Jelf bids to double size
Article Date: Feb 21 2006Corporate insurance, financial services and healthcare intermediary Jelf Group is buying complementary insurance broker Goss Group for up to £8.9 million.
Bristol-based Jelf has agreed to pay up to £4.2 million in new shares and £2 million in cash initially for Reading-headquartered Goss, to create 'a leading force in the commercial insurance, corporate healthcare and employee benefit markets in the south of England and Wales'. If Goss reaches certain commercial targets over the next two years, AIM-quoted Jelf will pay another £2.7 million in cash to the vendors.
At the same time, Jelf, whose previous acquisitions helped it double pre-tax profits to £1 million in the year to September on £11.3 million turnover, is raising £7.3 million through a placing at 106p arranged by broker JM Finn. The issue has been significantly oversubscribed and the funds will be used to help the acquisition and repay Goss's debts.
After these operations, Goss chairman Michael King will emerge with a seat on the board and 12.1 per cent of the enlarged group, slightly more than Jelf's chairman, Christopher Jelf. Goss made £1.3 million earnings before tax, interest, depreciation and amortisation in 2004 on £10 million turnover and £1.2 million in the first nine months of last year on £7.6 million turnover and so the deal will virtually double Jelf's revenues.
Alex Alway, Jelf's chief executive, argues the strategy behind the Goss deal is 'compelling'. As well as making an 'excellent fit in geography and people', he claims it will offer 'enhanced margins' from the enlarged group's 'increased buying power, identified cost savings and multiple cross-selling opportunities'.
JM Finn analysts suggest the inclusion of Goss could help the enlarged Jelf more than double pre-tax profits this year to £3 million on £20.5 million turnover, with £4.6 million pre-tax on the cards for 2006-07. That suggests current earnings of 11p, rising to 13.1p in 2007, putting the shares at 115p on an undemanding prospective p/e ratio of 10.4, falling to 8.75.
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