AGM Presentation May 2013


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Presentation to shareholders delivered at Melbourne IT's 2013 AGM

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AGM Presentation May 2013

  1. 1. Annual General MeetingMelbourne, Australia21 May 2013
  2. 2. Slide 2Board of Directors Simon Jones, Chairman Theo Hnarakis, CEO & MD Tom Kiing, Non-Executive Director Naseema Sparks, Non-Executive Director Rob Stewart, Non-Executive Director Andrew Walsh, Non-Executive Director And Ashe-lee Jegathesan, General Counsel &Company Secretary
  3. 3. Slide 3Auditors
  4. 4. Slide 4Agenda Chairman’s Address CEO’s Address Q&A Formal Business Q&A Tea & Coffee
  5. 5. Chairman’s AddressSimon Jones
  6. 6. Slide 62012 OverviewRevenue $179.8mOperating Cash-5%$19.1mFinal Dividend 8.0¢(FY12 40% Franked, FY11 Fully franked)Deferred Gross Margin $29.1m -5%NPAT (Pre-Impairment)* $13.5m -1%Year ended 31 December (A$) FY 12 FY 11 %Basic EPS (Post-Impairment) 16.77¢ -17%$170.6m$21.1m7.0¢$27.7m$13.4m13.96¢11%EBIT (Post-Impairment) $18.9m -21%$15.0mNB Figures may not total exactly due to rounding*Non-IFRS, unaudited accounting measure-13%EBIT (Pre-Impairment)* $18.9m -10%$17.0mNPAT (Post-Impairment) $13.5m -16%$11.4m
  7. 7. Slide 7Divisional PerformanceYear ended 31 December (A$) FY 12 FY 11 %Revenue $170.6m -5%EBIT $15.0m -21%$6.9m -12%For The Record$0.1m -92%For The Record$0.3m -25%Interest and Other Income-$5.5m 2%Corporate Overhead$179.8m$18.9mSMB Solutions $82.2m -8%$89.4m$55.2m 0%Digital Brand Services $55.3m$26.1m -3%Enterprise Services $26.8m$7.8mSMB Solutions $12.8m -17%$15.4m$9.5mDigital Brand Services $9.0m$2.3m 35%Enterprise Services $1.7m$1.2m$0.4m-$5.4m-$2.2m** -27%Transformation Costs -$3.0m**6%NB Figures may not total exactly due to rounding**EBIT impact only, excludes capitalised costs-$2.0m N/AFTR Impairment N/A
  8. 8. Slide 8A History of GrowthNew gTLDProgramOpensASX Listing2000Dot com bust2004Cogent Acquisition2008VeriSign DBMSAcquisition2010SystemsTransformationProject BeginsDeregulation of.au2002.auWebCentralAcquisition200620112013+A New Eraof Growth1996Melbourne ITFounded19992013Melbourne ITDBS Sold for$152.5mRevenue $44m $104m $180mEBIT $1.5m $8.3m $18.9mEmployees 100 500 700
  9. 9. Slide 9TSR and the Technology Sector
  10. 10. Slide 10Strategic ReviewUnlocking ValueShareholder BenefitCreating FocusUnlocking Value
  11. 11. Slide 11Divestment of Digital Brand Services Digital Brand Services (DBS) sold to CSC in anall-cash transaction of A$152.5 million whichclosed 12 March 2013 10% of purchase price will be held in escrowfor 15 months Net proceeds expected to be circa A$135-140 million (after transaction costs anddepending on tax treatment) Cash retained after debt repayment circa$100m
  12. 12. Slide 12Building Value – Digital Brand Services2001 2004 2007 20080102030405060 Column1CDMestablishedIDRacquisitionA$1.2mCogent IPCacquisitionA$4.5mVeriSign DBMSacquisitionUS$50mRevenue $m2013DBS soldA$152.5m3,800 Customers250 Employees10 Countries
  13. 13. Slide 13Compelling Shareholder Value DBS FY2012: $55.2m revenue, $9.5m EBIT Melbourne IT market cap $160m @ 11 March 2013 – DBSonly 32% of Melbourne IT 2012 revenue and 38% of 2012EBIT contribution $152.5m transaction value represents 2.8x DBS 2012 revenue 13.5x DBS 2012 EBITDA 16.1x DBS 2012 EBIT Estimated 23x DBS 2012 P/E2012 Revenue EBIT ContributionDBS $55.2m $9.5mSMB $82.2m $12.8mES $26.1m $2.3mFTR $6.9m $0.1m
  14. 14. Slide 14Strategic ReviewUnlocking ValueShareholder BenefitCreating FocusUnlocking ValueShareholder Benefit
  15. 15. Slide 15Capital Management Strategic review continues The Board continues to evaluate a range of capital managementoptions including special dividends, capital returns, M&A andshare buybacks Aim is to optimise return for shareholders
  16. 16. Slide 16Capital ManagementBoard has resolved two immediate Capital Management decisions Outstanding debt of US$35 million has been retired Shareholders will receive a special dividend of 25¢ pershare, partially franked (75%) Shareholder record date 31 July 2013 Special dividend payable 22 August 2013
  17. 17. Slide 17Strategic ReviewUnlocking ValueShareholder BenefitCreating FocusUnlocking ValueShareholder Benefit
  18. 18. Slide 18In appreciation Thanks to my Board colleagues for their valuable advice andsupport Thanks to all the staff of Melbourne IT for their efforts Thanks to CEO and Managing Director, Theo Hnarakis, and theMelbourne IT executive team Thanks to our shareholders for your continued support ofMelbourne IT
  19. 19. CEO’s AddressTheo Hnarakis
  20. 20. Slide 20DBS: A Proud AchievementFrom Concept toGlobal Business 2001: A whiteboardconcept2013: $55m revenue3,800 customers250 staffBrand ProtectionLeadership Shut down 9,800+phishing sites / year99% UDRP successrate – world leaderNew gTLDLeadership Recognised globalthought leaderWorld-leading 146.brand applications
  21. 21. Slide 21Strategic ReviewUnlocking ValueShareholder BenefitCreating FocusUnlocking ValueShareholder BenefitCreating Focus
  22. 22. Slide 22Repositioning the Business Reviewing our structure Reducing our overheads Greater focus on go-to-market sales and marketing strategies Competitiveness must match global heavyweights
  23. 23. Slide 23Leaner, focused Melbourne ITDigitalRecordingWeb ServicesSMBSolutionsEnterpriseServicesForTheRecordDomainsWeb HostingeCommerceOnline Performance
  24. 24. Slide 24Seizing the Opportunity – SMB Solutions Refocusing the business on enhancing thecustomer experience Improved, easy-to-navigate websites Investments in customer service Bolstering leadership team to deliverimproved outcomes 2013 targeted product investments WebCentral hosting product upgrade New Melbourne IT WordPress hosting New gTLD launches in H2 to drive newopportunities for SMBs and boost revenue Actively engaged with potential new largepartners to establish profitable newrelationships Increasing shift to cloud infrastructure
  25. 25. Slide 25Seizing the Opportunity – Enterprise Services Flexible, platform-agnostic strategy Delivering successful business outcomesto customers across a wide range ofindustry leading, cloud-based platforms Partnerships with key online experienceproviders Amazon WebServices, Adobe, Sitecore and Akamai New offerings including Application Profilingspecifically designed to target enterpriseonline pain points Quality certifications – ISO9001 andISO27001 – for deeper governmentrelationships More than 10 years experience in enterprisehosting for some of Australia’s largestcorporate and government clients
  26. 26. Slide 26New gTLDs are gTLDs290 ccTLDs1,000+ newunique
  27. 27. Slide 27The SMB new gTLD OppportunityIncreased choice for new SMBsAbility to get short, memorable, relevantdomain names for marketingMultiple domains to help boost searchengine potentialSignificant revenue opportunity forMelbourne IT
  28. 28. Slide 28The SMB new gTLD墨尔本花店. 點看
  29. 29. Slide 29Transformation Program Nearing CompletionBusiness systems to fully leverage value ofcustomer baseSingle system for customer, product, billingand order managementSignificant cost savings via greater efficiencyand retirement of legacy systemsImproved service to customer and partnersIntegrated customer information for moretargeted salesImproved billing for faster revenuerealisation
  30. 30. Slide 30Ingredients for SuccessAbility to increase scale & capability viaM&AFinancial strengthCompelling market opportunities for ourcore businessesTransformation Project nearingcompletionStrong Management TeamInvestment in products and support toimprove competitiveness
  31. 31. Slide 31Methodical plan to create value Restructure forsuccess as afocused entity Completesystemstransformation Commence newstrategyimplementationPlan & ImplementCY13 Conclude roll outof repositioningstrategy New gTLDs Begin benefitsrealisationRepositionCY14 Build uponstrategicrepositioning Roll out newproducts More aggressivemarketing andcross sellopportunities Leverage leadingposition in agrowing marketLead & LeverageGrowthCY15
  32. 32. Slide 32Q&A Any Questions?
  33. 33. Business of the Meeting
  34. 34. Slide 34Item 1: Financial Statements & Report To receive and consider the Annual Financial Report and theReports of the Directors and Auditor for the financial year ended31 December 2012
  35. 35. Slide 35Item 2: Election of Directorsa) Mr Simon Jones retires by rotation in accordance with rule 9.3 ofthe Company’s Constitution and, being eligible, offers himself forre-electionb) Mr Andrew Walsh retires by rotation in accordance with rule 9.3of the Company’s Constitution – Item withdrawn.c) Mr Tom Kiing retires by rotation in accordance with rule 9.3 ofthe Company’s Constitution and, being eligible, offers himself forre-election
  36. 36. Slide 36Item 3: Adoption of Remuneration Report To adopt the Remuneration Report for the year ended 31December 2012
  37. 37. Slide 37Remuneration Report Philosophy– Company performance depends on the quality of its Directors, Executives and Staff– The Company must therefore attract, motivate and retain highly skilled people– The Human Resources, Remuneration and Nomination Committee (HRRNC) isresponsible for determining and reviewing remuneration for Directors, Executivesand Staff Structure– The Company’s remuneration policy complies with the AICD guidelines for listedcompany executive remuneration– In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive remuneration is separate and distinct
  38. 38. Slide 38Remuneration for Executives and Key Senior Employees The objective is to reward executives and senior managers with alevel and mix of remuneration commensurate with their positionand responsibilities to: Provide competitive rewards to attract high calibre executives Link rewards to shareholder value Have a significant portion of remuneration “at risk”, dependent uponmeeting pre-determined financial and operational performancebenchmarks (KPIs) Establish appropriate, demanding performance hurdles for variableremuneration
  39. 39. Slide 39Remuneration for Executives and Key Senior EmployeesRemuneration consists of two key elements: Fixed remuneration (salary) Variable remuneration Short-Term Incentive (STI) – based on performance against company,business unit and personal performance KPIs Long-Term Incentive (LTI) – select group of key employees grantedperformance rights to acquire shares in the company, with an Earnings PerShare and a Total Shareholder Return vesting hurdle
  40. 40. Slide 40General Staff RemunerationRemuneration consists of two key elements: Fixed remuneration (salary) Variable remuneration for selected employees Short-Term Incentive (STI) – based on performance againstcompany, business unit and personal performance KPIs
  41. 41. Slide 41Non-Executive Director Remuneration Objective The Board seeks to set aggregate remuneration at an appropriate level to attract &retain Directors of the highest calibre at an acceptable cost Structure Each NED receives a fixed fee and sits on at least one Board committee Audit & Risk Management Committee or Human Resources Remuneration & Nomination Committee An additional fee is paid for chairing a Board committee, in recognition of theadditional time commitment and responsibility required NEDs are encouraged to hold shares in the Company (purchased by them onmarket). One of the NEDs is a substantial shareholder in the Company – Tom Kiing NED fees are generally reviewed every two-three years (last review was 1 Jan 2011and the Board has agreed the next review will be Dec 2013)
  42. 42. Slide 42Non-Executive Director Remuneration NED Deferred Share Plan was suspended at end of 2009 due to Governmentlegislation changes on the taxation of share plans NED received a 2.5% base fee increase in 2011; no increase in 2012 or 2013 For 2012, the NED base fee is $76,875 with an additional $10,000 for BoardCommittee Chairs The Board Chairman’s fee is set at 2.3 x NED base fee
  43. 43. Slide 43Item 3: Adoption of Remuneration Report Questions? Resolution: To adopt the Remuneration Report for the yearended 31 December 2012
  44. 44. Slide 44Item 4: Exclusion of Performance Rights from Listing Rule 7.1 To approve the exclusion of performance rights and underlyingshares issued under the Melbourne IT Performance Rights Planfrom the 15% cap in Listing Rule 7.1 of the ASX Listing Rules
  45. 45. Slide 45Item 5: Issue of Performance Rights to Managing Director & CEO To approve the issue of performance rights and underlying sharesunder the Melbourne IT Performance Rights Plan to the ManagingDirector & CEO
  46. 46. Slide 46Questions Any final questions?
  47. 47. Annual General MeetingMelbourne, Australia21 May 2013