Reduction in claims volumes triggered £19m writedown
Davies Group chief executive Dan Saulter has said the loss adjuster is on track for improved results this year after its operating loss worsened to £1.5m from £675,000in the year to 31 July 2013.
Excluding amortisation (£927,000), depreciation (£936,000) and exceptional costs (£997,000), Davies’ underlying profit improved to £1.37m from £1.18m.
Saulter predicted that underlying profit would more than double to £3m in the year to 31 July 2014 after a strong year of winning contracts and the acquisition of liability adjuster Garwyn.
Last year’s results were hit by the loss of big contracts with NFU Mutual and Zurich in 2012 and subsequent restructuring, including redundancies.
Turnover grew slightly to £25.7m from £24.6m in the year and Saulter said this was on track to have grown by “double digits” in the year to 31 July 2014 after winning new business and growing existing accounts.
“When I became chief executive in July 2013, Davies had already begun a programme to restructure its operations following the loss of revenue from two clients in 2012. However, it was clear to me on arrival that further work was needed to restructure the business, both operationally and financially,” he said in the Companies House report.
The company had won 11 new accounts during the year, which would add £2.5m of annual turnover, he reported.
Davies’ UK parent company, Daisybright, wrote down £19m of the £36m private equity owner Electra had paid for Davies in September 2011. The company said the economic downturn, low claim numbers from benign weather conditions and a general decline in claims frequency had reduced Davies’ value.
Saulter said that, 18 months after the write-down, the business was appropriately resourced.
“We are not seeing a continued decline in frequency this year,” he said. “Certainly providing a strong surge response to clients helps when it comes to renewing and winning new business.”
In December 2013 Davies restructured its finances by raising more money from shareholders and reducing its bank debt.
“As a group Davies now looks forward confidently,” Saulter said. “We have a strong core operation, boosted by the acquisition of Garwyn, and our success in securing new business. Folllowing the financial restructuring we have cash on hand to support the integration of Garwyn and our investment plans, alongside low bank borrowings and supportive shareholders.”
Davies bought Garwyn for £1.6m in December 2013.
The acquisition would make Davies less dependent on weather-related claims and help it win appointments from clients who want to deal with the same company for property and liability claims, Saulter said.
“We think there’s huge value in delivering an end-to-end service, but if someone wants to buy a bit, that’s great,” he said.
Since the Garwyn acquisition, Davies has closed Garwyn’s Billericay head office and merged its back office functions with Davies’ offices in London and Stoke.
It is also nearing the end of a project to merge Garwyn and Davies’ office networks and is investing in upgrading its IT platform.