Computershare Limited (CPU) Earnings Call Transcript & Summary

Welcome, everybody, to the Computershare new business stream report Presentation. [Operator Instructions] I'll now hand over to our first speaker, CEO and President, Mr. Stuart Irving.

Good morning, everybody, and welcome to today's call. I really appreciate you joining us as I know many are busy with the results and reporting season, but we don't expect this call to be too long. I have Nick Oldfield, our new CFO; and Michael Brown from our Investor Relations team with me. Many of you will know Nick from our Investor Days, and I'm pleased to introduce him on his first investor call in his new role. The purpose of today's call is simply to show you our new business stream reporting before we move to this new structure on February 12 when we report our first half FY '20 results. Today, we will not be talking about business performance or guidance or giving a trading update. That results presentation is still a work in progress. Now we wanted to show you our new reporting structure early so that you have time to understand the changes and to reconcile your models. To help you with the changes, we have released a presentation to the ASX platform this morning, and it's got plenty of detail for the super modelers amongst you. We're also putting this historical data onto the Computershare Investor Relations website in a format that you can download and be able to help you with your models. Now that spreadsheet will also contain historical revenue breakdown of each of our new business streams by country as I appreciate that some analysts model that way, and we hope that, that will help. As I said, there's a lot of detail here, but let me just give you the highlights. Firstly, you might ask why we're changing to this new business stream reporting. Well, as we have been talking about for some time now, Computershare has been moving to a new global business structure, and this new financial reporting aligns with how we manage the business. Now secondly, probably most importantly, the changes are only at the business stream level. It's only the divisions, so to speak, that are changing. All historical group numbers, group revenues, management EBITDA, EPS, ROE and cash flow, et cetera, all remain the same. No change. And finally, the level of financial disclosure going forward will stay the same or you could -- you will be provided more. We have worked hard to provide the market with more transparency over the last couple of years, and there are no backward steps, so to speak, here. Now let's move to Page 3. And before I hand to Nick to take you through the details, in a nutshell, let me just summarize the main changes to the new business streams. One, we have pulled together our Register Maintenance, Corporate Actions and Stakeholder Relationship Management into Issuer Services. This is our largest business stream. Mortgage Services is now a stand-alone stream. Now given the scale we have built, we have now taken this out of Business Services and will show it separately going forward. Now this stream also includes our other property rental services businesses, including the Deposit Protection Scheme in the U.K. The Business Services itself will now be made up of Bankruptcy; Class Actions; Corporate Trust, which we talked about at our AGM; and for historical purposes, Karvy, the Indian business we sold last year. Employee Share Plans now includes the Vouchers business, which you should know is in runoff. And Communication Services will now include our small Australian utilities business. And finally, corporate and technology, which was something of a holdall, has now been slimmed down as all corporate expenses are now allocated out to the business lines. Now I'm going to hand over to Nick who will take you through the ins and outs of the changes.

Thank you, Stuart. Good morning, everyone. Let me first start by saying that all of the numbers that we're presenting from Slides 4 onwards are historical reconciliations. We are showing the last 2 halves and the last 2 full financial years under our new structure. All of the numbers that we are showing are exactly the same as we have given previously. But given we report our numbers in constant currency, we have used actual FX rates here because they are over several periods. Those rates that we're using are shown on Slide 16, but this is not a move away from constant currency. You will also see, in many of the tables on the following slides, an Other line. For the sake of avoiding repetition as I move through the slides, I will not call this out on each page. But as you can see from the final point on Slide 3 and as Stuart's previously mentioned, this relates to income previously classified as technology and other and expenses associated with performance incentives. All the tables over the slides follow exactly the same methodology. We start with the previous streams reporting and then we show what's been added in and what's been taken out to get to our new number. So on Slide 4, let me now take you through Issuer Services. As Stuart said, we are grouping Register Maintenance, Corporate Actions and Stakeholder Relationship Management together. Using our FY '19 totals, you can see that this combination generated revenue in FY '19 of $942.8 million. In looking at the new Issuer Services stream, we now add our Governance Services business, which adds in $16.5 million to revenue. We adjust for Other revenues of $3.3 million, and then we take out our bonds and trustee-related activity, which you will see later. This is $10.7 million. The net result being that the new stream would have generated revenues of $951.9 million last year compared to $942.8 million as reported under the prior structure. EBITDA would have been around $12 million lower at $313.6 million relative to the $325.6 million we reported for Register Maintenance, Corporate Actions and Stakeholder Relationship Management. Turning to Slide 5. This is the new Business Services stream, which now does not include Mortgage Services. This stream has arguably the biggest amount of changes you will see. On the table, you can see the ins and outs as we reconcile the new Business Services stream, including the $10.7 million of bonds and trustee services revenue transferred from Issuer Services, which I mentioned on the previous slide. The net effect of all these changes is that our Business Services revenue would have been $266.7 million in FY '19 relative to the $927.4 million we reported last year. EBITDA would have been $92.6 million relative to $249.7 million. I'm happy to address any of the detailed questions in Q&A. If we now turn to Slide 6. In Employee Share Plans, we are adding our U.K. childcare vouchers business to this stream. This business is profitable, but you will recall, it is in runoff mode. And we will continue to disclose our Vouchers performance as we move forward so as not to cloud the performance of our share plans growth engine. As Stuart said, we are not reducing overall disclosure. In fact, we are disclosing Vouchers' EBITDA for the very first time here. As I move through the deck, I'm going to take Slides 7 and 8 as read and finish my remarks on Slide 9. So on Slide 9, this -- the corporate and technology stream now allocate out all corporate expenses to the business lines. The residual corporate and technology stream, as you can see here, is much reduced. It includes some third-party technology revenues and other small income streams. I will now hand back to Stuart for any questions that you may have.

Thank you, Nick. Now let me wrap up a few concluding remarks, and then we can open the lines for any questions you may have. As I said at the start, we are realigning our business stream reporting to really reflect the way in which we structure and manage the business, and we've been talking about that for some time. And we wanted to show you the changes before the results day to give you time, and we're providing the full detail in the pack and in the downloadable file on the website to help you reconcile your models. The changes are, of course, only at the business stream level. Group numbers are exactly the same. Now we look forward to reporting the first half FY '20 results on this new basis on the 12th of February, and we thank you again for joining us today. And we're now happy to take any questions.

[Operator Instructions] Your first question comes from Kieren Chidgey from UBS.

Just a couple of points of clarification. So on Issuer Services, Corporate Actions and SRM that are being included, obviously, historically had been more volatile lines. We've seen the sort of disclosure going forward. Are you still going to provide some sort of pie chart, sort of segmental breakdown within that division so we can just see sort of what impact those small volatile items have had?

Yes, yes, very much so. So the real intent was not to change any of the disclosure. As you know, we disclose revenues across all these sectors. We only disclose combined EBITDA of registry in corporate Actions, but we always provided EBITDA of the SRM model. Going forward, we will break that down so you will still get the EBITDA of SRM within Issuer Services and also you'll be able to see the combined there. So nothing is going to change. You will still have that granularity of information and disclosure.

Okay. And with -- similarly, with Property Rental Services going into Mortgage Services, are we still going to be able to assess the progress of that key business against the sort of targets you've outlined for Mortgage Services?

Yes. So in terms of Property Rental Services, we -- obviously, we've got some DPS in England and Wales. We do some other stuff up at Scotland and a little bit of technology here in Australia, et cetera. So that was one of the things. By putting that into that segment, we will have to break out that EBITDA going forward, and you will be able to see that. So that's actually one of the pieces of additional disclosure that you'll get as a result of moving to this new segment. So you will see that.

Okay. And then finally, just given you mentioned the new disclosure, the Voucher EBITDA, can you just remind us, Stuart, of the expected runoff profile of that over the next couple of years?

Yes. Look, I don't have the exact data in front of me. The problem -- it didn't run off as quickly as we thought. We actually kept the revenues pretty high -- there was delays with the government implementing their new scheme, et cetera. But we're now in sort of pretty much full runoff, and that will run down completely over the next, in my estimate, sort of 3 to 4 years, yes. And that will be a gradual run down. But I might have a look at that for the half, see if I can get that information as well just so we can have it for you exactly. But it is now in runoff mode and probably declining down about 25% roughly, maybe a little bit less.

[Operator Instructions] Your next question comes from Simon Fitzgerald from Evans & Partners.

Two very simplistic ones. I imagine that you will still show per division the contribution of margin income going forward

Yes. I think it's in there. Absolutely, Simon.

I'm sorry. Yes, okay. Apologies if I missed that. And the second one..

It's on Slide 15, I think, that breakdown, recalling from memory.

Okay. Apologies for that. Also, I just want to understand whether we'll also see a breakdown by geography in terms of all the divisions as well

Yes. That was -- we know that a number of people do -- has historically used the geographic method in terms of their modeling. And whilst on the ASX presentation, that is not there because that's an awful lot of data, et cetera, we will have an appendix that will go up to the Computershare investor website today that will actually break down the new segment reporting by country so you'll have all that information.

We have no further questions at this time. I'll now hand back to Stuart Irving for any closing remarks.

Okay. As I said earlier, thank you very much for taking the time, and look forward to seeing you in a few weeks. Be well. Thanks.

This concludes the Computershare new business stream report presentation. Thank you once again for joining us today and for your interest in Computershare. You may all disconnect.