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PSC reports strong trading results, eyes more broking acquisitions

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PSC Insurance Group says in a market update the business has made a strong start to the 2020/21 financial year, with pre-tax earnings in the first four months to October up 40% from a year earlier.

The Melbourne-based insurance group also announced that its $60 million capital raising exercise via a share placement has received binding commitments from investors.

PSC says the funds raised will be used to finance acquisitions to grow the business, with a number of potential targets in the UK and Australia having been identified.

“The group has a good pipeline of acquisition opportunities,” PSC says in the update. “In particular, we are considering acquisitions of UK and Australian commercial broking businesses, with a number materially progressed.”

PSC has made several strategic purchases in the UK and Australia, a move that has paid off as earnings increased markedly with the new additions.

At this month’s virtual annual general meeting, Chairman Brian Austin told shareholders the business expects to make more acquisitions in the UK.

MD Tony Robinson told insuranceNEWS.com.au today the UK has been a source of “great contribution” to PSC.

“We believe it’s a solid, sensible strategy and we’re executing it well,” he said of the business plan for the UK.

In the four months to October, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 40% from a year earlier, boosted in part from the strong performance of its London-based broking business Paragon International. PSC acquired the Lloyd’s broker for £42 million ($76.2 million) last year.

PSC says it expects underlying EBITDA in this financial year to fall at the top end of its $65-70 million guidance. In the last financial year, the business reported a 32.7% rise in underlying EBITDA to $57.4 million.

Trading conditions have been good despite the economic fallout from COVID-19, PSC says.

Mr Robinson says this is “more of a reflection of the nature of the industry because insurance is an essential spend for businesses”.

“The fact that they have continued to trade is a tribute to all of those businesses,” Mr Robinson told insuranceNEWS.com.au. “It’s those efforts that they put in to make those businesses continue to operate through this difficult period that means that essential spend continues.

“Are we delighted and thrilled with the resilience of the economy and particularly our customers? Of course.”

PSC says it will merge its APG and Carrolls businesses in the UK, with the move to result in a one-off, pre-tax charge of $3-4 million in the first-half earnings results.