Canadian Underwriter

Hub Canadian growth solid, US operations lagging

October 31, 2003   by Canadian Underwriter

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Broker consolidator Hub International Ltd. (TSX, NYSE: HBG) says its revenue and earnings are up for the third quarter ending September 30, 2003, with Canadian operations posting strong organic growth.
Revenue grew 31% to US$64.7 million for the quarter (Q3 2002: $49.6 million), with the strong Canadian dollar contributing to 11% organic growth. In total, Canadian operations represent 41% of revenue, with US operations, which saw a disappointing 1% organic growth rate over the period, representing 59% of revenue.
“In Canada, we posted organic growth of 24% – a solid 10% growth rate after removing the impact of foreign currency exchange. In the United States, organic growth was a disappointing 1%, but that seemingly low level was skewed by a sharp decline in a single financial institutions product line (creditor placed insurance). Absent that individual product impact, U.S. organic growth would have been approximately 11%,” explains Hub CEO Martin P. Hughes.
After-tax net earnings for the third quarter rose 26% for the third quarter, to US$6.8 million, or US$0.22 per diluted share (Q3 2002: US$5.4 million, or $0.19 per share).
For the first nine months of this year, revenue was up 33% to $207.7 million, versus $156.3 million at the same point in 2002. Organic growth for the first nine months of 2003 was 13%, reflecting 6% growth in the US and 22% growth in Canada.
After-tax net earnings for the first nine months are up 23% to US$25.8 million, from $21.1 million a year earlier. But net margins were down 1% between September 30, 2003 and a year prior. Diluted earnings per share are up 3% to $0.81 for the first nine months of 2003, versus $0.79 a year earlier.
The company says its projections for the yearend are at the low end of early earnings guidance, with full-year diluted earnings per share expected to be US$1.13-$1.18.
The company is paying out a quarterly dividend of US$0.05 per share on outstanding common shares.

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