Steadfast Group Limited · ASX:SDF
Steadfast — FY2014 Earnings Presentation
39 slides from Steadfast's earnings presentation, Aug 27, 2014
Slide 1: Full Year 2014 Results
Full Year 2014 Results 27 August 2014 Presenters Robert Kelly – Managing Director & CEO Stephen Humphrys – Chief Financial Officer
Slide 2: Important notice
Important notice This presentation contains general information in summary form which is current as at 27 August 2014. It presents financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standard
Slide 3: FY14 highlights
FY14 highlights Pro-forma Pro-forma % FY end – 30 June FY14 FY13 growth Revenue from consolidated Exceeded IPO 173.4 155.9 11.2 entities ($m) EBITA pre Corporate Office Prospectus 70.4 61.1 15.3 expenses ($m) NPATA ($m) 41.2 35.2 17.3 Cash EPS (cents) 8.23 7.02 17.3 forecasts and making headway with
Slide 4: Post IPO acquisitions
Post IPO acquisitions • Seven acquired businesses expected to contribute around $450m in GWP and $12m in EBITA (100% basis) • Three underwriting agencies/Strategic Partners Stayed disciplined Protecsure – Dec 13 with acquisition Nautilus Marine – Apr 14 MECON Winsure – May 14 criteria and pric
Slide 5: Steadfast Underwriting Agencies
Steadfast Underwriting Agencies Strong focus on Hard to place and complex Marine and SME insurance programs risks including motorcycle environmental liability Our nine underwriting agencies currently generate ~ $200 million Building and Sports and leisure Specialised equipment, construction industry
Slide 6: Calliden acquisition proposal highlights
Calliden acquisition proposal highlights • Creates one of the largest underwriting agency groups in Australia • Relationship with Munich Re, one of the world’s leading Steadfast to reinsurance companies become one of • “Normalised” EBITA of $8.3m pre transaction costs and pre synergies the largest •
Slide 7: Calliden acquisition proposal mechanics
Calliden acquisition proposal mechanics • Total value of $105.4m to Calliden shareholders based on 46.5 cents per share (41.5 cents per share plus special fully franked dividend of 5.0 cents per share) Scheme of Steadfast share approximately $55m arrangement • Immediate on-sale of insurance busine
Slide 8: Who we are
Who we are LARGEST GENERAL INSURANCE BROKER 500 NETWORK IN AUSTRALIA 1 offices across Australia, • Service provider to 306 broker businesses in 1 New Zealand Singapore Australia, New Zealand and and Singapore and 9 underwriting agencies 5 93 Singapore 02 Metro 71 Metro 03 Regional 49 22 Regional • C
Slide 9: SME customer base
SME customer base Steadfast GWP mix Corporate Personal 3% 10% Medium enterprises Small 35% enterprises 52% • Steadfast’s customer base primarily consists of small to medium size enterprises (SMEs) where clients need advice to buy the appropriate insurance for commercial and personal use • Focus is o
Slide 10: Business model
Business model Steadfast Group 306 • Service provider to 306 broker Steadfast Network Brokers businesses across Australia, New Zealand and Singapore • Source products from insurance companies and underwriting agencies • Receives Marketing & Administration on behalf of their clients (M&A) fees from S
Slide 11: GWP growth
GWP growth Network Brokers Gross Written Premium (GWP) 4.0 3.9bn 4.1bn 4.7% 3.4bn Up 4.7% compared to FY13 3.5 3.0bn 3.0 2.8bn $billion 2.5 2.4bn 2.0 11.4% CAGR over the past 5 years 1.5 1.0 0.5 0.0 FY09 FY10 FY11 FY12 FY13 FY14 • Steadfast Network GWP no longer includes the fire service levy which
Slide 12: Drivers of Network GWP growth
Drivers of Network GWP growth 4.5 0.10bn (0.03)bn 4.08bn + 1.8% organic 0.11bn 4.0 3.90b 2.5% (0.7)% growth (price 2.9% and volume) 3.5 $billion + 2.9% new 3.0 3.9 4.0 4.1 broker growth 2.5 4.7% total 2.0 1 FY13 New Broker Volume Growth Price Growth FY14 Growth • Despite price declines in 2H FY14, h
Slide 13: Drivers of gross M&A Fee growth
Drivers of gross M&A Fee growth 30 1.0m (0.4)m 27.0m1 24.5m 1.9m (1.5)% + 7.5% more M&A 25 7.5% 3.9% products 20 + 3.9% premium growth $ million 15 26.4 27.0 24.5 10 - 1.5% premium 5 funding contribution 0 FY13 Insurance Penetration Insurance Premium Growth Premium Funding Growth FY14 9.8% total Gro
Slide 14: Resilience
Resilience 18% 17.3% Steadfast’s rise in 2.3% 16% 14% acquisitions & hubbing profitability is not 12% dependant on 10% 8% 7.4% 15.0% organic premium rate 6% rises 4% 2.8% 2% 0.9% -0.7% 0% Price Broker GWP Organic F&C M&A NPATA -2% growth • Despite decline in premium rates, Steadfast showed growth in
Slide 15: Financial information
Financial information <> Steadfast STRENGTH WHEN YOU NEED IT
Slide 16: Exceeded forecast profits
Exceeded forecast profits Click to Edit Title Pro-forma IFRS Summary FY14 FY14 & FY14 ex Prospectus Pro-forma Pro-forma FY13 acquisitions FY end – 30 June Forecast FY14 FY13 % growth & hubbing EBITA pre Corporate Office expenses 67.9 70.4 61.1 15.3 68.2 ($m) NPAT ($m) 30.1 32.4 28.1 15.5 31.8 Report
Slide 17: Strong profit growth
Strong profit Click to Edit Title growth Pro-forma Statement of Income (IFRS View) Pro-forma Pro-forma $ millions FY14 FY13 % growth • Revenue up 11.2% based on Fees and commissions1 118.3 104.2 13.5 organic growth of 2.7% and M&A Fees 26.4 24.5 7.4 8.5% growth from Interest income 2.7 2.9 -6.2 acqu
Slide 18: Contributions to EBITA growth
Contributions to EBITA growth Breakdown of the change in EBITA pre Corporate Office expenses 80 3.9m (0.1m) 70.4m 70 1.6m 0.7m (1.9m) 1.9m 3.2m 61.1m 60 50 $ million 40 64.3 66.2 66.6 66.6 30 61.1 20 10 0 IFRS EBITA Consolidated Equity MPF SGL Broker rebates Underwriting Ancillary IFRS EBITA FY13 br
Slide 19: Increasing profit margins
Increasing profit margins Click to Edit Title EBITA margins (Aggregated View) FY14 Pro-forma Pro-forma Pro-forma Prospectus • Broker margins improved FY end – 30 June FY12 FY13 FY14 Forecast 2%+ Consolidated brokers 31.8% 30.8% 33.3% 32.6% Equity accounted 26.3% 27.1% 29.7% 29.2% • Underwriting agen
Slide 20: Balance sheet positioned for growth
Balance Click to Editsheet Title positioned for growth $ millions 30/06/14 31/12/13 Cash and cash equivalents 38.6 52.2 Cash held on trust 76.7 56.5 • Cash held on trust belongs to Receivables & other 152.7 77.1 insurers and brokers (balancing item in trade and other payables) Total current assets 2
Slide 21: Strong cash generation
Strong cash Click to Edit Titlegeneration $ millions FY14 FY13 Cash flows from operating activities • $76.7m cash on trust, remainder is “working capital” and cash Receipts from customers 138.4 37.0 accumulated for dividends Payments to suppliers and employees, and member -124.1 -38.7 rebates • Cash
Slide 22: Fully franked final dividend of 2.7 cents
Fully franked final dividend of 2.7 cents • Fully franked final dividend of 2.7 cents per share • Interim and final dividend total 4.5 cents per share • 69% dividend payout ratio target in line with policy, namely 65% to 85% of net profit after tax, and a minimum of 50% of net profit after tax befor
Slide 23: Strategy & outlook
Strategy & outlook <> Steadfast STRENGTH WHEN YOU NEED IT
Slide 24: Strategic initiatives
Strategic initiatives • Continue to provide and enhance the Network services that our brokers rely upon √ • Maintain and expand our strategic partnerships √ • Finalise initial hubs in each state of Australia √ • Convert, where appropriate, the acquisitions and other opportunities under √ considerati
Slide 25: Project 360˚ proof of concept
Project 360˚ proof of concept Project 360˚ Brokers 1. Collects premium from client 1. Client contact 2. Settles brokers’ debtors 2. Risk review 3. Invests funds 3. Placement of 4. Distributes commissions product & fees and investment 4. Creates invoice and income to brokers sends to client 5. Pays b
Slide 26: Hubbing
Hubbing Estimated synergies to emerge over the next 2 years starting in FY15 Brisbane Impact for hubbed 49% owned brokers: • 7% uplift in profits, Perth Adelaide 67% owned ~70% owned Sydney i.e. 2%+ uplift in 80% owned EBITA margin pilot project 360° Melbourne 80% owned Tasmania ~75% owned 26
Slide 27: Acquisition pipeline
Acquisition pipeline • Pipeline of potential acquisitions including several of those in active dialogue Natural acquirer of • Strict criteria being followed. Acquisitions must be further interests in EPS accretive to shareholders within the first 12 months Steadfast Network Brokers, Allied and a • C
Slide 28: Escrow shares
Escrow shares • 172.5m shares (owned by Steadfast brokers and associates) issued under the IPO Prospectus in escrow until 31 August 2014 • Share sale facility in place with Macquarie Bank and JP Morgan for any escrow shareholder wishing to sell SDF shares (no broker fees) • Applications for the shar
Slide 29: Summary & outlook
Summary & outlook • Underlying earnings exceeded FY14 Prospectus forecasts and post IPO acquisitions further strengthened our results • Strategic initiatives being delivered with success • Ongoing acquisition pipeline • Premium rates to continue to be under pressure • FY15 cash EPS forecast expected
Slide 30: Steadfast
<> Steadfast STRENGTH WHEN YOU NEED IT
Slide 31: Appendices
Appendices <> Steadfast STRENGTH WHEN YOU NEED IT
Slide 32: Diversification of Network Broker GWP
Diversification of Network Broker GWP 1, 2 1 Diversified by geography Diversified by product line Business Pack & Financial 22% Motor 15% VIC 27% Commercial Property & ISR 12% NSW 27% Home & Contents 11% WA 19% QLD 14% Liability 9% SA 7% Statutory Covers 9% TAS 3% Professional Risks 8% NZ 2% Constru
Slide 33: Statutory P&L
Statutory P&L Click to Edit Title Reflects 11 months of operations from IPO acquisitions and non-recurring items $ millions FY14 FY13 Revenue • M&A Fees adjusted for M&A fees 26.4 24.5 intercompany transactions Revenue from wholly owned entities 144.8 10.3 • Increase in EBITA from core Share of prof
Slide 34: Reconciliation between Pro-forma and Statutory profit
Reconciliation between Pro-forma and Statutory Click to Editprofit Title (pre CO) for FY14 80 2.5m 5.3m (0.9)m 70.4m (4.0)m 70 5.9m 61.6m 60 50 $ million 40 70.8 67.0 65.5 30 61.6 20 10 0 Statutory EBITA July trading Restructure costs Change in value of Share based Interest income IFRS EBITA FY14 fr
Slide 35: Pro-forma statement of income
Pro-forma statement of income (IFRS Click toview) Edit Title FY14 Pro- Pro- FY14 & FY14 ex Prospectus forma forma FY13 acquisitions $ millions Forecast FY14 FY13 % growth & hubbing 1 Underwriting agency Fees and commissions¹ 98.5 118.3 104.2 13.5 105.9 commission expense of M&A Fees 26.0 26.4 24.5 7
Slide 36: Pro-forma revenue and EBITA pre CO expenses
Pro-forma revenue and EBITA pre CO expenses (Aggregate view) Click to Edit Title FY14 FY14 ex Prospectus Pro-forma Pro-forma FY14 & FY13 acquisitions & $ millions FY14 GWP Forecast FY14 FY13 % growth hubbing Fees & Commissions Consolidated brokers 376.5 86.3 78.7 79.8 -1.4 75.9 Equity accounted 590.
Slide 37: Pro-forma results (Aggregate view)
Pro-forma results (Aggregate view) Click to Edit Title Revenue and EBITA margin pre Corporate Office expenses (Aggregated View) FY14 Prospectus $ millions FY11 FY12 FY13 FY14 Forecast Revenue Consolidated brokers 87.6 92.0 94.2 96.7 99.8 Equity accounted 123.8 135.6 143.6 147.3 149.2 Revenue from br
Slide 38: Pro-forma P&L items (IFRS view)
Pro-forma P&L items (IFRS view) Click to Edit Title Other revenue Pro-forma Pro-forma $millions FY14 FY13 Variance Fee income for other professional services 16.5 15.8 0.7 Legal fee disbursements 2.9 2.5 0.4 Steadfast Convention income 2.5 2.3 0.2 Other income 4.1 3.6 0.5 Total other revenue 26.0 24
Slide 39: Key dates (subject to change)
Key dates (subject to change) Date Event 10 September 2014 Final dividend ex dividend date 12 September 2014 Final dividend record date 15 September 2014 Final dividend DRP record date 8 October 2014 Final dividend payment date 29 October 2014 Annual General Meeting 26 February 2015 Half year FY15 r