UXC Limited 2015 Full Year Results
ACN 067 682 928
Delivering earnings growth
Cris Nicolli - Managing Director
Iona MacPherson - Chief Financial Officer & Company Secretary
Agenda
Key messages & highlights
│ Financial performance
│ Business overview & operational strengths
│ Strategy & growth opportunities
│ Outlook
│
2
Key messages & highlights
3
Key messages & highlights
|
Strong NPAT growth: +47% to $23.1m
|
Impressive PBT growth of +36%: organic core returns to strong growth : +18-23%
|
Annuity revenues increased by 13%: contributed 29% of FY15 revenues
|
$100m in new contract wins including annuity contracts underpin a strong FY16 outcome
|
Record group revenues: +7% notwithstanding the strategic mix shift
|
Success in North American markets; target to double the business to a $130m+ revenue
business; market leader in Microsoft AX
|
High growth in new customer additions - 4 new $5m+ clients
|
Market leader in new technologies and digital; over 50 emerging technology offerings;
contributes 10% of revenue and growing
|
Strengthening positon of UXC brand recognition
|
Strong cash flow and debt reduction; cash surplus of $3m at year end
4
Strongly improved FY15 performance
Financial highlights
FY15
$m
FY14
$m
%
Change
Revenue
686.4
643.4
7
Strong organic earnings growth
EBITDA*
42.1
32.8
28
2nd half PBT improvement of 27% over 2HFY14
EBIT*
32.6
24.6
33
PBT*
29.9
22.0
36
NPAT*
23.1
15.7
47
Statutory NPAT
22.5
15.7
43
Basic EPS*
7.0¢
4.97¢
41
Dividend (interim & final)
5.3¢
3.75¢
41
Return on equity
9.9%
7.3%
36
Free cash flow
25.6
24.2
6
Increasing annuity business now 29% of revenue
Strategic shift in product mix to higher margin
services
Full year dividend of 5.3c representing a 79%
payout ratio based on NPAT
$3m cash surplus as at 30 June 2015 (FY14 - $4.1m net debt)
* - from continuing operations
5
Strongly improved FY15 performance
|
Significant success in tender wins and customer renewals
|
Improved gross margin from product to services shift and improved utilisation
|
Disciplined and effective project delivery & risk management reflected in improved margins
|
Strong backlog of work won in FY15 plus FY16 pipeline supports further FY16 improvement
|
Highly successful and growing Microsoft Dynamics AX North American business
|
Market leader in emerging technologies & digital
|
Successful acquisition and integration of Saltbush and Contiigo
|
Debt refinanced on improved commercial terms
|
Consolidation of Sydney offices into one location
|
Planning underway for consolidation and rationalisation of certain support services
* - from continuing operations
6
Financial performance
Revenue growth
│ Earnings growth
│ Income statement
│ Balance sheet
│ Free cash flow
│
7
13 years of growing revenues
Revenue
$m
800
Full Year Revenue FY03 - FY15
700
686
600
643
17% CAGR over the
past 13 years
500
560
594
521
400
470
456
300
407
294
200
165
100
89
208
129
0
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
8
EBITDA growth history
EBITDA
$m
$45m
Full Year EBITDA FY03 - FY15
$40m
$42
$35m
$39
$30m
$33
$32
$25m
$31
$20m
$30
$26
$25
$15m
$17
$10m
$5m
$21
$15
$12
$7
$0m
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
9
Income statement
FY 15
$m
FY 14
$m
Revenue
686.4
643.4
EBITDA*
42.1
32.8
Depreciation
(4.4)
(3.9)
Amortisation
(5.1)
(4.3)
EBIT*
32.6
24.6
Interest
(2.7)
(2.6)
PBT*
29.9
22.0
Tax*
(6.8)
(6.3)
NPAT*
23.1
15.7
Statutory NPAT
22.5
15.7
Strong revenue growth despite the strategic shift in
revenue mix from lower margin product and licence
revenues
Depreciation increased due to capital spend associated
with the consolidation of Melbourne & Sydney facilities
Amortisation on contractual rights will reduce in line
with contracts reaching the end of their initial term:
• FY15 - $0.8m
• FY16 - $0.3m
One off tax benefit of $1.9m relating to the North
American business
* from continuing operations
10
Balance Sheet
FY 15 $m
FY 14 $m
Cash
25,197
19,724
Receivables
115,361
110,548
Accrued Income
23,250
21,829
Prepayments
15,377
15,624
Deferred tax assets
21,164
17,520
Plant & Equipment
17,675
12,593
Goodwill
226,795
209,130
Other Intangibles
11,842
14,147
Other Assets
6,202
5,716
Total Assets
462,863
426,831
Payables
114,411
100,586
Unearned income
46,711
42,357
Borrowings
22,239
23,888
Provisions
35,682
34,954
Other Liabilities
11,652
10,054
Total Liabilities
230,795
211,839
Net Assets
232,068
214,992
Cash surplus of $3m at 30 June 2015 (FY14 – net debt of $4.2m)
Debtors days consistent at 59 despite continuing pressure on
customer payment terms
Higher earnings converted successfully to cash
Increase in plant and equipment due to leasehold improvements
associated with new Sydney facility
Increase in goodwill following the acquisitions of Saltbush and
contiigo - $12.9m; and FX impact - $4.8m
Debt refinanced on improved and more flexible terms
Current ratio of < 1 is driven by unearned income of $46.7m. This is
not an external liability – it represents payments in advance and is
an amount that will be amortised to income as services are provided
– it effectively represents sold revenue streams yet to be delivered.
11
Free cash flow
FY 15
$’m
FY 14
$’m
Cash flow affected by seasonal factors consistent
with UXC history
EBITDA - Reported
42.1
32.8
Working Capital Movement
6.2
9.5
Net Borrowing costs paid
(2.4)
(2.6)
Tax Paid
(8.3)
(8.6)
Cash Generated by Operations
37.6
31.1
Capex & Software Development
(12.0)
(6.9)
Free Cashflow
25.6
24.2
Acquisitions
(6.4)
(42.0)
Dividends paid
(13.5)
(12.3)
Borrowings - Proceeds / (Repayment)
(1.6)
15.0
Net increase / (decrease) in cash
4.1
(15.1)
FX movements
1.4
0.5
Add: Opening cash 1 July 2014
19.7
34.3
Closing Cash 30 June 2015
25.2
19.7
Higher earnings converted successfully to cash
Strong free cash flows
Payments for the Saltbush & contiigo acquisitions $4.4m
Deferred consideration relation to prior period
acquisitions - $2.0m
Payments for capex includes $5.6m of leasehold
improvements relating to the consolidation of city
offices into one Sydney facility
12
Business overview &
operational strengths
| Business overview
| Annuity success
| Diversified client base & industries
| Diversified technologies & partners
| Emerging technologies
| Diversified geographies
| FY15 acquisitions
13
Business overview
Summary breakdown
FY15 revenue by UXC segment
Key segments and brands
1
CONSULTING AND ADVISORY (FY15 revenue: A$109m )
Design
Services: Advisory Research, Strategy & Architecture, Business Transformation, Cyber & information
security, Project, Program & Portfolio Management, Business Analysis, Technical Design,
Communications Consulting, Testing, Training
2
ENTERPRISE APPLICATIONS (FY15 revenue: A$355m)
Implement & Enhance
Services: ERP, CRM, Analytics & Business Intelligence, HCM, Supply Chain Management, Corporate
Performance, Enterprise Content Management, Financials, Asset Life Cycle Management, Financials,
Asset Life Cycle Management, Application Management Services, eCommerce, Omni-channel
FY15 EBITDA by UXC segment1
3
IT INFRASTRUCTURE (FY15 revenue: A$223m)
Operate & Manage
Services: Network Infrastructure, Unified Communications, Data Centre Optimisation, Workspace
Virtualisation, Managed Services & Support, Enterprise Mobility, Contact Centre, Entertainment &
Content, IP Video Surveillance, Outsourcing & Cloud
1.
Before corporate costs, on continuing operations basis
14
Business overview – changing mix of revenue
Revenue ($m) by UXC Segment
FY14 vs FY15
Revenue ($m) by UXC Offering
FY14 vs FY15
10.1%
7%
354.9
322.1
345.0
236.4
29%
371.4
5.8%
13%
222.6
2.3%
175.3 196.7
123.1
84.9
109.2
Consulting
|
|
|
|
|
120.2
Applications
Infrastructure
Services
Annuity
Revenues
Product &
Licences
Total Revenue up 7%
Small decline in Infrastructure segment through strategic shift from lower margin products revenues
Annuity Revenues up and increasing percentage of Total Revenue
Strong retention of clients and
15
Acquisitions have supported rise in Services Revenue
Annuity retention and new client wins
underpin FY16 growth
Annuity client wins and
retention
|
|
|
|
|
|
Retained all clients in FY15
Added new clients for revenue delivery in FY16
 IXOM
 Leightons/CIMIC JV
 Endeavour
 Fletchers
Renewed and expanded client contracts for FY16
Enhancements to service delivery continues to improve earnings
Increasing leverage for additional projects and services
Strong retention rate on maintenance and support agreements
16
Managed service and maintenance annuity
revenue by segment
(% yoy growth)
(A$ ‘000)
300,000
Group
+9%
+8%
+29%
+13%
Infrastructure
+6%
+2%
+17%
+6%
Applications
+15%
+17%
+45%
+18%
250,000
194,704
200,000
172,766
150,000
95,719
134,396
125,020
89,974
114,670
100,000
71,857
77,176
75,832
50,000
82,175
41,995
48,431
56,572
FY11
FY12
FY13
96,788
Applications
Infrastructure
FY14
FY15
Consulting
17
Diversified client base and industries
Diversified industries
Diversified client base
 Successful client strategy / retention and expansion of
services
Top 50
clients:
 Proactive partnerships – bringing solutions and
choices to clients
47%
 Exceptionally strong diversification across industry sectors, providing protection
against a downturn in any particular industry
 Retail will be a key focus for the future given the opportunity in the Microsoft
Dynamics market
 Successful year of key client contracts with long-term
annuity streams
FY15
 Strong base of medium enterprise clients
 Strategy to add new >$5m clients
Top 100
clients:
 New UXC cross-business accounts focus
60%
Customer profile
Annual revenue
Customer Revenue Analysis
FY11
FY12
FY13
FY14
FY15
>$5m
15
19
15
16
20
>$3m and <$5m
16
17
12
19
18
>$1m and <$3m
74
68
90
74
83
 UXC acquired 17 new million-dollar plus customers during FY15
 UXC lost no customers who had spent more than $2 million with the company in the
previous corresponding period
 Successfully re-contracted and won a number of new multi-year managed services
contracts
Transportation
4%
Capital Goods &
State
Commercial
Government
Services
13%
Retailing
Consumer
12%
2%
Goods &
Services
12%
Resources
6%
Education
4%
IT & Comms
12%
Health Care
11%
Federal
Government
11%
Financial
4%
Energy &
Utilities
9%
18
Building strong client offering
Client centricity
Retaining and wining new
customers
|
|
|
|
|
|
Building global
partnerships:
Giving clients choice
|
|
|
Proactive client relationships: anticipate their issues and
requirements. Innovate for their benefit and ours
New UXC large account team in place
Respected capability in cloud based architecture and solutions
Diverse technologies/services ideally suited to medium to large
enterprises
Agility and committed to delivering quality outcomes
Delivering solutions globally for Australian HQ businesses
Partnerships with global leaders SAP, Oracle, Microsoft,
ServiceNow, Cisco, Apptio, Tableau and others: provides
competitive advantage
Creating more entry and solution points – SaaS, Cloud applications
Find solutions to future issues today
19
Key partners
20
Emerging technologies
Emerging Solution
Strategic Driver
Focus Area
Shift in IT Operating Model
IT Cost Transparency
Capex vs Opex IT Models
End-to-End “as a Service”
Capex vs Opex IT Models
Enterprise Apps as a Service
Self-Service Business Insights
Visualisation Dashboards
Increasing Complexity of Data
Operational Intelligence
Increasing Volumes of Data
Cloud-based Data Warehousing
Contestability of IT Services
Cloud Orchestration and Automation
Content - Anywhere / Anytime
Mobile Content Management
Digitisation of manual processes
Digital Signature and Workflow
Success in FY15
21
UXC digital – Delivering real Customer projects
New Digital Ordering Solution with
end-to-end integration for Global
MedTech company
New Digital Business Registration and
Management System for Government Agency
Digital Channel with Order Distribution to
Stores and Staff access via hand-held
devices for leading Retailer
Digital Solution for Customer
Complaints and Case Management
for leading Media company
Digital Store for Home Delivered Meals
providing new business for a food
manufacturer
New Digital Channel for
IT and Library Requests
at a Tier 1 University
Digital Contract solution for the Sale of Land
transaction at a Government Agency
UXC’s company wide Digital Transaction
Management for on-boarding of new hires
22
Expanding geographies
|
The North American market performed strongly
|
Microsoft Dynamics has a strong presence in this market and is investing to grow
its new Dynamics AX and Azure products and services
|
Opportunities to deliver larger and more complex projects as UXC’s capability is
proven in this market
|
Scale derived from Tectura acquisition enhances opportunities in the high growth
North American markets particularly in retail.
|
Aspirations on track to build a $130m + business
|
Strong growth in NZ market
|
Contract wins include NZ Government, ERP and retail.
South East Asia / India
|
Convergence Group acquisition in late FY14 provides some increased presence in
South East Asia
$8m
|
Building offshore presence and partnerships to offer clients selected lower cost
services and capabilities
North American Market
Revenue of $68m per
annum – a significant
increase on prior year
216 employees
New Zealand/Fiji
$40m
179/25 employees
108 employees
23
FY15 acquisition
UXC Saltbush Group:
October 2014
Leading provider of cyber and
information security systems
contiigo:
Cyber and information security is an increasingly important issue for the market
|
Results ahead of Management forecasts
|
Example of value-add approach UXC brings to its clients
|
Leveraging capabilities and services into UXC client base
|
66 staff – now 90
|
SAP solutions for customer engagement, including the omni-channel hybris platform
and the SAP Cloud for Sales, SAP Cloud for Service, SAP Cloud for Marketing and SAP
Cloud for Social Engagement solutions.
|
Enable B2B and B2C companies everywhere to provide real-time, consistent,
contextual and relevant experiences to their customers regardless of channel or
device
|
Example of value-add approach UXC brings to its clients
|
26 staff
May 2015
Leading provider of SAP Hybris
Digital and Customer
Engagement
|
24
Strategy & growth opportunities
| Operational initiatives
| Strategically growing UXC
| UXC differentiators
| Strategic initiatives
25
Operational initiatives
│
│
│
│
│
│
Continued disciplined approach to project management has improved delivery quality and
margins
Continual vigilance in operational management:
– Utilisation and productivity
– Cost control
– Capex
Enhancing lower cost enterprise delivery models (offshore) and partnerships
Shared services rationalisation will begin in Q2FY16
Demonstrably improved collaboration across business units delivering a more streamlined
offering to clients
Sydney office facilities consolidation in May 2015 following consolidation of Melbourne facilities
in late 2013
26
Strategically growing UXC
Leveraging the solution
portfolio
Managed Services
North American Market
Broadens client base
Acquisition Strategy
Building new capabilities
meeting client needs
|
More clients looking to engage UXC in complex end to end solutions which
leverage our integrated model
|
Opportunities to deliver larger and more complex projects as our delivery
capability is proven
|
Security & cyber services are in very strong demand
|
Recent wins presents strong book of revenue streams – expecting more
wins in ERP applications and network management
|
Microsoft Dynamics has a strong market position in NA and is investing to
grow its stable of new products and services
|
Selected as Microsoft Dynamics Global Retail Partner
|
Winning large North American clients – Bartels, Jean Couteau extension
|
Continue to unlock value from recent acquisitions
|
Create new product offerings for existing UXC clients
|
Create new clients for existing UXC services and solutions
|
Focus on predicting emerging/disruptive technologies to meet client needs
27
UXC differentiators
UXC – the integrated model
CONSULTING AND
PROFESSIONAL SOLUTIONS
> Who we are
UXC Consulting
UXC Professional Solutions
UXC Saltbush
> What we do
> How we do it
> Customers
ENTERPRISE APPLICATIONS
UXC Eclipse (Microsoft Dynamics)
UXC Red Rock (Oracle)
UXC Oxygen (SAP)
UXC Cloud Solutions
UXC Keystone (ServiceNow)
ICT INFRASTRUCTURE
UXC Connect
- Network Infrastructure
- Advisory Research
- ERP, CRM
- Unified Communications
- Strategy & Architecture
- Analytics & Business Intelligence
- Data Centre Optimisation
- Business Transformation
- HCM
Workspace Virtualisation
- Cyber & information security
- Supply Chain Management
- Managed Services & Support
- Data & Analytics
- Corporate Performance
- Enterprise Mobility
- Project, Program & Portfolio
- Enterprise Content Management
- Contact Centre
Management
- Financials
- Entertainment & Content
- Business Analysis
- Asset Life Cycle Management
IP Video Surveillance
- Technical Design
- Application Management Services
- Outsourcing & Cloud
- Communications Consulting
- eCommerce, Omni-channel
- Testing
- Digital
- Training
- Customer experience
Design
Implement & Enhance
Operate & Manage
Health > Utilities > Government > Financial Services > Manufacturing > Resources > Retail > Telco
28
28
Key strategic initiatives
│
Expanded focus for key large accounts and Customer Satisfaction reporting (NPS)
│
Increasing leverage of infrastructure capability into the Application portfolio
│
More Cloud and digital based solutions with emerging technologies and existing vendor portfolios
│
Advanced customer advisory board to access future trends
│
Offshore program to build scale and lower cost delivery
│
Further investment Annuity based managed applications and infrastructure
│
Service Integration and Application Management (SIAM)
│
Consolidation of services across back office and IT
29
Outlook
| Segment margins
| Outlook
30
Segment margins
Underlying PBT (unaudited)
MARGINS BY SEGMENT
FY13
FY14
FY15
TARGET
Consulting
6.0%
7.6%
7.8%
9% - 10%
Applications
9.6%
9.4%
9.7%
11% - 12%
Infrastructure
4.0%
1.8%
4.9%
4.5% - 5.5%
• Targets to be achieved by the exit of FY16 year
• Target margins continue as goal for longer term sustainability
31
Outlook
│
Expect continuing profitable growth in core business
│
New contracts won and rising annuity revenues driving FY16 momentum
│
Confidence in winning new large projects and contracts
│
Strong backlog of work (55%) and FY16 pipeline to support further FY16 improvement
│
Enhanced value proposition and customer relevance - increasing focus on large clients and opportunities
to increase win rate and penetration into existing clients
│
Strategic positioning in high growth markets especially North America and cyber & information security
augmented by acquisitions and growing exposure to new technologies will aid drive earnings growth
│
Operational improvements in gross margin from new delivery models
│
Shared services savings to flow in 2HFY16 and beyond
│
Market conditions more positive than early FY15
│
Increasing dividend payout range from 60-75% to 60-80% of net profit after tax
│
FY16 has started well with strong July
32
Questions?
33
Disclaimer
This announcement contains certain forward-looking statements with respect to the financial condition, results of operations
and business of UXC Limited (“UXC”) and certain plans and objectives of the management of UXC. Forward-looking
statements can generally be identified by the use of words such as 'project', ‘believe’, 'foresee', 'plan’, 'expect', 'aim',
'potential’, ‘goal’, ‘target’, ‘intend', 'anticipate’, 'believe', 'estimate’, 'may', ‘could’, 'should', 'will’ or similar expressions. All such
forward looking statements involve known and unknown risks, significant uncertainties, assumptions, contingencies and other
factors, many of which are outside the control of UXC, which may cause the actual results or performance of UXC to be
materially different from any future results or performance expressed or implied by such forward looking statements. Such
forward-looking statements speak only as of the date of this announcement. Factors that could cause actual results or
performance to differ materially include without limitation the following: risks and uncertainties associated with the Australian
and global economic environment and capital market conditions, fluctuations in foreign currency exchange and interest rates,
competition, UXC’s relationships with, and the financial condition of, its suppliers and customers, or legislative changes, or
regulatory changes or other changes in the laws which affect UXC’s business. The foregoing list of important factors is not
exhaustive. There can be no assurance that actual outcomes will not differ materially from these statements. Readers should
not place undue reliance on forward looking statements. Except as required by law and ASX Listing Rules, UXC undertakes no
obligation to update publicly or otherwise revise any forward looking statement as a result of new information, future events
or other factors.
34
Appendices
35
Statutory NPAT versus Trading NPAT
│
Four items impacting the FY15 results have been identified as non trading in nature. These are
set out below in the reconciliation of Statutory NPAT to Trading NPAT
F15
$000s
Statutory / Reported NPAT
FY14
$000s
22,548
15,732
Addback
Restructure & Redundancy costs
Discontinued Business expenditure
Acquisition costs
1,426
524
290
1,333
1,459
Less
Deferred consideration write back
1,212
Trading NPAT
23,576
18,524
Growth
%
43
27
36
Operational Review
Staff Numbers (Employees and Contractors)
State / Region/Country
New South Wales
Victoria
Queensland
Australian Capital Territory
Western Australia
South Australia
Northern Territory
Tasmania
Total AUSTRALIA
New Zealand
North America
Fiji
India/South East Asia
Vietnam
TOTAL
30 June -14
30-June-15
773
895
238
189
870
936
212
208
123
46
1
21
2,288
170
241
22
51
9
2,779
90
55
1
25
2,300
179
216
25
100
8
2,917
New wins
Major Annuity Projects
Health practice – completed projects
Growing Government practice &
security
Mining downturn
Health practice growth
Growing presence
Growing Oracle business
Synergies from integration
Offshore and AX, .net
Growing offshore model
37
Further Information
│
Cris Nicolli
Managing Director
(613) 9224 5777
│
Iona MacPherson
Chief Financial Officer & Company Secretary
(613) 9224 5777
38