Insurance-focused business process services provider The Innovation Group (TIG) has delivered a mixed picture in the first half, with 10% headline growth, but declines in profitability and trouble with its North America business. Revenue for the six months ended 31 March grew 10% to £94.8m, with 9% organic growth. However pre-tax profits were down 7% to £4m, pushing the group margin down to 4.2% vs. 5% last time. The recently completed acquisition of Australian outsourcer Claims Services Australia (CSA) (see here), contributed £3.8m (4%) to revenue.
The UK business was a strong performer with revenue growth of 8.9% to £19.6m, which we suspect was all organic, driven by TIG’s biggest ever win a £11-13m per annum deal with RBS Insurance (see TIG signs £40m BPS deal with RBS Insurance). Its UK EBITDA margin is also up to 12% vs. 9% previously. Germany, TIG’s largest market, grew 9.9%, South Africa declined 2%, but Asia Pacific, more than doubled revenue to £12.3m (EBITDA margin of 13%) thanks to the CSA bolt-on. The problem area is North America, where revenue was down 12.9%, and where it reported a 9% EBITDA loss vs. break-even last time round. Despite this weakness, TIG claims there is more momentum in the US business with a recent win for its Insurer Claims v7.0 software and services for a tier two US insurer. We think it’s a little too early to call it a recovery.
TIG also announced another acquisition, this time in the UK, of environmental assessment specialist Marishal Thompson & Co (Environmental) Ltd (MT) for £5.2m in cash. TIG is looking to raise approximately £3.5m through a share placement to part fund the deal. Alnwick-based MT employs over 65 people across the UK, and is profitable – with 2011 revenue of £4.2m and a pre-tax profit of £1m. Paul Thompson, MT’s sole shareholder, will remain MD of the business, which will form part of TIG’s Northern European property division. This acquisition will no doubt support TIG’s delivery of claims services for the RBSI subsidence contract, and help it build out a broader offering to this target market.
We will be speaking with TIG’s management this morning and will provide more colour and movement later in HotViewsExtra.