TIDMCTR
RNS Number : 6644H
Charles Taylor PLC
14 March 2018
PRESS RELEASE
David Marock, Group Chief Executive
Contacts: Officer 020 3320 8988
Mark Keogh, Group Chief Financial
Officer 020 3320 2241
Charles Taylor plc
Announcement of results for year ended 31 December 2017
-- Revenue significantly increased
-- Organic initiatives and further investment driving growth strategy
-- Adjusted EBITDA increased
-- Adjusted profit before tax and earnings increased
-- Statutory profit before tax and earnings reduced
-- Adjusting Services' working capital months significantly improved
-- Refinancing completed on improved terms
-- Net debt increased to fund growth strategy
-- Final dividend increased
David Marock, Group Chief Executive Office, Charles Taylor plc
said:
"Charles Taylor achieved a solid overall financial performance
in 2017. We delivered significant revenue growth combined with
steady growth in adjusted profits before tax and good growth in
earnings. Investments have been made both to take forward our key
strategic initiatives, whilst also improving the Group's underlying
performance.
We are very positive about the long-term prospects for Charles
Taylor. We are taking forward numerous growth initiatives and our
investments are delivering good results overall. We are confident
that our strategy will deliver further growth, increased profit and
deliver greater shareholder value."
Consolidated financial highlights
For the year ended 31 December 2017
Revenue GBP210.8m increased (2016: GBP169.3m)
by 24.6%
Adjusted EBITDA(2) GBP22.9m increased (2016: GBP19.1m)
by 19.6%
Adjusted profit GBP15.3m increased (2016: GBP14.8m)
before tax by 3.5%
Statutory profit GBP7.4m decreased (2016: GBP10.7m)
before tax by 31.3%
Net debt GBP57.2m (2016: GBP37.5m)
Adjusted earnings 24.73p increased
per share (3) by 11.1% (2016: 22.27p)
Basic earnings per 13.14p decreased
share by 17.1% (2016: 15.85p)
11.01p increased
Dividend per share by 5% (2016: 10.50p)
2017 2016
GBPm GBPm
Revenue 210.8 169.3
----------------------------- ------ ------
Adjusted segmental
operating profit 18.3 16.3
Share of loss of associates (1.7) (0.8)
Amortisation of acquired
intangible assets (5.5) (3.0)
Non-recurring costs (2.7) (1.3)
Net finance costs (1.1) (0.5)
----------------------------- ------ ------
Statutory profit before
tax 7.4 10.7
Non-controlling interests (0.3) (0.2)
Adjustments(4) 8.2 4.3
Adjusted profit before
tax 15.3 14.8
----------------------------- ------ ------
Income tax credit 1.8 -
Tax on adjustments (0.3) -
----------------------------- ------ ------
Adjusted earnings 16.8 14.8
----------------------------- ------ ------
Notes:
1. Figures above are presented using unrounded numbers so minor rounding differences may arise.
2. Adjusted EBITDA is adjusted profit before tax plus
depreciation, amortisation and finance costs, before pre-tax
non-controlling interests.
3. Adjusted earnings per share is calculated by dividing the
adjusted earnings by weighted average number of ordinary shares as
disclosed in note 3.
4. Adjustments include non-recurring costs and amortisation of acquired intangible assets.
This announcement contains inside information within the meaning
of article 7 of the EU Market Abuse Regulation (MAR).
Group Chief Executive Officer's Report
Charles Taylor achieved a solid overall financial performance in
2017. We delivered significant revenue growth combined with steady
growth in adjusted profits before tax and good growth in earnings.
Statutory profits were down year on year, largely due the
amortisation of intangible customer relationship assets following
the acquisition of CEGA in 2016 and non-recurring costs relating to
office closures and operational efficiency. We do not consider that
these costs reflect the Group's underlying performance. These are
described in more detail in the Financial Review. We made excellent
progress in executing our strategy by growing our businesses
organically and investing to expand our capabilities for global
clients. These investments held back the underlying short-term
growth in adjusted profit before tax, which otherwise would have
been substantially higher, but are expected to deliver improved
long-term growth for shareholders.
Investments have been made both to take forward our key
strategic initiatives, whilst also improving the Group's underlying
performance. These include:
Growing our core businesses
-- Growing InsureTech. The business has secured or has been
selected as preferred provider for large and high-profile,
multi-year contracts in Europe and Latin America.
-- Developing our global property and casualty (P&C) loss
adjusting capability with the creation of new teams, the expansion
of existing teams and the opening of new offices in the UK, USA and
Middle East.
-- Securing significant new travel and medical assistance
business wins from leading UK insurers, along with expanding our
range of solutions utilised by clients.
Capturing new strategic opportunities
-- Acquiring Criterion Adjusters, a loss adjusting business
focused on the UK high net worth insurance sectors.
-- Strengthening our US TPA capability by acquiring Metro Risk
Management, a workers' compensation insurance claims
administrator.
-- Acquiring the book of Zurich International life insurance
bonds and integrated them into the Group's wholly-owned Isle of Man
life insurer.
Charles Taylor aims to deliver shareholder value by delivering a
diversified set of income streams, providing reliable, sustainable
year-on-year growth in earnings, while investing to create
opportunities to achieve a step-change in longer term earnings
growth.
We are well placed to grow our business by capitalising on the
major market trends in the insurance market and providing services
which meet the challenges our clients face. We believe these trends
will encourage larger global insurers, brokers, and corporates to
work with strategic partners like Charles Taylor. We can leverage
our technical services and technological solutions to enable our
clients to deliver services to their clients in fundamentally
better ways. Our global network, deep insurance knowledge,
technical capabilities and specialist solutions mean we are ideally
positioned to serve our clients across the globe and in every area
of their operating model.
The effectiveness of our growth strategy has been recognised at
The European Business Awards, Europe's largest business
competition. Charles Taylor was chosen by a panel of independent
judges including senior business leaders, politicians and academics
as the best in the UK in the 'Elite Award for Growth Strategy of
the Year' category.
Group results - continuing business
2017 2016 %
-------------------- ------ ------ -------
Revenue (GBPm) 210.8 169.3 +24.6%
-------------------- ------ ------ -------
Adjusted profit
before tax (GBPm) 15.3 14.8 +3.5%
-------------------- ------ ------ -------
Statutory profit
before tax (GBPm) 7.4 10.7 -31.3%
-------------------- ------ ------ -------
Adjusted earnings
per share (p) 24.73 22.27 +11.1%
-------------------- ------ ------ -------
Basic earnings
per share (p) 13.14 15.85 -17.1%
-------------------- ------ ------ -------
Dividend (p) 11.01 10.50 +5.0%
-------------------- ------ ------ -------
Net debt (GBPm) 57.2 37.5
-------------------- ------ ------ -------
Professional Services' performance
(GBPm) Revenue Adjusted
segmental
operating
profit
-------------------- -------------- -------------
2017 2016 2017 2016
-------------------- ------ ------ ------ -----
Management
Services 58.3 54.7 10.1 8.7
-------------------- ------ ------ ------ -----
Adjusting Services 74.9 65.4 4.5 1.8
-------------------- ------ ------ ------ -----
Insurance Support
Services 78.0 47.0 3.1 3.8
-------------------- ------ ------ ------ -----
Total 211.2 167.2 17.7 14.3
-------------------- ------ ------ ------ -----
Owned Life Insurers' performance
(GBPm) Revenue Adjusted
segmental
operating
profit
-------------- ------------- -------------
2017 2016 2017 2016
-------------- ------ ----- ------ -----
Owned Life
Insurers 4.6 4.7 0.6 2.0
-------------- ------ ----- ------ -----
Note: Small rounding differences
arise in the total amounts above
Professional services
-- The overall performance of our Management Services business
was strong. The UK and International business enabled The Standard
Club to achieve an excellent result and return premium to members.
We also introduced significant changes to the operating model of
The Strike Club to improve the financial performance of the club.
The Americas business also delivered an outstanding result for its
main client, Signal Mutual, achieving 100% renewal of members.
-- The Adjusting Services business made good progress in
strengthening its business to increase regular, repeatable income
streams and delivered a material improvement in its working capital
requirements. The business achieved good revenue growth, while our
efforts to reduce costs, increase efficiency and grow the business
delivered a pleasing increase in both profit and margin. The
acquisition of Criterion and the expansion of other teams are
expected to deliver further performance improvements.
-- The Insurance Support Services business delivered excellent
top line growth, benefiting from a full year's contribution from
CEGA, which secured additional businesses from high profile UK
insurers. Overall profit was down because of our increased
investment to build the capabilities of our insurance technology
business. We are seeing good progress in our efforts to establish
Charles Taylor InsureTech as a global insurance technology
provider. It has been selected to deliver large and high-profile,
multi-year projects in the UK and Latin America.
-- We participated in funding rounds for Fadata, an associated
business, in July 2017 and March 2018 as part of our technology
strategy. Fadata made losses in 2016 and 2017, largely due to long
lead times for software licence sales and investment to establish
the company in Western markets. Fadata is now seeing positive signs
of a stronger sales pipeline, which includes significant sales
opportunities in Latin America introduced by Charles Taylor
InsureTech. We are confident in the business' long-term future and
future growth prospects.
Owned Life Insurers
The Group's Owned Life Insurer's revenue decreased modestly.
Profit was down given the prior year included a one-off
contribution to profit on acquisition.
Following the acquisition of a closed book of Zurich
International life insurance bonds in early 2017, the business was
transferred successfully into LCL International Life Assurance
Company, the Group's wholly-owned Isle of Man life insurer, which
led to a gain on acquisition of GBP0.9m.
Balance sheet
We are managing actively the Group's cash profile while
investing for growth. Net debt was GBP57.2m at the end of 2017
(2016: GBP37.5m) largely as a result of acquisitions and
investments (GBP9.5m) and capital expenditure (GBP7.7m), as set out
in the Financial Review. The Group's annual average net debt, which
we believe better represents the Group's overall borrowing, was
GBP39.5m for the year (2016: GBP12.9m). Free cash flow was GBP4.3m
(2016: GBP7.2m). Taking into account the Group's annual cashflow
profile, the Board considers that the level of net debt is
appropriate.
Our significant efforts to reduce the working capital
requirement of Adjusting Services are yielding positive results .
The working capital requirement reduced by about one month,
releasing around GBP5m, which was used to support the growth in the
Adjusting business.
We completed a successful refinancing of the Group's debt
facilities, due to mature in November 2018, on improved terms
whilst increasing the Group's headroom to borrow to support further
growth.
The Group's pension scheme deficit fell during 2017, principally
due to good investment returns and the payment of deficit funding
contributions by the participating employers. The Group's net
pension liabilities were GBP44.7m at the year-end (2016: GBP52.5m).
Net of deferred tax, the liability was GBP37.1m (2016: GBP43.5m),
as set out in the Financial Review.
Dividend
An interim dividend for the year to 31 December 2017 of 3.31p
(2016: 3.15p) per share was paid on 10 November 2017. The Directors
recommend a final dividend of 7.70p (2016: 7.35p) per share to be
put to shareholders at the Annual General Meeting on 15 May 2018.
The total proposed dividend for the year is therefore 11.01p (2016:
10.50p). Subject to shareholder approval at the Annual General
Meeting, the final dividend will be paid on 25 May 2018 to all
shareholders on the register on 27 April 2018.
The Board
As announced at the Half Year, we were pleased to welcome Tamer
Ozmen as a Non-Executive Director, from 29 June 2017. Tamer also
joined the Audit, Remuneration and Nomination Committees with
effect from the same date.
Tamer is an accomplished technology professional with over 20
years' senior management experience. He currently runs Microsoft UK
Services, which supports UK customers to digitally transform
themselves and works with them to disrupt their business models to
achieve better results.
Management Services
The Management Services business earns fees from our mutual
insurance company and association clients. Growth in the business
of the mutuals and the number and extent of services we deliver,
leads to growth in our management activities and ultimately to the
level of management fees charged.
The performance of our largest managed mutual clients continues
to be excellent - providing a positive long-term indicator of the
performance of the Management Services business. The business also
seeks to grow by developing new mutuals and insurance ventures and
by tendering for the management contracts of other existing
mutuals, insurance companies and associations.
The overall performance of our Management Services business was
strong. The UK and International business line enabled The Standard
Club to achieve an excellent result and return premium to members.
It improved the operating model of The Strike Club to improve and
strengthen future financial performance of the club. The Americas
business delivered a strong result for its major client, Signal
Mutual, achieving 100% renewal of members.
Management Services - UK & International
Delivered exceptional services to our mutual clients
-- The Standard Club. Charles Taylor has managed The Standard
Club since it was founded in 1884. The club provides protection and
indemnity (P&I) insurance to around 10% of the world shipping
market. Our work has delivered an excellent result for the
club.
The club's entered tonnage grew by 7% growth during the 2016/17
policy year and 2% at renewal, an overall annual increase of 9%.
This is well ahead of growth in the world fleet of 3% over the same
period, demonstrating the quality of service and financial security
which we enable the club to deliver to its members.
At the 2017/18 renewal, the club set no general increase and
returned 5% of estimated total premium to members for the 2016/17
policy year, underlining the club's financial strength. The club
had a total premium income of $339m and free reserves of $430m at
the close of the 2016/17 policy year.
In other activity, we are helping the club to prepare for
Brexit. In this regard, we intend to establish an Irish insurer for
the club and open a Charles Taylor office in Dublin, specifically
to serve the club's European Union based members post-Brexit.
We have worked to enable the club to deliver its diversification
strategy. The Standard Syndicate, established in 2015 is now
established in the Lloyd's market. After a difficult start in
remarkably soft and challenging market conditions, the syndicate is
now poised for growth. In common with most new market entrants, The
Standard Syndicate's business plans for 2015-2017 which were
approved by Lloyd's, anticipated losses, due to start-up costs. The
Standard Syndicate's business plan for 2018 which was approved by
Lloyd's, which moves the syndicate beyond its start-up phase and is
focused on profitable underwriting.
The club diversified its business by agreeing a new mutual
excess cover facility with the Korea P&I Club. This will help
to expand the club's business in the important Korean shipping
market.
-- 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.
We delivered a good result overall for the club in 2017,
extending the range of insurance covers available, achieving a 95%
renewal and welcoming new members for the 2017/18 policy year. We
worked to improve the club's efficiency and operations, closing the
Monaco office in June 2017 and centralising its operations in
London.
-- The Offshore Pollution Liability Association (OPOL). We
provide financial, administrative and IT support to OPOL. OPOL is a
mutual association, established to manage offshore pollution claims
in the North Sea. The membership of the association remained stable
during the year despite a dip in the oil price. We anticipate that
the membership may now start to grow as activity increases in the
North Sea on the back of improving oil prices.
Management Services - America
The Management Services - America business supported the further
growth of Signal Mutual, increased the membership of SafeShore and
delivered management services to SCALA.
Secured growth for our mutual clients
-- Signal Mutual. Charles Taylor has been the manager of Signal
Mutual, the largest provider of Longshore workers' compensation
insurance to the US maritime industry, since it was founded in
1986.
Our work in 2017 helped ensure a very strong year for the
Association. The Association achieved 100% retention of members for
the 2017/18 policy year and reduced the advanced call charged to
members for the 15(th) successive year. This reflects a reduction
in the frequency of claims, driven by the highly effective safety
services we provide to the Association's members. As the US economy
strengthens, it leads to greater trade volumes through the ports
and terminals operated by Signal's members. As a result, we are
expecting growth in the payroll of Members to $4.0bn in
2017/18.
SafeShore, the Longshoreman Workers' Compensation Small Account
program, backed by Signal Mutual is growing strongly. We
established SafeShore as a 'for profit' programme on behalf of
Signal in 2014 to offer a further source of high quality income for
the mutual. 195 covered employers were entered in the programme in
the 2016/17 policy year (which is an increase of 16 over the prior
year), with payroll increasing to $60.4m, up from $40.6m in the
prior year.
Our work establishing SafeShore was recognised by the industry
when we won the 'Launch of the Year' award at the prestigious
Insider Honours awards in 2017.
-- SCALA. Charles Taylor has managed SCALA, which has provided
marine workers compensation insurance the majority of Canadian ship
owners since 1978. SCALA continued to perform well on behalf of its
Members.
Adjusting Services
Adjusting Services made good progress in strengthening its
business to increase regular, repeatable income streams and
delivered a material improvement in its working capital
requirements. The business increased revenue by 14.5%, while our
efforts to improve business performance, increase efficiency and
grow, delivered a pleasing increase in margin and more than doubled
the profit for the year. This year's improvement is part of our
longer-term strategy and we are focused on delivering further
improvements in 2018 and subsequent years. In particular, the
acquisition of Criterion Adjusters and the expansion of our
existing teams are expected to deliver further performance
improvements.
Diversified into profitable P&C lines: Our strategy to
expand our business into specialist profitable property &
casualty sectors is achieving positive results. In 2017, we:
-- Entered the high-net worth (HNW) adjusting market with the
acquisition of Criterion Adjusters, a prominent player in the HNW
sector. Criterion handles a significant share of the UK's HNW
property, fine art and antique-related claims as well as being the
preferred loss adjuster to many specialist HNW insurers.
-- Developed our US adjusting team. We appointed a new CEO and
Regional Head for our US adjusting business in January 2017. Over
the year, we have created a commercial property adjusting
capability, enhanced our existing business lines and significantly
strengthened our business development capabilities. We welcomed 15
senior adjusters to the team, extending our coverage across the
country, including opening an office in Fort Lauderdale to increase
our superyacht adjusting capabilities. Over the year, the US team
won over 100 new clients.
-- Delivered a positive performance for our UK construction and
engineering team, established in 2016. We have benefited from
considerable market support with important account nominations on
major contractors and infrastructure providers' annual covers and
significant commercial, residential, road, rail and waste to energy
specific nominations.
-- Extended our UK professional indemnity loss adjusting
capability by establishing a new team and opening an office in
Leeds.
Focused on core loss adjusting business: We believe we are the
only major global loss adjuster to have dedicated specialist teams
for larger and more complex aviation, marine, natural resources and
property & casualty claims. Our core adjusting business lines
are focused mainly on complex high value incidents, so their
performance is more dependent on the number and value of these type
of claims in the market. These core business lines performed well,
throughout the year.
The quality of our work has been recognised by the industry and
we won the Cuthbert Heath award at the Insurance Honours awards.
This prestigious award recognises the best response to a major
insurance loss and was awarded for our work in spearheading the
response to Hurricane Odile, which caused over US$1bn in damage in
Mexico.
Natural disasters: 2017 has been remarkable for the high number
of insured losses from Hurricanes Harvey, Irma and Maria and
earthquakes in Mexico. We led the programme to adjust losses
relating to government infrastructure in Mexico. We have also been
active adjusting property claims in the USA and yacht losses in
Florida and the Caribbean. While these claims have supported our
overall performance, we are not dependent on future major natural
catastrophes to achieve further business growth. Most
catastrophe-related adjusting is focused on high volumes of lower
value property claims. We are not active in the volume 'cat'
market, as our expertise is focused mainly on complex high value
incidents.
Improved operational efficiency: Our focus has been on both
significantly improving a small number of under-performing offices,
including closing our Halifax office in Canada, as well as
improving business performance generally. Our programme, which
includes restructuring teams and installing stronger central and
local management is delivering improved results. These initiatives
will remain the key area of focus in 2018.
We have focused on improving adjuster utilisation, by flexing
our teams to respond to demand surge wherever it occurs in the
world. For example, our Canadian adjusters provided significant
support and resources to our Mexico adjusting team, enabling them
to respond effectively to the inevitable increase in claims
management activity following the country's recent earthquakes.
Reduced working capital: Our significant efforts to reduce our
working capital requirement by invoicing faster and collecting
debts more quickly are also yielding positive results. We have
overhauled our invoicing and credit control process, particularly
in the key London market collections and have also strengthened our
working capital management across all our business lines. This has
resulted in an overall 10% reduction in our working capital from
9.1 to 8.2 months which releases over GBP5m in working capital.
Average Work-In-Progress months have reduced from 4.6 to 4.2 months
and our debtors from 4.5 to 4.0 months. We believe that this
positive reduction in working capital requirement will continue in
2018.
Educated the next generation: It is critical to the development
of the business that we invest in training to develop the next
generation of loss adjusters. This year we saw a success for three
of our marine loss adjusters, who passed the last module of the
Association of Average Adjusters exams and have become Fellows of
the Association of Average Adjusters. There are very few Fellows
worldwide, so to add three in one year is a great achievement and
significantly strengthens our marine adjusting business.
Insurance Support Services
The Insurance Support Services business delivered excellent top
line growth, benefiting from a full year's contribution from CEGA,
which secured additional businesses from high profile UK insurers.
Overall profit was down because of our increased investment to
build the capabilities of our Insurance technology business,
Charles Taylor InsureTech.
CEGA is a market-leading provider of 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 has delivered a strong performance and integrated well into
the Group in 2017. As reported at the Half Year, it has been
appointed as travel and medical assistance provider by major UK
clients and has since been awarded a contract with another
top-three insurer, extending its reach in the UK market. Onboarding
of these new clients has now been completed successfully. CEGA has
also renewed one of our largest insurer contracts with additional
revenues.
The business has built and launched a new medical screening
technology proposition, which has won strategically important new
business.
CEGA has also made substantial progress in delivering services
to the Group's other businesses. It has added insurance fraud
investigation services to Charles Taylor's loss adjusting
capabilities. CEGA has developed a major-medical cost-containment
programme, to reduce insured medical treatment costs for our
insurance clients. The business has introduced new insurer clients
to Adjusting Services and has won new business from existing
Charles Taylor clients, including The Standard Club and Signal
Mutual, to provide medical assistance and repatriation.
Charles Taylor InsureTech draws together provision of the
Group's specialist and bespoke technology solutions, systems
development and implementation solutions into a single
client-focused business.
We are making very good progress in our efforts to establish
Charles Taylor InsureTech as a global insurance technology
provider. It has been selected to deliver large and high-profile,
multi-year contracts in Europe and Latin America.
It has been chosen to deliver TIDE, our delegated authority
management solution, for the London insurance market. We have won
the contract to implement a multi-country life, health and general
insurance policy administration system for one of Latin America's
largest insurers.
Charles Taylor InsureTech has also been selected by one of the
world's largest employee benefit (re)insurance providers to
transform its technology infrastructure. Implementation of the new
technology platform will support the client to deliver its
ambitious business growth plans across Europe. Our solution will be
based on Fadata's INSIS policy administration software and
InsureTech's TIDE solution. The contract for the initial phase of
work has been signed, the full project is expected to deliver
consultancy, implementation and long-term support revenues for
InsureTech and licencing income for Fadata.
As part of our technology strategy, we participated in a funding
round of EUR1.7m for Fadata, an associated business, in July 2017,
and a further funding round of EUR1.9m in March 2018. Fadata is the
specialist insurance policy administration software business
acquired by the Group and The Riverside Company, a global private
equity firm, in December 2015. The investments support Fadata's
on-going development and enabled it to make a strategic investment
in IMPEO, a German digital insurance technology specialist.
Fadata has made a loss in 2016 and 2017, largely due to long
lead times for software licence sales and the cost of investment to
establish the company in Western markets. The business is taking
longer than anticipated to contribute to the Group's performance.
Fadata's INSIS software is highly rated by the leading industry
analysts and the business is now taking steps to transform its
operating model and processes to capitalise on the competitive
advantage inherent in its INSIS software. Fadata is seeing positive
signs of a stronger sales pipeline, including significant sales
opportunities in Latin America introduced through Charles Taylor
InsureTech. We are confident in the business's long-term future and
growth prospects and anticipate that its performance will improve
in 2018.
Charles Taylor Managing Agency has experienced some turnover in
its senior staff over the year as the business moved from it
start-up phase to becoming a more established business. It has
delivered high quality services to its client, The Standard
Syndicate, over the year. It is working to ensure that its systems
and operations meet or exceed the governance standards required to
win management contracts to manage further Lloyd's insurance
vehicles.
Charles Taylor TPA is a global Third Party Administrator (TPA),
which manages claims for insurers, coverholders and self-insured
employers. The business takes on some or all our clients' claims
management function, from white-labelled first notification of loss
services, through to claims investigation and delegated claims
settlement and loss fund management.
Charles Taylor TPA has made good progress in the US and UK
markets. It has appointed a senior industry practitioner to the new
role of Director, Strategy and Performance to be responsible for
strategy, sales and marketing performance and business
development.
As part of our growth strategy, we acquired Metro Risk
Management, a US West Coast-based TPA specialising in US Longshore
and State Act workers' compensation claims. The acquisition will
further strengthen the business' presence in these major
markets.
Separately, we extended our range of capabilities into the
international fund administration market with the completion of the
acquisition of Allied Dunbar International Fund Managers, announced
in the Group's 2016 annual report. These services complement the
life policy administration services the Group provides in the Isle
of Man.
Charles Taylor Insurance Services covers two separate business
lines, providing outsourced insurance services to life insurance
and non-life clients. Both performed steadily during the
period.
In the life sector, the business provides policy administration
services to both life insurance businesses writing live business
and those in run-off. In the non-life sector, Charles Taylor
Insurance Services provides services clients in the Lloyd's, London
and international insurance markets. Both businesses performed in
line with management expectations.
Other business lines, including the Group's investment
management, captive management, risk consulting businesses,
performed in line with management's expectations.
Owned Life Insurers
The business' revenue decreased modestly. As expected, profit
was down, given there was a one-off contribution to profit on
acquisition in the prior year.
Charles Taylor's strategy of acquiring and consolidating life
insurers in run-off creates benefits from economies of scale. Small
insurers typically have operational inefficiencies, often relating
to legacy systems and manual processes, and have high fixed costs
to cover, such as management, audit, director and regulatory fees.
Such cost structures are an important factor in small to medium
sized insurers holding actuarial reserves on a prudent basis. By
acquiring such insurers and then merging them, legally and
operationally, with another insurer, economies of scale in the
annual running costs are created for the current period and future
years. As estimation of future expected expenses over many years
can be a major factor in setting the actuarial reserves, such
economies of scale can trigger reductions in those reserves, which
can lead to positive revaluations, profits and cash releases
arising at trigger points such as acquisition, reinsurance and
following schemes of transfer.
Following the acquisition of a closed book of Zurich
International life insurance bonds, this business was transferred
successfully into LCL International Life Assurance Company, the
Group's wholly-owned Isle of Man life insurer.
Other Group strategy initiatives
During 2017, we took forward further initiatives to optimise our
core capabilities and support services to underpin growth:
Implementing London property strategy: Charles Taylor currently
operates from three London offices. We have been working to
rationalise our operations into a single London location, to
improve efficiency and support joint working and collaboration
between our business units. We have now agreed lease terms on a
high specification London office on competitive terms and are
exiting our existing lease commitments. Our London operations and
business units will relocate to the new office this summer. We will
adopt an agile working model in the new office which will increase
efficiency and collaboration whilst enabling us to reduce our total
London property footprint.
Strengthened technology infrastructure: We have improved the
security and flexibility of our IT infrastructure by moving most
systems and data into the 'cloud'. We established a new IT Service
Portal to improve the efficiency and cost effectiveness of our
technology support for our staff.
Enhanced learning and development: During the year, we
introduced a programme to provide new people managers with the
tools and techniques to enhance their skills. We also extended our
core curriculum to add further learning and development
opportunities.
Furthering diversity and inclusion: We recognise that
encouraging greater diversity and more inclusive practices brings
benefits to our business, so we have developed a strategy to ensure
that we recruit, develop and retain high quality staff irrespective
of age, gender, race or sexual orientation. These initiatives are
at an early stage, but include creating a diversity and inclusion
forum, delivering educational and training programmes and
establishing a health and wellbeing strategy.
Current trading and outlook
Charles Taylor has had a solid start to 2018. At this early
stage, we anticipate that our full year performance will be in line
with market expectations. We are making good progress in delivering
our growth strategy:
-- Our Management Services business continues to provide a solid
core to our business with deep and long-standing client
relationships and the delivery of steady, reliable growth. The UK
and International business delivered a strong renewal for The
Standard Club for the 2018/19 policy year, attracting new members
and delivering year-on -year growth. The Americas business is
building on the outstanding performance delivered for Signal Mutual
at the 2017/18 policy year.
-- The Adjusting Services business is well-positioned to
generate growth and improve profitability from its core business
lines and diversification strategy. Adjusting Services is building
its presence in selected property and casualty markets and
continuing its efforts to increase efficiency and reduce its
working capital requirements.
-- The Insurance Support Services business includes established
and newer businesses with the potential to deliver a material
change in earnings in the longer term. The established travel
assistance and claims management business is performing well for
its existing and new clients. In the insurance technology space, we
anticipate that we will successfully conclude contract negotiations
with further major clients in Europe and Latin America.
We continue to look at ways to optimise our operational activity
across the Group by making our processes more consistent,
regulatory compliant, robust, scalable and efficient. Our aim is
both to strengthen the Group's current businesses and to provide a
stronger platform for future organic and inorganic growth.
We intend to further strengthen our Group by continuing to make
carefully targeted acquisitions, joint ventures and business
investments. These build scale, leverage our infrastructure and
expand our range of services for our global clients. We have an
attractive pipeline of acquisition opportunities under
consideration. All potential acquisitions are tested against our
criteria of having a compelling strategic and financial rationale,
strong cultural fit and acceptable risk profile.
Our work is focused on enabling the insurance market to meet the
continually evolving challenges it faces and to make the business
of insurance work fundamentally better. This could not be achieved
without the full commitment of our highly professional team. I
would like to thank all our staff for their hard work and
dedication throughout the year.
We are very positive about the long-term prospects for Charles
Taylor. We are taking forward numerous growth initiatives and our
investments are delivering good results overall. We are confident
that our strategy will deliver further growth, increased profit and
deliver greater shareholder value.
David Marock
Group Chief Executive Officer
14 March 2018
Financial Review
The results for the year are summarised in the table below and
explained in more detail in the Group Chief Executive Officer's
Report.
2017 2016
Owned
Professional Services Life
businesses Insurers Group Group
-------------------------------- ------- --------- ---------------------- -------
Insurance
Management Adjusting Support Insurance Eliminations
Services Services Services Total Companies Total Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBP
---------------- ---------- --------- --------- ------- --------- ------------- ------- -------
Revenue 58.3 74.9 78.0 211.2 4.6 (5.0) 210.8 169.3
Depreciation
and
amortisation (0.3) (0.7) (5.0) (6.0) (0.3) - (6.3) (3.6)
Other expenses (48.5) (71.3) (69.8) (189.7) (3.7) 4.5 (188.9) (150.7)
Non-recurring
costs 0.5 1.6 - 2.1 - 0.5 2.6 1.3
---------------- ---------- --------- --------- ------- --------- ------------- ------- -------
Adjusted
segmental
operating
profit 10.1 4.5 3.1 17.7 0.6 - 18.3 16.3
Share of loss
of
associates (1.7) (0.8)
Amortisation
of acquired
intangible
assets (5.5) (3.0)
Non-recurring
costs (2.7) (1.3)
Net finance
costs (1.1) (0.5)
---------------- ---------- --------- --------- ------- --------- ------------- ------- -------
Statutory
profit before
tax 7.4 10.7
Non-controlling
interests (0.3) (0.2)
Adjustments(1) 8.2 4.3
Adjusted profit
before tax 15.3 14.8
Depreciation
and
amortisation 6.3 3.6
Net finance
costs 1.1 0.5
Non-controlling
interests 0.3 0.2
---------------- ---------- --------- --------- ------- --------- ------------- ------- -------
Adjusted
EBITDA(2) 22.9 19.1
---------------- ---------- --------- --------- ------- --------- ------------- ------- -------
Note: Figures above are presented using unrounded numbers so
minor rounding differences may arise.
1. Adjustments include non-recurring costs and amortisation of acquired intangible assets.
2. Adjusted EBITDA is adjusted profit before tax plus
depreciation, amortisation and finance costs, before pre-tax
non-controlling interests.
Adjustments
Charles Taylor is a global provider of technical services to the
insurance market. We operate through three professional services
businesses: Management, Adjusting and Insurance Support Services.
We also own and consolidate international life insurance businesses
through our Owned Life Insurers business.
The Professional Services businesses provide specialist services
to the insurance market. We are continually developing new
technical services capabilities through carefully targeted
acquisitions, joint ventures and business investments which have a
compelling strategic rationale, strong cultural fit, a persuasive
financial rationale and an acceptable risk profile. Our strategy
includes the execution of selected larger investments. Material
acquisitions and the significant expansion of new businesses, in
any given financial year are infrequent so the associated costs of
such investments are not representative of the underlying
performance of these businesses.
The Owned Life Insurers business consolidates life insurance
businesses which are primarily in run-off, creating value through
targeted acquisitions and operational efficiency. Its strategy is
to identify, acquire and then merge them, legally and
operationally, with another insurer, achieving economies of scale
in the annual running costs. This business has acquired five life
companies over the last five years. Profit releases on acquisitions
are dependent on the merging of businesses, requiring regulatory
approval, leading to profit fluctuations; acquisition related costs
are considered to be a core element of this business' underlying
performance.
For these reasons, the Group makes adjustments to statutory
profit before tax in order to report profit before tax which better
reflects the Group's underlying performance ("adjusted profit
before tax"). These adjustments, the largest of which are listed
below, are as follows in 2017:
-- The amortisation of intangible assets recognised on
acquisitions by the Professional Services division of GBP5.5m
(2016: GBP3.0m) is adjusted because this expense, which is higher
in 2017 than 2016 because of the Criterion and Metro Risk
Management acquisitions, does not relate to underlying
performance.
-- The Adjusting Services business also incurred costs
optimising their business operations, including rationalising
legacy remuneration and office locations. These expenses do not
relate to the underlying performance of this business and GBP1.6m
has been adjusted as a result.
-- In 2017 the Management Services business closed The Strike
Club's Monaco office in June and centralised operations in London
resulting in a net restructuring cost of GBP0.5m. These costs do
not relate to the underlying performance of this business and have
been adjusted.
-- The Professional Services business incurred GBP0.5m in
acquiring Criterion Loss Adjusters and Metro Risk Management and
refinancing its debt facilities and the Group's share of an
associate's acquisition and refinancing costs; these costs do not
relate to the Group's underlying performance and have been
adjusted.
Net debt, cash flow and financing
The Group ended 2017 with net debt of GBP57.2m (2016: GBP37.5m)
largely as a result of investments in Zurich International
Portfolio Bonds/Allied Dunbar International Fund Managers,
Criterion Adjusters, Metro Risk Management, Funds at Lloyd's and
Fadata AD (through REF Wisdom Limited) of GBP9.5m and capital
expenditure of GBP7.7m, which includes GBP5.1m of capitalised
development costs. Free cash flow was GBP4.3m (2016: GBP7.2m). We
are continuing to focus on managing our debt while investing for
growth.
In October 2017, the Group completed a refinancing of its debt
facilities, due to mature in November 2018, on improved terms. The
finance has been provided by Charles Taylor's existing UK lenders,
HSBC and Royal Bank of Scotland with the addition of a new lender,
the Bank of Ireland. These increased facilities will support
Charles Taylor in driving forward its growth strategy.
The new financing provides an increase in facilities over a
five-year term, maturing in October 2022 with the option to extend
by a further year. The details as follows:
-- Revolving credit facility: GBP70m, increased from GBP40m,
including the repayment of an existing GBP10m term loan
-- Accordion facility: GBP25m, increased from GBP10m
The amended facilities are subject to a 'margin ratchet' with
the margin varying from 2.00% - 3.00% over 3-month LIBOR. This is
an improvement of 25bp on the previous terms of 2.25% - 3.25%.
The facilities contain two key financial covenants which are
tested quarterly: (i) the interest cover in respect of any 12-month
period ending on a quarterly test date shall not be less than 5:1
and (ii) leverage in respect of any 12-month period ending on a
quarterly test date shall not exceed a target of 1.75: and 2.5:1.
The leverage covenant is calculated as Adjusted EBITDA to Net debt,
including a full 12 months of any acquired EBITDA.
The leverage covenant is calculated on a 12-month rolling basis
and we will be able to include the 12-months EBITDA for all
acquisitions including the Zurich book, Criterion and Metro Risk,
irrespective of the date of acquisition.
In addition, the Group has a US$9m facility with Citizens Bank
which remains in place and additional local overdraft facilities.
Following the refinancing and including existing facilities, but
excluding the Accordion, Charles Taylor has total available
facilities of c. GBP85m (sterling equivalent).
Retirement benefit schemes
The Group's pension scheme deficit fell during 2017, principally
due to good investment returns and the payment of deficit funding
contributions by the participating employers. The retirement
benefit obligation in the Group balance sheet at 31 December 2017
was GBP44.7m, compared with GBP52.5m at the previous year-end. Net
of deferred tax, the liability was GBP37.1m (2016: GBP43.5m). 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.
Dividend
The final dividend for 2017 is 7.70p (2016 7.35p) making the
total dividend for the year 11.01p (2016: 10.50p).
Foreign exchange
The Group manages its exposure to foreign currency fluctuations
by using forward foreign exchange contracts and options to sell
currency in the future. The contracts open during the year and at
the year-end were put in place to protect the Group's exposure to
movements between US $ and Sterling. The US$ profits of the Group
were translated at US$1.30 in 2017 (2016: US$1.36). The sensitivity
of the Group's results to movements in exchange rates is explained
in note 28 to the Financial Statements.
Taxation
During 2017, the effective tax rate on statutory profit was
-23.8% (2016: 0%) due to the recognition of deferred tax assets in
respect of brought forward UK tax losses. Following a detailed
review and our confidence in future profits, the remaining deferred
tax asset was released at year end which resulted in GBP1.8m credit
to Statutory profit before tax and a GBP1.5m credit to Adjusted
profit before tax.
Mark Keogh
Group Chief Financial Officer
14 March 2018
Consolidated Income Statement
Year to 31 December
---------------------
2017 2016
Note GBP000 GBP000
----------------------------------------------- ---- ---------- ---------
Continuing operations
Revenue from Professional Services 206,237 164,551
Revenue from Owned Insurance Companies
Gross revenue 5,609 5,567
Outward reinsurance premiums (1,026) (854)
----------------------------------------------- ---- ---------- ---------
Net revenue from Owned Insurance Companies 4,583 4,713
----------------------------------------------- ---- ---------- ---------
Total revenue 2 210,820 169,264
Expenses from Owned Insurance Companies
Claims incurred (52,779) (120,926)
Reinsurance recoveries 915 2,950
Other gains from insurance activities 55,455 120,464
Net operating expenses (7,160) (5,212)
----------------------------------------------- ---- ---------- ---------
Net expenses (3,569) (2,724)
Administrative expenses (197,905) (154,275)
Gain on acquisition 926 -
Share of loss of associates (1,780) (1,028)
----------------------------------------------- ---- ---------- ---------
Operating profit 8,492 11,237
Investment and other income 903 823
Finance costs (2,022) (1,333)
----------------------------------------------- ---- ---------- ---------
Profit before tax 7,373 10,727
Income tax credit 1,758 -
----------------------------------------------- ---- ---------- ---------
Profit for the year from continuing operations 9,131 10,727
----------------------------------------------- ---- ---------- ---------
Attributable to:
Owners of the Company 8,910 10,541
Non-controlling interests 221 186
----------------------------------------------- ---- ---------- ---------
9,131 10,727
----------------------------------------------- ---- ---------- ---------
Earnings per share from continuing operations
Basic earnings per share (p) 3 13.14 15.85
Diluted earnings per share (p) 3 13.01 15.73
----------------------------------------------- ---- ---------- ---------
Consolidated Statement of Comprehensive Income
Year to 31 December
---------------------
2017 2016
Note GBP000 GBP000
------------------------------------------------------------------- ----- --------- ----------
Profit for the year 9,131 10,727
-------------------------------------------------------------------------- --------- ----------
Items that will not be reclassified subsequently to profit or loss
Actuarial gains/(losses) on defined benefit pension schemes 4,740 (15,224)
Tax on items taken directly to equity (1,310) 1,790
-------------------------------------------------------------------------- --------- ----------
3,430 (13,434)
------------------------------------------------------------------------- --------- ----------
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations (1,909) 6,091
Gains/(losses) on cash flow hedges 709 (374)
-------------------------------------------------------------------------- --------- ----------
(1,200) 5,717
------------------------------------------------------------------------- --------- ----------
Other comprehensive income / (expense) for the year, net of tax 2,230 (7,717)
-------------------------------------------------------------------------- --------- ----------
Total comprehensive income for the year 11,361 3,010
-------------------------------------------------------------------------- --------- ----------
Attributable to:
Owners of the Company 11,283 2,570
Non-controlling interests 78 440
-------------------------------------------------------------------------- --------- ----------
11,361 3,010
------------------------------------------------------------------------- --------- ----------
Consolidated Balance Sheet
At 31 December
--------------------
2017 2016
Note GBP000 GBP000
--------------------------------------------- ---- --------- ---------
Non-current assets
Goodwill 61,375 58,264
Other intangible assets 46,605 34,180
Property, plant and equipment 8,793 8,690
Investments 1,547 1,486
Financial assets 8,492 6,682
Deferred tax assets 11,909 12,707
--------------------------------------------- ---- --------- ---------
Total non-current assets 138,721 122,009
--------------------------------------------- ---- --------- ---------
Current assets
Total assets in insurance businesses 1,103,032 1,251,017
Trade and other receivables 5 82,655 78,178
Cash and cash equivalents 146,057 141,436
--------------------------------------------- ---- --------- ---------
Total current assets 1,331,744 1,470,631
--------------------------------------------- ---- --------- ---------
Total assets 1,470,465 1,592,640
--------------------------------------------- ---- --------- ---------
Current liabilities
Total liabilities in insurance businesses 1,089,039 1,236,898
Trade and other payables 6 37,627 37,074
Deferred consideration 2,688 2,979
Current tax liabilities 1,934 458
Borrowings 15,708 10,002
Client funds 121,395 125,198
--------------------------------------------- ---- --------- ---------
Total current liabilities 1,268,391 1,412,609
--------------------------------------------- ---- --------- ---------
Net current assets 63,353 58,022
--------------------------------------------- ---- --------- ---------
Non-current liabilities
Borrowings 66,153 43,670
Deferred tax liabilities 4,386 6,309
Retirement benefit obligation 44,738 52,467
Provisions 302 338
Obligations under finance leases 28 41
Deferred consideration 8,187 7,044
--------------------------------------------- ---- --------- ---------
Total non-current liabilities 123,794 109,869
--------------------------------------------- ---- --------- ---------
Total liabilities 1,392,185 1,522,478
--------------------------------------------- ---- --------- ---------
Net assets 78,280 70,162
--------------------------------------------- ---- --------- ---------
Equity
Share capital 689 674
Share premium account 73,781 72,372
Merger reserve 6,872 6,872
Capital reserve 662 662
Own shares (369) (430)
Accumulated losses (5,136) (12,126)
--------------------------------------------- ---- --------- ---------
Equity attributable to owners of the Company 76,499 68,024
Non-controlling interests 1,781 2,138
--------------------------------------------- ---- --------- ---------
Total equity 78,280 70,162
--------------------------------------------- ---- --------- ---------
The financial statements were approved by the Board of Directors
and signed on its behalf by
Mark Keogh
Director
14 March 2018
Company number: 03194476
Cash Flow Statement
Year to 31 December
---------------------
2017 2016
Note GBP000 GBP000
--------------------------------------------- ---- ---------- ---------
Group
Net cash generated from operating activities 8 7,697 71,200
Investing activities
Interest received 420 394
Proceeds on disposal of property, plant
and equipment 145 278
Purchases of property, plant and equipment (2,645) (1,753)
Purchases of other intangible assets (5,102) (6,091)
Purchase of investments (3,739) (3,320)
Acquisition of subsidiaries - net of
cash acquired (7,146) (23,507)
Payment of deferred consideration (6,027) (8,214)
--------------------------------------------- ---- ---------- ---------
Net cash used in investing activities (24,094) (42,213)
--------------------------------------------- ---- ---------- ---------
Financing activities
Proceeds from issue of shares 760 442
Dividends paid (7,232) (6,732)
Repayments of borrowings (78,500) (12,590)
Repayments of obligations under finance
leases - (16)
New bank loans raised 104,000 40,587
Increase in bank overdrafts 3,140 3,465
--------------------------------------------- ---- ---------- ---------
Net cash generated from financing activities 22,168 25,156
--------------------------------------------- ---- ---------- ---------
Net increase in cash and cash equivalents 5,771 54,143
Cash and cash equivalents at beginning
of year 141,436 80,170
Effect of foreign exchange rate changes (1,150) 7,123
--------------------------------------------- ---- ---------- ---------
Cash and cash equivalents at end of
year 146,057 141,436
--------------------------------------------- ---- ---------- ---------
Consolidated Statement of Changes in Equity
Called up Share Non-
share premium Merger Capital Own Accumulated controlling Total
capital account reserve reserve shares losses interests equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ --------- ------- ------- ------- ------ ----------- ----------- --------
At 1 January 2017 674 72,372 6,872 662 (430) (12,126) 2,138 70,162
Issue of share capital 15 - - - - - - 15
Share premium arising on issue of
share
capital - 1,409 - - - - - 1,409
Profit for the financial year - - - - - 8,910 221 9,131
Dividends paid - - - - - (7,232) - (7,232)
Actuarial gains on defined benefit
pension schemes - - - - - 4,740 - 4,740
Tax on items taken to equity - - - - - (1,310) - (1,310)
Gains on cash flow hedges - - - - - 709 - 709
Foreign currency exchange
differences - - - - - (1,766) (143) (1,909)
Movement in share-based payments - - - - - 1,999 - 1,999
Movement in own shares - - - - 61 - - 61
Other movements - - - - - 940 (435) 505
------------------------------------ --------- ------- ------- ------- ------ ----------- ----------- --------
At 31 December 2017 689 73,781 6,872 662 (369) (5,136) 1,781 78,280
------------------------------------ --------- ------- ------- ------- ------ ----------- ----------- --------
At 1 January 2016 665 71,239 6,872 662 (489) (8,869) 19,404 89,484
Issue of share capital 9 - - - - - - 9
Share premium arising on issue of
share
capital - 1,133 - - - - - 1,133
Profit for the financial year - - - - - 10,541 186 10,727
Dividends paid - - - - - (6,732) - (6,732)
Actuarial losses on defined benefit
pension schemes - - - - - (15,224) - (15,224)
Tax on items taken to equity - - - - - 1,790 - 1,790
Losses on cash flow hedges - - - - - (374) - (374)
Foreign currency exchange
differences - - - - - 5,837 254 6,091
Movement in share-based payments - - - - - 1,227 - 1,227
Movement in own shares - - - - 59 - - 59
Sale and closure of non-life
operations - - - - - - (17,706) (17,706)
Other movements - - - - - (322) - (322)
------------------------------------ --------- ------- ------- ------- ------ ----------- ----------- --------
At 31 December 2016 674 72,372 6,872 662 (430) (12,126) 2,138 70,162
------------------------------------ --------- ------- ------- ------- ------ ----------- ----------- --------
The capital reserve and merger reserve arose on formation of the
Group and are non-distributable capital reserves.
Own shares comprise 324,247 (2016: 311,120) shares held by the
Charles Taylor Employee Share Ownership Plan Trust (ESOP). The
market value of these shares was GBP0.9m (2016: GBP0.8m) 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 consolidated 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 Financial Statements
1. Basis of accounting
The financial information set out above does not constitute the
statutory accounts of Charles Taylor plc for the year ended 31
December 2017, but is derived from those statutory accounts, which
have been prepared in accordance with International Financial
Reporting Standards (IFRSs) and also in accordance with IFRSs
adopted by the European Union and therefore they comply with
Article 4 of the EU IAS Regulation.
Statutory accounts for 2016 have been delivered to the Registrar
of Companies and those for 2017 will be delivered following the
Company's Annual General Meeting.
The auditors have reported on those accounts; their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498 (2) or (3) Companies Act 2006.
2. 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 - provides end-to-end management
services to insurance companies, mutuals and associations.
-- Adjusting Services business -provides loss adjusting services
across the aviation, energy, marine, property & casualty and
special risks sectors.
-- Insurance Support Services business - provides a wide range
of professional, technology and support services, enabling our
clients to select the specific services they require.
-- Owned Life Insurers business - consolidates life insurance
businesses which are primarily in run-off, creating value through
targeted acquisitions and operational efficiency.
Management information about these businesses is regularly
provided to the Group's chief operating decision maker 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 profit for the individual segments
includes an allocation of central costs. The Adjustments column
includes elimination of inter-segment revenue, share of results of
associates and the adjustments set out in the Finance Review.
Reconciliations of segmental results to the Group profit before tax
are set out below.
Information about major customers
The Group derived revenue within its Management services
business, of GBP36.1m (31 December 2016: GBP34.3m) from one
external customer which accounts for more than 10% of Group
revenue.
Owned Life
Professional Services businesses Insurers Adjustments Group
------------ ------------- ---------
Insurance
Management Adjusting Support Insurance Eliminations/
Year to 31
December 2017 Services Services Services Unallocated Total Companies Other Total
Continuing
operations GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- --------- --------- ----------- --------- ------------ ------------- ---------
Revenue from
external
clients 58,345 74,929 72,957 6 206,237 4,583 - 210,820
Revenue from
other
operating
segments - - 5,004 - 5,004 - (5,004) -
-------------- ---------- --------- --------- ----------- --------- ------------ ------------- ---------
Total revenue 58,345 74,929 77,961 6 211,241 4,583 (5,004) 210,820
Depreciation
and
amortisation (262) (700) (5,029) - (5,991) (268) - (6,259)
Other expenses (47,954) (69,738) (69,826) (6) (187,518) (3,701) (4,850) (196,069)
-------------- ---------- --------- --------- ----------- --------- ------------ ------------- ---------
Operating
profit/(loss) 10,129 4,491 3,112 - 17,732 614 (9,854) 8,492
-------------- ---------- --------- --------- ----------- --------- ------------ ------------- ---------
Investment and
other income 903
Finance costs (2,022)
-------------- ---------- --------- --------- ----------- --------- ------------ ------------- ---------
Profit before
tax 7,373
-------------- ---------- --------- --------- ----------- --------- ------------ ------------- ---------
Owned
Life
Professional Services businesses Insurers Adjustments Group
-------------------------------------------------------- --------- ------------- ---------
Insurance
Management Adjusting Support Insurance Eliminations/
Year to 31
December
2016 Services Services Services Unallocated Total Companies Other Total
Continuing
operations GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- ---------- --------- --------- ----------- --------- --------- ------------- ---------
Revenue from
external clients 54,746 65,420 44,380 5 164,551 4,713 - 169,264
Revenue from
other operating
segments - - 2,664 - 2,664 - (2,664) -
----------------- ---------- --------- --------- ----------- --------- --------- ------------- ---------
Total revenue 54,746 65,420 47,044 5 167,215 4,713 (2,664) 169,264
Depreciation
and amortisation (1,003) (1,282) (973) - (3,258) (379) - (3,637)
Other expenses (45,091) (62,314) (42,247) (5) (149,657) (2,327) (2,406) (154,390)
----------------- ---------- --------- --------- ----------- --------- --------- ------------- ---------
Operating
profit/(loss) 8,652 1,824 3,824 - 14,300 2,007 (5,070) 11,237
----------------- ---------- --------- --------- ----------- --------- --------- ------------- ---------
Investment and
other income 823
Finance costs (1,333)
----------------- ---------- --------- --------- ----------- --------- --------- ------------- ---------
Profit before
tax 10,727
----------------- ---------- --------- --------- ----------- --------- --------- ------------- ---------
At 31 December At 31 December
2017 2016
GBP000 GBP000
-------------------------------------- --------------------------------------
Professional Professional
Services Owned Services Owned
Life Life
businesses Insurers Group businesses Insurers Group
----------------------------- ------------ ----------- ----------- ------------ ----------- -----------
Management Services business 2,890 - 2,890 3,643 - 3,643
Adjusting Service business 220,238 - 220,238 209,560 - 209,560
Insurance Support Services
business 120,083 - 120,083 106,021 - 106,021
Unallocated assets and
eliminations 22,514 - 22,514 20,427 - 20,427
Owned Insurance Companies
business - 1,104,740 1,104,740 - 1,252,989 1,252,989
Total assets 365,725 1,104,740 1,470,465 339,651 1,252,989 1,592,640
- Non-current assets 137,012 1,708 138,720 120,037 1,972 122,009
- Current assets 228,713 1,103,032 1,331,745 219,614 1,251,017 1,470,631
----------------------------- ------------ ----------- ----------- ------------ ----------- -----------
Total assets 365,725 1,104,740 1,470,465 339,651 1,252,989 1,592,640
Current liabilities (176,665) (1,089,039) (1,265,704) (172,732) (1,236,898) (1,409,630)
Deferred consideration (2,688) - (2,688) (2,979) - (2,979)
Net current assets 49,360 13,993 63,353 43,903 14,119 58,022
Non-current liabilities (115,606) - (115,606) (102,825) - (102,825)
Deferred consideration (8,187) - (8,187) (4,612) (2,432) (7,044)
----------------------------- ------------ ----------- ----------- ------------ ----------- -----------
Total liabilities (303,146) (1,089,039) (1,392,185) (283,148) (1,239,330) (1,522,478)
----------------------------- ------------ ----------- ----------- ------------ ----------- -----------
Net assets 62,579 15,701 78,280 56,503 13,659 70,162
Non-controlling interests (1,781) - (1,781) (2,138) - (2,138)
----------------------------- ------------ ----------- ----------- ------------ ----------- -----------
Equity attributable to
owners of the company 60,798 15,701 76,499 54,365 13,659 68,024
----------------------------- ------------ ----------- ----------- ------------ ----------- -----------
Revenue Non-current assets(1)
Year to 31 December At 31 December
--------------------- -----------------------
Geographical information 2017 2016 2017 2016
Continuing operations GBP000 GBP000 GBP000 GBP000
-------------------------- ---------- --------- ----------- ----------
United Kingdom 86,798 59,467 111,646 96,813
Other Europe 18,556 11,381 4,870 2,683
Middle East 4,310 3,885 132 116
North America 17,449 14,462 7,673 6,918
Central and South America 7,390 5,483 146 180
Asia Pacific 18,326 17,676 1,507 1,637
Bermuda 57,991 56,910 838 955
-------------------------- ---------- --------- ----------- ----------
210,820 169,264 126,812 109,302
-------------------------- ---------- --------- ----------- ----------
1 Excluding deferred tax.
3. 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.
Year to 31 December
---------------------
2017 2016
GBP000 GBP000
----------------------------------------------- ---------- ---------
Earnings
Earnings for the purposes of basic and diluted
earnings per share from continuing operations 8,910 10,541
----------------------------------------------- ---------- ---------
Number Number
---------------------------------------------- ---------- ----------
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per share 67,824,263 66,526,347
Effect of dilutive potential ordinary shares:
Share options 654,371 473,825
---------------------------------------------- ---------- ----------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 68,478,634 67,000,172
---------------------------------------------- ---------- ----------
4. Acquisition of subsidiaries
Metro Risk Management
On 4 September 2017 Charles Taylor acquired all of the equity of
Metro Risk Management LLC ("MRM"). MRM is an insurance claims third
party administrator ("TPA") that specialises in managing workers'
compensation claims in California. This acquisition helps the Group
to expand its US TPA business.
MRM
----------- ----------- -----------
Carrying Amount
amount recognised
before at
acquisition Adjustments acquisition
GBP000 GBP000 GBP000
------------------------------------ ----------- ----------- -----------
Identifiable intangible assets - 1,130 1,130
Trade and other receivables 76 - 76
Cash and cash equivalents 202 - 202
Trade and other payables (46) - (46)
------------------------------------ ----------- ----------- -----------
Identifiable assets and liabilities 232 1,130 1,362
Goodwill -
------------------------------------ ----------- ----------- -----------
Consideration 1,362
------------------------------------ ----------- ----------- -----------
Satisfied by:
Cash 1,001
Deferred consideration 361
------------------------------------ ----------- ----------- -----------
Consideration 1,362
------------------------------------ ----------- ----------- -----------
Charles Taylor has committed to pay deferred consideration, of
GBP0.4m ($0.5m), in three years, based on profitability targets
being met. Acquisition-related costs of GBP0.1m are included in
administrative expenses in the consolidated income statement and in
the operating cash flows in the cash flow statement.
Criterion
On 9 August 2017 Charles Taylor acquired all of the equity of
Criterion Adjusters Limited, Criterion Surveyors Limited and
Criterion Claims Management Limited. These three companies, which
are described collectively as "Criterion", were separately owned by
the vendors, rather than via a holding company. Criterion Adjusters
is a loss adjusting practice specializing in the high net worth
insurance market. Criterion Surveyors provides insurance surveys
for listed, high value or unique properties. Criterion Claims
offers a desk-based service for lower value, less complex
claims.
This acquisition gives Charles Taylor access to the lucrative
high net worth adjusting market and should provide stable,
repeatable revenues with lower working capital requirements than
the Group's core adjusting business.
Criterion
----------- ----------- -----------
Carrying Amount
amount recognised
before at
acquisition Adjustments acquisition
GBP000 GBP000 GBP000
------------------------------------- ----------- ----------- -----------
Identifiable intangible assets - 10,063 10,063
Deferred tax liability recognised on
intangible assets - (1,912) (1,912)
Property, plant and equipment 148 - 148
Trade and other receivables 771 (388) 384
Cash and cash equivalents 110 - 110
Trade and other payables (811) - (811)
Tax liabilities (16) - (16)
------------------------------------- ----------- ----------- -----------
Identifiable assets and liabilities 202 7,763 7,965
Goodwill 3,602
------------------------------------- ----------- ----------- -----------
Consideration 11,567
------------------------------------- ----------- ----------- -----------
Satisfied by:
Cash 5,112
Deferred consideration 6,455
------------------------------------- ----------- ----------- -----------
Consideration 11,567
------------------------------------- ----------- ----------- -----------
Charles Taylor has committed to pay deferred consideration,
subject to a cap on the total initial cash and deferred
consideration of GBP14.6m, undiscounted, over the next three years,
based on profitability targets being met. The fair value of
contingent consideration of GBP6.5m was estimated by calculating
the present value of future expected cash flows using a discount
rate of 2.49%.
Acquisition-related costs of GBP0.2m are included in
administrative expenses in the consolidated income statement and in
the operating cash flows in the cash flow statements.
Closed book of Zurich International Portfolio Bonds and Allied
Dunbar International Fund Managers Limited
On 28 April 2017, Charles Taylor Group completed the acquisition
of the closed book of Zurich International Portfolio Bonds (the
Book) from Zurich International Life Limited and 100% of the equity
of Allied Dunbar International Fund Managers Limited (ADIFM) from
Zurich Insurance Company Ltd.
The transaction will enable Charles Taylor to increase its
revenue by managing the closed book and by providing policy
administration services. The acquisition of ADIFM, which manages a
collective investment scheme, will also enable Charles Taylor to
generate fund management revenues and further extend its range of
professional services by entering the international fund
administration services market. Charles Taylor Group's wholly-owned
Isle of Man life insurance subsidiary, LCL International Life
Assurance Company Limited, will reinsure the Book and subsequently
accept the legal transfer of the majority of the Book, subject to
regulatory and court approval.
ADIFM has been renamed as Charles Taylor International Fund
Managers (IoM) Limited.
The amounts recognised in respect of the identifiable assets are
liabilities assumed are as set out in the table below.
The Book plus
ADIFM
-------------------------------------
Carrying Amount
amount recognised
before at
acquisition Adjustments acquisition
GBP000 GBP000 GBP000
--------------------------------------------- ----------- ----------- -----------
Investment contract assets 271,299 - 271,299
Cash and cash equivalents 1,177 - 1,177
Loans and receivables 584 - 584
Investment contracts unit linked liabilities (271,253) - (271,253)
Other creditors (723) (84) (807)
--------------------------------------------- ----------- ----------- -----------
Identifiable assets and liabilities 1,084 (84) 1,000
VOBA 5,864
Gain on acquisition 926
--------------------------------------------- ----------- ----------- -----------
Consideration 5,938
--------------------------------------------- ----------- ----------- -----------
Satisfied by:
Initial cash consideration 2,519
Deferred consideration 3,419
--------------------------------------------- ----------- ----------- -----------
Consideration 5,938
--------------------------------------------- ----------- ----------- -----------
If the above acquisitions had been completed on the first day of
the financial year, the combined revenue and statutory profit
before tax would have been GBP215.7m and GBP7.9m respectively.
Deferred consideration
Included in the prior year deferred consideration of GBP11.7m,
as set out below, is the amount of GBP1.7m included within total
liabilities in insurance business. Acquisitions include the Zurich
International Portfolio Bonds/Allied Dunbar International Fund
Managers, Criterion Adjusters and Metro Risk Management, as
described above, offset by revisions for acquisitions within 12
months. GBP2.7m of the total is due within one year.
At 1 January 2017 11,694
---------------------------------------- -------
Acquisitions 9,586
Amounts paid (8,333)
Revaluation through income statement (2,437)
Interest unwind 365
---------------------------------------- -------
At 31 December 2017 10,875
---------------------------------------- -------
5. Trade and other receivables
Group
At 31 December
----------------
2017 2016
GBP000 GBP000
---------------------------- ------- -------
Trade debtors 37,874 35,560
Amounts due from associates 1 2
Other debtors 3,954 3,666
Prepayments 10,448 10,624
Accrued income 29,830 27,797
Corporation tax 548 529
----------------------------- ------- -------
82,655 78,178
---------------------------- ------- -------
6. Trade and other payables
Group
At 31 December
----------------
2017 2016
GBP000 GBP000
----------------------------------- ------- -------
Trade creditors 4,521 5,782
Other taxation and social security 3,173 2,863
Other creditors 4,970 3,642
Accruals and deferred income 24,963 24,787
------------------------------------ ------- -------
37,627 37,074
----------------------------------- ------- -------
7. Borrowings
Group
At 31 December
----------------
2017 2016
GBP000 GBP000
--------------------------------- ------- -------
Total borrowings:
Amount due for settlement within
12 months 15,708 10,002
Amount due for settlement after
12 months 66,153 43,670
---------------------------------- ------- -------
81,861 53,672
--------------------------------- ------- -------
Bank loans and overdrafts are secured by charges on specific
assets and cross guarantees between Group companies.
8. Note to the cash flow statement
Group
Year to 31 December
---------------------
2017 2016
GBP000 GBP000
-------------------------------------------------------- ---------- ---------
Operating profit 8,492 11,237
Adjustments for:
Depreciation of property, plant and equipment 2,007 1,403
Amortisation of intangibles 9,718 5,253
Other non-cash items (1,195) (85)
Decrease in provisions (3,014) (2,334)
Share of loss of associates 1,780 1,028
--------------------------------------------------------- ---------- ---------
Operating cash flow before movements in working capital 17,788 16,502
Increase in receivables (3,415) (10,296)
Increase in payables 57 3,612
Increase in insurance company assets (123,314) (163,732)
Increase in insurance company liabilities 123,440 169,841
--------------------------------------------------------- ---------- ---------
Cash generated from operations 14,556 15,927
Income taxes paid (1,398) (922)
Interest paid (1,658) (597)
Net cash before movement in client funds 11,500 14,408
Movement in client funds (3,803) 56,792
--------------------------------------------------------- ---------- ---------
Net cash generated from operating activities 7,697 71,200
--------------------------------------------------------- ---------- ---------
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 GBP121.4m
(2016: GBP125.2m).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR USANRWNAOARR
(END) Dow Jones Newswires
March 14, 2018 03:01 ET (07:01 GMT)
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