23 March 2016

Group Financial Highlights**

 

Commenting on the results, Towergate Chairman John Tiner said: “These results show a remarkably resilient performance given the Group went through a major restructuring and change of ownership during the course of 2015. Maintaining revenue to within 6% of the previous year’s level is a tremendous achievement and reflects the quality of our people, the strength of our client relationships and Towergate’s extraordinarily strong market position. The new management team has identified the actions needed to stabilise the business and to create a platform for growth and we are already beginning to see the benefits of effective execution.”

David Ross, Chief Executive Officer added: “This is a very solid performance. Income remained robust at £353m, which is testament to the deeply rooted knowledge and experience of our employees as trusted advisers in the communities we serve."

“Adjusted EBITDA of £79m is in line with expectations for a business that has experienced the legacy infrastructure and underinvestment challenges that we face. We’re very comfortable that we now have a good line of sight to what needs to be done, how much it’s going to cost, how long it’s going to take, and of the favourable impact it will have on improving efficiency in the business. The finance team have done heavy lifting to get further behind the numbers which we detail today. This transparency and movement allows us to go forward with confidence."

“We are investing over £14m to upgrade our IT infrastructure, part of a wider investment initiative in the business that will drive significant improvements in our back and front office. With crucial integration projects already underway, we expect to begin rolling out new systems to support the front end of our business by the beginning of Q3 2016. This will undoubtedly improve the experience of our staff and customers, and lead to annual savings of approximately £4m."

“We are also announcing today that we have agreed to sell a majority interest in Broker Network to Highbridge Principal Strategies (“Highbridge”), for a consideration of up to £46m. The proceeds of this transaction will allow us to accelerate our investment programme, provides us extra focus and provides Broker Network with a strong platform for growth."

“Insurers have also given us terrific support, recognising that we are an important partner. Since the refinancing we have signed multi-year deals with LV=, AXA, Ageas and Allianz."

“The uncertainty created by management and ownership changes last year is firmly behind us. We have seen that stability flowing through to organic improvements in our insurance broking and underwriting businesses."

“Towergate is a company with a strong leadership team, a clearly defined strategy, long-term and supportive shareholders and great people, over 1,000 of whom I’ve had the privilege of meeting in the last four months. With these factors in mind I am extremely confident in our ability to build on our enviable market position and realise this company’s full potential.”

 

Segment Performance

 


Notes to Financials:

  • 2015 revenue declined £24m from 2014, primarily due to an ineffective transition of clients to our SME business in Manchester, formerly SBU (£9m), run-off from Paymentshield’s back-book (£5m) and the impact of the financial restructuring on our Underwriting businesses (£5m). Advisory has achieved income growth for the year which shows their resilience.
  • Adjusted 2015 EBITDA declined £14.5m from 2014, driven largely by the SBU programme inefficiencies (£14m) and revenue decline in Paymentshield, offset by operating and compensation 3 cost saving programmes implemented in Q4 2015. The Group is making the necessary changes to reduce costs and build a more stable platform for growth.
  • Not included in EBITDA is a non-cash Goodwill impairment of £86.4m created largely by the reduced earnings in SBU.

Post Balance Sheet Events

Following the year end, we have undertaken a number of initiatives to secure additional funding that will be largely applied towards an acceleration of the strategic investments in the group transformation plan, including the contract with Accenture recently announced confirming their status as strategic partner in our IT transformation change program.

On 22 March 2016 the Company secured two sources of additional funding totalling approximately £65m from Highbridge comprised of:

  • Agreement for the disposal of the entire issued share capital of The Broker Network Limited and Countrywide Insurance Management Limited, both wholly owned subsidiaries of the Group, and the assets of Broker Network Underwriting, a trading style of Towergate Underwriting Group Limited. The consideration for the acquisition shall be satisfied by the payment of cash of up to £46 million (including earn-out) together with the allotment to Towergate of approximately 19.9% of the shares (subject to adjustment) in the acquisition vehicle.
  • A five year facility from Highbridge secured by certain legacy assets of the Group.

Both initiatives remain subject to the satisfaction of certain conditions including obtaining appropriate consents and/or approvals and will result in a cash injection to the Group.

In addition to the above, the Company secured a short term loan facility from Highbridge for an amount of up to £28m which will result in a cash injection to the Group if it is drawn.


*References to Adjusted EBITDA* represent EBITDA as adjusted for group exceptional costs (financial restructuring costs, group reorganisation costs and regulatory costs) plus annualised savings from cost saving initiatives initiated during the reporting period.

Towergate Insurance Full Year Results 2015 | Towergate Partnership


Notes to Editors

About Towergate

Launched in 1997 Towergate is the UK’s largest independently owned insurance intermediary.

Towergate is an important distribution channel for a significant range of insurance products and a key strategic partner for the UK’s largest insurers.

Towergate’s scale, customer insight and distribution relationships make it a unique business and a leader in the markets in which it operates. Its combination of distribution and underwriting gives it unparalleled consumer data and market insight.

Disclaimer

This document may contain forward looking statements in relation to certain of Towergate’s plans and current goals and expectations, in particular but not limited to its future financial condition, performance and results. These forward looking statements can be identified by the use of forward looking terminology, including the words “aims”, “believes”, “estimates”, “anticipates”, “expects”, “intends”, “may”, “will”, “plans”, “predicts”, “assumes”, “shall”, “continue” or “should” or, in each case, their negative or other variations or comparable terminology or by discussions of strategies, plans, objectives, targets, goals, future events or intentions. By their very nature, all forward looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Towergate’s control, including but not limited to insurance pricing, interest and exchange rates, inflation, competition and market structure, acquisitions and disposals, and regulation, tax and other legislative changes in those jurisdictions in which Towergate, its subsidiaries and affiliates operate. As a result, Towergate’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set out in any forward looking statement made by Towergate. Towergate has no obligation to update any forward looking statement contained in this document or any other document or any other forward looking statement Towergate may make. All subsequent written or oral forward looking statements attributable to Towergate or to persons acting on its behalf should be interpreted as being qualified by the cautionary statements included herein. As a result, undue reliance on these forward looking statements should not be placed.

Past performance cannot be relied upon as a guide to future performance.

No representation or warranty, express or implied, is or will be made in relation to the accuracy, fairness or completeness of the information or opinions made in this document, which information and opinions should not be relied or acted on, whether by persons who do not have professional experience in matters relating to investments or persons who do have such experience. The information and opinions contained in this document have not been audited or necessarily prepared in accordance with international financial reporting standards and are subject to change without notice. No responsibility or liability whatsoever is or will be accepted by Towergate, its subsidiaries or affiliates or by any of its officers, directors, employees or agents for any loss howsoever arising, directly or indirectly, from any use of this document or its contents or attendance at any associated presentation. 

Investor Relations Contacts

Lois Hutchings - Group FP&A and Investor Relations Analyst

Towergate Insurance Limited

Email: Investor.Relations@towergate.co.uk

Media Queries Internal Contact

Kelly-Ann Knight - Corporate Communications Director

Towergate Insurance Limited

Email: kelly-ann.knight@towergate.co.uk