30 Aug 2016 07:00
PRESS RELEASE
Contacts: | David Marock, Group Chief Executive Officer | 020 3320 8988 |
| Mark Keogh, Group Chief Financial Officer | 020 3320 2241 |
Charles Taylor plc
Announcement of results for six months ended 30 June 2016
Consolidated financial highlights
For the six months ended 30 June 2016
Continuing operations
Revenue1 | £74.0m increased by 7.0% | (2015: £69.2m) |
Adjusted profit before tax1, 2 | £6.0m increased by 4.2% | (2015: £5.8m) |
Statutory profit before tax | £5.3m increased by 1.9% | (2015: £5.2m) |
Net cash | £3.3m increased by 80.6% | (2015: £1.8m) |
Adjusted earnings per share1, 2 | 8.55p increased by 10.3% | (2015: 7.75p) |
Statutory earnings per share1 | 7.19p decreased by 4.9% | (2015: 7.56p) |
Dividend per share | 3.15p increased by 5.0% | (2015: 3.00p) |
Notes:
Movements are calculated using unrounded numbers so minor rounding differences may exist.
1. Restated to show continuing business.
2. The adjusted figures exclude the following:
2016 2015
£m £m
Acquired intangible amortisation 1.0 0.7
Non-recurring costs - 0.1
Non-controlling interests - profit before tax (0.2) (0.2)
Adjustments to profit before tax 0.8 0.6
Tax on adjustments (0.1) (0.1)
Adjustments to earnings 0.7 0.5
"Charles Taylor delivered a good set of results in the first half of 2016. Revenue and profit before tax were up on the strong figures reported in H1 2015. We also made excellent progress in delivering our strategic initiatives, including completing the sale or transfer of the Group's non-life insurance companies, agreeing a major software licencing and master services agreement with Fadata and negotiating a significant, value-enhancing acquisition of CEGA."
David Marock
Group Chief Executive Officer
Business highlights
· Grew revenue to £74.0m (2015: £69.2m)
· Improved statutory profit before tax to £5.3m (2015: £5.2m)
· Increased adjusted profit before tax to £6.0m (2015: £5.8m)
· Completed the sale or business transfer of the Group's non-life insurance companies
· Negotiated a major acquisition which completed just after the period-end, largely deploying the remainder of the Rights Issue proceeds
· Increased interim dividend to 3.15p (2015: 3.00p)
Group Chief Executive Officer's Review
Charles Taylor delivered a good set of results in the first half of 2016. Revenue and profit before tax were up on the strong figures reported in H1 2015. We also made excellent progress in delivering our strategic initiatives, including completing the sale or transfer of the Group's non-life insurance companies, agreeing a major software licencing and master services agreement with Fadata and negotiating a significant, value-enhancing acquisition of CEGA.
Professional Services
The Group's core Professional Services businesses performed well overall:
· Management Services achieved good growth in revenue and profit. The large mutuals managed by the Group - The Standard Club and Signal Mutual - performed well on behalf of their members with a strong focus on new business development for The Strike Club.
· Adjusting Services saw a modest increase in profit as we started to benefit from our efforts to improve operational efficiency. The business also benefited from the strengthening US dollar against sterling towards the period end. The adjusting market remains challenging, although there are early signs of slightly increased loss activity. We also invested further in the business to strengthen our teams, offices and capabilities.
· Insurance Support Services progressed its growth initiatives in the insurance technology and support services sectors. It achieved good revenue growth, although there was a slight dip in profitability, largely due to our investment in new initiatives.
Owned Insurance Companies
The Group life businesses performed steadily and in line with our expectations in H1, although their performance was hampered by the weakening of sterling against other currencies towards the period-end. Following the sale of Bestpark International Limited and the business transfers from our other non-life insurance companies in H1, this business is now solely focused on seeking targeted acquisitions and consolidation of international life insurance companies, where we see growth opportunities.
Group results H1 2016 - continuing business
| Six months to 30 June 2016 | Six months to 30 June 2015 | % change |
Revenue (£m) 1 | 74.0 | 69.2 | +7.0% |
Adjusted profit before tax (£m) 1 | 6.0 | 5.8 | +4.2% |
Statutory profit before tax (£m) 1 | 5.3 | 5.2 | +1.9% |
Adjusted earnings per share (p) 1 | 8.55 | 7.75 | +10.3% |
Statutory earnings per share (p) 1 | 7.19 | 7.56 | (4.9%) |
Dividend (p) | 3.15 | 3.00 | +5.0% |
Net cash (£m) | 3.3 | 1.8 | +80.6% |
1. Restated to show continuing business.
Professional Services performance H1 2016
(£m) | Revenue2 | Operating segment profit | ||
| Six months to 30 June 2016 | Six months to 30 June 2015 | Six months to 30 June 2016 | Six months to 30 June 2015 |
Management Services | 25.4 | 23.6 | 3.3 | 3.1 |
Adjusting Services | 31.7 | 29.4 | 1.6 | 0.8 |
Insurance Support Services | 16.0 | 15.3 | 2.4 | 2.6 |
Realised foreign exchange (losses)/gains | - | - | (0.3) | 0.1 |
Total | 73.1 | 68.3 | 6.9 | 6.6 |
2. Revenue figures are stated before inter-segment eliminations.
Owned Insurance Companies performance H1 2016
(£m) | Revenue | Operating segment profit | ||
| Six months to 30 June 2016 | Six months to 30 June 2015 | Six months to 30 June 2016 | Six months to 30 June 2015 |
Owned Insurance Companies | 2.3 | 2.5 | 0.1 | 0.1 |
Acquisition of CEGA Group
In the first half of 2016, we drove forward our strategy to grow by developing new related professional service business lines with the acquisition of CEGA Group. The transaction completed just after the period-end. CEGA has become part of Insurance Support Services, nearly doubling the size of that business.
CEGA is a market-leading provider of medical assistance and travel claims management services to insurers. It provides a high-quality, seamlessly integrated end-to-end service, which combines medical assistance with claims and case management, pre-travel advice, medical screening and corporate travel contingency planning.
CEGA brings additional technical, high value-added services which complement our existing capabilities. CEGA has long-standing relationships with large, high profile insurers, some of which are new to Charles Taylor, which offers the opportunity to cross-sell the Group's other professional services. In addition, many of our businesses and major clients use medical assistance services. This means we are well positioned to support CEGA's long-term growth. We are working closely with the CEGA management team to realise the full potential of the acquisition.
The acquisition of CEGA is our second significant investment using the proceeds of the March 2015 Rights Issue, which have now largely been deployed. Our first investment was a stake in Fadata, a specialist provider of software solutions to the global insurance industry, which was completed in December 2015.
Governance
David Watson informed us of his intention to retire from the Board later in 2016. David joined the Board in May 2010 as a Non-Executive Director and Chairman of the Audit Committee. We have started a search process to identify a suitable successor.
We are grateful to David for his contribution both as a Director and as Chair of the Audit Committee. The Company has made significant progress over the period of David's involvement and stewardship and the Board would like to thank him for his commitment to Charles Taylor over the last six years.
Joe Roach, Executive Director and Chief Executive Officer of Management Services - Americas, has advised the Board of his intention to retire from the Board on 31 December 2016. Thereafter, Joe intends to continue to work for the Group in a part-time capacity.
Joe Roach was instrumental in founding Signal Mutual in 1986 when he worked at insurance broker McQueary & Henry. He joined Charles Taylor in 1995 to drive Signal's growth and development. Under his leadership, Signal grew from inception to become the largest self-insured group provider of Longshore benefits in the United States.
The Board would like to thank Joe for his remarkable contribution to the Group over many years and in particular for his leadership of the management of Signal Mutual. We are delighted that he has agreed to continue his long involvement with the Group, so we can continue to benefit from his substantial experience and deep insight.
Balance sheet
We are managing the Group's cash while investing for growth. Free cash flow increased to £15.5m (H1 2015: £9.7m) and net cash improved to £3.3m (H1 2015: £1.8m).
In common with many businesses with defined benefit pension schemes, the Group's pension deficit increased in the first half as a result of a significant fall in corporate bond yields. The retirement benefit obligation in the Group balance sheet at 30 June 2016 was £56.3m, net of deferred tax £46.1m, compared with £39.6m at the year end, net of deferred tax £32.4m. The increase reflected the significant fall in corporate bond yield rates during the latter part of the period. We have long-term plans in place and work closely with the scheme's trustees to manage the deficit. We continue to monitor the Company's pension scheme exposures and take action, as appropriate.
Dividend
An interim dividend of 3.15p (H1 2015: 3.00p) has been declared and will be paid on 11 November 2016 to shareholders on the register on 14 October 2016.
Management Services
Management Services achieved good growth in revenue and profit in H1 2016. The mutual insurance companies managed by the Group performed well overall on behalf of their members.
Management Services - UK & International
Delivered good results for The Standard Club: We have managed The Standard Club since it was founded in 1884. The club provides protection and indemnity (P&I) insurance to approximately 10% of the global shipping market. Our work is delivering sustainable growth for the club and has resulted in it overtaking its nearest competitor to become the world's fourth largest P&I club by poolable tonnage in H1 2016. At the February 2016 renewal, the club reported a combined ratio of 95%. The total of poolable and non-poolable tonnage increased by 2% to 138m gross tons year-on-year and free reserves increased to US$390m.
We made good progress with a range of initiatives, introduced on behalf of the club, designed to diversify the club's range of services and sources of income:
· The Singapore War Risks Mutual, a class within Standard Asia and Singapore's first war risks mutual insurer, exceeded its first year expectations. The class is well ahead of budget, with over 400 ships, comprising 11.2 million gt, entered by 21 owners. The Singapore War Risks Mutual has been shortlisted for the 'Launch of the Year' award at The Insider Honours 2016.
· The Standard Syndicate - Syndicate 1884 at Lloyd's - has extended the range of covers it offers to include specie, political risk, political violence and has recruited additional underwriters. The strength and expertise of the team was recognised at the Commercial Insurance Awards, where The Standard Syndicate was named Insurance Team of the Year 2016.
Charles Taylor also manages The Standard Club's investment portfolio. Ahead of the UK's EU referendum, our investment team took the view that the negative consequences of a vote to leave exceeded the positive consequences of a vote to remain. The portfolio was therefore positioned to hedge against a Brexit vote, successfully protecting the club's investments when that transpired.
Focused on business development for The Strike Club: The Strike Club is the only dedicated mutual insurer covering the running costs of vessels delayed by strikes, shore delays, collisions, groundings and other incidents outside an owner's or charterer's control. Charles Taylor was appointed as manager of the club in early 2015. At the January 2016 renewal we achieved a high business retention rate for the club, with over 95% of the membership renewing their cover. In difficult market conditions for the sale of delay insurance, our principal focus in H1 has been on developing the club's new business development capabilities.
Provided management services to the Offshore Pollution Liability Association (OPOL): We provide financial, administrative management and IT support to OPOL, a mutual insurance association, established to meet offshore pollution claims under the Offshore Pollution Liability Agreement 1974. We delivered high quality management support services to the association in H1 2016.
Management Services - Americas
Delivered growth for Signal Mutual: We have managed Signal Mutual since it was founded in 1986. Signal Mutual is the largest provider of Longshore workers' compensation insurance to the US maritime industry. The mutual is performing well on behalf of its Members.
Signal's call contributions are based on the total payroll of its Members. Overall, Signal has gained market share in recent membership years, although we anticipate a small reduction in Signal's clients' payrolls to just under US$4bn for the membership year to October 2016. This is largely due to the impact of lower energy prices which has reduced activity at shipyard facilities which make up the largest number of Signal Members.
Safeshore, the new Longshore workers' compensation program for smaller employers, backed by Signal Mutual, is performing well ahead of expectations and is having better than expected level of claims. Over 114 members have now joined the facility with a total payroll of US$34m.
Delivered a steady performance for SCALA: We have managed SCALA, which provides marine workers compensation to the majority of Canada's ship owners since 1978. The mutual performed steadily on behalf of its members in H1 2016.
Adjusting Services
Adjusting Services increased its revenue and saw a modest but welcome increase in profit as it started to benefit from efforts to improve operational efficiency. The business also benefited from the strengthening US Dollar against Sterling towards the period end.
The adjusting market remains challenging, although there are early signs that the number of insured catastrophe-related losses may be increasing. Insurer Munich Re has reported that insured losses from natural catastrophe losses in H1 2016 were US$27bn, up from US$19bn in H1 2015. Swiss Re Sigma estimates suggest that insured losses from both natural and man-made catastrophes rose to US$31bn in H1 up from US$21bn in the prior year. It is too early to tell whether this indicates a return to higher claims levels which may benefit certain of our adjusting businesses
Against this background, we achieved good overall claims volumes across the majority of our business lines. In particular, our Calgary and Vancouver offices received a large number of instructions following the Fort McMurray wild fires in Q2 2016.
We invested in the Adjusting Services business to further strengthen our teams, offices and operational capabilities:
· Strengthened office network: We appointed a new management team in our Shanghai office and fostered stronger working relations between that office and our operations in Hong Kong and Taiwan. This improved the performance of the office, supporting our ambitions for further growth in Greater China. We built on the recent office opening in Rome by appointing a new adjuster.
· Invested in developing our teams: We appointed a new Managing Director for our energy loss adjusting business in London, Europe and Singapore following the retirement of his predecessor. We also appointed two Deputy Managing Directors for Energy UK positioning our business for growth in the international energy adjusting market. A new Managing Director for the UK, Europe and Singapore was appointed to our Marine adjusting business line. In the Middle East, we appointed a new Regional Director to drive the business forward. We further strengthened our financial lines and specie loss adjusting capabilities in the UK and the Americas with the appointment of loss adjusters and a forensic accountant.
· Improved operational capabilities: We appointed a finance director and a dedicated legal counsel for Adjusting Services in H1. This has enabled us to focus on improving operational efficiency across all our adjusting business lines.
The technical and professional expertise of our team was recognised at the Commercial Insurance Awards 2016, where Charles Taylor Adjusting was named Loss Adjuster of the Year.
Insurance Support Services
The Insurance Support Services business progressed its growth initiatives in the insurance technology and services sectors in H1 2016. The business achieved good revenue growth, although there was a slight dip in profitability, largely due to our investment in new initiatives.
Insurance Support Services - non-life business
The non-life Insurance Support Services business now includes CEGA Group, Charles Taylor Insurance Services (CTIS), Charles Taylor InsureTech, Charles Taylor TPA, Charles Taylor Managing Agency (CTMA), investment management, captive management and risk consulting business lines.
· Charles Taylor Insurance Services signed up new managing ageny clients to use its claims workflow and diary management solution, TRAX. It has also managed record volumes through its static claims service. Finally, the business expanded the London Market Expert database, which it manages on behalf of Lloyd's, with additional functionality and coordinated audit capabilities.
· Charles Taylor InsureTech made good progress in H1. We are working closely with Fadata, a specialist insurance software solutions business in which the Group has just over a 25% interest, on the Group's first implementation of the INSIS system for a Charles Taylor client. The business also secured a second contract to implement an insurance broking software system. Charles Taylor InsureTech is making good progress in developing its suite of solutions and strategic partnerships. We appointed a dedicated legal officer to meet the increased demands associated with the new business' contracts..
· Charles Taylor TPA: We extended the Group's established insurance claims Third Party Administrator (TPA) service capabilities. Charles Taylor TPA provides customised claims administration for insurers, MGAs, brokers and self-insureds. It benefits from the Group's long experience of providing claims management, adjusting and support services globally.
· Charles Taylor Managing Agency completed its first year of operation. It appointed a Chief Underwriting Officer in H1, as it actively markets its services to secure the management of a second syndicate at Lloyd's.
· Other non-life business lines: The Group's investment management, risk consulting, and captive management businesses performed in line with expectations in H1.
Insurance Support Services - Life business
Charles Taylor Insurance Services (Isle of Man) is the Group's life insurance servicing business. It provides policy administration services to both life insurance businesses writing live business and those in run-off. The business performed steadily in H1 2016 and is actively seeking to grow its life services to third-party life insurers.
The business is working closely with Charles Taylor InsureTech and Fadata to implement the INSIS policy administration system in the Isle of Man for a third-party client.
The Isle of Man government is planning to adopt new solvency regulations in line with the European Union's Solvency II directive. We increased our risk management resource in H1 to ensure that we are fully prepared for the new regime.
Owned Insurance Companies
Focused on integrating life businesses
The Group owns three life businesses, which performed steadily and in line with our expectations in H1, although their performance was hampered by the weakening of Sterling against other currencies towards the period-end. We are working to consolidate two of these businesses into LCL International Life Assurance Company Limited. We anticipate that we will progress these over the next 6-12 months, offering the potential of further cash releases for the Group. We are focused on seeking further acquisition opportunities in the UK international life insurance sector.
Reduced exposure to non-life Run-off
We completed the sale or business transfer of the Group's non-life insurance companies in H1 2016. As a result, the Group no longer has any non-life insurance exposures.
Other business strategy initiatives
· The Group undertook its second staff engagement survey in H1 2016. The results have been very encouraging with nine out of ten staff saying they regard Charles Taylor as a great place to work and that they would strongly recommend Charles Taylor as a place to work to family and friends.
· We further developed our staff training and professional development initiatives, extending the core learning and development curriculum with the addition of new courses. Workshops to date have received excellent feedback and are enabling our people to develop new business and personal skills that are relevant to their careers.
· We appointed a Group Director of Property and Procurement, to oversee our property strategy and management globally and to drive efficiencies through Group procurement. We also recruited an employment lawyer in our Human Resources team to improve our operational efficiency.
Current trading and outlook
The Group has had a good start to 2016, with all our businesses performing in line with expectations.
We have made excellent progress in delivering our growth strategy with numerous initiatives taken forward, including progressing our acquisition of CEGA, finalising a major software licence and master services agreement with Fadata, launching various new services and further strengthening our teams and operations.
We are very positive about the long-term prospects of Charles Taylor. We believe the potential for growth in the professional services delivered by the Group to global insurance markets is great. We are executing our strategy for growth successfully and are building on a significant number of initiatives which we believe will deliver over time further growth for the benefit of shareholders, clients and our highly professional team of people.
David Marock
Group Chief Executive Officer
29 August 2016
Financial Review
The results for the period, which exclude the discontinued non-life Owned Insurance Companies business, are summarised in the table below and explained in more detail in the Group Chief Executive Officer's review.
| H1 2016 | H1 2015 |
Revenue (£m) | 74.0 | 69.2 |
Operating segment profit (£m) | 7.0 | 6.7 |
Finance costs/other (£m) | (0.7) | (0.7) |
Non-controlling interests before tax (£m) | (0.2) | (0.2) |
Adjusted profit before tax (£m) | 6.0 | 5.8 |
Tax (£m) | (0.3) | (0.7) |
Adjusted earnings (£m) | 5.7 | 5.2 |
Adjusted earnings per share (p) | 8.55 | 7.75 |
Note: Small rounding differences arise in the total amounts above.
The above financial measures are adjusted as set out in the table below:
(£m) | H1 2016 | H1 2015 |
Statutory profit before tax | 5.3 | 5.2 |
Amortisation of acquired intangible assets | 1.0 | 0.7 |
Non-recurring items - restructuring costs | - | 0.1 |
Non-controlling interests before tax | (0.2) | (0.2) |
Adjusted profit before tax | 6.0 | 5.8 |
Note: Small rounding differences arise in the total amounts above.
Adjusted profit before tax was £6.0m (2015: £5.8m1) as a result of good performances across all businesses. The Adjusting Services result includes some benefit from foreign exchange differences, although this was largely offset by an adverse impact from losses on matured forward exchange contracts and foreign exchange differences in our Owned Insurance Companies business.
Net debt, cash flow and financing
Net cash at the half year was £3.3m (2015: £1.8m) and free cash flow increased to £15.5m (2015: £9.7m). We are continuing to focus on managing our debt while investing for growth.
The Group's senior banking facilities comprise an amortising senior term loan of £10.0m and a £30.0m revolving credit facility. The latter facility was increased by £5.0m post the period-end in conjunction with the CEGA acquisition. In addition, the Group has £5.0m uncommitted overdraft facilities in the UK, uncommitted overseas facilities of the local currency equivalent of £3.8m and committed overseas facilities of the local currency equivalent of £3.8m. Interest rates are mostly linked to 3 month Libor plus margins of 2.25-2.75%. The senior term loan and revolving credit facility are available until 7 November 2018. The other facilities are renewed on an annual basis.
Retirement benefit schemes
The retirement benefit obligation in the Group balance sheet at 30 June 2016 was £56.3m, net of deferred tax £46.1m, compared with £39.6m at the year end, net of deferred tax £32.4m. The significant increase in net obligation has been driven by a 1% drop in discount rates since the year end, which was driven in turn by the fall in corporate bond yields, following the UK vote to leave the European Union. The obligation increased by £22.1m as a result of financial assumptions alone, which was offset by company contributions and a positive return on assets, bringing the net increase down to £16.7m. There are multi-year programmes in place to recover pension scheme deficits fully on a regulatory funding basis and funding costs are reflected in management fees charged by the Group where appropriate. We continue to monitor the Company's pension scheme exposures and take action, as appropriate
Dividend
An interim dividend of 3.15p per share (2015: 3.00p) has been declared and will be paid on 11 November 2016 to shareholders on the register on 14 October 2016.
Foreign exchange
The Group manages its exposure to foreign currency fluctuations by use of forward foreign exchange contracts and options to sell currency in the future.
Taxation
The effective tax rate on adjusted profits for the period is 5.2%, (2015: 12.1%). The movement in the effective tax rate reflects the profit mix across different taxation jurisdictions and the utilisation of unrecognised UK brought-forward tax losses.
Related party transactions
There have been no related-party transactions in the period that have materially affected the financial position or performance of the company.
Principal risks and uncertainties
The nature of the principal risks and uncertainties for the first half of 2016 fall into the three categories of business, financial, and regulatory/compliance risks. These remain unchanged from those explained in the 2015 annual report and accounts. The Group's risk management systems are designed to manage the risk of failing to achieve our business objectives. We have an embedded and continuous process for identifying, evaluating and managing the principal risks which the Group faces.
We have considered the impact of the UK's EU referendum result on the Group. We are a globally diversified business, whose earnings are mainly exposed to the US$ and predominantly not directly linked to whether the UK is part of the EU. We will monitor the situation closely as the full implications of the Brexit decision unfold.
Going concern
The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.
Mark Keogh
Group Chief Financial Officer
29 August 2016
1. Restated to show continuing business.
Condensed consolidated income statement
| Note | Six months to 30 June 2016£000(Unaudited) | Six months to 30 June 2015£000(Unaudited) | Year to31 December 2015£000(Audited) |
Continuing operations |
|
|
|
|
Revenue from Professional Services |
| 71,683 | 66,665 | 138,640 |
|
|
|
|
|
Revenue from Owned Insurance Companies |
|
|
|
|
Gross revenue |
| 2,743 | 2,901 | 5,615 |
Outward reinsurance premiums |
| (430) | (407) | (813) |
Net revenue |
| 2,313 | 2,494 | 4,802 |
Total revenue | 3 | 73,996 | 69,159 | 143,442 |
|
|
|
|
|
Expenses from Owned Insurance Companies |
|
|
|
|
Claims incurred |
| 35,465 | (34,532) | (22,281) |
Reinsurance recoveries |
| 1,122 | 922 | 363 |
Other gains from insurance activities |
| (36,109) | 33,831 | 23,072 |
Net operating expenses |
| (2,458) | (2,376) | (5,136) |
Net losses |
| (1,980) | (2,155) | (3,982) |
|
|
|
|
|
Administrative expenses |
| (66,011) | (61,066) | (127,998) |
Gain on acquisition |
| - | - | 2,291 |
Share of results of associates |
| (284) | 27 | 131 |
Operating profit |
| 5,721 | 5,965 | 13,884 |
|
|
|
|
|
Investment and other income |
| 182 | 69 | 164 |
Finance costs |
| (605) | (837) | (1,230) |
Profit before tax |
| 5,298 | 5,197 | 12,818 |
Income tax expense | 4 | (312) | (685) | (1,044) |
Profit for the period from continuing operations |
| 4,986 | 4,512 | 11,774 |
Discontinued operations |
|
|
|
|
Profit/(loss) for the period from discontinued operations |
| - | 95 | (5,741) |
Profit for the period |
| 4,986 | 4,607 | 6,033 |
|
|
|
|
|
Attributable to: |
|
|
|
|
Owners of the Company |
| 4,755 | 4,509 | 8,724 |
Non-controlling interests |
| 231 | 98 | (2,691) |
|
| 4,986 | 4,607 | 6,033 |
|
|
|
|
|
Earnings per share |
|
|
|
|
From continuing and discontinued operations |
|
|
|
|
Statutory basic (p) | 6 | 7.19 | 7.84 | 14.14 |
Statutory diluted (p) | 6 | 7.14 | 7.80 | 14.04 |
From continuing operations |
|
|
|
|
Statutory basic (p) | 6 | 7.19 | 7.56 | 18.61 |
Statutory diluted (p) | 6 | 7.14 | 7.52 | 18.48 |
Condensed consolidated statement of comprehensive income
| Six months to 30 June2016£000(Unaudited) | Six monthsto 30 June2015£000(Unaudited) | Year to31 December 2015£000(Audited) |
Profit for the period | 4,986 | 4,607 | 6,033 |
Items that will not be reclassified subsequently to profit or loss |
|
|
|
Actuarial (losses)/gains on defined benefit pension schemes | (17,901) | 4,053 | (618) |
Tax on items taken directly to equity | 3,003 | (1,060) | (1,188) |
| (14,898) | 2,993 | (1,806) |
Items that may be reclassified subsequently to profit or loss |
|
|
|
Exchange differences on translation of foreign operations | 4,116 | (1,380) | (412) |
(Losses)/gains on cash flow hedges | (884) | 215 | (7) |
| 3,232 | (1,165) | (419) |
Other comprehensive (loss)/income for the period, net of tax | (11,666) | 1,828 | (2,225) |
Total comprehensive (loss)/income for the period | (6,680) | 6,435 | 3,808 |
Attributable to: |
|
|
|
Owners of the Company | (7,074) | 6,372 | 6,487 |
Non-controlling interests | 394 | 63 | (2,679) |
| (6,680) | 6,435 | 3,808 |
Condensed consolidated balance sheet
| Note | At30 June2016£000(Unaudited) | At30 June2015£000(Unaudited) | At31 December 2015£000(Audited) |
Non-current assets |
|
|
|
|
Goodwill | 7 | 45,007 | 45,379 | 44,844 |
Other intangible assets | 8 | 18,318 | 17,338 | 17,428 |
Property, plant and equipment |
| 6,043 | 5,126 | 3,559 |
Investments |
| 1,857 | 700 | 1,905 |
Financial assets |
| 6,060 | - | 5,095 |
Deferred tax assets |
| 9,857 | 7,610 | 7,282 |
Total non-current assets |
| 87,142 | 76,153 | 80,113 |
Current assets |
|
|
|
|
Total assets in insurance businesses |
| 1,131,713 | 842,318 | 1,087,198 |
Trade and other receivables |
| 76,039 | 64,318 | 65,545 |
Cash and cash equivalents |
| 109,620 | 76,988 | 80,170 |
Assets classified as held for sale |
| - | - | 48,161 |
Total current assets |
| 1,317,372 | 983,624 | 1,281,074 |
Total assets |
| 1,404,514 | 1,059,777 | 1,361,187 |
Current liabilities |
|
|
|
|
Total liabilities in insurance businesses |
| 1,113,058 | 788,924 | 1,066,765 |
Trade and other payables |
| 50,804 | 39,843 | 29,327 |
Deferred consideration |
| 9,713 | 10,556 | 8,213 |
Current tax liabilities |
| 1,247 | 308 | 1,018 |
Borrowings |
| 5,795 | 17,040 | 6,579 |
Client funds |
| 95,095 | 51,159 | 68,406 |
Liabilities directly associated with assets classified as held for sale |
| - | - | 28,843 |
Total current liabilities |
| 1,275,712 | 907,830 | 1,209,151 |
Net current assets |
| 41,660 | 75,794 | 71,923 |
Non-current liabilities |
|
|
|
|
Borrowings |
| 5,426 | 6,932 | 15,057 |
Retirement benefit obligation | 14 | 56,282 | 36,246 | 39,555 |
Provisions |
| 337 | 235 | 321 |
Obligations under finance leases |
| 50 | 56 | 50 |
Deferred consideration |
| 5,806 | 15,003 | 7,569 |
Total non-current liabilities |
| 67,901 | 58,472 | 62,552 |
Total liabilities |
| 1,343,613 | 966,302 | 1,271,703 |
Net assets |
| 60,901 | 93,475 | 89,484 |
Equity |
|
|
|
|
Share capital | 10 | 669 | 664 | 665 |
Share premium account |
| 71,476 | 71,380 | 71,239 |
Merger reserve |
| 6,872 | 6,872 | 6,872 |
Capital reserve |
| 662 | 662 | 662 |
Own shares |
| (587) | (408) | (489) |
Retained earnings |
| (20,322) | (8,039) | (8,869) |
Equity attributable to owners of the Company |
| 58,770 | 71,131 | 70,080 |
Non-controlling interests |
| 2,131 | 22,344 | 19,404 |
Total equity |
| 60,901 | 93,475 | 89,484 |
The financial statements were approved by the board of directors and authorised for issue on 29 August 2016.
Mark Keogh
Director
29 August 2016
Condensed consolidated cash flow statement
| Note | Six months to 30 June2016£000 (Unaudited) | Six months to 30 June2015£000(Unaudited) | Year to 31 December 2015 £000 (Audited) |
Net cash from operating activities | 11 | 46,755 | 22,896 | 41,741 |
|
|
|
|
|
Investing activities |
|
|
|
|
Interest received |
| 168 | 33 | 117 |
Proceeds on disposal of property, plant and equipment |
| 107 | 40 | 112 |
Purchases of property, plant and equipment |
| (2,844) | (2,006) | (2,700) |
Acquisition of other intangible assets |
| (1,951) | (1,946) | (4,192) |
Purchase of investments |
| (1,413) | (1,239) | (7,424) |
Acquisition of subsidiaries |
| - | (2,239) | (2,239) |
Payment of deferred consideration |
| (546) | (251) | (3,251) |
Net cash acquired with subsidiary |
| - | 3,831 | 3,831 |
Net cash used in investing activities |
| (6,479) | (3,777) | (15,746) |
|
|
|
|
|
Financing activities |
|
|
|
|
Proceeds from issue of shares |
| 89 | 29,672 | 29,533 |
Dividends paid |
| (4,622) | (3,431) | (5,405) |
Repayments of borrowings | 9 | (11,785) | (43,095) | (33,128) |
Repayments of obligations under finance leases |
| (5) | (113) | (119) |
New bank loans raised | 9 | 2,000 | 12,563 | 11,063 |
(Decrease)/increase in bank overdrafts |
| (751) | 11,708 | 783 |
Net cash (used in)/from financing activities |
| (15,074) | 7,304 | 2,727 |
Net increase in cash and cash equivalents |
| 25,202 | 26,423 | 28,722 |
Cash and cash equivalents at beginning of period |
| 80,170 | 52,185 | 52,185 |
Effect of foreign exchange rate changes |
| 4,248 | (1,620) | (737) |
Cash and cash equivalents at end of period | 12 | 109,620 | 76,988 | 80,170 |
Condensed consolidated statement of changes in equity
| Sharecapital£000 | Share premium account£000 | Merger reserve£000 | Capitalreserve £000 | Ownshares £000 | Retained earnings£000 | Non-controlling interests£000 | Total£000 |
At 1 January 2016 (audited) | 665 | 71,239 | 6,872 | 662 | (489) | (8,869) | 19,404 | 89,484 |
Issue of share capital (note 10) | 4 | - | - | - | - | - | - | 4 |
Share premium arising on issue of share capital (note 10) | - | 237 | - | - | - | - | - | 237 |
Profit for the financial period | - | - | - | - | - | 4,755 | 231 | 4,986 |
Dividends paid (note 5) | - | - | - | - | - | (4,622) | - | (4,622) |
Actuarial losses on defined benefitpension schemes | - | - | - | - | - | (17,901) | - | (17,901) |
Tax on items taken to equity | - | - | - | - | - | 3,003 | - | 3,003 |
Losses on cash flow hedges | - | - | - | - | - | (884) | - | (884) |
Foreign exchange translation differences | - | - | - | - | - | 3,952 | 164 | 4,116 |
Movement in share‑based payments | - | - | - | - | - | 129 | - | 129 |
Movement in own shares | - | - | - | - | (98) | - | - | (98) |
Sale and closure of non-life operations | - | - | - | - | - | - | (17,954) | (17,954) |
Other movements | - | - | - | - | - | 115 | 286 | 401 |
At 30 June 2016 (unaudited) | 669 | 71,476 | 6,872 | 662 | (587) | (20,322) | 2,131 | 60,901 |
| Sharecapital£000 | Sharepremium account£000 | Mergerreserve£000 | Capitalreserve £000 | Ownshares £000 | Retained earnings£000 | Non-controlling interests£000 | Total£000 |
At 1 January 2015 (audited) | 434 | 35,650 | 6,872 | 662 | (223) | (10,699) | 21,980 | 54,676 |
Issue of share capital (note 10) | 230 | - | - | - | - | - | - | 230 |
Share premium arising on issue of share capital (note 10) | - | 35,730 | - | - | - | - | - | 35,730 |
Profit for the financial period | - | - | - | - | - | 4,509 | 98 | 4,607 |
Dividends paid (note 5) | - | - | - | - | - | (3,431) | - | (3,431) |
Actuarial gains on defined benefit pension schemes | - | - | - | - | - | 4,053 | - | 4,053 |
Tax on items taken to equity | - | - | - | - | - | (1,060) | - | (1,060) |
Gains on cash flow hedges | - | - | - | - | - | 215 | - | 215 |
Foreign exchange translation differences | - | - | - | - | - | (1,346) | (34) | (1,380) |
Movement in share‑based payments | - | - | - | - | - | (280) | - | (280) |
Movement in own shares | - | - | - | - | (185) | - | - | (185) |
Sale and closure of non-life operations | - | - | - | - | - | - | - | - |
Other movements | - | - | - | - | - | - | 300 | 300 |
At 30 June 2015 (unaudited) | 664 | 71,380 | 6,872 | 662 | (408) | (8,039) | 22,344 | 93,475 |
Own shares comprise 619,994 (30 June 2015: 571,990; 31 December 2015: 571,990) shares held by the Charles Taylor Employee Share Ownership Plan Trust ("ESOP"). The market value of these shares was £1.5m (30 June 2015: £1.3m; 31 December 2015: £1.5m) at the balance sheet date.
The trustee of the ESOP is Summit Trust International SA, an independent professional trust company registered in Switzerland. The ESOP is a discretionary trust for the benefit of employees of the Group and provides a source of shares to distribute to the Group's employees (including executive directors and officers) under the Group's various bonus and incentive schemes, at the discretion of the trustee acting on the recommendation of a committee of the Board.
The assets, liabilities, income and costs of the ESOP are incorporated into the condensed set of financial statements.
There are no significant restrictions on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans or advances other than company law requirements dealing with distributable profits, and in the case of the insurance companies' regulatory permissions and solvency limits.
Notes to the condensed set of financial statements
1. General information
The information for the year ended 31 December 2015 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor reported on those accounts; its report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
Basis of preparation
The annual financial statements of Charles Taylor plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union. The same accounting policies and methods of computation are followed in the interim financial statements as in the most recent annual financial statements.
Going concern
The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.
Changes in accounting policy
In the current financial year, there were no new accounting policies. Other changes to accounting standards in the current period had no material impact.
3. Segmental information
Identification of segments
For management and internal reporting purposes the Group is currently organised into four operating businesses whose principal activities are as follows:
· Management Services business - mutual management service.
· Adjusting Services business - energy, aviation, property & casualty and marine (including average) adjusting.
· Insurance Support Services business - insurance support services, including Lloyd's turn-key managing agent, insurance technology services, captive management, investment management and risk management.
· Owned Insurance Companies business - life insurance companies.
Management information about these businesses is regularly provided to the Group CEO to assess their performance and to make decisions about the allocation of resources. Accordingly, these businesses correspond with the Group's operating segments under IFRS 8 Operating Segments. Businesses forming part of each business which might otherwise qualify as reportable operating segments have been aggregated where they share similar economic characteristics and meet the other aggregation criteria in IFRS 8.
In the Management Services business, a higher proportion of revenue arises in the second half of the financial year. There is no significant seasonality or cyclicality in the other businesses.
Measurement of segmental results and assets
Transactions between reportable segments are accounted for on the basis of the contractual arrangements in place for the provision of goods or services between segments and in accordance with the Group's accounting policies. Reportable segment results and assets are also measured on a basis consistent with the Group's accounting policies. Operating segment profit includes an allocation of central costs across the four businesses and excludes non-recurring adjusting costs. The prior period operating segment profits and assets have been adjusted to conform to the current period's presentation and exclude amounts for operations discontinued in the prior financial year. Reconciliations of segmental results to the group profit before tax are set out below.
Information about major customers
The Group derived revenue of £19.4m (to 30 June 2015: £19.9m, full year 2015: £38.5m) from one external customer which accounts for more than 10% of group revenue, and includes revenue earned by both the Management Services and Insurance Support Services businesses.
| Professional Services businesses | Owned Insurance Companies | Other | Group | ||||
Six months to 30 June 2016 Continuing operations | Management Services£000 | Adjusting Services£000 | Insurance Support Services£000 | Unallocated£000 | Total£000 | Insurance Companies£000 | Inter-segment eliminations£000 | Total£000 |
Revenue from external clients | 25,366 | 31,676 | 14,641 | - | 71,683 | 2,313 | - | 73,996 |
Revenue from other operating segments | - | - | 1,393 | - | 1,393 | - | (1,393) | - |
Total revenue | 25,366 | 31,676 | 16,034 | - | 73,076 | 2,313 | (1,393) | 73,996 |
Depreciation and amortisation | (349) | (639) | (253) | - | (1,241) | (224) | - | (1,465) |
Other expenses | (21,749) | (29,483) | (13,426) | (273) | (64,931) | (2,033) | 1,393 | (65,571) |
Operating segment profit | 3,268 | 1,554 | 2,355 | (273) | 6,904 | 56 | - | 6,960 |
Share of results of associates |
|
|
|
|
|
|
| (284) |
Amortisation of acquired intangible assets |
|
|
|
|
|
|
| (955) |
Non-recurring costs (note 17) |
|
|
|
|
|
|
| - |
Operating profit |
|
|
|
|
|
|
| 5,721 |
Investment and other income |
|
|
|
|
|
|
| 182 |
Finance costs |
|
|
|
|
|
|
| (605) |
Profit before tax |
|
|
|
|
|
|
| 5,298 |
Amortisation of acquired intangible assets |
|
|
|
|
|
|
| 955 |
Non-recurring costs (note 17) |
|
|
|
|
|
|
| - |
Non-controlling interests before tax |
|
|
|
|
|
|
| (238) |
Profit before tax - adjusted |
|
|
|
|
|
|
| 6,015 |
| Professional Services businesses | Owned Insurance Companies | Other | Group | ||||
Six months to 30 June 2015 Continuing operations | Management Services£000 | Adjusting Services£000 | Insurance Support Services£000 | Unallocated£000 | Total£000 | Insurance Companies£000 | Inter-segment eliminations£000 | Total£000 |
Revenue from external clients | 23,591 | 29,379 | 13,694 | 1 | 66,665 | 2,494 | - | 69,159 |
Revenue from other operating segments | - | - | 1,637 | - | 1,637 | - | (1,637) | - |
Total revenue | 23,591 | 29,379 | 15,331 | 1 | 68,302 | 2,494 | (1,637) | 69,159 |
Depreciation and amortisation | (605) | (716) | (244) | - | (1,565) | (188) | - | (1,753) |
Other expenses | (19,864) | (27,883) | (12,517) | 98 | (60,166) | (2,194) | 1,637 | (60,723) |
Operating segment profit | 3,122 | 780 | 2,570 | 99 | 6,571 | 112 | - | 6,683 |
Share of results of associates |
|
|
|
|
|
|
| 27 |
Amortisation of acquired intangible assets |
|
|
|
|
|
|
| (673) |
Non-recurring costs (note 17) |
|
|
|
|
|
|
| (72) |
Operating profit |
|
|
|
|
|
|
| 5,965 |
Investment and other income |
|
|
|
|
|
|
| 69 |
Finance costs |
|
|
|
|
|
|
| (837) |
Profit before tax |
|
|
|
|
|
|
| 5,197 |
Amortisation of acquired intangible assets |
|
|
|
|
|
|
| 673 |
Non-recurring costs (note 17) |
|
|
|
|
|
|
| 72 |
Non-controlling interests before tax |
|
|
|
|
|
|
| (171) |
Profit before tax - adjusted |
|
|
|
|
|
|
| 5,771 |
| Professional Services businesses | OwnedInsuranceCompanies | Other | Group | ||||
Year to 31 December 2015 Continuing operations | Management Services£000 | Adjusting Services£000 | Insurance Support Services£000 | Unallocated£000 | Total£000 | Insurance Companies£000 | Inter-segment eliminations£000 | Total£000 |
Revenue from external clients | 50,718 | 59,016 | 28,903 | 3 | 138,640 | 4,802 | - | 143,442 |
Revenue from other operating segments | - | - | 3,229 | - | 3,229 | - | (3,229) | - |
Total revenue | 50,718 | 59,016 | 32,132 | 3 | 141,869 | 4,802 | (3,229) | 143,442 |
Depreciation and amortisation | (1,348) | (1,689) | (623) | - | (3,660) | (385) | - | (4,045) |
Other expenses | (40,545) | (55,631) | (27,018) | 205 | (122,989) | (4,183) | 3,229 | (123,943) |
Operating segment profit | 8,825 | 1,696 | 4,491 | 208 | 15,220 | 234 | - | 15,454 |
Share of results of associates |
|
|
|
|
|
|
| 131 |
Amortisation of acquired intangible assets |
|
|
|
|
|
|
| (1,629) |
Non-recurring costs (note 17) |
|
|
|
|
|
|
| (72) |
Operating profit |
|
|
|
|
|
|
| 13,884 |
Investment and other income |
|
|
|
|
|
|
| 164 |
Finance costs |
|
|
|
|
|
|
| (1,230) |
Profit before tax |
|
|
|
|
|
|
| 12,818 |
Amortisation of acquired intangible assets |
|
|
|
|
|
|
| 1,629 |
Non-recurring costs (note 17) |
|
|
|
|
|
|
| 72 |
Non-controlling interests before tax |
|
|
|
|
|
|
| (324) |
Profit before tax - adjusted |
|
|
|
|
|
|
| 14,195 |
Loss for the full year 2015 from discontinued operations was £5.7m.
| At 30 June 2016£000 | At 30 June 2015£000 | At 31 December 2015£000 | ||||||
| Professional Services businesses | Owned Insurance Companies | Group | Professional Services businesses | Owned Insurance Companies | Group | Professional Services businesses | Owned Insurance Companies | Group |
Management Services business | 2,544 | - | 2,544 | 8,038 | - | 8,038 | 5,380 | - | 5,380 |
Adjusting Services business | 179,237 | - | 179,237 | 132,224 | - | 132,224 | 149,606 | - | 149,606 |
Insurance Support Services business | 62,521 | - | 62,521 | 37,657 | - | 37,657 | 46,528 | - | 46,528 |
Unallocated assets and eliminations | 26,346 | - | 26,346 | 36,529 | - | 36,529 | 21,963 | - | 21,963 |
Owned Insurance Companies business | - | 1,133,866 | 1,133,866 | - | 845,329 | 845,329 | - | 1,089,549 | 1,089,549 |
Assets classified as held for sale | - | - | - | - | - | - | - | 48,161 | 48,161 |
Total assets | 270,648 | 1,133,866 | 1,404,514 | 214,448 | 845,329 | 1,059,777 | 223,477 | 1,137,710 | 1,361,187 |
Non-current assets | 84,989 | 2,153 | 87,142 | 73,142 | 3,011 | 76,153 | 77,762 | 2,351 | 80,113 |
Current assets | 185,659 | 1,131,713 | 1,317,372 | 141,306 | 842,318 | 983,624 | 145,715 | 1,135,359 | 1,281,074 |
Total assets | 270,648 | 1,133,866 | 1,404,514 | 214,448 | 845,329 | 1,059,777 | 223,477 | 1,137,710 | 1,361,187 |
Current liabilities | (153,488) | (1,112,511) | (1,265,999) | (108,350) | (788,924) | (897,274) | (105,330) | (1,066,765) | (1,172,095) |
Deferred consideration | (1,641) | (8,072) | (9,713) | (810) | (9,746) | (10,556) | (875) | (7,338) | (8,213) |
Liabilities directly associated with assets classified as held for sale | - | - | - | - | - | - | - | (28,843) | (28,843) |
Net current assets | 30,530 | 11,130 | 41,660 | 32,146 | 43,648 | 75,794 | 39,510 | 32,413 | 71,923 |
Non-current liabilities | (62,095) | - | (62,095) | (43,469) | - | (43,469) | (54,983) | - | (54,983) |
Deferred consideration | (1,374) | (4,432) | (5,806) | (2,548) | (12,455) | (15,003) | (2,537) | (5,032) | (7,569) |
Total liabilities | (218,598) | (1,125,015) | (1,343,613) | (155,177) | (811,125) | (966,302) | (163,725) | (1,107,978) | (1,271,703) |
Net assets | 52,050 | 8,851 | 60,901 | 59,271 | 34,204 | 93,475 | 59,752 | 29,732 | 89,484 |
Non-controlling interests | (2,131) | - | (2,131) | (1,477) | (20,867) | (22,344) | (1,450) | (17,954) | (19,404) |
Equity attributable to owners of the Company | 49,919 | 8,851 | 58,770 | 57,794 | 13,337 | 71,131 | 58,302 | 11,778 | 70,080 |
| Revenue | Non-current assets1 | ||||
Geographical information | Six months to 30 June2016£000 | Six monthsto 30 June2015£000 | Year to 31 December2015 £000 | At30 June2016£000 | At30 June2015£000 | At 31 December 2015 £000 |
United Kingdom | 21,949 | 21,025 | 44,718 | 64,730 | 54,967 | 60,231 |
Other Europe | 5,557 | 4,735 | 9,856 | 3,071 | 4,715 | 3,746 |
Middle East | 1,909 | 1,919 | 3,720 | 117 | 119 | 114 |
North America | 6,921 | 6,102 | 12,249 | 6,715 | 6,375 | 6,254 |
Central and South America | 2,778 | 2,166 | 4,404 | 193 | 199 | 183 |
Asia Pacific | 8,347 | 7,560 | 15,037 | 1,585 | 1,394 | 1,480 |
Bermuda | 26,535 | 25,652 | 53,458 | 874 | 774 | 823 |
| 73,996 | 69,159 | 143,442 | 77,285 | 68,543 | 72,831 |
1. Excluding deferred tax.
4. Income tax expense
Tax for the six month period is charged at 5.2% (30 June 2015: 12.1%) representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income adjusted for certain amortisation costs, of the six month period.
5. Dividends
| Six months to 30 June2016£000 | Six months to 30 June2015£000 | Year to31 December2015£000 |
Ordinary dividends paid comprise: |
|
|
|
Second dividend paid (2015: 10.0p, 2014: 0.0p) | 4,622 | - | - |
Second interim dividend paid (2015: 0.0p, 2014: 7.50p - rebased 6.57p) | - | 3,431 | 3,431 |
Interim dividend paid (2015: 3.00p) | - | - | 1,974 |
| 4,622 | 3,431 | 5,405 |
The rebased dividend above reflects the impact of the 2015 Rights Issue. The interim dividend of 3.15p per share was approved by the Board on 29 August 2016 and has not been included as a liability as at 30 June 2016.
6. Earnings per share
The earnings and weighted average number of shares used in the calculation of earnings per share are as shown below. The shares held by the ESOP have been excluded from the calculation because the trustees have waived the right to dividends on these shares.
The calculation of the statutory basic, statutory diluted and adjusted earnings per share is based on the following data:
| Six months to 30 June2016£000 | Six months to 30 June2015£000 | Year to31 December2015£000 |
Earnings for the purposes of adjusted earnings per share being adjusted profit after tax attributable to owners of the Company | 5,650 | 5,178 | 10,287 |
Amortisation of acquired intangible assets | (955) | (673) | (1,629) |
Non-recurring costs (note 17) | - | (72) | (72) |
Tax on non-recurring and certain amortisation costs | 61 | 76 | 138 |
Earnings for the purposes of statutory basic and diluted earnings per share being net profit attributable to owners of the Company | 4,756 | 4,509 | 8,724 |
Profit/(loss) for the year from discontinued operations | - | (161) | 2,761 |
Earnings for the purposes of statutory basic and diluted earnings per share from continuing operations | 4,756 | 4,348 | 11,485 |
Earnings for the purposes of adjusted earnings per share from continuing operations | 5,650 | 5,017 | 13,048 |
| Number | Number | Number |
Number of shares |
|
|
|
Weighted average number of ordinary shares for the purposes of adjusted earnings per share | 66,113,754 | 64,767,592 | 65,308,762 |
Rebase adjustment1 | - | (7,277,534) | (3,608,860) |
Weighted average number of ordinary shares for the purposes of statutory basic earnings per share | 66,113,754 | 57,490,058 | 61,699,902 |
Effect of dilutive potential ordinary shares:Share options | 480,693 | 346,046 | 440,598 |
Weighted average number of ordinary shares for the purposes of statutory diluted earnings per share | 66,594,447 | 57,836,104 | 62,140,500 |
1. The rebase adjustment allows for the full effect of the Rights Issue in 2015.
7. Goodwill
The increase in goodwill from £44.8m at 31 December 2015 to £45.0m at 30 June 2016 was due entirely to foreign exchange differences.
8. Other intangible assets
During the period we capitalised a further £2.0m of IT assets.
9. Bank overdrafts and loans
Loans raised during the period amounted to £2.0m (to 30 June 2015: £12.6m, full year 2015: £11.1m) and repayments on loans amounted to £11.8m (to 30 June 2015: £43.1m, full year 2015: £33.1m). The Group's senior banking facilities were renewed on 7 November 2013 for a five-year term.
10. Share capital
Share capital as at 30 June 2016 amounted to £669,000 (at 30 June 2015: £664,000, at 31 December 2015: £665,000). The consideration above 1p per share is reflected in the share premium account and amounts to £0.2m (to 30 June 2015: £35.7m, full year 2015: £35.6m), the 2015 amounts reflecting the Rights Issue that took place during that period.
11. Notes to the condensed consolidated cash flow statement
| Six monthsto 30 June2016£000 | Six monthsto 30 June2015£000 | Year to31 December2015£000 |
Operating profit | 5,721 | 5,965 | 13,884 |
Adjustments for: Depreciation of property, plant and equipment | 595 | 878 | 1,780 |
Amortisation of intangibles | 1,820 | 1,554 | 3,904 |
Other non-cash items | 862 | 589 | 446 |
Decrease in provisions | (1,186) | (1,300) | (2,582) |
Share of results of associates and joint ventures | 481 | (27) | (131) |
Operating cash flows before movements in working capital | 8,293 | 7,659 | 17,301 |
Increase in receivables | (10,418) | (8,799) | (6,894) |
Increase in payables | 20,605 | 15,733 | 3,409 |
(Increase)/decrease in insurance company assets | (43,793) | 52,030 | (243,193) |
Increase/(decrease) in insurance company liabilities | 46,000 | (51,976) | 246,626 |
Cash generated by operations | 20,687 | 14,647 | 17,249 |
Contributed by: |
|
|
|
- Professional Services | 16,358 | 14,675 | 12,820 |
- Owned Insurance Companies | 4,329 | (28) | 4,429 |
Cash generated by operations | 20,687 | 14,647 | 17,249 |
Income taxes paid | (92) | (568) | (1,176) |
Interest paid | (529) | (456) | (852) |
Net cash before movement in client funds | 20,066 | 13,623 | 15,221 |
Movement in client funds | 26,689 | 9,273 | 26,520 |
Net cash from operating activities | 46,755 | 22,896 | 41,741 |
Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly-liquid investments with a maturity of three months or less. Cash includes client funds of £95.1m (30 June 2015: £51.2m, 31 December 2015: £68.4m).
12. Net interest bearing liabilities
| At30 June2016£000 | At30 June2015£000 | At31 December2015£000 |
Cash and cash equivalents | 109,620 | 76,988 | 80,170 |
Bank overdrafts | (4,520) | (16,195) | (5,271) |
Current loans | (1,275) | (845) | (1,308) |
Non-current bank loans | (5,426) | (6,932) | (15,057) |
Finance leases | (50) | (55) | (50) |
| 98,349 | 52,961 | 58,484 |
Client funds | (95,095) | (51,159) | (68,406) |
| 3,254 | 1,802 | (9,922) |
13. Financial instruments
Valuation techniques and assumptions applied for the purposes of measuring fair value
The fair values of the Group's financial assets and liabilities are determined as follows:
· For those financial assets and liabilities that are cash or short-term trade receivables or payables, carrying amount is a reasonable approximation of fair value.
· Retirement benefit obligations are valued by independent actuaries in accordance with IFRS.
· The Group's remaining financial assets and liabilities are measured, subsequent to initial recognition, at fair value, and they can be grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fair value hierarchy
For each of the assets in the table below carrying value is a reasonable approximation to fair value. Excluding insurance companies, there were no level 1 assets, no transfers between level 1 and 2 during the period, nor were there any valuation changes. All movements in the asset or liability values below, except deferred consideration, are through profit or loss.
Deferred consideration held outside insurance company liabilities has decreased by £0.3m since the year end 2015, being £0.8m arising on the acquisition of Fadata AD, offsetting distributions totalling £0.6m to former owners of KLA Group and Vesta Group, and all other movements reflecting a revaluation of deferred consideration through the income statement.
| At 30 June 2016 | At 30 June 2015 | At 31 December 2015 | ||||||
| Level 2 £000 | Level 3 £000 | Total £000 | Level 2 £000 | Level 3 £000 | Total £000 | Level 2 £000 | Level 3 £000 | Total £000 |
Funds at Lloyd's | - | 2,783 | 2,783 | - | - | - | - | 2,439 | 2,439 |
Preference shares held for maturity | - | 3,277 | 3,277 | - | - | - | - | 2,656 | 2,656 |
Trade debtors | - | 34,274 | 34,274 | - | 28,190 | 28,190 | - | 29,633 | 29,633 |
Accrued income | - | 25,310 | 25,310 | - | 23,671 | 23,671 | - | 23,551 | 23,551 |
Deferred consideration | - | (15,519) | (15,519) | - | (25,559) | (25,559) | - | (15,782) | (15,782) |
FX forward contracts | (906) | - | (906) | 200 | - | 200 | (21) | - | (21) |
| (906) | 50,125 | 49,219 | 200 | 26,302 | 26,502 | (21) | 42,497 | 42,476 |
The fair values of the financial assets and liabilities included in the Level 2 category have been independently valued by the Royal Bank of Scotland and HSBC based on observable market conditions prevailing at the valuation date, including relevant foreign exchange rates and the zero-coupon yield curve.
The fair values of the financial assets and liabilities included in the Level 3 category above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis with the most significant inputs being the discount rate that reflects substantially the same terms and characteristics including the credit quality of the instrument:
· Trade debtors are reduced by a discount to reflect the time value of money at a discount rate of 2.75% (30 June 2015: 2.75%, 31 December 2015: 2.75%) that reflects the Group's debt funding rate over the relevant maturities.
· Accrued income is uplifted by 6.3% for anticipated unrecorded income, which is based on average over-recovery of unrecorded income during 2015, and then discounted for the time value of money at 2.75% (30 June 2015: 2.75%, 31 December 2015: 2.75%) that reflects the Group's debt funding rate over the relevant maturities.
· Deferred consideration is reduced by a discount to reflect the time value of money at a discount rate of 3.39% (30 June 2015: 3.30%, 31 December 2015: 3.80%) that reflects the Group's debt funding rate over the relevant maturities.
The sensitivity of the fair values of trade debtors and accrued income to changes in the discount rate is negligible, irrespective of the change in discount rate. The sensitivity of the fair value of deferred consideration to reasonably likely changes in the discount rate is immaterial.
14. Pensions
The Group contributes to a number of defined benefit pension schemes on behalf of employees. The present value of the retirement benefit obligation at 30 June 2016 has been arrived at by recalculating the 31 December 2015 liabilities using the financial assumptions at 30 June 2016 and rolling forward the liability, allowing for interest and benefit accrual to 30 June 2016. The value of plan assets represents the bid value of invested assets at 30 June 2016 plus cash balances held.
The financial assumptions used to calculate scheme liabilities under IAS 19R Employee benefits are as follows:
| At30 June2016% | At30 June2015% | At31 December2015% |
Rate of increase in salaries | 3.0 | 3.30 | 3.20 |
Rate of increase of pensions in payment |
|
|
|
- RPI |
|
|
|
- maximum 5% | 2.90 | 3.20 | 3.10 |
- maximum 2.5% | 2.10 | 2.20 | 2.20 |
- minimum 3%, maximum 5% | 3.50 | 3.70 | 3.60 |
- CPI |
|
|
|
- maximum 5% | 2.10 | 2.30 | 2.20 |
- maximum 2.5% | 1.70 | 1.80 | 1.80 |
- maximum 3% | 1.80 | 2.00 | 2.00 |
Discount rate | 2.70 | 3.80 | 3.70 |
Inflation assumption |
|
|
|
- RPI | 3.00 | 3.30 | 3.20 |
- CPI | 2.00 | 2.30 | 2.20 |
Amount recognised in the balance sheet in respect of the Group's retirement benefit obligations
| At30 June2016£000 | At30 June2015£000 | At31 December2015£000 |
Total market value of assets | 92,526 | 87,580 | 87,838 |
Actuarial value of liability | (146,630) | (121,540) | (124,944) |
Restrictions on asset recognised | (1,921) | (2,093) | (2,239) |
Overseas retirement benefit obligation | (257) | (193) | (210) |
Net liability recognised in the balance sheet | (56,282) | (36,246) | (39,555) |
Related deferred tax asset | 10,147 | 7,256 | 7,135 |
Pension liability net of related deferred tax asset | (46,135) | (28,990) | (32,420) |
Sensitivity analysis
The sensitivities regarding key assumptions are shown below.
Assumption | Change in assumption | Increase/(decrease) in defined benefit obligation |
Discount rate | Reduce by 0.25% | £6.5m |
Inflation rate | Reduce by 0.25% | (£2.5m) |
Longevity | 1 year increase | £5.2m |
The sensitivities consider the impact of the single change shown, with the other assumptions assumed to be unchanged. The inflation sensitivities allow for the consequential impact on the salary increase, statutory deferred revaluation and pension increase assumptions. The sensitivity analyses have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. In practice, making two of the changes shown would not make the overall results the sum of the two sensitivities, due to the interdependence of the assumptions.
15. Commitments for expenditure
The Group has committed to purchase €0.9m of newly issued ordinary and preference shares in REF Wisdom Limited, the intermediary company to its investment in Fadata AD, on 30 June 2017.
The Group has also committed to purchase a further €1.6m of software implementation assistance from Fadata AD over the next five years.
16. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
17. Non-recurring costs
In prior periods, further restructuring costs of £0.1m were incurred, representing the reduction of headcount in certain business segments, with a view to improving operational efficiency. No such costs were incurred in the current period.
18. Events after the balance sheet date
On 26 July 2016, the Company acquired, through its wholly owned subsidiary Charles Taylor Insurance Services Limited, the CEGA Group, a specialist provider of technical medical assistance and travel claims management services, for a maximum consideration of £29.8m.
Forward-looking statements
This interim report contains certain forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; exchange rate fluctuations and other changes in business conditions; the actions of competitors and other factors.
Responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board
David MarockGroup Chief Executive Officer
Mark KeoghGroup Chief Financial Officer
Independent review report to Charles Taylor plc
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity, and related notes 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP Chartered Accountants and Statutory AuditorLondon, United Kingdom29 August 2016