Steadfast Group Limited · ASX:SDF
Steadfast — H1 2016 Earnings Presentation
43 slides from Steadfast's earnings presentation, Feb 24, 2016
Slide 1: 1H FY16 results presentation, 24 February 2016
24 February 2016 Presented By: Robert Kelly – Managing Director and CEO Stephen Humphrys – Chief Financial Officer
Slide 2: Important notice
Important notice This presentation has been prepared by Steadfast Group Limited (“Steadfast”). This presentation contains general information in summary form which is current as at 23 February 2016. This presentation is not a recommendation or advice in relation to Steadfast or any product or servic
Slide 3: 1H FY16 highlights
1H FY16 highlights Strong earnings growth in 1H FY16 vs Acquisitions overall performing ahead 1H FY15 of expectations Underlying NPATA 81% to $37.9m Realised acquisition synergies of $1.5m pre tax in 1H FY16 Underlying Cash EPS 26% to 5.10 cps Future acquisition growth supported by Sta
Slide 4: Continued earnings growth
Continued earnings growth Statutory and Underlying NPATA Statutory and Underlying 1H FY16 financial highlights 60 Statutory Underlying Six months ended Yoy 50 31 December ($m) 1H FY16 1H FY15 growth % 81% 40 37.9 pcp Statutory - revenue 191.9 105.1 83% 35.7 $million - NPAT 39.0 13.7 185% 30 22.4 - N
Slide 5: Network GWP and price movement
Network GWP and price movement 1 Price and total growth in Network GWP Pricing moved from soft to flat; 1H FY14 2H FY14 1H FY15 2H FY15 1H FY16 volume growth continues 4% 2% 0.6% Price growth flattened to +0.1% in 1H 0.1% 0% FY16 compared to 2H FY15 (-4.0%) -2% -4% -2.2% Volume growth continuing
Slide 6: Size and scale of Steadfast
Size Scale Steadfast Largest general insurance broker Largest underwriting agency group network in Australia and New Zealand in Australia and New Zealand Current run rate annual GWP Current run rate annual GWP $4.6 billion $765 million 343 Steadfast Network Brokers 22 Steadfast Underwriting Agencies
Slide 7: Network Brokers GWP growth
Network Brokers GWP growth Network Brokers 1,2 Gross Written Premium (GWP) 5.0 1H FY16 vs 1H FY15 2H $4.4b 4.5 $4.1b 1H 4.0 $3.9b - 3.9% AU price (-$83m) $3.4b 3.5 3.0 2.1 2.3 +3.5% AU volume ($74m) $billion 2.0 2.5 1.8 2.6% pcp 2.0 +2.4% New AU brokers ($51m) 1.5 2.1 2.2 1.0 1.9 2.0 1.6 +0.6% NZ ($
Slide 8: Underwriting Agencies GWP growth
Underwriting Agencies GWP growth Steadfast Underwriting Agencies Gross Written Premium (GWP) GWP growth enhanced significantly by 450 Calliden and the QBE 400 $385m 273% pcp agency acquisitions 350 $million 300 On track to generate 250 $284m 1H annual GWP of $378m 200 2H $765m+ $145m 150 100 $88
Slide 9: Solid organic performance
Solid organic performance 1.3% organic growth (+$0.5m) in EBITA pre Corporate Offices expenses Brokers: due to solid revenue gains, cost control, benefits from hubbing and bolt-on acquisitions Agencies: due to strong sales and margin improvement Complementary businesses: remain a core part o
Slide 10: Operating highlights from FY15 acquisitions
Operating highlights from FY15 acquisitions Performance exceeded our initial expectations Actual vs normalised Impact to Operating highlights Acquisitions historical EBITA earn out Managed by CEO of Steadfast Underwriting Agencies Calliden agencies +$1.2m - Cost savings generated from staff and
Slide 11: Financial information
Financial information <> Steadfast
Slide 12: Strong growth from acquisitions
Strong growth from acquisitions Growth from Underlying Underlying Year-on-year Organic acquisitions, & Six months ended 31 December 1H FY16 1H FY15 growth % growth % hubbing %1 Revenue ($m) 226.1 108.4 108.6% 6.3% 102.3% EBITA pre CO expenses ($m) 66.0 37.9 74.4% 1.3% 73.1% EBITA1 ($m) 60.4 34.9 73.
Slide 13: Statutory vs Underlying NPATA Reconciliation
Statutory vs Underlying NPATA Reconciliation 60 50.2m (0.2m) (16.0m) 50 40 3.9m 37.9m $ million 30 20 10 0 Statutory Less: executive loan Less: gain from Add: impairment Underlying NPATA NPATA income adjustments to calculated with deferred reference to the consideration deferred estimates considerat
Slide 14: Contributions to Underlying EBITA
Contributions to Underlying EBITA Breakdown of the growth in EBITA pre Corporate Office expenses 70 0.7m 26.9m 66.0m includes 60 $1.5m synergies Organic $ million 50 growth 0.5m 40 37.9m (0.8m) 1.3m 30 20 1 1H FY15 EBITA Organic Bolt-ons Acquisitions Hubbing 1H FY16 EBITA excluding bolt- ons Organ
Slide 15: Track record of strong earnings growth
Track record of strong earnings growth Cash EPS EBITA pre Corporate Office expenses 74% pcp 10.0 1H 70 66.0 1H 2H 61.0 60 2H cents per share 8.0 $million 50 5.76 6.0 4.32 26% pcp 40 32.2 33.1 37.4 37.9 3.50 28.9 30 4.0 20 5.10 2.0 3.62 4.03 3.27 10 0.0 0 Pf FY13 Pf FY14 FY15 FY16 Pf FY13 Pf FY14 FY1
Slide 16: Brokers & Agencies EBITA margins (Aggregate View)
Brokers & Agencies EBITA margins (Aggregate View) EBITA margin improvement primarily due to agency acquisitions 12 months ended 30 June 1H FY14 1H FY15 1H FY16 Consolidated & equity accounted brokers1 28.0% 26.2% 25.9% Underwriting agencies2 25.5% 23.2% 43.3% Total EBITA margin (Brokers & Agencies)
Slide 17: Broking operations (Aggregate)
Broking operations (Aggregate) Brokers (Consolidated & Equity Accounted) 1H FY16 vs Growth from Underlying Underlying 1H FY15 Organic acquisitions & Six months ended 31 December 1H FY16 1H FY15 growth % growth % hubbing%1 Fees & Commissions 134.5 113.2 18.8% 3.9% 14.9% Of which wholesale broker comm
Slide 18: Brokers' organic performance
Brokers’ organic performance Brokers on an aggregate basis realised revenue and cost synergies Sales pcp Costs pcp Price -3.9% n/a Volume +3.5% +1.4% Inflation n/a +1.7% Expectation -0.4% +3.1% Actual +2.0% +2.1% Variance +2.4% +1.0% Organic revenue growth (excluding bolt-ons) of 2.0% despite rela
Slide 19: Underwriting agencies (Aggregate)
Underwriting agencies (Aggregate) Agencies (Consolidated & Equity Accounted) Underlying Underlying Year-on-year Organic Growth from Six months ended 31 December 1H FY16 1H FY15 growth % growth % acquisitions % Fees & Commissions 122.4 33.8 262.1% 4.5% 257.6% Of which commission expense1 59.6 14.3 31
Slide 20: Strong conversion of profit to cash
Strong conversion of profit to cash Statutory cash flow statement Six months ended 31 Dec, $ millions 1H FY16 1H FY15 Cash flows from operating activities >100% of underlying Receipts from customers 178.9 111.9 NPATA converted into cash flow Payments to suppliers and employees, and network (130.7)
Slide 21: Healthy balance sheet
Healthy balance sheet Statutory balance sheet $ millions 31 Dec 15 30 Jun 15 Cash and cash equivalents 79.9 67.6 Cash held on trust 215.1 172.2 Corporate gearing ratio1 at Receivables & other 266.1 343.3 17% versus maximum target Total current assets 561.1 583.1 gearing ratio of 25% Equity account
Slide 22: Fully franked interim dividend of 2.4 cents, up 20%
Fully franked interim dividend of 2.4 cents, up 20% In line with dividend payout ratio target of 65% to 85% of underlying net profit after tax and a minimum of 50% of net profit 6.0 Interim dividend after tax before amortisation and impairment 5.0 Final dividend of intangibles cents per share 4.0
Slide 23: Strategy & Outlook
Strategy & Outlook <> Steadfast
Slide 24: Trends suggest need for price increases
Trends suggest need for price increases 1 Australian General Insurance Statistics Houseowners/householders Domestic motor vehicle CTP motor vehicle Premiums and Claims by Class of Business Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec Trend Trend Trend 2014 2015 2014
Slide 25: Steadfast shows resilience in a soft market
Steadfast shows resilience in a soft market Insurance profits down Outlook comments 1H FY16 vs 1H FY15 “The vast majority of respondents expect conditions to >-20% (Suncorp, IAG) improve next year, with 86% forecasting a profit increase, four points higher than in 2013.” Macquarie Benchmarking Surve
Slide 26: Strategic initiatives
Strategic initiatives Business Roll out common Hubbing Offshoring IT systems Development Steadfast Asian Acquisition New Zealand pipeline Direct presence © 2016 Steadfast Group Limited | 26
Slide 27: Back office IT systems at Steadfast
Back office IT systems at Steadfast Investing in common broking and accounting systems for brokers and agencies to realise cost synergies GWP data Monthly for equity brokers, semi annually Group Broking systems for non-equity brokers reporting • WinBeat Month end system • Underwriter Central reporti
Slide 28: Rollout for back office systems
Rollout for back office systems 2015 Feb 16 Apr 16 Jul 16+ 2017+ Eclipse Launch at Synergies to Steadfast Further upgrades; emerge; Develop Eclipse Beta testing Convention; convert new continued product convert existing users product users development Vietnam back office support Outsource finance Es
Slide 29: Re-affirm FY16 outlook
Re-affirm FY16 outlook FY16 underlying Cash EPS growth guidance range of 1 10-14%, driven by: Underlying NPATA 41-46% Uplift from 2H FY15 acquisitions 85 $80 – $83m Organic growth 75 65 $ millions 56.7 FY16 underlying NPATA guidance range of $80- 55 $83m, up 41-46% 41.2 45 35.2 35 Key assu
Slide 30: Summary - delivering
Summary - delivering Continuing to deliver strong earnings growth throughout the insurance cycle FY15 acquisitions overall performing ahead of expectations Achieving efficiencies from scale and cost savings initiatives such as hubbing and offshoring Strong conversion of profits to cash Hea
Slide 31: Questions
Questions <> Steadfast
Slide 32: Appendices
Appendices <> Steadfast
Slide 33: Resilient SME customer base
Resilient SME customer base 1,2,3 Steadfast Network Brokers’ GWP mix Corporate Other Retail 2% 2% 87% of customer base relates to small to Retail – medium size enterprises (SMEs) Home/Motor 9% Medium less pricing volatility enterprises 32% Focus is on advice Low exposure to Corporate (2%) Smal
Slide 34: Diversified sales footprint
Diversified sales footprint 1,2 1 Diversified by geography Diversified by product line VIC 28% NSW 22% QLD 17% Business Pack & Financial 24% Commercial Motor 13% WA 17% SA 6% NZ 6% Retail Home & Motor 10% Commercial Property & ISR 8% TAS 2% ACT 1% NT 1% Liability 8% Professional Risks 8% Statutory C
Slide 35: Statutory P&L
Statutory P&L $ millions 1H FY16 1H FY15 Revenue M&A fees 16.6 15.6 Revenue from wholly owned entities 169.9 83.7 Reconciliations to Share of profits of associates and joint venture 5.2 4.7 underlying revenue Other revenue 0.3 1.1 on slide 36 and to Total revenue 191.9 105.1 underlying NPATA 60.4 34
Slide 36: Statutory vs Underlying Revenue Reconciliation
Statutory vs Underlying Revenue Reconciliation 260 56.7m (16.0m) 240 (5.2m) 226.1m (1.3m) 220 191.9m 200 $ million 180 160 140 120 100 Statutory Revenue Add: Commissions paid Less: gain from Less: share of profit Less: other income Underlying Revenue (grossed up in revenues adjustments to deferred f
Slide 37: Cash EPS reconciliation
Cash EPS reconciliation1 Cash EPS restated to reflect 1:3 rights offering in February/March 2015 Bonus factor of 3.704% applied to reflect bonus shares issued at discounted exercise price Cents per share 1H FY16 2H FY15 1H FY15 2H FY14 1H FY14 2H FY13 1H FY13 NPATA 37.9 35.7 21.0 22.4 18.8 18.2 17.0
Slide 38: Statement of income (Adjusted IFRS view)
Statement of income (Adjusted IFRS view) Organic % growth from Six months ended 31 Dec, $ millions 1H FY16 1H FY15 % growth growth2 % acquisitions & hubbing3 Fees and commissions¹ 189.0 78.2 141.7% 5.3% 136.4% M&A Fees 16.6 15.6 6.5% 6.5% 0.0% Interest income 3.4 2.5 36.5% (4.0%) 40.5% Other revenue
Slide 39: Revenue and EBITA pre CO expenses
Revenue and EBITA pre CO expenses (Aggregate view) Organic Growth % from Underlying Underlying % growth3 acquisitions & $ millions 1H FY16 1H FY155 Growth % hubbing4 1 Includes gross up of wholesale Gross written premiums broker commission expense of Consolidated brokers 411.1 287.2 43.2% 1.3% 41.9%
Slide 40: Statement of income (Adjusted IFRS view)
Statement of income (Adjusted IFRS view) Underlying Underlying Underlying Pro-forma Pro-forma Six months ended 31 December, $ millions 1H FY16 2H FY15 1H FY15 2H FY14 1H FY14 Fees and commissions 189.0 156.0 78.2 65.9 52.4 M&A Fees 16.6 14.0 15.6 12.7 13.7 Interest income 3.4 3.1 2.5 1.4 1.3 Other r
Slide 41: P&L items
P&L items Other revenue $millions 1H FY16 1H FY15 Variance Fee income for other professional services 10.6 8.6 2.0 Legal fee disbursements 1.4 1.3 0.1 Other income 5.1 2.2 2.9 Total other revenue 17.0 12.1 4.9 Other expenses $millions 1H FY16 1H FY15 Variance 1 Commission expense: Rebate to Steadfas
Slide 42: Australian General Insurance Statistics
Australian General Insurance Statistics1 Houseowners/householders Domestic motor vehicle CTP motor vehicle Premiums and Claims by Class of Business Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec 2014 2015 2014 2015 2014 2015 Gross written premium ($m) 7,544 7,744 7,942
Slide 43: Australian General Insurance Statistics
Australian General Insurance Statistics1 Commercial motor vehicle Fire and ISR Public and product liability Professional indemnity Premiums and Claims by Class of Business Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec 2014 2015 2014 2015 2014