Oval boss may exit before flotation

Oval will not sell up and will float by May 2012 – but perhaps not under his leadership, chief executive Phillip Hodson said this week.

Hodson came out fighting following weeks of speculation about the broker’s future and the news that it had posted a £400,000 pre-tax loss for the financial year to May 2009.

Hodson admitted he might leave his role as chief executive prior to flotation. He said the board was considering a couple of replacements with City and broking experience, but this was at an early stage.

“We have to consider whether we replace me with someone with City experience. It’s being considered by the board at the moment. Have they my skills, am I too old? I’ve given the board a three-year commitment, which would take us past flotation, but it’s down to whether we find a better candidate.”

He said the board had agreed at its October meeting to float between May 2010 and May 2011, and revealed that shareholders had injected £15m of capital to strengthen the balance sheet. It had previously been reported that one shareholder, RSA, had invested up to £10m. Hodson said the actual figure was less than this, and that other shareholders including Caledonia, but not Allianz, had contributed to the total.

He refused to say whether he had put his own money in. The broker used £12m of the cash injection to pay down debt.

Oval expects to complete up to 12 acquisitions prior to flotation, though none of these will be a transformational deal. Hodson said: “We will be transformed by organic growth and sensible and niche acquisitions.”

Four or five targets have already been identified and announcements could be expected early in the new year, he added. Oval has £16m in the bank and a debt facility of up to £100m for acquisitions.

Hodson dismissed speculation that Oval had been looking at a sale to Marsh or Giles. “Marsh, Aon, Willis – we sit down at tables and have lunches from time to time, but the conversation is not really about them buying us. We just talk about the markets and our common problems. I’m not aware of any desire on their parts to own Oval.”

He also downplayed reports that a number of minority shareholders were agitating for a sale. “We will be talking to shareholders at the AGM on 26 November … the key people in the business all subscribe to this strategy.”

Asked about minority shareholders looking to realise their stakes, Hodson said: “If you have left the company or retired and are sitting on shares, you probably want to realise some cash. I wouldn’t have thought it’s the most sensible time. We have to plod on for a while.”

He attributed the £400,000 loss on £10m of amortisation costs for the year and £2m spent on restructuring. He added that Oval had reduced its debt to £45m, and would be debt free in four years. The broker also reported turnover for the period up by 16% to £104.6m, and EBITDA – most consolidators’ preferred measure – up 7% to £18.7m.