3i continues to back Jelf as company reports £0.4m loss

Private equity backers 3i will continue to commit to Jelf, says Alex Alway, Jelf’s group chief executive. “They have been very supportive and the transition into a new management team has been very smooth. I know they are not looking to go beyond their current holding but they have expressed their support.”

Alway refused to rule out the possibility of Jelf raising more money. “We are not anticipating it, but never say never. One of the advantages we have is that we are able to raise money via the stockmarket. If a good opportunity comes along, I wouldn’t rule it out.”

Earlier this year 3i QPE, which holds a 28% stake in Jelf Group, was acquired by parent company 3i. There was speculation that 3i would sell its stake in Jelf but Alway denied this would happen.

Jelf reported an operating loss of £0.4m from the £1.6m operating profit it made in the six months to 31 March 2009. This week Alway said this was due to “the impact of restructuring costs and increased amortisation”.

However, revenues were up 40% to £35m while Jelf saw 11% growth in EBITDAE to £3.5m compared with £3.1m in 2008. “Predominantly it’s through the acquisitions we’ve made last year but in some parts of the business we have shown organic growth,” said Alway.

Organic growth (ex-acquisitions) was negative (-6%) in the first half but remained largely flat, excluding wealth management. “Market conditions remain extremely difficult and I do not expect that to change this year,” said Alway. “Furthermore we have yet to see the benefits of a hardening of insurance rates. Despite these factors, the overall growth in our revenues and profits highlights the resilience of the business. However, I do expect the economic downturn to continue into next year and this will present fresh challenges to both our clients and the group which will have to be addressed.”

He added that although the group had a healthy pipeline of potential acquisitions, it decided not to invest because of a lack of value. “The price of brokerages has come down but has not reached a realistic level. So we are sitting on cash and waiting till we see the right value in the market,” he said. “It is unlikely that we will be making acquisitions any time this year.”