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Interim 2008 COMPUTERSHARE LTD Earnings Conference Call - Final.

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Original Source: FD (FAIR DISCLOSURE) WIRE

DARREN MURPHY, IR, COMPUTERSHARE LIMITED: Good morning. My name is Darren Murphy. Welcome to the Computershare half-year results briefing for financial year 2008. I would like to introduce Stuart Crosby, our Chief Executive Officer; and Tom Honan, our Chief Financial Officer who will be presenting this morning. We will kick it off with Staurt providing a summary of the results. We'll follow that with Tom going into more depth around the numbers and Stuart will conclude the presentation with an update regarding strategy and a review from around the globe.

(OPERATOR INSTRUCTIONS). We expect the briefing to last around one hour. I would like to introduce Stuart Crosby.

STUART CROSBY, CEO, COMPUTERSHARE LIMITED: Thank you, Darren, and good morning everyone. Today of course this is by no means the most important announcement being made in Australia. There was a very important one in Canberra this morning. While Computershare is very much a global company as far as its business is concerned, its corporate personality is distinctly Australian and I think today is a good day to be in Australia.

Moving to our results announcement and what Tom and I will do is work through the (inaudible) presentation that was posted on the Internet this morning and released to (inaudible). We have I believe a really good story for you today about the first half of financial year 2008.

Our management earnings per share for the first six months were up 53% and net profit after outside equity interest was up nearly 50%. Free cash flows were up nearly 45% and again, the thing that's driven that is a higher debt growth. It's a higher growth in revenue of nearly 15% as against costs which in constant dollar terms have pretty well strayed behind. Our dividend, we have increased again in step with the recent pattern of increases and importantly we're in a position to return to dividend franking and this dividend will be 20% franked.

We have historically shown a slide next which showed some of the Thomson corporate action numbers which at the last minute honestly we took out because we've never thought it was particularly helpful in understanding what drives our business. We have talked before about how size of corporate actions is completely uncorrelated to their financial value to us. So as I said we took that out. We have included a series of charts on global interest rate levels which (inaudible) in our (inaudible) editorialized. On that, we will look forward to questions on that when the Q&A time comes.

So, briefly to round out the introduction what I want to do is recapitulate what we see as our strengths which is our high level of recurring income, a high level of global diversification and our proven capacity to both deliver technology and innovate in relation to technology and to acquire and integrate businesses. Importantly, in the current environment, our balance sheet and our cash flow situation are real assets and we'll talk about that again later. And I guess the unique point of Computershare is that because we have businesses that can work together in a range of different places at capacity to service global transactions is without any sort of peer in the world.

So, that rounds out what I wanted to say before handing over to Tom to go through some of the more numerical and detailed issues. But I should reiterate what's in our release about our expectations going forward for the rest of this year which is that in the light of the half-year results and having done some careful analysis, we are lifting our guidance for full-year management earnings per share growth from 30% to 40%. That's really the quick overview that I wanted to give. I will hand over now to Tom Honan, our Chief Financial Officer.

TOM HONAN, CFO, COMPUTERSHARE LIMITED: Thank you, Stuart, and welcome to all on the line. A special hello to all of those Computershare staff around the world who have assisted in either driving or producing this result. We won't be long so you can all get back to work.

I would like to start on Page 10 which commences with a summary of our financial performance. You'll see total revenue of $788 million, which as Stuart said earlier was up around 14% on the prior corresponding period. Management EBITDA of $257 million and earnings per share expressed in management adjusted terms of $27.36 per share.

Stuart talked about 14% revenue growth and 5% operating cost growth driving an EBITDA result of 36%. Efficiencies below the EBITDA line drive (inaudible) result 46% higher than last year. And the buybacks and other events drive an increase beyond that to a 53% growth in earnings per share.

Next page -- the last couple of results we have talked about major drivers behind our corporate financial performance. Some of the items on this list are different to the last period but all are still valid.

It's fair to say as we go through the results that the Company is not firing on all cylinders but it is still an excellent result. It shows the portfolio effect of some businesses overdelivering and compensating for those businesses that are not quite performing to the level that they were a year ago.

The next page, Page 12 shows our earnings per share from a rolling 12 months perspective, the performance of that earnings per share as the Company's target measure. And if you look at this, we show three years of performance from as I said a rolling 12 months perspective. The first of those years, 24% growth. The second of those, 78% growth and the most recent which is 49% from a rolling 12 months perspective. That shows a compound annual growth rate of 49% over the past three years.

Page 13, in 2005, we communicated our internal target to the market and that internal target was 20% growth in earnings and since then we've obviously been well in excess of that target. In fact, closer to 50% compound annual growth rate rather than 20%.

Page 14, I just want to talk about a few points here. The first one of those is one I've already spoken about which is the comparison to the first half of last year of 53% growth -- growth from $0.178 a share to $0.273. The second point is that the $0.273 is 45% on top of the second half of 2007 so the most recent half. And those two increases, 53% and 45% have come off a high base.

For example, the first half of 2007, the prior corresponding period was up 102% on the first half of 2006. So, if you like we have delivered 102% from the first half of 2006 to the first half of 2007 and then another 53% for the first half of 2008.

Page 15 shows where the growth in net profit has come from. The first point I would make is that all regions have contributed to that growth. And I will talk about some of that detail later. But you can see Asia Pacific delivering $34 million; Europe, Middle East, and Africa delivering almost $17 million and North America delivering almost $18 million.

There is a higher interest number of $4.8 million which is obviously driven by the buyback as much as anything. And that's been offset by the number of shares reduction which shows as I said before the 7% difference between impact growth and earnings per share growth. $13.2 million is unfortunately an unhappy consequence of making more money -- we need to pay more tax -- unhappy for most of us anyway. And all of that delivering a 46% increase in impact from $107 million to almost $156 million.

The next page starts a section on operating cash flows. Anyone that knows me knows that I love the cash flow pages. In the days of (inaudible) IFRS and other accounting acronyms, cash generation is especially pleasing. The $206 million of operating cash flow is up 50% on the prior corresponding period. You'll see some CapEx numbers there in yellow and I will talk about that later.

Free cash flow is on Page 17. And what this shows is the full-year compound annual growth rate of 71% in cash flows, in operating -- in free cash flows which we define as operating cash flows less CapEx.

Page 18, I will talk about EBITDA margin later. But it's an area that Stuart has spent a lot of time on and we can see that it's definitely paying off through revenue quality and also through operating cost efficiency and will also tie in through some of the technology cost slides that we display later on in the presentation.

But you can see that as I said revenue grown 14% from 694 to 788; the blue columns and the red line of EBITDA growing 36% from 198 to $257 million. You really see the leverage of that margin improvement.

The next page -- 19. If I focus on the first half which is the left section of that page we can really see the growth in revenue but more importantly, the growth in margin growing at a much higher rate than the growth in revenue.

And Page 20 focuses on that margin where it's not that long ago that we were struggling around the 20% level of margin. We have driven that up into the high 20s last year and into the low 30s this year.

As I said before, this is about cost control but it's also about the quality of revenue. And as I said, something that Stuart has focused on and continues that focus and you will see some references later on in his presentation about revenue quality....

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