PSC Insurance Group Limited (PSI) Earnings Call Transcript & Summary

Hello everybody. Good morning, and welcome to the PSC Results Presentation for 2024. Hopefully, everyone's had a look at the presentation that we've sent-out. And I'll open up and then quickly hand over to Josh to get into some of the details. So the year has been a really good year, I'd say a great year. The businesses are in really good shape. The core areas of the business have all done well, a very even performance and even contribution. Each of the business is a better business at the end of the year than it was at the start of the year with the caliber of the people continuing to improve and the systems and processes continuing to improve. A great underlying EBITDA result, AUD 127.1 million. We would have been probably slightly higher than that if we hadn't been distracted with the merger with Ardonagh that slowed down the acquisitions a bit in the second half and also the start-ups have been a bit more of a drag than we initially anticipated. In fact, if you adjust for the startups, the results are well over AUD 128 million at the EBITDA level. So, a really outstanding year. No final dividend. That's part of the scheme arrangement agreement and that underlying earnings per share up 8% to AUD 0.24 per share. Not a lot more to add to the businesses. It is, as we keep saying each year. These are incredibly stable, this is an incredibly stable business. We know what we do, and we're continuing to do it. We're a broking and intermediary business and focused on continuing to grow and be the best that we can be. And that's what we're intending to be going forward. And the results, the consistency of results reflects the consistency of that approach to what we're doing. Josh?

Yes. Thank you, Tony. Moving on to the next slide. It's one that we have in all our back. This is a slide that we have in most of our presentations, and it shows that the group has a long and unbroken record of earnings growth since listing compound growth in sort of key metrics of revenue, EBITDA and NPATA around 24%, 25%. This has created real value for shareholders over that time. We've been nearly 9 years listed now. And indeed, the scheme gives the shareholders the opportunity to realize that value. One thing you'll sort of see over the last 2 or 3 years as well, the group has increasingly been generating free cash flow net dividend of a material and increasing amount, which has been driving up return on equity over the last few years, which again is just a great sign of a strong business. So moving forward, specifically as it relates to this year, Tony has sort of touched on, but we were either within or at the top end of guidance, depending on whether you're looking at our EBITDA or net profit or NPATA guidance. Specifically, operating revenue was up 16% to about AUD 344 million, underlying EBITDA growth of 15% to AUD 127.1 million, underlying NPATA growth of 11% to AUD 87 million. Moving on to the next slide, we'll sort of dive into a little bit more specifics across the group. Next one please. Specifically, just looking at the segments themselves, the Distribution business in Australia, that's the Australian broking and network businesses. Revenue growth of 15%, 12% earnings growth and 7% of that being organic. So a really strong foundation business of ours and another strong period. With the agency businesses this year, good strong revenue growth of 12% on a combination of acquisitions and organic. But there was a smaller level of -- or earnings growth was down, largely as Tony touched on, that was the main area where the start-up businesses were. So we've started up 3 new businesses in there, and Chase Plant, Chase Credit and Chase Accident & Health, specifically starting up in the second half. And also within that group, we purchased the insurance business in November, which is now being rebranded Chase Professional Risks, and that's starting to grow well. In the U.K., really good organic earnings growth there of 13%, 17% revenue growth and 21% earnings growth. In particular, Paragon had a good second half, well up on its prior corresponding period, notwithstanding they've still got challenges, risks left n the rating environment, particularly in the areas of like Cyber and D&O, so an outstanding effort to grow the business there in the second half, and Carrolls had a really strong period as well. So moving on, this next slide again just shows you some of the numbers that I was just talking to them regarding segments. So just moving forward just in terms of the composition of the growth here. So acquisitions contributed AUD 7 million of incremental EBITDA. So of the AUD 16 million odd, AUD 7 million of it was EBITDA. We did 14 acquisitions; most of those quite small bolt-ins. In Australia, we deployed AUD 50 million of capital, which is probably a lower cadence than we would have otherwise been looking at, as Tony touched on, particularly in the second half, a lot of group resources and thinking we're focused on the merger with The Ardonagh Group and set up of the scheme. So that possibly dragged a little bit just that lower cadence, what we otherwise maybe would have been hoping for, but that was for all positive reasons, as you'd all understand. Organic growth was good at 8%, approximately AUD 9 million, that was after a drag of about AUD 1.4 million from start-up businesses. All those businesses are in a good spot, and we're increasingly confident about where they're all getting. Probably a final point here, interest costs are up a little as been higher interest rates. And you'll notice that our average tax rate for the year is up a little, which has sort of been telegraphing for a while. Now that is due to the increase in the U.K. company tax rate in April 2023. So that was better than anticipated. And I'll hand back to Tony.

Thank you, Josh. Not much more I can add, the 2024 earnings were really good. And as I've said, across each of the businesses areas, we've invested in each of the business areas to see them continue to grow and prosper. Sometimes that's an investment in IT and the APEX system, which goes on improving and helps on productivity in the broking business in Australia or start-ups, such as we've got in Eldin Risk in the U.K. or the ones Josh mentioned in Chase. So in each of the areas, we've got continuing strong outlook in '25 for each of the businesses. We're entering into a period where leading up to the shareholder vote on the scheme of arrangement to merge with Ardonagh, that's set for September 26 is the vote date. We're very excited about what the merger means for our clients and our staff. It's a really positive step forward. We've always aspired to form a really significant broking growth. One of the Top 10 in the world has always been a quiet aspiration. And this merger is a real step to us achieving that in conjunction with a group that is very like-minded, very similar skill set and capability and drive and ambition. So it's a very exciting outcome if shareholders support the vote, a very exciting outcome for our partners and our staff. And in the absence of that going through, the outlook for 2025 is, as I said, really solid. These are great businesses, and we're really excited about the outlook for each of them. So we look forward to seeing you at the shareholders' meeting, and thank you for your support and open to any questions anyone might have on the 2024 results.

That comes in through the chat feature. I think that we've got -- I hope we've got an audience here. We have got no question. It's a perfect investor call. So thank you all. Don't hesitate to reach out if you do have any question. Again, on that basis, we'll end the call. Thank you, everybody.

Thank you.