Aon reports USD$47 million profit for second quarter

Aon plc has reported a profit of USD$47 million for the second quarter of 2018.

The profit translates to USD$0.19 earnings per share, compared to a loss of $(52) million, or $(0.20) per share, in the prior year period, which includes $(36) million, or $(0.14) per share, of unfavorable impact from adoption of the new revenue recognition standard, says the company. Net income per share from continuing operations on a comparable basis, adjusted for certain items and the impact of adoption of the new revenue recognition standard, increased 31% to $1.71, compared to $1.31 in the prior year period.

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“Our second quarter results reflect continued momentum toward our mission with positive performance across each of our key financial metrics; including strong organic revenue growth of 5% overall and substantial operational improvement reflected in 17% operating income growth and +130 basis points of operating margin expansion. During the quarter, we took specific steps to strengthen our client-serving capabilities and create greater long-term operating leverage,” says Greg Case, Chief Executive Officer. “We enter the second half of the year with momentum, operating from a position of strength and on track to deliver our near-term target of exceeding $7.97 adjusted earnings per share for the full year 2018. More important, we believe these further steps toward our mission to unite the firm will help deliver our potential for clients and colleagues and will unlock significant shareholder value creation through double-digit free cash flow growth over the long-term.”

Highlights from the company’s statement of Q2 results include the following:

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Total revenue in the second quarter increased 8% to USD$2.6 billion on a reported basis compared to the prior year period, including a decrease of USD$36 million, or 2%, related to adoption of the new revenue recognition standard. Excluding this impact, comparable revenue increased USD$229 million, or 10%, compared to the prior year period driven by 5% organic revenue growth, a 3% increase related to acquisitions, net of divestitures, and a 2% favorable impact from foreign currency translation.

Total operating expenses in the second quarter increased 3% to USD$2.6 billion on a reported basis compared to the prior year period, including an increase of USD$4 million related to adoption of the new revenue recognition standard. Excluding this impact, comparable expenses increased USD$79 million, or 3%, compared to the prior year period due primarily to USD$103 million of expense related to legacy litigation, a USD$72 million increase in operating expenses related to acquisitions, net of divestitures, a USD$44 million unfavorable impact from foreign currency translation, a USD$40 million increase in restructuring charges, and an increase in expenses associated with 5% organic revenue growth, partially offset by a USD$204 million net decrease in impairment charges, USD$40 million of incremental savings related to restructuring and other operational improvement initiatives, and a USD$34 million decrease in costs related to regulatory and compliance matters.

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Restructuring expenses were USD$195 million in the second quarter, primarily driven by costs associated with restructuring and separation initiatives and workforce reductions. As previously announced, the Company expects to invest USD$1.175 billion in total cash over a three-year period and incur USD$50 million of non-cash charges in driving one operating model across the firm. This includes an estimated investment of USD$975 million of cash restructuring charges and USD$200 million of capital expenditures. The company has incurred USD$766 million, or 75%, of the total estimated restructuring charges.

Restructuring savings in the second quarter related to restructuring and other operational improvement initiatives are estimated at USD$84 million before any reinvestment, an increase of USD$40 million compared to the prior year period. Before any potential reinvestment of savings, restructuring and other operational improvement initiatives are expected to deliver run-rate savings of USD$450 million annually in 2019. The company has achieved USD$257 million, or 57%, of the total estimated annualized savings, before any potential reinvestment.

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