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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Thanks for holding patiently, everyone. This is Jeremy, your operator for today. Just letting you know this call is being recorded. I will now hand you over to Mr. Darren Murphy, the Head of Investor Relations. Go ahead, Darren.
DARREN MURPHY, HEAD, IR, COMPUTERSHARE: Welcome everyone to the full year results call for 2007. I would also like to welcome Stuart Crosby, our Chief Executive Officer, and Tom Honan, our Chief Financial Officer. As per usual, we expect the call to last around one hour. We will kick off proceedings with an introduction from Stuart. We will follow that by a detailed financial review from Tom and finish it up with an update from around the globe from Stuart then question time. (Operator Instructions).
Over to Stuart.
STUART CROSBY, CEO, COMPUTERSHARE: Good morning everyone. As I'm sure you've all had a look at the headline numbers, this is a very satisfying result to be able to deliver on the back of operating in a favorable market environment but also on the back of some fairly significant operational and margin improvements and benefits.
Just to run down the financial highlights quickly, management EPS is just a kick under US$0.367 per share, which is up 61% as against our guidance on the half-year of 50%. Management net profit after outside equity interest is just shy of $220 million, up 62%. The free cash number is a very, very satisfying thing, $295 million and a bit, up 86%. The margin increased year on year from 20% to 26% on the basis of a 17% revenue increase while costs only rose 7%. Our total annual dividend is up 31% at AUD0.17 a share. All other numbers that are reported of course having been in US dollars reporting currency.
To characterize the results more generally, it is not -- as it was on the half, it is not one business or two businesses performing well. It is a very even effort across the world with strong performances from all our major markets. Revenue growth has been part of the story, and Tom will talk about that a little -- in a little more detail and break that up for you a little bit later on.
But margin growth is I think the really important part of the story from our point of view. As I've said before, when you have revenue grow by 10% more than costs grow, your margins must by definition improve.
The other point that I want to make at the start and I'm sure it's the question at the top of everyone's minds or lists or whatever is that we see no material impact from recent market events. Exactly what those events mean going forward, we know as little about as anyone else does. But, we have done some pretty careful thinking and analysis and talking to people around our businesses and we see as many ups for us as downs out of the changes to the world environment that seem to be emerging.
We always include a couple of slides on equities market and interest rate market levels. These are for reference and I won't dwell on them or analyze them. I guess what I will move on to is the next slide which talks about where we see our strengths. These are strengths that we have been fairly consistent in citing going forward. There's been a slight finesse as we look to make sure that they are exactly relevant to what we're talking about today.
Importantly, a very high percentage of our revenue recurring in nature -- well north of 70%. We do have a diversified exposure to most important world markets, including exposure albeit smaller at the moment to the significant global growth economies of China, India, and Russia. We continue to have exposure to any increases in interest rates. We have demonstrated and proven technology, M&A integration and M&A execution experience and skills that we believe continue to position us well going forward.
The financial health of the business is difficult to question with margins now north of 25% with a very healthy arguably undergeared balance sheet and with strong record of growth, both over the last four years and looking forward. And I guess, a new point on this slide which is one that I will mention again a little more later is we're starting to see more and more leverage from our cross-border capacities and that is making a material difference to our capacity to win important clients and important transactions.
So, moving on to the outlook, we have said consistently over the last few years that our long-term growth target is EPS growth -- management EPS growth of 20% per year. That remains our target and we reaffirm our commitment to achieving that. We see three basic levels to achieving that organic growth, acquisitions, and balance sheet management. Looking at FY '08 and having regard to current market conditions, we expect management EPS to be at least 15% higher in financial year 2008 as it was in financial year 2007.
Lastly, in this introduction and before I hand over to Tom, I will point out that in our result, we have announced that we are extending our current share buyback program both in size, moving the target number of shares from 25 million to 45 million, leaving just over 31.5 million yet to be purchased. And we're extending the time period to the end of January 2008.
That was what I wanted to say by way of introduction. I will now hand over to Tom to take you through the detail of the financial results.
TOM HONAN, CFO, COMPUTERSHARE: Welcome to all of those investors and employees and other people that are listening. Thanks to also all of the people who have contributed to making this result and also putting it together. I know there's a lot of Computershare employees that are listening to this presentation.
If we turn to page 13 of the presentation before we get into the details, it's worthwhile spending a few minutes looking at the summary profit and loss. As Stuart said, sales revenue growing to more than US$1.4 billion, an increase of 17% on the prior year. Operating costs growing by 7%, providing leverage to provide a management EBITDA increase of 54% further leverage through holding depreciation and amortization expenses to provide a management EPS growth of 61%.
These are all management numbers. There's details in the appendix on the non-recurring items that we have excluded. We believe that the management numbers provide a more realistic judgment -- a more realistic measurement of the operating performance of the business. It's the numbers that we use to run the business. And therefore, they are the ones that we communicate to investors in this presentation.
One final point before I come off this page, there's been some discussion about the impact of foreign exchange on these numbers. As you are all aware that the US dollar has deteriorated versus most of the currencies in which we operate. And as a result, the results are impacted to a small amount. More than 50% of our profits are generated in US dollars or US dollar-paid currencies. And the impact is basically around 2 or 3 percentage points. So total revenue in constant dollars would've been up 14%. Operating costs would've been up 5% and management EBITDA would've been up 50% if the currencies had remained in 2007 what they were in 2006.
If we turn to page 14, and I talked at the half-year about the top 10 issues that were impacting our business and all impacting in a favorable direction. I've added one more which is foreign exchange. So now, we have 11. As I said at the half-year, it's not any one of these items. And as Stuart said, it's not any one business. It's all of them contributing.
Corporate action environment is healthy for us. Interest rates levels are obviously higher in 2007 than they were in 2006. We have higher client balances so that we're able to earn higher margin income, both through those interest rate levels and high balances. We've won a number of new clients and new loans of business during the year. We've made a few small but important acquisitions during the year. We've divested some small but underperforming businesses during the year. Cost control as Stuart outlined has contributed towards holding costs at a much lower level than revenue growth. Stuart will also talk some more about operating efficiencies.
You'll see some balance sheet improvements through DSO and other still extracting acquisition synergies during the 2007 year from EquiServe and from other acquisitions made in prior years. And as I've said, the foreign exchange impact certainly contributed but wasn't a dominant factor in our performance.
If we turn to page 15, earnings per share has been the Company's key indicator for the past four years. You see the continued spiral from a low base in 2003 to a very satisfactory as Stuart said over $0.36 in 2007.
Page 16, two years ago, we talked about a long-term target of 20% compound annual growth in earnings per share. Since then we've grown in 2006 the earnings per share number by 41% and in 2007 by 61%. So obviously, we are well ahead of our 20% per annum growth target.
Page 17 breaks those numbers up into half on half, showing a significant growth on prior corresponding period. In the first half, we grew the earnings per share by over 100% and you might say that that's [tiled] off. It's certainly lower. It's 35% in the...
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