Steadfast Group Limited · ASX:SDF
Steadfast — H1 2018 Earnings Presentation
57 slides from Steadfast's earnings presentation, Feb 21, 2018
Slide 1: Steadfast Group Limited 1H18 results
21 February 2018 Steadfast Group Limited 1H18 results 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 21 February 2018. This presentation is not a recommendation or advice in relation to Steadfast or any product or service offere
Slide 3: Contents
1H18 investor presentation Contents ▪ Our track record 4 ▪ 1H18 highlights 5 ▪ 1H18 financial summary 10 ▪ Outlook and guidance 17 ▪ Appendices 21
Slide 4: Steadfast Group: Our growth record
Steadfast Group Our growth record Steadfast Network brokers Steadfast Network GWP ($bn) Steadfast Underwriting Agencies GWP ($m) 380 5 360 4 600 340 320 3 400 300 2 280 200 260 1 240 0 0 FY13 FY14 FY15 FY16 FY17 1H18 FY13 FY14 FY15 FY16 FY17 1H18 FY14 FY15 FY16 FY17 1H18 Brokers on INSIGHT Underlyin
Slide 5: 1H18 highlights
1H18 highlights <3> Steadfast ”
Slide 6: Steadfast Group highlights
Steadfast Group highlights Strong 1H18 performance driven by organic and acquisition growth Underlying earnings1 Organic growth ▪ EBITA +9.1% to $72.8m ▪ Underlying EBITA organic growth of $3.5m, +5% ▪ NPAT +8.4% to $32.5m ▪ Driven by record first half GWP across the Group ▪ NPATA2 +5.0% to $43.0m ▪
Slide 7: Steadfast Network highlights
Steadfast Network highlights Record first half gross written premium of $2.6 billion Financial highlights Operational highlights ▪ GWP +8% to $2.6 billion ▪ Growth in Steadfast Network brokers +15 to 376 at 31 December 2017 ▪ Primarily driven by price increases and growth in ▪ 326 brokers in the Aus
Slide 8: Steadfast Underwriting Agencies highlights
Steadfast Underwriting Agencies highlights Strong price, volume and acquisition growth Financial highlights Operational highlights ▪ GWP +16% to $449m ▪ 25 agencies offering over 100 niche products ▪ Strong momentum in 1H18 ▪ Acquired Axis Underwriting Services as part of Whitbread ▪ Growth primaril
Slide 9: Key initiatives progress
Key initiatives progress Delivering on long term strategic initiatives Technology International footprint Steadfast Client Trading Platform (SCTP) ▪ Steadfast model successfully replicated in New Zealand and Singapore ▪ Connected insurer partners include: AIG, Allianz, Calibre, CGU, CHUBB, ▪ New Zea
Slide 10: 1H18 financial summary
1H18 financial summary <3> Steadfast ”
Slide 11: Group financial performance
Group financial performance Strong underlying earnings growth Six months to 31 December Underlying Year-on-year Cash flow summary $ million 1H18 Underlying 1H17 growth % $ million 1H18 Revenue ($m) 269.6 250.1 +7.8% Operating cash flow 51.4 EBITA ($m) 72.8 66.7 +9.1% Dividend (33.0) EBITA margin 27.
Slide 12: Contributions to 9.1% growth in underlying EBITA
Contributions to 9.1% growth in underlying EBITA Organic and acquisition growth Organic growth1: $3.5m (+5.3%) Acquisition growth: $2.6m (+3.8%) $3.6m ($1.0m) $72.8m $3.8m ($0.4m) (1.6%) $0.1m 70 (0.6%) 0.1% 5.4% $66.7m 5.8% 60 50 1H17 EBITA Organic growth Additional net technology Bolt-ons Acquisit
Slide 13: Equity brokers financial performance
Equity brokers financial performance Price increases offset by one-off expenses Equity brokers – consolidated & equity accounted (assuming 100% ownership) Six months to 31 December, Year-on-year Growth from acquisitions $ million Underlying 1H18 Underlying 1H17 growth % Organic growth % & hubbing1 %
Slide 14: Underwriting Agencies financial performance
Underwriting Agencies financial performance Strong net earnings growth driven by price and volume increases Agencies – consolidated & equity accounted (assuming 100% ownership) Six months to 31 December, Year-on-year Growth from acquisitions $ million Underlying 1H18 Underlying 1H17 growth % Organic
Slide 15: Statutory balance sheet
Statutory balance sheet Strong balance sheet with capacity for future growth $ million 31 Dec 17 30 Jun 17 Cash and cash equivalents 79.8 66.5 Corporate debt facilities, Available at Cash held on trust 290.9 263.2 $ million Maturity Total 31 Dec 2017 Trade & other receivables 369.9 395.2 Facility A
Slide 16: Interim FY18 dividend
Interim FY18 dividend Interim dividend up 8% ▪ Interim FY18 dividend of 2.8 cps (fully franked), up from 10.0 2.6 cps, +8% compared to pcp 9.0 ▪ FY18 target dividend payout ratio of 65% to 85% of underlying NPAT 8.0 ▪ Dividend Reinvestment Plan (DRP) to apply to interim 7.0 FY18 dividend; no discoun
Slide 17: Outlook & guidance
Outlook & guidance <3> Steadfast ”
Slide 18: Strategy and outlook
Strategy and outlook Organic and acquisition growth Steadfast Group ▪ Constantly seeking organic and acquisition growth ▪ Strong balance sheet capacity with $89m of unutilised debt capacity as at 31 December 2017 to fund future growth ▪ Improving margins via back office streamlining ▪ Additional lev
Slide 19: FY18 guidance
FY18 guidance Increased FY18 guidance reaffirmed 3 ▪ FY18 guidance range increased to reflect the Underlying EBITA ($m) Whitbread Group acquisition in December 20171: 180 160 $160m-$170m Underlying EBITA Underlying NPAT 140 Guidance range2 120 $155m - $165m $70m - $75m (August 2017) 100 Increased gu
Slide 20: Questions
Questions <3> Steadfast ”
Slide 21: Appendices
Appendices ▪ Steadfast Group (slide 22) ▪ Steadfast Network (slide 28) ▪ Steadfast Underwriting Agencies (slide 33) ▪ Key initiatives (slide 35) ▪ 1H18 detailed operational highlights (slide 42) ▪ 1H18 detailed financials (slide 47)
Slide 22: Steadfast Group
Steadfast Group <3> Steadfast ”
Slide 23: Addressable market
Addressable market $16 billion of intermediated general insurance GWP written in 2017 Australian market – gross written premium1 $16bn Intermediated market Non-intermediated Steadfast Private 31% Health $22bn $82bn General Australian $37bn insurance market Life $23bn Non-intermediated (direct) Stead
Slide 24: Broker and underwriting agency model
Broker and underwriting agency model Advice based offering primarily focused on SME market Client Premium Steadfast is focused on the SME market Advice Fee Premium Niche insurance products General insurance broker The Steadfast Network is a collection of 376 brokers who pool Underwriting Agency thei
Slide 25: Three business units focused on intermediated general insurance market
Steadfast Group Three business units focused on intermediated general insurance market Steadfast Group (listed on ASX) Steadfast Network Steadfast Underwriting Agencies Complementary Businesses 376 general insurance brokers 25 underwriting agencies 7 businesses supporting the Steadfast Network and S
Slide 26: Five year financial summary
Steadfast Group Five year financial summary Gross revenue ($m) Underlying EBITA ($m) $143.3m $504m 140 500 $470m $129.6m 120 400 $254m $76.6m 100 $239m $90.4m $69.2m $309m 300 80 $62.3m $55.6m $196m 60 $57.4m 200 $188m $169m $29.6m $32.4m $102m $270m 40 $93m $250m $66.7m $72.8m 100 $231m $60.4m 20 $
Slide 27: Steadfast Group today
Steadfast Group today Size and scale Largest general insurance broker network in Australasia Largest underwriting agency group in Australasia Annual GWP1 376 Annual GWP1 25 $5.0+ billion Steadfast Network Brokers $777 million Agencies Steadfast Network Collects Marketing & Administration (M&A) and o
Slide 28: Steadfast Network
Steadfast Network <3> Steadfast ”
Slide 29: Steadfast Network: Largest general insurance broker network in Australasia
Steadfast Network Largest general insurance broker Network in Australasia Steadfast Network Strategy Steadfast Network $5.0bn+ The Steadfast Network has 376 general Exclusive to Steadfast Network brokers ▪ Operate a Network that is stronger insurance brokers in Australia, New Zealand together and th
Slide 30: Steadfast Network: Worldwide broker offices
Steadfast Network Worldwide broker offices 1 United Kingdom 35 21 Asia Northern 379 Territory Queensland 194 119 513 Western Australia South Australia 27 New South Wales 98 North Canberra 457 Island Victoria 36 23 Tasmania South Island 1,900+ broker offices across Australia, New Zealand and Asia © 2
Slide 31: Increasing Steadfast Group's share of growing Network GWP
Steadfast Network Increasing Steadfast Group’s share of growing Network GWP ▪ The Steadfast Network is a key driver of Steadfast Group ▪ Steadfast Group earns marketing and administration (M&A) fees from our insurer partners which are used as a revenue stream to provide products and services to the
Slide 32: Australia – resilient SME customer base
Steadfast Network Australia – resilient SME customer base 1,2,3 GWP mix Diversified by product line Diversified by geography Diversified by insurer Corporate Other retail 4% 2% Retail – home/motor 8% Medium enterprises 31% Small enterprises 55% Business pack 22% VIC 29% QBE 15% ▪ 86% of customer bas
Slide 33: Steadfast Underwriting Agencies
Steadfast Underwriting Agencies
Slide 34: 25 agencies, over 100 niche products
Steadfast Underwriting Agencies 25 agencies, over niche 100 products Personal accident, sickness Complete farm package Commercial and residential strata Accident and health Home and contents for and travel owner-occupied homes Residential and commercial strata Specialised and exotic motorcar Emergin
Slide 35: Key initiatives
Key initiatives ▪ Technology ▪ International footprint
Slide 36: Key initiative - technology
Key initiative - technology Technology implementation and return on investment Investment 2016 2017 2018 2019 Implementation 2017 2018 2019 2020 2021 Return on investment 2018 2019 2020 2021 beyond Investment Implementation Return on investment ▪ Development of current technology initiatives ▪ Stead
Slide 37: Key initiative – Steadfast Client Trading Platform
Key initiative – Steadfast Client Trading Platform Launched in June 2016 – end to end platform for brokers, agencies and their clients ▪ Exclusive to Steadfast Network brokers, clients and participating insurers ▪ Insurer partners contracted to provide one or more insurance class on the SCTP: AIG, A
Slide 38: Steadfast Technologies
Steadfast Technologies Powering the Steadfast Client Trading Platform The Steadfast Virtual Underwriter is a digital marketplace INSIGHT is a broking platform with a powerful search UnderwriterCentral is a cloud-based agency management which provides Steadfast Network brokers with access to engine w
Slide 39: International footprint: Capital light expansion model
International footprint Capital light expansion model Replicate Steadfast Network unisonSteadfast ▪ Build revenue streams to fund development ▪ 40% stake in existing global broker network – unisonBrokers which was ▪ M&A fees on products placed with strategic partners renamed unisonSteadfast ▪ Minima
Slide 40: International footprint: Steadfast Network model replication
International footprint Steadfast Network model replication 1. New Zealand ▪ 41 brokers in the Network ▪ Steadfast Underwriting Agencies building market presence ▪ NZ$330m of gross written utilising Network distribution premium in FY17 ▪ Strong buy-in from insurer partners 2. Asia ▪ Target Singapore
Slide 41: International footprint: unisonSteadfast
International footprint unisonSteadfast ▪ In June 2017, Steadfast Group acquired a stake in unisonBrokers to create unisonSteadfast, a global growth opportunity ▪ One of the world’s largest general insurance broker networks1 ▪ Established in 2005, headquartered in Hamburg, Germany, with office in Ch
Slide 42: 1H18 detailed operational highlights
1H18 detailed operational highlights ▪ Premium pricing outlook ▪ Steadfast Network ▪ Investment activity ▪ Steadfast Direct
Slide 43: Premium pricing outlook
Premium pricing outlook Market is hardening Insurance cycle Capital flows into market Rates start to Strong profits fall Rates rise Insurers chase strongly market share 4.4% year-on-year premium price increase Market capacity Hardening Softening Rates go into eroded Market Market free fall (excludin
Slide 44: 137 brokers have joined the Steadfast Network since IPO
Steadfast Network 137 brokers have joined the Steadfast Network since IPO Number of Steadfast Network brokers 450 9 29 31 400 7 3 31 376 350 66 Largest general insurance broker 300 network in Australia 278 with 31% market share by GWP2 250 200 August New Brokers Allied NZ Insight Singapore Hubbing¹
Slide 45: Investment activity
Investment activity Active investment management 1H18 2H17 1H17 2H16 1H16 Acquisitions 7 2 7 8 2 Increased equity holdings 8 5 7 7 4 Hubbed - 2 5 1 3 Equity brokers (including bolt-ons) ▪ Strict acquisition criteria based around cultural fit, strategic alignment and financial performance ▪ Constant
Slide 46: Steadfast Direct
Steadfast Direct Strong momentum Steadfast Direct Facility Gross Written Premium ($m) 100 90 $86m 80 70 1H18 vs 1H17 60 $47m 50 $40m GWP of $66m vs $39m 40 $66m 30 $24m +69% growth 20 $39m 10 $16m $0.5m 0 FY15 FY16 FY17 1H18 1H 2H ▪ Home, motor and now landlord products available to Steadfast Networ
Slide 47: 1H18 detailed financials
1H18 detailed financials <3> Steadfast ”
Slide 48: Statutory profit and loss statement
Detailed financial overview Statutory profit and loss statement Six months ended 31 December $ million 1H18 1H17 Revenue M&A and other fees 20.8 18.4 Revenue from controlled entities 188.8 182.1 Share of profits of associates and joint ventures 6.5 6.9 Other revenue 0.8 0.9 Total revenue 216.9 208.3
Slide 49: Statutory vs underlying reconciliation
Detailed financial overview Statutory vs underlying reconciliation Six months ended 31 December $ million 1H18 1H17 Revenue 269.6 250.1 Underlying NPAT 32.5 30.0 Underlying EPS (NPAT) 4.31 4.01 Reconciliation of earnings Statutory NPAT 33.8 37.9 Change in value and sale of investments (0.4) (4.0) Sh
Slide 50: Statutory vs underlying reconciliation
Detailed financial overview Statutory vs underlying reconciliation Revenue reconciliation ($m) 300 $58.7m ($3.5m) ($0.5m) ($1.8m) ($6.5m) $263.3m $6.3m $269.6m 250 $216.9m 200 150 100 1H18 Add: commissions paid Less: gain from deferred Less: net gain from sale of Less: other Less: statutory 1H18 und
Slide 51: Underlying revenue and EBITA (aggregate view)
Detailed financial overview Underlying revenue and EBITA (aggregate view) Underlying Underlying Growth $ million 1H18 1H17 % Gross written premiums Brokers 787.1 721.3 9.1% Underwriting agencies1 418.4 385.7 8.5% Total GWP 1,205.6 1,107.0 8.9% Underlying Underlying Growth Organic growth Acquisitions
Slide 52: Statement of income (underlying IFRS view)
Detailed financial overview Statement of income (underlying IFRS view) Six months to 31 December, Underlying Underlying Growth Organic growth Acquisitions & $ million 1H18 1H17 % %2 hubbing growth %3 Fees and commissions¹ 225.8 203.1 11.1% 7.3% 3.8% M&A and other fees 20.8 18.4 13.3% 13.3% 0.0% Inte
Slide 53: Statement of income (underlying IFRS view)
Detailed financial overview Statement of income (underlying IFRS view) Six months to 31 December, Underlying Underlying Underlying Underlying Underlying $ million 1H18 2H17 1H17 2H16 1H16 Fees and commissions¹ 225.8 212.9 203.1 195.4 189.0 M&A and other fees 20.8 16.9 18.4 15.8 16.6 Interest income
Slide 54: Underlying profit and loss items
Detailed financial overview Underlying profit and loss items Other revenue $million 1H18 1H17 Variance Fee income for other professional services 7.5 13.0 (5.5) Other income 5.5 5.3 0.2 Total other revenue 13.0 18.3 (5.3) Other expenses $million 1H18 1H17 Variance Selling expenses 11.0 9.1 1.9 Commi
Slide 55: Statutory cash flow statement
Detailed financial overview Statutory cash flow statement $ million 1H18 1H17 Cash flows from operating activities Net cash from operating activities before customer trust accounts movement 51.4 39.1 Net movement in customer trust accounts 8.8 4.2 Net cash from operating activities 60.2 43.3 $18.4m
Slide 56: 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 Sep Year End Sep Year End Sep Year End Sep Year End Sep Year End Sep 2016 2017 2016 2017 2016 2017 Gro
Slide 57: 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 Sep Year End Sep Year End Sep Year End Sep Year End Sep Year End Sep Year End