Final results for the year ended 30 September 2011
Jelf, an independent full service brokerage that supports businesses and individuals, announces its final results.
DownloadThe complete results are available to download in PDF Format |
Strong financial performance despite the difficult trading conditions and fragile wider economy:
- Revenue levels increased by 2% to £72.1m (2010: £70.4m)
- EBITDAE increased by 3% to £10.1m (2010: £9.8m)
- EBITDAE margin maintained at 14% (2010: 14%)
- Earnings per share increased by 136% to 2.6p (2010: 1.1p)
Significantly strengthened the balance sheet:
- Net debt down to £3.0m (2010: £7.3m)
Cash generated from operations continues to be strong and deferred consideration from previous acquisitions is nil (2010: £0.8m).
Operating highlights
- Organic sales in the Insurance business are up 4% to £44.8m (2010: £42.9m)
- Organic sales in the Employee Benefits business are up by 5% to £19.9m (2010: £18.9m)
- Investment continues in the business aimed at organic growth and developing people and infrastructure
- Plans in place to embrace the forthcoming Retail Distribution Review changes
- Drive for operational efficiency continues
Alex Alway, Group Chief Executive, commented:
"Strong trading during 2011 has enabled the Group to increase its income, and margins have been maintained whilst at the same time we have initiated a series of investments aimed at generating future economic growth."
Chairman's statement
I am delighted to be in a position to report a strong set of results for the year ended 30 September 2011.
We continue to operate in a difficult trading environment and our clients continue to be affected by the uncertain and fragile economic conditions. Despite this we have seen encouraging growth in the business. We have increased revenue to £72.1m (2010: £70.4m), increased EBITDAE by 3% to £10.1m (2010: £9.8m) and delivered a 136% increase in earnings per share to 2.6p (2010: 1.1p). This is a strong result.
Growth has been achieved through a focus on retaining existing clients, by providing clients with a wider range of services, and by winning new clients and new members for our network, The Purple Partnership.
Underpinning this is the high quality of our client service as reflected in a strong rating in the Investor in Customers survey. This independent and highly respected award is based solely on feedback from our clients and staff.
We have strengthened Jelf's balance sheet. As a result of strong trading and prudent financial management, our net debt has been reduced to £3.0m (2010: £7.3m).
Over the course of the last 12 months we have signed off a number of initiatives to provide the foundation for stronger future organic growth. In addition we are well placed to take advantage of selected acquisition opportunities where there is a good fit to our business and where the price is right.
The governance structure within Jelf is strong and fit for purpose in a regulated environment.
My fellow non-executives continue to be impressed by the high quality of the management team and by the dedication to client service shown by the employees in their everyday activities.
We are in a strong position to take advantage of any upturn in the economy and to generate growth in value for our shareholders.
I look forward to working with the Board and the people of Jelf in the year ahead to deliver another strong set of results.
Les Owen
Non-executive Chairman
Operating and financial review
"Positive trading during 2011 has enabled the Group to increase its income, and margins have been maintained whilst at the same time we have initiated a series of investments aimed at generating future economic growth." Alex Alway, Group Chief Executive
Financial results
In this financial year, we saw a continued improvement in both Jelf's financial performance and strength. In the year ended 30 September 2011, Jelf's revenue increased by 2% to £72.1m (2010: £70.4m). EBITDAE increased by 3% to £10.1m (2010: £9.8m) and earnings per share rose by 136% to 2.6p (2010: 1.1p).
EBITDAE margins have been maintained at 14% (2010: 14%) whilst at the same time we have initiated investment in a number of initiatives to generate future organic growth; a good example is the opening of our new London office.
Jelf has concentrated on improving profit levels and I am pleased that we have managed an increase in operating profit of 42% to £4.4m (2010: £3.1m).
Jelf continues to generate strong positive cash flow and all deferred consideration payments have been made.
The net debt position has reduced further and now stands at £3.0m (2010: £7.3m). This means that Jelf is in a strong and secure financial position, ideally poised to take advantage of any growth in the economy or opportunities for M&A as they arise.
Dividend policy
The Directors do not recommend the payment of a dividend this year (2010: nil). The Directors intend to commence payment of dividends only when it becomes commercially prudent to do so. Consideration will be given to:
- Repayment of existing loan facilities
- Maximisation of shareholder value
- Availability of Jelf's distributable profits and cash
- Level of retained funds required to finance future growth
- Meeting regulatory capital adequacy requirements.
Strategy
Our objective is to continue upon our strategy of profitable growth as a leading independent intermediary providing a broad and integrated range of products and services to the UK SME and corporate business sectors and the related private individual market.
The principles of Jelf's strategy continue to be:
- Clients - Doing what our clients tell us they want us to do, which is to work side-by-side with them, as their trusted business adviser, to understand their business needs and individual circumstances. In this way we provide them with bespoke solutions from our broad range of products and services that mitigate risks and add value. This applies equally to businesses of all sizes, individuals and affinity / specialist trade groups.
- People - Our people are our key selling point, and we continue to develop them in order to deliver a high value service to our clients. We foster a people centric culture focused on attracting, retaining and developing highly talented individuals.
- Provider relationships - Strategic and trading relationships with our provider partners across all sectors are a key factor in our success. These relationships allow us to deliver bespoke products and top quality service to our clients.
- Shareholders - Prudent management of Jelf's financial resources on behalf of our shareholders.
Throughout 2011, we have focused on achieving organic growth and on driving cross sales through use of the Jelf Menu. Registered cross sales this year exceeded £1m revenue. In addition, the Board continues to pursue an opportunistic strategy with regard to M&A. During this period the Board has reviewed a number of opportunities and it will continue to review the market during 2012.
Review of operations
The business continues to offer a wide range of services, which enables us to be flexible and provide a "one stop" for our clients' business and individual needs.
For all of our trading areas we have Directors who have responsibility for the profit and loss account and autonomy in the day-to-day running of their business. We have focused on investment and growth in our businesses: Insurance, Employee Benefits, Financial Planning and our network, the Purple Partnership.
Each of these business segments is monitored against key performance indicators (KPIs), which include revenue, EBITDAE and EBITDAE margin. In addition, we monitor our earnings per share and net debt. The performance of each business segment is included within the following review.
Insurance
This business provides insurance broking services to corporate and individual clients, directly and through affinity groups and specialist trade groups. It offers advice on all aspects of general insurance, including carrying out risk assessments, designing insurance programmes, reviewing existing insurance arrangements and claims management.
Insurance is the largest segment, accounting for 62% of Jelf's total income.
Revenues were ahead of 2010, at £44.8m compared to £42.9m. EBITDAE increased from £4.3m in 2010 to £4.9m and EBITDAE margin also increased from 10% to 11% year-on-year.
During 2011 the management team has implemented development plans as well as continuing to increase the efficiency of the business. We have invested in new sales people and in systems and prospects at the same time. The quality of these new recruits along with the experience of our existing staff provides us with an excellent platform for growth.
The new business efforts within Insurance have borne fruit and a number of introducer deals have been put in place. Insurance new business in 2011 was £5.2m. We expect this to continue into 2012.
During 2011 we achieved chartered status for our Insurance business, a quality mark that is currently awarded to only a small number of insurance brokers.
This year saw The Purple Partnership, Jelf's network for independent brokers which is included within the insurance business segment, exceed its targets and continue to build its membership base. Revenue increased by 45% to £0.6m in its fourth year of operation.
Employee Benefits
This business comprises a range of services including group pensions, group risk and healthcare (UK and international). The non-healthcare part of the business provides advice and a range of services to small and large businesses in respect of benefit design (including risk and pension benefits), benefit communication and implementation. This has always been an area of organic growth for Jelf and we have seen continued strong new business levels in this sector during 2011 as corporate clients have sought advice in these uncertain times and ahead of the introduction of the National Employment Savings Trust (‘NEST‘) from October 2012. We expect this growth to continue through into 2012.
The healthcare business provides advice on health-related employee benefits such as private medical insurance and other non-insurance services. Core clients are owner-managed enterprises based in England and Wales. The business also provides specialist fee-based advice to larger companies, encompassing wider healthcare related issues such as absence management and occupational health as well as international health insurance cover.
The international healthcare business is developing as a centre of excellence and continues to experience strong organic growth.
Employee Benefits accounts for 28% of Jelf's total income.
Despite the challenging economic conditions the Employee Benefits business experienced an increase in revenues of 5% in 2011, to £19.9m (2010: £18.9 m). Cost management resulted in growth in EBITDAE of 2%. EBITDAE has increased to £5.2m (2010: £5.0m). EBITDAE margins remain strong at 26% (2010: 27%).
Financial Planning
This business provides independent financial planning services, including investment planning, portfolio management and retirement planning advice to individuals, especially entrepreneurs; and business assurance advice to SMEs.
Financial Planning accounts for 10% of Jelf's total income.
There is a difficult wider environment for investments with all the problems associated with sovereign and private debt and directly as a result of these trading conditions revenues from Financial Planning have fallen by 13% to £7.5m (2010: £8.5m). EBITDAE has decreased by 96% to £18k (2010: £470k). EBITDAE margin is 0% (2010: 6%).
We reported last year we were implementing a phased transition to prepare the business for the new regulatory regime that will come into force on 1 January 2013. These plans continue and have included the development of a new investment proposition, the segmentation of our client base, new literature and a new preferred platform provider.
Jelf's advisers have a mandate for over £450m (2010: £450m) of Funds Under Advice with third party investment (wrap) platforms. These funds have been subject to the wider difficult investment climate.
During 2011 we retained the prestigious ‘Chartered Financial Planners' status for our Financial Planning business, a mark that is currently awarded to only a small number of intermediaries.
Jelf in the Community
Due to the efforts of staff members across Jelf, in excess of £17k (2010: £40k) has been raised to support local charities in England and Wales. This is in addition to £11k (2010: £7k) contributed by Jelf.
Rebranding
The brand refresh we carried out for all our businesses during September 2010 has been short listed for the Corporate Communications Awards 2011.
Organisational development
Over the last year, we have continued to implement a number of initiatives which will provide efficiency gains and simplify support and back office operations.
In addition, we have launched another tranche of our SAYE scheme which was significantly over subscribed by our employees.
Despite the difficult markets and the poor economic conditions in 2011, our staff retention remains good as we continue to build a cohesive Jelf culture across the business.
Infrastructure
As at 30 September 2011, Jelf operated out of 32 locations (2010: 31) and staff numbers at the end of the year decreased by 1% to 1,022 (2010: 1,031). We have continued to invest in our infrastructure to ensure that we develop support for our primary asset, the people within our business, whilst also creating capacity for future growth.
Organic growth
Total revenues increased by 2% on 2010. Particularly pleasing was the increase achieved by our Insurance business, with organic sales up 4% against a backdrop of a continuing soft market.
We have established a new London office which will act as a base to support the servicing of our existing clients as well as a hub for organic growth in London.
During the 2011 financial period, we have invested heavily in our marketing resources which will assist all business sectors.
Thanks to staff
Jelf remains determined to be responsive to the needs of our clients and to improve the underlying efficiency and quality of the service we deliver. We will continue to test ourselves and remain poised to capitalise on any improvements in the wider economy.
This year has again seen much change, and on behalf of the Board I would like to put on record our thanks to all our staff for their continued support and commitment.
We remain confident that, by meeting the needs of our clients, Jelf will be in a position to prosper over the next 12 months.
Alex Alway
Group Chief Executive
Consolidated balance sheet
As at 30 September 2011
| 2011 | 2010 | ||
| Note | £'000 | £'000 | |
| Non-current assets | |||
| Goodwill | 3 | 58,475 | 58,473 |
| Intangible assets | 4 | 42,495 | 47,016 |
| Property, plant and equipment | 2,948 | 2,941 | |
| Available for sale investments | 55 | 60 | |
| 103,973 | 108,490 | ||
| Current assets | |||
| Trade and other receivables | 7,053 | 7,846 | |
| Cash and cash equivalents* | 23,591 | 20,801 | |
| 30,644 | 28,647 | ||
| Total assets | 134,617 | 137,137 | |
| Current liabilities | |||
| Trade and other payables | (17,549) | (17,774) | |
| Deferred consideration | - | (840) | |
| Borrowings | 5 | (4,116) | (1,986) |
| Income tax liabilities | (1,347) | (372) | |
| Deferred income tax liabilities | (1,240) | (1,272) | |
| Provisions | (575) | (1,312) | |
| (24,827) | (23,556) | ||
| Net current assets | 5,817 | 5,091 | |
| Non-current liabilities | |||
| Borrowings | 5 | (7,562) | (13,373) |
| Deferred income tax liabilities | (9,190) | (11,413) | |
| Provisions | (519) | (139) | |
| (17,271) | (24,925) | ||
| Total liabilities | (42,098) | (48,481) | |
| Net assets | 92,519 | 88,656 | |
| Equity | |||
| Share capital | 6 | 1,104 | 1,100 |
| Share premium | 72,070 | 72,069 | |
| Merger reserve | 9,282 | 9,159 | |
| Other reserves | 2,942 | 2,031 | |
| Retained earnings | 7,121 | 4,297 | |
| Total equity attributable to the owners of the parent Company | 92,519 | 88,656 |
* Included within cash and cash equivalents is fiduciary cash of £14,485,000 (2010: 11,241,000)
Consolidated income statement
For the year ended 30 September 2011
| Note | 2011 | 2010 | ||
| £'000 | £'000 | |||
| Revenue | 2 | 72,100 | 70,371 | |
| Cost of Sales | (8,418) | (7,431) | ||
| Gross Profit | 63,682 | 62,940 | ||
| Administrative expenses | (59,234) | (59,799) | ||
| Operating profit | 4,448 | 3,141 | ||
| Operating profit consists of: | ||||
| Earnings before interest, taxation, depreciation, amortisation and exceptional costs (EBITDAE) | 2 | 10,078 | 9,778 | |
| Depreciation of property, plant and equipment | (891) | (839) | ||
| Amortisation of intangible fixed assets | (4,739) | (4,713) | ||
| Group reorganisation and rationalisation costs | - | (1,085) | ||
| Investment revenues | 65 | 32 | ||
| Finance costs | (1,298) | (2,895) | ||
| Finance costs consist of: | ||||
| Interest payable | (1,298) | (1,407) | ||
| Fees relating to cancellation of debt facility: | ||||
| Interest rate swap exit | - | (1,076) | ||
| Loan arrangement fees previously capitalised | - | (412) | ||
| Profit before income tax | 3,215 | 278 | ||
| Income tax (charge)/credit | 7 | (391) | 605 | |
| Profit for the year attributable to the owners of the parent Company | 2,824 | 883 | ||
| Earnings per share attributable to the owners of the parent Company | ||||
| Basic (pence) | 8 | 2.6 | 1.1 | |
| Diluted (pence) | 8 | 2.6 | 1.1 | |
Consolidated statement of comprehensive income
For the year ended 30 September 2011
| 2011 | 2010 | |
| £'000 | £'000 | |
| Profit for the year | 2,824 | 883 |
| Other comprehensive income | ||
| Cash flow hedges (net of tax) | - | 746 |
| Other comprehensive income, net of tax | - | 746 |
| Total comprehensive income for the year attributable to the owners of the parent Company | 2,824 | 1,629 |
Consolidated statement of changes in equity
For the year ended 30 September 2011
| Share capital |
Share premium |
Merger reserve | Hedging reserve1,2 |
Share based payment reserve1,3 |
Own shares held1 |
Other reserves1 |
Retained earnings |
Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 October 2009 | 498 | 54,852 | 10,742 | (746) | 3,650 | (1,074) | 14 | (1,890) | 66,046 |
| Share based payments | - | - | - | - | 848 | - | - | - | 848 |
| Share issue (net of issue costs) | 602 | 17,217 | 2,597 | - | - | - | - | - | 20,416 |
| Purchase of own shares by EBT | - | - | - | - | - | (283) | - | - | (283) |
| Settlement of cash flow hedges (net of tax) | - | - | - | 746 | - | - | - | - | 746 |
| Vesting of Employee Benefits Trust shares | - | - | - | - | (248) | 248 | - | - | - |
| Share based payments reallocation | - | - | - | - | (1,772) | 648 | - | 1,124 | - |
| Merger reserve transfer in respect of 2009 impairment | - | - | (4,180) | - | - | - | - | 4,180 | - |
| Retained profit for the year | - | - | - | - | - | - | - | 883 | 883 |
| At 30 September 2010 | 1,100 | 72,069 | 9,159 | - | 2,478 | (461) | 14 | 4,297 | 88,656 |
| Share based payments | - | - | - | - | 1,174 | - | - | - | 1,174 |
| Share issue (net of issue costs) | 4 | 1 | 123 | - | - | - | - | - | 128 |
| Purchase of own shares by EBT4 | - | - | - | - | - | (263) | - | - | (263) |
| Vesting of Employee Benefits Trust shares | - | - | - | - | (90) | 90 | - | - | - |
| Retained profit for the year | - | - | - | - | - | - | - | 2,824 | 2,824 |
| At 30 September 2011 | 1,104 | 72,070 | 9,282 | - | 3,562 | (634) | 14 | 7,121 | 92,519 |
- Shown within other reserves on the balance sheet
- Shown net of tax
- The share based payment reserve is distributable to the equity holders of the Company
- The EBT purchased 400,000 (2010: 616,666) shares in the year
Consolidated cash flow statement
For the year ended 30 September 2011
| Note | 2011 | 2010 | |
| £'000 | £'000 | ||
| Cash flows from operating activities | |||
| Cash generated from operations | 9 | 11,353 | 4,598 |
| Interest paid | (1,170) | (1,169) | |
| Taxation paid | (1,553) | (1,131) | |
| Net cash flow from operating activities | 8,630 | 2,298 | |
| Cash flows from investing activities | |||
| Interest received | 41 | 32 | |
| Proceeds on disposal of property, plant and equipment | 4 | 6 | |
| Purchase of property, plant and equipment | (903) | (921) | |
| Purchase of intangible assets | (209) | (136) | |
| Acquisition of client book | (18) | - | |
| Disposal of client book | 8 | - | |
| Deferred consideration paid | (618) | (6,564) | |
| Net cash flow used in investing activities | (1,695) | (7,583) | |
| Cash flows from financing activities | |||
| Repayments of borrowings | (3,883) | (32,298) | |
| Repayments of obligations under finance leases | - | (16) | |
| Purchase of own shares | (263) | (283) | |
| Settlement of interest rate swap | - | (1,076) | |
| Proceeds on issue of shares (net of expenses) | 1 | 17,745 | |
| New borrowings raised (net of expenses) | - | 23,267 | |
| Net cash flow from financing activities | (4,145) | 7,339 | |
| Net increase in cash and cash equivalents | 2,790 | 2,054 | |
| Cash and cash equivalents at beginning of year | 20,801 | 18,747 | |
| Cash and cash equivalents at end of year 1 | 23,591 | 20,801 |
Included within cash and cash equivalents is fiduciary cash of £14,485,000 (2010: £11,241,000)
Notes
Notes to the Financial Results are available in the pdf download