Heath Lambert’s operating profits surged from £3.6m in 2009 to £6.6m last year.
The London market broker accounts released today show that a cut in administrative expenses from £89.8m to £84.7m helped Heath generate an extra 83% in operating profit.
Heath posted a £1.2m loss for the year, down from £3.3m in 2009, when tax charges and interest are included.
However, the interest payments and debts were paid off by Heath after the London market broker was handed £97m in cash by Gallagher for the acquisition.
The accounts also show that Heath’s adjusted earnings before interest tax depreciation and amortisation (EBITDA) was £14.5m.
It means Gallagher paid an earnings ratio of 6.7 for the deal, in line with current market valuations, according to sources.
The deal shows that despite months of haggling, both Gallagher and Heath managed to strike a fair deal on price.
Heath Lambert chief executive Adrian Colosso pocketed £1m from the Gallagher deal according to regulatory filings, although he is thought to have also had an interest in the Appleby Trust, the employee benefits company, which has bolstered his take home packet.
The deal relieved the burden of money owed to preference shareholders – which includes the Government Payment Protection Fund, RBS and a gamut of offshore and onshore investment firms – which had escalated in debts from £54.5m in 2009 to £58.2m last year, according to the accounts.
Broking profit improved from £13.8m to £13.9m. Cash from operations also improved from £8m to £10.6m.
The accounts reveal that the dividends alone on unpaid preference share surged from £15.5m in 2009 to £19.2m last year. Net debt declined from £72.7m to £69.1m.
Earlier this week, InsuranceTimes.co.uk revealed that as well as Colosso’s £1m, chairman Keith Hamill pocketed £482,304 from the deal.
The Appleby Trust – the staff employee benefits fund – received £8.2m for its shareholding.
The biggest winner from the preference shares was Precis (2517) Limited – which was made up of the Government Pension Protection Fund and RBS – scooping £19.5m. A further £3.2m was handed over to Precis from the B shares.
Gallagher bought an indemnity policy from Chartis UK that protects it from Heath reneging on the tax and general warranties laid out in the agreement. A deductible of £800,000 was placed in escrow in case the policy was triggered.
The details were revealed in a Securities & Exchange Commission filing.
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