Although Willis Group Holdings reported net income of $72 million for the second quarter of 2006, a 37 percent drop from the $114 million it earned in Q2 2005, most of the earnings report was decidedly positive. “Organic growth” rose 10 percent. Total reported revenues for the quarter ended June 30 were $593 million, compared with $549 million for the same period last year, an increase of 8 percent. Willis’ Board of Directors also authorized a $1 billion share repurchase plan.
Commenting on the results, Joe Plumeri, Chairman and CEO, stated: “We have already begun successfully implementing the Shaping Our Future initiatives throughout Willis. Our 10 percent organic revenue growth in the second quarter is a clear demonstration of the effectiveness of our sales culture. In addition, we see traction and accretion from the new hires that we made over the last few years. Importantly, the expansion of our underlying margins and profitability are direct results of solid growth and contributions from each and every area of our business through the first half of 2006.
“We are confident that achieving leadership in our core businesses and delivering the best value to our clients through our distribution network will make a significant impact on our Company and drive our financial performance,” he continued. “We are focused on businesses where our unique expertise allows us to deliver superior advice, products and services. In addition, we believe that our extensive retail distribution network, client advocacy and efficient delivery platform makes Willis the broker most valued by our clients.”
Plumeri called the Board’s authorization of the $1 billion stock buy back plan “a clear indicator of their confidence in the future of Willis and a recognition that our best use of capital is to invest in ourselves.”
Willis said that “organic growth in commissions and fees excluding total market remuneration was 10 percent in the second quarter 2006. Each business unit had a strong contribution to overall organic growth in commissions and fees including Global with 13 percent organic growth in the quarter (including double digit organic growth in Reinsurance), North America with 8 percent and International with 6 percent.”
Willis six-month results showed total reported revenues increased by 4 percent to $1.264 billion, up from $1.218 billion for the corresponding period in 2005. “The effect of foreign currency translation decreased reported revenues by 2 percent and net disposals of operations decreased reported revenues by 1 percent,” the bulletin noted. “The reduction of total market remuneration as well as changes to the quarterly phasing of incentive compensation in 2006 impacted the year-over-year comparison of adjusted operating margin by over 1 percentage point in the first half of 2006 compared to the first half of 2005. The reported (and adjusted) operating margin was 25.6 percent in the first half of 2006, and excluding these items, this represented an over 1 percentage point improvement in adjusted operating margin over the first half of 2005.”
Willis said that for the full year 2006, it “anticipates continued growth in organic commissions and fees,” and also “expects salaries and benefits expense as a percentage of total revenues to be less than 59 percent and continues to expect modest adjusted operating margin expansion.
“In the third quarter 2006, Willis expects to incur certain one-time expenses related to the Company’s strategic initiatives. Willis also expects to close on the sale of Ten Trinity Square, its current London headquarters during the third quarter of 2006. The Company is on schedule to move into a new London headquarters in late 2007/early 2008.
In conclusion, Plumeri added, “We remain focused and committed to the Shaping Our Future initiatives which are designed to drive revenue and profitable growth in our Company. We have seen early signs that the execution of our strategy is working well and expect an even more significantly positive impact on our results in 2007 and beyond.”
The full report as well as a replay of the earnings conference call held Aug. 3 may be obtained on the Company’s Website at: www.willis.com.
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