At first sight, the market's reaction looked churlish, given that pre- tax profits, up from pounds 50.2m to pounds 91.6m in the 12 months to December, came in ahead of expectations. The comparison was flattered by last year's net exceptional hit of pounds 30m, mainly for extra provisions to cover the group's withdrawal from certain UK underwriting operations. Equally, the rise in operating profits from continuing businesses from pounds 79.4m to pounds 87.8m was helped by what is likely to prove a one-off boost from Willis's Lloyd's members' agency. The pounds 14.5m profit commission for the 1993 year of account, a bumper one for names, is the first for several years and Willis is warning that current estimates are that 1994 commissions will be around half the previous year's level.
Looking past these swings and roundabouts, the group is doing its best to manage its way through the storms which continue to swirl around the broking industry. The figures included a further pounds 11.3m severance burden as employee numbers, 11,500 two years ago, fell another 11 per cent to 9,116.
They are probably the minimum required in a business operating in a market which saw premium rates fall another 10 per cent or so last year. In view of that, Willis did well to raise brokerage and fee revenues in the continuing business by 3 per cent to pounds 683m.
The picture is even better in most individual business sectors. Willis enjoyed a 4 per cent rise in reinsurance brokerage last year, a 2 per cent increase in speciality businesses like marine and aerospace and growth of 6 per cent in so-called "retail" lines sold to companies in the UK and 3 per cent in North American retail.
With no debt, the group is well positioned to attack the maturity of its markets by buying some of its smaller competitors, but it still has a big hill to climb.
Even with 70 per cent of this year's revenues sold forward, the currency impact of the pound at current rates could be pounds 6m to pounds 7m. Meanwhile, rates continue to fall. NatWest has raised its profits forecast to pounds 94m for this year, putting the shares on a modest forward p/e of 10. Yielding 6.2 per cent, they are well supported, but investors hoping for a bid may be disappointed. Unattractive.