Aub Group Limited · ASX:AUB
Aub — Austbrokers Holdings — 1HY15 Earnings Presentation
29 slides from Aub's earnings presentation, Feb 25, 2015
Slide 1: Austbrokers Holdings Ltd 1HY15 Results
AUSTBROKERS HOLDINGS LTD 1HY15 RESULTS WEDNESDAY 25 FEBRUARY 2015
Slide 2: Performance Summary 1HY15
PERFORMANCE SUMMARY 1HY15 Reported NPAT up 8.3% on 1HY14 to Adherence to clearly defined Group $13.9m strategy driving income growth in all market facing areas and ensuring Adjusted NPAT decreased by 14.8% continued diversification of profit ($14.6m to $12.4m on adjusted basis) generation. A
Slide 3: Key Performance Indicators 1HY15
KEY PERFORMANCE INDICATORS 1HY15 3
Slide 4: More than Leading
More than LEADING $2 SB insurance broking, . Equity in 70+ underwriting agencies, GWP businesses across Aas AMecoremouy So6HO6 S606 Goods SoGn6ooGn : 250+ locations LARGEST adie ~30 WIS _ Cluster in NZ active | . _ ! LARGEST eauity Vv JV with LEADING SETS MO § Sestielageats broking cluster EXPEMIENC
Slide 5: A Diversified Group
A DIVERSIFIED GROUP Australia and NZ’s leading equity based insurance broking, underwriting agency and risk services group and pioneers of the ‘Owner-Driver’ model. • BWM – New Zealand’s • 50+ broking groups • 21 agency groups • 3 leading businesses largest cluster group • Largest equity based • 50+
Slide 6: Income Growth Across All Business Divisions
INCOME GROWTH ACROSS ALL BUSINESS DIVISIONS 6
Slide 7: Investments in Group Services Improve Service and Efficiency
INVESTMENTS IN GROUP SERVICES IMPROVE SERVICE AND EFFICIENCY 7
Slide 8: Financial Performance
FINANCIAL PERFORMANCE austbrokers
Slide 9: 1HY Growth Since ASX Listing
1HY GROWTH SINCE ASX LISTING CONTINUED 1HY NPAT GROWTH NPAT of $13.9 million up 8.3% on 1HY14 Adjusted NPAT down 14.8% Increase YoY N/A 15.3% 13.7% 8.5% 11% 14.7% 11.5% 12.1% 17.5% 18.1% 20.0% 15.0% 60.7% 17.1% (18.9)% 10.5% 8.3% (14.8)% NPAT: Net Profit after tax attributable to members. Adjust
Slide 10: Dividend Maintained - Earnings Per Share
DIVIDEND MAINTAINED - EARNINGS PER SHARE Interim dividend per share 1HY15 12.0 cents (1HY14 12.0 cents) DRP in place but not underwritten Payout ratio on adjusted NPAT is 60% (FY14 65%) 10
Slide 11: Reported NPAT Needs Reconciliation
REPORTED NPAT NEEDS RECONCILIATION 1HY15 1HY14 Variance $’000 $’000 % Revenue from ordinary activities 97,691 92,184 6.0 Income arising from sale of interests in Associates and controlled entities and adjustments to carrying values of associates and to contingent consideration (no income tax applica
Slide 12: Underlying NPAT
UNDERLYING NPAT 1HY15 1HY14 Variance $’000 $’000 % Reported Profit attributable to members 13,853 12,791 8.3 Add (Less) adjustments to the carrying value of associates (no income tax applicable)* (3,525) - Profit from operations 10,328 12,791 (19.3) Amortisation of intangibles net of tax* 2,119 1,81
Slide 13: Contribution to 1HY15
CONTRIBUTION TO 1HY15 Increase in corporate expenses and technology investments to build platform for continued growth Broker acquisitions, acquisition costs (2.9%) and increased borrowings (1.3%) impacted growth by 4.2% Deferral of broker income decreased growth by 2.7% Risk Services contri
Slide 14: Broker Profits Impacted by Soft Market
BROKER PROFITS IMPACTED BY SOFT MARKET Continued growth in Premium Funding Interest income reduction from lower rates still a negative After costs acquisitions contributed negatively growth Deferral of income from 1HY to 2HY 14
Slide 15: Insurance Broking Margin Impact
INSURANCE BROKING MARGIN* IMPACT Base commission and fees represented 18.2% of base premiums (1HY14 17.4%) Commission and fee split 62.5%/37.5% (1HY14 65%/35%) – due to increase in fees Margins have been impacted by negative contributions and related costs from acquisitions – accounts for 1.3%
Slide 16: Underwriting Agencies
UNDERWRITING AGENCIES Total income up 26% 21% growth in net commission and fees to $20.5 million Profit commissions up $938,000 – underwriting profitable business Expenses excluding acquisitions and start ups were up 35% – increased resourcing and technology costs to keep pace with growth Ac
Slide 17: Income to Expense Ratio Held Below Historic Rolling Average
INCOME TO EXPENSE RATIO HELD BELOW HISTORIC ROLLING AVERAGE Corporate expenses as % of income (share pre-tax profits from business operations) Stated Group objective of managing income: expense ratio below historic rolling average Ongoing investment in business within defined parameters enabli
Slide 18: Risk Services – A First
RISK SERVICES – A FIRST Contributed 2.8% to overall growth Commenced February 2014 with acquisition of 50% of Procare group Supplemented by acquisitions of Risk Strategies (July 2014) and Altius Group (February 2015) Early in development of opportunities to grow in this sector Complementary
Slide 19: Funding Position
FUNDING POSITION Total consolidated entities debt $60 million Strong net cash flow of ~$12 million over – includes subsidiaries which have separate the next twelve months after earn out facilities payments and assuming final dividend underwritten DRP Austbrokers Holdings acquisition facility f
Slide 20: Outlook
OUTLOOK
Slide 21: Market Conditions FY15
MARKET CONDITIONS FY15 Premium rates Soft premium rate environment in commercial lines Competition maintains pressure on rates Lower interest rate environment likely to continue Moderate economic growth forecast but patchy economic outlook may have impact on SME Insurance broking industr
Slide 22: Growth Strategies FY15
GROWTH STRATEGIES FY15 Continue to seek growth across all 3 divisions Continue to diversify income growth via acquisitions and organic opportunities across all divisions, as well as start-up opportunities in Underwriting Agencies and Risk Services areas Leverage back office, service and support
Slide 23: Well Positioned for FY15
WELL POSITIONED FOR FY15 2HY15 will benefit from Groundwork undertaken in FY14 and first half in developing products, systems and processes Organic growth expected to continue to emerge through broker network initiatives Deferred income being booked Insurance broking consolidation – continui
Slide 24: Forward looking statements
This release may contain forward looking statements relating to future matters, which are subject to known and unknown risks, Uncertainties and other important factors which could cause the actual results, performance or achievements of Austbrokers and the Austbrokers Group to be materially differen
Slide 25: Appendices
APPENDICES
Slide 26: Appendix 1 – 1HY15 Results
APPENDIX 1 – 1HY15 RESULTS 1HY 2015 1HY 2014 VARIANCE VARIANCE $’000 $’000 $’000 % BROKER OPERATIONS Commission And Fees 122,465 120,386 2,079 1.7% Life Income 6,025 6,337 (312) -4.9% Profit Commissions 224 266 (42) -15.8% Premium Funding 12,872 12,534 338 2.7% Interest 4,779 4,974 (195) -3.9% Other
Slide 27: Appendix 1 – 1HY15 Results (Brokers)
APPENDIX 1 – 1HY15 RESULTS VARIANCE VARIANCE $'000 1HY 2015 1HY 2014 $ % Consolidated Brokers Commission And Fees 54,239 51,218 3,021 5.9% Life Income 4,143 4,268 (125) -2.9% Profit Commissions 224 132 92 69.7% Premium Funding 4,869 4,756 113 2.4% Interest 1,701 1,845 (144) -7.8% Other Income 1,654
Slide 28: Appendix 2 - Underwriting Agencies
APPENDIX 2 - UNDERWRITING AGENCIES 1HY15 1HY14 INC/(DECR)% $’000 $’000 Commission and Fees 20,556 16,969 21% Profit Commission 1,058 120 882% Claims Handling Fee 300 351 (15)% Interest 386 334 16% Other Income 93 13 715% Total Income 22,393 17,787 26% Expenses (17,109) (12,652) (35)% Net Profit befo
Slide 29: Appendix 3 – 1HY15 Cash Flow
APPENDIX 3 – 1HY15 CASH FLOW 1HY15 1HY14 $’000 $’000 Cash flows from operations 14,967 20,094 Cash flows from investing activities - Acquisitions* (20,978) (2,446) - Sales proceeds / loan repayments (159) 559 - Plant equipment / other (814) (872) (21,951) 2,759 Cash flows from financing activities -