Interim Results

5th Jun 2008 07:00



05 June 2008

Jelf Group plc

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

Interim Results for the six months ended 31 March 2008

JELF ANNOUNCES STRONG PERFORMANCE AND CONTINUED GROWTH

Jelf Group plc, a leading independent corporate consultancy providing advice on insurance, healthcare, employee benefits, commercial finance and wealth management, today announces its interim results for the six months ended 31 March 2008. These interim results have been prepared for the first time in accordance with International Financial Reporting Standards (IFRS).

FINANCIAL HIGHLIGHTS

49% growth in Revenue to £25.0m (2007: £16.8m*)

85% growth in EBITDA** to £3.1m (2007: £1.7m*)

24% growth in EBITDA** margin to 12.4% (2007: 10.0%*)

Organic revenue growth of +16.3% in core areas of Insurance and Healthcare (2007: +3.5%)

Cash generated from operations of £6.5m (2007: £2.4m) 

Underlying*** diluted Earnings per Share (EPS) 5.6p (2007: 3.9p*)

£45m (net) capital raised during the period

Insurance Gross Written Premium ("GWP")increased to approximately £240m per annum

Private Medical Insurance GWP c. £150m per annum

*  restated in accordance with IFRS

**  operating profit before deduction of Depreciation of tangible fixed assets and Amortisation of intangible fixed assets

***  Before deduction of Amortisation of intangible fixed assets. Basic EPS is 1.9pps (2.3pps for 6 months ended 31/03/07)

OPERATING HIGHLIGHTS

Growth continues, both organically and through acquisitions. 

Clarke Roxburgh acquired in April to extend footprint to West Midlands

Manson Group purchased in January to create hub for growth in North-West

Argyll Group purchased in April to create hub for growth in South-East

Four smaller brokerages also purchased

Industry consolidation continuing to drive insurance markets 

Substantial investment in infrastructure to support growth

Strong performance in key month of April

Alex Alway, Chief Executive, said:

"Our continued growth and strong performance is testament to a successful strategy implemented by first-class teams across all areas of the business. Market conditions remain competitive but the growth in our revenues is a credit to our strong business proposition"  Enquiries:

Jelf Group plc

Alex Alway, Group Chief Executive  01454 272713

Rose Clark, Director of Finance  01454 272912

Cenkos Securities plc

Ian Soanes 0207 397 8924

Pelham Public Relations

Polly Fergusson  0207 743 6362

Damian Beeley 0203 178 2253

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 35,000 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 so that it will be in a position to acquire and integrate acquisitions within its core markets. These acquisitions will supplement existing operations, adding high quality (primarily corporate) clients which can be utilised by the enlarged Group. The acquisitions made since the start of this period are as follows:

January 2008: Manson Insurance Group - insurance, healthcare & financial services intermediary, based in Manchester

January 2008: Bartlett Davies Bicks - insurance intermediary, based in Devon

January 2008: Carter & Co Risk Management - insurance intermediary, based in Devon

February 2008: Bob Gee - insurance intermediary, based in Devon

April 2008: Argyll Insurance Group - insurance & financial services intermediary, based in Sussex

April 2008: Clarke Roxburgh - insurance & financial services intermediary, based in the West Midlands

May 2008: Godfrey Moore - insurance intermediary, based in Reading

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

  Group Chief Executive's statement

Our strategy continues to be one of expanding the business through both the acquisition of well run brokerages and by offering a wider range of services to new and existing clients. The broad range of services which we offer to owner-managed businesses will enable the Group to deliver strong results within a challenging economic environment. The outlook for the Group remains positive for the rest of 2008.

We have successfully integrated the previous year's key acquisitions, SPS and Lampier, into the Group. Jelf has also acquired a number of substantial insurance brokerages in 2008 namely Manson Group (January), Argyll Group (April) and Clarke Roxburgh (April) which will enhance our insurance offering. The transition of these businesses into the Group is going to plan and the beneficial effects of these acquisitions will be evident in the full year results. 

Underlying organic revenue growth is +4.3% (2007: +24%). The highlights of our organic growth include Insurance (+13%) and Healthcare (+33%) which, together, produce growth of +16.3% (2007: +3.5%) emphasising strong new business and the benefit of increased scale. Wealth management remained a strong contributor in the current difficult investment climate with a small reduction of -4%. The overall organic growth figure is affected by the phasing of the employee benefit business. At this point of time the Group has a strong pipeline of prospects in this area, which it is looking to complete on before the year-end.

The results of the Group are always 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. I am pleased to report that trading in April across the Group is in line with expectations overall.

The trend towards consolidation has, if anything, accelerated over the past six months due to a combination of available capital and changes in the CGT regime. Our acquisitions of smaller brokerages allow the Group to take advantage of economies of scale and cross-selling opportunities. The key to this activity is to build upon the relationships that already exist with clients. The significant capital raising completed in February of this year, in combination with the Group's ability to run an advice-based, multi-channel distribution business, will enable us to extract greater value than others in this sector. 

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.

The results for the first half of the Group's financial year give us confidence that we will deliver the forecast results for 2008 and that opportunity for further expansion will continue to be available.

  Chairman's Statement

I am delighted to report another set of strong results for the Group. Our organic growth continues, with Insurance, Healthcare and Commercial Finance producing notable successes, and we have made some excellent acquisitions.

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

Financial performance

In the six-month period ending 31 March 2008, the Group increased its turnover by 49.3% to £25.0m (2007: £16.8m*); EBITDA increased by 85% to £3.1m (2007:£1.7m*).

Underlying profit margin (operating margin prior to charging Amortisation) was 11.2% (2007: 8.4%*) 

* restated in accordance with IFRS

Cash generated from operations was £6.5m. The consideration payments for acquisitions made in the past six months amounted to £12.1m. Performance-based deferred consideration payments on previous acquisitions amounted to £1m for the period.

Total current bank debt is £23.5m. This increased from £20.3m as at 30 September 2007, with additional borrowings being used to help fund acquisitions made in the current financial year.

We continue to maintain a strong capital structure, raising £45m (net) in new equity in February 2008. This enabled us to further strengthen and diversify our investor base, and we are delighted to welcome 3i Quoted Private Equity Limited and our other new shareholders to the Jelf Group.

Organisational development

We continue to invest in the Group's infrastructure and core areas such as human resources, finance, compliance and marketing. This infrastructure investment in technology and front-line support will always be a priority as the Group has a declared strategy of ensuring that expansion takes place in a controlled environment and that new acquisitions are effectively integrated.

The Acturis IT system has been rolled out further across the Insurance business and we are also in the process of migrating the core Healthcare business onto the same system. 

The Group's intranet has now been expanded to the majority of our locations and forms an integral part of our programme of responses to FSA initiatives such as Treating Customers Fairly.

Business Development

Insurance

The provision of insurance advice for the mid-to-large corporate market, where we have a small presence, continues to be competitive due to a mixture of soft rating and competition. The smaller owner-managed sector, where Jelf specialises, is less competitive and we are seeing some rate changes here, but not enough to signal a turning point in the market. We anticipate that this trading environment for our Insurance businesses will continue through 2008 and into the first half of 2009.

Despite these mixed market conditions, our client-focused approach has enabled us to meet retention targets and to add value for clients. New business efforts and economies of scale have underpinned our +13% organic growth versus last year. 

Lampier

Completion of the Lampier acquisition in July 2007 has substantially enhanced the Group's presence in the Bristol insurance market. Provision of the full range of Group services to Lampier clients has been underway for several months and early indications are very encouraging with some very good new business sales.

Manson Group

This was our first significant move outside our previously defined geographical footprint of Southern England & Wales. The Manson team has expertise across all the major disciplines and we intend to use this new base in the North West as a hub for expansion and additional acquisitions in the region. 

Argyll Group and Clarke Roxburgh

These two businesses were purchased in April after the half year date. They have further increased our presence in the insurance market, where we now place approximately £240m GWP annually.

The addition of Clarke Roxburgh extends our client footprint into the West Midlands; Argyll Group provides us with a new base in the South East which, as with Manson Group in the North West, we intend to use as a hub for further expansion and acquisitions in this region.

Healthcare

The private medical insurance market continues to enjoy a hard market due to inflationary pressures within the sector.

The establishment of a new business team in the Lampier office is producing good early results. Our new business and cross-selling efforts, combined with the hard market and the Group's increasing scale, underpin the +33% organic growth. The results of the Healthcare business are weighted towards the second half of the financial year and we are pleased to announce that this business has shown strong performance in the key month of April. 

The Group now places approximately £150m GWP annually in the private medical insurance market.

Employee Benefits 

The market for advice on employee benefits remains buoyant and the Group continues to enjoy a strong competitive position in this area. The nature of the Employee Benefits business is that there is a longer lead time in the purchase of the services. This has resulted in a different profile to this year's income with revenues down 15% versus last year's very strong first half. We have a good pipeline of prospects and anticipate an improvement in the second half.

In conjunction with our partners, we have developed a market-leading flexible benefits offering ("my reward") which is proving to be popular with clients.

 

Wealth Management

The market for independent advice on pure wealth management is difficult in the current economic environment, although to date the main area impacted has been mortgage-related advice which represents only around 2% of the Group's revenue. 

We have launched a business development campaign around business assurance which was recently highlighted in the Mail on Sunday. This has already shown good results and will be a primary focus throughout 2008.

The Group now has in excess of £200m (2007: £125m) in third-party funds on Wrap programmes producing renewal income. In addition we have over £1 billion of client funds under advice in old style product structures.

The Wealth Management business was accredited with Chartered status in the first quarter of 2008.

Acquisitions

The active programme of acquisitions has continued through this half year with four completed transactions prior to the half-year and another three prior to this announcement.

The Group has a healthy pipeline of planned acquisitions. Our strategy of multi-channel distribution, with a strong geographical focus on chosen markets, has enabled us to avoid overpaying when acquiring due to the number of targets available and our strong reputation and local infrastructure. As in the past, on a number of occasions we have curtailed preliminary discussions if the price being asked is deemed excessive. We will only complete acquisitions if they add shareholder value.

People

I would like to extend a warm welcome to the management and employees of the businesses acquired over this financial year.

We have continued to recruit and motivate key employees by utilising Employee Benefit Trust and share option awards, whilst strengthening the senior management team with appointments and promotions.

This year saw the launch of our first Save As You Earn share scheme which was taken up by over 250 employees.

Throughout the year we have been running a full programme of development training for staff and management.

Our employees and management continue to deliver value to our clients, shareholders and our strategic partners in the market. They have delivered a substantial uplift in the value of the Group and I would like to again take this opportunity to thank them for their dedication and support. They remain our key asset.

  Plc Board ("the Board")

I was particularly pleased to welcome Bruce Carnegie-Brown as a Non-Executive Director and also Jon Manson as an Executive Director, both of whom were appointed to the Board in the first quarter of 2008. I would also like to put on record our thanks to Michael King who retired from the Board in February 2008.

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 customer service and client focus.

David Walker

Group Chairman

5th June 2008

  Consolidated Balance Sheet

As at 31 March 2008 

				Note	31 Mar 2008 (unaudited)	31 Mar 2007 (restated and unaudited)	30 Sept 2007 (restated and unaudited)
					£'000	£'000	£'000
Non-current assets
Goodwill					46,086	19,291	33,246
Intangible assets					37,171	15,614	26,812
Property, plant and equipment					2,471	2,162	2,318
Available for sale investments					143	45	131
					85,871	37,112	62,507
Current assets
Trade and other receivables					10,014	9,397	11,242
Cash and cash equivalents					32,538	7,369	9,270
Derivative financial instruments					61	-	-
					42,613	16,766	20,512
Total assets					128,484	53,878	83,019
Current liabilities
Trade and other payables					(16,577)	(11,618)	(14,937)
Deferred consideration					(10,354)	(4,493)	(4,894)
Income tax liabilities					(972)	(1,841)	(3,275)
					(27,903)	(17,952)	(23,106)
Net current assets/(liabilities)					14,710	(1,186)	(2,594)
Non-current liabilities
Long-term provisions					(346)	(25)	(130)
Deferred income tax liability					(11,214)	(4,898)	(8,330)
Trade and other payables					(181)	(16)	(29)
Deferred consideration					(6,144)	(3,206)	(8,785)
Bank overdrafts and loans					(10,144)	(9,801)	(20,011)
					(28,029)	(17,946)	(37,285)
Total liabilities					(55,932)	(35,898)	(60,391)
Net assets					72,552	17,980	22,628
Equity
Share capital				5,6	498	246	257
Share premium				6	65,617	14,105	16,247
Other reserves				6	(387)	(5)	(80)
Retained earnings				6	6,824	3,634	6,204
Total equity					72,552	17,980	22,628

  Consolidated income statement

For the six months ended 31 March 2008

						Note	Six months ended 31 Mar 2008 (unaudited)	Six months ended 31 Mar 2007 (restated and unaudited)	Year  ended 30 Sept 2007 (restated and unaudited)
							£'000	£'000	£'000
Revenue							25,024	16,759	39,694
Cost of Sales							(2,036)	(1,615)	(2,554)
Gross Profit							22,988	15,144	37,140
Administrative expenses							(21,399)	(14,138)	(32,123)
Operating profit							1,589	1,006	5,017
Operating profit consists of:
Earnings before interest, taxation, depreciation and amortisation							3,110	1,680	7,155
Depreciation of tangible fixed assets							(317)	(283)	(586)
Amortisation of intangible fixed assets							(1,204)	(391)	(1,552)
Investment revenues							153	55	86
Finance costs							(1,004)	(274)	(906)
Profit before income tax							738	787	4,197
Income tax expense							(118)	(196)	(1,069)
Retained profit for the period							620	591	3,128
Earnings per share
Basic (pence)						4	2.0	2.4	12.6
Diluted (pence)						4	1.9	2.3	12.1
All results are derived from continuing operations

  Consolidated statement of recognised income and expense

For the six months ended 31 March 2008

						Six months ended 31 Mar 2008 (unaudited)	Six months ended 31 Mar 2007 (restated and unaudited)	Year  ended 30 Sept 2007 (restated and unaudited)
						£'000	£'000	£'000
Gains on cash flow hedges						61	-	-
Net income recognised directly in equity						61	-	-
Profit for the period						620	591	3,128
Total recognised income and expense for the period						681	591	3,128

  Consolidated cash flow statement

For the six months ended 31 March 2008

			Note	Six months ended  31 Mar 2008 (unaudited)	Six months ended  31 Mar 2007 (restated and unaudited)	Year  ended  30 Sept 2007 (restated and unaudited)
				£'000	£'000	£'000
Cash flows from operating activities			7
Cash generated from operations				6,471	2,426	8,965
Interest paid				(872)	(240)	(730)
Taxation paid				(3,146)	(100)	(322)
Net cash from operating activities				2,453	2,086	7,913
Cash flows from investing activities
Interest received				193	55	86
Proceeds on disposal of property, plant and equipment				-	528	656
Purchase of property, plant and equipment				(467)	(628)	(997)
Purchase of intangible assets				(174)	(17)	(166)
Purchase of own shares				(695)	(222)	(491)
Acquisition of subsidiaries and businesses				(12,135)	(5,855)	(19,670)
Disposal of subsidiaries and businesses				-	-	35
Net cash used in investing activities				(13,278)	(6,139)	(20,547)
Financing activities
Repayments of borrowings				(23,870)	-	(6,300)
Deferred consideration paid				(985)	(706)	(2,562)
Repayments of obligations under finance leases				-	(7)	(43)
New lease funding				-	-	45
Proceeds on issue of shares (net of expenses)				44,994	300	2,453
New bank loans raised				13,954	6,609	23,085
Net cash from financing activities				34,093	6,196	16,678
Net increase in cash and cash equivalents				23,268	2,143	4,044
Cash and cash equivalents at beginning of period				9,270	5,226	5,226
Cash and cash equivalents at end of period *				32,538	7,369	9,270

* Included within cash and cash equivalents is fiduciary cash of £12,837k (31 March 2007: £6,754k; 30 September 2007: £8,074k).

  

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 10.

These condensed interim financial statements do not comprise statutory accounts under the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 30 September 2007, as prepared under United Kingdom Generally Accepted Accounting Principles, were approved by the Board of Directors on 28 January 2008 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 International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and the AIM rules. 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.

These are the Group's first set of condensed financial statements under IFRS. The first full set of financial statements under IFRS will be for the year ending 30 September 2008.

The transition to IFRS has resulted in a number of changes in the reported financial statements, notes thereto and accounting principles compared to previous annual reports which were prepared under applicable United Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative information has been restated in accordance with IFRS.  Note 11 provides further details on the transition from UK GAAP to IFRS. The date of transition to IFRS was 1 October 2006 (transition date). Details of the accounting policies adopted by the Group under IFRS are disclosed in note 12.

 3. Segmental Reporting

The Directors have identified five business sectors: insurance, healthcare, employee benefits, commercial finance and wealth management. Business sector data includes an allocation of corporate costs to the 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.

Revenue
				Six months ended  31 Mar 2008 (unaudited)	Six months ended  31 Mar 2007 (restated and unaudited)	Year ended  30 Sept 2007 (restated and unaudited)
				£'000	£'000	£'000
Insurance				13,824	7,094	17,454
Healthcare				3,664	1,714	6,119
Employee benefits				3,024	3,552	7,391
Commercial finance				268	180	475
Wealth management				4,244	4,219	8,255
				25,024	16,759	39,694
Results
				Six months ended  31 Mar 2008 (unaudited)	Six months ended  31 Mar 2007 (restated and unaudited)	Year ended  30 Sept 2007 (restated and unaudited)
				£'000	£'000	£'000
Insurance				2,506	614	3,461
Healthcare				181	(192)	1,421
Employee benefits				152	693	911
Commercial finance				(47)	(14)	2
Wealth management				318	579	1,360
EBITDA				3,110	1,680	7,155
Depreciation of tangible fixed assets				(317)	(283)	(586)
Amortisation of intangible fixed assets				(1,204)	(391)	(1,552)
Investment revenues				153	55	86
Finance costs				(1,004)	(274)	(906)
Income tax expense				(118)	(196)	(1,069)
Profit for the period				620	591	3,128

  

Balance sheet
		31 Mar 2008 (unaudited)	31 Mar 2007 (restated and unaudited)	30 Sept 2007 (restated and unaudited)
		£'000	£'000	£'000
Segment assets
Insurance		61,559	11,351	24,179
Healthcare		25,999	19,059	34,056
Employee benefits		7,671	16,519	17,018
Commercial finance		181	(161)	(157)
Wealth management		15,060	7,182	7,398
Unallocated		18,014	(72)	525
		128,484	53,878	83,019
Segment liabilities
Insurance		(32,004)	(6,526)	(18,661)
Healthcare		(12,976)	(13,262)	(24,286)
Employee benefits		(3,476)	(11,198)	(12,128)
Commercial finance		(532)	(44)	(44)
Wealth management		(6,944)	(4,868)	(5,272)
		(55,932)	(35,898)	(60,391)
Other information
		Six months ended  31 Mar 2008 (unaudited)	Six months ended  31 Mar 2007 (restated and unaudited)	Year  ended  30 Sept 2007 (restated and unaudited)
		£'000	£'000	£'000
Capital additions
Insurance		67	236	424
Healthcare		154	91	163
Employee benefits		108	109	195
Commercial finance		-	4	7
Wealth management		204	205	367
		533	645	1,156
Depreciation
Insurance		143	103	214
Healthcare		36	33	68
Employee benefits		47	50	103
Commercial finance		3	3	6
Wealth management		88	94	195
		317	283	586

  

4. Earnings per share
			Six months ended  31 Mar 2008 (unaudited)	Six months ended  31 Mar 2007  (restated and unaudited)	Year  ended  30 Sept 2007 (restated and unaudited)
Retained profit for the period (£'000)			620	591	3,128
Amortisation (£'000)			1,204	391	1,552
Underlying profit for the period (£'000)*			1,824	982	4,680
Weighted average shares in issue (number)
	Basic		30,580,433	24,539,324	24,739,188
	Diluted		32,688,794	25,447,331	25,930,715
Earnings per share (pence)
	Basic (pence)		2.0	2.4	12.6
	Diluted (pence)		1.9	2.3	12.1
Amortisation per share (pence)
	Basic (pence)		4.0	1.6	6.3
	Diluted (pence)		3.7	1.6	5.9
Underlying earnings per share*
	Basic (pence)		6.0	4.0	18.9
	Diluted (pence)		5.6	3.9	18.0

* before deduction of amortisation of intangible fixed assets

5. Share capital

As at 31 March 2008 the Company had authorised share capital of 100,000,000 (31 March and 30 September 2007: 100,000,000) ordinary shares of 1p each, of which 49,787,906 (31 March 2007: 24,596,014, 30 September 2007: 25,744,412) ordinary shares have been allotted, called up and fully paid.

At 31 March 2008, of the called up share capital, 423,809 (31 March 2007: 339,700, 30 September 2007: 472,178) 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.

6. Reconciliation of movement in equity (restated and unaudited)
	Share  capital	Share  premium	Capital  redemption reserve	Capital  reserve	Hedging  reserve	Share based payment reserve	Own shares held	Profit and loss account	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 October 2006	244	13,807	1	13	-	106	(360)	3,043	16,854
Share based payments						456			456
Share issue (net of issue costs)	2	298							300
Purchase of own shares by EBT							(221)		(221)
Retained profit for the period								591	591
At 31 March 2007	246	14,105	1	13	-	562	(581)	3,634	17,980
Share based payments						195		33	228
Share issue (net of issue costs)	11	2,142							2,153
Purchase of own shares by EBT							(270)		(270)
Retained profit for the period								2,537	2,537
At 30 September 2007	257	16,247	1	13	-	757	(851)	6,204	22,628
Share based payments						327			327
Share issue (net of issue costs)	241	49,370							49,611
Purchase of own shares by EBT							(695)		(695)
Gains on cash flow hedges					61				61
Retained profit for the period								620	620
At 31 March 2008	498	65,617	1	13	61	1,084	(1,546)	6,824	72,552

7. Cash generated from operations
			Six months ended  31 Mar 2008 (restated and unaudited)	Six months ended  31 Mar 2007 (restated and unaudited)	Year  ended  30 Sept 2007 (restated and unaudited)
			£'000	£'000	£'000
Profit for the period			620	591	3,128
Adjustments for:
Investment revenues			(153)	(55)	(86)
Finance costs			1,004	274	906
Income tax			118	196	1,069
Depreciation of property, plant and equipment			317	283	586
Amortisation of intangible assets			1,204	391	1,552
Share-based payment expense			327	94	265
Increase in provisions			12	79	203
Loss /(profit) on disposal of tangible fixed assets and investments			-	(31)	59
Operating cash flows before movement in working capital			3,449	1,822	7,682
Increase in receivables			(6,641)	(4,404)	(6,100)
Increase in payables			9,663	5,008	7,383
Cash generated by operations			6,471	2,426	8,965

  

8. Acquisitions
During the period, the Group has made the following acquisitions:
Bartlett Davies Bicks Ltd				100% ordinary share capital			28 January 2008				Insurance Brokers
Carter & Co Risk Management Ltd				100% ordinary share capital			28 January 2008				Insurance Brokers
Manson Insurance Group Ltd				100% ordinary share capital			28 January 2008				Insurance, healthcare and wealth management
Bob Gee & Co Ltd				100% ordinary share capital			29 February 2008				Insurance Brokers
The net assets acquired, fair value adjustments, consideration and goodwill for these acquisitions are summarised below:
								Provisional book value acquired (unaudited)				Provisional fair value adjustments (unaudited)			Provisional fair value acquired (unaudited)
								£'000				£'000			£'000
Intangible assets								11,367				-			11,367
Property, plant and equipment								129				-			129
Available for sale investments								9				-			9
Current assets								5,193				-			5,193
Current liabilities								(4,396)				-			(4,396)
Net assets acquired								12,302				-			12,302
Consideration (cash)								13,635				-			13,635
Consideration (shares, share options and share awards)								4,617				-			4,617
Consideration (deferred)								3,758				-			3,758
Costs								671				-			671
Total consideration								22,681				-			22,681
Goodwill								10,379				-			10,379
Included in the above summary is the acquisition of Manson Insurance Group Ltd which is summarised below.
								Provisional book value acquired (unaudited)				Provisional fair value adjustments (unaudited)			Provisional fair value acquired (unaudited)
								£'000				£'000			£'000
Intangible assets								8,927				-			8,927
Property, plant and equipment								129				-			129
Available for sale investments								9				-			9
Current assets								5,193				-			5,193
Current liabilities								(4,396)				-			(4,396)
Net assets acquired								9,862				-			9,862
Consideration (cash)								12,152				-			12,152
Consideration (shares, share options and share awards)								4,043				-			4,043
Consideration (deferred)								2,450				-			2,450
Costs								475				-			475
Total consideration								19,120				-			19,120
Goodwill								9,258				-			9,258

9. Acquisitions post period end

Subsequent to the period end, the Group has made the following acquisitions:

Argyll Insurance (Holdings) Limited	100% ordinary share capital	1 and 8 April 2008	Insurance and wealth management
Kelquota Limited (Clarke Roxburgh)	100% ordinary share capital	2 April 2008	Insurance and wealth management
Godfrey Moore Limited	100% ordinary share capital	15 May 2008	Insurance broker

Initial consideration for these acquisitions was £28.7m.

10. 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.

11. Transition to IFRS

As stated in Note 2, these are the Group's first condensed financial statements prepared in accordance with IFRS.

The transition from UK GAAP to IFRS has been made in accordance with IFRS1, 'First-time adoption of International Financial Reporting Standards'.

The following reconciliations and explanatory notes thereto describe the effects of the transition on the IFRS opening balance sheet as at 1 October 2006 and for the periods ended 31 March 2007 and 30 September 2007. All explanations should be read in conjunction with the IFRS accounting policies of the Group as disclosed in Note 12.

The re-measurement of the consolidated balance sheet items at the IFRS opening balance sheet date and at 31 March 2007 and 30 September 2007, together with the reconciliation of the Group's equity reported under previous UK GAAP to its equity under IFRS as at 1 October 2006, 31 March 2007 and 30 September 2007, may be summarised as follows:

				UK GAAP	Effect of transition	IFRS
Balance Sheet			Note	£'000	£'000	£'000
At 1 October 2006
Goodwill			a, e	19,204	(4,984)	14,220
Other intangible assets			a, b	-	8,049	8,049
Property, plant and equipment			b	2,201	(112)	2,089
Trade and other receivables			c	12,839	(7,244)	5,595
Trade and other payables (current)			c	17,697	(7,244)	10,453
Long-term provisions			d	25	-	25
Deferred income tax liability			a	87	2,468	2,555
Bank overdrafts and loans			e	3,200	(42)	3,158
Profit and loss account			a	2,516	527	3,043
At 31 March 2007
Goodwill			a, e	28,686	(9,395)	19,291
Other intangible assets			a, b	-	15,614	15,614
Property, plant and equipment			b	2,291	(129)	2,162
Trade and other receivables			c	17,220	(7,823)	9,397
Trade and other payables (current)			c	19,441	(7,823)	11,618
Long-term provisions			d	25	82	107
Deferred income tax liability			a	84	4,732	4,816
Bank overdrafts and loans			e	9,951	(150)	9,801
Profit and loss account				2,210	1,424	3,634
At 30 September 2007
Goodwill			a, e	49,274	(16,028)	33,246
Other intangible assets			a, b	-	26,812	26,812
Property, plant and equipment			b	2,596	(278)	2,318
Trade and other receivables			c	20,544	(9,302)	11,242
Trade and other payables (current)			c	24,239	(9,302)	14,937
Long-term provisions			d	130	37	167
Deferred income tax liability			a	167	8,126	8,293
Bank overdrafts and loans			e	20,268	(257)	20,011
Profit and loss account				3,605	2,599	6,204

  Profit and loss reported under UK GAAP for the periods ended 31 March 2007 and 30 September 2007 are reconciled to IFRS as follows:

				UKGAAP	Effect of  transition	IFRS
Income statement			Note	£'000	£'000	£'000
6 months ended 31 Mar 2007
Revenue				17,064	(305)	16,759
Cost of Sales				(1,920)	305	(1,615)
Gross Profit				15,144	-	15,144
Administrative expenses			d	(13,382)	(82)	(13,464)
Depreciation of tangible fixed assets				(283)	-	(283)
Amortisation of intangible fixed assets				(1,288)	897	(391)
Operating profit				191	815	1,006
Investment revenues				55	-	55
Finance costs			e	(240)	(34)	(274)
Profit before taxation				6	781	787
Income tax expense				(312)	116	(196)
Retained (loss) / profit for the period				(306)	897	591
				UKGAAP	Effect of transition	IFRS
			Note	£'000	£'000	£'000
12 months ended 30 September 2007
Revenue				40,556	(862)	39,694
Cost of Sales				(3,416)	862	(2,554)
Gross Profit				37,140	-	37,140
Administrative expenses				(29,947)	(38)	(29,985)
Depreciation of tangible fixed assets				(586)	-	(586)
Amortisation of intangible fixed assets				(3,340)	1,788	(1,552)
Operating (loss) / profit				3,267	1,750	5,017
Investment revenues				86	-	86
Finance costs			e	(838)	(68)	(906)
Profit before taxation				2,515	1,682	4,197
Income tax expense				(1,459)	390	(1,069)
Retained profit for the period				1,056	2,072	3,128

  Reconciliation of opening equity

Shareholders' funds as at 1 October 2006

	Note		£'000
As originally reported			16,327
Goodwill amortisation	a		829
Amortisation of intangible assets	a		(291)
Finance costs	e		(11)
As restated			16,854

 

Notes 

 

a. Goodwill and intangible assets - In accordance with IAS 38, 'Intangible Assets', acquired businesses have been reviewed to identify assets that  meet the definition of an intangible asset. 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 over the life of the contract or their estimated economic life. Under UK GAAP, such assets were previously held as goodwill and amortised to the income statement over the estimated useful economic life.

As a result of the review, any intangible assets identified have been reclassified to intangible assets. In accordance with IAS12, deferred tax is recognised on the intangible assets. The deferred tax arises on the difference between the carrying amount of the intangible asset and its tax base, which is nil. Any residual goodwill is retained and, in accordance with IFRS, not amortised but subject to annual impairment reviews.

A deferred tax liability arises on the intangible assets recognised under IFRS. This liability is released to the income statement over the life of the corresponding asset.

b. Computer software - Under IFRS, computer software is treated as an intangible asset 'where the software is not an integral part of the related hardware'. Software costs that have previously been capitalised as tangible assets have been reclassified to intangible assets.

c. Recognition of insurance broking debtors and creditors - 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. Notwithstanding such legal relationships, debtors, cash and creditors arising from insurance broking transactions have previously been shown as assets and liabilities in recognition of the fact that the insurance broker is entitled to retain investment income on any cash flows arising from such transactions.

This treatment has been reviewed in accordance with IFRS. Arising from this review it was considered that insurance debtors in respect of premiums receivable do not represent an asset of the company and therefore should not be treated as an asset until the cash has been received.  Consequently the balance sheets at 1 October 2006, 31 March 2007 and 30 September 2007 have been restated to reflect only insurance cash received and the corresponding liability.

d. Employee benefits - IAS 19, 'Employee Benefits' requires that an accrual must be made for the cost of holidays due to staff but not taken. This cost has been included in the income statement.

e. Finance costs - In accordance with IFRS, finance costs associated with bank loans which had previously been capitalised as part of the goodwill associated with acquisitions, have been netted off bank overdraft and loans and amortised over the term of the facility.

Revenue recognition - The transition to IFRS has resulted in certain items being reclassified from revenue to cost of sales. This change also impacts the segmental disclosures.

12. Accounting policies

IFRS 1 Exemptions

IFRS 1, 'First-time Adoption of International Financial Reporting Standards', permits those companies adopting IFRS for the first time to take some exemptions from the full requirements of IFRS in the transition period. The following exemption has been taken:

- Business combinations - any business combinations prior to 01 October 2005 have not been restated on an IFRS basis

a. Standards: amendment and interpretations to existing standards that are effective from 2007 

IFRS 7, 'Financial instruments: Disclosures', and the consequential amendment to IAS 1, 'Presentation of financial statements - Capital disclosures', introduces new disclosures relating to financial instruments and will have an impact on the classification and valuation of the group or company's financial instruments and the disclosures relating to taxation and trade and other payables. This will be applied in full for the accounts for the year ended 30 September 2008.

IFRIC 8, 'Scope of IFRS 2', requires consideration of transactions involving the issuance of equity instruments, where the identifiable consideration received is less than the fair value of the equity instruments issued in order to establish whether or not they fall within the scope of IFRS 2. This standard does not have any impact on the group or company's financial statements. The company already applies an accounting policy which complies with the requirements of IFRIC 8.

IFRIC 10, 'Interim financial reporting and impairment', prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. This standard does not have any impact on the group or company's financial statements.

b. Standards, amendments and interpretations effective from 2007 but not relevant The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after 1 January 2007 but they are not relevant to the group or company's operations:

Revised guidance on implementing IFRS 4, 'Insurance contracts';

IFRIC 7, 'Applying the restatement approach under IAS 29, Financial reporting in hyper-inflationary economies'; and

IFRIC 9, 'Re-assessment of embedded derivatives'.

c. Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the group and company

The following standards, amendments and interpretations to existing standards have been published and are mandatory for the group's accounting periods beginning on or after 1 January 2008 or later periods, but the group and company have not early adopted them and do not consider they will have a material impact:

IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009)

IFRS 8, 'Operating segments ' (effective from 1 January 2009)

IFRIC 14, 'IAS 19 'Employee Benefits'

d. Interpretations to existing standards that are not yet effective and not relevant for the group and company's operations 

The following interpretations to existing standards have been published and are mandatory for the group and company's accounting periods beginning on or after 1 January 2008 or later periods but are not relevant for the group's operations:

IFRIC 12, 'Service concession arrangements' (effective from 1 January 2008). 

IFRIC 13, 'Customer loyalty programmes' (effective from 1 July 2008).

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 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. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement as negative 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. Turnover 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.

Other services

Fees and other income receivable 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. 

Segmental reporting

The Directors have identified five business sectors: insurance, healthcare, employee benefits, commercial finance and wealth management. Business segment data includes an allocation of corporate costs to the segment. There are no sales between business segments.

All revenue arises within the UK. No secondary segment information is therefore given.

Business combinations

The consolidated financial statements include the statements of its subsidiary undertakings drawn up to the balance sheet date. Acquisitions are accounted for using the purchase method as required by IFRS 3 Business Combinations. 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.

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.

In the Company's financial statements, investment in subsidiary undertakings is stated at cost, less any impairment in value. Where the consideration for the acquisition of a subsidiary undertaking includes shares in the Company to which the provisions of section 131 Companies Act 1985 apply, cost represents the nominal value of the shares issued together with the fair value of any additional consideration given.

Intangible Fixed 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. 

Computer Software

Computer software, which is not an integral part of the related hardware, is stated at cost less depreciation. Depreciation 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 depreciation. 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:

Freehold buildings 2% Straight line

Motor vehicles  25% Reducing balance

Fixtures and fittings  15% Reducing balance

Computer equipment 20% Straight line

Impairment of plant, property and equipment and intangible assets

At each balance sheet date, the Group reviews the carrying amounts of its plant, property and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment. 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 pre-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, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Investments

Investments are stated at cost less any impairment.

Leasing and finance 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 lease obligations are included in liabilities. The interest elements of the 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.

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

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. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss.

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 debtors and creditors

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, debtors 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, 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, other short-term highly liquid investments with original maturities of three months or less.

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.

In accordance with the transitional provisions, IFRS 2 has been applied to all the grants of equity instruments after 7 November 2002, that were unvested at 1 January 2006. The fair value of share options is recognised as an expense on a straight line basis over the vesting period. Where the options are granted as part of the consideration for an acquisition, the fair value is capitalised. 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.

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.

13. 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. 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.

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 were disclosed in the financial statements for the year ended 30 September 2007.

ENDIR EAXKLELXPEFE

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