10-QPeriod: Q2 FY2011

Aon plc Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 4, 2011For Securities:AON

Summary

Aon plc (AON) reported solid financial results for the period ending June 30, 2011, showcasing significant revenue growth driven by strategic acquisitions, most notably Hewitt Associates. While facing a challenging global economic environment with pricing pressures, the company demonstrated resilience through a 1% organic revenue growth in both its Risk Solutions and HR Solutions segments. Net income from continuing operations attributable to Aon stockholders saw a substantial increase, reflecting improved profitability and effective cost management initiatives. The company's financial position remains strong, supported by robust operating cash flows. Aon has actively managed its debt structure, including refinancing efforts, and continued its share repurchase program. Despite ongoing restructuring charges related to the Hewitt integration, the company is focused on its key metrics of organic growth, margin expansion, and earnings per share, positioning itself for continued value creation for its shareholders.

Financial Highlights

52 data points
Beta

Revenue

$2.81B

Net Income

$258.00M

9.2% Net Margin

EPS (Diluted)

$0.75

Total Assets

$30.50B

Cash & Equivalents

$300.00M

Free Cash Flow

$221.00M

Financial Statements
Beta
Revenue$2.81B
Operating Expenses$2.37B
Operating Income$440.00M
Interest Expense$63.00M
Net Income$258.00M
EPS (Basic)$0.76
EPS (Diluted)$0.75
Shares Outstanding (Basic)337.70M
Shares Outstanding (Diluted)342.70M

Key Highlights

  • 1Revenue increased by 48% to $2.8 billion in the second quarter and 47% to $5.6 billion year-to-date, primarily driven by acquisitions, particularly Hewitt Associates.
  • 2Organic revenue growth was 1% for both the second quarter and the first six months of 2011, indicating stability and modest growth from existing operations.
  • 3Net income from continuing operations attributable to Aon stockholders rose by 43% to $256 million in the second quarter and 40% to $500 million year-to-date.
  • 4Operating expenses increased due to the inclusion of acquired entities and amortization of intangible assets but were partially offset by restructuring savings.
  • 5The company actively managed its debt, completing a refinancing that resulted in a $19 million loss on extinguishment of debt but improved its debt structure.
  • 6Aon continued its share repurchase program, buying back 12.6 million shares for $653 million in the first six months of 2011.
  • 7Restructuring charges related to the Aon Hewitt Plan amounted to $54 million for the first six months of 2011, with an expected total cost of $325 million.

Frequently Asked Questions

The primary driver of revenue growth was the acquisition of Hewitt Associates, which significantly boosted the HR Solutions segment. Organic revenue growth also contributed, albeit modestly, showing resilience in core operations across both Risk Solutions and HR Solutions segments.

Aon incurred significant restructuring charges related to the Aon Hewitt Plan, totaling $54 million for the first six months of 2011. While these costs impacted operating expenses, the company noted that these initiatives are expected to yield substantial long-term savings and are part of the strategy to streamline operations and expand margins.

Aon believes its balance sheet and strong cash flow provide sufficient liquidity. The company has access to credit facilities and actively manages its debt. During this period, Aon refinanced debt, issuing new notes and a term loan, and used the proceeds to repay outstanding balances from a previous credit agreement related to the Hewitt acquisition. Total debt increased slightly, and the company maintained compliance with its debt covenants.

Aon acknowledged headwinds from the challenging global economic environment, including pricing pressure and decreased client spending. The company is focusing on its core strategies of growing organically, expanding margins, and increasing earnings per share to navigate these conditions. The ongoing integration of Hewitt and cost-saving initiatives are key to maintaining performance.