Thursday, 2 August 2012
JLT's revenue and profit up as analysts report 'good' h1 results
Jardine Lloyd Thompson Group reported revenue up 7% in the first half of 2012 and operating profit up 11.8%, with analysts claiming a 'good' set of results.
Dominic Burke, Chief Executive at JLT
Total revenue rose to £441.7m, reflecting organic growth of 6.3% over the same period last year. Fees and commissions accounted for £439m, up from £408.7m in 2011.
Profit before tax increased by 11% to £85.1m. Underlying profit before tax, which excludes the impact of exceptional items, increased by 12% to £89.4m.
Total revenue for Risk and Insurance services stood at £331.6m for the first six months of the year, reflecting organic growth of 7%.
JLT Specialty achieved revenue of £110.1m signaling growth of 5% and organic growth of 3%.
The broker said it expects higher organic growth rates for JLT Specialty in the second half of the year, following a trend of recent years.
It said that investments made to expand its Aviation and Financial Risks specialty capabilities are delivering ‘encouraging results’.
Lloyd & Partners, JLT’s specialist wholesale broker, delivered revenue of $42.9m. This reflects growth of 4% and organic growth of 6%.
JLT Re delivered revenue growth of 16% for the period with organic growth of 17%.
“We remain positive about the long-term prospects of our reinsurance broking activities. Over the period, we have increased our headcount by some 10% and remain very active, attracting new talent as we further develop our international platform. As a result of these investments, it is envisaged that the trading profit for the full year will be broadly flat when compared to the prior year,” said the broker.
Revenue for Australasia stood at £68.1m with growth of 5% and organic growth of 3%.
This business delivered an improved trading profit margin of 34%, although it is anticipated this will fall back for the full year as has been the case in prior years, reflecting the high volume of business transacted in June each year.
In Latin America, revenue increased by 31% to £22.9m with 14% organic growth with 19% contributed from acquisitions. This includes the first full period contribution from Orbital-JLT in Chile.
In Asia, revenue increased by 22% to £29.9m with organic growth of 18%. The trading margin has increased to 17%, up from 10% in the prior year. This reflects ‘significant’ investments being made in the region, said JLT.
With senior new hires, good progress has been made over the last two years to develop leading specialty capabilities in Aviation, Construction and Telecoms in Asia, it added.
Dominic Burke, Chief Executive, commented: “JLT’s continued execution of its clearly defined strategy gives us confidence in our ability to deliver year-on-year financial progress despite the difficult global economic conditions.”
The results reflect an increasing contribution from the high growth economies of Asia and Latin America, said JLT, and reflect an improvement in trading profit margin to 19.4%.
“Strong organic growth maintains our track record of the last four years,” added the broker.
Commenting on the results, Kevin Ryan, an analyst at Investec, said a big influence on the group’s trading results is the health of the world’s economies in which it transacts business. The interim results were better than expected, he added.
The 11.8% rise in operating profit coupled with a 4% rise in the interim dividend is ‘a sound achievement’, said the analyst.
“First half revenues were 6.3% ahead on an organic basis and this growth was broadly spread across the group’s businesses. All this good news is, we believe, reflected in the share price as the stock trades at 14.1x 2012E earnings,” he said.
“Operating profit rose 11.8% to £81.3m and while there was no consensus, our forecast was for £78.8m and an 8.4% rise YoY. This was achieved on revenues up 7% (6.3% on an organic basis according to the company) which compares to our estimate of 5.9%. The management’s confidence in the outlook is demonstrated, we believe, by the 4% increase in the interim dividend to 9.6p. We anticipated a more cautious 3% increase,” continued the analyst.
The mainstream insurance broking operations of JLT saw trading profit up 14% year on year, with a margin maintained at 24%.
“Given the almost continual downward pressure on both fees and brokerage we think this represents a good result. Brokerage and fee income is almost evenly split in this business, which we suspect is a good balance given the variety of business services offered,” said Mr Ryan.