Banking on Erinaceous

Much to the delight of newshounds and naysayers, the Erinaceous saga has ended. But the story of the insurance division, EIS, will continue.

While Monday’s announcement that the property services group that once stood on the cusp of the FTSE 250 was being placed into administration was about surprising as its share price was low (1.6p to be exact), the creation of a new holding company for the insurance division, Caley, means that there could yet be a strong future for the business.

The confirmation that Zurich had tabled an unsuccessful bid in excess of £100m for the company echoes that sentiment. It also means that the chances of it being sold now are slim to none.

“The banks' decision is they like the business, and they want to support it,” says group chief Tim Redburn. “This should draw a line under the speculation.”

He should be so lucky.

Over the past nine months, while the group remained tight-lipped, its share price plummeted and EIS’ year-on-year profits fell, any attempt at positive talk seemed like little more than desperate spin.

Chief of EIS, Leslie Goodman, will at least be relieved that the nub of criticisms aimed in his direction, that the business was not ring-fenced from the ailing group, appear to have been dealt a decisive blow.

“What we did with EIS and the rest of the group was interdependent,” Redburn admits. “Our decisions in part were driven by what was going on with the rest of the group."

“The defectors, once their covenants are lifted, will inevitably attempt to poach their old accounts

“We’ve held the business together well. But the sales process has been disruptive,” Goodman adds.

This is all well and good, but until the company could put its money where its mouth was – that is, in the form of its 2007 results – it was very much fair game.

So last year’s performance of its commercial and property arm, with its GWP of £112m, brokerage of £25.5m, and profits of £12.6m (well ahead of most sources' estimates, and broadly in keeping with previous years) will form the centerpiece of its upcoming defence against its detractors. There could still be some collateral, due to the multi-year nature of commercial property deals, but it seems as though EIS might just have survived the implosion of its parent, and evaded the clutches of its enemies.

What is more, the three-year financing and investment plan courtesy of its three banks, HBOS, Lloyds TSB and HSBC stands in marked contrast to the quarter of a billion pounds of debt the group owes – but of which Caley will pay not a penny.

Though that should be enough for the critics, question marks will inevitably persist, exacerbated by the volume of key personnel that have jumped ship over the past year, including 20 to rival Towergate. As expected the defectors, once their covenants are lifted, will attempt to poach their old accounts.

But what of the staff?

Redburn and Goodman, part of a four-man board that includes EIS chief operating office Jamie Smith and group finance director Dominic Lavelle, insist that they, like the banks will stick around for the immediate future.

Equally insistent are they that few, if any, of the division’s 750 staff (including senior personnel) are poised to either walk or be shown the door.

“The banks decision is they like the business, and they want to support it. This should draw a line under the speculation.

Tim Redburn, group chief executive

But a sound financial footing is no guarantee that staff will stay, nor that there will be staff turnover due to attrition and restructuring as the company moves to drive efficiencies.

“The big issue is what we do to centralise finance. We need to pull that together,” says Redburn.

Discussing the exodus of senior staff from the business Goodman points out that in the past six months there has been only one senior resignation: Victoria Hotchkin, managing director of Letsure two weeks ago. He insists that her departure was the result of merging Letsure with company’s other (and much larger) letting business, Homelet.

Ultimately, while jokes about road-kill and spikes may have run their course it seems as though EIS could have the last, and somewhat ironic, laugh: a return to its halcyon days of acquiring brokers.

“We can go back to the banks.” says Redburn. “We could become a buyer of businesses.”

So, with the shackles of its parent company removed, the animal will change its spikes and rebrand.

The question is: could the hedgehog bounce back?

“I said we would take the fight to those who have been attacking us,” says Goodman. “That time has come.”