REG - JTC PLC - Interim results for the period ended 30 June 2023
12/09/2023 07:00
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RNS Number : 0819M JTC PLC 12 September 2023
12 September 2023
JTC PLC
(the "Company") together with its subsidiaries (the "Group" or "JTC")
Interim results for the period ended 30 June 2023
Outstanding financial performance, alongside further strategic M&A,
outlook ahead of market expectations
As reported Underlying*
H1 2023 H1 2022 Change H1 2023 H1 2022 Change
Revenue (£m) 121.5 93.0 +30.6% 121.5 93.0 +30.6%
EBITDA (£m) 36.5 25.3 +44.0% 40.2 30.7 +30.8%
EBITDA margin 30.0% 27.2% +2.8pp 33.1% 33.0% +0.1pp
Operating profit/EBIT (£m) 24.7 14.8 +66.7% 28.4 20.2 +40.5%
Profit before tax (£m) 11.9 21.0 -43.3% 19.7 16.9 +16.3%
Earnings per share (p)** 7.61 14.21 -46.5% 18.16 16.23 +11.9%
Cash conversion 113% 101% +12pp 113% 101% +12pp
Net debt (£m) 44.6 104.1 -59.5 28.0 92.2 -64.2
Interim dividend per share (p) 3.5 3.1 +12.9% 3.5 3.1 +12.9%
* For further information on our alternative performance measures
(APM) see the appendix to the CFO Review.
** Average number of shares (thousands) for H1 2023: 147,075 (H1 2022:
144,429)
OUTSTANDING FINANCIAL PERFORMANCE
· Very strong net organic revenue growth of 21.0% (H1 2022: 9.5%),
driven by the highly successful implementation of the Group's growth
strategies
· Revenue +30.6% to £121.5m (H1 2022: £93.0m)
· Underlying EBITDA +30.8% to £40.2m (H1 2022: £30.7m) with an
underlying EBITDA margin of 33.1% (H1 2022: 33.0%)
· Record new business wins +15.9% to £14.6m (H1 2022: £12.6m)
· Strong underlying cash conversion of 113% (H1 2022: 101%)
alongside the SDTC equity fundraise in June has resulted in a significant
reduction in leverage to 0.37x underlying EBITDA at period end
· Following completion of the SDTC deal post period end, leverage
is still expected to be below 2.0 times reported underlying EBITDA by the
year-end, as previously announced
· Interim dividend +12.9% to 3.5p (H1 2022: 3.1p)
SUCCESSFUL STRATEGIC EXECUTION
· Both the Group's ICS and PCS divisions performed extremely well,
delivering organic growth of 22.4% and 18.6% respectively
· The lifetime value of the JTC client book now stands at £1.6bn
with an average lifespan of 14 years
· The Group strengthened its position in the strategically
important US market through the acquisition of SDTC, which completed on 2
August 2023. JTC is now the leading independent provider of trust and
administration services to the large, high growth, US private trust market
· H1 2023 strong organic performance was supported by greater
penetration of the Group's centrally developed offerings such as Banking, Tax
Compliance, and its Strategic Transformation services, which together
contributed incremental revenues in the period, which we expect to continue to
contribute to Group growth
STRONG GROWTH OUTLOOK AHEAD OF MARKET EXPECTATIONS
· Strong growth momentum will continue with net organic growth
through 2023 expected to remain well above the top end of the Group's
medium-term revenue guidance, and the Group expects to deliver full year
results ahead of current market expectations
· The addition of the SDTC business to JTC is expected to offer
significant growth synergies post the completion of integration
· Galaxy era growth strategy to be achieved by the year end, two
years ahead of plan
· Continued strong pipeline of further consolidation opportunities
across both Divisions over the medium-term
· New Cosmos era growth ambition to double the size of the Group,
relative to performance delivered at FY 2023, by 2027
· All medium-term guidance metrics to remain as JTC commences the
Cosmos era: net organic revenue growth of 8% - 10% per annum; underlying
EBITDA margin of 33% - 38%; cash conversion of 85% - 90% and net debt of
between 1.5x - 2.0x underlying EBITDA
Nigel Le Quesne, CEO of JTC PLC, said:
"Today's excellent results and the continued growth of our platform, including
the successful acquisition of SDTC, which further enhances our platform in the
important US market, yet again demonstrate the significant earnings power of
JTC. Organic revenue growth in the period has been outstanding and we continue
to successfully acquire and integrate great businesses that deliver increasing
returns, particularly from capturing incremental share of wallet from our
growing client base. The fact that this is being achieved in a more
challenging global environment proves how powerful JTC's business model, and
ability to innovate, really is. At the core of this is our people, whose
commitment to raise the bar results after results, as collective owners of our
Company, is incredible.
By the end of 2023, we will have delivered our Galaxy era business plan,
resulting in a quadrupling of the size of the Group since listing in 2018. The
momentum in the business, coupled with the long-term structural drivers in our
sector, mean that we remain as ambitious for the Group as ever and aim to once
again double in size during the Cosmos era, which will commence in 2024 and is
expected to run until 2027. We look forward to continuing to deliver strong,
consistent results, with compounding revenues, for all of our shareholders
year in and year out."
ENQUIRIES
JTC PLC +44 (0) 1534 700 000
Nigel Le Quesne, Chief Executive Officer
Martin Fotheringham, Chief Financial Officer
David Vieira, Chief Communications Officer
Camarco
Geoffrey Pelham-Lane +44 (0) 7733 124 226
Sam Morris +44 (0) 7796 827 008
A presentation for analysts will be held at 09:30 BST today via Zoom video
conference. The slides and an audio-cast of the presentation will subsequently
be made available on the JTC website www.jtcgroup.com/investor-relations
(http://www.jtcgroup.com/investor-relations)
FORWARD LOOKING STATEMENTS
This announcement may contain forward looking statements. No forward-looking
statement is a guarantee of future performance and actual results or
performance or other financial condition could differ materially from those
contained in the forward looking statements. These forward-looking statements
can be identified by the fact they do not relate only to historical or current
facts. They may contain words such as "may", "will", "seek", "continue",
"aim", "anticipate", "target", "projected", "expect", "estimate", "intend",
"plan", "goal", "believe", "achieve" or other words with similar meaning. By
their nature forward looking statements involve risk and uncertainty because
they relate to future events and circumstances. A number of these influences
and factors are outside of the Company's control. As a result, actual results
may differ materially from the plans, goals and expectations contained in this
announcement. Any forward-looking statements made in this announcement speak
only as of the date they are made. Except as required by the FCA or any
applicable law or regulation, the Company expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statements contained in this announcement.
ABOUT JTC
JTC is a publicly listed, global professional services business with deep
expertise in fund, corporate and private client services. Every JTC person is
an owner of the business, and this fundamental part of our culture aligns us
with the best interests of all our stakeholders. Our purpose is to maximize
potential and our success is built on service excellence, long-term
relationships and technology capabilities that drive efficiency and add value.
www.jtcgroup.com (http://www.jtcgroup.com/)
CHIEF EXECUTIVE OFFICER'S REVIEW
Consistently delivering year in and year out
NIGEL LE QUESNE
CHIEF EXECUTIVE OFFICER
JTC has delivered uninterrupted growth for every one of its 35 years. This has
been achieved in all conditions, regardless of whether the global economy is
strong or weak, or equity markets are confident or uncertain. If further
evidence of this was needed during what has proved to be a period of
significant macro-economic and geopolitical instability, then our half year
results are precisely that, demonstrating yet again the consistent earnings
power of our business model through economic cycles. The fact that we will
achieve our Galaxy era goal of doubling the size of the Group (in terms of
revenue and EBITDA) by the end of 2023, some two years earlier than originally
anticipated, is a fantastic team effort and provides great energy and momentum
to the business.
H1 2023 FINANCIAL PERFORMANCE
Revenue grew 30.6% to £121.5m driven by record net organic growth of 21.0%
(H1 2022: 9.5%), significantly above our medium-term guidance range of between
8% and 10%. Underlying EBITDA rose by 30.8% to £40.2m (H1 2022: £30.7m),
with an underlying EBITDA margin to 33.1% (H1 2022: 33.0%). The very strong
net organic revenue growth was driven by strong annualised new business wins
(from both new and existing clients), which increased 15.9% to a record
£14.6m (H1 2022: £12.6m). There was also an impressive improvement in
underlying cash conversion to 113% (H1 2022: 101%), reflecting the continued
cash generative nature of our business model. While leverage at the period
end was very low at 0.37x, this was due to the proceeds of the equity
fundraise for the acquisition of the South Dakota Trust Company ("SDTC"),
which didn't complete until after the period end on 2 August 2023. By the year
end, leverage is expected to be below 2.0x underlying EBITDA, consistent with
our medium-term guidance of between 1.5x and 2.0x underlying EBITDA. Based
on these results and the Board's confidence in JTC's ability to continue to
deliver consistent returns to shareholders, our interim dividend has increased
by 12.9% to 3.5 pence per share.
INSTITUTIONAL CLIENT SERVICES DIVISION
Revenue increased 27.0% to £80.7m (H1 2022: £63.5m) and underlying EBITDA
was up 27.4% to £25.5m (H1 2022: £20.0m). The underlying EBITDA margin
rose by ten basis points to 31.6% (H1 2022: 31.5%). The Division delivered
excellent net organic growth on a last twelve months basis ("LTM") of 22.4%
(H1 2022: 14.1%), and the annualised value of new business wins rose 28% to a
record £10.9m (H1 2022: £8.5m), providing good revenue visibility of future
growth.
The ICS Division has benefited from a number of initiatives delivered over a
period of time to improve and extend the service offering, talent and 'go to
market' strategy. The strong net organic growth was driven in particular by
performance in the US, the Channel Islands & UK and Luxembourg and through
revenues generated by our centrally developed banking, tax and regulatory
compliance and strategic transformation services. The Division continues to
invest in scaling its offering in Ireland and during the period launched a
consolidated Global AIFM Solutions service, which currently spans Luxembourg,
Ireland and Guernsey.
This performance is all the more impressive in that it has been achieved
without the benefit of any recent acquisitions, demonstrating the increasing
returns on capital being generated from previously acquired businesses as they
have been successfully integrated within the ICS Division and the valuable
synergies realised. Stand out performers from the acquisitions completed in
recent years include the Employer Solutions business (formerly RBC cees) and
SALI Fund Services in the US, which completed in 2021.
PRIVATE CLIENT SERVICES DIVISION
Revenue increased strongly by 38.3% to £40.8m (H1 2022: £29.5m) with a
similarly impressive increase of 37.1% in underlying EBITDA to £14.7m (H1
2022: £10.7m), with contributions from strategic transformation services
mandates such as Amaro, Campari and Ottawa. The underlying EBITDA margin
reduced slightly to 36.0% (H1 2022: 36.3%), reflecting the first half impact
of the acquisition of New York Private Trust Company ("NYPTC"), which
completed on 1 November 2022. Excluding this, the Division's underlying EBITDA
margin would have been 36.5%. LTM net organic growth was a sector-leading
18.6% (H1 2022: 4.0%), driven in part by the Amaro mandate coming on-stream,
but even without this, the Division would have delivered organic growth well
above guidance, reflecting growth in banking and tax and regulatory compliance
services, which demonstrate the important connection to our Group Commercial
Office. The annualised value of new business wins was £3.7m (H1 2022:
£4.1m), which whilst a lower figure is due to an exceptional H1 2022
comparator, when the Amaro mandate was won.
The acquisitions of NYPTC, which completed just prior to the start of the
period and SDTC, which completed just after the period end, slightly ahead of
schedule, have significantly strengthened the Division's market leadership in
the global trust company industry. The integration of Delaware-based NYPTC,
which offers a broad range of fiduciary services, is progressing well. The
acquisition of SDTC, makes JTC the leading independent provider of trust and
administration services to the US private trust sector, providing the benefits
that come from scale in the very large and fast-growing US market.
Our US PCS offering can now service both international and domestic clients,
it is worth noting that the US is home to the largest number of ultra-high net
worth individuals (UHNWI) of any country in the world and it is estimated that
the core addressable market captures approximately US$1.2 trillion of assets.
This market has grown at a compound annual growth rate ("CAGR") of 9.4% from
2018 to 2022 and is forecast to grow at a CAGR of 8.2% from 2023 to 2028
(source: Cerulli Associates). Similar to JTC, and a key part of the strategic
rationale for acquiring the business, SDTC has a 22-year track record of
consistent growth, with revenues increasing at a CAGR of 33% from 2000 to 2022
while steadily increasing its market share. SDTC also delivers high margins
and benefits from highly predictable fees, which when coupled with the
opportunities from an enormous and growing market, creates a transformational
platform opportunity for JTC in the US over the medium to long-term.
OTHER GROWTH INITIATIVES
Key to our culture at JTC is that we never stand still or take continued
profitable growth for granted. Through investment in our Group Commercial
Office, which acts as a catalyst for both Divisions, we have introduced other
services of value to our clients, including; banking, treasury, tax and
regulatory compliance, and our strategic transformation services. What all
these have in common is that they are complementary to our core fund,
corporate and private client business lines, which are the bedrock of JTC. Our
client book now has an average lifespan of some 14 years and the Lifetime
Value Won (LVW) 1 in the period, based on this lifespan, was a record
£195.1m, up 16% (H1 2022: £168.2m). This gives us visibility of at least
£1.6 billion of forward revenues from our existing client book, which is
without the addition of any new future mandates.
OUR GREATEST ASSET
I have also said before that none of what JTC has achieved to date would be
possible without the commitment and expertise of our people. As we conclude
our Galaxy era and look ahead to the Cosmos era beginning in 2024, the same
could be said about what is to come. This is why having a business where every
one of your employees are also owners is so important. What I have said in the
past about the benefit of and commitment to ownership for all employees
couldn't be more relevant today when navigating the current macro-economic
volatility and as always, I extend my sincere thanks to every member of our
growing global team.
RISK
The principal risks facing the Group remain as set out in the JTC Annual
Report and Accounts 2022 (pages 50 to 53). The Group's principal risks are
periodically re-examined and reported by the Chief Risk Officer to the
Governance and Risk Committee with an assessment on (i) their impact if they
were to occur and (ii) the likelihood of occurrence, together with a
description of the controls and mitigation in place to manage those controls
and any actions deemed necessary by the risk owner to further reduce the
assessed residual risk. Ongoing material risks include acquisition risk,
competitor and client demand risk, strategy risk, performance of business
risk, client and process risk, data security risk, political/regulation risk,
financial crime risk, fiduciary risk and adequate resource risk.
Global macroeconomic developments and geopolitical tensions heightened by the
conflict in Ukraine, high inflation, higher interest rates, the energy crisis,
supply chain shortages and the risk of a global economic downturn all present
a particular set of risks that have the potential to slow investment and
global growth. Whilst the Group is unable to control these risks we remain
vigilant to their impact and react accordingly e.g. to attract and retain
talent in a competitive employment market beset by wage inflation, we believe
that the business will continue to prove resilient in the face of these
challenges. Overall, we remain satisfied as to the effectiveness of the
Group's risk analysis, management and culture, developed over 35 years of JTC
operations.
DIVIDEND
The Board has declared an interim dividend of 3.5p per share, an increase of
0.4p period on period (H1 2022: 3.1p). The interim dividend will be paid on 20
October 2023 to shareholders on the register as at close of business on the
record date of 22 September 2023. The shares will become ex-dividend on 21
September 2023.
OUTLOOK
Based on these results, our step up in the delivery of additional recurring
revenues in H1, the exciting opportunities from our latest acquisitions in the
US, delivered by a highly committed team, we remain confident in the Group's
continued success. As before, we will deliver this through a combination of
organic and inorganic growth. In terms of the M&A pipeline, we continue to
see potential opportunities (including some off market such as the recent SDTC
transaction) and will maintain our selective and disciplined approach. Strong
growth momentum will continue with net organic growth through 2023 expected to
remain well above the top end of the Group's medium-term revenue guidance, and
the Group expects to deliver full year results ahead of current market
expectations
We are particularly pleased that we will achieve our Galaxy era goal of
doubling the business from where we finished 2020, by the end of this year;
some two years' earlier than planned and having previously delivered a similar
result in the Odyssey era, which ran from 2018 to 2020. Our next business plan
era, which we are calling Cosmos, will commence in 2024 and we are again
aiming to double the Group by 2027, with a particular focus on leveraging the
US platform built during Galaxy. And, in the meantime, our medium-term
guidance metrics for responsible compounding delivery of achieving between 8%
to 10% net organic revenue growth, a 33% to 38% underlying EBITDA margin, cash
conversion of between 85% to 90% and net debt of between 1.5 times and 2 times
underlying EBITDA remain intact.
In summary, JTC continues to extend its excellent track record of profitable
growth driven by consistent and innovative organic growth, a disciplined
approach to M&A, a robust and scalable global platform, exceptional talent
and our unique shared ownership culture. Since our listing on the stock market
in 2018, we will have quadrupled the size of the Group and we aim to double it
again no later than the end of 2027. As such, we look forward to continuing to
deliver the performance our shareholders expect, year in and year out.
NIGEL LE QUESNE
CHIEF EXECUTIVE OFFICER
Chief Financial Officer's review
Delivering long term value through exceptional revenue growth
Martin Fotheringham
CHIEF FINANCIAL OFFICER
REVENUE
In H1 2023, revenue was £121.5m, an increase of £28.5m (+30.6%) from H1
2022. Revenue growth on a constant currency basis was +27.9% (H1 2022:
+37.4%).
Net organic growth for the last twelve months (LTM) ended 30 June 2023 was a
record 21.0% (H1 2022: 9.5%) with the rolling three year average now reporting
12.7% (H1 2022: 9.1%).
Within organic growth, we have seen particularly strong volume growth with a
significant contribution coming from the expansion of our Tax Compliance
offering (heavily involved with Project Amaro) as well as the introduction of
our Treasury Services. The latter is a positive endorsement of the creation
and investment we have made in the Group Commercial Office. We have embedded
the revenues associated with these services into the underlying business and
can see further opportunities for growth.
Our largest 15 clients represent only 11.5% (H1 2022: 11.6%) of our annual
revenue thereby demonstrating the lack of customer concentration in the
business. The new business pipeline was healthy and at the period end was
reported at £47.1m (31.12.2022: £45.8m) increasing to £54.1m as at 1
September.
Net organic growth was driven by gross new business revenues for the
proceeding twelve months of 26.7% (H1 2022: 16.2%). This was offset by reduced
attrition of 5.7% (H1 2022: 6.7%), with the three-year average now having
fallen to 6.9% (H1 2022: 7.6%). Notably, attrition levels have decreased for
five successive reporting periods, reflecting the increased lifetime value of
our book of business and long-term earnings stability. This is further
enhanced with the SDTC acquisition completed in August 2023.
The retention of revenues that were not end of life increased to 98.6% (H1
2022: 97.9%) and the rolling three-year average has now improved to 97.9% (H1
2022: 97.5%).
As demonstrated by the geographical breakdown below, all regions generated
good growth with the US showing the highest growth by region.
H1 2023 H1 2022 £ +/- % +/-
Revenue Revenue
UK & Channel Islands £64.7m £51.6m +£13.1m +25.3%
US £25.3m £16.2m +£9.1m +55.6%
Rest of Europe £18.6m £16.4m +£2.2m +13.3%
Rest of the World £12.9m £8.8m +£4.2m +47.8%
£121.5m £93.0m +£28.5m +30.6%
LTM revenue growth, on a constant currency basis, is summarised as follows:
LTM revenue Jun 22 £178.0m
Lost - JTC decision (£0.4m)
Lost - Moved service provider (£1.8m)
Lost - End of life/no longer required (£7.1m)
Net more from existing clients £33.5m
New clients £10.6m
Acquisitions* £14.7m
LTM revenue Jun 23 £227.5m
* When JTC acquires a business, the acquired book of clients are
defined as inorganic for the first two years of JTC ownership. Acquired
clients contributed an additional £14.7m in the LTM to 30 June 2023 and is
broken down as follows: NYPTC £4.2m, EFS £1.3m, SALI £8.2m, Ballybunion
£0.6m, perfORM £0.1m, and Segue £0.3m.
UNDERLYING EBITDA AND MARGIN PERFORMANCE
Underlying EBITDA in H1 2023 was £40.2m, an increase of £9.5m (30.8%) from
H1 2022.
The underlying EBITDA margin was 33.1% (H1 2022: 33.0%) and although the
macroeconomic environment remained uncertain, we are pleased to have continued
to deliver margins in line with our medium-term guidance range.
As highlighted in the 2022 results, during periods of heightened revenue
growth above our medium-term guidance range, the required upfront investment
can inherently slow down margin progression. Management considers this initial
investment as a key allocation of capital in order to ensure the continued
longevity of our client relationships and support future margin enhancements.
Management re-iterates its medium-term guidance range of 33% - 38%, albeit
with the short-term expectation that performance will continue to be towards
the lower end of this guidance range during periods of heightened revenue
growth.
INSTITUTIONAL CLIENT SERVICES
Revenue increased by 27.0% when compared with H1 2022.
Net organic growth improved significantly to 22.4% (H1 2022: 14.1%) with
strong growth in the US, Channel Islands & UK, and Luxembourg. The rolling
three year average for net organic growth now stands at 14.1% (H1 2022: 9.6%).
Attrition for the Division was lower at 6.0% (H1 2022: 7.1%), of which 5.0%
were for end of life losses.
LTM revenue growth, on a constant currency basis, is summarised below.
The Division's underlying EBITDA margin increased from 31.5% in H1 2022 to
31.6% in H1 2023 and we are pleased that the margin continues to improve given
the ongoing momentum in the division.
LTM REVENUE GROWTH ICS
LTM revenue Jun 22 £118.9m
Lost - JTC decision (£0.2m)
Lost - Moved service provider (£0.9m)
Lost - End of life/no longer required (£5.3m)
Net more from existing clients £23.4m
New clients £6.9m
Acquisitions* £10.5m
LTM revenue Jun 23 £153.3m
* When JTC acquires a business, the acquired book of clients are
defined as inorganic for the first two years of JTC ownership. Acquired
clients contributed an additional £10.5m in the LTM to 30 June 2023 and is
broken down as follows: EFS £1.3m, SALI £8.2m, Ballybunion £0.6m, perfORM
£0.1m, and Segue £0.3m.
PRIVATE CLIENT SERVICES
Revenue increased by 38.3% when compared with H1 2022.
Net organic growth was 18.6% (H1 2022: 4.0%) with strong growth in the
Caribbean, US, and Channel Islands & UK. The rolling three year average
now stands at 10.8% (H1 2022: 8.6%).
Attrition for the Division was also lower at 4.9% (H1 2022: 6.1%), of which
3.0% were for end of life losses.
Net organic growth for the Division in H1 2022 had been supressed whilst we
onboarded the Amaro mandate. Note that even without the Amaro revenues coming
in during the current LTM period, the Division would have been well above our
medium-term guidance range.
LTM revenue growth, on a constant currency basis, is summarised below.
The Division's underlying EBITDA margin decreased slightly from 36.3% in H1
2022 to 36.0% in H1 2023. The Division continues to perform well and excluding
the recent NYPTC acquisition, the underlying EBITDA margin would have been
36.5% and both of these are comfortably within our medium-term guidance range.
LTM REVENUE GROWTH PCS
LTM revenue Jun 22 £59.1m
Lost - JTC decision (£0.2m)
Lost - Moved service provider (£0.9m)
Lost - End of life/no longer required (£1.8m)
Net more from existing clients £10.1m
New clients £3.7m
Acquisitions* £4.2m
LTM revenue Jun 23 £74.2m
* When JTC acquires a business, the acquired book of clients are
defined as inorganic for the first two years of JTC ownership. Acquired
clients contributed an additional £4.2m in the LTM to 30 June 2023 and all of
which can be attributed to NYPTC £4.2m.
PROFIT BEFORE TAX
The reported profit before tax was £11.9m (H1 2022: £21.0m).
The depreciation and amortisation charge increased to £11.8m from £10.5m in
H1 2022. Of the £1.3m increase, £0.6m was as a result of previously acquired
intangible assets and £0.7m as a result of increased software and customer
contracts, the latter driven by costs incurred in 2022 to fulfil the Amaro
mandate.
Adjusting for non-underlying items, the underlying profit before tax increased
by 16.3% to £19.7m (H1 2022: £16.9m).
The relative increase was lower than the 30.8% growth reported in underlying
EBITDA and this was due to the increased interest expense on our borrowings
that fund M&A activity and an underlying foreign exchange rate loss of
£1.4m (H1 2022: £2.2 gain).
The interest rate applied to our loan facilities is determined using SONIA
plus a margin based on net leverage calculations and the base rate increases
have resulted in a £2.4m increase in H1 2023 to the interest expense on our
borrowings.
NON-UNDERLYING ITEMS
Non-underlying items incurred in the period totalled a £7.8m debit (H1 2022:
£4.1m credit) and comprised the following:
H1 2023 H1 2022
£m £m
EBITDA
Acquisition and integration costs 3.5 0.5
Office start-up costs 0.1 -
Revision of ICS operating model - 0.4
Employee Incentive Plan (EIP) - 4.5
Other costs 0.1 -
Total non-underlying items within EBITDA 3.7 5.4
Profit before tax
Items impacting EBITDA 3.7 5.4
Gain on revaluation of contingent consideration (0.2) (0.4)
Foreign exchange losses/(gains) 4.3 (9.0)
Total non-underlying items within profit before tax 7.8 (4.1)
Acquisition and integration costs were significantly higher (+£3.0m) than the
prior period due to £2.6m of costs incurred in relation to the SDTC
acquisition, which was announced pre period end but completed in early August.
There were also £0.2m of costs incurred in relation to the NYPTC acquisition
that completed in Q4 2022.
The business incurred £0.1m of non-underlying office start-up costs in
relation to establishing the infrastructure to trade in new offices in Austria
and the Bahamas. Our experience is that these require significant up-front
investment in personnel in advance of trading and the generation of revenues.
The H1 2022 EIP expense related to the second tranche of the awards made in
2021 which vested in July 2022.
The foreign exchange loss of £4.3m relates to the revaluation of intercompany
loans (£9.0m gain in H1 2022). Management consider these foreign exchange
movements to be non-underlying as they are unrealisable losses/(gains) as the
loans are eliminated upon consolidation.
EARNINGS PER SHARE
Basic EPS decreased by 46.5% to 7.61p but this was as a result of the above
non-underlying items. Adjusted underlying basic EPS increased by 11.9% and was
18.16p (H1 2022: 16.23p).
Adjusted underlying basic EPS reflects the profit for the period adjusted to
remove the impact of non-underlying items, amortisation of acquired intangible
assets and associated deferred tax, amortisation of loan arrangement fees and
unwinding of net present value discounts in relation to contingent
consideration.
CASH FLOW AND DEBT
Underlying cash generated from operations was £45.2m (H1 2022: £30.9m) and
the underlying cash conversion was 113% (H1 2022: 101%).
Reported net debt includes regulatory trapped cash. Underlying net debt
excludes this and at the period end was £28.0m compared with £104.8m at 31
December 2022. This significant reduction was driven by the aforementioned
strong cash collection and the proceeds from the June equity raise associated
with the SDTC acquisition.
In anticipation of the acquisition of SDTC, on 15 June 2023, our lenders
agreed to increase our revolving credit facility (RCF) by £50m to a total
commitment of £275m.
Leverage at the period end was 0.37x underlying EBTIDA. On 30 June 2023 the
Group had undrawn funds of £169.3m available from the £275m facility. On 1
August 2023 £118m was withdrawn from the banking facility to provide the
necessary proceeds to complete the SDTC acquisition.
MARTIN FOTHERINGHAM
CHIEF FINANCIAL OFFICER
Statement of directors' responsibilities in respect of the interim financial
statements
For the 6 month period ended 30 June 2023
"The directors' confirm that these condensed interim financial statements have
been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
· material related-party transactions in the first six months and
any material changes in the related-party transactions described in the last
annual report."
Nigel Le
Quesne Martin
Fotheringham
Chief Executive Officer
Chief Financial Officer
11 September
2023 11
September 2023
Appendix: Reconciliation of reported results to Alternative Performance
Measures (APMs)
In order to assist the reader's understanding of the financial performance of
the Group, APMs have been included to better reflect the underlying activities
of the Group excluding specific items as set out in note 8 in the interim
financial statements. The Group appreciates that APMs are not considered to be
a substitute for, or superior to, IFRS measures but believes that the selected
use of these may provide stakeholders with additional information which will
assist in the understanding of the business.
An explanation of our key APMs and link to equivalent statutory measures has
been detailed below.
Alternative performance measure Closest equivalent statutory measure APM Definition
net Organic revenue growth % Revenue Definition: Revenue growth from clients not acquired through business
combinations and reported on a constant currency basis where the prior year
results are restated using current year consolidated income statement
exchange rates.
Acquired clients are defined as inorganic for the first two years of JTC
ownership.
Purpose and strategic link: Enables the business to monitor growth excluding
acquisitions and the impact of external exchange rate factors. The current
strategy is to double the size of the business by a mix of organic and
acquisition growth and the ability to monitor and set clear expectations on
organic growth is vital to the successful execution of its business strategy.
Management's medium-term guidance range is 8% - 10%.
Underlying EBITDA % Profit/(loss) Definition: Earnings before interest, tax, depreciation and amortisation
excluding non-underlying items (see note 8 of the financial statements).
Purpose and strategic link: An industry-recognised alternative measure of
performance which has been at the heart of the business since its inception
and therefore fundamental to the performance management of all business units.
The measure enables the business to measure the relative profitability
of servicing clients.
Management's medium-term guidance range is 33% - 38%.
Underlying cash conversion % Net cash from operating activities Definition: The conversion of underlying EBITDA into cash excluding
non-underlying items.
Purpose and strategic link: Measures how effectively the business is managing
its operating cash flows. It differs to net cash from operating profits as it
excludes non-underlying items and tax, the latter in order to better compare
operating profitability to cash from operating activities.
Management's medium-term guidance range is 85% - 90%.
Underlying leverage Cash and cash equivalents Definition: Leverage ratio showing the relative amount of third party debt
(net of cash held in the business) that we have in comparison to underlying
LTM EBITDA.
Purpose and strategic link: Ensures Management can measure and control
exposure to reliance on third party debt in support of its inorganic growth.
Management's medium-term guidance range is 1.5x - 2.0x.
Adjusted underlying EPS (p) Basic Earnings Per Share Definition: Reflects the profit after tax for the period adjusted to remove
the impact of non-underlying items. Additionally, a number of other items
relating to the Group's acquisition activities, including amortisation of
acquired intangible assets and associated deferred tax, amortisation of loan
arrangement fees and unwinding of NPV discounts in relation to contingent
consideration, are removed.
Purpose and strategic link: Presents an adjusted underlying EPS which is used
more widely by external investors and analysts, and is in addition the basis
upon which the dividend is calculated.
A reconciliation of our APMs to their closest equivalent statutory measure has
been provided below.
1. ORGANIC GROWTH
H1 2023 H1 2022
£m £m
Reported prior year full year revenue (2021 / 2020) 147.5 115.1
Less: reported prior year interim revenue (H1 2021, H1 2020) (67.0) (53.7)
Plus: reported interim revenue (H1 2022 / H1 2021) 93.0 67.0
Less: impact of exchange rate restatement* (4.5) 0.4
Less: acquisition revenues (12.4) (5.6)
a. Prior period LTM organic revenue 165.6 123.2
Reported prior year full year revenue (2022 / 2021) 200.0 147.5
Less: reported prior year interim revenue (H1 2022 / H1 2021) (93.0) (67.0)
Plus: reported interim revenue (H1 2023 / H1 2022) 121.5 93.0
Less: impact of exchange rate restatement* (1.1) 0.9
Less: acquisition revenues (27.1) (39.3)
b. Current period LTM organic revenue 200.3 135.1
Net organic growth % (b / a) -1 21.0% 9.5%
* Impact of restating LTM revenue on a constant currency basis using
the H1 2023 / H1 2022 average rates
2. UNDERLYING EBITDA
H1 2023 H1 2022
£m £m
Reported profit 11.2 20.5
Add:
Income tax 0.8 0.5
Finance cost 7.5 5.4
Finance income (0.3) (0.0)
Other losses/(gains) 5.5 (11.6)
Depreciation and amortisation 11.8 10.5
Non-underlying items within EBITDA* 3.7 5.4
Underlying EBITDA 40.2 30.7
Underlying EBITDA % 33.1% 33.0%
* As set out in note 8 in the interim financial statements
3. UNDERLYING CASH CONVERSION
H1 2023 H1 2022
£m £m
Net cash generated from operating activities 41.5 28.7
Less:
Non-underlying cash items* 1.6 1.5
Income taxes paid 2.1 0.7
a. Underlying cash generated from operations 45.2 30.9
b. Underlying EBITDA 40.2 30.7
Underlying cash conversion (a / b) 113% 101%
* As set out in note 19.2 in the interim financial statements
4. UNDERLYING LEVERAGE
H1 2023 H1 2022
£m £m
Cash and cash equivalents 75.7 60.9
Bank debt (103.7) (153.1)
Other debt - -
a. Net debt - underlying (28.0) (92.2)
b. LTM underlying EBITDA 75.5 57.2
Leverage (a / b) 0.37 1.61
5. ADJUSTED UNDERLYING EPS
H1 2023 H1 2022
£m £m
Profit for the year as per basic EPS 11.2 20.5
Less:
Non-underlying items* 7.8 (4.1)
Amortisation of customer relationships, acquired software and brands 6.5 5.9
Amortisation of loan arrangement fees 0.4 0.6
Unwinding of NPV discounts for contingent consideration 1.6 1.7
Temporary tax differences arising on amortisation of customer relationships, (0.8) (1.2)
acquired software and brands
a. Adjusted underlying profit for the year 26.7 23.4
b. Weighted average number of shares 147.1 144.4
Adjusted underlying EPS (a / b) 18.16 16.23
* As set out in note 8 in the financial statements
Independent review report to JTC PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed JTC PLC's condensed consolidated interim financial statements
(the "interim financial statements") in the Interim Financial Report (the
"interim financial report") of JTC PLC for the 6-month period ended 30 June
2023 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
The interim financial statements comprise:
● the condensed consolidated interim balance sheet as at 30 June
2023;
● the condensed consolidated interim income statement for the period
then ended;
● the condensed consolidated interim statement of comprehensive
income for the period then ended;
● the condensed consolidated interim statement of changes in equity
for the period then ended;
● the condensed consolidated interim statement of cash flows for the
period then ended; and
● the explanatory notes to the interim financial statements.
The interim financial statements included in the interim financial report have
been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the International Auditing and
Assurance Standards Board. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and, consequently, does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the interim financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim financial report, including the interim financial statements, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim financial report in accordance with
International Accounting Standard 34, 'Interim Financial Reporting', and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the interim financial report based on our review. This report,
including the conclusion, has been prepared for and only for the company for
the purpose of complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Jersey, Channel Islands
11 September 2023
(a) The maintenance and integrity of the JTC PLC website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
(b) Legislation in Jersey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
JTC PLC
INTERIM FINANCIAL REPORT 30 JUNE 2023
UNAUDITED
Condensed consolidated interim income statement
Condensed consolidated interim statement of comprehensive income
Condensed consolidated interim balance sheet
Condensed consolidated interim statement of changes in equity
Condensed consolidated interim statement of cash flows
Notes to the condensed consolidated interim financial statements
1. Reporting entity
2. Significant changes in the current reporting period
3. Basis of preparation
4. Significant accounting policies and standards
5. Critical accounting estimates and judgements
6. Segmental reporting
7. Staff expenses
8. Non-underlying items
9. Other net (losses)/gains
10. Finance cost
11. Income tax
12. Earnings Per Share
13. Goodwill and other intangible assets
14. Share capital and reserves
15. Trade and other payables
16. Loans and borrowings
17. Other non-financial liabilities
18. Financial risk and capital management
19. Cash flow information
20. Related party transactions
21. Contingencies
22. Events occurring after the reporting period
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
£'000 Note H1 2023 H1 2022
Revenue 6 121,492 93,022
Staff expenses 7 (61,616) (51,666)
Other operating expenses (22,038) (15,213)
Credit impairment losses (1,466) (1,160)
Other operating income 22 21
Share of profit of equity-accounted investee 101 333
Earnings before interest, taxes, depreciation and amortisation ("EBITDA") 36,495 25,337
Comprising:
Underlying EBITDA 40,174 30,714
Non-underlying items 8 (3,679) (5,377)
36,495 25,337
Depreciation and amortisation (11,813) (10,530)
Profit from operating activities 24,682 14,807
Other net (losses)/gains 9 (5,530) 11,622
Finance income 323 15
Finance cost 10 (7,536) (5,411)
Profit before tax 11,939 21,033
Comprising:
Underlying profit before tax 19,708 16,942
Non-underlying items 8 (7,769) 4,091
11,939 21,033
Income tax 11 (753) (513)
Profit for the period 11,186 20,520
Earnings per Ordinary share ("EPS") Pence Pence
Basic EPS 12.1 7.61 14.21
Diluted EPS 12.2 7.54 13.96
The above condensed consolidated interim income statement should be read in
conjunction with the accompanying notes.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
£'000 Note H1 2023 H1 2022
Profit for the period 11,186 20,520
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations (net of tax) 18.1 (10,665) 20,541
Total comprehensive income for the period (net of tax) 521 41,061
The above condensed consolidated interim statement of comprehensive income
should be read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
£'000 Note 30.06.2023 31.12.2022
Assets
Property, plant and equipment 45,952 49,566
Goodwill 13 352,408 363,708
Other intangible assets 13 116,871 128,020
Investments 3,506 3,156
Other non-financial assets 2,218 2,369
Other receivables 226 535
Deferred tax assets 69 143
Total non-current assets 521,250 547,497
Trade receivables 32,891 33,290
Work in progress 12,262 12,525
Accrued income 28,436 23,911
Other non-financial assets 8,704 5,983
Other receivables 4,360 3,827
Cash and cash equivalents 75,726 48,861
Total current assets 162,379 128,397
Total assets 683,629 675,894
Equity
Share capital 14.1 1,595 1,491
Share premium 14.1 350,993 290,435
Own shares 14.2 (3,912) (3,697)
Capital reserve 25,654 24,361
Translation reserve 5,314 15,979
Retained earnings 14.3 72,776 71,648
Total equity 452,420 400,217
Trade and other payables 15 3,481 26,896
Loans and borrowings 16 103,741 153,622
Lease liabilities 37,438 40,602
Deferred tax liabilities 10,953 11,184
Other non-financial liabilities 17 950 788
Provisions 1,928 1,884
Total non-current liabilities 158,491 234,976
Trade and other payables 15 43,058 23,424
Lease liabilities 3,832 4,292
Other non-financial liabilities 17 22,017 8,628
Current tax liabilities 3,610 4,088
Provisions 201 269
Total current liabilities 72,718 40,701
Total equity and liabilities 683,629 675,894
The above condensed consolidated interim balance sheet should be read in
conjunction with the accompanying notes.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2023
Attributable to owners of JTC PLC
£'000 Note Share capital Share premium Own shares Capital reserve Translation reserve Retained earnings Total
equity
Balance at 1 January 2023 1,491 290,435 (3,697) 24,361 15,979 71,648 400,217
Profit for the period - - - - - 11,186 11,186
Other comprehensive loss for the period - - - - (10,665) - (10,665)
Total comprehensive income for the period - - - - (10,666) 11,186 520
Issue of share capital 14.1 104 60,558 - - - - 60,662
Share-based payment expense 7 - - - 1,293 - - 1,293
Movement of own shares 14.2 - - (215) - - - (215)
Dividends paid 14.3 - - - - - (10,058) (10,058)
Balance at 30 June 2023 1,595 350,993 (3,912) 25,654 5,314 72,776 452,419
For the period ended 30 June 2022
Attributable to owners of JTC PLC
£'000 Share capital Share premium Own Capital reserve Translation reserve Retained earnings Total
shares
equity
Balance at 1 January 2022 1,476 285,852 (3,366) 17,536 (5,335) 48,462 344,625
Profit for the period - - - - - 20,520 20,520
Other comprehensive income for the period - - - - 20,541 - 20,541
Total comprehensive income for the period - - - - 20,541 20,520 41,061
Issue of share capital 15 1,985 - - - - 2,000
Share-based payment expense - - - 977 - - 977
EIP share-based payment expense - - - 4,330 - - 4,330
Movement of own shares - - (11) - - - (11)
Balance at 30 June 2022 1,491 287,837 (3,377) 22,843 15,206 68,982 392,982
The above condensed consolidated interim statement of changes in equity should
be read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
£'000 Note H1 2023 H1 2022
Cash generated from operations 19.1 43,639 29,420
Income taxes paid (2,130) (740)
Net movement in cash generated from operations 41,509 28,680
Comprising:
Underlying cash generated from operations 45,219 30,906
Non-underlying cash items 19.2 (1,580) (1,486)
43,639 29,420
Investing activities
Interest received 322 15
Property, plant and equipment (777) (841)
Intangible assets (1,462) (3,606)
Business combinations (net of cash acquired) (1,392) (33)
Investment (250) -
Costs to obtain or fulfil a contract (465) (1,234)
Loans to related parties (160) -
Net cash used in investing activities (4,184) (5,699)
Financing activities
Proceeds from the issue of shares 62,000 -
Share issuance costs (1,713) (169)
Dividends paid (10,058) -
Repayment of loans and borrowings (50,000) -
Interest paid on loans and borrowings (4,668) (2,312)
Principal paid on lease liabilities (3,040) (2,983)
Interest paid on lease liabilities (645) (633)
Net cash used in financing activities (8,124) (6,097)
Net increase in cash and cash equivalents 29,201 16,884
Cash and cash equivalents at start of the period 48,861 39,326
Effect of foreign exchange rate changes on cash and cash equivalents (2,336) 4,738
Cash and cash equivalents at end of the period 75,726 60,948
The above condensed consolidated interim statement of cash flows should be
read in conjunction with the accompanying notes.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. REPORTING ENTITY
JTC PLC ("the Company") was incorporated on 12 January 2018 and is domiciled
in Jersey, Channel Islands. The address of the Company's registered office is
28 Esplanade, St Helier, Jersey.
The condensed consolidated interim financial statements of the Company for the
period from 1 January 2023 to 30 June 2023 comprise the Company and its
subsidiaries (together "the Group" or "JTC") and the Group's interest in an
associate and investments.
2. SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD
"The business performance has remained at a consistently strong level during
the six months to 30 June 2023. Despite the depressed global macroeconomic
outlook and continued inflationary pressures the business has continued to
perform well and meet the expectations of the Board."
There were no significant transactions or events during the period that
affected the financial position and performance.
For a detailed discussion about the Group's performance and financial
position, please refer to the Chief Financial Officer's review.
3. BASIS OF PREPARATION
The condensed consolidated interim financial statements (the "interim
financial statements") for the six months to 30 June 2023 have been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted by the
European Union ("EU"), the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and Companies
(Jersey) Law 1991. The interim financial statements are presented in pounds
sterling (£), which is the functional and reporting currency of the Company.
They do not include all the information required for a complete set of
International Financial Reporting Standards ("IFRS") financial statements.
Accordingly, the interim financial statements should be read in conjunction
with the annual consolidated financial statements for the year ended 31
December 2022, which have been prepared in accordance with IFRS as adopted by
the EU. Selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual consolidated
financial statements as at and for the year ended 31 December 2022.
The Group has adopted the going concern basis of accounting in preparing the
interim financial statements. The Directors are confident that the Group will
meet its day-to-day working capital requirements through its cash-generating
activities and bank facilities. The Group's forecasts and projections, taking
account of possible changes in trading performance, show that the Group should
be able to operate within the level of its current facilities. The Directors
therefore have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future, being at
least 12 months from the date of approval of these interim financial
statements.
These interim financial statements were approved by the Board on 11 September
2023 and have been reviewed but not audited by the Group's external auditors.
4. SIGNIFICANT ACCOUNTING POLICIES AND STANDARDS
The accounting policies applied in these condensed consolidated interim
financial statements are the same as those applied in the Group's consolidated
financial statements as at and for the year ended 31 December 2022.
To the extent relevant, all IFRS standards and interpretations including
amendments that were in issue and effective from 1 January 2023, have been
adopted by the Group from 1 January 2023. The Group has not early adopted any
standard, interpretation or amendment that has been issued but is not yet
effective. Several amendments apply for the first time in 2023, but they do
not have an impact on these condensed consolidated interim financial
statements.
5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Group's accounting policies, Management are required
to make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are regularly evaluated based on
historical experience, current circumstances, expectation of future events and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
In preparing these condensed interim financial statements, the significant
judgements made by Management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the consolidated financial statements for the year ended 31 December 2022.
6. SEGMENTAL REPORTING
6.1. BASIS OF SEGMENTATION
The Group has a multi-jurisdictional footprint and the core focus of
operations is on providing services to its institutional and private client
base, with revenues from alternative asset managers, financial institutions,
corporates, high-net-worth and ultra-high-net-worth individuals and family
office clients. Recognised revenue is generated from external customers.
The Chief Executive Officer and Chief Financial Officer are together the Chief
Operating Decision Makers of the Group and determine the appropriate business
segments to monitor financial performance. Each segment is defined as a set of
business activities generating a revenue stream determined by divisional
responsibility and the management information reviewed by the Board. They have
determined that the Group has two reportable segments: these are Institutional
Client Services ("ICS") and Private Client Services ("PCS").
6.2. SEGMENTAL INFORMATION
The table below shows the segmental information provided to the Board for the
two reportable segments (ICS and PCS) on an underlying basis:
ICS PCS Total
£'000 H1 2023 H1 2022 H1 2023 H1 2022 H1 2023 H1 2022
Revenue 80,692 63,521 40,800 29,501 121,492 93,022
Direct staff costs (33,729) (27,019) (15,672) (11,354) (49,401) (38,373)
Other direct costs (1,408) (1,061) (1,649) (722) (3,057) (1,783)
Underlying gross profit 45,555 35,441 23,479 17,425 69,034 52,866
Underlying gross profit margin % 56.5% 55.8% 57.5% 59.1% 56.8% 56.8%
Indirect staff costs (8,153) (5,290) (3,498) (3,955) (11,651) (9,245)
Other operating expenses (11,931) (10,160) (5,401) (3,101) (17,332) (13,261)
Other income 15 9 108 345 123 354
Underlying EBITDA 25,486 20,000 14,688 10,714 40,174 30,714
Underlying EBITDA margin % 31.6% 31.5% 36.0% 36.3% 33.1% 33.0%
The Board evaluates segmental performance based on revenue, underlying gross
profit and underlying EBITDA. Profit before income tax is not used to measure
the performance of the individual segments as items such as depreciation,
amortisation of intangibles, other net (losses)/gains and net finance costs
are not allocated to individual segments. Consistent with the aforementioned
reasoning, segment assets and liabilities are not reviewed regularly on a
by-segment basis and are therefore not included in segmental reporting.
6.3. GEOGRAPHICAL INFORMATION
The table below shows revenue generated by the geographical location of the
contracting Group entity.
H1 2023 H1 2022 Increase/(decrease)
£'000 £'000
£'000 %
UK & Channel Islands 64,675 51,605 13,070 25.3%
US 25,279 16,246 9,033 55.6%
Rest of Europe 18,613 16,423 2,190 13.3%
Rest of the World 12,925 8,748 4,177 47.8%
121,492 93,022 28,470 30.6%
6.4. SEASONALITY
There is no material change for seasonality or cyclicality in the condensed
consolidated interim income statement. The condensed consolidated balance
sheet is impacted where annual fees have been billed in advance at the start
of the calendar year, see deferred income in note 17.
7. STAFF EXPENSES
£'000 H1 2023 H1 2022
Salaries and Directors' fees 50,163 38,719
Employer-related taxes and other staff-related costs 4,850 4,192
Other short-term employee benefits 2,801 1,655
Pension employee benefits 2,461 1,793
Share-based payments 1,341 977
Employee Incentive Plan ("EIP") share-based payments - 4,330
Total staff expenses 61,616 51,666
8. NON-UNDERLYING ITEMS
£'000 H1 2023 H1 2022
EBITDA 36,495 25,337
Non-underlying items within EBITDA:
Acquisition and integration costs(1) 3,495 501
Office start-up costs(2) 141 -
Revision of ICS operating model - 351
EIP share-based payments - 4,511
Other 43 14
Total non-underlying items within EBITDA 3,679 5,377
Underlying EBITDA 40,174 30,714
Profit before tax 11,939 21,033
Total non-underlying items within EBITDA 3,679 5,377
Gain on revaluation of contingent consideration(3) (167) (424)
Foreign exchange losses/(gains)(4) 4,257 (9,044)
Total non-underlying items within profit before tax 7,769 (4,091)
Underlying profit before tax 19,708 16,942
1 Acquisition and integration costs include deal and tax advisory fees,
legal and professional fees, any client-acquired penalties, staff
reorganisation costs and other integration costs. This includes acquisition
related share-based payment awards granted to act as retention tools for key
management and/or to recruit senior management to support various
acquisitions. Most acquisition and integration costs are incurred in the first
two years following acquisition but this period can be longer depending on the
nature of the costs.
2 Initial costs incurred to establish the infrastructure to trade in new
offices in Austria and the Bahamas.
3 Gain on revaluation of liability-classified contingent consideration
payable for perfORM of £0.03m and Segue of £0.13m, see note 15.1.
4 Non-underlying foreign exchange losses/(gains) relate to the revaluation
of intercompany loans. Management consider these to be non-underlying items
and adjust accordingly in order to reflect the Group's underlying trading
performance.
9. OTHER NET (LOSSES)/GAINS
£'000 Note H1 2023 H1 2022
Gain on revaluation of contingent consideration 8((3)) 167 424
Foreign exchange (losses)/gains 8((4)) (5,697) 11,198
Total other net (losses)/gains (5,530) 11,622
10. FINANCE COST
£'000 H1 2023 H1 2022
Bank loan interest 4,347 1,940
Amortisation of loan arrangement fees 465 566
Unwinding of net present value discounts 2,271 2,328
Other finance expense 453 577
Total finance costs 7,536 5,411
11. INCOME TAX
£'000 H1 2023 H1 2022
Current tax 1,635 1,666
Deferred tax (882) (1,153)
Total tax charge for the period 753 513
12. EARNINGS PER SHARE
The Group calculates basic, diluted and adjusted underlying basic Earnings Per
Share ("EPS"). The results can be summarised as follows:
Pence Note H1 2023 H1 2022
Basic EPS 12.1 7.61 14.21
Diluted EPS 12.2 7.54 13.96
Adjusted underlying basic EPS 12.3 18.16 16.23
12.1. BASIC EARNINGS PER SHARE
£'000 H1 2023 H1 2022
Profit for the period 11,186 20,520
Thousands No. of shares No. of shares
Issued ordinary shares at 1 January 146,001 144,326
Effect of shares issued to acquire business combinations 13 -
Effect of movement in treasury shares held 232 103
Effect of equity placing 829 -
Weighted average number of Ordinary shares (basic) 147,075 144,429
Basic EPS 7.61 14.21
12.2. DILUTED EARNINGS PER SHARE
£'000 H1 2023 H1 2022
Profit for the period 11,186 20,520
Thousands No. of shares No. of shares
Weighted average number of Ordinary shares (basic): 147,075 144,429
Effect of movement in share-based payments 1,187 2,586
Weighted average number of Ordinary shares (diluted) 148,262 147,015
Diluted EPS 7.54 13.96
12.3. ADJUSTED UNDERLYING BASIC EARNINGS PER SHARE
£'000 Note H1 2023 H1 2022
Profit for the period 11,186 20,520
Non-underlying items 8 7,769 (4,091)
Amortisation of customer relationships, acquired software and brands 6,548 5,898
Amortisation of loan arrangement fees 465 566
Unwinding of net present value discounts 1,627 1,694
Temporary tax differences arising on amortisation of customer relationships, (882) (1,153)
acquired software and brands
Adjusted underlying profit for the period 26,713 23,434
Thousands No. of shares No. of shares
Weighted average number of Ordinary shares (basic) 147,075 144,429
Adjusted underlying basic EPS 18.16 16.23
Adjusted underlying basic EPS is an alternative performance measure which
reflects the underlying activities of the Group. The following definition is
not consistent with the requirements of IAS 33.
The Group's definition of adjusted underlying basic EPS reflects the profit
for the year adjusted to remove the impact of non-underlying items (see note
8). Additionally, a number of other items relating to the Group's acquisition
activities including amortisation of acquired intangible assets and associated
deferred tax, amortisation of loan arrangement fees and unwinding of NPV
discounts in relation to contingent consideration are removed to present an
adjusted underlying basic EPS which is used more widely by external investors
and analysts.
13. GOODWILL AND OTHER INTANGIBLE ASSETS
IMPAIRMENT OF NON-FINANCIAL ASSETS
Goodwill that arises on the acquisition of business combinations and
intangible assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment, or more frequently if
events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount might not be
recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount.
At 30 June 2023, Management have concluded there are no impairment indicators
present for Goodwill, intangible assets with an indefinite useful life and
other non-financial assets.
14. SHARE CAPITAL AND RESERVES
14.1. SHARE CAPITAL AND SHARE PREMIUM
Movements in Ordinary shares Note No. of shares (thousands) Par value £'000 Share premium
£'000
At 31 December 2022 149,061 1,491 290,435
Shares issued for equity raises 8,857 88 60,198
PLC EBT issue 1,580 16 -
Acquisition of Segue 15.1((3)) 45 - 360
Movement in the period 10,482 104 60,558
At 30 June 2023 159,543 1,595 350,993
On 14 June 2023, the Company issued 8,857,143 Placing Shares at a price of
£7.00 per share, raising gross proceeds of £62m for the Company. Share
issuance costs were £1.7m. The Placing Shares are fully paid and rank pari
passu in all respects with the existing shares, including the right to receive
all dividends and other distributions declared, made or paid after the issue
date.
On 21 June 2023, the Company issued an additional 1,579,636 Ordinary shares to
the Company's Employee Benefit Trust ("PLC EBT") in order for PLC EBT to
satisfy anticipated future exercises of awards granted to beneficiaries.
14.2. OWN SHARE RESERVE
Own shares represent the shares of the Company that are unallocated and held
by PLC EBT for the benefit of its employees. Own shares have been excluded
from the weighted average number of Ordinary shares for the purpose of
calculating EPS as they are not outstanding.
Note No. of shares (thousands) PLC EBT £'000
At 31 December 2022 2,957 3,697
PSP and DBSP awards (281) -
Other awards (18) -
PLC EBT issue 14.1 1,580 16
Purchase of own shares 28 199
Movement in the period 1,309 215
At 30 June 2023 4,266 3,912
14.3. RETAINED EARNINGS
The retained earnings include accumulated profits and losses.
The final dividend for the year 2022 of 6.88p per qualifying Ordinary share
was paid on 30 June 2023.
An interim dividend of 3.5p per qualifying Ordinary share (2022: 3.1p per
qualifying Ordinary share) was declared by the Directors on 11 September 2023
and will be payable on 20 October 2023 to shareholders on the record on 22
September 2023. The interim dividend has not been recognised as a liability as
at 30 June 2023.
15. TRADE AND OTHER PAYABLES
£'000 Note 30.06.2023 31.12.2022
Non-current
Other payables 134 72
Contingent consideration 15.1 3,347 26,824
Total non-current 3,481 26,896
Current
Trade payables 1,455 2,728
Other taxation and social security 818 926
Other payables 3,946 4,391
Accruals 11,164 9,907
Contingent consideration 15.1 25,675 5,472
Total current 43,058 23,424
Total trade and other payables 46,539 50,320
15.1. CONTINGENT CONSIDERATION
Contingent consideration payables are discounted to NPV, split between current
and non-current and are due as follows:
£'000 30.06.2023 31.12.2022
Acquisition
perfORM(1) 3,347 3,181
SALI - 23,643
Total non-current contingent consideration 3,347 26,824
INDOS(2) 1,537 1,483
Segue(3) 403 2,163
SALI 23,735 -
Sterling - 1,826
Total current contingent consideration 25,675 5,472
1 The earn-out for perfORM is calculated based on a multiple of their
underlying EBITDA for the year ended 31 December 2024 (up to a maximum of
£6m). This is payable in an equal split of cash and JTC PLC Ordinary shares,
the 50% payable in shares is liability-classified contingent consideration as
the no. of shares due is calculated based on a fixed share price as defined in
their share purchase agreement ("SPA"). In accordance with IAS 32, Management
are required to update the fair value at each reporting date.
At the acquisition date, Management forecast the underlying EBITDA
for perfORM and estimated that £4.48m would be due. At 30 June 2023,
Management revisited their forecast and have identified no evidence to
indicate an adjustment was required to the total due. To update the fair value
of the 282,854 JTC PLC Ordinary shares payable, the Monte Carlo simulation was
updated and this decreased the share price applied to £7.59 (31.12.2022:
£7.92).
The simulation is based on JTC's share price at 30 June 2023,
factoring in historical volatility and projected dividend payments and is then
discounted using an appropriate risk free rate.
The updated share price resulted in a gain on revaluation of £0.03m
(see note 9) as the fair value of the contingent consideration payable in JTC
Ordinary Shares decreased to £2.15m (31.12.22: £2.24m).
The revalued earn-out contingent consideration of £4.37m (cash
£2.22m/ JTC PLC Ordinary shares £2.15m) has then been discounted to a
present value of £3.35m.
2 Contingent consideration of £1.5m was payable subject to JTC PLC meeting
an underlying EPS target for the period ended 31 December 2022. As the
business performed successfully, on 14 April 2023, equity awards were granted
and subject to continued employment, will vest on 31 December 2023.
3 Contingent consideration was subject to Segue meeting adjusted EBITDA
targets over the calendar years 2022 and 2023. During the period, Management
paid £1.4m ($1.7m) in cash and issued 45,386 JTC Ordinary shares in
part-payment of the outstanding liability (see note 14.1), the timing of the
settlement resulted in a small gain on revaluation of contingent consideration
of £0.13m (see note 9).
16. LOANS AND BORROWINGS
£'000 30.06.2023 31.12.2022
Non-current
Bank loan 103,741 153,622
Total loans and borrowings 103,741 153,622
At 31 December 2022, the Group had a multicurrency loan facility agreement for
a total commitment of £225m consisting of a term loan of £75m and a
revolving credit facility ("RCF") of £150m. On 15 June 2023, the lenders
agreed to increase the RCF by £50m increasing the total commitment to £275m.
Following the equity raise that took place on 14 June 2023, the Group used
£50m of the proceeds to temporarily repay the RCF on 21 June 2023.
At 30 June 2023 the Group had available £169.3m of committed facilities
currently undrawn (31 December 2022: £69.3m).
On 1 August 2023, £118m of the facility was drawn to part satisfy the cash
consideration for the acquisition of SDTC (see note 22).
All facilities are due to be repaid on or before the termination date of 6
October 2025 unless the termination date is extended for the available one
year extension. It is Management's intention to exercise the option to extend
the facility for the additional year.
17. OTHER NON-FINANCIAL LIABILITIES
£'000 30.06.2023 31.12.2022
Non-current
Contract liabilities 394 216
Employee benefit obligations 556 572
Total non-current 950 788
Current
Deferred income 21,168 7,856
Contract liabilities 849 772
Total current 22,017 8,628
Total other non-financial liabilities 22,967 9,416
As a result of annual fees being billed in advance at the start of the
financial year, deferred income is higher at 30 June than at 31 December.
18. FINANCIAL RISK AND CAPITAL MANAGEMENT
PRINCIPAL FINANCIAL INSTRUMENTS
All financial assets and liabilities are measured at amortised cost which is
deemed to be representative of fair value. The exception to this is
liability-classified contingent consideration payable of £1.7m for perfORM
(31 December 2022: £1.6m).
Management considered the following fair value hierarchy levels in line with
IFRS 13.
Level 1 - Inputs are quoted prices (unadjusted) in active markets for
identical assets and liabilities
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset and liability, either directly or indirectly.
Level 3 - Inputs are unobservable inputs for the asset or liability.
Management concluded that the contingent consideration was classified under
the level 3 inputs of the fair value hierarchy. Please see note 15 for further
detail on changes to fair value for the six months ended 30 June 2023.
18.1. FOREIGN CURRENCY RISK
The Group's exposure to the risk of changes in exchange rates relates
primarily to the Group's operating activities when the revenue or expenses are
denominated in a different currency from the Group's functional and
presentation currency of pounds sterling ('£'). For trading entities that
principally affect the profit or net assets of the Group, the exposure
continues to be mainly from Euro, US dollar and South African rand. The
Group's bank loans are denominated in £ although the facility is
multicurrency. As disclosed in note 29.1 of the JTC Annual Report and Accounts
2022, Management continue to monitor the effectiveness of the Group's policy
to minimise foreign currency risk and regularly assess if a foreign currency
hedge is appropriate.
For the six months to 30 June 2023, mainly due to the Euro and United States
dollar foreign currency exchange rate movements, we have recognised the
following:
* a foreign exchange loss of £10.7m in other comprehensive income (H1 2022:
£20.5m gain) upon translating our foreign operations to our functional
currency
* a foreign exchange loss of £5.7m (H1 2022: £11.2m gain) in the condensed
consolidated income statement upon the retranslation of monetary assets and
liabilities denominated in foreign currencies (see note 9)
On 7 July 2023, JTC entered a foreign exchange forward contract to sell £60m
and buy $76.1m on 31 August 2023 to mitigate the foreign exchange risk between
the date of signing their SPA and the date of completion for SDTC (see note
22).
18.2. INTEREST RATE RISK
The Group is exposed to interest risk as it borrows funds at floating interest
rates. The interest rate applied to loan facilities is determined using SONIA
plus a margin based on net leverage calculations.
The risk is managed by the Group maintaining an appropriate leverage ratio and
by giving consideration to the use of hedging instruments.
Sensitivity for variable rate instruments
The Group's sensitivity to interest rate risk as disclosed in the JTC Annual
Report and Accounts 2022 is impacted by rising interest rates during the first
six months of 2023.
For loans and borrowings with floating rates at the 30 June 2023, the Group
still considers a reasonable interest rate movement for sensitivity analysis
to be 100 basis points.
If interest rates had been higher/lower by 100 basis points and all other
variables were held constant, the Group's profit for the period ended 30 June
2023 would decrease/increase by £0.8m.
18.3. CREDIT RISK
The Group's principal exposure to credit risk arises from contracts with
customers and therefore from the following financial assets: trade
receivables, work in progress and accrued income (together "customer
receivables") as well as cash and cash equivalents and other receivables.
Despite the challenging economic environment the impact on the recoverability
of customer receivables has not been significant, as evidenced by our strong
performance for underlying operating cash conversion and credit impairment
losses. Following an analysis on a customer-by customer basis we anticipate
that customers will meet their payment obligations and as a result we have not
incorporated updated forward-looking information into measuring expected
credit losses as at 30 June 2023. Our credit risk management as set out in
note 29.2 of the JTC Annual Report and Accounts 2022 remains unchanged.
18.4. LIQUIDITY RISK
There has been no change in our liquidity risk assessment compared to our
disclosure in note 29.3 of the JTC Annual Report and Accounts 2022.
18.5. CAPITAL MANAGEMENT
The Group's objective for managing capital is unchanged from that disclosed in
Note 30 of the JTC Annual Report and Accounts 2022
In accordance with the Group's capital risk management objective, the
financial covenants attached to the bank borrowings continue to be met.
19. CASH FLOW INFORMATION
19.1. OPERATING CASH FLOWS
£'000 H1 2023 H1 2022
Operating profit 24,682 14,807
Adjustments:
Depreciation of property, plant and equipment 3,883 3,822
Amortisation of intangible assets 7,930 6,708
Equity-settled share-based payment expense 1,293 1,085
EIP share-based payment expense - 4,330
Share of profit of equity-accounted investee (101) (333)
Operating cash flows before movements in working capital 37,687 30,419
Net changes in working capital:
Increase in receivables (6,662) (12,327)
Increase in payables 12,614 11,328
Cash generated from operations 43,639 29,420
19.2. NON-UNDERLYING ITEMS WITHIN CASH GENERATED FROM OPERATIONS
£'000 H1 2023 H1 2022
Cash generated from operations 43,639 29,420
Non-underlying items:
Acquisition and integration 1,439 1,121
Office start-up costs 141 -
Revision of ICS operating model - 351
Other - 14
Total non-underlying items within cash generated from operations 1,580 1,486
Underlying cash generated from operations 45,219 30,906
20. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note.
The Group has defined key management personnel as Directors and members of
senior management who have the authority and responsibility to plan, direct
and control the activities of the Group. The remuneration of key management
personnel in aggregate for each of the specified categories is as follows:
£'000 H1 2023 H1 2022
Salaries and other short-term employee benefits 1,250 1,472
Post-employment and other long-term benefits 60 76
Share-based payments 801 628
EIP share-based payments - 325
Total payments 2,111 2,501
21. CONTINGENCIES
The Group operates in a number of jurisdictions and enjoys a close working
relationship with all of its regulators. It is not unusual for the Group to
find itself in discussion with regulators in relation to past events. With any
such discussions there is inherent uncertainty in the ultimate outcome but the
Board currently does not believe that any such current discussions are likely
to result in an outcome that would have a material impact upon the Group.
22. EVENTS OCCURRING AFTER THE REPORTING PERIOD
There are no material subsequent events to disclose other than those already
noted in the condensed consolidated financial statements except for the
following:
Acquisition of TC3 Group Holdings LLC (trading as South Dakota Trust Company ("SDTC"))
On 2 August 2023, following receipt of all applicable change of control and
regulatory approvals, JTC completed the acquisition of 100% of the share
capital of TC3 Group Holdings LLC (trading as SDTC) for a maximum
consideration of $270m. The initial consideration of $200m comprised of $147m
in cash and up to a maximum of $53m in new JTC PLC Ordinary shares. On 8
August 2023, the Company issued and admitted 5,978,400 Ordinary shares at fair
value to satisfy the initial consideration. A further $70m contingent
consideration is available on the achievement of specific revenue performance
targets for the two year period ending 31 December 2025 and is payable in cash
and JTC PLC Ordinary shares.
The acquisition is hugely complementary to JTC's existing US operations and
establishes JTC as the leading independent provider of administration services
to the US personal trust sector.
At the date the condensed consolidated interim financial statements were
authorised for issue, it was impracticable to disclose the information
required by IFRS 3 'Business Combinations' as some of the required information
was not available.
1 LVW is 14 times annualised value of work won minus value of attrition in
past year.
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