Veda Group Limited Presenters Nerida Caesar Chief Executive Office & Managing Director James Orlando Chief Financial Officer
Important Notice This presentation contains general information about the activities of Veda Group Limited (Veda) which is current as at 25 February 2015. It is in summary form and does not purport to be complete. It presents financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standards (IFRS)) as well as information provided on a non-ifrs basis. This presentation is not a recommendation or advice in relation to Veda or any product or service offered by Veda s subsidiaries. It is not intended to be relied upon as advice to investors or potential investors, and does not contain all information relevant or necessary for an investment decision. It should be read in conjunction with Veda s other periodic and continuous disclosure announcements filed with the Australian Securities Exchange, and in particular the half year results for the half year to 31 December 2014. These are also available at www.veda.com.au. No representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates or opinions or other information contained in this presentation. To the maximum extent permitted by law, Veda, its controlled entities and their respective directors, officers, employees and agents disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through use of or reliance on anything contained in or omitted from this presentation. No recommendation is made as to how investors should make an investment decision. Investors must rely on their own examination of Veda, including the merits and risks involved. Investors should consult with their own professional advisors in connection with any investment decision. The information in this presentation is for general information only. To the extent that certain statements contained in this presentation may constitute forward-looking statements or statements about future matters, the information reflects Veda s intent, belief or expectations at the date of this presentation. Subject to any continuing obligations under applicable law or any relevant listing rules of the Australian Securities Exchange, Veda disclaims any obligation or undertaking to disseminate any updates or revisions to this information over time. Any forward-looking statements, including projections, guidance on future revenues or earnings and estimates, are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Veda s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Any forward-looking statements, opinions and estimates in this presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. For example, the factors that are likely to affect the results of Veda include, but are not limited to, general economic conditions in Australia, exchange rates, competition in the markets in which Veda operates and the inherent regulatory risks in the businesses of Veda. Neither Veda, nor any other person, gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur. In addition, please note that past performance is no guarantee or indication of future performance. This presentation does not constitute an offer to issue or sell, or solicitation of an offer to buy, any securities or other financial products in any jurisdiction. The distribution of this presentation outside Australia may be restricted by law. Any recipient of this presentation outside Australia must seek advice on and observe any such restrictions. This presentation may not be reproduced or published, in whole or in part, for any purpose without the prior written permission of Veda. All amounts are in Australian dollars. All references starting with FY refer to the financial year ended 30 June. For example, FY15 refers to the year ended 30 June 2015. 2
Agenda 1. Highlights Nerida Caesar 2. Veda s business 3. Strategic alignment 4. Financial performance James Orlando 5. Outlook Nerida Caesar 6. Appendices 3
1. Highlights
First Half Highlights Strong performance vs prior calendar period Financial Highlights Other Highlights External Drivers Acquisitions Revenue: +11.0% EBITDA: +10.4% vs pro forma; +11.6% vs statutory NPAT: +12.7% vs pro forma; +$50.6m vs statutory Paid FY14 final dividend: $33.7m/4c per share Risk based pricing offers starting to emerge Comprehensive Credit Reporting (CCR) data load commenced Regulatory drivers: Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF) ASIC Financial Advisor Register Financial Systems Inquiry (FSI) Market drivers: PEXA Complementing and expanding existing segments and product sets 5
2. Veda s business
Serving Businesses and Consumers Creating new opportunities through superior insights Financial Services Utilities Charity Telco Legal Wealth Consumers Trade Credit Government Property Collect, Match, Augment, Predict Public data, Proprietary data, Consumer data assets, Commercial data assets 7
Data assets on Australian consumers Attitudes Renters/ Rental properties Employer Job title Veda Consumer Assets Veda Proprietary Public Self Managed Super Fund Credit Insurance Consumer Fraud Census Social Email Identity Phone Other Property Veda holds over 200m individual records This represents 18m persistent individual records A persistent method to identify, understand and reach Australian consumers Electoral Deceased 8
Data assets on Australian commercial entities Veda Consumer Assets Employee Titles Employee Numbers Trade Payments Credit Insurance Business Identifiers Veda Proprietary Public Website Content Defaults Directors & Shareholders Business Names ACNs GST Reg d ABNs ANZSIC codes Other Veda holds over 20m commercial sourced records This represents 3m persistent commercial records We can access a dynamic, multidimensional view of Australian businesses, profiles and ownership relationships Phone Financials 9
B2B Value Attribution Model Helping our customers grow Help them understand their customers Help them reach new customers Help them verify and assess new customers Help them to manage existing customers Data Cleansing Receivables Management Profiling and new customer acquisition Single Customer View Segmentation Consumption habits Omni-channel Acquisition Attribution ID Check Fraud Check Credit Check Collections Management of debtor accounts Collect Manage Acquire Grow Verification of assets Targeting for Up-Sell Alerts to changes in financial behaviour Predictive modelling 10
External Drivers of Growth Regulatory: AML/CTF Act: Customer due diligence compliance by 1 January 2016 FSI: positive recommendations for Veda National identity strategy Data access and use, including DVS Review of credit reporting in 2017, including expanded data fields ASIC Financial Advisor Register Market drivers: PEXA ID Matrix expansion into the legal/conveyancing segment 11
Veda s business lines Australia International Consumer Risk & Identity Commercial Risk & Information Services B2C & Marketing Services International Consumer credit bureau services Identity verification to prevent fraud Employee verification Collection services Scoring and decision analytics Third party data access solutions Commercial credit bureau services Risk analysis of business suppliers Consumer credit monitoring, identity theft prevention, automotive and tenancy information Data driven marketing services Consumer and commercial credit bureau in New Zealand Bureau investments and joint ventures across Asia and the Middle East. $52.6m 1 8.7% 2 $67.4m 7.5% $24.3m 29.9% $18.7m 10.0% 32% 3 41% 15% 12% Notes: 1. 1H FY15 Revenue 2. The percentages next to the arrows are growth vs 1H FY14. 3. Percentages against the doughnut chart above are the proportion of Total 1H FY15 revenue. 12
3. Strategic Alignment
Our Strategic Initiatives 1 2 3 4 5 Expand into new segments and increase product penetration Continue to invest in new product offerings Position the Company to take advantage of Comprehensive Credit reporting Focus on high growth B2C & digital marketing Make targeted acquisitions and investments 14
1. Expand into new segments and increase product penetration Wealth segment: we help super funds and advisory businesses understand, retain and attract their customers Government: Veda s acquisition of Kingsway coupled with Corporate Scorecard delivers clear market leadership in supplier risk solutions Legal/Conveyancing: investment in PEXA sponsorship 15
2. Continue to invest in new product offerings Launched VedaCheck Visual making it easier for our customers to look behind complex structures Evolution of fraud and identity solutions to adapt to the changing environment Veda Corporate Ratings: enables businesses to take control of their market perceptions and demonstrate financial capacity Collections: tools to enhance returns and drive workflow 16
3. Position the Company to take advantage of Comprehensive Credit reporting Data load in progress Upfront investment in customer transition and product development to enable future revenue growth New Zealand insights support Australian Pilot learnings: less risk, better predictability, more up to date and accurate info Veda is committed to leadership in CCR in Australia and New Zealand 17
4. Focus on high growth B2C & digital marketing B2C Risk based pricing offers have started to enter the market Identity takeover and cyber ID theft is driving ongoing interest in cyber monitoring products CarHistory.com.au providing confidence for buyers of used cars Audience monetisation with lead generation and enhanced datasets 18
4. Focus on high growth B2C & digital marketing Digital Marketing Using the power of insights to execute effective marketing strategies Inivio Marketing Platform self service web based marketing platform KMS, now branded Inivio NZ, and The Prospect Shop acquisitions complement the strategy and expand to new segments 19
Key Products Key Products 5. Make targeted acquisitions and investments Acquisitions support Veda s long term growth strategy Consumer Credit Scores and ID Monitoring Marketing Services Employee Verification Value-Added Third Party Data & Data services Collections Management Fraud and Identity Focus on consumer and digital marketing New products and markets July - Veda acquired KMS Data (now branded Inivio NZ), to support our growth strategy for marketing services. September - Veda acquired Kingsway Financial Assessments, increasing our scale in financial risk assessment Other Credit Analytics Credit Reports Core Banks Other Financial Institutions Telcos and Utilities Collection Govt. Wealth Customer Segments Not-for- Profit Consumer December - Veda acquired direct marketing and data agency The Prospect Shop expanding into the not-for-profit sector. 20
4. Financial Performance
Highlights 1H FY15 vs 1H FY14 Revenue Growth Total revenue 11% EBITDA Growth vs pro forma Growth vs statutory EBITDA Margin 10.4% 11.6% 42.5% NPAT Growth vs pro forma Growth vs statutory 12.7% $50.6m Cash Flow Operating cash flow EBITDA to Operating Cash conversion $58.0m 84% 22
Financial Results Summary 1H FY15 Statutory Actual $ m 1H FY14 Pro forma Actual $ m Variance % 1H FY14 Statutory Actual $ m Variance Revenue 163.0 146.8 11.0% 146.8 11.0% Costs of external data and products used for resale (29.9) (28.5) 4.9% (28.5) 4.9% Staff costs (46.2) (40.3) 14.6% (40.0) 15.5% Other operating expenses (17.6) (15.2) 15.8% (16.2) 8.6% Total operating expenses (excluding IPO expenses) (93.7) (84.0) 11.5% (84.7) 10.6% EBITDA 1 69.3 62.8 10.4% 62.1 11.6% IPO expenses 0.0 0.0 n/m (25.7) (100%) Depreciation and amortisation (12.6) (11.0) 14.5% (11.0) 14.5% EBIT 56.7 51.8 9.5% 25.4 123% Net finance costs (6.5) (7.6) (14.5%) (42.4) (85%) Share of profit from associates 1.5 1.4 7.1% 1.4 7.1% Profit before tax 51.7 45.6 13.4% (15.6) n/m Tax expense (13.6) (11.8) 15.3% 3.1 n/m NPAT 2 38.1 33.8 12.7% (12.5) n/m Notes: 1. A reconciliation of differences between 1H FY14 statutory EBITDA and the pro forma EBITDA is included on slide 35. 2. A reconciliation between 1H FY14 pro forma NPAT and statutory NPAT is included on slide 35. % Veda continued to deliver financial performance in line with expectations Operating Cost Drivers: Organic and acquisition sales growth CCR transition investment New equity incentive scheme Listed company costs Tax expense impacted by R&D tax offsets. 23
Revenue by business line B2C & Marketing 15% Commercial Risk & Information Services 41% International 12% 1H FY15 Actual $ m 1H FY15 Revenue 1H FY14 Actual $ m Consumer Risk & Identity 32% Growth Consumer Risk & Identity 52.6 48.4 8.7% Commercial Risk & Information Services 67.4 62.7 7.5% B2C & Marketing Services 24.3 18.7 29.9% Australia 144.3 129.8 11.2% International 18.7 17.0 10.0% Total Revenue 163.0 146.8 11.0% % Growth Drivers: Consumer Risk & Identity: Fraud and Identity Solutions, Verify and Collection Services Commercial Risk & Information Services: Balanced growth between Commercial risk bureau and property solutions B2C & Marketing Services: Inivio, carhistory.com.au, Consumer credit suite of B2C products International: Acquisition of KMS (now branded Inivio NZ), Commercial risk, international sales of bureau technology, Verify New Zealand 24
Source of revenue growth 1H FY14 to 1H FY15 Source of Revenue Growth ($m) 3.0 163.0 13.2 146.8 1H FY14 Organic growth Bolt-on acquisitions 1H FY15 Organic growth driven by continued investment in new products and enhancements on existing product sets, focusing on selling more products to existing customers and new segment expansion. Bolt-on acquisitions include acquisitions since FY14. We target acquisitions that are in adjacent markets and will grow faster as part of Veda. 25
Source of EBITDA growth 1H FY14 to 1H FY15 Source of EBITDA Growth ($m) 1.4 62.8 16.2 5.9 2.4 69.3 69.3 Pro forma 1H FY14 Revenue COS Staff Costs Other Costs 1H FY15 COS: data optimisation benefits realised. Staff costs: increased in line with sales growth and mix, CCR customer transition, recent acquisitions and the new equity incentive scheme. Other costs: technology outsourcing and maintenance, support of new products and systems, property for higher staff numbers. 26
Cash flow Veda continues to deliver strong free cash flow $m 1H FY15 Statutory Actual 1H FY14 Statutory Actual EBITDA 69.3 62.1 Interest and income tax (included in net cash from operating activities) Net changes in working capital and non-cash items in EBITDA (2.3) (2.1) (9.0) (6.0) Net cash from operating activities 1 58.0 54.0 Capital expenditure (27.1) (24.2) Acquisition of subsidiaries (5.1) (6.3) Free Cash Flow 25.8 23.5 Working capital performance reflects collections over a more diverse customer base, greater non-click sales and the impact of acquisitions. Capital expenditure growth primarily driven by the one time infrastructure technology refresh and higher sales driven data acquisition costs. Acquisition cash flow relates to upfront consideration for new acquisitions and earn out payments for previous acquisitions. Note: 1. Net cash from operating activities is extracted from the statement of cash flows in the Interim Financial Report. 27
Capital expenditure Capital Expenditure ($m) 27.1 24.2 1H FY14 1H FY15 Growth in capital expenditure driven by data acquisition and a non-recurring infrastructure technology refresh. Capital spend on CCR declined from $8.0m to $5.0m as the project moves from the development to an implementation phase. Stable capital expenditure as a percent of revenue: 16.6% in 1H, compared to 1H FY14 of 16.5%. Full year capital expenditure is expected to be in line with guidance assuming revenue mix, in particular sales related data purchases, is in line with forecast. 28
Key ratios Actual 31-Dec-2014 $ m Actual 30-Jun-2014 $ m Non-current loans and borrowings 274.8 267.9 Cash and cash equivalents (21.6) (30.0) Net debt 253.2 237.9 Debt Ratios: Net debt / EBITDA 1 2 1.87x 1.84x Interest coverage (EBITDA / Net finance costs) 3 4 10.1x 8.9x Net debt / (net debt + equity) 25.6% 24.7% Major items funded in 1H FY15: Payment of $33.7m FY14 final dividend Capital expenditure: $27.1m Acquisitions: $5.1m Significant borrowing capacity for acquisitions and capital management Notes: 1. For 31-Dec-2014 used Last Twelve Months (LTM) EBITDA of $135.5m. For 30-Jun14 used FY14 pro forma EBITDA of $129.0m. 2. Financial Covenant requirement for the Facilities Agreement: not greater than 3.50 to 1. 3. For 31-Dec-14 used LTM EBITDA of $135.5m and LTM net finance costs of $13.4m. For 30-Jun-14 used FY14 pro forma EBITDA of $129.0m and pro forma net finance costs of $14.5m. 4. Financial Covenant for the Facilities Agreement : not less than 3.00. 29
5. Outlook
FY15 Outlook - UPDATE Veda affirms its previously released full year guidance with the following change: The NPAT growth rate for the full year over the FY14 pro forma result is expected to be slightly higher than that anticipated for the EBITDA growth rate. Revenue EBITDA NPAT Capital expenditure Dividend payout ratio Original Will broadly reflect the average growth rate achieved over the past two years At least low double digit growth over FY14 pro forma of $129.0m Broadly commensurate with the anticipated rate of growth in EBITDA as was the case in FY14 Broadly sustained at the same per cent of revenue Between 50 and 70 per cent of statutory NPAT Update No change No change Growth rate slightly higher than EBITDA growth rate No change No change Consistent with historical performance, EBITDA and NPAT will be somewhat skewed towards the second half of FY15. 31
Q & A
6. Appendices
Balance sheet Actual 31-Dec -14 $ m Actual 30-Jun-14 $ m Cash 21.6 30.0 Other current assets 44.2 42.0 Current assets 65.8 72.0 Other non-current assets 67.3 77.2 Intangible assets 940.3 910.2 Total non-current assets 1,007.6 987.4 Total assets 1,073.4 1,059.4 Trade and other payables 26.0 26.1 Other current liabilities 21.6 25.2 Total current liabilities 47.6 51.3 Loans and borrowings 274.8 267.9 Other non-current liabilities 14.7 12.6 Total non-current liabilities 289.5 280.5 Total liabilities 337.1 331.8 Net assets 736.3 727.6 Share capital 791.4 791.4 Reserves 15.2 10.8 Accumulated losses (72.5) (76.6) Non-controlling interests 2.2 2.0 Total equity 736.3 727.6 34
Statutory to pro forma results reconciliation: 1H FY14 1H FY14 Actual $ m Statutory Net Profit after Tax (12.5) Management fees 1 1.8 Listed company expenses 1 (1.1) IPO expenses 2 25.7 Total operating expense adjustments 26.4 Net finance costs adjustment 3 34.8 Tax expense 4 (14.9) Pro forma Net Profit after Tax 33.8 1H FY14 Actual $ m Statutory ( Operating ) EBITDA 5 62.1 Management fees 1 1.8 Listed company expenses 1 (1.1) Pro forma EBITDA 62.8 Notes: 1. Pro forma operating expense adjustments (excluding IPO expenses) have been made for the period 1 July 2013 to 10 December 2013 to remove the PEP management fees and include listed company expenses. 2. IPO expenses includes $11.6 million of share based payments. 3. Net finance costs have been adjusted to reflect the debt profile following completion of the IPO. 4. Tax expense reflects the income tax impact of the adjustments for notes 1-3. The share based payments (included in IPO costs) is non-tax deductible. 5. Statutory ( Operating ) EBITDA excludes IPO expenses. 35
Important notice Non-IFRS and pro forma measures have not been subject to audit or review. Glossary EBITDA Statutory ( Operating ) EBITDA Pro forma EBITDA EBITDA to Operating Cash Conversion IPO expenses NPAT Statutory NPAT Pro forma NPAT AML/CTF/KYC CCR DVS FSI Veda s Financial Statements for the half year ended 31 December 2014 are presented in accordance with Australian Accounting Standards. Veda has also chosen to include certain non-ifrs financial information. This information has been included to allow investors to relate the performance of the business to the pro forma financial information outlined in the prospectus and these measures are used by management and the Board to assess performance and make decisions on the allocation of resources. A reconciliation between statutory and pro forma NPAT is presented on slide 35. Further information regarding the non-ifrs and pro forma financial measures and other key terms used in this presentation is included in the Glossary below. PEXA Earnings Before Interest, Tax, Depreciation and Amortisation. Interest includes net finance costs, including any finance related fees or other finance costs. Excludes IPO costs and share of profits from associates. Earnings Before Interest, Tax, Depreciation and Amortisation and excluding IPO expenses. Interest includes net finance costs, including any finance related fees or other finance costs. Excludes share of profits from associates. Pro forma EBITDA is based on the Statutory ( Operating ) EBITDA, however, pro forma adjustments have been made for the period 1 July 2013 to 10 December 2013 to remove the PEP management fees ($1.8m) and include listed company expenses (-$1.1m). A reconciliation of these adjustments is included on slide 35. Net cash from operating activities divided by EBITDA Non recurring expenses incurred in respect of the Initial Public Offering, including share based payments Net Profit After Tax The profit after tax as disclosed in the statement of profit or loss in Veda s interim financial statements Pro forma NPAT is based on the Statutory NPAT, however, pro forma adjustments have been made for certain transactions, one-off expenses that will not occur in a listed environment and to reflect the financing structure post listing. A reconciliation of these adjustments is included on slide 35. Anti-Money Laundering/Counter-Terrorism Financing/Know your customer Comprehensive Credit Reporting Document Verification Service Financial Services Inquiry Property Exchange Australia 36
Contact us Veda Group Limited Level 15, 100 Arthur Street, North Sydney NSW 2060, Australia +61 2 9278 7000 veda.com.au Copyright Veda 2014