Scale.
Strength.
Steadfast.
Annual Report 2014
CONTENTS
Scale. Strength. Steadfast
Business Model
Financial Highlights
Message from the Chairman
Message from the Managing Director & CEO
Chief Financial Officer Report
Partnerships
The Steadfast Difference
Realising Synergies
Macquarie Pacific Funding
Steadfast Underwriting Agencies
Board of Directors
Executive Management Team
Corporate Governance Statement
2014 Financial Report
Shareholders’ Information
Corporate Directory
Cover Image:
Corporate Office, 99 Bathurst Street, Sydney NSW 2000
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99
IBC
Scale
We are the largest general insurance
broker network in Australasia. We are
also a leading consolidator of insurance
broking and underwriting agencies
in Australia.
Our network, including Allied
Insurance Group (whose name will
change to Steadfast New Zealand),
now consists of 306 insurance
brokerages that generate annual gross
written premiums of $4.3 billion.
Our brokers are based in 500 offices
across Australia, New Zealand and
Singapore. We now service around
two million policies.
Strength
Our Network Brokers benefit from
the support and collective scale of
a large industry leading organisation,
while at the same time having the
ability to remain independently
owned, operated and locally based.
They further benefit from our
significant buying power, flexibility
and influence when negotiating
with insurers and other Strategic
Partners on claims, triage, bespoke
policy wording and market
competitive pricing.
To enhance the Network Brokers’
client offering, Steadfast has invested
in a range of underwriting agencies,
ancillary businesses, and has a joint
venture in a premium funder,
Macquarie Pacific Funding.
Steadfast
Our network’s scale and strength
allows us to attract Australia
and New Zealand’s best broker
firms who take advantage of our
favourable relationships with
our Strategic Partnerships.
Being an ASX 200 listed company
provides Steadfast with the capacity
to continue to consolidate the
market in Australasia.
Through organic growth and
acquisitions, we maintain and grow
our market share while enhancing
the value of our network businesses
and in turn shareholder value.
Steadfast Group Annual Report 2014 | 1
Business Model
Our business model revolves around the Steadfast Network Brokers, our ownership
in some of these businesses and our ability to provide them with services funded by
our Strategic Partners. To leverage the distribution power of our network, we have
acquired equity interests in vertically integrated businesses.
Steadfast Group
Service provider to 306 broker businesses across
Australia, New Zealand and Singapore
Receives Marketing & Administration (M&A) fees
from Strategic Partners when brokers market
their products
Consolidator with equity interests in 54 broking
businesses, nine underwriting agencies,
a life broking business, a reinsurance broking
business, a premium funder and two ancillary
service organisations
Life
PROFILED ON PAGES 16 AND 17.
PROFILED ON PAGES 16 & 17
PROFILED ON PAGE 15.
PROFILED ON PAGE 15
306
Steadfast Network Brokers
Source products from insurance companies and
underwriting agencies on behalf of their clients
Select appropriate insurance in terms of coverage,
flexibility and pricing
Assist customers in submitting and negotiating
claims
Includes wholesale broking facilities
2 | Steadfast Group Annual Report 2014
We are a leading general insurance broker network
in Australasia, with 500 offices across Australia,
New Zealand and Singapore.
1
Singapore
49
43 Metro
06 Regional
5
02 Metro
03 Regional
34
30 Metro
04 Regional
93
71 Metro
22 Regional
128
106 Metro
22 Regional
114
101 Metro
13 Regional
45
27 Metro
18 Regional
12
03 Metro
09 Regional
5
All Metro
14
12 Metro
02 Regional
LARGEST GENERAL INSURANCE BROKER NETWORK IN AUSTRALIA
Based on
annual premiums
Based on number
of intermediaries
23%
33%
$18.5b
872
Source: Steadfast estimates as at 31 December 2013 and APRA “Intermediated General Insurance Statistics, December 2013”
Steadfast Group Annual Report 2014 | 3
Steadfast Network Brokers & Underwriting Agencies $4.2bn Other $14.3bnSteadfast Network Brokers & Underwriting Agencies 289Other 583Steadfast Network Brokers & Underwriting Agencies $4.2bn Other $14.3bnSteadfast Network Brokers & Underwriting Agencies 289Other 583 Financial Highlights
Steadfast Network Brokers
Gross Written Premiums (GWP)
$ billion
Marketing & Administration (M&A) Fees
$ million
Steadfast Network Billings
$ billion
5.0
4.0
3.0
2.0
1.0
0
4.1b
3.9b
1 % C A G R
1
3.0b
2.8b
3.4b
2.4b
2.2b
FY08
FY09
FY10
FY11
FY12
FY13
FY14
30
25
20
15
10
5
0
27.0m
24.5m
4 % C A G R
1
19.8m
16.9m
21.7m
14.5m
12.4m
FY08 FY09
FY10
FY11
FY12
FY13
FY14
Network Brokers GWP by Product1
Network Brokers GWP by Geography1,2
5.1B
Consist of billings generated by
Network Brokers and Underwriting
Agencies.
M&A Fees $ million
27M
Up 9.8%
year-on-year
Business Pack & Financial
Business Pack & Financial
22%
Motor
Motor
15%
Commercial Property & ISR
Commercial Property & ISR
12%
Home & Contents
11%
Home & Contents
Liability
Liability
9%
Statutory Covers
Statutory Covers
9%
Professional Risks
8%
Professional Risks
Construction & Engineering
Construction & Engineering
4%
Rural & Farm
Rural & Farm
4%
Marine & Aviation
3%
Marine & Aviation
Accident & Health
3%
Accident & Health
VIC 27%
VIC 27%
NSW 27%
NSW 27%
WA
19%
WA
19%
QLD 14%
QLD 14%
SA
TAS
NZ
ACT
NT
7%
2%
2%
1%
1%
SA
TAS
NZ
ACT
NT
7%
2%
2%
1%
1%
Dividend
4.5¢
Fully franked
Includes the 1H FY14 dividend
of 1.8 cents per share
22%
15%
12%
11%
9%
9%
8%
4%
4%
3%
3%
1: Based on FY14 Steadfast Network Broker GWP of $4.1 billion.
2: Geography is based on head office location of each Steadfast Network Broker; a small
number of Steadfast Network Brokers had overseas operations in FY14.
4 | Steadfast Group Annual Report 2014
Message from the Chairman
The 2014 year has been a busy
and exciting one for Steadfast
Group Limited.
We listed on the ASX on 7 August 2013,
maintained our position as the largest
general insurance broker network in
Australasia and became a significant
co-owner and consolidator of insurance
brokers, underwriting agencies and other
complementary businesses. Furthermore,
we reported pro-forma full year profits
above those forecast in our June 2013
IPO Prospectus.
2014 dividends
Your Directors declared a fully franked final
dividend of 2.7 cents per share payable on
8 October 2014 based on a record date
of 12 September 2014. The total dividend
for the full year is 4.5 cents per share. This
represents 69% of the net profit after tax
(on a pro-forma basis), which is in line with
our target dividend payout ratio range.
Industry consolidation
Over the past year, we have witnessed
further consolidation in the general
insurance industry in Australia and New
Zealand. Steadfast has played a key role in
the consolidation of insurance brokers and
underwriting agencies, starting with its IPO
acquisitions in August 2013, followed by
post IPO acquisitions of three brokers, three
underwriting agencies and a broker network
in New Zealand, Allied Insurance Group.
Distribution strength
What has not changed is the fact that
Steadfast remains the largest general
insurance broker network in Australasia.
This is supported by the Network’s 23%
market share of gross written premiums
(GWP) generated by General Insurance
Intermediaries in Australia (source: APRA,
December 2013). This continues to give us
significant scale and strength to grow our
company and attract more businesses and
Strategic Partners.
Consistent strategy
What also remains the same is the
Group’s long-term strategy to create
shareholder value.
This strategy encompasses:
• continuing to enhance the services
we provide to all Network Brokers;
• building and developing our strategic
relationships with insurers and
other parties;
• delivering synergies from acquisitions
and for the Steadfast Network;
• generating growth from acquisitions;
• cross-selling existing and new products
within the Steadfast Network; and
• building and developing our
underwriting agencies business.
Our strategy reflects the fact that Steadfast
has multiple growth opportunities
domestically and overseas on an organic
basis as well as through acquisitions.
Sound risk management
The Prospectus issued in June 2013
contained numerous risks that required
careful management, in particular the
integration of the 62 acquisitions made
pre IPO and in August 2013. I am pleased to
confirm that we have not had any material
issues arise during the past 12 months
which is a reflection of the quality of risk
management focus and close monitoring
that was put in place by the Steadfast team.
Strong financial performance
The statutory results for the 2014 financial
year show how dramatically the Group has
changed since its ASX listing. The increases
in revenues and profits are due to the
strong underlying business and the impact
of the pre IPO acquisitions made in 2013,
the IPO acquisitions made on listing in
August 2013 and the post IPO acquisitions.
If we assume both the pre IPO and the IPO
acquisitions were made at the beginning
of the 2013 financial year and exclude non-
recurring items, the 2014 pro-forma net
profit after tax and before amortisation was
$41.5 million, an increase of 11.6% over the
prior year and above the IPO Prospectus
forecast of $37.8 million.
Balance sheet capacity
for acquisitions
At the end of June 2014, we had spent
the additional cash raised from the float
and $20 million of our $85 million debt
capacity on acquisitions. Since then, we
have made three more acquisitions costing
$25 million. Following Steadfast delivering
on all key financial expectations for the
2014 financial year, the Board approved
raising the Group’s gearing levels from the
conservative 15%, established for the first
year of ASX listing, to 20%. This increases
the Group’s debt capacity to $130 million.
This provides Steadfast with debt capacity
of $85 million, plus cash from operations,
to make further acquisitions.
Summary
Within the course of a year we have
established a successful ASX 200 listed
company with a broker network of
306 members and a joint venture with
Macquarie Pacific Funding, and acquired
equity interests in 54 broking businesses,
nine underwriting agencies, two ancillary
organisations and the second largest
broker network in New Zealand. I would
like to thank Robert Kelly and the people
who have helped make this transformation
possible including my fellow Directors, the
Executive Management Team, staff and
contractors, Steadfast Network members
and Strategic Partners.
Frank O’Halloran AM
CHAIRMAN
Steadfast Group Annual Report 2014 | 5
Message from the Managing Director & CEO
2014 was a milestone year
for Steadfast.
• We listed on the ASX and
transformed into a consolidator
of general insurance broking
businesses and underwriting
agencies in Australia and
New Zealand.
• We maintained and strengthened
our leadership position as a broker
network and distributor of general
insurance products.
• The pre IPO and IPO acquisitions
were integrated successfully and
initiatives to deliver synergies to
the acquisitions and the Network
are under way.
• Seven acquisitions were made
following the float in August 2013.
• Finally, we successfully exceeded
IPO Prospectus financial forecasts.
Strong network growth
The strength of the Steadfast Network
continued to shine in 2014 despite a
softening market towards the end of the
financial year. Gross written premiums
(GWP) generated from Steadfast Network
Brokers increased 4.7% over the prior year
to $4.1 billion. Gross written premiums no
longer include the fire service levy. The
growth in GWP is despite a small decline
in premium rates of 0.7% which was more
than offset by 2.5% volume growth and
2.9% growth as a result of more brokers
joining the Steadfast Network.
Since 2008, our Network Brokers’ GWP
in Australia has increased on average
by 11.3% per annum.
Steadfast Network Brokers GWP ($bn)
1 1 . 3 % C A G R
3.4b
3.0b
2.8b
4.1b
3.9b
2.4b
2.2b
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
FY08
FY09 FY10 FY11
FY12 FY13
FY14
Solid growth in Group profitability
To assess the underlying performance
of the Group, we need to consider the
pro-forma numbers on the basis that we
owned the pre IPO and IPO acquisitions
from the beginning of the 2013 financial
year. One of the key metrics used to
measure financial performance is
pro-forma earnings before interest and
amortisation (EBITA) pre Corporate Office
expenses. In 2014, pro-forma EBITA pre
Corporate Office expenses was $69.6
million, a 13.9% increase over 2013 and
slightly above the Prospectus forecast of
$67.9 million.
Post IPO acquisitions
We made seven acquisitions after listing
on the ASX which together generated
annual GWP of about $450 million and
normalised full year EBITA of over $12
million for 100%.
Underwriting agencies
The first acquisition was for a majority
shareholding in Protecsure, completed
in December 2013, and was followed by
a majority shareholding in two further
underwriting agencies – NM Insurance
(Nautilus Marine) in April 2014 and MECON
Winsure in May 2014. All three were
Strategic Partners of Steadfast. Underwriting
agencies are an important growth area for
Steadfast. We have created an umbrella
group, Steadfast Underwriting Agencies,
to help existing and future underwriting
agencies benefit from the scale of being
part of Steadfast. We will be helping these
underwriting agencies improve margins
and increase revenues.
Bolt-on acquisition
One of the largest Steadfast owned brokers,
NCIB, acquired another Steadfast broker,
IMC, in June 2014. Both specialise in credit
insurance and credit risk management
where we see cross selling opportunities
within the Network.
New Zealand broker network
In July 2014 we broadened our presence
in New Zealand with the purchase of
the Allied Insurance Group, the second
largest network service provider in New
Zealand. Allied has 31 independently
owned members with 40 offices across
metropolitan and regional New Zealand.
Allied generated NZ$172 million (A$160
million) of GWP in 2014. As a result, Steadfast
is now the third largest distributor of general
insurance products in New Zealand.
6 | Steadfast Group Annual Report 2014
Authorisation Representative network
In August 2014, we purchased a majority
stake in Ausure Group, an Authorised
Representative (AR) network of 336
insurance intermediaries in 150 locations
across Australia and a Steadfast Network
Broker. Ausure’s network provides us with
opportunities to attract smaller brokers and
to improve the profitability of other small
brokers by encouraging them to become
part of Ausure, as an alternative to our
Hubbing stratergy.
Reinsurance broker
The last acquisition made to date was a
50% stake in a reinsurance broking business
which has appropriately been renamed
Steadfast Re. This joint venture introduces
a further complementary business to our
distribution channel.
Organic growth initiatives
Consolidating the general insurance broking
market is a key strategic initiative for us as
we are the natural acquirer of the 200-plus
Steadfast Network Brokers not owned
by Steadfast, other non-aligned brokers
in Australia and the 31 Allied brokers in
New Zealand. However, we never lose
sight of maintaining and improving the
service to our Network members and
enhancing relationships with our
Strategic Partners.
The significance and advantages of our
partnerships with our Network Brokers
and Strategic Partners are outlined on
pages 10 to 13.
To better improve returns for the acquired
brokers and ultimately the Group, we
have been working on two initiatives to
create back office cost savings – Hubbing
and Project 360°. Both initiatives are
summarised on page 14 and demonstrate
that we are following through on delivering
the synergies outlined in our June 2013
IPO Prospectus.
Outlook for 2015
Although the general insurance market has
seen some softening in certain areas and
products, the SME market (which consists
of approximately 85% of our business)
remains resilient. Our focus on the SME
market, combined with expected margin
improvements in each of our business
units, means we are predicting organic
growth in the 2015 financial year (FY15).
Factoring in growth from acquisitions,
we anticipate cash earnings per share to
increase by 10% to 13% in FY15.
Thank you
Over the past 12 months, significant
progress was made towards integrating
our acquisitions and delivering synergies.
Our pro-forma profits were ahead of
forecasts provided in our June 2013 IPO
Prospectus. Lastly, we converted seven
acquisitions from our strong pipeline
of opportunities.
These achievements were made possible
due to the excellent team behind Steadfast
– our Directors, Executive Management,
staff and contractors, Network members
and Strategic Partners. I would like to
extend my sincere thanks to all for their
hard work and success during the year.
We have created an exciting platform
for growth and hope you will continue
to join us on our journey of increasing
shareholder value.
Robert Kelly
MANAGING DIRECTOR & CEO
Steadfast Group Annual Report 2014 | 7
Chief Financial Officer Report
I am pleased to report that
the underlying earnings
of Steadfast have exceeded
the forecasts contained in
our June 2013 IPO Prospectus.
Our organic growth
projections for the 2014
financial year were ahead
and the acquisitions made
post floating on the ASX
have further strengthened
our results.
Our growth in pro-forma
cash earnings was a very
pleasing 17%.
To reconcile the statutory results to the
underlying performance of Steadfast,
we assume the pre IPO and IPO acquisitions
were made on 1 July 2013 instead of on
7 August 2013, and exclude non-recurring
income and expense items that mainly relate
to the capital raising and restructuring of
the business. Our cash earnings are derived
by adding back the amortisation charge
on customer lists acquired.
Pro-forma net profit after tax
and before amortisation up
17% year-on-year
Below is a table which shows the
adjustments that reconcile the statutory
net profit after tax of $25.7 million to
the pro-forma net profit after tax and
amortisation, a non-cash expense,
of $41.2 million.
Year ended 30 June, $ million
Comprehensive income after tax
Changes in value of investments
Add: IPO, due diligence and restructure costs
Share based payment expense on share options and
executive loans and shares
Add: Trading of IPO acquired businesses pre IPO
Pro-forma net profit after tax
Add back: Amortisation
Pro-forma net profit after tax and before amortisation
(cash earnings)
FY14
25.7
(4.0)
2.3
5.3
3.1
32.4
8.8
41.2
FY13
(13.3)
-
13.3
10.5
17.6
28.1
7.1
35.2
Pro-forma cash earnings per share (cents)
8.2
7.0
Pro-forma EBITA up 10% on
average over the past three years
The graph below shows the growth
in the Group’s pro-forma earnings before
interest, tax and amortisation (EBITA) over
the past three years which on average
has been 10% per annum.
Pro-forma EBITA up 10%
on average over past 3 years
10%
1 0 % C A G R
$ million
75
70
65
60
55
50
45
40
35
30
25
FY11
FY12
FY13
FY14
EBITA
EBITA - FY14 Acquisitions and Hubbing
8 | Steadfast Group Annual Report 2014
The strong financial performance in 2014
was achieved in a market that showed
signs of a slight softening late in the year.
The results reflect growing volumes of
business as well as improved profit margins
as highlighted in the graph below.
Rising EBITA margins for brokers
and underwriting agencies on an
aggregated basis
$ million
35
33
31
29
27
25
23
21
FY12
FY13
FY14
Consolidated brokers
Equity accounted brokers
Underwriting agencies
Solid network growth
During the year, the Steadfast Network
GWP increased by 4.7% to $4.1 billion,
despite pricing pressures in the market
towards the end of the financial year.
This was achieved through the addition
of new members to the Network, together
with higher volumes of policies written.
Further, we saw a 9.8% uplift in Marketing
& Administration (M&A) fees collected by
the parent entity to $27.0 million, reflecting
the additional GWP written by the Steadfast
Network on strategic products, combined
with an increase in the number of products
sold that attract the M&A fee.
Strong cash flows generated
by the underlying businesses
Under the Shareholder Agreements we have
with our equity brokers and underwriting
agencies, a minimum of 75% of the after tax
profits is required to be submitted within
45 days of the end of the half year and the
end of the financial year. For the half year
to 31 December 2013, we received cash in
excess of 82% of the after tax profits.
2014 dividend of 4.5 cents per share
A fully franked interim dividend of 1.8 cents
per share was declared by the Board of
Directors in February. The final dividend
of 2.7 cents per share was approved
by the Board in August and will also be
fully franked. This dividend is payable on
8 October 2014 based on a record date
of 12 September 2014. The Company’s
Dividend Reinvestment Plan (DRP) is open
to shareholders to participate in, should
they elect to do so. A discount of 2.5%
will be applied to shares allocated under
the DRP for the final dividend.
Healthy balance sheet
capacity for acquisitions
During the 2014 financial year, Steadfast
arranged an $85 million debt facility.
Total Group debt as at 30 June 2014 was
$21 million, leaving $65 million available
for future acquisitions. Subsequent to 30
June 2014, three additional acquisitions
were completed amounting to just over
$25 million. The Board has now approved
a 20% (previously 15%) debt to equity
ratio and the debt facility limit has been
extended to $130 million. This provides
$85 million of debt facilities to be utilised
for future acquisitions and earn-out
payments as at the date of this annual
report. This, together with expected free
cash flow from earnings, provides the
Group with significant financial capability
to acquire further businesses that meet
our strict acquisition criteria.
Successful implementation of
financial reporting systems
Much effort has been spent in creating
robust financial reporting systems at the
start of the financial year to accommodate
the enhanced statutory and management
reporting requirements of an ASX listed
entity. My thanks to the many people who
have made the implementation of these
systems a resounding success.
Stephen Humphrys
CHIEF FINANCIAL OFFICER
Steadfast Group Annual Report 2014 | 9
Partnerships
A fundamental strength of Steadfast is the power
of our partnerships, particularly with our Network
Brokers and our Strategic Partners.
Steadfast Strength through partnerships
10 | Steadfast Group Annual Report 2014
OUR NETWORK BROKERS
We meet with our brokers at least
four times a year – at our Town Hall
meetings across Australia and at our
annual Convention – in order to
gather feedback on ways to enhance
the services provided to the Network.
Whatever key initiatives we undertake,
we ensure that it’s something the
brokers want to pursue. All brokers,
whether we have ownership in them or
not, are treated equally in terms of what
services we offer them and we believe
this sets us apart from our competitors.
“Whilst operating as an
independent insurance
broker, being a Steadfast
Broker gives us substantial
buying power and flexibility
when negotiating with
insurers on behalf of our
clients. This ensures that we
deliver competitive, market
leading products.”
Graham Stevens
Director at Edgewise Insurance Brokers
“Being part of Steadfast
allows us to work as
an independent business
with the support of a
large organisation.”
Retha van der Merwe
Managing Director at
Multi Secure Financial Solutions
OUR STRATEGIC PARTNERS
Steadfast has built solid partnerships
with a significant number of insurers,
underwriting agencies and specialist
providers in Australia and New Zealand.
These partnerships have secured
Steadfast a place at the negotiating
table where all parties benefit from
listening to and being influenced by
the requirements of the Network.
In addition, our reputation and size
provides Steadfast with opportunities
and access to international markets.
This has enabled us to: work with
Lloyds on international risk appetite
and business placement as well as
being an industry leader by influencing
and implementing standards through
our affiliation with ACORD –
Asia/Pacific region.
“We value the extensive
customer knowledge and
expertise Steadfast brings
to the partnership.”
“We view Steadfast as
a key strategic partner
and key voice of the
Australian Broker Industry.”
Peter Harmer
Chief Executive, Commercial Insurance
at Insurance Australia Group
Colin Fagen
CEO, Australian and New Zealand
Operations at QBE
“Vero will continue to
work with Steadfast
to shape the insurance
industry environment
for the good of customers.”
“Zurich is proud to work
with Steadfast who
leverages its diverse
network and experience to
meet customers’ needs.”
Anthony Day
CEO, Commercial Insurance at Suncorp
(Vero brand)
Daniel Fogarty
CEO, General Insurance Australia
and New Zealand at Zurich
Steadfast Group Annual Report 2014 | 11
The Steadfast Difference
The advantages of being
a Steadfast Network Broker
include the ability to remain
independently owned and
operated while benefiting
from the support and scale
of a large industry leading
organisation.
However, what differentiates
Steadfast from other broker
networks is the fact that we
have services available to all
Network brokers no matter
their size or whether or not
they are owned by Steadfast.
Our services include ground-
breaking innovations like
Steadfast Triage and Steadfast
Virtual Underwriter that are
unique to the industry.
12 | Steadfast Group Annual Report 2014
Network Advantages
The Steadfast Difference
• Ability to remain independently owned
• Helplines covering five different
and operated
business areas
• Access to a broad range of Strategic
Partners including insurers, underwriting
agencies and premium funders
• Collective negotiating to offer more
favourable pricing and terms
• Exclusive policy wordings with broader
coverage than the standard product
offerings
• Compliance and legal support
• Discounted goods and services
• 35% M&A Fee rebate
• Erato Program, a professional indemnity
program and error rectification service
• Steadfast Triage, a managed escalation
process for claims and other issues
• Steadfast Virtual Underwriter
technology allows multiple quotes
using one data input
• Brand awareness marketing
• Training and broker interaction only
open to Steadfast Network Brokers and
its Strategic Partners
All of the products, services and initiatives that deliver on Steadfast’s model broker concept
are housed on the Broker section of our website which is exclusive to Steadfast Network
members. This intranet includes broker tools to keep members up to date with changing
products and wordings, training and education, Strategic Partners, services available to
members and advice on topics including human resources, compliance and legal.
Helplines
Our helplines are an essential part of the
online support we provide to our broker
network. Advice is provided by experts in
each field. These include:
• Compliance
• Contractual Liability
• Human Resources and Industrial
Relations
• Legal Advice
• Technical Assistance
Erato Program
The Erato Program provides Steadfast
Network Brokers with access to a higher
level of professional indemnity cover
(i.e. coverage for errors and omissions)
than would be the case had the broker
purchased cover individually. The program
provides cover of $100 million for any one
event and $214 million in aggregate, with
one automatic reinstatement per annum.
Steadfast Triage
Steadfast Triage is a managed escalation
process designed to support brokers in
areas impacting client interaction and
business relationships including claims,
ethic and placement issues. Working
closely with the brokers, we help to clarify
the facts of the situations, apply established
stands of best practice and assist with the
resolution of disputes involving customers
directly with the insurers. This year
Steadfast extended the Triage process
to include a helpline for those who have
been directly affected by an emergency
bushfire, storm or flood situation.
Steadfast Virtual Underwriter
Steadfast Virtual Underwriter (SVU) is a
web-based tool, developed and funded
by Steadfast, that enables Steadfast
Network Brokers to obtain multiple,
detailed quotes from a variety of Strategic
Partners using only one data input. The
SVU empowers brokers and their clients
by delivering the information they need
to make informed choices, quickly and
cost efficiently.
Brand Awareness Marketing
Steadfast initiated a brand awareness
campaign two years ago to promote
the value of Steadfast Network Brokers
to consumers. This ongoing national
advertising program includes sponsorships
and television, radio, print, outdoor and
digital media. The 2014 season will see
Steadfast again on the bumpers of two
Nissan V8 supercars and on the shirts of
the A-League Brisbane Roar football players
– the winners of 2013/2014 Premiers.
Training and Broker Interaction
Continuous development of our brokers
is paramount at Steadfast. We run three
training workshops Australia-wide annually.
We have also developed ‘Steadfast Campus’,
an online training tool providing our brokers
numerous opportunities to broaden their
knowledge and skill base.
Steadfast holds Town Hall meetings
Australia wide three times a year and hosts
an annual Steadfast Convention. The Town
Hall meetings keep brokers up to date with
new developments and are used to gather
feedback. The Steadfast Convention is the
largest insurance conference in Australia,
attended only by Steadfast Network Brokers,
Strategic Partners and service providers.
The 16th Steadfast Convention was held
in Melbourne in April this year and was
attended by over 2,100 delegates with
98 sponsors and exhibitors and 154
display booths.
16th Steadfast Convention 2014
Delegates attended
2,100+
98
154
Sponsors and exhibitors
Display booths
Since Steadfast was founded, our
brokers and Strategic Partners have
consistently demonstrated their
generosity and commitment to
supporting the communities within
which we live and work. As a result,
Steadfast has been a substantial
contributor to charity, typically
donating around 1% of net profit
after tax to charitable causes each
financial year.
The Steadfast Foundation was
created to provide a more robust
and sustainable structure for these
donations. As well as managing and
distributing funds from the Steadfast
Group, it provides a mechanism for
Steadfast Network Brokers and the
public to donate to causes that are
important to them.
In 2014, Steadfast Convention
attendees donated $165,000 to
Kids with Cancer Foundation, which
supports children and their families
impacted by Cancer. Over the last
10 years, more than $1.3 million
has been donated to local charities
by Steadfast Group and the
Steadfast Foundation.
We would like to thank our brokers
and Strategic Partners for their
continued generosity.
Steadfast Group Annual Report 2014 | 13
Realising Synergies
Steadfast Group is working on two initiatives
to create back office cost savings for our
brokers and ultimately for the Group.
Hubs across Australia
Perth
67% owned
Adelaide
~70% owned
Brisbane
49% owned
Sydney
80% owned
pilot Project 360o
Melbourne
80% owned
Tasmania
~75% owned
Project 360° concept
BROKERS
1 | Client contact
2 | Risk review
3 | Placement
of product
4 | Creates invoice
and sends to client
1 | Collects premium
from client
2 | Settles brokers’ debtors
3 | Invests funds
4 | Distributes commissions
& fees and investment
income to brokers
5 | Pays brokers’ creditors
(i.e. insurance companies)
PROJECT
360°
01
Hubbing strategy
Our Hubbing strategy is where we
combine two or more brokers together
to create scale and cost synergies.
We now have a hub in each State across
Australia except for the Northern Territory.
In terms of potential synergies, we expect
for them to begin to emerge in the 2015
financial year.
02
Project 360°
Project 360° is currently in proof of
concept stage with the Sydney hub.
This initiative aims to make the process
of collecting premiums and distributing
them to insurance companies smoother,
more cost-effective and less time
consuming for our brokers.
We want our brokers to focus on providing
their customers with the appropriate risk
cover, invoice them for their service and
insurance policies, and organise electronic
deposits. Project 360° will then complete
the cycle by paying the insurers, and
distributing the commissions & fees and
investment income to brokers.
14 | Steadfast Group Annual Report 2014
Macquarie Pacific Funding
One of the largest premium
funders in Australia;
50% owned by Steadfast.
Understanding Premium Funding
The premium for an insurance product
is usually paid up front. However, some
customers prefer to spread payments of
the premium over 12 months. Premium
funding can be arranged through an
insurance broker. This is essentially a
short-term loan which is separate from
the insurance transaction. Specialist
premium funding companies handle
the credit arrangements.
The Benefits
• Match your insurance payments
to your cash flow
• Spread the cost of your insurance
over monthly instalments
• The insurance policy itself acts
as security
• Interest costs are usually tax deductible
• Fixed interest rates to protect you
from rate variations
• No impact on existing banking
or credit arrangements
Background
Macquarie Premium Funding was
established as a 50/50 joint venture
between Steadfast and Macquarie Bank in
2007. In March 2013, Macquarie Premium
Funding purchased another leading
premium funding business in Australia,
Pacific Premium Funding. The integration,
which involved bringing together the best
of both businesses under the new business
name Macquarie Pacific Funding (MPF),
was completed in the first half of 2014.
Strong growth over the past five years
Over the past five years, MPF has grown
its annual funded GWP by an average of
21% per year to total $1.5 billion in 2014.
Growth over the past two years has been
enhanced by the acquisition of Pacific
Premium Funding.
Annual GWP funded ($ billion)
1 % C A G R
2
1.7
1.5
1.3
1.1
0.9
0.7
0.5
FY09
FY10
FY11
FY12
FY13
FY14
Business model
Macquarie Pacific Funding is remunerated
primarily through origination fees paid by
the underlying financier, Macquarie Bank.
The origination fee is paid to MPF over the
life of each loan and is calculated based on
each loan’s interest income, cost of funding,
establishment fee and servicing cost.
Macquarie Bank is responsible for the
underwriting and funding of the loan
portfolio. Any loan losses incurred by
Macquarie Bank in relation to premium
funding originated through MPF are
deducted from the origination fees paid
to MPF.
MPF manages broker and borrower
relationships and, as a result of the recent
integration activity, is responsible for all
aspects of servicing the loans. MPF is also
responsible for paying commissions to
the brokers that originate the sale of its
premium funding products, and also pays
an override commission to certain broker
network groups such as Steadfast.
Selling to the Steadfast Network
MPF is an important Strategic Partner
for Steadfast. The Steadfast Network
contributes to approximately 50% of
MPF volume and 95% of Steadfast Network
Brokers support MPF. Steadfast Group
receives a 0.5% M&A fee on MPF eligible
products sold by Steadfast Network Brokers.
Key statistics
NUMBER OF BORROWERS:
~66,000 in Australia and New Zealand
NUMBER OF POLICIES FUNDED:
~217,000 per annum
NUMBER OF TRANSACTIONS:
>1.1 million per annum
LOANS ORIGINATED THROUGH MPF
ONLINE FACILITIES:
>80%
Product development
MPF continues to invest in product
development, which in 2014 included
launching its Domestic Funding product
and introducing the capability for
commercial borrowers to accept funding
contracts online.
The Domestic Funding product allows
intermediaries to offer monthly payment
options to their client base for personal
lines insurance.
The online contract acceptance feature
allows intermediaries to manage the loan
origination and client acceptance online
– no paper or signatures required. While
suited to intermediaries with an insurance
scheme focus, it also appeals to clients
who find online transactions a flexible and
convenient alternative to paper contracts.
Gross Written Premiums funded in FY14
$1.5 billion
Steadfast Group Annual Report 2014 | 15
Steadfast Underwriting Agencies
A key growth area due to cross selling,
cost synergy and acquisition opportunities.
Underwriting agencies
act on behalf of general
insurers to design, develop
and provide specialised
insurance products and
services for specific
market segments.
In consultation with
the underwriters, they
determine the risk price
and risk coverage
and manage the
underwriting process.
In certain cases, the
agencies will also
manage claims and the
claims process, but they
do not bear the underlying
insurance risk for the
insurance policies that
they offer.
Most of their products
are sold through
insurance brokers.
Background
Steadfast entered the underwriting agency
market in 2005 with the establishment
of Miramar, an underwriting joint venture
in which Steadfast held a 50% equity
interest. Today, Steadfast owns 100% of
Miramar, Hostsure and Winsure, and has
equity interests in another six – Sterling,
NM Insurance (Nautilus Marine), MECON,
Sports Underwriting, Protecsure and
Procover. Collectively, they are referred
to as Steadfast Underwriting Agencies.
2014 acquisitions
Acquisitions at listing included the 50%
remaining interest in Miramar, Hostsure
and a minority interest in Sterling.
During the remainder of the 2014 financial
year Steadfast acquired majority interests in
three underwriting agencies – Protecsure
in December 2013, NM Insurance in April
2014 and MECON Winsure in May 2014.
Winsure and Procover, which were part
of Miramar, have subsequently become
separate agencies to focus on their niche
product offerings.
Diverse mix of businesses
Each Steadfast underwriting agency
focuses on a different specific market
segment, as outlined on the next page.
Steadfast will continue to look for
additional agencies that provide different
and complementary products to provide
the Network with a comprehensive suite
of specialised insurance products.
Steadfast has also established Steadfast
Placement Solutions (SPS) which exclusively
works with Steadfast Network Brokers
on hard-to-place risks.
Steadfast Underwriting Agencies currently
generate over $200 million of GWP.
Key growth area
Developing and acquiring niche underwriting
agencies and driving down costs has been
one of Steadfast Group’s key strategic
initiatives for 2014 and beyond.
Over the past two years, the annual GWP
placed by Steadfast Underwriting Agencies
on a pro-forma basis has almost doubled
(i.e. from $120 million in FY12 to over
$200 million).
Leveraging the Steadfast
distribution network
Steadfast Underwriting Agencies plan to
leverage the distribution power of the
Steadfast Network, the largest general
insurance broker network in Australia and
the third largest in New Zealand.
Steadfast Underwriting Agencies account
for less than 5% of insurance premiums
placed through the Steadfast Network and
around 20% of insurance premiums placed
by underwriting agencies through the
Network. This presents the business unit
with cross selling opportunities.
At the same time, our underwriting
agencies are not exclusive to the Steadfast
Network and due to their niche and
specialisation, depend on other networks
and non-aligned brokers. Likewise, our
brokers deal with agencies that are part
of other networks in order to provide the
best product and service to their clients.
Driving down costs
Our commitment to deliver cost synergies
from the underwriting agency acquisition
is under way with several of the agencies
operating from the same underwriting
system, producing common uniform data
to the Group. Further commitments to cost
savings on the administration side of the
agency business are planned including
a unified back office service to agencies.
Annual Gross Written Premiums
$200 million+
16 | Steadfast Group Annual Report 2014
Below are the nine Steadfast Underwriting Agencies ranked by annual gross premiums and
including a brief description of the insurance market segments in which they specialise.
Strong focus on
SME insurance programs
Hard-to-place and complex risks
including environmental liability
Marine and motorcycle
Building and
construction industry
Sports and leisure
related businesses
Specialised equipment, tradesmen &
small business and marine transit
Community care, entertainment
& hospitality, and security
Professionals including engineers,
architects and doctors
Hospitality, leisure and
entertainment sector
+
Hard-to-place risks, exclusive to
Steadfast Network Brokers.
Steadfast Group Annual Report 2014 | 17
Board of Directors
Frank O’Halloran AM
Robert Kelly
David Liddy
Anne O’Driscoll
NON-EXECUTIVE AND
INDEPENDENT CHAIRMAN
Frank has over 35 years’
experience at QBE Insurance
Group where he was CEO
from 1998 until 2012. He
also worked with Coopers &
Lybrand for 13 years where
he started his career as
a Chartered Accountant.
Frank has held a number of
positions in the Insurance
Council of Australia,
including President in 1999-
2000, and was inducted into
the International Insurance
Hall of Fame in 2010.
MANAGING DIRECTOR & CEO
Robert co-founded Steadfast
and has over 45 years’
experience in the insurance
industry. He was named
the second Most Influential
Person in Insurance by
Insurance News in 2014.
Robert is a Qualified
Practicing Insurance Broker,
a Fellow of NIBA, a Senior
Associate Certified Insurance
Professional and holds a
Diploma in Financial Services
and in Occupational Health
and Safety, and a Graduate
Diploma in Australian Risk
Management.
NON-EXECUTIVE DIRECTOR
(INDEPENDENT)
NON-EXECUTIVE DIRECTOR
(INDEPENDENT)
David has over 43 years’
experience in banking,
including postings in London
and Hong Kong. He was
Managing Director of Bank
of Queensland from 2001
to 2011. David is currently
Chairman of Collection
House Ltd, Financial Basics
Foundation and Community
Foundation and a Director
of Emerchants Ltd. He
is a Senior Fellow of the
Financial Services Institute
of Australasia and a Fellow
of the Australian Institute of
Company Directors.
Anne has over 30 years of
business experience, having
qualified as a Chartered
Accountant in 1984. She was
CFO of Genworth Australia
from 2009 to 2012 and
spent over 13 years with
Insurance Australia Group.
Anne is on the boards of
the Commonwealth Bank
insurance subsidiaries, is
a fellow of ANZIIF, and a
graduate of the Australian
Institute of Company
Directors and Harvard’s
Advanced Management
Program.
Philip Purcell
Greg Rynenberg
Jonathan Upton
NON-EXECUTIVE DIRECTOR
(INDEPENDENT)
NON-EXECUTIVE DIRECTOR
(INDEPENDENT)
NON-EXECUTIVE DIRECTOR
(NON-INDEPENDENT)
Philip has over 40 years’
experience in the insurance
and legal industries. He
has been a partner at
Dunhill Madden Butler,
PricewaterhouseCoopers
Legal and Ebsworth &
Ebsworth and has held
two Board positions with
GE in Australia. Philip
currently is a Consultant to
the international law firm
Holman Fenwick Willan
and provides advice to
clients who are engaged in
mediation of commercial
disputes.
Greg has 38 years of
experience in the general
insurance broking industry
with 30 years spent running
his own business, East West
Group. East West Group is
a Steadfast Network Broker
but not a Steadfast Equity
Broker. Greg is a Qualified
Practicing Insurance Broker,
Fellow of NIBA and an
Associate of ANZIIF. He holds
an Advanced Diploma in
Financial Services (General
Insurance Broking). Greg was
named NIBA Queensland
Broker for 2014.
Jonathan has 41 years’
experience in insurance
broking. For the past 34
years, he has been running
his own business, Steadfast
IRS, a Steadfast Equity Broker.
Jonathan is a Qualified
Practicing Insurance Broker,
an Associate of NIBA, an
Associate Fellow of the
Australian Institute of
Management, a Member
of the Australian Institute
of Company Directors and
holds a Diploma of Financial
Services (General Insurance
Broking).
18 | Steadfast Group Annual Report 2014
Executive Management Team
Robert Kelly
Linda Ellis
Samantha Hollman
Stephen Humphrys
MANAGING DIRECTOR & CEO
Robert co-founded Steadfast
and has over 45 years’
experience in the insurance
industry. He was named
the second Most Influential
Person in Insurance by
Insurance News in 2014.
Robert is a Qualified
Practicing Insurance Broker,
a Fellow of NIBA, a Senior
Associate Certified Insurance
Professional and holds a
Diploma in Financial Services
and in Occupational Health
and Safety, and a Graduate
Diploma in Australian Risk
Management.
GROUP COMPANY SECRETARY &
GENERAL COUNSEL
EXECUTIVE GENERAL MANAGER –
STRATEGIC PROJECTS
Linda joined Steadfast in
2013. She is a lawyer with
over 15 years’ experience
at international law firms
including Mallesons Stephen
Jaques (now King & Wood
Mallesons), Atanaskovic
Hartnell and Clifford Chance.
Linda has diverse experience
in corporate and commercial
law, including mergers and
acquisitions, capital markets
and corporate governance.
She is admitted to practice
as a solicitor of the Supreme
Court of NSW.
Sam joined Steadfast in
2000 and has more than
19 years’ experience in
the insurance industry.
She has held key roles in
broker services, project
management, and marketing
and communications. Sam
works closely with the
Managing Director & CEO
and the Board, implementing
strategic initiatives for the
Group, including marketing
trips overseas to review
these projects on an
international level.
CHIEF FINANCIAL OFFICER
Stephen joined Steadfast in
2013. He has over 25 years’
experience as a Chartered
Accountant and extensive
experience in acquisitions
and integrations. As
Managing Director of
Moore Stephens Sydney
for 10 years and Chairman
of Moore Stephens Australasia
for three, Stephen took
Moore Stephens into the
top 10 accounting firms in
Australia. He is a Fellow of
the Institute of Chartered
Accountants and a registered
tax agent.
Allan Reynolds
Peter Roberts
Dana Williams
EXECUTIVE GENERAL MANAGER
Allan joined Steadfast in 2002
and oversees broker products
and services, Strategic Partner
relationships, and equity
brokers. With a background
in product development and
distribution, corporate strategy
and portfolio management,
Allan has more than 40 years
of industry experience in
general insurance. He holds a
Diploma of Business Studies
(Insurance), is a Certified
Insurance Professional and is
a Fellow and honorary
member of ANZIIF.
EXECUTIVE GENERAL MANAGER –
INTEGRATION SYNERGIES
Peter joined Steadfast in
2013 and is establishing and
developing centralised back
office services within the
Group. He is a director of
White Outsourcing and
company secretary of
Century Australia Investments,
Australian Leaders Fund,
Watermark Market Neutral
Fund and Macquarie Pacific
Funding. Peter has over
25 years’ experience in
accounting and back office
services to the financial
services sector and is a
member of the Insurance
Council of Australia.
CHIEF OPERATING OFFICER
Dana joined Steadfast in
January 2014 and was
promoted to COO in June.
Her focus is on working with
Steadfast equity brokers to
improve their operations
as well as on acquisitions.
Dana has 25 years’ business
experience, including 15
in brokerage, insurance,
reinsurance and underwriting
agencies. She has worked
at international insurance
brokerages Hub International
and Marsh. Dana holds a
Bachelor of Engineering,
an MBA and is a Chartered
Professional Accountant.
Steadfast Group Annual Report 2014 | 19
Corporate Governance Statement
The Directors and
management of Steadfast
Group Limited are committed
to achieving high corporate
governance standards
and to following the ASX
Corporate Governance
Council’s Corporate
Governance Principles
and Recommendations.
The corporate governance policies and
practices adopted by the Board are outlined
in Steadfast’s Charters and Policies found
in the Corporate Governance section in
the Investor Centre on our website at
www.steadfast.com.au
The Group’s main corporate governance
policies are summarised below under the
eight principles that the ASX Corporate
Governance Council believes underlie
good corporate governance.
Should Steadfast propose to depart
from the ASX Corporate Governance
recommendations, the Group will
appropriately disclose any departures.
Principle 1 – Lay solid foundations
for management and oversight
Role of the Board
Steadfast has established a Board charter
which sets out the responsibilities of the
Board and the responsibilities of senior
management. The responsibilities of the
Board for approval include:
• the Group’s overall strategic direction
and monitoring performance against
the strategic and business plans;
• overseeing all aspects of the Group’s
financial position and approving the
business plans and timetables, including
operating budgets;
• overseeing the risk management
framework and approving the risk
appetite within which the Board
expects management to operate;
• approving and monitoring major
projects and acquisitions;
• overseeing the Group’s capacity
to identify and respond to changes
in its economic and operating
environments; and
• overseeing the Group’s framework by
internal controls and reporting systems.
The Board delegates authority to the
Managing Director & Chief Executive
Officer for the day to day operations
of the Group, its subsidiaries and their
respective operations.
The Company Secretary is accountable
directly to the Board, through the
Chairman, on all matters relating to
the proper functioning of the Board.
Performance evaluation of senior
management
The Board charter provides that the Board
is responsible for ensuring there is an
appropriate process in place to review
the performance of senior management.
Executive management are reviewed
by the Managing Director & CEO. The
Managing Director & CEO is reviewed
by the Chairman.
The review process involves a performance
management process (PMP) with a
performance assessment rating out
of a maximum of 5.
No employee is entitled to awards under
the Short Term Incentive Plan or Long
Term Incentive Plan if their PMP rating is
less than 3 out of a maximum of 5. The
PMP involves a set of specified objectives
and criteria against which performance is
measured.
Principle 2 – Structure the Board
to add value
Composition of the Steadfast Board
The role of Chairman and the role of
the Managing Director & Chief Executive
Officer are exercised by different
individuals, being Frank O’Halloran and
Robert Kelly respectively.
The Board is comprised of a majority
of independent Directors including
the Chairman. The Board is comprised
of 7 Directors, with 5 characterised as
independent by Steadfast, being Frank
O’Halloran, David Liddy, Anne O’Driscoll,
Philip Purcell and Greg Rynenberg.
The Board takes a qualitative approach to
materiality and assesses independence on
a case by case basis, by reference to each
Director’s particular circumstances rather
than applying strict quantitative thresholds.
When reviewing the independence of
Directors, the Board decided to re-base
tenure from 2013 in view of the significant
changes in the Group’s operations
subsequent to its restructure and ASX listing.
The Board charter sets out the mix of
skills that Steadfast is looking to achieve
in its Board and provides the procedure
for Directors to seek external professional
advice at the expense of Steadfast. All
of the Directors have extensive industry
experience in a range of insurance broking,
general insurance, professional services
and financial management. The following
table provides specific information
regarding the Directors:
20 | Steadfast Group Annual Report 2014
Name
Position
Joined Board
Experience (years) /
industry
Independence
Frank O’Halloran AM Non-executive Chairman
2012
48 / insurance and accounting
Independent
of the Board
Robert Kelly
Managing Director & CEO
David Liddy
Non-executive Director
Anne O’Driscoll
Non-executive Director
Philip Purcell
Non-executive Director
Greg Rynenberg1
Non-executive Director
1996
2013
2013
2013
1998
45 / insurance
Non-independent
43 / banking
Independent
31 / accounting and insurance
Independent
40 / legal and insurance
Independent
38 / insurance
Independent
Jonathan Upton1
Non-executive Director
2005
41 / insurance
Non-independent
Further details of the Directors are disclosed on page 18 and page 25.
Note:
1. Greg Rynenberg and Jonathan Upton each own and manage a broker business in the Steadfast Network. Mr Rynenberg is deemed independent as
Steadfast does not have an equity interest in his business. Mr Upton is deemed non-independent as a majority of his business is owned by Steadfast.
Nomination Committee
The Board has established a Nomination
Committee which is currently comprised
of the full Board and, accordingly, comprises
a majority of independent Directors.
The Chairman of the Nomination
Committee is the Chairman of the
Board, Frank O’Halloran (who is an
independent Director).
As the Nomination Committee is
comprised of the full Board, the Board’s
nomination functions are included in
the Board charter and sets out its roles,
responsibilities, composition and structure.
The Board charter also sets out the Board’s
policy for the nomination and appointment
of Directors and the procedure for the
selection and appointment of new Directors.
The Nomination Committee meets
at least four times each year.
Performance evaluation of the Board
The Board charter provides that the
Board is responsible for developing
and implementing a formal process to
assess its own performance. The Board,
and each committee established by the
Board, performs an annual self-evaluation.
Each year, the Directors are requested to
provide to the Board their assessments
of the effectiveness of the Board and the
committees on which they serve.
In accordance with the processes outlined
in the Board charter, a performance
evaluation for the Board and Directors
was undertaken during the reporting
period to preserve the effective functioning
of the Board.
Principle 3 – Promote ethical and
responsible decision making
Code of Conduct
Steadfast has established a Code of
Conduct which provides an ethical and
legal framework for all Directors, officers,
employees, contractors and certain other
individuals in the conduct of Steadfast’s
business to safeguard the confidence of
Steadfast stakeholders.
Conflicts of Interest
The Board takes conflicts of interest
very seriously. At the Board level, this is
dealt with in part by minimising conflicts
of interest and having a majority of
independent directors on the Board.
Conflicts of interest are identified in a
timely manner, largely by having an open
culture and policies of disclosure including
maintaining an up to date register of
interests. Conflicts of interest are dealt with
in an appropriate framework, including
exclusion from decision making of
individuals with a conflict.
Anti-Bribery & Corruption Policy
Steadfast has also established an Anti-
Bribery & Corruption Policy which
sets out the behaviour and standards
Steadfast expects its Directors, employees,
consultants, contractors and agents to
comply with in conducting business.
The Code of Conduct and the Anti-Bribery
& Corruption Policy give employees
responsibility for reporting unethical or
suspicious behaviour.
A whistleblowing policy has also been
adopted.
Securities Trading Policy
A Securities Trading Policy has been
established to summarise the law relating
to insider trading and set out Steadfast’s
trading policy on buying and selling
securities of Steadfast including shares,
options, derivatives and other financial
products of Steadfast that are able to be
traded on a financial market.
By law, all Directors, officers, employees,
contractors, family and associates are
prohibited from trading in the Company’s
securities at any time if they are in
possession of non-public price sensitive
information regarding the Group and its
securities (‘insider information’).
In addition, the policy identifies all
Directors, officers, other key management
Steadfast Group Annual Report 2014 | 21
Corporate Governance Statement continued
personnel of Steadfast, senior members of
the financial team, and any other person
designated by the Board from time to time
as “Designated Persons”. The definition of
a Designated Person extends to include
family and associates of Designated Persons.
Subject to not being in possession of
insider information and in accordance with
the requirements of Steadfast’s Securities
Trading Policy, Designated Persons may
only deal in Steadfast’s securities during
the following trading windows:
a) the 30 day period beginning on the
business day after Steadfast’s half yearly
results are announced to the ASX;
b) the 30 day period beginning on the
business day after Steadfast’s annual
results are announced to the ASX;
c) the 30 day period beginning on the
business day after Steadfast’s annual
general meeting (AGM);
d) at any time a prospectus or similar
disclosure document has been lodged
with the Australian Securities and
Investments Commission and is open
for acceptances; and
e) at any other times as the Steadfast
Board permits.
In addition, Designated Persons are
prohibited from entering into margin
lending arrangements relating to Steadfast’s
shares; prohibited from short-term or
speculative trading in Steadfast’s shares
or in financial products associated with
Steadfast’s securities; and prohibited from
entering into transactions or arrangements
with anyone which could have the effect
of limiting their exposure to risk relating
to an element of their remuneration that:
• has not vested; or
• has vested but remains subject to a
holding lock.
Diversity Policy
Steadfast has established a Diversity Policy
which outlines Steadfast’s commitment
to diversity including in relation to gender,
Board and senior executive diversity,
work/life balance, and ability not disability.
Steadfast is committed to an inclusive
workplace that embraces and promotes
diversity as part of our corporate culture.
This involves providing supportive and
inclusive diversity-related workplace
policies, programs and practices within
the Group’s business.
A survey to monitor gender diversity in
leadership, management, the corporate
22 | Steadfast Group Annual Report 2014
office and its controlled entities is
conducted annually. The results of the
survey are as follows:
• Women on the Board
• Women on the Executive
Management Team
• Women in the corporate office
• Women in management
positions in Steadfast
controlled entities
• Women in Steadfast
controlled entities
14%
43%
48%
29%
59%
In accordance with the Diversity Policy,
the Board has approved the following
measurable objectives for achieving diversity:
• achieve or maintain appropriate ethnic
and/or cultural diversity having regard to
the general population and the industry;
• achieve or maintain appropriate age
diversity having regard to the general
population and the industry; and
• achieve or maintain appropriate female
participation at all levels of the organisation
having regard to the industry.
The Board also receives an annual report
from management on the progress against
these objectives including:
• succession plans and appointment
processes to achieve diversity;
• policies to support work/life balance;
• provision of supportive and inclusive
diversity related polices programs
and practices;
• ways to promote a culture supportive
of diversity; and
• review of appropriate procedures
for proper implementation of the
Diversity Policy.
The report for 2014 shows that Steadfast
Group has met its diversity objectives and
achieved a high level of cultural, age and
gender diversity compared to its peers
and other ASX 200 listed companies.
Principle 4 – Safeguard integrity
in financial reporting
Audit & Risk Committee
The Board has established an Audit & Risk
Committee to:
• ensure the integrity of external
financial reporting;
• safeguard the independence of the
external auditor;
• ensure that Directors are provided with
financial and non-financial information
that is of high quality and relevance;
• ensure that systems or procedures
are in place so that Steadfast complies
with relevant statutory and regulatory
requirements, including the Risk
Management Framework, Compliance
Management Framework and Internal
Audit Plan; and
• assess financial and other risks arising
from the Group’s operations and
consider the adequacy of measures
taken to moderate those risks.
The Audit & Risk Committee is currently
comprised of 6 non-executive Directors,
the majority of whom are independent
including the Chairman. The Directors
currently serving on the Audit & Risk
Committee are Anne O’Driscoll (Chair),
Frank O’Halloran, David Liddy, Philip Purcell,
Greg Rynenberg and Jonathan Upton.
A charter has been adopted for the Audit
& Risk Committee which discloses that the
committee’s responsibilities in relation to
the external audit include:
• to conduct audit tenders when considered
necessary and recommend the
appointment of an external auditor; and
• to assess the performance of the
external auditor on an annual basis and
to consider whether it is appropriate to
propose to the Board that an auditor be
removed, or that competitive tenders for
audit work be sought.
• The external auditor is in attendance
at the AGM and is available to answer
any shareholder questions about the
conduct of the audit and preparation
of the audit report.
Principle 5 – Make timely and
balanced disclosure; and Principle 6
– Respect the rights of shareholders
Disclosure & Communication Policy
Steadfast has established a Disclosure
& Communication Policy which firstly,
ensures that the Group complies with the
continuous disclosure requirements of the
ASX Listing Rules and the Corporations
Act and secondly, provides effective
communication to the market and
Steadfast shareholders.
The Disclosure & Communication Policy
outlines the processes that Steadfast
implements to ensure compliance with
our continuous disclosure obligations,
particularly at the senior executive level
through the establishment of a Disclosure
Committee which currently comprises the
Managing Director & CEO, Chief Financial
Officer and Group Company Secretary &
General Counsel.
The Group is required to immediately
disclose to the ASX any information
concerning Steadfast which is not generally
available and which, if it were made
available, a reasonable person would
expect to have a material effect on the
price or value of Steadfast’s securities.
Steadfast’s Disclosure & Communications
Policy also ensures that Shareholders
are informed of all major developments
affecting Steadfast through effective
communication materials and processes.
Shareholder communications include
half yearly and annual reports, market
announcements and media releases, all of
which are available in the Investor section
of our website in addition to background
information on the Steadfast Group.
Shareholders are encouraged to attend
general meetings for the opportunity to
meet the Board and senior management.
Principle 7 – Recognise and
manage risk
Risk Management Policy
Steadfast has established a Risk Management
Policy which sets out the Group’s approach
to the oversight and management of risks.
The Board is responsible for reviewing
and approving Steadfast’s overall
risk management strategy, including
determining the Group’s appetite for risk.
In determining the risk appetite for
Steadfast, the Board has determined that
the Group has a moderate tolerance for
risk taking. Where Steadfast enters into a
transaction or acts on a particular decision,
the risks are justified by greater rewards
and action taken to mitigate the exposure
to risk. While Steadfast is willing to take on
a moderate level of risk, Steadfast remains
risk aware. As a result, management
has incorporated risk management into
strategic planning and decision making
to understand and prioritise the
management of material business risks.
The Board has delegated to the Audit
& Risk Committee responsibility for
recommending to the Board the Group’s
risk and reward strategy framework and
the Group’s risk appetite.
The Audit & Risk Committee annually:
• reviews and makes recommendations
to the main Board on the Group’s risk
appetite, including strategic, operational,
financial, legal and regulatory, reputational
and counterparty risk;
• reviews and makes recommendations
to the main Board on the frameworks for
managing risk and compliance;
• reviews and makes recommendations
to the main Board on the limits and
conditions that apply to the taking of risk,
including the authority delegated by the
Board to the Managing Director & CEO
and Executive Management Team;
• provides recommendations to the Board
on the Group’s risk-reward strategy; and
• monitors the risk profile, performance,
and exposure against risk appetite and
the management and control of the
Group’s risks.
Steadfast management is responsible
for managing operational risk and
implementing risk mitigation measures.
Steadfast has a Chief Risk Officer whose
role is to:
• coordinate the implementation of the
risk management frameworks, risk profile
and treatment strategies;
• facilitate, challenge and drive risk
management development within
the Group;
• review the sufficiency and effectiveness
of the internal control framework;
• review systems and operations and
the adequacy of controls;
• plan and manage internal audits to
comply with the internal control
framework and operational framework
within the Group; and
• report to senior management and
the Audit & Risk Committee at regular
intervals on the risk management
process, material business risks and
internal control framework.
Management has reported to the Board
as to the effectiveness of Steadfast’s
material business risk management
processes. The Board has a process in
place to receive written assurances from
the Managing Director & CEO and Chief
Financial Officer that in their opinion the
declarations provided under section 295A
of the Corporations Act are founded on
a sound system of risk management and
internal control and that the system is
operating effectively in all material respects
in relation to financial reporting risks. The
Board receives these assurances prior to
approving annual financial statements, and
all half year and full year financial results.
Principle 8 – Remunerate fairly
and responsibly
Remuneration & Succession Planning
Committee
The Board has established a Remuneration
& Succession Planning Committee which:
• establishes, amends, reviews and
approves the compensation and benefit
plans for Steadfast’s senior management
and employees and reviews the
performance of Steadfast’s executive
officers with respect to these elements
of compensation; and
• reviews the succession planning for key
executives of Steadfast as well as the
key executives of the 20 largest Steadfast
Equity Brokers, measured by size of
brokerage income.
The Remuneration & Succession Planning
Committee is currently comprised of 6
non-executive Directors, the majority of
whom are independent including the
Chairman. The Directors currently serving
on the Remuneration & Succession
Planning Committee are David Liddy
(Chair), Frank O’Halloran, Anne O’Driscoll,
Philip Purcell, Greg Rynenberg and
Jonathan Upton.
The Remuneration & Succession Planning
Committee is responsible for reviewing and
recommending to the Board remuneration
arrangements of senior executives and
Directors, equity based incentive plans
and other employee benefit programs.
Steadfast distinguishes the remuneration of
executive Directors and senior executives
from that of non-executive Directors by
offering the Managing Director & CEO and
other senior executives a mix of fixed and
incentive based remuneration in certain
circumstances (e.g., under the Short Term
Incentive Plan and Long Term Incentive
Plan). Remuneration of non-executive
Directors is fixed.
Steadfast does not have any schemes
for retirement benefits, other than
superannuation, for non-executive
Directors.
Steadfast Group Annual Report 2014 | 23
2014 Financial Report Contents
Directors’ report
Remuneration report – audited
Lead auditor’s independence declaration
FINANCIAL STATEMENTS
Consolidated statement of comprehensive
income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
NOTES TO THE FINANCIAL STATEMENTS
Note 1. General information
Note 2. Significant accounting policies
Note 3. Critical accounting judgements,
estimates and assumptions
Note 4. Operating segments
Note 5. Earnings per share
Note 6. Dividends
Note 7. Intangible assets and goodwill
Note 8 Borrowings
Note 9. Notes to the statement of changes in
equity and reserves
Note 10. Business combinations
Note 11. Subsidiaries
Note 12. Investments in associates
Note 13. Investment in joint venture
Note 14. Financial instruments
Note 15. Contingencies
Note 16. Commitments
Note 17. Events after the reporting period
Note 18. Profit and loss information
Note 19. Share based remuneration
Note 20. Taxation
Note 21. Notes to the statement of cash flows
Note 22. Related party transactions
Note 23. Parent entity information
Note 24. Remuneration of auditors
25
34
51
52
54
56
58
59
96
97
59
59
61
62
63
64
65
67
68
70
76
78
81
82
83
84
84
86
86
89
91
92
94
95
24 | Steadfast Group Annual Report 2014
Directors’ Report
The Directors present their report together with the consolidated financial statements of Steadfast Group Limited (Steadfast or the
Company) and its subsidiaries, and the Group’s interests in associates and a joint venture (Steadfast Group or the Group) for the financial
year ended 30 June 2014 and the auditor’s report thereon.
DIRECTORS
The Directors of the Company at any time during or since the end of the financial year are as follows. Directors were in office for the
entire period unless otherwise stated.
Name
CHAIRMAN
Frank O’Halloran, AM
MANAGING DIRECTOR & CEO
Robert Kelly
OTHER DIRECTORS
David Liddy
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
Jonathan Upton
Date of appointment
21 October 2012
18 April 1996
1 January 2013
1 July 2013
1 February 2013
10 August 1998
9 May 2005
DIRECTORSHIPS OF OTHER LISTED COMPANIES
Directorships of other listed companies held by the Directors in the three years preceding the end of the financial year are as follows.
Name
Company
Period of directorship
Frank O’Halloran, AM
QBE Insurance Group Limited
From 1984 to August 2012
Robert Kelly
David Liddy
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
Jonathan Upton
SubZero Group Limited
From December 2013
None
Bank of Queensland Limited
From April 2001 to August 2011
Collection House Limited
Emerchants Limited
From March 2012
From April 2012
None
None
None
None
Particulars of the Directors’ qualifications and experience are set out under Board of Directors on page 18.
COMPANY SECRETARY
LINDA ELLIS, BEC, LLB (HONS 1)
Linda Ellis joined the Company in June 2013 as Group Company Secretary & General Counsel. Linda is a lawyer with over 15 years
experience. Further details of Linda’s experience are set out under Executive Management Team on page 19.
PETER ROBERTS, BBUS, CA
Peter Roberts was appointed Company Secretary in May 2013 and has over 25 years experience in the fields of chartered accountancy
and specialised back office services to the financial services sector. Peter is also Executive General Manager – Integration Synergies.
Further details of Peter’s experience are set out under Executive Management Team on page 19.
Steadfast Group Annual Report 2014 | 25
Directors’ Report continued
DIRECTORS’ MEETINGS
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the
Directors of the Company during the financial year were as follows.
Director
Board
Audit & Risk Committee
Nomination Committee
Remuneration &
Succession Planning
Committee
Total number of
meetings held
Frank O’Halloran, AM
Robert Kelly
David Liddy
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
Jonathan Upton
12
4
3
3
Eligible to
attend as a
member
Attended
as a
member
Eligible to
attend as a
member
Attended
as a
member
Eligible to
attend as a
member
Attended
as a
member
Eligible to
attend as a
member
Attended
as a
member
12
12
12
12
12
12
12
12
12
12
12
11
12
12
4
-
4
4
4
4
4
4
-
4
4
4
4
4
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
-
3
3
3
3
3
3
-
3
3
3
3
3
Particular details of the responsibilities and members of the Board and the various committees are set out in the Corporate Governance
Statement on pages 20 to 23.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the financial year were the provision of services to Steadfast Network Brokers, equity interests
in insurance brokers, underwriting agencies, premium funders and ancillary businesses.
26 | Steadfast Group Annual Report 2014
OPERATING AND FINANCIAL REVIEW
A. OPERATING RESULTS FOR THE YEAR
EBITA – consolidated entities
Share of EBITA from associates and joint venture
EBITA from core operations – pre-corporate expenses
Corporate expenses
EBITA from core operations – post-corporate expenses
Finance costs (net of interest received on surplus cash held)
Amortisation expense
Profit before income tax for the year from core operations before non-recurring items
Add: net non-recurring profit on changes in value of investments
Less: non-recurring expenses
Profit before income tax after non-recurring items
Income tax (expense)/benefit
Net profit/(loss) after income tax for the year
Non-controlling interests
Net profit/(loss) after income tax attributable to owners of Steadfast Group Limited
Other comprehensive income
Note
2014
$’000
2013
$’000
4
4
4
4
4
4
4
4
40,270
23,056
63,326
(8,130)
55,196
(1,130)
(10,158)
43,908
3,996
(8,562)
39,342
13,063
4,472
17,535
(5,192)
12,343
(1,205)
(756)
10,382
-
(23,782)
(13,400)
(11,900)
133
27,442
(13,267)
(2,355)
(170)
25,087
(13,437)
653
157
Total comprehensive income/(loss) after income tax attributable to owners of Steadfast Group Limited
25,740
(13,280)
The increase in comprehensive income after tax was mainly due to:
• profits generated from the date of acquisition of subsidiaries and associates upon successful listing on the Australian Securities
Exchange (ASX) in August 2013;
• small profits generated from other post listing acquisitions;
• a net profit of $3.996 million on changes in value of investments consisting of:
– a non-recurring profit of $4.611 million recognised as a result of remeasuring to fair value the equity interest in Miramar Underwriting
Agency Pty Limited (Miramar). This was required when the Group increased its shareholding in Miramar from 50% to 100% (refer to
Note 11 for further details); offset by
– net loss of $0.615 million on re-assessment of deferred consideration on acquisitions based on updated information and on disposal
to an associate of certain partially owned investments as part of the hubbing arrangements;
• offset by non-recurring expenses of $8.562 million which arose due to specific activities to facilitate the Company restructure and
listing on the ASX. The significant expenses were:
– $3.283 million (2013: $13.304 million) in relation to due diligence and restructuring on acquisition of equity interests in 64 subsidiaries
and associates, completed in August 2013 and in relation to other potential acquisitions considered for inclusion at that time; and
– a total of $5.279 million of share based payments and other employment costs recognised due to (2013: $10.478 million of share
based payments on re-weighting of shares):
» $1.635 million share based payments for the $0.15 discount to the $1.15 listing share price on 10.900 million ordinary shares
allotted to four executives (Executive Shares) at $1.00 per share;
» $4.015 million costs on interest free, unsecured and full recourse loans provided to four executives (Executive loans) for the
allotment of Executive Shares. These effective interest costs will be reversed in the five years period to August 2018 including
$0.736 million written back in the year ended 30 June 2014. The Board assessed and confirmed that these Executive loans are
recoverable; and
» $0.365 million share based payments on share options issued to a key management personnel of an acquired business; and
• higher income tax expense on the increased scale of operations.
Some of the financial data in the table above, namely the EBITA related items, are not disclosed in accordance with current Australian
Accounting Standards requirements. However, all financial data is based on the information disclosed in the audited financial statements
and notes to the financial statements of the Group and follow the recognition requirements of Australian Accounting Standards.
Steadfast Group Annual Report 2014 | 27
Directors’ Report continued
B. REVIEW OF FINANCIAL CONDITION
I. Financial position
The total assets of the Group as at 30 June 2014 were $822.712 million compared to $97.729 million as at 30 June 2013. The increase
was mainly attributable to the raising of capital on the ASX upon listing which was applied towards:
• the acquisition of 64 subsidiaries and equity interests in associates completed on 7 August 2013 that included:
– cash and cash equivalents of $81.619 million. This included cash held on trust, being cash received from insurance policyholders
which cannot be used to meet business obligations/operating expenses other than payments to insurers, underwriting agencies
and/or refunds to policyholders;
– trade and other receivables of $77.534 million;
– investments in associates of $138.153 million;
– acquired intangible assets of $65.251 million; and
– goodwill of $221.794 million; and
• approximately $25.000 million surplus cash raised on issuing new shares when the Company listed on the ASX for future acquisitions
which was subsequently utilised in funding further acquisitions.
The total liabilities of the Group as at 30 June 2014 were $297.674 million compared to $85.347 million as at 30 June 2013. The increase
was mainly attributable to:
• an increase in trade and other payables of $178.449 million following the acquisition of subsidiaries completed on 7 August 2013.
A portion of the trade and other payables represents amounts to be paid to insurance companies or underwriting agencies out of cash
received on trust from policyholders; offset by
• the repayment of bank loans of $36.623 million which was funded by the cash inflows from the shares issued to the retail and
institutional investors when the Company listed on the ASX;
• the $13.944 million drawdown of debt facilities by entities in the Group, including $12.524 million by the Company post listing to fund
the acquisition of further subsidiaries;
The increase in the Group’s equity from $12.382 million at 30 June 2013 to $525.038 million at 30 June 2014 largely reflects:
• $486.867 million of share capital issued when listing on the ASX, net of costs (net of income tax) of $12.077 million;
• $1.003 million of new shares issued from the Dividend Reinvestment Plan;
• $28.095 million of comprehensive income;
• $7.596 million of acquired non-controlling interests; and
• $3.187 million share based payments reserve recognised for ordinary shares issued to executives at a discount in accordance with
the Executive Shares, share options granted and employee share plan arrangements.
The Group has a revolving line of credit facility that will allow the Group to borrow up to $85.000 million. As at balance date, the Group
had the ability to borrow an additional $63.956 million from this facility.
II. Cash from operations
The net operating cash flows, before broking trust account movements, of $16.398 million are higher than those for the prior period,
reflecting the increased scale of operations of the Group. This amount represents the derivation of the profits for the period, apart from
the delayed receipt of dividends from associates which are contracted to be received half yearly typically no later than 45 days post
December half year end and June year end.
The net cash inflow from operating activities for the year ended 30 June 2014 was $5.463 million compared to $2.946 million for the
year ended 30 June 2013. The net inflows of $5.463 million include a net outflow of $10.935 million from broking accounts and net
inflows from the balance of operating activities of $16.398 million as detailed above. At the time of acquisition in August 2013, the
liabilities of the brokers included cash held on trust which was subsequently remitted to insurers in accordance with normal trading
terms. The seasonality of insurance premium receipts following June renewals meant that the amounts held on trust at acquisition in
August 2013 were higher than the $76.679 million balance as at 30 June 2014.
28 | Steadfast Group Annual Report 2014
III. Other significant cash movements
The Company raised $333.703 million in cash on issuing new shares upon listing the Company on the ASX in August 2013. The cash
raised was used to fund the following:
• transaction costs (gross) of $15.896 million in relation to the Company’s listing on the ASX;
• repayment of borrowings of $36.623 million which had been used to invest in subsidiaries, associates and business assets completed in
the year to 30 June 2013;
• settlement of $186.577 million (net of cash acquired) for the acquisitions of 64 subsidiaries and equity interests in associates completed
on 7 August 2013 and the subsequent acquisitions of other subsidiaries; and
• cash held for corporate needs.
IV. Capital management
In August 2013, the Company listed on the ASX. As at 30 June 2014, the Company had a total of 501.638 million ordinary shares on issue
resulting from:
• 65.686 million ordinary shares for re-weighting shares;
• 10.900 million ordinary shares for Executive Shares;
• 134.210 million ordinary shares for consideration shares in respect of acquisitions of subsidiaries and associates;
• 290.175 million ordinary shares for individual and institutional investors; and
• 0.667 million ordinary shares in April 2014 under the terms of its Dividend Reinvestment Plan.
In addition, there were 1,395 preferred capital shares issued resulting from the conversion of the ordinary share capital on issue
as at 30 June 2013. These preferred capital shares were cancelled in November 2013 following member approval.
STRATEGY AND PROSPECTS
Steadfast’s business strategy is to grow shareholder value through maintaining and growing its market position in the provision of
insurance and related services, with a core focus on general insurance intermediation. The table below details the key strategies of the
Group together with accomplishments to date and the prospects for future years. Also relevant to an assessment of the Company’s
prospects is an assessment of risks facing the Company and the industry generally and the risk management strategies in place to
address these risks.
Strategy
FY14 achievements
Prospects and strategic initiatives
Continuing to enhance
the services we provide
to all Network brokers
• Town Hall meetings
• Increase SVU penetration by adding more insurers
• National marketing campaigns
• Steadfast Virtual Underwriter (SVU),
an eCommerce platform
to the platform
• Continued promotion of SVU to Network brokers
• Implementation of Steadfast Direct
• Net addition of five new brokers to Network
• Continue to expand and refine broker services
Building and
developing our
strategic relationships
with strategic partners
and other parties
• Further products added to the strategic
product list
• New strategic partners added
• More insurers being added to the SVU platform
• Expand the services offered to the Network offshore
eg provision of services to the Allied network of
31 brokers in New Zealand
• Continued promotion of products which generate
enhanced marketing and administration (M&A) fees
• Continue to increase strategic product offerings
and develop new partnerships including in relation
to life products
• Initiatives to increase the rate of M&A fees and the
range of products to which they apply
• Joint ventures with strategic partners
Delivering synergies
from the acquisitions
made to date and for
the Steadfast Network
• Finalised initial hubs in each state
• Deliver synergies for each hub
• Developed proof of concept for Project 360
which will automate certain key back office
transactions
• Cost saving initiatives including back office services
• Expand hubs by adding more brokers
• Pilot and roll out Project 360
Steadfast Group Annual Report 2014 | 29
Directors’ Report continued
Strategy
FY14 achievements
Prospects and strategic initiatives
Generating growth
from acquisitions.
We are the natural
acquirer of Steadfast
Network Brokers, non-
aligned brokers and
underwriting agencies
Cross-selling existing
and new products
within the Steadfast
Network
Building on our existing
underwriting agencies
with particular focus
on specialist products
and driving down
costs of servicing and
administration
RISKS
• Acquired four companies with a total gross written
premium (GWP) of $96.597 million including three
underwriting agencies and one “bolt-on” trade
credit broker business
• Continue to apply strict cultural and financial
acquisition guidelines including that acquisitions be
earnings accretive in first 12 months using 80% equity
and 20% debt funding assumption
• Developed a pipeline of potential acquisitions
with a number under active consideration
• Continue to actively convert acquisition opportunities
including Network brokers and underwriting agencies
• Continued offshore expansion eg New Zealand
• Acquire niche underwriting agencies in certain
market segments
• Presentations of niche broker offerings at Town
• Further initiatives to cross sell underwriting agency
Hall meetings and annual Convention
services into the Steadfast Network
• Underwriting agencies – on an annualised basis,
have grown from 4% of total GWP sold through
the Steadfast Network to over 5%
• Macquarie Pacific Funding – 50% of business sold
through Steadfast Network
• Work with strategic partners to develop new products
• Continue to increase Macquarie Pacific Funding
penetration in Steadfast Network
• Steadfast expects pricing of insurance premiums to
remain under pressure
• Umbrella group Steadfast Underwriting
• Acquisition and successful integration of additional
Agencies formed
• Expanded through acquisition and restructure
to nine agencies and over 80% increase in
annualised GWP since IPO
underwriting agencies, including by joint venture with
strategic partners
• Continued product development
• Roll out of cost saving initiatives
• Develop niche underwriting agencies to complement
and expand range of products offered to brokers
In seeking to achieve our strategic goals, Steadfast is subject to a number of risks which may materially adversely affect operating and financial
performance. Steadfast adopts a rigorous risk management process which is an integral part of the Company’s corporate governance structure
but some risks are outside the Group’s control. Some of the key risks (in no particular order and non-exhaustively) include:
Risk
Description
Risk management strategies
Acquiring and holding
equity in operating
businesses
• Possible deficiencies in management by Steadfast
• Stringent due diligence
• Integration may be disruptive and costly
• Selecting acquisitions which are expected to integrate
• Potential unknown liabilities
• Reliant on partners performing satisfactorily
well and have good cultural fit
• Tight acquisition and shareholders agreements
• Insufficient funding to capitalise on opportunities
• Thorough integration management
• Close oversight and audit of ongoing operations, profit
margins, including continual reporting and reviews
• Ongoing monitoring of available capital and resources
• Ongoing monitoring of profit and margins
People risk
• Loss of key executives
• Succession planning
• Loss of key individuals in operating businesses
• Appropriate restraints to protect ongoing business
• Material business interruption possible
• Market competitive remuneration
• Potential loss of key customer relationships
• Career development opportunities
Investment
impairment risk
• Investments which are subject to a permanent
decrease in value indicated by a decrease in
profits below level which supports the value of the
asset are required to be written down
• Investment write down or impairment results in an
expense and reduced profit for the Group
• Close monitoring of investments
• Steadfast works with management of businesses in
which Steadfast is invested to optimise results
30 | Steadfast Group Annual Report 2014
Risk
Description
Risk management strategies
Reduction in rates
for marketing and
administration (M&A)
fees, commission rates
or advice fees
paid to brokers
• Strategic partners may seek to reduce rates of
M&A fees paid to Steadfast
• Insurers may seek to reduce rates of commission
• Diversity of earnings via a number of revenue sources
eg M&A fees, dividends from operating businesses
derived from commission and other revenue
Fraud or
embezzlement
of Group or
client funds
Loss of Steadfast
Network Brokers
• Particularly in operating businesses where
Steadfast does not control the day-to-day
operations
• Network brokers can leave the Network at any
time potentially resulting in a reduction in M&A
fees for Steadfast
• Continue to engage strategic partners and offer
a powerful value proposition to them to justify the
M&A fees and commission rates
• Operating businesses seek to increase fees to mitigate
any loss of commission arising from reduced premiums
• Appropriate policies and procedures implemented
and regularly reviewed
• Fidelity insurance held
• Implement Project 360
• Provision of excellent services and support to
Steadfast Network Brokers
• Continue to share M&A fees in the form of
Network Broker rebates with members
• Considerable ongoing engagement with
Network brokers
Reliance on
strategic partners
• Potential reduction in M&A fees (and commission
due to lower gross written premium (GWP)) if
strategic partners are lost and not replaced within
appropriate timeframe
• Considerable effort expended in maintaining and
strengthening relationships with strategic partners
of which most are longstanding
• Continually adding new strategic partners
Increased competition
or market change
• Increased competition from new entrants and
existing market participants including increased
commoditisation of business insurance products
• Diversity in investments (ie underwriting agencies,
premium funding and ancillary services as well as
insurance broking)
• Changes in the remuneration model for, or the
use of, insurance brokers or underwriting agencies
• Increased competition or change in market
• Diversity in earnings (eg M&A fees as well as dividends
from investments dependent upon the commissions
and fees earned by the underlying businesses)
structure for premium funding
• Geographical spread of the businesses of subsidiaries
and associates
Information and
technology (IT)
systems risk
• Risk of data loss/fraud, system breakdown
• Back-up, restoration and recovery procedures
• Potential material adverse effect on ability
• IT security guidelines implemented
to deliver services and profitability
• IT risk assessment program and other procedures
Reduction in GWP in
the Australian general
insurance market
• Group has a number of revenue sources linked
to size and growth of GWP in Australian market
• GWP is influenced by factors including pricing
decisions by insurers and level of demand for
general insurance products
• Any softening in local and global economic
conditions would be expected to lead to a
softening in the level of GWP
in place
• Initiatives to increase the size of the network,
make further investments in insurance brokers and
underwriting agencies and other strategic initiatives
(including increasing fee income) have the capacity
to partially offset pressure on profitability of any
softening in GWP
• SME sector, which accounts for 85%+ of Steadfast’s
total GWP sold through the network, has historically
experienced higher growth in GWP with less volatility
compared to the large corporate sector
Steadfast Group Annual Report 2014 | 31
Directors’ Report continued
Risk
Description
Risk management strategies
Regulatory risk
• Risk that Steadfast’s subsidiaries and associates
may individually not comply with their Australian
Financial Services Licence requirements or
financial services regulation more generally and
their licence may be in the worst case suspended
or withdrawn
• Initial due diligence on acquisition includes reviews
of historical and current compliance. Steadfast also
provides a range of services to advise and assist the
entities within the Group with regulatory change and
compliance
• Continue to monitor the entities within the Group
• Risk that regulatory changes may impact the
from an operations viewpoint
Group’s or entities within the Group’s business
model either through costly and burdensome
regulations or the structure and management of
the operations
• An internal audit programme, which includes a review
of compliance
• Along with other broker representative organisations,
the Group monitors and consults on regulatory
changes with the regulators to ensure changes are
introduced in the most efficient way for the industry
and to minimise unintended consequences
DIVIDENDS
Details of dividends paid or declared by the Company are set out in Note 6.
During the financial year ended 30 June 2014, a fully franked interim dividend of 1.8 cents was declared and paid.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
During the financial year ended 30 June 2014:
• the Company listed on the ASX in August 2013; and
• the Group completed the acquisition of:
– 64 subsidiaries and equity interests in associates completed on 7 August 2013; and
– four businesses and five hubbing arrangements (ie the transfer of equity interests and the operations of some broking businesses into
business hubs headed by another entity within the Group) in the major capital cities (refer to Note 10 for further details).
Apart from the above, there were no other significant changes in the state of affairs of the Group.
EVENTS SUBSEQUENT TO REPORTING DATE
Subsequent to 30 June 2014, the following events occurred:
• the Board declared a final dividend of 2.7 cents per share, 100% franked;
• the Group acquired equity interests in the following businesses:
– Allied Insurance Group, the second largest broker network in New Zealand;
– Ausure Group, an authorised representative network of insurance professionals;
– Steadfast Re, a reinsurance broking business; and
• the Group extended its revolving line of credit facility from $85.000 million to $130.000 million.
• on 27 August 2014, the Group announced the potential acquisition of Calliden Group Ltd (Calliden) and a binding sale of the general
insurance business of Calliden Insurance Ltd on completion for a net cost of approximately $55.000 million. The acquisition is subject
to approval of a Scheme of Arrangement by Calliden’s shareholders, the Court and regulators. Subject to these approvals, the Group
expects completion to occur in December 2014.
Further details are set out in Note 17.
32 | Steadfast Group Annual Report 2014
ENVIRONMENTAL REGULATION
The Group’s operations are not subject to any particular and significant environmental regulation under a law of the Commonwealth or
of a State or Territory legislation.
INDEMNIFICATION AND INSURANCE OF OFFICERS
The Company has entered into deeds of access, insurance and indemnity, with each Director and officer which contain rights of access
to certain books and records of the Company for a period of seven years after the Director and officer ceases to hold office. This seven
year period can be extended where certain proceedings or investigations commence before the seven year period expires.
In respect of the indemnity of the Directors and officers, the Company is required, pursuant to the constitution, to indemnify all Directors
and officers, past and present, against all liabilities allowed under law. Under the deed of access, insurance and indemnity, the Company
indemnifies parties against all liabilities to another person that may arise from their position as a Director or an officer of the Company
or its subsidiaries to the extent permitted by law. The deed stipulates that the Company will meet the full amount of any such liabilities,
including reasonable legal costs and expenses.
In respect of insurance being obtained on behalf of the Directors and officers, the Company may arrange and maintain Directors’ and
officers’ insurance for its Directors and officers to the extent permitted by law. Under the deed of access, insurance and indemnity, the
Company must obtain such insurance during each Director’s and officer’s period of office and for a period of seven years after a Director
or an officer ceases to hold office. This seven year period can be extended where certain proceedings or investigations commence
before the seven year period expires.
Disclosure of the insurance premiums and the nature of liabilities covered by such insurance are prohibited by the relevant contracts of
insurance.
NON-AUDIT SERVICES
During the financial year KPMG, the Group’s auditor, has performed certain other services in addition to their statutory duties.
The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those
non-audit services during the financial year by the auditor is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the
Audit & Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and
• the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or
decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms, for audit and non-audit services provided during
the financial year are provided in Note 24 to the financial statements.
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The Lead auditor’s independence declaration is set out on page 51 and forms part of the Directors’ report for the year ended 30 June 2014.
Steadfast Group Annual Report 2014 | 33
Directors’ Report continued
Remuneration Report — Audited
A. INTRODUCTION
The remuneration report outlines Steadfast’s remuneration philosophy, framework and outcomes for the financial year ended 30 June
2014 (FY14) for all key management personnel, including all Non-executive Directors and the Executive Team made up of the Managing
Director & Chief Executive Officer (MD & CEO) and his direct reports. Key management personnel (KMP) are those persons having
authority and responsibility for planning, directing and controlling the activities of the entity.
The current KMP of the Group for the entire financial year unless otherwise stated, are as follows.
TABLE 1 – NON-EXECUTIVE DIRECTORS
Name
Frank O’Halloran, AM
David Liddy
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
Jonathan Upton
Date of appointment
21 October 2012
1 January 2013
1 July 2013
1 February 2013
10 August 1998
9 May 2005
David Liddy is Chairman of the Remuneration & Succession Planning Committee.
Anne O’Driscoll is Chairman of the Audit & Risk Committee.
When reviewing the independence of Directors, the Board decided to rebase tenure for Greg Rynenberg to 2013 in view of the significant
changes in the Group’s operations following its restructure and listing. Other than Jonathan Upton, all Non-executive Directors listed in
Table 1 above are independent directors.
TABLE 2 – EXECUTIVE TEAM
Name
Role
Robert Kelly
Managing Director & CEO
Stephen Humphrys
Chief Financial Officer
Linda Ellis
Group Company Secretary & General Counsel
Samantha Hollman
Executive General Manager – Strategic Projects
Allan Reynolds
Peter Roberts
Dana Williams
Executive General Manager
Executive General Manager – Integration Synergies
Chief Operating Officer
Date of appointment
18 April 1996
2 January 2013
3 June 2013
4 January 2000
5 December 2002
1 August 2013
28 January 2014*
* Dana Williams was appointed as Executive General Manager – Acquisitions on that date and Chief Operating Officer from 1 July 2014.
Remuneration is a highly technical subject in the current regulatory and reporting environment. In writing this report, our aim is to
present information in a way which is easy to be understood by the readers as well as to meet our legal obligations. In sections B to D,
we concentrate on providing the structure and value of remuneration of the Executive Team. Other relevant and technical information is
provided in section G, Additional information, for those readers who want to understand the executive remuneration in more detail.
The structure of the remuneration report is as follows.
Section
Details
B
C
D
E
F
G
Remuneration governance
Executive remuneration structure
Executive remuneration details
Non-executive Directors remuneration
Non-executive Directors remuneration details
Additional information
34 | Steadfast Group Annual Report 2014
B. REMUNERATION GOVERNANCE
This report meets the remuneration reporting requirements of the Corporations Act 2001 and Accounting Standard AASB 124 Related
Party Disclosures. The term remuneration used in this report has the same meaning as compensation as prescribed in AASB 124.
I. REMUNERATION & SUCCESSION PLANNING COMMITTEE
The Remuneration & Succession Planning Committee of the Board is responsible for reviewing and determining remuneration
arrangements for the Non-executive Directors and the Executive Team made up of the Managing Director & CEO and his direct reports
listed in the KMP table above.
II. REMUNERATION PHILOSOPHY
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for
the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for
shareholders and conforms to market practice for delivery of reward.
The Board embodies the following principles in its remuneration framework:
• a performance based reward structure;
• competitive and reasonable rewards to attract and retain high calibre executives;
• strong links between executive rewards and shareholder value;
• a significant proportion of executive remuneration is at risk, that is linked to achievement of pre-determined performance targets; and
• transparent reward structures.
III. INVOLVEMENT OF EXTERNAL REMUNERATION ADVISORS
The Remuneration & Succession Planning Committee directly engages and considers market remuneration data from remuneration
consultants as required. The data provided by remuneration consultants is used as a guide for remuneration decisions in respect of the
Executive Team. For the financial year ended 30 June 2014, remuneration consultant (Egan Associates Pty Ltd) was engaged to provide
information on fixed remuneration packages and incentives to the Remuneration & Succession Planning Committee.
No remuneration recommendations as defined by the Corporations Act 2001 were provided by Egan Associates Pty Ltd.
C. EXECUTIVE REMUNERATION STRUCTURE
The listing of the Company necessitated the introduction of a remuneration structure which aligns with the current ASX Corporate
Governance Practice and commenced operation from 1 July 2013 (FY14).
The Group aims to reward executives with a level of remuneration commensurate with their responsibilities and position within the
Group and their ability to influence shareholder value creation.
The remuneration framework links rewards with the strategic goals and performance of the Group and provides a market competitive
mix of both fixed and variable rewards. The Group has adopted an approach to position fixed remuneration at the market median with
total remuneration at the upper quartile (depending on the time the executive has been in their position).
The key elements of the executive remuneration are:
• fixed remuneration consists of cash salary, superannuation and non-monetary benefits;
• an annual incentive referred to as short term incentive plan (STI); and
• a long term incentive referred to as long term incentive plan (LTI).
The Board believes that the fundamental driver for executive remuneration should be long term financial performance that generates
value for the Steadfast’s shareholders. The at risk (or variable) remuneration components of the Executive Team are set by referencing
to regulation and current market practices. To ensure the Executive Team remain focused on long term outcomes without encouraging
excessive risk taking, the following conditions apply:
• financial performance hurdle – earnings per share (EPS) growth has been chosen to meet and align with shareholders’ objectives;
• operating performance hurdle – each member of the Executive Team has set annual performance objectives and must achieve at least
60% of those objectives to be eligible to any STI and LTI;
• 40% of the STI is granted as deferred equity awards and is intended to be satisfied by the issue or transfer of ordinary shares in the
capital of the Company after the end of the three year period from the grant date;
• vesting of the LTI occurs after five years from the grant date and is satisfied by the issue or transfer of ordinary shares in the capital of
the Company; and
• the Board retains the discretion to adjust any unpaid or unvested performance related remuneration (such as STI – Cash, STI – deferred
equity awards and LTI) downwards if it is appropriate to do so. This discretion, while not specifically mentioned, applies to all the
following comments on applicable dates for vesting of share based payment awards.
Steadfast Group Annual Report 2014 | 35
Directors’ Report continued
The targeted remuneration mix for:
• the MD & CEO is 36% fixed and 64% variable (at risk);
• other members of the Executive Team are in the range of 44% to 54% fixed and 46% to 56% variable (at risk).
Table 4 provides a breakdown of the three elements of the total remuneration for the Executive Team, measured at maximum level and
FY14 actual.
Table 3 provides a snapshot of the key elements comprising executive remuneration as well as the purpose, performance hurdles (where
applicable) and the FY14 outcome. Table 3A provides executive remuneration changes from FY15 onwards.
TABLE 3 – SNAPSHOT OF EXECUTIVE REMUNERATION STRUCTURE AND FY14 OUTCOME
Operation and outcome for FY14
Opportunity
Performance metrics
Form of
remuneration
Purpose and link
to strategy
a. Fixed remuneration
Cash salary and
superannuation
Helps to attract
and retain high
calibre executives
Reflects individual
role, experience
and performance
Non-monetary
benefits
Helps to attract
and retain high
calibre executives
Reviewed annually by the Remuneration &
Succession Planning Committee and fixed
for 12 months, with any changes effecting
from 1 July each financial year. Decision
influenced by:
• role, experience and performance;
• reference to comparative remuneration in
the market; and
• total organisational salary budgets.
FY14 outcome
The Board approved an overall 4% increase in
fixed remuneration.
Executive Team is provided with car parking,
income protection and life insurance
FY14 outcome
Executive loans were provided to four
executives as interest free loans for them to
acquire Steadfast’s share at a discount of 15
cents. Refer to section G.III. for further details.
b. Variable and at risk remuneration
Short term
incentive (STI)
Recognises the
contributions and
achievements
of the Executive
Team
STI Plan consisting of cash and deferred
equity award commenced in FY14.
EPS growth measured against the FY13
prospectus forecast pro forma EPS of
5.4 cents.
For FY14, EPS excludes non-recurring items
relating to the listing of the Company in
August 2013.
FY14 outcome
STI was awarded in the range of 12% to 67%
of fixed pay approved by Board. The forms
and time of STI awards are:
• 60% cash award will be paid in September
2014; and
• 40% deferred equity award to be granted
in August 2014.
Refer to Table 6 for details of STI awarded.
36 | Steadfast Group Annual Report 2014
Target at 40%
to 60% of total
remuneration
Personal objectives set
each year
Car parking cost
per annum:
$5,000
Income
protection and
life insurance:
$10,000
Both STI and LTI
are discretionary,
performance
based, at
risk reward
arrangements
The combined
total of STI and
LTI is targeted at
40% to 60% of
total remuneration
Personal objectives set
each year
STI – Cash award
(60% of total STI)
• achievement of personal
objectives
• earnings per share (EPS)
minimum growth hurdle
of 5% to be met
STI – Deferred equity
award (40% of total STI)*
• continuous employment
for the three year vesting
period; and
• EPS minimum growth of
5% to be met in base year
Form of
remuneration
Purpose and link
to strategy
Operation and outcome for FY14
Opportunity
Performance metrics
Long term
incentive (LTI)
Provides
opportunity for
the Executive
Team to acquire
equity in the
Company as
a reward for
increasing
EPS over the
longer term
LTI Plan consisting of deferred equity award
commenced in FY14.
EPS growth is measured against the FY13
prospectus forecast pro forma EPS of
5.4 cents.
For FY14, EPS excludes non-recurring items
relating to the listing of the Company in
August 2013.
FY14 outcome
LTI based on the percentage of fixed
remuneration of the Executive Team was
awarded and approved by the Board. The
actual number of deferred equity awards will
be granted in August 2014.
Refer to Table 8 for details of LTI awarded.
LTI – Deferred equity
award (100%)*
• continuous employment
and performance rating
to be met for the five year
vesting period; and
• the Group’s average
diluted EPS increasing
by a compound 10% per
annum over the five year
vesting period
* The FY14 STI and LTI, which were granted in the form of deferred equity award for the MD & CEO, are subject to shareholders’ approval
in the FY14 Annual General Meeting.
As part of the ongoing review of remuneration, the STI and LTI plans were refined to ensure incentives aligned with our remuneration
philosophy and market competitiveness. The Board approved the remuneration changes as set out below in Table 3A for the financial
year ending 30 June 2015 (FY15) to be more in line with the market and still motivate our executives to outperform.
TABLE 3A – EXECUTIVE REMUNERATION CHANGES FROM FY15 ONWARDS
Remuneration changes
FY14 terms
FY 15 new terms
STI – performance
hurdles
Maximum STI could be awarded if the EPS
growth is 20% or more
Maximum STI could be awarded if the EPS growth is
15% or more
STI – vesting condition
for the deferred equity
award (DEA)
All of the DEA vesting after a three years tenure
hurdle from the grant date
One third of DEA vesting after one year tenure from
the grant date;
One third of DEA vesting after second year tenure from
the grant date; and
One third of DEA vesting after third year tenure from
the grant date
LTI – vesting period and
tenure hurdles only*
All of the DEA vesting after a five year tenure
hurdle from the grant date and meeting financial
and non-financial performance measures over
the five year vesting period
All of the DEA vesting after a three year tenure hurdle
from the grant date and meeting financial and non-
financial performance measures over the three year
vesting period
* The LTI plan’s financial performance hurdle, namely the Group’s diluted EPS growth compound rate of 10% has not changed.
TABLE 4 – MAXIMUM POTENTIAL AND FY14 ACTUAL REMUNERATION MIX
Fixed remuneration
At risk
STI – cash
STI – deferred(a)
LTI(a)
Total at risk
Maximum potential
MD & CEO
%
Other
executives
%
FY14 Actual
MD & CEO
%
FY14 Actual
Other
executives(b)
%
36%
44%-54%
36%
44%-54%
27%
18%
19%
64%
100%
15%-20%
10%-13%
19%-25%
46%-56%
100%
25%
-%
-%
25%
61%
14%-19%
-%
-%
14%-19%
63%-70%
Steadfast Group Annual Report 2014 | 37
Directors’ Report continued
(a) During the year, there was no STI – deferred or LTI vested, they were granted and pending for vesting conditions to be met in
the future.
(b) Executive data for FY14 actual excludes:
– Peter Roberts and Dana Williams who commenced on 1 August 2013 and 28 January 2014, respectively; and
– Cameron McCullagh who agreed to waive his right to STI for FY14 upon resignation.
I. REMUNERATION OUTCOME FOR FY14
The following sections provided further details on how the at risk components (being STI and LTI) of the Executive Team’s remuneration
were determined and how that linked to the performance of the Group and the shareholders’ value.
a. Short term incentives
The STI Plan consisting of cash and deferred equity awards commenced in FY14 and is designed to recognise the contributions and
achievements of the Executive Team when outstanding financial results and individual performance objectives are achieved.
Details of the STI Plan are explained in Table 5 below.
Table 5 – Key details of the STI Plan
Potential maximum STI
MD & CEO can earn up to 125% of his annual fixed remuneration.
The other executives within the Executive Team can earn 50% to 75% of their annual fixed remuneration.
Performance measures
Non-financial measures – personal, cultural and behavioural objectives as agreed with the Board. At least
60% of the objectives must be achieved by the members of the Executive Team to be eligible to any STI.
Financial measures – no STI will be payable unless at least 5% pro forma EPS growth is achieved against
the FY13 prospectus forecast pro forma EPS of 5.4 cents. Maximum STI could be awarded if the EPS
growth is 20% or more.
Testing and approval of
performance measures
The MD & CEO’s STI is recommended by the Remuneration & Succession Planning Committee based on
the financial and his non-financial performance outcome and approved by the Board.
The STI of other members of the Executive Team is recommended by the MD & CEO to Remuneration
& Succession Planning Committee based on their financial and non-financial performance outcome and
recommended by Remuneration & Succession Planning Committee for approval by the Board.
Rationale for choosing
performance measures
The non-financial measures are chosen to ensure each executive of the Executive Team performs specific
tasks that support the success of Steadfast.
The financial measure of EPS growth is chosen to ensure long term shareholders value is achieved.
Forms of STI reward
elements
60% is paid as cash, normally in September following the end of financial year.
40% is granted as deferred equity award (DEA) of conditional rights to Steadfast ordinary shares and
vesting after a three year tenure hurdle from the grant date.
Key terms of DEA
DEA of conditional rights to Steadfast ordinary shares are normally granted in August following the
financial year.
These rights are granted to the participants at no cost, to the dollar value of their DEA awarded.
The number of conditional rights granted is calculated based on the weighted average share price over
the five trading days before the grant date.
The participants in the STI Plan become eligible to receive one Steadfast ordinary share per conditional
right subject to their continuing employment with the Group for three year period from the grant date.
These rights will accrue notional dividends which will be paid upon vesting.
Forfeiture conditions
The Board retains the discretion to adjust any unpaid or unvested performance related remuneration
(such as STI – Cash, STI – deferred portion) downwards if it is appropriate to do so.
The conditional rights will be forfeited if the executive resigns before the vesting date.
When an executive ceases employment in special circumstances, such as redundancy, any unvested
rights may be paid in cash and/or Steadfast ordinary shares subject to Board discretion.
The Executive Team met their non-financial performance objectives and the Group achieved an underlying EPS growth of 19.1% for FY14.
38 | Steadfast Group Annual Report 2014
The underlying EPS for FY14 was measured on a pro forma basis to reflect:
• a full 12 months operation of the Group; and
• the normalised results by excluding non-recurring income and expenses that resulted from the ASX listing and restructure.
Details of maximum potential STI and actual STI awarded to each members of the Executive Team are provided in Table 6 below.
Table 6 – Actual STI outcomes for FY14
Maximum
STI
potential
Actual STI outcome
STI – cash outcome
(60% of outcome)
STI – deferred equity
award outcome
(40% of outcome)
(% of
fixed pay)
(% of
maximum)(a)
(% of
fixed pay)(b)
(% of
fixed pay)
($)
(% of
fixed pay)
125%
75%
50%
50%
50%
50%
50%
94%
95%
96%
96%
96%
96%
96%
118%
71%
48%
48%
48%
48%
48%
71%
43%
29%
29%
29%
29%
29%
552,240
181,892
79,894
72,742
98,158
80,927
42,253
47%
28%
19%
19%
19%
19%
19%
($)(c)
368,160
121,261
53,263
48,495
65,439
53,951
28,169
Robert Kelly
Stephen Humphrys
Linda Ellis
Samantha Hollman
Allan Reynolds
Peter Roberts
Dana Williams
Executive who ceased as key management personnel during the year:
Cameron McCullagh(d)
75%
-%
-%
-%
-
-%
-
Table note
(a) The proportion of STI forfeited is derived by subtracting the actual percentage of maximum awarded from the maximum STI potential
and was 8% on average for the year ended 30 June 2014.
(b) The dollar value of STI awarded to Peter Roberts and Dana Williams is pro-rated for the period from their employment date to 30 June 2014.
(c) The number of conditional rights to be granted to the Executive Team will be determined by dollar value of the deferred equity award
outcome divided by the weighted average share price over the five trading days prior to the grant date in September 2014.
(d) During the year, Cameron McCullagh resigned and agreed to waive his right to STI for FY14. Mr McCullagh has resigned from
Steadfast with effect from 30 June 2014.
b. Long term incentives
The LTI Plan in the form of deferred equity awards commenced in FY14 and is designed to provide the Executive Team with the
opportunity to acquire equity in Steadfast as a reward for increasing earnings per share over the longer term.
Details of the LTI Plan are explained in Table 7 below.
Table 7 – Key details of the LTI Plan
Potential maximum LTI
MD & CEO can earn up to 50% of his annual fixed remuneration.
The other executives within the Executive Team can earn 35% to 50% of their annual fixed remuneration.
Approval of the LTI
No later than the end of August 2014, the Remuneration & Succession Planning Committee based on the
financial and non-financial performance outcome and recommended by Remuneration & Succession
Planning Committee for approval by the Board.
Forms of LTI reward
Deferred equity award (DEA) of conditional rights to Steadfast ordinary shares and vesting after a five year
tenure hurdle and meeting future performance hurdles from the grant date.
Future performance hurdles Non-financial measures – personal, cultural and behavioural objectives as agreed with the Board. At least
60% of the objectives must be achieved by the members of the Executive Team to be eligible to any LTI.
Rationale for choosing
performance measures
Financial measures – no LTI will be vested unless the Group’s average diluted EPS growth by at least a
compound 10% per annum over the five year vesting period is achieved.
The financial measure of EPS growth is chosen to ensure long term shareholders value is achieved.
The non-financial measures are chosen to ensure each executive of the Executive Team performs specific
tasks that support the success of Steadfast.
Steadfast Group Annual Report 2014 | 39
Directors’ Report continued
Key terms of DEA
DEA of conditional rights to Steadfast ordinary shares are normally granted in September following the
end of the financial year.
These rights are granted to the participants at no cost, to the dollar value of a percentage to their fixed
remuneration in accordance with the LTI Plan.
The number of conditional rights granted is calculated based on the weighted average share price over
the five trading days before the grant date.
The participants in the LTI Plan become eligible to receive one Steadfast ordinary share per conditional
right subject to their continuing employment with the Group for five year period from the grant date and
meeting performance hurdles, subject to Board discretion.
These rights will accrue notional dividends which will be paid upon vesting.
Forfeiture conditions
The Board retains the discretion to adjust any unpaid or unvested LTI downwards if it is appropriate to do so.
The conditional rights will be forfeited if the executive resigns before the vesting date.
When an executive ceases employment in special circumstances, such as redundancy, any unvested
rights may be paid in cash and/or Steadfast shares subject to Board discretion.
Table 8 – LTI awarded for the year ended 30 June 2014
Robert Kelly
Stephen Humphrys
Linda Ellis
Samantha Hollman
Allan Reynolds
Peter Roberts(b)
Dana Williams(b)
Executive who ceased as key management personnel during the year:
Cameron McCullagh(c)
Fixed pay
($)
Maximum LTI
(% of fixed pay)
LTI – deferred
equity awards
($)(a)
780,000
425,000
277,410
252,578
340,827
308,000
350,000
572,000
50%
50%
35%
35%
50%
35%
35%
50%
390,000
212,500
97,094
88,402
170,414
96,577
51,349
-
Table note
(a) The number of conditional rights to be granted to the Executive Team will be determined by the dollar value of the deferred equity
award outcome divided by the weighted average share price over the five trading days prior to the grant date in September 2014.
(b) The dollar value of LTI awarded to Peter Roberts and Dana Williams is pro-rated for the period from their employment date to 30 June 2014.
(c) During the year, Cameron McCullagh resigned and agreed to waive his right to LTI for FY14.
II. SHAREHOLDING REQUIREMENTS
There is no specific policy requiring the Executive Team to hold any Steadfast’s ordinary shares. However, the Executive Team acquire
Steadfast’s ordinary shares, through the following means:
• re-weighting shares allocated to the shareholders who held ordinary shares before the Company’s change of constitution as approved
by its Extraordinary General Meeting in June 2013;
• for one executive, acquisition of consideration shares pursuant to the initial public retail and institutional offer as part consideration for
an acquisition made by the Group;
• subscription for ordinary shares as part of the Company’s initial public retail and institutional offer;
• for four executives, acquisition of Executive Shares through the Executive Loan Arrangement (for further details, refer to section G.III.
Executive loans and Executive Shares and Table 15 – Movement of Executive loans);
• participation in the Company’s Dividend Reinvestment Plan;
• conditional rights conversion into ordinary shares at the end of August 2014 (refer to Table 14 – Conditional rights allocated to the
Executive Team for further details); and
• potential vesting of deferred equity awards granted through the STI and LTI Plans in the financial years from 1 July 2014 onwards
(refer to Table 3 – Key elements of executive remuneration for further details of the STI and LTI Plans).
Table 16 provides movements of Steadfast’s ordinary shares held by the Executive Team during the current financial year.
40 | Steadfast Group Annual Report 2014
III. HISTORICAL ANALYSIS OF FINANCIAL PERFORMANCE
The following table outlines the returns of the Group delivered to its shareholders. The Company has gone through significant
development and transformation to facilitate its successful listing on the ASX in August 2013. As a result, historical analysis of financial
performance for the financial years prior to 2014 does not provide meaningful comparative information to the users of this report.
Table 9 – Key financial performance indicator
2010
2011
2012
2013
2014
Net profit/(loss) attributable to owners of the Company ($’000)
3,581
2,810
6,174
(13,437)
25,087
Dividends paid in 2010 and 2012 were $950.183 per share and $1,351.250 per share, respectively. The dividends per share calculated
were based on 1,425 and 1,395 shares on issue as at 30 June 2010 and 2012, respectively. Upon ASX listing, 500.971 million shares were
issued. The historical comparative basic and diluted earnings per share, dividend paid per share cannot be used as an indication of future
earnings and dividend per share.
The pro forma EPS used for determining STI and LTI for FY14 excludes non-recurring income and expenses relating to the ASX listing
and restructure of the Company in August 2013. This is consistent with the FY13 pro forma EPS used as the base for determining FY14’s
STI and LTI awards. The reconciliation on the reported EPS to the adjusted EPS used for STI and LTI is as follows:
2014
Reported net profit attributable to owners of the Company
Less: non-recurring income, pre tax
Add: non-recurring expenses, pre tax
Add: July 2013 trading results, pre tax
Less: tax effect on the above
Adjusted pro forma net profit attributable to owners of the Company*
Adjusted pro forma EPS (cents per share)
2013
$’000
25,087
(3,996)
8,562
4,507
(1,738)
32,422
6.47 cents
Prospectus forecast pro forma net profit/(loss) attributable to owners of the Company ($’000)
27,200
Prospectus forecast pro forma EPS (cents per share)
Growth from FY13 (%)
5.43 cents
19.1%
* The adjusted pro forma net profit/(loss) attributable to owners of the Company reflected the full 12 months’ operations of the Group.
EPS used in the future periods for determining STI and LTI awards will exclude any reversal of the effective interest expense of the
Executive loans.
D. EXECUTIVE REMUNERATION DETAILS
The table below provides remuneration details for the Executive Team (including the MD & CEO and his direct reports).
For an executive who was newly appointed to the Executive Team during either financial year, the remuneration information provided in
the table below relates to the period from the date of their appointment as key management personnel (KMP) to the year ended 30 June.
Refer to Table 2 – Executive Team for KMP who were appointed during the financial year ended 30 June 2014.
The table below also contains remuneration information of KMP who resigned during the financial year from 1 July 2013 to the date of
their resignation.
Steadfast Group Annual Report 2014 | 41
Directors’ Report continued
TABLE 10 – TOTAL EXECUTIVE REMUNERATION OF THE GROUP
Short term employment benefits
Post
employ-
ment
benefits
Other
long term
employ-
ment
benefits
Sub total
(excluding
share based
payments)
Table note
(1)
(2)
(3)
(4)
(5)
Cash salary
and leave
accruals
$
Short term
incentive
$
Non-
monetary
benefits
(refer
table 10a)
$
Superann-
uation
$
Long
service
leave
accruals
$
Share based
payments
(6)
Total
$
$
$
Current Executive Team (including Managing Director):
Robert Kelly, Managing Director & CEO
2014
2013
809,011
552,240
2,613,658
869,013
-
16,727
Stephen Humphrys, Chief Financial Officer, KMP since 2 January 2013
2014
2013
409,474
181,892
534,844
190,375
-
6,962
17,775
21,784
15,888
8,235
Linda Ellis, Group Company Secretary & General Counsel, KMP since 3 June 2013
2014
2013
254,433
79,894
12,247
19,635
-
550
Samantha Hollman, Executive General Manager – Strategic Projects
2014
2013
242,713
219,514
72,742
-
12,306
9,867
Allan Reynolds, Executive General Manager
2014
2013
323,763
330,807
98,158
478,007
-
9,362
17,775
1,373
17,498
19,252
17,621
21,784
14,976
4,007,660
126,304
4,133,964
52,093
959,617
-
959,617
8,207
1,150,305
128,001
1,278,306
3,875
209,447
6,519
215,966
5,216
369,565
61,667
431,232
358
21,916
2,933
24,849
15,724
360,983
59,351
420,334
2,470
251,103
3,259
254,362
6,426
923,975
110,508
1,034,483
13,029
374,982
6,519
381,501
Peter Roberts, Executive General Manager – Integration Synergies, KMP since 1 August 2013
2014
303,836
80,927
9,034
23,237
17,464
434,498
20,680
455,178
Dana Williams, Chief Operating Officer, KMP from 28 January 2014 to 30 June 2014 and former Chief Financial Officer, KMP from
13 August 2012 to 9 November 2012(b)
2014
2013
154,579
42,253
70,930
-
5,761
1,238
8,887
5,070
-
77,238
2,688
214,168
5,638
219,806
-
-
-
77,238
2,418,066
571,688
Executive who ceased as key management personnel during the year:
Cameron McCullagh, former Chief Operating Officer(c), KMP ceased on 30 June 2014
2014
2013
337,921
529,773
-
-
2,084,816
8,995
17,775
18,243
(22,446)
2,418,066
14,677
571,688
I. Footnote to Table 10
(a) During the year ended 30 June 2013, Jenny Varley (former Company Secretary) ceased as KMP, her total remuneration was $582,576.
(b) Dana Williams, former Chief Financial Officer left Steadfast on 9 November 2012. Ms Williams was appointed as Executive General
Manager – Acquisitions and re-joined Steadfast on 28 January 2014. From 1 July 2014, Ms Williams was appointed as Chief Operating
Officer to replace Mr McCullagh. In Table 10 above, her remuneration for both financial years ended 30 June 2013 and 2014 were
only part year.
(c) During the year, Cameron McCullagh, former Chief Operating Officer, resigned (with effect from 30 June 2014) and agreed to waive
his right to STI and LTI for FY14.
His remuneration was for the full financial year and he was not entitled to any termination benefits in accordance with the employment
agreement. The Board confirmed that there would be no changes in terms and conditions of the interest free Executive Loan agreement.
42 | Steadfast Group Annual Report 2014
II. Table note
(1) Cash salary includes amounts paid in cash plus any salary sacrifice items. Annual leave accruals are determined as per Accounting
Standard, AASB 119 Employee Benefits.
(2) 2014 short term incentive (STI) represents 40% of the total STI awarded and approved by the Board and will be paid in cash in
September 2014. No STI payment was awarded to any KMP for the prior financial year ended 30 June 2013.
(3) This amount includes car parking and the relevant fringe benefit tax, cost of income protection and life insurance and other benefits
provided by the Group.
In the year ended 30 June 2014, the non-monetary benefits also included the effective interest on the interest free Executive loans
provided by Steadfast to four members of the Executive Team to acquire Executive Shares at $1.00 with a discount of $0.15 per share.
Details of the interest free Executive loans and Executive Shares are provided in section G.III. in this report. Executive loans’ effective
interest and the discount on Executive Shares are provided in Table 10a for the four executives.
Table 10a - Breakdown of non-monetary benefits
Deemed
interest
expense
during the
year
$
Deemed
interest
expense for
future years
$
Total
effective
interest on
Executive
loans
$
Discount on
Executive
Shares
$
Other non-
monetary
benefits
$
Total non-
monetary
benefits
$
Robert Kelly
Stephen Humphrys
Allan Reynolds
337,623
1,504,006
1,841,629
67,495
60,797
300,831
270,696
368,326
331,493
750,000
150,000
135,000
22,029
2,613,658
16,518
11,514
534,844
478,007
Executive ceased as key management personnel during the year:
Cameron McCullagh
270,128
1,203,175
1,473,303
600,000
11,513
2,084,816
(4) Superannuation contribution is paid in line with legislative requirements.
(5) Long service leave accruals are determined as per AASB 119 Employee Benefits.
(6) For FY14, the significant increase in the share based payments is mainly due to:
– the operation of new STI and LTI Plans, an allocated portion of the unvested STI and LTI is required to be recognised for the
services provided by the members of the Executive Team for the year; and
– a full 12 months effect on the allocated portion of the unvested conditional rights granted in 2013 as described below.
During the prior financial year, four members of the Executive Team were allocated conditional rights which will convert to the Company’s
ordinary shares free of costs at the end of August 2014 subject to continuing employment at that time and their performance meeting the
minimum criteria as agreed. Details of the conditional rights are provided in Table 14 Movement of conditional rights in Section G.II. in this
report. An allocated portion of the unvested conditional rights is included in Table 10 above. The value of the conditional rights is calculated
based on the expected share price, less expected dividends without discounting (due to immaterial time value over the vesting period).
E. NON-EXECUTIVE DIRECTORS REMUNERATION
I. STRUCTURE AND POLICY
Non-executive Directors fees are determined within an aggregate Directors’ fee pool limit which is reviewed periodically and
recommended for approval by shareholders.
The fee structure is designed to provide the Group with the ability to attract and retain directors of the highest calibre.
The aggregate amount of remuneration sought to be approved by shareholders and the manner in which it is paid to Directors is
reviewed annually. The Board considers advice from external consultants as well as fees paid to Non-executive Directors of comparable
companies when undertaking the review process.
For the financial year ended 30 June 2014, a remuneration consultant (Egan Associates Pty Ltd) was engaged to provide information on
Non-executive Director remuneration to the Remuneration & Succession Planning Committee. No recommendation as defined by the
Corporations Act 2001 was provided by Egan Associates Pty Ltd.
Steadfast Group Annual Report 2014 | 43
Directors’ Report continued
II. BOARD AND COMMITTEE FEES
Independent and non independent Non-executive Director remuneration consists of three elements:
• Board fees;
• committee fees; and
• superannuation which is paid in line with legislative requirements.
Directors do not receive retirement benefits beyond superannuation contributions and do not participate in any incentive programs.
Directors may also be reimbursed for travel and other expenses incurred in attending to the Company’s affairs.
In the Extraordinary General Meeting held on 14 June 2013, the shareholders approved the maximum aggregate directors’ fee pool of
$900,000 per annum for each financial year effective from 1 July 2013.
Table 11 – Steadfast’s Board or committee annual fee (inclusive of superannuation)
Board/committee
Board
Audit & Risk Committee
Role
Chairman
Non-executive Directors
Chairman
Non-executive Directors
Remuneration & Succession Planning Committee
Chairman
Non-executive Directors
2014
$
200,000
100,000
7,500
Nil
7,500
Nil
No additional remuneration will be paid for the Chairman and members of the Nomination Committee nor any directorships of subsidiaries.
F. NON-EXECUTIVE DIRECTOR REMUNERATION DETAILS
The table below provides remuneration details of the Non-executive Directors on the Company’s Board.
For those Directors appointed during the financial year, the remuneration information provided in Table 12 relates to the period from the
date of their appointment to the year ended 30 June.
TABLE 12 – TOTAL DIRECTOR REMUNERATION OF THE GROUP
Current Directors
Frank O’Halloran, AM, appointed 21 October 2012
2014
2013
David Liddy, appointed 1 January 2013
2014
2013
Anne O’Driscoll, appointed 1 July 2013
2014
Philip Purcell, appointed 1 February 2013
2014
2013
Greg Rynenberg
2014
2013
Jonathan Upton*
2014
2013
44 | Steadfast Group Annual Report 2014
Short term employment benefits
Board fees
$
Other boards and
committee fees
$
Post
employment
benefits
Superannuation
$
Total
$
183,066
127,780
91,533
49,313
91,533
91,533
38,226
91,533
80,982
91,533
107,986
-
-
6,865
-
6,865
-
-
-
22,652
-
12,000
16,934
11,468
200,000
139,248
9,102
4,438
107,500
53,751
9,102
107,500
8,467
3,440
8,467
6,227
8,467
4,817
100,000
41,666
100,000
109,861
100,000
124,803
During the prior financial year ended 30 June 2013, the following Non-executive Directors ceased as KMP and the total remuneration of
each former director for that year was as follows:
• Christopher Baker, retired 6 October 2012 – $44,679;
• Cameron Bott, retired 6 October 2012 – $44,363;
• Michael Olofinsky, retired 6 October 2012 – $30,625;
• Richard Post, retired 6 October 2012 – $13,125;
• Shayne Smith, appointed 19 October 2011 and retired 6 October 2012 – $13,125;
• Graham Stevens, retired 20 August 2012 – $13,125;
• Gregory Stewart, retired 6 October 2012 – $77,438;
• Joseph Vella, retired 6 October 2012 – $13,125; and
• John Wolozny, retired 6 October 2012 – $36,094.
* Jonathan Upton is the Managing director and minority shareholder (via his related parties) of Steadfast IRS Pty Limited, a subsidiary
of the Group, his remuneration and other related party transactions with Steadfast IRS are provided in section G.V.b. in this report.
SHAREHOLDINGS REQUIREMENTS
Non-executive Directors are not required under the Company’s constitution to hold any Steadfast’s ordinary shares.
However, contained in each Director’s letter of appointment from the Company is a term and condition that the Non-executive Directors
must hold an amount equal to 50% of their annual remuneration in the Company’s ordinary shares by the end of their second year in office.
Table 16 provided movements of Steadfast’s ordinary shares held by the Non-executive Directors during the current financial year.
G. ADDITIONAL INFORMATION
I. EXECUTIVE SERVICE AGREEMENTS
Steadfast has ongoing executive service agreements (Executive Agreements) with each of the member of the Executive Team. These
Executive Agreements may be terminated by written notice from either party or by the Company making a payment in lieu of notice.
The Executive Agreements outline the components of remuneration paid to executives and require the remuneration of executives to be
reviewed annually. The Executive Agreements do not require the Company to increase base salary, pay a short term incentive or offer a
long term incentive in any given year.
The table below contains the key terms of the Executive Team’s Executive Agreements. The Executive Agreements do not provide for any
termination payments, other than payment in lieu of notice by the Company.
Table 13 – Key terms of executive service agreements
Name
Robert Kelly*
Stephen Humphrys
Linda Ellis
Samantha Hollman
Allan Reynolds
Peter Roberts
Dana Williams
Notice period from
the Company
Notice period from
the employee
Termination provisions in relation
to payment in lieu of notice
12 months
6 months
6 months
6 months
6 months
6 months
6 months
12 months
6 months
6 months
6 months
6 months
6 months
6 months
12 months fixed remuneration
6 months fixed remuneration
6 months fixed remuneration
6 months fixed remuneration
6 months fixed remuneration
6 months fixed remuneration
6 months fixed remuneration
* Mr Kelly has agreed not to terminate his employment contract before 21 October 2015.
In accordance with the Corporations Act 2001 requirements, termination provisions could include the payment of unused annual leave
and long service leave accruals where applicable.
a. Retrenchment entitlements
In the event of redundancy, Mr Kelly will be paid an amount equal to 12 months fixed remuneration.
b. Termination under other situations
In the event of gross negligence or gross misconduct, the Company may terminate the Executive Agreement immediately by notice in
writing and without payment in lieu of notice.
Steadfast Group Annual Report 2014 | 45
Directors’ Report continued
II. CONDITIONAL RIGHTS
During the prior financial year ended 30 June 2013, the Remuneration & Succession Planning Committee approved the allocation of
conditional rights to selected employees who contributed to the listing of the Company. The conditional rights allocated were free of
cost and will convert to one ordinary share per right at the end of August 2014 subject to the continuing employment at that time and
the performance of the employee meeting the minimum criteria as agreed by management (or the Remuneration & Succession Planning
Committee for the Executive Team). The table below provides the number of conditional rights held by four members of the Executive
Team at 1 July 2013 and 30 June 2014. There was no movement in conditional rights held by these four members of the Executive Team
during the financial year. Other members of the Executive Team were not granted conditional rights during the prior financial year. No
conditional rights were granted to the two new members of the Executive Team appointed during the current financial year.
Table 14 – Movement in conditional rights
Stephen Humphrys
Linda Ellis
Samantha Hollman
Allan Reynolds
At 1 Jul 2013
Number
At 30 Jun 2014
Number
100,000
50,000
50,000
100,000
300,000
100,000
50,000
50,000
100,000
300,000
The fair value of the conditional rights as recognised at 1 July 2013 and 30 June 2014 is $0.98.
Conditional rights awarded as deferred equity award from the STI Plan and LTI Plan as approved by the Board will be granted to the
Executive Team in September 2014. Further information of these rights will be provided in the 2015 Remuneration Report.
III. EXECUTIVE LOANS AND EXECUTIVE SHARES
In the Extraordinary General Meeting held on 14 June 2013, the shareholders approved the making by the Company of full recourse
loans to four members of the Executive Team. They have entered into loan agreements with the Company (Executive Loan Agreements).
Under the Executive Loan Agreements, the Company provided loans to these executives with the loan proceeds to be used only to fund
the acquisition of ordinary shares in the capital of the Company at a fixed price of $1.00 per share pursuant to the Company’s initial retail
and institutional offer (Executive Shares).
The loans were intended:
• to recognise and reward the services and contributions provided by these executives to the development and ongoing transformation
of the Company;
• to assist in the retention of these executives; and
• as part of the Company’s remuneration strategy to align the interests of the Executive Team to shareholder value.
The key terms of the Executive Loan Agreements are:
• interest free, unsecured and full recourse loans;
• all dividends in respect of Executive Shares must be applied towards repayment of the loans; and
• to be repaid in full five years after the date on which the loans are provided.
The Executive Shares are subject to escrow restrictions. Apart from the exceptions as noted below, the key restrictions are:
• the executives agreed not to, for the period from the receipt by the executives of the Executive Shares until the end of the term of
the loan (or upon the loan being accelerated due to an event of default), dispose of the Executive Shares or grant security over the
Executive Shares (subject to certain exceptions as set out below) without the prior consent of the Board; and
• the executives agreed to the application of a holding lock in respect of the Executive Shares.
During the financial year ended 30 June 2014, the Executive loans were recognised at fair value. The Executive loans were interest free
loans, and the Executive Shares were issued at a fixed price of $1.00 (being the minimum price to meet the condition of listing). The fixed
price was different to the final share price of the Company when listed on the ASX in August 2014. A share based payments expense
on Executive Shares of $4.015 million was recorded to recognise the difference between the cost and the fair value of the Executive
loans. Subject to the Company’s share price being in excess of $1.00, the share based payments expense of $4.015 million is likely to be
reversed over the period to the final repayment date.
46 | Steadfast Group Annual Report 2014
The exceptions to the above escrow restrictions on Executive Shares are:
• if the disposal does not cause the executive to breach the trading restrictions and the Executive Shares are disposed of during the
permitted trading window under the Executive Loan Agreements. Under the trading restrictions, each executive may only sell their
Executive Shares as below:
Period
Cumulative amount of Executive Shares that may be sold
12 months ended 31 August 2015
12 months ended 31 August 2016
12 months ended 31 August 2017
12 months ended 31 August 2018
12 months ended 31 August 2019
≤ 20% of total Executive Shares
≤ 40% of total Executive Shares
≤ 60% of total Executive Shares
≤ 80% of total Executive Shares
≤ 100% of total Executive Shares
• the proceeds from the disposal of the Executive Shares are to be applied towards the repayment of the Executive loans first in the
same proportion as the percentage of total Executive Shares disposed. The executives are entitled to retain any profits or gains from
the disposal of the Executive Shares.
• the disposal is made in the event of the death of the executive, the executive being declared bankrupt or the executive ceasing to be
employed by the Company as a consequence of termination of an employment contract, ill health or retirement.
Table 15 below provides the amount of the Executive loans provided to the four executives and the fair value at the drawn down date
and movement during the financial year. Table 16 provides details of Executive Shares acquired on 2 August 2014 (date of listing of the
Company).
Table 15 – Movement of Executive loans
Robert Kelly
Stephen Humphrys
Allan Reynolds
Face value
of Executive
loans
$
Fair value of
Executive
loans drawn
down during
the year
$
Deemed
interest
expense
during
the year
$
Repayment
during
the year
$
Fair value of
Executive
loans at the
end of
the year
$
5,000,000
3,158,371
337,623
(90,000)
3,405,994
1,000,000
900,000
631,674
568,507
67,495
60,797
(18,000)
681,169
(16,200)
613,104
Executive ceased as key management personnel during the year:
Cameron McCullagh*
4,000,000
2,526,697
270,128
(72,000)
2,724,825
10,900,000
6,885,249
736,043
(196,200)
7,425,092
* It is agreed that the Executive Loan Agreement with Cameron McCullagh continues despite his resignation from the Company.
IV. SHAREHOLDINGS OF NON-EXECUTIVE DIRECTORS AND THE EXECUTIVE TEAM
Following the successful listing of the Company in August 2013, Non-executive Directors and the Executive Team acquired Steadfast’s
ordinary shares through the initial public retail offer, re-weighting shares, consideration shares and Executive Shares. Some of them
participate in the Dividend Reinvestment Plan and were allotted with Steadfast’s ordinary shares instead of receiving cash for the FY14
interim dividend during the financial year.
These shares are held directly by Non-executive Directors and the Executive Team or indirectly by Non-executive Directors’ and the
Executive Teams’ related parties, inclusive of entities controlled, jointly controlled or significantly influenced by them.
Steadfast Group Annual Report 2014 | 47
Directors’ Report continued
Table 16 below summarises the various types of ordinary shares allotted on 2 August 2013, other changes (including new shares allotted
through the Dividend Reinvestment Plan) during the year and the balance at the end of the financial year both in total and held nominally
by related parties of Non-executive Directors and the Executive Team.
Table 16 – Movement of shareholding interests of Non-executive Directors in accordance with Section 205G of the Corporations
Act 2001 and the Executive Team
Shares allotted on 2 August 2013
Initial public
retail offer
Number
Re-
weighting
shares
Number
Consider-
ation shares
Number
Executive
Shares
Number
Other
changes
during
the year
Number
Total shares
held at
30 June
2014
Number
Shares held
nominally
at 30 June
2014(a)
Number
Frank O’Halloran, AM(b)
1,147,825
-
Robert Kelly(b)
David Liddy(b)
Anne O’Driscoll(b)
Philip Purcell(b)
Greg Rynenberg(b)
Jonathan Upton(b)
Stephen Humphrys
Linda Ellis
Samantha Hollman
Allan Reynolds
Peter Roberts(c)
Dana Williams(c)
17,390
478,709
1,700,000
208
2,196,307
2,196,307
98,260
150,461
217,391
108,695
86,956
-
-
-
247,824
286,414
-
60,869
173,913
13,043
6,519
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,147,825
5,000,000
627
5,249,348
-
-
24,000
3,688
217,391
108,695
110,956
537,926
-
-
-
-
-
-
-
-
-
1,650,000
-
-
1,000,000
-
1,000,000
-
-
900,000
-
-
4,000,000
728
-
156
-
-
-
61,597
173,913
913,199
1,656,519
1,656,519
-
-
4,039,129
39,129
626,086
249,348
217,391
108,695
110,956
537,926
-
-
173,913
13,199
Executive ceased as key management personnel during the year:
Cameron McCullagh
39,129
-
Footnote to Table 16
(a) Shares held nominally are included in the column headed total shares held at 30 June 2014. Total shares are held directly by the KMP
and indirectly by the KMP’s related parties, inclusive of domestic partner, dependants and entities controlled, jointly controlled or
significantly influenced by the KMP.
(b) For the Directors, total shares held directly and nominally also represented the relevant interest in the listed securities, being ordinary
shares of the Company, as notified by the Directors to the ASX in accordance with section 205G(1) of the Corporations Act 2001, at
the date of this Directors’ report.
(c) Dana Williams and Peter Roberts became KMP from 28 January 2014 and 1 August 2013, respectively.
V. KMP OTHER RELATED PARTY TRANSACTIONS
a. Consultancy fee to a Non-executive Director
Anne O’Driscoll, a Director of the Company from 1 July 2013, was engaged as a consultant to the Company to assist in managing the
restructure and listing between December 2012 and June 2013. Her total remuneration for these services up to 30 June 2013 amounted
to $224,965.
b. Related party transactions with Jonathan Upton, a Non-executive Director
i. Sale of equity interests of Steadfast IRS and Sydney hub
On 7 August 2013, the Group acquired an initial 49% interest in Steadfast IRS Pty Limited (formerly known as IRS Steadfast Pty Limited and
Indemnity Corporation Pty Limited). In February 2014, the Group sold the insurance brokerages of Wagland Salter & Associates and DMA
(both 100% subsidiaries) to Steadfast IRS. Consideration for these sales included the issue of shares in the capital of Steadfast IRS and further
shares in the capital of Steadfast IRS were purchased from interests associated with Jonathan Upton. In aggregate, the Group acquired
an additional 31% interest in Steadfast IRS to hold an 80% equity interest in the combined operations. The transaction was a related party
transaction due to the interest in Steadfast IRS held by interests associated with Jonathan Upton, a Non-executive Director of the Company.
The Company relied upon the arm’s length exception in the Corporations Act 2001 to the requirement for shareholder approval.
48 | Steadfast Group Annual Report 2014
ii. Jonathan Upton’s related party transactions with Steadfast IRS
Jonathan Upton is the Managing Director of Steadfast IRS. During the year, Mr Upton received remuneration from managing the entity.
Details of remuneration received or receivable are:
Short term employment benefits
Cash salary and leave accruals
Non-monetary benefits
Post-employment benefits
Superannuation
Other long term employment benefits
Long service leave accruals
Total
2014
$
275,710
11,061
23,248
8,625
318,644
Mr Upton has equity interests in Steadfast IRS directly and indirectly through his 100% ownership interest in Upton Grange Australia Pty
Limited and Upton Grange Pty Limited. An interim dividend of $21,506 was received during the year.
The following transactions occurred between Steadfast Group and Steadfast IRS:
Sale of goods and services
Marketing and administration fees received from Steadfast IRS based on the same terms as other Steadfast Network Brokers
8,849
Payment for goods and services
Estimated Steadfast Network Broker rebate expense to Steadfast IRS
34,989
The following balances are outstanding at the reporting date between Steadfast Group and Steadfast IRS and these intercompany
balances are fully eliminated on consolidation:
Current receivable and payable
Trade receivables from Steadfast IRS
Trade payables to Steadfast IRS
Non-current loan receivable
Loan receivable from Steadfast IRS
138,421
2,151
10,985,171
The loan receivable from Steadfast IRS as at 30 June 2014 included an accrued interest of $269,721.
The key terms of the loan are:
• variable interest rate based on the Macquarie Bank Reference Rate plus a margin of 1.7% per annum;
• the borrower may elect to fix the interest rate for periods between one and five years at the rate nominated by the lender from time
to time;
• the loan’s maturity date is 15 years after the day of first drawdown; and
• monthly repayment will commence 12 months after the first drawdown or at a later date as may be agreed in writing by the lender
at its absolute discretion.
Steadfast Group Annual Report 2014 | 49
Directors’ Report continued
c. Sale of equity interests by KMP to the Group
White Outsourcing
On 7 August 2013, the Group acquired an initial 87.5% interest in White Outsourcing from its shareholders. Some of the equity interests
were held by entities associated with Stephen Humphrys and Peter Roberts, being key management personnel of the Group (refer details
of the Executive Team as listed in Table 2 of this report).
In February 2014, the Group acquired the remaining 12.5% of White Outsourcing from interests associated with Cameron McCullagh,
being key management personnel of the Group. The acquisition was on financial terms calculated on the same basis that other vendors
of White Outsourcing received on the initial acquisition. The Company relied upon the arm’s length exception in the Corporations
Act 2001.
d. Other KMP related party transactions
The following transactions occurred with Directors’ (Robert Kelly and Greg Rynenberg) related parties which are part of Steadfast
Network but are not part of Steadfast Group:
i. Sale of goods and services
Marketing and administration fees received from Directors’ and former Directors’ related entities
on normal commercial terms
ii. Payment for goods and services
Estimated Steadfast Network Broker rebate expense to Directors’ and former Directors’ related entities
on the basis as determined by the Board
The following balances are outstanding at the reporting date in relation to transactions with related parties:
iii. Current receivable from related parties
Trade receivables from Directors’ related entities
ROUNDING
2014
$
19,692
55,767
47,660
The Group is of the kind referred to in the class order 98/100 dated 10 July 1998 issued by the Australian Securities & Investment
Commission. In accordance with that class order, amounts in the Directors’ report and financial report have been rounded to the nearest
thousand dollars, unless otherwise stated.
Signed at Sydney on 27 August 2014 in accordance with a resolution of the Directors.
Frank O’Halloran, AM
Chairman
Robert Kelly
Managing Director
50 | Steadfast Group Annual Report 2014
Lead Auditor’s Independence Declaration
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF STEADFAST GROUP LIMITED
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2014, there have been:
• no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
• no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Andrew Dickinson
Partner
Sydney
27 August 2014
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KMPG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
Steadfast Group Annual Report 2014 | 51
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2014
Fee and commission income
Marketing and administration fees
Other revenue
Revenue
Share of profits of associates accounted for using the equity method
Share of profits of joint venture accounted for using the equity method
Profit on fair value of investments
Other income
EXPENSES
Employment expense
Selling expense
Administration, brokers support service and other expenses
Steadfast Network Broker rebates
Occupancy expense
Amortisation expense
Depreciation expense
Finance costs
Due diligence and restructure costs
Profit/(loss) before income tax (expense)/benefit
Income tax (expense)/benefit
Note
12
13
18
18
20
2014
$’000
112,132
26,361
28,250
166,743
10,139
3,196
4,445
465
2013
$’000
5,623
24,513
4,633
34,769
546
2,386
-
97
184,988
37,798
(73,971)
(10,566)
(24,766)
(27,043)
(7,084)
(5,299)
(7,236)
(1,689)
(1,016)
(3,283)
33,601
(6,159)
(30)
(9,403)
(5,894)
(610)
(521)
(492)
(1,188)
(23,782)
(14,688)
1,421
Profit/(loss) after income tax (expense)/benefit for the year
27,442
(13,267)
OTHER COMPREHENSIVE INCOME
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Net movement in foreign currency translation reserve
Income tax expense on other comprehensive income
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive income/(loss) for the year, net of tax
933
(280)
653
224
(67)
157
28,095
(13,110)
52 | Steadfast Group Annual Report 2014
PROFIT/(LOSS) FOR THE YEAR IS ATTRIBUTABLE TO:
Non-controlling interests
Owners of Steadfast Group Limited
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR IS ATTRIBUTABLE TO:
Non-controlling interests
Owners of Steadfast Group Limited
EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Note
2014
$’000
2013
$’000
2,355
25,087
27,442
2,355
25,740
28,095
170
(13,437)
(13,267)
170
(13,280)
(13,110)
5
5
5.43
5.41
(20.46)
(20.46)
The above consolidated statement of comprehensive income should be read in conjunction with the notes to the financial statements.
Steadfast Group Annual Report 2014 | 53
Consolidated Statement of Financial Position
AS AT 30 JUNE 2014
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Cash held on trust
Receivables from broking/underwriting agency operations
Other receivables
Related party loans receivable
Other
Total current assets
NON-CURRENT ASSETS
Related party loans receivable
Property, plant and equipment
Deferred tax assets
Investments in associates
Interest in joint venture
Intangible assets
Goodwill
Other
Total non-current assets
Total assets
LIABILITIES
CURRENT LIABILITIES
Bank overdrafts
Payables on broking/underwriting agency operations
Other payables
Borrowings
Income tax payable
Provisions
Deferred consideration
Total current liabilities
NON-CURRENT LIABILITIES
Borrowings
Other payables
Deferred tax liabilities
Deferred consideration
Provisions
Total non-current liabilities
Total liabilities
Net assets
54 | Steadfast Group Annual Report 2014
Note
2014
$’000
2013
$’000
22
22
20
12
13
7
7
8
8
8
20
38,551
76,679
133,460
16,243
1,351
1,730
268,014
12,686
19,825
5,817
144,388
4,425
79,389
3,235
8,243
12,871
7,226
-
1,506
33,081
3,698
12,944
138
8,219
3,593
7,923
287,214
28,131
954
554,698
822,712
2
64,648
97,729
654
188,222
23,706
862
4,929
6,388
13,598
-
18,305
16,459
3,094
1,001
1,334
8,340
238,359
48,533
19,528
1,285
26,700
6,454
5,348
59,315
297,674
525,038
33,529
-
1,021
1,524
740
36,814
85,347
12,382
EQUITY
Share capital
Treasury shares held in trust
Foreign currency translation reserve
Share based payments reserve
Undistributed profits reserve
Other reserves
Retained earnings
Equity attributable to the owners of Steadfast Group Limited
Non-controlling interests
Total equity
Note
2014
$’000
2013
$’000
9
9
488,187
(1,070)
810
3,187
6,328
(2,578)
20,937
515,801
9,237
317
-
157
-
-
-
11,195
11,669
713
525,038
12,382
The above consolidated statement of financial position should be read in conjunction with the notes to the financial statements.
Steadfast Group Annual Report 2014 | 55
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2014
Equity attributable to owners of Steadfast Group Limited
Non-
controlling
interests
Total
equity
Treasury
shares
held in
trust
$’000
Foreign
currency
translation
reserve
$’000
Share
based
payments
reserve
$’000
Un-
distributed
profits
reserve
$’000
Share
capital
$’000
Other
reserves
$’000
Retained
earnings
$’000
$’000
$’000
2014
Balance at 1 July 2013
317
Profit after income tax
expense for the year
Other comprehensive
income for the year,
net of tax
Total comprehensive
income for the year
TRANSACTIONS WITH
OWNERS IN THEIR
CAPACITY AS OWNERS:
Contributions of equity,
net of transaction costs
(Note 9)
Shares issued for Dividend
Reinvestment Plan (Note 9)
Shares acquired and held
in trust (Note 9)
Share based payments
on Executive Shares and
employee share plans
Share based payments
on share options granted
Transfer of retained
earnings to profit reserve
Put option liability on
acquisition of subsidiaries
Acquisition of non-
controlling interests
Disposal of part equity
interests in subsidiaries
without loss of control
Dividends declared
and paid
-
-
-
-
-
-
-
-
-
486,867
1,003
-
-
-
-
-
-
-
-
(1,070)
-
-
-
-
-
-
-
157
-
653
653
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,822
365
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,328
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(804)
-
(1,774)
11,195
713
12,382
25,087
2,355
27,442
-
-
653
25,087
2,355
28,095
-
-
-
-
-
(6,328)
-
-
-
-
-
-
-
-
-
-
486,867
1,003
(1,070)
2,822
365
-
(804)
7,596
7,596
679
(1,095)
-
(9,017)
(2,106)
(11,123)
Balance at 30 June 2014
488,187
(1,070)
810
3,187
6,328
(2,578)
20,937
9,237
525,038
56 | Steadfast Group Annual Report 2014
Equity attributable to owners of Steadfast Group Limited
Non-
controlling
interests
Total
equity
Treasury
shares
held in
trust
$’000
Foreign
currency
translation
reserve
$’000
Share
based
payments
reserve
$’000
Un-
distributed
profits
reserve
$’000
Share
capital
$’000
Other
reserves
$’000
Retained
earnings
$’000
$’000
$’000
2013
Balance at 1 July 2012
317
Profit after income tax
expense for the year
Other comprehensive
income for the year,
net of tax
Total comprehensive
income for the year
TRANSACTIONS WITH
OWNERS IN THEIR
CAPACITY AS OWNERS:
Share based payments on
re-weighting shares
Acquisition of a subsidiary
with non-controlling
interest
-
-
-
-
-
Balance at 30 June 2013
317
-
-
-
-
-
-
-
-
-
157
157
-
-
157
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,154
-
14,471
(13,437)
170
(13,267)
-
-
157
(13,437)
170
(13,110)
10,478
-
10,478
-
11,195
543
713
543
12,382
The above consolidated statement of changes in equity should be read in conjunction with the notes to the financial statements.
Steadfast Group Annual Report 2014 | 57
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2014
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
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities before customer trust accounts movement
Net movement in customer trust accounts (net cash receipts/payments on behalf of customers)
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for acquisitions of subsidiaries and business assets, net of cash acquired and repayment
of subsidiaries’ loans
Payments for investments in associates and joint venture
Proceeds on part disposal of investments in subsidiaries on hubbing arrangements
Payments for property, plant and equipment
Payments for intangible assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Payments of transaction costs on issue of shares
Payments for purchase of treasury shares
Repayment of related party loan
Provision of related party loan
Proceeds from borrowings
Repayment of borrowings
Dividends paid to owners of Steadfast Group Limited, net of Dividend Reinvestment Plan
Dividends paid to non-controlling interests
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Note
2014
$’000
2013
$’000
138,443
36,988
(124,092)
(38,721)
7,163
3,701
(1,016)
(7,801)
16,398
(10,935)
5,463
2,778
300
(1,188)
(624)
(467)
3,413
2,946
(116,355)
(18,173)
(70,222)
(8,780)
6,875
(1,751)
(241)
-
(9,446)
(103)
(181,694)
(36,502)
333,703
(15,896)
(1,070)
196
(2,993)
12,524
(37,015)
(8,014)
(2,106)
279,329
103,098
11,478
-
-
-
-
-
38,872
(3,660)
(168)
-
35,044
1,488
9,990
Cash and cash equivalents at the end of the financial year
21
114,576
11,478
The above consolidated statement of cash flows should be read in conjunction with the notes to the financial statements.
58 | Steadfast Group Annual Report 2014
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 1. GENERAL INFORMATION
This general purpose financial report is for the year ended 30 June 2014 and comprises the consolidated financial statements for Steadfast
Group Limited (Steadfast or the Company) and its subsidiaries, and the Group’s interests in associates and a joint venture (Steadfast Group
or the Group). These financial statements are presented in Australian dollars, which is Steadfast’s functional and presentation currency.
The Company is a for-profit listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and
principal place of business is Level 3, 99 Bathurst Street, Sydney NSW 2000.
A description of the nature of the Group’s operations and its principal activities is included in the Directors’ report, which is not part of the
financial report.
This general purpose financial report was authorised for issue by the Board on 27 August 2014.
This year’s financial report is re-ordered and re-written to aid improvement in communication. The flow of information is grouped as follows:
• significant accounting policies and critical accounting judgements, estimates and assumptions – Notes 2 and 3;
• key financial indicators of the Group – Notes 4 to 6;
• significant assets and liabilities – Notes 7 to 8;
• equity related matters – Note 9;
• group structure – Notes 10 to 13;
• risk and unrecognised items – Note 14 to 16; and
• additional information and disclosures required by Accounting Standards – Notes 17 to 24.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
A. STATEMENT OF COMPLIANCE
This financial report has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board, as appropriate for for-profit oriented entities and the
Australian Securities Exchange (ASX) Listing Rules.
International Financial Reporting Standards (IFRS) refer to the overall framework of standards and pronouncements approved by the International
Accounting Standards Board. IFRS forms the basis of the Australian Accounting Standards. This financial report of the Group complies with IFRS.
B. BASIS OF PREPARATION OF THE FINANCIAL REPORT
The significant accounting policies adopted in the preparation of this financial report are set out below. The accounting policies adopted
in the preparation of this financial report have been applied consistently by all entities in the Group and are the same as those applied for
the previous reporting period unless otherwise noted. These financial statements have been prepared under the historical cost convention,
modified, where applicable, by the measurement at fair value of certain non-current assets, financial assets and financial liabilities.
I. Changes in accounting polices
The Company has adopted all of the new recognition and measurement requirements, revised or amending Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board that are mandatory for the year ended 30 June 2014. There were a
number of new and revised Australian Accounting Standards applicable for the current reporting period. Adoption of these standards has
not had any material effect on the financial position or performance of the Group.
The Group elected to early adopt AASB2013-3 Amendments to AASB136 – Recoverable Amount Disclosures for Non-Financial Assets,
adoption of this standard only affects disclosures in Note 7 Intangible assets and goodwill for the year ended 30 June 2014.
II. Reclassification of comparatives
Certain prior year comparative information has been revised in this financial report to conform to the current period’s presentation.
The reclassifications are for:
• improving readability of the statement of comprehensive income and the statement of financial position by providing further details/
breakdown of expenses and assets and liabilities on the face of these two statements; and
• aligning the nature of the rebate to Steadfast Network Brokers as accrued expenditure (which is grouped with trade and other payables).
The rebate was classified as a provision in the prior period. The comparatives of current trade and other payables and current provisions
were increased and decreased by $6.020 million, respectively. The reclassification has no profit and loss impact.
III. Rounding
The Group is of the kind referred to in the class order 98/100 dated 10 July 1998 issued by the Australian Securities & Investment Commission.
In accordance with that class order, amounts in this financial report have been rounded to the nearest thousand dollars, unless otherwise stated.
C. REVENUE RECOGNITION
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received or receivable.
Steadfast Group Annual Report 2014 | 59
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES continued
I. Fees and commission income
Commission, brokerage and fees are recognised when the related service has been provided and it is probable that the Group will be
compensated for services rendered and the amount of consideration for such services can be reliably measured. This is deemed to be
the invoice date. An allowance is made for anticipated lapses and cancellations.
II. Marketing and administration fees
The Company has negotiated with strategic partners, such as insurers, premium funders and underwriting agencies, to receive marketing
and administration fees based on the amount of business placed with those entities for the Group’s preferred products. These amounts
are recognised as revenue when base premium is placed (in the case of insurers and underwriting agencies) or premiums funded (in the
case of premium funders).
III. Claims experience benefit
The Group may receive a claims experience benefit payment or payments in respect of certain types of insurance products placed with
insurance companies. Revenue is recognised for a claims experience benefit for a particular policy year when it is likely that a claims
experience benefit is receivable and the amount can be measured reliably.
Factors taken into account in recognising a claims experience benefit include the number of years that have passed since the end of a
policy year and whether various claims have been closed or can be reliably measured.
VI. Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
D. TAXATION
Tax consolidation
The Company (the head entity) and its wholly owned Australian subsidiaries have formed an income tax consolidated group under the
tax consolidation regime. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these
entities are offset in the consolidated financial statements.
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in bank, deposits held at call with financial institutions, and other short term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash. This includes cash
held by the subsidiaries for business operations/operating expenses purposes.
Cash held on trust relates to cash held for insurance premiums received from policyholders which will ultimately be paid to underwriters.
Cash held on trust cannot be used to meet business operations/operating expenses other than payments to underwriters and/or refunds
to policyholders.
F. RECEIVABLES FROM BROKING/UNDERWRITING AGENCY OPERATIONS
Receivables from broking/underwriting agency operations are initially recognised based on the invoiced amount to customers. After initial
recognition, provision is made for lapses or cancellations of insurance policies or other matters that may lead to non-collection.
These receivables are generally due for settlement within 30 to 60 days. Collectability of trade receivables is reviewed on an ongoing basis.
G. INTANGIBLE ASSETS
Identifiable intangible assets acquired separately or in a business combination (mainly customer relationships and capitalised software)
are initially measured at cost.
The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. The useful lives of these
intangible assets are assessed on acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and provision for impairment.
Intangible assets with finite lives are amortised over the useful lives, currently estimated to be up to 10 years, and their useful lives are
reviewed annually.
H. PAYABLES ON BROKING/UNDERWRITING AGENCY OPERATIONS
These amounts represent insurance premium payable to the insurance companies for broking/underwriting agency operations on
invoiced amounts to customers and liabilities for goods and services provided to the Group prior to the end of the financial period and
which are unpaid. The amounts are unsecured and are usually paid within 30 to 90 days of recognition.
I. NON-CONTROLLING INTERESTS
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date. For the
operations and business being put into a business hub, non-controlling interests represent the fair value at the hubbing date.
60 | Steadfast Group Annual Report 2014
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES continued
J. AUSTRALIAN ACCOUNTING STANDARDS ISSUED AND NOT YET EFFECTIVE
The Company has not early adopted and applied any new, revised or amending Accounting Standards and Interpretations that are not yet
mandatory for the year ended 30 June 2014, except as described in Note 2.B.I.
New, revised or amending Accounting Standards and Interpretations will be adopted by the Company in the operating year commencing
1 July after the effective date of these standards and interpretations as set out in the table below.
Title
Description
Effective date
Operating year
Note
AASB 9
Financial Instruments
1 January 2018
30 June 2019
AASB 2009-11
Amendments to Australian Accounting Standards arising from AASB 9
1 January 2018
30 June 2019
AASB 2010-7
Amendments to Australian Accounting Standards arising from AASB 9
1 January 2018
30 June 2019
AASB 2012-6
Amendments to Australian Accounting Standards arising from AASB 9
1 January 2018
30 June 2019
(i)
(i)
(i)
(i)
Table note
(i) These changes are not expected to have a significant financial impact, if any.
NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical
experience and on other various factors, including expectations of future events management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates may differ from the related actual results. The judgements, estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the
respective notes) during the year ended 30 June 2014 are discussed below.
A. FAIR VALUE OF ASSETS ACQUIRED
The Group measures the net assets acquired in a business combination at their fair value at the date of acquisition.
Fair value is estimated with reference to the market transactions for similar assets or discounted cash flow analysis.
B. DEFERRED CONSIDERATION
The Group has made a best estimate of the amount of consideration payable for the acquisitions where there is a variable purchase price
(generally, a multiple of future period earnings before interest expense, tax and amortisation (EBITA)) after performing due diligence on
the acquisition. Should the final EBITA vary from these estimates, the Group will be required to increase or reduce the final consideration
payable and recognise the difference as expense or income.
C. GOODWILL
Goodwill is assessed annually for impairment or when there is an evidence of impairment.
The recoverable amount of goodwill is estimated using discounted cash flow analysis of the relevant cash generating unit (CGU) deducting
the carrying amount of the identifiable net assets of the CGU. Key assumptions used in the calculation of recoverable amounts are the
discount rates, terminal value growth rates and EBITA growth rates.
D. INTANGIBLE ASSETS
The carrying amounts of intangible assets with finite lives are reviewed at each reporting date to determine whether there is any indication
of impairment. If any such indication exists, then the asset’s recoverable amount is estimated on the same basis as goodwill above.
An impairment loss is recognised if the carrying amount of the intangible asset exceeds its recoverable amount.
E. ESTIMATION OF USEFUL LIVES OF ASSETS
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment
and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The
depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete
or non-strategic assets that have been abandoned or sold will be written off or written down.
F. RECOVERY OF DEFERRED TAX ASSETS
Deferred tax assets are recognised for deductible temporary differences and operating tax losses only if the Group considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
G. REBATES ACCRUALS
Included in accrued expenditure is an accrual for rebates from the Group to Steadfast Network Brokers which is calculated based on a
percentage of eligible income received and receivable from the Group’s insurance and premium funding partners.
Steadfast Group Annual Report 2014 | 61
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 4. OPERATING SEGMENTS
The Company’s corporate structure includes equity investments in insurance intermediary entities (insurance broking and underwriting
agencies and premium funders) and ancillary businesses. Discrete financial information about each of these entities is reported to
management on a regular basis and accordingly management considers each entity to be a discrete business operation. The Company
believes that all of the Group’s equity investments in insurance intermediary entities exhibit similar economic characteristics and have
therefore been aggregated into a single reporting segment, being the general insurance intermediary sector. This assessment is based on
each of the business operations having similar products and services, similar types of customer, employing similar operating processes
and procedures and operating within similar regulatory environments. The Group is in the business of distributing and advising on
insurance products in Australia, New Zealand and Singapore.
In addition to reviewing performance based on statutory profit after tax, the Chief Operating Decision Maker (being the Managing
Director & CEO) also reviews the additional performance measures, earnings before interest expense, tax and amortisation (EBITA) broken
down by consolidated entities, and associates and joint venture.
The additional performance measures, EBITA, and other related information (broken down by consolidated entities, and associates and
joint venture) provided on a regular basis to the Chief Operating Decision Maker is outlined in the table below.
EBITA – consolidated entities
Share of EBITA from associates and joint venture
EBITA from core operations – pre-corporate expenses
Corporate expenses
EBITA from core operations – post-corporate expenses
Finance costs (net of interest received on surplus cash held)
Amortisation expense
Profit before income tax for the year
from core operations before non-recurring items
Less: non-recurring expenses
Profit before income tax after non-recurring items
Income tax (expense)/benefit
Net profit/(loss) after income tax for the year
Non-controlling interests
Net profit/(loss) after income tax attributable to owners
of Steadfast Group Limited
Other comprehensive income
Total comprehensive income/(loss) after income tax attributable
to owners of Steadfast Group Limited
2014
Total
$’000
2013
Insurance
intermediary
$’000
Table
note
Insurance
intermediary
$’000
(i)
(ii)
(iii)
(iv)
39,618
22,414
62,032
(8,130)
53,902
(1,130)
(9,814)
42,958
(4,566)
38,392
(11,324)
27,068
(2,299)
24,769
653
Other
$’000
652
642
1,294
40,270
23,056
63,326
-
(8,130)
1,294
55,196
-
(1,130)
(344)
(10,158)
950
-
950
43,908
(4,566)
39,342
(576)
(11,900)
27,442
(2,355)
374
(56)
318
-
13,063
4,472
17,535
(5,192)
12,343
(1,205)
(756)
10,382
(23,782)
(13,400)
133
(13,267)
(170)
25,087
(13,437)
653
157
25,422
318
25,740
(13,280)
TABLE NOTE
(i) Breakdown of finance costs net of interest received on surplus cash held are as below.
Finance costs – consolidated entities (net of interest received on surplus cash held)
Finance costs – associates and joint venture (Note 12, 13)
(ii) Breakdown of amortisation expenses are as below.
Amortisation expense – consolidated entities
Amortisation expense – associates and joint venture (Note 12, 13)
(72)
(1,058)
(1,130)
(6,958)
(2,856)
(9,814)
-
-
-
(72)
(1,058)
(1,130)
(278)
(66)
(7,236)
(2,922)
(344)
(10,158)
(1,188)
(17)
(1,205)
(521)
(235)
(756)
62 | Steadfast Group Annual Report 2014
NOTE 4. OPERATING SEGMENTS continued
(iii) Breakdown of non-recurring income/(expenses) are as below.
Net profit on changes in value of investments
Due diligence and restructure costs
Share based payments on re-weighting of shares
Share based payments and write down of Executive loans
Deemed interest expense on interest free Executive loans
(iv) Breakdown of income tax expenses are as below.
Income tax (expense)/benefit – consolidated entities
Income tax (expense)/benefit – associates and joint venture (Note 12, 13)
Insurance
intermediary
$’000
Other
$’000
2014
Total
$’000
2013
Insurance
intermediary
$’000
3,996
(3,283)
-
(6,015)
736
(4,566)
-
-
-
-
-
-
3,996
(3,283)
-
(6,015)
736
-
(13,304)
(10,478)
-
-
(4,566)
(23,782)
(5,744)
(5,580)
(11,324)
(415)
(161)
(576)
(6,159)
(5,741)
(11,900)
1,421
(1,288)
133
NOTE 5. EARNINGS PER SHARE
A. REPORTING PERIOD VALUE
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
B. RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
Profit/(loss) after income tax
Non-controlling interests
Profit/(loss) after income tax attributable to the owners of Steadfast Group Limited
for calculation of basic and diluted earnings per share
C. RECONCILIATION OF WEIGHTED AVERAGE NUMBER OF SHARES USED IN CALCULATING
EARNINGS PER SHARE
I. Weighted average number of ordinary shares issued
Re-weighting shares(a)
Ordinary shares issued on the Company’s listing on the ASX(b)
Executive Shares(c)
Ordinary shares issued for Dividend Reinvestment Plan(d)
Weighted average number of ordinary shares issued
Ordinary shares bought by the Company and classified as treasury shares held in trust(e)
Weighted average number of ordinary shares used in calculating basic earnings per share
2014
cents
2013
cents
5.43
5.41
2014
$’000
(20.46)
(20.46)
2013
$’000
27,442
(13,267)
(2,355)
(170)
25,087
(13,437)
2014
Number in
$’000
2013
Number in
$’000
65,686
65,686
387,179
9,944
137
-
-
-
462,946
65,686
(602)
-
462,344
65,686
Steadfast Group Annual Report 2014 | 63
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 5. EARNINGS PER SHARE continued
2014
Number in
$’000
2013
Number in
$’000
II. Weighted average number of dilutive potential ordinary shares related to
Weighted average number of ordinary shares used in calculating basic earnings per share
462,344
65,686
Effect of share based payments arrangements(f)
Effect of deemed bonus shares on share options(g)
398
1,078
-
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
463,820
65,686
The weighted average number of ordinary shares or dilutive potential ordinary shares is calculated by taking into account the period from
the issue date of the shares to the reporting date unless otherwise stated as below.
(a) Prior period basic earnings per share has been retrospectively adjusted for the effect of 65.686 million re-weighting shares allotted to
those shareholders who supported various products and businesses for the two years prior to June 2013. These shares are deemed
shares split as they were an increase in number of shares outstanding without a corresponding increase in resources at their issuance.
(b) 424.385 million ordinary shares were issued on the Company’s listing on the ASX in August 2013, being:
– 134.210 million for consideration shares; and
– 290.175 million for individual and institutional investors.
(c) 10.900 million ordinary shares were issued to a number of executives (Executive Shares) under the Executive Loan Agreements when
the Company listed on the ASX in August 2013.
(d) 0.667 million ordinary shares were issued in April 2014 for the Dividend Reinvestment Plan.
(e) 0.745 million ordinary shares were bought on market and held by the trustee (a wholly owned subsidiary of the Group) of an employee
share plan. In addition, 0.009 million ordinary shares were acquired through the Dividend Reinvestment Plan. These shares are held to
meet conditional rights granted to eligible employees by the Company. The conditional rights could convert to one ordinary shares per
right at the end of August 2014 subject to vesting conditions being met.
(f) Steadfast operates share based payments arrangements (being an employee conditional rights scheme, a short term incentive plan
and a long term incentive plan) where eligible employees could receive conditional rights instead of cash. One conditional right will
convert to one ordinary share subject to vesting conditions being met. These share based payments arrangements are granted to
employees free of costs and no consideration will be paid on conversion to Steadfast’s ordinary shares. These arrangements have a
dilutive effect to the basic earnings per share in the current reporting period.
(g) 3.000 million share options were issued to a key management personnel of an acquired business with an exercise price of $1.00 per
share. Because the average share price exceeds the exercise price, 1.078 million shares are deemed to be bonus shares.
NOTE 6. DIVIDENDS
A. DIVIDENDS ON ORDINARY SHARES
2014
Cents per share
Total amount
$’000
Payment date
Tax rate for
franking credit
Percentage franked
2014 interim dividend
1.8
9,017
14 April 2014
30%
100%
No dividends were declared or paid by the Company in the prior year ended 30 June 2013.
It is standard practice that the Board declares the dividend for a period after the relevant reporting date. A dividend is not accrued for
until it is declared and so the dividends for a period are generally recognised and measured in the financial reporting period following the
period to which the dividends relate.
The dividends recognised in the current reporting period include $0.013 million (2013: $Nil) paid in relation to treasury shares held in a
trust controlled by the Group. All the treasury shares participate in the Dividend Reinvestment Plan.
B. DIVIDEND POLICY
The Company intends to target a dividend payout ratio in the range of 65% to 85% of net profit after tax attributable to shareholders of
the Company with a minimum dividend payout ratio of 50% of net profit after tax and before amortisation expense.
C. DIVIDEND REINVESTMENT
The Company operates a Dividend Reinvestment Plan (DRP) that allows equity holders to elect to receive their dividend entitlement in
the form of the Company’s ordinary shares. The price of DRP shares is the average share market price, less a discount if any (determined
by the directors) calculated over the pricing period (which is at least five trading days) as determined by the directors for each dividend
payment date.
64 | Steadfast Group Annual Report 2014
NOTE 6. DIVIDENDS continued
D. DIVIDEND NOT RECOGNISED AT REPORTING DATE
On 27 August 2014, the Board resolved to pay the following dividend. As this occurred after the reporting date, the dividends declared
have not been recognised in this financial report.
2014
Cents per share
Total amount
$’000
Expected
payment date
Tax rate for
franking credit
Percentage franked
2014 final dividend
2.7
13,544
8 October 2014
30%
100%
The Company’s DRP will operate by issuing ordinary shares to participants by issuing new shares with an issue price per share of the
average market price as defined by the DRP terms with 2.5% discount applied and a record date of 12 September 2014. The last election
notice for participation in the DRP in relation to this final dividend is 15 September 2014.
E. FRANKING CREDITS
Franking account balance at reporting date at 30%
Franking credits to arise from payment of income tax payable
Franking credits available for future reporting periods
Franking account impact of dividends declared before issuance of financial report
but not recognised at reporting date
Franking credits available for subsequent financial periods based on a tax rate of 30%
2014
$’000
8,248
1,588
9,836
(5,805)
4,031
2013
$’000
4,310
-
-
4,310
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date;
• franking debits that will arise from the payment of dividends not recognised as a liability at the reporting date; and
• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
NOTE 7. INTANGIBLE ASSETS AND GOODWILL
2014
A. COMPOSITION
At cost
Accumulated amortisation
B. MOVEMENTS
Balance at the beginning of the financial year
Changes in cash consideration for a subsidiary acquired
prior to the Company’s listing
Additions
Additions through business combinations
Reduction on part disposal of subsidiaries in hubbing arrangements
Amortisation expense reduction in hubbing arrangements
Amortisation expense
Balance at the end of the financial year
Customer
relationships
$’000
Capitalised
software
$’000
Total
intangible
assets
$’000
Goodwill
$’000
85,787
(7,040)
78,747
7,918
-
-
82,074
(4,626)
563
(7,182)
78,747
880
(238)
642
5
-
241
450
-
-
(54)
642
86,667
287,214
(7,278)
-
79,389
287,214
7,923
28,131
-
241
(601)
-
82,524
280,032
(4,626)
(20,348)
563
(7,236)
-
-
79,389
287,214
Steadfast Group Annual Report 2014 | 65
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 7. INTANGIBLE ASSETS AND GOODWILL continued
2013
C. COMPOSITION
At cost
Accumulated amortisation
D. MOVEMENTS
Balance at the beginning of the financial year
Additions
Additions through business combinations
Amortisation expense
Balance at the end of the financial year
Customer
relationships
$’000
Capitalised
software
$’000
Total
intangible
assets
$’000
Goodwill
$’000
8,339
(421)
7,918
-
-
8,339
(421)
7,918
189
(184)
5
-
103
2
(100)
5
8,528
(605)
7,923
-
103
8,341
(521)
7,923
28,131
-
28,131
-
-
28,131
-
28,131
E. AMORTISATION RATES
10.0%
20.0-100.0%
F. IMPAIRMENT TESTING OF IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL
The Group performed impairment testing for all goodwill on an annual basis and any identifiable intangibles (customer relationships
and capitalised software) which had impairment indicators. There was no impairment provision for the year ended 30 June 2014
(2013: no impairment provision).
In performing impairment testing, each subsidiary acquired or portfolio of businesses acquired is considered a separate cash generating
unit (CGU) or grouped into one CGU where operations are linked.
The methodologies used in the impairment testing are:
• value in use – a discounted cash flow model, based on a five year projection on the approved budget of the tested CGUs with a
terminal value; and
• fair value – based on the Group’s estimates of sustainable earnings before interest expense, tax and amortisation (EBITA) for each CGU
multiplied by an earnings multiple appropriate for similar businesses less costs to sell.
The following table sets out the key assumptions for the value in use model.
Post tax discount rates(a)
Pre tax discount rates
Revenue growth rate(b) – one year to five years extrapolation
Long term revenue growth rate(c)
2014
%
2013
%
10.6% or 12.4%
11.2% or 13.1%
13.3% or 16.0%
15.1% or 17.9%
4.0% per annum
4.0% per annum
4.0% per annum
2.5% per annum
(a) Post tax discount rates reflect the Group’s weighted average cost of capital (WACC), adjusted for additional risks specific to each
CGU. The WACC takes into account market risks, size of the business, current borrowing interest rates, borrowing capacity of
the businesses and the risk free rate. As a result, 10.6% and 12.4% are the post tax discount rates used for large and small CGUs,
respectively. Large CGUs are those businesses that have EBITA over $0.800 million. External advice has been sought in relation
to the determination of appropriate discount rates to be used.
(b) The Group has estimated a revenue growth of 4.0% per annum for the financial years between 2015 and 2019 based on short term
industry forecasts and has no reason to revise this estimation based on current performance.
(c) The Group considers that the long term revenue growth rate is justified, based on the current market conditions.
No reasonable possible change in assumptions would result in the recoverable amount of a CGU being materially less than the carrying value.
66 | Steadfast Group Annual Report 2014
NOTE 8. BORROWINGS
A. BANK LOANS
Current
Non-current
B. BANK FACILITIES AVAILABLE
I. Bank facilities drawn down
Bank loans
Lines of credit (bank overdrafts)
II. Undrawn bank facilities
Bank loans
Lines of credit
III. Total bank facilities available
Bank loans
Lines of credit
C. BANK FACILITIES PROVIDED BY
Macquarie Bank – Revolving line of credit facility, secured
National Australia Bank, secured by assets of subsidiaries
Other financial institutions
2014
$’000
2013
$’000
862
19,528
20,390
3,094
33,529
36,623
20,390
36,623
654
-
21,044
36,623
63,610
346
63,956
84,000
1,000
85,000
78,897
6,048
55
7,807
-
7,807
44,430
-
44,430
44,430
-
-
85,000
44,430
D. MOVEMENT OF BORROWINGS
The outstanding borrowings as at 30 June 2014 represent bank loans drawn down:
• $12.524 million by the Company post listing to fund acquisition of subsidiaries; and
• by certain subsidiaries of the Group to support their operations.
The borrowings outstanding as at 30 June 2013 were fully repaid during August 2013, funded by cash raised on the Company’s listing
on the ASX.
E. BANK FACILITY DETAILS
At 30 June 2014, the Group had a $85.000 million revolving line of credit facility (30 June 2013: $44.430 million in secured cash advance
term and revolving loan facilities) with Macquarie Bank Limited (Macquarie Bank) for the Group. Any debt arrangements by subsidiaries
with any other financial institutions (including bank loans and line of credit – bank overdraft) would decrease the funds available to be drawn.
F. KEY TERMS AND CONDITIONS OF BANKING FACILITIES
As at 30 June 2014, $21.044 million debt (including bank overdrafts) had been drawn down by the Group. The key terms and conditions
of the revolving line of credit facility with Macquarie Bank for Steadfast as at 30 June 2014 are as follows.
• The undrawn facility is calculated with reference to the borrowings of the Group, leaving an $63.956 million undrawn facility at balance date.
• Variable interest rate, currently ranging between BBSW plus margin of 1.40% and 1.90% per annum (depending on quantum of borrowings)
payable monthly.
• A line fee of 0.35% per annum.
• The Company and certain of its subsidiaries (the Guarantors) have granted a guarantee and indemnity in favour of Macquarie Bank in
respect of the Company’s obligation under the Macquarie Bank revolving line of credit facility.
Steadfast Group Annual Report 2014 | 67
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 8. BORROWINGS continued
• The Company and the Guarantors have granted various securities to secure the Macquarie Bank facility including:
– security interests over all of their present and after-acquired assets and undertakings in favour of Macquarie Bank including shares in
subsidiaries and associates;
– mortgages over Levels 1, 3 and 5, 97–99 Bathurst Street, Sydney NSW 2000 in favour of Macquarie Bank; and
– mortgages over any money or negotiable instrument received in payment of any claim on, or on cancellation of, any insurance
policy in respect of the above property in favour of Macquarie Bank.
The Macquarie Bank revolving line of credit facility contains a number of representations, warranties and undertakings (including financial
covenants and reporting obligations) from the Company and the Guarantors that are customary for a facility of this nature, including
covenants ensuring that the Company maintains a Company debt to EBITDA ratio below agreed levels and a Company debt service
cover ratio above agreed levels. There were no breaches of covenants or default during the year.
G. BORROWING BY ASSOCIATES
As at 30 June 2014, the associates had a total of $28.379 million of bank borrowings (including bank overdrafts and loans).
NOTE 9. NOTES TO THE STATEMENT OF CHANGES IN EQUITY AND RESERVES
2014
Number of
shares in
’000
2013
Number of
shares in
’000
2014
2013
$’000
$’000
A. SHARE CAPITAL
Reconciliation of movements
Balance at the beginning of the financial year
Conversion to preferred capital shares*
1
(1)
Shares issued in August 2013 on the Company’s listing on the ASX
500,971
Less: Transaction costs on issue of ordinary shares, net of income tax
Shares issued in April 2014 for the Dividend Reinvestment Plan
($1.5037 per share)
Balance at the end of the financial year
-
667
501,638
1
-
-
-
-
1
317
-
498,944
(12,077)
1,003
488,187
317
-
-
-
-
317
* 1,395 ordinary shares on issue at 30 June 2013 were converted into 1,395 preferred capital shares. These preferred capital shares were
cancelled in November 2013 following member approval.
In August 2013, the Company issued a total of 500.971 million ordinary shares that were allotted as follows.
Number of
shares
in ’000
Amount
per share
$
Total
amount
$’000
65,686
10,900
134,210
290,175
500,971
-
1.00
1.15
1.15
-
10,900
154,341
333,703
498,944
Cash
received/
receivable
$’000
-
10,900
-
333,703
344,603
Purpose of allotment of shares
Re-weighting shares
Executive Shares
Consideration shares for acquisitions
Individual and institutional investors
68 | Steadfast Group Annual Report 2014
NOTE 9. NOTES TO THE STATEMENT OF CHANGES IN EQUITY AND RESERVES continued
B. TREASURY SHARES HELD IN TRUST
Reconciliation of movements
Shares acquired
Shares allotted through Dividend Reinvestment Plan
Balance at the end of the financial year
2014
Number of
shares
in ’000
2013
Number of
shares
in ’000
2014
2013
$’000
$’000
745
9
754
-
-
-
(1,057)
(13)
(1,070)
-
-
-
Treasury shares are ordinary shares of Steadfast bought on market by the trustee (a wholly owned subsidiary of the Group) of an employee
share plan for meeting future obligations under that plan when conditional rights vest and shares allocated to participants.
C. CAPITAL RISK MANAGEMENT
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue its
listing on the ASX, provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares, take on borrowings or sell assets to reduce debt.
D. NATURE AND PURPOSE OF RESERVES
I. Foreign currency translation reserve
The foreign currency translation reserve records the foreign currency differences from the translation of the financial information of foreign
operations that have a functional currency other than Australian dollars.
II. Share based payments reserve
The share based payments reserve is used to recognise the fair value at grant date of equity settled share based remuneration provided
to employees and a key management personnel of a subsidiary and the discount on Executive Shares.
III. Other reserves
The other reserves are used to recognise other movements in equity including the fair value of put options issued to a shareholder of a
subsidiary over that subsidiary’s shares and the net effect on disposal of partial equity ownership in subsidiaries without loss of control.
IV. Undistributed profits reserve
The undistributed profits reserve consists of current financial period’s net profit attributable to owners of the Group and any retained
amount carried forward from prior periods transferred from retained earnings. This reserve will be used to pay dividends declared by
the Board.
Steadfast Group Annual Report 2014 | 69
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 10. BUSINESS COMBINATIONS
A. ACQUISITIONS FOR THE YEAR ENDED 30 JUNE 2014
In accordance with the Group’s strategy, the Group completed a number of acquisitions.
I. Acquisitions on 7 August 2013
On 7 August 2013, the Group acquired equity interests in a total of 64 insurance broking businesses (Steadfast Equity Brokers),
underwriting agencies, and ancillary services businesses.
All of the acquired businesses have existing management teams who continue to be primarily responsible for ongoing day-to-day
management of each individual business. For the 12 businesses in which the Group acquired 100% ownership, the Group either
contracted with existing management to continue to operate the business or had an intention to merge the business with another
Steadfast Equity Broker, consistent with the Group’s hubbing strategy.
The acquisitions of equity interests ranged from 25% to 100% and the consideration paid for individual investments ranged from
$0.646 million to $78.200 million. For all those investees classified as subsidiaries, the Group has over 50% of the voting rights
or less than 50% but with power to have control.
II. Other acquisitions during the year ended 30 June 2014
In addition to the major acquisitions completed on 7 August 2013, the Group also made the following acquisitions:
• on 13 December 2013, the Group acquired 60% of the share capital of Protecsure Pty Limited, a non-aligned underwriting agency;
• on 3 April 2014, the Group acquired 70% of the share capital of NM Insurance Pty Limited (Nautilus Marine), a Steadfast strategic
partner. Nautilus Marine is a leading underwriting agency operating across Australia and New Zealand that specialises in marine
and motorcycle insurance;
• on 5 May 2014, the Group acquired an interest in the MECON Winsure Insurance Group, being 76% of the MECON business and
100% of the Winsure business. MECON Winsure is an underwriting agency that specialises in providing insurance to the building
and construction industry across Australia. They offer tailored end to end insurance solutions exclusively through broking partners.
• on 18 June 2014, the Group acquired IMC Trade Credit Solutions Pty Ltd (IMC) through the Group’s subsidiary, National Credit
Insurance (Brokers) Pty Ltd. IMC is a specialised trade credit insurance brokerage.
III. Acquisition of subsidiaries
The following disclosures provide the financial impact to the Group at the acquisition date, 7 August 2013 (for 64 businesses) and other
acquisitions completed as listed in section A.II above, subject to any adjustments on settlement of deferred consideration. For some of
the businesses, the disclosures include the impact of the broking business and operations being transferred into a business hub (refer
to Table note (i) in Note 11 Subsidiaries for further details). Any such adjustments will be made by expense or credit in the statement of
comprehensive income. Only the top five acquisitions by consideration are disclosed separately. The other acquisitions are disclosed
in aggregate.
Note 11 Subsidiaries contains the names of all subsidiaries acquired and the respective ownership interests. The top five are as follows:
• RIB Group Holdings Pty Ltd and its controlled entities (RIB Group), an insurance broker based in Queensland;
• National Credit Insurance (Brokers) Pty Ltd and its controlled entities (NCIB), an insurance broker based in South Australia;
• Brecknock Insurance Brokers Pty Ltd (Brecknock), an insurance broker based in South Australia;
• GWS Pty Ltd (GWS), an insurance broker based in Victoria; and
• Mega Capital Holdings Pty Ltd and its controlled entities (Mega Capital), an insurance broker based in Victoria.
70 | Steadfast Group Annual Report 2014
NOTE 10. BUSINESS COMBINATIONS continued
a. Consideration paid/payable
2014
Cash
Consideration shares(a)
Deemed consideration(b)
Deferred consideration(c)
Scrip for scrip(d)
Total
RIB Group
$’000
NCIB
$’000
Brecknock
$’000
41,400
36,800
-
-
-
29,667
17,473
-
-
-
-
852
-
-
-
78,200
29,667
18,325
GWS
$’000
8,611
3,364
-
-
6,018
17,993
Mega
Capital
$’000
Other
acquisitions
$’000
16,244
575
-
-
-
78,558
34,669
6,112
10,441
14,658
Total
$’000
191,953
76,260
6,112
10,441
20,676
16,819
144,438
305,442
(a) The consideration shares were valued at $1.15 per share at settlement based on the initial public offer price when the Company
listed on the ASX.
(b) This amount represented the original investment in Miramar Underwriting Agency Pty Ltd (Miramar) when the Group increased
its shareholding in Miramar from 50% to 100%.
(c) Pursuant to the Share and Unit Purchase Agreements, some of the consideration will be settled based on the actual financial
performance for the financial year ending 30 June 2014 and thus was recognised as deferred consideration by the Group.
The deferred consideration is estimated based on the assumption that the acquirees will meet the forecast revenue and/or earnings
target. Any variation at time of settlement will be recognised as an expense or credit in the statement of comprehensive income.
(d) Some hubbing arrangements have been partially completed on a scrip for scrip basis.
b. Identifiable assets and liabilities acquired
2014
RIB Group
$’000
NCIB
$’000
Brecknock
$’000
Cash and cash equivalents
Trade and other receivables*
Property, plant and equipment
Deferred tax assets
Identifiable intangibles
Other assets
12,819
9,020
258
79
19,862
-
13,719
17,208
1,734
510
9,567
184
5,824
11,763
578
79
4,301
980
GWS
$’000
2,719
3,903
243
88
5,451
20
Mega
Capital
$’000
Other
acquisitions
$’000
5,336
3,773
117
71
4,036
101
55,146
47,742
3,991
1,181
39,307
306
Total
$’000
95,563
93,409
6,921
2,008
82,524
1,591
Trade and other payables
(20,918)
(25,698)
(15,888)
(7,093)
(8,342)
(86,979)
(164,918)
Income tax payable
Provisions
Deferred tax liabilities
Other liabilities
Total net identifiable
assets/(liabilities)
(494)
(358)
(6,419)
(7,507)
(54)
(2,063)
(4,807)
(13,113)
(90)
(221)
(1,951)
(972)
(343)
(419)
(1,770)
(1,545)
25
(217)
(1,970)
(6,018)
(2,926)
(9,296)
(1,266)
(13,736)
(29,949)
(56)
(18,728)
(41,921)
6,342
(2,813)
4,403
1,254
3,578
20,242
33,006
* The trade receivables comprise contractual amounts and are expected to be fully recoverable.
For those acquisitions acquired since December 2013 (as listed in A.II above), if new information obtained within one year from the
acquisition date about facts and circumstances that existed at the acquisition date identifies adjustments to the above amounts,
then the acquisition accounting will be revised.
Steadfast Group Annual Report 2014 | 71
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 10. BUSINESS COMBINATIONS continued
c. Goodwill on acquisition
2014
RIB Group
$’000
NCIB
$’000
Brecknock
$’000
GWS
$’000
Mega
Capital
$’000
Other
acquisitions
$’000
Total
$’000
Total consideration paid/payable
78,200
29,667
18,325
17,993
16,819
144,438
305,442
Total net identifiable (assets)/
liabilities acquired
(6,342)
2,813
(4,403)
(1,254)
(3,578)
(20,242)
(33,006)
Non-controlling interests acquired(a)
Goodwill on acquisition(b)
1,268
73,126
-
32,480
1,211
15,133
1,801
18,540
715
2,601
7,596
13,956
126,797
280,032
(a) Non-controlling interests acquired are based on the proportionate ownership interest in the total net identifiable assets recognised at
the acquisition date. For the operations and business being put into a business hub, non-controlling interest represents the fair value
at the hubbing date.
(b) Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired and non-controlling
interests at the acquisition date. The majority of the goodwill relates to benefits from the combination of synergies as well as the
acquired subsidiaries’ ability to generate future profits. None of the goodwill recognised is expected to be deductible for tax purposes.
d. Financial performance of acquired subsidiaries
The contribution for the period since acquisition by the acquired subsidiaries to the financial performance of the Group is outlined in the
table below.
2014
Revenue
EBITA
Profit after income tax
RIB Group
$’000
NCIB
$’000
Brecknock
$’000
15,327
25,653
7,218
3,911
3,326
1,988
7,214
1,918
1,168
GWS
$’000
6,358
2,638
1,702
Mega
Capital
$’000
Other
acquisitions
$’000
9,698
2,379
1,638
59,060
12,590
8,352
Total
$’000
123,310
30,069
18,759
If the acquisitions of subsidiaries occurred on 1 July 2013, the Group’s total revenue and profit after income tax attributable to the owners
of the Group (without taking into account the cost of funding the acquisitions) for the year ended 30 June 2014 would have been
$245.325 million and $43.395 million respectively.
e. Acquisition-related costs
The Group incurred acquisition-related costs, being external legal fees and due diligence costs for business interests acquired during the
year ended 30 June 2014. The amounts incurred could not be separately identified by individual acquisition as there were concurrent
acquisition activities for all businesses acquired throughout the year.
The legal fees and due diligence costs have been included in due diligence and restructure costs in the Group’s consolidated statement
of comprehensive income.
IV. Investments in associates
The table below provides aggregated information on the 41 businesses which are treated as investments in associates. The consideration
paid/payable ranged from $0.646 million to $11.948 million. The Group increased its equity interest in Rothbury Group Ltd from 17.9% to
30.1% on 7 August 2013.
Total assets and total liabilities are the aggregated balance of all the acquired associates as a whole and not just the Group’s share. These
balances are based on the acquired associates’ financial position at acquisition date. The financial information for any entity with overseas
operations is translated using exchange rate at the relevant reporting year end date.
a. Consideration and financial position of acquired associates
2014
Total consideration
Total assets
Total liabilities
72 | Steadfast Group Annual Report 2014
Total
$’000
139,251
393,435
295,267
NOTE 10. BUSINESS COMBINATIONS continued
b. Financial performance of acquired associates
The financial performance of the acquired associates in the table below is based on the percentage holding in the equity interests
of each acquired associate for the financial period since acquisition. The financial information for any entity with overseas operations
is translated using average exchange rate as at their relevant reporting year end date.
2014
Revenue
EBITA
Profit after income tax
Total
$’000
61,776
16,298
9,269
B. ACQUISITIONS FOR THE YEAR ENDED 30 JUNE 2013
I. Acquisition of subsidiaries
During the year ended 30 June 2013, the Group acquired the following subsidiaries:
• Wasal Holdings Pty Ltd and its wholly owned subsidiary, Wagland Salter & Associates Pty Limited (Wagland), an insurance broker in
New South Wales;
• Sports Underwriting Australia Pty Ltd (Sports), an insurance underwriting agency in Victoria; and
• DMA Unit Trust and DMA Insurance Brokers Pty Ltd (DMA), an insurance broker in New South Wales.
a. General details of the acquisitions
2013
Acquisition date
Voting shares acquired
Non-controlling interests at 30 June 2013
b. Consideration transferred
Cash
Deferred consideration - shares(a)
Deferred consideration(b)
Total
Wagland
Sports
DMA
30/11/2012
12/12/2012
12/12/2012
100.00%
80.00%
100.00%
-%
20.00%
-%
4,055
1,554
-
3,733
5,750
1,036
9,046
-
-
5,609
10,519
9,046
(a) On 7 August 2013, 25.00% and 50.00%, respectively of the purchase price for Wagland and Sports were settled with ordinary shares
issued by the Company. The shares are valued at $1.15 per share based on the initial public offer price when the Company listed on
the ASX. As at 30 June 2013, these amounts were classified as current liabilities as part of trade and other payables as the amounts
were expected to be settled as cash if the listing of the Company was not successful.
(b) The deferred consideration for Sports was subject to adjustment based on EBITA for the financial year ended 30 June 2013. The
amount recognised was based on 2013 actual EBITA and was subsequently settled at a lower amount than that based on the forecast
EBITA at date of acquisition.
Steadfast Group Annual Report 2014 | 73
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 10. BUSINESS COMBINATIONS continued
c. Identifiable assets and liabilities acquired
2013
Cash and cash equivalents
Trade and other receivables*
Property, plant and equipment
Deferred tax assets
Identifiable intangibles
Other assets
Trade and other payables
Income tax payable
Provisions
Deferred tax liabilities
Other liabilities
Total net identifiable assets
* The trade receivables comprise contractual amounts and are expected to be fully recoverable.
d. Goodwill on acquisition
2013
Total consideration paid
Total net identifiable assets acquired
Non-controlling interests acquired(a)
Goodwill on acquisition(b)
Wagland
$’000
Sports
$’000
1,596
1,398
67
81
972
30
1,925
3,701
48
13
3,000
-
DMA
$’000
1,489
1,445
143
52
2,538
3
(2,549)
(4,700)
(2,694)
(67)
(268)
(408)
-
852
(164)
(34)
(1,073)
-
(174)
(820)
-
(1,360)
2,716
622
Wagland
$’000
Sports
$’000
5,609
(852)
-
4,757
10,519
(2,716)
543
8,346
DMA
$’000
9,046
(622)
-
8,424
(a) Non-controlling interests acquired are based on the proportionate ownership interest in the total net identifiable assets recognised at
the acquisition date.
(b) Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired and non-controlling
interests at the acquisition date. The majority of the goodwill relates to benefits from the combination of synergies as well as the
acquired subsidiaries’ abilities to generate future profits. None of the goodwill recognised is expected to be deductible for tax purposes.
II. Acquisition of business assets
On 28 February 2013, the Group acquired the business assets of Newmarket Insurance Brokers Pty Ltd (Newmarket) for a payment of
$6,778,800, with 80% of the purchase price initially payable. The remaining 20% is recognised as deferred consideration and is subject to
adjustment based on an earn out based on earnings over the financial years ending 30 June 2013 and 2014.
On 10 May 2013, the Group acquired the business assets of an Authorised Representative of Wagland Salter & Associates Pty Limited
(Authorised Representative of WSA) for a payment of $456,000, being acquisition of client list and goodwill. The deferred consideration
for Authorised Representative of WSA is subject to adjustment based on the fee and commission income for the financial years ending
30 June 2014 and 2015. The amount recognised has been based on forecast fee and commission income.
a. Consideration transferred
2013
Cash
Deferred consideration*
Total
Newmarket
$’000
Authorised
Representative
of WSA
$’000
5,406
1,372
6,778
304
152
456
* The deferred consideration is an estimate based on the assumption that the acquirees will meet the forecast earnings target.
74 | Steadfast Group Annual Report 2014
NOTE 10. BUSINESS COMBINATIONS continued
2013
b. Identifiable assets and liabilities acquired
Property, plant and equipment
Deferred tax assets
Identifiable intangibles
Provisions
Deferred tax liabilities
Total net identifiable assets
c. Goodwill on acquisition
Total consideration paid
Total net identifiable assets acquired
Goodwill on acquisition*
Newmarket
$’000
Authorised
Representative
of WSA
$’000
15
20
1,545
(84)
(464)
1,032
6,778
(1,032)
5,746
-
-
284
-
(85)
199
456
(199)
257
* Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the acquisition
date. The majority of the goodwill relates to benefits from the combination of synergies as well as the acquired subsidiaries ability to
generate future profits. None of the goodwill recognised is expected to be deductible for tax purposes.
III. Financial performance of acquired subsidiaries and business assets
The contribution by the acquired subsidiaries and business assets to the financial performance of the Group from the acquisition date
to 30 June 2013 was outlined in the table below.
2013
Contribution for the period since acquisition
Revenue
Profit after income tax
Wagland*
$’000
Sports
$’000
DMA
$’000
Newmarket
$’000
1,371
227
1,988
778
1,633
188
831
(20)
* The contribution by the Authorised Representative of WSA is included in the result of Wagland.
If the acquisitions of subsidiaries and business assets occurred on 1 July 2012, the Group’s total revenue and loss after income tax
attributable to the owners of the Company for the year ended 30 June 2013 would have been $40.664 million and $12.328 million,
respectively.
IV. Acquisition-related costs
The Group incurred acquisition-related costs, being legal fees and due diligence costs for businesses acquired. They could not be
separately identified by individual acquisition as there were concurrent acquisition activities for all businesses acquired throughout
the financial periods.
V. Investment in associates for the year ended 30 June 2013
On 1 April 2013, the Group acquired 17.9% ownership interest in Rothbury Group Limited (Rothbury) and contracted to increase its
shareholding to 30.1% on the successful listing of the Company, which occurred in August 2013. Rothbury is considered an associate
as at 30 June 2013 due to the terms of the shareholder agreement in place.
The financial information provided in the table below is for the financial year ended 31 March 2013. These figures represent the financial
position and financial performance of Rothbury as a whole and not just the Group’s share. The financial information is translated using
exchange rate as at 31 March 2013 (being the year end date of Rothbury).
Steadfast Group Annual Report 2014 | 75
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 10. BUSINESS COMBINATIONS continued
Consideration transferred
Total assets
Total liabilities
Total revenue
Profit after income tax
NOTE 11. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries.
Rothbury
$’000
6,360
64,792
42,729
27,664
4,594
Table note
Country of
incorporation
2014
%
2013
%
Ownership interest
Name
A. PARENT ENTITY
Steadfast Group Limited
B. SUBSIDIARIES – OPERATING ENTITIES
I. Insurance broking businesses
Steadfast Insurance Brokers Pty Ltd
Brecknock Insurance Brokers Pty Ltd
Capital Insurance (Broking) Group Pty Ltd and Capital Insurance
Broking Group Unit Trust
Corporate Insurance Brokers Ballina (NSW) Pty Ltd and
Corporate Insurance Brokers Pty Ltd
Cyclecover Pty Ltd (formerly Australian Underwriting Group Pty Ltd)
DMA Insurance Brokers Pty Ltd
Gallivan, Magee & Associates Pty Ltd
Grand West Pty Ltd
GWS Pty Ltd
Hosie Steadfast Pty Ltd
Jakomil Pty Ltd and The Milbar Unit Trust
Logan Group Insurance Brokers Pty Ltd
Masterman Insurance Brokers Pty Ltd and
Robert Masterman Insurance Broking Unit Trust
Mega Capital Holdings Pty Ltd
National Credit Insurance (Brokers) Pty Ltd (incorporating IMC Trade Credit)
Newmarket Insurance Brokers Pty Ltd
PID Holdings Pty Limited
Professional Risk Placements Pty Ltd
Queensland Insurance Brokers Pty Ltd and QIS Financial Services Pty Ltd
RIB Group Holdings Pty Limited and its subsidiaries (RIB Group)
(iv)
Richards Steadfast Pty Ltd
RSM Financial Services Pty Ltd
Saunders Higgins Insurance Brokers Pty Ltd
76 | Steadfast Group Annual Report 2014
Australia
Australia
Australia
100.00
72.50
(ii)
Australia
47.00
(i)
(i)
(i)
(i)
(i)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
80.00
100.00
80.00
80.00
100.00
80.00
100.00
67.00
85.00
80.00
80.00
100.00
100.00
100.00
100.00
80.00
80.00
100.00
100.00
87.52
100.00
-
-
-
-
100.00
-
-
-
-
-
-
-
-
-
100.00
-
-
-
-
-
-
-
NOTE 11. SUBSIDIARIES continued
Name
Sawtell & Salisbury Pty Ltd and Sawtell & Salisbury Unit Trust
Steadfast IRS Pty Limited (formerly IRS Steadfast Pty Ltd)
Steadfast Taswide Insurance Brokers Pty Ltd (formerly Anca (Tas) Pty Ltd)
Wagland Salter & Associates Pty Limited
Waveline Investments Pty Ltd
II. Underwriting agencies businesses
Steadfast Underwriting Agencies Holdings Pty Ltd
Hostsure Underwriting Agency Pty Ltd (formerly Altiora Insurance Services Pty
Ltd)
Miramar Underwriting Agency Pty Limited
NM Insurance Pty Ltd
Protecsure Pty Limited
Sports Underwriting Australia Pty Ltd
Winsure Underwriting Pty Limited
WM Amalgamated Pty Ltd
III. Ancilliary and other businesses
Steadfast Convention Pty Ltd
Steadfast Foundation Pty Ltd
Steadfast Share Plan Nominee Pty Ltd
Steadfast Technologies Pty Ltd
White Outsourcing Pty Limited
Table note
Country of
incorporation
2014
%
2013
%
Ownership interest
(i)
(i)
(i)
(i)
(v)
(iii)
(iii)
(iii)
(iii)
(viii)
(vi)
(vii)
Australia
Australia
Australia
Australia
Australia
100.00
80.00
87.52
80.00
67.00
-
-
-
100.00
-
Australia
100.00
100.00
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100.00
100.00
70.00
60.00
80.00
100.00
76.00
100.00
100.00
100.00
100.00
100.00
-
-
-
-
80.00
-
-
100.00
100.00
100.00
100.00
-
Table note
(i) The following entities went through internal restructuring - transferring the equity interests of the broking business and its operations
into a business hub headed by another entity within the Group (hubbing) during the financial year. The ownership interest in the table
above represents the ownership interest post restructuring:
– Perth hub – Jakomil Pty Ltd (Jakomil) and The Milbar Unit Trust (trading as CentreWest Insurance Brokers) acquired 100.00% equity
interest in Waveline Investments Pty Ltd. The Group disposed 13.00% of equity interest of the Jakomil Group with the net effect
on disposal taken up as other reserves. The Group retains 67.00% equity in this hubbed operation.
– Queensland hub – The 100.00% equity interest in Insurance Broking Queensland Pty Ltd’s (IBQ) was sold to an associate,
Webmere Pty Ltd. After the change in ownership, IBQ became an associate of the Group.
– Melbourne hub – The Group has sold the insurance brokerages of Gallivan Magee & Associates and Masterman (both 100.00%
subsidiaries) into GWS Network Insurance Brokers (80% subsidiary). The Group retains 80.00% equity interest in the combined
operations.
– Sydney hub – The Group sold the insurance brokerages of Wagland Salter & Associates and DMA (both 100.00% subsidiaries)
to Steadfast IRS Pty Ltd (Steadfast IRS). Consideration for these sales included the issue of shares in the capital of Steadfast IRS
and further shares in the capital of Steadfast IRS were purchased from interests associated with Jonathan Upton. In aggregate,
the Group acquired an additional 31.00% interest in Steadfast IRS to hold an 80.00% equity interest in the combined operations.
The transaction was a related party transaction due to the interest in Steadfast IRS held by interests associated with Jonathan
Upton, a Director of the Company. The Company relied upon the arm’s length exception in the Corporations Act 2001 to the
requirement for shareholder approval.
– Tasmania hub – Steadfast Taswide Insurance Brokers Pty Ltd (formerly Anca (Tas) Pty Ltd) (Anca) acquired 100.00% of equity interest
in Saunders Higgins Insurance Brokers Pty Ltd. The Group acquired an additional 43.52% equity interest in Anca. The Group has
equity interest of 87.52% in the combined operation.
(ii) Although the Group acquired only 47.00% of equity interest in Capital Insurance (Broking) Group Pty Ltd and Capital Insurance Broking
Group Unit Trust (trading as Hervey Bay Maryborough Insurance Brokers, (Hervey Bay)), the Group effectively has control over Hervey Bay
as the Group has the right to appoint (and has appointed) half of the directors of Hervey Bay. Therefore it is classified as a subsidiary.
Steadfast Group Annual Report 2014 | 77
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 11. SUBSIDIARIES continued
(iii) All entities listed in the table above with no ownership holding in 2013 were acquired on 7 August 2013 apart from the entities which
were acquired by the Group on a different date as listed below:
– Protecsure Pty Limited was acquired on 13 December 2013;
– NM Insurance Pty Limited was acquired on 3 April 2014;
– MECON Winsure Insurance Group, being WM Amalgamated Pty Ltd and Winsure Underwriting Pty Ltd was acquired on 5 May 2014;
– IMC Trade Credit was acquired through National Credit Insurance Brokers.
(iv) The Group’s 90.00% interest is in RIB Group Holdings Pty Limited, but there are minority shareholders in RIB Group’s subsidiaries.
Following a scrip for scrip offer by RIB Group to these minority shareholders in its subsidiaries as well as further acquisitions
by the RIB Group, the Group’s effective ownership interest is 80.00%.
In addition to the acquisition considerations paid/payable, the Group entered into the following arrangement with the key management
personnel of this acquired business and minority interest shareholder:
– 3.000 million share options to be exercised at $1.00 per share. A share based payment of $0.365 million was recognised in the
profit and loss; and
– Put options to acquire the “A” shares held by the minority interest shareholder, the put option liability is recognised in other reserves.
(v) As at 30 June 2013, the Group had a 50.00% equity interest in Miramar Underwriting Agency Pty Ltd (Miramar) and completed the
increase in its shareholding in Miramar to 100.00% equity interest on 7 August 2013. The additional consideration was $6.112 million.
For the year ended 30 June 2014, a profit of $4.611 million is recognised as a result of remeasuring to fair value the equity interest
in Miramar which was held by the Group before the increase in shareholding in Miramar.
(vi) A trustee for Steadfast employee share plans.
(vii) The Group acquired the remaining 12.50% of White Outsourcing from interests associated with Cameron McCullagh, a key management
personnel during the financial year. The acquisition was on the same financial terms that other vendors of White Outsourcing received
upon the initial acquisition.
(viii) A trustee for Steadfast Foundation.
NOTE 12. INVESTMENTS IN ASSOCIATES
A. RECONCILIATION OF MOVEMENTS
Balance at the beginning of the financial year
Acquisition of associates
Write down of investment in an associate being deregistered
Reclassification of investment in associates to investment in subsidiaries*
Reclassification of investment in a subsidiary to investment in associates due to hubbing arrangement
Share of EBITA from associates
Less share of:
Finance costs
Amortisation expense
Income tax expense
Share of associates’ profit after income tax
Dividend received/receivable
Net foreign exchange movements
Balance at the end of the financial year
* This amount included:
2014
$‘000
8,219
139,251
-
(9,450)
46
2013
$‘000
1,543
6,360
(24)
-
-
17,732
824
(778)
(2,443)
(4,372)
10,139
(4,799)
982
(17)
(29)
(232)
546
(430)
224
144,388
8,219
– the carrying value of 50% equity interest in Miramar Underwriting Agency Pty Ltd (Miramar) as at 7 August 2013 prior to deemed
disposal of investment in associate. As at 30 June 2013, the Group had a 50% equity interest in Miramar and completed the increase
in its shareholding in Miramar to 100% equity interest on 7 August 2013. The additional consideration was $6.112 million. For the year
ended 30 June 2014, a profit of $4.611 million is recognised as a result of remeasuring to fair value the equity interest in Miramar
which is held by the Group before the increase in shareholding in Miramar.
– the associates, Steadfast IRS and Anca went into the hubbing arrangements during the year and are now classified as subsidiaries.
78 | Steadfast Group Annual Report 2014
NOTE 12. INVESTMENTS IN ASSOCIATES continued
B. DETAILS OF ASSOCIATES
Interests in associates are accounted for using the equity method of accounting. Information relating to associates is set out below.
Name
I. Insurance broking businesses
Armbro Insurance Brokers Pty Ltd
Armstrong’s Insurance Brokers Pty Ltd and Armstrong’s Insurance Brokers Unit Trust
Austcover Holdings Pty Ltd
Blackburn (Insurance Brokers) Pty Ltd and Liability Brokers Pty Ltd
Commercial Industrial Insurance Consultants Pty Ltd
Consolidated Insurance Agencies Pty Ltd
Covercorp Pty Ltd
Edgewise Insurance Brokers Pty Ltd and The Bradstock GIS Unit Trust
Empire Insurance Services Pty Ltd and McLardy McShane & Associates Pty Ltd
Finn Foster & Associates Pty Ltd
Finpac Insurance Advisors Pty Ltd
Garaty Murnane Insurance Brokers Pty Ltd
Gardner Insurance Brokers Qld Pty Ltd
Glenowar Pty Ltd
IPS Insurance Brokers Pty Ltd
J.D.I (YOUNG) Pty Limited
Johansen Insurance Brokers Pty Ltd
King Insurance Brokers Pty Ltd
Lanyon Partners Consolidated Pty Ltd
McKillop Insurance Brokers Pty Ltd
Melbourne Insurance Brokers Pty Ltd
Multi-Functional Policies Pty Ltd
NCA Insurance Services Pty Ltd
Optimus 1 Pty Ltd
Paramount Insurance Brokers Pty Ltd
Phoenix Insurance Brokers Pty Ltd
Pollard Advisory Services Pty Ltd
Rose Stanton Insurance Brokers Pty Limited
Rothbury Group Limited(b), (d)
RSM Group
Sapphire Star Pty Ltd
Scott & Broad Pty Ltd
Southside Insurance Brokers Pty Limited
Steadfast Life Pty Ltd (formerly Finserve Solutions Pty Limited)
Tudor Insurance Australia (Insurance Brokers) Pty Ltd and Tudor Insurance
Agency Unit Trust
Watkins Insurance Brokers Pty Limited and D&E Watkins Unit Trust
Webmere Pty Ltd
Ownership interest
Equity accounted
2014
%
2013
%
2014
$’000
2013
$’000
40.00
25.00
49.00
49.00
49.00
49.00
49.00
25.00
37.00
49.00
49.00
49.00
49.00
49.00
40.00
25.00
48.00
49.00
45.00
49.00
49.00
49.00
49.00
25.00
25.00
46.00
49.00
49.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,569
779
13,260
3,403
2,369
3,780
1,208
2,123
3,731
7,566
1,105
4,690
1,429
4,407
3,329
745
4,822
2,319
5,146
5,111
1,631
1,171
3,576
642
971
5,155
4,717
777
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30.10
17.90
13,857
6,836
49.00
30.00
49.00
49.00
50.00
48.00
35.00
49.00
-
-
-
-
-
-
-
-
6,284
1,478
9,076
665
3,083
2,037
1,885
4,569
-
-
-
-
-
-
-
-
Steadfast Group Annual Report 2014 | 79
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
Name
II. Underwriting agencies businesses
Miramar Underwriting Agency Pty Limited(c)
Sterling Insurance Pty Limited
III. Ancilliary and other businesses
Meridian Lawyers Limited
Ownership interest
Equity accounted
2014
%
2013
%
2014
$’000
2013
$’000
-
50.00
-
1,383
39.50
25.00
-
-
7,612
2,311
-
-
(a) The following entities went through internal restructuring - transferring the equity interests of the broking business and its operations
into a business hub headed by another entity within the Group (hubbing). The ownership interest in the table above represents the
ownership interest post restructuring:
– The Group acquired 100.00% of the equity interest of Insurance Broking Queensland Pty Ltd (IBQ) in August 2013. IBQ’s 100.00%
equity interest was sold to Webmere Pty Ltd during the internal restructure (transferring the equity interests of the broking business
and its operations into a business hub). After the hubbing arrangement, IBQ became an associate with effective equity interest
reduced to 49.00%.
– Steadfast Taswide Insurance Brokers Pty Ltd (formerly Anca (Tas) Pty Ltd) (Anca) acquired 100.00% of equity interest in Saunders
Higgins Insurance Brokers Pty Ltd. The Group acquired an additional 43.52% equity interest in Anca. The Group has an equity
interest of 87.52% in this hubbed operation. Anca became a subsidiary of the Group post hubbing.
(b) Rothbury is considered an associate as at 30 June 2013 due to the terms of the shareholder agreement in place, including the
request to provide a board member to Rothbury. The Group is delivering a range of services to Rothbury as it establishes the Group’s
presence in the New Zealand market. Further, an additional 12.20% interest in the business was acquired as part of the listing of the
Company in August 2013.
(c) As at 30 June 2013, the Group had a 50.00% equity interest in Miramar and completed the increase in its shareholding in Miramar
to 100.00% equity interest on 7 August 2013. Miramar became a subsidiary of the Group post the increase in equity interest.
(d) All entities have principal operations in Australia with the exception of Rothbury Group Limited whose principal operation is in
New Zealand.
C. SUMMARISED FINANCIAL INFORMATION OF ASSOCIATES
I. Disclosure in aggregate
These disclosures relate to the investment in all associates in aggregate. These figures represent the financial position and performance
of the associates as a whole and not just the Group’s share.
2014
$’000
268,398
110,278
243,243
27,456
159,643
45,572
30,472
30,472
2013
$’000
54,704
22,802
48,632
5,696
35,743
8,719
5,183
5,183
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
EBITA
Profit/(loss) after income tax from continued operations
Total comprehensive income
80 | Steadfast Group Annual Report 2014
NOTE 13. INVESTMENT IN JOINT VENTURE
A. RECONCILIATION OF MOVEMENTS
Balance at the beginning of the financial year
Additional investment in joint venture
Share of EBITA from joint venture
Less share of:
Finance costs
Amortisation expense
Income tax expense
Share of joint venture’s profit after income tax
Dividend received/receivable
Balance at the end of the financial year
B. DETAILS OF JOINT VENTURE
Name
2014
$’000
3,593
-
2013
$’000
2,462
1,206
5,324
3,648
(280)
(479)
(1,369)
3,196
(2,364)
4,425
-
(206)
(1,056)
2,386
(2,461)
3,593
Ownership interest
2014
%
2013
%
Macquarie Premium Funding Pty Ltd and its subsidiaries (Macquarie Pacific Funding Group)
50.00
50.00
Macquarie Pacific Funding Group, which has a business name of Macquarie Pacific Funding, is an insurance premium funding provider.
Macquarie Premium Funding Pty Ltd, the holding company of the Macquarie Pacific Funding Group, is incorporated in Australia. It has
operations in both Australia and New Zealand.
Macquarie Bank Limited and the Company, the joint venture partners, have an equal equity interest in Macquarie Pacific Funding Group.
C. SUMMARISED FINANCIAL INFORMATION OF JOINT VENTURE
These disclosures relate to the financial position and financial performance of the joint venture as a whole and not just the Group’s share.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenue
EBITA
Profit/(loss) after income tax
Total comprehensive income
2014
$’000
24,567
9,565
17,228
7,675
56,299
10,637
6,392
6,392
2013
$’000
20,913
11,176
14,502
8,954
37,853
7,296
4,772
4,772
Steadfast Group Annual Report 2014 | 81
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 14. FINANCIAL INSTRUMENTS
A. FINANCIAL RISK MANAGEMENT OBJECTIVES
The Group’s activities expose it to a variety of financial risks: interest rate risk, credit risk and liquidity risk. The Group’s overall risk
management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These
methods include sensitivity analysis in the case of interest rate risk and ageing analysis for credit risk.
Risk management is carried out by senior finance executives (finance) under policies approved by the Board of Directors (the Board).
These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits.
Finance identifies, evaluates and may hedge financial risks within the Group’s operating units. Finance reports to the Board on a regular basis.
B. MARKET RISK
Interest rate risk
As at the reporting date, the Group had the following variable rate bank accounts and borrowings.
Cash at bank
Cash on deposit
Bank overdrafts
Bank loans
2014
2013
Weighted
average
interest rate
%
1.93
3.42
7.00
5.23
Weighted
average
interest rate
%
1.72
4.02
-
6.95
Balance
$’000
94,510
20,698
(654)
(20,390)
94,164
Balance
$’000
10,530
937
-
(36,623)
(25,156)
The Group held $0.022 million (2013: $0.011 million) cash in hand which did not generate any interest income at the end of the financial year.
An official increase/decrease in interest rates of one hundred (2013: one hundred) basis points would have an adverse/favourable effect
on profit/(loss) after tax of $0.659 million (2013: adverse/favourable effect of $0.176 million) per annum.
The basis point change is based on the expected volatility of interest rates using market data, historical trends over prior years and the
Group’s ongoing relationships with financial institutions.
C. CREDIT RISK
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group
obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised
financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial
position and notes to the financial statements. The Group does not hold any collateral.
Credit risk of the Group mainly arises from cash and cash equivalents, trade and other receivables and loan to a joint venture.
Although there is a concentration of cash and cash equivalents held with a major bank, credit risk is not considered significant.
The Group’s exposure to credit risk is concentrated in the financial services industry with parties which are considered to be of sufficiently
high credit quality to minimise credit risk losses. Receivables include amounts due from policyholders in respect of insurances arranged
by controlled entities. Insurance brokers and underwriting agencies have credit terms of 90 days from policy inception to pay funds
received from policyholders to insurers. Should policyholders not pay, the insurance policy is cancelled by the insurer and a credit
given against the amount due. The Group’s credit risk exposure in relation to these receivables is limited to commissions and fees
charged. Commission revenue is recognised after taking into account an allowance for expected revenue losses on policy lapses and
cancellations, based on past experience.
The loan to a joint venture is provided with a fixed maturity date, seven years from March 2013. The credit risk from the joint venture party
is considered to be low as it is a loan secured by all present and future assets of the joint venture party.
D. LIQUIDITY RISK
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available
borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities, continuously monitoring actual
and forecast cash flows, and by matching the maturity profiles of financial assets and liabilities.
82 | Steadfast Group Annual Report 2014
NOTE 14. FINANCIAL INSTRUMENTS continued
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on
the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid.
Weighted
average
interest rate
%
1 year
or less
$’000
Between
1 to 2 years
$’000
Between
2 to 5 years
$’000
Over
5 years
$’000
Total
contractual
maturities
$’000
2014
Non-derivatives
Non-interest bearing
Payables on broking/underwriting
agency operations
Trade and other payables
Deferred consideration
Interest bearing
Bank loans
Total non-derivatives
2013
Non-derivatives
Non-interest bearing
Payables on broking/underwriting
agency operations
Trade and other payables
Deferred consideration
Interest bearing
Bank loans
Total non-derivatives
188,222
23,706
13,598
5.23
862
226,388
18,305
16,459
8,340
3,094
46,198
6.95
-
1,285
6,454
746
8,485
-
-
1,524
3,094
4,618
-
-
-
-
-
-
188,222
24,991
20,052
14,657
14,657
4,125
4,125
20,390
253,655
-
-
-
30,435
30,435
-
-
-
-
-
18,305
16,459
9,864
36,623
81,251
The cash flows in the maturity analysis above are not reflective of events that occurred subsequent to balance date. With respect to
30 June 2013 balances, the Company successfully completed its capital raising in August 2013 through the initial public retail and
institutional offer via the ASX and repaid all bank loans at that time. The capital raised also provided funding for the settlement of deferred
consideration payable through a combination of cash and shares.
E. FAIR VALUE OF FINANCIAL INSTRUMENTS
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of trade receivables
and trade payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities is
estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial
instruments.
NOTE 15. CONTINGENCIES
A. CONTINGENT ASSETS
Claims experience benefit
The Group may receive a claims experience benefit payment or payments in respect of certain types of insurance products placed with
insurance companies. Where the revenue recognition criteria for those insurance products’ claims experience benefit have not been met,
the timing and amount of any such payments are still too uncertain and dependent upon future events. In these circumstances it is not
practical to include an estimate of the financial effect of any potential claims experience benefit as considered by AASB 137.
B. CONTINGENT LIABILITIES
There were no contingent liabilities as at 30 June 2014.
Steadfast Group Annual Report 2014 | 83
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 16. COMMITMENTS
Contracted non-cancellable leases for property, plant and equipment committed at the reporting date but not recognised as liabilities or
payables are provided below.
OPERATING LEASE COMMITMENTS
Within one year
One to five years
Over five years
2014
$’000
2013
$’000
3,926
6,305
986
11,217
74
256
-
330
NOTE 17. EVENTS AFTER THE REPORTING PERIOD
A. FINAL DIVIDEND
On 27 August 2014, the Board declared a final dividend for 2014 of 2.7 cents per share, 100% franked. The dividend will be paid
on 8 October 2014.
B. ACQUISITIONS
I. Acquisition of Ausure Group
On 1 August 2014, the Group announced that it has agreed to acquire 72.3% of Ausure Group (Ausure), an authorised representative
network of insurance professionals in 150 locations across Australia. Ausure has a normalised forecast earnings before interest expense,
tax and amortisation of $4.000 million for the year ending 30 June 2015.
Due to the very recent timing of this acquisition, for the purposes of this financial report, it is currently impractical to state with any certainty
the fair values of the assets and liabilities acquired. The following disclosures provide the preliminary estimated financial impact to the Group
at the acquisition date based on Ausure’s 30 June 2014 financial information. This will not be the same as the financial impact which will be
disclosed in the business combination for the next reporting period when the full financial information will be available.
a. Consideration paid/payable
Cash
Deferred consideration*
Total
Ausure
$’000
13,000
7,619
20,619
* Some of the consideration will be settled based on the actual financial performance for the financial year ending 30 June 2015 and thus
will be recognised as deferred consideration by the Group. The deferred consideration is estimated based on the assumption that the
acquirees will meet the forecast revenue and/or earnings target.
84 | Steadfast Group Annual Report 2014
NOTE 17. EVENTS AFTER THE REPORTING PERIOD continued
b. Estimated identifiable assets and liabilities as at 30 June 2014 (not at acquisition date)
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Deferred tax assets
Identifiable intangibles
Other assets
Trade and other payables
Income tax payable
Provisions
Deferred tax liabilities
Total net identifiable assets/(liabilities)
c. Estimated goodwill on acquisition as at 30 June 2014 (not at acquisition date)
Total consideration paid/payable
Total net identifiable assets acquired
Non-controlling interests acquired(a)
Goodwill on acquisition(b)
Ausure
$’000
469
1,369
354
119
5,110
802
(758)
(1,594)
(396)
(1,653)
3,822
Ausure
$’000
20,619
(3,822)
1,059
17,856
(a) Non-controlling interests acquired are based on the proportionate ownership interest in the total net identifiable assets recognised
at the acquisition date.
(b) Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired and non-controlling
interests at the acquisition date. The majority of the goodwill relates to benefits from the combination of synergies as well as the
acquired subsidiary’s abilities to generate future profits. None of the goodwill recognised is expected to be deductible for tax purposes.
II. Other acquisitions
Post the reporting date, the Group also announced the following acquisitions:
• Allied Insurance Group – on 4 July 2014, the Group acquired Allied Insurance Group Limited (Allied), the second largest broker
network in New Zealand. Allied had a normalised earnings before interest expense, tax and amortisation of $0.300 million for the
12 months ended 31 March 2014.
• Steadfast Re – on 5 August 2014, the Group agreed to take a 50% equity interest in Steadfast Re Pty Limited (Steadfast Re).
Steadfast Re is the former Australian & New Zealand reinsurance broking business of Beach & Associates Limited with forecast
earnings before interest expense, tax and amortisation of $1.000 million for the year ending 30 June 2015.
C. BANK FACILITIES WITH MACQUARIE BANK
The Group extended its Macquarie Bank revolving line of credit facility from $85.000 million to $130.000 million.
D. POTENTIAL ACQUISITON OF CALLIDEN INSURANCE LTD’S GENERAL INSURANCE BUSINESS
On 27 August 2014, the Group announced the potential acquisition of Calliden Group Ltd (Calliden) and a binding sale of the general
insurance business of Calliden Insurance Ltd on completion for a net cost of approximately $55.000 million. The acquisition is subject
to approval of a Scheme of Arrangement by Calliden’s shareholders, the Court and regulators. Subject to these approvals, the Group
expects completion to occur in December 2014.
Steadfast Group Annual Report 2014 | 85
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 18. PROFIT AND LOSS INFORMATION
This provides further information about individual items recognised in the statement of comprehensive income:
A. DUE DILIGENCE AND RESTRUCTURE COSTS(a)
Due diligence and restructure costs on acquisition of businesses
Share based payments on re-weighting of shares(b)
Due diligence and restructure costs
2014
$’000
2013
$’000
3,283
-
3,283
13,304
10,478
23,782
(a) The due diligence and restructure costs are expected to be non-recurring expenses and arose due to specific activities to facilitate the
Company listing on the ASX in August 2013.
(b) At the Extraordinary General Meeting of shareholders in June 2013, the shareholders agreed to restructure the shareholdings from an
equal holding to a combination of an equal and proportionate holding based on past services provided to the Group. This resulted in
share based payments relating to those brokers receiving more than the average shareholding. The retained earnings of the Group
were increased by a corresponding amount.
B. EMPLOYEE BENEFITS
Contributions to defined contribution superannuation funds
Share based payments
C. RENTAL EXPENSE RELATING TO OPERATING LEASES
Minimum lease payments
D. TRANSFERS TO PROVISIONS CHARGED TO PROFIT OR LOSS
Restructuring provision
E. (PROFIT)/LOSS ON INVESTMENTS
(Profit) on fair value of investments(a)
Net (profit)/loss on disposal of part interest in investments(b)
(a) This amount represented:
4,960
3,187
687
64
4,027
251
-
400
(4,445)
449
-
-
– a profit of $4.611 million recognised as a result of remeasuring to fair value the equity interest in Miramar Underwriting Agency Pty
Ltd (Miramar). The Group increased its shareholding in Miramar from 50.00% to 100.00% (refer to Note 10 for further details);
– a net loss of $0.166 million on re-assessment of deferred consideration on acquisitions of businesses, being the reduction in
amounts recognised previously based on updated information.
(b) This amount was presented as part of the administration, brokers support service and other expense on the statement of
comprehensive income.
NOTE 19. SHARE BASED REMUNERATION
A. SHARE BASED PAYMENTS – EMPLOYEE RELATED
Share based remuneration encourages employee share ownership, links employee reward to the performance of the Group and assists
with retention of key personnel.
The obligations under share based payment arrangements will be settled by the on-market purchase of the Company’s ordinary shares
which will be held in trust. The Group intends that shares will be purchased on or near grant date at the prevailing market price.
Trading in the Company’s ordinary shares awarded under the share based remuneration arrangements is covered by the same restrictions
that apply to all forms of share ownership by employees. These restrictions limit an employee trading in the Company’s ordinary shares
when they are in a position to be aware, or are aware, of price sensitive information.
The Group has the following types of share based remuneration arrangements provided to employees, each arrangement has different
purposes and different rules:
• conditional rights;
• short term incentive plan; and
• long term incentive plan.
The share based payments are included in the employee expenses line in the statement of comprehensive income.
86 | Steadfast Group Annual Report 2014
NOTE 19. SHARE BASED REMUNERATION continued
I. Senior management and executive plans
The senior management and executive share plan arrangements are awarded based on the terms and conditions as set out in the short
term and long term incentive plans. The awards in these two plans when granted may be in the form of cash and/or conditional rights.
The Remuneration & Succession Planning Committee has approved the participation of each individual in these arrangements as well as
the actual awards based on the performance conditions in these two plans being met.
a. Short term incentive plan
The short term incentive (STI) plan commenced operation during the financial year ended 30 June 2014. The STI plan is a discretionary,
performance based, at risk reward arrangement. STI will be awarded based on each participant’s performance hurdles and whether the
financial performance hurdles of the Group are met.
The key terms of the STI plan are:
• total STI will be awarded and settled in the form of cash and conditional rights as approved by the Board if diluted EPS growth targets
and individual participant’s performance criteria for the performance period (ie 1 July to 30 June) are met. If met:
– 60% of STI will be settled in the form of cash and will be paid annually in September after the performance period; and
– 40% of STI awarded will be deferred and granted in the form of conditional rights;
• conditional rights (rights) are granted for nil consideration;
• the vesting condition of rights is not market related and requires the participant to continue in relevant employment for a three year
tenure from the grant date of the rights (retention period);
• notional dividends will accrue on the rights during the retention period;
• when vesting (after completion of retention period), each right will be converted into one Steadfast ordinary share per right for nil
consideration upon exercise by the participant. The notional dividend will be converted into the equivalent number of Steadfast
ordinary shares based on the weighted average share price over the five trading days upon exercise of rights by the participant;
• the Board has discretion to settle the rights in cash instead of Steadfast ordinary shares; and
• if the vesting condition is not met then the rights lapse.
The first STI award was approved by the Board on 25 August 2014. Further details of 2014 STI in relation to the Group’s executives (being
key management personnel of the Group) are disclosed in the Remuneration Report for the current financial year.
b. Long term incentive plan
The long term incentive (LTI) plan commenced operation during the financial year ended 30 June 2014. The LTI plan is a discretionary,
performance based, at risk reward arrangement. LTI will be awarded based on the Board’s approved percentage of the fixed remuneration
for each participant (in the range of 15%-50%).
The key terms of the LTI plan are:
• LTI will be awarded in the form of conditional rights as approved by the Board and will be granted in August following the end of each
financial year;
• conditional rights (rights) are granted for nil consideration;
• the vesting condition of rights is not market related and is conditional on meeting the following performance hurdles:
– the participants meeting their individual performance hurdles during the five year employment tenure from the grant date
of the rights (retention period); and
– the Group’s achieving a 10% compound per annum diluted EPS growth during the retention period;
• notional dividends will accrue on the rights during the retention period;
• the vesting is conditional on there being no material adverse deterioration of the EPS growth during the performance period before
the exercise of the rights;
• before vesting, the Board will determine the number of rights to vest based on the combined outcome of the performance hurdles;
• when vesting (after completion of retention period), each right will be converted into one Steadfast ordinary share per right for nil
consideration upon exercise by the participant. The notional dividend will be converted into equivalent number of Steadfast ordinary
shares based on the weighted average share price over the five trading days upon exercise of rights by the participant;
• the Board has discretion to settle the rights in cash instead of Steadfast ordinary shares; and
• if the vesting conditions are not met then the rights lapse.
The first LTI award was approved by the Board on 25 August 2014. Further details of 2014 LTI in relation to the Group’s executives (being
key management personnel of the Group) are disclosed in the Remuneration Report for the current financial year.
Steadfast Group Annual Report 2014 | 87
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 19. SHARE BASED REMUNERATION continued
II. Employee share plan
Conditional rights
During the financial year ended 30 June 2013, the Remuneration & Succession Planning Committee approved the allocation of conditional
rights to various employees who have contributed to the ASX listing of the Company.
The key terms of the conditional rights allocated include:
• rights allotted free of cost to those employees; and
• conversion to one ordinary share per right at the end of August 2014 subject to the continuing employment at that time and the
performance of the employee meeting the minimum criteria as agreed by management.
The table below provides the details of the conditional rights allocated.
Conditional rights
No conditional rights were granted during the year ended 30 June 2014 (2013: 736,500).
No conditional rights are vested and exercisable as at 30 June 2014 (2013: Nil).
Fair value at
grant date
$
2014
Number
2013
Number
0.98
736,500
736,500
The fair value of the conditional rights at grant date was calculated using the following assumptions. The value of the conditional rights
was not discounted as the effect of time value of the money was not material.
2013
Significant factors and assumptions
Share price ($)(a)
Expected dividend foregone
Expected life of rights
1.00
40% of annual dividend at mid-range of the dividend payout ratio(b)
15 months
(a) As the Company’s shares were not listed as at 30 June 2013, the closest price for valuation of the conditional rights was the minimum
share price required for the Company to proceed with the listing on the ASX.
(b) The Company intends to target a dividend payout ratio in the range of 65% to 85% of net profit after tax attributable to shareholders
of the Company.
B. SHARE BASED PAYMENTS ON RE-WEIGHTING SHARES WITH NON-EMPLOYEES
On 14 June 2013, an Extraordinary General Meeting was held to change the constitution of the Company to facilitate the listing of the
Company on the ASX. In August 2013, the Company was successfully listed on the ASX.
During the Extraordinary General Meeting, the shareholders also voted to adopt a re-weighting of shares between owners from an equal
allocation basis to a combination of equal allocation and one based on past support of various products and businesses.
This re-weighting did not change the dollar value of share capital which existed as at 30 June 2013 or at listing in August 2013. However,
it had a one-off effect of causing a share based payment expense of $10.478 million, offset by an increase in retained earnings for the
financial year ended 30 June 2013. The expense reflected the value transferred to owners whose proportionate holding in the Company
increased as a result of past services provided to the Company.
The re-weighting determined the number of ordinary shares to be issued to each owner upon successful listing of the Company.
The Board considered that it was important that the relative value provided by each of the Company’s existing owners (each of them
owned five ordinary shares before the re-weighting of shares assessment) was recognised through their future shareholdings in the
Company. Therefore, the re-weighting of shares assessment had reference to a number of factors relating to each owner’s past
contribution to the Company. The outcome of the re-weighting assessment resulted in a total of 65.588 million of ordinary shares
to be issued to the existing owners in August 2013 upon the listing of the Company. This re-weighting assessment also changed the
shareholdings from five ordinary shares per owner to various numbers of shares per owner, with some of the owners holding more than
the average number of shares on issue at listing and others holding less than the average number of shares.
There were four elements (Re-weighting criteria) which were taken into account when assessing the number of re-weighting shares
an owner was entitled to. The total number of shares assessed from Re-weighting criteria represented the total number of shares to be
issued to each existing owner upon successful listing of the Company. The Re-weighting criteria were:
• equal allocation;
• marketing and administration fees contribution;
• claims experience benefits contribution; and
• Macquarie Premium Funding contribution.
88 | Steadfast Group Annual Report 2014
NOTE 20. TAXATION
A. INCOME TAX (EXPENSE)/BENEFIT
Profit/(loss) before income tax (expense)/benefit
Income tax (expense)/benefit at statutory tax rate of 30%
2014
$’000
2013
$’000
33,601
(14,688)
(10,080)
4,406
Tax effect of amounts which are not (deductible)/taxable in calculating taxable income:
Non-deductible expenses – share based payments on re-weighting of shares
-
(3,144)
Share of after tax profits of associates and joint venture
Non-deductible expenses – other (including restructure costs)
Non-assessable gains - including uplift on fair value of subsidiary
Other amounts deductible upon acquisition
Other miscellaneous
Over/(under) provision for income tax of prior periods
Income tax (expense)/benefit
B. MAJOR COMPONENTS OF INCOME TAX (EXPENSE)/BENEFIT
Current tax
Movement in deferred tax assets
Movement in deferred tax liabilities
Adjustments for current tax of prior periods
C. INCOME TAX ON ITEMS RECOGNISED DIRECTLY IN EQUITY
Deferred tax assets
Deferred tax liabilities
D. DEFERRED TAX ASSETS
I. Composition
Accrued expenses
Provisions
Software development pool and capitalised project
Expenditure claimable over five years
Executive loans
Employee share scheme
Deferred income
Others
4,000
(1,392)
1,300
-
44
880
(721)
-
-
-
(6,128)
1,421
(31)
-
(6,159)
1,421
(9,169)
(1,495)
930
2,111
(31)
1,200
1,716
-
(6,159)
1,421
5,194
(294)
4,900
412
3,012
340
4,261
1,042
356
412
389
-
67
67
694
603
205
510
-
-
79
1
10,224
2,092
Steadfast Group Annual Report 2014 | 89
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 20. TAXATION continued
II. Movements
Balance at the beginning of the financial year
Add: reversal of offset against deferred tax liabilities
Gross balance at the beginning of the financial year
Credited to profit or loss
Credited to equity
Additions through business combinations
Balance at the end of the financial year before offset
Less: offset against deferred tax liabilities
Balance at the end of the financial year
E. DEFERRED TAX LIABILITIES
I. Composition
Intangible assets
Unearned income
Accrued income
Property, plant and equipment
Prepayments
Other
II. Movements
Balance at the beginning of the financial year
Add: reversal of offset against deferred tax assets
Gross balance at the beginning of the financial year
Credited to profit or loss
Charged to equity
Additions through acquisitions - identified intangible assets
Additions through business combinations
Balance at the end of the financial year before offset
Less: offset against deferred tax assets
Balance at the end of the financial year
90 | Steadfast Group Annual Report 2014
2014
$’000
2013
$’000
138
1,954
2,092
930
5,194
2,008
10,224
(4,407)
5,817
23,621
5,879
479
140
32
956
726
-
726
1,200
-
166
2,092
(1,954)
138
2,369
-
519
20
-
67
31,107
2,975
1,021
1,954
2,975
(2,111)
294
23,324
6,625
31,107
(4,407)
26,700
1,774
-
1,774
(1,716)
67
-
2,850
2,975
(1,954)
1,021
NOTE 21. NOTES TO THE STATEMENT OF CASH FLOWS
A. COMPOSITION
Cash and cash equivalents
Cash held on trust
Bank overdrafts
2014
$’000
2013
$’000
38,551
76,679
(654)
3,235
8,243
-
114,576
11,478
B. RECONCILIATION OF PROFIT/(LOSS) AFTER INCOME TAX TO NET CASH FROM OPERATING ACTIVITIES
Profit/(loss) after income tax expense/(benefit) for the year
27,442
(13,267)
Adjustments for
Depreciation and amortisation and loss on disposal of property, plant and equipment
Share of profits of associates and joint venture
Income tax paid
Profit on fair value of investment
Dividends received from associates/joint venture
Executive loans fair value adjustment
Loss on sale of associate
Share based payments and incentives accruals
Change in operating assets and liabilities
Change in trade and other receivables
Change in deferred tax assets
Change in other assets
Change in trade and other payables
Change in income tax payable
Change in deferred tax liabilities
Change in other liabilities
Change in provisions
Net cash from operating activities
9,012
(13,335)
(7,801)
(4,445)
7,163
3,279
(51)
1,013
(2,932)
(624)
-
-
-
-
4,391
10,478
(35,605)
(3,787)
731
12,829
11,754
(1,800)
(3,862)
(452)
5,463
1,518
734
(1,137)
15,006
(1,102)
(1,053)
-
(5,688)
2,946
C. SIGNIFICANT NON-CASH TRANSACTIONS IN RELATION TO INVESTING AND FINANCING ACTIVITIES
I. Investing activities
During the financial year ended 30 June 2014, the Group had the following non-cash investing activities:
• allotment of 134.210 million ordinary shares (consideration shares) at $1.15 per share as partial settlement on acquisitions of subsidiaries
and associates completed on 7 August 2013. Refer to Note 9.A share capital movement and Note 10 Business combinations for further details.
• the following hubbing arrangements have been partially completed on a scrip for scrip basis:
– $6.524 million on Sydney (Steadfast IRS) hub;
– $6.018 million on Melbourne (GWS) hub; and
– $8.134 million on Tasmania (Anca) hub.
Steadfast Group Annual Report 2014 | 91
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 21. NOTES TO THE STATEMENT OF CASH FLOWS continued
II. Financing activities
During the financial year ended 30 June 2014, the following ordinary shares issued were settled by cash:
• $154.341 million consideration shares for acquisitions (as mentioned in section I above);
• $10.900 million interest free, unsecured and full recourse loans provided to four executives (Executive loans) for the allotment
of 10.900 million shares in August 2013; and
• $1.003 million dividends under the Dividend Reinvestment Plan were settled by the allotment of 0.667 million of ordinary shares
at $1.5037 per share in lieu of cash.
During the financial year ended 30 June 2013, there were no non-cash transactions relating to investing and financing activities,
apart from the re-weighting of shares described in Note 19.B.
NOTE 22. RELATED PARTY TRANSACTIONS
A. KEY MANAGEMENT PERSONNEL COMPENSATION
The aggregate remuneration received/receivable by the Directors and other members of key management personnel of the Group
is set out below.
Short term employee benefits
Post employment benefits
Long term benefits
Termination payments
Share based payments
2014
$
2013
$
10,348,970
3,270,649
196,995
48,255
-
512,149
148,615
100,060
284,271
19,230
11,106,369
3,822,825
B. TRANSACTIONS WITH SUBSIDIARIES
All transactions that have occurred among the subsidiaries within the Group have been eliminated for consolidation purposes.
C. TRANSACTIONS WITH OTHER RELATED PARTIES
The following transactions occurred with related parties:
I. Sale of goods and services
Marketing and administration fees received from associates on normal commercial terms
103,266
366,351
Marketing and administration fees received from joint venture on normal commercial terms
3,153,676
3,157,769
Commission income received/receivable from associates on normal commercial terms
85,888
II. Interest income
Interest income received/receivable from joint venture
III. Payment for goods and services
Estimated Steadfast Network Broker rebate expense paid or payable to associates on the basis as
determined by the Board
Commission expense paid/payable to associates on normal commercial terms
Service fees paid to associates
285,422
1,262,575
1,613,420
1,690,997
-
-
-
-
-
92 | Steadfast Group Annual Report 2014
NOTE 22. RELATED PARTY TRANSACTIONS continued
IV. Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
a. Current receivables
Trade receivables from associates
Trade receivables from joint venture
Dividend receivable from associates
b. Current payables
Trade payables to associates
V. Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
a. Current receivables
Loan to joint venture(a)
Executive loans(b)
Loans to subsidiaries’ related parties(c)
b. Non-current receivables
Loan to joint venture(a)
Executive loans(b)
Loans to subsidiaries’ related parties(c)
2014
$
2013
$
4,261,029
144,863
-
82,516
902,031
430,943
124,964
587
603,125
490,500
256,912
-
-
-
3,015,625
3,698,268
6,934,592
2,735,526
-
-
(a) The loan to joint venture, Macquarie Pacific Funding Group (MPF) has a face value of $3,618,750. The loan receivable balance
includes $Nil accrued interest (2013: $79,518).
The key terms and conditions of this loan are:
– Variable interest rate based on the aggregate of Macquarie Bank Limited (MBL) Reference Rate and a margin of 2% per annum.
The MBL Reference Rate refers to the interest rate determined by MBL and published by MBL at any time on its website.
– The loan is repayable seven years from the date of initial advance, which occurred in March 2013.
– The loan is secured by all present and future assets of MPF.
(b) Executive loans were provided to four Steadfast executives as interest free loans for them to acquire Steadfast ordinary shares when
the Company was listed on the ASX.
The key terms and conditions of these loans are:
– interest free, unsecured and full recourse loans; and
– to be repaid in full five years after the date on which the loans were provided.
(c) Loans to subsidiaries’ related parties were provided to some non-controlling interests owners of certain subsidiaries for them
to refinance existing debts. Due to the confidentiality clauses within the agreements, no further terms and conditions can
be provided.
Steadfast Group Annual Report 2014 | 93
Notes to the Financial Statements continued
FOR THE YEAR ENDED 30 JUNE 2014
NOTE 23. PARENT ENTITY INFORMATION
The financial information provided in the table below is only for Steadfast Group Limited, the parent entity of the Group.
A. STATEMENT OF COMPREHENSIVE INCOME
Profit/(loss) after income tax
Total comprehensive income
B. STATEMENT OF FINANCIAL POSITION
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Share capital
Reserves
Retained earnings
Total equity
2014
$’000
2013
$’000
8,381
8,381
(13,749)
(13,749)
39,718
538,921
28,246
42,023
488,187
8,711
-
496,898
10,966
62,037
20,961
54,756
317
-
6,964
7,281
C. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in Note 2, except for Investments in
subsidiaries, associates and joint venture which are accounted for at cost, less any impairment. Dividends received are recognised as
income by the parent entity and its receipt may be an indicator of an impairment of the investment.
D. GOING CONCERN
The parent entity financial statements have been prepared on a going concern basis.
E. GUARANTEES ENTERED INTO BY THE PARENT ENTITY IN RELATION TO THE DEBTS OF ITS SUBSIDIARIES
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2014 and 30 June 2013.
F. CONTINGENT ASSETS/LIABILITIES
I. Contingent assets
Claims experience benefit
The Company may receive a claims experience benefit payment or payments in respect of an insurance product placed with an
insurance company. Where the revenue recognition criteria for this insurance product’s claims experience benefit have not been met,
the timing and amount of any such payments are still too uncertain and dependent upon future events. In these circumstances it is not
practical to include an estimate of the financial effect of any potential claims experience benefit as considered by AASB 137.
II. Contingent liabilities
There were no contingent liabilities as at 30 June 2014.
G. CAPITAL COMMITMENTS - PROPERTY, PLANT AND EQUIPMENT
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2014 and 30 June 2013.
94 | Steadfast Group Annual Report 2014
NOTE 24. REMUNERATION OF AUDITORS
A. KPMG
I. Audit and review services
2014
$
2013
$
Audit or review of the financial statements
1,068,708
438,200
II. Services other than audit and review of financial statements
Other assurance services
Due diligence services
Investigating accountant services
Other services
Taxation compliance and advisory services
Other services
B. OTHER AUDITORS
I. Audit and review services
Audit or review of the financial statements
II. Services other than audit and review of financial statements
Other services
Taxation advisory services
Other services
72,209
1,212,212
-
1,909,968
25,000
-
140,097
267,296
97,209
3,529,573
153,311
46,498
139,436
185,934
-
-
-
-
Steadfast Group Annual Report 2014 | 95
Directors’ Declaration
In the opinion of the Directors of Steadfast Group Limited (the Company):
• the consolidated financial statements and notes 1 to 24, including all the remuneration disclosures that are contained in the Remuneration
Report of the Directors’ Report, are in accordance with the Corporations Act 2001, including:
– giving a true and fair view of the financial position of the Group as at 30 June 2014 and of its performance for the year ended on that
date; and
– complying with Australian Accounting Standards (including Australian Interpretations) and the Corporations Regulations 2001; and
• the financial report also complies with International Financial Reporting Standards as disclosed in Note 2; and
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The Directors have been given the declaration required by section 295A of the Corporations Act 2001 from the Chief Executive Officer
and Chief Financial Officer for the financial year ended 30 June 2014.
Signed at Sydney on 27 August 2014 in accordance with a resolution of the Directors.
Frank O’Halloran, AM
Chairman
Robert Kelly
Managing Director
96 | Steadfast Group Annual Report 2014
Independent Auditor’s Report
TO THE OWNERS OF STEADFAST GROUP LIMITED
REPORT ON THE FINANCIAL REPORT
We have audited the accompanying financial report of Steadfast Group Limited (the company), which comprises the consolidated
statement of financial position as at 30 June 2014, and consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 24 comprising a summary of
significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company
and the entities it controlled at the year’s end or from time to time during the financial year.
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL REPORT
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary
to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In note 2, the
directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements of the Group comply with International Financial Reporting Standards.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the
Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the
Group’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
INDEPENDENCE
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
AUDITOR’S OPINION
In our opinion:
(a) the financial report of the Group is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2014 and of its performance for the year ended on that
date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2.
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KMPG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
Steadfast Group Annual Report 2014 | 97
REPORT ON THE REMUNERATION REPORT
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2014. The directors of the
company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in
accordance with auditing standards.
AUDITOR’S OPINION
In our opinion, the remuneration report of Steadfast Group Limited for the year ended 30 June 2014, complies with Section 300A of the
Corporations Act 2001.
KPMG
Andrew Dickinson
Partner
Sydney
27 August 2014
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KMPG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
98 | Steadfast Group Annual Report 2014
Shareholders’ Information
AS AT 15 AUGUST 2014
ORDINARY SHARE CAPITAL
There were 501,638,307 fully paid ordinary shares held by 3,737 shareholders. All the shares carry one vote per share and carry the rights
to dividends.
DISTRIBUTION OF SHAREHOLDERS
The number of shareholders by size of holding is as follows:
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number
of holders
Number
of shares
% of
issued capital
471
1,640
562
781
283
439,748,852
54,853,063
4,400,482
2,454,278
181,632
87.66
10.93
0.88
0.49
0.04
3,737
501,638,307
100.00
There were 69 shareholders holding fewer than a marketable parcel ($500) based on a market price of $1.39 at the close of trading
on 15 August 2014.
SUBSTANTIAL SHAREHOLDERS
Steadfast Group Limited*
JCP Investment Partners
Mackay Insurance Services Pty Ltd
Number
of shares
% of
issued capital
184,110,351
50,021,769
32,000,000
36.70
9.97
6.38
* This balance consists of 172.5 million Re-weighting Shares and Consideration Shares subject to escrow until 31 August 2014, 10.9 million
Executive Shares subject to ongoing escrow arrangements, and 0.7 million Employee Share Plan Shares.
Steadfast Group Annual Report 2014 | 99
Shareholders’ Information continued
AS AT 15 AUGUST 2014
TWENTY LARGEST SHAREHOLDERS
Name
J P Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Mackay Insurance Services Pty Ltd
Citicorp Nominees Australia Limited
National Nominees Limited
RBC Investor Services Australia Nominees Pty Limited
BNP Paribas Nominees Pty Limited
Citicorp Nominees Pty Limited
Argo Investments Limited
Robert Bernard Kelly
Cameron Scott McCullagh
Yabby Investments Pty Limited
RC & IP Gilbert Pty Limited
HSBC Custody Nominees (Australia) Limited
Condell Holdings Pty Limited
David Wayne Higgins
UBS Nominees Pty Limited
David Ingram
RM & JA Alford Investments Pty Limited
Number
of shares
% of
issued capital
51,488,449
50,381,821
47,083,140
32,000,000
16,177,923
13,448,069
10,469,735
8,087,516
7,092,359
5,197,797
5,000,000
4,000,000
4,000,000
4,000,000
3,741,823
3,453,636
3,091,006
2,946,257
2,815,821
2,730,000
10.26
10.04
9.38
6.38
3.23
2.68
2.09
1.61
1.41
1.04
1.00
0.80
0.80
0.80
0.74
0.69
0.62
0.59
0.56
0.54
Total
DIVIDEND DETAILS
Dividend
Interim
Final
277,205,352
55.26
Franking
Amount per share
DRP issue price
Payment date
Fully franked
Fully franked
1.8 cents
2.7 cents
$1.5037
14 April 2014
*
8 October 2014
* The DRP issue price for the final dividend is scheduled to be announced on 22 September 2014.
100 | Steadfast Group Annual Report 2014
Corporate Directory
DIRECTORS
Frank O’Halloran, AM (Chairman)
Robert Kelly (Managing Director & CEO)
David Liddy
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
Jonathan Upton
COMPANY SECRETARY
Linda Ellis
Peter Roberts
NOTICE OF AGM
The annual general meeting of Steadfast Group Limited will be held on
Wednesday 29 October 2014 at 10.00 am at The Radisson Blu Plaza Hotel,
27 O’Connell Street, Sydney NSW 2000.
CORPORATE OFFICE
STEADFAST GROUP LIMITED
Level 3
99 Bathurst Street
Sydney NSW 2000
POSTAL ADDRESS
PO Box A980
Sydney South NSW 1235
phone: 02 9495 6500
email: investor@steadfast.com.au
website: steadfast.com.au
SHARE REGISTRY
LINK MARKET SERVICES
Level 12
680 George Street
Sydney NSW 2000
POSTAL ADDRESS
Locked Bag A14
Sydney South NSW 1235
phone: 1300 554 474
email: registrars@linkmarketservices.com.au
STOCK LISTING
Steadfast Group Limited’s ordinary shares are listed
on the Australian Securities Exchange (ASX code: SDF).
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Steadfast Group Annual Report 2014
Steadfast Group Limited
ABN 98 073 659 677
www.steadfast.com.au