In spite of a tough market, Broker Network – up over a third since being recommended by Growth Company Investor at 189.5p in October – has demonstrated that its model is robust enough ‘to prosper at all points of the insurance cycle’. And it has the buoyant interim results to prove it.

The group’s network of insurance brokers increased by seven to 162 in the last six months, the majority of which were ‘members’ that buy insurance through BN and pay it a percentage of each premium they write. BN now owns 19 of the brokers outright after acquiring two during the half, including its largest-ever purchase, of TL Risk Solutions, (TLRS) for £12.5m.

Chief executive Grant Ellis admited that competition for new recruits to the network was tougher than ever and that the number of newcomers was not as high as he’d like – ‘but we’re not reducing our requirements for return on capital’. Happily, the group is seeing an ‘increasingly positive attitude’ towards its structure from brokers, and accordingly plans to increase recruitment this year by ‘beefing up the sales team’. Nine new members are already contracted to join in the second half.

The TLRS acquisition helped boost sales growth by 79% (44% was organic) to a total of £10.5m for the six months to October. Profit before tax and goodwill came in higher than the whole of the previous year at £2.7m to provide a 74% rise in earnings to 8.10p. Cashflow of £1.68m plus bank financing of £12.9m to pay for deferred acquisition payments drove total debt from £1.1m to £13.9m, mostly due to the acquisition of TLRS.

Operating margins grew from 16.8% to 19.5%, though the company acknowledged depressed insurance premiums made growth ‘more challenging’. The 2.3% fall in like-for-like premiums was more than offset for members by a 5% increase in earnings.

Forecasts from house broker Teather & Greenwood have been upgraded very slightly to £5.2m pre-tax profits and 24.6p earnings. Changing hands for just over ten times full-year earnings, the shares are still worth holding for more upside.