Investor Presentation 1H FY14 Results 24 February 2014 Presenters: Robert Kelly, Managing Director & CEO Stephen Humphrys, Chief Financial Officer This presentation contains general information in summary form which is current as at 24 February 2014. It presents financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standards (IFRS)) and non-IFRS basis. This presentation is not a recommendation or advice in relation to Steadfast Group Limited (Steadfast) or any product or service offered by Steadfasts subsidiaries. It is not intended to be relied upon as advice to investors or potential investors, and does not contain all information relevant or necessary for an investment decision. It should be read in conjunction with Steadfasts other periodic and continuous disclosure announcements filed with the Australian Securities Exchange, and in particular the Half Year Report for the half year ended 31 December 2013. These are also available at www.steadfast.com.au. Important notice No representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates or opinions or other information contained in this presentation. To the maximum extent permitted by law, Steadfast, its subsidiaries and their respective directors, officers, employees and agents disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through use of or reliance on anything contained in or omitted from this presentation. No recommendation is made as to how investors should make an investment decision. Investors must rely on their own examination of Steadfast, including the merits and risks involved. Investors should consult with their own professional advisors in connection with any acquisition of securities. The information in this presentation is for general information only. To the extent that certain statements contained in this presentation may constitute forward-looking statements or statements about future matters, the information reflects Steadfasts intent, belief or expectations at the date of this presentation. Steadfast gives no undertaking to update this information over time (subject to legal or regulatory requirements). Any forward-looking statements, including projections, guidance on future revenues, earnings and estimates, are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Steadfasts actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Any forward-looking statements, opinions and estimates in this presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Neither Steadfast, nor any other person, gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur. In addition, please note that past performance is no guarantee or indication of future performance. This presentation does not constitute an offer to issue or sell securities or other financial products in any jurisdiction. The distribution of this presentation outside Australia may be restricted by law. Any recipient of this presentation outside Australia must seek advice on and observe any such restrictions. This presentation may not be reproduced or published, in whole or in part, for any purpose without the prior written permission of Steadfast. Local currencies have been used where possible. Prevailing current exchange rates have been used to convert local currency amounts into Australian dollars, where appropriate. All references starting with FY refer to the financial year ended 30 June. For example, FY14 refers to the year ended 30 June 2014. All references starting with 1H FY refer to the financial half year ended 31 December. For example, 1H FY14 refers to the half year ended 31 December 2013. 2 Agenda Who we are Service provider and consolidator Steadfast GWP growth 1H FY14 highlights Financial information Strategy & outlook 3 Who we are LARGEST general insurance broker network in Australia1 Founded in 1996 as a collective buying and service group for
independent brokers 455 offices across Australia and New Zealand Network has grown from 43 to 285 insurance broker businesses representing over $4.0bn in GWP Equity interests in 60 broker businesses, 5 underwriting agencies and 2 ancillary businesses 50% joint venture in Macquarie Premium Funding Registered broker in Singapore Note: 1. Measured by annual premiums placed (23% market share in FY13) and number of licensed brokers (32% market share in FY13) 4 Service provider and consolidator 18 years as a broker cluster group; first year as a consolidator Steadfast Network Brokers Services provided to 285 brokers Includes education and training, technical advice, brand and marketing support, information systems and other ongoing support services. Funded by Marketing & Administration (M&A) Fees paid to Steadfast from Strategic Partners. Number of brokers up from 279 Steadfast Equity Brokers Equity interests in 62 brokers 6 integrating into hubs Steadfast Underwriting Agencies Equity interests in five u/w agencies Acquired 60% of Protecsure (December 2013) Premium Funding 50% joint
venture in Macquarie Pacific Premium Funding Macquarie Premium Funding acquired Pacific Premium Funding in March 2013 Ancillary Businesses Equity interests in two support services businesses Acquired remaining 12.5% of White Outsourcin g (January 2014) 5 Strong GWP growth Network Brokers Equity Brokers Gross Written Premium (GWP) Gross Written Premium (GWP) 4.0 $3.8b n 3.5 1,000 $3.2b n 3.0 $m 1.6 $b n $1.0b n 800 2.0 2.5 $0.9b
n 2.0 487.8 512.6 446.6 454.7 600 400 1.5 1.0 1.5 1.8 2.0 FY13 1H/FY14 200 487.5 0.5 0 0.0 FY12 Up 9.0% compared to 1H Up 7.2% compared to 1H FY13 Network GWP no longer includes the fire service levy which FY13is no longer applied in Victoria and Steadfast which generates no income for brokers (1H FY14: $46.1m, 1H FY13 $110.8m, FY13: $177.6m) Network GWP higher than Equity Broker GWP growth due to net new members in the Steadfast Network 6 Drivers of Network GWP growth $billion 6.9% organic (price and volume) + 2.1% new broker growth =
9.0% Based on the increase in average price per premium broked by the Steadfast Network (sample size of over 775,000 policies in 1H FY14) 1 7 Solid pro-forma 1H FY14 results Pro-forma revenue (IFRS view) of $73.6m, up 6.8% compared to 1H FY13 Pro-forma EBITA pre Corporate Office expenses (IFRS view) of $33.0m, an increase of 14.4% 1H/2H split: achieved 49% of FY14 pro-forma prospectus forecasted EBITA pre Corporate Office expenses (vs 47% for 1H FY13 as a percentage of FY13) 1H FY14 dividend of 1.8 cents per share, fully franked, to be paid in April 2014 Acquisitions: purchased 60% of underwriting agency Protecsure and 12.5% balance of White Outsourcing; strong pipeline of opportunities Hubs: Sydney, Melbourne, Perth and Brisbane completed with discussions underway for other major cities in Australia 8 Financial information Continuing growth Click to Edit Title Pro-forma EBITA pre Corporate Office expense Pro-forma IFRS summary FY end 30 June 1H FY14 1H FY13 FY14 % Prospectu growth s Forecast 70 33.0 28.9 14.4% 67.9 60
10 0 10 Strong profit Click to Edit Title growth Pro-forma Statement of Income (IFRS View) FY14 Prospect us Forecast 1H FY14 1H FY13 % growth Fees and commissions 46.8 43.9 6.4% 100.1 M&A Fees 13.7 12.2 11.8% 26.0 1.3 1.7 -21.5% 3.2 Other revenue 11.8 11.2 6.9% 22.7 Revenue Consolidated entities 73.6 69.0 6.8%
152.0 Expenses Consolidated entities 52.4 50.6 3.6% 107.5 EBITA Consolidated entities 21.2 18.4 15.6% 44.5 Share of EBITA from associates and joint ventures 11.8 10.5 12.3% 23.4 EBITA Pre Corporate Office expenses 33.0 28.9 14.4% 67.9 3.2 1.1 n/a 7.3 EBITA Post Corporate Office expenses 29.8 27.8 7.4% 60.6 Net profit after tax 15.7 14.4 9.2%
33.5 Net profit attributable to Steadfast members 14.5 13.5 7.7% 30.1 Net Profit after Tax and before Amortisation 18.8 17.0 10.7% 37.8 $ millions Interest income Corporate Office expenses Revenue up 6.8% yoy M&A Fees up 11.8% yoy reflecting Network GWP growth of 9.0% and new strategic partners and products EBITA pre Corporate Office expenses up 14.4% yoy Rise in corporate office expenses due to new corporate structure and ASX listing 11 Drivers of M&A Fee growth $million 6.9% premium growth + 4.3% more M&A products + 0.6% premium funding = 11.8% 12 Contributions to profit growth Breakdown of the change in EBITA pre Corporate Office expenses $million 40 35
2.7m 30 0.0m 1.1m 0.8m 0.2m 33.0m -0.6m 28.9m 25 20 15 10 5 0 IFRS EBITA Consolidated Equity 1H FY13 brokers accounted brokers Macquari e Premium Funding Steadfas Underwriting Ancillary agencies t Group Limited IFRS EBITA 1H FY14 13 Healthy Click to Editprofit Title margins EBITA margin pre Corporate Office expenses (Aggregated View) $ millions 1H FY14 1H FY13 FY14 % growth Prospectus Forecast Consolidated brokers 32.2% 27.5% 4.7%
14 Balance sheet positioned for growth Click to Edit Title 31/12/13 31/12/12 Pf post IPO Cash and cash equivalents 52.2 70.4 Cash held on trust 56.5 50.9 Receivables & other 77.1 68.8 Total current assets 185.8 190.1 Equity accounted investments 153.4 132.4 Property, plant and equipment 18.8 17.7 Identifiable intangibles 72.3 71.7 252.9 236.4 Deferred tax assets & other 21.1 17.0 Total non-current assets 518.5 475.2
Total assets 704.3 665.3 Trade and other payables 124.7 107.5 1.1 0.6 20.4 16.6 146.2 124.7 7.5 6.2 Deferred tax liabilities & other 34.2 33.3 Total non-current liabilities 41.7 39.5 Total liabilities 187.9 164.2 Net assets 516.4 501.1 $ millions Goodwill Loan and borrowings Other Total current liabilities Loans and borrowings Conservative balance sheet (consolidated basis) $29m cash on hand for acquisitions Zero debt at holding company $8.6m debt belongs to broker businesses
$85m debt facility in place Pro-forma balance sheet based on $1.00 IPO Price (page 74 of IPO Prospectus) Balance sheet does not reflect ~$9m shareholder dividends to be paid in April 2014 15 Healthy increase in cash and cash Click toequivalents Edit Title Dividends from equity accounted investments due by mid February $millions 1H FY14 1H FY13 90.1 21.1 -88.4 -20.1 3.5 - 1.7 0.0 Income taxes paid -1.8 0.0 Net cash from operating activities before customer trust accounts movement 5.1 1.0 Net movement in customer trust accounts -20.8 -0.3 Net cash from operating activities -15.7 0.7 -166.7 -13.3 279.4
10.2 Net increase/(decrease) in cash and cash equivalents 97.0 -2.5 Cash and cash equivalents at 1 July 11.5 10.0 108.5 7.5 56.5 8.2 Cash flows from operating activities Receipts from customers Payments to suppliers and employees, and member rebates Dividends received from associates and joint venture Interest received net of interest and other finance costs paid Net cash used in investing activities Net cash from financing activities Cash and cash equivalents at 31 December Cash held on trust included in cash and cash equivalents Cash held in trust balances high when Steadfast purchased equity stakes in brokers causing $21m outflow in 1H FY14 Cash used in investing activities includes $171m (net of cash and trust cash acquired) paid for equity stakes in brokers and other businesses Cash from financing activities includes $334m raised from IPO and repayment of debt Dividends from equity accounted investments due by mid February (at least 75% of profit after tax) 16 Fully franked dividend of 1.8 cents Dividend payout ratio target: 65% to 85% of net profit after tax, and a minimum of 50% of net profit after tax before amortisation and impairment of intangibles
Fully franked dividend of 1.8 cents Expected interim/final dividend split: 40%/60% Dividend Reinvestment Plan (DRP): dividends eligible for reinvestment under the DRP; 1H FY14 DRP will be funded by issue of new SDF shares; no discount Key dates for 1H FY14 dividend: Ex date Monday 17 March Record date Friday 21 March Payment date Monday 14 April 17 1H results ClickFY14 to Editstatutory Title Reflects 5 months of operations from IPO acquisitions and a number of non$ millions recurring items 1H FY14 1H FY13 Revenue M&A fees 13.5 12.2 Revenue from wholly owned entities 49.1 1.7 6.2 2.1 4.6 - 0.2 0.0 Total revenue 73.6
16.1 EBITA from core operations Share of profits of associates and joint venture Profit on fair value of 50% stake in Miramar now wholly owned Other revenue 24.8 6.0 Profit on fair value of 50% stake in Miramar now wholly owned 4.6 - Due diligence and restructure costs -2.3 -2.7 Share based payment expense on share options and executive loans and shares -5.7 - 21.4 3.3 Amortisation -4.2 0.0 Finance costs -1.7 -0.2 Income tax expense -5.8 -1.1 Net profit after tax 9.7 1.9 Non-controlling interests -0.9 0.0 Net profit after tax
8.8 1.9 Foreign exchange benefit from NZ$ 0.6 - Total comprehensive income 9.4 1.9 Statutory EBITA Statutory M&A Fees adjusted for M&A Fees from Steadfast underwriting agencies payments Increase in EBITA from core operations derived from IPO Acquisitions and higher M&A Fees Non-recurring items consist of: Non-cash profit on revaluation of Steadfasts 50% stake in Miramar Due diligence and restructure costs Non-cash share based payment expense on share options to Key Management Personnel of acquired businesses and executive shares 18 Strategy & outlook 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 Convert, where appropriate, the acquisitions and other opportunities under consideration
Develop and acquire underwriting agencies in niche and complementary areas Implement Project 360 Demonstrate, internally and externally, the synergies we can create by amalgamation and back office integration Evaluate, develop, implement and roll out Steadfast Direct for the retail sector of our client base 20 Project 360 Vision Clients Insurance Broking Account Insurer Payments Electronic Deposits t s en on i ym ct Pa tru s In Electronic Deposit Report for Receipting r re u s In St t en em at s Designated Partner 21 Hubbing Sydney
now 80% owned pilot Project 360 Melbourne 80% owned Perth 67% owned, developed Brisbane continued development Tasmania Estimated synergies to emerge over the next 2 years starting in FY15 Impact for brokers: 7% uplift in profits, i.e. 2%+ uplift in EBITA margin under development South Australia/NT scoped 22 Acquisition pipeline Steadfast is the natural acquirer of further interests in Steadfast Network Brokers, and a potential acquirer of non-aligned brokers and underwriting agencies Active dialogue with potential acquisitions Strict criteria being followed. Acquisitions must be EPS accretive to shareholders within the first 12 months, assuming 85% equity funded Current balance sheet capacity of close to $120 million Brokers and underwriting agencies are our prime targets 23 Steadfast 2014 Convention Largest insurance conference in Australia 4 day event focused on networking, products and services and education around regulation, risks, technology,
growth opportunities, etc. Open only to the Steadfast Network, its strategic partners and service providers Venue alternates between different major cities across Australia 24 Conclusion Steadfast has performed strongly Strategic initiatives being delivered with success Robust acquisition and organic pipeline for growth Experienced team to implement strategy 25 Q&A Appendices Pro-forma statement of income (IFRS Click toview) Edit Title $ millions 1H FY14 1H FY13 Fees and commissions 46.8 43.9 M&A Fees 13.7 1.3 Other revenue FY14 % growth Prospectu s Forecast 6.4% 100.1 12.2 11.8% 26.0 1.7 -21.5%
Share of EBITA from associates and joint ventures 11.8 10.5 12.3% 23.4 EBITA Pre Corporate Office expenses 33.0 28.9 14.4% 67.9 3.2 1.1 nm 7.3 29.8 27.8 7.4% 60.6 Net financing expense -0.6 -1.1 -47.8% -0.5 Amortisation expense -4.8 -4.3 11.0% -9.5 Income tax expense -8.8 -8.0 9.7% -17.1 Interest income
Occupancy expenses Corporate Office expenses EBITA Post Corporate Office expenses Non-controlling interests -1.2 -0.9 26.2% -3.4 Net profit after tax 15.7 14.4 9.2% 33.5 1.2 0.9 30.4% 3.4 14.5 13.5 7.7% 30.1 4.3 3.5 22.0% 7.7 18.8 17.0 10.7% 37.8 Non-controlling interests in net profit after tax Net profit attributable to Steadfast members Amortisation expense Net Profit after Tax and before Amortisation 28 Pro-forma revenue and EBITA pre CO Clickexpenses
26.3% 27.0% Steadfast Total EBITA margin (pre CO expenses) 30 Reconciliation between Pro-forma and Statutory Click to Editprofit Title for 1H FY14 35 5.6m 30 $million 26.9m 0.5m xx 25 x 20 x 15 x 33.0m 10 5 Statutory EBITA pre CO from core operations July trading IPO expenses Pro forma EBITA pre CO from core operations 31 Pro-forma P&L items (IFRS view) Click to Edit Title Other revenue $millions 1H FY14 1H FY13 Variance Management fee income 0.5
0.5 -0.0 Fee income for other professional services 8.5 7.8 0.7 Other income 2.9 2.8 0.1 11.9 11.1 0.8 Total other revenue Other expenses $millions 1H FY14 1H FY13 Variance Rebate to Steadfast brokers 3.6 2.5 1.1 Cost of broker services 1.3 1.6 -0.3 Selling expenses 2.3 3.4 -1.1 10.7 11.5 -0.8 0.9 0.9
-0.0 18.8 19.9 -1.1 Administration expenses Depreciation of PP&E Total other expenses 32 Ordinary on issue Click to Edit shares Title millions Ordinary shares on issue as at 31 December 2013 No. of ordinary shares1 501.0 Made up of:2 Re-weighting Shares 65.7 Executive Shares 10.9 Consideration Shares 134.2 IPO Shares 290.2 172.5 million shares under escrow until 31 August 2014 Escrow shares are owned by Steadfast brokers and associates Notes: 1. IPO shares were issued at the Final Price of $1.15 per share. Re-weighting Shares, Executive Shares and Consideration Shares were issued at $1.00 per share. 2. The description of shares that make up total ordinary shares have the meaning of those terms given in the IPO prospectus. 33
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