Transcript Inset SAI Global logo & The better business people tag
SAI Global Limited ASX Code: SAI Macquarie Emerging Leaders 7 May 2009
1 SAI Global Limited ABN: 67 050 611 642
Corporate Overview
Listed on ASX in December 2003 Approximately 154 million shares on issue
Market capitalisation of (approx) $A400 million Board consists of CEO plus five non-executive directors
Offices in 25 countries across Asia-Pacific, Europe and North America
1,400 employees, circa 40% offshore
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Our Business & Value Proposition
SAI Global provides solutions that help businesses understand and comply with their technical requirements and regulatory obligations in a cost effective manner by providing:
Easy and generally on-line access to need-to-know technical business information and associated embedded workflow solutions Products, tools and services that reduce the burden and cost of regulatory and internal compliance
Assessment of conformance to various national, international and internal standards thereby providing confidence around processes, products and supply chain
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Our Business & Our Services Publishing (Information Services)
Standards, regulatory and technical information, databases and workflow solutions
Compliance
Alerts and news feeds, governance, risk and compliance (GRC) products and services and online courseware
Assurance
System and product related conformity assessment services and related training services
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Key Investment Features
Both defensive and growth characteristics to the business Defensive:
Strong demand drivers High proportion of annuity or non-discretionary revenue streams Leading market position in our businesses in Australia, which underpin performance
Business model resilience to economic slowdowns Growth:
Increasing exposure to higher growth products, geographic markets and business sectors
Market share gains Industry consolidation globally
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Demand Drivers
Regulatory environment
Constantly changing Punitive remedies Boardroom
Heightened awareness of compliance and risk management obligations Brand Protection Greater demand for SAI’s services
Brand impact of regulatory failures Need for supply chain confidence System and product conformity Globalisation Sustained growth rates
Increasing globalisation of trade flows
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Nature of Revenue Streams
Publishing 38% 59% 3% Compliance 61% 37% 2% Assurance 79% 2% 19% Espre on Group Total
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100% 58% 32% 10%
0% 10% 20% 30% Annuity Style
1. Based on Espreon revenue net of disbursements
40% 50% 60% Non-discre tionary 70% 80% Discre tionary Annuity style Non-discretionary Discretionary 90% 100% = subscription arrangement or renewable contracts exist with SAI = “must have” products and services for customers = neither annuity nor non-discretionary revenue
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Geographic and Service mix
Revenue 1 Publishing Compliance Assurance Espreon EBITDA Publishing Compliance Assurance Espreon
1. Based on Espreon revenue net of disbursements
Revenue 1 Asia Pac North America Europe EBITDA Asia Pac North America Europe
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Consolidated Trends
A$M 350.0
Revenue 300.0
CAGR >25% 250.0
200.0
130.5
112.0
150.0
91.0
100.0
54.6
48.1
142.8
112.9
50.0
100.8
68.7
48.5
51.3
0.0
FY04 FY05 FY06 1s t Half FY07 2nd Half FY08 FY09 20.0% 15.0% 16.7% EBITDA Margin* 20.3% 20.6% 18.2% 18.8% 10.0% 5.0% 0.0% FY04 FY05 FY06 FY07 FY08 FY09
*FY08 EBITDA and EBITDA margin are shown before non-recurring items
A$M 70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
8.5
7.7
FY04 CAGR >30% 17.2
10.1
9.1
12.8
FY05 FY06 1s t Half Ce nts 20.0
16.0
12.0
8.0
4.0
0.0
-4.0
4.2
4.1
CAGR >15% 6.4
5.1
FY04 1s t Half FY05 EBITDA* 7.0
5.5
EPS 23.9
19.3
FY07 2nd Half FY08 7.4
5.7
FY06 2nd Half FY07 29.7
20.5
9.2
28.2
FY09 7.1
4.5
(3.1) FY08 FY09 Non-re curring
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Publishing (Information Services)
Profitability currently underpinned by Publishing License Agreement (PLA) with Standards Australia (15+5 years from Dec 03)
Non-exclusive licenses with more than 250 international standards bodies
Current revenues in Standards distribution estimated to be around 5% of addressable market (USD 830M)
Main competitor is IHS (listed on NYSE), but also competes with SDOs in local markets
Transitioning from being a publisher (distributor) of third party IP to an information services provider with a focus on work flow solutions
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Publishing (Information Services)
Nature of revenue: Te chnical (Standards, database s) 50% 45% 5% Mix 67% Le gislation (Victoria) 70% 30% 6% Prope rty Information (e x Espre on) 1% 99% 27% Total base d on product mix 38% 59% 3% 100%
Annuity style Non-discretionary Discretionary 0% 10% 20% 30% Annuity Style 40% 50% 60% Non-discre tionary 70% 80% Discre tionary 90% 100% = subscription arrangement or renewable contracts exist with SAI = “must have” products and services for customers = neither annuity nor non-discretionary revenue
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Publishing (Information Services)
A$M 90.0
75.0
60.0
Annual organic revenue growth trend currently 4% - 6%, but expected to increase over time EBITDA margins in excess of 40% CAGR >25% Revenue
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45.0
30.7
30.0
15.0
15.0
15.0
22.3
14.4
15.3
0.0
FY04
1. Excludes Espreon
FY05 FY06 1st Half 38.8
36.7
43.3
42.3
FY07 2nd Half FY08 45.0
FY09 A$M 40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
CAGR >28% 6.8
4.2
FY04 6.7
6.8
EBITDA
1
12.7
9.1
FY05 FY06 1st Half 16.4
15.1
FY07 19.6
17.5
FY08 2nd Half 18.8
FY09
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Publishing (Information Services)
Strategy:
Continue transformation into embedded, value-adding information services supplier in targeted verticals Focus on
“
operational excellence
”
to optimise distribution Fully develop core tailored product offerings Expand presence in Asia Pacific through resellers and partnerships Continue to gain market share through enhanced associations, permissions and products Collaborate with Compliance division on publishing opportunities presented by deep reach into selected compliance segments
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Compliance Services
Growing annuity revenue base Double digit market growth driven by changing regulatory environment Blue chip customer base No dominant global player - many small niche players in GRC solutions Major competitors in the provision of on-line regulatory courseware are LRN, Integrity Interactive and Corpedia World wide addressable market estimated at USD4.1Bn of which content is USD2.2Bn, GRC USD1.1Bn, training and awareness USD200M, consulting USD600M and hotline services USD50M
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Compliance Services
Nature of revenue: Course ware 49% 50% 1% Mix 65% Conte nt GRC (Gov e rnance , Risk & Compliance ) 100% 100% 15% 14% Consulting 75% 25% 6% Total base d on product mix 61% 37% 2% 0% 10% 20% 30% Annuity Style 40% 50% 60% Non-discre tionary 70% 80% Discre tionary 90% 100%
Annuity style Non-discretionary Discretionary = “must have” products and services for customers = neither annuity nor non-discretionary revenue 100% = subscription arrangement or renewable contracts exist with SAI
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Compliance Services
Medium term annual organic revenue growth of 10% - 15% expected EBITDA margins in excess of 25% achievable A$M 40 Revenue 30 20 10 0 FY04 CAGR >30% 19.7
15.9
9.5
1.4
7.3
FY05 FY06 1st Half 16.6
10.1
FY07 2nd Half FY08 19.4
FY09 A$M 10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
FY04 CAGR >40% EBITDA 1.8
1.3
FY05 FY06 1st Half 3.5
1.3
FY07 4.1
3.3
1.2
FY08 2nd Half FY09
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Compliance Services
Strategy:
Secure and enhance market leadership position in regulatory on-line learning Integrate LMS and GRC technologies enabling a customer managed, end-to-end compliance solution Focus GRC and content on targeted verticals where SAI can ascend to market leading positions Build a
“
thought leadership
”
and
“
consulting community
”
Make technology a core competency Optimise and fully leverage the organisation
’
s resources
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Assurance Services
Market leading positions in Australia, North America and food sector – growing global capability Competitive advantage from “Five Ticks” StandardsMark Supplier and customer driven industry consolidation occurring Strong underlying demand drivers emanating from the desire of business to provide products and services that have integrity, are safe and comply with national, international and internal standards and specifications Global TIC market estimated at USD 80bn, of which the certification portion is approximately USD 6bn
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Assurance Services
Nature of revenue: Syste ms Ce rtification 90% 10% Mix 81% Product Ce rtification 80% 20% 8% Training 100% 11% Total base d on product mix 79% 2% 19% 100%
Annuity style Non-discretionary Discretionary 0% 10% 20% 30% Annuity Style 40% 50% 60% Non-discre tionary 70% 80% Discre tionary 90% 100% = subscription arrangement or renewable contracts exist with SAI = “must have” products and services for customers = neither annuity nor non-discretionary revenue
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Assurance Services
Sustainable annual organic revenue growth of 5% - 7% EBITDA margins in “high teens” achievable A$M 160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
32.7
33.5
37.7
35.2
Revenue CAGR >15% 51.5
38.8
57.2
54.0
FY04 FY05 FY06 1st Half 68.7
55.4
FY07 2nd Half FY08 79.3
FY09 A$M 25.0
20.0
15.0
10.0
5.0
3.2
5.2
0.0
FY04 EBITDA CAGR >20% 6.2
5.3
4.7
5.9
FY05 FY06 1st Half 7.3
7.2
10.1
6.9
11.2
FY07 FY08 2nd Half FY09
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Assurance Services
Strategy:
Continue to build geographic capability
Presence in “top” 25 countries (now 19) Use a mix of acquisition, JV and organic start ups Specifically target/ focus on Europe
Enable enhanced global account capability
Seamless account management model and structure World class end-to-end business processes A single, global, scaleable IT system
Drive high growth product development
Enhance our Product Lifecycle management capability Develop a cohesive Supply Chain offering Exploit emerging opportunities in food and the environment 21
Espreon
Espreon is a national provider of property information and conveyancing & lending workflow solutions Customers include major Australian banks (lenders) and top 200 law firms (conveyancers) Espreon is both the largest provider of property information required to execute a property transaction and the largest property settlement agent in the Australian market Revenue is driven by transaction volumes, not transaction values Employs circa 230 staff with offices in all States and major centres
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Espreon Business Model
Information Services Lending Workflow Platform Settlement, Stamping & Registration Services Conveyance Workflow Platform 23
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Espreon
Nature of revenue: Conveyancing 100% Revenue Mix Gross 85% Net 58% Lending 100% 15% 42% Total based on product m ix 100% 0% 10% 20% 30% 40% 50% 60% 70% Annuity Style Non-discretionary Discretionary 80% 90% 100% 100% 100%
Net revenue = Gross revenue less disbursements
Annuity style Non-discretionary Discretionary = subscription arrangement or renewable contracts exist with SAI = “must have” products and services for customers = neither annuity nor non-discretionary revenue
Espreon
Rationale for the acquisition:
It is consistent with SAI’s core strategy to build information services businesses that provide need-to-know information and workflow solutions The combination of Espreon’s and SAI’s property businesses will result in an Australian property services business with a strong market position Espreon’s and SAI’s businesses have complementary strategies with no substantial overlap It is financially compelling - integration of the businesses will generate cost savings and the acquisition will deliver EPS accretion throughout the market cycle
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Espreon
SAI Ownership at 62.5%, Vectis at 36.2% Consideration:
Cash (new debt) 8.5M SAI shares, VWAP $2.20
Incidentals $ 8.8M $18.8M
$ 1.2M
$28.8M
FY10 EPS accretion of circa 5% expected
Intention is to delist Espreon – as per SAI’s Bidder’s Statement
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Balance Sheet
Total assets
Debt Other liabilities
Total liabilities Net assets Net gearing Interest cover Net asset backing (cents) As at 31 Dec 08 $M Pro-Forma with Espreon $M 477.5
176.2
113.7
289.9
187.6
47.2% 6.2x
129.6
548.8
195.4
122.2
317.6
231.2
43.2% 7.3x
150.1
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Borrowings – Maturity Analysis
A$M 80.00
Debt Maturity By Quarter 60.00
USD 38.8
40.00
USD 34.0 20.00
0.00
GBP 11.1
GBP 4.5
AUD AUD 9.0
10.2
USD 8.0 AUD 23.0
Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 AUD GBP USD Espreon Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13
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Outlook – FY09
Whilst the impact of the current economic climate is evident in some of our businesses overall demand for our products and services remains firm
The outcome for the year will be a record result for the SAI Group
The profit guidance range remains unchanged with the impact of the recent strength of the Australian dollar mitigating to some extent the expected positive contribution from the Espreon acquisition
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