What: Shares in insurance broker Austbrokers Holdings Limited (ASX: AUB) have fallen over 4% today after the company released its full year results. The price action is quite the opposite of that experienced by its peer Steadfast Group Ltd (ASX: SDF), which rallied 8.3% after delivering a set of results which pleased the market.
So what: Austbrokers reported a fall in its statutory profit of 16%, however on an adjusted basis net profit after tax increased 10.5% to $35.5 million. Impressively this is the ninth year in a row that the broking firm has achieved a double-digit gain in underlying profits!
The growth in profits has meant growth in the dividend too – it was raised by 8.5%, bringing the total distribution for the 12 months to 38.5 cents per share.
Now what: Management is focussed on improving the group's operating model by increasing shared services across its network of brokers. It also expects organic growth to occur complemented by acquisitions and start-up investment opportunities across all three of its divisions. These initiatives have led management to forecast FY 2015 adjusted profit growth of between 5% and 10%.
Valuation: The guidance implies that Austbrokers will struggle to make it to ten consecutive years of double-digit profit growth. This certainly could impact the market's rating of the stock.
On an adjusted earnings per share basis, earnings increased 6.5% to 60 cents per share. With the share price trading down near its 52-week low and on a price-to-earnings ratio of 17.1, Austbrokers is a stock worth watching given the high quality, defensive nature of its earnings. However, given the lower growth outlook it may not yet be time for investors to pounce.
