But Towergate’s year-to-date profitability still down
Towergate grew underlying profit by 5.9% in the third quarter of 2016, the first quarter this has happened since its restructuring began last year.
But revenue continued to decline, and underlying profitability was down by 10.6% for the year to date.
Towergate Q3 and nine month key figures
| Q3 2016 | Q3 2015 | change (%) | Nine month 2016 | Nine month 2015 | change (%) | |
|---|---|---|---|---|---|---|
| Revenue | 80.8 | 84.9 | -4.8 | 245.7 | 262.1 | -6.3 |
| Staff expenses | 42 | 47.9 | -12.2 | 131 | 147.1 | -7.6 |
| Operating expenses | 19.3 | 18.6 | 3.7 | 55 | 53.6 | 2.6 |
| Adjusted EBITDA* | 19.4 | 18.3 | 5.9 | 59.7 | 66.8 | -10.6 |
| EBITDA | 22.5 | -6 | n/a | 40.2 | -21 | n/a |
*excludes exceptional items and run-rate savings
Third quarter improvement
The recovering broking group reported adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of £19.4m in the third quarter of 2016, up from £18.6m in the same quarter last year.
The main reason for the improvement was lower staff-related costs, which fell by 12.2% to £42m (Q3 2015: £47.9m).
This offset a 3.7% increase in operating expenses to £19.3m (Q3 2015: £18.6m) and a 4.8% drop in revenue to £80.8m (Q3 2016: £84.9m).
Towergate chief executive David Ross hailed the third quarter adjusted EBITDA growth. He said: “Towergate has reached a milestone in its recovery, with our first quarter of positive year on year growth in adjusted EBITDA since our financial restructuring. This performance has been driven by a continued improvement in underlying profitability driven by strong cost control and stabilising income.”
Nine month drop
For the first nine months of 2016, adjusted EBITDA was down by 10.6% to £59.7m (nine months 2015: £66.8m).
Revenues were down 6.3% to £245.7m (nine months 2015: £262.1m) and operating expenses were up by 2.6% to £55m (nine months 2016: £53.6m).
This was offset by a 7.6% reduction in staff-related costs to £131m (nine months 2015: £141.7m).
Towergate also revealed that it has increased its cost saving target to £39m by 2019, from the £36m it reported in the first half this year.
It has also raised £26m through a five-year loan facility, secured by “certain legacy assets of the group”.
Towergate said that its efforts to fix the business ware “well underway” with continued investment in IT and other infrastructure upgrade projects.
Ross said: “We have maintained our leading market position across many of our businesses despite tough market conditions and have achieved our first quarter of year-on-year growth in underlying profitability. These results demonstrate the strength of our business, our specialist knowledge, local footprint and strong customer relationships, all of which set Towergate apart.”
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