TIDMJLT
RNS Number : 8010V
Jardine Lloyd Thompson Group PLC
26 July 2018
26 JULY 2018
Jardine Lloyd Thompson Group plc
INTERIM RESULTS
FOR THE SIX MONTHSED 30 JUNE 2018 (UNAUDITED)
Jardine Lloyd Thompson Group plc ("JLT" or the "Group")
announces its interim results for the six months ended 30 June
2018.*
GROUP FINANCIAL HIGHLIGHTS
-- Total revenue growth of 3% to GBP713.5m
-- Organic revenue growth of 4%:
- 4% in Specialty
- 6% in Reinsurance
- 4% in Employee Benefits
-- Underlying** trading margin increased by 80 basis points from 15.8% to 16.6%
-- Underlying** profit before tax increased by 10% to GBP108.8m
-- Reported profit before tax decreased by 9% to GBP89.4m,
reflecting the exceptional costs of the Global Transformation
Programme
-- Underlying** diluted earnings per share (EPS) rose 11% from 31.4p to 34.7p
-- Reported diluted EPS decreased by 12% from 31.2p to 27.5p,
reflecting the exceptional costs of the Global Transformation
Programme
-- Interim cash dividend of 12.7p, up 4.1%
* The Company's 2017 financial results have been restated
following the implementation of IFRS 15 "Revenue from Contracts
with Customers" ("IFRS 15"), effective from 1 January 2018, and the
Group's new segment reporting structure, in order to show prior
year figures on a comparative basis. A restatement of the Full Year
and Half Year 2017 financial results was published by the Company
on 3 July 2018 and is available on the Company's website at
http://www.jlt.com/investors.
** Underlying results exclude exceptional items.
BUSINESS HIGHLIGHTS
-- The new leadership and management structure in Specialty is
driving closer co-ordination and increasing global opportunities.
Strong performances were delivered in Latin America, Australia and
in the global Energy specialty.
-- New business wins in Reinsurance across the UK, European and
US markets were achieved, alongside the launch of JLT's
next-generation economic capital modelling software, ANSER.
-- Employee Benefits won several global mandates from large
multi-national clients, accompanied by good organic revenue growth
in Brazil and Asia. UK Employee Benefits remains on track to
achieve a 15% trading margin in 2019.
-- US Specialty delivered 17% organic revenue growth, and is on
track to move into profit in 2019. The business now employs 380
people and continues to attract the best industry
practitioners.
-- The Global Transformation Programme delivered benefits of
GBP6.1m in the period and remains on track to deliver annualised
benefits of GBP40m by 2020 for a one-off cost of GBP45m.
Dominic Burke, Group Chief Executive, commented:
"The Group's results for the first six months of 2018 represent
a robust trading performance. The strategic initiatives we are
implementing are already generating tangible benefits for our
clients and for the Group. We are trading with real momentum as we
move into the second half and we expect to report continued strong
organic revenue growth and further financial progress for the full
year."
ENQUIRIES:
Jardine Lloyd Thompson Group plc
Dominic Burke Group Chief Executive 020 7558 3373
Charles Rozes Group Finance Director 020 7558 3380
Paul Dransfield Head of Investor Relations 020 7528 4933
Brunswick Group LLP
Tom Burns / Dania Saidam 020 7404 5959
Click on, or paste, the following link into your web browser to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/8010V_1-2018-7-25.pdf
A presentation to investors and analysts will take place at
9.00am today at The St Botolph Building, 138 Houndsditch, London,
EC3A 7AW. A live webcast of the presentation can be viewed on the
Group's website www.jlt.com.
INTERIM STATEMENT
JLT made significant progress in the first half of 2018, set
against a global economic and insurance markets environment that
remains inconsistent and unpredictable.
Total revenues increased by 3%, or 6% at constant rates of
exchange (CRE), to GBP713.5m. The Group achieved organic revenue
growth of 4%.
6 months to Total Revenue Underlying Trading Trading Margin
30 June Profit
GBPm 2018 2017 Growth CRE Organic 2018 CRE 2017 2018 CRE 2017
Specialty 408.3 392.9 4% 7% 4% 68.3 68.0 60.2 17% 16% 15%
Reinsurance 152.8 146.9 4% 6% 6% 49.1 48.5 43.8 32% 31% 30%
Employee Benefits 152.4 152.0 0% 4% 4% 18.6 20.7 21.7 12% 13% 14%
Head Office - - - - - (17.6) (15.8) (16.6) - - -
Group 713.5 691.8 3% 6% 4% 118.4 121.4 109.1 16.6% 16.5% 15.8%
Notes:
-- Total revenue comprises fees, commissions and investment income.
-- CRE: Constant rates of exchange are calculated by translating
2018 results at 2017 exchange rates.
-- Organic revenue growth is based on total revenue excluding
the effect of currency, acquisitions, disposals and investment
income.
-- Underlying results exclude exceptional items.
-- 2017 results have been restated for IFRS 15 and the new segment reporting structure.
JLT's Specialty business delivered a 4% increase in revenues to
GBP408.3m, or 7% at CRE, with organic revenue growth of 4%. The
trading margin in Specialty was 17%, an improvement on the prior
year both on a reported and a CRE basis.
The Reinsurance business delivered revenue growth of 4%, or 6%
on an organic revenue basis, to GBP152.8m. The trading margin in
Reinsurance increased year-on-year from 30% to 32%.
Revenues within JLT's Employee Benefits business were GBP152.4m,
increasing by 4% on an organic revenue basis or largely unchanged
on a reported basis. The trading margin reduced year-on-year from
14% to 12%. This was largely due to the impact of the new revenue
accounting standard, IFRS 15, on the phasing of profits and is
expected to unwind in the second half of 2018 as explained in the
'Employee Benefits' section below.
For the Group, the negative impact of foreign exchange
movements, most of which was translational, impacted revenue growth
in the period by 300 basis points.
6 months to 30 June
GBPm 2018 2017*
Underlying trading profit 118.4 109.1
Underlying share of associates 2.5 2.1
Net finance costs (12.1) (12.0)
--------------------------- -------------------------
Underlying profit before taxation 108.8 99.2
Exceptional items (19.4) (0.9)
--------------------------- -------------------------
Profit before taxation 89.4 98.3
Underlying tax expense (29.5) (29.3)
Tax on exceptional items 3.6 0.3
Underlying non-controlling interests (4.3) (2.4)
Non-controlling interests on exceptional items 0.3 0.3
--------------------------- -------------------------
Profit after taxation and non-controlling interests 59.5 67.2
--------------------------- -------------------------
Underlying profit after taxation and non-controlling
interests 75.0 67.5
--------------------------- -------------------------
Diluted earnings per share 27.5p 31.2p
Underlying diluted earnings per share 34.7p 31.4p
Interim dividend per share 12.7p 12.2p
----------------------------------------------------- --------------------------- -------------------------
*2017 results have been restated for IFRS 15.
Group underlying trading profit increased by 9% to GBP118.4m, or
11% at CRE. Underlying profit before tax increased by 10% to
GBP108.8m.
The underlying trading margin increased to 16.6%, up from 15.8%
in the first half of 2017.
The Group's reported profit before tax was GBP89.4m, compared
with GBP98.3m for the same period in 2017. This decrease reflects
the exceptional costs of the Global Transformation Programme.
Underlying EPS increased by 11%, to 34.7p.
DIVIDS
The Board has declared an increased interim dividend of 12.7p
per share for the period ended 30 June 2018 (2017: 12.2p), which
will be paid on 3 October 2018 to shareholders on the register at
24 August 2018.
OPERATIONAL REVIEW
The Group now operates as three global trading businesses:
Specialty, Reinsurance and Employee Benefits.
SPECIALTY
6 months to 30 June Growth
GBPm 2018 2017 Reported CRE Organic
Revenue 408.3 392.9 4% 7% 4%
Underlying Cost (340.0) (332.7) 2% 6%
Underlying Trading
Profit 68.3 60.2 13% 13%
=================== ========= ======== =========== ============
Underlying Trading
Margin 17% 15%
CRE 16%
------------------- --------- -------- ----------- ------------ ----------
Notes:
-- CRE: Constant rates of exchange are calculated by translating
2018 results at 2017 exchange rates.
-- Underlying results exclude exceptional items.
-- 2017 results have been restated for IFRS 15 and the new segment reporting structure.
JLT's Specialty business performed well during its first period
under the new leadership and management structure, achieving
organic revenue growth of 4%.
Specialty's underlying trading profit grew by 13% to GBP68.3m,
with 7% revenue growth at CRE. This was underpinned by the
continued reduction of net investment losses in US Specialty and
the delivery of benefits from the Global Transformation
Programme.
The US Specialty business delivered organic revenue growth of
17% and recorded total revenues of US$60m for the period. The
business is successfully integrating International Risk
Consultants, the specialist Credit and Political Risk broker
acquired in February 2018. A number of important hires were also
made in the period across US Specialty, bringing the total number
of employees to 380, a headcount increase of 75 since the 2017 half
year.
During the period, the US Specialty net investment loss was
US$11m, compared to US$17m at the same time last year. As
previously guided, the Group expects that total US Specialty net
investment losses will be approximately US$100m and that the
business will move into profit in 2019. The US Specialty build-out
will continue to focus on continuing organic development,
complemented by compatible acquisitions.
Within Asia Pacific, Australia returned to organic revenue
growth, achieving good business wins across Energy, Power, Sport
and Analytical and Consulting Services.
In May 2018, the Group acquired OWL Marine Insurance Brokers,
based in Hamburg, strengthening JLT's Global Marine specialty. The
transaction complements the acquisition of Belgibo, the Belgian
specialty broker, in 2017 and further reinforces JLT's
representation in Continental Europe.
REINSURANCE
6 months to 30 June Growth
GBPm 2018 2017 Reported CRE Organic
Revenue 152.8 146.9 4% 6% 6%
Underlying Cost (103.7) (103.1) 1% 4%
Underlying Trading
Profit 49.1 43.8 12% 11%
=================== ======== ========= =========== ======
Underlying Trading
Margin 32% 30%
CRE 31%
------------------- -------- --------- ----------- ------ ----------
Notes:
-- CRE: Constant rates of exchange are calculated by translating
2018 results at 2017 exchange rates.
-- Underlying results exclude exceptional items.
-- 2017 results have been restated for IFRS 15 and the new segment reporting structure.
JLT's Reinsurance business achieved strong organic revenue
growth of 6%, with notable new business successes in the UK,
European and US operations. Coupled with the delivery of benefits
from the Global Transformation Programme, this resulted in
underlying trading profit growth of 11% at CRE.
The business secured many new client wins in the period and also
increased hiring, most notably in Cyber, Trade Credit and
Analytics.
Reinsurance has successfully launched its next-generation
economic capital modelling software under the ANSER brand, which
has been well received by existing and prospective clients. This
further enhances JLT's standing in the industry, while reinforcing
its record of creating innovative client solutions.
EMPLOYEE BENEFITS
6 months to 30 June Growth
GBPm 2018 2017 Reported CRE Organic
Revenue 152.4 152.0 0% 4% 4%
Underlying Cost (133.8) (130.3) 3% 5%
Underlying Trading
Profit 18.6 21.7 (15%) (5%)
=================== ======= ======= =========== ======
Underlying Trading
Margin 12% 14%
CRE 13%
------------------- ------- ------- ----------- ------ ----------
Notes:
-- CRE: Constant rates of exchange are calculated by translating
2018 results at 2017 exchange rates.
-- Underlying results exclude exceptional items.
-- 2017 results have been restated for IFRS 15 and the new segment reporting structure.
JLT's Employee Benefits business achieved both CRE and organic
revenue growth of 4%, although the negative impact of foreign
exchange movements on international revenues resulted in reported
revenue being flat overall.
JLT's international Employee Benefits businesses recorded
significant organic revenue growth in the period, maintaining the
momentum achieved in the second half of 2017.
The international sales team continued its record of successes
with wins of multi-national clients, including one of the world's
largest pharmaceutical companies.
Organic revenue growth of 4% in Employee Benefits did not
translate into headline profit growth at the half year. In addition
to foreign exchange rate movements, this was due to the variability
introduced by the new revenue accounting standard adopted at the
start of 2018. As explained in the Group's 2017 results restatement
announcement dated 3 July 2018, IFRS 15 requires deferral of some
revenues and costs, which can move profits across balance sheet
dates. This has a particular effect on UK Employee Benefits due to
the nature of its client contracts. This negative half year phasing
is expected to unwind in the second half of the year and Employee
Benefits is expected to achieve profit growth for the full year.
The UK Employee Benefits business remains on track to achieve a 15%
trading margin in 2019.
During the period, the business completed the substantial
preparatory work necessary for it to start providing the actuarial,
administration and documentation services to Lloyds Banking Group
in respect of its Scottish Widows and Clerical Medical final salary
pension clients. This is a portfolio of over 800 defined benefit
pension and specialist schemes. The business also completed the
acquisition of Chartwell Healthcare, making JLT one of the leading
providers of Group Risk and Health services to mid-market clients
in the UK.
ASSOCIATES
The Group's income from its Associates increased by GBP0.4m to
GBP2.5m.
OPERATING COSTS
During the first half of 2018, the Group's underlying operating
expenses, excluding exceptional items, increased by GBP12.4m, or
2%, to GBP595.1m. Operating expenses included a favourable foreign
exchange impact of GBP18.0m, or 3%, and benefits from the delivery
of the Global Transformation Programme of GBP6.1m, or 1%.
There was a net increase in costs of GBP7.5m (1%) from
acquisitions and disposals, primarily relating to the acquisitions
of Belgibo, CRP and IRC in Specialty which added GBP9.0m of
operating expenses. This was partly offset by the disposal of
Expacare and Peru Affinity in 2017. The overall organic growth in
the Group's cost base, excluding benefits from the Global
Transformation Programme, was GBP22.8m, or 4%.
The Group will continue to invest in the business, but remains
focused on ensuring that costs and trading margins are well-managed
as the Group continues to grow. Continued delivery of the benefits
from the Global Transformation Programme, further details of which
are set out below, will be a significant contributor in delivering
operating leverage and enhancing the trading margin.
GLOBAL TRANSFORMATION PROGRAMME
The Global Transformation Programme achieved a total of GBP6.1m
of cost savings in the first half of 2018, and is on track to
deliver the benefits that were previously advised for the full
year, as set out below. The programme generated an uplift in the
Group trading margin of 85 basis points in the period and the Group
expects to see further trading profit margin expansion as the
programme continues to deliver benefits.
GBPm Cost to Incremental Annualised
achieve* Benefit Benefit
2018 33 16 16
2019 12 19 35
2020 - 5 40
----- -------------- ----------- ----------
* Treated as exceptional items.
The table below provides a breakdown of the benefits achieved in
each business during the period, together with the approximate
proportion of the programme's total annualised benefits to be
delivered by each business over the programme period.
Business Benefit in H1 Programme split
2018 by 2020 (approximation)
GBPm
Specialty 3.7 55%
Reinsurance 1.7 20%
Employee Benefits 0.7 25%
------------------ ------------- ------------------------
Total 6.1 100%
------------------ ------------- ------------------------
EXCEPTIONAL ITEMS
Net exceptional items in the first half totalled GBP19.4m,
principally driven by Global Transformation Programme expenditure
of GBP17.0m at the half year with a further GBP16.0m anticipated to
be charged in the second half of 2018.
BALANCE SHEET AND FUNDING
Implementation of the new revenue recognition standard, IFRS 15,
effective from 1 January 2018, resulted in the 1 January 2017
retained earnings being restated with a reduction of GBP38.2m due
to a re-phasing of profits as a consequence of the new rules. IFRS
9 ('Financial Instruments') also became effective from 1 January
2018 resulting in a GBP0.7m reduction to 1 January 2018 retained
earnings due to the revised impairment approach for trade
receivables under the new standard.
The net assets of the Group decreased by GBP15m, from GBP356m at
the 2017 financial year end, as restated for IFRS 15. The key
movements were:
-- Goodwill and intangibles increased by GBP30m principally as a
result of completed acquisitions for IRC, Chartwell and OWL Marine
Insurance Brokers;
-- Mark to market adjustments decreasing derivative fair values by GBP16m, net of deferred tax;
-- An increase in the pension liability of GBP8m, net of
deferred tax, mainly due to changes in actuarial assumptions and
methodology arising from the triennial valuation partially offset
by positive economic changes; and
-- Working capital, which for balance sheet presentation
includes working capital acquired, taxation and provisions,
increased by GBP62m.
Net debt, defined as own funds, less total borrowings net of
transaction costs, was GBP593m (30 June 2017: GBP565m). The Net
Debt to EBITDA ratio remained at similar levels to the same period
last year, at 2.2:1 (2017: 2.1:1) on a reported basis and 1.9:1
(2017: 1.8:1) on a bank covenant basis.
As at 30 June 2018, the Group had long-term credit facilities
totalling approximately GBP1bn. This comprised the private
placement loan note programmes of US$458m and GBP75m, with a
maturity profile extending to 2029, and the committed revolving
credit facilities (RCF) totalling GBP500m, which are provided by
the Group's relationship banks and mature in 2022. Utilisation of
the RCF stood at GBP323m leaving unutilised headroom of GBP177m (31
December 2017: GBP229m), as June is historically the high point
during the year for the Group's net debt seasonality.
CASH FLOW
6 months to 30 June
GBPm 2018 2017
EBITDA 145* 147
Net interest (6) (6)
Working capital (82) (82)
Annual capex (24) (32)
========================== ==== ====
Operational free cash
flow 33 27
========================== ==== ====
Dividends paid (48) (45)
Tax paid (21) (17)
Net shares acquired (19) (15)
Other (1) (2)
========================== ==== ====
Net cash inflow/(outflow)
excl acq/disp (56) (52)
========================== ==== ====
Acquisitions / disposals (29) (40)
========================== ==== ====
Net cash (outflow)
/ inflow (85) (92)
-------------------------- ---- ----
Notes:
* Includes GBP15m Global Transformation Programme cash
charges.
-- 2017 has been restated for IFRS 15.
The Group primarily monitors operational cash flows, which
report cash and net debt movements but exclude fiduciary funds;
statutory cash flows include movements in fiduciary funds. The net
cash outflow in the period was GBP85m, of which GBP29m was in
relation to acquisitions and disposals. Annual capex was GBP24m,
reduced on 2017, driven by lower expenditure on software with other
cash flows at similar levels to prior periods.
EBITDA in the period was GBP145m, which included the cash amount
of the Global Transformation Programme exceptional costs. Excluding
this cash outflow of GBP15m, EBITDA was approximately GBP160m.
FOREIGN EXCHANGE
Foreign exchange movements across the Group reduced underlying
profit before tax by GBP2.8m to GBP108.8m in the first half of
2018.
Foreign exchange rates remain volatile and are expected to be so
as a result of Brexit-related events, as well as other
macroeconomic and geopolitical developments. The Group continues to
adopt a hedging strategy to mitigate transactional currency
exposures.
BOARD AND SENIOR MANAGEMENT DEVELOPMENTS
As announced in March 2018, Lynne Peacock was appointed as a
Non-Executive Director and joined the Board on 1 May 2018.
Derek Walsh was appointed as Group General Counsel and joined
the Group Executive Committee on 4 June 2018.
OUTLOOK
The perennial softness the industry experienced in recent years
would seem to have ceased, but it has not been replaced by any
consistent hardening. This 'traders' market', as we described the
evolving market conditions in February, plays to JLT's strengths.
Turns in the insurance cycle have traditionally been led by the
reinsurance sector. However, it is in the retail segment where JLT
is seeing some rates rise, and in some cases, rise substantially,
for particularly heavily loss affected lines or geographies.
Conversely, there are many areas of the market in which conditions
have not hardened at all, and attractive risks are often still able
to secure material rate reductions. Across all of the market
conditions in which we operate, JLT continues to improve its
business and its propositions to clients.
The results for the first 6 months of 2018 demonstrate the
steady progress JLT is making as it implements the decisions from
last year's strategy re-examination. The Group is trading with real
momentum as it moves into the second half and expects to report
continued strong organic revenue growth and further financial
progress for the full year.
(LEI Number: 213800XRWB6SDDCZZ434)
Consolidated income statement
Unaudited Interim Results for the six months ended 30 June
2018
6 months 6 months
ended ended
30 June 30 June
2018 2017
Restated
Notes GBP'000 GBP'000
================================================== ===== ========== ==========
Fees and commissions 2 708,678 688,738
----- ---------- ----------
Investment income 2 4,806 3,021
================================================== ===== ========== ==========
Total revenue 2 713,484 691,759
================================================== ===== ========== ==========
Salaries and associated expenses (448,874) (424,502)
----- ---------- ----------
Premises (36,268) (35,564)
----- ---------- ----------
Other operating costs (108,755) (106,862)
----- ---------- ----------
Depreciation, amortisation and impairment charges (16,675) (16,668)
----- ---------- ----------
Impairment loss on financial assets (3,900) -
================================================== ===== ========== ==========
Operating profit 1,2,3 99,012 108,163
================================================== ===== ========== ==========
Analysed as:
----- ---------- ----------
Operating profit before exceptional items 1,2 118,385 109,054
----- ---------- ----------
Acquisition and integration costs 3 (793) (1,022)
----- ---------- ----------
Restructuring costs 3 (16,996) -
----- ---------- ----------
Other exceptional items 3 (1,584) 131
================================================== ===== ========== ==========
Operating profit 1,2,3 99,012 108,163
================================================== ===== ========== ==========
Finance costs (13,497) (13,520)
----- ---------- ----------
Finance income 1,389 1,567
----- ========== ==========
Finance costs - net (12,108) (11,953)
----- ---------- ----------
Share of results of associates 2,549 2,051
================================================== ===== ========== ==========
Profit before taxation 1,2 89,453 98,261
================================================== ===== ========== ==========
Income tax expense 4 (25,873) (28,951)
================================================== ===== ========== ==========
Profit for the period 63,580 69,310
================================================== ===== ========== ==========
Profit attributable to:
----- ---------- ----------
Owners of the parent 2 59,509 67,163
----- ---------- ----------
Non-controlling interests 4,071 2,147
================================================== ===== ========== ==========
63,580 69,310
================================================== ===== ========== ==========
Earnings per share attributable to the owners
of the parent during the period
(expressed in pence per share)
----- ---------- ----------
Basic earnings per share 5 28.1p 31.9p
----- ---------- ----------
Diluted earnings per share 5 27.5p 31.2p
----- ---------- ----------
Consolidated statement of comprehensive income
Unaudited Interim Results for the six months ended 30 June
2018
6 months 6 months
ended ended
30 June 30 June
2018 2017
Restated
Notes GBP'000 GBP'000
===================================================== ===== ======== =========
Profit for the period 63,580 69,310
===================================================== ===== ======== =========
Other comprehensive (expense)/income
----- -------- ---------
Items that will not be reclassified to profit
or loss
----- ======== =========
Remeasurement of post-employment benefit obligations 22 (7,579) 25,446
===================================================== ===== -------- ---------
Taxation thereon 1,375 (4,774)
----- ======== =========
Total items that will not be reclassified to
profit or loss (6,204) 20,672
----- -------- ---------
Items that may be reclassified subsequently
to profit or loss
----- -------- ---------
Fair value (losses)/gains net of tax:
----- ======== =========
- available-for-sale - 35
----- -------- ---------
- cash flow hedges (11,078) 39,639
----- -------- ---------
Currency translation differences (2,619) (22,854)
----- ======== =========
Total items that may be reclassified subsequently
to profit or loss (13,697) 16,820
===================================================== ===== ======== =========
Other comprehensive (expense)/income net of
tax (19,901) 37,492
===================================================== ===== ======== =========
Total comprehensive income for the period 43,679 106,802
===================================================== ===== ======== =========
Attributable to:
----- -------- ---------
Owners of the parent 40,779 105,884
----- ======== =========
Non-controlling interests 2,900 918
===================================================== ===== ======== =========
43,679 106,802
===================================================== ===== ======== =========
Consolidated balance sheet
Unaudited Interim Results as at 30 June 2018
As at As at As at
30 June 30 June 31 Dec
2018 2017 2017
Restated Restated
Notes GBP'000 GBP'000 GBP'000
========================================== ===== ============ ============ ============
NET OPERATING ASSETS
----- ------------ ------------ ------------
Non-current assets
========================================== ===== ============ ============ ============
Goodwill 7 604,569 571,100 577,778
========================================== ===== ============ ============ ============
Other Intangible assets 112,928 107,364 108,954
----- ------------ ------------ ------------
Property, plant and equipment 67,063 66,030 68,645
----- ------------ ------------ ------------
Investments in associates 2 53,047 53,401 53,055
----- ------------ ------------ ------------
Available-for-sale financial assets 8,15 - 17,343 16,858
----- ------------ ------------ ------------
Other financial assets at fair value
through other comprehensive income 8,15 8,623 - -
----- ------------ ------------ ------------
Other financial assets at fair value
through profit or loss 8,15 4,890 - -
----- ------------ ------------ ------------
Other financial assets at amortised costs 8,15 11,478 - -
----- ------------ ------------ ------------
Derivative financial instruments 9 77,759 92,641 82,569
----- ------------ ------------ ------------
Trade and other receivables 10 22,114 20,993 21,609
----- ------------ ------------ ------------
Contract assets 13 33,120 17,488 18,249
========================================== ===== ============ ============ ============
Retirement benefit surpluses 22 337 125 92
----- ------------ ------------ ------------
Deferred tax assets 55,280 54,112 63,751
========================================== ===== ============ ============ ============
1,051,208 1,000,597 1,011,560
========================================== ===== ============ ============ ============
Current assets
----- ------------ ------------ ------------
Trade and other receivables 10 536,200 507,154 495,725
----- ------------ ------------ ------------
Contract assets 13 69,611 66,031 68,576
----- ------------ ------------ ------------
Current tax assets 20,612 - -
----- ------------ ------------ ------------
Derivative financial instruments 9 6,155 8,667 5,545
----- ------------ ------------ ------------
Available-for-sale financial assets 8,15 - 124,193 115,080
----- ------------ ------------ ------------
Other financial assets at amortised costs 8,15 138,362 - -
========================================== ----- ------------ ------------ ------------
Held-for-sale financial assets 8 193 - 189
----- ------------ ------------ ------------
Cash and cash equivalents 11,15 1,043,365 965,764 1,015,087
========================================== ===== ============ ============ ============
1,814,498 1,671,809 1,700,202
========================================== ===== ============ ============ ============
Current liabilities
========================================== ===== ============ ============ ============
Borrowings 15,16 (19,129) (51,093) (19,226)
========================================== ===== ============ ============ ============
Trade and other payables 12 (1,281,554) (1,150,288) (1,212,988)
----- ============ ============ ============
Contract liabilities 14 (59,303) (52,136) (60,392)
----- ============ ============ ============
Derivative financial instruments 9 (9,465) (17,873) (10,265)
----- ------------ ------------ ------------
Current tax liabilities (18,366) (14,332) (10,290)
----- ============ ============ ============
Provisions for liabilities and charges 17 (11,962) (12,695) (6,865)
========================================== ===== ============ ============ ============
(1,399,779) (1,298,417) (1,320,026)
========================================== ===== ============ ============ ============
Net current assets 414,719 373,392 380,176
========================================== ===== ============ ============ ============
Non-current liabilities
========================================== ===== ============ ============ ============
Borrowings 15,16 (746,651) (696,087) (690,872)
========================================== ===== ============ ============ ============
Trade and other payables 12 (52,056) (52,178) (49,475)
========================================== ===== ============ ============ ------------
Contract liabilities 14 (27,261) (27,868) (27,278)
========================================== ===== ============ ============ ------------
Derivative financial instruments 9 (100,522) (96,878) (85,516)
----- ------------ ------------ ------------
Deferred tax liabilities (17,351) (7,898) (11,773)
----- ------------ ------------ ------------
Retirement benefit obligations 22 (179,458) (175,679) (169,376)
----- ------------ ------------ ------------
Provisions for liabilities and charges 17 (1,616) (1,798) (1,549)
========================================== ===== ============ ============ ============
(1,124,915) (1,058,386) (1,035,839)
========================================== ===== ============ ============ ============
341,012 315,603 355,897
========================================== ===== ============ ============ ============
TOTAL EQUITY
----- ------------ ------------ ------------
Capital and reserves attributable to
the owners of the parent
----- ------------ ------------ ------------
Ordinary shares 11,008 11,008 11,008
----- ------------ ------------ ------------
Share premium 18 104,111 104,111 104,111
----- ------------ ------------ ------------
Fair value and hedging reserves 18 (1,869) (14,779) 9,290
----- ------------ ------------ ------------
Exchange reserves 18 47,515 61,936 48,963
----- ------------ ------------ ------------
Retained earnings 163,580 135,171 163,072
========================================== ===== ============ ============ ============
Shareholders' equity 324,345 297,447 336,444
----- ------------ ------------ ------------
Non-controlling interests 16,667 18,156 19,453
========================================== ===== ============ ============ ============
341,012 315,603 355,897
========================================== ===== ============ ============ ============
Consolidated statement of
changes in equity
Unaudited Interim Results for the six months ended 30 June
2018
Ordinary Other Retained Shareholders' Non- controlling Total
shares reserves earnings equity interests equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ===== ======== ========= ========= ============= ================ ============
Balance at 31 December
2017 11,008 162,005 204,781 377,794 19,911 397,705
----- -------- --------- --------- ------------- ---------------- ------------
Change in accounting
policy in respect of
IFRS 15 25 - 359 (41,709) (41,350) (458) (41,808)
============================ ===== ======== ========= ========= ============= ================ ============
Balance at 31 December
(restated) 11,008 162,364 163,072 336,444 19,453 355,897
-------- --------- --------- ------------- ---------------- ------------
Change in accounting
policy in respect of
IFRS 9 25 - (81) (646) (727) (20) (747)
============================ ===== ======== ========= ========= ============= ================ ============
Balance at 1 January
2018 (restated) 11,008 162,283 162,426 335,717 19,433 355,150
-------- --------- --------- ------------- ---------------- ------------
Profit for the period - - 59,509 59,509 4,071 63,580
----- -------- --------- --------- ------------- ---------------- ------------
Other comprehensive
expense for the period - (12,526) (6,204) (18,730) (1,171) (19,901)
============================ ===== ======== ========= ========= ============= ================ ============
Total comprehensive
income for the period - (12,526) 53,305 40,779 2,900 43,679
----- -------- --------- --------- ------------- ---------------- ------------
Dividends 6 - - (47,134) (47,134) (4,388) (51,522)
----- -------- --------- --------- ------------- ---------------- ------------
Amounts in respect
of share based payments:
----- -------- --------- --------- ------------- ---------------- ------------
- reversal of amortisation
net of tax - - 14,163 14,163 - 14,163
----- -------- --------- --------- ------------- ---------------- ------------
- shares acquired - - (19,132) (19,132) - (19,132)
----- -------- --------- --------- ------------- ---------------- ------------
Acquisitions - - - - (1,402) (1,402)
----- -------- --------- --------- ------------- ---------------- ------------
Disposals - - - - 124 124
----- -------- --------- --------- ------------- ---------------- ------------
Change in non-controlling
interests - - (48) (48) - (48)
============================ ===== ======== ========= ========= ============= ================ ============
Balance at 30 June
2018 11,008 149,757 163,580 324,345 16,667 341,012
============================ ===== ======== ========= ========= ============= ================ ============
Non-
Ordinary Other Retained Shareholders' controlling Total
shares reserves earnings equity interests equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ===== ======== ========= ========= ============= ================ ============
Balance at 1 January
2017 11,008 133,219 183,919 328,146 22,764 350,910
----- -------- --------- --------- ------------- ---------------- ------------
Change in accounting
policy in respect of
IFRS 15 25 - - (38,153) (38,153) (450) (38,603)
============================ ===== ======== ========= ========= ============= ================ ============
Balance at 1 January
2017 (restated) 11,008 133,219 145,766 289,993 22,314 312,307
============================ ===== ======== ========= ========= ============= ================ ============
Profit for the period
(restated) - - 67,163 67,163 2,147 69,310
----- -------- --------- --------- ------------- ---------------- ------------
Other comprehensive
income/(expense)
for the period (restated) - 18,049 20,672 38,721 (1,229) 37,492
============================ ===== ======== ========= ========= ============= ================ ============
Total comprehensive
income/(expense)
for the period (restated) - 18,049 87,835 105,884 918 106,802
----- -------- --------- --------- ------------- ---------------- ------------
Dividends 6 - - (44,280) (44,280) (6,223) (50,503)
----- -------- --------- --------- ------------- ---------------- ------------
Amounts in respect
of share based payments:
----- -------- --------- --------- ------------- ---------------- ------------
- reversal of amortisation
net of tax - - 14,145 14,145 - 14,145
----- -------- --------- --------- ------------- ---------------- ------------
- shares acquired - - (15,009) (15,009) - (15,009)
----- -------- --------- --------- ------------- ---------------- ------------
Acquisitions - - - - 1,926 1,926
----- -------- --------- --------- ------------- ---------------- ------------
Change in non-controlling
interests - - (53,286) (53,286) (779) (54,065)
============================ ===== ======== ========= ========= ============= ================ ============
Balance at 30 June
2017 (restated) 11,008 151,268 135,171 297,447 18,156 315,603
============================ ===== ======== ========= ========= ============= ================ ============
Consolidated statement of cash flows
Unaudited Interim Results for the six months ended 30 June
2018
6 months 6 months
ended ended
30 June 30 June
2018 2017
Restated
Notes GBP'000 GBP'000
=================================================== ===== ========== ==========
Cash flows from operating activities
----- ---------- ----------
Cash generated from operations 19 60,215 64,463
----- ---------- ----------
Interest paid (7,986) (7,518)
----- ---------- ----------
Interest received 7,002 4,330
----- ---------- ----------
Taxation paid (21,140) (16,647)
----- ---------- ----------
Increase in net insurance broking payables 85,200 28,248
=================================================== ===== ========== ==========
123,291 72,876
----- ---------- ----------
Dividend received from associates 2,222 1,030
=================================================== ===== ========== ==========
Net cash generated from operating activities 125,513 73,906
=================================================== ===== ========== ==========
Cash flows from investing activities
----- ---------- ----------
Purchase of property, plant and equipment (4,780) (9,096)
----- ---------- ----------
Purchase of other intangible assets (19,086) (23,947)
----- ---------- ----------
Proceeds from disposal of property, plant and
equipment 208 750
----- ---------- ----------
Proceeds from disposal of other intangible fixed
assets - 122
----- ---------- ----------
Acquisition of businesses, net of cash acquired 20 (22,841) (32,131)
----- ---------- ----------
Acquisition of associates - (89)
----- ---------- ----------
Proceeds from disposal of businesses, net of
cash disposed - 1,601
----- ---------- ----------
Purchase of fair value through other comprehensive
income financial assets 8 (2,264) -
----- ---------- ----------
Purchase of fair value through profit or loss
financial assets 8 (20) -
=================================================== ===== ========== ==========
Net cash (used) in investing activities (48,783) (62,790)
=================================================== ===== ========== ==========
Cash flows from financing activities
----- ---------- ----------
Dividends paid to owners of the parent (48,375) (44,620)
----- ---------- ----------
Purchase of available-for-sale financial assets 8 - (119,467)
----- ---------- ----------
Purchase of other financial assets at amortised
costs 8 (144,179) -
----- ---------- ----------
Proceeds from disposal of available-for-sale
financial assets 8 - 117,133
----- ---------- ----------
Proceeds from disposal of other financial assets
at amortised costs 8 114,851 -
----- ---------- ----------
Purchase of shares (19,132) (15,009)
----- ---------- ----------
Proceeds from borrowings 57,211 95,749
----- ---------- ----------
Repayments of borrowings (1,652) (1,981)
----- ---------- ----------
Dividends paid to non-controlling interests (4,388) (6,223)
=================================================== ===== ========== ==========
Net cash (used)/generated in financing activities (45,664) 25,582
=================================================== ===== ========== ==========
Net increase in cash and cash equivalents 31,066 36,698
----- ---------- ----------
Cash and cash equivalents at beginning of period 1,015,087 939,945
----- ---------- ----------
Exchange losses on cash and cash equivalents (2,788) (10,879)
=================================================== ===== ========== ==========
Cash and cash equivalents at end of period 1,043,365 965,764
=================================================== ===== ========== ==========
Notes to the unaudited interim results
For the six months ended 30 June 2018
BASIS OF ACCOUNTING
The Group's condensed consolidated interim financial statements
for the six months ended 30 June 2018 have been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34 Interim financial
reporting (IAS 34) as adopted by the European Union.
The Group has considerable financial resources and a
geographically diversified business and as a consequence, the
Directors believe that the Group is well placed to manage its
business risks in the context of the current economic outlook.
Accordingly, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. They therefore continue to adopt the
going concern basis in preparing these interim results.
These financial statements should be read in conjunction with
the consolidated statutory accounts of the Group for the year ended
31 December 2017, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union.
This condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2017 were approved by the Board of Directors on 28
February 2018 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements have
been reviewed, not audited.
The accounting policies are consistent with those of the annual
financial statements for the year ended 31 December 2017, except
for the adoption of IFRS 9 Financial instruments and IFRS 15
Revenue from Contract with Customers. The impact of the adoption of
these standards and the new accounting policies are disclosed in
note 25.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 December
2017.
Full details of the audited accounts and accounting policies for
the year ended 31 December 2017 are available at www.jlt.com
1. Alternative income statement
The format of the consolidated income statement conforms to the
requirements of IFRS. The alternative income statement set out
below, which is provided by way of additional information, has been
prepared on a basis that conforms more closely to the approach
adopted by the Group in assessing its performance. The statement
provides a reconciliation between the underlying results used by
the Group to assess performance and the IFRS income statement.
Underlying Exceptional
profit items Total
6 months ended 30 June 2018 GBP'000 GBP'000 GBP'000
========================================== ========== =========== ==========
Fees and commissions 708,678 - 708,678
---------- ----------- ----------
Investment income 4,806 - 4,806
---------- ----------- ----------
Salaries and associated expenses (432,283) (16,591) (448,874)
---------- ----------- ----------
Premises (36,074) (194) (36,268)
---------- ----------- ----------
Other operating costs (106,167) (2,588) (108,755)
---------- ----------- ----------
Depreciation, amortisation and impairment
charges (16,675) - (16,675)
---------- ----------- ----------
Impairment loss on financial assets (3,900) - (3,900)
========================================== ========== =========== ==========
Trading profit 118,385 (19,373) 99,012
---------- ----------- ----------
Finance costs - net (12,108) - (12,108)
---------- ----------- ----------
Share of results of associates 2,549 - 2,549
========================================== ========== =========== ==========
Profit before taxation 108,826 (19,373) 89,453
========================================== ========== =========== ==========
Exceptional
profit items Total
6 months ended 30 June 2017 (restated) GBP'000 GBP'000 GBP'000
========================================== ========== =========== ==========
Fees and commissions 688,738 - 688,738
---------- ----------- ----------
Investment income 3,021 - 3,021
---------- ----------- ----------
Salaries and associated expenses (423,470) (1,032) (424,502)
---------- ----------- ----------
Premises (35,529) (35) (35,564)
---------- ----------- ----------
Other operating costs (107,038) 176 (106,862)
---------- ----------- ----------
Depreciation, amortisation and impairment
charges (16,668) - (16,668)
========================================== ========== =========== ==========
Trading profit 109,054 (891) 108,163
---------- ----------- ----------
Finance costs - net (11,953) - (11,953)
---------- ----------- ----------
Share of results of associates 2,051 - 2,051
========================================== ========== =========== ==========
Profit before taxation 99,152 (891) 98,261
========================================== ========== =========== ==========
2. Segment information
Management has determined its operating segments based on the
analysis used to make strategic decisions.
Business segment analysis
The Group has been restructured into three global trading
divisions each operating on a worldwide basis, Specialty,
Reinsurance and Employee Benefits, and Head Office & Other.
These segments are consistent with the internal reporting provided
to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Group Executive Committee.
The Specialty segment comprises JLT's global specialist,
wholesale, personal lines and SME activities. The Reinsurance
segment comprises JLT's global reinsurance and captives management
activities. The Employee Benefits segment consists of pension
administration, outsourcing and employee benefits consultancy,
healthcare and wealth management activities. 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. Prior period numbers
have been restated to reflect the new operating structure.
Segment results
Management assesses the performance of the operating segments
based upon a measure of underlying trading profit. Segment results
include the net income or expense derived from the trading
activities of the segment together with the investment income
earned on fiduciary funds. Interest income on the Group's own funds
and finance costs are excluded since the trading activities of the
Group's primary segments are not of a financial nature. Income tax
expense and the charge in respect of non-controlling interests are
excluded from the segmental allocation.
Segment assets and liabilities
Assets and liabilities are not allocated to individual segments
and are therefore all reported within Head Office & Other.
Investments in associates
The Group owns the following stakes in its principal associates:
20% of GrECo, which operates mainly in Austria and Eastern Europe;
25% of MAG JLT, which operates mainly in Italy and 25% of
March-JLT, which operates mainly in Spain. The investment and the
Group's share of the net results of these associates are included
in the Head Office & Other segment, together with the
investment and results of the Group's other associates, JLT
Insurance Management Malta, JLT Energy (France) SAS and JLT
Independent Insurance Brokers Private Ltd.
On 20 December 2017, the Group disposed of its 35.5% stake in
its Mexican associate, Sterling Re Intermediaro de Reaseguro SA de
CV.
The disposal is subject to certain conditions that are in the
process of being completed.
Other segment items
Capital expenditure comprises additions to property, plant and
equipment and other intangible assets.
Business cyclicality
From an overall perspective, given the inherent nature and
geographical spread of the Group's operations, whilst there may be
an element of period on period phasing of revenue and profits, the
business is not considered to be significantly cyclical between
each half year period.
Employee Head Office
Specialty Reinsurance Benefits & Other Total
6 months ended 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ========= =========== ========== ============ ============
Fees and commissions 404,745 151,546 152,387 - 708,678
--------- ----------- ---------- ------------ ------------
Investment income 3,510 1,266 30 - 4,806
=============================== ========= =========== ========== ============ ============
Total revenue 408,255 152,812 152,417 - 713,484
=============================== ========= =========== ========== ============ ============
Underlying trading profit 68,294 49,099 18,572 (17,580) 118,385
=============================== ========= =========== ========== ============ ============
Operating profit 59,273 44,968 12,850 (18,079) 99,012
--------- ----------- ---------- ------------ ------------
Finance costs - net (12,108) (12,108)
--------- ----------- ---------- ------------ ------------
Share of results of associates 2,549 2,549
=============================== ========= =========== ========== ============ ============
Profit before taxation 59,273 44,968 12,850 (27,638) 89,453
--------- ----------- ---------- ------------ ------------
Income tax expense (25,873) (25,873)
--------- ----------- ---------- ------------ ------------
Non-controlling interests (4,071) (4,071)
=============================== ========= =========== ========== ============ ============
Net profit attributable to
the owners of the parent 59,273 44,968 12,850 (57,582) 59,509
=============================== ========= =========== ========== ============ ============
Segment assets
Investments in associates 2,812,659 2,812,659
--------- ----------- ---------- ------------ ------------
Investments in associates 53,047 53,047
=============================== ========= =========== ========== ============ ============
Total assets 2,865,706 2,865,706
=============================== ========= =========== ========== ============ ============
Segment liabilities (2,524,694) (2,524,694)
=============================== ========= =========== ========== ============ ============
Total liabilities (2,524,694) (2,524,694)
=============================== ========= =========== ========== ============ ============
Other segment items:
--------- ----------- ---------- ------------ ------------
Capital expenditure 11,912 2,071 4,752 5,131 23,866
--------- ----------- ---------- ------------ ------------
Depreciation, amortisation
and impairment charges (10,014) (2,543) (6,684) (5,805) (25,046)
--------- ----------- ---------- ------------ ------------
Employee Head Office
6 months ended 30 June 2017 Specialty Reinsurance Benefits & Other Total
(restated) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ========= =========== ========== =========== ===========
Fees and commissions 390,491 146,247 152,000 - 688,738
--------- ----------- ---------- ----------- -----------
Investment income 2,390 594 37 - 3,021
=============================== ========= =========== ========== =========== ===========
Total revenue 392,881 146,841 152,037 - 691,759
=============================== ========= =========== ========== =========== ===========
Underlying trading profit 60,182 43,717 21,730 (16,575) 109,054
=============================== ========= =========== ========== =========== ===========
Operating profit 58,302 43,600 22,838 (16,577) 108,163
--------- ----------- ---------- ----------- -----------
Finance costs - net (11,953) (11,953)
--------- ----------- ---------- ----------- -----------
Share of results of associates 2,051 2,051
=============================== ========= =========== ========== =========== ===========
Profit before taxation 58,302 43,600 22,838 (26,479) 98,261
--------- ----------- ---------- ----------- -----------
Income tax expense (28,951) (28,951)
----------- -----------
Non-controlling interests (2,147) (2,147)
=============================== ========= =========== ========== =========== ===========
Net profit attributable to
the owners of the parent 58,302 43,600 22,838 (57,577) 67,163
=============================== ========= =========== ========== =========== ===========
Segment assets 2,619,005 2,619,005
--------- ----------- ---------- ----------- -----------
Investments in associates 53,401 53,401
=============================== ========= =========== ========== =========== ===========
Total assets 2,672,406 2,672,406
=============================== ========= =========== ========== =========== ===========
Segment liabilities (2,356,803) (2,356,803)
=============================== ========= =========== ========== =========== ===========
Total liabilities (2,356,803) (2,356,803)
=============================== ========= =========== ========== =========== ===========
Other segment items:
--------- ----------- ---------- ----------- -----------
Capital expenditure 11,627 3,140 11,549 6,727 33,043
--------- ----------- ---------- ----------- -----------
Depreciation, amortisation
and impairment charges (10,401) (2,290) (4,765) (6,757) (24,213)
--------- ----------- ---------- ----------- -----------
3. Operating profit
The following items have been charged/(credited) in arriving at
operating profit:
6 months 6 months
ended ended
30 June 2018 30 June 2017
GBP'000 GBP'000
====================================================== ============= =============
Foreign exchange losses/(gains):
------------- -------------
- fees and commissions 286 17,525
------------------------------------------------------ ------------- -------------
- other operating costs 954 (1,745)
====================================================== ============= =============
1,240 15,780
====================================================== ============= =============
Amortisation of other intangible assets:
------------- -------------
- software costs 8,893 8,997
------------- -------------
- other intangible assets 1,711 1,423
============= =============
Depreciation on property, plant and equipment 6,071 6,248
====================================================== ============= =============
Total depreciation, amortisation and impairment
charges 16,675 16,668
====================================================== ============= =============
Amortisation of other intangible assets:
------------- -------------
- employment contract payments (included in salaries
and associated expenses) 8,371 7,545
====================================================== ============= =============
Gains on disposal of property, plant and equipment (92) (11)
====================================================== ============= =============
Fair value losses/(gains) on derivative financial
instruments 1,083 (371)
====================================================== ============= =============
Available-for-sale and held-for-sale assets:
------------- -------------
- Fair value (gains)/losses (4) 122
====================================================== ============= =============
Exceptional items:
------------- -------------
Acquisition and integration costs of which:
============= =============
- included in salaries and associated expenses 60 606
------------------------------------------------------ ------------- -------------
- included in premises costs 2 7
------------------------------------------------------ ------------- -------------
- included in other operating costs 731 409
------------------------------------------------------ ============= =============
793 1,022
------------- -------------
Restructuring costs of which:
============= =============
- included in salaries and associated expenses 16,531 -
------------------------------------------------------ ------------- -------------
- included in premises costs 192 -
------------------------------------------------------ ------------- -------------
- included in other operating costs 273 -
------------------------------------------------------ ============= =============
16,996 -
------------- -------------
Net gains on disposal of businesses of which:
============= =============
- included in salaries and associated expenses - 426
------------------------------------------------------ ------------- -------------
- included in premises costs - 28
------------------------------------------------------ ------------- -------------
- included in other operating costs - (1,340)
------------------------------------------------------ ============= =============
- (886)
------------- -------------
Net litigation costs 1,640 -
------------- -------------
Release of contingent consideration (56) (464)
------------- -------------
Fair value losses on available-for-sale financial
assets - 1,375
------------- -------------
Additional deferred consideration received on
a disposal of a business - (156)
====================================================== ============= =============
Total exceptional items included within operating
profit 19,373 891
====================================================== ============= =============
4. Income tax expense
6 months 6 months
ended ended
30 June 30 June
2018 2017
Restated
GBP'000 GBP'000
================================================== ======== =========
Current tax expense
-------- ---------
Current period 9,523 22,094
-------- ---------
Adjustments in respect of prior periods (853) (756)
================================================== ======== =========
8,670 21,338
================================================== ======== =========
Deferred tax expense
-------- ---------
Origination and reversal of temporary differences 17,330 6,363
-------- ---------
Reduction in tax rate 129 515
-------- ---------
Adjustments in respect of prior periods (256) 735
================================================== ======== =========
17,203 7,613
================================================== ======== =========
Total income tax expense 25,873 28,951
================================================== ======== =========
The total income tax expense in the income statement of
GBP25,873,000 (2017: GBP28,951,000) includes a tax credit on
exceptional items of GBP3,607,000 (2017: GBP272,000). There were no
non-recurring tax credits in the period.
The headline rate of UK corporation tax is currently 19%, this
will reduce to 17% from 1 April 2020. As at 30 June 2018, the rate
reduction to 17% from April 2020 has been enacted. The impact of
the rate reduction to 17% has been incorporated into the income tax
charge for the 6 months ended 30 June 2018, taking into
consideration when temporary differences are expected to
reverse.
As explained in note 25, prior period balances have been
restated for IFRS 15, resulting in the recognition of higher
deferred tax balances. As IFRS 15 or equivalent local standards
have been recognised in local tax bases in 2018 some of those
timing differences have reversed resulting in lower current tax and
reversal of deferred tax temporary difference.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the tax rate of the home
country of the Company as follows:
6 months 6 months
ended ended
30 June 30 June
2018 2017
Restated
GBP'000 GBP'000
===================================================== ======== ========
Profit before taxation 89,453 98,261
===================================================== ======== ========
Tax calculated at UK Corporation Tax rate of 19.0%
(2017: 19.25%) 16,996 18,915
-------- --------
Non-deductible expenses 2,626 3,820
-------- --------
Non recognition of tax losses 1,553 2,422
-------- --------
Other* - (953)
-------- --------
Adjustments in respect of prior periods (1,109) (19)
-------- --------
Effect of difference between UK and non-UK tax rates 6,162 4,648
-------- --------
Effect of reduction in tax rate 129 515
-------- --------
Tax on associates (484) (397)
===================================================== ======== ========
Total income tax expense 25,873 28,951
===================================================== ======== ========
* Other includes the non-taxable (gain)/loss on disposal of
subsidiaries
5. Earnings per share
Basic EPS is calculated by dividing the profit attributable to
shareholders by the sum of the weighted average number of ordinary
shares in issue during the year and the vested share options
eligible for discretionary dividend equivalents, excluding
unallocated shares held by the Trustees of the Employees' Share
Ownership Plan Trust, which are treated as treasury shares. The
profit attributable to shareholders is the profit attributable to
the owners of the parent adjusted for the dividend equivalents and
undistributed earnings attributable to the unvested share options
carrying unconditional dividend equivalent rights.
Diluted EPS is calculated by adjusting the weighted average
number of ordinary shares in issue to take account of the potential
dilutive effect
of outstanding share options.
Basic and diluted EPS are also calculated based on underlying
earnings attributable to shareholders, which exclude any
exceptional items.
A reconciliation of earnings is set out below:
As at As at
30 June 30 June
2018 2017
No. of No. of
shares shares
=========================================== ============ ============
Weighted average number of shares 211,781,704 210,691,298
------------ ------------
Effect of outstanding share options 4,385,374 4,388,282
=========================================== ============ ============
Adjusted weighted average number of shares 216,167,078 215,079,580
=========================================== ============ ============
6 months ended 30 June 2018
=============================================================
GBP'000 GBP'000 GBP'000 Pence Pence
--------- -------------- ---------- ---------- ----------
Adjusted
earnings
for basic Basic Diluted
earnings earnings earnings
Earnings Adjustments(2) per share per share per share
================================== ========= ============== ========== ========== ==========
Underlying profit after taxation
and non-controlling interests(1) 75,055 (29) 75,026 35.4 34.7
-------------- ---------- ----------
Exceptional items before tax (19,373)
---------------------------------- --------- -------------- ---------- ---------- ----------
Taxation thereon 3,607
---------------------------------- --------- -------------- ---------- ----------
Non-controlling interests thereon 220
---------------------------------- -------------- ---------- ----------
(15,546) 6 (15,540) (7.3) (7.2)
================================== ========= ============== ========== ========== ==========
Profit attributable to the owners
of the parent 59,509 (23) 59,486 28.1 27.5
================================== ========= ============== ========== ========== ==========
6 months ended 30 June 2017 (restated)
============================================================
GBP'000 GBP'000 GBP'000 Pence Pence
-------- -------------- ---------- ---------- ----------
Adjusted
earnings
for basic Basic Diluted
earnings earnings earnings
Earnings Adjustments(2) per share per share per share
================================== ======== ============== ========== ========== ==========
Underlying profit after taxation
and non-controlling
interests(1) 67,500 (50) 67,450 32.0 31.4
======== -------------- ========== ---------- ----------
Exceptional items before tax (891)
---------------------------------- -------- -------------- ---------- ---------- ----------
Taxation thereon 272
---------------------------------- -------- -------------- ========== ---------- ----------
Non-controlling interests thereon 282
---------------------------------- ======== -------------- ========== ---------- ----------
(337) - (337) (0.1) (0.2)
================================== ======== ============== ========== ========== ==========
Profit attributable to the
owners of the parent 67,163 (50) 67,113 31.9 31.2
================================== ======== ============== ========== ========== ==========
(1) Underlying excludes exceptional items.
(2) Adjustments related to the dividends and undistributed
earnings on unvested share options carrying dividend equivalent
rights.
6. Dividends
6 months 6 months
ended ended
30 June 30 June
2018 2017
GBP'000 GBP'000
===================================================== ======== ========
Final dividend in respect of 2017 of 21.8p per share
(2016: 20.6p) 47,134 44,280
===================================================== ======== ========
An interim dividend in respect of 2018 of 12.7p per share (2017:
12.2p) amounting to a total of GBP27,818,000 (2017: GBP26,810,000)
is payable on 3 October 2018 to shareholders who are registered at
the close of business on 24 August 2018. The dividend proposed will
not be accounted for until it is paid. The ex-dividend date will be
23 August 2018.
7. Goodwill
Gross Impairment Net carrying
amount losses amount
GBP'000 GBP'000 GBP'000
======================== ======== ========== ============
At 30 June 2018
-------- ---------- ------------
Opening net book amount 583,699 (5,921) 577,778
-------- ---------- ------------
Exchange differences 2,087 (51) 2,036
-------- ---------- ------------
Acquisitions 24,755 - 24,755
======================== ======== ========== ============
Closing net book amount 610,541 (5,972) 604,569
======================== ======== ========== ============
At 30 June 2017
-------- ---------- ------------
Opening net book amount 548,117 (5,104) 543,013
-------- ---------- ------------
Exchange differences (9,596) (137) (9,733)
-------- ---------- ------------
Acquisitions 37,820 - 37,820
======================== ======== ========== ============
Closing net book amount 576,341 (5,241) 571,100
======================== ======== ========== ============
8. OTHER financial assets and held-for-sale
Other financial assets are categorised according to their nature
into three categories:
1. Financial assets at fair value through other comprehensive
income (FVOCI) mainly consist of investments in preference shares
and some equity holdings held for strategic purposes.
2. Financial assets at fair value through profit or loss (FVTPL)
mainly consist of contingent considerations.
3. Financial assets at amortised costs include fixed term
deposits, bonds and certificates of deposit.
On 20 December 2017, the Group disposed of its Mexican
associate, Sterling Re Intermediaro de Reaseguros de CV. The
disposal is subject to certain conditions that are in the process
of being completed. The asset is recognised under
held-for-sale.
As at 30 June 2018
---------------------------------------------------------------
Financial Financial
assets at assets
fair value at fair Financial
through value through assets
other comprehensive profit at amortised
income or loss cost Total
-------------------- -------------- ------------- ----------
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------------------- -------------- ------------- ----------
At 1 January 2018 (restated) 6,137 4,870 120,931 131,938
-------------------- -------------- ------------- ----------
Exchange differences 222 - (419) (197)
-------------------- -------------- ------------- ----------
Additions 2,264 20 144,179 146,463
-------------------- -------------- ------------- ----------
Disposals/maturities - - (114,851) (114,851)
----------------------------------- -------------------- -------------- ------------- ----------
At 30 June 2018 8,623 4,890 149,840 163,353
----------------------------------- -------------------- -------------- ------------- ----------
Analysis of other financial assets
-------------------- -------------- ------------- ----------
Current - - 138,362 138,362
-------------------- -------------- ------------- ----------
Non-current 8,623 4,890 11,478 24,991
----------------------------------- -------------------- -------------- ------------- ----------
At 30 June 2018 8,623 4,890 149,840 163,353
----------------------------------- -------------------- -------------- ------------- ----------
Analysis of other financial assets
-------------------- -------------- ------------- ----------
Fiduciary funds - - 149,523 149,523
-------------------- -------------- ------------- ----------
Own funds 8,623 4,890 317 13,830
----------------------------------- -------------------- -------------- ------------- ----------
At 30 June 2018 8,623 4,890 149,840 163,353
----------------------------------- -------------------- -------------- ------------- ----------
As at 30 June 2017
-------------------- -----------------------------------------
Other Investments
investments & deposits Total
-------------------- -------------- ------------- ----------
GBP'000 GBP'000 GBP'000
----------------------------------- -------------------- -------------- ------------- ----------
At 1 January 2017 13,079 127,659 140,738
-------------------- -------------- ------------- ----------
Exchange differences (273) 117 (156)
-------------------- -------------- ------------- ----------
Additions - 119,467 119,467
-------------------- -------------- ------------- ----------
Finance income 154 - 154
-------------------- -------------- ------------- ----------
Disposals/maturities - (117,133) (117,133)
-------------------- -------------- ------------- ----------
Revaluation deficit (included
within equity) - 42 42
-------------------- -------------- ------------- ----------
Amounts written off (1,576) - (1,576)
----------------------------------- -------------------- -------------- ------------- ----------
At 30 June 2017 11,384 130,152 141,536
----------------------------------- -------------------- -------------- ------------- ----------
Analysis of available-for-sale
financial assets
-------------------- -------------- ------------- ----------
Current - 124,193 124,193
-------------------- -------------- ------------- ----------
Non-current 11,384 5,959 17,343
----------------------------------- -------------------- -------------- ------------- ----------
At 30 June 2017 11,384 130,152 141,536
----------------------------------- -------------------- -------------- ------------- ----------
Analysis of available-for-sale
investments & deposit
-------------------- -------------- ------------- ----------
Fiduciary funds - 129,849 129,849
-------------------- -------------- ------------- ----------
Own funds - 303 303
----------------------------------- -------------------- -------------- ------------- ----------
At 30 June 2017 - 130,152 130,152
----------------------------------- -------------------- -------------- ------------- ----------
9. Derivative financial instruments
As at 30 June As at 30 June
2018 2017
-------------------- ---------------------
Assets Liabilities Assets Liabilities
------- ----------- -------- -----------
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------- ----------- -------- -----------
Interest rate swaps - fair value
hedges 9,425 (10,570) 18,034 (4,230)
------- ----------- -------- -----------
Forward foreign exchange contracts
- cash flow hedges 74,489 (19,377) 83,274 (32,144)
------- ----------- -------- -----------
Redemption liabilities - option
contracts - (80,040) - (78,377)
----------------------------------- ------- ----------- -------- -----------
Total 83,914 (109,987) 101,308 (114,751)
----------------------------------- ------- ----------- -------- -----------
Current 6,155 (9,465) 8,667 (17,873)
------- ----------- -------- -----------
Non-current 77,759 (100,522) 92,641 (96,878)
----------------------------------- ------- ----------- -------- -----------
Total 83,914 (109,987) 101,308 (114,751)
----------------------------------- ------- ----------- -------- -----------
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 risks. The treasury
department is subject to periodic review by internal audit.
The Group uses various derivative instruments including forward
foreign exchange contracts, interest rate swaps, and from time to
time, foreign currency collars and options to manage the risks
arising from variations in currency and interest rates. Derivative
instruments purchased are primarily denominated in the currencies
of the Group's main markets.
Where forward foreign exchange contracts have been entered into
to manage currency risk, they are designated as hedges of currency
risk on specific future cash flows, and qualify as highly probable
transactions for which hedge accounting is applied. The Group
anticipates that hedge accounting requirements will continue to be
met on its foreign currency and interest rate hedging activities
and that no material ineffectiveness will arise which will result
in gains or losses being recognised through the income
statement.
The fair value of financial derivatives based upon market values
as at 30 June 2018 and designated as effective cash flow hedges was
an asset of GBP55.1 million and has been deferred in equity (2017:
net assets of GBP51.1 million). Gains and losses arising on
derivative instruments outstanding as at 30 June 2018 will be
released to the income statement at various dates up to:
a) 31 months in respect of cash flow hedges on currency
denominated UK earnings.
b) 11 years in respect of specific hedges on USD denominated
long-term debt drawn under the Group's USD private placement
programme.
c) 8 years in respect of specific hedges on GBP denominated
long-term debt drawn under the Group's private placement
programme.
No material amounts were transferred to the income statement
during the period in respect of the fair value of financial
derivatives.
Transactions maturing within 12 months of the balance sheet date
are classified in current maturities. Transactions maturing in a
period in excess of 12 months of the balance sheet date are
classified as non-current maturities.
a) Forward foreign exchange contracts
The Group's major currency transaction exposure arises in USD
and the Group continues to adopt a prudent approach in actively
managing this exposure. As at 30 June 2018 the Group had
outstanding foreign exchange contracts, principally in USD,
amounting to a principal value of GBP1,328,160,000 (2017:
GBP1,327,379,000).
b) Interest rate swaps
The Group uses interest rate hedges, principally interest rate
swaps, to mitigate the impact of changes in interest rates. As at
30 June 2018, the notional principal amounts of outstanding cross
currency interest rate swaps was USD 458,000,000 and sterling
interest rate swaps was GBP75,000,000 (2017: USD 500,000,000 and
GBP75,000,000). A net loss of GBP1.1 million (2017: net gain
GBP13.8 million) on these instruments was offset by a fair value
movement of GBP1.1 million (2017: GBP13.8 million) on the private
placement loans, both of which were recognised in the income
statement in the period.
c) Redemption liabilities
The redemption liabilities represent the valuation of the put
options provided in the shareholders agreements of JLT Specialty
Insurance Services Inc., JLT Sigorta ve Reasurans Brokerligi Ltd
Sirketi, JLT SCK Corretora e Administradora and Construction Risk
Partners, LLC.
No new redemption liability was recognised in the period.
d) Price risk
The Group does not have a material exposure to commodity price
risk.
The maximum exposure to credit risk at the reporting date is the
fair value of derivatives in the balance sheet.
10. Trade and other receivables
As at As at
30 June 30 June
2018 2017
Restated
Current GBP'000 GBP'000
---------------------------------------------------- --------- ---------
Trade receivables 475,639 449,956
--------- ---------
Less: provision for impairment of trade receivables (20,727) (22,414)
---------------------------------------------------- --------- ---------
Trade receivables - net 454,912 427,542
--------- ---------
Other receivables 40,506 42,141
--------- ---------
Prepayments 40,782 37,471
---------------------------------------------------- --------- ---------
536,200 507,154
---------------------------------------------------- --------- ---------
As at As at
30 June 30 June
2018 2017
Restated
Non-current GBP'000 GBP'000
------------------ -------- --------
Trade receivables 2,706 1,700
-------- --------
Other receivables 19,196 19,278
-------- --------
Prepayments 212 15
------------------ -------- --------
22,114 20,993
------------------ -------- --------
As at 30 June 2018, the Group had exposures to individual trade
counterparties within trade receivables. In accordance with Group
policy, Group operating companies continually monitor exposures
against credit limits and concentration of risk. No individual
trade counterparty credit exposure is considered significant in the
ordinary course of trading activity. Management does not expect any
significant losses from non-performance by trade counterparties
that have not been provided for.
11. Cash and cash equivalents
As at As at
30 June 30 June
2018 2017
GBP'000 GBP'000
------------------------- ---------- --------
Cash at bank and in hand 610,882 527,878
---------- --------
Short-term bank deposits 432,483 437,886
------------------------- ---------- --------
1,043,365 965,764
------------------------- ---------- --------
Fiduciary funds 870,935 783,974
---------- --------
Own funds 172,430 181,790
------------------------- ---------- --------
1,043,365 965,764
------------------------- ---------- --------
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 1.37% (2017: 1.03%). These deposits have an average maturity of
14 days (2017: 14 days).
12. Trade and other payables
As at As at
30 June 30 June
2018 2017
Restated
Current GBP'000 GBP'000
--------------------------------------- ---------- ----------
Insurance payables 1,020,458 913,823
---------- ----------
Social security and other taxes 21,097 21,160
---------- ----------
Other creditors and accruals 234,136 207,546
---------- ----------
Deferred and contingent considerations 5,863 7,759
--------------------------------------- ---------- ----------
1,281,554 1,150,288
--------------------------------------- ---------- ----------
As at As at
30 June 30 June
2018 2017
Restated
Non-current GBP'000 GBP'000
---------------------------------------------------- ----------- ----------
Other creditors and accruals 34,823 36,247
----------- ----------
Deferred and contingent considerations 17,233 15,931
---------------------------------------------------- ----------- ----------
52,056 52,178
---------------------------------------------------- ----------- ----------
The trade and other payables include GBP106,633,000 of non-financial
liabilities (2017: GBP94,307,000). At 30 June 2017, GBP52,178,000
of rent free accruals within other payables and deferred and contingent
considerations have been split between current and non-current.
13. contract assets
As at As at
30 June 30 June
2018 2017 Restated
-------- --------------
GBP'000 GBP'000
-------------------------------------------------------- -------- --------------
Estimated contract values 78,740 59,366
-------- --------------
Asset recognised for costs incurred to fulfil contracts 22,950 21,157
-------- --------------
Other contract values 2,482 2,996
-------------------------------------------------------- -------- --------------
104,172 83,519
-------- --------------
Less: Provision for loss allowance (1,441) -
-------------------------------------------------------- -------- --------------
Total contract assets 102,731 83,519
-------------------------------------------------------- -------- --------------
Analysis of contract assets
-------- --------------
Current 69,611 66,031
-------- --------------
Non-current 33,120 17,488
-------------------------------------------------------- -------- --------------
Total contract assets 102,731 83,519
-------------------------------------------------------- -------- --------------
14. contract liabilities
As at As at
30 June 30 June
2018 2017 Restated
-------- --------------
GBP'000 GBP'000
---------------------------------- -------- --------------
Claims handling provision 48,293 48,611
-------- --------------
Other post-replacement activities 15,865 14,630
-------- --------------
Cancellation and refund provision 9,076 9,656
-------- --------------
Cash received in advance 13,330 7,107
---------------------------------- -------- --------------
Total contract liabilities 86,564 80,004
---------------------------------- -------- --------------
Analysis of contract liabilities
-------- --------------
Current 59,303 52,136
-------- --------------
Non-current 27,261 27,868
---------------------------------- -------- --------------
Total contract liabilities 86,564 80,004
---------------------------------- -------- --------------
15. Financial instruments by category
The accounting policies for financial instruments have been
applied to the line items below:
Financial Financial
assets assets
at fair at fair Financial
value through value through assets Derivatives
other comprehensive profit at amortised used for
income or loss cost hedging Total
At 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------------------- -------------- ------------- ----------- ----------
Assets
-------------------- -------------- ------------- ----------- ----------
Other financial assets 8,623 4,890 149,840 - 163,353
-------------------- -------------- ------------- ----------- ----------
Derivative financial instruments - - - 83,914 83,914
-------------------- -------------- ------------- ----------- ----------
Trade and other receivables
(a) - 1,234 516,086 - 517,320
-------------------- -------------- ------------- ----------- ----------
Cash and cash equivalents - 142,008 901,357 - 1,043,365
--------------------------------- -------------------- -------------- ------------- ----------- ----------
Total 8,623 148,132 1,567,283 83,914 1,807,952
--------------------------------- -------------------- -------------- ------------- ----------- ----------
Other financial
liabilities Derivatives Total
GBP'000 GBP'000 GBP'000
--------------------------------- --------------- ----------- ------------
Liabilities
--------------- ----------- ------------
Borrowings (765,780) - (765,780)
--------------- ----------- ------------
Trade and other payables (b) (1,226,977) - (1,226,977)
--------------- ----------- ------------
Redemption liabilities - option
contracts - (80,040) (80,040)
--------------- ----------- ------------
Derivative financial instruments - (29,947) (29,947)
---------------------------------- --------------- ----------- ------------
Total (1,992,757) (109,987) (2,102,744)
---------------------------------- --------------- ----------- ------------
Derivatives
Loans and used for Available-
receivables hedging for-sale Total
At 30 June 2017 (restated) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ----------- ---------- ----------
Assets
------------ ----------- ---------- ----------
Available-for-sale financial assets - - 141,536 141,536
------------ ----------- ---------- ----------
Derivative financial instruments - 101,308 - 101,308
------------ ----------- ---------- ----------
Trade and other receivables (a) 490,661 - - 490,661
------------ ----------- ---------- ----------
Cash and cash equivalents 965,764 - - 965,764
------------------------------------ ------------ ----------- ---------- ----------
Total 1,456,425 101,308 141,536 1,699,269
------------------------------------ ------------ ----------- ---------- ----------
Other
financial
liabilities Derivatives Total
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ----------- ------------
Liabilities
------------ ----------- ------------
Borrowings (747,180) - (747,180)
------------ ----------- ------------
Trade and other payables (b) (1,108,159) - (1,108,159)
------------ ----------- ------------
Redemption liabilities - option
contracts - (78,377) (78,377)
------------ ----------- ------------
Derivative financial instruments - (36,374) (36,374)
---------------------------------- ------------ ----------- ------------
Total (1,855,339) (114,751) (1,970,090)
---------------------------------- ------------ ----------- ------------
(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 30 June 2018.
Level 1 Level 2 Level 3 Total
At 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- --------- --------- ----------
Assets
-------- --------- --------- ----------
Derivatives used for hedging - 83,914 - 83,914
-------- --------- --------- ----------
Other financial assets at fair value
through comprehensive income (FVOCI)
-------- --------- --------- ----------
- equity securities - - 961 961
-------- --------- --------- ----------
- debt investments - - 7,662 7,662
-------- --------- --------- ----------
Other financial assets at fair value
through profit or loss (FVTPL)
-------- --------- --------- ----------
- cash equivalents 142,008 - - 142,008
-------- --------- --------- ----------
- other receivables - - 1,234 1,234
-------- --------- --------- ----------
- other financial assets - - 4,890 4,890
------------------------------------------ -------- --------- --------- ----------
Total 142,008 83,914 14,747 240,669
------------------------------------------ -------- --------- --------- ----------
Liabilities
-------- --------- --------- ----------
Contingent consideration - - (16,603) (16,603)
-------- --------- --------- ----------
Redemption liabilities - option contracts - - (80,040) (80,040)
-------- --------- --------- ----------
Derivatives used for hedging - (29,947) - (29,947)
------------------------------------------ -------- --------- --------- ----------
Total - (29,947) (96,643) (126,590)
------------------------------------------ -------- --------- --------- ----------
Level 1 Level 2 Level 3 Total
At 30 June 2017 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- --------- --------- ----------
Assets
-------- --------- --------- ----------
Derivatives used for hedging - 101,308 - 101,308
-------- --------- --------- ----------
Available-for-sale financial assets
-------- --------- --------- ----------
- equity securities - - 992 992
-------- --------- --------- ----------
- debt investments - - 10,392 10,392
-------- --------- --------- ----------
- fixed deposits 130,152 - - 130,152
------------------------------------------ -------- --------- --------- ----------
Total 130,152 101,308 11,384 242,844
------------------------------------------ -------- --------- --------- ----------
Liabilities
-------- --------- --------- ----------
Contingent consideration - - (16,458) (16,458)
-------- --------- --------- ----------
Redemption liabilities - option contracts - - (78,377) (78,377)
-------- --------- --------- ----------
Derivatives used for hedging - (36,374) - (36,374)
------------------------------------------ -------- --------- --------- ----------
Total - (36,374) (94,835) (131,209)
------------------------------------------ -------- --------- --------- ----------
Apart from where disclosed, there are no differences between the
fair value and the carrying value of financial assets and
liabilities.
Instruments included in level 1 are financial instruments traded
in active markets for which the fair value is based upon quoted
market prices at the balance sheet date. A market is regarded as
active if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service, or
regulatory agency and those prices represent actual and regularly
occurring market transactions on an arm's-length basis.
Instruments included in level 2 are financial instruments that
are not traded in an active market (for example, over-the-counter
derivatives) and for which the fair value is determined by using
internal and external models. These models maximise the use of
observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument
is included in level 2. Level 2 includes derivatives used for
hedging. The valuations of which are performed using a discounted
cash flow methodology incorporating observable market forward
foreign exchange and interest rates.
During the period there were no transfers between level 1, 2 and
3. There were no changes in valuation techniques during the
period.
Instruments included in level 3 are financial instruments for
which one or more of the significant inputs are not based on
observable market data. In respect of deferred and contingent
consideration and redemption liabilities - option contracts,
unobservable inputs include management's assessment of the expected
future performance of relevant acquired businesses and are valued
using a discounted cash flow methodology.
A reconciliation of the movements in level 3 is provided
below:
Level 3
---------------------
Assets Liabilities
GBP'000 GBP'000
---------------------------------- -------- -----------
At 1 January 2018 11,196 (89,724)
-------- -----------
Remeasurement on adoption of IFRS
9 1,219 -
---------------------------------- -------- -----------
At 1 January 2018 (restated) 12,415 (89,724)
-------- -----------
Exchange differences 252 (1,372)
-------- -----------
Additions 2,284 -
-------- -----------
Fair valuation (11) -
-------- -----------
Utilised in the period - 261
-------- -----------
Companies acquired - (3,587)
-------- -----------
Charged to income statement - (2,221)
------------------------------------ -------- -----------
At 30 June 2018 14,940 (96,643)
------------------------------------ -------- -----------
Of the GBP2,221,000 charged to the income statement GBP2,276,000
is charged to net finance costs and GBP55,000 is credited to other
operating costs.
16. Borrowings
As at As at
30 June 30 June
2018 2017
GBP'000 GBP'000
-------------------------- -------- --------
Current
-------- --------
Bank overdraft 17,709 16,605
-------- --------
Unsecured loan notes - 34,010
-------- --------
Bank borrowings 187 239
-------- --------
Finance lease liabilities 1,233 239
-------------------------- -------- --------
19,129 51,093
-------------------------- -------- --------
Non-current
-------- --------
Unsecured loan notes 420,167 439,005
-------- --------
Bank borrowing 322,363 256,555
-------- --------
Finance lease liabilities 4,121 527
-------------------------- -------- --------
746,651 696,087
-------------------------- -------- --------
Total borrowings 765,780 747,180
-------------------------- -------- --------
The borrowings include secured liabilities (finance leases) of
GBP5,354,000 (2017: GBP766,000).
17. Provisions for liabilities and charges
Property
related Litigation
provisions provisions Other Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ----------- -------- --------
At 1 January 2018 2,104 6,274 36 8,414
----------- ----------- -------- --------
Exchange differences 39 (9) 1 31
----------- ----------- -------- --------
Utilised in the period (251) (517) - (768)
----------- ----------- -------- --------
Charged to the income statement 18 5,846 - 5,864
----------- ----------- -------- --------
Interest charge 25 - - 25
----------- ----------- -------- --------
Companies acquired - - 12 12
-------------------------------- ----------- ----------- -------- --------
At 30 June 2018 1,935 11,594 49 13,578
-------------------------------- ----------- ----------- -------- --------
At 1 January 2017 2,919 7,442 36 10,397
Exchange differences (32) (44) - (76)
------ ------- --- -------
Utilised in the period (16) (970) - (986)
------ ------- --- -------
Charged to the income statement 40 5,088 - 5,128
------ ------- --- -------
Interest charge 30 - - 30
-------------------------------- ------ ------- --- -------
At 30 June 2017 2,941 11,516 36 14,493
-------------------------------- ------ ------- --- -------
As at As at
30 June 30 June
2018 2017
GBP'000 GBP'000
-------------------------------- -------- --------
Analysis of total provisions
-------- --------
Current - to be utilised within
one year 11,962 12,695
-------- --------
Non-current - to be utilised in
more than one year 1,616 1,798
---------------------------------- -------- --------
13,578 14,493
-------------------------------- -------- --------
Property related provisions
The Group recognises a provision for onerous contracts when the
expected benefits to be derived from a contract are less than the
unavoidable costs of meeting the obligations under the contract.
Provision is made for the future rental cost of vacant property and
expected dilapidation expenses. In calculating the provision
required, account is taken of the duration of the lease and any
recovery of cost achievable from subletting. Property provisions
principally relate to the US and UK and relate to a variety of
lease commitments. The longest lease term expires in 2026.
Litigation provisions
At any point in time the Group can be involved in a variety of
litigation, regulatory and other government authorities
investigations and disputes around the world. A provision is
established in respect of such issues when it is probable that the
liability has been incurred and the amount of the liability can be
reasonably estimated. The Group analyses its litigation exposures
based on available information, including external legal
consultation where appropriate, to assess its potential liability.
Where appropriate the Group also provides for the cost of defending
or initiating such matters. However, the final outcome could differ
materially from the amount provided.
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 30 June
2018, in connection with certain litigation matters, the Group's
litigation provisions include an amount of GBP0.1 million (2017:
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 period ended 30 June 2018
(2017: nil).
18. Other reserves
Share Fair value Exchange
premium and hedging reserves Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- ------------ --------- ---------
At 1 January 2018 104,111 9,290 48,604 162,005
-------- ------------ --------- ---------
Change in accounting policy in
respect of IFRS 15 - - 359 359
------------------------------------- -------- ------------ --------- ---------
At 1 January 2018 (restated) 104,111 9,290 48,963 162,364
-------- ------------ --------- ---------
Recycling of the fair value reserves
to retained earnings (IFRS 9) - (81) - (81)
------------------------------------- -------- ------------ --------- ---------
At 1 January 2018 (restated) 104,111 9,209 48,963 162,283
-------- ------------ --------- ---------
Fair value gains net of tax:
-------- ------------ --------- ---------
- cash flow hedges - (11,078) - (11,078)
-------- ------------ --------- ---------
Currency translation differences - - (1,448) (1,448)
------------------------------------- -------- ------------ --------- ---------
Net losses recognised directly
in equity - (11,078) (1,448) (12,526)
------------------------------------- -------- ------------ --------- ---------
At 30 June 2018 104,111 (1,869) 47,515 149,757
------------------------------------- -------- ------------ --------- ---------
Share Fair value Exchange
premium and hedging reserves Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- ------------ --------- --------
At 1 January 2017 (restated) 104,111 (54,453) 83,561 133,219
-------- ------------ --------- --------
Fair value losses net of tax:
-------- ------------ --------- --------
- available-for-sale - 35 - 35
-------- ------------ --------- --------
- cash flow hedges - 39,639 - 39,639
-------- ------------ --------- --------
Currency translation differences
(restated) - - (21,625) (21,625)
--------------------------------- -------- ------------ --------- --------
Net gains/(losses) recognised
directly in equity - 39,674 (21,625) 18,049
--------------------------------- -------- ------------ --------- --------
At 30 June 2017 (restated) 104,111 (14,779) 61,936 151,268
--------------------------------- -------- ------------ --------- --------
19. Cash generated from operations
6 months 6 months
ended ended
30 June 30 June
2018 2017
Restated
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Profit before taxation 89,453 98,261
------------------------------------------------------ --------- ---------
Investment and finance income (6,195) (4,588)
--------- ---------
Interest payable on bank loans and finance leases 9,050 8,235
--------- ---------
Fair value losses/(gains) on derivative financial
instruments 1,083 (371)
--------- ---------
Net pension financing expenses 2,102 2,812
--------- ---------
Unwinding of liability discounting 2,345 2,473
--------- ---------
Depreciation 6,071 6,248
--------- ---------
Amortisation of other intangible assets 18,975 17,965
--------- ---------
Amortisation of share based payments 15,052 13,031
--------- ---------
Share of results of associates' undertakings (2,549) (2,051)
--------- ---------
Non cash exceptional items 3,487 1,054
--------- ---------
Gains on disposal of businesses - (1,455)
--------- ---------
Gains on disposal of property, plant and equipment (92) (11)
--------- ---------
Gains on held-for-sale assets (4) -
--------- ---------
Impairment of available-for-sale financial assets - 122
--------- ---------
Increase in trade and other receivables (39,595) (11,126)
--------- ---------
Increase in contract assets (16,682) (9,774)
--------- ---------
Decrease in trade and other payables - excluding
insurance broking balances (24,561) (57,289)
--------- ---------
Decrease in contract liabilities (1,105) (3,415)
--------- ---------
Increase in provisions for liabilities and charges 3,446 3,957
--------- ---------
(Decrease)/increase in retirement benefit obligations (66) 385
------------------------------------------------------ --------- ---------
Net cash inflow from operations 60,215 64,463
------------------------------------------------------ --------- ---------
20. Business combinations
Adjustments in respect of prior year acquisitions
During the period, the deferred consideration booked in respect
of acquisitions completed in previous years has been revised
following the final settlement of amounts due or the revision of
amounts due or the revision of estimates based on performance
conditions.
Change
in estimated
Consideration consideration Consideration
at 31 Dec impacting at 30 Jun Paid during
17 goodwill 2018 the year
Revisions to deferred consideration
impacting goodwill GBP'000 GBP'000 GBP'000 GBP'000
==================================== ============== =============== ============== ============
Belgibo NV 1,477 42 1,519 (42)
==================================== ============== =============== ============== ============
1,477 42 1,519 (42)
==================================== ============== =============== ============== ============
Current year acquisitions
During the period the following new business acquisitions and
additional investments were completed:
Percentage
voting
Acquisition rights Cost
Notes dates acquired GBP'000
==================================== ====== ============ ========== ========
International Risk Consultants,
Inc. i Feb 2018 100.0% 18,775
------ ------------ ---------- --------
Acquisition of other new businesses Jan - Jun
completed during the period ii 2018 100.0% 13,485
==================================== ====== ============ ========== ========
32,260
======================================================== ========== ========
i) Acquisition of Insurance Risk Consultants, Inc. (IRC)
On 28 February 2018, the Group completed the acquisition of
Insurance Risk Consultants, Inc. one of the leading trade credit
and political risk specialty brokers in the USA. The acquired
business contributed revenue of GBP2,583,000 and net loss,
including acquisition and integration costs incurred to date, of
GBP107,000 to the Group for the period since acquisition. If the
acquisition had taken place on 1 January 2018, we estimate the
contribution to Group revenue would have been GBP3,484,000 and net
loss, including acquisition and integration costs incurred to date,
would have been GBP287,000.
Goodwill calculation GBP'000
=======
Purchase consideration
-------
- cash paid 18,775
========================================== =======
Total purchase consideration 18,775
-------
Less fair value of net assets acquired 4,064
========================================== =======
Goodwill 14,711
========================================== =======
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying
amount Fair value
GBP'000 GBP'000
============================== ========== ==========
Property, plant and equipment 51 51
---------- ----------
Other intangible assets - 1,877
---------- ----------
Trade and other receivables 340 340
---------- ----------
Cash and cash equivalents
---------- ----------
- own cash 501 501
---------- ----------
- fiduciary cash 857 857
---------- ----------
Insurance payables (857) (857)
---------- ----------
Trade and other payables (124) (124)
---------- ----------
Current taxation 17 17
---------- ----------
Non-controlling interests 1,402 1,402
================================ ========== ==========
2,187 4,064
============================== ========== ==========
GBP'000
========================================================= =======
Purchase consideration settled in cash 18,775
Cash and cash equivalents - own cash in subsidiary
acquired (501)
========================================================== =======
18,274
---------------------------------------------------------
Cash and cash equivalents - fiduciary cash in subsidiary
acquired (857)
========================================================== =======
Cash outflow on acquisition 17,417
========================================================== =======
As at 30 June 2018, the process of reviewing the fair values of
assets acquired had not been completed, consequently the fair
values stated above are provisional. Goodwill recognised is
expected to be deductible for income tax purposes.
ii) Other acquisitions and additional investments
Goodwill calculation GBP'000
=======
Purchase consideration
-------
- cash paid 8,719
-------
- contingent consideration 3,587
-------
- deferred consideration 1,179
========================================== =======
Total purchase consideration 13,485
-------
Less fair value of net assets acquired 3,483
========================================== =======
Goodwill 10,002
========================================== =======
The assets and liabilities arising from the acquisition were as
follows:
Acquiree's
carrying
amount Fair value
GBP'000 GBP'000
=============================== ========== ==========
Property, plant and equipment 38 38
---------- ----------
Other intangible assets 12 1,933
---------- ----------
Trade and other receivables 1,913 1,914
---------- ----------
Cash and cash equivalents
---------- ----------
- own cash 983 983
---------- ----------
- fiduciary cash 2,519 2,519
---------- ----------
Insurance payable (2,519) (2,519)
---------- ----------
Trade and other payables (1,009) (1,009)
---------- ----------
Current taxation (196) (196)
---------- ----------
Deferred taxation (3) (3)
---------- ----------
Borrowings (165) (165)
---------- ----------
Provisions for liabilities and
charges (12) (12)
================================= ========== ==========
1,562 3,483
=============================== ========== ==========
GBP'000
====================================== =======
Purchase consideration settled
in cash 8,719
Cash and cash equivalents - own
cash in subsidiary acquired (983)
Borrowings 165
========================================= =======
7,901
-------------------------------------- -------
Cash and cash equivalents - fiduciary
cash in subsidiary acquired (2,519)
========================================= =======
Cash outflow on acquisition 5,382
========================================= =======
As at 30 June 2018, 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 GBP3,587,000, of which the
largest individual consideration is GBP3,071,000, is based upon the
expected profit before tax of the business for future periods up to
2022. The deferred consideration of GBP1,179,000 is based upon the
net assets in the completion accounts. None of the goodwill
recognised is expected to be deductible for income tax
purposes.
Group summary of the net assets acquired and goodwill
IRC Others Total
GBP'000 GBP'000 GBP'000
============================================== ======== ======== ========
Purchase consideration:
-------- -------- ========
- cash paid 18,775 8,719 27,494
-------- -------- ========
- contingent consideration - 3,587 3,587
-------- -------- ========
- deferred consideration - 1,179 1,179
============================================== ======== ======== ========
Total purchase consideration 18,775 13,485 32,260
============================================== ======== ======== ========
Less fair value of net assets acquired 4,064 3,483 7,547
============================================== ======== ======== ========
Goodwill on acquisitions occurring during
the period 14,711 10,002 24,713
============================================== ======== ======== ========
Impact of revisions to deferred consideration 42
============================================== ======== ======== ========
Net increase in goodwill 24,755
============================================== ======== ======== ========
Group summary of cash flows
IRC Others Total
GBP'000 GBP'000 GBP'000
=================================================== ======== ======== ========
Purchase consideration settled in cash 18,775 8,719 27,494
======== ======== ========
Borrowings - 165 165
Cash and cash equivalents - own cash in subsidiary
acquired (501) (983) (1,484)
=================================================== ======== ======== ========
18,274 7,901 26,175
-------- -------- --------
Cash and cash equivalents - fiduciary cash
in subsidiary acquired (857) (2,519) (3,376)
=================================================== ======== ======== ========
Cash outflow on acquisitions in the period 17,417 5,382 22,799
=================================================== ======== ======== ========
Impact of revision to fair value adjustment
on cash in relation to prior period acquisitions
completed in 2017 42
=================================================== ======== ======== ========
Net cash outflow on acquisitions during the
period 22,841
=================================================== ======== ======== ========
21. Business disposals
During the period, the Group completed disposals, none of which
were individually significant.
Total
Net liabilities and proceeds of disposal GBP'000
==================================================== ========
Non-controlling interests (124)
===================================================== ========
Net liabilities at disposal (124)
--------
Equity movement on transaction with non-controlling
interest 47
===================================================== ========
Proceeds on disposal 77
===================================================== ========
Deferred proceeds 77
===================================================== ========
Total consideration 77
===================================================== ========
22. Retirement benefit obligations
The Group operates a number of pension schemes throughout the
world, the most significant of which are of the defined benefit
type and operate on a funded basis. The principal pension schemes
are the Jardine Lloyd Thompson UK Pension Scheme, the JLT (USA)
Incentive Savings Plan, the JLT (USA) Employee Retirement Plan, the
JLT (USA) Stable Value Plan, the Pension Plan for Employees of
Jardine Lloyd Thompson Canada Inc. and the Jardine Lloyd Thompson
Ireland Limited Pension Fund.
An updated triennial valuation of the Jardine Lloyd Thompson UK
Pension Scheme was undertaken as at 31 March 2017. The Group has
agreed an updated recovery plan with the scheme trustees to
eliminate the funding deficit over a period of 8 years and 3 months
from 1 July 2018 by the payment of additional funding contributions
of GBP16,500,000 per annum. The triennial valuation resulted in the
recognition of a net experience loss arising from updates to
financial assumptions, and experience related to actuarial factors
and liability transfers over the period.
The pension service costs accrued for the period are as
follows:
UK Scheme Overseas Schemes Total
================== ================== ==================
6 months 6 months 6 months 6 months 6 months 6 months
ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June
2018 2017 2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= ======== ======== ======== ======== ========
Defined benefit schemes - - 66 - 66 -
======== -------- ======== ======== ======== ========
Defined contribution schemes 10,474 10,269 11,446 12,020 21,920 22,289
============================= ======== ======== ======== ======== ======== ========
10,474 10,269 11,512 12,020 21,986 22,289
============================= ======== ======== ======== ======== ======== ========
The amounts recognised in the consolidated income statement are
as follows:
UK Scheme Overseas Schemes Total
================== ================== ===================
6 months 6 months 6 months 6 months 6 months 6 months
ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June
2018 2017 2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================ ======== ======== ======== ======== ======== =========
Service cost - - (66) - (66) -
--------------------------------
Expenses (58) (180) (122) (205) (180) (385)
-------------------------------- ======== ======== ======== ======== ======== =========
Total (included within salaries
and associated expenses) (58) (180) (188) (205) (246) (385)
======== ======== ======== ======== ======== =========
Interest cost (7,802) (9,170) (1,046) (1,247) (8,848) (10,417)
--------------------------------
Expected return on assets 5,897 6,605 849 1,000 6,746 7,605
-------------------------------- ======== ======== ======== ======== ======== =========
Total (included within finance
costs) (1,905) (2,565) (197) (247) (2,102) (2,812)
================================ ======== ======== ======== ======== ======== =========
Expenses before taxation (1,963) (2,745) (385) (452) (2,348) (3,197)
================================ ======== ======== ======== ======== ======== =========
The amounts disclosed in respect of both the UK and Overseas
defined benefit schemes ("the Schemes") have been projected from
previous valuations of the Schemes and updated for the results of
the latest triennial valuation where relevant. They do not
represent the results of a full actuarial valuation. In respect of
30 June 2018 the Group has updated its assumption regarding the
discount rate applicable to the Schemes' liabilities in line with
current market information.
The amounts included in the consolidated statement of
comprehensive income are as follows:
UK Scheme Overseas Schemes Total
===================== ===================== ==========
6 months ended 30 June 2018 GBP'000 % GBP'000 % GBP'000
=========================================== ========== ========= ========= ========== ==========
Actual return less expected return
on Scheme assets (20,969) (23) (20,992)
------------------------------------------- ---------- --------- --------- ---------- ----------
% of period end market value
of Scheme assets (4.6%) - (4.1%)
------------------------------------------- ---------- --------- --------- ---------- ----------
Experience losses arising on
Scheme liabilities (25,039) (1,163) (26,202)
------------------------------------------- ---------- --------- --------- ---------- ----------
% of period end present value
of Scheme liabilities (4.0%) (1.6%) (3.8%)
------------------------------------------- ---------- --------- --------- ---------- ----------
Changes in assumptions underlying
the present value of the Scheme
liabilities 36,265 3,350 39,615
------------------------------------------- ---------- --------- --------- ---------- ----------
% of period end present value
of Scheme liabilities 5.8% 4.7% 5.7%
=========================================== ========== ========= ========= ========== ==========
Actuarial losses recognised in
reserves (1) (9,743) 2,164 (7,579)
=========================================== ========== ========= ========= ========== ==========
% of period end present value
of Scheme liabilities (1.6%) 3.1% (1.1%)
=========================================== ========== ========= ========= ========== ==========
UK Scheme Overseas Schemes Total
====================== ==================== ======================
6 months 6 months 6 months 6 months 6 months 6 months
---------- ---------- --------- --------- ---------- ----------
ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June
---------- ---------- --------- --------- ---------- ----------
2018 2017 2018 2017 2018 2017
---------- ---------- --------- --------- ---------- ----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ========== ========== ========= ========= ========== ==========
Defined benefit obligation
---------- ---------- --------- --------- ---------- ----------
Present value of funded
obligations (626,009) (644,242) (70,770) (71,441) (696,779) (715,683)
---------- ---------- --------- --------- ---------- ----------
Fair value of plan assets 457,891 483,395 59,767 56,734 517,658 540,129
=============================== ========== ========== ========= ========= ========== ==========
Net liability recognised
in the balance sheet (168,118) (160,847) (11,003) (14,707) (179,121) (175,554)
=============================== ========== ========== ========= ========= ========== ==========
Total
---------- ---------- --------- --------- ======================
6 months 6 months
---------- ---------- --------- --------- ---------- ----------
ended ended
30 June 30 June
---------- ---------- --------- --------- ---------- ----------
2018 2017
---------- ---------- --------- --------- ---------- ----------
GBP'000 GBP'000
=============================== ========== ========== ========= ========= ========== ==========
Defined benefit obligation
---------- ---------- --------- --------- ---------- ----------
Retirement benefit surpluses 337 125
---------- ---------- --------- --------- ---------- ----------
Retirement benefit obligations (179,458) (175,679)
=============================== ========== ========== ========= ========= ========== ==========
Net liability recognised
in the balance sheet (179,121) (175,554)
=============================== ========== ========== ========= ========= ========== ==========
UK Scheme Overseas Schemes Total
====================== ==================== ======================
6 months 6 months 6 months 6 months 6 months 6 months
---------- ---------- --------- --------- ---------- ----------
ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June
---------- ---------- --------- --------- ---------- ----------
2018 2017 2018 2017 2018 2017
---------- ---------- --------- --------- ---------- ----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ========== ========== ========= ========= ========== ==========
Reconciliation of defined
benefit liability
---------- ---------- --------- --------- ---------- ----------
Opening defined benefit
liability (156,412) (184,496) (12,872) (13,916) (169,284) (198,412)
---------- ---------- --------- --------- ---------- ----------
Exchange differences - - (222) 609 (222) 609
---------- ---------- --------- --------- ---------- ----------
Pension expense (1,963) (2,745) (385) (452) (2,348) (3,197)
---------- ---------- --------- --------- ---------- ----------
Employer contributions - - 312 - 312 -
---------- ---------- --------- --------- ---------- ----------
Total (loss)/gain recognised
in reserves (1) (9,743) 26,394 2,164 (948) (7,579) 25,446
=============================== ========== ========== ========= ========= ========== ==========
Net liability recognised
in the balance sheet (168,118) (160,847) (11,003) (14,707) (179,121) (175,554)
=============================== ========== ========== ========= ========= ========== ==========
(1) Amounts recognised in reserves have been taken through the
consolidated statement of comprehensive income
23. Related-party transactions
The Group has applied the exemption available under IAS 24
Related Party Disclosures, not to disclose details of transactions
with its subsidiary undertakings. For the period, the Group's
related parties are the same as those disclosed on page 160 of the
Group's Annual Report for 2017. The basis of the remuneration of
the Directors and key management remains consistent with that
reported in the Group's Annual Report for 2017.
24. subsequent events
On 29 June 2018, the Group acquired, subject to regulatory
approval, JLT March Re, Correduria de Reaseguros, S.A.U., the
Reinsurance subsidiary of the Group's associate March-JLT for a
consideration of EUR3,211,000 payable on completion.
Also subject to regulatory approval, the Group acquired Moola
Systems Limited on 18 July 2018, a digital saving and investment
service business for a consideration payable on completion of
GBP2,500,000 followed by a contingent consideration capped at
GBP10,000,000.
25. CHANGES IN ACCOUNTING POLICIES
IFRS 9 Financial Instruments ('IFRS 9') and IFRS 15 Revenue from
Contract with Customers ('IFRS 15') became mandatorily effective on
1 January 2018. The Group adopted IFRS 15 and the requirements of
IFRS 9 in respect of classification and measurement and impairment
on 1 January 2018 (the 'date of initial application'), which
resulted in changes in the Group's accounting policies. The Group
has elected to continue to apply the IAS 39 Financial Instruments
('IAS 39') requirements in respect of hedge accounting as provided
by paragraph 7.2.21 of IFRS 9.
This note explains the impact of the adoption of IFRS 15 and
IFRS 9 on the Group's financial statements and also discloses the
new accounting policies that have been applied from 1 January 2018,
where they are different to those applied in prior periods.
The Group has applied IFRS 15 retrospectively and has restated
comparatives for the 2017 financial period, with the cumulative
impact on retained earnings recognised in the opening balance sheet
as at 1 January 2017. IFRS 9 has been applied prospectively without
restating comparatives for the 2017 financial period. The
adjustments arising from the adoption of IFRS 9 are not reflected
in the restated balance sheet as at 31 December 2017, but are
recognised in retained earnings as at 1 January 2018. Consequently,
the amendments to IFRS 7 Financial Instruments: Disclosures ('IFRS
7') disclosure requirements, which are consequential to IFRS 9
becoming effective, have been applied to the current period. The
comparative period notes disclosures mandated by IFRS 7 repeat
those disclosures made in the prior year.
A) NEW ACCOUNTING POLICIES IN RESPECT OF FINANCIAL INSTRUMENTS
AND REVENUE RECOGNITION
Financial Instruments
The adoption of IFRS 9 has resulted in changes in the Group's
accounting policies for the recognition, classification and
measurement of financial assets and financial liabilities and
impairment of financial assets. Set out below are the Group's
accounting policies relating to financial instruments on adoption
of IFRS 9. These accounting policies were applied to the Group's
financial instruments from 1 January 2018. Financial instruments
disclosed for the comparative 2017 financial period were accounted
for in accordance with the accounting policies disclosed on pages
114 and 115 of the Group's 2017 annual report.
The Group continues to apply the accounting policy disclosed
under 'Derivative Financial Instruments' on page 116 of the 2017
annual report in respect of hedge accounting.
FINANCIAL ASSETS
On initial recognition, a financial asset is measured at fair
value plus, for an instrument not measured at fair value through
profit or loss, transaction costs that are directly attributable to
its acquisition. Trade receivables without a significant financing
component are measured at the transaction price, rather than fair
value, at initial recognition.
On initial recognition, the Group further classifies its
financial assets as measured at amortised cost, fair value through
other comprehensive income (debt or equity instrument) or fair
value through profit or loss. The classification of financial
assets is based on the business model under which a financial asset
is managed, and its contractual cash flow characteristics. These
classification categories also describe the measurement of
financial assets subsequent to initial recognition.
Financial assets at amortised cost
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as measured at
fair value through profit or loss:
-- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
Financial assets in this category are measured at amortised cost
using the effective interest method. The amortised cost is reduced
by accumulated impairment losses. Interest income, foreign exchange
gains and losses and impairment losses are recognised in profit or
loss. Any gain or loss on derecognition is recognised in profit or
loss.
Financial assets at fair value through other comprehensive
income ('FVOCI')
Debt instruments
A debt investment is measured at FVOCI if it meets both of the
following conditions and is not designated as measured at fair
value through profit or loss:
-- it is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling
financial assets; and
-- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
Such financial assets are measured at fair value. Interest
income calculated using the effective interest method, foreign
exchange gains and losses and impairment losses are recognised in
profit or loss. Other net gains and losses are recognised in other
comprehensive income ('OCI'). On derecognition, gains and losses
accumulated in OCI are reclassified to profit or loss.
Equity instruments
On initial recognition of an equity investment that is not held
for trading, the Group may irrevocably elect to present subsequent
changes in the investment's fair value in OCI. This election is
made on an investment-by-investment basis.
Such financial assets are measured at fair value. Dividends are
recognised as income in profit or loss unless the dividend clearly
represents a recovery of part of the cost of the investment. Other
net gains and losses are recognised in OCI. On derecognition, gains
and losses accumulated in OCI may be reclassified to another
component of equity, but will never be reclassified to profit or
loss.
Financial assets at fair value through profit or loss
('FVTPL')
All financial assets not classified as measured at amortised
cost or FVOCI as described above are classified as measured at
FVTPL.
Financial assets in this category are measured at fair value
subsequent to initial recognition. Net gains and losses, including
any interest or dividend income, are recognised in profit or
loss.
IMPAIRMENT OF FINANCIAL ASSETS
At each reporting date, the Group assesses whether financial
assets carried at amortised cost and debt instruments measured at
FVOCI are credit-impaired. A financial asset is 'credit-impaired'
when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have
occurred.
The Group measures credit loss allowances on credit-impaired
financial assets on either of the following bases:
-- Lifetime expected credit losses ('ECLs'): ECLs that result
from all possible default events over the expected life of a
financial instrument; and
-- 12-month ECLs: The portion of lifetime ECLs that result from
possible default events within the 12 months after the reporting
date.
The Group measures credit loss allowances on financial assets at
an amount equal to lifetime ECLs, except for the following
financial assets, which are measured as 12-month ECLs:
-- debt instruments that are considered to have low credit risk at the reporting date; and
-- other debt instruments and bank balances for which credit
risk (i.e. the risk of default occurring over the expected life of
the financial instrument) has not increased significantly since
initial recognition.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the Group's historical experience and
informed credit assessment and including forward-looking
information.
The Group considers a financial asset to be in default (i.e.
loss incurred) when:
-- there is evidence that the amount is unlikely to be paid in
full, without recourse by the Group to actions such as realising
collaterals (if any is held); or
-- the financial asset is more than 2 years past due.
The Group applies the IFRS 9 simplified approach to measure ECLs
on trade receivables and certain contract assets which represent
unbilled consideration for which goods or services have been
delivered, but the right to consideration is contingent on
something other than passage of time. Under the simplified
approach, ECLs are measured at an amount equal to lifetime
ECLs.
Lifetime ECLs on trade receivables and contract assets are
measured based on the actual credit loss experience over the
preceding 5 years. The actual credit loss experience is adjusted,
if considered significant, by scalar factors to reflect the
differences between economic conditions during the period over
which the historical data was collected, current conditions and the
Group's view of economic conditions over the expected lives of the
assets.
Credit loss allowances on financial assets measured at amortised
cost are deducted from the gross carrying amount of the assets.
Credit loss allowances on financial assets measured at FVOCI are
recognised in OCI, instead of reducing the carrying amount of the
asset.
Credit loss allowances relating to trade and other receivables,
including contract assets, are presented separately in the Income
Statement.Impairment losses on financial assets other than trade
and other receivables are presented as 'finance costs'.
Revenue Recognition
Revenue comprises both commission and fees for the services
undertaken to place and administer contracts of insurance, employee
benefits arrangements and other related services. Revenue may
comprise a combination of fees, commissions and other forms of
variable consideration. The transaction price considers all of the
elements for each contract and applies constraints to variable
consideration based on the past performance of similar
contracts.
Where past performance has been volatile and has little
predictive value, the constraint applied can be significant. Where
appropriate, revenue is deferred to account for the possibility of
a cancellation or a refund liability. Performance obligations are
assessed on the basis of the specific arrangements in the contract,
or where such is not defined, on the basis of each separate and
distinct obligation for which a market value can be ascribed.
The Group satisfies some performance obligations at a point in
time, and others over time where the customer is receiving a
simultaneous benefit, or the Group has a contractual right to
payment for the work both performed and transferred to the
client.
For contracts where the revenue is expected to be collected more
than 1 year from its recognition and is not an estimate of a
variable amount, consideration is given to the time value of money.
Where relevant the deemed interest is recognised as a component of
finance income.
Where the value of revenue is beyond the control of the Group
and it cannot be estimated reliably, it will not be recognised
until the amount is known with reasonable certainty. In these cases
any associated costs are expensed as incurred.
Contract warranties and indemnities are not a significant
feature of the Group's business.
Incremental costs to obtain a contract and contract fulfilment
costs are capitalised and amortised to profit or loss on a
systematic basis to match the recognition of revenue as the service
is delivered to the client. Such costs are capitalised only where
the Group expects to recover these costs, and, in the case of
incremental costs to obtain a contract, where the amortisation
period of the asset is more than 1 year. Additionally, in respect
of contract fulfilment costs, these costs must relate directly to
the contract, generate assets used to satisfy the contractual
performance obligations, and do not qualify to be recognised as an
asset under other accounting standards.
Assets recognised on the Group's balance sheet arising from the
capitalisation of incremental costs to obtain a contract and
contract fulfilment costs are presented as part of contract
assets.
Insurance Broking and Related Services
Revenue may comprise a combination of fees, commissions and
other forms of variable consideration. Where the contract
specifically identifies the performance obligations then revenue is
recognised accordingly.
Where there is no separate arrangement, revenue is considered to
be wholly related to the placement activity and recognised at the
later of the policy inception date, or the date on which the
placement is complete and confirmed. Where there are separate
arrangements or where other performance obligations are separate
and distinct from placement, revenue is deferred to cover the
provision of services that are more than administrative in nature
and that are separate and distinct. In the main these
post-placement performance obligations relate to the provision of
claims related services.
Contract modifications are treated on a cumulative catch-up
basis or as a new contract depending on the circumstances in each
case.
A deferral of revenue is made to cover the likelihood of
contract cancellation.
Fulfilment costs, which mainly represent the direct costs
incurred from appointment or renewal instruction to the point at
which placement is confirmed, are amortised in full when the
placement revenue is recognised.
Revenue deferrals and fulfilment costs are mainly calculated on
a portfolio basis, with estimates made based on past history.
Incremental costs to obtain a contract are capitalised where
they can be directly identified and are expected to be
recovered.
Employee Benefits
Fee-based revenue is recognised in line with the distinct and
separate performance obligations in the contract.
Fulfilment costs, which may include data transfer and other set
up costs, are amortised in line with the recognition of revenue for
the specific performance obligation.
The likelihood of cancellation is assessed based on past
performance of similar contracts and a resulting deferral of
revenue is made.
Commission-based remuneration follows the same recognition
criteria as insurance broking and related services.
Other Services
These are mainly fee-based arrangements and revenue is
recognised in line with the distinct and separate performance
obligations in the contract.
Fulfilment and other incremental costs to obtain the contract
are capitalised where they are expected to be recovered and
amortised as the revenue is recognised for each specific
performance obligation.
B) Impact on the financial statements
The following tables show the adjustments recognised for each
individual line item in the Group's Balance Sheet as at 31 December
2017, interim Income Statement as at 30 June 2017 and Statement of
Comprehensive Income as at 30 June 2017.
Consolidated Balance Sheet as at 31 December 2017 and 1 January
2018
31 Dec 31 Dec 31 Dec 1 Jan 1 Jan 2018
2017 2017 2017 2018
As previously IFRS 15 As IFRS 9 IFRS 9
reported adjustments restated adjustments carrying
amounts
Restated
------------- ------------ ------------ ------------ ------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
==================================== ============= ============ ============ ============ ============
NET ASSETS
------------- ------------ ------------ ------------ ------------
Non-current assets
------------- ------------ ------------ ------------ ------------
Goodwill 577,778 - 577,778 - 577,778
------------- ------------ ------------ ------------ ------------
Other Intangible assets 108,954 - 108,954 - 108,954
------------- ------------ ------------ ------------ ------------
Property, plant and equipment 68,645 - 68,645 - 68,645
------------- ------------ ------------ ------------ ------------
Investments in associates 53,055 - 53,055 - 53,055
------------- ------------ ------------ ------------ ------------
Available-for-sale financial
assets 16,858 - 16,858 (16,858) -
------------- ------------ ------------ ------------ ------------
Other financial assets at fair
value through other comprehensive
income - - - 6,137 6,137
------------- ------------ ------------ ------------ ------------
Other financial assets at fair
value through profit or loss - - - 4,870 4,870
------------- ------------ ------------ ------------ ------------
Other financial assets at amortised
cost - - - 5,851 5,851
------------- ------------ ------------ ------------ ------------
Derivative financial instruments 82,569 - 82,569 - 82,569
------------- ------------ ------------ ------------ ------------
Trade and other receivables* 9,882 11,727 21,609 (37) 21,572
------------- ------------ ------------ ------------ ------------
Contract assets - 18,249 18,249 (165) 18,084
------------- ------------ ------------ ------------ ------------
Retirement benefit surpluses 92 - 92 - 92
------------- ------------ ------------ ------------ ------------
Deferred tax assets 54,266 9,485 63,751 310 64,061
==================================== ============= ============ ============ ============ ============
972,099 39,461 1,011,560 108 1,011,668
==================================== ============= ============ ============ ============ ============
Current assets
------------- ------------ ------------ ------------ ------------
Trade and other receivables* 600,624 (104,899) 495,725 (104) 495,621
------------- ------------ ------------ ------------ ------------
Contract assets - 68,576 68,576 (610) 67,966
------------- ------------ ------------ ------------ ------------
Derivative financial instruments 5,545 - 5,545 - 5,545
------------- ------------ ------------ ------------ ------------
Other financial assets at amortised
cost - - - 115,080 115,080
------------- ------------ ------------ ------------ ------------
Available-for-sale financial
assets 115,080 - 115,080 (115,080) -
------------- ------------ ------------ ------------ ------------
Held-for-sale financial assets 189 - 189 - 189
------------- ------------ ------------ ------------ ------------
Cash and cash equivalents 1,015,087 - 1,015,087 - 1,015,087
==================================== ============= ============ ============ ============ ============
1,736,525 (36,323) 1,700,202 (714) 1,699,488
==================================== ============= ============ ============ ============ ============
Current liabilities
------------- ------------ ------------ ------------ ------------
Borrowings (19,226) - (19,226) - (19,226)
------------- ------------ ------------ ------------ ------------
Trade and other payables (1,256,074) 43,086 (1,212,988) - (1,212,988)
------------- ------------ ------------ ------------ ------------
Contract liabilities - (60,392) (60,392) - (60,392)
------------- ------------ ------------ ------------ ------------
Derivative financial instruments (10,265) - (10,265) - (10,265)
------------- ------------ ------------ ------------ ------------
Current tax liabilities (10,290) - (10,290) - (10,290)
------------- ------------ ------------ ------------ ------------
Provisions for liabilities and
charges (6,865) - (6,865) - (6,865)
==================================== ============= ============ ============ ============ ============
(1,302,720) (17,306) (1,320,026) - (1,320,026)
==================================== ============= ============ ============ ============ ============
Net current assets 433,805 (53,629) 380,176 (714) 379,462
==================================== ============= ============ ============ ============ ============
Non-current liabilities
------------- ------------ ------------ ------------ ------------
Borrowings (690,872) - (690,872) - (690,872)
------------- ------------ ------------ ------------ ------------
Trade and other payables (49,475) - (49,475) - (49,475)
------------- ------------ ------------ ------------ ------------
Contract liabilities - (27,278) (27,278) - (27,278)
------------- ------------ ------------ ------------ ------------
Derivative financial instruments (85,516) - (85,516) - (85,516)
------------- ------------ ------------ ------------ ------------
Deferred tax liabilities (11,411) (362) (11,773) (141) (11,914)
------------- ------------ ------------ ------------ ------------
Retirement benefit obligations (169,376) - (169,376) - (169,376)
------------- ------------ ------------ ------------ ------------
Provisions for liabilities and
charges (1,549) - (1,549) - (1,549)
==================================== ============= ============ ============ ============ ============
(1,008,199) (27,640) (1,035,839) (141) (1,035,980)
==================================== ============= ============ ============ ============ ============
397,705 (41,808) 355,897 (747) 355,150
==================================== ============= ============ ============ ============ ============
TOTAL EQUITY
------------- ------------ ------------ ------------ ------------
Capital and reserves attributable
to the owners of the parent
------------- ------------ ------------ ------------ ------------
Ordinary shares 11,008 - 11,008 - 11,008
Share premium 104,111 - 104,111 - 104,111
Fair value and hedging reserves 9,290 - 9,290 (81) 9,209
Exchange reserves 48,604 359 48,963 - 48,963
Retained earnings 204,781 (41,709) 163,072 (646) 162,426
====================================
Shareholders' equity 377,794 (41,350) 336,444 (727) 335,717
Non-controlling interests 19,911 (458) 19,453 (20) 19,433
====================================
397,705 (41,808) 355,897 (747) 355,150
====================================
*GBP9,882,000 of other receivables have been reclassified from
current to non-current.
Consolidated income statement
For the six months ended 30 June 2017
As originally IFRS 15
presented adjustments Restated
30 June 30 June 30 June
2017 2017 2017
GBP'000 GBP'000 GBP'000
Fees and commissions 686,912 1,826 688,738
Investment income 3,021 - 3,021
Total revenue 689,933 1,826 691,759
Salaries and associated expenses (423,083) (1,419) (424,502)
Premises (35,564) - (35,564)
Other operating costs (105,469) (1,393) (106,862)
Depreciation, amortisation and impairment
charges (16,668) - (16,668)
Operating profit 109,149 (986) 108,163
Analysed as:
Operating profit before exceptional items 110,040 (986) 109,054
Acquisition and integration costs (1,022) - (1,022)
Other exceptional items 131 - 131
Operating profit 109,149 (986) 108,163
Finance costs (13,520) - (13,520)
Finance income 1,567 - 1,567
Finance costs - net (11,953) - (11,953)
Share of results of associates 2,051 - 2,051
Profit before taxation 99,247 (986) 98,261
Income tax expense (28,730) (221) (28,951)
Profit for the period 70,517 (1,207) 69,310
Profit attributable to:
Owners of the parent 68,316 (1,153) 67,163
Non-controlling interests 2,201 (54) 2,147
70,517 (1,207) 69,310
Earnings per share attributable to the
owners of the parent during the period
(expressed in pence per share)
Basic earnings per share 32.4p (0.5p) 31.9p
Diluted earnings per share 31.8p (0.6p) 31.2p
Consolidated STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2017
As originally IFRS 15
presented adjustments Restated
30 June 30 June 30 June
2017 2017 2017
GBP'000 GBP'000 GBP'000
Profit for the period 70,517 (1,207) 69,310
Other comprehensive (expense)/income
Items that will not be reclassified to
profit or loss 25,446 - 25,446
Remeasurement of post employment benefit
obligations (4,774) - (4,774)
Total items that will not be reclassified
to profit or loss 20,672 - 20,672
Items that may be reclassified subsequently
to profit or loss
Fair value gains/(losses) net of tax:
- available-for-sale 35 - 35
- cash flow hedges 39,639 - 39,639
Currency translation differences (23,097) 243 (22,854)
Total items that may be reclassified subsequently
to profit or loss 16,577 243 16,820
Other comprehensive income/(expense) net
of tax 37,249 243 37,492
Total comprehensive income for the period 107,766 (964) 106,802
Attributable to:
Owners of the parent 106,821 (937) 105,884
Non-controlling interests 945 (27) 918
107,766 (964) 106,802
C) IFRS 15 Revenue from Contracts with Customers - Impact of adoption
The Group adopted IFRS 15 from 1 January 2018. In accordance with
the transition provisions in IFRS 15, the Group has applied the
new rules retrospectively and restated the comparatives for the
2017 financial year, with the cumulative impact on retained earnings
recognised in the opening balance sheet as at the earliest comparative
period (1 January 2017). In restating the comparatives for the
2017 financial year the Group has elected to apply the transitional
expedients availed in paragraph C5 of IFRS 15, the most significant
of which exempts the Group from restating contracts which had been
completed as at 1 January 2017, and, for contracts entered into
during the 2017 financial year if they were also completed within
2017. There was no significant impact on the 2017 financials in
applying these transitional expedients.
The table below summarises the adjustments recognised in the Group's
Balance Sheet at the date of initial application.
As previously IFRS 15 As restated
reported adjustments 31 Dec
31 Dec 31 Dec 2017
2017 2017 As Restated
Notes GBP'000 GBP'000 GBP'000
NET ASSETS
Trade receivables and other receivables
(non-current) (2) - 11,727 11,727
Contract assets (non-current) (1),(2) - 18,249 18,249
Deferred tax assets 54,266 9,485 63,751
Trade receivables and other receivables
(current) (2) 610,506 (104,899) 505,607
Contract assets (current) (1),(2) - 68,576 68,576
Trade and other payables (current) (3) (1,256,074) 43,086 (1,212,988)
Contract liabilities (current) (1),(3) - (60,392) (60,392)
Contract liabilities (non-current) (1),(3) - (27,278) (27,278)
Deferred tax liabilities (11,411) (362) (11,773)
Retained earnings (2),(3) (204,781) 41,709 (163,072)
Exchange reserves (48,604) (359) (48,963)
Non-controlling interests (19,911) 458 (19,453)
The impact on the Group's retained earnings as at 31 December
2017 and 1 January 2017 is as follows:
31 Dec
2017 1 Jan 2017
Notes GBP'000 GBP'000
Retained earnings - before IFRS 15 restatement 204,781 183,919
Deferral of revenues for claims handling services (3) (33,509) (33,492)
Other deferral of revenues (3) (32,075) (26,076)
Cancellation provision (3) (7,868) (7,076)
Recognition of fulfilment cost assets (2) 27,982 25,612
Other (5,360) (5,290)
Adjustment to retained earnings from adoption
of IFRS 15 (50,830) (46,322)
Taxation on adjustments 9,121 8,169
Net adjustment to retained earnings from adoption
of IFRS 15 (41,709) (38,153)
Retained earnings - restated for adoption
of IFRS 15 163,072 145,766
(1) Presentation of contract assets and contract liabilities
The Group has voluntarily changed the presentation of certain
amounts in the Balance Sheet to reflect the terminology in IFRS 15.
IFRS 15 introduces the concepts of contract assets, fulfilment
costs assets and contract liabilities.
Contract assets represent an entity's right to consideration in
exchange for goods or services which have been transferred to a
customer, but are not yet billed at balance sheet date. They are
distinct from accrued revenue recognised on the balance sheet in
that the right to consideration is contingent on something other
than the passage of time. Such assets were previously presented as
part of trade and other receivables.
Also included as contract assets on the Group's Balance Sheet
are fulfilment costs assets. Fulfilment costs assets relate to
direct costs incurred which generate assets used to satisfy the
contractual performance obligations, are expected to be recovered,
and which do not qualify to be recognised as an asset under other
accounting standards. Previously, such costs were expensed as
incurred. Fulfilment costs assets are amortised and recorded as an
expense in the income statement when the related revenues are
recognised.
Contract liabilities are defined as performance obligations to
be satisfied in the future periods for which an entity has received
consideration. These were previously presented as part of trade and
other payables.
(2) Trade and other receivables, contract assets and fulfilment
costs
The GBP104.9 million decrease in current trade and other
receivables as at 31 December 2017 relates to:
-- GBP59.1 million reclassified to contract assets in respect of
our proportional treaty book in the Reinsurance division (GBP13.6
million as non-current and GBP45.5 million as current);
-- GBP32.6 million derecognised to align the revenue recognition
to the timing of satisfaction of the related performance
obligations as required by IFRS 15 and;
-- GBP11.7 million reclassified to non-current trade receivables
to reflect the timing of expected settlement.
-- GBP1.5 million of other adjustments.
As at 31 December 2017, GBP27.7 million of fulfilment costs were
recognised on the Group's Balance Sheet, giving rise to a positive
impact on cumulative retained earnings. These comprise:
-- GBP23.0 million (presented in current contract assets) mainly
relates to placement activity.
-- GBP4.6 million (presented in non-current contract assets) in
respect of pension administration and investment solution services
in our Employee Benefits division. These costs are related to data
transfer for the set up of the IT platform related to long term
contracts.
(3) Trade and other payables and contract liabilities
On adoption of IFRS 15 the Group reclassified GBP43.1 million
from trade and other payables to contract liabilities. These
balances related to deferred revenue and claims handling and other
post-placement services to be provided in future periods.
Additional contract liabilities of GBP37 million relating to claims
handling and other post placement services have been recognised as
at 31 December 2017, with a negative impact on cumulative retained
earnings. A further GBP8 million of revenues have been deferred to
account for cancellation risk. The adjustment was calculated based
on the Group's historical experience of contract cancellation.
D) IFRS 9 Financial Instruments - Impact of adoption
The Group adopted the requirements of IFRS 9 in respect of
classification and measurement and impairment from 1 January 2018
on a prospective basis in accordance with the transition provisions
of IFRS 9. The 2017 comparatives have not been restated; any impact
to retained earnings on adoption of the new requirements has been
recognised in the Group's Balance Sheet as at 1 January 2018. The
Group has elected to continue to apply the IAS 39 requirements in
respect of hedge accounting as provided by paragraph 7.2.21 of IFRS
9.
The total impact on the Group's retained earnings as at 1
January 2018 is as follows:
1 Jan 2018
GBP'000
Retained earnings - restated for adoption of IFRS
15 163,072
Increase in provision for trade receivables and contract
assets, net of tax (727)
Recycling of the fair value reserves to retained earnings 81
==========
Adjustment to retained earnings from adoption of IFRS
9 on 1 January 2018 (646)
==========
Retained earnings - restated for adoption of IFRS
15 and IFRS 9 162,426
i) Classification and measurement
IFRS 9 replaces the provisions of IAS 39 that relate to the recognition,
classification and measurement of financial assets and financial liabilities,
derecognition of financial instruments, impairment of financial assets
and hedge accounting. IFRS 9 eliminates the previous IAS 39 categories
for financial assets of held-to-maturity ('HTM'), loans and receivables
and available-for-sale ('AFS'), and replaces these categories with
two principal measurement and classification categories - fair value
through other comprehensive income ('FVOCI') and amortised cost. The
fair value through profit or loss ('FVTPL') classification category
for financial assets has been retained. IFRS 9 has not significantly
changed the classification and measurement rules in respect of financial
liabilities.
On 1 January 2018, the Group's management has assessed which business
models apply to the financial assets held by the Group and has reclassified
its financial instruments into the appropriate IFRS 9 categories.
The main effects resulting from this reclassification are as follows:
Closing balances
as at
31 Dec 2017 Opening balances
(restated for as at
IFRS 15) 1 Jan 2018
Original measurement New measurement
category under category under IFRS
IAS 39 9
Loans FVOCI
and (debt/ Amortised
Available-for-sale receivables equity) cost FVTPL
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Reclassify
fixed term
deposits,
bonds and
certificates
of deposit
from AFS to
Investments amortised
and deposits cost (1) 120,931 - - 120,931 -
Reclassify
other
investments
Other from AFS to
investments FVOCI/FVTPL (2) 11,007 - 6,137 - 4,870
Reclassify
trade
receivables
from loans
and
receivables
Trade to amortised
receivables cost (3) - 426,178 - 426,178 -
Reclassify
other
receivables
from loans
and
receivables
Other to amortised
receivables cost/FVTPL (3) - 63,989 - 62,770 1,219
Reclassify
cash and
cash
equivalents
from
loans and
receivables
Cash and cash to amortised
equivalents cost/FVTPL (4) - 1,015,087 - 991,050 24,037
131,938 1,505,254 6,137 1,600,929 30,126
(1) Reclassification from available-for-sale to amortised cost
Certain investments in fixed term deposits were reclassified from
available-for-sale to amortised cost on adoption of IFRS 9. At the
date of initial application the Group's business model is to hold
these investments for the collection of the principal and the interest.
As no fair value movement had been recognised in previous periods,
there is no impact on retained earnings on reclassification.
(2) Reclassification from available-for-sale to fair value through
other comprehensive income/fair value through profit or loss
A receivable relating to contingent consideration was classified as
an available-for-sale debt instrument under IAS 39. The contractual
cash flows of this receivable do not represent solely payments of
principal and interest, with the result that the receivable does not
qualify to be measured at amortised cost or fair value through other
comprehensive income under IFRS 9. Consequently, it has been reclassified
to the fair value through profit or loss measurement category on adoption
of IFRS 9. As no fair value movement had been recognised in previous
periods, there is no impact on retained earnings on reclassification.
(3) Reclassification from loans and receivables to amortised
cost/fair value through profit or loss
These reclassifications to the appropriate IFRS 9 measurement
categories have no impact on the presentation on the balance
sheet.
(4) Reclassification of cash and cash equivalents from loans and
receivables to amortised cost/FVTPL
These reclassifications to the appropriate IFRS 9 measurement
categories have no impact on the presentation on the balance sheet.
Money market funds investments are measured at fair value through
profit or loss under IFRS 9 as they do not meet the criteria to be
measured at amortised cost, on account of the contractual cash
flows not representing solely payments of principal and interest.
The investments continue to be classified as cash equivalents on
the basis of their liquid nature.
ii) Impairment of financial assets
IFRS 9 replaces the incurred loss model in IAS 39 with an
expected credit loss ('ECL') model. The new impairment model
applies to financial assets measured at amortised cost, certain
contract assets and debt instruments measured at fair value through
other comprehensive income, but not to investments in equity
instruments measured at fair value through other comprehensive
income. Under IFRS 9 an entity is required to make ongoing
assessments of estimated ECLs to reflect the general pattern of
deterioration or improvement in the credit quality of financial
assets since initial recognition. One consequence of this change is
that credit losses are recognised earlier than under IAS 39.
The application of IFRS 9's impairment requirements at 1 January
2018 resulted in GBP0.8 million at additional credit loss
allowance, which has been recognised as a reduction of the Group's
retained earnings as at 1 January 2018. Related net deferred tax
assets amounting to GBP0.1 million has been recognised.
The Group applies the IFRS 9 simplified approach to measure ECLs
on trade receivables and certain contract assets. Under this
approach, the credit losses expected over the life of trade
receivables and contract assets are recognised on the Balance Sheet
at each reporting date. Contract assets within the scope of IFRS
9's impairment requirements represent unbilled consideration for
which goods or services have been delivered, but the right to
consideration is dependent on other additional conditions unrelated
to the passage of time. They are therefore considered to possess
the same risk characteristics as trade receivables, and have been
assessed together with trade receivables as a single group of
financial assets. The average loss rate of trade receivables is
considered a reasonable approximation of the ECLs on contract
assets when they are eventually invoiced.
ECLs on financial assets other than trade receivables and
contract assets are calculated based on the ECLs within the next 12
months when no material increase of credit risk has occurred
between the inception and the reporting period. The impact of the
change in methodology on the Group's retained earnings and equity
is immaterial.
Cash and cash equivalents are also subject to the impairment
requirements of IFRS 9. The ECLs related to these assets are
immaterial.
The following table analyses the ECLs recognised on trade
receivables and contract assets as at 1 January 2018, by age
category.
Restated for IFRS 15 IFRS 9
Expected
Contract credit Provision
Trade receivables assets Total loss rate for impairment
1 January 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Not overdue 335,408 59,137 394,545 1.0% (3,939)
Past due not more than three months 68,880 - 68,880 1.4% (978)
Past due more than three months and
not more than six months 20,704 - 20,704 4.9% (1,012)
Past due more than six months and
not more than one year 7,826 - 7,826 38.6% (3,020)
Past due more than one year and not
more than two years 5,304 - 5,304 73.7% (3,911)
Past due more than two years 6,231 - 6,231 100.0% (6,231)
Opening balances at 1 January 2018
(IFRS 9/IFRS 15) 444,353 59,137 503,490 3.8% (19,091)
The loss allowances for trade receivables and contract assets as at 31 December 2017 reconcile
to the opening loss allowances on 1 January 2018 as follows:
Trade receivables Contract assets Total
GBP'000 GBP'000 GBP'000
Loss allowance at 31 December 2017
(IAS 39) (18,175) - (18,175)
Amounts restated through opening
retained earnings (133) (783) (916)
Loss allowance at 1 January 2018
(IFRS 9) (18,308) (783) (19,091)
26. PRINCIPAL RISKS
As a global company, JLT faces a range of risks, each of which
has the potential to impact on the achievement of our strategic
business objectives, as well as providing opportunity in the right
circumstances.
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 outcome of the EU referendum on 23 June 2016 introduced
uncertainty in future periods. The future development and
performance of the UK economy remains subject to volatility in the
near term as the negotiation of the UK's exit from the EU
accelerates. The Group has continued its preparatory work for
Brexit and to strengthen its representation in the EU, including
through the recent acquisitions of OWL Marine Insurance Brokers and
Belgibo. JLT does not anticipate that Brexit will materially impact
its ability to serve clients and access markets in the EU. The
Group continues to monitor events closely working with its
(re)insurance partners and clients.
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 43 to 45 of the Group's Annual Report for
2017. These are summarised below:
PRINCIPAL RISKS NATURE OF RISK
STRATEGIC RISKS
Economic Instability JLT's business is driven more by economic activity
and growth than by (re)insurance market rates.
There is a risk that economic instability reduces
client demand.
Strategic Risks There are risks to the Group's strategic plan
arising from changes in the external environment
as well as risks arising from acquisitions,
strategic change initiatives and the execution
of the Group's strategy. JLT is an agile organisation
that seeks to ensure it maximises opportunities
for the benefit of clients and other stakeholders,
and is well controlled and resilient. There
is a risk that the appetite of the Group for
change, exceeds its capability and capacity
to deliver and absorb change(s) effectively.
Reputation JLT recognises the strategic importance and
value of its reputation, and takes a wide range
of measures to protect it. Damage to reputation
can potentially occur as a result of any principal
risk crystallising.
OPERATIONS RISKS
Business Interruption The Group operates from over 100 offices in
41 territories across the world. There is a
risk of a business interruption due to a large,
unexpected incident. The Group is also reliant
on the ability to process its transactions on
behalf of its clients. Risks arise from non-performance
or failure of IT, whether in-house or from an
outsourcing provider/IT supplier, malicious
act and/or cyber-crime, and internal operational
issues.
PEOPLE RISKS
Loss of Key Staff/Teams The Group's principal asset is its people; there
is a risk that the organisation may not be able
to attract and retain market leading talent.
IT RISKS
Information Security Intermediaries and pension administrators process
& Cyber and retain confidential data in the normal course
of business. Risks relate to loss of customer
records or breach of confidentiality due to
inadequate security and other key controls.
LEGAL AND COMPLIANCE
RISKS
Data Privacy Risks arising from non-compliance with or misinterpretation
of local or international data privacy regulation/legislation.
E&O claims Intermediaries run a risk of incurring a loss
if the operating procedures in place across
the Group in relation to market security, placement
and claims are not complied with or alleged
negligence/ breach of contract in the provision
of services/advice becomes apparent.
Litigation (Non E&O Litigation risk can arise from the number of
litigation) different sources such as M&A litigation (eg
breach of Sale & Purchase Agreement), breach
Employment Law and tortious liability arising
from the recruitment of individuals.
Competition/Anti-trust Engagement in anti-competitive/anti-trust practices
could result in infringement of competition/anti-trust
laws and/or regulations.
Bribery and Corruption Risks relating to the engagement in corrupt
practices could result in a breach of Bribery
& Corruption legislation and regulation.
Regulatory The Group's footprint brings with it an increasingly
complex regulatory landscape to be anticipated
and managed. There is a risk that JLT may fail
to take into consideration the requirements
leading to legal and/or regulatory breach. Risk
can also arise from regulators conducting a
review of past business activities which causes
it to revise its view of the product/proposition
and results in regulatory sanction and/or additional
cost to the business for remediation which could
result in sanctions, fines or remediation costs.
Sanctions As a global Group supporting international clients,
brokers run the risk of engaging with sanctioned
territories and/or individuals/entities which
could give rise to a breach in sanctions/export
control orders.
FINANCIAL RISKS
Liquidity/Financing Risks arising from non-compliance with or misinterpretation
of local or international data privacy regulation/legislation.
Foreign Exchange The Group has foreign exchange exposures to:
-- risk arising from the need to convert currencies
into GBP for reporting purposes
-- risk arising from revenues and costs being
denominated in different currencies
Counterparty Risk Counterparty risk can arise for JLT from two
key sources: banks and (re)insurers.
Defined Benefit Pension Risk of adverse financial impact as a consequence
Scheme of an increase in the Defined Benefit Pension
Scheme deficit.
Interest Rate Risk of volatility of earnings and cash flows
arising from exposure to movements in Interest
Rates. This may also impact the Defined Benefit
Pension Scheme assets and liabilities.
Financial Reporting The risk of inaccurate accounting and reporting,
internally and externally.
Fraud Risks relating to the theft or mis-use of JLT
and client monies.
27. legal and other loss contingencies
Jardine Lloyd Thompson Group plc and its subsidiaries are
subject to various claims, legal proceedings, investigations by
regulatory and other government authorities and disputes around the
world including alleged errors and omissions in connection with the
placement of insurance and reinsurance risks and consulting
services.
IFRS requires that liabilities for contingencies be recorded
when it is probable that a liability has been incurred before the
balance sheet date and the amount can be reasonably estimated.
Significant management judgement is required to comply with this
guidance. The Group analyses its litigation exposure based on
available information, including external legal consultation where
appropriate, to assess its potential liability.
On the basis of present information, amounts already provided,
availability of insurance coverages and legal advice received, it
is the opinion of management that the disposition or ultimate
determination of such claims will not have a material adverse
effect on the consolidated financial position of the Group.
However, it is possible that future results of operations or cash
flows for any annual period could be materially affected by an
unfavourable resolution of these matters.
In addition, in the UK, the Group is working with the UK
Financial Conduct Authority following a market-wide thematic review
of financial advice provided to customers who were offered enhanced
transfer value products ('ETVs'). Pending the outcome of the UK
Financial Conduct Authority's review provisions have been made to
cover known liabilities. It is too early to determine the extent of
any potential further liabilities.
28. forward-looking statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements.
The Group undertakes no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
Statement of directors' responsibilities
The Directors confirm that this consolidated interim financial
information has been prepared in accordance with IAS 34 as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last Annual Report.
The Directors of Jardine Lloyd Thompson Group plc are listed in
the Annual Report of the Company for the year ended 31 December
2017, subject to the following change which has taken place since
the publication of that document: Lynne Peacock joined the Board as
a Non-Executive Director on 1 May 2018.
On behalf of the Board
Charles Rozes
Finance Director
26 July 2018
independent review report to
jardine lloyd thompson group plc
report on the consolidated interim financial statement
Our conclusion
We have reviewed Jardine Lloyd Thompson Group plc's consolidated
interim financial statements (the 'interim financial statements')
in the interim results of Jardine Lloyd Thompson Group plc for the
6 month period ended 30 June 2018. Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- The consolidated balance sheet as at 30 June 2018;
-- The consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- The consolidated statement of cash flows for the period then
ended;
-- The consolidated statement of changes in equity for the
period then ended; and
-- The explanatory notes to the interim financial
statements.
The interim financial statements included in the interim results
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2018
a. The maintenance and integrity of the Jardine Lloyd Thompson
Group plc website is the responsibility of the directors; the
work carried out by the auditors does not involve consideration
of these matters and, accordingly, the auditors accept no responsibility
for any changes that may have occurred to the interim financial
statements since they were initially presented on the website.
b. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DBGDRBGDBGIU
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July 26, 2018 02:02 ET (06:02 GMT)
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