Towergate results damaged by SME business and restructuring costs
Profits at Towergate fell in 2015 thanks to hefty financial restructuring costs but the company’s chairman said the company was much more stable now.
The company’s profits were down to £352.1 million, compared to £376.7 million in 2014 – a decrease of 6.4 percent.
The insurer said that this £24 million revenue decline was partly due to an ineffective transition of clients to its SME business in Manchester, formerly SBU (£9 million), run-off from Paymentshield’s back-book (£5 million) and the impact of the financial restructuring on its underwriting businesses (£5 million).
The decline was also affected by a 300 percent increase in the group’s financial restructuring costs, up to £41.2 million last year, compared to £10.3 million in the previous year.
Towergate’s earnings before interest, taxes, depreciation and amortisation (EBITDA) plummeted to (£34.6 million) in 2015, compared with £32.9 million in 2014, a fall of 205.1 percent.
The insurer said its EBITDA decline was driven largely by the SBU programme inefficiencies (£14 million) and revenue decline in Paymentshield, offset by operating and compensation cost saving programmes implemented in Q4 2015. It said the group is making the necessary changes to reduce costs and build a more stable platform for growth.
John Tiner, chairman, Towergate, said: “These results show a remarkably resilient performance given the group went through a major restructuring and change of ownership during the course of 2015. Maintaining revenue to within 6 percent of the previous year’s level is a tremendous achievement and reflects the quality of our people, the strength of our client relationships and Towergate’s extraordinarily strong market position.
“The new management team has identified the actions needed to stabilise the business and to create a platform for growth and we are already beginning to see the benefits of effective execution.”
David Ross, chief executive officer, added: “This is a very solid performance. Income remained robust at £353 million, which is testament to the deeply rooted knowledge and experience of our employees as trusted advisers in the communities we serve.
“Adjusted EBITDA of £79 million is in line with expectations for a business that has experienced the legacy infrastructure and underinvestment challenges that we face. We’re very comfortable that we now have a good line of sight to what needs to be done, how much it’s going to cost, how long it’s going to take, and of the favourable impact it will have on improving efficiency in the business. The finance team have done heavy lifting to get further behind the numbers which we detail today. This transparency and movement allows us to go forward with confidence.”
