Presentation by McMillan Shakespeare Limited Merrill Lynch Presentation September 2010
Background � Australia’s largest provider of salary packaging and novated lease facilitation. � Following recent acquisition of Interleasing/Holden Leasing, now Australia’s only provider of total corporate vehicle services i.e.: - - fleet management; fleet management; - operating, finance and novated leases; - full FBT management, administration and reporting. P 1 September 2010
Historical normalised NPAT (1) 35 NPAT 5-year CAGR of 39.9% 30 27.9 25 20 20.5 ($m) 17.4 15 13.2 10 11.3 5 5.2 0 FY05 FY06 FY07 FY08 FY09 FY10 NPAT Note 1: Normalised NPAT excludes the profit recognised on acquisition as a result of the business combination of ILA. P 2 September 2010
Earnings and dividends per share Total dividends per share Normalised earnings per share (EPS) (1) 50.0 30 EPS 5-year CAGR of 39.0% 45.0 25 40.0 35.0 20 30.0 cents cents 25.0 15 15 cen ce 20.0 10 15.0 10.0 5 5.0 0.0 0 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 Basic EPS Cash EPS Note 1: Normalised EPS excludes the profit recognised on acquisition as a result of the business combination of ILA P 3 September 2010
Strategic rationale for Interleasing acquisition � Acquiring the Interleasing business at a discount to net assets provides MMS a low risk opportunity to transform its business: - Creates a unique value proposition of high value to customers underpinned by a unique grouping of skills – no other market participant offers comprehensive salary packaging, novated lease and operating lease services. and operating lease services. - Provides a desirable diversification from FBT risk. - Increased scale creates increased buying power with key suppliers e.g. financiers, fuel providers, insurers etc. P 4 September 2010
Strategic rationale for Interleasing acquisition(cont’d) - Interleasing has strong NSW presence which complements MMS major sites in Vic and QLD and adds scale in SA, WA and Tas. - Immediate cross-sell opportunities (Interleasing has mostly private sector customers, has very low novated lease penetration and provides no salary packaging services to its customers; MMS has mostly public sector customers and provides no operating lease services). services). - The opportunity to collaborate with Holden, one of Australia’s most loved and trusted brands provides immediate growth opportunities. - Operating lease funding capability provides platform for future provision of additional financial services to MMS’ rich customer base. P 5 September 2010
A Converging Market Novated Salary Packagers Operating Leasing Providers Leasing Skills Skills � � Business process outsourced. Financing � � High transaction loads. Fleet Management � � FBT administration. Access to vehicle value chain � Retail sales and marketing. (procurement, management and disposal of vehicles; insurance; disposal of vehicles; insurance; fuel; tyres; etc) � Novated leasing commenced in the 1990’s. It requires competencies that reside in salary packaging companies AND operating lease companies. � Currently the outsourced novated market is split largely between salary packagers and operating lease companies. � Many customers prefer to deal with one supplier. P 6 September 2010
Service driven solutions Client Challenges MMS Solutions � Relationships, experience & Employers face a expertise layer series of complex issues outside of their � Dedicated specialists in FBT, core business exemptions and managing the activities when dealing vehicle value chain with FBT and salary � Supplier relationships to procure packaging vehicles and after market services � Dedicated personnel assist with employee’s questions and claims Capital, systems & risk management layer • Ability to finance vehicle purchases and arrange lease finance. � Organisations face a • Single supplier series of issues when • Regular reporting owning and managing • FBT liability indemnity a vehicle fleet • Robust systems with backup to administer employee business, pre- tax payments and FBT reporting. Drivers of demand P 7 September 2010
Definition of segments Remuneration Services segment definition : � The segment provides administrative services in respect of salary packaging and facilitates the settlement of motor vehicle novated leases for customers, but does not provide financing. The segment also provides ancillary services associated with motor vehicle novated also provides ancillary services associated with motor vehicle novated lease products. Asset Management segment definition : � The segment provides financing and ancillary management services associated with motor vehicles, commercial vehicles and equipment. P 8 September 2010
Sources of revenue Salary Packaging Novated Lease Novated Lease Operating Leases Management Services (including motor Management Distribution Fees vehicles) � � � � � Portion of employee’s pre- Recurring Income MMS can procure and ILA rents passenger & ILA receives tax salary is transferred to supply car & after market commercial vehicle fleets administration fees for MMS, usually on a parts and arrange finance typically to corporate managing client owned car fortnightly basis for the employee customers fleets i.e. corporates � � � � � Disbursements made on Lessee pays for lease Tripartite lease Typically a 4 year lease Services include arranging behalf of employees from administration arrangement between term toll fees, repairs, fuel, funds held in trust account financier, employee and insurance and scheduled employer maintenance � � � � � MMS earns an annual Typically a three year Success based distribution ILA retains ownership of Agency business with low management fee paid lease period fees are paid by the the vehicles (appears on levels of Capital Employed typically in fortnightly financier and/or suppliers the ILA Balance Sheet as instalments instalments a fixed asset) a fixed asset) � � � MMS typically has a 5 year Employee is the Recurring rental income contract with the employer beneficial owner of the covers interest costs, on a 3+1+1 basis car deprecation/ principal repayments, in-life car services e.g. Fuel, tolls , tyres, green slips, infringements and management fees � � Customer base includes Cars sold at lease expiry over 800 charities, NFP’s, using retail & wholesale public health, government channels departments and corporates P 9 September 2010
Market opportunity Full FBT Rebatable FBT $17,000 Exempt $30,000 Exempt Types of Employers Government departments Independent schools Public hospitals Public benevolent institutions Private companies Sporting clubs Private not-for-profit hospitals Charities Public companies Religious institutions Trade unions FBT Treatment FBT rate 46.5% on taxable Rebatable FBT on first $30,000 FBT exempt on first $17,000 FBT exempt on first value of benefits of grossed-up taxable value of of grossed up taxable value $30,000 of grossed-up benefits (46.5% rebate) of benefits taxable value of benefits Equates to $16,050 of benefits Equates to $9,095 of benefits Equates to $16,050 of benefits Full FBT on excess over Full FBT on excess over Full FBT on excess over $30,000 $17,000 $30,000 Common Fringe Benefits Common Fringe Benefits Novated leases Novated leases Novated leases Novated leases Additional superannuation Additional superannuation Additional superannuation Additional superannuation Associate leases Additional superannuation Mortgage/rent Mortgage/rent Additional superannuation Mortgage/rent Meal entertainment and Meal entertainment and venue hire venue hire Professional association In-house school fees membership fees Personal loans Personal loans LAFA Living expenses Living expenses Remote area Novated leases (not part of Novated leases (not part of cap) cap) Total workforce 10.7m By sector 9.5m 1.2m MMS target market 2.5m 1.0m Typical participation 0-20% 59-90% Target participation 5-25% 80-90% Estimated outsourced participants 0.45m Conclusion Large untapped market to exploit P 10 September 2010
Market opportunity (cont’d) Australian Fleet Lessors Association (AFLA) - Total Portfolio at July 2010 By Type of Facility (units/%) � ILA is a tier 2 industry player. 40,867 - 8% � - Operating ILA share of novated leases as Leases - % of total fleet significantly less Funding only than AFLA average. 149,484 - 30% - � MMS’s expertise in novated Fleet Managed lease allows MMS to target even greater % novated lease share. 184,773 - 37% - � � Access to capital and significant Access to capital and significant Operating Leases- Operating Leases- Other flexibility in pursuing optimum funding structure. 12,808 - 3% - Other � Funding CAGR for 2001-2009 was 8% 75,855 - 15% - (AFLA). Expect 5-8% over next 5 Novated 29,326 - years. 6% - Finance Interleasing is well under represented Leases in Novated leases compared to industry participants (8%) P 11 September 2010
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