Steadfast Group Limited (ASX: SDF)
Annual Report 2017
The largest general insurance broker network and group of underwriting
agencies in Australasia, with growing operations in Asia and Europe.
Vision:
To enhance the value of
Steadfast Group aligned
businesses through our
combined strength, creating
exceptional value for our
shareholders.
Mission:
We aim to grow shareholder
value through maintaining
and growing our market
position in the provision of
insurance distribution and
related services with a core
focus on general insurance.
Values:
We are united
We achieve
We are strong
Our industry
Steadfast Group overview
Our 21 year journey
2017 fi nancial highlights
Message from the Chairman
Message from the Managing Director & CEO
Steadfast Network
Steadfast Underwriting Agencies
Complementary businesses
Steadfast Technologies
02
04
06
08
09
10
12
14
16
17
Key initiative – Steadfast Client Trading Platform
18
Key initiative – International footprint
Environmental, social and governance
Supporting our people
Board of Directors
Senior management team
Chief Financial Offi cer’s report
2017 Financial Report
20
22
24
25
26
28
30
1
Steadfast Group Annual Report 2017 Steadfast Group focuses on the
intermediated general insurance market in
Australasia, with growing operations in Asia
and Europe. Within this market, Steadfast
Group primarily focuses on small-to-medium
enterprises (SMEs) which make up 87% of our
clients by gross written premium.
The SME market is advice driven which
means that client relationships are key to
Steadfast Group.
y
r
t
s
u
d
n
i
r
u
O
28%
market share of intermediated
general insurance brokers in
Australia1
2.3m
policies placed in FY17
87%
of Steadfast Group clients
are small-to-medium
enterprises
Steadfast Group client base
Small enterprises
Small enterprises
Medium enterprises
Medium enterprises
Retail: Home/Motor
Retail: Home/Motor
Retail: Other
Retail: Other
Corporate
Corporate
56%
56%
31%
31%
9%
9%
2%
2%
2%
2%
2
1Steadfast Group and APRA Intermediated General Insurance Performance Statistics (December 2016)
Key market:
Australian intermediated general insurance1
The intermediated general insurance market consists of insurance brokers and underwriting agencies.
Australia is Steadfast Group’s largest market, of which the Group has a 28% share, with a total $16b of
gross written premium generated in 2016.
$16b
intermediated
market
Steadfast 2 8 %
d
n-interm e diat e
rivate health $
P
o
N
b
2
2
$82b
Australian
insurance
market
G
e
n
e
r
a
l
$
3
7
b
)
t
c
e
d (dir
Life $23b
o
N
n -inter m ediate
Steadfast Group does not carry underwriting risk
What is an insurance broker?
An insurance broker is a qualifi ed professional who advises
their clients on insurance and risk management strategies.
A broker acts on behalf of their client to arrange insurance
most suitable to their specifi c circumstances and works
directly with insurers to arrange cover as well as manage
any claim process. They are paid a fi xed or percentage-
based commission and often a fee for their advice.
Steadfast Network brokers are primarily focused on the
small-to-medium enterprise market where they use their
experience and expertise to off er specialised advice directly
to their clients.
What is a broker network?
A collection of individual brokers who work together and
pool their gross written premium under a mutual banner
and obtain services which are best in class.
What is an underwriting agency?
An underwriting agency distributes specialised products
through insurance brokers (and through direct channels for
personal lines business) on behalf of insurers.
Steadfast Underwriting Agencies use specialised market
knowledge to off er products in niche areas through general
insurance brokers, both Steadfast Network and non-
Steadfast Network brokers.
1APRA Quarterly General Insurance Statistics (December 2016).
3
Steadfast Group Annual Report 2017
Steadfast Group (listed on ASX) has three
business units primarily focused on the
intermediated general insurance market.
Steadfast Group is the largest general
insurance broker network and group of
underwriting agencies in Australasia, with
growing operations in Asia and Europe.
Steadfast
Network
361
62
general insurance brokers
equity holdings by Steadfast Group
(all of which are in the Steadfast
Network)
The Steadfast Network is the largest general insurance
broker network in Australasia. It has 361 Network brokers
primarily focused on small-to-medium enterprise clients
and generated $5 billion of gross written premium in FY17.
The Steadfast Network was co-founded 21 years ago led
by Steadfast Group Managing Director & CEO, Robert
Kelly, initially with 43 brokers and has grown continually
since. Steadfast Network brokers receive improved market
access, exclusive products and services. Steadfast Group
receives marketing and administration (M&A) fees from
insurers in exchange for access to the Steadfast Network
which is used to provide products and services to the
Network with a portion rebated back to brokers.
Steadfast Group currently has equity holdings in 62
brokers in the Steadfast Network. Equity holdings range
from 25% to 100% with Steadfast Group receiving a
corresponding share of earnings from each broker.
Steadfast Group will combine or ‘hub’ these brokers
where growth opportunities, economies of scale and
synergies can be obtained.
All brokers in the Network are treated equally with no
preference given to those where there is a Steadfast
Group equity holding.
Page 12
t
s
a
f
d
a
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t
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p
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G
4
Steadfast
Underwriting
Agencies
Complementary
businesses
24
75
underwriting agencies
products off ered by Steadfast
Underwriting Agencies
businesses supporting the
Steadfast Network and Steadfast
Underwriting Agencies
7
Mixture of wholly owned, part owned
and joint venture businesses
Steadfast Underwriting Agencies is the largest group of
underwriting agencies in Australasia. The 24 agencies
generated $777 million of gross written premium in FY17
by off ering specialised products in niche areas.
In December 2014, eight agencies were acquired from
Calliden (an ASX listed company), four months later, two
large, market leading agencies (UAA and CHU) were
purchased from QBE to create the largest underwriting
agency group in Australasia.
Steadfast Group has an equity holding in all 24 Steadfast
Underwriting Agencies. Most are majority owned with
Steadfast Group receiving a corresponding share of
earnings. Each agency retains their individual brand
to highlight their unique off ering. Approximately half
of gross written premium is placed outside of the
Steadfast Network.
Steadfast Group has seven complementary businesses
which support the operations of the Steadfast Network
and Steadfast Underwriting Agencies and provide an
EBITA contribution to intermediaries and other businesses
in the Group.
Steadfast Technologies
Technology services (see page 17 for more detail)
100% owned
Steadfast Business Solutions
Back offi ce service provider
100% owned
Work Health Options
Work health consultancy
Steadfast Re
Reinsurance broker
Steadfast Life
Specialised life insurance broker
Macquarie Pacifi c Funding
Premium funding
(Joint venture with Macquarie)
Meridian Lawyers
Specialised legal practice
70% owned
50% owned
50% owned
50% owned
25% owned
Page 14
Page 16
5
Steadfast Group Annual Report 2017 Our 21 year journey
Steadfast Group
Steadfast Network brokers
Steadfast Underwriting Agencies
Complementary businesses
Steadfast was established in 1996 as a collective buying and service group for independent brokers.
The Network quickly grew to become the largest general insurance broking network in Australasia.
In August 2013, Steadfast listed on the ASX to raise funds to become a co-owner and consolidator
of brokers, underwriting agencies and complementary businesses.
21 years on, the Group is the largest distribution channel of general insurance products across
Australasia, with growing operations in Asia and Europe.
ASX
listed
at an IPO price of $1.15 per
share, raised $334 million and
purchased equity interests in
59 brokers, three agencies and
two complementary businesses
(White Outsourcing and
Meridian Lawyers)
$3.9b
Network broker GWP
278
Network brokers
$114m
Underwriting Agencies GWP
5
Underwriting Agencies
Macquarie Premium Funding
merged with Pacifi c Premium
Funding to form Macquarie
Pacifi c Funding
Establishment of
Macquarie Premium
Funding, a 50%
owned joint venture
with Macquarie
Establishment of
Miramar Underwriting
Agency with a 50%
ownership position
43
Steadfast Network
brokers
Founded as a
collective buying
and service group for
independent brokers
in Australia
$4.4b
Network broker GWP
304
Network brokers
$385m
Underwriting Agencies GWP
GWP
22
$145m
Underwriting Agencies GWP
22
$4.5b
Network broker GWP
343
Network brokers
$5.0b
Network broker GWP
361
Network brokers
$745m $777m
Underwriting Agencies
Underwriting Agencies GWP
24
Underwriting Agencies
Underwriting Agencies
$40m $86m
Steadfast Direct GWP
Steadfast Direct GWP
Underwriting Agencies
Established hubs in six
states and merged 25
entities into eight hubs
Purchased eight Calliden
underwriting agencies
Raised $300m in equity to
fund acquisitions, primarily
the CHU and UAA agencies
Became the largest
underwriting agency group
in Australia
Reached an ASX market
capitalisation of
$1b+
Developed common
back offi ce IT systems
for Steadfast brokers and
Agencies
Launched the Steadfast
Client Trading Platform
Launched the Steadfast
Underwriting Agencies
London super binder
Reached an ASX market
capitalisation of
$1.5b+
Launched Steadfast
Network in Singapore
Acquired equity stake
in unisonBrokers and
renamed unisonSteadfast
Reached an ASX market
capitalisation of
$2.0b+
$4.1b
Network broker GWP
306
Network brokers
10
Underwriting Agencies
Joined the ASX 200 index
Acquired the second
largest broker network in
New Zealand which was
renamed Steadfast New
Zealand
Established a referring
network in Asia
Launched retail product
off erings through Steadfast
Direct
Established Steadfast Life
with a 50% ownership
Established Steadfast Re,
a 50% owned joint venture
with the former management
of the Australian & New
Zealand reinsurance broking
business of Beach
& Associates Limited
1996
2005
2007
2013
2014
2015
2016
2017
PRE INITIAL PUBLIC OFFERING
POST INITIAL PUBLIC OFFERING
6
$4.5b
Network broker GWP
343
Network brokers
$5.0b
Network broker GWP
361
Network brokers
$745m $777m
Underwriting Agencies GWP
Underwriting Agencies
GWP
24
Underwriting Agencies
22
$40m $86m
Steadfast Direct GWP
Underwriting Agencies
Launched Steadfast
Network in Singapore
Acquired equity stake
in unisonBrokers and
renamed unisonSteadfast
Reached an ASX market
capitalisation of
$2.0b+
Steadfast Direct GWP
Developed common
back offi ce IT systems
for Steadfast brokers and
Agencies
Launched the Steadfast
Client Trading Platform
Launched the Steadfast
Underwriting Agencies
London super binder
Reached an ASX market
capitalisation of
$1.5b+
$4.4b
Network broker GWP
304
Network brokers
$385m
Underwriting Agencies GWP
22
Underwriting Agencies
Established hubs in six
states and merged 25
entities into eight hubs
Purchased eight Calliden
underwriting agencies
Raised $300m in equity to
fund acquisitions, primarily
the CHU and UAA agencies
Became the largest
underwriting agency group
in Australia
Reached an ASX market
capitalisation of
$1b+
$4.1b
Network broker GWP
306
Network brokers
$145m
Underwriting Agencies GWP
10
Underwriting Agencies
Joined the ASX 200 index
Acquired the second
largest broker network in
New Zealand which was
renamed Steadfast New
Zealand
Established a referring
network in Asia
Launched retail product
off erings through Steadfast
Direct
Established Steadfast Life
with a 50% ownership
Established Steadfast Re,
a 50% owned joint venture
with the former management
of the Australian & New
Zealand reinsurance broking
business of Beach
& Associates Limited
2014
2015
2016
2017
7
Steadfast Group Annual Report 2017 2017
fi nancial
highlights
Underlying NPAT
Underlying EPS (NPAT)
Full year dividend
$66m 8.9cps
up 10% year-on-year
up 10% year-on-year
7.0cps
up 17% year-on-year
Underlying revenue
$504m up 7% year-on-year
Total shareholder return
since listing
Underlying EBITA
$143m up 11% year-on-year
$m
600
500
400
300
200
100
0
504
470
309
169
188
FY13
FY14
FY15
FY16
FY17
196%1
$m
150
120
90
60
30
0
143
130
90
57
62
FY13
FY14
FY15
FY16
FY17
Steadfast Network GWP
$5.0b up 10% year-on-year
Steadfast Underwriting Agencies
$777m up 4% year-on-year
Total billings
5.0
4.4
4.5
3.9
4.1
$b
6
5
4
3
2
1
0
745
777
$b
800
700
600
500
400
300
200
100
0
385
114
145
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
$6.5b+
Steadfast Network brokers,
Steadfast Underwriting Agencies
GWP plus fees, levies, taxes
8
1Total shareholder return as at 30 June 2017 including FY17 dividend and further value to shareholders who participated in the 2015 rights issue
Underlying NPAT
Underlying EPS (NPAT)
Full year dividend
$66m 8.9cps
up 10% year-on-year
up 10% year-on-year
7.0cps
up 17% year-on-year
Underlying revenue
Total shareholder return
Underlying EBITA
$504m up 7% year-on-year
since listing
$143m up 11% year-on-year
504
470
309
169
188
143
130
90
57
62
$m
150
120
90
60
30
0
196%1
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
Steadfast Network GWP
Steadfast Underwriting Agencies
Total billings
$5.0b up 10% year-on-year
$777m up 4% year-on-year
5.0
4.4
4.5
3.9
4.1
745
777
$b
800
700
600
500
400
300
200
100
0
385
114
145
$6.5b+
Steadfast Network brokers,
Steadfast Underwriting Agencies
GWP plus fees, levies, taxes
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
$m
600
500
400
300
200
100
0
$b
6
5
4
3
2
1
0
Message from the Chairman
'Steadfast Group has
delivered another strong
set of fi nancial results
and continues to invest
for the future.'
The Directors are pleased to report another year of strong
fi nancial and operational performance which saw 9.8%
growth in underlying net profi t after tax and 10.6% growth
in earnings before interest, tax and amortisation (EBITA).
This excellent result was driven by organic growth and
margin improvement, particularly in our broker business.
Importantly, the increase in profi t was achieved as we
continued to invest in new broker services and technology
to deliver longer term value to your company (see page 17
for more detail).
Total shareholder return and dividend
Shareholders who have been invested in Steadfast Group
since our IPO in August 2013 have benefi ted from a 196%
total return (including the fi nal 2017 dividend). Our ASX
market capitalisation reached $2 billion (as at 30 June 2017)
largely driven by the growth in underlying earnings and our
outlook for continued growth from the Steadfast Network.
Our strong fi nancial performance, including record
underlying net profi t after tax and cash fl ow, has allowed the
Board to declare a fully franked fi nal dividend of 4.4 cents
per share up 22% from last year. This is a total dividend of 7.0
cents per share (fully franked), growth of 17% year-on-year.
The total 2017 dividend is in line with our target payout ratio
of between 65% and 85% of underlying net profi t after tax
adjusting for non-trading items.
Steadfast Network growth
One of our core strategies is to continue to grow the
Steadfast Network by providing quality products and
services to our brokers. In FY17, we were again successful
in growing the Network by adding 18 new brokers across
Australia, New Zealand, Asia and London (see page 20 for
more detail). We also continued our successful acquisition
and hubbing strategy as referred to on page 13 of this report.
Capital management
We continue to be prudent with our capital by following a
strict acquisition strategy. As at the year end, the total Group
gearing ratio was 18.5% which is well below the Board
mandated total gearing maximum ratio of 30%. Long term
corporate debt facilities of $285 million are in place with a
maturity date of August 2020, with $111 million unutilised
and available for the fi nancing of acquisitions.
Environmental, social and governance
Steadfast Group is committed to supporting the
communities in which we operate. In 2017, we donated over
1% of underlying net profi t after tax to charitable causes
including $350,000 to nine diff erent organisations through
the Steadfast Foundation (see page 22 for more detail).
Our sustainability ambassador, Tim Jarvis AM, is sponsored
by Steadfast Group for his climate change research and
is engaged with Steadfast Network brokers and Steadfast
Underwriting Agencies to develop practical strategies on
climate change (see page 23 for more detail).
We believe our diverse workforce is a key strength of
Steadfast Group with females making up 57% of all
employees group-wide and 41% of management positions
while 24% of our staff are from a non-English speaking
background. We also see the importance of succession
planning which is in place for all senior executives.
Corporate governance remains a key focus for the Board.
This includes regular review of senior management and
business performance against strategic objectives and
oversight of risk management. Another year of strong results
is testament to management performance, with no material
breaches demonstrating the strong risk management
framework that is in place.
Annual General Meeting
Our Annual General Meeting will be held on Thursday 26
October 2017 in Sydney. I encourage our shareholders to
attend. The senior management team, the Directors and
I will be available to answer your questions on Steadfast
Group’s performance and future strategy.
Thank you
I would like to extend my gratitude to all our employees
who are extremely well led by Robert Kelly, Managing
Director & CEO, for another year of record growth. I would
also like to thank all our brokers in the Steadfast Network,
our Steadfast Underwriting Agencies, our strategic partners
and our clients for their commitment to the success of
Steadfast Group. I am very fortunate to have the support of
Robert and a small Board of Directors who are all focused
on their responsibilities and commitment to increasing the
wealth of our shareholders.
Frank O’Halloran, AM
Chairman
9
Steadfast Group Annual Report 2017 Message from the Managing Director & CEO
Steadfast Group has a 28% share by broker of the near $16
billion intermediated general insurance market in Australia.
We are the largest general insurance broker network and
underwriting agencies group in Australasia and have
achieved this by off ering innovative products, services and
support to attract brokers and underwriting agencies to join
Steadfast.
We are proud of what we have achieved but we are not
complacent and see technology as the next evolution
in our service off ering. Our investment in technology is
culminating in the development of the Steadfast Client
Trading Platform, a contestable marketplace off ering
Steadfast Network brokers effi cient access to improved
products from our insurer partners to support our Network
broker's clients.
Financial performance
We are pleased to report record earnings before interest, tax
and amortisation ($143m, up 10.6%), record net profi t before
tax ($66m, up 9.8%) and over $6.5 billion of total network
billings including $5bn of gross written premium (GWP)
from the Steadfast Network.
Steadfast Network broker growth
The Steadfast Network grew to 361 brokers in FY17, which
includes nine brokers from our international expansion
into Singapore, as brokers continue to be attracted to our
exclusive products and services.
Acquisitions
Steadfast Group had another busy year acquiring brokers.
In total we acquired new equity holdings in nine brokers
and increased our existing equity holdings in a further 12
brokers (see page 13 for more detail) providing 3% growth in
acquisition EBITA.
New Steadfast Underwriting Agency
Steadfast Underwriting Agencies launched a new agency
in FY17, Blend Insurance Solutions, which specialises in the
accident and health sector. It aligns with our strategy of
focusing on niche product segments and is a joint venture
with Canadian-based Fairfax Financial Holdings (see page 14
for more detail).
Number of brokers in the Steadfast Network
400
361
343
306
304
300
278
FY13
FY14
FY15
FY16
FY17
200
10
Investment in technology
Over our 21 year history we have worked with our Steadfast
Network brokers and Underwriting Agencies to support
them in off ering the best possible products and services
to their clients. The next evolution is through technology
where we have invested in developing our own systems
which allows us to control and analyse our data to adapt to
our users needs (see page 17 for more detail).
This has required signifi cant investment over the recent
years and we expect to see higher commission revenue and
improved effi ciency as a result. Steadfast Network brokers
will have exclusive access to the Steadfast Client Trading
Platform, a contestable marketplace and instant quoting
system which allows them to obtain market data for their
clients as effi ciently as possible (see page 18 for more detail).
This will allow brokers to spend more time with their clients,
tailoring their cover to their personalised risk management
needs and generating new business opportunities.
Importantly, the Steadfast Client Trading Platform seamlessly
integrates with INSIGHT, another major technological
investment. INSIGHT is a content management system
which increases effi ciency and reduces back offi ce costs
and is exclusively available to Steadfast Network brokers. We
have received considerable demand for this new initiative
from brokers and will be investing in the year ahead to
integrate the system across the Network.
Our investment in the Steadfast Client Trading Platform
also gives our Underwriting Agencies the ability to off er
international capacity through the London super binder,
via our technology platform, UnderwriterCentral, which
sits alongside our local insurer partners in the contestable
market available to brokers.
International footprint
International growth of our Network is a key strategy for
Steadfast Group. In recent years we have successfully
replicated our model in New Zealand. In Asia, we have
initially focused on the Singapore market where we have
nine brokers with further applications pending. We continue
to roll out products and services to our Singapore brokers
as the network grows and are investigating opportunities in
other Asian jurisdictions.
In June 2017 we acquired a stake in unisonBrokers (renamed
unisonSteadfast) which is one of the world’s largest general
insurance broker networks with over 200 brokers in 130
countries and $US17 billion of GWP. In time, we will create
new revenue streams by off ering products and services to
unisonSteadfast brokers while Steadfast Network brokers will
also have the ability to off er global coverage to their clients.
Outlook
Steadfast Group is primarily focused on the small-to-medium
enterprise general insurance which is experiencing a hardening
market, particularly in the June 2017 renewals period.
We expect our ongoing investment in technology to
continue to deliver revenue in FY18 with a further uplift in
FY19 as more Steadfast Network brokers use the Steadfast
Client Trading Platform and integrate INSIGHT into their
business. The resulting sales and margin growth and cost
'Steadfast
Group has
reported
record
results while
investing
for the next
phase of
growth.'
$5b
Steadfast Network gross
written premium
$66m
Underlying NPAT
24
Steadfast Underwriting
Agencies
effi ciencies will benefi t Steadfast Group through our equity
holdings in 62 Steadfast Network brokers and continue to
attract new brokers to join the Network.
Our focus on the relationship and advice driven small-to-
medium enterprises market gives us a stable customer,
product and geographical base. Combined with our
investment in technology and international strategy, we see
strong growth opportunities in FY18 and beyond.
We have given FY18 guidance of EBITA of between $155
million and $165 million and NPAT of between $70 million
and $75 million. This guidance allows for:
- 5% to 7% premium price increase across brokers' portfolios
- Growth from key initiatives
- Broker-led organic growth and margin improvement
- No material acquisition growth
- Ongoing spend on new technology initiatives for future
growth
- 2H 18 impact of closure of builders warranty agency
Thank you
'None of us are as good as all of us' and ‘Stronger Together’
are the Steadfast Group mottos and nowhere is this better
refl ected than in the performance of our staff who work
enthusiastically towards achieving our strategy. I would also
like to thank our Board members, Steadfast Network brokers,
Steadfast Underwriting Agencies and strategic partners for their
contribution towards our excellent performance this year.
We have been on our journey for 21 years but there is still
much more to achieve and I look forward to many more
years ahead.
Robert Kelly
Managing Director & CEO
11
Steadfast Group Annual Report 2017 Steadfast
Network
The Steadfast Network has 361
general insurance brokers who
receive superior market access,
exclusive products and services
backed by the size and scale of
the Steadfast Group. Brokers in
the Network have access to over
160 products and services which
support their business and allow
them to focus on their clients'
insurance and risk management
needs. Key benefi ts to being a
Steadfast Network broker include
improved policy wordings, broker
services, exclusive access to
Steadfast’s technology (see page
17 for more detail) and triage
support for challenging claims.
Steadfast Network brokers
receive all of these products and
services at no cost to them.
Insurer partners have access to
over $5.0 billion of gross written
premium from the small-to-
medium enterprise market
through the Steadfast Network.
12
Exclusive to Steadfast Network brokers
Scale and strength
Size gives us strong relationships with insurer partners.
Products and services
Access to over 160 services supporting their business
& clients.
Technology
Specialised technology services.
Helplines
Legal, contractual liability, compliance, human
resources & technical.
Steadfast triage
Provides expert support across claims, ethics &
placement.
Training and networking events
Market leading professional development through
face-to-face & webinars.
Erato PI program
Professional indemnity cover for Steadfast Network
brokers.
Steadfast Direct
Home, motor & landlord products off ered to clients
through Steadfast Network brokers.
Marketing
Sales and marketing support.
Policy wordings
Best in class wordings utilising broker & triage input.
Market access
Access to the leading insurance providers from
Australia & around the world.
Strategic partners
Over the Group's 21 year history, Steadfast Group has
developed strong relationships with carefully selected
insurers, underwriting agencies and premium funders to
support the Steadfast Network. These relationships extend to
Steadfast Network brokers providing them with an extensive
marketplace of product and service providers.
Major insurer partners
Premium funders
Equity brokers
Steadfast Group currently has equity holdings in 62
brokers, all of which are in the Steadfast Network. Steadfast
Group will look to acquire an equity position in a broker
based on cultural alignment, strategic rationale and
fi nancial performance. As these brokers are generally part
of the Steadfast Network, they are already well known to
Steadfast Group which facilitates the due diligence and
acquisition process.
Steadfast Group may combine or ‘hub’ these brokers where
growth opportunities, economies of scale and synergies can
be obtained. Currently there are 11 hubs across Australia,
with a total of 7 brokers being added to these hubs in FY17.
Future activities
The Steadfast Network continually adds and improves
products and services to support brokers in the Network
based on broker feedback, to best serve their clients and
grow their business as well as attract new brokers to join.
Technology is a key way in which we support brokers
in the Steadfast Network and a major focus in the years
ahead. The Steadfast Client Trading Platform will continue
to roll out (see page 18 for more detail) with fi ve major
insurance classes now contracted. Although it has only
been in operation for a short period, it is expected that the
contestable marketplace, best-in-class policy wording, client
services and improved remuneration to attract Steadfast
Network brokers to use the system. The Steadfast Client
Trading Platform is exclusive to Steadfast Network brokers.
The Steadfast Network is also expanding its footprint in
international markets (see page 20 for more detail). The
Steadfast Network model has been successfully replicated
in New Zealand with 38 brokers generating gross written
premium of NZ$330m. Singapore is the current focus of the
Asian rollout with nine initial brokers agreeing to join the
Network and fi ve insurers agreeing to support improved
policy wordings and commission rates.
In June 2017, Steadfast Group acquired a stake in
unisonBrokers (renamed unisonSteadfast), a global general
insurance network, which has over 200 broker members
in 130 countries, generating US$17 billion of gross written
premium. This is a strategic partnership and over the
medium term new revenue streams will be created by using
our experience to grow the products and services available
on the unisonSteadfast network. Steadfast Network brokers
will benefi t from access to the unisonSteadfast multi-
jurisdictional product off ering for their clients.
Strategy
2017
achievements
Operate a Network that is stronger together and the
network of choice for brokers
$5.0b
record gross written premium
Continually enhance services that are provided to Steadfast
Network brokers to meet the needs of their clients
Build and develop relationships with insurers
and other strategic partners
361
9
brokers now in the Network
up 18 from FY16
new brokers in Singapore
Grow international presence
US$17b
unisonSteadfast network GWP
13
Steadfast Group Annual Report 2017 Steadfast
Underwriting
Agencies
Steadfast Underwriting Agencies
is the largest underwriting
agency group in Australasia.
The agencies extend our
intermediated general insurance
distribution capability by off ering
brokers, inside and outside of the
Steadfast Network, specialised
products and capacity in niche
markets.
Blend Insurance Solutions
Blend is the newest underwriting agency in the Steadfast Underwriting
Agencies group. It was launched in May 2017 as a 50/50 joint venture
with Advent, part of Fairfax Financial Holdings. Blend specialises in
off ering accident and health capacity to brokers and has secured renewal
rights to Beazley’s Australian portfolio.
London super binder
The London super binder was launched in August 2016 creating a
single binder facilitating simple access to Lloyd's of London capacity.
This binder allows Lloyd's to participate in the Steadfast Client Trading
Platform (see page 18 for more detail) alongside local insurer partners.
In addition, the binder has the ability to off er capacity to other global
jurisdictions, including New Zealand, Asia and Europe, supporting
Steadfast Group’s international growth strategy (see page 20 for more
detail).
Future activities
Steadfast Underwriting Agencies will continue to look for opportunities
to enter new niche markets to expand its product off ering. This could be
in the form of an acquisition, start-up, or joint venture (similar to Blend
Insurance Solutions).
Gross written premium
2017
2014
$777m
$145m
2016
2013
$745m
2015
$385m
$114m
2012
$46m
14
Each of the 24 Steadfast Underwriting Agencies preserves its brand and unique off ering. Retaining individual brands is
particularly important as around half of our agencies’ business is placed with brokers outside of the Steadfast Network.
Personal accident, sickness
and travel
Complete farm package
Accident and health
Home and contents for
owner-occupied homes
Residential and commercial
strata
Specialised and exotic motorcar
and motorcycle
Emerging risks
Community care, entertainment,
hospitality and security
Business interruption focused
on SMEs
High-value homes
Building and construction
industry
SME insurance programs
Marine and motorcycle
Professionals including
engineers, architects and
doctors
Specialised equipment,
tradesmen, small business, and
marine transit
Marine hull, cargo and transit
Property insurance
Builders’ warranty
Sports and leisure-related
businesses
Hard-to-place risks, exclusive to
Steadfast Network Brokers
Hard-to-place and complex
risks, including environmental
liability
Marine hull and other marine
industry
Mobile plant and equipment
Hospitality, leisure and
entertainment sector
Strategy
2017
achievements
Grow existing underwriting agencies
and enter new markets
$777m
Grow international presence through the London super
binder and establishment of agencies overseas
50/50
record gross written premium
joint venture with Fairfax
Financial Holdings to create
Blend Insurance Solutions
15
Steadfast Group Annual Report 2017 Complementary
businesses
Steadfast Network brokers and Steadfast Underwriting
Agencies benefi t from the support of seven complementary
businesses which are also part of the Steadfast Group.
Steadfast Technologies
100% owned
Technology services operation developing and
administering proprietary software (see page 17
for more detail), Virtual Underwriter and INSIGHT,
which power the Steadfast Client Trading Platform
(see page 18 for more detail) and are exclusive to
Steadfast Network brokers.
Steadfast Technologies also administers the
UnderwriterCentral system for Steadfast
Underwriting Agencies and other underwriting
agencies.
Steadfast Business Solutions
100% owned
Back offi ce service provider for insurance
intermediaries retaining the key relevant
functionality from White Outsourcing which was
divested in December 2016.
Workplace health consultancy.
Reinsurance broker specialising in treaty and
facultative reinsurance, wholesale insurance
solutions and analytics.
Specialised life insurance broker allowing brokers
on the Steadfast Network to off er life insurance
product directly to their clients.
Life
Joint venture with Macquarie off ering premium
funding facilities to clients looking to pay
premiums by instalment.
Legal practice specialising in insurance matters.
Workplace Health Options
70% owned
Steadfast Re
50% owned
Steadfast Life
50% owned
Macquarie Pacifi c Funding
50% owned
Meridian Lawyers
25% owned
16
Steadfast
Technologies
Technology is a key competitive advantage for Steadfast
Network brokers and Underwriting Agencies.
Steadfast provides specialised technology services to our brokers and underwriting agencies through Steadfast
Technologies, a complementary business. Investment in key technology platforms enables us to access and control data
which fl ows between clients, brokers and insurers. By analysing this data, Steadfast Network brokers and Underwriting
Agencies are better able to serve their clients.
The Steadfast Virtual Underwriter is
a digital marketplace which provides
Steadfast Network brokers with access
to a variety of insurance products
based on a single agreed question set.
The system is integrated with a group
of leading insurers and provides an
effi cient way to rapidly receive a range
of insurance quotes in a single view. It
displays a comprehensive, side-by-side
comparison showing the diff erences
in each insurer’s terms, products and
services for each quote.
The Virtual Underwriter has been
seamlessly integrated with insurer
and broker back offi ce management
systems, including Steadfast’s INSIGHT
broker platform. This eliminates costly,
time consuming and error prone data
re-entry into multiple systems.
INSIGHT is a broking platform with
a powerful search engine which
gives brokers a single view of their
customers and an instant view of
their business at any time. It is cloud-
based, accessible from anywhere
and designed as an open platform to
enable connectivity to other business
applications if required.
There has been strong interest from
Steadfast Network brokers wanting to
utilise INSIGHT to help manage their
business. Steadfast Group is making a
signifi cant investment to roll out the
platform as it will deliver substantial
effi ciencies and cost savings for
brokers who will be able to remove
their dependency on legacy systems.
UnderwriterCentral is a cloud-
based agency management system
designed specifi cally for underwriting
agencies. It is an eff ective, fl exible
and aff ordable software solution that
allows underwriters to manage the full
policy lifecycle, as well as implement
underwriting rules, rating and claims
management.
UnderwriterCentral is the fi rst platform
in the world to electronically interface
with Lloyd’s of London. This allows
underwriting agencies to easily deliver
data into the London market adding
further effi ciencies to the underwriting
process.
UnderwriterCentral is available to
Steadfast Underwriting Agencies and
other underwriting agencies.
Key advantages
Key advantages
Key advantages
Rapidly generates and compares
quotes from diff erent insurer partners
without re-keying data into multiple
insurer systems
Real-time, straight-through processing
throughout the life of a policy
Increased client insights from data
analytics
Controls, analyses and reports all data
Automated data recovery and back up
Turnkey solution for underwriting
agencies to manage clients, policies
and claims
Open to interface with other
business systems, accounting
or other software packages
High degree of cyber security
protection
Supports multiple, customised
insurance products through its
powerful confi guration capability
Built-in document management
eCommerce portal capability
17
Steadfast Group Annual Report 2017 Key initiative
The Steadfast Client
Trading Platform
A contestable marketplace allowing Steadfast Network brokers
and insurer partners to deliver the best value for their clients.
Steadfast Network brokers
powered by
Steadfast Client Trading Platform
powered by
Client
Insurer partners
including Steadfast Underwriting Agencies
Underwriting
agencies
powered by
Insurance classes now contracted:
Insurance classes
Each class of insurance has separate Steadfast Client
Trading Platform (SCTP wording) tailored to that category.
Powered by Steadfast Technologies
– Virtual Underwriter and INSIGHT
The Virtual Underwriter platform provides a contestable
marketplace and seamlessly integrates with INSIGHT
streamlining processes and allowing data analytics.
Business pack
Professional lines
Liability
Property
Commercial motor
18
Insurer partners
We have worked closely with our insurer partners to allow their systems to operate seamlessly with the SCTP resulting in
signifi cant cost reductions. 13 insurer partners have agreed to join the SCTP in one or more insurance classes:
Major Insurer Partners
Advantages for clients
Benefi ts for Steadfast Group
Market leading policy wording
Instant policy issue
Genuine contestable marketplace
Triage claims service
Technology is a key diff erentiator for Steadfast Group
Superior technology off ering will attract more brokers and
clients, growing the size of the Steadfast Network
Steadfast Group will receive increased marketing and
administration fees driven by growth in the gross written
premium written by the Steadfast Network
Advantages for Steadfast Network brokers
Automated market access to leading policy providers
Increased commissions paid to Steadfast Network brokers
using the Steadfast Client Trading Platform will benefi t
Steadfast Group where equity positions are held
Higher commission rates
Complete data analytics
Advantages for insurer partners
Automated access to Steadfast Network for all policies
placed on platform
Signifi cantly reduced technology costs
Use of data analytics will allow brokers to better serve their
clients, off er more products and attract new clients
Steadfast Network brokers will benefi t from effi ciency and
cost savings from access to a contestable marketplace and
INSIGHT platform
Data analytics proposition
The transfer of data is key in the insurance industry. Owning our technology systems means that we access and control
data giving Steadfast Network brokers the ability to analyse it. This gives our brokers an advantage over competitors and the
ability to better serve their clients.
19
Steadfast Group Annual Report 2017 Key initiative
International
footprint
Steadfast Group is successfully expanding the Steadfast Network model to
international markets. Steadfast Group also acquired a stake in unisonBrokers
(renamed unisonSteadfast) to further extend our international reach and
facilitate access to new jurisdictions for Steadfast Network brokers.
In June 2017, Steadfast Group acquired a stake in
unisonBrokers to increase our global presence.
unisonBrokers is one of the largest global network of general
insurance brokers with 200 brokers across 130 countries and
US$17 billion of gross written premium generated across the
network.
Steadfast Network model replication
– New Zealand and Asia
The Steadfast Network model has been successfully
replicated in jurisdictions where there is a similar insurance
market, strong regulatory framework and demand from
brokers to join a network off ering bespoke policy wordings,
market competitive pricing and a range of products and
services that give them a competitive edge.
Following the transaction, unisonBrokers was renamed
unisonSteadfast and Robert Kelly (Steadfast Group Managing
Director & CEO), Samantha Hollman (Steadfast Group Chief
Operating Offi cer) and Heinrich Eder (former Managing
Director of Munich Re, Australia) joined the unisonSteadfast
Supervisory Board.
When entering a new international jurisdiction, the Steadfast
Network will initially build revenue streams to avoid a large
capital outlay. Agreements with insurer partners create
marketing and administration (M&A) fees ensuring that the
initial roll out can be cost neutral, with additional products and
services made available to each jurisdiction as demand grows.
This strategic partnership will provide opportunities for both
parties as unisonSteadfast brokers will benefi t from Steadfast
Group’s success in providing broker products and services,
while Steadfast Network brokers will be able to leverage the
multi-jurisdictional market access for their clients.
In the medium term, unisonSteadfast will develop new
revenue streams by off ering new products and services
to brokers. Steadfast Group will also consider, in concert
with unisonSteadfast, acquiring equity holdings in suitable
brokers in the unisonSteadfast network.
The strategic partnership will grow the global distribution
platform for both networks. Steadfast’s current operations
in Australia, New Zealand, Asia (except China) and London
(wholesale) will continue unchanged. The rest of the world
will operate as unisonSteadfast.
20
Benefi ts for Steadfast Group
International growth strategy is low risk,
capital light and revenue-led
Diversify market presence beyond Australia
and New Zealand
unisonSteadfast creates the ability to off er multi-
jurisdictional coverage for Steadfast Network and
Underwriting Agency clients
Steadfast Group Annual Report 2017
2
3
1
2
New Zealand
New Zealand is the fi rst international market
where the Steadfast Network model was
successfully replicated with 38 brokers joining
the Network in the three years since launch.
Steadfast Network brokers in New Zealand
generated gross written premium of NZ$330m
(+7%) in FY17 and Steadfast Group has acquired
an equity holding in three brokers.
Steadfast Underwriting Agencies also have
a strong presence in New Zealand, with 5
agencies present to support the Steadfast
Network and other brokers located there.
Asia
Asia presented another opportunity to
replicate the Steadfast Network model, with
the rollout currently focused on Singapore.
During FY17, nine selected brokers joined
the Steadfast Network in Singapore.
Signifi cant progress has been made in
building revenue streams with fi ve insurer
partners agreeing to support M&A fees
allowing brokers in the Network to benefi t
from improved policy wordings and the
development of products and services.
1
3
London
Our London presence gives access to London
and European insurance and reinsurance
markets for Steadfast Underwriting Agencies and
Steadfast Network brokers. We will continue to
extend our European presence as the London
super binder continues to grow through the
unisonSteadfast Network.
21
21
Steadfast Group Annual Report 2017 Environmental,
social and governance
Steadfast Group is committed to supporting
our community, promoting workforce diversity
and strong governance practices.
>1%
of Steadfast Group underlying
net profi t after tax donated to
charitable causes in FY17
$1.4m
raised by Steadfast Foundation
since inception in 2011
Philanthropy
Steadfast Group actively supports the communities in which
we live and work, donating over 1% of underlying net profi t
after tax to charitable causes in FY17.
Steadfast Foundation
The Steadfast Foundation was created in 2011 and has
donated a total of $1.4 million since inception. In FY17
donations were made to charitable causes including:
Steadfast Convention gala dinner fundraise
Attendees at the gala dinner, held on the fi nal night of the
Steadfast Convention in April 2017, raised over $220,000 for
KidsXpress, this year’s chosen charity. KidsXpress supports
children who are facing emotional trauma by off ering
counselling and the opportunity to express themselves
creatively.
Steadfast Group - annual donations
$1000,000
$800,000
$600,000
$400,000
$200,000
0
22
FY13
FY14
FY15
FY16
FY17
Supporting our community
Steadfast Group is committed to supporting the
communities in which we operate. For example, Steadfast
Network brokers support those aff ected by a catastrophe to
manage the claims process and receive their entitlements
regardless of whether they bought their insurance through a
Steadfast Network broker or not. For example, following the
catastrophic bushfi res in the Blue Mountains and Victoria,
the Steadfast Network ran radio and print advertising to off er
support to those aff ected.
Sustainability Ambassador – Tim Jarvis
As part of Steadfast Group’s social awareness and desire
to make a positive contribution to environmental issues,
we have engaged Tim Jarvis AM as our sustainability
ambassador. Tim is an environmental scientist, polar
explorer, speaker, author and fi lmmaker. He is working
with Steadfast Group on practical solutions that promote
a roadmap for change on environmental issues including
climate change, reducing carbon footprint and embedding
awareness of environmental issues into decision making.
Steadfast Bushfire
Insurance Claims Helpline
Steadfast is Australia's largest network of insurance brokers. We have built genuine
relationships with our Insurance Partners and are not exclusively aligned with any particular
insurer. Steadfast Brokers work on behalf of the customer to assist in making a claim.
Steadfast understands the confusion and uncertainty you might be feeling as you try to
navigate the best way forward following the bushfire damage to your homes, property and
business.
We have set up a Steadfast Bushfire Insurance Claims Helpline to assist those who don’t know
where to begin.
If you know who your insurance is with:
Your first step is to contact your broker who will need to report your claim to the
insurer as soon as possible
If you do not have a broker then you need to contact your insurer directly
If you find yourself in any of the situations described below:
You are insured but not sure who your insurance provider is
You are not sure if you are covered and are in need of advice and assistance
You are not satisfied with the claims process
You think you need legal help with a claim
You just need someone to talk to for general insurance or claims information
We will assist at no charge and direct you to the relevant channel for free
professional advice*.
To contact Steadfast for assistance:
Go to www.steadfast.com.au and submit your details via our online form
Or please call us on 1800 080 989
* This service is not a substitute for professional legal advice. Professional advice should be
sought before any action is taken about an insurance claim. Any advice provided by or on
behalf of Steadfast may have been prepared without taking into account your personal
circumstances, objectives or needs. You should consider the appropriateness of the advice,
taking these matters into account, before you act on any advice. Steadfast reserves the right to
refuse or withdraw assistance under the hotline or to cease to provide these services, in its
absolute discretion, at any time, and without notice.
Our training teams hold regular personal development
sessions for Steadfast Network brokers to keep them
appraised of the latest developments in areas such as climate
change and cyber security so that they can best support their
clients and the community to manage their risk.
41%
of management positions
held by females
47%
of head offi ce employees born
outside Australia
Through his ambassador role with Steadfast Group, Tim
engaged with a number of brokers and their clients to
address climate change and respond to the economic and
moral challenges.
Know Risk
Steadfast Group contributes $100,000 per annum to Know
Risk, a program designed to educate the community about
insurance and risk through interactive content. It off ers web
based videos and tools as well as mobile applications and is
administered by the Australian and New Zealand Institute of
Insurance and Finance (ANZIIF).
Workforce diversity
Steadfast Group sees a diverse workforce as a key
strength of the organisation. There is a focus on hiring
and promoting talent from diverse backgrounds and
fostering equal opportunity. In terms of gender diversity,
41% of management positions are held by females while
47% of employees in our head offi ce are female and 57%
Group wide. In addition, Steadfast Group has continued
sponsorship of the “Head over Heels” initiative aimed at
increasing the representation of female entrepreneurs
and leaders by contributing $150,000 to the organisation
over the past three years. Steadfast Group also participates
in the Australian and New Zealand Institute of Insurance
and Finance (ANZIIF) women’s forum which is focused on
promoting gender awareness initiatives across the insurance
industry.
Steadfast Group also fosters an ethnically diverse workforce
with 47% of the head offi ce workforce born outside Australia
and 24% from non-English speaking backgrounds.
Governance
Steadfast Group has a comprehensive risk management
and corporate governance framework. The Board regularly
reviews business and management performance and is
pleased to note that no material breaches were reported in
FY17. For more information on our risk management and
governance polices, please refer to our investor website.
23
Steadfast Group Annual Report 2017
Supporting our people
We support our people to allow them to best
serve our clients and our community.
Supporting our Network brokers
Steadfast Convention
The Steadfast Convention is the premier event for Steadfast
Network brokers, Underwriting Agencies and strategic
partners. It is held in April in a diff erent city each year and
off ers the opportunity for professional development and
networking. In 2017, the 19th Steadfast Convention was held
at the International Convention Centre in Sydney with a
record attendance of over 2,300 brokers and 100 exhibitors
including the major insurers, underwriting agencies and
support services. There were 24 sessions from industry
experts and a central ‘expo’ where attendees could network
and interact.
Town hall meetings
Town hall meetings are held three times a year in cities
all across Australia and are an important communication
channel between Steadfast Network brokers and Steadfast
Group. Led by Robert Kelly, Steadfast Group Managing
Director and CEO, members of senior management meet
with brokers to give an update on Steadfast Network
2,300+
Steadfast convention attendees
4,000+
brokers attended professional
development days in FY17.
1,000+
hours of face-to-face training
delivered to our staff members
24
projects and initiatives. It is also an opportunity for brokers
to give feedback to senior management on Steadfast
Network products and services as well as issues aff ecting
their clients.
Professional development days
Steadfast Group holds professional development days
covering relevant topics for Steadfast Network brokers.
In FY17, there were four roadshows to 11 towns and cities
across Australia with over 4,000 broker attendees. Recent
topics include business interruption, industrial special risks,
liability and professional indemnity.
Supporting our staff
Creating a positive culture
Steadfast Group is committed to maintaining and enhancing
a positive culture that drives company performance. We
have a clear set of company values which are embedded
in the business and incorporated into all we do. An annual
employee engagement survey is conducted which is
embedded with a continuous improvement methodology.
Despite our rapid growth, our Group-wide engagement
score has been successfully maintained at 68% for three
years running. This is 8% above the Australian industry norm
and puts us in the high-performing engagement zone.
Developing our people
Steadfast Group runs the College of Leadership, off ering our
current and future leaders the opportunity to develop while
exposing them to forward-thinking, relevant and practical
leadership methodologies and applications. In addition our
people partake in annual development planning to ensure
continued technical and non-technical development with
over 1,000 hours of face-to-face and 2,000 hours of online
training undertaken in the last year.
Volunteering
We have a volunteer programme which off ers each staff
member a volunteer day each year to spend with the
charities supported by the Steadfast Foundation (see page
22 for more detail). We have arranged to support eight
organisations as part of our volunteer programme in the
coming year.
Supporting our people
Board of Directors
We support our people to allow them to best
serve our clients and our community.
Supporting our Network brokers
Steadfast Convention
The Steadfast Convention is the premier event for Steadfast
Network brokers, Underwriting Agencies and strategic
partners. It is held in April in a diff erent city each year and
off ers the opportunity for professional development and
networking. In 2017, the 19th Steadfast Convention was held
at the International Convention Centre in Sydney with a
record attendance of over 2,300 brokers and 100 exhibitors
including the major insurers, underwriting agencies and
support services. There were 24 sessions from industry
experts and a central ‘expo’ where attendees could network
projects and initiatives. It is also an opportunity for brokers
to give feedback to senior management on Steadfast
Network products and services as well as issues aff ecting
their clients.
Professional development days
Steadfast Group holds professional development days
covering relevant topics for Steadfast Network brokers.
In FY17, there were four roadshows to 11 towns and cities
across Australia with over 4,000 broker attendees. Recent
topics include business interruption, industrial special risks,
liability and professional indemnity.
and interact.
Town hall meetings
Town hall meetings are held three times a year in cities
all across Australia and are an important communication
channel between Steadfast Network brokers and Steadfast
Group. Led by Robert Kelly, Steadfast Group Managing
Director and CEO, members of senior management meet
with brokers to give an update on Steadfast Network
Supporting our staff
Creating a positive culture
Steadfast Group is committed to maintaining and enhancing
a positive culture that drives company performance. We
have a clear set of company values which are embedded
in the business and incorporated into all we do. An annual
employee engagement survey is conducted which is
embedded with a continuous improvement methodology.
Despite our rapid growth, our Group-wide engagement
score has been successfully maintained at 68% for three
years running. This is 8% above the Australian industry norm
and puts us in the high-performing engagement zone.
Developing our people
Steadfast Group runs the College of Leadership, off ering our
current and future leaders the opportunity to develop while
exposing them to forward-thinking, relevant and practical
leadership methodologies and applications. In addition our
people partake in annual development planning to ensure
continued technical and non-technical development with
over 1,000 hours of face-to-face and 2,000 hours of online
training undertaken in the last year.
Volunteering
We have a volunteer programme which off ers each staff
member a volunteer day each year to spend with the
charities supported by the Steadfast Foundation (see page
22 for more detail). We have arranged to support eight
organisations as part of our volunteer programme in the
coming year.
2,300+
Steadfast convention attendees
4,000+
brokers attended professional
development days in FY17.
1,000+
hours of face-to-face training
delivered to our staff members
Frank O’Halloran, AM
Non-Executive Chairman
(independent)
Frank had over 35 years’ experience at
QBE where he was Group CEO from
1998 until 2012. He also worked with
Coopers & Lybrand for 13 years where
he started his career as a Chartered
Accountant. Frank was President
of the ICA from 1999 to 2000 and
was inducted into the International
Insurance Hall of Fame in 2010. He
is the Chairman of The Salvation
Army Territorial Appeal and Fund
Development Committee.
Robert Kelly
Managing Director & CEO
David Liddy, AM
Non-Executive Director (independent)
Robert co-founded Steadfast
and has over 45 years’ experience in
the insurance industry. He is ranked
the second most infl uential person in
insurance by Insurance News, and was
awarded the ACORD Rainmaker Award
in 2014. Robert is a Qualifi ed Practising
Insurance Broker, a Fellow of NIBA, a
Senior Associate of ANZIIF, a Certifi ed
Insurance Professional and a Graduate
member of the Australian Institute of
Company Directors.
David has 44 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 a Director of
Emerchants Limited. He is a Senior
Fellow of the Financial Services
Institute of Australasia and a Fellow of
the Australian Institute of Company
Directors.
Anne O’Driscoll
Non-Executive Director (independent)
Philip Purcell
Non-Executive Director (independent)
Greg Rynenberg
Non-Executive Director (independent)
Anne has over 30 years of business
experience. A Chartered Accountant
since 1984, she was CFO of Genworth
Australia from 2009 to 2012 following
more than 13 years with IAG. Anne is
member of the Board of Infomedia
Limited, Commonwealth Bank’s
insurance subsidiaries (CommInsure)
and MDA National Insurance Pty Ltd.
She is a Fellow of ANZIIF, a Graduate
member of the Australian Institute of
Company Directors and a graduate
of Harvard’s Advanced Management
Program.
Philip has 43 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 is a consultant
to Norton Rose Fulbright, a leading
global legal practice, and also
assists clients who are engaged in
commercial transactions or mediation
of commercial disputes.
Greg has 40 years of experience in the
insurance broking industry with 32
years spent running his own business,
East West Group. East West Group
is a Steadfast Network Broker not
owned by Steadfast. Greg is a Qualifi ed
Practising Insurance Broker, Fellow
of NIBA and an Associate of ANZIIF.
He holds an Advanced Diploma in
Financial Services (General Insurance
Broking) and was named NIBA
Queensland Broker for 2014.
25
Steadfast Group Annual Report 2017
Senior Management Team
Robert Kelly
Managing Director & CEO
Stephen Humphrys
Chief Financial Offi cer
Samantha Hollman
Chief Operating Offi cer
Robert co-founded Steadfast
and has over 45 years’ experience in
the insurance industry. He is ranked
the second most infl uential person in
insurance by Insurance News, and was
awarded the ACORD Rainmaker Award
in 2014. Robert is a Qualifi ed Practising
Insurance Broker, a Fellow of NIBA, a
Senior Associate of ANZIIF, a Certifi ed
Insurance Professional and a Graduate
member of the Australian Institute of
Company Directors.
Stephen joined Steadfast in 2013 and
has over 30 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 played
a key role in placing Moore Stephens
into the top 10 accounting fi rms in
Australia. Stephen is a Fellow of the
Institute of Chartered Accountants.
Samantha has 23 years' experience in
the insurance industry including 17
years at Steadfast. She was promoted
to COO in September 2016 to direct
and manage operational activities
of the organisation to ensure the
implementation of the overall strategy.
Samantha works closely with the
Managing Director & CEO and the
Board to implement strategic initiatives
for the Group on a national and
international level. Samantha sits on
the unisonSteadfast Supervisory Board.
Simon Lightbody
Chief Executive Offi cer
of Steadfast Underwriting Agencies
Allan Reynolds
Executive General Manager
Direct, New Zealand & Singapore
Nick Cook
Executive General Manager
Partner & Broker Services
Simon has worked in the insurance
industry for 25 years in both the UK
(at Lloyd’s of London) and Australia,
including nine years within his own
business, Miramar Underwriting
Agency (Miramar). Steadfast entered
into the underwriting agency market
in 2005 as a 50% joint venture partner
of Miramar and acquired the remaining
balance in August 2013.
Allan joined Steadfast in 2002, and in
April 2015 took on the Direct, New
Zealand & Singapore portfolios. 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 broking. He
holds a Diploma of Business Studies
(Insurance), is a Certifi ed Insurance
Professional and is a Fellow, honorary
member and Chairman of ANZIIF.
Nick, who joined Steadfast in February
2015, had over 12 years’ experience
at Zurich Financial Services, including
three as the Head of Customer &
Proposition Development (where he
was responsible for the performance
of Zurich products & propositions
in the marketplace) and nine years
as a distribution manager. He is an
Associate ANZIIF member and has
graduated from both the AGSM
Leadership Program and the Prosci
Organizational Change Management
Program.
26
Senior Management Team
Robert Kelly
Managing Director & CEO
Stephen Humphrys
Chief Financial Offi cer
Samantha Hollman
Chief Operating Offi cer
Robert co-founded Steadfast
Stephen joined Steadfast in 2013 and
Samantha has 23 years' experience in
and has over 45 years’ experience in
has over 30 years’ experience as a
the insurance industry. He is ranked
Chartered Accountant and extensive
the second most infl uential person in
experience in acquisitions and
insurance by Insurance News, and was
integrations. As Managing Director of
awarded the ACORD Rainmaker Award
Moore Stephens Sydney for 10 years
in 2014. Robert is a Qualifi ed Practising
and Chairman of Moore Stephens
Insurance Broker, a Fellow of NIBA, a
Australasia for three, Stephen played
Senior Associate of ANZIIF, a Certifi ed
a key role in placing Moore Stephens
the insurance industry including 17
years at Steadfast. She was promoted
to COO in September 2016 to direct
and manage operational activities
of the organisation to ensure the
implementation of the overall strategy.
Samantha works closely with the
Managing Director & CEO and the
Insurance Professional and a Graduate
into the top 10 accounting fi rms in
Board to implement strategic initiatives
member of the Australian Institute of
Australia. Stephen is a Fellow of the
for the Group on a national and
Company Directors.
Institute of Chartered Accountants.
international level. Samantha sits on
the unisonSteadfast Supervisory Board.
Adrian Humphreys
Executive General Manager
Business Development
Peter Roberts
Executive General Manager
Business Solutions
Adrian joined Steadfast in January
2015 in a new role to help brokers
grow their business. He was previously
Managing Director of Lloyd’s Australia
where he grew the business by 84% to
over $2 billion in under fi ve years while
increasing the number of agencies.
Adrian has over 10 years’ experience in
insurance, working for both Lloyd’s of
London and Aon. Prior to insurance, he
worked at KPMG Financial Services.
Peter joined Steadfast in 2013 and
focuses on back offi ce outsourcing
opportunities for the Group. He was
also Managing Director of White
Outsourcing until stepping down on
30 June 2016 to concentrate on his
role at Steadfast Business Solutions.
Peter has over 25 years’ experience in
accounting and back offi ce services
to the fi nancial services sector, is a
member of the Institute of Chartered
Accountants, and commenced his
career in accounting with KPMG.
Simon Lightbody
Chief Executive Offi cer
Allan Reynolds
Executive General Manager
of Steadfast Underwriting Agencies
Direct, New Zealand & Singapore
Nick Cook
Executive General Manager
Partner & Broker Services
Simon has worked in the insurance
industry for 25 years in both the UK
(at Lloyd’s of London) and Australia,
including nine years within his own
business, Miramar Underwriting
Agency (Miramar). Steadfast entered
into the underwriting agency market
in 2005 as a 50% joint venture partner
of Miramar and acquired the remaining
balance in August 2013.
Allan joined Steadfast in 2002, and in
Nick, who joined Steadfast in February
April 2015 took on the Direct, New
2015, had over 12 years’ experience
Zealand & Singapore portfolios. With a
at Zurich Financial Services, including
background in product development
three as the Head of Customer &
and distribution, corporate strategy and
Proposition Development (where he
portfolio management, Allan has more
was responsible for the performance
than 40 years of industry experience
of Zurich products & propositions
in general insurance broking. He
in the marketplace) and nine years
holds a Diploma of Business Studies
as a distribution manager. He is an
(Insurance), is a Certifi ed Insurance
Associate ANZIIF member and has
Professional and is a Fellow, honorary
graduated from both the AGSM
member and Chairman of ANZIIF.
Leadership Program and the Prosci
Organizational Change Management
Program.
Duncan Ramsay
General Counsel
Duncan began with Steadfast in June
2014 after 20 years at QBE. He was
Group General Counsel and Company
Secretary at QBE. He was also a
director or secretary of a number of
QBE-controlled entities in Australia.
Duncan's career commenced in 1986
with Freehills in Sydney. He holds
degrees in commerce and law, a
graduate certifi cate in applied risk
management and is a Fellow of ANZIIF
and the Governance Institute of
Australia.
Linda Ellis
Group Company Secretary
& Corporate Counsel
Linda joined Steadfast in 2013. She has
over 15 years’ experience as a lawyer
in Sydney and London, including at
King & Wood Mallesons, Atanaskovic
Hartnell and Cliff ord Chance. Linda
has diverse experience in capital
markets, corporate and commercial
law, and corporate governance. She is
a Graduate member of the Australian
Institute of Company Directors, holds
a BEC and LLB (Hons 1) and is on the
Board of Mosman Church of England
Preparatory School.
27
Steadfast Group Annual Report 2017 Chief Financial Offi cer's report
'Steadfast Group
has again delivered
record underlying
earnings and
dividends for
shareholders.'
10.6%
underlying EBITA growth
9.8%
underlying NPAT growth
Underlying net profi t after tax ($m)
66.4
60.4
42.1
32.4
28.1
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0
FY13
FY14
FY15
FY16
FY17
Steadfast Group produced strong underlying FY17 earnings
growth while continuing to invest for the future. We
delivered record results including growth in underlying
earnings before interest, tax and amortisation (EBITA) of
10.6% and growth in underlying net profi t after tax (NPAT)
attributable to shareholders of 9.8%. This was driven by
record fees and commissions from our equity positions in
insurance brokers and underwriting agencies as well as
record marketing and administration (M&A) fees for the
Steadfast Network.
Our conversion of profi ts into cash continues to be high at
98% of underlying cash profi ts.
Reconciliation of statutory and underlying earnings
Year ended 30 June, $million
Revenue
Underlying EBITA
Underlying NPAT
Underlying NPATA
Underlying EPS (NPAT)
Underlying EPS (NPATA)
Reconciliation of earnings:
Statutory comprehensive
income after tax
Change in value and sale of
investments
Share based payment expense
on share options and executive
loans and shares
Deferred acquisition
adjustments
Non‑recurring impairments and
fair value adjustments
Underlying NPAT
Underlying NPAT growth
Amortisation
Underlying NPATA1
Underlying NPATA growth
2017
504.1
143.3
66.4
87.2
8.87
11.65
66.8
(2.9)
(0.4)
(4.2)
7.1
66.4
9.8%
20.8
87.2
6.4%
2016
470.2
129.6
60.4
82.0
8.09
11.00
73.4
(2.2)
(0.4)
(23.9)
13.5
60.4
21.6
82.0
Investing for future growth
Steadfast Group is investing in key projects including rolling
out our technology to Steadfast Network brokers and
Underwriting Agencies to drive future growth (see page 17
for more detail). We invested in new technology initiatives in
FY17 and will continue to do so in FY18 to deliver benefi ts to
shareholders in FY19 and beyond.
We also invested in growing our future fees and
commissions revenue streams by investing a total of $45m
on building equity stakes in our brokers and Underwriting
Agencies. In FY17, our equity holdings contributed 94% of
our total EBITA (pre Corporate Offi ce).
EBITA contribution
Our growth in earnings resulted from both organic growth
as well as acquisition growth. Our equity brokers (53% of
total underlying EBITA) delivered revenue growth as well
as higher margins. Our agencies (41% of total underlying
EBITA) also delivered strong underlying results despite lower
profi t shares that are typical of softer insurance market
conditions. We also delivered earnings growth from our
new acquisitions, which more than countered the loss of
earnings resulting from the divestment of certain non-core
assets, including White Outsourcing.
28
1Calculated on same basis since IPO
98%
of NPATA converted into cash
$111m
debt facilities to fund growth
FY17 underlying EBITA mix
Earnings per share and dividend growth (cents per share)
8.9
7.0
8.1
6.0
7.2
5.0
5.4
6.2
4.5
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
FY13
FY14
FY15
FY16
FY17
Underlying earnings per share
Dividend per share
Robust risk management
We have implemented numerous internal controls across
our business and continue to make progress on the
centralisation of many back offi ce functions. In addition,
we have a robust internal audit program which has now
reviewed the fi nancial, operational and compliance
procedures for the vast majority of our businesses.
Thank you
Again, I thank all those staff who contribute to our fi nancial
reporting and analysis, who provide quality and timely data
to all our stakeholders, allowing them to eff ect informed
and timely decisions.
Stephen Humphrys
Chief Financial Offi cer
29
Investments in Steadfast equity brokers
Investments in Steadfast Underwriting Agencies
Earnings from other businesses
53%
41%
6%
Strong balance sheet
Our balance sheet remains strong and well positioned for
future acquisition growth. Our total Group gearing was
18.5% against a Board approved maximum gearing ratio of
30%. We have over $111m available in our debt facilities to
fund corporate activities including future acquisitions. Our
three year facility was extended in August 2017 by a further
one year, meaning all our corporate debt facilities have a
maturity date of August 2020.
Dividends up 17% Year on Year
We announced a fully franked, fi nal dividend of 4.4 cents
per share payable on 13 October 2017. This brings our total
dividend to 7 cents per share, a record high. This is a 17%
increase on the FY16 total dividend and in line with our
target payout ratio of 65% to 85% of underlying net profi t
after tax (after adjusting for non-trading items).
Steadfast Group Annual Report 2017 2017 Financial Report
Directors’ report
Remuneration report – audited
Lead auditor’s independence declaration
FINANCIAL STATEMENTS
Consolidated statement of profit or loss
and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
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 ventures
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
Directors’ declaration
Independent auditor’s report
30
31
41
63
64
66
68
70
71
71
76
78
81
83
85
87
89
90
94
97
100
102
104
104
105
105
105
107
109
110
112
113
114
115
Directors’ Report
Steadfast Group Annual Report 2017
The Directors present their report together with the consolidated financial statements of Steadfast Group Limited (Steadfast or
the Company), its subsidiaries and interests in associates and joint ventures (collectively Steadfast Group or the Group) for the
financial year ended 30 June 2017 (FY17) 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, AM
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
Date of appointment
21 October 2012
18 April 1996
1 January 2013
1 July 2013
1 February 2013
10 August 1998
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
SubZero Group Limited
December 2013 to June 2016
Robert Kelly
David Liddy, AM
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
None
Collection House Limited
March 2012 to November 2016
Emerchants Limited
Infomedia Limited
None
None
Since April 2012
Since December 2014
Particulars of the Directors’ qualifications and experience are set out under Board of Directors on page 25.
COMPANY SECRETARIES
LINDA ELLIS, BEC, LLB (HONS 1), GAICD
Linda Ellis joined the Company in June 2013 as Group Company Secretary & Corporate Counsel. Linda is a lawyer with over
15 years’ experience. Further details of Linda’s experience are set out under Senior Management Team on page 27.
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 specialises in back‑office services to the financial services sector. Peter is also Executive General Manager –
Business Solutions. Further details of Peter’s experience are set out under Senior Management Team on page 27.
31
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
Total number of meetings held
Board
6
Audit &
Risk Committee
Nomination
Committee
Remuneration &
Succession Planning
Committee
4
3
4
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
Frank O’Halloran, AM
Robert Kelly
David Liddy, AM
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
6
6
6
6
6
6
6
6
5
6
6
6
4
4
4
4
4
4
4
4
4
4
4
4
3
3
3
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
4
4
4
4
Particular details of the responsibilities of the members of the Board and the various committees are set out in the Corporate
Governance Statement lodged with the Australian Securities Exchange (ASX) on the same date as this report, and are available
in the corporate governance section of the Steadfast Investor website (http://investor.steadfast.com.au/).
PRINCIPAL ACTIVITIES
The principal activities of the Group during the financial year were the provision of services to Steadfast Network brokers,
the distribution of insurance policies via insurance brokerages and underwriting agencies, and related services.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group. The Group continued to acquire insurance
intermediaries during the year.
32
OPERATING AND FINANCIAL REVIEW
A. OPERATING RESULTS FOR THE YEAR
The trading results for the year are summarised as follows (refer Note 4):
Revenue – consolidated entities
Expenses – consolidated entities
EBITA* – consolidated entities
Share of EBITA from associates and joint ventures
EBITA from core operations
Finance costs
Amortisation expense
Profit before income tax before non‑trading items
Income tax expense on profit before non‑trading items
Profit after income tax before non‑trading items
Non‑trading items:
Income
Expenses
Income tax benefit/(expense) on non‑trading items
Net profit after income tax for the year
Non‑controlling interests (NCI) in profit after tax before non‑trading items
NCI in non‑trading items:
Profit before income tax
Income tax benefit/(expense) on non‑trading items
Net profit after income tax attributable to owners of Steadfast Group Limited (NPAT)
Other comprehensive income attributable to owners of Steadfast Group Limited
2017
$’000
392,159
(272,816)
119,343
24,006
143,349
(9,697)
(23,683)
109,969
(31,628)
78,341
8,205
(7,411)
(948)
78,187
(11,949)
769
(215)
66,792
(214)
2016
$’000
358,483
(249,075)
109,408
20,683
130,091
(9,187)
(24,164)
96,740
(28,774)
67,966
27,173
(18,572)
4,551
81,118
(7,519)
(171)
52
73,480
(59)
Total comprehensive income after income tax attributable to owners of
Steadfast Group Limited
66,578
73,421
* EBITA refers to earnings before interest expense, tax and amortisation of acquired intangible assets.
The increase in profit after income tax before non‑trading items was mainly due to:
• revenue growth derived by the existing businesses;
• efficiency gains extracted by these businesses;
• increased marketing and administration fee revenue in Australia and New Zealand; and
• acquisitions of interests in further businesses.
This additional profit was partially offset by:
• increased expenditure on technology;
• divestment of businesses including White Outsourcing Pty Ltd; and
• higher income tax expense.
33
Steadfast Group Annual Report 2017
Directors’ Report continued
There was a reduction in non‑trading net gains during the year. Included in non‑trading net gains are:
• profit on sale of investments;
• income reported from downwards revised estimates of deferred acquisition payments where earnout arrangements existed
(this was more significant in the 2016 financial year); and
• impairment of certain intangible assets mainly relating to the Calliden acquisition in the 2015 financial year as a result of the
impact of the impending closure of the builders warranty agency.
Refer Note 4 for further details.
Some of the financial data in the table above, namely the EBITA‑related and non‑trading 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.
B. REVIEW OF FINANCIAL CONDITION
I. Financial position
The total assets of the Group as at 30 June 2017 were $1,800.027 million compared to $1,712.498 million as at 30 June 2016.
The increase was mainly attributable to the addition of assets from acquired businesses throughout the year as detailed in
Note 10 to the financial statements.
Total liabilities of the Group as at 30 June 2017 were $886.859 million compared to $814.357 million as at 30 June 2016.
The increase was mainly attributable to the assumption of liabilities in the books of the newly acquired businesses.
The increase in the Group’s equity from $898.141 million at 30 June 2016 to $913.168 million at 30 June 2017 largely reflects
retention of profits.
The Group has a multibank syndicated facility that will allow the Group to borrow up to $285.000 million. As at balance date,
the Group had the ability to borrow an additional $110.515 million from this facility.
II. Cash from operations
The net inflows of $107.952 million include net inflows from operating activities of $85.635 million and a net inflow of
$22.317 million to broking accounts.
The net operating cash flows, before broking trust account movements, of $85.635 million are higher than those for the prior
period, reflecting the continued growth of the Group. This amount represents the continued strong conversion of profit into
cash inflows from which the dividends paid were funded leaving the remaining free cash flow available for corporate activities,
including acquisitions of further business interests.
III. Capital management
As at 30 June 2017, the Company had a total of 749.752 million ordinary shares on issue. This was unchanged for the year as
obligations under the Dividend Reinvestment Plan were managed by on‑market purchases of shares.
The Board leverages the Group’s equity, adopting a maximum 25.0% corporate gearing ratio (defined as corporate debt:
corporate debt and equity). As at 30 June 2017, the Company’s corporate gearing ratio was 16.0% (2016: 16.0%). In recognition
that subsidiaries may require debt to fund bolt‑on acquisitions, the Group has limited the extent of subsidiary borrowings to an
additional 5% leverage. The Group’s total gearing ratio at year end was 18.5% (2016: 18.4%). Refer Note 9C.
34
STRATEGY AND PROSPECTS
Steadfast’s business strategy is to increase shareholder value through maintaining and growing its market position in the
provision of insurance distribution and related services, with a core focus on general insurance intermediation. The table
below details the key strategies of the Group together with FY17 accomplishments and the prospects for future years.
Considerable achievements were delivered on each of the ongoing strategic objectives. Steadfast Group has a robust risk
management framework which includes regularly assessing industry and Company‑specific risks relevant to the Group and its
prospects. This assessment and the strategies in place to manage these risks are detailed in the next section.
Strategy
FY17 achievements
Prospects and strategic initiatives
Maintain and develop
premier service offering to
Steadfast Network brokers
• Steadfast Client Trading Platform (SCTP)
• Continue FY17 strategic initiatives and build
rollout
on FY17 achievements
• INSIGHT broker system redeveloped and
• Continue to enhance and communicate the
Network value proposition
• Continue to develop market leading
technology solutions in brokers and
underwriting agencies
• Increase Network broker usage of SCTP
• Continue to improve back‑office functionality
rollout scheduled
• Continued provision of over 160 services to
Network and regular communication with
Network brokers including through regular
town hall meetings
• Steadfast Convention, the premier event
in general insurance in Australia, held with
record attendance
• Business development and marketing
solutions delivered across the Network
• Steadfast Direct further developed
• Further services rolled out in New Zealand
Maintain, build and
enhance Steadfast’s
strategic relationships
for the benefit of the
Steadfast Network
Improve profitability,
margin, earnings per share
and Total Shareholder
Return (TSR) through
organic and acquisitive
growth
• Initiatives with strategic partners
• Continue FY17 strategic initiatives and build
implemented e.g. Steadfast Direct developed
into a contestable platform with AIG and IAG
on FY17 achievements including continuing to
seek new opportunities with strategic partners
• Joint venture established e.g. Blend with
Advent, a subsidiary of Fairfax Financial
Holdings
• Product range expanded
• New strategic partners added
• Drive Network broker usage of the SCTP
• Grow the London super binder footprint
• FY17 financial results delivered in line with
• Continue FY17 strategic initiatives and build on
guidance
• Share price rose from $1.98 to $2.66 in FY17
• Back‑office services enhanced and further
rollouts achieved across the Group
• Hubbed seven brokers into four
• Commenced offshoring of broker processing
functions
FY17 achievements
• Improve EBITA margins
• Continue to implement marketing and
business development/sales initiatives to grow
sales and Steadfast revenue
• Drive Network broker usage of the SCTP
• Expand offshoring division to other back‑office
• Increased offshoring of certain functions:
activities
back‑office, marketing and IT
• UnderwriterCentral further enhanced and
rollout scheduled
• Increased M&A fees
• Grow the London super binder
• Continue to develop our market leading
technology solutions in broker and
underwriting agency spaces
• Continue to challenge expense base
35
Steadfast Group Annual Report 2017 Directors’ Report continued
Strategy
FY17 achievements
Prospects and strategic initiatives
Growth through both
acquisitions and adding
new Steadfast Network
brokers
• Net addition of nine new brokers to Steadfast
Network in Australia and New Zealand as
well as establishment of Singapore network
including 9 new members
• Grow the network domestically and
internationally
• Continue FY17 strategic initiatives and build
on FY17 achievements
• Proactively seek out acquisition opportunities
including from the broader broker market
• Continue to investigate potential equity
opportunities offshore when appropriate
• Develop cluster groups offshore as
appropriate
• Continue to leverage strategic relationships to
develop the Group’s international footprint
• Support underlying operating business
expansion offshore as appropriate
• Maximise the value of the unisonSteadfast
relationship
Network to access the London market
• Continue to promote the London office to
the Network
• Realise revenue growth and cost reduction
• Seek to capture greater share of the Network
Gross Written Premium (GWP) for product
lines via the London super binder
• Extend the London super binder to
unisonSteadfast network
• Roll out further product lines and connect
further strategic partners to the SCTP
• Drive Network broker usage of SCTP
• Continue FY17 strategic initiatives and build on
FY17 achievements
• Optimise funding structure and financing
• Seek to ensure remuneration practices are
designed to retain and attract high quality staff
• Continue to review the industry and seek
opportunities to ensure Steadfast Group
remains strong and viable
• Acquisition of equity in 9 new brokers and
increased holding in 12 equity brokers –
executed in accordance with strict cultural
and financial acquisition guidelines
• Executed hubbing, bolt‑on acquisitions and
management buy‑ins to drive the co‑owner
model
• Continually assessed other potential
acquisitions in the acquisition pipeline
• Acquisition of non‑controlling stake in
unisonSteadfast, based in Germany
• Steadfast cluster launched in Singapore
• Underlying business expansion into Asia
• Grew presence in New Zealand by adding
new brokers to the Network
Expand and solidify
Steadfast’s international
reach
Continue to develop the
London office to support
the Steadfast Network
Grow the London super
binder footprint
• London super binder operational and writing
new and renewal business
Complete Steadfast Client
Trading Platform (SCTP)
• Live for Property, Liability, PI and Business
Insurance underwritten by major insurers
• Commercial motor panel selected
Continue to enhance
organisational profitability
and sustainability
• Continued provision of technology solutions
that support key strategies e.g. development
of Steadfast Direct to contestable platform
• Executed first one‑year extension of the
$235m three‑year tranche of the $285m
syndicated debt facility
• Strong corporate governance and ongoing
improvements in risk management and
governance policies and procedures
• Brand kept reputable and strong
• Brand awareness grown and initiatives
executed e.g. digital and social media
• Strong dynamic, ethical culture continues
• Initiatives executed to engage workforce
to ensure quality people to drive business
performance and support diversity
36
• London office open and operational
• Steadfast Re placement services expanded
• Expand broking resources in London
• Use the London office as an avenue for the
into London
RISKS
In seeking to achieve its 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 and monitors those risks to which it is exposed that are outside the Group’s
control. Some of the key risks include:
Risk
Description
Risk management strategies
Investment risk:
A. Acquiring and holding
equity in operating
businesses
• Insufficient funding to capitalise on
• Ongoing monitoring of available capital and
opportunities
resources
• Deficiencies in due diligence by Steadfast
• Transition to new owners may be disruptive
and costly
• Potential unknown or contingent liabilities
• Reliance on partners performing satisfactorily
• Stringent due diligence
• Selecting acquisitions which are expected to
transition well and have a good cultural fit
• Tight acquisition and shareholders’
agreements
• Thorough transition management
• Close oversight and audit of ongoing
operations, profit and profit margins, including
continual reporting and reviews
• Business continuity planning
• Close monitoring of investments
• Steadfast works with management of
businesses in which Steadfast is invested to
optimise results
• Back‑up, restoration and recovery procedures
• IT security guidelines implemented
• IT risk assessment program and other
B. Investment impairment
• Investments which are subject to a
risk
permanent decrease in value
• Investment write down or impairment results
in an expense for the Group
Information technology
(IT) systems risk
• Risk of data loss/fraud, system breakdown
• Potential material adverse effect on ability to
deliver services and profitability
• Implementation risk for the INSIGHT
procedures
and UnderwriterCentral systems into our
businesses
• Experienced personnel and controlled rollout
with monitoring, management and continual
improvement in the rollout process
37
Steadfast Group Annual Report 2017 Directors’ Report continued
Risk
Description
Risk management strategies
Reduction in income
caused by:
A. Loss of Steadfast
Network brokers
• Network brokers can leave the Steadfast
• Provision of excellent services and support to
Network at any time, potentially resulting in
a reduction in Marketing and Administration
(M&A) fees for Steadfast
B. Reduction in rates
for marketing and
administration fees,
commission rates or
advice fees
• Strategic partners may seek to reduce rates
of M&A fees paid to Steadfast
• Insurers may seek to reduce rates of
commission paid to brokers
• Potential reduction in M&A fees (and
commission due to lower GWP) if strategic
partners are lost and not replaced within
appropriate timeframe
C. Loss of capacity for
underwriting agencies
• Risk the underwriter withdraws capacity for
strategic reasons (exit of lines of business or
country exit)
• Risk an underwriter withdraws due to
uneconomic underwriting results
Steadfast Network brokers
• Continue to share M&A fees, in the form of
Network broker rebates, with members
• Considerable ongoing engagement with
Network brokers including seeking and
addressing feedback
• Conversion of Network brokers to Steadfast
proprietary INSIGHT broking system
• Diversity of earnings via a number of revenue
sources e.g. M&A fees, profits from operating
businesses derived from commission and
other revenue
• 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
• Significant effort expended in maintaining
and strengthening relationships with strategic
partners of which most are longstanding
• Continually adding new strategic partners
• Longstanding delivery of attractive results to
underwriters
• Longstanding strong relationships with both
incumbent underwriters and/or alternative
capacity
• Steadfast Underwriting Agencies (SUA) has
a diverse range of specialist products and
capacity providers
• Replacement capacity available for profitable
portfolios
• Establishment of London super binder provides
better access to deeper insurance markets
D. Reliance on strategic
• Potential reduction in M&A fees (and
• Significant effort expended in maintaining
partners
commission due to lower GWP) if strategic
partners are lost and not replaced within
appropriate timeframe
and strengthening relationships with strategic
partners of which most are longstanding
• Continually adding new strategic partners
E. Reduction in GWP
• Group has a number of revenue sources
• Initiatives to increase the size of the Steadfast
in the Australian and
New Zealand general
insurance markets
linked to size and growth of GWP in
Australian and New Zealand markets
• GWP is influenced by factors including
pricing decisions by insurers and level of
demand for general insurance products
(which can be influenced by economic
conditions)
• Any softening in local and global economic
conditions would be expected to lead to a
softening in the level of GWP
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
• Small‑to‑medium enterprises (SME) sector,
which accounts for 85%+ of Steadfast’s total
GWP sold through the Steadfast Network,
has historically experienced higher growth in
GWP with less volatility compared to the large
corporate sector
• Growth in other markets e.g. Steadfast Direct,
Asia and other international markets
38
Risk
Description
Risk management strategies
External factors:
A. Increased competition
or market change
• Increased competition from new entrants
and existing market participants, including
increased commoditisation of business
insurance products
• Diversity in investments (i.e. portfolio of
underwriting agencies, premium funding and
complementary services as well as insurance
broking)
• Changes in the remuneration model for
• Diversity in earnings (e.g. M&A fees as well as
insurance brokers or underwriting agencies
• Increased competition or change in market
profits from investments)
• Geographical spread of the businesses of
structure for premium funding
subsidiaries and associates
• More customers buying direct from insurers
through the internet
B. Disruption risk
• Risk of business model disruption due to
external factors including, but not limited
to, technological (Insurtech) developments,
new business models developed by existing
competitors and regulation changes
• Steadfast constantly monitors and evaluates
international and local developments
impacting the Steadfast business model and
other industries to learn about disruption
opportunities as they emerge
C. Regulatory risk
• Risk that Steadfast’s subsidiaries and
• Initial due diligence on acquisition includes
associates may not individually 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
• Risk that regulatory changes may impact
the Group’s or entities within the Group’s
business model either through costly
and burdensome regulations or from the
structure and management of the operations
People risk
• Loss of key executives
• Loss of key individuals in operating
businesses with consequential material
business interruption
• Potential loss of key customer relationships
Fraud or embezzlement of
Group or client funds
• Particularly in operating businesses where
Steadfast does not control the day‑to‑day
operations
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 from an operations viewpoint
• An ongoing internal audit program, 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
• Succession planning
• Appropriate earn‑outs, shareholdings and
restraints to protect ongoing business
• Market‑competitive remuneration
• Career development opportunities
• Appropriate policies and procedures
implemented and regularly reviewed
• Fidelity insurance held
• Implement INSIGHT broker system improving
day‑to‑day broker visibility and system controls
and audit trails
International expansion
risk
• Steadfast business model, skills, services
• Due diligence is performed on each country
and experience may not be transferable and
successful in other countries
• Management may lose focus on domestic
operations resulting in missed opportunities
or operational issues may not be addressed
on a timely basis
to ensure Steadfast will add value to the
country. Steadfast takes time to assemble a
compelling deliverable offer for each new
market
• Appropriate resources engaged in both
domestic and international operations.
Resource levels regularly monitored and
operating performance levels reviewed using
internal and external inputs
• Monitoring percentage of funds invested
overseas
39
Steadfast Group Annual Report 2017 Directors’ Report continued
DIVIDENDS
Details of dividends paid or declared by the Company are set out in Note 6 to the accounts.
During the financial year ended 30 June 2017, a final dividend for 2016 of 3.6 cents per share and an interim dividend for 2017
of 2.6 cents per share were declared and paid, both fully franked.
EVENTS AFTER THE REPORTING PERIOD
Subsequent to 30 June 2017, the Board declared a final dividend of 4.4 cents per share, 100% franked. Further details are set
out in Note 17 to the accounts.
ENVIRONMENTAL REGULATION
The Group’s operations are not subject to any particular significant environmental regulations under a law of the
Commonwealth or under State or Territory legislation.
INDEMNIFICATION AND INSURANCE OF OFFICERS
In accordance with its Constitution, and where permitted under relevant legislation or regulation, the Company indemnifies
the Directors and Officers against all liabilities to another person that may arise from their position as Directors or Officers
of the Company and its subsidiaries, except if, in the Board’s reasonable opinion, the liability arises out of conduct which is
fraudulent, criminal, dishonest or a wilful default of the Directors’ or Officers’ duties.
In accordance with the provisions of the Corporations Act 2001, the Company has insured the Directors and Officers against
liabilities incurred in their role as Directors and Officers of the Company. The terms of the insurance policy, including the
premium, are subject to confidentiality clauses and therefore the Company is prohibited from disclosing the nature of the
liabilities covered and the premium paid.
NON‑AUDIT SERVICES
During the financial year, KPMG, the Group’s auditor, performed certain other services in addition to their statutory duties.
The Board has considered the non‑audit services provided by the auditor and is satisfied that the provision of those non‑audit
services 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 affect 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.
40
Steadfast Group Annual Report 2017
Remuneration Report
1.
INTRODUCTION
1.1
Key management personnel
2.
REMUNERATION OUTCOMES FOR 2017
2.1
Link between Steadfast’s performance
and remuneration
2.2 Maximum potential and actual STI and LTI outcomes
2.3 Targeted maximum potential and actual
remuneration mix
2.4 STI and LTI vesting information
3.
2017 REMUNERATION EXPLAINED
3.1 Remuneration framework
3.1.1 Target remuneration mix
3.2 Fixed remuneration
3.3
Short-term incentives
3.4 Long-term incentives
3.5 Keeping executives’ and shareholders’ interest aligned
4.
REMUNERATION IN DETAIL
4.1
Statutory remuneration disclosure
4.2 Conditional rights
4.3
Executive service agreements
4.3.1 Retrenchment entitlements
4.3.2 Termination under other situations
5. NON‑EXECUTIVE DIRECTOR REMUNERATION
5.1
Fee structure and policy
5.2 Minimum shareholding requirement
5.3 Remuneration details for Non-executive Directors
6.
ADDITIONAL INFORMATION
6.1 Remuneration governance
6.1.1 Role of the Remuneration & Succession Planning
Committee
6.1.2 Use of remuneration consultant
6.2 Valuation of conditional rights
6.3
Shareholdings
6.4 Executive loans
6.5 Related party transactions
42
42
43
43
46
47
47
48
48
49
51
51
53
54
55
55
56
56
57
57
57
57
57
58
58
58
58
58
59
60
60
62
41
Directors’ Report continued
Remuneration Report – Audited
1. INTRODUCTION
The Remuneration Report outlines Steadfast’s remuneration philosophy, framework and outcomes for the financial year
ended 30 June 2017 (FY17) for all key management personnel (KMP), including all Non‑executive Directors and the Executive
Team made up of the Managing Director & Chief Executive Officer (MD & CEO) and certain direct reports. KMP are those
persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly and
indirectly.
1.1 Key management personnel
The current KMP of the Group for the entire financial year unless otherwise stated, are as follows:
Name
Role
Date of appointment
Non‑executive Directors
Frank O’Halloran, AM(a)(d)
Chairman, Non‑executive Director
David Liddy, AM(b)(d)
Anne O’Driscoll(c)(d)
Philip Purcell(d)
Greg Rynenberg(d)
Executive Director
Robert Kelly
Non‑executive Director
Non‑executive Director
Non‑executive Director
Non‑executive Director
21 October 2012
1 January 2013
1 July 2013
1 February 2013
10 August 1998
Managing Director & CEO
18 April 1996
Other key management
Stephen Humphrys
Chief Financial Officer
Samantha Hollman(e)
Chief Operating Officer
Simon Lightbody
Allan Reynolds
CEO, Steadfast Underwriting Agencies
Executive General Manager
‑ Direct, New Zealand & Singapore
2 January 2013
4 January 2000
1 January 2015
5 December 2002
Linda Ellis(f)
Group Company Secretary & Corporate Counsel
3 June 2013
Former key management
Dana Williams (former Chief Operating Officer) ceased to be KMP on 23 September 2016 following her resignation.
Table notes
(a) Frank O’Halloran is Chairman of the Nomination Committee.
(b) David Liddy is Chairman of the Remuneration & Succession Planning Committee.
(c) Anne O’Driscoll is Chairman of the Audit & Risk Committee.
(d) All Non‑executive Directors listed in the table above are independent directors.
(e) Samantha Hollman was in the role of Executive General Manager – Project, Brand, People prior to becoming the
Chief Operating Officer on 17 October 2016.
(f) Linda Ellis was reinstated as KMP from 1 July 2016.
42
2. REMUNERATION OUTCOMES FOR 2017
The following table outlines the returns the Group delivered to its shareholders. The Company experienced 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.
2.1 Link between Steadfast’s performance and remuneration
Earnings per share (EPS) is used as a core financial measure for determining incentives payables (if any) to the Executive
Team in FY17, and together with achievement against annual key performance objectives, remains the financial performance
measure for short‑term incentives (STI). The EPS used in determining STI and long‑term incentive plan (LTI) for FY17 excludes
non‑trading income and expenses approved by the Board. This is consistent with prior year calculations.
As presented in last year’s Remuneration report, the Board has approved the adoption of Total Shareholder Return (TSR) as a
second financial performance measure for DEA awarded in August 2016 and beyond. This is a result of the Board’s ongoing
review of remuneration strategy to further strengthen the alignment between shareholder returns and executive remuneration.
Refer Section 3.1.1 for further details on the remuneration changes in FY17.
TSR is calculated as the change in share price plus dividends declared and any capital returns measured over the financial year
together with a future three‑year vesting period.
Historical data pertaining to the key financial metrics involved in calculating STI and LTI are shown in the table below:
2013
2014
2015
2016
2017
Net profit/(loss) attributable to owners
of the Company ($’000)
(13,437)*
25,087
42,104
73,480
66,792
* The earnings for 2013 were $7.075 million after adjusting for non‑trading items.
43
Steadfast Group Annual Report 2017
Directors’ Report continued
The reconciliation on the reported EPS to the adjusted EPS used for STI and LTI is as follows:
Reported net profit attributable to owners of the Company(e)
25,087
2014(a)
$’000
Less: non‑trading income (Note 4 (iv))
Add: non‑trading expenses (Note 4 (v))
Add: July 2013 trading results, pre‑tax
Less: non‑trading tax effect
Less: non‑controlling interests in non‑trading
items (net of tax)
2015(b)
$’000
42,104
(3,186)
3,302
–
(126)
2016
$’000
73,480
(27,173)
18,572
–
(4,551)
2017
$’000
66,792
(8,205)
7,411
–
948
(4,732)
9,298
4,507
(1,738)
–
–
119
(554)
Adjusted pro forma net profit attributable to owners
of the Company
32,422
42,094
60,447
66,392
Adjusted pro forma diluted EPS (cents per share) (Note 5A)
6.22
7.24
8.09
8.87
Growth from prior financial year (%)
Growth required for minimum STI (%)
Growth required for maximum STI (%)(f)
UBS weighted EPS growth for industrial companies (%)(c)
UBS weighted EPS growth for finance sector (%)(c)
Opening share price ($)(d)
Closing share price ($)
Change in share price (cents per share)(d)
Interim dividend declared per share (cents per share)
Final dividend declared per share (cents per share)
TSR for the year (cents per share)
TSR for the year (%)
Dividend paid
Table notes
19.1%
5.0%
15.0%
7.4%
8.3%
1.15
1.26
11.0
1.8
2.7
15.5
14.7%
9,017
16.4%
5.0%
15.0%
5.8%
3.6%
1.26
1.62
36.0
2.0
3.0
41.0
32.5%
23,611
11.8%
9.6%
5.0%
12.5%
(3.0%)
(4.6%)
1.62
1.98
36.0
2.4
3.6
42.0
25.9%
40,297
5.0%
10.0%
5.6%
5.9%
1.98
2.66
68.0
2.6
4.4
75.0
37.9%
46,485
(a) The 2014 adjusted pro forma net profit attributable to owners of the Company reflected the full 12 months’ operations of
the Group. The 2014 TSR of 14.7% is an annualised figure.
(b) The diluted EPS is adjusted for the bonus element of the rights issue completed in March 2015, including restating 2014.
(c) Data sourced from Australian Equity Strategy report published by UBS on 6 July 2017. Figures shown for 2016 above are
actual (figures in 2016 Annual report are estimates). Figures shown for 2017 are estimates.
(d) IPO share price of $1.15 is used as opening share price for 2014.
(e) A question was posed by the representative of the Australian Shareholders Association at the 2016 AGM querying
why statutory earnings are not used in calculating the EPS used for calculating STI and LTI. Non‑trading income and
expenses approved by the Board are excluded for consistency with prior periods and to achieve a better measure of
underlying performance of the business. This was also the case in prior years. For these reasons, and in accordance with
section 300A(1)(g) of the Corporations Act 2001 which requires the Board to provide an explanation of its proposed action
in response to comments made at the most recent AGM in relation to a prior year Remuneration Report, or if the Board
does not consider any action is required, the Board’s reasons for inaction, the Board does not consider that any change
is required. It should be noted that non‑trading items excluded in 2015 and 2016 were net gains of $0.010 million and
$13.033 million respectively.
(f) Figures represent growth required for maximum STI granted in August 2014, 2015, 2016 and 2017.
44
Pro forma diluted EPS (cents per share):
The graph below shows the base, minimum, maximum and actual pro forma diluted EPS (cents per share) used for
determining STI and LTI for the financial years ended 30 June 2014, 2015, 2016 and 2017. The pro forma diluted EPS for the
prior financial year is the base used for calculating growth for the following financial year.
No STI is payable if the growth in pro forma diluted EPS is less than 5%. The maximum STI is awarded if the pro forma diluted
EPS growth is 15% or higher for the awards granted in August 2014 and 2015; 12.5% or higher for awards granted in August
2016; and 10% or higher for awards to be granted in August 2017.
Pro forma diluted EPS growth accounts for 75% weighting on LTI award granted in August 2016 and beyond (previously:
100%), which is not payable unless at least 5% straight line growth is achieved over a future three‑year vesting period for the
LTI award to be granted in August 2017 (previously: 5% compound growth).
Pro forma diluted EPS (for awards granted in August of the financial year)
8.87
8.09
7.24
6.22
5.22
FY13*
FY14
FY15
FY16
FY17
Base EPS
Min 5% growth
Max 10-15% growth
Actual EPS
* FY13 data is based on pro‑forma financial information as if the Group operations listed in August 2013 had operated in the
Group for FY13.
Total Shareholder Return (TSR):
The graph below shows the Company’s FY17 TSR compared against the median TSR of Top 200 ASX companies excluding
those in the mining industry (peer group). TSR accounts for 25% weighting on LTI award granted in August 2016 and beyond
(previously: nil weighting), which is not payable unless at least at median (previously: at average) of peer group is achieved
over the reporting year and the future three‑year vesting period.
TSR: 37.9%
3.6%
34.3%
TSR: 10.1%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
FY17
SDF
FY17
Peer Group
Share price
Dividend
Peer Group Median
45
Steadfast Group Annual Report 2017 Directors’ Report continued
2.2 Maximum potential and actual STI and LTI outcomes
All participants of the STI and LTI schemes have to achieve at least 60% of their annual key performance objectives to be
eligible for any incentive payments.
The MD & CEO’s performance against his annual key performance indicators (KPIs) set at the beginning of FY17 is set out
below:
FY17 performance measures
Weighting %
Achieved %
Comments
• Achieve budgeted growth of 8% in
adjusted pro forma net profit after tax
• Improve broker margins
• Continue growth of Steadfast Network
brokers
• Successful implementation of INSIGHT
(three‑year project)
• Successful implementation of
UnderwriterCentral (three‑year project)
• Successful implementation of new
technology for back‑office efficiencies
• Retention, development and succession
planning of key executive roles
20
20
15
15
10
10
10
100
Achieved growth of 9.8% in adjusted pro
forma net profit after tax
Broking margin improved from 26.6% to
30.2%
Steadfast Network brokers grew by 9 in
Australia and 10 in Singapore
On target for delivery in 2018 and within
budget
On target for delivery in 2018 and within
budget
Progressing slowly with delays due to third
party commitments
KMP retained and succession plans are in
place for key executive roles
20
20
12
12
8
5
10
87
The above scorecard shows more than 60% of KPIs were achieved.
The table below provides details of maximum potential STI and LTI, and actual STI and LTI awarded to KMP.
Maximum
STI potential
(% of
fixed pay)
Actual STI
outcome(a)
(% of
fixed pay)
Fixed pay
$
STI –
deferred
equity
award
outcome
(40% of
outcome)
$(b)
STI –
cash
outcome
(60% of
outcome)
$
Robert Kelly
900,000
150.00%
101.67%
549,000
366,000
Stephen Humphrys
525,000
100.00%
71.00%
223,650
149,100
Samantha Hollman(c)
450,000
68.00%
51.37%
138,708
Simon Lightbody
Allan Reynolds
Linda Ellis
Table notes
450,000
370,000
210,000
50.00%
50.00%
50.00%
40.33%
108,900
40.33%
40.33%
89,540
50,820
92,472
72,600
59,693
33,880
Maximum
LTI
potential
(% of
fixed pay)
Actual LTI
outcome(a)
(% of
fixed pay)
LTI –
deferred
equity
award
outcome
$(b)
75.00%
75.00%
50.00%
50.00%
50.00%
50.00%
75.00%
675,000
75.00%
393,750
50.00%
225,000
50.00%
225,000
50.00%
185,000
50.00%
105,000
(a) All participants of the FY17 STI and LTI schemes have exceeded the 60% non‑financial performance hurdle and therefore
are eligible.
(b) The number of conditional rights to be granted to the Executive Team has been determined by the dollar value of deferred
equity award (DEA) outcome divided by the weighted average share price over the five trading days prior to the date of this
report. The LTI award outcome is subject to meeting future financial performance hurdles detailed in Section 3.4.
(c) For Samantha Hollman the maximum STI potential was 50% of fixed pay from 1 July 2016 to 16 October 2016. From 17 Oct
2016 to 30 June 2017 the maximum STI potential was increased to 75% of fixed pay after being appointed as Chief Operating
Officer.
46
2.3 Targeted maximum potential and actual remuneration mix for FY17:
Robert Kelly Targeted Maximum
Robert Kelly Actual
Stephen Humphrys Targeted Maximum
Stephen Humphrys Actual
Samantha Hollman Targeted Maximum
Samantha Hollman Actual
Simon Lightbody Targeted Maximum
Simon Lightbody Actual
Allan Reynolds Targeted Maximum
Allan Reynolds Actual
Linda Ellis Targeted Maximum
Linda Ellis Actual
30%
36%
36%
41%
28%
22%
22%
17%
19%
15%
15%
12%
46%
49%
19%
15%
12%
10%
50%
53%
50%
53%
15%
13%
15%
13%
10%
8%
10%
8%
54%
57%
16%
14%
11%
9%
23%
27%
27%
30%
23%
26%
25%
26%
25%
26%
19%
20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed remuneration
At risk - STI cash
At risk - STI deferred
At risk - LTI
2.4 STI and LTI vesting information:
Summary of vesting conditions on the STI and LTI plans are as detailed below:
STI
LTI
Vesting conditions
• Tenure of employment
• No material adverse change to the
reported results over the retention
period of three years
• Refer Section 3.3 for more details
including award conditions
• Awarded in August 2016
• Tenure of employment
• Achieve at least 60% of the annual
key performance objectives
• 75% based on average diluted EPS
increasing by a compound 5% to
12.5% per annum over a future
three‑year vesting period, vesting
made on a 50‑100% straight line
basis.
• 25% based on minimum TSR
measured against average of peer
group
• Refer Section 3.4 for more details
including award conditions
47
Steadfast Group Annual Report 2017 Directors’ Report continued
Should all vesting conditions be met, the DEAs of conditional rights will convert to Steadfast ordinary shares over the following
years (refer Section 6.2 for the vesting date of the STI and LTI conditional rights):
DEA awarded
August 2016
August 2017
August 2018
August 2019
August 2020
August 2014
August 2015
August 2016
August 2017
STI
LTI
STI
LTI
STI
LTI
STI
LTI
Vesting occurs three years after grant date
Vesting occurs five years after grant date
Vesting occurs in three equal tranches after one, two, and three years from grant date
During the current financial year, one‑third of the DEAs granted in August 2015 were vested in August 2016 and in accordance
with the terms of the STI, the applicable number of Steadfast ordinary shares is transferred to relevant Executive Team
members at nil cost to them. Refer Section 6.3 for number of Steadfast ordinary shares transferred to the relevant Executive
Team members.
3. 2017 REMUNERATION EXPLAINED
The listing of the Company necessitated the introduction of a remuneration structure which aligns with the current ASX
Corporate Governance Practice and commenced from 1 July 2013.
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 incentive schemes are designed to encourage
participants to strive to ensure Steadfast outperforms the market on an ongoing basis (refer table 2.1 for EPS growth
comparison against the finance sector and broader market).
The remuneration framework links rewards with the strategic goals and performance of the individual and the Group and
provides a market‑competitive mix of both fixed and variable rewards. To retain and attract high‑calibre employees, the Group
has adopted an approach to position fixed remuneration and total remuneration at the 75th percentile. Key Performance
Indicators (KPIs) together with weightings are established for each individual and are aligned to the Group’s strategic
objectives.
The key elements of the executive remuneration are:
• fixed remuneration consisting of cash salary, superannuation and non‑monetary benefits (Section 3.2);
• an annual incentive referred to as short‑term incentive (STI) plan (Section 3.3); and
• a long‑term incentive referred to as long‑term incentive (LTI) plan (Section 3.4).
Refer Section 2.3 for targeted maximum remuneration mix.
3.1 Remuneration framework
The objective of the Group’s executive remuneration 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 remuneration. The incentive schemes are
designed to incentivise performance that is better than market.
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, and is linked to achievement of pre‑determined individual KPIs
and financial performance targets; and
• transparent reward structures.
48
3.1.1 Target remuneration mix
The Board believes that the fundamental driver for executive remuneration should be long‑term financial performance that
generates value for Steadfast 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 hurdles:
– diluted EPS growth has been chosen to meet and align with shareholders’ objectives. This measure was chosen by the
Board, after considering alternatives such as return on capital employed (ROCE), or return on equity (ROE). The Board
considers that EPS is, on balance, the best driver of executive behaviour that achieves superior performance outcomes
for Steadfast and its shareholders. It is also a relatively simple and transparent measure that is easily reconciled to reported
net profit (see Section 2.1). As funding mix can impact EPS, it is noted that the Board has approved a maximum corporate
gearing ratio of 25.0%. In recognition that subsidiaries may require debt to fund bolt‑on acquisitions, the Group has limited
the extent of subsidiary borrowings to an additional 5% leverage. The corporate gearing ratio at year end was 16.0%. The
total gearing ratio at year end was 18.5%, both materially unchanged from the prior year;
– TSR was introduced as the second financial performance hurdle for LTI awarded in August 2016. This measure was added
by the Board as a result of their ongoing review of the remuneration framework, current market practice and market
feedback. The Board considers TSR is an effective way to incentivise and measure shareholder value creation.
• non‑financial performance hurdle – each member of the Executive Team has been set annual performance objectives
known as KPIs with weightings aligned to the Group’s strategic objectives, and must achieve at least 60% of those objectives
to be eligible for 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 over a three‑year period from the grant date – being one‑third at the end of years one, two
and three;
• subject to meeting the personal and financial objectives, vesting of the LTI occurs after three 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 – DEA and LTI) downwards if it is appropriate to do so. This discretion, applies to all the STI and LTI awards on applicable
dates for vesting of share‑based payment awards.
The Board has set the total remuneration of the Managing Director & CEO at a level to correspond to the 75th percentile
of CEO remuneration of a comparator group of companies. The 75th percentile was chosen in light of the considerable
experience of the Managing Director & CEO and his very strong performance in the role, including the very strong financial
performance of Steadfast since its initial public offering (IPO) in August 2013 as demonstrated by the Company achieving:
• a 9.6% adjusted pro forma diluted EPS growth in FY17;
• a 58.1% adjusted pro forma diluted EPS growth for the period since the IPO; and
• a TSR of 196% for the period since the IPO, inclusive of FY17 final dividend of 4.4 cents per share payable in October 2017.
49
Steadfast Group Annual Report 2017 Directors’ Report continued
As part of the ongoing review of remuneration, the STI and LTI plans were refined to ensure incentives aligned with the Group’s
remuneration philosophy, market‑competitiveness and market feedback on the incentive schemes. The Board approved the
remuneration changes as set out below for the financial year ending 30 June 2017 (FY17) and 30 June 2018 (FY18).
Remuneration
changes
STI
LTI
FY17 terms (awarded in August 2016)
FY18 new terms (awarded in August 2017)
Maximum STI awarded when diluted EPS growth of
12.5% is achieved.
Maximum STI awarded when diluted EPS growth of
10.0% is achieved.
75% based on average diluted EPS increasing by a
compound 5% to 12.5% per annum over a future
three‑year vesting period. The vesting schedule is
outlined below:
75% based on average diluted EPS increasing by
a straight line 5% to 10% per annum over a future
three‑year vesting period. The vesting schedule is
outlined below:
Compound average
diluted EPS growth
Vesting outcome
Straight line diluted
EPS growth
Vesting outcome
Below 5%
At 5%
5% to 12.5%
0%
50%
Straight line between 50%
to 100%
Below 5%
At 5%
5% to 10%
0%
50%
Straight line between 50%
to 100%
12.5% or higher
100%
10% or higher
100%
25% based on Total Shareholder Return (TSR)(a)
measured against Top 200 ASX companies excluding
those in the mining industry (peer group).
25% based on Total Shareholder Return (TSR)(a)
measured against Top 200 ASX companies excluding
those in the mining industry (peer group).
TSR
Vesting outcome
TSR
Vesting outcome
Less than average of
peer group
At average of peer
group
0%
50%
Less than median of
peer group
At median of peer
group
0%
50%
Exceeding average of
peer group by 100%
or below
Exceeding average of
peer group by 100%
or higher
Straight line between 50%
to 100%
100%
Exceeding median of
peer group by 75% or
below
Exceeding median of
peer group by 75% or
higher
Straight line between 50%
to 100%
100%
(a) TSR is calculated as the change in share price plus dividends declared and any capital returns measured over the financial
year together with a future three‑year vesting period.
50
3.2 Fixed remuneration for FY17
The table below outlines the key details of executives’ fixed remuneration.
Component
Details
Description
Cash salary, superannuation, and non‑monetary benefits.
Purpose and link
to strategy
Operation
Helps to attract and retain high‑calibre executives.
Reflects individual role, experience and performance.
Reviewed annually by the Remuneration & Succession Planning Committee and fixed for
12 months (unless there is a significant role change), with any changes effected 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.
Executive Team is provided with cash salary, superannuation, car parking ($7,200 per annum),
income protection and life insurance ($10,400 per annum).
Potential reward
Fixed remuneration targeted at 30%–54% of total remuneration.
3.3 Short‑term incentives for FY17
The table below outlines the key details of the STI plan. STI awards in FY17 are summarised in Section 2.2 of the Remuneration
Report.
Component
Details
Operation
STI Plan consisting of cash and deferred equity award.
Purpose and link
to strategy
Potential reward
Recognises the contributions and achievements of the Executive Team and helps to attract
and retain talent.
STI awards are performance‑based, at risk reward arrangements with Board discretion.
The combined total of at risk remuneration (STI and LTI combined) is targeted at 46%–70% of
total remuneration.
Performance metrics
STI – Cash award (60% of total STI); Deferred equity award (40% of total STI)
• Continuous employment for the vesting period for deferred equity awards split one‑third over
Performance measures
one, two and three years; and
• vesting is subjected to future performance hurdles below.
Non‑financial measures:
Personal, cultural and behavioural objectives aligned to the Group’s strategic 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 for any STI. The MD & CEO achieved a substantial majority of his FY17
non‑financial objectives with weightings (refer Section 2.2).
Financial measures relating to awards issued during FY17 (awarded in August 16):
No STI is payable unless at least 5% EPS growth is achieved against the base pro forma EPS.
Maximum STI can be awarded if the EPS growth is 12.5% or higher.
Potential maximum STI MD & CEO can earn up to 150% of his annual fixed remuneration.
Approval of the STI
The other executives within the Executive Team can earn 50% to 100% of their annual fixed
remuneration.
The MD & CEO’s STI is recommended by the Remuneration & Succession Planning Committee
based on the Group’s financial and his non‑financial performance outcomes and approved by the
Board.
The STI of other members of the Executive Team is recommended by the MD & CEO to the
Remuneration & Succession Planning Committee, based on the Group’s financial and their
non‑financial performance outcomes. It is recommended by the Remuneration & Succession
Planning Committee and approved by the Board.
Rationale for choosing
performance measures
The non‑financial measures are chosen to ensure each member 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 shareholder value is
increased.
51
Steadfast Group Annual Report 2017
Directors’ Report continued
Component
Details
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 of conditional rights to Steadfast ordinary shares (DEA)
and vesting over a three‑year tenure hurdle from the grant date. The conditional rights will vest in
three equal tranches after one, two and three years from the grant date.
Key terms of DEA
DEA is normally granted in August following the end of 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 over the vesting period
post grant date, and no material adverse change to the reported results. The Remuneration &
Succession Planning Committee noted there had not been any negative material deterioration in
EPS from prior year adjustments in the subsequent year.
These rights will accrue notional dividends and any bonus element inherent in any rights issue,
which will be paid as additional shares 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 or ill
health, any unvested rights may be paid in cash and/or Steadfast ordinary shares, subject to Board
discretion.
52
3.4 Long‑term incentives for FY17
The table below outlines the key details of the LTI plan. LTI awards in FY17 are summarised in Section 2.2 of the Remuneration
Report.
Component
Details
Purpose and link
to strategy
Provides opportunity for the Executive Team to acquire equity in the Company as a reward for
increasing EPS and TSR over the longer term and helps to attract and retain talent.
Operation
LTI Plan consisting of DEA.
Potential reward
LTI awards are discretionary, performance‑based, at risk reward arrangements.
The combined total of at risk remuneration (LTI and STI combined) is targeted at 46%–70% of total
remuneration.
Performance metrics
LTI – Deferred equity award (100%)
Future performance
hurdles
• Continuous employment and performance rating to be met for the three‑year vesting period;
and
• vesting is subjected to future performance hurdles below.
Non‑financial measures:
Personal, cultural and behavioural objectives aligned to the Group’s strategic 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. The MD & CEO achieved a substantial majority of his FY17
non‑financial objectives with weightings (refer Section 2.2).
Financial measures relating to awards issued during FY17 (awarded in August 2016):
• 75% is based on average pro forma diluted EPS growth, which is not payable unless at least 5%
compound growth is achieved over a future three‑year vesting period; The vesting schedule is
outlined below:
Compound average diluted EPS growth
Vesting outcome
Below 5%
At 5%
5% to 12.5%
12.5% or higher
and
0%
50%
Straight line between 50% to 100%
100%
• 25% is based on TSR measured against Top 200 ASX companies excluding those in the mining
industry (peer group), which is not payable unless TSR is at least the average of peer group.
TSR is calculated as the change in share price plus dividends declared and any capital returns
measured over the financial year together with a future three‑year vesting period. The vesting
schedule is outlined below:
TSR
Less than average of peer group
At average of peer group
Vesting outcome
0%
50%
Exceeding average of peer group by 100% or below
Straight line between 50% to 100%
Exceeding average of peer group by 100% or higher
100%
53
Steadfast Group Annual Report 2017
Directors’ Report continued
Component
Details
Potential maximum LTI
The MD & CEO can earn up to 75% of his annual fixed remuneration.
The other executives within the Executive Team can earn 50% to 75% of their annual fixed
remuneration.
Approval of the LTI
The Board approves the LTI based on the financial and non‑financial performance outcome as
recommended by the Remuneration & Succession Planning Committee.
Forms of LTI reward
DEA of conditional rights to Steadfast ordinary shares and vesting after a three‑year tenure hurdle
and meeting future performance hurdles from the grant date.
Rationale for choosing
performance measures
Key terms of DEA
Forfeiture conditions
The financial measures of EPS growth and TSR are chosen to ensure long‑term shareholders
value is increased.
The non‑financial measures are chosen to ensure each member of the Executive Team performs
specific tasks that support the success of Steadfast.
DEA is normally granted on the date the audited financial results are announced.
These rights are granted to the participants (at no cost), to the dollar value of a percentage of 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 the three‑year
period from the grant date and meeting performance hurdles, subject to Board discretion.
These rights will not accrue notional dividends.
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 or
ill health, any unvested rights may be paid in cash and/or Steadfast shares subject to Board
discretion.
3.5 Keeping executives’ and shareholders’ interest aligned
Component
Details
Shareholding
requirements
There is no specific policy requiring the Executive Team to hold any of Steadfast’s ordinary shares.
However, the Executive Team have acquired Steadfast’s ordinary shares, through the following
means:
• re‑weighting shares allocated to the MD & CEO as a shareholder who held ordinary shares
before the Company’s change of constitution as approved by its Extraordinary General Meeting
in June 2013;
• allotment of ordinary shares to Mr Lightbody as part consideration for the acquisition by
Steadfast, as part of the initial public offer in August 2013, of Miramar, an underwriting agency
business then partly owned by Mr Lightbody;
• subscription for ordinary shares as part of the Company’s initial public retail and institutional
offer and subsequent rights issues;
• for three executives, acquisition of Executive Shares through the Executive Loan Arrangement
(for further details, refer Section 6.4 Executive loans);
• participation in the Company’s Dividend Reinvestment Plan;
• conditional rights converting into ordinary shares at the end of August 2014;
• potential vesting of DEAs granted through the STI and LTI Plans in the financial years from 1 July
2014 onwards (refer Sections 3.3 and 3.4 for further details of the STI and LTI Plans); and
• purchase of shares on market within trading windows.
Section 6.3 provides movements of Steadfast’s ordinary shares held by the Executive Team during the current financial year.
54
4. REMUNERATION IN DETAIL
4.1 Statutory remuneration disclosure
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 KMP to the year ended 30 June. Refer
Section 1.1 Key management personnel for KMP who were appointed during the financial year ended 30 June 2016 and 2017.
Short‑term employment benefits
(1)
Cash salary
and leave
accruals
$
(2)
Short‑term
incentive
$
(3)
Non‑
monetary
benefits
$
Post‑
employment
benefits
(4)
Super‑
annuation
$
Other
long‑term
employment
benefits
(5)
Long
service leave
accruals
$
Subtotal
(excluding
share‑based
payments)
Share‑based
payments
Total
$
$
$
Key Management Personnel (including Managing Director & CEO):
Robert Kelly, Managing Director & CEO
2017
2016
927,566
549,000
931,331
574,200
Stephen Humphrys, Chief Financial Officer
2017
2016
552,978
509,306
223,650
228,000
35,816
27,453
38,025
20,719
Samantha Hollman, Chief Operating Officer(6)
2017
2016
426,933
299,378
138,708
75,600
29,832
16,524
Simon Lightbody, CEO, Steadfast Underwriting Agencies
2017
2016
460,270
440,469
108,900
110,680
23,898
9,093
19,616
19,308
19,616
19,308
19,616
19,308
19,616
19,308
18,924
23,051
9,872
–
1,550,922
230,714
1,781,636
1,575,344
504,469
2,079,813
844,141
777,333
83,959
207,648
928,100
984,981
5,565
(1,334)
620,654
409,476
59,747
77,987
680,401
487,463
13,843
14,344
626,527
593,894
63,036
37,480
689,563
631,374
Allan Reynolds, Executive General Manager ‑ Direct, New Zealand & Singapore
2017
2016
357,832
334,069
89,540
90,720
27,692
11,622
19,616
19,308
8,036
8,338
502,716
464,057
36,107
119,785
538,823
583,842
Linda Ellis, Group Company Secretary & Corporate Counsel(7)
199,365
50,820
25,760
18,469
3,099
297,513
17,350
314,863
2017
2016
–
–
–
–
Former Key Management Personnel
Dana Williams, Chief Operating Officer(8)
2017
2016
133,775
445,187
–
159,300
8,603
10,841
6,476
19,308
Table notes
–
–
–
–
–
–
148,854
634,636
–
148,854
125,475
760,111
(1) Cash salary includes amounts paid in cash plus any salary sacrifice items. Annual leave accruals are determined in
accordance with Accounting Standard, AASB 119 Employee Benefits.
(2) The 2017 short‑term incentive (STI) represents 60% of the total STI awarded and approved by the Board and will be paid in
cash in September 2017.
(3) This amount includes car parking and the relevant fringe benefit tax, cost of income protection and life insurance provided
by the Group.
(4) Superannuation contribution is paid in line with legislative requirements.
(5) Long service leave accruals are determined in accordance with AASB 119 Employee Benefits.
(6) Samantha Hollman was appointed Chief Operating Officer on 17 October 2016. Prior to this, Mrs Hollman held the
position of Executive General Manager – Projects, Brand, People. Mrs Hollman was KMP for the full period in 2017 and
2016.
(7) Linda Ellis was reinstated as KMP from 1 July 2016. Mrs Ellis is employed on a 60% of full‑time basis.
(8) Dana Williams ceased being a KMP on 23 September 2016 following her resignation.
55
Steadfast Group Annual Report 2017 Directors’ Report continued
4.2 Conditional rights
In August 2016, the Remuneration & Succession Planning Committee approved the allocation of conditional rights to the KMP
being the DEA portion of the STI and LTI based on FY16 results. The STI conditional rights will vest in three equal tranches
on 24 August 2017, 24 August 2018 and 24 August 2019 should all conditions of vesting be met. The LTI conditional rights
will vest 24 August 2019 should all conditions of vesting be met. The STI conditional rights participated in the Dividend
Reinvestment Plan (DRP) in October 2016 and April 2017 for the final FY16 dividends and half‑year FY17 interim dividends
respectively.
The table below provides the number of conditional rights held by members of the Executive KMP at 30 June 2016 and
30 June 2017.
Balance
30 June STI granted LTI granted
STI vested
and/or
transferred
2016 during FY17 during FY17 granted during FY17(a)
DRP
1,180,571
175,130
199,012
36,512
531,409
209,462
–
360,327
235,495
69,540
23,058
33,757
27,670
16,141
114,375
16,438
48,037
6,397
70,328
923
(95,615)
(33,031)
(12,107)
–
82,350
10,802
(16,337)
33,626
6,496
(13,908)
Balance
30 June
2017
1,495,610
698,731
274,847
105,008
464,812
277,850
Forfeited
–
–
–
–
–
–
286,172
48,586
102,937
–
(27,815)
(409,880)
–
2,803,436
393,882
650,665
77,568
(198,813)
(409,880)
3,316,858
Robert Kelly
Stephen Humphrys
Samantha Hollman
Simon Lightbody
Allan Reynolds
Linda Ellis
Dana Williams(b)
Table notes
(a) One‑third of the DEAs granted in August 2015 were vested in the current financial year. In accordance with the terms of
the STI plan, eligible participants of the plan received one Steadfast ordinary share per conditional right at nil cost to them
upon vesting.
(b) The unvested conditional rights were forfeited upon Ms William’s resignation in September 2016.
Refer Section 6.2 for the fair value of the conditional rights awarded in August 2016.
4.3 Executive service agreements
Steadfast has ongoing executive service agreements (Executive Agreements) with each of the members of the Executive KMP.
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 KMP’s Executive Agreements. The Executive Agreements do not
provide for any termination payments, other than payment in lieu of notice by the Company.
Name
Robert Kelly*
Stephen Humphrys
Samantha Hollman
Simon Lightbody
Allan Reynolds
Linda Ellis
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
12 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
* Mr Kelly has agreed not to terminate his employment contract before 31 December 2020.
56
In accordance with the requirements of Corporations Act 2001, termination provisions could include the payment of unused
annual leave and long service leave accruals where applicable.
4.3.1 Retrenchment entitlements
In the event of redundancy, Mr Kelly will be paid an amount equal to 12 months fixed remuneration.
4.3.2 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.
5. NON‑EXECUTIVE DIRECTOR REMUNERATION
5.1 Fee 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 2017, no consultants were 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 any remuneration consultant.
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.
At 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.
The table below contains the annual fee structure for the Steadfast Board and committees (inclusive of superannuation).
Board
$
225,000
220,000
115,000
110,000
Audit &
Risk Committee
$
Remuneration &
Succession
Planning Committee
$
Nomination
Committee
$
20,000
20,000
5,000
5,000
20,000
20,000
5,000
5,000
–
–
–
–
Chairman
Members
2017
2016
2017
2016
No additional remuneration will be paid for the Chairman and members of the Nomination Committee nor any directorships
of subsidiaries.
5.2 Minimum shareholding requirement
Non‑executive Directors are not required under the Company’s constitution to hold any of 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.
Refer Section 6.3 for details of Steadfast’s ordinary shares held by the Non‑executive Directors.
57
Steadfast Group Annual Report 2017 Directors’ Report continued
5.3 Remuneration details for Non‑executive Directors
The table below provides remuneration details of the Non‑executive Directors on the Company’s Board.
Short‑term employment benefits
Post‑
employment benefits
Board fees
$
Committee fees
$
Superannuation
$
Current Non‑executive Directors
Frank O’Halloran, AM
2017
2016
David Liddy, AM
2017
2016
Anne O’Driscoll
2017
2016
Philip Purcell
2017
2016
Greg Rynenberg
2017
2016
205,479
200,913
105,023
100,457
105,023
100,457
105,023
100,457
105,023
100,457
9,905
9,779
22,831
22,831
22,831
22,831
9,132
9,132
9,132
9,132
19,616
19,308
12,146
11,712
12,146
11,712
10,845
10,411
10,845
10,411
Total
$
235,000
230,000
140,000
135,000
140,000
135,000
125,000
120,000
125,000
120,000
6. ADDITIONAL INFORMATION
6.1 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.
6.1.1 Role of the 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 in Section 1.1.
6.1.2 Use of remuneration consultant
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 with respect to the Executive Team. Remuneration consultants are engaged no less than every three years 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.
58
6.2 Valuation of conditional rights
The table below details the fair value of conditional rights issued affecting remuneration of KMP in the previous, current or
future reporting periods:
Description
Recipient
Grant date
Vesting date
Volume
weighted
average share
price
(VWAP)(c)
$
Fair value at
grant date(b)
$
October 2016 STI conditional rights(a) MD & CEO
27 October 2016
24 August 2017
October 2016 STI conditional rights(a) MD & CEO
27 October 2016
24 August 2018
October 2016 STI conditional rights(a) MD & CEO
27 October 2016
24 August 2019
August 2016 STI conditional rights(a) Other executives
24 August 2016
24 August 2017
August 2016 STI conditional rights(a) Other executives
24 August 2016
24 August 2018
August 2016 STI conditional rights(a) Other executives
24 August 2016
24 August 2019
October 2015 STI conditional rights(a) MD & CEO
30 October 2015
24 August 2016
October 2015 STI conditional rights(a) MD & CEO
30 October 2015
24 August 2017
October 2015 STI conditional rights(a) MD & CEO
30 October 2015
24 August 2018
August 2015 STI conditional rights(a) Other executives
24 August 2015
24 August 2016
August 2015 STI conditional rights(a) Other executives
24 August 2015
24 August 2017
August 2015 STI conditional rights(a) Other executives
24 August 2015
24 August 2018
October 2016 LTI conditional rights MD & CEO
27 October 2016
24 August 2019
August 2016 LTI conditional rights
Other executives
24 August 2016
24 August 2019
October 2015 LTI conditional rights MD & CEO
30 October 2015
24 August 2018
August 2015 LTI conditional rights
Other executives
24 August 2015
24 August 2018
October 2014 STI conditional rights MD & CEO
29 October 2014
25 August 2017
August 2014 STI conditional rights
Other executives
25 August 2014
25 August 2017
October 2014 LTI conditional rights MD & CEO
29 October 2014
25 August 2019
2.1292
2.1234
2.1128
2.1264
2.1179
2.1047
1.4992
1.4939
1.4841
1.4519
1.4442
1.4323
1.9834
1.9500
1.4841
1.4323
1.4312
1.3253
1.4001
August 2014 LTI conditional rights
Other executives
25 August 2014
25 August 2019
1.2908
2.1858
2.1858
2.1858
2.1858
2.1858
2.1858
1.4881
1.4881
1.4881
1.4881
1.4881
1.4881
2.1858
2.1858
1.4881
1.4881
1.3960
1.3960
1.3960
1.3960
Table notes
(a) The STI conditional rights granted in October 2016, August 2016, October 2015 and August 2015 will vest in three equal
tranches after one, two and three years from the grant date.
(b) The fair value at grant date is determined in accordance with Accounting Standard, AASB 2 Share‑based Payment.
(c) To calculate the number of conditional rights to be granted, the award value is divided by the volume weighted average
share price of Steadfast shares over the five trading days on the Australian Securities Exchange prior to Steadfast
announcing its full‑year results.
59
Steadfast Group Annual Report 2017
Directors’ Report continued
6.3 Shareholdings
The table below summarises the movement in holdings of ordinary shares 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 KMPs.
Total
shares
held at
1 July
2016
Shares
transferred
upon
vesting
of DEA
Purchases
Shares
allocated
Sales/
via DRP Reductions
Total
shares
held at
30 June
2017
Shares
held
nominally
at
30 June
2017(a)
Frank O’Halloran, AM(b)
1,947,826
Robert Kelly(b)
David Liddy, AM(b)
Anne O’Driscoll(b)
Philip Purcell(b)
Greg Rynenberg(b)
5,391,543
250,000
163,043
160,142
745,633
Stephen Humphrys
1,466,667
Samantha Hollman
316,437
–
–
–
–
–
–
–
–
Simon Lightbody
1,792,314
20,000
Allan Reynolds
1,021,045
–
Linda Ellis
Dana Williams(c)
Table notes
199,350
55,700
–
–
–
–
(450,000)
1,497,826
95,615
10,363
–
–
–
–
33,031
12,107
–
16,337
13,908
27,815
–
–
–
19,733
–
–
–
–
–
5,497,521
250,000
163,043
160,142
765,366
–
(499,698)
1,000,000
8,695
–
3,635
–
–
–
–
–
337,239
1,812,314
1,041,017
(14,000)
254,958
(27,815)
–
802,174
401,906
250,000
163,043
160,142
765,366
–
253,281
455,314
38,371
–
–
(a) Shares held nominally are included in the column headed ‘Total shares held at 30 June 2017’. 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) Individual shareholdings removed upon cessation as a KMP of the Company.
6.4 Executive loans
In the Extraordinary General Meeting held on 14 June 2013, the shareholders approved the making by the Company of
full recourse loans to three continuing KMP. 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.
60
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
2013. A share‑based payments expense on Executive Shares of $4.015 million was recorded in FY14 to recognise the
difference between the cost and the fair value of the Executive loans. The share‑based payments expense of $4.015 million is
likely to be reversed over the period to the final repayment date. $3.464 million has been reversed as at 30 June 2017.
The Executive Shares are subject to escrow restrictions. Apart from the exceptions as noted below, the key restrictions are:
• 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) the executives agreed not to 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.
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:
Date
30 August 2015
30 August 2016
30 August 2017
30 August 2018
30 August 2019
Cumulative amount of Executive Shares that may be sold
≤ 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
• should the executive leave, then the shares are not subject to the trading restrictions noted above;
• 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; and
• 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.
The table below provides the amount of the Executive loans provided to three executives and the fair value at the drawn
down date and movement during the financial year.
Face value of
Executive loans
$
5,000,000
1,000,000
900,000
6,900,000
Fair value of
Executive loans
drawn down at
start of the year
$
Deemed
interest income
during the year
$
Repayment
during the year
$
Fair value of
Executive loans
at the end
of the year
$
3,637,626
727,431
654,852
5,019,909
368,316
73,631
66,324
508,271
(310,000)
(62,000)
(55,800)
(427,800)
3,695,942
739,062
665,376
5,100,380
Robert Kelly
Stephen Humphrys
Allan Reynolds
61
Steadfast Group Annual Report 2017 Directors’ Report continued
6.5 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:
2017
$
2016
$
i. Sale of goods and services
Marketing and administration fees received from Directors’ related entities on normal
commercial terms
22,268
27,683
ii. Payment for goods and services
Estimated Steadfast Network broker rebate expense to Directors’ related entities on
the basis as determined by the Board
48,947
40,648
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
6,536
–
The Group is of the kind referred to in the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191
issued by the Australian Securities & Investments Commission. In accordance with that Instrument, amounts in the Directors’
Report and financial report have been rounded to the nearest thousand dollars, unless otherwise stated.
Signed at Sydney on 23 August 2017 in accordance with a resolution of the Directors.
Frank O’Halloran, AM
Chairman
Robert Kelly
Managing Director & CEO
62
Lead Auditor’s Independence Declaration
UNDER SECTION 307C OF 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 year ended 30 June 2017, 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
23 August 2017
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative ("KPMG International"), a Swiss entity. Liability limited by a scheme approved under Professional
Standards Legislation.
63
Steadfast Group Annual Report 2017 Steadfast Group Limited
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2017
Note
2017
$’000
2016
$’000
REVENUE
Fee and commission income
Less: brokerage commission paid
Net fee and commission income
Marketing and administration fees
Interest income
Other revenue
12
13
10
4
7
4, 7, 12
20
Share of profits of associates accounted for using the equity method
Share of profits of joint ventures accounted for using the equity method
Profit on fair value of investments
Net gain from adjustments to deferred consideration estimates
Net gain from sale of subsidiaries
Other income
EXPENSES
Employment expense
Selling expense
Administration, brokers’ support service and other expenses
Steadfast Network Broker rebates expense
Occupancy expense
Amortisation expense
Depreciation expense
Impairment expense
Loss on fair value of investments
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
OTHER COMPREHENSIVE INCOME
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Net movement in foreign currency translation reserve
Cash flow hedge effective portion of change in fair value
Income tax expense on other comprehensive income
Other comprehensive income for the period, net of tax
Total comprehensive income for the year, net of tax
431,125
(119,241)
311,884
35,310
7,467
34,636
389,297
12,104
1,937
–
3,421
4,065
3,826
414,650
(175,513)
(20,747)
(46,895)
(11,362)
(14,451)
(21,473)
(3,292)
(6,459)
(803)
(9,096)
(310,091)
104,559
(26,372)
78,187
(277)
(28)
91
(214)
404,828
(124,830)
279,998
32,404
7,222
37,159
356,783
9,071
2,095
1,600
23,874
–
3,399
396,822
(159,046)
(15,255)
(48,908)
(10,158)
(13,071)
(20,888)
(3,119)
(18,090)
–
(8,432)
(296,967)
99,855
(18,737)
81,118
379
(463)
25
(59)
77,973
81,059
64
PROFIT FOR THE YEAR IS ATTRIBUTABLE TO:
Non‑controlling interests
Owners of Steadfast Group Limited
TOTAL COMPREHENSIVE INCOME FOR THE YEAR IS ATTRIBUTABLE TO:
Non‑controlling interests
Owners of Steadfast Group Limited
EARNINGS PER SHARE
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Note
5
5
2017
$’000
11,395
66,792
78,187
11,395
66,578
77,973
8.96
8.92
2016
$’000
7,638
73,480
81,118
7,638
73,421
81,059
9.86
9.84
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with
the notes to the financial statements.
65
Steadfast Group Annual Report 2017
Steadfast Group Limited
Consolidated Statement of Financial Position
AS AT 30 JUNE 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Cash held on trust
Receivables of broking/underwriting agency operations
Trade and other receivables
Related party loans
Other
Total current assets
NON‑CURRENT ASSETS
Goodwill
Intangible assets
Investments in associates
Interest in joint ventures
Deferred tax assets
Property, plant and equipment
Related party loans
External shareholder loans
Other
Total non‑current assets
Total assets
LIABILITIES
CURRENT LIABILITIES
Payables on broking/underwriting agency operations
Trade and other payables
Bank overdrafts
Borrowings
Deferred consideration
Income tax payable
Provisions
Total current liabilities
NON‑CURRENT LIABILITIES
Borrowings
Deferred consideration
Other payables
Deferred tax liabilities
Provisions
Total non‑current liabilities
Total liabilities
Net assets
66
Note
2017
$’000
2016
$’000
21
21
22
7
7
12
13
20
22
14C
8, 21
8
10
8
10
20
66,537
263,198
343,882
45,248
1,031
4,984
724,880
717,397
154,990
125,690
11,362
3,419
27,498
6,182
27,489
1,120
1,075,147
1,800,027
533,975
49,551
526
995
5,222
13,727
15,020
619,016
67,457
224,752
301,011
35,466
976
4,455
634,117
712,329
165,280
121,783
2,211
8,284
27,908
7,197
29,800
3,589
1,078,381
1,712,498
453,322
48,002
464
1,116
11,821
17,583
15,363
547,671
204,945
200,326
1,366
3,788
50,655
7,089
267,843
886,859
913,168
1,848
3,005
55,342
6,165
266,686
814,357
898,141
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
9
9
2017
$’000
2016
$’000
796,857
(7,014)
(165)
3,761
64,086
(20,484)
35,161
872,202
40,966
913,168
796,857
(4,396)
28
3,675
31,542
(15,108)
47,399
859,997
38,144
898,141
The above Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial
statements.
67
Steadfast Group Annual Report 2017
Steadfast Group Limited
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2017
Equity attributable to owners of Steadfast Group Limited
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
Non‑
controlling
interests
Total
equity
$’000
$’000
2017
Balance at 1 July 2016
796,857
(4,396)
28
3,675
31,542
(15,108)
47,399
38,144 898,141
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:
Shares acquired and held
in trust (Note 9)
Share‑based payments
on Executive Shares and
employee share plans
Shares allotted through
Dividend Reinvestment
Plan (Note 9)
Shares allotted to
employees under
Employee Conditional
Rights Scheme (Note 9)
Transfer of retained
earnings to profit reserve
Acquisition of
non‑controlling interests
(Note 10)
Changes in equity
interests in subsidiaries
without loss of control
Dividends declared and
paid (Note 6)
–
–
–
–
–
–
–
(193)
(193)
–
(2,827)
–
–
–
–
–
–
–
–
(252)
461
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
86
–
–
–
–
–
–
–
–
–
–
32,544
–
–
–
–
–
–
–
66,792
11,395
78,187
(21)
–
–
(214)
(21)
66,792
11,395
77,973
–
–
–
–
–
–
(5,355)
–
–
–
–
(32,544)
–
(2,827)
–
–
–
–
86
(252)
461
–
–
–
2,665
2,665
(1,249)
(6,604)
– (46,486)
(9,989)
(56,475)
Balance at 30 June 2017
796,857
(7,014)
(165)
3,761
64,086 (20,484)
35,161
40,966
913,168
The above Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial
statements.
68
Equity attributable to owners of Steadfast Group Limited
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
Non‑
controlling
interests
Total
equity
$’000
$’000
2016
Balance at 1 July 2015
787,946
(3,018)
(237)
3,130
6,562
(10,698)
39,196
18,684
841,565
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:
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
Shares allotted through
Dividend Reinvestment
Plan (Note 9)
Shares allotted to
employees under
Employee Conditional
Rights Scheme (Note 9)
Transfer of retained
earnings to profit reserve
Acquisition of
non‑controlling interests
(Note 10)
Changes in part equity
interests in subsidiaries
without loss of control
Dividends declared and
paid (Note 6)
–
–
–
–
–
–
–
265
265
8,911
–
–
(1,388)
–
–
–
–
–
–
–
–
(155)
165
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
710
–
(165)
–
–
–
–
–
–
–
–
–
–
–
–
47,282
–
–
73,480
7,638
81,118
(324)
–
–
(59)
(324)
73,480
7,638
81,059
–
–
–
–
–
–
–
–
–
–
–
–
(47,282)
–
–
–
–
–
–
–
–
8,911
(1,388)
710
(155)
–
–
(279)
(279)
19,247
15,161
–
(4,086)
(22,302)
–
(17,995)
(7,146)
(47,443)
Balance at 30 June 2016
796,857
(4,396)
28
3,675
31,542
(15,108)
47,399
38,144
898,141
The above Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the financial
statements.
69
Steadfast Group Annual Report 2017 Steadfast Group Limited
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2017
Note
2017
$’000
2016
$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees, and Network broker rebates
Dividends received from associates and joint ventures
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
21
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for acquisitions of subsidiaries and business assets,
net of cash acquired
Payments for investments in associates and joint ventures
Payments for step‑up investment in subsidiaries on hubbing arrangements
Payments for deferred consideration of subsidiaries, associates
and business assets
Proceeds from disposal of investment in subsidiaries, net of cash disposed
Proceeds from disposal of investment in associates
Proceeds from part disposal of investment 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
Dividends paid to owners of Steadfast (net of Dividend Reinvestment Plan in 2016)
Proceeds from borrowings
Repayment of borrowings
Payments for purchase of treasury shares
Repayment of related party loan
Payments for related party loans
Repayment of non‑related party loans
Payments for non‑related party loans
Dividends paid to non‑controlling interests
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effect of movements in exchange rates on cash held
404,955
(299,159)
14,064
6,989
(9,154)
(32,060)
85,635
22,317
107,952
(4,372)
(16,671)
(3,835)
(11,745)
25,168
–
1,763
(2,241)
(7,595)
(19,528)
(46,486)
55,429
(51,135)
(2,827)
1,552
(100)
3,256
(654)
(9,989)
(50,954)
37,470
291,745
(6)
Cash and cash equivalents at the end of the financial year
21
329,209
376,862
(289,209)
12,910
5,773
(7,710)
(14,658)
83,968
42,259
126,227
(10,521)
(17,632)
(3,593)
(23,138)
–
497
–
(5,306)
(5,637)
(65,330)
(31,385)
210,553
(180,331)
(1,388)
976
(200)
2,038
(1,440)
(7,146)
(8,323)
52,574
239,171
–
291,745
The above Consolidated Statement of Cash Flows should be read in conjunction with the notes to the financial statements.
70
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1. GENERAL INFORMATION
This general purpose financial report is for the year ended 30 June 2017 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 joint
ventures (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 4, 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 23 August 2017.
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. These accounting
policies 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. New and amended standards adopted by the Group
The Group has adopted the following revised or amending Accounting Standard and Interpretation issued by the Australian
Accounting Standards Board that is mandatory for the year ended 30 June 2017. Adoption of this standard has not had any
material effect on the financial position or performance of the Group.
Title
Description
AASB 1057
Application of Australian Accounting Standards
II. Reclassification of comparatives
Prior year comparative information relating to stamp duty, due diligence and restructure costs in the consolidated statement
of profit or loss and other comprehensive income has been revised in this financial report to conform to the current period’s
presentation. This is now contained within line item Administration, brokers’ support service and other expenses.
Prior year comparative information relating to corporate expenses in Note 4 of this financial report has been revised to
conform to the current period’s presentation. This is now contained within line item Expenses – consolidated entities.
III. Rounding
The Group is of the kind referred to in the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191
issued by the Australian Securities and Investments Commission. In accordance with that Instrument, amounts in this financial
report have been rounded to the nearest thousand dollars, unless otherwise stated.
71
Steadfast Group Annual Report 2017 Notes to the Financial Statements continued
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES continued
C. PRINCIPLES OF CONSOLIDATION
I. Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired. The excess
of the consideration transferred over the fair value of identifiable net assets acquired and non‑controlling interests is recorded
as goodwill. If the consideration transferred is less than the fair value of identifiable net assets acquired and non‑controlling
interests, the difference is recognised directly in profit or loss. Costs of acquisition are expensed as incurred, except if they
related to the issue of debt or equity securities.
II. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the consolidated financial statements of the Group from the date on
which control commences until the date on which control ceases.
III. Non‑controlling interests
Non‑controlling interests (NCI) are measured at their proportionate share of the acquired subsidiaries’ identifiable net assets
at the date of acquisition. For the operations and business being put into a business hub, NCI represent the fair value at the
hubbing date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions.
IV. Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI
and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former
subsidiary is measured at fair value when control is lost.
V. Interests in equity‑accounted investees
The Group’s interests in equity‑accounted investees comprise interests in associates and joint ventures. Associates are those
entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.
Joint ventures are arrangements in which the Group has joint control, whereby the Group has rights to the net assets of the
arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in associates and joint ventures are accounted for using the equity method. They are initially recognised at cost,
which includes transaction costs. Subsequent to initial recognition, the Group’s share of the profit or loss of associates and the
joint ventures is included in the Group’s profit or loss.
VI. Transactions eliminated on consolidation
Intra‑group balances and transactions, and any unrealised income and expenses arising from intra‑group transactions,
are eliminated in full.
72
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES continued
D. 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 recognised to the extent that there is no future obligation. Where there is a future obligation, a portion
is deferred over the expected service period.
Revenue is measured at the fair value of the consideration received or receivable.
I. Fee 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. Where there is a future
obligation to provide claims handling services, a portion of the commission income is deferred over the expected service
period.
II. Marketing and administration (M&A) fees
The Company has negotiated with strategic partners, such as insurers, premium funders and underwriting agencies, to receive
M&A 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.
IV. Other revenue
Other revenue is recognised when the right to receive payment is established.
E. 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. Consequently, 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.
In addition, certain controlled subsidiaries and their wholly‑owned Australian subsidiaries have formed income tax
consolidated groups under the tax consolidation regime. These entities are also taxed as a single entity and the deferred tax
assets and liabilities of these tax consolidated groups are offset in the consolidated financial statements.
F. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash at 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.
73
Steadfast Group Annual Report 2017 Notes to the Financial Statements continued
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES continued
G. RECEIVABLES OF 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 90 days. Collectability of receivables is reviewed on an
ongoing basis.
H. 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. Internally developed software costs are capitalised once the project is
assessed to be feasible. The costs capitalised include licensing and direct labour costs. The useful lives of capitalised software
assets are assessed when the project is completed and available for use.
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 their useful lives, currently estimated to be up to 10 years, and their useful
lives are reviewed annually.
I. PAYABLES ON BROKING/UNDERWRITING AGENCY OPERATIONS
These amounts represent insurance premiums payable to insurance companies for broking/underwriting agency operations
on amounts invoiced 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.
J. HEDGE ACCOUNTING
Hedge accounting is applied when the Group designates certain derivatives to be part of a hedging relationship, and they
meet the criteria for hedge accounting.
The Group uses cash flow hedges to mitigate the risk of variability of future cash flows attributable to interest rate fluctuations
associated with the corporate debt facility. For cash flow hedges, the portion of the gain or loss on the hedge instrument that
is effective is recognised directly in equity, while the ineffective portion is recognised in profit or loss. Amounts deferred in
equity are transferred to profit or loss in the same period the hedged item is recognised in the profit or loss.
K. AUSTRALIAN ACCOUNTING STANDARDS ISSUED AND NOT YET EFFECTIVE
The Group 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 2017.
74
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES continued
The Group intends to adopt new, revised or amending Accounting Standards and Interpretations in the operating year
commencing 1 July after the effective date of these standards and interpretations as set out in the table below. The Group
does not expect any adverse impact to financial covenants as a result of applying the new standards.
Title
Description
Effective date
Operating year Note
Financial Instruments and the relevant amending standards
1 January 2018
30 June 2019
(i)
AASB 9
AASB 15
Revenue from Contracts with Customers and the relevant
amending standards
AASB 16
Leases
AASB 2016‑2
AASB 2016‑5
Table notes
Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 107
Amendments to Australian Accounting Standards –
Classification and Measurement of Share‑based
Payment Transactions
1 January 2018
30 June 2019
1 January 2019
30 June 2020
(ii)
(iii)
1 January 2017
30 June 2018
(i)
1 January 2018
30 June 2019
(i)
(i)
These changes are not expected to have a significant financial impact.
(ii) The Group has completed a preliminary review of the contracts with insurers and customers and has identified claims
handling services as an area that is likely to be affected by the new revenue standard. The application of the new standard
may result in the identification of separate performance obligations for handling claims on behalf of customers as part
of the insurance brokerages’ customary business practices, which could affect the timing of revenue recognition. Based
on the results of the preliminary review, the Group does not expect a material impact on the consolidated statement
of profit or loss on the basis that the business volumes would not change significantly from one reporting period to the
next. The Group intends to apply paragraph C3(b) of the new standard on transition which does not require comparative
financial information to be restated. Under this transition approach, the cumulative effect of initially applying this new
standard is recognised as an adjustment to opening retained earnings of the first annual reporting report, i.e. financial year
ending 30 June 2019. Based on results of the preliminary review, the estimated adjustment to opening retained earnings
and deferred income provision is in the range of $7 million to $13 million.
At this stage, the Group does not intend to adopt the standard before its effective date of 1 January 2018. The Group will
make more detailed assessments of the effect over the next twelve months.
(iii) The primary impact of the new leases standard will be the accounting for the Group’s operating leases.
The Group intends to apply the short‑term and low value recognition exemptions available under paragraph 5 of AASB 16.
The Group intends to adopt paragraph C8(b)(i) modified retrospective approach on transition with practical expedients as
permitted by the new standard. The modified retrospective approach does not require comparative financial information
to be restated.
Based on operating lease commitments as at 30 June 2017, the application of the modified retrospective approach under
paragraph C8(b)(i) would have had the following estimated impacts on the balance sheet on 1 July 2017 if the Group had
been required to apply the new standard on that date:
• $27 million increase in lease liability measured at the present value of the remaining lease payments, discounted using
the Group’s incremental borrowing rate at the date of initial application;
• $25 million increase in right‑of‑use asset measured at either its carrying amount as if the new standard had been applied
since the commencement date of the lease, discounted using the Group’s incremental borrowing rate at the date of
initial application; and
• $1 to $2 million opening retained earnings adjustment.
It is expected that on initial application of the abovementioned options, there will be:
• increases in property, plant and equipment and the corresponding lease liabilities;
• front‑loaded lease expense comprising of interest and depreciation expenses; and
• reclassification of cash flows in the consolidated statement of cash flows.
At this stage, the Group does not intend to adopt the standard before its effective date of 1 January 2019. The Group will
make more detailed assessments of the effect over the next twelve months.
75
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
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 2017 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.
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 fair value, then the amounts recognised as at the acquisition date will be
retrospectively revised.
B. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Group’s deferred consideration liability is measured at fair value at the end of each reporting period. The following table
gives information about how the fair value of this financial liability is determined, including the valuation technique and inputs
used. For the Group’s financial instruments not measured at fair value, the carrying amount of these financial instruments
provides a reasonable approximation of their fair values.
Financial instrument
Fair value hierarchy
Valuation technique
Deferred consideration Level 3
Interest rate swaps
Level 2
The fair value is
calculated based on a
contracted multiple of
forecast EBITA or fees
and commissions
The fair value is
calculated using the
present value of the
estimated future cash
flow based on observable
yield curves
Significant
unobservable inputs
Relationship of
unobservable inputs to
fair value
Forecast EBITA or fees
and commissions
The estimated fair value
would increase/decrease
if the forecast EBITA or
fees and commissions
were higher/lower
Not applicable
Not applicable
C. DEFERRED CONSIDERATION
The Group has made a best estimate of the fair value of consideration payable for the acquisitions where there is a variable
purchase price (generally, a multiple of revenue or future period earnings before interest expense, tax and amortisation
(EBITA)) after performing due diligence on the acquisition. Should the fair value of the final consideration payable vary from
these estimates, the Group will be required to recognise the difference as expense or income.
D. GOODWILL
Goodwill is not amortised but assessed for impairment annually or more frequently when there is an evidence of impairment.
The recoverable amount of goodwill is estimated using the higher of fair value or the value in use 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.
76
NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS continued
E. 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.
F. EQUITY‑ACCOUNTED INVESTMENTS
Equity‑accounted investments are carried at the lower of the equity‑accounted amount and the recoverable amount.
The carrying amounts of equity‑accounted investments (which include embedded amounts of intangible assets) 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 equity‑accounted investment exceeds its recoverable amount.
G. 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/decrease where the useful lives are less/greater
than previously estimated. It would also change if the amortisation methodology was reassessed. Technically obsolete or
non‑strategic assets that have been abandoned or sold will be written off or written down.
H. 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.
77
Steadfast Group Annual Report 2017 Notes to the Financial Statements continued
NOTE 4. OPERATING SEGMENTS
The Company’s corporate structure includes equity investments in insurance intermediary entities (insurance broking,
underwriting agencies and premium funders) and complementary 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, United Kingdom and Singapore; and investment in unisonSteadfast network headquartered in Germany.
In regards to geographical information, the revenue and non‑current assets attributed to geographies outside of Australasia
are currently immaterial to the Group and hence no separate disclosure has been made.
In addition to reviewing performance‑based on statutory profit after tax, the Chief Operating Decision Maker (being the
Managing Director & CEO) also reviews a key additional performance measure being earnings before interest expense, tax and
amortisation on acquired intangible assets (EBITA) broken down by consolidated entities, associates and joint ventures.
78
NOTE 4. OPERATING SEGMENTS continued
The additional performance measures, EBITA and other related information (broken down by consolidated entities
and associates and joint ventures) provided on a regular basis to the Chief Operating Decision Maker are outlined in the
table below.
Revenue – consolidated entities
Expenses – consolidated entities
EBITA – consolidated entities
Share of EBITA from associates and joint
ventures (Note 12, 13)
EBITA from core operations
Finance costs (net of interest received on
surplus cash held)
Amortisation expense
Profit/(loss) before income tax from core
operations before non‑trading items
Income tax benefit/(expense) on profit
before non‑trading items
Profit/(loss) after income tax before
non‑trading items
Non‑trading items:
Income
Expenses
Income tax benefit/(expense) on
non‑trading items
Net profit after income tax for the year
Non‑controlling interests (NCI) in profit
after tax before non‑trading items
NCI in non‑trading items:
Profit before income tax
Income tax benefit/(expense)
on non‑trading items
Net profit after income tax attributable
to owners of Steadfast Group Limited
(NPAT)
Other comprehensive income attributable
to owners of Steadfast Group Limited
Total comprehensive income after income
tax attributable to owners of Steadfast
Group Limited
Insurance
intermediary
$’000
Table
note
Other
$’000
2017
Total
$’000
Insurance
intermediary
$’000
Other
$’000
2016
Total
$’000
383,272
(262,153)
8,887
(10,663)
392,159
(272,816)
345,477
(238,195)
13,006
(10,880)
358,483
(249,075)
121,119
(1,776)
119,343
107,282
2,126
109,408
23,513
493
24,006
144,632
(1,283)
143,349
20,341
127,623
342
20,683
2,468
130,091
(i)
(ii)
(9,681)
(23,150)
(16)
(9,697)
(533)
(23,683)
(9,169)
(23,420)
(18)
(9,187)
(744)
(24,164)
111,801
(1,832)
109,969
95,034
1,706
96,740
(iii)
(32,215)
587
(31,628)
(28,268)
(506)
(28,774)
79,586
(1,245)
78,341
66,766
1,200
67,966
(iv)
(v)
21
8,184
(7,411)
–
8,205
(7,411)
165
72,361
(1,113)
5,826
(948)
78,187
27,173
(18,572)
4,551
79,918
–
–
–
1,200
(11,949)
769
(215)
–
–
–
(11,949)
(7,519)
769
(215)
(171)
52
–
–
–
27,173
(18,572)
4,551
81,118
(7,519)
(171)
52
60,966
5,826
66,792
72,280
1,200
73,480
(214)
–
(214)
(59)
–
(59)
60,752
5,826
66,578
72,221
1,200
73,421
79
Steadfast Group Annual Report 2017 Notes to the Financial Statements continued
NOTE 4. OPERATING SEGMENTS continued
Table notes
(i) Breakdown of finance costs:
Finance costs – consolidated entities
Finance costs – associates and joint ventures
(Note 12, 13)
Insurance
intermediary
$’000
Other
$’000
2017
Total
$’000
Insurance
intermediary
$’000
Other
$’000
2016
Total
$’000
(9,096)
–
(9,096)
(8,432)
–
(8,432)
(585)
(9,681)
(16)
(16)
(601)
(9,697)
(737)
(9,169)
(18)
(18)
(755)
(9,187)
(ii) Breakdown of amortisation expenses of acquired intangibles:
Amortisation expense – consolidated entities
(19,852)
(460)
(20,312)
(20,216)
(672)
(20,888)
Amortisation expense – associates and joint
ventures (Note 12, 13)
(3,298)
(73)
(3,371)
(3,204)
(72)
(3,276)
(23,150)
(533)
(23,683)
(23,420)
(744)
(24,164)
(iii) Breakdown of income tax benefit/(expense) on profit before non‑trading items:
Income tax benefit/(expense) – consolidated
entities
Income tax expense – associates and joint
ventures (Note 12, 13)
(iv) Breakdown of non‑trading income:
Net profit on change in value of investments
Reversal of deemed interest income on
interest‑free executive loans
Net gain on disposal of customer list
Net gain on re‑estimation and settlement of
deferred consideration
Net gain/(loss) from sale of subsidiaries
(v) Breakdown of non‑trading expenses:
Net loss on change in fair value of investments
Impairment loss (Note 7F)
Non‑recurring amortisation expense
Other expenses
(26,135)
711
(25,424)
(22,856)
(432)
(23,288)
(6,080)
(32,215)
(124)
(6,204)
(5,412)
(74)
(5,486)
587
(31,628)
(28,268)
(506)
(28,774)
–
508
211
3,421
(4,119)
21
(803)
(6,459)
–
(149)
(7,411)
–
–
–
–
8,184
8,184
–
–
–
–
–
–
1,600
508
211
3,421
4,065
8,205
(803)
(6,459)
–
(149)
(7,411)
530
1,169
23,874
–
27,173
–
(18,090)
(482)
–
(18,572)
–
–
–
–
–
–
–
–
–
–
–
1,600
530
1,169
23,874
–
27,173
–
(18,090)
(482)
–
(18,572)
80
NOTE 5. EARNINGS PER SHARE
A. REPORTING PERIOD VALUE
Basic earnings per share
Diluted earnings per share
2017
Cents
8.96
8.92
2016
Cents
9.86
9.84
The higher earnings per share reported in the year ended 30 June 2016 compared to the year ended 30 June 2017 is primarily
due to the high level of non‑trading items in 2016, in particular the net gain on re‑estimation and settlement of deferred
consideration as detailed in Note 4.
If all non‑trading items were removed the adjusted pro forma earnings per share would be as follows:
Adjusted pro forma basic earnings per share
Adjusted pro forma diluted earnings per share
B. RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
Profit after income tax
Non‑controlling interests
8.90
8.87
2017
$’000
78,187
(11,395)
8.11
8.09
2016
$’000
81,118
(7,638)
Profit after income tax attributable to the owners of Steadfast Group Limited for
calculation of statutory basic and diluted earnings per share
66,792
73,480
Removing non‑trading items*:
Income
Expenses
Income tax expense/(benefit)
Non‑controlling interests (net of tax)
(8,205)
7,411
948
(554)
(27,173)
18,572
(4,551)
119
Profit after income tax attributable to the owners of Steadfast Group Limited for
calculation of adjusted pro forma basic and diluted earnings per share
66,392
60,447
* The separate identification of non‑trading items is not disclosed in accordance with current Australian Accounting
Standards requirements.
81
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 5. EARNINGS PER SHARE continued
2017
Number in ’000
2016
Number in ’000
C. RECONCILIATION OF WEIGHTED AVERAGE NUMBER OF SHARES USED
IN CALCULATING EARNINGS PER SHARE
I. Weighted average number of ordinary shares issued
Weighted average number of ordinary shares issued
Weighted average number of treasury shares held in trust
749,752
(3,916)
Weighted average number of ordinary shares used in calculating basic earnings per share
745,836
747,928
(2,721)
745,207
II. Weighted average number of dilutive potential ordinary shares related to
Weighted average number of ordinary shares
Effect of share‑based payments arrangements(a)
Effect of deemed bonus shares on share options(b)
745,836
745,207
1,153
1,706
729
1,144
Weighted average number of ordinary shares used in calculating diluted earnings per share
748,695
747,080
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) 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 (EPS).
(b) 3.000 million share options were issued to a member of key management personnel of an acquired business in 2013 with
an exercise price of $1.00 per share. Because the average share price exceeds the exercise price, 1.706 million shares
(2016: 1.144 million) are deemed to be bonus shares.
82
NOTE 6. DIVIDENDS
Cents
per share
Total amount
$’000
Payment date
Tax rate for
franking credit
Percentage
franked
A. DIVIDENDS ON ORDINARY SHARES
2017
2017 interim dividend
2016 final dividend
2016
2016 interim dividend
2015 final dividend
2.6
3.6
2.4
3.0
19,495
13 April 2017
26,991
14 October 2016
17,994
14 April 2016
22,302
14 October 2015
30%
30%
30%
30%
100%
100%
100%
100%
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 $0.252 million (2016: $0.155 million) paid in relation to
treasury shares held in a trust controlled by the Group. All the treasury shares participate in the Dividend Reinvestment
Plan (DRP).
B. DIVIDEND POLICY
The Company targets 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
A Dividend Reinvestment Plan (DRP) 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 calculated over the pricing period
(which is at least five trading days) as determined by the Board for each dividend payment date.
83
Steadfast Group Annual Report 2017 Notes to the Financial Statements continued
NOTE 6. DIVIDENDS continued
D. DIVIDEND NOT RECOGNISED AT REPORTING DATE
On 23 August 2017, 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.
Cents
per share
Total amount
$’000
Expected
payment date
Tax rate for
franking credit
Percentage
franked
2017 final dividend
4.4
32,989
13 October 2017
30%
100%
The Company’s DRP will operate by purchasing ordinary shares on market. No discount will be applied. The last election
notice for participation in the DRP in relation to this final dividend is 13 September 2017.
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%
2017
$’000
32,827
1,592
34,419
2016
$’000
27,942
8,824
36,766
(14,138)
(11,568)
20,281
25,198
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 relating to the parent entity
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.
84
NOTE 7. INTANGIBLE ASSETS AND GOODWILL
2017
A. COMPOSITION
At cost
Accumulated amortisation and impairment
Customer
relationships
$’000
Capitalised
software
$’000
Other
intangible
assets
$’000
Total
intangible
assets
$’000
Goodwill
$’000
208,667
(69,188)
139,479
14,105
(1,757)
12,348
7,816
230,588
721,918
(4,653)
(75,598)
(4,521)
3,163
154,990
717,397
B. MOVEMENTS
Balance at the beginning of the financial year
154,967
Additions
Additions through business combinations
Reduction upon loss of control
Disposals – accumulated amortisation and
impairment upon loss of control
Amortisation expense transferred to other
reserve on hubbing
Amortisation expense – acquired intangibles
Amortisation expense – developed intangibles
Impairment
Net foreign currency exchange difference
–
11,163
(9,779)
2,569
202
(19,181)
–
(454)
(8)
6,361
7,526
–
(676)
571
–
(273)
(1,161)
–
–
3,952
165,280
712,329
7,595
11,163
–
38,145
(10,455)
(30,055)
3,140
1,058
69
–
–
–
–
202
(858)
(20,312)
–
–
–
(1,161)
(454)
(8)
–
–
–
(4,072)
(8)
Balance at the end of the financial year
139,479
12,348
3,163
154,990
717,397
2016
C. COMPOSITION
At cost
Accumulated amortisation and impairment
207,291
(52,324)
154,967
D. MOVEMENTS
Balance at the beginning of the financial year
175,742
Additions
Additions through business combinations
Reduction upon loss of control
Amortisation expense transferred to other
reserve on hubbing
Amortisation expense
Impairment
Net foreign currency exchange difference
–
13,360
(678)
201
(19,484)
(14,343)
169
7,255
(894)
6,361
1,746
5,095
–
–
–
7,747
(3,795)
3,952
222,293
713,837
(57,013)
(1,508)
165,280
712,329
180,952
669,321
3,464
543
3,109
–
–
5,638
16,469
(678)
201
–
46,405
(2,459)
–
–
(1,507)
569
(480)
(924)
(20,888)
–
–
(2,240)
(16,583)
–
169
Balance at the end of the financial year
154,967
6,361
3,952
165,280
712,329
E. AMORTISATION RATES PER ANNUM
10.0% 20.0%–100.0% 20.0%–33.3%
85
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 7. INTANGIBLE ASSETS AND GOODWILL continued
F. IMPAIRMENT TESTING OF IDENTIFIABLE INTANGIBLE ASSETS AND GOODWILL
The Group performs impairment testing for all goodwill on an annual basis and for any identifiable intangibles that have
impairment indicators. For the year ended 30 June 2017, the Group has recognised an impairment provision of $6.459 million
(2016: $18.090 million). The impairment of certain intangible assets mainly relates to the Calliden acquisition in the 2015
financial year as a result of the impact of the impending closure of the builders warranty agency. Impairment losses for
each category of intangible assets are shown in Section B above. When assessing the recoverable amount of customer
relationships, the Group considered client retention rates and current market conditions to determine both fair value and value
in use of each asset.
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.
To conduct impairment testing, the Group compares the carrying value with the recoverable amount of each asset.
The recoverable amount is the higher of:
• 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 of acquired
intangible assets (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
2017
%
2016
%
10.0% or 11.0%
9.8% or 11.5%
13.7% or 14.0%
12.7% or 15.2%
Revenue growth rate(b) – one year to five years extrapolation
4.0% to 5.9% per annum 4.0% to 5.9% per annum
Long‑term revenue growth rate(c)
3.25% per annum
3.25% 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. External advice has been sought in relation to the determination of
appropriate discount rates to be used.
(b) The Group has estimated revenue growth of between 4.0% and 5.9% per annum for the financial years between 2018 and
2022 based on short‑term forecasts and current performance, including initiatives pertaining to the rollout of the Steadfast
Client Trading Platform to further products.
(c) The Group considers that a long‑term revenue growth rate of 3.25% is appropriate, based on the current market
conditions and historical Gross Written Premium (GWP) trends.
No reasonable possible change in assumptions would result in the recoverable amount of a CGU being materially less than
the carrying value.
86
NOTE 8. BORROWINGS
A. BANK LOANS
Current
Non‑current
Capitalised transaction costs
B. BANK FACILITIES AVAILABLE
I. Bank facilities drawn down or applied
Bank loans – corporate facility
Bank loans – subsidiaries
Lines of credit – corporate facility
Lines of credit – subsidiaries
II. Bank facilities not drawn down or applied
Bank loans – corporate facility
Bank loans – subsidiaries
Lines of credit – corporate facility
Lines of credit – subsidiaries
III. Total bank facilities available
Bank loans
Lines of credit
C. CORPORATE FACILITY DETAILS
As at 30 June 2017:
2017
$’000
2016
$’000
995
205,680
(735)
205,940
174,000
32,676
485
526
1,116
201,265
(939)
201,442
170,500
31,881
428
464
207,687
203,273
105,000
110,500
225
5,515
1,249
–
3,572
1,211
111,989
115,283
311,901
7,775
319,676
312,881
5,675
318,556
• the Company had a $285.000 million multibank syndicated facility (corporate facility) with Macquarie Bank and ANZ
Banking Group (30 June 2016: $285.000 million); and
• $174.000 million of the $285.000 million facility has been drawn down which, together with $0.485 million for bonds and
rental guarantees, leaves $110.515 million available in the corporate facility for future drawdowns (2016: $114.072 million).
87
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 8. BORROWINGS continued
D. KEY TERMS AND CONDITIONS OF CORPORATE FACILITIES
The key terms and conditions of the multibank syndicated facility with Macquarie Bank and ANZ Banking Group for Steadfast
as at 30 June 2017 were as follows:
• $285.000 million facility consisting of a three‑year tranche of $235.000 million and a five‑year tranche of $50.000 million;
• the three‑year tranche has the potential for two one‑year extensions by agreement of all parties at the end of the first and
second year of the facility. The second one‑year extension was completed in August 2017, moving the maturity date of the
three‑year tranche from August 2019 to August 2020;
• the five‑year tranche matures in August 2020;
• variable interest rate – based on BBSY plus a margin;
• the facility is guaranteed by certain wholly‑owned subsidiaries and is secured over all of the present and after acquired
property of the Company and the guarantors (other than certain excluded property), which is standard in facilities of this
nature; and
• other terms and conditions are consistent with a facility of this size and nature and the circumstances of Steadfast.
The facility charges variable interest rates based on BBSY plus the applicable margin. The Company has entered into an
interest rate swap with notional amount of $75.000 million where the Company swaps the floating rate payment into fixed
rate payments. Refer Note 14 for further details on the interest rate swap.
E. BORROWING BY ASSOCIATES AND JOINT VENTURES
As at 30 June 2017, the Group’s associates and joint ventures had a total of $42.406 million (2016: $37.674 million) of bank
borrowings (including bank overdrafts and loans). The Group’s proportionate share of the associates and joint ventures’ bank
borrowings is $18.630 million (2016: $16.352 million).
As the associates are equity‑accounted, these borrowings are not included in the Group balance sheet. Refer Note 12C for
summarised financial information of associates.
88
NOTE 9. NOTES TO THE STATEMENT OF CHANGES IN EQUITY AND RESERVES
2017
Number of
shares in ’000
2016
Number of
shares in ’000
2017
$’000
2016
$’000
A. SHARE CAPITAL
Reconciliation of movements
Issued ordinary shares, fully paid at the beginning
of the financial year
Shares issued for the Dividend Reinvestment Plan
Issued ordinary shares, fully paid at the end of the
financial year
749,752
–
743,414
6,338
796,857
–
787,946
8,911
749,752
749,752
796,857
796,857
Ordinary shares in the Company have no par value and entitle the holder to participate in dividends as declared from time to
time. All ordinary shares rank equally with regard to the Company’s residual assets.
2017
Number of
shares in ’000
2016
Number of
shares in ’000
B. TREASURY SHARES HELD IN TRUST
Reconciliation of movements
Balance at the beginning of the financial year
Shares allocated to employees
Shares acquired
Shares allotted through the Dividend Reinvestment Plan
Balance at the end of the financial year
2,942
(213)
1,308
107
4,144
2,036
(100)
907
99
2,942
2017
$’000
4,396
(461)
2,827
252
7,014
2016
$’000
3,018
(165)
1,388
155
4,396
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 are 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 minimise the cost of capital, within the risk appetite approved by the Directors.
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.
The Group monitors capital on the basis of corporate gearing ratio, which is calculated as borrowings attributable to the
Company (corporate borrowings) divided by total equity and corporate borrowings. The Company’s current maximum
corporate gearing ratio determined by the Board is 25%. In recognition that subsidiaries may require debt to fund bolt‑on
acquisitions, the Group has limited the extent of subsidiary borrowings to an additional 5% leverage. The gearing ratios at
reporting date are as follows:
Corporate borrowings
Total borrowings
Total Group equity
Total Group equity and corporate borrowings
Total Group equity and total borrowings
Corporate gearing ratio
Total gearing ratio
Note
8
8
2017
$’000
174,000
207,687
913,168
1,087,168
1,120,855
16.0%
18.5%
2016
$’000
Maximum
approved
170,500
202,845
898,141
1,068,641
1,100,986
16.0%
18.4%
25.0%
30.0%
89
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 9. NOTES TO THE STATEMENT OF CHANGES IN EQUITY AND RESERVES continued
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; a member of the key management personnel of a subsidiary; as well as the discount on Executive
Shares.
III. Other reserves
The other reserves are used to recognise other movements in equity including: cumulative net change in fair value of hedging
instruments; 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 any retained amount from prior periods transferred from retained earnings.
This reserve will be utilised should the Board declare a dividend from this reserve.
NOTE 10. BUSINESS COMBINATIONS
ACQUISITIONS FOR THE YEAR ENDED 30 JUNE 2017
During the year ended 30 June 2017, the Group completed a number of acquisitions in accordance with its strategy.
Acquisition of subsidiaries
The following disclosures provide information for eight acquired businesses. As no acquisition is individually material, the
information is shown in aggregate. Note 10f contains a list of subsidiaries acquired and the respective ownership interests.
a. Consideration paid/payable
2017
Cash
Deemed consideration(a)
Deferred consideration(b)
Subsidiaries’ scrip for scrip(c)
Total
Acquisitions
$’000
26,612
7,224
7,969
3,886
45,691
(a) This amount represents the fair value of the original investments in Phoenix Insurance Brokers Pty Ltd and Steadfast
QIS Pty Ltd at the date the Group increased its shareholding and gained control of these entities which were previously
associates of the Group.
(b) Pursuant to the Share Purchase Agreements, some of the consideration will be settled based on future years’ actual
financial performance and thus was recognised as deferred consideration by the Group. The deferred consideration
is estimated based on a contracted multiple of forecast EBITA or fees and commissions. Any variations at the time of
settlement will be recognised as an expense or income in the statement of profit or loss and other comprehensive
income. The deferred consideration shown above represents:
– $6.659 million of deferred consideration for which the maximum amount of payment is not capped; and
– $1.310 million of deferred consideration which is fixed.
(c) Some acquisitions made through existing subsidiaries of the Group have been partially completed on a scrip for scrip basis
(using the subsidiaries’ scrip).
90
NOTE 10. BUSINESS COMBINATIONS continued
b. Identifiable assets and liabilities acquired
2017
Cash and cash equivalents(a)
Trade and other receivables(b)
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 acquired
(a) Includes cash held on trust.
Acquisitions
$’000
22,240
20,361
817
314
11,163
297
(37,719)
(280)
(1,309)
(4,158)
(1,515)
10,211
(b) The trade receivables comprise contractual amounts and are expected to be fully recoverable.
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.
c. Goodwill on acquisition
2017
Total consideration paid/payable
Total net identifiable assets acquired
Non‑controlling interests acquired
Goodwill on acquisition*
Acquisitions
$’000
45,691
(10,211)
2,665
38,145
* The majority of 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.
2017
Revenue
EBITA
Profit after income tax
Acquisitions
$’000
15,402
5,443
4,200
A number of acquisitions occurred early in the 2017 financial year. If the acquisitions of subsidiaries occurred on 1 July 2016,
the Group’s total revenue and profit after income tax for the year ended 30 June 2017 would have been $424.993 million and
$79.866 million respectively.
91
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 10. BUSINESS COMBINATIONS continued
e. Acquisition‑related costs
The Group incurred acquisition‑related costs, including stamp duty and legal fees, for business interests acquired during the
year ended 30 June 2017.
f. Subsidiaries acquired
The table below outlines all the subsidiaries acquired during the year ended 30 June 2017. It includes some entities in which
the Group had a prior equity interest and that became subsidiaries following internal restructuring.
Name of subsidiary acquired
AIS Holdings WA Pty Ltd
Armbro Insurance Brokers Pty Ltd
Asset Insurance Brokers Pty Ltd
Ballyglisheen Pty Ltd (trades as Steel Pacific)
Phoenix Insurance Brokers Pty Ltd
Steadfast IFS Pty Ltd
Steadfast QIS Pty Ltd (formerly NCA Insurance Services Pty Ltd)
Trident Insurance Group Pty Ltd
Table notes
Ownership interest as
at 30 June 2017
%
Table note
(i)
(ii)
(iii)
(iv)
(v)
(v)
56.55
55.00
100.00
50.00
61.00
50.98
61.91
60.00
(i)
The Group acquired AIS Holdings WA Pty Ltd (AIS) through Centrewest Holdings Pty Ltd, an existing subsidiary of the
Group. The equity interest in AIS represents the Group’s effective interest in the entity.
(ii) The Group sold its equity interest in Armbro Insurance Brokers Pty Ltd (Armbro) to Consolidated Insurance Agencies Pty
Ltd (CIA), which also acquired the remaining equity interest from external shareholders. As a result of these transactions,
Armbro became a subsidiary of the Group and the Group’s equity interest in this entity became 55%. The equity interest in
Armbro represents the Group’s effective interest in the entity.
(iii) The Group acquired Asset Insurance Brokers Pty Ltd (AIB) through Steadfast IRS Pty Ltd, an existing wholly‑owned
subsidiary of the Group.
(iv) Although the Group only has 50% equity interest in Ballyglisheen Pty Ltd, the Group has control over the entity due to the
terms of the sale and purchase agreement that give the Group the ability to direct the key financial and operating activities.
(v) The Group acquired additional shares in Steadfast QIS Pty Ltd (formerly NCA Insurance Services Pty Ltd) and Phoenix
Insurance Brokers Pty Ltd. As a result, Steadfast QIS Pty Ltd and Phoenix Insurance Brokers Pty Ltd became subsidiaries of
the Group.
92
NOTE 10. BUSINESS COMBINATIONS continued
g. Deferred consideration reconciliation
The following table shows a reconciliation of movements in deferred consideration for the years ended 30 June 2017 and
30 June 2016.
Balance at the beginning of the financial year
Settlement of deferred consideration
Non‑cash settlement of deferred consideration
Additions from new acquisitions in business combinations
Additions from new acquisitions of associates
Additions from new acquisitions in step‑up acquisitions and hubbing arrangements
Net gain in profit or loss on settlement or reassessment
Balance at the end of the financial year
Disclosed as:
Deferred consideration current
Deferred consideration non‑current
Balance at the end of the financial year
The balance of deferred consideration at the end of the financial year represents:
Amount payable is limited
Amount payable is not capped
Amount payable is fixed
2017
$’000
13,669
(11,745)
(106)
7,969
222
–
(3,421)
6,588
5,222
1,366
6,588
2017
$’000
88
6,009
491
6,588
2016
$’000
55,327
(23,138)
(3,745)
7,901
1,003
195
(23,874)
13,669
11,821
1,848
13,669
2016
$’000
247
8,250
5,172
13,669
93
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 11. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following key subsidiaries.
Table
note
Country of
incorporation
2017
%
2016
%
Ownership interest
Name
A. PARENT ENTITY
Steadfast Group Limited
B. SUBSIDIARIES – OPERATING ENTITIES
I. Insurance broking businesses
Steadfast Insurance Brokers Pty Ltd
AIS Holdings WA Pty Ltd
Armbro Insurance Brokers Pty Ltd
Asset Insurance Brokers Pty Ltd
Austcover Holdings Pty Ltd
(vii)
Ausure Group Pty Ltd and its related entities
Ballyglisheen Pty Ltd (trades as Steel Pacific)
(ii)
Body Corporate Brokers Pty Ltd
Capital Insurance (Broking) Group Pty Ltd and Capital
Insurance Broking Group Unit Trust and its subsidiaries
Centrewest Holdings Pty Ltd
Commercial‑Industrial Insurance Consultants Pty Ltd
Consolidated Insurance Agencies Pty Ltd
Corporate Insurance Brokers Ballina (NSW) Pty Ltd and
Corporate Insurance Brokers Pty Ltd
Cyclecover Pty Ltd
Gallivan, Magee & Associates Pty Ltd
Garaty Murnane Insurance Brokers Pty Ltd
Gardner Insurance Brokers Qld Pty Ltd
G.W.S. Pty Ltd
ICF (Australia) Pty Ltd and its related entities
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
IC Frith (NZ) Limited and its related entities
New Zealand
Insurance Broking Queensland Pty Ltd
Masterman Insurance Brokers Pty Ltd and Robert Masterman
Insurance Broking Unit Trust
Jakomil Pty Ltd and The Milbar Unit Trust
Mega Capital Holdings Pty Ltd
Multi‑Functional Policies Pty Ltd
National Credit Insurance (Brokers) Pty Ltd
(incorporating IMC Trade Credit)
Newmarket Grand West Pty Ltd
Newmarket Insurance Brokers Pty Ltd
Phoenix Insurance Brokers Pty Ltd
(viii)
PID Holdings Pty Limited
Professional Risk Placements Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
94
100.00
56.55
55.00
100.00
50.00
62.00
50.00
100.00
47.00
56.55
80.00
55.00
80.00
80.00
80.00
60.00
77.00
80.00
100.00
90.00
77.00
80.00
56.55
100.00
–
86.95
90.00
90.00
61.00
100.00
100.00
100.00
–
–
–
50.00
60.50
–
100.00
47.00
67.00
80.00
55.00
80.00
80.00
80.00
60.00
65.00
80.00
100.00
90.00
65.00
80.00
67.00
100.00
83.24
86.95
90.00
90.00
–
100.00
100.00
NOTE 11. SUBSIDIARIES continued
Name
Quattro Risk Services Pty Ltd
(formerly Finn Foster & Associates Pty Ltd)
Queensland Insurance Brokers Pty Ltd
QIS Financial Services Pty Ltd
RIB Group Holdings Pty Limited and its subsidiaries (RIB Group)
RSM Financial Services Pty Ltd
Sawtell & Salisbury Pty Ltd and Sawtell & Salisbury Unit Trust
Steadfast Brecknock Insurance Brokers Pty Ltd (formerly
Brecknock Insurance Brokers Pty Ltd)
Steadfast IFS Pty Ltd
Steadfast IRS Pty Limited
Steadfast NZ Holdings Limited
Steadfast NZ Limited
Table
note
Country of
incorporation
(i)
(i)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Steadfast QIS Pty Ltd (formerly NCA Insurance Services Pty Ltd)
(i)
Steadfast Re Pty Ltd
Steadfast Taswide Insurance Brokers Pty Ltd
Trident Broking Pty Ltd
Trident Insurance Group Pty Ltd
VBIH Pty Ltd
V.F.P. Insurance Brokers Pty Limited
Virtus Insurance Brokers Pty Ltd (formerly
Brecknock Insurance Brokers (VIC) Pty Ltd)
Waveline Investments Pty Ltd
Webmere Pty Ltd
Work Health Alternatives Pty Ltd
II. Underwriting agency businesses
Steadfast Underwriting Agencies Holdings Pty Ltd
SUA Services Pty Ltd
Associated Marine Underwriting Agency Pty Limited
CAIP Services Pty Ltd
(v)
Calliden Group Pty Ltd and its subsidiaries
CHU Underwriting Agencies Pty Ltd
CHUiSaver Underwriting Agency Pty Ltd
Grange Underwriting Pty Ltd
Hostsure Underwriting Agency Pty Ltd
Miramar Underwriting Agency Pty Limited
NM Insurance Pty Ltd
Procover Underwriting Agency Pty Ltd
Protecsure Pty Limited
Residential Builders Underwriting Agency Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2017
%
60.00
61.91
–
81.08
–
77.00
95.10
50.98
100.00
100.00
100.00
61.91
50.00
74.70
60.00
60.00
80.00
95.10
72.00
56.55
77.00
70.00
100.00
100.00
100.00
–
100.00
100.00
100.00
77.00
100.00
100.00
75.00
100.00
80.00
80.00
Ownership interest
2016
%
60.00
80.00
80.00
80.00
100.00
65.00
83.24
–
100.00
100.00
100.00
–
50.00
73.21
100.00
–
80.00
80.00
64.00
67.00
65.00
70.00
100.00
100.00
100.00
70.00
100.00
100.00
–
65.00
100.00
100.00
75.00
100.00
80.00
100.00
95
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 11. SUBSIDIARIES continued
Name
Proteus Marine Insurance Pty Ltd
Sports Underwriting Australia Pty Ltd
Steadfast Placement Solutions Pty Ltd
Underwriting Agencies of Australia Pty Ltd
Table
note
Country of
incorporation
Australia
Australia
Australia
Australia
Underwriting Agencies of New Zealand Limited
New Zealand
Winsure Underwriting Pty Limited
WM Amalgamated Pty Ltd
III. Complementary businesses
Actionquote Holdings Pty Ltd and its subsidiaries
CHU Services Pty Ltd
InsuranceCONNECT Pty Ltd
Steadfast Business Solutions Pty Ltd
Steadfast Convention Pty Ltd
Steadfast Foundation Pty Ltd
Steadfast Share Plan Nominee Pty Ltd
Steadfast Technologies Pty Ltd
Steadfast Technology Services Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
(vi)
(v)
(iii)
(iv)
Steadfast Technology Services NZ Limited
White Outsourcing Pty Limited
New Zealand
(v)
Australia
Ownership interest
2017
%
87.50
80.00
100.00
90.00
90.00
100.00
84.16
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
2016
%
–
80.00
100.00
90.00
–
100.00
85.00
100.00
–
100.00
–
100.00
100.00
100.00
100.00
100.00
–
100.00
Table notes
(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:
• Steadfast QIS hub – On 1 July 2016, the Group sold its 80% equity interest in Queensland Insurance Brokers Pty Ltd
(QIS) and QIS Financial Services Pty Ltd (QISFS) to Steadfast QIS Pty Ltd (formerly NCA Insurance Services Pty Ltd),
which also acquired the remaining 20% of QIS and QISFS from external shareholders. Steadfast QIS issued additional
shares to the Group to fund these acquisitions. As a result of these transactions, Steadfast QIS became a subsidiary of
the Group. In April 2017, Steadfast QIS sold all ownership in QISFS to its management.
(ii)
Although the Group only has 50% of equity interest in Ballyglisheen Pty Ltd (Steel Pacific), the Group effectively has
control over Steel Pacific as the Group has the right to appoint (and has appointed) half of the Directors, and the Group
has the ability to direct the key financial and operating activities of Steel Pacific under the terms of the sale and purchase
agreement.
(iii) A trustee for Steadfast Foundation, a charitable foundation.
(iv) A trustee for Steadfast employee share plan trust.
(v)
White Outsourcing Pty Limited (WOS) and CAIP Services Pty Ltd were sold during the year. The sale of WOS excluded the
broker accounting function which has been re‑branded and moved to a newly formed entity Steadfast Business Solutions
Pty Ltd. The net gain on sale is disclosed in Note 4.
(vi) CHU Services Pty Ltd was formed to provide additional non‑underwriting services to customers.
(vii) The Group sold its equity interest in Armbro Insurance Brokers Pty Ltd (Armbro) to Consolidated Insurance Agencies Pty
Ltd (CIA), which also acquired the remaining equity interest from external shareholders. As a result of these transactions,
Armbro became a subsidiary of the Group and the Group’s equity interest in this entity became 55%. The 55% equity
interest in Armbro represents the Group’s effective interest in the entity.
(viii) The Group purchased an additional 15% interest in Phoenix Insurance Brokers Pty Ltd (Phoenix). The Group’s ownership
of Phoenix increased to 61% and Phoenix became a subsidiary.
96
NOTE 12. INVESTMENTS IN ASSOCIATES
A. DETAILS OF ASSOCIATES
Interests in associates are accounted for using the equity method of accounting. Information relating to key associates is set
out below.
Ownership interest
Equity‑accounted
2017
%
2016
%
2017
$’000
2016
$’000
45.00
–
10,179
–
40.00
–
Name
I. Insurance broking businesses
Abbott Insurance Brokers Limited(a)
Armbro Insurance Brokers Pty Ltd(b)
Armstrong’s Insurance Brokers Pty Ltd and Armstrong’s
Insurance Brokers Unit Trust
Ausure Group Pty Ltd – associates thereof
Blackburn (Insurance Brokers) Pty Ltd and Liability Brokers 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
Finpac Insurance Advisors 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
McKillops Insurance Brokers Pty Ltd
Melbourne Insurance Brokers Pty Ltd
Northern City Insurance Brokers (VIC) Pty Ltd
Steadfast QIS Pty Ltd (formerly NCA Insurance Services Pty Ltd)(c)
Optimus 1 Pty Ltd
Paramount Insurance Brokers Pty Ltd
Phoenix Insurance Brokers Pty Ltd(d)
Pollard Advisory Services Pty Ltd
QUS Pty Ltd
Risk Partners Pty Ltd
Rose Stanton Insurance Brokers Pty Limited
Rothbury Group Limited(a)
RSM Group Pty Ltd
Sapphire Star Pty Ltd
Scott & Broad Pty Ltd
Southside Insurance Brokers Pty Limited
Steadfast Eastern Insurance Brokers Pty Ltd
Steadfast Life Pty Ltd
25.00
26.29
49.00
49.00
34.22
37.00
49.00
49.00
40.00
25.00
48.00
37.00
45.00
49.00
49.00
50.00
–
25.00
25.00
–
49.00
45.00
45.00
49.00
44.51
49.00
30.00
42.88
49.00
34.38
50.00
25.00
27.02
49.00
49.00
25.00
37.00
49.00
49.00
40.00
25.00
48.00
37.00
45.00
49.00
49.00
–
49.00
25.00
25.00
46.00
49.00
46.50
45.00
49.00
44.44
49.00
30.00
42.88
49.00
34.38
50.00
–
1,536
832
3,577
3,607
1,158
2,126
3,739
1,078
4,276
3,100
821
4,677
–
4,908
4,845
1,545
–
3,550
584
1,092
4,851
4,714
1,103
7,503
680
786
3,787
3,398
1,133
3,123
3,849
1,042
4,242
3,107
803
4,513
–
4,997
4,735
1,621
9
–
597
1,034
–
4,778
1,165
9,641
701
24,255
22,857
5,347
1,268
8,299
631
321
3,012
5,953
1,318
8,242
660
378
3,018
97
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 12. INVESTMENTS IN ASSOCIATES continued
Name
Tudor Insurance Australia (Insurance Brokers) Pty Ltd and
Tudor Insurance Agency Unit Trust
unisionSteadfast AG(a)
Watkins Taylor Stone Insurance Brokers Pty Limited and
D&E Watkins Unit Trust
II. Underwriting agencies businesses
Emergence Insurance Group Pty Ltd
Sterling Insurance Pty Limited
Tradewise Insurance Pty Ltd
III. Complementary businesses
Meridian Lawyers Limited
Ownership interest
Equity‑accounted
2017
%
2016
%
2017
$’000
48.00
26.25
48.00
–
2,048
1,829
2016
$’000
2,002
–
35.00
35.00
1,771
1,824
33.33
39.50
–
33.33
39.50
48.00
164
5,216
–
200
7,346
–
25.00
25.00
2,289
2,081
(a) All entities classified as associates have their principal operations in Australia with the exception of:
• Abbott Insurance Brokers Limited and Rothbury Group Limited whose principal operations are in New Zealand; and
• unisonSteadfast AG whose principle operation is in Germany.
(b) The Group sold its equity interest in Armbro Insurance Brokers Pty Ltd (Armbro) to Consolidated Insurance Agencies Pty
Ltd (CIA), which also acquired the remaining equity interest from external shareholders. As a result of these transactions,
Armbro became a subsidiary of the Group and the Group’s equity interest in this entity became 55%. The 55% equity
interest in Armbro represents the Group’s effective interest in the entity.
(c) 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:
• Steadfast QIS hub – On 1 July 2016, the Group sold its 80% equity interest in Queensland Insurance Brokers Pty Ltd (QIS)
and QIS Financial Services Pty Ltd (QISFS) to Steadfast QIS Pty Ltd (formerly NCA Insurance Services Pty Ltd), which also
acquired the remaining 20% of QIS and QISFS from external shareholders. Steadfast QIS issued additional shares to the
Group to fund these acquisitions. As a result of these transactions, Steadfast QIS became a subsidiary of the Group.
(d) The Group purchased an additional 15% interest in Phoenix Insurance Brokers Pty Ltd (Phoenix). The Group’s ownership of
Phoenix increased to 61% and Phoenix became a subsidiary.
98
NOTE 12. INVESTMENTS IN ASSOCIATES continued
B. RECONCILIATION OF MOVEMENTS
Balance at the beginning of the financial year
Acquisition of associates
Reclassification to investment in subsidiaries
Disposal of associates through hubbing arrangements
Share of EBITA from associates
Add share of:
Non‑trading income (Note 4 (iv))
Less share of:
Finance costs
Amortisation expense
Income tax expense
Share of associates’ profit after income tax
Dividend received/receivable
Impairment
Net foreign exchange movements
Balance at the end of the financial year
2017
$’000
121,783
15,821
(8,053)
(1,671)
20,596
2016
$’000
122,351
18,635
(16,257)
(1,842)
17,004
211
–
(467)
(2,862)
(5,374)
12,104
(12,383)
(1,933)
22
125,690
(574)
(2,795)
(4,564)
9,071
(9,580)
–
(595)
121,783
C. SUMMARISED FINANCIAL INFORMATION OF ASSOCIATES
I. Disclosure in aggregate
These disclosures relate to the investment in all associates in aggregate. The figures below represent the financial position and
performance of the associates as a whole and not just the Group’s share.
Current assets
Non‑current assets
Current liabilities
Non‑current liabilities
Net assets
Revenue
EBITA
Profit after income tax
Total comprehensive income
2017
$’000
297,502
129,567
258,794
37,154
131,121
182,876
47,575
32,692
32,692
Included in liabilities is $42.406 million (2016: $37.674 million) of bank borrowings. Refer Note 8E.
2016
$’000
241,831
101,918
210,357
26,030
107,362
163,051
42,778
27,261
27,261
99
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 13. INVESTMENT IN JOINT VENTURES
A. DETAILS OF JOINT VENTURES
Name
Blend Insurance Solutions Pty Ltd(a)
Macquarie Premium Funding Pty Ltd and its subsidiaries (Macquarie Pacific Funding Group)(b)
Ausure Ruralco Pty Ltd (formerly Ausure Consolidated Brokers Pty Ltd)(c)
Ownership interest
2017
%
50.00
50.00
50.00
2016
%
–
50.00
–
(a) Blend Insurance Solutions Pty Ltd (Blend) is a newly formed joint venture in 2017 between Advent Capital (Holdings) Pty
Ltd and Steadfast Underwriting Agencies Holdings Pty Ltd. Blend is an underwriting agency focused on the distribution
of accident and health, consumer and bespoke products in the Australian market, via brokers, third party distribution
partnerships and direct.
(b) Macquarie Pacific Funding Group (MPF), which trades as Macquarie Pacific Funding, is a joint venture between Macquarie
Bank Limited and the Company. MPF is an insurance premium funding provider. Macquarie Premium Funding Pty Ltd, the
holding company of the MPF, is incorporated in Australia. It has operations in both Australia and New Zealand.
(c) Ausure Ruralco Pty Ltd (Ausure Ruralco) is a joint venture formed between Ausure Group Pty Ltd and Ruralco Holdings Pty
Ltd (Ruralco). The joint venture focuses on financial services distribution in both regional and rural Australia.
B. RECONCILIATION OF MOVEMENTS
Balance at the beginning of the financial year
Additions – deemed consideration(a)
Additions – cash
Share of EBITA from joint ventures
Less share of:
Finance costs
Amortisation expense
Income tax expense
Share of joint ventures’ profit after income tax
Dividend received/receivable
Balance at the end of the financial year
Table note
2017
$’000
2,211
8,045
850
3,410
(134)
(509)
(830)
1,937
(1,681)
11,362
2016
$’000
3,446
–
–
3,679
(181)
(481)
(922)
2,095
(3,330)
2,211
(a) This amount represents the fair value of the retained 50% in Ausure Ruralco Pty Ltd (Ausure Ruralco, formerly Ausure
Consolidated Brokers Pty Ltd). Ausure Ruralco was a wholly‑owned subsidiary of Ausure Group Pty Ltd (Ausure). In
December 2016, Ausure sold 50% of its ownership interest in Ausure Ruralco to Ruralco Holdings Pty Ltd. As a result of the
50% sale, Ausure Ruralco became a joint venture of Ausure.
100
NOTE 13. INVESTMENT IN JOINT VENTURES continued
C. SUMMARISED FINANCIAL INFORMATION OF JOINT VENTURES
These disclosures relate to the financial position and financial performance of the joint ventures as a whole and not just the
Group’s share.
Current assets
Non‑current assets
Current liabilities
Non‑current liabilities
Net assets
Revenue
EBITA
Profit after income tax
Total comprehensive income
2017
$’000
19,893
13,230
15,089
3,788
14,246
52,041
7,159
4,053
4,053
2016
$’000
15,892
6,068
12,559
4,615
4,786
48,700
7,357
4,190
4,190
101
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
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 Directors. 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 Directors
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:
Non‑derivatives
Cash at bank
Cash on deposit
Bank overdrafts
Bank loans
Derivatives
Interest rate swap
2017
2016
Weighted
average
interest rate
%
1.06
2.33
6.75
Weighted
average
interest rate
%
1.39
2.45
6.75
Balance
$’000
261,074
68,545
(526)
Balance
$’000
231,834
60,333
(464)
3.59(a)
(205,940)
3.78(a)
(201,442)
123,153
90,261
3.79(b)
(75,000)(b)
3.79(b)
(75,000)(b)
(a) Weighted average interest rate excludes any applicable line fee.
(b) The Group has entered into an interest rate swap with a notional amount of $75.000 million where the Group swaps the
BBSY indexed floating rate payment into 3.79% fixed rate payment. The interest rate swap matures in August 2018. The
Group entered into the interest rate swap to minimise the Group’s exposure to interest rate risk, in which the Group agrees
to exchange the difference between fixed and variable rate interest amounts calculated by reference to an agreed‑upon
notional principal amount. The swap is designed to hedge interest costs associated with the underlying corporate debt
obligations. At 30 June 2017, after taking into account the effect of the interest rate swap, the Group had approximately
56.8% of the Group’s corporate debt exposed to variable rates (2016: 56%).
The Group held $0.116 million (2016: $0.042 million) cash in hand which did not generate any interest income at the end of
the financial year.
An increase/decrease in interest rates of one hundred (2016: one hundred) basis points would have a favourable/adverse
effect on profit/(loss) after tax of $0.862 million (2016: favourable/adverse effect of $0.632 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 a loan to one of the
joint ventures.
102
NOTE 14. FINANCIAL INSTRUMENTS continued
The Group has funded $27.489 million (2016: $29.800 million) of loans to facilitate management buy‑ins to certain businesses
under the Group’s owner‑driver business model. These loans are disclosed as other non‑current assets in the Consolidated
Statement of Financial Position. These loans attract commercial interest rates, with dividends from these businesses used to
fund interest and loan repayments. The shares held by management in those businesses are provided as loan collateral.
The Group’s exposure to credit risk is concentrated in the financial services industry with parties that are considered to be
of sufficiently high credit quality (including cash held with major Australian banks) 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 up to 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. 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 joint venture Macquarie Pacific Funding Group 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 the loan is 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.
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 Over 5 years
$’000
$’000
Total
contractual
maturities
$’000
2017
Non‑derivatives
Non‑interest bearing
Payables on broking/underwriting
agency operations*
Trade and other payables
Deferred consideration
Interest bearing
Bank loans
Total non‑derivatives
Derivatives
Hedge interest rate swaps
(net settled)
Total derivative
533,975
49,551
5,222
1,031
589,779
–
3,788
1,366
1,643
6,797
–
–
–
–
–
–
221,661
221,661
3,346
3,346
533,975
53,339
6,588
227,681
821,583
3.59
–
–
491
491
–
–
–
–
491
491
103
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 14. FINANCIAL INSTRUMENTS continued
Weighted
average
interest
rate 1 year or less
$’000
%
Between
1 to 2 years
$’000
Between
2 to 5 years Over 5 years
$’000
$’000
Total
contractual
maturities
$’000
2016
Non‑derivatives
Non‑interest bearing
Payables on broking/underwriting
agency operations*
Trade and other payables
Deferred consideration
Interest bearing
Bank loans
Total non‑derivatives
Derivatives
Hedge interest rate swaps
(net settled)
Total derivative
453,322
48,002
11,821
1,158
514,303
–
3,005
1,848
1,530
6,383
–
–
–
–
–
–
213,912
213,912
6,962
6,962
453,322
51,007
13,669
223,562
741,560
3.78
–
–
–
–
463
463
–
–
463
463
* Paid to underwriters only upon receipt of premiums from customers.
NOTE 15. CONTINGENCIES
CONTINGENT LIABILITIES
Macquarie Bank put options
The Group has granted options to Macquarie Bank Limited (Macquarie) to enable Macquarie to put shares held by other
shareholders in associates to the Group at fair value if Macquarie enforces its security over those shares. These have been
granted in relation to shares held by other shareholders in associates over which Macquarie holds a security interest to secure
indebtedness by those shareholders. The Group expects no material net exposure from this arrangement as the contingent
liabilities have contingent assets (being rights to shares held by the relevant shareholders) approximating similar values.
Bank guarantee
In the normal course of business, certain controlled entities in the Group have provided bank guarantees principally in respect
of their contractual obligations on commercial leases.
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
104
2017
$’000
9,429
17,582
2,065
29,076
2016
$’000
7,804
16,330
2,253
26,387
NOTE 17. EVENTS AFTER THE REPORTING PERIOD
FINAL DIVIDEND
On 23 August 2017, the Board declared a final dividend for 2017 of 4.4 cents per share, 100% franked. The dividend will be paid
on 13 October 2017.
NOTE 18. PROFIT AND LOSS INFORMATION
This note provides further information about individual items recognised in the statement of comprehensive income.
A. EMPLOYEE BENEFITS (INCLUDED IN EMPLOYMENT EXPENSE)
Contributions to defined contribution superannuation funds
Share‑based payments
B. RENTAL EXPENSE RELATING TO OPERATING LEASES
2017
$’000
12,858
86
2016
$’000
11,380
710
Lease payments
11,820
10,665
NOTE 19. SHARE‑BASED REMUNERATION
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 Company intends to settle its obligations under share‑based payment arrangements by the on‑market purchase of
the Company’s ordinary shares which will be held in trust pending exercise of vested rights by employees. The Group has
established a practice of purchasing a tranche of shares on or near grant date at the prevailing market price to facilitate
building up a portfolio sufficient to meet the obligations when rights vest.
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 prohibit an employee trading in the
Company’s ordinary shares when they are aware of price‑sensitive information and limit their trading at other times.
The Group has the following types of share‑based remuneration arrangements provided to employees; each arrangement has
different purposes and different rules:
• short‑term incentive plan; and
• long‑term incentive plan.
The share‑based payments are included in the employment expense line in the statement of comprehensive income.
Senior management and executive share 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. The short‑term incentive plan (STI)
The STI plan is a discretionary, performance‑based, at risk reward arrangement. STI is awarded based on each participant’s
performance hurdles and whether the financial performance hurdle of a minimum 5% of underlying earnings per share
growth of the Group are met.
105
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
NOTE 19. SHARE‑BASED REMUNERATION continued
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 (i.e. 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 from
the grant date of the rights (retention period), split one‑third over one, two and three years;
• the rights will accrue notional dividends during the retention period;
• when vesting (after completion of the retention period), each right will be converted into one Steadfast ordinary share per
right for nil consideration upon exercise by the participant. The notional dividends will be converted into an equivalent
number of Steadfast ordinary shares based on the Dividend Reinvestment Plan issue price applicable to each dividend;
• the Board has discretion to settle the rights in cash instead of Steadfast ordinary shares;
• the vesting is conditional on there being no material adverse deterioration in the reported results during the performance
period before the exercise of the rights; and
• if the vesting condition is not met then the rights lapse.
Further details of the 2017 STI in relation to the Group’s key management personnel are disclosed in the Remuneration
Report.
b. The long‑term incentive plan (LTI)
The LTI plan is a discretionary, performance‑based, at risk reward arrangement. LTI is awarded based on each participant’s
performance hurdles and whether the minimum financial performance hurdles in underlying earnings per share growth and
Total Shareholder Return (TSR) are met.
The key terms of the LTI plan awarded in August 2016 were:
• 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 three‑year employment tenure from the grant
date of the rights (retention period);
– 75% based on the Group achieving a minimum 5% average compound per annum diluted EPS growth during the
retention period; and
– 25% based on the Group achieving a minimum TSR at average of peer group during the retention period;
• the rights will not accrue notional dividends during the retention period but do accrue for FY14 and FY15 plans;
• 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 the retention period), each right will be converted into one Steadfast ordinary share for nil
consideration upon exercise 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.
Further details of the 2017 LTI in relation to the Group’s key management personnel are disclosed in the Remuneration Report.
106
NOTE 20. TAXATION
A. INCOME TAX (EXPENSE)/BENEFIT
Profit before income tax expense
Income tax expense at statutory tax rate of 30%
Tax effect of amounts that are not (deductible)/taxable in calculating taxable income:
Share of after‑tax profits of associates and joint ventures
Unrealised (loss)/gain on revised non‑assessable deferred consideration
Difference on accounting and tax gain on sale of investments
Revaluation of fair value
Non‑deductible items – including restructuring costs
Impairment
Over/(under) provision for income tax of prior periods
Income tax expense
B. MAJOR COMPONENTS OF INCOME TAX EXPENSE
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
Expenditure claimable over five years
Employee share scheme
Deferred income
Others
2017
$’000
104,559
(31,368)
4,212
(1,026)
2,403
(241)
(740)
(1,802)
(28,562)
2,190
(26,372)
(32,007)
(1,210)
4,655
2,190
(26,372)
264
(43)
221
2,789
7,119
2,044
745
2,252
2,278
17,227
2016
$’000
99,855
(29,956)
3,350
7,840
(226)
480
299
(452)
(18,665)
(72)
(18,737)
(26,191)
266
7,260
(72)
(18,737)
(88)
51
(37)
2,777
6,348
3,626
848
1,997
2,263
17,859
107
Steadfast Group Annual Report 2017
2017
$’000
8,284
9,575
17,859
(1,210)
264
314
17,227
(13,808)
3,419
41,451
16,919
4,676
1,417
64,463
55,342
9,575
64,917
(4,655)
43
4,158
64,463
(13,808)
50,655
2016
$’000
10,357
7,022
17,379
266
(88)
302
17,859
(9,575)
8,284
47,827
14,886
1,264
940
64,917
59,810
7,022
66,832
(7,260)
(51)
5,396
64,917
(9,575)
55,342
Notes to the Financial Statements continued
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
Receivables
Accrued income
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
Balance at the end of the financial year before offset
Less: offset against deferred tax assets
Balance at the end of the financial year
108
NOTE 21. NOTES TO THE STATEMENT OF CASH FLOWS
A. COMPOSITION
Cash and cash equivalents
Cash held on trust
Bank overdrafts
2017
$’000
2016
$’000
66,537
263,198
(526)
329,209
67,457
224,752
(464)
291,745
B. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH FROM
OPERATING ACTIVITIES
Profit after income tax expense for the year
78,187
81,118
Adjustments for
Depreciation and amortisation and gain on disposal of property, plant and equipment
Share of profits of associates and joint ventures
Income tax paid
Dividends received from associates/joint ventures
Net loss/(profit) on fair value of investment
Capitalised interest on loans
Net gain on disposal of investment in subsidiaries
Net gain from adjustments to deferred consideration estimates
Net gain on disposal of customer list
Share‑based payments and incentives accruals
Impairment expense
Change in operating assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in deferred tax assets
(Increase)/decrease in other assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in income tax payable
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in other liabilities
Increase/(decrease) in provisions
Net cash from operating activities
24,749
(14,041)
(32,060)
14,064
803
(536)
(4,065)
(3,421)
–
1,994
6,459
(38,764)
4,806
104
50,005
27,896
(6,330)
(732)
(1,166)
24,275
(11,166)
(14,658)
12,910
(1,600)
(726)
–
(23,874)
(1,169)
1,986
18,090
13,281
2,375
(1,018)
9,627
22,021
(5,659)
650
(236)
107,952
126,227
C. SIGNIFICANT NON‑CASH TRANSACTIONS IN RELATION TO INVESTING ACTIVITIES
Investing activities
During the financial year ended 30 June 2017, the Group completed a number of acquisitions (investing activities) to effect
hubbing arrangements using the scrip of certain subsidiaries (refer Note 10a).
109
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
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
Share‑based payments
2017
$
2016
$
4,266,585
4,294,492
116,549
59,339
490,913
4,933,386
115,848
44,400
1,072,844
5,527,584
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
153,116
Marketing and administration fees received from joint ventures on normal commercial terms 2,528,684
Commission income received/receivable from associates on normal commercial terms
143,730
165,965
2,537,988
84,437
II. Interest income
Interest income received/receivable from joint ventures
138,167
185,538
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
IV. Receivable from and payable to related parties
773,656
3,397,672
9,505
896,910
2,533,913
14,220
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 ventures
Dividend receivable from associates
b. Current payables
Trade payables to associates
110
6,377,567
102,146
–
6,082,087
88,434
73,163
126,480
134,786
NOTE 22. RELATED PARTY TRANSACTIONS continued
V. Loans to 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)
b. Non‑current receivables
Loan to joint venture(a)
Executive loans(b)
Loans to associates
2017
$
2016
$
603,125
427,800
1,030,925
1,206,250
4,672,580
302,976
6,181,806
603,125
372,600
975,725
1,809,375
4,647,309
739,825
7,196,509
(a) The loan to a joint venture relates to Macquarie Pacific Funding Group (MPF). It has a face value of $1,809,375 (2016:
$2,412,500). The loan receivable balance includes $nil accrued interest (2016: $nil).
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; and
• the loan is secured by all present and future assets of MPF.
(b) Executive loans are interest‑free loans to certain executives provided at the time of listing for them to acquire Steadfast
ordinary shares when the Company was listed on the ASX in August 2013.
The key terms and conditions of these loans are:
• interest‑free, unsecured and full recourse loans;
• dividends received from the acquired shares to be applied towards part repayment of the loans; and
• to be repaid in full five years after the date on which the loans were provided.
111
Steadfast Group Annual Report 2017
Notes to the Financial Statements continued
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 after income tax
Other comprehensive income
Total comprehensive income
B. STATEMENT OF FINANCIAL POSITION
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Share capital
Reserves
Total equity
2017
$’000
79,029
(14)
79,015
70,685
1,069,029
30,503
204,668
796,857
67,504
864,361
2016
$’000
65,278
419
65,697
43,202
1,045,888
43,158
213,418
796,857
35,613
832,470
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 ventures which are accounted for at cost, less any impairment. Dividends
received are recognised as income by the parent entity.
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 provided no guarantees in relation to the debts of its subsidiaries as at 30 June 2017 and 30 June 2016.
F. CONTINGENT ASSETS/LIABILITIES
The Company is exposed to the contingent assets and liabilities pertaining to the Macquarie Bank put options set out in
Note 15.
G. CAPITAL COMMITMENTS – PROPERTY, PLANT AND EQUIPMENT
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017 and 30 June 2016.
112
NOTE 24. REMUNERATION OF AUDITORS
A. KPMG
I. Audit and review services
2017
$
2016
$
Audit or review of the financial statements of the Company and certain subsidiaries
1,387,251
1,485,671
II. Other assurance, taxation and due diligence services
Other assurance services
Other assurance services
Other services
Taxation compliance and other advisory services
B. OTHER AUDITORS
I. Audit and review services
–
43,350
80,954
80,954
82,780
126,130
Audit or review of the financial statements
261,103
272,865
II. Services other than audit and review of financial statements
Other services
Taxation advisory services
Other services
133,522
2,995
136,517
110,644
–
110,644
113
Steadfast Group Annual Report 2017
Directors’ declaration
1.
In the opinion of the Directors of Steadfast Group Limited (‘the Company’):
(a) the consolidated financial statements and notes that are set out on pages 64 to 113 and the Remuneration Report in
the Directors’ Report, are 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 2017 and of its performance, for the
financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2.
3.
The Directors have been given the declarations 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 2017.
The Directors draw attention to Note 2A to the consolidated financial statements, which includes a statement of
compliance with International Financial Reporting Standards.
Signed at Sydney on 23 August 2017 in accordance with a resolution of the Directors:
Frank O’Halloran, AM
Chairman
Robert Kelly
Managing Director & CEO
114
Independent Auditor’s Report
TO THE SHAREHOLDERS OF STEADFAST GROUP LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
OPINION
We have audited the Financial Report of Steadfast Group
Limited (the Company).
In our opinion, the accompanying Financial Report of
the Company is in accordance with the Corporations Act
2001, including:
• giving a true and fair view of the Group’s financial
position as at 30 June 2017 and of its financial
performance for the year ended on that date; and
• complying with Australian Accounting Standards and the
Corporations Regulations 2001.
The Financial Report comprises:
• Consolidated statement of financial position as at 30 June
2017
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of changes
in equity, and Consolidated statement of cash flows for the
year then ended
• Notes including a summary of significant accounting policies
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year‑end or from time to time during the
financial year.
BASIS FOR OPINION
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that
are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance
with the Code.
KPMG, an Australian partnership and a member firm of the
KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a
Swiss entity.
Liability limited by a scheme approved under Professional
Standards Legislation.
115
Steadfast Group Annual Report 2017 Independent Auditor’s Report
TO THE SHAREHOLDERS OF STEADFAST GROUP LIMITED
KEY AUDIT MATTERS
Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial
Report of the current period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
The key audit matter
How the matter was addressed in our audit
IMPAIRMENT OF GOODWILL AND INVESTMENTS IN ASSOCIATES
Refer Note 7, Goodwill ($717,397k), Note 12, Investments in Associates ($125,690k) and Note 3, Critical Accounting
Judgements, Estimates and Assumptions.
The impairment of goodwill and investments in associates
is a key audit matter as:
• goodwill and investments in associates represented
46.8% of the Group’s total assets.
• the high number of individual Cash Generating Units
(CGUs) (more than 60 at 30 June 2017) necessitated
our consideration of Group's determination of CGUs
and the valuation for each of the CGUs.
• the sectors in which the Group operates experienced
competitive market conditions during the year which
increased the uncertainty of forecast cash flows used in
the impairment model for goodwill and investments in
associates.
• we applied a significant level of judgement when
considering Group’s assessment of impairment.
We focused on the Group’s valuation methodologies and
the key inputs such as forecast cash flows and discount
rates applied, as well as the assumptions underlying the
forecast growth rates and terminal growth rates.
Our procedures included the following:
• We assessed Group's determination of CGUs based on our
understanding of the nature of the Group’s business. We also
analysed the internal reporting of the Group to assess how
results were monitored and reported.
• We compared the cash flow forecasts to Board approved
forecasts. We also evaluated the forecast process
undertaken by the Group by assessing the precision of prior
year forecast cash flows by comparing to actual outcomes.
We used knowledge from this evaluation to inform our
detailed testing focus.
• We challenged the Group's forecast cash flows based on
our understanding of general insurance industry trends, in
particular the competitive market and customer retention
rates. This included comparing growth assumptions to APRA
statistics for the general insurance industry.
• With the assistance of KPMG valuation specialists we
challenged the Group’s valuation methodologies, discount
rates and growth rates. This included comparing the Group’s
inputs to external data such as economic growth projections
and interest rates. Where growth rates also reflect increases
from the new Steadfast Client Trading Platform, we obtained
copies of contracts in place and agreed commission rates
within the growth calculation to contracts.
• We performed sensitivity analysis on the discount rate
and growth rate inputs for all CGUs. Additionally, we cross
checked the valuation results against earnings multiples
inherent in the value of other comparable companies.
116
The key audit matter
How the matter was addressed in our audit
DECENTRALISED OPERATIONS
Refer Note 2, Significant Accounting Policies, Note 11, Subsidiaries and Note 12, Investments in Associates.
The Group comprises more than 100 subsidiaries and
associates (components) whose operations are spread
across Australia, New Zealand, London, Singapore and
Germany. The Group’s business is general insurance
distribution, and the individual components are wide
ranging in size and also in the customers and products of
each business operation.
The decentralised and varied nature of these operations
requires significant oversight by Steadfast management
to monitor the activities, review component financial
reporting and undertake the Group consolidation. This
is an extensive process due to the variety of accounting
processes and systems used across the Group.
This was a key audit matter for us given the high number
of subsidiaries and associates, and the varied operations,
accounting processes and systems. We focused on:
• understanding the components and identifying the
significant risks of misstatement within them;
• the scoping of relevant procedures consistent with the
risks identified and to enable coverage of significant
aggregated balances;
• the assessment of components compliance with
Group accounting policies, particularly regarding
revenue recognition; and
• the consolidation process and aggregating results from
component procedures.
Audit procedures included the following:
• We instructed component audit teams to perform
procedures on the financial information prepared for
consolidation purposes by 21 components. The selected
components were those of most significance to the audit of
the Group, either by individual size or by risk to the Group,
and included over 78% of the Group’s revenue and 73%
of profit before tax. The objective of this approach was to
gather evidence on significant balances that aggregate to
form the Group’s financial reporting.
The two charts below show the proportion of Group revenue
and the Group profit before tax covered by full scope audits,
specific risk‑focused procedures and by head office audit
procedures.
Group total revenue
22%
12%
66%
Group total profit before tax
27%
17%
57%
56%
Full scope audits conducted by component audit team
Specific risk-focused audit procedures conducted by
component audit teams
Head office audit procedures
117
Steadfast Group Annual Report 2017 Independent Auditor’s Report
Independent Auditor’s Report
TO THE SHAREHOLDERS OF STEADFAST GROUP LIMITED
TO THE SHAREHOLDERS OF STEADFAST GROUP LIMITED
The key audit matter
How the matter was addressed in our audit
• The component audit teams performed audits of the
financial information of the components on specific
Group reporting package information and local statutory
financial reporting. This included full scope audits and
specific risk‑focused audit procedures. We worked with
the component audit teams to identify risks that are
significant to the audit of the Group and to plan relevant
procedures. We discussed the audits as they progressed
to identify and address any issues, working with the
component audit teams as appropriate. We read the
audit reports to us and the underlying memos explaining
component results. We evaluated the work performed by
the component audit teams for sufficiency for our overall
audit purpose. We also considered the components’
compliance with the Group’s accounting policies,
including in recognising revenue.
• We tested the financial data used, in both the
consolidation process and head office management
review, for consistency with the financial data audited
by component audit teams. We also assessed the
consolidation process for compliance with accounting
standards.
• For the other components, not within the scope of the
component audit teams (22% of total group revenue and
27% of profit before tax), our head office audit procedures
included testing the Group’s key monitoring controls
and performance of analytical procedures to deepen
our understanding of these components. This included
testing the head office management review of financial
information received from components. We inspected
a sample of bank reconciliations, statutory financial
reports and accompanying audit reports, and enquired
of head office and component management. In our
analytical procedures we compared actual financial results
to budgets and the prior year results, we enquired of
management and considered trends within the insurance
market.
OTHER INFORMATION
Other Information is financial and non‑financial information in Steadfast Group Limited’s annual reporting which is provided in
addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit
opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we
consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the
work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing
to report.
118
RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL REPORT
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001
• implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is
free from material misstatement, whether due to fraud or error
• assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL REPORT
Our objective is:
• to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether
due to fraud or error; and
• to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report.
A further description of our responsibilities for the Audit of the Financial Report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_files/ar[2].pdf. This description forms part of our Auditor’s
Report.
REPORT ON THE REMUNERATION REPORT
OPINION
DIRECTORS’ RESPONSIBILITIES
In our opinion, the Remuneration Report of Steadfast
Group Limited for the year ended 30 June 2017, complies
with Section 300A of the Corporations Act 2001.
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 RESPONSIBILITIES
We have audited the Remuneration Report included in pages
41 to 62 of the Directors’ report for the year ended 30 June
2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our Audit conducted in
accordance with Australian Auditing Standards.
KPMG
Andrew Dickinson
Partner
Sydney
23 August 2017
119
Steadfast Group Annual Report 2017 Shareholders' Information
AS AT 16 AUGUST 2017
ORDINARY SHARE CAPITAL
There were 749,751,634 fully paid ordinary shares held by 4,214 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 are 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
No. of holders
No. of shares
% of issued capital
426
1,440
607
1,130
611
4,214
694,766,182
46,806,046
4,621,859
3,232,991
324,556
749,751,634
92.67%
6.24%
0.62%
0.43%
0.04%
100.0%
There were 0 shareholders holding less than a marketable parcel based on a market price of $2.87 at the close of trading on
16 August 2017.
SUBSTANTIAL SHAREHOLDERS
Date of notice
No. of shares
% of issued capital
Investors Mutual Ltd
Vinva Investment Management
07/06/17
21/12/16
44,821,736
37,517,925
5.98
5.00
This information is based on the most recent substantial holder notices lodged with the ASX.
TWENTY LARGEST SHAREHOLDERS
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
MacKay Insurance Services Pty Ltd
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
UBS Nominees Pty Ltd
Argo Investments Limited
Mr Robert Bernard Kelly
Steadfast Share Plan Nominee Pty Ltd
RC & IP Gilbert Pty Ltd
RM & JA Alford Investments Pty Ltd
AMP Life Limited
Mr David Ingram
Australian Executor Trustees Limited
HSBC Custody Nominees (Australia) Limited‑GSCO ECA
PAN Australian Nominees Pty Limited
No. of shares
% of issued capital
174,101,625
137,006,887
66,981,533
63,516,137
29,481,109
16,123,525
12,277,028
10,575,989
9,688,496
9,431,269
5,095,615
4,143,698
3,700,000
3,185,000
2,748,786
2,691,440
2,440,823
2,114,408
2,060,000
2,023,623
23.22
18.27
8.93
8.47
3.93
2.15
1.64
1.41
1.29
1.26
0.68
0.55
0.49
0.42
0.37
0.36
0.33
0.28
0.27
0.27
NOTNEF Pty Ltd
Total
DIVIDEND DETAILS
Dividend
Interim
Final
559,386,991
74.61
Franking
Fully franked
Fully franked
Amount per share
DRP issue price
Payment date
2.6 cents
4.4 cents
$2.43
13 April 2017
*
13 October 2017
The fi nal dividend has an ex‑dividend date of 11 September 2017, a record date of 12 September 2017, a payment date of 13
October 2017 and is eligible for Steadfast's Dividend Reinvestment Plan (DRP), which carries no discount.
120
*The DRP issue price for the fi nal dividend is scheduled to be announced on 3 October 2017
Corporate Directory
DIRECTORS
Frank O’Halloran, AM (Chairman)
Robert Kelly (Managing Director & CEO)
David Liddy, AM
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
COMPANY SECRETARIES
Linda Ellis
Peter Roberts
NOTICE OF AGM
The AGM will be held on Thursday 26 October 2017
at 10.00 am at the Sheraton on the Park,
161 Elizabeth Street, Sydney NSW 2000.
CORPORATE OFFICE
STEADFAST GROUP LIMITED
Level 4
99 Bathurst Street
Sydney NSW 2000
Postal Address
PO Box A980
Sydney South NSW 1235
P 02 9495 6500
E investor@steadfast.com.au
W steadfast.com.au
ACN 073 659 677
SHARE REGISTRY
LINK MARKET SERVICES
Level 12
680 George Street
Sydney NSW 2000
Postal Address
Locked Bag A14
Sydney South NSW 1235
P 1300 554 474
E registrars@linkmarketservices.com.au
STOCK LISTING
Steadfast Group Limited ordinary shares are
listed on the Australian Securities Exchange
(ASX code: SDF).
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Steadfast Group Limited
ABN 98 073 659 677
www.steadfast.com.au