PSC earnings race ahead of guidance, acquisition focus shifts
PSC Insurance Group achieved better-than-expected earnings in the last financial year, driven by strong organic growth and past acquisitions performing ahead of plan.
The Melbourne-based broking group today reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 30% to $93.5 million from a year earlier, exceeding its $87-92 million forecast.
Underlying net profit surged 40% to $64 million, surpassing the $57-61 million guidance.
The business is anticipating this financial year to be better, forecasting underlying EBITDA of $105-110 million and underlying net profit in the $70-73 million range.
“It’s a great result,” MD Tony Robinson told insuranceNEWS.com.au. He says the performance is “a product of [the] enormous amount of effort and hard work from the people in the business working to help their clients achieve great outcomes”.
PSC says the business enjoyed organic growth of 13% on an EBITDA basis, which translates to about $9.6 million spread broadly across the three operating segments: Australia distribution, Australia agency and the UK.
“Market conditions continue to be broadly supportive,” PSC says.
On acquisitions, PSC says it completed 12 deals in the last financial year including regional Victorian brokerage Alan Wilson Insurance Brokers (AWIB) and the broking business of Alliance Insurance Broking Services.
PSC says the $17.5 million acquisition of AWIB has provided the group with a “market leading” position in the fire protection industry and expects future growth opportunities both locally, and in time, in the New Zealand and UK markets from the investment.
“All are performing well,” PSC said of the new additions to the group in the 2021/22 year. Acquisition growth across the group was $11.9 million.
The full-year year results underlined PSC’s successful UK expansion, with the business there now contributing 49% of overall underlying revenue of $254.3 million.
PSC says the UK business – which also includes results of its significantly smaller-scale Hong Kong operations – had a successful year with about $1.25 billion in gross written premium (GWP) and underlying EBITDA rising to $39.1 million from $28.6 million.
The Australia distribution segment – comprising of insurance broking, including PSC Network Partners, life broking and workers’ comp consulting – achieved $950 million in GWP and improved its underlying EBITDA to $48.3 million from $39.7 million.
The Australia agency business – made up of underwriting agencies including Chase, Breeze, online travel and medical – recorded $130 million in GWP and about $11.1 million in underlying EBITDA, up from $6.8 million.
Looking ahead, PSC has signalled a change in acquisition strategy, especially in the UK where it has seen “eye watering levels” for some opportunities and chosen not to proceed.
Mr Robinson says future acquisitions similar to the Tysers joint investment may occur if the right opportunities come along. AUB announced in May it is buying UK-based Tysers for $880 million and has a non-binding agreement with PSC for it to own half of Tysers’ UK retail division as part of a 50/50 joint venture.
“We’ll look for some opportunities where there might be joint ventures but also we’ll focus on smaller acquisitions where the prices haven’t moved as much,” he told insuranceNEWS.com.au.
He says Tysers is “fairly priced but full of great people and it’s a retail business [where] we’re looking to increase our presence”. PSC is contributing about $60-70 million to the joint venture.
