Jelf heads back to profit as losses fall

Jelf Group is aiming for a full-year net profit for the 2010 financial year, after losses at the consolidator narrowed in the first half, according to group finance and operations director John Harding.

Jelf posted a net loss of £616,000 for the six months to 31 March 2010, down from a loss of £994,000 in the same period last year. Jelf made a full-year loss of £9.8m in the year to 30 September 2009.

“We would expect by the end of the year to move that to a small profit,” Harding said. He stressed, however, that the company and its shareholders measure performance on the firm’s earnings before income tax, depreciation, amortisation and exceptional items, which rose 20% to £4.1m in the first half of 2010 from £3.5m in that period 2009.

The biggest events of the period, according to Jelf’s group chief executive Alex Alway, were the firm’s £24m debt refinancing, completed in February, and the £19m share placement, completed in March 2010. As part of this, 3i sold its stake to rival private equity firm Capital Z.

Jelf has used part of the proceeds from the placement to reduce debt. Total debt has been cut to £16m from £24.3m, and net debt has fallen to £13.6m.

“We probably have the least indebtedness of our peer group,” Alway said. “We are going to pay down more of the debt and should have quite a bit of the £13.6m paid off by the end of the financial year.”

He added that the debt reduction so far was “more than enough” to satisfy both its management and shareholders.

Jelf reported new business growth in its insurance segment of 38% for the six months to 31 March 2010, but this was offset by lapses resulting from the effects of the economic climate on clients.

Jelf’s core customer base is made up of owner-managed, small to medium-sized enterprises. As a result, insurance revenues fell 3% to £22.3m from £22.9m. Accordingly, operating profit from insurance fell to £192,000 from £476,000.

Alway said it was hard to predict whether there would be more client insolvencies, which he believed was a key reason for the lapses, but added: “The trend of increased new business is definitely going to continue for the rest of the year.”