Jelf wins US backer

New York private equity concern Capital Z is putting £11 million into financial broker Jelf Group and taking investment group 3i’s near-28 per cent stake.

Capital Z is participating in a £19 million placing of ordinary shares and non-voting convertible shares from Jelf at a price of 36p. The US group will emerge with at least 25 per cent but less than a bid-triggering 30 per cent of the AIM-quoted company.

The proposed fund raising coincides with news that Jelf turned a £3.5 million profit into an £11.3 million loss on turnover up 11 per cent to £70.3 million in the year to last September. Earnings before interest, tax, depreciation and amortisation slipped nearly 20 per cent to £8.1 million, which Jelf says reflects the ‘difficult economic conditions experienced by our clients'.

Efforts to streamline the company took their toll on the pre-tax figure, after £4.7 million of reorganisation and rationalisation costs, £4.7 million of intangible fixed assets amortisation and £7.5 million of impairment charges. Chief executive Alex Alway says Jelf’s employee benefits side did well, while insurance was somewhat down but ‘resilient’ in difficult circumstances.

He stresses ‘positive developments’, including ‘£15 million off net debt’ and £24 million of new senior debt facilities. Rationalisation costs hit 2008-09’s results, but the benefits will show through later. Encouraged by support from Capital Z and others, Jelf is investing in a new 15,000 sq ft office in Manchester and maintaining its expansionist stance. Alway says he is looking for 'bolt-on acquisitions’.

Jelf shares, which traded at around 250p three years ago, but hit a 34p low over the past 12 months, now stand at 43.5p, up 0.56p today and valuing the company at £21.4 million. Capital Z’s investment could support a speculative recovery punt for the bold.