2014 interim results
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INTERIM RESULTS 2014
2014 Interim Results
Highlights
Organic revenue growth of 6%
Underlying PBT up by 15%
Strong performances from Asia, Latin America and International Employee Benefits
Good progress in Towers Watson Re integration
Continuing investment in the business through acquisitions in Hong Kong, Brazil and the UK and a start up operation in Argentina
Business Transformation Programme on track
Increased interim dividend
INTERIM RESULTS 2014
Growth
2014 Interim Financial Highlights
1 Total revenue comprises fees, commissions and investment income2 Underlying results exclude exceptional items 3 CRE = constant rates of exchange4 Organic growth is based on total revenue excluding the effect of currency, acquisitions, disposals and investment income
2014 2013 Actual CRE3 Organic46 months to June (£m)
Total revenue1 559.6 487.2 15% 22% 6%
Underlying trading profit2 110.5 92.8 19% 31%
Underlying profit margin2 19.7% 19.0%
Underlying PBT2 107.4 93.1 15%
Reported PBT 98.4 85.1 16%
Underlying EPS (diluted)2 33.6p 29.7p 13%
Reported EPS (diluted) 30.3p 26.9p 13%
Dividend per share 10.6p 10.1p 5%
INTERIM RESULTS 2014
Total Revenue and Trading Profit
Risk & Insurance 429.6 15% 24% 5% 94.9 104.6 82.7 22% 23% 22%
Employee Benefits 130.0 13% 18% 12% 26.0 27.5 21.1 20% 20% 18%
Central Costs - - - - (10.4) (10.4) (11.0) - - -
559.6 15% 22% 6% 110.5 121.7 92.8 19.7% 20.4% 19.0%
Trading Margin
2014 CRE2013
Total Revenue Trading Profit
2014 CRE2013
6 months to June (£m) 2014 Growth CREOrganic
INTERIM RESULTS 2014
Trading Margin
2014 CRE2013
Risk & Insurance
• Organic revenue growth of 4% • Lower trading profit due to tougher trading conditions • Notable new business wins and strong new business pipeline• Intensifying insurance rating and FX headwinds• 2014 full year overall financial performance anticipated to be broadly similar to 2013
JLT Specialty
Highlights
Total Revenue Trading Profit
2014 CRE2013
JLT Specialty 112.3 2% 4% 4% 16.4 17.5 17.8 15% 15%
16%
6 months to June (£m) 2014 Growth CREOrganic
INTERIM RESULTS 2014
• Good first trading period for combined business • Integration progressing well; encouraged by support of cedants and strength of sales
pipeline• Significant growth opportunity, that we are continuing to invest in• Expecting that full year trading margin will be broadly flat to the previous year due to:
– Ongoing investment– Sharp decline in reinsurance rating environment– Strengthening of sterling
Trading Margin
2014 CRE2013
Total Revenue Trading Profit
2014 CRE2013
Highlights
6 months to June (£m) 2014 Growth CREOrganic
Risk & Insurance
JLT Towers Re
JLT Towers Re 110.0 125% 137% 6% 33.2 35.6 14.7 30% 31%
30%
INTERIM RESULTS 2014
Risk & Insurance
JLT Australia & New Zealand
• Organic revenue growth of 7%, in part benefiting from phasing of business into 1H • Fall in revenue and trading profit due to adverse FX movements• A strong performance given fierce broker competition and fall in insurance rates• Public Sector business continues to perform well• Benefiting from aligning business along specialty lines to drive growth
Trading Margin
2014 CRE2013
Total Revenue Trading Profit
2014 CRE2013
JLT Australia & NZ 64.5 (10%) 7% 7% 22.6 26.9 25.4 35% 35%
35%Highlights
6 months to June (£m) 2014 Growth CREOrganic
INTERIM RESULTS 2014
Risk & Insurance
Lloyd & Partners
• Revenues decreased by 3%; flat at constant rates of exchange • Continuing to invest in building leading specialty capabilities• Surplus of capital in domestic markets currently impacting competitiveness of London,
European and Bermuda markets
Trading Margin
2014 CRE2013
Total Revenue Trading Profit
2014 CRE2013
Lloyd & Partners 43.3 (3%) - (1%) 10.5 11.0 10.5 24% 25%
23%Highlights
6 months to June (£m) 2014 Growth CREOrganic
INTERIM RESULTS 2014
• Strong organic revenue growth of 14%• Trading profit increased 9%, or 19% at constant rates of exchange • Specialty led strategy attracting clients and enabling us to continue to win market
share• Acquisition of Lambert Brothers adds to Marine and Corporate capabilities in
Hong Kong
Trading Margin
2014 CRE2013
Total Revenue Trading Profit
2014 CRE2013
Highlights
6 months to June (£m) 2014 Growth CREOrganic
Risk & Insurance
JLT Asia
JLT Asia 38.0 9% 20% 14% 7.0 7.7 6.4 18% 18%
18%
INTERIM RESULTS 2014
• Strong organic revenue growth of 17%• 6% reduction in trading profit due to adverse FX movements• Trading margin reduced as expected due to continuing investments• Launched new start-up operation in Argentina
Trading Margin
2014 CRE2013
Total Revenue Trading Profit
2014 CRE2013
Highlights
6 months to June (£m) 2014 Growth CREOrganic
Risk & Insurance
JLT Latin America
JLT Latin America 26.2 2% 19% 17% 6.8 7.9 7.3 26% 26%
28%
INTERIM RESULTS 2014
• Organic revenue growth of 1% in difficult market conditions• Continuing to win new clients and secure further business from existing clients• Building strong position in bulk-purchase annuity market including acquisition of Ensign
Pension Administration• Year-on-year financial progress anticipated in 2014
Trading Margin
2014 CRE2013
Total Revenue Trading Profit
2014 CRE2013
Highlights
6 months to June (£m) 2014 Growth CREOrganic
Employee Benefits
UK & Ireland
UK & Ireland 85.4 5% 5% 1% 12.3 12.3 12.9 14% 14%
16%
INTERIM RESULTS 2014
Employee Benefits
International
• Strong performance by JLT EB in Asia, with growing demand for healthcare in the region
• Asia high-net-worth life insurance broker maintains positive track record • Latin America benefiting from increasing corporate spend on healthcare• Acquisition of SCK during the period in Brazil
Trading Margin
2014 CRE2013
Trading Profit
2014 CRE2013
6 months to June (£m) 2014 Growth CREOrganic
Total Revenue
Asia 30.6 35% 49% 42% 11.1 12.2 7.5 36% 36%33%
Latin America 9.3 39% 63% 30% 2.6 3.0 1.2 28% 27%17%
Australia & NZ 3.1 (7%) 12% 12% 0.3 0.3 (0.3) 10% 10%(9%)
Other 1.6 65% 98% 11% (0.3) (0.3) (0.2) (19%) (19%)(17%)
Highlights
INTERIM RESULTS 2014
Associates
6 months to June (£m) 2014 2013 Growth
Total contribution to JLT after tax 7.2 7.5 (4%)
Principal Associate Holdings
% = JLT equity interest
Highlights
Siaci Saint Honoré France 26%
GrECo Austria 20%
MAG-JLT Italy 25%
March-JLT Spain 25%
JLT Sterling Mexico 36%
Reduced contribution reflecting poor macro economic conditions across most of Europe
Weighting of contribution towards the first half of the year expected to continue in 2014
INTERIM RESULTS 2014
Total revenue 560 100% 487 100% 73
Operating costs:
Staff costs 320 57.2% 281 57.7% 39
Premises 28 5.0% 25 5.1% 3
Depreciation & amortisation 14 2.5% 12 2.4% 2
Travel & entertainment 23 4.0% 18 3.7% 5
Other operating costs 64 11.6% 58 12.1% 6
449 80.3% 394 81.0% 55
Underlying Operating Cost Ratio
6 months to June (£m) 2014 2013 Variance
INTERIM RESULTS 2014
USD Revenue Protection
USD hedging rates achieved 1.56 1.53 1.54
as at 28th July 2014
Current USD hedged positions 77% 48% 25%
Forward USD rates as at 28th July 2014 1.70 1.69 1.67
Blended USD rates post hedging 1.55 1.59 1.61 1.64
Value of 2014 revenue ($350m) £226m £220m £217m £213m
Approx YOY revenue impact (£6m) (£3m) (£4m)
Full Year Projections
Forward ratesActual
2013 2014 2015 2016
INTERIM RESULTS 2014
2014 impact of exchange rate movements
March guidance indicated that we were facing a potential £12.7 million reduction in profits due to the transactional and translational impact of adverse exchange rate movements
The impact at the half year was £11.2 million when compared to the same period in 2013
We expect further negative year-on-year impact if rates stay at current levels
Second half impact however likely to be less than first half as sterling strengthened significantly in the second half of 2013
INTERIM RESULTS 2014
Breakdown of exceptional items
6 months to June (£m) 2014 2013
Exceptional costs:
Acquisition and integration costs 6.2 3.9
Business Transformation Programme costs 2.8 3.8
St Botolph costs - 0.3
9.0 8.0
Taxation impact of exceptional items:
Tax on exceptional items 1.6 1.8
INTERIM RESULTS 2014
Balance Sheet
Goodwill and intangibles 523 341 182 499
Fixed assets 60 44 16 60
Associates and investments 108 109 (1) 107
Net working capital and other 233 177 56 137
Hedging contracts after deferred tax (5) (11) 6 (7)
Net pension deficit after deferred tax (120) (100) (20) (106)
Other deferred net tax assets 5 11 (6) 15
Net debt (436) (228) (208) (345)
Net assets 368 343 25 360
As at 30th June (£m) 2014 2013 Change 31 Dec 2013
INTERIM RESULTS 2014
Cash Flow (Operational Basis)
EBITDA 138 116
Deduct: Net interest (7) (3)
Tax paid (18) (20)
Net working capital increase (101) (62)
Annual capex (31) (33)
Net shares acquired (15) (18)
Pension deficit funding (1) (7)
Acquisitions/disposals (12) (11)
Dividends paid (41) (39)
Foreign exchange (1) 1
Associates & other (2) (9)
Net cash outflow (91) (85)
6 months to June (£m) 2014 2013
INTERIM RESULTS 2014
Group funding
Successful issue of additional long-term loan notes:
• £75 million of unsecured 2026 loan notes @ 4.27%
• Proceeds swapped to floating rate, currently @ 2.1%
• Used to refinance shorter term bank borrowings
• Extends debt maturity profile
Group committed debt facilities now total £636 million
Good balance between long and short term debt
Net debt/EBITDA ratio of 1.8:1
INTERIM RESULTS 2014
2014 Current estimate of full year exceptional items
£m2014
Acquisition and integration costs 12.2
Business Transformation Programme 8.5
20.7
INTERIM RESULTS 2014
(£m)
2014 Full YearForecast
Business Transformation Programme
Incremental:
One-off costs (9.5) (8.5)Associated benefits 7.3 4.7
Cumulative:
One-off costs (9.5) (18.0)
Recurring benefit 7.3 12.0
2013 Actual
2013Actual
INTERIM RESULTS 2014
Market Update
Speed of decline in insurance and reinsurance rating environment steepest since just before 9/11; pricing also fast approaching levels seen at that time
• Reinsurance rates fell by between 15-25% on average during the 1st June renewals
• Primary market seeing rating declines of 15-30% at present
Opportunistic buying environment for clients
Risk of a lack of underwriting discipline from certain capital providers poses threat to long term stability of the market
Brokers play an important role helping clients navigate current market
JLT’s long-term success tied more to economic growth than insurance rates
INTERIM RESULTS 2014
Outlook
We are confident that we can deliver year-on-year financial progress, but we are more cautious over the outlook for the remainder of the year given the marked decline in the insurance and reinsurance rating environment over the last quarter and the continued strength of sterling.
The strong organic revenue growth we achieved in the period despite these challenges, demonstrates the success of our strategy of focusing on our areas of specialisation and higher growth economies.
INTERIM RESULTS 2014
This presentation contains forward-looking statements with respect to the operations, performance and financial condition of Jardine Lloyd Thompson Group plc. By their nature, these statements are subject to risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied because they relate to future events.Unless otherwise required by applicable law, regulation or accounting standard, we do not undertake to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. Nothing in this presentation should be construed as a profit forecast.
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