Transcript Document

INTERIM RESULTS 2014
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
2014 Interim Financial Highlights
Growth
6 months to June (£m)
2014
2013
Actual
CRE3
Organic4
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%
107.4
93.1
15%
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%
Underlying PBT2
Reported PBT
1
2
3
4
Total revenue comprises fees, commissions and investment income
Underlying results exclude exceptional items
CRE = constant rates of exchange
Organic growth is based on total revenue excluding the effect of currency, acquisitions, disposals and investment income
INTERIM RESULTS 2014
Total Revenue and Trading Profit
Total Revenue
6 months to June (£m)
2014 Growth
Trading Profit
CRE Organic
Trading Margin
2014
CRE
2013
2014
CRE
2013
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%
-
-
-
-
(10.4)
(10.4)
(11.0)
-
-
-
559.6
15%
22%
6%
110.5
121.7
92.8
Central Costs
INTERIM RESULTS 2014
19.7% 20.4% 19.0%
Risk & Insurance
JLT Specialty
Total Revenue
6 months to June (£m)
2014
JLT Specialty
112.3
Growth
2%
Trading Profit
CRE Organic
4%
4%
2014
CRE
2013
16.4
17.5
17.8
Trading Margin
2014
15%
CRE
2013
15%
Highlights
•
•
•
•
•
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
INTERIM RESULTS 2014
16%
Risk & Insurance
JLT Towers Re
Total Revenue
6 months to June (£m)
2014
Growth
JLT Towers Re
110.0
125%
Trading Profit
CRE Organic
137%
6%
2014
CRE
2013
33.2
35.6
14.7
Trading Margin
2014
30%
CRE
31%
2013
30%
Highlights
• 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
INTERIM RESULTS 2014
Risk & Insurance
JLT Australia & New Zealand
Total Revenue
6 months to June (£m)
JLT Australia & NZ
2014
Growth
64.5
(10%)
Trading Profit
CRE Organic
7%
7%
2014
CRE
2013
22.6
26.9
25.4
Trading Margin
2014
35%
CRE
35%
Highlights
•
•
•
•
•
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
INTERIM RESULTS 2014
2013
35%
Risk & Insurance
Lloyd & Partners
Total Revenue
6 months to June (£m)
Lloyd & Partners
2014
Growth
43.3
(3%)
Trading Profit
CRE Organic
-
(1%)
2014
CRE
2013
10.5
11.0
10.5
Trading Margin
2014
24%
CRE
25%
2013
23%
Highlights
• 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
INTERIM RESULTS 2014
Risk & Insurance
JLT Asia
Total Revenue
6 months to June (£m)
JLT Asia
2014
38.0
Growth
9%
Trading Profit
CRE Organic
20%
14%
Trading Margin
2014
CRE
2013
7.0
7.7
6.4
2014
18%
CRE
18%
Highlights
• 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
INTERIM RESULTS 2014
2013
18%
Risk & Insurance
JLT Latin America
Total Revenue
6 months to June (£m)
JLT Latin America
2014
26.2
Growth
2%
Trading Profit
CRE Organic
19%
17%
Trading Margin
2014
CRE
2013
6.8
7.9
7.3
Highlights
•
•
•
•
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
INTERIM RESULTS 2014
2014
26%
CRE
26%
2013
28%
Employee Benefits
UK & Ireland
Total Revenue
6 months to June (£m)
UK & Ireland
2014
85.4
Growth
5%
Trading Profit
CRE Organic
5%
1%
2014
CRE
2013
12.3
12.3
12.9
Trading Margin
2014
14%
CRE
14%
2013
16%
Highlights
• 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
INTERIM RESULTS 2014
Employee Benefits
International
Total Revenue
6 months to June (£m) 2014
Asia
Growth
Trading Profit
CRE Organic
Trading Margin
2014
CRE
2013
2014
CRE
2013
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
• 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
INTERIM RESULTS 2014
Associates
6 months to June (£m)
Total contribution to JLT after tax
Principal Associate Holdings
France
26%
GrECo
Austria
20%
Italy
25%
Spain
25%
Mexico
36%
March-JLT
JLT Sterling
% = JLT equity interest
INTERIM RESULTS 2014
2013
Growth
7.2
7.5
(4%)
Highlights
Siaci Saint Honoré
MAG-JLT
2014
 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
Underlying Operating Cost Ratio
6 months to June (£m)
Total revenue
2014
2013
Variance
560
100%
487
100%
73
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
Operating costs:
INTERIM RESULTS 2014
USD Revenue Protection
Full Year Projections
Forward rates
Actual
2013
2014
2015
1.56
1.53
1.54
Current USD hedged positions
77%
48%
25%
Forward USD rates as at 28th July 2014
1.70
1.69
1.67
1.55
1.59
1.61
1.64
£226m
£220m
£217m
£213m
(£6m)
(£3m)
(£4m)
USD hedging rates achieved
2016
as at 28th July 2014
Blended USD rates post hedging
Value of 2014 revenue ($350m)
Approx YOY revenue impact
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
Acquisition and integration costs
6.2
3.9
Business Transformation Programme costs
2.8
3.8
-
0.3
9.0
8.0
1.6
1.8
Exceptional costs:
St Botolph costs
Taxation impact of exceptional items:
Tax on exceptional items
INTERIM RESULTS 2014
Balance Sheet
As at 30th June (£m)
2014
2013
Change
31 Dec
2013
523
341
182
499
60
44
16
60
Associates and investments
108
109
(1)
107
Net working capital and other
233
177
56
137
Goodwill and intangibles
Fixed assets
Hedging contracts after deferred tax
(5)
(11)
Net pension deficit after deferred tax
(120)
(100)
Other deferred net tax assets
Net debt
Net assets
INTERIM RESULTS 2014
5
11
6
(7)
(20)
(106)
(6)
15
(436)
(228)
(208)
(345)
368
343
25
360
Cash Flow (Operational Basis)
6 months to June (£m)
2014
2013
EBITDA
Deduct:
138
(7)
(18)
(101)
(31)
(15)
(1)
(12)
(41)
(1)
(2)
116
(3)
(20)
(62)
(33)
(18)
(7)
(11)
(39)
1
(9)
(91)
(85)
Net interest
Tax paid
Net working capital increase
Annual capex
Net shares acquired
Pension deficit funding
Acquisitions/disposals
Dividends paid
Foreign exchange
Associates & other
Net cash outflow
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
£m
2014
Acquisition and integration costs
12.2
Business Transformation Programme
8.5
20.7
INTERIM RESULTS 2014
Business Transformation Programme
(£m)
2013
Actual
2013
Actual
2014 Full Year
Forecast
Incremental:
One-off costs
Associated benefits
(9.5)
7.3
(8.5)
4.7
Cumulative:
One-off costs
Recurring benefit
(9.5)
7.3
(18.0)
12.0
INTERIM RESULTS 2014
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
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.
INTERIM RESULTS 2014