By content director Saxon East
A £38m pre-tax loss can look a bit scary, at first.
But there is a reasonable explanation here from SSP, in that this loss mostly comes from non-cash items such as the impairment charge and shareholder loan interest. Furthermore, the firm’s leaders believe that the investment spend will produce positive results later.
SSP does have a leveraged capital structure. The £22.5m EBITDA to £128m bank debt is just shy of x6. Including the shareholder loans it is x10.5. There is a risk that most of the equity will be wiped out by the debt in a sale, leaving shareholders out of pocket.
That is why it is so important that management delivers on their strategic goals to help push up the earnings and get a bigger multiple.
Reaping the benefits
Management has a clear and credible plan: invest heavily now and reap the benefits later.
SSP management stress they are well over the outage issues, with robust IT and operational security
One of SSP’s big benefits is its scale across the whole of general insurance.
This means that brokers can enjoy the same operating capabilities as insurers through the Digital Insurance Platform. SSP customer Direct Line Group is one of the leading direct insurers.
Brokers can enjoy the same benefits as major insurers across analytics and intelligence, the digital experience platform, pricing and data, and customer communications.
The only difference will be in the core administration system.
Another important part of the strategy is moving brokers across to the Amazon cloud. This is a much more optimal operational platform and brokers will benefit.
As for insurers, SSP will grow a large share of its profits by winning more insurer customers and reaping the full benefits of higher margin recurring revenues once implementations finish. The SSP insurer customer base is international, meaning it has a potential global pipeline.
The plan is clear – now it’s up to management to deliver.
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