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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Jardine Lloyd | LSE:JLT | London | Ordinary Share | GB0005203376 | ORD 5P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1,914.00 | 1,914.00 | 1,916.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMJLT
RNS Number : 3242G
Jardine Lloyd Thompson Group PLC
03 March 2015
3rd March 2015
Jardine Lloyd Thompson Group plc
Preliminary Results for the year ended 31st December 2014 (unaudited)
Jardine Lloyd Thompson Group plc ("JLT" or "the Group") announces its preliminary results for the year ended 31st December 2014.
Financial Highlights
-- Total revenue up 13% to GBP1,104.1m -- Strong organic revenue growth of 6% -- Underlying PBT up 3% to GBP183.0m -- Reported PBT up 3% to GBP159.7m -- Underlying diluted EPS up 3% to 56.1p -- Reported diluted EPS up 3% to 47.8p -- Underlying profit margin down 110 basis points to 17.8% -- Increased total dividend of 28.9p up 6.3%
Operational and Strategic Highlights
-- Established Specialty insurance brokerage in USA o GBP5.2m net expenses in year as expected o Underlying Group PBT up 6% excluding these expenses -- Ongoing investment to deliver sustainable long term earnings growth
o 8 new acquisitions made for a total consideration of GBP63m, including Hayward Aviation for GBP27m
o 950 new joiners take total employee numbers above 10,000 -- Continued successful integration of JLT Re and Towers Watson Re
-- Created one of the world's leading Specialty businesses through the merger of JLT Specialty and Lloyd & Partners
-- Concluded Business Transformation Programme with higher than projected recurring savings of GBP16m for total one-off costs of GBP17m
-- Sale of French associate Siaci St Honoré in 2015 expected to generate cash receipt of approximately GBP82m
Dominic Burke, Chief Executive, commented:
"We are pleased to deliver another strong set of results, building on the progress and momentum of recent years. During the year we took a series of actions and strategic decisions, including the establishment of a Specialty insurance broking business in the US and the merger of JLT Specialty and Lloyd & Partners, that we believe will prove to be pivotal in terms of shaping our long term growth prospects. Despite a challenging insurance rating environment, we are confident in JLT's revenue growth momentum and in our strategy of continuing to invest to deliver sustainable long term earnings growth."
Enquiries: Dominic Burke, Jardine Lloyd Thompson 020 7528 Chief Executive Group plc 4948 Mike Reynolds, Finance 020 7528 Director 4375 Paul Dransfield, Corporate 020 7528 Communications 4933 Brunswick Group 020 7404 Tom Burns / Dania Saidam LLP 5959
A presentation to investors and analysts will take place at 9.00am today at The St Botolph Building, 138 Houndsditch, London, EC3A 7AW. A live webcast of the presentation can be viewed on the Group's website www.jltgroup.com.
FULL RELEASE FOLLOWS
_____________________________________________________________________________________
PRELIMINARY STATEMENT
JLT has delivered good results for 2014, building on the progress and momentum of recent years, with organic revenue growth of 6% (2013: 8.5%). This is a strong performance when set against the marked decline in both the insurance and reinsurance rating environment during the year.
The 2014 preliminary results are summarised in the tables below:
Year ended 31st December 2014 GBPm Total Revenue Trading Profit Trading Margin --------------------------------- ------------------------- ---------------------- 2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013 -------- ------- ---- -------- ------- ------- ------- ------ ------ ------ Risk & Insurance 820.5 13% 19% 5% 154.3 164.2 149.9 19% 19% 21% Employee Benefits 283.6 11% 14% 7% 65.0 66.2 55.8 23% 23% 22% Central Costs - - - - (22.5) (22.5) (20.3) - - - 1,104.1 13% 18% 6% 196.8 207.9 185.4 17.8% 18.1% 18.9% -------- ------- ---- -------- ------- ------- ------- ------ ------ ------ GBPm 2014 2013 ------- ------- ------- Underlying trading profit 196.8 185.4 Underlying share of associates 7.7 8.1 Net finance costs (21.5) (16.1) ------- ------- Underlying profit before taxation 183.0 177.4 Exceptional items (23.3) (22.8) ------- ------- Profit before taxation 159.7 154.6 Underlying tax expense (47.2) (46.8) Tax on exceptional items 5.1 5.0 Non-controlling interests (12.3) (10.8) ------- ------- Profit after taxation and non-controlling interests 105.3 102.0 ------- ------- Underlying profit after taxation and non-controlling interests 123.5 119.8 ------- ------- Diluted earnings per share 47.8p 46.4p Underlying diluted earnings per share 56.1p 54.5p
Notes:
CRE: Constant rates of exchange.
Organic growth is based on total revenue excluding the effect of currency, acquisitions, disposals and investment income.
Total revenue comprises fees, commissions and investment income.
Underlying results exclude exceptional items.
Total revenue increased by 13% to GBP1,104.1 million or 18% at constant rates of exchange (CRE), comprising 6% organic growth and 12% from acquisitions. Total revenue and underlying trading profit include investment income on fiduciary funds of GBP4.4 million (2013: GBP4.5 million).
Underlying trading profit increased by 6% to GBP196.8 million, or 12% at CRE. The underlying trading margin decreased from 18.9% to 17.8%, largely reflecting the impact of foreign exchange, which was an GBP11.1 million adverse movement in the year, and the investment being made to build a Specialty business in the US, which resulted in net expenses of GBP5.2 million in the year. Excluding these two factors, the underlying trading margin would have been 18.6%. This is despite an approximate 10% increase in our headcount during the year, demonstrating that we are maintaining tight control of our costs.
Underlying profit before tax was GBP183.0 million, 3% ahead of 2013, while reported profit before tax was GBP159.7 million compared to GBP154.6 million in the prior year, an increase of 3%. This is after charging net exceptional costs of GBP23.3 million, primarily relating to the Business Transformation Programme and costs relating to acquisitions, integration and the initial restructuring costs associated with the merger of JLT Specialty and Lloyd & Partners.
The tax charge was GBP42.1 million, or GBP47.2 million on an underlying basis. The underlying effective tax rate for 2014 was 26%, unchanged on 2013.
Profit after tax and non-controlling interests was GBP105.3 million (2013: GBP102.0 million) and reported diluted earnings per share was 47.8p (2013: 46.4p).
Underlying profit after tax and non-controlling interests increased by 3% to GBP123.5 million and underlying diluted earnings per share increased by 3% to 56.1p.
In 2014, some 56% of the Group's trading profit was generated in the first half of the year. For 2015 we are expecting the phasing of the Group's trading profit to be relatively even across the two halves of the year. This is for a combination of reasons, including the timings of recent acquisitions, our changing business mix, the phasing of a number of significant accounts and the impact of our investment in the US.
DIVIDENDS
Subject to shareholder approval, the final dividend will be increased to 18.3p per share for the year to 31st December 2014 (2013: 17.1p) and will be paid on 6th May 2015 to shareholders on the register at 4th April 2015. This brings the total dividend for the year to 28.9p per share, compared to 27.2p for the prior year, an increase of 6.3%.
OPERATIONAL REVIEW
The Group operates in two principal areas: Risk & Insurance and Employee Benefits. The results of each of these businesses are reported in more detail below:
Risk & Insurance
Total revenue in our Risk & Insurance division increased by 13% to GBP820.5 million. This represented a 19% increase at CRE and organic revenue growth of 5%. Trading profit grew by 3% to GBP154.3 million for the year, with a trading margin of 19%.
Year ended 31st December 2014 GBPm Total Revenue Trading Profit Trading Margin --------------------------------- ---------------------- ------------------- 2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013 ------ ------- ------ -------- ------ ------ ------ ----- ----- ----- JLT Specialty 255.4 5% 7% 6% 52.1 53.6 51.5 20% 21% 21% JLT Re 159.6 108% 115% 7% 24.4 26.1 11.3 15% 16% 15% JLT Australia and NZ 114.1 (8%) 2% 2% 32.3 36.1 37.1 28% 28% 30% Lloyd & Partners 85.2 2% 3% 1% 18.4 18.6 18.3 22% 22% 22% JLT Asia 71.8 7% 14% 9% 11.3 12.2 10.4 16% 16% 15% JLT Latin America 60.7 9% 24% 22% 19.3 21.6 17.2 32% 31% 31% Thistle UK 33.2 (5%) (5%) (5%) 2.7 2.7 2.4 8% 8% 7% JLT Canada 20.5 (20%) (11%) (8%) (1.1) (1.4) 1.5 (6%) (6%) 6% JLT Middle East and Africa 11.3 - - 14% (0.3) (0.3) (0.4) (3%) (3%) (9%) JLT Insurance Management 7.4 (8%) (4%) (5%) 0.4 0.4 0.6 5% 5% 7% JLT USA 1.3 - - - (5.2) (5.4) - - - - 820.5 13% 19% 5% 154.3 164.2 149.9 19% 19% 21% ------ ------- ------ -------- ------ ------ ------ ----- ----- -----
JLT Specialty delivered a strong performance with revenues of GBP255.4 million in 2014 and organic revenue growth of 6%. Trading profit increased to GBP52.1 million, an uplift of 1%, with a decrease in the trading margin from 21% to 20%. However, the trading margin remained unchanged at CRE.
We highlighted at the time of our interim results that we expected that the combination of the acceleration in the decline in insurance rates seen since the beginning of the second quarter of the year and the strength of sterling, would result in a broadly similar performance in this business to that delivered in the previous year. This has proven to be the case.
As the organic revenue growth number indicates, the underlying business is in good shape, maintaining our market leading positions in many of our Specialty areas, while we have continued to make progress in other key areas such as Financial Lines, M&A, Credit, Political Risk and Security. The business has also maintained its investment in high growth Specialties including Cyber, Entertainment and Renewables.
With the full strategic and operational benefits of the merger with Lloyd & Partners to be realised during 2015 and a strong new business pipeline, this business is now better positioned for future growth.
JLT Re delivered a solid performance in the year which included the first full year contribution from the Towers Watson reinsurance broking business which was acquired in November 2013.
Revenues were GBP159.6 million, an increase of 108% over the previous year and included organic revenue growth of 7%. This is a particularly strong performance when set against the sharp decline in the reinsurance rating environment experienced over the year, demonstrating how well positioned this business is to continue to win market share.
As anticipated, the trading margin for the business remained at 15%, reflecting our ongoing commitment to make significant investments in this business. Despite the difficult trading conditions, we believe that this business is capable of moving to a trading profit margin of 20% by the end of 2016. This belief is underpinned by the high levels of client retention being achieved, the continued ability of the business to attract and retain talent and the investments we are making to increase efficiency and effectiveness through improvements in the operating model, systems and processes.
We also remain very encouraged by the support we are receiving from cedants,as reflected by the business' strong performance during the January 2015 renewals season when we both won significant new accounts and achieved growth with existing clients. We therefore believe that JLT Re is well positioned for growth.
JLT Australia and New Zealand delivered revenue of GBP114.1 million, growth of 2% at CRE, all of which was organic. Actual revenues, however, reduced by 8% when compared to the previous year due to the fall in the value of the Australian dollar against sterling. The trading margin decreased to 28%, compared to 30% in 2013.
The underlying performance of the business remains pleasing when set against the continued fierce competition and decline in insurance rates experienced in the region. Its market leading Public Sector business continued its progress during the year. The investments made in attracting talent to the Group's core Specialties such as Energy, Mining and Construction are repositioning JLT to become one of the leading Specialty brokers for large corporate buyers in the region.
Lloyd & Partners, the Group's specialist wholesale broker, achieved revenue growth of 2%, or 3% at CRE, with organic revenue growth of 1%. Actual trading profit was broadly flat on the previous year, but increased by 1% at CRE. This was achieved despite increasingly competitive domestic insurance markets making the London, Bermuda and European markets less attractive to Lloyd & Partners'wholesale clients.
In August, we announced the bringing together of JLT Specialty and Lloyd & Partners to create a single Specialty business. This merger was effective from the beginning of 2015 and has progressed very smoothly. The enduring strength and importance of our wholesale relationships and the quality of the service and expertise we provide to our clients has come through in the months since the announcement of the merger, with the business delivering its best November and December trading performance for many years.
JLT Asia delivered revenue growth of 7% to GBP71.8 million, an increase of 14% at CRE, with organic revenue growth of 9%. Trading profit improved by 9% to GBP11.3 million, with the trading margin increasing to 16%.
This strong performance underlines the continued successful build out of the Group's Specialty capabilities across the region. The business is attracting new clients and winning market share in an expanding Specialty market place where demand continues to increase, driven by long term demographic and socio-economic factors.
JLT Latin America had an impressive year, achieving revenue growth of 9% to GBP60.7 million, an increase of 24% at CRE, with organic revenue growth of 22%. Trading profit increased to GBP19.3 million, an increase of 26% at CRE, with the trading margin increasing to 32%. The new start-up business in Argentina enjoyed a successful first year.
Our Specialty businesses have continued to benefit from focus and investment in areas such as Construction, Surety, Energy, Aviation and Property, which are in turn aligned to the more dynamic industry sectors in what remains a high growth region.
In 2014 a regional Affinity business was established that had an immediate impact through the development of a bespoke technology platform that has helped differentiate the client offering.
JLT USA was formed in August when JLT announced its decision to enter the US market as a Specialty broker with a focus on Energy, Construction, Financial Lines, Credit, Political & Security and Aerospace.
This decision reflected the brand, reputation, scale, geographic reach and leadership that we have been able to build over recent years by following our Specialty-led strategy and the unique opportunity this gave us to create a dynamic platform for long term growth in the world's largest insurance market. It also reflected the significant and growing demand from clients and leading industry talent for JLT to challenge the position of the other major brokers in the US and to deliver our unique proposition on a global scale, given our clients' increasing requirements for seamless worldwide coverage.
At that time we stated that this was expected to result in a net investment of approximately $80 million during the period 2015 to 2017, before moving into profit in 2018 and then generating an accelerated return thereafter. This figure takes account of the upfront costs of building out the business offset by revenues which are expected to build more slowly. Given the size of this investment, it is our intention to report the financial results of this new business area separately.
JLT USA has made a very encouraging start, resulting in the acceleration of its recruitment plans and the bringing forward of some expenditure into 2014. This was partially offset by revenues which, as expected, were minimal for the period. This produced net expenses in the period of GBP5.2 million. In 2015 it is anticipated that the business will generate revenues in the region of $50 million and a net trading loss of $35 million. This includes revenues and profits transferred from other parts of the Group and the Energy business acquired from Alliant in October 2014.
We have been very encouraged by the quality of the people we have been able to hire, the response of insurers and reinsurers who have been very supportive of the Group's plans and the early indications of traction with clients.
Employee Benefits
Total revenue in our Employee Benefits division increased by 11% to GBP283.6 million. This represented a 14% increase at CRE and organic revenue growth of 7%. Trading profit grew by 17% to GBP65.0 million for the year, with a trading margin of 23%.
Year ended 31st December 2014 GBPm Total Revenue Trading Profit Trading Margin ------------------------------- ---------------------- --------------------- 2014 Growth CRE Organic 2014 CRE 2013 2014 CRE 2013 ------ ------- ---- -------- ------ ------ ------ ------ ------ ----- UK & Ireland 183.2 6% 6% - 36.0 36.0 32.2 20% 20% 19% Asia 69.3 25% 32% 28% 23.4 24.0 18.6 34% 33% 34% Latin America 20.1 12% 26% 6% 4.2 4.7 4.3 21% 21% 24% Australia and NZ 7.7 1% 13% 13% 2.0 2.2 1.1 26% 26% 14% Canada 1.7 (10%) 1% 1% (0.4) (0.4) - (21%) (21%) (1%) Middle East and Africa 1.6 - - - (0.2) (0.3) (0.4) (15%) (15%) - 283.6 11% 14% 7% 65.0 66.2 55.8 23% 23% 22% ------ ------- ---- -------- ------ ------ ------ ------ ------ -----
OurUK & Ireland Employee Benefits business increased revenues by 6% to GBP183.2 million, with good trading profit growth of 12% to GBP36.0 million and the trading margin increasing to 20% from the 19% achieved in 2013.
JLT's market position was further strengthened during the year by the acquisition of Ensign Pensions Administration in April. Following the acquisition, all of Ensign's clients were retained and several major new administration clients were won. As a result, JLT is today the largest administrator of private sector pensions in the UK.
The UK and Ireland pensions and savings landscape will continue to experience significant regulatory change over the years ahead and increasing demand for help and support from existing and new clients is generating new business opportunities.
Asia achieved strong revenue growth of 25% to GBP69.3 million, an increase of 32% at CRE, with impressive organic revenue growth of 28%. This growth was driven by our market leading life insurance broking business, which provides solutions to high-net-worth clients, working closely with most of the largest private banks in the region.
In Asia we have a strong and growing Employee Benefits business employing some 700 people which secured many new clients during the year. We are seeing growing demand for benefits advice, particularly around Group health insurance and we are developing our services to assist the management of these costs for clients. In early 2015, we invested in JLT Essential Healthcare Network which provides a strong platform to take advantage of healthcare opportunities in China.
In LatAm, our acquisition of SCK at the beginning of 2014 has broadened our overall client proposition in Brazil by extending our capabilities into broader risk management through wellness management and consulting. This has enabled us to secure good levels of new business, whilst clearly differentiating ourselves in the market place. Our other businesses have continued to perform well, benefitting from growing demand and our strong capabilities and market position.
In Australia & New Zealand, we are growing our Employee Benefits business by offering an integrated broking, occupational health and return-to-work service, assisting clients in managing the rising cost of mandatory worker's compensation and discretionary benefits.
We have this morning announced the acquisition of Recovre, one of the leading providers of workplace rehabilitation services in the Australian market. This acquisition greatly enhances JLT's scale and ability to deliver workplace rehabilitation services on behalf of corporate clients and insurers and positions JLT as one of the clear market leaders in this rapidly expanding sector.
Our Employee Benefits operations in Canada and Middle East & Africa continue to make progress.
ASSOCIATES
Year ended 31st December 2014 GBPm Contribution After Tax --------------------------- 2014 CRE 2013 Growth ----- ---- ----- ------- Underlying share of associates 7.7 8.1 8.1 (5%) ----- ---- ----- -------
Our Associates' contribution in 2014 reduced marginally, reflecting the mixed trading conditions that have impacted our European Associates in particular, combined with adverse currency movements.
On 13th February 2015, the Group announced that the shareholders in Milestone, the holding company of Siaci St Honoré ("Siaci"), JLT's French Associate, had received an offer to sell their shares to a private equity investor to fund the next phase of the company's development. As part of this transaction, JLT would dispose of its 26.2% shareholding in the business for net cash proceeds of around GBP82 million, generating an approximate exceptional gain of GBP21 million in 2015.
Assuming this transaction completes as expected in May, this will reduce Siaci's contribution to JLT in 2015 to approximately GBP2 million, which compares to GBP5 million in 2014.
Siaci and JLT share a longstanding Specialty-focused trading relationship that goes back over twenty years. Siaci remains the exclusive partner of the JLT International Network in France.
The weighting of the contribution from Associates is towards the first half of the financial year and we expect this to continue.
EXCEPTIONAL ITEMS
In 2014 total net exceptional and non-recurring costs for the year were GBP23.3 million (2013: GBP22.8 million). These primarily comprised the costs of the Business Transformation Programme, which completed at the end of 2014 and is detailed below, acquisition and integration costs and the initial restructuring costs associated with the merger of JLT Specialty and Lloyd & Partners.
For 2015, exceptional and non-recurring items are expected to include acquisition and integration costs of GBP11 million and restructuring costs of GBP9 million, off-set by the exceptional gain of GBP21 million on the anticipated disposal of the 26.2% interest in Milestone, the holding company of the Group's French Associate, Siaci St Honoré.
OPERATING COSTS
In 2014, the Group's underlying operating cost ratio increased by 110 basis points to 82.2% of total revenue. This reflects the competitive trading environment, foreign exchange movements and the continued investment in the business, particularly the investment being made in establishing a Specialty insurance broking business in the US.
We remain focused on cost discipline, but have a track record in delivering market-leading levels of organic growth which gives us the confidence to make investments when we identify an opportunity to deliver sustainable long-term earnings growth. Clearly establishing a US Specialty insurance broking business is such an opportunity and our current expectation is that this investment will impact the Group's trading margin by approximately 200 basis points in 2015.
CASH FLOW AND BALANCE SHEET
The Group continues to be well funded. The increase in net debt during the year largely reflects the cost of acquisitions and capital expenditure in 2014. In addition the increase reflects the retranslation of $500 million of the Group's Private Placement Loan Notes, the impact of which is hedged in the balance sheet. Net debt at 31st December 2014 was GBP474 million. At that date the Group had committed long term unsecured bank facilities of GBP350 million and drawn Private Placement Loan Notes equivalent to GBP393 million, resulting in total committed debt facilities equivalent to GBP743 million, with maturities between 2015 and 2029. Gross borrowings as at 31st December 2014 were GBP612 million, which includes GBP593 million of borrowings under the Group's committed facilities, leaving un-utilised committed facilities headroom of GBP150 million.
In February 2015 the Group completed the renewal of its core unsecured revolving credit facility. This GBP450 million committed facility is for a term of 5 years. Taken together with an existing bilateral facility of GBP50 million, the Group has total bank facilities of GBP500 million. Had this renewed revolving credit facility been in place at 31 December 2014, the Group's committed headroom would have been GBP300 million.The Group now has medium and long term debt facilities equivalent to approximately GBP893 million.
The Group expects to receive some GBP82 million during May 2015, representing the proceeds of the disposal of its shareholding in its French Associate Siaci, which will be used to repay borrowings drawn under the Group's revolving credit facility, further increasing the available headroom.
FOREIGN EXCHANGE
The Group's major currency transaction exposure arises in those businesses that earn US dollar denominated revenue but which have a sterling cost base. The Group continues to operate a US dollar hedging programme to smooth the volatility caused by exchange rate movements. In 2014, the Group achieved an average rate after hedging of US$1.56 compared to an average market rate of US$1.65.
As at 27th February 2015, some 63% of anticipated dollar revenues for 2015 (approximately US$355 million) are hedged at an average rate of US$1.55. For 2016, some 43% of expected dollar revenues are hedged at an average rate of US$1.57 and some 10% are hedged for 2017 at an average rate of US$1.59.
As a guide, each one cent movement in the achieved rate currently translates to a change of approximately GBP1.5 million in revenue and a corresponding impact on trading profit equal to approximately 65% of the revenue change.
In addition to the transactional foreign exchange exposure which is managed through the Group's hedging programmes, JLT is also exposed to translational foreign exchange movements in overseas earnings which are not hedged. Given the relative size and profitability of the Group's Australian business, the most material such exposure is to the Australian dollar which continues to be weak versus sterling.
BUSINESS TRANSFORMATION PROGRAMME
The Group's two year Business Transformation Programme successfully completed in 2014. The previously projected total one-off costs and recurring annualised savings for the programme had been GBP18 million and GBP12 million respectively. The final outcome however exceeded these expectations, with a final total cost of GBP17 million and recurring savings of GBP16 million.
BOARD AND SENIOR MANAGEMENT DEVELOPMENTS
On 30th January 2015, the Group announced several senior management appointments within its UK Employee Benefits business and JLT Asia. These appointments are subject to obtaining the appropriate regulatory approvals, where required.
Mark Wood is retiring from his role as the CEO of JLT's UK Employee Benefits business and will be leaving the Group at the end of May 2015.
Duncan Howorth is returning to the UK after two successful years as CEO of JLT Asia to take up the position of CEO of JLT's UK Employee Benefits business, effective from 1st June 2015. Duncan will continue in his role as the International Chairman of Employee Benefits.
Dominic Samengo-Turner is being appointed CEO of JLT Asia, with effect from 1st May 2015. Dominic previously spent over 20 years at Willis, most recently as Co-Chief Executive of Global Specialities and a Director of Willis Limited.
OUTLOOK
Despite a challenging insurance rating environment, we are confident in JLT's revenue growth momentum and in our strategy of continuing to invest to deliver sustainable long term earnings growth.
Results follow
Jardine Lloyd Thompson Group plc
Consolidated Income Statement
Unaudited Preliminary Results for the year ended 31st December 2014
Notes 2014 2013 GBP'000 GBP'000 ---------- ---------- Fees and commissions 3 1,099,728 974,623 Investment income 3 4,398 4,529 ---------- ---------- Total revenue 3 1,104,126 979,152 Salaries and associated expenses (671,758) (580,968) Premises (57,927) (53,638) Other operating costs (172,426) (157,386) Depreciation, amortisation and impairment charges 4 (28,139) (24,667) ---------- ---------- Operating profit 2,3,4 173,876 162,493 ---------- ---------- Analysed as: Operating profit before exceptional items 3 196,830 185,365 Acquisition and integration costs 4 (13,271) (9,020) Business Transformation Programme 4 (7,753) (9,521) Restructuring costs 4 (2,482) - Premises consolidation costs 4 - (5,022) Other exceptional items 4 552 691 ---------- ---------- Operating profit 2,3,4 173,876 162,493 ---------- ---------- Finance costs 5 (22,972) (17,476) Finance income 5 1,526 1,441 ---------- ---------- Finance costs - net 3,5 (21,446) (16,035) Share of results of associates 3 7,306 8,106 ---------- ---------- Profit before taxation 2,3 159,736 154,564 Income tax expense 3,6 (42,072) (41,789) ---------- ---------- Profit for the year 117,664 112,775 ---------- ---------- Profit attributable to: Owners of the parent 3 105,291 101,960 Non-controlling interests 3 12,373 10,815 ---------- ---------- 117,664 112,775 ---------- ---------- Earnings per share attributable to the owners of the parent during the year (expressed in pence per share) 7 Basic earnings per share 47.9p 46.6p Diluted earnings per share 47.8p 46.4p
The notes on pages 19 to 52 form an integral part of these condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Consolidated Statement of Comprehensive Income
Unaudited Preliminary Results for the year ended 31st December 2014
Notes 2014 2013 GBP'000 GBP'000 --------- --------- Profit for the year 117,664 112,775 --------- --------- Other comprehensive expense Items that will not be reclassified to profit or loss --------- --------- Remeasurement of post employment benefit obligations 23 (51,394) (9,370) Taxation thereon 9,907 1,364 --------- --------- Total items that will not be reclassified to profit or loss (41,487) (8,006) Items that may be reclassified subsequently to profit or loss Fair value gains/(losses) net of tax --------- --------- * available-for-sale 203 48 * available-for-sale reclassified to the income statement (204) - * cash flow hedges (17,457) 1,720 Currency translation differences (3,238) (24,332) Total items that may be reclassified subsequently to profit or loss (20,696) (22,564) --------- --------- Other comprehensive expense net of tax (62,183) (30,570) --------- --------- Total comprehensive income for the year 55,481 82,205 --------- --------- Attributable to: Owners of the parent 43,312 72,830 Non-controlling interests 12,169 9,375 --------- --------- 55,481 82,205 --------- ---------
The notes on pages 19 to 52 form an integral part of these condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Consolidated Balance Sheet
Unaudited Preliminary Results as at 31st December 2014
Notes 2014 2013 GBP'000 GBP'000 ------------ ---------- NET OPERATING ASSETS Non-current assets Goodwill 9 475,697 429,450 Other intangible assets 86,495 69,092 Property, plant and equipment 61,405 59,715 Investments in associates 100,650 101,445 Available-for-sale financial assets 10,15 9,004 22,346 Derivative financial instruments 11,15 18,514 16,906 Retirement benefit surpluses 23 572 1,249 Deferred tax assets 64,818 51,809 ------------ ---------- 817,155 752,012 ------------ ---------- Current assets Trade and other receivables 12 493,647 411,428 Derivative financial instruments 11,15 3,101 9,826 Available-for-sale financial assets 10,15 5,384 1,421 Cash and cash equivalents 13,15 871,246 753,164 ------------ ---------- 1,373,378 1,175,839 ------------ ---------- Current liabilities Borrowings 15,16 (168,586) (12,995) Trade and other payables 14 (1,037,544) (909,595) Derivative financial instruments 11,15 (2,491) (2,344) Current tax liabilities (8,743) (5,201) Provisions for liabilities and charges 17 (7,588) (10,158) ------------ ---------- (1,224,952) (940,293) ------------ ---------- Net current assets 148,426 235,546 ------------ ---------- Non-current liabilities Borrowings 15,16 (443,651) (447,188) Derivative financial instruments 11,15 (15,859) (30,543) Deferred tax liabilities (16,687) (12,542) Retirement benefit obligations 23 (179,607) (131,876) Provisions for liabilities and charges 17 (3,225) (4,952) ------------ ---------- (659,029) (627,101) ------------ ---------- 306,552 360,457 ------------ ---------- TOTAL EQUITY Capital and reserves attributable to the owners of the parent Ordinary shares 11,006 11,003 Share premium 18 103,941 103,739 Fair value and hedging reserves 18 (234) 17,224 Exchange reserves 18 (5,033) (1,999) Retained earnings 178,932 211,009 ------------ ---------- Shareholders' equity 288,612 340,976 Non-controlling interests 17,940 19,481 ------------ ---------- 306,552 360,457 ------------ ----------
The notes on pages 19 to 52 form an integral part of these condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Consolidated Statement of Changes in Equity
Unaudited Preliminary Results for the year ended 31st December 2014
For the year ended 31st December 2014 ---------------------------------------------------------------------------- Ordinary Other Retained Shareholders' Non-controlling Total Notes shares reserves earnings equity interests equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- --------- -------------- ---------------- --------- Balance at 1st January 2014 11,003 118,964 211,009 340,976 19,481 360,457 --------- --------- --------- -------------- ---------------- --------- Profit for the year - - 105,291 105,291 12,373 117,664 Other comprehensive expense for the year - (20,492) (41,487) (61,979) (204) (62,183) --------- --------- --------- -------------- ---------------- --------- Total comprehensive (expense)/income for the year - (20,492) 63,804 43,312 12,169 55,481 Dividends 8 - - (60,610) (60,610) (8,324) (68,934) Amounts in respect of share based payments: * reversal of amortisation net of tax - - 18,646 18,646 - 18,646 * shares acquired - - (32,698) (32,698) - (32,698) Acquisitions 21 - - - - (5,170) (5,170) Disposals - - - - (216) (216) Change in non-controlling interests 21 - - (21,219) (21,219) - (21,219) Issue of share capital 3 202 - 205 - 205 --------- --------- --------- -------------- ---------------- --------- Balance at 31st December 2014 11,006 98,674 178,932 288,612 17,940 306,552 --------- --------- --------- -------------- ---------------- --------- For the year ended 31st December 2013 ---------------------------------------------------------------------------- Ordinary Other Retained Shareholders' Non-controlling Total Notes shares reserves earnings equity interests equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- --------- -------------- ---------------- --------- Balance at 1st January 2013 10,997 139,537 182,775 333,309 14,909 348,218 --------- --------- --------- -------------- ---------------- --------- Profit for the year - - 101,960 101,960 10,815 112,775 Other comprehensive expense for the year - (21,124) (8,006) (29,130) (1,440) (30,570) --------- --------- --------- -------------- ---------------- --------- Total comprehensive (expense)/income for the year - (21,124) 93,954 72,830 9,375 82,205 Dividends 8 - - (57,092) (57,092) (5,475) (62,567) Amounts in respect of share based payments: * reversal of amortisation net of tax - - 18,306 18,306 - 18,306 * shares acquired - - (21,704) (21,704) - (21,704) Acquisitions - - - - 685 685 Disposals - - - - (48) (48) Additions - - - - 35 35 Change in non-controlling interests - - (5,230) (5,230) - (5,230) Issue of share capital 6 551 - 557 - 557 --------- --------- --------- -------------- ---------------- --------- Balance at 31st December 2013 11,003 118,964 211,009 340,976 19,481 360,457 --------- --------- --------- -------------- ---------------- ---------
The notes on pages 19 to 52 form an integral part of these condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Consolidated Statement of Cash Flows
Unaudited Preliminary Results for the year ended 31st December 2014
Notes 2014 2013 GBP'000 GBP'000 ---------- -------------------- Cash flows from operating activities Cash generated from operations 20 159,299 163,430 Interest paid (16,484) (8,772) Interest received 6,000 5,538 Taxation paid (36,560) (41,380) Increase in net insurance broking payables 77,268 106,203 ---------- -------------------- 189,523 225,019 Dividend received from associates 2,287 1,732 ---------- -------------------- Net cash generated from operating activities 191,810 226,751 ---------- -------------------- Cash flows from investing activities Purchase of property, plant and equipment (13,371) (44,788) Purchase of other intangible assets (36,931) (27,354) Proceeds from disposal of property, plant and equipment 1,041 596 Acquisition of businesses, net of cash acquired 21 (58,205) (150,874) Acquisition of associates (686) (230) Proceeds from disposal of businesses, net of cash disposed 22 703 (2,089) Purchase of available-for-sale other investments - (3,264) Proceeds from disposal of available-for-sale other investments 1,008 1,317 ---------- -------------------- Net cash used in investing activities (106,441) (226,686) ---------- -------------------- Cash flows from financing activities Dividends paid to owners of the parent (60,327) (57,582) Purchase of available-for-sale financial assets (5) (6,439) Proceeds from disposal of available-for-sale financial assets 7,991 269 Purchase of shares (32,698) (21,704) Proceeds from issuance of ordinary shares 205 557 Proceeds from borrowings 208,514 230,403 Repayments of borrowings (84,450) (4,711) Dividends paid to non-controlling interests (8,324) (5,475) ---------- -------------------- Net cash generated from financing activities 30,906 135,318 ---------- -------------------- Net increase in cash and cash equivalents 116,275 135,383 Cash and cash equivalents at beginning of the year 753,164 624,321 Exchange gains/(losses) on cash and cash equivalents 1,807 (6,540) ---------- -------------------- Cash and cash equivalents at end of the year 871,246 753,164 ---------- --------------------
The notes on pages 19 to 52 form an integral part of these condensed consolidated financial statements.
Jardine Lloyd Thompson Group plc
Notes to the Unaudited Preliminary Results
For the year ended 31st December 2014
1. Basis of accounting
The consolidated preliminary results of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC interpretations and the Companies Act 2006 applicable to Companies reporting under IFRSs. The consolidated preliminary results have been prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of available-for-sale assets and financial assets and liabilities (including derivative financial instruments) at fair value through profit and loss.
The accounting policies are consistent with those of the Annual Report for the year ended 31st December 2013 except as described below.
Standards, amendments and interpretations effective in 2014
The principal standards adopted by the Group for the first time for the financial year beginning on or after 1st January 2014 are:
IFRS 10, 'Consolidated financial statements' builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the Parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess.
IFRS 11, 'Joint arrangements' focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted.
IFRS 12, 'Disclosures of interests in other entities' includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles.
The preliminary results for the year ended 31st December 2014 are unaudited.
2. Alternative income statement
The format of the consolidated income statement on page 14 conforms to the requirements of IFRS. The alternative income statement set out below, which is provided by way of additional information, has been prepared on a basis that conforms more closely to the approach adopted by the Group in assessing its performance. The statement provides a reconciliation between the underlying results used by the Group to assess performance and the IFRS income statement.
Year ended 31st December 2014 ----------------------------------------------- Underlying Exceptional profit items Total GBP'000 GBP'000 GBP'000 ----------- --- ------------ --- ---------- Fees and commissions 1,099,728 - 1,099,728 Investment income 4,398 - 4,398 Salaries and associated expenses (656,323) (15,435) (671,758) (55,576) Premises ) (2,351) (57,927) Other operating costs (167,258) (5,168) (172,426) Depreciation, amortisation and impairment charges (28,139) - (28,139) Trading profit 196,830 (22,954) 173,876 Finance costs - net (21,446) - (21,446) Share of results of associates 7,660 (354) 7,306 ----------- --- ------------ --- ---------- Profit before taxation 183,044 (23,308) 159,736 ----------- --- ------------ --- ---------- Year ended 31st December 2013 ---------------------------------------------- Underlying Exceptional profit items Total GBP'000 GBP'000 GBP'000 --------------- ------------ --------------- Fees and commissions 974,623 - 974,623 Investment income 4,529 - 4,529 Salaries and associated expenses (569,716) (11,252) (580,968) Premises (48,229) (5,409) (53,638) Other operating costs (151,175) (6,211) (157,386) Depreciation, amortisation and impairment charges (24,667) - (24,667) Trading profit 185,365 (22,872) 162,493 Finance costs - net (16,035) - (16,035) Share of results of associates 8,106 - 8,106 --------------- ------------ --------------- Profit before taxation 177,436 (22,872) 154,564 --------------- ------------ --------------- 3. Segment information
Management has determined its operating segments based on the analysis used to make strategic decisions.
Business segment analysis
The Group is organised on a worldwide basis into three main segments: Risk & Insurance, Employee Benefits and Head Office & Other operations. These segments are consistent with the internal reporting structure of the Group.
The Risk & Insurance segment comprises JLT's global specialist, wholesale, reinsurance broking, personal lines and SME activities. The Employee Benefits segment consists of pension administration, outsourcing and employee benefits consultancy, healthcare and wealth management activities. Certain Risk & Insurance and Employee Benefits operating segments have been disclosed within the reporting segments given their individual size. The Head Office & Other segment consists mainly of holding companies, central administration functions, the Group's captive insurance companies and the Group's investments in associates.
JLT Re and JLT Asia are now disclosed as reportable segments to meet the quantitative thresholds required by IFRS 8. During the year, the Group has reclassified the Middle East and North Africa business which was reported previously in JLT Specialty to the Middle East and Africa segment (included in Other Risk & Insurance).
Segment results
Management assesses the performance of the operating segments based upon a measure of underlying trading profit. Segment results include the net income or expense derived from the trading activities of the segment together with the investment income earned on fiduciary funds. Interest income on the Group's own funds and finance costs are excluded since the trading activities of the Group's primary segments are not of a financial nature. Income tax expense and the charge in respect of non-controlling interests are excluded from the segmental allocation.
Segment assets and liabilities
Assets and liabilities are not allocated to individual segments and are therefore all reported within Head Office & Other.
Investments in associates
The Group owns the following stakes in its principal associates: 26% in Milestone, the holding company of Siaci Saint Honoré, which operates principally in France; 20% of GrECo, which operates mainly in Austria and Eastern Europe; 25% of MAG-JLT, which operates mainly in Italy and 25% of March-JLT, which operates mainly in Spain. On the 2nd of July 2014, the Group acquired a 26% shareholding in JLT Independent Insurance Brokers Private Ltd which operates in India. The investment and the Group's share of the net profit of these associates are included in the Head Office & Other segment, together with the investment and results of the Group's other associates, Sterling Re Intermediaro de Reaseguro SA de CV, JLT Insurance Management Malta and JLT Energy (France) SAS.
Other segment items
Capital expenditure comprises additions to property, plant and equipment and other intangible assets.
Year ended 31st December 2014 ------------------------------------------------------------------------------------------------------------------ Risk & Insurance Employee Benefits ------------------- JLT Australia Other & Lloyd Risk UK Other Head JLT JLT New & JLT & & Employee Office Specialty Re Zealand Partners Asia Insurance Ireland Benefits & Other Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------ Fees and commissions 254,561 159,240 111,767 85,094 71,587 133,929 183,167 100,383 - 1,099,728 Investment income 801 377 2,353 143 167 494 1 62 - 4,398 ---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------ Total revenue 255,362 159,617 114,120 85,237 71,754 134,423 183,168 100,445 - 1,104,126 ---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------ Underlying trading profit 52,149 24,453 32,269 18,372 11,299 15,723 36,002 29,030 (22,467) 196,830 ---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------ Operating profit 48,631 14,045 32,269 16,279 9,094 14,600 34,228 28,642 (23,912) 173,876 Finance costs - net - - - - - - - - (21,446) (21,446) Share of results of associates - - - - - - - - 7,306 7,306 ---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------ Profit before taxation 48,631 14,045 32,269 16,279 9,094 14,600 34,228 28,642 (38,052) 159,736 Income tax expense - - - - - - - - (42,072) (42,072) Non-controlling interests - - - - - - - - (12,373) (12,373) ---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------ Net profit attributable to the owners of the parent 48,631 14,045 32,269 16,279 9,094 14,600 34,228 28,642 (92,497) 105,291 ---------- -------- ---------- --------- -------- ---------- -------- --------- ------------ ------------ Segment assets 2,089,883 2,089,883 Investments in associates 100,650 100,650 ------------ ------------ Total assets 2,190,533 2,190,533 ------------ ------------ Segment liabilities (1,883,981) (1,883,981) ------------ ------------ Total liabilities (1,883,981) (1,883,981) ------------ ------------ Other segment items: Capital expenditure 6,733 2,859 2,370 9,493 3,125 7,567 7,592 1,419 9,144 50,302 Depreciation, amortisation and impairment charges (3,793) (1,687) (2,916) (2,732) (2,372) (4,064) (6,023) (1,107) (11,297) (35,991) Year ended 31st December 2013 ------------------------------------------------------------------------------------------------------------------------------------- Risk & Insurance Employee Benefits -------------------------------------- JLT Australia Other & Lloyd Risk Other Head JLT JLT New & JLT & UK Employee Office Specialty Re Zealand Partners Asia Insurance & Ireland Benefits & Other Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------ Fees and commissions 241,930 76,686 121,829 83,507 66,961 128,485 172,101 83,124 - 974,623 Investment income 815 140 2,640 142 146 600 1 45 - 4,529 ---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------ Total revenue 242,745 76,826 124,469 83,649 67,107 129,085 172,102 83,169 - 979,152 ---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------ Underlying trading profit 51,544 11,303 37,073 18,344 10,374 21,252 32,200 23,608 (20,333) 185,365 ---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------ Operating profit 48,191 6,574 35,933 18,344 8,034 20,406 27,008 22,795 (24,792) 162,493 Finance costs - net - - - - - - - - (16,035) (16,035) Share of results of associates - - - - - - - - 8,106 8,106 ---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------ Profit before taxation 48,191 6,574 35,933 18,344 8,034 20,406 27,008 22,795 (32,721) 154,564 Income tax expense - - - - - - - - (41,789) (41,789) Non-controlling interests - - - - - - - - (10,815) (10,815) ---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------ Net profit attributable to the owners of the parent 48,191 6,574 35,933 18,344 8,034 20,406 27,008 22,795 (85,325) 101,960 ---------- -------- ---------- --------- -------- ---------- ------------------ ------------------ ------------ ------------ Segment assets 1,826,406 1,826,406 Investments in associates 101,445 101,445 ------------ ------------ Total assets 1,927,851 1,927,851 ------------ ------------ Segment liabilities (1,567,394) (1,567,394) ------------ ------------ Total liabilities (1,567,394) (1,567,394) ------------ ------------ Other segment items: Capital expenditure 2,143 1,752 7,873 872 4,214 4,154 10,255 782 40,097 72,142 Depreciation, amortisation and impairment charges (4,145) (1,219) (2,624) (1,152) (1,893) (4,059) (4,794) (728) (10,807) (31,421)
Geographical segment analysis
Although the Group's two business segments are managed on a worldwide basis, they operate in five principal geographical areas of the world.
The United Kingdom is the home country of the parent company Jardine Lloyd Thompson Group plc.
The Risk & Insurance segment operates in the United Kingdom, the Group's home country. In the Americas, the Risk & Insurance segment operates in Argentina, Bermuda, the Caribbean, Brazil, Canada, Colombia, Peru, Chile and the United States. The Australasian segment includes operations in Australia and New Zealand. In Europe, it operates in Republic of Ireland, Sweden, Finland, Norway, Denmark, Germany, Guernsey, France, The Netherlands, Spain, Switzerland and Russia. The Asian segment includes operations in Singapore, Hong Kong, Taiwan, Indonesia, Japan, Thailand, South Korea, Philippines, Malaysia, China, Vietnam, Dubai, Qatar and Bahrain. In Africa, it operates in South Africa.
The Employee Benefits segment operates in the United Kingdom. In the Americas, the Employee Benefits segment operates in Brazil, Canada, Colombia and Peru. The Australasian segment includes operations in Australia and New Zealand. In Europe, it operates in the Republic of Ireland and Switzerland. The Asian segment includes operations in Singapore, Hong Kong, Taiwan, Indonesia, Japan, Thailand, South Korea, Philippines, Malaysia, China and Vietnam. In Africa, it operates in South Africa.
The Head Office & Other activities segment is mainly based in the United Kingdom with minor operations in the Americas, Europe and Asia. The Group's captive operations are included in the United Kingdom segment.
Fees and commissions are disclosed by (1) the country in which the office is located and (2) the country in which the customer is located.
Segment non-current assets, segment assets and segment liabilities are disclosed based on the country in which they are located or occur. Interest bearing assets (e.g. cash and cash equivalents and investments & deposits) relating to the Group's own funds and deferred tax assets are excluded from segment assets. Interest bearing liabilities (e.g. borrowings) and income and deferred tax liabilities are excluded from segment liabilities. Items excluded from segmental allocation are referred to as "unallocated".
Year ended 31st December 2014 ------------------------------------------------------------------------------ Fees Fees Segment and commissions and commissions non-current Segment Segment (1) (2) assets assets liabilities GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------------- ----------------- ------------- ---------- ------------- UK 591,002 360,415 378,995 1,192,734 (830,555) Americas 199,696 320,918 157,286 329,087 (158,945) Australasia 121,728 131,071 25,705 118,270 (79,983) Asia 156,054 166,364 41,398 183,580 (134,305) Europe 26,974 86,856 15,926 52,560 (33,527) Rest of the World 4,274 34,104 4,287 5,213 (3,326) ----------------- ----------------- ------------- ---------- ------------- 1,099,728 1,099,728 623,597 1,881,444 (1,240,641) ----------------- ----------------- ------------- ---------- ------------- Investment in 100,650 - associates Unallocated assets/(liabilities) 208,439 (643,340) ---------- ------------- Total assets/(liabilities) 2,190,533 (1,883,981) ---------- ------------- Year ended 31st December 2013 ------------------------------------------------------------------------------ Fees Fees Segment and commissions and commissions non-current Segment Segment (1) (2) assets assets liabilities GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------------- ----------------- ------------- ---------- ------------- UK 540,951 337,587 336,194 1,048,684 (742,449) Americas 149,637 247,146 138,947 299,806 (131,006) Australasia 130,591 141,835 27,250 115,233 (81,203) Asia 126,414 145,918 34,170 141,598 (102,839) Europe 24,066 78,786 17,361 43,669 (24,636) Rest of the World 2,964 23,351 4,335 4,360 (2,184) ----------------- ----------------- ------------- ---------- ------------- 974,623 974,623 558,257 1,653,350 (1,084,317) ----------------- ----------------- ------------- ---------- ------------- Investment in 101,445 - associates Unallocated assets/(liabilities) 173,056 (483,077) ---------- ------------- Total assets/(liabilities) 1,927,851 (1,567,394) ---------- ------------- 4. Operating profit 2014 2013 GBP'000 GBP'000 --------- --------- The following items have been (credited)/charged in arriving at operating profit: Foreign exchange (gains)/losses: * fees and commissions (8,705) (2,687) * other operating costs (894) 902 --------- --------- (9,599) (1,785) --------- --------- Amortisation of other intangible assets: * software costs 15,362 12,240 * other intangible assets 1,530 1,093 Depreciation on property, plant and equipment: * owned assets 10,963 11,243 * leased assets under finance leases 284 91 --------- --------- Total depreciation and amortisation charges 28,139 24,667 --------- --------- Amortisation of other intangible assets: * employment contract payments (included in salaries and associated expenses) 7,852 6,754 --------- --------- Losses/(gains) on disposal of property, plant and equipment 53 (22) --------- --------- Operating lease rentals payable: * minimum lease payments * land and buildings 35,422 30,817 * furniture, equipment and motor vehicles 735 770 * computer equipment and software 329 284 * sub-lease receipts * land and buildings (1,904) (1,668) --------- --------- 34,582 30,203 --------- --------- Available-for-sale financial assets: * fair value gains (16) (2) * gain on sale (332) (348) --------- --------- (348) (350) --------- --------- Exceptional items: Acquisition and integration costs of which: --------- --------- * included in salaries and associated expenses 7,347 2,562 * included in premises costs 1,873 387 * included in other operating costs 4,051 6,071 --------- --------- 13,271 9,020 Business Transformation Programme of which: --------- --------- * included in salaries and associated expenses 5,753 8,690 * included in other operating costs 2,000 831 --------- --------- 7,753 9,521 Restructuring costs of which: --------- --------- * included in salaries and associated expenses 2,335 - * included in premises costs 142 - * included in other operating costs 5 - --------- --------- 2,482 - Net gain on restructuring of businesses in Canada of which: --------- --------- * included in premises costs 336 - * included in other operating costs (683) - (347) - Release of contingent considerations (205) - London premises consolidation costs - 5,022 Loss on disposal of JLT Re Spain branch - 372 Profit on partial disposal of JLT Energy (France) SAS - (715) Profit on sale of premises in Colombia - (348) --------- --------- Total exceptional items included within operating profit 22,954 22,872 Siaci restructuring costs - included in share of results of associates 354 - --------- --------- Total exceptional items 23,308 22,872 --------- --------- 5. Finance income and costs 2014 2013 GBP'000 GBP'000 --------- --------- Interest receivable - own funds 1,500 1,441 Investment income on available-for-sale financial assets 26 - Interest expense: * bank and other borrowings (16,803) (11,658) * finance leases (48) (24) * interest in respect of liability discounting (291) (114) Pension financing: --------- --------- * expected return on post-employment scheme assets 23,151 22,940 * interest on post-employment scheme liabilities (28,981) (28,620) --------- --------- Net pension financing expense (5,830) (5,680) Finance costs - net (21,446) (16,035) --------- --------- Finance costs (22,972) (17,476) Finance income 1,526 1,441 --------- --------- Finance costs - net (21,446) (16,035) --------- --------- 6. Income tax expense 2014 2013 GBP'000 GBP'000 --------- --------- Current tax expense Current year 43,637 41,510 Adjustments in respect of prior years 1,430 918 --------- --------- 45,067 42,428 --------- --------- Deferred tax credit Origination and reversal of temporary differences (3,348) (514) Reduction in tax rate 18 1,610 Adjustments in respect of prior years 335 (1,735) --------- --------- (2,995) (639) --------- --------- Total income tax expense 42,072 41,789 --------- ---------
The total income tax expense in the income statement of GBP42,072,000 (2013: GBP41,789,000) includes a tax credit on exceptional items of GBP5,128,000 (2013: GBP5,012,000). There were no non-recurring tax credits in the year.
The UK Government has announced various measures in relation to UK corporation tax including a 2% reduction in the headline rate of corporation tax from April 2014 and a further reduction of 1% in 2015. These reductions reduce the UK tax rate from 23% to 20%. As at 31st December 2014 the 2% rate reduction to 21% is already in force and the subsequent 1% rate reduction has been enacted. The impact of the 1% reduction has therefore been incorporated into the income tax charge for the year ended 31st December 2014.
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the tax rate of the home country of the Company as follows:
2014 2013 GBP'000 GBP'000 --------- --------- Profit before taxation 159,736 154,564 --------- --------- Tax calculated at UK Corporation Tax rate of 21.5% (2013: 23.25%) 34,343 35,936 Non-deductible expenses* 4,584 4,783 Tax losses not previously recognised - (102) Adjustments in respect of prior years 1,783 (817) Effect of UK and non-UK tax rate differences 2,894 2,284 Effect of reduction in UK tax rate - 1,590 Tax on associates (1,532) (1,885) --------- --------- Total income tax expense 42,072 41,789 --------- --------- * The non-deductible expenses relate principally to non-deductible entertainment expenses. 7. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent by the weighted average number of ordinary shares in issue during the year, excluding unallocated shares held by the Trustees of the Employee Share Ownership Plan Trust and the Qualifying Employee Share Ownership Trust.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
Additionally basic and diluted earnings per share are also calculated based on underlying earnings attributable to the owners of the parent.
A reconciliation of earnings is set out below.
2014 2013 No. No. of shares of shares ------------ ------------ Weighted average number of ordinary shares in issue 219,713,827 218,951,874 Effect of outstanding share options 475,892 899,435 ------------ ------------ Adjusted weighted average number of ordinary shares for diluted earnings per share 220,189,719 219,851,309 ------------ ------------ 2014 2013 ---------------------------- ---------------------------- Basic Diluted Basic Diluted pence pence pence pence per per per per GBP'000 share share GBP'000 share share --------- ------- -------- --------- ------- -------- Earnings reconciliation Underlying profit after taxation and non-controlling interests 123,471 56.2 56.1 119,820 54.7 54.5 Exceptional items before tax (23,308) (22,872) Taxation thereon 5,128 5,012 --------- --------- (18,180) (8.3) (8.3) (17,860) (8.1) (8.1) Profit attributable to the owners of the parent 105,291 47.9 47.8 101,960 46.6 46.4 --------- ------- -------- --------- ------- -------- 8. Dividends 2014 2013 GBP'000 GBP'000 --------- --------- Final dividend in respect of 2013 of 17.1p per share (2012: 15.9p) 37,216 34,976 Less: adjustment * (18) (111) --------- --------- 37,198 34,865 Interim dividend in respect of 2014 of 10.6p per share (2013: 10.1p) 23,412 22,227 --------- --------- 60,610 57,092 --------- --------- * Adjustment relating to dividend equivalents accrued in respect of various performance related share awards and long-term incentive plans not currently anticipated to fully vest.
A final dividend in respect of 2014 of 18.3p per share (2013: 17.1p) amounting to a total of GBP40,076,000 (2013: GBP37,438,000) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved at the Annual General Meeting on 1st May 2015.
9. Goodwill Gross Impairment Net carrying amount losses amount GBP'000 GBP'000 GBP'000 --------- ----------- ------------- At 31st December 2014 Opening net book amount 434,026 (4,576) 429,450 Exchange differences 2,315 97 2,412 Acquisitions 43,835 - 43,835 Closing net book amount 480,176 (4,479) 475,697 --------- ----------- ------------- At 31st December 2013 Opening net book amount 280,975 (4,587) 276,388 Exchange differences (13,219) 11 (13,208) Acquisitions 166,270 - 166,270 --------- ----------- ------------- Closing net book amount 434,026 (4,576) 429,450 --------- ----------- -------------
Goodwill is allocated to the Group's cash generating units (CGUs) identified according to country of operation and business segment. A summary of the goodwill allocation is presented below.
Risk Employee & Insurance Benefits Total GBP'000 GBP'000 GBP'000 ------------- ---------- ---------- At 31st December 2014 Australasia 17,022 - 17,022 Asia 24,097 4,998 29,095 UK and Europe 208,718 73,053 281,771 Americas 140,394 4,297 144,691 Africa - 3,118 3,118 390,231 85,466 475,697 ------------- ---------- ---------- At 31st December 2013 Australasia 17,419 - 17,419 Asia 19,632 4,528 24,160 UK and Europe 187,384 67,961 255,345 Americas 127,725 740 128,465 Africa - 4,061 4,061 ------------- ---------- ---------- 352,160 77,290 429,450 ------------- ---------- ----------
10. Available-for-sale financial assets
Available-for-sale financial assets are categorised into one of two categories:
1) Investments and deposits consist mainly of fixed term deposits, bonds and certificates of deposits. These investments are held at fair value and are classified between current and non-current assets according to the maturity date.
2) Other investments include securities and other investments held for strategic purposes. These investments are held at fair value unless a fair value cannot be accurately determined in which case they are held at cost less any provision for impairment.
Other Investments investments and deposits Total GBP'000 GBP'000 GBP'000 ------------- -------------- ---------- At 1st January 2014 5,948 17,819 23,767 Exchange differences 173 (255) (82) Additions - 5 5 Companies acquired 31 - 31 Disposals/maturities (1,538) (7,916) (9,454) Revaluation gain (included within equity) 265 (11) 254 Amounts to be written off (133) - (133) ------------- -------------- ---------- At 31st December 2014 4,746 9,642 14,388 ------------- -------------- ---------- Analysis of available-for-sale financial assets Current - 5,384 5,384 Non-current 4,746 4,258 9,004 ------------- -------------- ---------- At 31st December 2014 4,746 9,642 14,388 ------------- -------------- ---------- Analysis of available-for-sale investments and deposits Fiduciary funds 9,518 Own funds 124 -------------- At 31st December 2014 9,642 -------------- Other Investments investments and deposits Total GBP'000 GBP'000 GBP'000 ------------- -------------- ---------- At 1st January 2013 3,104 14,546 17,650 Exchange differences (202) (2,897) (3,099) Additions 3,264 6,439 9,703 Companies acquired 1,003 - 1,003 Disposals/maturities (969) (269) (1,238) Revaluation gain (included within equity) 55 - 55 Amounts to be written off (307) - (307) ------------- -------------- ---------- At 31st December 2013 5,948 17,819 23,767 ------------- -------------- ---------- Analysis of available-for-sale financial assets Current - 1,421 1,421 Non-current 5,948 16,398 22,346 ------------- -------------- ---------- At 31st December 2013 5,948 17,819 23,767 ------------- -------------- ---------- Analysis of available-for-sale investments and deposits Fiduciary funds 16,283 Own funds 1,536 -------------- At 31st December 2013 17,819 --------------
The credit quality of available-for-sale investments and deposits is assessed by reference to external credit ratings, where available and other current and historical credit data including counterparty default rates. This is summarised as follows:
2014 2013 GBP'000 GBP'000 --------- --------- AA 9,637 16,398 AA/A - - A 5 4 BBB - 1,417 --------- --------- Total 9,642 17,819 --------- ---------
11. Derivative financial instruments
As at 31st December As at 31st December 2014 2013 ----------------------- ----------------------- Assets Liabilities Assets Liabilities GBP'000 GBP'000 GBP'000 GBP'000 --------- ------------ --------- ------------ Interest rate swaps - fair value hedges 10,099 (11,453) 2,990 (14,382) Forward foreign exchange contracts - cash flow hedges 11,516 (6,897) 23,742 (18,505) --------- ------------ --------- ------------ Total 21,615 (18,350) 26,732 (32,887) --------- ------------ --------- ------------ Current 3,101 (2,491) 9,826 (2,344) Non-current 18,514 (15,859) 16,906 (30,543) --------- ------------ --------- ------------ Total 21,615 (18,350) 26,732 (32,887) --------- ------------ --------- ------------
The credit quality of counterparties with whom derivative financial assets are held is assessed by reference to external credit ratings, where available, and other current and historical credit data including counterparty default rates. This is summarised as follows:
2014 2013 GBP'000 GBP'000 --------- --------- AA 5,609 1,721 AA/A 2,370 13,304 A - 11,707 BBB 13,636 - Total 21,615 26,732 --------- ---------
Maturity analysis
The table below analyses the Group's derivative financial instruments, which will be settled on a gross basis, into relevant maturity groupings based upon the remaining period at the balance sheet date to contractual maturity. The amounts disclosed are the contractual undiscounted cash flow.
Less Greater than than 1 year 1 year GBP'000 GBP'000 ---------- -------------- At 31st December 2014 Forward foreign exchange contracts Outflow (268,743) (508,000) Inflow 271,866 501,809 ---------- -------------- At 31st December 2013 Forward foreign exchange contracts Outflow (243,457) (474,231) Inflow 256,158 502,150 ---------- --------------
The Group's treasury policies are approved by the Board and are implemented by a centralised treasury department. The treasury department operates within a framework of policies and procedures that establishes specific guidelines to manage currency risk, liquidity risk and interest rate risk and the use of counterparties and financial instruments to manage these. The treasury department is subject to periodic review by internal audit.
The Group uses various derivative instruments including forward foreign exchange contracts, interest rate swaps and from time to time, foreign currency collars and options to manage the risks arising from variations in currency and interest rates. Derivative instruments purchased are primarily denominated in the currencies of the Group's main markets.
Where forward foreign exchange contracts have been entered into to manage currency risk, they are designated as hedges of currency risk on specific future cash flows, and qualify as highly probable transactions for which hedge accounting is applied. The Group anticipates that hedge accounting requirements will continue to be met on its foreign currency and interest rate hedging activities and that no material ineffectiveness will arise which will result in gains or losses being recognised through the income statement.
The fair value of financial derivatives based upon market values as at 31st December 2014 and designated as effective cash flow hedges was a net asset of GBP4.6 million and has been deferred in equity (2013: net assets of GBP5.2 million). Gains and losses arising on derivative instruments outstanding as at 31st December 2014 will be released to the income statement at various dates up to:
a) 36 months in respect of cash flow hedges on currency denominated UK earnings.
b) 15 years in respect of specific hedges on USD denominated long term debt drawn under the Group's USD private placement programme.
c) 12 years in respect of interest rate hedges on sterling denominated long term debt drawn under the Group's private placement programme.
No material amounts were transferred to the income statement during the year in respect of the fair value of financial derivatives.
Transactions maturing within 12 months of the balance sheet date are classified in current maturities. Transactions maturing in a period in excess of 12 months of the balance sheet date are classified as non-current maturities.
a) Forward foreign exchange contracts
The Group's major currency transaction exposure arises in USD and the Group continues to adopt a prudent approach in actively managing this exposure. As at 31st December 2014 the Group had outstanding foreign exchange contracts, principally in USD, amounting to a principal value of GBP773,675,000 (2013: GBP758,308,000).
b) Interest rate swaps
The Group uses interest rate hedges, principally interest rate swaps, to mitigate the impact of changes in interest rates. The notional principal amounts of outstanding cross currency interest rate swaps as at 31st December 2014 was USD500,000,000 and GBP75,000,000 (2013: USD375,000,000 and GBPnil). A net loss of GBP1.4 million (2013: net loss GBP11.4m) on these instruments was offset by a fair value gain of GBP1.4 million (2013: gain GBP11.4m) on the private placement loans, both of which were recognised in the income statement in the year.
c) Price risk
The Group does not have a material exposure to commodity price risk.
The maximum exposure to credit risk at the reporting date is the fair value of the derivatives in the balance sheet.
12. Trade and other receivables
2014 2013 GBP'000 GBP'000 --------- --------- Trade receivables 343,343 284,748 Less: provision for impairment of trade receivables (10,724) (11,375) --------- --------- Trade receivables - net 332,619 273,373 Other receivables 144,305 125,090 Prepayments 16,723 12,965 --------- --------- 493,647 411,428 --------- ---------
13. Cash and cash equivalents
2014 2013 GBP'000 GBP'000 --------- --------- Cash at bank and in hand 438,179 371,435 Short-term bank deposits 433,067 381,729 --------- --------- 871,246 753,164 --------- --------- Fiduciary funds 732,974 639,392 Own funds 138,272 113,772 --------- --------- 871,246 753,164 --------- ---------
Fiduciary funds represent client money held in the form of premiums due to underwriters, claims paid by insurers and due to policyholders, and funds held to defray commissions and other income. Fiduciary funds are not available for general corporate purposes.
The effective interest rate in respect of short-term deposits was 0.53% (2013: 0.50%). These deposits have an average maturity of 15 days (2013: 29 days).
14. Trade and other payables
2014 2013 GBP'000 GBP'000 ---------- --------- Insurance payables 742,492 655,675 Social security and other taxes 17,234 17,460 Other payables 134,377 125,755 Accruals and deferred income 124,058 97,657 Deferred and contingent consideration 19,383 13,048 ---------- --------- 1,037,544 909,595 ---------- ---------
15. Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
As at 31st December 2014 ------------------------------------------------------------------- Derivatives Loans used and receivables for hedging Available-for-sale Total GBP'000 GBP'000 GBP'000 GBP'000 ----------------- ------------- ------------------- ------------ Assets per balance sheet Available-for-sale financial assets - - 14,388 14,388 Derivative financial instruments - 21,615 - 21,615 Trade and other receivables (a) 476,924 - - 476,924 Cash and cash equivalents 871,246 - - 871,246 ----------------- ------------- ------------------- ------------ Total 1,348,170 21,615 14,388 1,384,173 ----------------- ------------- ------------------- ------------ Derivatives Other used financial for hedging liabilities Total GBP'000 GBP'000 GBP'000 ------------- ------------------- ------------ Liabilities per balance sheet Borrowings - (612,237) (612,237) Trade and other payables (b) - (913,486) (913,486) Derivative financial instruments (18,350) - (18,350) ------------- ------------------- ------------ Total (18,350) (1,525,723) (1,544,073) ------------- ------------------- ------------ As at 31st December 2013 ------------------------------------------------------------------- Derivatives Loans used and receivables for hedging Available-for-sale Total GBP'000 GBP'000 GBP'000 GBP'000 ----------------- ------------- ------------------- ------------ Assets per balance sheet Available-for-sale financial assets - - 23,767 23,767 Derivative financial instruments - 26,732 - 26,732 Trade and other receivables (a) 398,463 - - 398,463 Cash and cash equivalents 753,164 - - 753,164 ----------------- ------------- ------------------- ------------ Total 1,151,627 26,732 23,767 1,202,126 ----------------- ------------- ------------------- ------------ Derivatives Other used financial for hedging liabilities Total GBP'000 GBP'000 GBP'000 ------------- ------------------- ------------ Liabilities per balance sheet Borrowings - (460,183) (460,183) Trade and other payables (b) - (811,938) (811,938) Derivative financial instruments (32,887) - (32,887) ------------- ------------------- ------------ Total (32,887) (1,272,121) (1,305,008) ------------- ------------------- ------------ (a) Prepayments are excluded from the trade and other receivables balance, as this analysis is required only for financial instruments. (b) Non-financial liabilities are excluded from the trade and other payables balance, as this analysis is required only for financial instruments.
The following table presents the Group's financial assets and liabilities that are measured at fair value at 31 December 2014.
As at 31st December 2014 ------------------------------------------- Level Level Level 1 2 3 Total GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- --------- ---------- Assets Derivatives used for hedging - 21,615 - 21,615 Available-for-sale financial assets * equity securities 402 - 4,088 4,490 * debt investments 256 - - 256 * fixed deposits 9,642 - - 9,642 --------- --------- --------- ---------- Total 10,300 21,615 4,088 36,003 --------- --------- --------- ---------- Liabilities Deferred and contingent consideration - - (19,383) (19,383) Derivatives used for hedging - (18,350) - (18,350) --------- --------- --------- ---------- Total - (18,350) (19,383) (37,733) --------- --------- --------- ---------- As at 31st December 2013 ------------------------------------------- Level Level Level 1 2 3 Total GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- --------- ---------- Assets Derivatives used for hedging - 26,732 - 26,732 Available-for-sale financial assets * equity securities 1,659 - 4,029 5,688 * debt investments 260 - - 260 * fixed deposits 17,819 - - 17,819 --------- --------- --------- ---------- Total 19,738 26,732 4,029 50,499 --------- --------- --------- ---------- Liabilities Deferred and contingent consideration - - (13,048) (13,048) Derivatives used for hedging - (32,887) - (32,887) --------- --------- --------- ---------- Total - (32,887) (13,048) (45,935) --------- --------- --------- ----------
Apart from where disclosed, there are no differences between the fair value and the carrying value of financial assets and liabilities.
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm's length basis. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using internal and external models. These models maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
During the year there were no transfers between level 1 and level 2.
There were no changes in valuation techniques during the year.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
In respect of deferred and contingent consideration, unobservable inputs include management's assessment of the expected future performance of relevant acquired businesses.
A reconciliation of the movements in level 3 is provided below:
Assets Liabilities Level Level 3 3 GBP'000 GBP'000 --------- ------------ At 1st January 2014 4,029 (13,048) Exchange differences 161 (230) Companies acquired 31 (10,876) Utilised in the year - 4,198 (Charged)/credited to income statement (133) 573 At 31st December 2014 4,088 (19,383) --------- ------------
16. Borrowings
2014 2013 GBP'000 GBP'000 --------- --------- Current Bank overdraft 18,145 12,508 Bank borrowings 150,216 399 Finance lease liabilities 225 88 --------- --------- 168,586 12,995 --------- --------- Non-current Unsecured loan notes 393,203 214,006 Bank borrowings 49,916 232,656 Finance lease liabilities 532 526 --------- --------- 443,651 447,188 --------- --------- Total borrowings 612,237 460,183 --------- ---------
The borrowings include secured liabilities (leases) of GBP757,000 (2013: GBP614,000).
The carrying amounts and fair value of borrowings are as follows:
As at 31st December As at 31st December 2014 2013 ---------------------- ---------------------- Carrying Fair Carrying Fair amount value amount value GBP'000 GBP'000 GBP'000 GBP'000 ---------- ---------- ---------- ---------- Current Bank overdraft 18,145 18,145 12,508 12,508 Bank borrowings 150,216 150,216 399 399 Finance lease liabilities 225 225 88 88 ---------- ---------- ---------- ---------- 168,586 168,586 12,995 12,995 ---------- ---------- ---------- ---------- Non-current Unsecured loan notes 393,203 393,203 214,006 214,006 Bank borrowings 49,916 49,916 232,656 232,656 Finance lease liabilities 532 532 526 526 ---------- ---------- ---------- ---------- 443,651 443,651 447,188 447,188 ---------- ---------- ---------- ---------- Total borrowings 612,237 612,237 460,183 460,183 ---------- ---------- ---------- ---------- 17. Provisions for liabilities and charges Property related Litigation provisions provisions Other Total GBP'000 GBP'000 GBP'000 GBP'000 ------------ ------------ --------- ---------- At 1st January 2014 8,049 6,354 707 15,110 Exchange differences 1 25 - 26 Utilised in the year (3,844) (1,559) - (5,403) Charged/(credited) to the income statement 1,292 750 (345) 1,697 Interest charge 10 - - 10 Companies acquired (627) - - (627) At 31st December 2014 4,881 5,570 362 10,813 ------------ ------------ --------- ---------- Property related Litigation provisions provisions Other Total GBP'000 GBP'000 GBP'000 GBP'000 ------------ ------------ --------- ---------- At 1st January 2013 6,863 8,308 959 16,130 Exchange differences - (17) - (17) Reclassification from current assets/liabilities 24 - - 24 Utilised in the year (1,404) (5,435) (41) (6,880) Charged/(credited) to the income statement 1,392 3,498 (211) 4,679 Interest charge 32 - - 32 Companies acquired 1,142 - - 1,142 At 31st December 2013 8,049 6,354 707 15,110 ------------ ------------ --------- ---------- 2014 2013 GBP'000 GBP'000 --------- --------- Analysis of total provisions: Current - to be utilised within one year 7,588 10,158 Non-current - to be utilised in more than one year 3,225 4,952 --------- --------- 10,813 15,110 --------- ---------
Property related provisions
The Group recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract. Provision is made for the future rental cost of vacant property. In calculating the provision required, account is taken of the duration of the lease and any recovery of cost achievable from subletting. Property provisions occur principally in the US and UK and relate to a variety of lease commitments. The longest lease term expires in 2022.
Litigation provisions
At any point in time the Group can be involved in a variety of litigation and dispute issues. A provision is established in respect of such issues when it is probable that the liability has been incurred and the amount of the liability can be reasonably estimated. The Group analyses its litigation exposures based on available information, including external legal consultation where appropriate, to assess its potential liability. Where appropriate the Group also provides for the cost of defending or initiating such matters.
Where a litigation provision has been made it is stated gross of any third party recovery. All such recoveries are included as "other receivables" within trade and other receivables. At 31st December 2014, in connection with certain litigation matters, the Group's litigation provisions include an amount of GBP0.1 million (2013: GBP0.1 million) to reflect this gross basis and the corresponding insurance recovery has been included within trade and other receivables. This presentation has had no effect on the consolidated income statement for the year ended 31st December 2014 (2013: nil).
Other
Other provisions include provisions for clawback of commission which arises on certain types of Employee Benefits contracts.
18. Other reserves Fair value Share and hedging Exchange premium reserves reserves Total GBP'000 GBP'000 GBP'000 GBP'000 --------- ------------- ---------- ---------- At 1st January 2014 103,739 17,224 (1,999) 118,964 Fair value gains/(losses) net of tax --------- ------------- ---------- ---------- * available-for-sale - 203 - 203 * available-for-sale reclassified to the income statement - (204) - (204) * cash flow hedges - (17,457) - (17,457) Currency translation differences - - (3,034) (3,034) Net losses recognised directly in equity - (17,458) (3,034) (20,492) Issue of share capital 202 - - 202 At 31st December 2014 103,941 (234) (5,033) 98,674 --------- ------------- ---------- ---------- Fair value Share and hedging Exchange premium reserves reserves Total GBP'000 GBP'000 GBP'000 GBP'000 --------- ------------- ---------- ---------- At 1st January 2013 103,188 15,456 20,893 139,537 Fair value gains net of tax --------- ------------- ---------- ---------- * available-for-sale - 48 - 48 * cash flow hedges - 1,720 - 1,720 Currency translation differences - - (22,892) (22,892) --------- ------------- ---------- ---------- Net gains/(losses) recognised directly in equity - 1,768 (22,892) (21,124) Issue of share capital 551 - - 551 At 31st December 2013 103,739 17,224 (1,999) 118,964 --------- ------------- ---------- ----------
19. Qualifying Employee Share Ownership Trust
During the year, the Qualifying Employee Share Ownership Trust (QUEST) allocated nil ordinary shares to employees in satisfaction of options that have been exercised under the Sharesave schemes (2013: 601,341).
20. Cash generated from operations
2014 2013 GBP'000 GBP'000 --------- --------- Profit before taxation 159,736 154,564 Investment and finance income (5,924) (5,970) Interest payable on bank loans and finance leases 16,851 11,682 Fair value gains on financial instruments (16) (2) Net pension financing expenses 5,830 5,680 Unwinding of liability discounting 291 114 Depreciation 11,247 11,334 Amortisation of other intangible assets 24,744 20,087 Amortisation of share based payments 18,837 15,815 Amount written off the Employee Benefit Trust - 66 Share of results of associates' undertakings (7,306) (8,106) Non-cash exceptional items 3,176 1,786 Gains on disposal of businesses (359) (343) Losses/(gains) on disposal of property, plant and equipment 53 (22) Gains on disposal of fixed asset investments (332) (348) Increase in trade and other receivables (72,947) (39,627) Increase in trade and other payables - excluding insurance broking balances 18,406 15,240 Decrease in provisions for liabilities and charges (3,706) (2,177) Decrease in retirement benefit obligation (9,282) (16,343) --------- --------- Net cash inflow from operations 159,299 163,430 --------- ---------
21. Business combinations
2013 acquisitions
During the year, the process of finalising the provisional fair values in respect of acquisitions carried out during 2013 has been completed.
Provisional fair Revised value fair reported Change value at 31st in fair acquired Dec 2013 value GBP'000 GBP'000 GBP'000 ---------- ------------ ---------- Towers Watson Reinsurance Group 31,731 31,907 (176) Others 2,600 1,819 781 34,331 33,726 605 ---------- ------------ ----------
These changes in fair values affected the following balance sheet classes:
Provisional fair Revised value fair reported Change value at 31st in fair acquired Dec 2013 value GBP'000 GBP'000 GBP'000 ---------- ------------ ---------- Property, plant and equipment 791 786 5 Other intangible assets 7,585 6,759 826 Available-for-sale financial assets 1,003 1,003 - Trade and other receivables 24,455 23,662 793 Cash and cash equivalents * own cash 23,283 23,920 (637) * fiduciary cash 22,205 21,606 599 Insurance payables (22,205) (21,606) (599) Trade and other payables (17,971) (16,431) (1,540) Current taxation 9 104 (95) Deferred taxation (3,245) (3,226) (19) Bank overdraft (360) (360) - Provisions for liabilities and charges (528) (1,155) 627 Non-controlling interests (691) (1,336) 645 ---------- ------------ ---------- 34,331 33,726 605 ---------- ------------ ---------- As at As at 31st 31st Goodwill calculation Dec 2014 Dec 2013 Change GBP'000 GBP'000 GBP'000 ---------- ---------- ---------- Purchase consideration * cash paid 189,615 189,281 334 * contingent consideration 4,826 4,826 - * deferred consideration 1,939 3,149 (1,210) Total purchase consideration 196,380 197,256 (876) Less fair value of net assets acquired 34,331 33,726 605 Goodwill 162,049 163,530 (1,481) ---------- ---------- ---------- As at As at 31st 31st Dec 2014 Dec 2013 Change GBP'000 GBP'000 GBP'000 ---------- ---------- --------- Purchase consideration settled in cash 189,615 189,281 334 Cash and cash equivalents - own cash in subsidiaries acquired (23,283) (23,920) 637 ---------- ---------- --------- 166,332 165,361 971 Cash and cash equivalents - fiduciary cash in subsidiaries acquired (22,205) (21,606) (599) Cash outflow on acquisition 144,127 143,755 372 ---------- ---------- ---------
Current year acquisitions
During the year the following new business acquisitions and additional investments were completed:
Percentage voting Acquisition rights Cost Notes date acquired GBP'000 ------- ------------- ----------- --------- Lambert Brothers Holdings Limited i Jan 2014 100% 6,028 SCK Corretora e Administradora de Seguros Ltda ii Jan 2014 75% 6,852 Ensign Pensions Administration Limited iii Apr 2014 100% 9,799 Alliant Insurance Services, Inc. (Energy Division) iv Oct 2014 100% 7,563 The Hayward Holding Group Limited v Dec 2014 100% 27,472 Acquisition of other new businesses completed Jan - during the year vi Dec 2014 - 4,304 Additional investment Jan - in existing businesses vi Dec 2014 - 23,145 -------- -------------- ----------- 85,163 --------- i) Acquisition of Lambert Brothers Holdings Limited (Lambert)
On 14th January 2014, the Group acquired Lambert Brothers Holdings Limited in Hong Kong, a mid-market insurance broker with broking operations in Marine Hull, Construction, Employee Benefits, Corporate and SME schemes. The acquired business contributed revenue of GBP3,100,000 and a net profit of GBP762,000 to the Group for the period since acquisition. If the acquisition had taken place on 1st January 2014 the contribution to Group revenue and net profit would have been GBP3,299,000 and GBP863,000 respectively.
Goodwill calculation GBP'000 -------- Purchase consideration * cash paid 4,933 * contingent consideration 940 * deferred consideration 155 -------- Total purchase consideration 6,028 Less fair value of net assets acquired 2,498 Goodwill 3,530 --------
The assets and liabilities arising from the acquisition were as follows:
Acquiree's carrying Fair amount value GBP'000 GBP'000 ----------- ---------- Property, plant and equipment 172 172 Other intangible assets 28 93 Available-for-sale financial assets 31 31 Trade and other receivables 885 885 Cash and cash equivalents * own cash 1,725 1,725 * fiduciary cash 2,361 2,361 Insurance payables (2,361) (2,361) Trade and other payables (380) (380) Current taxation (22) (22) Deferred taxation (6) (6) 2,433 2,498 ----------- ---------- GBP'000 -------- Purchase consideration settled in cash 4,933 Cash and cash equivalents - own cash in subsidiary acquired (1,725) 3,208 Cash and cash equivalents - fiduciary cash in subsidiary acquired (2,361) Cash outflow on acquisition 847 --------
As at 31st December 2014, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.
The deferred consideration of GBP155,000 is based upon the net assets shown on the completion accounts. The amount recognised is based on the provisional amount of assets acquired as stated above.
The contingent consideration of GBP940,000 is based on the expected turnover of 2014. The maximum amount of contingent consideration payable has been provided for.
None of the goodwill recognised is expected to be deductible for income tax purposes.
ii) Acquisition of SCK Corretora e Administradora de Seguros Ltda (SCK)
On 29th January 2014, the Group acquired SCK Corretora e Administradora de Seguros Ltda, a Brazil based Employee Benefits and Insurance Broking operations mainly in Property & Casualty and Affinity. The acquired business contributed revenue of GBP4,031,000 and a net profit of GBP241,000 to the Group for the period since acquisition. If the acquisition had taken place on 1st January 2014 the contribution to Group revenue and net profit would have been GBP4,237,000 and GBP249,000 respectively.
Goodwill calculation GBP'000 -------- Purchase consideration * cash paid 3,897 * contingent consideration 2,955 Total purchase consideration 6,852 Less fair value of net assets acquired 49 Less equity movement on transactions with non-controlling interest 2,955 Goodwill 3,848 --------
The assets and liabilities arising from the acquisition were as follows:
Acquiree's carrying Fair amount value GBP'000 GBP'000 ----------- ---------- Property, plant and equipment 56 56 Other intangible assets 1 86 Trade and other receivables 650 650 Cash and cash equivalents * own cash 48 48 Trade and other payables (790) (790) Non-controlling interests (1) (1) (36) 49 ----------- ---------- GBP'000 -------- Purchase consideration settled in cash 3,897 Cash and cash equivalents - own cash in subsidiary acquired (48) Cash outflow on acquisition 3,849 --------
As at 31st December 2014, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.
The contingent consideration of GBP2,955,000 is related to a put option on the 25% shareholding remaining with the non-controlling interests. The consideration is payable in two tranches based on the average expected profit of the fourth and fifth years following the year of completion for the first tranche and the ninth and tenth years for the second tranche. The contingent consideration is capped at GBP25,000,000.
None of the goodwill recognised is expected to be deductible for income tax purposes.
iii) Acquisition of Ensign Pensions Administration Limited (Ensign)
On 30th April 2014, the Group acquired Ensign Pensions Administration Limited, a UK based Employee Benefits consultant and administrator. The acquired business contributed revenue of GBP10,713,000 and a net profit of GBP1,489,000 to the Group for the period since acquisition. If the acquisition had taken place on 1st January 2014 the contribution to Group revenue and net profit would have been GBP15,775,000 and GBP1,708,000 respectively.
Goodwill calculation GBP'000 -------- Purchase consideration * cash paid 9,699 * deferred consideration 100 -------- Total purchase consideration 9,799 Less fair value of net assets acquired 4,707 Goodwill 5,092 --------
The assets and liabilities arising from the acquisition were as follows:
Acquiree's carrying Fair amount value GBP'000 GBP'000 ----------- ---------- Property, plant and equipment 645 645 Other intangible assets 12 643 Trade and other receivables 3,424 3,424 Cash and cash equivalents * own cash 3,546 3,546 Trade and other payables (3,474) (3,474) Current taxation (201) (201) Deferred taxation 124 124 4,076 4,707 ----------- ---------- GBP'000 -------- Purchase consideration settled in cash 9,699 Cash and cash equivalents - own cash in subsidiary acquired (3,546) Cash outflow on acquisition 6,153 --------
As at 31st December 2014, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.
The deferred consideration of GBP100,000 is based upon the net assets shown on the completion accounts. The amount recognised is based on the provisional amount of assets acquired as stated above.
None of the goodwill recognised is expected to be deductible for income tax purposes.
iv) Acquisition of the Energy business of Alliant Insurance Services, Inc.
On 31st October 2014, the Group acquired part of the energy business of Alliant Insurance Services, Inc. The acquired business contributed revenue of GBP971,000 and a net profit of GBP98,000 to the Group for the period since acquisition. If the acquisition had taken place on 1st January 2014 the contribution to Group revenue and net profit would have been GBP5,707,000 and GBP1,008,000 respectively.
Goodwill calculation GBP'000 -------- Purchase consideration * cash paid 1,012 * deferred consideration 6,551 -------- Total purchase consideration 7,563 Less fair value of net liabilities acquired (592) Goodwill 8,155 --------
The assets and liabilities arising from the acquisition were as follows:
Acquiree's carrying Fair amount value GBP'000 GBP'000 ------------ ---------- Trade and other payables - (592) - (592) ------------- ------------------------- ---------- GBP'000 -------- Purchase consideration settled in cash 1,012 Cash outflow on acquisition 1,012 --------
As at 31st December 2014, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.
The deferred consideration of GBP6,551,000 is payable in seven equal instalments until 2021.
The goodwill of GBP8,155,000 is expected to be deductible for income tax purposes.
v) Acquisition of The Hayward Holding Group Limited
On 23rd December 2014, the Group acquired The Hayward Holding Group Limited, a leading international specialist general aviation insurance broker. If the acquisition had taken place on 1st January 2014 the contribution to Group revenue and net profit would have been GBP11,372,000 and GBP1,988,000 respectively.
Goodwill calculation GBP'000 -------- Purchase consideration * cash paid 27,000 * deferred consideration 472 -------- Total purchase consideration 27,472 Less fair value of net assets acquired 7,257 Goodwill 20,215 --------
The assets and liabilities arising from the acquisition were as follows:
Acquiree's carrying Fair amount value GBP'000 GBP'000 ----------- ---------- Property, plant and equipment 26 26 Other intangible assets - 3,249 Available-for-sale financial assets 47 - Trade and other receivables 3,769 3,269 Cash and cash equivalents * own cash 972 972 * fiduciary cash 6,589 6,589 Insurance payables (6,589) (6,589) Trade and other payables (355) (355) Current taxation (39) (39) Deferred taxation 30 135 4,450 7,257 ----------- ---------- GBP'000 -------- Purchase consideration settled in cash 27,000 Cash and cash equivalents - own cash in subsidiary acquired (972) 26,028 Cash and cash equivalents - fiduciary cash in subsidiary acquired (6,589) Cash outflow on acquisition 19,439 --------
As at 31st December 2014, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.
The deferred consideration of GBP472,000 is based upon the net assets shown on the completion accounts. The amount recognised is based on the provisional amount of assets acquired as stated above.
None of the goodwill recognised is expected to be deductible for income tax purposes.
vi) Other acquisitions and additional investments
Goodwill calculation GBP'000 -------- Purchase consideration * cash paid 26,554 * contingent consideration 466 * cancellation of loans 429 Total purchase consideration 27,449 Less fair value of net assets acquired 4,709 Less equity movement on transactions with non-controlling interests 18,264 -------- Goodwill 4,476 --------
The assets and liabilities arising from acquisitions were as follows:
Acquiree's carrying Fair amount value GBP'000 GBP'000 ----------- ---------- Property, plant and equipment 8 8 Other intangible assets - 191 Trade and other receivables 5 5 Cash and cash equivalents * own cash 21 21 Trade and other payables (42) (42) Non-controlling interests 4,526 4,526 4,518 4,709 ----------- ---------- GBP'000 -------- Purchase consideration settled in cash 26,554 Cash and cash equivalents - own cash in subsidiary acquired (21) Cash outflow on acquisition 26,533 --------
As at 31st December 2014, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.
Goodwill of GBP2,750,000 is expected to be deductible for income tax purposes, the remaining goodwill is not expected to be deductible.
Group summary of the net assets acquired and goodwill
Lambert SCK Ensign Alliant Hayward Others Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- --------- --------- --------- --------- --------- Purchase consideration * cash paid 4,933 3,897 9,699 1,012 27,000 26,554 73,095 * contingent consideration 940 2,955 - - - 466 4,361 * deferred consideration 155 - 100 6,551 472 - 7,278 * cancellation of loans - - - - - 429 429 --------- --------- --------- --------- --------- --------- --------- Total purchase consideration 6,028 6,852 9,799 7,563 27,472 27,449 85,163 Less fair value of net assets acquired 2,498 49 4,707 (592) 7,257 4,709 18,628 Less equity movement on transactions with non-controlling interests - 2,955 - - - 18,264 21,219 --------- --------- --------- --------- --------- --------- --------- Goodwill on acquisitions occurring during the year 3,530 3,848 5,092 8,155 20,215 4,476 45,316 --------- Impact of revision to fair value adjustment in relation to acquisitions completed in 2013 (1,481) --------- Net increase in goodwill 43,835 --------- Impact of additional investments 21,219 --------- Net decrease in equity 21,219 ---------
Group summary of cash flows
Lambert SCK Ensign Alliant Hayward Others Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- --------- --------- --------- --------- --------- Purchase consideration settled in cash 4,933 3,897 9,699 1,012 27,000 26,554 73,095 Cash and cash equivalents - own cash in subsidiaries acquired (1,725) (48) (3,546) - (972) (21) (6,312) --------- --------- 3,208 3,849 6,153 1,012 26,028 26,533 66,783 Cash and cash equivalents - fiduciary cash in subsidiaries acquired (2,361) - - - (6,589) - (8,950) --------- --------- Cash outflow on acquisition during the year 847 3,849 6,153 1,012 19,439 26,533 57,833 --------- --------- --------- --------- --------- --------- --------- Impact of revision to fair value adjustment on cash in relation to acquisitions completed in 2013 372 Net cash outflow on acquisition during the year 58,205 ----------- 22. Business disposals
On 29th December 2014, the Group disposed of 100% of its shareholding in Invcol Limited. This resulted in a gain of GBP12,000.
On 9th May 2014, the Group disposed of 100% of its shareholding in ForVision Risk Services Ltd for a consideration of GBP155,000, which equalled the value of the net assets disposed. The transaction took place after the transfer of its business to another Group company. The transaction resulted in a net cash inflow of GBP8,000.
During the year, the Group disposed of certain books of business in Canada for a total consideration of GBP695,000 and costs on disposal of GBP348,000. This resulted in a gain of GBP347,000. The transaction resulted in a cash inflow of GBP695,000.
Group summary of cash flows
Total GBP'000 --------- Disposal consideration settled in cash 850 Cash and cash equivalents - own cash in subsidiaries disposed (147) Cash inflow on disposal during the year 703 --------- 23. Retirement benefit obligations
The Group operates a number of pension schemes throughout the world, the most significant of which are of the defined benefit type and operate on a funded basis. The principal pension schemes are the Jardine Lloyd Thompson UK Pension Scheme, the JLT (USA) Incentive Savings Plan, the JLT (USA) Employee Retirement Plan, the JLT (USA) Stable Value Plan,the Pension Plan for Employees of Jardine Lloyd Thompson Canada Inc and the Jardine Lloyd Thompson Ireland Limited Pension Fund.
The pension costs accrued for the year are comprised as follows:
Overseas UK Scheme Schemes Total ------------------ ------------------ ------------------ 2014 2013 2014 2013 2014 2013 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 -------- -------- -------- -------- -------- -------- Defined benefit schemes - - 2,813 - 2,813 - Defined contribution schemes 19,258 16,926 14,373 13,516 33,631 30,442 -------- -------- -------- -------- -------- -------- 19,258 16,926 17,186 13,516 36,444 30,442 -------- -------- -------- -------- -------- --------
The Jardine Lloyd Thompson UK Pension Scheme has two sections; one providing defined benefits and the other providing benefits on a defined contribution basis. The assets of the scheme are held in a trustee administered fund separate from the Company.
With effect from 1st December 2006 the defined benefit section of the Scheme was amended to cease future benefits accruals. Under the Scheme as amended, a participant's normal retirement benefit will be determined based on their service and compensation prior to 1st December 2006.
The latest finalised triennial actuarial funding valuation of the Jardine Lloyd Thompson Pension UK Scheme was at 31st March 2011. An updated actuarial funding valuation as at 31st March 2014 is currently being finalised with the scheme trustees. This valuation was updated to 31st December 2014 by a qualified actuary employed by the Group.
The principal overseas schemes are:
a) The JLT (USA) Incentive Savings Plan which is a defined contribution scheme. Employees may contribute up to 50% of their salary subject to an IRS maximum each year - USD17,500 in 2014 - and the Group contributes at a rate of 100% of each 1% contributed by the employee up to a maximum employee contribution of 4%, up to a maximum of USD10,400. Employees aged over 50 may make "catch-up" contributions subject to an IRS maximum each year - USD5,500 in 2014.
b) The JLT (USA) Employee Retirement Plan which is a defined benefit scheme. The latest actuarial valuation was undertaken at 1st January 2014 by independent actuaries. With effect from 31st July 2005 the Plan was amended to eliminate future benefit accruals. Under the Plan as amended, a participant's normal retirement benefit will be determined based on their service and compensation prior to 31st July 2005. The average compensation and length of service will be determined as at 31st July 2005.
c) The JLT (USA) Stable Value Plan. This plan is closed to new participants, but still accrues a benefit for current participants. The latest actuarial valuation was undertaken at 1st January 2014 by independent actuaries. The actual contributions made in 2014 and the minimum funding requirement for the 2014 plan year has been fully satisfied. The plan is not subject to a quarterly contribution requirement in 2015 so there are no required contributions in calendar 2015. Each Plan Year, a participant is credited with an amount equal to 15% of Compensation for the year up to the Taxable Wage base, plus 20% of Compensation in excess of the Taxable Wage Base. This pay credit is calculated on an annual basis and added to the prior year's balance.
d) The Pension Plan for Employees of Jardine Lloyd Thompson Canada Inc. The JLT Canada Pension Plan has two sections; one providing defined benefits based primarily on the 2007 pensionable salary and the other providing benefits on a defined contribution basis. The JLT pension contribution for the defined contribution plan ranges from 3% to 13% based on age and service. The last formal valuation of the JLT Canada Pension Plan was undertaken as of 31st December 2013 by a qualified third party actuary. The defined benefits section was amended to eliminate future benefit accruals with effect from 1st January 2009.
e) The Jardine Lloyd Thompson Ireland Limited Pension Fund which is a defined benefit pension scheme with assets held in a separately administered fund. The contributions are agreed between the Trustees and the Company based on advice by a qualified actuary. The most recent triennial actuarial valuation for funding purposes was carried out by a qualified independent actuary as at 1st January 2014. With effect from 30th November 2008 the scheme was closed to new entrants and future service accrual. The company also operates a defined contribution scheme, namely The Jardine Lloyd Thompson 2004 Retirement Benefits Scheme, which is held and administered by a separate trust.
f) The Jardine Matheson Executive Staff Retirement Plan (JMESRP), Jardine Matheson Resident Staff Retirement Plan (JMRSRP) and Menu Plan section B and C of the Jardine Matheson Group Retirement Plan (JMGRP). The JMRSRP and section C of the JMGRP provided benefits based on final salary, which were solely funded by the participating employer, while the JMESRP and section B of the JMGRP provided benefits based on final salary, which were funded by both the participating employer and the members.
With effect from 31st December 2009, the participation in the JMESRP, JMRSRP and JMGRP (collectively the plans) ceased and the schemes were closed.
The accrued rights of the members in the plans were transferred to the Hong Kong Mandatory Provident Fund (MPF) scheme on 1st January 2010. The MPF scheme provides benefits on a defined contribution basis. The scheme is funded by both the employer and the members. The employer contribution under the MPF scheme ranges from 5% to 15% of the member's monthly basic salary based on an age factor. The MPF scheme is held and administered by a separate trust, which is funded by both the participating employer and the members.
The principal actuarial assumptions used were as follows:
Canadian Irish US Stable At 31st December UK Scheme US Scheme Scheme Scheme Value 2014 Plan ----------- ---------- --------- ------- ----------- Rate of increase in salaries n/a n/a 2.50% n/a 3.0% Rate of increase of pensions in payment (a) 3.11% n/a 3.25% 3.00% n/a Discount rate (b) 3.59% 3.80% 4.10% 2.30% 3.25-3.35% Inflation rate 2.78-3.21% 2.00% 2.25% 2.00% 2.00% Revaluation rate for deferred pensioners 1.78% n/a n/a 2.00% n/a Mortality - life expectancy at age 65 for male member: Aged 65 at 31st December (c) 22.0 22.1 19.7 21.7 22.1 ----------- ---------- --------- ------- ----------- Canadian Irish US Stable At 31st December UK Scheme US Scheme Scheme Scheme Value 2013 Plan ----------- ---------- --------- ------- ---------- Rate of increase n/a n/a 3.00% n/a n/a in salaries Rate of increase of pensions in payment (a) 3.42% n/a 3.50% 3.00% n/a Discount rate (b) 4.60% 4.70% 4.80% 4.00% n/a Inflation rate 3.25-3.52% 3.00% 2.25% 2.00% n/a Revaluation rate for deferred pensioners 2.25% n/a n/a 2.00% n/a Mortality - life expectancy at age 65 for male member: Aged 65 at 31st December (c) 22.8 19.7 19.7 21.7 n/a ----------- ---------- --------- ------- ----------
(a) In respect of the UK scheme, where there are inflation linked benefits the inflation increases are limited to a maximum of 5% per annum (some are limited to 3% per annum).
(b) In line with IAS 19 (Revised) the expected return on scheme assets assumption is the same as the discount rate assumed for the liabilities.
(c) Mortality assumptions for the UK scheme are based on 105% of the S2PxA tables, with improvements based on CMI 2013 tables with a 1.25% p.a. long-term rate of improvement.
Mortality assumptions for the US scheme and US Stable Value Plan are based on the RP2014 Mortality Table with MP2014 Projections.
Mortality assumptions for the Canadian scheme are based on the CPM-2014 Private Table with generational projection using scale CPM-B1D2014.
Mortality assumptions for the Irish scheme, in respect of both deferred pensioners and pensioners, assume that deaths after retirement will be in accordance with standard mortality tables 62% PNML00 for males and 70% PNFL00 for females with an increase to the annuity value of:
- 0.50% (male with no spouse's pension) - 0.38% (female with no spouse's pension) - 0.39% (male or female with spouse's pension)
This is per annum compound for each year between 2008 and the year in which normal pension date falls. Pre-retirement mortality has been assumed as nil.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Impact on defined benefit obligation --------------------------------------------------------------- Change Change in assumptions to obligation ---------------------------- --------------------------------- decrease increase Discount rate of 0.1% of 2.0% increase increase Inflation rate of 0.1% of 2.0% increase increase Life expectancy of 1 year of 4.0% ---------------------------- ---------------------------------
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position. Note this sensitivity is for defined benefit obligations only and does not consider the impact that changes in assumptions may have on the assets, in particular the assets held in respect of the insured pensioners.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.
Overseas UK Scheme Schemes Total ---------------------- -------------------- ---------------------- Defined benefit obligation 2014 2013 2014 2013 2014 2013 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- ---------- --------- --------- ---------- ---------- Present value of funded obligations (641,759) (583,745) (78,044) (60,566) (719,803) (644,311) Fair value of plan assets 479,139 458,727 61,629 54,957 540,768 513,684 ---------- ---------- --------- --------- ---------- ---------- Net liability recognised in the balance sheet (162,620) (125,018) (16,415) (5,609) (179,035) (130,627) ---------- ---------- --------- --------- ---------- ---------- Overseas UK Scheme Schemes Total ---------------------- -------------------- ---------------------- Reconciliation of defined benefit 2014 2013 2014 2013 2014 2013 liability GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- ---------- --------- --------- ---------- ---------- Opening defined benefit liability (125,018) (110,739) (5,609) (20,652) (130,627) (131,391) Exchange differences - - (466) (529) (466) (529) Pension expense (6,154) (4,942) (3,315) (994) (9,469) (5,936) Employer contributions 8,795 13,018 4,126 3,581 12,921 16,599 Total (loss)/gain recognised in reserves (40,243) (22,355) (11,151) 12,985 (51,394) (9,370) ---------- ---------- --------- --------- ---------- ---------- Net liability recognised in the balance sheet (162,620) (125,018) (16,415) (5,609) (179,035) (130,627) ---------- ---------- --------- --------- ---------- ---------- Overseas UK Scheme Schemes Total ---------------------- -------------------- ---------------------- Reconciliation of defined benefit 2014 2013 2014 2013 2014 2013 obligation GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- ---------- --------- --------- ---------- ---------- Opening defined benefit obligation (583,745) (574,360) (60,566) (68,937) (644,311) (643,297) Exchange differences - - (1,579) 601 (1,579) 601 Service cost - - (2,813) - (2,813) - Interest cost (26,283) (26,039) (2,698) (2,581) (28,981) (28,620) (Loss)/gain on defined benefit obligation (56,680) (138) (13,601) 6,122 (70,281) 5,984 Actual benefit payments 24,949 16,792 3,213 4,229 28,162 21,021 ---------- ---------- --------- --------- ---------- ---------- Closing defined benefit obligation (641,759) (583,745) (78,044) (60,566) (719,803) (644,311) ---------- ---------- --------- --------- ---------- ---------- Overseas UK Scheme Schemes Total -------------------- ------------------ -------------------- Reconciliation of fair value of 2014 2013 2014 2013 2014 2013 assets GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- -------- -------- --------- --------- Opening value of assets 458,727 463,621 54,957 48,285 513,684 511,906 Exchange differences - - 1,113 (1,130) 1,113 (1,130) Expected return on assets 20,709 21,097 2,442 1,843 23,151 22,940 Actuarial gains/(losses) 16,437 (22,217) 2,450 6,863 18,887 (15,354) Employer contributions 8,795 13,018 4,126 3,581 12,921 16,599 Actual benefit payments (24,949) (16,792) (3,213) (4,229) (28,162) (21,021) Expenses (580) - (246) (256) (826) (256) --------- --------- -------- -------- --------- --------- Closing value of assets 479,139 458,727 61,629 54,957 540,768 513,684 --------- --------- -------- -------- --------- ---------
The analysis of the fair value of the scheme assets is as follows:
Overseas UK Scheme Schemes ----------------- ----------------- Value Value Value Value At 31st December 2014 GBP'000 % GBP'000 % --------- ------ --------- ------ Equities 182,369 38% 40,584 66% Bonds - - 15,064 24% Investment funds 105,944 22% - - Qualifying insurance policies 188,889 40% - - Other assets - - 2,374 4% Cash 1,937 - 3,607 6% --------- ------ --------- ------ Total market value 479,139 100% 61,629 100% --------- ------ --------- ------ Overseas UK Scheme Schemes ----------------- ----------------- Value Value Value Value At 31st December 2013 GBP'000 % GBP'000 % --------- ------ --------- ------ Equities 169,056 37% 37,434 69% Bonds 47,023 10% 11,800 21% Investment funds 100,989 22% - - Qualifying insurance policies 179,358 39% - - Deferred buy-in premium (40,343) (9%) - - Other assets - - 1,110 2% Cash 2,644 1% 4,613 8% --------- ------ --------- ------ Total market value 458,727 100% 54,957 100% --------- ------ --------- ------
Other assets include hedge funds and property. The schemes do not hold cash as a strategic investment and cash balances at 31st December represent working balances.
The long-term rates of return on scheme assets at 31st December 2014 have been derived considering market conditions at 31st December 2014.
Overseas UK Scheme Schemes Total ------------------- ------------------ ------------------- Reconciliation of return on 2014 2013 2014 2013 2014 2013 assets GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 -------- --------- -------- -------- -------- --------- Expected return on assets 20,709 21,097 2,442 1,843 23,151 22,940 Actuarial gains/(losses) 16,437 (22,217) 2,450 6,863 18,887 (15,354) -------- --------- -------- -------- -------- --------- Actual return on assets 37,146 (1,120) 4,892 8,706 42,038 7,586 -------- --------- -------- -------- -------- ---------
The amounts recognised in the consolidated income statement are as follows:
Overseas UK Scheme Schemes Total -------------------- -------------------- -------------------- 2014 2013 2014 2013 2014 2013 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------- --------- --------- --------- --------- --------- Service cost - - (2,813) - (2,813) - Expenses (580) - (246) (256) (826) (256) --------- --------- --------- --------- --------- --------- Total (included within salaries and associated expense) (580) - (3,059) (256) (3,639) (256) Interest cost (26,283) (26,039) (2,698) (2,581) (28,981) (28,620) Expected return on assets 20,709 21,097 2,442 1,843 23,151 22,940 --------- --------- --------- --------- --------- --------- Total (included within finance costs) (5,574) (4,942) (256) (738) (5,830) (5,680) Expense before taxation (6,154) (4,942) (3,315) (994) (9,469) (5,936) --------- --------- --------- --------- --------- ---------
The amounts included in the consolidated statement of comprehensive income are as follows:
Overseas UK Scheme Schemes Total ---------------------- -------------------- ---------------------- 2014 2013 2014 2013 2014 2013 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- ---------- --------- --------- ---------- ---------- (Losses)/gains on defined benefit obligation (56,680) (138) (13,601) 6,122 (70,281) 5,984 Actuarial gains/(losses) 16,437 (22,217) 2,450 6,863 18,887 (15,354) ---------- ---------- --------- --------- ---------- ---------- Total actuarial (losses)/gains recognised (40,243) (22,355) (11,151) 12,985 (51,394) (9,370) ---------- ---------- --------- --------- ---------- ---------- Cumulative actuarial losses recognised (243,897) (203,654) (37,528) (26,377) (281,425) (230,031) ---------- ---------- --------- --------- ---------- ----------
The five year history of experience adjustments is as follows:
UK Scheme ----------------------------------------------------- 2014 2013 2012 2011 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 restated restated restated Defined benefit obligation at end of year (641,759) (583,745) (574,360) (523,846) (492,911) Fair value of plan assets 479,139 458,727 463,621 424,624 435,498 Deficit in the scheme (162,620) (125,018) (110,739) (99,222) (57,413) Difference between the actual and expected return on plan assets - amount (GBP'000) 16,437 (22,217) 32,889 (17,930) 20,658 - expressed as a percentage of the plan assets 3.43% (4.84%) 7.09% (4.22%) 4.74% Experience losses on plan liabilities - amount (GBP'000) 1,592 1,364 11,890 903 1,902 - expressed as percentage of the present value of the plan liabilities (0.25%) (0.23%) (2.07%) (0.17%) (0.39%) Overseas Schemes 2014 2013 2012 2011 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 restated restated restated Defined benefit obligation at end of year (78,044) (60,566) (68,937) (66,407) (59,425) Fair value of plan assets 61,629 54,957 48,285 44,630 44,003 Deficit in the schemes (16,415) (5,609) (20,652) (21,777) (15,422) Difference between the actual and expected return on plan assets - amount (GBP'000) 2,450 6,863 3,034 (2,665) 1,787 - expressed as a percentage of the plan assets 3.98% 12.49% 6.28% (5.97%) 4.06% Experience losses/(gains) on plan liabilities - amount (GBP'000) 1,265 377 (3,925) 308 453 - expressed as percentage of the present value of the plan liabilities (1.62%) (0.62%) 5.69% (0.46%) (0.76%)
The expected employer contributions for the year ending 31st December 2015 are as follows:
Defined benefit GBP'000 UK Scheme 7,000 US Scheme 1,408 US Stable Value Plan 1,903 Canadian Scheme - Irish Scheme 780 Total expected contributions 11,091
24. Principal risks
As with all businesses, the Group is exposed to a range of financial and operational risks, not wholly within our control, which could have a material impact on the Group's financial performance.
The Group takes a holistic approach to risk management and the control environment with the responsibility and accountability shared across all the Group companies, and the ultimate responsibility resting with the Board.
The principal risks to which the Group will be exposed in the second half of the financial year are substantially the same as those discussed on pages 41 and 42 of the Group's Annual Report for 2013. The Annual Report for 2014 will contain an updated discussion on these risks.
25. Forward-looking statements
Certain statements in this preliminary report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
26.
The financial information contained in this preliminary announcement does not constitute statutory accounts within the meaning of the Companies Act 2006. The results for the year ended 31st December 2014 are unaudited and statutory accounts have not yet been delivered to the Registrar of Companies.
27.
The Annual Report for the year ended 31st December 2014 will be posted to shareholders no later than 23rd March 2015 and delivered to the Registrar of Companies following the Annual General Meeting on 1st May 2015.
28.
The shareholders entered in the Register of Members at 4.00pm on 7th April 2015 will be entitled to the proposed final dividend of 18.3p per share which will, subject to approval at the Annual General Meeting to be held on 1st May 2015, be payable on 6th May 2015.
29.
Copies of the preliminary press release (and statutory accounts when available) may be obtained from the Company Secretary, Jardine Lloyd Thompson Group plc, The St Botolph Building, 138 Houndsditch, London, EC3A 7AW.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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