Company plans to use £90m acquisition fund in two to three years
Towergate made a loss after tax of £14m in the third quarter of 2011, up 41% on the £9.9m loss it made in the same quarter last year.
The results posted today also show how rapidly trading conditions are deteriorating as the £14m plunge into the red was nearly twice the £7.5m loss racked up in the previous quarter.
The company also revealed that it plans to use the full amount of its £90m senior secured acquisition facility over the next two to three years.
The deterioration was largely caused by increased administrative expenses and amortisation of intangible assets coupled with flat turnover in difficult market conditions.
Administrative expenses were up £3.6m to £66.7m in the quarter because of increases in staff numbers in growing areas, increased IT spending and increasing regulatory fees.
The £2.9m rise in amortisation relates to the reduction in valuations of businesses transferred from Towergate Partnership to the new holding company, Towergate Holdings II.
Excluding the effects of amortisation, earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter dropped 9%to £28.5m from £31.5m.
Adjusted EBITDA, which excludes certain costs such as financing transaction costs, was broadly flat at £33.5m (Q3 2010: £34m).
The third-quarter performance pushed Towergate’s loss for the first nine months of 2011 to £35.4m (9M 2010: £23.2m). Nine-month EBITDA dropped 12% to £90.5m (9M 2010: £102.8m).
Turnover for the quarter was £91m (Q3 2010: 90.5m), as increases in the underwriting and PowerPlace divisions were offset by falling turnover in retail broking. Towergate blamed the declining retail broking turnover on the prevailing soft market.
Despite the deterioration in results, Towergate group chief executive Mark Hodges praised the flat adjusted EBITDA performance amid tough economic conditions.
“I am pleased to report a strong set of results for the quarter,” Hodges said in a statement. “Our underwriting division performed particularly well with record new business levels and turnover in the third quarter, up 7.4% compared to 2010.”
He added: “Whilst the UK economic outlook remains challenging for all businesses, our unique business model positions us well for the future.”
Towergate’s net borrowings increased 42% to £795.4m as of September 30 from £560.5m on the same date last year. However, interest payments remained broadly static at £22m in the third quarter alone (Q3 2010: £21.8m) and £65.3m in the first none months of the year (9M 2010: £65.1m).
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