The weak US dollar and soft rates have hit THB's results, but there is room for optimism
THB Group’s interim results were, it admitted, disappointing. The broking group suffered the pain of soft rates, the weak dollar and the increased retention of premium by US domestic insurers.
The result was a pre-tax profit down 77% to £0.32m for the six months to 31 October 2007. Revenues fell to £12.9m, down 7% from the first half last year. The share price continued its slide and analyst Numis downgraded its full year forecasts for the coming two years, lowering pre-tax profit forecast by 28%.
But gloomy headline numbers aside, there is scope for encouragement.
THB finally completed its acquisition of part of PWS Holdings’ business as the soap-opera-like saga leapt to its conclusion this week. The deal will provide a welcome boost to THB, expanding its international operations and helping to bring revenues in line with its cost base. The City certainly approved, and THB’s share price jumped.
The launch of the broker’s underwriting business, Unicorn, will also expand THB’s offering, diversifying its income streams. It is aiming to write over £10m in gross written premium this year and is looking to recruit additional underwriting teams.
THB’s provincial wholesale business is also showing potential. Whilst the group’s Lloyd’s broking operation saw revenues slide 11%, the wholesale business, which includes its Risk Solutions and Risk Management businesses and the newly- acquired health and safety specialist Cardinus, grew by 22%.
However, investment in new systems for the risk management proposition adversely affected the overall result for the wholesale operation during the first half.
The potential upturn in motor fleet rates – a core part of the THB business – could also provide some respite to the drag on the company’s performance.
