TIDMJLT
RNS Number : 3242G
Jardine Lloyd Thompson Group PLC
03 March 2015
3rd March 2015
Jardine Lloyd Thompson Group plc
Preliminary Results for the year ended 31st December 2014
(unaudited)
Jardine Lloyd Thompson Group plc ("JLT" or "the Group")
announces its preliminary results for the year ended 31st December
2014.
Financial Highlights
-- Total revenue up 13% to GBP1,104.1m
-- Strong organic revenue growth of 6%
-- Underlying PBT up 3% to GBP183.0m
-- Reported PBT up 3% to GBP159.7m
-- Underlying diluted EPS up 3% to 56.1p
-- Reported diluted EPS up 3% to 47.8p
-- Underlying profit margin down 110 basis points to 17.8%
-- Increased total dividend of 28.9p up 6.3%
Operational and Strategic Highlights
-- Established Specialty insurance brokerage in USA
o GBP5.2m net expenses in year as expected
o Underlying Group PBT up 6% excluding these expenses
-- Ongoing investment to deliver sustainable long term earnings growth
o 8 new acquisitions made for a total consideration of GBP63m,
including Hayward Aviation for GBP27m
o 950 new joiners take total employee numbers above 10,000
-- Continued successful integration of JLT Re and Towers Watson Re
-- Created one of the world's leading Specialty businesses
through the merger of JLT Specialty and Lloyd & Partners
-- Concluded Business Transformation Programme with higher than
projected recurring savings of GBP16m for total one-off costs of
GBP17m
-- Sale of French associate Siaci St Honoré in 2015 expected to
generate cash receipt of approximately GBP82m
Dominic Burke, Chief Executive, commented:
"We are pleased to deliver another strong set of results,
building on the progress and momentum of recent years. During the
year we took a series of actions and strategic decisions, including
the establishment of a Specialty insurance broking business in the
US and the merger of JLT Specialty and Lloyd & Partners, that
we believe will prove to be pivotal in terms of shaping our long
term growth prospects. Despite a challenging insurance rating
environment, we are confident in JLT's revenue growth momentum and
in our strategy of continuing to invest to deliver sustainable long
term earnings growth."
Enquiries: Dominic Burke, Jardine Lloyd Thompson 020 7528
Chief Executive Group plc 4948
Mike Reynolds, Finance 020 7528
Director 4375
Paul Dransfield, Corporate 020 7528
Communications 4933
Brunswick Group 020 7404
Tom Burns / Dania Saidam LLP 5959
A presentation to investors and analysts will take place at
9.00am today at The St Botolph Building, 138 Houndsditch, London,
EC3A 7AW. A live webcast of the presentation can be viewed on the
Group's website www.jltgroup.com.
FULL RELEASE FOLLOWS
_____________________________________________________________________________________
PRELIMINARY STATEMENT
JLT has delivered good results for 2014, building on the
progress and momentum of recent years, with organic revenue growth
of 6% (2013: 8.5%). This is a strong performance when set against
the marked decline in both the insurance and reinsurance rating
environment during the year.
The 2014 preliminary results are summarised in the tables
below:
Year ended 31st December
2014
GBPm Total Revenue Trading Profit Trading Margin
--------------------------------- ------------------------- ----------------------
2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013
-------- ------- ---- -------- ------- ------- ------- ------ ------ ------
Risk
& Insurance 820.5 13% 19% 5% 154.3 164.2 149.9 19% 19% 21%
Employee
Benefits 283.6 11% 14% 7% 65.0 66.2 55.8 23% 23% 22%
Central
Costs - - - - (22.5) (22.5) (20.3) - - -
1,104.1 13% 18% 6% 196.8 207.9 185.4 17.8% 18.1% 18.9%
-------- ------- ---- -------- ------- ------- ------- ------ ------ ------
GBPm 2014 2013
------- ------- -------
Underlying trading profit 196.8 185.4
Underlying share of
associates 7.7 8.1
Net finance costs (21.5) (16.1)
------- -------
Underlying profit before
taxation 183.0 177.4
Exceptional items (23.3) (22.8)
------- -------
Profit before taxation 159.7 154.6
Underlying tax expense (47.2) (46.8)
Tax on exceptional
items 5.1 5.0
Non-controlling interests (12.3) (10.8)
------- -------
Profit after taxation
and non-controlling
interests 105.3 102.0
------- -------
Underlying profit after
taxation and
non-controlling interests 123.5 119.8
------- -------
Diluted earnings per
share 47.8p 46.4p
Underlying diluted earnings
per share 56.1p 54.5p
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 13% to GBP1,104.1 million or 18% at
constant rates of exchange (CRE), comprising 6% organic growth and
12% from acquisitions. Total revenue and underlying trading profit
include investment income on fiduciary funds of GBP4.4 million
(2013: GBP4.5 million).
Underlying trading profit increased by 6% to GBP196.8 million,
or 12% at CRE. The underlying trading margin decreased from 18.9%
to 17.8%, largely reflecting the impact of foreign exchange, which
was an GBP11.1 million adverse movement in the year, and the
investment being made to build a Specialty business in the US,
which resulted in net expenses of GBP5.2 million in the year.
Excluding these two factors, the underlying trading margin would
have been 18.6%. This is despite an approximate 10% increase in our
headcount during the year, demonstrating that we are maintaining
tight control of our costs.
Underlying profit before tax was GBP183.0 million, 3% ahead of
2013, while reported profit before tax was GBP159.7 million
compared to GBP154.6 million in the prior year, an increase of 3%.
This is after charging net exceptional costs of GBP23.3 million,
primarily relating to the Business Transformation Programme and
costs relating to acquisitions, integration and the initial
restructuring costs associated with the merger of JLT Specialty and
Lloyd & Partners.
The tax charge was GBP42.1 million, or GBP47.2 million on an
underlying basis. The underlying effective tax rate for 2014 was
26%, unchanged on 2013.
Profit after tax and non-controlling interests was GBP105.3
million (2013: GBP102.0 million) and reported diluted earnings per
share was 47.8p (2013: 46.4p).
Underlying profit after tax and non-controlling interests
increased by 3% to GBP123.5 million and underlying diluted earnings
per share increased by 3% to 56.1p.
In 2014, some 56% of the Group's trading profit was generated in
the first half of the year. For 2015 we are expecting the phasing
of the Group's trading profit to be relatively even across the two
halves of the year. This is for a combination of reasons, including
the timings of recent acquisitions, our changing business mix, the
phasing of a number of significant accounts and the impact of our
investment in the US.
DIVIDENDS
Subject to shareholder approval, the final dividend will be
increased to 18.3p per share for the year to 31st December 2014
(2013: 17.1p) and will be paid on 6th May 2015 to shareholders on
the register at 4th April 2015. This brings the total dividend for
the year to 28.9p per share, compared to 27.2p for the prior year,
an increase of 6.3%.
OPERATIONAL REVIEW
The Group operates in two principal areas: Risk & Insurance
and Employee Benefits. The results of each of these businesses are
reported in more detail below:
Risk & Insurance
Total revenue in our Risk & Insurance division increased by
13% to GBP820.5 million. This represented a 19% increase at CRE and
organic revenue growth of 5%. Trading profit grew by 3% to GBP154.3
million for the year, with a trading margin of 19%.
Year ended 31st December
2014
GBPm Total Revenue Trading Profit Trading Margin
--------------------------------- ---------------------- -------------------
2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013
------ ------- ------ -------- ------ ------ ------ ----- ----- -----
JLT Specialty 255.4 5% 7% 6% 52.1 53.6 51.5 20% 21% 21%
JLT Re 159.6 108% 115% 7% 24.4 26.1 11.3 15% 16% 15%
JLT Australia
and NZ 114.1 (8%) 2% 2% 32.3 36.1 37.1 28% 28% 30%
Lloyd
& Partners 85.2 2% 3% 1% 18.4 18.6 18.3 22% 22% 22%
JLT Asia 71.8 7% 14% 9% 11.3 12.2 10.4 16% 16% 15%
JLT Latin
America 60.7 9% 24% 22% 19.3 21.6 17.2 32% 31% 31%
Thistle
UK 33.2 (5%) (5%) (5%) 2.7 2.7 2.4 8% 8% 7%
JLT Canada 20.5 (20%) (11%) (8%) (1.1) (1.4) 1.5 (6%) (6%) 6%
JLT Middle
East and
Africa 11.3 - - 14% (0.3) (0.3) (0.4) (3%) (3%) (9%)
JLT Insurance
Management 7.4 (8%) (4%) (5%) 0.4 0.4 0.6 5% 5% 7%
JLT USA 1.3 - - - (5.2) (5.4) - - - -
820.5 13% 19% 5% 154.3 164.2 149.9 19% 19% 21%
------ ------- ------ -------- ------ ------ ------ ----- ----- -----
JLT Specialty delivered a strong performance with revenues of
GBP255.4 million in 2014 and organic revenue growth of 6%. Trading
profit increased to GBP52.1 million, an uplift of 1%, with a
decrease in the trading margin from 21% to 20%. However, the
trading margin remained unchanged at CRE.
We highlighted at the time of our interim results that we
expected that the combination of the acceleration in the decline in
insurance rates seen since the beginning of the second quarter of
the year and the strength of sterling, would result in a broadly
similar performance in this business to that delivered in the
previous year. This has proven to be the case.
As the organic revenue growth number indicates, the underlying
business is in good shape, maintaining our market leading positions
in many of our Specialty areas, while we have continued to make
progress in other key areas such as Financial Lines, M&A,
Credit, Political Risk and Security. The business has also
maintained its investment in high growth Specialties including
Cyber, Entertainment and Renewables.
With the full strategic and operational benefits of the merger
with Lloyd & Partners to be realised during 2015 and a strong
new business pipeline, this business is now better positioned for
future growth.
JLT Re delivered a solid performance in the year which included
the first full year contribution from the Towers Watson reinsurance
broking business which was acquired in November 2013.
Revenues were GBP159.6 million, an increase of 108% over the
previous year and included organic revenue growth of 7%. This is a
particularly strong performance when set against the sharp decline
in the reinsurance rating environment experienced over the year,
demonstrating how well positioned this business is to continue to
win market share.
As anticipated, the trading margin for the business remained at
15%, reflecting our ongoing commitment to make significant
investments in this business. Despite the difficult trading
conditions, we believe that this business is capable of moving to a
trading profit margin of 20% by the end of 2016. This belief is
underpinned by the high levels of client retention being achieved,
the continued ability of the business to attract and retain talent
and the investments we are making to increase efficiency and
effectiveness through improvements in the operating model, systems
and processes.
We also remain very encouraged by the support we are receiving
from cedants,as reflected by the business' strong performance
during the January 2015 renewals season when we both won
significant new accounts and achieved growth with existing clients.
We therefore believe that JLT Re is well positioned for growth.
JLT Australia and New Zealand delivered revenue of GBP114.1
million, growth of 2% at CRE, all of which was organic. Actual
revenues, however, reduced by 8% when compared to the previous year
due to the fall in the value of the Australian dollar against
sterling. The trading margin decreased to 28%, compared to 30% in
2013.
The underlying performance of the business remains pleasing when
set against the continued fierce competition and decline in
insurance rates experienced in the region. Its market leading
Public Sector business continued its progress during the year. The
investments made in attracting talent to the Group's core
Specialties such as Energy, Mining and Construction are
repositioning JLT to become one of the leading Specialty brokers
for large corporate buyers in the region.
Lloyd & Partners, the Group's specialist wholesale broker,
achieved revenue growth of 2%, or 3% at CRE, with organic revenue
growth of 1%. Actual trading profit was broadly flat on the
previous year, but increased by 1% at CRE. This was achieved
despite increasingly competitive domestic insurance markets making
the London, Bermuda and European markets less attractive to Lloyd
& Partners'wholesale clients.
In August, we announced the bringing together of JLT Specialty
and Lloyd & Partners to create a single Specialty business.
This merger was effective from the beginning of 2015 and has
progressed very smoothly. The enduring strength and importance of
our wholesale relationships and the quality of the service and
expertise we provide to our clients has come through in the months
since the announcement of the merger, with the business delivering
its best November and December trading performance for many
years.
JLT Asia delivered revenue growth of 7% to GBP71.8 million, an
increase of 14% at CRE, with organic revenue growth of 9%. Trading
profit improved by 9% to GBP11.3 million, with the trading margin
increasing to 16%.
This strong performance underlines the continued successful
build out of the Group's Specialty capabilities across the region.
The business is attracting new clients and winning market share in
an expanding Specialty market place where demand continues to
increase, driven by long term demographic and socio-economic
factors.
JLT Latin America had an impressive year, achieving revenue
growth of 9% to GBP60.7 million, an increase of 24% at CRE, with
organic revenue growth of 22%. Trading profit increased to GBP19.3
million, an increase of 26% at CRE, with the trading margin
increasing to 32%. The new start-up business in Argentina enjoyed a
successful first year.
Our Specialty businesses have continued to benefit from focus
and investment in areas such as Construction, Surety, Energy,
Aviation and Property, which are in turn aligned to the more
dynamic industry sectors in what remains a high growth region.
In 2014 a regional Affinity business was established that had an
immediate impact through the development of a bespoke technology
platform that has helped differentiate the client offering.
JLT USA was formed in August when JLT announced its decision to
enter the US market as a Specialty broker with a focus on Energy,
Construction, Financial Lines, Credit, Political & Security and
Aerospace.
This decision reflected the brand, reputation, scale, geographic
reach and leadership that we have been able to build over recent
years by following our Specialty-led strategy and the unique
opportunity this gave us to create a dynamic platform for long term
growth in the world's largest insurance market. It also reflected
the significant and growing demand from clients and leading
industry talent for JLT to challenge the position of the other
major brokers in the US and to deliver our unique proposition on a
global scale, given our clients' increasing requirements for
seamless worldwide coverage.
At that time we stated that this was expected to result in a net
investment of approximately $80 million during the period 2015 to
2017, before moving into profit in 2018 and then generating an
accelerated return thereafter. This figure takes account of the
upfront costs of building out the business offset by revenues which
are expected to build more slowly. Given the size of this
investment, it is our intention to report the financial results of
this new business area separately.
JLT USA has made a very encouraging start, resulting in the
acceleration of its recruitment plans and the bringing forward of
some expenditure into 2014. This was partially offset by revenues
which, as expected, were minimal for the period. This produced net
expenses in the period of GBP5.2 million. In 2015 it is anticipated
that the business will generate revenues in the region of $50
million and a net trading loss of $35 million. This includes
revenues and profits transferred from other parts of the Group and
the Energy business acquired from Alliant in October 2014.
We have been very encouraged by the quality of the people we
have been able to hire, the response of insurers and reinsurers who
have been very supportive of the Group's plans and the early
indications of traction with clients.
Employee Benefits
Total revenue in our Employee Benefits division increased by 11%
to GBP283.6 million. This represented a 14% increase at CRE and
organic revenue growth of 7%. Trading profit grew by 17% to GBP65.0
million for the year, with a trading margin of 23%.
Year ended 31st December
2014
GBPm Total Revenue Trading Profit Trading Margin
------------------------------- ---------------------- ---------------------
2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013
------ ------- ---- -------- ------ ------ ------ ------ ------ -----
UK & Ireland 183.2 6% 6% - 36.0 36.0 32.2 20% 20% 19%
Asia 69.3 25% 32% 28% 23.4 24.0 18.6 34% 33% 34%
Latin
America 20.1 12% 26% 6% 4.2 4.7 4.3 21% 21% 24%
Australia
and NZ 7.7 1% 13% 13% 2.0 2.2 1.1 26% 26% 14%
Canada 1.7 (10%) 1% 1% (0.4) (0.4) - (21%) (21%) (1%)
Middle
East and
Africa 1.6 - - - (0.2) (0.3) (0.4) (15%) (15%) -
283.6 11% 14% 7% 65.0 66.2 55.8 23% 23% 22%
------ ------- ---- -------- ------ ------ ------ ------ ------ -----
OurUK & Ireland Employee Benefits business increased
revenues by 6% to GBP183.2 million, with good trading profit growth
of 12% to GBP36.0 million and the trading margin increasing to 20%
from the 19% achieved in 2013.
JLT's market position was further strengthened during the year
by the acquisition of Ensign Pensions Administration in April.
Following the acquisition, all of Ensign's clients were retained
and several major new administration clients were won. As a result,
JLT is today the largest administrator of private sector pensions
in the UK.
The UK and Ireland pensions and savings landscape will continue
to experience significant regulatory change over the years ahead
and increasing demand for help and support from existing and new
clients is generating new business opportunities.
Asia achieved strong revenue growth of 25% to GBP69.3 million,
an increase of 32% at CRE, with impressive organic revenue growth
of 28%. This growth was driven by our market leading life insurance
broking business, which provides solutions to high-net-worth
clients, working closely with most of the largest private banks in
the region.
In Asia we have a strong and growing Employee Benefits business
employing some 700 people which secured many new clients during the
year. We are seeing growing demand for benefits advice,
particularly around Group health insurance and we are developing
our services to assist the management of these costs for clients.
In early 2015, we invested in JLT Essential Healthcare Network
which provides a strong platform to take advantage of healthcare
opportunities in China.
In LatAm, our acquisition of SCK at the beginning of 2014 has
broadened our overall client proposition in Brazil by extending our
capabilities into broader risk management through wellness
management and consulting. This has enabled us to secure good
levels of new business, whilst clearly differentiating ourselves in
the market place. Our other businesses have continued to perform
well, benefitting from growing demand and our strong capabilities
and market position.
In Australia & New Zealand, we are growing our Employee
Benefits business by offering an integrated broking, occupational
health and return-to-work service, assisting clients in managing
the rising cost of mandatory worker's compensation and
discretionary benefits.
We have this morning announced the acquisition of Recovre, one
of the leading providers of workplace rehabilitation services in
the Australian market. This acquisition greatly enhances JLT's
scale and ability to deliver workplace rehabilitation services on
behalf of corporate clients and insurers and positions JLT as one
of the clear market leaders in this rapidly expanding sector.
Our Employee Benefits operations in Canada and Middle East &
Africa continue to make progress.
ASSOCIATES
Year ended 31st December
2014
GBPm Contribution After
Tax
---------------------------
2014 CRE 2013 Growth
----- ---- ----- -------
Underlying
share of
associates 7.7 8.1 8.1 (5%)
----- ---- ----- -------
Our Associates' contribution in 2014 reduced marginally,
reflecting the mixed trading conditions that have impacted our
European Associates in particular, combined with adverse currency
movements.
On 13th February 2015, the Group announced that the shareholders
in Milestone, the holding company of Siaci St Honoré ("Siaci"),
JLT's French Associate, had received an offer to sell their shares
to a private equity investor to fund the next phase of the
company's development. As part of this transaction, JLT would
dispose of its 26.2% shareholding in the business for net cash
proceeds of around GBP82 million, generating an approximate
exceptional gain of GBP21 million in 2015.
Assuming this transaction completes as expected in May, this
will reduce Siaci's contribution to JLT in 2015 to approximately
GBP2 million, which compares to GBP5 million in 2014.
Siaci and JLT share a longstanding Specialty-focused trading
relationship that goes back over twenty years. Siaci remains the
exclusive partner of the JLT International Network in France.
The weighting of the contribution from Associates is towards the
first half of the financial year and we expect this to
continue.
EXCEPTIONAL ITEMS
In 2014 total net exceptional and non-recurring costs for the
year were GBP23.3 million (2013: GBP22.8 million). These primarily
comprised the costs of the Business Transformation Programme, which
completed at the end of 2014 and is detailed below, acquisition and
integration costs and the initial restructuring costs associated
with the merger of JLT Specialty and Lloyd & Partners.
For 2015, exceptional and non-recurring items are expected to
include acquisition and integration costs of GBP11 million and
restructuring costs of GBP9 million, off-set by the exceptional
gain of GBP21 million on the anticipated disposal of the 26.2%
interest in Milestone, the holding company of the Group's French
Associate, Siaci St Honoré.
OPERATING COSTS
In 2014, the Group's underlying operating cost ratio increased
by 110 basis points to 82.2% of total revenue. This reflects the
competitive trading environment, foreign exchange movements and the
continued investment in the business, particularly the investment
being made in establishing a Specialty insurance broking business
in the US.
We remain focused on cost discipline, but have a track record in
delivering market-leading levels of organic growth which gives us
the confidence to make investments when we identify an opportunity
to deliver sustainable long-term earnings growth. Clearly
establishing a US Specialty insurance broking business is such an
opportunity and our current expectation is that this investment
will impact the Group's trading margin by approximately 200 basis
points in 2015.
CASH FLOW AND BALANCE SHEET
The Group continues to be well funded. The increase in net debt
during the year largely reflects the cost of acquisitions and
capital expenditure in 2014. In addition the increase reflects the
retranslation of $500 million of the Group's Private Placement Loan
Notes, the impact of which is hedged in the balance sheet. Net debt
at 31st December 2014 was GBP474 million. At that date the Group
had committed long term unsecured bank facilities of GBP350 million
and drawn Private Placement Loan Notes equivalent to GBP393
million, resulting in total committed debt facilities equivalent to
GBP743 million, with maturities between 2015 and 2029. Gross
borrowings as at 31st December 2014 were GBP612 million, which
includes GBP593 million of borrowings under the Group's committed
facilities, leaving un-utilised committed facilities headroom of
GBP150 million.
In February 2015 the Group completed the renewal of its core
unsecured revolving credit facility. This GBP450 million committed
facility is for a term of 5 years. Taken together with an existing
bilateral facility of GBP50 million, the Group has total bank
facilities of GBP500 million. Had this renewed revolving credit
facility been in place at 31 December 2014, the Group's committed
headroom would have been GBP300 million.The Group now has medium
and long term debt facilities equivalent to approximately GBP893
million.
The Group expects to receive some GBP82 million during May 2015,
representing the proceeds of the disposal of its shareholding in
its French Associate Siaci, which will be used to repay borrowings
drawn under the Group's revolving credit facility, further
increasing the available headroom.
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. In 2014, the Group achieved an average rate after
hedging of US$1.56 compared to an average market rate of
US$1.65.
As at 27th February 2015, some 63% of anticipated dollar
revenues for 2015 (approximately US$355 million) are hedged at an
average rate of US$1.55. For 2016, some 43% of expected dollar
revenues are hedged at an average rate of US$1.57 and some 10% are
hedged for 2017 at an average rate of US$1.59.
As a guide, each one cent movement in the achieved rate
currently translates to a change of approximately GBP1.5 million in
revenue and a corresponding impact on trading profit equal to
approximately 65% of the revenue change.
In addition to the transactional foreign exchange exposure which
is managed through the Group's hedging programmes, JLT is also
exposed to 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.
BUSINESS TRANSFORMATION PROGRAMME
The Group's two year Business Transformation Programme
successfully completed in 2014. The previously projected total
one-off costs and recurring annualised savings for the programme
had been GBP18 million and GBP12 million respectively. The final
outcome however exceeded these expectations, with a final total
cost of GBP17 million and recurring savings of GBP16 million.
BOARD AND SENIOR MANAGEMENT DEVELOPMENTS
On 30th January 2015, the Group announced several senior
management appointments within its UK Employee Benefits business
and JLT Asia. These appointments are subject to obtaining the
appropriate regulatory approvals, where required.
Mark Wood is retiring from his role as the CEO of JLT's UK
Employee Benefits business and will be leaving the Group at the end
of May 2015.
Duncan Howorth is returning to the UK after two successful years
as CEO of JLT Asia to take up the position of CEO of JLT's UK
Employee Benefits business, effective from 1st June 2015. Duncan
will continue in his role as the International Chairman of Employee
Benefits.
Dominic Samengo-Turner is being appointed CEO of JLT Asia, with
effect from 1st May 2015. Dominic previously spent over 20 years at
Willis, most recently as Co-Chief Executive of Global Specialities
and a Director of Willis Limited.
OUTLOOK
Despite a challenging insurance rating environment, we are
confident in JLT's revenue growth momentum and in our strategy of
continuing to invest to deliver sustainable long term earnings
growth.
Results follow
Jardine Lloyd Thompson Group plc
Consolidated Income Statement
Unaudited Preliminary Results for the year ended 31st December
2014
Notes 2014 2013
GBP'000 GBP'000
---------- ----------
Fees and commissions 3 1,099,728 974,623
Investment income 3 4,398 4,529
---------- ----------
Total revenue 3 1,104,126 979,152
Salaries and associated expenses (671,758) (580,968)
Premises (57,927) (53,638)
Other operating costs (172,426) (157,386)
Depreciation, amortisation
and impairment charges 4 (28,139) (24,667)
---------- ----------
Operating profit 2,3,4 173,876 162,493
---------- ----------
Analysed as:
Operating profit before exceptional
items 3 196,830 185,365
Acquisition and integration
costs 4 (13,271) (9,020)
Business Transformation Programme 4 (7,753) (9,521)
Restructuring costs 4 (2,482) -
Premises consolidation costs 4 - (5,022)
Other exceptional items 4 552 691
---------- ----------
Operating profit 2,3,4 173,876 162,493
---------- ----------
Finance costs 5 (22,972) (17,476)
Finance income 5 1,526 1,441
---------- ----------
Finance costs - net 3,5 (21,446) (16,035)
Share of results of associates 3 7,306 8,106
---------- ----------
Profit before taxation 2,3 159,736 154,564
Income tax expense 3,6 (42,072) (41,789)
---------- ----------
Profit for the year 117,664 112,775
---------- ----------
Profit attributable to:
Owners of the parent 3 105,291 101,960
Non-controlling interests 3 12,373 10,815
---------- ----------
117,664 112,775
---------- ----------
Earnings per share attributable
to the owners of the parent
during the year (expressed
in pence per share) 7
Basic earnings per share 47.9p 46.6p
Diluted earnings per share 47.8p 46.4p
The notes on pages 19 to 52 form an integral part of these
condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Consolidated Statement of Comprehensive Income
Unaudited Preliminary Results for the year ended 31st December
2014
Notes 2014 2013
GBP'000 GBP'000
--------- ---------
Profit for the year 117,664 112,775
--------- ---------
Other comprehensive expense
Items that will not be reclassified
to profit or loss
--------- ---------
Remeasurement of post employment
benefit obligations 23 (51,394) (9,370)
Taxation thereon 9,907 1,364
--------- ---------
Total items that will not
be reclassified to profit
or loss (41,487) (8,006)
Items that may be reclassified
subsequently to profit or
loss
Fair value gains/(losses)
net of tax
--------- ---------
* available-for-sale 203 48
* available-for-sale reclassified to the income
statement (204) -
* cash flow hedges (17,457) 1,720
Currency translation differences (3,238) (24,332)
Total items that may be reclassified
subsequently to profit or
loss (20,696) (22,564)
--------- ---------
Other comprehensive expense
net of tax (62,183) (30,570)
--------- ---------
Total comprehensive income
for the year 55,481 82,205
--------- ---------
Attributable to:
Owners of the parent 43,312 72,830
Non-controlling interests 12,169 9,375
--------- ---------
55,481 82,205
--------- ---------
The notes on pages 19 to 52 form an integral part of these
condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Consolidated Balance Sheet
Unaudited Preliminary Results as at 31st December 2014
Notes 2014 2013
GBP'000 GBP'000
------------ ----------
NET OPERATING ASSETS
Non-current assets
Goodwill 9 475,697 429,450
Other intangible assets 86,495 69,092
Property, plant and equipment 61,405 59,715
Investments in associates 100,650 101,445
Available-for-sale financial
assets 10,15 9,004 22,346
Derivative financial instruments 11,15 18,514 16,906
Retirement benefit surpluses 23 572 1,249
Deferred tax assets 64,818 51,809
------------ ----------
817,155 752,012
------------ ----------
Current assets
Trade and other receivables 12 493,647 411,428
Derivative financial instruments 11,15 3,101 9,826
Available-for-sale financial
assets 10,15 5,384 1,421
Cash and cash equivalents 13,15 871,246 753,164
------------ ----------
1,373,378 1,175,839
------------ ----------
Current liabilities
Borrowings 15,16 (168,586) (12,995)
Trade and other payables 14 (1,037,544) (909,595)
Derivative financial instruments 11,15 (2,491) (2,344)
Current tax liabilities (8,743) (5,201)
Provisions for liabilities
and charges 17 (7,588) (10,158)
------------ ----------
(1,224,952) (940,293)
------------ ----------
Net current assets 148,426 235,546
------------ ----------
Non-current liabilities
Borrowings 15,16 (443,651) (447,188)
Derivative financial instruments 11,15 (15,859) (30,543)
Deferred tax liabilities (16,687) (12,542)
Retirement benefit obligations 23 (179,607) (131,876)
Provisions for liabilities
and charges 17 (3,225) (4,952)
------------ ----------
(659,029) (627,101)
------------ ----------
306,552 360,457
------------ ----------
TOTAL EQUITY
Capital and reserves attributable
to the owners of the parent
Ordinary shares 11,006 11,003
Share premium 18 103,941 103,739
Fair value and hedging reserves 18 (234) 17,224
Exchange reserves 18 (5,033) (1,999)
Retained earnings 178,932 211,009
------------ ----------
Shareholders' equity 288,612 340,976
Non-controlling interests 17,940 19,481
------------ ----------
306,552 360,457
------------ ----------
The notes on pages 19 to 52 form an integral part of these
condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Consolidated Statement of Changes in Equity
Unaudited Preliminary Results for the year ended 31st December
2014
For the year ended 31st December
2014
----------------------------------------------------------------------------
Ordinary Other Retained Shareholders' Non-controlling Total
Notes shares reserves earnings equity interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- -------------- ---------------- ---------
Balance at 1st
January 2014 11,003 118,964 211,009 340,976 19,481 360,457
--------- --------- --------- -------------- ---------------- ---------
Profit for the
year - - 105,291 105,291 12,373 117,664
Other comprehensive
expense for the
year - (20,492) (41,487) (61,979) (204) (62,183)
--------- --------- --------- -------------- ---------------- ---------
Total comprehensive
(expense)/income
for the year - (20,492) 63,804 43,312 12,169 55,481
Dividends 8 - - (60,610) (60,610) (8,324) (68,934)
Amounts in respect
of share based
payments:
* reversal of amortisation net of tax - - 18,646 18,646 - 18,646
* shares acquired - - (32,698) (32,698) - (32,698)
Acquisitions 21 - - - - (5,170) (5,170)
Disposals - - - - (216) (216)
Change in non-controlling
interests 21 - - (21,219) (21,219) - (21,219)
Issue of share
capital 3 202 - 205 - 205
--------- --------- --------- -------------- ---------------- ---------
Balance at 31st
December 2014 11,006 98,674 178,932 288,612 17,940 306,552
--------- --------- --------- -------------- ---------------- ---------
For the year ended 31st December
2013
----------------------------------------------------------------------------
Ordinary Other Retained Shareholders' Non-controlling Total
Notes shares reserves earnings equity interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- -------------- ---------------- ---------
Balance at 1st
January 2013 10,997 139,537 182,775 333,309 14,909 348,218
--------- --------- --------- -------------- ---------------- ---------
Profit for the
year - - 101,960 101,960 10,815 112,775
Other comprehensive
expense for the
year - (21,124) (8,006) (29,130) (1,440) (30,570)
--------- --------- --------- -------------- ---------------- ---------
Total comprehensive
(expense)/income
for the year - (21,124) 93,954 72,830 9,375 82,205
Dividends 8 - - (57,092) (57,092) (5,475) (62,567)
Amounts in respect
of share based
payments:
* reversal of amortisation net of tax - - 18,306 18,306 - 18,306
* shares acquired - - (21,704) (21,704) - (21,704)
Acquisitions - - - - 685 685
Disposals - - - - (48) (48)
Additions - - - - 35 35
Change in non-controlling
interests - - (5,230) (5,230) - (5,230)
Issue of share
capital 6 551 - 557 - 557
--------- --------- --------- -------------- ---------------- ---------
Balance at 31st
December 2013 11,003 118,964 211,009 340,976 19,481 360,457
--------- --------- --------- -------------- ---------------- ---------
The notes on pages 19 to 52 form an integral part of these
condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Consolidated Statement of Cash Flows
Unaudited Preliminary Results for the year ended 31st December
2014
Notes 2014 2013
GBP'000 GBP'000
---------- --------------------
Cash flows from operating
activities
Cash generated from operations 20 159,299 163,430
Interest paid (16,484) (8,772)
Interest received 6,000 5,538
Taxation paid (36,560) (41,380)
Increase in net insurance
broking payables 77,268 106,203
---------- --------------------
189,523 225,019
Dividend received from associates 2,287 1,732
---------- --------------------
Net cash generated from operating
activities 191,810 226,751
---------- --------------------
Cash flows from investing
activities
Purchase of property, plant
and equipment (13,371) (44,788)
Purchase of other intangible
assets (36,931) (27,354)
Proceeds from disposal of
property, plant and equipment 1,041 596
Acquisition of businesses,
net of cash acquired 21 (58,205) (150,874)
Acquisition of associates (686) (230)
Proceeds from disposal of
businesses, net of cash disposed 22 703 (2,089)
Purchase of available-for-sale
other investments - (3,264)
Proceeds from disposal of
available-for-sale other
investments 1,008 1,317
---------- --------------------
Net cash used in investing
activities (106,441) (226,686)
---------- --------------------
Cash flows from financing
activities
Dividends paid to owners
of the parent (60,327) (57,582)
Purchase of available-for-sale
financial assets (5) (6,439)
Proceeds from disposal of
available-for-sale financial
assets 7,991 269
Purchase of shares (32,698) (21,704)
Proceeds from issuance of
ordinary shares 205 557
Proceeds from borrowings 208,514 230,403
Repayments of borrowings (84,450) (4,711)
Dividends paid to non-controlling
interests (8,324) (5,475)
---------- --------------------
Net cash generated from financing
activities 30,906 135,318
---------- --------------------
Net increase in cash and
cash equivalents 116,275 135,383
Cash and cash equivalents
at beginning of the year 753,164 624,321
Exchange gains/(losses) on
cash and cash equivalents 1,807 (6,540)
---------- --------------------
Cash and cash equivalents
at end of the year 871,246 753,164
---------- --------------------
The notes on pages 19 to 52 form an integral part of these
condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Notes to the Unaudited Preliminary Results
For the year ended 31st December 2014
1. Basis of accounting
The consolidated preliminary results of the Group have been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the
EU), IFRIC interpretations and the Companies Act 2006 applicable to
Companies reporting under IFRSs. The consolidated preliminary
results have been prepared on a going concern basis, under the
historical cost convention, as modified by the revaluation of
available-for-sale assets and financial assets and liabilities
(including derivative financial instruments) at fair value through
profit and loss.
The accounting policies are consistent with those of the Annual
Report for the year ended 31st December 2013 except as described
below.
Standards, amendments and interpretations effective in 2014
The principal standards adopted by the Group for the first time
for the financial year beginning on or after 1st January 2014
are:
IFRS 10, 'Consolidated financial statements' builds on existing
principles by identifying the concept of control as the determining
factor in whether an entity should be included within the
consolidated financial statements of the Parent company. The
standard provides additional guidance to assist in the
determination of control where this is difficult to assess.
IFRS 11, 'Joint arrangements' focuses on the rights and
obligations of the parties to the arrangement rather than its legal
form. There are two types of joint arrangements: joint operations
and joint ventures. Joint operations arise where the investors have
rights to the assets and obligations for the liabilities of an
arrangement. A joint operator accounts for its share of the assets,
liabilities, revenue and expenses. Joint ventures arise where the
investors have rights to the net assets of the arrangement; joint
ventures are accounted for under the equity method. Proportional
consolidation of joint arrangements is no longer permitted.
IFRS 12, 'Disclosures of interests in other entities' includes
the disclosure requirements for all forms of interests in other
entities, including joint arrangements, associates, structured
entities and other off balance sheet vehicles.
The preliminary results for the year ended 31st December 2014
are unaudited.
2. Alternative income statement
The format of the consolidated income statement on page 14
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.
Year ended 31st December
2014
-----------------------------------------------
Underlying Exceptional
profit items Total
GBP'000 GBP'000 GBP'000
----------- --- ------------ --- ----------
Fees and commissions 1,099,728 - 1,099,728
Investment income 4,398 - 4,398
Salaries and associated
expenses (656,323) (15,435) (671,758)
(55,576)
Premises ) (2,351) (57,927)
Other operating costs (167,258) (5,168) (172,426)
Depreciation, amortisation
and impairment charges (28,139) - (28,139)
Trading profit 196,830 (22,954) 173,876
Finance costs - net (21,446) - (21,446)
Share of results of associates 7,660 (354) 7,306
----------- --- ------------ --- ----------
Profit before taxation 183,044 (23,308) 159,736
----------- --- ------------ --- ----------
Year ended 31st December
2013
----------------------------------------------
Underlying Exceptional
profit items Total
GBP'000 GBP'000 GBP'000
--------------- ------------ ---------------
Fees and commissions 974,623 - 974,623
Investment income 4,529 - 4,529
Salaries and associated
expenses (569,716) (11,252) (580,968)
Premises (48,229) (5,409) (53,638)
Other operating costs (151,175) (6,211) (157,386)
Depreciation, amortisation
and impairment charges (24,667) - (24,667)
Trading profit 185,365 (22,872) 162,493
Finance costs - net (16,035) - (16,035)
Share of results of associates 8,106 - 8,106
--------------- ------------ ---------------
Profit before taxation 177,436 (22,872) 154,564
--------------- ------------ ---------------
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.
JLT Re and JLT Asia are now disclosed as reportable segments to
meet the quantitative thresholds required by IFRS 8. During the
year, the Group has reclassified the Middle East and North Africa
business which was reported previously in JLT Specialty to the
Middle East and Africa segment (included in Other Risk &
Insurance).
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:
26% in Milestone, the holding company of Siaci Saint Honoré, which
operates principally in France; 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. On the 2nd of July 2014, the Group acquired a 26%
shareholding in JLT Independent Insurance Brokers Private Ltd which
operates in India. The investment and the Group's share of the net
profit of these associates are included in the Head Office &
Other segment, together with the investment and results of the
Group's other associates, Sterling Re Intermediaro de Reaseguro SA
de CV, JLT Insurance Management Malta and JLT Energy (France)
SAS.
Other segment items
Capital expenditure comprises additions to property, plant and
equipment and other intangible assets.
Year ended 31st December 2014
------------------------------------------------------------------------------------------------------------------
Risk & Insurance Employee
Benefits
-------------------
JLT
Australia Other
& Lloyd Risk UK Other Head
JLT JLT New & JLT & & Employee Office
Specialty Re Zealand Partners Asia Insurance Ireland Benefits & Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------
Fees
and
commissions 254,561 159,240 111,767 85,094 71,587 133,929 183,167 100,383 - 1,099,728
Investment
income 801 377 2,353 143 167 494 1 62 - 4,398
---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------
Total
revenue 255,362 159,617 114,120 85,237 71,754 134,423 183,168 100,445 - 1,104,126
---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------
Underlying
trading
profit 52,149 24,453 32,269 18,372 11,299 15,723 36,002 29,030 (22,467) 196,830
---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------
Operating
profit 48,631 14,045 32,269 16,279 9,094 14,600 34,228 28,642 (23,912) 173,876
Finance
costs
- net - - - - - - - - (21,446) (21,446)
Share
of results
of associates - - - - - - - - 7,306 7,306
---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------
Profit
before
taxation 48,631 14,045 32,269 16,279 9,094 14,600 34,228 28,642 (38,052) 159,736
Income
tax
expense - - - - - - - - (42,072) (42,072)
Non-controlling
interests - - - - - - - - (12,373) (12,373)
---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------
Net
profit
attributable
to the
owners
of the
parent 48,631 14,045 32,269 16,279 9,094 14,600 34,228 28,642 (92,497) 105,291
---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------
Segment
assets 2,089,883 2,089,883
Investments
in associates 100,650 100,650
------------ ------------
Total
assets 2,190,533 2,190,533
------------ ------------
Segment
liabilities (1,883,981) (1,883,981)
------------ ------------
Total
liabilities (1,883,981) (1,883,981)
------------ ------------
Other
segment
items:
Capital
expenditure 6,733 2,859 2,370 9,493 3,125 7,567 7,592 1,419 9,144 50,302
Depreciation,
amortisation
and
impairment
charges (3,793) (1,687) (2,916) (2,732) (2,372) (4,064) (6,023) (1,107) (11,297) (35,991)
Year ended 31st December 2013
-------------------------------------------------------------------------------------------------------------------------------------
Risk & Insurance Employee
Benefits
--------------------------------------
JLT
Australia Other
& Lloyd Risk Other Head
JLT JLT New & JLT & UK Employee Office
Specialty Re Zealand Partners Asia Insurance & Ireland Benefits & Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------
Fees
and
commissions 241,930 76,686 121,829 83,507 66,961 128,485 172,101 83,124 - 974,623
Investment
income 815 140 2,640 142 146 600 1 45 - 4,529
---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------
Total
revenue 242,745 76,826 124,469 83,649 67,107 129,085 172,102 83,169 - 979,152
---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------
Underlying
trading
profit 51,544 11,303 37,073 18,344 10,374 21,252 32,200 23,608 (20,333) 185,365
---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------
Operating
profit 48,191 6,574 35,933 18,344 8,034 20,406 27,008 22,795 (24,792) 162,493
Finance
costs
- net - - - - - - - - (16,035) (16,035)
Share
of results
of associates - - - - - - - - 8,106 8,106
---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------
Profit
before
taxation 48,191 6,574 35,933 18,344 8,034 20,406 27,008 22,795 (32,721) 154,564
Income
tax
expense - - - - - - - - (41,789) (41,789)
Non-controlling
interests - - - - - - - - (10,815) (10,815)
---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------
Net
profit
attributable
to the
owners
of the
parent 48,191 6,574 35,933 18,344 8,034 20,406 27,008 22,795 (85,325) 101,960
---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------
Segment
assets 1,826,406 1,826,406
Investments
in associates 101,445 101,445
------------ ------------
Total
assets 1,927,851 1,927,851
------------ ------------
Segment
liabilities (1,567,394) (1,567,394)
------------ ------------
Total
liabilities (1,567,394) (1,567,394)
------------ ------------
Other
segment
items:
Capital
expenditure 2,143 1,752 7,873 872 4,214 4,154 10,255 782 40,097 72,142
Depreciation,
amortisation
and
impairment
charges (4,145) (1,219) (2,624) (1,152) (1,893) (4,059) (4,794) (728) (10,807) (31,421)
Geographical segment analysis
Although the Group's two business segments are managed on a
worldwide basis, they operate in five principal geographical areas
of the world.
The United Kingdom is the home country of the parent company
Jardine Lloyd Thompson Group plc.
The Risk & Insurance segment operates in the United Kingdom,
the Group's home country. In the Americas, the Risk & Insurance
segment operates in Argentina, Bermuda, the Caribbean, Brazil,
Canada, Colombia, Peru, Chile and the United States. The
Australasian segment includes operations in Australia and New
Zealand. In Europe, it operates in Republic of Ireland, Sweden,
Finland, Norway, Denmark, Germany, Guernsey, France, The
Netherlands, Spain, Switzerland and Russia. The Asian segment
includes operations in Singapore, Hong Kong, Taiwan, Indonesia,
Japan, Thailand, South Korea, Philippines, Malaysia, China,
Vietnam, Dubai, Qatar and Bahrain. In Africa, it operates in South
Africa.
The Employee Benefits segment operates in the United Kingdom. In
the Americas, the Employee Benefits segment operates in Brazil,
Canada, Colombia and Peru. The Australasian segment includes
operations in Australia and New Zealand. In Europe, it operates in
the Republic of Ireland and Switzerland. The Asian segment includes
operations in Singapore, Hong Kong, Taiwan, Indonesia, Japan,
Thailand, South Korea, Philippines, Malaysia, China and Vietnam. In
Africa, it operates in South Africa.
The Head Office & Other activities segment is mainly based
in the United Kingdom with minor operations in the Americas, Europe
and Asia. The Group's captive operations are included in the United
Kingdom segment.
Fees and commissions are disclosed by (1) the country in which
the office is located and (2) the country in which the customer is
located.
Segment non-current assets, segment assets and segment
liabilities are disclosed based on the country in which they are
located or occur. Interest bearing assets (e.g. cash and cash
equivalents and investments & deposits) relating to the Group's
own funds and deferred tax assets are excluded from segment assets.
Interest bearing liabilities (e.g. borrowings) and income and
deferred tax liabilities are excluded from segment liabilities.
Items excluded from segmental allocation are referred to as
"unallocated".
Year ended 31st December 2014
------------------------------------------------------------------------------
Fees Fees Segment
and commissions and commissions non-current Segment Segment
(1) (2) assets assets liabilities
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----------------- ------------- ---------- -------------
UK 591,002 360,415 378,995 1,192,734 (830,555)
Americas 199,696 320,918 157,286 329,087 (158,945)
Australasia 121,728 131,071 25,705 118,270 (79,983)
Asia 156,054 166,364 41,398 183,580 (134,305)
Europe 26,974 86,856 15,926 52,560 (33,527)
Rest of the World 4,274 34,104 4,287 5,213 (3,326)
----------------- ----------------- ------------- ---------- -------------
1,099,728 1,099,728 623,597 1,881,444 (1,240,641)
----------------- ----------------- ------------- ---------- -------------
Investment in 100,650 -
associates
Unallocated assets/(liabilities) 208,439 (643,340)
---------- -------------
Total assets/(liabilities) 2,190,533 (1,883,981)
---------- -------------
Year ended 31st December 2013
------------------------------------------------------------------------------
Fees Fees Segment
and commissions and commissions non-current Segment Segment
(1) (2) assets assets liabilities
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----------------- ------------- ---------- -------------
UK 540,951 337,587 336,194 1,048,684 (742,449)
Americas 149,637 247,146 138,947 299,806 (131,006)
Australasia 130,591 141,835 27,250 115,233 (81,203)
Asia 126,414 145,918 34,170 141,598 (102,839)
Europe 24,066 78,786 17,361 43,669 (24,636)
Rest of the World 2,964 23,351 4,335 4,360 (2,184)
----------------- ----------------- ------------- ---------- -------------
974,623 974,623 558,257 1,653,350 (1,084,317)
----------------- ----------------- ------------- ---------- -------------
Investment in 101,445 -
associates
Unallocated assets/(liabilities) 173,056 (483,077)
---------- -------------
Total assets/(liabilities) 1,927,851 (1,567,394)
---------- -------------
4. Operating profit
2014 2013
GBP'000 GBP'000
--------- ---------
The following items have been (credited)/charged
in arriving at operating profit:
Foreign exchange (gains)/losses:
* fees and commissions (8,705) (2,687)
* other operating costs (894) 902
--------- ---------
(9,599) (1,785)
--------- ---------
Amortisation of other intangible
assets:
* software costs 15,362 12,240
* other intangible assets 1,530 1,093
Depreciation on property, plant
and equipment:
* owned assets 10,963 11,243
* leased assets under finance leases 284 91
--------- ---------
Total depreciation and amortisation
charges 28,139 24,667
--------- ---------
Amortisation of other intangible
assets:
* employment contract payments (included in salaries
and associated expenses) 7,852 6,754
--------- ---------
Losses/(gains) on disposal of property,
plant and equipment 53 (22)
--------- ---------
Operating lease rentals payable:
* minimum lease payments
* land and buildings 35,422 30,817
* furniture, equipment and motor vehicles 735 770
* computer equipment and software 329 284
* sub-lease receipts
* land and buildings (1,904) (1,668)
--------- ---------
34,582 30,203
--------- ---------
Available-for-sale financial assets:
* fair value gains (16) (2)
* gain on sale (332) (348)
--------- ---------
(348) (350)
--------- ---------
Exceptional items:
Acquisition and integration costs
of which:
--------- ---------
* included in salaries and associated expenses 7,347 2,562
* included in premises costs 1,873 387
* included in other operating costs 4,051 6,071
--------- ---------
13,271 9,020
Business Transformation Programme
of which:
--------- ---------
* included in salaries and associated expenses 5,753 8,690
* included in other operating costs 2,000 831
--------- ---------
7,753 9,521
Restructuring costs of which:
--------- ---------
* included in salaries and associated expenses 2,335 -
* included in premises costs 142 -
* included in other operating costs 5 -
--------- ---------
2,482 -
Net gain on restructuring of businesses
in Canada of which:
--------- ---------
* included in premises costs 336 -
* included in other operating costs (683) -
(347) -
Release of contingent considerations (205) -
London premises consolidation costs - 5,022
Loss on disposal of JLT Re Spain
branch - 372
Profit on partial disposal of JLT
Energy (France) SAS - (715)
Profit on sale of premises in Colombia - (348)
--------- ---------
Total exceptional items included
within operating profit 22,954 22,872
Siaci restructuring costs - included
in share of results of associates 354 -
--------- ---------
Total exceptional items 23,308 22,872
--------- ---------
5. Finance income and costs
2014 2013
GBP'000 GBP'000
--------- ---------
Interest receivable - own funds 1,500 1,441
Investment income on available-for-sale
financial assets 26 -
Interest expense:
* bank and other borrowings (16,803) (11,658)
* finance leases (48) (24)
* interest in respect of liability discounting (291) (114)
Pension financing:
--------- ---------
* expected return on post-employment scheme assets 23,151 22,940
* interest on post-employment scheme liabilities (28,981) (28,620)
--------- ---------
Net pension financing expense (5,830) (5,680)
Finance costs - net (21,446) (16,035)
--------- ---------
Finance costs (22,972) (17,476)
Finance income 1,526 1,441
--------- ---------
Finance costs - net (21,446) (16,035)
--------- ---------
6. Income tax expense
2014 2013
GBP'000 GBP'000
--------- ---------
Current tax expense
Current year 43,637 41,510
Adjustments in respect of prior
years 1,430 918
--------- ---------
45,067 42,428
--------- ---------
Deferred tax credit
Origination and reversal of temporary
differences (3,348) (514)
Reduction in tax rate 18 1,610
Adjustments in respect of prior
years 335 (1,735)
--------- ---------
(2,995) (639)
--------- ---------
Total income tax expense 42,072 41,789
--------- ---------
The total income tax expense in the income statement of
GBP42,072,000 (2013: GBP41,789,000) includes a tax credit on
exceptional items of GBP5,128,000 (2013: GBP5,012,000). There were
no non-recurring tax credits in the year.
The UK Government has announced various measures in relation to
UK corporation tax including a 2% reduction in the headline rate of
corporation tax from April 2014 and a further reduction of 1% in
2015. These reductions reduce the UK tax rate from 23% to 20%. As
at 31st December 2014 the 2% rate reduction to 21% is already in
force and the subsequent 1% rate reduction has been enacted. The
impact of the 1% reduction has therefore been incorporated into the
income tax charge for the year ended 31st December 2014.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the tax rate of the home
country of the Company as follows:
2014 2013
GBP'000 GBP'000
--------- ---------
Profit before taxation 159,736 154,564
--------- ---------
Tax calculated at UK Corporation
Tax rate of 21.5% (2013: 23.25%) 34,343 35,936
Non-deductible expenses* 4,584 4,783
Tax losses not previously recognised - (102)
Adjustments in respect of prior
years 1,783 (817)
Effect of UK and non-UK tax rate
differences 2,894 2,284
Effect of reduction in UK tax rate - 1,590
Tax on associates (1,532) (1,885)
--------- ---------
Total income tax expense 42,072 41,789
--------- ---------
* The non-deductible expenses relate principally
to non-deductible entertainment expenses.
7. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent by the weighted average
number of ordinary shares in issue during the year, excluding
unallocated shares held by the Trustees of the Employee Share
Ownership Plan Trust and the Qualifying Employee Share Ownership
Trust.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares.
Additionally basic and diluted earnings per share are also
calculated based on underlying earnings attributable to the owners
of the parent.
A reconciliation of earnings is set out below.
2014 2013
No. No.
of shares of shares
------------ ------------
Weighted average number of ordinary
shares in issue 219,713,827 218,951,874
Effect of outstanding share options 475,892 899,435
------------ ------------
Adjusted weighted average number
of ordinary shares for diluted
earnings per share 220,189,719 219,851,309
------------ ------------
2014 2013
---------------------------- ----------------------------
Basic Diluted Basic Diluted
pence pence pence pence
per per per per
GBP'000 share share GBP'000 share share
--------- ------- -------- --------- ------- --------
Earnings reconciliation
Underlying profit
after taxation
and non-controlling
interests 123,471 56.2 56.1 119,820 54.7 54.5
Exceptional items
before tax (23,308) (22,872)
Taxation thereon 5,128 5,012
--------- ---------
(18,180) (8.3) (8.3) (17,860) (8.1) (8.1)
Profit attributable
to the owners of
the parent 105,291 47.9 47.8 101,960 46.6 46.4
--------- ------- -------- --------- ------- --------
8. Dividends
2014 2013
GBP'000 GBP'000
--------- ---------
Final dividend in respect of 2013
of 17.1p per share (2012: 15.9p) 37,216 34,976
Less: adjustment * (18) (111)
--------- ---------
37,198 34,865
Interim dividend in respect of
2014 of 10.6p per share (2013:
10.1p) 23,412 22,227
--------- ---------
60,610 57,092
--------- ---------
* Adjustment relating to dividend equivalents
accrued in respect of various performance related
share awards and long-term incentive plans not
currently anticipated to fully vest.
A final dividend in respect of 2014 of 18.3p per share (2013:
17.1p) amounting to a total of GBP40,076,000 (2013: GBP37,438,000)
is proposed by the Board. The dividend proposed will not be
accounted for until it has been approved at the Annual General
Meeting on 1st May 2015.
9. Goodwill
Gross Impairment Net carrying
amount losses amount
GBP'000 GBP'000 GBP'000
--------- ----------- -------------
At 31st December 2014
Opening net book amount 434,026 (4,576) 429,450
Exchange differences 2,315 97 2,412
Acquisitions 43,835 - 43,835
Closing net book amount 480,176 (4,479) 475,697
--------- ----------- -------------
At 31st December 2013
Opening net book amount 280,975 (4,587) 276,388
Exchange differences (13,219) 11 (13,208)
Acquisitions 166,270 - 166,270
--------- ----------- -------------
Closing net book amount 434,026 (4,576) 429,450
--------- ----------- -------------
Goodwill is allocated to the Group's cash generating units
(CGUs) identified according to country of operation and business
segment. A summary of the goodwill allocation is presented
below.
Risk Employee
& Insurance Benefits Total
GBP'000 GBP'000 GBP'000
------------- ---------- ----------
At 31st December 2014
Australasia 17,022 - 17,022
Asia 24,097 4,998 29,095
UK and Europe 208,718 73,053 281,771
Americas 140,394 4,297 144,691
Africa - 3,118 3,118
390,231 85,466 475,697
------------- ---------- ----------
At 31st December 2013
Australasia 17,419 - 17,419
Asia 19,632 4,528 24,160
UK and Europe 187,384 67,961 255,345
Americas 127,725 740 128,465
Africa - 4,061 4,061
------------- ---------- ----------
352,160 77,290 429,450
------------- ---------- ----------
10. Available-for-sale financial assets
Available-for-sale financial assets are categorised into one of
two categories:
1) Investments and deposits consist mainly of fixed term
deposits, bonds and certificates of deposits. These investments are
held at fair value and are classified between current and
non-current assets according to the maturity date.
2) Other investments include securities and other investments
held for strategic purposes. These investments are held at fair
value unless a fair value cannot be accurately determined in which
case they are held at cost less any provision for impairment.
Other Investments
investments and deposits Total
GBP'000 GBP'000 GBP'000
------------- -------------- ----------
At 1st January 2014 5,948 17,819 23,767
Exchange differences 173 (255) (82)
Additions - 5 5
Companies acquired 31 - 31
Disposals/maturities (1,538) (7,916) (9,454)
Revaluation gain (included
within equity) 265 (11) 254
Amounts to be written off (133) - (133)
------------- -------------- ----------
At 31st December 2014 4,746 9,642 14,388
------------- -------------- ----------
Analysis of available-for-sale
financial assets
Current - 5,384 5,384
Non-current 4,746 4,258 9,004
------------- -------------- ----------
At 31st December 2014 4,746 9,642 14,388
------------- -------------- ----------
Analysis of available-for-sale
investments and deposits
Fiduciary funds 9,518
Own funds 124
--------------
At 31st December 2014 9,642
--------------
Other Investments
investments and deposits Total
GBP'000 GBP'000 GBP'000
------------- -------------- ----------
At 1st January 2013 3,104 14,546 17,650
Exchange differences (202) (2,897) (3,099)
Additions 3,264 6,439 9,703
Companies acquired 1,003 - 1,003
Disposals/maturities (969) (269) (1,238)
Revaluation gain (included
within equity) 55 - 55
Amounts to be written off (307) - (307)
------------- -------------- ----------
At 31st December 2013 5,948 17,819 23,767
------------- -------------- ----------
Analysis of available-for-sale
financial assets
Current - 1,421 1,421
Non-current 5,948 16,398 22,346
------------- -------------- ----------
At 31st December 2013 5,948 17,819 23,767
------------- -------------- ----------
Analysis of available-for-sale
investments and deposits
Fiduciary funds 16,283
Own funds 1,536
--------------
At 31st December 2013 17,819
--------------
The credit quality of available-for-sale investments and
deposits is assessed by reference to external credit ratings, where
available and other current and historical credit data including
counterparty default rates. This is summarised as follows:
2014 2013
GBP'000 GBP'000
--------- ---------
AA 9,637 16,398
AA/A - -
A 5 4
BBB - 1,417
--------- ---------
Total 9,642 17,819
--------- ---------
11. Derivative financial instruments
As at 31st December As at 31st December
2014 2013
----------------------- -----------------------
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------ --------- ------------
Interest rate swaps
- fair value hedges 10,099 (11,453) 2,990 (14,382)
Forward foreign exchange
contracts - cash
flow hedges 11,516 (6,897) 23,742 (18,505)
--------- ------------ --------- ------------
Total 21,615 (18,350) 26,732 (32,887)
--------- ------------ --------- ------------
Current 3,101 (2,491) 9,826 (2,344)
Non-current 18,514 (15,859) 16,906 (30,543)
--------- ------------ --------- ------------
Total 21,615 (18,350) 26,732 (32,887)
--------- ------------ --------- ------------
The credit quality of counterparties with whom derivative
financial assets are held is assessed by reference to external
credit ratings, where available, and other current and historical
credit data including counterparty default rates. This is
summarised as follows:
2014 2013
GBP'000 GBP'000
--------- ---------
AA 5,609 1,721
AA/A 2,370 13,304
A - 11,707
BBB 13,636 -
Total 21,615 26,732
--------- ---------
Maturity analysis
The table below analyses the Group's derivative financial
instruments, which will be settled on a gross basis, into relevant
maturity groupings based upon the remaining period at the balance
sheet date to contractual maturity. The amounts disclosed are the
contractual undiscounted cash flow.
Less Greater
than than
1 year 1 year
GBP'000 GBP'000
---------- --------------
At 31st December 2014
Forward foreign exchange contracts
Outflow (268,743) (508,000)
Inflow 271,866 501,809
---------- --------------
At 31st December 2013
Forward foreign exchange contracts
Outflow (243,457) (474,231)
Inflow 256,158 502,150
---------- --------------
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 31st December 2014 and designated as effective cash flow
hedges was a net asset of GBP4.6 million and has been deferred in
equity (2013: net assets of GBP5.2 million). Gains and losses
arising on derivative instruments outstanding as at 31st December
2014 will be released to the income statement at various dates up
to:
a) 36 months in respect of cash flow hedges on currency denominated UK earnings.
b) 15 years in respect of specific hedges on USD denominated
long term debt drawn under the Group's USD private placement
programme.
c) 12 years in respect of interest rate hedges on sterling
denominated long term debt drawn under the Group's private
placement programme.
No material amounts were transferred to the income statement
during the year in respect of the fair value of financial
derivatives.
Transactions maturing within 12 months of the balance sheet date
are classified in current maturities. Transactions maturing in a
period in excess of 12 months of the balance sheet date are
classified as non-current maturities.
a) Forward foreign exchange contracts
The Group's major currency transaction exposure arises in USD
and the Group continues to adopt a prudent approach in actively
managing this exposure. As at 31st December 2014 the Group had
outstanding foreign exchange contracts, principally in USD,
amounting to a principal value of GBP773,675,000 (2013:
GBP758,308,000).
b) Interest rate swaps
The Group uses interest rate hedges, principally interest rate
swaps, to mitigate the impact of changes in interest rates. The
notional principal amounts of outstanding cross currency interest
rate swaps as at 31st December 2014 was USD500,000,000 and
GBP75,000,000 (2013: USD375,000,000 and GBPnil). A net loss of
GBP1.4 million (2013: net loss GBP11.4m) on these instruments was
offset by a fair value gain of GBP1.4 million (2013: gain GBP11.4m)
on the private placement loans, both of which were recognised in
the income statement in the year.
c) Price risk
The Group does not have a material exposure to commodity price
risk.
The maximum exposure to credit risk at the reporting date is the
fair value of the derivatives in the balance sheet.
12. Trade and other receivables
2014 2013
GBP'000 GBP'000
--------- ---------
Trade receivables 343,343 284,748
Less: provision for impairment
of trade receivables (10,724) (11,375)
--------- ---------
Trade receivables - net 332,619 273,373
Other receivables 144,305 125,090
Prepayments 16,723 12,965
--------- ---------
493,647 411,428
--------- ---------
13. Cash and cash equivalents
2014 2013
GBP'000 GBP'000
--------- ---------
Cash at bank and in hand 438,179 371,435
Short-term bank deposits 433,067 381,729
--------- ---------
871,246 753,164
--------- ---------
Fiduciary funds 732,974 639,392
Own funds 138,272 113,772
--------- ---------
871,246 753,164
--------- ---------
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 0.53% (2013: 0.50%). These deposits have an average maturity of
15 days (2013: 29 days).
14. Trade and other payables
2014 2013
GBP'000 GBP'000
---------- ---------
Insurance payables 742,492 655,675
Social security and other taxes 17,234 17,460
Other payables 134,377 125,755
Accruals and deferred income 124,058 97,657
Deferred and contingent consideration 19,383 13,048
---------- ---------
1,037,544 909,595
---------- ---------
15. Financial instruments by category
The accounting policies for financial instruments have been
applied to the line items below:
As at 31st December 2014
-------------------------------------------------------------------
Derivatives
Loans used
and receivables for hedging Available-for-sale Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------- ------------------- ------------
Assets per balance
sheet
Available-for-sale
financial assets - - 14,388 14,388
Derivative financial
instruments - 21,615 - 21,615
Trade and other receivables
(a) 476,924 - - 476,924
Cash and cash equivalents 871,246 - - 871,246
----------------- ------------- ------------------- ------------
Total 1,348,170 21,615 14,388 1,384,173
----------------- ------------- ------------------- ------------
Derivatives Other
used financial
for hedging liabilities Total
GBP'000 GBP'000 GBP'000
------------- ------------------- ------------
Liabilities per balance
sheet
Borrowings - (612,237) (612,237)
Trade and other payables
(b) - (913,486) (913,486)
Derivative financial
instruments (18,350) - (18,350)
------------- ------------------- ------------
Total (18,350) (1,525,723) (1,544,073)
------------- ------------------- ------------
As at 31st December 2013
-------------------------------------------------------------------
Derivatives
Loans used
and receivables for hedging Available-for-sale Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------- ------------------- ------------
Assets per balance
sheet
Available-for-sale
financial assets - - 23,767 23,767
Derivative financial
instruments - 26,732 - 26,732
Trade and other receivables
(a) 398,463 - - 398,463
Cash and cash equivalents 753,164 - - 753,164
----------------- ------------- ------------------- ------------
Total 1,151,627 26,732 23,767 1,202,126
----------------- ------------- ------------------- ------------
Derivatives Other
used financial
for hedging liabilities Total
GBP'000 GBP'000 GBP'000
------------- ------------------- ------------
Liabilities per balance
sheet
Borrowings - (460,183) (460,183)
Trade and other payables
(b) - (811,938) (811,938)
Derivative financial
instruments (32,887) - (32,887)
------------- ------------------- ------------
Total (32,887) (1,272,121) (1,305,008)
------------- ------------------- ------------
(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.
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 31 December
2014.
As at 31st December 2014
-------------------------------------------
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ----------
Assets
Derivatives used
for hedging - 21,615 - 21,615
Available-for-sale
financial assets
* equity securities 402 - 4,088 4,490
* debt investments 256 - - 256
* fixed deposits 9,642 - - 9,642
--------- --------- --------- ----------
Total 10,300 21,615 4,088 36,003
--------- --------- --------- ----------
Liabilities
Deferred and contingent
consideration - - (19,383) (19,383)
Derivatives used
for hedging - (18,350) - (18,350)
--------- --------- --------- ----------
Total - (18,350) (19,383) (37,733)
--------- --------- --------- ----------
As at 31st December 2013
-------------------------------------------
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ----------
Assets
Derivatives used
for hedging - 26,732 - 26,732
Available-for-sale
financial assets
* equity securities 1,659 - 4,029 5,688
* debt investments 260 - - 260
* fixed deposits 17,819 - - 17,819
--------- --------- --------- ----------
Total 19,738 26,732 4,029 50,499
--------- --------- --------- ----------
Liabilities
Deferred and contingent
consideration - - (13,048) (13,048)
Derivatives used
for hedging - (32,887) - (32,887)
--------- --------- --------- ----------
Total - (32,887) (13,048) (45,935)
--------- --------- --------- ----------
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 year there were no transfers between level 1 and
level 2.
There were no changes in valuation techniques during the
year.
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.
A reconciliation of the movements in level 3 is provided
below:
Assets Liabilities
Level Level
3 3
GBP'000 GBP'000
--------- ------------
At 1st January 2014 4,029 (13,048)
Exchange differences 161 (230)
Companies acquired 31 (10,876)
Utilised in the year - 4,198
(Charged)/credited
to income statement (133) 573
At 31st December
2014 4,088 (19,383)
--------- ------------
16. Borrowings
2014 2013
GBP'000 GBP'000
--------- ---------
Current
Bank overdraft 18,145 12,508
Bank borrowings 150,216 399
Finance lease liabilities 225 88
--------- ---------
168,586 12,995
--------- ---------
Non-current
Unsecured loan notes 393,203 214,006
Bank borrowings 49,916 232,656
Finance lease liabilities 532 526
--------- ---------
443,651 447,188
--------- ---------
Total borrowings 612,237 460,183
--------- ---------
The borrowings include secured liabilities (leases) of
GBP757,000 (2013: GBP614,000).
The carrying amounts and fair value of borrowings are as
follows:
As at 31st December As at 31st December
2014 2013
---------------------- ----------------------
Carrying Fair Carrying Fair
amount value amount value
GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ----------
Current
Bank overdraft 18,145 18,145 12,508 12,508
Bank borrowings 150,216 150,216 399 399
Finance lease liabilities 225 225 88 88
---------- ---------- ---------- ----------
168,586 168,586 12,995 12,995
---------- ---------- ---------- ----------
Non-current
Unsecured loan notes 393,203 393,203 214,006 214,006
Bank borrowings 49,916 49,916 232,656 232,656
Finance lease liabilities 532 532 526 526
---------- ---------- ---------- ----------
443,651 443,651 447,188 447,188
---------- ---------- ---------- ----------
Total borrowings 612,237 612,237 460,183 460,183
---------- ---------- ---------- ----------
17. Provisions for liabilities and charges
Property
related Litigation
provisions provisions Other Total
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ --------- ----------
At 1st January 2014 8,049 6,354 707 15,110
Exchange differences 1 25 - 26
Utilised in the year (3,844) (1,559) - (5,403)
Charged/(credited)
to the income statement 1,292 750 (345) 1,697
Interest charge 10 - - 10
Companies acquired (627) - - (627)
At 31st December
2014 4,881 5,570 362 10,813
------------ ------------ --------- ----------
Property
related Litigation
provisions provisions Other Total
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ --------- ----------
At 1st January 2013 6,863 8,308 959 16,130
Exchange differences - (17) - (17)
Reclassification
from current assets/liabilities 24 - - 24
Utilised in the year (1,404) (5,435) (41) (6,880)
Charged/(credited)
to the income statement 1,392 3,498 (211) 4,679
Interest charge 32 - - 32
Companies acquired 1,142 - - 1,142
At 31st December
2013 8,049 6,354 707 15,110
------------ ------------ --------- ----------
2014 2013
GBP'000 GBP'000
--------- ---------
Analysis of total provisions:
Current - to be utilised within
one year 7,588 10,158
Non-current - to be utilised in
more than one year 3,225 4,952
--------- ---------
10,813 15,110
--------- ---------
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. 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 31st
December 2014, in connection with certain litigation matters, the
Group's litigation provisions include an amount of GBP0.1 million
(2013: GBP0.1 million) to reflect this gross basis and the
corresponding insurance recovery has been included within trade and
other receivables. This presentation has had no effect on the
consolidated income statement for the year ended 31st December 2014
(2013: nil).
Other
Other provisions include provisions for clawback of commission
which arises on certain types of Employee Benefits contracts.
18. Other reserves
Fair
value
Share and hedging Exchange
premium reserves reserves Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------- ---------- ----------
At 1st January 2014 103,739 17,224 (1,999) 118,964
Fair value gains/(losses)
net of tax
--------- ------------- ---------- ----------
* available-for-sale - 203 - 203
* available-for-sale reclassified to the income
statement - (204) - (204)
* cash flow hedges - (17,457) - (17,457)
Currency translation
differences - - (3,034) (3,034)
Net losses recognised
directly in equity - (17,458) (3,034) (20,492)
Issue of share capital 202 - - 202
At 31st December
2014 103,941 (234) (5,033) 98,674
--------- ------------- ---------- ----------
Fair
value
Share and hedging Exchange
premium reserves reserves Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------- ---------- ----------
At 1st January 2013 103,188 15,456 20,893 139,537
Fair value gains
net of tax
--------- ------------- ---------- ----------
* available-for-sale - 48 - 48
* cash flow hedges - 1,720 - 1,720
Currency translation
differences - - (22,892) (22,892)
--------- ------------- ---------- ----------
Net gains/(losses)
recognised directly
in equity - 1,768 (22,892) (21,124)
Issue of share capital 551 - - 551
At 31st December
2013 103,739 17,224 (1,999) 118,964
--------- ------------- ---------- ----------
19. Qualifying Employee Share Ownership Trust
During the year, the Qualifying Employee Share Ownership Trust
(QUEST) allocated nil ordinary shares to employees in satisfaction
of options that have been exercised under the Sharesave schemes
(2013: 601,341).
20. Cash generated from operations
2014 2013
GBP'000 GBP'000
--------- ---------
Profit before taxation 159,736 154,564
Investment and finance income (5,924) (5,970)
Interest payable on bank loans
and finance leases 16,851 11,682
Fair value gains on financial instruments (16) (2)
Net pension financing expenses 5,830 5,680
Unwinding of liability discounting 291 114
Depreciation 11,247 11,334
Amortisation of other intangible
assets 24,744 20,087
Amortisation of share based payments 18,837 15,815
Amount written off the Employee
Benefit Trust - 66
Share of results of associates'
undertakings (7,306) (8,106)
Non-cash exceptional items 3,176 1,786
Gains on disposal of businesses (359) (343)
Losses/(gains) on disposal of property,
plant and equipment 53 (22)
Gains on disposal of fixed asset
investments (332) (348)
Increase in trade and other receivables (72,947) (39,627)
Increase in trade and other payables
- excluding insurance broking balances 18,406 15,240
Decrease in provisions for liabilities
and charges (3,706) (2,177)
Decrease in retirement benefit
obligation (9,282) (16,343)
--------- ---------
Net cash inflow from operations 159,299 163,430
--------- ---------
21. Business combinations
2013 acquisitions
During the year, the process of finalising the provisional fair
values in respect of acquisitions carried out during 2013 has been
completed.
Provisional
fair
Revised value
fair reported Change
value at 31st in fair
acquired Dec 2013 value
GBP'000 GBP'000 GBP'000
---------- ------------ ----------
Towers Watson Reinsurance
Group 31,731 31,907 (176)
Others 2,600 1,819 781
34,331 33,726 605
---------- ------------ ----------
These changes in fair values affected the following balance
sheet classes:
Provisional
fair
Revised value
fair reported Change
value at 31st in fair
acquired Dec 2013 value
GBP'000 GBP'000 GBP'000
---------- ------------ ----------
Property, plant and
equipment 791 786 5
Other intangible
assets 7,585 6,759 826
Available-for-sale
financial assets 1,003 1,003 -
Trade and other receivables 24,455 23,662 793
Cash and cash equivalents
* own cash 23,283 23,920 (637)
* fiduciary cash 22,205 21,606 599
Insurance payables (22,205) (21,606) (599)
Trade and other payables (17,971) (16,431) (1,540)
Current taxation 9 104 (95)
Deferred taxation (3,245) (3,226) (19)
Bank overdraft (360) (360) -
Provisions for liabilities
and charges (528) (1,155) 627
Non-controlling interests (691) (1,336) 645
---------- ------------ ----------
34,331 33,726 605
---------- ------------ ----------
As at As at
31st 31st
Goodwill calculation Dec 2014 Dec 2013 Change
GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Purchase consideration
* cash paid 189,615 189,281 334
* contingent consideration 4,826 4,826 -
* deferred consideration 1,939 3,149 (1,210)
Total purchase consideration 196,380 197,256 (876)
Less fair value of
net assets acquired 34,331 33,726 605
Goodwill 162,049 163,530 (1,481)
---------- ---------- ----------
As at As at
31st 31st
Dec 2014 Dec 2013 Change
GBP'000 GBP'000 GBP'000
---------- ---------- ---------
Purchase consideration
settled in cash 189,615 189,281 334
Cash and cash equivalents
- own cash in subsidiaries
acquired (23,283) (23,920) 637
---------- ---------- ---------
166,332 165,361 971
Cash and cash equivalents
- fiduciary cash in subsidiaries
acquired (22,205) (21,606) (599)
Cash outflow on acquisition 144,127 143,755 372
---------- ---------- ---------
Current year acquisitions
During the year the following new business acquisitions and
additional investments were completed:
Percentage
voting
Acquisition rights Cost
Notes date acquired GBP'000
------- ------------- ----------- ---------
Lambert Brothers
Holdings Limited i Jan 2014 100% 6,028
SCK Corretora e Administradora
de Seguros Ltda ii Jan 2014 75% 6,852
Ensign Pensions Administration
Limited iii Apr 2014 100% 9,799
Alliant Insurance
Services, Inc. (Energy
Division) iv Oct 2014 100% 7,563
The Hayward Holding
Group Limited v Dec 2014 100% 27,472
Acquisition of other
new businesses completed Jan -
during the year vi Dec 2014 - 4,304
Additional investment Jan -
in existing businesses vi Dec 2014 - 23,145
-------- -------------- -----------
85,163
---------
i) Acquisition of Lambert Brothers Holdings Limited (Lambert)
On 14th January 2014, the Group acquired Lambert Brothers
Holdings Limited in Hong Kong, a mid-market insurance broker with
broking operations in Marine Hull, Construction, Employee Benefits,
Corporate and SME schemes. The acquired business contributed
revenue of GBP3,100,000 and a net profit of GBP762,000 to the Group
for the period since acquisition. If the acquisition had taken
place on 1st January 2014 the contribution to Group revenue and net
profit would have been GBP3,299,000 and GBP863,000
respectively.
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 4,933
* contingent consideration 940
* deferred consideration 155
--------
Total purchase consideration 6,028
Less fair value of
net assets acquired 2,498
Goodwill 3,530
--------
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying Fair
amount value
GBP'000 GBP'000
----------- ----------
Property, plant and
equipment 172 172
Other intangible
assets 28 93
Available-for-sale
financial assets 31 31
Trade and other receivables 885 885
Cash and cash equivalents
* own cash 1,725 1,725
* fiduciary cash 2,361 2,361
Insurance payables (2,361) (2,361)
Trade and other payables (380) (380)
Current taxation (22) (22)
Deferred taxation (6) (6)
2,433 2,498
----------- ----------
GBP'000
--------
Purchase consideration
settled in cash 4,933
Cash and cash equivalents
- own cash in subsidiary
acquired (1,725)
3,208
Cash and cash equivalents
- fiduciary cash in subsidiary
acquired (2,361)
Cash outflow on acquisition 847
--------
As at 31st December 2014, the process of reviewing the fair
values of assets acquired had not been completed, consequently the
fair values stated above are provisional.
The deferred consideration of GBP155,000 is based upon the net
assets shown on the completion accounts. The amount recognised is
based on the provisional amount of assets acquired as stated
above.
The contingent consideration of GBP940,000 is based on the
expected turnover of 2014. The maximum amount of contingent
consideration payable has been provided for.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
ii) Acquisition of SCK Corretora e Administradora de Seguros Ltda (SCK)
On 29th January 2014, the Group acquired SCK Corretora e
Administradora de Seguros Ltda, a Brazil based Employee Benefits
and Insurance Broking operations mainly in Property & Casualty
and Affinity. The acquired business contributed revenue of
GBP4,031,000 and a net profit of GBP241,000 to the Group for the
period since acquisition. If the acquisition had taken place on 1st
January 2014 the contribution to Group revenue and net profit would
have been GBP4,237,000 and GBP249,000 respectively.
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 3,897
* contingent consideration 2,955
Total purchase consideration 6,852
Less fair value of
net assets acquired 49
Less equity movement on transactions with
non-controlling interest 2,955
Goodwill 3,848
--------
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying Fair
amount value
GBP'000 GBP'000
----------- ----------
Property, plant and
equipment 56 56
Other intangible
assets 1 86
Trade and other receivables 650 650
Cash and cash equivalents
* own cash 48 48
Trade and other payables (790) (790)
Non-controlling interests (1) (1)
(36) 49
----------- ----------
GBP'000
--------
Purchase consideration
settled in cash 3,897
Cash and cash equivalents
- own cash in subsidiary
acquired (48)
Cash outflow on acquisition 3,849
--------
As at 31st December 2014, 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 GBP2,955,000 is related to a put
option on the 25% shareholding remaining with the non-controlling
interests. The consideration is payable in two tranches based on
the average expected profit of the fourth and fifth years following
the year of completion for the first tranche and the ninth and
tenth years for the second tranche. The contingent consideration is
capped at GBP25,000,000.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
iii) Acquisition of Ensign Pensions Administration Limited
(Ensign)
On 30th April 2014, the Group acquired Ensign Pensions
Administration Limited, a UK based Employee Benefits consultant and
administrator. The acquired business contributed revenue of
GBP10,713,000 and a net profit of GBP1,489,000 to the Group for the
period since acquisition. If the acquisition had taken place on 1st
January 2014 the contribution to Group revenue and net profit would
have been GBP15,775,000 and GBP1,708,000 respectively.
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 9,699
* deferred consideration 100
--------
Total purchase consideration 9,799
Less fair value of
net assets acquired 4,707
Goodwill 5,092
--------
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying Fair
amount value
GBP'000 GBP'000
----------- ----------
Property, plant and
equipment 645 645
Other intangible
assets 12 643
Trade and other receivables 3,424 3,424
Cash and cash equivalents
* own cash 3,546 3,546
Trade and other payables (3,474) (3,474)
Current taxation (201) (201)
Deferred taxation 124 124
4,076 4,707
----------- ----------
GBP'000
--------
Purchase consideration
settled in cash 9,699
Cash and cash equivalents
- own cash in subsidiary
acquired (3,546)
Cash outflow on acquisition 6,153
--------
As at 31st December 2014, the process of reviewing the fair
values of assets acquired had not been completed, consequently the
fair values stated above are provisional.
The deferred consideration of GBP100,000 is based upon the net
assets shown on the completion accounts. The amount recognised is
based on the provisional amount of assets acquired as stated
above.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
iv) Acquisition of the Energy business of Alliant Insurance
Services, Inc.
On 31st October 2014, the Group acquired part of the energy
business of Alliant Insurance Services, Inc. The acquired business
contributed revenue of GBP971,000 and a net profit of GBP98,000 to
the Group for the period since acquisition. If the acquisition had
taken place on 1st January 2014 the contribution to Group revenue
and net profit would have been GBP5,707,000 and GBP1,008,000
respectively.
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 1,012
* deferred consideration 6,551
--------
Total purchase consideration 7,563
Less fair value of
net liabilities acquired (592)
Goodwill 8,155
--------
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying Fair
amount value
GBP'000 GBP'000
------------ ----------
Trade and other payables - (592)
- (592)
------------- ------------------------- ----------
GBP'000
--------
Purchase consideration
settled in cash 1,012
Cash outflow on acquisition 1,012
--------
As at 31st December 2014, the process of reviewing the fair
values of assets acquired had not been completed, consequently the
fair values stated above are provisional.
The deferred consideration of GBP6,551,000 is payable in seven
equal instalments until 2021.
The goodwill of GBP8,155,000 is expected to be deductible for
income tax purposes.
v) Acquisition of The Hayward Holding Group Limited
On 23rd December 2014, the Group acquired The Hayward Holding
Group Limited, a leading international specialist general aviation
insurance broker. If the acquisition had taken place on 1st January
2014 the contribution to Group revenue and net profit would have
been GBP11,372,000 and GBP1,988,000 respectively.
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 27,000
* deferred consideration 472
--------
Total purchase consideration 27,472
Less fair value of
net assets acquired 7,257
Goodwill 20,215
--------
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying Fair
amount value
GBP'000 GBP'000
----------- ----------
Property, plant and
equipment 26 26
Other intangible
assets - 3,249
Available-for-sale
financial assets 47 -
Trade and other receivables 3,769 3,269
Cash and cash equivalents
* own cash 972 972
* fiduciary cash 6,589 6,589
Insurance payables (6,589) (6,589)
Trade and other payables (355) (355)
Current taxation (39) (39)
Deferred taxation 30 135
4,450 7,257
----------- ----------
GBP'000
--------
Purchase consideration
settled in cash 27,000
Cash and cash equivalents
- own cash in subsidiary
acquired (972)
26,028
Cash and cash equivalents
- fiduciary cash in subsidiary
acquired (6,589)
Cash outflow on acquisition 19,439
--------
As at 31st December 2014, the process of reviewing the fair
values of assets acquired had not been completed, consequently the
fair values stated above are provisional.
The deferred consideration of GBP472,000 is based upon the net
assets shown on the completion accounts. The amount recognised is
based on the provisional amount of assets acquired as stated
above.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
vi) Other acquisitions and additional investments
Goodwill calculation GBP'000
--------
Purchase consideration
* cash paid 26,554
* contingent consideration 466
* cancellation of loans 429
Total purchase consideration 27,449
Less fair value of
net assets acquired 4,709
Less equity movement on
transactions with non-controlling
interests 18,264
--------
Goodwill 4,476
--------
The assets and liabilities arising from acquisitions were as
follows:
Acquiree's
carrying Fair
amount value
GBP'000 GBP'000
----------- ----------
Property, plant and
equipment 8 8
Other intangible
assets - 191
Trade and other receivables 5 5
Cash and cash equivalents
* own cash 21 21
Trade and other payables (42) (42)
Non-controlling interests 4,526 4,526
4,518 4,709
----------- ----------
GBP'000
--------
Purchase consideration
settled in cash 26,554
Cash and cash equivalents
- own cash in subsidiary
acquired (21)
Cash outflow on acquisition 26,533
--------
As at 31st December 2014, the process of reviewing the fair
values of assets acquired had not been completed, consequently the
fair values stated above are provisional.
Goodwill of GBP2,750,000 is expected to be deductible for income
tax purposes, the remaining goodwill is not expected to be
deductible.
Group summary of the net assets acquired and goodwill
Lambert SCK Ensign Alliant Hayward Others Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- --------- --------- ---------
Purchase consideration
* cash paid 4,933 3,897 9,699 1,012 27,000 26,554 73,095
* contingent consideration 940 2,955 - - - 466 4,361
* deferred consideration 155 - 100 6,551 472 - 7,278
* cancellation of loans - - - - - 429 429
--------- --------- --------- --------- --------- --------- ---------
Total purchase
consideration 6,028 6,852 9,799 7,563 27,472 27,449 85,163
Less fair value
of net assets
acquired 2,498 49 4,707 (592) 7,257 4,709 18,628
Less equity movement
on transactions
with non-controlling
interests - 2,955 - - - 18,264 21,219
--------- --------- --------- --------- --------- --------- ---------
Goodwill on acquisitions
occurring during
the year 3,530 3,848 5,092 8,155 20,215 4,476 45,316
---------
Impact of revision
to fair value
adjustment in
relation to acquisitions
completed in 2013 (1,481)
---------
Net increase in
goodwill 43,835
---------
Impact of additional
investments 21,219
---------
Net decrease in
equity 21,219
---------
Group summary of cash flows
Lambert SCK Ensign Alliant Hayward Others Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- --------- --------- ---------
Purchase consideration
settled in cash 4,933 3,897 9,699 1,012 27,000 26,554 73,095
Cash and cash
equivalents -
own cash in subsidiaries
acquired (1,725) (48) (3,546) - (972) (21) (6,312)
--------- ---------
3,208 3,849 6,153 1,012 26,028 26,533 66,783
Cash and cash
equivalents -
fiduciary cash
in subsidiaries
acquired (2,361) - - - (6,589) - (8,950)
--------- ---------
Cash outflow on
acquisition during
the year 847 3,849 6,153 1,012 19,439 26,533 57,833
--------- --------- --------- --------- --------- --------- ---------
Impact of revision
to fair value
adjustment on
cash in relation
to acquisitions
completed in 2013 372
Net cash outflow
on acquisition
during the year 58,205
-----------
22. Business disposals
On 29th December 2014, the Group disposed of 100% of its
shareholding in Invcol Limited. This resulted in a gain of
GBP12,000.
On 9th May 2014, the Group disposed of 100% of its shareholding
in ForVision Risk Services Ltd for a consideration of GBP155,000,
which equalled the value of the net assets disposed. The
transaction took place after the transfer of its business to
another Group company. The transaction resulted in a net cash
inflow of GBP8,000.
During the year, the Group disposed of certain books of business
in Canada for a total consideration of GBP695,000 and costs on
disposal of GBP348,000. This resulted in a gain of GBP347,000. The
transaction resulted in a cash inflow of GBP695,000.
Group summary of cash flows
Total
GBP'000
---------
Disposal consideration
settled in cash 850
Cash and cash equivalents
- own cash in subsidiaries
disposed (147)
Cash inflow on disposal
during the year 703
---------
23. 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 year are comprised as
follows:
Overseas
UK Scheme Schemes Total
------------------ ------------------ ------------------
2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- --------
Defined benefit
schemes - - 2,813 - 2,813 -
Defined contribution
schemes 19,258 16,926 14,373 13,516 33,631 30,442
-------- -------- -------- -------- -------- --------
19,258 16,926 17,186 13,516 36,444 30,442
-------- -------- -------- -------- -------- --------
The Jardine Lloyd Thompson UK Pension Scheme has two sections;
one providing defined benefits and the other providing benefits on
a defined contribution basis. The assets of the scheme are held in
a trustee administered fund separate from the Company.
With effect from 1st December 2006 the defined benefit section
of the Scheme was amended to cease future benefits accruals. Under
the Scheme as amended, a participant's normal retirement benefit
will be determined based on their service and compensation prior to
1st December 2006.
The latest finalised triennial actuarial funding valuation of
the Jardine Lloyd Thompson Pension UK Scheme was at 31st March
2011. An updated actuarial funding valuation as at 31st March 2014
is currently being finalised with the scheme trustees. This
valuation was updated to 31st December 2014 by a qualified actuary
employed by the Group.
The principal overseas schemes are:
a) The JLT (USA) Incentive Savings Plan which is a defined
contribution scheme. Employees may contribute up to 50% of their
salary subject to an IRS maximum each year - USD17,500 in 2014 -
and the Group contributes at a rate of 100% of each 1% contributed
by the employee up to a maximum employee contribution of 4%, up to
a maximum of USD10,400. Employees aged over 50 may make "catch-up"
contributions subject to an IRS maximum each year - USD5,500 in
2014.
b) The JLT (USA) Employee Retirement Plan which is a defined
benefit scheme. The latest actuarial valuation was undertaken at
1st January 2014 by independent actuaries. With effect from 31st
July 2005 the Plan was amended to eliminate future benefit
accruals. Under the Plan as amended, a participant's normal
retirement benefit will be determined based on their service and
compensation prior to 31st July 2005. The average compensation and
length of service will be determined as at 31st July 2005.
c) The JLT (USA) Stable Value Plan. This plan is closed to new
participants, but still accrues a benefit for current participants.
The latest actuarial valuation was undertaken at 1st January 2014
by independent actuaries. The actual contributions made in 2014 and
the minimum funding requirement for the 2014 plan year has been
fully satisfied. The plan is not subject to a quarterly
contribution requirement in 2015 so there are no required
contributions in calendar 2015. Each Plan Year, a participant is
credited with an amount equal to 15% of Compensation for the year
up to the Taxable Wage base, plus 20% of Compensation in excess of
the Taxable Wage Base. This pay credit is calculated on an annual
basis and added to the prior year's balance.
d) The Pension Plan for Employees of Jardine Lloyd Thompson
Canada Inc. The JLT Canada Pension Plan has two sections; one
providing defined benefits based primarily on the 2007 pensionable
salary and the other providing benefits on a defined contribution
basis. The JLT pension contribution for the defined contribution
plan ranges from 3% to 13% based on age and service. The last
formal valuation of the JLT Canada Pension Plan was undertaken as
of 31st December 2013 by a qualified third party actuary. The
defined benefits section was amended to eliminate future benefit
accruals with effect from 1st January 2009.
e) The Jardine Lloyd Thompson Ireland Limited Pension Fund which
is a defined benefit pension scheme with assets held in a
separately administered fund. The contributions are agreed between
the Trustees and the Company based on advice by a qualified
actuary. The most recent triennial actuarial valuation for funding
purposes was carried out by a qualified independent actuary as at
1st January 2014. With effect from 30th November 2008 the scheme
was closed to new entrants and future service accrual. The company
also operates a defined contribution scheme, namely The Jardine
Lloyd Thompson 2004 Retirement Benefits Scheme, which is held and
administered by a separate trust.
f) The Jardine Matheson Executive Staff Retirement Plan
(JMESRP), Jardine Matheson Resident Staff Retirement Plan (JMRSRP)
and Menu Plan section B and C of the Jardine Matheson Group
Retirement Plan (JMGRP). The JMRSRP and section C of the JMGRP
provided benefits based on final salary, which were solely funded
by the participating employer, while the JMESRP and section B of
the JMGRP provided benefits based on final salary, which were
funded by both the participating employer and the members.
With effect from 31st December 2009, the participation in the
JMESRP, JMRSRP and JMGRP (collectively the plans) ceased and the
schemes were closed.
The accrued rights of the members in the plans were transferred
to the Hong Kong Mandatory Provident Fund (MPF) scheme on 1st
January 2010. The MPF scheme provides benefits on a defined
contribution basis. The scheme is funded by both the employer and
the members. The employer contribution under the MPF scheme ranges
from 5% to 15% of the member's monthly basic salary based on an age
factor. The MPF scheme is held and administered by a separate
trust, which is funded by both the participating employer and the
members.
The principal actuarial assumptions used were as follows:
Canadian Irish US Stable
At 31st December UK Scheme US Scheme Scheme Scheme Value
2014 Plan
----------- ---------- --------- ------- -----------
Rate of increase
in salaries n/a n/a 2.50% n/a 3.0%
Rate of increase
of pensions in payment
(a) 3.11% n/a 3.25% 3.00% n/a
Discount rate (b) 3.59% 3.80% 4.10% 2.30% 3.25-3.35%
Inflation rate 2.78-3.21% 2.00% 2.25% 2.00% 2.00%
Revaluation rate
for deferred pensioners 1.78% n/a n/a 2.00% n/a
Mortality - life
expectancy at age
65 for male member:
Aged 65 at 31st
December (c) 22.0 22.1 19.7 21.7 22.1
----------- ---------- --------- ------- -----------
Canadian Irish US Stable
At 31st December UK Scheme US Scheme Scheme Scheme Value
2013 Plan
----------- ---------- --------- ------- ----------
Rate of increase n/a n/a 3.00% n/a n/a
in salaries
Rate of increase
of pensions in payment
(a) 3.42% n/a 3.50% 3.00% n/a
Discount rate (b) 4.60% 4.70% 4.80% 4.00% n/a
Inflation rate 3.25-3.52% 3.00% 2.25% 2.00% n/a
Revaluation rate
for deferred pensioners 2.25% n/a n/a 2.00% n/a
Mortality - life
expectancy at age
65 for male member:
Aged 65 at 31st
December (c) 22.8 19.7 19.7 21.7 n/a
----------- ---------- --------- ------- ----------
(a) In respect of the UK scheme, where there are inflation
linked benefits the inflation increases are limited to a maximum of
5% per annum (some are limited to 3% per annum).
(b) In line with IAS 19 (Revised) the expected return on scheme
assets assumption is the same as the discount rate assumed for the
liabilities.
(c) Mortality assumptions for the UK scheme are based on 105% of
the S2PxA tables, with improvements based on CMI 2013 tables with a
1.25% p.a. long-term rate of improvement.
Mortality assumptions for the US scheme and US Stable Value Plan
are based on the RP2014 Mortality Table with MP2014
Projections.
Mortality assumptions for the Canadian scheme are based on the
CPM-2014 Private Table with generational projection using scale
CPM-B1D2014.
Mortality assumptions for the Irish scheme, in respect of both
deferred pensioners and pensioners, assume that deaths after
retirement will be in accordance with standard mortality tables 62%
PNML00 for males and 70% PNFL00 for females with an increase to the
annuity value of:
- 0.50% (male with no spouse's pension)
- 0.38% (female with no spouse's pension)
- 0.39% (male or female with spouse's pension)
This is per annum compound for each year between 2008 and the
year in which normal pension date falls. Pre-retirement mortality
has been assumed as nil.
The sensitivity of the defined benefit obligation to changes in
the weighted principal assumptions is:
Impact on defined
benefit obligation
---------------------------------------------------------------
Change Change
in assumptions to obligation
---------------------------- ---------------------------------
decrease increase
Discount rate of 0.1% of 2.0%
increase increase
Inflation rate of 0.1% of 2.0%
increase increase
Life expectancy of 1 year of 4.0%
---------------------------- ---------------------------------
The above sensitivity analysis is based on a change in an
assumption while holding all other assumptions constant. In
practice, this is unlikely to occur, and changes in some of the
assumptions may be correlated. When calculating the sensitivity of
the defined benefit obligation to significant actuarial
assumptions, the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the
end of the reporting period) has been applied as when calculating
the pension liability recognised within the statement of financial
position. Note this sensitivity is for defined benefit obligations
only and does not consider the impact that changes in assumptions
may have on the assets, in particular the assets held in respect of
the insured pensioners.
The methods and types of assumptions used in preparing the
sensitivity analysis did not change compared to the previous
year.
Overseas
UK Scheme Schemes Total
---------------------- -------------------- ----------------------
Defined benefit
obligation 2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- --------- ---------- ----------
Present value of
funded obligations (641,759) (583,745) (78,044) (60,566) (719,803) (644,311)
Fair value of plan
assets 479,139 458,727 61,629 54,957 540,768 513,684
---------- ---------- --------- --------- ---------- ----------
Net liability recognised
in the balance sheet (162,620) (125,018) (16,415) (5,609) (179,035) (130,627)
---------- ---------- --------- --------- ---------- ----------
Overseas
UK Scheme Schemes Total
---------------------- -------------------- ----------------------
Reconciliation of
defined benefit 2014 2013 2014 2013 2014 2013
liability GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- --------- ---------- ----------
Opening defined
benefit liability (125,018) (110,739) (5,609) (20,652) (130,627) (131,391)
Exchange differences - - (466) (529) (466) (529)
Pension expense (6,154) (4,942) (3,315) (994) (9,469) (5,936)
Employer contributions 8,795 13,018 4,126 3,581 12,921 16,599
Total (loss)/gain
recognised in reserves (40,243) (22,355) (11,151) 12,985 (51,394) (9,370)
---------- ---------- --------- --------- ---------- ----------
Net liability recognised
in the balance sheet (162,620) (125,018) (16,415) (5,609) (179,035) (130,627)
---------- ---------- --------- --------- ---------- ----------
Overseas
UK Scheme Schemes Total
---------------------- -------------------- ----------------------
Reconciliation of
defined benefit 2014 2013 2014 2013 2014 2013
obligation GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- --------- ---------- ----------
Opening defined
benefit obligation (583,745) (574,360) (60,566) (68,937) (644,311) (643,297)
Exchange differences - - (1,579) 601 (1,579) 601
Service cost - - (2,813) - (2,813) -
Interest cost (26,283) (26,039) (2,698) (2,581) (28,981) (28,620)
(Loss)/gain on defined
benefit obligation (56,680) (138) (13,601) 6,122 (70,281) 5,984
Actual benefit payments 24,949 16,792 3,213 4,229 28,162 21,021
---------- ---------- --------- --------- ---------- ----------
Closing defined
benefit obligation (641,759) (583,745) (78,044) (60,566) (719,803) (644,311)
---------- ---------- --------- --------- ---------- ----------
Overseas
UK Scheme Schemes Total
-------------------- ------------------ --------------------
Reconciliation of
fair value of 2014 2013 2014 2013 2014 2013
assets GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- -------- -------- --------- ---------
Opening value of
assets 458,727 463,621 54,957 48,285 513,684 511,906
Exchange differences - - 1,113 (1,130) 1,113 (1,130)
Expected return
on assets 20,709 21,097 2,442 1,843 23,151 22,940
Actuarial gains/(losses) 16,437 (22,217) 2,450 6,863 18,887 (15,354)
Employer contributions 8,795 13,018 4,126 3,581 12,921 16,599
Actual benefit payments (24,949) (16,792) (3,213) (4,229) (28,162) (21,021)
Expenses (580) - (246) (256) (826) (256)
--------- --------- -------- -------- --------- ---------
Closing value of
assets 479,139 458,727 61,629 54,957 540,768 513,684
--------- --------- -------- -------- --------- ---------
The analysis of the fair value of the scheme assets is as
follows:
Overseas
UK Scheme Schemes
----------------- -----------------
Value Value Value Value
At 31st December 2014 GBP'000 % GBP'000 %
--------- ------ --------- ------
Equities 182,369 38% 40,584 66%
Bonds - - 15,064 24%
Investment funds 105,944 22% - -
Qualifying insurance policies 188,889 40% - -
Other assets - - 2,374 4%
Cash 1,937 - 3,607 6%
--------- ------ --------- ------
Total market value 479,139 100% 61,629 100%
--------- ------ --------- ------
Overseas
UK Scheme Schemes
----------------- -----------------
Value Value Value Value
At 31st December 2013 GBP'000 % GBP'000 %
--------- ------ --------- ------
Equities 169,056 37% 37,434 69%
Bonds 47,023 10% 11,800 21%
Investment funds 100,989 22% - -
Qualifying insurance policies 179,358 39% - -
Deferred buy-in premium (40,343) (9%) - -
Other assets - - 1,110 2%
Cash 2,644 1% 4,613 8%
--------- ------ --------- ------
Total market value 458,727 100% 54,957 100%
--------- ------ --------- ------
Other assets include hedge funds and property. The schemes do
not hold cash as a strategic investment and cash balances at 31st
December represent working balances.
The long-term rates of return on scheme assets at 31st December
2014 have been derived considering market conditions at 31st
December 2014.
Overseas
UK Scheme Schemes Total
------------------- ------------------ -------------------
Reconciliation
of return on 2014 2013 2014 2013 2014 2013
assets GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- -------- -------- -------- ---------
Expected return
on assets 20,709 21,097 2,442 1,843 23,151 22,940
Actuarial gains/(losses) 16,437 (22,217) 2,450 6,863 18,887 (15,354)
-------- --------- -------- -------- -------- ---------
Actual return
on assets 37,146 (1,120) 4,892 8,706 42,038 7,586
-------- --------- -------- -------- -------- ---------
The amounts recognised in the consolidated income statement are
as follows:
Overseas
UK Scheme Schemes Total
-------------------- -------------------- --------------------
2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- --------- ---------
Service cost - - (2,813) - (2,813) -
Expenses (580) - (246) (256) (826) (256)
--------- --------- --------- --------- --------- ---------
Total (included
within salaries
and associated expense) (580) - (3,059) (256) (3,639) (256)
Interest cost (26,283) (26,039) (2,698) (2,581) (28,981) (28,620)
Expected return
on assets 20,709 21,097 2,442 1,843 23,151 22,940
--------- --------- --------- --------- --------- ---------
Total (included
within finance costs) (5,574) (4,942) (256) (738) (5,830) (5,680)
Expense before taxation (6,154) (4,942) (3,315) (994) (9,469) (5,936)
--------- --------- --------- --------- --------- ---------
The amounts included in the consolidated statement of
comprehensive income are as follows:
Overseas
UK Scheme Schemes Total
---------------------- -------------------- ----------------------
2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- --------- --------- ---------- ----------
(Losses)/gains on
defined benefit
obligation (56,680) (138) (13,601) 6,122 (70,281) 5,984
Actuarial gains/(losses) 16,437 (22,217) 2,450 6,863 18,887 (15,354)
---------- ---------- --------- --------- ---------- ----------
Total actuarial
(losses)/gains recognised (40,243) (22,355) (11,151) 12,985 (51,394) (9,370)
---------- ---------- --------- --------- ---------- ----------
Cumulative actuarial
losses recognised (243,897) (203,654) (37,528) (26,377) (281,425) (230,031)
---------- ---------- --------- --------- ---------- ----------
The five year history of experience adjustments is as
follows:
UK Scheme
-----------------------------------------------------
2014 2013 2012 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
restated restated restated
Defined benefit obligation
at end of year (641,759) (583,745) (574,360) (523,846) (492,911)
Fair value of plan assets 479,139 458,727 463,621 424,624 435,498
Deficit in the scheme (162,620) (125,018) (110,739) (99,222) (57,413)
Difference between the actual and expected return on plan
assets
- amount (GBP'000) 16,437 (22,217) 32,889 (17,930) 20,658
- expressed as a percentage
of the plan assets 3.43% (4.84%) 7.09% (4.22%) 4.74%
Experience losses on plan
liabilities
- amount (GBP'000) 1,592 1,364 11,890 903 1,902
- expressed as percentage of the present value of the plan
liabilities (0.25%) (0.23%) (2.07%) (0.17%) (0.39%)
Overseas Schemes
2014 2013 2012 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
restated restated restated
Defined benefit obligation
at end of year (78,044) (60,566) (68,937) (66,407) (59,425)
Fair value of plan assets 61,629 54,957 48,285 44,630 44,003
Deficit in the schemes (16,415) (5,609) (20,652) (21,777) (15,422)
Difference between the actual and expected return on plan
assets
- amount (GBP'000) 2,450 6,863 3,034 (2,665) 1,787
- expressed as a percentage
of the plan assets 3.98% 12.49% 6.28% (5.97%) 4.06%
Experience losses/(gains)
on plan liabilities
- amount (GBP'000) 1,265 377 (3,925) 308 453
- expressed as percentage of the present value of the plan
liabilities (1.62%) (0.62%) 5.69% (0.46%) (0.76%)
The expected employer contributions for the year ending 31st
December 2015 are as follows:
Defined benefit
GBP'000
UK Scheme 7,000
US Scheme 1,408
US Stable Value Plan 1,903
Canadian Scheme -
Irish Scheme 780
Total expected contributions 11,091
24. Principal risks
As with all businesses, the Group is exposed to a range of
financial and operational risks, not wholly within our control,
which could have a material impact on the Group's financial
performance.
The Group takes a holistic approach to risk management and the
control environment with the responsibility and accountability
shared across all the Group companies, and the ultimate
responsibility resting with the Board.
The principal risks to which the Group will be exposed in the
second half of the financial year are substantially the same as
those discussed on pages 41 and 42 of the Group's Annual Report for
2013. The Annual Report for 2014 will contain an updated discussion
on these risks.
25. Forward-looking statements
Certain statements in this preliminary 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.
The financial information contained in this preliminary
announcement does not constitute statutory accounts within the
meaning of the Companies Act 2006. The results for the year ended
31st December 2014 are unaudited and statutory accounts have not
yet been delivered to the Registrar of Companies.
27.
The Annual Report for the year ended 31st December 2014 will be
posted to shareholders no later than 23rd March 2015 and delivered
to the Registrar of Companies following the Annual General Meeting
on 1st May 2015.
28.
The shareholders entered in the Register of Members at 4.00pm on
7th April 2015 will be entitled to the proposed final dividend of
18.3p per share which will, subject to approval at the Annual
General Meeting to be held on 1st May 2015, be payable on 6th May
2015.
29.
Copies of the preliminary press release (and statutory accounts
when available) may be obtained from the Company Secretary, Jardine
Lloyd Thompson Group plc, The St Botolph Building, 138 Houndsditch,
London, EC3A 7AW.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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