What's Towergate's next move?

Towergate chief executive Mark Hodges was in an upbeat mood this morning when announcing Towergate’s first-quarter results update.

Compared to this stage last year, the consolidator’s operating earnings rose 9% to £34.3m, while revenues increased 2% to £105.5m.

It’s a steady start to the year for Hodges and his new finance director Scott Egan, but with the first quarter not being its most productive period there is still a long way to go if it is to keep up the “momentum” that Hodges refers to.

There is work to be done in Towergate’s core retail business, where operating earnings dropped 8% to £15.6m and revenues dipped 4% to £60.5m. This is where Towergate will be hoping for the biggest turnaround, and the decisions it makes now on where to play its cards in this division will ultimately impact the performance of the overall business for the rest of the year.

Adding bulk

Hodges says Towergate’s acquisition pipeline is healthy, so expect future deals to add bulk to the retail business as organic growth could be set back by the tough economic conditions in its chosen markets. There has also been a slump in its network division, where operating earnings dropped 16% to £2.6m and revenues fell 10% to £4.5m.

The driving forces in the network business is Broker Network and Countrywide, and Hodges will be expecting a strong year from these two units. But with Towergate on the acquisition trail, it is too soon to rule out a network acquisition. It certainly has plenty to choose from, and makes the decision to pull out of the Cobra deal a little more surprising.