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RNS

Half-year Report

Released 07:00 27-Jul-2017

RNS Number : 2139M
Jardine Lloyd Thompson Group PLC
27 July 2017
 

 

27 JULY 2017

 

Jardine Lloyd Thompson Group plc

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2017 (UNAUDITED)

Jardine Lloyd Thompson Group plc (JLT or the 'Group') announces its interim results for the six months ended 30 June 2017.

FINANCIAL HIGHLIGHTS                                                                    

·    Total revenue growth of 11% to £689.9m

·    Organic revenue growth of 3%, reflecting strong retention and new client wins

·    3% in Specialty businesses

·    2% in JLT Re

·    9% in UK Employee Benefits

·    Positive impact of foreign exchange movements, helping offset continued rating weakness

·    Underlying* profit before tax (PBT) of £100.1m, up 12%

·    Underlying PBT, excluding the US investment**, up £7.1m to £113.5m

·    Reported PBT up 80% to £99.2m, driven by reduced exceptional charges

·    Underlying trading margin maintained at 15.9%

·    Underlying trading margin, excluding the US investment, at 18.9%

·    Reported diluted earnings per share (EPS) up 104% from 15.6p to 31.8p

·    Underlying diluted EPS up 12% from 28.4p to 31.9p

·    Interim cash dividend of 12.2p, up 5.2%

* Underlying results exclude exceptional items of £0.9m

** Net investment in US Specialty in the six month period to 30 June 2017 was £13.4m (2016: £17.2m)

 

BUSINESS HIGHLIGHTS

·    Further progress made with the US Specialty build-out, as revenues more than doubled, driven by strong organic growth and the contribution from Construction Risk Partners, acquired in January 2017

·    UK EB business now trading strongly following the restructure in 2016

Dominic Burke, Group Chief Executive, commented:

"JLT delivered a good financial performance in the first half of 2017.  We have entered the second half with many of our businesses showing increasing momentum and we remain confident that we will deliver full year organic revenue growth more in line with historical rates, generating sustained year-on-year financial progress."

ENQUIRIES:

Jardine Lloyd Thompson Group plc

Dominic Burke

Group Chief Executive

020 7528 4948

Charles Rozes

Group Finance Director

020 7528 4375

Paul Dransfield

Head of Investor Relations

020 7528 4933

Brunswick Group LLP

 

Tom Burns/Dania Saidam


020 7404 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.jlt.com.



 

INTERIM STATEMENT

JLT made good progress in the first half of 2017, despite the continuing challenging trading and economic conditions. Total revenues increased by 11%, or 3% at constant rates of exchange (CRE), to £689.9 million. The Group achieved organic revenue growth of 3%, compared with 1% for the same period in 2016, reflecting strong business retention and new client wins.

6 months to 30 June

Total Revenue

Underlying Trading Profit

Trading Margin

£m

2017

Growth

CRE

Organic

2016

2017

CRE

2016

2017

CRE

2016

Risk & Insurance

540.8

12%

3%

3%

481.8

108.7

101.1

93.7

20%

20%

19%

Employee Benefits

149.1

8%

2%

2%

137.6

17.9

16.2

17.4

12%

12%

13%

Group*

689.9

11%

3%

3%

619.4

110.0

100.9

98.4

15.9%

15.8%

15.9%

Notes:












-     Total revenue comprises fees, commissions and investment income.

-     CRE: Constant rates of exchange are calculated by translating 2017 results at 2016 exchange rates.

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

-     Underlying results exclude exceptional items.

 

* Underlying trading profit figures include central costs.

The Risk & Insurance businesses, which represented nearly 78% of global turnover, grew revenues to £540.8 million, an increase of 12%, or 3% at CRE.  The trading margin in Risk & Insurance was 20%, an improvement over the prior year, both on a reported and a CRE basis. 

Revenues within the Employee Benefits businesses increased by 8%, or 2% at CRE, to £149.1 million. The trading margin reduced slightly year-on-year from 13% to 12%.

6 months to 30 June



£m

2017

2016

Underlying trading profit

110.0

98.4

Underlying share of associates

2.1

1.9

Net finance costs

(12.0)

(11.1)

Underlying profit before taxation

100.1

89.2

Exceptional items

(0.9)

(34.0)

Profit before taxation

99.2

55.2

Underlying tax expense

(29.0)

(25.6)

Tax on exceptional items

0.3

6.6

Non-controlling interests

(2.2)

(2.9)

Profit after taxation and non-controlling interests

68.3

33.3

Underlying profit after taxation and non-controlling interests

68.6

60.7

Diluted earnings per share

31.8p

15.6p*

Underlying diluted earnings per share

31.9p

28.4p*

Interim dividend per share

12.2p

11.6p

 

* Restated following revision to the calculation

Group underlying trading profit increased by 12% to £110.0 million, or 3% at CRE. Underlying PBT increased by 12% to £100.1 million. 

The trading margin was maintained at 15.9%, however excluding the US net investment of £13.4 million in the period, the Group's trading margin would have been 18.9%.

The Group's reported PBT was £99.2 million, compared with £55.2 million for the same period in 2016, which included the impact of significant exceptional costs. As a consequence, reported EPS also increased substantially, from 15.6p to 31.8p.

DIVIDENDS

The Board has declared an increased interim dividend of 12.2p per share for the period ended 30 June 2017 (2016: 11.6p), which will be paid on 3 October 2017 to shareholders on the register at 25 August 2017.

OPERATIONAL REVIEW

The Group operates two principal trading divisions: Risk & Insurance and Employee Benefits. The results of the larger businesses within each of these areas are reported in more detail below:

 

 

RISK & INSURANCE

6 months to 30 June

Total Revenue

Underlying Trading Profit

Trading Margin

 

£m

2017

Growth

CRE

Organic

2016

2017

CRE

2016

2017

CRE

2016

JLT Europe

177.6

0%

(3%)

3%

178.5

31.6

30.2

27.0

18%

17%

15%

JLT Re

144.4

13%

5%

2%

127.7

51.6

49.4

48.0

36%

37%

38%

JLT Australia & New Zealand

69.3

12%

(3%)

(4%)

61.9

23.8

20.7

21.6

34%

34%

35%

JLT Asia

51.7

16%

4%

4%

44.6

11.0

9.7

9.5

21%

21%

21%

JLT Latin America

34.5

25%

5%

3%

27.6

3.9

3.3

4.0

11%

11%

15%

JLT Middle East & Africa

12.5

15%

(2%)

(2%)

10.9

1.8

1.2

1.3

14%

11%

12%

JLT USA

35.2

116%

92%

43%

16.3

(13.4)

(11.9)

(17.2)

(38%)

(38%)

(106%)

JLT Canada

10.5

10%

(3%)

(3%)

9.5

(1.1)

(1.0)

(0.5)

(10%)

(11%)

(5%)

JLT Insurance Management

5.1

6%

(5%)

(5%)

4.8

(0.5)

(0.5)

(0)

(9%)

(9%)

(1%)


540.8

12%

3%

3%

481.8

108.7

101.1

93.7

20%

20%

19%

JLT Europe

JLT Europe, consisting of what was formerly reported as JLT Specialty and the Group's Northern European businesses, is now managed as a single reporting unit.

The marginal reduction in JLT Europe's reported revenues was due to the sale of the bulk of the Thistle business at the end of 2016, which amounted to some £10 million of revenues in that period. Excluding Thistle, JLT Europe's revenues rose by 5%, of which 3% was organic. 

Specialty classes continue to see some of the largest rate reductions experienced by the Group. This effect has been compounded by reduced activity in a number of industry sectors, such as Energy and Marine, which continue to operate in challenging industry trading conditions. However, the strengths of JLT Europe span a range of industries and it is not overexposed to one specific sector. The majority of its Specialty divisions have reported impressive organic revenue growth; areas such as Financial Lines, Credit, Political & Security, Aviation and Property & Casualty. The performance of the Northern European businesses has also been good, with recent investments now generating increasing levels of revenue growth.

JLT Europe continues to work closely with its Specialty colleagues in the US; of particular note has been the early success of a joint natural resources initiative which has secured two significant global accounts in the first half.

The business has entered the second half with high levels of activity and remains confident about its prospects for the year.

JLT Re

JLT Re saw a 13% increase in revenues to £144.4 million, or 5% at CRE, with organic revenue growth of 2%.

JLT Re is building a strong reputation as a provider of complex structured solutions to insurance capital providers by the application of analysis-based intelligence.

Organic revenue growth was achieved through significant new business wins in the period, despite reinsurance rates continuing to decline. Revenues also benefitted from the contributions of the two acquisitions made in late 2016, both of which have performed in line with expectations and contributed 3% of total JLT Re revenues.

The UK, Europe and North America businesses saw strong new business wins generated both from new and existing clients and as a result of the substantial investment in the business. 

JLT Re delivered trading profit of £51.6 million in the period, a 7% increase over the same period in 2016.  This reflects the meaningful and steady investments made in people, geographies and infrastructure which are expected to deliver increasing returns going forward.

JLT Re has started the second half of the year strongly, despite the continued decline in property catastrophe rates. The July 1st renewal season saw good business retention and new business generation, giving the Group confidence in the outlook for the business.

JLT Australia and New Zealand

On a reported basis the Australia and New Zealand businesses saw revenues increase by 12% to £69.3 million. This translates into a 3% reduction on a CRE basis, reflecting a very competitive trading environment with continued pressure on insurance rates throughout the first half. The trading margin nevertheless remains one of the strongest in the Group, at 34%. In the second half of this year, the business will commence the management of a new scheme for municipal councils in Victoria, representing a significant new client win.

JLT Asia

Asia delivered a good performance in the period, with a 16% increase in revenues to £51.7 million and 4% organic revenue growth. Reported trading profits increased by 16%. Revenue performance in Hong Kong, Singapore and Japan was particularly strong in the first half.

JLT Latin America

The Group's Latin American operations delivered revenue growth of 25% in the period, or 5% at CRE, with a 3% organic growth rate. Significant investments are being made in building out Specialty capabilities across the region and, while the early benefit of this investment is being seen through increased revenue, trading profit has reduced year on year as a result. The business is expected to perform more strongly in the second half of the year, however, resulting in a year-on-year improvement in trading profit.

JLT USA

Now employing over 300 people, the US Specialty business more than doubled headline revenues to £35.2 million for the period, a 92% increase on the same period last year at CRE. These results include the first contribution from Construction Risk Partners (CRP), which was acquired at the end of January 2017. Organic revenue growth, which excludes the benefit of acquisitions, was 43%. The net investment of £13.4 million in the period reduced from £17.2 million in the first half of 2016, demonstrating that the business has passed the high-water mark for losses.

The Group remains confident that US Specialty revenues will see a significant uplift in 2017 as a whole and that the business remains on track to turn to profits for the first time in 2019.

EMPLOYEE BENEFITS

6 months to 30 June

Total Revenue

Underlying Trading Profit

Trading Margin

£m

2017

Growth

CRE

Organic

2016

2017

CRE

2016

2017

CRE

2016

 

UK & Ireland

81.8

9%

9%

9%

74.9

5.3

5.0

0.2

6%

6%

0%

 

Asia

41.0

0%

(11%)

(9%)

41.2

11.8

10.3

15.0

29%

28%

36%

 

Australia & New Zealand

13.8

17%

2%

(1%)

11.7

1.6

1.4

1.4

12%

12%

12%

 

Latin America

10.1

21%

1%

0%

8.3

(1.0)

(0.7)

0.7

(10%)

(8%)

9%

 

Middle East & Africa

1.3

75%

34%

34%

0.8

0

0

0

(1%)

(1%)

1%

 

Canada

1.1

52%

35%

28%

0.7

0.2

0.2

0.1

17%

17%

11%

 


149.1

8%

2%

2%

137.6

17.9

16.2

17.4

12%

12%

13%

 

 

UK & Ireland Employee Benefits

Reported revenues in UK and Ireland Employee Benefits for the first half were £81.8 million, compared to £74.9 million for the same period in 2016, representing a 9% increase, all of which was organic and delivered across the business through strong client penetration and new business wins. Trading profit of £5.3 million for the period compared to what was effectively a breakeven position for the first half of 2016.

These results provide a further indication of how the business has returned to revenue and profit growth. The business is expected to show continued momentum in the second half, with several new business opportunities, particularly in its Pension Administration division and its wealth management platform. The Group remains confident that the trend of trading margin improvement will continue through the balance of 2017 and into 2018.

International Employee Benefits

JLT's international Employee Benefits businesses deploy different client offerings in different parts of the world, highlighting the Group's focus on specialisation. These range from services related to workers compensation insurance in Australia to high-net-worth solutions in Asia.  JLT has now put in place more extensive arrangements to coordinate both its own employee benefits operations and those of its network partners around the world. The benefits of doing this are beginning to be seen, not just in applications, process and client propositions, but also in multi-country appointments for leading regional and global clients. The aims of the business are also to facilitate cross-selling opportunities in JLT's Specialty businesses, and to export the Group's Employee Benefits capabilities to new markets.

Some short term external influences impacted the international EB businesses in the first half; however, the Group is confident about the prospects and opportunities for each of these businesses.

Asia

Asia EB had flat reported revenues but an 11% decline at CRE, which was attributable to the life insurance broking business.  The revenue pipeline remains strong; however conversion of the pipeline slowed in the first half in certain Southeast Asian markets as the maturing of the regulatory framework has lengthened the on-boarding process for new clients. The trading margin remains strong.

Australia and New Zealand

JLT's Australia and New Zealand business achieved 17% revenue growth, or 2% at CRE. While organic revenue growth was lower in the first half, it is expected to improve by the full year. 

Latin America

In Latin America, revenues increased 21% on a reported basis, largely driven by foreign exchange. JLT's business in Brazil had a particularly challenging first half, given its economic and political environment. By contrast, JLT's business in Colombia continues to perform well, delivering strong organic revenue growth in the period.

ASSOCIATES

The Group's income from its Associates increased by £0.2 million to £2.1 million. The Group anticipates that Associate earnings will remain at this level for the full year.

OPERATING COSTS

During the first half of 2017, the Group's underlying operating expenses (excluding exceptional items) increased by £58.9 million, or 11%, to £579.9 million. The foreign exchange impact included therein was £41.9 million.

There was a net reduction in costs of £4.9 million (1%) from acquisitions and disposals, primarily relating to the disposal of most of the Thistle business late in 2016, which reduced costs by £14 million. This was offset in part by the acquisitions completed in US Specialty, JLT Re and other businesses, which added £9 million of operating expenses. 

The overall organic growth in the Group's cost base was £21.9 million, or 4%.

Underlying staff costs rose by £12.3 million, an increase of 3% against the equivalent period in 2016, which includes investments in people across several businesses. Headcount increased by 235 across the Group year-on-year, reflecting the net impact of acquisitions and disposals, as well as continued hiring in the US, Asia and Latin America.

There was an increase in some provisions in the Group's captive, as well as an increase in premises costs, primarily driven by the expanded space in JLT's London headquarters.

As is the case with revenue and profit, foreign exchange movements continue to have a significant impact on the Group's reported costs with the translation of overseas results into Sterling, driving costs up by 8% year-on-year. 

The Group will continue to invest in the business, but will remain focussed on ensuring that costs and trading margins are well-managed as the Group continues to grow.

EXCEPTIONAL ITEMS

Net exceptional items in the first half totalled less than £1 million and mainly related to acquisitions made in 2016 and year-to-date in 2017.

BALANCE SHEET AND FUNDING

The net assets of the Group increased to £355 million, from £351 million at the 2016 financial year end. The key movements were:

·           Goodwill and intangibles increased by £33 million principally as a result of completed acquisitions;

·           Working capital, which for balance sheet presentation includes working capital acquired, taxation and provisions, increased by £69 million. On a cash flow basis there was a working capital outflow of £82 million, the main change from the same period in 2016 being the ending of the rent free period included in the premises lease of the Group's London headquarters; and

·           A decrease in the pension liability of £19 million, net of deferred tax, mainly due to changes in some of the underlying actuarial assumptions.

 

The factors above were offset by net debt, defined as own funds, less total borrowings net of transaction costs, of £565 million and a change in derivatives of £43 million, net of deferred tax.

As at 30 June 2017 the Group had long-term credit facilities totalling approximately £1 billion. This comprised the private placement loan note programmes of $500 million and £75 million, with a maturity profile extending to 2029, and the committed revolving credit facilities (RCF) totalling £500 million, which are provided by the Group's relationship banks and mature in 2022. 

Utilisation of the RCF stood at £259 million, compared to £248 million at June 2016.  This leaves unutilised headroom of £241 million, a level consistent with prior years, as June is historically the high point during the year for the Group's net debt seasonality.

The Net Debt to EBITDA ratio was 2.1:1 on reported basis and 1.8:1 on a bank covenant basis, both of which are improvements on the same period last year, demonstrating the Group's ability to operate and grow the business within a conservative range. 

CASH FLOW

The Group monitors operational rather than statutory cash flows. Operational cash flows monitor the movement in net debt and exclude movements in fiduciary funds.

The net cash outflow in the period was £93 million, of which £40 million was in respect of acquisitions and disposals. Dividend outflows have grown in line with the increase in the final dividend declared. The other main cash outflows were consistent with prior period averages.

FOREIGN EXCHANGE

Foreign exchange (FX) has continued to have a positive impact as a result of the movement in exchange rates due to continued Sterling weakness since the EU referendum in June 2016. 

The FX market currently remains volatile, consequently it is difficult to predict the impact of foreign exchange on the Group's 2017 underlying profit before tax.  

BOARD DEVELOPMENTS

As announced at the time of the Group's preliminary results in March 2017, Bruce Carnegie-Brown stepped down from the Board on 14 June 2017, following his appointment as Chairman of Lloyd's of London. The recruitment of a new Non-executive Director is underway.

GROUP STRATEGY

During the first half of 2017, the Group concluded that it would be appropriate to carry out a review of its strategy in order to ensure that it remains aligned with, and will deliver, future growth ambitions. 

Since the start of 2014, which was a pivotal year for JLT due to the launch of JLT Specialty in the United States, the shape and profile of the Group have been materially transformed:

·    The build-out of US Specialty has played a leading role in the Group's development of truly global Specialty practices,  enabling multinational client wins across all of the Group's Specialty businesses; and

 

·    The substantial investment in JLT Re has significantly bolstered the Group's global reinsurance proposition and enabled it to apply analysis-based intelligence to help meet the needs and address the issues faced by insurance capital providers across the world.

The review has validated the Group's strategy for Specialty, Reinsurance and Employee Benefits and has confirmed that JLT is on the right track to achieve its ambition, which has now been articulated as to become the 'Leading Global Specialty Risk Adviser and Broker'.

The Group is now taking further steps to deliver on this strategy, by developing the coordination between JLT's businesses around the world in how they operate; the propositions JLT offers to its clients; the information-based advice it provides; and the ways JLT delivers client service. Improved coordination will better equip JLT to develop new emerging Specialties, particularly fast-maturing 'intangible' risks such as cyber.

OUTLOOK

The Group has entered the second half with many of its businesses showing increasing momentum and it remains confident that it will deliver full year organic revenue growth more in line with historical rates, generating sustained year-on-year financial progress.

 

Consolidated income statement
Unaudited Interim Results for the six months ended 30 June 2017


Notes

6 months ended

30 June 2017

£'000

6 months ended

30 June 2016

£'000

Fees and commissions

2

 686,912

617,590

Investment income

2

 3,021

1,803

Total revenue

2

 689,933

619,393





Salaries and associated expenses


 (423,083)

(388,892)

Premises


 (35,564)

(33,793)

Other operating costs


 (105,469)

(115,007)

Depreciation, amortisation and impairment charges

1,3

 (16,668)

(17,273)

Operating profit

1,2,3

 109,149

64,428





Analysed as:




Operating profit before exceptional items

1,2

 110,040

 98,405

Acquisition and integration costs

3

 (1,022)

 (414)

Restructuring costs

3

-

 (10,151)

Net litigation costs

3

-

 (22,000)

Other exceptional items

3

 131

 (1,412)

Operating profit

1,2,3

 109,149

 64,428





Finance costs


(13,520)

(12,156)

Finance income


1,567

1,017

Finance costs - net


 (11,953)

(11,139)

Share of results of associates


 2,051

1,948

Profit before taxation

1,2

 99,247

55,237

Income tax expense

4

 (28,730)

(19,048)

Profit for the period


 70,517

36,189





Profit attributable to:




Owners of the parent

2

 68,316

33,328

Non-controlling interests


 2,201

2,861



 70,517

36,189





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



restated

Basic earnings per share

5

32.4p

15.8p

Diluted earnings per share

5

31.8p

15.6p

 

 

Consolidated statement of comprehensive income
Unaudited Interim Results for the six months ended 30 June 2017


Notes

6 months ended

30 June 2017

£'000

6 months ended

30 June 2016

£'000

Profit for the period


70,517

36,189





Other comprehensive income/(expense)








Items that will not be reclassified to profit or loss




Remeasurement of post-employment benefit obligations

20

25,446

(66,372)

Taxation thereon


(4,774)

11,293

Total items that will not be reclassified to profit or loss


20,672

(55,079)





Items that may be reclassified subsequently to profit or loss




Fair value gains/(losses) net of tax:




- available-for-sale


35

(10)

- available-for-sale reclassified to the income statement


-

(146)

- cash flow hedges


39,639

(18,043)

Currency translation differences


(23,097)

62,767

Total items that may be reclassified subsequently to profit or loss


16,577

44,568





Other comprehensive income/(expense) net of tax


37,249

(10,511)

Total comprehensive income for the period


107,766

25,678





Attributable to:




Owners of the parent


106,821

20,091

Non-controlling interests


945

5,587



107,766

25,678

 

 

Consolidated balance sheet
Unaudited Interim Results as at 30 June 2017


Notes

As at

30 June 2017
£'000

As at

30 June 2016
£'000

As at

31 Dec 2016
£'000

NET OPERATING ASSETS





Non-current assets





Goodwill

7

 571,100

529,124

543,013

Other intangible assets


 107,364

101,937

101,963

Property, plant and equipment


 66,030

64,441

64,330

Investments in associates

2

 53,401

46,981

50,928

Available-for-sale financial assets

8,13

 17,343

16,821

23,805

Derivative financial instruments

9,13

 92,641

95,080

117,043

Retirement benefit surpluses

20

 125

-

509

Deferred tax assets


 45,691

82,368

70,088



 953,695

936,752

971,679

Current assets





Trade and other receivables

10

 617,561

568,051

588,640

Derivative financial instruments

9,13

 8,667

6,632

7,930

Available-for-sale financial assets

8,13

 124,193

99,598

116,933

Cash and cash equivalents

11,13

 965,764

929,215

939,945



  1,716,185

1,603,496

1,653,448

Current liabilities





Borrowings

13,14

 (51,093)

(22,748)

(54,729)

Trade and other payables

12

 (1,240,852)

(1,148,506)

(1,257,782)

Derivative financial instruments

9,13

 (17,873)

(18,194)

(33,136)

Current tax liabilities


 (14,332)

(4,142)

(5,119)

Provisions for liabilities and charges

15

 (12,695)

(10,829)

(8,826)



 (1,336,845)

(1,204,419)

(1,359,592)

Net current assets


 379,340

399,077

293,856

Non-current liabilities





Borrowings

13,14

 (696,087)

(731,367)

(633,103)

Derivative financial instruments

9,13

 (96,878)

(55,026)

(69,652)

Deferred tax liabilities


 (7,423)

(34,452)

(11,378)

Retirement benefit obligations

20

 (175,679)

(201,474)

(198,921)

Provisions for liabilities and charges

15

 (1,798)

(837)

(1,571)



 (977,865)

(1,023,156)

(914,625)



 355,170

312,673

350,910

TOTAL EQUITY





Capital and reserves attributable to the owners of the parent





Ordinary shares


 11,008

11,008

11,008

Share premium

16

 104,111

104,077

104,111

Fair value and hedging reserves

16

 (14,779)

(31,026)

(54,453)

Exchange reserves

16

 61,720

42,761

83,561

Retained earnings


 174,477

166,464

183,919

Shareholders' equity


 336,537

293,284

328,146

Non-controlling interests


 18,633

19,389

22,764



 355,170

312,673

350,910

 

Consolidated statement of
changes in equity
Unaudited Interim Results for the six months ended 30 June 2017

                                                                         

Notes

Ordinary shares
£'000

Other reserves £'000

Retained earnings £'000

Shareholders' equity
£'000

Non- controlling
interests £'000

Total
equity
£'000

Balance at 1 January 2017


11,008

133,219

183,919

328,146

22,764

350,910

Profit for the period


 -

 -

 68,316

 68,316

 2,201

 70,517

Other comprehensive income for the period


 -

 17,833

 20,672

38,505

(1,256)

 37,249

Total comprehensive income for the period


 -

 17,833

 88,988

 106,821

945

 107,766

Dividends

6

 -

 -

 (44,280)

 (44,280)

(6,223)

 (50,503)

Amounts in respect of share based payments:








- reversal of amortisation net of tax


 -

 -

 14,145

 14,145

 -

 14,145

- shares acquired


 -

 -

 (15,009)

 (15,009)

 -

 (15,009)

Acquisitions


 -

 -

 -

 -

 1,926

 1,926

Change in non-controlling interests


 -

 -

 (53,286)

 (53,286)

 (779)

 (54,065)

Balance at 30 June 2017


 11,008

 151,052

 174,477

 336,537

 18,633

 355,170


















Notes

Ordinary shares
£'000

Other
reserves
£'000

Retained earnings
£'000

Shareholders' equity
£'000

Non-
controlling
interests
£'000

Total
equity
£'000

Balance at 1 January 2016


 11,008

73,967

 227,362

 312,337

 18,465

 330,802

Profit for the period


 -

 -

 33,328

 33,328

 2,861

 36,189

Other comprehensive income/(expense)

for the period


 -

 41,842

 (55,079)

 (13,237)

 2,726

 (10,511)

Total comprehensive income/(expense)
for the period


 -

 41,842

 (21,751)

 20,091

 5,587

 25,678

Dividends

6

 -

-

 (42,550)

 (42,550)

 (4,514)

 (47,064)

Amounts in respect of share based payments:








- reversal of amortisation net of tax


 -

 -

 13,402

 13,402

 -

 13,402

- shares acquired


 -

 -

 (8,085)

 (8,085)

 -

 (8,085)

Acquisitions


 -

 -

-

 -

 (149)

 (149)

Change in non-controlling interests


 -

 -

 (1,914)

 (1,914)

 -

 (1,914)

Issue of share capital


 -

 3

 -

 3

 -

 3

Balance at 30 June 2016


 11,008

 115,812

 166,464

 293,284

 19,389

 312,673


 

Consolidated statement of cash flows
Unaudited Interim Results for the six months ended 30 June 2017


Notes

6 months ended

30 June 2017

£'000

6 months ended

30 June 2016

£'000

Cash flows from operating activities




Cash generated from operations

17

 64,708

29,305

Interest paid


 (8,148)

(8,530)

Interest received


 4,330

2,628

Taxation paid


 (16,647)

(17,576)

Increase in net insurance broking payables


 28,248

82,422



 72,491

88,249

Dividend received from associates


 1,030

895

Net cash generated from operating activities


 73,521

89,144





Cash flows from investing activities




Purchase of property, plant and equipment


 (9,096)

 (4,153)

Purchase of other intangible assets


 (23,947)

 (13,166)

Proceeds from disposal of property, plant and equipment


 750

 367

Proceeds from disposal of other intangible fixed assets


 122

 -

Acquisition of businesses, net of cash acquired

18

 (32,131)

 (4,631)

Acquisition of associates


 (89)

 -

Proceeds from disposal of businesses, net of cash disposed

19

1,601

914

Proceeds from disposal of available-for-sale other investments


-

259

Net cash used in investing activities


 (62,790)

(20,410)





Cash flows from financing activities




Dividends paid to owners of the parent


 (44,620)

(41,653)

Purchase of available-for-sale financial assets

8

 (119,467)

(99,701)

Proceeds from disposal of available-for-sale financial assets

8

117,133

19

Purchase of shares


 (15,009)

(8,085)

Proceeds from issuance of ordinary shares


-

3

Proceeds from borrowings


 96,379

87,360

Repayments of borrowings


(1,981)

(63)

Dividends paid to non-controlling interests


 (6,223)

(4,514)

Net cash generated/(used) in financing activities


 26,212

(66,634)

Net increase in cash and cash equivalents


 36,943

2,100

Cash and cash equivalents at beginning of period


 939,945

901,087

Exchange (losses)/gains on cash and cash equivalents


 (11,124)

26,028

Cash and cash equivalents at end of period


 965,764

929,215

 

 

Notes to the unaudited interim results
For the six months ended 30 June 2017

BASIS OF ACCOUNTING

The Group's condensed consolidated interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.

The Group has considerable financial resources and a geographically diversified business and as a consequence, the Directors believe that the Group is well placed to manage its business risks in the context of the current economic outlook. Accordingly, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis in preparing these interim results.

These financial statements should be read in conjunction with the consolidated statutory accounts of the Group for the year ended 31 December 2016, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 were approved by the Board of Directors on 28 February 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

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

The accounting policies are consistent with those of the annual financial statements for the year ended 31 December 2016.

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

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

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016.

Full details of the audited accounts and accounting policies for the year ended 31 December 2016 are available at www.jlt.com

1. Alternative income statement

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

6 months ended 30 June 2017

Underlying

profit

£'000

Exceptional

items

£'000

Total

£'000

Fees and commissions

 686,912

 -

 686,912

Investment income

 3,021

 -

 3,021

Salaries and associated expenses

 (422,051)

 (1,032)

 (423,083)

Premises

 (35,529)

 (35)

 (35,564)

Other operating costs

 (105,645)

 176

 (105,469)

Depreciation, amortisation and impairment charges

 (16,668)

-

 (16,668)

Trading profit

 110,040

 (891)

 109,149

Finance costs - net

 (11,953)

 -

 (11,953)

Share of results of associates

 2,051

 -

 2,051

Profit before taxation

 100,138

 (891)

 99,247

 

 

6 months ended 30 June 2016

profit

£'000

Exceptional

items

£'000

Total

£'000

Fees and commissions

 617,590

 -

 617,590

Investment income

 1,803

 -

 1,803

Salaries and associated expenses

 (381,053)

 (7,839)

 (388,892)

Premises

 (31,947)

 (1,846)

 (33,793)

Other operating costs

 (90,715)

 (24,292)

 (115,007)

Depreciation, amortisation and impairment charges

 (17,273)

 -

 (17,273)

Trading profit

 98,405

 (33,977)

 64,428

Finance costs - net

 (11,139)

 -  

 (11,139)

Share of results of associates

 1,948

 -  

 1,948

Profit before taxation

 89,214

 (33,977)

 55,237

 

2. 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.

Following the disposal of Thistle in 2016, the majority of what was classified as JLT Insurance Services, plus Northern Europe which was previously in JLT Europe Middle East and Africa, both included in Other Risk & Insurance in the 2016 financial year, now together with JLT Specialty, form the business group JLT Europe. Prior period numbers have been restated to reflect this change.

JLT Re principal locations includes North America, the United Kingdom and Asia.

Segment results

Management assesses the performance of the operating segments based upon a measure of underlying trading profit. Segment results include the net income or expense derived from the trading activities of the segment together with the investment income earned on fiduciary funds. Interest income on the Group's own funds and finance costs are excluded since the trading activities of the Group's primary segments are not of a financial nature. Income tax expense and the charge in respect of non-controlling interests are excluded from the segmental allocation.

Segment assets and liabilities

Assets and liabilities are not allocated to individual segments and are therefore all reported within Head Office & Other.

Investments in associates

The Group owns the following stakes in its principal associates: 20% of GrECo, which operates mainly in Austria and Eastern Europe; 25% of MAG JLT, which operates mainly in Italy and 25% of March-JLT, which operates mainly in Spain. The investment and the Group's share of the net results of these associates are included in the Head Office & Other segment, together with the investment and results of the Group's other associates, Sterling Re Intermediaro de Reaseguro SA de CV, JLT Insurance Management Malta, JLT Energy (France) SAS and JLT Independent Insurance Brokers Private Ltd.

Other segment items

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

Business cyclicality

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

3. Operating profit

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


6 months

ended

30 June 2017

£'000

6 months

ended

30 June 2016

£'000

Foreign exchange losses/(gains):



- fees and commissions

17,525

6,527

- other operating costs

(1,745)

(3,717)


15,780

2,810

Amortisation of other intangible assets:



- software costs

8,997

10,199

- other intangible assets

1,423

972

Depreciation on property, plant and equipment

6,248

6,102

Total depreciation, amortisation and impairment charges

16,668

17,273

Amortisation of other intangible assets:



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

7,545

6,862

Gains on disposal of property, plant and equipment

(11)

(56)

Fair value (gains)/losses on derivative financial instruments

(371)

90

Available-for-sale financial assets:



- Fair value losses

122

-

- Gain on sale

-

(129)


122

(129)

Exceptional items:



Acquisition and integration costs of which:



- included in salaries and associated expenses

606

165

- included in premises costs

7

69

- included in other operating costs

409

180


1,022

414

Restructuring costs of which:



- included in salaries and associated expenses

-

7,674

- included in premises costs

-

1,777

- included in other operating costs

-

700


-

10,151

Net (gains)/losses on disposal of businesses of which:



- included in salaries and associated expenses

426

-

- included in premises costs

28

-

- included in other operating costs

(1,340)

1,363


(886)

1,363

Costs associated with a regulatory review

-

147

Net litigation costs

-

22,000

Release of contingent consideration

(464)

(98)

Fair value losses on available-for-sale financial assets

1,375

-

Additional deferred consideration received on a disposal of a business

(156)

-

Total exceptional items included within operating profit

891

33,977

 

 

We identified that the foreign exchange gain of £101,000 disclosed in 2016 should have been a loss of £6,527,000. This does not result in a change to the consolidated income statement.

4. Income tax expense


6 months

ended

30 June 2017

6 months

ended

30 June 2016


£'000

£'000

Current tax expense



Current period

22,094

17,774

Adjustments in respect of prior periods

(756)

(5,297)


21,338

12,477

Deferred tax expense



Origination and reversal of temporary differences

6,140

2,289

Reduction in tax rate

515

-

Adjustments in respect of prior periods

737

4,282


7,392

6,571

Total income tax expense

28,730

19,048

 

The total income tax expense in the income statement of £28,730,000 (2016: £19,048,000) includes a tax credit on exceptional items of £272,000 (2016: £6,560,000). There were no non-recurring tax credits in the period.

In July 2015, the UK Government announced further measures in relation to the UK corporation tax rate, reducing the headline rate of corporation tax to 19% from April 2017 and then to 18% from April 2020. A further 1% reduction in the main rate of corporation tax rate to 17% from 1 April 2020 was announced in Budget 2016. As at 30 June 2017, the additional 1% rate reduction to 17% from April 2020 has been enacted.  The impact of the rate reduction to 17% has been incorporated into the income tax charge for the 6 months ended 30 June 2017, taking into consideration when timing differences are expected to reverse.

 

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


6 months

ended

30 June 2017

6 months

ended

30 June 2016


£'000

£'000

Profit before taxation

99,247

55,237

Tax calculated at UK Corporation Tax rate of 19.25% (2016: 20%)

19,105

11,047

Non-deductible expenses

3,820

1,858

Non recognition of tax losses

2,421

2,384

Other*

(953)

3

Adjustments in respect of prior periods

(19)

(1,015)

Effect of difference between UK and non-UK tax rates

4,236

5,161

Effect of reduction in tax rate

515

-

Tax on associates

(395)

(390)

Total income tax expense

28,730

19,048

 

* Other includes the non-taxable (gain) / loss on disposal of subsidiaries

 

5. Earnings per share

Following changes to the terms of several share-based staff compensation schemes, whereby dividend rights eligibility were removed in certain circumstances, a comprehensive review of IAS 33 ('earnings per share' or 'EPS') was undertaken in 2016 to determine the impact of these changes. The schemes affected by this change include the JLT Long Term Incentive Plan (2004/2013), the Senior Executive Share Scheme, the Executive Share Option Scheme, and the Sharesave Scheme. The review considered whether the share options in these plans continued to qualify as participating equity instruments under IAS 33 for the purposes of calculating basic and diluted EPS. With the changes to schemes, the review concluded that only vested share options eligible to receive discretionary dividend equivalents should be included in the basic calculation. As a result, for the basic EPS calculation, the number of ordinary shares as at June 2016 should reduce from 220,013,812 to 210,291,518, resulting in an increase in basic EPS of 0.7p from 15.1p to 15.8p. The review also concluded that unvested share options should be included in the diluted EPS calculation, using the treasury stock method. This has the effect of reducing the number of ordinary shares in the June 2016 diluted EPS calculation from 220,045,514 to 214,110,761, resulting in an increase in diluted EPS of 0.5p from 15.1p to 15.6p.

Under the revised calculation, basic EPS is calculated by dividing the profit attributable to shareholders by the sum of the weighted average number of ordinary shares in issue during the year and the vested share options eligible for discretionary dividend equivalents, excluding unallocated shares held by the Trustees of the Employees' Share Ownership Plan Trust, which are treated as treasury shares. The profit attributable to shareholders is the profit attributable to the owners of the parent adjusted for the dividend equivalents and undistributed earnings attributable to the unvested share options carrying unconditional dividend equivalent rights.

Diluted EPS is calculated by adjusting the weighted average number of ordinary shares in issue to take account of the potential dilutive effect
of outstanding share options.

Basic and diluted EPS are also calculated based on underlying earnings attributable to shareholders, which exclude any exceptional items.

A reconciliation of earnings is set out below:


As at

30 June 2017

As at

30 June 2016


No. of shares

No. of shares restated

Weighted average number of shares

 210,691,298

 210,291,518

Effect of outstanding share options

 4,388,282

 3,819,243

Adjusted weighted average number of shares

 215,079,580

 214,110,761

 

 


6 months ended 30 June 2017


£'000

£'000

£'000

Pence

Pence


Earnings

Adjustments2

Adjusted earnings for basic earnings per share

Basic earnings

per share

Diluted earnings

 per share

Underlying profit after taxation and non-controlling interests1

68,653

(51)

68,602

32.6

31.9

Exceptional items before tax

(891)





Taxation thereon

272





Non-controlling interests thereon

282






(337)

-

(337)

(0.2)

(0.1)

Profit attributable to the owners of the parent

68,316

(51)

68,265

32.4

31.8

 

 

6 months ended 30 June 2016


£'000

£'000

£'000

Pence

Pence


Earnings 

Adjustments2

Adjusted earnings for basic earnings per share

Basic

earnings

per share

restated

Diluted

earnings

per share

restated

Underlying profit after taxation and non-controlling

interests1

60,745

(106)

60,639

28.8

28.4

Exceptional items before tax

(33,977)





Taxation thereon

6,560






(27,417)

48

(27,369)

(13.0)

(12.8)

Profit attributable to the owners of the parent

33,328

(58)

33,270

15.8

15.6

 

1 Underlying excludes exceptional items

2 Adjustments related to the dividends and undistributed earnings on unvested share options carrying dividend equivalent rights.

 

6. Dividends


6 months

ended

30 June 2017

6 months

ended

30 June 2016


£'000

£'000

Final dividend in respect of 2016 of 20.6p per share (2015: 19.5p)

 44,280

42,550

 

 

An interim dividend in respect of 2017 of 12.2p per share (2016: 11.6p) amounting to a total of £26,810,000 (2016: £25,637,000) is payable on 3 October 2017 to shareholders who are registered at the close of business on 25 August 2017.  The dividend proposed will not be accounted for until it is paid. The ex-dividend date will be 24 August 2017.

 

7. Goodwill


Gross

amount

Impairment

losses

Net carrying

amount


£'000

£'000

£'000

At 30 June 2017




Opening net book amount

548,117

(5,104)

 543,013

Exchange differences

 (9,596)

 (137)

 (9,733)

Acquisitions

 37,820

 -

 37,820

Closing net book amount

 576,341

 (5,241)

 571,100





At 30 June 2016




Opening net book amount

500,434

(4,268)

 496,166

Exchange differences

 28,339

 (57)

 28,282

Impairment

 -

 (370)

 (370)

Acquisitions

 6,762

 -

 6,762

Disposals

 (1,716)

 -

 (1,716)

Closing net book amount

 533,819

 (4,695)

 529,124

 

8. 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 deposit. 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 and some debt instruments. The 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
& deposits

Total


£'000

£'000

£'000

At 1 January 2017

 13,079

 127,659

 140,738

Exchange differences

 (273)

 117

 (156)

Additions

-

 119,467

 119,467

Finance income

154

-

 154

Disposals/maturities

-

 (117,133)

 (117,133)

Revaluation gain (included within equity)

-

 42

 42

Amounts written off

 (1,576)

 -

 (1,576)

At 30 June 2017

 11,384

  130,152 

 141,536





Analysis of available-for-sale financial assets




Current

 -  

 124,193

 124,193

Non-current

 11,384

 5,959

 17,343

At 30 June 2017

 11,384

 130,152

 141,536





Analysis of available-for-sale investments & deposits




Fiduciary funds


 129,849


Own funds


 303


At 30 June 2017


 130,152






At 1 January 2016

 6,436

 9,049

 15,485

Exchange differences

 513

 1,130

 1,643

Additions

-

 99,701

 99,701

Disposals/maturities

 (311)

(19)

 (330)

Revaluation deficit (included within equity)

-

(10)

 (10)

Amounts written off

 (70)

-

 (70)

At 30 June 2016

 6,568

 109,851

 116,419

Analysis of available-for-sale financial assets




Current

 -  

 99,598

 99,598

Non-current

 6,568

 10,253

 16,821

At 30 June 2016

 6,568

 109,851

 116,419


Analysis of available-for-sale investments & deposits




Fiduciary funds


 109,572


Own funds


 279


At 30 June 2016


 109,851


 

9. Derivative financial instruments


 As at 30 June 2017

 As at 30 June 2016


Assets

Liabilities

Assets

Liabilities


£'000

£'000

£'000

£'000

Interest rate swaps - fair value hedges

 18,034

 (4,230)

 36,578

 (203)

Forward foreign exchange contracts - cash flow hedges

 83,274

 (32,144)

 65,134

 (47,076)

Redemption liabilities - option contracts

 -  

 (78,377)

 -  

 (25,941)

Total

 101,308

 (114,751)

 101,712

 (73,220)

Current

 8,667

(17,873)

 6,632

 (18,194)

Non-current

 92,641

 (96,878)

 95,080

 (55,026)

Total

 101,308

 (114,751)

 101,712

 (73,220)

 

The Group's treasury policies are approved by the Board and are implemented by a centralised treasury department. The treasury department operates within a framework of policies and procedures that establishes specific guidelines to manage currency risk, liquidity risk and interest rate risk and the use of counterparties and financial instruments to manage these risks. The treasury department is subject to periodic review by internal audit.

The Group uses various derivative instruments including forward foreign exchange contracts, interest rate swaps, and from time to time, foreign currency collars and options to manage the risks arising from variations in currency and interest rates. Derivative instruments purchased are primarily denominated in the currencies of the Group's main markets.

Where forward foreign exchange contracts have been entered into to manage currency risk, they are designated as hedges of currency risk on specific future cash flows, and qualify as highly probable transactions for which hedge accounting is applied. The Group anticipates that hedge accounting requirements will continue to be met on its foreign currency and interest rate hedging activities and that no material ineffectiveness will arise which will result in gains or losses being recognised through the income statement.

The fair value of financial derivatives based upon market values as at 30 June 2017 and designated as effective cash flow hedges was an asset of £51.1 million and has been deferred in equity (2016: net assets of £18.1 million). Gains and losses arising on derivative instruments outstanding as at 30 June 2017 will be released to the income statement at various dates up to:

a) 44 months in respect of cash flow hedges on currency denominated UK earnings.

b) 12 years in respect of specific hedges on USD denominated long-term debt drawn under the Group's USD private placement programme.

c) 9 years in respect of specific hedges on GBP denominated long-term debt drawn under the Group's private placement programme.

No material amounts were transferred to the income statement during the period in respect of the fair value of financial derivatives.

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

a) Forward foreign exchange contracts

The Group's major currency transaction exposure arises in USD and the Group continues to adopt a prudent approach in actively managing this exposure.  As at 30 June 2017 the Group had outstanding foreign exchange contracts, principally in USD, amounting to a principal value of £1,327,379,000 (2016: £1,051,545,000).

b) Interest rate swaps

The Group uses interest rate hedges, principally interest rate swaps, to mitigate the impact of changes in interest rates. As at 30 June 2017, the notional principal amounts of outstanding cross currency interest rate swaps was USD 500,000,000 and sterling interest rate swaps was £75,000,000 (2016: USD 500,000,000 and £75,000,000). A net gain of £13.8 million (2016: net gain £36.4 million) on these instruments was offset by a fair value movement of £13.8 million (2016: £36.4 million) on the private placement loans, both of which were recognised in the income statement in the period.

c) Redemption liabilities

The redemption liabilities represent the valuation of the put options provided in the shareholders agreements of JLT Specialty Insurance Services Inc., JLT Sigorta ve Reasurans Brokerligi Ltd Sirketi, JLT SCK Corretora e Administradora and Construction Risk Partners, LLC.

The redemption liability increased in the period following the recognition of put option liabilities. These are detailed as follows:

a) options provided in the operating agreement of CRP Holding Company LLC for £48,898,000.

b) options in respect of new shareholders in JLT Specialty Insurance Services Inc. for £290,000.

The recognition of those liabilities resulted in a reduction in equity, related to transactions with non-controlling interest of £49,188,000.

d) Price risk

The Group does not have a material exposure to commodity price risk.

The maximum exposure to credit risk at the reporting date is the fair value of derivatives in the balance sheet.

 

10. Trade and other receivables


As at

30 June

2017

As at

30 June

2016


£'000

£'000

Trade receivables

 429,666

 414,994

Less: provision for impairment of trade receivables

 (22,414)

 (19,699)

Trade receivables - net

 407,252

 395,295

Other receivables

 172,837

 140,174

Prepayments

 37,472

 32,582


 617,561

 568,051

 

As at 30 June 2017, the Group had exposures to individual trade counterparties within trade receivables. In accordance with Group policy, Group operating companies continually monitor exposures against credit limits and concentration of risk. No individual trade counterparty credit exposure is considered significant in the ordinary course of trading activity. Management does not expect any significant losses from non-performance by trade counterparties that have not been provided for.

 

11. Cash and cash equivalents


As at

30 June

2017

As at

30 June

2016


£'000

£'000

Cash at bank and in hand

 527,878

 550,648

Short-term bank deposits

 437,886

 378,567


 965,764

 929,215




Fiduciary funds

 783,974

 719,420

Own funds

 181,790

 209,795


 965,764

 929,215

 

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

The effective interest rate in respect of short-term deposits was 1.03% (2016: 0.43%). These deposits have an average maturity of 14 days (2016: 15 days).

12. Trade and other payables


As at

30 June

2017

As at

30 June

2016


£'000

£'000

Insurance payables

 913,823

 828,992

Social security and other taxes

 21,160

 20,663

Other payables

 134,331

 119,914

Accruals and deferred income

 147,848

 157,398

Deferred and contingent consideration

 23,690

 21,539


 1,240,852

 1,148,506

 

All payables are considered current as the non-current portion is not material. We have reclassified £28,956,000 of accruals from other payables to accruals and deferred income in 2016. The trade and other payables include £92,639,000 of non-financial liabilities (2016: 92,331,000).

 

13. Financial instruments by category

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

At 30 June 2017

Loans and receivables

Derivatives

used for

hedging

Available-
for-sale

Total

Assets per balance sheet

£'000

£'000

£'000

£'000

Available-for-sale financial assets

 -  

 -  

 141,536

 141,536

Derivative financial instruments

 -  

 101,308

 -  

 101,308

Trade and other receivables (a)

 580,089

 -  

 -  

 580,089

Cash and cash equivalents

 965,764

 -  

 -  

 965,764

Total

 1,545,853

 101,308

 141,536

 1,788,697

 



Derivatives

used for

hedging

Other
financial

liabilities

Total

Liabilities per balance sheet


£'000

£'000

£'000

Borrowings


 -  

 (747,180)

 (747,180)

Trade and other payables (b)


 -  

 (1,148,213)

 (1,148,213)

Redemption liabilities - option contracts


 (78,377)

 -  

 (78,377)

Derivative financial instruments


 (36,374)

 -  

 (36,374)

Total


 (114,751)

 (1,895,393)

 (2,010,144)

 

At 30 June 2016

Loans and receivables

Derivatives

used for

hedging

Available-
for-sale

Total

Assets per balance sheet

£'000

£'000

£'000

£'000

Available-for-sale financial assets

 -  

 -  

 116,419

 116,419

Derivative financial instruments

 -  

 101,712

 -  

 101,712

Trade and other receivables (a)

 535,469

 -  

 -  

 535,469

Cash and cash equivalents

 929,215

 -  

 -  

 929,215

Total

 1,464,684

 101,712

 116,419

 1,682,815

 



Derivatives

used for

hedging

Other
financial
liabilities

Total

Liabilities per balance sheet


£'000

£'000

£'000

Borrowings


 -  

 (754,115)

 (754,115)

Trade and other payables (b)


 -  

 (1,056,175)

 (1,056,175)

Redemption liabilities - option contracts


 (25,941)

 -  

 (25,941)

Derivative financial instruments


 (47,279)

 -  

 (47,279)

Total


 (73,220)

 (1,810,290)

 (1,883,510)

 

(a) Prepayments are excluded from the trade and other receivables balance, as this analysis is required only for financial instruments.

(b) Non-financial liabilities are excluded from the trade and other payables balance, as this analysis is required only for financial instruments.

 

The following table presents the Group's financial assets and liabilities that are measured at fair value at 30 June 2017.


Level 1

Level 2

Level 3

Total

At 30 June 2017

£'000

£'000

£'000

£'000

Assets





Derivatives used for hedging

 -  

 101,308

 -  

 101,308

Available-for-sale financial assets





- equity securities

 -  

 -  

 992

 992

- debt investments

 -  

 -  

 10,392

 10,392

- fixed deposits

130,152

 -  

 -  

 130,152

Total

 130,152

 101,308

 11,384

 242,844






Liabilities





Deferred and contingent consideration

 -  

 -  

 (23,690)

 (23,690)

Redemption liabilities - option contracts

 -  

 -  

 (78,377)

 (78,377)

Derivatives used for hedging

 -  

 (36,374)

 -  

 (36,374)

Total

 -  

 (36,374)

 (102,067)

 (138,441)

 


Level 1

Level 2

Level 3

Total

At 30 June 2016

£'000

£'000

£'000

£'000

Assets





Derivatives used for hedging

 -  

 101,712

 -  

 101,712

Available-for-sale financial assets





- equity securities

1

-

 1,279

 1,280

- debt investments

 -  

-

 5,288

 5,288

- fixed deposits

109,851

-

-

 109,851

Total

 109,852

 101,712

 6,567

 218,131






Liabilities





Deferred and contingent consideration

 -  

-

 (21,539)

 (21,539)

Redemption liabilities - option contracts

 -  

 -  

 (25,941)

 (25,941)

Derivatives used for hedging

 -  

 (47,279)

 -  

 (47,279)

Total

 -  

 (47,279)

 (47,480)

 (94,759)

 

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

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

Instruments included in level 2 are financial instruments that are not traded in an active market (for example, over-the-counter derivatives) and for which the fair value is determined by using internal and external models. These models maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Level 2 includes derivatives used for hedging. The valuations of which are performed using a discounted cash flow methodology incorporating observable market forward foreign exchange and interest rates.

 

During the period there were no transfers between level 1, 2 and 3. There were no changes in valuation techniques during the period.

Instruments included in level 3 are financial instruments for which one or more of the significant inputs is not based on observable market data. In respect of deferred and contingent consideration and redemption liabilities - option contracts, unobservable inputs include management's assessment of the expected future performance of relevant acquired businesses and are valued using a discounted cash flow methodology.

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




Assets

Level 3

£'000

Liabilities

Level 3

£'000

At 1 January 2017



 13,079

 (57,134)

Exchange differences



 (274)

 3,262

Companies acquired



-

 (49,188)

Utilised in the year



-

 2,973

Charged to income statement



 (1,421)

 (1,980)

At 30 June 2017



 11,384

 (102,067)


Of the £1,421,000 charged to the income statement, £75,000 is credited in net finance costs and £1,496,000 charged to other operating costs.

Of the £1,980,000 charged to the income statement, £2,444,000 is charged to net finance costs and £464,000 is credited to other operating costs.

 

14. Borrowings


As at

30 June

2017

£'000

As at

  30 June

2016

£'000

Current



Bank overdraft

 16,605

 22,055

Unsecured loan notes

 34,010

 -

Bank borrowings

 239

 449

Finance lease liabilities

 239

 244


 51,093

 22,748

Non Current



Unsecured loan notes

 439,005

 482,875

Bank borrowing

 256,555

 248,051

Finance lease liabilities

 527

 441


 696,087

 731,367

Total borrowings

 747,180

 754,115

 

The borrowings include secured liabilities (finance leases) of £766,000 (2016: £685,000).

15. Provisions for liabilities and charges

 


Property

related provisions

£'000

Litigation provisions

£'000

Other

£'000

Total

£'000

At 1 January 2017

 2,919

 7,442

 36

 10,397

Exchange differences

 (32)

 (44)

 -

 (76)

Utilised in the period

 (16)

 (970)

 -

 (986)

Charged to the income statement

 40

 5,088

 -

 5,128

Interest charge

 30

-

-

 30

At 30 June 2017

 2,941

 11,516

 36

  14,493

 

 

At 1 January 2016

 1,300

 18,223

 114

 19,637

Exchange differences

 47

 143

 -

 190

Utilised in the period

 (267)

 (10,573)

 -

 (10,840)

Charged to the income statement

 33

 1,851

 795

 2,679

At 30 June 2016

 1,113 

 9,644

 909

  11,666 

 

 




As at

30 June

2017

£'000

As at

30 June

2016

£'000

Analysis of total provisions





Current - to be utilised within one year



 12,695

 10,829

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



 1,798

 837




 14,493

11,666

 

Property related provisions

The Group recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract. Provision is made for the future rental cost of vacant property and expected dilapidation expenses. In calculating the provision required, account is taken of the duration of the lease and any recovery of cost achievable from subletting. Property provisions occur principally in the US and UK and relate to a variety of lease commitments. The longest lease term expires in 2026.

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. However, the final outcome could differ materially from the amount provided.

The amount charged to the income statement in 2016 includes litigation costs related to employment contract disputes.

Where a litigation provision has been made it is stated gross of any third party recovery. All such recoveries are included as "Other receivables" within trade and other receivables. At 30 June 2017, in connection with certain litigation matters, the Group's litigation provisions include an amount of £0.1 million (2016: £0.1 million) to reflect this gross basis and the corresponding insurance recovery has been included within trade and other receivables. This presentation has had no effect on the consolidated income statement for the period ended 30 June 2017 (2016: nil).

Other

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

16. Other reserves


Share

premium

£'000

Fair value

and hedging

£'000

Exchange

reserves

£'000

Total

£'000

At 1 January 2017

 104,111

 (54,453)

 83,561

 133,219

Fair value gains net of tax:





- available-for-sale

 -

 35

 -

 35

- cash flow hedges

 -

 39,639

 -

 39,639

Currency translation differences

 -

 -

 (21,841)

 (21,841)

Net gains/(losses) recognised directly in equity

 -

 39,674

 (21,841)

 17,833

Issue of share capital

 -

 -

 -

 -

At 30 June 2017

 104,111

 (14,779)

 61,720

 151,052

 

 


Share

premium

£'000

Fair value and hedging

£'000

Exchange

reserves

£'000

Total

£'000

At 1 January 2016

 104,074

 (12,827)

 (17,280)

 73,967

Fair value losses net of tax:





- available-for-sale

 -

 (10)

 -

 (10)

- available-for-sale reclassified to the income statement

 -

 (146)

 -

 (146)

- cash flow hedges

 -

 (18,043)

 -

 (18,043)

Currency translation differences

 -

 -

 60,041

 60,041

Net (losses)/gains recognised directly in equity

 -

 (18,199)

 60,041

 41,842

Issue of share capital

 3

 -

 -

 3

At 30 June 2016

 104,077

 (31,026)

 42,761

 115,812

 

17. Cash generated from operations


6 months

ended

30 June 2017

£'000

6 months

ended

30 June 2016

£'000

Profit before taxation

 99,247

 55,237

Investment and finance income

 (4,588)

 (2,820)

Interest payable on bank loans and finance leases

 8,235

 8,804

Fair value (gains)/losses on derivative financial instruments

 (371)

 90

Net pension financing expenses

 2,812

 2,499

Unwinding of liability discounting

 2,473

 853

Depreciation

 6,248

 6,102

Amortisation of other intangible assets

 17,965

 18,033

Amortisation of share based payments

 13,031

 13,490

Share of results of associates' undertakings

 (2,051)

 (1,948)

Non cash exceptional items

 1,054

 9,134

(Gains)/losses on disposal of businesses

 (1,455)

 1,363

Gains on disposal of property, plant and equipment

 (11)

 (56)

Impairment of available-for-sale financial assets

 122

 -

Gains on disposal of available-for-sale financial assets

 -

 (129)

Increase in trade and other receivables

 (24,663)

 (39,209)

Decrease in trade and other payables - excluding insurance broking balances

 (57,682)

 (29,159)

Increase/(decrease) in provisions for liabilities and charges

 3,957

 (13,597)

Decrease in retirement benefit obligations

 385

 618

Net cash inflow from operations

 64,708

 29,305

 

 

18. Business combinations

 

Adjustments in respect of 2016 acquisitions

 

During the period, provisional fair values have been updated in respect of acquisitions made in 2016 and has resulted in the following changes:



 Revised fair value acquired

£'000

 Provisional

fair value reported at

31 Dec 2016

£'000

 Change in fair value

£'000

Stonehill Reinsurance Partners, LLC (Stonehill)


 2,123

2,085

38

AssetVal Pty Ltd


 573

637

 (64)



2,696

2,722

 (26)

 

 

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



Revised fair value acquired

£'000

Provisional

fair value

reported at

31 Dec 2016

£'000

Change in

fair value

£'000

Property, plant and equipment


 145

 146

 (1)

Other intangible assets


 2,366

 2,038

 328

Trade and other receivables


 391

 607

 (216)

Cash and cash equivalents





- own cash


 1,078

 1,078

 -  

- fiduciary cash


 1,098

 1,098

 -  

Insurance payables


 (1,098)

 (1,098)

 -  

Trade and other payables


 (1,168)

 (1,004)

 (164)

Current taxation


 -  

 (27)

 27

Deferred taxation


(116)

(116)

-



 2,696

 2,722

 (26)

 

 

 

Goodwill calculation


At

30 June 2017

£'000

At

31 Dec 2016

£'000

Change

£'000

Purchase consideration





- cash paid


 4,832

 4,832

 -  

- contingent consideration


 1,731

 1,731

 -  

- deferred consideration


 374

 374

 -  

Total purchase consideration


 6,937

 6,937

 -  

Less fair value of net assets acquired


 2,696

 2,722

 (26)

Goodwill


 4,241

 4,215

 26

 

 

 



At

30 June 2017

£'000

At

31 Dec 2016

 £'000

Change

£'000

Purchase consideration settled in cash


4,832

4,832

 -  

Cash and cash equivalents - own cash in subsidiaries acquired


 (1,078)

 (1,078)

 -  



 3,754

 3,754

 -  

Cash and cash equivalents - fiduciary cash in subsidiaries acquired


 (1,098)

 (1,098)

 -  

Cash outflow on acquisition


 2,656

 2,656

 -  

 

Current  period acquisitions

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


Notes

Acquisition

date

Percentage

voting rights

acquired

Cost

£'000

Construction Risk Partners LLC (CRP)

i

Jan 2017

50.1%

 39,417

Additional investments in existing businesses

ii

Jan- Jun 2017

various

 4,877





 44,294

 

 

i) Acquisition of Construction Risk Partners LLC (CRP)

On 27 January 2017, the Group completed the acquisition of CRP Holding Company LLC, the holding company of Construction Risk Partners LLC (CRP), one of the leading construction risk and surety specialty brokers in the USA, providing risk consulting and broking services. The acquired business contributed revenue of £9,111,000 and net profit, including acquisition and integration costs incurred to date, of £2,892,000 to the Group for the period since acquisition. If the acquisition had taken place on 1 January 2017, we estimate the contribution to Group revenue would have been £10,933,000 and net profit, including acquisition and integration costs incurred to date, would have been £3,470,000.

 

Goodwill calculation




£'000

Purchase consideration





- cash paid




 39,417

- contingent consideration




 -  

Total purchase consideration




 39,417

Less fair value of net assets acquired




 1,623

Goodwill




 37,794

 

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




Acquiree's

carrying

amount

£'000

Fair value

£'000

Property, plant and equipment



 381

 381

Other intangible assets



 2

 2

Trade and other receivables



 4,794

 4,794

Cash and cash equivalents





- own cash



 2,574

 2,574

- fiduciary cash



 9,589

 9,589

Insurance payables



 (9,589)

 (9,589)

Trade and other payables



 (4,202)

 (4,202)

Non-controlling interests



(1,926)

(1,926)




 1,623

 1,623






 



£'000

Purchase consideration settled in cash


 39,417

Cash and cash equivalents - own cash in subsidiary acquired


 (2,574)



 36,843

Cash and cash equivalents - fiduciary cash in subsidiary acquired


 (9,589)

Cash outflow on acquisition


 27,254

 

As at 30 June 2017, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.

Goodwill recognised is expected to be deductible for income tax purposes.

 

ii) Other acquisitions and additional investments




Goodwill calculation


£'000

Purchase consideration



- cash paid


 4,877

Total purchase consideration


 4,877

Less fair value of net assets acquired


 779

Less equity movement on transactions with non-controlling interest


 4,098

Goodwill


 -  

 

 

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


Acquiree's

carrying

amount

Fair value

£'000

Non-controlling interests

 779

 779


 779

 779

 

 



£'000

Purchase consideration settled in cash


 4,877

Cash outflow on acquisition


 4,877

 

As at 30 June 2017, the process of reviewing the fair values of assets acquired had not been completed, consequently the fair values stated above are provisional.

Group summary of the net assets acquired and goodwill

 


Total

£'000

Purchase consideration:




- cash paid

 39,417

 4,877

 44,294

Total purchase consideration

 39,417

 4,877

 44,294

Less fair value of net assets acquired

 1,623

 779

 2,402

Less equity movement on transactions with non-controlling interests

 -  

 4,098

 4,098

Goodwill on acquisitions occurring during the period

 37,794

 -  

 37,794

Impact of revision to fair value adjustment in relation to acquisitions completed in 2016



 26

Net increase in goodwill



 37,820

Impact of additional investments



 4,098

Net decrease in equity



 4,098

 

Group summary of cash flows


CRP

£'000

Others

£'000

Total

£'000

Purchase consideration settled in cash

 39,417

 4,877

 44,294

Cash and cash equivalents - own cash in subsidiary acquired

 (2,574)

 -  

 (2,574)


 36,843

 4,877

 41,720

Cash and cash equivalents - fiduciary cash in subsidiary acquired

 (9,589)

 -  

 (9,589)

Cash outflow on acquisitions in the period

 27,254

 4,877

 32,131

 

19. Business disposals

On 31 May 2017, the Group disposed of 100% of its shareholdings in Expacare Limited.

 

Net assets and proceeds of disposal



Fair value

£'000

Other intangible assets


 8

Trade and other receivables


 538

Cash and cash equivalents



- own cash


 235

Trade and other payables


 (239)

Current taxation


 (48)

Deferred taxation


 3

Net assets at disposal


 497

Gain on disposal


 682

Proceeds on disposal


 1,179




Cash inflow on disposal during the period


 1,179

Total consideration


 1,179

 



Total

£'000

Disposal consideration settled in cash


 1,179

Cash and cash equivalents



- own cash in subsidiary disposed


 (235)

Cash inflow on disposal during the period


 944

 

On 3 April 2017, the Group disposed of a retail book of business in Australia for a total consideration of £773,000. After costs on disposal of £501,000, the disposal resulted in a gain of £272,000. The transaction generated a cash inflow of £657,000 and the remaining consideration of £116,000 will be received in second half of the year.

 

Group summary of cash flows



Expacare

£'000

Others

£'000

Total

£'000

Disposal consideration settled in cash


 1,179

 657

 1,836

Cash and cash equivalents - own cash in subsidiary disposed


 (235)

 -  

 (235)

Cash inflow on disposal during the period


 944

 657

 1,601

 

 

20. 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 service costs accrued for the period are as follows:


UK Schemes

Overseas Schemes

Total


6 months

ended

30 June 2017

£'000

6 months

ended

30 June

2016

£'000

6 months

ended

30 June

2017

£'000

6 months

ended

30 June

2016

£'000

6 months

ended

30 June

2017

£'000

6 months

ended

30 June

2016

£'000

Defined benefit schemes

 -

 -

 -  

 463

 -  

 463

Defined contribution schemes

 10,269

 10,664

 12,020

 9,453

 22,289

 20,117


 10,269

 10,664

 12,020

 9,916

 22,289

 20,580

 

 

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

 


UK Schemes

Overseas Schemes

Total


6 months

ended

30 June 2017

£'000

6 months

ended

30 June

2016

£'000

6 months

ended

30 June

2017

£'000

6 months

ended

30 June

2016

£'000

6 months

ended

30 June

2017

£'000

6 months

ended

30 June

2016

£'000








Service cost

 -  

 -  

 -  

 (463)

 -  

 (463)

Expenses

 (180)

 (170)

 (205)

 (48)

 (385)

 (218)

Total (included within salaries and associated expenses)

 (180)

 (170)

 (205)

 (511)

 (385)

 (681)

Interest cost

 (9,170)

 (10,783)

 (1,247)

 (1,209)

 (10,417)

 (11,992)

Expected return on assets

 6,605

 8,508

 1,000

 985

 7,605

 9,493

Total (included within finance costs)

 (2,565)

 (2,275)

 (247)

 (224)

 (2,812)

 (2,499)

Expenses before taxation

 (2,745)

 (2,445)

 (452)

 (735)

 (3,197)

 (3,180)

 

 

The amounts disclosed in respect of both the UK and Overseas defined benefit schemes ("the Schemes") have been projected from previous valuations of the Schemes. They do not represent the results of a full actuarial valuation. In respect of 30 June 2017 the Group has updated its assumption regarding the discount rate applicable to the Schemes' liabilities in line with current market information.

 

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


UK Scheme

Overseas Schemes

Total

6 months ended 30 June 2017

£'000

%

£'000

%

£'000

Actual return less expected return on Scheme assets

 16,433


1,999


18,432

% of period end market value of Scheme assets


3.4%


3.5%


Experience gains arising on Scheme liabilities (1)

 - 


(563)


(563)

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


-


(0.8%)


Changes in assumptions underlying the present value of the Scheme liabilities

 9,961


(2,384)


7,577

% of period end present value of Scheme liabilities


1.5%


(3.3%)


Actuarial losses recognised in reserves (2)

 26,394

-

(948)


25,446

% of period end present value of Scheme liabilities


4.1%


(1.3%)










UK Scheme

Overseas Schemes

Total


6 months

6 months

6 months

6 months

6 months

6 months


ended

30 June

ended

30 June

ended

30 June

ended

30 June

ended

30 June

ended

30 June


2017

2016

2017

2016

2017

2016


£'000

£'000

£'000

£'000

£'000

£'000

Defined benefit obligation







Present value of funded obligations

 (644,242)

 (646,314)

 (71,441)

 (75,373)

 (715,683)

 (721,687)

Fair value of plan assets

 483,395

 464,946

 56,734

 55,267

 540,129

 520,213

Net liability recognised in the balance sheet

 (160,847)

 (181,368)

 (14,707)

 (20,106)

 (175,554)

 (201,474)











Total






6 months

6 months






ended

30 June

ended

30 June






2017

2016






£'000

£'000

Defined benefit obligation







Retirement benefit surpluses





125

 -  

Retirement benefit obligations





(175,679)

 (201,474)

Net liability recognised in the balance sheet





(175,554)

 (201,474)






UK Scheme

Overseas Schemes

Total


6 months

6 months

6 months

6 months

6 months

6 months


ended

30 June

ended

30 June

ended

30 June

ended

30 June

ended

30 June

ended

30 June


2017

2016

2017

2016

2017

2016


£'000

£'000

£'000

£'000

£'000

£'000

Reconciliation of defined benefit liability







Opening defined benefit liability

 (184,496)

 (118,947)

 (13,916)

 (11,440)

 (198,412)

 (130,387)

Exchange differences

-

 -  

 609

 (1,598)

 609

 (1,598)

Pension expense

 (2,745)

 (2,445)

 (452)

 (735)

 (3,197)

 (3,180)

Employer contributions

-

 -  

 -  

 63

 -  

 63

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

 26,394

 (59,976)

 (948)

 (6,396)

 25,446

 (66,372)

Net liability recognised in the balance sheet

 (160,847)

 (181,368)

 (14,707)

 (20,106)

 (175,554)

 (201,474)








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

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

 

21. Related-party transactions

The Group has taken advantage of the exemption available under IAS 24, "Related Party Disclosures", not to disclose details of transactions with its subsidiary undertakings. For the period, the Group's related parties are the same as those disclosed on page 162 of the Group's Annual Report for 2016. The basis of the remuneration of the Directors and key management remains consistent with that reported in the Group's Annual Report for 2016.

 

22. PRINCIPAL RISKS

As a global company, JLT faces a range of risks, each of which has the potential to impact on the achievement of our strategic business objectives, as well as providing opportunity in the right circumstances. 

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

The outcome of the EU referendum on 23 June 2016 introduced uncertainty in future periods. Whilst there has been much speculation in the press about the scenarios the country faces, the Group continues to serve its clients' best interests. The Group continues to monitor events closely working with its insurance partners and clients, as the outcome starts to become more certain.

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 44 and 45 of the Group's Annual Report for 2016. These are summarised below:

PRINCIPAL RISKS

NATURE OF RISK

STRATEGIC RISKS


Economic Instability

JLT's business is more tied to economic activity and growth rather than (re)insurance market rates, since greater levels of corporate activity generally drive greater demand for the Group's services. There is a risk that economic instability reduces client demand.

Strategic Risks

There are risks to the Group's strategic plan arising from changes in the external environment, markets, customer behaviour and political developments such as Brexit, as well as risks arising from acquisitions and strategic change initiatives.

OPERATIONAL RISKS


Loss of Key Staff

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

Business Interruption

The Group operates from over 100 offices in 40 territories across the world, each with a unique local environment. There is a risk of a business interruption due to a large, unexpected incident.

Loss of IT Environment

The Group is reliant on the ability to process its transactions on behalf of its clients. Risks arise from non-performance or failure of an IT outsourcing provider / IT supplier, malicious act and/or cyber crime and internal operational issues.

Information Security

Intermediaries and pension administrators process and retain confidential data in the normal course of business. Risks relate to loss of customer records or breach of confidentiality due to inadequate security and other key controls.

Data Privacy

Risks arising from non-compliance with or misinterpretation of local or international data privacy regulation/legislation/laws.

Errors and Omissions

Intermediaries run a risk of incurring a loss if the operating procedures in place across the Group in relation to market security, placement and claims are not complied with or alleged negligence/breach of contract in the provision of services/advice becomes apparent.

Litigation

Litigation risk can arise from a number of different sources such as:

- M&A litigation (e.g. breach of Sale & Purchase Agreement).

- Breach of Employment Law.

- Tortious liability arising from the recruitment of individuals where appropriate recruitment controls are not adhered to.

Regulatory Breach / Financial Crime (including internal and external fraud)

Risks arise from non-compliance with or misinterpretation of local and international regulations and failure to meet regulatory standards both in the present, and retrospectively, in relation to past business activities.

FINANCIAL RISKS


Capital Risk and Liquidity

Risks arising from an inability to maintain an effective and efficient capital structure and ensure an optimal cost of capital, or meet the short term financial demands of the business.

Foreign Currency

The Group has foreign exchange exposures to:

- 'Translational' risk arising from the need to convert currencies into GBP for reporting purposes.

- 'Transactional' risk arising from revenues and costs being denominated in different currencies.

Counterparty Risk

There is a risk associated with a failure of a key counterparty resulting in a loss of own cash, fiduciary funds, investments and deposits, derivative assets and/or trade receivables.

Defined Benefit Pension Scheme

Risk of adverse impact on the balance sheet and income statement as a consequence of an increase in the Defined Benefit Pension Scheme deficit.

 

23. forward-looking statements

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

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

 

Statement of directors' responsibilities

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

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

•     Material related-party transactions in the first six months and any material changes in the related-party transactions described in the last Annual Report.

The directors of JLT Group plc are listed in the Annual Report of the Company for the year ended 31 December 2016, subject to the following change which has taken place since the publication of that document: Bruce Carnegie-Brown stepped down from the Board on 14 June 2017.

 

On behalf of the Board

 

Charles Rozes

Finance Director

27 July 2017

 

independent review report to
jardine lloyd thompson group
plc

report on the consolidated interim financial statement

Our conclusion

We have reviewed Jardine Lloyd Thompson Group plc's consolidated interim financial statements (the 'interim financial statements') in the interim results of Jardine Lloyd Thompson Group plc for the 6 month period ended 30 June 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

•  The consolidated balance sheet as at 30 June 2017;

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

•  The consolidated statement of cash flows for the period then ended;

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

•  The explanatory notes to the interim financial statements.

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

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

responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

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

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

What a review of interim financial statements involves

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

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

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

 

PricewaterhouseCoopers LLP

Chartered Accountants

London

27 July 2017

a.

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

b.

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

 

 

 

 

 

 

 

 


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