Acquisitions and 5% organic growth but margins fall

Broker group Jelf has announced that acquisitions have increased revenue by 59% to £63.1m but its wealth management business has dragged overall margins down from 18% to 16%.

Jelf said organic growth across the group, excluding Wealth Management, which has been affected by the severe economic conditions, had been 5%.

Results highlights include:

  • EBITDA (before exceptional items) has increased by 40% to £10.1m (2007: £7.2m). Margins have declined to 16% (2007: 18%), mainly due to the difficult trading conditions for our Wealth Management business and the semi-fixed nature of Group costs.
  • Strong operating cash flow of £10.5m (2007: £9.0m), which has allowed the group to meet its deferred consideration payments from operating cash. Deferred consideration payments arising from past acquisitions will be substantially complete by the end of 2010.
  • The £0.7m of exceptional costs relates principally to the restructuring carried out as part of the drive for organisational efficiency. This will generate cost savings.
  • Diluted earnings per share (before amortisation and exceptionals) 13.7p (2007: 17.6p).
  • The Group has a long term facility (expires in 2013) with the Royal Bank of Scotland, which will be used to cover earnouts in conjunction with operating cash.

The company had three major acquisitions in the year: Manson Group (based in Manchester), Clarke Roxburgh Group (based in the West Midlands) and Argyll Group (based in Kent and East Sussex).

Jelf said: “All continue to perform in line with expectations and will provide a strong platform upon which the Group will develop its full range of services.”

Its employee benefits and healthcare businesses combined from 1 October 2008, to create Jelf Employee Benefits. “This will help us to present a co-ordinated proposition to our clients, further enhance cross-sales and capture scale economies” the firm said.

Alex Alway, Jelf chief executive, said: “We are pleased to report another year of progressive growth, despite some very difficult trading conditions. In the early part of last year we made some high quality and strategic acquisitions that have extended our geographic footprint and generated opportunities for future organic growth. In the latter half of the year we turned our focus to the operating efficiencies of the business. The primary aim of this was, and continues to be, to ensure we continue to deliver excellent service and support to our clients in a difficult economic environment. We also want to improve profit margins and, partly in response to the difficult economic environment, we have taken action to reduce our cost base to bring it in line with current trading expectations. Jelf continues to be well placed to deliver further growth and shareholder value in the future.”