Steadfast Group Limited (ASX: SDF)
Annual Report
2018
The largest general
insurance broker network
and group of underwriting
agencies in Australasia,
with growing operations
in Asia and Europe.
Five years
as a listed
company
Steadfast Network
GWP ($bn)
Steadfast Underwriting
Agencies GWP ($m)
Underlying
EBITA ($m)
5.3
5.0
4.4
4.5
4.1
3.9
$bn
6
5
4
3
2
1
914
777
745
$m
1,000
800
600
400
200
146
385
166
143
130
$m
200
150
100
50
91
62
57
FY13
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
FY13
FY14
FY15
FY16
FY17
FY18
Underlying
NPAT ($m)
Underlying earnings per share
(NPAT) (cents per share)
Dividend per share
(cents per share)
$m
80
70
60
50
40
30
20
10
66
60
42
33
28
75
10
9.7
8.9
8.1
7.2
6.2
5.4
8
6
4
2
7.5
7.0
6.0
5.0
4.5
8
7
6
5
4
3
2
1
FY13
FY14
FY15
FY16
FY17
FY18
FY13
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
Vision:
Continually grow shareholder
value through our leading
general insurance distribution
model and related businesses
domestically and internationally.
Mission:
Deliver value to our broker
network by being a market
leader and an innovator in
insurance broking.
Key strategies and 2018 performance
Our diversified business model
Our key market
Our clients
Our businesses
Monetising our insurTech
International reach
2018 financial highlights
Values:
Message from the Chairman
02
03
04
05
06
10
12
14
15
We are united
We achieve
We are strong
Message from the Managing Director & CEO
16
Message from the Chief Financial Officer
Corporate social responsibility
Corporate governance
Board of Directors
Senior management team
18
20
22
24
26
Key strategies and
2018 performance
Steadfast Group’s vision is to continually grow shareholder value
through our leading general insurance distribution model and related
businesses domestically and internationally. We continually measure
our performance against our key strategies with 2018 highlights set
out below and a full report on page 33:
Key strategy
2018 performance
Improve profitability, margin,
earnings per share and total
shareholder return through
organic and acquisition growth
– Organic underlying EBITA growth
– Underlying net profit after tax of
of $13.8m (+9.6%)
$75.0m (+12.9%)
– Acquisition underlying EBITA growth
– Underlying earnings per share of
of $8.4m (+5.9%)
9.7 cps (+9.5%)
Maintain and develop premier
service offering to Steadfast
Network brokers
– Underlying EBITA margin (aggregated)
– Total dividend per share of 7.5 cps
of 30.5% (FY17: 30.3%) for equity
brokers and 44.9% (FY17: 42.5%) for
Steadfast Underwriting Agencies
(+7.1%)
– GWP growth of 6%
– Intermediated market share
of 29% in Australia
– Over 160 products and services
provided to the Network
– Record attendees at the
Steadfast Convention
– Launched Steadfast Client Trading
Platform; our market-leading
technology to create greater
competition for our Network's
products which is exclusive to
Steadfast Network brokers
Drive growth organically
and through acquisition
– 16 new brokers joined the Steadfast
– 25 equity acquisitions in
Network in FY18
Steadfast Network brokers
and underwriting agencies
Grow the Steadfast Client
Trading Platform (SCTP)
– Six business lines live on SCTP
– 14 insurers and underwriting
equating to c.60% of the Steadfast
Network’s GWP available to be
transacted through the platform
agencies now live on the SCTP
– $231 million GWP transacted
on SCTP in FY18
Expand and solidify Steadfast’s
international reach
– 53 brokers across the Steadfast
– Aggregation exercise of
Network in New Zealand and Asia
with ten major insurers supporting
the Network.
unisonSteadfast GWP near
completion to enable discussions
with global insurers
– 200 brokers in unisonSteadfast
Network
– Diverse income streams with
growth of Steadfast Underwriting
Agencies and international reach
– 72% employee engagement score
which is in the 'highly engaged
workforce' category
– Use of SCTP improving competition
for our Network's products, for the
benefit of clients and improved
profitability of existing businesses
Continue to enhance
organisational capability
and sustainability
02
y market
age 04
P
e
r k
u
O
M
o
n
e
t
i
s
i
n
g
Our focus
O u r clients
Page 05
Our
diversified
business
model
O
u
r
b
P
a
u
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e
s
i
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6
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e
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atio nal rea
P a ge 12
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e
1
0
r in
surTech
Our key strate g i e s
Our diversified
business model
Steadfast Group was established in 1996 and is the largest general
insurance broker network and the largest underwriting agency group in
Australasia with growing operations in Asia and Europe. We have grown
the Steadfast Network to 377 brokers (of which Steadfast Group has
equity in 64) and created a portfolio of 25 underwriting agencies. Our
business model allows us to achieve sustainable growth. The diversified
drivers of our business model are set out below and position us well to
maintain and grow our market position.
Our focus
O u r clients
Page 05
Our
diversified
business
model
O
u
r
b
P
a
u
g
e
s
i
0
6
n
e
s
s
h
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atio nal rea
P a ge 12
e r n
n t
I
y market
age 04
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i
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o
P
a
g
u
e
1
0
r in
surTech
Our key strate g i e s
Steadfast Group does not carry underwriting risk.
03
Steadfast Group Annual Report 2018
Our focus
Our 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,
with gross written premium of $17 billion generated in 2017, of which
our Network has a market share of 29%.
We are a key distribution channel for our insurer partners as the
Steadfast Network has a large and diverse client base across Australia.
$17bn
intermediated
market
S
t
eadfast N e t w o rk
brokers $ 4 . 9 b
n
d
n-interm e diat e
ealth $ 2
te h
o
N
a
v
i
r
P
n
b
2
$82bn
Australian
insurance
market
G
e
n
e
r
a
l
$
3
7
b
n
)
t
c
e
d (dir
L
if
e $
23bn
o
N
n -inter m ediate
2.2m
policies placed in FY18
Measuring
performance
Steadfast Network brokers' market share has grown from
25% to 29% of intermediated general insurance GWP in the
last 5 years
04
1APRA Quarterly General Insurance Performance Statistics (March 2018), Steadfast Group and
APRA Intermediated General Insurance Performance Statistics (December 2017).
Our focus
Our clients
Steadfast Group is primarily focused on the small-to-medium
enterprise (SME) market. The SME market is advice-driven
which means that client relationships are key to Steadfast
Network brokers and Underwriting Agencies.
These relationships mean that the SME market is more stable
than the corporate market.
85%
of Steadfast Network clients are
small-to-medium enterprises
Diversified product offering and client base
Steadfast Network brokers and Underwriting Agencies offer
a diverse range of general insurance products to their clients
across Australasia. This diversity of product and client base
supports sustainable growth of GWP.
Diversified by client base
Diversified by product
Diversified by geography
Small-to-medium enterprises (SMEs)
Retail – home and motor
Corporate
Retail – other
85%
10%
4%
1%
Business pack
Commercial motor
Retail home and motor
Commercial property and ISR
Liability
Professional risks
Statutory covers
Strata
Rural and farm
Construction and engineering
Other
VIC
NSW
QLD
WA
NZ
SA
TAS
ACT
NT
22%
14%
10%
10%
8%
8%
7%
7%
4%
4%
6%
30%
20%
17%
17%
7%
5%
2%
1%
1%
05
Steadfast Group Annual Report 2018 Our focus
Our business
Steadfast Group has three business streams focused
on servicing general insurance clients.
Steadfast Group (listed on the ASX)
1. Steadfast Network
2. Steadfast Underwriting
Agencies
3. Complementary
businesses
377 general insurance brokers
25 underwriting agencies
200 brokers in unisonSteadfast
Network (see page 13)
Steadfast Group has equity holdings
in all 25 underwriting agencies
Seven businesses supporting the
Steadfast Network and Steadfast
Underwriting Agencies
Mixture of wholly owned, part-owned
and joint venture businesses
Steadfast Group has equity holdings in
64 brokers (all of which are part of the
Steadfast Network)
1. Steadfast Network
The Steadfast Network is the largest general insurance
broker network in Australasia. The Network is made up of
377 brokers with around 1,900 offices, who receive superior
market access and exclusive products and services backed
by the scale of Steadfast Group. This allows them to focus on
servicing their clients’ insurance and risk management needs.
Steadfast Group holds equity stakes in 64 Network brokers
and receives a corresponding share of dividends from
each business.
1
United
Kingdom
47
Asia
192
Western
Australia
116
South
Australia
Worldwide office network
(excluding unisonSteadfast)
06
16
Northern
Territory
25
Australian
Capital
Territory
35
Tasmania
355
Queensland
512
New South
Wales
457
Victoria
83
North
Island
18
South
Island
1. Steadfast Network cont.
Key benefits to brokers include:
Steadfast Network GWP ($bn)1
Market-leading
policy wordings
Exclusive access to
Steadfast proprietary
technology
Training and
marketing support
377
brokers in the
Steadfast Network
160+
exclusive products and
services and market-leading
policy wordings
5.3
5.0
4.4
4.5
4.1
3.9
$bn
6
5
4
3
2
1
FY13
FY14
FY15
FY16
FY17
FY18
1Excludes unisonSteadfast
2. Steadfast
Underwriting
Agencies
Steadfast Underwriting Agencies is the largest underwriting
agency group in Australasia. The agencies extend our
intermediated general insurance distribution by offering
brokers, inside and outside of the Steadfast Network,
specialised products and capacity in niche markets.
Steadfast Group holds equity stakes in 25 underwriting
agencies and receives a corresponding share of dividends
from each business.
Steadfast Underwriting
Agencies GWP ($m)
914
777
745
$m
1,000
800
600
400
200
146
385
FY14
FY15
FY16
FY17
FY18
07
Steadfast Group Annual Report 2018 Our focus – Our business
3. Complementary
businesses
Seven complementary businesses support the operations of
the Steadfast Network and Steadfast Underwriting Agencies
and provide an EBITA contribution to the Group.
Life
Our partners
Major insurer partners
Over our 22 year history,
Steadfast Group has developed
strong relationships with carefully
selected insurers, underwriting
agencies, premium funders and
strategic partners to support the
Steadfast Network.
Strategic partner
Premium funders
Measuring
performance
$7bn+
total billings
16
new brokers joined
the network in FY18
08
Our focus – Our business
Case study
Steadfast Network brokers are
key advisors to their clients and
are supported by the products
and services offered by Steadfast
to deliver the best outcomes.
This expertise and support is
particularly important when
clients need us most.
Earlier this year, a Steadfast Network
broker’s client, a waste management
company, suffered a catastrophic
loss of their fleet of specialised waste
collection trucks. This restricted their
ability to operate and could have
resulted in the loss of a key contract
and a substantial loss of income and
increased operating costs.
Their Steadfast Network broker,
who had intimate knowledge of
the business, used their expertise
to recommend ‘additional costs of
working’ and ‘business interruption’
cover. Based on this advice and
Steadfast’s superior policy wording,
the client was covered for this type
of catastrophe. This allowed the
client to use their cover to source
replacement vehicles in time to fulfil
their obligations and avert the loss
of a key contract.
This positive outcome for the client
was made possible by the expertise
and advocacy of the broker, Steadfast’s
superior policy wording and claims
triage support and the use of a
Steadfast-approved claims preparer
combined with the swift action of
the insurer. This demonstrates the
importance of the client-broker
relationship and benefits of the
Steadfast Network.
Based on this advice and
Steadfast’s superior policy
wording, the client was
covered for this type of
catastrophe.
09
Steadfast Group Annual Report 2018 Our key strategies
Monetising
our insurTech
Steadfast provides exclusive, market-leading technology
to support broker and underwriting agency operations and
facilitate interactions with our insurer partners to support
client outcomes.
This technology positions us as a global leader in insurance
technology (insurTech) and secures our strong market position.
– Steadfast Virtual Underwriter: powers the
Steadfast Client Trading Platform (SCTP),
a contestable digital marketplace giving
brokers automated access to all insurers
on the platform allowing comparison of
policies and prices on a single screen.
– INSIGHT: client relationship management
and back office system for brokers offering
a single view of their business.
– UnderwriterCentral: underwriting agency
management system which manages the
entire policy lifecycle.
> Steadfast Direct: part of SCTP product
suite, offering automated access for
brokers to domestic motor, home and
landlords products for their clients.
Client
Powered by
Client relationship
management
and back office
system
Powered by
Automated
contestable
marketplace
Powered by
Policy
management
system
10
SCTP benefits for clients:
SCTP benefits for brokers:
SCTP benefits for insurers:
– Contestable digital marketplace
generating improved pricing
competition and coverage
– Market-leading policy wordings
– Instant policy issue, maintenance
and renewal, all on a market
contestable basis
– Supported by Steadfast
claims Triage
– Automated market access to
leading insurers at no access cost
– Market-leading policies
– Fixed commission, same
for all insurers
– In-depth data analytics
– Stimulates advisory discussions
with clients
– Automated access to Steadfast
Network for all policies placed
on the platform
– Significantly reduced technology
and distribution costs
– Data analytics and market insights,
live at all times
– Updated policy wordings, based
on prior claims scenarios
General insurance lines live on SCTP
– Business pack
– Professional risks
– Commercial property and
industrial special risks
– Liability
– Commercial motor
– Strata (in beta testing)
– Steadfast Direct
(domestic home,
motor and landlords)
Major insurer partners and underwriting agencies live on the SCTP
6
general insurance lines
live on the SCTP
$2.3 billion
Steadfast Network annual GWP targeted to
be transacted through the SCTP in five years
Measuring performance
14
major insurers and underwriting agencies
have joined the platform
$231m
SCTP GWP in FY18
11
Steadfast Group Annual Report 2018 Our key strategies
International reach
Expanding our markets
While we are primarily focused on our Australian and
New Zealand markets, we are also growing our international
presence to create geographically diverse revenue streams.
We are doing so with a low-risk ‘capital-light’ strategy where
we either build revenue streams to self-fund expansion or
potentially take an equity stake in an existing global network
(unisonSteadfast).
Replicating our model in
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 offering market-leading policy
wordings, market competitive pricing
and a range of products and services
that give them a competitive edge.
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.
53
network brokers in
New Zealand and Asia
Measuring
performance
12
3
2
1
Steadfast offices
1. New Zealand
2. Asia
3. London
NZ$366m
New Zealand
GWP in FY18
5
major insurers supporting four
lines of business in Singapore
200
Steadfast Group Annual Report 2017
Investment in an existing global broker
network to access new markets and,
in the long term, roll out Steadfast
products and services.
In June 2017, Steadfast Group acquired a 26% stake,
since increased to 40%, in unisonSteadfast which
is one of the largest global networks of general
insurance brokers with 200 brokers across 130
countries.
200
brokers
130
countries
Head office: Hamburg, Germany
Recent developments
– GWP aggregation – data gathering from unisonSteadfast
brokers enabling discussions with global insurers
– Access to London market for unisonSteadfast brokers –
leveraging London ‘super’ binder to create first revenue
stream for Steadfast Group from unisonSteadfast operations
– Seeking to create first new product for unisonSteadfast
brokers – increasing professional indemnity (PI) cover for
brokers, leveraging Steadfast Group’s existing relationship
with PI provider
13
Steadfast Group Annual Report 2018 2018
financial
highlights
Underlying NPAT
Underlying EPS (NPAT)
Total dividend
$75m
up 13% year-on-year
9.7cps
up 10% year-on-year
7.5cps
up 7% year-on-year
Underlying revenue
$582m up 15% year-on-year
Total billings
Underlying EBITA
$166m up 16% year-on-year
582
504
470
309
$m
600
500
400
300
200
169
188
100
FY13
FY14
FY15
FY16
FY17
FY18
$m
200
150
100
50
90
57
62
166
143
130
FY13
FY14
FY15
FY16
FY17
FY18
$7.0bn+
Steadfast Network brokers, Steadfast
Underwriting Agencies GWP plus
fees, levies, taxes
Steadfast Network GWP
$5.3bn up 6% year-on-year
Steadfast Underwriting
Agencies GWP
$914m up 18% year-on-year
Steadfast Client Trading
Platform GWP
$231m up 136% year-on-year
5.3
5.0
4.4
4.5
4.1
3.9
$m
1,000
800
600
400
200
145
114
914
777
745
385
$m
240
180
120
60
40
231
98
FY13
FY14
FY15
FY16
FY17
FY18
FY13
FY14
FY15
FY16
FY17
FY18
FY16
FY17
FY18
$m
6
5
4
3
2
1
14
Message from
the Chairman
‘We expect our technology
platform and growing
international reach to
underpin further growth
for years to come.’
The Directors are pleased to report another result
comfortably in-line with our guidance which was
upgraded in December 2017. We saw 16% growth in
underlying revenue, 16% growth in underlying earnings
before interest, tax and amortisation (EBITA) and 13%
growth in underlying net profit after tax (NPAT).
This result was driven by a combination of underlying
organic EBITA growth (+$14 million) particularly in
our underwriting agencies, and underlying acquisition
EBITA growth (+$8 million).
Dividend
This strong financial performance has allowed the Board
to declare a fully-franked final dividend of 4.7 cents per
share (cps), up 7% from last year. This is a total dividend
of 7.5 cps (fully franked), growth of 7% year-on-year.
The 2018 total dividend represents a payout ratio of 79%,
in-line with our target range of 65% – 85% of underlying
net profit after tax, adjusting for non-trading items.
Steadfast Network GWP growth
The Steadfast Network reported GWP of $5.3 billion in
Australasia and Asia which is another record. This is an
excellent performance by the Network brokers who are
supported by our unrivalled offering of over 160 products
and services. We expect our technology platform and
growing international reach to underpin further growth
for years to come.
Steadfast Underwriting Agencies profitability
The Steadfast Underwriting Agencies also reported record
GWP of $914 million and a record underlying EBITA (IFRS)
of $75 million which represents a 42% contribution to total
Group EBITA. Our portfolio of 25 underwriting agencies has
continued to grow their offering to brokers and their clients
looking for coverage in niche markets and are a key part of
our future growth prospects.
Capital management
We continue to be prudent with our capital as we assess
potential acquisition opportunities against disciplined
criteria. We made 25 equity acquisitions in FY18 totalling
$136 million. Our Group gearing ratio is 17.5% which is well
below the Board-mandated maximum of 30%, consisting of
25% corporate and 5% subsidiary ratios. Long-term corporate
debt facilities of $285 million are in place with $109 million of
unutilised capacity available to fund future acquisitions.
Corporate social responsibility and governance
We acknowledge our responsibilities to our community
by donating more that 1% of our FY18 NPAT to charitable
causes and encouraging our people to participate in various
charitable activities.
We are focused on building a diverse workforce with 59%
of employees across Steadfast Group entities being female
including 40% in management positions. 47% of our head
office employees were born outside Australia as were 24%
of employees across Steadfast Group controlled entities. We
also strengthened our Board with Gai McGrath joining as a
Director in June 2018.
Steadfast Group continues to adhere to the corporate
governance principles as set out by the ASX Corporate
Governance Council. Our governance framework and
robust risk management strategies are set out in more detail
on page 37 and I am pleased to note another year in which
there were no material departures from these principles.
Annual General Meeting
Our Annual General Meeting will be held on Thursday
18 October 2018 in Sydney. The Directors and senior
management team will be available to answer your
questions on our FY18 performance, strategy and prospects.
I encourage all our shareholders to attend and hope to
see you then.
Thank you
I would like to thank all our employees, who are extremely
well led by our highly experienced Managing Director &
CEO Robert Kelly, for their efforts this year. Their hard work,
combined with that of the Steadfast Network brokers,
Steadfast Underwriting Agencies and complementary
businesses has driven our strong performance.
I would also like to extend my gratitude to my fellow board
Directors who are focused on strong governance and
driving shareholder value through organic and acquisition
growth from our ever-increasing network of brokers.
Frank O’Halloran, AM
Chairman
15
Message from the
Managing Director & CEO
I’m pleased to report another strong set of results
to celebrate five years since listing on the Australian
Securities Exchange (ASX). We delivered underlying
earnings before interest, tax and amortisation (EBITA)
growth of 16% and underlying net profit after tax (NPAT)
growth of 13%. This came from growth of the Steadfast
Network, a particularly strong performance by Steadfast
Underwriting Agencies and further acquisitions.
Five year performance since listing
Our FY18 results mark five years since we listed on the ASX.
During this time, we are proud to have grown underlying
EBITA from $57 million to $166 million (+191%) and
underlying NPAT from $28 million to $75 million (+168%).
This has been driven by growth of the Steadfast Network,
over 100 brokers have joined since IPO, our underwriting
agencies which now consist of 25 agencies generating
$914 million of GWP and acquisitions.
We have also delivered for our shareholders by growing
underlying earnings per share (NPAT) from 5.4 cps to
9.7 cps (+80%) and total dividend per share from 4.5 cps
to 7.5 cps (+67%). Our share price has grown from $1.15
at listing to $2.81 at 30 June 2018.
While we are proud of our performance so far, we still have
plenty of work to do to execute our key growth strategies,
particularly monetising our insurTech and developing our
overseas broker network and unisonSteadfast.
Steadfast Network broker growth
We now have a total of 377 brokers in the Network with 324
in Australia and 53 across our international jurisdictions of
New Zealand and Asia. In addition, there are 200 brokers in
unisonSteadfast, a network in which we have a 40% stake.
16
Steadfast Network brokers
400
350
306
304
300
278
377
361
343
250
200
150
100
50
FY13
FY14
FY15
FY16
FY17
FY18
TBC
Monetising our insurTech
Steadfast offers market-leading
technology exclusively to Network
brokers. This technology, in
collaboration with our insurer partners,
allows Steadfast brokers to offer the
best outcomes for their clients.
The Steadfast Client Trading Platform
(SCTP) is live across six of our key
insurance lines with 14 insurer
and underwriting agency partners
connected, offering a contestable
marketplace to brokers and their
clients. With around 60% of our GWP
now available to be transacted through
the SCTP, we expect increasing revenue
contribution from the platform in
FY19 which will continue to grow
in subsequent years.
We will continue to invest in our
technology as growing usage of the
SCTP is a key medium-term strategy for
Steadfast Group, and we’ve already had
excellent feedback from brokers using
this platform.
231
Steadfast Client Trading
Platform GWP ($m)
$m
240
180
120
60
98
40
FY16
FY17
FY18
$5.3bn
Steadfast Network GWP
$75m
Underlying NPAT
Steadfast Direct
Part of our SCTP offering, Steadfast Direct was launched in late FY15
to provide retail home and motor cover for brokers to offer their
clients. As with other insurance lines on the SCTP, Steadfast Direct is
an automated, contestable platform. This represents an outstanding
success and is another example of the way that our proprietary
insurTech is driving growth for Steadfast Network brokers and
generating earnings for shareholders.
Strong underwriting agencies performance
Steadfast Underwriting Agencies have delivered record GWP of $914
million and record underlying EBITA (IFRS) of $75 million. This was
driven by our key long-term strategies of aligning our product with
distribution partners and our London ‘super’ binder going live on the
SCTP. A rising premium pricing environment has also contributed to
growth as insurers return prices towards technical levels.
Acquisitions
Acquisition growth provided a further uplift of 6% of underlying EBITA
as we made 25 acquisitions in FY18. We are constantly evaluating
broker acquisitions against our disciplined criteria as we look to
acquire high-quality businesses that are accretive to our earnings. Our
largest acquisition in FY18 was Whitbread Insurance Brokers and Axis
Underwriting Services for consideration of approximately $100 million.
These are particularly strong businesses and have made a positive
contribution to our FY18 underlying EBITA performance.
Outlook
Our small-to-medium enterprise general insurance market has seen
moderate premium price rises during FY18. We expect this trend
to continue through FY19 as insurers look to improve their profitability.
We will continue to focus on rolling out and driving usage of our
technology as we target $2.3 billion of Steadfast Network annual GWP
to be transacted through the SCTP in five years. This will drive improved
outcomes for clients, offer fixed remuneration for brokers and insurers
and higher shareholder returns.
Our FY19 guidance is underlying EBITA of between $185 million
and $195 million and underlying NPAT of between $82.5 million
and $87.5 million. This guidance is subject to1:
– insurers continuing to drive moderate premium price increases;
– increasing contribution from Steadfast Client Trading Platform; and
– ongoing technology investment.
Thank you
I would to thank our employees, Board members, Steadfast Network
brokers, Steadfast Underwriting Agencies, complementary business and
strategic partners for contributing to our success this year and over the
last five years as a listed company.
I would also like to thank all our shareholders including those who
supported our capital raise in December 2017 to help fund our
growing business.
I look forward to continuing working with our team as we strive to
achieve our strategies and growth targets in the years ahead.
Robert Kelly
Managing Director & CEO
1Also refer to pages 37-39
17
Steadfast Group Annual Report 2018 Message from the
Chief Financial Officer
‘Our track record of
underlying EPS and DPS
growth has provided
excellent returns for our
shareholders since we
listed on the ASX five
years ago.’
15.5%
underlying EBITA growth FY18
12.9%
underlying NPAT growth FY18
Underlying net profit
after tax ($m)
75.0
66.4
60.4
42.1
32.4
28.1
FY13
FY14
FY15
FY16
FY17
FY18
$m
80
70
60
50
40
30
20
10
18
Steadfast Group has reported strong FY18 financial results. We
recorded underlying EBITA growth of 15.5% and underlying NPAT
growth of 12.9%. This was driven by organic and acquisition
growth of our portfolio of equity-held Steadfast Network brokers
and Steadfast Underwriting Agencies (SUA).
This performance flowed through to cash flow with 99%
of Group underlying cash converted into profit.
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
Impairments
Non-recurring costs from closure of
residential builders agency
Underlying NPAT
Underlying NPAT growth
Amortisation
Underlying NPATA1
Underlying NPATA growth
2018
582.5
165.6
75.0
97.3
9.71
12.60
75.9
(0.2)
(0.4)
(3.1)
2.3
0.5
75.0
12.9%
22.3
97.3
11.6%
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%
1Calculated on consistent basis since IPO
Organic growth
We delivered organic underlying EBITA growth of $13.8 million (+9.6%)
which was driven by record GWP generated by the Group. The Steadfast
Network and SUA reporting 6% and 18% of GWP growth respectively.
Organic GWP growth of 5% combined with a strong performance
from our equity-held brokers contributed to our organic growth.
Price and volume growth drove the outstanding performance from
our underwriting agencies.
Acquisition growth
We continued to build equity stakes in insurance brokers and
underwriting agencies, making a total of 25 equity acquisitions
contributing growth in underlying EBITA of $8.4 million (+9.6%).
The largest acquisitions were Whitbread Insurance Brokers and
Axis Underwriting Services, both acquired in December 2017 and
funded from a $115 million capital raise. Whitbread Insurance Brokers
is a long standing Steadfast Network broker and Axis Underwriting
Services is a commercial and residential underwriting agency
which complements our existing presence in that market.
EBITA contribution
While all business units achieved impressive growth, a strong
performance by SUA increased their contribution to 42% of
Group underlying EBITA (IFRS) in FY18.
Strong balance sheet
Our balance sheet remains strong with significant capacity to fund
future growth with a total Group gearing ratio was 17.5%. We have
$109 million available in our debt facilities to fund corporate activities
including acquisitions.
Earnings per share (EPS) and dividend growth
We reported underlying EPS (NPAT) of 9.7 cents per share (cps) and
a total dividend per share (DPS) of 7.5 cps. This is consistent with our
track record of underlying EPS and DPS growth which has provided
excellent returns for our shareholders since we listed on the ASX
five years ago.
Thank you
I would like to thank all of our staff from our Group head office,
brokers and underwriting agencies who have contributed to our
financial reporting and analysis. It is the culmination of another year
of hard work providing our stakeholders with quality and timely data
to support their decision making.
Stephen Humphrys
Chief Financial Officer
19
FY18 underlying EBITA mix (IFRS)
Investments in Steadfast equity brokers
50%
Investments in Steadfast
Underwriting Agencies
Earnings from other businesses
42%
8%
Underlying earnings per share (NPAT)
and dividend growth (cents per share)
9.7
8.9
7.5
7.0
8.1
7.2
6.2
6.0
5.4
5.0
4.5
10
8
6
4
2
FY13
FY14
FY15
FY16
FY17
FY18
Underlying earnings per share (NPAT)
Dividend per share
Steadfast Group Annual Report 2018
Corporate social
responsibility
Steadfast Group and our subsidiaries actively support the
communities in which we live and work. We have donated
more than 1% of our underlying NPAT to charities in FY18
through three primary channels:
– Steadfast Foundation
– Steadfast Convention gala charity dinner
– Industry aligned sponsorships
Steadfast Group annual donations ($)
$
1,000,000
800,000
750
660
975
890
850
810
600,000
400,000
200,000
FY13
FY14
FY15
FY16
FY17
FY18
Steadfast Foundation
The Steadfast Foundation was created in 2011 to
facilitate donations to support charities that help people
overcome adversity. In FY18 we made donations to the
following charities:
Industry aligned sponsorships
St Vincent de Paul’s
CEO Sleepout
Steadfast Group Managing Director & CEO Robert Kelly
joined over 1,400 CEOs across Australia in the ‘Vinnies
CEO Sleepout’. Robert spent the night sleeping on
concrete at the White Bay Cruise Terminal in Sydney
to raise money to support the 250,000 Australians who
seek help from homelessness services each year.
A total of $6 million was raised by the event with
Robert being the highest fund raiser in New South
Wales by contributing over $50,000, including a
$2,000 contribution from Steadfast Group.
20
Corporate social responsibility
Our employees
Diversity
Employee gender profile
Employee age profile (%)
Training and supporting our people
Steadfast Group offers training to our employees and
Network brokers to encourage continuous improvement.
%
20
15
10
5
Developing our staff
Steadfast Group employees have undertaken a total of
1,300 hours of face-to-face training and 1,100 hours of
online training in FY18. This consists of technical and
non-technical modules, including the “future leaders”
programme focused on developing the next generation
of executives.
<19
20-29
30-39
40-49
50-59
>60
Male
Female
Male
Female
Employees born
outside Australia
Employees from a
non-English speaking
background
1,300
hours of employee
face-to-face
training
4,000+
brokers attended
professional
development days
Born inside Australia
Born outside Australia
English speaking background
Non-English speaking
background
Steadfast Convention
gala charity dinner
A total of $270,000 was raised by the 1,500 attendees on
the night. This was donated to The Reach Foundation, a
charity which supports disadvantaged young people to
develop new strategies and skills for navigating life whilst
encouraging each other to recognise their strengths,
passions and potential.
Training Steadfast Network brokers
Steadfast Group runs ‘town halls’ and accredited professional
development days to continually train Steadfast Network
brokers. This gives brokers the opportunity to keep up
to date with latest products and services offered to the
Network as well as technical and compliance requirements
relating to the insurance broking industry.
This culminates at the annual Steadfast Convention, which
is held over four days and attracts over 2,400 attendees
and 100 exhibitors. This year’s Convention, the 20th, was
held in Melbourne and included 25 educational sessions
from industry experts and a central ‘expo’ where attendees
could interact.
21
Steadfast Group Annual Report 2018 Corporate
governance
Steadfast Group’s corporate governance framework aligns with
the latest edition of the ASX Corporate Governance Council’s
Principles and Recommendations.
Board of Directors
Board committees
Senior management team
Nomination
committee
Audit & risk
committee
Remuneration
& succession
planning
committee
Corporate governance statement
Steadfast Group’s corporate governance principles are
set out in the corporate governance statement which is
regularly reviewed and updated to reflect our operations.
The full statement is available on the investor section of
our website (http://investor.steadfast.com.au/Investor-
Centre/?page=Corporate-Governance) with the key
principles set out below:
Corporate governance principles
Steadfast Group’s charters and policies
Steadfast Group has a series of charters and
policies which support the corporate governance
principles. They are listed below with the full
documents available in the corporate governance
section of the investor website:
– Board and nomination
committee charter
Principle 1: Lay solid foundations for management
and oversight
– Audit & risk committee charter
Principle 2: Structure the Board to add value
– Remuneration & succession planning
Principle 3: Promote ethical and responsible
decision making
committee charter
– Code of conduct
Principle 4: Safeguard integrity and financial reporting
– Securities trading policy
Principle 5: Make timely and balanced disclosures
– Diversity policy
Principle 6: Respect the rights of shareholders
– Risk management policy
Principle 7: Recognise and manage risk
– Anti-bribery and corruption policy
Principle 8: Remunerate fairly and responsibly
– Whistleblower policy
22
Corporate governance
Risk management
In seeking to achieve our strategic goals, Steadfast Group is subject to a number
of risks which may materially affect operational and financial performance. Risk
management is an integral part of our corporate governance structure and is
overseen by the Board’s audit and risk management committee who have put
robust mitigation strategies in place. In addition, the Chief Risk Officer conducts
regular internal audits of all brokers in which Steadfast Group has an equity
holding to monitor financial performance and risk management procedures.
Key risk and management strategies are set out below, with a full risk
management report available on page 37:
Key risk
Risk management strategy
Investment and acquisition risk
on performance and cultural fit
– Rigorous acquisition criteria and due diligence process in place based
– Ongoing oversight and reporting processes for investments
Reduction in income due to loss
of Steadfast Network brokers
– Provision of excellent products and services to attract and retain Network brokers
– Ongoing engagement with brokers to seek and address feedback
Loss of capacity for
Steadfast Underwriting Agencies
– Long-standing relationships with capital providers and track record of delivering
attractive results
– Establishment of London ‘super’ binder to provide deeper access to capital
Increased competition
or industry disruption
– Diversity of earnings and investments across range of businesses, products
and geographies
– Focus on constant innovation, including our proprietary market-leading technology
International expansion risk
– Capital-light expansion model following extensive due diligence
Cyber security
People risk
– Back-up, restoration and recovery procedures
– Security guidelines implemented
– Focused on offering strong culture, succession planning, market-competitive
remuneration and career development
Culture
The Board and management are focused on fostering
a culture based on Steadfast Group’s core values.
The culture and values are measured in an annual
employee engagement survey which is reviewed
by the Board and senior management and is the
basis of a continuous improvement programme.
The importance of culture permeates throughout the
organisation with 20% of employee key performance
indicators linked to the display of our values.
Cyber risk
Our proprietary technology is a key strategy and growth
driver for Steadfast Group and is administered by our
Steadfast Technologies division. There are significant
security, back-up and restoration procedures in place
to guard against the impact of cyber-attacks. Continual
risk assessments are conducted with ongoing monitoring
undertaken by experienced professionals in our
Technologies division.
72%
employee engagement
score up by 4 percentage
points from last year
We are
united
We
achieve
We are
strong
23
Steadfast Group Annual Report 2018 Board of
Directors
24
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 Insurance
Council of Australia from 1999 to 2000 and was inducted into
the International Insurance Hall of Fame in 2010. He is the
Chairman of The Salvation Army Sydney Appeal and Fund
Development Committee.
Robert Kelly
Managing Director & CEO
Robert co-founded Steadfast and has over 45 years’
experience in the insurance industry. He is ranked the
second most influential person in insurance by Insurance
News, and was awarded the ACORD Rainmaker Award in
2014. Robert is a Qualified Practising Insurance Broker, a
Fellow of NIBA, a Senior Associate of ANZIIF, a Certified
Insurance Professional and a Graduate member of the
Australian Institute of Company Directors. Robert is also
a Director of ASX-listed Johns Lyng Group Limited and
not-for-profit organisation KidsXpress.
David Liddy, AM
Non-Executive Director (independent)
David has 45 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.
Gai McGrath
Non-Executive Director (independent)
Gai has over 32 years’ experience in the financial services and
legal industries. This includes 12 years with Westpac Group
where she was General Manager of Westpac’s retail banking
business in Australia from 2012 to 2015 and in New Zealand
from 2010 to 2012.
Gai is a Director of Genworth Mortgage Insurance Australia
Limited (where she also chairs the Audit Committee), IMB Bank
(where she chairs the People & Culture Committee and Financial
Planning Committee), Investa Listed Funds Management Limited
as responsible entity of the Investa Office Fund and Toyota
Finance Australia Limited.
Anne O’Driscoll
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 Purcell
Non-Executive Director (independent)
Philip has 44 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 consults to clients who are engaged in commercial
transactions or mediation of commercial disputes.
Greg Rynenberg
Non-Executive Director (independent)
Greg has over 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 Qualified Practising Insurance
Broker, a 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 2018 Senior Management Team
Robert Kelly
Managing Director & CEO
Stephen Humphrys
Chief Financial Officer
Samantha Hollman
Chief Operating Officer
Robert co-founded Steadfast
and has over 45 years’ experience in
the insurance industry. He is ranked
the second most influential person
in insurance by Insurance News, and
was awarded the ACORD Rainmaker
Award in 2014. Robert is a Qualified
Practising Insurance Broker, a Fellow
of NIBA, a Senior Associate of ANZIIF,
a Certified Insurance Professional and
a Graduate member of the Australian
Institute of Company Directors. Robert
is also a Director of ASX-listed Johns
Lyng Group Limited and not-for-profit
organisation KidsXpress.
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 firms
in Australia. Stephen is a Fellow
of Australia and New Zealand
Chartered Accountants.
Samantha has 24 years' experience in
the insurance industry including 18
years at Steadfast. She was promoted
to COO in September 2016 to direct
and manage operational activities of
the organisation and 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 Officer
Steadfast Underwriting Agencies
Allan Reynolds
Executive General Manager
Direct, New Zealand & Asia
Nick Cook
Executive General Manager
Partner & Broker Services
Simon has worked in the insurance
industry for over 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. He holds a Diploma
of Business Studies (Insurance), is a
Certified Insurance Professional and
is a Fellow, honorary member and
Chairman of ANZIIF.
Nick, who joined Steadfast in February
2015, had over 13 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
Peter Roberts
Executive General Manager
Business Solutions
Peter joined Steadfast in 2013 and
focuses on back office 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 office services to the financial
services sector, is a member of
Australia and New Zealand Chartered
Accountants, and commenced his
career in accounting with KPMG.
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
certificate 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
18 years’ experience as a lawyer and
was previously in private practice in
Sydney and London, including at King
& Wood Mallesons, Atanaskovic Hartnell
and Clifford 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 2018 2018 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. Property, plant and equipment
Note 15. Financial instruments
Note 16. Contingencies
Note 17. Commitments
Note 18. Events after the reporting period
Note 19. Profit and loss information
Note 20. Share-based remuneration
Note 21. Taxation
Note 22. Notes to the statement of cash flows
Note 23. Related party transactions
Note 24. Parent entity information
Note 25. Remuneration of auditors
Directors’ declaration
Independent auditor’s report
Shareholders' information
28
29
41
63
64
66
68
70
71
71
77
78
82
84
85
87
89
90
94
97
99
101
102
105
105
105
105
106
107
110
111
112
113
114
115
120
Directors’ Report
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 2018 (FY18) 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
Gai McGrath
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
Date of appointment
21 October 2012
18 April 1996
1 January 2013
1 June 2018
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
Johns Lyng Group Limited
Collection House Limited
EML Payments Limited
Since 16 November 2017
March 2012 to November 2016
Since April 2012
Gai McGrath
Genworth Mortgage Insurance Australia Limited Since August 2016
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
Investa Office Fund
Infomedia Limited
None
None
Since October 2017
Since December 2014
Particulars of the Directors’ qualifications and experience are set out under Board of Directors on page 24.
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.
29
Steadfast Group Annual Report 2018
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:
Total number of meetings held
Board
6
Audit & Risk
Committee
Nomination
Committee
Remuneration &
Succession Planning
Committee
4
3
4
Director
Frank O’Halloran, AM
Robert Kelly
David Liddy, AM
Gai McGrath*
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
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
6
6
6
1
6
6
6
6
6
6
1
6
6
6
4
–
4
1
4
4
4
4
–
4
1
4
4
4
3
3
3
–
3
3
3
3
3
3
–
3
3
3
4
–
4
1
4
4
4
4
–
4
1
4
4
4
* Gai McGrath was appointed on 1 June 2018 and attended all meetings held after this date.
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 brokers
and underwriting agencies during the year (refer Note 10).
30
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 before non-trading items
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-controlling interests in profit after tax before non-trading items
Underlying net profit after income tax attributable to owners of
Steadfast Group Limited (Underlying NPAT)
Non-trading items:
Income
Expenses
Income tax benefit/(expense) on non-trading items
Non-controlling interests
Share of EBITA from associates and joint ventures
Net profit after income tax attributable to owners of Steadfast Group Limited (NPAT)
Other comprehensive income/(expense) attributable to owners of Steadfast Group Limited
Total comprehensive income after income tax attributable to owners of
Steadfast Group Limited
Underlying diluted earnings per share (cents per share)
Statutory diluted earnings per share (cents per share)
2018
$’000
568,514
(427,512)
141,002
24,567
165,569
(10,577)
(25,219)
129,773
(40,844)
88,929
(13,967)
2017
$’000
490,802
(371,459)
119,343
24,006
143,349
(9,697)
(23,683)
109,969
(31,628)
78,341
(11,949)
74,962
66,392
4,193
(3,026)
255
(530)
–
75,854
(200)
75,654
9.71
9.83
8,449
(7,866)
(884)
554
147
66,792
(214)
66,578
8.87
8.92
* EBITA refers to earnings before finance costs, tax and amortisation of acquired intangible assets.
Refer Note 4 for reconciliation of underlying earnings (i.e. before non-trading items) to statutory earnings.
The profit attributable to the Group after income tax, before non-trading items was $74.962 million compared to $66.392
million in 30 June 2017. The increase was mainly due to:
• revenue growth generated by the existing businesses;
• improved margins in these businesses derived through overall premium rate increases and efficiency gains;
• increased marketing and administration fee revenue in Australia and New Zealand; and
• acquisitions of interests in further businesses and a listed investment.
This additional profit was partially offset by:
• divestment of businesses in the prior corresponding period, particularly White Outsourcing Pty Ltd; and
• higher income tax expense mainly from higher earnings and reduced research and development claims in the current year.
31
Steadfast Group Annual Report 2018
Directors’ Report continued
There was an increase 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;
and
• impairment of certain intangible assets relating to a business where there was a downward revised estimation of a deferred
acquisition payment.
Some of the financial data in section A on the previous page, 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 2018 were $2,081.613 million compared to $1,800.027 million as at 30 June 2017.
The increase was mainly attributable to the capital raised for the acquisition of Whitbread Insurance Brokers and Axis
Underwriting Services as well as 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 2018 were $1,024.634 million compared to $886.859 million as at 30 June 2017.
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 $913.168 million at 30 June 2017 to $1,056.979 million at 30 June 2018 largely
reflects the $106.016 million capital raised for the Whitbread acquisition plus the retention of profits net of dividends paid.
The Group has a multibank syndicated facility that allows the Group to borrow up to $285.000 million. As at balance date,
the Group had the capacity to borrow an additional $109.259 million from this facility.
II. Cash from operations
The net inflows of $123.224 million include net inflows from operating activities of $96.070 million and a net inflow of
$27.154 million to broking accounts.
The net operating cash flows, before broking trust account movements of $96.070 million are 12% 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. The acquisition of Whitbread Insurance Brokers
and Axis Underwriting Services were funded by a $106.016 million capital raise in December 2017.
III. Capital management
As at 30 June 2018, the Company had a total of 793.036 million ordinary shares on issue compared to 749.752 million
ordinary shares on issue at 30 June 2017. The increase is the result of the institutional placement of 35.335 million shares
($100.000 million) in December 2017 and 2.126 million shares ($6.016 million) issued to vendors as part consideration for
the acquisition by the Group of Whitbread Insurance Brokers and Axis Underwriting Services. Additionally, 2.823 million shares
($7.762 million) were issued in January 2018 for the Share Purchase Plan (SPP), and 3.000 million options ($3.000 million)
were exercised (on a 1:1 basis) in February 2018 to a key management member of an acquired business.
The Board leverages the Group’s equity, adopting a maximum 30.0% total gearing ratio (defined as total debt: total debt
and equity) made up of 25.0% for the Company and 5.0% for subsidiaries. As at 30 June 2018, the Company’s corporate
gearing ratio was 14.0% (2017: 16.0%) and the Group’s total gearing ratio was 17.5% (2017: 18.5%). Refer Note 9C.
32
STRATEGY AND PROSPECTS
Steadfast’s business strategy is to continually grow shareholder value through continued expansion of the Steadfast insurance
distribution model and related businesses domestically and internationally. The table below details the key strategies of the
Group together with FY18 accomplishments and 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. The assessment and the strategies in
place to manage the key risks are detailed in the next section.
The table below details the key strategies of the Group in FY18 together with FY18 accomplishments to date.
Strategy
FY18 achievements
Prospects and strategic initiatives
Maintain and develop
premier service offering to
Steadfast Network brokers
• INSIGHT broker system further enhanced
• Continue to create competition for products
and further conversions
• Refreshed services to Network based
on annual “Your Shout” survey
for the benefit of the Network's clients
• Continue to develop the Steadfast brand
• Continue to enhance and communicate
• Substantially increased broker usage
the Network value proposition
of services
• Regular communication with Network
brokers enhanced, including Town Hall
meetings, training workshops, webinars,
The Cover distributed fortnightly
• Head of Broker Network – new position
and team created to build broker
relationships focussed on improving business
performance whilst executing product
service and technology strategies that will
grow M&A revenue
• Steadfast Convention – first time managed
entirely in-house, record sponsorship and
record delegates attended
• Broker tools continue to be delivered
across the Network
• Steadfast Client Trading Platform (SCTP)
development (refer below)
• New Zealand: further services rolled out,
wordings progressed, INSIGHT conversions,
Steadfast Virtual Underwriter (SVU) launched,
held first NZ conference
• Launched new broker website
• New strategic partners added
• Partnerships between underwriting
agencies and strategic partners enhanced
and working effectively
• Product range with strategic
partners expanded
• SCTP interface to improve efficiencies
and competitive pricing for the
Network's clients
• Continue to attract new brokers to
the Network
• Provide marketing and business
development initiatives to the Network
• Continue to expand the services offered
• Maintain the Steadfast Convention as the
premier event in general insurance in Australia
• Continue to grow Steadfast Direct
• Continue to develop market leading
technology solutions
• Continue to rollout, further develop and
promote usage of INSIGHT
• Grow broker usage of SCTP
• Continue to improve back and middle
office functionality
• Continued product development
• Continued provision of risk management
services to the Network
• Grow number of partners on the SCTP
• Embed SCTP functionality with and
engagement by strategic partners
• Grow the London superbinder
• Continue to negotiate, and seek new
opportunities with strategic partners
including expanding our product range
• Continue to develop international in-bound
and out-bound referrals
33
Steadfast Group Annual Report 2018 Directors’ Report continued
Strategy
FY18 achievements
Prospects and strategic initiatives
Improve profitability,
margin, earnings
per share and Total
Shareholder Return (TSR)
through organic and
acquisitive growth
• Agency and broker margins improved
• Hubbing continued
• Further streamlining, synchronising and
offshoring of back office processes
• Steadfast Business Solutions continues
to support brokerages
• Continue FY18 strategic initiatives and build
on FY18 achievements
• Seek ongoing improvement in EBITA margins
• Continue to implement marketing and
business development/sales initiatives to
grow sales and Steadfast revenue
• UnderwriterCentral further enhanced
• Drive Network broker and strategic partner
and further conversions
usage of the SCTP
• Expand coverage of Steadfast Business
Solutions activities
• Grow the London super binder
• Continue to challenge expense base
• Continue to develop and roll out our
technology platforms
Growth through
both acquisitions and
adding new Steadfast
Network brokers
• $136m net total investment
• Acquisition of equity in 6 new brokers/
• Continue to apply strict cultural, risk and
financial acquisition guidelines
underwriting agencies & increased holding
in 15 equity brokers/underwriting agencies
• Continue to implement management buy-ins,
hubbing and the co-owner model
• Indirect investments in 7 additional
brokerages which were acquired by
existing equity investments (bolt-ons)
• All acquisitions executed against disciplined
• Continue to enhance and communicate
the Network value proposition
• Proactively seek out acquisition opportunities
including from the broader broker market
criteria
• Continued to assess potential acquisitions
in the acquisition pipeline
• Net addition of 13 new brokers to Steadfast
Network in Australia & New Zealand plus
3 in Singapore
• Add new brokers to the Network
• Drive increased profitability in some of
the underlying businesses
34
Strategy
FY18 achievements
Prospects and strategic initiatives
Grow the Steadfast Client
Trading Platform (SCTP)
Expand and solidify our
international reach
• SCTP rollout and growth continued
• 6 insurers on panel for Business Pack
• 13 insurers now live on the SCTP
• SCTP also live for Commercial Motor,
ISR, Liability, PI, Strata Product
• SCTP Management Liability
wording developed
• SCTP Business Pack Reference Guides
produced and delivered to Network
• Newly established Broker Network
team driving SCTP usage
• Drive growth and competition through
increased SCTP usage
• Continue to develop and add further
product lines
• Continue to add new strategic partners
• Implement auto-rating interfaces with insurers
• Complete interface with existing panel of
strategic partners
• Singapore: CEO appointed, office opened, 12
brokers in network, agreed wording in place
for 4 products, first Town Hall meeting held
• Outbound and inbound placement requests
through unisonSteadfast
• Continued underlying business expansion
offshore
• Continue to investigate potential equity
opportunities offshore
• Develop Steadfast Asia network
• Continue to leverage strategic relationships
to develop the Group’s international footprint
and Marketing & Administration fee revenue
• Continue to expand operating
• Grew presence in New Zealand by adding
businesses offshore
5 new brokers
• Maximise the value of the unisonSteadfast
• Business Planning Day to set priorities, and
relationship
data collected in preparation for discussions
with global insurers, London market
access provided and top-up PI scheme
opportunity introduced
• Continue to expand and promote the
London office to the Network
• Extend the London superbinder to our
international network
• Started to place risks into the London
market with new partners
• London office being used by Network and
started to place risks into London market
from non-related coverholders
• London placement services expanded
• London superbinder renewed
• Increase in GWP placed through the London
superbinder, including through the SCTP
• Use the London office as an avenue for the
Network to access the London market
• Seek to capture greater share of the Network
Gross Written Premium (GWP) for product
lines via the London superbinder
• Obtain London broking licence
35
Steadfast Group Annual Report 2018 Directors’ Report continued
Strategy
FY18 achievements
Prospects and strategic initiatives
Continue to enhance
growth, profitability
& organisational
sustainability
• FY18 financial results within guidance range
• Continue FY18 strategic initiatives and build
provided to shareholders
on FY18 achievements
• Placement of 35m shares executed at $2.83,
3.4% discount to then closing share price
• Executed second one year extension of the
$235m three year tranche of the $285m
syndicated debt facility
• New consumer and broker site launched,
intranet launched
• EGM: Corporate Development appointed
• Substantial number of technology
initiatives launched
• Graduate program successfully launched
• Implemented in-house Leadership
Development Program and Managers
Development Program for staff development
• Continuous review of industry to ensure
Steadfast remains strong and viable
• Strong corporate governance and ongoing
improvements in risk management and
governance policies and procedures
• Brand kept reputable and strong, brand
awareness grown
• Strong, dynamic, ethical culture continues
• Continuing initiatives executed to engage
workforce to ensure quality people to drive
business performance and support diversity
• A highly engaged workforce: engagement
survey results in highly engaged zone
• Delivered on staff Health & Wellbeing strategy
• Growth of Steadfast agencies portfolio
and GWP
• Continue to drive efficiencies in underwriting
agencies through appointment of SUA COO
• Further develop a culture of excellence
that drives business performance including
further enhancing systems and structures
for staff development, succession planning
and appraisal
• Optimise funding structure and financing
• Continue to challenge expense base
• Continue to improve margins in
underlying businesses
• Further enhance Steadfast as an employer
of choice that fosters the development
and wellbeing of staff
• Further create brand awareness, promote
and protect brand
• Meet or exceed expectations of all
key stakeholders
• Continue to promote strong corporate
governance including risk management
and sustainability
• Continue to promote an ethical culture
• Provide technology solutions that support
the key strategies and promote ongoing
sustainability of Steadfast
• Ensure remuneration practices are
designed to retain and attract quality staff
• Continue to build talent pipeline
• Continue to be an industry leader in
innovation and seek opportunities to
ensure Steadfast remains strong and viable
• Contribute to the community by supporting
charities through the Steadfast Foundation,
sponsorships and other initiatives
36
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 and
acquisition risk:
A. Acquiring and holding
equity in operating
businesses
• Insufficient funding to capitalise
• Experienced management team to assess
on opportunities
opportunities and risks
• 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
• Ongoing monitoring of available capital
and resources
• 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
• Earn-out / deferred consideration arrangements
B. Investment
impairment risk
• Investments which are subject to a
permanent decrease in value
• Close monitoring of investments
• Steadfast works with management of
• Investment write down or impairment
results in an expense for the Group
businesses in which Steadfast is invested to
optimise results
Reduction in income
caused by:
A. Loss of Steadfast
Network brokers
B. Reduction in rates
for marketing and
administration fees,
commission rates
or advice fees
• Network Brokers can leave the Steadfast
• Provision of excellent services and support
Network at any time, potentially resulting in
a reduction in Marketing and Administration
(M&A) fees for Steadfast
• 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
• Potential reduction in broker remuneration
due to change in remuneration structures
driven by insurers, clients or regulators.
to Steadfast Network brokers
• Continue to share M&A fees, in the form
of Network Broker rebates, with members
• Considerable ongoing engagement with
Network Brokers 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, most of whom are longstanding
• Continually adding new strategic partners
37
Steadfast Group Annual Report 2018 Directors’ Report continued
Risk
Description
Risk management strategies
C. Loss of 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
D. Reduction in GWP
in the Australian and
New Zealand general
insurance markets
• Group has a number of revenue sources
linked to size and growth of GWP in the
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
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
• Initiatives to increase the size of the Steadfast
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 (SMEs) 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 opportunities in other markets, e.g
Steadfast Direct, Asia and other international
markets
• 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
• Establishment of London superbinder provides
better access to deeper insurance markets
Increased competition
or industry disruption:
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
insurance brokers or underwriting agencies
• Increased competition or change in market
well as profits from investments)
• Geographical spread of the businesses
structure for premium funding
of subsidiaries and associates
• More customers buying direct from insurers
• Continue to develop the Steadfast
through the internet
Direct offering
B. Disruption risk
• Risk of business model disruption due to
• Steadfast constantly monitors and evaluates
external factors including, but not limited to
technological developments, new business
models developed by existing competitors
and regulation changes
international and local developments
impacting the Steadfast business model and
other industries to learn about disruption
opportunities as they emerge
38
Risk
Description
Risk management strategies
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
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
regulators to ensure changes are introduced in
the most efficient way for the industry and to
minimise unintended consequences
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 including regional allocation
Cyber security
• Cybercrime targeting Steadfast may
• A security roadmap underpinned by an
materially negatively impact earnings, ability
to deliver services to clients and reputation
• Failure of key internal and cloud systems
would be detrimental to business
performance and ability to deliver services
• Migration and implementation issues for
INSIGHT and UnderwriterCentral systems
may adversely impact business growth
People risk:
A. Loss of key people
• Loss of key executives
• Loss of key individuals in operating
businesses with consequential material
business interruption
B. Fraud or embezzlement
of Group or client fund
• Fraud or embezzlement in operating
businesses where Steadfast does not control
the day-to-day operations
ongoing improvement program that is led by
an IT security officer is in place to minimise
the occurrence and the impact of cybercrime
• Processes in place and being further
developed based on industry best
practice which are designed to maintain
system availability and support ongoing
business operations
• Dedicated teams focussing on migration,
implementation and support are in place
with processes validated through a program
for external compliance audits aimed at
sustainable performance
• 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
• INSIGHT broker system improving day-to-day
broker transparency, system controls and
audit trails
• Established internal audit program
39
Steadfast Group Annual Report 2018 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 2018, a final dividend for 2017 of 4.4 cents per share and an interim dividend for 2018
of 2.8 cents per share were declared and paid, both fully franked.
EVENTS AFTER THE REPORTING PERIOD
Subsequent to 30 June 2018, the Board declared a final dividend of 4.7 cents per share, 100% franked. Further details are set
out in Note 18 to the accounts.
LIKELY DEVELOPMENTS
The Group’s ongoing business strategy is to grow shareholder value through maintaining and growing its market position in
the provision of insurance and related services, with a core focus on general insurance intermediation. Please refer to the
Strategy and Prospects section of the Directors’ report.
The Group continues to work closely with the management team of each acquired business, and allow each business to
operate in a manner consistent with the Group’s co-ownership model. In most cases, this model involves ongoing equity
participation of key management personnel in the business acquired.
Our FY19 guidance is underlying EBITA of between $185million and $195million and underlying NPAT of between $82.5million
and $87.5million. This assumes:
• insurers continuing to drive moderate premium price increases;
• increasing contribution from Steadfast Client Trading Platform; and
• ongoing technology investment.
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 25 to the financial statements.
LEAD AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration is set out on page 63 and forms part of the Directors’ Report for the year ended
30 June 2018.
40
Steadfast Group Annual Report 2018
Remuneration Report
1.
Introduction
1.1
Key management personnel
2.
Remuneration outcomes for 2018
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.
2018 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
49
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 2018 (FY18) 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)
Non-Executive Director
Gai McGrath(d)
Non-Executive Director
Anne O’Driscoll(c)(d)
Non-Executive Director
Philip Purcell(d)
Non-Executive Director
Greg Rynenberg(d)
Non-Executive Director
21 October 2012
1 January 2013
1 June 2018
1 July 2013
1 February 2013
10 August 1998
Executive Director
Robert Kelly
Other key management
Managing Director & CEO
18 April 1996
Stephen Humphrys
Chief Financial Officer
Samantha Hollman
Chief Operating Officer
CEO, Steadfast Underwriting Agencies
Executive General Manager – Direct, New Zealand & Asia
5 December 2002
Group Company Secretary & Corporate Counsel
3 June 2013
2 January 2013
4 January 2000
1 January 2015
Simon Lightbody
Allan Reynolds
Linda Ellis
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.
42
2. REMUNERATION OUTCOMES FOR 2018
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 payable to the Executive Team for
FY18, and together with achievement against annual individual key performance objectives, remains the financial performance
measure for short-term incentives (STI). The EPS used in determining STI and the long-term incentive plan (LTI) for FY18
excludes non-trading income and expenses approved by the Board. This is consistent with prior year calculations.
In addition to EPS growth, the Board has adopted Total Shareholder Return (TSR) as a second financial performance measure
for LTI 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. There are no changes in FY18.
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.
2014
2015
2016
2017
2018
Reported net profit attributable to
owners of the Company ($’000)
25,087
42,104
73,480
66,792
75,854
43
Steadfast Group Annual Report 2018
Directors’ Report continued
The reconciliation on the reported EPS to the underlying EPS used for STI and LTI is as follows:
2014(a)
$’000
2015(b)
$’000
2016
$’000
2017
$’000
2018
$’000
Reported net profit attributable to owners
of the Company
Less: non-trading income (Note 4 (i))
Add: non-trading expenses (Note 4 (i))
Add: July 2013 trading results, pre-tax
Less: non-trading tax effect (Note 4 (i))
Less: non-controlling interests in
non-trading items (net of tax)
Less: share of EBITA from
associates and joint ventures
Underlying net profit attributable
to owners of the Company (Note 4)
25,087
(4,732)
9,298
4,507
(1,738)
–
–
42,104
(3,186)
3,302
–
(126)
–
–
73,480
(27,173)
18,572
–
(4,551)
119
–
66,792
(8,449)
7,866
–
884
(554)
(147)
75,854
(4,193)
3,026
–
(255)
530
–
32,422
42,094
60,447
66,392
74,962
Underlying diluted EPS (cents per share) (Note 5A) 6.22
7.24
8.09
8.87
9.71
Growth from prior financial year (%)
Growth required for minimum STI (%)
Growth required for maximum STI (%)(e)
UBS weighted EPS growth for industrial
companies (%)(c)
19.1%
5.0%
15.0%
7.4%
UBS weighted EPS growth for finance sector (%)(c) 8.3%
Opening share price ($)(d)
Closing share price ($)
Change in share price (cents per share)(d)
Interim dividend declared per share
(cents per share)
1.15
1.26
11.0
1.8
Final dividend declared per share (cents per share) 2.7
TSR for the year (cents per share)
TSR for the year (%)
Dividend paid
Table notes
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%
5.0%
12.5%
(3.0%)
(4.6%)
1.62
1.98
36.0
2.4
3.6
42.0
25.9%
40,297
9.6%
5.0%
10.0%
6.4%
3.0%
1.98
2.66
68.0
2.6
4.4
75.0
37.9%
46,485
9.5%
5%
10%
7.1%
3.6%
2.66
2.81
15.0
2.8
4.7
22.5
8.5%
55,195
(a) The 2014 underlying 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 31 July 2018. Figures shown for 2017 above are
actual (figures in 2017 Annual Report were estimates). Figures shown for 2018 are estimates.
(d) IPO share price of $1.15 is used as opening share price for 2014.
(e) Figures represent growth required for maximum STI granted in August 2014, 2015, 2016, 2017 and 2018.
44
Underlying diluted EPS (cents per share):
The graph below shows the base, minimum, maximum and actual underlying diluted EPS (cents per share) used for
determining STI and LTI for the financial years ended 30 June 2014, 2015, 2016, 2017 and 2018. The underlying 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 underlying diluted EPS is less than 5%. The maximum STI is awarded if the underlying 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; 10% or higher for awards granted in August 2017 and August 2018.
Underlying diluted EPS growth accounts for 75% weighting on LTI awards 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 awards in August 2017 and beyond (previously: 5% compound growth).
Underlying diluted EPS (for awards granted in August of the financial year)
9.71
8.87
8.09
7.24
6.22
5.22
FY13*
FY14
FY15
FY16
FY17
FY18
Base EPS
Min 5% growth
Max 10-15% growth
Actual EPS (Cents)
* FY13 data is based on pro-forma financial information as if the Group operations which listed in August 2013 had operated
as the Group for FY13.
Total Shareholder Return (TSR):
The graph below shows the Company’s TSR in FY18 as well as the cumulative TSR since FY17, 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.
FY18 TSR
FY17-FY18 TSR
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
75th percentile
24.7%
9.7%
50th percentile
9.7%
TSR = 8.5%
2.8%
5.7%
FY18
SDF
Share price
Dividend
TSR = 49.2%
7.3%
41.9%
FY17-FY18
SDF
75th percentile
43.7%
50th percentile
18.5%
45
Steadfast Group Annual Report 2018
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 FY18 is set out
below:
FY18 performance measures
Weighting %
Achieved % Comments
• Achieve budgeted growth of 9% in
underlying net profit after tax
• Successful implementation of INSIGHT and
UnderwriterCentral (three year project)
• Improve EBITA margin (aggregated)
from 29.6% to at least 31.2%
• Grow Steadfast Network Brokers with
successful international expansion
• Achieve organic growth in revenue
of at least 5%
• Successful implementation of back office
technology to improve efficiencies
• Retention and development of key staff
20
20
15
15
10
10
10
100
20 Achieved growth of 12.9% in underlying
net profit after tax
15 Generally on target for implementation
13 Achieved aggregated EBITA margin of 31.0%
10 Growth of unisonSteadfast was slower
than anticipated
10 Achieved organic growth in revenue of 8.6%
7 Progressing to plan
7 Key staff retained. Management strengthened.
82
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)
Fixed pay
$
Actual STI
outcome(a)
(% of
fixed pay)
STI – cash
outcome
(60% of
outcome)
$
STI –
deferred
equity
award
outcome
(40% of
outcome)
$(b)
Maximum
LTI
potential
(% of
fixed pay)
Actual LTI
outcome(a)
(% of
fixed pay)
LTI –
deferred
equity
award
outcome
$(b)
Robert Kelly
975,000
150.00%
138.25%
808,763
539,175
100.00%
100.00%
975,000
Stephen Humphrys
540,750
100.00%
92.95%
301,576
201,051
Samantha Hollman
450,000
100.00%
92.95%
250,965
167,310
Simon Lightbody
Allan Reynolds
Linda Ellis
Table notes
465,000
380,000
217,000
75.00%
50.00%
50.00%
70.30%
196,137
130,758
47.65%
47.65%
108,642
62,040
72,428
41,360
75.00%
50.00%
50.00%
50.00%
50.00%
75.00%
405,563
50.00%
225,000
50.00%
232,500
50.00%
190,000
50.00%
108,500
(a) All participants of the FY18 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 the
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.
46
2.3 Targeted maximum potential and actual remuneration mix for FY18:
Robert Kelly Targeted Maximum
Robert Kelly Actual
30%
30%
25%
25%
15%
15%
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
36%
37%
40%
40%
22%
21%
15%
14%
23%
23%
20%
19%
15%
15%
15%
15%
15%
15%
13%
13%
10%
10%
10%
10%
44%
45%
50%
50%
50%
50%
30%
30%
27%
28%
22%
22%
22%
23%
25%
25%
25%
25%
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 FY18 reported results over the
retention period of three years
• Refer Section 3.3 for more details
including award conditions
• Awarded in August 2017
• Tenure of employment
• Achieve at least 60% of the annual
key performance objectives
• 75% based on average diluted EPS
increasing by a straight line 5% to 10%
per annum over a three-year vesting
period, vesting made on a 50-100%
straight line basis
• 25% based on minimum TSR measured
against 50th to 75th percentile of
peer group
• Refer Section 3.4 for more details
including award conditions
47
Steadfast Group Annual Report 2018
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 2017
August 2018
August 2019
August 2020
August 2021
August 2014
August 2015
August 2016
August 2017
August 2018
STI
LTI
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, the DEAs granted in August 2014, the second tranche of the DEAs granted in August 2015
and the first tranche of the DEA granted in August 2016 were vested in August 2017 and in accordance with the terms of the
STI, the applicable number of Steadfast ordinary shares were 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. 2018 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.
48
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.
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 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 total
Group gearing ratio of 30.0% made up of 25.0% for the Company and 5% for the subsidiaries. The total Group gearing
ratio at year end was 17.5%, slightly lower than the prior year.
– TSR was first 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 is 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 (DEA) 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 9.5% underlying diluted EPS growth in FY18;
• an 85.9% underlying diluted EPS growth for the period since the IPO; and
• a TSR of 222% for the period since the IPO, inclusive of FY18 final dividend of 4.7 cents per share payable in September 2018.
49
Steadfast Group Annual Report 2018 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 has
determined that no changes to STI or LTI terms are necessary for the financial year ending 30 June 2019.
The FY19 key terms for the STI and LTI plans are as follows:
FY19 terms (awarded August 2018)
STI
LTI
Maximum STI awarded when diluted EPS growth of 10.0% is achieved.
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:
Straight line diluted EPS growth
Vesting outcome
Below 5%
At 5%
5% to 10%
10% or higher
0%
50%
Straight line between 50% to 100%
100%
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
Less than 50th percentile of peer group
At 50th percentile of peer group
0%
50%
Between 50th and 75th percentile of peer group
Straight line between 50% to 100%
Exceeding 75th percentile of peer group
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 FY18
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.
The Executive Team is provided with cash salary, superannuation, and other non-monetary
benefits such as car parking, and income protection and life insurance.
Potential reward
Fixed remuneration targeted at 30%-50% of total remuneration.
3.3 Short-term incentives for FY18
The table below outlines the key details of the STI plan. STI awards in FY18 are summarised in Section 2.2 of the
Remuneration Report.
Component
Details
Purpose and link
to strategy
Recognises the contributions and achievements of the Executive Team and helps to attract and
retain talent.
Operation
STI Plan consisting of cash and deferred equity award.
Potential reward
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 50%-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
Performance measures
over one, two and three years; and
• vesting is subjected to future performance hurdles below.
Non-financial measures:
Personal objectives (KPI's) 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 FY18 non-financial objectives with weightings (refer Section
2.2).
Financial measures relating to awards issued during FY18 (awarded in August 17):
No STI is payable unless at least 5% EPS growth is achieved against the base underlying EPS.
Maximum STI can be awarded if the EPS growth is 10.0% or higher.
Potential maximum STI
MD & CEO can earn up to 150% of his annual fixed remuneration.
The other executives within the Executive Team can earn 50% to 100% of their annual
fixed remuneration.
Approval of the STI
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.
51
Steadfast Group Annual Report 2018 Directors’ Report continued
3.3 Short-term incentives for FY18 - continued
Component
Details
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.
Forms of STI reward
elements
Key terms of deferred
equity award (DEA)
The financial measure of EPS growth is chosen to ensure long-term shareholder value is increased.
60% is paid as cash, normally in September following the end of financial year.
40% is granted as deferred equity award (DEA) of conditional rights to Steadfast ordinary shares
and vesting 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.
DEA is 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.
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 FY18
The table below outlines the key details of the LTI plan. LTI awards in FY18 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 50%-70%
of total remuneration.
Performance metrics
LTI – Deferred equity award (100%)
• Continuous employment and performance rating to be met for the three-year vesting period;
Future performance
hurdles
and
• vesting is subjected to future performance hurdles below.
Non-financial measures:
Personal objectives (KPI's) 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 FY18 non-financial objectives with weightings (refer Section
2.2).
Financial measures relating to awards issued during FY18 (awarded in August 2017):
• 75% is based on average underlying diluted EPS growth, which is not payable unless at least 5%
straight line growth is achieved over a future three-year vesting period; The vesting schedule is
outlined below:
Average diluted EPS growth
Vesting outcome
Below 5%
At 5%
5% to 10.0%
10.0% 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 median 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
Vesting outcome
Less than 50th percentile of peer group
At 50th percentile of peer group
0%
50%
Between 50th and 75th percentile of peer group Straight line between 50% to 100%
Exceeding 75th percentile of peer group
100%
53
Steadfast Group Annual Report 2018 Directors’ Report continued
Component
Details
Potential maximum LTI
The MD & CEO can earn up to 100% 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
Forms of LTI reward
The Board approves the LTI based on the financial and non-financial performance outcome
as recommended by the Remuneration & Succession Planning Committee.
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
The financial measures of EPS growth and TSR are chosen to ensure long-term shareholders
value is increased.
Key terms of deferred
equity award (DEA)
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.
Forfeiture conditions
The Board retains the discretion to adjust any unpaid or unvested LTI downwards if it is
appropriate to do so.
The conditional rights will be forfeited if the executive resigns before the vesting date.
When an executive ceases employment in special circumstances, such as redundancy
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:
• shares allocated to the MD & CEO upon 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;
• 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 2017 and 2018.
(1)
Cash salary
and leave
accruals
$
Short-term employment benefits
(3)
(2)
Non-
Cash
monetary
short-term
benefits
incentive
$
$
Post-
employment
benefits
(4)
Other
long-term
employment
benefits
(5)
Subtotal
(excluding
share-based
payments)
Share-based
payments
(6)
Total
Super-
annuation
$
Long service
leave accruals
$
$
$
$
Key Management Personnel (including Managing Director & CEO):
Robert Kelly, Managing Director & CEO
2018
2017
973,871
927,566
808,763
549,000
Stephen Humphrys, Chief Financial Officer
2018
2017
537,837
552,978
301,576
223,650
29,821
35,816
36,530
38,025
Samantha Hollman, Chief Operating Officer(7)
2018
2017
437,626
426,933
250,965
138,708
28,682
29,832
Simon Lightbody, CEO, Steadfast Underwriting Agencies
2018
2017
448,285
460,270
196,137
108,900
15,897
23,898
20,049
19,616
20,049
19,616
20,049
19,616
20,049
19,616
27,803
1,860,308
1,210,646
3,070,954
18,924
1,550,922
230,714
1,781,636
9,793
9,872
7,149
5,565
905,785
844,141
575,897
1,481,682
83,959
928,100
744,471
620,654
280,257
1,024,728
59,747
680,401
10,947
13,843
691,314
626,527
152,564
63,036
843,878
689,563
Allan Reynolds, Executive General Manager – Direct, New Zealand & Singapore
2018
2017
372,118
357,832
108,642
89,540
24,246
27,692
20,049
19,616
Linda Ellis, Group Company Secretary & Corporate Counsel(8)
2018
2017
214,345
199,365
62,040
50,820
24,568
25,760
18,710
18,469
8,310
8,036
3,721
3,099
533,365
502,716
339,663
36,107
873,028
538,823
323,384
200,946
297,513
17,350
524,330
314,863
Former Key Management Personnel
Dana Williams, Chief Operating Officer(9)
2018
2017
–
133,775
–
–
–
8,603
–
6,476
–
–
–
148,854
–
–
–
148,854
Table notes
(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 2018 short-term incentive (STI) represents 60% of the total STI awarded and approved by the Board and will be paid in
cash in September 2018.
(3) The Executive Team is provided with cash salary, superannuation, and other non-monetary benefits such as car parking,
and income protection and life insurance.
(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) Share-based payments represent the expense amount accrued in the year for deferred equity awards (both STI and LTI).
The 2018 expense is higher than prior year due to the cumulative effect of prior years’ grants plus increased probability of
meeting vesting conditions.
(7) 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 2018 and 2017.
(8) Linda Ellis was reinstated as KMP from 1 July 2016. Mrs Ellis is employed on a 60% of full-time basis.
(9) Dana Williams ceased being a KMP on 23 September 2016 following her resignation.
55
Steadfast Group Annual Report 2018 Directors’ Report continued
4.2 Conditional rights
In August 2017, 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 FY17 results. The STI conditional rights will vest in three equal tranches on
23 August 2018, 23 August 2019 and 23 August 2020 should all conditions of vesting be met. The LTI conditional rights will vest
23 August 2020 should all conditions of vesting be met. The STI conditional rights participated in the Dividend Reinvestment
Plan (DRP) in October 2017 and April 2018 for the final FY17 dividends and half-year FY18 interim dividends respectively.
The table below provides the number of conditional rights held by members of the Executive KMP at 30 June 2017 and
30 June 2018.
Balance
30 June 2017
STI granted
during FY18
LTI granted
during FY18 DRP granted
STI vested and/
or transferred
during FY18(a)
Balance
30 June 2018
1,495,610
129,925
698,731
274,847
105,008
464,812
277,850
52,929
32,826
25,772
21,190
12,027
239,617
139,776
79,872
79,872
65,673
37,274
25,692
(461,937)
1,428,907
12,771
5,308
1,302
8,614
5,127
(157,785)
(60,339)
(11,560)
(80,241)
(63,756)
746,422
332,514
200,394
480,048
268,522
3,316,858
274,669
642,084
58,814
(835,618)
3,456,807
Robert Kelly
Stephen Humphrys
Samantha Hollman
Simon Lightbody
Allan Reynolds
Linda Ellis
Table notes
(a) The STI DEAs granted in August 2014, the second tranche of the DEAs granted in August 2015 and first tranche of the
DEAs granted in August 2016 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.
Refer Section 6.2 for the fair value of the conditional rights awarded in August 2017.
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.
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.
56
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 2018, a remuneration consultant (Egan and Associates) was engaged to provide
information on Non-Executive Director remuneration to the Remuneration & Succession Planning Committee.
No recommendation as defined by the Corporations Act 2001 was provided by Egan and Associates.
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 Annual General Meeting held on 26 October 2017, the shareholders approved the maximum aggregate Directors’ fee pool
of $1,100,000 per annum for each financial year effective from and including the financial year commenced on 1 July 2017.
The table below contains the annual fee structure for the Steadfast Board and committees (inclusive of superannuation).
Chairman
Members
2018
2017
2018
2017
Board
$
231,750
225,000
118,450
115,000
Audit & Risk
Committee
$
Remuneration &
Succession Planning
Committee
$
Nomination
Committee
$
20,600
20,000
5,150
5,000
20,600
20,000
5,150
5,000
–
–
–
–
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 2018 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
Committee fees
Board fees
$
$
Post-employment
benefits
Superannuation
$
Current Non-Executive Directors
Frank O’Halloran, AM
2018
2017
David Liddy, AM
2018
2017
Gai McGrath
2018(a)
2017
Anne O’Driscoll
2018
2017
Philip Purcell
2018
2017
Greg Rynenberg
2018
2017
211,701
205,479
108,174
105,023
9,014
–
108,174
105,023
108,174
105,023
108,174
105,023
10,300
9,905
23,516
22,831
784
–
23,516
22,831
9,406
9,132
9,406
9,132
20,049
19,616
12,511
12,146
931
–
12,511
12,146
11,170
10,845
11,170
10,845
Total
$
242,050
235,000
144,201
140,000
10,729
–
144,201
140,000
128,750
125,000
128,750
125,000
(a) Gai McGrath was appointed to the Board effective 1 June 2018.
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:
Volume
weighted
average
share price
Fair value at
grant date(b)
(VWAP)(c)
Description
Recipient
Grant date
Vesting date
$
$
October 2017 STI conditional rights(a)
MD & CEO
26 October 2017 23 August 2018
October 2017 STI conditional rights(a)
MD & CEO
26 October 2017 23 August 2019
October 2017 STI conditional rights(a)
MD & CEO
26 October 2017 23 August 2020
August 2017 STI conditional rights(a)
Other executives 23 August 2017
23 August 2018
August 2017 STI conditional rights(a)
Other executives 23 August 2017
23 August 2019
August 2017 STI conditional rights(a)
Other executives 23 August 2017
23 August 2020
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 2017 LTI conditional rights
MD & CEO
26 October 2017 23 August 2020
August 2017 LTI conditional rights
Other executives 23 August 2017
23 August 2020
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
August 2014 LTI conditional rights
Other executives 25 August 2014
25 August 2019
2.7389
2.7318
2.7175
2.6053
2.5945
2.5771
2.1292
2.1234
2.1128
2.1264
2.1179
2.1047
1.4992
1.4939
1.4841
1.4519
1.4442
1.4323
2.5581
2.3879
1.9834
1.9500
1.4841
1.4323
1.4312
1.3253
1.4001
1.2908
2.8170
2.8170
2.8170
2.8170
2.8170
2.8170
2.1858
2.1858
2.1858
2.1858
2.1858
2.1858
1.4881
1.4881
1.4881
1.4881
1.4881
1.4881
2.8170
2.8170
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 2017, August 2017, 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 2018 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
2017
Shares
transferred
upon vesting
of DEA
Shares
allocated via
DRP
Total shares
held at
30 June
2018
Shares held
nominally
at 30 June
2018(a)
Sales/
Reductions
Purchases
Frank O’Halloran, AM(b)
1,497,826
121,820
–
–
–
1,619,646
–
461,937
10,705
(37,000)
5,933,163
Robert Kelly(b)
David Liddy, AM(b)
Gai McGrath
Anne O’Driscoll(b)
Philip Purcell(b)
Greg Rynenberg(b)
5,497,521
250,000
–
163,043
160,142
765,366
Stephen Humphrys
1,000,000
Samantha Hollman
Simon Lightbody
Allan Reynolds
Linda Ellis
Table notes
337,239
1,812,314
1,041,017
254,958
5,455
10,500
5,455
–
60,000
–
–
–
5,722
10,910
–
–
–
–
–
157,780
60,339
11,560
80,241
63,754
918,539
412,611
255,455
10,500
168,498
160,142
–
–
–
–
21,019
–
–
–
–
–
255,455
10,500
168,498
160,142
846,385
846,385
–
(757,780)
400,000
9,629
(90,900)
316,307
–
(347,000)
1,476,874
4,837
(80,241)
1,051,576
–
(164,622)
165,000
–
168,167
455,314
44,906
–
(a) Shares held nominally are included in the column headed ‘Total shares held at 30 June 2018’. 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.
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.
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
will be reversed over the period to the final repayment date. $3.973 million has been reversed as at 30 June 2018.
60
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
could only sell their Executive Shares as below:
Date
Cumulative amount of Executive Shares that may be sold
30 August 2015
≤ 20% of total Executive Shares
30 August 2016
≤ 40% of total Executive Shares
30 August 2017
≤ 60% of total Executive Shares
30 August 2018
≤ 80% of total Executive Shares
30 August 2019
≤ 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
$
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
$
Robert Kelly
Stephen Humphrys
Allan Reynolds
5,000,000
1,000,000
900,000
3,695,942
739,062
665,376
368,316
73,631
66,324
(360,000)
(672,000)
(64,800)
3,704,258
140,693
666,900
6,900,000
5,100,380
508,271
(1,096,800)
4,511,851
Subsequent to balance date, the Board agreed to extend the term of the recourse loans to the Managing Director & CEO and
Executive General Manager – Direct, New Zealand & Singapore to 23 September 2021 at a commercial (floating) interest rate.
A trading lock will continue in place over certain shares held by each of the executives which may be sold during a trading
window with the approval of the Chairman, with a portion of the loan repaid as corresponds to the shares sold. Dividends
will first be used to pay interest on the loans and the balance used to repay the loan balances. In the event of voluntary
cessation of employment, repayment will be required within 12 months.
61
Steadfast Group Annual Report 2018 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:
i. Sale of goods and services
Marketing and administration fees received from Directors’ related entities
on normal commercial terms
ii. Payment for goods and services
2018
$
2017
$
26,348
22,268
Estimated Steadfast Network Broker rebate expense to Directors’ related entities
on the basis as determined by the Board
28,344
48,947
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
71,434
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 2018 in accordance with a resolution of the Directors.
Frank O’Halloran, AM
Chairman
Robert Kelly
Managing Director & CEO
62
Auditor’s responsibility for the review of the Half-year Financial Report
Our responsibility is to express a conclusion on the Half-year Financial Report based on our review. We
conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410
Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state
whether, on the basis of the procedures described, we have become aware of any matter that makes
us believe that the Half-year Financial Report is not in accordance with the Corporations Act 2001
including: giving a true and fair view of the Group’s financial position as at 31st December 2017 and its
performance for the half-year ended on that date; and complying with Australian Accounting Standard
AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of Steadfast
Group Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit
of the annual financial report.
Lead Auditor’s Independence Declaration
UNDER SECTION 307C OF CORPORATIONS ACT 2001
A review of a Half-year Financial Report consists of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures. A review is
TO THE DIRECTORS OF STEADFAST GROUP LIMITED
substantially less in scope than an audit conducted in accordance with Australian Auditing Standards
I declare that, to the best of my knowledge and belief, in relation to the audit of Steadfast Group Limited for the financial year
and consequently does not enable us to obtain assurance that we would become aware of all significant
ended 30 June 2018 there have been:
matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
i.
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.
In conducting our review, we have complied with the independence requirements of the
ii.
Corporations Act 2001.
KPMG
KPMG
Scott Guse
Partner
Sydney
23 August 2018
Scott Guse
Partner
Sydney
21 February 2018
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
30
Steadfast Group Annual Report 2018
Steadfast Group Limited
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2018
Note
2018
$’000
2017
$’000
REVENUE
Fee and commission income
Less: brokerage commission paid
Net fee and commission income
Marketing and administration and other professional services fees
Interest income
Share of profits of associates accounted for using the equity method
Share of profits of joint ventures accounted for using the equity method
Fair value gain on financial assets
Net gain from adjustments to deferred consideration estimates
Net gain from sale of subsidiaries and associates
12
13
15
4, 10
4
Other income
EXPENSES
Employment expense
Commission and other related expenses
Operating, brokers’ support service and other expenses
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
PROFIT FOR THE YEAR IS ATTRIBUTABLE TO:
Non-controlling interests
Owners of Steadfast Group Limited
7
14
4, 7, 12
21
505,627
(136,679)
368,948
70,629
7,560
12,436
2,058
1,500
3,275
480
1,217
431,125
(119,241)
311,884
69,946
7,467
12,104
1,937
–
3,421
4,065
3,826
468,103
414,650
(200,123)
(26,761)
(58,897)
(16,458)
(25,000)
(3,832)
(2,372)
–
(9,995)
(343,438)
124,665
(34,314)
90,351
(717)
431
86
(200)
(175,513)
(20,747)
(58,257)
(14,451)
(21,473)
(3,292)
(6,459)
(803)
(9,096)
(310,091)
104,559
(26,372)
78,187
(277)
(28)
91
(214)
90,151
77,973
14,497
75,854
90,351
11,395
66,792
78,187
TOTAL COMPREHENSIVE INCOME FOR THE YEAR IS ATTRIBUTABLE TO:
Non-controlling interests
14,497
11,395
64
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
2018
$’000
75,654
90,151
9.87
9.83
2017
$’000
66,578
77,973
8.96
8.92
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 2018 Steadfast Group Limited
Consolidated Statement of Financial Position
AS AT 30 JUNE 2018
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
Other financial assets
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
2018
$’000
2017
$’000
22
22
23
7
7
12
13
15
21
14
23
15C
8, 22
8
10G
8
10G
21
76,746
310,856
430,140
53,830
5,115
3,875
66,537
263,198
343,882
45,248
1,031
4,984
880,562
724,880
816,246
171,660
138,743
6,862
6,547
3,514
39,001
–
16,928
1,550
717,397
154,990
125,690
11,362
–
3,419
27,498
6,182
27,489
1,120
1,201,051
2,081,613
1,075,147
1,800,027
659,812
38,489
–
1,055
2,822
16,868
19,226
738,272
218,185
1,124
2,812
56,320
7,921
286,362
1,024,634
1,056,979
533,975
49,551
526
995
5,222
13,727
15,020
619,016
204,945
1,366
3,788
50,655
7,089
267,843
886,859
913,168
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
2018
$’000
2017
$’000
912,347
796,857
(7,728)
(667)
4,512
89,509
(30,793)
30,397
997,577
59,402
1,056,979
(7,014)
(165)
3,761
64,086
(20,484)
35,161
872,202
40,966
913,168
The above Consolidated Statement of Financial Position should be read in conjunction with the notes to the financial statements.
67
Steadfast Group Annual Report 2018 Steadfast Group Limited
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2018
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
2018
Non-
controlling
interests
Total
equity
$’000
$’000
Balance at 1 July 2017
796,857
(7,014)
(165)
3,761
64,086 (20,484)
35,161
40,966 913,168
–
–
–
–
–
–
–
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 under
institutional and retail
share placement (Note 9)
Less: transaction costs
on issued shares, net of
income tax (Note 9)
–
–
–
107,762
(1,288)
Shares issued to Whitbread/
Axis vendors (Note 9)
6,016
3,000
Shares issued to key
management member
(Note 9)
Shares acquired and held
in trust (Note 9)
Share-based payments
on Executive Shares and
employee share plans
Shares allotted through the
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)
–
(1,799)
–
–
–
–
–
–
–
–
(283)
1,368
–
–
–
–
–
(502)
(502)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,484
–
(1,733)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75,854
14,497
90,351
302
–
–
(200)
302
75,854
14,497
90,151
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 107,762
–
–
–
–
(1,288)
6,016
3,000
(1,799)
–
2,484
–
(283)
–
–
(365)
–
25,423
– (25,423)
–
–
–
1,514
1,514
– (10,611)
–
15,846
5,235
–
– (55,195)
(13,421)
(68,616)
Balance at 30 June 2018
912,347
(7,728)
(667)
4,512
89,509 (30,793)
30,397
59,402 1,056,979
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
2017
Non-
controlling
interests
Total
equity
$’000
$’000
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
Changes in part 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.
69
Steadfast Group Annual Report 2018 Steadfast Group Limited
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2018
Note
2018
$’000
2017
$’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
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 financial assets
22
15
Payments for deferred consideration of subsidiaries, associates and business assets
10G
Proceeds from disposal of investment in subsidiaries, net of cash disposed
Proceeds from part disposal of investment in subsidiaries on hubbing arrangements
Proceeds from disposal of investment in associates
Payments for property, plant and equipment
Payments for intangible assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Payments for transaction costs on issue of shares
Dividends paid to owners of Steadfast
Proceeds from borrowings
Repayment of borrowings
Payments for purchase of treasury shares
Repayment of related party loans
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 from/(used) in financing activities
Net increase in cash and cash equivalents
6
8
8
Cash and cash equivalents at the beginning of the financial year
Effect of movements in exchange rates on cash held
Cash and cash equivalents at the end of the financial year
22
483,644
(362,488)
15,857
6,899
(9,946)
(37,896)
96,070
27,154
123,224
(83,186)
(7,368)
(16,952)
(5,047)
(5,047)
–
6,210
1,719
(13,490)
(11,933)
(135,094)
110,762
(2,206)
(55,195)
76,476
(63,111)
(1,799)
2,303
–
16,864
(187)
(13,421)
70,486
58,616
329,209
(223)
387,602
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)
329,209
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 2018
NOTE 1. GENERAL INFORMATION
This general purpose financial report is for the year ended 30 June 2018 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 2018.
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 2018. Adoption of this standard has not had any
material effect on the financial position or performance of the Group.
Title
Description
AASB 2016-2
Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107
II. Reclassification of comparatives
During the current year, the presentation of Note 4 has been updated to reflect more appropriately the way in which
operating segments are now reviewed by the Chief Operating Decision Maker (being the Managing Director & CEO).
Prior year comparative information has been reclassified to align with the current year’s presentation.
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 2018 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
relate 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 operations and businesses 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 reliably measured.
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 2018 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. PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment are measured at cost, less accumulated depreciated and any accumulated impairment
losses. The carrying value of property, plant and equipment is periodically reviewed for impairment when events or changes
in circumstances indicate that the carrying value may not be recoverable.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
I. 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 projects are 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.
J. 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.
K. 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.
L. 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 2018.
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. Additional
disclosures as a result of adopting these new accounting standards will be provided in accordance with the disclosure
requirements. The Group does not expect any adverse impact to financial covenants as a result of applying the new
accounting standards.
Title
Description
Effective date Operating year Note
AASB 9
AASB 15
Financial Instruments and the relevant amending standards
1 January 2018 30 June 2019
Revenue from Contracts with Customers and the relevant
amending standards
1 January 2018 30 June 2019
AASB 16
Leases
AASB 2016-5
Amendments to Australian Accounting Standards – Classification
and Measurement of Share-based Payment Transactions
1 January 2019 30 June 2020
1 January 2018 30 June 2019
(i)
(ii)
(iii)
(iv)
AASB 17
Insurance Contracts
1 January 2021 30 June 2022
(v)
Table notes
(i) AASB 9 addresses classification, measurement and recognition of financial assets and financial liabilities. The standard
replaces the guidance in AASB 139 that relates to the classification and measurement of financial instruments.
The Group has reviewed its financial assets and liabilities and identified that commission receivable, a subset of receivables
from broking/underwriting agency operations is affected by the new accounting standard. The new standard requires the
recognition of expected credit losses from the moment when receivables are first recognised, rather than when a trigger
event occurs.
The majority of receivables from broking/underwriting agency operations relates to premium receivable from customers
which are on-paid to insurers and underwriters. In the event that the premiums are not received from customers, the
insurers and underwriters have the right to cancel the insurance policies and any premium receivable and payable by the
Group are derecognised. As such there is no credit loss risk from the Group’s perspective.
The other amount in receivables from broking/underwriting agency operation relates to commission receivable due
to the brokerages and underwriting agencies. Based on historical experience, an insignificant portion of commission
receivable is not recoverable, but any such amount was written off at the point when the trigger event occurred. The new
standard requires provision to be made for the expected non-recoverable portion of commission receivable at the time it
is invoiced to the clients. The Group does not expect any material changes due to the classification of financial assets and
liabilities.
The Group has initially applied AASB 9 at 1 July 2018. The cumulative effect of applying the new standard is recognised
in opening retained earnings as at 1 July 2018 and, as such, is not reflected in the 30 June 2018 statement of financial
position. The following table summarises the impact of transition to AASB 9 on 1 July 2018.
Consolidated statement of position
Non-current assets
Increase in deferred tax assets
Current liabilities
Increase in provision for doubtful debts
Equity
Decrease in retained earnings
Impact of adopting
AASB 9 at 1 July 2018
($ million)
0.7
2.4
1.7
75
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES continued
(ii) AASB 15 Revenue from Contracts with Customers introduces a comprehensive revenue recognition model aimed at
enhancing comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets.
The standard replaces AASB 118 Revenue, AASB 111 Construction Contracts and related interpretations.
The Group has reviewed the contracts with insurers and customers and identified claims handling services as an area that
is affected by the new accounting standard. The application of the new standard results in the identification of separate
performance obligations for handling claims on behalf of customers as part of the insurance brokerages’ customary
business practices. The new standard requires the deferral of revenue recognition until the performance obligation is
satisfied. Based on the results of the review, the Group does not expect a material impact on the consolidated statement
of profit or loss provided that the business volumes do not change significantly from one reporting period to the next.
The Group has initially applied AASB 15 at 1 July 2018. It has chosen to apply the transition option in paragraph C3(b) of
AASB 15 under which the comparative information is not required to be restated. The cumulative effect of applying the
new standard is recognised in opening retained earnings as at 1 July 2018 and, as such, is not reflected in 30 June 2018
statement of financial position. The following table summarises the impact of transition to AASB 15 on 1 July 2018.
Consolidated statement of position
Non-current assets
Increase in deferred tax assets
Current liabilities
Increase in provision for deferred income
Equity
Decrease in retained earnings
Impact of adopting
AASB 15 at 1 July 2018
($ million)
5.7
19.0
13.3
(iii) AASB 16 Leases replaces AASB 117 leases and it effectively requires recognition of the majority of leases on the balance
sheet. The primary impact of the new leases standard will be the accounting for the Group’s operating leases by
recognising the leased asset as an asset and a liability for the leasing obligations.
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.
It is expected that on initial application of the abovementioned options on 1 July 2019, there will be:
• increases in property, plant and equipment and the corresponding lease liabilities;
• front-loaded lease expense comprising interest and depreciation expenses; and
• reclassification of cash flows in the consolidated statement of cash flows.
Based on operating lease commitments as at 30 June 2018, 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 2018 if the Group had
been required to apply the new standard on that date:
• $42 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;
• $40 million increase in right-of-use asset measured at 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
• $1.5 to $2.5 million opening retained earnings adjustment.
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.
(iv) These changes are not expected to have a significant impact to the Group.
76
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES continued
(v) AASB 17 was issued in July 2017 as replacement for AASB 4 Insurance Contacts and will be applicable to general, life and
health insurance businesses. The new accounting standard introduces a new general model for measuring and accounting
for insurance contracts. It requires insurance contracts to be measured on building blocks of discounted, probability-
weighted cash flows, a risk adjustment and a contractual service margin representing the unearned profit of the contract.
The Group is in the business of providing services to the Steadfast Network brokers, distributing insurance policies via
insurance brokerages and underwriting agencies, and providing related services. The Group does not issue insurance
contracts or reinsurance contracts and as such does not expect any financial impact from AASB 17.
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 various other 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 2018 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. 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.
Fair value is estimated with reference to the market transactions for similar assets or discounted cash flow analysis.
B. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The Group’s financial assets and liabilities are measured at fair value at the end of each reporting period. The following table
gives information about how the fair value of financial assets and liabilities is determined, including the valuation technique
and inputs used. For the Group’s financial assets and liabilities not measured at fair value, their carrying amount provides a
reasonable approximation of their fair values.
Financial
instrument
Fair value
hierarchy
Valuation technique
Significant
unobservable inputs
Relationship of unobservable
inputs to fair value
Deferred
consideration
Level 3
The fair value is calculated based
on a contracted multiple of forecast
EBITA or fees and commissions
Forecast EBITA or fees
and commissions
The estimated fair value would
increase/decrease if the forecast
EBITA or fees and commissions
were higher/lower
Interest rate
swaps
Level 2
Investment in
listed shares
Level 1
The fair value is calculated using
the present value of the estimated
future cash flow based on observable
yield curves
The fair value is calculated based
on number of shares multiplied
by quoted price on ASX
C. DEFERRED CONSIDERATION
Not applicable
Not applicable
Not applicable
Not applicable
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.
77
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS continued
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 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 inputs to revenue and expense
growth assumptions.
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.
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.
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 primarily in Australia and New Zealand.
The Group is also expanding its footprint in the United Kingdom and Singapore, and has acquired a non-controlling
interest in unisonSteadfast, a network headquartered in Germany. Regarding geographical information, the revenue
and non-current assets attributed to geographies outside of Australasia are currently immaterial to the Group and hence
no separate geographical 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 underlying earnings before interest
expense, tax and amortisation on acquired intangible assets (EBITA) broken down by consolidated entities, associates and
joint ventures. The underlying EBITA excludes non-trading items as described in Note 4(i). The separate identification of
non-trading items and EBITA are not disclosed in accordance with current Australian Accounting Standards requirements.
Non-trading items are separately identified as they are considered to be unusual or non-recurring in nature.
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.
78
NOTE 4. OPERATING SEGMENTS continued
2018
Insurance
intermediary
$’000
Other
$’000
Total
underlying
$’000
Re -
classification
$’000
Non-trading
items(i)
$’000
Total
statutory
$’000
Fee and commission income
492,387
–
492,387
(123,439)
Marketing and administration and
other professional services fees
Interest income
Share of profits from
associates and joint ventures
Other revenue
Revenue
Less: share of profits from
associates and joint ventures
Revenue – consolidated entities
Employment expenses
Occupancy expenses
Other expenses
Expenses – consolidated entities
EBITA – consolidated entities
Share of EBITA from
associates and joint ventures
EBITA
Finance costs
Amortisation expense
Income tax benefit/(expense)
Net profit after tax
Non-controlling interests
Net profit after income tax
attributable to owners of
Steadfast Group Limited (NPAT)
63,702
7,045
13,637
2,303
2,765
7
322
305
66,467
7,052
13,959
2,608
4,162
–
535
179
579,074
3,399
582,473
(118,563)
–
–
508
–
3,685
4,193
368,948
70,629
7,560
14,494
6,472
468,103
(13,637)
565,437
(322)
3,077
(13,959)
(535)
–
(14,494)
568,514
(119,098)
4,193
453,609
(181,761)
(2,965)
(184,726)
(14,820)
(577)
(200,123)
(16,130)
(225,337)
(423,228)
142,209
(328)
(991)
(4,284)
(1,207)
(16,458)
(226,328)
(427,512)
141,002
24,028
539
24,567
166,237
(10,574)
(22,846)
(41,681)
91,136
(13,967)
(668)
165,569
(3)
(10,577)(ii)
837
(40,844)(iv)
(2,207)
–
88,929
(13,967)
77,169
(2,207)
74,962
–
136,914
122,094
2,996
135
3,131
–
–
–
–
–
(2,373)
(25,219)(iii)
(3,131)
–
(2,449)
(16,458)
(91,863)
(3,026)
(308,444)
1,167
145,165
316
25,018
1,483
–
(316)
255
1,422
(530)
170,183
(10,577)
(28,666)
(40,589)
90,351
(14,497)
892
75,854
79
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 4. OPERATING SEGMENTS continued
2017
Insurance
intermediary
$’000
Other
$’000
Total
underlying
$’000
Re-
classification
$’000
Non-trading
items(i)
$’000
Total
statutory
$’000
Fee and commission income
416,006
–
416,006
(104,122)
Expenses – consolidated entities
(360,796)
(10,663)
(371,459)
EBITA – consolidated entities
121,119
(1,776)
119,343
(189,498)
(3,918)
(193,416)
56,569
6,841
13,062
2,499
494,977
(13,062)
481,915
(157,113)
(14,185)
23,513
144,632
(9,681)
(21,989)
(32,215)
80,747
(11,949)
7,834
118
280
935
64,403
6,959
13,342
3,434
5,543
–
550
(63)
9,167
504,144
(98,092)
(280)
8,887
(13,342)
490,802
(6,479)
(163,592)
(266)
(14,451)
493
24,006
(1,283)
143,349
(16)
(9,697)(ii)
587
(31,628)(iv)
(2,406)
–
78,341
(11,949)
(1,694)
(23,683)(iii)
(1,161)
(550)
(98,642)
(11,921)
–
111,724
99,803
1,161
–
1,161
–
–
–
–
–
68,798
(2,406)
66,392
–
–
508
149
7,941
8,598
311,884
69,946
7,467
14,041
11,312
414,650
(149)
(14,041)
8,449
400,609
–
–
(7,866)
(7,866)
(175,513)
(14,451)
(89,558)
(279,522)
583
121,087
147
730
–
–
(884)
(154)
554
24,153
145,240
(9,697)
(24,844)
(32,512)
78,187
(11,395)
400
66,792
Marketing and administration and
other professional services fees
Interest income
Share of profits from
associates and joint ventures
Other revenue
Revenue
Less: share of profits from
associates and joint ventures
Revenue – consolidated entities
Employment expenses
Occupancy expenses
Other expenses
Share of EBITA from
associates and joint ventures
EBITA
Finance costs
Amortisation expense
Income tax benefit/(expense)
Net profit after tax
Non-controlling interests
Net profit after income tax
attributable to owners of
Steadfast Group Limited (NPAT)
80
NOTE 4. OPERATING SEGMENTS continued
Table notes
Insurance
intermediary
$’000
Other
$’000
2018
Total
$’000
Insurance
intermediary
$’000
Other
$’000
2017
Total
$’000
(i) Non-trading items
Breakdown of non-trading income adjustment:
Net gain from sale of investments in
subsidiaries and associates
Net gain on re-estimation
and settlement of deferred
consideration*
Reversal of deemed interest costs
on interest-free executive loans
Net gain/(loss) from change
in fair value of investments
Other income
480
3,275
508
(70)
–
4,193
Breakdown of non-trading expenses adjustment:
Impairment loss (Note 7F) *
Net loss on change in fair value
of investments
Non-recurring redundancy costs
Other expenses
(2,372)
–
(577)
(77)
(3,026)
–
–
–
–
–
–
–
–
–
–
–
480
(4,119)
8,184
4,065
3,275
3,421
508
(70)
–
4,193
508
–
455
265
(2,372)
(6,459)
–
(577)
(77)
(3,026)
(803)
–
(604)
(7,866)
–
–
–
–
3,421
508
–
455
8,184
8,449
–
–
–
–
–
(6,459)
(803)
–
(604)
(7,866)
* The Group often defers a portion of the purchase price of a business and makes the final payment referable to future
financial performance. At the time of acquisition, an estimate is made as to the fair value of the final payment. This is
reviewed each half-year based on information available and at settlement, and the estimate is adjusted if appropriate.
Any adjustment is taken to profit (downwards estimate) or loss (upwards estimate). Where an estimate is reduced, the
Group will consider whether the factors leading to the estimate of deferred consideration represent an indicator of
impairment, and if so, the need for impairment is considered. The deferred consideration adjustments and impairments
do not affect cash flows from operating activities.
Total non-trading items:
Non-trading revenue
Non-trading expenses
Total non-trading items:
Income tax benefit/(expense)
Non-controlling interests
Share of EBITA from
associates and joint ventures
Total non-trading items to NPAT
4,193
(3,026)
1,167
255
(530)
–
892
–
–
–
–
–
–
–
4,193
(3,026)
1,167
255
(530)
–
892
265
(7,866)
(7,601)
229
554
–
(6,818)
8,184
–
8,184
(1,113)
–
147
7,218
8,449
(7,866)
583
(884)
554
147
400
81
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 4. OPERATING SEGMENTS continued
Insurance
intermediary
$’000
Other
$’000
2018
Total
$’000
Insurance
intermediary
$’000
Other
$’000
2017
Total
$’000
(ii) Breakdown of finance costs:
Finance costs – consolidated entities
(9,994)
Finance costs – associates and
joint ventures (Note 12, 13)
(580)
(10,574)
–
(3)
(3)
(9,994)
(9,096)
–
(9,096)
(583)
(10,577)
(585)
(9,681)
(16)
(16)
(601)
(9,697)
(iii) Breakdown of amortisation expenses of acquired intangibles:
Amortisation expense –
consolidated entities
Amortisation expense – associates
and joint ventures (Note 12, 13)
(19,703)
(2,301)
(22,004)
(18,691)
(1,621)
(20,312)
(3,143)
(22,846)
(72)
(3,215)
(2,373)
(25,219)
(3,298)
(21,989)
(73)
(3,371)
(1,694)
(23,683)
(iv) Breakdown of income tax benefit/(expense):
(35,014)
980
(34,034)
(26,199)
711
(25,488)
(6,667)
(41,681)
(143)
837
(6,810)
(40,844)
(6,016)
(32,215)
(124)
587
(6,140)
(31,628)
Income tax benefit/(expense) –
consolidated entities
Income tax expense – associates
and joint ventures (Note 12, 13)
NOTE 5. EARNINGS PER SHARE
A. REPORTING PERIOD VALUE
Basic earnings per share
Diluted earnings per share
2018
Cents
2017
Cents
9.87
9.83
9.75
9.71
8.96
8.92
8.90
8.87
If non-trading items were removed, the underlying earnings per share would be as follows:
Basic earnings per share
Diluted earnings per share
82
NOTE 5. EARNINGS PER SHARE continued
B. RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
Profit after income tax
Non-controlling interests
Profit after income tax attributable to the owners of Steadfast Group Limited for calculation of
statutory basic and diluted earnings per share
Removing non-trading items:
Income
Expenses
Income tax expense/(benefit)
Non-controlling interests (net of tax)
Share of EBITA from associates and joint ventures
2018
$’000
2017
$’000
90,351
(14,497)
78,187
(11,395)
75,854
66,792
(4,193)
3,026
(255)
530
-
(8,449)
7,866
884
(554)
(147)
Profit after income tax attributable to the owners of Steadfast Group Limited for calculation of
underlying basic and diluted earnings per share
74,962
66,392
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
2018
Number in
‘000
2017
Number in
‘000
772,884
749,752
(3,982)
(3,916)
Weighted average number of ordinary shares used in calculating basic earnings per share
768,902
745,836
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)
768,902
745,836
1,811
1,245
1,153
1,706
Weighted average number of ordinary shares used in calculating diluted earnings per share
771,958
748,695
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 cost 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 key management member of an acquired business in 2013 with an exercise
price of $1.00 per share. The share options were exercised on 25 February 2018. Because the average share price up to
25 February 2018 exceeds the exercise price, 1.245 million shares (2017: 1.706 million) were deemed to be bonus shares
up to the date the options were exercised.
83
Steadfast Group Annual Report 2018
Notes to the Financial Statements continued
NOTE 6. DIVIDENDS
A. DIVIDENDS ON ORDINARY SHARES
2018
2018 interim dividend
2017 final dividend
2017
2017 interim dividend
2016 final dividend
Cents
per share
Total amount
$’000
Payment date
Tax rate for
franking credit
Percentage
franked
2.8
4.4
2.6
3.6
22,206
32,989
22 March 2018
13 October 2017
19,495
26,991
13 April 2017
14 October 2016
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 $0.283 million (2017: $0.252 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) less any discount as determined by the Board for each dividend payment date.
D. DIVIDEND NOT RECOGNISED AT REPORTING DATE
On 23 August 2018, 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
2018 final dividend
4.7
37,273 20 September 2018
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 31 August 2018.
E. FRANKING CREDITS
Franking account balance at reporting date at 30%
Franking credits to arise from payment of income tax payable/(refundable)
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%
2018
$’000
2017
$’000
38,851
(2,727)
36,124
(15,974)
20,150
32,827
1,592
34,419
(14,138)
20,281
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
2018
A. COMPOSITION
At cost
Accumulated amortisation and impairment
B. MOVEMENTS
Balance at the beginning of the financial year
Additions
Additions through business combinations
Reduction 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
Customer
relationships
$’000
Capitalised
software
$’000
Other
intangible
assets
$’000
Total
intangible
assets
$’000
Goodwill
$’000
237,927
(89,879)
148,048
139,479
–
31,469
(2,193)
532
(21,064)
–
(154)
(21)
25,939
(4,979)
20,960
12,348
11,834
–
–
–
(226)
(2,996)
–
–
7,915
271,781
823,058
(5,263)
(100,121)
(6,812)
2,652
171,660
816,246
3,163
154,990
717,397
99
–
–
104
(714)
–
–
–
11,933
31,469
(2,193)
636
(22,004)
(2,996)
(154)
(21)
–
108,203
(7,015)
–
–
–
(2,218)
(121)
Balance at the end of the financial year
148,048
20,960
2,652
171,660
816,246
2017
C. COMPOSITION
At cost
Accumulated amortisation and impairment
208,667
(69,188)
139,479
14,105
(1,757)
12,348
D. MOVEMENTS
Balance at the beginning of the financial year
154,967
Additions
Additions through business combinations
Reduction upon loss of control
Disposals – accumulated amortisation &
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)
–
–
230,588
721,918
(75,598)
154,990
(4,521)
717,397
165,280
712,329
7,595
11,163
–
38,145
(10,455)
(30,055)
3,140
1,058
7,816
(4,653)
3,163
3,952
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
E. AMORTISATION RATES PER ANNUM
10.0%-12.5% 20.0%-100.0% 20.0%-33.3%
85
Steadfast Group Annual Report 2018 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 2018, the Group has recognised an impairment provision of $2.372 million
(2017: $6.459 million). Impairment losses for each category of intangible assets are shown in Section B above. All impairments
related to acquisitions for which there was also a downward revision of deferred consideration (earnout) payments. 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 of 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
2018
%
2017
%
10.1% to 11.1%
13.7% to 15.9%
10.0% to 11.0%
13.7% to 14.0%
Revenue growth rate – one year to five years extrapolation
4.0% to 6.5% per annum
4.0% to 5.9% per annum
Long-term revenue growth rate(b)
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 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 2018:
2018
$’000
2017
$’000
1,055
218,985
220,040
995
205,680
206,675
(800)
(735)
219,240
205,940
171,500
48,540
174,000
32,675
220,040
206,675
4,241
–
485
526
224,281
207,686
107,500
105,000
598
1,759
1,075
226
5,515
1,249
110,932
111,990
328,138
311,901
7,075
7,775
335,213
319,676
• the Company had a $285.000 million multibank syndicated facility (corporate facility) with Macquarie Bank and ANZ
Banking Group (2017: $285.000 million); and
• $171.500 million of the $285.000 million facility has been drawn down which, together with $4.241 million for bonds and
rental guarantees, leaves $109.259 million available in the corporate facility for future drawdowns (2017: $110.515 million).
87
Steadfast Group Annual Report 2018 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 2018 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. In August 2015, the Company entered
into a three-year interest rate swap with notional amount of $75.000 million where the Company swaps the floating rate
payment into fixed rate payments. Refer Note 15 for further details on the interest rate swap.
The key terms and conditions of the multi-bank syndicated facility are consistent with a facility of this size and nature
and the circumstances of Steadfast. The Company remains compliant with the terms and conditions.
E. RECONCILIATION OF MOVEMENTS OF LIABILITIES TO CASH FLOWS ARISING FROM FINANCING ACTIVITIES
2018
Balance at the beginning of the financial period
Proceeds from borrowings
Repayment of borrowings
Unwind capitalised transaction costs
Balance at the end of the financial period
Bank loans –
corporate
facility
$’000
Bank loans –
subsidiaries
$’000
Total bank
loans
$’000
173,265
58,500
(61,000)
(65)
32,675
17,976
(2,111)
–
205,940
76,476
(63,111)
(65)
170,700
48,540
219,240
F. BORROWING BY ASSOCIATES AND JOINT VENTURES
As at 30 June 2018, the Group’s associates and joint ventures had a total of $35.190 million (2017: $42.406 million) of bank
borrowings (including bank overdrafts and loans). The Group’s proportionate share of the associates and joint ventures’ bank
borrowings is $15.530 million (2017: $18.630 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
2018
Number of
shares in
’000
2017
Number of
shares in
’000
2018
$’000
2017
$’000
A. SHARE CAPITAL
Reconciliation of movements
Balance at the beginning of the financial year
749,752
749,752
Shares issued under the institutional and retail share placement
Shares issued to Whitbread/Axis vendors
Shares issued for call option exercised by key management
member of acquired business
Less: transaction costs on issue of shares, net of income tax
38,158
2,126
3,000
–
–
–
–
–
796,857
107,762
6,016
3,000
(1,288)
796,857
–
–
–
–
Balance at the end of the financial year
793,036
749,752
912,347
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.
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
2018
Number of
shares in
’000
2017
Number of
shares in
’000
2018
$’000
2017
$’000
4,144
(914)
668
104
4,002
2,942
(213)
1,308
107
4,144
7,014
(1,368)
1,799
283
7,728
4,396
(461)
2,827
252
7,014
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 total gearing ratio, which is calculated as total borrowings divided by total equity
and total borrowings. Currently the Group’s total maximum gearing ratio determined by the Board is 30.0%. The Group and
corporate 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
2018
$’000
2017
$’000
Maximum
approved
171,500
224,281
1,056,979
174,000
207,687
913,168
1,228,479
1,087,168
1,281,260
1,120,855
14.0%
17.5%
16.0%
18.5%
25.0%
30.0%
89
Steadfast Group Annual Report 2018 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; 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 2018
During the year ended 30 June 2018, the Group completed a number of acquisitions in accordance with its strategy.
The following disclosures provide the provisional financial impact to the group at the acquisition date. Only the significant
acquisition with total consideration over $45 million is disclosed separately. Other acquisitions are disclosed in aggregate.
ACQUISITION OF SUBSIDIARIES
The following tables provide:
• detailed information for the acquisition of the Whitbread and Axis businesses during the year; and
• aggregated information for six other acquired businesses (Other acquisitions).
Note 10F contains a list of subsidiaries acquired and the respective ownership interests.
A. CONSIDERATION PAID/PAYABLE
2018
Cash
Consideration shares(a)
Deemed consideration(b)
Deferred consideration(c)
Subsidiaries’ scrip for scrip(d)
Total
Axis
$’000
Whitbread
$’000
Other
acquisitions
$’000
Total
$’000
49,120
475
45,035
5,541
–
–
–
–
–
–
15,890
110,045
–
8,299
4,349
7,984
6,016
8,299
4,349
7,984
49,595
50,576
36,522
136,693
(a) The Company issued shares to the Whitbread and Axis vendors as part of the purchase price. The consideration shares
were valued at $2.83 per share at settlement.
(b) This amount represents the fair value of the original investments in Ausure Ruralco Pty Ltd and Emergence Insurance
Group Pty Ltd at the date the Group increased its shareholding and gained control of these entities which were previously
joint venture and associate of the Group.
(c) 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 multiple of forecast revenue and/or earnings. 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:
• $4.185 million of deferred consideration for which the maximum amount of payment is not capped; and
• $0.164 million of deferred consideration which is fixed.
(d) 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
2018
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.
Axis
$’000
Whitbread
$’000
Other
acquisitions
$’000
5,843
14,638
–
108
10,935
–
13,370
9,300
1,027
209
12,013
270
7,646
5,905
616
558
8,521
371
Total
$’000
26,859
29,843
1,643
875
31,469
641
(17,001)
(20,153)
(8,855)
(46,009)
(354)
(403)
(3,865)
(197)
9,704
(169)
(943)
(360)
(295)
(883)
(1,641)
(3,990)
(4,285)
(12,140)
–
10,934
(456)
9,366
(653)
30,004
(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
2018
Total consideration paid/payable
Total net identifiable assets acquired
Non-controlling interests acquired
Goodwill on acquisition*
Axis
$’000
Whitbread
$’000
Other
acquisitions
$’000
Total
$’000
49,595
50,576
36,522
136,693
(9,704)
(10,934)
(9,366)
(30,004)
–
–
1,514
1,514
39,891
39,642
28,670
108,203
* 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.
2018
Revenue
EBITA
Profit after income tax
Axis
$’000
Whitbread
$’000
Other
acquisitions
$’000
13,287
4,764
3,364
11,380
3,651
2,559
8,770
1,820
1,334
Total
$’000
33,437
10,235
7,257
If the acquisitions of subsidiaries occurred on 1 July 2017, the Group’s revenue for the year ended 30 June 2018 would increase
from $468.103 million to $491.458 million and profit after income tax would increase from $90.351 million to $93.667 million.
91
Steadfast Group Annual Report 2018 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 2018.
F. SUBSIDIARIES ACQUIRED
The table below outlines all the subsidiaries acquired during the year ended 30 June 2018. It includes some entities in which
the Group had a prior equity interest and that became subsidiaries following internal restructuring.
Name of subsidiary acquired
Ausure Ruralco Pty Ltd
Axis Underwriting Services Pty Ltd
Emergence Insurance Group Pty Ltd
Galaxy Insurance Consultants Pte Ltd
Graham Elliott & Associates Pty Ltd
Great Wall Insurance Services Pty Ltd
Joe Vella Insurance Brokers Pty Ltd
Whitbread Insurance Brokers
Table notes
Ownership interest
as at 30 June 2018
%
Table note
(i)
(ii)
(iii)
(iv)
(v)
50.01
100.00
50.00
73.00
73.12
75.00
70.00
100.00
(i) The Group acquired Ausure Ruralco Pty Ltd (Ausure Ruralco) through Ausure Group Pty Ltd, an existing subsidiary
of the Group. The equity interest in Ausure Ruralco represents the Group’s effective interest in the entity.
(ii) The Group acquired additional shares in Emergence Insurance Group Pty Ltd (Emergence) and Emergence became
a subsidiary of the Group. Although the Group only has 50.00% equity interest in Emergence, the Group has control
over the entity due to the terms of the shareholders’ deed that gives the Group the ability to direct the key financial
and operating activities.
(iii) The Group acquired Galaxy Insurance Consultants Pte Ltd (Galaxy) through Steadfast Distribution Services Pte Ltd,
a wholly-owned newly established Singapore subsidiary of the Group.
(iv) The Group acquired Graham Elliott & Associates Pty Ltd (Graham Elliott) through Steadfast Taswide Insurance Brokers Pty Ltd,
an existing subsidiary of the Group. The equity interest in Graham Elliott represents the Group’s effective interest in the entity.
(v) The acquisition of Whitbread Insurance Brokers consists of 100% equity in the following legal entities: Whitbread Holdings
Pty Ltd, Whitbread Associates Pty Ltd, Resolute Property Protect Pty Ltd and Whitbread Life Pty Ltd.
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 2018 and
30 June 2017.
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 step-up investments
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
2018
$’000
6,588
(5,047)
(83)
4,349
–
1,414
(3,275)
3,946
2,822
1,124
3,946
2018
$’000
–
3,815
131
3,946
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
93
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 11. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following key subsidiaries.
Name
A. PARENT ENTITY
Steadfast Group Ltd
B. SUBSIDIARIES – OPERATING ENTITIES
I. Insurance broking businesses
Steadfast Insurance Brokers Pty Ltd
Steadfast Group UK Ltd
Austcover Holdings Pty Ltd and its subsidiary
Ausure Group Pty Ltd and its subsidiaries
Ballyglisheen Pty Ltd (trades as Steel Pacific)
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 and its subsidiaries
Consolidated Insurance Agencies Pty Ltd and its subsidiary
Corporate Insurance Brokers Ballina (NSW) Pty Ltd
G.W.S. Pty Ltd and its subsidiaries
Galaxy Insurance Consultants Pte Ltd
Great Wall Insurance Services Pty Ltd
ICF (Australia) Pty Ltd and its subsidiary
IC Frith (NZ) Ltd and its subsidiaries
Joe Vella Insurance Brokers Pty Ltd
Mega Capital Holdings Pty Ltd and Mega Capital Unit Trust
and its subsidiary
National Credit Insurance (Brokers) Pty Ltd
(incorporating IMC Trade Credit) and its subsidiaries
Newmarket Grand West Pty Ltd and its subsidiaries
Newmarket Insurance Brokers Pty Ltd
Phoenix Insurance Brokers Pty Ltd
PID Holdings Pty Ltd and its subsidiaries
Quattro Risk Services Pty Ltd (formerly Finn Foster &
Associates Pty Ltd) and its subsidiaries
Resolute Property Protect Pty Ltd
RIB Group Holdings Pty Ltd and its subsidiaries (RIB Group)
Steadfast Brecknock Insurance Brokers Pty Ltd (formerly
Brecknock Insurance Brokers Pty Ltd) and its subsidiaries
Steadfast Distribution Services Pte Ltd
Steadfast IFS Pty Ltd
Steadfast IRS Pty Ltd and its subsidiaries
Steadfast NZ Holdings Ltd
Steadfast NZ Ltd
94
Table
note
Country of
incorporation
Ownership interest
2018
%
2017
%
Australia
Australia
United Kingdom
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
(i)
New Zealand
Australia
100.00
100.00
50.00
50.01
60.00
100.00
–
50.00
62.00
50.00
100.00
100.00
88.35
70.18
55.00
100.00
100.00
73.00
75.00
100.00
–
70.00
47.00
56.55
55.00
80.00
80.00
–
–
100.00
90.00
–
Australia
100.00
100.00
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
New Zealand
New Zealand
87.20
90.00
100.00
89.00
100.00
65.60
100.00
81.08
95.00
100.00
50.98
100.00
100.00
100.00
86.95
90.00
90.00
61.00
100.00
60.00
–
81.08
95.10
–
50.98
100.00
100.00
100.00
NOTE 11. SUBSIDIARIES continued
Ownership interest
Name
Table
note
Country of
incorporation
2018
%
Steadfast QIS Pty Ltd (formerly NCA Insurance Services Pty Ltd)
and its subsidiary
Steadfast Re Pty Ltd
Steadfast Taswide Insurance Brokers Pty Ltd and its subsidiaries
Trident Insurance Group Pty Ltd and its subsidiary
VBIH Pty Ltd and its subsidiary
V.F.P. Insurance Brokers Pty Ltd and its subsidiary
Webmere Pty Ltd and its subsidiaries
Whitbread Life Pty Ltd
Whitbread Holdings Pty Ltd and its subsidiary
Work Health Alternatives Pty Ltd
II. Underwriting agency businesses
Steadfast Underwriting Agencies Holdings Pty Ltd
SUA Services Pty Ltd
Associated Marine Underwriting Agency Pty Ltd
Axis Underwriting Services Pty Ltd
Calliden Group Pty Ltd and its subsidiaries
CHU Underwriting Agencies Pty Ltd and its subsidiaries
Emergence Insurance Group Pty Ltd and its subsidiary
(ii)
Grange Underwriting Pty Ltd
Hostsure Underwriting Agency Pty Ltd
Miramar Underwriting Agency Pty Ltd
NM Insurance Pty Ltd and its subsidiary
Procover Underwriting Agency Pty Ltd
Protecsure Pty Ltd
Proteus Marine Insurance Pty Ltd
Residential Builders Underwriting Agency Pty Ltd
Sports Underwriting Australia Pty Ltd
Steadfast Placement Solutions Pty Ltd
Steadfast Placement Solutions UK Ltd
Underwriting Agencies of Australia Pty Ltd and its subsidiary
Unity Trade Credit Pty Ltd
Winsure Underwriting Pty Ltd
WM Amalgamated Pty Ltd and its subsidiaries
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
Australia
Australia
United Kingdom
Australia
Australia
Australia
Australia
61.91
50.00
73.12
60.00
80.00
95.00
77.00
100.00
100.00
70.00
100.00
100.00
100.00
100.00
100.00
97.00
50.00
77.00
100.00
100.00
75.00
100.00
90.00
87.50
80.00
90.00
100.00
100.00
88.33
100.00
100.00
84.16
2017
%
61.91
50.00
74.70
60.00
80.00
95.10
77.00
–
–
70.00
100.00
100.00
100.00
–
100.00
100.00
–
77.00
100.00
100.00
75.00
100.00
80.00
87.50
80.00
80.00
100.00
–
90.00
–
100.00
84.16
95
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 11. SUBSIDIARIES continued
Name
III. Complementary businesses
CHU Services Pty Ltd
InsuranceCONNECT Pty Ltd
Steadfast Business Solutions Pty Ltd
Steadfast Convention Pty Ltd
Steadfast Foundation Pty Ltd
Steadfast INSIGHT Holdings Pty Ltd (formerly Actionquote
Holdings Pty Ltd)
Steadfast Share Plan Nominee Pty Ltd
Steadfast Technologies Group Holdings Pty Ltd
Steadfast Technologies NZ Ltd
Steadfast Technologies Pty Ltd
Steadfast Technologies Shared Services Pty Ltd
Steadfast Technology Services Pty Ltd
Steadfast Technology Services NZ Ltd
Steadfast UnderwriterCentral Holdings Pty Ltd (formerly Insurance
Connect Holdings Pty Ltd)
Steadfast Virtual Underwriter Holdings Pty Ltd
Table notes
Table
note
Country of
incorporation
Ownership interest
2018
%
2017
%
(iii)
(iv)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
97.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
–
–
100.00
–
100.00
100.00
–
–
(i) The Group sold its equity interest in IC Frith (NZ) Ltd to Abbott NZ Holdings Ltd (Abbott) in exchange for additional equity
interest in Abbott. As a result, the Group’s equity interest in this entity became 65.48%. Due to the nature of the current
shareholders' agreement it was deemed to be an associate, and disclosed in Note 12.
(ii) The Group acquired additional shares in Emergence Insurance Group Pty Ltd (Emergence) and Emergence became
a subsidiary of the Group. Although the Group only has 50.00% equity interest in Emergence, the Group has control
over the entity due to the terms of the shareholders’ deed that gives the Group the ability to direct the key financial and
operating activities.
(iii) A trustee for Steadfast Foundation, a charitable foundation.
(iv) A trustee for the Steadfast employee share plan trust.
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
Name
I. Insurance broking businesses
Abbott Insurance Brokers Ltd(a)(b)
Abbott NZ Holdings Ltd and its subsidiaries(a)(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 Ltd
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
Optimus 1 Pty Ltd
Paramount Insurance Brokers Pty Ltd
Pollard Advisory Services Pty Ltd
Risk Partners Pty Ltd
Rose Stanton Insurance Brokers Pty Ltd
Rothbury Group Ltd and its subsidiaries(b)
RSM Group Pty Ltd
Sapphire Star Pty Ltd
Scott & Broad Pty Ltd and its subsidiary
Southside Insurance Brokers Pty Ltd
Steadfast Eastern Insurance Brokers Pty Ltd
Steadfast Life Pty Ltd and its subsidiary
Tudor Insurance Australia (Insurance Brokers) Pty Ltd and
Tudor Insurance Agency Unit Trust
unisonSteadfast AG(b)
Watkins Taylor Stone Insurance Brokers Pty Ltd and
D&E Watkins Unit Trust
2018
%
–
65.48
25.00
20.00
40.00
49.00
33.14
37.00
49.00
49.00
40.00
25.00
48.35
37.00
45.00
49.00
49.00
50.00
–
25.00
46.50
45.00
49.00
44.51
49.00
30.00
49.00
49.00
34.38
50.00
48.00
40.00
2017
%
2018
$’000
2017
$’000
45.00
–
10,179
–
22,085
–
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
49.00
44.51
49.00
30.00
42.88
49.00
34.38
50.00
48.00
26.25
804
4,234
2,857
1,119
3,035
3,851
1,043
4,101
2,961
819
4,468
–
4,843
4,733
1,626
9
–
1,011
3,742
9,145
669
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
9,641
701
25,037
24,255
5,277
1,246
8,923
614
405
3,059
1,966
2,959
5,347
1,268
8,299
631
321
3,012
2,048
1,829
35.00
35.00
1,705
1,771
97
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 12. INVESTMENTS IN ASSOCIATES continued
Name
II. Underwriting agencies businesses
Emergence Insurance Group Pty Ltd(c)
QUS Pty Ltd
Sterling Insurance Pty Ltd
III. Complementary businesses
Meridian Lawyers Ltd
Table notes
Ownership interest
Equity-accounted
2018
%
–
45.00
39.50
2017
%
2018
$’000
2017
$’000
33.33
45.00
39.50
–
1,097
7,157
164
1,165
5,216
25.00
25.00
2,352
2,289
(a) The Group sold its equity interest in IC Frith (NZ) Ltd to Abbott NZ Holdings Ltd (Abbott) in exchange for additional equity
interest in Abbott. As a result, the Group’s equity interest in Abbott became 65.48%. Due to the nature of the current
shareholders' agreement it was deemed to be an associate.
(b) All entities classified as associates have their principal operations in Australia with the exception of:
• Abbott Insurance Brokers Ltd and Rothbury Group Ltd whose principal operations are in New Zealand; and
• unisonSteadfast AG whose principal operation is in Germany.
(c) The Group acquired additional shares in Emergence Insurance Group Pty Ltd (Emergence) and Emergence became a subsidiary
of the Group. Although the Group only has 50.00% equity interest in Emergence, the Group has control over the entity due
to the terms of the shareholders’ deed that gives the Group the ability to direct the key financial and operating activities.
B. RECONCILIATION OF MOVEMENTS
Balance at the beginning of the financial year
Additions – deemed consideration(a)
Additions – cash
Additions – scrip for scrip(b)
Step-up investment to subsidiaries
Disposal of associates
Share of EBITA from associates
Less share of:
Finance costs
Amortisation expense
Income tax expense
Share of associates’ profit after income tax
Dividend received/receivable
Impairment
Net foreign exchange movements
Balance at the end of the financial year
Table notes
2018
$’000
2017
$’000
125,690
121,783
2,125
3,215
22,085
(11,403)
(1,491)
21,287
(494)
(2,643)
(5,714)
12,436
(13,575)
–
(339)
–
15,821
–
(8,053)
(1,671)
20,743
(467)
(2,862)
(5,310)
12,104
(12,383)
(1,933)
22
138,743
125,690
(a) This amount represents the carrying amounts of investments in associates of the subsidiaries at the date the Group
acquired during the financial year.
(b) The associate was acquired through scrip for scrip.
98
NOTE 12. INVESTMENTS IN ASSOCIATES continued
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
Included in liabilities is $35.190 million (2017: $42.406 million) of bank borrowings. Refer Note 8F.
NOTE 13. INVESTMENT IN JOINT VENTURES
A. DETAILS OF JOINT VENTURES
Name
ABICO Insurance Brokers and its related entities (ABICO)(a)
Ausure Ruralco Pty Ltd (formerly Ausure Consolidated Brokers Pty Ltd)(b)
Blend Insurance Solutions Pty Ltd(c)
Macquarie Premium Funding Pty Ltd and its subsidiaries (Macquarie Pacific Funding Group)(d)
Rhymemat Pty Ltd(e)
Table notes
2018
$’000
352,053
136,887
314,065
31,062
143,813
208,430
56,922
39,664
39,477
2017
$’000
297,502
129,567
258,794
37,154
131,121
182,876
47,575
32,692
32,692
Ownership interest
2018
%
50.00
–
50.00
50.00
27.80
2017
%
–
50.00
50.00
50.00
–
(a) Ausure Group Pty Ltd (Ausure) acquired a stake in ABICO Insurance Brokers (ABICO) in April 2018. Ausure has partnered
with the principal of ABICO to focus on financial service distribution in Southern NSW, complementing the existing
partnership with Ruralco Holdings Pty Ltd.
(b) Ausure Ruralco Pty Ltd (Ausure Ruralco) is a joint venture 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. In April 2018,
Ausure issued additional shares to Ruralco for acquiring remaining 50% of Ausure Ruralco. As a result, Ausure Ruralco
became a wholly-owned subsidiary of Ausure.
(c) Blend Insurance Solutions Pty Ltd (Blend) is a joint venture formed 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 &
health, consumer and bespoke products in the Australian market, via brokers, third party distribution partnerships and direct.
(d) 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.
(e) Ausure acquired a stake in Rhymemat Pty Ltd trading as Ausure Gippsland (Gippsland) in September 2017. Gippsland is an
Authorised Representation of Ausure based in Victoria. Although Ausure only has 27.8% equity interest in Gippsland, the
shareholders’ agreement requires the unanimous consent of the parties when making decisions about the key financial
and operating activities. Therefore, Ausure is considered to have joint control of Gippsland although only having 27.8%
equity interest.
99
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 13. INVESTMENT IN JOINT VENTURES continued
B. RECONCILIATION OF MOVEMENTS
Balance at the beginning of the financial year
Additions – deemed consideration(a)
Additions – cash
Reclassification to investment in subsidiaries
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
2018
$’000
2017
$’000
11,362
–
4,153
(8,429)
3,815
(89)
(572)
(1,096)
2,058
(2,282)
6,862
2,211
8,045
850
–
3,410
(134)
(509)
(830)
1,937
(1,681)
11,362
(a) The amount in 2017 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.
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.
2018
$’000
22,534
8,633
17,952
1,903
11,312
65,140
9,466
4,525
4,915
2017
$’000
19,893
13,230
15,089
3,788
14,246
52,041
7,159
4,053
4,053
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Revenue
EBITA
Profit after income tax
Total comprehensive income
100
NOTE 14. PROPERTY, PLANT AND EQUIPMENT
2018
A. COMPOSITION
At cost
Accumulated depreciation
B. MOVEMENTS
Balance at the beginning of the financial year
Additions
Additions through business combinations
Depreciation expense
Balance at the end of the financial year
2017
A. COMPOSITION
At cost
Accumulated depreciation
B. MOVEMENTS
Buildings(a)
$’000
Other
$’000
Total
$’000
36,211
63,800
(21,465)
(24,799)
14,746
39,001
27,589
(3,334)
24,255
16,334
8,562
–
(641)
11,164
5,130(b)
1,643
(3,191)
24,255
14,746
Buildings(a)
$’000
Other
$’000
19,027
(2,693)
16,334
30,326
(19,162)
11,164
27,498
13,692
1,643
(3,832)
39,001
Total
$’000
49,353
(21,855)
27,498
27,908
2,065
817
(3,292)
27,498
Balance at the beginning of the financial year
16,242
11,666
Additions
Additions through business combinations
Depreciation expense
Balance at the end of the financial year
Table notes
(a) The estimated useful life of buildings is 40 years.
652
–
(560)
16,334
1,413(b)
817
(2,732)
11,164
(b) The balance represents the net addition to leasehold improvements, office equipment and furniture, motor vehicles and
other fixed assets in the Group. There were no material disposals in the current year, hence not separately disclosed.
The offices in Sydney used as the Group’s head office are measured at cost. Based on the most recent transaction,
the Directors believe that the buildings have a value at least $15 million in excess of their carrying value.
101
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 15. 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
(i) 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
2018
2017
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$’000
Balance
$’000
1.13
1.85
–
297,904
89,596
–
1.06
2.33
6.75
261,074
68,545
(526)
3.99(a)
(219,240)
3.59(a)
(205,940)
168,260
123,153
3.79(b)
(75,000)(b)
3.79(b)
(75,000)(b)
(a) Weighted average interest rate excludes any applicable line fee paid to lenders.
(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 matured 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 2018, after taking into account the effect of the interest rate swap, the Group
had approximately 56.3% of the Group’s corporate debt exposed to variable rates (2017: 56.8%).
The Group held $0.102 million (2017: $0.116 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 (2017: one hundred) basis points would have a favourable/adverse
effect on profit/(loss) after tax of $1.178 million (2017: favourable/adverse effect of $0.862 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.
102
NOTE 15. FINANCIAL INSTRUMENTS continued
(ii) Price risk
As at the reporting date, the Group held the following securities:
Investment in ASX listed securities at cost(a)
Fair value adjustment(a)
Investment in non-listed securities at cost
2018
$’000
5,000
1,500
47
6,547
2017
$’000
–
–
–
–
(a) During the year ended 30 June 2018, the Group invested $5.000 million in Johns Lyng Group Ltd, an ASX listed company.
The investment is classified as financial asset measured at fair value through profit or loss. The fair value adjustment above
represents the market-to-market movement for the year ended 30 June 2018.
At each reporting date, these shares are revalued to reflect movements in the market value based on the ASX quoted share
price. The price risk faced on the Johns Lyng Group shares is incidental to the policy and is immaterial compared with other
market risks faced by the Group.
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.
The Group has funded $16.928 million (2017: $27.489 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.
103
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 15. FINANCIAL INSTRUMENTS continued
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
$’000
Over
5 years
$’000
Total
contractual
maturities
$’000
2018
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
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
3.99
3.59
659,812
38,489
2,822
1,097
702,220
60
60
533,975
49,551
5,222
1,031
589,779
–
–
–
2,812
1,124
1,099
5,035
–
–
–
3,788
1,366
1,643
6,797
491
491
–
–
–
–
–
–
659,812
41,301
3,946
211,790
211,790
13,999
13,999
227,985
933,044
–
–
–
–
–
–
–
–
–
–
60
60
533,975
53,339
6,588
221,661
221,661
3,346
3,346
227,681
821,583
–
–
–
–
491
491
* Paid to underwriters and insurers only upon receipt of premiums from customers.
104
NOTE 16. 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 17. 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
NOTE 18. EVENTS AFTER THE REPORTING PERIOD
FINAL DIVIDEND
2018
$’000
2017
$’000
11,471
26,423
3,980
41,874
9,429
17,582
2,065
29,076
On 23 August 2018, the Board declared a final dividend for 2018 of 4.7 cents per share, 100% franked. The dividend will be
paid on 20 September 2018.
NOTE 19. 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
Lease payments
2018
$’000
2017
$’000
14,159
2,484
12,858
86
13,298
11,820
105
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 20. 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. When granted, the awards in these two plans 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.
The key terms of the STI plan for 2018 financial year 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 2018 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 2018 STI in relation to the Group’s key management personnel are disclosed in the Remuneration Report.
106
NOTE 20. SHARE-BASED REMUNERATION continued
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 2017 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% (maximum at 10%) average straight line per annum diluted EPS growth
during the retention period; and
– 25% based on the Group achieving a minimum TSR at 50th percentile (maximum at 75th percentile) median of peer
group during the retention period;
• the rights will not accrue notional dividends during the retention period;
• 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 2018 LTI in relation to the Group’s key management personnel are disclosed in the Remuneration Report.
NOTE 21. TAXATION
A. INCOME TAX (EXPENSE)/BENEFIT
Profit before income tax expense
Income tax expense at statutory tax rate of 30%
Tax effect of differential corporate tax rate
Tax effect of amounts that are not (deductible)/taxable in calculating taxable income:
Share of after-tax profits of associates and joint ventures
Non-deductible items
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
2018
$’000
2017
$’000
124,665
104,559
(37,399)
(31,368)
276
–
4,348
(967)
4,212
(1,406)
(33,742)
(28,562)
(572)
2,190
(34,314)
(26,372)
(38,643)
(32,007)
537
4,364
(572)
(1,210)
4,655
2,190
(34,314)
(26,372)
107
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 21. TAXATION continued
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
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
Charged to profit or loss
Charged 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
Charged 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
2018
$’000
2017
$’000
785
9
794
4,212
7,866
1,122
1,893
1,863
2,468
19,424
3,419
13,808
17,227
537
785
875
264
(43)
221
2,789
7,119
2,044
745
2,252
2,278
17,227
8,284
9,575
17,859
(1,210)
264
314
19,424
17,227
(15,910)
(13,808)
3,514
3,419
44,868
18,602
5,771
2,989
72,230
50,655
13,808
64,463
41,451
16,919
4,676
1,417
64,463
55,342
9,575
64,917
(4,364)
(4,655)
(9)
12,140
72,230
(15,910)
56,320
43
4,158
64,463
(13,808)
50,655
NOTE 21. TAXATION continued
F. ATO TRANSPARENCY REPORTING
The Australian Taxation Office (ATO) publishes total income, taxable income and tax payable in relation to large taxpayers, with
the 2016 financial year being the latest information released. The information published is sourced from the income tax return
lodged by Steadfast Group Limited as the head company of the Australian tax consolidated group (which captures only the
entities that are 100% owned by the Group). On release of the 2017 tax information, we envisage the following will be reported:
Total income
Taxable income
Tax payable
Effective tax rate
2017
$’000
2016
$’000
292,098
326,539
61,320
4,550
7.42%
82,611
10,944
3.35%
The most significant reason for the low effective tax rate for the parent entity is that a substantial portion of its disclosed
taxable income is dividends received and the attached franking credits (derived from those entities paying tax) reduce the tax
payable by the head entity.
For a complete view of the effective tax rate, the following needs to be considered:
Tax payable
Tax paid by investees
Research & Development offset
Underlying tax payable
Effective tax rate (excl. franking credits)
2017
$’000
4,550
13,447
397
18,394
30%
2016
$’000
10,944
12,456
1,383
24,783
30%
The 2018 income tax return for Steadfast Group Limited is expected to have an effective rate continuing at circa 30%.
109
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 22. NOTES TO THE STATEMENT OF CASH FLOWS
A. COMPOSITION
Cash and cash equivalents
Cash held on trust
Bank overdrafts
2018
$’000
2017
$’000
76,746
66,537
310,856
263,198
–
(526)
387,602
329,209
B. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH FROM OPERATING ACTIVITIES
Profit after income tax expense for the year
90,351
78,187
Adjustments for
Depreciation, 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 (profit)/loss on fair value of investment
Capitalised interest on loans
Net gain on disposal of investment in subsidiaries and associates
Net gain from adjustments to deferred consideration estimates
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
29,270
(14,494)
(37,896)
15,857
(1,500)
(896)
(480)
(3,275)
5,034
2,372
24,749
(14,041)
(32,060)
14,064
803
(536)
(4,065)
(3,421)
1,994
6,459
(64,983)
(38,764)
780
57
71,114
38,757
(5,223)
(1,580)
(41)
4,806
104
50,005
27,896
(6,330)
(732)
(1,166)
123,224
107,952
C. SIGNIFICANT NON-CASH TRANSACTIONS IN RELATION TO INVESTING ACTIVITIES
Investing activities
During the financial year ended 30 June 2018, the Group had the following non-cash investing activities:
• allotment of 2.126 million ordinary shares (consideration shares) at $2.83 per share as part consideration for the acquisition
of Whitbread Insurance Brokers and Axis Underwriting Services (refer Note 10A);
• hubbing arrangements using the scrip of certain subsidiaries and associates (refer Note 10A and Note 12B).
110
NOTE 23. 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
Accrued share-based expenses
B. TRANSACTIONS WITH SUBSIDIARIES
2018
$’000
2017
$’000
4,872
4,267
119
68
2,760
7,819
116
59
491
4,933
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:
2018
$’000
2017
$’000
I. Sale of goods and services
Marketing and administration fees received from associates on normal commercial terms
Marketing and administration fees received from joint ventures on normal commercial terms
Commission income received/receivable from associates on normal commercial terms
137
2,706
119
153
2,529
144
II. Interest income
Interest income received/receivable from joint ventures
93
138
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
The following balances are outstanding at the reporting date in relation to transactions with
related parties:
a. Current receivables
Receivables from associates
Receivables from joint ventures
Dividend receivable from associates
b. Current payables
Payables to associates
703
3,650
57
774
3,398
10
11,274
213
295
6,378
102
-
1,357
126,480
111
Steadfast Group Annual Report 2018 Notes to the Financial Statements continued
NOTE 23. 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
2018
$’000
2017
$’000
603
4,512
5,115
–
–
–
–
603
428
1,031
1,206
4,673
303
6,182
(a) The loan to the joint venture, Macquarie Pacific Funding Group (MPF) has a face value of $603,125 (2017: $1,809,375).
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 in equal instalments by March 2020; 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.
Subsequent to balance date, the Board agreed to extend the term of the recourse loans to the Managing Director & CEO
and Executive General Manager – Direct, New Zealand & Singapore to 23 September 2021 at a commercial (floating)
interest rate. A trading lock will continue in place over certain shares held by each of the executives which may be sold
during a trading window with the approval of the Chairman, with a portion of the loan repaid as corresponds to the
shares sold. Dividends will first be used to pay interest on the loans and the balance used to repay the loan balances.
In the event of voluntary cessation of employment, repayment will be required within 12 months.
NOTE 24. PARENT ENTITY INFORMATION
The financial information provided in the table below is only for Steadfast Group Limited, the parent entity of the Group.
2018
$’000
2017
$’000
52,561
302
52,863
79,029
(14)
79,015
A. STATEMENT OF COMPREHENSIVE INCOME
Profit after income tax
Other comprehensive income
Total comprehensive income
112
NOTE 24. PARENT ENTITY INFORMATION continued
B. STATEMENT OF FINANCIAL POSITION
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Share capital
Reserves
Total equity
2018
$’000
2017
$’000
75,258
70,685
1,247,716
1,069,029
68,747
30,503
241,389
204,668
912,347
93,980
1,006,327
796,857
67,504
864,361
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 2018 and 30 June 2017.
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 16.
G. CAPITAL COMMITMENTS – PROPERTY, PLANT AND EQUIPMENT
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
NOTE 25. REMUNERATION OF AUDITORS
A. KPMG
I. Audit and review services
2018
$
2017
$
Audit or review of the financial statements of the Company and certain subsidiaries
1,464,318
1,387,251
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
107,000
–
114,445
221,445
80,954
80,954
Audit or review of the financial statements
302,731
261,103
II. Services other than audit and review of financial statements
Other services
Taxation advisory services
Other services
35,403
42,089
77,492
133,522
2,995
136,517
113
Steadfast Group Annual Report 2018 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 2018 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 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 2018.
3 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 2018 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 2018 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 2018
• 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.
Key audit matters
The Key Audit Matters we identified are:
• Valuation of Goodwill, Other Intangible Assets and Investments in Associates
• Decentralised Operations
Key Audit Matters are those matters that, in our professional judgement, 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.
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 2018 Independent Auditor’s Report
TO THE SHAREHOLDERS OF STEADFAST GROUP LIMITED
Key audit matter
How our audit addressed the key audit matter
VALUATION OF GOODWILL, OTHER INTANGIBLE ASSETS AND INVESTMENTS IN ASSOCIATES
Refer to Note 7, Goodwill ($816,246k) and Other Intangible Assets ($171,660k), Note 12, Investments in Associates ($138,743k),
and Note 3, Critical Accounting Judgements, Estimates and Assumptions.
The valuation of goodwill, other intangible assets, and
investments in associates is a key audit matter as:
• goodwill and other intangible assets and investments
in associates and interests in joint ventures represented
54.1% of the Group’s total assets.
• the high number of individual Cash Generating Units
(CGUs) (more than 70 at 30 June 2018), necessitated
our consideration of the Group’s determination
of CGUs and the valuation for each of the CGUs,
intangible assets, and investments in associates.
• the sectors in which the Group operates continue
to experience competitive market conditions during
the year. This increased the uncertainty of forecast
cash flows used in the valuation models (value in
use (VIU) and fair value less cost to sell (FVLCTS)) for
goodwill and other intangible assets and investments in
associates.
• we applied a significant level of judgment when
considering the Group’s assessment of impairment.
We focused on the Group’s valuation methodologies and
the key assumptions such as the forecast revenue growth
rate, discount rates and terminal growth rates underlying
the valuation models.
Our procedures included:
• We assessed the Group’s determination of CGUs based on
our understanding of the operation of the Group’s business,
and how independent cash flows were generated, against
the requirement of the accounting standards.
• We assessed the Group’s analysis of indicators of impairment
of other intangible assets and its investment in associates.
Working with our valuation specialists:
• We considered the appropriateness of the valuation
methods applied (VIU and FVLCTS) by the Group against
the requirements of the accounting standards.
• We compared the forecast cash flows contained in the
valuation models to the Board approved budgets. We also
evaluated the forecasting process undertaken by the Group
and assessed the precision of prior year forecast cash flows
by comparison to actual outcomes. We used knowledge
from this evaluation to inform our detailed testing focus.
• We applied increased scepticism to forecasts in the areas
where previous forecasts were not achieved. We compared
the forecast revenue growth rate and terminal growth
rate assumptions to external data on inflation rates and
projected revenue growth for the insurance brokerage
industry in Australia. We examined contracts and analysed
the impact from growth in business via the Steadfast Client
Trading Platform. We used our knowledge of the Group,
their past performance, business and customers, and our
general insurance industry experience in considering the
appropriateness of the forecast used.
• We independently developed a discount rate range based on
analysis of comparable companies using publicly available
market data, adjusted by risk factors specific to the Group
and the industry it operates in.
• We performed sensitivity analysis on the discount rate, and
forecast growth rate for key CGUs, placing focus on the
expected increase in forecast revenue growth rates from
usage of the Steadfast Client Trading Platform. Additionally,
we cross checked the valuation results against earnings
multiples inherent in the value of other comparable
companies.
• We assessed the integrity of the value in use model used,
including accuracy of the underlying calculation formulas.
116
Key audit matter
How our audit addressed the key audit matter
DECENTRALISED OPERATIONS
Refer to 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, and to a lesser degree,
the United Kingdom, 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 Group 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, taking
significant acquisitions made during the year into
consideration;
• 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.
Our procedures included:
• We instructed component audit teams to perform
procedures on the financial information prepared for
consolidation purposes by 21 components. The selected
components were significant to the audit of the Group,
either by size or by risk, included over 77% of the Group’s
revenue and 91% of total assets. The objective of this
approach was to gather evidence on significant balances
that aggregate to form the Group’s financial reporting.
• 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 significant to the audit of the
Group and to plan relevant procedures. There was additional
effort and attention given to our procedures on the newly
acquired businesses in scope for group reporting. We
discussed the component 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 those relating to
the recognition of revenue as part of our evaluation of the
component audit teams reporting to us.
• We tested the financial data used in the consolidation
process for consistency with the financial data audited by
component audit teams. We also assessed the consolidation
process for compliance with accounting standards.
• We selected the financially significant components where
KPMG were not the auditors and inspected the component
auditors’ files for consistency between the auditor’s opinion
and the underlying audit work.
• For the other components, not within the scope of the
component audit teams, our head office audit procedures
included testing the Group’s key monitoring controls
and performance of analytical procedures. We tested the
head office 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
head office and component management and considered
trends within the insurance market.
117
Steadfast Group Annual Report 2018 Independent Auditor’s Report
Independent Auditor’s Report
TO THE SHAREHOLDERS OF STEADFAST GROUP LIMITED
TO THE SHAREHOLDERS OF STEADFAST GROUP LIMITED
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 and our related
assurance opinion.
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.
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 and Company’s ability to continue as a going concern and whether the use of the going concern basis
of accounting is appropriate. 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 and Company 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_responsibilities/ar1.pdf. This description forms part of our
Auditor’s Report.
118
REPORT ON THE REMUNERATION REPORT
Opinion
In our opinion, the Remuneration Report of Steadfast Group Limited for the year ended 30 June 2018,
complies with Section 300A of the Corporations Act 2001.
Directors’ responsibilities
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 42 to 62 of the Directors’ report for the year
ended 30 June 2018.
Our responsibility is to express an opinion on the Remuneration Report, based on our Audit conducted
in accordance with Australian Auditing Standards.
KPMG
Scott Guse
Partner
Sydney
23 August 2018
119
Steadfast Group Annual Report 2018 Shareholders' Information
AS AT 31 JULY 2018
ORDINARY SHARE CAPITAL
There were 793,035,955 fully paid ordinary shares held by 5,046 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
427
1,449
607
1,527
1,036
5,046
737,789,739
45,999,560
4,647,215
4,046,217
553,224
793,035,955
93.03%
5.80%
0.59%
0.51%
0.07%
100.00%
There were 0 shareholders holding less than a marketable parcel based on a market price of $2.92 at the close of trading on
31 July 2018.
SUBSTANTIAL SHAREHOLDERS
Date of notice
No. of shares
% of issued capital
INVESTORS MUTUAL LTD
07/06/17
44,821,736
5.98%
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
ARGO INVESTMENTS LIMITED
UBS NOMINEES PTY LTD
MACKAY INSURANCE SERVICES PTY LTD
MR ROBERT BERNARD KELLY
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
STEADFAST SHARE PLAN NOMINEE PTY LTD
RC & IP GILBERT PTY LTD
RM & JA ALFORD INVESTMENTS PTY LTD
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
MR DAVID INGRAM
SANDHURST TRUSTEES LTD
Total
DIVIDEND DETAILS
Dividend
Interim
Final
Franking
Fully franked
Fully franked
No. of shares
% of issued capital
196,838,900
143,051,226
63,851,194
59,223,465
27,764,302
14,746,660
14,415,410
14,081,611
12,399,654
11,615,120
10,459,780
6,165,945
5,520,552
4,976,452
4,002,247
3,500,000
3,185,000
2,886,187
2,768,639
2,362,000
24.82%
18.04%
8.05%
7.47%
3.50%
1.86%
1.82%
1.78%
1.56%
1.46%
1.32%
0.78%
0.70%
0.63%
0.50%
0.44%
0.40%
0.36%
0.35%
0.30%
603,814,344
76.14%
Amount per share
DRP issue price
Payment date
2.8 cents
4.7 cents
$2.65
22 March 2018
*
20 September 2018
The final dividend has an ex-dividend date of 29 August 2018 a record date of 30 August 2018, a payment date of
20 September 2018 and is eligible for Steadfast's Dividend Reinvestment Plan (DRP), which carries no discount.
120
*The DRP issue price for the final dividend is scheduled to be announced on 10 September 2018
Corporate Directory
DIRECTORS
Frank O’Halloran, AM (Chairman)
Robert Kelly (Managing Director
& CEO)
David Liddy, AM
Gai McGrath
Anne O’Driscoll
Philip Purcell
Greg Rynenberg
COMPANY SECRETARIES
Linda Ellis
Peter Roberts
NOTICE OF AGM
The AGM will be held on Thursday
18 October 2018 at 10.00am at the
Hilton Hotel, 488 George 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).
Steadfast Group Limited
ABN 98 073 659 677
www.steadfast.com.au