SSP bosses hail positive transitional year as firm invests for growth

“It was, overall, a pretty positive year for the business,” Steve Lathrope summed up as SSP published its financial results.

In the year to 31 March 2018 the business saw Ebitda decline to £22.5m and turnover slip by 3% to £85.3m.

SSP’s chief executive explained the company was two years into a four year investment period and was focused on improving the fundamentals of innovation and service.

R&D spend
The group upped its spend on research and development by 10% to £8.8m in the period and he highlighted the SSP’s Digital Insurance platform, SSP Cloud with Amazon Web Services and SSP Broking as key areas.

SSP Digital Insurance is now live with larger insurer customers however cloud-based SSP Broking has “taken longer than we expected” Lathrope admitted.

It was first unveiled in June 2017 and Lathrope committed that the first broker would go live on the service in the first quarter of 2019.

“It is a massive investment and I make no bones about it that we are three months plus late but that is because we have taken care to do the engineering properly and not to rush to the line,” he said.

Lathrope detailed that many of the services and native cloud components were already available to brokers but the final step of bringing out the full bundle was yet to be taken.

“It would have been relatively easy to move existing software into the cloud but that isn’t building the right technology for the future,” he observed.

Migration
The company has more than 700 broker clients and Lathrope stressed that there would be no forced migration.

“It will become available to segments of our customer base of the course of next year,” he continued.

“We are not going to rush our customers off their existing platforms. Frankly broker software houses have done that in the past and it hasn’t gone well.”

He predicted that customers would embrace the change and said many were eager for it. The target is to migrate “virtually all” brokers within three years.

“We are applying more of a carrot and less of a stick in encouraging the customers to move to the new platform.”

Outage
The technology house suffered a major outage in August 2016 that left hundreds of brokers unable to access the services for weeks.

Lathrope, who replaced Laurence Walker as CEO in August 2017, has previously expressed his regret for the outage and reaffirmed the company’s mission “to make sure the kind of experience that our brokers had in 2016 never happens again”.

He said: “Our broker customers should have every confidence that SSP is committed to providing a very resilient, robust service.”

To help fund the investment the backers added £7.6m to the coffers and management also put in another £300,000 during the financial year.

Lathrope stressed it was not to pay day to day bills but was a strategic investment.

Confident
As well as funding future developments the money has been spent on keeping existing services robust.

“I would be confident that we have addressed everything that we need to,” he said.

While the current software may only have a further shelf life of three years during the transition to the cloud Lathrope underlined that the ‘Heartland’ programme had seen “investment on raising the bar on service provided to brokers through existing software”.

Employing more staff was part of the process.

Head count rose from 704 to 773 during the 12 months and continued to rise after the end of the financial year.

However, Lathrope confirmed that a restructuring process was currently in place. A consultation process is open which could see more than 20 people being made redundant in the UK and 50 globally.

The process is due to end next week so the company “can provide certainty before the end of the year”.

Employees
The overall net effect will still leave SSP with more employees than in 2016.

“It is a list of small changes rather than a big team being removed,” said Lathrope.

The financial figures for 2018 showed an accounting loss of £38.2m.

Chris Pennington, chief financial officer at SSP, noted that the business had written down £25m of goodwill.

The company made the move after the annual re-evaluation of projections dating back to 2015.

“We have taken a more cautious view,” he stated. “Rather than saying it is growth every year we have recognised that we are in an investment phase.”

Prudent
The movement was a non-cash effect on the business and Pennington described it as a “more prudent” future forecast in a transitional phase.

He also delved into the dip in Ebitda and revenue.

As revealed by Insurance Age in 2016, Swinton moved from SSP to CDL in 2017.

It was the defining factor in the reductions.

However, Pennington drew out the positives from the numbers noting why a granular view of Ebitda was the true measure to monitor.

Revenue
He explained that while recurring revenue from subscriptions and transactions had indeed declined, implementation revenue – delivered by bringing new customers on stream – showed a strong order book and was good news.

In short, these customers will rebuild the recurring revenue stream of years to come.

“Ebitda cuts out the noise and puts us in a comparable position year on year,” he concluded.

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