TIDMJLT
RNS Number : 5517N
Jardine Lloyd Thompson Group PLC
29 July 2014
Jardine Lloyd Thompson Group plc
Unaudited Interim Results for the six months ended 30th June
2014
Jardine Lloyd Thompson Group plc ("JLT" or "the Group")
announces interim results for the six months ended 30th June
2014.
Financial Highlights
-- Total revenue up 15% to GBP559.6m
-- Organic revenue growth of 6%
-- Underlying PBT up 15% to GBP107.4m
-- Reported PBT up 16% to GBP98.4m
-- Interim dividend increased by 5% to 10.6p
Operational and Strategic Highlights
-- Strong organic revenue growth
-- Strong growth in Asia, Latin America, and International Employee Benefits
-- Good progress in the integration of Towers Watson Re
-- Continuing challenges due to decline in the insurance and
reinsurance rating environment and adverse foreign exchange
movements
-- Continuing to invest in the business through acquisitions in
Hong Kong, Brazil and the UK, and a start-up venture in
Argentina
-- Business Transformation Programme on track to deliver GBP12m recurring savings for 2014
Dominic Burke, Chief Executive, commented:
'We are confident that we can deliver year-on-year financial
progress, but we are more cautious over the outlook for the
remainder of the year given the marked decline in the insurance and
reinsurance rating environment over the last quarter and the
continued strength of sterling.
The strong organic revenue growth we achieved in the period,
despite these challenges, demonstrates the success of our strategy
of focusing on our areas of specialisation and higher growth
economies.'
Enquiries:
Jardine Lloyd Thompson
Dominic Burke, Chief Executive Group plc 020 7528 4948
Mike Reynolds, Finance Director 020 7528 4375
Paul Dransfield, Corporate
Communications 020 7528 4933
Tom Burns Brunswick Group LLP 020 7404 5959
Dania Saidam
A presentation to investors and analysts will take place at
9.00am today at The St Botolph Building, 138 Houndsditch, London,
EC3A 7AW. A live webcast of the presentation can be viewed on the
Group's website www.jltgroup.com.
FULL RELEASE FOLLOWS
_____________________________________________________________________________________
INTERIM STATEMENT
For the first half of 2014 JLT delivered another good
performance with strong organic revenue growth of 6%. This was
achieved despite a further significant decline in the insurance and
reinsurance rating environment, particularly in the second quarter,
and the continuing rise in the strength of sterling.
The financial performance is summarised in the table below:
6 months ended 30th June 2014
GBPm Total Revenue Trading Profit Trading Margin
----------------------------------- ------------------------- ----------------------
2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013
-------- -------- ---- --------- ------- ------- ------- ------ ------ ------
Risk &
Insurance 429.6 15% 24% 5% 94.9 104.6 82.7 22% 23% 22%
Employee
Benefits 130.0 13% 18% 12% 26.0 27.5 21.1 20% 20% 18%
Central
Costs - - - - (10.4) (10.4) (11.0) - - -
559.6 15% 22% 6% 110.5 121.7 92.8 19.7% 20.4% 19.0%
-------- -------- ---- --------- ------- ------- ------- ------ ------ ------
GBPm 2014 2013
------- ------- -------
Underlying trading profit 110.5 92.8
Associates 7.2 7.5
Net finance costs (10.3) (7.2)
------- -------
Underlying profit before taxation 107.4 93.1
Exceptional items (9.0) (8.0)
------- -------
Profit before taxation 98.4 85.1
Underlying tax expense (26.8) (23.3)
Tax on exceptional items 1.6 1.8
Non-controlling interests (6.6) (4.4)
------- -------
Profit after taxation and non-controlling
interests 66.6 59.2
------- -------
Underlying profit after taxation
and
non-controlling interests 74.0 65.4
------- -------
Diluted earnings per share 30.3p 26.9p
Underlying diluted earnings
per share 33.6p 29.7p
Notes:
CRE: Constant rates of exchange.
Organic growth is based on total revenue excluding the effect of
currency, acquisitions, disposals and investment income.
Total revenue comprises fees, commissions and investment
income.
Underlying results exclude exceptional items.
Total revenue for the six months to 30th June 2014 increased by
15% to GBP559.6 million, an increase of 22% at constant rates of
exchange (CRE), with organic revenue growth of 6%.
The underlying trading profit increased by 19% to GBP110.5
million, which primarily reflects the first six months contribution
from Towers Watson Re. Underlying trading profit increased by 31%
at CRE. Currency movements had a negative impact of GBP11.2 million
in the period, representing the effect of transactional and
translational exchange rate movements, as anticipated and
highlighted at the time of our preliminary results in March.
Profit before tax increased by 16% to GBP98.4 million after
incurring net exceptional costs of GBP9.0 million, comprising
acquisition and integration costs of GBP6.2 million and GBP2.8
million relating to the two year Business Transformation Programme
which concludes at the end of 2014.
Underlying profit before tax, which excludes the impact of
exceptional items, increased by 15% to GBP107.4 million for the
period.
As we highlighted at the time of our preliminary results in
March, the acquisition of Towers Watson Re has weighted the Group's
overall revenues and profits towards the first half of the
financial year. This acquisition is also the primary reason that
the first half trading margin for the Group has grown to 19.7%,
being 70 basis points higher than the same period last year.
Diluted earnings per share increased by 13% to 30.3 pence per
share for the period while underlying diluted earnings per share
increased by 13% to 33.6 pence per share.
DIVIDENDS
The Board has declared an increased interim dividend of 10.6
pence per share, up from 10.1 pence per share, which will be paid
on 1st October 2014 to shareholders on the register at 5th
September 2014.
OPERATIONAL REVIEW
The Group operates in two principal areas: Risk & Insurance
and Employee Benefits. The results of each of these businesses are
reported in more detail below:
Risk & Insurance
Our Risk & Insurance businesses achieved revenue growth of
15% to GBP429.6 million, an increase of 24% at CRE, with organic
revenue growth of 5%. Trading profit has increased by 15% to
GBP94.9 million, an increase of 26% at CRE. As noted above, this
reflects the contribution from our enlarged reinsurance broking
business. The trading margin of 22% remained unchanged when
compared to the same period in 2013.
6 months ended 30th June 2014
GBPm Total Revenue Trading Profit Trading Margin
--------------------------------- ---------------------- ---------------------
2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013
------ ------- ------ -------- ------ ------ ------ ------ ------ -----
JLT Specialty 112.3 2% 4% 4% 16.4 17.5 17.8 15% 15% 16%
JLT Towers
Re 110.0 125% 137% 6% 33.2 35.6 14.7 30% 31% 30%
JLT Australia
and NZ 64.5 (10%) 7% 7% 22.6 26.9 25.4 35% 35% 35%
Lloyd &
Partners 43.3 (3%) - (1%) 10.5 11.0 10.5 24% 25% 23%
JLT Asia 38.0 9% 20% 14% 7.0 7.7 6.4 18% 18% 18%
JLT Latin
America 26.2 2% 19% 17% 6.8 7.9 7.3 26% 26% 28%
Thistle
UK 16.1 4% 4% 3% (0.1) (0.1) (1.3) (1%) (1%) (9%)
JLT Canada 10.0 (28%) (18%) (18%) (1.6) (2.0) 0.8 (16%) (17%) 6%
JLT Middle
East and
Africa 5.6 60% 76% (27%) (0.1) (0.1) 1.0 (2%) (2%) 28%
JLT Insurance
Management 3.6 (7%) - (3%) 0.2 0.2 0.1 6% 7% 3%
429.6 15% 24% 5% 94.9 104.6 82.7 22% 23% 22%
------ ------- ------ -------- ------ ------ ------ ------ ------ -----
JLT Specialty achieved revenues of GBP112.3 million, marginally
ahead of the same period in 2013. Trading profits were GBP16.4
million, compared to GBP17.8 million in the first half of 2013,
reflecting the tough trading conditions that this business has
experienced. The business delivered organic revenue growth of 4%
and goes into the second half of the year in good shape in terms of
both its underlying new business pipeline and the strength of its
specialist teams in which we continue to invest.
However, we anticipate that the accelerating decline in
insurance rates experienced in the second quarter combined with the
continued strengthening of sterling will result in JLT Specialty's
overall financial performance in 2014 being broadly similar to
2013.
JLT Towers Re has had a good start to its first period of
trading. Organic revenue growth was 6% in the period and the
enlarged business delivered an unchanged trading profit margin of
30%. Revenue for the combined JLT Towers Re for the period was
GBP110.0 million. Historically approximately 70% of our reinsurance
revenues were booked in the first six months of the calendar year
and we expect a similar pattern going forward for the merged
business.
The overall integration is progressing well. In North America we
have seen high levels of client and people retention and are now
actively engaged in recruiting both senior leaders and producers.
In London both teams are fully merged and operating out of one
building. The focus for the enlarged business is on building new
business opportunities for 2015 and beyond and we are very
encouraged both by the support of cedants and the strength of the
developing pipeline.
This is a business with an exciting long-term growth
opportunity. There is strong client demand for a differentiated
broker that can provide real choice and innovation. We now have the
scale, capabilities and client access to win increasing market
share and we are committed to making significant investments in our
reinsurance businesses around the world, particularly in the USA,
now and into the future.
However, we would expect the full year margin to be broadly flat
on the prior year. In addition to our ongoing investment in the
business, this is due to the sharp decline in the reinsurance
rating environment, given that JLT Towers Re earns a much higher
proportion of commission income than the rest of the Group. A
further factor is the continued strengthening of sterling seen so
far in 2014, as Towers Watson Re did not have a hedging programme
in place at the time of the acquisition.
JLT Australia and New Zealand achieved revenues of GBP64.5
million, a reduction of 10% due to the strength of sterling. At CRE
revenues grew by 7% all of which was organic. Trading profit
declined by 11% to GBP22.6 million, but increased by 6% at CRE.
Included within the first half were some revenues that were
anticipated in the second half. The good underlying performance
reflects the growing benefits being delivered by the investments we
are making in our specialty areas and the continued strength of our
Public Sector business.
Lloyd & Partners, our specialist wholesale broker, saw
revenues reduce by 3% to GBP43.3 million and trading profit remain
unchanged at GBP10.5 million. However at CRE, revenues were flat
and trading profit increased by 6%.
During the period this business has continued to invest in
expanding its specialty capabilities in areas such as Energy &
Marine and Property. However the business has also had to contend
with surplus capital in domestic markets in particular, which is
currently making the London, European, and Bermuda markets less
attractive to Lloyd & Partners' clients.
JLT Asia reported revenues of GBP38.0 million and trading profit
of GBP7.0 million, each representing a 9% increase over the same
period in 2013. At CRE this represented an increase in revenues of
20%, with organic revenue growth of 14% and an uplift in trading
profit of 19%. This strong performance was delivered by our
investment in building our specialty capabilities which is enabling
us to continue to attract new clients and win market share in areas
such as Construction, Energy and Marine. In January the business
acquired Lambert Brothers which has added considerably to our
Marine and Corporate capabilities.
JLT Latin America has continued to perform well with revenues
increasing by 2% to GBP26.2 million, or 19% at CRE. Organic revenue
growth was 17%. Trading profit decreased by 6% to GBP6.8 million,
but increased by 9% at CRE. The trading margin for the half year
reduced to 26% in line with expectations as the business continues
to invest in building-out its specialty capabilities. We also
established a new start-up operation in Argentina during this
period, focussed on large scale Energy, Infrastructure and
Corporate accounts.
Employee Benefits
Our Employee Benefits operations delivered revenues of GBP130.0
million, a 13% increase, with organic revenue growth of 12%. This
good performance was largely driven by the continued strong results
of our international Employee Benefits operations. Trading profit
grew to GBP26.0 million, an increase of 23% over the corresponding
period in 2013. The 20% trading profit margin of the combined
Employee Benefits operations increased by 200 basis points over the
same period last year.
6 months ended 30th June 2014
GBPm Total Revenue Trading Profit Trading Margin
------------------------------- ---------------------- ---------------------
2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013
------ ------- ---- -------- ------ ------ ------ ------ ------ -----
UK & Ireland 85.4 5% 5% 1% 12.3 12.3 12.9 14% 14% 16%
Asia 30.6 35% 49% 42% 11.1 12.2 7.5 36% 36% 33%
Latin America 9.3 39% 63% 30% 2.6 3.0 1.2 28% 27% 17%
Australia
and NZ 3.1 (7%) 12% 12% 0.3 0.3 (0.3) 10% 10% (9%)
Canada 0.9 (8%) 7% 6% (0.2) (0.2) - (22%) (22%) 3%
Middle East
and Africa 0.7 - - - (0.1) (0.1) (0.2) (16%) (16%) -
130.0 13% 18% 12% 26.0 27.5 21.1 20% 20% 18%
------ ------- ---- -------- ------ ------ ------ ------ ------ -----
UK & Ireland Employee Benefits delivered revenues of GBP85.4
million, an increase of 5%, with organic revenue growth of 1% and
trading profit reducing by 5% to GBP12.3 million. Our pension
administration business has continued to grow, with both new
clients and further penetration of the existing client base, the
benefits of which will come through in the second half of the year
and into the future. There were some important changes to the UK
pensions regime during the period. While the changes to the
individual annuity market adversely impacted a small part of our
business, we have been quick to take the opportunity to build out
our bulk-purchase annuity advisory and administration capabilities.
Our market position in this sector has been further strengthened by
our acquisition of Ensign Pensions Administration in April.
Overall, therefore, we are expecting our UK & Ireland
Employee Benefits business to show year-on-year financial
progress.
Asia Employee Benefitscontinued to perform well with revenues
increasing by 35% or 49% at CRE, of which 42% was organic. The
trading profit increased by 48% to GBP11.1 million, an increase of
62% at CRE. This included a strong contribution from our
high-net-worth life insurance broker, with good progress being made
through the representative office opened in Geneva in 2013 which
complements its existing hubs in Asia where it remains the clear
market leader.
Our Employee Benefits operations in Latin America and Australia
& New Zealand continue to make good progress.
ASSOCIATES
6 months ended 30th June
2014
GBPm Contribution After
Tax
-----------------------
2014 2013 Growth
------ ------ -------
Associates 7.2 7.5 (4%)
------ ------ -------
The contribution from our associates reduced slightly,
reflecting a combination of the challenging macro-economic trading
conditions being experienced across continental Europe and the
strength of sterling. The benefits of the specialty-led approach,
which JLT has helped drive across our international network, is
creating new opportunities to work collaboratively with our
partners.
EXCEPTIONAL ITEMS
Total exceptional costs for the period were GBP9.0 million
(2013: GBP8.0 million), in line with expectations. These primarily
comprised one-off acquisition and integration costs, in particular
in relation to Towers Watson Re which was acquired in November
2013, and the costs of the two year Business Transformation
Programme which concludes at the end of 2014.
For 2014 as a whole, exceptional items are expected to be in the
region of GBP20.7 million, reflecting acquisition and integration
costs of GBP12.2 million, primarily in relation to the Towers
Watson Re acquisition, together with the cost of the second and
final year of the two year Business Transformation Programme of
GBP8.5 million.
OPERATING COSTS
In 2014 the Group's underlying operating cost ratio reduced by
70 basis points to 80.3% of total revenue, when compared to the
same period last year.
This was primarily driven by the impact of the acquisition of
Towers Watson Re at the end of 2013 where, in common with our
existing reinsurance business, a larger proportion of revenue is
recognised in the first half of the year.
As highlighted in March, our London property costs will increase
by GBP5 million for the full year 2014 following our move to The St
Botolph Building.
CASH FLOW AND BALANCE SHEET
Cash flows in the first half of the year closely mirror those of
the same period in 2013, with the increase in working capital
outflow reflecting the impact of the first half renewals of the
acquired Tower Watson Re business and the resultant increase in
trade receivables.
Following the additional GBP75 million of loan notes issued in
April 2014, the Group has committed unsecured long term debt
facilities equivalent to GBP636 million with maturities between
2015 and 2026. Gross borrowings at 30th June were GBP555 million
which includes GBP533 million of borrowings under the Group's
committed facilities, leaving unutilised committed facilities
headroom of approximately GBP103 million. Net debt at 30th June
2014 was GBP436 million. This represents a Net Debt to EBITDA ratio
of 1.8:1 which remains comfortably within our debt facilities
covenants and represents the peak of our normal annual leverage
cycle.
Net pension liabilities at 30th June 2014 have increased to
GBP149 million mainly due to the decrease in the underlying
discount rate applicable to scheme liabilities.
FOREIGN EXCHANGE
The Group's major transactional currency exposure arises in our
businesses which earn US dollar denominated revenue but which have
a sterling cost base. The Group continues to operate a rolling US
dollar hedging programme to smooth the volatility caused by
exchange rate movements.
At 28th July 2014, some 77% of anticipated US dollar revenues
for 2014 (approximately US$350 million) are hedged at an average
rate of US$1.56. For 2015 some 48% of US dollar revenues are hedged
at an average rate of US$1.53 and 25% are hedged for 2016 at an
average rate of US$1.54. The Group's overall hedged position in the
period has been affected by the fact that Towers Watson Re was
acquired without any hedging programme in place.
As a guide, each one cent movement in our achieved rate
currently translates into a change of approximately GBP1.4 million
in revenue and a corresponding impact on trading profit equal to
approximately 65% of the revenue change.
In addition to the transactional foreign exchange exposure which
is managed through the Group's hedging programmes, JLT is also
exposed to the translational effect of foreign exchange movements
on overseas earnings which are not hedged, the most material of
which is the Australian Dollar, given the relative size and
profitability of the Group's Australian business.
In March we gave guidance that the Group was facing a potential
GBP12.7 million reduction in profits over the year as a result of
both transactional and translational foreign exchange.
At 30th June the impact of exchange rates had already reduced
the Group's trading profit by GBP11.2 million, compared to the same
period in 2013.
Given the current strength of sterling, we would expect further
negative year-on-year exchange rate variances during the remainder
of the year, albeit less than the first half effect given that
sterling strengthened significantly during the second half of
2013.
BUSINESS TRANSFORMATION PROGRAMME
Our two year Business Transformation Programme, which concludes
at the end of the year is designed to capture two opportunities.
Firstly, to improve the process and back office activities of our
Asian and Latin American businesses and secondly, to strengthen and
align the operating platforms of our more mature businesses to
enable greater specialty focus, increased international
collaboration and the seamless servicing of global clients. At the
half year, the Group had incurred one-off costs of GBP2.8
million.
The projected total one-off costs and recurring savings for the
two year programme remain at GBP18 million and GBP12 million
respectively.
OUTLOOK
We are confident that we can deliver year-on-year financial
progress, but we are more cautious over the outlook for the
remainder of the year given the marked decline in the insurance and
reinsurance rating environment over the last quarter and the
continued strength of sterling.
The strong organic revenue growth we achieved in the period,
despite these challenges, demonstrates the success of our strategy
of focusing on our areas of specialisation and higher growth
economies.
Results follow
Consolidated Income Statement
Unaudited Interim Results for the six months ended 30th June
2014
6 months 6 months
ended 30th ended 30th
June June
Notes 2014 2013
GBP'000 GBP'000
------------ ------------
Fees and commissions 3 558,045 485,310
Investment income 3 1,590 1,905
------------ ------------
Total revenue 559,635 487,215
Salaries and associated expenses (324,375) (286,918)
Premises (29,825) (25,050)
Other operating costs (90,250) (78,758)
Depreciation, amortisation and impairment
charges 4 (13,768) (11,724)
------------ ------------
Operating profit 2,3,4 101,417 84,765
------------ ------------
Analysed as:
Operating profit before exceptional
items 3 110,499 92,794
Acquisition and integration costs 4 (6,320) (3,928)
Business Transformation Programme 4 (2,762) (3,808)
Other exceptional items 4 - (293)
------------ ------------
Operating profit 2,3,4 101,417 84,765
------------ ------------
Finance costs (10,936) (8,046)
Finance income 703 912
------------ ------------
Finance costs - net (10,233) (7,134)
Share of results of associates 7,173 7,485
------------ ------------
Profit before taxation 2,3 98,357 85,116
Income tax expense 5 (25,160) (21,544)
------------ ------------
Profit for the period 73,197 63,572
------------ ------------
Profit attributable to:
Owners of the parent 3 66,621 59,172
Non-controlling interests 6,576 4,400
------------ ------------
73,197 63,572
------------ ------------
Earnings per share attributable to
the owners of the parent during the
period (expressed in pence per share) 6
Basic earnings per share 30.3p 27.0p
Diluted earnings per share 30.3p 26.9p
The notes on pages 15 to 40 form an integral part of these
condensed consolidated interim financial statements.
Consolidated Statement of Comprehensive Income
Unaudited Interim Results for the six months ended 30th June
2014
6 months 6 months
ended 30th ended 30th
June June
Notes 2014 2013
GBP'000 GBP'000
------------ ------------
Profit for the period 73,197 63,572
------------ ------------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit or loss
------------ ------------
Remeasurement of post employment benefit
obligations 21 (16,666) 1,943
Taxation thereon 3,178 884
------------ ------------
Total items that will not be reclassified
to profit or loss (13,488) 2,827
Items that may be reclassified subsequently
to profit or loss
Fair value gains/(losses) net of tax
------------ ------------
* available-for-sale 10 30
* cash flow hedges 5,084 (25,815)
Currency translation differences (9,906) 6,881
------------ ------------
Total items that may be reclassified
subsequently to profit or loss (4,812) (18,904)
------------ ------------
Other comprehensive expense net of
tax (18,300) (16,077)
------------ ------------
Total comprehensive income for the
period 54,897 47,495
------------ ------------
Attributable to:
Owners of the parent 48,900 42,707
Non-controlling interests 5,997 4,788
------------ ------------
54,897 47,495
------------ ------------
The notes on pages 15 to 40 form an integral part of these
condensed consolidated interim financial statements.
Consolidated Balance Sheet
Unaudited Interim Results as at 30th June 2014
As at As at As at
30th June 30th June 31st December
Notes 2014 2013 2013
GBP'000 GBP'000 GBP'000
------------ ----------- ---------------
NET OPERATING ASSETS
Non-current assets
Goodwill 438,188 283,722 429,450
Other intangible assets 84,822 57,121 69,092
Property, plant and equipment 60,002 44,351 59,715
Investments in associates 103,235 102,781 101,445
Available-for-sale financial
assets 8,13 15,039 24,742 22,346
Derivative financial instruments 9,13 19,098 12,050 16,906
Deferred tax assets 47,110 46,229 51,809
------------ ----------- ---------------
767,494 570,996 750,763
------------ ----------- ---------------
Current assets
Trade and other receivables 10 485,442 392,436 411,428
Derivative financial instruments 9,13 10,513 1,558 9,826
Available-for-sale financial
assets 8,13 1,331 1,026 1,421
Current tax assets 111 - -
Cash and cash equivalents 11,13 838,170 709,525 753,164
------------ ----------- ---------------
1,335,567 1,104,545 1,175,839
------------ ----------- ---------------
Current liabilities
Borrowings 13,14 (22,443) (20,563) (12,995)
Trade and other payables 12 (971,037) (826,628) (909,595)
Derivative financial instruments 9,13 (1,769) (4,587) (2,344)
Current tax liabilities - (1,277) (5,201)
Provisions for liabilities
and charges 15 (7,369) (11,926) (10,158)
------------ ----------- ---------------
(1,002,618) (864,981) (940,293)
------------ ----------- ---------------
Net current assets 332,949 239,564 235,546
------------ ----------- ---------------
Non-current liabilities
Borrowings 13,14 (532,554) (307,901) (447,188)
Derivative financial instruments 9,13 (32,696) (21,188) (30,543)
Deferred tax liabilities (14,293) (8,108) (12,542)
Retirement benefit obligations 21 (148,530) (126,414) (130,627)
Provisions for liabilities
and charges 15 (4,779) (3,450) (4,952)
------------ ----------- ---------------
(732,852) (467,061) (625,852)
------------ ----------- ---------------
367,591 343,499 360,457
------------ ----------- ---------------
TOTAL EQUITY
Capital and reserves attributable
to the owners of the parent
Ordinary shares 11,005 11,002 11,003
Share premium 16 103,870 103,644 103,739
Fair value and hedging
reserves 16 22,318 (10,329) 17,224
Exchange reserves 16 (11,326) 27,386 (1,999)
Retained earnings 219,993 195,881 211,009
------------ ----------- ---------------
Shareholders' equity 345,860 327,584 340,976
Non-controlling interests 21,731 15,915 19,481
------------ ----------- ---------------
367,591 343,499 360,457
------------ ----------- ---------------
The notes on pages 15 to 40 form an integral part of these
condensed consolidated interim financial statements.
Consolidated Statement of Changes in Equity
Unaudited Interim Results for the six months ended 30th June
2014
6 months ended 30th June 2014
----------------------------------------------------------------------------
Ordinary Other Retained Shareholders' Non-controlling Total
Notes shares reserves earnings equity interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- -------------- ---------------- ---------
Balance at 1st January
2014 11,003 118,964 211,009 340,976 19,481 360,457
--------- --------- --------- -------------- ---------------- ---------
Profit for the period - - 66,621 66,621 6,576 73,197
Other comprehensive
income for the period - (4,233) (13,488) (17,721) (579) (18,300)
--------- --------- --------- -------------- ---------------- ---------
Total comprehensive
income for the period - (4,233) 53,133 48,900 5,997 54,897
Dividends 7 - - (37,221) (37,221) (3,254) (40,475)
Amounts in respect
of share based payments:
* reversal of amortisation - - 9,772 9,772 - 9,772
* shares acquired - - (15,367) (15,367) - (15,367)
Acquisitions 19 - - - - (493) (493)
Change in non-controlling
interests 19 - - (1,333) (1,333) - (1,333)
Issue of share capital 2 131 - 133 - 133
--------- --------- --------- -------------- ---------------- ---------
Balance at 30th June
2014 11,005 114,862 219,993 345,860 21,731 367,591
--------- --------- --------- -------------- ---------------- ---------
6 months ended 30th June 2013
----------------------------------------------------------------------------
Ordinary Other Retained Shareholders' Non-controlling Total
Notes shares reserves earnings equity interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- -------------- ---------------- ---------
Balance at 1st January
2013 10,997 139,537 182,775 333,309 14,909 348,218
--------- --------- --------- -------------- ---------------- ---------
Profit for the period - - 59,172 59,172 4,400 63,572
Other comprehensive
income for the period - (19,292) 2,827 (16,465) 388 (16,077)
--------- --------- --------- -------------- ---------------- ---------
Total comprehensive
income for the period - (19,292) 61,999 42,707 4,788 47,495
Dividends 7 - - (34,919) (34,919) (3,189) (38,108)
Amounts in respect
of share based payments:
* reversal of amortisation - - 9,908 9,908 - 9,908
* shares acquired - - (18,665) (18,665) - (18,665)
Acquisitions - - - - (633) (633)
Additions - - - - 40 40
Change in non-controlling
interests - - (5,217) (5,217) - (5,217)
Issue of share capital 5 456 - 461 - 461
--------- --------- --------- -------------- ---------------- ---------
Balance at 30th June
2013 11,002 120,701 195,881 327,584 15,915 343,499
--------- --------- --------- -------------- ---------------- ---------
The notes on pages 15 to 40 form an integral part of these
condensed consolidated interim financial statements.
Consolidated Statement of Cash Flows
Unaudited Interim Results for the six months ended 30th June
2014
6 months 6 months
ended 30th ended 30th
June June
Notes 2014 2013
GBP'000 GBP'000
------------ ------------
Cash flows from operating activities
Cash generated from operations 18 26,330 36,916
Interest paid (7,651) (3,916)
Interest received 2,581 2,627
Taxation paid (17,931) (19,932)
Increase in net insurance broking
creditors 72,725 100,331
------------ ------------
76,054 116,026
Dividend received from associates 1,526 1,770
------------ ------------
Net cash generated from operating
activities 77,580 117,796
------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (5,381) (21,695)
Purchase of other intangible assets (25,882) (11,304)
Proceeds from disposal of property,
plant and equipment 442 391
Proceeds from disposal of other intangible
assets - 2
Acquisition of businesses, net of
cash acquired 19 (9,902) (7,206)
Acquisition of associates - (24)
Proceeds from disposal of business,
net of cash disposed 20 8 -
Purchase of available-for-sale other
investments - (3,230)
Proceeds from disposal of available-for-sale
other investments 1,102 -
------------ ------------
Net cash used in investing activities (39,613) (43,066)
------------ ------------
Cash flows from financing activities
Dividends paid to owners of the parent (37,493) (35,629)
Purchase of available-for-sale financial
assets (1,310) (6,239)
Proceeds from disposal of available-for-sale
financial assets 7,928 252
Purchase of shares (15,367) (18,665)
Proceeds from issuance of ordinary
shares 133 461
Proceeds from borrowings 128,013 161,987
Repayments of borrowings (30,389) (90,482)
Dividends paid to non-controlling
interests (3,254) (3,189)
------------ ------------
Net cash generated from financing
activities 48,261 8,496
------------ ------------
Net increase in cash and cash equivalents 86,228 83,226
Cash and cash equivalents at beginning
of the period 753,164 624,321
Exchange (losses)/gains on cash and
cash equivalents (1,222) 1,978
------------ ------------
Cash and cash equivalents at end of
the period 838,170 709,525
------------ ------------
The notes on pages 15 to 40 form an integral part of these
condensed consolidated interim financial statements.
Notes to the Unaudited Interim Results
For the six months ended 30th June 2014
1. Basis of accounting
The Group's condensed consolidated interim financial statements
for the six months ended 30th June 2014 have been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority (previously the Financial Services
Authority) and with IAS 34, 'Interim financial reporting' as
adopted by the European Union. The Group has considerable financial
resources and a geographically diversified business and as a
consequence, the Directors believe that the Group is well placed to
manage its business risks in the context of the current economic
outlook. Accordingly, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. They therefore continue to
adopt the going concern basis in preparing these interim results.
These financial statements should be read in conjunction with the
consolidated statutory accounts of the Group for the year ended
31st December 2013, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union.
This condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended
31st December 2013 were approved by the Board of Directors on 14th
March 2014 and delivered to the Registrar of Companies. The report
of the auditors on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements have
been reviewed, not audited.
The accounting policies are consistent with those of the annual
financial statements for the year ended 31st December 2013 except
as described below.
IFRS 10, 'Consolidated financial statements'. Under IFRS 10,
subsidiaries are all entities (including structured entities) over
which the group has control. The Group controls an entity when the
group has power over an entity, is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect these returns through its power over the entity.
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 Group has applied IFRS 10 and this had no
effect on the consolidated accounts as at 31st December 2013.
IFRS 11, 'Joints arrangements'. Under IFRS 11, investments in
joint arrangements are classified either as joint operations or
joint ventures, depending on the contractual rights and obligations
each investor has rather than the legal structure of the joint
arrangement. The Group has applied IFRS 11 and this had no effect
on the consolidated accounts as at 31st December 2013.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31st December
2013.
Full details of the audited accounts and accounting policies for
the year ended 31st December 2013 are available at
www.jltgroup.com.
2. Alternative income statement
The format of the consolidated income statement on page 10
conforms to the requirements of IFRS. The alternative income
statement set out below, which is provided by way of additional
information, has been prepared on a basis that conforms more
closely to the approach adopted by the Group in assessing its
performance. The statement provides a reconciliation between the
underlying results used by the Group to assess performance and the
IFRS income statement.
6 months ended 30th June 2014
-------------------------------------
Underlying Exceptional
profit items Total
GBP'000 GBP'000 GBP'000
----------- ------------ ----------
Fees and commissions 558,045 - 558,045
Investment income 1,590 - 1,590
Salaries and associated expenses (319,878) (4,497) (324,375)
Premises (27,909) (1,916) (29,825)
Other operating costs (87,581) (2,669) (90,250)
Depreciation, amortisation and
impairment charges (13,768) - (13,768)
Trading profit 110,499 (9,082) 101,417
Finance costs - net (10,233) - (10,233)
Share of results of associates 7,173 - 7,173
----------- ------------ ----------
Profit before taxation 107,439 (9,082) 98,357
----------- ------------ ----------
6 months ended 30th June 2013
-------------------------------------
Underlying Exceptional
profit items Total
GBP'000 GBP'000 GBP'000
----------- ------------ ----------
Fees and commissions 485,310 - 485,310
Investment income 1,905 - 1,905
Salaries and associated expenses (280,972) (5,946) (286,918)
Premises (24,914) (136) (25,050)
Other operating costs (76,811) (1,947) (78,758)
Depreciation, amortisation and
impairment charges (11,724) - (11,724)
Trading profit 92,794 (8,029) 84,765
Finance costs - net (7,134) - (7,134)
Share of results of associates 7,485 - 7,485
----------- ------------ ----------
Profit before taxation 93,145 (8,029) 85,116
----------- ------------ ----------
3. Segment information
Management has determined its operating segments based on the
analysis used to make strategic decisions.
Business segment analysis
The Group is organised on a worldwide basis into three main
segments: Risk & Insurance, Employee Benefits and Head Office
& Other operations. These segments are consistent with the
internal reporting structure of the Group.
The Risk & Insurance segment comprises JLT's global
specialty retail and wholesale, reinsurance, personal lines and SME
broking, advisory and other services. The Employee Benefits segment
consists of pension administration, outsourcing and employee
benefits consultancy, healthcare and wealth management activities.
Certain Risk & Insurance and Employee Benefits operating
segments have been disclosed within the reporting segments given
their individual size. The Head Office & Other segment consists
mainly of holding companies, central administration functions, the
Group's captive insurance companies and the Group's investments in
associates.
As JLT Towers Re now meets the quantitative thresholds it is
disclosed as a separate operating segment. During the period, the
Group has reclassified the Middle East and North Africa business
which was reported previously in JLT Specialty to the Middle East
and Africa segment (included in Other Risk & Insurance). Prior
period numbers have been restated accordingly.
Segment results
Management assesses the performance of the operating segments
based upon a measure of underlying trading profit. Segment results
include the net income or expense derived from the trading
activities of the segment together with the investment income
earned on fiduciary funds. Interest income on the Group's own funds
and finance costs are excluded as they are not considered as part
of the trading activities of the Group's primary segments. Income
tax expense and the charge in respect of non-controlling interests
are excluded from the segmental allocation.
Segment assets and liabilities
Assets and liabilities are not allocated to individual segments
and are therefore all reported within Head Office & Other.
Investments in associates
The Group owns the following stakes in its principal associates:
26% in Milestone, the holding company of Siaci Saint Honoré, which
operates principally in France; 20% of GrECo, which operates mainly
in Austria and Central and Eastern Europe; 25% of MAG-JLT, which
operates mainly in Italy and 25% of March-JLT, which operates
mainly in Spain. The investment and the Group's share of the net
profit of these associates are included in the Head Office &
Other segment, together with the investment and results of the
Group's other associates, Sterling Re Intermediaro de Reaseguro SA
de CV, JLT Insurance Management Malta and JLT Energy (France)
SAS.
Other segment items
Capital expenditure comprises additions to property, plant and
equipment and other intangible assets.
3. Segment information cont'd
6 months ended 30th June 2014
Risk & Insurance Employee Benefits
-------------------
JLT Other
JLT Australia Lloyd Risk Other Head
JLT Towers & New & & UK & Employee Office
Specialty Re Zealand Partners Insurance Ireland Benefits & Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Fees and
commissions 111,925 109,802 63,773 43,278 99,226 85,374 44,667 - 558,045
Investment
income 344 162 686 59 318 - 21 - 1,590
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Total revenue 112,269 109,964 64,459 43,337 99,544 85,374 44,688 - 559,635
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Underlying
trading
profit 16,446 33,229 22,595 10,468 12,201 12,314 13,658 (10,412) 110,499
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Operating
profit 15,675 28,345 22,595 10,468 10,550 11,789 13,526 (11,531) 101,417
Finance
costs -
net - - - - - - - (10,233) (10,233)
Share of
results
of associates - - - - - - - 7,173 7,173
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Profit before
taxation 15,675 28,345 22,595 10,468 10,550 11,789 13,526 (14,591) 98,357
Income tax
expense - - - - - - - (25,160) (25,160)
Non-controlling
interests - - - - - - - (6,576) (6,576)
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Net profit 15,675 28,345 22,595 10,468 10,550 11,789 13,526 (46,327) 66,621
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Segment
assets 1,999,826 1,999,826
Investments
in associates 103,235 103,235
------------ ------------
Total assets 2,103,061 2,103,061
------------ ------------
Segment
liabilities (1,735,470) (1,735,470)
------------ ------------
Total
liabilities (1,735,470) (1,735,470)
------------ ------------
Other segment
items:
Capital
expenditure 4,839 177 1,461 9,498 4,281 3,215 671 7,121 31,263
Depreciation,
amortisation
and impairment (1,803) (907) (1,415) (1,326) (3,128) (2,995) (503) (5,556) (17,633)
3. Segment information cont'd
6 months ended 30th June 2013
--------------------------------------------------------------------------------------------------------
Risk & Insurance Employee Benefits
-------------------
JLT Other
JLT Australia Lloyd Risk Other Head
JLT Towers & New & & UK & Employee Office
Specialty Re Zealand Partners Insurance Ireland Benefits & Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Fees and
commissions 109,352 48,769 70,668 44,606 96,952 81,333 33,630 - 485,310
Investment
income 443 63 987 71 318 1 22 - 1,905
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Total revenue 109,795 48,832 71,655 44,677 97,270 81,334 33,652 - 487,215
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Underlying
trading
profit 17,854 14,743 25,436 10,469 14,229 12,912 8,184 (11,033) 92,794
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Operating
profit 17,016 14,743 25,106 10,469 12,235 8,880 7,642 (11,326) 84,765
Finance
costs -
net - - - - - - - (7,134) (7,134)
Share of
results
of associates - - - - - - - 7,485 7,485
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Profit before
taxation 17,016 14,743 25,106 10,469 12,235 8,880 7,642 (10,975) 85,116
Income tax
expense - - - - - - - (21,544) (21,544)
Non-controlling
interests - - - - - - - (4,400) (4,400)
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Net profit 17,016 14,743 25,106 10,469 12,235 8,880 7,642 (36,919) 59,172
---------- -------- ---------- --------- ---------- -------- --------- ------------ ------------
Segment
assets 1,572,760 1,572,760
Investments
in associates 102,781 102,781
------------ ------------
Total assets 1,675,541 1,675,541
------------ ------------
Segment
liabilities (1,332,042) (1,332,042)
------------ ------------
Total
liabilities (1,322,042) (1,332,042)
------------ ------------
Other segment
items:
Capital
expenditure 746 767 2,828 635 4,315 3,003 377 20,328 32,999
Depreciation,
amortisation
and impairment (2,132) (628) (1,332) (566) (2,803) (2,252) (322) (5,218) (15,253)
4. Operating profit
6 months 6 months
ended ended
30th 30th
June June
2014 2013
GBP'000 GBP'000
--------- ---------
The following items have been (credited)/charged
in arriving at operating profit:
Foreign exchange (gains)/losses:
* fees and commissions (4,055) (1,825)
* other operating costs 1,726 (967)
--------- ---------
(2,329) (2,792)
--------- ---------
Amortisation of other intangible assets:
* software costs 7,538 5,711
* other intangible assets 796 530
Depreciation on property, plant and equipment 5,434 5,483
--------- ---------
Total depreciation and amortisation charges 13,768 11,724
--------- ---------
Amortisation of other intangible assets:
* employment contract payments (included in salaries
and associated expenses) 3,865 3,529
--------- ---------
Gains on disposal of property, plant and equipment (86) (77)
--------- ---------
Available-for-sale financial assets:
* fair value losses/(gains) 50 (378)
* gain on sale (103) (1)
--------- ---------
(53) (379)
--------- ---------
Exceptional items:
Acquisition and integration costs of which:
--------- ---------
* included in salaries and associated expenses 2,635 2,404
* included in premises costs 1,916 136
* included in other operating costs 1,769 1,388
--------- ---------
6,320 3,928
Business Transformation Programme of which:
--------- ---------
* included in salaries and associated expenses 1,862 3,542
* included in premises costs - -
* included in other operating costs 900 266
--------- ---------
2,762 3,808
London premises consolidation costs - 293
Total exceptional items 9,082 8,029
--------- ---------
5. Income tax expense
6 months 6 months
ended ended
30th June 30th June
2014 2013
GBP'000 GBP'000
----------- -----------
Current tax expense
Current period 15,567 13,011
Adjustments in respect of prior periods 315 (245)
----------- -----------
15,882 12,766
----------- -----------
Deferred tax expense
Origination and reversal of temporary differences 10,079 9,255
Reduction in tax rate - 13
Adjustments in respect of prior periods (801) (490)
----------- -----------
9,278 8,778
----------- -----------
Total income tax expense 25,160 21,544
----------- -----------
The total income tax expense in the income statement of
GBP25,160,000 includes a tax credit on exceptional items of
GBP1,702,000 (2013: GBP1,799,000). There were no non-recurring tax
credits in the period.
The UK Government has announced various measures in relation to
UK corporation tax including a 2% reduction in the headline rate of
corporation tax from April 2014 and a further reduction of 1% in
2015. These reductions reduce the UK tax rate from 23% to 20%. As
at 30th June 2014 the 2% rate reduction to 21% is already in force
and the subsequent 1% rate reduction has been enacted. The impact
of the 1% reduction has therefore been incorporated into the income
tax charge for the six months ended 30th June 2014.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the tax rate of the home
country of the Company as follows:
6 months 6 months
ended ended
30th 30th
June June
2014 2013
GBP'000 GBP'000
--------- ---------
Profit before taxation 98,357 85,116
--------- ---------
Tax calculated at UK Corporation Tax rate
of 21.5% (2013: 23.25%) 21,147 19,789
Non-deductible expenses* 2,386 2,264
Adjustments in respect of prior periods (486) (735)
Effect of UK and non-UK tax rate differences 3,655 1,966
Tax on associates (1,542) (1,740)
--------- ---------
Total income tax expense 25,160 21,544
--------- ---------
* The non-deductible expenses relate primarily to non-deductible
entertainment expenses.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent by the weighted average
number of ordinary shares in issue during the year, excluding
unallocated shares held by the Trustees of the Employee Share
Ownership Plan Trust and the Qualifying Employee Share Ownership
Trust.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares.
Additionally basic and diluted earnings per share are also
calculated based on underlying earnings attributable to the owners
of the parent.
A reconciliation of earnings is set out below.
As at As at
30th 30th
June June
2014 2013
No. of No. of
shares shares
------------ ------------
Weighted average number of ordinary shares
in issue 219,645,128 218,994,347
Effect of outstanding share options 520,130 1,114,844
------------ ------------
Adjusted weighted average number of ordinary
shares for diluted earnings per share 220,165,258 220,109,191
------------ ------------
6 months ended 30th 6 months ended 30th
June 2014 June 2013
----------------------------------- -----------------------------------
Basic Diluted Basic Diluted
pence pence pence pence
GBP'000 per share per share GBP'000 per share per share
--------- ----------- ----------- --------- ----------- -----------
Earnings reconciliation
Underlying profit after
taxation and non-controlling
interests 74,001 33.7 33.6 65,402 29.9 29.7
Exceptional items before
tax (9,082) (8,029)
Taxation thereon 1,702 1,799
--------- ---------
(7,380) (3.4) (3.3) (6,230) (2.9) (2.8)
Profit attributable
to the owners of the
parent 66,621 30.3 30.3 59,172 27.0 26.9
--------- ----------- ----------- --------- ----------- -----------
7. Dividends
6 months 6 months
ended ended
30th June 30th June
2014 2013
GBP'000 GBP'000
----------- -----------
Final dividend in respect of 2013 of 17.1p
per share (2012: 15.9p) 37,221 34,919
----------- -----------
An interim dividend in respect of 2014 of 10.6p per share (2013:
10.1p) amounting to a total of GBP23,396,000 (2013: GBP22,090,000)
is payable on 1st October 2014 to shareholders who are registered
at the close of business on 5th September2014. The dividend
proposed will not be accounted for until it is paid. The
ex-dividend date will be 3rd September 2014.
8. Available-for-sale financial assets
Available-for-sale financial assets are categorised according to
their nature into one of two categories:
1) Investments and deposits consist mainly of fixed term
deposits, bonds and certificates of deposits. These investments are
held at fair value and are classified between current and
non-current assets according to the maturity date.
2) Other investments include securities and other investments
held for strategic purposes. These investments are held at fair
value unless a fair value cannot be accurately determined in which
case they are held at cost less any provision for impairment.
6 months ended 30th June 2014
-----------------------------------------
Other Investments
investments and deposits Total
GBP'000 GBP'000 GBP'000
------------- -------------- ----------
At 1st January 2014 5,948 17,819 23,767
Exchange differences (79) 256 177
Additions - 1,310 1,310
Companies acquired 31 - 31
Disposals/maturities (999) (7,928) (8,927)
Revaluation gain (included within
equity) 12 - 12
------------- -------------- ----------
At 30th June 2014 4,913 11,457 16,370
------------- -------------- ----------
Analysis of available-for-sale
financial assets
Current - 1,331 1,331
Non-current 4,913 10,126 15,039
------------- -------------- ----------
At 30th June 2014 4,913 11,457 16,370
------------- -------------- ----------
Analysis of available-for-sale investments
and deposits
Fiduciary 10,012
Own funds 1,445
--------------
At 30th June 2014 11,457
--------------
6 months ended 30th June 2013
-----------------------------------------
Other Investments
investments and deposits Total
GBP'000 GBP'000 GBP'000
------------- -------------- ----------
At 1st January 2013 3,104 14,546 17,650
Exchange differences 49 (1,188) (1,139)
Additions 3,230 6,239 9,469
Disposals/maturities - (252) (252)
Revaluation gain (included within
equity) 40 - 40
------------- -------------- ----------
At 30th June 2013 6,423 19,345 25,768
------------- -------------- ----------
Analysis of available-for-sale
financial assets
Current - 1,026 1,026
Non-current 6,423 18,319 24,742
------------- -------------- ----------
At 30th June 2013 6,423 19,345 25,768
------------- -------------- ----------
Analysis of available-for-sale investments
and deposits
Fiduciary 18,191
Own funds 1,154
--------------
At 30th June 2013 19,345
--------------
9. Derivative financial instruments
As at 30th June 2014 As at 30th June 2013
----------------------- -----------------------
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------ --------- ------------
Interest rate swaps - fair
value hedges 3,736 (11,260) 4,682 (13,908)
Forward foreign exchange
contracts - cash flow hedges 25,875 (23,205) 8,926 (11,867)
--------- ------------ --------- ------------
Total 29,611 (34,465) 13,608 (25,775)
--------- ------------ --------- ------------
Current 10,513 (1,769) 1,558 (4,587)
Non-current 19,098 (32,696) 12,050 (21,188)
--------- ------------ --------- ------------
Total 29,611 (34,465) 13,608 (25,775)
--------- ------------ --------- ------------
The Group's treasury policies are approved by the Board and are
implemented by a centralised treasury department. The treasury
department operates within a framework of policies and procedures
that establishes specific guidelines to manage currency risk,
liquidity risk and interest rate risk and the use of counterparties
and financial instruments to manage these. The treasury department
is subject to regular internal audit.
The Group uses various derivative instruments including forward
foreign exchange contracts, interest rate swaps and from time to
time, foreign currency collars and options to manage the risks
arising from variations in currency and interest rates. Derivative
instruments purchased are primarily denominated in the currencies
of the Group's main markets.
Where forward foreign exchange contracts have been entered into
to manage currency risk, they are designated as hedges of currency
risk on specific future cash flows, and qualify as highly probable
transactions for which hedge accounting is applied. The Group
anticipates that hedge accounting requirements will continue to be
met on its foreign currency and interest rate hedging activities
and that no material ineffectiveness will arise which will result
in gains or losses being recognised through the income
statement.
The fair value of financial derivatives based upon market values
as at 30th June 2014 and designated as effective cash flow hedges
was a net asset of GBP2.7 million and has been deferred in equity
(2013: net liability of GBP2.9 million). Gains and losses arising
on derivative instruments outstanding as at 30th June 2014 will be
released to the income statement at various dates up to:
a) 32 months in respect of cash flow hedges on currency denominated UK earnings.
b) 11 years in respect of specific hedges on USD denominated
long term debt drawn under the Group's USD private placement
programme.
c) 12 years in respect of specific hedges on sterling
denominated long term debt drawn under the Group's private
placement programme.
No material amounts were transferred to the income statement
during the period in respect of the fair value of financial
derivatives.
Transactions maturing within 12 months of the balance sheet date
are classified in current maturities. Transactions maturing in a
period in excess of 12 months of the balance sheet date are
classified as non-current maturities.
a) Forward foreign exchange contracts
The Group's major currency transaction exposure arises in USD
and the Group continues to adopt a prudent approach in actively
managing this exposure. As at 30th June 2014 the Group had
outstanding foreign exchange contracts, principally in USD,
amounting to a principal value of GBP681,123,000 (2013:
GBP804,493,000).
b) Interest rate swaps
The Group uses interest rate hedges, principally interest rate
swaps, to mitigate the impact of changes in interest rates. The
notional principal amounts of outstanding cross currency and
interest rate swaps as at 30th June 2014 was USD375,000,000 and
GBP75,000,000 (2013: USD375,000,000 and GBPnil).
c) Price risk
The Group does not have a material exposure to commodity price
risk.
The maximum exposure to credit risk at the reporting date is the
fair value of the derivatives in the balance sheet.
10. Trade and other receivables
As at As at
30th June 30th June
2014 2013
GBP'000 GBP'000
----------- -----------
Trade receivables 331,399 264,757
Less: provision for impairment of trade receivables (12,097) (13,054)
----------- -----------
Trade receivables - net 319,302 251,703
Other receivables 137,494 117,155
Prepayments 28,646 23,578
----------- -----------
485,442 392,436
----------- -----------
11. Cash and cash equivalents
As at As at
30th 30th June
June
2014 2013
GBP'000 GBP'000
--------- -----------
Cash at bank and in hand 449,651 314,967
Short-term bank deposits 388,519 394,558
--------- -----------
838,170 709,525
--------- -----------
Fiduciary 720,711 609,824
Own funds 117,459 99,701
--------- -----------
838,170 709,525
--------- -----------
Fiduciary funds represent client money held in the form of
premiums due to underwriters, claims paid by insurers and due to
policyholders, and funds held to defray commissions and other
income. Fiduciary funds are not available for general corporate
purposes.
The effective interest rate in respect of short-term deposits
was 0.40% (2013: 0.50%). These deposits have an average maturity of
17 days (2013: 24 days).
12. Trade and other payables
As at As at
30th 30th June
June
2014 2013
GBP'000 GBP'000
--------- -----------
Insurance payables 730,723 628,015
Social security and other taxes 18,435 19,326
Other payables 98,890 83,909
Accruals and deferred income 107,367 86,977
Deferred and contingent consideration 15,622 8,401
--------- -----------
971,037 826,628
--------- -----------
All payables are considered current.
13. Financial instruments by category
The accounting policies for financial instruments have been
applied to the line items below:
As at 30th June 2014
------------------------------------------------------------------
Derivatives
Loans used for
and receivables hedging Available-for-sale Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------ ------------------- ------------
Assets per balance sheet
Available-for-sale financial
assets - - 16,370 16,370
Derivative financial instruments - 29,611 - 29,611
Trade and other receivables
(a) 456,796 - - 456,796
Cash and cash equivalents 838,170 - - 838,170
----------------- ------------ ------------------- ------------
Total 1,294,966 29,611 16,370 1,340,947
----------------- ------------ ------------------- ------------
Derivatives Other
used for financial
hedging liabilities Total
GBP'000 GBP'000 GBP'000
------------ ------------------- ------------
Liabilities per balance
sheet
Borrowings - (554,997) (554,997)
Trade and other payables
(b) - (863,670) (863,670)
Derivative financial instruments (34,465) - (34,465)
------------ ------------------- ------------
Total (34,465) (1,418,667) (1,453,132)
------------ ------------------- ------------
As at 30th June 2013
------------------------------------------------------------------
Derivatives
Loans used for
and receivables hedging Available-for-sale Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------ ------------------- ------------
Assets per balance sheet
Available-for-sale financial
assets - - 25,768 25,768
Derivative financial instruments - 13,608 - 13,608
Trade and other receivables
(a) 368,858 - - 368,858
Cash and cash equivalents 709,525 - - 709,525
----------------- ------------ ------------------- ------------
Total 1,078,383 13,608 25,768 1,117,759
----------------- ------------ ------------------- ------------
Derivatives Other
used for financial
hedging liabilities Total
GBP'000 GBP'000 GBP'000
------------ ------------------- ------------
Liabilities per balance
sheet
Borrowings - (328,464) (328,464)
Trade and other payables
(b) - (739,651) (739,651)
Derivative financial instruments (25,775) - (25,775)
------------ ------------------- ------------
Total (25,775) (1,068,115) (1,093,890)
------------ ------------------- ------------
(a) Prepayments are excluded from the trade and other receivables
balance, as this analysis is required only for financial instruments.
(b) Non-financial liabilities are excluded from the trade and
other payables balance, as this analysis is required only for
financial instruments.
13. Financial instruments by category cont'd
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 30 June 2014.
As at 30th June 2014
-------------------------------------------
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ----------
Assets
Derivatives used for hedging - 29,611 - 29,611
Available-for-sale financial
assets
* equity securities 731 - 3,914 4,645
* debt investments 268 - - 268
* fixed deposits 11,457 - - 11,457
--------- --------- --------- ----------
Total 12,456 29,611 3,914 45,981
--------- --------- --------- ----------
Liabilities
Deferred and contingent
consideration - - (15,622) (15,622)
Derivatives used for hedging - (34,465) - (34,465)
--------- --------- --------- ----------
Total - (34,465) (15,622) (50,087)
--------- --------- --------- ----------
As at 30th June 2013
-------------------------------------------
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ----------
Assets
Derivatives used for hedging - 13,608 - 13,608
Available-for-sale financial
assets
* equity securities 663 - 5,482 6,145
* debt investments 278 - - 278
* fixed deposits 19,345 - - 19,345
--------- --------- --------- ----------
Total 20,286 13,608 5,482 39,376
--------- --------- --------- ----------
Liabilities
Deferred and contingent
consideration - - (8,401) (8,401)
Derivatives used for hedging - (25,775) - (25,775)
--------- --------- --------- ----------
Total - (25,775) (8,401) (34,176)
--------- --------- --------- ----------
Apart from where disclosed, there are no differences between the
fair value and the carrying value of financial assets and
liabilities.
The fair value of financial instruments traded in active markets
is based on quoted market prices at the balance sheet date. A
market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry
group, pricing service, or regulatory agency and those prices
represent actual and regularly occurring market transactions on an
arm's length basis. These instruments are included in level 1.
The fair value of financial instruments that are not traded in
an active market (for example, over-the-counter derivatives) is
determined by using internal and external models. These models
maximise the use of observable market data where it is available
and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are
observable, the instrument is included in level 2.
During the period there were no transfers between level 1 and
level 2.
There were no changes in valuation techniques during the
period.
If one or more of the significant inputs is not based on
observable market data, the instrument is included in level 3.
In respect of deferred and contingent consideration,
unobservable inputs include management's assessment of the expected
future performance of relevant acquired businesses.
13. Financial instruments by category cont'd
A reconciliation of the movements in level 3 is provided
below:
Assets Liabilities
Level Level
3 3
GBP'000 GBP'000
--------- ------------
At 1st January 2014 4,029 (13,048)
Exchange differences (86) 428
Companies acquired 31 (7,155)
Utilised in the period - 4,181
Charged to income statement (60) (28)
At 30th June 2014 3,914 (15,622)
--------- ------------
14. Borrowings
As at As at
30th 30th June
June
2014 2013
GBP'000 GBP'000
--------- -----------
Current
Bank overdraft 21,950 20,298
Unsecured loan notes - 215
Bank borrowings 376 -
Finance lease liabilities 117 50
--------- -----------
22,443 20,563
--------- -----------
Non-current
Unsecured loan notes 285,743 236,903
Bank borrowings 246,166 70,505
Finance lease liabilities 645 493
--------- -----------
532,554 307,901
--------- -----------
Total borrowings 554,997 328,464
--------- -----------
The borrowings include secured liabilities (leases) of
GBP762,000 (2013: GBP543,000).
The carrying amounts and fair value of borrowings are as
follows:
As at 30th June 2014 As at 30th June 2013
----------------------- -----------------------
Carrying Carrying
amount Fair value amount Fair value
GBP'000 GBP'000 GBP'000 GBP'000
---------- ----------- ---------- -----------
Current
Bank overdraft 21,950 21,950 20,298 20,298
Unsecured loan notes - - 215 215
Bank borrowings 376 376 - -
Finance lease liabilities 117 117 50 50
---------- ----------- ---------- -----------
22,443 22,443 20,563 20,563
---------- ----------- ---------- -----------
Non-current
Unsecured loan notes 285,743 285,743 236,903 236,903
Bank borrowings 246,166 246,166 70,505 70,505
Finance lease liabilities 645 645 493 493
---------- ----------- ---------- -----------
532,554 532,554 307,901 307,901
---------- ----------- ---------- -----------
Total borrowings 554,997 554,997 328,464 328,464
---------- ----------- ---------- -----------
15. Provisions for liabilities and charges
6 months ended 30th June 2014
-------------------------------------------------
Property
related Litigation
provisions provisions Other Total
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ --------- ----------
At 1st January 2014 8,049 6,354 707 15,110
Exchange differences (1) (38) - (39)
Utilised in the period (1,900) (888) (50) (2,838)
Charged/(credited) to the
income statement 1,544 (980) (27) 537
Interest charge 5 - - 5
Companies acquired (627) - - (627)
At 30th June 2014 7,070 4,448 630 12,148
------------ ------------ --------- ----------
6 months ended 30th June 2013
-------------------------------------------------
Property
related Litigation
provisions provisions Other Total
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ --------- ----------
At 1st January 2013 6,863 8,308 959 16,130
Exchange differences 2 83 - 85
Utilised in the period (397) (1,802) - (2,199)
Charged/(credited) to the
income statement - 1,416 (59) 1,357
Interest charge 16 - - 16
Companies acquired - (13) - (13)
At 30th June 2013 6,484 7,992 900 15,376
------------ ------------ --------- ----------
As at As at
30th 30th June
June
2014 2013
GBP'000 GBP'000
--------- -----------
Analysis of total provisions:
Current - to be utilised within one year 7,369 11,926
Non-current - to be utilised in more than
one year 4,779 3,450
--------- -----------
12,148 15,376
--------- -----------
Property related provisions
The Group recognises a provision for onerous contracts when the
expected benefits to be derived from a contract are less than the
unavoidable costs of meeting the obligations under the contract.
Provision is made for the future rental cost of vacant property and
expected dilapidation expenses. In calculating the provision
required, account is taken of the duration of the lease and any
recovery of cost achievable from subletting. Property provisions
occur principally in the UK and relate to a variety of lease
commitments. The longest lease term for the UK is 2022.
Litigation provisions
At any point in time the Group can be involved in a variety of
litigation issues. A provision is established in respect of such
issues when it is probable that the liability has been incurred and
the amount of the liability can be reasonably estimated. The Group
analyses its litigation exposures based on available information,
including external legal consultation where appropriate, to assess
its potential liability. Where appropriate the Group also provides
for the cost of defending or initiating such matters.
Where a litigation provision has been made it is stated gross of
any third party recovery. All such recoveries are included as
"other receivables" within trade and other receivables. At 30th
June 2014, in connection with certain litigation matters, the
Group's litigation provisions include an amount of GBP0.1 million
(2013: GBP0.1 million) to reflect this gross basis and the
corresponding insurance recovery has been included within trade and
other receivables. This presentation has had no effect on the
consolidated income statement for the six months ended 30th June
2014 (2013: nil).
Other
Other provisions include provisions for clawback of commission
which arises on certain types of Employee Benefits contracts.
16. Other reserves
6 months ended 30th June 2014
------------------------------------------------
Fair value
Share and hedging Exchange
premium reserves reserves Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------- ---------- ----------
At 1st January 2014 103,739 17,224 (1,999) 118,964
Fair value gains net of
tax
--------- ------------- ---------- ----------
* available-for-sale - 10 - 10
* cash flow hedges - 5,084 - 5,084
Currency translation differences - - (9,327) (9,327)
--------- ------------- ---------- ----------
Net gains/(losses) recognised
directly in equity - 5,094 (9,327) (4,233)
Issue of share capital 131 - - 131
At 30th June 2014 103,870 22,318 (11,326) 114,862
--------- ------------- ---------- ----------
6 months ended 30th June 2013
------------------------------------------------
Fair value
Share and hedging Exchange
premium reserves reserves Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------- ---------- ----------
At 1st January 2013 103,188 15,456 20,893 139,537
Fair value gains/(losses)
net of tax
--------- ------------- ---------- ----------
* available-for-sale - 30 - 30
* cash flow hedges - (25,815) - (25,815)
Currency translation differences - - 6,493 6,493
--------- ------------- ---------- ----------
Net (losses)/gains recognised
directly in equity - (25,785) 6,493 (19,292)
Issue of share capital 456 - - 456
At 30th June 2013 103,644 (10,329) 27,386 120,701
--------- ------------- ---------- ----------
17. Qualifying Employee Share Ownership Trust
During the period, the Qualifying Employee Share Ownership Trust
(QUEST) allocated 407 ordinary shares to employees in satisfaction
of options that have been exercised under the Sharesave schemes
(2013: nil).
18. Cash generated from operations
6 months 6 months
ended ended
30th 30th June
June
2014 2013
GBP'000 GBP'000
--------- -----------
Profit before taxation 98,357 85,116
Investment and finance income (2,293) (2,817)
Interest payable on bank loans and finance
leases 7,964 5,218
Fair value losses/(gains) on financial instruments 50 (378)
Net pension financing expenses 2,939 2,766
Unwinding of liability discounting 33 63
Depreciation 5,434 5,483
Amortisation of intangible assets 12,199 9,770
Amortisation of share based payments 9,095 8,082
Share of results of associates' undertakings (7,173) (7,485)
Non-cash exceptional items 2,738 331
Gains on disposal of property, plant and equipment (86) (77)
Gains on disposal of fixed asset investments (103) (1)
Increase in trade and other receivables (70,971) (44,737)
Decrease in trade and other payables - excluding
insurance broking balances (28,104) (16,548)
Decrease in provisions for liabilities and
charges (2,301) (842)
Decrease in retirement benefit obligation (1,448) (7,028)
--------- -----------
Net cash inflow from operations 26,330 36,916
--------- -----------
19. Business combinations
2013 acquisitions
During the period, the process of finalising the provisional
fair values in respect of acquisitions carried out during 2013 has
resulted in the following changes.
Provisional
Revised fair value
fair reported Change
value at 31st in fair
acquired Dec 2013 value
GBP'000 GBP'000 GBP'000
---------- ------------ ----------
Towers Watson Reinsurance
Group 32,134 31,907 227
Others 3,376 1,819 1,557
35,510 33,726 1,784
---------- ------------ ----------
These changes in fair values affected the following balance
sheet classes:
Provisional
Revised fair value
fair reported Change
value at 31st in fair
acquired Dec 2013 value
GBP'000 GBP'000 GBP'000
---------- ------------ ----------
Property, plant and equipment 786 786 -
Other intangible assets 8,339 6,759 1,580
Available-for-sale financial
assets 1,003 1,003 -
Trade and other receivables 23,277 23,662 (385)
Cash and cash equivalents
* own cash 23,940 23,920 20
* fiduciary cash 21,606 21,606 -
Insurance payables (21,606) (21,606) -
Trade and other payables (16,536) (16,431) (105)
Current taxation 104 104 -
Deferred taxation (3,226) (3,226) -
Bank overdraft (360) (360) -
Provisions for liabilities
and charges (528) (1,155) 627
Non-controlling interests (1,289) (1,336) 47
---------- ------------ ----------
35,510 33,726 1,784
---------- ------------ ----------
As at As at
30th June 31st
Goodwill calculation 2014 Dec 2013 Change
GBP'000 GBP'000 GBP'000
----------- ---------- ----------
Purchase consideration
* cash paid 189,563 189,281 282
* contingent consideration 4,826 4,826 -
* deferred consideration 3,149 3,149 -
----------- ---------- ----------
Total purchase consideration 197,538 197,256 282
Less fair value of net
assets acquired 35,510 33,726 1,784
Goodwill 162,028 163,530 (1,502)
----------- ---------- ----------
As at As at
30th 31st
June 2014 Dec 2013 Change
GBP'000 GBP'000 GBP'000
----------- ---------- ---------
Purchase consideration
settled in cash 189,563 189,281 282
Cash and cash equivalents - own
cash in subsidiaries acquired (23,940) (23,920) (20)
----------- ---------- ---------
165,623 165,361 262
Cash and cash equivalents - fiduciary
cash in subsidiaries acquired (21,606) (21,606) -
Cash outflow on acquisition 144,017 143,755 262
----------- ---------- ---------
19. Business combinations cont'd
Current period acquisitions
During the period the following new business acquisitions and
additional investments were completed:
Percentage
voting
Acquisition rights Cost
Notes date acquired GBP'000
------- ------------- ----------- ---------
Lambert Brothers Holdings
Limited i Jan 2014 100% 5,930
SCK Corretora e Administradora
de Seguros Ltda ii Jan 2014 75% 4,038
Ensign Pension Administration
Limited iii Apr 2014 100% 9,914
Acquisition of other new
businesses completed during Jan -
the period iv Jun 2014 - 2,750
Additional investment in Jan -
existing businesses iv Jun 2014 - 1,779
-------
24,411
------------------------------------------------------ ----------- ---------
i) Acquisition of Lambert Brothers Holdings Limited (Lambert)
On 14th January 2014, the Group acquired Lambert Brothers
Holdings Limited in Hong Kong, a mid-market insurance broker with
broking operations in Marine Hull, Construction, Employee Benefits,
Corporate and SME schemes. The acquired business contributed
revenue of GBP1,815,000 and a net profit of GBP534,000 to the Group
for the period since acquisition. If the acquisition had taken
place on 1st January 2014 the contribution to Group revenue and net
profit would have been GBP2,011,000 and GBP633,000
respectively.
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 3,235
* contingent consideration 924
* deferred consideration 1,771
--------
Total purchase consideration 5,930
Less fair value of net
assets acquired 2,393
Goodwill 3,537
--------
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying
amount Fair value
GBP'000 GBP'000
----------- -------------
Property, plant and equipment 170 170
Other intangible assets 27 27
Available-for-sale financial
assets 31 31
Trade and other receivables 865 865
Cash and cash equivalents
* own cash 1,697 1,697
* fiduciary cash 2,323 2,323
Insurance payables (2,323) (2,323)
Trade and other payables (371) (371)
Current taxation (21) (21)
Deferred taxation (5) (5)
2,393 2,393
----------- -------------
GBP'000
--------
Purchase consideration
settled in cash 3,235
Cash and cash equivalents - own
cash in subsidiary acquired (1,697)
1,538
Cash and cash equivalents - fiduciary
cash in subsidiary acquired (2,323)
Cash inflow on acquisition (785)
--------
19. Business combinations cont'd
As at 30th June 2014, the process of reviewing the fair values
of assets acquired had not been completed, consequently the fair
values stated above are provisional.
The deferred consideration of GBP1,771,000 is based upon the
completion accounts net assets. The amount recognised is based on
the provisional amount of assets acquired as stated above.
The contingent consideration of GBP924,000 is based on the
expected turnover for 2014. The maximum amount of contingent
consideration payable has been provided for.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
ii) Acquisition of SCK Corretora e Administradora de Seguros Ltda (SCK)
On 29th January 2014, the Group acquired SCK Corretora e
Administradora de Seguros Ltda, a Brazil based Employee Benefits
and Insurance broking operations mainly in Property & Casualty
and Affinity. The acquired business contributed revenue of
GBP2,332,000 and a net profit of GBP630,000 to the Group for the
period since acquisition. If the acquisition had taken place on 1st
January 2014 the contribution to Group revenue and net profit would
have been GBP2,532,000 and GBP611,000 respectively.
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 4,038
Total purchase consideration 4,038
Less fair value of net
assets acquired 127
Goodwill 3,911
--------
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying
amount Fair value
GBP'000 GBP'000
----------- -------------
Property, plant and equipment 56 56
Other intangible assets 1 1
Trade and other receivables 696 696
Cash and cash equivalents
* own cash 50 50
Trade and other payables (678) (678)
Current taxation 2 2
127 127
----------- -------------
GBP'000
--------
Purchase consideration
settled in cash 4,038
Cash and cash equivalents - own
cash in subsidiary acquired (50)
Cash outflow on acquisition 3,988
--------
As at 30th June 2014, the process of reviewing the fair values
of assets acquired had not been completed, consequently the fair
values stated above are provisional.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
19. Business combinations cont'd
iii) Acquisition of Ensign Pension Administration Limited
(Ensign)
On 1st May 2014, the Group announced the acquisition of Ensign
Pension Administration Limited, a UK based Employee Benefits
consultant and administrator. The acquired business contributed
revenue of GBP2,849,000 and a net profit of GBP611,000 to the Group
for the period since acquisition. If the acquisition had taken
place on 1st January 2014 the contribution to Group revenue and net
profit would have been GBP9,007,000 and GBP2,239,000
respectively.
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 5,623
* deferred consideration 4,291
--------
Total purchase consideration 9,914
Less fair value of net
assets acquired 4,822
Goodwill 5,092
--------
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying
amount Fair value
GBP'000 GBP'000
----------- -------------
Property, plant and equipment 645 645
Other intangible assets 13 644
Trade and other receivables 3,448 3,448
Cash and cash equivalents
* own cash 3,546 3,546
Trade and other payables (3,384) (3,384)
Current taxation (201) (201)
Deferred taxation 124 124
4,191 4,822
----------- -------------
GBP'000
--------
Purchase consideration
settled in cash 5,623
Cash and cash equivalents - own
cash in subsidiary acquired (3,546)
Cash outflow on acquisition 2,077
--------
As at 30th June 2014, the process of reviewing the fair values
of assets acquired had not been completed, consequently the fair
values stated above are provisional.
The deferred consideration of GBP4,291,000 is based upon the
completion accounts net assets. The amount recognised is based on
the provisional amount of assets acquired as stated above.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
iv) Other acquisitions and additional investments
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 4,360
* deferred consideration 169
Total purchase consideration 4,529
Less fair value of net
assets acquired 446
Less equity movement on transactions
with non-controlling interests 1,333
--------
Goodwill 2,750
--------
19. Business combinations cont'd
The assets and liabilities arising from acquisitions were as
follows:
Acquiree's
carrying
amount Fair value
GBP'000 GBP'000
----------- -------------
Non-controlling interests 446 446
----------- -------------
446 446
----------- -------------
GBP'000
--------
Purchase consideration
settled in cash 4,360
Cash outflow on acquisition 4,360
--------
As at 30th June 2014, the process of reviewing the fair values
of assets acquired had not been completed, consequently the fair
values stated above are provisional.
The goodwill of GBP2,750,000 is expected to be deductible for
income tax purposes.
Group summary of the net assets acquired and goodwill
Lambert SCK Ensign Others Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- ---------
Purchase consideration
* cash paid 3,235 4,038 5,623 4,360 17,256
* contingent consideration 924 - - - 924
* deferred consideration 1,771 - 4,291 169 6,231
--------- --------- --------- --------- ---------
Total purchase consideration 5,930 4,038 9,914 4,529 24,411
Less fair value of net assets
acquired 2,393 127 4,822 446 7,788
Less equity movement on
transactions with non-controlling
interests - - - 1,333 1,333
--------- --------- --------- --------- ---------
Goodwill on acquisitions occurring
during the period 3,537 3,911 5,092 2,750 15,290
--------- --------- --------- --------- ---------
Impact of revision to fair value
adjustment in relation to acquisitions
completed in 2013 (1,502)
---------
Net increase in goodwill 13,788
---------
Impact of additional investments 1,333
---------
Net decrease in equity 1,333
---------
Group summary of cash flows
Lambert SCK Ensign Others Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- ---------
Purchase consideration
settled in cash 3,235 4,038 5,623 4,360 17,256
Cash and cash equivalents - own
cash in subsidiaries acquired (1,697) (50) (3,546) - (5,293)
1,538 3,988 2,077 4,360 11,963
Cash and cash equivalents - fiduciary
cash in subsidiaries acquired (2,323) - - - (2,323)
Cash (inflow)/outflow
on acquisition in the
period (785) 3,988 2,077 4,360 9,640
--------- --------- --------- --------- ---------
Impact of revision to fair value
adjustment on cash in relation
to acquisitions completed in
2013 262
---------
Net cash outflow on acquisition 9,902
---------
20. Business disposals
On 9th May 2014, the Group disposed of 100% of its shareholding
in ForVision Risk Services Ltd, after the transfer of its business
to another Group company, for a consideration of GBP153,000 which
equalled the value of the net assets disposed. The transaction
resulted in a net cash inflow of GBP8,000.
21. Retirement benefit obligations
The Group operates a number of pension schemes throughout the
world, the most significant of which are of the defined benefit
type and operate on a funded basis. The principal pension schemes
are the Jardine Lloyd Thompson Pension Scheme in the UK, the JLT
(USA) Incentive Savings Plan, the JLT (USA) Employee Retirement
Plan, the Pension Plan for Employees of Jardine Lloyd Thompson
Canada Inc and the Jardine Lloyd Thompson Ireland Limited Pension
Fund.
The pension costs accrued for the period are comprised as
follows:
6 months ended 30th 6 months ended 30th
June 2014 June 2013
------------------------------- -------------------------------
UK Overseas Total UK Overseas Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- --------- ---------
Defined benefit schemes - 58 58 - 78 78
Defined contribution schemes 9,781 8,273 18,054 8,185 6,654 14,839
--------- --------- --------- --------- --------- ---------
9,781 8,331 18,112 8,185 6,732 14,917
--------- --------- --------- --------- --------- ---------
The amounts recognised in the consolidated income statement are
as follows:
UK Scheme Overseas Schemes Total
-------------------- -------------------- --------------------
6 months 6 months 6 months 6 months 6 months 6 months
ended ended ended ended ended ended
30th 30th 30th 30th 30th 30th
June June June June June June
2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- --------- ---------
Expenses (included within
salaries and associated
expense) - - (58) (78) (58) (78)
Interest cost (13,163) (12,948) (1,317) (1,302) (14,480) (14,250)
Expected return on assets 10,337 10,566 1,204 918 11,541 11,484
--------- --------- --------- --------- --------- ---------
Total (included within
finance costs) (2,826) (2,382) (113) (384) (2,939) (2,766)
Expense before taxation (2,826) (2,382) (171) (462) (2,997) (2,844)
--------- --------- --------- --------- --------- ---------
The amounts disclosed in respect of both the UK and Overseas
defined benefit schemes ("the Schemes") have been projected from
previous valuations of the schemes. They do not represent the
results of a full actuarial valuation. In respect of 30th June 2014
the Group has updated its assumption regarding the discount rate
applicable to the Scheme liabilities in line with current market
information.
21. Retirement benefit obligations cont'd
The amounts included in the consolidated statement of
comprehensive income are as follows:
6 months ended 30th June 2014
--------------------------------------------------
UK Scheme Overseas Schemes Total
------------------ ------------------- ---------
GBP'000 % GBP'000 % GBP'000
--------- ------- ---------- ------- ---------
Actual return less expected return
on Scheme assets 7,074 1,352 8,426
% of period end market value
of Scheme assets 1.5% 2.5%
Experience gains arising on Scheme
liabilities (1) - 270 270
% of period end present value
of Scheme liabilities (1) 0.0% 0.4%
Changes in assumptions underlying
the present value of the Scheme
liabilities (19,757) (5,605) (25,362)
% of period end present value
of Scheme liabilities (3.3%) (8.8%)
--------- ------- ---------- ------- ---------
Actuarial loss recognised in
reserves (2) (12,683) (3,983) (16,666)
--------- ------- ---------- ------- ---------
% of period end present value
of Scheme liabilities (2.1%) (6.3%)
--------- ------- ---------- ------- ---------
UK Scheme Overseas Schemes Total
---------------------- -------------------- ----------------------
As at As at As at As at As at As at
30th 30th 30th 30th 30th 30th
June June June June June June
2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- --------- ---------- ----------
Defined benefit liability
Present value of funded
obligations (606,769) (577,824) (63,656) (67,705) (670,425) (645,529)
Fair value of plan assets 466,992 466,118 54,903 52,997 521,895 519,115
Net liability recognised
in the balance sheet (139,777) (111,706) (8,753) (14,708) (148,530) (126,414)
---------- ---------- --------- --------- ---------- ----------
UK Scheme Overseas Schemes Total
---------------------- -------------------- ----------------------
As at As at As at As at As at As at
30th 30th 30th 30th 30th 30th
June June June June June June
2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- --------- ---------- ----------
Reconciliation of defined
benefit liability
Opening defined benefit
liability (125,018) (110,738) (5,609) (20,652) (130,627) (131,390)
Exchange differences - - 254 (1,229) 254 (1,229)
Pension expense (2,826) (2,382) (171) (462) (2,997) (2,844)
Employer contributions 750 6,000 756 1,106 1,506 7,106
Total (loss)/gain recognised
in reserves (2) (12,683) (4,586) (3,983) 6,529 (16,666) 1,943
Net liability recognised
in the balance sheet (139,777) (111,706) (8,753) (14,708) (148,530) (126,414)
---------- ---------- --------- --------- ---------- ----------
As at As at
30th 30th
June June
2014 2013
GBP'000 GBP'000
---------- ----------
Defined benefit obligation recognised
in the balance sheet
Retirement benefit obligation (148,530) (126,414)
---------- ----------
(1) Calculation is only done as part of the year-end valuation
of the schemes
(2) Amounts recognised in reserves have been taken through the
statement of comprehensive income
22. Related-party transactions
The Group has taken advantage of the exemption available under
IAS 24, "Related Party Disclosures", not to disclose details of
transactions with its subsidiary undertakings. There were no
material related party transactions during the period.
23. Principal risks
As with all businesses, the Group is exposed to a range of
financial and operational risks, not wholly within our control,
which could have a material impact on the Group's financial
performance.
The Group takes a holistic approach to risk management and the
control environment with the responsibility and accountability
shared across all the Group companies, and the ultimate
responsibility resting with the Board.
The principal risks to which the Group will be exposed in the
second half of the financial year are substantially the same as
those discussed on pages 41 and 42 of the Group's Annual Report for
2013. These are summarised below:
Principal Risks Nature of Risk
---------------------- ----------------------------------------------------------
STRATEGIC RISKS
Economic instability JLT's business is more tied to economic activity
and growth rather than market rates, since greater
levels of corporate activity drive greater demand
for the Group's services.
Strategic risks There are risks to the business model arising from
changes in external events, our markets and customer
behaviour as well as risks arising from mergers and
acquisitions.
---------------------- ----------------------------------------------------------
OPERATIONAL RISKS
Loss of key The Group's core asset is its people. Therefore there
staff is a risk that the organisation may no longer be
able to attract and retain market leading talent.
Business interruption The Group operates out of 115 offices in 40 territories
across the world, each with a unique local environment.
There is a risk of a business interruption due to
a large external event.
Loss of IT The JLT businesses are reliant on the ability to
environment process its transactions on behalf of its clients.
Risks arising from non-performance of an IT supplier,
malicious act, cyber crime and staff not following
Group IT policies and procedures.
Information Intermediaries and pension administrators retain
security confidential data in the normal course of business.
Risk of loss of records, breach of confidentiality
or inadequate security measures need to be managed.
Errors and Intermediaries run a risk of incurring a loss if
omissions the operating procedures in place across the Group
are not complied with or alleged negligence in provision
of services/advice becomes apparent.
Regulatory The JLT Group operates in a regulated environment
sanctions / in many jurisdictions across the world. Risks arise
financial crimes from non-compliance with or misinterpretation of
local and international regulations and failure to
meet regulatory standards.
---------------------- ----------------------------------------------------------
FINANCIAL RISKS
Capital risk Risks arising from an inability to maintain an efficient
and liquidity capital structure and ensure an optimal cost of capital.
Foreign currency The Group operates in 40 territories and incurs foreign
exchange exposures in the normal course of business.
Interest rate Risk of adverse impact on earnings from net exposure
risk to changes in interest rates.
Counterparty There is a risk to JLT if there is a failure of a
risk key counterparty resulting in a loss of own cash,
fiduciary funds, investments and deposits, derivative
assets and trade receivables.
Defined benefit Risk of adverse impact on the Balance Sheet and Income
pension scheme Statement as a consequence of an increase in the
defined benefit pension scheme deficit.
---------------------- ----------------------------------------------------------
24. Forward-looking statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements.
The Group undertakes no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
Statement of directors' responsibilities
The directors confirm that this consolidated interim financial
information has been prepared in accordance with IAS 34 as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The directors of Jardine Lloyd Thompson Group plc are listed in
the Annual Report of the Company for the year ended 31st December
2013, with the exception of Mr Nick MacAndrew who resigned on 29th
April 2014.
On behalf of the Board
M T Reynolds
Finance Director
29th July 2014
Independent review report to Jardine Lloyd Thompson Group
plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed the consolidated interim financial statements,
defined below, in the interim report' of Jardine Lloyd Thompson
Group Plc for the six months ended 30 June 2014. Based on our
review, nothing has come to our attention that causes us to believe
that the consolidated interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
This conclusion is to be read in the context of what we say in
the remainder of this report.
What we have reviewed
The interim financial statements, which are prepared by Jardine
Lloyd Thompson Group Plc, comprise:
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated balance sheet as at 30 June 2014;
-- the consolidated statement of changes in equity for the period then ended; and
-- the consolidated statement of cash flows for the period then ended;
-- the explanatory notes to the consolidated interim financial statements.
As disclosed in note 1, the financial reporting framework that
has been applied in the preparation of the full annual financial
statements of the group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The consolidated interim financial statements included in the
interim report have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
What a review of consolidated financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the consolidated interim financial statements.
Responsibilities for the consolidated interim financial
statements and the review
Our responsibilities and those of the directors
The interim report, including the consolidated interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the interim
report in accordance with the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Our responsibility is to express to the company a conclusion on
the consolidated interim financial statements in the interim report
based on our review. This report, including the conclusion, has
been prepared for and only for the company for the purpose of
complying with the Disclosure and Transparency Rules of the
Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly agreed by our
prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
29th July 2014
London
Notes:
(a) The maintenance and integrity of the Jardine Lloyd Thompson
Group Plc website is the responsibility of the directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the financial statements
since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUWGMUPCGRR
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