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‘Another strong quarter’ from Willis

Broker Willis Group Holdings reported net income of $78mn, or $0.54 per share, 8 percent up on the prior-year period in what was described as “another strong quarter” for the firm as it announced its interim results yesterday (1 August).

Analyst David Small of Bear Stearns commented: “Operating income was on top of our estimate at $78mn. Revenue came in slightly less than expected but was more than offset by stronger profitability. Willis’ ability to deliver this type of EPS growth in the face of a rapidly softening pricing environment should prevent multiple compression. Finally, we suspect that consistent results throughout the cycle could result in multiple expansion.”

Revenues rose 6 percent to $626mn with a 4 percent rise in organic growth in commissions and fees. The company said that the growth was fuelled by a 5 percent gain in new business that was partially offset by a negative 1 percent impact from declining premium rates.

Willis’ operating margin increased to 22 percent for the quarter, against 20.1 percent for the same period last year, an increase of 190 basis points.

“Our results this quarter once again illustrate the diligent execution of our Shaping our Future strategies for growth, productivity and efficiency,” said Joe Plumeri, Willis chairman and CEO. “The top line is growing nicely despite the very soft market conditions; we are realising cost savings identified last year, maintaining ongoing expense discipline and managing capital.”

The broker said it expects the net benefits of its Shaping our Future programme would be $20mn this year, a figure that is expected to rise to $45mn by 2009. For the second quarter its salaries and benefits expenses grew to $360mn, but fell to 57.5 percent as a ratio of total revenue.

The company’s shares fell 0.19 percent to $40.40 at close of trading on the New York Stock Exchange.

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