JLF.L Regulatory News (JLF)

18 Jun 2009 07:00



18th June 2008

Jelf Group plc

('Jelf' or 'Jelf Group' or 'The Group')

Interim Results for the six months ended 31 March 2009

JELF CONTINUED GROWTH

Jelf Group plc, a leading independent corporate consultancy providing advice on insurance, employee benefits including healthcare, commercial finance and wealth management, today announces its interim results for the six months ended 31 March 2009. 

FINANCIAL HIGHLIGHTS

40% growth in Revenue to £35.0m (2008: £25.0m)

11% growth in EBITDAE to £3.5m (2008: £3.1m)

5% organic revenue growth in Employee Benefits 

Cash generated from operations of £8.3m (2008: £6.5m) 

10% EBITDAE margin (2008: 12%)

OPERATING HIGHLIGHTS

Growth continues, 

Good cross sales through existing client relationships and major acquisitions

Integration of major acquisitions made in 2008 going to plan

Investment in people and systems continues

Focus on costs has achieved results but there is more to be done as the economic downturn continues

Award of 2* (Outstanding) Investors In Customers from (IIC)

Alex Alway, Group Chief Executive, said:

"Market conditions remain extremely difficult and I do not expect that to change this year. Furthermore we have yet to see the benefits of a hardening of insurance rates in the market.  Despite these external factors, the overall growth in our revenues and profits highlights the resilience of the business. However, I do expect the economic downturn to continue into next year and this will present fresh challenges to both our clients and the Group which will have to be addressed."

Enquiries:

Notes to Editors:

Jelf Group was founded by Chris Jelf in 1989. Today, the Jelf Group operates from a number of premises in England & Wales and offers an extensive range of corporate and private client services;

The Group advises in excess of 40,000 corporate clients across a range of disciplines. These clients cover the spectrum from significant public companies to small owner-managed businesses. Core Jelf clients are medium-sized owner-managed businesses.

The Group has continued to strengthen its corporate support infrastructure and integrate the acquisitions made. 

Further information is available on Jelf Group at the Group's website: www.jelfgroup.com.

Chairman's statement

Our strategy continues to be one of expanding the business through offering a broad range of services to new and existing clients. The range of services which we offer to owner-managed businesses, in particular, has enabled the Group to maintain its resilience even within a challenging economic environment.

We continue to successfully integrate key acquisitions, and we are pleased with the performance of these businesses given the wider economic climate. The contribution of these acquisitions to our insurance and employee benefits businesses continues to be in line with forecasts. 

Our organic growth (ex-acquisitions) has declined in the first half as a result of the economic downturn, which has affected all our businesses in varying degrees. We achieved positive organic growth in Employee Benefits and Commercial Finance, but Insurance and in particular Wealth Management experienced negative organic growth due to the difficult economic and investment climate. Our overall organic growth was negative (-6%), but remained largely flat excluding Wealth Management.

Given the economic climate, we have continued to focus on reducing our cost base and improving operating efficiencies during this period; these efforts will continue.

Our operating cash flow remains strong, which has helped us to reduce our total debt (bank plus deferred consideration) in the first half from £49.3m to £42.3m (-£7.0m or -14%).

The results of the Group are biased to the key months of the third quarter of our financial year due to the start of the tax year in April, when a significant amount of business is conducted. The interim results reflect this bias. 

We would like to put on record our thanks for the continued support, dedication and professionalism of our staff. They continue to face considerable change within the business and constantly rise to the challenge.

I would also like to record our thanks to Bruce Carnegie-Brown, who retired from the Board in April 2009 following the acquisition of 3i QPE by the wider 3i Group. Bruce has made a valuable contribution to the Group in the last year, and we wish him well for the future.

The Board remains committed to providing excellent service to our clients, and to achieving strong returns for our shareholders.

David Walker

Group Chairman

18th June 2009

Group Chief Executive's Statement

I am pleased to be in a position to report another set of solid results for the Group helped particularly by the successful integration of the three large acquisitions made last year. The economic climate is extremely challenging and the Group is taking appropriate action to reduce its cost base to reflect this situation. 

We continue to make investments in people and infrastructure, to enable the business to execute our declared growth strategy.

Financial performance

In the six-month period ending 31 March 2009, the Group increased its turnover by 40% to £35.0m (2008: £25.0m); Operating profit has decreased from £1.6m to a loss of £0.4m due to the impact of restructuring costs and increased amortisation; EBITDAE increased by 11% to £3.5m (2008: £3.1m).

Underlying EBITDAE margin was down 17% to 10% (2008: 12%).

Cash generated from operations was £8.3m. Performance-based deferred consideration payments on previous acquisitions amounted to £3.6m for the period. Our deferred consideration liabilities have been reduced during the period from £26.1m as at 30 September 2008 to an estimated £18.5m, due to payments and the impact of earn-out formulae.

Total bank debt, gross of capitalised loan fees, is now £24.3m. This increased from £23.5m as at 30 September 2008, with additional borrowings being used to help fund the payment of the deferred consideration. This is in line with expectations.

Organisational development

We have selectively invested in the Group's infrastructure in this period to enable integration whilst reducing back office costs. Infrastructure investment in technology and front-line support will always be a priority.

We have largely completed the process of migration of the core Healthcare business onto one system. 

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, where Jelf specialises, is less sensitive to incremental market rate movements and we have seen some rate increases here, but these have been offset by the difficulties faced by many of our corporate clients and the resulting reduction of overall insurance covers. We anticipate that the challenging trading environment for our Insurance businesses will continue through 2009 and into the first half of 2010.

We have focused on reducing the cost base and the integration of acquisitions during this period.

Despite these mixed market conditions, our client-focused approach has enabled us to maintain strong retention rates and to add value for clients. 

Employee Benefits

The market for advice on Employee Benefits remains resilient and the Group continues to enjoy a strong competitive position in this area. Clients continue to seek good advice, however the conversion of pipeline prospects for corporate pensions is taking longer to materialise as the decision making process is slowed due to focus on other areas such as redundancies. 

The rates for private medical insurance continue to harden and we are pleased to be able to report 13% organic growth on the previous year. The Group now places approximately £140m GWP annually in the private medical insurance market.

The results of the Healthcare business are weighted towards the second half of the financial year. 

During this period we have worked hard at getting closer to our Healthcare corporate clients to introduce the wider suite of employee benefits services and products and this campaign is beginning to bolster the pipeline of future prospects.

Wealth Management

The market for independent advice to individuals has been extremely difficult in the current economic environment. Revenues have fallen by just 5%, due to the addition of the three acquisitions made last year, all of which had small elements of financial services business. All areas of advice are down as client confidence in this market has ebbed. 

During this period we have reduced our cost base resulting in the release of a number of advisors and associated support staff. It is our intention to continue with the programme of integration and to focus on a smaller number of talented individuals whilst reducing costs further. 

The business assurance campaign launched in 2008 has provided significant organic sales into the Group's existing corporate clients that have underpinned these results. This will continue to be a primary focus throughout 2009.

The Group now has currently circa £270m (2008: £200m) in third-party funds on Wrap programmes producing fund-based income. Despite a strong inflow of funds, the overall amount under advice has reduced in line with equity price movements and remains market sensitive. In addition we continue to advise on over £1 billion of client funds under advice in old style product structures.

It is unlikely that we will see any return of confidence to this market during 2009 and the first half of 2010.

Acquisitions

Whilst the Group has a healthy pipeline of potential acquisitions it has chosen not to invest during this period due to a lack of value. The consolidation of the intermediary market whilst slowing in pace has continued despite the wider economic difficulties.

The Insurance and Healthcare elements of the acquisitions made in 2008 are trading in line with expectations. These businesses did contain some Wealth Management businesses which although small in size are trading below expectations. 

People

I am particularly pleased at the progress made this year in the way the management and employees of the businesses acquired in 2008 have embraced the opportunities within the wider Group and are making a real contribution.

Whilst we have not made any acquisitions during this period and will have a strong focus on operating efficiencies, we have continued to recruit and motivate key talent whilst strengthening the senior management team with appointments and promotions.

Our employees and management continue to deliver excellent value to our clients, shareholders and our strategic partners in the market. They remain our key asset.

Future

The Group will continue with its strategy of strengthening its position within its chosen sectors and providing a wider range of enhanced services to our clients.

The Jelf Group will continue to place great emphasis on superior customer service to our clients .

Alex Alway

Group Chief Executive

18th June 2009

Consolidated Balance Sheet

1 Included within cash and cash equivalents is fiduciary cash of £18,951,000 (31 March 2008: £12,837,000; 30 September 2008: £18,161,000).

The notes on pages 10 to 14 form an integral part of these condensed interim financial statements.

Consolidated income statement

All results are derived from continuing operations 

Consolidated statement of recognised income and expense

Consolidated cash flow statement

1 Cash inflow from the acquisition of subsidiaries and businesses for the six months ended 31 Mar 2009 has been shown net of £63,000 receipt relating to a net asset settlement on a previous acquisition. 2 The condensed interim financial statements for the six months ended 31 March 2008 disclosed deferred consideration paid as a financing activity. This has subsequently been restated to be an investing activity.3 Included within cash and cash equivalents is fiduciary cash of £18,951,000 (31 March 2008: £12,837,000; 30 September 2008: £18,161,000).

1. General information

Jelf Group plc is an AIM listed company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered office is given in note 9.

These condensed interim financial statements do not comprise statutory accounts under the meaning of Section 240 of the Companies Act 1985 and should be read in conjunction with the statutory accounts for the year ended 30 September 2008. These were prepared under International Financial Reporting Standards (IFRSs), which were approved by the Board of Directors on 2 February 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 (2) or (3) of the Companies Act 1985.

These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.

2. Basis of preparation

The condensed financial statements have been prepared using accounting policies consistent with IFRSs as adopted for use in the European Union and the AIM rules and as disclosed in the Group's statutory accounts for the year ended 30 September 2008. These condensed financial statements do not comply with all the requirements of IAS 34 'Interim financial reporting' as the Company is not required to adopt this.

The statutory accounts for the year ended 30 September 2008 were the Group's first under IFRS and the reserves at 1 October 2007 have been restated accordingly.

The Group has applied s131 of the Companies Act 1985 in respect of merger relief. An adjustment in respect of this has been made to the equity reserves at 31 March 2008 and the relevant balances restated.

3. Segmental Reporting

The Board have determined that the Group has five business sectors: Insurance, Healthcare, Employee Benefits, Commercial Finance and Wealth Management. Business sector data includes an allocation of corporate costs to each sector. There are no sales between business sectors.

All turnover arose within the United Kingdom. No secondary segment information is therefore given. Segment information about these businesses is presented below.

4. (Loss) / earnings per share

(Loss) / earnings per share attributable to the equity holders of the Company are as follows:-

1. before deduction of amortisation of intangible fixed assets and exceptional

2. in accordance with IAS33 Earnings per Share, the basic weighted average shares in issue has been used to calculate the  2009 loss per share due to the antidilutive nature of losses

5. Share capital

As at 31 March 2009 the Company had authorised share capital of 100,000,000 (31 March and 30 September 2008: 100,000,000) ordinary shares of 1p each, of which 49,802,687 (31 March 2008: 49,787,906, 30 September 2008: 49,802,687) ordinary shares have been allotted, called up and fully paid.

At 31 March 2009, of the called up share capital, 780,968 (31 March 2008: 423,809, 30 September 2008: 785,609) ordinary shares were held by the Jelf Group plc Employee Benefit Trust and are shown within other reserves.

On 25 February 2008 22,117,648 new ordinary shares of 1p each were issued for £45.0m, net of share issue costs, and admitted to AIM. The new ordinary shares will rank pari passu with the existing ordinary shares of the Company.

1 shown within other reserves on the balance sheet

2 shown net of tax

8. Exceptional costs

£1,099,000 (31 March 2008: £nil, 30 September 2008: £666,000) of Group reorganisation and rationalisation costs are a result of combining and restructuring operations. These costs are not associated with the ongoing activities of the Group.

9. Copies of the Interim Financial Statements

Copies of this Interim Report and Accounts announcement are available on the Group's website (www.jelfgroup.com) or from the Company Secretary at the Company's registered office: Fromeforde House, Church Road, Yate, Bristol, BS37 5JB.