Broker braces for tough 2012 with expense cuts

Birmingham-based broker Perkins Slade made a profit before tax of £78,153 in the year to 31 August 2011, down 13% on its adjusted 2010 pre-tax profit of £90,130.

The adjusted 2010 profit strips out the £446,969 one-off gain the company achieved that year from the sale of its Petersfield operations. With the gain included, Perkins Slade’s 2010 profit was £537,099.

The profit slump came on the back of a 4% drop in turnover to £5.61m from £5.87m. The company said this was due to the impact of the sale of the Petersfield operations as well as the effects of the recession on its clients and new business activities.

“There was little or no good news in the economy or insurance market to lighten the gloom and this is reflected in the pre-tax profit of £78,153,” Perkins Slade chairman David Slade wrote in a statement accompanying the results.

However, he added that there were positive signs. “I am much encouraged by the continuing performance on client retention,” he said. “To grow we need to be more successful on new business and 2011 was the first year we have increased our new business gained for several years.”

He added: “I believe this reflects the great efforts and focus on new business and recruitment of high-calibre individuals to spearhead our efforts in becoming a more development-focused company.”

Despite the dip in profits, shareholders’ funds increased 4.6% to £3m (2010: £2.9m). Perkins Slade said this amount gives it headroom of £2.7m in its regulatory capital requirements.

Perkins Slade said it expects 2012 to continue to remain difficult for clients because of the challenging economic climate, in turn putting pressure on the broker’s earnings.  

It noted that some clients may suffer a contraction in their businesses, resulting in either a reduction of their insurance requirements or outright failure. As a result, it has cut its cost base to withstand a 5% fall in income above the income loss it has already budgeted for. It added that risk is mitigated by the fact that the business is diversified, and no one customer accounts for more than 5% of income.

Perkins Slade’s administrative expenses fell to £5.59m in 2011 from £5.85m in 2010.

Perkins Slade year to 31 August 2011 results in £ (compared with 2010)

  • Turnover: 5,611,379 (5,867,800)
  • Administrative expenses: 5,595,031 (5,853,034)
  • Operating profit: 16,348 (14,766)
  • Profit before tax: 78,153 (537,099)*
  • Profit after tax: 101,965 (388,960)*

* 2010 number includes one-off gain from Petersfield sale