TIDMCPP
RNS Number : 8357O
CPPGroup Plc
24 August 2017
CPPGROUP PLC
24 AUGUST 2017
HALF YEAR REPORT
FOR THE SIX MONTHSED 30 JUNE 2017
CPPGroup Plc - Half year report for the six months ended 30 June
2017
International revenue growth exceeds decline in the UK renewal
book
CPPGroup Plc (CPP or the Group), the innovative product
marketing business, today announces its results for the six months
ended 30 June 2017.
Highlights
-- Group revenue increased by 18% to GBP41.8 million (H1 2016:
GBP35.4 million), representing the first period of growth in over
five years
-- International revenues grew 52% to GBP30.3 million (H1 2016:
grew 19% to GBP20.0 million) more than compensating for the further
reduction in the UK renewal book, which is in managed decline,
where revenues declined 26% to GBP11.4 million (H1 2016: declined
30% to GBP15.3 million)
-- Reported operating profit increased 2% to GBP2.7 million (H1
2016: GBP2.6 million). However, underlying operating profit reduced
42% to GBP2.1 million (H1 2016: GBP3.6 million) with the growth
from an increasing international customer base not yet covering the
decline in the higher margin UK renewal book. In the international
business we expect to see continued significant growth in revenues,
led by India where we also expect the percentage margin to
materially increase as higher margin products enter the mix
-- Profit after tax increased 15% to GBP2.6 million (H1 2016: GBP2.3 million)
-- Unrestricted cash position improved significantly to GBP29.6
million (H1 2016: GBP7.8 million) following approval from the PRA
to lift the capital and asset restrictions on Homecare Insurance
Limited and the receipt of the proceeds from the sale of the York
Head Office premises
-- Product development has been re-focused using bespoke
development capabilities, which is more removed from the historic
UK based in-house strategy. As a first step we have acquired Blink
Innovation Limited (Blink), an innovative product and systems
developer based in Cork. Blink is already performing as intended
working closely in partnership with our business leaders around the
world
-- Implemented a change in organisational structure to support
growth plans and create cost efficiencies
Jason Walsh, Chief Executive Officer, commented:
"I am pleased with the performance of the business during the
first half of this year, which has seen a return to revenue growth
for the first time in five years. This was the result of growth in
a number of our key international markets, but particularly India,
where our consumer-led products and Business Partner relationships
have gone from strength to strength.
"During the half, we simplified our operating structure by
devolving greater responsibility to our country leaders and
acquired Blink, which is performing as intended and is helping to
ensure we have the right platform for product innovation. These
factors, along with our improved free capital position, will enable
us to maximise the significant opportunities for sustainable growth
that are available across the Group.
"We are continuing to deliver on our strategic plan and as we
enter the second half of the year, we expect to continue this
revenue growth momentum and remain confident with the outlook for
the full year."
Highlights Six months ended 30 June 2017 Six months ended 30 June 2016
(Unaudited) (Unaudited)
---------------------------------- ------------------------------ ------------------------------
Revenue (GBP millions) 41.8 35.4
Operating profit (GBP millions)
- Reported 2.7 2.6
- Underlying(1) 2.1 3.6
Profit after tax (GBP millions) 2.6 2.3
Basic earnings per share (pence) 0.31 0.27
Net assets (GBP millions) 13.1 12.9
Net funds (GBP millions)(2) 29.7 29.5
1. Underlying operating profit excludes an exceptional credit of
GBP0.8 million (H1 2016: GBP0.5 million charge) and Matching Share
Plan (MSP) charges of GBP0.2 million (H1 2016: GBP0.5 million).
Further detail of exceptional items is provided in note 4 to the
condensed consolidated interim financial statements.
2. Net funds comprise cash and cash equivalents of GBP32.2
million (H1 2016: GBP33.2 million) partially offset by borrowings
of GBP2.5 million (H1 2016: GBP3.7 million). Cash and cash
equivalents includes cash held for regulatory purposes of GBP2.6
million. Unrestricted cash of GBP29.6 million (H1 2016: GBP7.8
million) represents the Group's cash and cash equivalents less cash
held for regulatory purposes. Cash and cash equivalents restricted
in the prior period for either regulatory purposes or by the terms
of the Voluntary Variation of Permissions (VVOP) was GBP25.4
million.
Enquiries
CPPGroup Plc
Jason Walsh, Chief Executive Officer
Oliver Laird, 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 is a leading, innovative product marketing business which
works with Business Partners across a range of sectors in 11
markets within Asia, Europe and Latin America to provide product,
marketing and distribution expertise delivering tangible commercial
benefits and meaningful solutions to their customers. CPP's
insurance and assistance products provide peace of mind by reducing
the stresses of everyday life ranging from protection of mobile
phones, payment cards and household belongings to keeping travel
plans moving and the monitoring of compromised personal data.
For more information on CPP visit www.cppgroupplc.com
REGISTERED OFFICE
CPPGroup Plc
Holgate Park
York
YO26 4GA
Registered number: 07151159
CHIEF EXECUTIVE'S STATEMENT
CPP has continued to make good progress during the first half of
2017 as the significant opportunities that are available to the
Group continue to materialise and we further develop our strategy
to capitalise on them. There have been a number of key milestones
and successes achieved that have provided and will provide the
necessary momentum and capability to drive the business forward and
shape the picture for our future.
Key milestones
We have made major progress during the first half of the year in
freeing up the necessary capital to take the Group into the next
stage of its strategy.
In May 2017, the Group received approval from the Prudential
Regulation Authority (PRA) to lift the non-trading related
restrictions for Homecare Insurance Limited (HIL). The lifting of
these restrictions allows the Group to develop a structured run-off
plan for HIL with the regulator, which will release further capital
in the short to medium term for investment in our targeted
international growth opportunities within the wider Group.
Additionally, on 30 June 2017, the Group completed the sale and
partial leaseback of its Head Office premises in York. The sale
proceeds of GBP5.3 million further increased the cash funds
available to the Group to reinvest into the business.
This funding will be used to focus on our rapidly expanding
international operations, particularly India, China and Turkey, as
well as in other more recent investments, such as Blink, the
digital travel product and innovation business, which CPP acquired
in March 2017.
Improved operational purpose
As part of our strategy we have taken the important step to
redesign our organisational structure as it is critical that we
have a simplified business model and operating structure that is
aligned to our strategic priorities. To promote this we have
implemented a decentralised operating model, which has placed far
greater operational responsibility with each of our country
markets. Our country heads now have more autonomy across a broader
aspect of their business including marketing, product selection and
financial performance. This change allows our experts in country,
who are best placed to understand local demands and opportunities,
to make key decisions that affect their business and customers.
This is an important development as not only does it create true
accountability for the country heads but it also has enabled less
reliance on a large, UK based Group function, with the focus now on
an efficient Corporate Centre that will provide the appropriate
level of support, oversight and governance across the entire Group.
The efficiencies obtained from the reduction in size of the
Corporate Centre are expected to be approximately GBP2 million
annualised and will be reinvested in revenue generating activities
within our markets.
At the same time, to enable the Corporate Centre to be
completely focused on supporting the Group, it will be relocating
to a new Global Head Office. Premises located in Leeds have been
agreed and current plans are for the Corporate Centre to transfer
to these premises during Q4 2017.
Having the right team in place is also critical and we are
pleased that Oliver Laird joined the business as Chief Financial
Officer in June 2017. Oliver has more than 10 years' experience in
senior finance roles in regulated financial services businesses,
most recently as CFO of First Direct Bank. Oliver, along with the
rest of the senior team, will have a vital role to play in
executing the Group's strategic plans.
Operational review
Revenue performance returns to growth
The Group has continued to perform well financially. One of our
strategic priorities for 2017 was to grow revenue and customer
volume and the actions we have taken over the last 12 months are
seeing this come to fruition.
Revenue has increased by 18% compared to the same period last
year, which represents the first reported period of revenue growth
in over five years. This growth is driven by our international
markets where revenue is 52% higher and includes our Indian
business that has almost trebled its revenue period on period.
Our live policy base has once again grown to 4.5 million from
4.3 million in the first half of 2017, reflecting significant new
volumes in our priority markets of India, China and Turkey. The
impact of this strong new policy volume has been partly offset by
continued managed decline in the UK, which includes a one-off
impact of over 0.4 million customers from a low revenue wholesale
book that closed in May.
The Group operates in three regions: Asia Pacific which accounts
for 40% of Group revenue; Europe and Latin America which accounts
for 32% of Group revenue; and UK and Ireland which accounts for 28%
of Group revenue. The shift in the revenue profile from our
established markets to developing markets has continued in H1 2017,
with Asia Pacific, led by India, now representing the largest share
of the Group's revenue. This change was expected and follows the
Group's strategic plan which will see this trend continuing over
the short to medium term.
In India, we have continued to grow our revenues and increase
profitability through significant customer volume growth. Multiple
Business Partner relationships distributing through multiple
marketing channels has seen a rapid growth in our three main
product lines of Extended Warranty, Card Protection and Mobile
Phone Insurance.
Our other key international markets are also making good
progress. China is growing revenue as current Business Partner
relationships begin to scale and we have recently signed a new
Business Partner contract with a top tier bank. These factors,
along with IT infrastructure investment, will help to grow the
business in H2 2017. Turkey is continuing to increase its revenue,
profitability and customer numbers as Business Partner
relationships develop and we expand our product and channel
propositions. Mexico has also made progress as the renewal book
grows and we have recently launched a new campaign for OwlDetect
through a leading bank. In Spain, although revenue has fallen,
renewal performance continues to be good and underlying operating
profit has improved as the business continues to make operational
efficiencies.
In the UK, as a recognition that the issues which faced the
business in the past have now been remedied, the FCA agreed to lift
the capital and asset restrictions placed on HIL and Card
Protection Plan Limited (CPPL) as part of the VVOP's. At the same
time, the Group decided to place the CPPL back book into managed
decline and new business opportunities in the UK will now be
focused through Blink. This marks a significant step in the UK
business and allows the Group to focus resources on revenue
generating opportunities.
The Group's annual renewal rate at 75.7% has continued to
strengthen and reflects actions taken in Turkey to improve the
retention of customers. Renewal rates in our established markets
continue to be strong.
Integration of Blink and new product development
As part of our restructuring, product development is now driven
using bespoke development capabilities more removed from the
historic UK based in-house strategy. As a first step on 17 March
2017, the Group acquired Blink, an innovative product and systems
developer based in Cork. The acquisition represents an exciting
development in enhancing the Group's product set and innovation
capability. Since acquisition, we have continued to invest and grow
the Blink business, whose launch product was part of the FCA's
Project Innovate 'sandbox' scheme. Through Blink, CPP will extend
its regulatory presence in the UK and an application for full
trading permissions is in the process of being submitted to the
FCA. The Group will use Blink as a platform to develop innovative
assistance and insurance products both for the UK market and
internationally. In the UK this will also involve a relaunch of the
UK's distribution network.
The acquisition of Blink has provided the Group with the
platform to drive this strategy forward and allow meaningful local
development to be delivered at pace. To further enhance new product
development opportunities, each market will have the capability to
build new products locally for use on the Blink platform. The first
product of this type will be delivered on the Blink platform in Q4
2017.
Additionally, CPP will look to acquire or partner with other
assistance and technology businesses, where appropriate, in order
to expand our product portfolio and to capitalise on our
distribution networks in our country markets.
Expansion into new and existing jurisdictions
The next phase in the Group's strategy is to focus on its
rapidly-expanding international operations, particularly in India,
China and Turkey, as well as other more recent investments, and we
are preparing to enter new markets in the first half of 2018, where
the Group believes it can harness existing regional distribution
and operating synergies to develop a strong regional network.
In China, we are investing further in developing the IT
infrastructure capabilities of the business, which will allow it to
develop targeted new business partnerships in the financial
services and insurance sectors, as well as providing the capability
for it to operate more efficiently and independently within the
Chinese marketplace.
Over the last 12 months, the Indian business has grown and now
contributes a significant portion of Group revenue. As the Indian
market continues to develop, the intention is to invest further in
developing new products and marketing channels to ensure that the
Group is well placed to capture new Business Partners and secure
existing Business Partners for the longer term.
Financial review
Summary
Group revenue has increased by 18% for the half year to GBP41.8
million (H1 2016: GBP35.4 million). Returning to revenue growth is
an important step in the development of the Group and reflects our
continued progress in the Indian and Turkish markets, partly offset
by the continued natural decline in the historic UK renewal book.
New business opportunities in the UK will be focused through Blink
where an application for trading permissions is in progress.
Reported operating profit in the first half of year has
increased to GBP2.7 million (H1 2016: GBP2.6 million). As expected,
underlying operating profit, which excludes an exceptional credit
of GBP0.8 million and MSP charges of GBP0.2 million, has declined
period on period to GBP2.1 million (H1 2016: GBP3.6 million). This
reflects the shift in the revenue mix from higher margin, back book
focused European markets to lower margin growth markets such as
India and China, as well as the significant reinvestment we are
making in our markets and costs associated with the operational
restructure. Plans are in place to improve the margin levels in
these developing markets through focus on renewal rates and the
extension of the business into products with greater functionality
and consequently higher margins.
The exceptional credit of GBP0.8 million (H1 2016: GBP0.5
million charge) in the period comprises GBP0.6 million reversal of
impairment on the freehold land and property prior to disposal of
the York Head Office and GBP0.2 million customer redress
credit.
Net finance costs and taxation total GBP0.1 million (H1 2016:
GBP0.3 million). Profit after tax has increased to GBP2.6 million
(H1 2016: GBP2.3 million) due to exceptional items which are a
credit in H1 2017 compared to a charge in H1 2016.
Balance sheet, financing and cash flow
The Group's net asset position has increased to GBP13.1 million
(31 December 2016: GBP10.1 million). The current borrowing
arrangements are a GBP5.0 million revolving credit facility (RCF)
which is available until February 2018. At 30 June 2017, the
balance on the RCF was GBP2.5 million, although this has been
repaid subsequent to the balance sheet date. Discussions with our
lender regarding a renewal of the facility have been positive and
are at an advanced stage.
The Group's net funds position has increased to GBP29.7 million
at 30 June 2017 (31 December 2016: GBP26.9 million). This
improvement reflects the proceeds from the sale of the York Head
Office partly offset by the acquisition of Blink. The net funds
position includes cash balances of GBP32.2 million which following
the lifting of the VVOP asset restrictions on HIL and CPPL has
improved the availability of our cash resources for investment
within the Group. At 31 December 2016, GBP18.7 million was held in
the Group's regulated entities with any distribution requiring
either PRA or FCA approval; at 30 June 2017, the only remaining
restriction on our cash balances relate to HIL's regulatory capital
requirements, with the current minimum level of cash required to be
held in the business being GBP2.6 million. Our unrestricted cash
has, therefore, increased to GBP29.6 million, a position which is
approximately GBP20 million higher than at 31 December 2016. This
represents a major step to have the flexibility to invest resources
around the Group to capitalise on the opportunities that exist.
Summary and outlook
The Group's financial and operational performance is progressing
as planned and our expectations for the full year remain unchanged.
CPP is at a very exciting stage in its journey. We have implemented
a new organisational design and have the resources freely available
to invest in the many exciting opportunities we see to secure
sustainable growth for the Group.
Jason Walsh
Chief Executive Officer
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
6 months ended Year ended
30 June 2017 6 month ended 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Continuing operations
Revenue 41,822 35,441 73,649
Cost of sales (20,759) (12,230) (27,737)
Gross profit 21,063 23,211 45,912
Administrative expenses (18,382) (20,586) (47,693)
Operating profit/(loss) 2,681 2,625 (1,781)
Analysed as:
Underlying operating profit 3 2,113 3,650 8,365
Exceptional items 4 766 (549) (9,172)
MSP charges 13 (198) (476) (974)
----------------------------------------- -----
Investment revenues 84 120 231
Finance costs (160) (224) (325)
Profit/(loss) before taxation 2,605 2,521 (1,875)
Taxation 5 18 (230) 1,342
Profit/(loss) for the period from
continuing operations 2,623 2,291 (533)
Discontinued operations
Profit for the period from discontinued
operations - - 579
--------------- --------------------------- ------------------
Profit for the period attributable to
equity holders of the Company 2,623 2,291 46
--------------- --------------------------- ------------------
Basic earnings/(loss) per share:
Continuing operations 7 0.31 0.27 (0.06)
Discontinued operations 7 - - 0.07
--------------- --------------------------- ------------------
0.31 0.27 0.01
--------------- --------------------------- ------------------
Diluted earnings/(loss) per share:
Continuing operations 7 0.30 0.26 (0.06)
Discontinued operations 7 - - 0.07
----- ----- -------
0.30 0.26 0.01
----- ----- -------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended
6 months ended 30 June 2017 6 months ended 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Profit for the period 2,623 2,291 46
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on
translation of foreign
operations (116) (10) (62)
Other comprehensive expense for
the period net of taxation (116) (10) (62)
---------------------------- ---------------------------- ------------------
Total comprehensive
income/(expense) for the period
attributable to equity holders
of the
Company 2,507 2,281 (16)
---------------------------- ---------------------------- ------------------
CONSOLIDATED BALANCE SHEET
30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Non-current assets
Goodwill 8 776 - -
Other intangible assets 8 2,158 7,893 2,136
Property, plant and equipment 8 879 3,545 5,316
Deferred tax asset 394 274 818
------------- ------------- -----------------
4,207 11,712 8,270
------------- ------------- -----------------
Current assets
Insurance assets 48 209 62
Inventories 29 37 40
Trade and other receivables 23,325 12,281 16,991
Cash and cash equivalents 9 32,199 33,222 28,250
------------- ------------- -----------------
55,601 45,749 45,343
Total assets 59,808 57,461 53,613
------------- ------------- -----------------
Current liabilities
Insurance liabilities (735) (970) (863)
Income tax liabilities (1,245) (2,317) (1,946)
Trade and other payables 2 (24,903) (28,195) (25,383)
Borrowings 10 (2,457) (1,367) (1,391)
Provisions 11 (201) (1,771) (1,143)
Deferred revenue 2 (17,185) (7,370) (12,716)
------------- -----------------
(46,726) (41,990) (43,442)
------------- ------------- -----------------
Net current assets 8,875 3,759 1,901
------------- ------------- -----------------
Non-current liabilities
Borrowings 10 - (2,384) 80
Deferred tax liabilities - (141) (103)
- (2,525) (23)
------------- ------------- -----------------
Total liabilities (46,726) (44,515) (43,465)
------------- ------------- -----------------
Net assets 13,082 12,946 10,148
============= ============= =================
Equity
Share capital 12 23,975 23,975 23,975
Share premium account 45,225 45,225 45,225
Merger reserve (100,399) (100,399) (100,399)
Translation reserve 813 981 929
ESOP reserve 15,126 13,889 14,516
Retained earnings 28,342 29,275 25,902
Total equity attributable to equity holders of the
Company 13,082 12,946 10,148
============= ============= =================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Share premium Merger Translation Equalisation ESOP Retained
capital account reserve reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6 months ended
30 June 2017
(Unaudited)
At 1 January 2017 23,975 45,225 (100,399) 929 - 14,516 25,902 10,148
Total
comprehensive
income - - - (116) - - 2,623 2,507
Equity settled
share-based
payment charge - - - - - 401 - 401
Movement in EBT
shares - - - - - 209 - 209
Exercise of share
options - - - - - - (183) (183)
At 30 June 2017 23,975 45,225 (100,399) 813 - 15,126 28,342 13,082
======== ======== ========== ============ ============= ======== ========= ========
6 months ended
30 June 2016
(Unaudited)
At 1 January 2016 23,939 45,225 (100,399) 991 6,243 13,093 20,923 10,015
Total
comprehensive
income - - - (10) - - 2,291 2,281
Movement on
equalisation
reserve (note 2) - - - - (6,243) - 6,243 -
Current tax charge
on equalisation
reserve movement - - - - - - (182) (182)
Equity settled
share-based
payment charge - - - - - 796 - 796
Exercise of share
options 36 - - - - - - 36
At 30 June 2016 23,975 45,225 (100,399) 981 - 13,889 29,275 12,946
======== ======== ========== ============ ============= ======== ========= ========
Year ended
31 December 2016
(Audited)
At 1 January 2016 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 - - - - - (63) - (63)
Exercise of share
options 36 - - - - - (50) (14)
At 31 December
2016 23,975 45,225 (100,399) 929 - 14,516 25,902 10,148
======== ======== ========== ============ ============= ======== ========= ========
CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year ended
Note 30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Net cash used in operating activities 15 (1,409) (6,098) (7,209)
Investing activities
Interest received 84 120 243
Proceeds from sale of freehold property 8 5,325 - -
Purchases of property, plant and equipment (236) (186) (592)
Purchases of intangible assets (52) (2,513) (3,812)
Acquisition of a subsidiary 14 (862) - -
Net cash from/(used in) investing activities 4,259 (2,579) (4,161)
--------------- --------------- ------------------
Financing activities
Proceeds from/(repayment of) bank loans 2,500 1,500 (1,000)
Repayment of the Second Commission Deferral (1,304) - -
Agreement
Interest paid (210) (189) (230)
Issue/(purchase) of ordinary share capital and
associated costs 26 36 (76)
Net cash from/(used in) financing activities 1,012 1,347 (1,306)
--------------- --------------- ------------------
Net increase/(decrease) in cash and cash equivalents 3,862 (7,330) (12,676)
Effect of foreign exchange rate changes 87 742 1,116
Cash and cash equivalents at start of period 28,250 39,810 39,810
Cash and cash equivalents at end of period 32,199 33,222 28,250
=============== =============== ==================
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1 General information
The condensed consolidated interim financial statements for the
six months ended 30 June 2017 do not constitute statutory accounts
as defined under Section 434 of the Companies Act 2006. The
Financial Statements for the year ended 31 December 2016 were
approved by the Board on 23 March 2017 and have been delivered to
the Registrar of Companies. The Auditor, Deloitte LLP, reported on
these financial statements; their report was unqualified, did not
contain an emphasis of matter paragraph and did not contain
statements under s498 (2) or (3) of the Companies Act 2006.
2 Accounting policies
Basis of preparation
The unaudited condensed consolidated interim financial
statements for the six months ended 30 June 2017 have been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the European Union.
The condensed consolidated interim financial statements should
be read in conjunction with the Annual Report and Financial
Statements ("the Financial Statements") for the year ended 31
December 2016, which have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The prior period balance sheets have been
re-presented to separately disclose deferred revenue due to the
material nature of this balance. Deferred revenue was previously
presented within trade and other payables. Following the
implementation of Solvency II in 2016 the comparative period
balance sheet equity position has been re-presented to show the
equalisation reserve as transferred to retained earnings.
The condensed consolidated interim financial statements were
approved for release on 23 August 2017.
New and amended standards and interpretations need to be adopted
in the interim financial statements issued after their effective
date (or date of early adoption). There are no new IFRSs or IFRICs
that are effective for the first time for the six months ended 30
June 2017 which have a material impact on the Group.
Goodwill accounting policy
Goodwill arising on the acquisition of an entity represents the
excess of the cost of acquisition over the Group's interest in the
net fair value of the identifiable assets, liabilities and
contingent liabilities of the entity recognised at the date of
acquisition. Goodwill is initially recognised as an asset at cost
and is subsequently measured at cost less any accumulated
impairment losses.
Goodwill is not subject to amortisation but is tested for
impairment annually.
Going concern
The Group has continued to trade profitably in the first half of
2017 and taking account of reasonably possible changes in trading
performance, the 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
condensed consolidated interim financial statements.
3 Segmental analysis
Segment revenue and performance for the current and comparative
periods have been as follows:
Europe
UK and and Latin Asia
Ireland America Pacific Total
Six months ended 30 GBP'000 GBP'000 GBP'000 GBP'000
June 2017 (Unaudited)
Continuing operations
Revenue - external
sales 11,540 13,522 16,760 41,822
--------- ------------ --------- --------
Regional underlying
operating (loss)/profit (1,835) 2,758 1,190 2,113
--------- ------------ ---------
Exceptional items (note
4) 766
MSP charges (note 13) (198)
Operating profit 2,681
Investment revenues 84
Finance costs (160)
--------
Profit before taxation 2,605
Taxation 18
--------
Profit for the period
from continuing operations 2,623
Discontinued operations
Profit for the period -
from discontinued operations
--------
Profit for the period 2,623
========
Europe
UK and and Latin Asia
Ireland America Pacific Total
Six months ended 30 GBP'000 GBP'000 GBP'000 GBP'000
June 2016 (Unaudited)
Continuing operations
Revenue - external
sales 15,482 13,441 6,518 35,441
--------- ------------ --------- --------
Regional underlying
operating profit 656 2,302 692 3,650
--------- ------------ ---------
Exceptional items (note
4) (549)
MSP charges (note 13) (476)
Operating profit 2,625
Investment revenues 120
Finance costs (224)
--------
Profit before taxation 2,521
Taxation (230)
--------
Profit for the period
from continuing operations 2,291
Discontinued operations
Profit for the period -
from discontinued operations
--------
Profit for the period 2,291
========
Europe
UK and and Latin Asia
Ireland America Pacific Total
Year ended 31 December GBP'000 GBP'000 GBP'000 GBP'000
2016 (Audited)
Continuing operations
Revenue - external sales 28,757 27,619 17,273 73,649
--------- ------------ --------- --------
Regional underlying
operating profit 1,521 5,201 1,643 8,365
--------- ------------ ---------
Exceptional items (note
4) (9,172)
MSP charges (note 13) (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 annual net charges of central costs of
GBP2,359,000 presented within UK and Ireland in the table above
which has been charged to other regions for statutory purposes.
Segmental assets
30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
UK and Ireland 29,977 42,344 30,454
Europe and Latin America 8,870 8,773 8,262
Asia Pacific 19,791 6,070 14,038
Total segment assets 58,638 57,187 52,754
Assets relating to discontinued operations - - 41
Unallocated assets 1,170 274 818
Consolidated total assets 59,808 57,461 53,613
Goodwill and deferred tax are not allocated to segments.
Capital expenditure
Property, plant and
Intangible assets equipment
-----------------------------------------
6 months
6 months 6 months Year ended 6 months Year
ended ended ended 30 ended ended
30 June 30 June 31 December June 30 June 31 December
2017 2016 2016 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
Continuing
operations
UK and Ireland 86 3,082 3,780 98 165 478
Europe and
Latin America 17 27 32 126 12 27
Asia Pacific 35 - - 12 9 87
Total continuing
operations 138 3,109 3,812 236 186 592
============ ============ ============= ============ ============ =============
Revenue from major products
Year ended
6 months ended 30 June 2017 6 months ended 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Continuing operations
Retail assistance policies 39,910 32,401 68,013
Retail insurance policies 563 1,507 2,473
Wholesale policies 1,097 1,188 2,503
Non-policy revenue 252 345 660
---------------------------- ---------------------------- ------------------
Revenue from continuing
operations 41,822 35,441 73,649
============================ ============================ ==================
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
ongoing product or service which is provided for a specified period
of time; "non-policy revenue" is that which is not in connection
with providing an ongoing service to policyholders for a specified
period of time.
Geographical information
The Group operates across a wide number of territories, of which
India, the UK and Spain are considered individually material.
Revenue from external customers and non-current assets (excluding
goodwill and deferred tax) by geographical location are detailed
below.
External revenues Non-current assets
-----------------------------------------
6 months 6 months Year
ended ended ended 30
30 June 30 June 31 December June 30 June 31 December
2017 2016 2016 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
Continuing
operations
India 15,731 5,575 15,163 88 15 90
UK 11,363 15,264 28,358 2,532 11,180 7,074
Spain 5,830 6,067 11,997 146 111 92
Other 8,898 8,535 18,131 271 132 196
Total continuing
operations 41,822 35,441 73,649 3,037 11,438 7,452
============ ============ ============= ============ ============ ============
4 Exceptional items
Year ended
6 months ended 30 June 2017 6 months ended 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Reversal of freehold property
impairment (601) - (1,534)
Customer redress and associated
costs (165) - (100)
Aborted IT platform and
associated contractual
settlement costs - - 9,104
Restructuring costs - - 1,170
Requisition costs - 549 532
Exceptional (credit)/charge
included in operating profit (766) 549 9,172
Tax on exceptional items - - (436)
---------------------------- ---------------------------- -------------------
Total exceptional
(credit)/charge after tax (766) 549 8,736
============================ ============================ ===================
Reversal of freehold property impairment is a credit of
GBP601,000 (H1 2016: GBPnil; year ended 31 December 2016:
GBP1,534,000) and reflects the write-back of the asset to its
disposal value less costs to sell.
Customer redress and associated costs are a credit of GBP165,000
(H1 2016: GBPnil; year ended 31 December 2016: GBP100,000) and
relate to a release of provision in line with the latest estimate
of residual customer redress activity.
5 Taxation
The effective tax rate at the half year is negative 0.7% (H1
2016: positive 9.1%; year ended 31 December 2016: positive 71.6%).
The effective rate is lower than the standard rate of corporation
tax in the UK due to the release of tax liabilities that are now
considered remote partly offset by higher rates of tax on overseas
profits. The 2017 full year rate may vary from this as the release
of the tax liabilities has a one-off impact and the territory mix
of future 2017 profits may vary.
6 Dividends
The Directors have not proposed an interim dividend for
2017.
7 Earnings per share
Basic and diluted 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.
Six months ended 30 June 2017
(Unaudited) Continuing operations Discontinued operations Total
Earnings GBP'000 GBP'000 GBP'000
Profit for the purposes of basic and
diluted earnings per share 2,623 - 2,623
Exceptional items (net of tax) (766) - (766)
MSP charges (net of tax) 198 - 198
Earnings for the purposes of underlying
basic and diluted earnings per share 2,055 - 2,055
====================== ======================== ============
Number of shares Number
(thousands)
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 856,481
Effect of dilutive potential ordinary
shares: share options 18,709
------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 875,190
Earnings per share Continuing operations Discontinued operations Total
Pence Pence Pence
Basic and diluted earnings per share
Basic 0.31 - 0.31
Diluted 0.30 - 0.30
====================== ======================== ============
Basic and diluted underlying
earnings per share
Basic 0.24 - 0.24
Diluted 0.23 - 0.23
====================== ======================== ============
Six months ended 30 June 2016
(Unaudited) Continuing operations Discontinued operations Total
Earnings GBP'000 GBP'000 GBP'000
Earnings for the purposes of basic and
diluted earnings per share 2,291 - 2,291
Exceptional items (net of tax) 549 - 549
MSP charges (net of tax) 476 - 476
Earnings for the purposes of underlying
basic and diluted earnings per share 3,316 - 3,316
====================== ======================== ========
Number of shares Number
(thousands)
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 852,854
Effect of dilutive potential ordinary
shares: share options 27,902
------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 880,756
Earnings per share Continuing operations Discontinued operations Total
Pence Pence Pence
Basic and diluted earnings per share
Basic 0.27 - 0.27
Diluted 0.26 - 0.26
====================== ======================== ============
Basic and diluted underlying
earnings per shares
Basic 0.39 - 0.39
Diluted 0.38 - 0.38
====================== ======================== ============
Year ended 31 December 2016
(Audited) Continuing operations Discontinued operations Total
(Loss)/earnings GBP'000 GBP'000 GBP'000
(Loss)/earnings for the purposes of
basic and diluted (loss)/earnings per
share (533) 579 46
Exceptional items (net of tax) 8,736 - 8,736
MSP charges (net of tax) 698 - 698
Earnings for the purposes of underlying
basic and diluted earnings per share 8,901 579 9,480
====================== ======================== ===========
Number of shares Number
(thousands)
Weighted average number of ordinary
shares for the purposes of basic
(loss)/earnings per share
and basic underlying earnings per share 854,677
Effect of dilutive potential ordinary
shares: share options 28,506
Weighted average number of ordinary
shares for the purposes of diluted
underlying earnings
per share 883,183
(Loss)/earnings per share Continuing operations Discontinued operations Total
Pence Pence Pence
Basic and diluted (loss)/earnings per share
Basic (0.06) 0.07 0.01
Diluted (0.06) 0.07 0.01
Basic and diluted underlying earnings per
shares
Basic 1.04 0.07 1.11
Diluted 1.00 0.07 1.07
8 Tangible and intangible assets
Goodwill Other intangible assets Property, plant and equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Six months ended 30
June 2017 (Unaudited)
Carrying amount at 1
January 2017 - 2,136 5,316 7,452
Additions 776 138 236 1,150
Disposals - - (5,040) (5,040)
Amortisation/depreciation - (116) (232) (348)
Exchange adjustments - - (2) (2)
Impairment reversal - - 601 601
Carrying amount at 30 June 2017 776 2,158 879 3,813
Six months ended 30
June 2016 (Unaudited)
Carrying amount at 1
January 2016 - 4,825 3,502 8,327
Additions - 3,109 186 3,295
Disposals - - (15) (15)
Amortisation/depreciation - (49) (149) (198)
Exchange adjustments - 8 21 29
Carrying amount at 30 June 2016 - 7,893 3,545 11,438
Year ended 31 December
2016 (Audited)
Carrying amount at 1
January 2016 - 4,825 3,502 8,327
Additions - 3,812 592 4,404
Disposals - - (19) (19)
Amortisation/depreciation - (104) (400) (504)
Exchange adjustments - 7 107 114
(Impairment)/impairment
reversal - (6,404) 1,534 (4,870)
Carrying amount at 30
June 2016 - 2,136 5,316 7,452
Goodwill of GBP776,000 was generated on the acquisition of
Blink. Further detail of the acquisition is included in note
14.
During the year, the Group has recognised a GBP601,000 reversal
of prior year impairment of freehold land and property to reflect
its disposal value less costs to sell. The impairment reversal has
been recognised as an exceptional credit through the consolidated
income statement. On 30 June 2017, the Group disposed of the
freehold land and property for total consideration of
GBP5,325,000.
9 Cash and cash equivalents
Cash and cash equivalents of GBP32,199,000 (H1 2016:
GBP33,222,000; 31 December 2016: GBP28,250,000) comprises cash held
on demand by the Group and short term deposits.
Cash and cash equivalents includes GBP2,571,000 cash maintained
by the Group's insurance business for solvency purposes. During the
period the VVOP asset restrictions previously in place with the
Group's regulated entities, HIL and CPPL, have been lifted. The
VVOP prevented cash held within HIL and CPPL being distributed to
the wider Group without FCA approval. The comparative cash and cash
equivalents therefore included H1 2016: GBP25,402,000; and 31
December 2016: GBP18,727,000 which was held in HIL and CPPL either
for solvency purposes or due to the VVOP restrictions.
10 Borrowings
30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Bank loans due within one year 2,500 - -
Less: unamortised issue costs (43) - -
Second Commission Deferral Agreement - 1,367 1,391
Borrowings due within one year 2,457 1,367 1,391
Bank loans due outside of one year - 2,500 -
Less: unamortised issue costs - (116) (80)
Borrowings due outside of one year - 2,384 (80)
The Group's bank debt is in the form of a GBP5,000,000 revolving
credit facility (RCF). At 30 June 2017, the Group has an undrawn
committed borrowing facility of GBP2,500,000 (H1 2016:
GBP2,500,000; 31 December 2016: GBP5,000,000).
The RCF is secured by fixed and floating charges on certain
assets of the Group.
11 Provisions
Customer redress and associated
costs Onerous leases Total
GBP'000 GBP'000 GBP'000
Six months ended 30 June 2017
(Unaudited)
At 1 January 2017 476 667 1,143
Credited to the income statement (165) - (165)
Customer redress and associated costs
paid in the period (110) - (110)
Utilisation of onerous lease provision in
the period - (667) (667)
At 30 June 2017 201 - 201
Six months ended 30 June 2016
(Unaudited)
At 1 January 2016 1,611 829 2,440
Customer redress and associated costs
paid in the period (346) - (346)
Utilisation of onerous lease provision in
the period - (323) (323)
At 30 June 2016 1,265 506 1,771
Year ended 31 December 2016 (Audited)
At 1 January 2016 1,611 829 2,440
(Credited)/charged to the income
statement (100) 500 400
Customer redress and associated costs
paid in the year (1,035) - (1,035)
Utilisation of onerous lease provision in
the year - (662) (662)
At 31 December 2016 476 667 1,143
The customer redress and associated costs provision is 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.
12 Share capital
Share capital at 30 June 2017 amounted to GBP23,975,000 (H1
2016: GBP23,975,000; 31 December 2016: GBP23,975,000). Share option
exercises in the six month period to 30 June 2017 total 2,595,483
and have been satisfied through ordinary shares held by the
Employee Benefit Trust (EBT). The number of ordinary shares held by
the EBT at 30 June 2017 is 1,455,643.
13 Share-based payment
Share-based payment charges for the six month period to 30 June
2017 comprise MSP charges of GBP188,000 (H1 2016: GBP500,000; 31
December 2016: GBP902,000) and Long Term Incentive Plan 2016 (2016
LTIP) charges of GBP213,000 (H1 2016: GBP296,000; 31 December 2016:
GBP582,000). These costs are disclosed within administrative
expenses, although the MSP share-based payment charge forms part of
MSP charges 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.
Number of share options Weighted average exercise price
(thousands) (GBP)
Six months ended 30 June 2017 (Unaudited)
MSP
Outstanding at 1 January 2017 17,665 0.01
Forfeited during the period (2,611) 0.01
Exercised during the period (2,590) 0.01
Outstanding at 30 June 2017 12,464 0.01
Exercisable at 30 June 2017 2,340 0.01
2016 LTIP
Outstanding at 1 January 2017 15,081 -
Granted during the period 14,924 -
Forfeited during the period (5,485) -
Outstanding at 30 June 2017 24,520 -
Six months ended 30 June 2016 (Unaudited)
MSP
Outstanding at 1 January 2016 36,135 0.01
Forfeited during the period (10,500) 0.01
Exercised during the period (3,647) 0.01
Outstanding at 30 June 2016 21,988 0.01
Exercisable at 30 June 2016 47 0.01
2016 LTIP
Outstanding at 1 January 2016 - -
Granted during the period 26,050 -
Forfeited during the period (8,000) -
Outstanding at 30 June 2016 18,050 -
Year ended 31 December 2016 (Audited)
MSP
Outstanding at 1 January 2016 36,135 0.01
Forfeited during the year (14,111) 0.01
Exercised during the year (4,359) 0.01
Outstanding at 31 December 2016 17,665 0.01
Exercisable at 31 December 2016 1,810 0.01
2016 LTIP
Outstanding at 1 January 2016 - -
Granted during the period 26,050 -
Forfeited during the period (10,969) -
Outstanding at 31 December 2016 15,081 -
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 are
also subject to achievement of performance criteria including
underlying operating profit targets and either a share price or a
non-financial events measure over the vesting period.
The options outstanding at 30 June 2017 had a weighted average
remaining contractual life of one year (30 June 2016: two years; 31
December 2016: one year) in the MSP and two years (30 June 2016:
three years; 31 December 2016: two years) in the 2016 LTIP.
The principal assumptions underlying the valuation of the 2016
LTIP options granted during the period at the date of grant are as
follows:
Weighted average share price GBP0.1575
Weighted average exercise price -
Expected volatility n/a
Expected life 3 years
Risk-free rate n/a
Dividend yield 0%
There have been 14,924,000 share options granted in the current
period. The aggregate estimated fair value of the options granted
in the current period under the 2016 LTIP was GBP2,351,000.
14 Acquisition of a subsidiary
On 17 March 2017, the Group acquired 100% of the issued share
capital of Blink for initial cash consideration of EUR1 million.
The acquisition also allows for a further earn-out based on future
profits and product development which is considered to represent
remuneration rather than contingent consideration.
The net assets acquired and their provisional fair values at 17
March 2017 were:
Book value Fair value
GBP'000 GBP'000
Intangible assets - 86
Net assets acquired - 86
Goodwill - 776
Cash consideration paid 862
Cash consideration paid 862
Acquisition costs 128
Cash acquired on acquisition -
Total cash outflow 990
On acquisition, the carrying value of the net assets of Blink
was GBPnil. The Group have made a fair value adjustment of
GBP86,000 to recognise an intangible asset relating to the
development of the Blink website. The acquisition remains within
the measurement period and the Group continues to evaluate all
identifiable assets and liabilities.
Goodwill of GBP776,000 reflects the discounted future cash flows
of Blink's product offering (cancelled flight resolution), future
development opportunities from the Blink team, as well as synergies
to the Group from the acquired team's expertise.
Acquisition costs of GBP128,000 have been recognised as an
administrative expense through the condensed consolidated interim
income statement.
Included within the Group's condensed consolidated interim
income statement is revenue of GBPnil and a loss before tax of
GBP126,000 relating to Blink since the acquisition date and is the
same had the acquisition occurred on 1 January 2017.
15 Reconciliation of operating cash flows
6 months ended Year ended
6 months ended 30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Profit for the period 2,623 2,291 46
Adjustment for:
Depreciation and amortisation 348 198 504
Equity settled share-based payment expense 401 796 1,486
Impairment loss on intangible assets - - 6,404
Reversal of freehold property impairment (601) - (1,534)
Loss on disposal of property, plant and equipment 2 15 20
Investment revenues (84) (120) (243)
Finance costs 160 224 325
Income tax (credit)/expense (18) 230 (1,342)
Operating cash flows before movement in working
capital 2,831 3,634 5,666
Decrease in inventories 11 5 2
(Increase)/decrease in receivables (6,223) 590 (3,542)
Decrease in insurance assets 14 108 255
Increase/(decrease) in payables 3,455 (9,093) (6,718)
Decrease in insurance liabilities (128) (219) (326)
Decrease in provisions (943) (669) (1,296)
Cash used in operations (983) (5,644) (5,959)
Income taxes paid (426) (454) (1,250)
Net cash used in operating activities (1,409) (6,098) (7,209)
16 Related party transactions
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:
6 months ended 6 months ended Year ended
30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Short term employee benefits 1,261 1,284 2,697
Post-employment benefits 52 72 142
Termination benefits 253 - 817
Share-based payments 330 568 1,028
1,896 1,924 4,684
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUUURUPMGRW
(END) Dow Jones Newswires
August 24, 2017 02:00 ET (06:00 GMT)
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