25th Jan 2007 07:01
Jelf Group PLC25 January 2007 25 January 2007 JELF GROUP PLC ('Jelf Group' or 'The Group') Preliminary Results for the year ended 30 September 2006 JELF GROUP ANNOUNCES RECORD GROWTH AND MAJOR ACQUISITION Jelf Group, the leading corporate and financial consultancy, which offersinsurance, healthcare, employee benefits, commercial finance and wealthmanagement services to businesses and individuals, announces record financialresults for the 12 months to 30 September 2006. FINANCIAL HIGHLIGHTS • Turnover more than doubled to £25.1m (2005 : £11.5m), driven by increased cross-selling, winning new corporate clients and a number of strategic acquisitions • Normalised pre-tax profit (before goodwill) up 148% to £3.3m (2005 : £1.3m) • EBITDA increased 151% to £3.6m (2005 : £1.4m), with particularly strong organic growth in Employee Benefits • Normalised Earnings Per Share up 65% to 12.4p (2005: 7.5p) • Operating margins up 17% to 13.1% (2005: 11.2%), demonstrating further progress towards our stated objectives of raising margins despite continuing to invest in our infrastructure OPERATING HIGHLIGHTS • Six acquisitions in the financial year ended 30th September 2006, including commercial insurance and financial services intermediary Goss Group Ltd, all of which have integrated and driven growth across Jelf Group • Expanded into 17 locations across the UK ( 8 in 2005) • Corporate client numbers up 85% from 6,500 to 12,000 • Increased staff by 145% to 453 (185 in 2005) The company is pleased to announce that it has agreed terms to acquire theentire issued share capital of Hampshire-based SPS Wellbeing Ltd ("SPS WellBeing"), a market leading specialist healthcare and group risk intermediary, for amaximum consideration of £10.0m (subject to completion accounts and theachievement in full of performance targets).. Alex Alway, chief executive, comments: 'The strong performance in 2006 has resulted in the Jelf Group doubling itsturnover, earnings and pre-tax profits. We have worked hard throughout the yearto drive growth across all areas of the business. While we have been busyacquiring businesses, mainly in commercial insurance, we continue to focus onbuilding organic growth through cross-referrals and engaging new clients. Marketconditions are strong and the Jelf Group remains well-placed to deliver furthergrowth in 2007. ' ENQUIRIESJelf GroupAlex Alway, Group Chief Executive 01454 272713Rose Clark, Group Financial Controller 01454 272853 Pelham PRPolly Fergusson 020 7743 6362Philip Dennis 020 7743 6363 Notes for Editors: • Jelf Group was founded by Chris Jelf in 1989. Today it operates from 19locations in the South of England and Wales (17 as at 30 September 2006) andoffers an extensive range of corporate and private client services • The Group advises over 12,000 corporate clients, principally in insurance,healthcare, employee benefits, commercial finance and wealth managementservices. These clients cover the spectrum from significant public companies tosmall owner-managed businesses. Core Jelf Group clients are medium-sized owner-managed businesses, typically employing between one to fifty staff, with aturnover of up to £10 million • The Group has developed a corporate support infrastructure that has enabled itto make a number of acquisitions over the last five years. These acquisitionsspan all core areas of Jelf 's business and have been made to either supplementexisting operations or to acquire a corporate client base that can be used bythe enlarged Group Acquisitions - for the Year ended 30 September 2006 October 2005 - book of employee benefits business purchased from Alexanders November 2005 - Farndale Hammond (Healthwise) Ltd - acquisition of a Hampshirebased healthcare intermediary March 2006 - Goss Group Ltd - acquisition of a substantial commercialinsurance and financial services intermediary, based in the South East ofEngland May 2006 - Brian D Thomas Insurance Services Ltd - acquisition of a SouthWales-based commercial insurance intermediary May 2006 - Cherwell Insurance Management - acquisition of an Oxfordshire-basedcommercial insurance intermediary June 2006 - Auto Business Solutions Ltd - acquisition of a specialist vehicleand asset finance intermediary, based in Wiltshire Chairman's Statement I am delighted to once again be able to report another strong year of tradingfor the Group. In addition to completing six acquisitions, the culture of crossreferrals within the Group continues to produce good organic growth. I am also particularly pleased to welcome Michael King and the wider Goss teamwho joined us in March of this year. The combined business is going to be a realforce in each of our chosen markets. The Group continues to secure and develop value-creating propositions such asthe specialist transportation team, which focuses on the self storage andprofessional removals sector and the retirement counselling advisory servicesoffered to larger corporate clients, both of which had been nurtured by the Gossteam. I would particularly like to thank the Employee Benefits team which has enjoyeda tremendous year, both in terms of developing their proposition and throughwinning new client mandates. The Jelf story of dramatic growth in the last few years will have beeninteresting to the external observer, but it is the opportunities for the futurethat really continue to excite myself and the whole team. There is however no room for complacency and our continued focus and objectiveis to provide a world class personalised service to our valued clients. The employees and management team in the last few years have served shareholderswell, with a substantial rise in the market value of the Group and I would liketo take this opportunity on behalf of the Board to thank our colleagues fortheir efforts and continued support in driving the Jelf Group forward. We fully realise that our staff continue to be our greatest asset. I would liketo thank our existing clients for their continued support and loyalty. Christopher Jelf, Group Chairman, January 2007 Operating and Financial Review Overview It has been another active year for the Jelf Group and we have againdemonstrated the strength of our strategy and our organic growth credentials.Each business area has delivered good performance and the commitment andflexibility of our people have contributed to another great year. For the 12 months to 30 September 2006 Jelf Group went through considerablechange, growth and positive development. At the end of the period, the Group hadmore than twice the number of employees and three times the commercial insurancepremiums under management than at the start of the year. These results showsubstantial increases in turnover, earnings before interest, tax, depreciationand amortization (EBITDA) and pre-tax profits. Our six acquisitions this year have contributed approximately £9.1m of the£13.6m increase in turnover. The Group now employs a dedicated team ofprofessionals to manage the acquisition programme and subsequent integration ofeach business. Business Strategy For the last six years Jelf Group's aim has been to build an independentintermediary business providing a broad range of services to the corporatebusiness sector and related private individual market, focused in the South ofEngland and Wales. Our strategy is built on the following foundation principles: • Maintaining a strong client focus • Strong and prudent management of the Group's financial resources • Professional and caring management of our people • Embedding cross referral of clients within our culture The Group has pursued its strategy using the twin approaches of organic andacquisition opportunities. We intend using equity and debt in order to pursueour acquisition strategy. Clear and consistent communication, internally andexternally, is a fundamental part of implementing this strategy Financial results In the year ending 30 September 2006 the Group increased turnover by 118% to£25.1m (2005:£11.5m) and achieved EBITDA of £3.56m (2005:£1.42m). Thisrepresents a 151% increase on 2005. Operating margins before goodwill were 13.1% (2005:11.2%); representing anincrease of 16.6% and demonstrating further progress towards our statedobjective of raising margins, as well as continuing to invest in the Group'sinfrastructure. Consolidated shareholders' funds as at 30 September 2006 amounted to £16.33m(2005:£4.43m), representing an increase of 268%. The basic earnings per shareamounted to 6.2p (2005:5.0p). Dividend Policy In line with the Company's stated dividend policy, the Directors intend tocommence payment of dividends only when it becomes commercially prudent to doso, having regard to the availability of the Group's distributable profit andretained funds required to finance future growth and meet regulatory capitaladequacy requirements. As a result, the Directors are not recommending thepayment of a dividend at this time. Review of operations The Group now consists of eight separate regulated operating companies, allbased in the UK. Our business is conducted through five operating divisions eachreporting to a Managing Director, who has direct responsibility for the profitand loss account and considerable autonomy in the day-to-day management of theirbusiness. Insurance This business provides commercial insurance broking services to corporateclients. It offers independent advice on all aspects of commercial insurance,including risk assessments, design of insurance programmes, auditing of existinginsurance arrangements and claims management. Turnover for insurance has increased by 174.6% to £10.51m (2005:£3.82m), whileEBITDA has increased by 172.3% to £1.58m (2005:£0.58m). This growth has largelybeen achieved through a number of acquisitions, including Goss Group Ltd (March2006), Brian D Thomas Insurance Services Ltd (May 2006) and Cherwell InsuranceManagement (May 2006), coupled with success in winning new corporate clientmandates. Core clients for this business are owner-managed enterprises based in southernEngland and Wales. The softening of insurance premiums has continued in 2006 as competition frominsurance carriers focused on the UK market has intensified. However, in theGroup's core insurance market of smaller owner-managed businesses the effect ofthis softening has been less than within the larger corporate sector. As such,the effect of the Group's significant economies of scale has largely offset anyshortfall in revenues. The softening of insurance rates is expected to continuethroughout 2007/08. The insurance business operates in nine locations and represents 41.9% of theGroup's turnover. Healthcare The healthcare business provides advice on health-related employee benefits suchas private medical insurance. Core clients are owner-managed enterprises basedin southern England and Wales. Jelf Group also provides specialist fee-basedadvice on wider healthcare related issues, such as absence management andoccupational health, to larger companies.. While the corporate healthcare insurance market for new business remains robust,the Group continues to strengthen its position as a leading player byintroducing new services, capturing market share at the expense of nationalcompetitors, enjoying economies of scale and consolidating other intermediarybusinesses. The relationships established with clients as a result of the healthcarebusiness continue to be a major source of cross-sales growth for other parts ofthe Group. Turnover for the Group's healthcare business has increased by 19.8% to £2.92m(2005:£2.44m), while EBITDA has increased by 46.8% to £0.43m (2005:£0.29m). Thisgrowth has largely been achieved by winning new corporate client mandates,supplemented by the acquisition of Farndale Hammond (Healthwise) Ltd in November2005. The healthcare business primarily operates in three locations and represents11.7% of the Group's turnover. Employee Benefits The employee benefits business provides a wide range of services and advice tolarge corporate entities including benefit design (including risk and pensionbenefits), benefit communication and benefit implementation. In 2006, this hasbeen strengthened by the development of a market-leading online benefitsmanagement system for employers. Turnover for employee benefits has increased by 190.3% to £3.68m (2005:£1.27m),while EBITDA has increased to £0.36m (2005:£0.03m). This growth has largely beenachieved through introducing these services to existing clients of the corporatehealthcare business. In addition, performance was assisted by the recruitment ofan employee benefits team in October 2005. Since the start of the financial year we have been investing in both systems andpeople as this market continues to enjoy favourable conditions. This investmentis not expected to have a considerable impact on the financial results for thisyear. The employee benefits business operates in two locations and represents 14.6% ofthe Group's turnover. Commercial Finance Launched in 2005, this business has enjoyed strong growth during its first yearof trading. It provides solutions to Group clients who require specialist adviceon all aspects of commercial finance, including property, asset, vehicle andinvoice finance. Turnover for commercial finance was £109,000 (2005:£nil), largely achievedthrough introducing this new service to existing clients of the Group. Theperformance was assisted by the acquisition of a specialist vehicle financebusiness, Auto Business Solutions Ltd, in June 2006. The commercial finance business operates in three locations and represents 0.4%of the Group's turnover. Wealth Management This business provides independent wealth management services, includingmortgage advice, investment planning, portfolio management and retirementplanning advice to individuals, especially entrepreneurs. It has enjoyed a yearof excellent organic sales success as the combination of legislative changes topensions and a favourable investment climate have generated considerableopportunities for individual advice. This success was aided by the introduction of the Group's own branded SelfInvested Personal Pension (SIPP). All market indicators forecast continuedstrong performance in 2007, especially in the pension and protection markets forbusiness people. Turnover for wealth management has increased by 98.7% to £7.88m (2005:£3.97m),and EBITDA has increased by 122.8% to £1.25m (2005:£0.56m). The wealth management business operates in six locations and represents 31.4% ofthe Group's turnover. Organisational development The Group, as at 30 September 2006, operated out of 17 locations (2005:8) andstaff numbers throughout the year have increased by 145% to 453 (2005:185). JelfGroup has continued to invest heavily in its infrastructure to ensure that wedevelop support for our primary asset - the people within the business - andcreate capacity for future growth. People The Board and I wish to express our thanks to all the employees of the JelfGroup for their dedication and hard work during this financial period. TheGroup's employees have faced considerable change during the last 12 months andhave risen to the challenge, performing superbly. Our particular thanks go tothose employees who have joined the Group through acquisition and showedremarkable flexibility when dealing with the issues of integration. The Board and Group Management Following the acquisition of Goss Group Ltd, Michael King was appointed to theBoard on 21 March 2006. Phil Barton was also appointed to the Board in his roleas Group Commercial Director on 1 June 2006. Alex Rowe joined as a Non-Executive Director in the period following thisreview. Peter Elliott resigned as a director of the Jelf Group on 1 June 2006. He willcontinue to work within the Group on strategic issues and key clientrelationships. The Board wishes to put on record its thanks for Peter'scontribution over the last eight years. We believe the structure and compositionof the Board is now appropriate for our business. In addition to the changes to the Board of Directors, the Group has strengthenedits operational management with the appointment of three new senior executivesalong with the promotion of a number of members of the existing management overthe past 12 months. In particular, the appointment of Rose Clark as Group Financial Controller inMay 2006 is a clear sign of our continuing commitment to strong financialmanagement. Rose is a Chartered Accountant with 15 years' experience workingwithin the financial services sector. With tremendous strength in depth, theGroup's management team puts us in a strong position to further increase incomeand profitability over the coming 12 months. The Future The Group will continue to invest heavily in its people and infrastructure as itpursues its twin strategic objectives of: • Acquiring and consolidating commercial insurance and healthcare brokers • Delivering organic growth by introducing a wider range of Group services to existing clients The results for 2006, combined with the investments already made and the highlevels of professionalism exhibited by our people give us confidence that 2007will be another year of significant progress. The Jelf Group culture of hardwork and an unwavering client focus is still as strong as ever. Trading acrossthe Group remains in line with expectations. Alex Alway, Group Chief Executive Consolidated profit and loss accountFor the year ended 30 September 2006 2006 2006 2005 2005 Note £'000 £'000 £'000 £'000 Turnover 1,2 25,095 11,501 - Continuing 15,995 10,529- Acquired 9,100 972 Cost of sales (3,167) (661) Gross profit 21,928 10,840- Continuing 14,041 9,908- Acquired 7,887 932 Administrative expenses (19,838) (9,870) Operating profit 3 2,090 970Interest receivable 6 123 86Interest payable 7 (102) (45) Profit on ordinary activities before taxation 2,111 1,011 Taxation on profit on ordinary activities 8 (921) (348) Profit on ordinary activities after taxation 1,190 663 Earnings per share: Basic 9 6.2p 5.0p Diluted 9 5.9p 4.8p Consolidated balance sheetAs at 30 September 2006 2006 2006 2005 2005 Note £'000 £'000 £'000 £'000Fixed assetsIntangible assets 10 19,204 3,340Tangible fixed assets 11 2,201 678Investments 12 43 35 21,448 4,053Current assetsDebtors 13 12,839 6,159Cash at bank and in hand 5,226 1,946 18,065 8,105 Creditors: amounts falling due within one year 14 (17,697) (6,975) Net current assets 368 1,130 Total assets less current liabilities 21,816 5,183 Creditors: amounts falling due after more than one year 15 (5,377) (605) Provisions for liabilities 16 (112) (146) Net assets 16,327 4,432 Capital and reservesCalled up share capital 17 244 134 Share premium account 18 13,807 2,879Capital reserve 18 13 13Capital redemption reserve 18 1 1Profit and loss account 18 2,262 1,405 Shareholders' funds - all equity 16,327 4,432 The financial statements were approved and authorised for issue by the Board andwere signed on 24 January 2007. Alex Alway John HardingGroup Chief Executive Group Finance and Operations Director Company balance sheet As at 30 September 2006 2006 2006 2005 2005 Note £'000 £'000 £'000 £'000Fixed assetsIntangible assets 10 1,085 -Investments 12 13,680 1,271 14,765 1,271Current assetsDebtors 13 5,390 1,331Cash at bank and in hand 752 511 6,142 1,842 Creditors: amounts falling 14 (2,130) (33)due within one year Net current assets 4,012 1,809 Total assets less current liabilities 18,777 3,080 Creditors: amounts falling due 15 (5,123) -after more than one year Net assets 13,654 3,080 Capital and reserves Called up share capital 17 244 134 Share premium account 18 13,777 2,849Capital redemption reserve 18 1 1Profit and loss account 18 (368) 96 Shareholders' funds - all equity 13,654 3,080 The financial statements were approved and authorised for issue by the Board andwere signed on 24 January 2007. Alex Alway John HardingGroup Chief Executive Group Finance and Operations Director Consolidated cash flow statementFor the year ended 30 September 2006 2006 2006 2005 2005 £'000 £'000 £'000 £'000Net cash inflow from operating 2,535 1,185activities (below) Returns on investments andservicing of financeInterest received 123 86Interest paid (102) (45)Net cash inflow from returns on investment 21 41and servicing of finance Taxation (921) (204) Capital expenditure and financialinvestmentPurchase of tangible fixed assets (889) (380)Purchase of own shares (360) -Purchase of investments (9) -Sale of tangible fixed assets 150 2Net cash outflow for capital expenditure (1,108) (378) Acquisitions and disposalsPurchase of undertakings (incl costs) (9,687) (1,072)Net (debt) / cash acquired (1,131) 23Net cash outflow from acquisitions and (10,818) (1,049)disposals Cash outflow before use of liquid (10,291) (405)resources and financing FinancingIssue of ordinary shares (net of expenses) 11,038 1,899Capital element of finance lease rental payments (10) -Draw down loan funding 3,200 -Draw down finance lease funding 49 -Repayment of loans and deferred consideration (706) (949)Net cash inflow from financing 13,571 950 Increase in cash in the year 3,280 545 2006 2005 £'000 £'000Reconciliation of operating profit to net cash inflow from operating activities Operating profit 2,090 970Amortisation of intangible fixed assets 1,194 321Depreciation of tangible fixed assets 275 125(Profit) / Loss on disposal of tangible fixed assets (148) 10Cost of shares awarded to staff 27 -Decrease / (Increase) in debtors 246 (2,925)(Decrease) / Increase in creditors (1,084) 2,662(Decrease) / Increase in provisions (65) 22 Net cash inflow from operating activities 2,535 1,185 Reconciliations of movements in shareholders' fundsFor the year ended 30 September 2006 Group 2006 2005 £'000 £'000 Profit for the financial year 1,190 663Cost of shares awarded to staff 27 - Retained profit for the financial year 1,217 663 Issue of new shares 110 31Premium on issue of new shares 11,430 2,469Costs of share issue (502) (601)Net movement of shares in EBT (360) - Net addition to shareholders' funds 11,895 2,562 Opening shareholders' funds 4,432 1,870 Closing shareholders' funds 16,327 4,432 Company 2006 2005 £'000 £'000 (Loss) / profit for the financial year (104) 56 Issue of new shares 110 31Premium on issue of new shares 11,430 2,469Costs of share issue (502) (601)Net movement of shares in EBT (360) - Net addition to shareholders' funds 10,574 1,955 Opening shareholders' funds 3,080 1,125 Closing shareholders' funds 13,654 3,080 Consolidated statement of total recognised gains and lossesFor the year ended 30 September 2006 2006 2005 £'000 £'000Profit for the financial year 1,190 663Cost of shares awarded to staff 27 - Total recognised gains and losses 1,217 663 Notes to the financial statements For the year ended 30 September 2006 1. Accounting policies The following accounting policies have been applied consistently indealing with items which are considered material in relation to the Group'sfinancial statements. Under section 230(4) of the Companies Act 1985 theCompany is exempt from the requirement to present its own profit and lossaccount. 1.1 Basis of preparation The financial statements have been prepared in accordancewith applicable accounting standards and under the historical cost accountingrules. They have been prepared on the same basis as for the year ended 30September 2005. 1.2 Consolidation The consolidated financial statements include the financialstatements of the Company and its subsidiary undertakings drawn up to 30September 2006. Unless otherwise stated, the acquisition method of accountinghas been adopted. Under this method, the results of subsidiary undertakingsacquired or disposed of in the year are included in the consolidated profit andloss account from the date of acquisition or up to the date of disposal. 1.3 Turnover - Income recognition Income is recognised on a receivable basis. Turnoverrepresents commissions and fees due by reference to the commencement date of theinsurance policy or other product taken out by clients. Insurance transactionsare such that a debtor balance representing the premiums owing from anindividual customer is recognised at the commencement date of a policy. Acorresponding creditor balance represents the amount due to the insurer inrespect of that policy. 1.4 Intangible fixed assets - goodwill Goodwill, representing the excess of the fair value of theconsideration given and the associated costs over the fair value of theseparable net assets acquired, is capitalised. It is amortised in equalinstalments over its estimated useful life. The estimated useful life is theperiod over which the Directors estimate that the value of the underlyingbusiness acquired is expected to exceed the value of the underlying assets.Goodwill is being amortised over 10 years. In the Company's financial statements, investment insubsidiary undertakings is stated at cost, less any impairment in value. Wherethe consideration for the acquisition of a subsidiary undertaking includesshares in the Company to which the provisions of section 131 Companies Act 1985apply, cost represents the nominal value of the shares issued together with thefair value of any additional consideration given and transaction costs. 1.5 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost or valuation lessdepreciation. Depreciation is provided at rates calculated to write off thecost or valuation of fixed assets, less their estimated residual value, overtheir expected useful lives on the following basis: Freehold buildings - 2% Straight line Motor vehicles - 25% Reducing balance Fixtures & fittings - 15% Reducing balance Computer equipment - 20% Straight line 1.6 Investments Investments are stated at cost less any impairment. 1.7 Leasing and finance leasing Assets obtained under hire purchase contracts and financeleases are capitalised and the outstanding future lease obligations are shown increditors. Operating lease rentals are charged to the profit and loss accounton a straight line basis over the period of the lease. 1.8 Pensions The Group operates a defined contribution pension scheme forcertain of its directors and the pension charge represents the amounts payableby the Group to the fund in respect of the year. The Group also makescontributions to the personal pension plans of permanent employees. These arecharged to the profit and loss account as they arise. 1.9 Taxation The charge for taxation is based on the profit for the yearand takes into account taxation deferred because of timing differences betweenthe treatment of certain items for taxation and accounting purposes. Deferredtax is recognised, without discounting, in respect of timing differences betweenthe treatment of certain items for taxation and accounting purposes which havearisen but not reversed by the balance sheet date, except as otherwise requiredby Financial Reporting Standard 19. 1.10 Financial instruments The Group's financial instruments comprise cash andborrowings and various items such as trade debtors and creditors that arisedirectly from its operations. The Group's policy towards financial instrumentsis to manage interest rate and liquidity risk without exposing the Group toundue risk or speculation. 1.11 Employee Benefit Trust ("EBT") / own shares held Shares awarded through the EBT are accounted for inaccordance with UITF Abstract 17 (Employee Share Schemes). A period ofcontinued employment is required before the employees become unconditionallyentitled to the shares awarded. The cost of the awards is spread over thisperiod. The amount recognised is based on the fair value of shares at the datethe award is made. Own shares held by the EBT are accounted for in accordance with UITF Abstract 38(Accounting for ESOP Trusts): • Until such time as the Company's own shares held by the EBT vestunconditionally in employees, the consideration paid for the shares is deductedfrom the Group and Company profit and loss account in arriving at shareholders'funds • Consideration paid or received for the purchase or sale of theCompany's own shares are shown as separate amounts in the reconciliations ofmovements in shareholders' funds • Any dividend income arising on own shares is excluded in arriving atprofit before tax and deducted from dividends paid and proposed. Other assets and liabilities of the EBT are recognised as the assets andliabilities of the Group and Company. Finance costs and any administration expenses of the EBT are charged as theyaccrue. 1.12 Acquisitions Following acquisition, businesses are fully integrated intothe existing activities of the Group. As a result of this the Directors do notconsider it practicable to analyse the results of acquired entities beyond thelevel of contribution to overhead expenditure. In accordance with Financial Reporting Standard 3 theturnover and contribution to overhead expenditure of acquisitions is shownseparately for the year in which the acquisition occurred. 2. Segmental analysis The Directors have identified five business sectors; insurance,healthcare, employee benefits, commercial finance and wealth management. Ananalysis of turnover, profit before taxation and interest and net assets bybusiness sector is set out below. Business sector data includes an allocation ofcorporate costs to the sector. There are no sales between business sectors. All turnover arose within the United Kingdom. 2006 2005 £'000 £'000Turnover by business sectorInsurance - Continuing 4,931 3,221 - Acquired 5,578 607Healthcare - Continuing 2,527 2,387 - Acquired 398 55Employee benefits - Continuing 2,767 1,266 - Acquired 908 -Commercial finance - Continuing 80 - - Acquired 29 -Wealth management - Continuing 5,690 3,655 - Acquired 2,187 310 25,095 11,501 Profit before tax by business sectorInsurance 724 429Healthcare 227 132Employee benefits 302 15Commercial finance (73) (47)Wealth management 910 441 Operating profit 2,090 970 Net interest receivable 21 41 Profit before taxation 2,111 1,011 Taxation (921) (348) Earnings 1,190 663 Net assets by business sectorInsurance 8,016 2,287Healthcare 2,435 725Employee benefits 3,697 726Commercial finance (123) (47)Wealth management 1,513 231 15,538 3,922 Unallocated Group net funds 789 510 Group net assets 16,327 4,432 3. Operating profit The operating profit is stated after charging: 2006 2005 £'000 £'000 Amortisation of intangible fixed assets 1,194 32Depreciation of tangible fixed assets- owned fixed assets 270 125- assets under finance lease 5 -(Profit) / loss on sale of fixed assets (148) 10Auditors' remuneration- audit fees 70 33- other services relating to taxation 12 6- costs of placing / AIM flotation (costs charged against share premium) 18 138- costs of assisting with acquisitions (within goodwill) 8 -Operating lease rentals- vehicles and equipment 152 39- office space 451 242 4. Staff costs Staff costs, including Directors' remuneration, were as follows: 2006 2005 £'000 £'000 Wages and salaries 11,777 5,680Social security costs 1,304 645Other pension costs 459 221 13,540 6,546 The average monthly number of employees, including Directors, duringthe year was as follows: 2006 2005 No. No. Sales 99 54Administration 186 90Group core 38 22 323 166 5. Directors' remuneration Details of Directors' emoluments, share and share option awards and pensionentitlements are given in the Remuneration Report 6. Interest receivable 2006 2005 £'000 £'000 Bank loans and overdrafts 123 86 7. Interest payable 2006 2005 £'000 £'000 Bank loans and overdrafts 90 42Finance lease agreements 2 -Other loans 10 3 102 45 8. Taxation 2006 2005 £'000 £'000Analysis of tax charge in the year Current tax (see note below)UK corporation tax on profits of the year 975 318Adjustments in respect of prior periods (84) 4 Total current tax 891 322 Deferred taxOrigination and reversal of timing differences 30 26 Total deferred tax (see note 16) 30 26 Tax on profit on ordinary activities 921 348 Factors affecting tax charge for the year The tax assessed for the year is higher than the standard rate ofcorporation tax in the UK (30%). The differences are explained below: 2006 2005 £'000 £'000 Profit on ordinary activities before tax 2,111 1,011 Profit on ordinary activities multiplied by standard rate of Corporation tax in the UK of 30% (2005 - 30%) 633 303 Effects of:Expenses not deductible for tax purposes 331 29Capital allowances for period in excess of depreciation (56) (2)Marginal relief 67 (12)Adjustments to tax charge in respect of prior periods (84) 4 Current tax charge for the year (see note above) 891 322 There were no material factors that may affect future charges. 9. Earnings per share 2006 2005 Computation of EPSNumeratorEarnings - £'000 1,190 663 DenominatorWeighted average number of ordinary shares - Basic 19,270,208 13,201,001 Weighted average number of ordinary shares - Diluted 20,045,458 13,909,865 Basic EPS 6.2p 5.0p Diluted EPS 5.9p 4.8p The calculation of the weighted average number of ordinary sharestakes account of the new shares issued in November 2005 and March 2006 (2005 -October 2004). Details are set out in note 17. 10. Intangible fixed assets Negative Goodwill Goodwill Total £'000 £'000 £'000GroupCostAt 1 October 2005 (28) 4,416 4,388Additions - 17,058 17,058At 30 September 2006 (28) 21,474 21,446 AmortisationAt 1 October 2005 (9) 1,057 1,048Charge/(credit) for the year (2) 1,196 1,194At 30 September 2006 (11) 2,253 2,242 Net Book ValueAt 30 September 2006 (17) 19,221 19,204 At 30 September 2005 (19) 3,359 3,340 The negative goodwill arose on the acquisition of the minority holdingin Jelf Corporate Healthcare Limited in the year ended 30 September 2002. Goodwill £'000 CompanyCostAt 1 October 2005 -Additions 1,123At 30 September 2006 1,123 AmortisationAt 1 October 2005 -Charge/(credit) for the year 38At 30 September 2006 38 Net Book ValueAt 30 September 2006 1,085 At 30 September 2005 - 11. Tangible fixed assets Land & Fixtures & Computer Motor Buildings Fittings Equipment Vehicles Total £'000 £'000 £'000 £'000 £'000GroupCostAt 1 October 2005 - 436 598 - 1,034From acquisitions 500 507 615 35 1,657Additions - 398 443 48 889Disposals - (7) (9) - (16)At 30 September 2006 500 1,334 1,647 83 3,564 DepreciationAt 1 October 2005 - 152 204 - 356From acquisitions 9 372 330 35 746Charge for the year 4 71 195 5 275Disposals - (6) (8) - (14)At 30 September 2006 13 589 721 40 1,363 Net book valueAt 30 September 2006 487 745 926 43 2,201 At 30 September 2005 - 284 394 - 678 Land & buildings are all freehold. The cost or valuation of freeholdbuildings on which depreciation is charged is £375,000 (2005 - £nil). Thefreehold property was independently valued at £500,000 during 2004 by HoltWalters, commercial property consultant, on the basis of open market value. Included within motor vehicles are leased assets with a net book valueof £43,000 (2005 - £nil). The depreciation charge for the year on these assetswas £5,000 (2005 - £nil). 12. Fixed asset investments Other investments £'000GroupCost and net book valueAt 1 October 2005 35Additions 8 At 30 September 2006 43 The aggregate market value of listed investments at 30 September 2006,shown at cost above, was £50,000 (2005 - £30,000). Shares in Other group investments undertakings Total £'000 £'000 £'000CompanyCostAt 1 October 2005 - 1,271 1,271Additions 3 12,406 12,409 At 30 September 2006 3 13,677 13,680 Details of the Company's subsidiary undertakings are given in note 19. 13. Debtors Group 2006 2005 £'000 £'000Due within one yearTrade debtors 2,276 1,224Insurance broking debtors 9,090 4,200Other debtors 137 12Prepayments and accrued income 1,336 723 12,839 6,159 Included within other debtors due within one year are loans of £nil(2005 - £2,000) to Directors of the Group. The maximum amount outstandingduring the year was £2,000 (2005 - £2,000). Company 2006 2005 £'000 £'000Due within one yearAmounts owed by group undertakings 5,335 1,298Other debtors 25 -Prepayments and accrued income 30 33 5,390 1,331 14. Creditors: amounts falling due within one year Group 2006 2005 £'000 £'000 Bank loans and overdrafts - 61Obligations under finance leases 14 -Trade creditors 836 494Insurance broking creditors 10,835 4,469Corporation tax 608 330Social security and other taxes 529 213Deferred consideration 2,770 707Other creditors 389 139Accruals and deferred income 1,716 562 17,697 6,975 Company 2006 2005 £'000 £'000 Amounts owed to group undertakings 212 23Corporation tax 5 10Deferred consideration 1,903 -Accruals and deferred income 10 - 2,130 33 15. Creditors: amounts falling due after more than one year Group 2006 2005 £'000 £'000 Bank loans and overdrafts 3,200 46Obligations under finance leases 25 -Deferred consideration 2,152 559 5,377 605 Company 2006 2005 £'000 £'000 Bank loans and overdrafts 3,200 -Deferred consideration 1,923 - 5,123 - Group 2006 2005 £'000 £'000 Included within the above are amounts falling due as follows:In 1 - 2 years:Bank loans 450 16Obligations under finance leases 25 -In 2 - 5 years:Bank loans 2,750 30 The bank loans are at a floating interest rate of between 1.5% and 2.0% abovebase rate and are repayable between February 2008 and 2011. 16. Provisions for liabilities Deferred Clawback Tax provisions Total £'000 £'000 £'000GroupAt 1 October 2005 56 90 146From acquisitions 1 - 1Charge / (credit) for the year 30 (65) (35) At 30 September 2006 87 25 112 Deferred Tax The deferred tax provision is made in respect of accelerated capitalallowances. Clawback provision Provision is made for commissions repayable to insurance companieswhere it has been received and receivable on indemnity terms during the year. 17. Called up share capital Group and Company 2006 2005 £'000 £'000Authorised100,000,000 Ordinary shares of 1p each 1,000 1,000 Allotted, called up and fully paid No. of shares £'000 At 1 October 2005 13,370,120 134Issued during the year 11,011,120 110At 30 September 2006 24,381,240 244 On 2 November 2005, 125,000 new ordinary shares of 1p were issued atpar as an incentive to members of the new Employee Benefits team based in theSwindon office. On 21 March 2006, 3,981,132 new ordinary shares of 1p were issued at106p as part of the price for the acquisition of the Goss Group Limited. On thesame date the Company issued a further 6,904,988 new ordinary shares of 1p at106p under a placing. On 11 October 2006, 133,701 new ordinary shares of 1p were issued at81p to fulfil the exercise of share warrants by JM Finn. On 2 November 2006, afurther 5,000 new ordinary shares of 1p were issued at 96p to fulfil a shareoption exercise by a staff member under the EMI scheme. 18. Reserves Group Company £'000 £'000Share Premium AccountAt 1 October 2005 2,879 2,849Premium on shares issued 11,430 11,430Costs of share issue (502) (502) At 30 September 2006 13,807 13,777 Capital ReserveAt 1 October 2005 and 30 September 2006 13 - Capital Redemption ReserveAt 1 October 2005 and 30 September 2006 1 1 Profit and Loss AccountAt 1 October 2005 1,405 96Profit / (loss) for the year 1,190 (104)Purchase of own shares by EBT (360) (360)Cost of shares awarded to staff 27 - At 30 September 2006 2,262 (368) Included within the retained profit of the Company and the Group is £2,000 (2005- £nil) held by the EBT. 19. Subsidiary undertakings The following is a list of all of the subsidiary companies within the Group.All subsidiaries are 100% owned, except where noted, and are registered andoperate in England and Wales. Name of company Holding Nature of business Jelf Financial Planning Limited £1 Ords Employee Benefits and Wealth ManagementJelf Insurance Brokers Limited £1 Ords Insurance BrokersGoss Group Limited** £1 Ords Holding CompanyJelf Corporate Healthcare Limited £1 Ords HealthcareGoss & Co (Insurance Brokers) Limited* £1 Ords Insurance BrokersGoss & Co (Financial Services) Limited* £1 Ords Wealth ManagementJelf Commercial Finance Limited £1 Ords Commercial FinanceAuto Business Solutions Limited £1 Ords Vehicle and Asset FinanceAccess Underwriting Agencies Limited* 5p Ords Insurance BrokersGoss Risk Management Limited* £1 Ords Insurance BrokersJelf Insurance Brokers (Wessex) Limited* £1 Ords Non tradingFarndale Hammond (Healthwise) Limited* £1 Ords Non tradingBrian D Thomas Insurance Services Limited £1 Ords DormantKallender Walwyn Limited £1 Ords DormantBath Financial Planning Limited* £1 Ords Non tradingManaged Healthcare Limited* £1 Ords Non tradingA Wills & Co Limited* £1 Ords Non tradingCrowther Beard Financial Planning Limited* £1 Ords Non tradingPendleton May Insurance Brokers Limited* £1 Ords Non tradingPendleton May Financial Services Limited* £1 Ords & £1 deferred Non tradingC&I Insurance Services Limited* £1 Ords Non tradingJelf Corporate Consultancy Limited £1 Ords DormantJelf Mortgage Solutions Limited £1 Ords DormantJelf Private Clients Limited £1 Ords Dormant *Denotes where the shareholding is held by a wholly owned subsidiaryof the Company **At the year end, Michael King held all the £1 'B' Ordinary shares of GossGroup Limited. These shares carry no voting rights and are in the process ofbeing transferred to the Company as part of the acquisition of Goss GroupLimited. 20. Other commitments At 30 September 2006 there were annual commitments undernon-cancellable operating leases as follows: Land and buildings Other 2006 2005 2006 2005 £'000 £'000 £'000 £'000GroupExpiry date:Within 1 year 132 8 16 -Between 2 and 5 years 290 23 120 16After more than 5 years 177 194 - - 599 225 136 16 21. Reconciliation of net cash flow to movement in net (debt) / funds 2006 2006 2005 2005 £'000 £'000 £'000 £'000 Increase in cash in the year 3,280 545 Cash (inflow) / outflow from increase / (2,533) 949decrease in debt and lease financingNew deferred consideration (4,346) (920)Revision of deferred consideration 91 9Change in net debt / (funds) resulting (6,788) 38from cash flows Movement in net (debt) / funds (3,508) 583in the year Net funds / (debt) at 1 October 573 (10) Net (debt) / funds at 30 September (2,935) 573 22 Analysis of net funds / (debt) At At 30 September 1 October Other 2006 2005 Cash Flow changes £'000 £'000 £'000 £'000 Net cash:Cash at bank and in hand 1,946 3,280 - 5,226 Debt:Deferred consideration (1,266) 599 (4,255) (4,922)Obligations under finance lease - (39) - (39)Bank loans (107) (3,093) - (3,200) (1,373) (2,533) (4,255) (8,161) Net funds / (debt) 573 747 (4,255) (2,935) 23. Related parties During the year, Group companies paid a total of £124,488 (2005 - £119,000) toJelf Insurance Group Directors' Retirement and Death Benefit Scheme for rent ofthe buildings from which they operate. The Pension Scheme is deemed to be arelated party because the Scheme's only members are certain directors ofcompanies within the Group. At the year end, an amount of £nil (2005 - £nil)was owed by the Group to Jelf Insurance Group Directors' Retirement and DeathBenefit Scheme. Subsequent to the year end, the ownership of the buildingconcerned was changed to Fromeforde Partners LLP, the partners of which areDirectors of the Company. During the year, Group companies paid a total of £10,000 (2005 - £nil) to TheMichael King SSAS for the rent of the buildings from which they operate. Thesole beneficiary of The Michael King SSAS is a Director of the Company. At theyear end, an amount of £nil (2005 - £nil) was owed to The Michael King SSAS. 24. Employee Benefit Trust and employee share options The Company and Group results include those of the Jelf Group plcEmployee Benefit Trust ('EBT'), which holds shares in respect of the Group'sshare schemes. The EBT was set up during the year to acquire 'excess' shares asthey become available on the open market. The shares so purchased are to beused to meet awards of shares and share options for the Group's employees. Theshare purchases are funded by means of a third party bank loan to the EBT, forwhich the Company acts as guarantor. Finance and administrative costs are borne by the EBT. All costs areaccounted for as they accrue. At 30 September 2006, the EBT held 232,000 1pordinary shares. At that date, share awards issued under the Group's sharescheme amounted to 112,803 (2005 - £nil). Since the year end, the EBT has purchased a further 50,000 shares in theCompany. It has also been granted an option by Michael King to buy 500,000ordinary shares of 1p at 183p per share. This option is exercisable by the EBTbetween 22 March 2008 and 21 March 2009. The nominal value of own shares held by the Group and Company at 30 September2006 was £2,320. Own shares are held in the EBT and are listed investments.Their market value at 30 September 2006 was £425,000. At 30 September 2006 there were 186,625 (2005 - 205,625) EMI Options outstandingwith an exercise price of 96p. Further details of Employee Share and ShareOption Schemes are given in the Remuneration Report. In October 2006 15,000 unapproved share options were awarded to employees. Theseoptions entitle the holder to subscribe at a price of 170p per ordinary share. On 12 January 2007, 12,000 share options were awarded to employees. Theseoptions entitle the holder to subscribe at a price of 230p per ordinary share. 25. Third party share options and warrants On 6 October 2004, the Company issued warrants to subscribe for170,738 ordinary shares to Daniel Stewart & Company plc, warrants to subscribefor 133,701 ordinary shares to JM Finn & Co and warrants to subscribe for267,402 ordinary shares to Midicorp Corporate Finance Limited. Each warrant entitles the warrant holder to subscribe for one ordinaryshare at the price of 81p per share, commencing on the date of Admission to AIMand ending on the fourth anniversary of Admission. As detailed in note 17, on 11 October 2006 JM Finn & Co exercised itswarrants over 133,701 ordinary shares. On 3 October 2005, 50,000 of share options at 96p were awarded tomembers of the new Employee Benefits team based in the Swindon office.. Theseoptions are exercisable from October 2007 until October 2009. On 12 January 2007, 478,000 of share options at 230p were awarded tothis team in recognition of their contribution to the 2006 results. Theseoptions are exercisable from January 2010 until January 2011 26. Derivatives and other financial instruments Derivatives and financial instruments have not been used during the year increating or changing the risks the Group faces. As permitted by FinancialReporting Standard 13, short-term debtors and creditors have been excluded fromthe disclosures. Interest rate profile The interest rate profile of Group financial liabilities is as follows: Currency No Floating interest interest Total £'000 £'000 £'00030 September 2006Sterling borrowings - 3,200 3,200Deferred consideration 4,922 - 4,922 4,922 3,200 8,122 30 September 2005Sterling borrowings - 107 107Deferred consideration 1,266 - 1,266 1,266 107 1,373 The no interest financial liabilities comprise the deferred consideration inrespect of acquisitions made by the Group. The weighted average period untilmaturity of these liabilities is 1.5 years (2005 - 1.5 years). The floating rate financial liabilities comprise denominated bank borrowingsthat bear interest at rates detailed in note 15. Maturity of financial liabilities The maturity profile of Group financial liabilities is detailed in note 15. Currency exposures Group operations are handled almost entirely in sterling. 27. Acquisitions During the year, the Group has made the following acquisitions: Book of business from Alexanders 26 October 2005 Employee BenefitsFarndale Hammond (Healthwise) Limited 1 November 2005 HealthcareGoss Group Limited 21 March 2006 Wealth Management & Insurance BrokersBrian D Thomas Insurance Services Limited 5 May 2006 Insurance BrokersCherwell Insurance Management 31 May 2006 Insurance BrokersAuto Business Solutions Limited 30 June 2006 Vehicle & Asset Finance The net assets acquired, fair value adjustments, consideration and goodwill forthese acquisitions are summarised below: Book value Fair value Fair value acquired adjustments acquired £'000 £'000 £'000 Fixed assets 1,090 (179) 911Debtors 6,946 (13) 6,933Bank / other loans (3,682) - (3,682)Designated insurance broking account 2,551 - 2,551Creditors (9,820) - (9,820)Provisions (8) - (8) Net liabilities acquired (2,923) (192) (3,115) Consideration (cash) 5,040Consideration (shares) 4,220Consideration (deferred) 4,346Costs 427 Goodwill 17,148 Included in the above summary is the acquisition of Goss Group Limited which issummarised below: Book value Fair value Fair value acquired adjustments acquired £'000 £'000 £'000 Fixed assets 978 (138) 840Debtors 6,369 - 6,369Bank / other loans (4,453) - (4,453)Designated insurance broking account 2,551 - 2,551Creditors (8,883) - (8,883) Net liabilities acquired (3,438) (138) (3,576) Consideration (cash) 2,434Consideration (shares) 4,220Consideration (deferred) 2,676Costs 264 Goodwill 13,170 The financial period of the Goss Group Limited prior to acquisitioncommenced on 1 October 2005. The results for the period 1 October 2005 to 20March 2006 were turnover of £4,455,000, operating profit of £59,000, loss beforetaxation of £60,000 and taxation charge of £35,000. The results for the ninemonths ended 30 September 2005 were turnover of £7,656,000, operating profit of£884,000, profit before taxation of £766,000, taxation charge of £320,000 andprofit after taxation of £446,000. The turnover of this business is subject toseasonal fluctuations. In most cases the Directors considered the book values of assets inthe acquired entities not to be materially different to the fair value of theassets acquired. Where fair value adjustments have been made, these have beento align depreciation policies or to write off surplus assets. Deferred consideration is dependent upon a number of criteriaincluding future turnover levels and is to be satisfied in cash. The Directorshave provided for deferred consideration at their best estimate of the liabilitywhich is reasonably expected to be payable. Due to the nature of deferredconsideration final amounts paid may be reduced with a resulting adjustment togoodwill. 28. Acquisitions post year end Subsequent to the year end, the Group has made the followingacquisitions: Book of business from Hern Waters & Co 2 October 2006 Insurance BrokersBook of business from North Cotswold Insurance 31 October 2006 Insurance BrokersHaines Wallace (Insurance Brokers) Ltd 30 November 2006 Insurance BrokersBook of business from John Wason (Insurance Brokers) Ltd 29 December 2006 Insurance Brokers This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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