Six-month profits plummet at Cobra

Half-year profits at Cobra have nosedived by 66% from £801,000 in the six months to 30 June 2007 to £274,000 in the six months to 30 September last year. (The broker changed its accounting reference date from 31 December to 31 March at the end of 2007.)

“Our net profits are hit because of the way International Financial Reporting Standards are calculated. This makes if difficult for the way brokers operate when they purchase other brokers,” said Steve Burrows, Cobra’s chief executive.

However, the company’s premium income increased 263%, while its revenues went up 55% to £11.8m. Underlying EBITDA (earnings before interest, taxes, depreciation and amortisation) increased 19% to £1.4m. The company said it would continue to re-evaluate its operating costs to improve margins.

Its programme of targeted acquisitions up to 31 March last year had boosted revenues. During that time it bought five businesses, including three brokers, an underwriting agency and an IFA.

Burrows admitted Cobra was now in the midst of buying two more commercial brokerage firms but that this was still subject to contract.

The broker said the acquisitions already had added about £30m retail GWP to the group; the full impact of improved commission and revenue rates would enhance EBITDA in the year to 31 March 2010.

It predicted “problematic” times ahead for insurance broking, but said it would mitigate this by actively managing the placement of business with insurers.

“One of the things we are doing is looking to consolidate some of our agencies,” said Burrows.

“We probably have more than 120 agencies throughout the group – which is far too many for us to manage, We are looking to support 12 main insurers and move some of the business to them,” he said.