
Interim Results for the six months ended 31 March 2008
JELF ANNOUNCES STRONG PERFORMANCE AND CONTINUED GROWTH
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Jelf Group plc, a leading independent corporate consultancy providing advice on insurance, healthcare, employee benefits, commercial finance and wealth management, today announces its interim results for the six months ended 31 March 2008. These interim results have been prepared for the first time in accordance with International Financial Reporting Standards (IFRS).
Financial Highlights
- 49% growth in Revenue to £25.0m (2007: £16.8m*)
- 85% growth in EBITDA** to £3.1m (2007: £1.7m*)
- 24% growth in EBITDA** margin to 12.4% (2007: 10.0%*)
- Organic revenue growth of +16.3% in core areas of Insurance and Healthcare (2007: +3.5%)
- Cash generated from operations of £6.5m (2007: £2.4m)
- Underlying*** diluted Earnings per Share (EPS) 5.6p (2007: 3.9p*)
- £45m (net) capital raised during the period
- Insurance Gross Written Premium ("GWP")increased to approximately £240m per annum
- Private Medical Insurance GWP c. £150m per annum
* restated in accordance with IFRS
** operating profit before deduction of Depreciation of tangible fixed assets and Amortisation of intangible fixed assets
*** Before deduction of Amortisation of intangible fixed assets. Basic EPS is 1.9pps (2.3pps for 6 months ended 31/03/07)
Operating Highlights
- Growth continues, both organically and through acquisitions.
- Clarke Roxburgh acquired in April to extend footprint to West Midlands
- Manson Group purchased in January to create hub for growth in North-West
- Argyll Group purchased in April to create hub for growth in South-East
- Four smaller brokerages also purchased
- Industry consolidation continuing to drive insurance markets
- Substantial investment in infrastructure to support growth
- Strong performance in key month of April
Alex Alway, Chief Executive, said:
"Our continued growth and strong performance is testament to a successful strategy implemented by first-class teams across all areas of the business. Market conditions remain competitive but the growth in our revenues is a credit to our strong business proposition"
Group Chief Executive's statement
Our strategy continues to be one of expanding the business through both the acquisition of well run brokerages and by offering a wider range of services to new and existing clients. The broad range of services which we offer to owner-managed businesses will enable the Group to deliver strong results within a challenging economic environment. The outlook for the Group remains positive for the rest of 2008.
We have successfully integrated the previous year's key acquisitions, SPS and Lampier, into the Group. Jelf has also acquired a number of substantial insurance brokerages in 2008 namely Manson Group (January), Argyll Group (April) and Clarke Roxburgh (April) which will enhance our insurance offering. The transition of these businesses into the Group is going to plan and the beneficial effects of these acquisitions will be evident in the full year results.
Underlying organic revenue growth is +4.3% (2007: +24%). The highlights of our organic growth include Insurance (+13%) and Healthcare (+33%) which, together, produce growth of +16.3% (2007: +3.5%) emphasising strong new business and the benefit of increased scale. Wealth management remained a strong contributor in the current difficult investment climate with a small reduction of -4%. The overall organic growth figure is affected by the phasing of the employee benefit business. At this point of time the Group has a strong pipeline of prospects in this area, which it is looking to complete on before the year-end.
The results of the Group are always biased to the key months of the third quarter of our financial year due to the start of the tax year in April, when a significant amount of business is conducted. The interim results reflect this bias. I am pleased to report that trading in April across the Group is in line with expectations overall.
The trend towards consolidation has, if anything, accelerated over the past six months due to a combination of available capital and changes in the CGT regime. Our acquisitions of smaller brokerages allow the Group to take advantage of economies of scale and cross-selling opportunities. The key to this activity is to build upon the relationships that already exist with clients. The significant capital raising completed in February of this year, in combination with the Group's ability to run an advice-based, multi-channel distribution business, will enable us to extract greater value than others in this sector.
We would like to put on record our thanks for the continued support, dedication and professionalism of our staff. They continue to face considerable change within the business and constantly rise to the challenge.
The results for the first half of the Group's financial year give us confidence that we will deliver the forecast results for 2008 and that opportunity for further expansion will continue to be available.
Chairman's Statement
I am delighted to report another set of strong results for the Group. Our organic growth continues, with Insurance, Healthcare and Commercial Finance producing notable successes, and we have made some excellent acquisitions.
We continue to make substantial investments in people and infrastructure, to enable the business to execute our declared growth strategy in a controlled manner.
Financial performance
In the six-month period ending 31 March 2008, the Group increased its turnover by 49.3% to £25.0m (2007: £16.8m*); EBITDA increased by 85% to £3.1m (2007:£1.7m*).
Underlying profit margin (operating margin prior to charging Amortisation) was 11.2% (2007: 8.4%*)
* restated in accordance with IFRS
Cash generated from operations was £6.5m. The consideration payments for acquisitions made in the past six months amounted to £12.1m. Performance-based deferred consideration payments on previous acquisitions amounted to £1m for the period.
Total current bank debt is £23.5m. This increased from £20.3m as at 30 September 2007, with additional borrowings being used to help fund acquisitions made in the current financial year.
We continue to maintain a strong capital structure, raising £45m (net) in new equity in February 2008. This enabled us to further strengthen and diversify our investor base, and we are delighted to welcome 3i Quoted Private Equity Limited and our other new shareholders to the Jelf Group.
Organisational development
We continue to invest in the Group's infrastructure and core areas such as human resources, finance, compliance and marketing. This infrastructure investment in technology and front-line support will always be a priority as the Group has a declared strategy of ensuring that expansion takes place in a controlled environment and that new acquisitions are effectively integrated.
The Acturis IT system has been rolled out further across the Insurance business and we are also in the process of migrating the core Healthcare business onto the same system.
The Group's intranet has now been expanded to the majority of our locations and forms an integral part of our programme of responses to FSA initiatives such as Treating Customers Fairly.
Business Development
Insurance
The provision of insurance advice for the mid-to-large corporate market, where we have a small presence, continues to be competitive due to a mixture of soft rating and competition. The smaller owner-managed sector, where Jelf specialises, is less competitive and we are seeing some rate changes here, but not enough to signal a turning point in the market. We anticipate that this trading environment for our Insurance businesses will continue through 2008 and into the first half of 2009.
Despite these mixed market conditions, our client-focused approach has enabled us to meet retention targets and to add value for clients. New business efforts and economies of scale have underpinned our +13% organic growth versus last year.
Lampier
Completion of the Lampier acquisition in July 2007 has substantially enhanced the Group's presence in the Bristol insurance market. Provision of the full range of Group services to Lampier clients has been underway for several months and early indications are very encouraging with some very good new business sales.
Manson Group
This was our first significant move outside our previously defined geographical footprint of Southern England & Wales. The Manson team has expertise across all the major disciplines and we intend to use this new base in the North West as a hub for expansion and additional acquisitions in the region.
Argyll Group and Clarke Roxburgh
These two businesses were purchased in April after the half year date. They have further increased our presence in the insurance market, where we now place approximately £240m GWP annually.
The addition of Clarke Roxburgh extends our client footprint into the West Midlands; Argyll Group provides us with a new base in the South East which, as with Manson Group in the North West, we intend to use as a hub for further expansion and acquisitions in this region.
Healthcare
The private medical insurance market continues to enjoy a hard market due to inflationary pressures within the sector.
The establishment of a new business team in the Lampier office is producing good early results. Our new business and cross-selling efforts, combined with the hard market and the Group's increasing scale, underpin the +33% organic growth. The results of the Healthcare business are weighted towards the second half of the financial year and we are pleased to announce that this business has shown strong performance in the key month of April.
The Group now places approximately £150m GWP annually in the private medical insurance market.
Employee Benefits
The market for advice on employee benefits remains buoyant and the Group continues to enjoy a strong competitive position in this area. The nature of the Employee Benefits business is that there is a longer lead time in the purchase of the services. This has resulted in a different profile to this year's income with revenues down 15% versus last year's very strong first half. We have a good pipeline of prospects and anticipate an improvement in the second half.
In conjunction with our partners, we have developed a market-leading flexible benefits offering ("my reward") which is proving to be popular with clients.
Wealth Management
The market for independent advice on pure wealth management is difficult in the current economic environment, although to date the main area impacted has been mortgage-related advice which represents only around 2% of the Group's revenue.
We have launched a business development campaign around business assurance which was recently highlighted in the Mail on Sunday. This has already shown good results and will be a primary focus throughout 2008.
The Group now has in excess of £200m (2007: £125m) in third-party funds on Wrap programmes producing renewal income. In addition we have over £1 billion of client funds under advice in old style product structures.
The Wealth Management business was accredited with Chartered status in the first quarter of 2008.
Acquisitions
The active programme of acquisitions has continued through this half year with four completed transactions prior to the half-year and another three prior to this announcement.
The Group has a healthy pipeline of planned acquisitions. Our strategy of multi-channel distribution, with a strong geographical focus on chosen markets, has enabled us to avoid overpaying when acquiring due to the number of targets available and our strong reputation and local infrastructure. As in the past, on a number of occasions we have curtailed preliminary discussions if the price being asked is deemed excessive. We will only complete acquisitions if they add shareholder value.
People
I would like to extend a warm welcome to the management and employees of the businesses acquired over this financial year.
We have continued to recruit and motivate key employees by utilising Employee Benefit Trust and share option awards, whilst strengthening the senior management team with appointments and promotions.
This year saw the launch of our first Save As You Earn share scheme which was taken up by over 250 employees.
Throughout the year we have been running a full programme of development training for staff and management.
Our employees and management continue to deliver value to our clients, shareholders and our strategic partners in the market. They have delivered a substantial uplift in the value of the Group and I would like to again take this opportunity to thank them for their dedication and support. They remain our key asset.
Plc Board ("the Board")
I was particularly pleased to welcome Bruce Carnegie-Brown as a Non-Executive Director and also Jon Manson as an Executive Director, both of whom were appointed to the Board in the first quarter of 2008. I would also like to put on record our thanks to Michael King who retired from the Board in February 2008.
Future
The Group will continue with its strategy of strengthening its position within its chosen sectors and providing a wider range of enhanced services to our clients.
The Jelf Group will continue to place great emphasis on customer service and client focus.
David Walker
Group Chairman
5th June 2008
Consolidated Balance Sheet
As at 31 March 2008
| Note | 31 Mar 2008 (unaudited) | 31 Mar 2007 (restated and unaudited) | 30 Sept 2007 (restated and unaudited) | |
| £'000 | £'000 | £'000 | ||
| Non-current assets | ||||
| Goodwill | 46,086 | 19,291 | 33,246 | |
| Intangible assets | 37,171 | 15,614 | 26,812 | |
| Property, plant and equipment | 2,471 | 2,162 | 2,318 | |
| Available for sale investments | 143 | 45 | 131 | |
| 85,871 | 37,112 | 62,507 | ||
| Current assets | ||||
| Trade and other receivables | 10,014 | 9,397 | 11,242 | |
| Cash and cash equivalents | 32,538 | 7,369 | 9,270 | |
| Derivative financial instruments | 61 | - | - | |
| 42,613 | 16,766 | 20,512 | ||
| Total assets | 128,484 | 53,878 | 83,019 | |
| Current liabilities | ||||
| Trade and other payables | (16,577) | (11,618) | (14,937) | |
| Deferred consideration | (10,354) | (4,493) | (4,894) | |
| Income tax liabilities | (972) | (1,841) | (3,275) | |
| (27,903) | (17,952) | (23,106) | ||
| Net current assets/(liabilities) | 14,710 | (1,186) | (2,594) | |
| Non-current liabilities | ||||
| Long-term provisions | (346) | (25) | (130) | |
| Deferred income tax liability | (11,214) | (4,898) | (8,330) | |
| Trade and other payables | (181) | (16) | (29) | |
| Deferred consideration | (6,144) | (3,206) | (8,785) | |
| Bank overdrafts and loans | (10,144) | (9,801) | (20,011) | |
| (28,029) | (17,946) | (37,285) | ||
| Total liabilities | (55,932) | (35,898) | (60,391) | |
| Net assets | 72,552 | 17,980 | 22,628 | |
| Equity | ||||
| Share capital | 5,6 | 498 | 246 | 257 |
| Share premium | 6 | 65,617 | 14,105 | 16,247 |
| Other reserves | 6 | (387) | (5) | (80) |
| Retained earnings | 6 | 6,824 | 3,634 | 6,204 |
| Total equity | 72,552 | 17,980 | 22,628 |
Consolidated income statement
For the six months ended 31 March 2008
| Note | Six months ended 31 Mar 2008 (unaudited) |
Six months ended 31 Mar 2007 (restated and unaudited) |
Year
ended 30 Sept 2007 (restated and unaudited) |
|
| £'000 | £'000 | £'000 | ||
| Revenue | 25,024 | 16,759 | 39,694 | |
| Cost of Sales | (2,036) | (1,615) | (2,554) | |
| Gross Profit | 22,988 | 15,144 | 37,140 | |
| Administrative expenses | (21,399) | (14,138) | (32,123) | |
| Operating profit | 1,589 | 1,006 | 5,017 | |
| Operating profit consists of: | ||||
| Earnings before interest, taxation, depreciation and amortisation | 3,110 | 1,680 | 7,155 | |
| Depreciation of tangible fixed assets | (317) | (283) | (586) | |
| Amortisation of intangible fixed assets | (1,204) | (391) | (1,552) | |
| Investment revenues | 153 | 55 | 86 | |
| Finance costs | (1,004) | (274) | (906) | |
| Profit before income tax | 738 | 787 | 4,197 | |
| Income tax expense | (118) | (196) | (1,069) | |
| Retained profit for the period | 620 | 591 | 3,128 | |
| Earnings per share | ||||
| Basic (pence) | 4 | 2.0 | 2.4 | 12.6 |
| Diluted (pence) | 4 | 1.9 | 2.3 | 12.1 |
All results are derived from continuing operations
Consolidated statement of recognised income and expense
For the six months ended 31 March 2008
| Six months ended 31 Mar 2008 (unaudited) | Six months ended 31 Mar 2007 (restated and unaudited) | Year ended 30 Sept 2007 (restated and unaudited) |
|
| £'000 | £'000 | £'000 | |
| Gains on cash flow hedges | 61 | - | - |
| Net income recognised directly in equity | 61 | - | - |
| Profit for the period | 620 | 591 | 3,128 |
| Total recognised income and expense for the period | 681 | 591 | 3,128 |
Consolidated cash flow statement
For the six months ended 31 March 2008
| Note | Six months ended
31 Mar 2008 (unaudited) |
Six months ended 31 Mar 2007 (restated and unaudited) |
Year ended 30 Sept 2007 (restated and unaudited) |
|
| £'000 | £'000 | £'000 | ||
| Cash flows from operating activities | 7 | |||
| Cash generated from operations | 6,471 | 2,426 | 8,965 | |
| Interest paid | (872) | (240) | (730) | |
| Taxation paid | (3,146) | (100) | (322) | |
| Net cash from operating activities | 2,453 | 2,086 | 7,913 | |
| Cash flows from investing activities | ||||
| Interest received | 193 | 55 | 86 | |
| Proceeds on disposal of property, plant and equipment | - | 528 | 656 | |
| Purchase of property, plant and equipment | (467) | (628) | (997) | |
| Purchase of intangible assets | (174) | (17) | (166) | |
| Purchase of own shares | (695) | (222) | (491) | |
| Acquisition of subsidiaries and businesses | (12,135) | (5,855) | (19,670) | |
| Disposal of subsidiaries and businesses | - | - | 35 | |
| Net cash used in investing activities | (13,278) | (6,139) | (20,547) | |
| Financing activities | ||||
| Repayments of borrowings | (23,870) | - | (6,300) | |
| Deferred consideration paid | (985) | (706) | (2,562) | |
| Repayments of obligations under finance leases | - | (7) | (43) | |
| New lease funding | - | - | 45 | |
| Proceeds on issue of shares (net of expenses) | 44,994 | 300 | 2,453 | |
| New bank loans raised | 13,954 | 6,609 | 23,085 | |
| Net cash from financing activities | 34,093 | 6,196 | 16,678 | |
| Net increase in cash and cash equivalents | 23,268 | 2,143 | 4,044 | |
| Cash and cash equivalents at beginning of period | 9,270 | 5,226 | 5,226 | |
| Cash and cash equivalents at end of period * | 32,538 | 7,369 | 9,270 |
*Included within cash and cash equivalents is fiduciary cash of £12,837k (31 March 2007: £6,754k; 30 September 2007: £8,074k).
Notes
Notes to the Financial Results are available in the pdf download



