Steadfast Group Limited · ASX:SDF

Steadfast — FY2017 Earnings Presentation

50 slides from Steadfast's earnings presentation, Aug 23, 2017

  1. Slide 1: Presenters

    PRESENTERS: Robert Kelly – Managing Director & CEO Stephen Humphrys – Chief Financial Officer

  2. 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 23 August 2017. This presentation is not a recommendation or advice in relation to Steadfast or any product or service offered

  3. Slide 3: Contents

    Investor presentation Contents  Group overview 4  Financial highlights 5  Operational highlights 6  Business unit operational highlights 7  Steadfast Network 8  Steadfast Underwriting Agencies 11  Investment activity 14  Key initiatives  Technology 15  International footprint 17  Financia

  4. Slide 4: Group overview

    Group overview  Financial highlights  Operational highlights © 2017 Steadfast Group Limited | 4

  5. Slide 5: Group financial highlights

    Group financial highlights Strong growth in FY17 while investing for future growth Underlying earnings  Strong earnings growth in line with guidance:  Underlying EBITA +10.6% to $143.3m  Underlying NPAT +9.8% to $66.4m  Underlying EPS (NPAT) +9.6% to 8.87 cents per share (cps) Statutory earnings

  6. Slide 6: Group operational highlights

    Group operational highlights Delivering on key objectives Steadfast Network  Growth in FY17 gross written premium, +10% to $5.0bn  Growth in Steadfast Network brokers, +18 to 361 including Singapore Steadfast Underwriting Agencies  Growth in FY17 gross written premium, +4% to $777m  Launched Ble

  7. Slide 7: Business unit operational highlights

    Business unit operational highlights  Steadfast Network  Steadfast Underwriting Agencies  Investment activity  Key initiatives:  Technology  International footprint © 2017 Steadfast Group Limited | 7

  8. Slide 8: Steadfast Network

    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

  9. Slide 9: Steadfast Network: record gross written premium of $5.0bn

    Steadfast Network Record gross written premium of $5.0bn Steadfast Network brokers 1 Gross Written Premium (GWP) 5.0 $5.0bn FY17 vs FY16 $4.5bn $4.4bn $4.1bn 4.0 $3.9bn GWP of $5.0bn vs $4.5bn $2.6bn $2.3bn $ billion 3.0 $2.0bn $2.1bn $2.3bn +4.9% organic growth 2.0 +2.4% AR network 1.0 $2.1bn $2.2b

  10. Slide 10: Steadfast Network brokers joined since IPO

    Steadfast Network 121 new brokers have joined the Steadfast Network since IPO Number of Steadfast Network brokers 450 9 29 400 31 7 2 31 361 350 50 Largest general insurance 300 broker network in 278 Australia with 28% market share by broker2 250 200 August New Allied NZ Insight Singapore Hubbing¹ S

  11. Slide 11: Steadfast Underwriting Agencies: strong momentum in 2H

    Steadfast Underwriting Agencies Strong momentum in 2H 17 as market hardens Steadfast Underwriting Agencies Gross Written Premium (GWP) 800 $777m $745m 700 FY17 vs FY16 600 $367m $391m GWP of $777m vs $745m 500 $ million 400 $385m +4.2% total growth 300 $284m 200 $378m $386m $145m 100 $88m Largest un

  12. Slide 12: Steadfast Underwriting Agencies operational highlights

    Steadfast Underwriting Agencies Operational highlights London super binder  Launched in May 2017, specialises in accident &  Contracted to all business lines on the Steadfast health Client Trading Platform  50/50 joint venture between Steadfast Underwriting  Opportunity for international growth

  13. Slide 13: Steadfast Direct: continued strong momentum

    Steadfast Direct Continued strong momentum Steadfast Direct Facility Gross Written Premium (GWP) 100 90 $86m 80 70 $47m FY17 vs FY16 60 $ million 50 40 $40m GWP of $86m vs $40m 30 $24m $39m 20 +115% total growth 10 $16m $0.5m 0 FY15 FY16 FY17 1H 2H  Home, motor and now landlord products available t

  14. Slide 14: Investment activity

    Investment activity Active investment management Equity brokers (including bolt-ons)  Strict acquisition criteria based around cultural fit, strategic alignment and financial performance  Constant stream of potential opportunities in and outside of the Steadfast Network  All brokers acquired in F

  15. Slide 15: Key initiative - technology

    Key initiative - technology Technology implementation and return on investment Investment 2016 2017 2018 2019 Implementation 2017 2018 2019 2020 Return on investment 2018 2019 2020 2021 beyond Investment  Development of current technology initiatives expected to be substantially completed in FY18 I

  16. Slide 16: Key initiative - Steadfast Client Trading Platform (SCTP)

    Key initiative - Steadfast Client Trading Platform (SCTP) Launched in June 2016 - end to end platform for brokers 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, Alli

  17. Slide 17: International footprint: capital light expansion model

    International footprint Capital light expansion model Replicate Steadfast Network unisonSteadfast  Build revenue streams to fund  Acquired stake in existing global broker development network – unisonBrokers which was  M&A fees on products placed renamed unisonSteadfast with strategic partners  M

  18. Slide 18: International footprint: Steadfast Network model replication

    International footprint Steadfast Network model replication 1. New Zealand 2. Asia  38 brokers in the Network  Target Singapore initially  9 brokers have joined the Network  NZ$330m (+7%) of gross written premium in FY17  Local CEO appointed  Equity investment in 3 brokers  First equity inves

  19. Slide 19: International footprint: unisonSteadfast

    International footprint  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 Chicago, USA  Bro

  20. Slide 20: Premium pricing outlook

    Premium pricing outlook Market is hardening Insurance cycle Capital Strong flows profits into Rates rise market strongly Rates start to fall Market Insurers  3.8% year-on-year capacity chase eroded market premium price increase share across Australian portfolio Hardening Softening Market Market Rat

  21. Slide 21: Financial highlights

    Financial highlights © 2017 Steadfast Group Limited | 21

  22. Slide 22: Group financial performance

    Group financial performance Strong underlying earnings growth Year-on- Year-on- FY17 underlying EBITA mix 12 months to 30 June, Underlying Underlying year year 6% $ million FY17 FY16 growth $ growth % Revenue ($m) 504.1 470.2 33.9 7.2% EBITA ($m) 143.3 129.6 13.7 10.6% EBITA margin 28.4% 27.6% 41% 5

  23. Slide 23: Contributions to underlying EBITA

    Contributions to underlying EBITA Organic and acquisition growth Breakdown of the growth in EBITA Organic growth1: Acquisition growth: $9.8m (+7.6%) $3.9m (+3.0%) 160 14.5m ($5.8m) $2.4m ($1.5m) $3.0m $143.3m ($2.4m) $3.5m 140 $129.6m (4.5%) 1.9% (1.2%) 2.3% (1.8%) 2.7% 11.2% 120 $ million 100 80 60

  24. Slide 24: Steadfast Network and equity brokers financial performance

    Steadfast Network and equity brokers financial performance Strong organic and acquisition growth Steadfast Network – revenue 12 months to 30 June, Underlying Underlying Year-on-year Organic Growth from Acquisitions $ million FY17 FY16 growth % growth % & Hubbing2 % Revenue – gross1 41.4 37.7 10.0% 1

  25. Slide 25: Underwriting agencies financial performance

    Underwriting agencies financial performance Solid margin growth Agencies – consolidated & equity accounted (assuming 100% ownership) Growth from 12 months to 30 June, Underlying Underlying Year-on-year Organic Acquisitions & $ million FY17 FY16 growth % growth % Hubbing2 % Net fees & commissions1 13

  26. Slide 26: Statutory cash flow statement

    Statutory cash flow statement Strong conversion of profit to cash Statutory cash flow statement extract $ million FY17 FY16 Cash flows from operating activities Net cash from operating activities before customer trust accounts 85.6 84.0 movement 98% Net movement in customer trust accounts 22.4 42.2

  27. Slide 27: Statutory Balance Sheet

    Statutory Balance Sheet Strong balance sheet with leverage capacity $ million 30 Jun 17 30 Jun 16 Cash and cash equivalents 66.5 67.5 Corporate debt Available at Cash held on trust 263.2 224.7 facilities, $ million Maturity Total 30 Jun 2017 Trade & other receivables 395.2 341.9 Facility A Aug 2020

  28. Slide 28: Final FY17 dividend

    Final FY17 dividend Final dividend up 22%  Final FY17 dividend of 4.4 cps (fully franked), up 22% pcp 10.0  Final FY17 dividend payout ratio is 79% of underlying 8.9 NPAT, in line with targeted 65% to 85% 9.0 8.1  Total FY17 dividend of 7.0 cps (fully franked) up 17% pcp 8.0 7.2 7.0 7.0 6.2  Div

  29. Slide 29: FY17 value drivers

    Group financial performance FY17 value drivers Dividend 17% $52.5m dividend 7 cps growth Technology Drive future $6m Operating growth 0.8 cps cash flow $85.6m 11.4 cps 7.6% Organic growth 10.6% EBITA Net growth 3.0% acquisitions Acquisition $25m growth 3.3 cps © 2017 Steadfast Group Limited | 29

  30. Slide 30: Outlook & guidance

    Outlook & guidance © 2017 Steadfast Group Limited | 30

  31. Slide 31: Outlook

    Outlook Implementing growth initiatives Group  Constantly seeking organic and acquisition growth  Strong balance sheet capacity with $111m of unused debt facilities at 30 June 2017 to fund future growth  Steadfast Business Solutions continuing to drive centralisation of several back office functi

  32. Slide 32: FY18 guidance

    FY18 guidance Organic growth and key initiatives 2  FY18 guidance range: Underlying EBITA 180  Underlying EBITA of $155m-$165m 160 $155m-$165m  Underlying NPAT of $70m-$75m 140 120  Guidance allows for1: $ million 100 80 $143.3m  5-7% premium price increase 60 $129.6m across brokers’ portfolios

  33. Slide 33: Questions

    Questions © 2017 Steadfast Group Limited | 33

  34. Slide 34: Appendices

    Appendices © 2017 Steadfast Group Limited | 34

  35. Slide 35: Financial overview: statutory profit and loss statement

    Financial overview Statutory profit and loss statement $ million FY17 FY16 Revenue M&A fees 35.3 32.4 Revenue from controlled entities 361.5 349.8 Share of profits of associates and joint venture 14.0 11.2 Other revenue 3.8 3.4 Total revenue 414.7 396.8 EBITA from core operations 143.3 129.6 Amortis

  36. Slide 36: Statutory vs underlying reconciliation

    Financial overview Statutory vs underlying reconciliation Revenue reconciliation $104.2m ($3.4m) ($4.1m) ($6.6m) ($14.0m) $13.3m $504.1m 500 $490.8m $414.7m 400 $ million 300 200 100 Statutory Revenue Add: Commissions Less: gain from Less: net gain from Less: other Less: statutory Underlying Revenue

  37. Slide 37: Addressable market

    Addressable market $16 billion of intermediated general insurance GWP written in 2016 1 Australian market – gross written premium  Focused on the general insurance market  87% of customer base relates to small to medium size enterprises (SMEs) with less pricing volatility 1 APRA Quarterly General

  38. Slide 38: Steadfast Group business units

    Steadfast Group 3 business units focused on intermediated general insurance market © 2017 Steadfast Group Limited | 38

  39. Slide 39: Steadfast Group today

    Steadfast Group today Size and scale Largest general insurance broker Largest underwriting agency group network in Australasia in Australasia Annual GWP Annual GWP $5.0 billion $777 million 361 Steadfast Network Brokers 24 Agencies Steadfast Network Collects Marketing & Administration (M&A) Fees, 10

  40. Slide 40: Steadfast Network

    Steadfast Network Largest general insurance broker Network in Australasia © 2017 Steadfast Group Limited | 40

  41. Slide 41: Steadfast Network: worldwide office network

    Steadfast Network Worldwide office Network 1 Broker Network offices United Kingdom 25 Asia 10 Northern Territory 257 Queensland 127 85 89 349 Western Australia South North Australia Island New South 16 Wales 329 Canberra 16 Victoria 31 South Island Tasmania 1,300+ broker offices across Australia, Ne

  42. Slide 42: Australia - resilient SME customer base

    Steadfast Network Australia - resilient SME customer base 1,2,3 GWP mix Corporate Diversified by product line Diversified by geography Diversified by insurer Other 2% Retail 2% Retail – Home/Motor 9% Medium enterprises 31% Small enterprises 56%  87% of customer base Business Pack 22% VIC 30% QBE 16

  43. Slide 43: Steadfast Underwriting Agencies

    Steadfast Underwriting Agencies 24 agencies, 75 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

  44. Slide 44: Steadfast Technologies

    Steadfast Technologies Powering the Steadfast Client Trading Platform © 2017 Steadfast Group Limited | 44

  45. Slide 45: Underlying revenue and EBITA (aggregate view)

    Financial overview Underlying revenue and EBITA (aggregate view) Underlying Underlying $ million FY17 FY16 Growth Gross written premiums Consolidated brokers 1,043.2 844.5 23.5% Equity accounted 497.5 507.9 (2.1%) GWP from brokers 1,540.7 1,352.5 13.9% Underwriting agencies 776.6 745.1 4.2% Total GW

  46. Slide 46: Statement of income (underlying IFRS view)

    Financial overview Statement of income (underlying IFRS view) Growth from 12 months to 30 June, Underlying Underlying Organic growth2 acquisitions & $ million FY17 FY16 Growth % % hubbing3 % Fees and commissions¹ 416.0 384.4 8.2% 2.0% 6.3% M&A Fees 35.3 32.4 9.0% 9.0% 0.0% Interest income 7.0 6.7 4.

  47. Slide 47: Statement of income (underlying IFRS view)

    Financial overview Statement of income (underlying IFRS view) 12 months to 30 June, Underlying Underlying Underlying Underlying Underlying $ million 2H 17 1H 17 2H 16 1H 16 2H 15 Fees and commissions¹ 212.9 203.1 195.4 189.0 156.0 M&A Fees 16.9 18.4 15.8 16.6 14.0 Interest income 3.3 3.7 3.3 3.4 3.1

  48. Slide 48: Profit and loss items

    Financial overview Profit and loss items Other revenue $million FY17 FY16 Variance Fee income for other professional services 19.5 22.2 (2.7) Legal fee disbursements1 0.0 2.7 (2.7) Other income 13.0 11.1 1.9 Total other revenue 32.5 36.0 (3.5) Other expenses $million FY17 FY16 Variance Rebate to Ste

  49. Slide 49: 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 Jun Year End Jun Year End Jun Year End Jun Year End Jun Year End Jun 2016 2017 2016 2017 2016 2017 Gro

  50. Slide 50: 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 Jun Year End Jun Year End Jun Year End Jun Year End Jun Year End Ju

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