Steadfast Group Limited · ASX:SDF
Steadfast — FY2021 Earnings Presentation
71 slides from Steadfast's earnings presentation, Aug 16, 2021
Slide 1: FY21 results, major acquisition and equity raising
Steadfast Group FY21 results, major acquisition and equity raising - Investor Presentation 16 August 2021
Slide 2: Important notice and disclaimers
Important notice and disclaimers Important Notice and Disclaimer IMPORTANT: You are advised to read the following carefully before making any use of the information contained in this presentation. This presentation has been prepared by Steadfast Group Limited (ABN 98 073 659 677) (Steadfast or the C
Slide 3: Important notice and disclaimers
Important notice and disclaimers The Lead Managers and their affiliates are full service financial institutions engaged in various activities, which may include trading, financing, corporate advisory, financial advisory, investment management, investment research, principal investment, hedging, mark
Slide 4: Financial data
Important notice and disclaimers Financial data Local currencies have been used where possible. Prevailing current exchange rates have been used to convert local currency amounts into Australian dollars, where appropriate. All references starting with “FY” refer to the financial year ended 30 June.
Slide 5: Table of Contents
Table of Contents FY21 results, major acquisition 06 FY21 Highlights and equity raising – Investor Presentation 14 FY21 Financial Summary 22 Acquisition of Coverforce and equity raising 32 FY22 Guidance 35 Appendices 5
Slide 6: FY21 Highlights
FY21 Highlights 6
Slide 7: Steadfast Group
Steadfast Group Increase in underlying NPAT of 20.2% Underlying earnings 1 Statutory earnings1 EBITA +17.6% to $262.7m NPAT of $143.0m (FY20 loss of $55.2m)3 NPAT +20.2% to $130.7m Broker and underwriting agency growth NPATA2 +18.1% to $160.0m Equity brokers and network aggregate underlyin
Slide 8: Our track record since listing on ASX
Our track record since listing on ASX Steadfast Group 1 Steadfast Network GWP ($bn) Steadfast Underwriting Agencies GWP ($m) Underlying EBITA ($m) 10 1,500 280 240 8 1,000 200 6 160 120 4 500 80 2 40 0 0 0 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY14 FY15 FY16
Slide 9: Our enduring business model
Steadfast Group Our enduring business model and the skills and stability of our executive team drive Steadfast’s reliable and consistent accretive financial performance Strategic Initiatives Covid Impact Industry Update • The acquisition of Coverforce, an aligned business of scale • Our brokers and
Slide 10: Steadfast broking
Steadfast broking Continued moderate price increases from strategic partners Financial highlights FY21 vs FY20 Steadfast Network GWP GWP of $9.8bn vs $8.3bn +8.0% organic growth for the period (excludes statutory classes) +8.0% organic growth +18.3% to $9.8 billion (total growth) +7.7% AR netw
Slide 11: Steadfast Underwriting Agencies
Steadfast Underwriting Agencies Organic GWP growth of 11.5% driven by price and volume Operational highlights Financial highlights 24 agencies offering over 100 niche products +11.5% GWP to $1.5 billion +13.0% underlying EBITA of $119.5 million Property lines pricing remains strong Continu
Slide 12: Our insurTech
Our insurTech Steadfast Client Trading Platform and INSIGHT Steadfast Client Trading Platform (SCTP) $793m GWP transacted through SCTP in FY21 SCTP delivers strong client outcomes, addressing several concerns raised by the Hayne Royal Commission Genuine contestable marketplace, generating improv
Slide 13: Final dividend up 16.7%
Final dividend up 16.7% Final FY21 dividend Final FY21 dividend of 7.0 cps (fully franked), up from 6.0 cps in FY20, +16.7% 16.0 Dividend Reinvestment Plan (DRP) to operate for final FY21 dividend 14.0 No discount will be applied 12.0 Key dates for final FY21 dividend: Ex dividend date: 19
Slide 14: FY21 Financial Summary
FY21 Financial Summary 14
Slide 15: Reconciliation of statutory NPAT to underlying NPAT
Reconciliation of statutory NPAT to underlying NPAT Reconciliation of statutory NPAT to underlying NPAT Statutory vs Statutory vs 12 months to 30 June underlying underlying $ million reconciliation FY21 reconciliation FY20 Statutory profit/(loss) 143.0 (55.2) Adjusted for non-trading items (net of t
Slide 16: Group financial performance
Group financial performance Strong underlying earnings growth Underlying earnings 12 months to 30 June Underlying Underlying Period-on-period $ million FY211,2 FY201,2 growth % Revenue ($m) 899.9 826.3 8.9% EBITA ($m) 262.7 223.5 17.6% NPAT ($m) 130.7 108.7 20.2% Diluted EPS2 (NPAT) (cents) 15.1 12.
Slide 17: Drivers of 17.6% growth in underlying EBITA
Drivers of 17.6% growth in underlying EBITA1 Organic and acquisition growth Organic growth: $25.4m (+11.4%) Technology investment: -$3.4m (-1.5%) Acquisitions growth: $17.2m (+7.7%) $270.0m $2.6m 17.6% $14.6m $260.0m 1.2% $2.1m ($1.0m) $250.0m $23.3m ($2.4m) (0.4%) 0.9% 6.5% $240.0m (1.1%) $230.0m $
Slide 18: Steadfast broking
Steadfast broking Organic and acquisition growth Equity brokers and network - consolidated & equity accounted (assuming 100% ownership) 12 months to 30 June 2021 Underlying Underlying Period-on-period Organic Growth from $ million FY211 FY201 growth % growth % acquisitions % Net revenue 589.1 534.8
Slide 19: Steadfast Underwriting Agencies
Steadfast Underwriting Agencies Organic growth driven by price and volume Steadfast Underwriting Agencies – consolidated & equity accounted (assuming 100% ownership) 12 months to 30 June 2021 Underlying Underlying Period-on-period Organic Growth from $ million FY211 FY201 growth % growth % acquisiti
Slide 20: Continued conversion of profits to cash
Continued conversion of profits to cash FY21 cash flow statement Cash flow summary¹ $ million FY21 FY20 $ million FY21 FY20 Adjusted net cash from operating activities 172.4 138.6 Statutory operating cash flow² 225.1 205.9 Less IQumulate collections balance Cash used for dividends (61.3) (68.0) (38.
Slide 21: Conservatively geared balance sheet
Conservatively geared balance sheet Statutory balance sheet $ million 30 June 21 30 Jun 20 Corporate debt facilities (excludes premium funding) $ million Maturity Total Cash and cash equivalents 231 211 Facility A - Revolving Jan 2023 260 Cash held on trust 506 449 Facility B - Revolving Jan 2025 75
Slide 22: Acquisition of Coverforce and Equity Raising
Acquisition of Coverforce and Equity Raising 22
Slide 23: Acquisition highlights
Acquisition highlights Coverforce is a large Australian privately owned insurance broker • The acquisition of 100% of the shares in Coverforce Holdco Pty Ltd (Coverforce), with an enterprise value of $411.5 million • Coverforce is majority owned by founder and managing director Jim Angelis (95%) wit
Slide 24: Overview of Coverforce financial performance
Overview of Coverforce financial performance Coverforce has a strong track record in delivering earnings growth GWP ($m)1,2,3 EBITDA ($m)1,2,3 700 35 30% 600 12% 30 25% 500 25 20% 400 8% 20 15% 300 15 10% 200 4% 10 5 5% 100 0 0% 0 0% FY18 FY19 FY20 FY21 FY22F FY18 FY19 FY20 FY21 FY22F Revenue ($m) 1
Slide 25: Overview of acquisition
Overview of acquisition Coverforce is Australia’s largest unlisted insurance broker Strategic alignment Acquisition summary • Highly successful business with an excellent track record of Coverforce acquisition price of $411.5m implying an acquisition growth multiple of 12.5x1 FY22 forecast EBITDA,
Slide 26: Overview of Coverforce
Overview of Coverforce Coverforce is a well diversified insurance brokerage with multiple growth levers Coverforce comprises of four different business divisions providing earnings diversification: Insurance broking Coverforce Partners Group Income Protection Quanta Wholly owned insurance brokerage,
Slide 27: Benefits to Steadfast Group
Benefits to Steadfast Group Enhancing Steadfast’s earnings growth profile • Acquisition strengthens Steadfast’s position as the leading general insurance broker network in Australasia • Strong strategic alignment with the Steadfast’s insurance broking network • Steadfast will benefit from extracting
Slide 28: Steadfast's acquisition track record
Steadfast’s acquisition track record Steadfast has a proven track record of successfully completing earnings accretive acquisitions Established track record of evaluating, executing and integrating M&A opportunities Long standing dedicated internal acquisitions team In line with previous acqui
Slide 29: Increasing Steadfast Group's share of growing Network GWP
Increasing Steadfast Group’s share of growing Network GWP Steadfast Network Since IPO Steadfast has successfully implemented the dual strategies of growing our network as well as increasing equity stakes in the network The acquisition of Coverforce increases our equity ownership from 32% to 37%
Slide 30: Sources and uses
Sources and uses Fully underwritten placement to raise $200 million Use of funds Acquisition of Coverforce $411.5m Transaction costs (pre-tax) $4.0m Surplus cash/reduce debt $2.3m Non-underwritten SPP will provide additional Total $417.8m capital Vendor Steadfast scrip to be priced at the final
Slide 31: Pro-forma gearing and debt capacity
Pro-forma gearing and debt capacity Post equity raise and acquisition debt capacity of $260m4 Pro-forma post Equity raising & equity raising and $ million 30 June 21 acquisition1 acquisition Debt (excluding premium funding) 357.2 - 357.2 Equity 1,267.1 417.8 1,684.9 Debt + equity 1,624.3 417.8 2,042
Slide 32: FY22 guidance
FY22 guidance Steadfast continues to deliver growth in earnings and meet guidance Key assumptions: FY22 Guidance Range1 Strategic partners continuing to require moderate premium price increases Underlying EBITA $320 million - $330 million $39m of EBITA in FY22 from acquisitions of Coverforce and
Slide 33: Equity raising – Placement and SPP overview
Equity raising – Placement and SPP overview Placement offer • Fully underwritten institutional placement to raise approximately $200 million (“Placement”) structure and size • The final Placement issue price (“Issue Price”) is expected to be announced to ASX on Tuesday, 17 August 2021 prior to resum
Slide 34: Equity raising – timetable
Equity raising – timetable1 Event Date1 (2021) Record date for SPP Friday, 13 August 2021 (7.00pm) Trading halt and announcement of the Placement Monday, 16 August 2021 Placement bookbuild Monday, 16 August 2021 Announcement of the outcome of the Placement Tuesday, 17 August 2021 Trading halt lifted
Slide 35: Appendices
Appendices Key risks and Jurisdictions (slide 36) Steadfast Group (slide 47) Steadfast Network (slide 51) Steadfast Underwriting Agencies (slide 58) Our InsurTech (slide 60) 35 FY21 detailed financials (slide 64)
Slide 36: Key risks and International offer restrictions
Key risks and International offer restrictions 36
Slide 37: Key risks
Key risks 1. INTRODUCTION The future performance of Steadfast and the future investment performance of the Steadfast shares (before and after the Coverforce Acquisition) may be influenced by a range of factors, many of which are outside the control of Steadfast and its directors. A non-exhaustive li
Slide 38: Key risks continued
Key risks continued Loss of Steadfast Network Brokers Steadfast Network Brokers are able to leave the Steadfast Network at any time. When an individual broker leaves, this results in a reduction in PSF revenue for Steadfast. Additionally, the size and strength of the Steadfast Network is an importan
Slide 39: Key risks continued
Key risks continued Loss of capacity for underwriting agencies Unexpected loss of underwriter capacity, whereby an underwriter fails to renew a binder or withdraws capacity for strategic reasons (such as exiting lines of business or a specific country exit) is likely to result in significant loss of
Slide 40: Key risks continued
Key risks continued Technology and cyber security risk Steadfast faces risks relating to failure of critical technology assets, infrastructure and services and the risk of loss from theft or unauthorised access to systems including the compromise of an IT asset’s confidentiality, integrity or availa
Slide 41: Key risks continued
Key risks continued The Coronavirus (Covid) pandemic On 11 March 2020, the World Health Organisation declared a pandemic following the emergence in China, and subsequent spread to the rest of the world, of a severe acute respiratory illness caused by a novel coronavirus (Covid). The Covid pandemic h
Slide 42: Key risks continued
Key risks continued Market price of Steadfast shares will fluctuate The market price of Steadfast shares on the ASX may rise or fall due to numerous factors, including: i. Australian and international general economic conditions, including inflation rates, the level of economic activity, interest ra
Slide 43: Key risks continued
Key risks continued Changes to accounting standards Changes to Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act could affect Steadfast’s reported results of operations in any given period or Steadfast’s financia
Slide 44: Completion and Funding Risk
Key risks continued Completion Risk If the Coverforce Acquisition does not proceed and funds have been raised via the Placement and/or SPP, Steadfast intends to use the Placement and/or SPP proceeds to pursue further delivery of outcomes in line with its strategic plan. The alternative deployment of
Slide 45: International offer restrictions
International offer restrictions International Offer Restrictions This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares m
Slide 46: International offer restrictions
International offer restrictions Switzerland The New Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange or on any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material rela
Slide 47: Steadfast Group
Steadfast Group 47
Slide 48: Business units focused on the intermediated general insurance market
Business units focused on the intermediated general insurance market Steadfast Group as at 30 June 2021 Steadfast Group (listed on ASX) Steadfast Network unisonSteadfast Steadfast Underwriting Agencies Complementary Businesses 457 general insurance brokers 264 brokers in unisonSteadfast 24 underwrit
Slide 49: Size and scale
Size and scale Steadfast Group as at 30 June 2021 Largest general insurance broker network in Australasia Largest group of underwriting agencies in Australasia $9.8 billion 457 $1.5 billion 24 Annual GWP1 Steadfast Network brokers Annual GWP1 Underwriting agencies Steadfast Network collects professi
Slide 50: Our market
Our market $27 billion of intermediated general insurance GWP written in CY20 Australian market – gross written premium1 Steadfast Group is focused on the intermediated $27bn general insurance market, Intermediated market with a primary focus on SME Steadfast Network brokers CY20 $8.9bn Intermediate
Slide 51: Steadfast Network
Steadfast Network 51
Slide 52: Largest general insurance broker Network in Australasia
Largest general insurance broker Network in Australasia Steadfast Network Steadfast Network Strategy Steadfast Network $9.8bn The Steadfast Network has 457 general Exclusive to Steadfast Network brokers Be the best solution for our clients’ needs insurance brokers in Australia, New Zealand Opera
Slide 53: Steadfast Network brokers since IPO
Steadfast Network 270 brokers have joined the Steadfast Network since IPO Number of Steadfast Network brokers 600 19 550 77 75 500 12 2 457 31 450 31 400 112 350 300 276 250 200 August New brokers Allied NZ Insight IBNA Singapore Merged Sold externally Leavers June 2021 2013 (IPO) In FY21 18 broke
Slide 54: Worldwide broker offices
Steadfast Network Worldwide broker offices (excluding unisonSteadfast) 1 United Kingdom 43 Asia 13 381 Northern Territory 203 Queensland 112 Western Australia South Australia 533 New South Wales 131 21 North Island 512 Australian Capital Territory Victoria 2,011 broker offices 32 across Australia, 2
Slide 55: Australia – resilient SME client base
Steadfast Network Australia – resilient SME client base 1 GWP mix Diversified by product line Diversified by geography Diversified by insurer 3% 12% 4% 32% 13% 36% Micro (Policy size <$650) Small Enterprise (Policy size $650 - $5,000) Business pack 18% QBE 16% VIC 38% Small Enterprise (Policy size $
Slide 56: International footprint
International footprint Steadfast Network model replication 1. New Zealand 52 brokers in the Network Steadfast Underwriting Agencies building market presence utilising NZ$587m of gross written premium Network distribution in FY21 Strong buy-in from insurer partners SCTP introduced 2. Asia
Slide 57: International footprint: unisonSteadfast
International footprint unisonSteadfast Steadfast Group increased its ownership to a 60% equity stake in unisonSteadfast during the year One of the world’s largest global general insurance broker networks, 600+ offering multi-jurisdictional coverage Referrals between the Steadfast Network and un
Slide 58: Steadfast Underwriting Agencies
Steadfast Underwriting Agencies 58
Slide 59: Steadfast Underwriting Agencies
Steadfast Underwriting Agencies 24 agencies, over 100 niche products Complete farm package Caravans, cabins and trailers Commercial and residential strata Accident and health Base essentials strata Residential and commercial strata Marine hull and other marine Specialised and exotic motorcar Emergin
Slide 60: Our insurTech
Our insurTech 60
Slide 61: Steadfast Client Trading Platform – benefits for clients, brokers and insurers
Our insurTech Steadfast Client Trading Platform (SCTP) – benefits for clients, brokers and insurers Market-leading technology – exclusive to Steadfast Network brokers, clients and participating insurers Benefits for clients: Genuine contestable marketplace generating improved pricing, competit
Slide 62: Insurer and underwriting agency partners on the SCTP
Our insurTech Insurer and underwriting agency partners on the SCTP Commercial property Domestic home, Business pack Professional risks Liability Commercial motor Strata & ISR motor & landlords Q3 CY21 Q3 CY21 CY22 Q4 CY21 FY22 Q4 CY21 CY22 Key: indicates new insurers joining SCTP product lines 62
Slide 63: Steadfast Technologies
Our insurTech Steadfast Technologies Steadfast Client Trading Platform (SCTP) The Steadfast Client Trading Platform is a digital INSIGHT is an insurance broking platform with a UnderwriterCentral is a cloud-based agency marketplace which provides Steadfast Network insurance powerful search engine wh
Slide 64: FY21 Detailed Financials
FY21 Detailed Financials 64
Slide 65: FY21 detailed financials
FY21 detailed financials Reconciliation of statutory to underlying earnings 12 months ended 30 June 2021 Total statutory Reclassifications Non-trading items Total underlying $ million Fees and commissions income 636.4 86.8 - 723.2 Professional Services and other fees - 68.7 - 68.7 Premium funding in
Slide 66: FY21 detailed financials
FY21 detailed financials Statement of underlying income (IFRS view) 12 months ended 30 June 2021 Underlying Underlying Period-on-period Organic Acquisitions & $ million FY21 FY20 growth % growth %3 hubbing growth %4 Fees and commissions1, 2 791.9 706.9 12.1% 7.3% 4.8% Other revenue 108.0 119.4 -9.5%
Slide 67: FY21 detailed financials
FY21 detailed financials Statement of income (underlying IFRS view) Underlying Underlying Underlying Underlying Underlying Underlying $ million 2H21 1H21 2H20 1H20 2H19 1H19 Fees and commissions¹, 2 410.4 381.5 357.4 349.5 328.9 302.9 Other revenue 51.7 56.3 58.1 61.3 38.5 18.1 Revenue – Consolidate
Slide 68: FY21 detailed financials
FY21 detailed financials Statutory cash flow statement $ million FY21 FY20 $111.1m free cash flow in FY21 Cash flows from operating activities Cash from operations1 225.1 Less IQumulate collections balance date mismatch2 (38.7) Net cash from operating activities before customer 225.1 205.9 trust acc
Slide 69: Australian General Insurance Statistics
Australian General Insurance Statistics1 Premiums and claims by class of business Houseowners/householders Domestic motor vehicle CTP motor vehicle Premiums and Claims by class of Business Year End Year End Year End Year End Year End Year End Mar 2020 Mar 2021 Mar 2020 Mar 2021 Mar 2020 Mar 2021 Gro
Slide 70: Australian General Insurance Statistics
Australian General Insurance Statistics1 Premiums and claims by class of business Commercial motor vehicle Fire and ISR Public and product liability Professional indemnity Premiums and Claims by class of Business Year End Year End Year End Year End Year End Year End Year End Year End Mar 2020 Mar 20
Slide 71: Steadfast
<> Steadfast ‘THE STRENGTH YOU NEED