TIDMGOCO
RNS Number : 2317W
Gocompare.com Group plc
31 July 2018
GoCompare.com Group plc - Interim results for the six months
ended 30 June 2018
31 July 2018
GoCompare.com Group plc ("The Group" or "GoCompare") announces
record first-half adjusted operating profit of GBP21.0m, up 20% on
H1 2017. The result reflects controlled management of the core
business, the delivery of innovation at pace and a focus on cash
generation. The Group is well positioned to deliver against its
automation strategy - Savings as a Service(TM) - reducing hassle
and bother for consumers following good progress in its strategic
investment programme and key partnerships.
Financial highlights and KPIs:
H1-2018 H1-2017 YOY
Revenue GBP75.8m GBP75.8m 0.0%
--------- --------- ---------
Marketing margin (price comparison) 46.4% 39.6% +6.8ppts
--------- --------- ---------
Operating profit GBP17.3m GBP15.8m +9.5%
--------- --------- ---------
Adjusted operating profit(1) GBP21.0m GBP17.5m +20.0%
--------- --------- ---------
Leverage(2) 1.7x 1.5x +0.2x
--------- --------- ---------
Basic EPS 3.1p 2.8p +10.7%
--------- --------- ---------
Adjusted basic EPS 3.8p 3.2p +18.8%
--------- --------- ---------
Customer Interactions (m) (price
comparison) 14.9 17.1 -12.9%
--------- --------- ---------
Average Revenue per Interaction
(GBP) (price comparison) 4.80 4.43 8.4%
--------- --------- ---------
Savings made by customers(3) (price
comparison) GBP545m GBP620m -12.1%
--------- --------- ---------
Business highlights:
-- Acquired Energylinx, a leading UK energy switching and price comparison business with strong commercial
relationships in June, which resulted in the delivery of a new energy customer journey on 16 July
-- Quicker than anticipated integration of MyVoucherCodes into the Group following acquisition in January - taking
just six weeks
-- Signed an exclusive partnership with News UK in June to power The Sun's voucher codes site, leveraging the
MyVoucherCodes platform
-- Strong car and home insurance conversion in Q2: up 10.7% on Q2 2017, as a result of continuous product
improvement
-- Targeted and disciplined approach to marketing resulting in a 6.8ppts half-on-half improvement in margin and
increased efficiency in spend per interaction
-- Launched a customer rewards programme in April to give away dining incentives, contributing to conversion
improvements
-- Ongoing development of a strong, agile tech team, with a 'FinTech mindset' across the Group
-- Increased investment in the fintech start-up MortgageGym in July 2018.
-- Interim dividend declared of 0.8 pence per share.
Sir Peter Wood, Chairman, said: "I am pleased with the Group's
results based on the strong progress that Matthew and the
leadership team are making to deliver a Group strategy that is
exciting, meaningful for consumers and differentiated from the
market.
"Outside of a strong focus on cash generation and building
important foundations for the future, the Group has deployed
capital through two strategic acquisitions in MyVoucherCodes and
Energylinx which broaden the opportunities to help consumers save
time and money while driving shareholder value over the medium
term."
Matthew Crummack, Chief Executive Officer, said: "The first six
months of 2018 were marked by two strategically important
acquisitions: MyVoucherCodes and Energylinx, with MyVoucherCodes
already successfully integrated with the Group. We also delivered a
20% year on year increase in adjusted operating profit thanks to a
disciplined approach to marketing spend. Our focus on cash
generation has been consistent since day one, and we believe this
approach will continue to enable us to drive innovation and
shareholder value.
"The Group now consists of three highly complementary brands,
ideally placed to deliver on our 'Savings as a Service' strategy
that aims to make saving time and money as hassle-free as possible
for consumers. This in turn enables us to build a greater life time
value model for our business. We're working from strong foundations
built around fintech speed and agility, alongside industry-leading
tech capabilities, scalable platforms and a disciplined approach to
capital deployment."
Outlook
We continue to focus on the disciplined delivery of profit and
growth and the Board remains confident in meeting its expectations
for the full year 2018.
Presentation
A webcast of the presentation for investors and analysts will be
streamed live at 8.30am this morning. To register, and to watch
and/or listen to the presentation, visit:
http://www.gocomparegroup.com/investors/results-reports-and-presentation/2018
For further information:
Nick Wrighton Anders Nilsson
Chief Financial Officer, Head of External Communications,
GoCompare GoCompare
t: 01633 655 051 t: 01633 654 054
e: IR@GoCompare.com e: anders.nilsson@GoCompare.com
Chris Barrie / Jos Bieneman
/ Elizabeth Kittle
Citigate Dewe Rogerson
t: 0207 638 9571
e: gocompare@citigatedr.co.uk
Notes:
1. Adjusted operating profit represents operating profit, after
adding back amortisation of acquired intangibles, transaction
costs, other exceptional corporate costs and Foundation Award
share-based payment charges.
2. Net leverage ratio is calculated as net debt divided by 12 month rolling Adjusted EBITDA.
3. Customer savings measured by Car and Home insurance savings
calculated by applying the average Consumer Intelligence reported
savings per customer across the year.
Cautionary statements
Certain statements made in this announcement are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of known and unknown risks
and uncertainties that may cause actual results, performance or
achievements of the Group or industry results to differ materially
from any future events, results, performance or achievements
expressed or implied by such forward-looking statements. Persons
receiving this announcement should not place undue reliance on any
forward-looking statements. Unless otherwise required by applicable
law, regulation or accounting standard, GoCompare disclaims any
obligation or undertaking to update or revise any forward-looking
statements, whether as a result of new information, future
developments or otherwise.
Business review
The Group's performance in the first half of 2018 saw us
maintain a disciplined approach to the delivery of strong financial
results, with a focus on profit growth in the price comparison
business, alongside the completion of two strategic acquisitions.
We have also continued on the journey to transform the Group,
yielding encouraging improvements in productivity, output and
innovation as the strong foundations of our FinTech mindset
continue to build.
In a competitive environment, we've delivered first-half
adjusted operating profit of GBP21.0m, a 20% increase on the same
period in 2017. This was underpinned by strong conversion in car
and home insurance (up 10.7% in Q2 compared to Q2 2017) driven by
the changes delivered through our product and tech teams. Marketing
margin increased to 46.4%, 6.8ppts higher than H1 2017, reflecting
our focus on driving profitable business.
More brands and diverse capabilities to increase
'botheration'
Away from the price comparison business, we completed two
strategic acquisitions in H1 that have diversified the Group and
provide a strong platform for our move towards a 'Savings as a
Service' business model, through which we will reduce hassle for
consumers to get the right deal, while helping our business
partners to deliver better products and services.
MyVoucherCodes was the first of these acquisitions, completed in
January and integrated within six weeks. We've since relaunched the
website and leveraged the platform for further growth by signing an
exclusive partnership with News UK to power The Sun's discount
site. In June of this year we acquired Energylinx, an energy
comparison and switching business with market-leading commercial
relationships across UK domestic and business energy markets. By
16(th) July, Energylinx was powering GoCompare's energy service
bringing this industry-leading energy switching service to
GoCompare's audience.
With a combination of strong cash generation, focus on
conversion improvements, disciplined approach to marketing spend
and a diversified brand portfolio and Group capabilities, we are in
a good position to deliver much-needed innovation into our
markets.
Embedding the FinTech mindset
Through investment in our engineering and tech teams, and in the
delivery of an effective company-wide change programme, we have
seen output grow and the 'test-and-learn' approach result in some
effective improvements to the customer experience and to
conversion.
We had already made huge strides in productivity in 2017,
accelerating our software release cycle from once per quarter to
many times per week and we have seen further improvement in H1
2018.
Collaborative working practices plus a focus on decision making
and accountability permeate the business: this is something we have
been replicating across a growing Group. We're building a culture
where talented people can thrive across brands and where
capabilities can be leveraged for the benefit of the whole
business.
Smarter marketing
Marketing is a significant cost for the Group, so improving the
efficiency of spend has been a key area of focus. In the first half
of this year, we've considered different approaches to marketing,
aimed at reaching the right people, at the right time, and driving
preference for our brand.
Rather than spending more money in the same way with the same
search engine operators and advertisers, we've been applying more
science to the way we allocate marketing budget. We continue to
build our own in-house media planning competencies. We have also
identified and tested improved ways of talking to our extensive
customer base. We ran our first large-scale print advertising
campaign with The Sun, an extensive out-of-home campaign across the
Transport for London network and tested messages across regional
print and digital titles.
We also launched our first ever customer rewards programme with
a dining incentive. Again, in the spirit of speed we took this from
a desk concept to onsite and TV launch within eight weeks. This
provides people with an incentive to switch through GoCompare,
rewarding them with a free annual membership that entitles them to
money-off deals at thousands of restaurants nationwide, seven days
a week. This launched in April and has been well-received by our
customers, with almost 80,000 having taken up the offer already.
The feedback we've had so far indicates that this is helping to
drive purchase preference for the GoCompare brand.
We remain confident of meeting our expectations for the full
year 2018. We shall remain focused on the development and
investment into a strong, diverse culture and talented workforce
that enables us to innovate at pace. We are excited about H2 2018
and are on track to deliver the first product under our Savings as
a Service model by the end of the year.
Matthew Crummack
Chief Executive Officer
Financial Review
Revenue remained flat compared to H1 17 at GBP75.8m and adjusted
operating profit increased by 20% to GBP21.0m compared to the same
period last year.
The Directors have declared an interim dividend of 0.8 pence per
share, which represents a pay-out ratio of approximately 21% of
profit after tax (excluding adjusting items and their tax
effect).
Operating segments
Price Comparison
H1 18 H1 17 Movement Movement
GBPm GBPm GBPm %
Revenue 72.1 75.8 (3.7) (4.9)
------- ------- --------- ---------
Cost of sales (21.2) (24.0) 2.8 (11.7)
------- ------- --------- ---------
Distribution costs (17.5) (21.8) 4.3 (19.7)
------- ------- --------- ---------
Trading profit 33.4 30.0 3.4 11.3
------- ------- --------- ---------
Marketing margin 46.4% 39.6% +6.8%pts
The Price comparison segment generated lower revenue in H1 18 as
a result of lower customer interactions, reflecting a focus on
targeting profitable customers as well as the downward trend on car
insurance premiums. Whilst interactions were down, income per
interaction increased by 8.4%, primarily driven by an improvement
in conversion.
Cost of sales of GBP21.2m are GBP2.8m lower than H1 17 as we
focused on improving efficiency in paid search and targeting
profitable customers. Distribution costs of GBP17.5m are GBP4.3m
lower than H1 17 as we have tested different broadcast
strategies.
Rewards
H1 18 H1 17 Movement Movement
GBPm GBPm GBPm %
Revenue 3.7 - 3.7 n/a
------ ------ --------- ---------
Cost of sales (0.9) - (0.9) n/a
------ ------ --------- ---------
Distribution costs (0.4) - (0.4) n/a
------ ------ --------- ---------
Trading profit 2.4 - 2.4 n/a
------ ------ --------- ---------
Marketing margin 63.8% - n/a
The Rewards segment generated revenue of GBP3.7m and a trading
profit of GBP2.4m in H1 18 following the acquisition of The Global
Voucher Group on 10 January 2018.
Administrative expenses
Administrative expenses excluding adjusting items, depreciation
and amortisation of GBP13.9m are GBP2.0m higher than in H1 17. This
increase is mainly attributable to an increase in staff costs which
reflects the increased headcount across the Tech and Product teams
and a lower rate of VAT recovery compared to H1 17 due to a
relatively lower volume of VAT-able transactions compared to exempt
transactions.
Adjusted operating profit, Adjusted EBITDA, and Profit before
tax
H1 18 H1 17 Movement Movement
GBPm GBPm GBPm %
------- ------- --------- ---------
Revenue 75.8 75.8 - -
------- ------- --------- ---------
Total marketing spend (40.0) (45.8) 5.8 (12.7)
------- ------- --------- ---------
Administrative expenses excluding
adjusting items, depreciation and
amortisation (13.9) (11.9) (2.0) 16.8
------- ------- --------- ---------
Adjusted EBITDA 21.9 18.1 3.8 21.0
------- ------- --------- ---------
Depreciation and amortisation (0.9) (0.6) (0.3) 50.0
------- ------- --------- ---------
Adjusted operating profit 21.0 17.5 3.5 20.0
------- ------- --------- ---------
Amortisation of acquired intangibles (1.1) - (1.1) (100.0)
------- ------- --------- ---------
Foundation Award share based payment
charge (0.9) (1.7) 0.8 (47.1)
------- ------- --------- ---------
Integration, restructuring and other
corporate costs (1.3) - (1.3) (100.0)
------- ------- --------- ---------
Transaction costs (0.4) - (0.4) (100.0)
------- ------- --------- ---------
Operating profit 17.3 15.8 1.5 9.5
------- ------- --------- ---------
Net finance costs (1.4) (1.1) (0.3) 27.3
------- ------- --------- ---------
Profit before tax 15.9 14.7 1.2 8.2
------- ------- --------- ---------
Adjusted operating profit, calculated as operating profit for
the period after adding back the adjusting items, increased by
20.0% to GBP21.0m.
Adjusted EBITDA for the period, calculated as Adjusted operating
profit for the period after adding back depreciation and
amortisation, increased by 21.0% to GBP21.9m.
Amortisation of acquired intangibles of GBP1.1m (H1 17: GBPnil)
relates to the acquisition of The Global Voucher Group Limited.
Total intangibles (excluding goodwill) of GBP10.8m were acquired on
acquisition and these will be amortised over a 5 year period. There
is no amortisation charge in the period in relation to the
acquisition of Energylinx Limited and Energylinx for Business
Limited as this transaction completed on 13 June 2018 and the
acquisition accounting is yet to be finalised. It is expected that
an amortisation charge in relation to this will be incurred in H2
18.
The integration, restructuring and other corporate costs of
GBP1.3m (H1 17: GBPnil) represent one-off costs that were primarily
incurred in relation to the acquisition of The Global Voucher
Group. This business was integrated into the Group during Q1 18 and
costs incurred include those in relation to closing down the
International business and restructuring costs.
The transaction costs of GBP0.4m (H1 17: GBPnil) relate to legal
and other adviser fees incurred in relation to the acquisition of
Energylinx Limited and Energylinx for Business Limited.
The Group incurred net finance costs of GBP1.4m during H1 18
compared to GBP1.1m in H1 17 due to the higher borrowings in the
period and a higher interest margin.
Profit before tax for H1 18 of GBP15.9m is GBP1.2m higher than
H1 17. This reflects the improvement in Adjusted operating profit,
partly offset by the amortisation of acquired intangibles, the
integration restructuring and other corporate costs and increase in
net finance costs.
Income tax expense
The Group's tax charge of GBP3.0m is based on an expected
effective income tax rate for the year to December 2018 of 19.00%
(H1 17: 19.25%).
Earnings per share
H1 18 H1 17 Movement
(pence per (pence per (pence per
share) share) share)
Basic earnings per share 3.1 2.8 0.3
------------ ------------ ------------
Adjusted basic earnings
per share 3.8 3.2 0.6
------------ ------------ ------------
Basic earnings per share for H1 18 is 3.1pence, an increase of
0.3pence (10.7%) compared to H1 17. Adjusted earnings per share,
which excludes the impact of the adjusting items noted above (net
of tax), is 3.8pence, an increase of 0.6pence (18.8%) on H1 17 and
better reflects the earnings generated by the underlying core
business.
Cash and leverage
The Group delivered a positive operating cash flow during H1 18
of GBP17.8m. Net cash used in investing activities of GBP47.5m
includes the GBP36.9m that was paid for the acquisition of the
Global Voucher Group Limited and GBP8.2m for the acquisition of
Energylinx Limited and Energylinx for Business Limited.
The total decrease in cash and cash equivalents during the
period was GBP9.8m and the total cash and cash equivalents at the
end of the period was GBP14.7m. After allowing for working capital
requirements and the cost of the interim dividend, surplus cash at
the end of the period is approximately GBP5m.
H1 18 H1 17
GBPm GBPm
Net cash generated from operating activities 17.8 7.7
------- ------
Purchase of tangible and intangible assets (3.6) (0.8)
------- ------
Acquisition of subsidiary investments (45.1) -
------- ------
Cash acquired on acquisition 1.2 -
------- ------
Purchase of equity investment - (1.0)
------- ------
Net cash used in investing activities (47.5) (1.8)
------- ------
Proceeds from borrowings (net of fees) 23.5 -
------- ------
Interest paid (0.7) (1.1)
------- ------
Dividends paid to owners of the parent (2.9) -
------- ------
Net cash generated from / (used in) financing
activities 19.9 (1.1)
------- ------
Net (decrease) / increase in cash and
cash equivalents (9.8) 4.8
------- ------
Cash and cash equivalents at beginning
of year 24.5 18.4
------- ------
Cash and cash equivalents at end of period 14.7 23.2
------- ------
Borrowings at 30 June 2018 were GBP88.5m, which, after allowing
for cash and cash equivalents of GBP14.7m results in net debt of
GBP73.8m. Net debt is GBP34.4m higher than at 31 December 2017.
This is largely due to the GBP45.1m of acquisitions in the period,
partly offset by the operating cashflow of GBP17.8m. Adjusted
EBITDA for the 12 months to 30 June 2018 of GBP42.6m is GBP5.4m
higher than in the 12 months to 31 December 2017. The combination
of the increase in net debt and the increase in Adjusted EBITDA
results in the leverage increasing to 1.7x compared to 1.1x at 31
December 2017. The leverage is significantly lower than the 2.8x at
the time of the demerger and well within the banking covenants.
The Board does not target a specific leverage ratio but instead
looks to optimise the capital structure of the Group ensuring that
cash is available for investment in opportunities that will drive
shareholder value over the medium term as well as for paying
dividends in line with the dividend policy.
H1 18 FY 17
GBPm GBPm
Borrowings (88.5) (63.9)
------- -------
Cash and cash equivalents 14.7 24.5
------- -------
Net debt (73.8) (39.4)
------- -------
Adjusted EBITDA (rolling 12 months) 42.6 37.2
------- -------
Leverage 1.7 1.1
------- -------
Dividends
The Board has declared an interim dividend of 0.8 pence per
share. The dividend is equivalent to a pay-out ratio of
approximately 21% of profit after tax (excluding adjusting items
and their tax effect), which is at the lower end of the Group's
target pay-out ratio of 20%-40%. The pay-out ratio balances cash
returns to shareholders with our ability to fund potential
investments.
The ex-dividend date is 13 September 2018, with a record date of
14 September 2018 and a payment date of 5 October 2018.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group are
unchanged from those disclosed in the 2017 Annual Report (pages 20
to 23) which is available to view at www.gocomparegroup.com. These
cover certain key areas of risk which have been summarised
below.
Risk area Nature of risk Mitigation and management
--------------------- ------------------------------- --------------------------------------------------------------
Competitive The Group operates in a highly
environment competitive market and changes * Experienced and capable customer acquisition team.
from new or existing
competitors
may have a significant impact * Comprehensive mix of marketing activities to drive
on market share, revenue and efficient and cost-effective customer acquisition.
profit.
* Continual investment developing other verticals to
diversify revenue streams.
--------------------- ------------------------------- --------------------------------------------------------------
Financial The Group is exposed to a
number * Regular monitoring and management of debtors to
of financial risks; ensure prompt payment.
principally
credit risk, liquidity risk
and * Cash flow forecasting and headroom monitoring to
interest rate risk. Failure to manage availability of cash, debt repayment and
manage financial risks covenant compliance.
appropriately
could lead to an adverse
impact
on the Group's financial
performance,
availability of cash or breach
of banking covenants.
--------------------- ------------------------------- --------------------------------------------------------------
Customer The Group is reliant on
acquisition customer * Ongoing review of the advertising approach, including
and brand awareness and appreciation of performance and customer perception.
the GoCompare brand,
deterioration
of which may lead to lower * Launch of the 'Dine Card' incentive in April 2018.
market
share, revenue and profit.
--------------------- ------------------------------- --------------------------------------------------------------
Technology The Group is reliant on
and cyber high-performing * Continual investment in and response to developments
comparison solutions in cyber risk management including cyber threat
delivered monitoring systems.
through online interaction
with
its customers. Inability to * Regular review and testing of business and service
develop continuity capabilities.
or adapt to technological
changes
could impact the number of
customers
using the Group's services.
Inability
to protect against cyber
related
incidents could impact the
availability
of this online service and
potential
loss of data.
----------------------- ----------------------------- --------------------------------------------------------------
Legal and The Group operates in a
regulatory number * Ongoing dialogue and contact with regulatory bodies.
of regulated markets and is
also
subject to competition and * Established in-house Legal and Compliance resource
data with access to specialist advice, as required.
protection laws. Failure to
comply
with existing or adapt to
changes
in regulatory requirements
may
have a fundamental impact on
the Group's business model
and
financial performance.
----------------------- ----------------------------- --------------------------------------------------------------
People, The Group's success depends
leadership on * Skilled senior team with experience of running online
and management the performance of senior businesses.
management,
upon the industry, marketing
and technical expertise of * Review and evolution of employee reward packages at
employees all levels.
and on the Group's ability
to
attract, retain and motivate * Structured approach to learning and development.
its people.
----------------------- ----------------------------- --------------------------------------------------------------
Strategic The Group has an opportunity
development to grow the brand beyond * Dedicated in-house strategy and investments team.
and diversification motor
and home insurance into
other * Acquired The Global Voucher Group Limited in January
product and price comparison 2018 to further diversify the Group's revenue.
services and sectors. Over
reliance
on products or segments made
lead to adverse financial
performance.
----------------------- ----------------------------- --------------------------------------------------------------
Economic The Group's revenue is
conditions derived * Ongoing review of wider market conditions and
from provision of product indicators.
and
price comparison services in
the UK. A contraction in the * UK based company not reliant on imports or exports
economy, changes to fiscal and low exposure to changes in tarfiffs.
policy,
developments in the process
for * Flexible approach to cost base.
the UK to leave the EU, or
changes
to trading tariffs, may lead * Diversification of revenue streams to adapt to future
to worsening economic changes and development of scalable solutions in
conditions emerging markets.
and performance of the
Group.
In a time of economic
uncertainty
and rising costs, consumers
are
more likely to consider
switching
through a price comparison
website
to achieve better deals.
----------------------- ----------------------------- --------------------------------------------------------------
The Board ensures that measures are in place to provide
independent and objective identification and management of risks
through the Audit and Risk Committee. The Committee is responsible
for reviewing the effectiveness of internal control and assurance
through the reports from internal audit, compliance and risk
functions.
Statement of Directors' Responsibilities
The Directors' confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- An indication of the important events that have occurred
during the first six months and their impact on the condensed set
of financial statements, and a description of the principal risks
and uncertainties for the remaining six months of the financial
year; and
-- Material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The Directors of GoCompare.com Group plc are listed in the
GoCompare.com Group plc Annual Report for 31 December 2017. There
have been no changes since the publication of that Annual Report to
the date of this interim report.
Matthew Crummack, Nick Wrighton,
Chief Executive Officer Chief Financial Officer
INDEPENT REVIEW REPORT TO GOCOMPARE.COM GROUP PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2018 which comprises the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Changes in
Equity, the Consolidated Statement of Cash Flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual consolidated financial
statements of the Company are prepared in accordance with
International Financial Reporting Standards as adopted by the EU.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Timothy Butchart
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
30 July 2018
Condensed consolidated interim financial statements
GoCompare.com Group plc
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 June 2018
6 months 6 months
to to
30 June 30 June
2018 2017
Note GBPm GBPm
Revenue 4 75.8 75.8
Cost of sales (22.1) (24.0)
Gross profit 53.7 51.8
Distribution
costs (17.9) (21.8)
Administrative expenses (18.5) (14.2)
--------- ---------
Operating profit 17.3 15.8
Analysed as:
Adjusted operating
profit 5 21.0 17.5
Amortisation of acquired intangibles (1.1) -
Foundation Award share-based payment
charges (0.9) (1.7)
Integration, restructuring and (1.3) -
other corporate costs
Transaction costs (0.4) -
Operating profit 17.3 15.8
--------------------------------------- ----- --------- ---------
Finance income 0.0 0.0
Finance costs (1.4) (1.1)
--------- ---------
(1.4) (1.1)
Profit before income
tax 15.9 14.7
Income tax expense 6 (3.0) (2.8)
Profit for the period 12.9 11.9
--------- ---------
Other comprehensive income - -
Total comprehensive income for
the period 12.9 11.9
--------- ---------
Earnings per share
(pence) 7
Basic earnings per
share 3.1 2.8
Diluted earnings per
share 3.0 2.7
Notes 1 to 16 are an integral part of these condensed
consolidated interim financial statements
GoCompare.com Group plc
Condensed Consolidated Statement of Financial Position
As at 30 June 2018
30 June 31 December 30 June
2018 2017 2017
Note GBPm GBPm GBPm
Non-current assets
Investments 11 2.5 2.5 1.0
Goodwill 10 31.7 2.5 2.5
Intangible assets 10 22.1 1.4 0.5
Tangible assets 1.6 1.5 1.6
Deferred tax asset 1.5 0.8 1.0
-------- ------------ --------
59.4 8.7 6.6
Current assets
Trade and other receivables 27.9 18.7 23.7
Cash and cash equivalents 14.7 24.5 23.2
-------- ------------ --------
42.6 43.2 46.9
Total assets 102.0 51.9 53.5
-------- ------------ --------
Non-current liabilities
Borrowings 54.3 54.1 63.6
Provisions for liabilities
and charges 3.0 0.4 1.0
-------- ------------
57.3 54.5 64.6
Current liabilities
Trade and other payables 27.6 17.8 20.4
Current income tax liabilities 3.6 3.3 3.2
Borrowings 34.2 9.7 9.6
Provisions for liabilities
and charges 1.4 0.7 -
-------- ------------
66.8 31.5 33.2
Total liabilities 124.1 86.0 97.8
-------- ------------ --------
Equity attributable to owners of
the parent
Ordinary shares 0.1 0.1 0.1
Share premium 2.7 2.7 2.7
Retained earnings (24.9) (36.9) (47.1)
------------
Total equity (22.1) (34.1) (44.3)
-------- ------------ --------
Total equity and liabilities 102.0 51.9 53.5
-------- ------------ --------
Notes 1 to 16 are an integral part of these condensed
consolidated interim financial statements
GoCompare.com Group plc
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 June 2018
Share Share premium Profit and Total equity
capital loss account
GBPm GBPm GBPm GBPm
At 1 January 2017 0.1 2.7 (61.4) (58.6)
Profit for the
period - - 11.9 11.9
Other comprehensive income
for the period - - - -
--------- -------------- -------------
Total comprehensive income for
the period - - 11.9 11.9
Transactions with owners
Dividends paid - - - -
Share based payments - - 2.0 2.0
Deferred tax recognised
in equity - - 0.4 0.4
--------- -------------- -------------- -------------
Total transactions with owners - - 2.4 2.4
At 30 June 2017 0.1 2.7 (47.1) (44.3)
--------- -------------- -------------- -------------
At 1 July 2017 0.1 2.7 (47.1) (44.3)
Profit for the
period - - 12.5 12.5
Other comprehensive income
for the period - - - -
--------- -------------- -------------
Total comprehensive income for
the period - - 12.5 12.5
Transactions with owners
Dividends paid - - (2.9) (2.9)
Share based payments - - 0.7 0.7
Deferred tax recognised
in equity - - (0.1) (0.1)
--------- -------------- -------------- -------------
Total transactions with owners - - (2.3) (2.3)
At 31 December 2017 0.1 2.7 (36.9) (34.1)
--------- -------------- -------------- -------------
At 1 January 2018 0.1 2.7 (36.9) (34.1)
Profit for the
period - - 12.9 12.9
Other comprehensive income
for the period - - - -
--------- -------------- -------------
Total comprehensive income for
the period - - 12.9 12.9
Transactions with owners
Dividends paid - - (2.9) (2.9)
Share based payments - - 1.6 1.6
Deferred tax recognised
in equity - - 0.4 0.4
--------- -------------- -------------- -------------
Total transactions with owners - - (0.9) (0.9)
At 30 June 2018 0.1 2.7 (24.9) (22.1)
--------- -------------- -------------- -------------
Notes 1 to 16 are an integral part of these condensed
consolidated interim financial statements
GoCompare.com Group plc
Condensed Consolidated Statement of Cash Flows
For the period ended 30 June 2018
6 months to 6 months to
30 June 30 June
2018 2017
GBPm GBPm
Cash flows from operating
activities
Profit for the period
before tax 15.9 14.7
Adjustments
for:
Depreciation of property, plant
and equipment 0.3 0.2
Amortisation of intangible
assets 1.7 0.3
Impairment of tangible
assets - 0.1
Share based payment
charge 1.6 2.0
Net finance
costs 1.4 1.1
Changes in working
capital:
Increase in trade and other
receivables (4.1) (6.9)
Increase / (decrease) in trade
and other payables 4.3 (0.9)
Income tax
paid (3.3) (2.9)
------------
Net cash generated from operating
activities 17.8 7.7
Cash flows from investing
activities
Purchase of property, plant and
equipment (0.3) (0.6)
Purchase of intangible
assets (3.3) (0.2)
Interest received - 0.0
Acquisition of subsidiary investments (45.1) -
Cash acquired on acquisition 1.2 -
Purchase of equity
investment - (1.0)
------------
Net cash used in investing
activities (47.5) (1.8)
Cash flows from financing
activities
Proceeds from issuance of ordinary
shares - -
Proceeds from borrowings (net
of fees) 23.5 -
Interest paid (0.7) (1.1)
Dividends paid to owners
of the parent (2.9) -
------------
Net cash used in financing
activities 19.9 (1.1)
Net (decrease) / increase in cash and
cash equivalents (9.8) 4.8
Cash and cash equivalents at beginning
of period 24.5 18.4
------------
Cash and cash equivalents at end
of period 14.7 23.2
Notes 1 to 16 are an integral part of these condensed
consolidated interim financial statements
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
1. General information
GoCompare.com Group plc ("the Company") and its subsidiaries
(together, "the Group") provide internet based platforms which
enable consumers to save time and money on financial and
non-financial products.
The company is a public limited company, which is listed on the
London Stock Exchange and is incorporated in England and Wales. Its
registered office is Imperial House, Imperial Way, Newport, NP10
8UH.
All of the Company's subsidiaries are located in the United
Kingdom.
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2017 were approved by the Board of Directors on 27
February 2018 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 498 (2) and (3) of the Companies Act 2006.
These condensed interim financial statements have been reviewed,
not audited.
2. Summary of significant accounting policies
These condensed interim financial statements for the six months
ended 30 June 2018 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS34, 'Interim financial reporting', as adopted
by the European Union. The condensed interim financial statements
should be read in conjunction with the annual financial statements
for the year ended 31 December 2017, which have been prepared in
accordance with IFRSs as adopted by the European Union.
The accounting policies adopted are consistent with those
applied to the consolidated financial statements for the year ended
31 December 2017. In addition to those accounting policies, a
policy for acquired intangibles is provided as this is a new
accounting item for the current financial period.
The financial statements have been presented in Sterling and
rounded to the nearest hundred thousand. Throughout these financial
statements any amounts which are less than GBP0.05m are shown by
0.0, whereas a dash (-) represents that no balance exists.
Acquired intangibles
Intangible assets acquired as part of a business combination are
recorded at fair value at the date of acquisition. Intangible
assets are subsequently stated at initial value less accumulated
amortisation and any accumulated impairment losses. Amortisation is
charged to the consolidated statement of comprehensive income on a
straight-line basis over the estimated useful lives of the
intangible assets which are as follows:
Brand 5 years
Customer relationships 5 years
Technology 5 years
New accounting standards and interpretations
A number of new standards, amendments to standards and
interpretations will be applicable to the consolidated financial
statements in future years. The adoption of these standards are not
expected to have a material impact on the Group financial results
or disclosures.
The Group has adopted IFRS 15 - Revenue from contracts with
customers and IFRS 9 - Financial instruments from 1 January
2018.
IFRS 15
The Group has assessed its accounting policies which applied
under IAS 18 and determined that the adoption of IFRS 15 does not
have a significant impact on the way that the Group recognises
revenue, in terms of both value and timing.
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
2. Summary of significant accounting policies (continued)
IFRS 9
IFRS 9 replaces IAS 39 and sets out requirements for recognising
and measuring financial assets and financial liabilities. The
standard largely retains the existing requirements in IAS 39 for
the classification and measurement of financial liabilities and has
not had a significant effect on the Group's accounting policies for
financial assets or financial liabilities. With the exception of
the investments in equity investments, the Group only holds basic
financial instruments which will be classified as held at
'amortised cost'. For the Group's investments in equity
instruments, the Group has made an irrevocable election for any
changes in fair value to be recognised in Other Comprehensive
Income. This is consistent with the accounting policy previously
adopted under IAS 39 as the assets were classified as 'available
for sale' with changes in fair value recognised through Other
Comprehensive Income.
IFRS 9 also replaces the 'incurred loss' model in IAS 39 with an
'expected credit loss' model which applies to financial assets
measured at amortised cost and means that credit losses are
recognised earlier than under IAS 39. The Group has not identified
a material difference in recognition of losses for its financial
assets compared to what was previously recognised under IAS 39.
Going concern
The Group meets its day to day working capital requirements
through it bank facilities and cash balances held. In considering
the appropriateness of the going concern assumption, the Directors'
have taken into account the Group's forecasts, projections and
reasonably possible changes in trading performance and cash flows.
After making enquiries, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for at least twelve months from the date of approval of
the financial statements. Having reassessed the principal risks,
the directors considered it appropriate to adopt the going concern
basis of accounting in preparing its condensed interim financial
statements.
Use of non-GAAP performance measures
In the analysis of the Group's results, certain financial
performance measures are presented which may be prepared on a
non-GAAP basis. The Board believes that these measures provide a
useful analysis, allow comparability of performance and present
results in a way that is consistent with how information is
reported internally.
The key non-GAAP measures presented by the Group are:
- Adjusted Operating profit: defined as Operating profit after
adding back transaction costs and other exceptional corporate
costs, amortisation of acquired intangibles and Foundation Award
share-based payment charges.
- Adjusted EBITDA: defined as Adjusted Operating profit after
adding back depreciation and amortisation
- Adjusted basic EPS: defined as Profit for the period,
excluding exceptional items (adjusted for tax) divided by the
weighted average number of shares in issue for the period.
Adjusted EBITDA is a measure which is used in calculating one of
the Group's financial covenants on its borrowings as well as a
factor in determining the coupon rate. Adjusted Operating profit is
one of the factors used in assessing performance to determine
remuneration for the Executive Directors and Senior Management.
3. Critical accounting judgements and estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
include those applied to the consolidated financial statements for
the year ended 31 December 2017, in addition to the following areas
which are new for 2018.
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
3. Critical accounting judgements and estimates (continued)
Acquisition of The Global Voucher Group Limited
On 10 January 2018, the Group completed its acquisition of The
Global Voucher Group Limited and its subsidiaries. The process of
determining the fair value and useful life of assets and
liabilities acquired is inherently judgemental and there is a risk
that the assumptions applied or basis of methodology could lead to
the valuation of acquired intangibles or goodwill being misstated.
The details of the assets and liabilities recognised are set out in
Note 10.
Impairment of goodwill and acquired intangibles
The Group holds goodwill and acquired intangibles in respect of
business combinations which have occurred. In 2018, the Group
recognised acquired intangible assets of GBP10.8m and goodwill of
GBP26.6m in respect of the acquisition of The Global Voucher Group
Limited. Acquired intangibles include acquired brands, customer
relationships, and technology. The Group is required to review
goodwill annually for impairment and assess at each reporting
period whether there is any indication that an asset may be
impaired. Determining whether goodwill and intangible assets are
impaired or whether a reversal of impairment of intangible assets
should be recorded requires an estimation of the recoverable value
of the relevant cash-generating unit, which represents the higher
of fair value and value in use. The value in use calculation
requires estimation of the future cash flows expected to arise from
the cash-generating unit, discounted using a suitable discount rate
to determine if any impairment has occurred. No indications of
impairment of goodwill or intangibles have been identified at 30
June 2018.
The Group has also made an estimation of the value of goodwill
and acquired intangibles in respect of the acquisition of
Energylinx Limited and Energylinx for Business Limited which
occurred on 13 June 2018. The accounting for this acquisition is
provisional, therefore the balances disclosed are subject to change
and the final balances will be reflected in the Group's full year
reporting at 31 December 2018.
4. Segment information
In January 2018, the Group acquired The Global Voucher Group
Limited and its subsidiaries which represents a new source of
revenue and costs. From this point, the information reported to the
Board (the Chief Operating Decision Maker) for the purposes of the
assessment of segment performance was amended to reflect the
updated operating structure. The Group's two reportable segments
are:
-- "Price comparison"; and
-- "Rewards".
The Chief Operating Decision Maker, does not review profit and
loss items below distribution costs nor the assets and liabilities
of the Group by reportable segments and therefore they are reported
on an aggregated basis for the Group.
The identification and disclosure of the Group's segments has
changed from those detailed in the consolidated financial
statements of the Group for the year ended 31 December 2017. The
results of the "Insurance" and Strategic "Initiatives" segments
reported to this period are now disclosed as a combined operating
segment, "Price comparison". The comparative information has
therefore been restated in order to present on a comparable basis
with the new segmental reporting.
Period ended 30 June 2018
Price comparison Rewards Total
GBPm GBPm GBPm
Revenue 72.1 3.7 75.8
Cost of sales (21.2) (0.9) (22.1)
----------------- -------- -------
Gross profit 50.9 2.8 53.7
Distribution
costs (17.5) (0.4) (17.9)
----------------- -------- -------
Trading profit 33.4 2.4 35.8
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
4. Segment information (continued)
Period ended 30 June 2017 (as restated)
Price comparison Rewards Total
GBPm GBPm GBPm
Revenue 75.8 - 75.8
Cost of sales (24.0) - (24.0)
----------------- -------- -------
Gross profit 51.8 - 51.8
Distribution
costs (21.8) - (21.8)
----------------- -------- -------
Trading profit 30.0 - 30.0
The consolidated revenue recognised in the 6 months to 30 June
2018 includes GBP75.0m of revenue recognised at a point in time
(2017: GBP75.8m) and GBP0.8m of revenue that is recognised over
time (2017: GBP0.0m). All of the revenue that is recognised over
time relates to the rewards segment.
5. Adjusted operating profit
The following transactions occurred during the year which have
been added back to operating profit in arriving at adjusted
operating profit:
6 months 6 months
to to
30 June 30 June
2018 2017
GBPm GBPm
Amortisation of acquired intangibles 1.1 -
Foundation Award share-based payment charge 0.9 1.7
Integration, restructuring and other corporate 1.3 -
costs
Transaction costs 0.4 -
--------- ---------
3.7 1.7
The Group acquired The Global Voucher Group Limited on 10
January 2018 and recognised acquired intangible assets of GBP10.8m
as a result of this transaction. The intangible assets are being
amortised over 5 years and the accounting charge, a non-cash item
which arises on consolidation, is excluded from our adjusted
operating profit.
The integration, restructuring and other corporate costs of
GBP1.3m (H1 17: GBPnil) represent one-off costs that were primarily
incurred in relation to the acquisition of The Global Voucher
Group. The Group also incurred transaction fees of GBP0.4m in
relation to the acquisition of Energylinx Limited and Energylinx
for Business Limited. These costs are one off in nature,
non-recurring and have therefore been excluded from our adjusted
operating profit.
In November 2016, the Group issued a number of Foundation Awards
in the form of free shares to the Executive Directors and Senior
Management. These were awarded as a result of the Group's
successful listing and will vest after 2 years subject to the
achievement of certain stretching performance criteria.
The Awards have been treated as an adjusting item by the Group
in arriving at adjusted operating profit, by virtue of their
association with the listing, the quantum of shares and individual
size of the Awards made in addition to the fact that they vest over
a shorter 2 year period. Furthermore, the Foundation Awards are
non-recurring (although accounting charges will follow until they
vest) and the Directors do not, therefore, consider these Awards to
be part of the ongoing trading performance of the business.
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
6. Taxation
Income tax expense is recognised based on management's estimate
of the weighted average annual income tax rate expected for the
full financial year. The estimated average annual tax rate used for
the year to 31 December 2018 is 19.0%. The estimated tax rate used
for the six months ended 30 June 2017 was 19.25%.
7. Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the period.
6 months 6 months
to to
30 June 30 June
2018 2017
Profit from continuing operations attributable
to owners of the parent (GBPm) 12.9 11.9
--------- ---------
Weighted average number of ordinary shares
in issue (m) 418.4 418.3
Earnings per share (pence
per share) 3.1 2.8
b) Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
the conversion of all dilutive potential ordinary shares at their
vesting levels.
6 months 6 months
to to
30 June 30 June
2018 2017
Profit from continuing operations attributable
to owners of the parent (GBPm) 12.9 11.9
--------- ---------
Weighted average number of ordinary shares
in issue (m) 418.4 418.3
Adjustment for share options
(m) 11.5 15.2
Weighted average number of ordinary shares
for dilutive earnings per share (m) 429.8 433.5
Dilutive earnings per share (pence
per share) 3.0 2.7
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
7. Earnings per share (continued)
c) Adjusted basic
6 months 6 months
to to
30 June 30 June
2018 2017
Profit from continuing operations attributable
to owners of the parent (GBPm) 12.9 11.9
--------- ---------
Adjustment for amortisation of acquired
intangibles, Foundation Awards, integration
costs and transaction fees, net of tax (GBPm) 3.1 1.3
Adjusted profit from continuing operations
attributable to owners of the parent (GBPm) 16.0 13.2
Weighted average number of ordinary shares
in issue (m) 418.4 418.3
Adjusted earnings per share (pence
per share) 3.8 3.2
8. Financial instruments
The following table sets out the financial assets and financial
liabilities of the Group at the period end. The carrying amounts of
the Group's financial instruments are considered to be a reasonable
approximation of their fair value and therefore no separate
disclosure of fair values is given.
30 June 30 June
2018 2017
Financial assets GBPm GBPm
Investments in equity instruments 2.5 1.0
Trade and other receivables 20.4 17.9
Cash and cash equivalents 14.7 32.2
37.6 42.1
Financial liabilities:
Trade and other payables (7.6) (16.8)
Borrowings (88.5) (73.2)
(96.1) (90.0)
9. Financial risk management
The Group's activities expose it to a variety of financial
risks: credit risk, liquidity risk, interest rate risk.
The condensed interim financial statements do not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group's annual financial statements as at 31 December
2017.
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
10. Investments in subsidiaries
a. Acquisition of The Global Voucher Group Limited
On 10 January 2018 the Group acquired 100% of the share capital
of The Global Voucher Group Limited (and its subsidiaries) trading
as 'MyVoucherCodes' which is an online voucher code aggregator
based in the UK. The business was acquired for cash consideration
of GBP36.9m and the Group incurred direct costs of GBP0.8m in
relation to the transaction which were charged to the income
statement in the prior year.
MyVoucherCodes' strong position in retail vouchers is highly
complementary to GoCompare's position as a leading provider of
financial services and utilities comparison. GoCompare believes the
acquisition will increase the opportunities for frequency of
engagement with savvy savers who use both comparison and voucher
websites, introduce offers to incentivise conversion on both
GoCompare and MyVoucherCodes, and provide a new channel for
existing GoCompare partners.
The purchase has been accounted for as a business combination
under the acquisition method in accordance with IFRS 3. In
calculating the goodwill arising on acquisition the fair value of
net assets acquired was assessed and no material adjustments from
book value were made to existing assets and liabilities. Separately
identifiable intangible assets were recognised as part of the
acquisition as detailed further below.
The net assets acquired and goodwill are as follows:
On acquisition
GBPm
-------------------------------------------------- ---------------
Purchase consideration 36.9
Fair value of assets acquired (summarised below) 10.3
Goodwill 26.6
---------------
The goodwill recognised is attributable to Global Voucher
Group's profitability and its position as a leading UK voucher code
site. The acquisition also benefits from various value creation
synergies including interchange of traffic between Gocompare's and
The Global Voucher Group's websites and various cross-sell
opportunities.
None of the business combinations that completed during the year
had any goodwill that is expected to be deductible for tax
purposes.
The fair value of assets and liabilities arising on acquisition
have been determined as follows:
Fair value
GBPm
---------------------------------------------- -----------
Cash and cash equivalents 0.7
Property, plant & equipment 0.0
Software 0.1
Intangibles - Brand name 0.9
Intangibles - Customer relationships 7.8
Intangibles - Technology 2.1
Trade and other receivables 2.5
Trade and other payables (1.9)
Deferred tax arising on acquired intangibles (1.9)
-----------
Fair value of net assets acquired 10.3
The fair value of trade and other receivables acquired is
GBP2.5m which have a gross contractual value of GBP2.7m. The best
estimate at the acquisition date of the contractual cash flows not
to be collected is GBP0.2m.
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
10. Investments in subsidiaries (continued)
In the period from acquisition to 30 June 2018, the acquired
business generated revenue of GBP3.7m and trading profit of
GBP2.4m. Had the acquisition completed on 1 January 2018, and the
results consolidated from the commencement of the 2018 financial
year, the acquired business would have generated GBP3.9m and
GBP2.4m of trading profit.
Intangible assets recognised on consolidation
i) Brand
GBP0.9m has been recognised in respect of the acquired brand
name, representing its inherent value. MVC is one of the UK's
leading voucher codes businesses with c2.5m monthly visits. The
brand valuation has been determined using a relief from royalty
approach. A brand royalty rate of 3.5% and a post-tax discount rate
of 11.7% have been applied. The useful economic life has been
assessed as 5 years.
ii) Customer relationships
GBP7.8m has been recognised in respect of the customer
relationships held by The Global Voucher Group Limited. The
intangible value has been determined using a multi-period excess
earnings model. A post-tax discount rate of 11.7% has been applied
to forecast cashflows relating to the existing customers. The
useful economic life of the customer relationships has been
assessed as an average of 5 years.
iii) Technology
GBP2.1m has been recognised in respect of the Technology
acquired in the acquisition. The entity has a website, mobile app
and supporting infrastructure in order to enable customers to use
the vouchers. The software infrastructure can also be used as a
white label product to other providers. A post-tax discount rate of
11.7% has been applied. The useful economic life has been assessed
as 5 years.
b. Acquisition of Energylinx Limited and Energylinx for Business Limited
On 13 June 2018 the Group acquired 100% of the ordinary share
capital of Energylinx Limited and Energylinx for Business Limited
(and its subsidiaries) for total consideration of GBP10.0m. Cash
consideration of GBP8.2m was paid upfront with GBP1.8m deferred
consideration which is dependent on key personnel remaining with
the business. The purchase will be accounted for as a business
combination under the acquisition method in accordance with IFRS
3.
Energylinx is a leading UK energy switching and price comparison
service with strong commercial relationships. The business
compliments Gocompare's core price comparison services, provides a
number of key partnerships in this sector and supports the Group's
automation strategy, Savings as a Service.
The goodwill recognised is attributable to the profitability of
the Energylinx businesses and their leading position as an energy
price comparison website. The Group also expects to benefit from
synergies, including Energylinx becoming the provider for
Gocompare's energy comparison services.
At the date of this report, the acquisition accounting is
ongoing and therefore provisional balances for the acquired net
assets, intangible assets and goodwill are included in these
consolidated financial statements. The final balances will be
reported in the Group's full year reporting at 31 December
2018.
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
10. Investments in subsidiaries (continued)
The net assets and goodwill arising from the acquisition,
provisionally determined are as follows:
On acquisition
GBPm
------------------------------------------ ---------------
Purchase consideration 10.0
Fair value of net assets acquired 0.7
Intangible assets arising on acquisition 8.3
Deferred tax on acquired intangibles (1.5)
Goodwill 2.5
---------------
The intangible assets acquired have provisionally been assessed
as brand, customer relationships, supplier relationships, database
and technology.
11. Investments in equity instruments
The Group's investment in equity instruments are identified as
follows:
6 months 6 months
to to
30 June 30 June
2018 2017
GBPm GBPm
MortgageGym Limited 1.0 1.0
Souqalmal Holdings Limited 1.5 -
--------- ---------
2.5 1.0
On 30 June 2017 the Group acquired a minority shareholding in
Mortgage Gym Limited for consideration of GBP1.0m. On 10 October
2017 the Group acquired a minority shareholding in Souqalmal
Holdings Limited for consideration of GBP1.5m.
Both of the investments are classified as equity investments
recognised at fair value through other comprehensive income, held
at fair value and are both unquoted. Fair value is classified as
level 3 within the IFRS7 fair value hierarchy, as the inputs for
their fair values are not based on observable market data. At
period end, fair value has been determined based on the
consideration paid, as the completion date is the same as the
reporting date and this is deemed to represent fair value of the
investment. The fair value movement recognised through other
comprehensive income in the period is GBPnil (2017: GBPnil).
12. Share based payments
The Group has a number of equity-settled, share-based
compensation plans. Following admission of the Group to the London
Stock Exchange, arrangements have been put in place for employee
incentives in GoCompare.com Group plc shares. These include the
Foundation Awards, the 2017 and 2018 Performance Share Plan
('PSP'), as well as the Free Share Awards, Partnership and Matching
shares issued under the all-employee Share Incentive Plan
("SIP").
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
12. Share based payments (continued)
The share-based payment charge recognised in the Statement of
Comprehensive Income is attributed to each of the schemes as
shown:
6 months 6 months
to to
30 June 30 June
2018 2017
GBPm GBPm
Foundation Awards 0.9 1.7
2017 PSP 0.4 0.3
2018 PSP 0.3 -
Free Share Awards 0.0 0.0
Partnership Shares 0.0 0.0
Save As You Earn Shares 0.0 0.0
--------- ---------
1.6 2.0
The following table shows the number of share options awarded,
exercised and outstanding at the period end.
Foundation 2017 2018 Free 2016 2017 Total
PSP PSP Share SAYE SAYE
Awards
------------------------- ----------- ------ ------ -------- ------ ------ -------
At 30 June 2017 13,457 3,476 - 319 1,045 - 18,297
Awards granted during
the period - - - - - 329 329
Awards exercised during - - - - - - -
the period
Awards forfeited during
the period - - - (15) (41) (5) (61)
At 31 December 2017 13,457 3,476 - 304 1,004 324 18,565
Awards granted during
the period - - 3,259 - - - 3,259
Awards exercised during - - - - - - -
the period
Awards forfeited during
the period (321) (157) - (17) (43) (26) (564)
------------------------- ----------- ------ ------ -------- ------ ------ -------
At 30 June 2018 13,136 3,319 3,259 287 961 298 21,260
The Group has awarded an equity settled Performance Share Plan
(the '2018 PSP') to the Executive Directors and Senior Management.
The 2018 PSP Awards were granted on 28 March 2018. The awards are
subject to an EPS growth performance condition, for which the fair
value of the awards was estimated using a Black-Scholes valuation
model, and a total shareholder return ('TSR') condition, which has
been valued using a Monte-Carlo simulation.
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
12. Share based payments (continued)
The inputs into the model were:
2018-2020
PSP Awards
--------------
Number of options
granted 3,258,695
Valuation method
- TSR Monte-Carlo
Valuation method
- EPS Black-Scholes
Share price at grant GBP1.13
Exercise price GBPnil
Volatility
% p.a. 32.6%
Dividend yield %
p.a. Nil
Risk-free rate
% 1.10%
Expected life 3yrs
Fair value per share
- TSR GBP0.66
Fair value per share GBP1.13
- EPS
--------------
Details of the other equity-settled, share-based compensation
plans are set out in the GoCompare.com Group plc Annual Report
2017.
Scheme limits
The rules of the various Plans described above provide that, in
any 10 year rolling period, not more than 10 per cent. of the
Company's issued ordinary share capital may be issued under the
combined Plans and under any other employee share plan adopted by
the Company. In addition, the rules of the Performance Share Plan
and the Deferred Bonus Plan provide that, in any 10 year rolling
period, not more than 5 per cent. of the Company's issued ordinary
share capital may be issued under these two schemes (and any other
discretionary employee share plan adopted by the Company).
GoCompare.com Shares transferred out of treasury under the Plans
will count towards these limits for so long as this is required
under institutional shareholder guidelines. GoCompare.com Shares
issued or to be issued pursuant to awards granted before Admission
or in relation to the Foundation Awards (described above) will not
count towards these limits. In addition, awards which are
relinquished or lapse will be disregarded for the purposes of these
limits.
GoCompare.com Group plc
Notes to the financial statements
For the period ended 30 June 2018
13. Dividends
6 months
6 months to 12 months to to
31 December
30 June 2018 2017 30 June 2017
GBPm GBPm GBPm
Dividends paid 2.9 2.9 -
------------- ------------- -------------
In November 2017, an interim dividend for 2017 of GBP2.9m was
paid, equivalent to 0.7 pence per share.
In May 2018, a final dividend for 2017 of GBP2.9m was paid,
equivalent to 0.7 pence per share
The Directors have recommended an interim dividend for 2018 of
GBP3.3m, equivalent to 0.8 pence per share.
Dividends per share are disclosed based on the number of shares
in issue at the point they were declared and paid.
14. Contingent liabilities
The Group continues to be in discussions with HMRC regarding the
re-application (following demerger) of its special method to
calculate its recovery of VAT used since 2015. In November 2017,
HMRC rejected the proposed method. The Group has appealed the
decision and will continue to seek resolution on the matter in
order to agree an approved method. Should the appeal be
unsuccessful, HMRC may require us to apply the standard method from
which would result in an additional cost being recognised in the
Statement of Comprehensive Income. These events give rise to a
contingent liability. At 30 June 2018, the impact of this is
estimated to be GBP1.7m (30 June 2017: GBPnil)
15. Related parties
Intercompany transactions between entities that are members of
the Group at year end and have been eliminated on consolidation are
not disclosed, as per the exemption available in IAS24.
Key management includes the executive and non-executive
directors of GoCompare.com Group plc.
During the period there were no transactions, and at the period
end there were no outstanding balances, relating to key management
personnel and entities over which they have control, other than the
share option arrangements as set out in Note 12. A number of share
options have been granted to key management and other senior
management, none of which have yet vested.
During the period, the Group had the following related party
transactions with related entities:
The Group paid fees of GBP88,000 (6 months to 30 June 2017:
GBPnil) to a company in which one of the Directors of the Group has
a controlling interest. The arrangement was made under normal
commercial terms with consideration settled in cash. The amount
outstanding at the period end was GBPnil (30 June 2017:
GBPnil).
16. Post balance sheet event
On 30 July 2018, the Group paid GBP1.3m in order to acquire an
increased shareholding in MortgageGym Limited. In these financial
statements this investment is recognised at fair value through
other comprehensive income. Following this increase in investment,
it will be accounted for as an Associate of the Group.
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
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