Trifecta: Steadfast (ASX:SDF) share price jumps 5% amid record results

Steadfast hits a home run in the first half of FY22…

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Key points

  • The Steadfast share price is 5% higher today following its half-year results 
  • Hitting the earnings trifecta: Steadfast has increased earnings, dividends, and upgraded guidance for FY22
  • The majority of Australian and New Zealand brokers are now using SCTP

The Steadfast Group Ltd (ASX: SDF) share price is triumphantly trekking to the upside on Wednesday.

This follows the release of the company's first-half results for FY22 after markets had closed yesterday afternoon.

Steadfast share price jumps following upgraded earnings

  • Underlying revenue up 19% over the prior corresponding period to $520.9 million
  • EBITA up 22.7% to $153.9 million
  • Statutory net profit after tax (NPAT) up 42.9% to $104.9 million
  • Diluted earnings per shares (EPS) up 20.5% to 8.41 cents per share
  • Interim fully franked dividend of 5.2 cents per share, up 18.2%
  • Gross written premium (GWP) of $5.2 billion during the half, up 15.6%

What else happened during the first half?

The six months ended 31 December 2021 was a cracking display from ASX-listed Steadfast Group, delivering both organic and acquisition growth.

During the six-month period, the broker network segment of the business added another acquisition to its name. In August last year, Steadfast swept up Australian insurance broker Coverforce for an enterprise value of $411.5 million.

The deal means the ASX-listed company has now captured 18 completed acquisitions as part of its 'Trapped Capital Project'. This acquisition success has been a key component in the growing Steadfast share price.

Furthermore, Steadfast's broker network is now 434 brokers strong. This includes 361 in Australia, 54 in New Zealand, and 19 across Singapore. Through these brokers, GWP was grown by 15.6% to $5.2 billion during the half. For reference, the company delivered outside of acquisitions, achieving 8.3% organic growth in GWP.

Meanwhile, the underwriting agencies part of the business also performed strongly with a 16.3% increase in GWP to $852 million. Additionally, the majority of this growth was organic, with 14.5% organic growth compared to 1.8% acquisition growth.

Steadfast's tech platform offering experienced strong uptake during the first half. The Steadfast client trading platform (SCTP) reached 19,201 active users, with $458 million in GWP transacted via the platform — an increase of 31.6%.

Notably, the majority of Australian and New Zealand brokers are now using SCTP.

What did management say?

Steadfast managing director and CEO, Robert Kelly commented:

Steadfast's business has grown strongly since listing on the ASX in 2013, and I am pleased to report Steadfast has again delivered a record financial and operating result for the six months to 31 December 2021. Our underlying earnings growth for the period was again driven by sustained organic growth in the Group's insurance broking and underwriting agencies and our prudent acquisition strategy.

Regarding the Coverforce acquisition, Kelly stated:

The Coverforce acquisition in late August and other network broker acquisitions, including those from our Trapped Capital Project, are performing in line with expectations. The cash conversion of earnings continues to be strong, with more than 100% of underlying NPATA converting into cash during the period.

What's next?

For the Steadfast share price, the good times are expected to keep on rolling, with its FY22 guidance being upgraded. As a result, underlying NPAT is now expected to be between $163 million and $170 million. Previously, Steadfast had guided between $159 million and $166 million.

However, the upgrade did come with a number of assumptions, including:

  • Moderate premium price increases
  • Organic growth exceeding original guidance
  • No impacts from COVID-19

Finally, shareholders can expect to receive their Steadfast dividend on 23 March 2022.

Steadfast share price snapshot

Over the past year, the Steadfast share price has been a worthwhile investment. The broker network has managed to outperform the S&P/ASX 200 Index (ASX: XJO) with a return of 15% in the 12-month window. Although, the performance has been rockier so far in 2022, slipping 12.9%.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Steadfast Group Ltd. The Motley Fool Australia has recommended Steadfast Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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