PSC Insurance share price rallies 5% on profit and dividend boost

A bunch of acquisitions in FY22 helped PSC Insurance boost its profits.

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Key points

  • PSC Insurance shares are 5.37% higher today after the company released its FY22 full-year results 
  • EBITDA is up 30% in FY22 and earnings per share is up 28% 
  • PSC has increased its annual dividends by 14% 

The PSC Insurance Group Ltd (ASX: PSI) share price is up 5.37% today after the company released its FY22 full-year results.

The shares opened at $4.80 today — 5.26% higher than the previous closing price of $4.56. At the time of writing, the PSC Insurance share price is $4.81.

PSC Insurance offers insurance services in Australia, the United Kingdom, and New Zealand. It receives the bulk of its revenue from the UK. Let's see what the company reported today.

What did PSC Insurance report?

The highlights of the report are as follows:

In its investor presentation released today, PSC said the report showed a "continuation of a long track record of growth, with ~ 20%+ compound annual growth rate (CAGR) across all financial metrics a testament to PSC's empowered business model".

What else happened in FY22?

The company said its FY22 EBITDA was "stronger than we envisioned" and driven by better organic growth and performances from the acquired businesses.

This time last year, the company forecasted an EBITDA range of $84 million to $89 million, which was then upgraded to $87 million to $92 million in February 2022.

PSC said recruiting high-performance professionals and purchasing businesses had enabled the company to grow in FY22.

In its statement, the company said: "Expansion of our team this year has seen us bring some wonderful groups of people into PSC via the merger with a number of businesses, the two largest of which are the teams at Alliance and AWIB."

PSC commented further:

Looking forward we are showing signs of change and moves to respond to a changing environment.

Our partnership with AUB Group Ltd (ASX: AUB) on a large retail broking opportunity in the UK is an example. We have not traditionally partnered with other groups however are delighted to be doing it with AUB in this situation.

With the competition for broking businesses in the UK continuing to heat up, we need to be open to looking for different paths to continue our growth there. The joint venture with AUB is a good indication of our flexibility to change as our environment changes.

What's next?

In FY23, PSC expects an annualised impact of approximately $2.6 million from the acquisitions completed in FY22. PSC also expects "continued organic growth across all of our operating segments".

The company warned that wages costs might go up in FY23 due to strong competition for workers in all markets. In addition, now that many COVID-19 restrictions have been lifted, the company also expects travel and entertainment costs to increase as members meet more often "which should also commensurately lead to revenue growth with a small lag".

Looking ahead, PSC stated:

We expect that the Tysers UK 'retail' joint venture with AUB will settle before the end of the calendar year. Based on receiving a contribution from the joint venture for a six month period, we would expect it to generate ~ A$4-5m in a share of EBITDA for FY23 (being a 50% contribution for half a year).

After accounting for the expected FY23 contribution of the Tysers UK 'retail' joint venture, we
expect an underlying EBITDA range of $105-110m and an underlying NPATA range of $70-73m.

PSC said "a number of additional acquisitions" are expected in FY23 but are not included in the guidance.

PSC Insurance share price snapshot

The PSC Insurance share price is up 1.8% year to date and up 15.5% over the past 12 months.

This compares to an 8.5% drop in the S&P/ASX All Ordinaries Index (ASX: XAO) in the year to date.

The All Ords is also down 6.7% over the past 12 months.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended PSC Insurance Group. The Motley Fool Australia has recommended Austbrokers Holdings Limited and PSC Insurance Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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