Steadfast first-half revenue jumps 27%

Steadfast’s earnings and revenue jumped significantly during July-December, boosted by strength in price and volume and “prudent” acquisitions, including Insurance Brands Australia (IBA).

First-half underlying net profit increased 18% to $90.2 million while revenue rose 27% to $662.8 million in the six months to December 31.

Underwriting agencies generated $1 billion of gross written premium (GWP), up 19% from a year earlier, while Steadfast’s brokers delivered 15% GWP growth to $5.6 billion.

It was the first result with no contribution from PSC Insurance Group since it departed the network. PSC will remain on the client trading platform until the end of May, Steadfast MD and CEO Robert Kelly told analysts today in a briefing attended by insuranceNEWS.com.au.

Mr Kelly says sustained price and volume increases and a “prudent” acquisition strategy again drove earnings growth for the half year.

“We’re very proud of what we presented and very strong that this company should continue along the lines articulated,” Mr Kelly said.

Steadfast last week raised its forecast for full-year underlying net profit to $198-208 million, and for underlying earnings before interest, tax and amortisation (EBITA) to $420-430 million.

In the first-half EBITA jumped 23% to $188.6 million, and Steadfast says earnings growth is skewed to January-June.

“The seasonality for our earnings – we think there is a strong second half coming up,” CFO Stephen Humphrys said.

“IBA, like the vast majority of our brokers, is more heavily second-half skewed,” he said. “The uplifted rate environment has a more meaningful dollar value impact on our second half organic growth.”

Further hardening of insurance premiums and a strong January result had led to the guidance upgrade, he said, subject to expected continued premium rate increases by insurers, and completion of a further $43 million of acquisitions by June 30, and acquisition growth meeting expectations.

“We’re going to assume that absolutely carries on through the rest of the second half 2023,” Mr Humphrys said.

The network is comprised of 342 brokers in Australia, 53 in New Zealand and 22 in Singapore, and Steadfast has equity interests in 70 brokers.

Steadfast has spent $177.7 million on acquistions so far this year, with 27 in the first half and a further 5 since the start of January. It says there is a $326 million pipeline of 49 more opportunities. In the first half, acquisitions contributed 13%, while organic growth of 9% was achieved on continued uplift in premiums by insurers and increased volume.

“The IBA acquisition in late August and other network broker acquisitions, including our trapped capital project, are performing in line with expectations,” Mr Kelly said.

Steadfast bought IBA, owner of Melbourne–based brokerage Insurance House and underwriting agency ProRisk, in August. Acquisitions made to date are forecast to contribute 4% net profit growth in fiscal 2024.

Steadfast’s statutory net profit in the first half fell to $84.7 million, from $104.9 million a year earlier. It says the reduction was due to non-trading items, including deferred consideration expense for “outperforming acquisitions” of $8.3 million.

“Slightly down from last year. Basically, it’s very simple to explain. We paid more for some of the businesses who exceeded what we expected them to do and under accounting terms, we have to take that off. It’s a great result,” Mr Kelly said.

Steadfast shares outperformed after the result today to be up more than 3% at $5.77.