Shares of Cover-More Group Ltd (ASX: CVO) have recovered some of their recent losses today after the travel insurance business revealed its interim earnings results for financial year 2016.
The company's share price was hammered earlier in the week, falling 13.8% in a single day when it announced its earnings before interest, tax, depreciation and amortisation (EBITDA) would be 16.4% lower than in the prior corresponding period at $20.4 million (or 9.4% lower when one-off costs and business expansion costs were excluded).
It confirmed that figure in its official results today, with net profit after tax (NPAT) also down 31.1% to $8.2 million. Meanwhile, although group sales rose 6.6% with gross travel insurance sales in Australia and Asia growing by 7.1% and 27.6% versus the prior corresponding period respectively. Actual revenue declined by 7.9% to $103.1 million.
The group's EBITDA result was impacted by a number of factors, including higher claims costs (which were exacerbated by the weaker Australian dollar), together with one-off costs to help fund its growth. The ash clouds in Bali also hampered the result, as did a 2.1% increase in overheads during the period.
On a more positive note, the company did extend its partnership with Flight Centre Travel Group Ltd (ASX: FLT) during the period, with that partnership expected to run through to 2024.
As was noted by the company in its update to the market earlier in the week, Cover-More Group said: "We continue to work with our Australian underwriting partner in an effort to limit the volatility experienced through the current underwriting premium model with an aim to transition to a Generalised Linear Model. We anticipate that the issue will be resolved in H2 FY2016."
Cover-More Group's shares rose 4.8% to $1.75, although they did trade as high as $1.77 earlier in the session. That compares to a 0.6% decline for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) so far.
