Source - RNS
RNS Number : 3575I
Charles Taylor PLC
30 August 2016
 

PRESS RELEASE

Contacts:

David Marock, Group Chief Executive Officer

020 3320 8988

 

Mark Keogh, Group Chief Financial Officer

020 3320 2241

 

Charles Taylor plc

Announcement of results for six months ended 30 June 2016

 

Consolidated financial highlights

For the six months ended 30 June 2016

Continuing operations

 

Revenue1

£74.0m increased by 7.0%

(2015: £69.2m)

Adjusted profit before tax1, 2

£6.0m increased by 4.2%

(2015: £5.8m)

Statutory profit before tax

£5.3m increased by 1.9%

(2015: £5.2m)

Net cash

£3.3m increased by 80.6%

(2015: £1.8m)

Adjusted earnings per share1, 2

8.55p increased by 10.3%

(2015: 7.75p)

Statutory earnings per share1

7.19p decreased by 4.9%

(2015: 7.56p)

Dividend per share

3.15p increased by 5.0%

(2015: 3.00p)

 

Notes:

Movements are calculated using unrounded numbers so minor rounding differences may exist. 

 

1.   Restated to show continuing business.

2.   The adjusted figures exclude the following: 

                                                                                                      2016    2015

                                                                                                      £m         £m

Acquired intangible amortisation                                                    1.0          0.7

Non-recurring costs                                                                         -            0.1

Non-controlling interests - profit before tax                                  (0.2)        (0.2)

Adjustments to profit before tax                                                     0.8          0.6

Tax on adjustments                                                                      (0.1)       (0.1)

Adjustments to earnings                                                             0.7         0.5

 

"Charles Taylor delivered a good set of results in the first half of 2016.  Revenue and profit before tax were up on the strong figures reported in H1 2015.  We also made excellent progress in delivering our strategic initiatives, including completing the sale or transfer of the Group's non-life insurance companies, agreeing a major software licencing and master services agreement with Fadata and negotiating a significant, value-enhancing acquisition of CEGA."

 

David Marock

Group Chief Executive Officer

 

Business highlights

 

·     Grew revenue to £74.0m (2015: £69.2m)

·     Improved statutory profit before tax to £5.3m (2015: £5.2m)

·     Increased adjusted profit before tax to £6.0m (2015: £5.8m)

·     Completed the sale or business transfer of the Group's non-life insurance companies

·     Negotiated a major acquisition which completed just after the period-end, largely deploying the remainder of the Rights Issue proceeds

·     Increased interim dividend to 3.15p (2015: 3.00p)

 

Group Chief Executive Officer's Review

 

Charles Taylor delivered a good set of results in the first half of 2016.  Revenue and profit before tax were up on the strong figures reported in H1 2015.  We also made excellent progress in delivering our strategic initiatives, including completing the sale or transfer of the Group's non-life insurance companies, agreeing a major software licencing and master services agreement with Fadata and negotiating a significant, value-enhancing acquisition of CEGA.

Professional Services

The Group's core Professional Services businesses performed well overall:

·     Management Services achieved good growth in revenue and profit.  The large mutuals managed by the Group - The Standard Club and Signal Mutual - performed well on behalf of their members with a strong focus on new business development for The Strike Club.

·     Adjusting Services saw a modest increase in profit as we started to benefit from our efforts to improve operational efficiency.  The business also benefited from the strengthening US dollar against sterling towards the period end.  The adjusting market remains challenging, although there are early signs of slightly increased loss activity.  We also invested further in the business to strengthen our teams, offices and capabilities.

·     Insurance Support Services progressed its growth initiatives in the insurance technology and support services sectors.  It achieved good revenue growth, although there was a slight dip in profitability, largely due to our investment in new initiatives.

Owned Insurance Companies

The Group life businesses performed steadily and in line with our expectations in H1, although their performance was hampered by the weakening of sterling against other currencies towards the period-end.  Following the sale of Bestpark International Limited and the business transfers from our other non-life insurance companies in H1, this business is now solely focused on seeking targeted acquisitions and consolidation of international life insurance companies, where we see growth opportunities.

Group results H1 2016 - continuing business

 

Six months to 30 June 2016

Six months to 30 June 2015

% change

Revenue (£m) 1

74.0

69.2

+7.0%

Adjusted profit before tax (£m) 1

6.0

5.8

+4.2%

Statutory profit before tax (£m) 1

5.3

5.2

+1.9%

Adjusted earnings per share (p) 1

8.55

7.75

+10.3%

Statutory earnings per share (p) 1

7.19

7.56

(4.9%)

Dividend (p)

3.15

3.00

+5.0%

Net cash (£m)

3.3

1.8

+80.6%

1.   Restated to show continuing business.

Professional Services performance H1 2016

(£m)

Revenue2

Operating segment profit

 

Six months to 30 June 2016

Six months to 30 June 2015

Six months to 30 June 2016

Six months to 30 June 2015

Management Services

25.4

23.6

3.3

3.1

Adjusting Services

31.7

29.4

1.6

0.8

Insurance Support Services

16.0

15.3

2.4

2.6

Realised foreign exchange (losses)/gains

-

-

(0.3)

0.1

Total

73.1

68.3

6.9

6.6

2. Revenue figures are stated before inter-segment eliminations.

 

Owned Insurance Companies performance H1 2016

(£m)

Revenue

Operating segment profit

 

Six months to 30 June 2016

Six months to 30 June 2015

Six months to 30 June 2016

Six months to 30 June 2015

Owned Insurance Companies

2.3

2.5

0.1

0.1

 

Acquisition of CEGA Group

In the first half of 2016, we drove forward our strategy to grow by developing new related professional service business lines with the acquisition of CEGA Group.  The transaction completed just after the period-end.  CEGA has become part of Insurance Support Services, nearly doubling the size of that business.

CEGA is a market-leading provider of medical assistance and travel claims management services to insurers.  It provides a high-quality, seamlessly integrated end-to-end service, which combines medical assistance with claims and case management, pre-travel advice, medical screening and corporate travel contingency planning.

CEGA brings additional technical, high value-added services which complement our existing capabilities.  CEGA has long-standing relationships with large, high profile insurers, some of which are new to Charles Taylor, which offers the opportunity to cross-sell the Group's other professional services.  In addition, many of our businesses and major clients use medical assistance services.  This means we are well positioned to support CEGA's long-term growth.  We are working closely with the CEGA management team to realise the full potential of the acquisition.

The acquisition of CEGA is our second significant investment using the proceeds of the March 2015 Rights Issue, which have now largely been deployed.  Our first investment was a stake in Fadata, a specialist provider of software solutions to the global insurance industry, which was completed in December 2015.

Governance

David Watson informed us of his intention to retire from the Board later in 2016.  David joined the Board in May 2010 as a Non-Executive Director and Chairman of the Audit Committee.  We have started a search process to identify a suitable successor.

We are grateful to David for his contribution both as a Director and as Chair of the Audit Committee.  The Company has made significant progress over the period of David's involvement and stewardship and the Board would like to thank him for his commitment to Charles Taylor over the last six years.

Joe Roach, Executive Director and Chief Executive Officer of Management Services - Americas, has advised the Board of his intention to retire from the Board on 31 December 2016. Thereafter, Joe intends to continue to work for the Group in a part-time capacity.

Joe Roach was instrumental in founding Signal Mutual in 1986 when he worked at insurance broker McQueary & Henry.  He joined Charles Taylor in 1995 to drive Signal's growth and development. Under his leadership, Signal grew from inception to become the largest self-insured group provider of Longshore benefits in the United States.

The Board would like to thank Joe for his remarkable contribution to the Group over many years and in particular for his leadership of the management of Signal Mutual.  We are delighted that he has agreed to continue his long involvement with the Group, so we can continue to benefit from his substantial experience and deep insight.

Balance sheet

We are managing the Group's cash while investing for growth.  Free cash flow increased to £15.5m (H1 2015: £9.7m) and net cash improved to £3.3m (H1 2015: £1.8m). 

In common with many businesses with defined benefit pension schemes, the Group's pension deficit increased in the first half as a result of a significant fall in corporate bond yields.  The retirement benefit obligation in the Group balance sheet at 30 June 2016 was £56.3m, net of deferred tax £46.1m, compared with £39.6m at the year end, net of deferred tax £32.4m.  The increase reflected the significant fall in corporate bond yield rates during the latter part of the period.  We have long-term plans in place and work closely with the scheme's trustees to manage the deficit.  We continue to monitor the Company's pension scheme exposures and take action, as appropriate.

Dividend

An interim dividend of 3.15p (H1 2015: 3.00p) has been declared and will be paid on 11 November 2016 to shareholders on the register on 14 October 2016.

Management Services

Management Services achieved good growth in revenue and profit in H1 2016.  The mutual insurance companies managed by the Group performed well overall on behalf of their members.

Management Services - UK & International

Delivered good results for The Standard Club:  We have managed The Standard Club since it was founded in 1884.  The club provides protection and indemnity (P&I) insurance to approximately 10% of the global shipping market.  Our work is delivering sustainable growth for the club and has resulted in it overtaking its nearest competitor to become the world's fourth largest P&I club by poolable tonnage in H1 2016.  At the February 2016 renewal, the club reported a combined ratio of 95%.  The total of poolable and non-poolable tonnage increased by 2% to 138m gross tons year-on-year and free reserves increased to US$390m.

We made good progress with a range of initiatives, introduced on behalf of the club, designed to diversify the club's range of services and sources of income:

·     The Singapore War Risks Mutual, a class within Standard Asia and Singapore's first war risks mutual insurer, exceeded its first year expectations.  The class is well ahead of budget, with over 400 ships, comprising 11.2 million gt, entered by 21 owners.  The Singapore War Risks Mutual has been shortlisted for the 'Launch of the Year' award at The Insider Honours 2016.

·     The Standard Syndicate - Syndicate 1884 at Lloyd's - has extended the range of covers it offers to include specie, political risk, political violence and has recruited additional underwriters.  The strength and expertise of the team was recognised at the Commercial Insurance Awards, where The Standard Syndicate was named Insurance Team of the Year 2016.

Charles Taylor also manages The Standard Club's investment portfolio.  Ahead of the UK's EU referendum, our investment team took the view that the negative consequences of a vote to leave exceeded the positive consequences of a vote to remain.  The portfolio was therefore positioned to hedge against a Brexit vote, successfully protecting the club's investments when that transpired.

Focused on business development for The Strike Club:  The Strike Club is the only dedicated mutual insurer covering the running costs of vessels delayed by strikes, shore delays, collisions, groundings and other incidents outside an owner's or charterer's control.  Charles Taylor was appointed as manager of the club in early 2015.  At the January 2016 renewal we achieved a high business retention rate for the club, with over 95% of the membership renewing their cover.  In difficult market conditions for the sale of delay insurance, our principal focus in H1 has been on developing the club's new business development capabilities.

Provided management services to the Offshore Pollution Liability Association (OPOL):   We provide financial, administrative management and IT support to OPOL, a mutual insurance association, established to meet offshore pollution claims under the Offshore Pollution Liability Agreement 1974.  We delivered high quality management support services to the association in H1 2016.

Management Services - Americas

Delivered growth for Signal Mutual:  We have managed Signal Mutual since it was founded in 1986.  Signal Mutual is the largest provider of Longshore workers' compensation insurance to the US maritime industry.  The mutual is performing well on behalf of its Members.

Signal's call contributions are based on the total payroll of its Members. Overall, Signal has gained market share in recent membership years, although we anticipate a small reduction in Signal's clients' payrolls to just under US$4bn for the membership year to October 2016.  This is largely due to the impact of lower energy prices which has reduced activity at shipyard facilities which make up the largest number of Signal Members. 

Safeshore, the new Longshore workers' compensation program for smaller employers, backed by Signal Mutual, is performing well ahead of expectations and is having  better than expected level of claims.  Over 114 members have now joined the facility with a total payroll of US$34m.

Delivered a steady performance for SCALA:  We have managed SCALA, which provides marine workers compensation to the majority of Canada's ship owners since 1978.  The mutual performed steadily on behalf of its members in H1 2016.

Adjusting Services

Adjusting Services increased its revenue and saw a modest but welcome increase in profit as it started to benefit from efforts to improve operational efficiency.  The business also benefited from the strengthening US Dollar against Sterling towards the period end.

The adjusting market remains challenging, although there are early signs that the number of insured catastrophe-related losses may be increasing.  Insurer Munich Re has reported that insured losses from natural catastrophe losses in H1 2016 were US$27bn, up from US$19bn in H1 2015.  Swiss Re Sigma estimates suggest that insured losses from both natural and man-made catastrophes rose to US$31bn in H1 up from US$21bn in the prior year.  It is too early to tell whether this indicates a return to higher claims levels which may benefit certain of our adjusting businesses

Against this background, we achieved good overall claims volumes across the majority of our business lines.  In particular, our Calgary and Vancouver offices received a large number of instructions following the Fort McMurray wild fires in Q2 2016.

We invested in the Adjusting Services business to further strengthen our teams, offices and operational capabilities:

·     Strengthened office network:  We appointed a new management team in our Shanghai office and fostered stronger working relations between that office and our operations in Hong Kong and Taiwan.  This improved the performance of the office, supporting our ambitions for further growth in Greater China.  We built on the recent office opening in Rome by appointing a new adjuster.

·     Invested in developing our teams:  We appointed a new Managing Director for our energy loss adjusting business in London, Europe and Singapore following the retirement of his predecessor.  We also appointed two Deputy Managing Directors for Energy UK positioning our business for growth in the international energy adjusting market.  A new Managing Director for the UK, Europe and Singapore was appointed to our Marine adjusting business line. In the Middle East, we appointed a new Regional Director to drive the business forward.  We further strengthened our financial lines and specie loss adjusting capabilities in the UK and the Americas with the appointment of loss adjusters and a forensic accountant.

·     Improved operational capabilities:  We appointed a finance director and a dedicated legal counsel for Adjusting Services in H1. This has enabled us to focus on improving operational efficiency across all our adjusting business lines.

The technical and professional expertise of our team was recognised at the Commercial Insurance Awards 2016, where Charles Taylor Adjusting was named Loss Adjuster of the Year.

Insurance Support Services

The Insurance Support Services business progressed its growth initiatives in the insurance technology and services sectors in H1 2016.  The business achieved good revenue growth, although there was a slight dip in profitability, largely due to our investment in new initiatives.

Insurance Support Services - non-life business

The non-life Insurance Support Services business now includes CEGA Group, Charles Taylor Insurance Services (CTIS), Charles Taylor InsureTech, Charles Taylor TPA, Charles Taylor Managing Agency (CTMA), investment management, captive management and risk consulting business lines.

·     Charles Taylor Insurance Services signed up new managing ageny clients to use its claims workflow and diary management solution, TRAX.  It has also managed record volumes through its static claims service.  Finally, the business expanded the London Market Expert database, which it manages on behalf of Lloyd's, with additional functionality and coordinated audit capabilities.

·     Charles Taylor InsureTech made good progress in H1.  We are working closely with Fadata, a specialist insurance software solutions business in which the Group has just over a 25% interest, on the Group's first implementation of the INSIS system for a Charles Taylor client.  The business also secured a second contract to implement an insurance broking software system.  Charles Taylor InsureTech is making good progress in developing its suite of solutions and strategic partnerships.  We appointed a dedicated legal officer to meet the increased demands associated with the new business' contracts..

·     Charles Taylor TPA:  We extended the Group's established insurance claims Third Party Administrator (TPA) service capabilities.  Charles Taylor TPA provides customised claims administration for insurers, MGAs, brokers and self-insureds.  It benefits from the Group's long experience of providing claims management, adjusting and support services globally.

·     Charles Taylor Managing Agency completed its first year of operation.  It appointed a Chief Underwriting Officer in H1, as it actively markets its services to secure the management of a second syndicate at Lloyd's.

·     Other non-life business lines:  The Group's investment management, risk consulting, and captive management businesses performed in line with expectations in H1.

Insurance Support Services - Life business

Charles Taylor Insurance Services (Isle of Man) is the Group's life insurance servicing business.  It provides policy administration services to both life insurance businesses writing live business and those in run-off.  The business performed steadily in H1 2016 and is actively seeking to grow its life services to third-party life insurers.

The business is working closely with Charles Taylor InsureTech and Fadata to implement the INSIS policy administration system in the Isle of Man for a third-party client. 

The Isle of Man government is planning to adopt new solvency regulations in line with the European Union's Solvency II directive.  We increased our risk management resource in H1 to ensure that we are fully prepared for the new regime.

Owned Insurance Companies

Focused on integrating life businesses

The Group owns three life businesses, which performed steadily and in line with our expectations in H1, although their performance was hampered by the weakening of Sterling against other currencies towards the period-end.  We are working to consolidate two of these businesses into LCL International Life Assurance Company Limited.  We anticipate that we will progress these over the next 6-12 months, offering the potential of further cash releases for the Group.  We are focused on seeking further acquisition opportunities in the UK international life insurance sector.

Reduced exposure to non-life Run-off

We completed the sale or business transfer of the Group's non-life insurance companies in H1 2016.  As a result, the Group no longer has any non-life insurance exposures.

Other business strategy initiatives

·     The Group undertook its second staff engagement survey in H1 2016.  The results have been very encouraging with nine out of ten staff saying they regard Charles Taylor as a great place to work and that they would strongly recommend Charles Taylor as a place to work to family and friends.

·     We further developed our staff training and professional development initiatives, extending the core learning and development curriculum with the addition of new courses.  Workshops to date have received excellent feedback and are enabling our people to develop new business and personal skills that are relevant to their careers.

·     We appointed a Group Director of Property and Procurement, to oversee our property strategy and management globally and to drive efficiencies through Group procurement.  We also recruited an employment lawyer in our Human Resources team to improve our operational efficiency.

Current trading and outlook

The Group has had a good start to 2016, with all our businesses performing in line with expectations.

We have made excellent progress in delivering our growth strategy with numerous initiatives taken forward, including progressing our acquisition of CEGA, finalising a major software licence and master services agreement with Fadata, launching various new services and further strengthening our teams and operations.

We are very positive about the long-term prospects of Charles Taylor. We believe the potential for growth in the professional services delivered by the Group to global insurance markets is great.  We are executing our strategy for growth successfully and are building on a significant number of initiatives which we believe will deliver over time further growth for the benefit of shareholders, clients and our highly professional team of people.

David Marock

Group Chief Executive Officer

29 August 2016

 

 

Financial Review

The results for the period, which exclude the discontinued non-life Owned Insurance Companies business, are summarised in the table below and explained in more detail in the Group Chief Executive Officer's review.

 

H1 2016

H1 2015

Revenue (£m)

74.0

69.2

Operating segment profit (£m)

7.0

6.7

Finance costs/other (£m)

(0.7)

(0.7)

Non-controlling interests before tax (£m)

(0.2)

(0.2)

Adjusted profit before tax (£m)

6.0

5.8

Tax (£m)

(0.3)

(0.7)

Adjusted earnings (£m)

5.7

5.2

Adjusted earnings per share (p)

8.55

7.75

Note: Small rounding differences arise in the total amounts above.

The above financial measures are adjusted as set out in the table below:

(£m)

H1 2016

H1 2015

Statutory profit before tax

5.3

5.2

Amortisation of acquired intangible assets

1.0

0.7

Non-recurring items - restructuring costs

-

0.1

Non-controlling interests before tax

(0.2)

(0.2)

Adjusted profit before tax

6.0

5.8

Note: Small rounding differences arise in the total amounts above.

 

Adjusted profit before tax was £6.0m (2015: £5.8m1) as a result of good performances across all businesses.  The Adjusting Services result includes some benefit from foreign exchange differences, although this was largely offset by an adverse impact from losses on matured forward exchange contracts and foreign exchange differences in our Owned Insurance Companies business.

Net debt, cash flow and financing

Net cash at the half year was £3.3m (2015: £1.8m) and free cash flow increased to £15.5m (2015: £9.7m).  We are continuing to focus on managing our debt while investing for growth.

The Group's senior banking facilities comprise an amortising senior term loan of £10.0m and a £30.0m revolving credit facility.  The latter facility was increased by £5.0m post the period-end in conjunction with the CEGA acquisition.  In addition, the Group has £5.0m uncommitted overdraft facilities in the UK, uncommitted overseas facilities of the local currency equivalent of £3.8m and committed overseas facilities of the local currency equivalent of £3.8m.  Interest rates are mostly linked to 3 month Libor plus margins of 2.25-2.75%.  The senior term loan and revolving credit facility are available until 7 November 2018.  The other facilities are renewed on an annual basis.  

Retirement benefit schemes

The retirement benefit obligation in the Group balance sheet at 30 June 2016 was £56.3m, net of deferred tax £46.1m, compared with £39.6m at the year end, net of deferred tax £32.4m. The significant increase in net obligation has been driven by a 1% drop in discount rates since the year end, which was driven in turn by the fall in corporate bond yields, following the UK vote to leave the European Union.  The obligation increased by £22.1m as a result of financial assumptions alone, which was offset by company contributions and a positive return on assets, bringing the net increase down to £16.7m.  There are multi-year programmes in place to recover pension scheme deficits fully on a regulatory funding basis and funding costs are reflected in management fees charged by the Group where appropriate.  We continue to monitor the Company's pension scheme exposures and take action, as appropriate

Dividend

An interim dividend of 3.15p per share (2015: 3.00p) has been declared and will be paid on 11 November 2016 to shareholders on the register on 14 October 2016.

 

Foreign exchange

The Group manages its exposure to foreign currency fluctuations by use of forward foreign exchange contracts and options to sell currency in the future. 

Taxation

The effective tax rate on adjusted profits for the period is 5.2%, (2015: 12.1%).  The movement in the effective tax rate reflects the profit mix across different taxation jurisdictions and the utilisation of unrecognised UK brought-forward tax losses.

Related party transactions

There have been no related-party transactions in the period that have materially affected the financial position or performance of the company.

Principal risks and uncertainties

The nature of the principal risks and uncertainties for the first half of 2016 fall into the three categories of business, financial, and regulatory/compliance risks.  These remain unchanged from those explained in the 2015 annual report and accounts. The Group's risk management systems are designed to manage the risk of failing to achieve our business objectives. We have an embedded and continuous process for identifying, evaluating and managing the principal risks which the Group faces.

We have considered the impact of the UK's EU referendum result on the Group.  We are a globally diversified business, whose earnings are mainly exposed to the US$ and predominantly not directly linked to whether the UK is part of the EU.  We will monitor the situation closely as the full implications of the Brexit decision unfold.

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Mark Keogh

Group Chief Financial Officer

29 August 2016

1. Restated to show continuing business.

 

 

 

Condensed consolidated income statement

 

 

Note

Six months

to 30 June

2016
£000
(Unaudited)

Six months

to 30 June

2015
£000
(Unaudited)

Year to
31 December 2015
£000
(Audited)

Continuing operations

 

 

 

 

Revenue from Professional Services

 

71,683

66,665

138,640

 

 

 

 

 

Revenue from Owned Insurance Companies

 

 

 

 

 Gross revenue

 

2,743

2,901

5,615

 Outward reinsurance premiums

 

(430)

(407)

(813)

 Net revenue

 

2,313

2,494

4,802

Total revenue

3

73,996

69,159

143,442

 

 

 

 

 

Expenses from Owned Insurance Companies

 

 Claims incurred

 

35,465

(34,532)

(22,281)

 Reinsurance recoveries

 

1,122

922

363

 Other gains from insurance activities

 

(36,109)

33,831

23,072

 Net operating expenses

 

(2,458)

(2,376)

(5,136)

 Net losses

 

(1,980)

(2,155)

(3,982)

 

 

 

 

 

Administrative expenses

 

(66,011)

(61,066)

(127,998)

Gain on acquisition

 

-

-

2,291

Share of results of associates

 

(284)

27

131

Operating profit

 

5,721

5,965

13,884

 

 

 

 

 

Investment and other income

 

182

69

164

Finance costs

 

(605)

(837)

(1,230)

Profit before tax

 

5,298

5,197

12,818

Income tax expense

4

(312)

(685)

(1,044)

Profit for the period from continuing operations

 

4,986

4,512

11,774

Discontinued operations

 

 

 

 

Profit/(loss) for the period from discontinued operations

 

-

95

(5,741)

Profit for the period

 

4,986

4,607

6,033

 

 

 

 

 

Attributable to:

 

 

 

 

Owners of the Company

 

4,755

4,509

8,724

Non-controlling interests

 

231

98

(2,691)

 

 

4,986

4,607

6,033

 

 

 

 

 

Earnings per share

 

 

 

 

From continuing and discontinued operations

 

 

 

 

Statutory basic (p)

6

7.19

7.84

14.14

Statutory diluted (p)

6

7.14

7.80

14.04

From continuing operations

 

 

 

 

Statutory basic (p)

6

7.19

7.56

18.61

Statutory diluted (p)

6

7.14

7.52

18.48

 

 

 

Condensed consolidated statement of comprehensive income

 

Six months

 to 30 June
2016
£000
(Unaudited)

Six months
to 30 June
2015
£000
(Unaudited)

Year to
31 December 2015
£000
(Audited)

Profit for the period

4,986

4,607

6,033

Items that will not be reclassified subsequently to profit or loss

 

 

 

Actuarial (losses)/gains on defined benefit pension schemes

(17,901)

4,053

(618)

Tax on items taken directly to equity

3,003

(1,060)

(1,188)

 

(14,898)

2,993

(1,806)

Items that may be reclassified subsequently to profit or loss

 

 

 

Exchange differences on translation of foreign operations

4,116

(1,380)

(412)

(Losses)/gains on cash flow hedges

(884)

215

(7)

 

3,232

(1,165)

(419)

Other comprehensive (loss)/income for the period, net of tax

(11,666)

1,828

(2,225)

Total comprehensive (loss)/income for the period

(6,680)

6,435

3,808

Attributable to:

 

 

 

Owners of the Company

(7,074)

6,372

6,487

Non-controlling interests

394

63

(2,679)

 

(6,680)

6,435

3,808

 

 

 

Condensed consolidated balance sheet

 

Note

At
30 June
2016
£000
(Unaudited)

At
30 June
2015
£000
(Unaudited)

At
31 December 2015
£000
(Audited)

Non-current assets

 

 

 

 

Goodwill

7

45,007

45,379

44,844

Other intangible assets

8

18,318

17,338

17,428

Property, plant and equipment

 

6,043

5,126

3,559

Investments

 

1,857

700

1,905

Financial assets

 

6,060

-

5,095

Deferred tax assets

 

9,857

7,610

7,282

Total non-current assets

 

87,142

76,153

80,113

Current assets

 

 

 

 

Total assets in insurance businesses

 

1,131,713

842,318

1,087,198

Trade and other receivables

 

76,039

64,318

65,545

Cash and cash equivalents

 

109,620

76,988

80,170

Assets classified as held for sale

 

-

-

48,161

Total current assets

 

1,317,372

983,624

1,281,074

Total assets

 

1,404,514

1,059,777

1,361,187

Current liabilities

 

 

 

 

Total liabilities in insurance businesses

 

1,113,058

788,924

1,066,765

Trade and other payables

 

50,804

39,843

29,327

Deferred consideration

 

9,713

10,556

8,213

Current tax liabilities

 

1,247

308

1,018

Borrowings

 

5,795

17,040

6,579

Client funds

 

95,095

51,159

68,406

Liabilities directly associated with assets classified as held for sale

 

-

-

28,843

Total current liabilities

 

 1,275,712

907,830

1,209,151

Net current assets

 

41,660

75,794

71,923

Non-current liabilities

 

 

 

 

Borrowings

 

5,426

6,932

15,057

Retirement benefit obligation

14

56,282

36,246

39,555

Provisions

 

337

235

321

Obligations under finance leases

 

50

56

50

Deferred consideration

 

5,806

15,003

7,569

Total non-current liabilities

 

67,901

58,472

62,552

Total liabilities

 

1,343,613

966,302

1,271,703

Net assets

 

60,901

93,475

89,484

Equity

 

 

 

 

Share capital

10

669

664

665

Share premium account

 

71,476

71,380

71,239

Merger reserve

 

6,872

6,872

6,872

Capital reserve

 

662

662

662

Own shares

 

(587)

(408)

(489)

Retained earnings

 

(20,322)

(8,039)

(8,869)

Equity attributable to owners of the Company

 

58,770

71,131

70,080

Non-controlling interests

 

2,131

22,344

19,404

Total equity

 

60,901

93,475

89,484

 

The financial statements were approved by the board of directors and authorised for issue on 29 August 2016.

 

Mark Keogh

Director

29 August 2016

 

 

 

Condensed consolidated cash flow statement

 

 

Note

Six months

to 30 June
2016
£000 (Unaudited)

Six months

 to 30 June
2015
£000
(Unaudited)

Year to 31 December 2015

£000

 (Audited)

Net cash from operating activities

11

46,755

22,896

41,741

 

 

 

 

 

Investing activities

 

 

 

 

Interest received

 

168

33

117

Proceeds on disposal of property, plant and equipment

 

107

40

112

Purchases of property, plant and equipment

 

(2,844)

(2,006)

(2,700)

Acquisition of other intangible assets

 

(1,951)

(1,946)

(4,192)

Purchase of investments

 

(1,413)

(1,239)

(7,424)

Acquisition of subsidiaries

 

-

(2,239)

(2,239)

Payment of deferred consideration

 

(546)

(251)

(3,251)

Net cash acquired with subsidiary

 

-

3,831

3,831

Net cash used in investing activities

 

(6,479)

(3,777)

(15,746)

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from issue of shares

 

Dividends paid

 

(4,622)

(3,431)

(5,405)

Repayments of borrowings

9

Repayments of obligations under finance leases

 

(5)

(113)

(119)

New bank loans raised

9

2,000

12,563

11,063

(Decrease)/increase in bank overdrafts

 

(751)

11,708

783

Net cash (used in)/from financing activities

 

(15,074)

7,304

2,727

Net increase in cash and cash equivalents

 

25,202

26,423

28,722

Cash and cash equivalents at beginning of period

 

80,170

52,185

52,185

Effect of foreign exchange rate changes

 

4,248

(1,620)

(737)

Cash and cash equivalents at end of period

12

109,620

76,988

80,170

 

 

 

 

Condensed consolidated statement of changes in equity

 

 

Share
capital
£000

Share premium account
£000

Merger reserve
£000

Capital
reserve

£000

Own
shares

£000

Retained earnings
£000

Non-controlling interests
£000

Total
£000

At 1 January 2016 (audited)

665

71,239

6,872

662

(489)

(8,869)

19,404

89,484

Issue of share capital (note 10)

4

-

-

-

-

-

-

4

Share premium arising on issue of share capital (note 10)

-

237

-

-

-

-

-

237

Profit for the financial period

-

-

-

-

-

4,755

231

4,986

Dividends paid (note 5)

-

-

-

-

-

(4,622)

-

(4,622)

Actuarial losses on defined benefit
pension schemes

-

-

-

-

-

(17,901)

-

(17,901)

Tax on items taken to equity

-

-

-

-

-

3,003

-

3,003

Losses on cash flow hedges

-

-

-

-

-

(884)

-

(884)

Foreign exchange translation differences

-

-

-

-

-

3,952

164

4,116

Movement in sharebased payments

-

-

-

-

-

129

-

129

Movement in own shares

-

-

-

-

(98)

-

-

(98)

Sale and closure of non-life operations

-

-

-

-

-

-

(17,954)

(17,954)

Other movements

-

-

-

-

-

115

286

401

At 30 June 2016 (unaudited)

669

71,476

6,872

662

(587)

(20,322)

2,131

60,901

 

 

Share
capital
£000

Share
premium account
£000

Merger
reserve
£000

Capital
reserve

£000

Own
shares

£000

Retained earnings
£000

Non-controlling interests
£000

Total
£000

At 1 January 2015 (audited)

434

35,650

6,872

662

(223)

(10,699)

21,980

54,676

Issue of share capital (note 10)

230

-

-

-

-

-

-

230

Share premium arising on issue of share capital (note 10)

-

35,730

-

-

-

-

-

35,730

Profit for the financial period

-

-

-

-

-

4,509

98

4,607

Dividends paid (note 5)

-

-

-

-

-

(3,431)

-

(3,431)

Actuarial gains on defined benefit pension schemes

-

-

-

-

-

4,053

-

4,053

Tax on items taken to equity

-

-

-

-

-

(1,060)

-

(1,060)

Gains on cash flow hedges

-

-

-

-

-

215

-

215

Foreign exchange translation differences

-

-

-

-

-

(1,346)

(34)

(1,380)

Movement in sharebased payments

-

-

-

-

-

(280)

-

(280)

Movement in own shares

-

-

-

-

(185)

-

-

(185)

Sale and closure of non-life operations

-

-

-

-

-

-

-

-

Other movements

-

-

-

-

-

-

300

300

At 30 June 2015 (unaudited)

664

71,380

6,872

662

(408)

(8,039)

22,344

93,475

 

Own shares comprise 619,994 (30 June 2015: 571,990; 31 December 2015: 571,990) shares held by the Charles Taylor Employee Share Ownership Plan Trust ("ESOP"). The market value of these shares was £1.5m (30 June 2015: £1.3m; 31 December 2015: £1.5m) at the balance sheet date.

 

The trustee of the ESOP is Summit Trust International SA, an independent professional trust company registered in Switzerland. The ESOP is a discretionary trust for the benefit of employees of the Group and provides a source of shares to distribute to the Group's employees (including executive directors and officers) under the Group's various bonus and incentive schemes, at the discretion of the trustee acting on the recommendation of a committee of the Board.

 

The assets, liabilities, income and costs of the ESOP are incorporated into the condensed set of financial statements.

 

There are no significant restrictions on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans or advances other than company law requirements dealing with distributable profits, and in the case of the insurance companies' regulatory permissions and solvency limits.

 

 

 

 

Notes to the condensed set of financial statements

 

1. General information

The information for the year ended 31 December 2015 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor reported on those accounts; its report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

2. Accounting policies

Basis of preparation

The annual financial statements of Charles Taylor plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union. The same accounting policies and methods of computation are followed in the interim financial statements as in the most recent annual financial statements.

 

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

 

Changes in accounting policy

In the current financial year, there were no new accounting policies. Other changes to accounting standards in the current period had no material impact.

 

3. Segmental information

Identification of segments

For management and internal reporting purposes the Group is currently organised into four operating businesses whose principal activities are as follows:

·    Management Services business - mutual management service.

·    Adjusting Services business - energy, aviation, property & casualty and marine (including average) adjusting.

·    Insurance Support Services business - insurance support services, including Lloyd's turn-key managing agent, insurance technology services, captive management, investment management and risk management. 

·    Owned Insurance Companies business - life insurance companies.

 

Management information about these businesses is regularly provided to the Group CEO to assess their performance and to make decisions about the allocation of resources. Accordingly, these businesses correspond with the Group's operating segments under IFRS 8 Operating Segments. Businesses forming part of each business which might otherwise qualify as reportable operating segments have been aggregated where they share similar economic characteristics and meet the other aggregation criteria in IFRS 8.

 

In the Management Services business, a higher proportion of revenue arises in the second half of the financial year. There is no significant seasonality or cyclicality in the other businesses.

 

Measurement of segmental results and assets

Transactions between reportable segments are accounted for on the basis of the contractual arrangements in place for the provision of goods or services between segments and in accordance with the Group's accounting policies. Reportable segment results and assets are also measured on a basis consistent with the Group's accounting policies. Operating segment profit includes an allocation of central costs across the four businesses and excludes non-recurring adjusting costs. The prior period operating segment profits and assets have been adjusted to conform to the current period's presentation and exclude amounts for operations discontinued in the prior financial year. Reconciliations of segmental results to the group profit before tax are set out below.

 

Information about major customers

The Group derived revenue of £19.4m (to 30 June 2015: £19.9m, full year 2015: £38.5m) from one external customer which accounts for more than 10% of group revenue, and includes revenue earned by both the Management Services and Insurance Support Services businesses.

 

 

 

 

Professional Services businesses

Owned Insurance Companies

Other

Group

Six months to 30 June 2016

Continuing operations

Management Services
£000

Adjusting Services
£000

Insurance Support Services
£000

Unallocated
£000

Total
£000

Insurance Companies
£000

Inter-segment eliminations
£000

Total
£000

Revenue from external clients

25,366

31,676

14,641

-

71,683

2,313

-

73,996

Revenue from other operating segments

-

-

1,393

-

1,393

-

(1,393)

-

Total revenue

25,366

31,676

16,034

-

73,076

2,313

(1,393)

73,996

Depreciation and amortisation

(349)

(639)

(253)

-

(1,241)

(224)

-

(1,465)

Other expenses

(21,749)

(29,483)

(13,426)

(273)

(64,931)

(2,033)

1,393

(65,571)

Operating segment profit

3,268

1,554

2,355

(273)

6,904

56

-

6,960

Share of results of associates

 

 

 

 

 

 

 

(284)

Amortisation of acquired intangible assets

 

 

 

 

 

 

 

(955)

Non-recurring costs (note 17)

 

 

 

 

 

 

 

-

Operating profit

 

 

 

 

 

 

 

5,721

Investment and other income

 

 

 

 

 

 

 

182

Finance costs

 

 

 

 

 

 

 

(605)

Profit before tax

 

 

 

 

 

 

 

5,298

Amortisation of acquired intangible assets

 

 

 

 

 

 

 

955

Non-recurring costs (note 17)

 

 

 

 

 

 

 

-

Non-controlling interests before tax

 

 

 

 

 

 

 

(238)

Profit before tax - adjusted

 

 

 

 

 

 

 

6,015

 

 

 

 

Professional Services businesses

Owned Insurance Companies

Other

Group

Six months to 30 June 2015

Continuing operations

Management Services
£000

Adjusting Services
£000

Insurance Support Services
£000

Unallocated
£000

Total
£000

Insurance Companies
£000

Inter-segment eliminations
£000

Total
£000

Revenue from external clients

23,591

29,379

13,694

1

66,665

2,494

-

69,159

Revenue from other operating segments

-

-

1,637

-

1,637

-

(1,637)

-

Total revenue

23,591

29,379

15,331

1

68,302

2,494

(1,637)

69,159

Depreciation and amortisation

(605)

(716)

(244)

-

(1,565)

(188)

-

(1,753)

Other expenses

(19,864)

(27,883)

(12,517)

98

(60,166)

(2,194)

1,637

(60,723)

Operating segment profit

3,122

780

2,570

99

6,571

112

-

6,683

Share of results of associates

 

 

 

 

 

 

 

27

Amortisation of acquired intangible assets

 

 

 

 

 

 

 

(673)

Non-recurring costs (note 17)

 

 

 

 

 

 

 

(72)

Operating profit

 

 

 

 

 

 

 

5,965

Investment and other income

 

 

 

 

 

 

 

69

Finance costs

 

 

 

 

 

 

 

(837)

Profit before tax

 

 

 

 

 

 

 

5,197

Amortisation of acquired intangible assets

 

 

 

 

 

 

 

673

Non-recurring costs (note 17)

 

 

 

 

 

 

 

72

Non-controlling interests before tax

 

 

 

 

 

 

 

(171)

Profit before tax - adjusted

 

 

 

 

 

 

 

5,771

 

 

 

 

 

Professional Services businesses

Owned
Insurance
Companies

Other

Group

Year to 31 December 2015 Continuing operations

Management Services
£000

Adjusting Services
£000

Insurance Support Services
£000

Unallocated
£000

Total
£000

Insurance Companies
£000

Inter-segment eliminations
£000

Total
£000

Revenue from external clients

50,718

59,016

28,903

3

138,640

4,802

-

143,442

Revenue from other operating segments

-

-

3,229

-

3,229

-

(3,229)

-

Total revenue

50,718

59,016

32,132

3

141,869

4,802

(3,229)

143,442

Depreciation and amortisation

(1,348)

(1,689)

(623)

-

(3,660)

(385)

-

(4,045)

Other expenses

(40,545)

(55,631)

(27,018)

205

(122,989)

(4,183)

3,229

(123,943)

Operating segment profit

8,825

1,696

4,491

208

15,220

234

-

15,454

Share of results of associates

 

 

 

 

 

 

 

131

Amortisation of acquired intangible assets

 

 

 

 

 

 

 

(1,629)

Non-recurring costs (note 17)

 

 

 

 

 

 

 

(72)

Operating profit

 

 

 

 

 

 

 

13,884

Investment and other income

 

 

 

 

 

 

 

164

Finance costs

 

 

 

 

 

 

 

(1,230)

Profit before tax

 

 

 

 

 

 

 

12,818

Amortisation of acquired intangible assets

 

 

 

 

 

 

 

1,629

Non-recurring costs (note 17)

 

 

 

 

 

 

 

72

Non-controlling interests before tax

 

 

 

 

 

 

 

(324)

Profit before tax - adjusted

 

 

 

 

 

 

 

14,195

 

Loss for the full year 2015 from discontinued operations was £5.7m. 

 

 

 

At 30 June 2016
£000

At 30 June 2015
£000

At 31 December 2015
£000

 

Professional Services businesses

Owned Insurance Companies

Group

Professional Services businesses

Owned Insurance Companies

Group

Professional Services businesses

Owned Insurance Companies

Group

Management Services business

2,544

-

2,544

8,038

-

8,038

5,380

-

5,380

Adjusting Services business

179,237

-

179,237

132,224

-

132,224

149,606

-

149,606

Insurance Support Services business

62,521

-

62,521

37,657

-

37,657

46,528

-

46,528

Unallocated assets and eliminations

26,346

-

26,346

36,529

-

36,529

21,963

-

21,963

Owned Insurance Companies business

-

1,133,866

1,133,866

-

845,329

845,329

-

1,089,549

1,089,549

Assets classified as held for sale

-

-

-

-

-

-

-

48,161

48,161

Total assets

270,648

1,133,866

1,404,514

214,448

845,329

1,059,777

223,477

1,137,710

1,361,187

Non-current assets

84,989

2,153

87,142

73,142

3,011

76,153

77,762

2,351

80,113

Current assets

185,659

1,131,713

1,317,372

141,306

842,318

983,624

145,715

1,135,359

1,281,074

Total assets

270,648

1,133,866

1,404,514

214,448

845,329

1,059,777

223,477

1,137,710

1,361,187

Current liabilities

(153,488)

(1,112,511)

(1,265,999)

(108,350)

(788,924)

(897,274)

(105,330)

(1,066,765)

(1,172,095)

Deferred consideration

(1,641)

(8,072)

(9,713)

(810)

(9,746)

(10,556)

(875)

(7,338)

(8,213)

Liabilities directly associated with assets classified as held for sale

-

-

-

-

-

-

-

(28,843)

(28,843)

Net current assets

30,530

11,130

41,660

32,146

43,648

75,794

39,510

32,413

71,923

Non-current liabilities

(62,095)

-

(62,095)

(43,469)

-

(43,469)

(54,983)

-

(54,983)

Deferred consideration

(1,374)

(4,432)

(5,806)

(2,548)

(12,455)

(15,003)

(2,537)

(5,032)

(7,569)

Total liabilities

(218,598)

(1,125,015)

(1,343,613)

(155,177)

(811,125)

(966,302)

(163,725)

(1,107,978)

(1,271,703)

Net assets

52,050

8,851

60,901

59,271

34,204

93,475

59,752

29,732

89,484

Non-controlling interests

(2,131)

-

(2,131)

(1,477)

(20,867)

(22,344)

(1,450)

(17,954)

(19,404)

Equity attributable to owners of the Company

49,919

8,851

58,770

57,794

13,337

71,131

58,302

11,778

70,080

 

 

Revenue

Non-current assets1

Geographical information

Six months to 30 June
2016
£000

Six months
to 30 June
2015
£000

Year to 31 December
2015

£000

At
30 June
2016
£000

At
30 June
2015
£000

At 31 December

2015

£000

United Kingdom

21,949

21,025

44,718

64,730

54,967

60,231

Other Europe

5,557

4,735

9,856

3,071

4,715

3,746

Middle East

1,909

1,919

3,720

117

119

114

North America

6,921

6,102

12,249

6,715

6,375

6,254

Central and South America

2,778

2,166

4,404

193

199

183

Asia Pacific

8,347

7,560

15,037

1,585

1,394

1,480

Bermuda

26,535

25,652

53,458

874

774

823

 

73,996

69,159

143,442

77,285

68,543

72,831

 

1. Excluding deferred tax.

 

4. Income tax expense

Tax for the six month period is charged at 5.2% (30 June 2015: 12.1%) representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income adjusted for certain amortisation costs, of the six month period.

 

5. Dividends

 

Six months to 30 June
2016
£000

Six months

 to 30 June
2015
£000

Year to
31 December
2015
£000

Ordinary dividends paid comprise:

 

 

 

Second dividend paid (2015: 10.0p, 2014: 0.0p)

4,622

-

-

Second interim dividend paid (2015: 0.0p, 2014: 7.50p - rebased 6.57p)

-

3,431

3,431

Interim dividend paid (2015: 3.00p)

-

-

1,974

 

4,622

3,431

5,405

 

The rebased dividend above reflects the impact of the 2015 Rights Issue. The interim dividend of 3.15p per share was approved by the Board on 29 August 2016 and has not been included as a liability as at 30 June 2016.

 

6. Earnings per share

The earnings and weighted average number of shares used in the calculation of earnings per share are as shown below. The shares held by the ESOP have been excluded from the calculation because the trustees have waived the right to dividends on these shares.

 

The calculation of the statutory basic, statutory diluted and adjusted earnings per share is based on the following data:

 

 

 

 

Six months to 30 June
2016
£000

Six months

 to 30 June
2015
£000

Year to
31 December
2015
£000

Earnings for the purposes of adjusted earnings per share being adjusted profit after tax attributable to owners of the Company

5,650

5,178

10,287

Amortisation of acquired intangible assets

(955)

(673)

(1,629)

Non-recurring costs (note 17)

-

(72)

(72)

Tax on non-recurring and certain amortisation costs

61

76

138

Earnings for the purposes of statutory basic and diluted earnings per share being net profit attributable to owners of the Company

4,756

4,509

8,724

Profit/(loss) for the year from discontinued operations

-

(161)

2,761

Earnings for the purposes of statutory basic and diluted earnings per share from continuing operations

4,756

4,348

11,485

Earnings for the purposes of adjusted earnings per share from continuing operations

5,650

5,017

13,048

 

 

Number

Number

Number

Number of shares

 

 

 

Weighted average number of ordinary shares for the purposes of adjusted earnings per share

66,113,754

64,767,592

65,308,762

Rebase adjustment1

-

(7,277,534)

(3,608,860)

Weighted average number of ordinary shares for the purposes of statutory basic earnings per share

66,113,754

57,490,058

61,699,902

Effect of dilutive potential ordinary shares:
Share options

480,693

346,046

440,598

Weighted average number of ordinary shares for the purposes of statutory diluted earnings per share

66,594,447

57,836,104

62,140,500

 

1.  The rebase adjustment allows for the full effect of the Rights Issue in 2015.

 

7. Goodwill

The increase in goodwill from £44.8m at 31 December 2015 to £45.0m at 30 June 2016 was due entirely to foreign exchange differences.

 

8. Other intangible assets

During the period we capitalised a further £2.0m of IT assets.

 

9. Bank overdrafts and loans

Loans raised during the period amounted to £2.0m (to 30 June 2015: £12.6m, full year 2015: £11.1m) and repayments on loans amounted to £11.8m (to 30 June 2015: £43.1m, full year 2015: £33.1m). The Group's senior banking facilities were renewed on 7 November 2013 for a five-year term. 

 

10. Share capital

Share capital as at 30 June 2016 amounted to £669,000 (at 30 June 2015: £664,000, at 31 December 2015: £665,000). The consideration above 1p per share is reflected in the share premium account and amounts to £0.2m (to 30 June 2015: £35.7m, full year 2015: £35.6m), the 2015 amounts reflecting the Rights Issue that took place during that period. 

 

 

 

11. Notes to the condensed consolidated cash flow statement

 

Six months
to 30 June
2016
£000

Six months
to 30 June
2015
£000

Year to
31 December
2015
£000

Operating profit

5,721

5,965

13,884

Adjustments for:

 Depreciation of property, plant and equipment

595

878

1,780

 Amortisation of intangibles

1,820

1,554

3,904

 Other non-cash items

862

589

446

 Decrease in provisions

(1,186)

(1,300)

(2,582)

 Share of results of associates and joint ventures

481

(27)

(131)

Operating cash flows before movements in working capital

8,293

7,659

17,301

 Increase in receivables

(10,418)

(8,799)

(6,894)

 Increase in payables

20,605

15,733

3,409

 (Increase)/decrease in insurance company assets

(43,793)

52,030

(243,193)

 Increase/(decrease) in insurance company liabilities

46,000

(51,976)

246,626

Cash generated by operations

20,687

14,647

17,249

Contributed by:

 

 

 

- Professional Services

16,358

14,675

12,820

- Owned Insurance Companies

4,329

(28)

4,429

Cash generated by operations

20,687

14,647

17,249

Income taxes paid

(92)

(568)

(1,176)

Interest paid

(529)

(456)

(852)

Net cash before movement in client funds

20,066

13,623

15,221

Movement in client funds

26,689

9,273

26,520

Net cash from operating activities

46,755

22,896

41,741

 

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly-liquid investments with a maturity of three months or less. Cash includes client funds of £95.1m (30 June 2015: £51.2m, 31 December 2015: £68.4m). 

 

12. Net interest bearing liabilities

 

At
30 June
2016
£000

At
30 June
2015
£000

At
31 December
2015
£000

Cash and cash equivalents

109,620

76,988

80,170

Bank overdrafts

(4,520)

(16,195)

(5,271)

Current loans

(1,275)

(845)

(1,308)

Non-current bank loans

(5,426)

(6,932)

(15,057)

Finance leases

(50)

(55)

(50)

 

98,349

52,961

58,484

Client funds

(95,095)

(51,159)

(68,406)

 

3,254

1,802

(9,922)

 

13. Financial instruments

Valuation techniques and assumptions applied for the purposes of measuring fair value

The fair values of the Group's financial assets and liabilities are determined as follows:

·    For those financial assets and liabilities that are cash or short-term trade receivables or payables, carrying amount is a reasonable approximation of fair value.

·    Retirement benefit obligations are valued by independent actuaries in accordance with IFRS.

·    The Group's remaining financial assets and liabilities are measured, subsequent to initial recognition, at fair value, and they can be grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

-  Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

-  Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

-  Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

Fair value hierarchy

For each of the assets in the table below carrying value is a reasonable approximation to fair value. Excluding insurance companies, there were no level 1 assets, no transfers between level 1 and 2 during the period, nor were there any valuation changes. All movements in the asset or liability values below, except deferred consideration, are through profit or loss.

 

Deferred consideration held outside insurance company liabilities has decreased by £0.3m since the year end 2015, being £0.8m arising on the acquisition of Fadata AD, offsetting distributions totalling £0.6m to former owners of KLA Group and Vesta Group, and all other movements reflecting a revaluation of deferred consideration through the income statement.

 

 

At 30 June 2016

At 30 June 2015

At 31 December 2015

 

Level 2

£000

Level 3

£000

Total

£000

Level 2

£000

Level 3

£000

Total

£000

Level 2

£000

Level 3

£000

Total

£000

Funds at Lloyd's

-

2,783

2,783

-

-

-

-

2,439

2,439

Preference shares held for maturity

-

3,277

3,277

-

-

-

-

2,656

2,656

Trade debtors

-

34,274

34,274

-

28,190

28,190

-

29,633

29,633

Accrued income

-

25,310

25,310

-

23,671

23,671

-

23,551

23,551

Deferred consideration

-

(15,519)

(15,519)

-

(25,559)

(25,559)

-

(15,782)

(15,782)

FX forward contracts

(906)

-

(906)

200

-

200

(21)

-

(21)

 

(906)

50,125

49,219

200

26,302

26,502

(21)

42,497

42,476

 

The fair values of the financial assets and liabilities included in the Level 2 category have been independently valued by the Royal Bank of Scotland and HSBC based on observable market conditions prevailing at the valuation date, including relevant foreign exchange rates and the zero-coupon yield curve.

 

The fair values of the financial assets and liabilities included in the Level 3 category above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis with the most significant inputs being the discount rate that reflects substantially the same terms and characteristics including the credit quality of the instrument:

 

·    Trade debtors are reduced by a discount to reflect the time value of money at a discount rate of 2.75% (30 June 2015: 2.75%, 31 December 2015: 2.75%) that reflects the Group's debt funding rate over the relevant maturities.

·    Accrued income is uplifted by 6.3% for anticipated unrecorded income, which is based on average over-recovery of unrecorded income during 2015, and then discounted for the time value of money at 2.75% (30 June 2015: 2.75%, 31 December 2015: 2.75%) that reflects the Group's debt funding rate over the relevant maturities.

·    Deferred consideration is reduced by a discount to reflect the time value of money at a discount rate of 3.39% (30 June 2015: 3.30%, 31 December 2015: 3.80%) that reflects the Group's debt funding rate over the relevant maturities.

 

The sensitivity of the fair values of trade debtors and accrued income to changes in the discount rate is negligible, irrespective of the change in discount rate. The sensitivity of the fair value of deferred consideration to reasonably likely changes in the discount rate is immaterial.

 

14. Pensions

The Group contributes to a number of defined benefit pension schemes on behalf of employees. The present value of the retirement benefit obligation at 30 June 2016 has been arrived at by recalculating the 31 December 2015 liabilities using the financial assumptions at 30 June 2016 and rolling forward the liability, allowing for interest and benefit accrual to 30 June 2016. The value of plan assets represents the bid value of invested assets at 30 June 2016 plus cash balances held.

 

 

 

The financial assumptions used to calculate scheme liabilities under IAS 19R Employee benefits are as follows:

 

 

At
30 June
2016
%

At
30 June
2015
%

At
31 December
2015
%

Rate of increase in salaries

3.0

3.30

3.20

Rate of increase of pensions in payment

 

 

 

- RPI

 

 

 

 - maximum 5%

2.90

3.20

3.10

 - maximum 2.5%

2.10

2.20

2.20

 - minimum 3%, maximum 5%

3.50

3.70

3.60

- CPI

 

 

 

 - maximum 5%

2.10

2.30

2.20

 - maximum 2.5%

1.70

1.80

1.80

 - maximum 3%

1.80

2.00

2.00

Discount rate

2.70

3.80

3.70

Inflation assumption

 

 

 

- RPI

3.00

3.30

3.20

- CPI

2.00

2.30

2.20

 

Amount recognised in the balance sheet in respect of the Group's retirement benefit obligations

 

At
30 June
2016
£000

At
30 June
2015
£000

At
31 December
2015
£000

Total market value of assets

92,526

87,580

87,838

Actuarial value of liability

(146,630)

(121,540)

(124,944)

Restrictions on asset recognised

(1,921)

(2,093)

(2,239)

Overseas retirement benefit obligation

(257)

(193)

(210)

Net liability recognised in the balance sheet

(56,282)

(36,246)

(39,555)

Related deferred tax asset

10,147

7,256

7,135

Pension liability net of related deferred tax asset

(46,135)

(28,990)

(32,420)

 

Sensitivity analysis

The sensitivities regarding key assumptions are shown below.

 

Assumption

Change in assumption

Increase/(decrease) in defined benefit obligation

Discount rate

Reduce by 0.25%

£6.5m

Inflation rate

Reduce by 0.25%

(£2.5m)

Longevity

1 year increase

£5.2m

 

The sensitivities consider the impact of the single change shown, with the other assumptions assumed to be unchanged. The inflation sensitivities allow for the consequential impact on the salary increase, statutory deferred revaluation and pension increase assumptions. The sensitivity analyses have been determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. In practice, making two of the changes shown would not make the overall results the sum of the two sensitivities, due to the interdependence of the assumptions.

 

15. Commitments for expenditure

The Group has committed to purchase €0.9m of newly issued ordinary and preference shares in REF Wisdom Limited, the intermediary company to its investment in Fadata AD, on 30 June 2017.

 

The Group has also committed to purchase a further €1.6m of software implementation assistance from Fadata AD over the next five years.

 

16. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

17. Non-recurring costs

In prior periods, further restructuring costs of £0.1m were incurred, representing the reduction of headcount in certain business segments, with a view to improving operational efficiency. No such costs were incurred in the current period.

 

18.  Events after the balance sheet date

On 26 July 2016, the Company acquired, through its wholly owned subsidiary Charles Taylor Insurance Services Limited, the CEGA Group, a specialist provider of technical medical assistance and travel claims management services, for a maximum consideration of £29.8m. 

 

Forward-looking statements

This interim report contains certain forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements, depending on a variety of factors, including demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; exchange rate fluctuations and other changes in business conditions; the actions of competitors and other factors.

 

Responsibility statement

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein). 

 

By order of the Board

 

David Marock
Group Chief Executive Officer

 

Mark Keogh
Group Chief Financial Officer

 

Independent review report to Charles Taylor plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity, and related notes 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company 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. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

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 inquiries, 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Deloitte LLP              
Chartered Accountants and Statutory Auditor

London, United Kingdom
29 August 2016

 


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