TIDMJLT
RNS Number : 5505Q
Jardine Lloyd Thompson Group PLC
01 March 2016
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1 MARCH 2016
Jardine Lloyd Thompson Group plc
PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2015 (UNAUDITED)
Jardine Lloyd Thompson Group plc ("JLT" or "the Group")
announces its preliminary results for the year ended 31 December
2015.
In 2015, the Group delivered a resilient financial performance
that reflected the business's sustained overall momentum despite
the challenging trading environment.
FINANCIAL HIGHLIGHTS
-- Revenue growth of 5% to GBP1,155.1m
-- Organic revenue growth of 2%
-- Strong 5% organic revenue growth in Risk & Insurance
-- Organic revenue declined by 6% in Employee Benefits due to
specific challenges within UK & Ireland. International Employee
Benefits organic revenue growth of 7%.
-- Underlying profit before tax of GBP170.1m, down 7%, reflecting planned US investment*
-- Underlying profit before tax, excluding US investment*, up 3% to GBP190.6m
-- Reported profit before tax down 3% to GBP155.0m
-- Underlying profit margin down 160bp to 16.2%
-- Underlying profit margin, excluding US investment*, increased by 10bp to 18.4%
-- Reported diluted EPS down 2% to 47.0p
-- Total cash dividend of 30.6p up 6%, reflecting the Board's
confidence in the Group's underlying trading performance
* Net investment in JLT USA in 2015 was GBP20.5m (2014:
GBP2.7m)
OPERATIONAL AND STRATEGIC HIGHLIGHTS
-- Established JLT Specialty as a true powerhouse following its
successful merger with Lloyd & Partners. Delivered a 7%
increase in revenues at constant rates of exchange and a 19%
increase in trading profit
-- Cemented JLT Re's status as one of the world's leading
reinsurance brokers following successful integration of Towers
Watson Re's US platform. Generated a 24% increase in trading
profit
-- Completed a successful first full year in the build-out of
our US Specialty business, with nearly 180 people in 13
locations
-- Achieved strong growth in our emerging markets businesses in
Asia and Latin America. Together delivered 8% organic revenue
growth
OUTLOOK
Dominic Burke, Group Chief Executive, commented:
"The Group faces a number of external headwinds as we go into
2016. However, our focus remains on those factors that we can
control and on maintaining the revenue momentum and cost control
established over the last ten years. We remain confident in our
strategy, our platform and our continued ability to grow."
ENQUIRIES:
Jardine Lloyd Thompson Group plc
Dominic Burke Chief Executive 020 7528 4948
Charles Rozes Finance Director 020 7528 4375
Paul Dransfield Corporate Communications 020 7528 4933
Brunswick Group
LLP
Tom Burns/Dania
Saidam 020 7404 5959
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.jlt.com.
PRELIMINARY STATEMENT
JLT has delivered good results for 2015 that reflect the
sustained overall momentum of the business. Total revenues
increased by 5%, or 6% at constant rates of exchange, to GBP1.16
billion with overall organic revenue growth of 2%. This performance
was delivered despite the weak insurance and reinsurance rating
environment and the further deterioration in the macro-economic
environment experienced over the year.
Total Revenue Trading Margin Underlying Trading
Profit
GBPm 2015 Growth CRE Organic 2015 CRE 2014 2015 CRE 2014
Risk & Insurance
Specialty
Businesses 693.0 6% 8% 6% 19% 18% 20% 128.5 131.1 128.1
JLT Re 173.6 5% 2% 2% 19% 18% 16% 32.4 30.3 26.2
866.6 6% 7% 5% 19% 18% 19% 160.9 161.4 154.3
Employee Benefits
UK & Ireland 167.4 (9%) (8%) (14%) 8% 8% 20% 12.8 12.9 36.0
International
EB 121.1 21% 23% 7% 25% 23% 29% 30.8 28.9 29.0
288.5 2% 3% (6%) 15% 14% 23% 43.6 41.8 65.0
Group* 1,155.1 5% 6% 2% 16.2% 16.0% 17.8% 187.5 186.3 196.8
Notes:
- Total revenue comprises fees, commissions and investment income.
- CRE: Constant rates of exchange are calculated by translating
2015 results at 2014 exchange rates.
- Organic growth is based on total revenue excluding the effect
of currency, acquisitions, disposals and investment income.
- Underlying results exclude exceptional items.
* Trading profit figures include central costs.
Our Risk & Insurance businesses, which represent
approximately 75% of the Group's revenue, grew revenues to GBP866.6
million, an increase of 6%, with market-leading organic revenue
growth of 5%. This is in line with previous years and demonstrates
the resilience of our strategy and our franchise. Both our
Specialty and Reinsurance businesses achieved solid 19% trading
margins.
Revenues within our Employee Benefits businesses increased by 2%
overall, but reduced by 6% on an organic basis. As previously
indicated in our Q3 2015 Interim Management Statement, this result
reflected a reduction in the revenues of our UK & Ireland
Employee Benefits business, which fell by 9% as a result of the
specific challenges it faced in the year.
Our International Employee Benefits businesses achieved 21%
revenue growth, or 7% on an organic basis, after another good
year.
GBPm 2015 2014
Underlying trading profit 187.5 196.8
Underlying share of associates 5.5 7.7
Net finance costs (22.9) (21.5)
Underlying profit before taxation 170.1 183.0
Exceptional items (15.1) (23.3)
Profit before taxation 155.0 159.7
Underlying tax expense (47.5) (47.2)
Tax on exceptional items 5.9 5.1
Non-controlling interests (10.3) (12.3)
Profit after taxation and non-controlling
interests 103.1 105.3
Underlying profit after taxation
and non-controlling interests 112.3 123.5
Diluted earnings per share 47.0p 47.8p
Underlying diluted earnings per
share 51.2p 56.1p
Total dividend per share 30.6p 28.9p
As anticipated, the Group's underlying trading profit decreased
by 5% to GBP187.5 million, with underlying profit before tax
reducing by 7% to GBP170.1 million. As a result, the trading profit
margin reduced from 17.8% to 16.2%.
This reduction in the Group's trading profit reflects both our
investment in building out our US Specialty business and the
specific challenges faced by our UK & Ireland Employee Benefits
business.
Excluding the US net investment of GBP20.5 million, the Group's
underlying profit before tax increased by 3% and the Group's
trading profit margin increased by 10bp to 18.4% when compared to
2014.
This reflects the strong performances delivered by our Risk
& Insurance businesses and the continued success of our
International Employee Benefits businesses, as well as good cost
control in the year.
Our reported profit before tax reduced by 3% to GBP155.0
million, which includes the impact of net exceptional costs of
GBP15.1 million and, as a consequence, reported diluted earnings
per share decreased to 47.0p.
DIVIDENDS
Subject to shareholder approval, the final dividend will be
increased to 19.5p per share for the year ended
31 December 2015 (2014: 18.3p) and will be paid on 3 May 2016 to
shareholders on the register at 1 April 2016. This brings the total
dividend for the year to 30.6p per share, compared to 28.9p for the
prior year, an increase of 6%.
OPERATIONAL REVIEW
The Group operates two sets of businesses: Risk & Insurance
and Employee Benefits. The results of the businesses within each of
these areas are reported in more detail below:
RISK & INSURANCE
Total Revenue Trading Margin Underlying Trading
Profit
GBPm 2015 Growth CRE Organic 2015 CRE 2014 2015 CRE 2014
JLT Specialty 311.2 7% 7% 4% 22% 22% 20% 68.3 67.0 57.2
JLT Re 173.6 5% 2% 2% 19% 18% 16% 32.4 30.3 26.2
JLT Australia
& New Zealand 109.5 (4%) 6% 6% 30% 30% 28% 32.7 36.3 32.3
JLT Asia 76.6 7% 3% 3% 17% 15% 16% 12.7 11.2 11.3
JLT Latin
America 63.1 4% 16% 16% 34% 31% 32% 21.3 21.6 19.3
JLT Insurance
Services 50.6 (6%) (6%) (6%) 12% 12% 15% 6.0 6.1 7.9
JLT Europe,
Middle East
& Africa 30.1 15% 22% 19% 20% 20% 13% 6.0 6.3 3.5
JLT USA 23.3 106% 92% 41% - - - (20.5) (19.1) (2.7)
JLT Canada 20.4 (1%) 6% 8% 7% 6% (6%) 1.5 1.3 (1.1)
JLT Insurance
Management 8.2 11% 4% 4% 6% 6% 5% 0.5 0.4 0.4
866.6 6% 7% 5% 19% 18% 19% 160.9 161.4 154.3
JLT SPECIALTY
(MORE TO FOLLOW) Dow Jones Newswires
March 01, 2016 02:01 ET (07:01 GMT)
JLT Specialty generated revenues of GBP311.2 million in the
year, showing revenue growth of 7%, or 4% on an organic basis.
Trading profit increased by 19% to GBP68.3 million, with the
trading margin increasing 200 basis points to 22%.
This was a strong result given the continued fall in insurance
pricing, achieved in challenging market conditions, demonstrating
the strategic and operational logic of the merger between JLT
Specialty and Lloyd & Partners. We believe that the combined
business is now a Specialty powerhouse with growing momentum, as
evidenced by a significant number of client wins during the
year.
Particularly notable has been the performance of our Aviation,
Credit, Political & Security and Financial Lines teams, which
have been able to translate their specialist knowledge into a
stream of important client wins.
JLT Specialty now has new leadership in place following the
planned succession of Paul Knowles to the role of CEO with Lucy
Clarke as his Deputy. This new team is continuing to drive
collaboration with JLT's other Specialty businesses around the
world, in particular our developing US platform, strengthening our
global proposition.
During 2016, we will be taking the opportunity to merge our
Thistle UK operation into JLT Specialty. This reflects UK Thistle's
drive into Specialty segments and will improve the client offering,
simplify the Group's structure and generate greater
efficiencies.
JLT Specialty's revenue growth prospects are set to continue in
2016, supported by the further investments we
are making in Specialty areas such as Marine, Financial Lines,
Cyber and General Aviation and our proven ability to consistently
win market share.
INTERNATIONAL SPECIALTY BUSINESSES
In our JLT Australia & New Zealand business, organic revenue
grew 6%, but reported revenues reduced by 4%, when compared with
the previous year, as a consequence of the movement of the
Australian Dollar versus Sterling.
At constant rates of exchange, the trading profit increased by
13%, but, again, this was impacted on a reported basis.
The business secured a significant number of client wins in the
year, including both one of the largest construction companies and
one of the largest oil and gas companies in the region. Its
progress reflects the success of its strategy of establishing
itself as a Specialty player.
This momentum has allowed the business to continue to invest in
strengthening its team in its key Specialty areas. Today this
business operates from more than 30 locations and has more than 850
employees.
JLT Asia has delivered an encouraging performance, despite a
difficult macro-economic environment caused by the slowdown in
China and falling commodity prices.
Revenues grew by 7% to GBP76.6 million, with organic revenue
growth of 3%. Trading profits grew by 12% on a reported basis, but
were flat on a constant rate of exchange basis.
Good progress was seen in our Hong Kong, Philippines and
Vietnamese businesses in particular, while our Financial Lines and
Credit & Political Risks businesses also had a good year.
Under the new leadership of Dominic Samengo-Turner as CEO and
Warren Downey as his Deputy, we are encouraged by the prospects for
this business in 2016.
Our JLT Latin America businesses delivered strong results, with
revenues increasing 16% on an organic basis.
Our trading profits increased by 10% to GBP21.3 million, with
the business successfully collaborating with our other offices
around the world. We are winning significant new business in
Energy, Surety, Cargo, Power and large industrial Property and
Casualty.
Set against its domestic macro-economic backdrop, our Brazilian
business, in particular, delivered a good performance.
JLT USA generated revenues of nearly USD36 million, which
equates to GBP23.3 million, in its first full year of operation.
This demonstrates an acceleration from the USD11 million delivered
at the half year and the growing revenue momentum of this business.
The business also secured a number of important client wins during
the year which were not booked in 2015, but that will benefit
2016.
As anticipated in our Q3 2015 Interim Management Statement, the
net investment spend in the period of USD31.4 million (GBP20.5
million) was lower than had been previously advised.
While total revenues were short of our initial expectations,
this was largely due to the business taking a more prudent and
selective approach to hiring, given the volume of approaches we
have received. This is important as we are seeking to grow the
franchise by identifying the very best people.
We remain focused on driving growth, with our investment in the
US a key element of our strategy to position the Group as the
world's leading Specialty-focused broker and to increase our
penetration of the US market, which continues to be the world's
largest insurance market.
While our business is still in the early stages of its
development, we are delighted with its momentum and progress after
just one year.
The business now employs around 180 people and this will rise
steadily over the course of this year.
Our US Specialty business has now established offices in 13
cities, supported by a robust operational and infrastructure
backbone, giving us the foundations upon which to target those
regions where we see a concentration of client demand and economic
activity in our chosen Specialty sectors.
It has also built real strength and depth in its key Specialty
lines - Aviation, Cyber, Energy and Financial Lines - and
established strong platforms in areas such as Credit, Political
& Security, Entertainment, Representations & Warranties,
Real Estate and Construction, with further investment to come this
year.
The US Specialty build-out is on track and, in 2016, we
anticipate that revenues will approximately double and the net
investment spend will be similar compared with 2015.
JLT RE
JLT Re delivered a strong performance in 2015, with revenues
increasing by 5% to nearly GBP174 million and organic revenue
growth of 2%.
Trading profits increased by 24% to GBP32.4 million. This is
reflected in an improved trading margin of 19%, with the business
completing the successful integration of the Towers Watson Re US
platform, as well as driving further operational efficiencies.
Particularly noteworthy in 2015 has been the growth delivered in
Asia as our capabilities and reputation in the region have
grown.
This performance was pleasing when set against the continued
decline in the reinsurance rating environment during the period. It
is worth noting that, since acquiring the Towers Watson Re business
just over two years ago, we have seen property catastrophe rates
fall by over 30%.
The appointment of Ed Hochberg as the CEO of our North American
reinsurance business has been well received by our clients, markets
and our colleagues. This business is well positioned for growth,
building on its already strong US Regional, Public Sector and
Natural Catastrophe practices, as well as targeting other areas
such as Transportation and Workers Compensation.
We have continued to invest in talent, selectively hiring in key
growth areas, as well as in analytics, where we are complementing
our existing offering with new tools and capabilities that further
increase our ability to serve insurers and reinsurers on their
largest and most complex risks.
As we enter 2016, there are signs that demand for reinsurance is
increasing. We have seen significant reserve strengthening on
long-tail lines of business for a number of large carriers, and a
recognition that, at current pricing, reinsurance is an extremely
efficient form of capital. The business has had a good 1 January
renewal season and remains well positioned for future growth.
EMPLOYEE BENEFITS
Total Revenue Trading Margin Underlying Trading
Profit
GBPm 2015 Growth CRE Organic 2015 CRE 2014 2015 CRE 2014
UK & Ireland 167.4 (9%) (8%) (14%) 8% 8% 20% 12.8 12.9 36.0
Asia 78.9 14% 7% 5% 31% 29% 34% 24.5 21.4 23.4
Australia
& New Zealand 20.3 164% 193% 18% 16% 16% 26% 3.3 3.7 2.0
Latin America 18.9 (6%) 15% 12% 19% 19% 21% 3.5 4.4 4.2
Europe, Middle
East & Africa 1.7 6% 16% 16% (17%) (17%) (15%) (0.3) (0.3) (0.2)
Canada 1.3 (22%) (16%) (15%) (17%) (17%) (21%) (0.2) (0.3) (0.4)
288.5 2% 3% (6%) 15% 14% 23% 43.6 41.8 65.0
UK & IRELAND EMPLOYEE BENEFITS
Reported revenues in our UK and Irish business for the period
were GBP167.4 million, a reduction of 9% when compared to the
previous year. Trading profits were GBP12.8 million, with the
trading margin falling from 20% to 8% for the year.
This disappointing performance reflects the challenges that we
highlighted at the time of our 2015 interim results and in our Q3
Interim Management Statement.
Firstly, a significant slowdown in project work and new business
due to the uncertainty created by government-led changes to the UK
occupational pensions market.
Secondly, the structural impact of the Retail Distribution
Review on our commission revenue, where we saw insurers
opportunistically choosing to end commission payments in advance of
the expected deadline of 2016. We booked our last tranche of
commissions-related revenues in 2015. This amounted to GBP5
million, which will not be repeated in 2016.
Given the above, we gave guidance in November 2015 that we
anticipated that full year revenues in the UK Employee Benefits
business would reduce by a mid to high single digit percentage,
when compared to 2014, and that trading profit would be in the low
to mid-teens, and this has indeed been the outcome for the
year.
(MORE TO FOLLOW) Dow Jones Newswires
March 01, 2016 02:01 ET (07:01 GMT)
Despite the challenges of 2015, our UK Employee Benefits
business has a strong offering and an attractive range of
capabilities in a market that continues to need and value our
services. We are taking steps to improve this business's
profitability and return it to year-on-year revenue growth.
The business has been under the new leadership of Bala
Viswanathan since early October 2015. We are now implementing plans
to reorganise the business with a flatter structure that is better
able to respond to today's dynamic marketplace, while continuing to
invest in technology and the client proposition.
This restructuring will result in a reduction in headcount as
certain layers within the business are removed. It is anticipated
that this will deliver ongoing annualised savings in the range of
GBP14 million, for a one-off cost of GBP12 million. We would expect
savings in 2016 to be in the region of GBP9 million of the
estimated annual savings.
Our UK Employee Benefits operation is a well-balanced business,
made up of four complementary components, each of which has a
strong position in its market. The business is characterised by a
mixture of recurring revenues backed by long-term contracts, as
well as opportunities to benefit from industry changes and
technology developments.
As the UK's largest provider of administration solutions to
private sector pension schemes, JLT is well positioned to secure
new business as companies' Defined Benefit schemes are run off and
to benefit from the growth of Defined Contribution arrangements. We
also see further significant benefits from the application of
technology and automation in this area.
As a market leader in pension and benefits consulting, ongoing
economic and regulatory changes will stimulate demand from
employers and from trustees as the current market confusion
abates.
Our software operations provide and service one of the most
widely-used pension administration platforms in the UK, while
BenPal enables companies to manage the full range of employees'
benefits on a single application.
Finally, we have a growing investment management business, which
already has some GBP5.3 billion under advice.
The components that constitute our UK Employee Benefits business
are, therefore, strongly positioned and our new management team is
now firmly established and focused on exploiting the market
opportunities this business faces and delivering a significant
improvement in its profitability. Given this, we believe that this
business will grow over the coming years and move to an approximate
15% trading margin by the end of 2017.
INTERNATIONAL EMPLOYEE BENEFITS
Our Asia Employee Benefits operations achieved organic revenue
growth of 5%, despite headwinds in Indonesia, notably from the
introduction of a mandatory state-sponsored healthcare scheme, and
some impact from the restructuring of our operation in Singapore.
Private Client Services, our high-net-worth life insurance broking
business, had a solid year despite the slowdown in the Chinese
economy. Demand for healthcare insurance and consultancy is still
strong in Asia, with supporting demographics to suggest this will
continue.
Our Australian & New Zealand Employee Benefits businesses
are also progressing well, with organic revenue growth of 18%. This
was supported by the successful execution of our strategy to focus
on the return-to-work sector, with our acquisitions of Recovre and
Alpha now making us one of the largest providers of rehabilitation
services in
the region. The integration of these businesses has gone well
and we see further opportunity to expand in this area as clients
seek an integrated occupational health and return-to-work service.
As expected, the trading profit margin has reduced for the combined
Australian & New Zealand Employee Benefits business as Recovre
and Alpha are, intrinsically, lower profit margin businesses.
In our Latin America Employee Benefits businesses, organic
revenues grew by 12%. This reflects the investments we have made
across the region in building our capabilities and expanding our
offering. This has included opening a number of new offices in
Brazil to target larger regional clients, working in close
collaboration with Risk & Insurance colleagues.
ASSOCIATES
The Group's income from its Associates reduced by GBP2.2 million
to GBP5.5 million following the disposal of our stake in Siaci
Saint Honoré (Siaci) in May 2015. The disposal in May 2015 meant
that we had the benefit of four months of income, approximately
GBP4 million, that will not recur in 2016. As a result, we believe
that Associate earnings in 2016 will be approximately GBP2
million.
OPERATING COSTS
In 2015, total underlying operating costs (excluding exceptional
items) increased by GBP60.3 million, or 7%, to GBP967.6 million. Of
the increase, GBP29.9 million stemmed from our investment in JLT
USA, GBP11.3 million mainly resulted from the acquisition of
Recovre, and GBP10.6 million came from JLT Specialty, in line with
the growth of that business. The mix of the cost base remained
unchanged, with staff and premises costs being the major individual
costs items.
The Group's underlying operating cost ratio increased by 160
basis points to 83.8% of total revenues. This reflects the impact
of the first full year of the investment in JLT USA and the
performance of our UK & Ireland Employee Benefits business,
offset by underlying cost ratio improvements in JLT Specialty and
JLT Re, and a reduction of GBP5.5 million in Head Office costs
which is non-recurring. The impact of the continued investment in
JLT USA was the principal
reason for the increase in the staff costs to revenue ratio from
59.4% to 61.0%.
The Group's operating leverage, defined as the differential of
the year-on-year growth rates of total revenue against total
operating costs, is an indicator of how we are managing revenue and
cost growth simultaneously over time. Excluding the investment in
JLT USA, this is a positive one percentage point, indicating that
the Group has kept cost growth in check with revenues, even with
the impact of the UK Employee Benefits business.
EXCEPTIONAL ITEMS
In 2015, net exceptional costs were GBP15.1 million (2014:
GBP23.3 million), comprising GBP21.3 million of acquisition and
integration costs; restructuring costs, mainly following the merger
of JLT Specialty with Lloyd & Partners, of GBP9.9 million; net
litigation costs of GBP1.6 million; and other exceptional costs of
GBP0.9 million. These were offset by the gain on the disposal of
the Group's stake in Siaci of GBP18.6 million. Consequently,
reported profit before tax was GBP155.0 million compared to
GBP159.7 million in 2014.
Looking to 2016, it is currently anticipated that there will be
approximately GBP12 million of exceptional costs associated with
the restructuring of the UK Employee Benefits business. In
addition, there will be some restructuring costs relating to the
integration of Thistle UK into JLT Specialty. We will update the
market on the cost and benefits of this at our 2016 interim
results.
BALANCE SHEET
The net assets of the Group increased to GBP331 million from
GBP307 million. The key movements were:
-- An increase in goodwill of GBP20 million mainly due to the 9
acquisitions completed in 2015 for a total consideration of GBP30.3
million;
-- A reduction in the pension liability of GBP49 million mainly
due to an increase in the AA rated corporate bond yield;
-- A reduction in net debt of GBP48 million;
-- A decrease in our costs of associates of GBP57 million, following the disposal of Siaci; and
-- A net reduction of working capital (trade and other
receivables less trade and other payables and provisions for
liabilities and charges) of GBP34 million.
Net debt, defined as own funds less total borrowings net of
transaction costs, was GBP426 million (2014: GBP474 million). At 31
December 2015, the Group had committed long-term unsecured
revolving credit bank facilities of GBP500 million and drawn
private placement loan notes equivalent to GBP420 million,
resulting in total debt facilities equivalent to GBP920 million
with maturities between 2016 and 2029.
Gross borrowings were GBP607 million, which includes GBP584
million of borrowings under the Group's committed facilities,
leaving unutilised committed facilities headroom of GBP336
million.
Finance costs in 2015 were GBP22.9 million and are expected to
be a similar amount in 2016, subject to acquisition spend.
CASHFLOW
The Group monitors operational cash flows rather than statutory.
Operational cash flows monitor the movement in net debt and exclude
movements in fiduciary funds.
Our operational cash flows have been robust, but continue to
reflect significant capital expenditure in 2015 as we add breadth
and depth to our business. The decrease in net debt of GBP48
million represents the net increase in cash in the year.
BOARD AND SENIOR MANAGEMENT DEVELOPMENTS
As previously announced, Charles Rozes was appointed as Group
Finance Director on 1 September 2015, succeeding Mike Reynolds, who
was appointed Global CEO of JLT Re in August 2014. Charles has
joined the JLT Board as an Executive Director and is also a member
of the Group Executive Committee. As mentioned above, Bala
Viswanathan was announced as the CEO of our UK Employee Benefits
business in October 2015, upon the retirement of Duncan Howorth. On
1 January 2016, Paul Knowles became CEO of JLT Specialty,
succeeding John Lloyd,
and Lucy Clarke was appointed as Deputy CEO. John will remain on
the board of JLT Specialty as a non-executive director.
PHASING OF REVENUES AND PROFITS IN 2016
Over the past two years, underlying profit before tax,
generally, has been phased with just under 60% in the first half of
the year, with the balance in the second half. That phasing was
distorted in 2015 due to profit erosion in UK Employee Benefits in
the second half.
For 2016, we believe underlying profit before tax will be split
roughly 45% to 55% between the first and second halves of the
year.
OUTLOOK
(MORE TO FOLLOW) Dow Jones Newswires
March 01, 2016 02:01 ET (07:01 GMT)
The Group faces a number of external headwinds as we go into
2016. However, our focus remains on those factors that we can
control and on maintaining the revenue momentum and cost control
established over the last ten years. We remain confident in our
strategy, our platform and our continued ability to grow.
Results follow
CONSOLIDATED INCOME STATEMENT
for the year ended 31st December 2015
2015 2014
Notes GBP'000 GBP'000
Fees and commissions 2 1,151,392 1,099,728
Investment income 2,4 3,689 4,398
Total revenue 1,155,081 1,104,126
Salaries and associated expenses 6 (727,334) (671,758)
Premises (61,167) (57,927)
Other operating costs (163,685) (172,426)
Depreciation, amortisation and impairment
charges 3 (30,538) (28,139)
Operating profit 1,2,3 172,357 173,876
Analysed as:
Operating profit before exceptional
items 1,2 187,462 196,830
Acquisition and integration costs 3 (21,329) (13,271)
Restructuring costs 3 (9,878) (2,482)
Net litigation costs 3 (1,556) -
Gain on sale of associate 3 18,595 -
Business Transformation Programme 3 - (7,753)
Other exceptional items 3 (937) 552
Operating profit 1,2,3 172,357 173,876
Finance costs 5 (24,473) (22,972)
Finance income 5 1,612 1,526
Finance costs - net 5 (22,861) (21,446)
Share of results of associates 5,531 7,306
Profit before taxation 1,2 155,027 159,736
Income tax expense 8 (41,586) (42,072)
Profit for the year 113,441 117,664
Profit attributable to:
Owners of the parent 2 103,099 105,291
Non-controlling interests 10,342 12,373
113,441 117,664
Earnings per share attributable to
the owners of the parent during 9
the year (expressed in pence per
share)
Basic earnings per share 47.0 p47.9 p
Diluted earnings per share 47.0 p47.8 p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st December 2015
2015 2014
Notes GBP'000 GBP'000
Profit for the year 113,441 117,664
Other comprehensive income/(expense)
Items that will not be reclassified to
profit or loss
Remeasurement of post employment benefit
obligations 31 43,149 (51,394)
Taxation thereon (8,856) 9,907
Total items that will not be reclassified
to profit or loss 34,293 (41,487)
Items that may be reclassified subsequently
to profit or loss
Fair value (losses)/ gains net of tax:
- available-for-sale (34) 203
- available-for-sale reclassified to
the income statement 10 (204)
- cash flow hedges (12,569) (17,457)
Currency translation differences (13,622) (3,238)
Total items that may be reclassified
subsequently to profit or loss (26,215) (20,696)
Other comprehensive income/(expense)
net of tax 8,078 (62,183)
Total comprehensive income for the year 121,519 55,481
Attributable to:
Owners of the parent 112,552 43,312
Non-controlling interests 8,967 12,169
121,519 55,481
CONSOLIDATED BALANCE SHEET
as at 31st December 2015
2015 2014
Notes GBP'000 GBP'000
NET OPERATING ASSETS
Non-current assets
Goodwill 11 496,166 475,697
Other Intangible assets 12 104,323 86,495
Property, plant and equipment 13 63,167 61,405
Investments in associates 14 41,180 100,650
Available-for-sale financial assets 15,20 15,466 9,004
Derivative financial instruments 16,20 33,684 18,514
Retirement benefit surpluses 31 366 572
Deferred tax assets 22 51,023 62,028
805,375 814,365
Current assets
Trade and other receivables 17 528,595 493,647
Derivative financial instruments 16,20 1,544 3,101
Available-for-sale financial assets 15,20 19 5,384
Cash and cash equivalents 18,20 901,087 871,246
1,431,245 1,373,378
Current liabilities
Borrowings 20,21 (22,338) (168,586)
Trade and other payables 19 (1,086,278) (1,037,544)
Derivative financial instruments 16,20 (6,115) (2,491)
Current tax liabilities (8,749) (8,743)
Provisions for liabilities and charges 23 (18,594) (7,588)
(1,142,074) (1,224,952)
Net current assets 289,171 148,426
Non-current liabilities
Borrowings 20,21 (581,244) (443,651)
Derivative financial instruments 16,20 (33,726) (15,859)
Deferred tax liabilities 22 (16,978) (13,897)
Retirement benefit obligations 31 (130,753) (179,607)
Provisions for liabilities and charges 23 (1,043) (3,225)
(763,744) (656,239)
330,802 306,552
TOTAL EQUITY
Capital and reserves attributable
to the owners of the parent
Ordinary shares 24 11,008 11,006
Share premium 24,26 104,074 103,941
Fair value and hedging reserves 26 (12,827) (234)
Exchange reserves 26 (17,280) (5,033)
Retained earnings 227,362 178,932
Shareholders' equity 312,337 288,612
Non-controlling interests 18,465 17,940
330,802 306,552
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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for the year ended 31st December 2015
For the year ended 31st December 2015
Ordinary Other Retained Shareholders' Non-controlling Total
Shares reserves earnings equity interests equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1st January
2015 11,006 98,674 178,932 288,612 17,940 306,552
Profit for
the year - - 103,099 103,099 10,342 113,441
Other
comprehensive
(expense)/income
for the year - (24,840) 34,293 9,453 (1,375) 8,078
Total
comprehensive
(expense)/income
for the year - (24,840) 137,392 112,552 8,967 121,519
Dividends 10 - (64,484) (64,484) (8,923) (73,407)
Amounts in
respect of
share based
payments:
- reversal
of amortisation
net of tax - - 21,740 21,740 - 21,740
- shares
acquired - - (26,056) (26,056) - (26,056)
Acquisitions 29 - - - (787) (787)
Disposals - - - - 1,268 1,268
Change in
non-controlling
interests 30 - - (20,162) (20,162) - (20,162)
Issue of share
capital 24 2 133 - 135 - 135
Balance at
31st December
2015 11,008 73,967 227,362 312,337 18,465 330,802
0 0 0 - 0 -
For the year ended 31st December 2014
Ordinary Other Retained Shareholders' Non-controlling Total
Shares reserves earnings equity interests equity
Notes 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 year - - 105,291 105,291 12,373 117,664
Other
comprehensive
expense for
the year - (20,492) (41,487) (61,979) (204) (62,183)
Total
comprehensive
(expense)/income
for the year - (20,492) 63,804 43,312 12,169 55,481
Dividends 10 - - (60,610) (60,610) (8,324) (68,934)
Amounts in
respect of
share based
payments:
- reversal
of amortisation
net of tax - - 18,646 18,646 - 18,646
- shares
acquired - - (32,698) (32,698) - (32,698)
Acquisitions - - - - (5,170) (5,170)
Disposals - - - - (216) (216)
Change in
non-controlling
interests - - (21,219) (21,219) - (21,219)
Issue of share
capital 24 3 202 - 205 - 205
Balance at
31st December
2014 11,006 98,674 178,932 288,612 17,940 306,552
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31st December 2015
2015 2014
Notes GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 28 229,647 159,299
Interest paid (16,448) (16,484)
Interest received 5,116 6,000
Taxation paid (37,003) (36,560)
(Decrease)/increase in net insurance
broking payables (13,384) 77,268
167,928 189,523
Dividend received from associates 800 2,287
Net cash generated from operating activities 168,728 191,810
Cash flows from investing activities
Purchase of property, plant and equipment 13 (15,183) (13,371)
Purchase of other intangible assets 12 (45,940) (36,931)
Proceeds from disposal of property,
plant and equipment 1,282 1,041
Acquisition of businesses, net of cash
acquired 29 (20,824) (58,205)
Acquisition of associates (411) (686)
Proceeds from disposal of businesses,
net of cash disposed 30 (122) 703
Proceeds from disposal of associates 2 80,235 -
Purchase of available-for-sale other
investments 15 (1,964) -
Proceeds from disposal of available-for-sale
other investments 243 1,008
Net cash used in investing activities (2,684) (106,441)
Cash flows from financing activities
Dividends paid to owners of the parent (63,094) (60,327)
Purchase of available-for-sale financial
assets 15 (5,081) (5)
Proceeds from disposal of available-for-sale
financial assets 5,039 7,991
Purchase of shares (26,056) (32,698)
Proceeds from issuance of ordinary
shares 24 135 205
Proceeds from borrowings 17,637 208,514
Repayments of borrowings (50,118) (84,450)
Dividends paid to non-controlling interests (8,923) (8,324)
Net cash generated from financing activities (130,461) 30,906
Net increase in cash and cash equivalents 35,583 116,275
Cash and cash equivalents at beginning
of year 871,246 753,164
Exchange gains/(losses) on cash and
cash equivalents (5,742) 1,807
Cash and cash equivalents at end of
year 18 901,087 871,246
SIGNIFICANT ACCOUNTING POLICIES (unaudited)
for the year ended 31st December 2015
BASIS OF PREPARATION
Compliance with IFRS
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the
EU) and interpretations issued by the IFRS interpretations
Committee (IFRS IC) and the Companies Act 2006 applicable to
Companies reporting under IFRSs. The financial statements comply
with IFRS as issued by the International Accounting Standards Board
(IASB).
Historical cost convention
The consolidated financial statements have been prepared on a
going concern basis, under the historical cost convention, except
for the following:
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-- the available-for-sale financial assets, financial assets and
liabilities (including derivative financial instruments) are
measured at fair value and
-- defined benefit pension plans where plan assets are measured at fair value.
STANDARDS, AMENDMENTS AND INTERPRETATIONS EFFECTIVE IN 2015
The following standards have been adopted by the Group for the
first time for the financial year beginning on or after 1 January
2015:
Annual improvements to IFRSs 2010-2012 and 2011-2013 cycles
In December 2013, the IASB has made the following
amendments:
IFRS 2 - clarifies the definition of 'vesting condition' and now
distinguishes between 'performance condition' and 'service
condition'
IFRS 3 - clarifies that an obligation to pay contingent
consideration is classified as financial liability or equity under
the principles in IAS 32 and that all non-equity contingent
consideration (financial and non-financial) is measured at fair
value at each reporting date
IFRS 3 - clarifies that IFRS 3 does not apply to the accounting
for the formation of any joint arrangement
IFRS 8 - requires disclosure of the judgements made by
management in aggregating operating segments and clarifies that a
reconciliation of segment assets must only be disclosed if segment
assets are reported
IFRS 13 - confirms that short-term receivables and payables can
continue to be measured at invoice amounts if the impact of
discounting is immaterial
IFRS 13 - clarifies that the portfolio exception in IFRS 13
(measuring the fair value of a group of financial assets and
financial liabilities on a net basis) applies to all contracts
within the scope of IAS 39 or IFRS 9
IAS 16 and IAS 38 - clarifies how the gross carrying amount and
accumulated depreciation are treated where an entity measures its
assets at revalued amounts
IAS 24 - where an entity receives management personnel services
from a third party (a management entity), the fees paid for those
services must be disclosed by the reporting entity, but not the
compensation paid by the management entity to its employees or
directors
Defined benefit plans: Employee contributions - Amendments
to IAS 19
The amendments clarify the accounting for defined benefit plans
that require employees or third parties to contribute towards the
cost of the benefits. Under the previous version of IAS 19, most
entities deducted the contributions from the cost of the benefits
earned in the year the contributions were paid. However, the
treatment under the 2011 revised standard was not so clear. It
could be quite complex to apply, as it requires an estimation of
the future contributions receivable and an allocation over future
service periods.
To provide relief, changes were made to IAS 19. These allow
contributions that are linked to service, but that do not vary with
the length of employee service (eg a fixed % of salary), to be
deducted from the cost of benefits earned in the period that the
service is provided.
Therefore many entities will be able to (but not be required)
continue accounting for employee contributions using their existing
accounting policy.
None of these amendments had an effect on the Group financial
statements.
BASIS OF CONSOLIDATION
Subsidiaries
Subsidiaries are all entities (including structured entities)
over which the
Group has control.
The Group controls an entity when the Group is exposed to, or
has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its
power over the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from
the date that control ceases.
The Group uses the acquisition method of accounting to account
for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred and the equity interests
issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business
combination
are measured initially at their fair values at the acquisition
date. On an acquisition-by-acquisition basis, the Group recognises
any non- controlling interest in the acquiree either at fair value
or at the non-
controlling interest's proportionate share of the acquiree's net
assets. Acquisition-related costs are expensed as incurred.
If a business combination is achieved in stages, the fair value
of the Group's previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date through profit or
loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 either in
profit or loss or as a charge to other comprehensive income.
Contingent consideration that is classified as equity is not
remeasured, and its subsequent settlement is accounted for within
equity.
The excess of the consideration transferred, the amount of any
non- controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the
fair value of
the identifiable net assets acquired is recorded as goodwill. If
the total of consideration transferred, non-controlling interest
recognised and previously held interest measured is less than the
fair value of the net assets of the subsidiary acquired in the case
of a bargain purchase, the difference is recognised directly in the
income statement.
Inter-company transactions, balances, income and expenses on
transactions between Group companies are eliminated. Accounting
policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the Group.
Transactions with non-controlling interests
Transactions with non-controlling interests that do not result
in loss of control are accounted for as equity transactions - that
is, as transactions with the owners in their capacity as
owners.
The difference between fair value of any consideration paid and
the relevant share acquired of the carrying value of net assets of
the subsidiary is recorded in equity. Gains or losses on disposals
to non- controlling interests are also recorded in equity.
Disposal of subsidiaries
When the Group ceases to have control any retained interest in
the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognised in
profit or loss.
The fair value is the initial carrying amount for the purposes
of subsequently accounting for the retained interest as an
associate, joint venture or financial asset. In addition, any
amounts previously recognised in other comprehensive income in
respect of that entity are accounted
for as if the Group had directly disposed of the related assets
or liabilities.
This may mean that amounts previously recognised in other
comprehensive income are reclassified to profit or loss.
Associates
Associates are entities over which the Group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting.
Under the equity method, the investment is initially recognised
at cost, and the carrying amount is increased or decreased to
recognise the investor's share of the profit or loss of the
investee after the date of acquisition.
The Group's investment in associates includes goodwill
identified on acquisition.
If the ownership interest in an associate is reduced but
significant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income is
reclassified to profit or loss where appropriate.
The Group's share of post-acquisition profit or loss is
recognised in the income statement, and its share of
post-acquisition movements
in other comprehensive income is recognised in other
comprehensive income with a corresponding adjustment to the
carrying amount of the investment. When the Group's share of losses
in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not
recognise further losses, unless it has
incurred legal or constructive obligations or made payments on
behalf of
the associate.
Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group's interest in
the associates.
Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
Accounting policies of the associates have been modified where
necessary to ensure consistency with the policies adopted by the
Group.
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources
and assessing performance of the operating segments, has been
identified as the Chief Executive Officer.
FOREIGN CURRENCIES
Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency').
The consolidated financial statements are presented in Sterling,
which is the Group's functional and presentational currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions.
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Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement, except when
deferred in equity
as qualifying cash flow hedges and qualifying net investment
hedges. Translation differences on non-monetary items, such as
equities held at fair value through profit or loss, are reported as
part of the fair value gain or loss. Translation differences on
non-monetary items, such as equities classified as
available-for-sale financial assets, are included in other
comprehensive income.
Group companies
The results and financial position of all the Group entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentational
currency are translated into the presentational currency as
follows:
i) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
ii) income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and
iii) all resulting exchange differences are recognised in other comprehensive income.
On consolidation exchange differences arising from the
translation of net investment in foreign entities, and of
borrowings and other currency instruments designated as hedges of
such investments, are taken to other comprehensive income. When a
foreign operation is sold, such
exchange differences are recognised in the income statement as
part of
the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate. Exchange
differences arising are recognised in other comprehensive
income.
GOODWILL ARISING ON CONSOLIDATION
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the identifiable net
assets of the acquired subsidiary/associate at the date of
acquisition. Goodwill on acquisitions of subsidiaries is shown
separately on the Balance Sheet. Goodwill on acquisitions of
associates is included in investments in associates.
Goodwill is not amortised but it is tested for impairment
annually or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less
accumulated impairment losses.
Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold. Goodwill
is allocated to cash generating units, or groups of cash generating
units, for the purpose of impairment testing. Cash generating units
represent the lowest level of geographical and business segment
combinations that the Group uses for internal reporting
purposes.
OTHER INTANGIBLE ASSETS
Computer software
Acquired computer software licenses are capitalised on the basis
of
the costs incurred to acquire them and bring them to use. These
costs are amortised over their estimated useful lives. Costs
associated with maintaining computer software programmes are
recognised as an expense as incurred.
Development costs that are directly associated with the
production of identifiable and unique software products controlled
by the Group, and that will generate economic benefits exceeding
costs beyond one year, are recognised as intangible assets. Direct
costs include the software development employee costs and an
appropriate portion of relevant overheads. Capitalised development
costs are amortised over their estimated useful lives from the
point when the asset is ready to use.
The rates of amortisation are between 14% and 100% per
annum.
Capitalised employment contract payments
The Group makes payments to certain key employees in recognition
of them signing a long-term employment contact, usually three to
five years. These payments are capitalised as intangible assets
since legal
rights protect the expected benefits that the Group will derive
from the
contracts.
The asset recognised is then amortised over the duration of the
underlying contract within salaries and associated expenses.
Other
For acquisitions completed after 1st January 2004, the business
acquired is reviewed to identify assets that meet the definition of
an intangible asset per IAS 38. Examples of such assets include
customer contracts, expectations of business renewal and contract
related customer relationships. These assets are valued on the
basis of the present value of future cash flows and are amortised
to the income statement over the life of the contract or their
estimated economic life. The current maximum estimated economic
life is fifteen years.
IMPAIRMENT OF ASSETS
Goodwill and other intangible assets that have an indefinite
useful life are not subject to amortisation and are tested annually
for impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss is recognised
for the amount by which the asset's carrying amount exceeds its
recoverable amount.
The recoverable amount is the higher of an asset's fair value
less costs to sell and value-in-use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).
PROPERTY, PLANT AND EQUIPMENT
Assets are stated at their net book amount (historical cost less
accumulated depreciation). Cost includes the original purchase
price of the asset and the costs attributable to bringing the asset
to its working condition for its intended use. Depreciation is
calculated to write off the cost of such assets over their
estimated useful lives.
The principal rates of depreciation are as follows:
-- Freehold land and buildings - between 0% and 2% per annum.
-- Leasehold improvements - between 10% and 20% per annum or over the life of the lease.
-- Furniture and office equipment - between 10% and 20% per annum.
-- Computer hardware - between 20% and 100% per annum.
-- Motor vehicles - between 25% and 33 1/3% per annum. The
depreciation rates are reviewed on an annual basis.
FINANCIAL ASSETS
The Group classifies its financial assets as loans and
receivables and available-for-sale assets. The classification
depends upon the purpose for which the financial assets were
acquired. Management determines the classification of its financial
assets at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
greater than 12 months after the balance sheet date.
The Group's loans and receivables comprise trade and other
receivables and cash and cash equivalents in the balance sheet.
Loans and receivables are carried at amortised cost.
Available-for-sale financial assets
Available-for-sale financial assets are categorised into one of
two categories:
1) Investments and deposits consist mainly of fixed term
deposits, bonds and certificates of deposit. 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.
Interest on deposits and interest-bearing investments is
credited as it is
earned.
Regular purchases and sales of financial assets are recognised
on the trade date - the date on which the Group commits to purchase
or sell the asset. Investments are initially recognised at fair
value plus transaction costs. Financial assets are derecognised
when the rights to receive cash flows have expired or have been
transferred and the
Group has transferred substantially all risks and rewards of
ownership. Available-for-sale assets are subsequently carried at
fair value.
The fair values of quoted investments are determined based upon
current bid price.
When securities classified as available-for-sale are sold or
impaired, the accumulated fair value adjustments recognised in
equity are included in the income statement.
Interest on available-for-sale securities calculated using the
effective interest method is recognised in the income statement as
part of finance income. Dividends on available-for-sale equity
instruments are
recognised in the income statement as part of finance income
when the Group's right to receive payments is established.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the balance sheet when there is a legally enforceable
right to offset the recognised amounts and there is an intention to
settle on a net basis
or realise the asset and settle the liability simultaneously.
The legally enforceable right must not be contingent on future
events and must be enforceable in the normal course of business and
in the event of default, insolvency or bankruptcy of the company or
the counterparty.
INSURANCE BROKING RECEIVABLES AND PAYABLES
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Insurance brokers act as agents in placing the insurable risks
of their clients with insurers and, as such, are not liable as
principals for amounts arising from such transactions. In
recognition of this relationship, debtors from insurance broking
transactions are not included as an asset of the Group. Other than
the receivable for fees and commissions earned on a transaction, no
recognition of the insurance transaction occurs until the Group
receives cash in respect of premiums or claims, at which time a
corresponding liability is established in favour of the insurer or
the client.
In certain circumstances, the Group advances premiums, refunds
or
claims to insurance underwriters or clients prior to
collection.
These advances are reflected in the consolidated balance sheet
as part of trade receivables.
TRADE RECEIVABLES
Trade receivables are recognised initially at fair value and
subsequently at amortised cost, less provision for impairment.
A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor,
dispute, default or delinquency in payments are considered
indicators that the receivable is impaired.
The carrying amount of the asset is reduced through the use of
an allowance account, and the amount of the loss is recognised in
the income statement.
When a trade receivable is uncollectible, it is written off
against the allowance account for trade receivables.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less. Bank overdrafts
are shown within borrowings in current liabilities on the balance
sheet.
Whilst held in the Group's non statutory trust accounts under
appropriate client money regulation, fiduciary funds held are
controlled by the Group and economic benefits are derived from
them. As such these funds are recognised as an asset on the Group's
balance sheet.
TRADE PAYABLES
Trade payables are initially recognised at fair value and
subsequently measured at amortised cost except for deferred and
contingent consideration which is always measured at fair value
based on the underlying criteria of each transaction.
BORROWINGS
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12
months after the balance sheet date. Borrowings are recognised
initially at fair value, net of transaction costs incurred. They
are subsequently stated at amortised cost using the effective
interest rate method.
DEFERRED INCOME TAX
The charge for taxation is based on the result for the year at
current rates of tax and takes into account deferred tax.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the
consolidated financial statements. However, if the deferred income
tax arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or
loss, it is not recognised. Deferred income tax
is determined using tax rates (and laws) that have been enacted
or substantively enacted by the balance sheet date and are expected
to apply when the related deferred income tax asset is realised or
the deferred income tax liability is settled.
Deferred income tax is charged or credited to equity in respect
of any items, which is itself either charged or credited directly
to equity.
Any subsequent recognition of the deferred gain or loss in the
consolidated income statement is accompanied by the corresponding
deferred income tax.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except where the
Group controls the timing of the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
EMPLOYEE BENEFITS
Pension obligations
The Group operates a number of defined benefit pension schemes,
and a number of employees are members of defined contribution
pension schemes.
Full actuarial valuations of the Group's main defined benefit
schemes are carried out at least every three years.
A qualified actuary updates these valuations to 31st December
each year.
For the purposes of these annual updates, scheme assets are
included at market value and scheme liabilities are measured on an
actuarial basis using the projected unit credit method; these
liabilities are discounted
at the current rate of return of an AA corporate bond of
equivalent currency and term. The defined benefit surplus or
deficit is calculated as the present value of defined benefit
obligations less the fair value of the plan assets and is included
on the Group's balance sheet. Surpluses are included only to the
extent that they are recoverable through reduced contributions in
the future or through refunds from the schemes. The net interest on
the defined benefit liability (asset) is included within finance
costs. Actuarial gains and losses, including differences between
the expected and actual return on scheme assets, are recognised
through the consolidated statement of comprehensive income.
A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity. The Group
has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the
current and prior periods.
The costs of the Group's defined contribution pension schemes
are charged to the income statement in the period in which they
fall due.
Share-based compensation
The Group operates a number of equity-settled, share-based
compensation plans. The fair value of the employee services
received in exchange for the grant of the options is recognised as
an expense.
The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted,
excluding the impact of any non-market vesting conditions (for
example, profitability and sales growth targets). Non-market
vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. At each balance
sheet date, the entity revises its estimates of the number of
options that are expected to become exercisable. It recognises the
impact of the revision of original estimates, if any, in the income
statement, and a corresponding adjustment to equity.
The proceeds received net of any directly attributable
transaction costs are credited to share capital (at nominal value)
and share premium (excess over nominal value) when the options are
exercised.
PROVISIONS FOR LIABILITIES AND CHARGES
A provision is recognised where there is a present obligation,
whether legal or constructive, as a result of a past event for
which it is probable that a transfer of economic benefits will be
required to settle the obligation and a reasonable estimate can be
made of the amount of the obligation. Where appropriate the Group
discounts provisions to their present value. The unwinding of the
provision discounting is included as an 'interest expense' within
finance costs in the income statement.
REVENUE
Fees and commissions
Fees and commissions are derived from three principal
sources:
Insurance broking
Income relating to insurance broking is accounted for at the
later of policy inception date or when the policy placement has
been completed and confirmed.
Where there is an expectation of future servicing requirements
an element of income relating to the policy is deferred to cover
the associated contractual obligation.
Employee benefits
Income relating to employee benefit services includes fees and
commissions. Fees are charged on a time-cost or fixed-fee basis and
are recognised in line with the performance of the underlying
service. Commission is recognised upon confirmation of the
underlying policy or product.
Other services
Fees and other income receivable are recognised in the period to
which they relate and when they can be measured with reasonable
certainty.
Investment income
Investment income arises from the holding of cash and
investments relating to fiduciary funds and is recognised on an
accruals basis.
EXCEPTIONAL ITEMS
Exceptional items are separately identified to provide greater
understanding of the Group's underlying performance. Items
classified as exceptional items include: gains or losses arising
from the sale of businesses and investments; closure costs for
businesses; restructuring costs; professional fees in respect of
acquisitions; post acquisition integration costs; and other credits
and charges of non-recurring nature that require inclusion in order
to provide additional insight into the underlying business
performance. Items of a non-recurring and material nature are
charged or credited to operating profit and are classified to the
appropriate income statement headings.
To assist in the analysis and understanding of the underlying
trading position of the Group these items are summarised within the
operating profit, note 3 on page 26, under the heading of
"Exceptional items".
LEASES
Assets held under leasing agreements, which transfer
substantially all the risks and rewards of ownership to the Group
are included in
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property, plant and equipment. The capital elements of the
related lease obligations are included in liabilities. The interest
elements of the lease obligations are charged to the income
statement over the period of the lease term.
The property, plant and equipment acquired under finance leases
is depreciated over the shorter of the useful life of the asset and
the lease term.
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group only enters into derivative financial instruments in
order to hedge underlying financial and commercial exposures.
Derivative financial instruments are initially recognised at
fair value on the date a derivative contract is entered into and
are subsequently
re-measured at their fair value.
The method of recognising the resulting gain or loss is
dependent on the nature of the item being hedged.
The Group designates derivatives as either a hedge of the fair
value of
a recognised asset or liability (fair value hedge), a hedge of a
forecasted transaction or of the foreign currency risk on a firm
commitment (cash flow hedge), or a hedge of a net investment in a
foreign entity (net investment hedges).
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges and that are highly effective, are
recorded in the
income statement, along with any changes in the fair value of
the hedged asset or liability that is attributable to the hedged
risk.
Changes in the fair value of derivatives that are designated and
qualify as cash flow hedges and that are highly effective, are
recognised in equity. Where the forecasted transaction or firm
commitment results
in the recognition of a non-financial asset or of a
non-financial liability, the gains and losses previously deferred
in equity are transferred from equity and included in the initial
measurement of the cost of the asset or liability. Otherwise,
amounts deferred in equity are transferred to the consolidated
income statement and classified as income or expense
in the same periods during which the hedged firm commitment or
forecasted transaction affects the income statement.
The gain or loss relating to the ineffective portion is
recognised
immediately in the income statement.
When a hedging instrument expires or is sold, any cumulative
gain or loss existing in equity at that time remains in the hedging
reserves and is recognised in the income statement when a hedge no
longer meets the criteria for hedge accounting or when the
committed or forecasted transaction ultimately occurs. When a
committed or forecasted transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is
immediately recognised in the income statement.
DIVIDEND DISTRIBUTION
Dividends proposed or declared after the balance sheet date are
not recognised as a liability at the balance sheet date. Final
dividends are recognised as a charge to equity once approved and
interim dividends are charged once paid.
FINANCIAL AND CAPITAL RISK MANAGEMENT
The Group's exposure to financial risks and its financial and
capital management policies are detailed in the Finance Director's
Review and the Risk Management Report will be available in the 2015
Annual Report.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Estimates and judgments used in preparing the financial
statements are continually evaluated and are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable. The resulting accounting
estimates will, by definition, seldom equal the related actual
results.
The estimates and assumptions that have a significant effect on
the carrying amounts of assets and liabilities are discussed
below.
a) Fair value estimation
The fair value of financial instruments traded in active markets
(such as available-for-sale) is based upon quoted market prices at
the balance sheet date. The quoted market price used for financial
assets held by the Group is the current bid price.
The carrying value less impairment provision of trade
receivables and payables are assumed to approximate their fair
values. The fair values of financial liabilities is estimated by
discounting the future contractual cash flows at the current market
interest rate that is available to the Group for similar financial
instruments.
The fair value of acquired intangible assets is estimated based
upon the present value of modelled related expected future cash
flows.
Judgement may be applied in the determination of the growth
rates, discount rates and the expected cash flows.
b) Impairment of assets
The Group tests annually whether goodwill and other assets that
have indefinite useful lives suffered any impairment. Other assets
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset
exceeds its recoverable amount.
The recoverable amount of an asset or a cash generating unit is
determined based on value-in-use calculations prepared on the basis
of management's assumptions and estimates. This determination
requires significant judgment. In making this judgment, the Group
evaluates, among other factors, the duration and extent to which
the fair value of an investment is less than its cost; and the
financial health of and near-term business outlook for the
investment, including factors such as industry and sector
performance, changes in regional economies and operational and
financing cash flow.
c) Income taxes
The Group is subject to income taxes in numerous jurisdictions.
Significant judgement is required in determining the worldwide
provision for income taxes. There are many transactions and
calculations for which the ultimate tax determination is uncertain
during the ordinary course of business. Where the final tax outcome
of these matters is different from the amounts that were initially
recorded, such differences will impact
the income tax and deferred tax provisions in the period in
which such determination is made.
d) Pension obligations
The present value of the pension obligations depends on a number
of factors that are determined on an actuarial basis using a number
of assumptions.
The assumption used in determining the net cost or income for
pension obligations is a discount rate based upon high quality
corporate bonds.
Any changes in the assumptions may impact the carrying amount of
pension obligations, the charge in the income statement, or
statement of comprehensive income.
The Group determines the appropriate discount rate at the end of
each year. This is the interest rate that should be used to
determine the present value of estimated future cash outflows
expected to be required to settle the pension obligations.
In determining the appropriate discount rate, the Group
considers the interest rates of high-quality corporate bonds that
are denominated in the currency in which the benefits will be paid,
and that have terms to maturity approximating the terms of the
related pension liability. Other key assumptions for pension
obligations are based in part on current
market conditions. As well as the discount rate, the inflation
rates and life expectancy are also key assumptions.
To set the price inflation assumptions the Group considers
market expectations of inflation at the appropriate durations.
Adjustments are made to these rates where necessary to reflect an
inflation risk premium.
In determining the life expectancy assumptions the Group
considers the mortality assumptions used by the Trustees of the
pension schemes in their latest actuarial valuations and also
mortality guidance laid out by legislation. This enables the Group
to determine a best estimate of life expectancy that is appropriate
for accounting purposes.
e) Errors and omissions liability
During the ordinary course of business the Group can be subject
to claims for errors and omissions made in connection with its
broking activities.
A balance sheet provision is established in respect of such
claims 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.
The outcome of the currently pending and future proceedings
cannot be predicted with certainty. Thus, an adverse decision in a
current or future lawsuit could result in additional costs that are
not covered, either wholly or partially, under insurance policies
and are in excess of the presently established provisions. It is
possible therefore that the financial position, results of
operations or cash flows of the Group could be materially affected
by the unfavourable outcome of litigation.
FUTURE DEVELOPMENTS
The following standards and amendments to existing standards
have been published and are not mandatory for 31 December 2015
reporting periods, but the Group has not adopted them early.
Accounting standards and interpretation applicable on or
after
1 January 2016
Accounting for Acquisitions of Interests in Joint Operations -
Amendments to IFRS 11
The amendments to IFRS 11 clarify the accounting for the
acquisition of an interest in a joint operation where the
activities of the operation
constitute a business. They require an investor to apply the
principles of business combination accounting when it acquires an
interest in a joint operation that constitutes a business.
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This includes:
-- measuring identifiable assets and liabilities at fair value
-- expensing acquisition-related costs
-- recognising deferred tax, and
-- recognising the residual as goodwill, and testing this for impairment annually.
Existing interests in the joint operation are not remeasured on
acquisition of an additional interest, provided joint control is
maintained.
The Group is yet to assess IFRS 11 amendment's full impact.
Clarification of Acceptable Methods of Depreciation and
Amortisation - Amendments to IAS 16 and IAS 38
The amendments clarify that a revenue-based method of
depreciation or
amortisation is generally not appropriate.
The IASB has amended IAS 16 Property, Plant and Equipment to
clarify that a revenue-based method should not be used to calculate
the depreciation of items of property, plant and equipment.
IAS 38 Intangible Assets now includes a rebuttable presumption
that the amortisation of intangible assets based on revenue is
inappropriate. This presumption can be overcome if either
-- The intangible asset is expressed as a measure of revenue (ie
where a measure of revenue is the limiting factor on the value that
can be derived from the asset), or
-- It can be shown that revenue and the consumption of economic
benefits generated by the asset are highly correlated
The Group does not believe this will have any impact.
Sale or contribution of assets between an investor and its
associate or joint venture - Amendments to IFRS 10 and IAS 28
The IASB has made limited scope amendments to IFRS 10
Consolidated financial statements and IAS 28 Investments in
associates and joint ventures.
The amendments clarify the accounting treatment for sales or
contribution of assets between an investor and its associates or
joint ventures. They confirm that the accounting treatment depends
on whether the non-monetary assets sold or contributed to an
associate or joint venture constitutes a 'business' (as defined in
IFRS 3 Business Combinations).
Where the non-monetary assets constitute a business, the
investor
will recognise the full gain or loss on the sale or contribution
of assets.
If the assets do not meet the definition of a business, the gain
or loss is recognised by the investor only to the extent of the
other
investor's investors in the associate or joint venture. The
amendments apply prospectively. The Group is yet to assess IFRS 10
and IAS 28 amendment's full impact.
Disclosure Initiative - Amendments to IAS 1
The amendments to IAS 1 Presentation of Financial Statements are
made in the context of the IASB's Disclosure Initiative, which
explores how financial statement disclosures can be improved. The
amendments provide clarifications on a number of issues,
including:
-- Materiality - an entity should not aggregate or disaggregate
information in a manner that obscures useful information. Where
items are material, sufficient information must be provided to
explain the impact on the financial position or performance.
-- Disaggregation and subtotals - line items specified in IAS 1
may need to be disaggregated where this is relevant to an
understanding of the entity's financial position or performance.
There is also new guidance on the use of subtotals.
-- Notes - confirmation that the notes do not need to be presented in
a particular order.
-- OCI arising from investments accounted for under the equity
method - the share of OCI arising from equity-accounted investments
is grouped based on whether the items will or will not subsequently
be reclassified to profit or loss. Each group should then be
presented as a single line item in the statement of other
comprehensive income.
Annual Improvements to IFRSs 2012-2014 cycle
The latest annual improvements clarify:
-- IFRS 5 - when an asset (or disposal group) is reclassified
from 'held for sale' to 'held for distribution' or vice versa, this
does not constitute a change to a plan of sale or distribution and
does not have to be accounted for as such
-- IFRS 7 - that the additional disclosures relating to the
offsetting of financial assets and financial liabilities only need
to be included in interim reports if required by IAS 34
-- IAS 19 - that when determining the discount rate for post-
employment benefit obligations, it is the currency that the
liabilities are denominated in that is important and not the
country where they arise
-- IAS 34 - what is meant by the reference in the standard to
'information disclosed elsewhere in the interim financial report'
and adds a requirement to cross-reference from the interim
financial statements to the location of that information.
Accounting standards and interpretation applicable on or
after
1 January 2017
Financial Instruments - Amendments to IFRS 9
IFRS 9, 'Financial instruments', addresses the classification,
measurement and recognition of financial assets and financial
liabilities. The complete version of IFRS 9 was issued in July
2015. It replaces the guidance in IAS 39 that relates to the
classification and
measurement of financial instruments. IFRS 9 retains but
simplifies the mixed measurement model and establishes three
primary measurement categories for financial assets: amortised
cost, fair value through other comprehensive income (OCI) and fair
value through profit or loss.
The basis of classification depends on the entity's business
model and the contractual cash flow characteristics of the
financial asset. Investments in equity instruments are required to
be measured at fair value through profit or loss with the
irrevocable option at inception to
present changes in fair value in OCI not recycling. There is now
a new expected credit losses model that replaces the incurred loss
impairment model used in IAS 39. For financial liabilities there
were no changes to classification and measurement except for the
recognition of changes in own credit risk in other comprehensive
income, for liabilities designated at fair value through profit or
loss. IFRS 9 relaxes the requirements for hedge effectiveness by
replacing the bright line hedge effectiveness tests. It requires an
economic relationship between the hedged item
and hedging instrument and for the 'hedged ratio' to be the
same
as the one management actually use for risk management purposes.
Contemporaneous documentation is still required but is different to
that currently prepared under IAS 39. The standard is effective for
accounting periods beginning on or after 1 January 2018. Early
adoption is permitted subject to EU endorsement. The Group is yet
to assess IFRS 9's full impact.
Issuance of new standard "IFRS15 - Revenue from contracts with
customers"
IFRS 15, 'Revenue from contracts with customers' deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature,
amount, timing and
uncertainty of revenue and cash flows arising from an entity's
contracts with customers. Revenue is recognised when a customer
obtains control of a good or service and thus has the ability to
direct the use and obtain the benefits from the good or service.
The standard replaces IAS 18 'Revenue' and IAS 11 'Construction
contracts' and related interpretations. The standard is effective
for annual periods beginning on
or after 1 January 2017 and earlier application is permitted
subject to EU endorsement. The Group is in the process of assessing
the full impact
of IFRS 15 and this work will continue through 2016. Based on
our initial assessment this standard will impact many areas of the
business. It is expected that it will lead to an acceleration of
income recognition and the quantum of recognition will become more
judgemental. As a consequence of this, there will be an increase in
trade receivables and
working capital, as the timing of income recognition and it's
collection in cash move further apart. Quantification of the impact
cannot be given at this time.
Issuance of new standard "IFRS16 - Leases"
IFRS 16, 'Leases' requires lessees to recognise a lease
liability reflecting future lease payments and a 'right-of-use
asset' for virtually all lease contracts. This defers from IAS 17
'Leases' were a distinction between
a finance lease (on balance sheet) and an operating lease (off
balance sheet) was required. The standard is effective for annual
periods beginning on or after 1 January 2019 and earlier
application is permitted subject to EU endorsement. The Group is
yet to assess IFRS 16's full impact.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2015
1. 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.
Underlying Exceptional
profit items Total
GBP'000 GBP'000 GBP'000
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Year ended 31st December 2015
Fees and commissions 1,151,392 - 1,151,392
Investment income 3,689 - 3,689
Salaries and associated expenses (704,435) (22,899) (727,334)
Premises (58,852) (2,315) (61,167)
Other operating costs (173,794) 10,109 (163,685)
Depreciation, amortisation and impairment
charges (30,538) - (30,538)
Trading profit 187,462 (15,105) 172,357
Finance costs - net (22,861) - (22,861)
Share of results of associates 5,531 - 5,531
Profit before taxation 170,132 (15,105) 155,027
In 2015 total other operating costs includes the gain on the
disposal of the Group's interest in Milestone, the holding company
of Siaci Saint Honoré, and elements of the net litigation
costs.
Year ended 31st December 2014
Underlying Exceptional
profit items Total
GBP'000 GBP'000 GBP'000
Fees and commissions 1,099,728 - 1,099,728
Investment income 4,398 - 4,398
Salaries and associated expenses (656,323) (15,435) (671,758)
Premises (55,576) (2,351) (57,927)
Other operating costs (167,258) (5,168) (172,426)
Depreciation, amortisation and impairment
charges (28,139) - (28,139)
Trading profit 196,830 (22,954) 173,876
Finance costs - net (21,446) - (21,446)
Share of results of associates 7,660 (354) 7,306
Profit before taxation 183,044 (23,308) 159,736
2. 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
specialist, wholesale, reinsurance broking, personal lines and SME
activities. 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.
The JLT Asia Employee Benefits segments is now disclosed as
reportable segments to meet the quantitative threshold required by
IFRS 8.
Lloyd & Partners was merged into JLT Specialty at the
beginning of the year. The businesses located in the United States,
the Nordic region and the Netherlands previously reported under JLT
Specialty have been reclassified respectively to JLT USA and JLT
EMEA (both included in Other Risk & Insurance). The Healthcare
business previously reported under JLT Specialty has been
reclassified to JLT Re.
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 since the trading activities of the
Group's primary segments are not of a financial nature. 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:
20% of GrECo, which operates mainly in Austria 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 results 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, JLT Energy (France) SAS and JLT Independent Insurance
Brokers Private Ltd.
On 6th May 2015, the Group disposed of its 26% stake in
Milestone, the holding company of Siaci Saint Honoré, generating
cash proceeds of GBP80,235,000 and a net exceptional gain of
GBP18,595,000.
Other segment items
Capital expenditure comprises additions to property, plant and
equipment and other intangible assets.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
2. Segment information continued
Risk & Insurance Employee Benefits
JLT Australia Other Other
Other segment
items:
Capital
expenditure 10,578 8,877 1,737 2,752 11,905 10,851 1,510 473 12,440 61,123
Depreciation,
amortisation
and
impairment
charges (8,232) (1,949) (2,614) (2,638) (6,691) (6,561) (880) (775) (12,570) (42,910)
JLT JLT & New Risk & UK & Employee Head Office
Specialty Re Zealand JLT Asia Insurance Ireland Asia Benefits
&
Other Total
Year ended 31st December 2015 GBP'000 GBP'000 GBP'000
GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fees and commissions
Investment income 310,366 173,274 107,504 76,406 195,423 167,376 78,903 42,140 - 1,151,392
805 286 2,032 177 347 1 13 28 - 3,689
Total revenue 311,171 173,560 109,536 76,583 195,770 167,377 78,916 42,168 - 1,155,081
Underlying trading
profit 68,294 32,416 32,745 12,657 14,742 12,829 24,433 6,295 (16,949) 187,462
Operating profit 60,071 36,739 32,745 12,814 12,319 8,041 24,431 4,481 (19,284) 172,357
Finance costs -
net - - - - - - - - (22,861) (22,861)
Share of results
of associates - - - - - - - - 5,531 5,531
Profit before
taxation 60,071 36,739 32,745 12,814 12,319 8,041 24,431 4,481 (36,614) 155,027
Income tax expense - - - - - - - - (41,586) (41,586)
Non-controlling
interests - - - - - - - - (10,342) (10,342)
Net profit
attributable
to the
owners of the parent 60,071 36,739 32,745 12,814 12,319 8,041 24,431 4,481 (88,542) 103,099
Segment assets 2,195,440 2,195,440
Investments in
associates 41,180 41,180
Total assets 2,236,620 2,236,620
Segment liabilities (1,905,818) (1,905,818)
Total liabilities (1,905,818) (1,905,818)
Risk & Employee
Insurance Benefits
JLT Other
Australia UK & Employee Head
Other Ireland Asia Office Total
Year ended 31st JLT JLT & Benefits & Other GBP'000
December 2014 New Risk GBP'000 GBP'000
& GBP'000
Specialty GBP'000
Re
Zealand
JLT Asia
Insurance
GBP'000
GBP'000
GBP'000
GBP'000
GBP'000
288,571 165,118 111,767 71,587 183,167 69,306
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Fees and commissions 179,135 31,077 - 1,099,728
Investment income 907 387 2,353 167 521 1 13 49 - 4,398
289,478 165,505 114,120 71,754 183,168 69,319
Total revenue 179,656 31,126 - 1,104,126
Underlying trading 57,177 26,205 32,269 11,299 36,002 23,450
profit 27,315 5,580 (22,467) 196,830
51,705 15,797 32,269 9,094 34,228 23,224
Operating profit 26,053 5,418 (23,912) 173,876
Finance costs -
net - - - - - - - - (21,446) (21,446)
Share of results
of associates - - - - - - - - 7,306 7,306
51,705 15,797 32,269 9,094 34,228 23,224
Profit before taxation 26,053 5,418 (38,052) 159,736
Income tax expense - - - - - - - - (42,072) (42,072)
Non-controlling
interests - - - - - - - - (12,373) (12,373)
Net profit
attributable
to the
51,705 15,797 32,269 9,094 34,228 23,224
owners of the parent 26,053 5,418 (92,497) 105,291
Segment assets 2,087,093 2,087,093
Investments in
associates 100,650 100,650
Total assets 2,187,743 2,187,743
Segment liabilities (1,881,191) (1,881,191)
Total liabilities (1,881,191) (1,881,191)
Other segment items:
Capital expenditure 16,131 2,859 2,370 3,125 8,137 7,592 713 707 8,668 50,302
Depreciation,
amortisation
and impairment (6,030) (1,687) (2,916) (2,372) (6,023) (626)
charges (4,559) (481) (11,297) (35,991)
2. Segment information continued
Geographical segment analysis
Although the Group's two business segments are managed on a
worldwide basis, they operate in five principal geographical areas
of the world. The United Kingdom is the home country of the parent
company Jardine Lloyd Thompson Group plc.
The Risk & Insurance segment operates in the United Kingdom,
the Group's home country. In the Americas, the Risk & Insurance
segment operates in Argentina, Bermuda, the Caribbean, Brazil,
Canada, Colombia, Peru, Chile, and the United States. The
Australasian segment includes operations in Australia and New
Zealand. In Europe, it operates in the Republic of Ireland, Sweden,
Finland, Norway, Denmark, Germany, Guernsey, France, The
Netherlands, Spain, Switzerland and Russia. The Asian segment
includes operations in Singapore, Hong Kong, Taiwan, Indonesia,
Japan, Thailand, South Korea, Philippines, Malaysia, China,
Vietnam, Dubai, Qatar, Bahrain and Turkey. In Rest of the World, it
operates in South Africa.
The Employee Benefits segment operates in the United Kingdom. In
the Americas, the Employee Benefits segment operates in Brazil,
Canada, Colombia and Peru. The Australasian segment includes
operations in Australia and New Zealand. In Europe, it operates in
the Republic of Ireland and Switzerland. The Asian segment includes
operations in Singapore, Hong Kong, Taiwan, Indonesia, Japan,
Thailand, South Korea, Philippines, Malaysia, China and Vietnam. In
Rest of the World, it operates in South Africa.
The Head Office & Other activities segment is mainly based
in the United Kingdom with minor operations in the Americas, Europe
and Asia. The Group's captive operations are included in the United
Kingdom segment.
Fees and commissions are disclosed by (1) the country in which
the office is located and (2) the country in
which the customer is located.
Segment non-current assets, segment assets and segment
liabilities are disclosed based on the country in which they are
located or occur. Interest bearing assets (e.g. cash & cash
equivalents and investments & deposits) relating to the Group's
own funds and deferred tax assets are excluded from segment assets.
Interest bearing liabilities (e.g. borrowings) and income and
deferred tax liabilities are excluded from segment liabilities.
Items excluded from segmental allocation are referred to as
"unallocated".
Fees and commissions Fees and Segment
(1) commissions non-current Segment Segment
GBP'000 (2) assets assets liabilities
GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31st December
2015
UK 592,652 365,892 391,344 1,271,524 (854,669)
Americas 218,962 335,914 167,288 345,628 (178,662)
Australasia 130,470 140,631 32,725 112,941 (74,525)
Asia 173,305 175,082 44,462 162,495 (124,704)
Europe 31,000 87,804 21,745 58,465 (31,818)
Rest of the World 5,003 46,069 6,092 8,433 (4,986)
1,151,392 1,151,392 663,656 1,959,486 (1,269,364)
Investments in associates 41,180 -
Unallocated assets/(liabilities) 235,954 (636,454)
Total assets/(liabilities) 2,236,620 (1,905,818)
Fees and Fees and Segment
commissions commissions non-current Segment Segment
(1) (2) assets assets liabilities
Year ended 31st December GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2014
UK 591,002 360,415 378,995 1,192,734 (830,555)
Americas 199,696 320,918 157,286 329,087 (158,945)
Australasia 121,728 131,071 25,705 118,270 (79,983)
Asia 156,054 166,364 41,398 183,580 (134,305)
Europe 26,974 86,856 15,926 52,560 (33,527)
Rest of the World 4,274 34,104 4,287 5,213 (3,326)
1,099,728 1,099,728 623,597 1,881,444 (1,240,641)
Investments in associates 100,650 -
Unallocated assets/(liabilities) 205,649 (640,550)
Total assets/(liabilities) 2,187,743 (1,881,191)
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
3. Operating profit
The following items have been (credited)/charged in arriving at
operating profit:
2015 2014
GBP'000 GBP'000
Foreign exchange gains:
- fees and commissions (3,133) (8,705)
- other operating costs (3,236) (894)
(6,369) (9,599)
Amortisation of other intangible assets:
- software costs 17,171 15,362
- other intangible assets 1,767 1,530
Depreciation on property, plant and equipment:
- owned assets 11,316 10,963
- leased assets under finance leases 284 284
Total depreciation and amortisation charges 30,538 28,139
Amortisation of other intangible assets:
- employment contract payments (included in salaries and
associated expenses) 12,372 7,852
Losses on disposal of property, plant and equipment 60 53
Operating lease rentals payable:
- minimum lease payments: 36,409 35,422
- land and buildings
- furniture, equipment and motor vehicles 821 735
- computer equipment and software 364 329
- sub-leases receipts:
- land and buildings (376) (1,904)
37,218 34,582
Available-for-sale financial assets: 41 (16)
- fair value losses/(gains) 72 (332)
- losses/(gains) on sale
113 (348)
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Exceptional items:
- included in salaries and associated expenses 13,274 7,347
- included in premises costs 1,736 1,873
- included in other operating costs 6,319 4,051
Restructuring costs of which: 21,329 13,271
- included in salaries and associated expenses 9,314 2,335
- included in premises costs 233 142
- included in other operating costs 331 5
Net litigation costs: 9,878 2,482
- included in salaries and associated expenses 529 -
- included in premises costs 346 -
- included in other operating costs 681 -
1,556 -
Costs associated with a regulatory review:
- included in salaries and associated expenses 274 -
- included in other operating costs 1,258 -
1,532 -
Business Transformation Programme of which:
- included in salaries and associated expenses - 5,753
- included in other operating costs - 2,000
Net gain on restructuring of businesses in Canada of which: - 7,753
- included in premises costs - 336
- included in other operating costs - (683)
- (347)
Net gain on sale of associate (18,595) -
Net loss on disposal of businesses 527 -
Pension curtailment gain (492) -
Release of contingent considerations (456) (205)
Fair value adjustments on put options (174) -
Total exceptional items included within operating profit 15,105 22,954
Siaci restructuring costs - included in share of results
of associates - 354
Total exceptional items 15,105 23,308
Acquisition and integration costs of which:
4. Investment income
2015 2014
GBP'000 GBP'000
Interest receivable - fiduciary funds 3,689 4,398
Prior year investment income 4,398 4,529
Effect of:
- average cash balance variance 127 468
- interest yield variance (614) (222)
- foreign exchange variance (222) (377)
3,689 4,398
The Group's investment income arises from its holdings of cash
and investments relating to fiduciary funds. Equivalent average
cash and investment balances during the year amounted to GBP766
million (2014: GBP719 million) denominated principally in US
dollars (55%), Sterling (17%) and Australian dollars (11%). The
average return for 2015 was 0.50% (2014: 0.60%). Based upon average
invested balances each 1% movement in the average achieved rate of
return would impact anticipated interest income by some GBP7.7
million.
5. Finance income and costs
2015 2014
GBP'000 GBP'000
Interest receivable - own funds 1,503 1,500
Investment income from available for-sale financial assets 109 26
Interest expense:
- bank and other borrowings (16,733) (16,803)
- finance leases (49) (48)
- interest in respect of liability discounting (1,567) (291)
Pension financing:
- expected return on post employment scheme assets 18,749 23,151
- interest on post employment scheme liabilities (24,873) (28,981)
Net pension financing expense (6,124) (5,830)
Finance costs - net (22,861) (21,446)
Finance costs (24,473) (22,972)
Finance income 1,612 1,526
Finance costs - net (22,861) (21,446)
Interest Rate Risk
The Group has both interest bearing assets, explained in note 4,
and interest bearing liabilities that give rise to net exposures to
changes in interest rates, primarily in US Dollars and Sterling.
Where appropriate, the Group uses interest rate swaps to hedge or
match these interest rate exposures. The Group's policy is to
continue to manage net interest rate exposures arising from the
Group's cash (including fiduciary funds) and borrowings. Each 1%
movement in the average achieved interest rate impacts interest
expense by approximately GBP5.5 million based on average net
borrowings in 2015.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
6. Employee information (unaudited)
2015 2014
GBP'000 GBP'000
a) Salaries and associated expenses
Wages and salaries 573,723 521,920
Social security costs 49,448 47,158
Pension costs 40,185 37,270
Equity settled share-based payments:
- incentive schemes (LTIP, SESS, ESOS) 19,991 18,669
- Sharesave Scheme 84 168
20,075 18,837
Other staff costs 43,903 46,573
727,334 671,758
2015 2014
b) Analysis of employees
Monthly average number of persons employed by the Group
during the year:
Geographical segment:
- UK 4,131 3,962
- Americas 1,679 1,582
- Australasia 1,133 921
- Asia 3,322 2,906
- Europe 234 195
- Rest of the World 105 87
10,604 9,653
Business segment:
- Risk & Insurance 5,990 5,698
- Employee Benefits 3,778 3,228
- Head Office & Other 836 727
10,604 9,653
2015 2014
GBP'000 GBP'000
c) Key management compensation
Salaries and short-term employee benefits 13,893 12,370
Post employment benefits 457 277
Other long-term benefits 448 461
Share-based payments 5,992 6,017
Termination benefits - 374
20,790 19,499
6. Employee information (unaudited) continued
Key management personnel are defined as persons having authority
and responsibility for planning, directing and controlling the
activities of the Group directly or indirectly, including any
director of the Group. This represents the Group Board of Directors
and the Group Executive Committee only.
The Group's equity-settled share-based payments comprise the JLT
Long Term Incentive Plan (2004/2013), Senior Executive Share
Scheme, Executive Share
Option Scheme and the Sharesave Schemes.
JLT Long Term Incentive Plan (2004/2013)
The Group operates the Long Term Incentive Plan (LTIP) for
Executive Directors and persons discharging managerial
responsibility (PDMR's). The scheme was renewed in 2013. Awards
under the scheme are granted in the form of nil-priced options and
are satisfied using market-purchased shares. The awards vest in
full or in part depending on satisfaction of the performance
conditions which will be set out on in the Director's Remuneration
Report in the 2015 Annual Report. The awards have a 3 year
performance period and have a 10 year life from the date of
grant.
Senior Executive Share Scheme
The Group operates a Senior Executive Share Scheme for senior
management and employees. Awards under the scheme are granted in
the form of nil-priced options and are satisfied using
market-purchased shares. The majority of awards have no specific
performance criteria attached, other than the requirement that
employees remain in employment with the Group. Certain awards have
been granted with specific performance targets defined for the
individual executives. In general these require targets for revenue
and profit growth to be met over the vesting period. The awards
have a 10 year life from the date of grant.
Executive Share Option Scheme
Options were granted at a fixed price (usually market price) and
are exercisable after the vesting period (usually 3 years). Options
are satisfied by the issue of new shares or market-purchased
shares. Some options carry performance conditions where they are
only exercisable when earnings per share is in excess of RPI for
the three consecutive financial accounting periods preceding the
date of exercise. The awards have a 10 year life from the date of
grant. This scheme is now closed for new grants and options were
last granted under this scheme on 29th September 2006.
Sharesave Scheme
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The Sharesave Scheme is open to all employees and are exercised
after 5 years from the date of grant. Options are satisfied by the
issue of new shares or market-purchased shares. The price at which
options are offered is not less than 80% of the market price on the
date preceding the date of invitation. All Sharesave Schemes
options have no performance criteria attached, other than the
requirement that the employee remains in employment with the Group.
All options must be exercised within 6 months of the vesting
date.
Fair value of awards
Under IFRS 2 the fair value of awards granted during the year,
calculated using a Black-Scholes model, is set out below:
Black-Scholes model assumptions
Exercise Share price Dividend Risk free Fair value
price Performance on Volatility yield Maturity interest of
grant date rate one award
pence period pence % % years % pence
JLT Long Term
Incentive
Plan (2013) /
Senior
Executive Share
Scheme 2015 -
2015 25 March - 18 1,052.00 18.34 - 1 - 3 0.60 1,052.00
2015 -
2015 1 April - 18 1,032.00 18.35 - 3 0.62 1,032.00
2015 -
2015 10 September - 18 1,030.00 18.62 - 1 - 3 0.67 1,030.00
2015 -
2015 21 September - 18 1,022.00 18.58 - 1 - 3 0.72 1,022.00
The option holders who have awards under the JLT Long Term
Incentive Plan (2004/2013) and the Senior Executive Share Scheme
also receive payments equating to the dividends payable on their
shares (subject to meeting the performance criteria). Assuming that
the dividend yield is zero and that the options are issued with no
cost to the employees, then the fair value will equal the share
price at date of grant.
The volatility has been calculated based on the historical share
price of the Company, using a 3 year term.
All options granted under the share option schemes are
conditional upon the employees remaining in the Group's employment
during the vesting period of the option, the actual period varies
according to the scheme in which the employee participates. In
calculating the cost of options granted, a factor is included to
take account of anticipated lapse rates. For Executive Share Option
and Sharesave Schemes this is 20%. For the JLT Long Term Incentive
Plan (2004/2013) and the Senior Executive Share Scheme it is nil as
both are issued with no cost to the employee.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
6. Employee information (unaudited) continued
Movement in number of options
Options Options Weighted Options
outstanding Granted/ outstanding average exercisable Remaining
at 1st adjustments Lapsed Exercised at 31st exercise at 31st contractual
Jan 15 number number number Dec 15 (sale) Dec 15 life
number number price (p) number years
JLT Long
Term
Incentive
Plan
(2004/2013) 2,178,744 762,100 (326,796) (686,266) 1,927,782 1,052.56 37,514 8.18
Senior
Executive
Share
Scheme 7,006,456 2,784,511 (686,913) (1,936,272) 7,167,782 1,026.77 887,022 8.00
Executive
Share
Option
Scheme 301,576 - - (236,776) 64,800 1,018.15 64,800 0.75
Sharesave
Scheme 417,429 - (19,919) (397,510) - 1,010.94 - -
Total 9,904,205 3,546,611 (1,033,628) (3,256,824) 9,160,364 1,029.65 989,336 7.98
Movement in number of options
Options Options Weighted Options
outstanding Granted/ outstanding average exercisable Remaining
at 1st adjustments Lapsed Exercised at 31st exercise at 31st contractual
Jan 14 number number number Dec 14 (sale) Dec 14 life
number number price (p) number years
JLT Long
Term
Incentive
Plan
(2004/2013) 2,187,814 689,000 (102,770) (595,300) 2,178,744 1,043.00 223,014 7.91
Senior
Executive
Share
Scheme 5,558,728 2,944,983 (372,186) (1,125,069) 7,006,456 1,030.91 1,341,746 7.86
Executive
Share
Option
Scheme 494,704 - (39,800) (153,328) 301,576 1,033.58 301,576 0.83
Sharesave
Scheme 460,020 - (29,519) (13,072) 417,429 986.28 1,927 1.00
Total 8,701,266 3,633,983 (544,275) (1,886,769) 9,904,205 1,034.63 1,868,263 7.37
Range of option prices of outstanding awards
The outstanding awards at 31st December 2015 have the following
option prices and weighted average remaining contractual life:
Executive Share Option Scheme
Number Years
GBP3.50-GBP4.00 64,800 0.75
The LTIP and SESS awards are nil priced and therefore have not
been analysed above.
7. Services provided by the Company's auditor and its
associates
During the year the Group (including its overseas subsidiaries)
obtained the following services from the Group's auditor and its
associates:
2015 2014
GBP'000 GBP'000
Fees payable to the Group's auditor for the audit of the
parent Company and consolidated financial statements 217 220
Fees payable to the Group's auditor and its associates for
other services:
- the audit of the Company's subsidiaries 2,436 2,315
- audit related assurance services 417 278
- tax compliance services 120 136
- tax advisory services 51 45
- other assurance services 131 9
- other non-audit services 23 27
3,395 3,030
In addition to the above, fees payable to the Company's auditor
and its associates for audit services supplied to the Company's
associated pension
schemes amounted to GBP18,200 (2014: GBP18,000).
The Audit & Risk Committee has a policy on the use of the
external auditors for non-audit services to ensure that the
auditor's independence is maintained and that appropriate approvals
are sought for non-audit services depending upon their nature and
value. Each year a limit is set on the total fees that can be paid
to the external auditor in relation to non-audit services. For 2015
the Audit & Risk Committee has set this limit at GBP1 million
(2014: GBP1 million).
8. Income tax expense
2015 2014
GBP'000 GBP'000
Current tax expense
Current year Adjustments in respect of prior years 43,153 43,637
(2,167) 1,430
40,986 45,067
Deferred tax expense/(credit)
Origination and reversal of temporary differences (1,515) (3,348)
Reduction in tax rate 655 18
Adjustments in respect of prior years 1,460 335
600 (2,995)
Total income tax expense 41,586 42,072
The total income tax expense in the income statement of
GBP41,586,000 (2014: GBP42,072,000) includes a tax
credit on exceptional items of GBP5,914,000 (2014:
GBP5,128,000). There were no non-recurring tax credits in the
year.
The UK Government introduced a 1% reduction in the headline rate
of corporation tax from April 2015. This reduction reduced the UK
tax rate from 21% to 20%. In July 2015, the UK Government announced
further measures in relation to the UK corporation tax rate,
reducing the headline rate of corporation tax to 19% from April
2017 and then to 18% from April 2020. As at 31st December 2015
these further rate reductions have been enacted. The impact of
these further rate reductions has therefore been incorporated into
the income tax expense for the year ended 31st December 2015,
taking into consideration when timing differences are expected to
reverse.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
8. Income tax expense continued
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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:
2015 2014
GBP'000 GBP'000
Profit before taxation 155,027 159,736
Tax calculated at UK Corporation Tax rate of 20.25% (2014:
21.5%) 31,393 34,343
Non-deductible expenses* 5,564 4,584
Adjustments in respect of prior years (707) 1,783
Effect of difference between UK and non-UK tax rates 5,801 2,894
Effect of reduction in UK tax rate 655 -
Tax on associates (1,120) (1,532)
Total income tax expense 41,586 42,072
* The non-deductible expenses include the non-recognition of tax
losses in the US of GBP3,513,000 and the
non-taxable gain on disposal of Siaci of GBP4,128,000.
9. 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.
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.
2015 2014
No. of shares No. of shares
Weighted average number of ordinary shares in
issue Effect of outstanding share options 219,234,336 219,713,827
217,178 475,892
Adjusted weighted average number of ordinary shares
for diluted earnings per share 219,451,514 220,189,719
2015 2014
Basic pence Diluted Basic pence Diluted
per pence per per pence
per
GBP'000 share share GBP'000 share share
Earnings reconciliation
Underlying profit after taxation
and non-controlling interests* 112,290 51.2 51.2 123,471 56.2 56.1
Exceptional items before tax (15,105) (23,308)
Taxation thereon 5,914 5,128
(9,191) (4.2) (4.2) (18,180) (8.3) (8.3)
Profit attributable to the
owners of the parent 103,099 47.0 47.0 105,291 47.9 47.8
* Underlying excludes exceptional
items.
10. Dividends
2015 2014
GBP'000 GBP'000
Final dividend in respect of 2014 of 18.3p per share (2013:
17.1p) 40,141 37,216
Less: adjustment* (164) (18)
39,977 37,198
Interim dividend in respect of 2015 of 11.1p per share
(2014: 10.6p) 24,507 23,412
64,484 60,610
* Adjustment relating to dividend equivalents accrued in respect
of various performance related share awards and long-term incentive
plans not currently
anticipated to fully vest.
A final dividend in respect of 2015 of 19.5p per share (2014:
18.3p) amounting to a total of GBP42,710,000 (2014: GBP40,076,000)
is proposed by the Board. The dividend proposed will not be
accounted for until it has
been approved at the Annual General Meeting on 26th April 2016.
11. Goodwill
Impairment Net carrying
Gross amount losses amount
GBP'000 GBP'000 GBP'000
At 31st December 2015
Opening net book amount 480,176 (4,479) 475,697
Exchange differences (2,266) 211 (2,055)
Acquisitions 23,239 - 23,239
Disposals (715) - (715)
Closing net book amount 500,434 (4,268) 496,166
At 31st December 2014
Opening net book amount 434,026 (4,576) 429,450
Exchange differences 2,315 97 2,412
Acquisitions 43,835 - 43,835
Closing net book amount 480,176 (4,479) 475,697
Impairment tests for goodwill
Goodwill is allocated to the Group's cash generating units
(CGUs) identified according to country of operation and business
segment. A summary of the goodwill allocation is presented
below.
The recoverable amount of a CGU is determined based on
value-in-use calculations. These calculations use cash flow
projections based on financial budgets approved by management
covering a five year period and are discounted using the weighted
average cost of capital. Cash flows beyond the five year period are
extrapolated using the estimated growth rates stated below:
Key assumptions
Net carrying Growth Discount
rate (1) rate (2)
amount % %
GBP'000
At 31st December 2015
JLT Re 161,767 2.13% 7.36%
JLT Speciality 101,669 2.12% 6.45%
UK & Ireland Employee Benefits 79,729 2.13% 6.46%
Latin America 31,670 3.75% 11.14%
JLT Insurance Services 30,894 2.09% 7.01%
Asia 27,513 2.59% 7.06%
Australia & New Zealand 24,068 2.82% 7.36%
Other 38,856 2.35% 7.78%
496,166 2.42% 7.23%
At 31st December 2014
JLT Re 158,123 2.48% 8.44%
JLT Speciality 101,700 2.44% 7.28%
UK & Ireland Employee Benefits 73,052 2.45% 7.17%
Latin America 35,869 4.69% 12.56%
JLT Insurance Services 31,258 2.45% 7.45%
Asia 26,171 3.53% 9.23%
Australia & New Zealand 17,022 3.02% 11.31%
Other 32,502 2.71% 10.62%
475,697 2.85% 8.62%
1) Average growth rate used to extrapolate cash flows beyond
five years.
2) Pre-tax discount rate applied to the cash flow
projections.
The key assumptions used in value-in-use calculations were:
The budgeted trading profit growth: management determines
budgeted trading profit based on past experience and its
expectation for market development. The budgeted IBA interest
income growth:- this is based on past experience and long-term
interest rates projections.
The discount rates used are pre-tax and reflect specific risks
relating to the relevant segment and country of operation. The
weighted average growth rates used are consistent with long-term
economic forecasts in the countries of operation.
The value-in-use is compared to an adjusted goodwill. The
adjusted goodwill is the goodwill grossed up to
reflect a 100% ownership by the Group.
The key sensitivity analysis are:
A decrease of 1% on the growth rate resulted in a reduction of
19% in the excess between the value in use and the adjusted
carrying value of goodwill. An increase of 2% on the discount rate
resulted in a reduction of 38% in the excess between the value in
use and the adjusted carrying value of goodwill.
A combined decrease of 1% on the growth rate and an increase of
2% in the discount rate resulted in a reduction of 47% in the
excess between the value in use and the adjusted carrying value of
goodwill.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
12. Other intangible assets
Capitalised employment
Computer contract
software payments Other Total
GBP'000 GBP'000 GBP'000 GBP'000
At 31st December 2015
Opening net book value 55,353 16,005 15,137 86,495
Exchange differences (231) 213 (152) (170)
Additions 23,884 22,056 - 45,940
Companies acquired 48 - 3,320 3,368
Amortisation charge (17,171) (12,372) (1,767) (31,310)
Closing net book value 61,883 25,902 16,538 104,323
At 31st December 2015
Cost 159,357 54,892 25,846 240,095
Accumulated amortisation and impairment (97,474) (28,990) (9,308) (135,772)
Closing net book value 61,883 25,902 16,538 104,323
At 31st December 2014 Opening
net book value 50,551 7,755 10,786 69,092
Exchange differences (22) 87 63 128
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Additions 20,904 16,015 12 36,931
Companies acquired (718) - 5,806 5,088
Amortisation charge (15,362) (7,852) (1,530) (24,744)
Closing net book value 55,353 16,005 15,137 86,495
At 31st December 2014 Cost 135,451 36,039 22,878 194,368
Accumulated amortisation and impairment (80,098) (20,034) (7,741) (107,873)
Closing net book value 55,353 16,005 15,137 86,495
At 31st December 2013 Cost 112,155 29,242 17,124 158,521
Accumulated amortisation and impairment (61,604) (21,487) (6,338) (89,429)
Closing net book value 50,551 7,755 10,786 69,092
Additions to computer software during 2015 include GBP20,532,000
of capitalised costs in respect of internal developments (2014:
GBP12,825,000).
At 31st December 2015
Opening net book amount 210 43,660 14,163 3,372 61,405
Exchange differences 2 (498) (574) (197) (1,267)
Additions - 8,050 6,039 1,094 15,183
Companies acquired - 452 345 13 810
Companies disposed - - (22) - (22)
Disposals (193) (166) (368) (615) (1,342)
Depreciation charge (1) (5,463) (4,965) (1,171) (11,600)
Closing net book amount 18 46,035 14,618 2,496 63,167
At 31st December 2015
Cost 63 88,093 88,076 5,769 182,001
Accumulated depreciation (45) (42,058) (73,458) (3,273) (118,834)
Closing net book amount 18 46,035 14,618 2,496 63,167
At 31st December 2014 Opening
net book amount 359 41,430 14,106 3,820 59,715
Exchange differences (3) 37 (126) (160) (252)
Additions - 7,111 4,838 1,422 13,371
Companies acquired - 413 488 11 912
Disposals (99) (223) (345) (427) (1,094)
Depreciation charge (47) (5,108) (4,798) (1,294) (11,247)
Closing net book amount 210 43,660 14,163 3,372 61,405
At 31st December 2014 Cost 365 82,333 85,400 6,493 174,591
Accumulated depreciation (155) (38,673) (71,237) (3,121) (113,186)
Closing net book amount 210 43,660 14,163 3,372 61,405
At 31st December 2013 Cost 570 75,827 80,822 6,738 163,957
Accumulated depreciation (211) (34,397) (66,716) (2,918) (104,242)
Closing net book amount 359 41,430 14,106 3,820 59,715
The net book amount of property, plant and equipment held under
finance leases is as follows:
2015 2014
GBP'000 GBP'000
13. Property, plant and equipment
Land Leasehold Furniture Motor
&
& buildings improvements equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Furniture, equipment and motor vehicles 650 715
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
14. Investments in associates
On 6th May 2015, the Group disposed of its stake in its
principal associate Milestone, the holding company of Siaci Saint
Honoré. Milestone, in the opinion of the directors, was the only
material associate to the Group during the year. The associate had
share capital consisting solely of ordinary shares, which was held
directly by the Group; the country of incorporation or registration
was also its principal place of business.
Nature of investment in associates 2015 and 2014:
Name of entity Place of business/ % of ownership % of ownership Nature Measurement
country of incorporation interest interest of the method
(2015) (2014) relationship
Milestone (Siaci Saint
Honoré) France - 26.18% Note 1 Equity
Note 1: Siaci Saint Honoré is a leading independent provider of
insurance broking and employee benefit services to major French
companies and multinational corporations.
Milestone is a private company and there is no quoted market
price available for its shares. There are no contingent liabilities
relating to the Group's interest in the associate.
Summarised financial information for associates
Set out below is the summarised financial information for Siaci
Saint Honoré which is accounted for using the equity method. The
Group does not report any Balance Sheet information at the Balance
Sheet date following the disposal of its stake. The results during
the period of ownership in 2015 are reported under the Summarised
Income Statement and Statement of Comprehensive Income.
Summarised Balance Sheet
Siaci
2015 2014
GBP'000 GBP'000
Current
Cash and cash equivalents Other current assets (excluding
cash) - 152,319
- 121,129
Total current assets - 273,448
Financial liabilities (excluding trade payables) - (27,422)
Other current liabilities (including trade payables) - (291,844)
Total current liabilities - (319,266)
Non current
Assets - 283,332
Financial liabilities - (15,609)
Other liabilities - (18,312)
Total non-current liabilities - (33,921)
Net assets - 203,593
14. Investments in associates continued
Summarised Income Statement and Statement of Comprehensive
Income
Siaci
2015 2014
GBP'000 GBP'000
Revenue 54,820 174,045
Depreciation and amortisation (2,132) (9,524)
Interest income 1,018 2,122
Interest expense (73) (1,950)
Profit from continuing operations 22,078 28,994
Income tax expense (7,200) (10,373)
Profit after tax from continuing operations 14,878 18,621
Other comprehensive income - 1,803
Total comprehensive income 14,878 20,424
The income statement above includes the exceptional item of nil
(2014: GBP2,090,000). Nil dividends were received in 2015 (2014:
nil).
Reconciliation of summarised financial information
Reconcilliation of the summarised financial information
presented to the carrying amount of its interest in associates.
Siaci Others Total 2015 2014 2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening net assets 203,594 198,591 30,176 27,484 233,770 226,075
Acquisition during the year - - - 543 - 543
Disposal during the year (208,416) - - - (208,416) -
Profit for the year 14,878 18,621 6,671 9,281 21,549 27,902
Other comprehensive income - 1,803 167 - 167 1,803
Dividends - (507) (2,306) (7,184) (2,306) (7,691)
Change in non-controlling
interests (491) (905) 90 - (401) (905)
Capital increase - - 1,677 1,764 1,677 1,764
Exchange differences (9,565) (14,010) (1,403) (1,712) (10,968) (15,721)
Closing net assets - 203,593 35,072 30,176 35,072 233,770
Carrying value - 58,792 41,180 41,858 41,180 100,650
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15. Available-for-sale financial assets
Available-for-sale financial assets are categorised into one of
two categories:
1) Investments and deposits, consist mainly of fixed term
deposits, bonds and certificates of deposit. These investments are
held at fair value and are classified between current and
non-current assets according to the maturity date.
2)
Other Investments
investments & deposits Total
GBP'000 GBP'000 GBP'000
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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.
At 1st January 2015 4,746 9,642 14,388
Exchange differences 194 (571) (377)
Additions 1,964 5,081 7,045
Disposals/maturities (243) (5,099) (5,342)
Revaluation deficit (included within
equity) (82) (4) (86)
Amounts to be written off (143) - (143)
At 31st December 2015 6,436 9,049 15,485
Analysis of available-for-sale financial
assets
Current - 19 19
Non-current 6,436 9,030 15,466
At 31st December 2015 6,436 9,049 15,485
Analysis of available-for-sale investments
& deposits
Fiduciary funds 8,894
Own funds 155
At 31st December 2015 9,049
At 1st January 2014 5,948 17,819 23,767
Exchange differences 173 (255) (82)
Additions - 5 5
Companies acquired 31 - 31
Disposals/maturities (1,538) (7,916) (9,454)
Revaluation gain/(deficit) (included within
equity) 265 (11) 254
Amounts to be written off (133) - (133)
At 31st December 2014 4,746 9,642 14,388
Analysis of available-for-sale financial
assets
Current - 5,384 5,384
Non-current 4,746 4,258 9,004
At 31st December 2014 4,746 9,642 14,388
Analysis of available-for-sale investments
& deposits Fiduciary funds 9,518
Own funds 124
At 31st December 2014 9,642
The credit quality of available-for-sale investments and
deposits is assessed by reference to external credit
ratings, where available, and other current and
historical credit data including counterparty default rates.
This is summarised as follows:
2015 2014
GBP'000 GBP'000
AA A 4,133 9,637
4,916 5
Total 9,049 9,642
16. Derivative financial instruments
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
At 31st December 2015 At 31st December 2014
Interest rate swaps - fair value hedges 11,654 (5,490) 10,099 (11,453)
Forward foreign exchange contracts - cash
flow hedges 23,574 (11,725) 11,516 (6,897)
Redemption liabilities - option contracts - (22,626) - -
Total 35,228 (39,841) 21,615 (18,350)
Current 1,544 (6,115) 3,101 (2,491)
Non-current 33,684 (33,726) 18,514 (15,859)
Total 35,228 (39,841) 21,615 (18,350)
The credit quality of counterparties with whom derivative
financial assets are held is assessed by reference to external
credit ratings, where available, and other current and historical
credit data including counterparty default rates. This is
summarised as follows:
2015 2014
GBP'000 GBP'000
AA 16,419 5,609
AA/A 2,973 2,370
BBB 15,836 13,636
Total 35,228 21,615
Maturity analysis
The table below analyses the Group's derivative financial
instruments, which will be settled on a gross basis, into relevant
maturity groupings based upon the remaining period at the balance
sheet date to contractual maturity. The amounts disclosed are the
contractual undiscounted cash flows.
Less than Greater
1 year than
At 31st December 2015 GBP'000 1 year
GBP'000
Forward foreign exchange contracts
Outflow (275,406) (442,156)
Inflow 269,827 461,276
At 31st December 2014
Forward foreign exchange contracts
Outflow (268,743) (508,000)
Inflow 271,866 501,809
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 establish
specific guidelines to manage currency risk, liquidity risk and
interest rate risk and the use of counterparties and financial
instruments to manage these risks. The treasury department is
subject to periodic review by 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 31st December 2015 and designated as effective cash flow
hedges was a net asset of GBP11.8 million and has been deferred in
equity (2014: net asset of GBP4.6 million). Gains and losses
arising on derivative instruments outstanding as at 31st December
2015 will be released to the income statement at various dates up
to:
i) 33 months in respect of cash flow hedges on currency denominated UK earnings.
ii) 14 years in respect of specific hedges on USD denominated
long-term debt drawn under the Group's USD private placement
programme.
iii) 11 years in respect of interest rate 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 year 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 31st December 2015 the Group had outstanding
foreign exchange contracts, principally in USD, amounting to a
principal value of GBP731,103,000 (2014: GBP773,675,000).
As a guide, each 1 cent movement in the achieved rate (taking
into account the hedges in place) currently translates into a
change of approximately GBP1.5 million in revenue, with a
corresponding impact on trading profit equal to approximately 70%
of the revenue change.
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 amount of outstanding cross currency interest
rate swaps as
at 31st December 2015 was USD500,000,000
and GBP75,000,000 (2014: USD500,000,000 and
GBP75,000,000). A net gain of GBP6.2 million (2014: net loss
GBP1.4 million) on these instruments was offset by a fair value
loss of GBP6.2 million (2014: gain GBP1.4 million) on the private
placement loans, both of which were recognised in the income
statement in the year.
c) Redemption liabilities
The redemption liabilities represent the valuation of the put
options provided in the shareholders agreements of JLT Specialty
Insurance Services Inc., JLT Sigorta ve Reasurans Brokerligi Ltd
Sirketi and JLT SCK Corretora e Administradora de Seguros Ltda
respectively being GBP19,721,000,
GBP1,349,000 and GBP1,556,000. The recognition of these
liabilities resulted in a reduction in equity, related to
transactions with non-controlling interests of
GBP18,482,000.
d) 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.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17. Trade and other receivables
2015 2014
GBP'000 GBP'000
Trade receivables 368,215 343,343
Less: provision for impairment of trade receivables (15,018) (10,724)
Trade receivables - net 353,197 332,619
Other receivables 152,282 144,305
Prepayments 23,116 16,723
528,595 493,647
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As at 31st December 2015, the Group had exposures to individual
trade counterparties within trade receivables. In accordance with
Group policy, Group operating companies continually monitor
exposures against credit limits and concentration of risk. No
individual trade counterparty credit exposure is considered
significant in the ordinary course of trading activity. Management
does not expect any significant losses from non-performance by
trade counterparties that have not been provided for.
Movements on the Group provision for impairment of trade
receivables are as follows:
2015 2014
GBP'000 GBP'000
At 1st January (10,724) (11,375)
Currency translation adjustments (26) (113)
Companies acquired (28) (889)
Provisions for impairment of trade receivables (9,849) (3,692)
Receivables written off during the year as uncollectible 2,499 3,652
Unused amounts reversed 3,110 1,693
At 31st December (15,018) (10,724)
The creation and release of provision for impaired receivables
have been included in 'other operating costs' in the income
statement. The other classes within trade and other receivables do
not contain impaired assets. The maximum exposure to credit risk at
the reporting date is the carrying value of each class of
receivables mentioned above. The Group does not hold any collateral
as security.
Trade Provision Net trade
for
receivables impairment receivables
At 31st December 2015 GBP'000 GBP'000 GBP'000
The following table sets out details of the age of trade
receivables that are not overdue as well as an analysis
of overdue amounts impaired and provided for.
Not overdue 270,706 - 270,706
Past due not more than three months 60,212 (539) 59,673
Past due more than three months and not
more than six months 19,002 (2,600) 16,402
Past due more than six months and not
more than one year 8,512 (2,975) 5,537
Past due more than one year 9,783 (8,904) 879
368,215 (15,018) 353,197
Trade receivables Provision Net trade
GBP'000 for impairment receivables
GBP'000 GBP'000
At 31st December 2014
Not overdue 241,051 - 241,051
Past due not more than three months 69,783 (244) 69,539
Past due more than three months and not
more than six months 16,556 (1,964) 14,592
Past due more than six months and not
more than one year 8,586 (3,252) 5,334
Past due more than one year 7,367 (5,264) 2,103
343,343 (10,724) 332,619
18. Cash and cash equivalents
2015 2014
GBP'000 GBP'000
Cash at bank and in hand Short-term bank deposits 463,665 438,179
437,422 433,067
901,087 871,246
Fiduciary funds Own funds 723,409 732,974
177,678 138,272
901,087 871,246
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 credit quality of cash at bank and in hand and short-term
deposits is assessed by reference to external
credit ratings, where available and other current
and historical credit data including counterparty default rates.
This is summarised as follows:
2015 2014
GBP'000 GBP'000
AAA 12,237 34,195
AA 336,311 295,499
AA/A 112,869 105,526
A 107,744 253,521
BBB 327,567 175,862
Other 4,359 6,643
Total 901,087 871,246
The effective interest rate in respect of short-term deposits
was 0.87% (2014: 0.53%). These deposits have an average maturity of
24 days (2014: 15 days).
19. Trade and other payables
2015 2014
GBP'000 GBP'000
Insurance payables 732,303 742,492
Social security and other taxes 17,161 17,234
Other payables 181,147 134,377
Accruals and deferred income 137,905 124,058
Deferred and contingent consideration 17,762 19,383
1,086,278 1,037,544
All payables are considered current as the non-current portion
is not material.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
20. Financial instruments by category
The accounting policies for financial instruments have been
applied to the line items below:
Derivatives
Loans and used for Available-
At 31st December 2015 receivables hedging for-sale Total
Derivatives Other
used for financial
hedging liabilities Total
Liabilities per balance sheet GBP'000 GBP'000 GBP'000
Assets per balance sheet GBP'000 GBP'000 GBP'000 GBP'000
Available-for-sale financial
assets - - 15,485 15,485
Derivative financial instruments - 35,228 - 35,228
Trade and other receivables
(a) 505,479 - - 505,479
Cash and cash equivalents 901,087 - - 901,087
Total 1,406,566 35,228 15,485 1,457,279
Borrowings - (603,582) (603,582)
Trade and other payables (b) - (948,373) (948,373)
Redemption liabilities - option contracts (22,626) - (22,626)
Derivative financial instruments (17,215) - (17,215)
Total (39,841) (1,551,955) (1,591,796)
Derivatives
Loans and receivables used for Available-
GBP'000 hedging for-sale
At 31st December 2014 Assets GBP'000 GBP'000 Total
per balance sheet GBP'000
Available-for-sale financial
assets - - 14,388 14,388
Derivative financial instruments - 21,615 - 21,615
Trade and other receivables
(a) 476,924 - - 476,924
Cash and cash equivalents 871,246 - - 871,246
Total 1,348,170 21,615 14,388 1,384,173
Derivatives Other
used for financial
hedging liabilities Total
Liabilities per balance sheet GBP'000 GBP'000 GBP'000
Borrowings - (612,237) (612,237)
Trade and other payables (b) - (913,486) (913,486)
Derivative financial instruments (18,350) - (18,350)
Total (18,350) (1,525,723) (1,544,073)
(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.
20. Financial instruments by category continued
Level 1 Level 2 Level 3 Total
At 31st December 2015 GBP'000 GBP'000 GBP'000 GBP'000
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The following table presents the Group's financial assets and
liabilities that are measured at fair value at 31st December
2015.
Assets
Derivatives used for hedging - 35,228 - 35,228
Available-for-sale financial assets
- equity securities 311 - 1,312 1,623
- debt investments - - 4,813 4,813
- fixed deposits 9,049 - - 9,049
Total 9,360 35,228 6,125 50,713
Liabilities
Deferred and contingent consideration - - (17,762) (17,762)
Redemption liabilities - option
contracts - - (22,626) (22,626)
Derivatives used for hedging - (17,215) - (17,215)
Total - (17,215) (40,388) (57,603)
Level 1 Level 2 Level 3 Total
At 31st December 2014 GBP'000 GBP'000 GBP'000 GBP'000
Assets
Derivatives used for hedging - 21,615 - 21,615
Available-for-sale financial assets
- equity securities 402 - 4,088 4,490
- debt investments 256 - - 256
- fixed deposits 9,642 - - 9,642
Total 10,300 21,615 4,088 36,003
Liabilities
Deferred and contingent consideration - - (19,383) (19,383)
Derivatives used for hedging - (18,350) - (18,350)
Total - (18,350) (19,383) (37,733)
Apart from where disclosed, there are no differences between the
fair value and the carrying value of financial assets and
liabilities.
Instruments included in level 1 are financial instruments traded
in active markets for which the fair value is based upon 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.
Instruments included in level 2 are financial instruments that
are not traded in an active market (for example, over-the-counter
derivatives) and for which the fair value 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. Level
2 includes derivatives used for hedging. The valuations of which
are performed using a discounted cash flow methodology
incorporating observable market forward foreign exchange and
interest rates.
During the year there were no transfers between level 1 and
level 2.There were no changes in valuation
techniques during the year.
Instruments included in level 3 are financial instruments for
which one or more of the significant inputs is not based on
observable market data. In respect of deferred and contingent
consideration and Redemption liabilities - option contracts,
unobservable inputs include management's assessment of the expected
future performance of relevant acquired businesses and are valued
using a discounted cash flow methodology.
A 1% movement in the discount rate applied in the calculation of
the redemption liability in respect of JLT Specialty Insurance
Services Inc., the largest item within the redemption liability,
would result in a change of the overall redemption liability of
9%.
Assets Liabilities
Level Level
3 3
GBP'000 GBP'000
A reconciliation of the movements in level 3 is provided
below:
At 1st January 2015 4,088 (19,383)
Exchange differences 216 150
Additions 1,964 -
Companies acquired - (24,539)
Utilised in the year - 4,264
Charged to income statement (143) (880)
At 31st December 2015 6,125 (40,388)
Of the GBP143,000 charged to the income statement, GBP131,000 is
included in net finance costs and GBP12,000 in other operating
costs.
Of the GBP880,000 charged to the income statement, GBP1,567,000
is included in net finance costs and GBP687,000
is credited in other operating costs.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21. Borrowings (unaudited)
2015 2014
GBP'000 GBP'000
Current
Bank overdraft 21,702 18,145
Bank borrowings 418 150,216
Finance lease liabilities 218 225
22,338 168,586
Non current
Unsecured loan notes 419,394 393,203
Bank borrowing 161,435 49,916
Finance lease liabilities 415 532
581,244 443,651
Total borrowings 603,582 612,237
The borrowings include secured liabilities (finance leases) of
GBP633,000 (2014: GBP757,000).
The exposure of the borrowings of the Group to interest rate
changes and the periods in which the borrowings
re-price are as follows:
6 months 6-12 Over
or less months 1-5 years 5 years Fixed rate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31st December 2015 557,334 - 418 - 45,830 603,582
At 31st December 2014 569,769 - 413 - 42,055 612,237
The effective interest rates at the balance sheet date were as
follows:
2015 2014
GBP'000 GBP'000
Bank overdraft - -
Unsecured loan notes - private placement 2.84% 2.75%
Bank borrowings 1.53% 2.20%
Finance lease liabilities 8.14% 8.33%
21. Borrowings (unaudited) continued
Maturity of non-current borrowings (excluding finance lease
liabilities):
2015 2014
GBP'000 GBP'000
Between 1 and 2 years 30,220 49,916
Between 2 and 3 years 6 27,444
Between 3 and 4 years - -
Between 4 and 5 years 56,092 -
Over 5 years 494,511 365,759
580,829 443,119
Finance lease liabilities - minimum lease payments:
2015 2014
GBP'000 GBP'000
No later than 1 year 255 267
Later than 1 year and no later than 2 years 204 244
Later than 2 years and no later than 3 years 142 190
Later than 3 years and no later than 4 years 80 100
Later than 4 years and no later than 5 years 31 50
Later than 5 years - 2
712 853
Future finance charges on finance leases (79) (96)
Present value of finance lease liabilities 633 757
No later than 1 year 218 225
Later than 1 year and no later than 2 years 180 214
Later than 2 years and no later than 3 years 127 171
Later than 3 years and no later than 4 years 73 91
Later than 4 years and no later than 5 years 35 54
Later than 5 years - 2
633 757
The present value of finance lease liabilities 2015 2014
is as follows:
GBP'000 GBP'000
Lease liabilities are effectively secured as the rights to the
leased assets revert to the lessor in the event of default.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21. Borrowings (unaudited) continued
The carrying amount of the Group's borrowings are denominated in
the following currencies:
2015 2014
GBP'000 GBP'000
Sterling 263,729 290,403
US Dollar 338,796 320,657
Other currencies 1,057 1,177
603,582 612,237
Borrowing facilities
The Group has undrawn committed borrowing facilities of:
2015 2014
GBP'000 GBP'000
Floating rate
- expiring within one year 150,000
- expiring beyond one year - 336,000 -
Facilities expiring within one year relate to:
a) The committed unsecured GBP50 million revolving credit
facility in the name of JIB Group Limited which matures in November
2016. As at the balance sheet date, drawings under the revolving
credit facilities are subject to a margin of 150 basis points above
the relevant LIBOR interest rate and additional commitment fees on
the undrawn facility.
The Group has agreed with its relationship banks the renewal of
the above facility for a new 5 year term maturing in February 2021
and to bring it within
the Group's core revolving credit facility. Facilities expiring
beyond one year relate to:
b) The committed unsecured GBP450 million revolving credit
facilities in the name of JIB Group Limited which matures in
February 2020. As at the balance sheet date, drawings under the
revolving credit facilities are subject to a margin and fees of 115
basis points above the relevant LIBOR interest rate and additional
commitment fees on the undrawn facility.
In January 2016, the Group agreed with its relationship banks to
exercise an extension option, under existing
agreed terms, by a further one year to a new
maturity date of February 2021.
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c) Senior unsecured loan notes totalling USD125 million issued
by JIB Group Limited under the Group's 2010 private placement
programme with maturities of USD42 million (GBP28.5 million) in
September 2017 with a coupon of 5.02%, USD42 million (GBP28.5
million) in September 2020 with a coupon of 5.59% and USD41 million
(GBP27.8 million) in September 2022 with a coupon of 5.69%.
Drawings under the Group's private placement programme are swapped
into sterling floating and are subject to an equivalent spread over
LIBOR of between 227 and 238 basis points.
d) Senior unsecured loan notes totalling USD250 million issued
by JIB Group Limited under the Group's 2012 private placement
programme with maturities of USD40 million (GBP27.1 million) in
January 2020 with a coupon of 3.21%, USD140 million (GBP95.0
million) in January 2023 with a coupon of 3.78% and USD70 million
(GBP47.5 million) in January 2025 with a coupon of 3.93%. The
proceeds of this placement have been swapped into sterling at fixed
and LIBOR based floating rates and are subject to an equivalent
spread over LIBOR of between 205 and 220 basis points.
e) Senior unsecured loan notes totalling GBP75 million issued by
JIB Group Limited under the Group's April 2014 private placement
programme maturing in April 2026 with a coupon of 4.27%. The
proceeds of this placement have been swapped into LIBOR based
floating rates and are subject to an equivalent spread over LIBOR
of 150 basis points.
f) Senior unsecured loan notes totalling USD125 million issued
by JIB Group Limited under the Group's October 2014 private
placement programme with maturities of USD62.5 million (GBP42.4
million) in October 2026 with a coupon of 3.93% and USD62.5 million
(GBP42.4 million) in October 2029 with a coupon of 4.13%. The
proceeds of this private placement in October 2014 have been
swapped into sterling at LIBOR based floating rates and are subject
to an equivalent spread over LIBOR of between 146 and 157 basis
points.
The terms and conditions of the Group's facilities include
common debt and interest cover covenants with which
the Group expects to continue to comply.
Liquidity risk
Liquidity risk arises from an inability to maintain an optimal
cost of capital or meet the short term financial demands of the
business. The Group has implemented the following steps to mitigate
the risk:
- Management reviews of business unit balance sheets and cash
flows
- Maintenance of committed credit facilities
- Compliance with regulatory minimum capital requirements and
regular stress testing
- Maintenance of a conservative funding profile.
22. Deferred income taxes
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to set off
current tax assets against current tax liabilities and when
the deferred income taxes relate to the same fiscal
authority.
The following amounts, determined after appropriate offsetting,
are shown in the consolidated balance sheet.
2015 2014 2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Assets Liabilities Net
Property, plant and equipment 2,105 2,400 (746) (549) 1,359 1,851
Provisions 11,588 10,027 (910) (883) 10,678 9,144
Losses 2,986 3,975 - - 2,986 3,975
Deferred income 285 364 (8,619) (7,773) (8,334) (7,409)
Other intangibles 2,436 1,827 (48) (43) 2,388 1,784
Goodwill 237 244 (6,024) (4,379) (5,787) (4,135)
Other 7,033 4,614 (2,933) (1,878) 4,100 2,736
Pensions 22,125 33,119 (93) (149) 22,032 32,970
Share based payments 6,554 8,032 - - 6,554 8,032
Fair values - - (1,931) (817) (1,931) (817)
Tax assets/(liabilities) 55,349 64,602 (21,304) (16,471) 34,045 48,131
Set off of tax (4,326) (2,574) 4,326 2,574 - -
Net tax assets/(liabilities) 51,023 62,028 (16,978) (13,897) 34,045 48,131
At 1st Credit/ Credit/ Acquisitions/ At 31st
January Exchange (charge) (charge) disposals December
2015 differences to income to equity of sub 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
The majority of the deferred tax is not expected to reverse
within 12 months.
Accelerated tax depreciation 1,851 (23) (479) - 10 1,359
Provisions 9,144 (414) 1,734 - 214 10,678
Losses 3,975 (619) (370) - - 2,986
Deferred income (7,409) 73 (998) - - (8,334)
Other intangibles 1,784 (1) 605 - - 2,388
Goodwill (4,135) (192) (1,473) - 13 (5,787)
Other 2,736 1,702 (337) - (1) 4,100
Pensions 32,970 (17) 1,083 (12,004) - 22,032
Share based payments 8,032 - (365) (1,113) - 6,554
Fair values (817) - - (1,114) - (1,931)
Net tax assets 48,131 509 (600) (14,231) 236 34,045
At 1st Credit/ At 31st
January (charge) December
2015 to equity 2015
GBP'000 GBP'000 GBP'000
The total current and deferred income tax charged to equity
during the year is as follows:
Pensions 43,207 (8,856) 34,351
Share based payments 11,243 790 12,033
Fair values:
- foreign exchange 1,699 (1,715) (16)
(30)
- available-for-sale (92) 62
1,607 (1,653) (46)
56,057 (9,719) 46,338
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22. Deferred income taxes continued
Deferred tax assets are recognised to the extent that the
realisation of the related tax benefits through the future taxable
profits is considered probable. A deferred tax asset relating to
tax losses of GBP7,660,000 (2014: GBP2,991,000) has not been
recognised in the balance sheet in respect of certain of the
Group's operations, principally US, Singapore and Japan, where it
is considered likely that the losses will expire before use. A
deferred tax asset relating to other deferred tax balances of
GBP5,030,000 (2014: GBP3,163,000) has not been recognised in the
balance sheet in respect of certain of the Group's overseas
operations, principally the US, where it is considered that the
asset is unlikely to be realised in the short term.
Deferred tax liabilities have not been recognised on temporary
differences of GBP86 million (2014: GBP60 million) representing the
unremitted earnings of subsidiaries and joint ventures. Such
amounts are permanently reinvested. Deferred tax liabilities have
not been recognised on temporary differences of nil (2014: nil)
representing unremitted earnings of associates.
23. Provisions for liabilities and charges
Property
related Litigation
provisions provisions Other Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1st January 2015 4,881 5,570 362 10,813
Exchange differences 19 30 - 49
Reclassification from current liabilities 462 - - 462
Utilised in the year (3,372) (3,710) (8) (7,090)
(Credited)/charged to the income
statement (690) 16,333 (240) 15,403
Interest charge - - - -
Companies acquired - - - -
At 31st December 2015 1,300 18,223 114 19,637
At 1st January 2014 8,049 6,354 707 15,110
Exchange differences 1 25 - 26
Utilised in the year (3,844) (1,559) - (5,403)
Charged/(credited) to the income
statement 1,292 750 (345) 1,697
Interest charge 10 - - 10
Companies acquired (627) - - (627)
At 31st December 2014 4,881 5,570 362 10,813
2015 2014
GBP'000 GBP'000
Analysis of total provisions
Current - to be utilised within one year 18,594 7,588
Non-current - to be utilised in more than one year 1,043 3,225
19,637 10,813
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 US and UK and relate to a variety of lease
commitments. The longest lease term expires in 2025.
Litigation provisions
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At any point in time the Group can be involved in a variety of
litigation and dispute 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. However, the final outcome could differ materially
from the amount provided.
The amount charged to the income statement in 2015 includes
litigation cost related to employment contract disputes.
23. Provisions for liabilities and charges continued
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 31st
December 2015, in connection with certain litigation matters, the
Group's litigation provisions include an amount of GBP0.1
million
(2014: GBP0.1million) 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 year ended 31st December 2015
(2014: nil).
Other
Other provisions include provisions for clawback of commission
which arises on certain types of Employee Benefits contracts.
24.
Ordinary Share
Number shares premium Total
of
shares GBP'000 GBP'000 GBP'000
Share capital and premium
Allotted, called up and fully
paid
At 1st January 2014 220,084,602 11,003 103,739 114,742
Issued during the year 51,965 3 202 205
At 31st December 2014 220,136,567 11,006 103,941 114,947
Issued during the year 34,440 2 133 135
At 31st December 2015 220,171,007 11,008 104,074 115,082
Ordinary shares carry rights to dividends, voting and proceeds
on winding up and have a par value of GBP0.05.
During the year the Company issued 34,440 (2014: 51,965)
ordinary shares for a consideration of GBP134,532 (2014:
GBP204,792) following exercises by executives of options held under
the Jardine Lloyd Thompson Group plc Executive Share Option
Scheme.
The Employee Benefit Trust holds 8,994,952 ordinary shares
(2014: 9,280,816) acquired to settle employee share based payments.
Acquisitions of such shares are booked directly to equity.
25. Non-controlling interests
The Group's total non-controlling interests' financial position
for the year is GBP18,465,000 of which GBP6,153,000 is attributed
to JLT's Private Client Services group of business (PCS). PCS is
defined as a material non-controlling interest to the Group. The
non-controlling interests in respect of other entities are not
individually material.
Set out below is the summarised financial information for
PCS.
Summarised Balance Sheet
2015 2014
GBP'000 GBP'000
Current
Assets 49,451 37,892
Liabilities (28,535) (17,400)
Total 20,916 20,492
Non-current
Assets 2,998 2,022
Liabilities (312) (345)
Total 2,686 1,677
Net assets 23,602 22,169
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
25. Non-controlling interests continued
Summarised Statement of Comprehensive Income
2015 2014
GBP'000 GBP'000
Revenue 55,357 49,661
Profit for the year 18,195 18,115
Other comprehensive income 95 -
Total comprehensive income for the year 18,290 18,115
Total comprehensive income attributable to non-controlling
interests Dividends paid to non-controlling interests 4,575 6,583
4,289 6,445
Summarised Statement of Cash Flows
2015 2014
GBP'000 GBP'000
Net cash generated from operating activities 34,522 17,168
Net cash used in investing activities (1,403) (303)
Net cash used in financing activites (17,340) (12,968)
Net increase in cash and cash equivalents 15,779 3,897
The information above is the amount before inter-company
eliminations.
26. Other reserves
Fair value
Share and hedging Exchange
premium reserves reserves Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1st January 2015 103,941 (234) (5,033) 98,674
Fair value (losses)/gains net of
tax:
- available-for-sale - (34) - (34)
- available-for-sale reclassified
to the income statement - 10 - 10
- cash flow hedges - (12,569) - (12,569)
Currency translation differences - - (12,247) (12,247)
Net losses recognised directly in
equity - (12,593) (12,247) (24,840)
Issue of share capital 133 - - 133
At 31st December 2015 104,074 (12,827) (17,280) 73,967
Fair value
Share premium and hedging Exchange
GBP'000 reserves reserves Total
GBP'000 GBP'000 GBP'000
At 1st January 2014 103,739 17,224 (1,999) 118,964
Fair value gains/(losses) net of tax:
- available-for-sale - 203 - 203
- available-for-sale reclassified
to the income statement - (204) - (204)
- cash flow hedges - (17,457) - (17,457)
Currency translation differences - - (3,034) (3,034)
Net losses recognised directly in
equity - (17,458) (3,034) (20,492)
Issue of share capital 202 - - 202
At 31st December 2014 103,941 (234) (5,033) 98,674
27. Qualifying Employee Share Ownership Trust
During the year, the Qualifying Employee Share Ownership Trust
(QUEST) allocated nil ordinary shares to
employees in satisfaction of options that have been
exercised under the Sharesave schemes (2014: nil).
28. Cash generated from operations
2015 2014
GBP'000 GBP'000
155,027
Profit before taxation (5,301) 159,736
Investment and finance income 16,782 (5,924)
Interest payable on bank loans and finance leases 41 16,851
Fair value losses/(gains) on available-for-sale financial 6,124 (16)
assets Net pension financing expenses 1,567 5,830
Unwinding of liability discounting Depreciation Amortisation 11,600 291
of other intangible assets Amortisation of share based payments 31,310 11,247
Share of results of associates' undertakings Non cash exceptional 20,075 24,744
items (5,531) 18,837
Losses/(gains) on disposal of businesses 21,959 (7,306)
Losses on disposal of property, plant and equipment Losses/(gains) 527 3,176
on disposal of available-for-sale financial assets Gain 60 (359)
on sale of associates 72 53
Increase in trade and other receivables (19,142) (332)
Increase in trade and other payables - excluding insurance (23,475) - (72,947)
broking balances Decrease in provisions for liabilities 36,806 18,406
and charges (7,833) (3,706)
Decrease in retirement benefit obligations (11,021) (9,282)
Net cash inflow from operations 229,647 159,299
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
29. Business combinations
Adjustments in respect of prior year acquisitions
During the year, the deferred consideration booked in respect of
acquisitions completed in previous years has
been revised following either the final settlement
of amounts due, the revision of amounts due or the revision of
estimates based on performance conditions.
Deferred Change in Deferred consideration estimated consideration at
deferred at 31st Dec 2014 consideration 31st Dec 2015
Revision of deferred consideration impacting goodwill GBP'000
GBP'000 GBP'000
-
Heath Lambert Aviation - Virginia
397
(397)
2014 acquisitions
During the year, the process of finalising the provisional fair
values in respect of acquisitions carried out
during 2014 has been completed.
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Provisional
Revised fair value
fair value reported at Change in acquired 31st Dec 2014 fair value
GBP'000 GBP'000 GBP'000
The Hayward Holding Group Limited 7,281 7,257 24
Ensign Pensions Administration Limited 4,707 4,707 -
Others 497 467 30
12,485 12,431 54
These changes in fair value affected the following balance sheet
classes:
Provisional
Revised fair value
fair value reported at Change in acquired 31st Dec 2014 fair value
GBP'000 GBP'000 GBP'000
Property, plant and equipment 738 727 11
Other intangible assets Trade and
other receivables Cash and cash
equivalents 3,967 3,978 (11)
- own cash 7,343 7,343 -
- fiduciary cash Insurance payables
Trade and other payables Current
taxation 4,566 4,566 -
Deferred taxation 6,589 6,589 -
Non-controlling interests (6,589) (6,589) - 30
(4,590) (4,620) 24
(216) (240) -
260 260 -
417 417
12,485 12,431 54
At At
31st Dec 2015 31st Dec 2014 Change
Goodwill calculation GBP'000 GBP'000 GBP'000
Purchase consideration
- cash paid 44,976 44,784 192
- contingent consideration 2,955 2,955 -
- deferred consideration 568 572 (4)
Total purchase consideration 48,499 48,311 188
Less: fair value of net assets acquired 12,485 12,431 54
Less: equity movement on transactions with
non-controlling interests 6,667 6,725 (58)
Goodwill 29,347 29,155 192
29. Business combinations continued
At At
31st Dec 2015 31st Dec 2014 Change
GBP'000 GBP'000 GBP'000
Purchase consideration settled in cash 44,976 44,784 192
Cash and cash equivalents - own cash in
subsidiaries acquired (4,566) (4,566) -
40,410 40,218 192
Cash and cash equivalents - fiduciary cash
in subsidiaries acquired (6,589) (6,589) -
Cash outflow on acquisition 33,821 33,629 192
Current year acquisitions
During the year the following new business acquisitions and
additional investments were completed:
Percentage
Acquisition voting rights Cost
Notes date acquired GBP'000
Liberty Asset Management Group (LAM) i Jan 2015 100% 5,195
The Recovre Group Pty Ltd (Recovre) ii Mar 2015 100% 7,581
Alpha Consultants (2002) Limited (Alpha) iii Apr 2015 100% 2,709
Eikos Risk Application Proprietary
Limited (Eikos) iv Oct 2015 100% 3,699
Close Brothers Asset Management (Close
Brothers) v Nov 2015 100% 3,748
Pierre Leblanc & Associés SAS
(PL&A) vi Nov 2015 100% 3,247
Acquisition of other new businesses
completed during the year vii Jan - Dec 2015 Various 4,258
Additional investments in existing
businesses vii Jan - Dec 2015 Various 5,099
35,536
i) Acquisition of Liberty Asset Management Group
On 1st January 2015, the Group completed the acquisition of
Liberty Asset Management Limited and Freedom Trust Services Limited
in Ireland, a leading specialist in providing advice to companies
and trustee boards on employee benefit arrangements and individuals
on wealth management solutions. The acquired business contributed
revenue of GBP3,638,000 and a net profit, including acquisition and
integration costs incurred to date, of GBP95,000 to the Group for
the period since acquisition.
Goodwill calculation GBP'000
Purchase consideration
- cash paid 5,195
Total purchase consideration 5,195
Less: fair value of net assets acquired 1,978
Goodwill 3,217
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's carrying
amount Fair value
GBP'000 GBP'000
Other intangible assets - 383
Trade and other receivables 503 503
Cash and cash equivalents
- own cash 2,064 2,064
Trade and other payables (945) (945)
Current taxation (37) (37)
Deferred taxation 10 10
1,595 1,978
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
29. Business combinations continued
GBP'000
Purchase consideration settled in cash 5,195
Cash and cash equivalents - own cash in subsidiary acquired (2,064)
Cash outflow on acquisition 3,131
As at 31st December 2015, the process of reviewing the fair
values of net assets acquired had been completed. None of the
goodwill recognised is expected to be deductible for income tax
purposes.
ii) Acquisition of The Recovre Group Pty Ltd
On 2nd March 2015, the Group acquired The Recovre Group Pty Ltd
in Australia, a leading national provider of workplace health &
safety and rehabilitation services. The acquired business
contributed revenue of GBP11,095,000 and a net loss, including
acquisition and integration costs incurred to date, of GBP297,000
to the Group for the period since acquisition. If the acquisition
had taken place on 1st January 2015, we estimate the contribution
to Group revenue would have been GBP13,085,000 and the net loss,
including acquisition and integration costs incurred to date, would
have been GBP214,000.
Goodwill calculation GBP'000
Purchase consideration
- cash paid 5,861
- contingent consideration 1,720
Total purchase consideration 7,581
Less: fair value of net assets acquired 1,741
Goodwill 5,840
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 568 568
Other intangible assets 59 943
Trade and other receivables 1,260 1,260
Cash and cash equivalents
- own cash 215 215
Trade and other payables (1,476) (1,476)
Deferred taxation 231 231
857 1,741
GBP'000
Purchase consideration settled in cash 5,861
Cash and cash equivalents - own cash in subsidiary acquired (215)
Cash outflow on acquisition 5,646
As at 31st December 2015, the process of reviewing the fair
values of net assets acquired had not been completed, consequently
the fair values stated above are provisional.
The contingent consideration of GBP1,720,000 is based upon
expected revenues for periods ending up to two years following
completion. It also includes a retention payment. The maximum
amount of contingent consideration has been provided for.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
29. Business combinations continued
iii) Acquisition of Alpha Consultants (2002) Limited
On 1st April 2015, the Group acquired Alpha Consultants (2002)
Limited in New Zealand, a vocational rehabilitation services
provider. The acquired business contributed revenue of GBP1,035,000
and a net profit, including acquisition and integration costs
incurred to date, of GBP85,000 to the Group for the period since
acquisition. If the acquisition had taken place on 1st January
2015, we estimate the contribution to Group revenue would have been
GBP1,453,000 and the net profit, including acquisition and
integration costs incurred to date, would have been GBP179,000.
Goodwill calculation GBP'000
Purchase consideration
- cash paid 2,285
- contingent consideration 424
Total purchase consideration 2,709
Less: fair value of net assets acquired 509
Goodwill 2,200
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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 24 24
Other intangible assets - 406
Trade and other receivables 280 280
Bank overdraft (1) (1)
Trade and other payables (94) (94)
Finance lease liabilities (11) (11)
Current taxation (66) (66)
Deferred taxation (29) (29)
103 509
GBP'000
Purchase consideration settled in cash Bank overdraft in subsidiary
acquired 2,285
1
Cash outflow on acquisition 2,286
As at 31st December 2015, the process of reviewing the fair
values of net assets acquired had not been completed, consequently
the fair values stated above are provisional.
The contingent consideration of GBP424,000 is based upon the
expected revenues of the business in the 12 months
period ending 31st March 2017.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
29. Business combinations continued
iv) Acquisition of Eikos Risk Application Proprietary
Limited
On 1st October 2015, the Group acquired Eikos Risk Application
Proprietary Limited, a leading marine, transportation and logistics
risk consulting and insurance
broking business in South Africa. The acquired business
contributed revenue of GBP501,000 and a net profit, including
acquisition and integration costs incurred to date, of GBP61,000 to
the Group for the period since acquisition. If the acquisition had
taken place on 1st January 2015, we estimate the contribution to
Group revenue would have been GBP2,080,000 and the net profit,
including acquisition and integration costs incurred to date, would
have been GBP384,000.
Goodwill calculation GBP'000
Purchase consideration
- cash paid 2,421
- contingent consideration 1,022
- deferred consideration 256
Total purchase consideration 3,699
Less: fair value of net assets acquired 975
Goodwill 2,724
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 10 10
Other intangible assets - 487
Trade and other receivables 278 278
Cash and cash equivalents
- own cash 282 282
- fiduciary cash 977 977
Insurance payables (977) (977)
Trade and other payables (134) (134)
Current taxation 28 28
Deferred taxation 24 24
488 975
GBP'000
Purchase consideration settled in cash 2,421
Cash and cash equivalents - own cash in subsidiary acquired (282)
2,139
Cash and cash equivalents - fiduciary cash in subsidiary acquired (977)
Cash outflow on acquisition 1,162
As at 31st December 2015, the process of reviewing the fair
values of net assets acquired had not been completed, consequently
the fair values stated above are provisional.
The contingent consideration of GBP1,022,000 is based upon
expected profit before tax of the business in the 12
months period ending 30th June 2017. The
maximum amount of contingent consideration has been provided
for.
The deferred consideration of GBP256,000 is based on the net
current assets shown on the completion balance sheet.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
29. Business combinations continued
v) Acquisition of Close Brothers Asset Management (Employee
benefits business)
On 9th November 2015, the Group acquired the employee benefits
business of Close Brothers Asset Management, providing actuarial
and administration services to trustees of defined benefit pension
schemes and general consultancy to both trustees and sponsoring
employers of such schemes. The acquired business contributed
revenue of GBP846,000 and a net loss, including acquisition and
integration costs incurred to date, of GBP11,000 to the Group for
the period since acquisition. If the acquisition had taken place on
1st January 2015, we estimate the contribution to Group revenue
would have been GBP5,814,000 and the net profit, including
acquisition and integration costs incurred to date, would have been
GBP198,000.
Goodwill calculation GBP'000
Purchase consideration
- cash paid 3,000
- contingent consideration 500
- deferred consideration 248
Total purchase consideration 3,748
Less: fair value of net assets acquired 580
Goodwill 3,168
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 4 4
Other intangible assets - 352
Trade and other receivables 632 632
Cash and cash equivalents
- own cash 75 75
Trade and other payables (476) (476)
Current taxation (7) (7)
228 580
GBP'000
Purchase consideration settled in cash 3,000
Cash and cash equivalents - own cash in subsidiary acquired (75)
Cash outflow on acquisition 2,925
As at 31st December 2015, the process of reviewing the fair
values of net assets acquired had not been completed, consequently
the fair values stated above are provisional.
The contingent consideration of GBP500,000 is based upon
expected revenues booked until 31st December 2016 following the
completion date. The maximum
amount of contingent consideration has been provided for.
The deferred consideration of GBP248,000 is based upon the net
assets shown on the completion accounts. 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.
vi) Acquisition of Pierre Leblanc & Associés SAS
On 18th November 2015, the Group acquired Chauveau
Investissements SA, the holding company of Pierre Leblanc &
Associés SAS, a Paris based specialist providing credit risk
consultancy. The acquired business contributed revenue of GBP96,000
and a net profit of GBP4,000 to the Group for the period since
acquisition. If the acquisition had taken place on 1st January
2015, we estimate the contribution to Group revenue would have been
GBP1,522,000 and the net profit would have been GBP551,000.
Goodwill calculation GBP'000
Purchase consideration
- cash paid 3,030
- contingent consideration 217
Total purchase consideration 3,247
Less: fair value of net assets acquired 990
Goodwill 2,257
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
29. Business combinations continued
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's carrying amount Fair value
GBP'000 GBP'000
Other intangible assets 551 716
Trade and other receivables 314 81
Cash and cash equivalents
- own cash 436 436
- fiduciary cash 2,218 2,218
Insurance payables (2,218) (2,218)
Trade and other payables (187) (228)
Current taxation (4) (15)
1,110 990
GBP'000
Purchase consideration settled in cash 3,030
Cash and cash equivalents - own cash in subsidiary acquired (436)
2,594
Cash and cash equivalents - fiduciary cash in subsidiary acquired (2,218)
Cash outflow on acquisition 376
As at 31st December 2015, the process of reviewing the fair
values of net assets acquired had not been completed, consequently
the fair values stated above are provisional.
The contingent consideration of GBP217,000 is based upon the
expected own cash position as at 30th April 2016.
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.
vii) Other acquisitions and additional investments
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Goodwill calculation GBP'000
Purchase consideration
- cash paid 6,325
- contingent consideration 2,071
- cancellation of loans 1,580
- other receivables (619)
Total purchase consideration 9,357
Less: fair value of net assets acquired 1,157
Less: equity movement on transactions with non-controlling interests 4,162
Goodwill 4,038
The assets and liabilities arising from the acquisitions were as
follows:
Acquiree's carrying amount Fair value
GBP'000 GBP'000
Property, plant and equipment 193 193
Other intangible assets - 92
Trade and other receivables 572 572
Cash and cash equivalents
- own cash 1,219 1,219
Trade and other payables (1,706) (1,706)
Non-controlling interests 787 787
1,065 1,157
29. Business combinations continued
GBP'000
Purchase consideration settled in cash 6,325
Cash and cash equivalents - own cash in subsidiary acquired (1,219)
Cash outflow on acquisition 5,106
As at 31st December 2015, the process of reviewing the fair
values of net assets acquired had not been completed, consequently
the fair values stated above are provisional.
The contingent consideration of GBP2,071,000 relates to two
acquisitions of which the largest (GBP1,899,000) is
based upon expected client revenue as at 29th
February 2016.
Goodwill of GBP2,226,000 is expected to be deductible for income
tax purposes, the remaining goodwill is not expected to be
deductible.
Close
LAM Recovre Alpha Eikos Brothers PL&A Others Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Group summary of the net assets acquired and goodwill
Purchase consideration
- cash paid 5,195 5,861 2,285 2,421 3,000 3,030 6,325 28,117
- contingent consideration - 1,720 424 1,022 500 217 2,071 5,954
- deferred consideration - - - 256 248 - - 504
- cancellation of loans - - - - - - 1,580 1,580
- other receivables - - - - - - (619) (619)
Total purchase consideration 5,195 7,581 2,709 3,699 3,748 3,247 9,357 35,536
Less: fair value of net assets
aquired 1,978 1,741 509 975 580 990 1,157 7,930
Less: equity movement on transactions
with non-controlling interests - - - - - - 4,162 4,162
Goodwill on acquisitions occurring
during the year 3,217 5,840 2,200 2,724 3,168 2,257 4,038 23,444
Impact of revisions to deferred considerations (397)
Impact of revision to fair value adjustment in relation to acquisitions
completed in 2014 192
Net increase in goodwill 23,239
Impact of revisions to deferred considerations (58)
Impact of additional investments 4,162
Net decrease in equity 4,104
Close
LAM Recovre Alpha Eikos Brothers PL&A Others Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Group summary of cash flows
Purchase consideration settled
in cash 5,195 5,861 2,285 2,421 3,000 3,030 6,325 28,117
Cash and cash equivalents - own
cash in subsidiaries acquired (2,064) (215) - (282) (75) (436) (1,219) (4,291)
Bank overdrafts in subsidiaries
acquired - - 1 - - - - 1
3,131 5,646 2,286 2,139 2,925 2,594 5,106 23,827
Cash and cash equivalents - fiduciary
cash in subsidiaries acquired - - - (977) - (2,218) - (3,195)
Cash outflow on acquisitions during
the year 3,131 5,646 2,286 1,162 2,925 376 5,106 20,632
Impact on revision to fair value adjustment on cash
in relation to acquisitions completed in 2014 192
Net cash outflow on acquisitions during the year 20,824
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
30. Business disposals
During the period the Group completed other disposals, none of
which were individually significant.
Net assets and proceeds of disposal
Total
GBP'000
Goodwill 715
Property, plant and equipment 22
Trade and other receivables 9
Cash and cash equivalents
- own cash 358
Trade and other payables (273)
Current taxation (46)
Deferred taxation (1)
Non-controlling interests 1,268
Equity movement on transaction with non-controlling interest 2,424
4,476
Loss on disposal (527)
Proceeds on disposal 3,949
Total
GBP'000
Deferred proceeds 3,713
Cash inflow on disposal during the year 236
Total consideration 3,949
Group summary of cash flows
Total
GBP'000
Disposal consideration settled in cash 236
Cash and cash equivalents - own cash in subsidiaries disposed (358)
Cash outflow on disposal during the year (122)
31. 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 UK Pension Scheme, the JLT (USA)
Incentive Savings Plan, the JLT (USA) Employee Retirement Plan, the
JLT (USA) Stable Value Plan, the Pension Plan for Employees of
Jardine Lloyd Thompson Canada Inc and the Jardine Lloyd Thompson
Ireland Limited Pension Fund.
The pension service costs accrued for the year are comprised as
follows:
2015 2014 2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK Schemes Overseas Schemes Total
Defined benefit schemes Defined
contribution schemes - 21,265 - 2,630 2,813 2,630 2,813
19,258 15,723 14,373 36,988 33,631
21,265 19,258 18,353 17,186 39,618 36,444
The Jardine Lloyd Thompson UK Pension Scheme has two sections;
one providing defined benefits and the other
providing benefits on a defined contribution
basis. The assets of the scheme are held in a trustee
administered fund separate from the Company.
With effect from 1st December 2006 the defined benefit section
of the Scheme was amended to cease future benefits accruals. Under
the Scheme as amended, a participant's normal retirement benefit
will be determined based on their service and compensation prior to
1st December 2006.
The latest finalised triennial actuarial funding valuation of
the Jardine Lloyd Thompson UK Pension Scheme was at 31st March
2014. This valuation was updated to 31st December 2015 by a
qualified actuary employed by the Group.
The principal overseas schemes are:
a) The JLT (USA) Incentive Savings Plan which is a defined
contribution scheme. Employees may contribute up to 50% of their
salary subject to an IRS maximum each year - USD18,000 in 2015 -
and the Group contributes at a rate of 100% of each 1% contributed
by the employee up to a maximum employee contribution of 4%, up to
a maximum of USD10,600. Employees aged over 50 may make "catch-up"
contributions subject to an IRS maximum each year - USD6,000 in
2015.
b) The JLT (USA) Employee Retirement Plan which is a defined
benefit scheme. The latest actuarial valuation was undertaken at
1st January 2015 by independent actuaries. With effect from 31st
July 2005 the plan was amended to eliminate future benefit
accruals. Under the plan as amended, a participant's normal
retirement benefit will be determined based on their service and
compensation prior to 31st July 2005. The average compensation and
length of service will be determined as at 31st July 2005.
Group has made a settlement gain of GBP492,000 relating to
non-routine lump sum payments and it is disclosed under curtailment
gain.
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c) The JLT (USA) Stable Value Plan. The plan is closed to new
participants, but still accrues a benefit for current participants.
The latest actuarial valuation was undertaken at 1st January 2015
by independent actuaries. The actuarial contributions made in 2015
and the minimum funding requirements for the 2015 plan year has
been fully satisfied. The plan is not subject to a quarterly
contribution requirement in 2016 so there are no required
contributions in calendar year 2016. Each plan year, a participant
is credited with an amount equal to 15% of compensation for the
year up to the taxable wage base, plus 20% of compensation in
excess of the taxable wage base. This pay credit is calculated on
an annual basis and added to the prior year's balance.
With effect from 31st March 2016 the plan will be amended to
eliminate future benefit accruals. Under the plan to be amended, a
participant's normal retirement benefit will be determined based on
their service and compensation prior to 31st March 2016. The Group
has chosen to make allowance for the upcoming closure of the Stable
Value Plan to future accrual. This closure results in a gain of
GBP506,000 due to the removal of future
salary increases, which is disclosed under curtailment gain.
d) The Pension Plan for Employees of Jardine Lloyd Thompson
Canada Inc. The JLT Canada Pension Plan has two sections; one
providing defined benefits based primarily on the 2007 pensionable
salary and the other providing benefits on a defined contribution
basis. The JLT pension contribution for the defined contribution
plan ranges from 3% to 13% based on age and service. The last
formal valuation of the JLT Canada Pension Plan was undertaken as
of 31st December 2013 by a qualified third party actuary. The
defined benefits section was amended to eliminate future benefit
accruals with effect from 1st January 2009. The company makes
matching contribution to the defined contribution plan, not
exceeding 2% of pensionable earnings, if the member makes voluntary
contributions
e) The Jardine Lloyd Thompson Ireland Limited Pension Fund which
is a defined benefit pension scheme with assets held in a
separately administered fund. The contributions are agreed between
the Trustees and the Company based on the advice by a qualified
independent actuary. The most recent triennial actuarial valuation
for funding purposes was carried out by a qualified independent
actuary as at 1st January 2014. With effect from 30th November
2008 the scheme was closed to new entrants and future service
accrual ceased. The company also operates a defined contribution
scheme, namely The Jardine Lloyd Thompson 2004 Retirement Benefits
Scheme, which is held and administered by a separate trust.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
31. Retirement benefit obligations
continued
The principal actuarial assumptions
used were as follows:
UK US Canadian Irish US Stable
At 31st December 2015 Scheme Scheme Scheme Scheme Value
Plan
Rate of increase in salaries n/a n/a 2.50% n/a n/a
Rate of increase of pensions in
payment (a) 2.82% n/a 3.25% 3.00% n/a
Discount rate (b) 3.86% 4.20% 4.00% 2.50% 3.50-3.55%
Inflation rate 2.92% 2.00% 2.25% 1.75% 2.00%
Revaluation rate for deferred pensioners 1.92% n/a n/a 1.75% n/a
Mortality - life expectancy at
age 65 for male members: (c)
Aged 65 at 31st December (years) 21.7 21.7 22.0 22.8 21.7
UK US Canadian Irish US Stable
At 31st December 2014 Scheme Scheme Scheme Scheme Value
Plan
Rate of increase in salaries n/a n/a 2.50% n/a 3.0%
Rate of increase of pensions in
payment (a) 3.11% n/a 3.25% 3.00% n/a
Discount rate (b) 3.59% 3.80% 4.10% 2.30% 3.25-3.35%
Inflation rate 2.78-3.21% 2.00% 2.25% 2.00% 2.00%
Revaluation rate for deferred pensioners 1.78% n/a n/a 2.00% n/a
Mortality - life expectancy at
age 65 for male members: (c)
Aged 65 at 31st December (years) 22.0 22.1 19.7 21.7 22.1
(a) In respect of the UK scheme, where there are inflation
linked benefits, the inflation increases are limited to a maximum
of 5% per annum (some are limited to 3% per annum).
(b) In line with IAS 19 (Revised) the expected return on scheme
assets assumption is the same as the discount rate assumed for the
liabilities.
(c) Mortality assumptions for the UK scheme are based on 105% of
the S2PxA tables, with improvements based on CMI 2015 tables with a
1.25% p.a. long-term rate of improvement.
Mortality assumptions for the US Scheme and US Stable Value Plan
are based on the RP2014 Mortality Table with MP2015
Projections.
Mortality assumptions for the Canadian Scheme are based on the
CPM-2014 Private Table with generational projection using scale
CPM-B1D2014.
Mortality assumptions for the Irish Scheme, assume that deaths
after retirement will be in accordance with standard mortality
tables 90% PxA92C=2004 with allowance for expected future mortality
improvements. There is assumed to be no pre-retirement
mortality.
The sensitivity of the defined benefit obligation to changes in
the weighted principal assumptions is:
Impact on defined benefit obligation Change in Change to
assumptions obligation
Discount rate decrease of 0.1% increase of 2.0%
Inflation rate increase of 0.1% increase of 1.0%
Life expectancy increase of 1 year increase of 4.0%
The above sensitivity analysis is based on a change in an
assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, and changes in some of the
assumptions may be correlated. When calculating the sensitivity of
the defined benefit obligation to significant actuarial
assumptions, the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the
end of the reporting period) has been applied as when calculating
the pension liability recognised within the balance sheet. Note
this sensitivity is for defined benefit obligations only and does
not consider the impact that changes in assumptions may have on the
assets, in particular the assets held in respect of the insured
pensioners.
The methods and types of assumptions used in preparing the
sensitivity analysis did not change compared to the previous
year.
31. Retirement benefit obligations continued
Defined benefit obligation 2015 2014 2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK Scheme Overseas Schemes Total
Present value of funded obligations
Fair value of plan assets (576,343) (641,759) (61,940) (78,044) (638,283) (719,803)
457,396 479,139 50,500 61,629 507,896 540,768
Net liability recognised in
the balance sheet (118,947) (162,620) (11,440) (16,415) (130,387) (179,035)
Reconciliation of defined benefit liability
UK Scheme
2015
Overseas Schemes
Total
2014
2015
2014
2015
2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening defined benefit liability (162,620) (125,018) (16,415) (5,609) (179,035) (130,627)
Exchange differences - - (396) (466) (396) (466)
Pension expense (5,902) (6,154) (2,421) (3,315) (8,323) (9,469)
Employer contributions 11,117 8,795 3,101 4,126 14,218 12,921
Total gain/(loss) recognised
in reserves 38,458 (40,243) 4,691 (11,151) 43,149 (51,394)
Net liability recognised in
the balance sheet (118,947) (162,620) (11,440) (16,415) (130,387) (179,035)
Reconciliation of defined 2015 2014 2015 2014 2015 2014
benefit obligation
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK Scheme Overseas Schemes Total
Opening defined benefit obligation (641,759) (583,745) (78,044) (60,566) (719,803) (644,311)
Exchange differences - - (870) (1,579) (870) (1,579)
Service cost - - (2,630) (2,813) (2,630) (2,813)
Interest cost (22,366) (26,283) (2,507) (2,698) (24,873) (28,981)
Curtailment gain - - 998 - 998 -
Settlement amount - - 5,773 - 5,773 -
Gain/(loss) on defined benefit
obligation 50,051 (56,680) 5,453 (13,601) 55,504 (70,281)
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Actual benefit payments 37,731 24,949 9,887 3,213 47,618 28,162
Closing defined benefit obligation (576,343) (641,759) (61,940) (78,044) (638,283) (719,803)
Reconciliation of fair value of assets
UK Scheme
2015
Overseas Schemes
Total
2014
2015
2014
2015
2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening value of assets 479,139 458,727 61,629 54,957 540,768 513,684
Exchange differences - - 474 1,113 474 1,113
Expected return on assets 16,722 20,709 2,027 2,442 18,749 23,151
Actuarial (losses)/gains (11,593) 16,437 (762) 2,450 (12,355) 18,887
Employer contributions 11,117 8,795 3,101 4,126 14,218 12,921
Actual benefit payments (37,731) (24,949) (9,887) (3,213) (47,618) (28,162)
Settlement amount - - (5,773) - (5,773) -
Expenses (258) (580) (309) (246) (567) (826)
Closing value of assets 457,396 479,139 50,500 61,629 507,896 540,768
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
31. Retirement benefit obligations continued
The analysis of the fair value of the scheme assets is as
follows:
UK Scheme Overseas Schemes
Value Value Value Value
At 31st December 2015 GBP'000 % GBP'000 %
Equities 174,843 38% 32,395 64%
Bonds - - 14,848 30%
Investment funds 99,079 22% - -
Qualifying insurance policies 176,996 39% - -
Other assets - - 2,656 5%
Cash 6,478 1% 601 1%
Total market value 457,396 100% 50,500 100%
UK Scheme Overseas Schemes
Value Value Value Value
At 31st December 2014 GBP'000 % GBP'000 %
Equities 182,369 38% 40,584 66%
Bonds - - 15,064 24%
Investment funds 105,944 22% - -
Qualifying insurance policies 188,889 40% - -
Other assets - - 2,374 4%
Cash 1,937 - 3,607 6%
Total market value 479,139 100% 61,629 100%
Other assets include hedge funds and property. The schemes do
not hold cash as a strategic investment and cash
balances at 31st December represent
Reconciliation of return 2015 2014 2015 2014 2015 2014
on assets
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
working balances.
UK Scheme
Overseas Schemes
Total
Expected return on assets
Actuarial (losses)/gains 16,722 20,709 2,027 2,442 18,749 23,151
(11,593) 16,437 (762) 2,450 (12,355) 18,887
Actual return on assets 5,129 37,146 1,265 4,892 6,394 42,038
2015 2014 2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
The amounts recognised in the consolidated income statement are
as follows:
UK Scheme
Overseas Schemes
Total
Service cost - - (2,630) (2,813) (2,630) (2,813)
Settlement and curtailment
gain - - 998 - 998 -
Expenses (258) (580) (309) (246) (567) (826)
Total (included within salaries
and associated expenses)
Interest cost Expected return
on assets
Total (included within finance
costs)
(258) (580) (1,941) (3,059) (2,199) (3,639)
(22,366) (26,283) (2,507) (2,698) (24,873) (28,981)
16,722 20,709 2,027 2,442 18,749 23,151
(5,644) (5,574) (480) (256) (6,124) (5,830)
Expense before taxation (5,902) (6,154) (2,421) (3,315) (8,323) (9,469)
31. Retirement benefit obligations continued
2015 2014 2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
The amounts included in the consolidated statement of
comprehensive income are as follows:
UK Scheme
Overseas Schemes
Total
Gains/(losses) on defined
benefit obligation 50,051 (56,680) 5,453 (13,601) 55,504 (70,281)
Actuarial (losses)/gains (11,593) 16,437 (762) 2,450 (12,355) 18,887
Total actuarial gains/(losses)
recognised 38,458 (40,243) 4,691 (11,151) 43,149 (51,394)
Cumulative actuarial losses
recognised (205,439) (243,897) (32,837) (37,528) (238,276) (281,425)
The five year history of experience adjustments is as
follows:
2015 2014 2013 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
restated restated
UK Scheme
Defined benefit obligation at end
of year (576,343) (641,759) (583,745) (574,360) (523,846)
Fair value of plan assets 457,396 479,139 458,727 463,621 424,624
Deficit in the scheme (118,947) (162,620) (125,018) (110,739) (99,222)
Difference between the actual and expected return on plan
assets
- amount (GBP'000) (11,593) 16,437 (22,217) 32,889 (17,930)
- expressed as a percentage
of the plan assets (2.53%) 3.43% (4.84%) 7.09% (4.22%)
Experience (gains)/losses on plan liabilities
- amount (GBP'000) (8,840) 1,592 1,364 11,890 903
- expressed as a percentage of the
present value of the plan liabilities 1.53% (0.25%) (0.23%) (2.07%) (0.17%)
2015 2014 2013 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
restated restated
Overseas Schemes
Defined benefit obligation at end
of year (61,940) (78,044) (60,566) (68,937) (66,407)
Fair value of plan assets 50,500 61,629 54,957 48,285 44,630
Deficit in the schemes (11,440) (16,415) (5,609) (20,652) (21,777)
Difference between the actual and expected return on plan
assets
- amount (GBP'000) (762) 2,450 6,863 3,034 (2,665)
- expressed as a percentage
of the plan assets (1.51%) 3.98% 12.49% 6.28% (5.97%)
Experience (gains)/losses on plan liabilities
- amount (GBP'000) (1,427) 1,265 377 (3,925) 308
- expressed as a percentage of the
present value of the plan liabilities 2.30% (1.62%) (0.62%) 5.69% (0.46%)
The expected employer contributions in respect of the year
ending 31st December 2016 are as follows:
Defined benefit
GBP'000
UK Scheme Irish Scheme 10,500
755
Total expected contributions 11,255
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
32. Related-party transactions
Transactions with the Jardine Matheson Group
At 19th February 2016 the Jardine Matheson Group owns 40.17% of
the Company's shares via its wholly-owned subsidiary JMH
Investments Limited. The remaining 59.83% of the shares are widely
held.
In the normal course of business a number of the Group's
subsidiaries undertake, on an arm's length basis, a
variety of transactions with the Jardine Matheson
Group (JMG) and its associates (JMA).
The following transactions were carried out during the year:
JMG JMA Total JMG JMA Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2015 2014
Income
Fees and commissions 3,472 1,794 5,266 2,961 1,936 4,897
Expenditure
Administrative expenses 1,729 - 1,729 1,713 - 1,713
Year-end balances arising
from these transactions:
Trade and other receivables
Trade and other payables 522 253 775 3,542 552 4,094
(58) (1) (59) (138) - (138)
464 252 716 3,404 552 3,956
Transactions with associates
The following transactions were carried out with associates
during the year:
2015 2014
GBP'000 GBP'000
Income
Fees and commissions 5,994 7,398
Finance income
Interest receivable - own funds 194 284
Expenditure
Administrative expenses 67 18
Year-end balances arising from these transactions:
Trade and other receivables Trade and other payables 5,115 8,839
(140) (70)
4,975 8,769
Transactions with key management
The related-party disclosure regarding key management is
detailed in note 6 on page 28.
33. Commitments
Capital commitments
There are no significant capital expenditure contracted for 2016
at the balance sheet date (2014: GBP1,562,000).
Operating lease commitments - where a Group company is the
lessee
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The future aggregate minimum lease payments under a
non-cancellable operating leases are as follows:
2015 2014
GBP'000 GBP'000
No later than 1 year 24,987 23,543
Later than 1 year and no later than 5 years 121,441 116,141
Later than 5 years 264,356 263,712
410,784 403,396
The Group leases various offices under non-cancellable operating
lease agreements. The principal lease term on the Group's
headquarters at The St Botolph Building is for 23 years from the
balance sheet date. Rents will be reviewed on 1st October 2018, and
every 5 years thereafter, and will be calculated by reference to
the prevailing market rate.
Sub-leases
Operating lease commitments - where a Group company is the
lessor
The future aggregate minimum lease payments under a
non-cancellable operating sub-leases are as follows:
2015 2014
GBP'000 GBP'000
No later than 1 year 143 936
Later than 1 year and no later than 5 years 370 523
513 1,459
Legal and other loss contingencies
Jardine Lloyd Thompson Group plc and its subsidiaries are
subject to various claims and legal proceedings and disputes
including alleged errors and omissions in connection with the
placement of insurance and reinsurance risks and consulting
services.
IFRS requires that liabilities for contingencies be recorded
when it is probable that a liability has been incurred before the
balance sheet date and the amount can be reasonably estimated.
Significant management judgement is required to comply with this
guidance. The Group analyses its litigation exposure based on
available information, including external legal consultation where
appropriate, to assess its potential liability.
On the basis of present information, amounts already provided,
availability of insurance coverages and legal advice received, it
is the opinion of management that the disposition or ultimate
determination of such claims will not have a material adverse
effect on the consolidated financial position of the Group.
However, it is possible that future results of operations or cash
flows for any annual period could be materially affected by
an unfavourable resolution of these matters.
At 31st December 2015, the Group has contingent liabilities in
respect of guarantees and letters of credit given
on behalf of Group companies amounting to
GBP7,113,000 (2014: GBP5,563,000).
In the UK, the Group is working with the UK Financial Conduct
Authority following a market-wide thematic review of financial
advice provided to customers who were offered enhanced transfer
value products ('ETVs'). Pending the outcome of the UK Financial
Conduct Authority's review a provision has been created for the
estimated administration costs of completing the work for this
review. It is too early to determine if there is any other
liability.
34. Subsequent events
At the date of this report, the Group is planning to restructure
its UK Employee Benefits business with a flatter structure that is
better able to respond to the current dynamic marketplace. The
Group estimates, that the cost of this will be in the region of
GBP12 million.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the year ended 31st December 2015
35. Subsidiaries and associated companies
The following were the subsidiaries and associated undertakings
at 31st December 2015. Unless otherwise shown,
the capital of each company is wholly-
owned, is in ordinary shares and the principal country of
operation is the country of incorporation/registration.
% Holding
(if less
Company Country than 100%) Notes
Agnew Higgins Pickering & Company United Kingdom
Limited
Aldgate Trustees Ltd United Kingdom
Aviary Limited United Kingdom
Burke Ford Group Limited United Kingdom
Burke Ford Trustees (Leicester) United Kingdom
Limited
CPRM Limited United Kingdom
Echelon Consulting Limited United Kingdom
Expacare Limited United Kingdom
GCube Underwriting Limited United Kingdom
Gracechurch Trustees Limited United Kingdom
Gresham Pension Trustees Limited United Kingdom
Hayward Aviation Limited United Kingdom
iimia (Holdings) Limited United Kingdom
Independent Trustee Services United Kingdom
Limited
Ingham & Co (Liabilities) Limited United Kingdom
Ingham (Holdings) Limited United Kingdom
Jardine (Lloyd's Underwriting United Kingdom
Agents) Limited
Jardine Lloyd Thompson Group United Kingdom
plc
Jardine Lloyd Thompson Reinsurance United Kingdom
Holdings Limited
Jardine Lloyd Thompson Reinsurance United Kingdom
Limited
Jardine Reinsurance Management United Kingdom
Limited
JIB Group Holdings Limited United Kingdom
JIB Group Limited United Kingdom
JIB Overseas Holdings Limited United Kingdom
JIB UK Holdings Limited United Kingdom 3
JIS (1974) Limited United Kingdom
JLT Actuaries and Consultants United Kingdom
Limited
JLT Advisory Limited United Kingdom
JLT Benefit Consultants Limited United Kingdom
JLT Benefit Solutions Limited United Kingdom
JLT Capital Markets Limited United Kingdom
JLT Colombia Retail Limited United Kingdom
JLT Colombia Wholesale Limited United Kingdom 89.37%
JLT Consultants & Actuaries United Kingdom
Limited
JLT Corporate Services Limited United Kingdom
JLT EB Holdings Limited United Kingdom 3
JLT EB Services Limited United Kingdom
JLT Financial Consultants Ltd United Kingdom
JLT iimia Limited United Kingdom
JLT Insurance Group Holdings United Kingdom
Ltd
JLT Investment Management Limited United Kingdom
JLT LATAM (Southern Cone) Wholesale
Limited United Kingdom 51%
JLT Latin American Holdings United Kingdom
Limited
JLT Management Services Limited United Kingdom
JLT Mexico Holdings Limited United Kingdom
JLT Nominees Limited United Kingdom
JLT Pension Trustees Limited United Kingdom
JLT Pensions Administration United Kingdom
Holdings Limited
JLT Pensions Administration United Kingdom
Limited
JLT Peru Reinsurance Solutions
Limited United Kingdom 80.07%
JLT Peru Retail Limited United Kingdom
JLT Peru Wholesale Limited United Kingdom
JLT Quest Trustee Limited United Kingdom
JLT Re Limited United Kingdom
JLT Reinsurance Brokers Limited United Kingdom
JLT Secretaries Limited United Kingdom
JLT Specialty Limited United Kingdom
JLT Trustees (Southern) Limited United Kingdom
JLT Trustees Limited United Kingdom
JLT UK Investment Holdings United Kingdom
Limited
JLT Wealth Management (Falmouth) United Kingdom
Limited
JLT Wealth Management Limited United Kingdom
Leadenhall Independent Trustees United Kingdom
Ltd
Lloyd & Partners Limited United Kingdom
M.P. Bolshaw and Company Limited United Kingdom
Marine, Aviation & General
(London) Limited United Kingdom 25%
P3 Corporate Pensions Software United Kingdom
Limited
Pavilion Insurance Management United Kingdom
Limited
Pavilion Insurance Network United Kingdom
Limited
Pension Capital Strategies United Kingdom
Limited
Personal Pension Trustees Limited United Kingdom
Pet Animal Welfare Scheme Limited United Kingdom
PIN Finance Limited United Kingdom
Portland Pensions Limited United Kingdom
Portsoken Trustees (No. 2) United Kingdom
Limited
Portsoken Trustees Limited United Kingdom
Premier Pension Trustees Limited United Kingdom
35. Subsidiaries and associated companies continued
% Holding
(if less
Company Country than 100%) Notes
Profund Solutions Limited United Kingdom
Renewable Energy Loss Adjusters Limited
United Kingdom
The Hayward Holding Group Limited United
Kingdom
Thistle Insurance Services Limited United
Kingdom
Thistle Underwriters Limited United Kingdom
Jardines PF (Angola) Lda Angola
JLT Towner Insurance Management (Anguilla)
Limited Anguilla
JLT Re Argentina Corredores de Reaseguros
S.A. Argentina 51%
Australian Insurance Brokers Pty Ltd Australia
Echelon Australia Pty Limited Australia
Group Promoters Pty Limited Australia
Jardine Lloyd Thompson Australia Pty Limited
Australia
Jardine Lloyd Thompson Pty Limited Australia
JLT Group Services Pty Limited Australia
JLT Re Pty Ltd Australia
Local Government Insurance Brokers Pty
Limited Australia
Premium Services Australia Pty Limited
Australia
The Recovre Group Pty Ltd Australia
Thistle Underwriting Services Pty Ltd Australia
GrECo International Holding AG Austria 20%
Isosceles Insurance (Barbados) Limited
Barbados 90.91%
JLT Holdings (Barbados) Ltd Barbados 90.91%
JLT Insurance Management (Barbados) Ltd
Barbados 90.91%
JLT Management (Barbados) Ltd Barbados 90.91%
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