Willis Group Holdings plc
(
WSH
) reported third-quarter 2012 adjusted net income from continuing
operations of 22 cents per share, falling short of the Zacks
Consensus Estimate by 8 cents.
Results were also 46% lower than 41 cents earned in the
year-ago quarter. Adjusted net income from continuing operations
was $38 million, down 47% year over year. Lower revenue coupled
with higher expenses weighed on the performance.
Including an $11 million charge related to a settlement with a
former joint venture partner in India and a $1 million loss on
disposal of the Indian operations, the company reported net
income of $26 million or 15 cents per share, comparing
unfavorably with $60 million or 34 cents earned in the year-ago
quarter.
Operational Performance
Total revenue in the quarter decreased 0.8% year over year to
$754 million due to lower commissions and fees and lower
investment income. Also, revenues lagged the Zacks Consensus
Estimate of $770 million.
Commissions and fees went down 1% year over year to $749 million
in the quarter, as foreign currency translation had a negative
impact on it.
Investment income also declined 43% from the year-ago quarter to
$4 million, attributable to lower net yields on cash and cash
equivalents.
Total expense increased 2.1% year over year to $684 million,
primarily due to an increase in salaries and benefits and higher
depreciation expense.
In the quarter under review, adjusted operating income was $82
million, down 22% year over year. Operating margin contracted 290
basis points to 10.9%.
Segment Update
Global
: Organic growth in commissions and fees was 3% in the quarter,
while reported growth was flat with year-ago level.
Organic growth was primarily driven by mid double-digit increase
in Global Specialties.
Operating margin was 22.1%, contracting 50 basis points year over
year.
North America
: Commissions and fees, on an organic basis and reported basis
remained flat with year-ago level.
Operating margin in the quarter contracted 280 basis points.
International
: Commissions and fees increased 5% year over year on an organic
basis, while on a reported basis, it declined 2%. Asia and Latin
America reported mid teen-digit growth, while the UK business was
up in low single-digits. On the flip side, Australasia and Europe
were each down in low-single digits.
Operating margin was a negative 4.5%, compared with 1.9% in the
year-ago quarter.
Financial Update
The cash and cash equivalent balance at quarter end stood at $424
million, down 2.7% from 2011 end.
Long-term debt edged up 0.4% to $2.4 billion from 2011 end.
Dividends and Share Buybacks
Willis spent $42 million to buy back 1.16 million shares in the
quarter. With this, it exhausted the $100 million in 2012 buyback
authorization.
The company's board authorized a dividend of 27 cents to the
shareholders of record as on December 31, payable on January 15,
2013.
Zacks Rank
We retain our Neutral recommendation on Willis Group. The
quantitative Zacks #3 Rank (short-term Hold rating) for the
company indicates no clear directional pressure on the stock over
the near term.
Marsh & McLennan Companies Inc.
(
MMC
), which competes with Willis Group, also shares a Zacks #3 Rank
and is scheduled to release its third quarter results before the
opening bell on November 6.
MARSH &MCLENNAN (MMC): Free Stock Analysis
Report
WILLIS GP HLDGS (WSH): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research
