But underlying results continue to deteriorate
Towergate has returned to profitability in the second half of 2016, despite a series of headwinds that have continued to eat into revenue.
But when exceptional items are excluded, the broking group’s underlying performance deteriorated as a result of the revenue drop.
Towergate H1 2016 key figures
|£m||H1 2016||H1 2015||change (%)|
|Staff related expenses||89||93.8||-5.1|
Towergate reported earnings before interest, tax, depreciation and amortisation (EBITDA) of £16.7m in the first half of 2016, compared with a loss before interest, tax depreciation and amortisation of £14.7m in the same period last year.
The improvement was mainly driven by a sharp drop in exceptional restructuring costs to £9.6m (H1 2015: £51.6m).
But excluding the benefits of these exceptional items, the performance in the half deteriorated. Adjusted EBITDA fell 16.9% to £40.3m in the first half of 2016 (H1 2015: £48.5m).
The main cause was a 7% drop in revenue to £164.9m (H1 2015: £177.3m).
The revenue decline was caused by a combination of continuing reduction in subsidiary Paymentshield’s legacy book of business, the restructuring of the SME call centre business and “corrective action” taken on lower-quality business in the Towergate Underwriting managing general agency unit.
Towergate said the revenue trends were “broadly in line” with expectations given the stage it is at in its restructuring plan.
The group is continuing efforts to turn itself around following its financial rescue in 2015. It suffered a setback in July when the FCA fined it £2.6m for failing to protect client money.
But the company said progress continues to be made. It has increased its cost saving target to £36m from the £30m it had set in the first quarter this year. It expects to achieve the savings over the next two years.
Chief executive David Ross said in a statement: “Our turnaround is ahead of schedule as we continue to address our legacy issues and build on our unique platform as the last remaining independent broker with national clout.”