TIDMJTC
RNS Number : 9537Y
JTC PLC
15 September 2020
15 September 2020
JTC PLC
("the Company") together with its subsidiaries ("the Group" or
"JTC")
Interim results for the six months ended 30 June 2020
JTC delivers 10.1% net organic revenue growth, strong cash
conversion and increases dividend by 41.2%
As reported Underlying
H1 2020 H1 2019 Change H1 2020 H1 2019 Change
------------------------------- ------- ------- ------- ------- ------- -------
Revenue (GBPm) 53.7 46.6 +15.2% 53.7 46.6 +15.2%
------------------------------- ------- ------- ------- ------- ------- -------
EBITDA (GBPm) 16.7 15.7 +6.1% 17.9 16.1 +11.2%
------------------------------- ------- ------- ------- ------- ------- -------
EBITDA margin (%) 31.0% 33.7% -2.7pp 33.3% 34.5% -1.2pp
------------------------------- ------- ------- ------- ------- ------- -------
Operating profit/EBIT (GBPm) 10.2 10.7 -4.7% 11.5 11.1 +3.0%
------------------------------- ------- ------- ------- ------- ------- -------
Profit before tax (GBPm) 10.4 9.0 +14.7% 11.6 9.5 +22.1%
------------------------------- ------- ------- ------- ------- ------- -------
Earnings per share (p)* 8.62 7.09 +21.6% 12.03 9.61 +25.2%
------------------------------- ------- ------- ------- ------- ------- -------
Cash conversion 93% 82% +11.0pp 108% 103% +5.0pp
------------------------------- ------- ------- ------- ------- ------- -------
Net debt (GBPm) (70.5) (63.9) -6.6 (68.0) (60.9) -7.1
------------------------------- ------- ------- ------- ------- ------- -------
Interim dividend per share (p) 2.4 1.7 +41.2% 2.4 1.7 +41.2%
------------------------------- ------- ------- ------- ------- ------- -------
*Average number of shares for 6 months to 30 June 2020:
114,350,893 (12 months ending 2019: 111,352,868).
financial highlights
-- Revenue up 15.2% to GBP53.7m (H1 2019: GBP46.6m), reflecting
a combination of strong net organic growth (+10.1%) and growth from
acquisitions (+5.1%)
-- Underlying EBITDA up 11.2% to GBP17.9m (H1 2019: GBP16.1m)
with underlying EBITDA margin down 1.2pp to 33.3% (H1 2019:
34.5%)
-- Annualised new business wins totaling GBP8.6m, including
NESF, (H1 2019: GBP5.9m) with substantial new mandates won during
the period
-- Net debt at period end of 2.0x underlying proforma EBITDA (H1
2019: 1.9x) reflecting our acquisition activity during the
period
-- Underlying cash conversion of 108% (H1 2019: 103%)
-- Interim dividend increased 41.2% to 2.4p (H1 2019: 1.7p)
strategic highlights
-- JTC's highly resilient business model has allowed the
business to perform well during the first half of the year during a
period of global turmoil
-- Strong all round performance from the Private Client Services
(PCS) Division and substantial new business wins in the
Institutional Client Services (ICS) Division
-- Acquired the Sanne private client business in Jersey (1 July
2020) and technology-enabled fund administration business NES
Financial (NESF) in the US (29 April 2020). Also acquired a small
bolt-on in the UK (Registrar Services) and established a presence
in Ireland on a greenfield basis with a new office in Dublin
(Corporate Services)
-- M&A pipeline remains healthy and our disciplined approach will continue
CURRENT TRADING & Outlook
-- The Group has traded broadly in line with Board expectations
-- JTC's medium term guidance metrics at Group level remain unchanged:
o 8% - 10% net organic revenue growth per annum
o Underlying EBITDA margin of 33% - 38%
o Net debt of up to 2.0x underlying EBITDA
o Cash conversion in the range 85% - 90%
-- Ongoing integration of acquisitions made in H1 2020, with
particular focus on NESF in the US and the application of acquired
technology capabilities across the wider Group.
-- The Group's established platform will enable further
operational efficiencies, especially in the fund services practice
of the ICS division, and to also allow it to take advantage of
consolidation opportunities.
-- Continued positive growth prospects for the Group,
underpinned by long-term fundamental drivers for our industry
Nigel Le Quesne, Chief Executive Officer of JTC PLC, said:
"In the first half of 2020 we all faced extreme challenges at
very short notice. At JTC our priorities were the safety of our
people, uninterrupted service for our clients and maintaining the
long-term performance of the Group. The strong results delivered in
H1 are testament to the highly resilient nature of our business,
the outstanding quality of our people and the loyalty of our client
base.
Based on our more than 30 years' experience, our outlook remains
positive. We will continue to focus on the smooth integration of
the Sanne private client and NESF businesses while simultaneously
working to grow the Group through client service excellence,
improving operational efficiencies and making even greater use of
technology. We will also remain open to acquisition opportunities
that fit our disciplined approach to inorganic growth."
Enquiries:
JTC PLC +44 (0) 1534 700 000
Nigel Le Quesne, Chief Executive Officer
Martin Fotheringham, Chief Financial Officer
David Vieira, Chief Communications Officer
Camarco +44(0)20 3757 4985
Geoffrey Pelham-Lane
Georgia Edmonds
Monique Perks
A presentation for analysts will be held at 09:30 today via
audio-conference arranged by Camarco.
An audio-cast of the presentation will subsequently be made
available on the JTC website:
www.jtcgroup.com/investor-relations
Forward Looking Statements
This announcement may contain forward looking statements. No
forward looking statement is a guarantee of future performance and
actual results or performance or other financial condition could
differ materially from those contained in the forward looking
statements. These forward looking statements can be identified by
the fact they do not relate only to historical or current facts.
They may contain words such as "may", "will", "seek", "continue",
"aim", "anticipate", "target", "projected", "expect", "estimate",
"intend", "plan", "goal", "believe", "achieve" or other words with
similar meaning. By their nature forward looking statements involve
risk and uncertainty because they relate to future events and
circumstances. A number of these influences and factors are outside
of the Company's control. As a result, actual results may differ
materially from the plans, goals and expectations contained in this
announcement. Any forward looking statements made in this
announcement speak only as of the date they are made. Except as
required by the FCA or any applicable law or regulation, the
Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward looking
statements contained in this announcement.
About JTC
JTC is an award-winning provider of fund, corporate and private
client services. Founded in 1987, the company employs c.900 people
across its global office network and is trusted to administer
assets of c.US$ 130 billion.
JTC is committed to its shared ownership culture and philosophy,
with management and staff holding over 20% of the equity of the
firm, clearly aligning the interests of clients, employees and
other stakeholders.
www.jtcgroup.com
Strategic Report
ChIEf executive Officer's review
Resilient growth
The first half of 2020 presented unique challenges that
ultimately proved just how resilient and well-constructed our
business is. We often reference our long track record spanning more
than 30 years and experience in successfully navigating external
shocks and volatility and so it has proved again during the
Covid-19 pandemic. Our shared ownership culture came to the fore as
our outstanding global team ensured that client service continued
seamlessly and despite restrictions on certain aspects of business
development activity, we grew strongly during the period in terms
of net organic growth and new business wins. We were also able to
acquire NESF and a smaller ICS bolt-on in the period and the Sanne
PCS business immediately post period end. We continue to see many
acquisition opportunities and, if anything, our potential pipeline
is even stronger than at the beginning of the year. The fundamental
drivers of our industry remain valid and we see good opportunities
for both organic and inorganic growth in the second half of the
year and beyond.
Financial Highlights
Our H1 2020 results are in line with our expectations and we
have seen good momentum in the period across both divisions. In
comparing to the same period last year, Group revenue increased by
15.2% to GBP53.7m (H1 2019: 46.6m), the annualised value of new
business won was up 46% to GBP8.6m (H1 2019: GBP5.9m) and
underlying EBITDA increased by 11.2% to GBP17.9m (H1 2019:
GBP16.1m). It is worth noting that due to the timing of
acquisitions, the growth seen during the period was predominantly
driven by the core business, with net organic revenue growth of
10.1%, which is at the top end of our guidance range and a 1.9pp
increase on the 8.2% recorded in the 12 months to 30 June 2019. Our
underlying EBITDA margin fell slightly to 33.3% (H1 2019: 34.5%)
but is still within our guidance range of 33% - 38%. The cause was
weaker margin performance in our ICS Division and explained in more
detail below is the work that is underway to bring ICS margins back
in line with Group targets. The net debt at the period end was 2.0x
proforma underlying EBITDA (H1 2019: 1.9x) and underlying cash
conversion was strong at 108% (H1 2019: 103%).
Our outlook is positive and we maintain our medium term
guidance, namely: 8%-10% net organic revenue growth per annum at
Group level; underlying EBITDA margin of 33%-38% at Group level;
net debt of up to 2.0x underlying EBITDA and annual cash conversion
in the range 85%-90%.
I am also pleased that we have been able to increase our interim
dividend by 41.2% to 2.4p per share (H1 2019: 1.7p).
Institutional Client Services (ICS) Division
Gross revenue showed a 19.6% increase in the period to GBP30.3m
(H1 2019: GBP25.4m) but disappointingly, underlying EBITDA was flat
at GBP8.2m (H1 2019: GBP8.2m) and underlying EBITDA margin fell
5.1pp to 27.1% (H1 2019: 32.2%).
Turning first to revenue growth, this was a success driven by an
effective business development and marketing programme that pivoted
rapidly to adapt to remote working conditions. Last twelve months
(LTM) organic revenue growth was 8.9% (H1 2019 LTM: 12.3%) and the
annualised value of new business won during H1 2020 was GBP6.9m, an
increase of 116% over the H1 2019 figure of GBP3.2m. We have seen
positive trends for win rate and average mandate size and the new
work won in the period demonstrates the quality of our new business
pipeline at the time of 'lockdown' and the strength of our
relationships with existing clients and intermediaries who refer
business to JTC. The ICS organic new business pipeline at 30 June
2020 was up 32% at GBP29.3m (H1 2019: GBP22.2m) and we continue to
be invited to tender for mandates of GBP1m+ pa on a regular
basis.
With regard to the fall in underlying EBITDA margin, we have
taken the opportunity presented by the external environment to
focus internally and have started to implement a revised operating
model into our fund services practice supported by a greater
reliance on technology to deliver efficiencies. In the short-term
this has had an adverse effect on the ICS margin, which we
anticipated, but once implemented (within the next 6-12 months) we
are confident that there are increasing efficiencies to be found in
the servicing of this growing book providing a scalable platform
and working model for future expansion.
We purchased a small bolt-on business in the UK that adds
Registrar Services to our offering. We have also expanded our
footprint to Ireland for the first time, where we will commence
with Corporate Services before expanding into Fund Services once
relevant regulatory approvals have been secured.
The acquisition of NES Financial (NESF), a technology-enabled
fund administration business, provided an important strategic entry
into the US, which is a key growth market for the industry and in
particular the alternative fund administration sector. The pace of
integration has been slower than normal due to remote working
restrictions and the business itself has faced a number of Covid-19
related headwinds as market conditions have temporarily impacted
fund raising for existing NESF clients as well as slowing the rate
of new fund launches. The low interest rate environment and
impending US elections in November are also acting as a general
drag on market confidence in the US and the markets served by NESF,
further slowing activity levels. As such, we believe the direct
financial benefit of the transaction will only begin to come
through in 2021. More generally, we are making good progress with
the very capable NESF management team to develop the business and
integrate it into the global JTC platform. The technology
capabilities of NESF are starting to be leveraged in both Divisions
to enhance the client experience, improve processes and deliver
efficiencies all of which will make an increasing impact over
time.
The ICS Division enjoys strong market fundamentals and we will
continue to invest in the platform to deliver organic growth and to
capitalise on the technology capabilities brought by the NESF
acquisition. The work to improve the margin is well underway and we
expect to see positive changes in the second half of the year.
Private Client Services (PCS) Division
Gross revenue showed a 10.0% increase in the period to GBP23.4m
(H1 2019: GBP21.2m) and underlying EBITDA increased by 22.1% to
GBP9.7m (H1 2019: GBP7.9m). Underlying EBITDA margin increased by
4.2pp to 41.4% (H1 2019: 37.2%).
Revenue growth was good, with particularly strong LTM organic
revenue growth of 11.8% (H1 2019: 2.3%) demonstrating the ability
of the PCS Division to develop and grow the core client book.
Indeed, the number of client mandates generating in excess of
GBP100k pa in fees increased by 21.8% period on period as clients
took more services from the PCS Division, including our innovative
JTC Private Office offering. The annualised value of new business
won during the period was slightly disappointing at GBP1.7m (H1
2019: GBP2.7m) and this reflects the more personal nature of PCS
work in general, with many clients and intermediaries unable to
travel or attend in-person meetings due to Covid-19 restrictions.
However, the organic new business pipeline at 30 June 2020 was
GBP13.3m (H1 2019: GBP11.0m) which augurs well for the second half
of the year.
Margin improvement was strong with the PCS Division now
operating consistently at or beyond the top end of our Group
guidance range of 33% - 38%, driven by a highly efficient operating
model.
Immediately post period end on 1 July 2020, we purchased the
Sanne private client business in Jersey, which has delivered a high
quality client book supported by an experienced group of employees.
Clients representing annualised ongoing revenues of GBP4.1m
transferred to JTC resulting in a cash payment of GBP9m. Our
ability to rapidly integrate the business into our Jersey office,
despite having to do this on a virtual basis, is further evidence
of the rationale for this straightforward deal. Moving forward, our
award winning PCS team will provide fresh impetus and positivity
and we have already seen material cross selling activity within the
acquired book, including engagement with our JTC Private Office and
treasury services. We believe that the acquisition price will
ultimately represent only a low single digit multiple of the EBITDA
that it generates for the Group.
The PCS Division continues to be a clear leader in its sector
and we see multiple opportunities for further investment and
growth. We will enhance our Edge client portal, which forms part of
the JTC Private Office proposition, using technology acquired in
the NESF transaction and will also continue to leverage a range of
'first cousin' services, including: treasury, custody, FX and tax
compliance to drive organic growth.
inorganic Growth
We maintained our disciplined approach to acquisitions and
during the period completed the NESF transaction as well as a small
bolt-on deal and immediately post-period end completed the Sanne
PCS transaction, as detailed in the Divisional sections above.
More generally, we continue to regard the sector as being in a
period of consolidation and have an active global pipeline of
M&A opportunities of varying sizes and stages of development.
The impact of the Covid-19 pandemic on acquisition opportunities
and pricing is still evolving, but following an initial hiatus of
several months, we are now seeing an increase in activity levels
with deal flow back to, or even exceeding, levels seen at the
beginning of the year pre-pandemic.
We believe there will be opportunities to make acquisitions at
attractive price points that fit with our disciplined approach and
commitment to both the ICS and PCS Divisions. As ever, always
knowing when to say no remains a key JTC attribute.
Our People and Culture
Our shared ownership culture has always been at the heart of JTC
and in 2020 it came into its own. The Covid-19 pandemic required an
almost overnight shift to remote working for our more than 900
employees worldwide and their collective response has been nothing
short of outstanding. The team spirit, ingenuity, commitment and
professionalism displayed by the team at JTC has allowed us to not
only provide a seamless and uninterrupted service to clients, but
has enabled the business to grow and develop through a period of
incredible challenge and uncertainty. As already noted, we even
managed to successfully progress two major acquisitions under
lockdown conditions, a testament to the skill and tenacity of our
people.
While some of our 23 offices are now fully or partially back to
'normal' working, we anticipate that the impact of the pandemic on
our people and their working arrangements will be felt for some
time to come. At JTC we pride ourselves on being innovative and
solutions orientated and new processes and adoption of technology
that have been accelerated through necessity are now in the process
of being formally adopted as long-term working practices, to the
benefit of our people, our clients and the long-term success of
JTC.
Our people continue to be our most important asset and
personally, and on behalf of the Board, I would like to thank all
members of the team for their contribution in the first half of the
year and their continued dedication to JTC.
Risk
The principal risks facing the Group remain as set out in our
2019 Annual Report. Ongoing material risks include acquisition
risk, client risk, data protection and cyber security risk, staff
resourcing risk, political and regulatory change risk, and
regulatory and procedural compliance risk. The Covid-19 pandemic
presents a particular set of risks at the present time and we
believe that the business has demonstrated great resilience to date
in this regard. Overall, we remain satisfied as to the
effectiveness of the Group's risk analysis, management and culture,
developed over more than 30 years of JTC operations.
Dividend
The Board has recommended an interim dividend of 2.4p per share,
an increase of 41.2% period on period (H1 2019: 1.7p). The interim
dividend will be paid on 23 October 2020 to shareholders on the
register as at close of business on the record date of 25 September
2020.
Outlook
We are pleased with the results delivered in the period and in
particular the net organic growth of the business and the growth in
both revenue and underlying EBITDA. The strong results are
testament to the highly resilient and defensive nature of our
business, the outstanding quality of our people and the loyalty of
our client base and as such our guidance metrics remain unchanged
and we increase our dividend pay-out ratio guidance from 25% of
underlying earnings per share to 30%.
Although overall margin at Group level was at the lower end of
our expectations, a particular area of focus going forward will be
on the implementation of the revised operating model of our fund
services business within the ICS Division. The PCS Division
continues to build on its recent success and has a clear path to
maintain that momentum.
We will continue to focus on the smooth integration of both
Sanne and NESF in the second half of the year, although we
recognise that there will be challenges due to the impact of the
Covid-19 pandemic, in particular for the NESF business and we
remain open to opportunities that fit our disciplined approach to
inorganic growth.
Our long-term outlook for our business and industry is positive,
despite Covid-19, and we see good organic and inorganic growth
opportunities for both Divisions.
Nigel Le Quesne
Chief Executive Officer
Chief financial officer's review
Growth and opportunity despite macroeconomic headwinds
Financial Review
Despite the challenging economic backdrop we have delivered
another strong set of results. LTM organic growth was ahead of
guidance at 10.1% (H1 2019: 8.2%) and underlying EBITDA was 33.3 %
(H1 2019: 34.5%). Underlying cash conversion was 108% (H1 2019:
103%). Our PCS business continues to deliver outstanding results by
almost every measure. Delivering LTM organic growth of 11.8% is
testament to the quality of the business. By our own standards our
ICS performance was relatively disappointing - albeit we recognise
that the results are as good, and indeed better, than many other
similar businesses in our market. The implementation of a number of
changes planned for the ICS division was delayed by the impact of
Covid-19. In addition the pandemic had an immediate and direct
impact upon NESF performance. However, we have worked hard with
management in the USA to address the issues and are confident that
this will in time be another successful acquisition. We have also
started to see a positive impact on our technology capabilities
from making this acquisition.
We remain extremely confident in the continuing success of the
overall business and its ability to deliver significant growth in
revenues at highly attractive margins. We recognise that we adopt a
prudent approach to managing our business but we believe that,
given our view of the enduring strength of the business and its
predictable profits and cash flows that, it is appropriate to
increase our dividend pay-out guidance from 25% of underlying EPS
to 30%.
We are currently seeing unprecedented M&A opportunities. It
is our intention to pursue those which we believe will improve our
business. It is management's view that that utilising existing
banking facilities is the most efficient capital allocation and
lowest cost of capital. As previously indicated management would be
comfortable with temporarily increasing leverage levels up to 2.5
times proforma EBITDA for the right opportunity on the basis of
strong forecast cash flows.
Revenue
In H1 2020, revenue was GBP53.7m, an increase of GBP7.1m (15.2%)
compared to H1 2019.
Period on period growth was driven by net LTM organic growth of
10.1% and inorganic growth from acquisitions of 5.1%.
LTM Revenue growth, on a constant currency basis is summarised
below.
GROUP ICS PCS
--------------------------------------- --------- --------- ---------
LTM Revenue Jun 19 GBP89.1m GBP48.7m GBP40.4m
--------------------------------------- --------- --------- ---------
Lost - JTC Decision (GBP0.5m) (GBP0.3m) (GBP0.2m)
--------------------------------------- --------- --------- ---------
Lost - Moves Service Provider (GBP1.3m) (GBP0.9m) (GBP0.4m)
--------------------------------------- --------- --------- ---------
Lost - End of Life / No Longer Required (GBP3.8m) (GBP2.2m) (GBP1.6m)
--------------------------------------- --------- --------- ---------
Net More From Existing Clients GBP5.8m GBP2.9m GBP2.9m
--------------------------------------- --------- --------- ---------
New Clients GBP7.3m GBP4.3m GBP3.0m
--------------------------------------- --------- --------- ---------
Acquisitions GBP9.7m GBP7.2m GBP2.5m
--------------------------------------- --------- --------- ---------
LTM Revenue Jun 20 GBP106.3m GBP59.7m GBP46.6m
--------------------------------------- --------- --------- ---------
Note: presented as constant currency using H1, 2020 Consolidated
Income Statement exchange rates.
LTM organic growth for the period ending 30 June 2020 was 10.1%.
PCS organic growth was 11.8% (H1 2019: 2.3%) and ICS organic growth
was 8.9% (H1 2019: 12.3%). PCS organic growth was lower in 2018 and
early 2019 due to the impact of the closure of sales offices in
Latin America in late 2017. Much of this revenue growth had been
low margin and management determined to move away from this and to
concentrate on larger accounts. We have seen strong growth in the
Channel Islands, USA and Cayman. With regard to ICS our organic
growth is very much in line with guidance. Given the macroeconomic
environment and constraints on business development and new fund
issues we believe this is a strong performance. We have recently
been successful in winning a number of large ICS mandates.
LTM client attrition is 7.6%, a small increase from 7.0% at 31
December 2019. The majority of the increase in attrition is due to
a higher number of end of life structures (4.5% in the twelve
months to 31 December 2019 increased to 5.1% at 30 June 20).
Attrition is broken down into three principal categories as shown
in the table above. 97.5% of revenues that are not end of life were
retained in the period (97.4% at 31 December 2019).
Acquisitions contributed GBP9.7m
of new revenue in the LTM period
broken down as follows: GROUP ICS PCS
---------------------------------- ------- ------- -------
NESF (Q2 2020) GBP1.4m GBP1.4m -
---------------------------------- ------- ------- -------
Anson Registrars (Q1 2020) GBP0.2m GBP0.2m -
---------------------------------- ------- ------- -------
Aufisco (Q4 2019) GBP1.2m GBP1.2m -
---------------------------------- ------- ------- -------
Acquisitions < 12 months (Minerva,
Van Doorn, Exequtive) GBP6.9m GBP4.4m GBP2.5m
---------------------------------- ------- ------- -------
Total GBP9.7m GBP7.2m GBP2.5m
---------------------------------- ------- ------- -------
When JTC acquires a business, the acquired book of clients is
defined as inorganic. These clients continue to be treated as
inorganic for the first two years of JTC ownership.
NEW BUSINESS / PIPELINE .
The enquiry pipeline increased by 28.3% from GBP33.2m at 30 June
2019 to GBP42.6m at 30 June 2020. During H1 2020 JTC secured new
work with an annualised value of GBP8.6m and in the period GBP1.9m
of revenue was recognised (H1 2019: GBP5.9m annualised value of won
work, GBP2.3m revenue recognised). Typically this revenue will have
an average lifespan of approximately 10 years and we estimate that
the Lifetime Value of the Book increased by GBP80.2m during H1, a
44.1% uplift on the increase in H1, 2019.
Underlying Profit and Margin Performance
Underlying EBITDA in H1 2020 was GBP17.9m, an increase of
GBP1.8m. Although the underlying EBITDA margin for the group fell
from 34.5% in H1 2019 to 33.3% in H1 2020 it remained within our
stated guidance range.
ICS PCS GROUP
------------------ ------------------ ------------------ ------------------
H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019
------------------ -------- -------- -------- -------- -------- --------
Revenue GBP30.3m GBP25.4m GBP23.4m GBP21.2m GBP53.7m GBP46.6m
------------------ -------- -------- -------- -------- -------- --------
Underlying gross
profit GBP17.4m GBP15.1m GBP14.7m GBP13.1m GBP32.1m GBP28.2m
------------------ -------- -------- -------- -------- -------- --------
Underlying gross
profit margin 57.4% 59.7% 63.0% 61.6% 59.9% 60.6%
------------------ -------- -------- -------- -------- -------- --------
Underlying EBITDA GBP8.2m GBP8.2m GBP9.7m GBP7.9m GBP17.9m GBP16.1m
------------------ -------- -------- -------- -------- -------- --------
Underlying EBITDA
margin 27.1% 32.2% 41.4% 37.2% 33.3% 34.5%
The underlying EBITDA margin % remains the primary KPI used by
the business and is a key measure of our ability to run the
business effectively and in line with competitors and historical
performance levels.
For H1 2020 the underlying EBITDA margin in the PCS division
increased to 41.4% (H1 2019: 37.2%). This reflects the continuing
exceptional performance of this part of the business. We have been
able to swiftly integrate acquisitions and improve margins and are
confident in our ability to be able to deliver equivalent margins
from the recently acquired Sanne Private Client business.
In the ICS division the underlying EBITDA margin fell to 27.1%
(H1 2019: 32.2%). Whilst the actual margin achieved compares well
with many other businesses in our market it was below what we
expect. This was due to two principle reasons. First, the advent of
Covid-19 meant that we were frustrated in our plans within the
legacy JTC business to be able to restructure operations. We have a
clear plan but have held off implementing this given the continuing
situation. Second, NESF has been materially impacted by Covid-19.
The business derived a significant proportion of its revenue from
commissions linked to bank interest rates. With the reduction in US
base rates this source of income was immediately impacted. We are
working with NESF management to implement a new pricing model which
is consistent with the core JTC approach of time/activity based
revenue and are confident that the short term adverse impact will
be addressed. We recognise that the benefits of this new pricing
model will not be immediately realised. Any additional earn out
consideration for this transaction will be due at the end of the
second year of ownership and we are confident that the merits of
this acquisition will clearly be apparent over this period.
The Group reported EBIT in the period of GBP10.2m (H1 2019:
GBP10.7m). Adjusting for non-underlying items the equivalent
results are H1 2020: GBP11.5m and H1 2019: GBP11.1m.
profit Before Tax
The reported profit before tax for the six month period ended 30
June 2020 was GBP10.4m (H1 2019: GBP9.0m).
Earnings Per Share
Basic EPS was 8.62p in the period (H1 2019: 7.09p). Underlying
EPS was 12.03p (H1 2019: 9.61p). Underlying EPS is the profit for
the year adjusted to remove the impact of non-underlying items
charged to profit as detailed in note 9.3 of the Consolidated
Interim Financial Statements.
Cash Flow and Debt
Cash generated from underlying operating activities in the six
month period was GBP19.4m representing an underlying cash
conversion ratio of 108% of underlying EBITDA (H1 2019: 103%). Net
investment days reduced from 116 days at 31 December 2019 to 103
days at 30 June 2020.
Our annual billing and payment cycle is such that it is usual to
see strong H1 cash conversion and a reduction in net investment
days. We retain our view that we expect that our annual cash
conversion should typically be in the range 85 - 90%. We do
experience fluctuations in reported cash conversion depending upon
the timing of acquisitions we have made but these are will only
impact in the first year of our ownership.
H1 2020 H1 2019
----------------------------------- -------- --------
Net cash from operating activities GBP14.9m GBP12.1m
----------------------------------- -------- --------
Non-underlying cash items GBP3.9m GBP3.7m
----------------------------------- -------- --------
Taxes paid GBP0.6m GBP0.7m
----------------------------------- -------- --------
Underlying cash generated GBP19.4m GBP16.5m
----------------------------------- -------- --------
Underlying EBITDA GBP17.9m GBP16.1m
----------------------------------- -------- --------
Underlying cash conversion 108% 103%
------------------------------------ -------- --------
Note: Cash Conversion = Underlying Cash Flow from Operating
Activities / Underlying EBITDA.
Net debt at the period end was GBP70.5m compared to GBP63.9m at
30 June 2019. Our banking covenants are calculated on the basis of
IAS 17 accounting standard and at 30 June 2020 our leverage ratio
was 2.12 times LTM EBITDA. Underlying LTM EBITDA does not include
the full year impact of the profit of the NESF acquisition in this
calculation. On a proforma basis, leverage at 30 June 2020 was 2.0
times.
Currently we are seeing a number of high quality acquisition
opportunities. At 30 June 2020 we had GBP44m of unused banking
facilities and post period end we drew down an additional GBP10m to
finance the acquisition of the Sanne Private Client business. These
facilities expire in March 2023. We believe that it would be
fiscally prudent for us to seek to fully utilise these facilities
as we believe that the cost of drawing down this debt is
significantly cheaper than the cost of raising equity. We recognise
that this may increase our leverage levels in the short term but we
are comfortable that there is sufficient covenant headroom within
our facilities and that the cash generating nature of our business
is such that leverage levels should quickly fall.
Martin Fotheringham
Chief Financial Officer
Statement of directors' responsibilities in respect of the
interim financial statements
For the 6 month period ended 30 June 2020
"The directors' confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', 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."
Nigel Le Quesne Martin Fotheringham
Chief Executive Officer Chief Financial Officer
14 September 2020 14 September 2020
Independent review report to JTC PLC
Report on the condensed consolidated interim financial
statements
_________________________________________________________________________
Our conclusion
We have reviewed JTC PLC's condensed consolidated interim
financial statements (the "interim financial statements") in the
interim financial report 30 June 2020 of JTC PLC (the "Company")
and its subsidiaries (together the "Group") for the 6-month period
ended 30 June 2020 (the "period"). 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 condensed consolidated interim balance sheet as at 30 June 2020;
-- the condensed consolidated interim income statement for the period then ended;
-- the condensed consolidated interim statement of comprehensive
income for the period then ended;
-- the condensed consolidated interim statement of changes in
equity for the period then ended;
-- the condensed consolidated interim statement of cash flows for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim
financial report 30 June 2020 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 3 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
the Companies (Jersey) Law 1991 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 financial report 30 June 2020, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the interim financial report 30 June 2020 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.
Our responsibility is to express a conclusion on the interim
financial statements in the interim financial report 30 June 2020
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 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the International Auditing and Assurance Standards Board
. 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 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
financial report 30 June 2020 and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Jersey, Channel Islands
14 September 2020
(a) The maintenance and integrity of the JTC PLC website is the
responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
(b) Legislation in Jersey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
JTC PLC
INTERIM FINANCIAL REPORT 30 JUNE 2020
UNAUDITED
Condensed consolidated interim income statement
Condensed consolidated interim statement of comprehensive
income
Condensed consolidated interim balance sheet
Condensed consolidated interim statement of changes in
equity
Condensed consolidated interim statement of cash flows
Notes to the condensed consolidated interim financial
statements
1. Reporting entity
2. Significant changes in the current reporting period
3. Basis of preparation
4. Significant accounting policies and standards
5. Critical accounting estimates and judgements
6. Segmental reporting
7. Staff expenses
8. Non-underlying items
9. Earnings per share
10. Property, plant and equipment
11. Business combinations
12. Share capital and reserves
13. Trade and other payables
14. Loans and borrowings
15. Other non-financial liabilities
16. Financial risk and capital management
17. Cash flow information
18. Related party transactions
19. Events occurring after the reporting period
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
GBP'000 Note H1 2020 H1 2019
------------------------------------ ---- -------- --------
Revenue 6 53,697 46,613
Staff costs 7 (27,024) (21,969)
Establishment costs (863) (544)
Other operating expenses (8,346) (8,019)
Credit impairment losses (1,096) (509)
Other operating income 42 27
Share of profit of equity-accounted
investee 245 97
------------------------------------ ---- -------- --------
Earnings before interest, taxes,
depreciation and amortisation
("EBITDA") 16,655 15,696
------------------------------------ ---- -------- --------
Comprising:
Underlying EBITDA 17,879 16,077
Non-underlying items 8 (1,224) (381)
------------------------------------ ---- -------- --------
16,655 15,696
------------------------------------ ---- -------- --------
Depreciation and amortisation (6,419) (4,955)
------------------------------------ ---- -------- --------
Profit from operating activities 10,236 10,741
------------------------------------ ---- -------- --------
Other gains 16.1 2,234 259
Finance income 27 78
Finance cost (2,117) (2,031)
------------------------------------ ---- -------- --------
Profit before tax 10,380 9,047
------------------------------------ ---- -------- --------
Comprising:
Underlying profit before tax 11,637 9,528
Non-underlying items 8 (1,257) (481)
------------------------------------ ---- -------- --------
10,380 9,047
------------------------------------ ---- -------- --------
Tax (519) (1,178)
------------------------------------ ---- -------- --------
Profit for the period 9,861 7,869
------------------------------------ ---- -------- --------
Earnings per ordinary share
("EPS") Pence Pence
------------------------------------ ---- -------- --------
Basic EPS 9.1 8.62 7.09
Diluted EPS 9.2 8.57 7.06
------------------------------------ ---- -------- --------
The above condensed consolidated interim income statement should
be read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED INTERIM STATEMENT
OF COMPREHENSIVE INCOME
GBP'000 Note H1 2020 H1 2019
----------------------------------------------- ---- ------- -------
Profit for the period 9,861 7,869
Items that may be subsequently reclassified
to profit or loss:
Exchange differences on translation of foreign
operations (net of tax) 16.1 3,399 120
----------------------------------------------- ---- ------- -------
Total comprehensive income for the period (net
of tax) 13,260 7,989
----------------------------------------------- ---- ------- -------
The above condensed consolidated interim statement of
comprehensive income should be read in conjunction with the
accompanying notes.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
GBP'000 Note 30.06.2020 31.12.2019
---------------------------------------- ---- ---------- ----------
Assets
Property, plant and equipment 10 38,563 37,865
Goodwill 11 176,903 124,880
Other intangible assets 11 54,162 48,039
Investment in equity-accounted investee 1,369 1,124
Other non-financial assets 990 965
Other receivables 64 217
Deferred tax assets 58 103
---------------------------------------- ---- ---------- ----------
Total non-current assets 272,109 213,193
---------------------------------------- ---- ---------- ----------
Trade receivables 17,413 16,255
Work in progress 10,621 9,297
Accrued income 14,269 12,906
Other non-financial assets 4,908 2,992
Other receivables 5,862 6,266
Cash and cash equivalents* 40,951 26,317
---------------------------------------- ---- ---------- ----------
Total current assets 94,024 74,033
---------------------------------------- ---- ---------- ----------
Total assets 366,133 287,226
---------------------------------------- ---- ---------- ----------
Equity
Share capital 12.1 1,225 1,141
Share premium 12.1 130,823 100,658
Own shares 12.2 (3,084) (3,027)
Capital reserve 760 451
Translation reserve 4,468 1,069
Retained earnings 12.3 33,715 28,265
---------------------------------------- ---- ---------- ----------
Total equity 167,907 128,557
---------------------------------------- ---- ---------- ----------
Trade and other payables 13 16,253 -
Loans and borrowings 14 104,417 86,681
Lease liability 29,033 28,616
Deferred tax liabilities 9,224 7,656
Other non-financial liabilities 15 541 518
Provisions 1,285 1,116
---------------------------------------- ---- ---------- ----------
Total non-current liabilities 160,752 124,587
---------------------------------------- ---- ---------- ----------
Trade and other payables 13 14,117 21,148
Loans and borrowings 14 4,557 508
Lease liability 3,677 2,875
Other non-financial liabilities 15 12,515 7,536
Current tax liabilities 2,526 1,942
Provisions 82 73
---------------------------------------- ---- ---------- ----------
Total current liabilities 37,474 34,082
---------------------------------------- ---- ---------- ----------
Total equity and liabilities 366,133 287,226
---------------------------------------- ---- ---------- ----------
*The cash balance at 31.12.19 included GBP2.6m for pending EBT12
capital distributions, these were paid in full during the
period.
The above condensed consolidated interim balance sheet should be
read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED INTERIM STATEMENT
OF CHANGES IN EQUITY
For the period ended 30 June 2020
Attributable to owners of JTC PLC
Share Share Own Capital Translation Retained Total
GBP'000 Note capital premium shares reserve reserve earnings equity
------------------------ ----- ------- ------- ------- -------- ----------- -------- -------
Balance at 1 January
2020 1,141 100,658 (3,027) 451 1,069 28,265 128,557
Profit for the period - - - - - 9,861 9,861
Other comprehensive
income for the period - - - - 3,399 - 3,399
------------------------ ----- ------- ------- ------- -------- ----------- -------- -------
Total comprehensive
income for the period - - - - 3,399 9,861 13,260
------------------------ ----- ------- ------- ------- -------- ----------- -------- -------
Issue of share capital 12.1 84 30,165 - - - - 30,249
Share-based payment
expense 7 - - - 383 - - 383
Movement in EBT - - - (74) - - (74)
Movement of own shares 12.2 - - (57) - - - (57)
Dividends paid 12.3 - - - - - (4,411) (4,411)
------------------------ ----- ------- ------- ------- -------- ----------- -------- -------
Balance at 30 June
2020 1,225 130,823 (3,084) 760 4,468 33,715 167,907
------------------------ ----- ------- ------- ------- -------- ----------- -------- -------
For the period ended 30 June 2019
Attributable to owners of JTC PLC
Share Share Own Capital Translation Retained Total
GBP'000 capital premium shares reserve reserve earnings equity
----------------------- ------------- ------- ------- -------- ----------- -------- -------
Balance at 1 January
2019 1,109 94,599 (2,565) (112) 2,444 13,426 108,901
------------------------ ------------- ------- ------- -------- ----------- -------- -------
IFRS 16 adjustment - - - - - 1,730 1,730
------------------------ ------------- ------- ------- -------- ----------- -------- -------
Restated balance at
1 January 2019 1,109 94,599 (2,565) (112) 2,444 15,156 110,631
------------------------ ------------- ------- ------- -------- ----------- -------- -------
Profit for the period - - - - - 7,869 7,869
Other comprehensive
income for the period - - - - 120 - 120
------------------------ ------------- ------- ------- -------- ----------- -------- -------
Total comprehensive
income for the period - - - - 120 7,869 7,989
------------------------ ------------- ------- ------- -------- ----------- -------- -------
Issue of share capital 19 5,663 - - - - 5,682
Share-based payment
expense - - - 347 - - 347
Movement in EBT - - - (46) - - (46)
Movement of own shares - - (285) - - - (285)
Dividends paid - - - - - (2,235) (2,235)
------------------------ ------------- ------- ------- -------- ----------- -------- -------
Balance at 30 June
2019 1,128 100,262 (2,850) 189 2,564 20,790 122,083
------------------------ ------------- ------- ------- -------- ----------- -------- -------
The above condensed consolidated interim statement of changes in
equity should be read in conjunction with the accompanying
notes.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
GBP'000 Note H1 2020 H1 2019
----------------------------------------------------- ----- -------- --------
Operating cash flows before movements
in working capital 17 16,793 15,946
Increase in receivables (4,013) (332)
Increase/(decrease) in payables 2,726 (2,770)
----------------------------------------------------- ----- -------- --------
Cash generated by operations 15,506 12,844
Income taxes paid (650) (706)
----------------------------------------------------- ----- -------- --------
Net movement in cash from operating activities 14,856 12,138
----------------------------------------------------- ----- -------- --------
Comprising:
Underlying net movement in cash from
operating activities 19,371 16,551
Non-underlying cash items 17 (3,865) (3,707)
----------------------------------------------------- ----- -------- --------
15,506 12,844
----------------------------------------------------- ----- -------- --------
Investing activities
Interest received 26 78
Payment for property, plant and equipment (181) (627)
Payment for intangible assets (1,218) (528)
Payment for business combinations (8,738) (21,338)
Prepayment for investment (403) -
----------------------------------------------------- ----- -------- --------
Net cash used in investing activities (10,514) (22,415)
----------------------------------------------------- ----- -------- --------
Financing activities
Sale and purchase of own shares (45) (285)
Dividends paid 12.3 (4,411) (2,235)
Loans to third parties (238) -
Repayment of loans and borrowings (344) (344)
Proceeds from loans and borrowings 17,926 15,509
Loan arrangement fees (17) (285)
Interest paid on loans and borrowings (1,075) (1,029)
Facility fees paid on loans and borrowings (139) (96)
Principal paid on lease liabilities (1,540) (915)
Interest paid on lease liabilities (465) (450)
----------------------------------------------------- ----- -------- --------
Net cash from financing activities 9,652 9,870
----------------------------------------------------- ----- -------- --------
Net increase/(decrease) in cash and cash
equivalents 13,994 (407)
----------------------------------------------------- ----- -------- --------
Cash and cash equivalents at the beginning
of the period 26,317 32,457
Effect of foreign exchange rate changes
on cash and cash equivalents 640 (1,593)
----------------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of period* 40,951 30,457
----------------------------------------------------- ----- -------- --------
*The cash balance at 31.12.19 included GBP2.6m for pending
EBT12 capital distributions, these were paid in full during
the period.
The above condensed consolidated interim statement of cash flows
should be read in conjunction with the accompanying notes.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
1. REPORTING ENTITY
JTC PLC ("the Company") was incorporated on 2 January 2018 and
is domiciled in Jersey, Channel Islands. The address of the
Company's registered office is 28 Esplanade, St Helier, Jersey.
The condensed consolidated interim financial statements of the
Company for the period from 1 January 2020 to 30 June 2020 comprise
the Company and its subsidiaries (together "the Group" or "JTC")
and the Group's interest in an associate.
2. SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD
Despite the unique challenges presented by the Covid-19
pandemic, the business performed well during the six months to 30
June 2020 and is trading in line with Board expectations.
The financial position and performance of the Group was affected
by the following events and transactions during the six months to
30 June 2020:
-- the acquisition of NES Financial Corp ("NESF") (see note
11.1)
-- the draw down of GBP16.4m from our existing loan facility to
partially fund the acquisition of Sanne private client business
(see Note 19) and deferred consideration from previous acquisitions
(see note 14.1)
For more detail on the Group's performance and financial
position, please refer to the Chief Financial Officer's review.
3. BASIS OF PREPARATION
The condensed consolidated interim financial statements (the
"interim financial statements") for the six months to 30 June 2020
have been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union ("EU"), the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority and Companies (Jersey) Law 1991. They
are presented in pounds sterling (GBP), which is the functional and
reporting currency of the Company. They do not include all the
information required for a complete set of IFRS financial
statements. Accordingly, the interim financial statements should be
read in conjunction with the annual consolidated financial
statements for the year ended 31 December 2019, which have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the EU. Selected explanatory notes
are included to explain events and transactions that are
significant to an understanding of the changes in the Group's
financial position and performance since the last annual
consolidated financial statements as at and for the year ended 31
December 2019.
The Group has adopted the going concern basis of accounting in
preparing the interim financial statements. The Directors are
confident that the Group will meet its day-to-day working capital
requirements through its cash-generating activities and bank
facilities. The Group's forecasts and projections, taking account
of possible changes in trading performance, show that the Group
should be able to operate within the level of its current
facilities. The Directors therefore have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future, being at least 12 months from
the date of approval of these interim financial statements.
These interim financial statements were approved by the board of
directors on 14 September 2020 and have been reviewed but not
audited by the Group's external auditors.
4. SIGNIFICANT ACCOUNTING POLICIES AND STANDARDS
The accounting policies applied in these interim financial
statements are the same as those applied in the Group's
consolidated financial statements as at and for the year ended 31
December 2019.
To the extent relevant, all IFRS standards and interpretations
including amendments that were in issue and effective from 1
January 2020, have been adopted by the Group from 1 January 2020.
These standards and interpretations have had no material impact for
the Group.
5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of these interim financial statements requires
Management to make certain assumptions, estimates and judgements
that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the date of
the interim financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
may differ from those estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of revision and the future
periods if the revision affects both current and future
periods.
5.1. CRITICAL JUDGEMENTS IN APPLYING THE GROUP'S ACCOUNTING
POLICIES
In addition to the critical judgements set out in note 28.1 of
the 2019 Annual Report, the following are the critical judgements
that Management have made in the process of applying the Group's
accounting policies that have the most significant effect on the
amounts recognised in the interim financial statements.
Recognition of separately identifiable intangibles
During the period ended 30 June 2020, the Group acquired NESF
(see note 11.1). IFRS 3 'Business Combinations' requires Management
to identify assets and liabilities purchased including intangible
assets. Following their assessment, Management concluded that the
intangible assets meeting the recognition criteria were the NESF
Brand, internally generated software (known as "eSTAC") and
customer relationships. The intangible assets recognised through
this acquisition were GBP0.69m, GBP2.68m and GBP2.5m
respectively.
5.2. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
In addition to critical estimates as set out in note 28.2 of the
2019 Annual Report, the following are the critical estimates that
Management have made in the process of applying the Group's
accounting policies that have the most significant effect on the
amounts recognised in the interim financial statements.
Fair value of internally developed software intangibles
To derive the fair value of the internally generated software
(eSTAC), a relief from royalty valuation methodology was used.
Management consider the key assumptions in this model to be the
projected revenue growth and the royalty rate applied. See note
11.1(a) for the sensitivity analysis.
Fair value of earn-out consideration
To derive the fair value of the earn-out contingent
consideration, Management allocated a probability weighting to cash
flow forecast scenarios to determine the calculated number of
shares and then applied an estimated share price. Management
considers the estimated number of shares and forecast share price
to be the key assumptions in the calculation of the fair value of
the earn-out contingent consideration. See note 11.1(b) for the
sensitivity analysis.
6. SEGMENTAL REPORTING
6.1. BASIS OF SEGMENTATION
The Group has a multi-jurisdictional footprint and the core
focus of operations is on providing services to its institutional
and private client base, with revenues from alternative asset
managers, financial institutions, corporates, high-net-worth and
ultra-high-net-worth individuals and family office clients.
Declared revenue is generated from external customers.
The Chief Executive Officer and Chief Financial Officer are
together the Chief Operating Decision Makers of the Group and
determine the appropriate business segments to monitor financial
performance. Each segment is defined as a set of business
activities generating a revenue stream determined by divisional
responsibility and the management information reviewed by the
Board. They have determined that the Group has two reportable
segments: these are Institutional Client Services ("ICS") and
Private Client Services ("PCS").
6.2. SEGMENTAL INFORMATION
The table below shows the segmental information provided to the
Board for the two reportable segments (ICS and PCS) on an
underlying basis:
ICS PCS Total
GBP'000 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 H1 2019
------------------------- -------- -------- ------- ------- -------- --------
Revenue 30,334 25,366 23,364 21,247 53,697 46,613
Direct staff expenses (12,793) (10,024) (8,040) (7,315) (20,833) (17,339)
Other direct expenses (115) (196) (606) (842) (721) (1,038)
Underlying gross profit 17,426 15,147 14,717 13,090 32,143 28,237
Underlying gross profit
margin % 57.4% 59.7% 63.0% 61.6% 59.9% 60.6%
Indirect staff expenses (3,598) (2,511) (2,462) (2,233) (6,060) (4,744)
Other operating expenses (5,628) (4,478) (2,863) (3,061) (8,490) (7,539)
Other income 14 5 273 119 286 123
Underlying EBITDA 8,213 8,163 9,666 7,914 17,879 16,077
Underlying EBITDA margin
% 27.1% 32.2% 41.4% 37.2% 33.3% 34.5%
------------------------- -------- -------- ------- ------- -------- --------
The Board evaluates segmental performance based on revenue,
underlying gross profit and underlying EBITDA. Profit before income
tax is not used to measure the performance of the individual
segments as items such as depreciation, amortisation of
intangibles, other gains and net finance costs are not allocated to
individual segments. Consistent with the aforementioned reasoning,
segment assets and liabilities are not reviewed regularly on a
by-segment basis and are therefore not included in the IFRS
segmental reporting.
6.3. SEASONALITY
The business of the Group does not show material changes for
seasonality in the condensed consolidated interim income statement.
However, the timing of invoicing annual fees in advance at the end
of Q4 and the start of Q1 each year results in higher working
capital and deferred income at 30 June, as demonstrated by a
GBP4.95m increase in deferred income at 30 June 2020 when compared
to 31 December 2019 (see note 15).
7. STAFF EXPENSES
GBP'000 H1 2020 H1 2019
--------------------------------------- ------- -------
Salaries and Directors' fees 22,863 18,691
Capital distribution from EBT12 9 (257)
Other short-term employee benefits 702 588
Defined contribution pension costs 940 797
Share-based payments 383 347
Training and other staff-related costs 2,127 1,803
--------------------------------------- ------- -------
27,024 21,969
--------------------------------------- ------- -------
7.1. SHARE-BASED PAYMENT ARRANGEMENTS
In April 2020, the Group granted the following share awards:
(i) 213,420 shares (April 2019: 253,518 shares) under the PSP.
The 2020 awards have the same performance conditions as the 2018
and 2019 awards (TSR and EPS performance) and also vest over a
performance period of three consecutive accounting periods.
(ii) 72,717 shares (April 2019: 45,809) under the DBSP. These
awards are not subject to performance conditions but are subject to
the rules of the DBSP, including vesting criteria.
For further information on share-based compensation, see note 36
of the 2019 Annual Report.
The equity-settled share-based payment expenses recognised
during the period, per plan and in total are as follows:
GBP'000 H1 2020 H1 2019
----------------------------------- ------- -------
PSP Awards 254 246
DBSP Awards 86 25
Other Awards 43 76
----------------------------------- ------- -------
Total share-based payments expense 383 347
----------------------------------- ------- -------
8. NON-UNDERLYING ITEMS
GBP'000 H1 2020 H1 2019
--------------------------------------------------------- ------- -------
Acquisition and integration costs (i) 1,119 600
Capital distribution from EBT12 (ii) 9 (257)
Other (iii) 96 38
--------------------------------------------------------- ------- -------
Non-underlying items within EBITDA 1,224 381
Unwinding of discount on capital distribution from EBT12 33 100
Total non-underlying items 1,257 481
--------------------------------------------------------- ------- -------
The directors consider that the items above are not
representative of underlying performance.
During the period ended 30 June 2020:
(i) The Group expensed GBP1.12m (30 June 19: GBP0.6m) in
relation to business combinations. For those completed in the
period; NESF GBP0.8m (see note 11.1) and other smaller acquisitions
GBP47k (see note 11.2). For those completed in prior periods; Van
Doorn GBP110k, Minerva GBP71k, Aufisco GBP28k, and Exequtive GBP8k.
Also expensed in the period was GBP51k in relation to the
acquisition of Sanne private client business (see note 19).
(ii) An adjustment was made to the credit previously recognised
in relation to leavers who forfeited their distributions.
(iii) One-off costs relating to other items not considered to
represent the ongoing operations of the business included GBP96k of
fees relating to terminated projects.
9. EARNINGS PER SHARE
9.1. BASIC EARNINGS PER SHARE
GBP'000 H1 2020 H1 2019
--------------------------------------------------------- ----------- -----------
Profit for the period 9,861 7,869
--------------------------------------------------------- ----------- -----------
No. No.
--------------------------------------------------------- ----------- -----------
Issued ordinary shares at 1 January 111,820,703 110,153,982
Effect of shares issued to acquire business combinations 2,560,169 909,966
Effect of movement in treasury shares held (29,979) (107,741)
--------------------------------------------------------- ----------- -----------
Weighted average number of Ordinary shares (basic): 114,350,893 110,956,207
Basic EPS 8.62 7.09
--------------------------------------------------------- ----------- -----------
9.2. DILUTED EARNINGS PER SHARE
GBP'000 H1 2020 H1 2019
------------------------------------------------------ ----------- -----------
Profit for the period 9,861 7,869
------------------------------------------------------ ----------- -----------
No. No.
------------------------------------------------------ ----------- -----------
Weighted average number of Ordinary shares (basic): 114,350,893 110,956,207
Effect of share-based payments issued 757,532 460,224
------------------------------------------------------ ----------- -----------
Weighted average number of Ordinary shares (diluted): 115,108,425 111,416,431
Diluted EPS 8.57 7.06
------------------------------------------------------ ----------- -----------
9.3. UNDERLYING BASIC EARNINGS PER SHARE
GBP'000 Note H1 2020 H1 2019
---------------------------------------------------- ---- ------------ ------------
Profit for the period 9,861 7,869
---------------------------------------------------- ---- ------------ ------------
Non-underlying items 8 1,257 481
Amortisation of customer relationship intangible
assets 2,764 2,284
Amortisation of loan arrangement fees 286 188
Unwinding of net present value discounts 65 194
Temporary difference arising on amortisation
of customer relationships (481) (355)
Adjusted underlying profit for the period 13,752 10,661
---------------------------------------------------- ---- ------------ ------------
No. No.
---------------------------------------------------- ---- ------------ ------------
Weighted average number of Ordinary shares (basic): 114,350,893 110,956,207
---------------------------------------------------- ---- ------------ ------------
Underlying Basic EPS 12.03 9.61
---------------------------------------------------- ---- ------------ ------------
Our definition of underlying basic Earnings Per Share has been
updated to remove any adjustment for IFRS 16 but now includes
adjustments to remove the unwinding of net present value discounts,
the amortisation of both customer relationship intangible assets
and loan arrangement fees and the temporary differences arising on
the amortisation of customer relationships. These adjustments were
previously included in adjusted underlying basic Earning Per Share
which is no longer presented.
10. PROPERTY, PLANT AND EQUIPMENT ("PPE")
During 2019, the Group transitioned to IFRS 16 'Leases' and as
at 31 December 2019 the total carrying amount of GBP37.9m for PPE
included GBP30.2m for right-of-use assets. During the period to 30
June 2020, as a result of acquiring NESF (see note 11.1),
right-of-use assets increased by GBP2.5m and depreciation for the
six month period ended 30 June 2020 was GBP1.9m.
11. BUSINESS COMBINATIONS
11.1. NES FINANCIAL CORP " (NESF")
On 29 April 2020, JTC acquired 100% of NES Financial Corp and
its subsidiaries (together known as "NESF"), a United States based,
technology-enabled, market leading provider of specialist fund
administration services. NESF was merged with, and into, JTC USA
Holding Inc., a California corporation. This acquisition represents
a key part of JTC's ongoing growth strategy, its focus on
developing its ICS business in the United States and a commitment
to acquire and develop technology capabilities that drive future
growth and operating efficiency.
The acquired business contributed revenues of GBP1.4m and a loss
before tax of GBP0.5m to the Group for the period from 1 May 2020
to 30 June 2020. If the business had been acquired on 1 January
2020, the consolidated revenue and profit for the period for the
Group would have been GBP56.9m and GBP5.7m respectively.
(a) Identifiable assets acquired and liabilities assumed on
acquisition
The following table shows, at fair value, the recognised assets
acquired and liabilities assumed at the acquisition date:
$'000 GBP'000
-------------------------------------------------- ------ -------
Property, plant and equipment 3,077 2,467
Intangible assets - Brand 859 689
Intangible assets - Internally developed software 3,346 2,683
Intangible assets - Customer relationships 3,116 2,499
Intangible assets - Software 91 73
Trade receivables 1,906 1,528
Other receivables 4,372 3,505
Cash and cash equivalents 205 165
-------------------------------------------------- ------ -------
Assets 16,972 13,609
-------------------------------------------------- ------ -------
Deferred income 174 139
Deferred tax liabilities 2,002 1,605
Trade and other payables 11,510 9,230
Lease liabilities 2,819 2,261
-------------------------------------------------- ------ -------
Liabilities 16,505 13,235
-------------------------------------------------- ------ -------
Total identifiable net assets 467 374
-------------------------------------------------- ------ -------
Deferred tax liabilities have been recognised in relation to
identified intangible assets, the amortisation of which is
non-deductible against United States Corporation Taxes and
therefore creates temporary differences between the accounting and
taxable profits.
Sensitivity analysis on fair value of internally developed
software intangibles
The internally developed platform, known as eSTAC, leverages
end-to-end integrated software to automate fund administration and
is used to support all product lines. To derive the fair value we
used a relief from royalty method. This takes an estimated royalty
rate as a percentage of the projected revenues generated to
calculate anticipated royalty payments which are discounted to
present value using an appropriate risk adjusted rate.
Management carried out a sensitivity analysis on the key
assumptions used in the valuation of internally developed software
intangible assets. An increase or decrease of 1% to the royalty
rate used of 4%, would increase or decrease the fair value by
GBP0.86m. An increase to year on year revenue growth of 10% would
increase the fair value by GBP0.74m, a decrease to year on year
revenue growth of 10% would decrease the fair value by
GBP0.62m.
(b) Consideration
Total consideration is satisfied by the following:
$'000 GBP'000
----------------------------------------------------- ------ -------
Equity instruments (6,746,623 Ordinary shares issued
at fair value) 34,732 27,931
Cash consideration 4,704 3,759
Contingent consideration - Indemnification holdback
(i) 2,133 1,715
Contingent consideration - Earn-out (ii) 18,760 15,087
----------------------------------------------------- ------ -------
Fair value of total consideration 60,329 48,492
----------------------------------------------------- ------ -------
At the reporting date we have estimated the fair value of
contingent consideration as follows:
(i) The indemnification holdback part of the initial
consideration was 637,954 JTC PLC Ordinary shares and we
anticipated these will be adjusted downwards for working capital
and transaction expenses to 421,458 shares. Of these, 50% are
payable 12 months following completion (30 April 2021) with the
balance payable 6 months later (31 October 2021). The simulated
share prices at these dates under the Monte Carlo valuation method
have been discounted using an appropriate risk free rate and as a
result we estimate the fair value of the contingent shares to be
GBP1.72m ($2.13m).
(ii) The earn-out consideration is subject to NESF meeting
certain EBITDA thresholds across assessment periods, being 1 June
2020 to 31 May 2021 ("Earn-out AP1") and 1 June 2021 to 31 May 2022
("Earn-out AP2"). The maximum earn-out consideration for Earn-out
AP1 is 7,348,771 shares and for Earn-out AP2 is 6,904,299
shares.
To calculate the anticipated earn-out, Management gave a
probability weighting to three forecast scenarios; a downside,
upside and base case for the three financial years ended 31
December 2020 ("FY2020"), 31 December 2021 and 31 December 2022.
The resulting number of shares was then multiplied by an estimated
share price at the relevant date.
In each of the scenarios, there is negative EBITDA in Earn-out
AP1 due to the loss forecast for FY2020 as a result of the impact
of COVID-19, which is recovered in Earn-out AP2 in all instances.
As the two most likely scenarios give a negative EBITDA for
Earn-out AP1, a probability weighted approach, rather than a Monte
Carlo simulation was used to determine the likely number of JTC PLC
Ordinary shares attributed to the earn-out.
The estimated share price is based upon the same Monte Carlo
simulation and risk free rate discounting methodology as in (i)
above. As a result, the number of shares due for Earn-out AP2 was
calculated to be 3,765,269 with a fair value of GBP15.08m
($18.76m).
Sensitivity analysis on fair value of earn-out consideration
Management carried out a sensitivity analysis on the output of
the key assumptions and estimates used to calculate the fair value
of the earn-out consideration. Management consider the key
assumptions and estimates to include the estimated share price and
the estimated number of shares to calculate the fair value of
earn-out consideration. Increasing or decreasing the number of
shares earnt by 20% and applying the same simulated share price
using the Monte Carlo valuation model in (i) above, the fair value
of the earn-out contingent consideration would be GBP3.2m
higher/lower. Increasing or decreasing the share price by 10% and
applying the number of shares as in (ii), the fair value of the
earn-out contingent consideration would be GBP1.51m
higher/lower.
(c) Goodwill
Goodwill arising from the acquisition has been recognised as
follows:
$'000 GBP'000
-------------------------------------------- ------ -------
Total consideration 60,329 48,492
Less: Fair value of identifiable net assets (467) (374)
-------------------------------------------- ------ -------
Goodwill 59,862 48,118
-------------------------------------------- ------ -------
Goodwill is represented by assets that do not qualify for
separate recognition or other factors. These include access to the
US market, new business wins from new customers, effects of an
assembled workforce and synergies from combining some resources and
operations of the acquiree and the acquirer.
(d) Impact on cash flow
$'000 GBP'000
---------------------------------------- ----- -------
Cash consideration paid at 30 June 2020 3,173 2,540
Less: cash balances acquired (205) (165)
---------------------------------------- ----- -------
Net cash outflow from acquisition 2,968 2,375
---------------------------------------- ----- -------
(e) Acquisition related costs
Up to the 30 June 2020, the Group had incurred
acquisition-related costs of GBP0.8m for professional, legal and
advisory fees. These costs have been recognised in other operating
expenses in the Group's condensed consolidated interim income
statement and are treated as non-underlying items to calculate
underlying EBITDA (see note 8).
11.2. OTHER ACQUISITIONS IN THE PERIOD
On 23 January 2020, JTC acquired 100% of the share capital of
Cornerstone AIS Corporate Services Ireland Limited and Cornerstone
AIS Corporate Trustees Ireland Limited, entities registered in
Ireland with a regulatory licence to operate as a trust or company
service provider. Consideration was GBP65k (EUR77k) for net assets
acquired of the same amount.
On 27 February 2020, JTC acquired 100% of the share capital of
Anson Registrars Limited and Anson Registrars (UK) Limited, the
entities have registered offices in Guernsey, Channel Islands and
the UK respectively. This acquisition enables JTC to provide a
holistic package to both corporate and fund clients who require
CREST enabled registrar services, complementing the administration
and accounting offering already being provided. Consideration was
GBP222k for net assets acquired of GBP59k, resulting in goodwill of
GBP163k.
12. SHARE CAPITAL AND RESERVES
12.1. SHARE CAPITAL AND SHARE PREMIUM
At 31 December 2019, 114,068,353 Ordinary shares of GBP0.01 each
were in issue and fully paid up at a cost of GBP1.14m with share
premium of GBP100.66m.
On 8 April 2020, the Company issued and admitted an additional
560,707 Ordinary shares at fair value to satisfy the earn-out
consideration due for the acquisition of Exequtive, as they
successfully maintained agreed targets for underlying EBITDA and
revenue (see note 31.1 of the 2019 Annual Report).
On 29 April 2020, the Company issued an additional 1,146,291
Ordinary shares in order for PLC EBT to satisfy potential future
exercises of awards granted to beneficiaries.
On 4 May 2020, the Company issued an additional 6,746,623
Ordinary shares at fair value to satisfy the share consideration
payable for the acquisition of NESF (see note 11.1).
12.2. OWN SHARE RESERVE
Own shares represent the shares of the Company that are
unallocated and held by PLC EBT for the benefit of its employees.
Own shares have been excluded from the weighted average number of
ordinary shares for the purpose of calculating EPS as they are not
outstanding.
As at 31 December 2019, 2,160,667 shares were held at a cost of
GBP3.03m. During the six months to 30 June 2020, the number of own
shares held increased by 1,156,643 and GBP0.06m following the issue
of 1,146,291 new shares as described in note 12.1 above and also
the purchase of 10,352 shares for PLC EBT from surplus cash
held.
12.3. RETAINED EARNINGS
The retained earnings include accumulated profits and
losses.
The final dividend for the year 2019 of 3.6p per qualifying
ordinary share was paid on 3 July 2020.
An interim dividend of 2.4p per qualifying ordinary share (2019:
1.7p per qualifying ordinary share) was declared by the Directors
on 14 September 2020 and will be payable on 23 October 2020 to
shareholders on the record on 25 September 2020. The interim
dividend has not been recognised as a liability as at 30 June
2020.
13. TRADE AND OTHER PAYABLES
GBP'000 30.06.2020 31.12.2019
----------------------------------- ---------- ----------
Non-current
Other payables 312 -
Deferred consideration 15,941 -
----------------------------------- ---------- ----------
Total non-current 16,253 -
----------------------------------- ---------- ----------
Current
Trade payables 1,117 1,196
Other taxation and social security 797 646
Other payables 5,973 5,670
Accruals 4,039 5,176
Deferred consideration 2,191 8,460
----------------------------------- ---------- ----------
Total current 14,117 21,148
----------------------------------- ---------- ----------
Total trade and other payables 30,370 21,148
----------------------------------- ---------- ----------
14. LOANS AND BORROWINGS
GBP'000 30.06.2020 31.12.2019
--------------------------- ---------- ----------
Non-current
Bank loan 104,417 86,681
--------------------------- ---------- ----------
Total non-current 104,417 86,681
--------------------------- ---------- ----------
Current
Bank loan 3,114 -
Other loans 1,443 508
--------------------------- ---------- ----------
Total current 4,557 508
--------------------------- ---------- ----------
Total loans and borrowings 108,974 87,189
--------------------------- ---------- ----------
14.1. BANK LOANS
(a) Non-current bank loan
On 9 January 2020, the Company's revolving facility commitment
was increased by GBP50m taking the total facility commitment to
GBP150m, consisting of a term loan of GBP45m and a revolving
facility commitment of GBP105m. The commitments were increased by
each bank as follows: GBP10m from Barclays, Santander and BOI and
GBP20m from HSBC. The additional commitments are made on the same
terms as the existing commitments.
A withdrawal was made on 16 April 2020 for GBP6.425m to assist
with the funding required to settle deferred consideration due for
the Exequtive (GBP5.5m) and Aufisco (GBP0.58m). A further
withdrawal was made on 30 June 2020 for GBP10m to partially fund
the acquisition of Sanne private client business (see note 19).
At 30 June 2020, the Company had available GBP44m of committed
facilities currently undrawn (31 December 2019: GBP12.1m). All
drawn facilities for this loan are due to be repaid on or before
the Termination Date of 8 March 2023.
(b) Current bank loan
Upon acquiring NESF, JTC inherited their existing bank revolving
credit note with CIBC Bank USA, an Illinois banking corporation.
The original note was executed on 25 January 2018 for a line up to
$5m, of which $3.85m was drawn down on 1 February 2018 and remains
outstanding at the time of the merger. The interest rate on the
drawn amount is the greater of (a) the Federal Funds Rate plus
0.5%, and (b) the Prime Rate. Repayment of the revolving credit
line is due in full prior to the debt maturity on 25 January
2021.
14.2. OTHER LOANS
On 18 June 2020, the Company entered into an uncommitted loan
facility with Close Leasing Limited for GBP1.29m, which is being
settled in six monthly instalments.
15. OTHER NON-FINANCIAL LIABILITIES
GBP'000 Note 30.06.2020 31.12.2019
-------------------------------------- ---- ---------- ----------
Non-current
Contract liabilities 541 518
-------------------------------------- ---- ---------- ----------
Total non-current 541 518
-------------------------------------- ---- ---------- ----------
Current
Contract liabilities 637 606
Deferred income 6.3 11,878 6,930
-------------------------------------- ---- ---------- ----------
Total current 12,515 7,536
-------------------------------------- ---- ---------- ----------
Total other non-financial liabilities 13,056 8,054
-------------------------------------- ---- ---------- ----------
16. FINANCIAL RISK AND CAPITAL MANAGEMENT
16.1 FOREIGN CURRENCY RISK
The Group's exposure to the risk of changes in exchange rates
relates primarily to the Group's operating activities when the
revenue or expenses are denominated in a different currency from
the Group's functional and presentation currency of pounds sterling
('GBP'). For trading entities that principally affect the profit or
net assets of the Group, the exposure continues to be mainly from
Euro, United States dollar and South African rand. The loans and
borrowings of the Group continue to be denominated in GBP and Euro.
Management will continue to monitor the effectiveness of the
Group's policy to minimise foreign currency risk (as disclosed in
note 29.1 of the 2019 Annual Report) and continue to regularly
assess if a foreign currency hedge is appropriate.
For the six months to 30 June 2020, mainly due to the Euro and
United States dollar foreign currency exchange rate movements, we
have recognised the following:
-- a foreign exchange gain of GBP3.4m in other comprehensive
income (H1 2019: GBP0.12m gain) upon translating our foreign
operations to our functional currency
-- a foreign exchange gain of GBP2.2m (H1 2019: GBP0.26m gain)
in the condensed consolidated income statement upon the
retranslation of monetary assets and liabilities denominated in
foreign currencies
16.2 INTEREST RATE RISK
The Group is exposed to interest risk as it borrows funds at
floating interest rates, these are directly linked to LIBOR and/or
EURIBOR plus a margin based on the leverage ratio of the Group.
Despite a fall in interest rates linked to Covid-19, interest
fluctuations are generally low which minimises the Group's exposure
to interest rate movements. As a result, no hedging instruments
have been put in place.
The following sensitivity analysis has been determined based on
the floating rate liabilities. The Group considers a reasonable
interest rate movement in LIBOR to be 50 basis points based on
recent historical changes to interest rates. If interest rates had
been higher/lower by 50 basis points and all other variables were
held constant, the Group's profit for the period ended 30 June 2020
would decrease/increase by GBP0.54m (31 December 2019:
GBP0.43m).
16.3 CREDIT RISK
The Group's principal exposure to credit risk arises from
customer receivables (this includes trade receivables, work in
progress and accrued income) as well as cash and cash equivalents
and other receivables. Despite a challenging trading environment,
the impact of the Covid-19 outbreak on the recoverability of
debtors has not been significant, as evidenced by our strong
performance for underlying operating cash conversion. For net
receivable positions, as at the reporting date we anticipate that
customers will continue to meet their payment obligations. As a
result we have not incorporated updated forward-looking information
into measuring ECLs as at 30 June 2020. Our credit risk management
as set out in note 29.2 of the 2019 Annual Report remains
unchanged.
16.4 LIQUIDITY RISK
There has been no change in our liquidity risk assessment
compared to our disclosure in note 29.3 of the 2019 Annual
Report.
As at 30 June 2020, the contractual maturities of the Group's
financial liabilities were as follows:
Total contractual
<3 months 3 - 12 months 1 - 5 years >5 years cash flow
At 30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- ------------- ----------- -------- -----------------
Loans and borrowings (i) 894 5,670 109,287 - 115,851
Trade payables and accruals 12,563 - 541 - 13,104
Deferred consideration for
acquisitions 1,330 861 15,941 - 18,132
Lease liabilities 1,153 3,458 13,635 22,046 40,292
---------------------------- --------- ------------- ----------- -------- -----------------
15,940 9,989 139,404 22,046 187,379
---------------------------- --------- ------------- ----------- -------- -----------------
Total contractual
<3 months 3 - 12 months 1 - 5 years >5 years cash flow
At 31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- ------------- ----------- -------- -----------------
Loans and borrowings (i) 462 2,114 92,321 - 94,897
Trade payables and accruals 13,294 - 518 - 13,812
Deferred consideration for
acquisitions 823 5,382 - - 6,205
Lease liabilities 930 2,790 12,531 23,205 39,456
---------------------------- --------- ------------- ----------- -------- -----------------
15,509 10,286 105,370 23,205 154,370
---------------------------- --------- ------------- ----------- -------- -----------------
(i) This includes the future interest payments not yet accrued
and the repayment of capital upon maturity.
16.5 CAPITAL MANAGEMENT
The Group's objective for managing capital is unchanged from
that disclosed in Note 30 of the 2019 Annual Report. As disclosed
in note 14, the Group has increased its borrowings during the
period to partly fund the acquisitions of Exequtive, Aufisco and
Sanne private client business. In accordance with the Group's
capital risk management objective, the financial covenants attached
to the bank borrowings continue to be met.
For our non-current borrowings (see Note 14.1(a)), as at 30 June
2020, the Leverage ratio was 2.12x (31 December 2019: 1.98x), as a
result the margin applied to LIBOR and/or EURIBOR increased to 2%
(31 December 2019: 1.75%). Interest Cover was 12.89x (31 December
2019: 13.52x). As the maximum Leverage ratio is 3.25x and the
Interest Cover covenant is 4.00x, for both covenants there is
significant headroom.
17. CASH FLOW INFORMATION
17.1 OPERATING CASH FLOWS
GBP'000 H1 2020 H1 2019
--------------------------------------------------------- ------- -------
Operating profit 10,236 10,741
Adjustments for:
Depreciation of property, plant and equipment 2,879 2,117
Amortisation of intangible assets 3,540 2,838
Share-based payment expense 383 347
Share of profit of equity-accounted investee (245) (97)
--------------------------------------------------------- ------- -------
Operating cash flows before movements in working capital 16,793 15,946
--------------------------------------------------------- ------- -------
17.2 NON- UNDERLYING ITEMS WITHIN NET CASH FROM OPERATING
ACTIVITIES
GBP'000 H1 2020 H1 2019
---------------------------------------------------------- ------- -------
Net cash from operating activities 14,856 12,138
Non-underlying items:
Capital distribution from EBT12 2,650 2,976
Acquisition and integration costs 1,182 693
Other 33 38
---------------------------------------------------------- ------- -------
Total non-underlying items within net cash from operating
activities 3,865 3,707
---------------------------------------------------------- ------- -------
Underlying net cash from operating activities 18,721 15,845
---------------------------------------------------------- ------- -------
18. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
The Group's associate KIG has provided GBP0.43m of services to
Group entities during the six month period to 30 June 2020 (H1
2019: GBP0.375m).
The Group's only other significant related parties are key
management personnel, comprising the board of directors of the
principal operating entities, JTC PLC and JTCGHL, being those
persons having the authority and responsibility for planning,
directing and controlling the activities of the Group.
The remuneration of key management personnel of the Group is set
out below in aggregate for each of the categories specified in IAS
24 'Related Party Disclosures'.
GBP'000 H1 2020 H1 2019
------------------------------------------------ ------- -------
Salaries and other short-term employee benefits 987 990
Post employment and other long-term benefits 65 52
Share-based payments 262 252
------------------------------------------------ ------- -------
Total payments 1,314 1,294
------------------------------------------------ ------- -------
19. EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 1 July 2020, the Group completed its acquisition of the
assets, contracts and employees of Sanne Group plc's private client
business based in Jersey ("Sanne private client business"). To
date, clients representing annualised ongoing revenues of GBP4.1m
have transferred to JTC resulting in an initial cash payment of
GBP9m. For this acquisition, at the date the interim financial
statements were authorised for issue, it was impracticable to
disclose the information required by IFRS 3 'Business Combinations'
as Management needed to consider the pertinent facts and
circumstances surrounding the business combination in order to
appropriately determine the date upon which control was obtained
and then make their fair value assessments.
On 31 July 2020, JTC entered into a Subscription Agreement to
purchase 20% of the share capital of Harmonate Corp ("Harmonate"),
a Delaware corporation, for the aggregate sum of $1m. Harmonate was
incubated within the NESF Group and became a standalone business
from 30 March 2020. Harmonate is a software as a service (SaaS)
business and through its proprietary data operations technology,
'Conductor', delivers supervised machine learning for the
consumption, contextualisation and delivery of data, replacing the
need for costly labour resources within the middle and back office
functions of funds and fund administrators.
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