Jelf is set to Beat the credit crunch
The extension to Jelf of a line of acquisitional credit worth £45m is further evidence that the credit crunch, though already impacting on UK insurance plc, will not restrict the availability of capital for those companies that can put it to good use.
The acquisition of Manson two weeks ago, which controls £45m in premium and two Devon brokers, controlling around £5m takes the Westcountry consolidator giant’s GWP to around £325m.
Considering that barely six months ago chief executive Alex Alway said he was hoping to control £250m in premium within three years, you could be forgiven for thinking his latest target – £500m – a little on the modest side.
At a time when a few brokers could be accused of premium targets at best described as ambitious, at worst impossible, it would not have been surprising to hear Jelf’s chief suggesting a figure north of £750m.
There are a number of reasons for this. First is Manson. Though a significant bolt-on in terms of its size, its location is equally telling. The Manchester market is both outside Jelf’s traditional southern remit and one that two months ago was regarded as among the most fiercely independent outside Scotland. Since then, Venture Preference has made its first foray into the region, while local consolidator CBG and Bridge have made moves.
Suddenly, the region seems up for grabs. Though Alway has said he will continue to focus on Southern England, considering that in November the broker revealed it was in discussions with 40 potential takeover targets, the chances are a couple of them will be in the North-West.
“Its staggering that we have secured this backing in this economic climate.
Alex Alway, chief executive, Jelf
The underlying financials and expertise within the Group are also strong. Though shareholders will doubtless be happiest with the news the group had upped its turnover by 62% to £40.56m and pretax profits by 104% to £7.19m, the addition of former Marsh UK chief Bruce Carnegie-Brown , as manging partner of 3i investments, to the board will add serious clout to the broker’s offering.
Then there is the company’s year on year organic growth of 16% which, says Alway, proved of particular interest to investors.
In this landscape of ballooning revenues as a result of acquisitions, it is this figure that suggests Jelf is primed for sustained as well as rapid growth. The fact that 3i has substantially more to shell out that the initial £45m it has granted should be seen as a sign that this is merely the end of the beginning for Jelf. After all, it already has a £40m chest courtesy of RBS, and numerous other investors who have money – and the inclination to spend it.
“We have brought in a necklace of mid-cap investors to drive us forward. 3i have £400m to spend, £700m if leveraged, on AIM-listed companies,” says Alway.
“It’s staggering that we’ve secured this backing in this economic climate.”
Staggering, maybe. Unsurprising? Definitely not.