Macquarie Australia Conference Investor Presentation. May 2014

Transcription

1 Macquarie Australia Conference Investor Presentation May 2014

2 2 MMS overview McMillan Shakespeare Group (ASX: MMS) Group Remuneration Services Asset Management Salary packaging administration Novated leases Hospitals, health & charity workers Public and private sector lease programs Over 800 customers Circa 1m employees employed by customers Annual administration fee Transaction fees on leases Growth opportunity in packaging Lease penetration growth opportunity, private sector United Kingdom Australia & NZ 100% owned 50% owned Maxxia Finance UK CLM JV Fleet Management Operating leases, finance leases Mainly corporate customer base Balanced revenue Stream of management fees, NIM, in-life services Profit on sale, RV risks on balance sheet UK growth opportunity, bank dominated, Basel III Competitive cost of funds Maxxia Finance UK finance assets managed by JV CLM acquired Oct 13

3 3 Revenue model Remuneration Services Salary packaging administration fees: Annuity income stream; paid directly and regularly from employees salary. Interest income on float. Facilitation and procurement fees for assisting with novated lease settlements. Vehicle management income. Negative working capital requirement. Asset Management Net interest margin on financed vehicles. Fees for managing customer vehicles. Supplier rebates based on transaction volumes e.g. fuel, tyres, maintenance. Vehicle remarketing profit.

4 Salary Packagers 4 Integrated model - unique market position Core Skills Proactive sales culture Retail sales and marketing Budgeting/ BPO processing Tax knowledge base Fringe Benefits Tax administration and reporting Agency model, success based fees High transaction loads Novated Leases Core Skills Managing vehicle value chain: procurement, maintenance and disposals (insurance, fuel, tyres, etc.) Fleet management Treasury, financing and RV risk management Wholesale channel Operating Lessors/ Fleet Managers

5 5 Unique business model underpinned by key competitive strengths World class service levels (as independently measured by net promoter methodology). Low delivered cost (expense ratio in GRS segment reduced from 75% in 2005 to 55%). Industry leading counter-party risk management: strong balance sheet fully insured, including crime and fidelity FBT indemnity full disaster recovery/business continuity capability Industry leading IT Security Attractive customer to financiers = low cost of funds. Bespoke, fully scalable FBT management/salary packaging systems.

6 $m 6 NPAT Performance NPAT 8 year CAGR 17% Results impacted by the now withdrawn proposed changes to motor vehicle FBT H FY06 1H FY07 1H FY08 1H FY09 1H FY10 1H FY11 1H FY12 1H FY13 1H FY14

7 cents 7 Earnings Per Share Basic EPS 8-year CAGR of 16% Results impacted by the now withdrawn proposed changes to motor vehicle FBT H FY06 1H FY07 1H FY08 1H FY09 1H FY10 1H FY11 1H FY12 1H FY13 1H FY14 Basic EPS Cash EPS Cash EPS after CAPEX but excludes the investment in fleet growth. FY11, FY12, FY13 and FY14 EPS includes funding the major systems upgrade as part of 5 year IT strategy.

8 8 MMS Share Price v ASX 3,500 3,000 2,500 Base index of 100 CAGR: 35% 2,000 1,500 1, CAGR: 5% All ords MMS share price MMS IPO price 10 March $0.50. Dividend return since IPO of $2.33.

9 9 Group Remuneration Services market size Types of Employers Full FBT Rebatable FBT $17,000 Exempt $30,000 Exempt Government departments. Private companies. Public companies. Independent schools. Sporting clubs. Religious institutions. Trade unions. Public hospitals. Private not-for-profit hospitals. Public benevolent institutions. Charities. FBT Treatment FBT rate 47% (1) on taxable value of benefits. Certain benefits, including motor vehicles on novated leases are concessionally taxed. Rebatable FBT on first $30,000 FBT exempt on first $17,000 of of grossed-up taxable value of grossed-up taxable value of benefits (47% rebate). benefits. Equates to $15,900 of benefits Equates to $9,010 of benefits. concessionally taxed. Full FBT on excess over $30,000. Full FBT on excess over $17,000. FBT exempt on first $30,000 of grossed-up taxable value of benefits. Equates to $15,900 of benefits. Full FBT on excess over $30,000. Common Fringe Benefits Novated leases. Associate leases. Additional superannuation. Professional association membership fees. Living away from home allowance. Remote area housing allowance. Novated leases. Additional superannuation. Mortgage/rent. In-house school fees. Additional superannuation. Mortgage/rent. Meal entertainment and venue hire. Personal loans. Living expenses. Novated leases (not part of cap). Total workforce 12.3m By sector 10.9m (Govt 1.9m) 1.4m MMS target market 4.0m 1.2m Typical participation 0-20% 59-90% Target participation 5-25% 80-90% Estimated participants 0.6m (outsourced) Additional superannuation. Mortgage/rent. Meal entertainment and venue hire. Personal loans. Living expenses. Novated leases (not part of cap). Note 1: The FBT rate increases from 46.5% to 47% on 1 April 2014

10 10 Australian outsourced fleet vehicles ( 000) as at 30 June ILA is a tier 2 industry player. ILA share of novated leases as % of total fleet less than AFLA average. 222 MMS s expertise in novated lease allows MMS to target even greater % novated lease share. 183 Access to capital and significant flexibility in pursuing optimum funding structure. 60 CAGR for was 7% (AFLA). Expect 3-6% over next 5 years. Novated leases Fleet managed Finance leases/other Operating leases Source: AFLA. Note the novated lease numbers exclude MMS numbers.

11 11 MMS UK opportunity: accelerated growth in the medium term Post GFC environment & introduction of Basel III is creating structural shifts and a significant market opportunity for MMS to provide integrated asset management, asset finance and vehicle leasing services including salary sacrifice in the UK. MMS developing a unique, integrated business approach leveraging local management expertise and Australian capabilities and experiences. Clear strategies to accelerate growth including marketing initiatives, partnerships and diversified funding models. Execution proceeding well. UK economy appears to be recovering.

12 12 UK market size - businesses and employees Estimated 4.5 million private sector businesses Majority are very small; over 95 per cent have less than 10 employees. Number of businesses with 250 plus employees amounts to 6,320, but between them employ 9.63 million people. There are salary packagers / benefit providers operating under the UK tax laws (notably for cars and child care) No UK provider has an integrated offering such as MMS deploys in Australia Salary sacrifice is immature and has similar selling advantages to novated leases Target market for Employee Lease >10 employees 250+ employees 10 to 250 employees 6, ,880 4,332,565 Private sector workforce is 23m: 5m earn less than national minimum wage 8m work part time Total number of potentially eligible employees is 10m Estimated number of current employees in public sector 5.9m: 900,000 in NHS 136,000 police 220,000 armed forces central government 2.8m local government 1.4m public corporations 0.5m UK company car fleet size circa 2.3m Annual new car finance GBP18.4bn (business and consumer) Approx GBP15bn of other non car asset finance annually UK financial sector recovering from crisis Market fragmented, lots of providers, little differentiation

13 Asset Finance Solution Services 13 Developing the UK integrated business model Maxxia core competencies Proactive sales culture Strong marketing capability Financial management Tax knowledge base Employee lease Asset finance brokerage and agency Lending as principal Enterprise funding portal Maxxia vehicle fleet competencies Treasury, financing & RV risk management Fleet Mgmt Novated Lease Salary Sacrifice Business Assets Vehicle Leasing Employee Assets General Asset Finance ECOS IT Life Cycle Mgmt CLM current core competencies Managing vehicle Fleet value chain: Procurement Maintenance Disposals Service costs Fleet management Consultancy Short term rental Mini lease Lease co. panel Contract Hire/ Operating Lessors/ Fleet Managers In place In devt/ planned

14 Execution well advanced JV formed MMS enters UK Maxxia brand launched Business origination boosted Launched Maxxia Finance Acquired CLM 1 st Feb 13 1st April 13 1st July 13 1st Aug 13 22nd Oct 13

15 15 MMS UK market entry model Required initial minimal risk capital. Structured to align the ongoing capital required in accordance with the visible opportunities. Access a deeply experienced and respected local management team with aligned incentives, 150 years of experience in contract hire and salary sacrifice programs. Provides MMS with the opportunity to leverage off this local experience and develop a salary sacrifice motor vehicle offering including, potentially, the novated lease product and a full employee benefits offering. Diversified funding, tier 1 and 2 financiers, plus own funding via Maxxia (UK) wholly owned by MMS.

16 16 Update and Outlook Novated lease orders YTD FY14 Index Average novated lease orders per working day FY13 base index = 100 Period from Labour FBT announcement to Federal Govt. election Period from Federal Govt. election 0 FY13 16 Jul to 6 Sept 13 1 Jul to 30 April 14 9 Sept to 30 April 14 Based on prior disclosed charts, investors will be able to calculate the period from 1 Feb 14 to 30 April 14 is an index of 115.

17 17 MMS has a strong, diversified business model with multiple growth opportunities Given Government commentary, material changes to FBT treatment of motor vehicles appears unlikely. GRS has fully recovered from proposed changes to FBT on motor vehicles announced on 16 July 2013 and rescinded on 9 September Second half should see a continuing improvement in the Group Remuneration Services business. Salary packaging systems being delivered progressively driving improved service and greater productivity. Growth in assets under finance and management, notwithstanding intense competition. Good, low risk growth opportunity to build integrated model in the UK. Business well placed to acquire opportunistically in current or adjacent products, services and markets.