Underlying performance reflects the Group’s transformational year and demonstrates a strong result in the face of industry and global economic headwinds.
- Revenue increased by 50% to £299.0m from £199.0m in 2014.
- The Group’s principal measure of profitability, EBITDA, increased 31% to £56.7m from £43.2m in 2014.
- EBITDA margin decreased to 19%, primarily reflecting continuing investment in start-up businesses (2014: 22%).
- The Group delivered underlying organic revenue growth of 5% (2014: 7%).
Transaction, financing charges and non-recurring expenses
The structure, integration and related financing profile of the acquisition of RKH Holdings Limited (RKH) and other transactions are reflected in the Group’s 2015 income statement. Specifically, the majority of the deferred consideration payable to RKH employee shareholders will, as anticipated, be expensed in accordance with International Financial Reporting Standards (IFRS) over the deferral period to 2017. In addition, Hyperion completed a $750m debt refinancing in April 2015 resulting in both recurring and non-recurring financing charges to the Group’s income statement. There will also be a number of one-off integration and other transaction-related expenses in 2015. As a result, the Group will report an IFRS accounting loss of £81.4m for 2015 despite a significantly higher level of operating profit.
The accounting loss under IFRS specifically reflects:
- £84.8m of non-recurring and acquisition costs, including a non-cash charge of £29.7m in respect of the deferred consideration payable to RKH employee shareholders and a further non-cash impairment charge of £23.6m following a review of the carrying value of intangible assets relating to previous acquisitions.
- £28.7m in respect of finance charges, including £22.7m of loan interest and similar cash items, with the balance relating to amortisation of capitalised fees and fair value adjustments.
- £23.2m for depreciation and amortisation, including £15.8m related to customer relationship assets recognised on the acquisitions made during 2015.
The Board has concluded that Hyperion will not pay a dividend in relation to the 2015 financial year.
Strategic acquisitions have brought scale, distribution and specialisms in key markets.
The acquisition of RKH was completed on 29 April 2015 and created a business with a strong international and UK retail distribution network outside North America; a leading independent specialty lines insurance and reinsurance broker; and a leading international specialist underwriting agency.
As well as RKH, Hyperion made a number of acquisitions in 2015 which strengthened its product and distribution capabilities both geographically and in terms of specialist market positions. These included:
- Schouten Sicherheit International bolstered the Group’s presence in Germany, and brought Hyperion a leading market position in the global sports and contingency markets.
- Harmonia, a leading insurance broking firm which specialises in employee benefits and commercial lines, enhanced the Group’s presence in Brazil.
- Wacolda, Proseguros and NMB Colombia, which gave the Group a strong broking platform in Colombia.
- Powell Bateson, a commercial insurance broking firm based in Liverpool, which brought specific expertise in construction, property and risk and safety management to the UK business.
- PrimeCare Insurance Services Limited gave the Group a strong market position in the UK care sector through brands Care Homes Insurance Services and Primecare.
- Perkins Slade, a UK-based sport and recreation, corporate and high net worth insurance broking firm gave the Group an enhanced market position in insurance broking services to sports’ national governing bodies and amateur sports associations as well as a regional broking operation in Birmingham.
- UBK Correduria de Seguros, Spain’s eleventh largest broker, brought scale, broad regional presence and significant personal lines and high net worth expertise to the Group’s operations in Spain.
- An initial 49% stake in, and management control of, specialist financial lines, commercial, employee benefits, marine, engineering and credit insurance broker, CIMB Insurance Brokers (CIB), which brought scale and enhanced the Group’s position and reputation in Malaysia, one of the region’s fastest growing markets.
The employee ownership model is at the heart of the Group’s proposition to all its stakeholders, attracting entrepreneurial talent to Hyperion and in turn delivering a different and enhanced offering to clients, employees and insurer and broker partners.
The Group’s ability to attract talent is evidenced in the appointment of a number of well-respected, senior market experts during the year, from Board level to business development, corporate governance and support services.
Three important senior appointments were made in 2015:
- Dominic Collins became Chairman of the Group following the merger with RKH in April 2015.
- Oliver Corbett was appointed Chief Financial Officer and an Executive Director of the Group Board in September 2015.
- Clement Booth was appointed Non-Executive Chairman of the DUAL International Board and a Non-Executive Director of the Group Board in October 2015.
The Group is committed to growing its employee shareholder base and following the latest employee share offer, 600 of the Group’s more than 3,000 employees are now shareholders in Hyperion and its subsidiaries.
David Howden, Chief Executive Officer, commented:
“2015 was a pivotal year in what has been achieved for the future of Hyperion. Our commitment to a long-term strategy to build sustainable value for our shareholders through organic growth and strategic acquisitions that deliver balance in our operating model, geographic reach and product range remains as strong as ever. Hyperion now stands out as something exceptional in the insurance industry. The three pillars of the Group – our retail broking operations, our leading Specialty and Reinsurance business, and our international underwriting agency operations – are clearly differentiated from their competitors and are each market-leading in their own right. Together, and underpinned by majority employee ownership, they offer a truly unique proposition for clients, insurance markets, brokers and employees.
As we look to the future, the 2015 financial year has laid the foundation upon which we will continue to build a Group that stands out as a home for exceptional people; that provides a service to its clients and partners that is different from its competitors because its employees own it.”
Dominic Collins, Chairman, said:
“I am delighted that from 1 October 2015 the combined Hyperion and RKH businesses have been legally and organisationally integrated and the planned changes in leadership and structure have been effected. This ensures the enlarged Group is fit for purpose as the industry continues to evolve rapidly and I am confident we are well positioned to deliver the benefits to our clients, insurer partners and shareholders of our efforts.”