Company insists it can cope with tough conditions after revealing £22m loss to March
Broker technology provider SSP’s losses have widened amid tough economic conditions and cost-cutting by clients.
However, the company asserts it is in a strong position to cope with the difficult environment.
SSP’s growing loss comes at a challenging time for broker technology providers.
H&F Sensor Equityco, SSP’s holding company in the UK, made a loss after tax of £22.1m for the year to 31 March 2011, a 22% increase on the £18.1m loss it made the previous financial year.
SSP’s growing loss was prompted by lower revenues, higher cost of sales and increased interest payments. The lower revenue was prompted in part by the sale of subsidiary Media Maker in 2010. Excluding the effects of Media Maker, SSP would have achieved organic revenue growth of 1% to £71.2m from £70.6m.
SSP derives 80% of its revenue from the UK. The company, which was formed in 2002, estimates that its broker systems division has a 50% share of the UK market. SSP was bought by private equity firm Hellman & Friedman in September 2008.
The biggest contributor to SSP’s loss was £29m of interest payments (2010: £26.4m). Operating profit before interest payments was £5m (2010: £5.8m).
SSP’s broker systems division saw profit before corporate expenses fall 4% to £15.7m from £16.4m despite a 5% increase in revenues to £51.4m from £48.9m.
The insurer systems division made a loss of £993,000 in the 2010/2011 financial year, compared with a £2m profit in the previous financial year.
The insurer systems division’s revenue dropped 15% to £19.8m from £23.2m.
Despite the deteriorating results on a statutory accounting basis, SSP chief executive Laurence Walker praised the company’s performance during the year.
The company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) and reorganisation costs was almost unchanged at £14.6m compared with £14.7m.
Walker also highlighted a sustained EBITDA margin (EBITDA as a percentage of revenue) above 20% despite start-up losses and investment in products and management systems, and organic EBITDA growth pre-reorganisation costs of 5% to £15.7m from £14.9m.
In H&F Sensor Equityco’s 2010/11 results filing with Companies House, Walker said: “2011 has been a further year of strong financial and operational performance from SSP despite turbulent global markets and slow growth in the UK economy.”
Walker was also upbeat about SSP’s levels of repeat business, which accounts for almost 75% of group revenues.
While brokers are struggling to grow and are cutting costs to compensate, Walker said that brokers’ efficiency drives were playing into SSP’s hands.
“In the UK broker market, the focus remains away from external consolidation towards internal efficiency,” he said in the filing. “Rates remain low in the personal lines and SME markets, placing pressure on margins. Within this context, stable and efficient processing is a priority and we work hard to ensure outstanding levels of service and constant availability.”
He added that the prospects in the insurer market were better internationally than in the UK, mainly due to the differing economic conditions and regulatory environments of each territory, central
bank intervention and volatility in the eurozone.
The company is aiming to develop its business further in Africa and Asia, and is looking at its options in North America.
SSP is also continuing to streamline its broker administration platforms, with a view to providing better functionality across a smaller set of packages.
The company expects its S21 (Pure) and Insight (Select) platforms to be the mainstay of its future broker offerings.