SSP Group, the market-leading provider of business IT systems and services to the general insurance industry, has published headline results for the 12 months to 31 March 2012.
Highlights
· Revenue £71.7m (2011: £71.0m)
· EBITDA margins up to 25.0% (FY11: 22.2%)
· EBITDA up 13.8% to £17.9m (FY11: £15.8m)
· Three year rationalisation and integration programme implemented
· Key new client wins in South Africa, Asia and Australia and continental Europe
· Continued investment into new markets and products
· Strong forward revenue visibility with 75% recurring revenues
Laurence Walker, Chief Executive of SSP Group, said:
"The last few years at SSP have been focused on developing the business' maturity and capabilities. We have made significant investments in our products and services as well as our people. The economic backdrop and our investor support have provided us with the opportunity to undertake a transformation in all the key aspects of the organisation.
“SSP has emerged from this investment period with new products and services to address the new challenges in the global insurance technology market.
“Our new subscription based revenue model has provided us with even higher levels of recurring revenue, which gives us greater predictability in our earnings and consequently underpins the long termfuture of the business.
“The Group’s transformation is reflected both in its results and in the new customers we have won across all our product lines and territories."
Strategic overview
Over the last three years the Group has implemented a comprehensive integration and rationalisation programme of eight acquisitions. The business has also been transitioning its revenue model to a subscription-based one in order to improve visibility and bring revenue recognition in line with the length of contracts. SSP now has visibility on 75% of its expected revenues, most of which is derived from maintenance contracts.
SSP’s focus on professional services, quality of delivery, and broadening of the product set – all of which all help insurance organisations reduce their administration costs – supports the ambition to grow recurring, subscription-based revenues.
SSP continues to develop long term value enhancing relationships with its customers, operating in both UK and global markets, with typical engagements of three to five years.
Financial performance
This has been a year of strong performance despite the tough economic backdrop, with EBITDA of £17.9m generated on revenues of £71.7m, both increases on the prior year.
Revenues from the Insurer division, which is responsible for the supply of software and services to insurance companies in the UK and overseas, increased by 8.2% to £21.5m (2011: £19.8m). SSP has continued to invest in this business, with the acquisition of BES in South Africa and a 25% investment in the South African insurance portal, Webgate.
The broad geographic spread of the Insurer division, and location in growth markets including Africa and Asia Pacific, has helped to mitigate slower conditions in the UK.
The Broker division reported slightly lower revenues of £50.2m but showed a positive increase in the recurring revenue base.
Group EBITDA was £17.9m, up 13.8% (FY11: £15.8m), which converted to pre-financing cash flow of £10.8m. Cash at the year-end increased to £12.8m (FY11: £11m).
The Group has invested in product development throughout the year, as well as continuing the £15m programme to deliver SSP’s private cloud offering. This investment underpins the ambition for future growth and service delivery and will serve to bolster SSP’s software as a service (SaaS) offerings.
Products and services
The Group has worked to develop and rationalise its products over the last three years to ensure SSP provides a simple set of modern, functional offerings that meet its customers’ requirements.
SSP Select Insurance has been at the forefront of development and now enables customers across all three key territories of UK, Africa and Asia to operate on an enterprise Java solution. A number of major customers are now live on Select Insurance. SSP has also secured an engagement to migrate its largest l90 customer onto Select Insurance with a pan-European implementation, demonstrating the capability of Select Insurance to meet the requirements of legacy product customers.
Expansion in Asia and Africa has required the development of multi-language systems, as well as territory specific product and trading platforms, which is an exciting growth area for the company.
Broker division customers continue to migrate away from legacy systems, and take advantage of SSP’s cost-effective subscription-based offering.
SSP is continuing to make significant investments into its private cloud network in order to centralise broker platforms in both commercial and personal lines. This investment will strongly benefit the Group’s Pure Broking and Select Contact Centre platforms, which will gain traction alongside increasing demand for and monetisation of data and analytics in the industry.
Markets
Whilst the UK insurance agents and brokers sector has struggled to register growth in the last five years, new research from IBISWorld suggest that the market will recover to grow 5.7% this year to £33.4bn.
The next five years are set to see strong demand for general insurance as consumers build assets and seek to free-up more disposable income. Given that the UK general insurance market - the third largest in the world - is estimated to grow to £49.9bn by 2015, from £42.5bn currently, there still remains a substantial opportunity for SSP in the UK.
The previous years of tightened IT budgets and a renewed need to save costs has resulted in insurers realising the benefits of upgrading slow, inflexible and inefficient legacy systems. Solutions, such as SSP’s Select Insurance product, provide these facilities as part of the core administration system and opportunities in this area will fuel long-term growth in both divisions.
Select Insurance has also been well received in Africa and Asia Pacific. These are key growth regions for SSP, and the Group has been working to expand and fortify its reach in these territories.
SSP has delivered strong operational and financial performance in FY12, achieving revenue and EBITDA growth against a challenging economic backdrop. The Group has gained traction in key emerging markets, including Africa and Asia Pacific, and this has helped to offset some softness in the UK. Heightened focus on cost controls within brokers has propelled demand for SSP’s efficiency enhancing products, which generate tangible and measurable ROI.
Growth has not been achieved at the expense of investment. SSP has continued to develop its key product offerings as part of an overall strategy of rationalisation, as well as pursue major upgrades in the facilities offered to customers. The ongoing investment in state-of-the-art secure private cloud capabilities supports the Group’s competitive SaaS offering and sits alongside the functional advances being provided in the product.
Across all product sets and all territories, the Group will continue to look for opportunities to add value to its long term customer relationships.
Industry commentators are forecasting growth in SSP’s core markets, so despite the sluggish UK economy, the combination of new products and services plus the Group’s market position means that SSP is confident that the business will continue to go from strength to strength.
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