The PSC Insurance Group Ltd (ASX: PSI) share price is trading down 3% following the release of the insurance broking group's half-year results.
PSC Insurance results
PSC Insurance reported underlying operational revenue of $74.6 million, up 38.8%, with growth driven by acquisitions. Underlying costs increased from $39.5 million to $55.9 million.
Meanwhile, underlying core business earnings before interest, tax, depreciation and amortisation (EBITDA) increased 31.1% to $18.8 million, up from $14.3 million in the prior corresponding period (pcp).
Acquisitions contributed $20.1 million in incremental revenue and $7.1 million in incremental EBITDA.
The insurance group grew net profit before tax by 6.7% to $11.8 million from $11 million in the pcp, while net profit after tax (NPAT) rose 13.4% to $8.8 million, up from $7.7 million in 1HFY19.
Underlying earnings per share increased 17% to 4.2 cents, up from 3.6 cents per share in the pcp. A dividend of 3.5 cents per share was declared, fully franked, an increase of 13% on the prior period.
PSC Insurance's performance during the half was led by acquisitions, while the company has strengthened its platform to better enable continued organic growth.
Expanding geographies
During the half, PSC Insurance diversified its premium pool by segment and geography. With this, the company gained access to the large United States market via its acquisition of Paragon International and increasing its business in the UK to take advantage of lower tax rates and larger market opportunities. The Paragon acquisition provides for geographic expansion with the majority of income from its US client base.
Market share in Australia has grown through the acquisition of Griffiths Goodall Insurance Brokers, amongst others. Both Griffiths Goodall and Paragon have been integrated into the business as stand-alone business units. Carroll Insurance and Walker Insurance have been merged into existing business units.
The size and scale of the group has grown strongly during the period, particularly following the Paragon and Griffiths Goodall acquisitions.
Balance sheet
PSC Insurance reported total cash of $79.7 million at the end of 2019, up from $46.6 million at 30 June 2019. Borrowings stood at $135 million, up from $55.8 million in the pcp. The ratio of gross debt to EBITDA was below 2.5 times, and less than 2.0 times after adjusting for investment assets.
The group raised $35 million in equity capital during the half to assist with acquisition activity.
A UK-based debt facility of £35 million was completed, with capacity to increase this to £85 million to support UK activity. The facility provides the group with additional flexibility in gearing levels and will support acquisition-based growth opportunities. PSC Insurance believes its balance sheet retains capacity for growth.
Further acquisitions
The insurance broker has been building a strong pipeline of acquisition opportunities, identifying and seeding a small number of new business ventures.
The acquisition pipeline includes opportunities in Australia and the UK, and the possibility of taking a holding in a small business in Hong Kong to test the opportunities in that region.
