3rd Feb 2009 07:00
3 February 2009
JELF GROUP plc
("Jelf", the "Group" or the "Company")
Preliminary results for the year ended 30th September 2008
Jelf Group plc - Another year of strong growth
Jelf Group plc, an independent full service brokerage that supports businesses and individuals, announces strong results achieved through both acquisitions and organic growth.
Financial highlights
Revenue has increased by 59% to £63.1m (2007: £39.7m), driven principally by strategic acquisitions.
EBITDA (before exceptional items) has increased by 40% to £10.1m (2007: £7.2m). Margins have declined to 16% (2007: 18%), mainly due to the difficult trading conditions for our Wealth Management business and the semi-fixed nature of Group costs.
Strong operating cash flow of £10.5m (2007: £9.0m), which has allowed the Group to meet its deferred consideration payments from operating cash. Deferred consideration payments arising from past acquisitions will be substantially complete by the end of 2010.
The £0.7m of exceptional costs relates principally to the restructuring carried out as part of the drive for organisational efficiency. This will generate cost savings.
Diluted earnings per share (before amortisation and exceptionals) 13.7p (2007: 17.6p).
The Group has a long term facility (expires in 2013) with the Royal Bank of Scotland, which will be used to cover earnouts in conjunction with operating cash.
Operating highlights
Another progressive year highlighted by the acquisition of three leading regional insurance brokers: Manson Group (based in Manchester), Clarke Roxburgh Group (based in the West Midlands) and Argyll Group (based in Kent and East Sussex). All continue to perform in line with expectations and will provide a strong platform upon which the Group will develop its full range of services.
5% organic growth across the Group, excluding Wealth Management which has been affected by the severe economic conditions.
Insurance: Group-wide insurance business fully integrated into a single placement strategy.
Employee Benefits: Employee Benefits and Healthcare businesses combined, effective 1st October 2008, to create Jelf Employee Benefits. This will help us to present a co-ordinated proposition to our clients, further enhance cross-sales and capture scale economies.
Alex Alway, Group Chief Executive, commented:
"We are pleased to report another year of progressive growth, despite some very difficult trading conditions. In the early part of last year we made some high quality and strategic acquisitions that have extended our geographic footprint and generated opportunities for future organic growth. In the latter half of the year we turned our focus to the operating efficiencies of the business. The primary aim of this was, and continues to be, to ensure we continue to deliver excellent service and support to our clients in a difficult economic environment. We also want to improve profit margins and, partly in response to the difficult economic environment, we have taken action to reduce our cost base to bring it in line with current trading expectations. Jelf continues to be well placed to deliver further growth and shareholder value in the future."
ENQUIRIES
Jelf Group plc
Alex Alway, Chief Executive 01454 272713
Rose Clark, Director of Finance 01454 272853
Cenkos Securities plc
Stephen Keys 020 7397 8900
Further information is available on Jelf at the Group's website:
www.Jelfgroup.com.
Chairman's Statement
This is my first year as Non-Executive Chairman of the Group and I am pleased to be able to report another good set of results in what has probably been the most significant year in the Group's history. Highlights of the year include our £45m net fund raising in January 2008, which won the AIM award for "Transaction of the Year"; and our subsequent acquisition of three major regional brokerages - Argyll Group, Clarke Roxburgh and Manson Insurance Group - which have extended the Group's footprint to the South East, West Midlands and North West respectively.
I would like to take this opportunity to welcome the employees of all the businesses which have joined Jelf in the last year, with a particular welcome to Jon Manson who joined the Plc Board in January 2008. Jon brings 40 years of insurance and client service experience to the Board.
Our fund raising was underpinned by the £26m investment by 3i Quoted Private Equity, who now own approximately 28% of our equity. Bruce Carnegie Brown, Managing Partner of 3i QPE, joined the Board as a Non-Executive Director at the time of the placing, bringing a wealth of financial and general insurance experience. 3i QPE is a committed and sophisticated investor, willing to support our growth strategy with advice and capital when required as well as offering other synergies with the broader 3i Group.
I would also like to put on record here our thanks to Michael King, who stepped down from the Board in January 2008 after 40 years in the industry. While we miss Michael at the Board, I am pleased to report that he continues to provide great service to our clients and staff in Reading.
In addition to our acquisition and related financing activities, our executive team - led by Alex Alway - has been very focused on the successful integration of these acquisitions and on driving organic growth and profitability across all our businesses. As the year progressed, the economic and trading environment became more challenging. In response, we have increased our efforts to capture the benefits of synergies, enhanced buying power and cross referrals, and to manage our cost base and maximize operating efficiencies, all of which deliver real value for our clients and shareholders. As part of these efforts, we have recently merged our healthcare and employee benefits businesses, creating one of the leading intermediaries in this sector. Our healthcare business won three awards including, for the third time in four years, the "Intermediary of the Year" at the Health Insurance Magazine Annual Awards.
Despite the challenging nature of trading and in particular stock market conditions in recent months, the Jelf Group remains a strong and resilient business. Specifically:
Trading - the Group has traded strongly in 2007-08. Our Insurance and Employee Benefits/Healthcare businesses, which now account for around 85% of Group revenues, have not been materially affected by the economic downturn; and all our recent acquisitions continue to perform in line with expectations.
Capital and Cash Flow - operating cash flow remains strong and we have recently reaffirmed our long-term banking arrangements with the Royal Bank of Scotland.
We cannot be complacent in these strange economic times, but we are cautiously optimistic about 2008-09 and very optimistic about the long-term future of the Group.
I want to assure all our shareholders that the Board is doing everything in its power to improve the Group's performance and shareholder value. We will continue to focus on the things that we can control - the operating performance, financial strength and growth prospects of the Jelf Group.
Finally, on behalf of the Board I would like to thank our employees for their excellent efforts, and our shareholders, provider partners and most importantly our clients for their continued support.
David Walker
Group Chairman
February 2009
Operating and financial review
This year has probably represented one of the most exciting periods in the Jelf Group's history and we have again demonstrated the strength of our strategy and our organic growth credentials. We have delivered a good performance and the commitment and flexibility of our people has contributed to another successful year.
The year to 30 September 2008 was again one of considerable change, growth and progress. The results for the year show substantial increases in both revenue and earnings before interest, tax, depreciation, amortisation and exceptionals (EBITDAE).
Financial results
In the year ended 30 September 2008 the Group increased its revenue by 59% to £63.1m (2007:£39.7m); EBITDAE increased by 40% to £10.1m (2007:£7.2m). EBITDAE margin was 16.0% (2007: 18.1%). Operating profit has remained level at £5.1m (2007: £5.0m), primarily because it includes amortisation of intangibles relating to acquisitions of £3.6m (2007: £1.6m).
The Group generated cash from operations of £10.5m (2007: £9.0m). This strong cash flow has continued to enable the Group to meet its deferred consideration payments during the year; the deferred consideration payments arising from past acquisitions should be substantially completed by the end of 2010. The Group has its long term borrowing facility with the Royal Bank of Scotland which expires in 2013 and which will be used to cover outstanding deferred consideration in conjunction with operating cash.
Margins have come under pressure due to the difficult trading conditions in the wealth management business and the semi fixed nature of Group costs. Costs are being reduced in the business to address this. This is the main reason for the exceptional Rationalisation and Restructuring charge this year of £0.7m.
Consolidated shareholders' funds as at 30 September 2008 amounted to £75.44m (2007:£22.63m), representing an increase of 233%. Diluted earnings per share before amortisation and exceptionals (net of tax) is 13.7p (2007: 17.6p) and basic earnings per share amounted to 6.0p (2007:12.7p). Share capital of £45m was raised in February 2008, contributing to the change from 2007.
Dividend policy
In line with the Company's stated dividend policy, the Directors intend to commence payment of dividends only when it becomes commercially prudent to do so, having regard to the maximisation of shareholder value and the availability of the Group's distributable profit and retained funds required to finance future growth and meet regulatory capital adequacy requirements. As a result the Directors are not recommending the payment of a dividend (2007: £nil).
Strategy
The Group's aim continues to be to build a leading independent intermediary business providing a broad range of services to the corporate business sector and related private individual market.
We have recently launched our new Compass strategy which is built on the following principles:
Maintenance of a strong client focus
Strategic and trading relationships with our provider partners
Prudent management of the Group's financial resources on behalf of our shareholders
The development of our people to deliver high value service to our clients
Embedding cross referral of clients within our culture
Clear and consistent communication with all stakeholders
The Group has pursued its growth strategy by focussing on both organic and acquisition opportunities.
The Board and Group management
It was a pleasure to welcome both Jon Manson and Bruce Carnegie-Brown to the Board during 2008. Jon Manson, who joined the Board as an Executive Director in January 2008, brings considerable experience in the insurance broking market having successfully run his own business for over 35 years.
Bruce Carnegie-Brown, who joined the Board in February 2008 as a Non-Executive Director, brings a wealth of financial and insurance knowledge which has assisted in our development.
Our Insurance Executive acts as a leadership team bringing together all the businesses within the Group, and following the acquisitions of Manson, Clarke Roxburgh and Argyll we invited senior managers from these businesses to join this Executive team to ensure we have an integrated approach in dealing with insurers and delivering best practice service to our clients.
We have continued regular reviews of our operating areas to identify and implement appropriate strategies and management structures that support and reflect the expanded business.
The experience and breadth of the Group's management team puts us in a strong position to further increase revenue and enhance profitability over the coming 12 months and beyond.
Review of operations
During 2008 the business continued to be conducted through business sectors, each reporting to Managing Directors who have direct responsibility for the profit and loss account and considerable autonomy in the day-to-day management of their business. The businesses acquired during 2008 are reflected within these different business sectors.
Each of these business sectors is monitored against the key performance indicators (KPI's) of revenue, EBITDAE and EBITDAE margin. The performance of each business sector is included within the following review:
Insurance
This business provides insurance broking services to corporate clients and personal lines products to individuals. It offers independent advice on all aspects of general insurance, including risk assessments, design of insurance programmes, auditing of existing insurance arrangements and claims management.
The professional indemnity (PI) insurance broking team acquired with Lampier in 2007 (Jelf Professions) continues to trade strongly. In addition, the Group is currently in the process of redirecting all PI business into this team to capture economies of scale.
Revenue for insurance has increased by 105% to £35.85m (2007:£17.45m), whilst EBITDAE has increased by 78% to £6.17m (2007:£3.46m). EBITDAE margin is 17% (2007: 20%). Operating profit is £2.69m (2007: £2.17m). This growth has largely been achieved through a number of acquisitions, including Manson, Clarke Roxburgh, Argyll and a number of smaller brokerages, together with success in winning new corporate client mandates.
Manson operates out of Manchester and is a significant insurance intermediary to the leisure and recruitment sector. Clarke Roxburgh is a long established West Midlands based insurance brokerage servicing the small to medium enterprise (SME) business community and personal lines clients. Argyll is a South East insurance brokerage servicing the SME business community in Sussex and Kent.
We have seen some hardening of insurance premiums in the SME market towards the end of 2008, whilst the mid-to-large market rates have remained weak as competition from insurance carriers focused on the UK market has intensified. Recent upheavals in investment markets, coupled with the difficulties of some individual providers, is generally expected to lead to a hardening of insurance premiums in 2009. We have adopted a prudent approach, however, and remain neutral on insurance premiums within our forecasts for 2009.
The insurance business operates in over 30 locations and represents 57% of the Group's revenue.
Healthcare
The healthcare business provides advice on health-related employee benefits such as private medical insurance. Core clients for this business are owner-managed enterprises based in England and Wales. The business also provides specialist fee-based advice to larger companies, encompassing wider healthcare related issues such as absence management and occupational health.
The healthcare business within Manson is recognised as an industry leader and we were delighted to welcome Graeme Warner and his team into the Group in January 2008.
Whilst the corporate healthcare insurance market for new business remains static, the Group continues to strengthen its position as a leading player by introducing new services, capturing market share at the expense of competitors, enjoying economies of scale and consolidating acquired intermediary businesses. We have also seen substantial upward re-ratings of Private Medical Insurance policies in 2008.
The relationships established with clients in this sector continue to be a major source of cross-sales growth for other parts of the Group.
Revenue for the Group's healthcare business has increased by 60% to £9.80m (2007:£6.12m), whilst EBITDAE has increased by 68% to £2.38m (2007:£1.42m). EBITDAE margin is 24% (2007: 23%). Operating profit is £1.72m (2007: £1.00m). This growth has largely been achieved by winning new corporate client mandates, and the acquisition of Manson Warner Healthcare in January 2008.
The healthcare business primarily operates in four locations and represents 16% of the Group's revenue.
During 2008 we have placed a significant part of our Healthcare business onto a new core administration system, adopting the same platform used by the majority of our Insurance business.
Employee benefits
The employee benefits business provides a wide range of services and advice to large corporate entities in respect of benefit design (including risk and pension benefits), communication and implementation. This proposition has been further strengthened by the ongoing development of a market-leading online benefits management system for employers.
Revenue for employee benefits has increased by 6% to £7.84m (2007:£7.39m), whilst EBITDAE has increased to £0.96m (2007: £0.91m). EBITDAE margin is 12% (2007: 12%). Operating profit is £0.75m (2007: £0.81m). These results have largely been achieved through introducing these services to existing clients of the corporate healthcare business and winning a significant number of new client mandates.
Since the start of the financial year we have invested in both systems and people as this sector continues to enjoy favourable conditions. During 2009 we will continue with this investment as we see real opportunities to grow the business. The employee benefits business operates in six locations and represents 12% of the Group's revenue.
Following the year end we have merged our healthcare and employee benefits businesses, to enhance cross-referrals and to capture other scale economies.
Commercial finance
This business has continued to enjoy strong organic growth during its third full year of trading. It provides solutions to Group clients who require specialist advice on all aspects of commercial finance, including property, asset, vehicle and invoice finance.
During 2008 we recruited a new Managing Director to this business in Mike Wakefield, who has considerable experience in the sector.
Revenue for commercial finance has increased by 32% to £627k (2007:£475K). This growth has largely been achieved through introducing this new service to existing clients of the Group. EBITDAE is £2k (2007: £2k). EBITDAE margin 0% (2007: 0%). Operating loss is £7k (2007: £4k).
The commercial finance business operates in two locations and represents 1% of the Group's revenue.
Wealth management
This business provides independent wealth management services, including mortgage advice, investment planning, portfolio management and retirement planning advice to individuals, especially entrepreneurs. It remains the most challenged in the current investment climate, and we have taken steps to reduce costs and have largely mothballed our mortgage operations in light of market conditions.
Revenue for wealth management has increased by 9% to £9.03m (2007:£ 8.26m); EBITDAE has decreased by 60% to £0.55m (2007:£1.36m). EBITDAE margin is 6% (2007: 17%). Operating loss is £0.08m (2007: profit of £1.04m). At the end of the trading year, the business has over £200m (2007: £125m) of client funds on third-party investment (wrap) platforms.
The wealth management business operates in 15 locations and represents 14% of the Group's revenue.
At the end of 2008 Mike Heard retired as Managing Director of this business and we are currently looking to recruit a replacement in 2009.
Chartered status
During 2008 we obtained the prestigious "Chartered Financial Planners" status for our Wealth Management business. This initiative is intended to introduce a greater deal of professionalism into this sector and we are looking to extend it to other parts of the business.
Acquisitions
During this financial year the Group has completed 7 acquisitions, of both commercial insurance and healthcare brokerages; highlights were the purchases of Manson (January 2008) and Clarke Roxburgh and Argyll (April 2008). These businesses are all performing in line with our expectations.
Integration
At the start of this financial year we rationalised the number of separate FSA regulated operating companies from 10 to 6. This rationalisation will continue and, following the end of this financial year, we have integrated our healthcare business into the existing Employee Benefits business.
Our strategy of careful integration of businesses and the people within them has borne fruit, with staff retention and morale remaining strong in all areas of the business showing an emerging culture that is evident throughout the Group.
The Jelf Community
2008 has been a year where our people have once again proved their unquestionable commitment to support a range of very worthy local and national causes.
Due to the efforts of staff members from right across the Group, in excess of £75,000 has been raised to support charities such as the National Deaf Children's Society, Bliss, Acorns Children's Hospice and the Argyll Children's Fund.
Organisational development
The Group, as at 30 September 2008, operated out of 37 locations (2007: 21) and staff numbers throughout the year have increased by 67% to 1,138 (2007:681). The Group has continued to invest heavily in its infrastructure to ensure that we develop support for our primary asset, the people within the business, whilst also creating capacity for future growth.
Our property strategy is to use lease break clauses as an opportunity to exploit local synergies and to co-locate teams to maximise the cross-sales potential.
Examples of our investments include:
Installation of a new Acturis administration system into our healthcare business
Roll-out of bespoke training programmes for management and staff
Launch of a number of cross-over products and services, which has enhanced our full-service offering to clients
Roll-out of our offering for professional practices through Jelf Professions
Investment in the physical working environment in several key locations
Organic growth
Organic growth during 2008 in terms of revenue was 5% excluding Wealth Management, which has been adversely affected by the current investment climate.
The year-on-year organic growth achieved in each division was as follows:
Insurance: 3% growth
Healthcare: 8% growth
Employee Benefits: 6% growth
Commercial Finance: 32% growth
Wealth Management: 11% decline
Awards
We were delighted to receive several awards during the last year, recognising our commitment to clients, staff and investors, as follows:
In October 2008 Jelf won the AIM "Transaction of the year "
At the 2008 Healthcare industry awards Jelf was voted:
Health Insurance Intermediary of the year
Best International Medical Insurance Intermediary
Best Newcomer
People
The Board and I wish to express our thanks to all the employees of the Jelf Group for their dedication and hard work during this financial period. The Group's employees have faced considerable change during the last 12 months and have risen to the challenge. Our particular thanks go to those employees who have joined the Group through acquisition, who have demonstrated remarkable flexibility when dealing with the issues of integration.
The future
The current business environment is one of the most challenging of modern times. Jelf is determined to remain responsive to this, by improving the efficiency of our businesses and delivering the right services at the right price to our clients to help them through this challenging period. We have developed some innovative products and services with our provider partners and will continue to strive to deliver a first class all-round service to our clients.
The Board is confident that the Group's business model, providing multiple services to a wide range of clients across all business sectors through accessing diverse markets, will provide the Group with the necessary resilience needed in the current climate. We look forward to the future with confidence.
Alex Alway
Group Chief Executive
Consolidated Balance Sheet
As at 30 September 2008
|
2008 |
2007 |
|||||||
|
(restated) |
||||||||
|
|
|
|
|
Note |
£'000 |
£'000 |
||
|
Non-current assets |
||||||||
|
Goodwill |
6 |
73,972 |
33,246 |
|||||
|
Intangible assets |
7 |
56,180 |
26,812 |
|||||
|
Property, plant and equipment |
8 |
3,160 |
2,318 |
|||||
|
Available for sale investments |
|
9 |
76 |
131 |
||||
|
133,388 |
62,507 |
|||||||
|
Current assets |
||||||||
|
Trade and other receivables |
10 |
14,289 |
11,242 |
|||||
|
Cash and cash equivalents * |
11 |
21,832 |
9,270 |
|||||
|
36,121 |
20,512 |
|||||||
|
Total assets |
|
|
169,509 |
83,019 |
||||
|
Current liabilities |
||||||||
|
Deferred income tax liability |
16 |
(1,272) |
(639) |
|||||
|
Trade and other payables |
12 |
(26,101) |
(14,937) |
|||||
|
Deferred consideration |
(13,578) |
(4,894) |
||||||
|
Income tax liabilities |
|
|
(2,670) |
(3,275) |
||||
|
Derivative financial instruments |
13 |
(14) |
- |
|||||
|
Bank overdrafts and loans |
17 |
(498) |
- |
|||||
|
(44,133) |
(23,745) |
|||||||
|
Net current assets/(liabilities) |
(8,012) |
(3,233) |
||||||
|
Non-current liabilities |
||||||||
|
Long-term provisions |
15 |
(1,029) |
(167) |
|||||
|
Deferred income tax liability |
16 |
(13,686) |
(7,654) |
|||||
|
Trade and other payables |
12 |
(46) |
(29) |
|||||
|
Deferred consideration |
(12,513) |
(8,785) |
||||||
|
Bank overdrafts and loans |
17 |
(22,663) |
(20,011) |
|||||
|
(49,937) |
(36,646) |
|||||||
|
Total liabilities |
|
|
(94,070) |
(60,391) |
||||
|
Net assets |
|
|
|
75,439 |
22,628 |
|||
|
Equity |
||||||||
|
Share capital |
19,20 |
498 |
257 |
|||||
|
Share premium |
20 |
54,850 |
10,103 |
|||||
|
Merger Reserve |
20 |
10,742 |
6,144 |
|||||
|
Other reserves |
20 |
712 |
(80) |
|||||
|
Retained earnings |
20 |
8,637 |
6,204 |
|||||
|
Total equity |
|
|
75,439 |
22,628 |
||||
* Included within cash and cash equivalents is fiduciary cash of £18,161,000 (30 September 2007: £8,074,000).
The financial statements were approved by the Board of Directors and authorised for issue on 2 February 2009. They were signed on its behalf by:
Alex Alway John Harding Group Chief Executive Group Finance and Operations Director
Consolidated income statement
For the year ended 30 September 2008
|
Note |
2008
|
2007 (restated) |
||||||
|
|
|
|
|
|
|
£'000 |
£'000 |
|
|
Revenue |
5 |
63,147 |
39,694 |
|||||
|
Cost of Sales |
|
|
|
|
(4,758) |
(2,554) |
||
|
Gross Profit |
58,389 |
37,140 |
||||||
|
Administrative expenses |
|
|
|
(53,308) |
(32,123) |
|||
|
Operating profit |
5,081 |
5,017 |
||||||
|
Operating profit consists of: |
||||||||
|
Earnings before interest, taxation, depreciation, amortisation and exceptionals |
5 |
10,066 |
7,155 |
|||||
|
Group reorganisation and rationalisation costs |
25 |
(666) |
- |
|||||
|
Depreciation of tangible fixed assets |
25 |
(738) |
(586) |
|||||
|
Amortisation of intangible fixed assets |
|
25 |
(3,581) |
(1,552) |
||||
|
Investment revenues |
22 |
308 |
86 |
|||||
|
Finance costs |
|
|
|
23 |
(1,875) |
(906) |
||
|
Profit before income tax |
3,514 |
4,197 |
||||||
|
Income tax expense |
|
|
24 |
(1,081) |
(1,069) |
|||
|
Retained profit for the year |
|
|
25 |
2,433 |
3,128 |
|||
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
||||||||
|
Basic (pence) |
26 |
6.1 |
12.8 |
|||||
|
Diluted (pence) |
26 |
6.0 |
12.7 |
|||||
|
All results are derived from continuing operations |
||||||||
Consolidated statement of recognised income and expense
For the year ended 30 September 2008
|
Note |
2008
|
2007 (restated) |
|||||
|
|
|
|
|
|
£'000 |
£'000 |
|
|
Loss on cash flow hedges |
|
|
20 |
(14) |
- |
||
|
Net income recognised directly in equity |
(14) |
- |
|||||
|
Profit for the year |
20 |
2,433 |
3,128 |
||||
|
Total recognised income and expense for the year |
2,419 |
3,128 |
|||||
Consolidated cash flow statement
For the year ended 30 September 2008
|
Note |
2008
|
2007 (restated) |
|||||
|
|
|
|
|
£'000 |
£'000 |
||
|
Cash flows from operating activities |
|||||||
|
Cash generated from operations |
27 |
10,538 |
8,965 |
||||
|
Interest paid |
(1,642) |
(730) |
|||||
|
Taxation paid |
(2,817) |
(322) |
|||||
|
Net cash from operating activities |
|
|
6,079 |
7,913 |
|||
|
Cash flows from investing activities |
|||||||
|
Interest received |
276 |
86 |
|||||
|
Proceeds on disposal of property, plant and equipment |
- |
656 |
|||||
|
Proceeds on disposal of available for sale investments |
- |
- |
|||||
|
Purchase of property, plant and equipment |
(892) |
(997) |
|||||
|
Purchase of intangible assets |
(279) |
(166) |
|||||
|
Purchase of own shares |
(725) |
(491) |
|||||
|
Acquisition of subsidiaries and businesses |
(35,354) |
(19,670) |
|||||
|
Deferred consideration paid |
(4,724) |
(2,562) |
|||||
|
Disposal of subsidiaries and businesses |
- |
35 |
|||||
|
Net cash used in investing activities |
|
|
(41,698) |
(23,109) |
|||
|
Financing activities |
|||||||
|
Repayments of borrowings |
(23,870) |
(6,300) |
|||||
|
Repayments of obligations under finance leases |
(43) |
(43) |
|||||
|
New lease funding |
- |
45 |
|||||
|
Proceeds on issue of shares (net of expenses) |
44,994 |
2,453 |
|||||
|
New bank loans raised |
|
|
|
27,100 |
23,085 |
||
|
Net cash from financing activities |
|
|
|
48,181 |
19,240 |
||
|
|
|||||||
|
Net increase in cash and cash equivalents |
12,562 |
4,044 |
|||||
|
Cash and cash equivalents at beginning of year |
9,270 |
5,226 |
|||||
|
Cash and cash equivalents at end of year * |
11 |
21,832 |
9,270 |
||||
* Included within cash and cash equivalents is fiduciary cash of £18,161,000 (30 September 2007: £8,074,000).
Notes to the consolidated financial statements
1. General information
Jelf Group plc is an AIM listed company incorporated and domiciled in the United Kingdom under the Companies Act 1985. The address of the registered office is given in note 32. The nature of the Group's operations and its principal activities are set out in the Chairman's Statement, the Operating and Financial Review and the Directors' Report.
These Group consolidated financial statements were authorised for issue by the Board of Directors on 2 February 2009.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.
2. Basis of preparation
These consolidated 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 consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies are set out below.
These are the Group's first set of consolidated financial statements under IFRS.
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 33 provides further details on the transition from UK GAAP to IFRS. The date of transition to IFRS was 1 October 2006 (transition date).
3. 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 1 October 2005 have not been restated on an IFRS basis
Standards and Interpretations effective in 2008
IFRIC 11, IFRS 2 - Group and treasury share transactions, provides guidance on whether share based transactions involving treasury shares or involving Group entities should be accounted for as equity settled or cash settled share based payment transactions in the stand-alone accounts of the parent and Group companies. This interpretation does not have an impact on the Group's financial statements.
Interpretations effective in 2008 but not relevant
The following interpretations to the published standards are mandatory for accounting periods beginning on or after 1 October 2007 but are not relevant to the Group's operations:
IFRIC 12 Service concession arrangements
IFRIC 13 Customer loyalty programmes
IFRIC 14, IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group
The following standards and amendments to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 October 2008 or later periods, but the Group has not early adopted them:
IFRS 8 Operating segments replaces IAS 14 Segment Reporting. The new standard requires a management approach, under which segment information is presented on the same basis as that used for internal reporting purposes.
IAS 1 (revised) Presentation of financial statements. This standard is still subject to endorsement by the EU. The revised standard will prohibit the presentation of items and income and expenses in the statement of changes in equity requiring "non-owner changes in equity" to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning of the comparative period in addition to usual requirements. The Group will apply IAS 1 from 1 October 2009 subject to endorsement by the EU.
IFRS 2 (amendment) Share based payment. The amendment to the standard is still subject to endorsement by the EU. It deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and other providing similar services. They would not impact the number of awards expected to vest. All cancellations whether by the entity or by other parties should receive the same accounting treatment. The Group will apply IFRS 2 amendment from 1 October 2009, subject to endorsement by the EU. It is not expected to have a material impact on the Group's financial statements.
IAS 32 (amendment) Financial instruments: Presentation and IAS 1 (amendment)- Presentation of financial statements - Puttable financial instruments and obligations arising on liquidation. The amendment is still subject to endorsement by the EU. It is not expected to have any impact on the Group's financial statements.
IAS 27 (revised) Consolidated and separate financial statements. The amendment to the standard is still subject to endorsement by the EU. The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains or losses. The Group will apply IAS 27 revised from 1 October 2009 subject to endorsement by the EU.
IFRS 3 (revised) Business Combinations (effective 1 July 2009). The revised standard is subject to endorsement by the EU. The revised standard continues to apply the acquisition method of accounting to business combinations, with some significant changes. For example all payments to purchase a business will need to be recorded at fair value at acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. All acquisition costs will have to be expensed. The Group will apply IFRS 3 (revised) prospectively to all business combinations from 1 October 2009, subject to endorsement by the EU.
IAS28 (amendment) Investments in associates (and consequential amendments to IAS 32 Financial Instruments: Presentation, and IFRS 7 Financial instruments: Disclosures). The amendment to the standard is still subject to endorsement by the EU. An investment in an associate is treated as a single asset for the purposes of impairment testing. Any impairment loss is not allocated to specific assets included within the investment, for example goodwill. The Group will apply IAS23 (amendment) to impairment tests related to investments in associates and any related impairment losses from 1 October 2009, subject to endorsement by the EU.
IAS38 (amendment) Intangible Assets. The amendment to the standard is still subject to endorsement by the EU. A prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. The Group will apply the amendment from 1 October 2009, subject to endorsement by the EU.
IAS39 (amendment) Financial instruments: recognition and measurement. The amendment to the standard is still subject to endorsement by the EU. This amendment clarifies that it is possible for there to be movements into and out of the fair value through profit and loss category where a derivative commences or ceases to qualify as a hedging instrument in a cash-flow or net investment hedge. The Group will apply the IAS 39 amendment from 1 October 2009, but it is not expected to have an impact on the Group income statement.
IAS1 (amendment) Presentation of financial statements. The amendment to the standard is still subject to endorsement by the EU. The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with IAS 39 Financial Instruments: Recognition and measurement are examples of current assets and liabilities respectively. The Group will apply the IAS 39 (amendment) from 1 October 2009, subject to endorsement by the EU. It is not expected to have an impact on the Group financial statements.
Interpretations and amendments to existing standards that are not yet effective and not relevant for the Group's operations
The following interpretations and amendments to existing standards have been published and are mandatory for the Group's accounting period beginning on 1 October 2009, but are not relevant for the Group's operations:
IAS 16 (amendment) Property, plant and equipment and consequential amendment to IAS 7 Statement of cash flows
IAS19 (amendment) Employee Benefits
IAS20 (amendment) Accounting for government grants and disclosure of government assistance
IAS23 (amendment) Borrowing Costs
IAS 29 (amendment) Financial Reporting in hyperinflationary economies
IAS31 (amendment) Interests in Joint Ventures
IAS40 (amendment) Investment Properties
IAS41 (amendment) Agriculture
IFRS 1 (amendment) First time adoption of IFRS and IAS 27 Consolidated and separate financial statements
IFRS 5 (amendment) Non-current assets held-for-sale and discontinued operations
IFRIC 13, Customer Loyalty programmes
IFRIC 15 Agreements for construction of real estates
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and all Group undertakings.
Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The results of subsidiary undertakings acquired or disposed of are included in the consolidated income statement from the date of acquisition or up to the date of disposal.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. 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. Revenue represents commissions and fees due with reference to the commencement date of the insurance policy or other product taken out by clients.
Where there is an expectation of future servicing requirements an element of income relating to the policy is deferred to cover the associated contractual obligation.
Investment returns
Investment returns on fiduciary cash balances held are credited to revenue on an accruals basis, subject to the terms of business agreed with the client.
Other services
Fees and other income receivable, including profit share and commission overriders, are recognised in the period to which they relate and when they can be measured with reasonable certainty, and all servicing obligations have been met.
Operating profit
Operating profit is stated before investment revenues and finance costs.
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.
Goodwill
Goodwill, representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired, is recognised as an asset. Goodwill is reviewed for impairment at least annually and any impairment will be recognised in the income statement and may not be subsequently reversed. Goodwill is carried at cost less accumulated impairment losses.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment.
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. The current maximum estimated economic life of these assets is 13 years.
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, 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.
Current and deferred income tax
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax is charged or credited to equity in respect of any items, which is itself either charged or credited directly to equity. Any subsequent recognition of the deferred gain or loss in the consolidated income statement is accompanied by the corresponding deferred income tax.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Derivative financial instruments and hedging activities
Financial instruments are defined as: "Any contract which gives rise to a financial asset of one entity and a financial liability of another".
Financial assets and liabilities are recognised in the Group balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Derivatives
The Group only enters into derivative financial instruments in order to hedge underlying commercial exposures.
Hedge Accounting
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, which is included within trade receivables, no recognition of the insurance transaction occurs until the Group receives cash in respect of premiums, at which time a corresponding liability is established in favour of the insurer or the client.
In certain circumstances, the Group advances premiums, refunds or claims to insurance underwriters or clients prior to collection. These advances are reflected in the consolidated balance sheet as part of trade receivables.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently at amortised cost, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, dispute, default or delinquency in payments are considered indicators that the receivable is impaired. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. Included within cash and cash equivalents is fiduciary cash held on behalf of clients or insurers.
Trade payables
Trade payables are initially recognised at fair value and subsequently measured at amortised cost.
Borrowings
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Borrowings are recognised initially at fair value, net of transaction costs incurred. They are subsequently stated at amortised cost using the effective interest rate method.
Deferred and contingent consideration
Deferred and contingent consideration is included at the Directors' best estimate of the amounts which will be payable. This amount is reviewed on an annual basis.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.
Employee benefits
Share based payment
Shares awarded through the Jelf Group plc Employee Benefit Trust ('EBT') are accounted for in accordance with IFRS 2 'Share-based payment'. A period of continued employment is required before the relevant employees become unconditionally entitled to the shares awarded. The cost of the awards is spread over this period. The amount recognised is based on the fair value of shares at the date the award is made.
Own shares held by the EBT are accounted for in accordance with IFRS 2 Share-based payment:
Until such time as the Company's own shares held by the EBT vest unconditionally to employees, the consideration paid for the shares is deducted from the Group and Company profit and loss account in arriving at shareholders' funds.
Consideration paid or received for the purchase or sale of the Company's own shares are shown as separate amounts in the reconciliations of movements in shareholders' funds.
Any dividend income arising on own shares is excluded in arriving at profit before tax and deducted from dividends paid and proposed.
Other assets and liabilities of the EBT are recognised as the assets and liabilities of the Group and Company.
Finance costs and any administration expenses of the EBT are charged as they accrue.
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.
4. Critical accounting estimates and judgements
In the application of the Group's accounting policies the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historic experience and other factors that are considered to be relevant and are reviewed on an ongoing basis. Actual results may differ from these estimates.
Key sources of estimation uncertainty
The Directors have considered the key assumptions used to estimate the Group's assets and liabilities as at the balance sheet date, and believe these assumptions to be entirely appropriate. The estimates and judgements most likely to have a significant effect are in the following areas:
Goodwill and impairment
The Group performs annual impairment tests to verify whether goodwill and other assets that have indefinite useful lives have suffered any impairment. Other assets are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the asset exceeds its recoverable amount. Impairment testing requires a number of assumptions to be made about future cash-flows, including estimating a post-tax discount rate.
There is no impairment charge for the year. The post-tax discount rate applied to the cash flows would have to be 0.5% higher than the Directors' estimations to give rise to any impairment. More information on the impairment testing performed is shown in Note 6.
Intangible assets
When new entities are acquired by the Group, the client books of those acquisitions are valued using a discounted cash-flow methodology. There are significant judgements involved in estimating the assumptions underlying these calculations: most notably the size and timing of the relevant cash-flows and the applicable discount rate. These assets are capitalised and then amortised over the expected useful economic life of the book; the life of these assets is based on the expected retention rate of the clients.
Share-based payments
Various assumptions are required in order to calculate the charge for the year; for option based awards, these assumptions are then applied to option pricing models. The key assumptions relate to the future performance of the Group, the number of employees likely to remain employed for the duration of the scheme and the volatility of the Group's share price. These assumptions are shown in Note 18.
Contingent consideration
When new entities are acquired by the Group, it is common for part of the purchase consideration to be deferred and contingent on future events. Estimates are required in respect of the amount of deferred contingent consideration, which is determined according to formulae agreed at the time of the business combination, and normally related to the projected future revenues of the acquired business. The Directors review these estimates at each Balance Sheet date. At 30 September 2008 the Group has outstanding deferred consideration payable amounting to £26,091,000 (2007: £13,679,000) of which £5,156,000 (2007: £600,000) was contingent.
5. Segmental Reporting
All revenue arose within the United Kingdom. No secondary segment information is therefore given. Segment information about these businesses is presented below.
|
Income statement |
2008
|
2007 (restated) |
||
|
|
|
£'000 |
£'000 |
|
|
Revenue |
||||
|
Insurance |
35,852 |
17,454 |
||
|
Healthcare |
9,796 |
6,119 |
||
|
Employee benefits |
7,842 |
7,391 |
||
|
Commercial finance |
627 |
475 |
||
|
Wealth management |
9,030 |
8,255 |
||
|
|
|
63,147 |
39,694 |
|
|
Retained profit |
||||
|
Insurance |
6,173 |
3,461 |
||
|
Healthcare |
2,382 |
1,421 |
||
|
Employee benefits |
961 |
911 |
||
|
Commercial finance |
2 |
2 |
||
|
Wealth management |
|
548 |
1,360 |
|
|
Earnings before interest, taxation, depreciation, amortisation and exceptionals |
10,066 |
7,155 |
||
|
Group reorganisation and rationalisation costs |
(666) |
- |
||
|
Depreciation of tangible fixed assets |
(738) |
(586) |
||
|
Amortisation of intangible fixed assets |
(3,581) |
(1,552) |
||
|
Investment revenues |
308 |
86 |
||
|
Finance costs |
(1,875) |
(906) |
||
|
Income tax expense |
(1,081) |
(1,069) |
||
|
Retained profit for the period |
2,433 |
3,128 |
||
|
Balance sheet |
2008 |
2007 |
|
|
£'000 |
£'000 |
||
|
Segment assets |
|||
|
Insurance |
118,906 |
24,179 |
|
|
Healthcare |
25,595 |
34,056 |
|
|
Employee benefits |
6,781 |
17,018 |
|
|
Commercial finance |
661 |
(157) |
|
|
Wealth management |
15,843 |
7,398 |
|
|
Unallocated |
1,723 |
525 |
|
|
|
|
169,509 |
83,019 |
|
Segment liabilities |
|||
|
Insurance |
(58,102) |
(18,661) |
|
|
Healthcare |
(22,404) |
(24,286) |
|
|
Employee benefits |
(3,253) |
(12,128) |
|
|
Commercial finance |
(3,021) |
(44) |
|
|
Wealth management |
(7,290) |
(5,272) |
|
|
|
|
(94,070) |
(60,391) |
|
Other information |
|||
|
Capital additions |
|||
|
Insurance |
517 |
424 |
|
|
Healthcare |
161 |
163 |
|
|
Employee benefits |
79 |
195 |
|
|
Commercial finance |
14 |
7 |
|
|
Wealth management |
132 |
367 |
|
|
|
|
903 |
1,156 |
|
Depreciation |
|||
|
Insurance |
380 |
214 |
|
|
Healthcare |
75 |
68 |
|
|
Employee benefits |
101 |
103 |
|
|
Commercial finance |
4 |
6 |
|
|
Wealth management |
178 |
195 |
|
|
|
|
738 |
586 |
|
Amortisation |
|||
|
Insurance |
2,677 |
1,073 |
|
|
Healthcare |
517 |
352 |
|
|
Employee benefits |
75 |
- |
|
|
Commercial finance |
1 |
- |
|
|
Wealth management |
311 |
127 |
|
|
|
|
3,581 |
1,552 |
6. Goodwill
Details of movements during the year relating to acquisitions are shown in note 28.
|
2008 £'000 |
2007 (restated) £'000 |
|||
|
Cost and net book value |
||||
|
At 1 October (restated) |
33,246 |
14,220 |
||
|
Acquisitions |
40,726 |
19,026 |
||
|
At 30 September |
73,972 |
33,246 |
Impairment tests for goodwill
Goodwill is allocated to the Group's cash generating units (CGUs) identified according to the business segment. A summary of the goodwill allocated is presented below.
|
2008 |
2007 |
||
|
|
|
£'000 |
£'000 |
|
Insurance |
54,982 |
23,086 |
|
|
Healthcare |
8,735 |
5,464 |
|
|
Employee Benefits |
3,039 |
1,576 |
|
|
Commercial Finance |
194 |
194 |
|
|
Wealth Management |
7,022 |
2,926 |
|
|
|
|
73,972 |
33,246 |
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a two year period. Cash flows beyond the two-year period are extrapolated using the estimated growth rates stated below.
|
Insurance |
Healthcare |
Employee benefits and Wealth management |
Commercial finance |
|
|
As at 30 September 2008 |
||||
|
Growth rate 1 |
2.25% |
2.25% |
2.25% |
2.25% |
|
Discount rate 2 |
12.4% |
12.4% |
12.4% |
12.4% |
|
As at 30 September 2007 |
||||
|
Growth rate 1 |
2.25% |
2.25% |
2.25% |
2.25% |
|
Discount rate 2 |
13.6% |
13.6% |
13.6% |
13.6% |
1 Average growth rate used to extrapolate cash flows beyond two years
2 Post-tax discount rate applied to the cash flow projections
|
Key assumptions used in value in use calculations The budgeted growth in trading profits is determined by management based on past experience and its expectation for the market development. The discount rates used are post-tax and reflect specific risks relevant to the group. |
|
Impairment During the year no impairment losses were recognised. |
7. Intangible assets
|
Computer software £'000 |
Client books of business £'000 |
Total £'000 |
||
|
Cost |
||||
|
At 1 October 2007 (restated) |
395 |
28,392 |
28,787 |
|
|
Acquisitions |
5 |
32,173 |
32,178 |
|
|
Additions |
369 |
- |
369 |
|
|
At 30 September 2008 |
769 |
60,565 |
61,334 |
|
|
Accumulated amortisation |
||||
|
At 1 October 2007 (restated) |
117 |
1,858 |
1,975 |
|
|
Adjustment |
- |
(402) |
(402) |
|
|
Amortisation charge |
112 |
3,469 |
3,581 |
|
|
At 30 September 2008 |
229 |
4,925 |
5,154 |
|
|
Net book value |
||||
|
At 30 September 2008 |
540 |
55,640 |
56,180 |
|
|
At 30 September 2007 (restated) |
278 |
26,534 |
26,812 |
Impairment tests for intangible assets
Intangible assets are allocated to the Group's cash generating units (CGUs) identified according to the business segment. A summary of the allocations is presented below.
|
2008 |
2007 |
||
|
|
|
£'000 |
£'000 |
|
Insurance |
42,422 |
18,544 |
|
|
Healthcare |
8,190 |
6,075 |
|
|
Employee Benefits |
969 |
- |
|
|
Wealth Management |
4,599 |
2,193 |
|
|
|
|
56,180 |
26,812 |
Disclosures regarding the assumption used in the impairment test are disclosed in note 6.
8. Property, plant and equipment
|
Land and Buildings £'000 |
Motor Vehicles £'000 |
Fixtures, fittings and equipment £'000 |
Total £'000 |
|
|
Cost |
||||
|
At 1 October 2007 (restated) |
- |
52 |
4,116 |
4,168 |
|
Acquisitions |
54 |
140 |
504 |
698 |
|
Additions |
34 |
- |
869 |
903 |
|
Disposals |
- |
(21) |
- |
(21) |
|
At 30 September 2008 |
88 |
171 |
5,489 |
5,748 |
|
Accumulated Depreciation |
||||
|
At 1 October 2007 (restated) |
- |
6 |
1,844 |
1,850 |
|
Charge for the year |
6 |
29 |
703 |
738 |
|
At 30 September 2008 |
6 |
35 |
2,547 |
2,588 |
|
Net book value |
||||
|
At 30 September 2008 |
82 |
136 |
2,942 |
3,160 |
|
At 30 September 2007 (restated) |
- |
46 |
2,272 |
2,318 |
The group leases various motor vehicles, fixtures, fittings and equipment under non-cancellable finance lease agreements. The lease terms are between 1 and 4 years, and ownership for the assets lie within the group. The net book value of property, plant and equipment held under finance leases is as follows:
|
2008 |
2007 |
|||
|
|
|
|
£'000 |
£'000 |
|
Motor vehicles, fixtures, fittings and equipment |
32 |
42 |
||
9. Available for sale investments
|
2008 |
2007 |
|||
|
£'000 |
£'000 |
|||
|
Cost and net book value |
||||
|
At 1 October |
131 |
43 |
||
|
Acquisitions |
9 |
86 |
||
|
Fair value adjustment |
(70) |
- |
||
|
Additions |
12 |
5 |
||
|
Disposals |
(6) |
(3) |
||
|
At 30 September |
76 |
131 |
||
The fair value adjustment relates to a minority interest held by the Lampier Group. The aggregate market value of the investments at 30 September 2008 was £83,000 (30 September 2007: £139,000).
10. Trade and other receivables
|
2008 |
2007 (restated) |
|||
|
|
|
£'000 |
£'000 |
|
|
Trade receivables |
11,975 |
7,698 |
||
|
Less: Provision for bad and doubtful debt |
(300) |
(115) |
||
|
Trade receivables - net |
11,675 |
7,583 |
||
|
Deferred tax asset |
- |
442 |
||
|
Other debtors |
555 |
1,382 |
||
|
Prepayments and accrued income |
2,059 |
1,835 |
||
|
14,289 |
11,242 |
|||
All trade and other receivables are current.
Movements on the Group's provision for bad and doubtful debts are as follows:
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
At 1 October |
115 |
101 |
||
|
Acquisitions |
35 |
7 |
||
|
Increase in provision |
150 |
7 |
||
|
At 30 September |
300 |
115 |
||
The following table sets out the age of trade receivables. The Group does not hold any collateral over these balances.
|
Trade receivables |
Provision for bad and doubtful debt |
Trade receivables - net |
||
|
30 September 2008 |
|
£'000 |
£'000 |
£'000 |
|
Not overdue |
7,220 |
- |
7,220 |
|
|
Past due but not more than three months |
2,016 |
- |
2,016 |
|
|
Past due more than three months and not due more than six months |
1,709 |
- |
1,709 |
|
|
Past due more than six months and not due more than one year |
762 |
(54) |
708 |
|
|
Past due more than one year |
268 |
(246) |
22 |
|
|
11,975 |
(300) |
11,675 |
||
|
Trade receivables |
Provision for bad and doubtful debt |
Trade receivables - net |
||
|
30 September 2007 |
|
£'000 |
£'000 |
£'000 |
|
Not overdue |
1,397 |
- |
1,397 |
|
|
Past due but not more than three months |
4,507 |
- |
4,507 |
|
|
Past due more than three months and not due more than six months |
678 |
- |
678 |
|
|
Past due more than six months and not due more than one year |
440 |
- |
440 |
|
|
Past due more than one year |
676 |
(115) |
561 |
|
|
7,698 |
(115) |
7,583 |
||
11. Cash and cash equivalents
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
Cash at bank and on hand |
||||
|
Fiduciary |
18,161 |
8,074 |
||
|
Own funds |
3,671 |
1,196 |
||
|
21,832 |
9,270 |
|||
The credit quality of cash at bank can be assessed by reference to external credit ratings, where available, or to historical information about counterparty default rates.
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
AAA 1 |
- |
9,270 |
||
|
AA 2 |
17,951 |
- |
||
|
A 3 |
3,881 |
- |
||
|
21,832 |
9,270 |
|||
1 Royal Bank of Scotland plc
2 Royal Bank of Scotland plc, Barclays Bank plc and Lloyds TSB Bank plc
3 HBOS plc - the Group is currently in the process of transferring these deposits to its principal bankers, the Royal Bank of Scotland plc
12. Trade and other payables
|
2008 |
2007 (restated) |
|||
|
|
|
£'000 |
£'000 |
|
|
Current |
||||
|
Trade creditors |
1,591 |
1,614 |
||
|
Insurance broking creditors |
16,037 |
4,456 |
||
|
Other tax and social security |
1,027 |
697 |
||
|
Obligations under finance leases |
78 |
12 |
||
|
Other creditors |
837 |
1,385 |
||
|
Accruals and deferred income |
6,531 |
6,773 |
||
|
26,101 |
14,937 |
|||
|
Non-current |
||||
|
Obligations under finance leases |
15 |
29 |
||
|
Other creditors |
31 |
- |
||
|
46 |
29 |
|||
Finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
Gross finance lease liabilities - minimum lease payments |
||||
|
Within one year |
64 |
19 |
||
|
In the second to fifth year inclusive |
15 |
32 |
||
|
79 |
51 |
|||
|
Less: future finance charges |
(11) |
(10) |
||
|
Present value of finance lease liabilities |
68 |
41 |
||
|
Present value of minimum lease payments |
|||
|
Within one year |
56 |
12 |
|
|
In the second to fifth year inclusive |
12 |
29 |
|
|
Present value of finance lease liabilities |
68 |
41 |
13. Derivative financial instruments
|
2008 |
2007 |
|||||
|
Assets £'000 |
Liabilities £'000 |
Assets £'000 |
Liabilities £'000 |
|||
|
Interest rate swaps - cash flow hedges |
- |
(14) |
- |
- |
||
The credit quality of derivative financial assets can be assessed by reference to external credit ratings, where available, or to historical information about counterparty default rates:
|
2008 |
2007 |
|||||
|
Assets £'000 |
Liabilities £'000 |
Assets £'000 |
Liabilities £'000 |
|||
|
AA |
- |
(14) |
- |
- |
||
|
Total |
- |
(14) |
- |
- |
||
The Group uses interest rate swaps to manage the market risk arising from holding floating rate bank loans. The notional principal amount of the outstanding interest rate swap contract at 30 September 2008 was £10m (30 September 2007: £nil). The fixed interest rate implicit in the contract is 4.99% and the bank loan carries a floating rate linked to LIBOR. These interest rate swaps are designated and effective as cash flow hedges and the fair value thereof has been deferred in equity.
Trading derivatives are classified as a current asset or liability where they mature within 12 months. Trading derivatives maturing after a period in excess of 12 months are classified as non-current.
14. Financial Instruments
|
30 September 2008 |
Loans and receivables £'000 |
Derivatives used for hedging £'000 |
Available for sale £'000 |
Other financial liabilities £'000 |
Total £'000 |
|
Assets per balance sheet |
|||||
|
Available for sale investments |
- |
- |
76 |
- |
76 |
|
Trade and other receivables |
14,289 |
- |
- |
- |
14,289 |
|
Cash and cash equivalents |
21,832 |
- |
- |
- |
21,832 |
|
36,121 |
- |
76 |
- |
36,197 |
|
|
Liabilities per balance sheet |
|||||
|
Bank overdraft and loans |
- |
- |
- |
(23,161) |
(23,161) |
|
Deferred consideration |
- |
- |
- |
(26,091) |
(26,091) |
|
Trade and other payables |
- |
- |
- |
(26,147) |
(26,147) |
|
Income tax liabilities |
- |
- |
- |
(2,670) |
(2,670) |
|
Derivative financial instruments |
- |
(14) |
- |
- |
(14) |
|
- |
(14) |
- |
(78,069) |
(78,083) |
|
30 September 2007 |
Loans and receivables £'000 |
Derivatives used for hedging £'000 |
Available for sale £'000 |
Other financial liabilities £'000 |
Total £'000 |
|
Assets per balance sheet |
|||||
|
Available for sale investments |
- |
- |
131 |
- |
131 |
|
Trade and other receivables |
11,242 |
- |
- |
- |
11,242 |
|
Cash and cash equivalents |
9,270 |
- |
- |
- |
9,270 |
|
20,512 |
- |
131 |
- |
20,643 |
|
|
Liabilities per balance sheet |
|||||
|
Bank overdrafts and loans |
- |
- |
- |
(20,011) |
(20,011) |
|
Deferred consideration |
- |
- |
- |
(13,679) |
(13,679) |
|
Trade and other payables |
- |
- |
- |
(14,966) |
(14,966) |
|
Income tax liabilities |
- |
- |
- |
(3,275) |
(3,275) |
|
Derivative financial instruments |
- |
- |
- |
- |
- |
|
- |
- |
- |
(51,931) |
(51,931) |
The Directors consider that the carrying value of financial instruments approximate fair value.
The tables below set out the contractual cash flows attaching to the Group's non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities, based on the earliest date on which the Group can be required to pay.
|
30 September 2008 |
1 - 6 months |
6 months to 1 year |
1 - 5 years |
5+ years |
Total |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Bank overdrafts and loans |
498 |
- |
23,000 |
- |
23,498 |
|
Deferred consideration |
6,269 |
7,309 |
12,513 |
- |
26,091 |
|
Trade and other payables |
26,079 |
22 |
46 |
- |
26,147 |
|
Income tax liabilities |
2,670 |
- |
- |
- |
2,670 |
|
|
35,516 |
7,331 |
35,559 |
- |
78,406 |
|
30 September 2007 |
1 - 6 months |
6 months to 1 year |
1 - 5 years |
5+ years |
Total |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Bank overdrafts and loans |
- |
- |
19,770 |
- |
19,770 |
|
Deferred consideration |
2,612 |
2,282 |
8,785 |
- |
13,679 |
|
Trade and other payables |
14,931 |
6 |
29 |
- |
14,966 |
|
Income tax liabilities |
3,275 |
- |
- |
- |
3,275 |
|
|
20,818 |
2,288 |
28,584 |
- |
51,690 |
15. Long-term provisions
|
Short-term employee Benefits provision £'000 |
Clawback provision £'000 |
Group reorganisation and rationalisation provision £'000 |
Other provisions £'000 |
Total £'000 |
||
|
At 1 October 2007 (restated) |
37 |
130 |
- |
- |
167 |
|
|
Acquisitions |
69 |
93 |
- |
71 |
233 |
|
|
Charged in the income statement |
97 |
4 |
463 |
170 |
734 |
|
|
Utilised in the year |
- |
(12) |
- |
(93) |
(105) |
|
|
At 30 September 2008 |
203 |
215 |
463 |
148 |
1,029 |
|
At 1 October 2006 (restated) |
- |
25 |
- |
- |
25 |
|
|
Acquisitions |
- |
20 |
- |
- |
20 |
|
|
Charged to income statement |
37 |
85 |
- |
- |
122 |
|
|
At 30 September 2007 |
37 |
130 |
- |
- |
167 |
The short-term employee benefits provision relates to the cost of holidays due to staff but not taken.
Clawback provisions are in respect of potential repayment of commission received on indemnity terms.
The Group reorganisation provision relates to reorganisation and rationalisation costs expected to be incurred as a result of combining and restructuring operations. These costs are not associated with the ongoing activities of the Group.
Other provisions relate to potential client redress and dilapidations on various leased properties.
16. Deferred income tax liabilities
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities. The offset amounts are as follows:
|
2008 |
2007 (restated) |
|
|
£'000 |
£'000 |
|
|
Deferred tax assets: |
||
|
Deferred tax asset to be recovered after more than 12 months |
587 |
442 |
|
Deferred tax asset to be recovered within 12 months |
- |
- |
|
587 |
442 |
|
|
Offset against liabilities |
(587) |
- |
|
Deferred tax assets (note 10) |
- |
442 |
|
Deferred tax liabilities: |
||
|
Deferred tax liability to be recovered after more than 12 months |
(14,273) |
(7,654) |
|
Offset against liabilities |
587 |
- |
|
(13,686) |
(7,212) |
|
|
Deferred tax liability to be recovered within 12 months |
(1,272) |
(639) |
|
(14,958) |
(8,127) |
|
|
Net tax assets/(liabilities) |
(14,958) |
(7,851) |
The movement in the net deferred income tax assets and liabilities during the year is as follows:
|
At 1 Oct 2007 (restated) £'000 |
Charge / (credit) to income £'000 |
Charge / (credit) to equity £'000 |
Companies acquired £'000 |
Adjustment in respect of prior years £'000 |
At 30 Sept 2008 £'000 |
|
|
Accelerated capital allowances |
276 |
6 |
- |
(47) |
- |
235 |
|
Intangibles |
(8,127) |
971 |
542 |
(9,009) |
78 |
(15,545) |
|
Other |
- |
352 |
- |
- |
- |
352 |
|
Net tax assets/(liabilities) |
(7,851) |
1,329 |
542 |
(9,056) |
78 |
(14,958) |
17. Bank overdraft and loans
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
Bank loans |
||||
|
Current |
498 |
- |
||
|
Non-current |
22,663 |
20,011 |
||
|
23,161 |
20,011 |
|||
The Group has undrawn committed borrowing facilities at 30 September 2008 of £17,000,000 (2007: £9,989,000). As at 2nd February 2009 the non-current debt drawn was £23,800,000 and the undrawn amount was £11,200,000.
The bank loan facility floats at a rate of between 1.75% and 3% above LIBOR. The current portion of the bank debt is repayable in February 2009 and the non-current debt is repayable between 2011 and 2013. The loan is secured by an unlimited inter-company composite guarantee over the trading companies within the Group. The facility terms and conditions include common debt and interest cover covenants which the Group expects to continue to comply with and has done so throughout the period.
The exposure of the bank loans of the Group to interest rate changes and the periods in which the borrowings re-price are as follows. The element which re-prices after 5 years relates to the £10,000,000 interest rate swap disclosed in note 13:
|
6 months or less £'000 |
6 - 12 months £'000 |
1 - 5 years £'000 |
Over 5 years £'000 |
Total £'000 |
|
|
At 30 September 2008 |
13,161 |
- |
- |
10,000 |
23,161 |
|
At 30 September 2007 |
20,011 |
- |
- |
- |
20,011 |
The effective interest rate at the balance sheet date, before any hedging adjustments, was as follows:
|
30 Sept 2008 £'000 |
30 Sept 2007 £'000 |
||||
|
Bank loans |
7.64% |
7.84% |
The Directors consider that the carrying amount of bank overdraft and loans approximate to their fair value.
18. Share based Payment
Equity-settled share option schemes
The Group has a number of share option plans that are available to Board members and employees as described in the Remuneration Report on pages 14 to 17.
Options are settled by the issue of ordinary shares of 1p each upon receipt of the relevant exercise funds from the option holder. Options are forfeited if the employee leaves the Group before the options vest.
The Company also has a share option plan to recognise the performance of a number of self-employed advisors.
Details of the movements in share options and warrants during the year are as follows:
|
2008 |
2007 |
|||
|
Number of share options |
Weighted average exercise price (pence) |
Number of share options |
Weighted average exercise price (pence) |
|
|
Outstanding at beginning of year |
1,185,891 |
189.8 |
808,466 |
85.4 |
|
Granted during the year |
1,514,692 |
243.7 |
991,047 |
211.1 |
|
Forfeited during the year |
(919,734) |
228.1 |
(21,000) |
230.0 |
|
Exercised during the year |
(14,781) |
96.0 |
(592,622) |
81.5 |
|
Outstanding at the end of the year |
1,766,068 |
216.9 |
1,185,891 |
189.8 |
|
Exercisable at the end of the year |
201,063 |
96.0 |
160,625 |
96.0 |
The weighted average remaining contractual life of the options outstanding at 30 September 2008 was 2.4 years (2007: 2.8 years). The exercise prices for the options range from 96p to 265p (2007: 96p to 265p).
Valuation
Key assumptions used in the valuation of share options using the Black Scholes model are determined as follows:
|
Share price |
Market value at the award date |
||
|
Exercise price |
As stated in the option agreement. There are no options with a variable exercise price |
||
|
Expected volatility |
Based on the historical volatility of the Company's share price, which the Directors believe is the most objective basis for estimating future volatility |
||
|
Expected option life |
Assuming a holder exercises their option half-way through the exercise period |
||
|
Expected dividends Lapse probability Performance criteria |
Nil Based on annualised historic lapses No options have performance criteria |
||
|
Risk-free interest rate |
Based on UK Gilts with similar issue dates and terms as the option |
||
|
Grant date |
Exercisable |
Aggregate fair value at issuance £ |
|
01 Sept 2005 |
01 Oct 2006 to 30 Sept 2014 |
40,524 |
|
01 Sept 2005 |
01 Oct 2007 to 30 Sept 2015 |
6,815 |
|
03 Oct 2005 |
01 Oct 2007 to 30 Sept 2009 |
8,105 |
|
01 Oct 2006 |
01 Nov 2008 to 31 Oct 2016 |
6,517 |
|
12 Jan 2007 |
01 Feb 2010 to 31 Jan 2011 |
298,026 |
|
06 Feb 2007 |
01 Mar 2009 to 28 Feb 2016 |
200,226 |
|
31 May 2007 |
01 Jun 2009 to 31 May 2017 |
10,159 |
|
6 Nov 2007 |
06 Nov 2010 to 05 Nov 2011 |
207,342 |
|
29 Jan 2008 |
30 Jan 2010 to 29 Jan 2018 |
22,692 |
|
29 Jan 2008 |
30 Jan 2011 to 29 Jan 2012 |
32,223 |
|
16 Apr 2008 |
01 Jun 2011 |
227,993 |
Equity settled Share Appreciation Rights
The Jelf Group plc 2008 Long Term Incentive Plan was adopted on 3 April 2008 and provides for awards of equity settled Share Appreciation Rights (SARs) to certain Directors and key employees. This SARs award was conditional on the recipients surrendering their options held under the Jelf Group plc Long Term Incentive Plan (Old LTIP). The SARs awards deliver to recipients a net gain equal to the increase in share price between the base price 212.5p and the price prevailing at the end of three years. This net gain is delivered in shares, with reference to the share price prevailing at the end of three years. The number of shares issued following exercise will be less than the number of SARs issued.
Exercise of the SARs is subject to the achievement of specified performance conditions over a three year period. If these conditions are met the SARs vest and are exercisable at the end of years 3 (50%), 4 (25%) and 5 (25%).
Details of the SARs issued during the year are as follows:
|
2008 |
||
|
Number of SARs |
Weighted average exercise price (pence) |
|
|
Outstanding at beginning of year |
- |
- |
|
Granted during the year * |
4,405,000 |
214.0 |
|
Outstanding at the end of the year |
4,405,000 |
214.0 |
|
Exercisable at the end of the year |
- |
- |
* Included in this number are 139,260 awards made under CSOP scheme at a price of 258.5p.
The weighted average remaining contractual life of the options outstanding at 30 September 2008 was 3.25 years. The exercise price for these options range from 212.5p to 258.5p.
The key assumptions used in the valuation of the SARs, using a Monte Carlo modelling technique to calculate a range of probable outcomes, were as follows:
|
Share price |
Market value at the award date |
||
|
Exercise price |
As stated in the option agreement. |
||
|
Expected volatility |
Based on the historical volatility of the Company's share price, which the Directors believe is the most objective basis for estimating future volatility |
||
|
Expected option life |
The SAR is exercisable only on vesting |
||
|
Expected dividends Lapse probability Performance criteria |
Nil Based on annualised historic lapses for senior management The SARs have market performance criteria based on the company's share price |
||
|
Risk-free interest rate |
Based on UK Gilts with similar issue dates and terms as the option |
||
The SARs were granted on 3 April 2008 and the fair value of the award was £3,020,354 (2007: £nil).
Conditional Share Award
On 3 April 2008 a conditional share award of 220,000 shares (2007: nil) was made to David Walker (Non-Executive Chairman). These shares will vest after 3 years, dependent on the same market performance criteria as for the SARs being met. This award was valued using the same assumptions used for the SARs valuation and a Monte Carlo modelling methodology to calculate a range of probable outcomes. The fair value of this award has been calculated as £312,498.
Employee Benefit Trust
The Company and Group results include those of the Jelf Group plc Employee Benefit Trust ('EBT'), details of which are shown in the Remuneration Report. The share purchases are funded by means of a third party bank loan to the EBT, for which the Company acts as guarantor. This loan amounted to £498,000 and is shown in Note 17.
Finance and administrative costs are borne by the EBT. All costs are accounted for as they accrue. At 30 September 2008, the EBT held 785,609 (2007: 462,678) 1p ordinary shares. At that date, shares allocated to individuals through the EBT amounted to 616,040 (2007: 430,554). During the year a total of 63,369 shares vested with individuals (2007: nil).
The EBT was granted an option by Michael King to buy 500,000 ordinary shares of 1p at 183p per share. This option was exercisable by the EBT between 22 March 2008 and 21 March 2009. On 9 August 2007, 100,000 of these options were exercised by the EBT by mutual agreement between the EBT and Michael King. On 2 April 2008 the remaining 400,000 shares under this option were purchased by the EBT.
The nominal value of own shares held by the Group and Company at 30 September 2008 was £7,856 (2007: £4,627). Own shares are held in the EBT and are listed investments. Their market value at 30 September 2008 was £1,265,000 (2007: £1,124,000).
Details of the share awards made by the EBT are as follows:
|
2008 |
2007 |
|||
|
Number of share awards |
Weighted average exercise price (pence) |
Number of share awards |
Weighted average exercise price (pence) |
|
|
Outstanding at beginning of year |
430,666 |
- |
103,369 |
- |
|
Granted during the year |
269,935 |
- |
329,087 |
- |
|
Forfeited during the year |
(29,757) |
- |
(1,790) |
- |
|
Exercised during the year |
(68,369) |
- |
- |
- |
|
Outstanding at the end of the year |
602,475 |
- |
430,666 |
- |
|
Exercisable at the end of the year |
- |
- |
- |
- |
The weighted average remaining contractual life of the options outstanding at 30 September 2008 was 0.61 years (2007: 0.83 years).
Valuation
Key assumptions used in the valuation of share awards using the Black Scholes model are determined as follows:
|
Share price |
Market value at the award date |
||
|
Exercise price |
For awards made by the EBT, there is no exercise price. |
||
|
Expected volatility |
Based on the historical volatility of the Company's share price, which the Directors believe is the most objective basis for estimating future volatility |
||
|
Expected option life |
The shares vest with the employee at the end of the vesting period. This is usually two years. |
||
|
Expected dividends Lapse probability Performance criteria |
Nil Based on annualised historic lapses No options have performance criteria |
||
|
Risk-free interest rate |
Based on UK Gilts with similar issue dates and terms as the award |
||
|
Grant date |
Exercisable |
Aggregate fair value at issuance £ |
|||
|
17 March 2006 |
16 March 2008 |
53,808 |
|||
|
22 March 2006 |
21 March 2008 |
13,337 |
|||
|
12 May 2006 |
11 May 2008 |
17,003 |
|||
|
01 October 2006 |
30 September 2008 |
67,939 |
|||
|
01 November 2006 |
31 October 2008 |
36,857 |
|||
|
20 November 2006 |
19 November 2008 |
53,098 |
|||
|
29 November 2006 |
28 November 2008 |
24,402 |
|||
|
02 January 2007 |
01 January 2009 |
46,977 |
|||
|
19 January 2007 |
18 January 2009 |
13,946 |
|||
|
24 January 2007 |
23 January 2009 |
73,894 |
|||
|
23 February 2007 |
22 February 2009 |
4,648 |
|||
|
06 March 2007 |
05 March 2009 |
116,903 |
|||
|
21 March 2007 |
20 March 2009 |
4,650 |
|||
|
29 June 2007 |
28 June 2009 |
18,595 |
|||
|
26 July 2007 |
25 July 2009 |
4,774 |
|||
|
31 July 2007 |
30 July 2009 |
202,763 |
|||
|
13 August 2007 |
12 August 2009 |
32,537 |
|||
|
28 January 2008 |
27 January 2010 |
359,785 |
|||
|
26 February 2008 |
25 February 2010 |
79,373 |
|||
|
01 April 2008 |
31 March 2010 |
74,372 |
|||
|
02 April 2008 |
01 April 2010 |
32,538 |
|||
|
15 April 2008 |
14 April 2010 |
13,944 |
|||
|
03 May 2008 |
02 May 2010 |
4,649 |
|||
|
01 June 2008 |
31 May 2010 |
21,671 |
|||
|
02 July 2008 |
01 July 2010 |
9,296 |
|||
19. Called up share capital
|
Group and Company |
2008 £'000 |
2007 £'000 |
|
Authorised |
||
|
100,000,000 Ordinary shares of 1p each |
1,000 |
1,000 |
|
No. of shares |
£'000 |
|
|
Allotted, called up and fully paid |
||
|
At 1 October 2007 |
25,744,412 |
257 |
|
Issued during the year |
24,058,275 |
241 |
|
At 30 September 2008 |
49,802,687 |
498 |
On 28 January 2008, 1,681,220 ordinary shares of 1p were issued as part of the price for the acquisition of the Manson Group at 240.5p.
On 28 January 2008, 244,626 ordinary shares of 1p were issued as part of the price for the acquisitions of Bartlett Davis Bicks Ltd and Carter & Co Risk Management Ltd at 234.7p.
On 25 February 2008, 22,117,648 ordinary shares of 1p were issued at a price of 212.5p.
On 3 April and 24 June 2008 5,000 and 9,781, respectively, ordinary shares of 1p were issued at 96p to fulfil share options exercised by staff members.
20. Reconciliation of movement in equity
|
Share capital |
Share premium |
Merger reserve |
Hedging reserve |
Share based payment reserve |
Own shares held |
Other reserves |
Profit and loss account |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
At 1 October 2006 (restated) |
244 |
9,627 |
4,180 |
- |
106 |
(360) |
14 |
3,043 |
16,854 |
|
Share based payments |
- |
- |
- |
- |
651 |
- |
- |
33 |
684 |
|
Share issue (net of issue costs) |
13 |
476 |
1,964 |
- |
- |
- |
- |
- |
2,453 |
|
Purchase of own shares by EBT |
- |
- |
- |
- |
- |
(491) |
- |
- |
(491) |
|
Retained profit for the year (restated) |
- |
- |
- |
- |
- |
- |
- |
3,128 |
3,128 |
|
At 30 September 2007 (restated) |
257 |
10,103 |
6,144 |
- |
757 |
(851) |
14 |
6,204 |
22,628 |
|
Share based payments |
- |
- |
- |
- |
1,531 |
- |
- |
- |
1,531 |
|
Share issue (net of issue costs) |
241 |
44,747 |
4,598 |
- |
- |
- |
- |
- |
49,586 |
|
Purchase of own shares by EBT |
- |
- |
- |
- |
- |
(725) |
- |
- |
(725) |
|
Loss on cash flow hedges |
- |
- |
- |
(14) |
- |
- |
- |
- |
(14) |
|
Retained profit for the year |
- |
- |
- |
- |
- |
- |
- |
2,433 |
2,433 |
|
At 30 September 2008 |
498 |
54,850 |
10,742 |
(14) |
2,288 |
(1,576) |
14 |
8,637 |
75,439 |
All equity adjustments arising from the conversion to IFRS are incorporated within the income statement.
The Group has applied s131 of the Companies Act (1985) in respect of Merger Relief. An adjustment in respect of this has been made to prior years and the relevant balances restated.
21. Employee benefit expense
Staff costs, including Directors' remuneration, were as follows:
|
2008 |
2007 |
||
|
|
£'000 |
£'000 |
|
|
Wages and salaries |
29,970 |
18,622 |
|
|
Social security costs |
3,511 |
2,215 |
|
|
Pension costs |
1,218 |
746 |
|
|
Share based payments |
1,069 |
651 |
|
|
Termination payments |
391 |
- |
|
|
36,159 |
22,234 |
||
Key management compensation was as follows:
|
2008 |
2007 |
||
|
|
£'000 |
£'000 |
|
|
Wages and salaries |
1,477 |
1,153 |
|
|
Pension costs |
108 |
74 |
|
|
Share based payments |
504 |
60 |
|
|
2,089 |
1,287 |
||
The average monthly number of employees, including Directors, during the year was as follows:
|
|
No. |
No. |
|
|
Sales |
333 |
184 |
|
|
Administration |
484 |
330 |
|
|
Group core |
129 |
84 |
|
|
946 |
598 |
||
Details of the Directors' emoluments, share and share option awards and pension entitlements are given in the Remuneration Report on pages 14 to 17.
22. Investment revenues
|
2008 |
2007 |
||
|
|
£'000 |
£'000 |
|
|
Bank interest |
308 |
86 |
|
23. Finance costs
|
2008 |
2007 (restated) |
||
|
|
£'000 |
£'000 |
|
|
Interest expense |
|||
|
Bank borrowings |
1,610 |
782 |
|
|
Finance lease liabilities |
12 |
8 |
|
|
Other |
153 |
49 |
|
|
Other |
|||
|
Amortisation of loan facility costs |
100 |
67 |
|
|
1,875 |
906 |
||
24. Income tax expense
|
2008 |
2007 (restated) |
|
|
£'000 |
£'000 |
|
|
Current tax expense |
||
|
Current year |
2,472 |
1,806 |
|
(Over)/under provided in prior years |
(62) |
3 |
|
2,410 |
1,809 |
|
|
Deferred tax expense |
||
|
Origination and reversal of temporary differences |
(1,329) |
(740) |
|
Total income tax expense in income statement |
1,081 |
1,069 |
The tax on the Group's profit before tax differs from the standard rate of Corporation Tax in the UK of 28% (2007: 30%) for the reasons identified below.
|
2008 |
2007 |
|
|
£'000 |
£'000 |
|
|
Profit before income tax |
3,514 |
4,197 |
|
Tax calculated at UK Corporation Tax rate of 28% (2007: 30%) |
984 |
1,259 |
|
Expenses not deductable for tax purposes |
88 |
98 |
|
Marginal relief |
- |
2 |
|
Effect of reduction in UK tax rate |
71 |
- |
|
Adjustments to tax charge in respect of prior periods |
(62) |
(290) |
|
Total income tax expense in income statement |
1,081 |
1,069 |
25. Retained profit for the year
Profit for the year has been arrived at after charging the following items:
|
2008 |
2007 (restated) |
|||
|
|
£'000 |
£'000 |
||
|
Amortisation of intangible assets |
- software costs |
112 |
21 |
|
|
- other intangible assets |
3,469 |
1,531 |
||
|
Depreciation of property, plant and equipment |
- Owned assets |
722 |
574 |
|
|
- Assets held under finance lease |
16 |
12 |
||
|
Loss on disposal of property, plant and equipment |
- |
59 |
||
|
Loss on disposal of available for sale investments |
- |
3 |
||
|
Minimum lease payments under operating leases |
||||
|
- vehicles & equipment |
427 |
216 |
||
|
- office space |
1,600 |
889 |
||
|
Exceptional costs |
||||
|
Reorganisation and rationalisation costs |
||||
|
- Included in salaries and associated expenses |
529 |
- |
||
|
- Included in premises costs |
60 |
- |
||
|
- Included in other operating costs |
77 |
- |
||
|
Auditors remuneration 1 |
||||
|
Fees payable to the Company's auditor for the audit of parent company and consolidated financial statements |
29 |
25 |
||
|
Fees payable to the Company's auditor for other services |
||||
| The audit of the Company's subsidiaries pursuant to legislation |
145 |
124 |
||
| Other services pursuant to legislation |
139 |
13 |
||
| Tax services |
36 |
33 |
||
1 The fees shown above for 2007 were paid to Howarth, Clark Whitehill, the previous auditors of the Group.
Exceptional costs
Group reorganisation and rationalisation costs are a result of combining and restructuring operations. These costs are not associated with the ongoing activities of the Group.
26. Earnings per share
|
2008 |
2007 (restated) |
||
|
Retained profit for the year (£'000) |
2,433 |
3,128 |
|
|
Amortisation and exceptionals (net of tax) (£'000) |
3,088 |
1,215 |
|
|
Underlying profit for the year (£'000)* |
5,521 |
4,343 |
|
|
Weighted average shares in issue (number) |
Basic |
39,608,301 |
24,276,510 |
|
Diluted |
40,385,502 |
24,865,134 |
|
|
Earnings per share (pence) |
Basic (pence) |
6.1 |
12.8 |
|
Diluted (pence) |
6.0 |
12.7 |
|
|
Amortisation and exceptional (net of tax) per share (pence) |
Basic (pence) |
7.8 |
5.0 |
|
Diluted (pence) |
7.6 |
4.9 |
|
|
Underlying earnings per share* |
Basic (pence) |
13.9 |
17.8 |
|
Diluted (pence) |
13.7 |
17.6 |
* before deduction of amortisation of intangible fixed assets and exceptionals
|
27. Cash generated from operations |
||||
|
2008 |
2007 (restated) |
|||
|
|
|
|
£'000 |
£'000 |
|
Profit for the year |
2,433 |
3,128 |
||
|
Adjustments for: |
||||
|
Investment revenues |
(308) |
(86) |
||
|
Finance costs |
1,875 |
906 |
||
|
Income tax |
1,081 |
1,069 |
||
|
Depreciation of property, plant and equipment |
738 |
586 |
||
|
Amortisation of intangible assets |
3,581 |
1,552 |
||
|
Share-based payment expense |
1,069 |
265 |
||
|
Capitalised share-based payments |
461 |
- |
||
|
Increase in provisions |
862 |
203 |
||
|
Loss on disposal of tangible fixed assets and investments |
- |
59 |
||
|
Operating cash flows before movement in working capital |
11,792 |
7,682 |
||
|
Increase in receivables |
(172) |
(6,100) |
||
|
(Decrease) / increase in payables |
(1,082) |
7,383 |
||
|
|
|
|
|
|
|
Cash generated by operations |
|
10,538 |
8,965 |
|
28. Acquisitions
|
During the year, the Group has made the following acquisitions:
|
||||||||||||||||||||||||||||||||||||||||||
|
The net assets acquired, fair value adjustments, consideration and goodwill for these acquisitions are summarised below: |
||||||||||||||||||||||||||||||||||||||||||
|
Book value acquired |
Fair value adjustments |
Fair value acquired |
||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
£'000 |
£'000 |
£'000 |
||||||||||||||||||||||||||||||||||||
|
Intangible assets - client book of business |
- |
32,173 |
32,173 |
|||||||||||||||||||||||||||||||||||||||
|
Property, plant and equipment |
676 |
22 |
698 |
|||||||||||||||||||||||||||||||||||||||
|
Available for sale investments |
9 |
- |
9 |
|||||||||||||||||||||||||||||||||||||||
|
Current assets - cash (includes £9,143,000 fiduciary cash) |
10,924 |
- |
10,924 |
|||||||||||||||||||||||||||||||||||||||
|
Current assets - other |
10,293 |
1,047 |
11,340 |
|||||||||||||||||||||||||||||||||||||||
|
Current liabilities |
(17,345) |
(602) |
(17,947) |
|||||||||||||||||||||||||||||||||||||||
|
Non-current liabilities |
(2,836) |
(257) |
(3,093) |
|||||||||||||||||||||||||||||||||||||||
|
Net assets acquired |
1,721 |
32,383 |
34,104 |
|||||||||||||||||||||||||||||||||||||||
|
Consideration - cash |
42,961 |
- |
42,961 |
|||||||||||||||||||||||||||||||||||||||
|
Consideration - shares, share options and share awards |
5,079 |
- |
5,079 |
|||||||||||||||||||||||||||||||||||||||
|
Consideration - deferred |
12,720 |
- |
12,720 |
|||||||||||||||||||||||||||||||||||||||
|
Consideration - contingent |
4,556 |
- |
4,556 |
|||||||||||||||||||||||||||||||||||||||
|
Costs |
505 |
- |
505 |
|||||||||||||||||||||||||||||||||||||||
|
Total consideration |
65,821 |
- |
65,821 |
|||||||||||||||||||||||||||||||||||||||
|
Deferred tax arising on client book |
- |
9,009 |
9,009 |
|||||||||||||||||||||||||||||||||||||||
|
Goodwill |
|
64,100 |
(23,374) |
40,726 |
||||||||||||||||||||||||||||||||||||||
Shares issued as consideration were at market value on the date of acquisition. Further details on the number and price of shares are given in note 19.
|
Included in the above summary are the acquisitions of Manson Insurance Group Ltd, Argyll Insurance (Holdings) Limited and Kelquota Limited (Clarke Roxburgh), which are summarised below. |
||||||||||
|
Book value acquired |
Fair value adjustments |
Fair value acquired |
||||||||
|
|
|
|
|
£'000 |
£'000 |
£'000 |
||||
|
Manson Insurance Group Ltd |
||||||||||
|
Intangible assets - client book of business |
- |
8,927 |
8,927 |
|||||||
|
Property, plant and equipment |
129 |
- |
129 |
|||||||
|
Available for sale investments |
9 |
- |
9 |
|||||||
|
Current assets - cash (includes £2,007,000 fiduciary cash) |
2,684 |
- |
2,684 |
|||||||
|
Current assets - other |
2,509 |
90 |
2,599 |
|||||||
|
Current liabilities |
(4,396) |
(15) |
(4,411) |
|||||||
|
Net assets acquired |
935 |
9,002 |
9,937 |
|||||||
|
Consideration - cash |
12,242 |
- |
12,242 |
|||||||
|
Consideration - shares, share options and share awards |
4,430 |
- |
4,430 |
|||||||
|
Consideration - contingent |
2,450 |
- |
2,450 |
|||||||
|
Costs |
515 |
- |
515 |
|||||||
|
Total consideration |
19,637 |
- |
19,637 |
|||||||
|
Deferred tax arising on client book |
- |
2,500 |
2,500 |
|||||||
|
Goodwill |
|
|
|
18,702 |
(6,502) |
12,200 |
||||
Manson Insurance Group Ltd contributed £5,027,000 to revenue and £1,286,000 to profit before tax for the period between the date of acquisition and the balance sheet date.
|
Argyll Insurance (Holdings) Limited |
|||||||||||||
|
Intangible assets - client book of business |
- |
7,770 |
7,770 |
||||||||||
|
Property, plant and equipment |
291 |
- |
291 |
||||||||||
|
Current assets - cash (includes £1,895,000 fiduciary cash) |
1,895 |
- |
1,895 |
||||||||||
|
Current assets - other |
2,247 |
(132) |
2,115 |
||||||||||
|
Current liabilities |
(4,495) |
(26) |
(4,521) |
||||||||||
|
Non-current liabilities |
(20) |
- |
(20) |
||||||||||
|
Net assets acquired |
(82) |
7,612 |
7,530 |
||||||||||
|
Consideration - cash |
9,872 |
- |
9,872 |
||||||||||
|
Consideration - shares, share options and share awards |
40 |
- |
40 |
||||||||||
|
Consideration - deferred |
2,560 |
- |
2,560 |
||||||||||
|
Consideration - contingent |
1,250 |
- |
1,250 |
||||||||||
|
Costs |
312 |
- |
312 |
||||||||||
|
Total consideration |
14,034 |
- |
14,034 |
||||||||||
|
Deferred tax arising on client book |
- |
2,176 |
2,176 |
||||||||||
|
Goodwill |
|
|
|
14,116 |
(5,436) |
8,680 |
|||||||
Argyll Insurance (Holdings) Limited contributed £2,538,000 to revenue and £360,000 to profit before tax for the period between the date of acquisition and the balance sheet date.
|
Book value acquired |
Fair value adjustments |
Fair value acquired |
|||||||||
|
£'000 |
£'000 |
£'000 |
|||||||||
|
Clarke Roxburgh |
|||||||||||
|
Intangible assets - client book of business |
- |
12,578 |
12,578 |
||||||||
|
Property, plant and equipment |
310 |
- |
310 |
||||||||
|
Current assets - cash (includes £4,769,000 fiduciary cash) |
5,872 |
- |
5,872 |
||||||||
|
Current assets - other |
2,905 |
493 |
3,398 |
||||||||
|
Current liabilities |
(8,197) |
(28) |
(8,225) |
||||||||
|
Non-current liabilities |
(26) |
- |
(26) |
||||||||
|
Net assets acquired |
864 |
13,043 |
13,907 |
||||||||
|
Consideration - cash |
18,966 |
- |
18,966 |
||||||||
|
Consideration - shares, share options and share awards |
35 |
- |
35 |
||||||||
|
Consideration - deferred |
8,616 |
- |
8,616 |
||||||||
|
Consideration - contingent |
856 |
- |
856 |
||||||||
|
Costs |
341 |
- |
341 |
||||||||
|
Total consideration |
28,814 |
- |
28,814 |
||||||||
|
Deferred tax arising on client book |
- |
3,522 |
3,522 |
||||||||
|
Goodwill |
|
|
|
27,950 |
(9,521) |
18,429 |
|||||
Clarke Roxburgh contributed £5,840,000 to revenue and £419,000 to profit before tax for the period between the date of acquisition and the balance sheet date.
Had Manson, Argyll and Clarke Roxburgh been included within the Group from 1 October 2007, the additional revenue and profit before tax would have been £10,406,000 and £675,000 respectively. It is not possible to separately identify the profit before tax related to the four smaller acquisitions as these have been integrated from day one into Jelf Insurance Brokers Limited.
29. Commitments
Capital commitments
There were no capital commitments at the balance sheet date.
Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
|
2008 |
2007 |
||
|
|
£'000 |
£'000 |
|
|
Within one year |
2,199 |
1,603 |
|
|
In the second to fifth years inclusive |
4,731 |
3,847 |
|
|
After five years |
979 |
2,311 |
|
|
7,909 |
7,761 |
||
Contingent liabilities
There were no contingent liabilities at the balance sheet date.
30. Subsidiary and associated companies
The following is a list of all the Group subsidiary and associate companies at 30 September 2008. Unless otherwise shown, the capital of each company is wholly owned, is in ordinary shares and is registered and operates in England and Wales.
|
Name of company |
Note |
Nature of business |
|
Subsidiary undertakings Jelf Insurance Brokers Limited (formerly Goss & Co (Insurance Brokers) Limited) Jelf Professions Limited John Lampier & Son Limited Jelf Wellbeing Limited (formerly SPS Wellbeing Limited) Jelf Financial Planning Limited Jelf Commercial Finance Limited Goss Risk Management Limited Manson Insurance Group Limited (formerly JL Manson Insurance Group Limited) Manson Insurance Brokers Limited (formerly JL Manson & Partners Limited) Manson Warner Healthcare Limited Manson Financial Services Limited Argyll Insurance (Holdings) Limited Argyll Insurance Services Limited Argyll Financial Services Limited Kelquota Limited Clarke Roxburgh Financial Planning Limited Clarke Roxburgh Insurance Brokers Limited Clarke Roxburgh Mortgages Limited Goss Group Limited Peaceproud Limited Martin & Galpin (Insurance Services) Limited Martin & Galpin (Holdings) Limited Argyll Insurance Brokers Limited Cheltenham Insurance Brokers Limited Cheltenham Insurance Brokers Life & Pensions Limited Haines Wallace Insurance Brokers Limited Sunninghill Insurance Brokers Limited Wellbeing Healthcare Limited Access Underwriting Agencies Limited Goss & Co (Insurance Brokers) Limited (formerly Jelf Insurance Brokers Limited) Goss & Co (Financial Services) Limited Auto Business Solutions Limited Jelf Corporate Healthcare Limited Bartlett Davies Bicks Limited Carter & Co Risk Management Limited Bob Gee & Co Limited J M Galloway Limited Argyll Sharpe Limited Argyll Insurance Services (Herne Bay) Limited Palmer, Avard & Galloway Limited PAG Risk Management Limited A Wills & Co Limited Bath Financial Planning Limited Crowther Beard Financial Planning Limited Farndale Hammond (Healthwise) Limited Jelf Corporate Consultancy Limited Jelf Insurance Brokers (Wessex) Limited Jelf Mortgage Solutions Limited Jelf Private Clients Limited Kallender Walwyn Limited Managed Healthcare Limited Brian D Thomas Insurance Services Limited C&I Insurance Services Limited Pendleton May Financial Services Limited Pendleton May Insurance Brokers Limited The Purple Partnership Limited Associate undertakings Stem Financial Planning Limited St Giles Financial Solutions Limited |
1,2 1,2 1,2 1,2 2 1 2 1 1 1 2 1 1 2 1 1 1 2,3 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2,4 5 5 |
Insurance Brokers Insurance Brokers Insurance Brokers Insurance Brokers Healthcare Employee Benefits and Wealth Management Commercial Finance Insurance Brokers Holding company Insurance Brokers Healthcare Wealth Management Holding company Insurance Brokers Wealth Management Holding Company Wealth Management Insurance Brokers Mortgage Brokers Holding company Holding company Insurance Brokers Non trading holding company Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Non trading Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Dormant Insurance broker network Wealth Management Wealth Management |
Regulated by the Financial Services Authority
Subsidiary of Jelf Group plc
At the year end, Michael King held all the £1 'B' Ordinary shares of Goss Group Limited. These shares carry no voting rights and are in the process of being transferred to the Company
The Group owns 75% of the ordinary share capital of the company
The Group owns 50% of the ordinary share capital of the company
31. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
During the year, the Group paid a total of £129,000 (2007: £127,000) for premises at Yate. These buildings are owned by Fromeforde Partners LLP, the partners of which are Directors of Group companies. Prior to October 2007 the buildings were owned by Jelf Insurance Group Directors' Retirement and Death Benefit Scheme, which is deemed to be a related party by virtue of the Scheme's only members being certain directors of Group companies.
During the year, the Group paid a total of £20,000 (2007: £20,000) rent in respect of premises at Newton Abbott. These buildings are owned by Fromeforde Partners LLP. In March 2007 the buildings were purchased from the Michael King SSAS of which the sole beneficiary is Michael King, a Director of the Company.
At the year end, an amount of £nil (2007 - £10,000) was owed to Fromeforde Partners LLP, £nil (2007 - £nil) was owed to Jelf Insurance Group Directors' Retirement and Death Benefit Scheme and £nil (2007 - £nil) was owed to the Michael King SSAS.
During the year the Group made payments of £936,000 (2007: £936,600), £65,000 (2007: £66,900) and £317,000 (2007: £335,000) to Michael King, Jeremy Wilson and Michael Heard, being Directors of subsidiary companies, in respect of deferred consideration relating to the acquisition of the Goss Group in March 2006.
32. Copies of the Financial Statements
Copies of this consolidated Group Annual Report and Accounts 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.
33. Transition to IFRS
As stated in Note 2, these are the Group's first consolidated 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 year ended 30 September 2007. All explanations should be read in conjunction with the IFRS accounting policies of the Group as disclosed in Note 3.
The re-measurement of the consolidated balance sheet items at the IFRS opening balance sheet date and at 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 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 |
i, v |
19,204 |
(4,984) |
14,220 |
||
|
Other intangible assets |
i, ii |
- |
8,049 |
8,049 |
||
|
Property, plant and equipment |
ii |
2,201 |
(112) |
2,089 |
||
|
Trade and other receivables |
iii |
12,839 |
(7,244) |
5,595 |
||
|
Trade and other payables (current) |
iii |
17,697 |
(7,244) |
10,453 |
||
|
Long-term provisions |
iv |
25 |
- |
25 |
||
|
Deferred income tax liability |
i |
87 |
2,468 |
2,555 |
||
|
Bank overdrafts and loans |
v |
3,200 |
(42) |
3,158 |
||
|
Profit and loss account |
|
i |
2,516 |
527 |
3,043 |
|
|
At 30 September 2007 |
||||
|
Goodwill |
i, v |
49,274 |
(16,028) |
33,246 |
|
Other intangible assets |
i, ii |
- |
26,812 |
26,812 |
|
Property, plant and equipment |
ii |
2,596 |
(278) |
2,318 |
|
Trade and other receivables |
iii |
20,544 |
(9,302) |
11,242 |
|
Trade and other payables (current) |
iii |
24,239 |
(9,302) |
14,937 |
|
Long-term provisions |
iv |
130 |
37 |
167 |
|
Deferred income tax liability |
i |
167 |
8,126 |
8,293 |
|
Bank overdrafts and loans |
v |
20,268 |
(257) |
20,011 |
|
Profit and loss account |
3,605 |
2,599 |
6,204 |
|
Profit and loss reported under UK GAAP for the year ended 30 September 2007 can be reconciled to IFRS as follows:
|
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 profit |
3,267 |
1,750 |
5,017 |
|||
|
Investment revenues |
86 |
- |
86 |
|||
|
Finance costs |
|
v |
(838) |
(68) |
(906) |
|
|
Profit before taxation |
2,515 |
1,682 |
4,197 |
|||
|
Income tax expense |
|
|
(1,459) |
390 |
(1,069) |
|
|
Retained profit for the year |
|
|
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 |
i |
829 |
|
|
Amortisation of intangible assets |
i |
(291) |
|
|
Finance costs |
v |
(11) |
|
|
As restated |
16,854 |
Notes
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.
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.
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 and 30 September 2007 have been restated to reflect only insurance cash received and the corresponding liability.
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.
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 against 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 cost of sales to revenue. This change also impacts the segmental disclosures.
Company Balance Sheet
As at 30 September 2008
|
Note |
2008 £'000 |
2008 £'000 |
2007 £'000 |
2007 £'000 |
|
Fixed assets |
||||
|
Intangible assets b |
4,556 |
3,157 |
||
|
Investments c |
118,760 |
45,572 |
||
|
123,316 |
48,729 |
|||
|
Current assets |
||||
|
Debtors d |
5,201 |
3,752 |
||
|
Cash at bank and in hand |
529 |
461 |
||
|
5,730 |
4,213 |
|||
|
Creditors: amounts falling due within one year e |
(25,987) |
(8,667) |
||
|
Net current (liabilities)/assets |
(20,257) |
(4,454) |
||
|
Total assets less current liabilities |
103,059 |
44,275 |
||
|
Creditors: amounts falling due after more than one year f |
(35,513) |
(29,082) |
||
|
Provisions for liabilities g |
- |
(17) |
||
|
Net assets |
67,546 |
15,176 |
||
|
Capital and reserves |
||||
|
Called up share capital h |
498 |
257 |
||
|
Share premium account |
54,850 |
10,073 |
||
|
Merger reserve |
10,742 |
6,144 |
||
|
Other reserves |
1 |
1 |
||
|
Share based payment reserve |
2,288 |
757 |
||
|
Own shares held |
(1,576) |
(851) |
||
|
Profit and loss account |
743 |
(1,205) |
||
|
Shareholders' funds - all equity |
67,546 |
15,176 |
The financial statements were approved and authorised for issue by the Board and were signed on 2 February 2009.
Alex Alway John Harding
Group Chief Executive Group Finance and Operations Director
The notes on pages 68 to 71 form part of these financial statements.
Reconciliation of movement in shareholders' funds
For the year ended 30 September 2008
|
|
2008 £'000 |
2007 £'000 |
||
|
Retained profit / (loss) for the financial year |
1,978 |
(1,124) |
||
|
Issue of new shares (net of issue costs) |
49,586 |
2,453 |
||
|
Share based payments |
1,531 |
684 |
||
|
Purchase of own shares by EBT |
(725) |
(491) |
||
|
Net addition to shareholders' funds |
52,370 |
1,522 |
||
|
Opening shareholders' funds |
15,176 |
13,654 |
||
|
Closing shareholders' funds |
67,546 |
15,176 |
Notes to the company financial statements
a. Significant accounting policies
The separate financial statements of the Company are presented as required by the Companies Act 1985. As permitted by that Act, the separate financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Principles (UKGAAP).
The financial statements have been prepared on a going concern basis under the historical cost convention. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company's financial statements. Under section 230(4) of the Companies Act 1985 the Company is exempt from the requirement to present its own profit and loss account. The profit dealt with in the accounts of the Parent Company was £1,978,000 (2007 - loss of £1,124,000).
The Company has also taken advantage of the exemption from preparing a cash flow statement under the terms of Financial Reporting Standard 1 (Revised 1996) 'Cash Flow Statements'.
Basis of preparation
The financial statements have been prepared in accordance with applicable accounting standards and under the historical cost accounting rules.
Intangible fixed assets - goodwill
Goodwill, representing the excess of the fair value of the consideration given and the associated costs over the fair value of the separable net assets acquired, is capitalised. It is amortised in equal instalments over its estimated useful life. The estimated useful life is the period over which the Directors estimate that the value of the underlying business acquired is expected to exceed the value of the underlying assets. Goodwill is amortised over 10 years.
Investments
Investments are stated at cost less any impairment.
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 and transaction costs.
Leasing and finance leasing
Assets obtained under hire purchase contracts and finance leases are capitalised and the outstanding future lease obligations are shown in creditors. Operating lease rentals are charged to the profit and loss account on a straight line basis over the period of the lease.
Pensions
The Company operates a defined contribution pension scheme for certain of its Directors and the pension charge represents the amounts payable by the Company to the fund in respect of the year. The Company also makes contributions to the personal pension plans of permanent employees. These are charged to the profit and loss account as they arise.
Taxation
The charge for tax is based on the profit for the year and takes into account tax deferred. Deferred tax is recognised, without discounting, in respect of timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by Financial Reporting Standard 19.
Financial instruments
The Company's financial instruments comprise cash and borrowings and various items such as trade debtors and creditors that arise directly from its operations. The Company's policy towards financial instruments is to manage interest rate and liquidity risk without exposing the Company to undue risk or speculation.
Share based payments / own shares held
The Company has applied the requirements of Financial Reporting Standard 20 'Share Based Payment'. In accordance with the transitional provisions, Financial Reporting Standard 20 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 measured using the Black-Scholes model. The expected life in the model has been adjusted, based on management's best estimate, for the effects of exercise restrictions and behavioural considerations
b. Intangible assets
|
Goodwill |
|
|
£'000 |
|
|
Cost |
||||
|
At 1 October 2007 |
3,501 |
|||
|
Additions |
3,181 |
|||
|
Adjustments |
25 |
|||
|
At 30 September 2008 |
6,707 |
|||
|
Amortisation |
||||
|
At 1 October 2007 |
344 |
|||
|
Additions |
1,153 |
|||
|
Adjustments |
654 |
|||
|
At 30 September 2008 |
2,151 |
|||
|
Net book value |
||||
|
At 30 September 2008 |
4,556 |
|||
|
At 30 September 2007 |
3,157 |
|||
c. Investments
|
Other investments |
Shares in Group undertakings |
Total |
||
|
|
£'000 |
£'000 |
£'000 |
|
|
Cost |
||||
|
At 1 October 2007 |
5 |
45,567 |
45,572 |
|
|
Additions |
- |
73,193 |
73,193 |
|
|
Disposals |
(5) |
- |
(5) |
|
|
At 30 September 2008 |
- |
118,760 |
118,760 |
|
Details of the Company's subsidiary undertakings are given in note 30 on pages 62 to 63.
d. Debtors
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
Amounts owed by Group undertakings |
3,697 |
2,159 |
||
|
Other debtors |
92 |
995 |
||
|
Prepayments and accrued income |
911 |
598 |
||
|
Corporation tax recoverable |
224 |
- |
||
|
Deferred tax (note g) |
277 |
- |
||
|
5,201 |
3,752 |
|||
e. Creditors: amounts falling due within one year
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
Bank loans |
498 |
- |
||
|
Obligations under finance leases |
- |
12 |
||
|
Trade creditors |
558 |
553 |
||
|
Amounts owed to Group undertakings |
7,245 |
2,184 |
||
|
Social security and other taxes |
698 |
411 |
||
|
Deferred consideration |
13,578 |
4,664 |
||
|
Other creditors |
127 |
441 |
||
|
Accruals and deferred income |
3,283 |
402 |
||
|
25,987 |
8,667 |
|||
f. Creditors: amounts falling due after more than one year
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
Bank loans |
23,000 |
20,268 |
||
|
Obligations under finance leases |
- |
29 |
||
|
Deferred consideration |
12,513 |
8,785 |
||
|
35,513 |
29,082 |
|||
Details of the bank loans can be found in note 17 on page 48.
g. Provisions for liabilities
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
Deferred tax |
||||
|
At 1 October |
17 |
- |
||
|
(Credit) /charge for the year |
(294) |
17 |
||
|
Deferred tax asset (note d) |
277 |
- |
||
|
At 30 September |
- |
17 |
||
The deferred tax balance is made up as follows:
|
2008 |
2007 |
|||
|
|
|
£'000 |
£'000 |
|
|
Deferred tax asset |
||||
|
Other timing differences |
(293) |
- |
||
|
Deferred tax liabilities |
||||
|
Accelerated capital allowances |
16 |
17 |
||
|
Net deferred tax (asset) / liability |
(277) |
17 |
||
h. Share capital
Details of the Company's share capital is given in note 19 on page 53.
i. Related party transaction
Details of the related party transaction for the Company are given in note 31 on page 63. The Company has taken advantage of the exemption available under the terms of Financial Reporting Standard 8 'Related Party Disclosures' to dispense with the requirement to disclose transactions with subsidiaries, 90% or more whose rights are held within the Group, and which are included in the Group consolidated financial statements.
Related Shares:
JLF.L