Acquisition costs deflate Equisure’s earnings

Listed broker network con- solidator, Equisure Financial Network (TSE:EFN), reported a 50% drop in earnings for the first quarter of this year to 2c a share compared with the same period previous.

Although consolidated revenue for the first quarter of the 2000 financial year rose by 47% to $18.3 million (1999: $12.4 million), net income fell to $380,000 from the $764,000 recorded for the same period the year previous. The drop in earnings is attributed to the takeover costs of several large brokerages during 1999, the interest-bearing structure of the deals in question resulted in significantly higher finance charges being incurred in the first quarter of this year. Earnings were also diluted by an increase in the number of common shares in issue to 21.2 million shares from 19.58 million shares. The combined effect of the acquisitions on the company’s bottom-line was over $1.4 million, the directors state.

However, the directors note that the impact of finance charges relating to the brokerage acquisitions had been anticipated, and that the operations in question are expected to deliver significant revenue gains in the second half of the year. “…these new acquisitions, although very profitable on an annual basis, historically produce little or no profit in the first quarter of the year. Despite the modest first quarter results, the year 2000 is expected to be a very profitable one for the corporation as the new acquisitions move into their busy periods.”

Annualized network premiums have risen to approximately $400 million with annualized revenue of around $84 million.

Furthermore, the directors note that, since the announcement made earlier this year that the company would seek potentials buyers, Equisure has appointed financial advisors BMO Nesbitt Burns to coordinate potential bids. Interest has been “strong” the directors say, and at least one interested party has made public statement of its interest to make a takeover bid for Equisure.