CBL shares slip 11pc after result misses some expectations

CBL chairman Sir John Wells. Photo / Jason Oxenham

CBL Corp shares tumbled 11 per cent after the credit surety and financial risk insurance company posted full-year earnings that missed some market expectations and included one-time costs that weren't projected in its prospectus.

Net profit fell to $30.7 million in the 2016 calendar year, from $35.5m a year earlier, the Auckland-based company said in a statement. That fell short of the $40.4m forecast in its prospectus. Operating earnings rose to $76.2m, exceeding its prospectus forecast of $63.6m, from $59.9m a year earlier. Revenue rose 36 per cent to $333.5m, also ahead of its prospectus forecast.

Weighing on net profit were $4.2m of capital raising and business acquisition costs, finance costs of $6.7m and a foreign exchange adjustment of $9.7m, the company's results show. The shares declined 41 cents to $3.30, having climbed 50 per cent in the past 12 months.

"There were a few one-offs by the look at it, what they're saying is the result's not as bad as it maybe looks at first glance because they're more focussed on the underlying profit," said Mark Lister, head of private wealth research at Craigs Investment Partners. "If you look at this time last year the shares weren't too far above $2 and it put on a pretty stellar performance through most of last year so it's possibly a case of expectations being a little high, and maybe the market wasn't as happy with the numbers as the company was."

CBL listed on the NZX in 2015, raising $90m to help fund the acquisition of Australia's largest surety bond insurer Assetinsure, and has since acquired UK tax investigation insurance provider Professional Fee Protection, and France's largest specialist producer of construction-sector insurance Securities and Financial Solutions Europe SA, continuing an international expansion strategy begun in 2000. Its debt increased to $96.9m at the end of 2016, from $65.2m in 2015, and it signalled that growth through acquisitions was likely to slow this year.

"After a busy few years with the IPO, major acquisitions and capital raising, 2017 is about refocusing on business development opportunities across the group and consolidating acquisitions," the company said in presentation notes accompanying the earnings release. "Current levels of capital, together with earnings development, (are) expected to be sufficient to fund growth, and small acquisitions in the foreseeable future."

This year, the company plans to develop emerging programmes and markets in Europe (France, Italy, Romania, and Spain), Latin America (Mexico), Australia, South East Asia (Philippines, Vietnam), and India.

"As a result, CBL expects 2017 to be a strong year with a developing pipeline of new business," the company said.

The company's CBL Insurance unit posted a 21 per cent increase in profit to $47m as revenue lifted 11 per cent to $228.2m. Its gross written premium value increased 14 per cent to $247.5m on growth in existing product programmes and new programmes in Australia, South East Asia and continuing development of its Mexican building warranties product.

Its Assetinsure unit posted a profit of $4m, beating the prospectus forecast of $2.4m, as it exited unprofitable commercial property lines and aligned the business more with its own underwriting philosophy and expertise.

The company's CBL Insurance Europe unit posted a profit of $1.9m, lagging behind its forecast for $2.9m, as it increased investment in resources and infrastructure to support growth.

Its European Insurance Services business posted profit of $2.6m, missing its $5.4m forecast. The company said it had strengthened the management team during the year, appointing chief executive Pierre Galeon, and had restructured its operations to gain efficiencies.

The Professional Fee Protection business added $1.8m to profit in the year, while the Securities and Financial Solutions Europe business contributed $2.8m in profit since the company gained regulatory approval for the acquisition in October 2016.

It will pay a final dividend of 2 cents on March 31, taking the annual total for 2016 to 5 cents, unchanged from the previous year.