COMPUTERSHARE LIMITED. — AGM Information 2016

Nov 8, 2016

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MARKET ANNOUNCEMENT

Computershare Limited ABN 71 005 485 825 Yarra Falls, 452 Johnston Street Abbotsford Victoria 3067 Australia PO Box 103 Abbotsford Victoria 3067 Australia Telephone 61 3 9415 5000 Facsimile 61 3 9473 2500 www.computershare.com

Date:	9 November 2016
To:	Australian Securities Exchange
Subject:	Computershare Limited Annual General Meeting

Attached is the presentation – ‘an inflection point in earnings growth’, which is being delivered at the Annual General Meeting at 10am today, 9 November 2016.

For further information contact: Michael Brown Investor Relations Ph +61 400 248 080 michael.brown@computershare.com.au

About Computershare Limited (CPU)

Computershare (ASX: CPU) is a global market leader in transfer agency and share registration, employee equity plans, mortgage servicing, proxy solicitation and stakeholder communications. We also specialise in corporate trust, bankruptcy, class action and a range of other diversified financial and governance services.

Founded in 1978, Computershare is renowned for its expertise in high integrity data management, high volume transaction processing and reconciliations, payments and stakeholder engagement. Many of the world’s leading organisations use us to streamline and maximise the value of relationships with their investors, employees, creditors and customers. Computershare is represented in all major financial markets and has over 16,000 employees worldwide.

For more information, visit www.computershare.com

2016 ANNUAL GENERAL MEETING

An inflection point in earnings growth 9 November 2016

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2016 ANNUAL GENERAL MEETING

Chairman’s address Simon Jones

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Company overview

A leading global provider of administration services in our selected markets

Who we are

• › Global market leader in transfer agency and share registration, employee equity plan administration, proxy solicitation and stakeholder communications

• › Also specialise in mortgage servicing, corporate trust, bankruptcy, class action administration and a range of other business services

Our capabilities

• › Renowned for our expertise in high integrity data management, high volume/high value transaction processing, reconciliation, payments and stakeholder communications

• › Many of the world’s leading organisations use Computershare’s services to streamline and maximise the value of relationships with their investors, employees, customers and other stakeholders

Our strategy and model

• › Our strategy is to be the leading provider of services in our selected markets by leveraging our core competencies to deliver outstanding client outcomes from engaged staff

• › We focus on new products and services to reinforce market leadership in established markets and invest in technology and innovation to deliver productivity gains and improve cost outcomes

• › We have a combination of annuity and activity based revenue streams, strong free cash flow and high ROE

Growth drivers

• › Organic: Investment in mortgage servicing and employee share plans and enterprise wide cost out programs coupled with property rationalisation benefits to drive growth and improved returns

• › Macro: Leverage to rising interest rates on client balances, corporate actions and equity market activity

• › Structural: Emerging trend of new non-share registry outsourcing due to rising compliance, technology complexity and requirement for efficient processing, payments and reconciliations

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Leveraging our strengths to drive profitable growth, free cash flow and enhanced returns

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Largest global share Strong market
Diverse and loyal
customer base with registrar and positions with high
employee share plans barriers to entry.
many of the world’s
administrator, only Technology
leading
provider with globally investments drive
organisations and
integrated innovation and
brands trusting us
market offering efficiency.
History of revenue
growth, with over
70% of a recurring Cash generative, high Focus on driving
nature and strong return on equity profitable growth to
underlying profit business model reward shareholders
growth. Leverage to
rising interest rates.
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FY16 global highlights

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5 All figures presented are as at 30 June 2016 and stated in US Dollars (USD) unless otherwise noted.

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FY2016 results

Track record of consistent returns

• › Delivered EPS of 55.09 cents – in line with guidance

• › Total management revenue +5.0%, $2,075m*

• › Management EBITDA $557.1m*, +0.5%, excluding margin income +4.3%

• › Free cash flow $347.5m, ROE 26.9%

• › AUD 105.2m shares bought back at accretive prices

• › Total dividend per share AUD 33 cents, +6.5%

Dividend history – steady growth

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35
30
25
20
33
15 28 28 28 28 29 31
10 21 22
17
13
5
0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
DPS (AU cents)
Cents
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• All figures are presented in United States Dollars (USD), unless otherwise stated.

• denotes constant currency

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Risk management

Computershare has a well developed culture, processes and governance in place to manage risk. These are established and embedded across all parts of the organisation.

• › Primary responsibility at the individual and business level

• › Strong independent oversight by the Risk and Audit Committee

• › Effective consequence management

Computershare operates in highly regulated markets

• › Clients entrust us to execute transactions and maintain their data in a timely and accurate way

• › We continue to monitor and enhance our risk controls and consequence planning

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Corporate responsibility Community – Change A Life

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2016 ANNUAL GENERAL MEETING

CEO’s address Stuart Irving

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Robust underlying business performance continues

Management EBITDA, excluding both margin income and the impact of exchange rate movements, has grown 46.1% since FY13

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400 35%
379.3
350 364.4
30%
327.2
300
25%
250
259.7
21.4% 20%
20.8%
200 19.6%
16.4% 15%
150
10%
100
5%
50
0 0%
FY13 FY14 FY15 FY16
Mgt EBITDA (excluding MI) EBITDA margin (excluding MI)
USD million
EBITDA Margin
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Management EBITDA translated at FY16 average exchange rates and excludes margin income.

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Management revenue

Computershare operates across a range of complementary businesses with a broad international footprint

By geography

By product

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Technology &
other
Communication
Canada ANZ
2%
9% 15% Services
9%
Employee
Share Plans
Asia 11%
6%
Register
Maintenance
Stakeholder
37%
Relationship
$2,074.7m Mgt $2,074.7m
4%
USA UCIA
47% 19%
Business
Services
30% Corporate
Actions
CEU
7%
4%
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11 Figures are quoted in constant currency (CC). CC equals FY16 results translated to USD at FY15 average exchange rates. * Mortgage Services revenue is $321.1m in constant currency

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Strategy: Growth, profitability and capital management Focus on organic growth, operational excellence and capital discipline

• Growth drivers › Mortgage servicing › Plans

• Profit drivers › Registry › Group wide efficiency programs › Margin income leverage

• Capital management › Debt leverage › Focus on cash generative organic growth complemented by compelling, accretive acquisitions

• › Growing dividend over time with share buy-backs

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Growth: Mortgage servicing

Building scale to enhance returns

• Strategy

• › Build sustainable servicing business with complementary skills and scope to leverage CPU’s operational and technology expertise

• › Deploy incremental capital to deliver enhanced returns

• Update

• › CMC acquisition performing well › UPB purchasing program underway and on-track › UKAR integration on-track, delivering synergies

• Target scale in the US

• › $53bn of UPB at close FY16. Strategy to target scale of around $100bn UPB: - Optimised blend of owned and sub-serviced revenues from performing and nonperforming loans (approx. equal proportions)

• • Should generate revenues of over $350m per annum, around 20% PBT margins and 12-14% free cash flow return*
• • Average invested capital expected to be around $300m for FY17, increasing to around $400m at scale

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*Free cash flow return measured on a post tax and post MSR maintenance capex basis / average invested capital for the year

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Growth: Employee share plans

Reinvigorating plans offerings to increase leverage to structural growth in equity compensation

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Long term Reinvigorated
Strong Diversifying
structural customer value
competitive sector
growth drivers position proposition and concentrations
intact technology
Transaction fees
29%
Multiple revenue streams with Fees
growing contributions from 49%
employers and employees
partially offsetting post Brexit
Margin
income
lower margin income
13%
Other
9%
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Multiple revenue streams with growing contributions from employers and employees partially offsetting post Brexit lower margin income

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US: organic growth and profitability

Three stage strategy to drive improved performance in US registry

• › Manage revenue - offset/minimise attrition through corporate actions, new markets and product innovation: spin offs (increases number of shareholders), IPO’s and new products

• › Enhance profitability - technology efficiency programs, Louisville property consolidation, process automation, productivity gains

• › Leverage our core assets to build broader multi product relationships with key clients

• Organic revenue growth initiatives

• › Computershare has identified organic growth initiatives across its US businesses to deliver additional revenue streams

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Leverage the
Expand
strong customer
bases in registry Private company bankruptcy, class
and plans with and REIT markets actions and
new products and initiatives communication
services
ancillary revenues
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Client balances

Assuming an increase of 100bps on our FY16 exposed balances ($4.7bn) CPU would generate an additional $47m annualised EBITDA

Strong leverage to rising rates

3.00% CPU would generate an additional $47m annualised 2.50% EBITDA 2.00% 1.50% 1.00% 0.50% 0.00% 1 2 3 Achieved Yield Market Yield Futures Yield

1 Achieved yield = annualised total margin income divided by the average balance for each reporting period 16 2 Market yield = avg. cash rate weighted according to the client balance currency composition for each reporting period 3 Futures yield = avg. quarterly implied rates weighted according to the client balance currency composition at 30 Jun 16

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Structural cost review

	Programs underway to deliver operational and process efficiencies	Benefits to be delivered across FY17 – FY20	Benefits to be delivered across FY17 – FY20	Total benefits, including Louisville, expected to be $85 – 100m*	Total benefits, including Louisville, expected to be $85 – 100m*
	Activity	Total cost savings estimates $m	Expected benefit realisation (cumulative) FY17 FY18 FY19 FY20
	Stage 1 Louisville (unchanged)	25 - 30	15%	55%	70%	100%
	Stage 2 Spans of control	~15	20%	90%	100%
	Operational efficiencies	10 - 15	-	25%	75%	100%
	Procurement	5 - 8	-	50%	100%
	Process Automation	~20	-	20%	80%	100%
	Other	10 - 12	-	50%	100%
	Stage 3 Further initiatives	TBD
	Total estimate	85 - 100

• Excluding UKAR integration. Estimates of total cash costs to deliver Stage 1 remain unchanged at $80-85 million. Total cash costs to achieve stage 2 savings estimated to be $30-40 million inclusive of opex and capex. Stage 2 costs to be incurred in FY17 and FY18. All opex costs to be expensed and included in Management adjustments. Savings to be achieved across the Group.

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FY17 outlook

Guidance affirmed

Q1 FY17 trading and guidance

• › Computershare’s trading performance for Q1FY17 is consistent with the pcp

• › Given current trading and the outlook for the remainder of the year, we affirm EPS guidance for FY17

• › In constant currency, Computershare expects FY17 Management EPS to be slightly up on FY16

Assumptions

• › This outlook assumes that equity markets remain at current levels, interest rate markets perform broadly in line with current market expectations and that FY17 corporate action revenue is similar to FY16

• › Also subject to the important notice on the final slide regarding forward-looking statements

Constant currency guidance (same as provided in August 2016)

• › FY17 guidance is given in constant currency terms to better illustrate Group underlying performance

• › For comparative purposes, the base Management EPS for FY16 is 55.09 cents

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• For constant currency exchange rate assumptions refer to page 51 of the FY16 Full Year results presentation, 10th August 2016

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Conclusion

An inflection point in earnings growth

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FY17 EPS guidance Q1 FY17 trading
FY16 results
(slightly up in CC) consistent with
resilient
affirmed the pcp
Clear growth
Enhancing
strategies –
profitability
execution on track
› Group-wide cost review
Capital management
› CMC delivering expected to deliver
Strong free cash flow
anticipated benefits $85m - $100m savings
driving shareholder returns
› UKAR integration over four years
underway
› Leverage to rising
› Plans strengthening interest rates
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Important notice

Forward-looking statements

• › This announcement may include 'forward-looking statements'. Such statements can generally be identified by the use of words such as 'may', 'will', 'expect', 'intend', 'plan', 'estimate', 'anticipate', 'believe', 'continue', 'objectives', 'outlook', 'guidance' and similar expressions. Indications of plans, strategies, management objectives, sales and financial performance are also forward-looking statements.

• › Such statements are not guarantees of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of Computershare. Actual results, performance or achievements may vary materially from any forward-looking statements. Readers are cautioned not to place undue reliance on forwardlooking statements, which are current only as at the date of this announcement.

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