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Australian Listed IT Companies and Global ITCompanies in the Australian MarketFinancial performance and growth byacquisition:IDC Corporate AdvisoryPresenter: Bob CowleyCopyright 2008 IDCReproduction is forbidden unless authorized.All rights reserved.

IDC Corporate Advisory IDC Corporate Advisory is a business unit ofIDC Australia IDC Corporate Advisory focuses on mergersand acquisitions IDC Corporate Advisory has experiencedsenior IT industry executives providingtransaction services 2008 IDC 2

AgendaA. Analysis of the financial performance of theAustralian IT market:– a select group of global IT companies andAustralian listed IT companiesB. Investigate the role of acquisitions inachieving growth targetsC. Consider rationale for acquisitions 2008 IDC 3

Australian IT Industry – Scope ofStudy Scope of the study–In November last year IDC Corporate Advisorycompleted an analysis of the Australian ITmarket covering the Australian listedcompanies and the global listed companies–Australian companies categorised intosoftware companies, services companies,information providers and recruitmentcompanies–Eight global IT companies selected andaccounts obtained from ASIC (2006 accounts) 2008 IDC 4

Australian Listed Companies Reviewed Service Companies–––––––––CPT GlobalOaktonSMSDWSASGCSG LimitedUXCData#3Hostworks Information Providers Software Companies–––––––Tech OneIBA HealthBravuraIntg. ResearchObjectiveGBST HoldingsEservglobal IT Recruitment Services– Peoplebank– Talent 2– RP Data– Infomedia 2008 IDC 5

Global Corporates - ReviewedUnisysCSCEDSAccentureFujitsuGetronicsPaxus PeopleIBM Australia 2008 IDC 6

Australian IT Industry Within Australian IT industry there is a storyof two distinct sectorsRevenue and PBT Growth - Yearon Year - 2007/2006 & 2006/2005RevenueGrowthPBTGrowthPBT/RevenueTotal Listed Companies38.30%35.30%12.40%Global Companies1.30%-12.90%2.80%Source: IDC, 2007 2008 IDC 7

Australian IT Industry Within Australian IT industry there is a storyof two distinct sectorsRevenue and PBT – 2006 YearRevenue mPBT mPBT/RevenueTotal Listed Companies1,590.5202.112.70%Global Companies7,103.3198.82.80%Source: IDC, 2007 2008 IDC 8

Aggregate Growth & Profitability of Local Listed& Global IT CompaniesRevenue and PBT Growth - Yearon YearRevenueGrowthPBTGrowthPBT/RevenueService Companies40.60%61.00%11.70%Software Companies44.10%17.90%15.10%Information Providers4.90%-11.00%31.40%IT Recruitment Companies32.00%44.10%5.50%Total Listed CompaniesGlobal : IDC, 2007 2008 IDC 9

Market structural changes –Global Corporates Growth and profitability challenged by:– Heroic transactions– Trend to selected sourcing– Competition from Indian companies andAustralian listed companies 2008 IDC 10

Infosys AustraliaInfosys Australia March 07 ’000March 06 ’000% 40%PBT/Revenue %22.90%8.50% 2008 IDC 11

Key Points The financial performance of the 20 listed companies and global companies is set out inthe Learn More section at the end of this report. The key points to note are:– Average revenue growth of service companies in 2007 was 44.9%, just below the48.3% average for software companies. Information providers had average revenuegrowth of 8.4% and the IT Recruitment companies averaged 34%.– Acquisitions were an important contributor to growth for Oakton, SMS, ASG, UXC andBravura– 2007 was the second year of high revenue growth.– Profitability of local companies has also been very strong. The average of the PBT toRevenue ratios in 2007 was 15.8% for service companies, 17.1% for softwarecompanies, 37.5% for information providers and 5.5% for recruitment companies.– As a consequence of the strong growth and profit performances the local listedcompanies have very high market capitalisation to revenue multiples. As at 1st October2007 for service companies the multiple is 2.65 and 3.11 for software companies. Thecomparable multiples for CSC, EDS and Accenture at 8th October 2007 are 0.66, 0.54and 1.27.– For the global companies the revenue growth achieved between 2005 and 2006 for theeight companies for which figures are available was highly variable.– The average of the PBT to Revenue ratios of these eight global companies in 2006 was2.9%. 2008 IDC 12

AgendaB. Investigate the role of acquisitions inachieving growth targets– Case Study UXC– 17 acquisitions 2004 to 2008 (YTD)– Core capability 2008 IDC 13

UXC Acquisitions 2008-2007-2006 2008– Getronics– Lucid IT 2007– Vision Energy– Trenchless– CVM– Agave 2006– Jigsaw Services– InfrastrutureConstruction– eOne– BCT Group– Oxygen 2008 IDC 14

UXC Acquisitions 2005-2004 2005– BML 2005– Dytech 2004– CPM Group– Data#3 Navisionbusiness– Red Rock– SkilltechConsulting 2008 IDC 15

UXC Financial Performance 2008 IDC 16

AgendaC. Consider rationale for acquisitions– A broader sample of Australian Listed companytransactions and some global companyacquisitions– Key considerations GeographyProduct and service extensions 2008 IDC 17

Australian Listed Company AcquisitionsTargetAcquirerDateDescriptionPacific PropertyTechnologiesRP Data2007Provider of Desk TopProperty th ManagementSoftwareEnterprise ContentManagement SoftwareAurion2007Payroll & HR SoftwareVindalooRossHumanDirectionsASG2006Oracle Consulting BusinessClickstreamOakton2006Accumen AllianceOakton2007Melbourne ConsultingBusinessCanberra ConsultingBusiness 2008 IDC18

SMS AcquisitionsTargetS C North Queensland BaseBusinessAvogaSMS2007NSW BaseForward MediaSMS2007ERP Consulting BusinessRealtechSMS2007ERP Consulting BusinessPermanian DefenceSystemsSMS2007Adelaide Based DefenceBusinessOperationalConceptsSMS2007IT Consulting Business 2008 IDC 19

Australian Listed Company AcquisitionsTargetAcquirerDateDescriptionStrategic DataManagementDWS2007Microsoft Developer Adelaide &MelbourneEquest ConsultingDWS2007Project Management SpecialistGlobalsoftDWS2007Sydney Base IT ConsultingAnandexCSG2007Melbourne Base ITIL SpecialistChange CorpCSG2007Perth Based Consulting & SIBusinessAmbitPeoplebank2007IT RecruitmentGryphonConsultantsPeoplebank2007Perth Based IT Recruitment 2008 IDC 20

Global Corporate - lp desk software – strongcustomer base internationallyTower SoftwareHP2008Electronic content managementsoftware – strong internationalbaseEarth ResourceMappingLeicaGeospatial2007Geospatial image servingsoftware - strong internationalbaseTCSTata2006Banking IT consultancyFNSTata2005Banking software - internationalInfra 2008 IDC 21

Market structural changes–Australian IT Companies Growth and profitability challenged by:– Access to outsourcing markets – beneficiaries ofselected outsourcing– Market confidence in capabilities– Market capitalisation and revenues overcoming‘size’ perception issues– Access to capital for expansion– Alliances with Indian companies for more effectivecompeting 2008 IDC 22

Growth by Transactions Growth by transactions – evident in bothcategories Global corporate transactions– Why so few– Has the game been taken away? 2008 IDC 23

Essential Guidance – Australian ITMarket Local companies are growing faster and aremore profitable than their global competitors Local companies are using acquisitions tofuel growth There are early signs global companies arestarting to look for acquisitions (Fujitsu, HP &Tata) 2008 IDC 24

Essential Guidance - Valuations Value determinates in acquisition process– Complementary products or services– Complementary customers– Product extensions– Distribution– Geographic reach 2008 IDC 25

Essential Guidance - Conclusion Australian listed entities will continue relativeoutperformance Indian competitors establishing track recordand instilling confidence Global corporates need niche acquisitions Some global corporates may chose to exitmarket by sale, example Getronics 2008 IDC 26

Contact Information/Reminder** A copy of the report: “Australia: ITCompanies Financial Results Analysis,2007” is available at the booth Please email me atbcowley@idc.com Please fill out your DirectionsEvaluation form 2008 IDC 27

Anandex CSG 2007 Melbourne Base ITIL Specialist Change Corp CSG 2007 Perth Based Consulting & SI . -Complementary products or services -Complementary customers -Product extensions -Distribution -Geographic reach 2008 IDC 26 Essential Guidance - Conclusion Australian listed entities will continue relative outperformance Indian .