Half Year Results FY15
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.
Half Year Results FY15
2
1.
Highlights
Nerida Caesar
2.
Veda’s business
3.
Strategic alignment
4.
Financial performance
James Orlando
5.
Outlook
Nerida Caesar
6.
Appendices
Agenda
Half Year Results FY15
3
1. Highlights
Strong performance vs prior calendar period
First Half Highlights
5
Half Year Results FY15
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
2. Veda’s business
Serving Businesses and Consumers
Half Year Results FY15
7
Public data, Proprietary data, Consumer data assets, Commercial data assets
Collect, Match, Augment, Predict
Financial
Services
Creating new opportunities through superior insights
Telco
Utilities
Legal
Trade
Credit
Government
Charity
Wealth
Property
Consumers
•
Veda holds over
200m
individual records
•
This represents
18m
persistent individual records
•
A persistent method to identify, understand and
reach Australian consumers
Self Managed Super Fund Attitudes Consumer Social Email Employer Job title Fraud Credit Insurance Identity Other Phone Electoral Deceased Property Census Renters/ Rental properties
Public Veda Proprietary Veda Consumer Assets
Data assets on Australian consumers
8
Half Year Results FY15
Data assets on Australian commercial entities
•
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
Employee Titles Employee Numbers Trade Payments Website Content Defaults Credit Directors & Shareholders Insurance Business Identifiers Other Phone Financials ANZSIC codes Business Names ACNs ABNs GST Reg’dPublic Veda Proprietary Veda Consumer Assets
Half Year Results FY15
9
Helping our customers grow
B2B Value Attribution Model
10
Half Year Results FY15
Help them reach newcustomers
Help them verify and assess new customers
Fraud Check ID Check
Credit Check
Help them to manage existing customers
Receivables Management Targeting for Up-Sell Predictive modelling Profiling and new customer acquisition Data Cleansing
Segmentation
Acquisition Omni-channel Single Customer View
Help them understand their customers Attribution Consumption habits Alerts to changes in financial behaviour Verification of assets Management of debtor accounts
Manage Grow
Collect Acquire
CollectionsExternal Drivers of Growth
11
Half Year Results FY15
•
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
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%
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. 41%
15% 12%
32%3
Half Year Results FY15
12
3. Strategic Alignment
Our Strategic Initiatives
14
Half Year Results FY15
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
1
2
3
4
5
1. Expand into new segments and increase product
penetration
15
Half Year Results FY15
•
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
2. Continue to invest in new product offerings
16
Half Year Results FY15
•
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
3. Position the Company to take advantage of
Comprehensive Credit reporting
17
Half Year Results FY15
•
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
B2C
4. Focus on high growth B2C & digital marketing
18
Half Year Results FY15
•
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
Digital Marketing
4. Focus on high growth B2C & digital marketing
19
Half Year Results FY15
•
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
Acquisitions support Veda’s long term growth strategy
5. Make targeted acquisitions and investments
20
Half Year Results FY15
•
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
•
December - Veda
acquired direct
marketing and data
agency The Prospect
Shop expanding into the
not-for-profit sector.
K
ey
Pr
odu
ct
s
Consumer Credit Scores and ID Monitoring Marketing Services Employee Verification Value-Added Third Party Data& Data services Collections Management Fraud and Identity Other Credit Analytics Credit Reports Banks Other Financial Institutions Telcos and
Utilities Collection Govt. Wealth
Not-for-Profit Consumer
Customer Segments
K
ey
Pr
od
u
ct
s
Focus on consumer and
digital marketing
New products
and markets
Core
4. Financial Performance
Highlights – 1H FY15 vs 1H FY14
22
Half Year Results FY15
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%
Financial Results Summary
Half Year Results FY15
23
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%
EBITDA1 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
NPAT2 38.1 33.8 12.7% (12.5) n/m
•
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.
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.
Revenue by business line
24
Half Year Results FY15
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
Consumer
Risk &
Identity
32%
Commercial
Risk &
Information
Services
41%
B2C &
Marketing
15%
International
12%
1H FY15 Revenue
1H FY15 Actual $’m 1H FY14 Actual $’m Growth %Consumer Risk & Identity 52.6 48.4 8.7%
Commercial Risk & Information Services 67.4 62.7 7.5%
B2C & Marketing Services 24.3 18.7 29.9%
Australia 144.3 129.8 11.2%
International 18.7 17.0 10.0%
Total Revenue 163.0 146.8 11.0%
1H FY14 to 1H FY15
Source of revenue growth
25
Half Year Results FY15
•
Organic growth driven by continued investment in new products and
enhancements on existing product sets, focusing on selling more products to
existing customers and new segment expansion.
•
Bolt-on acquisitions include acquisitions since FY14. We target acquisitions that
are in adjacent markets and will grow faster as part of Veda.
146.8
163.0
13.2
3.0
1H FY14 Organic growth Bolt-on acquisitions 1H FY15
Source of Revenue Growth ($m)
1H FY14 to 1H FY15
Source of EBITDA growth
26
Half Year Results 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.
62.8
69.3
69.3
16.2
1.4
5.9
2.4
Pro forma 1H FY14Revenue COS Staff Costs Other Costs 1H FY15
Source of EBITDA Growth ($m)
Veda continues to deliver strong free cash flow
Cash flow
27
Half Year Results FY15
Note: 1. Net cash from operating activities is extracted from the statement of cash flows in the Interim Financial Report.•
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.
$m 1H FY15 Statutory Actual 1H FY14 Statutory Actual EBITDA 69.3 62.1Interest and income tax
(included in net cash from operating activities)
(2.3) (2.1) Net changes in working capital and non-cash items in
EBITDA (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
Capital expenditure
28
Half Year Results 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 $5.0m as the project moves from the
development to an implementation phase.
•
Stable capital expenditure as a percent of
revenue: 16.6% in 1H, compared to 1H
FY14 of 16.5%.
•
Full year capital expenditure is expected to
be in line with guidance
assuming revenue
mix, in particular sales related data
purchases, is in line with forecast.
24.2
27.1
1H FY14 1H FY15
Capital Expenditure ($m)
Key ratios
29
Half Year Results FY15
Actual 31-Dec-2014 $’m Actual 30-Jun-2014 $’mNon-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%
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.
•
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
5. Outlook
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.
FY15 Outlook - UPDATE
Half Year Results FY15
31
Original
Update
Revenue
Will broadly reflect the average growth rate achieved
over the past two years
No change
EBITDA
At least low double digit growth over FY14 pro forma
of $129.0m
No change
NPAT
Broadly commensurate with the anticipated rate of
growth in EBITDA as was the case in FY14
Growth rate slightly
higher than EBITDA
growth rate
Capital
expenditure
Broadly sustained at the same per cent of revenue
No change
Dividend
payout ratio
Between 50 and 70 per cent of statutory NPAT
No change
Consistent with historical performance, EBITDA and NPAT will be somewhat skewed towards the second half
of FY15.
Q & A
6. Appendices
Balance sheet
34
Half Year Results FY15
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
Statutory to pro forma results reconciliation: 1H FY14
Half Year Results FY15
35
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.
1H FY14Actual $’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
Important notice
36
Half Year Results FY15
GlossaryEBITDA 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.
Statutory (‘Operating’) EBITDA 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 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.
EBITDA to Operating Net cash from operating activities divided by EBITDA Cash Conversion
IPO expenses Non–recurring expenses incurred in respect of the Initial Public Offering, including share based payments
NPAT Net Profit After Tax
Statutory NPAT The profit after tax as disclosed in the statement of profit or loss in Veda’s interim financial statements
Pro forma NPAT 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.
AML/CTF/KYC Anti-Money Laundering/Counter-Terrorism Financing/Know your customer
CCR Comprehensive Credit Reporting
DVS Document Verification Service
FSI Financial Services Inquiry
PEXA Property Exchange Australia
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.
Non-IFRS and pro forma measures have not been subject to audit or review.
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