Hub 2-Q net earnings flatten on share dilution

Broker network consolidator Hub International Ltd. (TSX: HBG) increased second quarter revenue by 29% year-on-year to US$74.1 million, while net earnings fell to US$10.1 million for the same period compared with the US$10.7 million reported at the end of June 2002. The modest decline in earnings, which equates to 31c a share on a diluted basis for the second quarter of this year (2-Q 2002: 41c a share), largely resulted from a 22% increase in the number of shares in issue, a company statement notes.
The broker consolidator’s revenue growth for the second quarter of this year was partly bolstered by the strengthening of the Canadian dollar over the same time period, with the rise in the currency accounting for about US$3 million of total revenue, or five percentage points of the 29% annual growth rate. Revenue from U.S. operations rose by 33% to US$44.7 million for the second quarter of this year compared with the US$33.6 million reported for the same period in 2002. Canadian revenue increased by 24% to US$29.5 million versus the US$23.7 million shown for the same period a year ago. Hub’s pre-tax earnings for the second quarter of this year rose by 6% in total to US$15.6 million (2-Q 2002: $14.8 million) with the earnings margin dropping to 21% compared with the 26% margin made during the second quarter of last year.
The company’s results for the first half of this year show a 34% year-on-year rise in revenue to US$143 million compared with the US$106.8 million reported at 2002’s half-year. Roughly four percentage points of this revenue gain resulted from the strengthening of the Canadian dollar, a company statement says. U.S. revenue rose by 41% for the latest six months to US$90 million against the US$63.7 million shown at the end of June 2002, while Canadian revenue increased by 23% year-on-year to US$53.1 million (June 2002: US$43.1 million). During the six month period, contingent commission and “volume overrides” rose by 32% year-on-year, the statement observes. “Growth of contingent commissions and volume overrides during the first half is a reflection of our ability to deliver an increasingly large and profitable book of business to high-quality insurers,” says CEO Martin Hughes.
The broker consolidator’s pre-tax earnings for the first half of this year increased by 37% to US$29.9 million compared with the US$21.8 million reported for the same period in 2002. Net earnings for the latest six month period rose by 21% to US$19 million from the US$15.7 million recorded at the end of the 2002 half-year. As a result, Hub has declared a dividend of US5c a share on outstanding common shares of the company payable at the end of September to shareholders registered by September 15.