TIDMCPP
RNS Number : 4052A
CPPGroup Plc
24 March 2017
CPPGROUP PLC
24 MARCH 2017
FULL YEAR REPORT FOR THE YEARED 31 DECEMBER 2016
CPP positions business for growth
CPPGroup Plc - Full year report for the year ended 31 December
2016
CPPGroup Plc (CPP or the Group), the international assistance
business, today announces its full year results for the year ended
31 December 2016.
Highlights
-- Group revenue from continuing operations of GBP73.6 million
(2015: GBP76.8 million). This represents a significantly reduced
rate of decline of 4% compared to previous years (2015: 20%)
-- Revenue in our international markets has grown by 33% to
GBP44.9 million (2015: GBP33.8 million). This includes revenue from
India which has more than doubled to GBP15.2 million (2015: GBP6.3
million)
-- Live policy base has returned to growth at 4.3 million (2015:
3.8 million) representing a growth in customer numbers for the
first time in five years
-- Underlying operating profit from continuing operations up 22%
at GBP8.4 million (2015: GBP6.9 million)
-- Underlying profit after tax from continuing operations
increased to GBP8.9 million (2015: GBP4.4 million)
-- Profit for the year from continuing and discontinued
operations at breakeven (2015: GBP20.8 million). The breakeven
performance is significant considering the impact of exceptional
charges in the year of GBP9.2 million (2015: GBP17.8 million
credit)
-- Net funds position at GBP26.9 million (2015: GBP37.6 million)
Outlook
The Group is focused on its strategic priorities, which support
its existing revenue, new revenue generation and growth ambitions.
The current year has started well, and while the Group anticipates
growing revenues in 2017, further investment will be made in the
current year in order to provide a sustainable performance in the
medium to long term. The Board remains confident in the direction
the business is heading and the progress it is making.
Jason Walsh, Chief Executive Officer, commented:
"Since my return to the business last May, I have undertaken a
review of the business and made a number of significant operational
improvements. 2016 was a year where we laid the foundations for our
future growth. We have started to see encouraging signs of customer
growth although there is still work to be done. The strength of our
international business is particularly encouraging, most notably in
India.
New product development is key for our business as we continue
to provide assistance products to our customers. We will grow our
business both organically, through product development such as
OwlDetect, and through acquisitions where complementary. Following
the year end, we acquired Blink Innovation Limited, an Ireland
based business that will provide us with leading product
development capability for our global markets."
Financial highlights - continuing operations 31 December 2016 31 December 2015
---------------------------------------------- ---------------- -----------------
Revenue (GBP millions) 73.6 76.8
Operating (loss)/profit (GBP millions)
- Reported (1.8) 23.0
- Underlying(1) 8.4 6.9
(Loss)/profit after tax (GBP millions)
- Reported (0.5) 18.5
- Underlying(2) 8.9 4.4
Profit for the year (GBP millions) (3, 4) 0.0 20.8
Reported (loss)/earnings per share (pence)
- Basic (0.06) 2.42
- Diluted (0.06) 2.41
Net assets (GBP millions) 10.1 10.0
Net funds (GBP millions)(5) 26.9 37.6
============================================== ================ =================
1. Underlying operating profit excludes exceptional items of
GBP9.2 million (2015: GBP17.8 million credit). Further detail is
provided in note 5 to the condensed financial statements.
Underlying operating profit also excludes GBP1.0 million (2015:
GBP1.7 million) Matching Share Plan (MSP) charges.
2. Underlying profit after tax excludes exceptional items net of
tax of GBP8.7 million (2015: GBP15.4 million credit) and MSP
charges net of tax of GBP0.7 million (2015: GBP1.3 million).
3. Profit for the year includes (loss)/profit after tax from
continuing and discontinued operations.
4. Profit for the year in 2015 includes a one-time gain of
GBP19.4 million from the compromise of the Commission Deferral
Agreement.
5. Net funds comprise cash and cash equivalents of GBP28.2
million (2015: GBP39.8 million) partially offset by borrowings of
GBP1.3 million (2015: GBP2.2 million). Cash and cash equivalents
includes cash held in the UK's regulated entities of GBP18.7
million (2015: GBP33.9 million) which is either held for regulatory
purposes or restricted by the terms of the Voluntary Variation of
Permissions (VVOP). 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.
Enquiries
CPPGroup Plc
Jason Walsh, Chief Executive Officer
Michael Corcoran, Chief Financial Officer
Tel: +44 (0)1904 544500
Nominated Adviser and Broker
Investec Bank plc: Sara Hale, James Rudd, Carlton Nelson
Tel: +44 (0)20 7597 5970
Media
Maitland: Neil Bennett, Daniel Yea
Tel: +44 (0)20 7379 5151
Email: cpp-maitland@maitland.co.uk
About CPP
CPP provides a range of assistance based services to customers
in the UK and Ireland and a number of international markets across
Asia, Europe and Latin America. The Company's core propositions
provide peace of mind for customers covering a range of areas
including lost and stolen credit cards, identity theft, insurance
of mobile devices and passport assistance.
For more information on CPP visit www.cppgroupplc.com
REGISTERED OFFICE
CPPGroup Plc
Holgate Park
York
YO26 4GA
Registered number: 07151159
CHAIRMAN'S STATEMENT
First impressions
Dominated by its history over the past five years, CPP had
become an organisation preoccupied with the past, which was
UK-centric in its focus and behaviours, despite the extraordinary
potential developing in its overseas markets. In 2016, we have
started work to redefine the organisation in order to refocus our
resources towards building a successful international operation,
using the talent and skills in our overseas businesses as well as
those that we have in the UK. These changes will not happen
overnight, but the organisation is progressing, led by a Group
Chief Executive who has been skilful in keeping morale high whilst
introducing difficult changes. This has been a solid start to
building a better future.
Progress to date
At the initiative of shareholders, the Board was mostly changed
in early May 2016 and a new Group Chief Executive, Jason Walsh, was
appointed. Shortly afterwards, all the new Directors were approved
by the FCA. This was then followed by the appointment of Justine
Shaw as People & Culture Director. Michael Corcoran has advised
the Board of his intention to stand down from the business and the
Board with effect from 30 April 2017. Michael has made an
invaluable contribution to the stability of the Group and provided
continuity during a period of potential risk to the business, and
the Board wishes him well in his future roles.
A major review of the Group's strategy was launched during the
year. This review has already concluded that resources needed to be
shifted towards providing greater support to our businesses in the
rapidly developing markets for our products in India, China, Turkey
and Mexico. At the same time, line management of the UK business
has been separated from the Group functions in order to treat the
UK as a self-standing market alongside other developed markets,
such as Germany and our southern European markets, as well as the
developing high growth markets mentioned above. The UK's regulated
businesses have been ring-fenced against the background of
establishing an open and constructive dialogue with the FCA. New
product development is being refocused to enable legacy products to
be adapted to meet customer requirements in all markets whilst
styling new innovative products to be attractive propositions, in
either a chosen developing market, or in an established market
prior to global roll-out. These new products may include regulated
(insurance) content alongside non-regulated (service) content.
Design will be driven by customer requirements. Our recently
announced acquisition of Blink Innovation Limited (Blink) adds
further substance to our product ambitions.
During a period of change in the organisational structure and
behaviour, senior management had become stretched. In January 2017,
the Board agreed a temporary extension to Nick Cooper's role in
order to provide additional capacity to Jason Walsh and his
executive team. One of the many benefits of Nick's willingness to
contribute in this way is that it avoids the immediate temptation
to make permanent appointments too quickly to an organisational
structure that is still evolving.
Governance
The Board is committed to maintaining high standards of
governance, both at Board level and operationally throughout the
business. A number of key permanent appointments have been made
during the year to support this approach and strengthen our
internal controls.
Performance
The Group's performance in 2016 had many positive developments.
However, there remains a good deal of work to be done to return the
Group to a position of strength and sustainable growth and the
Board sees this development as a long term goal, which will
ultimately benefit all of the Company's stakeholders.
Looking ahead
2016 saw the first steps in laying the foundations for a
prosperous and sustainable future and I look forward to continuing
that progress in 2017.
On behalf of the Board I would especially like to thank our
valued colleagues for their commitment and hard work during the
year and very much look forward to working with you all in the
coming year.
Sir Richard Lapthorne
Chairman
23 March 2017
CHIEF EXECUTIVE OFFICER'S REVIEW
CPP is committed to providing a great service to its customers
which is why I was delighted to return to the business as its CEO
in May 2016. Upon arriving I was heartened by the resilience and
professionalism all employees demonstrated through what had
potentially been a difficult period.
Since returning I have undertaken a major review of the business
and have identified many things that are good and working well, but
also opportunities that we are not capitalising on. I have set
focused plans in motion to address these missed opportunities. I
have visited all of our major operations to understand how they are
run and where the opportunities lie. Both the progress being made
and the relationships being developed in many of our markets are
highly encouraging.
Organisational improvements
For any business to be successful it is critical that the
structure is right; it must enable flexible and dynamic operations.
As a result, the Group Leadership Team has been slimmed down,
allowing focus to be provided in the correct areas. There is now
direct responsibility for country operations, product and
innovation in addition to marketing and the support functions,
which allows the Company to focus on the key growth drivers in the
business. As part of this streamlining certain Executive Directors
have also accepted additional support function responsibilities.
This action has also taken cost out of the business, which will
allow investment in other strategically important areas and
roles.
What's the plan?
My assessment of our operations quickly led me to identify a
clear set of strategic priorities that will propel the business
towards sustainable, profitable growth. These strategic priorities
are:
-- growing revenue and customer volume;
-- driving innovation, through local insight and global new product development; and
-- cost management
These priorities will be underpinned by the development of
colleagues and the cultural behaviour within the organisation,
along with the launch of a new visual identity for the business.
The strategic priorities have been cascaded into the business and
colleagues are focused on successfully realising our growth
ambitions which have been articulated in a vision for the Group
that takes us to 2020. These are exciting times.
Growing revenue and volume
The future looks very positive in some of our developing markets
such as India, China, Turkey and Mexico and our strategic plan
focuses on ensuring that the required investment is directed to
these markets to maximise all available opportunities. The
potential in these markets is significant. India, China and Turkey
are already contributing increased volumes to the business, but
there is more to come. Our established markets are not going to be
forgotten and we expect renewed contribution from markets such as
the UK, Spain, Germany and Italy. Stronger renewal rates in these
countries are really encouraging and have contributed to an
improvement in the Group renewal rate to 74.9% (2015: 72.9%).
Driving innovation
Whilst proud of our existing products we recognise the need to
stay relevant in a rapidly changing world. New product development
is key. We are creating a suite of products with global appeal and
compatibility. These are service-based propositions that can be
traded in any of our markets, including the UK. The first in this
suite of products, OwlDetect, has been launched in the UK and
Germany during 2016. Mexico and Spain will follow shortly, with
other markets due to launch in the first half of the year.
A further product is planned for release in H1 2017, with others
to follow as we continue to invest in ideas and concept generation.
These propositions are centred on consumer insight and needs and
will also be delivered digitally to match consumer preference.
Product innovation will also draw on external sources - via
partnerships and strategic alliances - to generate additional
concepts to test and market. The acquisition of Blink represents
the first step in this. New products may have regulated content if
the opportunity arises. Aligned to this, and very much a part of
the overall product strategy, local innovation is being encouraged
and supported to capitalise on particular market and Business
Partner opportunities.
Cost management
To enable additional investment in our emerging markets, cost
management remains an important pillar of the strategic plan. This
will ensure that our cost base remains appropriate and can be
targeted in the right areas. The Company has made important
decisions in the recent past to control costs but more can be done.
In 2016 a number of difficult decisions were taken to promote this:
we stopped development of our IT platform with SSP Limited (SSP) in
favour of developing a more cost-effective, flexible in-house
platform, the leadership team has been slimmed down, and
operational requirements and capability across the Group have been
reviewed. The changes made have not only reduced costs but improved
the performance of the Group. Cost management initiatives will
continue in 2017.
Colleague engagement and culture
Our colleagues are central to the success of the business and
are at the heart of providing great products and services to our
customers. We have embedded values of 'commit, collaborate and
perform' within the organisation and implemented initiatives to
promote colleague development and behaviours. The promotion of our
People & Culture Director, Justine Shaw, to an Executive
Director position further demonstrates our commitment to colleague
development. This has created greater influence at Board level to
drive the colleague engagement programme.
Customer
Our customers are hugely important to us. We pride ourselves on
providing relevant and engaging propositions, along with a great
ongoing customer experience. This will not change and our new
product development has this understanding and commitment at its
core. Our customer contact centres remain important but we
recognise that we must also embrace digital channels, supported by
innovative and engaging branding.
Understanding and engaging with our stakeholders
We have proactively engaged with our stakeholders through
frequent, transparent dialogue and consultation. We believe this is
critical in the development of the Group and sustaining valued
relationships. We have a credible plan and a strong team and I am
committed to ensuring our business operates in a responsible way,
meeting the needs of all stakeholders.
Performance
Our global operations continue to progress well, leading to a
reduced dependency on the UK. Asia Pacific has seen significant
growth and now represents 23% of Group revenue, compared to 11% in
2015. This has been a record year for India; customer numbers are
increasing rapidly; new propositions introduced to the market are
gaining momentum; and a significant contract signed with a leading
non-banking financial company is expected to provide continued
growth. Turkey has shown good revenue growth, driven by developing
multi-partner, multi-channel routes to market which will provide a
level of sustainability and further market opportunity. Other
markets are also contributing with the annual renewal rate
increasing to 74.9% (2015: 72.9%). This is largely due to rates
increasing in our established markets, providing a continued
endorsement of the value customers place on our traditional
products. Symbolically, the Group's live policy base has also
returned to growth with 4.3 million customers at the year end
(2015: 3.8 million), reflecting growth in our Indian and Chinese
markets.
As expected, Group revenue from continuing operations has
declined to GBP73.6 million (2015: GBP76.8 million). However, this
represents a much reduced rate of decline than previous years. The
growth in India has been offset by the natural decline in the UK
renewal book where new regulated sales remain restricted.
Underlying operating profit from continuing operations has
increased to GBP8.4 million (2015: GBP6.9 million), which reflects
the improved performance in India and continued focused management
of the cost base. During 2017, we anticipate that revenues will
grow, however further investment will be made in order to provide a
sustainable performance in the medium to long term.
Looking ahead
We have made good progress in 2016 and are moving forward with a
clear plan which will provide the platform for long term growth and
profitability. New product development is progressing well with
further globally applicable propositions currently in development.
As a truly global business, we are genuinely excited by the great
opportunities we have to support customers around the world.
Jason Walsh
Chief Executive Officer
23 March 2017
OPERATING REVIEW
The Group operates internationally as three regions: the UK and
Ireland; Europe and Latin America; and Asia Pacific.
Constant
2016 2015 currency
Year ended GBP'm GBP'm Growth growth
------------------------- ------ ------ ------ ---------
UK and Ireland
========================= ====== ====== ====== =========
- Revenue 28.8 43.0 (33)% (33)%
========================= ====== ====== ====== =========
- Underlying operating
profit(1) 1.5 2.0 (24)% (24)%
========================= ====== ====== ====== =========
Europe and Latin America
========================= ====== ====== ====== =========
- Revenue 27.6 25.5 9% (2)%
========================= ====== ====== ====== =========
- Underlying operating
profit(2) 5.2 4.6 13% 0%
========================= ====== ====== ====== =========
Asia Pacific
========================= ====== ====== ====== =========
- Revenue 17.3 8.3 107% 88%
========================= ====== ====== ====== =========
- Underlying operating
profit(2) 1.6 0.3 487% 433%
------------------------- ------ ------ ------ ---------
1 Excluding exceptional items and MSP charges
2 Excluding exceptional items
UK and Ireland
Financial performance
Revenue for 2016 decreased by 33% to GBP28.8 million (2015:
GBP43.0 million). Underlying operating profit has decreased to
GBP1.5 million (2015: GBP2.0 million).
Review
The UK and Ireland region accounted for 39% of Group full year
revenue in 2016. New retail business performance in the UK and
Ireland continues to be constrained by restrictions relating to the
ongoing VVOP. As a result the UK services a renewal book where
renewal rates have been strong and encouraging. In the interests of
providing value to our existing customers we implemented, through
savings from commission payments, price reductions across our Card
Protection and Identity Protection books during the year.
Excitingly, we launched our new non-regulated proposition,
OwlDetect, in December 2016. This is initially in a
direct-to-consumer capacity, but we also intend to operate a
business-to-business model for this proposition in the future.
Extensive work has been undertaken in 2016 to create a more
cost-effective and growth-orientated operating structure, which is
suitable for working within a global business. This focus will help
promote good governance and improved customer treatment, ensuring
we are operationally and commercially ready to apply to lift the
existing trading restrictions. In addition there have been key
appointments to support this, including a new Country Manager and
senior roles in support functions.
Europe and Latin America
Financial performance
Revenue has decreased by 2% on a constant currency basis
compared to the same period in 2015 to GBP27.6 million (2015:
GBP25.5 million). The underlying operating profit has increased to
GBP5.2 million (2015: GBP4.6 million).
Review
The Europe and Latin America region includes Spain, Italy,
Portugal, Germany, Turkey and Mexico. Europe and Latin America
represents 38% of the Group's full year revenue.
Turkey has shown significant development during the year growing
revenues, profit and customer numbers. This growth is through a
sustainable business model in which we are delivering multiple
engaging products across a variety of channels and Business
Partners.
Mexico continues to develop, growing revenue in the year as well
as building the right structure and experience within the business
to capitalise on the further market opportunities that exist.
The core European markets delivered solid renewal performance,
operational efficiencies and Business Partner engagement throughout
2016. Germany also became the second country in the Group to launch
OwlDetect in December. Other markets across the region are expected
to follow in 2017.
We are actively building strength and depth within an
appropriate operating structure for the region. The appointment of
a new Country Manager in Spain, along with a number of marketing
and sales roles across the region will provide the necessary skill
sets for an effective launch of Group-led propositions.
Asia Pacific
Financial performance
Revenue has increased by 88% on a constant currency basis
compared to the same period in 2015, to GBP17.3 million (2015:
GBP8.3 million). The underlying operating profit has improved to
GBP1.6 million (2015: GBP0.3 million).
Review
The main trading operations in our Asia Pacific region are in
India, China, Malaysia and Hong Kong. These markets account for 23%
of the Group's full year revenue, which is a significant increase
on the prior year and reflects the growth experienced in this
region. This growth has been led by India which has had its most
successful year, growing revenues by 120% on a constant currency
basis and increasing profitability. This growth has been generated
by strong customer volumes and introducing new products to market.
In late 2016, we signed a new contract with a leading non-banking
financial company for sales of our Asset Care and FoneSafe products
which demonstrates the strength of the relationship and will
provide future growth opportunities in 2017 and beyond. We are
investing in operational infrastructure in India to provide robust
support for the continued growth of the business.
China has continued to progress, growing revenue and improving
operating performance during 2016. This growth is underpinned by
new Business Partner wins and channel development activity. It is
our intention to build infrastructure and capability in China which
will set the foundation for accelerated growth.
The Malaysian renewal performance continues in line with
expectations, although having signed a new Business Partner
contract in early 2016 we have been disappointed by new revenue
performance. Renewal performance in Hong Kong has continued to
perform in line with expectations.
FINANCIAL REVIEW
Overview
The Group's financial performance has exceeded expectations
during the year; underlying operating profit has improved and work
continues on initiatives designed to place the business in a better
position for sustainable growth in the future. This has been
underpinned by a number of key strategic decisions and further
measures taken to improve the profitable performance of our
underlying business.
Importantly, the shape of the business is changing with less
reliance on our traditional core markets in the UK and Europe.
There has been excellent traction in a number of our key strategic
growth markets. The Asia Pacific region has seen revenue growth
levels of 107% and now represents 23% (2015: 11%) of Group revenue.
This growth in Asia Pacific has principally been generated in India
through strong partnerships and sales from new products introduced
to the market. There is great potential for further growth in the
region, with continued development in India expected and exciting
opportunities in China. We are also encouraged by the development
of some of our other markets during the year, such as Turkey which
is attracting significant levels of new customers and growing
revenue.
In September 2016, the Group decided to cease the development of
an IT platform with SSP in favour of developing an in-house global
IT platform which will better suit current and future requirements
and will ultimately be a more cost-effective solution. This
decision has led to an exceptional charge to the income statement
of GBP9.1 million, following a GBP6.4 million impairment to the
asset in development, a GBP2.5 million cash payment to conclude the
SSP contract and other minor payments to satisfy contractual
commitments.
In 2015, the business decided that it was no longer appropriate
to make commission payments on renewing policies where the Business
Partners have no ongoing involvement in the renewal process and do
not provide any service to the customer. During the year these
commission savings provided price reductions to our customers and
are being invested in product content enhancements. Our commission
approach has been agreed with a number of the affected Business
Partners, although the position with some of our Business Partners
is not yet finalised.
Cost management remains integral to the Group's strategy, the
benefit of which will enable focused investment in the correct
areas to drive growth. During 2016 the Group's administrative
costs, excluding exceptional items and MSP charges, were GBP37.5
million (2015: GBP37.6 million). Administrative costs are broadly
in line with the prior year which reflects continued cost
management and savings in core areas of the business offset by
foreign exchange movements which have effectively increased costs
in most of our non-UK markets, and the cost of developing and
marketing new products and positioning to take advantage of
opportunities in other markets.
Looking ahead, the Group is well placed financially for 2017 and
beyond; however, profit margins are expected to settle at a lower
average level due to continued back book decline in established
markets, costs associated with developing and launching new global
products, and growth in developing markets that typically have
lower profit margins. Focus on effective cost management will
continue to be a priority for the business.
Continuing operations 2016 2015
------------------------------------------- ------ ------
Revenue (GBP millions) 73.6 76.8
------------------------------------------- ------ ------
Gross profit (GBP millions) 45.9 44.4
=========================================== ====== ======
Administrative expenses(1) (GBP millions) (37.5) (37.6)
------------------------------------------- ------ ------
Underlying operating profit (GBP millions) 8.4 6.9
=========================================== ====== ======
Exceptional items (GBP millions) (9.2) 17.8
=========================================== ====== ======
MSP charges (GBP millions) (1.0) (1.7)
------------------------------------------- ------ ------
Reported operating (loss)/profit (GBP
millions) (1.8) 23.0
=========================================== ====== ======
Net finance costs (GBP millions) (0.1) (1.1)
------------------------------------------- ------ ------
Reported (loss)/profit before tax (GBP
millions) (1.9) 21.9
------------------------------------------- ------ ------
Basic (loss)/earnings per share (pence) (0.06) 2.42
------------------------------------------- ------ ------
Net assets (GBP millions) 10.1 10.0
------------------------------------------- ------ ------
Net funds (GBP millions) 26.9 37.6
------------------------------------------- ------ ------
(1 Excluding exceptional items and MSP charges)
Summary
Group revenue from continuing operations has declined by 4% to
GBP73.6 million (2015: GBP76.8 million). This level of decline is
much lower compared to previous years and mainly reflects the
natural decline in the UK renewal book whilst new regulated sales
remain restricted. The impact of this has been partly mitigated by
significant growth in India and the effect a weaker sterling has
had on reported revenues in our European operations. On a regional
basis revenue has reduced by 33% in the UK and Ireland. Revenue in
Asia Pacific has grown by 107% (88% on a constant currency basis)
and 9% (2% decline on a constant currency basis) in Europe and
Latin America.
The underlying operating profit in the year from continuing
operations is GBP8.4 million, which is a GBP1.5 million improvement
on 2015. This improvement reflects the profit impact of the revenue
growth in a number of our international markets, most notably India
and Turkey. The impact of declining revenue in the UK is mostly
mitigated by actions taken to reduce the related cost base.
Exceptional items in the year total GBP9.2 million (2015:
GBP17.8 million credit) comprising IT impairment and settlement
costs, associated with the SSP-led IT platform of GBP9.1 million;
restructuring costs of GBP1.2 million; professional costs
associated with the shareholder requisition in May 2016 of GBP0.5
million; a credit of GBP1.5 million relating to impairment reversal
on the freehold land and property and a smaller credit of GBP0.1m
relating to customer redress.
Share-based payment charges relating to the MSP were GBP1.0
million (2015: GBP1.7 million). Due to the one-off nature of this
plan, MSP costs are presented separately from underlying operating
results.
The exceptional items and MSP charges contribute to a reported
operating loss of GBP1.8 million (2015: GBP23.0 million profit).
The profit reported in the prior year benefited from an exceptional
gain of GBP19.4 million following the settlement in full of the
Commission Deferral Agreement of GBP20.9 million for a compromise
payment of GBP1.3 million. There were GBP0.2 million costs in 2015
associated with the transaction.
Net interest and finance costs of GBP0.1 million (2015: GBP1.1
million) are significantly lower than 2015. The prior year charge
included the write-off of unamortised issue costs on the previous
debt facility, which was refinanced midway through a three year
term. Since the refinancing in February 2015 borrowing levels have
remained broadly similar.
As a result, the reported loss before tax from continuing
operations was GBP1.9 million (2015: GBP21.9 million profit) and
the reported loss after tax from continuing operations was GBP0.5
million (2015: GBP18.5 million profit).
Profit from discontinued operations of GBP0.6 million (2015:
GBP2.3 million) reflects the final benefits from the closure of the
Airport Angel business in 2015.
Basic loss per share from continuing operations is 0.06 pence
compared to earnings of 2.42 pence in 2015.
There has been a substantial weakening in sterling during the
year against our main trading currencies the euro and Indian rupee.
The impact on the Group has been to improve reported revenue and
profits from our international operations. Revenue in the year
declined at 10% on a constant currency basis, but 4% at actual
exchange rates. Underlying operating profit increased at 10% on a
constant currency basis compared to 22% at actual exchange
rates.
Key Performance Indicators
2016 2015 Change
----------------------------------- ---- ---- ------
Live policies (millions)
(see table below) 4.3 3.8 14%
=================================== ==== ==== ======
Annual renewal rate (%) 74.9 72.9 2.0
=================================== ==== ==== ======
Revenue by major product
(GBP millions) (see table
below) 73.6 76.8 (4)%
=================================== ==== ==== ======
Cost/income ratio (%) 70.8 66.3 4.5
=================================== ==== ==== ======
Underlying operating profit
margin (%) 11.4 8.9 2.5
----------------------------------- ---- ---- ------
Group cash balances (GBP millions)
(see table below) 28.2 39.8 (29)%
----------------------------------- ---- ---- ------
Live policies (millions) 2016 2015 Change
--------------------------- ---- ---- ------
Retail assistance policies 2.9 2.5 17%
=========================== ==== ==== ======
Retail insurance policies -- - n/a
=========================== ==== ==== ======
Wholesale policies 1.4 1.3 9%
--------------------------- ---- ---- ------
Total 4.3 3.8 14%
--------------------------- ---- ---- ------
Revenue by major product
(GBP millions) 2016 2015 Change
-------------------------- ---- ---- ------
Retail assistance revenue 68.0 68.1 0%
========================== ==== ==== ======
Retail insurance revenue 2.5 5.4 (54)%
========================== ==== ==== ======
Wholesale revenue 2.5 2.3 7%
-------------------------- ---- ---- ------
Non-policy revenue 0.7 0.9 (27)%
-------------------------- ---- ---- ------
Total 73.6 76.8 (4)%
-------------------------- ---- ---- ------
Group cash balances
(GBP millions) 2016 2015 Change
------------------------------ ---- ---- ------
Regulated and VVOP restricted
cash 18.7 33.9 (45)%
============================== ==== ==== ======
Free cash 9.5 5.9 61%
------------------------------ ---- ---- ------
Total 28.2 39.8 (29)%
------------------------------ ---- ---- ------
Live policies
The live policy base has increased by 14% in the year to due to
customer growth in our Indian, Chinese and Turkish markets. The
positive impact of these markets is partly reduced by the continued
decline in the UK.
Annual renewal rate
The annual renewal rate for 2016 has increased by 2.0 percentage
points since December 2015 due to improving rates across the Group,
partly offset by the mix impact of increasing renewal bases in our
developing markets which typically have a lower renewal rate than
our established markets.
Revenue by major product
Revenue from retail assistance policies is broadly stable year
on year with growth in India being offset by the continued decline
in Card Protection and Identity Protection renewals in the UK.
Retail insurance revenue, which relates to an historic UK Business
Partner contract, has continued to decline as expected.
Cost/income ratio
Our cost/income ratio has increased 4.5 percentage points year
on year due to declining UK renewal revenue (including the impact
of price reductions) which is partly offset by growth in India
which has a comparatively low cost base (excluding commissions).
The cessation of commission payments on renewing policies in the UK
does not impact this measure.
Underlying operating profit margin
Our underlying operating profit margin has improved by 2.5
percentage points year on year, reflecting a rate improvement in
India and the benefit of ceasing commission arrangements in the UK,
offset by the associated price reductions applied in the UK and the
mix impact of growth in India which is typically at lower margins.
Continued growth in India and other developing countries is
expected to pressure margins in the future.
Group cash balances
Cash held in the UK's regulated entities has decreased year on
year due to clearance of the regulatory fine, capital expenditure
on the SSP-led core platform IT system prior to cancellation and a
one-time payment to cancel the SSP contract.
Free cash has increased year on year through increased cash
balances overseas, which includes a positive impact on translation
from a weakened sterling.
Tax
In 2016 there was a tax credit on continuing operations of
GBP1.3 million (2015: GBP3.4 million charge). A one-time net credit
of GBP1.2 million arises from the release in full of the
equalisation reserve following adoption of Solvency II reporting
for our insurance entity, Homecare Insurance Limited (HIL). A
corresponding tax charge of GBP1.2 million on the equalisation
reserve release has been recognised in reserves. A deferred tax
asset has been recognised on Indian prior year losses increasing
the credit to the income statement, which is largely offset by
charges on the profits made in Spain, Turkey and Italy. Due to the
various movements noted, the effective tax rate for the year is not
considered to be a representative measure.
Cash flow and net funds
Cash used in operations amounted to GBP6.0 million (2015: GBP0.2
million) and results primarily from settlement of the regulatory
fine and the one-time payment to conclude the SSP contract. This
impact has been mitigated in part by positive operating cash
flows.
The Group's net funds position has reduced in the year to
GBP26.9 million (2015: GBP37.6 million). The net funds figure
includes cash balances of GBP18.7 million held in the UK's
regulated entities, Card Protection Plan Limited (CPPL) and HIL.
These cash balances cannot currently be distributed to the wider
Group without the regulator's approval, as they are either held for
regulatory capital purposes or are restricted by the terms of the
VVOP. This 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 operations is
more than adequate to cover the Group's future investment
plans.
Balance sheet and financing
At 31 December 2016 the Group had net assets of GBP10.1 million
which is a marginal increase of GBP0.1 million from the 2015 net
asset position of GBP10.0 million. This increase in net assets is
recognised after the impact of ceasing development of the SSP-led
IT platform, and results from the Group's improved trading
performance. The balance sheet is in a stronger position than the
prior year. The Group has not drawn against its borrowing facility
at the year end and has substantially completed its remaining
redress obligations, including clearance of the regulatory
fine.
The Group's borrowing arrangements comprise a committed GBP5.0
million revolving credit facility (RCF), which is available until
February 2018, and a commission deferral balance of GBP1.4 million
broadly half of which has been repaid subsequent to the year end.
The RCF was not drawn at the year end.
Events after the balance sheet date
As announced on 17 March 2017, the Group has completed the
acquisition of Blink for an initial consideration of EUR1 million,
which was paid on completion. The acquisition allows for a further
earn-out based on future products developed by Blink. The maximum
earn-out is based on up to 20% of defined profits generated by
Blink up to a maximum of EUR20 million in profits over the next
five years.
Michael Corcoran
Chief Financial Officer
23 March 2017
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 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.
Risk: Liquidity
Status: No change on prior year
Nature of risk and potential impact:
Liquidity risk is the risk that the Group or any of its
subsidiaries cannot meet their contractual or payment obligations
in a timely manner. Should the business not successfully generate
revenue through legacy products and the development of compelling
new products, then in the medium term the Group's liquidity
position may be adversely impacted.
Mitigation:
The overall liquidity profile is actively managed, ensuring that
the business plans and strategy are effective and aligned. A number
of dynamic programmes are in place to develop and deploy new
products and offerings, and to refresh existing legacy
products.
Risk: Reputational
Status: No change on prior year
Nature of risk and potential impact:
Reputational risk impacts the CPP brand, reliability and
relationships with customers and shareholders. This may arise from
poor conduct or judgements, regulatory non-compliance, or from
negative financial or operational events as a result of weaknesses
in systems and controls. Reputational risk may also arise from the
selection of Business Partners and product offerings which may have
adverse implications for the Group.
Mitigation:
High standards of conduct and a principled approach to
regulatory compliance are integral to our culture and values. We
consider key reputational risks when initiating changes in
strategy, products or our operating model. In addition, we have
frameworks to address other risks that could affect our reputation
including conduct risk and product development.
Risk: Shareholder
Status: No change 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 and time/cost of the
overall strategy. The Group has specific vulnerabilities, 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 business
rationale/strategy and seeking support of the Board and its
business plans.
Risk: People and resources
Status: No change 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 significant unplanned attrition of key
individuals could adversely impact 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
Group continues to be successful in recruiting and attracting fresh
talent and new skill sets to ensure we continue to be able to
deliver our plans. The Group has introduced incentivisation schemes
for certain key roles.
Risk: Technology and information security
Status: Increased on prior year
Nature of risk and potential impact:
The Group had embarked on a significant and wide ranging
transformation programme that includes replacement of the core IT
platform. A change of strategy saw the Group exit its relationship
with the external partner (SSP) and embark on an in-house
development programme. The full scope of this programme is being
developed and other strategic initiatives are being progressed.
This programme of work is an enabler for our future sustainability
and growth. There are risks that the nature and complexity of the
programme impacts the business adversely through operational
issues, cost over-runs or a failure to deliver to quality and on
time. The Group is also rolling out a revised information security
agenda to strengthen the overall framework.
Mitigation:
The Group has a robust governance and delivery framework which
is applied throughout its transformation. We regularly assess and
review progress and deliverables to ensure these are being
effectively managed and controlled.
Risk: International business
Status: Increased on prior year
Nature of risk and potential impact:
Our business is broadly diversified by region and operates in
multiple regulated markets worldwide. The proportion of our
business from international markets is increasing. Whilst this
mitigates our aggregate risk profile it introduces additional risks
in terms of operating cross-border and in multiple environments as
a result of complexity, local laws, regulations, business customs
and practices. The risk may be exacerbated as we operate a central
IT platform, business model and product propositions derived from
the UK offerings.
Mitigation:
The Board has sought to mitigate this risk through further
enhancement of its risk compliance and governance approach. Our
international operations are regularly reviewed by Internal Audit.
We aim to employ people with local expertise who ensure the
business and operations conform to local requirements as well as
Group standards. In addition, we seek the advice of local advisers
where appropriate.
Risk: Conduct and regulatory
Status: Decreased on prior year
Nature of risk and potential impact:
The risk of customer detriment arising from inappropriate
conduct, practice or behaviour and failing to meet customer needs,
interests or expected outcomes.
The risk of fines, penalties, censure or other sanctions arising
from failure to identify or meet regulatory requirements.
The risk that new regulation or changes to existing
interpretation has a material effect on the Group's operations or
cost base.
Mitigation:
We promote a strong compliance culture, strive to put the
interests of the customer first and value good relationships with
our regulators. Our compliance function supports management in
identifying and meeting our regulatory obligations with relevant
training and procedures. Compliance with relevant regulatory
requirements is monitored in accordance with a risk-based
programme. Our approach to encouraging appropriate conduct is set
out in our conduct risk framework, and is built on culture and
values, supported by appropriate governance and reporting. This
includes a culture in which colleagues are encouraged to focus on
good customer outcomes; a focus on products that meet customer
needs; robust controls, governance, training and risk management
processes. Regulatory and legal change is monitored by the
compliance, legal and risk teams.
Risk: Third party Business Partner
Status: No change on prior year
Nature of risk and potential impact:
We have a number of key supplier relationships as part of our
business model, particularly in respect of insurance underwriting,
product distribution and information technology. Third party
Business Partner risk relates to the risk that partners may seek to
end or change existing relationships or may not be able to meet
their agreed service level terms. There is a significant risk that
without ongoing engagement with Business Partners our primary route
to market could be constrained.
Mitigation:
The Group continues to engage with Business Partners to ensure
the smooth continuation of services while at the same time
developing and monitoring plans for alternative arrangements and
new distribution opportunities.
Risk: Emerging
Status: No change on prior year
Nature of risk and potential impact:
Emerging risks are those with uncertain impact, probability and
time frame that could impact the Group. These are the hardest to
define. We analyse each risk and, if needed, develop and apply
mitigation and management plans.
Mitigation:
The external emerging risks that are currently our focus of
attention include how we deal with the UK's exit from the European
Union and the increase in cyber-crime.
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.
The Group has continued to trade profitably during 2016 and
residual redress activities are substantially complete. Whilst
there continues to be some uncertainty from medium term trading and
strategic risk, forecasts show that the Group has the necessary
resources to trade and operate within the level of its borrowing
facilities.
After making enquiries, the Directors have a reasonable
expectation that the Group has 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.
Consolidated income statement
For the year ended 31 December 2016
2016 2015
Note GBP'000 GBP'000
------------------------------------------------------------------- ----- --------- ---------
Continuing operations
=================================================================== ===== ========= =========
Revenue 4 73,649 76,771
=================================================================== ===== ========= =========
Cost of sales (27,737) (32,346)
------------------------------------------------------------------- ----- --------- ---------
Gross profit 45,912 44,425
=================================================================== ===== ========= =========
Administrative expenses (47,693) (21,443)
------------------------------------------------------------------- ----- --------- ---------
Operating (loss)/profit (1,781) 22,982
------------------------------------------------------------------- ----- --------- ---------
Analysed as:
Underlying operating profit 4 8,365 6,863
Exceptional items 5 (9,172) 17,777
MSP charges 13 (974) (1,658)
------------------------------------------------------------------- ----- --------- ---------
Investment revenues 231 282
=================================================================== ===== ========= =========
Finance costs (325) (1,362)
------------------------------------------------------------------- ----- --------- ---------
(Loss)/profit before taxation (1,875) 21,902
=================================================================== ===== ========= =========
Taxation 1,342 (3,374)
------------------------------------------------------------------- ----- --------- ---------
(Loss)/profit for the year from continuing operations (533) 18,528
------------------------------------------------------------------- ----- --------- ---------
Discontinued operations
=================================================================== ===== ========= =========
Profit for the year from discontinued operations 579 2,309
------------------------------------------------------------------- ----- --------- ---------
Profit for the year attributable to equity holders of the Company 46 20,837
------------------------------------------------------------------- ----- --------- ---------
Basic (loss)/earnings per share Pence Pence
--------------------------------- ------- ------
Continuing operations 6 (0.06) 2.42
================================= ======= ======
Discontinued operations 6 0.07 0.30
--------------------------------- ------- ------
Total 0.01 2.72
--------------------------------- ------- ------
Diluted (loss)/earnings per share Pence Pence
----------------------------------- ------- ------
Continuing operations 6 (0.06) 2.41
=================================== ======= ======
Discontinued operations 6 0.07 0.30
----------------------------------- ------- ------
Total 0.01 2.71
----------------------------------- ------- ------
Consolidated statement of comprehensive income
For the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
--------------------------------------------------------------------------------------------- -------- --------
Profit for the year 46 20,837
============================================================================================== ======== ==========
Items that may be reclassified subsequently to profit or loss:
============================================================================================= ======== ==========
Exchange differences on translation of foreign operations (62) 271
============================================================================================== ======== ==========
Other comprehensive (expense)/income for the year net of taxation (62) 271
---------------------------------------------------------------------------------------------- -------- ----------
Total comprehensive (expense)/income for the year attributable to equity holders of the
Company (16) 21,108
---------------------------------------------------------------------------------------------- -------- ----------
Consolidated balance sheet
At 31 December 2016
2016 2015
Note GBP'000 GBP'000
------------------------------------ ---- --------- ---------
Non-current assets
==================================== ==== ========= =========
Intangible assets 7 2,136 4,825
==================================== ==== ========= =========
Property, plant and equipment 8 5,316 3,502
==================================== ==== ========= =========
Deferred tax asset 818 652
------------------------------------ ---- --------- ---------
8,270 8,979
------------------------------------ ---- --------- ---------
Current assets
==================================== ==== ========= =========
Insurance assets 62 317
==================================== ==== ========= =========
Inventories 40 43
==================================== ==== ========= =========
Trade and other receivables 16,991 12,106
==================================== ==== ========= =========
Cash and cash equivalents 9 28,250 39,810
------------------------------------ ---- --------- ---------
45,343 52,276
------------------------------------ ---- --------- ---------
Total assets 53,613 61,255
------------------------------------ ---- --------- ---------
Current liabilities
==================================== ==== ========= =========
Insurance liabilities (863) (1,189)
==================================== ==== ========= =========
Income tax liabilities (1,946) (2,483)
==================================== ==== ========= =========
Trade and other payables (38,099) (42,629)
==================================== ==== ========= =========
Borrowings 10 (1,391) -
==================================== ==== ========= =========
Provisions 11 (1,143) (2,254)
------------------------------------ ---- --------- ---------
(43,442) (48,555)
==================================== ==== ========= =========
Net current assets 1,901 3,721
------------------------------------ ---- --------- ---------
Non-current liabilities
==================================== ==== ========= =========
Borrowings 10 80 (2,191)
==================================== ==== ========= =========
Deferred tax liabilities (103) (308)
==================================== ==== ========= =========
Provisions 11 - (186)
------------------------------------ ---- --------- ---------
(23) (2,685)
------------------------------------ ---- --------- ---------
Total liabilities (43,465) (51,240)
------------------------------------ ---- --------- ---------
Net assets 10,148 10,015
------------------------------------ ---- --------- ---------
Equity
==================================== ==== ========= =========
Share capital 12 23,975 23,939
==================================== ==== ========= =========
Share premium account 45,225 45,225
==================================== ==== ========= =========
Merger reserve (100,399) (100,399)
==================================== ==== ========= =========
Translation reserve 929 991
==================================== ==== ========= =========
Equalisation reserve - 6,243
==================================== ==== ========= =========
ESOP reserve 14,516 13,093
==================================== ==== ========= =========
Retained earnings 25,902 20,923
------------------------------------ ---- --------- ---------
Total equity attributable to equity
holders of the Company 10,148 10,015
------------------------------------ ---- --------- ---------
Consolidated statement of changes in equity
For the year ended 31 December 2016
Share
Share premium Merger Translation Equalisation ESOP 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
2015 17,126 33,291 (100,399) 720 7,487 11,891 (991) (30,875)
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Total
comprehensive
income - - - 271 - - 20,837 21,108
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Movement on
equalisation
reserve - - - - (1,244) - 1,244 -
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Current tax
charge on
equalisation
reserve
movement - - - - - - (252) (252)
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Equity settled
share-based
payment
charge - - - - - 1,466 - 1,466
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Deferred tax
on
share-based
payment
charge - - - - - - 86 86
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Movement in
EBT shares 12 - - - - - (264) - (264)
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Exercise of
share options 1 (1) - - - - (1) (1)
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Other ordinary
share issues 6,812 11,935 - - - - - 18,747
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
At 31 December
2015 23,939 45,225 (100,399) 991 6,243 13,093 20,923 10,015
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Total
comprehensive
expense - - - (62) - - 46 (16)
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Movement on
equalisation
reserve - - - - (6,243) - 6,243 -
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Current tax
charge on
equalisation
reserve
movement - - - - - - (1,249) (1,249)
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Equity settled
share-based
payment
charge - - - - - 1,486 - 1,486
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Deferred tax
on
share-based
payment
charge - - - - - - (11) (11)
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Movement in
EBT shares 12 - - - - - (63) - (63)
============== ==== ========== ========== ========== =========== ============ =========== ========== ========
Exercise of
share options 12 36 - - - - - (50) (14)
-------------- ---- ---------- ---------- ---------- ----------- ------------ ----------- ---------- --------
At 31 December
2016 23,975 45,225 (100,399) 929 - 14,516 25,902 10,148
-------------- ---- ---------- ---------- ---------- ----------- ------------ ----------- ---------- --------
Consolidated cash flow statement
For the year ended 31 December 2016
2016 2015
Note GBP'000 GBP'000
------------------------------------------ ---- -------- --------
Net cash used in operating activities 14 (7,209) (1,360)
========================================== ==== ======== ========
Investing activities
========================================== ==== ======== ========
Interest received 243 282
========================================== ==== ======== ========
Purchases of property, plant and
equipment (592) (194)
========================================== ==== ======== ========
Purchases of intangible assets (3,812) (4,435)
========================================== ==== ======== ========
Net cash used in investing activities (4,161) (4,347)
========================================== ==== ======== ========
Financing activities
========================================== ==== ======== ========
Repayment of bank loans (1,000) (12,000)
========================================== ==== ======== ========
Repayment of the Commission Deferral
Agreement - (1,304)
========================================== ==== ======== ========
Proceeds from the Second Commission
Deferral Agreement - 1,304
========================================== ==== ======== ========
Interest paid (230) (903)
========================================== ==== ======== ========
Costs of refinancing the bank facility - (220)
========================================== ==== ======== ========
Costs of compromising the Commission
Deferral Agreement - (743)
========================================== ==== ======== ========
(Purchase)/issue of ordinary share
capital and associated costs (76) 18,980
------------------------------------------ ---- -------- --------
Net cash (used in)/from financing
activities (1,306) 5,114
------------------------------------------ ---- -------- --------
Net decrease in cash and cash equivalents (12,676) (593)
========================================== ==== ======== ========
Effect of foreign exchange rate
changes 1,116 (196)
========================================== ==== ======== ========
Cash and cash equivalents at 1 January 39,810 40,599
------------------------------------------ ---- -------- --------
Cash and cash equivalents at 31
December 9 28,250 39,810
------------------------------------------ ---- -------- --------
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
2017.
The financial information set out above does not constitute the
Company's statutory financial statements for the years ended 31
December 2016 or 31 December 2015, but is derived from the 2016
financial statements. Statutory financial statements for 2015 for
the Company prepared under IFRS have been delivered to the
Registrar of Companies and those for 2016 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 2016 financial statements were
approved by the Board of Directors on 23 March 2017.
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 2015. 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
------------------------------- ---------------------------------------------------------------------
Annual improvements to IFRSs 2010-2012 Cycle
IAS 1 (amendments) Disclosure Initiative
Annual improvements to IFRSs 2012-2014 Cycle
IAS 16 and IAS 38 (amendments) Clarification of Acceptable Methods of Depreciation and Amortisation
------------------------------- ---------------------------------------------------------------------
3. Critical accounting judgements and key sources of estimation
uncertainty
Classification of exceptional items
Exceptional items are those items that are required to be
separately disclosed by virtue of their size or incidence or have
been separately disclosed in order to improve a reader's
understanding of the financial statements. Consideration of what
should be included as exceptional requires judgement to be applied.
Exceptional items are considered to be ones which are material,
non-recurring and outside of the normal operating practice of the
Group.
Share-based payments
Judgement and estimation are required in determining the fair
value of share options at the date of award. The fair value is
estimated using valuation techniques which take account of the
awards term, the share price volatility and risk-free rates.
Judgement and estimation are also required to assess the number of
options expected to vest. Details of the assumptions made are
included in note 13.
Different assumptions would alter the share-based payment charge
for the current and subsequent periods. Valuations for equity
settled share-based payments are set at grant date and revised for
changes in non-market conditions.
Contractual matters
The Group has made certain commercial and contractual decisions
that are not yet agreed with all affected parties. The Group is
satisfied with its position from both a legal and regulatory
perspective. Appropriate financial provisions are in place in
respect of these matters and are included in trade and other
payables. The Group has taken advantage of the reduced disclosures
available within IAS 37 as it does not consider it appropriate to
disclose the detail of contractual matters as it may prejudice any
future discussions.
The appropriate level of financial provision may vary and impact
the consolidated income statement depending on the outcome of any
future discussions with those parties affected.
Current tax
The Group is required to estimate the corporation tax payable
for the year in each of the territories in which it operates.
Applicable tax regulations are complex and require that judgement
be exercised in calculating the taxable profit. In many countries
in which the Group operates, filed tax positions remain open to
challenge by local tax authorities for several years. Corporation
tax is therefore accrued on the Directors' assessment of territory
specific tax law and likelihood of settlement.
Any changes to estimates of uncertain tax positions would be
reflected in the consolidated income statement.
Capitalised software costs
The Group has capitalised internally generated intangible assets
in accordance with IAS 38. The recoverable amount of the assets has
been determined using value in use calculations which require the
use of estimates and judgements. Internally generated intangible
assets are routinely reviewed for impairment.
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 and Portugal);
- Asia Pacific (India, China, Hong Kong, Malaysia and
Singapore).
Segment revenues and performance have been as follows:
Europe and Asia
UK and Ireland Latin America Pacific Total
2016 2016 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- --------------- --------------- --------- ---------
Year ended 31 December 2016
============================================================== =============== =============== ========= =========
Continuing operations
============================================================== =============== =============== ========= =========
Revenue - external sales 28,757 27,619 17,273 73,649
============================================================== =============== =============== ========= =========
Cost of sales (2,782) (13,129) (11,826) (27,737)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Gross profit 25,975 14,490 5,447 45,912
============================================================== =============== =============== ========= =========
Depreciation and amortisation (368) (119) (17) (504)
============================================================== =============== =============== ========= =========
Other administrative expenses excluding exceptional items and
MSP charges (24,086) (9,170) (3,787) (37,043)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Regional underlying operating profit 1,521 5,201 1,643 8,365
-------------------------------------------------------------- --------------- --------------- --------- ---------
Exceptional items (note 5) (9,172)
-------------------------------------------------------------- --------------- --------------- --------- ---------
MSP charges (974)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Operating loss (1,781)
============================================================== =============== =============== ========= =========
Investment revenues 231
============================================================== =============== =============== ========= =========
Finance costs (325)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Loss before taxation (1,875)
============================================================== =============== =============== ========= =========
Taxation 1,342
-------------------------------------------------------------- --------------- --------------- --------- ---------
Loss for the year from continuing operations (533)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Discontinued operations
============================================================== =============== =============== ========= =========
Profit for the year from discontinued operations 579
-------------------------------------------------------------- --------------- --------------- --------- ---------
Profit for the year 46
-------------------------------------------------------------- --------------- --------------- --------- ---------
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 GBP2,359,000
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
2015 2015 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- --------------- --------------- --------- ---------
Year ended 31 December 2015
============================================================== =============== =============== ========= =========
Continuing operations
============================================================== =============== =============== ========= =========
Revenue - external sales 42,979 25,455 8,337 76,771
============================================================== =============== =============== ========= =========
Cost of sales (14,939) (12,479) (4,928) (32,346)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Gross profit 28,040 12,976 3,409 44,425
============================================================== =============== =============== ========= =========
Depreciation and amortisation (292) (264) (30) (586)
============================================================== =============== =============== ========= =========
Other administrative expenses excluding exceptional items and
MSP charge (25,759) (8,118) (3,099) (36,976)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Regional underlying operating profit 1,989 4,594 280 6,863
-------------------------------------------------------------- --------------- --------------- --------- ---------
Exceptional items (note 5) 17,777
============================================================== =============== =============== ========= =========
MSP charges (1,658)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Operating profit 22,982
============================================================== =============== =============== ========= =========
Investment revenues 282
============================================================== =============== =============== ========= =========
Finance costs (1,362)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Profit before taxation 21,902
============================================================== =============== =============== ========= =========
Taxation (3,374)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Profit for the year from continuing operations 18,528
-------------------------------------------------------------- --------------- --------------- --------- ---------
Discontinued operations
============================================================== =============== =============== ========= =========
Profit for the year from discontinued operations 2,309
-------------------------------------------------------------- --------------- --------------- --------- ---------
Profit for the year 20,837
-------------------------------------------------------------- --------------- --------------- --------- ---------
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 GBP1,704,000
presented within UK and Ireland in the table above which have been
charged to other regions for statutory purposes.
Segment assets
2016 2015
GBP'000 GBP'000
-------------------------------------------- --------- ----------
UK and Ireland 30,454 47,667
============================================ ========= ==========
Europe and Latin America 8,262 8,074
============================================ ========= ==========
Asia Pacific 14,038 4,065
-------------------------------------------- --------- ----------
Total segment assets 52,754 59,806
============================================ ========= ==========
Assets relating to discontinued operations 41 797
============================================ ========= ==========
Unallocated assets 818 652
-------------------------------------------- --------- ----------
Consolidated total assets 53,613 61,255
-------------------------------------------- --------- ----------
Deferred tax is not allocated to segments.
Capital expenditure
Intangible assets Property, plant and equipment
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- -------------- ---------------
Continuing operations
====================================== ========= ========= ============== ===============
UK and Ireland 3,780 4,415 478 129
====================================== ========= ========= ============== ===============
Europe and Latin America 32 21 27 48
====================================== ========= ========= ============== ===============
Asia Pacific - - 87 17
-------------------------------------- --------- --------- -------------- ---------------
Additions from continuing operations 3,812 4,436 592 194
-------------------------------------- --------- --------- -------------- ---------------
Revenues from major products
2016 2015
GBP'000 GBP'000
------------------------------------ --------- ---------
Continuing operations
==================================== ========= =========
Retail assistance policies 68,013 68,139
==================================== ========= =========
Retail insurance policies 2,473 5,384
==================================== ========= =========
Wholesale policies 2,503 2,344
==================================== ========= =========
Non-policy revenue 660 904
------------------------------------ --------- ---------
Revenue from continuing operations 73,649 76,771
==================================== ========= =========
Discontinued operations 91 13,107
------------------------------------ --------- ---------
Consolidated total revenue 73,740 89,878
------------------------------------ --------- ---------
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; "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, India 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
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- --------- ---------
Continuing operations
============================= ========= ========= ========= =========
UK 28,358 42,179 7,074 8,062
============================= ========= ========= ========= =========
India 15,163 6,256 90 14
============================= ========= ========= ========= =========
Spain 11,997 11,873 92 122
============================= ========= ========= ========= =========
Other 18,131 16,463 196 129
----------------------------- --------- --------- --------- ---------
Total continuing operations 73,649 76,771 7,452 8,327
============================= ========= ========= ========= =========
Discontinued operations 91 13,107 - -
----------------------------- --------- --------- --------- ---------
73,740 89,878 7,452 8,327
----------------------------- --------- --------- --------- ---------
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
2016 2015
Note GBP'000 GBP'000
------------------------------------------------------------------ ----- --------- ---------
Aborted IT platform and associated contractual settlement costs 7 9,104 -
================================================================== ===== ========= =========
Restructuring costs 1,170 711
================================================================== ===== ========= =========
Requisition costs 532 -
================================================================== ===== ========= =========
Reversal of freehold property impairment 8 (1,534) -
================================================================== ===== ========= =========
Customer redress and associated costs 11 (100) 900
================================================================== ===== ========= =========
Commission deferral compromise and associated costs - (19,388)
------------------------------------------------------------------ ----- --------- ---------
Exceptional charge/(credit) included in operating profit or loss 9,172 (17,777)
================================================================== ===== ========= =========
Tax on exceptional items (436) 2,344
------------------------------------------------------------------ ----- --------- ---------
Total exceptional charge/(credit) after tax 8,736 (15,433)
================================================================== ===== ========= =========
Discontinued operations after tax - (38)
------------------------------------------------------------------ ----- --------- ---------
8,736 (15,471)
------------------------------------------------------------------ ----- --------- ---------
The aborted IT platform and associated contractual settlement
costs of GBP9,104,000 (2015: GBPnil) comprises:
-- GBP6,404,000 relates to the impairment and subsequent
write-off of the IT platform that was in development;
-- GBP2,500,000 relates to the payment to conclude the SSP contract; and
-- GBP200,000 relates to other payments to satisfy associated contractual commitments.
Restructuring costs of GBP1,170,000 (2015: GBP711,000) relate to
employment settlement costs and additional costs relating to the
expiry of the lease at a vacated office in the UK.
Requisition costs of GBP532,000 (2015: GBPnil) relate to
professional costs associated with the shareholder general meeting
requisition and subsequent interim injunction proceedings. The
shareholder requisition, announced on 21 March 2016, proposed
resolutions to remove the CEO and Non-Executive Directors from the
Board. These resolutions were subsequently passed at a general
meeting on 5 May 2016.
Reversal of freehold property impairment is a credit of
GBP1,534,000 (2015: GBPnil) and reflects the write-back of the
asset to its current fair value, refer to note 8 for further
detail.
Customer redress and associated costs are a credit of GBP100,000
(2015: GBP900,000 charge) and relate to a release of provision in
line with the latest estimate of residual customer redress
activity.
6. (Loss)/earnings per share
Basic and diluted (loss)/earnings per share have been calculated
in accordance with IAS 33 'Earnings per Share'. Underlying 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 decrease the earnings per share from
continuing operations attributable to equity holders. The diluted
loss per share is therefore equal to the basic loss per share in
the current year.
(Loss)/earnings
Continuing operations Discontinued operations Total
----------------------- ------------------------- --------------------
2016 2015 2016 2015 2016 2015
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 (533) 18,528 579 2,309 46 20,837
======================================== =========== ========== ============ =========== ========= =========
Exceptional items (net of tax) 8,736 (15,433) - (38) 8,736 (15,471)
======================================== =========== ========== ============ =========== ========= =========
MSP charges (net of tax) 698 1,318 - - 698 1,318
---------------------------------------- ----------- ---------- ------------ ----------- --------- ---------
Earnings for the purposes of underlying
basic and diluted earnings per share 8,901 4,413 579 2,271 9,480 6,684
---------------------------------------- ----------- ---------- ------------ ----------- --------- ---------
Number of shares
Number Number
(thousands) (thousands)
---------------------------------------------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares for the purposes of basic and diluted
(loss)/earnings
per share and basic underlying earnings per share 854,677 766,667
======================================================================================== ============= =============
Effect of dilutive potential ordinary shares: share options 28,506 2,748
---------------------------------------------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares for the purposes of diluted underlying
earnings
per share 883,183 769,415
---------------------------------------------------------------------------------------- ------------- -------------
Continuing operations Discontinued operations Total
----------------------- ------------------------- ----------------
2016 2015 2016 2015 2016 2015
Pence Pence Pence Pence Pence Pence
------------------------------------------------ ----------- ---------- ------------ ----------- ------- -------
Basic and diluted (loss)/earnings per share
================================================ =========== ========== ============ =========== ======= =======
Basic (0.06) 2.42 0.07 0.30 0.01 2.72
================================================ =========== ========== ============ =========== ======= =======
Diluted (0.06) 2.41 0.07 0.30 0.01 2.71
------------------------------------------------ ----------- ---------- ------------ ----------- ------- -------
Basic and diluted underlying earnings per share
================================================ =========== ========== ============ =========== ======= =======
Basic 1.04 0.58 0.07 0.30 1.11 0.88
================================================ =========== ========== ============ =========== ======= =======
Diluted 1.00 0.57 0.07 0.30 1.07 0.87
------------------------------------------------ ----------- ---------- ------------ ----------- ------- -------
The Group has 171,650,000 deferred shares which have no rights
to receive dividends and only very limited rights on a return of
capital. The deferred shares have not been admitted to trading on
AIM or any other Stock Exchange. Accordingly, these shares have not
been considered in the calculation of (loss)/earnings per
share.
7. Intangible assets
Contractual
arrangements with Business Internally generated Externally acquired
third parties relationships software software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================== =================== ==================== ==================== ==================== ========
Cost:
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 1 January 2015 17,420 1,211 19,672 19,397 57,700
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Additions - - 574 3,862 4,436
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Disposals (17,420) (1,211) - (276) (18,907)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Exchange
adjustments - - - (83) (83)
===================== =================== ==================== ==================== ==================== ========
At 1 January 2016 - - 20,246 22,900 43,146
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Additions - - 362 3,450 3,812
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Disposals - - (420) (6,583) (7,003)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Exchange
adjustments - - - 137 137
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 31 December 2016 - - 20,188 19,904 40,092
===================== =================== ==================== ==================== ==================== ========
Accumulated
amortisation:
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 1 January 2015 17,165 1,211 19,478 19,038 56,892
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Provided during the
year 255 - - 136 391
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Disposals (17,420) (1,211) - (275) (18,906)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Impairment - - - 21 21
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Exchange
adjustments - - - (77) (77)
===================== =================== ==================== ==================== ==================== ========
At 1 January 2016 - - 19,478 18,843 38,321
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Provided during the
year - - - 104 104
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Disposals - - (420) (6,583) (7,003)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Impairment - - 420 5,984 6,404
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Exchange
adjustments - - - 130 130
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 31 December 2016 - - 19,478 18,478 37,956
===================== =================== ==================== ==================== ==================== ========
Carrying amount:
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 31 December 2015 - - 768 4,057 4,825
===================== =================== ==================== ==================== ==================== ========
At 31 December 2016 - - 710 1,426 2,136
===================== =================== ==================== ==================== ==================== ========
During the year the Group recognised an impairment of
GBP6,404,000 on its core platform IT system following the decision
to abort the project with SSP, this element of the asset has
subsequently been written off. The impairment loss has been
recognised as an exceptional item through the consolidated income
statement and relates to the UK and Ireland segment. The carrying
value of intangible assets includes GBP1,331,000 relating to the
ongoing in-house development of a core platform IT system. This
asset is recognised across internally generated software and
externally acquired software.
8. Property, plant and equipment
Freehold land and Leasehold Furniture and
property improvements Computer systems equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================== ===================== ===================== ================ ===================== ========
Cost:
--------------------- --------------------- --------------------- ---------------- --------------------- --------
At 1 January 2015 7,278 5,545 28,855 6,523 48,201
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Additions - 34 148 12 194
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Disposals - (56) (315) (431) (802)
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Exchange
adjustments - (77) (163) (74) (314)
===================== ===================== ===================== ================ ===================== ========
At 1 January 2016 7,278 5,446 28,525 6,030 47,279
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Additions - 140 390 62 592
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Disposals - (89) (1,165) (120) (1,374)
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Exchange
adjustments - 125 312 101 538
--------------------- --------------------- --------------------- ---------------- --------------------- --------
At 31 December 2016 7,278 5,622 28,062 6,073 47,035
===================== ===================== ===================== ================ ===================== ========
Accumulated
amortisation:
--------------------- --------------------- --------------------- ---------------- --------------------- --------
At 1 January 2015 4,265 5,287 28,568 6,261 44,381
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Provided during the
year 86 64 209 106 465
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Disposals - (53) (312) (422) (787)
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Exchange
adjustments - (63) (156) (63) (282)
===================== ===================== ===================== ================ ===================== ========
At 1 January 2016 4,351 5,235 28,309 5,882 43,777
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Provided during the
year 87 74 110 129 400
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Disposals - (69) (1,166) (120) (1,355)
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Impairment reversal (1,534) - - - (1,534)
--------------------- --------------------- --------------------- ---------------- --------------------- --------
Exchange
adjustments - 114 305 12 431
--------------------- --------------------- --------------------- ---------------- --------------------- --------
At 31 December 2016 2,904 5,354 27,558 5,903 41,719
===================== ===================== ===================== ================ ===================== ========
Carrying amount:
--------------------- --------------------- --------------------- ---------------- --------------------- --------
At 31 December 2015 2,927 211 216 148 3,502
===================== ===================== ===================== ================ ===================== ========
At 31 December 2016 4,374 268 504 170 5,316
===================== ===================== ===================== ================ ===================== ========
Included in freehold land and property is freehold land at its
cost value of GBP759,000 (2015: GBP759,000), which is not
depreciated.
During the year the Group has recognised the reversal of prior
year impairment in respect of the freehold land and property
totalling GBP1,534,000. This reversal reflects a change in the
basis of the recoverable amount from value in use to fair value
less costs of disposal. The value of the property has been written
back to GBP4,500,000 comprising GBP4,374,000 freehold land and
property and GBP126,000 leasehold improvements. The impairment
reversal has been recognised as an exceptional item through the
consolidated income statement and relates to the UK and Ireland
segment. The fair value basis is categorised within level 3 of the
fair value hierarchy.
9. Cash and cash equivalents
Consolidated cash and cash equivalents of GBP28,250,000 (2015:
GBP39,810,000) comprises cash held on demand by the Group and short
term deposits.
Cash and cash equivalents includes GBP18,727,000 (2015:
GBP33,879,000) cash held in the UK's regulated entities, CPPL and
HIL. This cash is either maintained by the Group's insurance
business for solvency purposes or restricted by the terms of the
VVOP. The VVOP restricted cash cannot be distributed to the wider
Group without FCA approval. The 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 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 is
as follows:
2016 2015
GBP'000 GBP'000
---------------------------------- --------- ---------
AA 3,162 1,679
================================== ========= =========
A 21,510 36,064
================================== ========= =========
BBB 2,027 548
================================== ========= =========
BB 1,414 1,405
================================== ========= =========
Rating information not available 137 114
---------------------------------- --------- ---------
28,250 39,810
---------------------------------- --------- ---------
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.
10. Borrowings
The carrying value of the Group's financial liabilities, for
short term borrowings and long term borrowings, are as follows:
2016 2015
GBP'000 GBP'000
-------------------------------------- --------- ---------
Second Commission Deferral Agreement 1,391 -
-------------------------------------- --------- ---------
Borrowings due within one year 1,391 -
-------------------------------------- --------- ---------
Bank loans due outside of one year - 1,000
====================================== ========= =========
Less: unamortised issue costs (80) (152)
====================================== ========= =========
Second Commission Deferral Agreement - 1,343
-------------------------------------- --------- ---------
Borrowings due outside of one year (80) 2,191
-------------------------------------- --------- ---------
Analysis of repayments:
2016 2015
GBP'000 GBP'000
------------------------------- --------- ---------
Within one year 1,391 -
=============================== ========= =========
In the second year - 1,343
=============================== ========= =========
In the third to fifth years - 1,000
------------------------------- --------- ---------
Total repayments 1,391 2,343
=============================== ========= =========
Less: unamortised issue costs (80) (152)
------------------------------- --------- ---------
Total carrying value 1,311 2,191
------------------------------- --------- ---------
The Group's bank debt is in the form of a GBP5,000,000 revolving
credit facility (RCF). The current RCF became effective on 11
February 2015. 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 28 February 2018. At 31
December 2016, the Group has GBP5,000,000 undrawn committed
borrowing facilities (2015: GBP4,000,000).
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 financial covenants of the RCF are based
on the interest cover 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 respect of the Second Commission
Deferral Agreement fall due for repayment on expiry of the
agreement on 31 January 2017. The Second 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.
The weighted average interest rates paid during the year were as
follows:
2016 2015
% %
-------------------------------- ----- -----
Bank loans 2.3 2.5
================================ ===== =====
Commission Deferral Agreements 3.5 3.5
-------------------------------- ----- -----
Weighted average 2.5 2.9
-------------------------------- ----- -----
The bank loans weighted average interest rate of 2.3% comprises
the interest rate charged on the drawn amount and the interest rate
charged for the commitment on the undrawn element.
11. Provisions
Customer Customer
redress and redress and
associated associated
Onerous leases costs Total Onerous leases costs Total
2016 2016 2016 2015 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------------- ------------- --------- --------------- ------------- ---------
At 1 January 829 1,611 2,440 1,658 6,356 8,014
================================ =============== ============= ========= =============== ============= =========
Charged/(credited) to the
income statement 500 (100) 400 (97) 900 803
================================ =============== ============= ========= =============== ============= =========
Customer redress and associated
costs paid in the year - (1,035) (1,035) - (4,821) (4,821)
================================ =============== ============= ========= =============== ============= =========
Utilisation of onerous lease
provision in the year (662) - (662) (732) - (732)
================================ =============== ============= ========= =============== ============= =========
Transfer to trade and other
payables - - - - (824) (824)
-------------------------------- --------------- ------------- --------- --------------- ------------- ---------
At 31 December 667 476 1,143 829 1,611 2,440
-------------------------------- --------------- ------------- --------- --------------- ------------- ---------
The onerous lease provision reflects the future lease payments
and associated costs in the expected non-utilisation period at a
vacated office in the UK.
The customer redress and associated cost provision comprises
anticipated compensation payable to customers through residual
customer redress exercises and associated professional fees.
The onerous lease provision and customer redress and associated
costs are both expected to be settled within one year of the
balance sheet date.
The Group has made certain commercial and contractual decisions
that are not yet agreed with all affected parties. The Group is
satisfied with its position from both a legal and regulatory
perspective. Appropriate financial provisions are in place in
respect of these matters and are included in trade and other
payables.
Provisions are expected to be settled in the following
periods:
Customer Customer
redress and redress and
associated associated
Onerous leases costs Total Onerous leases costs Total
2016 2016 2016 2015 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------------- ------------- --------- --------------- ------------- ---------
Within one year 667 476 1,143 643 1,611 2,254
===================== =============== ============= ========= =============== ============= =========
Outside of one year - - - 186 - 186
--------------------- --------------- ------------- --------- --------------- ------------- ---------
At 31 December 667 476 1,143 829 1,611 2,440
--------------------- --------------- ------------- --------- --------------- ------------- ---------
12. Share capital
Ordinary shares Deferred shares Ordinary shares Deferred shares
of 1 penny each of 9 pence each Total of 1 penny each of 9 pence each Total
(thousands) (thousands) (thousands) GBP'000 GBP'000 GBP'000
----------------- ---------------- ----------------- ------------- ----------------- ----------------- ---------
Called up and
allotted:
================= ================ ================= ============= ================= ================= =========
At 1 January
2016 852,834 171,650 1,024,484 8,526 15,413 23,939
================= ================ ================= ============= ================= ================= =========
Issue of shares
in connection
with:
================= ================ ================= ============= ================= ================= =========
Exercise of
share options 3,647 - 3,647 36 - 36
----------------- ---------------- ----------------- ------------- ----------------- ----------------- ---------
At 31 December
2015 856,481 171,650 1,028,131 8,562 15,413 23,975
----------------- ---------------- ----------------- ------------- ----------------- ----------------- ---------
During the year, the Company issued 3,647,000 shares to option
holders for total consideration of GBP36,470. Further details
relating to share options are provided in note 13.
During the year the CPPGroup Plc Employee Benefit Trust (EBT)
purchased 3,000,000 (2015: 1,763,000) of the Company's ordinary
shares for total cash consideration of GBP120,000 (2015:
GBP264,000). Of the total shares purchased by the EBT 711,874
(2015: nil) were used to settle awards under the MSP.
The total amount paid by the EBT to acquire shares, offset by
the value of shares used to satisfy the MSP award, has been
deducted from the ESOP reserve. The reduction in the ESOP reserve
in the year is GBP63,000 (2015: GBP264,000).
Of the 856,480,830 ordinary shares issued at 31 December 2016,
855,980,831 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.
Deferred shares have no voting rights, no rights to receive
dividends and only very limited rights on a return of capital. The
deferred shares have not been listed for trading in any market and
are not freely transferable.
13. Share-based payment
Current share plans
Share-based payment charges comprise 2016 Long Term Incentive
Plan (2016 LTIP) charges of GBP582,000 (2015: GBPnil) and MSP
charges of GBP902,000 (2015: GBP1,457,000). These costs are
disclosed within administrative expenses, although the MSP
share-based payment charge forms part of the MSP charges which is
not included in underlying operating profit. MSP charges in the
income statement are different to the share-based payment charge
due to the recognition of employer's national insurance relating to
future option exercises. There have been 26,050,000 options granted
in the current year as part of the 2016 LTIP; the plan was not in
operation in the prior year. There have been no MSP options granted
in the current year (2015: 38,010,000).
2016 2015
Number of share Weighted average Number of share Weighted average
options exercise price options exercise price
(thousands) (GBP) (thousands) (GBP)
----------------------- ---------------------- --------------------- ---------------------- ----------------------
2016 LTIP
======================= ====================== ===================== ====================== ======================
Outstanding at 1
January - - - -
======================= ====================== ===================== ====================== ======================
Granted during the
year 26,050 - - -
======================= ====================== ===================== ====================== ======================
Forfeited during the
year (10,969) - - -
----------------------- ---------------------- --------------------- ---------------------- ----------------------
Outstanding at 31
December 15,081 - - -
----------------------- ---------------------- --------------------- ---------------------- ----------------------
MSP
======================= ====================== ===================== ====================== ======================
Outstanding at 1
January 36,135 0.01 - -
======================= ====================== ===================== ====================== ======================
Granted during the
year - - 38,010 0.01
======================= ====================== ===================== ====================== ======================
Forfeited during the
year (14,111) 0.01 (1,875) 0.01
======================= ====================== ===================== ====================== ======================
Exercised during the
year (4,359) 0.01 - -
----------------------- ---------------------- --------------------- ---------------------- ----------------------
Outstanding at 31
December 17,665 0.01 36,135 0.01
----------------------- ---------------------- --------------------- ---------------------- ----------------------
Exercisable at 31
December 1,810 0.01 - -
----------------------- ---------------------- --------------------- ---------------------- ----------------------
Nil-cost options and conditional shares granted under the 2016
LTIP normally vest after three years, lapse if not exercised within
ten years of grant and will lapse if option holders cease to be
employed by the Group. Vesting of 2016 LTIP options and shares is
also subject to achievement of certain performance criteria
including a share price measure and an underlying operating profit
target over the vesting period.
Options granted under the MSP have an exercise price of 1 penny
and vest over a three year period, with 25% vesting on the first
anniversary of the grant date, 25% vesting on the second
anniversary and 50% vesting on the third anniversary. Options lapse
if not exercised within ten years of the grant date and will lapse
if option holders cease to be employed by the Group or sell any of
their investment shares. There have been no options granted in the
current year (2015: 38,010,000) and options exercised in the
current year total 4,359,000 (2015: n/a).
The options outstanding at 31 December 2016 had a weighted
average remaining contractual life of two years (2015: n/a) in the
2016 LTIP and one year (2015: two years) in the MSP.
The principal assumptions underlying the valuation of the
options granted during the year at the date of grant are as
follows:
LTIP
2016
--------------------------------- --------
Weighted average share price GBP0.12
================================= ========
Weighted average exercise price -
================================= ========
Expected volatility 150%
================================= ========
Expected life 3 years
================================= ========
Risk-free rate 0.67%
================================= ========
Dividend yield 0%
--------------------------------- --------
There have been 26,050,000 share options granted in the current
year. The aggregate estimated fair value of the options and shares
granted in the current year under the 2016 LTIP was
GBP2,852,000.
14. Reconciliation of operating cash flows
2016 2015
GBP'000 GBP'000
---------------------------------------------------------- --------- ---------
Profit for the year 46 20,837
========================================================== ========= =========
Adjustment for:
========================================================== ========= =========
Depreciation and amortisation 504 856
========================================================== ========= =========
Equity settled share-based payment expense 1,486 1,466
========================================================== ========= =========
Impairment loss on intangible assets 6,404 21
========================================================== ========= =========
Reversal of freehold property impairment (1,534) -
========================================================== ========= =========
Loss on disposal of property, plant and equipment 20 16
========================================================== ========= =========
Commission deferral compromise and associated costs - (19,388)
========================================================== ========= =========
Investment revenues (243) (282)
========================================================== ========= =========
Finance costs 325 1,523
========================================================== ========= =========
Income tax (credit)/expense (1,342) 3,017
---------------------------------------------------------- --------- ---------
Operating cash flows before movements in working capital 5,666 8,066
========================================================== ========= =========
Decrease in inventories 2 50
========================================================== ========= =========
(Increase)/decrease in receivables (3,542) 2,234
========================================================== ========= =========
Decrease in insurance assets 255 276
========================================================== ========= =========
Decrease in payables (6,718) (4,410)
========================================================== ========= =========
Decrease in insurance liabilities (326) (830)
========================================================== ========= =========
Decrease in provisions (1,296) (5,574)
---------------------------------------------------------- --------- ---------
Cash used in operations (5,959) (188)
========================================================== ========= =========
Income taxes paid (1,250) (1,172)
---------------------------------------------------------- --------- ---------
Net cash used in operating activities (7,209) (1,360)
---------------------------------------------------------- --------- ---------
15. Related party transactions and control
Transactions with related parties
The Group has settled legal fees totalling GBP210,000 incurred
by Mr Hamish Ogston in relation to the interim injunction
proceedings which were announced on 11 April 2016 and subsequently
withdrawn on 25 April 2016. Mr Ogston is a substantial shareholder
in the Group.
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:
2016 2015
GBP'000 GBP'000
------------------------------ --------- ---------
Short term employee benefits 2,697 4,098
============================== ========= =========
Post-employment benefits 142 121
============================== ========= =========
Termination benefits 817 239
============================== ========= =========
Share-based payments 1,028 1,128
------------------------------ --------- ---------
4,684 5,586
------------------------------ --------- ---------
16. Events after the balance sheet date
As announced on 17 March 2017, the Group has completed the
acquisition of Blink Innovation Limited (Blink) for an initial
consideration of EUR1 million, which was paid on completion. The
acquisition allows for a further earn-out based on future products
developed by Blink. The maximum earn-out is based on up to 20% of
defined profits generated by Blink up to a maximum of EUR20 million
in profits over the next five years.
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 XXLLLDXFBBBF
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March 24, 2017 03:00 ET (07:00 GMT)
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