Interim Results for the six months ended 31 March 2010
JELF INCREASES MARGIN
Jelf Group plc, a leading independent corporate consultancy providing advice on insurance, employee benefits and wealth management, today announces its interim results for the six months ended
31 March 2010.
DownloadThe complete results are available to download in PDF Format |
Financial highlights
- Revenue in line with last year at £34.9m (2009: £35.0m) but EBITDAE increased by 20% to £4.1m (2009: £3.5m)
- EBITDAE margin increased by 20% to 12% (2009: 10%)
- Net debt reduced to £13.6m (31 March 2009: £38.8m; 30 September 2009: £30.7m)
Operating highlights
- Integration of the acquisitions continues:
- Wealth management integrated
- Employee benefits fully integrated by 30 September 2010
- Insurance integration in advanced stages
- Focus on costs has achieved results and increased margins but there is more to be done as economic forecasts remain uncertain
- Award of 2* for outstanding customer service from Investors In Customers from (IIC)
Alex Alway, Group Chief Executive, said:
"The wider economic climate remains challenging but Jelf has maintained its revenue levels and, thanks to actions taken last year, both profits and margins have increased. This, coupled with the strengthening of the balance sheet puts the Group in an excellent position to take advantage of future opportunities."
Chairman's Statement
Despite the continuing economic uncertainties, we have performed well in the first half of this year, in terms of both our improving operating profitability and the continuing strengthening of our capital structure.
Revenues remained essentially flat in the first half, with some organic growth in Wealth Management and Employee Benefits offsetting a small decline in Insurance. Insurance lapses remained above trend, largely due to the effects of the weak economy on our client base but were offset by strong new business growth which was up 38% year on year. Operating profitability improved, in part due to the cost management measures taken last year and to continuing efforts to control costs and improve operating efficiency. EBITDAE increased 20% year on year, and our EBITDAE margin improved from 10% to 12%.
In March 2010 we successfully executed a £19m share placement, and 3i sold its shareholding to CapZ, removing the uncertainty which has existed since 3i closed the 3i QPE fund. We have also reduced the amount and extended the maturities of our term debt; the covenants underlying this new loan provide considerable operational scope to continue the organic development of the business. Our overall gearing has again been substantially reduced, with net debt (gross debt plus deferred consideration less office cash) declining from £30.7m at 30 September 2009 to £13.6m at 31 March 2010. We are now in a strong position to benefit from the economic recovery as it unfolds, with the financial flexibility to invest in the business and take advantage of any opportunities to enhance shareholder value.
I would also like to welcome CapZ as a substantial shareholder to the Group, and Jonathan Kelly, partner at CapZ, as a non-executive director to the Board. The Jelf board and management view this as a positive development, and I am confident that CapZ as an institution, and Jon as an individual, will make a strong contribution to the success of the Group in the years ahead.
I would also like to add here that, after six years as a non executive Director and in my third year as Chairman, I have decided to retire from the Board at some time in the second half of this year. I have thoroughly enjoyed the last six years, and have been honoured to be associated with the Jelf Group. Given that our operating businesses are all performing well, and our capital structure is now very strong, I believe this is a good time for me to make way for some new blood. We will be announcing succession plans in due course.
Finally, on behalf of the Board I would like to thank our staff for their excellent efforts, and our provider partners, our shareholders and, most importantly, our clients for their continued support.
David Walker
Chairman
Group Chief Executive's Statement
Following the re-financing that was completed in February of this year I am pleased to be in a position to report another set of trading results for the Group, the highlight of which is the sharp rise in new business year on year if not overall revenues. The wider economic climate remains extremely challenging and the effect it has on our clients is reflected in our results. However the management actions taken over the last 18 months will provide a platform for margin and profit growth this year.
No trend in increased insurance rating has been detected to date.
This year has also seen us continuing with our programme of business integration and investment in people and the infrastructure to support them.
Financial performance
In the six-month period ending 31 March 2010, the Group revenue remained largely flat at £34.9m (2009: £35.0m); Operating profits are £1.0m compared to a £0.4m loss for the same time period last year. EBITDAE increased by 20% to £4.1m (2009: £3.5m).
Underlying EBITDAE margin was increased to 12% (2009: 10%).
Total debt is now £16.0m (2009: £24.3m). This is in line with expectation following the re-financing. Net debt has fallen from £30.7m at 30 September 2009 to £13.6m at 31 March 2010 and the earn-out liabilities relating to previous acquisitions will be largely paid by the end of the financial year.
Part of the refinancing deal involved cancelling the hedging instrument that was in place and writing off previous arrangement fees. This resulted in a one off cost of £1.4m. Any interest rate risk will be mitigated by the natural hedge provided by interest earned on cash balances.
Organisational development
Following the re-structuring and completion of the integration of the Wealth Management business and also separately the Employee Benefits business we have looked to both invest and grow these two areas organically.
During the last period we launched a number of people development programmes to promote excellence in client work and management. These investments are complemented by regular surveys of staff and management to enable the Group to effectively develop this key resource. This will remain in focus for 2010.
We have also invested in new leased offices in Ringwood and Manchester which has enabled us to pull together individuals from other sites and provide an improved working environment for staff.
Business Development
Insurance
Despite rating increases in some elements of the market, the mid-to-large corporate market continues to be competitive due to a mixture of competition and the wider economic climate. The smaller owner-managed sector, which makes up a substantial element of Jelf clients, has felt the effect of the wider economic climate and these pressures have meant that only marginal growth in client revenues resulted in flat rating coverage for us. We anticipate that the challenging trading environment for our Insurance business will continue through 2010 into 2011.
We have focused on tightly managing the cost base whilst looking to build our organic growth capability. The Group has invested in 17 new account executives over the last 12 months which will improve revenues over time.
The new business for this area has improved sharply, by 38% from the six month period to 31 March 2009. However, this has been offset by lapses as our client base has suffered due to the wider economic climate. The revenues for the insurance business declined by 3% year on year. The insurance business revenues represent 64% of Jelf total income for the six months ended 31 March 2010.
This insurance business remains positively geared to an improvement in the rating environment.
Employee Benefits
The market for advice on Employee Benefits still continues to remain resilient and the Group continues to enjoy a strong competitive position in this area. We have seen a desire amongst our clients to invest in this area and seek good advice, having made structural changes to their businesses last year. The decision making process that slowed last year has become more pro-active.
The rates for private medical insurance continue to harden and we are pleased to be able to report 1% organic growth on the previous year. The Group places approximately £140m GWP annually in the private medical insurance market.
The results of the healthcare business continue to be weighted towards the second half of the financial year, particularly in the 3rd quarter.
During this period we have introduced a number of healthcare corporate clients to the wider suite of employee benefits services and products and this campaign has bolstered the pipeline of future prospects.
Overall the employee benefits business has achieved a 3% growth in revenues year on year and represents 24% of Jelf revenues for the six months ended 31 March 2010.
Wealth Management
The market for advice to connected individual business clients has improved as they have sought independent support and financial planning. In the current economic environment individuals are looking to improve returns and seeking sound financial planning advice. Revenues have risen by 8% which is a strong performance considering the number of advisors was reduced by circa 25% year on year.
During the last period we reduced our cost base resulting in the release of a number of advisors and associated support staff. We have completed the programme of integration and with the focus on a smaller number of talented individuals we are now looking forward to the changing regulatory environment that will be brought about by the retail distribution review (RDR). All of our advisors will be suitably qualified to required level and we have retained our chartered status as a business.
The Group now has currently circa £446m (2009: £270m) in third-party funds on wrap and discretionary management programmes producing fund-based income. In addition we continue to advise on over £1 billion of client funds under advice in old style product structures.
The market for investment in equities has been strong but the current uncertainty makes it impossible to predict that this sentiment will remain throughout 2010.
The Wealth Management business represented 12% of our revenues in the period ended 31 March 2010.
IIC - Investors in Customers award
We were delighted to retain the prestigious 2* award again this year and that some of the subsidiaries actually attained the highest level of 3*. Group management has distilled the findings of the related surveys and have action plans in place to improve our client service levels.
Acquisitions
The focus throughout 2010 will be on completing the investment in people and infrastructure with an anticipated return to M&A in the next financial year.
The Insurance and Healthcare elements of the acquisitions made in 2008 continue to trade in line with expectations.
People
David Walker has indicated that he will be retiring from the Board at some point during the second half of this year. Although this is not the time to formally thank him for all his efforts over the last six years, he will be missed and has played a key role in the development of the Group.
Finally, I would like to thank all our staff and business partners for their support and efforts over the last six months and I look forward to working with them in the future.
Alex Alway
Group Chief Executive
Consolidated Balance Sheet
As at 31 March 2010
| Unaudited 31 Mar 2010 |
Unaudited 31 Mar 2009 |
Audited 30 Sep 2009 |
||
| Note | £'000 | £'000 | £'000 | |
| Non-current assets | ||||
| Goodwill | 58,854 | 69,786 | 57,088 | |
| Intangible assets | 49,258 | 53,890 | 51,593 | |
| Property, plant and equipment | 2,866 | 3,173 | 2,889 | |
| Available for sale investments | 86 | 83 | 86 | |
| 111,064 | 126,932 | 111,656 | ||
| Current assets | ||||
| Trade and other receivables | 9,754 | 15,214 | 11,358 | |
| Cash and cash equivalents * | 29,323 | 24,791 | 18,747 | |
| 39,077 | 40,005 | 30,105 | ||
| Total assets | 150,141 | 166,937 | 141,761 | |
| Current liabilities | ||||
| Trade and other payables | (26,476) | (31,384) | (26,238) | |
| Deferred consideration | (8,094) | (13,212) | (5,931) | |
| Borrowings | 4 | - | (498) | (498) |
| Income tax liabilities | (111) | (2,515) | (370) | |
| Deferred income tax liabilities | (1,272) | (1,284) | (1,272) | |
| Short-term provisions | (1,171) | (1,353) | (1,504) | |
| (37,124) | (50,246) | (35,813) | ||
| Net current assets / (liabilities) | 1,953 | (10,241) | (5,708) | |
| Non-current liabilities | ||||
| Trade and other payables | (6) | (24) | (6) | |
| Deferred consideration | (749) | (5,330) | (2,712) | |
| Borrowings | 4 | (15,286) | (23,296) | (23,151) |
| Deferred income tax liabilities | (12,464) | (12,364) | (12,890) | |
| Long-term provisions | (131) | (223) | (107) | |
| Derivative financial instruments | - | (1,273) | (1,036) | |
| (28,636) | (42,510) | (39,902) | ||
| Total liabilities | (65,760) | (92,756) | (75,715) | |
| Net assets | 84,381 | 74,181 | 66,046 | |
| Equity | ||||
| Share capital | 5,6 | 1,026 | 498 | 498 |
| Share premium | 5,6 | 72,077 | 54,850 | 54,852 |
| Merger reserve | 6 | 10,742 | 10,742 | 10,742 |
| Other reserves | 6 | 3,102 | 448 | 1,844 |
| Retained earnings | 6 | (2,566) | 7,643 | (1,890) |
| Total equity | 84,381 | 74,181 | 66,046 |
* Included within cash and cash equivalents is fiduciary cash of £18,067,000 (31 March 2009 £18,951,000; 30 September 2009: £16,490,000).
The notes on pages 8 to 13 form an integral part of these condensed interim financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 16 June 2010. They were signed on its behalf by:
| Alex Alway
Group Chief Executive |
John Harding
Group Finance and Operations Director |
Consolidated income statement
For the 6 months ended 31 March 2010
| Note | Unaudited 6 months to 31 Mar 2010 |
Unaudited 6 months to 31 Mar 2009 |
Audited year to 30 Sep 2009 |
||
| £'000 | £'000 | £'000 | |||
| Revenue | 3 | 34,934 | 35,019 | 70,287 | |
| Cost of sales | (3,862) | (2,195) | (4,839) | ||
| Gross profit | 31,072 | 32,824 | 65,448 | ||
| Administrative expenses | (30,095) | (33,253) | (75,151) | ||
| Operating profit / (loss) | 977 | (429) | (9,703) | ||
| Operating profit / (loss) consists of: | |||||
| Earnings before interest, taxation, depreciation, amortisation and exceptional costs (EBITDAE) | 3 | 4,140 | 3,450 | 8,065 | |
| Depreciation of property, plant and equipment | (434) | (432) | (865) | ||
| Amortisation of intangible fixed assets | (2,355) | (2,348) | (4,698) | ||
| Group reorganisation and rationalisation costs | 7 | (374) | (1,099) | (4,753) | |
| Impairment charges | 7 | - | - | (7,452) | |
| Investment revenues | 12 | 30 | 80 | ||
| Finance costs | (2,215) | (965) | (1,704) | ||
| Finance costs consist of: | |||||
| Interest payable | (799) | (965) | (1,704) | ||
| Fees relating to cancellation of debt facility: | |||||
| Interest rate swap exit | (1,076) | - | - | ||
| Loan arrangement fees previously capitalised | (340) | - | - | ||
| Loss before income tax | (1,226) | (1,364) | (11,327) | ||
| Income tax credit | 610 | 370 | 1,479 | ||
| Loss for the period attributable to equity holders of the Company | (616) | (994) | (9,848) | ||
| Loss per share attributable to equity holders of the Company | |||||
| Basic (pence) | 8 | (1.1) | (2.0) | (20.0) | |
| Diluted (pence) | 8 | (1.1) | (2.0) | (20.0) | |
All results are derived from continuing operations
Consolidated statement of comprehensive income
For the 6 months ended 31 March 2010
| Note | Unaudited 6 months to 31 Mar 2010 £'000 |
Unaudited 6 months to 31 Mar 2009 £'000 |
Audited year to 30 Sep 2009 £'000 |
||
| Loss for the period | 6 | (616) | (994) | (9,848) | |
| Other comprehensive income: | |||||
| Vesting of Employee Benefits Trust shares | 6 | (60) | - | (679) | |
| Cash flow hedges | 6 | 746 | (903) | (732) | |
| Other comprehensive income, net of tax | 686 | (903) | (1,411) | ||
| Total comprehensive income for the period attributable to equity holders of the Company | 70 | (1,897) | (11,259) | ||
Consolidated cash flow statement
For the 6 months ended 31 March 2010
| Note | Unaudited 6 months to 31 Mar 2010 |
Unaudited 6 months to 31 Mar 2009 |
Audited year to 30 Sep 2009 |
|
| £'000 | £'000 | £'000 | ||
| Cash flows from operating activities | ||||
| Cash generated from operations | 9 | 5,845 | 8,345 | 8,683 |
| Interest paid | (508) | (1,003) | (1,710) | |
| Taxation paid | (300) | (778) | (1,892) | |
| Net cash flow from operating activities | 5,037 | 6,564 | 5,081 | |
| Cash flows from investing activities | ||||
| Interest received | 12 | 29 | 80 | |
| Proceeds on disposal of property, plant and equipment | 3 | 14 | 32 | |
| Purchase of property, plant and equipment | (415) | (458) | (650) | |
| Purchase of intangible assets | (20) | (57) | (109) | |
| Purchase of own shares | (202) | (91) | (167) | |
| Acquisition of subsidiaries and businesses ¹ | - | 25 | 25 | |
| Deferred consideration paid | (1,316) | (3,609) | (7,899) | |
| Net cash flow used in investing activities | (1,938) | (4,147) | (8,688) | |
| Cash flows from financing activities | ||||
| Repayments of borrowings | (32,298) | - | - | |
| Repayments of obligations under finance leases | (11) | (31) | (51) | |
| Repayment of interest rate swap | (1,076) | - | - | |
| Proceeds on issue of shares (net of expenses) | 17,753 | - | - | |
| New borrowings raised (net of expenses) | 23,109 | 573 | 573 | |
| Net cash flow from financing activities | 7,477 | 542 | 522 | |
| Net increase / (decrease) in cash and cash equivalents | 10,576 | 2,959 | (3,085) | |
| Cash and cash equivalents at beginning of year | 18,747 | 21,832 | 21,832 | |
| Cash and cash equivalents at end of year ² | 29,323 | 24,791 | 18,747 |
- ¹ Cash inflow from the acquisition of subsidiaries and businesses for 2009 has been shown net of a £63,000 receipt relating to a net asset settlement on a previous acquisition.
- ² Included within cash and cash equivalents is fiduciary cash of £18,067,000 (31 March 2009: £18,951,000; 30 September 2009: £16,490,000)
Notes
Notes to the Financial Results are available in the pdf download