TIDMCPP
RNS Number : 1208T
CPPGroup Plc
24 March 2016
CPPGROUP PLC
24 March 2016
FULL YEAR REPORT
FOR THE YEAR ENDED 31 DECEMBER 2015
CPPGroup Plc - Full year report for the year ended 31 December
2015
CPPGroup Plc (CPP or the Group), the international assistance
business, today announces its full year results for the year ended
31 December 2015.
Financial highlights
Substantial improvement in profitability
-- Improved underlying operating profit performance from
continuing operations at GBP6.9 million (2014: GBP2.8 million) and
from continuing and discontinued operations combined at GBP8.9
million (2014: GBP0.6 million loss)
-- Profit for the year from continuing and discontinued
operations at GBP20.8 million compared to a prior year loss of
GBP6.7 million
Improved financial stability
-- Return to net assets at GBP10.0 million (2014: GBP30.9
million net liabilities) following the equity raise and debt
restructure in February 2015
-- Significant increase in net funds position at GBP37.6 million (2014: GBP7.9 million)
Business operations
-- Group revenue from continuing and discontinued operations has
declined to GBP89.9 million (2014: GBP108.8 million), which
reflects the continued decline in the UK renewal book whilst new
regulated sales remain restricted
-- Annual renewal rates are stronger at 72.9% (2014: 71.4%)
which reflects the value customers continue to place on our
products
-- Live policy base lower at 3.8 million, from prior year
position of 4.7 million (excluding Airport Angel policies)
Enhancement of shareholder value
-- Share price increased to 12.50 pence at 31 December 2015 from
5.63 pence at 31 December 2014
-- Basic earnings per share from continuing and discontinued
operations has improved to 2.72 pence (2014: 3.94 pence loss)
-- Market capitalisation has increased from the prior year and
subsequent to the GBP20.0 million equity raise in February 2015, at
GBP106.6 million on 31 December 2015 (2014: GBP9.7 million)
Operational highlights
-- Clear strategic initiatives implemented to enhance the
customer experience and value propositions - creating a business
platform from which to drive sustainable growth
-- New executive team in place - Stephen Callaghan as CEO and Michael Corcoran as CFO
-- Structural reorganisation complete to create a more dynamic
business with greater accountability, supported by the appointment
of many high impact colleagues
-- Ceased provision of non-core and historically unprofitable
airport lounge access services (Airport Angel)
-- Implementing a new, transformational IT system in the UK
which will drive significant improvements in 2016
-- Focus on bringing to market new, innovative product
propositions with global appeal; the first due to launch in Q2
2016
-- Winner of the Institute for Turnaround 'Listed Company
Turnaround of the Year' award in November 2015
Outlook
The Group is focused on its strategic priorities, which support
its existing revenue, new income generation and growth ambitions.
Following discussions with the FCA, the Company must demonstrate
that management practices and shareholder influence of the past no
longer exist, before reinstatement of regulatory permissions in the
UK will be considered. Reinstatement of regulatory permissions
remains a key part of the Group's plans. Challenges and risks
remain in the execution and delivery of the Group's strategic
plans. However the Group remains absolutely confident in the
direction the business is heading and the progress it is
making.
Driven by the new leadership team, the Group has made
significant financial and operational progress in 2015. The
Requisition (detailed in the Chairman's Statement) filed by
Schroder Investment Management Limited on 21 March 2016, if
successful, will likely have a detrimental impact on the future
strategy and performance of the business.
Stephen Callaghan, Chief Executive Officer, commented:
"We have made significant progress in 2015, highlighted by our
strong overall performance, including a substantial uplift in our
profitability over the prior year.
These results reflect a new beginning for CPP. We now have the
right leadership team in place, supported by over 700 great
colleagues and a similar number of dedicated customer service
agents. I would like to thank them for embracing the challenges
with such enthusiasm and personal commitment. It is the quality and
dedication of our people that gives me such confidence in our
future."
Financial Highlights
Year ended 31 December 2015 Continuing operations Discontinued operations Total
------------------------------------- --------------------- ------------------------ ------
Revenue (GBP millions) 76.8 13.1 89.9
Operating profit (GBP millions)
- Reported(1) 23.0 2.1 25.1
- Underlying(2) 6.9 2.1 8.9
Profit for the year (GBP millions) 18.5 2.3 20.8
Reported earnings per share (pence)
- Basic 2.42 0.30 2.72
- Diluted 2.41 0.30 2.71
Net assets (GBP millions) 10.0
Net funds (GBP millions)(3) 37.6
Share price (pence) 12.50
===================================== ===================== ======================== ======
1. Reported figures which agree to the income statement are for
continuing operations only. Discontinued operations are not
reported in operating profit in the income statement. Further
detail to the discontinued operations is provided in note 7 to the
condensed financial statements. Discontinued operations are
included in this analysis to provide an indicative view of how the
Group has performed.
2. Excluding exceptional credit from continuing operations of
GBP17.8 million and discontinued operations of GBP0.1 million.
Further detail is provided in note 5 to the condensed financial
statements. Continuing operations also excludes GBP1.7 million
Matching Share Plan (MSP) charges.
3. Net funds comprise cash and cash equivalents of GBP39.8
million partially offset by borrowings of GBP2.2 million. Cash and
cash equivalents includes cash held for regulatory purposes of
GBP12.1 million and cash restricted by the terms of the VVOP within
the UK's regulated entities of GBP21.8 million. Whilst not
available to the wider Group, the restricted cash is available to
the regulated entity in which it exists including for operational
and residual customer redress purposes.
Financial Highlights
Year ended 31 December 2014 Continuing operations Discontinued operations Total
---------------------------------------- --------------------- ------------------------ -------
Revenue (GBP millions) 96.5 12.3 108.8
Operating (loss)/profit (GBP millions)
- Reported(1) (3.2) (3.7) (6.9)
- Underlying(2) 2.8 (3.4) (0.6)
Loss for the year (GBP millions) (3.3) (3.5) (6.7)
Reported loss per share (pence)
- Basic and diluted (1.90) (2.04) (3.94)
Net liabilities (GBP millions) (30.9)
Net funds (GBP millions)(3) 7.9
Share price (pence) 5.63
======================================== ===================== ======================== =======
1. Reported figures which agree to the restated income statement
are for continuing operations only. Discontinued operations are not
reported in operating profit in the restated income statement.
Further detail to the discontinued operations is provided in note 7
to the condensed financial statements. Discontinued operations are
included in this analysis to provide an indicative view of how the
Group performed in the prior year.
2. Excluding exceptional charge from continuing operations of
GBP6.0 million and discontinued operations of GBP0.3 million.
Further detail is provided in note 5 to the condensed financial
statements.
3. Net funds comprise cash and cash equivalents of GBP40.6
million partially offset by borrowings of GBP32.7 million. Cash and
cash equivalents includes cash held for regulatory purposes of
GBP21.5 million and cash restricted by the terms of the VVOP within
the UK's regulated entities of GBP13.4 million.
Enquiries
CPPGroup Plc
Stephen Callaghan, Chief Executive Officer
Michael Corcoran, Chief Financial Officer
Tel: +44 (0)1904 544500
Nominated Adviser and Broker
Numis Securities Limited: Stuart Skinner (Nominated Adviser);
Charles Farquhar (Broker)
Tel: +44 (0)20 7260 1000
Media
Powerscourt Group: Justin Griffiths, Peter Ogden
Tel: +44 (0)20 7250 1446
Email: cpp@powerscourt-group.com
About CPP
CPP provides a range of assistance based services to customers
in the UK and Ireland and in a number of international markets
across Asia, Europe and Latin America. The Company's core
propositions provide peace of mind for customers covering a range
of areas including lost and stolen credit cards, identity theft,
insurance of mobile devices and passport assistance.
For more information on CPP visit www.cppgroupplc.com
REGISTERED OFFICE
CPPGroup Plc
Holgate Park
York
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YO26 4GA
Registered number: 07151159
CHAIRMAN'S STATEMENT
Introduction
I joined the Board of CPP in May 2015 and in my first year I
have spent time with the leadership team developing an in-depth
knowledge of the Group. CPP has come through a very challenging few
years since the FSA investigation in 2011.
The newly formed Executive Team, under the leadership of Chief
Executive Officer Stephen Callaghan, is now complete and they are
operating at pace, demonstrating the required focus to take us
forward and realise our potential to be a global business with a
sustainable and profitable outlook.
The equity funding at the beginning of the year, whilst
concurrently restructuring the Group's liabilities and refinancing
its debts, was a critical activity to establish a solid foundation.
The successful completion provided the Group with a stronger and
more stable financial footing and signalled the start of a new era
for CPP. Results at the half-year demonstrated that the new
Executive Team was also getting to grips with some of the more
gritty aspects of a turnaround situation; discontinuing businesses
that were not performing and had little prospect of being
profitable, focusing on cost control and revenue generation in
parts of the Group where there was opportunity to do so, whilst
undertaking business transformation activities and IT system
changes. The team has made real progress during 2015 reflected in a
set of results that show what can be achieved with focused
execution.
At the heart of CPP are our colleagues. They have real passion,
want to go the extra mile for our customers and they are committed
to the business. Ensuring that we continue to provide opportunities
for our people by both developing existing colleagues and
attracting new talent to the business remains a key priority. By so
doing, the Group will be better placed to capitalise on the
opportunities that lie ahead. As Chairman, I participated in an
extended leadership team development programme in October during
which the team were given methods and techniques to make them more
impactful as individuals and as business leaders. It was an
inspirational activity and I continue to provide my full support to
the Executive Team in this regard as they deepen and broaden their
colleague engagement and development programme during 2016. It is
only by having the right people and doing the right thing by
customers that we create real impact and deliver sustainable value
to our shareholders and other stakeholders.
CPP has also added to the new executive team. Having secured the
services of Stephen Callaghan as Chief Executive Officer (CEO)
during the first half of the year, in the second half we appointed
our new Chief Financial Officer (CFO), Michael Corcoran. Michael
has extensive international and regulated business experience and
expertise in managing strong financial, operational, governance and
compliance frameworks. Additional executive hires before year end
included a new Chief Marketing Officer and Chief Technology
Officer.
Board changes
There have been a number of Board changes during the year, not
least my own appointment in May before taking over as Chairman in
July. We welcome Abhai Rajguru as Chairman of our Audit Committee
and as a member of the Risk and Compliance Committee. Abhai brings
years of experience at a senior level in the financial services
sector and additionally possesses a wealth of digital and
technology knowledge to complement our insight and proposition
development activities. Ruth Evans resigned after the year end to
allow her more time to focus on her other portfolio roles. Shaun
Astley-Stone has extended his duties in support of the Board and
now Chairs the Remuneration Committee as well as holding the office
of Senior Independent Director. We will continue to evaluate
opportunities to strengthen the Board with individuals that have
relevant experience and will add value.
The Board's focus is now very much one of supporting the
management team as they introduce a new digital range of products,
and enter into dialogue with the FCA regarding its existing and new
product offerings to customers in the UK.
AGM and general meeting
The Company's AGM is scheduled for 2.00pm on 18 May 2016 and
will be held at the offices of Eversheds LLP, 1 Wood Street, London
EC2V 7WS.
As announced on 21 March 2016, Schroder Investment Management
Limited (Schroders) has filed a notice requisitioning a general
meeting of the Company's shareholders (the Requisition). The
Requisition proposes resolutions to remove the CEO and current
Non-Executive Directors from the Board and to replace them with
individuals proposed by Schroders. It is believed that Schroders
are working with Mr Hamish Ogston, one of the Group's major
shareholders and founder of the Company.
The Board is surprised by the Requisition given the significant
improvement in the Group's performance and the strong rise in the
share price since the new management team have been in place. The
Board does not believe that the actions proposed would be in the
best interests of CPP's customers, employees or other
shareholders.
The Board currently intends to call the general meeting within
21 days of receipt of the Requisition and to provide for such
meeting to be held not more than 28 days after the date of
notice.
Looking ahead
Notwithstanding the Requisition, a priority for me and the
leadership team will be to ensure that an appropriate culture
continues to exist in the Group underpinned by the necessary
governance structure to support the business.
2015 was a year during which remedial actions, team building and
clinical execution have resulted in underlying transformational
business and cultural changes to CPP in addition to a set of
improved financial results. Leadership is to be congratulated on
bringing colleagues on a journey which has delivered confidence,
commitment and high energy levels across the Group. Looking
forward, I am convinced that the strategic direction already set
will deliver on the promise of creating a global assistance
business whose mission is to help customers look after the things
that are important to them.
Roger Canham
Chairman
23 March 2016
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
I was appointed Chief Executive on 30 July 2015 and I continue
to be firmly focused on establishing a new strategic and
operational plan for the business, creating the right culture,
building the right team to execute that strategy and providing the
required level of high impact leadership to propel us forward.
CPP has operations in established markets such as the UK, Spain,
Germany, Italy and Portugal, as well as the emerging markets of
India, Mexico, Malaysia, Turkey and China. I have spent a
considerable amount of time with colleagues across the business and
I have visited country operations to understand how they are run,
to see where we can make investments to improve performance,
identify where additional opportunities may lie, and determine
where we may be able to create operational leverage and savings
across the Group.
Understanding immediate challenges
My initial focus was to carry out a fundamental business review
to determine what could be done to reduce cash burn, to create a
more profitable cash generative business in the short term and to
put that cash to good use with the objective of creating a
sustainable growth platform for the future. During 2015 we ceased
our non-core and historically unprofitable travel services
business, Airport Angel, reworked the basis of our commercial
relationships with banks in the UK and improved our revenue
performance where we were able - whilst reducing costs wherever it
made sense. We worked hard to improve our customer experience and
we were able to track improvements in renewal rates.
In addition to the financial measures, we also focused on
bringing about changes to our UK business processes and technology
platform; our business transformation plan hits an important
milestone in summer 2016 when the new systems go live.
Addressing the past
CPP has endured a number of challenging years, particularly in
the UK. In 2015 we have seen the UK business undergo many
organisational, people and operational changes to fix issues that
have been so damaging to our reputation. A new UK leadership team
has been established operating to a change agenda at pace to ensure
the business conduct and practices of the past are not
repeated.
Already in 2016 we have had initial engagement with the FCA to
agree a phased plan which will see UK customers receive better
value via a reduction in renewal premiums and enhanced benefits for
regulated products. This has been facilitated by changes in our
commercial relationships with Business Partners. Customer research
shows a strong desire for product simplification which we plan to
implement in summer 2016 and with new systems live, we hope to sell
the enhanced products to new customers in the UK through digital
channels. During the FCA engagement we will actively demonstrate
that the UK business has rehabilitated itself and now places the
customer at the heart of our operations with the appropriate
culture, controls and oversight befitting a regulated financial
services business.
Putting the customer at the heart of what we do
We have carried out extensive research into customer needs on an
international scale, not restricted to only countries where CPP has
a presence. The findings provide insight into customer fears about
losing track of things, their anxiety of personal details being
compromised online, and the preferred methods of interaction with
the business. Responding to this, we have developed new products
that will be available globally and have evolved our communications
channels to include self-service websites and mobile applications
to complement our telephony services.
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In 2016, we will launch CPP's first ever 100% digital product
with global reach and we aim to have customers live in five CPP
geographies by the end of the year - both direct to consumer and in
conjunction with Business Partners. Our new and highly innovative
product, Owl, signifies a step-change for CPP. It provides peace of
mind for our customers by monitoring key personal data on the dark
web, providing customers with alerts via email or SMS in the event
of a compromise, and offering guided support to get them back on
track in a way that is appropriate and meaningful.
Towards an efficient and effective organisation
To provide more direct accountability, the business structure
was reorganised early in 2015. The regional management layer was
removed to create a structure more appropriate for a business of
our size. This brings the Group executive closer to operations
across our geographies and allows me to work directly with small
teams to get things done. This helps us gain pace with our
initiatives and accelerate progress.
Our strategic approach is described on three axes; innovative
proposition development, channel partner development, and
performance marketing. The associated technology and proposition
developments are being led by our new Chief Technology Officer, in
close partnership with a newly created Group Product and
Proposition team. New channel partner opportunities are being
explored in automotive, consumer finance, utility,
telecommunications, healthcare and travel sectors led by our Chief
Commercial Officer and his directly reporting Country Managers.
Whilst financial Business Partners continue to be part of our
strategy, research shows that broader market opportunity exists for
a wider partnership approach. The appointment of a Chief Marketing
Officer at the end of 2015 allows us to establish a central
performance marketing capability, creating reusable marketing tools
and knowledge base to support countries in the launch of new
propositions, and to establish playbooks for direct-to-consumer
marketing.
Leadership and culture fit for the future
Much of the progress seen at CPP in the past 12 months has been
achieved with the existing capacity and resources already in the
business. However, leadership at every level is striving to effect
change, increase momentum and create impact. We must continue to
strive to be a committed, trusted organisation that provides a
valuable service to its customers. As a part of our culture shift
we have embedded our colleague derived core values of Commit,
Collaborate and Perform across the organisation. This is supported
by regular communications celebrating great behaviours and
achievements. We also continue to focus on governance, leadership,
controls and to ensure that our product offerings are designed to
meet customer need.
Group performance - a stronger, more profitable platform
The financial results for 2015 are much improved. They
demonstrate a return of confidence and signal significant progress
at CPP. We are now trading from an improved and effective platform
and we have plans to further embrace digital technologies to allow
customers multi-channel access to services. However, challenges
remain and there continues to be work to do for the Group to
realise its strategy. Consequently, there is some uncertainty
whilst this work is ongoing and new propositions are launched
globally. The Group remains confident in the direction it is
heading and understands the importance of maintaining momentum in
the delivery of our plans.
Our global operations are making progress. During 2015 we
recorded new business success in Spain by developing a new Business
Partner relationship in the Automotive sector. In India, we have
entered the Non-Banking Financial Services sector providing new
assistance and repair services to mobile phone users and in Turkey
we have continued to develop our ATM channel to market for customer
acquisition for our card protection product. Having appointed new
management in Mexico, we are rebuilding confidence and have been
successful in winning back Business Partners and customers.
As expected, Group revenue from both continuing and discontinued
operations has reduced in the year to GBP89.9 million (2014:
GBP108.8 million) reflecting the natural decline in the UK renewal
book whilst new regulated sales remain restricted. The underlying
operating profit from continuing and discontinued operation has
however, increased to GBP8.9 million (2014: GBP0.6 million loss).
This underlying operating profit performance is a result of several
initiatives including ongoing and new cost control scrutiny,
adopting a new basis for commission payments for Business Partners,
and some benefits driven by management action during the closure of
Airport Angel. Underlying operating profit from continuing
operations only is GBP6.9 million (2014: GBP2.8 million). Following
the equity raise and debt restructure at the beginning of 2015 the
Group's net funds position has improved significantly to GBP37.6
million (2014: GBP7.9 million).
During 2016, the business intends to further invest in the
necessary capability to support accelerated growth and introduce
reduced renewal premiums in the UK. The full benefit of this
investment is expected in a period beyond the next financial
year.
The Group's annual renewal rate has increased to 72.9% (2014:
71.4%) reflecting the value customers continue to place on our
products. The live policy base has reduced to 3.8 million (2014:
5.1 million) mainly due to a decline in UK wholesale policies,
which includes the closure of Airport Angel.
Final word
We have made significant progress in 2015 that I believe will
shape and positively impact the long term future development of the
Group. We have the cash and time resources for us to develop and
implement our strategy which in turn will build our future. These
results reflect a new beginning for CPP and I would like to thank
colleagues worldwide for embracing the changes with such enthusiasm
and personal commitment.
Stephen Callaghan
Chief Executive Officer
23 March 2016
OPERATING REVIEW
The Group operates internationally as three regions: the UK and
Ireland; Europe and Latin America; and Asia Pacific.
Constant
2015 2014 currency
Year ended GBP'm GBP'm Growth growth
------------------------- ------ ------ ------ ---------
UK and Ireland(1)
========================= ====== ====== ====== =========
- Revenue 43.0 57.4 (25)% (25)%
========================= ====== ====== ====== =========
- Underlying operating
profit/(loss)(2) 2.0 (2.1) 194% 194%
========================= ====== ====== ====== =========
Europe and Latin
America
========================= ====== ====== ====== =========
- Revenue 25.5 32.5 (22)% (13)%
========================= ====== ====== ====== =========
- Underlying operating
profit(3) 4.6 5.2 (11)% (3)%
========================= ====== ====== ====== =========
Asia Pacific
========================= ====== ====== ====== =========
- Revenue 8.3 6.7 25% 23%
========================= ====== ====== ====== =========
- Underlying operating
profit/(loss)(3) 0.3 (0.2) 220% 221%
------------------------- ------ ------ ------ ---------
1 2014 figures have been restated to exclude the Airport Angel
business which is discontinued
2 Excluding exceptional items and MSP charges
3 Excluding exceptional items
UK and Ireland
Financial performance
Revenue for 2015 decreased by 25% compared to the same period in
2014 to GBP43.0 million (2014: GBP57.4 million, excluding Airport
Angel). Underlying operating performance has improved to a profit
of GBP2.0 million (2014: GBP2.1 million loss, excluding Airport
Angel).
Review
The UK and Ireland region accounted for 56% of Group full year
revenue in 2015. New retail business performance in the UK and
Ireland continues to be constrained by the ongoing Voluntary
Variation of Permissions (VVOP), which amongst other things,
restricts our ability to sell new regulated products in the UK.
Despite these constraints however, our renewal performance was
strong and encouraging. While the underlying trading performance
confirms that our customers value our existing products, we
launched a fast-paced programme of product revitalisation in 2015
that will develop our core propositions further. Improving the
operational and commercial readiness of our UK and Ireland business
has been a key focus throughout 2015 to ensure that we have a
positive take-to-market strategy in place once the restrictions
have been lifted. We have taken active steps to address loss-making
and non-core interests like our Airport Angel business, have
analysed and improved core customer processes and have invested in
key personnel positions that will enable customer experience gains
and lift both our revenue and profit. Specific examples of such
people investment are; Commercial Director, Operations Director and
Category/Product Management. We view the UK and Ireland region as
having high growth potential and the UK is a priority market for
new customer propositions. These will be performance-marketed via
direct-to-consumer and business-to-business models to ensure that
we are reaching customers in the most meaningful and appropriate
way for them.
Europe and Latin America
Financial performance
Revenue has decreased by 13% on a constant currency basis
compared to the same period in 2014 to GBP25.5 million (2014:
GBP32.5 million). The underlying operating profit has reduced to
GBP4.6 million (2014: GBP5.2 million).
Review
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The Europe and Latin America region includes; Spain, Italy,
Portugal, Germany, Turkey and Mexico. Europe and Latin America
accounts for 33% of Group full year revenue. Having taken the
strategic decision in 2014 to exit Brazil, this process was
completed in 2015.
The core European markets each delivered solid renewal
performance, operational efficiencies and Business Partner
engagement throughout 2015. There was also encouraging new revenue
growth in Turkey although renewal performance was below
expectations, in part due to market conditions. Country Managers
have focused on market development actions that seek to win new
business partnerships in new sectors and channels, with the
automotive industry in Spain and the ATM channel in Turkey being
two successful initiatives.
In addition, in 2015 we reviewed the in-country skill-sets and
local structures to ensure that we are well-placed to capitalise on
Group-led proposition, brand and marketing initiatives as well as
capitalising on local product offers. Driving profitable new
revenue from both new and existing propositions remains a priority.
We are actively building strength and depth in all countries;
appointments have been made of a new Country Manager in Mexico and
a Sales Director in Turkey.
Asia Pacific
Financial performance
Revenue has increased by 23% on a constant currency basis
compared to the same period in 2014, to GBP8.3 million (2014:
GBP6.7 million). The underlying operating performance has improved
to a profit of GBP0.3 million (2014: GBP0.2 million loss).
Review
Our Asia Pacific region's main trading operations are in India,
China, Malaysia and Hong Kong and accounts for 11% of the Group's
full year revenue. Both India and China performed well, growing
revenue and improving operating performance during 2015. This
growth is underpinned by new Business Partner wins and new product
and channel development activity. Progress in India, which is a
very competitive market, is particularly strong and encouraging.
Our Indian team has secured new Business Partner contracts and have
successfully launched a mobile phone assistance product in the
market during 2015. Progress in China continues to be stilted in
what is a difficult market to break. However the opportunities are
immense and we remain focused on accessing the potential of this
market.
Malaysia's renewal performance continues to perform as expected
and in January 2016 we signed a new Business Partner contract to
deliver a new proposition which will re-start new revenue
activities in the market.
Having taken the strategic decision in 2014 to move towards a
more cost effective and higher-performing structure, we
repositioned the Hong Kong, Malaysia and China operations in 2015.
This involved the termination of Hong Kong services provided to
China and Malaysia. Significant cost savings have subsequently been
realised and the operating capabilities of China and Malaysia have
improved as a result. The renewal metrics of the Hong Kong customer
base continues to perform well.
FINANCIAL REVIEW
Overview
The Group completed the equity raise and debt restructure in
February 2015, which represented an essential and significant
milestone in restoring the Group's financial stability and provided
a platform from which it can accelerate progress in its
development.
In 2015, the Group's underlying operating performance has
improved, which reflects the financial benefits of difficult but
necessary decisions that have been taken in 2015 and earlier.
During 2015, the Group made the positive decision to cease
paying commissions in the UK to Business Partners where they have
no ongoing involvement in the renewal process and do not provide
any service to the customer. Discussions with certain Business
Partners regarding this change remain ongoing. It is the Group's
intention to re-invest this commission saving in improving the
customer value experience. The Group is committed to: providing
products that meet the specific needs of consumers; improving the
value proposition of existing products; and improving the overall
customer experience.
The Group's customer redress activities are now substantially
complete and reflect the end of a very difficult chapter. The
various redress programmes have had a substantial impact on the
business. The Group's processes have been significantly improved as
we now embark on the next stage of the Group's development.
The Group's overseas operations have contributed to the improved
operating performance during 2015. There have been strong new
retail policy sales in India and Turkey and whilst trading
conditions remain challenging in some of our established European
countries, cost control initiatives have helped to improve
operating profit margins.
As a reflection of the renewed energy and optimism in the
business, certain key management has taken the opportunity to
invest more than GBP400,000 to purchase newly issued shares through
the Matching Share Plan (MSP). The plan is designed to provide
management with a vested interest in driving growth and directly
align their aspirations with those of shareholders.
The closure of Airport Angel is now complete and, accordingly,
the results of Airport Angel are being disclosed as discontinued
operations within this review and the consolidated financial
statements. Airport Angel has historically been a loss-making
business; however, due to management focus on resolving prior
operational issues and certain benefits driven by closure
activities it has reported a GBP2.3 million profit for this
financial year.
2015 2014
--------------------------- --------------------------------- -----------
Discontinued Continuing Continuing
Total operations operations operations
--------------------------- ------ ------------ ----------- -----------
Revenue (GBP millions) 89.9 13.1 76.8 96.5
--------------------------- ------ ------------ ----------- -----------
Gross profit (GBP
millions) 48.7 4.3 44.4 46.6
=========================== ====== ============ =========== ===========
Administrative expenses(1)
(GBP millions) (39.8) (2.2) (37.6) (43.8)
--------------------------- ------ ------------ ----------- -----------
Underlying operating
profit (GBP millions) 8.9 2.1 6.9 2.8
=========================== ====== ============ =========== ===========
Exceptional items
(GBP millions) 17.9 0.1 17.8 (6.0)
=========================== ====== ============ =========== ===========
MSP charges (GBP
millions) (1.7) - (1.7) -
--------------------------- ------ ------------ ----------- -----------
Reported operating
profit/(loss) (GBP
millions) 25.1 2.1 23.0 (3.2)
=========================== ====== ============ =========== ===========
Net finance costs
(GBP millions) (1.3) (0.2) (1.1) (1.7)
--------------------------- ------ ------------ ----------- -----------
Reported profit/(loss)
before tax (GBP millions) 23.8 1.9 21.9 (4.9)
--------------------------- ------ ------------ ----------- -----------
Earnings/(loss) per
share (pence)
=========================== ====== ============ =========== ===========
Basic 2.72 0.30 2.42 (1.90)
=========================== ====== ============ =========== ===========
Diluted 2.71 0.30 2.41 (1.90)
--------------------------- ------ ------------ ----------- -----------
Net assets/(liabilities)
(GBP millions) 10.0 n/a 10.0 (30.9)
--------------------------- ------ ------------ ----------- -----------
Net funds (GBP millions) 37.6 n/a 37.6 7.9
--------------------------- ------ ------------ ----------- -----------
(1 Excluding exceptional items and MSP charges)
Summary
Group revenue from continuing operations has declined by 20% to
GBP76.8 million mainly reflecting the natural decline in Card
Protection and Identity Protection renewals in the UK whilst new
regulated sales remain restricted. On a regional basis revenue has
reduced by 25% in the UK and Ireland and 22% (13% on a constant
currency basis) in Europe and Latin America. Revenue in Asia
Pacific has grown by 25% (23% on a constant currency basis).
The underlying operating profit in the year from continuing
operations is GBP6.9 million, which is a GBP4.1 million improvement
on 2014. This improvement is largely a result of the actions taken
to reduce the cost base (including the impact of reviewing
commission arrangements in the UK) and improved contribution from
Asia Pacific driven largely by growth in India, both of which
offset the impact of declining revenue.
Exceptional items in the year are a net credit which totals
GBP17.8 million comprising: a gain from the compromise of the
Commission Deferral Agreement, net of associated costs of GBP19.4
million; further residual customer redress costs of GBP0.9 million;
and restructuring costs of GBP0.7 million. The GBP19.4 million gain
from the commission deferral compromise reflects the settlement of
GBP20.9 million Commission Deferral Agreement for a compromise
payment of GBP1.3 million and GBP0.2 million costs associated with
the arrangement. Costs relating to the compromise agreement
incurred in 2014 were GBP0.7 million.
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Share option charges relating to the Group's new share plan in
the year, MSP, were GBP1.7 million. The charge in the year reflects
both the charge related to investing individuals who purchased
ordinary shares at a discount to market value, and ongoing
accounting charges relating to the matching options. The size of
the charge has been impacted by the increasing share price through
2015.
The exceptional items and MSP charges, contribute to a reported
operating profit of GBP23.0 million (2014: GBP3.2 million
loss).
Net interest and finance costs of GBP1.1 million (2014: GBP1.7
million) are 37% lower than 2014 reflecting the reduction in the
Group's level of borrowings in the year. A significant proportion
of this year's charge relates to the write-off of unamortised issue
costs on the previous debt facility, which was refinanced midway
through a three year term.
As a result, the reported profit before tax from continuing
operations was GBP21.9 million (2014: GBP4.9 million loss) and the
reported profit after tax from continuing operations was GBP18.5
million (2014: GBP3.3 million loss).
Discontinued operations, which represent the Airport Angel
business in 2015, have reported a profit after tax of GBP2.3
million (2014: GBP3.5 million loss).
Basic earnings per share from continuing operations have
improved from a loss of 1.90 pence in 2014 to earnings of 2.42
pence for 2015.
Key Performance Indicators(1)
2015 2014 Change
------------------------- ---- ---- ------
Live policies (millions)
(see table below) 3.8 4.7 (19)%
========================= ==== ==== ======
Annual renewal rate
(%) 72.9 71.4 1.5
========================= ==== ==== ======
Revenue by major product
(GBP millions) (see
table below) 76.8 96.5 (20)%
========================= ==== ==== ======
Cost/income ratio (%) 66.3 64.2 2.1
========================= ==== ==== ======
Underlying operating
profit margin (%) 8.9 2.9 6.0
------------------------- ---- ---- ------
Group cash balances
(GBP millions)
(see table below) 39.8 40.6 (2)%
------------------------- ---- ---- ------
Live policies (millions) 2015 2014 Change
--------------------------- ---- ---- ------
Retail assistance policies 2.5 2.7 (9)%
=========================== ==== ==== ======
Retail insurance policies -- 0.1 (51)%
=========================== ==== ==== ======
Wholesale policies 1.3 1.9 (32)%
--------------------------- ---- ---- ------
Total 3.8 4.7 (19)%
--------------------------- ---- ---- ------
Revenue by major product
(GBP millions) 2015 2014 Change
-------------------------- ---- ---- ------
Retail assistance revenue 68.1 82.7 (18)%
========================== ==== ==== ======
Retail insurance revenue 5.4 10.2 (47)%
========================== ==== ==== ======
Wholesale revenue 2.3 2.8 (16)%
-------------------------- ---- ---- ------
Non-policy revenue 0.9 0.8 7%
-------------------------- ---- ---- ------
Total 76.8 96.5 (20)%
-------------------------- ---- ---- ------
Group cash balances
(GBP millions) 2015 2014 Change
--------------------- ---- ---- ------
Regulated cash 12.1 21.5 (44)%
===================== ==== ==== ======
VVOP restricted cash 21.8 13.4 63%
===================== ==== ==== ======
Free cash 5.9 5.7 4%
--------------------- ---- ---- ------
Total 39.8 40.6 (2)%
--------------------- ---- ---- ------
1 2014 figures have been restated to exclude the Airport Angel
business which is discontinued
Live policies
The live policy base is 0.9 million lower than December 2014 due
to UK factors, including an expected decline in wholesale policies
and declining retail Card Protection policies as the VVOP
restrictions on the sale of regulated products remain in place at
present. Live policies outside of the UK have decreased
marginally.
Annual renewal rate
The annual renewal rate for 2015 has increased by 1.5 percentage
points since 31 December 2014 mainly due to improving rates in the
Group's largest renewal markets, the UK and Spain. The annual
renewal rate does not include cancellations that have occurred
during the Scheme of Arrangement (Scheme). If Scheme cancellations
were included, the annual renewal rate would be 5.5 percentage
points lower at 67.4%.
Revenue by major product
Revenue from retail assistance policies has declined compared to
2014 reflecting the decline in Card Protection and Identity
Protection renewals in the UK. The continued new retail sales
restrictions associated with the UK VVOP limit the Group's ability
to grow retail revenue. Retail insurance revenue, which relates to
a historic UK Business Partner contract, has continued to decline
as expected.
Cost/income ratio
Cost of sales and administrative expenses (excluding
commissions, exceptional items and MSP charges) as a percentage of
revenue. Our cost/income ratio has remained broadly stable
year-on-year largely due to the impact of declining Card Protection
and Identity Protection renewal revenue in the UK being offset by a
reduction in operating costs following the actions taken by the
Group to reduce its cost base. The review of commission
arrangements in the UK does not impact this measure.
Underlying operating profit margin
Our underlying operating margin has increased 6.0 percentage
points due mainly to the actions taken by the Group to reduce its
cost base and the impact of reviewing commission arrangements in
the UK, partly offset by a reduction in Card Protection and
Identity Protection renewal revenue in the UK.
Group cash balances
Cash held in the Group's UK regulated entities has decreased
year-on-year due to continued funding of residual redress and the
core platform IT system development, partly offset by the impact of
reviewing commission arrangements in the UK. Free cash is broadly
stable year-on-year. The cash benefit of the equity raise and
increased cash overseas has been offset through a combination of
repayment of the bank loan and associated fees and Group overhead
requirement.
Customer redress
Our customer redress programmes are now substantially complete,
with current expectations that the remaining customer redress
provision of GBP1.6 million will be paid during 2016. We are
therefore nearing the conclusion of a particularly difficult
chapter for the Group, which has had a significant impact on the
business. The business has reflected on its historic practices and
has taken significant action to improve them, with the core
principle being to ensure that our actions ultimately benefit our
customers.
The Group has provided an additional GBP0.9 million in the year
reflecting the latest estimate of residual customer redress
activity. This additional provision arises following the decision
to cease paying commissions to UK Business Partners. The remaining
customer redress and associated costs provision of GBP1.6 million
is in addition to the outstanding element of the regulatory fine of
GBP8.5 million, which is due to be paid in 2016.
Tax
In 2015 there was a tax charge on continuing operations of
GBP3.4 million (2014: GBP1.7 million credit). The charge mainly
arises from the gain following the compromise of the Commission
Deferral Agreement in the UK, a switch in the utilisation of tax
losses between continuing and discontinued operations, and smaller
overseas charges on the profits made in Spain and Italy. No relief
is available for other Group losses. Similar to 2014, the effective
tax rate is not a representative measure
Discontinued operations
On 31 December 2015, the Group completed the operational closure
of its Airport Angel business. This business has historically been
loss-making; however, due to management focus on resolving prior
operational issues and certain benefits from closure activities, it
has reported a profit after tax of GBP2.3 million (2014: GBP2.7
million loss). Prior to 2015, the business had recorded cumulative
losses of GBP8.3 million. The 2014 discontinued loss was GBP3.5
million in total, representing GBP2.7 million for Airport Angel and
a GBP0.8 million loss relating to the disposal of Home3, which
completed in March 2014.
Cash flow and net funds
The Group has generated additional cash, excluding movements in
borrowings, of GBP11.2 million in the year, including the impact of
the equity raise partly reduced by expenditure on the new core
platform IT system. Cash used in operations amounted to GBP0.2
million (2014: GBP33.8 million) and includes GBP4.8 million paid in
residual redress exercises. Cash used in operations has improved by
GBP33.6 million year-on-year, which reflects the impact of
significant redress payments through the UK Scheme in 2014.
As expected, the Group's net funds position has improved
significantly in the year by GBP29.7 million to GBP37.6 million as
a result of the equity raise and commission deferral compromise.
Capital expenditure in the year is GBP4.6 million (2014: GBP0.6
million) as the Group continues to develop its new core platform IT
system, with planned implementation expected to be in Q3 2016 in
the UK. The net funds figure includes cash balances of GBP33.9
million held in the UK's regulated entities, Card Protection Plan
Limited (CPPL) and Homecare Insurance Limited (HIL). These cash
balances cannot be distributed to the wider Group without the
regulator's approval, as they are either held for regulatory
capital purposes or are restricted by the terms of the VVOP. This
restricted cash is, however, available to use in the regulated
entity in which it exists. This much improved financial position
provides the platform from which the Group can now invest to
accelerate future growth
Dividend
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The Directors have decided not to recommend the payment of a
dividend. Furthermore, the Board continues to believe it is not
appropriate to pay a dividend until cash generated by operations is
more than adequate to cover the Group's future investment
plans.
Balance sheet and financing
The equity raise and debt restructure has had a fundamental
impact on the Group's balance sheet position, returning it to net
assets of GBP10.0 million at 31 December 2015 from net liabilities
of GBP30.9 million in 2014.
The Group's borrowing arrangements comprise a committed GBP5.0
million revolving credit facility (RCF), which is available until
February 2018, and a commission deferral balance of GBP1.3 million
which is due for repayment in January 2017. The arrangements are
much reduced, following the debt restructure in February 2015, from
the previous GBP13.0 million debt facility and GBP20.9 million
commission deferral balance. The RCF has GBP1.0 million drawn at
the year end.
Michael Corcoran
Chief Financial Officer
23 March 2016
RISKS AND UNCERTAINTIES
The Group's risk management framework is designed to identify
and assess the likelihood and consequences of risk and to manage
the actions necessary to mitigate their impact.
The Group has a risk framework that enables risks to be
identified, assessed, controlled and monitored, consistently and
objectively. We continue to progress the implementation of the
framework throughout the Group and revise our risk framework as
necessary to maintain its effectiveness. The key elements of our
framework include: leadership and culture; risk appetites; risk
identification and assessment; management and control of risk
exposures; business incident management process; and a robust
policy and minimum standard framework.
Set out below are the known principal risks and uncertainties
which could have a material impact on the Group, together with the
corresponding mitigating actions that have been taken.
Risk: Liquidity
Status: No change on prior year
Nature of risk and potential impact:
Liquidity risk is the risk that the Group or any of its
subsidiaries cannot meet its contractual or payment obligations in
a timely manner. Should the business not successfully generate
revenue through legacy products and the development of compelling
new products, then in the medium term the Group's liquidity
position may be adversely impacted.
Mitigation:
Management actively manages the overall liquidity profile,
ensuring that the business plans are effective and aligned. A
number of dynamic programmes are in place to develop and deploy new
products and offerings, and to enhance/refresh existing legacy
products.
Risk: Reputational
Status: No change on prior year
Nature of risk and potential impact:
Reputational risk impacts the CPP brand, reliability and
relationship with customers and shareholders. This may arise from
poor conduct or judgements, regulatory non-compliance, or from
negative financial or operational events as a result of weaknesses
in systems and controls. Reputational risk may also arise from the
selection of Business Partners and product offerings which may have
adverse implications for the Group.
Mitigation:
High standards of conduct and a principled approach to
regulatory compliance are integral to our culture and values. We
consider key reputational risks when initiating changes in
strategy, products or operating model. In addition, we have
frameworks to address other risks that could affect our reputation
including conduct risk and product development.
Risk: Shareholder
Status: Increased on prior year
Nature of risk and potential impact:
There is a risk that the Group could be destabilised by events
that would significantly impact the delivery and time/cost of the
overall strategy. The Group has specific vulnerabilities, for
example, as a result of a highly concentrated shareholder base.
Mitigation:
The Board actively engages on a regular basis with our largest
shareholders to mitigate this risk, discussing business
rationale/strategy and seeking support of the Board and its
business plans.
Risk: People and resources.
Status: Decreased on prior year
Nature of risk and potential impact:
In recent years the Group has lost (either through redundancy or
attrition) a significant number of people from the business. This
not only represents a risk in terms of knowledge and experience
lost, but has increased the demands on our remaining colleagues.
There is a risk that any significant unplanned attrition of key
individuals could adversely impact the business and its
transformation.
Mitigation:
The Group has identified key skills and role dependencies and
takes steps to recruit and retain these within the business. The
Group also supports key roles with interim contractors and
consultants where necessary. The Group continues to be successful
in recruiting and attracting fresh talent and new skill sets to
ensure we continue to be able to deliver our plans.
Risk: Technology and information security
Status: No change on prior year
Nature of risk and potential impact:
The Group has embarked on a significant and wide ranging
transformation programme that includes replacement of the core
platform IT system. The extent of this transformation is enabling
for our future sustainability and growth. There are risks that the
nature and complexity of the programme impacts the business
adversely through operational issues, cost over-runs or a failure
to deliver to quality.
Mitigation:
The Group has a robust governance and delivery framework which
is applied throughout transformation. We regularly assess and
review progress and deliverables to ensure these are being
effectively managed and controlled.
Risk: International business
Status: No change on prior year
Nature of risk and potential impact:
Our business is broadly diversified by region and operates in
multiple regulated markets worldwide. Whilst this mitigates our
aggregate risk profile it introduces additional risks in terms of
operating cross-border and in multiple environments as a result of
complexity, local laws, regulations, business customs and
practices. The risk may be exacerbated as we operate a central IT
platform, business model and product propositions derived from the
UK offerings.
Mitigation:
The Board has sought to mitigate this risk through further
enhancement of its risk compliance and governance approach. Our
international operations are regularly reviewed by Internal Audit.
We aim to employ people with local expertise who ensure the
business and operations conform to local requirements as well as
Group standards. In addition, we seek the advice of local advisers
where appropriate.
Risk: Conduct and regulatory
Status: No change on prior year
Nature of risk and potential impact:
The risk of customer detriment arising from inappropriate
conduct, practice or behaviour and failing to meet customer needs,
interests or expected outcomes. The risk of fines, penalties,
censure or other sanctions arising from failure to identify or meet
regulatory requirements. The risk that new regulation or changes to
existing interpretation has a material effect on the Group's
operations or cost base.
Mitigation:
We promote a strong compliance culture, strive to put the
interests of the customer first, and value good relationships with
our regulators. Our compliance function supports management in
identifying and meeting our regulatory obligations with relevant
training and procedures. Compliance with relevant regulatory
requirements is monitored in accordance with a risk-based
programme. Our approach to encouraging appropriate conduct is set
out in our conduct risk framework, and is built on culture and
values, supported by appropriate governance and reporting. This
includes a culture in which colleagues are encouraged to focus on
good customer outcomes; a focus on products that meet customer
needs; robust controls, governance, training and risk management
processes. Regulatory and legal change is monitored by the
compliance, legal and risk teams.
Risk: Third party Business Partner
Status: Increased on prior year
Nature of risk and potential impact:
We have a number of key supplier relationships as part of our
business model, particularly in respect of insurance underwriting,
product distribution and information technology. Third party
Business Partner risk relates to the risk that partners may seek to
end or change existing relationships or may not be able to meet
their agreed service level terms. There is a significant risk that
without ongoing engagement with Business Partners our primary route
to market could be constrained.
Mitigation:
The Group continues to engage with Business Partners to ensure
the smooth continuation of services while at the same time
developing and monitoring plans for alternative arrangements and
new distribution opportunities.
Risk: Emerging
Status: Increased on prior year
Nature of risk and potential impact:
Emerging risks are those with uncertain impact, probability and
time frame that could impact the Group. These are the hardest to
define. We analyse each risk and, if needed, develop and apply
mitigation and management plans.
Mitigation:
The external emerging risks that are currently our focus of
attention include the potential UK exit from the European Union,
increasing cyber-crime, and geo-political events impacting key
markets including those in Turkey.
GOING CONCERN
In reaching their view on the preparation of the Group's
financial statements on a going concern basis, the Directors are
required to consider whether the Group can continue in operational
existence for the foreseeable future.
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The Group is in a much improved financial position following the
successful equity raise, restructure of liabilities and refinancing
in February 2015, which returned the consolidated balance sheet to
net assets and significantly increased the Group's net funds. The
Group's operating performance has improved following difficult but
necessary decisions taken in the current and prior year. Residual
redress obligations are now substantially complete. Whilst there
continues to be some uncertainty from medium term trading and
strategic risk, the Group's forecasts show that the Group has the
necessary resources to trade and operate within the level of its
borrowing facilities. After making enquiries, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly they continue to adopt the going concern basis
in preparing the financial statements.
Consolidated income statement
For the year ended 31 December 2015
2014
restated
2015 (note 2)
Note GBP'000 GBP'000
-------------------------------------------------------------------------- ----- --------- ----------
Continuing operations
========================================================================== ===== ========= ==========
Revenue 4 76,771 96,528
========================================================================== ===== ========= ==========
Cost of sales (32,346) (49,895)
-------------------------------------------------------------------------- ----- --------- ----------
Gross profit 44,425 46,633
========================================================================== ===== ========= ==========
Administrative expenses (21,443) (49,848)
-------------------------------------------------------------------------- ----- --------- ----------
Operating profit/(loss) 22,982 (3,215)
-------------------------------------------------------------------------- ----- --------- ----------
Analysed as:
Underlying operating profit 4 6,863 2,807
Exceptional items 5 17,777 (6,022)
MSP charges 13 (1,658) -
-------------------------------------------------------------------------- ----- --------- ----------
Investment revenues 282 432
========================================================================== ===== ========= ==========
Finance costs (1,362) (2,147)
-------------------------------------------------------------------------- ----- --------- ----------
Profit/(loss) before taxation 21,902 (4,930)
========================================================================== ===== ========= ==========
Taxation (3,374) 1,674
-------------------------------------------------------------------------- ----- --------- ----------
Profit/(loss) for the year from continuing operations 18,528 (3,256)
-------------------------------------------------------------------------- ----- --------- ----------
Discontinued operations
========================================================================== ===== ========= ==========
Profit/(loss) for the year from discontinued operations 7 2,309 (3,493)
-------------------------------------------------------------------------- ----- --------- ----------
Profit/(loss) for the year attributable to equity holders of the Company 20,837 (6,749)
-------------------------------------------------------------------------- ----- --------- ----------
Basic earnings/(loss) per share Pence Pence
-------------------------------------------------------------------------- ----- --------- ----------
Continuing operations 6 2.42 (1.90)
========================================================================== ===== ========= ==========
Discontinued operations 6 0.30 (2.04)
-------------------------------------------------------------------------- ----- --------- ----------
Total 2.72 (3.94)
-------------------------------------------------------------------------- ----- --------- ----------
Diluted earnings/(loss) per share Pence Pence
----------------------------------- ---------------------- -------
Continuing operations 6 2.41 (1.90)
=================================== ====================== =======
Discontinued operations 6 0.30 (2.04)
----------------------------------- ---------------------- -------
Total 2.71 (3.94)
----------------------------------- ---------------------- -------
Consolidated statement of comprehensive income
For the year ended 31 December 2015
2015 2014
GBP'000 GBP'000
--------------------------------------------------------------------------------------------- -------- --------
Profit/(loss) for the year 20,837 (6,749)
============================================================================================== ======== ==========
Items that may be reclassified subsequently to profit or loss:
============================================================================================= ======== ==========
Exchange differences on translation of foreign operations 271 111
============================================================================================== ======== ==========
Other comprehensive income for the year net of taxation 271 111
---------------------------------------------------------------------------------------------- -------- ----------
Total comprehensive income/(expense) for the year attributable to equity holders of the
Company 21,108 (6,638)
---------------------------------------------------------------------------------------------- -------- ----------
Consolidated balance sheet
As at 31 December 2015
2015 2014
Note GBP'000 GBP'000
------------------------------- ---- --------- ---------
Non-current assets
=============================== ==== ========= =========
Other intangible assets 8 4,825 808
=============================== ==== ========= =========
Property, plant and equipment 3,502 3,820
=============================== ==== ========= =========
Deferred tax asset 652 2,248
------------------------------- ---- --------- ---------
8,979 6,876
------------------------------- ---- --------- ---------
Current assets
=============================== ==== ========= =========
Insurance assets 317 593
=============================== ==== ========= =========
Inventories 43 93
=============================== ==== ========= =========
Trade and other receivables 12,106 15,709
=============================== ==== ========= =========
Cash and cash equivalents 9 39,810 40,599
------------------------------- ---- --------- ---------
52,276 56,994
------------------------------- ---- --------- ---------
Total assets 61,255 63,870
------------------------------- ---- --------- ---------
Current liabilities
=============================== ==== ========= =========
Insurance liabilities (1,189) (2,019)
=============================== ==== ========= =========
Income tax liabilities (2,483) (2,231)
=============================== ==== ========= =========
Trade and other payables (42,629) (40,631)
=============================== ==== ========= =========
Provisions 11 (2,254) (7,041)
------------------------------- ---- --------- ---------
(48,555) (51,922)
(MORE TO FOLLOW) Dow Jones Newswires
March 24, 2016 03:01 ET (07:01 GMT)
=============================== ==== ========= =========
Net current assets 3,721 5,072
------------------------------- ---- --------- ---------
Non-current liabilities
=============================== ==== ========= =========
Borrowings 10 (2,191) (32,733)
=============================== ==== ========= =========
Deferred tax liabilities (308) (126)
=============================== ==== ========= =========
Trade and other payables - (8,991)
=============================== ==== ========= =========
Provisions 11 (186) (973)
------------------------------- ---- --------- ---------
(2,685) (42,823)
------------------------------- ---- --------- ---------
Total liabilities (51,240) (94,745)
------------------------------- ---- --------- ---------
Net assets/(liabilities) 10,015 (30,875)
------------------------------- ---- --------- ---------
Equity
=============================== ==== ========= =========
Share capital 12 23,939 17,126
=============================== ==== ========= =========
Share premium account 45,225 33,291
=============================== ==== ========= =========
Merger reserve (100,399) (100,399)
=============================== ==== ========= =========
Translation reserve 991 720
=============================== ==== ========= =========
Equalisation reserve 6,243 7,487
=============================== ==== ========= =========
ESOP reserve 13,093 11,891
=============================== ==== ========= =========
Retained earnings/(accumulated
losses) 20,923 (991)
------------------------------- ---- --------- ---------
Total equity/(deficit)
attributable to equity
holders of the Company 10,015 (30,875)
------------------------------- ---- --------- ---------
Consolidated statement of changes in equity
For the year ended 31 December 2015
Retained
Share
Share premium Merger Translation Equalisation ESOP earnings/
capital account reserve reserve reserve reserve (accumulated losses) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ---- ------- ------- --------- ----------- ------------ ------- --------------------- --------
At 1 January
2014 17,120 33,292 (100,399) 609 8,129 11,688 5,259 (24,302)
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Total
comprehensive
expense - - - 111 - - (6,749) (6,638)
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Movement on
equalisation
reserve - - - - (642) - 642 -
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Current tax
charge on
equalisation
reserve
movement - - - - - - (138) (138)
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Equity settled
share-based
payment
charge - - - - - 203 - 203
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Deferred tax
on
share-based
payment
charge - - - - - - 1 1
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Exercise of
share options 6 (1) - - - - (6) (1)
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
At 31 December
2014 17,126 33,291 (100,399) 720 7,487 11,891 (991) (30,875)
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Total
comprehensive
income - - - 271 - - 20,837 21,108
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Movement on
equalisation
reserve - - - - (1,244) - 1,244 -
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Current tax
charge on
equalisation
reserve
movement - - - - - - (252) (252)
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Equity settled
share-based
payment
charge - - - - - 1,466 - 1,466
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Deferred tax
on
share-based
payment
charge - - - - - - 86 86
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Purchase of
ordinary
shares 12 - - - - - (264) - (264)
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Exercise of
share options 12 1 (1) - - - - (1) (1)
============== ==== ======= ======= ========= =========== ============ ======= ===================== ========
Other ordinary
share issues 12 6,812 11,935 - - - - - 18,747
-------------- ---- ------- ------- --------- ----------- ------------ ------- --------------------- --------
At 31 December
2015 23,939 45,225 (100,399) 991 6,243 13,093 20,923 10,015
-------------- ---- ------- ------- --------- ----------- ------------ ------- --------------------- --------
Consolidated cash flow statement
For the year ended 31 December 2015
2015 2014
Note GBP'000 GBP'000
------------------------------------ ---- -------- --------
Net cash used in operating
activities 14 (1,360) (32,906)
==================================== ==== ======== ========
Investing activities
==================================== ==== ======== ========
Interest received 282 432
==================================== ==== ======== ========
Purchases of property, plant
and equipment (194) (190)
==================================== ==== ======== ========
Purchases of intangible assets (4,435) (406)
==================================== ==== ======== ========
Cash consideration in respect
of sale of discontinued operation 7 - 275
==================================== ==== ======== ========
Credit associated with disposal
of discontinued operation 7 - 28
==================================== ==== ======== ========
Investment in joint venture 7 - (1,000)
------------------------------------ ---- -------- --------
Net cash used in investing
activities (4,347) (861)
==================================== ==== ======== ========
Financing activities
==================================== ==== ======== ========
Repayment of bank loans (12,000) -
==================================== ==== ======== ========
(Repayment of)/proceeds from
the Commission Deferral Agreement (1,304) 8,831
==================================== ==== ======== ========
Proceeds from the Second Commission
Deferral Agreement 1,304 -
==================================== ==== ======== ========
Interest paid (903) (514)
==================================== ==== ======== ========
Costs of refinancing (220) -
==================================== ==== ======== ========
Costs of compromising the
Commission Deferral Agreement (743) (193)
==================================== ==== ======== ========
Issue of ordinary share capital
and associated costs 18,980 (499)
------------------------------------ ---- -------- --------
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March 24, 2016 03:01 ET (07:01 GMT)
Net cash from financing activities 5,114 7,625
------------------------------------ ---- -------- --------
Net decrease in cash and cash
equivalents (593) (26,142)
==================================== ==== ======== ========
Effect of foreign exchange
rate changes (196) (159)
==================================== ==== ======== ========
Cash and cash equivalents
at 1 January 40,599 66,900
------------------------------------ ---- -------- --------
Cash and cash equivalents
at 31 December 9 39,810 40,599
------------------------------------ ---- -------- --------
Notes to condensed financial statements
1. General information
While the financial information included in this annual results
announcement has been computed in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards as adopted for use by the European Union ('IFRS') and
with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS, this announcement does not itself contain
sufficient information to comply with IFRS. The Company will
publish full financial statements that comply with IFRS in April
2016.
The figures shown for the year ended 31 December 2015 are
unaudited and do not represent statutory accounts within the
meaning of section 435 of the Companies Act 2006. The statutory
accounts for the year ended 31 December 2015 will be delivered to
the Registrar of Companies after the Annual General Meeting. This
announcement has been agreed with the Company's auditors for
release. A copy of this preliminary announcement will be published
on the Company's website www.cppgroupplc.com. The Directors are
responsible for the maintenance and integrity of the Company
website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements differ from
legislation in other jurisdictions.
2. Accounting policies
The same accounting policies, presentation and methods of
computation are followed in the condensed financial statements as
were applied in the Group's audited financial statements for the
year ended 31 December 2014 except for comparative amounts that
have been restated to reflect the Airport Angel business as
discontinued. The following Standards and Interpretations have
become effective and have been adopted in these condensed financial
statements. Their adoption has not had any material impact on the
Group. No Standards or Interpretations have been adopted early in
these condensed financial statements.
Standard/Interpretation Subject
----------------------------- ------------------
Annual improvements to IFRSs 2011 - 2013 cycle
----------------------------- ------------------
3. Critical accounting judgements and key sources of estimation
uncertainty
Provisions
The Group's provisions are detailed in note 11. The remaining
provisions include estimates relating to response rates for
customer redress and the non-utilisation period at a vacated office
in the UK.
Any changes to the estimates applied would lead to a change in
the provisions required which would be reflected through the
consolidated income statement
Share-based payments
Determining the fair value of share options granted requires
estimation of share price volatility, risk-free rates and a
discount for potential cancellations. Details of the assumptions
made are included in note 13.
Changes to the assumptions would alter the share-based payment
charge for the current and subsequent periods. Valuations for
equity settled share-based payments are set at grant date.
Current tax
The Group is required to estimate the corporation tax payable
for the year in each of the territories in which it operates.
Applicable tax regulations are complex and require that judgement
be exercised in calculating the taxable profit. In many countries
in which the Group operates, filed tax positions remain open to
challenge by local tax authorities for several years. Corporation
tax is therefore accrued on the Directors' assessment of territory
specific tax law and likelihood of settlement.
Any changes to estimates of uncertain tax positions would be
reflected in the consolidated income statement.
4. Segmental analysis
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the Board of Directors to allocate resources
to the segments and to assess their performance.
The Group is managed on the basis of three broad geographical
regions:
- UK and Ireland (UK and Ireland);
- Europe and Latin America (Spain, Italy, Germany, Turkey,
Mexico, Portugal, France and Brazil);
- Asia Pacific (India, Hong Kong, China, Malaysia and
Singapore).
Segment revenues and performance have been as follows:
Europe and Asia
UK and Ireland Latin America Pacific Total
2015 2015 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- --------------- --------------- --------- ---------
Year ended 31 December 2015
============================================================== =============== =============== ========= =========
Continuing operations
============================================================== =============== =============== ========= =========
Revenue - external sales 42,979 25,455 8,337 76,771
============================================================== =============== =============== ========= =========
Cost of sales (14,939) (12,479) (4,928) (32,346)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Gross profit 28,040 12,976 3,409 44,425
============================================================== =============== =============== ========= =========
Depreciation and amortisation (292) (264) (30) (586)
============================================================== =============== =============== ========= =========
Other administrative expenses excluding exceptional items and
MSP charges (25,759) (8,118) (3,099) (36,976)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Regional underlying operating profit 1,989 4,594 280 6,863
-------------------------------------------------------------- --------------- --------------- --------- ---------
Exceptional items (note 5) 17,777
-------------------------------------------------------------- --------------- --------------- --------- ---------
MSP charges (1,658)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Operating profit 22,982
============================================================== =============== =============== ========= =========
Investment revenues 282
============================================================== =============== =============== ========= =========
Finance costs (1,362)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Profit before taxation 21,902
============================================================== =============== =============== ========= =========
Taxation (3,374)
-------------------------------------------------------------- --------------- --------------- --------- ---------
Profit for the year from continuing operations 18,528
-------------------------------------------------------------- --------------- --------------- --------- ---------
Discontinued operations
============================================================== =============== =============== ========= =========
Profit for the year from discontinued operations (note 7) 2,309
-------------------------------------------------------------- --------------- --------------- --------- ---------
Profit for the year 20,837
-------------------------------------------------------------- --------------- --------------- --------- ---------
(MORE TO FOLLOW) Dow Jones Newswires
March 24, 2016 03:01 ET (07:01 GMT)
For the purposes of resource allocation and assessing
performance, operating costs and revenues are allocated to the
regions in which they are earned or incurred. The above does not
reflect additional net charges of central costs of GBP1,704,000
presented within UK and Ireland in the table above which have been
charged to other regions for statutory purposes.
Europe and Asia
UK and Ireland Latin America Pacific Total
2014 2014 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------- --------------- --------------- --------- ---------
Year ended 31 December 2014 - restated (note 2)
=========================================================== =============== =============== ========= =========
Continuing operations
=========================================================== =============== =============== ========= =========
Revenue - external sales 57,412 32,463 6,653 96,528
=========================================================== =============== =============== ========= =========
Cost of sales (29,919) (16,357) (3,619) (49,895)
----------------------------------------------------------- --------------- --------------- --------- ---------
Gross profit 27,493 16,106 3,034 46,633
=========================================================== =============== =============== ========= =========
Depreciation and amortisation (1,243) (784) (34) (2,061)
=========================================================== =============== =============== ========= =========
Other administrative expenses excluding exceptional items (28,372) (10,160) (3,233) (41,765)
----------------------------------------------------------- --------------- --------------- --------- ---------
Regional underlying operating (loss)/profit (2,122) 5,162 (233) 2,807
----------------------------------------------------------- --------------- --------------- --------- ---------
Exceptional items (note 5) (6,022)
----------------------------------------------------------- --------------- --------------- --------- ---------
Operating loss (3,215)
=========================================================== =============== =============== ========= =========
Investment revenues 432
=========================================================== =============== =============== ========= =========
Finance costs (2,147)
----------------------------------------------------------- --------------- --------------- --------- ---------
Loss before taxation (4,930)
=========================================================== =============== =============== ========= =========
Taxation 1,674
----------------------------------------------------------- --------------- --------------- --------- ---------
Loss for the year from continuing operations (3,256)
----------------------------------------------------------- --------------- --------------- --------- ---------
Discontinued operations
=========================================================== =============== =============== ========= =========
Loss for the year from discontinued operations (note 7) (3,493)
----------------------------------------------------------- --------------- --------------- --------- ---------
Loss for the year (6,749)
----------------------------------------------------------- --------------- --------------- --------- ---------
For the purposes of resource allocation and assessing
performance, operating costs and revenues are allocated to the
regions in which they are earned or incurred. The above does not
reflect additional net charges of central costs of GBP1,845,000
presented within UK and Ireland in the table above which have been
charged to other regions for statutory purposes.
Segment assets
2014
restated
2015 (note 2)
GBP'000 GBP'000
-------------------------------------------- --------- -----------
UK and Ireland 47,667 49,346
============================================ ========= ===========
Europe and Latin America 8,074 7,012
============================================ ========= ===========
Asia Pacific 4,065 2,937
-------------------------------------------- --------- -----------
Total segment assets 59,806 59,295
============================================ ========= ===========
Assets relating to discontinued operations 797 2,327
============================================ ========= ===========
Unallocated assets 652 2,248
-------------------------------------------- --------- -----------
Consolidated total assets 61,255 63,870
-------------------------------------------- --------- -----------
Deferred tax is not allocated to segments.
Capital expenditure
Intangible assets Property, plant and equipment
2015 2014 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- -------------- ---------------
Continuing operations
====================================== ========= ========= ============== ===============
UK and Ireland 4,415 393 129 118
====================================== ========= ========= ============== ===============
Europe and Latin America 21 13 48 61
====================================== ========= ========= ============== ===============
Asia Pacific - - 17 11
-------------------------------------- --------- --------- -------------- ---------------
Additions from continuing operations 4,436 406 194 190
-------------------------------------- --------- --------- -------------- ---------------
Revenues from major products
2014
restated
2015 (note 2)
GBP'000 GBP'000
------------------------------------ --------- ----------
Continuing operations
==================================== ========= ==========
Retail assistance policies 68,139 82,652
==================================== ========= ==========
Retail insurance policies 5,384 10,229
==================================== ========= ==========
Wholesale policies 2,344 2,802
==================================== ========= ==========
Non-policy revenue 904 845
------------------------------------ --------- ----------
Revenue from continuing operations 76,771 96,528
==================================== ========= ==========
Discontinued operations 13,107 12,278
------------------------------------ --------- ----------
Consolidated total revenue 89,878 108,806
------------------------------------ --------- ----------
Major product streams are disclosed on the basis monitored by
the Board of Directors. For the purpose of this product analysis,
"retail assistance policies" are those which may be insurance
backed but contain a bundle of assistance and other benefits;
"retail insurance policies" are those which protect against a
single insurance risk; "wholesale policies" are those which are
provided by Business Partners to their customers in relation to an
on-going product or service which is provided for a specified
period of time; "non-policy revenues" are those which are not in
connection with providing an on-going service to policyholders for
a specified period of time.
Geographical information
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March 24, 2016 03:01 ET (07:01 GMT)
The Group operates across a wide number of territories, of which
the UK and Spain are considered individually material. Revenue from
external customers and non-current assets (excluding deferred tax)
by geographical location are detailed below:
External revenues Non-current assets
2014 2014
restated restated
2015 (note 2) 2015 (note 2)
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ---------- -------- ----------
Continuing operations
============================= ========= ========== ======== ==========
UK 42,179 56,134 8,062 4,064
============================= ========= ========== ======== ==========
Spain 11,873 15,215 122 176
============================= ========= ========== ======== ==========
Other 22,719 25,179 143 352
----------------------------- --------- ---------- -------- ----------
Total continuing operations 76,771 96,528 8,327 4,592
============================= ========= ========== ======== ==========
Discontinued operations 13,107 12,278 - 36
----------------------------- --------- ---------- -------- ----------
89,878 108,806 8,327 4,628
----------------------------- --------- ---------- -------- ----------
Information about major customers
There are no customers either in the current or prior year from
which the Group earns more than 10% of its revenue.
5. Exceptional items
2014
restated
2015 (note 2)
Note GBP'000 GBP'000
---------------------------------------------------------------------------------------- ----- --------- ----------
Commission deferral compromise and associated costs Customer redress and associated
costs (19,388) 744
======================================================================================== ===== ========= ==========
Customer redress and associated costs 11 900 3,000
======================================================================================== ===== ========= ==========
Restructuring costs 711 2,278
---------------------------------------------------------------------------------------- ----- --------- ----------
Exceptional (credit)/charge included in operating profit or loss (17,777) 6,022
======================================================================================== ===== ========= ==========
Tax on exceptional items 2,344 (646)
---------------------------------------------------------------------------------------- ----- --------- ----------
Total exceptional (credit)/charge after tax (15,433) 5,376
======================================================================================== ===== ========= ==========
Discontinued operations after tax (38) 301
---------------------------------------------------------------------------------------- ----- --------- ----------
(15,471) 5,677
---------------------------------------------------------------------------------------- ----- --------- ----------
The gain from the commission deferral compromise and associated
costs of GBP19,388,000 (2014: GBP744,000 charge) relates to the
settlement in full of the Commission Deferral Agreement for a
payment of GBP1,304,000, net of costs associated with finalising
the agreement to compromise.
The customer redress and associated costs of GBP900,000 (2014:
GBP3,000,000) relate to the latest estimate with respect to
residual customer redress activity, which has arisen following
changes to commission arrangements in the UK.
The restructuring costs of GBP711,000 (2014: GBP2,278,000)
principally relate to redundancy programmes and associated costs
across the Group. The majority of this cost is located in
Spain.
6. Earnings/(loss) per share
Basic and diluted earnings/(loss) per share have been calculated
in accordance with IAS 33 'Earnings per Share'. Underlying
earnings/(loss) per share have also been presented in order to give
a better understanding of the performance of the business. In
accordance with IAS 33, potential ordinary shares are only
considered dilutive when their conversion would decrease the
earnings per share from continuing operations attributable to
equity holders.
Earnings/(loss)
Continuing operations Discontinued operations Total
----------------------- ------------------------- --------------------
2014 2014
restated restated
2015 (note 2) 2015 (note 2) 2015 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- ----------- ----------- ------------ --------- ---------
Earnings/(loss) for the purposes of
basic and diluted earnings/(loss) per
share 18,528 (3,256) 2,309 (3,493) 20,837 (6,749)
======================================== ========== =========== =========== ============ ========= =========
Exceptional items (net of tax) (15,433) 5,376 (38) (10) (15,471) 5,366
======================================== ========== =========== =========== ============ ========= =========
MSP charges (net of tax) 1,318 - - - 1,318 -
---------------------------------------- ---------- ----------- ----------- ------------ --------- ---------
Earnings/(loss) for the purposes of
underlying basic and diluted
earnings/(loss) per share 4,413 2,120 2,271 (3,503) 6,684 (1,383)
---------------------------------------- ---------- ----------- ----------- ------------ --------- ---------
Number of shares
Number
restated
Number (note 2)
(thousands) (thousands)
---------------------------------------------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares for the purposes of basic earnings/(loss)
per share 766,667 171,622
======================================================================================== ============= =============
Effect of dilutive potential ordinary shares: share options 2,748 6,059
---------------------------------------------------------------------------------------- ------------- -------------
Weighted average number of ordinary shares for the purposes of diluted earnings/(loss)
per
share 769,415 177,681
---------------------------------------------------------------------------------------- ------------- -------------
Continuing operations Discontinued operations Total
----------------------- ------------------------- -------------------
2014 2014 2014
restated restated restated
2015 (note 2) 2015 (note 2) 2015 (note 2)
Pence Pence Pence Pence Pence Pence
--------------------------------------------- --------- ------------ ---------- ------------- ------- ----------
Basic and diluted earnings/(loss) per share
============================================= ========= ============ ========== ============= ======= ==========
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March 24, 2016 03:01 ET (07:01 GMT)
Basic 2.42 (1.90) 0.30 (2.04) 2.72 (3.94)
============================================= ========= ============ ========== ============= ======= ==========
Diluted 2.41 (1.90) 0.30 (2.04) 2.71 (3.94)
--------------------------------------------- --------- ------------ ---------- ------------- ------- ----------
Basic and diluted underlying earnings/(loss)
per share
============================================= ========= ============ ========== ============= ======= ==========
Basic 0.58 1.23 0.30 (2.04) 0.88 (0.81)
============================================= ========= ============ ========== ============= ======= ==========
Diluted 0.57 1.19 0.30 (1.97) 0.87 (0.78)
--------------------------------------------- --------- ------------ ---------- ------------- ------- ----------
The Group has 171,650,000 deferred shares which have no rights
to receive dividends and will only have very limited rights on a
return of capital. The deferred shares have not been admitted to
trading on AIM or any other Stock Exchange. Accordingly, these
shares have not been considered in the calculation of
earnings/(loss) per share.
On 19 January 2016, the Company awarded options over 26,050,000
ordinary shares through the 2016 LTIP. This award occurred after
the period end and as such is not considered in the current year
diluted earnings per share calculation.
7. Discontinued operations
The Group announced on 27 May 2015 its decision to cease
providing airport lounge access services (Airport Angel). The
closure of the business was completed on 31 December 2015.
In accordance with IFRS 5 "Non-current Assets Held for Sale and
Discontinued Operations" this operation has been presented as a
discontinued operation. The comparative figure includes the
disposal of Home3 Assistance Limited (Home3) which completed in
March 2014.
The consolidated income statement, summary of cash flows and
assets and liabilities of this business is set out below:
(i) Consolidated income statement
2015 2014 - restated (note 2)
Airport Angel Airport Angel Home3 North America Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------------- -------------- --------- -------------- ---------
Revenue 13,107 12,278 - - 12,278
==================================== ============== ============== ========= ============== =========
Cost of sales (8,808) (10,879) - - (10,879)
------------------------------------ -------------- -------------- --------- -------------- ---------
Gross profit 4,299 1,399 - - 1,399
==================================== ============== ============== ========= ============== =========
Administrative expenses (2,186) (3,982) - - (3,982)
Share of loss of joint venture - - (1,096) - (1,096)
------------------------------------ -------------- -------------- --------- -------------- ---------
Operating profit/(loss) 2,113 (2,583) (1,096) - (3,679)
------------------------------------ -------------- -------------- --------- -------------- ---------
Analysed as:
Underlying operating profit/(loss) 2,060 (2,282) (1,096) - (3,378)
Exceptional items 53 (301) - - (301)
------------------------------------ -------------- -------------- --------- -------------- ---------
Finance costs (161) (149) - - (149)
------------------------------------ -------------- -------------- --------- -------------- ---------
Profit/(loss) before taxation 1,952 (2,732) (1,096) - (3,828)
==================================== ============== ============== ========= ============== =========
Taxation 357 24 - - 24
------------------------------------ -------------- -------------- --------- -------------- ---------
Profit/(loss) after tax 2,309 (2,708) (1,096) - (3,804)
==================================== ============== ============== ========= ============== =========
Profit on disposal - - 265 46 311
------------------------------------ -------------- -------------- --------- -------------- ---------
Profit/(loss) for the year 2,309 (2,708) (831) 46 (3,493)
------------------------------------ -------------- -------------- --------- -------------- ---------
The Group has not made any disposals required to comply with
IFRS 5 in the current year.
2015 2014
Total Home3 North America Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ---------- --------- -------------- ---------
Proceeds - 275 - 275
========================================= ========== ========= ============== =========
(Costs)/credit associated with disposal - (10) 46 36
----------------------------------------- ---------- --------- -------------- ---------
Profit on disposal - 265 46 311
----------------------------------------- ---------- --------- -------------- ---------
(ii) Summary of cash flows
2014
restated
2015 (note 2)
GBP'000 GBP'000
----------------------------------------------------------------- --------- ----------
Net cash flows from operating activities (432) (3,703)
================================================================= ========= ==========
Net cash flows from investing activities 21 34
================================================================= ========= ==========
Net cash flows from financing activities (161) (148)
================================================================= ========= ==========
Cash consideration in respect of sale of discontinued operation - 275
================================================================= ========= ==========
Credit associated with the disposal of discontinued operation - 28
================================================================= ========= ==========
Investment in joint venture - (1,000)
----------------------------------------------------------------- --------- ----------
Net cash outflow (572) (4,514)
----------------------------------------------------------------- --------- ----------
8. Other intangible assets
Contractual
arrangements with Business Internally generated Externally acquired
third parties relationships software software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===================== =================== ==================== ==================== ==================== ========
Cost:
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 1 January 2014 17,420 1,211 19,478 19,402 57,511
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Additions - - 194 212 406
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Disposals - - - (151) (151)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Exchange
adjustments - - - (66) (66)
===================== =================== ==================== ==================== ==================== ========
At 1 January 2015 17,420 1,211 19,672 19,397 57,700
(MORE TO FOLLOW) Dow Jones Newswires
March 24, 2016 03:01 ET (07:01 GMT)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Additions - - 574 3,862 4,436
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Disposals (17,420) (1,211) - (276) (18,907)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Exchange
adjustments - - - (83) (83)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 31 December 2015 - - 20,246 22,900 43,146
===================== =================== ==================== ==================== ==================== ========
Accumulated
amortisation:
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 1 January 2014 15,153 1,211 19,181 18,667 54,212
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Provided during the
year 2,012 - 297 575 2,884
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Disposals - - - (147) (147)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Exchange
adjustments - - - (57) (57)
===================== =================== ==================== ==================== ==================== ========
At 1 January 2015 17,165 1,211 19,478 19,038 56,892
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Provided during the
year 255 - - 136 391
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Disposals (17,420) (1,211) - (275) (18,906)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Impairment - - - 21 21
--------------------- ------------------- -------------------- -------------------- -------------------- --------
Exchange
adjustments - - - (77) (77)
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 31 December 2015 - - 19,478 18,843 38,321
===================== =================== ==================== ==================== ==================== ========
Carrying amount:
--------------------- ------------------- -------------------- -------------------- -------------------- --------
At 31 December 2014 255 - 194 359 808
===================== =================== ==================== ==================== ==================== ========
At 31 December 2015 - - 768 4,057 4,825
===================== =================== ==================== ==================== ==================== ========
9. Cash and cash equivalents
Consolidated cash and cash equivalents of GBP39,810,000 (2014:
GBP40,599,000) comprises cash held on demand by the Group and short
term deposits.
Cash and cash equivalents includes the following:
i) GBP12,126,000 (2014: GBP21,542,000) cash maintained by the
Group's insurance businesses for solvency purposes; and
ii) GBP21,753,000 (2014: GBP13,380,000) cash held in the UK's
regulated entities CPPL and HIL which is restricted by the terms of
the VVOP and cannot be distributed to the wider Group without FCA
approval. This restricted cash whilst being unavailable to
distribute to the wider Group, is available to the regulated entity
in which it exists including for operational and residual customer
redress purposes.
Concentration of credit risk is reduced, as far as practicable,
by placing cash on deposit across a number of institutions with the
best available credit ratings. Credit quality of counterparties are
as follows:
2015 2014
GBP'000 GBP'000
---------------------------------- --------- ---------
AA 1,679 1,537
================================== ========= =========
A 36,064 37,069
================================== ========= =========
BBB 548 1,000
================================== ========= =========
BB 1,405 978
================================== ========= =========
Rating information not available 114 15
---------------------------------- --------- ---------
39,810 40,599
---------------------------------- --------- ---------
Ratings are measured using Fitch's long term ratings, which are
defined such that ratings "AAA" to "BBB" denote investment grade
counterparties, offering low to moderate credit risk. "AAA"
represents the highest credit quality, indicating that the
counterparty's ability to meet financial commitments is highly
unlikely to be adversely affected by foreseeable events.
10. Borrowings
The carrying value of the Group's financial liabilities, for
short term borrowings and long term borrowings, are as follows:
2015 2014
GBP'000 GBP'000
-------------------------------------- --------- ---------
Bank loans due outside of one year 1,000 13,000
====================================== ========= =========
Less: unamortised issue costs (152) (969)
====================================== ========= =========
Commission Deferral Agreement - 20,702
====================================== ========= =========
Second Commission Deferral Agreement 1,343 -
-------------------------------------- --------- ---------
Borrowings due outside of one year 2,191 32,733
-------------------------------------- --------- ---------
Analysis of repayments:
2015 2014
GBP'000 GBP'000
------------------------------- --------- ---------
Within one year - -
=============================== ========= =========
In the second year 1,343 13,000
=============================== ========= =========
In the third to fifth years 1,000 20,702
------------------------------- --------- ---------
Total repayments 2,343 33,702
=============================== ========= =========
Less: unamortised issue costs (152) (969)
------------------------------- --------- ---------
Total carrying value 2,191 32,733
------------------------------- --------- ---------
The Group's bank debt is in the form of a GBP5,000,000 revolving
credit facility (RCF). The current RCF became effective on 11
February 2015. The Group is entitled to roll over repayment of
amounts drawn down, subject to all amounts outstanding falling due
for repayment on expiry of the facility on 28 February 2018.
The RCF bears interest at a variable rate of LIBOR plus a margin
of 4%. It is secured by fixed and floating charges on certain
assets of the Group. The financial covenants of the RCF are based
on the interest cover and minimum total cash balance of the Group.
The Group has been in compliance with these covenants since
inception of the RCF.
All amounts outstanding in respect of the Second Commission
Deferral Agreement fall due for repayment on expiry of the
agreement on 31 January 2017. The Commission Deferral Agreement
bears interest at a fixed rate of 3.5% and is secured by charges
over the assets of CPPL in substantially similar form and terms to
the security granted under the RCF.
The weighted average interest rates paid during the year were as
follows:
2015 2014
% %
-------------------------------- ----- -----
Bank loans 2.5 4.5
================================ ===== =====
Commission Deferral Agreements 3.5 3.5
-------------------------------- ----- -----
Weighted average 2.9 3.9
-------------------------------- ----- -----
The bank loans weighted average interest rate of 2.5% comprises
the interest rate charged on the drawn amount and the interest rate
charged for the commitment on the undrawn element.
At 31 December 2015, the Group has GBP4,000,000 undrawn
committed borrowing facilities (2014: GBPnil).
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March 24, 2016 03:01 ET (07:01 GMT)
11. Provisions
Customer Customer
redress and redress and
associated associated
Onerous leases costs Total Onerous leases costs Total
2015 2015 2015 2014 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------------- ------------- --------- --------------- ------------- ---------
At 1 January 1,658 6,356 8,014 - 37,398 37,398
================================ =============== ============= ========= =============== ============= =========
(Credited)/charged to the
income statement (97) 900 803 1,658 3,000 4,658
================================ =============== ============= ========= =============== ============= =========
Customer redress and associated
costs paid in the year - (4,821) (4,821) - (34,042) (34,042)
================================ =============== ============= ========= =============== ============= =========
Utilisation of onerous lease
provision in the year (732) - (732) - - -
================================ =============== ============= ========= =============== ============= =========
Transfer to trade and other
payables - (824) (824) - - -
-------------------------------- --------------- ------------- --------- --------------- ------------- ---------
At 31 December 829 1,611 2,440 1,658 6,356 8,014
-------------------------------- --------------- ------------- --------- --------------- ------------- ---------
The customer redress and associated cost provision comprises
anticipated compensation payable to customers through residual
customer redress exercises and associated professional fees. The
outstanding regulatory fine of GBP8,500,000 is included in trade
and other payables.
The onerous lease provision reflects the future lease payments
and associated costs in the expected non-utilisation period at one
of our vacated offices in the UK.
Customer redress and associated costs are expected to be settled
within one year of the balance sheet date and onerous lease
provisions are expected to be settled within two years of the
balance sheet date.
Provisions are expected to be settled in the following
periods:
Customer Customer
redress and redress and
associated associated
Onerous leases costs Total Onerous leases costs Total
2015 2015 2015 2014 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------------- ------------- --------- --------------- ------------- ---------
Within one year 643 1,611 2,254 685 6,356 7,041
===================== =============== ============= ========= =============== ============= =========
Outside of one year 186 - 186 973 - 973
--------------------- --------------- ------------- --------- --------------- ------------- ---------
At 31 December 829 1,611 2,440 1,658 6,356 8,014
--------------------- --------------- ------------- --------- --------------- ------------- ---------
12. Share capital
Ordinary Ordinary Deferred Ordinary Ordinary Deferred
shares of 10 shares of 1 shares of 9 shares of 10 shares of 1 shares of 9
pence each penny each pence each pence each penny each pence each
(thousands) (thousands) (thousands) GBP'000 GBP'000 GBP'000
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Called up and
allotted:
================ =============== =============== =============== =============== =============== ===============
At 1 January
2015 171,650 - - 17,126 - -
================ =============== =============== =============== =============== =============== ===============
Issue of shares
in connection
with:
================ =============== =============== =============== =============== =============== ===============
Capital
reorganisation (171,650) 171,650 171,650 (17,126) 1,713 15,413
================ =============== =============== =============== =============== =============== ===============
February
placement - 666,667 - - 6,667 -
================ =============== =============== =============== =============== =============== ===============
June share
issue - 8,550 - - 86 -
================ =============== =============== =============== =============== =============== ===============
November share
issue - 5,883 - - 59 -
================ =============== =============== =============== =============== =============== ===============
Exercise of
share options - 84 - - 1 -
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 December
2015 - 852,834 171,650 - 8,526 15,413
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
On 20 January 2015, each of the Company's 10 pence ordinary
shares was subdivided and redesignated into one new ordinary share
of 1 penny each and one new deferred share of 9 pence each. Each
new ordinary share of 1 penny carries the same rights as the old 10
pence ordinary share. Deferred shares have no voting rights, no
rights to receive dividends and only very limited rights on a
return of capital. The deferred shares have not been listed for
trading in any market and are not freely transferable.
On 11 February 2015, the Company transferred the trading of its
shares from the main market of the London Stock Exchange to AIM. On
transfer to AIM, as part of a placing, the Company also issued
666,666,667 1 penny ordinary shares for cash consideration of
GBP20,000,000. Costs of the share issue of GBP1,686,000 have been
charged to the share premium account.
On 25 June 2015, the Company issued 8,550,000 1 penny ordinary
shares as part of the Group's new share incentive scheme, the MSP.
The newly issued shares, which represent investment shares in the
terms of the plan, were purchased for total consideration of
GBP257,000. The second investment date for MSP completed on 24
November 2015, resulting in the issue of a further 5,883,000 1
penny ordinary shares which were purchased for total consideration
of GBP176,000.
The ordinary shares issued in the placing and MSP have increased
the share capital of the Company by GBP6,812,000 and increased the
share premium account by GBP11,935,000.
On 24 November 2015, the CPPGroup Plc Employee Benefit Trust
(EBT) purchased 1,763,000 of the Company's ordinary shares for
total cash consideration of GBP264,000. The total amount paid to
acquire the shares has been deducted from the ESOP reserve. As at
31 December 2015, the total number of ordinary shares held by the
EBT was 1,763,000 (2014: nil).
During the year, the Company issued 84,347 shares to option
holders for total consideration of GBP1,000.
Of the 852,833,955 ordinary shares issued at 31 December 2015,
852,333,956 are fully paid and 499,999 are partly paid.
The ordinary shares are entitled to the profits of the Company
which it may from time to time determine to distribute in respect
of any financial year or period.
All holders of ordinary shares shall have the right to attend
and vote at all general meetings of the Company. On a return of
assets on liquidation, the assets (if any) remaining, after the
debts and liabilities of the Company and the costs of winding up
have been paid or allowed for, shall belong to, and be distributed
amongst, the holders of all the ordinary shares in proportion to
the number of such ordinary shares held by them respectively.
13. Share-based payment
(MORE TO FOLLOW) Dow Jones Newswires
March 24, 2016 03:01 ET (07:01 GMT)
The MSP was implemented, subsequent to the transfer of the
Company's shares to AIM in 2015, to more closely align senior
management interests with those of shareholders. MSP charges
separately disclosed in the income statement include GBP1,457,000
(2014: GBPnil) relating to the share-based payment charges. There
have been 38,010,000 options granted in the current year as part of
the MSP; the plan was not in operation in the prior year.
2015 2014
Number of share Weighted average Number of share Weighted average
options exercise price options exercise price
(thousands) (GBP) (thousands) (GBP)
----------------------- ---------------------- --------------------- ---------------------- ----------------------
MSP
======================= ====================== ===================== ====================== ======================
Outstanding at 1
January - - - -
======================= ====================== ===================== ====================== ======================
Granted during the
year 38,010 0.01 - -
======================= ====================== ===================== ====================== ======================
Forfeited during the
year (1,875) 0.01 - -
----------------------- ---------------------- --------------------- ---------------------- ----------------------
Outstanding at 31
December 36,135 0.01 - -
----------------------- ---------------------- --------------------- ---------------------- ----------------------
Options granted under the MSP have an exercise price of 1 penny
and they vest over a three year period, with 25% vesting on the
first anniversary of the grant date, 25% vesting on the second
anniversary and 50% vesting on the third anniversary. Options lapse
if not exercised within ten years of the grant date and will lapse
if option holders cease to be employed by the Group or sell any of
their investment shares.
The options outstanding at 31 December 2015 had a weighted
average remaining contractual life of two years.
The principal assumptions underlying the valuation of the
options granted during the year at the date of grant are as
follows:
MSP
2015
--------------------------------- --------
Weighted average share price GBP0.09
================================= ========
Weighted average exercise price GBP0.01
================================= ========
Expected volatility 140.93%
================================= ========
Expected life 2 years
================================= ========
Risk-free rate 0.76%
================================= ========
Dividend yield n/a
--------------------------------- --------
There have been 38,010,000 share options granted in the current
year. The aggregate estimated fair value of the options and shares
granted in the current year under the MSP was GBP3,208,000.
14. Reconciliation of operating cash flows
2015 2014
GBP'000 GBP'000
------------------------------------------------------------------------ --------- ---------
Profit/(loss) for the year 20,837 (6,749)
======================================================================== ========= =========
Adjustment for:
======================================================================== ========= =========
Depreciation and amortisation 856 4,155
======================================================================== ========= =========
Equity settled share based payment expense 1,466 203
======================================================================== ========= =========
Impairment loss on intangible assets and property, plant and equipment 21 86
======================================================================== ========= =========
Loss on disposal of property, plant and equipment 16 43
======================================================================== ========= =========
Profit on disposal of discontinued operations - (311)
======================================================================== ========= =========
Commission deferral compromise and associated costs (19,388) 744
======================================================================== ========= =========
Share of loss of joint venture - 1,096
======================================================================== ========= =========
Investment revenues (282) (432)
======================================================================== ========= =========
Finance costs 1,523 2,296
======================================================================== ========= =========
Income tax expense/(credit) 3,017 (1,698)
------------------------------------------------------------------------ --------- ---------
Operating cash flows before movements in working capital 8,066 (567)
======================================================================== ========= =========
Decrease in inventories 50 56
======================================================================== ========= =========
Decrease in receivables 2,234 5,202
======================================================================== ========= =========
Decrease in insurance assets 276 2,794
======================================================================== ========= =========
Decrease in payables (4,410) (9,892)
======================================================================== ========= =========
Decrease in insurance liabilities (830) (1,970)
======================================================================== ========= =========
Decrease in provisions (5,574) (29,384)
------------------------------------------------------------------------ --------- ---------
Cash used in operations (188) (33,761)
======================================================================== ========= =========
Income taxes (paid)/repaid (1,172) 855
------------------------------------------------------------------------ --------- ---------
Net cash used in operating activities (1,360) (32,906)
------------------------------------------------------------------------ --------- ---------
15. Related party transactions and control
Ultimate controlling party
Following the equity raise in February 2015, Mr Hamish Ogston's
holding in the Company has reduced and currently represents 42.3%,
resulting in the Group no longer having a controlling party. Mr
Hamish Ogston's family investment vehicle, Milton Magna Limited, is
an investment client of the Schroder group of companies, of which
Schroder Investment Management Limited is part. Schroder Investment
Management Limited has a holding of 10.0% in the Company.
Transactions with related parties
As part of the placing of 666,666,667 ordinary shares by the
Company on 11 February 2015, Mr Hamish Ogston acquired 264,144,352
ordinary shares through his family investment vehicle Milton Magna
Limited for consideration of GBP7,924,000 and Schroder Investment
Management Limited acquired 61,437,285 ordinary shares for
consideration of GBP1,843,000. Both parties were substantial
shareholders in the Group prior to the placing.
As part of the MSP, key management personnel of the Group
purchased investment shares on 25 June 2015 and 24 November 2015
for total consideration of GBP433,000.
On 23 December 2015, Ruth Evans, a Non-Executive Director of the
Group at the time, purchased 208,571 ordinary shares in the Company
for total cash consideration of GBP25,000.
Remuneration of key management personnel
(MORE TO FOLLOW) Dow Jones Newswires
March 24, 2016 03:01 ET (07:01 GMT)
The remuneration of the Directors and senior management team,
who are the key management personnel of the Group, is set out
below:
2015 2014
GBP'000 GBP'000
------------------------------ --------- ---------
Short term employee benefits 4,098 2,133
============================== ========= =========
Post employment benefits 121 100
============================== ========= =========
Termination benefits 239 -
============================== ========= =========
Share-based payments 1,128 8
------------------------------ --------- ---------
5,586 2,241
------------------------------ --------- ---------
In 2015, the remuneration of key management personnel includes
an expansion of the senior management team, settlements to former
Directors and senior management and provision for bonuses
reflective of the turnaround in the Group's performance.
16. Events after the balance sheet date
As announced on 21 March 2016, Schroder Investment Management
Limited (Schroders) has filed a notice requisitioning a general
meeting of the Company's shareholders (the Requisition). The
Requisition proposes resolutions to remove the CEO and current
Non-Executive Directors from the Board and to replace them with
individuals proposed by Schroders. It is believed that Schroders
are working with Mr Hamish Ogston, one of the Group's major
shareholders and founder of the Company.
The intention is to call the general meeting within 21 days of
receipt of the Requisition and to provide for such meeting to be
held not more than 28 days after the date of notice.
Cautionary statement
This announcement has been prepared solely to provide additional
information to shareholders as a body to meet the relevant
requirements of the UK Listing Authority. The announcement should
not be relied on by any other party or for any other purpose.
The announcement contains certain forward-looking statements.
These statements are made by the Directors in good faith based on
the information available to them up to the time of approval of the
announcement but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
Subject to the requirements of the UK Listing Authority, CPP
undertakes no obligation to update these forward-looking statements
and it will not publicly release any revisions it may make to these
forward-looking statements that may result from events or
circumstances arising after the date of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FXLLLQXFZBBV
(END) Dow Jones Newswires
March 24, 2016 03:01 ET (07:01 GMT)
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