Broker network holds fast in NZ

by Maryvonne Gray 24 Feb 2014

Broker network holds fast in NZ

Australian broker network Steadfast is looking for even more opportunities to expand in New Zealand with 17 Kiwi offices now open in the North and South Islands since connecting with Rothbury in April last year.

Speaking to Insurance Business this morning after the network’s first half year results were released, MD and CEO Robert Kelly said New Zealand is a ‘great market’ and one that their overseas partners have an expectation of Steadfast to operate in.

“We here in Australia consider New Zealand a great market and I have to tell you that all around the world when people speak to us about distribution they actually expect us to have distribution across Australia and New Zealand.

“We like it, we’ve been there, and I’m happy to put us into that market. I just completed an assignment with the Insurance Council of New Zealand (ICNZ) recently and I was very pleased to see the sustainability in the market, and I think there’s going to be a great need for brokers in New Zealand, particularly if there’s a decision by either the incumbent or new government to start playing around with tools for insurance.”

He said he had had three discussions recently regarding future acquisitions.

“In terms of increasing it we’re open for business in terms of acquisition, we’re open for business to expand in New Zealand and we’ll evaluate any opportunity that comes our way under our criteria that we use as to whether it’s good either culturally or economically in terms of the revenue it produces for the group. But yes, we’re certainly keen from that point of view.

In revealing its pro forma half year results for 2014, from an IRFS view, Steadfast reported a net profit after tax was $14.5m, up from $13.5m, and net profit after tax and before amortisation was $18.8m, compared to $17m the prior year, and revenue rose 6.8% from $69m in the first half of 2013 to $73.6m in the first half of 2014, according to its pro forma results which assume the pre-IPO and IPO acquisitions. The full year prospectus target for revenue is $152m.

The statutory financial results, from an IFRS view, reported total comprehensive income net of tax was $9.4m, up from $1.9m in 2013.

From an aggregate view (pro forma), revenue was $188.4m in the first year of 2014, up 13.4% from $166.1m in 2013. EBITA pre CO expenses was $49.5m, up on $44.4m in 2013.

GWP placed by the 285 Steadfast Network Brokers (excluding underwriting agencies GWP) in 1H FY14 amounted to $2bn ($4bn and annualised), excluding the fire service levy, up 9.0% compared to 1H FY13.

The balance sheet as at 31 December 2013 with net assets of over $516m, reflects the $334m raised from the August 2013 IPO, net of the cash used to pay for the equity stakes in brokers and other businesses and payments to eliminate debt in the holding company.

Steadfast says it has a strong capacity to acquire further businesses, with $29m cash and an $85m debt facility, together with future retained earnings and equity funding if required.

The board has declared an interim dividend of 1.8 cents per share, fully franked. This dividend is payable on 14 April 2014 and will be eligible for Steadfast’s dividend reinvestment plan (DRP).

Kelly stated: “We are very pleased with the strong result from Steadfast Group Limited which shows growth in all key financial metrics from top line sales to bottom line profit. The growth of the Steadfast Network is also pleasing with the number of brokers increasing to 285 from 279 over the past six months, and offices throughout Australia and New Zealand expanding to 455 from 430.”

Commenting on GWP, he added: “The 9.0% year-on-year growth in GWP placed by Steadfast Network Brokers is due to price and volume increases as well as new brokers joining the network. It reflects the resilient SME market where our business is focused and is in line with our market outlook for the financial year.”

“The solid growth in our network as well as from Steadfast Group Limited reflects our efforts to continue to enhance the services we provide to our brokers, and expand our strategic relationships with insurers and other parties. Plans to deliver back office cost synergies are progressing well with the completion of four hubs to date (Sydney, Melbourne, Perth and Brisbane) and the common back office platform in its final planning stages.”