Hub Makes 15% Earnings Gain for 2-Q

Chicago-based broker Hub International (TSX: HBG), a subsidiary of the Fairfax group, saw improvement in its financial results from a variety of sources for the second quarter of 2004 – growth was experienced both organically and through acquisition, with both the Canadian and U.S. operations performing above expectation, a company statement says.

Hub’s net earnings for the second quarter of this year rose by 15% to US$11.6 million (US35 a share) from the US$10.1 million (US31 a share) reported the year prior. The broker consolidator’s revenue for the latest reporting period increased by 14% year-on-year to US$50.7 million (2-Q 2003: US$44.7 million) with organic growth accounting for 4% of this gain, the company notes.

Hub’s U.S. revenue grew by 14% for the second quarter of 2004 to US$50.7 million compared with the US$44.7 million disclosed a year ago. Over the same period, Canadian revenue rose 7% to US$31.5 million from the US$29.5 million reported a year ago (organic growth produced about 9% of this gain).

For the first half of 2004, the broker consolidator’s net earnings increased by 12% year-on-year to US$21.2 million (US64 a diluted share) from US$19.0 million (US59 a diluted share) disclosed for the first half of 2003. The company’s revenue rose 13% to US$161.6 million for the latest six months (first 6 months 2003: US$143.0 million). “Second quarter improvements were particularly strong in comparison to more recent quarters, considering that rate increases continued to moderate and we obtained only a one percentage point benefit from a stronger Canadian dollar,” says Hub International CEO Martin Hughes. “We are encouraged by the overall performance of our operating units.”

The company has declared a quarterly dividend of 5 a share. However, Hub has lowered its earnings projection for 2004 to US80-85 a share from its earlier projection of US$1.13-$1.17 a share. The company attributes this reduction to higher cost of acquisitions, such as the recent major purchase of Talbot Financial.