making a fresh start - charles taylor plc · 12/31/2011 · • final dividend 6.75p, full year...

Making a fresh start...

…to become the Professional Services provider of choice to

the insurance market

Charles Taylor Consulting plc

Results for the year to 31 December 2011

Charles Taylor Consulting plc Investor presentation 2011 23 March 2012 1

Disclaimer

This presentation contains certain forward-looking statements. By their

nature, forward-looking statements involve risks and uncertainties

because they relate to events and depend on circumstances that will or

may occur in the future. Actual results may differ from those expressed

in such statements, depending on a variety of factors, including demand

and pricing, operational problems, general economic conditions,

political stability and economic growth in relevant areas of the world,

changes in laws and governmental regulations, exchange rate

fluctuations and other changes in business conditions, the actions of

competitors and other factors.

2Charles Taylor Consulting plc Investor presentation 2011 23 March 2012

Agenda

• 2011 in summary

• About us

• Results

• Strategy

• Outlook


2011 in summary

• Professional Services revenue up and operating segment profit up

• Profit from non-life run-off companies in 2010 did not reoccur,

reducing adjusted PBT, but minimal impact on EPS

• Adjusted EPS down due to higher tax charge

• Final dividend 6.75p, full year dividend maintained at 10p

• David Marock appointed 1 July 2011

• Initiative to drive down debt delivered early results

• Fresh growth strategy for Professional Services

• Run-off strategy focus on life; no more non-life acquisitions


About us


About us

6

Professional Services businesses Run-off business

Management Services: Adjusting Services: Insurance Support Services: Insurance Companies

Run-off

End-to-end management of

mutual insurance companies

Loss adjusting for larger

and more complex losses

Stand-alone professional

services

Owns and runs off closed

insurance companies

…by 900 highly experienced, technically excellent staff…

…through 47 global offices located where our clients need us…

…with our Professional Services revenue principally provided by fees…

…thereby delivering sustainable growth and shareholder value

Charles Taylor Consulting plc Investor presentation 2011 23 March 2012

We deliver Professional Services to the global insurance market…

Our business model is underpinned by our core values

Results


Results 2011

2011 2010

Professional

Services

Insurance

Run-offs

Eliminations

/Other Total

Professional

Services

Insurance

Run-offs

Eliminations

/Other Total

Revenue (£m) 101.4 3.6 (2.5) 102.5 97.9 3.8 (2.6) 99.1

Operating segment

profit (£m) 11.6 (0.7) 10.9 11.2 5.4 16.6

Finance

costs/other (£m) (1.7) (1.7) (2.0) (2.0)

Adjusted profit

before tax (£m) 9.2 14.6

Tax (£m) (1.6) (0.2) (1.8) (0.5) (1.4) (1.9)

Non-controlling

interests (£m) (0.3) 0.9 0.6 (0.2) (3.7) (3.9)

Earnings (£m) 9.7 - (1.7) 8.0 10.6 0.2 (2.0) 8.8

Adjusted earnings

per share (p) 24.22 (0.08) (4.28) 19.86 26.51 0.43 (4.94) 22.00

Higher tax charge because less new deferred tax recognised in 2011 than 2010Interim Final 2011 Interim Final 2010

Dividend 3.25p 6.75p 10.00p 5.54p 4.46p 10.00p

8

Note: Adjusted profit and earnings per share figures include adjustments to present business performance excluding non-recurring items and

intangible charges as follows: charges for amortisation of customer relationship intangibles £1.8m (2010: £2.1m), CEO transition costs £0.7m (2010:

nil) and the loss on disposal of the Group’s interest in the Crescendo joint venture £0.3m (2010: nil).

Results by business

Revenue £mOperating segment

profit £m

2011 2010 2011 2010

Management Services 39.4 38.2 6.3 7.0

Adjusting Services 50.0 47.0 5.7 4.6

Insurance Support Services 12.0 12.7 (0.3) (0.2)

Unallocated (0.1) (0.2)

Total professional services 101.4 97.9 11.6 11.2

Insurance Companies Run-off 3.6 3.8 (0.7) 5.4

Inter-segment eliminations (2.5) (2.6) - -

Group 102.5 99.1 10.9 16.6


Core Professional Services businesses

performed solidly

• Management Services– Fees from mutual insurance clients up

– Expenses increased by regulatory requirements

– Difficult conditions for captive management and specialty risk

• Adjusting Services– Good performance from Energy and Marine adjusting

– Improving Aviation performance, Non Marine slightly down on 2010

– Initiative to drive down debt achieving early results

• Insurance Support Services– CTIS, formerly loss-making Axiom, achieves profitable turnaround

– Static claims management successful

– Tackled poorly performed non-life run-off servicing business


Run-off business loss had

minimal impact on EPS

11

Life

• Successful completion of

Alico Isle of Man acquisition

• Acquisition had little impact

on 2011

Non-Life

• 2010 profit did not reoccur,

reducing adjusted PBT;

minimal EPS impact

• Non-life businesses

experienced adverse claims

developments

Deferred consideration liability successfully capped


Net debt reduced


Net debt Since

31-12-10 £m

Since

30-06-11 £m

Opening balance 36.3 38.6

Term debt

repayments

(3.0) (1.5)

New debt

drawdown

2.4 2.4

Other (including

reduction in

Adjusting Services

working capital)

(1.7) (5.5)

At 31 December

2011

34.0 34.0

Commentary

• Total facilities £44.8m

• Net debt down £2.3m

• Includes £2.4 m to buy Alico,

expect to be repaid in 2012

• Free cashflow £7.9m

(2010: £10.9m)

• Initiative in H2 to drive down

Adjusting Services working

capital

• Less cash released from life

run-off companies

Defined benefit pensions

(balance sheet liability)

13

£m 2011 2010

Assets 66.3 65.7

UK liabilities (99.2) (88.3)

Overseas liabilities (0.2) (0.2)

IFRS cap on surpluses1 (1.7) (1.7)

Pension obligation (34.8) (24.5)

Deferred tax asset 8.7 6.6

Net pension obligation (26.1) (17.9)

Discount rate (%) 4.70 5.40

Salary growth (%) 3.00 3.30

RPI (%) 3.00 3.30

CPI (%) 2.25 2.80

1: Under IAS 19 para 58(b)


Balance sheet

£m 2011 2010

GoodwillIntangiblesDeferred taxOther fixed assets

41.89.79.66.4

44.012.5

7.57.1

Non-current assets 67.5 71.1

Insurance assetsOther current assets

343.596.2

269.195.8

Total assets 507.2 436.0

Insurance liabilitiesOther current liabilities

(290.7)(73.5)

(217.9)(73.7)

Total assets less current liabilities 143.0 144.4

Non-current loansPension liabilitiesOther non-current liabilities

(23.3)(34.8)(16.1)

(22.9)(24.5)(19.6)

Net assets 68.8 77.4

e

Analysis of non-controlling interests Prof Servs Run-off Prof Servs Run-off

Net assets 28.8 40.0 39.8 37.6

Non-controlling interests (1.2) (35.4) (0.5) (36.2)

Shareholders’ equity 27.6 4.6 39.3 1.4


Main equity movements

- Alico acquisition and renegotiated deferred consideration (Run-off)

- Higher pension liabilities (Professional Services)

Strategy


16

Drive Professional Services growth


Develop new

professional services

business lines,

organically, through

joint ventures or

through targeted M&A

opportunities

Ensure fit:

• Strategically

• Culturally

• Financially

Management Services

• Grow mutuals

• Create products & services

Adjusting Services

• Expand office network &

service offerings

• Recruit, retain & develop talent

Insurance Support Services

• Expand claims management

• Develop coverholder & MGA

services

Strengthen support for

professional staff

Enhance leadership and

governance

Create shared services and

encourage joint working

Coordinate Group marketing

and business development

We are executing our run-off strategy

Life run-off

• Well positioned in offshore

market

• Potentially attractive targets

• Integrate businesses rapidly

• Seek out acquisitions

Non-life run-off

• Limited opportunities

• No ownership advantages

• Stop further investment

• Consider options


Progress on key initiatives


Red = 2012 initiatives

Create growth

in our core

businesses

Execute run-off

strategy

Reinforce the

foundations

• Created and implementing new business plans for all businesses

• Ran 30+ town halls to identify business growth opportunities

• Kicked off and tracking most promising ideas

• Expanded range of claims management services within Lloyd’s market

• Started offering existing safety management services to wider client base

• Set up new San Francisco adjusting office and recruited new head

• Established and promoting new MGA and coverholder services

• Created E-Trade cover for SME businesses

• Established debt reduction initiative

• Set up Global ICT team to implement new strategy

• Established Global HR team, delivering performance and talent management

• Developing Group business development & marketing strategy with new Head

appointed

• Commenced adjusting Case Management and Accounting (CMA) programme

• Created new Executive Committee and Adjusting leadership team

• Developed and rolling out new corporate identity

• Acquired Alico Isle of Man Limited

• Capped deferred consideration liability successfully

• Disbanded non-life acquisitions team

Pro

fess

ion

al S

erv

ice

sR

un

-

off

Explore strategic

options• Starting to explore ideas for new professional services business lines

Outlook


Current trading and outlook

20

2012 started on track

Well positioned in the insurance industry

Implementing clear strategy for growth

Implementing initiatives to drive down debt

Confident of future prospects


Charles Taylor investment case

• Strong fundamental businesses

• Well established in the insurance market

• Long-standing, loyal client relationships

• Good dividend yield

• New CEO appointed to deliver growth

• Strengthened leadership structure

• Strategic growth plan being implemented

• Effective plan to reduce debt in place

• Positive prospects for 2012 and beyond


Appendices


Management Services increased

revenue

Shipping mutual management

Workers’ compensation mutuals

Other management servicesMove to Insurance Support Services in 2012

• Growth in the Standard Clubs• Successful restructure of clubs• Provides P&I to 9% of world shipping• Insured tonnage 131m gt

• Signal - largest provider of Longshoreworkers’ compensation insurance; payroll grew by 8% to US$2.5 bn

• SCALA - leading provider of workers’ comp coverage to Canadian ship owners

• Investment management business performed well

• Other services weaker

23

• Employs 241 staff in Europe, Asia and the Americas


Strong result from Adjusting Services

Energy adjusting

• Appointed on a number of the largest energy losses in the world in 2011

• Important progress in growing onshore energy business

24

Marine adjusting

Aviation adjusting

Non Marine adjusting

• Incorporates one of the largest average adjusters in the world

• High caseloads in UK and Asian marine offices and ports and terminal business

• Increased revenue and profit• Seeking growth from regions including

where claims volume is growing• Aviation asset management improved

• Slightly down on 2010• London financial institutions business had

good year• Property and casualty business down

• Employs 372 staff in Europe, Asia, Middle East and Americas


• Employs 130 staff from offices in UK, Isle of Man and Ireland

Progress in Insurance Support Services

Managed claims services • Strong revenues from static claims remit

25

Coverholder Services

Financial Reporting Services

Non-Life Run-off Servicing

• Ahead of budget and attracting market interest

• On budget after difficult period• Largest provider of outsourced

accounting to Lloyd’s managing agents

• Weak new business record, poor result, management costs cut

Offshore Life Run-off Servicing • Solid performance • Will benefit from Alico mandate


Core values

ExcellenceWe recruit, retain and develop highly skilled,

technically excellent professional staff

PartnershipWe have a partnership mind-set and work closely with

our clients to deliver mutually beneficial outcomes

QualityWe have genuine pride in delivering high quality work. We live by our reputation in professional services and it

is this focus that underpins our offering to clients

SupportWe work within a supportive, collegiate culture across

the Group


Income statement

2727

£m 2011 2010

Revenue

Gain on bargain purchase

Expenses

102.5

-

(91.6)

99.1

0.5

(83.1)

Adjusted operating profit

Associates and JVs

Net finance costs

10.9

0.1

(1.8)

16.5

0.2

(2.1)

Adjusted profit before tax 9.2 14.6

Tax (1.8) (1.9)

Adjusted profit after tax 7.4 12.7

Non-controlling interests 0.6 (3.9)

Earnings 8.0 8.8

Adjusted EPS 19.86p 22.00p


Note: Adjusted profit and earnings per share figures include adjustments to present business performance excluding non-recurring items and

intangible charges as follows: charges for amortisation of customer relationship intangibles £1.8m (2010: £2.1m), CEO transition costs £0.7m (2010:

nil) and the loss on disposal of the Group’s interest in the Crescendo joint venture £0.3m (2010: nil).

Tax

Charles Taylor Consulting plc Results 2011 23 March 2012 28

2011 2010

Tax at main UK rate (£m) 1.7 3.5

Tax effect of overseas profits (£m) (1.2) (1.6)

Deferred tax (£m) (0.1) (1.2)

Effect of non-deductible items (£m) 0.7 0.8

Prior years’ adjustments (£m) 0.4 0.4

Other reconciling items (£m) 0.3 -

Tax charge (£m) 1.8 1.9

Headline tax rate on statutory PBT (%) 28.4 15.2

Underlying tax rate1 on adjusted PBT (%) 18.5 19.9

1: Calculated after underlying adjustments as follows:

2011 2010

New deferred tax asset recognition 0.3 1.4

PYAs (0.4) (0.4)

Total (0.1) 1.0

Segmental balance sheet

Charles Taylor Consulting plc Investor presentation 2011 23 March 2012 29

At 31 December 2011 £m At 31 December 2010 £m

Professional

Services

Run-off Group Professional

Services

Run-off Group

Management Services business 7.1 7.1 5.2 5.2

Adjusting Services business 96.2 96.2 98.8 98.8

Insurance Support Services business 27.5 27.5 36.9 36.9

Unallocated assets and eliminations 29.0 29.0 21.1 21.1

Insurance Companies Run-off

business – 347.4 347.4 – 274.0 274.0

Total assets 159.8 347.4 507.2 162.0 274.0 436.0

– Non-current assets 63.5 3.9 67.4 66.3 4.9 71.2

– Current assets 96.3 343.5 439.8 95.7 269.1 364.8

Total assets 159.8 347.4 507.2 162.0 274.0 436.0

Current liabilities (71.5) (290.7) (362.2) (72.3) (218.2) (290.5)

Deferred consideration – (2.0) (2.0) – (1.2) (1.2)

Net current assets 24.8 50.8 75.6 23.4 49.7 73.1

Non-current liabilities (59.5) (0.3) (59.8) (49.1) (0.7) (49.8)

Deferred consideration – (14.4) (14.4) (0.8) (16.3) (17.1)

Total liabilities (131.0) (307.4) (438.4) (122.2) (236.4) (358.6)

Net assets 28.8 40.0 68.8 39.8 37.6 77.4

Non-controlling interests (1.2) (35.4) (36.6) (0.5) (36.2) (36.7)

Equity attributable to owners of the

Company 27.6 4.6 32.2 39.3 1.4 40.7

Charles Taylor Consulting plc Results 2011 23 March 2012

Cash flow from operations

£m 2011 2010

Operating profit1

Insurance Companies Run-off loss/ (profit)

8.5

0.1

14.6

(5.9)

Operating profit excluding Insurance Companies Run-off

Gain on bargain purchase

Depreciation

Intangible amortisation2

Net cash from Insurance Companies Run-off

Receivables (increase)/decrease

Payables increase

Other non cash2

Tax

Interest

8.6

-

1.9

2.5

1.1

(0.2)

1.4

(1.8)

(1.6)

(1.8)

8.7

(0.5)

1.9

2.7

1.8

3.0

1.3

(2.5)

(2.1)

(1.9)

Net cash flow from operations 10.1 12.4

1: Statutory unadjusted profit

2: Excluding Insurance Companies Run-off

3030

Reconciliation of non-GAAP financial

measures

31

2011 2010

Statutory profit before tax (£m) 6.4 12.5

Customer relationships amortisation (£m) 1.8 2.1

Non-recurring items (£m):

Loss on disposal of Crescendo

CEO recruitment and transition costs

0.3

0.7

-

-

Total adjustments (£m) 2.8 2.1

Adjusted profit before tax (£m) 9.2 14.6

Statutory earnings per share (p) 12.79 16.79

Adjusted earnings per share (p) 19.86 22.00


making a fresh start - charles taylor plc · 12/31/2011 · • final dividend 6.75p, full year...

Documents