The Steadfast Group Ltd (ASX: SDF) share price has been put on ice on Monday. Shares in the general insurance broker network are frozen at Friday's closing price of $4.69.
This follows a busy start to the week for Steadfast with the company announcing its full-year results, a major acquisition, and a capital raising all together on Monday.
Let's take a closer look.
Steadfast share price halted on FY21 results and acquisition
- Underlying revenue of $899.9 million, up 8.9% from prior year.
- Net profit after tax of $143 million, compared to a loss of $55.2 million in FY20
- Earnings before interest, tax, and amortisation increased 17.6% to $262.7 million.
- Diluted earnings per share up 18.8% to 15.1 cents per share
- Fully franked final dividend of 7 cents per share, up 16.7% from prior corresponding period
- $411.5 million acquisition of one of Australia's largest privately owned insurance broker, Coverforce
- Capital raise via a $200 million underwritten placement
What happened in FY21 for Steadfast?
The Steadfast share price remains frozen heading into afternoon trading on Monday. As such, it is hard to tell how investors have received the broker network's latest full-year results.
According to the release, Steadfast achieved underlying revenue of $899.9 million during the financial period – representing an increase of 8.9% on the prior year. The increase was the result of management continuing to execute on organic and acquisition growth strategies.
Likewise, the bottom line reflected an improvement in the business. Statutory net profit after tax swung to a profit of $143 million. Comparatively, Steadfast experienced a loss of $55.2 million during the previous financial year. However, the loss in FY20 was due in part to the cost of acquiring IBNA and the PSF Rebate Offer.
Furthermore, Steadfast reported strong growth driven by the continuation of the hardening insurance cycle. The solid performance allowed management to declare a fully franked dividend of 7 cents per share. This brings the full-year dividend to 11.4 cents per share, representing an increase of 18.8% on the previous year. An improved dividend payout certainly bodes well for the Steadfast share price.
Moving over to the acquisition, Steadfast has entered an agreement to acquire 100% of Coverforce. This company is one of Australia's largest privately-owned insurance brokers, primarily focused on small and medium-sized enterprises.
Steadfast will pay a total consideration of $411.5 million for the acquisition. This will be comprised of a $200 million underwritten placement and a $217.8 million scrip to vendors of Coverforce.
What did management say?
Commenting on the result, Steadfast Managing Director and CEO Robert Kelly said:
Steadfast has delivered a strong FY21 operating and financial performance, demonstrating the strength of our network, platform and resilient business model in the current environment.
Management continues to execute on both our organic and acquisition growth strategies and as
a result we have delivered a 20.2% increase in underlying NPAT to $130.7m, which is at the top
end of our upgraded guidance provided on 28 April 2021 of $127m to $132m.
What's next for Steadfast and its share price?
The acquisition of Coverforce is expected to occur on 20 August 2021. According to Steadfast, the acquisition will immediately be earnings accretive in FY22. Furthermore, the acquisition price of $411.5 million represents 12.5 times earnings before, interest, tax, depreciation, and amortisation (EBITDA).
Finally, the company provided FY22 guidance of $159 million to $166 million for net profit after tax.
The Steadfast share price has delivered investors a return of 37.5% over the past year. Pleasingly for shareholders, this exceeds the 24% return from the S&P/ASX 200 Index (ASX: XJO) over the same time period.
