Half Yearly Results

PRESS RELEASE

Charles Taylor plc

Announcement of results for six months ended 30 June 2015

Consolidated financial highlights

For the six months ended 30 June 2015

Notes:

Movements are calculated using unrounded numbers so minor rounding differences may exist.

1. The adjusted figures exclude the following:

2. Adjusted EPS figures have an adjustment applied to share capital to allow for the full effect of the Rights Issue in both H1 2015 and 2014.

3. 2014 figures rebased to allow for the increased shares in circulation following the Rights Issue in April 2015.

"Charles Taylor has made progress in the first half of 2015. We completed a successful Rights Issue and have delivered on numerous significant initiatives in the first half year."

David Marock

Group Chief Executive Officer

Business highlights

· Strong growth in revenue to £69.1m (2014: £56.8m)

· Increased statutory profit before tax of £5.3m (2014: £4.1m) and adjusted profit before tax of £5.9m (2014: £5.2m)

· Substantial progress in delivering growth strategy

· Successful Rights Issue in April 2015, raised £28.9m after expenses.

· Interim dividend increased to 3.00p (2014:2.85p3)

Group Chief Executive Officer's Review

Charles Taylor has made substantial progress in the first half of 2015. We completed a successful Rights Issue and delivered on numerous important initiatives in the first half year. These include the launch of the Group's Lloyd's managing agency, the acquisition of an international life insurer, signing an agreement to acquire a significant stake in an insurance software specialist, the expansion of our international office network and the appointment of key staff and senior loss adjusters.

The Group delivered strong growth in revenue, as the benefits of previously announced growth initiatives started to flow through, combined with solid growth in adjusted profit before tax. We benefited from our broad diversification of operations across the global insurance market. A strong performance from our Insurance Support Services business and steady progress by our Management Services and Owned Insurance Companies businesses have more than compensated for the weaker trading conditions experienced by the Adjusting Services business.

Group revenue for the first six months of 2015 increased to £69.1m (2014: £56.8m). Statutory profit before tax of £5.3m (2014: £4.1m) and adjusted profit before tax of £5.9m (2014: £5.2m) were both up on the prior half year. Earnings per share figures have been restated to reflect the Rights Issue, undertaken in April 2015, which significantly increased the Group's number of shares in circulation. Adjusted earnings per share increased to 8.00p (2014: 7.25p) 1, 2 and statutory earnings per share were up to 7.84p (2014: 7.73p)3.

Professional Services

The Group's core Professional Services businesses performed well overall. An increased contribution from the Insurance Support Services business resulted in a more equal balance in performance across the three Professional Services businesses:

· Management Services performed steadily in the first half after a period of sustained growth. The mutuals managed by the Group performed well overall on behalf of their members.

· Adjusting Services had a challenging first half, with the market-wide reduction in complex claims continuing. Despite this, the business maintained a good overall volume of claims and its top line benefited from a full half year contribution from Knowles, foreign exchange movements, along with the recruitment and deployment of various senior adjusters. Revenue growth was offset by increased operating costs associated with investing in new offices and senior adjusters along with the strengthening of the business' operations and foreign exchange movements.

· Insurance Support Services delivered a strong first half. The core business delivered a steady performance, supported by a strongly increased contribution from the new business initiatives introduced under the Group's growth strategy in recent years.

Owned Insurance Companies

The Owned Insurance Companies business performed steadily overall. The life insurance companies continued to make a positive contribution to the Group, including the benefits that are anticipated to flow from the most recent acquisitions. At the same time, we continue to explore options for the Group's non-life insurance companies. Revenue increased to £2.5m (2014: £2.0m) and operating segment profit was up to £0.2m (2014: £0.0m).

Group results H1 2015

Professional Services performance H1 2015

Owned Insurance Companies performance H1 2015

Revenue figures are stated before inter-segment eliminations

Rights Issue and agreement to acquire a stake in Fadata

We have been successfully executing our growth strategy since 2011. As a result, we are in a position to be able to consider an increased number and range of potential acquisition, joint venture and business investment opportunities. In order to take advantage of these, we undertook a Rights Issue in April 2015, raising £28.9m after expenses.

We are evaluating a number of opportunities. As previously stated, such opportunities need to be a good strategic, cultural and financial fit with the Group's existing businesses. The first of these to be announced, has been our agreement with The Riverside Company, a global private equity firm, to acquire collectively a majority interest in Fadata, a specialist provider of software solutions to the global insurance industry. We are excited by the potential of this joint venture, which will both support the growth of Fadata's software business globally and further expand our own technology capabilities and service offering for our insurance-related clients worldwide. This is expected to complete by October 2015.

Management Services

Our Management Services business performed steadily after a period of sustained growth, achieving a good increase in revenue in H1 2015 with operating segment profit in line with the prior year. The mutuals 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 positive results for the club. At the February 2015 renewal, the club achieved a 'breakeven' underwriting result, consistent with its aim of providing cover to the mutual's members 'at cost'. Tonnage increased by 3% to 135m gross tons from the 2014 renewal and free reserves increased by 3% to $380m.

We have supported the club to progress a number of initiatives during H1:

· The Singapore War Risks Mutual, a class within Standard Asia and Singapore's first war risks mutual insurer, commenced underwriting on 20 February 2015.

· Syndicate 1884 at Lloyd's began underwriting on 1 April 2015 offering a range of fixed premium marine and energy covers to club members and other insureds.

These initiatives are intended to diversify the club's business and income streams and add further to the financial strength of the club.

Acquired the management contract of The Strike Club: In early 2015, we were appointed by the Strike Club to manage the club, which 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. To facilitate this appointment, we acquired some of the previous independent manager's companies. We are preparing the club for Solvency II, the EU-wide capital requirements and risk management standards that are being introduced in January 2016.

Effectively managed of Offshore Pollution Liability Association (OPOL): We provide financial and administrative management support 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 mutual in H1 2015.

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. Ten new members have joined the mutual since the membership year commenced on 1 October 2014. The projected payroll of the member companies is expected to reach US$4b this membership year. Safeshore, the new Longshore workers' compensation program for smaller employers, backed by Signal Mutual and launched in October last year, is delivering a good performance as well.

Achieved 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 secured a new Canadian member and delivered a steady performance in H1 2015 under our management.

Adjusting Services

Adjusting Services had a challenging first half, with the market-wide reduction in complex claims continuing. The business maintained a good overall volume of claims and its top line benefited from a full half year contribution from Knowles, foreign exchange movements, along with the recruitment and deployment of various senior adjusters. Revenue growth was offset by increased operating costs associated with investing in new offices and senior adjusters along with the strengthening of the business' operations and foreign exchange movements. The further expansion in our network and teams positions the business well to benefit from an upturn in market-wide complex claims.

Investing for growth: We have further extended our office network, recruited senior adjusters with strong market followings to drive further business growth and strengthened the operational capability of the business in the first half of 2015.

Effective succession planning: We are pleased to announce that Damian Ely will be appointed as Chief Executive Officer of the Adjusting Services business on 1 January 2016, in succession to Arthur Clarke, who will retire from the company on 31 December 2015. Damian has long experience of working in the international insurance markets. He joined Charles Taylor in 1988 and is currently the Group Chief Operating Officer and an Executive Director of Charles Taylor. He originally joined Charles Taylor's Management Services - Americas business and then spent ten years based in the US, latterly as Chief Operating Officer - Americas. Damian will continue as an Executive Director of Charles Taylor.

We would like to thank Arthur for his contribution to Charles Taylor. During his tenure, Adjusting Services has grown from an operation with a turnover of just £18m in 2002 to today's global adjusting business with revenues of £56m in 2014. He has also driven the significant expansion of our Adjusting operations which has seen offices opened in every continent and the loss adjusting headcount more than double.

Insurance Support Services

The Insurance Support Services business had a strong first half. The core business delivered a steady performance, supported by a significantly increased contribution from the new business initiatives introduced under the Group's growth strategy.

Insurance Support Services - non-life business

The non-life Insurance Support Services business includes Charles Taylor Insurance Services (CTIS), Charles Taylor Managing Agency (CTMA) and our investment management, captive management, risk consulting and specialty risks business lines.

Increased traction for Charles Taylor Insurance Services (CTIS): CTIS provides outsourced back office insurance services to the Lloyd's, London and international insurance markets. The business has built on the improved performance reported in 2014 and delivered a steady overall performance in H1, with a number of services gaining greater traction in the market. These include increases in business volume for our static claims and elective claims management services. We have supported a leading European acquirer of run-off insurance companies by providing run-off claims management services for their portfolio of insurance companies. CTIS is also participating in a market-wide initiative to integrate claims management software services into Lloyd's Electronic Claims Files (ECF).

Increased contribution from other non-life business lines: The Group's other non-life insurance business lines performed well overall in the first half. It is particularly pleasing to see that our investments in many non-life growth initiatives are now making a meaningful contribution to the business' bottom line. Charles Taylor Managing Agency (CTMA), the Group's Lloyd's turn-key managing agency, performed well. It has been appointed by its first syndicate, Syndicate 1884, which commenced underwriting in April 2015. We intend that CTMA will offer its syndicate management capabilities to other Lloyd's syndicates in the future. Charles Taylor Third Party Administration (CTTPA) also had a good first half and received invitations to tender for additional workers' compensation claims handling mandates. Our Risk Consulting business is integrating the small risk business acquired at the end of 2014 in order to build our presence in NorthAmerica.

Focus on insurance technology services: Charles Taylor delivers a wide range of specialist and bespoke technology solutions, along with systems development and implementation support to numerous insurance-related clients. These include the technology related services provided by Charles Taylor KnowledgeCenter and CTIS. We are driving forward the development of the Group's insurance technology business and have appointed a senior executive in H1 to lead the development of the Group's insurance technology business strategy.

Insurance Support Services - Life business

The Group's international life run-off servicing business based in the Isle of Man performed well. We are actively marketing our new insurance fund services business, launched to provide specialised fund services for life companies' unitised funds and portfolio bonds, to prospective clients.

Owned Insurance Companies

The insurance companies business performed steadily overall.

Focused on integrating life businesses

The life business had a good first half. In line with our business strategy, we are focused on seeking acquisition opportunities in the UK international life insurance sector. In H1, we made good progress in integrating the former Nordea Life and Pension and Scottish Widows International Life businesses and anticipate that we will receive court approval to transfer both businesses into our wholly owned life insurance business by the year end.

Reduced exposure to non-life Run-off

The performance of the Group's non-life insurance companies was up in H1. We have clearly stated our intention to reduce our exposure to the non-life insurance run-off sector. We are exploring options for our non-life insurance companies to do so.

Other business strategy initiatives

In H1, we undertook a group-wide staff engagement survey. This reported that nine out of ten Charles Taylor staff would recommend the Group as a great place to work. This is an excellent result, which compares particularly well with other organisations and demonstrates that the overwhelming majority of staff are fully committed to the businesses and the work we deliver for our clients. We also launched a Learning and Development core curriculum, to put more emphasis on training and personal development of the Group's staff.

Governance update

Rupert Robson, Chairman of the Company, will retire from the role on 28 August 2015, following the release of the Company's half year results. Edward Creasy, who has been an independent Non-executive Director of Charles Taylor since 1 January 2014, will succeed Rupert as Chairman. Edward's appointment follows a thorough search process which was led by Gill Rider, Senior Independent Non-Executive Director.

Edward Creasy has had a long career in the London Market insurance industry and was formerly Chief Executive Officer of Kiln plc and latterly Chairman of the Kiln Group from 2001 to 2010. He currently holds a various other senior non-executive directorships. He is a Member of the Council of Lloyd's Market Supervision and Review Committee and was previously a Director of the Lloyd's Franchise Board.

The Board would like to thank Rupert for his contribution to the progress and development of Charles Taylor during his time as Chairman.

Current trading and outlook

The Group has had a positive start to the second half of 2015. Management Services is performing well and Insurance Support Services is building on its strong first half. Adjusting Services is receiving a steady volume of claims and is well placed to capitalise when the volume of large and complex insured claims in the market returns to the long-term norm. The Owned Insurance Companies business is well positioned to benefit from its recent life company acquisitions.

We have made significant progress in delivering our growth strategy in the first half with numerous initiatives taken forward, including the acquisition of Scottish Widows International, reaching an agreement to invest in Fadata and the launch of the Group's Lloyd's turn-key managing agent. The Group completed a successful Rights Issue, which has given us the resources and flexibility to drive forward our strategy. We are currently evaluating a number of acquisition, joint venture and business investment opportunities which have the potential to be a good strategic, cultural and financial fit with the Group's existing businesses.

We are very positive about the future prospects of Charles Taylor. The potential for growth in the professional services delivered by the Group to global insurance markets, along with the life company acquisition market, is high. We are successfully executing our strategy for growth and are building on a significant number of initiatives which we believe will deliver further growth for the benefit of shareholders, clients and our highly professional team of people.

David Marock

Group Chief Executive Officer

27 August 2015

Group Chief Financial Officer's Report

ResultsThe results for the period are summarised in the following table and are explained in more detail in the Group Chief Executive Officer's Review.

Note: Small rounding differences can arise in the total amounts above.

The adjusted financial measures exclude acquired customer relationship intangible charges, non-recurring items and non-controlling interests as set out in the table below.

The full impact of the Rights Issue has been included in the number of shares used in the adjusted EPS calculations for both 2015 and 2014.

Net debt, cash flow and financing

Net cash at the half year was £1.8m, which includes the net proceeds from the Rights Issue, £28.9m, compares to net debt of £21.9m at June 2014. The movement also reflects an increase in working capital following the launch of CTMA and continued investment in IT systems during the period. We have benefited again from the advance payment of the annual fee by one of our Management Services clients which reduced debt from the year-end figure.

At 30 June 2015, our 12-month rolling average net debt was £18.2m, down from £23.7m at 30 June 2014. We continue to focus on managing our debt and in particular our working capital while investing for the future.

Retirement benefit scheme

The retirement benefit obligation in the Group balance sheet at 30 June 2015 was £36.2m, compared to £41.5m at the year end and £31.4m at 30 June 2014. The decrease in obligation since December 2014 is primarily a result of changes in financial assumptions arising from movements in corporate bond yields.

Dividends

An interim dividend of 3.00p per share (2014: 2.85p3) has been declared and will be paid on 27 November 2015 to shareholders on the register on 16 October 2015.

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 12.1%, (2014: 14.2%). The movement in the effective tax rate reflects the profit mix across different taxation jurisdictions.

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 2015 fall into the three categories of business, financial, and regulatory compliance risks. These remain unchanged from those explained in the 2014 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 continuing process for identifying, evaluating and managing the principal risks which the Group faces.

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.

Mark KeoghGroup Chief Financial Officer27 August 2015

 Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

Condensed consolidated balance sheet

The financial statements were approved by the board of directors and authorised for issue on 27 August 2015.

Mark Keogh

Director

27 August 2015

Condensed consolidated cash flow statement

Condensed consolidated statement of changes in equity

Own shares comprise 571,990 (30 June 2014: 251,905; 31 December 2014: 299,123) shares held by the Charles Taylor Employee Share Ownership Plan Trust ("ESOP"). The market value of these shares was £1,258,378 (30 June 2014: £579,382; 31 December 2014: £747,808) 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 2014 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, the Group has adopted for the first time IFRIC 21 Levies. IFRIC 21 addresses the issue as to when to recognise a liability to pay a levy imposed by a government. The interpretation defines a levy, and specifies that the obligating event that gives rise to the liability is the activity that triggers the payment of the levy, as identified by legislation. The directors do not consider that any change to the financial statements would be required as a result of this change in accounting policy. 

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, non marine and marine (including average) adjusting.

· Insurance Support Services business - non-life and life insurance support services, including Lloyds' turn-key managing agent, captive management, investment management and risk management.

· Insurers in Run-off business - non-life and life insurance companies closed to new business.

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 items. Reconciliations of segmental results to the Group profit before tax are set out below.

Information about major customers

The Group derived revenue of £19.2m (to 30 June 2014: £15.5m, full year 2014: £35.4m) from one external customer which accounts for more than 10% of Group revenue, and is included within both the Management Services and Insurance Support Services businesses.

1 Excluding deferred tax.

4. Income tax expense

Tax for the six month period is charged at 12.1% (to 30 June 2014: 14.2%) 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

The rebased dividend above reflects the impact of the Rights Issue. The interim dividend of 3.00p per share was approved by the Board on 27 August 2015 and has not been included as a liability as at 30 June 2015.

6. Earnings per share

Earnings per ordinary share have been calculated by dividing the profit on ordinary activities after taxation and non-controlling interests for each period by the weighted average number of shares in issue. 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:

* The rebase adjustment allows for the effect of the Rights Issue, had it taken place on the last day of each of the respective periods.

7. Goodwill

The increase in goodwill from £42.2m at 31 December 2014 to £45.4m at 30 June 2015 was due to £3.4m goodwill arising on the acquisitions of CTMAH (£2.9m) and LCL Assurance Limited (£0.5m) (see note 9), offset by £0.2m of expense as a result of foreign exchange differences.

8. Other intangible assets

During the period we recognised an additional £1.4m of customer relationships as part of the acquisition of Vesta Group (see note 9) and capitalised a further £4.6m of IT assets. 

9. Acquisition of subsidiaries

Vesta Group

On 26 February 2015 the Group acquired the entire issued share capital of SC Management SAM, SC Services (Monaco) SARL and S.C. Management (Luxembourg) S.A. (collectively "Vesta "). Vesta provides management services to the Strike Club, which is a marine mutual that insures ship owners and ship charterers against delays due to strikes and other incidents.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

Almond One Limited (renamed Charles Taylor Managing Agency Holdings Limited ("CTMAH") and Almond Two Limited

On 19 February 2015, the Group acquired 50.1% of the issued share capital of CTMAH and 100% of the issued share capital of Almond Two Limited from the Standard Club. These acquisitions have enabled the Group to provide managing agency services to new syndicates at Lloyd's on a "turnkey" basis.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

LCL Assurance Limited

On 1 April 2015, the Group acquired 100% of the issued share capital of Scottish Widows International Limited, a Jersey registered life insurer which is closed to new business. Existing business comprises personalised and unit linked life insurance products primarily for UK residents. Scottish Widows International Limited was renamed LCL Assurance Limited ("LCLAL") on 1 April 2015 immediately after acquisition. On 2 July 2015, LCLAL was redomiciled to the Isle of Man.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below:

If the three acquisitions had been completed on the first day of the financial year the combined revenue for the Group and statutory profit before tax would have been £72.3m and £4.3m respectively.

10. Bank overdrafts and loans

Loans raised during the period amounted to £12.6m (to 30 June 2014: £18.0m, full year 2014: £31.1m) and repayments on loans amounted to £43.1m (to 30 June 2014: £28.6m, full year 2014: £29.1m). As noted in last year's annual audited financial statements, the Group's senior banking facilities were renewed on 7 November 2013 for a five-year term.

11. Share capital

Share capital as at 30 June 2015 amounted to £664,000 (at 30 June 2014: £427,000, at 31 December 2014: £434,000). 22,958,160 1p shares were issued during the period (to 30 June 2014: 1,193,197, full year 2014: 1,886,667), including 19,722,762 shares as part of a Rights Issue by way of an offer of three shares for every seven held. The consideration above 1p per share is reflected in the share premium account and amounts to £35,730,000 (to 30 June 2014: £2,555,000, full year 2014: £2,946,000).

12. Notes to the condensed consolidated cash flow statement