TIDMCPP
RNS Number : 9253I
CPPGroup Plc
31 March 2015
CPPGROUP PLC
31 MARCH 2015
FULL YEAR REPORT
FOR THE YEAR ENDED 31 DECEMBER 2014
CPPGroup Plc - Full year report for the year ended 31 December
2014
CPPGroup Plc (CPP or the Group) is an assistance business
operating internationally within the financial services,
telecommunications and travel sectors. CPP primarily operates a
business-to-business-to-consumer (B2B2C) business model providing
its assistance products to customers through Business Partners and
direct to consumer. The Group's core assistance and travel service
products are designed to make everyday life easier to manage.
Overview
-- Significant progress made to strengthen and secure the future of the Group
o Successfully secured new equity funding of GBP20.0 million
(GBP17.9 million net of expenses), significantly restructured the
Group's liabilities and refinanced the Group's debts in early
2015
o Substantially reduced the cost base and restructured the
business
o Progressed product development and new IT system plans
o Evolving digital capabilities
o Closure of the UK Scheme of Arrangement
-- Trading performance
o Return to underlying operating profit at GBP0.5 million (2013:
GBP1.8 million loss)
o Group revenue of GBP108.8 million (2013: GBP178.0 million)
o Loss for the year from continuing and discontinued operations
reduced to GBP6.7 million (2013: GBP32.9 million)
o Renewal rates stronger at 71.4%, on a moving annual total
basis, from half year position of 69.5%
o Live policy base lower at 5.1 million, from half year position
of 6.1 million
-- Net funds position of GBP7.9 million (2013: GBP44.3 million);
reduced significantly as a result of funding the UK Scheme of
Arrangement (see footnote 5 to highlights table for analysis of net
funds). The successful completion of the equity raise and debt
restructure in February 2015 has improved this position
significantly.
-- Medium term strategic business plan focused on trading from a platform for growth.
-- Outlook: The Group is focused on its strategic priorities,
which support its existing revenue, new income generation and
growth ambitions. Challenges and risks remain in the execution and
delivery of the Group's strategic plans and further action is
required before the business achieves its full potential.
Eric Anstee, Executive Chairman, commented:
"CPP has come a long way in 2014. The UK Scheme of Arrangement
was a significant undertaking and its completion marked the closure
of a challenging period in the Group's history. The subsequent
restructuring and substantial new investment has set the Group on a
new path that I believe will bring new opportunities for this
business.
"I was appointed to the Board at the end of 2014 and, despite
the significant challenges that the Group traversed last year, I
have been struck by the renewed energy and enthusiasm within the
Company. CPP has many strengths - longstanding relationships with a
broad range of Business Partners around the world, an international
footprint and people that have the ability to develop important
products that customers like and trust.
"These qualities are the foundations on which we will continue
to build CPP's future in the year ahead. The future will be
digital-led and we have recently announced critical investment in a
new IT system that will support our ambitions in this area. This is
an important first step on a new path for CPP, on which we are
focused on taking action to drive improved business performance and
maximise value for our shareholders."
Highlights - Continuing operations
Year ended 31 December 2014 31 December 2013
--------------------------------------------------------- ----------------- -----------------
Revenue (GBP millions) 108.8 178.0
Operating profit/(loss) (GBP millions)
- Reported (5.8) (39.3)
- Underlying1 0.5 (1.8)
Loss before tax (GBP millions)
- Reported (7.7) (43.2)
- Underlying1 (1.3) (5.7)
Loss after tax (GBP millions)
- Reported (6.0) (45.3)
- Underlying(2) (0.3) (8.0)
Loss for the year (GBP millions) 3 (6.7) (32.9)
Reported loss per share (pence)
- Basic and diluted (3.48) (26.43)
Cash (used in)/generated by operations (GBP millions) 4 (33.8) 23.0
Net funds (GBP millions) 5 7.9 44.3
1. Underlying operating profit/(loss) and underlying loss before
tax exclude exceptional items of GBP6.3 million (2013: GBP37.5
million). Further detail is provided in note 5 to the condensed
financial statements.
2. Underlying loss after tax excludes exceptional items net of
tax of GBP5.7 million (2013: GBP37.3 million). The tax effect of
the exceptional items is GBP0.6 million (2013: GBP0.2 million).
Further detail is provided in note 5 to the condensed financial
statements.
3. Loss for the year includes (loss)/profit after tax from
continuing and discontinued operations.
4. Includes cash flows from continuing and discontinued operations.
5. Net funds comprise cash and cash equivalents of GBP40.6
million (2013: GBP66.9 million) partially offset by borrowings of
GBP32.7 million (2013: GBP22.6 million). Cash and cash equivalents
includes cash held for regulatory purposes of GBP21.5 million
(2013: GBP27.8 million) and cash restricted by the terms of the
VVOP within the UK's regulated entities of GBP13.4 million (2013:
GBP32.7 million). Whilst not available to the wider Group, the
restricted cash is available to the regulated entity in which it
exists including for operational and residual customer redress
purposes.
A video with the Chief Financial Officer and Chief Operating
Officer is available on the Group's website at
www.cppgroupplc.com.
Enquiries
Investor Relations
CPPGroup Plc
Craig Parsons, Chief Financial Officer
Tel: +44 (0)1904 544372
Helen Spivey, Head of Corporate and Investor Communications
Tel: +44 (0)1904 544387
Nominated Adviser and Broker
Numis Securities Limited: Robert Bruce; Stuart Skinner; Charles
Farquhar
Tel: +44 (0)20 7260 1000
Media
Tulchan Communications: Martin Robinson
Tel: +44 (0)20 7353 4200
For more information on CPP visit www.cppgroupplc.com
REGISTERED OFFICE
CPPGroup Plc
Holgate Park
York
YO26 4GA
Registered number: 07151159
EXECUTIVE CHAIRMAN'S STATEMENT
Introduction
I worked with the previous Chairman and the Board in late 2014
to formalise plans to improve the financial position of the Group
and joined the Board in December 2014. I was appointed Executive
Chairman in February 2015 and I am pleased to have joined CPP as it
embarks on the next stage of its development as an international
assistance business. Significant progress has been made and
positive steps achieved during 2014 to restructure, stabilise and
strengthen the Group.
Our progress
The Group has continued its journey to stabilise the business
and develop its transformation programme. I am encouraged by the
considerable progress that has been made to add value to the Group
and ultimately support the successful equity raise and substantial
improvement in the financial position of the business in February
2015. As a result, we are in a stronger position, with a stable
foundation and renewed confidence that provides us with the
opportunity to take the Group forward for the future.
During 2014, the actions taken and significant milestones
achieved successfully repositioned the Group for the future and
comprised:
-- formalising essential plans to restructure the balance sheet
and strengthen the capital position of the Group at the end of the
year;
-- substantially reducing the cost base, with administrative
costs circa GBP20 million lower in the year;
-- restructuring and consolidation resulting in the closure of
two out of three offices in the UK and further closures in France,
Singapore, Hong Kong and Brazil;
-- the sale of our shareholding in Home3 (a joint venture with Mapfre);
-- improving processes and governance;
-- strengthening regulatory relationships and agreement with the
FCA to enable an initial change to the UK Voluntary Variation of
Permissions (VVOP), reverting to an industry standard 'cooling off'
period for renewing policies;
-- progressing product development plans and as announced in
March 2015, selecting a new IT system from SSP Limited to provide a
new international single platform; and
-- closure of the UK Scheme of Arrangement (UK Scheme) claims period.
In addition, our focus on evolving and increasing our digital
capabilities across the Group during the year included:
-- launching new online members' areas and acquisition sites in
a number of countries, with the remaining countries to follow in
2015;
-- launching Airport Angel membership sales online and upgrading the mobile app;
-- launching sales through ATMs in Turkey; and
-- developing opportunities in India relating to Mobile Phone Protection products.
A critical step to secure our future was achieved at the
beginning of 2015, as I noted in my opening remarks. I am pleased
that the Group successfully secured new equity funding of GBP20.0
million (GBP17.9 million net of expenses), significantly
restructured the Group's liabilities, refinanced the Group's debts
and commenced trading on the Alternative Investment Market (AIM) of
the London Stock Exchange. As a result, and following the closure
of the UK Scheme, the future of the Group is now more certain. CPP
today is providing an improved service to our 5.1 million
policyholders internationally and I look forward to building on
this success for our people, customers, Business Partners and
shareholders. In particular, during 2015 and as previously
announced, the Group will further invest in its digital interfaces
and new core IT platform across its international operations.
Our performance
The Group's headline financial results for 2014 remained
constrained, reflecting the overall challenges of our operating
environment during the year, particularly in the UK. Revenue
reduced to GBP108.8 million (2013: GBP178.0 million) whilst
underlying operating performance which excludes exceptional items
improved to a profit of GBP0.5 million (2013: GBP1.8 million loss).
Group exceptional items in the period were GBP6.3 million (2013:
GBP37.5 million), mainly comprising further residual customer
redress and associated costs and restructuring costs. As a result,
the Group reduced its reported operating loss to GBP5.8 million
(2013: GBP39.3 million). At a Group level, renewal rates for the
year were stronger at 71.4% (2013: 69.4%) and Group live policies
totalled 5.1 million (2013: 7.1 million).
The Group worked hard to ensure it had sufficient financial
resources to complete the Scheme in the UK and the closure of the
Scheme represented a significant milestone for the business. Its
impact, nonetheless, was considerable and consequently, the Group's
financial resources and liquidity were significantly reduced. The
Group made positive progress regarding its financial stability
towards the end of 2014 and in February 2015, successfully secured
new equity funding of GBP20.0 million, restructured the Group's
liabilities and refinanced the Group's debts. This has
significantly improved our balance sheet position.
The Directors have decided not to recommend the payment of a
dividend. The Board continues to believe it is not appropriate to
pay a dividend until cash generated by operating activities is more
than adequate to cover the Group's future investment plans.
Partnerships remain a key priority and the Group placed emphasis
on engaging and improving current Business Partner relationships
and developing new commercial opportunities during 2014. It is
encouraging that during the year, new contracts were secured with
new Business Partners and new campaigns launched with established
Business Partners across the Group, internationally.
Our Board
In August 2014, Duncan McIntyre announced his intention to step
down as Non-Executive Chairman and in January 2015, I was appointed
as Non-Executive Chairman. I would like to thank Duncan for his
leadership, guidance and support to the Group, which has
successfully enabled CPP to reposition for the future. In February
2015, Brent Escott, Chief Executive Officer stepped down from his
role. The process to identify a new Chief Executive Officer is
on-going and in the interim, I have assumed the role of Executive
Chairman.
Following the successful conclusion of the General Meeting in
January 2015, Les Owen stepped down as an Independent Non-Executive
Director and a process to identify a suitable successor is well
advanced.
In January 2015, Shaun Astley-Stone was appointed as Chairman of
the Risk & Compliance Committee.
The Board is committed to continue to maintaining and
strengthening a strong governance framework throughout the
business, supported by our Board Committees.
Our plan going forward
With greater certainty as we move into 2015, we can now begin to
finalise and implement our strategic business plan, focused on
trading from a platform for growth.
In the medium term, in order to deliver sustainable, attractive
returns, the Group is focused on the following four strategic
priorities, which support its existing revenue, new income
generation and growth ambitions. These are to;
-- implement an enhanced market-led business model;
-- innovate and leverage existing capacity and resource;
-- optimise financial performance; and
-- trade from an improved and effective operating environment,
embracing new digital technology to allow customers multi-channel
access to services.
Work is well advanced with the Group's transformation plan as
well as its product, digital and commercial development plans,
which support the four strategic priorities and will allow CPP to
regrow and evolve as an international assistance business.
The core areas of focus include: maximising value from the
established product portfolio; launching assistance products and
providing channel capability, particularly in the digital and
mobile space which further develop and increase the Group's digital
capabilities and support customers and Business Partners resulting
in lower cost service delivery and enhanced customer satisfaction;
replacing the existing IT systems to deliver a modern, cost
effective IT infrastructure; enhancing consistency of controls and
governance throughout the Group; simplifying and improving business
processes that support product innovation and testing pilot
products through to launch; and further developing our range of
international Business Partners.
This is a significant change programme that will support the
Group's efforts to embed and trade from a platform for growth and
importantly, as the Group works towards applying to remove the
restrictions on the regulatory selling and other permissions under
the UK VVOP.
We intend to draw on the core competencies across the Group
internationally, to develop new revenue streams to support future
growth.
Looking ahead
The Group is stronger than a year ago and with a medium term
business plan supported by new investment, a much reduced cost base
and the confidence of stakeholders, we can now drive the business
forward.
Our core priority is focused on our strategy for growth, which
will enable us to maximise the value from the existing business and
realise the new commercial opportunities that exist. Much work will
continue to take place as we embed our plans and complete the
actions required to transform the Group, which in time will create
a sustainable business proposition for the long term.
I look forward to progressing the Group's strategic plans and a
successful 2015. I would like to thank everyone at CPP for their
hard work and also express my thanks to new and existing
shareholders for their support and in particular our Business
Partners and Lenders for their support and on-going commitment.
Eric Anstee
Executive Chairman
30 March 2015
OPERATING REVIEW
The Group operates internationally as three regions: the UK and
Ireland; Europe and Latin America; and Asia Pacific.
Constant
2014 2013 currency
Year ended GBP'm GBP'm Growth growth
------------------------- ------ ------ ------ ---------
UK and Ireland
========================= ====== ====== ====== =========
- Revenue 69.7 129.0 (46)% (46)%
========================= ====== ====== ====== =========
- Underlying operating
loss(1) (4.4) (8.1) 46% 46%
========================= ====== ====== ====== =========
Europe and Latin America
========================= ====== ====== ====== =========
- Revenue 32.5 42.6 (24)% (18)%
========================= ====== ====== ====== =========
- Underlying operating
profit(1) 5.2 7.1 (28)% (25)%
========================= ====== ====== ====== =========
Asia Pacific
========================= ====== ====== ====== =========
- Revenue 6.7 6.4 3% 11%
========================= ====== ====== ====== =========
- Underlying operating
loss(1) (0.2) (0.8) 72% 73%
------------------------- ------ ------ ------ ---------
1 Excluding exceptional items.
UK and Ireland
Financial performance
Revenue for 2014 decreased 46% on a constant currency basis
compared to the same period in 2013, to GBP69.7 million (2013:
GBP129.0 million). Underlying operating loss has reduced for the
full year to GBP4.4 million (2013: GBP8.1 million loss).
Review
Operating in the UK and Ireland during 2014, the region accounts
for 64% of Group full year revenue. Performance during 2014
continued to reflect the on-going restriction on retail sales,
reduced Card Protection and Identity Protection renewal revenues
and the impact of historical Business Partner losses. Airport
Angel, our travel services business, continued to develop new
Business Partner opportunities and will continue to make
improvements whilst establishing profitable growth opportunities
both in the UK and internationally. During the year, the region
made good progress in establishing the appropriate structure and
operating capabilities, resources and reducing the cost base so
that it reflects the current scale of the business. In Ireland,
renewal performance has been in line with expectations.
Europe and Latin America
Financial performance
Revenue has decreased 18% on a constant currency basis compared
to the same period in 2013, to GBP32.5 million (2013: GBP42.6
million). Underlying operating profit has consequently reduced for
the full year to GBP5.2 million (2013: GBP7.1 million), 25% lower
on a constant currency basis.
Review
During 2014, this region operated in Spain, Italy, Portugal,
France, Germany, Turkey, Mexico and Brazil; Europe and Latin
America accounts for 30% of Group full year revenue. Performance
during the year in Europe has been constrained, reflecting reduced
renewal rates and campaign delays, although in Mexico revenue
continued to improve. As previously announced, the Group completed
the exit from France at the end of the year and following an
evaluation of the market opportunities, the Group will exit Brazil
in 2015.
Asia Pacific
Financial performance
Revenue is 11% higher on a constant currency basis compared to
the same period in 2013, at GBP6.7 million (2013: GBP6.4 million).
The underlying operating loss has reduced for the full year to
GBP0.2 million (2013: GBP0.8 million).
Review
During 2014, this region operated in India, China, Malaysia,
Hong Kong and Singapore; Asia Pacific represents 6% of Group full
year revenue. India and China continued to increase revenue during
the period. A new pilot product in India within the Mobile Phone
sector was successfully tested during the year. In Malaysia,
revenue continued to decline following delays to new campaign
launches and the Group continues to evaluate this market for future
growth opportunities. The sale of the Card Protection book in
Singapore was completed as planned during the year. Plans are
underway to exit from Hong Kong to right-size in accordance with
the reduced scale of the business.
FINANCIAL REVIEW
Overview
The equity raise and debt restructure, which completed in
February 2015, is a significant milestone as the Group rebuilds.
The transaction involved an equity raise of GBP20.0 million
(GBP17.9 million net of expenses), part of which was used to reduce
the bank debt from GBP13.0 million to GBP5.0 million and part to
settle in full the existing commission deferral balance of GBP20.9
million for a compromise payment of GBP1.3 million and further
deferral of commission of up to GBP1.3 million. The improved
financial stability this transaction provides underpins the next
stage of the Group's development.
In 2014, the Group experienced another difficult year in trading
performance. The UK Scheme had a substantial direct impact on the
UK business, resulting in redress payments of approximately GBP32.0
million and a reduction in the Group's existing policy base. It is
recognised that right-sizing the UK business remains crucial and
consequently in the year it was decided to close two of the three
office sites in the UK. Whilst there are some exceptions, the
overseas markets did not deliver growth with the southern European
economic climate, in particular, continuing to have an impact. In
the year, the decision was made to exit from Hong Kong and Brazil
and as planned operations in France have now closed and the sale of
the Card Protection book in Singapore has completed. We continue to
review our international presence.
2014 2013 Change
---------------------------------------- ------ ------ ------
Revenue (GBP millions) 108.8 178.0 (69.2)
---------------------------------------- ------ ------ ------
Gross profit (GBP millions) 48.0 65.9 (17.8)
======================================== ====== ====== ======
Other administrative expenses (GBP
millions) (47.5) (67.7) 20.2
---------------------------------------- ------ ------ ------
Underlying operating profit/(loss)
(GBP millions) 0.5 (1.8) 2.3
======================================== ====== ====== ======
Exceptional items (GBP millions) (6.3) (37.5) 31.2
---------------------------------------- ------ ------ ------
Reported operating loss (GBP millions) (5.8) (39.3) 33.5
======================================== ====== ====== ======
Net finance costs (GBP millions) (1.9) (3.9) 2.0
---------------------------------------- ------ ------ ------
Reported loss before tax (GBP millions) (7.7) (43.2) 35.6
---------------------------------------- ------ ------ ------
Underlying loss per share (pence)
Basic and diluted (0.17) (4.69) 4.52
---------------------------------------- ------ ------ ------
Net funds (GBP millions) 7.9 44.3 (36.4)
---------------------------------------- ------ ------ ------
Summary
Group revenue has declined by 39% to GBP108.8 million as a
result of revenue reducing by 46% in the UK and Ireland and 24%
(18% on a constant currency basis) in Europe and Latin America.
Revenue in Asia Pacific has grown marginally by 3% (11% on a
constant currency basis).
The underlying operating profit in the year was GBP0.5 million,
which is a GBP2.3 million improvement on 2013. This improvement is
largely a result of the actions taken by the Group during 2013 and
2014 to reduce its cost base to align with the Group's operational
size, which along with reduced depreciation charges following the
2013 asset impairments, has seen a reduction in administrative
costs of circa GBP20 million in the year. The measures taken in
2014 will also continue to reduce the cost base in 2015.
Exceptional items of GBP6.3 million have been recorded in the
year, mainly reflecting further residual customer redress activity
of GBP3.0 million and restructuring costs resulting from the
Group's cost saving measures of GBP2.6 million.
The exceptional items contributed to a reported operating loss
of GBP5.8 million (2013: GBP39.3 million).
Net interest and finance costs of GBP1.9 million (2013: GBP3.9
million) were 52% lower than 2013, reflecting the costs incurred in
the prior year relating to the six month extension of the loan
facility, which preceded the agreement of a three year term.
As a result, the reported loss before tax was GBP7.7 million
(2013: GBP43.2 million) and underlying loss before tax was GBP1.3
million (2013: GBP5.7 million).
Underlying loss after tax from continuing operations, excluding
exceptional items, was GBP0.3 million (2013: GBP8.1 million).
Exceptional items after tax during the year were GBP5.7 million.
This resulted in a reported loss after tax from continuing
operations of GBP6.0 million (2013: GBP45.3 million).
Discontinued operations, which represent the Home3 joint
venture, reported a loss after tax of GBP0.8 million (2013: GBP12.5
million profit). The comparative includes trading and the profit on
disposal of the North American business of GBP13.3 million. The
disposal of the North American business completed in May 2013.
Underlying loss per share from continuing operations has
improved from 4.69 pence in 2013 to 0.17 pence for 2014. The basic
loss per share from continuing operations has also improved from
26.43 pence in 2013 to 3.48 pence in 2014.
Key Performance Indicators
2014 2013 Change
----------------------------------- ----- ----- ------
Live policies (millions)
(see table below) 5.1 7.1 (29)%
=================================== ===== ===== ======
Annual renewal rate (%) 71.4 69.4 2.0
=================================== ===== ===== ======
Revenue by major product
(GBP millions) (see table
below) 108.8 178.0 (39)%
=================================== ===== ===== ======
Cost/income ratio (%) 70.4 70.7 0.3
=================================== ===== ===== ======
Underlying operating profit/(loss)
margin (%) 0.5 (1.0) 1.5
----------------------------------- ----- ----- ------
Group cash balances (GBP millions)
(see table below) 40.6 66.9 (39)%
----------------------------------- ----- ----- ------
Live policies (millions) 2014 2013 Change
-------------------------------- ---- ---- ------
Retail assistance policies 2.7 3.8 (29)%
================================ ==== ==== ======
Retail insurance policies 0.1 0.3 (71)%
================================ ==== ==== ======
Packaged and Wholesale policies 2.2 3.0 (25)%
-------------------------------- ---- ---- ------
Total 5.1 7.1 (29)%
-------------------------------- ---- ---- ------
Revenue by major product
(GBP millions) 2014 2013 Change
------------------------------- ----- ----- ------
Retail assistance revenue 82.7 117.1 (29)%
=============================== ===== ===== ======
Retail insurance revenue 10.2 28.2 (64)%
=============================== ===== ===== ======
Packaged and Wholesale revenue 15.1 32.3 (53)%
------------------------------- ----- ----- ------
Non-policy revenue 0.8 0.5 56%
------------------------------- ----- ----- ------
Total 108.8 178.0 (39)%
------------------------------- ----- ----- ------
Group cash balances
(GBP millions) 2014 2013 Change
--------------------- ---- ---- ------
Regulated cash 21.5 27.8 (23)%
===================== ==== ==== ======
VVOP restricted cash 13.4 32.7 (59)%
===================== ==== ==== ======
Free cash 5.7 6.4 (11)%
--------------------- ---- ---- ------
Total 40.6 66.9 (39)%
--------------------- ---- ---- ------
Live policies: the total number of policies that are available
to use by policyholders. The live policy base is 2.0 million lower
than 31 December 2013, due to UK factors including declining retail
Card Protection and Identity Protection policies, which include the
impact of policies cancelled through the Scheme and a reduction in
Packaged and Wholesale policies in the UK following the loss of a
historical Business Partner contract. Live policies outside of the
UK have declined marginally.
The Group annual renewal rate: the net amount of annual retail
policies remaining on book after the scheduled renewal date, as a
proportion of those available to renew. The annual renewal rate for
2014 has increased by 2.0 percentage points since 31 December 2013,
mainly due to a high level of cancellations in the prior year
resulting from adverse media attention prior to commencement of the
UK Scheme; and the positive impact of an initial change to the UK
VVOP in the latter part of 2014, reverting to an industry standard
'cooling off' period for UK renewing policies. The annual renewal
rate does not include cancellations that have occurred during the
UK Scheme, as they are not considered available to renew in the
normal course of business. If UK Scheme cancellations were included
the annual renewal rate would be 5.6 percentage points lower at
approximately 65.8%.
Revenue by major product: revenue from the Group's major product
offerings (defined in note 4 of the condensed financial
statements). Revenue from retail assistance policies has declined
compared to 2013 reflecting the decline in Card Protection and
Identity Protection renewals in the UK. The continued new retail
sales restrictions associated with the UK VVOP restrict the Group's
ability to grow retail revenue. Retail insurance and Packaged and
Wholesale revenue has declined in the year due to the impact of
lost Business Partner contracts in the UK.
Cost/income ratio: cost of sales (excluding commission), and
other administrative expenses as a percentage of revenue. Our
cost/income ratio has remained broadly stable year-on-year largely
due to the impact of declining Card Protection and Identity
Protection renewal revenue in the UK, being offset by a significant
reduction of circa GBP20 million year-on-year in other
administrative costs following the actions taken by the Group in
2013 and 2014 to reduce its cost base.
Underlying operating profit/(loss) margin: Operating
profit/(loss) before exceptional items as a percentage of revenue.
Our underlying operating margin has increased 1.5 percentage points
due mainly to the actions taken by the Group in 2013 and 2014 to
reduce its cost base which has resulted in other administrative
costs being circa GBP20 million lower year-on-year. This is partly
offset by a reduction in Card Protection and Identity Protection
renewal revenue in the UK.
Group cash balances: Allocated between regulatory funds, VVOP
restricted funds and free cash available to utilise throughout the
Group. Regulatory and VVOP restricted funds have decreased
year-on-year mainly reflecting the funding of the UK Scheme in Card
Protection Plan Ltd (CPPL). The free cash has declined marginally,
which reflects cash used by the wider Group compared to the cash
generated principally by its overseas operations and approved
distributions from one of our regulated entities. The decline is
mainly due to Group overhead requirement and continued investment
in developing markets. This position has improved in February 2015
following completion of the equity raise.
Total customer redress and associated costs
The UK Scheme closed for claims on 30 August 2014 and the value
of Scheme redress claims in respect of direct sales made by the
Group was GBP32.0 million.
The Group provided an additional GBP3.0 million in the year
reflecting the latest estimate of residual customer redress
activity. The total cost provided for customer redress and
associated costs from 2011 to 2014 is GBP72.8 million, of which
GBP14.9 million remains not utilised, representing GBP6.4 million
in remaining customer redress and associated costs and GBP8.5
million in respect of the outstanding regulatory fine levied by the
FCA in November 2012 (the remaining instalments are expected to be
paid in 2016).
Tax
In 2014, there was a tax credit on continuing operations of
GBP1.7 million (2013: GBP2.1 million charge) principally due to
deferred tax credits in the UK and Spain. This is partially offset
by current tax charges relating to profitable overseas
jurisdictions; no further relief is available on other Group
losses. Similar to 2013, the effective tax rate is not a
representative measure.
Discontinued operations
On 24 March 2014, the Group completed the disposal of its share
of the Home3 joint venture to Mapfre. This discontinued operation
reported a loss after tax of GBP0.8 million, which includes GBP1.1
million loss after tax in relation to historical trading results
prior to disposal, partially offset by GBP0.3m profit on
disposal.
Cash flow(1) and net funds
2014 2013
GBP'm GBP'm
-------------------------------------------- ------ ------
Underlying operating profit/(loss)2 0.5 (1.8)
============================================ ====== ======
Exceptional items3 (5.5) (23.6)
============================================ ====== ======
Operating profit from discontinued
North American operation - 3.8
============================================ ====== ======
Depreciation, amortisation and other
non-cash items 4.4 9.8
============================================ ====== ======
(Decrease)/increase in provisions (29.4) 8.4
============================================ ====== ======
Working capital (3.8) 26.4
-------------------------------------------- ------ ------
Cash (used in)/generated by operations (33.8) 23.0
============================================ ====== ======
Tax 0.9 (2.8)
-------------------------------------------- ------ ------
Operating cash flow (32.9) 20.2
============================================ ====== ======
Capital expenditure (including intangibles) (0.6) (2.8)
============================================ ====== ======
Investment in joint venture (1.0) (0.8)
============================================ ====== ======
Net proceeds from disposal of discontinued
operations 0.3 18.1
============================================ ====== ======
Net finance costs (0.1) (0.7)
============================================ ====== ======
Commission deferral compromise and
associated costs (0.2) -
============================================ ====== ======
Costs of refinancing - (4.6)
============================================ ====== ======
Share issue costs (0.5) -
-------------------------------------------- ------ ------
Net movement in cash/borrowings4 (35.0) 29.4
-------------------------------------------- ------ ------
Net funds5 7.9 44.3
-------------------------------------------- ------ ------
1. Cash flow from continuing and discontinued operations.
2. Continuing Group operating profit/(loss) excluding exceptional items.
3. Excludes exceptional impairments that are non-cash items
GBP0.1 million (2013: GBP13.9 million) and
commission deferral compromise and associated costs GBP0.7
million (2013: GBPnil).
4. Excluding effect of exchange rates, capitalised interest and
amortisation of debt issue costs.
5. Includes unamortised debt issue costs.
Cash used in operations amounted to GBP33.8 million (2013:
GBP23.0 million cash generated by operations) and results primarily
from funding the UK Scheme. Additionally, the prior year benefited
from a one-off reduction in working capital. Cash, excluding
movements in borrowings, has also decreased by GBP35.0 million
following UK Scheme funding.
As a result, as expected the Group's net funds position has
decreased in the year by GBP36.4 million to GBP7.9 million. The
successful completion of the equity raise and debt restructure in
February 2015 has improved this position significantly. The net
funds figure includes cash balances of GBP34.9 million in the UK's
regulated entities, CPPL and Homecare Insurance Limited (HIL).
These cash balances cannot be distributed to the wider Group as
they are held either for regulatory purposes or are restricted by
the terms of the VVOP. The restricted cash is, however, available
to use in the regulated entity in which it exists.
Dividend
The Directors have decided not to recommend the payment of a
dividend. Furthermore, the Board continues to believe it is not
appropriate to pay a dividend until cash generated by operating
activities is more than adequate to cover the Group's future
investment plans.
Balance sheet and financing
At 31 December 2014, the Group had net liabilities of GBP30.9
million which is an increase of GBP6.6 million from the 2013 net
liabilities position of GBP24.3 million. This position includes
bank borrowings of GBP13.0 million (excluding unamortised debt
issue costs) and borrowings under the commission deferral agreement
of GBP20.7 million (including capitalised interest).
The equity raise and debt restructure which completed in
February 2015, represents a material subsequent event and has
changed the shape of the Group's balance sheet significantly in
2015. In isolation, the transaction will have a beneficial impact
on the Group's existing net liabilities position of approximately
GBP37.1 million. As detailed in the proforma below, existing
borrowings have reduced by approximately GBP26.6 million and the
transaction has provided essential additional capital for the
business of approximately GBP9.7 million. Further detail on the
transaction is provided in note 13 of the condensed financial
statements.
The unaudited proforma statement of consolidated assets below
has been produced for illustrative purposes only and by its nature
addresses a hypothetical situation and, therefore, does not
represent the continuing Group's actual financial position or
results.
Amended Proforma
Business Second and Restated continuing
Equity raise Partner debt Commission Facility Group
31 December (net of expenses) restructure Deferral (note (notes 7,
2014 (Audited) (notes 1,2,3) (note 4) (note 5) 6) 8)
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------- --------------- ----------------- ------------- ---------------- ------------- -----------
Non-current assets 6.9 - - - - 6.9
===================== =============== ================= ============= ================ ============= ===========
Current assets
===================== =============== ================= ============= ================ ============= ===========
Trade and other
receivables 15.7 (1.0) - - - 14.7
===================== =============== ================= ============= ================ ============= ===========
Cash and cash
equivalents 40.6 18.4 (1.3) 1.3 (8.7) 50.3
--------------------- --------------- ----------------- ------------- ---------------- ------------- -----------
Other current
assets 0.7 - - - - 0.7
--------------------- --------------- ----------------- ------------- ---------------- ------------- -----------
Total assets 63.9 17.4 (1.3) 1.3 (8.7) 72.6
--------------------- --------------- ----------------- ------------- ---------------- ------------- -----------
Current liabilities (51.9) 1.1 0.2 - - (50.6)
===================== =============== ================= ============= ================ ============= ===========
Non-current
liabilities
===================== =============== ================= ============= ================ ============= ===========
Bank loans (12.0) - - - 7.2 (4.8)
--------------------- =============== ================= ============= ================ ============= ===========
Commission
deferral
agreement (20.7) - 20.7 (1.3) - (1.3)
--------------------- =============== ================= ============= ================ ============= ===========
Other non-current
liabilities (10.1) - - - 0.5 (9.6)
--------------------- --------------- ----------------- ------------- ---------------- ------------- -----------
Total liabilities (94.7) 1.1 20.9 (1.3) 7.7 (66.3)
--------------------- --------------- ----------------- ------------- ---------------- ------------- -----------
Net
(liabilities)/assets (30.9) 18.5 19.6 - (1.0) 6.3
--------------------- --------------- ----------------- ------------- ---------------- ------------- -----------
1. The cash movement of GBP18.4 million reflects the equity
raise of GBP20.0 million net of the remaining transaction fees to
be paid of GBP1.6 million. (Total transaction fees are expected to
be GBP2.1 million with GBP0.5 million already paid at 31 December
2014).
2. GBP1.1 million current liabilities movement reflects
transaction fees invoiced or accrued at 31 December 2014 but not
paid. The payment of these items is included in the GBP1.6 million
remaining transaction fees to be paid referenced in note 1.
3. GBP1.0 million other receivable movement reflects the costs
incurred at 31 December 2014 that have been transferred to share
premium now the transaction has completed.
4. GBP20.7 million deferred commission balance and capitalised
interest (totalling GBP20.9 million) compromised for a cash payment
of GBP1.3 million.
5. The transaction included further deferral of commission of up to GBP1.3 million.
6. The cash movement of GBP8.7 million comprises bank loan
prepayment in part of GBP8.0 million, prepayment fees of GBP0.5
million (accrued at 31 December 2014) and refinancing fees of
GBP0.2 million. The bank loans movement of GBP7.2 million reflects
the GBP8.0 million loan prepayment net of a GBP0.8 million movement
in unamortised issue costs.
7. The Amended and Restated Facility borrowings of GBP5.0
million are stated net of GBP0.2 million transaction costs which
are capitalised and amortised over the term of the facility.
8. Other than as described above, no adjustment has been made to
the unaudited proforma financial information to reflect trading or
cash flows of the Group subsequent to 31 December 2014.
Craig Parsons
Chief Financial Officer
30 March 2015
RISKS AND UNCERTAINTIES
The Group's risk management framework is designed to identify
and assess the likelihood and consequences of risk and to manage
the actions necessary to mitigate their impact.
The Group has a risk framework that enables risks to be
identified, assessed, controlled and monitored, consistently and
objectively. We continue to progress the implementation of the
framework throughout the Group and revise our risk framework as
necessary to maintain its effectiveness. The key elements of our
framework include: leadership and culture, risk appetites, risk
identification and assessment, management and control of risk
exposures, business incident management process and a robust policy
and minimum standard framework.
Set out below are the known principal risks and uncertainties
which could have a material impact on the Group, together with the
corresponding mitigating actions that have been taken.
Strategic risks
Risk: Transformation.
Status: Increased on prior year.
Nature of risk and potential impact:
The Group has embarked on a significant and wide ranging
transformation programme that includes new offerings/product
development and replacement of the core IT policy platform. This
transformation is vital for our future growth and sustainability.
There are risks that the complexity and nature of these programmes
impact the business adversely, and fails to facilitate the
necessary growth and development of our business.
Mitigation:
The Group has a robust governance and delivery framework which
is applied throughout transformation.
We have an internally and externally resourced programme to
support the evolution of our business strategy.
We regularly assess and review progress and deliverables to
ensure these are being effectively controlled.
Risk: Stability of the Group.
Status: Decreased on prior year.
Nature of risk and potential impact:
There is a risk that the Group could be destabilised by events
that would significantly impact the delivery to time/cost of the
overall strategy.
The Group has specific exposures, for example as a result of a
highly concentrated shareholder base.
Mitigation:
The Board actively engages on a regular basis with our largest
shareholders to mitigate this risk, discussing rationale and
seeking support for the Board and its business plans.
Regulatory risks
Risk: Operating Markets.
Status: No change on prior year.
Nature of risk and potential impact:
The Group operates in regulated markets worldwide. Each business
has different operating models, and as such the impact of any
specific local regulatory/legislative changes may adversely impact
our ability to conduct business in a particular territory. The risk
may be exacerbated as we operate a central IT platform, and product
propositions that are derived from the original model implemented
in the UK.
Mitigation:
The Board has sought to mitigate this risk through further
enhancement of its risk, compliance and governance processes
including the application of minimum standards self-certification,
as well as the recording and tracking of business incidents/risks.
Where appropriate we work with local specialist advisers.
Operational risks
Risk: People and Resources.
Status: Increased on prior year.
Nature of risk and potential impact:
In recent years the Group has lost (either through redundancy or
attrition) a significant number of people from the business. This
not only represents a risk in terms of knowledge and experience
lost, but has increased the demands on our remaining colleagues.
There is a risk that any further significant attrition of key
individuals could impact adversely on the business and its
transformation.
Mitigation:
The Group has identified key skills and role dependencies and
takes steps to recruit and retain these within the business. The
business also uses interim contractors and consultants where
appropriate. The Group has stated its intention to establish an
incentivisation scheme to target retention.
Risk: Business Partner Retention/Attraction.
Status: No change on prior year.
Nature of risk and potential impact:
The Group continues to have a dependency on retention and
development of key Business Partners. There is a significant risk
that without on-going engagement, our primary route to market would
be constrained.
Mitigation:
The Group continues to engage with existing, and previous
Business Partners in order to retain or build confidence.
Financial risks
Risk: Liquidity.
Status: Decreased on prior year.
Nature of risk and potential impact:
Whilst short term liquidity has improved there is a risk that,
should the business not successfully generate revenue through
legacy products and the development of compelling new products, in
the medium term the Group's liquidity position may be adversely
impacted.
Mitigation:
Management actively manages the overall liquidity profile,
ensuring that the business plans are effective and aligned.
A programme is in place to develop and deploy new products and
offerings.
GOING CONCERN
In reaching their view on the preparation of the Group's
financial statements on a going concern basis, the Directors are
required to consider whether the Group can continue in operational
existence for the foreseeable future.
During the year significant progress has been made; the UK
Scheme is now complete and the Group has successfully raised equity
capital since the year end of GBP20.0 million (GBP17.9 million net
of expenses) with the transaction completing on 11 February 2015.
As part of this transaction, it was agreed that the Business
Partner deferred commission debt of GBP20.9 million at the date of
the transaction would be compromised for a payment of GBP1.3
million and further deferral of commission of up to GBP1.3 million
and the Lender borrowing facility would be prepaid in part reducing
from GBP13.0 million to GBP5.0 million. The remaining funds from
the equity capital raise will provide additional liquidity for the
Group's on-going activities. Whilst there continues to be
uncertainty from trading and residual redress risk, along with
medium term strategic risk, the Group's forecasts, taking account
of the new capital structure, show that the Group should have the
necessary resources to trade and operate within the level of its
agreed facilities. After making enquiries, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis
in preparing the financial statements.
RESPONSIBILITY STATEMENT
The responsibility statement below has been prepared in
connection with the Company's full Annual Report and Accounts for
the year ended 31 December 2014. Certain parts thereof are not
included within this announcement.
We confirm that to the best of our knowledge:
-- The financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and loss of the
Company and the undertakings included in the consolidation taken as
a whole; and
-- The Strategic report, which is incorporated in the Annual
Report, includes a fair review of the development and performance
of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face: and
-- The Annual Report and Accounts, taken as a whole, are fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company's performance, business
model and strategy.
By order of the Board
Eric Anstee Craig Parsons
Chief Financial
Executive Chairman Officer
30 March 2015 30 March 2015
Consolidated income statement
2014 2013
Note GBP'000 GBP'000
----------------------------------------------------------------- ----- --------- ----------
Continuing operations
================================================================= ===== ========= ==========
Revenue 4 108,806 178,031
================================================================= ===== ========= ==========
Cost of sales (60,774) (112,174)
----------------------------------------------------------------- ----- --------- ----------
Gross profit 48,032 65,857
================================================================= ===== ========= ==========
Administrative expenses
================================================================= ===== --------- ----------
Exceptional items 5 (6,323) (37,506)
================================================================= ===== ========= ==========
Other administrative expenses (47,507) (67,663)
================================================================= ===== --------- ----------
Total administrative expenses (53,830) (105,169)
================================================================= ===== ========= ==========
Operating loss
================================================================= ===== --------- ----------
Operating profit/(loss) before exceptional items 4 525 (1,806)
================================================================= ===== --------- ----------
Operating loss after exceptional items (5,798) (39,312)
================================================================= ===== ========= ==========
Investment revenues 432 394
================================================================= ===== ========= ==========
Finance costs: non-derivative instruments (2,296) (4,305)
----------------------------------------------------------------- ----- --------- ----------
Loss before taxation (7,662) (43,223)
================================================================= ===== ========= ==========
Taxation 1,698 (2,112)
----------------------------------------------------------------- ----- --------- ----------
Loss for the year from continuing operations (5,964) (45,335)
----------------------------------------------------------------- ----- --------- ----------
Discontinued operations
================================================================= ===== ========= ==========
(Loss)/profit for the year from discontinued operations 7 (785) 12,468
----------------------------------------------------------------- ----- --------- ----------
Loss for the year attributable to equity holders of the Company (6,749) (32,867)
----------------------------------------------------------------- ----- --------- ----------
Basic and diluted (loss)/earnings per share Pence Pence
----------------------------------------------------------------- ----- --------- ----------
Continuing operations 6 (3.48) (26.43)
================================================================= ===== ========= ==========
Discontinued operations 6 (0.46) 7.27
----------------------------------------------------------------- ----- --------- ----------
Total (3.94) (19.16)
----------------------------------------------------------------- ----- --------- ----------
Consolidated statement of comprehensive income
2014 2013
GBP'000 GBP'000
---------------------------------------------------------------------------------------- -------- ---------
Loss for the year (6,749) (32,867)
========================================================================================= ======== ===========
Items that may be reclassified subsequently to profit or loss:
======================================================================================== ======== ===========
Exchange differences on translation of foreign operations 111 387
========================================================================================= ======== ===========
Currency translation differences reclassified on disposal - (1,618)
----------------------------------------------------------------------------------------- -------- -----------
Other comprehensive income/(expense) for the year net of taxation 111 (1,231)
----------------------------------------------------------------------------------------- -------- -----------
Total comprehensive expense for the year attributable to equity holders of the Company (6,638) (34,098)
----------------------------------------------------------------------------------------- -------- -----------
Consolidated balance sheet
As at 31 December
2014 2013
Note GBP'000 GBP'000
------------------------------------ ---- --------- ---------
Non-current assets
==================================== ==== ========= =========
Other intangible assets 808 3,299
==================================== ==== ========= =========
Property, plant and equipment 3,820 5,061
==================================== ==== ========= =========
Investment in joint venture 7 - -
==================================== ==== ========= =========
Deferred tax asset 2,248 142
------------------------------------ ---- --------- ---------
6,876 8,502
------------------------------------ ---- --------- ---------
Current assets
==================================== ==== ========= =========
Insurance assets 593 3,387
==================================== ==== ========= =========
Inventories 93 149
==================================== ==== ========= =========
Trade and other receivables 15,709 20,511
==================================== ==== ========= =========
Cash and cash equivalents 8 40,599 66,900
------------------------------------ ---- --------- ---------
56,994 90,947
------------------------------------ ---- --------- ---------
Total assets 63,870 99,449
------------------------------------ ---- --------- ---------
Current liabilities
==================================== ==== ========= =========
Insurance liabilities (2,019) (3,989)
==================================== ==== ========= =========
Income tax liabilities (2,231) (742)
==================================== ==== ========= =========
Trade and other payables (40,631) (49,004)
==================================== ==== ========= =========
Provisions 10 (7,041) (37,398)
------------------------------------ ---- --------- ---------
(51,922) (91,133)
==================================== ==== ========= =========
Net current assets/(liabilities) 5,072 (186)
------------------------------------ ---- --------- ---------
Non-current liabilities
==================================== ==== ========= =========
Borrowings 9 (32,733) (22,597)
==================================== ==== ========= =========
Deferred tax liabilities (126) (527)
==================================== ==== ========= =========
Trade and other payables (8,991) (9,494)
==================================== ==== ========= =========
Provisions 10 (973) -
------------------------------------ ---- --------- ---------
(42,823) (32,618)
------------------------------------ ---- --------- ---------
Total liabilities (94,745) (123,751)
------------------------------------ ---- --------- ---------
Net liabilities (30,875) (24,302)
------------------------------------ ---- --------- ---------
Equity
==================================== ==== ========= =========
Share capital 11 17,126 17,120
==================================== ==== ========= =========
Share premium account 33,291 33,292
==================================== ==== ========= =========
Merger reserve (100,399) (100,399)
==================================== ==== ========= =========
Translation reserve 720 609
==================================== ==== ========= =========
Equalisation reserve 7,487 8,129
==================================== ==== ========= =========
ESOP reserve 11,891 11,688
==================================== ==== ========= =========
(Accumulated losses)/retained
earnings (991) 5,259
------------------------------------ ---- --------- ---------
Total equity attributable to equity
holders of the Company (30,875) (24,302)
------------------------------------ ---- --------- ---------
Consolidated statement of changes in equity
Share
Share premium Merger Translation Equalisation ESOP (Accumulated losses)/retained
capital account reserve reserve reserve reserve earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ---- ------- ------- --------- ----------- ------------ ------- ----------------------------- --------
At 1 January
2013 17,111 33,297 (100,399) 1,840 7,984 11,638 38,250 9,721
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Total
comprehensive
expense - - - (1,231) - - (32,867) (34,098)
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Movement on
equalisation
reserve - - - - 145 - (145) -
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Current tax
credit on
equalisation
reserve
movement - - - - - - 31 31
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Equity settled
share based
payment
charge - - - - - 50 - 50
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Deferred tax
on share
based payment
charge - - - - - - (1) (1)
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Exercise of
share options 11 9 (5) - - - - (9) (5)
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
At 31 December
2013 17,120 33,292 (100,399) 609 8,129 11,688 5,259 (24,302)
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Total
comprehensive
expense - - - 111 - - (6,749) (6,638)
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Movement on
equalisation
reserve - - - - (642) - 642 -
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Current tax
charge on
equalisation
reserve
movement - - - - - - (138) (138)
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Equity settled
share based
payment
charge - - - - - 203 - 203
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Deferred tax
on share
based payment
charge - - - - - - 1 1
============== ==== ======= ======= ========= =========== ============ ======= ============================= ========
Exercise of
share options 11 6 (1) - - - - (6) (1)
-------------- ---- ------- ------- --------- ----------- ------------ ------- ----------------------------- --------
At 31 December
2014 17,126 33,291 (100,399) 720 7,487 11,891 (991) (30,875)
-------------- ---- ------- ------- --------- ----------- ------------ ------- ----------------------------- --------
Consolidated cash flow statement
2014 2013
Note GBP'000 GBP'000
--------------------------------------------- ---- -------- --------
Net cash (used in)/generated by operating
activities 12 (32,906) 20,158
============================================= ==== ======== ========
Investing activities
============================================= ==== ======== ========
Interest received 432 404
============================================= ==== ======== ========
Purchases of property, plant and equipment (190) (332)
============================================= ==== ======== ========
Purchases of intangible assets (406) (2,460)
============================================= ==== ======== ========
Cash consideration in respect of sale
of discontinued operation 7 275 26,086
============================================= ==== ======== ========
Credit/(costs) associated with disposal
of discontinued operation 7 28 (4,215)
============================================= ==== ======== ========
Cash disposed of with discontinued
operation 7 - (3,731)
============================================= ==== ======== ========
Investment in joint venture 7 (1,000) (780)
--------------------------------------------- ---- -------- --------
Net cash (used in)/from investing activities (861) 14,972
============================================= ==== ======== ========
Financing activities
============================================= ==== ======== ========
Repayment of bank loans - (30,500)
============================================= ==== ======== ========
Proceeds from new borrowings 8,831 11,249
============================================= ==== ======== ========
Interest paid (514) (1,089)
============================================= ==== ======== ========
Costs of refinancing - (4,633)
============================================= ==== ======== ========
Cost of compromising the Commission
Deferral Agreement (193) -
============================================= ==== ======== ========
Issue of ordinary share capital and
associated costs (499) (5)
--------------------------------------------- ---- -------- --------
Net cash from/(used in) financing activities 7,625 (24,978)
--------------------------------------------- ---- -------- --------
Net (decrease)/increase in cash and
cash equivalents (26,142) 10,152
============================================= ==== ======== ========
Effect of foreign exchange rate changes (159) (287)
============================================= ==== ======== ========
Cash and cash equivalents at 1 January 66,900 57,035
--------------------------------------------- ---- -------- --------
Cash and cash equivalents at 31 December 8 40,599 66,900
--------------------------------------------- ---- -------- --------
Notes to condensed financial statements
1. General information
While the financial information included in this annual results
announcement has been computed in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards as adopted for use by the European Union ('IFRS') and
with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS, this announcement does not itself contain
sufficient information to comply with IFRS. The Company will
publish full financial statements that comply with IFRS in April
2015.
The financial information set out above does not constitute the
Company's statutory financial statements for the years ended 31
December 2014 or 31 December 2013, but is derived from the 2014
financial statements. Statutory financial statements for 2013 for
the Company prepared under IFRS have been delivered to the
Registrar of Companies and those for 2014 for the Company will be
delivered following the Company's Annual General Meeting. The
Auditor, Deloitte LLP, has reported on these financial statements;
their report was unqualified, did not draw attention to any matters
by way of emphasis and did not contain statements under s498 (2) or
(3) of the Companies Act 2006. These 2014 financial statements were
approved by the Board of Directors on 30 March 2015.
2. Accounting policies
The same accounting policies, presentation and methods of
computation are followed in the condensed financial statements as
were applied in the Group's audited financial statements for the
year ended 31 December 2013 except that the following Standards and
Interpretations have become effective and have been adopted in
these condensed financial statements. Their adoption has not had
any material impact on the Group. No Standards or Interpretations
have been adopted early in these condensed financial
statements.
Standard/Interpretation Subject
------------------------------------- -------------------------------------------------------
Amendments to IAS 32 (December 2011) Offsetting financial assets and financial liabilities
===================================== =======================================================
Amendments to IAS 36 Recoverable amount disclosure for non-financial assets
------------------------------------- -------------------------------------------------------
3. Critical accounting judgements and key sources of estimation
uncertainty
Critical judgements in applying accounting policies
Going concern
The financial statements have been prepared on a going concern
basis, as the Board of Directors have a reasonable expectation that
the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. The going concern
assessment considered the risks and uncertainties facing the Group,
which include trading, residual customer redress and the medium
term strategy. Further details of the assessment are provided in
the going concern section earlier in this statement.
Key sources of estimation uncertainty
Customer redress and associated costs
The customer redress and associated costs provision relates to
costs associated with residual redress exercises. At 31 December
2014 the remaining balance of the provision is GBP6.4 million. The
provision includes anticipated compensation payable to customers
through the residual customer redress exercises together with
professional fees associated with these exercises.
The residual customer redress exercises in some instances are
dependent on customer response rates; changes to the assumptions on
response rates would lead to a change in the customer redress
provision which would be reflected through the consolidated income
statement.
Provision for onerous leases
The onerous lease provision relates to the expected
non-utilisation of our vacated offices in the UK. At 31 December
2014, the onerous lease provision is GBP1.7 million, which includes
future lease payments and other associated costs.
Any changes to the estimate of the non-utilisation period of the
properties or other associated costs will be reflected in the
consolidated income statement.
4. Segmental analysis
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the Board of Directors to allocate resources
to the segments and to assess their performance.
The Group is managed on the basis of three broad geographical
regions:
- UK and Ireland (UK and Ireland);
- Europe and Latin America (Spain, Italy, Germany, Turkey,
Mexico, Portugal, France and Brazil);
- Asia Pacific (India, Hong Kong, China, Malaysia and
Singapore).
Segment revenues and performance have been as follows:
Europe and Asia
UK and Ireland Latin America Pacific Total
2014 2014 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------- --------------- --------------- --------- ---------
Year ended 31 December 2014
=========================================================== =============== =============== ========= =========
Continuing operations
=========================================================== =============== =============== ========= =========
Revenue - external sales 69,690 32,463 6,653 108,806
=========================================================== =============== =============== ========= =========
Cost of sales (40,798) (16,357) (3,619) (60,774)
----------------------------------------------------------- --------------- --------------- --------- ---------
Gross profit 28,892 16,106 3,034 48,032
=========================================================== =============== =============== ========= =========
Depreciation and amortisation (1,325) (784) (34) (2,143)
=========================================================== =============== =============== ========= =========
Other administrative expenses (31,971) (10,160) (3,233) (45,364)
----------------------------------------------------------- --------------- --------------- --------- ---------
Regional operating (loss)/profit before exceptional items (4,404) 5,162 (233) 525
----------------------------------------------------------- --------------- --------------- --------- ---------
Exceptional items (note 5) (6,323)
----------------------------------------------------------- --------------- --------------- --------- ---------
Operating loss after exceptional items (5,798)
=========================================================== =============== =============== ========= =========
Investment revenues 432
=========================================================== =============== =============== ========= =========
Finance costs: non-derivative instruments (2,296)
----------------------------------------------------------- --------------- --------------- --------- ---------
Loss before taxation (7,662)
=========================================================== =============== =============== ========= =========
Taxation 1,698
----------------------------------------------------------- --------------- --------------- --------- ---------
Loss for the year from continuing operations (5,964)
----------------------------------------------------------- --------------- --------------- --------- ---------
Discontinued operations
=========================================================== =============== =============== ========= =========
Loss for the year from discontinued operations (note 7) (785)
----------------------------------------------------------- --------------- --------------- --------- ---------
Loss for the year (6,749)
----------------------------------------------------------- --------------- --------------- --------- ---------
For the purposes of resource allocation and assessing
performance, operating costs and revenues are allocated to the
regions in which they are earned or incurred. The above does not
reflect additional net charges of central costs of GBP1,845,000
presented within UK and Ireland in the table above which have been
charged to other regions for statutory purposes.
Europe and Asia
UK and Ireland Latin America Pacific Total
2013 2013 2013 2013
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------- --------------- --------------- --------- ----------
Year ended 31 December 2013
=========================================================== =============== =============== ========= ==========
Continuing operations
=========================================================== =============== =============== ========= ==========
Revenue - external sales 128,990 42,603 6,438 178,031
=========================================================== =============== =============== ========= ==========
Cost of sales (87,825) (21,317) (3,032) (112,174)
----------------------------------------------------------- --------------- --------------- --------- ----------
Gross profit 41,165 21,286 3,406 65,857
=========================================================== =============== =============== ========= ==========
Depreciation and amortisation (5,869) (548) (40) (6,457)
=========================================================== =============== =============== ========= ==========
Other administrative expenses (43,402) (13,605) (4,199) (61,206)
----------------------------------------------------------- --------------- --------------- --------- ----------
Regional operating (loss)/profit before exceptional items (8,106) 7,133 (833) (1,806)
----------------------------------------------------------- --------------- --------------- --------- ----------
Exceptional items (note 5) (37,506)
----------------------------------------------------------- --------------- --------------- --------- ----------
Operating loss after exceptional items (39,312)
=========================================================== =============== =============== ========= ==========
Investment revenues 394
=========================================================== =============== =============== ========= ==========
Finance costs: non-derivative instruments (4,305)
----------------------------------------------------------- --------------- --------------- --------- ----------
Loss before taxation (43,223)
=========================================================== =============== =============== ========= ==========
Taxation (2,112)
----------------------------------------------------------- --------------- --------------- --------- ----------
Loss for the year from continuing operations (45,335)
----------------------------------------------------------- --------------- --------------- --------- ----------
Discontinued operations
=========================================================== =============== =============== ========= ==========
Profit for the year from discontinued operations (note 7) 12,468
----------------------------------------------------------- --------------- --------------- --------- ----------
Loss for the year (32,867)
----------------------------------------------------------- --------------- --------------- --------- ----------
For the purposes of resource allocation and assessing
performance, operating costs and revenues are allocated to the
regions in which they are earned or incurred. The above does not
reflect additional net charges of central costs of GBP1,983,000
presented within UK and Ireland in the table above which have been
charged to other regions for statutory purposes.
Segment assets
2014 2013
GBP'000 GBP'000
--------------------------- --------- ----------
UK and Ireland 51,673 85,913
=========================== ========= ==========
Europe and Latin America 7,012 11,002
=========================== ========= ==========
Asia Pacific 2,937 2,392
--------------------------- --------- ----------
Total segment assets 61,622 99,307
=========================== ========= ==========
Unallocated assets 2,248 142
--------------------------- --------- ----------
Consolidated total assets 63,870 99,449
--------------------------- --------- ----------
Deferred tax is not allocated to segments.
Capital expenditure
Intangible assets Property, plant and equipment
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- -------------- ---------------
Continuing operations
====================================== ========= ========= ============== ===============
UK and Ireland 393 1,450 118 194
====================================== ========= ========= ============== ===============
Europe and Latin America 13 128 61 42
====================================== ========= ========= ============== ===============
Asia Pacific - 26 11 5
-------------------------------------- --------- --------- -------------- ---------------
Additions from continuing operations 406 1,604 190 241
-------------------------------------- --------- --------- -------------- ---------------
Revenues from major products
2014 2013
GBP'000 GBP'000
------------------------------------ --------- ---------
Continuing operations
==================================== ========= =========
Retail assistance policies 82,652 117,066
==================================== ========= =========
Retail insurance policies 10,229 28,153
==================================== ========= =========
Packaged and Wholesale policies 15,080 32,272
==================================== ========= =========
Non-policy revenue 845 540
------------------------------------ --------- ---------
Revenue from continuing operations 108,806 178,031
==================================== ========= =========
Discontinued operations - 15,634
------------------------------------ --------- ---------
Consolidated total revenue 108,806 193,665
------------------------------------ --------- ---------
Major product streams are disclosed on the basis monitored by
the Board of Directors. For the purpose of this product analysis,
"retail assistance policies" are those which may be insurance
backed but contain a bundle of assistance and other benefits;
"retail insurance policies" are those which protect against a
single insurance risk; "packaged and wholesale policies" are those
which are provided by Business Partners to their customers in
relation to an on-going product or service which is provided for a
specified period of time; "non-policy revenues" are those which are
not in connection with providing an on-going service to
policyholders for a specified period of time.
Geographical information
The Group operates across a wide number of territories, of which
the UK and Spain are considered individually material. Revenue from
external customers and non-current assets (excluding deferred tax)
by geographical location are detailed below:
External revenues Non-current assets
2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------
Continuing operations
============================= ========= ========= ========= =========
UK 68,412 125,432 4,100 7,008
============================= ========= ========= ========= =========
Spain 15,215 19,767 176 432
============================= ========= ========= ========= =========
Other 25,179 32,832 352 920
----------------------------- --------- --------- --------- ---------
Total continuing operations 108,806 178,031 4,628 8,360
============================= ========= ========= ========= =========
Discontinued operations - 15,634 - -
----------------------------- --------- --------- --------- ---------
108,806 193,665 4,628 8,360
----------------------------- --------- --------- --------- ---------
Information about major customers
There are no customers either in the current or prior year from
which the Group earns more than 10% of its revenue.
5. Exceptional items
2014 2013
Note GBP'000 GBP'000
-------------------------------------------------------- ----- --------- ---------
Customer redress and associated costs 10 3,000 18,168
======================================================== ===== ========= =========
Restructuring costs 2,579 5,503
======================================================== ===== ========= =========
Commission deferral compromise and associated costs 744 -
======================================================== ===== ========= =========
Impairment of IT assets - 8,058
======================================================== ===== ========= =========
Impairment of goodwill, intangible assets and freehold - 5,822
======================================================== ===== ========= =========
Other - (45)
-------------------------------------------------------- ----- --------- ---------
Exceptional items included in operating loss 6,323 37,506
======================================================== ===== ========= =========
Tax on exceptional items (646) (222)
-------------------------------------------------------- ----- --------- ---------
Total exceptional items after tax 5,677 37,284
-------------------------------------------------------- ----- --------- ---------
The customer redress and associated costs of GBP3,000,000 (2013:
GBP18,168,000) relates to the latest estimate with respect to
residual customer redress activity.
The restructuring costs of GBP2,579,000 (2013: GBP5,503,000)
principally relate to redundancy programmes and associated costs
across the Group, along with onerous lease provisioning following
closure of the Tamworth and Manchester sites in the UK. The
majority of this cost is located in the UK.
The commission deferral compromise and associated costs of
GBP744,000 (2013: GBPnil) relates to professional fees associated
with the agreement to compromise the Commission Deferral Agreement
which has completed in 2015.
6. (Loss)/earnings per share
Basic and diluted (loss)/earnings per share have been calculated
in accordance with IAS 33 "Earnings per Share". Underlying
(loss)/earnings per share have also been presented in order to give
a better understanding of the performance of the business. In
accordance with IAS 33, potential ordinary shares are only
considered dilutive when their conversion would increase the loss
per share from continuing operations attributable to equity
holders. The diluted loss per share is therefore equal to the basic
loss per share for the current and prior year.
(Loss)/earnings
Continuing operations Discontinued operations Total
----------------------- ------------------------- --------------------
2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- ---------- ------------ ----------- --------- ---------
(Loss)/earnings for the purposes of
basic and diluted (loss)/earnings per
share (5,964) (45,335) (785) 12,468 (6,749) (32,867)
======================================== =========== ========== ============ =========== ========= =========
Exceptional items (net of tax) 5,677 37,284 (311) (10,389) 5,366 26,895
---------------------------------------- ----------- ---------- ------------ ----------- --------- ---------
(Loss)/earnings for the purposes of
underlying basic and diluted
(loss)/earnings per share (287) (8,051) (1,096) 2,079 (1,383) 5,972
---------------------------------------- ----------- ---------- ------------ ----------- --------- ---------
Number of shares
Number Number
(thousands) (thousands)
---------------------------------------------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares for the purposes of basic and diluted
(loss)/earnings
per share 171,622 171,546
---------------------------------------------------------------------------------------- ------------- -------------
Continuing operations Discontinued operations Total
----------------------- ------------------------- -----------------
2014 2013 2014 2013 2014 2013
Pence Pence Pence Pence Pence Pence
----------------------------------------------- ---------- ----------- ------------ ----------- ------- --------
Basic and diluted (loss)/earnings per share (3.48) (26.43) (0.46) 7.27 (3.94) (19.16)
----------------------------------------------- ---------- ----------- ------------ ----------- ------- --------
Basic and diluted underlying (loss)/earnings
per share (0.17) (4.69) (0.64) 1.21 (0.81) (3.48)
----------------------------------------------- ---------- ----------- ------------ ----------- ------- --------
On 13 January 2015, the Company's existing 10 pence ordinary
share capital was subdivided and redesignated into one new ordinary
share of 1 penny each and one new deferred share of 9 pence each.
The new deferred shares have no rights to receive dividends and
will only have very limited rights on a return of capital.
Additionally they will not be admitted to trading on AIM or any
other stock exchange. Accordingly, the additional deferred shares
have not been considered in the calculation of (loss)/earnings per
share.
On 11 February 2015, the Company issued 666,666,667 new ordinary
shares as part of a GBP20.0 million equity raise; further detail is
available in note 13. This share issue occurred after the period
end and as such the shares are not included in the current year
(loss)/earnings per share calculation.
7. Discontinued operations
On 24 March 2014, the Group completed the sale of its 49%
shareholding in Home3 Assistance Limited (Home3). The gross
consideration on disposal was GBP275,000.
In accordance with IFRS 5 "Non-current Assets Held for Sale and
Discontinued Operations" this operation has been presented as
discontinued operations, which is consistent with the prior year.
The comparative figure includes the disposal of our North American
operation which completed in May 2013.
The consolidated income statement, summary of cash flows and
assets and liabilities of this business is set out below:
(i) Consolidated income statement
2014 2013
Home3 North America Total Home3 North America Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- -------------- --------- --------- -------------- ---------
Revenue - - - - 15,634 15,634
================================ ========= ============== ========= ========= ============== =========
Cost of sales - - - - (7,962) (7,962)
-------------------------------- --------- -------------- --------- --------- -------------- ---------
Gross profit - - - - 7,672 7,672
================================ ========= ============== ========= ========= ============== =========
Administrative expenses - - - - (3,902) (3,902)
================================ ========= ============== ========= ========= ============== =========
Share of loss of joint venture (1,096) - (1,096) (780) - (780)
================================ --------- -------------- --------- --------- -------------- ---------
Operating (loss)/profit (1,096) - (1,096) (780) 3,770 2,990
================================ --------- -------------- --------- --------- -------------- ---------
Investment revenues - - - - 10 10
================================ ========= ============== ========= ========= ============== =========
(Loss)/profit before taxation (1,096) - (1,096) (780) 3,780 3,000
================================ ========= ============== ========= ========= ============== =========
Taxation - - - - (921) (921)
-------------------------------- --------- -------------- --------- --------- -------------- ---------
(Loss)/profit after tax (1,096) - (1,096) (780) 2,859 2,079
================================ ========= ============== ========= ========= ============== =========
Profit/(loss) on disposal 265 46 311 (14) 10,403 10,389
-------------------------------- --------- -------------- --------- --------- -------------- ---------
(Loss)/profit for the year (831) 46 (785) (794) 13,262 12,468
-------------------------------- --------- -------------- --------- --------- -------------- ---------
On 24 March 2014, the Group completed the sale of its joint
venture, Home3, to Mapfre Abraxas Software Limited.
2014 2013
Home3 North America Total Home3 North America Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ --------- -------------- --------- --------- -------------- ---------
Proceeds 275 - 275 - 26,086 26,086
========================================== ========= ============== ========= ========= ============== =========
Net assets sold - - - - (14,042) (14,042)
========================================== ========= ============== ========= ========= ============== =========
(Costs)/credit associated with disposal (10) 46 36 (14) (3,259) (3,273)
========================================== ========= ============== ========= ========= ============== =========
Currency retranslation differences
reclassified on disposal - - - - 1,618 1,618
------------------------------------------ --------- -------------- --------- --------- -------------- ---------
Profit/(loss) on disposal 265 46 311 (14) 10,403 10,389
------------------------------------------ --------- -------------- --------- --------- -------------- ---------
(ii) Summary of cash flows
2014 2013
GBP'000 GBP'000
----------------------------------------------------------------------- --------- ---------
Net cash flows from operating activities - 2,216
======================================================================= ========= =========
Net cash flows from investing activities - (27)
======================================================================= ========= =========
Net cash flows from financing activities - (1,266)
======================================================================= ========= =========
Cash consideration in respect of sale of discontinued operation 275 26,086
======================================================================= ========= =========
Credit/(costs) associated with the disposal of discontinued operation 28 (4,215)
======================================================================= ========= =========
Cash disposed of with discontinued operation - (3,731)
======================================================================= ========= =========
Investment in joint venture (1,000) (780)
----------------------------------------------------------------------- --------- ---------
Net cash (outflow)/inflow (697) 18,283
----------------------------------------------------------------------- --------- ---------
(iii) Assets and liabilities
Movements in the Group's share in its joint venture are as
follows:
2014 2013
GBP'000 GBP'000
-------------------------------- --------- ---------
Carrying amount at 1 January - -
================================ ========= =========
Increase in investment 1,096 780
================================ ========= =========
Losses recognised for the year (1,096) (780)
-------------------------------- --------- ---------
Carrying amount at 31 December - -
-------------------------------- --------- ---------
The Group had a 50% economic interest in Home3, with 49% of the
issued ordinary share capital being allotted to the Group. As part
of the disposal transaction the Group invested a further
GBP1,000,000 to absorb its share of unrecognised losses as well as
capitalising further residual balances due from Home3 prior to
disposal. These balances have been accounted for as investments in
Home3 with the trading losses recognised limited to the level of
investment.
8. Cash and cash equivalents
Cash and cash equivalents of GBP40,599,000 (2013: GBP66,900,000)
comprises cash held on demand by the Group and short term
deposits.
Cash and cash equivalents includes the following:
i) GBP21,542,000 (2013: GBP27,815,000) cash maintained by the
Group's insurance businesses for solvency purposes; and
ii) GBP13,380,000 (2013: GBP32,706,000) cash held in the UK's
regulated entities CPPL and HIL which is restricted by the terms of
the VVOP and cannot be distributed to the wider Group without FCA
approval. This restricted cash whilst being unavailable to
distribute to the wider Group, is available to the regulated entity
in which it exists including for operational and residual customer
redress purposes.
Concentration of credit risk is reduced, as far as practicable,
by placing cash on deposit across a number of institutions with the
best available credit ratings. Credit quality of counterparties are
as follows:
2014 2013
GBP'000 GBP'000
---------------------------------- --------- ---------
AA 1,537 1,607
================================== ========= =========
A 37,069 62,444
================================== ========= =========
BBB 1,000 2,559
================================== ========= =========
BB 978 167
================================== ========= =========
Rating information not available 15 123
---------------------------------- --------- ---------
40,599 66,900
---------------------------------- --------- ---------
Ratings are measured using Fitch's long term ratings, which are
defined such that ratings "AAA" to "BBB" denote investment grade
counterparties, offering low to moderate credit risk. "AAA"
represents the highest credit quality, indicating that the
counterparty's ability to meet financial commitments is highly
unlikely to be adversely affected by foreseeable events.
9. Borrowings
The carrying value of the Group's financial liabilities, for
short term borrowings and long term borrowings, are as follows:
2014 2013
GBP'000 GBP'000
------------------------------------ --------- ---------
Bank loans due outside of one year 13,000 13,000
==================================== ========= =========
Less: unamortised issue costs (969) (1,653)
==================================== ========= =========
Commission deferral agreement 20,702 11,250
------------------------------------ --------- ---------
Borrowings due outside of one year 32,733 22,597
------------------------------------ --------- ---------
Analysis of repayments:
2014 2013
GBP'000 GBP'000
------------------------------- --------- ---------
Within one year - -
=============================== ========= =========
In the second year 13,000 -
=============================== ========= =========
In the third to fifth years 20,702 24,250
------------------------------- --------- ---------
Total repayments 33,702 24,250
=============================== ========= =========
Less: unamortised issue costs (969) (1,653)
------------------------------- --------- ---------
Total carrying value 32,733 22,597
------------------------------- --------- ---------
The Group's bank debt is in the form of a revolving credit
facility (RCF). The Group is entitled to roll over repayment of
amounts drawn down, subject to all amounts outstanding falling due
for repayment on expiry of the facility on 31 July 2016.
The RCF bears interest at a variable rate of LIBOR plus a margin
of 4%. It is secured by fixed and floating charges on certain
assets of the Group. The RCF includes a prepayment fee which
increases over the term of the loan to a maximum level of 8% of the
outstanding principal balance. The financial covenants of the RCF
are based on the interest cover, leverage and minimum total cash
balance of the Group. The Group has been in compliance with these
covenants since inception of the RCF.
All amounts outstanding in the Commission Deferral Agreement
fall due for repayment on expiry of the agreement on 31 July 2017.
The Commission Deferral Agreement bears interest at a fixed rate of
3.5% and is secured by charges over the assets of CPPL in
substantially similar form and terms to the security granted under
the RCF.
On 11 February 2015, the Amended and Restated RCF became
effective following prepayment in part of the existing RCF,
extending the term to 28 February 2018. The Amended and Restated
RCF is on substantially the same terms as the facility it replaced,
with the exception of the available balance reducing to GBP5.0
million, the removal of the leverage covenant and the removal of
the prepayment fee. At the same time the Group agreed to settle all
the liabilities of the Commission Deferral Agreement with certain
Business Partners for a compromise payment of GBP1.3 million and
further deferral of commission of up to GBP1.3 million. The Second
Commission Deferral Agreement has a repayment date of 31 January
2017 and is on the same terms as the Commission Deferral Agreement.
Further detail is provided in note 13.
The weighted average interest rates paid during the year were as
follows:
2014 2013
% %
------------------------------- ----- -----
Bank loans 4.5 3.8
=============================== ===== =====
Commission deferral agreement 3.5 3.5
------------------------------- ----- -----
Weighted average 3.9 3.8
------------------------------- ----- -----
At 31 December 2014, the Group does not have any undrawn
committed borrowing facilities (2013: GBPnil).
10. Provisions
Customer Customer
redress and redress and
associated associated
Onerous leases costs Total Restructuring costs costs Total
2014 2014 2014 2013 2013 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------------- ------------- --------- -------------------- ------------- ---------
At 1 January - 37,398 37,398 - 28,967 28,967
=========================== =============== ============= ========= ==================== ============= =========
Charged to the income
statement 1,658 3,000 4,658 1,750 18,168 19,918
=========================== =============== ============= ========= ==================== ============= =========
Customer redress and
associated costs paid in
the year - (34,042) (34,042) - (9,737) (9,737)
=========================== =============== ============= ========= ==================== ============= =========
Transfer to trade and
other payables - - - (1,750) - (1,750)
--------------------------- --------------- ------------- --------- -------------------- ------------- ---------
At 31 December 1,658 6,356 8,014 - 37,398 37,398
--------------------------- --------------- ------------- --------- -------------------- ------------- ---------
The customer redress and associated cost provision comprises
anticipated compensation payable to customers through residual
customer redress exercises and associated professional fees. The
outstanding regulatory fine of GBP8.5 million is included in
non-current payables.
The onerous lease provision reflects the future lease payments
and associated costs in the expected non-utilisation period at our
vacated offices in the UK.
Customer redress and associated costs are expected to be settled
within one year of the balance sheet date and onerous lease
provisions are expected to be settled within three years of the
balance sheet date.
Provisions are expected to be settled in the following
periods:
Customer Customer
redress and redress and
associated associated
Onerous leases costs Total Restructuring costs costs Total
2014 2014 2014 2013 2013 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------------- ------------- --------- -------------------- ------------- ---------
Within one year 685 6,356 7,041 - 37,398 37,398
===================== =============== ============= ========= ==================== ============= =========
Outside of one year 973 - 973 - - -
--------------------- --------------- ------------- --------- -------------------- ------------- ---------
At 31 December 1,658 6,356 8,014 - 37,398 37,398
--------------------- --------------- ------------- --------- -------------------- ------------- ---------
11. Share capital
2014 2013
Number 2014 Number 2013
(thousands) GBP'000 (thousands) GBP'000
---------------------------------------------------------- ------------- --------- ------------- ---------
Called-up and allotted: Ordinary Shares of 10 pence each
========================================================== ============= ========= ============= =========
At 1 January 171,588 17,120 171,487 17,111
========================================================== ============= ========= ============= =========
Issue of shares in connection with:
========================================================== ============= ========= ============= =========
Exercise of share options 62 6 101 9
---------------------------------------------------------- ------------- --------- ------------- ---------
At 31 December 171,650 17,126 171,588 17,120
---------------------------------------------------------- ------------- --------- ------------- ---------
During the year, the Company issued 61,529 shares to option
holders for total consideration of GBP6,000.
Of the 171,649,941 ordinary shares issued at 31 December 2014,
171,149,942 are fully paid and 499,999 are partly paid.
The ordinary shares are entitled to the profits of the Company
which it may from time to time determine to distribute in respect
of any financial year or period.
All holders of ordinary shares shall have the right to attend
and vote at all general meetings of the Company. On a return of
assets on liquidation the assets (if any) remaining, after the
debts and liabilities of the Company and the costs of winding up
have been paid or allowed for, shall belong to, and be distributed
amongst, the holders of all the ordinary shares in proportion to
the number of such ordinary shares held by them respectively.
As announced on 13 January 2015, subsequent to the year end and
prior to admission to the AIM market, each of the Company's
existing 10 pence ordinary share capital was subdivided and
redesignated into one new ordinary share of 1 penny each and one
new deferred share of 9 pence each. Each new ordinary share of 1
penny will carry the same rights as each existing ordinary share.
Each deferred share will have no voting rights, no rights to
receive dividends and will only have very limited rights on a
return of capital. The deferred shares will not be admitted to
trading on AIM or listed on any other stock exchange and will not
be freely transferable. Further detail is included in note 13.
12. Reconciliation of operating cash flows
2014 2013
GBP'000 GBP'000
---------------------------------------------------------------------------------- --------- ---------
Loss for the year (6,749) (32,867)
================================================================================== ========= =========
Adjustment for:
================================================================================== ========= =========
Depreciation and amortisation 4,155 9,552
================================================================================== ========= =========
Equity settled share based payment expense 203 50
================================================================================== ========= =========
Impairment loss on goodwill, intangible assets and property, plant and equipment 86 5,822
================================================================================== ========= =========
Impairment of IT assets - 8,058
================================================================================== ========= =========
Loss on disposal of property, plant and equipment 43 200
================================================================================== ========= =========
Profit on disposal of discontinued operations (311) (10,389)
================================================================================== ========= =========
Commission deferral compromise and associated costs 744 -
================================================================================== ========= =========
Share of loss of joint venture 1,096 780
================================================================================== ========= =========
Investment revenues (432) (404)
================================================================================== ========= =========
Finance costs: non-derivative instruments 2,296 4,305
================================================================================== ========= =========
Income tax (credit)/expense (1,698) 3,033
---------------------------------------------------------------------------------- --------- ---------
Operating cash flows before movements in working capital (567) (11,860)
================================================================================== ========= =========
Decrease in inventories 56 150
================================================================================== ========= =========
Decrease in receivables 5,202 8,464
================================================================================== ========= =========
Decrease in insurance assets 2,794 23,854
================================================================================== ========= =========
Decrease in payables (9,892) (2,526)
================================================================================== ========= =========
Decrease in insurance liabilities (1,970) (3,535)
================================================================================== ========= =========
(Decrease)/increase in provisions (29,384) 8,431
---------------------------------------------------------------------------------- --------- ---------
Cash (used in)/generated by operations (33,761) 22,978
================================================================================== ========= =========
Income taxes repaid/(paid) 855 (2,820)
---------------------------------------------------------------------------------- --------- ---------
Net cash (used in)/generated by operating activities (32,906) 20,158
---------------------------------------------------------------------------------- --------- ---------
13. Events after the balance sheet date
On 23 December 2014, the Group announced a number of proposals,
which were subject to shareholder approval in a general meeting.
These proposals were formally approved by the shareholders at a
general meeting on 13 January 2015 and were subsequently completed
on 11 February 2015. The transaction comprised the following
elements:
i) an equity placing to raise in aggregate GBP20.0 million
(approximately GBP17.9 million net of expenses) by way of a
non-preemptive placing of 666,666,667 placing shares at a price of
3 pence per placing share (the Placing);
ii) the reorganisation of CPPGroup Plc share capital to
subdivide and re-designate each of the existing ordinary shares of
10 pence each into one new ordinary share of 1 penny each and one
deferred share of 9 pence each. Each new ordinary share of 1 penny
carries the same rights as the old 10 pence ordinary share. Each
deferred share of 9 pence has no voting rights, no rights to
receive dividends and only has very limited rights on a return of
capital. The deferred shares have not been admitted to trading on
AIM or any other stock exchange and are not freely transferable.
The Placing shares represented new ordinary shares of 1 penny
each;
iii) the inter-conditional cancellation of the Group's shares
from the Main Market and admission to trading on AIM;
iv) prepayment in part of the Group's current bank facility and
related costs of GBP8.5 million, together with the refinancing of
the remaining GBP5.0 million through an Amended and Restated
Facility; and
v) settlement of all the liabilities of the Commission Deferral
Agreement with certain of its Business Partners for a compromise
payment of GBP1.3 million and further deferral of commission of up
to GBP1.3 million. This element of the transaction will result in
the recognition of an exceptional gain of approximately GBP19
million in the 2015 consolidated income statement.
Included in the Placing shares of 666,666,667 were acquisitions
by Phoenix Asset Management Partners Limited (335,326,643), Mr
Hamish Ogston (264,144,352), through his family investment vehicle
Milton Magna Limited, and Schroder Investment Management Limited
(61,437,285). Mr Hamish Ogston and Schroder Investment Management
Limited were both substantial shareholders in the Group prior to
the Placing; therefore their participation in the Placing
constituted related party transactions.
Following the Placing, the ordinary share capital of the Group
is 838,316,608, with Phoenix Asset Management holding 40.00% of
this capital. Mr Hamish Ogston holds 43.00% (reduced from 56.12%
prior to the Placing) and Schroder Investment Management hold 9.99%
(reduced from 13.00% prior to the Placing).
14. Related party transactions and control
Ultimate controlling party
During the year, the Group was controlled by the Company's
majority shareholder, Mr Hamish Ogston. On 11 February 2015, Mr
Hamish Ogston's holding in the Company reduced to 43.00%, resulting
in the Group no longer having a controlling party, see note 13.
Transactions with joint ventures
During the year the Group disposed of its shareholding in its
joint venture entity, Home3. Transactions between the Group and its
joint venture prior to disposal represent related party
transactions.
The Group undertook the following transactions with its joint
venture entity, Home3, prior to the disposal:
2014 2013
GBP'000 GBP'000
--------------------------------------------------- ---------- ---------
Costs rechargeable to Home3 incurred by the Group - 138
=================================================== ========== =========
Balance receivable from Home3 at 31 December - 2,299
--------------------------------------------------- ---------- ---------
The disposal of Home3 completed on 24 March 2014. As part of the
disposal agreement the balance receivable from Home3 prior to
disposal of GBP2,350,000 was capitalised as an investment in the
joint venture. GBP2,254,000 of this balance has already been
provided through the consolidated income statement between 2011 and
2013. The remaining balance of GBP96,000 has been recognised in the
consolidated income statement in the year ended 31 December
2014.
Transactions with related parties
There have been no transactions with related parties in the
year, other than the remuneration of key management personnel.
Subsequent to the year end, Mr Hamish Ogston and Schroder
Investment Management Limited participated in the Placing; further
detail is provided in note 13.
Remuneration of key management personnel
The remuneration of the Directors and senior management team,
who are the key management personnel of the Group, is set out
below:
2014 2013
GBP'000 GBP'000
------------------------------ --------- ---------
Short term employee benefits 2,133 3,769
============================== ========= =========
Post employment benefits 100 184
============================== ========= =========
Termination benefits - 547
============================== ========= =========
Share based payments 8 (144)
------------------------------ --------- ---------
2,241 4,356
------------------------------ --------- ---------
Cautionary statement
This announcement has been prepared solely to provide additional
information to shareholders as a body to meet the relevant
requirements of the UK Listing Authority. The announcement should
not be relied on by any other party or for any other purpose.
The announcement contains certain forward-looking statements.
These statements are made by the Directors in good faith based on
the information available to them up to the time of approval of the
announcement but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
Subject to the requirements of the UK Listing Authority, CPP
undertakes no obligation to update these forward-looking statements
and it will not publicly release any revisions it may make to these
forward-looking statements that may result from events or
circumstances arising after the date of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FBLLXEXFZBBF
Cppgroup (LSE:CPP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cppgroup (LSE:CPP)
Historical Stock Chart
From Apr 2023 to Apr 2024