Final Results

Jelf Group plc

("Jelf", the "Group" or the "Company")

Final results for the year ended 30th September 2010

Jelf, an independent full service brokerage that supports businesses and individuals, announces its final results.

Financial Highlights

Strong financial performance despite the difficult trading conditions and fragile wider economy:

·; EBITDAE increased by 21% to £9.8m (2009: £8.1m)

·; Revenue levels held at £70.4m (2009: £70.3m)

·; EBITDAE margin increased by 21% to 14% (2009: 11%)

·; Operating profit at £3.1m (2009: loss £9.7m)

Significantly strengthened balance sheet:

·; Net debt down to £7.3m (2009: £30.7m)

Cash generated from operations continues to be strong and deferred consideration from previous acquisitions now down to £0.8m (2009: £8.6m)

Operating highlights

·; Integration of the acquired businesses is now complete

·; Organic sales and captured operational efficiencies were achieved

·; Funds Under Advice rose to £450m (2009: £242m)

·; Investment in people and systems continue

·; New non-executive Chairman and NED appointed to board

Alex Alway, Group Chief Executive, commented:

"As a result of our focus on our clients we have managed to produce a good performance despite difficult trading and the wider economic conditions. We have now completed the integration of all our previous acquisitions and are focused on generating increased value from the three core business areas. We remain cautious about the economic outlook and believe that 2011 will be a challenging year for our clients. "

Enquiries

Jelf Group plc

Alex Alway, Chief Executive 01454 272713

John Harding, Group Finance and Operations Director 0117 315 6563

Cenkos Securities plc

Stephen Keys 0207 397 8900

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

Chairman's statement

I am delighted to join the Board at this exciting time, and would like to open by thanking David Walker for the enormous contribution that he has made since he joined the Board shortly after flotation in 2004.

During David's tenure as Chairman, turnover rose from £8.5m to £70.4m. He also successfully oversaw the transfer of the 3i shareholding to Capital Z and their entry as the leading Jelf shareholder.

Despite difficult trading conditions and an uncertain and fragile economy, which continues to badly affect our core SME clients, Jelf has performed in line with forecasts. We have maintained income at £70m and delivered a 21% increase in EBITDAE from £8.1m in 2009 to £9.8m this year. This is a strong result and is testimony to the quality of the management and staff within Jelf, and the excellent relationships that we build with our corporate and individual clients across the core areas of insurance, employee benefits and financial planning. We continue to enjoy high client retention levels and to consistently win new business. The quality of our customer service is reflected in our 'Outstanding' rating from Investor in Customers. This independent and highly respected award is based solely on feedback from our clients and staff.

Over the last 12 months, we have succeeded in significantly strengthening Jelf's financial and shareholding structure. In March 2010, we raised £17.7m (net of expenses) on AIM. Capital Z, a US-based private equity house focused on financial services, acquired the 3i shareholding as well as investing £11m in the fund raise. At the same time Jelf renegotiated a new five year senior debt facility. As a result of the above and strong trading, net debt has been significantly reduced to £7.3m from £30.7m at 30 September 2009.

In addition, over the last six months Jelf has completed its programme of integrating all the acquisitions into our three businesses - Jelf Insurance Brokers, Jelf Employee Benefits and Jelf Financial Planning. This simplification of our management and brand structure provides a strong platform for growth, and is symbolised in the move from Jelf Group plc to the new brand identity, Jelf.

We have strengthened our corporate governance and risk management procedures. At Board level, we have added a fourth non-executive director, Grahame Stott. Grahame is a qualified actuary who brings a wealth of experience gained from developing professional services firms. In addition, we have established a new internal audit function and restructured the Board committees. The remit of the old Audit and Compliance Committee has been split. The Audit Committee is now focused on issues related to the audit, oversight of the financial reviews undertaken by Internal Audit and to key issues such as client money management. Risk, compliance and conflicts of interest issues are now the preserve of the Risk and Compliance Committee. The other committees remain, namely Remuneration and Nominations, Data Security, Treating Customers Fairly ('TCF') and Solvency.

Since joining Jelf, I have been struck by the high quality of the management team and by the dedication to client service shown by the staff and management in their everyday activities. The actions taken by the Board and the senior management team mean that we are in a strong position to take advantage of any upturn in the economy and to generate substantial value for our shareholders.

I look forward to working with the Board and the people of Jelf in the year ahead to deliver another strong set of results for our shareholders.

Les Owen

Non-executive Chairman

Operating and financial review

"As a result of our clear focus during 2009/10 we have managed to maintain our income whilst increasing both our EBITDAE and EBITDAE margin by 21%."

We are proud to report that we experienced steady trading, an improvement in margins and, in some markets, increased new business levels.

In addition, we refinanced and raised a net £17.7m from a placing of shares along with welcoming Capital Z as a key investor. This was an excellent result and was directly linked to the organisational changes that were implemented in 2009 and the early part of 2010.

Financial results

In the last financial year, we saw a turnaround in Jelf's financial performance and strength. In the year ended 30 September 2010, Jelf's revenue was £70.4m (2009: £70.3m) and EBITDAE increased by 21% to £9.8m (2009: £8.1m). The EBITDAE margin was 14% (2009: 11%). The operating profit was £3.1m (2009: £9.7m loss). These results reflect our clear focus on clients. We fought hard to retain existing clients and to win new business, and kept a focus on cost management across the whole of Jelf. These mantras will continue throughout 2011 as economic conditions remain uncertain.

Jelf continues to generate a strong positive cash flow and has reduced deferred consideration arising from past acquisitions from £8.6m in 2009 to £0.8m in 2010. This will be paid off by the time the 2010/11 interims are announced.

At the beginning of 2010, we negotiated a new five year debt facility which is governed by a set of three covenants, all of which have significant headroom, based on our current projections. The net debt position has reduced considerably and now stands at £7.3m (2009: £30.7m). This means that Jelf is in a strong and secure financial position, ideally poised to take advantage of any growth in the economy.

Jelf has concentrated on improving EBITDAE margins and I am pleased that we have managed an increase from 11% (2009) to 14% (2010). This financial year saw the completion of a number of initiatives as part of our drive for cost efficiency. The costs in respect of these changes contributed to the exceptional reorganisation and rationalisation charge of £1.1m (2009: £4.8m). This work has now been largely completed.

Consolidated equity as at 30 September 2010 amounted to £88.7m (2009: £66.0m). Basic underlying earnings per share was 6.3p (2009: 7.0p) and basic earnings per share amounted to 1.1p (2009: loss per share of 20.0p).

Dividend policy

The Directors do not recommend the payment of a dividend this year (2009: nil). The Directors intend to commence payment of dividends only when it becomes commercially prudent to do so. Consideration will be given to:

• Repayment of existing loan facilities

• Maximisation of shareholder value

• Availability of Jelf's distributable profits and cash

• Level of retained funds required to finance future growth

• Meeting regulatory capital adequacy requirements

Strategy

Our objective is to continue to build a leading independent corporate intermediary business providing an enhanced range of services and products to the UK SME and corporate business sectors and the related private individual market.

The principles of Jelf's strategy continue to be:

• Clients - Doing what our clients tell us they want us to do, which is to work side-by-side with them to understand their business needs and individual circumstances. This allows us to provide them with bespoke solutions from our broad range of products and services that mitigate risks and add value.

• People - People are our unique selling point, and we continue to develop them to deliver a high value service to our clients.

• Provider relationships - Strategic and trading relationships with our provider partners across all sectors are a key factor in our success. These relationships allow us to deliver bespoke products and top quality service to our clients.

• Shareholders - Prudent management of Jelf's financial resources on behalf of our shareholders.

Throughout 2009/10, we have pursued a growth strategy focused on organic opportunities and on developing our menu of services. During this period the Board felt it was prudent not to pursue acquisitions. It will now review the market for opportunities during 2011.

Review of operations

During 2010, as in previous years, our operations continued to be conducted through business segments, each reporting to Directors who have responsibility for the profit and loss account and autonomy in the day-to-day running of their business. We have focused on our businesses: Insurance, Employee Benefits and Financial Planning. The integration of a number of regulated entities has resulted in a more streamlined organisation with clearer reporting lines.

Each of these business segments is monitored against key performance indicators (KPIs), which include revenue, EBITDAE and EBITDAE margin. In addition, we monitor our earnings per share and net debt. The performance of each business segment is included within the following review.

Insurance

This business provides insurance broking services to corporate and individual clients. It offers advice on all aspects of general insurance, including carrying out risk assessments, designing insurance programmes, reviewing existing insurance arrangements and claims management.

Insurance is the largest segment, accounting for 61% of Jelf's total income.

Revenues were slightly below those of 2009, at £42.9m compared to £43.7m. EBITDAE fell from £5.2m in 2009 to £4.3m and EBITDAE margin fell from 12% to 10% year on year. Operating loss, after depreciation, amortisation and reorganisation and rationalisation costs, was £1.42m (2009: £1.30m). As noted below, we now have plans to increase these margins on the back of improved structures and processes.

During 2009/10 we completed the integration of the acquired businesses and have put in place a new streamlined management structure headed up by the new Chief Executive (Insurance), Phil Barton. I am also delighted to welcome Jonathan Vickers and Mark Sayer as our new Insurance Finance and Operations Directors respectively.

The new business efforts within insurance have borne fruit and a number of introductory deals have been put in place. These will start to provide fresh impetus to sales growth in the 2010/11 financial year.

This year saw The Purple Partnership, Jelf's network for independent brokers, which is included within the insurance business segment, exceed its targets and continue to build its membership base. Revenue increased by 49% to £0.42m in its third year of operation.

Employee Benefits

This business comprises a range of services including group pensions, group risk and healthcare. The non-healthcare part of the business provides advice and a range of services to small and large businesses in respect of benefit design (including risk and pension benefits), benefit communication and implementation. This has always been an area of organic growth for Jelf and we have seen strong new business levels in this sector during 2009/10 as corporate clients have sought advice in these uncertain times.

The healthcare business provides advice on health-related employee benefits such as private medical insurance and other non-insurance services. Core clients are owner-managed enterprises based in England and Wales. The business also provides specialist fee-based advice to larger companies, encompassing wider healthcare related issues such as absence management and occupational health.

Employee Benefits accounts for 27% of Jelf's total income.

Despite the severe economic conditions this division experienced an increase in revenues of 4% in 2010, to £18.91m (2009: £18.27m). Firm cost management resulted in strong growth in EBITDAE of 64%. EBITDAE has increased to £5.04m (2009: £3.08m). EBITDAE margin is very strong at 27% (2009: 17%). Operating profit is £4.10m (2009: £0.57m).

Financial Planning

This business provides independent financial planning services, including investment planning, portfolio management and retirement planning advice to individuals, especially entrepreneurs. This area has enjoyed a resurgence of confidence and business levels following its reorganisation in 2009. A tight focus on costs and a re-alignment of the business around the most productive IFAs has had a positive impact on performance.

Financial Planning accounts for 12% of Jelf's total income.

Revenues from Financial Planning have increased by 3% to £8.54m (2009: £8.30m) and EBITDAE has increased by 354% to £0.47m (2009: negative £0.19m). EBITDAE margin is a positive 6% (2009: negative 2%). Operating profit is £0.46m (2009: loss of £8.98m).

The management team have been working towards ensuring that the business model for Financial Planning will respond positively to the regulatory changes (Retail Distribution Review) taking effect within this sector at the end of 2012. Jelf's advisers have a mandate for over £450m (2009: £240m) of Funds Under Advice with third party investment (wrap) platforms.

During 2010 we retained the prestigious 'Chartered Financial Planners' status for our Financial Planning business, a mark that is currently awarded to only a small number of intermediaries.

Jelf in the Community

Due to the efforts of staff members across Jelf, in excess of £40,000 (2009: £20,000) has been raised to support local charities in England and Wales. This is in addition to over £7,000 (2009: £13,000) contributed by Jelf.

Rebranding

Jelf completed a brand refresh for all its businesses during September 2010 following consultation with staff and clients.

Organisational development

Over the last year, we have made great strides to simplify our structure. We have:

• Completed a number of organisational changes which has resulted in a smaller, more focused management team. The management structures are aligned behind our three main business sectors and client needs. The experience, breadth and continuity of this team will enable us to further enhance our position over the coming 12 months and beyond.

• Reduced the number of FSA regulated entities from eight to three.

In addition, we have:

• Launched another tranche of our SAYE scheme which was significantly over subscribed by our employees.

• Invested in our compliance / internal audit resources to ensure that we can meet the significant obligations and demands of our regulatory framework.

Despite the organisational restructure that has taken place during 2009/10, our staff retention remains high as we continue to build a cohesive Jelf culture across the business.

Infrastructure

As at 30 September 2010, Jelf operated out of 31 locations (2009: 34) and staff numbers at the end of the year decreased by 5% to 1,031 (2009: 1,087). We have continued to invest in our infrastructure to ensure that we develop support for our primary asset, the people within our business, whilst also creating capacity for future growth.

Our property strategy is to use lease break clauses as an opportunity to reduce the rent roll and to co-locate teams to maximise cross-referral potential. The recent investments in our Ringwood and Manchester premises and the proposed moves and investments in our Swansea and Stratford offices are good examples.

Organic growth

Total revenues were held at the same levels as 2009, which represents a good performance given the market context. Both the Financial Planning business, with organic sales up by 2.9% (2009: down by 19.5%), and the Employee Benefits business, up by 3.5% (2009: 11.3%), produced strong growth. We consider these results a good indicator of the potential upside for Jelf.

Insurance new business sales were up 27% on 2009.

During the 2010/11 financial period, we have invested heavily in our marketing resources which will assist all business sectors.

Awards

I am delighted to confirm that Jelf has again been acknowledged within the employee benefits sector by being recognised in the following categories:

• Best Training and Development Intermediary

• Best International Intermediary

• Best Newcomer for one of our advisers

In addition, it was highly commended in a number of other categories once again.

The future

Jelf remains determined to be responsive to the needs of our clients and to improve the underlying efficiency and quality of the service we deliver. We will continue to test ourselves and remain poised to capitalise on any improvements in the wider economy.

We remain confident that, by meeting the needs of our clients, Jelf will be in a position to prosper over the next 12 months.

This year has again seen much change, and on behalf of the Board I would like to put on record our thanks to all our employees for their continued support and commitment.

On a personal note, I would like to thank David Walker who retired as our Non-Executive Chairman in September 2010 after several years with the business. David provided valuable insight and leadership during the restructuring that took place in 2009/10. The management team and I would like to wish him well in his other ventures.

Alex Alway

Group Chief Executive

Consolidated balance sheet

As at 30 September 2010

* Included within cash and cash equivalents is fiduciary cash of £11,241,000 (2009: 16,490,000)

The notes on pages 19 to 48 form an integral part of the consolidated financial statements. The financial statements were approved by the Board of Directors and authorised for issue on 31 January 2011. They were signed on its behalf by:

Consolidated income statement

For the year ended 30 September 2010

Consolidated statement of comprehensive income

For the year ended 30 September 2010

Consolidated statement of changes in equity

For the year ended 30 September 2010

1 Shown within other reserves on the balance sheet

2 Shown net of tax

3 The share based payment reserve is distributable to the equity holders of the Company

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 £11,241,000 (2009: £16,490,000)

Notes to the consolidated financial statements

1. General information

Jelf Group plc is an AIM listed company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The address of the registered office is given in note 32. The nature of the Group's operations and its principal activities are set out in the Chairman's Statement, the Operating and Financial Review and the Directors' Report.

These Group consolidated financial statements were authorised for issue by the Board of Directors on 31 January 2011.

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

These Group consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 4.

3. Accounting policies

New and amended standards adopted by the group

The following IFRS pronouncements relevant to the Group have been adopted in these consolidated financial statements:

·; IAS 1 Presentation of Financial Statements. The revised standard prohibits the presentation of items of income and expense (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All non-owner changes in equity are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The Group has elected to present two statements: an income statement and a statement of comprehensive income. The financial statements have been prepared under the revised disclosure requirements; the application of this revised standard, which affects presentation only, has not had any impact on amounts recognised in these financial statements.

·; Amendments to IFRS 7 Financial Instruments: Disclosures - 'Improving Disclosures about Financial Instruments'. The amendments require enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of a three level fair value measurement hierarchy for financial instruments carried on the Group's balance sheet at fair value. As the amendments only result in additional disclosures, the amendments have not had any impact on amounts recognised in these financial statements.

·; IFRS 8 Operating Segments. This new standard replaces IAS 14 Segment Reporting and requires reporting of financial and descriptive information about operating segments which are based on how financial information is reported and evaluated internally. The segment information for the year ended 30 September 2010 and for the corresponding comparative year is presented in note 5. The application of this new standard, which affects disclosures only, has not had any impact on amounts recognised in these financial statements.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

The following standards and amendments to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 October 2010 or later periods, but the group has not early adopted them.

·; IAS 36 (amendment), 'Impairment of assets', effective 1 January 2010. The amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by paragraph 5 of IFRS 8, ' Operating segments' (that is, before the aggregation of segments with similar economic characteristics).

·; IFRS 2 (amendments), 'Group cash-settled share-based payment transactions', effective from 1 January 2010. In addition to incorporating IFRIC 8, 'Scope of IFRS 2', and IFRIC 11, 'IFRS 2 - Group and treasury share transactions', the amendments expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by that interpretation.

·; IFRS 5 (amendment), 'Non-current assets held for sale and discontinued operations'. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation

uncertainty) of IAS 1.

·; Revised IAS 24 (revised), 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after 1 January 2011. Earlier application, in whole or in part, is permitted. However, the standard has not yet been endorsed by the EU. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The Group will apply the revised standard from 1 October 2011. When the revised standard is applied, the Group and the parent will need to disclose any transactions between its subsidiaries and its associates.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all Group undertakings.

Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The results of subsidiary undertakings acquired or disposed of are included in the consolidated income statement from the date of acquisition or up to the date of disposal.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Revenue recognition

Broking income

Income is recognised on a receivable basis. Revenue represents commissions and fees due with reference to the commencement date of the insurance policy or other product taken out by clients.

Where there is an expectation of future servicing requirements an element of income relating to the policy is deferred to cover the associated contractual obligation.

Investment returns

Investment returns on fiduciary cash balances held are credited to revenue on an accruals basis, subject to the terms of business agreed with the client.

Other services

Fees and other income receivable, including profit share and commission overriders, are recognised in the period to which they relate and when they can be measured with reasonable certainty, and all servicing obligations have been met.

Operating profit

Operating profit is stated before investment revenues and finance costs.

Exceptional costs

Exceptional costs are those items which are separately disclosed by virtue of their size or nature to enable a better understanding of the Group's financial performance. Transactions which may give rise to exceptional costs principally relate to Group reorganisation and integration costs including rationalisation of premises and IT systems as well as redundancy costs and impairment (see below).

Segmental reporting

The Directors have identified three business sectors: Insurance, Employee Benefits and Financial Planning. Business segment data includes an allocation of corporate costs to the segment. There are no sales between business segments.

Goodwill

Goodwill, representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired, is recognised as an asset. Goodwill is reviewed for impairment at least annually and any impairment will be recognised in the income statement and may not be subsequently reversed. Goodwill is carried at cost less accumulated impairment losses.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to reported operating segment.

Intangible assets

Client books of business

Acquired businesses are reviewed to identify assets that meet the definition of an intangible asset per IAS 38 'Intangible Assets'. Examples of such assets include customer relationships and expectations of business renewal. These assets are valued on the basis of the present value of future cash flows and are amortised to the income statement on a straight-line basis over the life of the contract or their estimated economic life. No revaluations are made to the initial cost of these assets. The current maximum estimated economic life of these assets is 13 years. Client books of business are stated at cost less accumulated amortisation.

Computer software

Computer software, which is not an integral part of the related hardware, is stated at cost less amortisation. Amortisation is provided at rates calculated to write off the cost, less estimated residual value, on a straight-line basis over their useful economic life. The current maximum estimated economic life of these assets is five years.

Property, plant and equipment

Assets are stated at cost less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided at rates calculated to write off the cost of assets, less their estimated residual value, over their expected useful lives on the following basis:

Land and buildings 2% Straight line

Motor vehicles 25% Reducing balance

Fixtures and fittings 15% Reducing balance

Computer equipment 20% Straight line

Residual values and useful economic lives are reviewed and adjusted as necessary on an annual basis.

Impairment of goodwill, property, plant and equipment, intangible assets

The Group reviews the carrying amounts of its plant, property and equipment and intangible assets (including goodwill) to determine whether there is any indication that those assets have suffered an impairment, on an annual basis. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment is recognised as an expense immediately in the income statement.

Impairments booked to the income statement are not subsequently reversed.

Investments

Investments are stated at cost less any impairment.

Leasing

Assets held under leasing agreements, which transfer substantially all the risks and rewards of ownership to the Group are included in property, plant and equipment. The capital elements of the related finance lease obligations are included in liabilities. The interest elements of the finance lease obligations are charged to the income statement over the period of the lease term.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

Current and deferred income tax

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax is charged or credited to equity in respect of any items, which is itself either charged or credited directly to equity. Any subsequent recognition of the deferred gain or loss in the consolidated income statement is accompanied by the corresponding deferred income tax.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Derivative financial instruments and hedging activities

Financial instruments are defined as any contract which gives rise to a financial asset of one entity and a financial liability of another.

Financial assets and liabilities are recognised in the Group balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Derivatives

The Group only enters into derivative financial instruments in order to hedge underlying commercial exposures.

Hedge Accounting

At the inception of the transaction, the Company documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the period.

Insurance broking receivables and payables

Insurance brokers act as agents in placing the insurable risks of their clients with insurers and, as such, are not liable as principals for amounts arising from such transactions. In recognition of this relationship, receivables from insurance broking transactions are not included as an asset of the Group.

Other than the receivable amount for fees and commissions earned on a transaction, which is included within trade receivables, no recognition of the insurance transaction occurs until the Group receives cash in respect of premiums, at which time a corresponding liability is established in favour of the insurer or the client.

In certain circumstances, the Group advances premiums, refunds or claims to insurance underwriters or clients prior to collection. These advances are reflected in the consolidated balance sheet as part of trade receivables.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently at amortised cost, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, dispute, default or delinquency in payments are considered indicators that the receivable is impaired. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Included within cash and cash equivalents is fiduciary cash held on behalf of clients or insurers.

Trade payables

Trade payables are initially recognised at fair value and subsequently measured at amortised cost.

Borrowings

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Borrowings are recognised initially at fair value, net of transaction costs incurred. They are subsequently stated at amortised cost using the effective interest rate method.

Deferred and contingent consideration

Deferred and contingent consideration is included at the Directors' best estimate of the amounts which will be payable. This amount is reviewed on an annual basis.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Employee benefits

Share based payment

Shares awarded through the Jelf Group plc Employee Benefit Trust ('EBT') are accounted for in accordance with IFRS 2 'Share-based payment'. A period of continued employment is required before the relevant employees become unconditionally entitled to the shares awarded. The cost of the awards is spread over this period. The amount recognised is based on the fair value of shares at the date the award is made.

Own shares held by the EBT are accounted for in accordance with IFRS 2 Share-based payment:

·; Until such time as the Company's own shares held by the EBT vest unconditionally to employees, the consideration paid for the shares is deducted from the Group and Company profit and loss account in arriving at shareholders' funds.

·; Consideration paid or received for the purchase or sale of the Company's own shares are shown as separate amounts in the reconciliations of movements in shareholders' funds.

·; Any dividend income arising on own shares is excluded in arriving at profit before tax and deducted from dividends paid and proposed.

·; Other assets and liabilities of the EBT are recognised as the assets and liabilities of the Group and Company.

Finance costs and any administration expenses of the EBT are charged as they accrue.

The fair value of share options is recognised as an expense on a straight line basis over the vesting period. For share option agreements where the number of options is dependent on performance, an estimate is made of the number of options that will be granted at the end of the performance period. This estimate is reviewed each accounting period. The fair value of share options granted by the Company is usually measured using the Black-Scholes model. For certain options with market conditions, Monte Carlo simulations are performed to measure fair value. The expected life in the model has been adjusted, based on management's best estimate, for the effects of exercise restrictions and behavioural considerations.

At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

Pensions

The Group operates a number of defined contribution pension schemes for employees and certain of its Directors and the pension charge represents the amounts payable by the Group to the fund in respect of the period. The Group also makes contributions to the personal pension plans of Directors and certain employees. These are charged to the income statement as they arise.

Financial risk management

The Group's activities expose it to a number of financial risks, including funding and liquidity risk, interest rate risk and counterparty credit risk. The Board have put in place a number of strategies and controls to manage these risks, and minimise the impact on the financial performance and financial position of the Group.

Funding and cash flow risk

A breach of the Group's loan covenants might lead to funding being withdrawn. The Group monitors its funding requirements and liquidity through the use of both long term and short term forecasting models to ensure it is able to meet its obligations as they fall due. Various stress tests are conducted to understand the key sensitivities.

In February 2010 the Group completed a review of its funding requirements and as a result entered into a new five year commercial loan. Further to this, in March 2010, the Group conducted an equity raise of £17.7m (net of expenses). At 30 September 2010, the Group has cash balances, net of fiduciary cash, of £9.6m (2009: £2.3m).

The Board are satisfied that the loan will provide significant headroom and liquidity to ensure sufficient access to funds to cover operational cash requirements, including deferred consideration payments, and growth for the next five years.Having reviewed the forecasting models and understood the key sensitivities, the Board are comfortable that the Group can continue to meet the loan covenants for the term of the loan.

Interest rate risk

Interest rate risk is the risk of loss through adverse movements in interest rates.

The Group is exposed to interest rate risks on its floating rate borrowings, although this is limited to an extent by the natural hedge provided by the interest earned on cash balances. The Group's policy is to continue to adopt a prudent approach to the management of net interest rate exposures and not to engage in speculative activity or enter into transactions unrelated to underlying commercial exposures.

Each one half percent increase in LIBOR results in additional finance costs of c. £80,000. However, each one half percent increase in base rate translates to additional revenues of c. £100,000, in respect of interest on cash.

Counterparty credit risk

Counterparty credit risk is the risk that counterparties fail to meet their obligations to the Group.

The Group's maximum exposure to credit risk is £26.6m (2009: £27.0m) being cash (including fiduciary funds of £11.2m (2009: £16.5m) and net trade receivables. The Group maintains a counterparty policy based on published rating criteria to manage the exposure to credit institutions and insurance providers. Counterparty limits and utilisation levels are reviewed regularly and reported to the Board and Solvency Committee.

The Group manages its cash balances in the form of deposits with prime banks in accordance with this investment and counterparty policy which is agreed by the Solvency Committee and, in respect of fiduciary funds, all relevant regulatory guidelines.

Regulatory capital requirements

The majority of the Group's activities are regulated by the FSA and the level of capital held by certain subsidiary companies is governed by specific solvency requirements. A failure to meet these requirements could lead to the FSA levying financial or other penalties on the Group.

The Board closely monitors the quantity and quality of capital in the regulated subsidiaries and can report that all regulated subsidiaries have maintained the required levels throughout the year.

4. Critical accounting estimates and judgements

In the application of the Group's accounting policies the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historic experience and other factors that are considered to be relevant and are reviewed on an ongoing basis. Actual results may differ from these estimates.

Key sources of estimation uncertainty

The Directors have considered the key assumptions used to estimate the Group's assets and liabilities as at the balance sheet date, and believe these assumptions to be entirely appropriate. The estimates and judgements most likely to have a significant effect are in the following areas:

Goodwill and impairment

The Group performs annual impairment tests, to verify whether goodwill and other assets that have indefinite useful lives have suffered any impairment, and all other assets are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the asset exceeds its recoverable amount. Impairment testing requires a number of assumptions to be made about future cash-flows, including estimating a post-tax discount rate.

Intangible assets

When new entities are acquired by the Group, the client books of those acquisitions are valued using a discounted cash-flow methodology. There are significant judgements involved in estimating the assumptions underlying these calculations: most notably the size and timing of the relevant cash-flows and the applicable discount rate. These assets are capitalised and then amortised over the expected useful economic life of the book; the life of these assets is based on the expected retention rate of the clients.

Share-based payments

Various assumptions are required in order to calculate the charge for the year; for option based awards, these assumptions are then applied to option pricing models. The key assumptions relate to the future performance of the Group, the number of employees likely to remain employed for the duration of the scheme and the volatility of the Group's share price. These assumptions are shown in Note 18.

Deferred consideration

When new entities are acquired by the Group, it is common for part of the purchase consideration to be deferred and contingent on future events. Estimates are required in respect of the amount of deferred contingent consideration, which is determined according to formulae agreed at the time of the business combination, and normally related to the projected future revenues of the acquired business. The Directors review these estimates at each balance Sheet date. At 30 September 2010 the Group has outstanding deferred consideration payable amounting to £840,000 (2009: £8,643,000) of which £nil (2009: £2,808,000) was contingent on the results of the acquired business.

5. Segmental Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board, which is responsible for allocating resources, assessing performance of the operating segments and making strategic decisions. Further information about each operating segment can be found in the Operating and Financial Review on pages 2 to 4.

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

It is not practicable to separately identify the investment revenues, finance costs and income tax credit for each of the segments. Accordingly, consolidated figures have been presented.

The amounts provided to the Board with respect to total assets and liabilities are measured in a manner consistent with that of the financial statements. These assets and liabilities are allocated based on the operations of the segment.

6. Goodwill

Adjustments relate to the revaluation of the Group's estimate of contingent consideration due on acquired businesses.

Impairment tests for goodwill

Goodwill has been allocated to the Group's cash generating units (CGUs) identified according to the business segment. 

No impairment has arisen during the year.

Key assumptions used in value in use calculations

The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five year period. Cash flows beyond the five year period are extrapolated using the following estimated rates.

1 Average growth rate used to extrapolate cash flows beyond 5 years (2009: 6 years). The growth rate is in line with the expected average UK economy long term growth rate

2 Post-tax discount rate applied to the cash flow projections

The budgeted growth in trading profits is determined by management based on past experience and its expectation for the market development. The discount rates used are post-tax and reflect specific risks relevant to the Group.

The Directors are required to disclose where a resulting possible change in assumption would give rise to an impairment. In relation to the Insurance CGU, a weighted average revenue growth rate of 5.22% has been assumed for the first 5 years. If this growth rate were to fall to 4.00%, an impairment would occur.

7. Intangible assets

8. Property, plant and equipment

9. Available for sale investments

10. Trade and other receivables

All trade and other receivables are current.

Movements on the Group's provision for impairment are as follows:

The following table sets out the aged profile of trade receivables. The Group does not hold any collateral over these balances.

11. Cash and cash equivalents

Fiduciary cash comprises client money held in statutory or non-statutory trust accounts.

The credit quality of cash at bank can be assessed by reference to external credit ratings, where available, or to historical information about counterparty default rates.

1 Royal Bank of Scotland plc, Barclays Bank plc, Lloyds Banking Group plc and Close Brothers Limited

12. Trade and other payables

Finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

13. Derivative financial instruments

The credit quality of derivative financial assets can be assessed by reference to external credit ratings, where available, or to historical information about counterparty default rates:

The Group settled the interest rate swap in the year. The notional principal amount of outstanding interest rate swap contracts at 30 September 2010 was £nil (30 September 2009: £10m). The fixed interest rate implicit in the contract was 4.99%.

14. Financial instruments 

The Directors consider that the carrying value of financial instruments approximate fair value.

The trade and other receivables are due from a number of sources and therefore the exposure to any one single party is considered low.

The tables below set out the contractual cash flows, including interest, attached to the Group's financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities, based on the earliest date on which the Group can be required to pay.

The Group has adopted the amendment to IFRS7 requiring additional categorisation of the Group's financial assets and liabilities held at fair value by the following valuation methodology:

·; Level 1: fair value derived from quoted prices in active markets for identical assets or liabilities

·; Level 2: fair value derived from observable inputs other than quoted prices included in level 1

·; Level 3: fair value derived from inputs for the asset or liability that are not based on observable market data

Movements in the year for financial instruments measured using level 3 valuation methods are presented below:

15. Provisions

These can be analysed as follows:

Non-current provisions relate to certain clawback and other provisions.

The short-term employee benefits provision relates to the cost of holidays due to staff but not taken. Clawback provisions are in respect of potential repayment of commission received on indemnity terms.

The Group reorganisation and rationalisation provision relates to costs expected to be incurred as a result of combining and restructuring operations. These costs are not associated with the ongoing activities of the Group.

Other provisions relate to potential client redress and dilapidations on various leased properties.

16. Deferred income tax assets and liabilities

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities. The offset amounts are as follows: