REG - CPPGroup Plc - Annual Financial Report <Origin Href="QuoteRef">CPPG.L</Origin> - Part 2
24/03/2017 07:06
- Part 2: For the preceding part double click ID:nRSX4052Aa
6,243 13,093 20,923 10,015
Total comprehensive expense - - - (62) - - 46 (16)
Movement on equalisation reserve - - - - (6,243) - 6,243 -
Current tax charge on equalisation reserve movement - - - - - - (1,249) (1,249)
Equity settled share-based payment charge - - - - - 1,486 - 1,486
Deferred tax on share-based payment charge - - - - - - (11) (11)
Movement in EBT shares 12 - - - - - (63) - (63)
Exercise of share options 12 36 - - - - - (50) (14)
At 31 December 2016 23,975 45,225 (100,399) 929 - 14,516 25,902 10,148
Consolidated cash flow statement
For the year ended 31 December 2016
2016 2015
Note £'000 £'000
Net cash used in operating activities 14 (7,209) (1,360)
Investing activities
Interest received 243 282
Purchases of property, plant and equipment (592) (194)
Purchases of intangible assets (3,812) (4,435)
Net cash used in investing activities (4,161) (4,347)
Financing activities
Repayment of bank loans (1,000) (12,000)
Repayment of the Commission Deferral Agreement - (1,304)
Proceeds from the Second Commission Deferral Agreement - 1,304
Interest paid (230) (903)
Costs of refinancing the bank facility - (220)
Costs of compromising the Commission Deferral Agreement - (743)
(Purchase)/issue of ordinary share capital and associated costs (76) 18,980
Net cash (used in)/from financing activities (1,306) 5,114
Net decrease in cash and cash equivalents (12,676) (593)
Effect of foreign exchange rate changes 1,116 (196)
Cash and cash equivalents at 1 January 39,810 40,599
Cash and cash equivalents at 31 December 9 28,250 39,810
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 2017.
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 December 2016 or 31
December 2015, but is derived from the 2016 financial statements. Statutory
financial statements for 2015 for the Company prepared under IFRS have been
delivered to the Registrar of Companies and those for 2016 for the Company
will be delivered following the Company's Annual General Meeting. The Auditor,
Deloitte LLP, has reported on these financial statements; their report was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain statements under s498 (2) or (3) of the Companies Act 2006. These
2016 financial statements were approved by the Board of Directors on 23 March
2017.
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 2015. 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 2010-2012 Cycle
IAS 1 (amendments) Disclosure Initiative
Annual improvements to IFRSs 2012-2014 Cycle
IAS 16 and IAS 38 (amendments) Clarification of Acceptable Methods of Depreciation and Amortisation
3. Critical accounting judgements and key sources of estimation uncertainty
Classification of exceptional items
Exceptional items are those items that are required to be separately disclosed
by virtue of their size or incidence or have been separately disclosed in
order to improve a reader's understanding of the financial statements.
Consideration of what should be included as exceptional requires judgement to
be applied. Exceptional items are considered to be ones which are material,
non-recurring and outside of the normal operating practice of the Group.
Share-based payments
Judgement and estimation are required in determining the fair value of share
options at the date of award. The fair value is estimated using valuation
techniques which take account of the awards term, the share price volatility
and risk-free rates. Judgement and estimation are also required to assess the
number of options expected to vest. Details of the assumptions made are
included in note 13.
Different 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 and revised for changes in non-market
conditions.
Contractual matters
The Group has made certain commercial and contractual decisions that are not
yet agreed with all affected parties. The Group is satisfied with its position
from both a legal and regulatory perspective. Appropriate financial provisions
are in place in respect of these matters and are included in trade and other
payables. The Group has taken advantage of the reduced disclosures available
within IAS 37 as it does not consider it appropriate to disclose the detail of
contractual matters as it may prejudice any future discussions.
The appropriate level of financial provision may vary and impact the
consolidated income statement depending on the outcome of any future
discussions with those parties affected.
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.
Capitalised software costs
The Group has capitalised internally generated intangible assets in accordance
with IAS 38. The recoverable amount of the assets has been determined using
value in use calculations which require the use of estimates and judgements.
Internally generated intangible assets are routinely reviewed for impairment.
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 and
Portugal);
- Asia Pacific (India, China, Hong Kong, Malaysia and Singapore).
Segment revenues and performance have been as follows:
UK and Ireland2016£'000 Europe andLatin America2016£'000 Asia Pacific2016£'000 Total2016£'000
Year ended 31 December 2016
Continuing operations
Revenue - external sales 28,757 27,619 17,273 73,649
Cost of sales (2,782) (13,129) (11,826) (27,737)
Gross profit 25,975 14,490 5,447 45,912
Depreciation and amortisation (368) (119) (17) (504)
Other administrative expenses excluding exceptional items and MSP charges (24,086) (9,170) (3,787) (37,043)
Regional underlying operating profit 1,521 5,201 1,643 8,365
Exceptional items (note 5) (9,172)
MSP charges (974)
Operating loss (1,781)
Investment revenues 231
Finance costs (325)
Loss before taxation (1,875)
Taxation 1,342
Loss for the year from continuing operations (533)
Discontinued operations
Profit for the year from discontinued operations 579
Profit for the year 46
For the purposes of resource allocation and assessing performance, operating
costs and revenues are allocated to the regions in which they are earned or
incurred. The above does not reflect additional net charges of central costs
of £2,359,000 presented within UK and Ireland in the table above which have
been charged to other regions for statutory purposes.
UK and Ireland2015£'000 Europe andLatin America2015£'000 Asia Pacific2015£'000 Total2015£'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 charge (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 2,309
Profit for the year 20,837
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 £1,704,000 presented within UK and Ireland in the table above which have
been charged to other regions for statutory purposes.
Segment assets
2016£'000 2015 £'000
UK and Ireland 30,454 47,667
Europe and Latin America 8,262 8,074
Asia Pacific 14,038 4,065
Total segment assets 52,754 59,806
Assets relating to discontinued operations 41 797
Unallocated assets 818 652
Consolidated total assets 53,613 61,255
Deferred tax is not allocated to segments.
Capital expenditure
Intangible assets Property, plant and equipment
2016£'000 2015£'000 2016£'000 2015 £'000
Continuing operations
UK and Ireland 3,780 4,415 478 129
Europe and Latin America 32 21 27 48
Asia Pacific - - 87 17
Additions from continuing operations 3,812 4,436 592 194
Revenues from major products
2016£'000 2015 £'000
Continuing operations
Retail assistance policies 68,013 68,139
Retail insurance policies 2,473 5,384
Wholesale policies 2,503 2,344
Non-policy revenue 660 904
Revenue from continuing operations 73,649 76,771
Discontinued operations 91 13,107
Consolidated total revenue 73,740 89,878
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
The Group operates across a wide number of territories, of which the UK, India
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
2016£'000 2015£'000 2016£'000 2015 £'000
Continuing operations
UK 28,358 42,179 7,074 8,062
India 15,163 6,256 90 14
Spain 11,997 11,873 92 122
Other 18,131 16,463 196 129
Total continuing operations 73,649 76,771 7,452 8,327
Discontinued operations 91 13,107 - -
73,740 89,878 7,452 8,327
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
Note 2016£'000 2015 £'000
Aborted IT platform and associated contractual settlement costs 7 9,104 -
Restructuring costs 1,170 711
Requisition costs 532 -
Reversal of freehold property impairment 8 (1,534) -
Customer redress and associated costs 11 (100) 900
Commission deferral compromise and associated costs - (19,388)
Exceptional charge/(credit) included in operating profit or loss 9,172 (17,777)
Tax on exceptional items (436) 2,344
Total exceptional charge/(credit) after tax 8,736 (15,433)
Discontinued operations after tax - (38)
8,736 (15,471)
The aborted IT platform and associated contractual settlement costs of
£9,104,000 (2015: £nil) comprises:
· £6,404,000 relates to the impairment and subsequent write-off of the IT
platform that was in development;
· £2,500,000 relates to the payment to conclude the SSP contract; and
· £200,000 relates to other payments to satisfy associated contractual
commitments.
Restructuring costs of £1,170,000 (2015: £711,000) relate to employment
settlement costs and additional costs relating to the expiry of the lease at a
vacated office in the UK.
Requisition costs of £532,000 (2015: £nil) relate to professional costs
associated with the shareholder general meeting requisition and subsequent
interim injunction proceedings. The shareholder requisition, announced on 21
March 2016, proposed resolutions to remove the CEO and Non-Executive Directors
from the Board. These resolutions were subsequently passed at a general
meeting on 5 May 2016.
Reversal of freehold property impairment is a credit of £1,534,000 (2015:
£nil) and reflects the write-back of the asset to its current fair value,
refer to note 8 for further detail.
Customer redress and associated costs are a credit of £100,000 (2015: £900,000
charge) and relate to a release of provision in line with the latest estimate
of residual customer redress activity.
6. (Loss)/earnings per share
Basic and diluted (loss)/earnings per share have been calculated in accordance
with IAS 33 'Earnings per Share'. Underlying earnings per share have also been
presented in order to give a better understanding of the performance of the
business. 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. The diluted
loss per share is therefore equal to the basic loss per share in the current
year.
(Loss)/earnings
Continuing operations Discontinued operations Total
2016£'000 2015£'000 2016£'000 2015£'000 2016£'000 2015 £'000
(Loss)/earnings for the purposes of basic and diluted (loss)/earnings per share (533) 18,528 579 2,309 46 20,837
Exceptional items (net of tax) 8,736 (15,433) - (38) 8,736 (15,471)
MSP charges (net of tax) 698 1,318 - - 698 1,318
Earnings for the purposes of underlying basic and diluted earnings per share 8,901 4,413 579 2,271 9,480 6,684
Number of shares
Number (thousands) Number (thousands)
Weighted average number of ordinary shares for the purposes of basic and diluted (loss)/earnings per share and basic underlying earnings per share 854,677 766,667
Effect of dilutive potential ordinary shares: share options 28,506 2,748
Weighted average number of ordinary shares for the purposes of diluted underlying earnings per share 883,183 769,415
Continuing operations Discontinued operations Total
2016Pence 2015Pence 2016Pence 2015Pence 2016Pence 2015 Pence
Basic and diluted (loss)/earnings per share
Basic (0.06) 2.42 0.07 0.30 0.01 2.72
Diluted (0.06) 2.41 0.07 0.30 0.01 2.71
Basic and diluted underlying earnings per share
Basic 1.04 0.58 0.07 0.30 1.11 0.88
Diluted 1.00 0.57 0.07 0.30 1.07 0.87
The Group has 171,650,000 deferred shares which have no rights to receive
dividends and only 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
(loss)/earnings per share.
7. Intangible assets
Contractual arrangements with third parties Business relationships£'000 Internally generated software Externally acquired software Total
£'000 £'000 £'000 £'000
Cost:
At 1 January 2015 17,420 1,211 19,672 19,397 57,700
Additions - - 574 3,862 4,436
Disposals (17,420) (1,211) - (276) (18,907)
Exchange adjustments - - - (83) (83)
At 1 January 2016 - - 20,246 22,900 43,146
Additions - - 362 3,450 3,812
Disposals - - (420) (6,583) (7,003)
Exchange adjustments - - - 137 137
At 31 December 2016 - - 20,188 19,904 40,092
Accumulated amortisation:
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 1 January 2016 - - 19,478 18,843 38,321
Provided during the year - - - 104 104
Disposals - - (420) (6,583) (7,003)
Impairment - - 420 5,984 6,404
Exchange adjustments - - - 130 130
At 31 December 2016 - - 19,478 18,478 37,956
Carrying amount:
At 31 December 2015 - - 768 4,057 4,825
At 31 December 2016 - - 710 1,426 2,136
During the year the Group recognised an impairment of £6,404,000 on its core
platform IT system following the decision to abort the project with SSP, this
element of the asset has subsequently been written off. The impairment loss
has been recognised as anexceptional item through the consolidated income
statement and relates to the UK and Ireland segment. The carrying value of
intangible assets includes £1,331,000 relating to the ongoing in-house
development of a core platform IT system. This asset is recognised across
internally generated software and externally acquired software.
8. Property, plant and equipment
Freehold land and property Leasehold improvements£'000 Computer systems Furniture and equipment Total
£'000 £'000 £'000 £'000
Cost:
At 1 January 2015 7,278 5,545 28,855 6,523 48,201
Additions - 34 148 12 194
Disposals - (56) (315) (431) (802)
Exchange adjustments - (77) (163) (74) (314)
At 1 January 2016 7,278 5,446 28,525 6,030 47,279
Additions - 140 390 62 592
Disposals - (89) (1,165) (120) (1,374)
Exchange adjustments - 125 312 101 538
At 31 December 2016 7,278 5,622 28,062 6,073 47,035
Accumulated amortisation:
At 1 January 2015 4,265 5,287 28,568 6,261 44,381
Provided during the year 86 64 209 106 465
Disposals - (53) (312) (422) (787)
Exchange adjustments - (63) (156) (63) (282)
At 1 January 2016 4,351 5,235 28,309 5,882 43,777
Provided during the year 87 74 110 129 400
Disposals - (69) (1,166) (120) (1,355)
Impairment reversal (1,534) - - - (1,534)
Exchange adjustments - 114 305 12 431
At 31 December 2016 2,904 5,354 27,558 5,903 41,719
Carrying amount:
At 31 December 2015 2,927 211 216 148 3,502
At 31 December 2016 4,374 268 504 170 5,316
Included in freehold land and property is freehold land at its cost value of
£759,000 (2015: £759,000), which is not depreciated.
During the year the Group has recognised the reversal of prior year impairment
in respect of the freehold land and property totalling £1,534,000. This
reversal reflects a change in the basis of the recoverable amount from value
in use to fair value less costs of disposal. The value of the property has
been written back to £4,500,000 comprising £4,374,000 freehold land and
property and £126,000 leasehold improvements. The impairment reversal has been
recognised as an exceptional item through the consolidated income statement
and relates to the UK and Ireland segment. The fair value basis is categorised
within level 3 of the fair value hierarchy.
9. Cash and cash equivalents
Consolidated cash and cash equivalents of £28,250,000 (2015: £39,810,000)
comprises cash held on demand by the Group and short term deposits.
Cash and cash equivalents includes £18,727,000 (2015: £33,879,000) cash held
in the UK's regulated entities, CPPL and HIL. This cash is either maintained
by the Group's insurance business for solvency purposes or restricted by the
terms of the VVOP. The VVOP restricted cash cannot be distributed to the wider
Group without FCA approval. The 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 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 is as follows:
2016£'000 2015 £'000
AA 3,162 1,679
A 21,510 36,064
BBB 2,027 548
BB 1,414 1,405
Rating information not available 137 114
28,250 39,810
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:
2016£'000 2015 £'000
Second Commission Deferral Agreement 1,391 -
Borrowings due within one year 1,391 -
Bank loans due outside of one year - 1,000
Less: unamortised issue costs (80) (152)
Second Commission Deferral Agreement - 1,343
Borrowings due outside of one year (80) 2,191
Analysis of repayments:
2016£'000 2015 £'000
Within one year 1,391 -
In the second year - 1,343
In the third to fifth years - 1,000
Total repayments 1,391 2,343
Less: unamortised issue costs (80) (152)
Total carrying value 1,311 2,191
The Group's bank debt is in the form of a £5,000,000 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. At 31 December 2016, the Group has £5,000,000 undrawn committed
borrowing facilities (2015: £4,000,000).
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
Second 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:
2016% 2015 %
Bank loans 2.3 2.5
Commission Deferral Agreements 3.5 3.5
Weighted average 2.5 2.9
The bank loans weighted average interest rate of 2.3% comprises the interest
rate charged on the drawn amount and the interest rate charged for the
commitment on the undrawn element.
11. Provisions
Onerous leases2016£'000 Customer redress and associated costs 2016 £'000 Total 2016 £'000 Onerous leases 2015 £'000 Customer redress andassociated costs 2015 £'000 Total2015 £'000
At 1 January 829 1,611 2,440 1,658 6,356 8,014
Charged/(credited) to the income statement 500 (100) 400 (97) 900 803
Customer redress and associated costs paid in the year - (1,035) (1,035) - (4,821) (4,821)
Utilisation of onerous lease provision in the year (662) - (662) (732) - (732)
Transfer to trade and other payables - - - - (824) (824)
At 31 December 667 476 1,143 829 1,611 2,440
The onerous lease provision reflects the future lease payments and associated
costs in the expected non-utilisation period at a vacated office in the UK.
The customer redress and associated cost provision comprises anticipated
compensation payable to customers through residual customer redress exercises
and associated professional fees.
The onerous lease provision and customer redress and associated costs are both
expected to be settled within one year of the balance sheet date.
The Group has made certain commercial and contractual decisions that are not
yet agreed with all affected parties. The Group is satisfied with its position
from both a legal and regulatory perspective. Appropriate financial provisions
are in place in respect of these matters and are included in trade and other
payables.
Provisions are expected to be settled in the following periods:
Onerous leases2016£'000 Customer redress and associated costs 2016 £'000 Total 2016 £'000 Onerous leases 2015 £'000 Customer redress andassociated costs 2015 £'000 Total2015 £'000
Within one year 667 476 1,143 643 1,611 2,254
Outside of one year - - - 186 - 186
At 31 December 667 476 1,143 829 1,611 2,440
12. Share capital
Ordinary shares of 1 penny each(thousands) Deferred shares of 9 pence each(thousands) Total(thousands) Ordinary shares of 1 penny each£'000 Deferred shares of 9 pence each£'000 Total£'000
Called up and allotted:
At 1 January 2016 852,834 171,650 1,024,484 8,526 15,413 23,939
Issue of shares in connection with:
Exercise of share options 3,647 - 3,647 36 - 36
At 31 December 2015 856,481 171,650 1,028,131 8,562 15,413 23,975
During the year, the Company issued 3,647,000 shares to option holders for
total consideration of £36,470. Further details relating to share options are
provided in note 13.
During the year the CPPGroup Plc Employee Benefit Trust (EBT) purchased
3,000,000 (2015: 1,763,000) of the Company's ordinary shares for total cash
consideration of £120,000 (2015: £264,000). Of the total shares purchased by
the EBT 711,874 (2015: nil) were used to settle awards under the MSP.
The total amount paid by the EBT to acquire shares, offset by the value of
shares used to satisfy the MSP award, has been deducted from the ESOP reserve.
The reduction in the ESOP reserve in the year is £63,000 (2015: £264,000).
Of the 856,480,830 ordinary shares issued at 31 December 2016, 855,980,831 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.
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.
13. Share-based payment
Current share plans
Share-based payment charges comprise 2016 Long Term Incentive Plan (2016 LTIP)
charges of £582,000 (2015: £nil) and MSP charges of £902,000 (2015:
£1,457,000). These costs are disclosed within administrative expenses,
although the MSP share-based payment charge forms part of the MSP charges
which is not included in underlying operating profit. MSP charges in the
income statement are different to the share-based payment charge due to the
recognition of employer's national insurance relating to future option
exercises. There have been 26,050,000 options granted in the current year as
part of the 2016 LTIP; the plan was not in operation in the prior year. There
have been no MSP options granted in the current year (2015: 38,010,000).
2016 2015
Number of share options(thousands) Weighted average exercise price(£) Number of share options(thousands) Weighted average exercise price(£)
2016 LTIP
Outstanding at 1 January - - - -
Granted during the year 26,050 - - -
Forfeited during the year (10,969) - - -
Outstanding at 31 December 15,081 - - -
MSP
Outstanding at 1 January 36,135 0.01 - -
Granted during the year - - 38,010 0.01
Forfeited during the year (14,111) 0.01 (1,875) 0.01
Exercised during the year (4,359) 0.01 - -
Outstanding at 31 December 17,665 0.01 36,135 0.01
Exercisable at 31 December 1,810 0.01 - -
Nil-cost options and conditional shares granted under the 2016 LTIP normally
vest after three years, lapse if not exercised within ten years of grant and
will lapse if option holders cease to be employed by the Group. Vesting of
2016 LTIP options and shares is also subject to achievement of certain
performance criteria including a share price measure and an underlying
operating profit target over the vesting period.
Options granted under the MSP have an exercise price of 1 penny and 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. There have been no options granted in the current
year (2015: 38,010,000) and options exercised in the current year total
4,359,000 (2015: n/a).
The options outstanding at 31 December 2016 had a weighted average remaining
contractual life of two years (2015: n/a) in the 2016 LTIP and one year (2015:
two years) in the MSP.
The principal assumptions underlying the valuation of the options granted
during the year at the date of grant are as follows:
LTIP 2016
Weighted average share price £0.12
Weighted average exercise price -
Expected volatility 150%
Expected life 3 years
Risk-free rate 0.67%
Dividend yield 0%
There have been 26,050,000 share options granted in the current year. The
aggregate estimated fair value of the options and shares granted in the
current year under the 2016 LTIP was £2,852,000.
14. Reconciliation of operating cash flows
2016£'000 2015 £'000
Profit for the year 46 20,837
Adjustment for:
Depreciation and amortisation 504 856
Equity settled share-based payment expense 1,486 1,466
Impairment loss on intangible assets 6,404 21
Reversal of freehold property impairment (1,534) -
Loss on disposal of property, plant and equipment 20 16
Commission deferral compromise and associated costs - (19,388)
Investment revenues (243) (282)
Finance costs 325 1,523
Income tax (credit)/expense (1,342) 3,017
Operating cash flows before movements in working capital 5,666 8,066
Decrease in inventories 2 50
(Increase)/decrease in receivables (3,542) 2,234
Decrease in insurance assets 255 276
Decrease in payables (6,718) (4,410)
Decrease in insurance liabilities (326) (830)
Decrease in provisions (1,296) (5,574)
Cash used in operations (5,959) (188)
Income taxes paid (1,250) (1,172)
Net cash used in operating activities (7,209) (1,360)
15. Related party transactions and control
Transactions with related parties
The Group has settled legal fees totalling £210,000 incurred by Mr Hamish
Ogston in relation to the interim injunction proceedings which were announced
on 11 April 2016 and subsequently withdrawn on 25 April 2016. Mr Ogston is a
substantial shareholder in the Group.
Remuneration of key management personnel
The remuneration of the Directors and senior management team, who are the key
management personnel of the Group, is set out below:
2016£'000 2015 £'000
Short term employee benefits 2,697 4,098
Post-employment benefits 142 121
Termination benefits 817 239
Share-based payments 1,028 1,128
4,684 5,586
16. Events after the balance sheet date
As announced on 17 March 2017, the Group has completed the acquisition of
Blink Innovation Limited (Blink) for an initial consideration of E1 million,
which was paid on completion. The acquisition allows for a further earn-out
based on future products developed by Blink. The maximum earn-out is based on
up to 20% of defined profits generated by Blink up to a maximum of E20 million
in profits over the next five years.
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
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