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Interim Results for six months ended 30 June 2015

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RNS Number : 2315U
Jardine Lloyd Thompson Group PLC
28 July 2015
 



28th July 2015

Jardine Lloyd Thompson Group plc

Unaudited Interim Results for the six months ended 30th June 2015

Jardine Lloyd Thompson Group plc ("JLT" or "the Group") announces interim results for the six months ended 30th June 2015.

Financial Highlights

·      Total revenue up 6% to £591.6m

·      Organic revenue growth of 2%

·      Reported PBT increased 3% to £101.5m

·      Underlying PBT decreased by 10% to £96.3m, impacted by cost of US investment

·      Reported diluted EPS up 11% to 33.6p

·      Underlying diluted EPS down 10% to 30.2p

·      Underlying profit margin decreased to 17.3% from 19.7%, impacted by cost of US investment

·      Increased interim dividend of 11.1p up 4.7%

Operational and Strategic Highlights

·      Organic revenue growth in the period of 2%, lower than recent years as a result of:

o   Shift in phasing of revenues and trading profit between the two halves of the year

o   Reduction in commission payments within UK Employee Benefits

o   Ongoing challenging rating environment

·      Full year organic revenue growth anticipated to be in line with previous year

·      Encouraging progress with build-out of US Specialty business

·      Acquired 5 new businesses and continued to invest in talent - 530 new colleagues joined the Group in the period

·      Disposed of stake in Siaci St Honoré for £80.2m

Dominic Burke, Chief Executive, commented:

We are pleased with the Group's underlying growth momentum and with the strong progress we are making in building out our US Specialty operations, creating a powerful platform for future growth for the whole Group. As anticipated, however, the cost of the US expansion is weighing against our short-term profitability. A one-off structural shift away from commissions within the UK employee benefits market is having an impact on our UK Employee Benefits margin and the Group's profit for the year. 

We remain confident that our full year organic revenue growth will be in line with the previous year. As we look forward, the business is well-positioned to deliver sustainable earnings growth.

Enquiries:

Dominic Burke, Chief Executive

Jardine Lloyd Thompson Group plc

020 7528 4948

Mike Reynolds, Finance Director

020 7528 4375

Paul Dransfield, Corporate Communications

020 7528 4933




Tom Burns

Brunswick Group LLP

020 7404 5959

Dania Saidam



A presentation to investors and analysts will take place at 9.00am today at The St Botolph Building, 138 Houndsditch, London, EC3A 7AW. A live webcast of the presentation can be viewed on the Group's website www.jlt.com.

FULL RELEASE FOLLOWS

_____________________________________________________________________________________


INTERIM STATEMENT

The 2015 interim results are summarised in the tables below:

JLT delivered a good first half, with strong underlying growth momentum, good progress with the build-out of our US Specialty business and continued investment to drive long-term growth.

6 months ended 30th June 2015










£m

Total Revenue


Trading Profit


Trading Margin


2015

Growth

CRE

Organic


2015

CRE

2014


2015

CRE

2014














Risk & Insurance

447.4

4%

4%

2%


91.1

91.3

94.9


20%

20%

22%

Employee Benefits

144.2

11%

10%

-


22.6

21.2

26.0


16%

15%

20%

Central Costs

-

-

-

-


(11.3)

(11.4)

(10.4)


-

-

-















591.6

6%

6%

2%


102.4

101.1

110.5


17.3%

17.1%

19.7%














£m






2015


2014


















Underlying trading profit


102.4


110.5





      Share of associates


5.8


7.2





      Net finance costs


(11.9)


(10.3)










 

Underlying profit before taxation


96.3


107.4

 

      Exceptional items


5.2


(9.0)

 






 

Profit before taxation


101.5


98.4

 

      Underlying tax expense


(26.0)


(26.8)

 

      Tax on exceptional items


2.3


1.6

 

Non-controlling interests


(3.9)


(6.6)

 

Profit after taxation and non-controlling interests


73.9


66.6





Underlying profit after taxation and

non-controlling interests


66.4


74.0














Diluted earnings per share


33.6p


30.3p





Underlying diluted earnings per share


30.2p


33.6p





 

Notes:

·     CRE:  Constant rates of exchange.

·     Organic growth is based on total revenue excluding the effect of currency, acquisitions, disposals and investment income. 

·     Total revenue comprises fees, commissions and investment income.

·     Underlying results exclude exceptional items.



 

Total revenue increased by 6% to £591.6 million, with organic revenue growth of 2% in the period. Total revenue and underlying trading profit include investment income on fiduciary funds of £1.6 million (2014: £1.6 million).

Organic revenue growth during the period was lower than during the same period in recent years as a result of a number of factors. Firstly, the anticipated shift in the phasing of revenues and trading profit between the two halves of the year, which impacted organic revenue growth by approximately 2% in the first half. Secondly, the acceleration of the ending of commission payments in our UK Employee Benefits business which, while only affecting a small part of the Group's business, had a 1% impact on our overall organic revenue growth. Thirdly, the insurance and reinsurance rating environment which continued to be challenging.

For the full year, JLT remains confident that its organic revenue growth will be in line with that achieved in the previous year, with good performances expected from JLT Specialty, Australasia, the United States and Latin America.

Underlying trading profit decreased by 7% to £102.4 million, a decrease of 9% at constant rates of exchange (CRE), and the underlying trading margin decreased from 19.7% to 17.3%, in line with the Group's expectations.

This reduction in the underlying trading profit and trading margin in part reflects the £12.6 million net cost of the Group's build-out of its US Specialty business. Excluding the net new investment made in the US, the Group's trading profit would have increased by 3% to £114.1 million and its trading margin would have been 19.5% (2014: 19.7%).

The reductions in trading profit and the trading margin also reflect the expectation that trading profits will move towards becoming more evenly distributed across the two halves of the year compared with 2014, when 56% of that year's trading profit was generated in the first half of the year.

This anticipated shift in phasing, which the Group highlighted at the time of its preliminary results in March 2015, is a result of a combination of factors, including the timing of acquisitions; the Group's changing business mix; the impact of investment in the US; and the phasing of a number of significant accounts, particularly in JLT Specialty, JLT Re and JLT Australia.

The Group's reported profit before tax increased 3% to £101.5 million, reflecting both the impact of exceptional costs relating to acquisitions and their integration, and the restructuring costs associated with the merger of JLT Specialty and Lloyd & Partners, which were more than offset by the exceptional gain on the disposal of the Group's shareholding in Siaci St Honoré. Underlying profit before tax reduced by 10% to £96.3 million.

The tax charge was £23.7 million, or £26.0 million on an underlying basis. The underlying effective tax rate for the first half of 2015 was 27%, compared with 25% for the same period in 2014.

Profit after tax and non-controlling interests increased 11% to £73.9 million. Underlying profit after tax and non-controlling interests decreased by 10% to £66.4 million.

Reported diluted earnings per share increased by 11% to 33.6p, while underlying diluted earnings per share decreased by 10% to 30.2p.

DIVIDENDS

The Board has declared an increased interim dividend of 11.1p per share, up from 10.6p per share, which will be paid on 1st October 2015 to shareholders on the register at 4th September 2015.

OPERATIONAL REVIEW

The Group operates in two principal areas: Risk & Insurance and Employee Benefits.

Risk & Insurance

6 months ended 30th June 2015










£m

Total Revenue


Trading Profit


Trading Margin


2015

Growth

CRE

Organic


2015

CRE

2014


2015

CRE

2014














JLT Specialty

138.8

5%

5%

1%


24.1

24.1

22.3


17%

17%

17%

JLT Re

117.9

5%

1%

1%


40.0

38.1

34.2


34%

34%

30%

JLT Australia and NZ

61.1

(5%)

1%

1%


20.6

22.1

22.6


34%

34%

35%

JLT Asia

40.1

5%

(1%)

(1%)


8.0

7.3

7.0


20%

19%

18%

JLT Latin America

28.4

8%

18%

18%


6.7

7.1

6.8


24%

23%

26%

JLT Insurance Services

25.0

(8%)

(9%)

(9%)


1.6

1.6

3.0


6%

6%

11%

JLT Europe, Middle East and Africa

14.2

18%

24%

24%


1.9

2.0

1.2


13%

14%

10%

JLT Canada

10.5

5%

7%

10%


0.9

0.7

(1.6)


8%

7%

(16%)

JLT USA

7.5

203%

178%

93%


(12.6)

(11.6)

(0.8)


-

-

(31%)

JLT Insurance Management

3.9

7%

(1%)

(1%)


(0.1)

(0.1)

0.2


(2%)

(2%)

6%















447.4

4%

4%

2%


91.1

91.3

94.9


20%

20%

22%





 

JLT Specialty generated revenues of £138.8 million in the period and organic revenue growth of 1%. Trading profit increased to £24.1 million, an uplift of 8%, with the trading margin unchanged at 17%.

The reported organic growth of 1% reflects the anticipated movement of certain existing accounts into the second half of the year. Without this movement of business, organic growth of 4% would have been delivered in the period.

This is a good performance in difficult market conditions, where a weak rating environment, combined with other external factors, has created further headwinds in some areas. This has affected the energy markets in particular, where low oil prices have caused the delay or cancellation of new capital projects and triggered renewed industry consolidation in the oil and gas sector.

Despite this, the business has continued to move forward, demonstrating the strategic logic of combining JLT Specialty with Lloyd & Partners to create a market-leading Specialty-focused business. The integration of the two businesses is progressing smoothly. The business's performance also underlines the strength and robustness of the Group's wholesale relationships with its independent broker clients.

The integration of Hayward Aviation has gone well and the Group sees strong growth opportunities in the General Aviation segment, both in the UK and around the world, in the years ahead as it combines Hayward Aviation's market-leading skills with the distribution strength of JLT's global retail operations.

Given the current pipeline of new business, the Group anticipates organic growth for the full year to be broadly in line with that of the previous year.

JLT Re generated revenue of £117.9 million for the first half of the year, an increase of 5% on the same period in 2014 on a reported basis, with organic revenue growth of 1%. Organic growth was negatively impacted by 2% due to the renewal dates on two large accounts moving to the second half of the year, the largest of which renewed on 1st July. Trading profit increased 17% to £40.0 million and the trading margin improved to 34% from 30%.

This performance was pleasing when set against the continued steep decline in the reinsurance rating environment experienced in the first half of the year, with rates typically falling by between 10% and 15% across many classes of business. The business also had to contend with further rate reductions at the time of the 1st June renewals, although the level of the reductions was lower than that seen at the beginning of the year.

JLT Re continues to win many new clients and to be successful in attracting leading talent from across the industry, particularly in the United States. The business sees clear opportunities to build on its strong positions in its US Regional, Public Sector and Natural Catastrophe practices. JLT Re is strongly positioned to take advantage of its strategic positioning and stable platform. We are also expanding our Chinese reinsurance capabilities and we will continue to invest in our London Specialty offering.

These factors, together with the strong new business pipeline, give the Group confidence that this business will demonstrate good positive year-on-year organic revenue growth.

As in prior years, the Group would expect the trading profit and the trading margin to normalise for the full year, but JLT remains confident that the business is on track to deliver a 20% trading margin by the end of 2016.

JLT Australia and New Zealand delivered revenue of £61.1 million during the period, an increase of 1% on a CRE basis from the first half of the previous year, with organic revenue growth of 1%. As anticipated, the level of organic growth in the first half of the year was lowered by the movement of some existing revenues into the second half of the year. Absent this factor, organic revenue growth would have been 4%.

Reported revenue reduced by 5%, when compared with the first half of 2014, as a consequence of the fall in value of the Australian dollar against sterling.

The business has delivered good growth in its Construction, Corporate Risk and Local Government operations, and secured a number of notable new business wins in the period. Investment in building out the team continues, with the business taking advantage of its strong momentum and attractive people proposition to recruit leading industry talent across its core Specialisms.

This business remains well-positioned to grow successfully in the second half and, based on its pipeline of activity, the Group is confident that it will deliver a good level of organic revenue growth for the year as a whole.

JLT Asia grew revenue by 5% during the period to £40.1 million, although, on a CRE basis, revenue declined by 1% when compared with the same period last year. This reflected the challenging trading conditions due to a marked influx of new capacity that has affected the rating environment in this region.

Trading profit increased by 15% to £8.0 million and the trading margin increased to 20% from 18%. This improvement reflects the benefits of the Group's Business Transformation Programme.

During the period, the business recruited senior leadership teams in both Singapore and China. It now plans to make significant investments in broadening its geographic presence and Specialty offering in China.

JLT Latin America delivered an 8% increase in revenue to £28.4 million, an increase of 18% at CRE, with organic growth of 18%. Trading profit was virtually unchanged from the prior period, with the trading margin declining to 24% from 26% from the same period last year. This reflects the previously-advised acceleration in the investment in the region in terms of recruitment; expanding affinity operations across Peru, Colombia and Brazil; and growing the Latin American office network. For example, in Brazil, JLT has increased from four offices three years ago to ten offices today.

The Group remains confident in this business's continued growth prospects over both the short and the longer term.

JLT USA generated revenue of US$11.4 million (£7.5 million) during the period and a net trading loss of US$19.4 million (£12.6 million), in line with the Group's expectations as we continue to invest in the build-out of our US Specialty operations following its launch in August 2014.

The business continues to progress well. The JLT Specialty USA team is now nearing 150 people, with 12 offices established across the US. 

JLT is creating real depth to its US Specialty capabilities, with strong leaders appointed to all of the key Specialty areas, which now also include Construction and Entertainment, further broadening the business's offering beyond its positions in Aviation, Energy, Technology, Cyber, Directors & Officers and Credit, Political & Security.

Our people are investing a significant amount of their time in building the business's platform, brand, sales and marketing capabilities, and developing new client relationships and opportunities. This is creating strong sales momentum and a large and growing pipeline of new business opportunities. This will be supplemented significantly as and when our new colleagues are free of their contractual restrictions to their previous employers. 



 

Employee Benefits

6 months ended 30th June 2015










£m

Total Revenue


Trading Profit


Trading Margin


2015

Growth

CRE

Organic


2015

CRE

2014


2015

CRE

2014














UK & Ireland

85.0

-

-

(8%)


7.1

7.1

12.3


8%

8%

14%

Asia

40.1

31%

21%

19%


14.0

12.3

11.1


35%

33%

36%

Latin America

9.1

(2%)

11%

5%


1.7

2.0

2.6


19%

19%

28%

Australia and NZ

8.4

172%

191%

20%


0.5

0.5

0.3


5%

5%

10%

Europe, Middle East and Africa

0.9

21%

24%

24%


(0.6)

(0.6)

(0.1)


(68%)

(68%)

(16%)

Canada

0.7

(17%)

(14%)

(14%)


(0.1)

(0.1)

(0.2)


(16%)

(16%)

(22%)















144.2

11%

10%

-


22.6

21.2

26.0


16%

15%

20%

 

UK & Ireland Employee Benefits reported revenue of £85.0 million during the period, unchanged from the corresponding period last year. On an organic basis, revenues decreased by 8% and trading profit reduced to £7.1 million, with the trading margin falling to 8% from 14%.

Under the Retail Distribution Review, all commission payments to intermediaries must cease by the end of 2016, creating a one-off structural change in this part of the industry. However, our business has increasingly seen insurers opportunistically choosing to end commission payments in advance of this deadline.

JLT has been moving its clients to a more sustainable fee-based remuneration structure. The business is about halfway through this process, with the balance expected to move across over the next 12 months.

The effect of this structural change has been to reduce first half revenues by £5.3 million, which in turn lowered the Group's overall organic revenue growth in the period by 1%. 

While the Group expects to see the UK Employee Benefits business deliver some revenue growth in 2015, the impact of this industry change will be to reduce the business's full year trading margin to around 17% compared with 20% in 2014.

The Group remains confident about the future of the broader Employee Benefits business. We see further opportunities in the large pensions administration sector, where we are one of the leading players. Furthermore, with BenPal now managing one million Defined Contribution pension scheme members, the Group sees this technology supporting the client benefit programmes of the future. In addition, further government policy and legislative change is creating, and will continue to create, demand from clients for advice and new solutions. Finally, JLT's investment platform, which now has £4 billion in assets under management, is well-placed to meet growing client demand for implemented consulting. 

For these reasons, JLT would expect that organic revenue growth for its overall UK Employee Benefits business will return to historic levels in 2016, but that the trading margin will remain around the 17% level, reflecting the one-off structural change in the industry. 

Asia Employee Benefits achieved strong revenue growth of 31% to £40.1 million, an increase of 21% at CRE, with an impressive organic revenue growth of 19%. The acquisition in China of Essential Healthcare, which extends JLT's offering in health and wellness consulting, was completed in January.

Latin America Employee Benefits delivered an 11% increase in revenues at CRE, with organic revenue growth of 5%. Revenue was virtually unchanged at £9.1 million on a reported basis, with the trading margin reducing to 19% compared with 28% for the corresponding period in 2014. Following the acquisition of SCK, JLT has invested heavily in its Employee Benefits business across the region in the first half, with capabilities now in place in many of its ten offices across Brazil.

Australia and New Zealand Employee Benefits businesses are also progressing well, with organic revenue growth of 20%. The acquisitions of Recovre and Alpha, rehabilitation service providers, are set to drive strong revenue growth over the years ahead and will provide an increasing contribution in the second half of this year. This is a rapidly expanding sector in Australia and New Zealand, as clients seek an integrated occupational health and return-to-work service that assists them in managing the rising cost of mandatory worker's compensation and discretionary benefits.

ASSOCIATES

6 months ended 30th June 2015




£m

Contribution After Tax


2015

CRE

2014

Growth






Share of associates

5.8

6.4

7.2

(20%)

 

The contribution from the Group's Associates has reduced by 20% compared with the same period in 2014, mainly as a result of the sale of JLT's stake in Siaci Saint Honoré. The transaction completed on 6th May 2015.

JLT's other European Associates have performed in line with the Group's expectations, which anticipated further headwinds from the general insurance rating environment and the growth and stability challenges facing the Eurozone.



 

EXCEPTIONAL ITEMS

The disposal of the Group's share in its French associate, Siaci St Honoré, for £80.2 million generated an exceptional gain of £18.5 million during the period. This is less than indicated in March 2015 due to the weakening of the euro against sterling.

During the period, the Group incurred acquisition and integration costs of £6.8 million. Acquisition and integration costs for the full year are now expected to be £13 million. This includes the final elements of the integration expenditure relating to the reinsurance acquisition; the integration of Ensign Pensions Administration; and costs relating to the integrations of Hayward Aviation, which was acquired at the end of 2014, and Recovre, Alpha and Liberty Asset Management acquired in 2015.

The Group incurred £6.7 million of restructuring costs during the period arising from the merger of JLT Specialty and Lloyd & Partners. The Group expects to incur a total of approximately £9 million of exceptional costs in respect of this restructuring for the full year.

Total exceptional costs are anticipated to be £24 million for 2015, which will be largely offset by the exceptional gain of £18.5 million from the sale of the Group's stake in Siaci St Honoré.

OPERATING COSTS

During the period, the Group's underlying operating cost ratio increased by 240 basis points to 82.7% of total revenues. This was mainly driven by a 220 basis point increase as a result of the investment in the US Specialty business.

The Group has continued to recruit, with staff numbers rising by 530 during the period, with more than half coming from acquisitions. This expansion is reflected in the increase in staff costs as a percentage of revenue - an increase of 280 basis points compared with the first half of 2014.

The Group remains focused on cost discipline. At the time of the 2014 preliminary results in March 2015, the Group stated that it expected the investment in the US Specialty business to negatively impact the full year 2015 trading margin by approximately 200 basis points.

CASH FLOW AND BALANCE SHEET

Net debt of £457 million compares with £436 million at 30th June 2014, an increase of £21 million. In broad terms, this increase represents the cash flows resulting from the Group's acquisitions over the last 12 months - in particular, Hayward Aviation and Recovre - together with the re-translation of $500 million of private placement loan notes, the impact of which is hedged on the balance sheet, largely offset by the £80.2 million proceeds from the disposal of the Group's investment in Siaci St Honoré.

The impact of the acquisition spend and the disposal proceeds can be seen in the increase in the Group's goodwill and the reduction in associates.

In February 2015, JLT completed the renewal of its core revolving credit facility with a new 5-year unsecured committed facility of £450 million. The Group now has medium and long-term debt facilities equivalent to approximately £890 million. The proceeds of the sale of the Group's stake in Siaci St Honoré has been used to repay borrowings drawn under the Group's revolving credit facility, further increasing the available headroom, which is now in excess of £300 million.

The net debt to EBITDA ratio at the end of June 2015 was just under 2:1, which remains comfortably within JLT's debt facilities covenants.

The Group will continue to invest in the business in line with its strategy and JLT remains of the view that future cash flows, together with EBITDA growth, will mean that the Group's net debt to EBITDA ratio will reduce over time.

FOREIGN EXCHANGE         

The Group's major currency transaction exposure arises in those businesses that earn US dollar-denominated revenue, but which have a sterling cost base. The Group continues to operate a US dollar hedging programme to smooth the volatility caused by exchange rate movements.

As at 30th June 2015, some 70% of these anticipated dollar revenues for 2015 earned in the UK (approximately US$360 million) are hedged at an average rate of US$1.55. For 2016, some 50% of expected dollar revenues are hedged at an average rate of US$1.56 and some 20% are hedged for 2017 at an average rate of US$1.54.

As a guide, each one cent movement in the achieved rate currently translates to a change of approximately £1.5 million in revenue and a corresponding impact on trading profit equal to approximately 65% of the revenue change. Based on current hedging levels in 2015, it would take a movement of around 3 cents in the spot rate to generate a 1 cent movement in the achieved rate.

In addition to the transactional foreign exchange exposure, which is managed through the Group's hedging programmes, JLT is also exposed to translational foreign exchange movements in overseas earnings which are not hedged. Given the relative size and profitability of the Group's Australian business, the most material such exposure is to the Australian dollar which continues to be weak versus sterling.

BOARD AND SENIOR MANAGEMENT DEVELOPMENTS

As announced on 27th May 2015, Charlie Rozes will join JLT on 1st September 2015 and will be appointed Group Finance Director, succeeding Mike Reynolds. Charlie will join the JLT Board as an Executive Director and will also be a member of the Group Executive Committee.

Mike Reynolds, who was appointed Global CEO of JLT Re in August 2014, will step down from the Board on 1st September, but will remain a member of the Group Executive Committee. Ed Hochberg has been appointed as CEO of JLT Re in North America.

Further to the announcement in January 2015 regarding management changes within the Group's UK Employee Benefits and Asia businesses, Duncan Howorth has taken up the position of CEO of JLT's UK Employee Benefits business, as well as continuing in his role as the International Chairman of Employee Benefits. Dominic Samengo-Turner has taken up the position of CEO of JLT Asia, with Warren Downey having been appointed as Deputy CEO of Asia.

OUTLOOK

We are pleased with the Group's underlying growth momentum and with the strong progress we are making in building out our US Specialty operations, creating a powerful platform for future growth for the whole Group. As anticipated, however, the cost of the US expansion is weighing against our short-term profitability. A one-off structural shift away from commissions within the UK employee benefits market is having an impact on our UK Employee Benefits margin and the Group's profit for the year. 

We remain confident that our full year organic revenue growth will be in line with the previous year.  As we look forward, the business remains well-positioned to deliver sustainable earnings growth.

 

Results follow

 

                    Jardine Lloyd Thompson Group plc
                    Consolidated Income Statement
                    Unaudited Interim Results for the six months ended 30th June 2015




6 months ended 30th June


6 months ended 30th June


Notes

2015
£'000


2014
£'000






Fees and commissions

3

590,052


558,045

Investment income

3

1,558


1,590

Total revenue

3

591,610


559,635






Salaries and associated expenses


(363,386)


(324,375)

Premises


(30,828)


(29,825)

Other operating costs


(74,330)


(90,250)

Depreciation, amortisation and impairment charges

4

(15,452)


(13,768)

Operating profit

2,3,4

107,614


101,417






Analysed as:





Operating profit before exceptional items

2,3

102,400


110,499






Acquisition and integration costs

4

(6,834)


(6,320)

Restructuring costs

4

(6,664)


-

Profit on sale of associate

4

18,542


-

 

 

Business Transformation Programme

4

-


(2,762)

Other exceptional items

4

170


-

Operating profit

2,3,4

107,614


101,417






Finance costs


(12,568)


(10,936)

Finance income


703


703

Finance costs - net


(11,865)


(10,233)

Share of results of associates


5,720


7,173

Profit before taxation

2,3

101,469


98,357

Income tax expense

5

(23,730)


(25,160)

Profit for the period


77,739


73,197






Profit attributable to:





Owners of the parent

3

73,890


66,621

Non-controlling interests


3,849


6,576



77,739


73,197






Earnings per share attributable to the owners of the parent during the period (expressed in pence per share)

6




Basic earnings per share


33.7p


30.3p

Diluted earnings per share


33.6p


30.3p

The notes on pages 18 to 43 form an integral part of these condensed consolidated interim financial statements.

                       Jardine Lloyd Thompson Group plc
                       Consolidated Statement of Comprehensive Income
                       Unaudited Interim Results for the six months ended 30th June 2015




6 months ended 30th June


6 months ended 30th June


Notes


2015
£'000


2014
£'000






Profit for the period


77,739


73,197






Other comprehensive income/(expense)










Items that will not be reclassified to profit or loss





Remeasurement of post employment benefit obligations

22

23,389


(16,666)

Taxation thereon


(3,562)


3,178

Total items that will not be reclassified to profit or loss


19,827


(13,488)






Items that may be reclassified subsequently to profit or loss





Fair value gains/(losses) net of tax





-  available-for-sale


72


10

-  cash flow hedges


4,616


5,084

Currency translation differences


(22,165)


(9,906)

Total items that may be reclassified subsequently to profit or loss


(17,477)


(4,812)

Other comprehensive income/(expense) net of tax


2,350


(18,300)

Total comprehensive income for the period


80,089


54,897






Attributable to:





Owners of the parent


77,285


48,900

Non-controlling interests


2,804


5,997



80,089


54,897

The notes on pages 18 to 43 form an integral part of these condensed consolidated interim financial statements.

                     Jardine Lloyd Thompson Group plc
                     Consolidated Balance Sheet
                     Unaudited Interim Results as at 30th June 2015




As at

30th June


As at

30th June


As at

31st December


Notes

2015
£'000


2014
£'000


2014
£'000








NET OPERATING ASSETS














Non-current assets







Goodwill

8

481,231


438,188


475,697

Other intangible assets


99,996


84,822


86,495

Property, plant and equipment


60,505


60,002


61,405

Investments in associates


39,820


103,235


100,650

Available-for-sale financial assets

9,14

13,384


15,039


9,004

Derivative financial instruments

10,14

16,324


19,098


18,514

Retirement benefit surpluses

22

559


782


572

Deferred tax assets


55,747


47,110


64,818



767,566


768,276


817,155








Current assets







Trade and other receivables

11

538,269


485,442


493,647

Derivative financial instruments

10,14

5,446


10,513


3,101

Available-for-sale financial assets

9,14

172


1,331


5,384

Current tax assets


-


111


-

Cash and cash equivalents

12,14

938,248


838,170


871,246



1,482,135


1,335,567


1,373,378








Current liabilities







Borrowings

14,15

(24,639)


(22,443)


(168,586)

Trade and other payables

13

(1,093,938)


(971,037)


(1,037,544)

Derivative financial instruments

10,14

(1,384)


(1,769)


(2,491)

Current tax liabilities


(8,304)


-


(8,743)

Provisions for liabilities and charges

16

(5,501)


(7,369)


(7,588)



(1,133,766)


(1,002,618)


(1,224,952)

Net current assets


348,369


332,949


148,426








Non-current liabilities







Borrowings

14,15

(581,704)


(532,554)


(443,651)

Derivative financial instruments

10,14

(33,156)


(32,696)


(15,859)

Deferred tax liabilities


(18,908)


(14,293)


(16,687)

Retirement benefit obligations

22

(158,523)


(149,312)


(179,607)

Provisions for liabilities and charges

16

(1,348)


(4,779)


(3,225)



(793,639)


(733,634)


(659,029)



322,296


367,591


306,552








TOTAL EQUITY














Capital and reserves attributable to the owners of the parent







Ordinary shares


11,008


11,005


11,006

Share premium

17

104,063


103,870


103,941

Fair value and hedging reserves

17

4,454


22,318


(234)

Exchange reserves

17

(26,153)


(11,326)


(5,033)

Retained earnings


211,865


219,993


178,932

Shareholders' equity


305,237


345,860


288,612

Non-controlling interests


17,059


21,731


17,940



322,296


367,591


306,552

The notes on pages 18 to 43 form an integral part of these condensed consolidated interim financial statements.

                     Jardine Lloyd Thompson Group plc
                     Consolidated Statement of Changes in Equity
                     Unaudited Interim Results for the six months ended 30th June 2015




6 months ended 30th June 2015


Notes

Ordinary shares

Other reserves

Retained earnings

Shareholders' equity

Non-controlling interests

Total equity



£'000

£'000

£'000

£'000

£'000

£'000









Balance at 1st January 2015


11,006

98,674

178,932

288,612

17,940

306,552









Profit for the period


-

-

73,890

73,890

3,849

77,739

Other comprehensive (expense)/income for the period


-

(16,432)

19,827

3,395

(1,045)

2,350









Total comprehensive (expense)/income for the period


-

(16,432)

93,717

77,285

2,804

80,089

Dividends

7

-

-

(40,262)

(40,262)

(3,922)

(44,184)

Amounts in respect of share based payments:








-  reversal of amortisation net of tax


-

-

12,779

12,779

-

12,779

-  shares acquired


-

-

(17,004)

(17,004)

-

(17,004)

Acquisitions

20

-

-

-

-

42

42

Disposals

21

-

-

-

-

195

195

Transactions with non-controlling interests


-

-

(16,297)

(16,297)

-

(16,297)

Issue of share capital


2

122

-

124

-

124

Balance at 30th June 2015


11,008

82,364

211,865

305,237

17,059

322,296



































6 months ended 30th June 2014


Notes

Ordinary shares

Other reserves

Retained earnings

Shareholders' equity

Non-controlling interests

Total equity



£'000

£'000

£'000

£'000

£'000

£'000









Balance at 1st January 2014


11,003

118,964

211,009

340,976

19,481

360,457









Profit for the period


-

-

66,621

66,621

6,576

73,197

Other comprehensive expense for the period


-

(4,233)

(13,488)

(17,721)

(579)

(18,300)









Total comprehensive (expense)/income for the period


-

(4,233)

53,133

48,900

5,997

54,897

Dividends

7

-

-

(37,221)

(37,221)

(3,254)

(40,475)

Amounts in respect of share based payments:








-  reversal of amortisation net of tax


-

-

9,772

9,772

-

9,772

-  shares acquired


-

-

(15,367)

(15,367)

-

(15,367)

Acquisitions


-

-

-

-

(493)

(493)

Transactions with non-controlling interests


-

-

(1,333)

(1,333)

-

(1,333)

Issue of share capital


2

131

-

133

-

133

Balance at 30th June 2014


11,005

114,862

219,993

345,860

21,731

367,591

The notes on pages 18 to 43 form an integral part of these condensed consolidated interim financial statements.

                     Jardine Lloyd Thompson Group plc
                     Consolidated Statement of Cash Flows
                     Unaudited Interim Results for the six months ended 30th June 2015




6 months ended 30th June


6 months ended 30th June


Notes

2015
£'000


2014
£'000






Cash flows from operating activities





Cash generated from operations

19

66,418


26,330

Interest paid


(8,461)


(7,651)

Interest received


2,019


2,581

Taxation paid


(15,823)


(17,931)

Increase in net insurance broking creditors


55,383


72,725



99,536


76,054

Dividend received from associates


806


1,526

Net cash generated from operating activities


100,342


77,580






Cash flows from investing activities





Purchase of property, plant and equipment


(6,310)


(5,381)

Purchase of other intangible assets


(27,320)


(25,882)

Proceeds from disposal of property, plant and equipment


801


442

Acquisition of businesses, net of cash acquired

20

(13,048)


(9,902)

Acquisition of associates


(309)


-

Proceeds from disposal of business, net of cash disposed

21

(13)


8

Proceeds from disposal of associates

3

80,235


-

Proceeds from disposal of available-for-sale other investments


245


1,102

Net cash generated/(used) in investing activities


34,281


(39,613)






Cash flows from financing activities





Dividends paid to owners of the parent


(39,382)


(37,493)

Purchase of available-for-sale financial assets

9

(5,423)


(1,310)

Proceeds from disposal of available-for-sale financial assets


5,199


7,928

Purchase of shares


(17,004)


(15,367)

Proceeds from issuance of ordinary shares


124


133

Proceeds from borrowings


49,936


128,013

Repayments of borrowings


(50,061)


(30,389)

Dividends paid to non-controlling interests


(3,922)


(3,254)

Net cash (used)/generated from financing activities


(60,533)


48,261






Net increase in cash and cash equivalents


74,090


86,228

Cash and cash equivalents at beginning of the period


871,246


753,164

Exchange losses on cash and cash equivalents


(7,088)


(1,222)

Cash and cash equivalents at end of the period


938,248


838,170

The notes on pages 18 to 43 form an integral part of these condensed consolidated interim financial statements.


Jardine Lloyd Thompson Group plc
Notes to the Unaudited Interim Results
For the six months ended 30th June 2015

 

1.   Basis of accounting

The Group's condensed consolidated interim financial statements for the six months ended 30th June 2015 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The Group has considerable financial resources and a geographically diversified business and as a consequence, the Directors believe that the Group is well placed to manage its business risks in the context of the current economic outlook. Accordingly, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis in preparing these interim results. These financial statements should be read in conjunction with the consolidated statutory accounts of the Group for the year ended 31st December 2014, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31st December 2014 were approved by the Board of Directors on 10th March 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

These condensed consolidated interim financial statements have been reviewed, not audited.

The accounting policies are consistent with those of the annual financial statements for the year ended 31st December 2014.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31st December 2014.

Full details of the audited accounts and accounting policies for the year ended 31st December 2014 are available at www.jlt.com.

 

2.   Alternative income statement

The format of the consolidated income statement on page 13 conforms to the requirements of IFRS.  The alternative income statement set out below, which is provided by way of additional information, has been prepared on a basis that conforms more closely to the approach adopted by the Group in assessing its performance. The statement provides a reconciliation between the underlying results used by the Group to assess performance and the IFRS income statement.


6 months ended 30th June 2015




Underlying profit
£'000


Exceptional items
£'000


 

Total
£'000








Fees and commissions


590,052


-


590,052

Investment income


1,558


-


1,558

Salaries and associated expenses


(354,600)


(8,786)


(363,386)

Premises


(29,722)


(1,106)


(30,828)

Other operating costs


(89,436)


15,106


(74,330)

Depreciation, amortisation and impairment charges


(15,452)


-


(15,452)








Trading profit


102,400


5,214


107,614

Finance costs - net


(11,865)


-


(11,865)

Share of results of associates


5,720


-


5,720

Profit before taxation


96,255


5,214


101,469

 


6 months ended 30th June 2014




Underlying profit
£'000


Exceptional items
£'000


 

Total
£'000








Fees and commissions


558,045


-


558,045

Investment income


1,590


-


1,590

Salaries and associated expenses


(319,878)


(4,497)


(324,375)

Premises


(27,909)
)


(1,916)


(29,825)

Other operating costs


(87,581)


(2,669)


(90,250)

Depreciation, amortisation and impairment charges


(13,768)


-


(13,768)








Trading profit


110,499


(9,082)


101,417

Finance costs - net


(10,233)


-


(10,233)

Share of results of associates


7,173


-


7,173

Profit before taxation


107,439


(9,082)


98,357

  

3.   Segment information

Management has determined its operating segments based on the analysis used to make strategic decisions.

Business segment analysis

The Group is organised on a worldwide basis into three main segments: Risk & Insurance, Employee Benefits and Head Office & Other operations. These segments are consistent with the internal reporting structure of the Group.

The Risk & Insurance segment comprises JLT's global 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 Risk & Insurance and Employee Benefit segments are 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 profit of these associates are included in the Head Office & Other segment, together with the investment and results of the Group's other associates, Sterling Re Intermediaro de Reaseguro SA de CV, JLT Insurance Management Malta, 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 £80,235,000 and a net exceptional gain of £18,542,000.

Other segment items

Capital expenditure comprises additions to property, plant and equipment and other intangible assets.

Business cyclicality

From an overall perspective, given the inherent nature and geographic spread of the Group's operations, whilst there may be an element of period on period phasing of revenue and profits, the business is not considered to be significantly cyclical between each half year period.

3.    Segment information cont'd


6 months ended 30th June 2015


Risk & Insurance


Employee Benefits




JLT Specialty

£'000

JLT Re

£'000

JLT Australia & New Zealand

£'000

JLT Asia

£'000

Other

 Risk & Insurance

£'000


UK & Ireland

£'000

Asia

£'000

Other Employee Benefits

£'000

Head Office & Other

£'000

Total

£'000













Fees and commissions

138,378

117,743

60,493

39,979

89,245


85,058

40,055

19,101

-

590,052

Investment income

445

159

649

89

195


1

7

13

-

1,558

Total revenue

138,823

117,902

61,142

40,068

89,440


85,059

40,062

19,114

-

591,610

Underlying trading profit

24,087

40,061

20,622

8,020

(1,672)


7,095

14,048

1,480

(11,341)

102,400













Operating profit

17,387

36,849

20,622

8,217

(2,795)


4,929

14,046

858

7,501

107,614

Finance costs - net

-

-

-

-

-


-

-

-

(11,865)

(11,865)

Share of results of associates

-

-

-

-

-


-

-

-

5,720

5,720

Profit before taxation

17,387

36,849

20,622

8,217

(2,795)


4,929

14,046

858

1,356

101,469

Income tax expense

-

-

-

-

-


-

-

-

(23,730)

(23,730)

Non-controlling interests

-

-

-

-

-


-

-

-

(3,849)

(3,849)

Net profit attributable to the owners of the parent

17,387

36,849

20,622

8,217

(2,795)


4,929

14,046

858

(26,223)

73,890













Segment assets










2,209,881

2,209,881

Investments in associates










39,820

39,820

Total assets










2,249,701

2,249,701













Segment liabilities










(1,927,405)

(1,927,405)

Total liabilities










(1,927,405)

(1,927,405)













Other segment items:












Capital expenditure

7,599

2,928

1,096

1,981

7,576


4,385

728

224

7,113

33,630

Depreciation, amortisation and impairment charges

(3,852)

(762)

(1,356)

(1,395)

(3,570)


(3,423)

(360)

(362)

(5,849)

(20,929)

  

3.    Segment information cont'd


6 months ended 30th June 2014


Risk & Insurance


Employee Benefits




JLT Specialty

£'000

JLT Re

£'000

JLT Australia & New Zealand

£'000

JLT Asia

£'000

Other

 Risk & Insurance

£'000


UK & Ireland

£'000

Asia

£'000

Other Employee Benefits

£'000

Head Office & Other

£'000

Total

£'000













Fees and commissions

132,363

112,649

63,773

37,991

81,228


85,374

30,664

14,003

-

558,045

Investment income

389

167

686

73

254


-

5

16

-

1,590

Total revenue

132,752

112,816

64,459

38,064

81,482


85,374

30,669

14,019

-

559,635

Underlying trading profit

22,311

34,172

22,595

6,982

8,879


12,314

11,108

2,550

(10,412)

110,499













Operating profit

21,540

29,288

22,595

6,048

8,161


11,789

11,046

2,481

(11,531)

101,417

Finance costs - net

-

-

-

-

-


-

-

-

(10,233)

(10,233)

Share of results of associates

-

-

-

-

-


-

-

-

7,173

7,173

Profit before taxation

21,540

29,288

22,595

6,048

8,161


11,789

11,046

2,481

(14,591)

98,357

Income tax expense

-

-

-

-

-


-

-

-

(25,160)

(25,160)

Non-controlling interests

-

-

-

-

-


-

-

-

(6,576)

(6,576)

Net profit attributable to the owners of the parent

21,540

29,288

22,595

6,048

8,161


11,789

11,046

2,481

(46,327)

66,621













Segment assets










2,000,608

2,000,608

Investments in associates










103,235

103,235

Total assets










2,103,843

2,103,843













Segment liabilities










(1,736,252)

(1,736,252)

Total liabilities










(1,736,252)

(1,736,252)













Other segment items:












Capital expenditure

14,270

177

1,461

921

3,427


3,215

306

365

7,121

31,263

Depreciation, amortisation and impairment charges

(2,861)

(907)

(1,415)

(1,045)

(2,351)


(2,995)

(291)

(212)

(5,556)

(17,633)

  

4.    Operating profit



6 months ended

 30th June


6 months ended

 30th June




2015
£'000


2014
£'000






The following items have been charged/(credited) in arriving at operating profit:










Foreign exchange losses/(gains):





-  fees and commissions


948


(4,055)

-  other operating costs


(85)


1,726



863


(2,329)











Amortisation of other intangible assets:





-  software costs


8,653


7,538

-  other intangible assets


904


796

Depreciation on property, plant and equipment


5,895


5,434

Total depreciation and amortisation charges


15,452


13,768











Amortisation of other intangible assets:





-  employment contract payments (included in salaries and associated expenses)

5,477


3,865











Gains on disposal of property, plant and equipment


(64)


(86)











Fair value losses - derivatives financial instruments


44


50

Losses/(gains) on sale - available-for-sale financial assets


64


(103)



108


(53)
















Exceptional items:










Acquisition and integration costs of which:





-  included in salaries and associated expenses


2,707


2,635

-  included in premises costs


1,015


1,916

-  included in other operating costs


3,112


1,769



6,834


6,320






Restructuring costs of which:





-  included in salaries and associated expenses


6,570


-

-  included in premises costs


91


-

-  included in other operating costs


3


-



6,664


-






Business Transformation Programme of which:





-  included in salaries and associated expenses


-


1,862

-  included in other operating costs


-


900



-


2,762






Net profit on sale of associate (including expenses)


(18,542)


-

Net loss on disposal of businesses


607


-

Pension curtailment gain


(491)


-

Release of contingent considerations


(286)


-

Total exceptional items


(5,214)


9,082

  

5.   Income tax expense



6 months ended

30th June


6 months ended

30th June




2015
£'000


2014
£'000






Current tax expense





Current period


15,196


15,567

Adjustments in respect of prior years


1,032


315



16,228


15,882






Deferred tax expense





Origination and reversal of temporary differences


5,586


10,079

Adjustments in respect of prior years


1,916


(801)



7,502


9,278

Total income tax expense


23,730


25,160


The total income tax expense in the income statement of £23,730,000 includes a tax credit on exceptional items of £2,270,000 (2014: £1,702,000).  There were no non-recurring tax credits in the period.

The UK Government has introduced a 1% reduction in the headline rate of corporation tax from April 2015. This reduces the UK tax rate from 21% to 20%. As at 30th June 2015, this rate reduction is already in force. The impact of this reduction has therefore been incorporated into the income tax charge for the six months ended 30th June 2015.

The UK Government has announced in July 2015 that the corporation tax rate is set to be cut to 19% in 2017 and to 18% in 2020. These rate reductions have not been substantively enacted, therefore the impact of these reductions has not been incorporated into the income tax charge for the six months ended 30th June 2015.

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:



6 months ended

 30th June


6 months ended

 30th June




2015
£'000


2014
£'000






Profit before taxation


101,469


98,357






Tax calculated at UK Corporation Tax rate of 20.25% (2014: 21.5%)


20,547


21,147

Non-deductible expenses*


(2,798)


2,386

Adjustments in respect of prior years


2,948


(486)

Effect of UK and non-UK tax rate differences


4,191


3,655

Tax on associates


(1,158)


(1,542)

Total income tax expense


23,730


25,160






* The non-deductible expenses relate primarily to non-deductible entertainment expenses and the gain on the disposal of Siaci.

 

6.    Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent by the weighted average number of ordinary shares in issue during the period, excluding unallocated shares held by the Trustees of the Employee Share Ownership Plan Trust and the Qualifying Employee Share Ownership Trust.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

Additionally basic and diluted earnings per share are also calculated based on underlying earnings attributable to the owners of the parent. 

6.   Earnings per share cont'd

A reconciliation of earnings is set out below.



As at

 30th June


As at

 30th June




2015
No. of shares


2014
No. of shares






Weighted average number of ordinary shares in issue


219,435,453


219,645,128

Effect of outstanding share options


349,815


520,130

Adjusted weighted average number of ordinary shares for diluted earnings per share


219,785,268


220,165,258

 


6 months ended 30th June 2015


6 months ended 30th June 2014



£'000

Basic pence per share

Diluted pence per share



£'000

Basic pence per share

Diluted pence per share









Earnings reconciliation
















Underlying profit after taxation and non-controlling interests

66,406

30.3

30.2


74,001

33.7

33.6









Exceptional items before tax

5,214




(9,082)



Taxation thereon

2,270




1,702




7,484

3.4

3.4


(7,380)

(3.4)

(3.3)









Profit attributable to the owners of the parent

73,890

33.7

33.6


66,621

30.3

30.3

 

 

7.   Dividends



6 months ended

30th June


6 months ended

30th June




2015
£'000


2014
£'000






Final dividend in respect of 2014 of 18.3p per share (2013: 17.1p)


40,262


37,221

An interim dividend in respect of 2015 of 11.1p per share (2014: 10.6p) amounting to a total of £24,420,000 (2014: £23,396,000) is payable on 1st October 2015 to shareholders who are registered at the close of business on 4th September 2015.  The dividend proposed will not be accounted for until it is paid. The ex-dividend date will be 3rd September 2015.

 

8.   Goodwill


6 months ended 30th June 2015




Gross amount
£'000


Impairment losses
£'000


Net carrying amount
£'000








At 30th June 2015







Opening net book amount


480,176


(4,479)


475,697

Exchange differences


(8,440)


221


(8,219)

Acquisitions


14,472


-


14,472

Disposals


(719)


-


(719)

Closing net book amount


485,489


(4,258)


481,231

  

8.    Goodwill cont'd


6 months ended 30th June 2014




Gross

 amount
£'000


Impairment losses
£'000


Net carrying amount
£'000








At 30th June 2014







Opening net book amount


434,026


(4,576)


429,450

Exchange differences


(5,164)


114


(5,050)

Acquisitions


13,788


-


13,788

Closing net book amount


442,650


(4,462)


438,188

 

9.   Available-for-sale financial assets

Available-for-sale financial assets are categorised into one of two categories:

1)   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.

2)   Investments and deposits consist mainly of fixed term deposits, bonds and certificates of deposits.  These investments are held at fair value and are classified between current and non-current assets according to the maturity date.


6 months ended 30th June 2015




Other investments
£'000


Investments and deposits
£'000


 

Total
£'000








At 1st January 2015


4,746


9,642


14,388

Exchange differences


(48)


(671)


(719)

Additions


-


5,423


5,423

Disposals/maturities


(245)


(5,263)


(5,508)

Revaluation gain (included within equity)


-


37


37

Amounts to be written off


(65)


-


(65)

At 30th June 2015


4,388


9,168


13,556








Analysis of available-for-sale financial assets







Current


-


172


172

Non-current


4,388


8,996


13,384

At 30th June 2015


4,388


9,168


13,556








Analysis of available-for-sale investments and deposits






Fiduciary funds




8,845



Own funds




323



At 30th June 2015




9,168



 


6 months ended 30th June 2014




Other investments
£'000


Investments and deposits
£'000


 

Total
£'000








At 1st January 2014


5,948


17,819


23,767

Exchange differences


(79)


256


177

Additions


-


1,310


1,310

Companies acquired


31


-


31

Disposals/maturities


(999)


(7,928)


(8,927)

Revaluation gain (included within equity)


12


-


12

At 30th June 2014


4,913


11,457


16,370








Analysis of available-for-sale financial assets







Current


-


1,331


1,331

Non-current


4,913


10,126


15,039

At 30th June 2014


4,913


11,457


16,370








Analysis of available-for-sale investments and deposits






Fiduciary funds




10,012



Own funds




1,445



At 30th June 2014




11,457



10.  Derivative financial instruments


As at 30th June 2015


As at 30th June 2014


Assets
£'000


Liabilities
£'000


Assets
£'000


Liabilities
£'000









Interest rate swaps - fair value hedges

9,214


(10,746)


3,736


(11,260)

Forward foreign exchange contracts - cash flow hedges

12,556


(5,568)


25,875


(23,205)

Redemption liabilities - option contracts

-


(18,226)


-


-

Total

21,770


(34,540)


29,611


(34,465)









Current

5,446


(1,384)


10,513


(1,769)

Non-current

16,324


(33,156)


19,098


(32,696)

Total

21,770


(34,540)


29,611


(34,465)


The Group's treasury policies are approved by the Board and are implemented by a centralised treasury department. The treasury department operates within a framework of policies and procedures that establishes specific guidelines to manage currency risk, liquidity risk and interest rate risk and the use of counterparties and financial instruments to manage these. The treasury department is subject to 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 30th June 2015 and designated as effective cash flow hedges was a net asset of £7.0 million and has been deferred in equity (2014:  net asset of £2.7 million).  Gains and losses arising on derivative instruments outstanding as at 30th June 2015 will be released to the income statement at various dates up to:

a)   30 months in respect of cash flow hedges on currency denominated UK earnings.

b)   14 years in respect of specific hedges on USD denominated long term debt drawn under the Group's USD private placement programme.

c)   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 period in respect of the fair value of financial derivatives.

Transactions maturing within 12 months of the balance sheet date are classified in current maturities. Transactions maturing in a period in excess of 12 months of the balance sheet date are classified as non-current maturities.

a)   Interest rate swaps

The Group uses interest rate hedges, principally interest rate swaps, to mitigate the impact of changes in interest rates. As at 30th June 2015, the notional principal amounts of outstanding cross currency interest rate swaps was USD500,000,000 and sterling interest rate swaps was £75,000,000 (2014: USD375,000,000 and £75,000,000). A net loss of £1.5 million (2014: net loss £7.5 million) on these instruments was offset by a fair value gain of £1.5 million (2014: gain £7.5 million) on the private placement loans, both of which were recognised in the income statement in the period.

b)   Forward foreign exchange contracts

The Group's major currency transaction exposure arises in USD and the Group continues to adopt a prudent approach in actively managing this exposure.  As at 30th June 2015 the Group had outstanding foreign exchange contracts, principally in USD, amounting to a principal value of £831,615,000 (2014: £681,123,000).

 

 

10. Derivative financial instruments cont'd

c)   Redemption liabilities

The redemption liabilities represent the valuation of the put options provided in the shareholders agreements of JLT Specialty Insurance Services Inc. and JLT Sigorta ve Reasurans Brokerligi Ltd Sirketi respectively being £16,089,000 and £2,194,000. The recognition of these liabilities resulted in a reduction in equity, related to transactions with non-controlling interests of £18,283,000.

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.

11.  Trade and other receivables



As at

 30th June


As at

 30th June




2015
£'000


2014
£'000






Trade receivables


361,541


331,399

Less: provision for impairment of trade receivables


(10,938)


(12,097)






Trade receivables - net


350,603


319,302

Other receivables


159,300


137,494

Prepayments


28,366


28,646


538,269


485,442

The carrying value of trade and other receivables is equivalent to their fair value.

12.  Cash and cash equivalents



As at

 30th June


As at

 30th June




2015
£'000


2014
£'000






Cash at bank and in hand


482,529


449,651

Short-term bank deposits


455,719


388,519


938,248


838,170






Fiduciary funds


789,030


720,711

Own funds


149,218


117,459


938,248


838,170

Fiduciary funds represent client money held in the form of premiums due to underwriters, claims paid by insurers and due to policyholders, and funds held to defray commissions and other income. Fiduciary funds are not available for general corporate purposes.

The effective interest rate in respect of short-term deposits was 0.40% (2014: 0.40%).  These deposits have an average maturity of 17 days (2014: 17 days).

13.  Trade and other payables



As at

 30th June


As at

 30th June




2015
£'000


2014
£'000






Insurance payables


797,875


730,723

Social security and other taxes


20,327


18,435

Other payables


139,539


98,890

Accruals and deferred income


116,685


107,367

Deferred and contingent consideration


19,512


15,622


1,093,938


971,037

All payables are considered current. The carrying value of trade and other payables is equivalent to their fair value.

14.  Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:


As at 30th June 2015


Loans and receivables
£'000


Derivatives used for hedging
£'000


Available-for-sale
£'000


 

Total
£'000









Assets per balance sheet








Available-for-sale financial assets

-


-


13,556


13,556

Derivative financial instruments

-


21,770


-


21,770

Trade and other receivables (a)

509,903


-


-


509,903

Cash and cash equivalents

938,248


-


-


938,248

Total

1,448,151


21,770


13,556


1,483,477












Derivatives used for hedging
£'000


Other financial liabilities
£'000


 

Total
£'000









Liabilities per balance sheet








Borrowings



-


(606,343)


(606,343)

Trade and other payables (b)



-


(977,253)


(977,253)

Derivative financial instruments



(16,314)


(18,226)


(34,540)

Total



(16,314)


(1,601,822)


(1,618,136)

 


As at 30th June 2014


Loans and receivables
£'000


Derivatives used for hedging
£'000


Available-for-sale
£'000


 

Total
£'000









Assets per balance sheet








Available-for-sale financial assets

-


-


16,370


16,370

Derivative financial instruments

-


29,611


-


29,611

Trade and other receivables (a)

456,796


-


-


456,796

Cash and cash equivalents

838,170


-


-


838,170

Total

1,294,966


29,611


16,370


1,340,947












Derivatives used for hedging
£'000


Other financial liabilities
£'000


 

Total
£'000









Liabilities per balance sheet








Borrowings



-


(554,997)


(554,997)

Trade and other payables (b)



-


(863,670)


(863,670)

Derivative financial instruments



(34,465)


-


(34,465)

Total



(34,465)


(1,418,667)


(1,453,132)









(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.

 

 



 

14.   Financial instruments by category cont'd 

The following table presents the Group's financial assets and liabilities that are measured at fair value at 30th June 2015.


As at 30th June 2015


Level 1
£'000


Level 2
£'000


Level 3
£'000


 

Total
£'000









Assets








Derivative financial instruments

-


21,770


-


21,770

Available-for-sale financial assets








-  equity securities

402


-


1,252


1,654

-  debt investments

-


-


2,734


2,734

-  mutual funds

172


-


-


172

-  fixed deposits

8,996


-


-


8,996

Total

9,570


21,770


3,986


35,326









Liabilities








Deferred and contingent consideration

-


-


(19,512)


(19,512)

Derivative financial instruments

-


(16,314)


(18,226)


(34,540)

Total

-


(16,314)


(37,738)


(54,052)

 

 


As at 30th June 2014


Level 1
£'000


Level 2
£'000


Level 3
£'000


 

Total
£'000









Assets








Derivative financial instruments

-


29,611


-


29,611

Available-for-sale financial assets








-  equity securities

731


-


1,282


2,013

-  debt investments

268


-


2,632


2,900

-  fixed deposits

11,457


-


-


11,457

Total

12,456


29,611


3,914


45,981









Liabilities








Deferred and contingent consideration

-


-


(15,622)


(15,622)

Derivative financial instruments

-


(34,465)


-


(34,465)

Total

-


(34,465)


(15,622)


(50,087)

 

Apart from where disclosed, there are no differences between the fair value and the carrying value of financial assets and liabilities.

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm's length basis. These instruments are included in level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using internal and external models. These models maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

During the period there were no transfers between level 1 and level 2.

There were no changes in valuation techniques during the period.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. 

In respect of deferred and contingent consideration, unobservable inputs include management's assessment of the expected future performance of relevant acquired businesses.

In respect of derivatives, the unobservable inputs include management's assessment of the performance criteria, the redemption multiple and the discount rate used. In respect of the JLT Specialty Insurance Services Inc. redemption liability, a 100 basis point movement in the discount rate would have an impact of circa £2,800,000 on the liability recognised.

14. Financial instruments by category cont'd 

A reconciliation of the movements in level 3 is provided below:






Assets

Level 3
£'000


Liabilities

Level 3
£'000









At 1st January 2015





4,088


(19,383)

Exchange differences





(37)


1,496

Additions





-


(18,283)

Companies acquired





-


(2,979)

Utilised in the period





-


1,843

Charged to income statement





(65)


(432)

At 30th June 2015





3,986


(37,738)

 

 

15.  Borrowings



As at

 30th June


As at

 30th June




2015
£'000


2014
£'000






Current





Bank overdraft


24,027


21,950

Bank borrowings


410


376

Finance lease liabilities


202


117



24,639


22,443






Non-current





Unsecured loan notes


390,276


285,743

Bank borrowings


190,923


246,166

Finance lease liabilities


505


645



581,704


532,554

Total borrowings


606,343


554,997


The borrowings include secured liabilities (leases) of £707,000 (2014: £762,000).

The carrying amounts and fair value of borrowings are as follows:


As at 30th June 2015


As at 30th June 2014


Carrying amount
£'000


Fair value
£'000


Carrying amount
£'000


Fair value
£'000









Current








Bank overdraft

24,027


24,027


21,950


21,950

Bank borrowings

410


410


376


376

Finance lease liabilities

202


202


117


117


24,639


24,639


22,443


22,443









Non-current








Unsecured loan notes

390,276


390,276


285,743


285,743

Bank borrowings

190,923


190,923


246,166


246,166

Finance lease liabilities

505


505


645


645


581,704


581,704


532,554


532,554

Total borrowings

606,343


606,343


554,997


554,997

  

16.  Provisions for liabilities and charges


6 months ended 30th June 2015


Property related provisions
£'000


Litigation provisions
£'000


Other
£'000


 

Total
£'000









At 1st January 2015

4,881


5,570


362


10,813

Exchange differences

-


(24)


-


(24)

Utilised in the period

(3,198)


(548)


(8)


(3,754)

(Credited)/charged to the income statement

(75)


127


(240)


(188)

Interest charge

2


-


-


2

At 30th June 2015

1,610


5,125


114


6,849

 


6 months ended 30th June 2014


Property related provisions
£'000


Litigation provisions
£'000


Other
£'000


 

Total
£'000









At 1st January 2014

8,049


6,354


707


15,110

Exchange differences

(1)


(38)


-


(39)

Utilised in the period

(1,900)


(888)


(50)


(2,838)

Charged/(credited) to the income statement

1,544


(980)


(27)


537

Interest charge

5


-


-


5

Companies acquired

(627)


-


-


(627)

At 30th June 2014

7,070


4,448


630


12,148

 



As at

 30th June


As at

 30th June




2015
£'000


2014
£'000






Analysis of total provisions:





Current - to be utilised within one year


5,501


7,369

Non-current - to be utilised in more than one year


1,348


4,779



6,849


12,148


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 2022.

Litigation provisions

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.

Where a litigation provision has been made it is stated gross of any third party recovery. All such recoveries are included as "other receivables" within trade and other receivables. At 30th June 2015, in connection with certain litigation matters, the Group's litigation provisions include an amount of £0.1 million (2014: £0.1 million) to reflect this gross basis and the corresponding insurance recovery has been included within trade and other receivables.  This presentation has had no effect on the consolidated income statement for the six months ended 30th June 2015 (2014: nil).

Other

Other provisions include provisions for clawback of commission which arises on certain types of Employee Benefits contracts.

17.  Other reserves


6 months ended 30th June 2015


Share premium
£'000


Fair value and hedging reserves
£'000


Exchange reserves
£'000


 

Total
£'000









At 1st January 2015

103,941


(234)


(5,033)


98,674









Fair value gains net of tax








-  available-for-sale

-


72


-


72

-  cash flow hedges

-


4,616


-


4,616

Currency translation differences

-


-


(21,120)


(21,120)

Net gains/(losses) recognised directly in equity

-


4,688


(21,120)


(16,432)









Issue of share capital

122


-


-


122

At 30th June 2015

104,063


4,454


(26,153)


82,364

 


6 months ended 30th June 2014


Share premium
£'000


Fair value and hedging reserves
£'000


Exchange reserves
£'000


 

Total
£'000









At 1st January 2014

103,739


17,224


(1,999)


118,964









Fair value gains net of tax








-  available-for-sale

-


10


-


10

-  cash flow hedges

-


5,084


-


5,084

Currency translation differences

-


-


(9,327)


(9,327)

Net gains/(losses) recognised directly in equity

-


5,094


(9,327)


(4,233)









Issue of share capital

131


-


-


131

At 30th June 2014

103,870


22,318


(11,326)


114,862

 

18.  Qualifying Employee Share Ownership Trust

During the period, 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).

 

19.  Cash generated from operations



6 months ended

 30th June


6 months ended

 30th June




2015
£'000


2014
£'000






Profit before taxation


101,469


98,357

Investment and finance income


(2,261)


(2,293)

Interest payable on bank loans and finance leases


8,635


7,964

Fair value losses on derivatives financial instruments


44


50

Net pension financing expenses


3,185


2,939

Unwinding of liability discounting


748


33

Depreciation


5,895


5,434

Amortisation of other intangible assets


15,034


12,199

Amortisation of share based payments


11,880


9,095

Share of results of associates' undertakings


(5,720)


(7,173)

Non-cash exceptional items


429


2,738

Losses on disposal of businesses


607


-

Gains on disposal of associates


(19,142)


-

Gains on disposal of property, plant and equipment


(64)


(86)

Losses/(gains) on disposal of available-for-sale financial assets


64


(103)

Pension curtailment gain


(491)


-

Increase in trade and other receivables


(41,886)


(70,971)

Decrease in trade and other payables - excluding insurance broking balances

(8,002)


(28,104)

Decrease in provisions for liabilities and charges


(3,942)


(2,301)

Decrease in retirement benefit obligation


(64)


(1,448)

Net cash inflow from operations


66,418


26,330

  

20.  Business combinations

2014 acquisitions

During the period, the process of finalising the provisional fair values in respect of acquisitions carried out during 2014 has resulted in the following changes to date.




Revised

 fair value acquired
£'000


Provisional fair value reported at 31st Dec 2014
£'000


 

Change in fair value
£'000









The Hayward Holding Group Limited



7,281


7,257


24

Others



5,208


5,174


34




12,489


12,431


58


These changes in fair values affected the following balance sheet classes:




Revised

 fair value acquired
£'000


Provisional fair value reported at 31st Dec 2014
£'000


 

Change in fair value
£'000









Property, plant and equipment



738


727


11

Other intangible assets



3,967


3,978


(11)

Trade and other receivables



7,343


7,343


-

Cash and cash equivalents








-  own cash



4,566


4,566


-

-  fiduciary cash



6,589


6,589


-

Insurance payables



(6,589)


(6,589)


-

Trade and other payables



(4,586)


(4,620)


34

Current taxation



(216)


(240)


24

Deferred taxation



260


260


-

Non-controlling interests



417


417


-




12,489


12,431


58

 

 

 

Goodwill calculation



As at

30th June

 2015
£'000


As at

 31st Dec 2014
£'000


 

Change
£'000









Purchase consideration








-  cash paid



44,726


44,784


(58)

-  contingent consideration



2,955


2,955


-

-  deferred consideration



568


572


(4)

Total purchase consideration



48,249


48,311


(62)

Less: fair value of net assets acquired



12,489


12,431


58

Less: equity movement on transactions with non-controlling interest


6,667


6,725


(58)

Goodwill



29,093


29,155


(62)

 




As at

 30th June 2015
£'000


As at

 31st Dec 2014
£'000


Change
£'000









Purchase consideration settled in cash



44,726


44,784


(58)

Cash and cash equivalents - own cash in subsidiaries acquired


(4,566)


(4,566)


-




40,160


40,218


(58)

Cash and cash equivalents - fiduciary cash in subsidiaries acquired


(6,589)


(6,589)


-

Cash outflow on acquisition



33,571


33,629


(58)

 



 

20.  Business combinations cont'd

Current period acquisitions

During the period the following new business acquisitions and additional investments were completed:


Notes


Acquisition date


Percentage voting rights acquired


Cost
£'000









Liberty Asset Management Group (LAM)

i


Jan 2015


100%


5,236

The Recovre Group Pty Ltd

ii


Mar 2015


100%


7,861

Acquisition of other new businesses completed during the period

iii


Jan - Jun 2015


-


 

6,178

Additional investments in existing businesses

iii


Jan - Jun 2015


-


312








19,587

 

i)    Acquisition of Liberty Asset Management Group (LAM)

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 £1,826,000 and a net loss, including acquisition and integration costs incurred to date, of £109,000 to the Group for the period since acquisition.

Goodwill calculation







£'000









Purchase consideration








-  cash paid







5,236

Total purchase consideration







5,236

Less: fair value of net assets acquired







1,974

Goodwill







3,262


The assets and liabilities arising from the acquisition were as follows:






Acquiree's carrying amount
£'000


 

Fair value
£'000









Other intangible assets





-


366

Trade and other receivables





507


507

Cash and cash equivalents








-  own cash





2,048


2,048

Trade and other payables





(952)


(952)

Current taxation





(5)


(5)

Deferred taxation





10


10






1,608


1,974

 








£'000









Purchase consideration settled in cash







5,236

Cash and cash equivalents - own cash in subsidiary acquired






(2,048)

Cash outflow on acquisition







3,188

 

As at 30th June 2015, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.

None of the goodwill recognised is expected to be deductible for income tax purposes.



 

20.  Business combinations cont'd

 

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 £4,566,000 and a net loss, including acquisition and integration costs incurred to date, of £357,000 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 £6,629,000 and net loss, including acquisition and integration costs incurred to date, would have been £278,000.

 

Goodwill calculation







£'000









Purchase consideration








-  cash paid







6,078

-  contingent consideration







1,783

Total purchase consideration







7,861

Less: fair value of net assets acquired







1,806

Goodwill







6,055


The assets and liabilities arising from the acquisition were as follows:






Acquiree's carrying amount
£'000


 

Fair value
£'000









Property, plant and equipment





588


588

Other intangible assets





62


979

Trade and other receivables





1,307


1,307

Cash and cash equivalents








-  own cash





223


223

Trade and other payables





(1,530)


(1,530)

Deferred taxation





239


239






889


1,806

 








£'000









Purchase consideration settled in cash







6,078

Cash and cash equivalents - own cash in subsidiary acquired






(223)

Cash outflow on acquisition







5,855


As at 30th June 2015, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.

The contingent consideration of £1,783,000 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.

 

20.  Business combinations cont'd

 

iii)  Other acquisitions and additional investments

Goodwill calculation







£'000









Purchase consideration








-  cash paid







5,290

-  deferred consideration







120

-  contingent consideration







1,080

Total purchase consideration







6,490

Less: fair value of net assets acquired







1,140

Less: equity movement on transactions with non-controlling interests





133

Goodwill







5,217

 

The assets and liabilities arising from acquisitions were as follows:






Acquiree's carrying amount
£'000


 

Fair value
£'000









Property, plant and equipment





217


217

Other intangible assets





-


520

Trade and other receivables





1,076


1,076

Cash and cash equivalents








-  own cash





1,227


1,227

Trade and other payables





(1,747)


(1,747)

Finance lease liabilities





(12)


(12)

Current taxation





(69)


(69)

Deferred taxation





(30)


(30)

Non-controlling interests





(42)


(42)






620


1,140

 








£'000









Purchase consideration settled in cash







5,290

Cash and cash equivalents - own cash in subsidiary acquired






(1,227)

Cash outflow on acquisition







4,063


As at 30th June 2015, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.

The contingent considerations of £1,080,000 and the deferred considerations of £120,000 consist of a number of considerations none of which are individually material.

None of the goodwill recognised is expected to be deductible for income tax purposes.


 

20.  Business combinations cont'd

Group summary of the net assets acquired and goodwill




LAM
£'000

Recovre
£'000

Others
£'000

Total
£'000








Purchase consideration







-  cash paid



5,236

6,078

5,290

16,604

-  contingent consideration



-

1,783

1,080

2,863

-  deferred consideration



-

-

120

120

Total purchase consideration



5,236

7,861

6,490

19,587

Less: fair value of net assets acquired


1,974

1,806

1,140

4,920

Less: equity movement on transactions with non-controlling interests

-

-

133

133

Goodwill on acquisitions occurring during the period


3,262

6,055

5,217

14,534








Impact of revision to fair value adjustment in relation to acquisitions completed in 2014




(62)

Net increase in goodwill






14,472








Impact of revisions to deferred consideration






(58)

Impact of additional investments






133

Net decrease in equity






75

Group summary of cash flows




LAM
£'000

Recovre
£'000

Others
£'000

Total
£'000

 








 

Purchase consideration settled in cash



5,236

6,078

5,290

16,604

 

Cash and cash equivalents - own cash in subsidiaries acquired

(2,048)

(223)

(1,227)

(3,498)

 

Cash outflow on acquisitions during the period


3,188

5,855

4,063

13,106

 








Impact of revision to fair value adjustment on cash in relation to acquisitions completed in 2014





(58)

Net cash outflow on acquisitions during the period





13,048

21.   Business disposals

During the period the Group completed disposals, none of which were individually significant. 

Group summary of the net assets and proceeds of disposal







Total
£'000








Goodwill






719

Cash and cash equivalents







-  own cash






138

Non-controlling interests






195

Equity movement on transaction with non-controlling interest





2,061







3,113

Loss on disposal





(607)

Proceeds on disposal





2,506








Deferred proceeds






2,381

Cash inflow on disposal during the period






125

Total consideration






2,506

Group summary of cash flows







Total
£'000








Disposal consideration settled in cash






125

Cash and cash equivalents - own cash in subsidiaries disposed




(138)

Cash outflow on disposal during the period





(13)

22.   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 costs accrued for the period are comprised as follows:


6 months ended 30th June 2015

6 months ended 30th June 2014


UK
£'000

Overseas
£'000

Total
£'000

UK
£'000

Overseas
£'000

Total
£'000








Defined benefit schemes

-

1,311

1,311

-

58

58

Defined contribution schemes

11,020

7,985

19,005

9,781

8,273

18,054


11,020

9,296

20,316

9,781

8,331

18,112


The amounts recognised in the consolidated income statement are as follows:


UK Scheme

Overseas Schemes

Total


6 months ended 30th June 2015
£'000

6 months ended 30th June 2014
£'000

6 months ended 30th June 2015
£'000

6 months ended 30th June 2014
£'000

6 months ended 30th June 2015
£'000

6 months ended 30th June 2014
£'000








Service cost

-

-

(1,311)

-

(1,311)

-

Curtailment gain

-

-

491

-

491

-

Expenses

(79)

-

(39)

(58)

(118)

(58)

Total (included within salaries and associated expense)

(79)

-

(859)

(58)

(938)

(58)








Interest cost

(11,168)

(13,163)

(1,311)

(1,317)

(12,479)

(14,480)

Expected return on assets

8,304

10,337

990

1,204

9,294

11,541

Total (included within finance costs)

(2,864)

(2,826)

(321)

(113)

(3,185)

(2,939)

Expense before taxation

(2,943)

(2,826)

(1,180)

(171)

(4,123)

(2,997)


The amounts disclosed in respect of both the UK and Overseas defined benefit schemes ("the Schemes") have been projected from previous valuations of the schemes. They do not represent the results of a full actuarial valuation. In respect of 30th June 2015 the Group has updated its assumption regarding the discount rate applicable to the Scheme liabilities in line with current market information.



 

22.   Retirement benefit obligations cont'd

The amounts included in the consolidated statement of comprehensive income are as follows:



6 months ended 30th June 2015



UK Scheme

Overseas Schemes

Total



£'000

%

£'000

%

£'000








Actual return less expected return on Scheme assets

(3,177)


842


(2,335)

% of period end market value of Scheme assets


(0.7%)


1.7%


Experience gains arising on Scheme liabilities (1)

2,326


1,455


3,781

% of period end present value of Scheme liabilities (1)


0.4%


2.5%


Changes in assumptions underlying the present value of the Scheme liabilities

18,518


3,425


21,943

% of period end present value of Scheme liabilities


3.0%


5.8%


Actuarial gains recognised in reserves (2)

17,667


5,722


23,389

% of period end present value of Scheme liabilities


2.9%


9.7%


 


UK Scheme

Overseas Schemes

Total


As at 30th June 2015
£'000

As at 30th June 2014
£'000

As at 30th June 2015
£'000

As at 30th June 2014
£'000

As at 30th June 2015
£'000

As at 30th June 2014
£'000








Defined benefit obligation







Present value of funded obligations

(614,462)

(606,769)

(59,114)

(63,656)

(673,576)

(670,425)

Fair value of plan assets

467,146

466,992

48,466

54,903

515,612

521,895

Net liability recognised in the balance sheet

(147,316)

(139,777)

(10,648)

(8,753)

(157,964)

(148,530)

 




Total






As at 30th June 2015
£'000

As at 30th June 2014
£'000








Defined benefit obligation







Retirement benefit surpluses





559

782

Retirement benefit obligations





(158,523)

(149,312)

Net liability recognised in the balance sheet





(157,964)

(148,530)

 


UK Scheme

Overseas Schemes

Total


As at 30th June 2015
£'000

As at 30th June 2014
£'000

As at 30th June 2015
£'000

As at 30th June 2014
£'000

As at 30th June 2015
£'000

As at 30th June 2014
£'000








Reconciliation of defined benefit liability







Opening defined benefit liability

(162,620)

(125,018)

(16,415)

(5,609)

(179,035)

(130,627)

Exchange differences

-

-

312

254

312

254

Pension expense

(2,943)

(2,826)

(1,180)

(171)

(4,123)

(2,997)

Employer contributions

580

750

913

756

1,493

1,506

Total gain/(loss) recognised in reserves (2)

17,667

(12,683)

5,722

(3,983)

23,389

(16,666)

Net liability recognised in the balance sheet

(147,316)

(139,777)

(10,648)

(8,753)

(157,964)

(148,530)

 

(1)  Calculation is only done as part of the year-end valuation of the schemes

 

(2)  Amounts recognised in reserves have been taken through the statement of comprehensive income

 

  

23.  Related-party transactions

The Group has taken advantage of the exemption available under IAS 24, "Related Party Disclosures", not to disclose details of transactions with its subsidiary undertakings. For the period, the Group's related parties are the same as those disclosed on page 135 of the Group's Annual Report for 2014. The basis of the remuneration of the Directors and key management remains consistent with that reported in the Group's Annual Report for 2014.

24.  Principal risks

As with all businesses, the Group is exposed to a range of financial and operational risks, not wholly within its control, which could have a material impact on the Group's financial performance. 

The Group takes a holistic approach to risk management and the control environment with the responsibility and accountability shared across all the Group companies, and the ultimate responsibility resting with the Board. 

The principal risks to which the Group will be exposed in the second half of the financial year are substantially the same as those discussed on pages 41 and 42 of the Group's Annual Report for 2014.  These are summarised below:

Principal Risks

Nature of Risk



STRATEGIC RISKS


Economic Instability

JLT's business is more tied to economic activity and growth rather than market rates, since greater levels of corporate activity drive greater demand for the Group's services.

Strategic Risks

There are risks to the business model arising from changes in external events, our markets and customer behaviour as well as risks arising from mergers and acquisitions.



OPERATIONAL RISKS

Loss of Key Staff

The Group's core asset is its people. Therefore there is a risk that the organisation may not be able to attract and retain market leading talent.

Business Interruption

The Group operates from over 100 offices in 39 territories across the world, each with a unique local environment. There is a risk of a business interruption due to a large external event.

Loss of IT Environment

The JLT businesses are reliant on the ability to process its transactions on behalf of its clients. Risks arising from non-performance of an IT supplier, malicious act, cyber crime and staff not following Group IT policies and procedures.

Information Security

Intermediaries and pension administrators retain confidential data in the normal course of business. Risk of loss of records, breach of confidentiality or inadequate security measures need to be managed.

Errors and Omissions

Intermediaries run a risk of incurring a loss if the operating procedures in place across the Group are not complied with or alleged negligence in provision of services/advice becomes apparent.

Regulatory Sanctions / Financial Crimes

The JLT Group operates in a regulated environment in many jurisdictions across the world. Risks arise from non-compliance with or misinterpretation of local and international regulations and failure to meet regulatory standards.



FINANCIAL RISKS


Capital Risk and Liquidity

Risks arising from an inability to maintain an efficient capital structure and ensure an optimal cost of capital.

Foreign Currency

The Group operates in 39 territories and incurs foreign exchange exposures in the normal course of business.

Interest Rate Risk

Risk of adverse impact on earnings from net exposure to changes in interest rates.

Counterparty Risk

There is a risk to JLT if there is a failure of a key counterparty resulting in a loss of own cash, fiduciary funds, investments and deposits, derivative assets and trade receivables.

Defined Benefit Pension Scheme

Risk of adverse impact on the Balance Sheet and Income Statement as a consequence of an increase in the defined benefit pension scheme deficit.

25.  Forward-looking statements

Certain statements in this interim report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

 

26.  UK GAAP accounting framework

Following the publication of FRS 100, 'Application of financial reporting requirements', by the Financial Reporting Council, Jardine Lloyd Thompson Group plc is required to change its accounting framework for its standalone and UK subsidiary financial statements, which is currently UK GAAP, for its financial year commencing 1st January 2015. The Board considers that it is in the best interests of the group for Jardine Lloyd Thompson Group plc to adopt FRS 101, 'Reduced disclosure framework'. No disclosures in the current UK GAAP financial statements would be omitted on adoption of FRS 101. A shareholder or shareholders holding in aggregate 5% or more of the total allotted shares in Jardine Lloyd Thompson Group plc can serve objections to the use of the disclosure exemptions on Jardine Lloyd Thompson Group plc, in writing, to its registered office, The St Botolph Building, 138 Houndsditch, London, England, EC3A 7AW not later than 30th September 2015.

 

Statement of directors' responsibilities

The directors confirm that this consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·     An indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·     Material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of Jardine Lloyd Thompson Group plc are listed in the Annual Report of the Company for the year ended 31st December 2014. 

 

On behalf of the Board

M T Reynolds
Finance Director

28th July 2015


Independent review report to Jardine Lloyd Thompson Group plc

Report on the consolidated interim financial statements

Our conclusion

We have reviewed the consolidated interim financial statements, defined below, in the interim results of Jardine Lloyd Thompson Group plc for the six months ended 30 June 2015. Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This conclusion is to be read in the context of what we say in the remainder of this report.

What we have reviewed

The consolidated interim financial statements, which are prepared by Jardine Lloyd Thompson Group plc, comprise:

·   the consolidated balance sheet as at the 30 June 2015;

·   the consolidated income statement and statement of comprehensive income for the period then ended;

·   the consolidated statement of cash flows for the period then ended;

·   the consolidated statement of changes in equity for the period then ended; and

·   the explanatory notes to the consolidated interim financial statements.

As disclosed in note 1, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The consolidated interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What a review of consolidated financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the consolidated interim financial statements.



 

Responsibilities for the consolidated interim financial statements and the review

Our responsibilities and those of the directors

The interim results, including the consolidated interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express to the company a conclusion on the consolidated interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

 

 

 

PricewaterhouseCoopers LLP

Chartered Accountants

27th July 2015

London

 

 

Notes:

(a)     The maintenance and integrity of the Jardine Lloyd Thompson Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b)     Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


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