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Steadfast hails "outstanding" result
Steadfast has reported 6.3% organic growth in revenue to $226 million for the six months to December 31.
This figure strips out the impact of Steadfast’s recent acquisitions – Calliden and QBE agencies. With these factored in, revenue growth for the half-year was 108.4%.
CEO Robert Kelly told an adviser briefing organic growth is solid despite flat market conditions.
“It is an outstanding result as we move from a soft cycle into a flattening cycle,” he told the briefing. “Pricing growth is flat, but volume growth is happening.” Network broker gross written premium (GWP) for the half-year was $2.2 billion, up 2.6% on the corresponding period of 2014. Steadfast Underwriting Agencies GWP was $378 million, up 273%. This exceptional growth is attributed to the recent acquisitions.
Mr Kelly says the group is on track to achieve billing of $4 billion for the current financial year, depending on market conditions. “We could see the market trends coming,” he said. “I think this is a two to three-year cycle and it can take a year before rates will harden. “The cycle is not over yet, but you can see the hill. The time for rates to harden will be in the last quarter of the 2017 financial year.”
The acquisitions have delivered additional financial benefits to Steadfast because it will pay $16 million below the agreed purchase prices. Mr Kelly says this follows revisions to earnout estimates in the original prices.
“We are paying less for these acquisitions, but the asset values stay the same. We have also achieved $27 million of synergies from these acquisitions.”
Mr Kelly says forthcoming common broking and accounting systems will bring further efficiencies.
He says speculation a few years ago that Steadfast’s integration program would fail has proved well wide of the mark. “The hubbing strategy for Steadfast has been very successful. We knew what we were doing and our integration strategy worked.”
Steadfast will introduce its own back-office system for brokers, called Eclipse, in April. Mr Kelly says it will be “revolutionary”, but declined to give further details. Steadfast has also established a back-office support facility in Vietnam. “We have decided to build our own systems, and at the end we will have everything in-house,” Mr Kelly said. Organic growth in earnings before tax was 1.4% to $60.4 million for the six months to December 31. Adding in the acquisitions, earnings grew 73.3%.
It is a similar story with net profit after tax, which grew 74% to $26.6 million.
Mr Kelly is bullish on Steadfast achieving its full-year forecasts, with earnings expected to rise 10-14%. The group predicts an after-tax profit of $80-$83 million. Although he has not ruled out further acquisitions, he sounds a degree of caution. “Our acquisitions have been strong and robust. We have a defined way of doing acquisitions and we don’t get ‘deal fever’.”