Steadfast Group Limited · ASX:SDF
Steadfast — H1 FY2017 Earnings Presentation
48 slides from Steadfast's earnings presentation, Feb 22, 2017
Slide 1: Presenters
PRESENTERS: Robert Kelly – Managing Director & 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 information in summary form which is current as at 22 February 2017. This presentation is not a recommendation or advice in relation to Steadfast or any product or service offere
Slide 3: Investor presentation overview
Investor presentation Overview Group performance highlights Business unit performance highlights Steadfast Network Equity brokers Steadfast Underwriting Agencies Steadfast Direct Complementary businesses Financial information Strategy and outlook © 2017 Steadfast Group Limited | 3
Slide 4: Group performance highlights
Group performance highlights Strong performance in 1H 17 Underlying earnings Strong earnings growth: Underlying EBITA 11% to $66.7m Underlying NPAT 13% to $30.0m Underlying NPATA 8% to $41.0m Underlying EPS (NPAT) 12% to 4.01 cents per share (cps) Organic performance Underlying EBITA org
Slide 5: Business unit performance highlights
Business unit performance highlights Steadfast Network Equity brokers Steadfast Underwriting Agencies Steadfast Direct Complementary businesses
Slide 6: Steadfast Network: Significant growth in Gross Written Premium
Steadfast Network Significant growth in Gross Written Premium Steadfast Network Brokers 1 Gross Written Premium (GWP) 1H 17 vs 1H 16 5.0 $4.5b 4.5 $4.4b $4.1b 4.0 $3.9b GWP of $2.5b vs $2.2b 3.5 $2.3b $2.3b +3.5% organic growth 3.0 $2.1b +12.7% $2.0b $ billion pcp 2.5 +5.0% AR network 2.0 1.5 +4.2%
Slide 7: Steadfast Network: New brokers joining
Steadfast Network New brokers joining the Network 107 brokers have joined and only one broker has left the Network since the IPO. Number of Steadfast Network Brokers 400 31 29 375 31 7 1 348 350 45 325 Largest general 300 insurance broker 278 network in Australia 275 with 28% market 250 share in Aus
Slide 8: Equity brokers
Equity brokers Continuing to invest and create synergies Equity brokers (including bolt-ons) 1H 17 2H 16 1H 16 Acquisitions 7 8 2 Increased equity holdings 7 7 4 Hubbed 5 1 3 Actively acquiring and hubbing brokers Brokers acquired in 1H 17 were all part of the Steadfast Network © 2017 Steadfast
Slide 9: Steadfast Underwriting Agencies
Steadfast Underwriting Agencies Solid growth in Gross Written Premium Steadfast Underwriting Agencies Gross Written Premium (GWP) 800 $745m 700 1H 17 vs 1H 16 600 $367m GWP of $386m vs $378m 500 +2% $ million $385m pcp 400 +2% total growth 300 $284m 200 $378m $386m $145m 100 $88m Largest underwritin
Slide 10: Steadfast Direct
Steadfast Direct Strong momentum Steadfast Direct Facility Gross Written Premium (GWP) 45 $40m 40 35 30 1H 17 vs 1H 16 $ million 25 $24m 20 $39m GWP of $39m vs $16m 15 10 $16m +146% total growth 5 $0.5m 0 FY15 FY16 1H17 1H 2H Home, motor and now landlord products Sold through the Steadfast Virtu
Slide 11: Complementary businesses
Complementary businesses Supporting the network Steadfast Network brokers benefit from access to niche products and services through Steadfast’s equity ownership in complementary businesses Steadfast Network Collects Marketing & Specialist life Technology Back office service Administration insuran
Slide 12: Financial information
Financial information <> Steadfast
Slide 13: Group financial performance
Group financial performance Strong underlying earnings growth Underlying EBITA: FY 13 – 1H 17 Year-on- Year-on- Six months to Underlying1 Underlying year year 140 $129.6m 31 December 1H 17 1H 16 growth $ growth % 120 Revenue ($m) 243.4 226.1 17.3 7.7% EBITA ($m) 66.7 60.4 6.3 10.5% 100 $90.4m $69.2m
Slide 14: Contributions to underlying EBITA
Contributions to underlying EBITA Organic and acquisition growth Breakdown of the growth in EBITA Total acquisition growth: Total organic growth: $3.0m (+5%) 80 $3.3m (+6%) 70 $66.7m $1.7m $1.3m $ million $1.5m $1.8m $60.4m 60 50 40 1H16 EBITA Organic growth Bolt-ons Acquisitions Hubs 1H17 EBITA S
Slide 15: Broking operations financial performance
Broking operations financial performance 1 Organic and acquisition growth Brokers – consolidated & equity accounted (assuming 100% ownership) Six months to 31 December, Underlying Underlying Year-on-year Organic Acquisition $million 1H 17 1H 16 growth % growth % growth % Net Fees & Commissions² 146.
Slide 16: Underwriting agencies financial performance
Underwriting agencies financial performance 1 Solid organic growth Agencies – consolidated & equity accounted (assuming 100% ownership) Six months to 31 December, Underlying Underlying Year-on-year Organic Acquisition $million 1H 17 1H 16 growth % growth % growth % Net Fees & Commissions² 65.3 62.8
Slide 17: Statutory cash flow statement
Statutory cash flow statement Strong conversion of profit to cash Statutory cash flow statement extract Six months to 31 December, $ million 1H 17 2H 16 1H 16 Cash flows from operating activities Net cash from operating activities before customer trust accounts movement 39.1 36.8 47.1 Net movement i
Slide 18: Statutory Balance sheet
Statutory Balance sheet Healthy balance sheet with leverage capacity $ million 31 Dec 16 30 Jun 16 Cash and cash equivalents 60.6 67.5 Corporate debt Available at Cash held on trust 230.9 224.7 facilities, $ million Maturity Total 31 Dec 2016 Receivables & other 303.9 341.9 Facility A Aug 2019 235 6
Slide 19: Interim FY dividend
Interim FY 17 dividend Interim dividend up 8% Interim FY 17 dividend of 2.6 cps (fully franked), up 8% pcp 7.0 6.0 Interim FY 17 dividend payout ratio is 75% of 6.0 net profit after tax (excluding non-trading 5.0 5.0 items), in line with targeted 65% to 85% 4.5 cents per share 3.6 4.0 Dividend
Slide 20: Shareholder returns
Shareholder returns Significant half on half underlying EPS growth Underlying EPS (NPAT)1: FY 13 – 1H 17 Underlying EPS (NPATA)1: FY 13 – 1H 17 9 12 8.09 11.00 8 7.24 10 9.79 7 6.24 7.94 cents per share cents per share 6 8 5.90 5.40 4.51 6.77 5 4.30 +12% 5.76 +7% 3.46 pcp 6 4.32 pcp 4 2.81 3.50 3 4
Slide 21: Strategy & outlook
Strategy & outlook <> Steadfast
Slide 22: Business strategy
Business strategy Clear strategy to grow Group Improve margins by increasing revenue and creating Develop our strategic partner relationships cost efficiencies Retain and develop senior management team Expand and roll out our offshoring division for IT, Continue to review potential acquisi
Slide 23: Digital strategy
Digital strategy Roll out common systems – intuitive, cloud-based Roll out to Launched in 2016 Convert existing Synergies to new users Further synergies at the Steadfast users emerge commenced to emerge Convention Jul 2016 115 Network brokers have signed up Live brokers (at 22 February 2017) = 1
Slide 24: Steadfast Client Trading Platform (SCTP)
Steadfast Client Trading Platform (SCTP) Supporting the Network Launched in June 2016, exclusive to Steadfast Network Brokers, their clients and select insurer partners Benefits from using the platform: Insurer partners on platform consist of: AIG, Allianz, Berkley, Calibre, CGU, CHUBB, Client
Slide 25: International strategy
International strategy Significant growth opportunity What is the strategy? New Zealand i. Grow the Network ii. Strengthen position with domestic insurers iii. Improve back office systems (roll out of Insight) iv. Explore bolt-on opportunities v. Support underwriting agency expansion Asia i. Set
Slide 26: Premium pricing outlook
Premium pricing outlook First signs of improvement in the SME market Insurance cycle Capital Strong flows profits into Rates rise market strongly Rates start to fall Risk selection Insurers rejects some chase activities and market First signs of price industries share Hardening Softening improvement
Slide 27: FY guidance
FY 17 guidance Organic growth and strategic initiatives No change to guidance range Underlying EBITA³ 160 FY 17 guidance range of: 140 $140m-$150m 120 Underlying EBITA of $140m-$150m 100 Underlying NPATA1 of $85m-$90m $ million 80 Underlying NPAT of $63m-$68m 60 $129.6m $90.4m 40 Guidanc
Slide 28: Summary
Summary Continuing to successfully execute business strategy Steadfast Network Strong volume growth SME portfolio price increases starting to emerge New brokers joining Equity brokers Margin improvement Organic growth Actively acquiring and hubbing brokers Offshoring and IT roll-out St
Slide 29: Questions
Questions a A Sa > ~ @ _— ne] @ = Os wa Ne 8 g 3 3 a Fy
Slide 30: Appendices
Appendices <> Steadfast
Slide 31: Group overview: Structure
Group overview Structure Vision To enhance the value of Steadfast-aligned businesses through our combined strength, creating exceptional value for our shareholders Steadfast Network Equity brokers Network of 348 general insurance brokers in Co-owner and consolidator of broking businesses Austral
Slide 32: Group overview: Size and scale
Group overview Size and scale Largest general insurance broker Largest underwriting agency group network in Australia and New Zealand in Australia Annual GWP Annual GWP $4.5 billion $745 million 348 Steadfast Network Brokers 23 Agencies Steadfast Network Collects Marketing & Administration (M&A) Fee
Slide 33: Steadfast Network: Worldwide office Network
Steadfast Network Worldwide office Network 1 Service provider Europe Broker Network offices 348 broker businesses 15 23 underwriting agencies Asia Equity participation 11 59 broker businesses Northern Territory 240 Queensland 23 underwriting agencies 115 Life broker 66 77 335 Western
Slide 34: Australia - resilient SME customer base
Steadfast Network Australia - resilient SME customer base 1,2,3 Steadfast Network Brokers’ GWP mix Corporate Other Retail 2% 2% 88% of customer base relates to Retail – small to medium size enterprises Home/Motor 8% Medium (SMEs) with less pricing volatility enterprises 32% Focus is on advice
Slide 35: Australia - diversified sales footprint
Steadfast Network Australia - diversified sales footprint 1,2 1 Diversified by geography Diversified by product line VIC 29% NSW 21% QLD 16% Business Pack 22% Commerical Motor 13% WA 18% SA 6% NZ 6% Professional Risks 8% Commercial Property & ISR 9% TAS 3% ACT 1% NT 1% Liability 8% Statutory Covers
Slide 36: Steadfast Underwriting Agencies
Steadfast Underwriting Agencies 23 agencies, 72 products Steadfast aims to highlight each agency’s specialised service by preserving its brand and unique offering which is important as approximately 50% of our agencies’ business is placed with non-Steadfast brokers Residential and Mobile plant and
Slide 37: London 'super' binder
Steadfast Underwriting Agencies London ‘super’ binder Rationalised and consolidated our London market placement into a single binder with a What is the ‘super’ binder? select number of carriers and co-brokers – JLT and Steadfast Re A delegated authority given to a Steadfast underwriting agency
Slide 38: Steadfast Technologies
Steadfast Technologies Common IT systems supporting the network IT is a competitive advantage as it creates significant cost synergies and efficiencies We have elected to build our own systems – we don’t want to have a third party controlling our destiny or our data Quotes and issues policies
Slide 39: Statutory profit and loss statement
Financial overview Statutory profit and loss statement $ million 1H 17 1H 16 Revenue M&A fees 18.4 16.6 Revenue from wholly owned entities 182.1 169.9 Share of profits of associates and joint venture 6.9 5.2 Other revenue 0.9 0.2 Total revenue 208.3 191.9 EBITA from core operations 66.7 60.4 Amortis
Slide 40: Statutory vs underlying revenue reconciliation
Financial overview Statutory vs underlying revenue reconciliation 300 $52.4m ($3.6m) ($5.5m) ($6.9m) 250 ($1.3m) $243.4m $ million $208.3m 200 150 100 1H17 Statutory Add: Less: gain from Less: net gain Less: share of Less: other 1H17 Underlying Revenue Commissions paid deferred from sale of profit f
Slide 41: Statutory vs underlying NPAT and NPATA reconciliation
Financial overview Statutory vs underlying NPAT and NPATA reconciliation $48.9m ($4.1m) 50 ($4.0m) $0.4m ($0.2m) $41.0m 40 30 $ million $37.9m 20 $30.0m 10 0 1H17 Less: gain from Less: net gain from Add: Other incl. executive 1H17 Statutory deferred sale of investments impairments loan income Underl
Slide 42: Underlying EPS reconciliation
Financial overview Underlying EPS reconciliation 1H 17 2H 16 1H 16 2H 15 1H 15 Underlying NPAT ($m) 30.0 33.8 26.6 26.8 15.3 Underlying NPATA¹ ($m) 41.0 44.1 37.9 35.7 21.0 Previous weighted average share # n/a n/a n/a 579.8 501.3 Restated weighted average share # 749.0 746.7 743.5 621.2 519.9 Under
Slide 43: Underlying revenue and EBITA (aggregate view)
Financial overview Underlying revenue and EBITA (aggregate view) Underlying Underlying $ millions 1H 17 1H 16 Growth Gross written premiums Consolidated brokers 479.9 411.2 16.7% Equity accounted 241.4 241.9 (0.2%) GWP from brokers 721.3 653.1 10.4% Underwriting agencies 385.7 378.2 2.0% Total GWP 1
Slide 44: Statement of income (underlying IFRS view)
Financial overview Statement of income (underlying IFRS view) Growth from Six months to 31 December, Underlying Underlying Organic acquisitions & $ millions 1H 17 1H 16 Growth % growth2 % hubbing %3 Fees and commissions¹ 203.1 189.0 7.5% 0.8% 6.7% M&A Fees 18.4 16.6 10.7% 10.7% 0.0% Interest income
Slide 45: Statement of income (underlying IFRS view)
Financial overview Statement of income (underlying IFRS view) Six months to 31 December, Underlying Underlying Underlying Underlying Underlying $ millions 1H 17 2H 16 1H 16 2H 15 1H 15 Fees and commissions¹ 203.1 195.4 189.0 156.0 78.2 M&A Fees 18.4 15.8 16.6 14.0 15.6 Interest income 3.7 3.3 3.4 3.
Slide 46: Profit and loss items
Financial overview Profit and loss items Other revenue $millions 1H 17 1H 16 Variance Fee income for other professional services 13.0 10.6 2.4 Legal fee disbursements1 0.0 1.4 (1.4) Other income 5.3 5.0 0.3 Total other revenue 18.3 17.0 1.3 Other expenses $millions 1H 17 1H 16 Variance Rebate to Ste
Slide 47: 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 Dec Year End Dec Year End Dec Year End Dec Year End Dec Year End Dec 2015 2016 2015 2016 2015 2016 Gro
Slide 48: Australian General Insurance Statistics continued
Australian General Insurance Statistics1 continued… 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 Dec Year End Dec Year End Dec Year End Dec Year End Dec Year End De