m2 1h12 results presentationm2.com.au/media/2636/investor-presentation-1h12-2012.pdf · total...

M2 1H12 Results PresentationM2 1H12 Results Presentation

Geoff Horth, CEO27 February 2012

1H12 Results Presentation, 27 February 2012, Slide 1

Disclaimer

The release publication or distribution of this presentation in certain jurisdictions may be restricted by law andThe release, publication or distribution of this presentation in certain jurisdictions may be restricted by law andtherefore persons in such jurisdictions into which this presentation is released, published or distributed should informthemselves about and observe such restrictions.This presentation does not constitute, or form part of, an offer to sell or the solicitation of an offer to subscribe for orbuy any securities, nor the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issue ortransfer of the securities referred to in this presentation in any jurisdiction in contravention of applicable law.Persons needing advice should consult their stockbroker, bank manager, solicitor, accountant or other independentfinancial advisor. Certain statements made in this presentation are forward-looking statements. These forward-lookingstatements are not historical facts but rather are based on M2’s current expectations, estimates and projections aboutthe industry in which M2 operates, and its beliefs and assumptions. Words such as "anticipates," "expects," "intends,""plans," "believes," "seeks,” "estimates,“ “guidance” and similar expressions are intended to identify forward-lookingstatements These statements are not guarantees of future performance and are subject to known and unknown risksstatements. These statements are not guarantees of future performance and are subject to known and unknown risks,uncertainties and other factors, some of which are beyond the control of M2, are difficult to predict and could causeactual results to differ materially from those expressed or forecasted in the forward-looking statements. M2 cautionsshareholders and prospective shareholders not to place undue reliance on these forward-looking statements, whichreflect the view of M2 only as of the date of this presentation. The forward-looking statements made in this presentationrelate only to events as of the date on which the statements are made. M2 will not undertake any obligation to releasepublicly any revisions or updates to these forward looking statements to reflect events circumstances or unanticipatedpublicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipatedevents occurring after the date of this presentation except as required by law or by any appropriate regulatory authority.


Presentation content

M2 business overviewM2 business overview

The NumbersThe Numbers

L ki f d L ki f d FY12FY12Looking forward Looking forward -- FY12FY12


Our Goal remains unchanged

To be the pre-eminent provider of telecoms services p pto small and medium businesses (SMB’s) and to

reseller telecoms service providers (SP’s).


M2 Brands, Products & Markets

Mobile Data Mobile Data

SMB’sFixed Mobile

DataReseller Telcos

Fixed

Mobile Data

Mobile Data

Fixed

Mobile Data

Mobile Data NZ

Fixed

Mobile Data

Mobile DataResi

Data NZ SMB’s

Data


Strategic Platforms

• Core retail market: Small and medium sized businesses (SMB’s)• Core wholesale market: small and medium sized telecoms service providers (SP’s)Focussed Markets

• 450+ people under multi-level channel program with the trusted Commander brand• M2 operated appointment setting teams driving qualified opportunities into channel• More than 60 Inside Sales team members increasing product penetration

Channels to Market

• Our team focus is to be better at accessing and servicing our target markets• 400+ team members across Australia and New Zealand • M2’s team culture at the core of the Company’s success

Teamp y

• Customer service is a key differentiator for target markets • Customer satisfaction surveys returning excellent and improving results• Billing / operating system investment to further improve efficiency, team and

Customer Experience g p g y p y

customer experienceExperience

• Long standing wholesale supply arrangements with Telstra and Optus• Infrastructure “lite” = low capital expenditure and no stranded network assetsTechnology &

Suppliers


• Match fit for NBN – accustomed to reseller marginsSuppliers

1H12 Achievements

Consolidated dealer channels under Commander brand Consolidated dealer channels under Commander brand

Appointment setting trial successfully completed, with “Commander Holiday Rewards” a key success factor

Implemented Wholesale “Defend + Extend” strategy; obtained two new “Tier 1” customers and launched new data offer

Transitioned North Ryde and Adelaide operations to Hobart (approx 100 roles) Transitioned North Ryde and Adelaide operations to Hobart (approx 100 roles)

Executed smooth CEO transition and formed expanded Executive Team

Completed NBN trial in partnership with Telstrap p p

Achieved admission into S&P/ASX300


Commander Holiday Rewards

Unique concept in SMB, creating a point of difference Improves effectiveness of appointment setting teams and first appointment close

1H12 Results Presentation, 27 February 2012, Slide 9www.commanderholidayrewards.com.au

1H12 - The Numbers

$m 1H12 1H11 % ChangeRevenue 185.1 215.7 Down 14%Revenue (underlying)* 185 1 171 5 Up 8%Revenue (underlying) 185.1 171.5 Up 8%EBITDA 27.6 20.1 Up 37%EBIT 23.4 17.4 Up 34%EBIT (underlying)** 25.6 19.0 Up 35%NPAT 16.7 11.5 Up 45%NPAT (underlying)** 18.9 13.1 Up 44%EPS (cents) 13.5 9.3 Up 45%EPS (cents, underlying)** 15.3 10.7 Up 43%Interim Dividend ( t ff) 9 7 Up 29%Interim Dividend (cents, ff) 9 7 Up 29%

** Underlying EBIT, NPAT and EPS results each include an add-back of a non-cash cost of $2.3 million in 1H12 ($1.7m in 1H11), comprised of amortisation costs associated with customer contracts acquired in the relevant period (in accordance with Australian Accounting Standards)

* Underlying Revenue excludes non-margin generating revenue associated with EDirect


EBIT is comprised of profit before income tax plus financing costs (interest). EBITDA is comprised of profit before income tax plus financing costs (interest) plus depreciation and amortisation.

1H12 – financial highlights

Entering 10th consecutive year of earnings growthg y g g

Underlying NPAT up 44% on underlying Revenue growth of 8%

EBITDA up 37% on previous corresponding period to $27 6 million EBITDA up 37% on previous corresponding period to $27.6 million

EBITDA margin (EBITDA as a % of revenue) increased to 14.9%, compared with 9.3% in the previous corresponding periodp p g p

15th consecutive dividend declared; at 9 cents (fully franked) is an increase of 29% on the previous corresponding period

Strong operating cashflow at $22.1 million for 1H12


Consistent, steep earnings growth

4550

2530354045

510152025

NPAT

EBITDA

NPATEBITDA

0FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

1H11 1H12

Growth in EBITDA every year since listing on the ASX in 2004 EBITDA margin has increased 82% in two years

1H12


EBITDA margin has increased 82% in two years

Increasing shareholder returns

25

15

20

5

10 DPS

EPS

DPS

EPS

0FY05 FY06 FY07 FY08 FY09 FY10 FY11

1H11

Consistent earnings per share growth every year since ASX listing in 2004 15th consecutive dividend declared on 24th February, 2012 @ 9 cents per

1H111H12


share, fully franked

Lowly geared balance sheet

$m 31 Dec ‘11 30 June ‘11$m 31 Dec 11 30 June 11Cash at bank 16.7 12.5Total assets 198.4 201.4Total liabilities 97.1 107.6Net assets 101.4 93.7Net tangible assets (14 3) (22 8)Net tangible assets (14.3) (22.8)Net debt 9.7 17.2

EBITDA to interest coverage = 25 times EBITDA to interest banking covenant = 3.65 times


Overview of the M2 businessOverview of the M2 business


L ki f d L ki f d FY12FY12Looking forward Looking forward –– FY12FY12


Post Period Events – Time Telecom acquisition

Acquisition of the assets of Time Telecom:q

Asset Sale Agreement executed 24th February 2012, due to complete 1st March 2012

All cash consideration of $18.35 million, comprised of an upfront and deferred payment, subject to performance milestones

Purchase multiple less than 3 x EBITDA

A i t l 30 000 SMB/SOHO d id ti l t Approximately 30,000 SMB/SOHO and residential customers

Excellent cross-sell opportunities, due to low product penetration in base

Customer operations to be integrated into Hobart contact centre Customer operations to be integrated into Hobart contact centre

Funded from renegotiated existing finance facilities


Post Period Events – Flextalk acquisition

Acquisition of the assets of Flextalk:

Completed 1st January 2012

All cash consideration of $3.45 million from cash reserves, comprised of an upfront and All cash consideration of $3.45 million from cash reserves, comprised of an upfront and deferred payment, subject to performance milestones

Purchase multiple of less than 3x EBITDA, consistent with M2 strategy

Approximately 5,000 SMB/SOHO customers

Excellent cross-sell opportunities, due to low product penetration in base Excellent cross sell opportunities, due to low product penetration in base

Customers migrated to M2’s Hobart contact centre in February 2012, under the Commander brand


2H12 Priorities

Continued focus on organic growth: 2H12 channel focus: drive breadth and depth of Commander channel

Move from trial to full deployment of appointment setting function, with a dedicated centre operational from April 2012

Finalise recruitment of additional Inside Sales resources Take extended wholesale data product offering to new markets

Continue to actively assess complementary, “bolt-on” and transformational acquisition opportunitiesacquisition opportunities

Launch Phase 1 Ninja

Targeted re-launch of Commander brand to reinforce challenger identity and Targeted re launch of Commander brand to reinforce challenger identity and improve awareness

More of the same: be better at accessing and servicing our target markets


More of the same: be better at accessing and servicing our target markets

Future State

User-Centric Portal Drive single-supplier & per month / per user pricing

Software Services CRM HR Accounting Payroll

Hosted Services eMail Storage Security

Software Essentials

Word Processing Spreadsheet Presentations

Backup

InfrasCloud

obile

, PC

etc

Services g y

Managed Hosted Voice Internet VideoInstant & Unified

Messaging

p structureDe

vices

–Mo

IP Essentials

VoiceFixed / Mob

Internet

Network Access & Delivery

Premises


Network Access & Delivery

Future State cont’d

Layer 2 construct ensures modest capital expenditure requirements

Opportunity to work with a number of potential competing aggregation partners

Applications layer key to building value proposition

Ease of use, per month / per user pricing is key to building customer adoption

Open to partner, build or buy scenariosp p , y

Heavy infrastructure advantage negated; reseller model prevails

Key to success is capacity to access and support target markets Key to success is capacity to access and support target markets

Match fit for NBN: in preparation for product suite expansion


FY12 Guidance reaffirmed

$m FY11(a) FY12 Guidance % Change (from midpoint)

T l R 426 8* 380 420 D 6%Total Revenue 426.8* 380 – 420 Down 6%

Customer Revenues 375 380 - 420 Up 7%

EBITDA 48.3 58 – 62 Up 24%

EBITDA Margin (EBITDA / Total Revenue) 11.3 % 15% Up 33%

NPAT 27.6 30 – 34 Up 15%

NPAT (underlying**) 31 3 34 – 38 Up 15%NPAT (underlying ) 31.3 34 – 38 Up 15%

EPS (cents per share) 22.6 24 – 28 Up 15%

EPS (cents per share, underlying**) 25.3 27 – 31 Up 15%

*Total Revenue in FY11 included approximately $55m in very low margin revenues, relating to the Edirect business prior to its acquisition by M2 in March 2011. Following M2’s acquisition of Edirect, these revenues ceased and therefore do not figure in FY12 guidance. The resulting effect of this revenue elimination is a marked increase in FY12 profit margins versus FY11

** Underlying NPAT and EPS guidance each include an add back of a non cash cost of $3 7 million comprised of amortisation costs associated with


Underlying NPAT and EPS guidance each include an add-back of a non-cash cost of $3.7 million, comprised of amortisation costs associated with customer contracts acquired in the relevant period (in accordance with Australian Accounting Standards)

Key Investment Metrics (@ 24 Feb ‘12)

No. of Shares 124,543,385Share Price $3.40Market Capitalisation $423 millionDividend Policy 70% NPAT1H12 Dividend 9.0cDiv Yield (based on FY12 Guidance) 5.3%PE Ratio (based on FY12 Guidance) 13.2 xPE Ratio (underlying) 11.7 xSubstantial Shareholders (>5%) Hunter Hall

Cornish GroupVaughan Bowen Pengana Capital


Contacts @ M2

Name Position Phone / Email_________________________________________________________________________

Geoff Horth Chief Executive Officer 03 9674 6469 / ghorth@m2 com auGeoff Horth Chief Executive Officer 03 9674 6469 / [email protected]

Darryl Inns Chief Financial Officer 03 9674 6520 / [email protected]

Kellie Dean Company Secretary 03 9674 6577 / [email protected]

Debra Mansfield Corporate Communications Manager 03 9674 6569 / [email protected]

www.m2.com.au


Thank you


m2 1h12 results presentationm2.com.au/media/2636/investor-presentation-1h12-2012.pdf · total...

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