HALF YEAR RESULTS 2013...TECHNOLOGY 22 Net revenue +5.4% Xuber revenues up Growth in Application...
Transcript of HALF YEAR RESULTS 2013...TECHNOLOGY 22 Net revenue +5.4% Xuber revenues up Growth in Application...
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HALF YEAR RESULTS 2013 Wednesday 31 July 2013
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© 2013 Xchanging plc 1
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YEAR-ON-YEAR IMPROVEMENT IN FINANCIAL PERFORMANCE
Net revenue £270.7m (HY 2012: £254.8m)
Adjusted operating profit £23.0m (HY 2012: £16.0m)
Adjusted operating margin 8.5% (HY 2012: 6.3%)
Operating cash flow £23.5m (HY 2012: £26.6m)
Economic profit £28.4m (HY 2012: £17.1m)
Net cash £90.0m (HY 2012: £62.1m)
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NEW STRUCTURE AND GO-TO-MARKET STRATEGY
7
Our Services
INSURANCE SERVICES
BUSINESS PROCESSING
ENTERPRISE
PROCUREMENT TECHNOLOGY
FINANCIAL SERVICES
Our Industries
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BUSINESS WINS
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GOING FOR GOLD
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Clear objectives
Good progress
One Xchanging initiative drives financial benefit
Drives productivity and optimises cost
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FINANCIAL PERFORMANCE David Bauernfeind
Chief Financial Officer
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© 2013 Xchanging plc © 2013 Xchanging plc
KEY PERFORMANCE INDICATORS
HY 2013 HY 2012 Change
Net revenue (£m)* 270.7 254.8 6.2%
Adjusted operating profit (£m) 23.0 16.0 43.8%
Adjusted operating margin (%) 8.5 6.3 -
Statutory operating profit (£m) 23.3 14.0 66.4%
Adjusted basic EPS (pence) 3.48 2.37 46.4%
Operating cash flow (£m) 23.5 26.6 (11.7%)
Equity free cash flow (£m) 16.1 19.4 (17.0%)
Adjusted cash conversion (%) 74.8 179.4 -
Net cash (£m) 90.0 62.1 44.9%
Economic profit (£m) 28.4 17.1 66.1%
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* Net revenue excludes principal spend on procurement contracts that arises from supplier costs that are passed on to the customer
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PRINCIPAL PROCUREMENT REVENUE
12
400
500
600
700
800
2008 2009 2010 2011 2012
Reve
nue
(£m
)
Revenue profile
Gross revenue Net revenue
Principal revenue is a pass-through with no margin impact
Required under IFRS to report gross revenue for all transactions where we are principal
Balances are significant when considered against our revenue base
No control over the quantum or timing of principal revenues
Net revenue is considered to be a more representative measure of economic value from revenue than statutory revenue and will be used for KPIs from 2013
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© 2013 Xchanging plc
XTB DISPOSAL
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Announced 15 May 2013
Xchanging to receive total cash of €40.5m to cover sale proceeds and performance and licence fees due to Xchanging
Service contract between XTB and Deutsche Bank would have expired May 2016
Shareholder approval granted at GM 26 July 2013
Closing date 31 August 2013
Cash proceeds will be partially used to pay down Group’s bank term loan £13.5m
Securities processing will not be classed as a discontinued operation
112.8 106.2 97.4
566.8 530.4 528.0
-
200
400
600
2010 2011 2012
Net Revenue (£m)
Group
XTB
8.9 10.2 9.6
56.1
43.2 50.4
-
20
40
60
2010 2011 2012
Adjusted Operating Profit (£m)
Group
XTB
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REVENUE
14
Net 254.8
Net 270.7
(20.1) Gross 322.7
26.9 6.3 2.8
Gross 347.3
-
50
100
150
200
250
300
350
400
Revenue H1 2012 Revenue growth Revenue shrinkage Acquisition Foreign exchange Revenue H1 2013 £m
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© 2013 Xchanging plc © 2013 Xchanging plc © 2013 Xchanging plc
ADJUSTED OPERATING PROFIT
15
16.0
23.0
(11.5)
(10.8)
(0.1)
14.0
1.0 11.3
3.1
-
5
10
15
20
25
30
35
AOP H1 2012 Impact of revenue growth
Impact of revenue
shrinkage
Impact of acquisition
Increase in costs
Cost savings Amortisation &
depreciation
Foreign exchange
AOP H1 2013 £m
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INCOME STATEMENT
HY 2013 HY 2012 £m £m
Adjusted operating profit 23.0 16.0 Exceptional other income 1.9 - Amortisation of acquired intangibles (1.6) (2.0) Statutory operating profit 23.3 14.0 Finance costs (6.2) (7.1) Finance income 3.9 4.6 Share of profit from joint venture 0.2 - Profit before tax 21.2 11.5 Taxation (5.7) (3.6) Profit for the period 15.5 7.9
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CASH FLOW
17
HY 2013 HY 2012 £m £m Adjusted operating profit 23.0 16.0 add/(less): Exceptionals and add backs 0.3 (2.0) Statutory operating profit 23.3 14.0 add: Non-cash items (incl. depreciation and amortisation) 12.9 15.4 EBITDA 36.2 29.4 Working capital movements * 9.2 13.9 Movement in provisions and pensions (6.4) (4.3) Cash generated from operations 39.0 39.0 Net capital expenditure (incl. pre-contract costs) (6.7) (7.3) Dividends to non-controlling interests (8.8) (5.1) Operating cash flow 23.5 26.6 less: Taxation (5.6) (5.9) less: Net finance costs (1.8) (1.3) Equity free cash flow 16.1 19.4
* Working capital movements include £6m received for early lease surrender
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© 2013 Xchanging plc © 2013 Xchanging plc © 2013 Xchanging plc
NET CASH
18
30 June 2013 £m
31 December 2012
£m
30 June 2012 £m
Cash Xchanging Xchanging Solutions Enterprise Partnerships
36.8
4.4 75.7
37.2 4.8
74.4
23.4
4.2 68.4
Total cash 116.9 116.4 96.0
UK bank debt Xchanging
(25.2)
(37.6)
(32.7)
Total UK bank debt (25.2) (37.6) (32.7)
Finance leases and other debt Xchanging Xchanging Solutions
(1.6) (0.1)
(1.8) (0.2)
(1.1) (0.1)
Net cash 90.0 76.8 62.1
£12.4m of UK bank debt repaid during H1 from Xchanging cash
At 30 June 2013 £7.4 million of Enterprise Partnership cash was held in Xetb and XTB
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© 2013 Xchanging plc © 2013 Xchanging plc © 2013 Xchanging plc
SECTOR PERFORMANCE
HY 2013 HY 2012
Net external revenue
£m
Adjusted operating
profit/ (loss)
£m
Adjusted operating
profit margin
%
Net external revenue
£m
Adjusted operating
profit/ (loss)
£m
Adjusted operating
profit margin
%
Insurance Services 99.7 20.5 20.6% 97.2 15.6 16.0%
Financial Services 92.3 8.6 9.3% 81.9 5.2 6.3%
Technology 49.0 2.5 5.1% 46.5 2.4 5.2%
Procurement and Other BPO 29.7 (1.3) (4.4)% 29.2 0.3 1.0%
Corporate - (7.3) - - (7.5) -
Total 270.7 23.0 8.5% 254.8 16.0 6.3%
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INSURANCE SERVICES
20.5
8.6
2.5 (1.3)
15.6
5.2 2.4
0.3
(5)
0
5
10
15
20
25
Insurance Services
Financial Services
Technology Procurement and Other BPO
Adjusted operating profit
20
99.7 92.3
49.0
29.7
97.2
81.9
46.5
29.2
0
20
40
60
80
100
120
Insurance Services
Financial Services
Technology Procurement and Other BPO
Net revenue Net revenue +2.6% Growth in core London market platforms Strong IT development revenues Australian workers’ compensation Adjusted operating profit +31.4% London market Phasing of IT development income
Reduction in broking services
HY 2013 HY 2012
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FINANCIAL SERVICES
Net revenue +12.7% AR acquisition Increased volumes Favourable FX impact Adjusted operating profit +65.4% AR acquisition XTB outperformed expectations in H1 Cost reduction program in Fondsdepot Bank
20.5
8.6
2.5 (1.3)
15.6
5.2 2.4
0.3
(5)
0
5
10
15
20
25
Insurance Services
Financial Services
Technology Procurement and Other BPO
Adjusted operating profit
99.7 92.3
49.0
29.7
97.2
81.9
46.5
29.2
0
20
40
60
80
100
120
Insurance Services
Financial Services
Technology Procurement and Other BPO
Net revenue
HY 2013 HY 2012
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TECHNOLOGY
22
Net revenue +5.4% Xuber revenues up Growth in Application Engineering Services business in India and SE Asia Growth in Infrastructure Managed Services across customer base Adjusted operating profit +4.2% Impact of sales growth No impact of LME contract change in 2013 to date
20.5
8.6
2.5 (1.3)
15.6
5.2 2.4
0.3
(5)
0
5
10
15
20
25
Insurance Services
Financial Services
Technology Procurement and Other BPO
Adjusted operating profit
99.7 92.3
49.0
29.7
97.2
81.9
46.5
29.2
0
20
40
60
80
100
120
Insurance Services
Financial Services
Technology Procurement and Other BPO
Net revenue
HY 2013 HY 2012
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PROCUREMENT
23
Net revenue +1.7% Net of principal spend revenues Revenue growth in US, although lower than anticipated Adjusted operating loss • Changed BAE UK contract impact from 1 January 2013 • HR business exiting its largest customers • Continued investment in USA market
20.5
8.6
2.5 (1.3)
15.6
5.2 2.4
0.3
(5)
0
5
10
15
20
25
Insurance Services
Financial Services
Technology Procurement and Other BPO
Adjusted operating profit/(loss)
99.7 92.3
49.0
29.7
97.2
81.9
46.5
29.2
0
20
40
60
80
100
120
Insurance Services
Financial Services
Technology Procurement and Other BPO
Net revenue
HY 2013 HY 2012
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SUMMARY
Year-on-year improvement in financial performance
No change to management expectations for 2013
Investment for growth and margin improvement
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STRATEGIC DIRECTION Ken Lever
Chief Executive
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© 2013 Xchanging plc © 2013 Xchanging plc © 2013 Xchanging plc
OUR PURSUIT
The transformation
Less dependent on major customers
Technology as an enabler to enhance domain strength
Differentiated service offerings through innovation
The goal
Value added solution
Differentiated products and services
Built around technology
Adds value to areas of domain strength
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WHAT SHOULD YOU EXPECT IN 3 YEARS?
Higher quality revenue
Technology-enabled solutions
Growth in line or ahead of the market growth rate
Continuing year-on-year improvement in financial performance
Improving margins
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CREATING VALUE A blended approach to creating value for shareholders
Grow economic
value
Increase shareholder
value
Business strategy: • Revenue growth • Cash margin • Investment • Operating cash flow
Financial strategy: • Dividends • Capital structure • Taxation
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OUTLOOK
Proportional reduction in H2 revenue due to Deutsche Bank securities processing exit, as planned
On track to deliver absolute year-on-year improvement, in line with market expectations
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APPENDIX
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© 2013 Xchanging plc © 2013 Xchanging plc © 2013 Xchanging plc © 2013 Xchanging plc
NON-CONTROLLING INTERESTS
36
HY 2013 HY 2012 Non controlling
interests’ share of adjusted profit after
tax (£m)
Non controlling interests’ share of
adjusted profit / (loss) after tax (£m)
Insurance Services XIS/XCS 5.9 3.8 Financial Services XTB 0.1 -
Xchanging Italy - (0.6)
Technology Xchanging Solutions 0.4 0.2 Total Group 6.4 3.4
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© 2013 Xchanging plc © 2013 Xchanging plc © 2013 Xchanging plc
EXECUTIVE BOARD
Ken LeverCEO
Andrew BinnsTechnology
Services
Adrian GuttridgeInsurance
Joerg BrandFinancial Services
Nimish SoniEnterprise Services
Ed CrossProcurement
David Bauernfeind
CFO
Stephen ScottGlobal Sales &
Marketing
Jon StratfordStrategy & Corporate
Development
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© 2013 Xchanging plc © 2013 Xchanging plc © 2013 Xchanging plc
DEBT COVENANTS
30 June 2013 31 Dec 2012 Test Criteria
Interest Cover 15.4x 16.7x Minimum of 6.0x
Leverage 0.6x 1.0x Maximum of 2.0x
Debt Service 5.0x 5.8x Minimum of 1.0x
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Bank covenants are tested quarterly under the revolving credit and term loan facilities agreement. We have agreed with our bank group that the debt service covenant will be removed following the disposal of the XTB group and associated term loan repayment.
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HEADROOM ON COMMITTED UK BANK FACILITIES
30 June 2013 £m
Term loan facility 16.8
Revolving credit facility 75.0
Total committed facilities 91.8
Cash drawings (25.2)
Bank guarantees/letters of credit (18.9)
Undrawn facility 47.7
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The analysis of headroom under committed and uncommitted credit facilities, presented in the operating and finance review section of the 30 June 2013 results, also contains non-UK and non-bank facilities.
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OVERVIEW OF EP CASH AT 30 JUNE 2013
• Attributable to Xchanging = expected dividends + net intercompany balance + accrued licence and performance fees + contractual share of residual cash
• Attributable to NCI = expected dividends + contractual share of residual cash
Xetb & XTB £5.5m
Attributable to NCI32%
£17.1Xetb and XTB£7.4m
Total Cash in Enterprise
Partnerships £75.7m
Customer Cash Deposits in Fondsdepot Bank
£21.7m
Trade Working Capital
27% £14.8m
£54.0m
Xetb & XTB £1.9m
Attributable to Xchanging
41% £22.1
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GROUP AND CENTRALLY CONTROLLED NET CASH
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Centrally controlled net cash represents Group cash and debt that is not held in Enterprise Partnerships
At 30 June 2013 customer cash deposits offered by FDB contributed £21.7 million to total Group cash
(35,000)
(25,000)
(15,000)
(5,000)
5,000
15,000
25,000
35,000
45,000
55,000
65,000
75,000
85,000
95,000 Ju
n-11
Sep
-11
Dec
-11
Ma
r-12
Jun-
12
Sep
-12
Dec
-12
Ma
r-13
Jun-
13
£'000 Centrally Controlled and Group Net Cash June 2011 - June 2013
Centrally Controlled Net Cash Group Net Cash
2nd payment for XBS acquisition
£6m
1st payment for AR Enterprise
acquisition £10m
1st receipt for Leadenhall lease
surrender £6m
1st payment for XBS acquisition
£4m
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CASH FLOW: RECONCILIATION TO NET CASH MOVEMENT
HY 2013 £m
HY 2012 £m
Movement
Adjusted operating profit 23.0 16.0 7.0
Add/(less): Exceptionals and add backs 0.3 (2.0) 2.3
Statutory operating profit 23.3 14.0 9.3
Add: Non-cash items (incl. depreciation and amortisation) 12.9 15.4 (2.5)
EBITDA 36.2 29.4 6.8
Working capital movements 9.2 13.9 (4.7)
Movement in provisions and pensions (6.4) (4.3) (2.1)
Cash generated from operations 39.0 39.0 -
Net capital expenditure (incl. pre-contract costs) (6.7) (7.3) 0.6
Dividends to non-controlling interests (8.8) (5.1) (3.7)
Operating cash flow 23.5 26.6 (3.1)
Less: Taxation (5.6) (5.9) 0.3
Less: Net finance costs (1.8) (1.3) (0.5)
Equity free cash flow 16.1 19.4 (3.3)
Dividends to shareholders (2.4) - (2.4)
Other (0.5) (2.5) 2.0
Movement in net cash 13.2 16.9 (3.7)
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FINANCIAL SERVICES – BY BUSINESS
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52.8
27.6
11.9
50.4
25.9
5.6
0
10
20
30
40
50
60
Securities Processing Funds Administation - Germany
Funds Administration - Italy
Net Revenue
HY 2013 HY 2012
7.3
1.2
0.1
5.2
1.0
(1.0) (2)
(1)
0
1
2
3
4
5
6
7
8
Securities Processing Funds Administation - Germany
Funds Administration - Italy
Adjusted Operating Profit
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BUSINESS MODEL
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