REG - CPPGroup Plc - Final Results
29/03/2022 07:00
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RNS Number : 3066G CPPGroup Plc 29 March 2022
29 March 2022
CPPGroup Plc
("CPP", "the Group" or "the Company")
FULL YEAR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
A year of financial and operational progress as we refocus the business
CPP Group (AIM: CPP), a provider of assistance and insurance products which
reduce disruptions to everyday life for millions of customers across the
world, is pleased to announce its full year results for the 12 months ended 31
December 2021.
Financial highlights
· Group revenue from continuing operations increased by 5% to £143.6
million (2020 restated: £136.5 million)
· EBITDA from continuing operations increased by 29% to £7.5 million
(2020 restated: £5.8 million).
· Profit before tax increased to £4.2 million (2020 restated: £0.9
million).
· Cash balance of £22.3 million as at 31 December 2021 (2020: £21.9
million).
· Final dividend proposed of 7.5 pence per share which will represent
a full year dividend of 12.5 pence per share (2020: 25.0 pence per share).
Operational progress
· Strong recovery in our Indian market with CPP India growing revenue by
7% and Globiva widening its client base with revenue increasing by 51%.
· Expanded partner base and product innovation in Turkey with revenue
growing 28% on a local currency basis.
· Making progress in the integration of Blink to strengthen the Group's
ability to deliver innovative parametric and digital solutions.
· Simplification of the Group to focus on key growth areas through:
o disposal of German card protection legacy business for £2.4 million;
o disposal of our historically loss-making China business in January 2022;
o restructure of Mexico and closure of the legacy Malaysia business; and
o post period, we have commenced the wind down of the UK MGA and Bangladesh.
· New Board and Executive team in place to provide strategic focus and
drive the business forward sustainably.
Financial and non-financial highlights - continuing operations
£ millions 31 December 2021 31 December 2020 (restated(1)) Change
Financial highlights:
Group
Revenue 143.6 136.5 5%
EBITDA(2) 7.5 5.8 29%
Operating profit 2.9 2.3 27%
Profit before tax 4.2 0.9 374%
Profit/(loss) after tax 0.5 (2.5) 120%
Profit/(loss) for the year(3) 3.0 (1.6) 288%
Basic earnings/(loss) per share (pence) 0.85 (30.21) 103%
Dividend per share (pence)(4) 12.5 25.0 (50)%
Cash and cash equivalents 22.3 21.9 2%
Segmental revenue
Ongoing Operations 134.8 125.5 8%
Restricted Operations 8.8 11.0 (21)%
Non-financial highlights:
Customer numbers (millions) 11.4 11.3 1%
1. Restated to reflect Germany and China as discontinued operations.
2. EBITDA represents earnings before interest, taxation, depreciation,
amortisation and exceptional items.
3. Profit/(loss) for the year includes continuing and discontinued
operations.
4. Comprises final dividend of 7.5 pence per share (2020: 25.0 pence
per share) and interim dividend paid of 5.0 pence per share (2020: nil) paid
in September 2021.
Simon Pyper, CEO of CPP Group, commented:
"Despite the COVID-19 related headwinds which have challenged us all, the
Group not only delivered a solid set of financial results but also made
progress in simplifying and refocusing its operations through the sale of its
German Card Protection business, the restructure of its operations in Mexico
and the closure of its operations in Malaysia. Whilst there is still much to
do, the changes introduced in 2021 have allowed the Group to refocus on its
core operations in India and Turkey, and on its digital rich, Blink parametric
business.
The Group is now focused on optimising the allocation of human, intellectual
and financial capital to where it can better achieve commercial advantage and
attractive returns. To that end, and post the reporting period, the Group has
exited from its underperforming China, Bangladesh, and UK MGA operations.
Additionally, the Board is evaluating the change management programme,
introduced by the previous management team, to ensure that the various
projects are consistent with the Group's new 'direction of travel' and
moreover, that the benefits assumed are realisable.
I am determined to re-energise CPP, to simplify its business model and to
improve returns to shareholders."
Enquiries:
CPPGroup Plc via Alma PR
Simon Pyper, CEO
David Bowling, CFO
Sarah Atherton, Group Company Secretary
Liberum Capital Limited (Nominated Adviser & Sole Broker) +44 (0)20 3100 2000
Richard Lindley
Lauren Kettle
Alma PR (Financial PR Adviser) +44 (0)20 3405 0205
Josh Royston cpp (mailto:cpp@almapr.co.uk) @almapr.co.uk (mailto:cpp@almapr.co.uk)
David Ison
Kieran Breheny
Faye Calow
About CPP Group:
CPP Group is technology-driven assistance company that creates embedded and
ancillary assistance products and resolution services that reduce disruption
to everyday life for millions of people across, at the time and place they are
needed. These products are provided through partnerships with leading
insurance, banking and finance companies as either as embedded solutions or as
relevant add-ons to enhance their core offering and deliver additional revenue
streams. CPP is listed on AIM, operated by the London Stock Exchange.
For more information on CPP visit https://international.cppgroup.com
(https://international.cppgroup.com)
REGISTERED OFFICE
CPPGroup Plc
6 East Parade
Leeds
LS1 2AD
Registered number: 07151159
Chairman's Statement
In spite of the challenges to the business of a second year of disruption
brought about by the COVID-19 pandemic, I am pleased to report that the Group
continued with important initiatives to refocus its operations, both
domestically and in its key overseas markets of India and Turkey.
Additionally, the Group made progress in streamlining its operations, exiting
from underperforming geographies and closing down unprofitable products.
Streamlining Operations
During the year the Group shut down its loss-making operation in Malaysia,
disposed of its legacy German Card Protection business and restructured its EU
operation. After the reporting period, the Group has also announced the
winding down of its operations in Bangladesh and its UK MGA business, and the
disposal of the Chinese operations, all of which were considered unable to
deliver profitable growth in the foreseeable future. Additionally, detailed
plans have been developed for the migration of the Group's remaining legacy
operations into a single, standalone business unit, which, once completed,
should facilitate a more profitable and disciplined run-off of the Group's UK
and non-UK back books.
Refocusing our Business
The business is now organised along geographic lines with in-country CEOs for
India, Turkey and our UK-based, parametric-technology business, each of whom
have prime responsibility for delivering growth in their regions. Furthermore,
the Group is in the process of developing a new IT platform which will
facilitate new product development and delivery throughout the Group. The
platform will initially launch in India in late 2022 with plans to roll-out
across other markets in the Group in 2023 and 2024. This will ultimately lead
to cost reductions as legacy systems are decommissioned.
Financial Results
Despite continued COVID-19 headwinds and the strengthening of sterling
relative to other currencies in which the Group operates, the Group delivered
growth over the prior year. Group revenues from continuing operations
increased by 5% to £143.6 million, whilst EBITDA from continuing operations
increased by £1.7 million to £7.5 million, inclusive of a one-time benefit
from the release of a third-party commission provision relating to the Group's
legacy card and identity products. Our balance sheet shows net cash of £22.3
million (2020: £21.9 million), which will allow the Group to fund further
investment in its technology platform and, if appropriate, to fund
acquisitions.
People
Unsurprisingly our top priority in 2021 has been to support our colleagues,
not just in terms of creating COVID-safe office and home-working conditions,
but also to sustain their overall well-being. We actively seek their
engagement and participation, and the achievements of the past year are a
testament to their hard work and dedication. On behalf of the Board, I offer
my thanks to them.
Board Changes
We were pleased to announce on 1 December 2021 the appointment of Jeremy
Miller as an independent Non-Executive Director, succeeding Timothy Elliott,
who stepped down from the Board at the end of November 2021. Mark Hamlin
also retired from the Board at the end of November and stood down as Chairman
of Globiva, in which the Group holds a 51% shareholding, at the end of
December. Mark and Tim had been on the Board since 2016 and 2017
respectively and I would like to thank them both for their years of service to
the Group. It is our objective to add one additional independent
Non-Executive Director to the Board during the current year, who will,
ideally, have specific operational experience in that part of the insurance
and assistance sectors in which the Group operates.
Early in the year, Justine Shaw, Head of Culture and HR, left the Group, with
her responsibilities being distributed to existing members of the management
team, and, in particular, Paula Cartwright, who was promoted to lead our HR
function. In October 2021, Oliver Laird, our CFO, resigned from the
business. We were pleased to be able to announce in December the appointment
of Simon Pyper to succeed him. Simon brings with him many years of
experience, both as CFO and CEO, of growth companies in the services sector.
Subsequent to the financial year end, Jason Walsh (announced on 8 February
2022) stood down as Chief Executive Officer, after six years in the role and
twenty years of service to the Group. I would like to thank Jason for his
many years of service and the contribution he has made. He took the reins as
Chief Executive Officer of the Group at a difficult time, after several years
of financial and regulatory challenges had almost brought it to its knees and
he leaves a stable organisation with considerable potential for growth.
Jason has been succeeded as CEO by Simon Pyper and, the Group announced, on
the 8 February 2022, the appointment of David Bowling, an internal candidate
with ten years' service to the Group, as Chief Financial Officer. I have
utmost confidence that both Simon and David will make a substantial
contribution to the success of the Group in the next few years, and I
congratulate them on their appointments.
Extensive board and senior personnel changes in a short period are inevitably
unsettling for all stakeholders in the Company, but particularly the members
of the management team. I would particularly like to recognise the commitment
and fortitude of all those members of the team who have participated in and
enabled these changes to take place in a committed and professional manner.
I would also like to add my specific thanks to Deepak Matai, who leads our
largest operating entity in India, and his colleagues, who have been able to
deliver strong growth in spite of the impact of COVID-19 in his country, as
well as to Selnur Guzel, whose management of our business in Turkey, along
with her team, has been even more forceful than the hurricane-force economic
and currency turbulence in which she and her colleagues have had to operate.
Outlook and Dividend
In our pre-close trading update of 19 January 2022, we reset the Group's
earnings expectations for the current financial year, reflecting in part, the
delayed benefits and additional costs brought about by the revision to the
scope and consequent implementation timetable for the Group's new IT platform.
Along with revising the Group's earnings expectations, we are resetting our
dividend guidance. The revised guidance on dividends will better reflect the
Groups earnings expectations, cash requirements and prospects. Consequently,
the Board is pleased to announce a final dividend of 7.5 pence per share
giving a full year dividend of 12.5 pence (2020: 25.0 pence).
The proposed final dividend will be paid on 17 May 2022 to shareholders on the
register at the close of business on 19 April 2022. The ex-dividend date will
be on 14 April 2022.
Whilst it is always disappointing to re-set market expectations, the business
continues to make good progress and is, I believe, notwithstanding heightened
levels of uncertainty globally as a result of the tragic events in the
Ukraine, increasingly well positioned for profitable and sustainable growth.
David Morrison
Chairman
28 March 2022
Chief Executive Officer's Statement
A second year of challenges created by COVID-19 has obliged our customers, our
partners and our people to adapt, often at pace, to the ever changing and
often disrupted circumstances in which they live, work and conduct business.
Our Company's performance has been remarkably resilient, thanks to the efforts
of our people and the demonstrable value of what we do for our customers and
partners.
While revenues were impacted by COVID-19 and associated Government imposed
restrictions, particularly in our key Indian market, our performance exceeded
our own expectations and I am pleased to report that revenues from continuing
operations grew by 5%, and, on a constant currency basis, by 11%, to £143.6
million (2020 restated: £136.5 million). Additionally, the actions commenced
in 2020 and 2021 to streamline the business, exit unprofitable markets and
reduce costs, in combination with the one-time commission provision release in
the UK, led to an improvement in EBITDA from continuing operations of 29% to
£7.5 million (2020 restated: £5.8 million) for the year.
We have also had a positive year in terms of client retention and business
development and have increased our customer base from 11.3 million to 11.4
million and, whilst our renewal rate has reduced to 63.6% (2020 restated:
68.5%), this is principally due to market mix with the renewal base further
shifting towards India and Turkey.
A Refocused Business
We have over the past year re-organised our operating business and management
structures to reflect how we see and manage the business. We start 2022 with a
leaner organisational structure, one which is designed to meet the
expectations of our growing client base. The new structure reflects our
geographic bias, our strategic intent to grow our technology business Blink,
and to exit from the predominately European low growth, regulatory-intensive
markets, where declining customer numbers with a relatively fixed cost base
are eroding margin.
A Resilient Financial Performance
Group revenue grew by 5% on a reported basis and by 11% on a constant currency
basis. Ongoing revenues, which exclude revenues relating to our Restricted
Operations (legacy UK back books), grew by 8% on a reported basis and by 14%
on a constant currency basis. Group EBITDA grew by 29% to £7.5m.
India: Revenue £119.3 million (2020: £108.4 million) and EBITDA £7.8
million (2020: £7.7 million)
India is the Group's largest operating business, generating 83% of total
revenues. The business performed well, despite a circa 7% weakening of the
Indian rupee over the year, with absolute revenue growth for 2021 of +10%
(constant currency +17%). EBITDA growth was subdued due to reduced sales
efficiency associated with COVID-19, with some modest margin erosion due to
local regulatory changes.
There are two constituent businesses:
1. CPP India: Reported 2021 +7% to £109.0 million (2020: £101.6
million), constant currency growth of +14%.
CPP India works closely with its business partners to drive value by growing
customer loyalty through the design and delivery of simple and innovative
products which fit seamlessly into the everyday life of consumers; and
2. Globiva: Reported 2021 +51% to £10.3 million (2020: £6.8 million),
constant currency growth of +57%.
Globiva is 51% owned by the Group and is one of India's fastest growing
Business Process Management (BPM) companies providing outsourced customer
relationship management, back-office functionality and automated human
resource services to a growing roll of clients.
Turkey: Revenue £3.6 million (2020: £3.8 million) and EBITDA £0.9 million
(2020: £0.9 million)
CPP Turkey is, in many respects, the most developed and most balanced of our
businesses, with a broad and well-established partnership base coupled with a
diverse mix of revenues. Despite difficult economic conditions our Turkish
business delivered the highest EBITDA margin and achieved revenue and EBITDA
growth, on a constant currency basis, of +28% and +53% respectively.
Blink: Revenue £0.3 million (2020: £0.2 million) and EBITDA loss £0.2
million (2020: £1.3 million)
Blink (CPP Innovation Limited) is a technology and software platform focused
on providing innovative insurance solutions for the global travel sector.
Blink has also designed and deployed a parametric business interruption
solution and has an active product pipeline to enter other sectors. Blink
leverages CPP's technology platforms to deliver bespoke plug-and-play 'white
label' solutions for our partners, typically travel insurance providers.
Legacy and Restricted Operations: Revenue £20.4 million (2020: £24.1
million) and EBITDA £3.4 million (2020: £3.5 million)
Our 'legacy and restricted' business comprises our UK and European operations
which have historically focused on the Group's legacy Card and Identity
Protection products. The UK business continues to operate under a variation of
permissions with the FCA which does not permit new sales, however, moreover
the market for these products is in decline, which coupled with ongoing
regulatory scrutiny and a high fixed cost base, means that these books of
business will reach an inflexion point in future years where they will be
unprofitable to maintain.
Central Costs: £4.2 million (2020: £4.7 million)
Central costs before appropriate recharge to business units are £10.4 million
(2020: £11.6 million) of which £4.0 million relates to the cost of the
Group's IT operations. The majority of the IT costs, which are recharged to
the Group's operating businesses, represent costs associated with maintaining
regulatory compliant, consumer data, in multiple geographies.
The Group is developing a new IT platform which is expected, once deployed, to
deliver significant efficiencies from late 2024.
Whilst IT costs have remained flat, other central costs have decreased by 17%
compared to the prior year.
Strategic Priorities
Fundamentally, we are a business which provides products and solutions which
assist and protect the daily lives, be it online or real world, of millions of
customers of major brands and financial institutions.
Our strategy must reflect the regulatory, economic and market nuances of the
geographies in which we operate. Consequently, and save for our new IT
platform and the introduction of our Blink proposition, there are few other
scale benefits to be had, as all our products and services are, to some
degree, bespoke. However, the lack of scale benefits does not equate to a lack
of opportunity.
Our key strategic priorities are to simplify our business, to reduce costs and
to build a platform which focuses on innovation in each of our key geographies
and organic growth which may be supported, where appropriate, by acquisitions
and strategic investments. We have a clear approach for growing our Indian and
Turkish businesses and to wind down our legacy and restricted operations in a
disciplined and profitable manner. We also intend to invest and grow our Blink
business and to build and implement a new Group-wide IT platform, both of
which should provide some scale efficiencies over the medium-term.
As, over time, we manage down our Legacy and Restricted operations we are,
save for Blink, in need of a coherent long-term strategy for our UK and
European markets. Whilst we have yet to set a definitive plan for these
markets our initial conclusions suggest a move away from the traditional
consumer focused products of the Group, which are highly regulated and carry a
high overhead requirement. We are instead considering a move toward either a
technology-led strategy, or a move into the business-to-business sector, which
has more attractive economics and is less regulated, or both. We will update
on our strategy once determined.
Whichever strategy we pursue for our important UK and European markets,
implementation will require careful planning, will leverage our current
infrastructure, and where appropriate, will include acquisitions.
STRATEGIC PRIORITIES INDIA TURKEY UK & EUROPE BLINK
Organic Growth Yes Yes No Yes
Acquisitive Growth No Yes Yes Yes
New IT Platform Yes Yes Yes Yes
India
Our growth will be organic led, with a focus on developing multi-product
strategic partnerships across the financial services and technology sectors.
We will focus on:
1. Introducing higher margin products which augment our partners
proposition, and which generate repeatable ancillary revenues.
2. Implementing our new technology platform which will widen the range of
mobile-first and digital sales channels which we can serve and, moreover, open
access to new partner channels and new customer segments.
Even though we have experienced high growth over the past few years, we remain
confident of further profitable growth over the long-term.
Turkey
We will have an organic led strategy focused on entrenching relationships and
winning new partners in the mobile, digital and financial services sectors. We
will continue to innovate and deliver services and products which improve the
day-to-day lives of consumers whilst improving revenues for both our partners
and the Group.
At the same time, acquisitions to accelerate growth are becoming more
attractive, as they would provide both a natural exchange rate hedge and,
moreover, accelerate client acquisition.
Blink
Blink is our newest business, with similar attributes to a start-up software
business. Leveraging the Group's existing product set, Blink is focused on
delivering differentiated 'white-label', technology led services for insurance
companies operating in the Travel and Digital sectors.
We will focus on organic growth led by additional account management and
technology headcount. In the longer-term, we will develop new products and
solutions for other digital intensive sectors.
Legacy & Restricted Operations (UK & Europe)
CPP's original strategy was one of volume, based on selling as many of the
Group's products, such as Card Protection and Identity Protection in multiple
geographies. As regulatory frameworks tightened, and consumer buying patterns
changed, the demand and margin associated with our more traditional products
started to decline. Our approach is to manage the decline in a disciplined and
profitable manner.
Technology
We are developing a new digital cloud-based IT platform which we expect to
start rolling out in India towards the final quarter of 2022. Group-wide
implementation is expected to complete during 2024. The new platform, once
fully operational, will allow the Group to lower costs, improve efficiencies
in each geography and moreover, accelerate the development and introduction of
new and complementary products and services
Specifically, the new platform is a hybrid, flexible and cloud-first approach
to managing our product proposition, CRM, and subscription platforms.
Utilising technologies which are both scalable and adaptive, the new platform
can be re-deployed to any market and hosted in multiple countries to meet
strict data residency requirements. Moreover, the platform draws on the
strengths of Amazon Web Services to provide a secure, scalable, and
redundancy-free global infrastructure that enables the business to 'Plug &
Play' third party solutions without affecting the core platform
People
I want to thank all my CPP colleagues for their dedication, hard work and
commitment while simultaneously responding and adapting to the effects of a
global pandemic. It is a measure of the quality of our people that our entire
business pivoted seamlessly to homeworking with no interruption to the support
we give our partners and customers.
We look forward with cautious optimism to a gradual return to normal working
patterns over the course of 2022.
Outlook
I have only been involved in the business for a short while, but my initial
impressions are unreservedly positive. We have excellent businesses in India
and Turkey where we expect further strong underlying growth. We are building
what I believe to be a compelling proposition for the travel sector with our
embryonic Blink platform and are exiting underperforming operations both in
the UK and abroad. As if this were not enough, we are developing and will
later this year start to introduce our new, digital cloud-based IT platform.
We are, as we exit from the UK MGA and as the renewal book continues to
run-down, in need of a clear and executable strategy for the UK, and this is
something that the Board and I will address during 2022.
We are now focused on optimising the allocation of our human, intellectual and
financial capital to where we are can better achieve commercial advantage and
attractive returns. To that end, and post the reporting period, we further
simplified the Group through the exit from our underperforming China,
Bangladesh, and UK MGA operations. Additionally, the Board is evaluating the
change management programme, introduced by the previous management team, to
ensure that the various projects are consistent with the Group's new
'direction of travel' and moreover, that the benefits assumed are realisable.
At the time of writing the Group is in discussions with its largest partner,
Bajaj Finance Limited, to early renew and extend current arrangements. While
there is likely to be some commercial trade-off between securing higher volume
(revenue) and pricing we will have stronger visibility over a substantial
amount of forward revenue.
I am determined to re-energise CPP Group, to simplify its business model and
to improve outcomes for all stakeholders and in particular for our
shareholders.
Simon Pyper
Chief Executive Officer
28 March 2022
Financial and Operational Review
Overview
The Group has continued to make solid financial progress in 2021 in the face
of continued disruption in our markets from the pandemic as we re-focus
resources on the key markets which provide the best opportunity for
sustainable growth. As expected, this has improved profitable performance and
reduced the cash draw on the business.
This strategy has led to the sale of our legacy German Card Protection
business and the exit from the Chinese market which completed in January 2022.
As a result, these businesses are presented as discontinued operations with
this review focusing on the performance of the Group's continuing operations.
Group revenue has increased by 5% (11% constant currency) to £143.6 million
(2020 restated: £136.5 million) with the growth continuing to be driven by
our Indian market. EBITDA has also improved to £7.5 million (2020 restated:
£5.8 million) which is a 29% (54% constant currency) increase. The EBITDA
improvement reflects the benefit of restructuring initiatives to reduce our
geographical footprint or streamline operations to focus resources on the
markets with the strongest prospects along with careful control of the central
cost base. EBITDA includes a one-time benefit of £1.1 million from the
release of a commission provision in the UK. Excluding this factor EBITDA
would have been £6.4 million which is 9% higher than in 2020.
Continuing Operations 2021 2020 (restated(1))
£'m £'m
Revenue 143.6 136.5
Gross profit 32.9 34.1
EBITDA(2) 7.5 5.8
Operating profit 2.9 2.3
Profit before tax 4.2 0.9
Taxation (3.7) (3.4)
Profit/(loss) for the year 0.5 (2.5)
Basic earnings/(loss) per share (pence) 0.85 (30.21)
Cash generated by operations(3) 7.4 6.2
Dividends (pence)(4) 12.5 25.0
1. Restated to reflect Germany and China as discontinued operations.
2. Excluding depreciation, amortisation and exceptional items.
3. Includes cash generated from continuing and discontinued
operations.
4. Interim dividend paid and final dividend proposed
Gross profit has reduced by 4% (1% constant currency increase) to £32.9
million (2020 restated: £34.1 million). This results in a reduction in the
gross profit margin to 22.9% (2020 restated: 25.0%) reflecting the continued
growth in our Indian business which has higher costs of acquisition associated
with sales than the UK and EU renewal books it is replacing. In addition,
whilst gross profit in India is increasing this is at a lower margin
year-on-year as an increasing share of revenue and customer growth comes from
lower margin product variants. Gross profit has also benefitted from the £1.1
million commission provision release in the UK and therefore would have been
7% lower than the prior year at £31.8 million at a margin of 22.1% without
it. We expect our gross profit margins to continue to reduce in the
medium-term whilst growth is predominantly driven by India and the legacy
renewal books diminish. Longer-term margin improvement will be driven by
product diversification in India and growth in technology-led product and
distribution.
We are pleased that EBITDA has increased to £7.5 million (2020 restated:
£5.8 million) which reflects the one-time £1.1 million commission provision
release alongside a reduction in the cost base with administrative expenses,
before depreciation and exceptional items, reducing by 10% in the year. The
reducing cost base demonstrates the expected savings from restructuring
exercises across the Group to address loss-making operations and available
operational efficiencies.
Depreciation and amortisation charges have decreased marginally to £3.0
million (2020 restated: £3.2 million). The Group's depreciation charges are
expected to increase in the medium-term as the new technology platform is
launched in India during Q4 2022 and Globiva increases its operational
capacity to facilitate growth.
Exceptional items charged to operating profit total £1.6 million (2020: £0.4
million) as the Group continues to focus its resources on its key markets.
Restructuring activities in the year have included the realisation of
operational efficiencies in Spain, new business activities being halted in
Mexico, the closure of Malaysia and a reduction in central Board costs. In
addition, Blink, the parametric platform, was brought under central
management.
The growth in EBITDA, in conjunction with the exceptional items and
depreciation charges, results in operating profit increasing by 27% to £2.9
million (2020 restated: £2.3 million).
Other gains and losses comprise a gain of £1.5 million (2020: £1.3 million
loss) which reflects a fair value gain on our investment in KYND. In December
2021, following a funding round by KYND, our holding was diluted to 14.7%
(2020: 20.0%), consequently we no longer recognise the investment as a joint
venture and have ceased equity accounting. Our reduced share of the holding in
KYND has a fair value of £1.9 million which is in excess of the £1.4 million
invested by the Group to date. Due to the one-off nature this gain has been
treated as an exceptional item outside of operating profit.
As a result, the Group's profit before tax was £4.2 million (2020 restated:
£0.9 million) and we have a profit after tax of £0.5 million (2020 restated:
£2.5 million loss).
Tax
The tax charge from continuing operations was £3.7 million (2020 restated:
£3.4 million) which constitutes an effective tax rate (ETR) of 88% (2020
restated: 386%). The ETR is impacted by withholding taxes arising on dividend
repatriations of £1.2 million (2020: £0.8 million) as cash increasingly
generated in our overseas markets is repatriated to the UK.
The local tax rates applying to our profitable countries which are higher than
the UK corporate income tax of 19% is also a contributor to the high ETR.
India, the most profitable of our markets, has a local tax rate of 25.2%. In
total, the tax charge includes £2.0 million of Indian tax (2020: £1.7
million). The tax rates in Turkey, Spain and Italy are also higher than the UK
statutory rate which adversely impacts our ETR.
Whilst the ETR is high, the overarching trend is a reduction in ETR as savings
from operational efficiencies, market exits and restructuring exercises are
reducing the number of loss-making entities in the Group.
Adjusted ETR
2021 2020
Reported - continuing operations Exceptional items and one-offs(1) Adjusted Reported - continuing operations Exceptional items(1) Adjusted
£'m £'m £'m £'m £'m £'m
Profit before tax 4.2 (0.9) 3.3 0.9 1.7 2.5
Tax 3.7 0.2 3.9 3.4 - 3.4
ETR 88% (18)% 119% 386% - 135%
1. Comprises exceptional items of £0.2 million (2020: £1.7 million) and
one-time benefit from the commission provision release in the UK of £1.1
million (2020: £nil). Further detail of exceptional items is provided in note
5.
The exceptional items and one-offs in the year have increased profit by £0.9
million whilst there has been a reduction in tax of £0.2 million. Without the
exceptional items and one-offs, the Group's ETR would increase to 119% (2020
restated: 135%).
As the UK statutory rate of tax increases to 25% on the 1 April 2023, the ETR
is expected to become closer aligned to the UK statutory tax rate as the
difference between the UK and the tax rates in the overseas territories in
which we make profits align. But, the ETR will remain higher in future years
as we provide for withholding taxes on overseas distributions and continue to
generate losses in developing markets against which we are not able to
recognise deferred tax assets.
Overall, we expect a progressive reduction in our ETR as our loss-making
operations reduce, distributions from overseas countries stabilise and
volatility arising from one-off charges declines.
Dividend
Last year we were pleased to confirm the recommencement of a dividend. The
Board remains committed to providing sustainable returns to shareholders at a
level that reflects the Group's cash requirements and progress.
As a result, the Directors have proposed a final dividend of 7.5 pence per
ordinary share giving a full year dividend of 12.5 pence (2020: 25.0 pence).
The proposed final dividend is subject to approval by shareholders at the AGM
and is expected to be paid on 17 May 2022 to all shareholders on the Register
of Members on 19 April 2022 with the ex-dividend date being 14 April 2022.
Discontinued operations
The Group has classified its German and Chinese businesses as discontinued in
the current year. The total profit after tax from discontinued operations of
£2.5 million comprises £3.3 million profit in relation to Germany and £0.8
million loss from China.
2021 2020
£'m £'m
Revenue 2.5 4.7
EBITDA 0.3 1.3
Operating (loss)/profit (0.2) 1.0
(Loss)/profit after tax (0.1) 0.9
Profit on disposal 2.6 -
Profit for the year 2.5 0.9
Net liabilities held for sale (0.1) -
On 17 May 2021, the Group completed the sale of its German business for a
final cash consideration of £2.4 million to Deutsche Schutzbriefgesellschaft
GmbH (Mehrwerk). The proceeds, together with the carrying value of net
liabilities on disposal, generated a profit on disposal of £2.7 million.
Germany also generated trading profits after tax of £0.6 million up to the
disposal date (2020: £1.5 million for a full year of trading)
Our China business was held for sale at the balance sheet date with the
transaction subsequently completing on 27 January 2022 with T-Link Holdings
Limited (T-Link) for a nominal consideration of HK$1. The terms of the
transaction included a working capital cash injection of £0.5 million
immediately prior to completion. The Group expects that the transaction
together with trading losses will generate a profit of approximately £0.6
million in 2022. China contributed trading losses of £0.8 million (2020:
£0.6 million) in the 2021 financial year.
Cash flow and net funds
2021 2020
£'m £'m
EBITDA 7.7 7.2
Exceptional items(1) (1.6) (0.3)
Non-cash items 0.1 1.5
Working capital movements 1.2 (2.2)
Cash generated by operations 7.4 6.2
Tax (2.8) (3.0)
Operating cash flow 4.6 3.2
Capital expenditure (including intangibles) (1.9) (1.8)
Lease repayments (1.5) (1.7)
Net proceeds from disposals 2.3 0.3
Net finance revenues 0.1 0.4
Dividends (2.6) -
Costs of refinancing - (0.1)
Net movement in cash(3) 1.0 0.3
Net funds(4) 16.4 15.3
1. Exceptional items represent cash costs relating to restructuring.
2. Net proceeds from disposals comprises cash proceeds from disposals of £2.4
million (2020: £0.3 million) less cash disposed with the business £0.1
million (2020: £nil).
3. Excluding the effect of exchange rates.
4. Net funds comprise cash and cash equivalents of £22.4 million (2020:
£21.9 million) and a borrowing asset of £nil (2020: £0.1 million) less
lease liabilities of £6.0 million (2020: £6.7 million).
The net funds position has increased to £16.4 million (2020: £15.3 million),
which includes cash of £22.4 million (2020: £21.9 million). The Group has
generated additional cash of £0.5 million in the year with increasing cash
generated by operations and cash proceeds from the sale of Germany being
largely offset by dividend payments, one-time restructuring costs and adverse
foreign exchange movements.
Cash generated by operations has increased to £7.4 million (2020: £6.2
million) reflecting a working capital benefit mainly driven by India. Tax paid
has remained broadly stable at £2.8 million (2020: £3.0 million) which is a
combination of taxes payable on profits in our markets and withholding taxes
on overseas dividends to the UK.
Proceeds from disposal relate to the net £2.3 million received on the sale of
Germany. The proceeds have been more than offset by the reintroduction of the
dividend with £2.6 million paid in the year in the form of a 2020 final
dividend and 2021 interim dividend.
As the Group's growth has shifted to overseas markets a material amount of the
cash balance is generated in India and Turkey along with cash generated by the
EU renewal books. These markets are profitable which enables repatriation of
funds to the UK. There are tax costs associated with returning these funds to
the UK with our blended cost being approximately 10%. As a result of
accounting recognition principles, cash generated in India exceeds the profits
generated and available to distribute and therefore cash planning continues to
be important. This along with our regulatory requirements in the UK, result in
£1.5 million (2020: £2.1 million) cash not being immediately available to
the Group, albeit the Indian funds are fully available for use by the Indian
business.
The Group has a £5.0 million revolving credit facility (RCF) which is in
place until August 2023. The RCF is not currently drawn.
Events after the balance sheet date
The Group completed the sale of China on 27 January 2022 with T-Link.
The Group is in the process of remodelling its operating structure as a
greater focus is placed on the distribution of technology-led propositions
into the UK and Europe. These technology-led solutions will lead to a
simplified UK-based operating model. This in conjunction with a smaller
geographic footprint has led to a restructuring process commencing in the UK,
which will see a redundancy programme in 2022. Exceptional restructuring costs
in 2022 are expected to be in the range £0.2 million to £0.3 million which
is anticipated to generate annualised savings of approximately £1.0 million.
Foreign exchange
The sustained strengthening of sterling through 2021 has led to exchange rate
movements continuing to work against the Group. The primary impacts on our
results have been in our Indian and Turkish businesses where exchange rates
have depreciated by approximately 7% and 37% (2020: 6% and 29%) respectively
over the year. This has adversely impacted reported results when comparing to
the prior year. We are pleased to observe that the volatile Turkish lira, led
by economic policy, seems to have stabilised in recent weeks and we continue
to manage as much as possible against a devaluation of surplus cash balances
in the market.
The reported results compared to 2020 include the following adverse foreign
exchange movements: £7.4 million (2020 restated: £6.8 million) within
revenue; and £0.9 million (2020 restated: £0.6 million) at an EBITDA level.
Segmental performance
REVENUE 2021 2020 (restated)(1) Change Constant currency change
£'m
£'m
Ongoing Operations
India 119.3 108.4 10% 17%
Turkey 3.6 3.8 (5)% 28%
Blink 0.3 0.2 84% 88%
UK & Rest of World(2) 11.6 13.1 (11)% (8)%
Total Ongoing Operations 134.8 125.5 8% 14%
Restricted Operations 8.8 11.0 (21)% (22)%
Group revenue 143.6 136.5 5% 11%
EBITDA 2021 2020 (restated)(1) Change Constant currency change
£'m
£'m
Ongoing Operations
India 7.8 7.7 2% 11%
Turkey 0.9 0.9 (4)% 53%
Blink (0.2) (1.3) 80% 80%
UK & Rest of World(2) 0.2 (0.3) 188% 171%
Total Ongoing Operations 8.7 7.0 27% 43%
Restricted Operations 3.2 3.8 (14)% (14)%
Central Functions (4.2) (4.7) 11% 11%
Segmental EBITDA 7.7 6.1 26% 50%
Share of loss in joint venture (0.2) (0.3) 28% 28%
Group EBITDA 7.5 5.8 29% 54%
1. Restated to reflect Germany and China as discontinued operations.
2. UK & Rest of World comprises UK, Spain, Italy, Portugal, Mexico,
Bangladesh, Malaysia and Southeast Asia (2020 only).
All percentage change figures in the segmental operating report below are
stated on a constant currency basis to eliminate the effects of foreign
exchange to enable better year-on-year comparison.
Ongoing Operations (94% of Group revenue):
Revenue increased by 14% to £134.8 million (2020 restated: £125.5 million)
and EBITDA increased to £8.7 million (2020 restated: £7.0 million). The
growth and improvement in EBITDA performance in our Ongoing Operations segment
continues to be an important demonstration of the necessary shift from our
naturally declining legacy businesses to the key growth markets in the Group.
Our Indian business, which includes Globiva, has had another strong year and
continues to drive the growth in this segment with revenue increasing by 17%
to £119.3 million (2020: £108.4 million). COVID-19 continued to cause some
disruption particularly during the well documented second wave in Q2 which the
business was able to withstand well following the learnings of 2020. The
growth has been fuelled by our relationship with Bajaj with a strong increase
in FoneSafe (mobile phone protection product) and LivPlus (life assistance,
health and wellness product). In Q4, the Indian regulator introduced the
requirement for second factor authentication on recurring credit card
transactions. It has taken time for our banking partners to understand their
position on this change and to agree the sales and renewal processes for Card
Protection with CPP. We expect this additional regulatory requirement to
impact our renewal rate in 2022. The new IT platform is progressing to plan
and is expected to go live in Q4 2022. This IT platform will be
transformational for both the Indian business, and the Group as whole, in
providing additional operating efficiencies and improved digital capability.
Globiva was not greatly impacted by the second wave of COVID-19 which is
testament to the stronger operating model that it has implemented since the
initial outbreak of the pandemic. Revenue in Globiva has grown 57% to £10.3
million (2020: £6.8 million) with EBITDA similarly showing strong progress at
£2.5 million (2020: £1.3 million). This performance has been built on
expansion of its partner base with over ten new partners onboarded during the
year. Globiva is one of India's fastest growing BPMs and we will continue to
support the business to realise the full potential.
Turkey has had another extremely strong year at a local currency level growing
revenue by 28% and EBITDA by 53%. This has been achieved through growth in our
partnerships with Turkiye Sigorta and AkBank as the relationships have
deepened over time. Turkey continues to be a key market for the Group and a
great example of the success that comes from a multi-partner, multi-product
approach. Unfortunately, on a reported basis this excellent local performance
has been completely negated by the ongoing devaluation in the Turkish lira
with reported revenue 5% lower in the year and EBITDA down 4%.
Blink has increased revenues by 88% to £0.3 million (2020: £0.2 million) and
reduced losses to £0.2 million (2020: £1.3 million). Blink's progress was
severely hampered by the impact the pandemic had on the travel industry and
whilst that sector is still far behind pre-pandemic levels there has been an
increase in travel in 2021. This improving trend in conjunction with greater
digital demand will place Blink in a strong position to capitalise on its
opportunity. In addition, Blink has added a further two products to its
portfolio in the year: Lost Luggage, which will complement travel delay; and
Blink Interruption, which enhances business interruption claims processes and
is currently in pilot phase with a global insurer. The business has been
brought under central management which has both focused the sales effort
leading to an acceleration in pipeline conversion along with a streamlining of
costs.
In other markets, the UK has increased revenues by 39% and reduced EBITDA
losses by 21%, albeit this progress was at a slower pace than expected, in
part due to market sentiment following UK lockdowns in Q1 2021. In addition, a
major motor ancillary partner which accounted for approximately 48% of revenue
in the year, decided to take its offering in-house and therefore this business
will not recur in 2022. The renewal books in Spain, Italy and Portugal have
been well managed and performed in line with expectations. Sustainable new
business progress through the traditional distribution channels has continued
to be difficult in both Spain and Italy.
Restricted Operations (6% of Group revenue)
Revenue decreased by 22% to £8.8 million (2020: £11.0 million) reflecting
the natural decline in the historic renewal books of Card Protection Plan
Limited (CPPL) and Homecare Insurance Limited (HIL) and the closure of
Malaysia which had become uneconomic to maintain. The UK is now the only
operation remaining in this segment. EBITDA fell by 14% to £3.2 million
(2020: £3.8 million) which reflects the lost profit from the revenue decline
partly offset by a one-time benefit of £1.1 million from the release of a
commission provision. Excluding the commission provision, EBITDA would have
been £2.1 million which is a reduction of 44% (2020: 42%). The underlying
margin in the UK book is falling due to a relatively fixed cost base to
service the remaining customer book and high IT costs associated with the
legacy platform. The Group expects to commence work on migrating the UK back
book from its legacy platforms to a UK-version of the new India platform in
late 2023 or early 2024 with completion during 2024. Implementation of the new
platform will enable legacy systems to be decommissioned which will unlock
significant savings in IT running costs for both the UK and the Group.
UK renewal rates have reduced to 67.6% (2020: 81.3%) due to the planned
changes in the renewal process for an additional number of vulnerable
customers and a switch in collections provider. We continue to prioritise the
best outcomes and experience for our customers. Renewal rates are expected to
stabilise and improve in 2022 as the vulnerable customer impact will reduce in
subsequent renewal cycles.
David Bowling
Chief Financial Officer
28 March 2022
Consolidated income statement
For the year ended 31 December 2021
2021 2020
(restated*)
Note £'000 £'000
Continuing operations
Revenue 4 143,625 136,464
Cost of sales (110,708) (102,317)
Gross profit 32,917 34,147
Administrative expenses (29,827) (31,597)
Share of loss of joint venture (189) (264)
Operating profit 2,901 2,286
Analysed as:
EBITDA 4 7,524 5,838
Depreciation and amortisation (2,995) (3,196)
Exceptional items 5 (1,628) (356)
Investment revenues 223 412
Finance costs (358) (512)
Other gains and losses 5 1,459 (1,294)
Profit before taxation 4,225 892
Taxation 6 (3,707) (3,441)
Profit/(loss) for the year from continuing operations 518 (2,549)
Discontinued operations
Profit for the year from discontinued operations 9 2,490 952
Profit/(loss) for the year 3,008 (1,597)
Attributable to:
Equity holders of the Company 2,565 (1,680)
Non-controlling interests 443 83
3,008 (1,597)
Basic earnings/(loss) per share Pence Pence
(restated*)
Continuing operations 8 0.85 (30.21)
Discontinued operations 8 28.31 10.93
29.16 (19.28)
Diluted earnings/(loss) per share Pence Pence
(restated*)
Continuing operations 8 0.83 (30.21)
Discontinued operations 8 27.60 10.93
28.43 (19.28)
*Restated to reflect Germany and China as discontinued operations. See note 2.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
2021 2020
£'000 £'000
Profit/(loss) for the year 3,008 (1,597)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (695) (809)
Exchange differences reclassified on disposal of foreign operations (4) 1,294
Other comprehensive (expense)/income for the year net of taxation (699) 485
Total comprehensive income/(expense) for the year 2,309 (1,112)
Attributable to:
Equity holders of the Company 1,867 (1,145)
Non-controlling interests 442 33
2,309 (1,112)
Consolidated balance sheet
As at 31 December 2021
2021 2020
Note £'000 £'000
Non-current assets
Goodwill 540 612
Other intangible assets 10 3,603 3,741
Property, plant and equipment 1,335 1,670
Right-of-use assets 5,109 6,097
Equity investment 11 1,889 -
Investment in joint venture 11 - 450
Deferred tax assets 396 858
Contract assets 564 426
13,436 13,854
Current assets
Insurance assets - 46
Inventories 102 145
Contract assets 4,020 4,853
Trade and other receivables 13,605 16,379
Cash and cash equivalents 22,319 21,856
40,046 43,279
Assets classified as held for sale 9 478 -
40,524 43,279
Total assets 53,960 57,133
Current liabilities
Insurance liabilities (82) (935)
Income tax liabilities (1,362) (974)
Trade and other payables (19,462) (20,387)
Lease liabilities (937) (882)
Contract liabilities (9,190) (10,889)
(31,033) (34,067)
Liabilities classified as held for sale 9 (550) -
(31,583) (34,067)
Net current assets 8,941 9,212
Non-current liabilities
Borrowings 58 98
Deferred tax liabilities (927) (579)
Lease liabilities (4,936) (5,756)
Contract liabilities (1,200) (1,094)
(7,005) (7,331)
Total liabilities (38,588) (41,398)
Net assets 15,372 15,735
Equity
Share capital 12 24,243 24,153
Share premium account 45,225 45,225
Merger reserve (100,399) (100,399)
Translation reserve 136 834
ESOP reserve 17,418 17,490
Retained earnings 27,202 27,327
Equity attributable to equity holders of the Company 13,825 14,630
Non-controlling interests 1,547 1,105
Total equity 15,372 15,735
Consolidated statement of changes in equity
For the year ended 31 December 2021
Share capital Share premium account Merger reserve Translation reserve ESOP reserve Retained earnings Total Non-controlling interests Total equity
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2020 24,056 45,225 (100,399) 299 16,999 28,928 15,108 884 15,992
Loss for the year - - - - - (1,680) (1,680) 83 (1,597)
Other comprehensive income for the year - - - 535 - - 535 (50) 485
Total comprehensive expense for the year - - - 535 - (1,680) (1,145) 33 (1,112)
Equity-settled share-based payment charge 13 - - - - 491 - 491 - 491
Deferred tax on intangible asset 6 - - - - - 58 58 - 58
Exercise of share options 97 - - - - (97) - - -
Movement in non-controlling interests - - - - - 118 118 188 306
At 31 December 2020 24,153 45,225 (100,399) 834 17,490 27,327 14,630 1,105 15,735
Profit for the year - - - - - 2,565 2,565 443 3,008
Other comprehensive expense for the year - - - (698) - - (698) (1) (699)
Total comprehensive income for the year - - - (698) - 2,565 1,867 442 2,309
Equity-settled share-based payment credit 13 - - - - (72) - (72) - (72)
Exercise of share options 12 90 - - - - (70) 20 - 20
Deferred tax on share options 6 - - - - - 9 9 - 9
Dividends paid 7 - - - - - (2,629) (2,629) - (2,629)
At 31 December 2021 24,243 45,225 (100,399) 136 17,418 27,202 13,825 1,547 15,372
Consolidated cash flow statement
For the year ended 31 December 2021
2021 2020
Note £'000 £'000
Net cash from operating activities 14 4,562 3,162
Investing activities
Interest received 224 410
Purchases of property, plant and equipment (525) (356)
Purchases of intangible assets 10 (1,370) (1,408)
Cash consideration in respect of sale of discontinued operations 9 2,366 -
Cash disposed of with discontinued operations (112) -
Receipts from net investment lease assets - 117
Net cash from/(used in) investing activities 583 (1,237)
Financing activities
Dividends paid 7 (2,629) -
Costs of refinancing the bank facility - (110)
Repayment of the lease liabilities (1,507) (1,783)
Proceeds on disposal of partial interest in subsidiary - 329
Interest paid (76) (60)
Issue of ordinary share capital 12 20 -
Net cash used in financing activities (4,192) (1,624)
Net increase in cash and cash equivalents 953 301
Effect of foreign exchange rate changes (400) (402)
Cash and cash equivalents at 1 January 21,856 21,957
Cash and cash equivalents at 31 December 22,409 21,856
Analysed as:
Continuing operations 22,319 21,856
Discontinued operations 9 90 -
22,409 21,856
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
in conformity with UK-adopted International Accounting Standards ('UK IAS')
and with those parts of the Companies Act 2006 applicable to companies
reporting under UK IAS, this announcement does not itself contain sufficient
information to comply with UK IAS. The Company will publish full financial
statements that comply with UK IAS in April 2022.
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 December 2021 or 31
December 2020, but is derived from the 2021 financial statements. Statutory
financial statements for 2020 for the Company prepared in conformity with
EU-endorsed International Financial Reporting Standards have been delivered to
the Registrar of Companies and those under UK IAS for 2021 for the Company
will be delivered following the Company's Annual General Meeting. The Auditor,
PKF Littlejohn 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 2021 financial statements were approved by the Board of Directors on 28
March 2022.
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 2020. The
following Standards and Interpretations have become effective and have been
adopted in these condensed financial statements. The IFRS 16 practical
expedient is effective for periods beginning on or after 1 June 2020 and was
early adopted by the Group in the prior year. No other Standards or
Interpretations have been adopted early in these condensed financial
statements.
Standard/Interpretation Subject
IFRS 9/ IAS 39/ IFRS 7/ IFRS 4/ IFRS 16 Interest rate benchmark reform
Restatement of disclosures
On 17 May 2021, the Group completed the sale of its 100% shareholding in CPP
Creating Profitable Partnerships GmbH ('Germany').
As at 31 December 2021, the Board was committed to the disposal of CPP Asia
Limited and its wholly owned subsidiary CPP Technology Services (Shanghai) Co.
Ltd (together 'China'). A sale process was well underway as at the balance
sheet date which subsequently completed on 27 January 2022.
In accordance with IFRS 5 Non-current assets held for sale and discontinued
operations, Germany and China have been classified as discontinued within
these financial statements. Accordingly, the comparative consolidated income
statement information and appropriate disclosure notes have been restated and
China has also been classified as held for sale as at 31 December 2021. See
note 9 for further details.
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 a period of at least 12 months
from the date of this report.
The Group has a formalised process of budgeting, reporting and review along
with procedures to forecast its profitability and cash flows. The plans
provide information to the Directors which are used to ensure the adequacy of
resources available for the Group to meet its business objectives, both in the
short-term and in relation to its strategic priorities. The Group's revenue,
profit and cash flow forecasts are subject to robust downside stress testing
which involves modelling the impact of a combination of plausible adverse
scenarios focused on crystallisation of the Group's key operational risks. The
assessment considers the Group's modelling of the ongoing risks associated
with COVID-19, This is done to identify risks to liquidity and covenant
compliance and enable management to formulate appropriate and timely
mitigation strategies. The Group's operations do not have a material direct
exposure to the conflict in the Ukraine.
Taking the analysis into consideration, the Directors are satisfied that the
Group has the necessary resources to continue in operational existence for a
period of at least 12 months from the date of this report. Accordingly, they
continue to adopt the going concern basis in preparing the financial
statements.
3. Critical accounting judgements and key sources of estimation uncertainty
Critical judgements
Revenue recognition
The Group recognises revenue either immediately on inception of a policy or over the duration of a policy where there are ongoing obligations to fulfil to a customer. Certain of the Group's contractual structures relating to product features require judgement in determining whether the Group carries an obligation to the customer over the term of the policy or if the exposure to that obligation has been transferred to a third party on inception. This judgement determines when the Group has completed the performance obligation to the customer and can recognise revenue.
The Group allocates revenue on a cost plus margin basis. The cost base may
vary over time as product features are enhanced, suppliers changed or
underlying costs move. Judgement is applied in determining if the resulting
changes to the cost base represent a temporary or permanent adjustment in the
allocation of revenue to performance obligations. If a change is considered
temporary, or within a materiality threshold, revenue recognition principles
are not amended to aid consistency.
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 on the
income statement 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 and outside of the normal operating practice of the Group. Items
which are in other gains or losses and exceptional from their size or nature
are identified in the exceptional note.
Assumptions and estimation uncertainties
Current tax
The Group operates in countries with complex tax regulations, where filed tax
positions may remain open to challenge by local tax authorities for several
years. Corporation taxes are recognised by assessment of the specific tax law
and likelihood of settlement. Where the Group has uncertain tax treatments it
has recognised appropriate provisions reflecting the expected value calculated
by the sum of the probability-weighted amounts in a range of possible
outcomes.
Changes to the Group's assessment of uncertain tax treatments would be
reflected through 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's operating segments are:
• Ongoing Operations: India, Turkey, Spain, Portugal, Italy, Mexico,
Malaysia, the UK, Bangladesh and Blink. These businesses have no regulatory
restrictions on new sales activity. These markets represent a combination of
businesses in which we continue to invest and drive new opportunities as well
as ones that have been strategically assessed and wound down or exited.
• Restricted Operations: historic renewal books of our UK regulated
entities; CPPL, including its overseas branch in Malaysia; and HIL. As a
result of regulatory restrictions we are not permitted to undertake new sales
in these businesses.
• Central Functions: central cost base required to provide expertise
and operate a listed group. Central Functions is stated after the recharge of
certain central costs that are appropriate to transfer to both Ongoing
Operations and Restricted Operations for statutory purposes.
As at December 2021, the German and Chinese operations were reclassified as
discontinued operations, having previously been part of Ongoing Operations,
accordingly the comparatives have been restated. See note 2.
Segment revenue and performance for the current and comparative periods are
presented below:
Ongoing Operations Restricted Operations Central Functions Total
2021 2021 2021 2021
£'000 £'000 £'000 £'000
Year ended 31 December 2021
Continuing operations
Revenue - external sales 134,837 8,788 - 143,625
Cost of sales (110,044) (664) - (110,708)
Gross profit 24,793 8,124 - 32,917
Administrative expenses excluding depreciation, amortisation and exceptional (16,146) (4,866) (4,192) (25,204)
items
Segmental EBITDA 8,647 3,258 (4,192) 7,713
Share of loss of joint venture (189)
EBITDA 7,524
Depreciation and amortisation (2,995)
Exceptional items (note 5) (1,628)
Operating profit 2,901
Investment revenues 223
Finance costs (358)
Other gains or losses (note 5) 1,459
Profit before taxation 4,225
Taxation (3,707)
Profit for the year from continuing operations 518
Discontinued operations
Profit for the year from discontinued operations 2,490
Profit for the year 3,008
Ongoing Operations (restated*) Restricted Operations Central Functions (restated*) Total
(restated*)
2020 2020 2020
2020
£'000 £'000 £'000
£'000
Year ended 31 December 2020
Continuing operations
Revenue - external sales 125,396 11,068 - 136,464
Cost of sales (100,942) (1,375) - (102,317)
Gross profit 24,454 9,693 - 34,147
Administrative expenses excluding depreciation, amortisation and exceptional (17,454) (5,887) (4,704) (28,045)
items
Segmental EBITDA 7,000 3,806 (4,704) 6,102
Share of loss of joint venture (264)
EBITDA 5,838
Depreciation and amortisation (3,196)
Exceptional items (note 5) (356)
Operating profit 2,286
Investment revenues 412
Finance costs (512)
Other gains and losses (note 5) (1,294)
Profit before taxation 892
Taxation (3,441)
Loss for the year from continuing operations (2,549)
Discontinued operations
Profit for the year from discontinued operations 952
Loss for the year (1,597)
* Restated to reflect Germany and China as discontinued operations. See note 2.
Segment assets
2021 2020
£'000 (restated*)
£'000
Ongoing Operations 36,947 40,677
Restricted Operations 7,392 7,564
Central Functions 6,318 5,113
Total segment assets 50,657 53,354
Unallocated assets 2,825 1,920
Assets relating to discontinued operations 478 1,859
Consolidated total assets 53,960 57,133
* Restated to reflect Germany and China as discontinued operations. See note
2.
Goodwill, deferred tax, equity investment and investment in joint venture are
not allocated to segments.
Capital expenditure
Intangible assets Property, plant and equipment Right-of-use assets
2021 2020 2021 2020 (restated*) 2021 2020 (restated*)
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Ongoing Operations 979 1,055 512 254 493 1,565
Restricted Operations 344 352 5 18 - -
Central Functions 47 1 8 83 6 523
Additions from continuing operations 1,370 1,408 525 355 499 2,088
Discontinued operations
Additions for discontinued operations - - - 1 250 3
Consolidated total additions 1,370 1,408 525 356 749 2,091
* Restated to reflect Germany and China as discontinued operations. See note
2.
Revenues from major products
2021 2020
(restated*)
£'000
£'000
Continuing operations
Retail assistance policies 128,982 126,531
Retail insurance policies - 85
Wholesale policies 2,705 2,549
Non-policy revenue 11,938 7,299
Revenue from continuing operations 143,625 136,464
Discontinued operations
Retail assistance policies 2,152 4,491
Wholesale policies 312 189
Revenue from discontinued operations 2,464 4,680
Total revenue 146,089 141,144
* Restated to reflect Germany and China as discontinued operations. See note
2.
Major product streams are disclosed on the basis monitored by senior
management. For the purpose of this product analysis, 'retail assistance
policies' are those which may be insurance backed but contain a bundle of
assistance and other benefits; 'retail insurance policies' are those which
protect against a single insurance risk; 'wholesale policies' are those which
are provided by business partners to their customers in relation to an ongoing
product or service which is provided for a specified period of time; and
'non-policy revenue' is that which is not in connection with providing an
ongoing service to policyholders for a specified period of time. The Group
derives its revenue from contracts with customers for the transfer of goods
and services which is consistent with the revenue information that is
disclosed for each reportable segment under IFRS 8.
Timing of revenue recognition
The Group derives revenue from the transfer of goods and services over time
and at a point in time as follows:
2021 2020
(restated*)
£'000
£'000
Continuing operations
At a point in time 126,606 116,296
Over time 17,019 20,168
Revenue from continuing operations 143,625 136,464
Discontinued operations
At a point in time 1,496 1,606
Over time 968 3,074
Revenue from discontinued operations 2,464 4,680
Total revenue 146,089 141,144
* Restated to reflect Germany and China as discontinued operations. See note
2.
Geographical information
The Group operates across a wide number of territories, of which India, the UK
and Spain are considered individually material. Revenue from external
customers and non-current assets (excluding equity investment, investment in
joint venture and deferred tax) by geographical location are detailed below:
External revenues Non-current assets
2021 2020 2021 2020
(restated*)
(restated*)
£'000
£'000
£'000 £'000
India 119,273 108,406 7,721 8,071
UK 10,750 12,082 1,585 2,062
Spain 6,341 7,538 323 256
Turkey 3,568 3,768 249 370
Other 3,693 4,670 1,273 1,423
143,625 136,464 11,151 12,182
Discontinued operations 2,464 4,680 - 364
146,089 141,144 11,151 12,546
* Restated to reflect Germany and China as discontinued operations. See note
2.
Information about major customers
Revenue from the customers of one business partner in the Group's Ongoing
Operations segment represented approximately £84,159,000 (2019: £73,739,000)
of the Group's total revenue.
5. Exceptional items
Exceptional items included in the table below details all exceptional items,
which are included in operating profit, other gains and losses and
discontinued operations, as well as the associated taxation.
Note 2021 2020
£'000 £'000
Continuing operations
Exceptional items included within operating profit
Restructuring costs 1,628 161
Impairment of goodwill - 880
Customer redress and associated costs - (685)
Exceptional charge included in operating profit 1,628 356
Exceptional items included within other gains and losses
Other gains and losses - gain on reclassification of investment (1,459) -
Other gains and losses - foreign exchange reclassification - 1,294
Exceptional (gain)/charge included in other gains and losses (1,459) 1,294
Total exceptional charge included in profit before tax 169 1,650
Tax on exceptional items (171) -
Exceptional (gain)/charge after tax for continuing operations 8 (2) 1,650
Discontinued operations
Exceptional gain from discontinued operations 8, 9 (2,399) -
(2,401) 1,650
Restructuring costs of £1,628,000 relate to the Group's commitment to focus
on the areas of the business that have the strongest prospects for delivering
sustainable and profitable medium to long-term growth. This has included
redundancy programmes in Spain, Blink and Mexico, as well as closure of the
Malaysian operation and head office operational restructuring. The prior year
restructuring of £161,000 related to redundancy costs and onerous leases
associated with the closure of the Southeast Asia operation.
Other gains and losses in the year, reflects the gain on reclassification of
the investment in KYND Limited (KYND) from a joint venture to an equity
investment of £1,459,000 (2020: £nil). This is following a dilution of the
Group's shareholding, after additional investment into KYND from the BGF
Investment Management Limited (BGF). As a result, the investment no longer
meets the criteria for to be held as a joint venture and is instead
reclassified as an equity investment and held at fair value (See note 11). In
the prior year, the foreign exchange reclassification of £1,294,000 related
to a reclassification of cumulative foreign translation adjustments on the
closure of the overseas branches in Hong Kong and Italy.
6. Taxation
2021 2020 (restated*)
£'000 £'000
Continuing operations
Current tax charge:
UK corporation tax 142 156
Foreign tax 3,386 2,895
Adjustments in respect of prior years (42) (29)
Current tax relating to continuing operations 3,486 3,022
Deferred tax charge:
Origination and reversal of timing differences 304 409
Impact of change in tax rates (37) 10
Adjustments in respect of prior years (46) -
Deferred tax relating to continuing operations 221 419
Tax charge relating to continuing operations 3,707 3,441
Discontinued operations
Tax charge relating to discontinued operations 30 168
Total tax charge 3,737 3,609
* Restated to reflect Germany and China as discontinued operations. See note
2.
The following is a segmental review of the tax charge, in which withholding
taxes arising on distributions are attributed to the country paying the
distribution:
2021 2020 (restated*)
£'000 £'000
Continuing operations
Ongoing Operations:
India 2,889 2,428
Turkey 554 340
Blink - -
UK and Rest of World 107 423
Total Ongoing Operations 3,550 3,191
Restricted Operations - -
Central Functions 157 250
Tax charge for continuing operations 3,707 3,441
Discontinued operations
Tax charge for discontinued operations 30 168
3,737 3,609
* Restated to reflect Germany and China as discontinued operations. See note
2.
Overall, UK profits chargeable to corporation tax are offset by group relief
surrendered from fellow UK entities.
UK corporation tax is calculated at 19% (2020: 19%) of the estimated
assessable profit for the year. The March 2021 Budget announced an increase to
the main rate of corporation tax to 25% from April 2023 and this rate has been
substantively enacted at the balance sheet date. Deferred tax is provided at
the rate which it is expected to reverse.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions - India 25.2% inclusive of surcharges (2020: 25.2%),
Spain 25% (2020: 25%), Turkey 25% for 2021, which is reducing to 23% in 2022
(2020: 22%), and Italy 27.5% (2020: 27.5%). Non-UK deferred tax is provided
at the local prevailing tax rate which is expected to apply to the reversal of
the timing difference.
The charge for the year can be reconciled to the profit per the consolidated
income statement as follows:
2021 2020 (restated*)
£'000 £'000
Profit before tax from continuing operations 4,225 892
Effects of:
Tax at the UK corporation tax rate of 19% (2020: 19%) 803 170
Unprovided deferred tax arising on losses(1) 792 804
Other movement in unprovided deferred tax 164 185
Recurring expenses not deductible for tax 409 243
One-off costs not deductible for tax(2) (259) 395
Provision for withholding tax on future distributions(3) 1,217 789
Other expense not chargeable for tax purposes 250 171
Higher tax rates on overseas earnings(4) 471 552
Adjustments in respect of prior years (88) (29)
Impact of change in future tax rates on deferred tax (36) 10
(Deficit)/ surplus of share option charge compared to tax allowable amount (16) 151
Tax charged to income statement for continuing operations 3,707 3,441
Tax charged to the income statement for discontinued operations 30 168
3,737 3,609
* Restated to reflect Germany and China as discontinued operations. See note 2
Effective tax charge
The net tax charge of £3,707,000 on a profit before tax from continuing
operations of £4,225,000 results in an effective tax rate of 88% which is
higher than the UK standard rate of 19%. Additional information is provided
below:
1. Deferred tax has not been recognised on the losses arising in developing
markets as the short-term profit expectations do not support the recognition
of deferred tax assets in these areas.
2. There is a one-off profit arising on KYND which is not taxable and
therefore reduces the tax charge. In the prior year there were one-off
consolidation adjustments which were not tax deductible and therefore
increased the tax charge, such as the impairment of Blink goodwill and foreign
exchange losses arising on branch closures.
3. There is a withholding tax burden arising on repatriation of funds
from overseas countries which is included in the tax charge.
4. Tax is chargeable at the local statutory rate in our profitable
countries, which are higher than the UK corporate income tax rate of 19%.
The Group's effective tax rate is expected to be considerably higher than the
UK statutory tax rate in future years as withholding taxes are provided on
overseas distributions and deferred tax credits are not taken on losses in
markets that are currently not profitable. The Group expects the rate to
reduce from the current level. The Group maintains appropriate provisions in
respect of tax uncertainties arising from operating in multiple overseas
jurisdictions.
Income tax credited to reserves during the year was as follows:
2021 2020
£'000 £'000
Deferred tax credit
Timing differences on business partner intangible - 58
Timing differences of equity-settled share-based charge 9 -
Total deferred tax credit and total tax credited to reserves 9 58
7. Dividends
2021 2020
£'000 £'000
Final dividend paid for the year ended 31 December 2020 of 25 pence per share 2,188 -
(2019: nil pence per share)
Interim dividend paid for the year ended 31 December 2021 of 5 pence per share 441 -
(2020: nil pence per share)
Amounts recognised as distributions to equity holders in the year 2,629 -
After 31 December 2021, the Directors have proposed a final dividend of 7.5
pence (2020: 25.0 pence) per ordinary share. The proposed final dividend is
subject to approval by shareholders at the AGM and has not been included as a
liability in these financial statements. The proposed dividend is expected to
be paid on 17 May 2022 to all shareholders on the Register of Members on 19
April 2022 with the ex-dividend date being 14 April 2022. This has not been
accrued as a liability as at 31 December 2021, consistent with the prior year,
in accordance with IAS 8.
8. 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 or increase the loss per share attributable to equity holders.
Profit/(loss)
Continuing operations Discontinued operations Total
2021 2020 (restated*) 2021 2020 (restated*) 2021 2020
£'000
£'000
£'000
£'000
£'000 £'000
Profit/(loss) for the purposes of basic and diluted earnings/(loss) per share 75 (2,632) 2,490 952 2,565 (1,680)
Exceptional items (net of tax) (2) 1,650 (2,399) - (2,401) 1,650
Profit/(loss) for the purposes of underlying basic and diluted earnings/(loss) 73 (982) 91 952 164 (30)
per share
Number of shares
2021 2020
Number Number
(thousands) (thousands)
Weighted average number of ordinary shares for the purposes of basic 8,796 8,713
earnings/(loss) per share and basic underlying earnings/(loss) per share
Effect of dilutive ordinary shares 225 -
Weighted average number of ordinary shares for the purposes of diluted 9,021 8,713
earnings/(loss) per share and diluted underlying earnings/ (loss) per share
Continuing operations Discontinued operations Total
2021 2020 2021 2020 2021 2020
Pence (restated*) Pence (restated*) Pence Pence
Pence
Pence
Basic earnings/(loss) per share 0.85 (30.21) 28.31 10.93 29.16 (19.28)
Diluted earnings/(loss) per share 0.83 (30.21) 27.60 10.93 28.43 (19.28)
Basic underlying earnings/(loss) per share 0.83 (11.27) 1.03 10.93 1.86 (0.34)
Diluted underlying earnings/(loss) per share 0.81 (11.27) 1.01 10.93 1.82 (0.34)
* Restated to reflect Germany and China as discontinued operations. See note
2.
The Group has 171,650,000 (2020: 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 earnings/ loss per share.
9. Discontinued operations and assets and liabilities classified as held for
sale
On 17 May 2021, the Group completed the sale of its 100% shareholding in CPP
Creating Profitable Partnerships GmbH ('Germany'). The gross consideration on
disposal was £2,366,000 (€2,744,000).
As at 31 December 2021, the Board was committed to the disposal of CPP Asia
Limited and its wholly owned subsidiary (together 'China'). A sale process was
well underway as at the year end. Subsequent to year end on 27 January 2022,
the sale was completed.
In accordance with IFRS 5 Non-current assets held for sale and discontinued
operations, Germany and China have been presented as discontinued operations,
and the China assets and liabilities have been reclassified as held for
sale.
Operating results for year ended 31 December 2021 reflect the trading
performance of Germany up to the date of disposal on 17 May 2021 and China for
the full year. Comparative information reflects a complete year. Both Germany
and China were part of the Ongoing Operations segment.
(i) Income statement
Note Germany China Total Germany China 2020 Total 2020
2021
2021
2021
2020
£'000
£'000
£'000
£'000 £'000 £'000
Revenue 1,062 1,402 2,464 3,003 1,677 4,680
Cost of sales (430) (547) (977) (1,127) (746) (1,873)
Gross profit 632 855 1,487 1,876 931 2,807
Administrative expenses 2,654 (1,721) 933 (172) (1,612) (1,784)
Operating profit/(loss) 3,286 (866) 2,420 1,704 (681) 1,023
Analysed as:
EBITDA 628 (322) 306 1,704 (382) 1,322
Depreciation and amortisation - (285) (285) - (299) (299)
Exceptional items 2,658 (259) 2,399 - - -
Investment revenues - 1 1 - - -
Finance costs 33 66 99 1 96 97
Profit/(loss) before taxation 3,319 (799) 2,520 1,705 (585) 1,120
Taxation (30) - (30) (168) - (168)
Profit/(loss) for the year 3,289 (799) 2,490 1,537 (585) 952
(ii) Exceptional items
Note Germany China Total Germany China 2020 Total 2020
2021
2021
2021
2020
£'000
£'000
£'000
£'000 £'000 £'000
Profit on disposal 2,654 (72) 2,582 - - -
Write down of assets on reclassification as held for sale - (113) (113) - - -
Restructuring costs 4 (74) (70) - - -
Exceptional items included in operating profit 2,658 (259) 2,399 - - -
Tax on exceptional items - - - - - -
Exceptional items after tax 2,658 (259) 2,399 - - -
(iii) Profit on disposal
The Group has recognised a profit on disposal as follows, this includes a
working capital adjustment for Germany, which was not finalised at the half
year:
Germany China Total
2021 2021 2021
£'000 £'000 £'000
Proceeds 2,366 - 2,366
Net liabilities sold 284 - 284
Costs associated with disposal - (72) (72)
Currency translation differences on disposal 4 - 4
Profit on disposal 2,654 (72) 2,582
(iv) Summary of cash flows
Germany China Total Germany China 2020 Total 2020
2021
2021
2021
2020
£'000
£'000
£'000
£'000 £'000 £'000
Net cash flows from operating activity (7,765) 54 (7,711) 1,265 (500) 765
Net cash flows from investing activity - 2 2 (894) (80) (974)
Net cash flows from financing activity 7,357 (85) 7,272 (132) 640 508
Net cash (outflow)/inflow (408) (29) (437) 239 60 299
(v) Assets and liabilities classified as held for sale
2021
£'000
Current assets
Other intangible assets 98
Property, plant and equipment 10
Right-of-use asset 138
Trade and other receivables 142
Cash and cash equivalents 90
Total assets held for sale 478
Current liabilities
Trade and other payables (333)
Contract liabilities (68)
Leases liabilities (149)
Total liabilities held for sale (550)
Following reclassification to held for sale, other intangible assets,
property, plant and equipment, and right-of-use assets were impaired by
£58,000 in total. The impairment charge is included within the exceptional
charge on write down of assets on reclassification as held for sale.
10. Other intangible assets
Business partner relationships Internally generated software Externally acquired software Total
£'000
£'000
£'000
£'000
Cost:
At 1 January 2020 644 2,761 3,796 7,201
Additions - 1,267 141 1,408
Disposals - - (265) (265)
Exchange adjustments - (79) (23) (102)
At 1 January 2021 644 3,949 3,649 8,242
Additions - 1,192 178 1,370
Exchange adjustments - (55) (144) (199)
Transfer of assets held for sale - - (792) (792)
At 31 December 2021 644 5,086 2,891 8,621
Accumulated amortisation:
At 1 January 2020 87 837 2,744 3,668
Provided during the year 142 501 428 1,071
Disposals - - (211) (211)
Exchange adjustments (6) (4) (17) (27)
At 1 January 2021 223 1,334 2,944 4,501
Provided during the year 125 705 325 1,155
Impairment 122 - 47 169
Exchange adjustments - (20) (100) (120)
Transfer of assets held for sale - - (687) (687)
At 31 December 2021 470 2,019 2,529 5,018
Carrying amount:
At 31 December 2020 421 2,615 705 3,741
At 31 December 2021 174 3,067 362 3,603
Amortisation of intangible assets totalling £1,195,000 (2020: £1,071,000) is
recognised through administrative expenses in the consolidated income
statement.
Internally generated software additions of £1,192,000 (2020: £1,237,000)
reflect the capitalisation of staff costs in IT development projects.
Internally generated software includes £1,956,000 (2020: £622,000) relating
to assets in development which are not yet operational and are not amortised.
The assets held at 31 December 2021 are expected to become operational in Q4
2022.
11. Investment in joint venture and equity investment
Movement in the Group's share in joint ventures is as follows:
2021 2020
£'000 £'000
Carrying amount at 1 January 450 714
Acquisitions 168 -
Share of losses in the year (189) (264)
Disposals (429) -
Carrying amount at 31 December - 450
Up to 23 December 2021, the Group held a 20% share of KYND Limited (KYND),
whose registered office is International House, Canterbury Crescent, London,
SW9 7QD. The Group's shareholding was in the form of preference and deferred
shares. KYND incurred losses of £943,000 (2020: £1,316,000) during the year.
The Group's share of loss in the joint venture is £189,000 (2020: £264,000),
which has been recognised in the consolidated income statement. The carrying
value of the investment has been adjusted for these losses. In the year, a
loan to KYND was converted into equity, which has been recognised as an
addition to the joint venture carrying amount.
The summarised financial information of KYND, is as follows:
2021 2020
£'000 £'000
Revenue 846 171
Expenses (1,789) (1,487)
Loss for the period (943) (1,316)
Group's share of loss for the period (189) (264)
On 23 December 2021, KYND received additional investment from BGF, which
diluted the Group's shareholding to 14.7% in the form of A and B shares.
Taking into account share options within KYND on a fully diluted basis the
Group's holding will be 13.3%. Following the investment, the Group could not
demonstrate significant influence and joint control and the investment could
no longer be equity accounted as a joint venture. Therefore, the investment in
joint venture was derecognised and accounted for as an equity investment. As
detailed in the table below:
2021
£'000
Carrying amount at 1 January -
Acquisitions 1,889
Carrying amount at 31 December 1,889
The equity investment in KYND is accounted for as a non-current asset
investment, under IFRS 9. The initial recognition of the equity investment in
KYND is at fair value at the date of acquisition. This will be subsequently
revalued at the accounting dates and an election has been made for any
movements in fair value to go through other comprehensive income.
In the year, £1,459,000 (2020: £nil) was recognised as a fair value gain
through other gains and losses (note 5) which reflected the net impact of the
disposal of the joint venture and the recognition of the equity investment at
fair value.
There have been no dividends received in the year (2020: £nil) from the KYND
equity investment.
12. Share capital
Ordinary Deferred Total
shares of shares of (thousands)
£1 each 9 pence
(thousands) each
(thousands)
Called-up and allotted
At 1 January 2021 8,743 171,650 180,393
Issue of shares in connection with:
Exercise of share options 90 - 90
At 31 December 2021 8,833 171,650 180,483
Ordinary Deferred Total
shares of shares of £'000
£1 each 9 pence
£'000 each
£'000
Called-up and allotted
At 1 January 2021 8,740 15,413 24,153
Issue of shares in connection with:
Exercise of share options 90 - 90
At 31 December 2021 8,830 15,413 24,243
Share capital at 31 December 2021 is £24,243,000 (2020: £24,153,000). To
satisfy share option exercises in the year the Company has issued 89,735 £1
ordinary shares for a total equity value of £90,000 and cash consideration of
£20,000.
13. Share-based payment
Equity-settled share-based payments
Share-based payments comprise a credit relating to the 2016 LTIP of £72,000
(2019: £491,000 charge) which are disclosed within administrative expenses.
No options have been granted in the current year or the prior year as part of
the 2016 LTIP.
2021 2020
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
(thousands) price (thousands) price
(£) (£)
2016 LTIP
Outstanding at 1 January 329 - 44,187 -
Exercised during the year (70) - (9,487) -
Lapsed during the year (69) - (1,602) -
Forfeited during the year (52) - - -
Share consolidation in the year - - (32,769) -
Outstanding at 31 December 138 - 329 -
Exercisable at 31 December 9 - 14 -
Nil-cost options and conditional shares granted under the 2016 LTIP normally
vest after three years, lapse if not exercised within ten years of grant and
will lapse if option holders cease to be employed by the Group. Vesting of
2016 LTIP options and shares are also subject to achievement of certain
performance criteria including Group financial targets and non-financial
events measured within the vesting period.
The options outstanding at 31 December 2021 had no remaining contractual life
of (2020: one year weighted average) in the 2016 LTIP.
Cash-settled share-based payments
The Group granted certain employees with notional share options that require
the Group to pay the intrinsic value of the notional share to the employee at
the date of exercise. The notional share options have the same requirements
and conditions as the 2016 LTIP. There have been no similar awards in 2021.
The Group has recorded a total expense in relation to cash-settled awards in
2021 of £8,000 (2020: £8,000) which is disclosed within administrative
expenses. The Group has recorded liabilities for its cash-settled awards of
£137,000 (2020: £129,000) which are included in trade creditors and
accruals.
14. Reconciliation of operating cash flows
2021 2020
£'000 £'000
Profit/(loss) for the year 3,008 (1,597)
Adjustments for:
Depreciation and amortisation 3,111 3,454
Share-based payment (credit)/charge (64) 499
Impairment loss on goodwill - 880
Impairment loss on intangible assets 176 -
Impairment loss on property, plant and equipment 3 -
Impairment loss on right-of-use assets 48 41
Loss on disposal of intangible assets - 54
Loss on disposal of property, plant and equipment 26 30
Share of loss in joint venture 189 264
Lease concessions - (86)
Profit from discontinued operations (2,582) -
Investment revenues (224) (412)
Finance costs 259 415
Other gains and losses (1,459) 1,294
Income tax charge 3,737 3,609
Operating cash flows before movements in working capital 6,228 8,445
Decrease/(increase) in inventories 40 (58)
Decrease in contract assets 354 1,272
Decrease in receivables 1,626 663
Decrease/(increase) in insurance assets 46 (4)
Increase/(decrease) in payables 217 (3,049)
Decrease in contract liabilities (276) (953)
(Decrease)/increase in insurance liabilities (853) 179
Decrease in provisions - (309)
Cash from operations 7,382 6,186
Income taxes paid (2,820) (3,024)
Net cash from operating activities 4,562 3,162
Reconciliation of net funds
At Cash flow Foreign exchange and other non-cash movements At
1 January £'000 £'000 31 December
2021 2021
£'000 £'000
Net cash per cash flow statement 21,856 953 (400) 22,409
Financing activities:
Lease liabilities (6,638) 1,507 (892) (6,023)
Borrowings due outside of one year
- Unamortised issue costs 98 - (40) 58
Total movement from financing activities (6,540) 1,507 (932) (5,965)
Total net funds 15,316 2,460 (1,332) 16,444
15. Related party transactions
Transactions with associated parties
The Group has a balance receivable from its joint venture, KYND, in the amount
of £nil (2020: £150,000). This was converted to equity in the year (Note
11).
In the year, the Group incurred fees of £8,000 plus VAT (2020: £nil) for
services rendered from KYND, which was payable under 14 day credit terms. The
creditor balance at the year end was £1,000 (2020: £nil).
Transactions with related parties
ORConsulting Limited (ORCL) is an organisation used by the Group for
consulting services in relation to leadership coaching. Organisation Resource
Limited (ORL), a company owned by Mark Hamlin, who was the Senior Independent
Director in the Group, retains intellectual property in ORCL for which it is
paid a licence fee. The fee paid to ORCL by the Group in 2021 was £81,000
plus VAT (2020: £63,000) and was payable under 30-day credit terms.
Mark Hamlin was the Chairman of Globiva until 31 December 2021. The fees for
this role are paid to his consultancy company, ORL. The fee paid to ORL by the
Group in 2021 was £71,000 (2020: £73,000) and was payable under 25-day
credit terms.
The Group paid £166,800 to Sosafe Limited (Sosafe) in February 2021 pursuant
to a settlement agreement with Sosafe and Mr Hamish Ogston dated 23 February
2021 (the Settlement). Mr Ogston is a director and majority shareholder of
Sosafe and a substantial shareholder in the Group and therefore the Settlement
constituted a related party transaction pursuant to AIM Rule 13. The
Settlement was made in connection with claims for certain legal and
professional costs incurred by Sosafe and Mr Ogston and represents full and
final settlement of such claims, which date back several years and have been
fully provided for since 2016. With the exception of David Morrison, the
Company's non-executive Chairman and a representative of Mr Ogston, the
independent Directors of the Company consider, having consulted with Liberum,
the Company's nominated adviser, that the terms of the transaction were fair
and reasonable insofar as its shareholders are concerned.
Remuneration of key management personnel
The remuneration of the Directors and senior management team, who are the key
management personnel of the Group and Company, is set out below:
2020 2019
£'000 £'000
Short-term employee benefits 1,788 2,442
Post-employment benefits 74 89
Termination benefits 203 -
Share-based payments (65) 423
2,000 2,954
16. Events after the balance sheet date
The Group completed the sale of China on 27 January 2022 with T-Link for a
nominal consideration of HK$1. The terms of the transaction included a working
capital cash injection of £0.5 million immediately prior to completion. The
Group expects that the transaction together with trading losses and a
reclassification of cumulative translation adjustments will contribute a
profit of approximately £0.6 million in 2022.
The Group is in the process of remodelling its operating structure as a
greater focus is placed on the distribution of technology-led propositions
into the UK and Europe. These technology-led solutions will lead to a
simplified UK-based operating model. This in conjunction with a smaller
geographic footprint has led to a restructuring process commencing in the UK,
which will see a redundancy programme in 2022. The total costs associated with
the restructuring is expected to be in the range £0.2 million to £0.3
million.
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.
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