TIDMCPP
RNS Number : 1135L
CPPGroup Plc
04 September 2019
CPPGROUP PLC
4 SEPTEMBER 2019
HALF YEAR REPORT
FOR THE SIX MONTHSED 30 JUNE 2019
CPPGROUP PLC
HALF YEAR REPORT FOR THE SIX MONTHSED 30 JUNE 2019
International expansion driving growth and building value
CPPGroup Plc (CPP or the Group), the partner focused, global
product and services company, today announces its results for the
six months ended 30 June 2019.
The Group has seen continued expansion in its international
revenues and customer numbers led by India. New business partners
continue to be added to our portfolio and further investment has
been made in our InsurTech capabilities to deliver strategic
advantage.
Highlights
-- Group revenue increased by 17% to GBP60.2 million (H1 2018:
GBP51.3 million) continuing the strong growth trajectory from
previous periods.
-- Revenue from Ongoing Operations increased by 28% to GBP51.4
million (H1 2018: GBP40.0 million), which includes a 45% increase
in Indian revenue to GBP40.9 million (H1 2018: GBP28.3
million).
-- Adjusted EBITDA increased by 25% to GBP3.6 million (H1 2018: GBP2.9 million).
-- EBITDA increased by 30% to GBP2.3 million (H1 2018: GBP1.8 million).
-- Overall, currency movements across our international markets
adversely impacted reported results. At constant currency:
-- Group revenue increased 19%.
-- Revenue from Ongoing Operations increased 30%.
-- Adjusted EBITDA increased by 34%.
-- EBITDA increased by 44%.
-- Profit before tax reduced by 36% to GBP0.9 million (H1 2018: GBP1.3 million).
-- Customer numbers have increased to 9.0 million (H1 2018: 6.7
million; 31 December 2018: 8.2 million).
Strategic progress
-- Diversification of our Indian business gathers pace through
the launch of a new product line, LivCare, and new business partner
contracts with Tata Capital Financial Services (Tata) and American
Express.
-- Strong existing and exciting new partners, such as Chinese
banking giant Bank of Communications (BoCom), gives potential
access to over 200 million customers.
-- Pioneering parametric insurance platform(1) developed by
Blink to transform the events-based insurance market.
-- Globiva performing ahead of expectations, forming
partnerships with global brands and colleague numbers increasing to
over 1,400.
1. Parametric insurance is a type of insurance that does not
indemnify the pure loss, but instead agrees to make a payment upon
the occurrence of a triggering event. Blink focuses on flight
disruption solutions and has developed an innovative technology
platform to deliver customers a proactive, real-time service.
Note - All subsequent percentage change figures within this
report are presented on a constant currency basis, unless otherwise
stated. The constant currency basis, which is an Alternative
Performance Measure (APM), retranslates the previous period
measures at the average actual periodic exchange rates used in the
current financial period. This approach is applied as a means of
eliminating the effects of exchange rate movements on the
period-on-period reported results.
Financial highlights
Six months ended 30 June 2019 Six months ended 30 June 2018(1)
GBP millions (Unaudited) (Unaudited) Change Constant currency change
----------------- ------------------------------ --------------------------------- ------ ------------------------
Group
Revenue 60.2 51.3 17% 19%
Adjusted
EBITDA(3) 3.6 2.9 25% 34%
Investments in
business growth
projects(4) (1.3) (1.1) (18)% (18)%
EBITDA(2) 2.3 1.8 30% 44%
Profit before
tax 0.9 1.3 (36)% (31)%
Basic
(loss)/earnings
per share
(pence) (0.01) 0.05 (126)% n/a
Net funds(5) 15.8 29.5 (46)% n/a
Segmental
revenue
Ongoing
Operations 51.4 40.0 28% 30%
Restricted
Operations 8.8 11.3 (21)% (21)%
================= ============================== ================================= ====== ========================
1. IFRS 16 Leases was effective from 1 January 2019, in
accordance with transition provisions allowed within the new
standard the rules have been applied retrospectively and as a
result 2018 comparative figures have not been restated.
2. EBITDA represents earnings before interest, taxation,
depreciation, amortisation, exceptional items and Matching Share
Plan (MSP) charges.
3. Adjusted EBITDA excludes costs associated with investments in business growth projects.
4. Investments in business growth projects of GBP1.3 million (H1
2018: GBP1.1 million) comprises start-up costs relating to the UK
GBP0.4 million (H1 2018: GBP0.2 million), Blink GBP0.5 million (H1
2018: GBP0.8 million), Bangladesh GBP0.1 million (H1 2018: GBPnil),
Southeast Asia GBP0.1 million (H1 2018: n/a) and our share of
losses in KYND GBP0.2 million (H1 2018: GBP0.1 million).
5. Net funds comprise cash and cash equivalents of GBP22.4
million (H1 2018: GBP29.4 million), a borrowing asset of GBPnil (H1
2018: GBP0.1 million) and net investment lease assets of GBP0.2
million (H1 2018: GBPnil) less lease liabilities of GBP6.8 million
(H1 2018: GBPnil). Lease liabilities and net investment lease
assets have been recognised following the adoption of IFRS 16
Leases on 1 January 2019, further detail is provided in note 10 to
the condensed consolidated interim financial statements.
Jason Walsh, Chief Executive Officer, commented:
"We are starting to see the rewards from the assembly of our
capabilities, each of which plays its part in supporting the
Group's operations. Blink is our InsurTech business where already
over 250,000 customers have had access to its parametric insurance
platform and Globiva, the start-up business process management
company, is growing rapidly and now has over 1,400 billable seats
and boasts global brands like Ola, American Express and Tui amongst
its third party clients.
We continue to grow our international revenues, with the strong
performance that we saw in 2018 being continued through the first
half of 2019. Our Indian operations have once again been the star
performer significantly growing its revenue, profitability and
customer numbers.
Ultimately, our success is built on our business partner
relationships which we continue to deepen and importantly we are
forming new partnerships with major brands in our strategically
important markets. These new and existing relationships will
develop over time and fuel the continued growth in our business. We
are investing in our technology-led capability which will continue
to strengthen our partnerships and enable more nimble and
cost-effective proposition delivery as well as an exceptional
customer experience."
Enquiries
CPPGroup Plc
Jason Walsh, Chief Executive Officer
Oliver Laird, Chief Financial Officer
Tel: +44 (0)113 487 7350
Nominated Adviser and Broker
Investec Bank plc: Sara Hale, James Rudd, Carlton Nelson
Tel: +44 (0)20 7597 5970
About CPP
CPP Group is a partner focused, global product and services
company, specialising in the financial services and insurance
markets. We use our local knowledge from 12 country markets within
Asia, Europe and Central America to provide our business partners
with technology-led product, marketing and distribution expertise
that deliver commercial benefits and bring meaningful solutions to
over 9 million end customers worldwide.
CPP's diverse range of insurance and assistance products can be
designed to suit the bespoke needs of our business partners through
providing their customers with 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
https://international.cppgroup.com
REGISTERED OFFICE
CPPGroup Plc
6 East Parade
Leeds
LS1 2AD
Registered number: 07151159
CHIEF EXECUTIVE'S STATEMENT
Financial performance
Constant
2019 2018(1) currency
Six months ended 30 June GBP'm GBP'm Change change
Revenue 60.2 51.3 17% 19%
------- -------- ------- ----------
EBITDA 2.3 1.8 30% 44%
------- -------- ------- ----------
Operating Profit 0.9 1.2 (25)% (18)%
------- -------- ------- ----------
Profit Before Tax 0.9 1.3 (36)% (31)%
------- -------- ------- ----------
1. IFRS 16 has been retrospectively applied and as a result 2018
comparatives have not been restated.
Group revenue of GBP60.2 million (H1 2018: GBP51.3 million) has
grown by 19% and customer numbers have increased by 10% to 9.0
million (H1 2018: 6.7 million; 31 December 2018: 8.2 million) we
have also increased our active business partners by 13%. This
growth has been led by our Indian market which has seen revenue
increase by 44% as we continue to deepen existing partner
relationships through additional product launches and opening up
incremental channels. In addition, we are expanding our partner
base in India with deals signed with Tata and American Express.
As a business we focus on EBITDA which has increased to GBP2.3
million (H1 2018: GBP1.8 million). The Group has opted not to
restate 2018 results for IFRS 16, however to aid comparability, H1
2018 EBITDA on an IFRS 16 basis would have been GBP0.3 million
higher at GBP2.1 million. The marginal increase in EBITDA of GBP0.2
million on a like-for-like basis reflects business growth in India
along with the benefit of restructuring activities in our European
markets, partly offset by the continued decline in our European
back books. Our adjusted EBITDA, which excludes the impact of
investment in business growth projects, has increased by 34% to
GBP3.6 million (H1 2018: GBP2.9 million).
The profile of our business continues to shift. Revenue and
customer growth is being led by our developing markets, whilst the
historic European renewal books continue to naturally decline.
Whilst this dynamic is driving revenue growth it is naturally
pressuring our gross profit margins as our Indian operation in
particular has higher costs associated with sales than the European
back books it is replacing. This is reflected in the reduced gross
profit margin of 32% (H1 2018: 39%), which we expect to settle at a
lower level in the medium term. We expect to generate longer-term
margin improvements through investment in the value chain and
digital capability.
Operating profit has reduced to GBP0.9 million (H1 2018: GBP1.2
million) reflecting our EBITDA growth offset by higher depreciation
charges associated with IFRS 16. As a result, profit before tax has
reduced to GBP0.9 million (H1 2018: GBP1.3 million).
The Group's effective tax rate of 118% (H1 2018: 68%) continues
to be significantly higher than the standard UK corporation tax
rate of 19%. The rate reflects charges on taxable profits in India
and our EU Hub where tax rates are higher than the UK. However, the
main driver of the rate is our policy to only recognise deferred
tax assets on start-up losses when profit forecasts indicate
short-term tax loss utilisation. The effective rate is expected to
continue to be high whilst we invest in business growth projects
which generate short-term start-up losses. As a result we report a
loss after tax of GBP0.2 million (H1 2018: GBP0.4 million
profit).
Segmental performance
H1 2019 H1 2018 Constant currency
Revenue GBP'm GBP'm Change change
Ongoing Operations:
-------- -------- ------- ------------------
India 40.9 28.3 45% 44%
-------- -------- ------- ------------------
EU Hub 6.8 8.1 (17)% (15)%
-------- -------- ------- ------------------
Turkey 2.1 2.5 (15)% 10%
-------- -------- ------- ------------------
Rest of World(1) 1.6 1.1 41% 37%
-------- -------- ------- ------------------
Total Ongoing Operations 51.4 40.0 28% 30%
-------------------------- -------- -------- ------- ------------------
Restricted Operations 8.8 11.3 (21)% (21)%
-------- -------- ------- ------------------
Group revenue 60.2 51.3 17% 19%
========================== ======== ======== ======= ==================
1. Rest of World comprises China, Malaysia, Mexico, the UK,
Blink, Bangladesh and Southeast Asia.
Constant
H1 2019 H1 2018 currency
EBITDA GBP'm GBP'm Change change
Ongoing Operations:
-------- -------- ------- ----------
India 2.2 0.6 263% 262%
-------- -------- ------- ----------
EU Hub 0.9 0.3 181% 191%
-------- -------- ------- ----------
Turkey 0.5 0.4 18% 91%
-------- -------- ------- ----------
Rest of World (1.5) (1.7) 12% 12%
-------- -------- ------- ----------
Total Ongoing Operations 2.1 (0.4) 589% 452%
-------------------------- -------- -------- ------- ----------
Restricted Operations 3.2 5.5 (42)% (42)%
-------- -------- ------- ----------
Central Functions (2.8) (3.2) 14% 14%
-------- -------- ------- ----------
Segmental EBITDA 2.5 1.9 34% 48%
-------- -------- ------- ----------
Share of loss of
joint venture (0.2) (0.1) (129)% (129)%
-------- -------- ------- ----------
Group EBITDA 2.3 1.8 30% 44%
========================== ======== ======== ======= ==========
Ongoing Operations
Revenue has increased 30% to GBP51.4 million (H1 2018: GBP40.0
million) due to strong new customer acquisitions in India and the
rapid expansion of Globiva, our majority owned business process
management (BPM) company in India. This growth has been partly
offset by a revenue reduction in our EU Hub where the renewal book
decline is outweighing new revenue generation.
EBITDA has increased significantly to GBP2.1 million (H1 2018:
GBP0.4 million loss), fuelled by the growth in India, along with
reduced costs in our EU Hub following the restructuring activity in
2018. The investments in business growth projects have increased
marginally period-on-period to GBP1.1 million (H1 2018: GBP1.0
million). These costs are included in Rest of World and comprise
the UK, Blink, Bangladesh and Southeast Asia.
The move to profit and a strongly growing EBITDA in our Ongoing
Operations segment represents a significant milestone for the Group
and one which will see us being much less dependent on our historic
legacy business which is in a natural decline.
Restricted operations
Revenue has decreased by 21% to GBP8.8 million (H1 2018: GBP11.3
million) reflecting the natural decline in the legacy renewal books
of Card Protection Plan Limited (CPPL) and Homecare Insurance
Limited (HIL), although renewal rates across these books of
customers remain strong at 84%. This decline along with marginally
higher transfer pricing charges, has led to a 42% reduction in
EBITDA to GBP3.2 million (H1 2018: GBP5.5 million). The prior
period also benefitted from a review of contractual provisions. Due
to the timing of headcount reductions the full cost benefit from
the 2018 restructuring activities in CPPL will be realised in
future periods.
Central Functions
The central cost base was reduced by 14% to GBP2.8 million (H1
2018: GBP3.2 million) following contractual savings and initial
steps in streamlining our UK-based IT function. Our decentralised
IT strategy is expected to generate further central cost savings in
the future.
Adjusted EBITDA
H1 2019 H1 2019 H1 2018 H1 2018
Investment
in business
growth adjusted adjusted adjusted adjusted
H1 2019 projects(1) EBITDA margin(2) EBITDA margin
Constant
currency
GBP'm GBP'm GBP'm % GBP'm % Change change
Ongoing Operations 2.1 1.1 3.2 6% 0.6 2% 416% 614%
-------- ------------- ---------- ------------ ---------- ---------- ------- ----------
Restricted
Operations 3.2 - 3.2 36% 5.5 49% (42)% (42)%
-------- ------------- ---------- ------------ ---------- ---------- ------- ----------
Central Functions (2.8) - (2.8) (100)% (3.2) (100)% 14% 14%
-------- ------------- ---------- ------------ ---------- ---------- ------- ----------
Segmental
EBITDA 2.5 1.1 3.6 6% 2.9 6% 25% 34%
-------- ------------- ---------- ------------ ---------- ---------- ------- ----------
Share of
loss of joint
venture (0.2) 0.2 - n/a - n/a n/a n/a
-------- ------------- ---------- ------------ ---------- ---------- ------- ----------
Group EBITDA 2.3 1.3 3.6 6% 2.9 6% 25% 34%
==================== ======== ============= ========== ============ ========== ========== ======= ==========
1. Investment in business growth projects in Ongoing Operations
are UK GBP0.4 million (H1 2018: GBP0.2 million), Blink GBP0.5
million (H1 2018: GBP0.8 million), Bangladesh GBP0.1 million (H1
2018: GBPnil) and Southeast Asia GBP0.1 million (H1 2018: GBPnil).
These projects are disclosed within Rest of World.
2. Adjusted margin is defined as adjusted EBITDA divided by revenue.
The Group's adjusted EBITDA is GBP3.6 million (H1 2018: GBP2.9
million). Adjusted EBITDA excludes investments in business growth
projects which reflect start-up losses in markets that will
contribute to growth in the future. The Group's adjusted EBITDA
margin, which is reflective of our more mature business, is 6% (H1
2018: 6%) compared to the reported margin of 4% (H1 2018: 3%).
Importantly, adjusted EBITDA in our Ongoing Operations is now at
the same level as the EBITDA from our Restricted Operations
demonstrating the shift in focus and dependency to growing markets
which will take the business forward.
Building value
The Group continues to follow its strategic principles, which
provide the foundations upon which future value will be built. CPP
is a diverse Group where structural, geographical and technical
differences in our countries mean that they drive and build value
for themselves and the Group in different ways. Following these
principles will mean that the Group will continue to focus on value
creation of its individual business lines as a route to increasing
overall Group valuation.
We operate a business to business to consumer (B2B2C) model and
recognise that the key to our success is the strength of the
reciprocal business partner relationships that we build and
nurture. Our priority is to establish strong relationships with
market-leading partners that have large accessible customer bases
where we can build trust and demonstrate the ability to deliver
innovative solutions. We are experts in providing technology-led
propositions that deliver additional revenue and customer loyalty
for our partners in a fully managed, brand enhancing customer
experience. It is this expertise that enables us to deepen our
partner relationships and gain access to a greater proportion of
their customer base through product and channel expansion. Our
existing partner base already allows us potential access to over
200 million customers.
In India, where we have successfully followed this strategy, we
are continuing to grow rapidly and are delivering increasingly
robust profits. We have a strong trusted relationship with the
Bajaj Group (Bajaj), successfully launching new innovative products
including, most recently in April 2019, a new life insurance and
wellness product, LivCare. New partnership deals with international
businesses like American Express add greatly to our potential
customer base whilst enhancing our market reputation. India
demonstrates how we identify and create propositions to fulfil the
needs of our partner's customers, whilst at the same time
significantly boosting our customer numbers, revenue streams and
market value.
Our strategy also includes investing in growth markets and
technology innovation. We have achieved this through shrewd
targeted investment in start-up companies like Blink and Globiva.
These companies, whilst providing different competitive advantages
to the Group, are similar in their innovative nature and drive to
grow at pace, which will over time add significant value to the
Group.
Blink is part of our investment in the InsurTech market and with
its in-house developed event-based parametric insurance platform is
pioneering technology that promises to transform the core travel
insurance market. Placing technology at the forefront of its
proposition delivery means that insurance solutions are delivered
in a customer-focused way with minimal ongoing delivery costs.
Whilst providing the necessary oversight and support, the Group has
deliberately not fully integrated Blink allowing it to operate
autonomously when delivering product and platform solutions to
partners. Blink already has two live campaigns in Canada with Blue
Cross and Manulife and there are more at final contract stage in
other parts of the world. We are excited by Blink's prospects and
the market value it represents both on a standalone basis and as
part of the Group.
Globiva forms an important part of the Group's margin expansion
plans as well as generating third party business relationships and
opportunities. Since acquisition, Globiva has grown rapidly,
exceeding our initial expectations, with international brands such
as Ola, American Express and TUI using the services. This growth
has resulted in the business expanding to three locations (two in
Delhi and one in Kolkata) with over 1,400 colleagues employed.
Globiva operates within a buoyant Indian economy and with growth
expected to continue over the next three years to in excess of
3,000 colleagues, we believe that the market value of the business
is already significantly in excess of our investment.
Building strategic advantage through technology
We understand the impact technology has on the successful
creation of value within any organisation. Our focus is on being a
technology-led business that invests in digital capabilities to
deliver strategic advantage to our partners by enhancing their
customer journeys and helping them to monetise their data.
We have commenced the build of our global technology platform
that can be delivered in-country according to local business
partner requirements. This will enable a nimble, responsive
platform to be created by local specialists at a cost that is
appropriate to that market. We will also be better positioned to
meet the global challenge that companies are facing where
in-country data residency and ownership is increasingly a demand of
local legislation. This decentralised approach to IT will prove to
be a competitive strength, although technology risk associated with
successfully executing our IT strategy remains in the short-term.
Focusing on this part of our technology journey will also enable us
to move away from inflexible legacy systems which will generate
further cost and operational efficiencies.
Operational review
Our Indian business has continued to grow rapidly with customer
numbers increasing by 1.0 million in H1 to 6.9 million (H1 2018:
4.4 million; 31 December 2018: 5.9 million) and is becoming
increasingly robust as we successfully diversify the partner and
product base. Bajaj continues to represent our most significant
partnership, however, importantly we have signed new Card
Protection campaigns with SBI Cards and Axis Bank which will lead
to a notable increase in customer numbers and strength in our
renewal business.
China is a strategically important market and we are pleased
that, under new leadership, revenue has grown by 84%
period-on-period. This reflects innovative marketing strategies
with key partners Ping-An Bank and SPDB to increase sales of our
Card Protection and Smart Travel products. In addition, we were
pleased to launch a new campaign with banking giant BoCom. Powered
by our standalone IT infrastructure we see further opportunities
for product and sector diversification in this market.
In our EU Hub the renewal books continue to perform well with
renewal rates of 82% (H1 2018: 84%). The profitability of the EU
Hub has improved reflecting the cost efficiencies generated through
the restructuring activities in H2 2018. EBITDA has increased to
GBP0.9 million (H1 2018: GBP0.3 million) at an EBITDA margin of 14%
(H1 2018: 4%). The restructuring has been successful and is in line
to deliver the expected annualised savings of GBP4.0 million to
GBP4.5 million (which includes CPPL savings which are not part of
the EU Hub).
Turkey has performed well against the backdrop of challenging
economic conditions, increasing revenue by 10% and EBITDA by 91%
and we have made good progress in a number of our other markets. We
have signed a new Card Protection contract with a second bank in
Bangladesh. The device protection segment in Bangladesh has huge
potential and we are close to agreeing our first Phone Insurance
deal with a leading market player. Following our re-entry in the UK
market, we continue to develop our product suite. We have a strong
pipeline with partner agreements in place that are expected to
generate new business in the second half of the year. Our Southeast
Asia expansion continues with a regional hub established in
Singapore led by an experienced dynamic regional CEO. With a solid
presence already established in Malaysia we continue to assess the
best markets in Southeast Asia to launch our product suite.
Financial position
The Group's net asset position is broadly unchanged at GBP16.3
million (31 December 2018: GBP16.3 million). Our net funds position
has reduced in the period to GBP15.8 million (31 December 2018:
GBP26.0 million) reflecting the recognition of lease liabilities
totalling GBP6.8 million following the adoption of IFRS 16 along
with our investment in technology and technology-led services, such
as the Blink parametric platform and digital services in India. Our
cash balances are GBP22.4 million which includes GBP1.1 million
required to be held in the UK for regulatory purposes and therefore
the Group's available cash balance is GBP21.3 million. Whilst this
represents a strong available cash position our borrowing facility
includes a cash covenant and increasingly cash is being generated
in India which is not currently available for repatriation in its
entirety due to historic trading losses. In the future our Indian
funds will become available for repatriation however a return of
cash is likely to suffer significant taxation costs. The cash
located in the UK and generated through the historic back books
currently supports Group IT, central support functions and key
strategic markets that are
presently loss-making. The Group is not currently utilising its
GBP5.0 million borrowing facility.
Outlook
Our success is built on our business partner relationships which
we continue to deepen and importantly we are forming new
partnerships with major brands in our strategically important
markets. These new and existing relationships will develop over
time and fuel the continued growth in our business. We are
investing in our technology-led capability which will continue to
strengthen our partnerships and enable more nimble and
cost-effective proposition delivery as well as an exceptional
customer experience.
We have continued to grow significantly in India and following
the successful launch of LivCare and expanded Card Protection
contracts with major banking partners, we expect revenue in 2019 to
exceed current market consensus. EBITDA margins in India are
typically 5% and other parts of the business that are currently
loss-making have progressed slower than expected, therefore
although revenue is expected to be higher our EBITDA expectations
for 2019 remain unchanged.
Jason Walsh
Chief Executive Officer
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
6 months ended Year ended
30 June 2019 6 months ended 30 June 2018 31 December 2018
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Revenue 3 60,229 51,264 110,070
Cost of sales (40,730) (31,020) (68,993)
Gross profit 19,499 20,244 41,077
Administrative expenses (18,448) (18,984) (41,031)
Share of loss of joint venture (152) (66) (199)
Operating profit/(loss) 899 1,194 (153)
Analysed as:
EBITDA 3 2,319 1,779 3,911
Depreciation and amortisation (1,420) (364) (866)
Exceptional items - (153) (3,137)
MSP charges - (68) (61)
------------------------------------ -----
Investment revenues 253 252 531
Finance costs (302) (112) (51)
Profit before taxation 850 1,334 327
Taxation 4 (1,006) (902) (712)
(Loss)/profit for the period (156) 432 (385)
=============== ============================ ==================
Attributable to:
Equity holders of the Company (113) 432 (380)
Non-controlling interests (43) - (5)
--------------- ---------------------------- ------------------
(156) 432 (385)
=============== ============================ ==================
(Loss)/earnings per share
Pence Pence Pence
Basic (loss)/earnings per share 6 (0.01) 0.05 (0.04)
=============== ============================ ==================
Diluted (loss)/earnings per share 6 (0.01) 0.05 (0.04)
=============== ============================ ==================
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended
6 months ended 30 June 2019 6 months ended 30 June 2018 31 December 2018
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
(Loss)/profit for the period (156) 432 (385)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on
translation of foreign
operations 20 (173) (286)
Other comprehensive
income/(expense) for the period
net of taxation 20 (173) (286)
---------------------------- ---------------------------- ------------------
Total comprehensive
(expense)/income for the period (136) 259 (671)
============================ ============================ ==================
Attributable to:
Equity holders of the Company (93) 259 (666)
Non-controlling interests (43) - (5)
---------------------------- ---------------------------- ------------------
(136) 259 (671)
============================ ============================ ==================
CONSOLIDATED BALANCE SHEET
30 June 2019 30 June 2018 31 December 2018
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Non-current assets
Goodwill 7 1,492 880 1,492
Other intangible assets 7 3,168 1,507 2,788
Property, plant and equipment 7 2,236 1,590 1,717
Right-of-use asset 10 6,087 - -
Investment in joint venture 882 438 1,034
Deferred tax asset 1,376 1,203 1,225
Net investment lease assets 10 63 - -
Contract assets 578 780 479
------------- ------------- -----------------
15,882 6,398 8,735
------------- ------------- -----------------
Current assets
Insurance assets - 30 24
Inventories 142 68 159
Net investment lease assets 10 168 - -
Contract assets 4,969 3,095 4,553
Trade and other receivables 13,263 10,016 13,704
Cash and cash equivalents 22,372 29,438 25,955
------------- ------------- -----------------
40,914 42,647 44,395
Total assets 56,796 49,045 53,130
------------- ------------- -----------------
Current liabilities
Insurance liabilities (471) (639) (617)
Income tax liabilities (779) (1,437) (536)
Trade and other payables (19,109) (20,364) (22,906)
Provisions (70) (369) (571)
Lease liabilities 10 (1,390) - -
Contract liabilities (11,971) (8,370) (10,934)
------------- ------------- -----------------
(33,790) (31,179) (35,564)
------------- ------------- -----------------
Net current assets 7,124 11,468 8,831
------------- ------------- -----------------
Non-current liabilities
Borrowings 71 116 90
Deferred tax liabilities (90) - (90)
Provisions (310) - (291)
Lease liabilities 10 (5,440) - -
Contract liabilities (926) (1,846) (1,009)
(6,695) (1,730) (1,300)
------------- ------------- -----------------
Total liabilities (40,485) (32,909) (36,864)
------------- ------------- -----------------
Net assets 16,311 16,136 16,266
============= ============= =================
Equity
Share capital 8 24,040 23,995 24,021
Share premium account 45,225 45,225 45,225
Merger reserve (100,399) (100,399) (100,399)
Translation reserve 498 591 478
ESOP reserve 16,249 15,476 15,884
Retained earnings 29,882 31,248 30,323
------------- ------------- -----------------
Equity attributable to equity holders of the Company 15,495 16,136 15,532
Non-controlling interests 816 - 734
------------- ------------- -----------------
Total equity 16,311 16,136 16,266
============= ============= =================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
Share Premium Merger Translation ESOP Retained Non-controlling Total
Capital Account reserve reserve reserve earnings Total interest equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6 months ended
30 June 2019
(Unaudited)
At 1 January
2019 24,021 45,225 (100,399) 478 15,884 30,323 15,532 734 16,266
Change of
accounting
policy - IFRS
16 10 - - - - - (203) (203) - (203)
Loss for the
period - - - - - (113) (113) (43) (156)
Other
comprehensive
income for the
period - - - 20 - - 20 - 20
Equity-settled
share-based
payment charge 9 - - - - 365 - 365 - 365
Exercise of
share options 8 19 - - - - - 19 - 19
Movement in
non-controlling
interest - - - - - (125) (125) 125 -
-------- -------- ---------- ------------ -------- --------- -------- ---------------- --------
At 30 June 2019 24,040 45,225 (100,399) 498 16,249 29,882 15,495 816 16,311
======== ======== ========== ============ ======== ========= ======== ================ ========
6 months ended
30 June 2018
(Unaudited)
At 1 January
2018 23,978 45,225 (100,399) 764 15,114 30,816 15,498 - 15,498
Profit for the
period 432 432 - 432
Other
comprehensive
expense for the
period - - - (173) - - (173) - (173)
Equity-settled
share-based
payment charge 9 - - - - 362 - 362 - 362
Exercise of
share options 17 - - - - - 17 - 17
-------- -------- ---------- ------------ -------- --------- -------- ---------------- --------
At 30 June 2018 23,995 45,225 (100,399) 591 15,476 31,248 16,136 - 16,136
======== ======== ========== ============ ======== ========= ======== ================ ========
Year ended
31 December 2018
(Audited) -
At 1 January
2018 23,978 45,225 (100,399) 764 15,114 30,816 15,498 - 15,498
Loss for the
year - - - - - (380) (380) (5) (385)
Other
comprehensive
expense for the
year - - - (286) - - (286) - (286)
Equity-settled
share-based
payment charge 9 - - - - 770 - 770 - 770
Deferred tax on
share-based
payment charge - - - - - (113) (113) - (113)
Exercise of
share options 43 - - - - - 43 - 43
Non-controlling
interest on
acquisition of
a subsidiary - - - - - - - 739 739
-------- -------- ---------- ------------ -------- --------- -------- ---------------- --------
At 31 December
2018 24,021 45,225 (100,399) 478 15,884 30,323 15,532 734 16,266
======== ======== ========== ============ ======== ========= ======== ================ ========
CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year ended
Note 30 June 2019 30 June 2018 31 December 2018
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Net cash used in operating activities 11 (1,406) (160) (833)
Investing activities
Interest received 248 252 531
Purchases of property, plant and equipment (836) (582) (792)
Purchases of intangible assets (844) (748) (1,931)
Acquisition of a subsidiary, net of cash acquired - (126) (704)
Investment in joint venture - (480) (1,224)
Net cash used in investing activities (1,432) (1,684) (4,120)
--------------- --------------- ------------------
Financing activities
Costs of refinancing the bank facility - (83) (126)
Capital lease repayments 10 (837) - -
Lessor capital receipts 10 78
Interest paid (61) (89) (51)
Issue of ordinary share capital 8 19 17 43
Net cash used in financing activities (801) (155) (134)
--------------- --------------- ------------------
Net decrease in cash and cash equivalents (3,639) (1,999) (5,087)
Effect of foreign exchange rate changes 56 (28) (423)
Cash and cash equivalents at start of period 25,955 31,465 31,465
Cash and cash equivalents at end of period 22,372 29,438 25,955
=============== =============== ==================
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1 General information
The condensed consolidated interim financial statements for the
six months ended 30 June 2019 do not constitute statutory accounts
as defined under Section 434 of the Companies Act 2006. The Annual
Report and Financial Statements (the 'Financial Statements') for
the year ended 31 December 2018 were approved by the Board on 26
March 2019 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 2019 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 Financial Statements for the year
ended 31 December 2018, which have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
The condensed consolidated interim financial statements were
approved for release on 3 September 2019.
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). The Group has applied the
following standards and amendments for the first time for their
annual reporting period commencing 1 January 2019:
-- IFRS 16 Leases
-- IFRIC 23 Uncertainty over tax treatments
-- IAS 28 (amendments) Long-term interests in Associates and Joint Ventures
-- Annual improvements to IFRSs 2015 - 2017 cycle
Following the adoption of IFRS 16, the Group has changed its
accounting policies and made certain transition adjustments, which
are disclosed in note 10. All other new or amended standards and
interpretations applied for the first time in the period commencing
1 January 2019 have not had a material impact on the Group.
The Group has revised income statement and segmental reporting
formats to include EBITDA from 1 January 2019. EBITDA is an APM
prior to which the Group used an alternative APM, underlying
operating profit. The Group is investing in technology, which will
be an ongoing focus, and as a result EBITDA provides a better
understanding of the underlying performance of our business. The
prior period income statement and relevant notes have been
represented to reflect the change.
The comparative balance sheet position as at 30 June 2018 has
been represented to reflect a change applied subsequent to the
approval of the 2018 Half Year Report in our transitionary
accounting for IFRS 15 Revenue from contracts with customers. As a
result, net assets have increased GBP320,000 compared to original
presentation, comprising an increase in current contract assets of
GBP588,000 and a reduction in deferred tax asset of GBP268,000.
Going concern
After making enquiries, the Directors have satisfied themselves
that taking account of reasonably possible changes in trading
performance, the Group's forecasts show 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.
Leases
The adoption of IFRS 16 Leases with effect from 1 January 2019
has led to amendments in the Group's accounting policy for leases.
The revised sections of the policy are below.
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group's leases include properties,
equipment and motor vehicles. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and low value assets. For these leases, the Group recognises the
lease payments as an expense through the consolidated income
statement on a straight-line basis over the term of the lease.
Lease liabilities
The lease liability is initially measured at the present value
of the lease payments, discounted by using the relevant incremental
borrowing rate available to the Group in each territory where a
lease is held. Lease liabilities include the net present value of
the following: lease payments; fixed payments, including any
incentives; variable lease payments; and amounts payable under
residual value guarantees.
Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to the consolidated
income statement over the lease period providing a constant
periodic rate of interest on the remaining balance of the liability
for each period.
Right-of-use assets
Right-of-use assets are measured at cost comprising the
following: the amount of the initial measurement of lease liability
and any lease payments made at or before the commencement date;
less any lease incentives received, any initial direct costs and
final committed restoration costs.
The right-of-use asset is depreciated on a straight line basis
over the shorter of the asset's useful life and the lease term.
Variable lease payments
When a lease includes terms that change the future lease
payments, such as index-linked reviews, the lease liability (and
related right-of-use asset) is re-measured based on the revised
future lease payments at the date on which the revision is
triggered.
Extension and termination options
A number of the Group's lease arrangements include extension and
termination options. These terms are used to maximise operational
flexibility in respect of managing contracts. The majority of
extension and termination options held are exercisable only by the
Group and not by the respective lessor. Extension options (or
periods after termination options) are only included in the lease
term if the lease is reasonably certain to be extended (or not
terminated), considering historic trends and circumstances of the
lease arrangement.
3 Segmental analysis
IFRS 8 Operating segments requires operating segments to be
identified on the basis of internal reports about components of the
Group that are regularly reviewed by the Board of Directors to
allocate resources to the segments and to assess their performance.
The Group's operating segments are:
-- Ongoing Operations; India, China, Turkey, Spain, Germany,
Portugal, Italy, Mexico, Malaysia, UK, Bangladesh, Blink and
Southeast Asia. We continue to invest and drive new business
opportunities in these markets.
-- Restricted Operations: historic renewal books of our UK
regulated entities; CPPL, including its overseas branches; and
HIL.
-- Central Functions: central cost base required to provide
expertise and operate a listed Group. Central Functions is stated
after the recharge of certain central costs that are appropriate to
transfer to both Ongoing Operations and Restricted Operations for
statutory purposes.
Segment revenue and performance for the current and comparative
periods are presented below:
Ongoing Restricted Central
Operations Operations Functions Total
Six months ended 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited)
Revenue - external sales 51,362 8,867 - 60,229
Segmental EBITDA 2,057 3,197 (2,783) 2,471
------------- ------------ -----------
Share of loss of joint venture (152)
--------
EBITDA 2,319
Depreciation and amortisation (1,420)
Operating profit 899
Investment revenues 253
Finance costs (302)
--------
Profit before taxation 850
Taxation (1,006)
--------
Loss for the period (156)
========
Ongoing Restricted Central
Operations Operations Functions Total
Six months ended 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited)
Revenue - external sales 40,005 11,259 - 51,264
Segmental EBITDA (421) 5,513 (3,247) 1,845
------------ ------------ -----------
Share of loss of joint venture (66)
--------
EBITDA 1,779
Depreciation and amortisation (364)
Exceptional items (153)
MSP charges (68)
Operating profit 1,194
Investment revenues 252
Finance costs (112)
--------
Profit before taxation 1,334
Taxation (902)
--------
Profit for the period 432
========
Ongoing Restricted Central
Operations Operations Functions Total
Year ended 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000
(Audited)
Revenue - external sales 88,033 22,037 - 110,070
Segmental EBITDA 13 10,097 (6,000) 4,110
------------ ------------ -----------
Share of loss of joint venture (199)
--------
EBITDA 3,911
Depreciation and amortisation (866)
Exceptional items (3,137)
MSP charges (61)
--------
Operating loss (153)
Investment revenues 531
Finance costs (51)
Profit before taxation 327
Taxation (712)
--------
Loss for the year (385)
========
Segmental assets
30 June 2019 30 June 2018 31 December 2018
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Ongoing Operations 36,931 23,305 30,637
Restricted Operations 14,021 18,886 17,114
Central Functions 2,094 4,333 1,628
Total segment assets 53,046 46,524 49,379
Unallocated assets 3,750 2,521 3,751
Consolidated total assets 56,796 49,045 53,130
============= ============= =================
Goodwill, deferred tax and investment in joint venture are not
allocated to segments.
Capital expenditure
Other intangible assets Property, plant and equipment
----------------------------------------- ------------------------------------------
6 months 6 months
ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
Ongoing
Operations 502 389 1,387 528 434 728
Restricted
Operations 32 - 20 137 3 61
Central Functions 310 363 878 171 151 277
Total assets 844 752 2,285 836 588 1,066
============ ============ ============= ============ ============ ============
Right-of-use asset additions in the period of GBP1,569,000
following the adoption of IFRS 16 from 1 January 2019 are not
included in the table above. The right-of-use asset additions are
located in our Ongoing Operations segment. Further information
relating to IFRS 16 is included in note 10
Timing of revenue recognition
The Group derives revenue from the transfer of goods and
services over time and at a point in time as follows:
6 months ended 30 June 2019 6 months ended 30 June 2018 Year ended 31 December 2018
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
At a point in time 49,070 43,478 89,116
Over time 11,159 7,786 20,954
---------------------------- ---------------------------- ----------------------------
60,229 51,264 110,070
============================ ============================ ============================
Revenue from major products
Year ended
6 months ended 30 June 2019 6 months ended 30 June 2018 31 December 2018
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Retail assistance policies 56,627 49,509 105,006
Retail insurance policies 96 168 336
Wholesale policies 1,682 1,375 4,162
Non-policy revenue 1,824 212 566
---------------------------- ---------------------------- ------------------
Consolidated revenue 60,229 51,264 110,070
============================ ============================ ==================
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.
The increase in non-policy revenue period-on-period reflects
third party revenues earned by Globiva.
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
investment in joint venture and deferred tax) by geographical
location is detailed below:
External revenues Non-current assets
----------------------------------------- ------------------------------------------
6 months 6 months
ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
India 40,894 28,267 65,326 6,347 855 2,115
UK 7,174 9,223 18,051 4,406 2,483 2,468
Spain 4,415 5,452 10,514 564 282 281
Other 7,746 8,322 16,179 2,307 1,137 1,612
Total 60,229 51,264 110,070 13,624 4,757 6,476
============ ============ ============= ============ ============ ============
Non-current assets at 30 June 2019 include GBP6,087,000
right-of-use assets recognised following adoption of IFRS 16
effective from 1 January 2019. Further details on IFRS 16 are
included in note 10.
Information about major customers
Revenue from customers of one business partner in our Ongoing
Operations segment represented approximately GBP27,708,000 (H1
2018: GBP20,577,000; year ended 31 December 2018: GBP48,158,000) of
the Group's total revenue.
4 Taxation
The effective tax rate at the half year is 118.4% (H1 2018:
67.6%; year ended 31 December 2018: 217.7%). The tax charge of
GBP1,006,000 (H1 2018: GBP902,000; year ended 31 December 2018:
GBP712,000) reflects charges on taxable profits arising in India
and our EU Hub. The corporate income tax in these overseas
jurisdictions is higher than the UK corporate income tax rate of
19%. Profits from UK entities are expected to be covered by group
relief from losses arising in other UK entities, brought forward
tax losses and double taxation relief.
The Group's effective tax rate is significantly higher than the
UK corporate income tax rate due to losses in our developing
markets which do not in the short-term indicate sufficient
certainty of future profitability to recognise deferred tax assets.
The Group's policy is to recognise deferred tax assets when profit
forecasts indicate that tax losses can be utilised in the
short-term. The 2019 full year rate may vary from the H1 2019 rate
as the territory mix of future 2019 profits or losses may differ,
however it is expected to continue to be significantly higher than
the UK rate in the future.
5 Dividends
The Directors have not proposed an interim dividend for 2019.
Neither an interim or final dividend was proposed in 2018.
6 (Loss)/earnings per share
Basic and diluted (loss)/earnings per share have been calculated
in accordance with IAS 33 Earnings per share. Underlying
(loss)/earnings per share, which exclude exceptional items and MSP
charges, have also been presented in order to give a better
understanding of the performance of the business. In accordance
with IAS 33, potential ordinary shares are only considered dilutive
when their conversion would decrease the earnings per share or
increase the loss per share attributable to equity holders. The
diluted loss per share is therefore equal to the basic loss per
share in the six months ended 30 June 2019 and year ended 31
December 2018.
Six months ended 30 June 2019 (Unaudited) Total
Losses GBP'000
Loss for the purposes of basic and diluted earnings per share and underlying earnings
per
share (113)
===========
Number of shares Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic and diluted loss
per
share 862,015
Loss per share Total
Pence
Basic and diluted loss per share (0.01)
Basic and diluted underlying loss per share (0.01)
Six months ended 30 June 2018 (Unaudited) Total
Earnings GBP'000
Earnings for the purposes of basic and diluted earnings per share 432
Exceptional items (net of tax) 153
MSP charges (net of tax) 39
Earnings for the purposes of underlying basic and diluted earnings per share 624
Number of shares Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic earnings per share 856,902
Effect of dilutive potential ordinary shares: share options 19,616
Weighted average number of ordinary shares for the purposes of diluted earnings per
share 876,518
Earnings per share Total
Pence
Basic and diluted earnings per share:
Basic 0.05
Diluted 0.05
Basic and diluted underlying earnings per share:
Basic 0.07
Diluted 0.07
Year ended 31 December 2018 (Audited) Total
(Loss)/earnings GBP'000
Loss for the purposes of basic and diluted loss per share (380)
Exceptional items (net of tax) 2,289
MSP charges (net of tax) 55
Earnings for the purposes of underlying basic and diluted earnings per share 1,964
Number of shares Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic and diluted
loss per
share and basic underlying earnings per share 858,474
Effect of dilutive potential ordinary shares: share options 28,308
Weighted average number of ordinary shares for the purposes of diluted underlying
earnings
per share 886,782
(Loss)/earnings per share Total
Pence
Basic and diluted loss per share (0.04)
Basic and diluted underlying earnings per share:
Basic 0.23
Diluted 0.22
7 Tangible and intangible assets
Property,
Other intangible plant and
Goodwill assets equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Six months ended 30 June 2019
(Unaudited)
Carrying amount at 1 January
2019 1,492 2,788 1,717 5,997
Additions - 844 836 1,680
Disposals - (7) (32) (39)
Amortisation/depreciation - (471) (293) (764)
Exchange adjustments - 14 8 22
Carrying amount at 30 June
2019 1,492 3,168 2,236 6,896
Six months ended 30 June 2018
(Unaudited)
Carrying amount at 1 January
2018 776 882 1,281 2,939
Additions 104 752 588 1,444
Disposals - - (7) (7)
Amortisation/depreciation - (128) (236) (364)
Exchange adjustments - 1 (36) (35)
Carrying amount at 30 June
2018 880 1,507 1,590 3,977
Year ended 31 December 2018
(Audited)
Carrying amount at 1 January
2018 776 882 1,281 2,939
Additions 716 1,931 792 3,439
Acquisition of subsidiaries - 354 274 628
Disposals - (11) (75) (86)
Amortisation/depreciation - (412) (454) (866)
Impairment - - (71) (71)
Exchange adjustments - 44 (30) 14
Carrying amount at 31 December
2018 1,492 2,788 1,717 5,997
8 Share capital
Share capital at 30 June 2019 is GBP24,040,000 (H1 2018:
GBP23,995,000; 31 December 2018: GBP24,021,000). To satisfy share
option exercises in the six month period to 30 June 2019 the
Company has issued 1,894,000 ordinary shares for a total
consideration of GBP19,000.
9 Share-based payment
Equity-settled share-based payments
Share-based payment charges for the six month period to 30 June
2019 comprise Long Term Incentive Plan 2016 (2016 LTIP) charges of
GBP365,000 (H1 2018: GBP294,000; 31 December 2018: GBP680,000).
There have been no MSP charges in the period (H1 2018: GBP68,000;
31 December 2018: GBP90,000). These costs are disclosed within
administrative expenses, although the MSP share-based payment
charge formed part of the MSP charges not included in EBITDA.
There have been 18,092,000 options granted in the six month
period to 30 June 2019 as part of the 2016 LTIP (30 June 2018 and
31 December 2018: 16,071,000 options granted). There have been no
MSP options granted in either the current period or the comparative
periods.
Number of share options Weighted average exercise price
(thousands) (GBP)
Six months ended 30 June 2019 (Unaudited)
2016 LTIP
Outstanding at 1 January 2019 37,981 -
Granted during the period 18,092 -
Lapsed/forfeited during the period (11,886) -
Outstanding at 30 June 2019 44,187 -
MSP
Outstanding at 1 January 2019 6,343 0.01
Exercised during the period (1,894) 0.01
Outstanding at 30 June 2019 4,449 0.01
Exercisable at 30 June 2019 4,449 0.01
Six months ended 30 June 2018 (Unaudited)
2016 LTIP
Outstanding at 1 January 2018 22,551 -
Granted during the period 16,071 -
Forfeited during the period (641) -
Outstanding at 30 June 2018 37,981 -
MSP
Outstanding at 1 January 2018 10,669 0.01
Forfeited during the period (53) 0.01
Exercised during the period (1,703) 0.01
Outstanding at 30 June 2018 8,913 0.01
Exercisable at 30 June 2018 5,944 0.01
Number of share options Weighted average exercise price
(thousands) (GBP)
Year ended 31 December 2018 (Audited)
2016 LTIP
Outstanding at 1 January 2018 22,551 -
Granted during the year 16,071 -
Forfeited during the year (641) -
Outstanding at 31 December 2018 37,981 -
MSP
Outstanding at 1 January 2018 10,669 0.01
Forfeited during the year (52) 0.01
Exercised during the year (4,274) 0.01
Outstanding at 31 December 2018 6,343 0.01
Exercisable at 31 December 2018 6,343 0.01
Nil cost options and conditional shares granted under the 2016
LTIP normally vest after three years, lapse if not exercised within
ten years of grant and will lapse if option holders cease to be
employed by the Group. Vesting of 2016 LTIP options and shares are
also subject to achievement of certain performance criteria
including revenue and profit-based targets and non-financial event
measures over the vesting period.
The options outstanding at 30 June 2019 had a weighted average
remaining contractual life of two years (30 June 2018: two years;
31 December 2018: two years) in the 2016 LTIP and no years (30 June
2018: no years; 31 December 2018: no years) in the MSP.
The principal assumptions underlying the valuation of the 2016
LTIP options granted during the period at the date of grant are as
follows:
LTIP 2016
April 2019
Weighted average share price GBP0.05
Weighted average exercise price -
Expected volatility n/a
Expected life 3 years
Risk-free rate n/a
Dividend yield 0%
There have been 18,092,000 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 GBP950,000.
Cash-settled share-based payments
On 29 April 2019, the Group granted certain employees with
notional share options that require the Group to pay the intrinsic
value of the notional share to the employee at the date of
exercise. The fair value of the notional share options has been
determined by the Black Scholes model using the assumptions noted
in the table above. The Group has recorded a total expense in
relation to this award in the six months to 30 June 2019 of
GBP24,000 (H1 2018: GBPnil; year ended 31 December 2018:
GBP30,000). The Group has recorded liabilities of GBP24,000 (30
June 2018: GBPnil and 31 December 2018: GBP30,000) in relation to
these notional awards.
10 Change in accounting policy
The Group adopted IFRS 16 Leases effective from 1 January 2019,
which has led to updates in the Group's accounting policy for
leases. In accordance with the transition provisions for IFRS 16,
the Group has adopted the new rules retrospectively and has opted
not to restate comparative reporting periods. As a result, the
reclassification and adjustments arising from the new leasing rules
are recognised in the opening balance sheet on 1 January 2019. The
new accounting policies are disclosed in note 2.
On adoption of IFRS 16, the Group has recognised lease
liabilities in relation to leases which had previously been
classified as 'operating leases' under the principles of IAS 17
Leases. The lease liabilities were measured at the present value of
the remaining lease payments, discounted using the lessee's
incremental borrowing rate as at 1 January 2019. The weighted
average lessee's incremental borrowing rate applied to the lease
liabilities on 1 January 2019 was 7.1%.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics, including geographical
location;
-- the accounting for operating leases with a remaining lease
term of less than 12 months as at 1 January 2019 as short-term
leases;
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application;
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease; and
-- relying on previous assessment of whether a lease is onerous.
The Group has also elected not to apply IFRS 16 to contracts
that were not identified as containing a lease under IAS 17 and
IFRIC 4 Determining whether an arrangement contains a lease.
Measurement of lease liabilities
GBP'000
Operating lease commitments as at 1 January 2019 5,532
Operating lease commitments as at 1 January 2019 restated net of VAT 5,291
Discounted using the lessee's incremental borrowing rate of 7.1% (656)
Add: finance lease liabilities recognised as at 1 January 2019 1,347
(Less): short-term leases recognised as expense on a straight line basis (146)
(Less): contracts re-assessed as service agreements (102)
Add: adjustments as a result of reassessment of extension and termination options 83
Lease liability recognised at 1 January 2019 5,817
Comprising:
Non-current lease liabilities 4,530
Current lease liabilities 1,287
5,817
The movement in the lease liability in the period is as
follows:
Lease liability 30 June 2019
GBP'000
(Unaudited)
At 1 January 2019 5,817
Additions 1,569
Interest 220
Lease payments (837)
Exchange adjustments 61
At 30 June 2019 6,830
Comprising:
Non-current lease liabilities 5,440
Current lease liabilities 1,390
6,830
Measurement of right-of-use assets
The associated right-of-use assets for all leases were measured
on a retrospective basis as if the new rules had always been
applied. Any identified restoration costs were added to the initial
costs of the right-of-use assets. Any right-of-use assets
associated with leases previously deemed to be onerous were
impaired where the previous assessment of the nature of the onerous
lease remained appropriate. Right-of-use assets are depreciated
using a straight-line approach over their deemed useful economic
life, which is based on interpretation of lease contract length in
line with the requirements of the standard.
30 June 2019 1 January 2019
GBP'000 GBP'000
(Unaudited) (Unaudited)
Properties 5,854 4,873
Motor vehicles 203 213
Equipment 30 37
Total right-of-use assets 6,087 5,123
The movement in the right-of-use asset in the period is as
follows:
Right-of-use asset 30 June 2019
GBP'000
(Unaudited)
At 1 January 2019 5,123
Additions 1,569
Depreciation (656)
Exchange adjustments 51
At 30 June 2019 6,087
Lessor accounting
The Group has certain finance lease arrangements where it acts
as a lessor and has made adjustments to accounting for the
associated sublet assets. The subleases were previously accounted
for as operating leases under IAS 17. On adoption of IFRS 16, the
Group recognised a net investment asset through reclassification of
the associated right-of-use assets.
The net investment asset is measured at the present value of the
remaining future minimum sub lease payments to be received,
discounted using the relevant incremental borrowing rate as at 1
January 2019. The right-of-use asset reclassified is measured at
the proportion of the existing right-of-use assets that are sublet
to the lessees in the arrangement. Any resulting differences are
recognised as a gain or loss in the consolidated income
statement.
Reconciliation of sublease future minimum payments to net investment assets
1 January 2019
GBP'000
(Unaudited)
Future minimum sublease payments disclosed as at 1 January 2019 278
(Less): adjustments as a result of reassessment of extension and termination options (3)
Add: residual value of sub-leased asset returned on conclusion of sublease 41
Discounted using the incremental borrowing rate (12)
Net investment asset recognised at 1 January 2019 304
Comprising:
Non-current net investment assets 148
Current net investment assets 156
304
Net investment lease assets 30 June 2019
GBP'000
(Unaudited)
At 1 January 2019 304
Payments received (78)
Interest 5
At 30 June 2019 231
Comprising:
Non-current net investment assets 63
Current net investment assets 168
231
In addition to lease liabilities, right-of-use assets and net
investment lease assets, the transition also reduced provisions.
Overall, the change in accounting policy impacted the balance sheet
on 1 January 2019 by increasing assets by GBP5,427,000 and
increasing liabilities by GBP5,630,000. The net impact on retained
earnings on 1 January 2019 was GBP203,000 reduction.
At 30 June 2019 assets were affected by an increase of
GBP6,318,000 and liabilities by an increase of GBP6,995,000.
11 Reconciliation of operating cash flows
6 months ended Year ended
6 months ended 30 June 2019 30 June 2018 31 December 2018
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
(Loss)/profit for the period (156) 432 (385)
Adjustments for:
Depreciation and amortisation 1,420 364 866
Share-based payment expense 389 362 800
Impairment loss on intangible assets - - 71
Loss on disposal of intangible assets 6 - 11
Loss on disposal of property, plant and equipment 31 6 75
Share of loss of joint venture 152 66 199
Investment revenues (253) (252) (531)
Finance costs 302 112 51
Income tax charge 1,006 902 712
Operating cash flows before movement in
working capital 2,897 1,992 1,869
Decrease/(increase) in inventories 17 9 (82)
Increase in contract assets (443) (600) (1,756)
Decrease/(increase) in receivables 321 (49) (2,691)
Decrease in insurance assets 24 - 6
(Decrease)/increase in payables (3,700) (2,198) 1
Increase in contract liabilities 846 780 2,407
Decrease in insurance liabilities (146) (67) (89)
(Decrease)/increase in provisions (482) (121) 372
Cash (used in)/from operations (666) (254) 37
Income taxes (paid)/received (740) 94 (870)
Net cash used in operating activities (1,406) (160) (833)
12 Related party transactions
Transactions with related parties
ORConsulting Limited (ORCL) is an organisation used by the Group
for consulting services in relation to leadership coaching.
Organisation Resource Limited (ORL), a company owned by Mark Hamlin
who is a Non-Executive Director of the Group, retains intellectual
property in ORCL for which it is paid a license fee. In the six
months to 30 June 2019, the Group has paid GBP25,000 plus VAT (six
months ended 30 June 2018: GBP25,000; year ended 31 December 2018:
GBP90,000) to ORCL, which was payable under 30 days credit
terms.
OR Talent Inc (ORTI) is an organisation which provides advice to
the Group in senior leadership recruitment and integration. ORTI is
a wholly owned subsidiary of OR Talent Limited (ORTL) in which Mark
Hamlin holds 75% of the voting rights. In the six months to 30 June
2019, the Group has paid GBP25,000 (six months ended 30 June 2018;
GBPnil; year ended 31 December 2018: GBPnil) to ORTI, which was
payable under 30 days credit terms.
Mark Hamlin is the Chairman of Globiva. The fees for this role
are paid to his consultancy company, ORL. The fee paid to ORL by
the Group in the six months ended 30 June 2019 was GBP38,000 (six
months ended 30 June 2018: GBPnil; year ended 31 December 2018:
GBP28,000) and was payable under 25 day credit terms.
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 2019 30 June 2018 31 December 2018
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Short-term employee benefits 1,107 1,070 2,248
Post-employment benefits 43 42 82
Share-based payments 317 217 512
1,467 1,329 2,842
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UGURPBUPBGMW
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