Steadfast Group Limited (SDF) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Steadfast Group Limited FY '23 results. [Operator Instructions] I would now like to hand the conference over to Mr. Robert Kelly, Managing Director and Chief Executive Officer. Please go ahead.

Thank you very much, and welcome, everybody, to our tenth anniversary. It's been an exciting decade for this business. And I think the most exciting part for everybody who participates in this business is that what we said going back 11 years ago and put into the market 10 years ago, we struck diligently too. We haven't moved away from what we set up in the beginning, and I'll just refer you to Page 4, if you can put Page 4 of the slide up, slide deck up. Is it up? I can't see it if it's up. I can't see its screen. Sorry, everybody, I can't see it's screen. It's not much good for me if I can't see the screen. Okay. We'll get the technology right in a second. Okay. If you have a look at Page 4, if everybody can see it, I hope -- yes, we can. Just bear with us for a second. Please, moderator, can you put it on the screen so that we can look at what we're actually -- the people that are dialed in are looking at. Okay. Great. Thank you. So Page 4, sorry for the delay of doing that. I'm not going to go through that in chapter adverse, but that's what we've -- that's the DNA of what we've done. And I'm just going to call out some numbers, 11.6%, 22.5%, 15.4%, 22.7%, 26.5%, 20.5%. They're just some of the numbers that we have risen in the last 12 months -- over the last 12 months, and as I say, I won't bore you by going through what they will represent, but that's what we run the business on to maintain that status quo and make sure those graphs work in that direction. They work, by the way, from left to right, in case anybody was worrying that they may go from right to left. So I'll then go to Page 5, okay. This is the DNA of Steadfast. I mean -- and I guess it's a brag to say, but we have achieved 498% total shareholder return since listing. And I guess it's incumbent on you as a listed company to make sure that when you actually go to the market and take capital, that the people that give you that capital expect a return. And that's what we've delivered in the 10 years we've been together as a listed entity. I mean, part of what we set up in the beginning, back 27 years ago in Steadfast was pretty simple. We set up to design, the best network of insurance brokers in the Australian insurance market. Not the biggest, not to dominate in any way, but to be assured that if you went to a Steadfast insurance broker, you've got the best possible advice and you've got the best available policies and that you maintain some sort of status to get reasonable pricing that was effectively the way you could run your business or your personal life. How do we do this? I mean it's pretty simple. So this is a metric of what we did. We started on the left-hand side by saying, if we're going to ensure as a network, we have to have strategic relationships with our insurer partners. We've got to understand what they need to achieve. They've got to understand what we need to achieve. And we've got to work in unison to make sure somehow we can cut a pathway to do that. We've done that very successfully. If you go down on the left-hand side, the next thing that stand up in the beginning was Erato. We broke the back of, I would say, sums insured for [ Erato mission ] programs in Australia. We set our first link of $50 million. We now carry $100 million of coverage for any Erato mission that the group may make. We've diligently had that insurance with the same provider since 2004. It's almost unheard of in the insurance industry that a high-risk area on advice, it's insurance broking has been at -- had the same supplier by its -- for its program, in fact, for that period of time. We're very proud of that. Next to that, you'll see Goldseal, and that was a company we worked in cohort -- worked many, many years to make sure that the programs they develop for audits and for compliance were accepted by the group. And then luckily, over the last 2 years, we've acquired that company, and it no longer works for the general public. It's because of our network and its size, it works exclusively for us. It conducts audits for us on compliance. It conducts operational audits for us. It works on HR programs and it makes them our external supplier that we actually owned that works independently on the network to make sure that anything the network has got to do from the regulatory point of view, we get out of sight on. Then underneath that, the first thing we did was we formed an underwriting agency. We had experience in the Board with people who had done underwriting agencies, and we built the underwriting agencies back up to 29th, 100 niche products and $2 billion plus in turnover during this period of time, and indeed to our net profit, a 44% contributor to our net profit. Below that, we had to put business support into the network brokers. The network strength was designed to make sure that a small to medium enterprise broker, somebody at a country town with 5 or 6 employees could get the best information about how they should act for their clients and not. We built this by a whole lot of business support program. We help with the marketing. We help with broker services. We built a technical operating service menu, which was the envy of the market in 1999. It was unheard of in those days. But the diligence that we put into the small to medium enterprise broker to list them up to a situation where they are on the same level as basically an international broker. And wonderfully, we were able to get on board some lawyers that had great experience in policy wordings and we built triage. Now triage is designed plus there's an issue with a claim. We're not saying it's designed to get claims paid that shouldn't be paid. It's designed to give if there's a quantum issue or denials of a claim, a pathway of excellence for the SME broker to be able to take this client into another area, which analyzes what should or shouldn't happen and give an impartial view. It's now so well thought of by the general insurance industry that triage people come to us and say, "What does [ Michael Whyte ], who heads up tirage, think about this problem." Absolutely okay. Then underneath it, so to anchor this seems to be the best network we could possibly do. We had -- we made a decision to build our own back office underwriting system, our own back office CRM, our own back office software. It was a risk that we took 15 years ago. It was a risk that we brought into the public arena when we floated in August 2013, and it was again everybody advised. Everybody said, "You're wasting your time". We now have the best software program available for insurance brokers anywhere in the world. And on the back of that, we built the contestable platform, a client trading platform, allowing 1 piece of information to go into as many as 10 insurers to provide within 18 to 20 seconds absolute quotations on a comparable basis where they compete. Nobody knows what the pricing is. Nobody pays extra money. Nobody gets more commission if they do business with insurer A or insurer B. We built that at a time when the whole market was against that. Insurers didn't want to be put into a comparable basis. The incumbent electronic system in the market wouldn't allow that to happen, okay? We built this and now it's doing $1.2 billion in turnover. And then on the technology side, the back office system inside, it was brought into that 2025, not 1925 syndrome and it stands alone. On the right-hand side, we moved into selective reinsurance advice through Steadfast Re. They were a company that was the participants in Steadfast Re had a wide-ranging reputation in the reinsurance industry, works for another reinsurer. They dominated in Asia Pacific, a lot of the information that they had. And we went to them and said, these people would like to come on, and we bought them out of that business. Now we didn't steal them. We didn't pay them more money. We didn't go and come in 12 months' time. We went to the people they work for and said, "We want to do this", and we made an equitable and amicable arrangement to take those people out of that business. So that they could start day 1 with us and not having to worry about that where the clients would come. Everybody knew it was going to happen. And that's going on with helping side cars, helping people fill gaps in treaty and is well respected. Then what we felt was and the third button on the right there was we had to do something about alternative risk. We had to build altnets to the traditional way of insurance was being done. As insurance was climbing and cost as risks were opening up wider as there was more pressure on capital around the world, we had to come up with our risk division. Our risk division, Steadfast Risk Group now is the envy of the market. It can cover from surveys to client engineering help, to mutual. We do a captive. We run valuation program through it. It's the full risk analysis that you would want at any level, and I mean any level from the largest mine to the smallest operating system somewhere where somebody has a problem because they developed something and they need advice about what can be done. And it, while has invested in a system of fire retardants, which is now being run out. It's available very shortly through one of the major hardware stores, okay? And it allows the ability to put a coating over flammable materials and make sure that it does not burn. It's a fantastic program; 2 or 3 of the international insurers are very interested in it and 1 -- and a couple of our domestics are looking at it. This is what the risk group does. This is what differentiates our network. This is what makes where we go forward with what we do different. So when people look at us and say, "What differentiates you from your competitors?" The fact that we run the network to service the network's clients to be ahead of what's going on in the market to make sure that risk mitigation is what we do, not just how much you're going to pay for your next premium. Then below that, of course, succession came in place. What should we do, okay? How should we develop the business? People were selling outside our networks because they were scared. They've worked for many years to build up this asset. They were frightened about what they were going to do. They were frightened. They would sell and then they would go, I wish I had him sell. So that's where we morphed into the public company to provide capital to these people. And I'm very pleased to say that the people who joined Steadfast back 27 years ago and paid $360 [indiscernible] for their shares, those shares that they bought in the beginning, those 5 shares are worth today, $570,000. So the people who supported us in the beginning have done very well. And we've been able to do the acquisitions to keep people contained still in our network, still stay and derisk themselves in the point of view of when I want to sell, I want to have a friendly person there. And then we moved into premium funding. We have the second largest premium funder in Australia. We have a premium funding network, which has been fantastic to allow people that want to amortize their premiums over a period of time, the time to do it at an acceptable rate of interest, which is off balance sheet leading to. And then we run a series of complementary services, health lines, health care lines, legal health lines, compliance health lines, training days, webinars, our convention, the largest in Australia in insurance, a range of buying services that allow people when they have to spend money on something to be able to go somewhere where they can get a pricing mechanism that as if they were one of the major companies buying it. And of course, in recent times, we've been able to develop our ESG program so that we can uplift it and put it into a small company in a small area that says, this is what we do for the environment and where we go forward. That's the Steadfast network. That's why 10 years later, we're still here. That's why 10 years on from when we started it, we are the market leader in distributing intermediated business. It's not because we did a lot of silly things. It's because we stuck to what we said would work and what we said has worked, and the people who invested with us got an increase of 498% on total shareholder return during this 10-year period. Then you go to Page 6. If I've been passionate about, I'm sorry, but I am. So Page 6. The numbers speak for themselves, okay? EBITA, up 26.5%. We did $340 million last year. We did $430 million this year. NPAT, up 22.5%. We did $190 million (sic) [ $169 million ] last year, $207 million this year. NPATA, again, $205 million last year, $252 million this year, up 22.7%. Diluted earnings per share NPAT, up 14.6%, okay, from $0.175 to $0.2015. Diluted NPATA, up 14.9%, from $0.2137% to $0.2455. Final dividend, $0.09; total dividend, $0.15, up 15.4% year-on-year. And just to keep the financial review happy, our statutory earnings were ahead of the year before, okay? Quite a lot of people understand statutory earnings, but just to make sure that everybody feels happy, we'd have to explain that there may be a loss for a silly accounting error. We are able to say that we went from $171 million to $189 million. So go across Page 7 now. Thank you very much. This is our Trapped Capital. This is what we've worked on. This was why we -- this was why we formed Steadfast IPO, Steadfast ASX. It was the ability to allow people who build good businesses, strong businesses, the ability to be able to go to a friend and take some of that money off the table, okay? This FY '23 acquisitions, we acquired a brilliant business, Insurance Brands Australia, okay? We paid $286 million for it. We got $21.2 million EBITA for it, okay. Our 57 completed Trapped Capital acquisitions during the same year, we picked up $30.1 million and $287 million in acquisition costs. We've got a fabulous pipeline, okay? We've got 3 completed acquisitions that give us just under $0.75 million of EBITA. We've got 13 term sheet out there, which would result in a further $11 million. We've got 13 other terms sheets are in due diligence and 23 other opportunities. The future looks really good. And you'll see we've put there, there's $445 million in pipeline activities. You'll see that the future and the runway and where we are. We are nowhere through this. We are -- we have years of potential to go forward in our acquisition programs. And then if you go to Page 8. We complete accretive earnings acquisitions. We are not a company that looks to buy broken and poorly performing businesses and show what skill we've got. We want to buy quality businesses that get EPS growth and that when we work with them and show them systems and show them how to get organic growth, we will get organic growth out of those businesses. Now I say that in particular reference to organic growth because we've all been, one could say, [indiscernible] could have made money in the insurance broking issue over the last few years. I probably argue that and say not quite. It maybe that drove us, but not the [indiscernible] could have made money out of it. The reason being that eventually, there is going to be a piling off of this accretive year-on-year compounding growth of insurance premiums. Our job from the beginning this started was not to sit back and say how clever you were for making more money, but to say this increase is going to be, it's going to drop one day. And our job is completely to make sure that when it starts to play out and that's not going to start in the next 12 months for 2 years, I can tell you, there's still a long way to go. But when it starts, we want to make sure that the organic growth that we've been able to shake out of those acquisitions, shake out of the capital we deployed, makes up for that difference so that when the plateau start to occur, the growth of this business will be made up by the increased organic growth that will shake out of that business. So that's Page 8 for you. Basically, That's, in summary, it gives you the bar chart showing what we've done, please, reflects on them. And then if you go to Page 9, this is pretty exciting. With 2013 on the left, we acquired equity positions that gave us $1 billion worth of turnover and $2.9 billion that we did -- the network. If you run forward for today, the network is doing $11.6 billion for FY '23. It's increasing past as we head towards September now. But if you have a look at that 48% of our equity brokers, the $5.6 billion turnover. There's a further 7% there in that little piece of pie at the bottom, which allows our track capital to fire up and go forward. And then on the other side, there's still $6 billion worth of network brokers. So we have a very delicate thing when you look at our acquisitions and our sell down. I'll just for a second, bear with me. When we do a sell-down, which means somebody who works in the business, we sell them a percentage of our EBITA. And we are very keen to do that because our model says, "Hey, have people involved with you that of partners and work with you in the business and share in the capital value of the business". That's why we do it. okay. But when we do that, sometimes, we sell down $10 million, $15 million, $18 million worth of EBITA, it's a fantastic thing to do. But then all of a sudden, Stephen Humphrys, has got to turn around to me and said, "Well, you're not [ guiding ] me of last year's EBITA because you sold it to people, you have to make that difference up". So when you see what we've sold down and you see that we still have great accretive growth, and we've got past 10% or 12% growth, we've had to overcome those sell-downs as well. That's a fabulous picture to be in on Page 9. And I'll just finish with a couple at the moment, if you go to Page 10. This is an analysis of where we are and what we -- what our view is of the market. So if you look at insurance and reinsurance, the lack of cash has not made much difference whatsoever. Okay. The impact of noncatastrophe on whether people are taking more risk or not taking more risk or whether premium is going down is being obliterated by the attritional claims, which keep going forward and keep escalating and keep coming up. And I'm sort of -- I look at people say, "Oh, well, the whole world is going to change now and El Nino is coming because there won't be any more cats". And I hope to make reference to it. Of course, it's really sad, [indiscernible] is a classic example of what we are not getting flooded. We're not getting windstorms, although we will get windstorms. We will [indiscernible]. But -- and the people are saying, "Well, hang on, the insurance cycle is going to change." It's not. The wildfires [indiscernible] all around the world. You've got major insurers, not insuring houses in California. That's a dramatic move, okay? And [indiscernible] haven't been and the loss of life is horrific and terrible, is absolutely a microcosm of what is happening around the world with climate change. The potential impact on reinsurance, it's interesting to watch the debacle of Vesta, okay? So this is -- was a reinsurance company set up that when I was at Monte Carlo, the reinsurance [indiscernible] last year, everybody was talking about this incredibly agile new reinsurance company that had come around. And in many cases, it wasn't using capital. It was using a letter of credit, which is fine, except that -- just recently, in the last 3 months, 1 of those letters of credit was in fact tested. And when a letter of credit was presented, that was backing up a reinsurance program to the bank, the bank said, "This is not a letter of credit. We know nothing about this." So how that rolls out? I don't know. But what that may put on further pressure to the reinsurance market is where there is a whole lot of capital supported by letters of credit, there may be some more diligence that's put into that area. There may be some pressure put on people to say, well, are you backing this with capital or you're backing it with letters of credit? So it's going to be an interesting time. It's going to be a fascinating to see how that plays through the whole reinsurance market because it may realign how capital is allocated for reinsurance. If it does, that will mean cost of reinsurance and cost of capital, as you see around the world is going up, so it will be interesting. Okay. The next thing there, I went through regulation. I'll give you a summary of that, okay. If reinsurer -- commission, people think it's the best way to do it for distributing general insurance, okay? The retail clients, the definition stayed as what it should be. There's subjectivity about that, about whether the retail clients is being served in a way it should be. It's still up to a little bit of interpretation. But the 1 thing that came out of home, the 1 thing that came out of [ Michelle Levy ], the thrust that we're getting from regulators is the transparency of REMS should be omnipotent when really in any general insurance transaction. So overlying that, that's something that has to underline everything we do. And then Steadfast technologies. And we've put in that first thing there somebody precipitously said to me, "How do you say you're the dominated automatic comparative [indiscernible] system?" Basically because we travel the world, looking at what we do, and we look at every other automated system around the world. And we can't see anyone that does $1.2 billion worth of turnover through. So that's why we made that statement. It's not made because we had a few drinks and decided to travel around [indiscernible] that's what we thought. It's based on several years investigating, of going through meticulously what we want to do. So we've done well with our back office -- the slowdown and we're getting out more automated stuff. It's due to the fact that most of the insurers are struggling to get API connectivity. We're working with the courts out of New York to develop a universal API connector. Cyber has been a massive issue. I mean it makes me worried when people go, "Oh, you're increasing your cost of your head office?" Yes, we did. We increased our costs in head office by $3 million to put in further cyber protection of this organization. But if you want to have a look at what's happening in the cyber world, there is a change happening every day. So with the responsibility we've got, we have invested very heavily in profit that we could take to our bottom line and put it into our cyber protection. And then lastly, we sold off our MDA underwriting agency to Javelin. There is a slick group out of New Zealand. We'll work cooperatively with them. I think the blending of their young guys and our young guys could look interesting over time. Then go to Page 11. Succession. Nobody likes anybody in succession, I agree. I don't know who they're modeled on, but they're not very nice people. This is about our succession, sorry. Okay. The reality is we have spent the last 2-and-a-bit years, making sure that this organization is well placed if any of us walk out the front and the train runs us over -- we found that we had a great team. We found that we had mostly good people. We found we had the odd gap. And we filled that and we need to do some training. And also, we're able to bring on some people. You'll meet at the half year, Nigel Fitzgerald, who is coming as COO. We got him having now for nearly 14 years and doing business with him in all forms [indiscernible] other iterations we have. And we've moved Sam Hollman, our COO, into our international assets. So succession is something that we were front of mind, well ahead of people started asking me how [indiscernible] hang around and whether I could still manage to get out him a car and get him into my office unaffected? Well, I can, okay, between you and I. And -- but I'm also smart enough to realize that this juggernaut that we've created at Steadfast needs people smarter than me coming through to take it to its next level. And hopefully, that when you meet the people that are doing this, you'll be very impressed with what we've done there. And on international expansion, we've been looking for 5 years at where we should take the systems that we've done well, in New Zealand and Singapore and other places, too, okay? We made a conscious decision not to use UnisonSteadfast to do that. Of course, UnisonSteadfast does what it does well and we'll keep working that. And that's part of Sam Hollman remit to run through that. But we've looked -- and the place we think that is very simple for us to move into is the U.S. And everybody goes, "Oh, be careful in the U.S." I've been working on distribution in the U.S. for the last 14 years. I've been on the Accord board for over 10 years. And so we understand the nuances of distribution at all levels from the international down to the small tied agents in some backwater that nobody has ever heard of. We have designed what we want to do in the U.S. market. We had 6 targets to look at over the last 2 years. We've refined that down to a couple, and we will, by the AGM, be in a position to tell you about what we're doing on the international expansion. Lastly, ESG is a very important position for this organization. It's crucially important that we work hand in hand. We've promoted Joan, one of our -- who was a senior person with us to actually take part of that as an AGM. We've put resources into it. It's there. It's clear. It's unequivocal what we're doing. It's not -- we're not saying it for the sake of opening our mouth. We've actually got programs that fit into it. The most exciting part about that is that we can uplift these programs and put them straight into the network. And funny enough, we're getting over the last 12 months, a huge amount of our broker being asked, "Hey, can you help us with ESG, we're being asked about it." Okay. And then the last couple of slides here. I'm only getting out of time. I have to got a bit quicker. All right. Go to Page 12. That's -- this is pretty simple. This is our insurance broking network. Go to the right-hand side, GWP, okay, $10.3 billion up to $11.6 billion. Organic growth, 9.8%. And our AR network still continue to put in the mid-2.5% range. And new brokers 0.4%. So all up, our total growth, 12.8%, okay. There you can see the number of brokers in our network. You can see what else our client trading platform is. You can have a look at the EBITA that we produce, okay? This is all the sum of what we do. So if you go to Page 13. The underwriting agencies, continue, okay? We've used our robotics to cut back costs in some ways. It's not the cost back people, but to give more efficiency. Our long-term strategy means we have to work hand in hand with the capital providers to produce the profits for them, okay. It's not much easy -- getting a delegated authority and not producing a profit. They don't want to talk to you, okay. The higher premium rates have helped us. The inefficiencies of some of the insurers to respond quickly to that has allowed us the opportunity to gain more people that want to deal with the underwriting agencies. The ability to get them as a client trading platform has been fantastic, and our in-house data analytics is now starting to become absolutely germane to a negotiation with an insurer. They want to know what it looks like. The want to know what we can give them, what to go through. And we continue. We've got over 100 of these agencies. And then finally, on insurTECH, okay. We've got $1.2 billion going through it. We've got 205 brokers on it. We've done about 220 broker conversions, that will be the amalgamation. We've got 6 million-plus users using the system. We've got a slate of brokers that are lined up to join us, okay. The situation on the right is pretty clear. When we started in '16, we had nothing going through it. We're past the $1.2 billion mark on the client trading platform. And then if you go to the sweet spot that you've all put up with me talking about what -- how good we are and what we've done on the page -- please go to Page 15. Dividends were up 15.4% to $0.15. That's we set up in the beginning. We said, if you back us in a public arena, we will guarantee to give you around 75% of our net profit back by way of dividends and we'll guarantee to accretively increase our dividends each year to you, and hopefully, you'll get capital gain and we've delivered. Thank you, everybody. It's time I hand it over to the sensible part of the submission from Stephen who will give you the facts and figures, to say to you that everything we said probably could be right because this is where the money comes from. Thank you.

Thank you, Rob. And I also just want to reflect a little bit on the last 10 years, if we can, just before we get into the numbers. This is the tenth consecutive record results that the team at Steadfast has produced when you look at all the underlying metrics, be it revenue, NPAT. They've all grown, CAGR growth of 20% plus, EPS is 15% plus for the CAGR across this 10-year period. We've set guidance or exceeded that or upgraded, which has been fantastic to be able to report to you, even things occurred, it didn't stop our momentum. So 498% of TSR over that 10-year journey. If you look at just the growth in '22 and '23, which is $38 million, that's actually in excess of the $27 million we took to market in the first place in FY '13. We told the market upfront the initial return on capital when you reference to NPATA was 6.85%. That's now at 12.7% and looking to build another 100 basis points for next year. We took to the market really 2 key strategies that we would continue to acquire further businesses, but we will also, just as importantly, seek to get that organic growth. And if you think over the last 10 years, we really have outlaid $2.5 billion for businesses, of which, $1.1 billion has happened in the last 2 years. And if you just compare the aggregate EBITA of all our businesses compared to what they were doing when we bought them, they're now delivering 81% [ either ] on top of what we originally bought. And if you think that, let's say, if you just look at the first 8 years of acquisitions because the last 2 years, obviously, they haven't had that much opportunity to grow, they're doing close to 100% better than when we first bought them. So I think that actually does prove our record of buying astutely in the first place. It proves that co-ownership model that we have and it also evidences our track record of organically growing the businesses throughout the insurance cycle, be it soft market we had originally or the hard market that we've had in the last few years. The network really does, as Rob outlaid, is the solid foundation upon which all the other revenue streams have been built. We have always invested significantly back into the network to ensure we retain that significant, and I would say, unique competitive advantage. When we floated, we had 276 brokers distributing $3.9 billion of GWP, that's now up 3x. We bought a stake in about $1 billion of it. That's now up 5.6x. We've expanded into New Zealand, Singapore and of course, we've also bought a couple of other networks in Australia in that time, let alone accessing into unisonSteadfast globally. The agency portfolio, we believe, is the strongest in Australasia. At IPO, we had a stake in 2 agencies, now 29 with over $2 billion of GWP. The technology suite is the envy of the Australasian indeed, the worldwide market, we have constantly invested to ensure it is at the forefront of the [ purchase ] market. That development of the risk management tools is also powerful for an SME broker who on the -- which role to develop any of that, but it's available as part of their Steadfast membership. They are investments that keeps the network, not just solid, but growing and was the reason why they got those brokers in New Zealand, Singapore, et cetera. It is the base upon which we spring before into other revenue streams, the agencies, the premium funders, the technology, the risk management, the complementary businesses with confidence. We've always had that mindset of delivering not just short-term results, but always looking at the medium and the longer term as well. So with that, let us now look at the '23 results. And again, we go through what do we do to reconcile the statutory underlying results on Slide 17. As per usual, we removed the -- any gains or losses on the Johns Lyng investment. For some of our recent acquisitions, we actually paid a little bit more than what we expected upfront. That's because they performed better. So that's $17.8 million that we had to put through the P&L. But of course, we reverse that for our underlying purposes, not the worst $17.8 million we've ever spent. There was $1.4 million, where the estimate we had was a little bit too high. We write that back of course. Just specifically for insurance brands, it did deliver EBITA that we expected at the time of acquisition, but the earnings mix was a little bit more biased towards profit shares, and we negotiated not to be paying for any uplift in profit shares when we did the acquisition agreement. So we'll actually end up paying $7 million of that $25 million earn-out, which means we adjusted both the carrying value of that liability as well as the carrying value of the asset, and there's about a $0.5 million net adjustment on the balance sheet for that. And of course, there's always a few other amendments here and there, but they effectively neutralize out. Slide 18, if I could, headline, underlying results for '23. A further significant uplift in earnings over FY '22, we came in at the top end of our guidance range. With the interest rate increases, our EBITA actually went slightly over, that interest received goes into our EBITA calculation. But of course, the interest costs on our debt facility brings the NPAT back into that top end of our uplifted guidance range. Total revenue was over $1.4 billion, representing a 24% increase that flowed through to EBITDA, which has come in at $430 million, a 26.5% increase. NPAT up 22.5%. Earnings per share up 14.6%, reflecting the equity raise that we had to fund the various transactions during the year. That was at the top end of our 10% to 15% guidance range. Cash earnings up $47 million, increased to 22.7%. Cash EPS up 14.9%. Our equity brokers actually experienced a further uptick in volumes. So they're actually about 3% to 4%. And of course, the hard insurance market did continue during the second half. This was a record year of acquisitions with over $570 million outlay led by IBA and complemented by the Trapped Capital program. If you exclude IBA for a second, the average multiple we paid was 9.6x, just under that 10x downed multiple that we have for Trapped Capital. We exceeded the $220 million of Trapped Capital acquisitions. We had a net $242 million spend when you net down some equity sell-offs that we [ muted ]. So that actually contributed to a further 1% of EPS growth compared to our expectations a year ago. So let's just have a quick commentary on '23. We finished with a strong second half as we did predict with revenue uplifts flowing through the bottom line, meaning we actually did get the margin expansion that we predicted in February. Our bottom line results, top end of guidance. The premium increases in SME land have remained strong as we forecasted in February '23. Interest revenue and expenses, unsurprisingly were both up, correlated interest rate rises throughout the year. We have more money on deposits than we have in borrowings. So that, together with the hedges that we had up to January '23, in particular, for $150 million, means that we had a net for net $4 million tailwind before tax on the interest. Given that, that hedge is now finished, we think the FY '24 will see the interest rate increases, give or take, matching the finance cost increases. We still enjoy a $62.5 million hedge. So just a quick commentary as we -- just thinking of FY '24 going forward. We do forecast that those premium increases will continue at similar rates into FY '24, give or take, that 7.5% to 10% sort of bracket. We are looking at investing additional resources, particularly in our agencies, be that systems and people as well as more broadly that expanded cyber protection for the group, and we've also dialed in additional costs as we continue to review those North American opportunities. And whilst the outlook has got organic growth during the heavy lifting, it is complemented by $280 million of acquisition activity in FY '24, given that continued pipeline of opportunities in front of us. If you think 12 months ago, we said to you there was $400 million of potential opportunities. 6 months ago, we said that's actually now uplifted to $500 million. Now we're telling you, it's closer to $750 million, and of which, we've completed around $300 million. We anticipate fully funding those from debt or our free cash flow. So if anybody thinking there'll be an equity rate about to happen, that's not on the cards at this point in time, not this month anyway. The seasonality of earnings in FY '23 came in with that slightly higher bias for the second half that we did predict 44%, 56% for the second half. And that's, at this stage, what we would expect to see in '24 as well. Going to Slide 19. Our 26.5% EBITA growth for the last year was roughly half each between organic growth and the acquisition growth. Both of them were ahead of our original full year guidance expectations and both of them ahead of our first half metrics. As forecasted, that seasonality of sales with a fairly consistent cost base across the year means you get higher leverage of that sales growth through that bottom line. The organic growth was 17.3% in the second half alone. The amount of IT capitalized on the balance sheet was a little bit down in prior years, a little bit more of that gets expensed, but it's in line with the amount that we amortized for the year. So they pretty much netting each other off. So we continue to expand the SCTP sales. And of course, the rollout of the INSIGHT is progressing as we expected. The acquisition growth obviously contains the results of insurance brands, which has delivered the underlying results in line with what we purchased. That acquisition has embedded really well into the group and has now become 1 of the potential hubs to place some of our businesses into along with a few other hubs that we have in our group. In fact, they've already started to embed 2 of them already. Slide 20. We now show the results of the broking and the agencies as if we own them all 100% and removed any impact of profit shares. For the brokers and the network combined, our blended average ownership is now 77%. 73% is for the pure broking, and of course, we own 100% of the network. For the year, there was 12.7% organic growth in revenue that reflects that hard market conditions, as I said, as well as that continued volume growth. The premium increases were across, of course, most property lines. They've continued with the average premium rate rises being spread all the way through the year. We're at 70% leverage on the commission side. So that kind of gives you about 10% revenue growth of that 10% price increase and give or take 4% organic volume growth with 2% from bolt-ons. As foreshadowed, we knew there would be some additional costs coming back in the business post COVID. Also return to normality in FY '22 and a further progression of course, to what you might call the new normal in FY '23. The war on talent was certainly evident 12 months ago when most wages were set for the year ahead that will -- it's not as feverish as it was 12 months ago, but there's still the need to ensure that staff are appropriately remunerated and those salaries being adjusted, of course, where merit does require. In addition to those significant acquisitions, you have that, particularly in the broking space, they added 11.2% to the bottom line. Slide 21 on the agencies who we own about 90% of the earnings that you see here. For the fifth year a row, they really did trade ahead of expectations throughout the year with solid performances across most of the businesses there. Growth rate for the second half was about 15%, down from 19.3%. Rob and I have been saying for many, many years that the 19.3% was absolutely stellar, and it will lead to -- it will come back a little bit. It has come back a little bit to that 15%, still not a bad result. It's pretty outstanding. We think those revenue growth rates might moderate a little bit further. And as I said, we're going to invest a little bit more on people and systems there. So we do expect margins in that business to reduce a little bit next year, but still deliver some further earnings to the bottom line. Slide 22 on the cash flow. Our businesses convert profits into cash, has done every year, this year is no exception. We've collected all the profit and then some -- all our NPATA converts into cash. Our debtor days continue to be equal or better than our historical levels. Our premium funding arrears also continue to be below the pre-COVID levels. So we believe the SME is continuingly robust. Obviously, there's been concerns in things like construction sector, no surprise there. But the overall impact on SME is holding up really well at this stage. $168 million of free cash flow, of course, we invested that, as you know, as we talked about into the ongoing acquisition activity. Balance sheet, I wanted to highlight, particularly we've literally this last week have reset our debt facilities. We've increased it further $200 million to $860 million on the corporate side, up from $660 million at competitive margins, and we continue to retain that $300 million accordion on top should we need to activate that. So those facilities now extend some of them all the way up to November '28. So the 3 and 5 years, if you like, has been reset, and we've shown you the metrics on the slide of what they are. So as of today, we actually have $378 million that we could draw upon the facilities, excluding the accordion. Given that we've forecasted $280 million of acquisitions against that $445 million of opportunities, you can see why we make the statement we expect to fund those opportunities from the free cash flow and the debt. So unless further opportunities will present themselves, it's debt funding here. We are currently 19% geared. It is conservative. We have that 30% maximum. If we were to go to that 30% maximum, we could borrow $440 million on our corporate facilities to get to that point. We are actually happy to stay that relatively conservative and nudge our way up towards that 30% as time progresses. Obviously, given we've got more cash on deposit than what we borrow, we've talked about the impact of our interest rates on to our P&L. And we'll continue to enjoy that $62.5 million hedge, while we've got it until January '25. I'm going to hand that now back to Rob.

Thank you, Stephen. And for an accounting, you can see here's a few [indiscernible] support. I'd just like to say that when we came together just under 12 years ago, we were 2 different characters, but with the same dedication to what we wanted to achieve and our ability to work in the trenches with next to one another without any ego between the 2 of us, but just with a common goal, hey, we've got a big responsibility with this capital deposit you're giving, this has been a great pleasure for me in the last decade to be able to turn to Stephen and ask him a question and rely absolutely emphatically on honesty and expertise in that answer. So from my point of view, thank you, Stephen, to be on my right hand during this period. Okay. So just on the guidance for '24. Our EBITA, okay, we're predicting between $500 million and $510 million. Our NPAT $230 million to $240 million. We think our EPS diluted will probably be in the 10% to 15% range. People often say, "Why do you give that range? We give that range because of the variations that can happen in general insurance, okay? And our underlying NPATA between $277 million and $287 million. They are good numbers. We always tell you that the low range is what we can guarantee. The other range up above is where the variables in our industry could lead us to with our expertise. There's a few guides -- subjects to the following guidance, that's 4 points down there. From our point of view, that's the presentation, and I'll hand you now back to the moderator so that you -- if there's any questions that have come in, we're very happy to take them at this time.

[Operator Instructions] Your first question comes from Andrei Stadnik from MS.

Can I ask a couple of questions. My first question, can I ask around the guidance. Just thinking through it seems a bit conservative, given we've seen maybe around 10% pricing, and in addition, you have quite a strong pipeline of M&A-driven growth without any share count dilution as well. So just thinking sort of that guidance 10% to 15% range, that seem a bit conservative. Like what's holding you back?

If I can just give a couple of points. So first of all, our revenue growth, we're thinking more in that 7.5% to 10% bracket. So that might just dial a little bit down your expectations perhaps. The share count is just slightly up because of the weighted average going through the year from that last year's capital raise. There's about a 1% dilution that happens on that front. Probably, key thing is we are factoring in, I'd say that additional $4 million of interest that we didn't have to pay last year because of the hedge, but are now factoring in for this year. And we've also targeted the fact that we're putting a little bit of extra spend into -- for agencies to make sure that they stay the cutting edge on their service proposition, their systems or people such as to make sure that they retain that competitive advantage in the market. They are probably the key things that we have consciously held our results back to make sure that we have that sustainable proposition going forward.

My second question, can I ask around the SCTP? What is the opportunity to expand into other products? And if open banking, open finance ever gains traction, is that a further opportunity to expand the SCTP?

It certainly has the flexibility to do that, and it certainly was designed 15 years ago, where we made anticipation that, that could occur in the future. And it's also been the design that when certain sectors of the market may seem to not become unintermediated, okay, then this would fill that role. This in fact, the self-service arrangement suits the consumer. So yes, it has the flexibility to do that. It's not so much the product lines that we have to expand in the client training platform, is the automation of the existing product lines and the integration of more insurers in that contestable platform from that point of view. And so that's the thing that holds you back. And you have to have some empathy for the insurers. Their back-office systems carry so much data that they have to turn through that many of the systems that are indeed antiquated, you can't change them. The whole U.S. system bogged down by the fact that there's so much data contained in there that -- it's really difficult to do. So there's a few things to hold you back from that point of view.

Your next question comes from Andrew Buncombe from Macquarie.

And also congratulations.

We've got no choice Andrew. Hang on, and we got no choice to come on I suppose but we'd love to hear from you, Andrew.

And congratulations on a fantastic 10 years of being listed as well, hopefully many more. The main question that I have is just in relation to Trapped Capital. Can you give us some color around how you're structuring those deals? Do any of them have deferred consideration? Or are they 100% cash? Just some color on the structure would be great.

Really is a case by case, Andrew, where if someone is, for instance, retiring, then you want to make sure you have an earn-out mechanism to protect any downside risk from our perspective. Sometimes, the broker will have such confidence in the year ahead. They'd like to see if there's an upside as they stay around and build the business. So it is a case-by-case negotiation. Sometimes we have some mitigation, sometimes opportunities.

Yes. And I think arrogantly I'd say our understanding of who we're buying and the networks that we're getting into and what we're doing allows us to be very sophisticated in decision-making processes about where we take risk and where we don't take risk.

And then my other question was in terms of Trapped Capital again. Given the M&A basis has been such a big part of the group for so long, can you give us some color around how you get synergies out of your acquisitions? Are they primarily on the cost side or the revenue side? Just some color there would be great.

I think what you've got to do, Andrew, is look at the historical performance of how we've increased our organic growth and say that, that's something we know how to do, and that's private to how we make our money in. I'd love to share it with you, but unfortunately, you'd probably -- other people would hear how [ core ] we are about doing that, and that is commercial in confidence, but I'm happy to say it's on both sides. If -- a lot of people think that synergies only comes from costs. We actually have, as we tried to spell out quite a few different revenue streams and allows to connect a lot of more dots along the way. So there is actually opportunities both on the revenue and the expense line to get those benefits through. You've seen, obviously, plenty of times where we've had businesses. We bought 100, I'm going to say, 50 businesses now on the broking side, and yet we tell you we've got, what, 60%, 70% equity brokers that's a lot of businesses that have come together and hub together where you can typically get a lot of cost savings, for instance, on -- particularly on the back office rent, et cetera. So there's a number of tricks in the trade that we pull to get those synergies out.

And I think while others are selling part of their network we're actually selling part of our network, too, to ourselves, and we're amalgamating and bringing them together. And we're looking at how doing that, means that we get the ability to reduce costs.

Yes. And then the final 1 for me is just in relation to acquisition multiples. How confident are you that, that 10x multiple that you quote for Trapped Capital is sustainable over the medium term?

A year ago, I would have said it's going to be interested to see how it plays out. That's when you didn't have to pay anything to get you money, risk money coming out of New York 13% at the moment. I can tell you that's taking a different perspective, a lot of people that were borrowing money [indiscernible] into the multiples they are offering. And I think that there is a big chance at the moment, the 10 is going to look really good in another few months' time. Stephen, you might -- you've been on those...

Yes. And I do think for the multiples for what you might call those much larger businesses without paying north of 15x is not the multiple that you will see going forward. With 10x for, let's call it, a smaller brokerage, does seem to be the market, and there's still plenty of evidence around it that's give or take the number. But yes, your funding mechanism has to be considered to think through what is the right multiple all the time.

Yes. And I mean, there are some aggregators in the market there that have -- that have slowed dramatically over the last 60 to 90 days.

Your next question comes from Kieren Chidgey from Jarden.

A couple of questions. Maybe just starting on the premium growth in the broker network. I think you called out organic growth of around 10% for the year, but it seems to have moderated a little bit from what you showed in first half, 11.5% down to around 8.5% in the second half. So I was a little bit surprised just given the strength of the rate environment. Just wondering if you can provide any comments as to sort of what was driving that slight slowdown?

There are a couple of lines, more -- not in the property lines that are kind of starting to flatten our touch and that just gives you the overall blend of coming down just that notch. But property lines, which represents hard assets is 2/3 of what we sell. They are still very much going forward. There's just a couple of areas. I mean, you saw people like [ Marsh ] talking about, maybe it's slowing, but that's probably more the corporate high, very high in corporate end. SME is still really going quite strongly. It seems like pressure for the insurers to continue to increase is still very much there to push rate rises through.

Yes, I think, the adverse greedy grab for D&O, although Nigel Fitzgerald in the room here, and he was part of that when he was at AIG, so we might be extended by that statement that I've just made. Our D&O came down from just over $4 million to just under $3 million. So we had about a $1.1 million drop in D&O. People are going on the D&O markets collapsing, I would say that something we paid $700,000 for -- and are now paying just sub-$3 million. It's not a class -- It may become a rationalization that people just won't buy at that stage. So there's a couple of areas. But I mean, D&O is not the main game. Property is still very, very difficult at the moment. All around the world, you're right. And in fact, the [ shadow of the fiber ] at the moment, is going to be an interesting transition from readily available. We want to write it to -- yes, we'll write it, but you've got to do this, this and this, and we'll restrict that, that and that. So I think that there is some movement around, but by and by 7.5% to 10% growth in GWP over the next 12 months is conservative, but not ridiculously conservative in our view.

A second question just on the agency costs. My calculations, the organic cost growth was a little bit under 20% year-on-year, and you talked about sort of compliance and claims staff. I mean relative to what you've seen in '23, I'm just wondering how significant that additional investment is in those areas, in the agency business into '24? And whether or not, despite that sort of the margin we should expect still holding around that 50% mark?

Yes. As I tried to put on the commentary, we think the 50% will come back, obviously, 50% is an extremely a good number that all our competitors would only dream to have. So coming back a couple of points, while we invest, we think is the right prudent long-term solution. So yes, those cost increases we expect to push through. There is some elements of APRA, obviously being heavier on insurers and then -- because you are the sales agent for insurer, there will be some extra work you've got to do on compliance, et cetera, around that. But it is particularly on claims handling that we really want to make sure that we are at the forefront of the market. And it is 1 of the competitive differences that we think our agencies can have, should have and ought to have and continue to be #1 in.

Absolutely. And I mean we are probably 1 of the most regulated, some would argue over-regulated financial sector than anywhere in the world. People come in to this market and have a look at it and go, really we've got to do that sort of compliance, and we unfortunately, with the delegated authority have to have the same rigors as the insurer basically in how we operate, they have to check that we have those rigors. We have to check and make sure that all of those 29 agencies have them as well, and there's an on cost to do that, okay? So that's why -- and we tend to be proactive on that and make sure that we're at least up with the game, if not ahead of the game, so that we're not creating problems for our capital providers in terms of the -- as Stephen said, APRA is laying down rules for what they should do to their "outsourced capital". . So that's how we're class now by APRA, is an MDA, is an outsourced capital for an insurer. So it's interesting times. But you have to work with legislation, you have to work with regulation, and we're prepared to do that, and we do, do that. But -- and smartly enough Stephen's allocated some cost for that this year, particularly in the first half coming, is where we expect to see it, but we still are looking for, what I call, a double-digit EBITA uplift for that group. So investing heavily, but still looking to get that good bottom line. So I have to fight the rigors of [indiscernible] are that keep changing accounting standards and tell us, well, if you think you -- if you're putting on more client staff, you know those client staff are in your budget and their expenses allocated, you better take some of their money and allocate it towards us.

We actually had to put $3 million aside.

$3 million, large, we had to put aside.

[indiscernible] which normally would have been called revenue. However, that's the gaming standards. It is what it is.

Yes. Just let me explain that. We had to put $3 million into our expenses for people that are already in our expense budgets for the EBITA that we're predicting for the next 12 months. Over the top of what's in the budget and that's the accounting standards. It's great. And that went straight from bottom line.

Right. I might have to take that one off-line. And then the third quick question. Just -- and I know you flagged, you'll make more comments around the AGM on this but offshore expansion. Just wondering if you could provide now some very high-level commentary on how we should think about the size of that? And obviously, given that funding relative to your current capital headroom?

So firstly, that's a lovely question and please wait for the AGM. Secondly, we have plenty of funding.

All right. So internally, debt funded.

That's debt funded internally, yes.

Your next question comes from Siddharth Parameswaran from JPMorgan.

A couple of questions, if I can. Just the EBITA growth guidance into FY '24. I was just keen to know if you could just split out the contribution from acquisitions and organic and also just the timing of the $280 million spend? Is it actually -- I mean is it even through the year? Is it front-end loaded?

Yes. Thanks, Sid. The -- if you look at EBITA line, then the organic growth is probably circa 8% and acquisition is 7.5% to 10% sort of number. The -- if you look at perhaps some breakdowns of that, the $280 million is a slight bias of earnings or buying more upfront rather than back-end. So you get a little bit of run rate into '25, maybe perhaps a 3% sort of run rate EBITA growth into '25, but the heavier -- slightly heavier contribution this year. So obviously, next year's budget has some run rate of what we bought in '23 going into '24 as well as the impact of the $280 million. And then, as I say, some of that actually flows on into '25.

Okay. Just keen to ask a question, just also on interest rates. I mean you mentioned you made some comments around just some of the impacts of -- I think some of the hedges rolling off and that impacting your guidance on -- and of course this year result from interest rate costs. But just on the revenue side, within your broking business, I was wondering if you could just help us understand how much of a contribution there was from just margin income you make on the -- just on the client funds?

Yes. If you're very, very astute, you might actually get a term deposit rate that starts with a 5% but a lot of them start with 4% at the moment. But obviously, that's progressed during the year to get to that point. Yes, the hedge itself, we probably had around about a $3 million advantage in FY '23 that we will no longer enjoy into '24. So a good while it lasted. As I said, net for net across the whole business, be it broking or agencies, there was roughly a $4 million tailwind that we enjoyed in FY '23.

Sorry, that's from just deposit -- sorry just from interest that you're getting on deposits, is it that your brokers have, probably the agents have?

Yes, brokers and agencies have it as well. Yes.

Yes. Okay. Okay. Fair enough.

That's why we did put some extra details on the interest in the appendices, just so you can see how the interest line, interest reserve, interest paid does both work its way through in the numbers. So if you go to the appendices, you'll see more details there.

Your next question comes from Scott Hudson from MST.

Just a couple of questions. Firstly, Stephen, are you able to give us any sense of what proportion of the organic growth delivered through '23 was as a result of the uplift in volume coming through the SCTP?

It's -- you think of still we have roughly $200-odd million worth of extra revenue going through the SCTP. That's for the whole network. So let that is $100 million circa that relates to our equity brokers. And so there's probably a couple of million dollars of extra revenue that comes out of. Yes, 2 to 3 sort of revenue that comes out of that SCTP.

And margin?

Because, yes, just difference in commission rates. Now the -- obviously, every year, the more brokers put on to it, the more efficient they can get in terms of having to process that, that's a question they have to answer every year as they look at their staffing resources, yes. That's a harder 1 to judge as to exactly how many people.

And then just to clarify, you did say that you would be able to fund any or are you expecting to fund any U.S. expansion utilizing your debt capacity?

That's right. What we're looking at the moment is through debt capacity, yes.

Next question comes from Jason Palmer from Taylor Collison.

Just 2 from me. First of all, the [indiscernible] Are you able to sort of comment on how that renewal process is going?

[indiscernible] renewal sorry, [ Jayce. ] It's not in negotiation at the moment.

It's in April, if [indiscernible].

The only thing I think you could do if you want to put a question to Andrew Horton is QBE, who said when I had a very extravagant lunch, which was a chicken paneer and a glass of water with him at lunch yesterday was there is no way that we want to see CHU and QBE parting company. It's been a long established relationship and we're very happy with it.

Okay. And just one question on that sort of U.S. expansion. When you think...

Hang on [indiscernible] a while ago. Okay. Ask your question.

I didn't hear you, sorry. I haven't heard you. I didn't hear you, sorry, the U.S. expansion. Page 5, you talk about the Steadfast DNA. When you look at the 2 targets you've narrowed it down to, how does that differentiate from the Steadfast DNA that you've built over the last 30 years?

How is it different, targets in U.S.A., not surprisingly, will reflect our business strategy that we've adopted to date.

And what we've looked for in the U.S., okay, is we've looked for established targets that would benefit greatly from our established network and what we've done for the network and how we could keep their existing management team, their existing network and enhance it so that the people that were participating in it would go, "Wow, this is fantastic and that other people who considered joining that network in the future would go wow, with who went there, we get that. Does that help you a little bit?

It does, Robert. [ Just that ] you spend a lot of time going through Slide 5, and it was great to sort of hear the story of how you sort of put together the Steadfast network. And I thought there must be a bit of a gap between what's in the U.S. market at the moment and what you've delivered in Australia. So I was just trying to throw out a response there.

There's a considerable gap to the way aggregation is being done in North America and the way that we've built a network and grown externally into aggregation of that network. They are like chalk and cheese. Okay. And I guess if you sat at the table and you had the choice between chalk or cheese, you'd probably take cheese.

Next question comes from Siddharth Parameswaran from JPMorgan.

Stephen, I just wanted to clarify your comment about the extra detail on the interest income that you're showing. So just to be clear, am I to take away that there is about an extra $20 million that we spent on just some client balances on -- for FY '23 plus FY '22. That's quite a large contribution from higher interest rates, which of course changes the picture on organic earnings. Am I reading that correctly? Was that the line you're referring to?

Yes, that's right. Look, if you think across [Audio Gap] we started the year, interest rates were pretty much 0 on the term deposits and obviously have win their way up. So there's about -- you're right. About $20 million uplift on EBITA comes from that. And then the interest paid has also then had that $14 million expense going through the year as well.

It's a differential.

Sure. But I mean, when we look at your results, you showed the organic trends, et cetera, [ with that in there ]. I suppose, if we want to strip out some of the [ inorganically controller ] should we -- I mean is it right to strip that out in terms of thinking of how your business is organically grown?

Well, no, no, not at all. It's intrinsic of how a broker run their businesses to get those premiums and on their trust account invest, et cetera. So we always have counted as being part of their core whether interest rates are going up or interest rates were going down. But if you look at the results that we've got, yes, some of the organic growth has come from that, no doubt about it. But as I said, spread across both agencies and brokers. So just be careful as you think through the analysis there. And that's why the EBITA actually went ahead of the guidance range because the interest -- but you got to take it out -- is in your EBITA but then the NPAT obviously has to climb back interest expense as well. It's a true revenue stream, but -- and always was very important in broking not so much in the MDA side, but it was always a great income and now it's starting to come back again as a very viable income stream. So yes, you couldn't take it out. It is part of revenue.

No, I understand. But just -- I mean given that we have such a strong cycle as well. I'm just trying to understand, we're getting low-digit EBITA, underlying growth -- sorry, low double-digit underlying growth in EBITA that you flagged, but a lot of it seems to be from interest income. Is that -- and what we...

Well, don't forget on the expense line. As we said, we had to put around about 8% wage increases through for the year, plus we have the return of COVID expenses. So those things are always going to go work against us. And yes, the interest rates on the EBITA line works for us as does the premium rate. So we flagged all that upfront. Yes, we've always been pretty transparent that the costs would be a substantial increase, which we had to mitigate.

Okay. And just in your guidance, what you're assuming for expenses to expense growth at a broker level. And I mean, you flagged what's happening on underwriting agencies, but just on broker level [indiscernible] increases again? Or what's sort in the guidance?

Interest rate increases. Yes, look, we have...

Not interest rate, sorry expense, expense...

For expenses, on the broking side of things?

For the broking...

Let me just -- yes, yes, it's fairly consistent. There is, as I said, still wage rises to go through. Again, this year, given the war on talent and rewarding merit, et cetera. So that's going to come through. It's probably just a touch under this -- a little bit less than the '23 increase going into '24 because you've got some of those, what I would call, COVID expenses have now been starting to normalize a little bit. So it's -- probably it's a high single sort of digit, sort of expense increases we still have to expect to come through.

There are no further questions at this time. I will now hand back the call to Mr. Kelly for closing remarks.

Okay. Thank you to everybody who stayed online. I appreciate your interest. I hope we've been clear and unequivocal about where we're at. Just before I go, we've been -- we have a fantastic team that runs this SDF, a public company. And I just want to thank them publicly for what they've done. So keep the faith, and we look forward to the next 10 years. Thanks very much.

That does conclude our conference for today. Thank you for participating. You may now disconnect.