But broking group’s profit rises 18% despite extra expense

Broking group Arthur J Gallagher incurred $16m (£9.4m) of acquisition integration costs in the second quarter of 2014 after its purchases of Oval and OAMPS.

This compares with the $5m integration costs in the second quarter of 2013, related to Gallagher’s 2011 purchase of Heath Lambert.

Gallagher completed the takeovers of Oval and the broking divisions of Australian retailer Wesfarmers, which included OAMPS and New Zealand-based brokerage Crombie Lockwood.

The $16m includes costs for Oval, Crombie and also Bollinger, which Gallagher acquired in August 2013.

The costs mainly relate to bringing 4,100 staff from the acquired companies on board. They also relate to conversation of communications systems and performance-related pay.

Integration costs for the first half of 2014 were $22.5m almost three times the $8m costs in last year’s first half.

Group performance

The acquisition costs have not hampered Gallagher’s profitability in either the second quarter or the first half of 2014.

Gallagher chief executive Pat Gallagher said: “Our second quarter was one for the record books.

“Closing 17 acquisitions in the quarter, including Oval in April, Crombie/OAMPS in June, followed by Noraxis on 2 July, plus doing a secondary offering in April and a debt raising in June, were feats unto themselves, yet our team also delivered on all other measures.”

Gallagher made a profit after tax of $109m in the second quarter of 2014, up 17% on the $93.5m it made in the second quarter of 2013.

Total revenues increased 51% to $1.2bn (Q2 2013: $779.5m).

Organic growth for the quarter was 3.4%.

First half performance

The group made a profit after tax of $158.3m in the first half of the year, up 18% on the $134m it made in last year’s first half.

Total revenues for the half were up 44% to $2.1bn  (H1 2013: $1.5bn).

The broking segment’s first half profit rose 30% to $121.1m (H1 2013: $93.1m), and revenues were also up 30% to $1.3bn (H1 2013: $1bn).

Organic growth for the half was 3.8%.

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