29th Jan 2008 07:16
Jelf Group PLC29 January 2008 29 January 2008 JELF GROUP PLC ("Jelf ", the "Group" or the "Company") Preliminary Results for the year ended 30 September 2007 JELF ANNOUNCES STRONG GROWTH ACROSS ALL AREAS OF THE BUSINESS Jelf Group plc, an independent full-service brokerage that supports businessesand related individuals, announces robust performance across all areas of thebusiness and another successful year of growth, both organically and throughacquisitions. FINANCIAL HIGHLIGHTS • Turnover has increased 62% to £40.6m (2006 : £25m), driven by increased cross-selling, winning new corporate clients and a number of strategic acquisitions • EBITDA more than doubled to £7.2m (2006 : £3.5m), with EBITDA margins up 26% to 17.7% (2006: 14%), demonstrating an ongoing lift in margins due to improving business mix and economies of scale • Normalised Diluted Earnings Per Share up 45% to 17.0p (2006: 11.7p) • Operating margins have now grown by more than 70% since Jelf floated on AIM in October 2004, to 16.3% OPERATING HIGHLIGHTS • Highly active acquisition programme: nine acquisitions for the financial year ended 30 September 2007, including the two largest deals, SPS Wellbeing, a healthcare intermediary, and John Lampier, a Bristol-based insurance broker, which are performing in line with expectations • Organic sales up 16%, including increased revenue from cross selling • Installed new core operating system • Strong repeat revenue with client retention more than 90% and healthy cash generation. Net cash inflow from operating activities was £9.0m (2006: £2.5m) The Company is also pleased to announce that on 28 January 2008, it made threeacquisitions. As detailed in an announcement dated 29 January 2008, Jelfacquired the entire issued share capital of Manson Insurance Group Limited ("Manson") which provides Jelf with a presence in the North West of England. TheCompany also acquired Bartlett Davies Bicks Limited ("BDB") and Carter & Co.Risk Management Limited ("CRM"), which build on Jelf's presence in Devon. Jelfhas also announced a conditional placing and subscription to raise approximately£47.0 million (before expenses). Alex Alway, chief executive, commented: "This ongoing strong performance has been the result of hard work throughout theyear to drive growth across all areas of the business. We have an activeacquisition programme and we are pleased with our organic growth, which is 16%this year. Market conditions continue to be competitive but Jelf remains wellplaced to deliver further growth in 2008." ENQUIRIES Jelf Group plcAlex Alway, Chief Executive 01454 272713Rose Clark, Director of Finance 01454 272853 Cenkos Securities plcIan Soanes 020 7397 8900 Pelham PRPolly Fergusson 020 7743 6362Damian Beeley 020 3178 2253 Notes to editors Jelf was founded by Chris Jelf in 1989. Today, Jelf operates from over 20locations primarily in the Southern England and South Wales and offers anextensive range of corporate services, insurance, healthcare, employee benefits,commercial finance and wealth management services to businesses and individuals. Jelf advises over 20,000 corporate clients across a range of disciplines. Theseclients cover the spectrum from significant public companies to smallowner-managed businesses. Core Jelf clients are medium-sized owner-managedbusinesses, typically employing up to 250 staff. Jelf has developed a corporate support infrastructure that has enabled it tomake 15 acquisitions over the last two years. These acquisitions span all coreareas of its business and have been made to either supplement existingoperations or as in the case of John Lampier and Son and the Manson InsuranceGroup Limited to operate as stand-alone entities within the Jelf Group usingtheir own brand names. The acquisitions made since the start of this period aredetailed in note 28 towards the end of this document. Further information is available on Jelf at the Group's website: www.Jelfgroup.com. Chairman's Statement I am pleased to be in a position to report another set of excellent resultswhich continue the outstanding growth that the Jelf Group has achieved. The Group once again had a busy year acquiring nine broking businesses; thehighlights of which were the acquisitions of SPS Wellbeing Ltd and John Lampier& Sons Ltd, which helped us to create significant scale within the healthcaremarket and build on our dominant position within the Bristol insurance market. . In addition, the Group has continued to make real progress by cultivating theculture of client cross referrals in order to drive organic growth. The Group'ssuccess in cross-selling its services can be firmly attributed to this culture,combined with development of unique client propositions, which rely upon thecapabilities of the Group as a whole. The Group's healthcare and employee benefits businesses have enjoyed anotheryear of strong organic growth, culminating in our healthcare team receivingindustry recognition when it was voted Private Medical Insurance Intermediary ofthe Year and International Medical Intermediary of the Year at the HealthInsurance Magazine Annual Awards. The opportunities that exist in the market, fuelled by emerging gaps incompetitor capability, genuinely excite us. Our focus on developing Jelf staffto meet the demands of our clients will enable us to continue to deliverexceptional service across a broad range of their requirements. We remain committed to constantly reviewing our performance and, moreimportantly, listening to what our clients and staff indicate is important tothem. The relationships we enjoy with our clients, along with our ability tooffer a broad range of products and services, remain key strengths. The employees and management team continue to strive to add shareholder valueand were delighted to receive an award for best corporate communications at theAIM Awards recently. I would like to take this opportunity on behalf of theBoard to once again thank our colleagues for their efforts and continued supportin driving the Jelf Group forward. The Jelf team has performed strongly andcontinues to be our greatest asset. In conclusion, I would also like to thank our clients for their continuedsupport and loyalty. Christopher Jelf, Group Chairman, January 2008 Operating and financial review Overview It's been another busy year for the Jelf Group and we have again demonstratedboth the strength of our strategy and our organic growth credentials. Eachbusiness area has delivered a good performance and the commitment andflexibility of our people have contributed to another very good year. The period to 30 September, 2007 was again one of considerable change, growthand positive development. The results for the period show substantial increasesin both turnover and earnings before interest, tax, depreciation andamortisation (EBITDA). Financial Results In the year ended 30 September, 2007 the Group increased its turnover by 61% to£40.56m (2006 - £25.10m) and achieved EBITDA of £7.19m (2006 - £3.52m). ThisEBITDA growth represents an increase of 104%. Underlying organic revenue growth (before the addition of acquired revenue)during 2007 increased 16% from the previous year. During our first year ofdetailed recording of organic growth from cross referrals, in excess of £1madditional income was generated and recorded. Operating margins before goodwill were 16.3% (2006 - 12.9%); representing anincrease of 26.4% and demonstrating further progress towards our statedobjective of raising margins, while continuing to invest in the Group'sinfrastructure. Operating margins have now grown by more than 70% since floatingon AIM in October 2004. The Group had net cash inflow from operating activities of £9.0m (2006 - £2.5m).This strong cash flow is used to settle deferred consideration payments fromacquisitions as these payments become due. Consolidated shareholders' funds as at 30 September, 2007 amounted to £20.03m(2006 - £16.33m) representing an increase of 23%. The basic earnings per shareamounted to 4.3p (2006 - 6.0p), reduced due to increased amortisation of thegoodwill arising in relation to the Group's acquisition strategy. Dilutedearnings per share before goodwill has increased by 45% from 11.7p to 17.0p. Dividend policy In line with the Company's stated dividend policy, the Directors intend tocommence payment of dividends only when it becomes commercially prudent to doso, having regard to the availability of the Group's distributable profit andretained funds required to finance future growth and meet regulatory capitaladequacy requirements. As a result, the Directors are not recommending thepayment of a dividend. Review of operations We have taken the opportunity following the year end to rationalise the numberof separate FSA-regulated operating companies to six from 10, all of which arebased in the UK. Our business continues to be conducted through five operatingareas each reporting to a Managing Director, who has direct responsibility forthe profit and loss account and considerable autonomy in the day-to-daymanagement of their business. Insurance • represents 50% of the Group's annualised turnover • manages c £150m GWP • One of the top 10 independent players in the marketplace This business provides commercial insurance broking services to corporateclients and offers independent advice on all aspects of commercial insurance,including risk assessments, design of insurance programmes, auditing of existinginsurance arrangements and claims management. The acquisition of John Lampier & Sons Ltd has added a specialist team focusedon the sourcing and placement of professional indemnity insurance to the Group'sinsurance offering. Turnover for the Group's insurance business has increased by 66% to £17.45m(2006 - £10.51m) while EBITDA has increased by 123% to £3.50m (2006 - £1.57m).This growth has largely been achieved through eight acquisitions, including JohnLampier & Sons Ltd, in addition to strong organic growth of 16% from newbusiness combined with increased economies of scale. Core clients for this business are owner-managed enterprises based in southernEngland and Wales. The softening of insurance premiums has shown signs of stabilising in the SMEmarket in 2007, while the mid to large market has continued to weaken ascompetition amongst insurers focused on the UK market has intensified. The vastmajority of Jelf insurance business clients fall into the SME category. TheGroup's significant economies of scale have continued to provide margin offsetto any shortfall in top line revenues. Healthcare • represents 14% of the Group's annualised turnover • manages in excess of £125m GWP • one of the top three independent players within its marketplace. The healthcare business provides advice to businesses across the UK in respectof health related employee benefits such as private medical insurance; inaddition to providing specialist fee-based advice on wider healthcare relatedissues, such as absence management and occupational health. The Group continues to strengthen its position as a leading player in thecorporate healthcare insurance market by introducing new services, capturingmarket share at the expense of national competitors, enjoying economies of scaleand consolidating other intermediary businesses. We have also experiencedongoing re-ratings of Private Medical Insurance policies in 2007. The relationships established with clients as a result of the Group's healthcarebusiness continue to be a major source of cross-sales growth for other parts ofthe Group. Turnover for the Group's healthcare business has increased by 130% to £6.73m(2006 - £2.92m) while EBITDA has increased by 258% to £1,530,000 (2006 -£427,000). This growth has largely been achieved by the acquisition of SPSWellbeing Ltd in January 2007, supplemented by the winning of new corporateclient mandates to give organic turnover growth of 7%. This division managesin excess of £125m GWP and is now one of the top three independent playerswithin its marketplace. Using the knowledge that we have gained from implementing a single coreadministration platform in our insurance business, our healthcare business willbe placed on one core administration system during 2008. Employee Benefits • represents 15% of the Group's annualised turnover The Group's employee benefits business provides a wide range of services andadvice to large corporate entities in respect of benefits design (including riskand pension benefits), communication and implementation. This proposition hasbeen further strengthened by ongoing development of the Group's market leadingon-line flexible benefits system for employers. Turnover for employee benefits has increased by 64% to £6.02m (2006 - £3.68m)while EBITDA has increased to £558,000 (2006 - £347,000). This growth haslargely been achieved through introducing these services to existing clients ofthe corporate healthcare business and winning a significant number of new clientmandates. Organic turnover growth for Employee Benefits is 57% for thefinancial year ended 30 September, 2007. Since the start of the financial year we have been investing in systems andpeople as this market continues to enjoy favourable conditions. During 2008 wewill continue with this investment as we see substantial opportunities forfurther growth within the business. These investments will not have asignificant affect the profitability of the business. Commercial Finance • represents 1% of the Group's annualised turnover. This business has enjoyed strong organic turnover growth of 134% during itssecond year of trading and has made a small positive EBITDA contribution thisyear. It provides solutions to Group clients who require specialist advice onall aspects of commercial finance, including property, asset, vehicle andinvoice finance. Turnover for commercial finance has increased to £475,000 (2006 - £109,000).This growth has largely been achieved through introducing this new service toexisting clients of the Group. Wealth Management • represents 20% of the Group's annualised turnover This business provides independent wealth management services, includinginvestment planning, portfolio management, retirement planning and mortgageadvice to individuals, especially entrepreneurs. It has enjoyed a year ofexcellent sales success as the combination of legislative changes to pensionsand a favourable investment climate have generated considerable opportunities inthis market. This success was aided by the introduction of the Group's own branded SelfInvested Personal Pension (SIPP). Developments such as this should enable us tocounteract the anticipated down-turn in the mortgage market as a result of the "credit crunch". In addition the wealth management team has installed a number of new investmentprocesses for private clients that have enabled us to capture in excess of £125mof client funds on third party wrap platforms. The Group has a clear objective to move a substantial part of its existingportfolio of funds under advice, which exceeds £1billion, to new style platformsover the next few years in order to be able to continue to meet client needs anddrive additional value for the Group. Turnover for wealth management has increased by 25% to £9.87m (2006 - £7.88m)whilst EBITDA has increased by 28% to £1.60m (2006 - £1.25m). Acquisitions The Group has completed nine acquisitions of commercial insurance and healthcarebrokerages during this financial year; the highlights of which were the purchaseof SPS Wellbeing (January, 2007) and John Lampier & Sons Ltd (July, 2007). Thesebusinesses are performing in line with our expectations. Our market profile, as a strong independent intermediary, provides us with ahealthy pipeline of acquisition targets against which we apply a strict businesscase set of principles. We expect to complete further acquisitions during 2008. Integration Our strategy of careful integration of businesses and the people within them hasborne fruit with staff retention and morale remaining strong in all areas of theGroup. Throughout 2007 we have implemented the Acturis administration platform acrossthe majority of our insurance locations and are in the process of rolling outthe same system to recent insurance acquisitions and our healthcare business.This system was selected for its ability to provide enhanced managementinformation whilst producing significant productivity gains once a completerenewal cycle has been undertaken. Furthermore the Group has taken the opportunity following our year end tosimplify its organisational structure, combining major acquisitions made overthe last two years into a single corporate entity in each of our core markets:insurance, healthcare, employee benefits and wealth management. This exercise has resulted in all major acquisitions (with the exception of JohnLampier & Sons Ltd) operating under the Jelf Group brand. Organisational development The Group, as at 30 September 2007, operated out of 21 locations (2006 - 17) andstaff numbers throughout the year have increased by 50% to 681 (2006 - 453). TheGroup has continued to invest heavily in its infrastructure to ensure that webuild further support for our primary asset; the people within the business,while also creating capacity for future growth. This investment includes: • Implementation of the Acturis administration system across the majority of our insurance offices • Initiation of a project to install a new Acturis administration system into our healthcare division • Further strengthening of core support functions, including finance, IT, HR, marketing and the corporate acquisition team • Rollout of bespoke training programmes for management and staff • Launch of a number of cross - over products and services which enable multiple client sales • Launch of Jelf Professions Ltd, the Group's specialist Professional Indemnity offering • Significant investment in the physical working environment in several key locations People The Board and I wish to express our thanks to all the employees of the JelfGroup for their dedication and hard work during this financial period. TheGroup's employees have faced considerable change during the last 12 months andhave risen to the challenge, performing superbly. Our particular thanks go tothose employees who have joined the Group through acquisition and showedremarkable flexibility when dealing with the issues of integration. Business strategy For the last seven years the Group's aim has been to build a leading independentintermediary business providing a broad range of services to the corporatebusiness sector and related private individuals market, primarily focused in theSouth of England and Wales. Our strategy is built on the following principles: • Maintenance of a strong client focus • Strong and prudent management of the Group's financial resources • Professional and caring management of our people • Embedding cross referral of clients within our culture The Group has pursued its strategy by combining organic growth with, wherecommercially and culturally appropriate, acquisition opportunities. We willcontinue to use both equity and debt in order to pursue our acquisitionstrategy. Alex Alway, Group Chief Executive Consolidated profit and loss account For the year ended 30 September 2007 2007 2007 2006 2006 Note £'000 £'000 Restated Restated £'000 £'000 Turnover 1,2 40,556 25,095 - Continuing 33,941 15,995- Acquired 6,615 9,100 Cost of sales (3,416) (3,167) Gross profit 37,140 21,928 - Continuing 30,525 14,041- Acquired 6,615 7,887 Administrative expenses (29,947) (18,407) Earnings before interest, taxation, depreciation 7,193 3,521and amortisation 2 Depreciation of tangible fixed assets (586) (275)Amortisation of intangible fixed assets (3,340) (1,194) Operating profit 3, 19 3,267 2,052 Interest receivable 6 86 123 Interest payable 7 (838) (102) Profit on ordinary activities before 2,515 2,073taxation Tax on profit on ordinary (1,459) (921)activities 8 Profit on ordinary activities after 1,056 1,152taxation Earnings per share: Basic 9 4.3p 6.0p Diluted 9 4.1p 5.7p Normalised earnings per share*: Basic 9 17.8p 12.2p Diluted 9 17.0p 11.7p * before deduction of amortisation of intangible fixed assets The notes on pages 51 to 68 form part of these financial statements. Consolidated balance sheet As at 30 September 2007 2007 2007 2006 2006 Note £'000 £'000 Restated Restated £'000 £'000 Fixed assets Intangible assets 10 49,274 19,204 Tangible fixed assets 11 2,596 2,201 Investments 12 131 43 52,001 21,448 Current assets Debtors 13 20,544 12,839 Cash at bank and in hand 9,270 5,226 29,814 18,065 Creditors: amounts falling 14 (32,407) (17,697)due within one year Net current (liabilities)/assets (2,593) 368 Total assets less current liabilities 49,408 21,816 Creditors: amounts falling due (29,082) (5,377)after more than one year 15 Provisions for liabilities 16 (297) (112) Net assets 20,029 16,327 Capital and reserves Called up share capital 17 257 244 Share premium account 18 16,247 13,807 Capital reserve 18 13 13 Capital redemption reserve 18 1 1 Share based payment reserve 18 757 106 Own shares held 18 (851) (360) Profit and loss account 18 3,605 2,516 Shareholders' funds - all equity 20,029 16,327 The financial statements were approved and authorised for issue by the Board andwere signed on 28 January 2008. Alex Alway John HardingGroup Chief Executive Group Finance and Operations Director The notes on pages 51 to 68 form part of these financial statements. Company balance sheet As at 30 September 2007 2007 2007 2006 2006 Note £'000 £'000 Restated Restated £'000 £'000 Fixed assets Intangible assets 10 3,157 1,085 Investments 12 45,572 13,680 48,729 14,765 Current assets Debtors 13 3,752 5,390 Cash at bank and in hand 461 752 4,213 6,142 Creditors: amounts falling (8,667) (2,130)due within one year 14 Net current (liabilities)/assets (4,454) 4,012 Total assets less current liabilities 44,275 18,777 Creditors: amounts falling due (29,082) (5,123)after more than one year 15 Provisions for liabilities 16 (17) - Net assets 15,176 13,654 Capital and reserves Called up share capital 17 257 244 Share premium account 18 16,217 13,777 Capital redemption reserve 18 1 1 Share based payment reserve 18 757 106 Own shares held 18 (851) (360) Profit and loss account 18 (1,205) (114) Shareholders' funds - all equity 15,176 13,654 The financial statements were approved and authorised for issue by the Board andwere signed on 28 January 2008. Alex Alway John HardingGroup Chief Executive Group Finance and Operations Director The notes on pages 51 to 68 form part of these financial statements. Consolidated cash flow statement For the year ended 30 September 2007 Note 2007 2007 2006 2006 £'000 £'000 Restated Restated £'000 £'000 Net cash inflow from 8,965 2,535operating activities (see note below) Returns on investments and servicing of finance Interest received 86 123Interest paid (730) (102) Net cash (outflow)/inflow from returns on (644) 21investment and servicing of finance Taxation (322) (921) Capital expenditure and financial investmentPurchase of tangible fixed assets (1,158) (889)Purchase of own shares (491) (360)Purchase of investments (5) (9)Sale of tangible fixed assets 656 150 Net cash outflow for capital expenditure and (998) (1,108)financial investment Acquisitions and disposalsPurchase of undertakings (including costs) (23,493) (9,687) Net cash/(debt) acquired 3,540 (1,131) Sale of undertakings (including costs) 35 - Net cash outflow from acquisitions and disposals (19,918) (10,818) Cash outflow before use of liquid resources and (12,917) (10,291)financing Financing Issue of ordinary shares (net of expenses) 17 2,453 11,038 Capital element of finance lease rental payments (43) (10)Draw down loan funding 23,368 3,200Draw down finance lease funding 45 49Repayment of loans and deferred consideration (8,862) (706) Net cash inflow from financing 16,961 13,571 Increase in cash in the year 22,23 4,044 3,280 2007 2006 Restated £'000 £'000 Reconciliation of operating profit to net cash inflow from operatingactivities Operating profit 3,267 2,052Amortisation of intangible fixed assets 3,340 1,194Depreciation of tangible fixed assets 527 275Loss/(profit) on disposal of tangible fixed assets and investments 59 (148)Cost of share options granted 110 38Cost of EBT shares awarded to staff 155 27(Increase)/decrease in debtors (2,984) 246Increase/(decrease) in creditors 4,325 (1,084)Increase/(decrease) in provisions 166 (65) Net cash inflow from operating activities 8,965 2,535 The notes on pages 51 to 68 form part of these financial statements. Reconciliations of movements in shareholders' funds For the year ended 30 September 2007 2006 2007 Restated £'000 £'000Group Profit for the financial year 1,056 1,152Cost of share options granted 110 38Cost of EBT shares awarded to staff 155 27 Retained profit for the financial year 1,321 1,217 Issue of new shares 13 110Premium on issue of new shares 2,440 11,430Cost of share issue - (502)Cost of share options granted on acquisitions 233 -Cost of EBT shares awarded on acquisitions 186 -Net movement of shares in EBT (491) (360) Net addition to shareholders' funds 3,702 11,895 Opening shareholders' funds 16,327 4,432 Closing shareholders' funds 20,029 16,327 Company Loss for the financial year (1,124) (169)Cost of share options granted 110 38Cost of EBT shares awarded to staff 155 27 Retained loss for the financial year (859) (104) Issue of new shares 13 110Premium on issue of new shares 2,440 11,430Cost of share issue - (502)Cost of share options granted on acquisitions 233 -Cost of EBT shares awarded on acquisitions 186 -Net movement of shares in EBT (491) (360) Net addition to shareholders' funds 1,522 10,574 Opening shareholders' funds 13,654 3,080 Closing shareholders' funds 15,176 13,654 Consolidated statement of total recognised gains and losses For the year ended 30 September 2007 2006 2007 Restated £'000 £'000 Profit for the financial year 1,056 1,152Cost of share options granted 110 38Cost of EBT shares awarded to staff 155 27 Total recognised gains and losses 1,321 1,217 The effect of the prior year adjustment is shown in note 19. The notes on pages 51 to 68 form part of these financial statements. Notes to the financial statements For the year ended 30 September 2007 1. Accounting policies The following accounting policies have been applied consistently in dealing withitems which are considered material in relation to the Group's financialstatements. Under section 230(4) of the Companies Act 1985 the Company isexempt from the requirement to present its own profit and loss account. The lossdealt with in the accounts of the Parent Company was £859,000 (2006 - £104,000) 1.1 Basis of preparation The financial statements have been prepared in accordance with applicableaccounting standards and under the historical cost accounting rules. The grouphas adopted Financial Reporting Standard 20 'Share Based Payment' (FRS20) duringthe year. 1.2 Consolidation The consolidated financial statements include the financial statements of theCompany and its subsidiary undertakings drawn up to 30 September 2007. Unlessotherwise stated, the acquisition method of accounting has been adopted. Underthis method, the results of subsidiary undertakings acquired or disposed of inthe year are included in the consolidated profit and loss account from the dateof acquisition or up to the date of disposal. 1.3 Turnover - income recognition Income is recognised on a receivable basis. Turnover represents commissions andfees due by reference to the commencement date of the insurance policy or otherproduct taken out by clients. Insurance transactions are such that a debtor,representing the premiums owing from an individual customer, and a correspondingcreditor, representing the amount due to the insurer, are recognised at thecommencement date of a policy. The difference, being the commission income, isrecognised as turnover at that date. 1.4 Intangible fixed assets - goodwill Goodwill, representing the excess of the fair value of the consideration givenand the associated costs over the fair value of the separable net assetsacquired, is capitalised. It is amortised in equal instalments over itsestimated useful life. The estimated useful life is the period over which theDirectors estimate that the value of the underlying business acquired isexpected to exceed the value of the underlying assets. Goodwill is amortisedover 10 years. In the Company's financial statements, investment in subsidiary undertakings isstated at cost, less any impairment in value. Where the consideration for theacquisition of a subsidiary undertaking includes shares in the Company to whichthe provisions of section 131 Companies Act 1985 apply, cost represents thenominal value of the shares issued together with the fair value of anyadditional consideration given and transaction costs. 1.5 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost or valuation less depreciation.Depreciation is provided at rates calculated to write off the cost or valuationof fixed assets, less their estimated residual value, over their expected usefullives on the following basis: Freehold buildings 2% Straight lineMotor vehicles 25% Reducing balanceFixtures and fittings 15% Reducing balanceComputer equipment 20% Straight line 1.6 Investments Investments are stated at cost less any impairment. 1.7 Leasing and finance leasing Assets obtained under hire purchase contracts and finance leases are capitalisedand the outstanding future lease obligations are shown in creditors. Operatinglease rentals are charged to the profit and loss account on a straight linebasis over the period of the lease. 1.8 Pensions The Group operates a defined contribution pension scheme for certain of itsDirectors and the pension charge represents the amounts payable by the Group tothe fund in respect of the year. The Group also makes contributions to thepersonal pension plans of permanent employees. These are charged to the profitand loss account as they arise. 1.9 Taxation The charge for tax is based on the profit for the year and takes into accounttax deferred because of timing differences between the treatment of certainitems for taxation and accounting purposes. Deferred tax is recognised, withoutdiscounting, in respect of timing differences between the treatment of certainitems for taxation and accounting purposes which have arisen but not reversed bythe balance sheet date, except as otherwise required by Financial ReportingStandard 19. 1.10 Financial instruments The Group's financial instruments comprise cash and borrowings and various itemssuch as trade debtors and creditors that arise directly from its operations.The Group's policy towards financial instruments is to manage interest rate andliquidity risk without exposing the Group to undue risk or speculation. 1.11 Share based payments / own shares held Shares awarded through the Employee Benefit Trust ('EBT') are accounted for inaccordance with UITF Abstract 17 'Employee Share Schemes'. A period ofcontinued employment is required before the employees become unconditionallyentitled to the shares awarded. The cost of the awards is spread over thisperiod. The amount recognised is based on the fair value of shares at the datethe award is made. Own shares held by the EBT are accounted for in accordance with UITF Abstract 38'Accounting for ESOP Trusts': • Until such time as the Company's own shares held by the EBT vestunconditionally in employees, the consideration paid for the shares is deductedfrom the Group and Company profit and loss account in arriving at shareholders'funds • Consideration paid or received for the purchase or sale of theCompany's own shares are shown as separate amounts in the reconciliations ofmovements in shareholders' funds • Any dividend income arising on own shares is excluded in arriving atprofit before tax and deducted from dividends paid and proposed. • Other assets and liabilities of the EBT are recognised as the assetsand liabilities of the Group and Company. Finance costs and any administration expenses of the EBT are charged as theyaccrue. The group has applied the requirements of FRS20 'Share Based Payment'.In accordance with the transitional provisions, FRS20 has been applied to allthe grants of equity instruments after 7 November 2002, that were unvested at 1January 2006.The fair value of share options is recognised as an expense on astraight line basis over the vesting period. Where the options are granted aspart of the consideration for an acquisition, the fair value is capitalised.For share option agreements where the number of options is dependent onperformance, an estimate is made of the number of options that will be grantedat the end of the performance period. This estimate is reviewed each accountingperiod. The fair value of share options granted by the Company is measuredusing the Black-Scholes model. The expected life in the model has been adjusted,based on management's best estimate, for the effects of exercise restrictionsand behavioural considerations 1.12 Acquisitions Following acquisition, businesses are integrated into the existing activities ofthe Group. As a result of this the Directors do not consider it practicable toanalyse the results of acquired entities beyond the level of contribution tooverhead expenditure. In accordance with Financial Reporting Standard 3 the turnover and contributionto overhead expenditure of acquisitions is shown separately for the year inwhich the acquisition occurred. 2. Segmental analysis The Directors have identified five business sectors; insurance, healthcare,employee benefits, commercial finance and wealth management. An analysis ofturnover, earnings before interest, taxation, depreciation and amortisation(EBITDA) and net assets by business sector is set out below. Business sectordata includes an allocation of corporate costs to the sector. There are no salesbetween business sectors. All turnover arose within the United Kingdom. 2006 2007 Restated £'000 £'000TurnoverInsurance - Continuing 14,351 4,931 - Acquired 3,103 5,578Healthcare - Continuing 3,222 2,527 - Acquired 3,512 398Employee benefits - Continuing 6,020 2,767 - Acquired - 908Commercial finance - Continuing 475 80 - Acquired - 29Wealth management - Continuing 9,873 5,690 - Acquired - 2,187 Turnover 40,556 25,095 EBITDA Insurance 3,499 1,565Healthcare 1,530 427Employee benefits 558 347Commercial finance 2 (66)Wealth management 1,604 1,248 EBITDA 7,193 3,521 Depreciation of tangible fixed assets (586) (275)Amortisation of intangible fixed assets (3,340) (1,194)Net interest (payable)/receivable (752) 21 Profit before taxation 2,515 2,073 Profit/(loss) before taxationInsurance 941 722Healthcare 574 229Employee benefits 257 288Commercial finance (30) (74)Wealth management 773 908 Profit before taxation 2,515 2,073 Net assets/(liabilities)Insurance 5,026 8,016Healthcare 8,532 2,435Employee benefits 4,272 3,697Commercial finance (177) (123)Wealth management 1,852 1,513 19,505 15,538 Unallocated Group net funds 524 789 Net assets 20,029 16,327 3. Operating profit The operating profit is stated after charging: 2007 2006 £'000 £'000 Amortisation of intangible fixed assets 3,340 1,194Depreciation of tangible fixed assets - owned fixed assets 515 270 - assets under finance lease 12 5 - loss/(profit) on sale of fixed assets 59 (148) Operating lease rental - vehicles and equipment 216 152 - office space 889 451 Auditors' remuneration - fees payable to the Company's auditors for the audit of the Company's 23 21 annual accounts - fees payable to the Company's auditors for other services to the Group 126 49Total audit fees 149 70 - tax services 33 12 - other services supplied pursuant to such legislation 13 26 Total non-audit fees 46 38 Fees payable to Horwath Clark Whitehall LLP for non-audit services to theCompany are not required to be disclosed because the consolidated financialstatements are required to disclose such fees on a consolidated basis. 4. Staff costs Staff costs, including Directors' remuneration, were as follows: 2007 2006 £'000 £'000 Wages and salaries 18,622 11,777Social security costs 2,215 1,304Other pension costs 746 459 21,583 13,540 The average monthly number of employees, including Directors, during the yearwas as follows: 2007 2006 No. No. Sales 184 99Administration 330 186Group core 84 38 598 323 5. Directors' remuneration Details of Directors' emoluments, share and share option awards and pensionentitlements are given in the Remuneration Report on pages 40 to 42. 6. Interest receivable 2007 2006 £'000 £'000 Bank interest receivable 86 123 7. Interest payable 2007 2006 £'000 £'000 Bank loans and overdrafts 781 90Finance lease agreements 8 2Other 49 10 838 102 8. Tax on profit on ordinary activities 2007 2006 £'000 £'000Analysis of tax charge in the year Current tax (see note below)UK corporation tax on profits in the year 1,806 975Adjustments in respect of prior periods 3 (84) Total current tax 1,809 891 Deferred taxOrigination and reversal of timing differences (350) 30 Total deferred tax (see note 16) (350) 30 Tax on profit on ordinary activities 1,459 921 Factors affecting tax charge for the year The tax assessed for the year is higher than the standard rate of corporationtax in the UK (30%). The differences are explained below: 2006 2007 Restated £'000 £'000 Profit on ordinary activities before taxation 2,515 2,073 Profit on ordinary activities multiplied by standard rate of corporation 755 622tax in the UK of 30% (2006 - 30%) Effects of:Expenses not deductible for tax purposes 992 342Capital allowances for period in excess of depreciation 57 (56)Marginal relief 2 67Adjustments to tax charge in respect of prior periods 3 (84) Current tax charge for the year (see note above) 1809 891 There were no material factors that may affect future charges. 9. Earnings per share 2007 2006 Restated £'000 £'000 Computation of EPS NumeratorEarnings - profit on ordinary activities after taxation 1,056 1,152Amortisation of intangible fixed assets 3,340 1,194 Normalised earnings 4,396 2,346 DenominatorWeighted average number of ordinary shares - Basic 24,739,188 19,270,208Weighted average number of ordinary shares - Diluted 25,930,715 20,045,458 Earnings per share: Basic 4.3p 6.0p Diluted 4.1p 5.7p Normalised earnings per share: Basic 17.8p 12.2p Diluted 17.0p 11.7p The calculation of the weighted average number of ordinary shares takes accountof the new shares issued in the year. Details are set out in note 17. 10. Intangible fixed assets Group Company £'000 £'000Goodwill CostAt 1 October 2006 21,446 1,123Additions 33,700 2,461Disposals (76) (76)Adjustments (214) (7) At 30 September 2007 54,856 3,501 AmortisationAt 1 October 2006 2,242 38Charge for the year 3,340 306 At 30 September 2007 5,582 344 Net Book ValueAt 30 September 2007 49,274 3,157 At 30 September 2006 19,204 1,085 Adjustments to goodwill represent revisions in the estimates ofdeferred consideration payable in line with post-acquisition results ofbusinesses acquired. 11. Tangible fixed assets Land & Fixtures & Computer Motor buildings fittings equipment vehicles Total £'000 £'000 £'000 £'000 £'000Group CostAt 1 October 2006 500 1,334 1,647 83 3,564From acquisitions - 364 516 210 1,090Additions - 252 895 45 1,192Disposals (500) (173) (325) (251) (1,249) At 30 September 2007 - 1,777 2,733 87 4,597 DepreciationAt 1 October 2006 13 589 721 40 1,363From acquisitions - 231 335 82 648Charge for the year - 136 379 12 527Disposals (13) (149) (281) (94) (537) At 30 September 2007 - 807 1,154 40 2,001 Net book valueAt 30 September 2007 - 970 1,579 47 2,596 At 30 September 2006 487 745 926 43 2,201 Included within motor vehicles are leased assets with a net book value of£42,000 (2006 - £43,000). The depreciation charge for the year on these assetswas £12,000 (2006 - £5,000). 12. Fixed asset investments Other investments £'000Group Cost and net book valueAt 1 October 2006 43Additions 5From acquisitions 86Disposals (3) At 30 September 2007 131 The aggregate market value of listed investments at 30 September 2007 was£139,000 (2006 - £50,000). Shares in Other group investments undertakings Total £'000 £'000 £'000Company CostAt 1 October 2006 3 13,677 13,680Additions 5 32,171 32,176Adjustments - (281) (281)Disposals (3) - (3) At 30 September 2007 5 45,567 45,572 Details of the Company's subsidiary undertakings are given in note 20.Adjustments to shares in group undertakings represent revisions in the estimatesof deferred consideration payable in line with post-acquisition results ofbusinesses acquired. 13. Debtors 2007 2006 £'000 £'000Group Due within one yearTrade debtors 5,258 2,276Insurance broking debtors 11,627 9,090Other debtors 1,382 137Deferred tax asset (note 16) 443 -Prepayments and accrued income 1,834 1,336 20,544 12,839 Company Due within one yearAmounts owed by group undertakings 2,159 5,335Other debtors 995 25Prepayments and accrued income 598 30 3,752 5,390 14. Creditors: amounts falling due within one year 2007 2006 £'000 £'000Group Obligations under finance leases 12 14Trade creditors 1,614 836Insurance broking creditors 13,758 10,835Corporation tax 3,275 608Social security and other taxes 697 529Deferred consideration 4,893 2,770Other creditors 1,385 389Accruals and deferred income 6,773 1,716 32,407 17,697 Company Obligations under finance leases 12 -Trade creditors 553 -Amounts owed to group undertakings 2,184 212Corporation tax - 5Social security and other taxes 411 -Deferred consideration 4,664 1,903Other creditors 441 -Accruals and deferred income 402 10 8,667 2,130 15. Creditors: amounts falling due after more than one year 2007 2006 £'000 £'000Group Bank loan 20,268 3,200Obligations under finance leases 29 25Deferred consideration 8,785 2,152 29,082 5,377 Company Bank loans 20,268 3,200Obligations under finance leases 29 -Deferred consideration 8,785 1,923 29,082 5,123 Group Included within the above are amounts falling due as follows: In 1 - 2 years:Bank loans 498 450Obligations under finance leases 29 25 In 2 - 5 years:Bank loans 19,770 2,750 The bank loan is at a floating interest rate of between 1.5% and 2.0% aboveLIBOR and is repayable between February 2009 and 2012. The loan is secured byan unlimited inter-company composite guarantee over the trading companies withinthe Group. 16. Provisions for liabilities Deferred Clawback tax provisions Total £'000 £'000 £'000Group At 1 October 2006 87 25 112From acquisitions (13) 20 7(Credit)/charge for the year (350) 85 (265)Deferred tax asset (note 13) 443 - 443 At 30 September 2007 167 130 297 Company At 1 October 2006 - - -Charge for the year 17 - 17 At 30 September 2007 17 - 17 Deferred tax The deferred tax provision is made in respect of accelerated capital allowances. Clawback provision Provision is made for commissions repayable to insurance companies where it hasbeen received and receivable on indemnity terms during the year. 17. Called up share capital Group and Company 2007 2006 £'000 £'000 Authorised100,000,000 Ordinary shares of 1p each 1,000 1,000 No. of shares £'000 Allotted, called up and fully paidAt 1 October 2006 24,381,240 244Issued during the year 1,363,172 13 At 30 September 2007 25,744,412 257 On 11 October 2006, 133,701 new ordinary shares of 1p were issued at 81p tofulfil the exercise of share warrants by JM Finn. On 25 July 2007, 267,402 newordinary shares of 1p were issued at 81p to fulfil the exercise of sharewarrants by Midicorp. On 28 September 2007, 170,738 new ordinary shares of 1pwere issued at 81p to fulfil the exercise of share warrants by Daniel Stewart. On 2 November 2006, 3 July 2007, 10 August 2007 and 18 September 2007, 5,000,5,000, 5,781 and 5,000, respectively, new ordinary shares of 1p were issued at96p to fulfil share options exercised by staff members under the EMI scheme. On 24 January 2007, 76,133 new ordinary shares of 1p were issued at 245p as partof the price for the acquisition of SPS Wellbeing Limited. On 31 July 2007,694,417 new ordinary shares of 1p were issued at 257p as part of the price forthe acquisition of John Lampier & Son Limited and its subsidiaries. 18. Reserves Group Company Restated Restated £'000 £'000Share premium accountAt 1 October 2006 13,807 13,777Premium on shares issued 2,440 2,440 At 30 September 2007 16,247 16,217 Capital reserveAt 1 October 2006 and 30 September 2007 13 - Capital redemption reserveAt 1 October 2006 and 30 September 2007 1 1 Share based payment reserveAt 1 October 2006 106 106Share options granted 110 110Share options granted on acquisitions 233 233EBT shares awarded to staff 155 155EBT shares awarded on acquisitions 186 186Share options exercised (33) (33) At 30 September 2007 757 757 Own shares heldAt 1 October 2006 (360) (360)Purchase of own shares by EBT (491) (491) At 30 September 2007 (851) (851) Profit and loss accountAt 1 October 2006 2,516 (114)Cost of share options exercised 33 33Profit /(loss) for the year 1,056 (1,124) At 30 September 2007 3,605 (1,205) Included within the retained profit of the Company and the Group is £6,000 loss(2006 - £2,000 profit) held by the EBT. 19. Prior year adjustment The Company has adopted Financial Reporting Standard 20 "Share Based Payment" ('FRS20') for the year ended 30 September 2007. Comparative figures for the yearended 30 September 2006 have been restated following the application of FRS20. 2006 £'000 Operating profit as previously stated 2,090 Cost of share options granted (38) Operating profit as restated 2,052 The corresponding adjustment to reserves at 1 October 2005 created an openingentry in the Share Based Payment Reserve of £41,000, with an equal reduction inthe Profit and Loss Account reserve to £1,364,000. 20. Subsidiary undertakings The following is a list of all of the subsidiary companies within the Group at30 September 2007. All subsidiaries are 100% owned, except where noted, and areregistered and operate in England and Wales. Name of company Holding Nature of business Access Underwriting Agencies Limited* 5p Ords Insurance Brokers**Goss & Co (Insurance Brokers) Limited* £1 Ords Insurance Brokers**Goss Risk Management Limited* £1 Ords Insurance Brokers**Jelf Insurance Brokers Limited £1 Ords Insurance Brokers** Jelf Professions Limited (formerly Lampier £1 Ords Insurance BrokersProfessions Limited) *John Lampier & Son Limited £1 Ords Insurance Brokers**Martin & Galpin (Insurance Services) Limited* £1 Ords Insurance BrokersJelf Corporate Healthcare Limited £1 Ords Healthcare**SPS Wellbeing Limited 1p Ords Healthcare**Goss & Co (Financial Services) Limited* £1 Ords Wealth Management**Jelf Financial Planning Limited £1 Ords Employee Benefits and Wealth Management**Auto Business Solutions Limited £1 Ords Vehicle and Asset Finance**Jelf Commercial Finance Limited £1 Ords Commercial FinanceGoss Group Limited*** £1 Ords Holding CompanyMartin & Galpin (Holdings) Limited* £1 Ords Non trading holding companyA Wills & Co Limited* £1 Ords DormantBath Financial Planning Limited* £1 Ords DormantCrowther Beard Financial Planning Limited* £1 Ords DormantFarndale Hammond (Healthwise) Limited* £1 Ords DormantJelf Corporate Consultancy Limited £1 Ords DormantJelf Insurance Brokers (Wessex) Limited £1 Ords DormantJelf Mortgage Solutions Limited £1 Ords DormantJelf Private Clients Limited £1 Ords DormantKallender Walwyn Limited £1 Ords DormantManaged Healthcare Limited* £1 Ords DormantBrian D Thomas Insurance Services Limited £1 Ords Non tradingC&I Insurance Services Limited* £1 Ords Non tradingCheltenham Insurance Brokers Limited £1 Ords Non tradingCheltenham Insurance Brokers Life & £1 Ords Non tradingPensions LimitedHaines Wallace Insurance Brokers Limited £1 Ords Non tradingPendleton May Financial Services Limited* £1 Ords & £1 deferred Non tradingPendleton May Insurance Brokers Limited* £1 Ords Non tradingSunninghill Insurance Brokers Limited £1 Ords Non tradingWellbeing Healthcare Limited* 10p Ords Non trading * Denotes where the shareholding is held by a wholly owned subsidiary of the Company ** Regulated by the Financial Services Authority *** At the year end, Michael King held all the £1 'B' Ordinary shares of GossGroup Limited. These shares carry no voting rights and are in the process ofbeing transferred to the Company as part of the acquisition of Goss GroupLimited. Subsequent to 30 September 2007, the Group rationalised its structure asdescribed in note 29. 21. Other commitments At 30 September 2007, there were annual commitments under non-cancellableoperating leases as follows: Land and buildings Other 2007 2006 2007 2006 £'000 £'000 £'000 £'000Group Expiry date:Within 1 year 43 132 59 16Between 2 and 5 years 345 290 247 120After more than 5 years 881 177 - - 1,269 599 306 136 22. Reconciliation of net cash flow to movement in net debt 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Increase in cash in the year 4,044 3,280 Cash inflow from increase in debt and lease (14,508) (2,533)financingNew deferred consideration (11,532) (4,346)Revision of deferred consideration 214 91 Change in net debt resulting from cash (25,826) (6,788)flows Movement in net debt in the year (21,782) (3,508) Net (debt)/funds at 1 October (2,935) 573 Net debt at 30 September (24,717) (2,935) 23. Analysis of net funds/(debt) At At 30 September 1 October Other 2007 2006 Cash Flow changes £'000 £'000 £'000 £'000 Net cash:Cash at bank and in hand 5,226 4,044 - 9,270 Debt:Deferred consideration (4,922) 2,562 (11,318) (13,678)Obligations under finance leases (39) (2) - (41)Bank loans (3,200) (17,068) - (20,268) (8,161) (14,508) (11,318) (33,987) Net debt (2,935) (10,464) (11,318) (24,717) 24. Related parties During the year, Group companies paid a total of £127,000 (2006 - £125,000) forrent of the buildings at Yate from which they operate. In 2006, the buildingswere owned by Jelf Insurance Group Directors' Retirement and Death BenefitScheme, which is deemed to be a related party because the Scheme's only membersare certain directors of companies within the Group. In October 2007, thebuildings were transferred to Fromeforde Partners LLP, the partners of which aredirectors of companies within the Group. During the year, Group companies paid a total of £20,000 (2006 - £10,000) rentin respect of the premises at Newton Abbott from which they operate. At thestart of the year, the landlord was the Michael King SSAS of which the solebeneficiary is Michael King, a Director of the Company. From March 2007, thisownership transferred to Fromeforde Partners LLP. At the year end, an amount of £10,000 (2006 - £nil) was owed to FromefordePartners LLP, £nil (2006 - £nil) was owed to Jelf Insurance Group Directors'Retirement and Death Benefit Scheme and £nil (2006 - £nil) was owed to theMichael King SSAS. In accordance with the requirements of Financial Reporting Standard 8, paragraph3(c), the Group is exempt from disclosing transactions between entities withinthe Group. 25. Employee Benefit Trust The Company and Group results include those of the Jelf Group plc EmployeeBenefit Trust ('EBT'), which holds shares in respect of the Group's shareschemes. The EBT was set up in February 2006 to acquire 'excess' shares as theybecome available on the open market. The shares so purchased are to be used tomeet awards of shares and share options for the Group's employees. The sharepurchases are funded by means of a third party bank loan to the EBT, for whichthe Company acts as guarantor. Finance and administrative costs are borne by the EBT. All costs are accountedfor as they accrue. At 30 September 2007, the EBT held 462,678 (2006 - 232,000)1p ordinary shares. At that date, share awards issued under the Group's sharescheme amounted to 430,554 (2006 - 112,803). The EBT has been granted an option by Michael King to buy 500,000 ordinaryshares of 1p at 183p per share. This option is exercisable by the EBT between22 March 2008 and 21 March 2009. On 9 August 2007, 100,000 of these optionswere exercised by the EBT by mutual agreement between the EBT and Michael King. The nominal value of own shares held by the Group and Company at 30 September2007 was £4,627 (2006 - £2,320). Own shares are held in the EBT and are listedinvestments. Their market value at 30 September 2007 was £1,124,000 (2006 -£425,000). 26. Share options The Group has a number of share option plans that are available to Board membersand employees, as described in the Remuneration Report on pages 40 to 42. Employees Employee share options outstanding at 30 September 2007 were as follows: At 30 Sept At 1 Oct Awards Exercised 2007 2006 in year in year No. No. No. No. Price Awarded Exercisable EMI Options 96p 1 Sep 05 Oct 2006 - Sep 2014 160,625 - (20,781) 139,844 EMI Options 96p 1 Sep 05 Oct 2007 - Sep 2015 26,000 - - 26,000 Long-service awards 170p 1 Oct 06 Nov 2008 - Oct 2016 - 15,000 - 15,000 Performance awards 230p 12 Jan 07 Feb 2010 - Jan 2011 - 12,000 - 12,000 SPS acquisition 12p 6 Feb 07 Mar 2009 - Feb 2016 - 101,047 - 101,047 Executives' LTIP 242p 7 Mar 07 Oct 2009 - Sep 2010 - 370,000 - 370,000 Long-service awards 265p 31 May 07 Jun 2009 - May 2017 - 15,000 - 15,000 On 1 October 2007, a further 490,000 share options were awarded under theExecutives' LTIP scheme. These options entitle the holder to subscribe at aprice of 243p per ordinary share between January 2011 and January 2012. Thenumbers of options to be granted in both the March 2007 and October 2007 awardsunder the Executives' LTIP scheme are subject to the achievement of prescribedperformance criteria. Options are settled by the issue of ordinary shares of 1p each upon receipt ofthe relevant exercise funds from the option holder. Options lapse if the holderis no longer employed by the Company. No options lapsed during the year (2006 -nil), and a total of 16,841 have lapsed since the year end. Third parties Upon admission to the Alternative Investment Market on 21 October 2004, theCompany issued warrants to Daniel Stewart & Company plc, JM Finn & Co andMidicorp Corporate Finance Ltd. All these warrants were exercised in the year. The Company also has a share option plan to recognise the performance of anumber of self-employed advisors. Share options outstanding at 30 September 2007 were as follows: At 1 At 30 Oct Exercised / Sep 2006 Awards Lapsed 2007 in year in year No. No. No. No.Awarded Price Exercisable 6 Oct 04 Warrants 81p Oct 2004 - Oct 2008 571,841 - (571,841) - 3 Oct 05 Performance Awards 96p Oct 2007 - Oct 2009 50,000 - - 50,000 12 Jan 07 Performance Awards 230p Jan 2010 - Jan 2011 - 478,000 (21,000) 457,000 On 6 November 2007, 435,000 of share options at 252p were issued as performanceawards. These options are exercisable from November 2010 until November 2011. Options are settled by the issue of ordinary shares of 1p each upon receipt ofthe relevant exercise funds from the option holder. Options lapse if the holderis no longer engaged by the Company. A total of 21,000 (2006 - nil) optionslapsed during the year for this reason. Weighted averages Weighted average exercise prices of the share options are: 2007 2006 Pence Pence Outstanding at 1 October 85.4 84.7Granted during the year 211.1 96.0Forfeited during the year 230.0 -Exercised during the year 81.5 -Outstanding at 30 September 189.8 85.4Exercisable at 30 September 96.0 84.3 The weighted average market price at the date of exercise of the optionsexercised during the year was 239.0p (2006 - n/a). Valuation Key assumptions used in the valuation of share options are determined asfollows: Share price Market value at the award date. Exercise price As stated in the option agreement. There are currently 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 Nil. Lapse probability Based on annualised historic lapses. Performance criteria Options granted on 7 March 2007 have performance criteria which must be met for the options to vest. A 60% probability of meeting the criteria has been applied. Risk-free interest Based on UK Gilts with similar issue dates and terms as the option.rate Grant date Expected Expected Risk-free Lapse Aggregate volatility option life rate probability fair value years £ 01 September 2005 20% 5.0 4.75% 7% 40,52401 September 2005 20% 6.0 4.75% 14% 6,81503 October 2005 20% 3.0 4.25% 14% 8,10501 October 2006 20% 6.0 4.00% 14% 6,51712 January 2007 20% 3.5 4.25% 21% 298,02606 February 2007 20% 5.5 4.00% 14% 200,22607 March 2007 20% 3.25 4.50% 18% 95,13631 May 2007 20% 6.0 4.00% 14% 10,159 27. Derivatives and other financial instruments Derivatives and financial instruments have not been used during the year increating or changing the risks the Group faces. As permitted by FinancialReporting Standard 13, short-term debtors and creditors have been excluded fromthe disclosures. Interest rate profile The interest rate profile of the Group's financial liabilities is as follows: Currency No Floating interest rate Total £'000 £'000 £'000 30 September 2007 Sterling borrowings - 20,268 20,268 Deferred consideration 13,678 - 13,678 13,678 20,268 33,946 30 September 2006 Sterling borrowings - 3,200 3,200 Deferred consideration 4,922 - 4,922 4,922 3,200 8,122 The no interest financial liabilities comprise the deferred consideration inrespect of acquisitions made by the Group. The weighted average period untilmaturity of these liabilities is 0.9 years (2006 - 1.5 years). The floating rate financial liabilities comprise denominated bank borrowingsthat bear interest at rates detailed in note 15. Maturity of financial liabilities The maturity profile of the Group's financial liabilities is detailed in note15. Currency exposures Group operations are handled almost entirely in sterling. 28. Acquisitions During the year, the Group has made the following acquisitions: Book of business from Hern Waters & Co 2 October 2006 Insurance BrokersBook of business from North Cotswold Insurance 31 October 2006 Insurance BrokersHaines Wallace (Insurance Brokers) Ltd 30 November 2006 Insurance BrokersBook of business from John Wason (Insurance Brokers) Ltd 29 December 2006 Insurance BrokersSPS Wellbeing Ltd 24 January 2007 HealthcareBook of business from Lloyd & Whyte Ltd 28 February 2007 Insurance BrokersSunninghill Insurance Brokers Ltd 30 April 2007 Insurance BrokersCheltenham Insurance Brokers Ltd 30 May 2007 Insurance BrokersCheltenham Insurance Brokers Life & Pensions Ltd 30 May 2007 Wealth ManagementJohn Lampier & Son Ltd 31 July 2007 Insurance BrokersMartin & Galpin Ltd 31 July 2007 Insurance BrokersLampier Professions Ltd (now Jelf Professions Ltd) 31 July 2007 Insurance Brokers The net assets acquired, fair value adjustments, consideration and goodwill forthese acquisitions are summarised below: Book value Fair value Fair value acquired adjustments acquired £'000 £'000 £'000 Fixed assets 697 (151) 546Debtors 3,872 - 3,872Bank/other loans 2,043 - 2,043Designated insurance broking account 1,497 - 1,497Creditors (7,426) 822 (6,604)Provisions (20) - (20) Net assets acquired 663 671 1,334 Consideration (cash) 20,453Consideration (shares, share options and share awards) 2,388Consideration (deferred) 11,532Net assets/(liabilities) payment due (409)Costs 1,070 Goodwill 33,700 Included in the above summary is the acquisition of SPS Wellbeing Limited whichis summarised in note 28(i) and the acquisition of John Lampier & Son Limited,Martin & Galpin Ltd and Lampier Professions Ltd (the 'Lampier Group') which issummarised in note 28(ii). In most cases the Directors considered the book values of assets in the acquiredentities not to be materially different to the fair value of the assetsacquired. Where differences were identified, fair value adjustments have beenmade. Deferred consideration is dependent upon a number of criteria including futureturnover levels and is to be satisfied in cash. The Directors have provided fordeferred consideration at their best estimate of the liability which isreasonably expected to be payable. Due to the nature of deferred considerationfinal amounts paid may be reduced with a resulting adjustment to goodwill. 28(i) SPS Wellbeing Limited Book value Fair value Fair value acquired adjustments acquired £'000 £'000 £'000 Fixed assets 358 (151) 207Debtors 1,239 - 1,239Bank/other loans 796 - 796Designated insurance broking account 1,131 - 1,131Creditors (2,462) 822 (1,640) Net assets acquired 1,062 671 1,733 Consideration (cash) 6,702Consideration (shares, share options and share awards) 497Consideration (deferred) 2,840Costs 371 Goodwill 8,677 Prior to acquisition, the financial period of SPS Wellbeing Limited commenced on1 April 2006. The results for the period 1 April 2006 to 24 January 2007 wereturnover of £3,675,000, operating profit of £481,000, profit before taxation of£599,000 and tax charge of £575,000. The results for the year ended 31 March2006 were turnover of £3,864,000, operating loss of £12,000, profit beforetaxation of £104,000, tax charge of £57,000 and profit after taxation of£47,000. 28(ii) Lampier Group Provisional book Provisional fair Provisional fair value value value acquired adjustments acquired £'000 £'000 £'000 Fixed assets 305 - 305Debtors 2,157 - 2,157Bank/other loans (129) - (129)Designated insurance broking account 1,030 - 1,030Creditors (4,170) - (4,170) Net liabilities acquired (807) - (807) Consideration (cash) 10,973Consideration (shares, share options and share awards) 1,783Consideration (deferred) 6,869Net assets/(liabilities) payment due (807)Costs 519 Goodwill 20,144 Prior to acquisition, the financial period of the Lampier Group commenced on 1April 2007. The results for the period 1 April 2007 to 31 July 2007 wereturnover of £2,004,000, operating profit of £127,000, profit before taxation of£2,000 and tax charge of £9,000. The results for the year ended 31 March 2007were turnover of £6,989,000, operating profit of £1,827,000, profit beforetaxation of £1,936,000, tax charge of £578,000 and profit after taxation of£1,358,000. 29. Post balance sheet events On 1 October 2007, the Company undertook a rationalisation of the groupstructure, the purpose of which was to bring the Goss and SPS Wellbeingbusinesses under the Jelf Group brand. Jelf Insurance Brokers Ltd. and Goss &Co (Insurance Brokers) Ltd. were combined to form Jelf Insurance Brokers Ltd.Jelf Financial Planning Ltd. and Goss & Co (Financial Services) Ltd. werecombined to form Jelf Financial Planning Ltd. Jelf Corporate Healthcare Ltd.and SPS Wellbeing Ltd. were combined to form Jelf Wellbeing Ltd. The businessof Auto Business Solutions Ltd. was transferred to Jelf Commercial Finance Ltd.and Jelf Insurance Brokers Ltd. The details of the transactions are as follows: • The shares of Goss & Co (Insurance Brokers) Ltd and Goss & Co (FinancialServices) Ltd were sold from Goss Group Ltd to the Company. • The regulated trade of Auto Business Solutions Ltd was hived into Goss &Co (Insurance Brokers) Ltd. The non-regulated trade and assets of Auto BusinessSolutions Ltd were hived into Jelf Commercial Finance Ltd. • The trade and assets of Jelf Insurance Brokers Ltd were hived into Goss& Co (Insurance Brokers) Ltd and the two companies underwent a simultaneousname-change. The remaining trading entity became Jelf Insurance Brokers Ltd. • The trade and assets of Goss & Co (Financial Services) Ltd were hivedinto Jelf Financial Planning Ltd. • The trade and assets of Jelf Corporate Healthcare Ltd were hived intoSPS Wellbeing Ltd and SPS Wellbeing Ltd was renamed as Jelf Wellbeing Ltd. All distributable reserves in the subsidiary entities whose trade had been hivedinto other Group companies were paid to the Company in the form of dividends. The following companies have applied to remove their FSA registration and are nolonger regulated by the FSA: Goss & Co (Insurance Brokers) Limited Goss & Co (Financial Services) Limited Auto Business Solutions Limited Jelf Corporate Healthcare Limited Access Underwriting Agency Ltd (formal notification of de-regulation isoutstanding) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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