TIDMQPP
RNS Number : 6825A
Quindell PLC
30 September 2015
30 September 2015
Quindell Plc
("Quindell" or the "Company" or the "Group")
Interim Results for the six months ended 30 June 2015
-- Profit retained for the period of GBP414.5m (2014: loss of
GBP81.9m), includes profit on sale of Professional Services
division of GBP485.9m
-- Strong balance sheet position with net assets of GBP699.0m as at 30 June 2015
-- Cash in hand of GBP524.0m as at 25 September 2015 with a
further GBP55.0m is being held in escrow relating to the disposal
of the Professional Services Division, with further potential cash
inflows from contingent consideration not included in the net
assets
-- Continuing operations revenues of GBP35.3m (2014: GBP42.8m)*
-- Adjusted EBITDA loss of GBP15.8m (2014: loss of GBP6.1m)
reflecting difficulties experienced by the Group during the first
half of the year
-- The Group's insurance technology solutions businesses have a
solid technology base from which to shape a future strategy,
including innovative usage based insurance (UBI) solutions, award
winning policy & claims solutions and consumer telematics
offerings
-- New Board now in place following the appointment of Indro Mukerjee as Group Chief Executive
-- The Group continues to co-operate fully with the outstanding
SFO enquiry relating to past business and accounting practices
-- Subject, inter alia, to Court approval, the stated desire of
the Board is to make a capital distribution of at least GBP1 per
ordinary share and up to GBP500 million. The Board is in the
process of determining, with its advisers, the exact amount, form
and methodology of the capital return which will be proposed to
shareholders
*including the results of Ingenie Limited from 4 February 2014
as explained in the Report and Accounts for the year ended 31
December 2014.
Richard Rose, Non-executive Chairman commented:
"This announcement comes just 7 weeks since the publication of
FY 2014 results, and the focus now is on the future. The
appointment of Indro Mukerjee on 7 September 2015 as Group CEO was
an important step. The new Board is now complete and will deliver
the highest standards of corporate governance with a focus on
shareholder value".
Indro Mukerjee, Group Chief Executive Officer commented:
"Since starting on 7 September, I have visited and met the vast
majority of our businesses as well as a number of customers,
shareholders and other key stakeholders. With shareholder value
clearly in mind, I will work quickly and methodically on the
Group's opportunities and challenges. I plan to share an outline
strategy around the turn of the year. In the meantime, I will be
focusing on: establishing good governance and operational
integrity; dealing with the Group's losses as quickly as possible;
and creating the best platform possible for future growth based on
clear and compelling value propositions."
For further information:
Quindell Plc Tel: 01489 864 200
Indro Mukerjee, Group Chief Executive
Officer
Stephen Joseph, Head of Investor Relations
Tulchan Communications Tel: 020 7353 4200
Victoria Huxster
Peel Hunt LLP, Nominated Adviser and Tel: 020 7418 8900
broker
Dan Webster
Chairman's Statement
The year to date has been extremely busy for the Group, with the
sale in the first half of the Professional Services Division
("PSD") followed by the publication of a complex set of accounts
for the year ended 31 December 2014, the appointment of a new Board
and the commencement of the strategic work for the future. We have
recently welcomed our new Group Chief Executive Officer, Indro
Mukerjee, who is leading the changes that will be happening across
the Group. The management team is focussed on delivering
shareholder value as well as a fantastic customer offering across
all of our divisions.
Results
The results for the period comprise the continuing operations of
the Group's remaining businesses as at 30 June 2015 and those
discontinued operations relating to the PSD, which had been
disposed of by that date. The trading results for the discontinued
operations are shown as one line in the Condensed Consolidated
Income Statement and the profit arising on the disposal of the PSD
is shown as separate line within discontinued operations. In other
respects all references in this statement refer to the results of
the continuing operations.
The comparative results for the 6 months ended 30 June 2014,
contained within the Condensed Consolidated Income Statement and
Condensed Consolidated Cashflow Statement, have been restated to
incorporate equivalent adjustments to those reported in the
financial statements for the year ended 31 December 2014. Further
details are provided in note 2.
Revenue has decreased by GBP7.5m to GBP35.3m (2014: GBP42.8m).
Revenue in the businesses that provide technology solutions to the
insurance sector (comprising Himex, QSI, Ingenie and QETS) remained
stable at GBP13.0m (2014: GBP13.4m). Revenue contributed by PT
Health was GBP12.9m (2014: GBP14.3m), whilst the other technology
and property services businesses saw revenues fall by GBP4.7m to
GBP8.7m (2014: GBP13.4m). We have benefitted from the inclusion of
Ingenie for the full 6 months, but have seen a fall in revenues in
Himex due to a temporary interruption in supply within one of our
US customers and a slowdown in new software sales by QETS in the UK
and Canada due to issues concerning the Quindell brand. We have
seen a material slow down in activity in the property services
businesses, which have been affected by Government policy and
subsidy changes significantly impacting our energy efficiency
related installations.
Gross margin declined by GBP6.3m to GBP10.3m (2014: GBP16.6m),
reflecting lower revenues and reduced margins in the technology
(utilisation) and property services (price pressure) businesses.
With an increase in volume in our technology businesses, we will
see the margin improve due to the relatively fixed cost base in
those companies. Administrative costs have reduced to GBP49.3m
(2014: GBP76.6m). This is attributable to reduced impairment and
other exceptional costs. Normalised administrative costs remained
broadly flat at GBP33.9m (2014: GBP34.5m).
Other income of GBP2.8m represents a gain on the sale of 360
Globalnet Limited. A further gain of GBP485.9m arose on the
disposal of the PSD (further details are set out in note 9). The
Group incurred net interest charges of GBP0.5m, prior to the
disposal of the PSD.
The balance sheet is strong with net assets of GBP699.0m and
cash in hand of GBP548.4m. We currently have a further GBP50.0m
held in escrow as security for potential warranty claims and
GBP5.0m as security for adjustments to the completion accounts
relating to the disposal of the PSD. In addition, we anticipate
contingent sales consideration relating to the disposal of the PSD
of approximately GBP39.6m which we expect will come through as cash
held by the Group in due course and for prudence have not recorded
this as an asset within our overall net assets.
Current trading and outlook
Trading for the Group's continuing operations since 30 June 2015
is broadly in line with the first half predominantly as a result of
the challenges the Group faces due to ongoing reputational issues
and the need to develop strong value propositions to best make use
of its capabilities. The Group has focused its efforts on ensuring
that the issues of the past have been properly identified, reported
appropriately and resolved. The Group has not identified any
further matters requiring additional disclosure beyond that made at
the time of the Group's Report and Accounts for the year ended 31
December 2014. We are now focussed on creating a strong and clear
value proposition and "go to market" strategy.
The Group's insurance solutions businesses have a solid
technology base to move forward with. This includes technologies
which span the market from innovative usage based insurance (UBI)
solutions from Himex to award winning policy and claims solutions
from QETS and QSI through to Ingenie which was awarded Telematics
Champion of the year by the Insurance Times as part of its Tech
awards earlier this month.
With the appointment of our new Group CEO on 7 September 2015,
the final quarter of 2015 will see activity in all businesses and a
particular focus on the areas of strategic development, market
engagement, sales and marketing and cash management. Indro has
already started with a mind-set which recognises the need to deal
with the historic and current challenges and will identify and take
action to exploit the opportunities pragmatically and with vigour
and speed. We would intend to start sharing strategic plans for the
future around the turn of the year.
Regulatory Matters
As announced on 24 June 2015, we were informed on 23 June 2015
that the Financial Conduct Authority ("FCA") had commenced an
investigation into the historic public statements made regarding
the financial results of the Company during 2013 and 2014. On 5
August 2015, the Serious Fraud Office ("SFO") informed the Company
that it had opened an investigation relating to past business and
accounting practices at the Company. On the same date, the
Financial Reporting Council advised the Company that, in light of
the positive actions taken by the Directors in correcting the
identified errors, amending accounting policies and providing their
undertakings, the Committee had closed its review of the 2011 and
2012 report and accounts. On 18 August 2015, the FCA announced
that, in light of the above investigation by the SFO it had decided
to discontinue its own investigation with immediate effect.
Accordingly, we continue to co-operate fully with the SFO
investigation which is now the only ongoing investigation to which
the Company is subject.
Return of Capital
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The Company is commencing the process to create distributable
reserves. This is a necessary step before we can make a return of
capital and commence any share buy back, if deemed appropriate. The
amount of any return to shareholders will be determined in the near
future and, in deciding the appropriate quantum to be distributed,
the Board will need to ensure the interests of creditors are
adequately safeguarded (including in respect of any contingent
liabilities). The Board is working with advisers to assess the
Group's contingent liabilities.
As announced on 29 September 2015, the Company has received a
letter described as a "Notice of Intended Claim" from a law firm
acting for a claimant group suggesting that it intends to commence
an action against the Company under the Financial Services and
Markets Act 2000 ("Notice").
Whilst the Company is not in a position to verify the assertions
in the Notice (as no claim has been received as yet), the Notice
estimates the value of the potential claims against the Company to
be a maximum of approximately GBP9 million before costs (if
awarded). There can be no guarantee that other claims will not be
made against the Company and, in particular, the claimant firm
details that it has been approached, but not retained, by other
potential claimants who together, it asserts, would have a claim of
a maximum value of a further GBP9 million.
The Company is not aware, and has not been made aware, of any
other law firms acting for (or in the process of forming) other
claimant groups.
The Notice provides little detail on the potential claim or the
timing of the pre-action Letter of Claim and no information to
support the valuation of the individual prospective claimants'
claims, which would require to be proved in due course in any
litigation. At this stage, the Company will vigorously defend all
such claims, as appropriate.
Sufficient funds will be retained for operational purposes, to
protect and deliver shareholder value and to cover contingent
liabilities. Subject, inter alia, to Court approval, the stated
desire of the Board is to make a capital distribution of at least
GBP1 per ordinary share and up to GBP500 million. The Board is in
the process of determining, with its advisers, the exact amount,
form and methodology of the capital return which will be proposed
to shareholders.
A capital return will require both the approval of shareholders
and Court approval for a capital reduction. We currently anticipate
a General Meeting in November 2015 and expect the Court date for
the approval to be on 2 December 2015 with a capital return taking
place shortly thereafter.
Summary
We continue to make good progress and have a refocussed Group.
We have some exciting opportunities ahead, and as we continue to
put the past behind us, we look forward to the future.
Condensed Consolidated Income Statement
for the period ended 30 June 2015
Restated
Six months ended 30 June six months ended
2015 30 June 2014
(unaudited) (unaudited)
Note GBP'000 GBP'000
Revenue 4 35,328 42,836
Cost of sales (25,075) (26,197)
Gross profit 10,253 16,639
Administrative expenses
* Normal (33,934) (34,535)
* Share-based payments (6,276) (3,744)
* Impairments 5 (4,571) (14,360)
* Other exceptional costs 5 (3,273) (23,963)
Total administrative
expenses (48,054) (76,602)
-------------------------------- ----- ------------------------- ------------------
Other income - exceptional 6 2,848 23,036
Share of results
of associates - 1,391
-------------------------------- ----- ------------------------- ------------------
Group operating loss (34,953) (35,536)
Finance income 336 283
Finance expense (838) (439)
Loss before taxation (35,455) (35,692)
Taxation 2,286 5,933
Loss after taxation
for the year from
continuing operations (33,169) (29,759)
Discontinued operations
Net gain on disposal
of PSD 9 485,857 -
Loss for the period
from discontinued
operations
(attributable to
equity holders of
the Company) (38,135) (51,327)
Profit/(loss) for
the period 414,553 (81,086)
-------------------------------- ----- ------------------------- ------------------
Attributable to:
Equity holders of
the parent 414,525 (81,938)
Non-controlling interests 28 852
-------------------------------- ----- ------------------------- ------------------
414,553 (81,086)
-------------------------------- ----- ------------------------- ------------------
Earnings/(loss) per
share from continuing
and discontinued
operations attributable
to owners of the
parent during the
period Pence Pence
Basic earnings/(loss)
per share
From continuing operations (7.349) (7.151)
From discontinued
operations 99.119 (12.334)
From earnings/(loss)
for the period 91.770 (19.485)
-------------------------------- ----- ------------------------- ------------------
Diluted earnings/(loss)
per share
From continuing operations (7.349) (7.151)
From discontinued
operations 99.119 (12.334)
From earnings/(loss)
for the period 91.770 (19.485)
-------------------------------- ----- ------------------------- ------------------
Condensed Consolidated Statement of Financial Position
as at 30 June 2015
At 30 June
At 31 December
2015 2014
(unaudited) (unaudited)
Note GBP'000 GBP'000
Non-current assets
Goodwill 96,975 97,832
Other intangible assets 59,780 66,271
Property, plant and equipment 10,704 14,091
Interests in associates 100 7,169
Investments 2,559 4,017
170,118 189,380
------------------------------------------ ----- ------------- ---------------
Current assets
Inventories 3,354 3,473
Trade and other receivables 7 78,600 32,863
Corporation tax assets 8,243 7,196
Cash 548,425 42,036
638,622 85,568
------------------------------------------ ----- ------------- ---------------
Assets of disposal group classified
as held for sale - 303,674
Total assets 808,740 578,622
------------------------------------------ ----- ------------- ---------------
Current liabilities
Bank overdraft (54) (4,968)
Borrowings (587) (3,133)
Trade and other payables 8 (58,098) (73,810)
Obligations under finance leases (251) (1,081)
Provisions (36,777) (30,809)
(95,767) (113,801)
------------------------------------------ ----- ------------- ---------------
Liabilities of disposal group classified
as held for sale - (182,845)
------------------------------------------ ----- ------------- ---------------
(95,767) (296,646)
------------------------------------------ ----- ------------- ---------------
Non-current liabilities
Borrowings (5,005) (4,947)
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September 30, 2015 02:03 ET (06:03 GMT)
Obligations under finance leases (105) (1,080)
Provisions (257) (257)
Deferred tax liabilities (8,592) (11,196)
(13,959) (17,480)
------------------------------------------ ----- ------------- ---------------
Total liabilities (109,726) (314,126)
------------------------------------------ ----- ------------- ---------------
Net assets 699,014 264,496
------------------------------------------ ----- ------------- ---------------
Equity
Share capital 11 66,744 65,467
Share premium account 438,349 430,070
Reverse acquisition and merger reserve 178,258 178,258
Shares to be issued 29,376 30,744
Other reserves 44,088 31,036
Foreign currency translation reserve (2,701) (2,401)
Retained earnings (58,218) (472,743)
------------------------------------------ ----- ------------- ---------------
Equity attributable to equity holders
of the parent 695,896 260,431
Non-controlling interests 3,118 4,065
Total equity 699,014 264,496
------------------------------------------ ----- ------------- ---------------
Company Registration Number: 05542221
Condensed Consolidated Cash Flow Statement
for the period ended 30 June 2015
Six months Restated
ended 30
June 2015
(unaudited) six months
ended 30
June 2014
(unaudited)
Note GBP'000 GBP'000
Cash flows from operating activities
Cash used in operations before exceptional
costs, net finance expense and tax (48,282) (52,273)
Cash outflow from exceptional items (6,936) (2,150)
Cash used in operations before net
finance expense and tax (55,218) (54,423)
------------------------------------------------------ ------------- -------------
Net finance expense paid (903) (675)
Corporation tax paid (83) (23,359)
Net cash used by operating activities (56,204) (78,457)
------------------------------------------------------ ------------- -------------
Cash flows from investing activities
Purchase of property, plant and equipment (3,247) (3,197)
Purchase of intangible fixed assets (3,902) (17,033)
Disposal of subsidiaries net of cash
forgone and expenses 578,920 (3,849)
Proceeds on disposal of property, 3,875 -
plant and equipment
Purchase of fixed asset investments - (1,500)
Proceeds from sale of associate 7,069 -
Acquisition of subsidiaries net of
cash acquired 352 (11,583)
Deposits held in Escrow - (3,000)
Loans to investments and other parties - (1,476)
Net cash generated by/(used in) investing
activities 583,067 (41,638)
------------------------------------------------------ ------------- -------------
Cash flows from financing activities
Issue of share capital - 100
Dividends paid - (6,180)
Sale of shares treated as held in
treasury 2,746 5,444
Finance lease repayments (1,829) (346)
Additional secured loans 766 5,727
Repayment of secured loans (30,329) -
Repayment of unsecured loans (191) -
Net cash generated by/(used in) financing
activities (28,837) 4,745
------------------------------------------------------ ------------- -------------
Net increase/(decrease) in cash and
cash equivalents 498,026 (115,350)
Cash and cash equivalents at the beginning
of the period 50,482 179,954
Exchange losses on cash and cash equivalents (137) (149)
Cash and cash equivalents at the end
of the period 548,371 64,455
------------------------------------------------------ ------------- -------------
Notes to the Interim Statements
1. Preparation of the condensed consolidated financial information
Basis of preparation
The interim financial statements for the six months ended 30
June 2015 have been prepared in accordance with the AIM Rules and
the recognition and measurement requirements of IFRSs as adopted by
the EU. The interim financial information should be read in
conjunction with the Group's Annual Report and Financial Statements
for the year ended 31 December 2014, which has been prepared in
accordance with IFRSs as adopted by the EU.
The comparative figures for the financial year ended 31 December
2014 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's auditor
and delivered to the registrar of companies. The report of the
auditor was qualified in respect of a limitation in the scope of
their work and contains statements under section 498 (2) and (3) of
the Companies Act 2006, concerning the keeping of adequate books
and records and the provision of information and explanations that
the auditor considered necessary for the purpose of their
audit.
The Group's business activities together with the factors that
are likely to affect its future developments, performance and
position are set out in the Chairman's Statement. The interim
financial statements were approved by the Board of Directors on 29
September 2015.
Going Concern
Following the disposal of the Professional Services Division the
number of entities within the Group and the Group's associated
working capital requirements were significantly reduced. The gross
sales proceeds of GBP637 million have been used to repay bank loans
of GBP40 million and up to GBP500 million of the sales proceeds are
expected to be repaid to shareholders as a return of capital. The
Group has concluded that the remaining cash reserves together with
ongoing operating cash flows, and receipts of deferred
consideration (estimated at GBP47 million) from the disposal of the
PSD and consideration from anticipated sales of non-core assets
will be sufficient to fund the ongoing operations of the Group's
businesses together with any future development needs of those
businesses.
On this basis, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future. The Directors have not
identified any material uncertainties that would cast significant
doubt on the ability of the Group to continue as a going concern.
As such, the Directors continue to adopt the Going Concern basis of
accounting in the preparation of the financial statements.
Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge, this
condensed set of consolidated financial statements have been
prepared in accordance with the AIM Rules
Significant Accounting Policies
The interim financial statements have been prepared in
accordance with the accounting policies set out in the Annual
Report and Accounts for the year ended 31 December 2014. Various
new accounting standards and amendments were issued during the
period, none of which have had or are expected to have any
significant impact on the Group, and none of which have been
adopted early. Taxes on income in the interim periods are accrued
using the tax rate that would be applicable to the expected total
annual earnings.
2. Impact of revisions to accounting policies and other prior
year adjustments
The 31 December 2014 Annual Report and Financial Statements
included a number of restatements to prior years arising from a
detailed review of accounting policies and historic transactions.
Details of these are included in note 3 to the 31 December 2014
Report and Financial Statement. A number of treatments and
transactions of a similar nature to those identified as part of
that review also apply to the previously reported Interim Results
for the six month period ended 30 June 2014, which have now been
restated, although the quantification of those adjustments may vary
from those reported for the full year.
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Details of these adjustments and a reconciliation of the
Condensed Consolidated Income Statement and Condensed Consolidated
Cash Flow Statement as previously presented in the Interim Results
for the six month period ended 30 June 2014 to the restated
comparative results and cash flows presented in this report is
provided below.
1. The previously reported Interim Results for the six month
period ended 30 June 2014 were presented in accordance with the
accounting policy for revenue recognition as applied in the
preparation of the 31 December 2013 Annual Report and Financial
Statements. Note 3 to the 2014 Annual Report and Accounts details
how this policy, in relation to the PSD businesses, has been
reviewed and adjusted to be more prudent and conservative. The
numbers presented in the 30 June 2014 Interim Results have
therefore been restated in accordance with this new policy.
2. Current management have been unable to verify or validate the
basis for certain provisions included within the Interim Results
for the six month period ended 30 June 2014 which appear to be
general in nature. The provisions had been adjusted for in the
results to December 2014.
3. Consistent with the treatment in the 31 December 2014 Annual
Report and Financial Statements the results of the PSD business
have been classified as a discontinued operation, as such the
comparative amounts have been restated on this basis.
4. Within note 3 of the 2014 Annual Report and Financial
Statements a number of transactions were identified with businesses
which were subsequently acquired (PYA D). Two different, albeit
similar, transactions have been identified in the previously
reported results for the six month period to 31 June 2014, which
had been adjusted for in the results to December 2014. The
comparative results have been restated to reflect the removal of
these transactions.
5. Current management have identified two transactions which
they believe, based upon the information available to them at this
time, were of limited commercial substance. These adjustments
differ to adjustment 4 above since the third parties with whom
these transactions took place were not subsequently acquired. These
transactions have therefore been reversed in the comparative
amounts and had been adjusted for in the results to December
2014.
6. The impact of changes to the date of control of acquisitions,
mainly Ingenie and Himex, to be consistent with the treatment in
the 31 December 2014 annual report and financial statements. Note
26 of the 31 December 2014 annual report and financial statements
contains further details. The previously reported Interim Results
for the six month period ended 30 June 2014 did not consolidate the
Ingenie businesses and consolidated Himex from February rather than
1 January. There were also a number of different assumptions used
in relation to the valuation and recognition of intangibles and
their related amortisation and impairment.
7. Adjustments have been made to acquisition related
consideration and share based payments of a similar nature to those
noted in adjustment C of note 4 to the 31 December 2014 annual
report and financial statements. These include adjustments to the
fair value of share based payments, corrections to warrants and the
reclassification of share based payments previously classified as
investments.
Six Adj. Adj. Adj. Adj. Adj. Adj. Adj. Restated
months six months
ended ended
30 June 30 June
2014 2014
as previously
stated
1 2 3 4 5 6 7 (unaudited)
B D D
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 357,335 (173,836) - (111,834) (16,612) (12,500) 283 - 42,836
Cost of sales (161,529) (12,066) 12,201 134,769 - - 428 - (26,197)
Gross Profit 195,806 (185,902) 12,201 22,935 (16,612) (12,500) 711 - 16,639
Administrative
expenses
* Normal (48,297) (6,171) - 26,520 - - (6,587) - (34,535)
* Share-based payments (6,603) - - - - - - 2,859 (3,744)
* Impairments - - - - - - (14,360) - (14,360)
* Other exceptional costs (2,435) - - 175 - - (5,972) (15,731) (23,963)
Total administrative
expenses (57,335) (6,171) - 26,695 - - (26,919) (12,872) (76,602)
Other income -
exceptional 14,522 - - - - - 8,514 - 23,036
Share of results
of associates 1,391 - - - - - - - 1,391
Group operating
profit/(loss) 154,384 (192,073) 12,201 49,630 (16,612) (12,500) (17,694) (12,872) (35,536)
Finance income 276 - - 1 - - 6 - 283
Finance expense (957) - - 526 - - (8) - (439)
Profit/(loss) before
taxation 153,703 (192,073) 12,201 50,157 (16,612) (12,500) (17,696) (12,872) (35,692)
Taxation (30,669) 30,109 (2,623) 1,170 3,572 2,688 1,059 627 5,933
Loss after taxation
for the year from
continuing operations 123,034 (161,964) 9,578 51,327 (13,040) (9,812) (16,637) (12,245) (29,759)
Discontinued operations
Loss for the year
from discontinued
operations (attributable
to equity holders
of the Company) - - - (51,327) - - - - (51,327)
Profit/(loss) for
the period 123,034 (161,964) 9,578 - (13,040) (9,812) (16,637) (12,245) (81,086)
------------------------------- ------------- --------- ------- --------- -------- -------- -------- -------- -------------
Attributable to:
Equity holders
of the parent 122,182 (161,964) 9,578 - (13,040) (9,812) (16,637) (12,245) (81,938)
Non-controlling
interests 852 - - - - - - - 852
------------------------------- ------------- --------- ------- --------- -------- -------- -------- -------- -------------
123,034 (161,964) 9,578 - (13,040) (9,812) (16,637) (12,245) (81,086)
------------------------------- ------------- --------- ------- --------- -------- -------- -------- -------- -------------
Six Months Adj. Adj. Restated
ended
30 June
2014 as
previously
stated
4 6 six months
ended 30
June 2014
(unaudited)
GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash used in operations
before exceptional costs,
net finance expense and
tax (51,024) (1,000) (249) (52,273)
Cash outflow from exceptional
items (2,150) - - (2,150)
Cash used in operations
before net finance expense
and tax (53,174) (1,000) (249) (54,423)
-------------------------------- ------------ --------- -------- -------------
Net finance expense paid (681) - 6 (675)
Corporation tax paid (23,359) - - (23,359)
Net Cash used by operating
activities (77,214) (1,000) (243) (78,457)
-------------------------------- ------------ --------- -------- -------------
Cash flows from investing
activities
Purchase of property,
plant and equipment (3,160) - (37) (3,197)
Purchase of intangible
fixed assets (16,946) - (87) (17,033)
Proceeds on disposal of - - - -
property, plant and equipment
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Disposal of subsidiaries
net of cash forgone - - (3,849) (3,849)
Proceeds from sale of - - - -
subsidiary undertaking
Purchase of fixed asset
investments (2,000) 500 - (1,500)
Proceeds from sale of - - - -
fixed asset investments
Acquisition of subsidiaries
net of cash acquired (15,799) - 4,216 (11,583)
Deposits held in escrow (3,000) - - (3,000)
Loans and investments
to other parties (1,976) 500 - (1,476)
Net cash generated by/(used
in) investing activities (42,881) 1,000 243 (41,638)
-------------------------------- ------------ --------- -------- -------------
Cash flows from financing
activities
Dividends paid (6,180) - - (6,180)
Finance lease repayments (346) - - (346)
Additional secured loans 5,727 - - 5,727
Sale of shares held in
treasury 5,444 - - 5,444
Issue of share capital 100 - - 100
Net cash generated by
financing activities 4,745 - - 4,745
-------------------------------- ------------ --------- -------- -------------
Net decrease in cash and
cash equivalents (115,350) - - (115,350)
Cash and cash equivalents
at the beginning of the
period 179,954 - - 179,954
Exchange losses on cash
and cash equivalents (149) (149)
Cash and cash equivalents
at the end of the period 64,455 - - 64,455
-------------------------------- ------------ --------- -------- -------------
3. Critical accounting judgements and key sources of estimation
uncertainty
In the process of applying the Group's accounting policies,
management has made a number of judgements, and the preparation of
financial statements requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of the amount,
event or actions, actual results ultimately may differ from those
estimates.
The key management judgements together with assumptions
concerning the future and other key sources of estimation
uncertainty at 30 June 2015 that have a significant risk of causing
a material adjustment to the carrying amounts of assets and
liabilities during the current financial year are discussed
below.
Recognition of revenue
Revenues are recognised in-line with the delivery and receipt of
services to and for our customers. Each revenue type is considered
separately and revenue is recognised when the customer has received
the service, the amount of revenue be reliably measured and
conversion of the revenue in to cash or other economic benefit can
be assured. These considerations are applied to both ongoing core
service activities and one off contracts that are entered into.
Intangible assets
The Directors last reviewed the carrying value of intangible
assets, comprising goodwill and other intangible assets, as at 31
December 2014 and the key elements of this review are contained in
Notes 15 and 16 to the Group's Annual Report and Financial
Statements for the year ended 31 December 2014. The Directors have
undertaken a further review of the carrying value of intangible
assets as at 30(th) June 2015 on substantially the same basis and
have concluded that no adjustment is necessary.
Deferred consideration
The disposal of the PSD contains an element of contingent
consideration in relation to future receipts arising on NIHL cases
which were current on the sale date. Given the inherent
uncertainties of this business line, the parties could not agree on
an appropriate valuation at completion and so the agreement
provides that the Group will receive 50% of the net after tax
receipts (after allowing for administrative costs) collected on the
NIHL cases outstanding at completion. Approximately 53,000 NIHL
cases were active and transferred at completion. Such amounts will
be determined on a six monthly basis commencing on 31 December
2015. The process will continue until 30 June 2017 when a terminal
value projection of expected receipts will be agreed. If no
agreement is reached, the process will continue with payments every
six months until the earlier of the date when a terminal value is
agreed or 31 December 2018. The Company has performed a preliminary
valuation exercise based on the information available at the point
of disposal and has determined that a prudent estimate of the
current value of the contingent consideration is approximately
GBP39.6m. Due to the uncertainty inherent in this estimate and the
lack of information over the current trends within those cases, no
credit has been taken for deferred consideration in calculating the
profit arising on the disposal of the PSD.
Capitalisation of internally generated development costs
The Group capitalizes internally generated development costs
where these can be clearly and fully assessed against IAS38. Such
costs are clearly and separately identifiable by developed saleable
product, with all products assessed against IAS38. Such assessment
is continuous.
Provisions and contingent liabilities
The Group has identified a number of provisions and contingent
liabilities which, by their nature, are subject to significant
judgement and uncertainty. All such matters are periodically
assessed with the assistance of external professional advisers,
where appropriate, to determine the likelihood of the Group
incurring a liability and to evaluate the extent to which a
reliable estimate of any liability can be made. However, the likely
outcome on the Group of the SFO investigation and any group
litigation which may potentially be brought against the Group is
subject to a number of significant uncertainties and these cannot
currently be determined. Accordingly, no provision has been made in
respect of these matters.
Deferred tax in connection with the continuing business
operations
Previously paid tax that can be reclaimed has been recognised as
a corporation tax asset in the Company and Group's continuing
business net assets. Other taxable losses have arisen during the
period ended 30 June 2015 which have the potential to give rise to
a deferred tax asset. This asset has not been recognised due to the
extent of the continuing business losses incurred in 2014 including
head office costs, further losses continuing into 2015 and the
developing nature of the continuing businesses such that the
expectation of profitability at sufficient quantum was not probable
within a reasonable timeframe.
4. Key performance indicators
Six months Restated
ended 30 six months
June 2015 ended 30
June 2014
(unaudited) (unaudited)
Note GBP'000 GBP'000
Revenue - continuing activities 35,328 42,836
---------------------------------------------------- ------------- -------------
Adjusted EBITDA - continuing activities:
Loss before taxation (35,455) (35,692)
Depreciation 1,059 1,365
Amortisation 6,786 9,040
Exceptional costs and impairments 7,844 38,323
Share-based payments 6,276 3,744
Other income - exceptional (2,848) (23,036)
Net finance expense 502 156
Adjusted EBITDA - continuing activities (15,836) (6,100)
---------------------------------------------------- ------------- -------------
Adjusted loss before taxation - continuing
activities
Loss before taxation (35,455) (35,692)
Amortisation 6,786 9,040
Exceptional costs and impairments 7,844 38,323
Share-based payments 6,276 3,744
Other income - exceptional (2,848) (23,036)
Adjusted loss before taxation - continuing
activities (17,397) (7,621)
---------------------------------------------------- ------------- -------------
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5. Exceptional Costs
Six months Restated
ended 30 six months
June 2015 ended 30
June 2014
(unaudited) (unaudited)
GBP'000 GBP'000
Acquisition costs
Acquisition related fees 30 1,687
Costs of integration and associated redundancies 99 -
Post combination vendor remuneration (cash
element) 500 500
Post combination vendor remuneration (share
element) including PAYE - 383
Impairments 4,571 14,360
Legal disputes - charge/(credit) (3,046) -
Loss of control over subsidiary - 5,841
Professional and other consultancy fees 5,691 5,599
Exceptional share based payments: warrants
granted in respect of customer agreements - 9,953
9,95
----------------------------------------------------- ------------- -------------
7,845 38,323
----------------------------------------------------- ------------- -------------
Costs are classified as exceptional where they are not incurred
in the ordinary course of business and are expected to be
non-recurring.
6. Other income - exceptional
Six months Restated
ended 30 June six months
2015 ended 30
June 2014
(unaudited) (unaudited)
GBP'000 GBP'000
Net gain on re-measurement of investments
on becoming associates and associates
on acquisition of control - 23,036
Net gain on disposal of the 360 Global 2,848 -
2,848 23,036
------------------------------------------- --------------- -------------
7. Trade and other receivables
30 June 31 December
2015 2014
(unaudited)
GBP'000 GBP'000
Trade receivables (net of impairment provision) 9,539 12,308
Other receivables 63,882 8,166
Prepayments 3,306 4,538
Accrued income 1,873 7,851
78,600 32,863
------------------------------------------------- ------------- ------------
8. Trade and other payables
30 June
2015 31 December
(unaudited) 2014
GBP'000 GBP'000
Current liabilities
Trade payables 9,537 11,692
Payroll and other taxes including social
security 478 7,136
Accruals 13,781 23,299
Deferred income 10,397 10,555
Other liabilities 23,905 21,128
58,098 73,810
------------------------------------------ ------------- ------------
9. Acquisitions and disposals
The sale of the PSD completed on 29 May 2015. These profit
arising on this disposal comprises the following elements:
30 June
2015
(unaudited)
GBP'000
Sales proceeds (excluding contingent consideration) 645,931
Net assets at disposal (142,436)
Expenses and other costs of sale (17,638)
Profit arising on sale 485,857
----------------------------------------------------------- -------------
The net gain on disposal of PSD represents sales proceeds of
GBP646m less net assets at completion of GBP142m and expenses of
GBP18m. As described in note 3, no credit has been taken for
deferred consideration. The Company is not aware of any warranty
claims and accordingly no provision has been made for claims
potentially deductible from escrow. These figures differ from the
estimates given in the 2014 strategic report as those did not
reflect actual movements in net assets and intercompany balances
settled out of the total consideration received
The sales proceeds above do not include any amounts receivable
in respect of contingent consideration related to the run off of
Noise Induced Hearing Loss ("NIHL"). As described in note 3.
The Company has performed a preliminary valuation exercise based
on the information available at the point of disposal and has
determined that a prudent estimate of the current value of the
contingent consideration is approximately GBP39.6m. Due to the
uncertainty inherent in this estimate and the lack of information
over the current trends within those cases, no credit has been
taken for deferred consideration in calculating the profit arising
on the disposal of the PSD. As described in the financial
statements for the year ended 31 December 2014, GBP55.0m was placed
in temporary escrow accounts relating to the sale of the PSD to
Slater and Gordon Limited. The Company has not been made aware of
any claims or potential claims and we are confident that the open
and detailed due diligence process in respect of the disposal will
ensure that all of the GBP55.0m currently reserved in a joint
escrow account for any warranty claims will be released in November
2016.
As previously announced, the Group disposed of its remaining
interests in Nationwide Accident Repair Services Plc ("NARS") and
360 Global in March and May respectively. No gain or loss occurred
in the period on the disposal of NARS and a GBP2.8m gain was
recognised on the sale of 360 Global in the period.
On 5 March 2015, the Group acquired the remaining 50% of the
shares it did not already own in BE Insulated Limited and 100% of
Carbon Reduction Company Limited (together "BEI") which gave the
Group control over these entities. This transaction gave rise to a
goodwill on acquisition of GBP3.6m. BEI reported revenue of GBP2.1m
and a loss before tax of GBP81k during the period from acquisition
to 30 June 2015. The market in which BEI operates includes the sale
and fitting of solar panels in domestic and commercial settings.
The Government recently announced that it intends to reduce the
incentives offered in this market. As a consequence, the Group has
fully impaired the goodwill arising on this acquisition.
On 13 March 2015, the Group announced that it had acquired a
further 8.33% in Navseeker Inc. a subsidiary of Himex Limited
("Navseeker") taking its effective interest in that company to
88.33%. As announced on 5 March 2015, the acquisition of the
remaining 11.67% is subject to the Court of Chancery of Delaware
USA granting its approval to a settlement of litigation between
current and former shareholders of Navseeker.
On 9 September 2015, the Group announced that it had reached
agreement to purchase the remaining 50.1% of shares it did not hold
in PT Healthcare Solutions Inc. ("PT Health") in return for a new
issue of 9,466,666 ordinary shares of 15p each. PT Health is one of
the largest physiotherapy and rehabilitation services in Canada.
Combining our insurance industry knowledge with the efficient use
of technology, this service will be leveraged further.
10. Contingent liabilities
The Group routinely enters into a range of contractual
arrangements in the ordinary course of events which can give rise
to claims or potential litigation against group companies. It is
the Group's policy to make specific provisions at the Statement of
Financial Position date for all liabilities which, in the opinion
of the Directors, are expected to result in a significant loss.
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