Brought to you by:

Steadfast raises earnings forecast on strong year-to-date performance

Facebook Twitter LinkedIn Google

Steadfast Group announced today the business has performed strongly during the nine-month period to March 31, prompting the broker network to again revise upwards its earnings outlook for this financial year.

Robust trading conditions led to a 7.2% increase in revenue and 20.5% jump in underlying earnings before interest, tax and amortisation (EBITA) from July to March, Steadfast says in an investor update to the Australian Securities Exchange.

“Based on this strong trading performance to date and accretive acquisitions made, Steadfast has uplifted its [FY2020/21] guidance range.”

Underlying EBITA is now projected at $259-266 million, up from $245-255 million previously while underlying net profit after tax is forecast at $127-132 million from $120-127 million.

The previous guidance, made at last year’s AGM, represented an upward revision after the business made a strong start to this financial year, with underlying EBITA surging 20.7% in the September quarter.

In the first half to December 31, the business achieved a 19.3% rise in underlying net profit to $60.4 million and underlying EBITA also saw the same percentage increase to $125.4 million.

Steadfast says the revised 2020/21 guidance excludes the mark-to-market movements from the revaluation of its listed investment in Johns Lyng Group, an insurance-focused building and restoration services provider.

Morningstar Equity Analyst Nathan Zaia, who covers the company, says the earnings upgrade “isn’t totally unexpected”.

“We felt the original guidance was on the conservative side,” he told today. “Our forecasts had been ahead of guidance on both [underlying] EBITA and NPAT, and now they sit at the bottom end of the new guidance range."

He says the hard market conditions have been a plus for the broking sector.

“It has been pretty clear that insurers have had to put up premiums given the earnings headwinds they have faced, and brokers like Steadfast are benefactors of that,” Mr Zaia said. “It’s reassuring that good revenue growth is flowing through to the bottom line too.

“Steadfast continues to invest in their technology and offering to make the brokers more efficient, but also help capture lower commission margins.

“And while that has held back margin expansion somewhat, we think it sets the group up for strong growth in the future, and helps solidify the broker network's competitive advantages.”