REG - CPPGroup Plc - FULL YEAR RESULTS FOR YEAR ENDED 31 DECEMBER 2022
28/03/2023 07:00
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RNS Number : 3843U CPPGroup Plc 28 March 2023
28 March 2023
CPPGroup Plc
("CPP", "the Group" or "the Company")
FULL YEAR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022
A RESILIENT FINANCIAL PERFORMANCE AND CHANGE MANAGEMENT PROGRAMME COMMENCED
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 2022.
Financial highlights
· Group revenue from continuing operations increased by 19% to
£169.8 million (2021 restated: £142.8 million)
· EBITDA(2) from continuing operations decreased by 5% to £6.9
million (2021 restated: £7.2 million).
· Core revenues(4) increased by 25% to £154.3 million (2021: £123.2
million) and Core EBITDA(4) increased by 20% to £5.0 million (2021: £4.1
million)
· Central overheads reduced to £3.3 million (2021 restated: £4.3
million)
· Profit before tax from continuing operations decreased to £2.4
million (2021 restated: £4.3 million). On an underlying basis(3), profit
before tax increased to £4.1 million (2021 restated: £3.1 million)
· Profit after tax from continuing operations reduced to £0.1
million (2021 restated: £0.6 million)
· Cash balance of £21.0 million at 31 December 2022 (2021: £22.3
million)
Operational progress
· Simplified structure focused on four Core business units (Blink
Parametric; CPP India; CPP Turkey; and Globiva)
· Strategy in place to migrate to a product-led global InsurTech
business
· Simplified the management and operational structures
· Core business(4) performing well, growing revenues and EBITDA
· Major partner renewals for CPP India, and new partner wins for both
CPP Turkey and Blink Parametric
· Legacy business(5) revenues and EBITDA continue to decline
year-on-year
· Change management programme progressing well and to plan:
o Disposal of China and Mexico and withdrawal from Bangladesh;
o Terms agreed with underwriters to exit from Spain and Portugal over the
next 12 months; and
o Blink Parametric scalability project well advanced during the year and
completed post period.
Financial and non-financial highlights - continuing operations
£ millions 31 December 2022 31 December 2021 Change
(Restated(1))
Financial highlights:
Group
Revenue 169.8 142.8 19%
EBITDA(2) 6.9 7.2 (5)%
Operating profit 2.6 3.0 (12)%
Profit before tax
- Reported 2.4 4.3 (43)%
- Underlying(3) 4.1 3.1 38%
Profit/(loss) for the year
- Reported 0.1 0.6 (82)%
- Underlying(3) 1.6 (0.8) 294%
Basic (loss)/earnings per share (pence) (1.73) 1.51 (215)%
Cash and cash equivalents 21.0 22.3 (6)%
Segmental
Revenue
- Core(4) 154.3 123.2 25%
- Legacy(5) 15.5 19.6 (21)%
EBITDA(2)
- Core(4) 5.0 4.1 20%
- Legacy(5) 1.9 3.1 (39)%
Non-financial highlights:
Customer numbers (millions) 11.4 11.4 0%
1. Restated to reflect Mexico as a discontinued operation.
2. EBITDA represents earnings before interest, taxation, depreciation,
amortisation and exceptional items.
3. Underlying profit before tax excludes exceptional items of £1.7
million (2021 restated: £1.2 million credit, comprising an exceptional credit
of £0.1 million and a one-time benefit from the release of a commission
provision of £1.1 million). The tax effect of the exceptional items is £0.2
million (2021: £0.2 million). Further detail of exceptional items is provided
in note 5 of the condensed consolidated financial statements.
4. Core business revenue comprises CPP India, CPP Turkey, Blink
Parametric and Globiva. In addition to these business units Core EBITDA
includes central costs.
5. Legacy business primarily comprises the UK and European renewal books
of business, which are principally Card Protection and Identity Protection
policies.
Simon Pyper, CEO of CPP Group, commented:
"In many respects, the results for the 2022 financial year are the last set of
results for the Group as historically constituted. Our new strategy and
accompanying change management programme, published in October of last year,
sets a new course for the business which will see the Group exit from its
Legacy businesses, address critical IT infrastructure requirements, and
migrate towards an InsurTech business led by Blink Parametric and supported by
CPP India and CPP Turkey.
We have already made some good progress with regards to our Legacy businesses,
withdrawing from China, Bangladesh, and Mexico. Additionally, in the fourth
quarter of last year, we agreed terms to dispose of our legacy Spanish and
Portuguese operations which included the transfer of some business to a
third-party underwriter. Despite the progress thus far, the change management
programme, a complex set of eight inter-dependent projects, is not expected to
fully conclude before the end of the 2025 financial year. The size and scope
of the change being implemented is profound and challenging, but I remain
firmly of the view, that we have set the right course for the business, which,
over time, will deliver satisfactory returns for shareholders and other
stakeholders.
From a trading perspective our Core businesses are performing very much in
line with expectations. From an operational point of view, we continue to make
good progress in implementing the change management programme and expect to
deliver on the objectives we have set ourselves for the 2023 financial year."
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
About CPP Group:
CPP Group is a technology-driven assistance company that creates embedded and
ancillary real-time assistance products and resolution services that reduce
disruption to everyday life for millions of people across the world, at the
time and place they are needed. 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 October of last year, we set out the conclusions of an extensive strategy
review, the future direction of the Group and the accompanying change
management programme (CMP). This will see the Group exit from its Legacy
operations, address critical IT infrastructure requirements, and migrate the
Group towards an InsurTech business led by Blink Parametric (Blink) and
supported by CPP India and CPP Turkey. It is a bold and ambitious strategy,
and it is certainly not without risk, but I firmly believe that it is the
right course, setting a clear framework and direction of travel for the Group,
which will improve outcomes for shareholders and other stakeholders.
Strategy for growth
Our new strategy reflects our starting point. We have two successful
businesses in India and Turkey, a sub-scale business with considerable
potential in Blink, and a Legacy business in terminal decline. Over a period
of three years, the Group will focus on new product and new partner
development in India and Turkey, we will seek to build our InsurTech
capability, with Blink at its core, whilst we withdraw from the Legacy
businesses, and the liabilities associated with them.
The execution of this plan and the operational risks associated with it are
not insignificant. Through the CMP we have put in place, which is discussed in
more detail in the Chief Executive Officer's statement, we aim both to
mitigate the risk and to exceed expectations. However, we are mindful that not
all such endeavours proceed exactly as planned and there may be
disappointments and delays along the way.
Financial results
Trading performance from Core operations (Blink, CPP India, CPP Turkey and
Globiva) was robust, with revenues increasing by 25% to £154.3 million and
EBITDA, which also includes central costs, increasing by £0.9 million to
£5.0 million. Group revenues from continuing operations, which include
results from our Legacy operations, increased by 19% to £169.8 million whilst
EBITDA of £6.9 million was 12% better than the prior year (adjusting for the
2021 £1.1 million commission release in UK Legacy operations). Our balance
sheet shows cash of £21.0 million (2021: £22.3 million), which allows the
Group to fund its working capital and CMP commitments.
People
The course we have set ourselves brings uncertainty, the need for adaptability
and a willingness to embrace change. It has also led, inevitably, to changes
in personnel and to the departure of some colleagues who have served the Group
with diligence for many years. It is in that context that I, and my fellow
Board members, would like to thank all of our colleagues for their
professionalism, hard work and dedication during a year of substantive change.
During the course of the year, we began meeting and considering candidates for
appointment to the Board, recognising the benefits brought by independent
non-executive directors who can also add value through their knowledge of the
sectors in which we operate or their experience of some of the challenges
thrown up by the CMP. Whilst that process continues the focus and engagement
of the current Non-Executive Directors and their support for and challenges to
the executive team has been immensely valuable as the revised strategy was
being developed during the course of last year. The Board pays full attention
to governance issues and endorses the importance of independent directors as
well as the benefits of diversity. However, its primary focus during this
period of transformation is on delivering a strategy for growth and returns
from which all shareholders and other stakeholders will benefit.
Outlook
We have had a positive start to the year with trading from continuing
operations performing in line with expectations and we are encouraged by the
good pipeline of new business within Blink. Additionally, the CMP is being
progressed with key milestones either being achieved or on track to being
achieved in line with our plans. Nevertheless, we remain cautious and
measured, as there is much to do over the course of 2023 and 2024.
David Morrison
Non-Executive Chairman
27 March 2023
Chief Executive Officer's Statement
Introduction
In many respects, the results for the 2022 financial year are the last set of
results for the Group as historically constituted. Our new strategy and
accompanying CMP published in October of last year, sets a new course for the
business, which will see the Group exit from its Legacy businesses, address
critical IT infrastructure requirements, and migrate towards an InsurTech
business led by Blink and supported by CPP India and CPP Turkey.
We have already made some good progress with regards to our Legacy business,
withdrawing from China, Bangladesh, and Mexico. Additionally, in the fourth
quarter of last year, we agreed terms to exit from our legacy Spanish and
Portuguese operations which included the transfer of some business to a
third-party underwriter. Despite the progress thus far, the CMP, a complex set
of eight inter-dependent projects, is not expected fully to conclude before
the end of the 2025 financial year.
The size and scope of the change being implemented is profound and
challenging, but I remain firmly of the view, that we have set the right
course for the business, which, over time, will deliver satisfactory returns
for shareholders and other stakeholders.
A focused business
Our organisational structure reflects our strategic intent, to grow Blink, our
InsurTech business, and to grow CPP India and CPP Turkey. Each of these
businesses has their own management team with full responsibility for revenue
and EBITDA growth. Our Legacy business has its own experienced team which is
responsible for the measured wind down and closure now in train. The Centre's
role will also change, moving, over time, to a slimmer refocused model, which
pressure-tests the businesses' targets and strategies, allocates capital and,
where appropriate, actively promotes the sharing of best practice.
A resilient financial performance
Group revenue from continuing operations grew by 19% on a reported basis and
by 15% on a constant currency basis. Revenues from our Core operations, which
exclude our Legacy business (UK and European back books), grew by 25% on a
reported basis and by 21% on a constant currency basis. Group EBITDA was
marginally lower than prior year at £6.9 million (2021 restated: £7.2
million), albeit this is 12% higher when excluding the one-time £1.1 million
commission release recognised in the UK in the prior year.
Blink Parametric: Revenue £0.5 million (2021: £0.3 million) and EBITDA loss
£0.4 million (2021: loss £0.3 million)
Blink is a technology and software platform focused on providing innovative
Travel Disruption (flight delay and lost luggage) solutions for the global
travel sector. Despite being part of CPP Group since 2017, little was done to
maximise its potential - it was in many respects an orphaned asset. During the
year we set in place, as part of the CMP, two work streams, one focused on
building capacity (people; processes; and structures) and the other on growth
(new product development; and sales and marketing). The benefits of these two
work streams will probably not be seen until the second half of 2023. That
said, some of the work we are undertaking has started to be recognised, and in
2022 Blink won several prestigious industry awards including:
· Insurance Times Awards - 'Excellence in Technology - Service
Provider'
· ITIJ Awards - 'Outstanding Industry Contribution of the year'
· InsurTech100. Blink Parametric made FinTechGlobal's InsurTech 100
for 2022
India: Revenue £150.6 million (2021: £119.3 million) and EBITDA £8.0
million (2021: £7.8 million)
India is the Group's largest operating business, generating circa 89% of total
revenues. The business performed well, benefiting from both volume growth and
favourable exchange rate movement. On a constant currency basis, revenue
growth for 2022 was 20%. EBITDA growth was subdued reflecting, in part, a
change in revenue mix towards lower margin products, and increased operating
costs.
There are two constituent businesses:
1. CPP India: Reported revenue up 24% to £134.8 million (2021: £109.0
million), constant currency revenue growth of 18%
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. Revenue
growth for 2022 was robust with the number of live polices at year end
increasing by 2% to 9.8 million, but with some movement towards lower margin
products such as LivCare. Operating costs increased during the year due to
additional third-party costs and improved incentives for the in-country
executive team.
2. Globiva: Reported revenue up 54% to £15.8 million (2021: £10.3
million), constant currency growth of 46%.
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. Revenue growth reflects
several new business wins, a favourable exchange rate and, importantly, a full
twelve months of trading without any COVID-19 disruption. Like the majority of
India-based BPMs, Globiva's largest operating cost relates to seat occupancy
(employees), which has increased significantly over the past year which, in
turn, had an adverse impact on EBITDA growth.
Turkey: Revenue £3.2 million (2021: £3.6 million) and EBITDA £0.7 million
(2021: £0.8 million)
CPP Turkey performed well during the year with revenue and EBITDA increasing
by 42% and 36% respectively on a constant currency basis. That the business
has been able to deliver real growth in such a turbulent economic environment
is a testament to the quality and strength of our proposition, of our
relationships with our business partners, and of our management team. CPP
Turkey ended the year with a live policy count of 1.1 million, a major
landmark and a substantial increase on the prior year.
In February 2023, a devastating earthquake hit the southern part of Turkey.
Whilst our Turkish office is not located in the disaster area most colleagues
have been impacted in some way through family, friends or business
connections. We continue to monitor the situation closely and are providing
any support that is needed to our colleagues.
Legacy operations: Revenue £15.5 million (2021 restated: £19.6 million) and
EBITDA £1.9 million (2021 restated: £3.3 million)
Our Legacy operations (UK and European back books) are in terminal decline and
will soon become unprofitable. To address this, the Group announced, in
October of last year, its plans to exit from its Legacy operations in an
orderly manner, effected by the CMP, which will take three years to conclude.
Live policies: Number of live polices at 31 December 11.4 million (2021
restated: 11.4 million)
Live policy growth is a good indicator of business performance for CPP India
and CPP Turkey. Live policies in our Core businesses have increased to 10.9
million (2021: 10.4 million) whilst, as expected, they have reduced in our
Legacy operations to 0.5 million (2021 restated: 1.0 million)
millions CPP India CPP Turkey Legacy Group
My Finances 3.3 0.3 0.5 4.1
Vs Lyr % +12% +16% -34% +4%
My Tech 1.8 - - 1.8
Vs Lyr % -25% n/a n/a -25%
My Health 2.5 0.1 - 2.6
Vs Lyr % +23% >+999% n/a +24%
My Home 2.2 - - 2.2
Vs Lyr % -2% n/a n/a 0%
My Digital Life - 0.7 - 0.7
Vs Lyr % n/a +28% n/a +19%
My Travel - - - -
Vs Lyr % n/a n/a n/a n/a
Total 9.8 1.1 0.5 11.4
Vs Lyr % +2% +27% -39% 0%
Central costs: £3.3 million down 22% in the year (2021 restated: £4.3
million)
Central costs before allocation are £9.0 million (2021: £10.4 million) of
which £3.5 million (2021: £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 the second half of 2024.
Net of recharges, central costs have reduced by £1.0 million year-on-year
primarily due to a reduction in Board and executive costs along with the cost
benefits from a 60% reduction in the Leeds Head Office space which was
finalised during Q3.
A simple strategy we can execute: Group
The over-arching strategy is to exit the Legacy business and to migrate CPP to
an InsurTech business led by Blink and supported by CPP India and CPP Turkey.
InsurTech businesses generally have attractive economics, they generate high
levels of repeat business, they operate with high margins and are commonly
valued more highly than their traditional insurance counterparts. The
strategy, if executed correctly, will simplify the business and its operations
and, moreover, will set out a clear purpose for the Group, one that leverages
the global nature of Blink's parametric propositions.
1) Where we will compete: The Group will focus on designing innovative
assistance products and services which augment and create value (customer
satisfaction, customer loyalty and new business) for its growing distribution
business partner base.
2) Base of competitive advantage: Differentiation, with a focus on new
product development, product innovation, and quality of service to our current
and future business partners.
3) Strategic direction: Market penetration and development for Blink, CPP
India and CPP Turkey.
4) Method of Implementation: Internal development with product
acquisitions which enrich or enhance our proposition. We will, at the same
time, withdraw from our Legacy business and dispose of non-core business
investments.
5) Constraints: Management bandwidth as we are going through a period of
substantial change. Finding suitable acquisitions at an appropriate price.
Moving from an informal approach to a formal approach and structure, with a
set of processes for continuous production, innovation, and development.
Our strategy is in two stages:
Stage one is to migrate away from the regulated Legacy business and to focus
on Blink, CPP India and CPP Turkey. Stage two is to develop CPP into a
product-led, global InsurTech business (Blink), supported by CPP India and CPP
Turkey.
Blink Parametric CPP India CPP Turkey The Centre
Global InsurTech business, initially focused on the Travel Disruption market Market development and penetration with local market responsibility for new Market development and penetration with local market responsibility for new Refocused model which is low cost and:
product development
product development
- oversees the business
Market development and penetration, with formal New Product Development
- pressure tests business unit strategies and allocates resources
approach
Organic approach
Organic approach with some product acquisitions where appropriate
- enables functional expertise
- facilitates best practice
Organic and acquisition led approach with acquisitions biased towards product
Incentives to encourage management to build long-term shareholder value
or technology gaps - manages key stakeholders
+ + +
Whilst this is a relatively simple strategy, it will take three years to
implement fully.
A simple strategy we can execute: By business unit
Blink Parametric: A differentiated suite of products with a focus on
technology and innovation providing the basis for competitive advantage,
particularly in the Travel Disruption (flight delay and lost luggage) market
over the near to medium term. With regard to Blink's strategic direction,
there are opportunities to introduce the suite of Travel Disruption products
to new geographies including North and South America, India, and Asia. Product
development, either organic or through small bolt on acquisitions, will focus
on identifying innovative digital solutions for our distributors and end
customers.
The business today is not fully scalable and the ability to execute the
strategy is somewhat constrained as there has, since acquisition in 2017, been
insufficient investment in people, processes, and structures to facilitate
growth. This lack of investment is being addressed as part of the CMP.
We have set out what we believe to be an achievable strategy; one which, post
the CMP, we can execute at pace.
CPP India: The business will continue with its successful local market
strategy, which is focused on providing low-cost innovative product and
service solutions to a growing distributor base. The strategic direction for
CPP India is one of increasing its distributor footprint and, where
appropriate, developing a broader range of online and mobile app products and
services, particularly within the Lifestyle and Healthcare markets. While
acquisition multiples in India remain beyond our reach, both market and new
product development will have to be internally led.
The strategy as set is an achievable one, though it is highly dependent upon
the retention and incentivisation of the CPP India management team and the
implementation of the new Indian IT platform scheduled for 2023.
From a risk perspective the majority of CPP India's revenues are currently
generated from two long-standing distributor relationships, one of which is
due for renewal around the end of 2024. Whilst we are confident that these
arrangements will be renewed, our strategy, even if successfully implemented,
will not materially rebalance this concentration risk in the foreseeable
future.
CPP Turkey: Similar to CPP India, the business will continue with its
successful local market strategy, which is focused on providing innovative
products and services to a broad and diversified distributor base. CPP Turkey
has an enviable track record of developing products which increase both the
perceived and real value of those products offered by its distributors to the
end consumer. New product development is a critical part of the strategic
process for CPP Turkey and this will continue, albeit via a more formalised
process which focuses on shared learning and best practice.
The strategy is in many respects 'more of the same' though, similar to CPP
India, it is highly dependent upon the retention and incentivisation of the
local management team.
From an execution and delivery perspective, the strategy is an achievable one.
The key risk, in terms of outcomes, is continued economic turbulence in
Turkey, which may either reduce demand for our products or services, or
further weaken exchange rates, or both.
The Centre: Where the business units develop their own strategies (CPP India
and CPP Turkey) and control many of the resources to execute those plans, the
Centre will pressure-test the businesses' targets and strategies, will
actively promote the sharing of best practices, and will, where appropriate,
provide select expertise or shared services. In general, the business unit
CEO's own their profit and loss accounts and make appropriate investment
trade-offs. The Centre provides services only where it has better expertise or
a lower cost than the businesses can provide on their own.
Legacy business: The Legacy UK and European Card Protection business has,
since 2012, been in decline and will, if not addressed, become both
unprofitable and a significant drain on the Group's resources. Our intention
through the CMP is to withdraw from these products and markets.
Withdrawal from the Legacy business will be a long and complex process, one
with many regulatory and operational inter-dependencies and is very much
dependent upon the goodwill of both our partners and colleagues. As we
progress, each decision we make and each action we implement will have due
regard to the best interests and well-being of our partners and colleagues.
Change Management Programme (CMP)
The CMP is the process by which the Group will effect strategic change,
exiting from its Legacy operations and building an InsurTech business
supported by CPP India and CPP Turkey. The CMP is a complex, inter-dependent
set of eight projects which are expected to conclude late 2025.
The CMP projects are summarised as:
· Legacy IT platform and new Indian IT platform development
The development of a new customer service platform for CPP India, which will
be delivered in two phases (Phase 1 - non-Card products; and Phase 2 - Card
products). The new platform will ensure all customer data resides fully in
India and that India has an independently managed customer IT infrastructure
which enables the decommissioning of the Group's legacy IT platform and
improved efficiency to India's operational model.
· Cessation of UK & European legacy books
A complex multi workstream programme which will accelerate the natural
cessation of the UK and European back books enabling the decommissioning of
the Group's expensive legacy IT platform, the removal of management focus on
legacy/run off books and is intended to remove the drag of the Legacy business
on the Group's valuation.
· Blink scalability
Currently a sub-scale business which is at an early stage of development,
Blink requires a programme of activity to ensure that its operational
processes are adequately robust to manage a substantially larger volume of
transactions and to become the Groups third business of strategic growth
alongside CPP India and CPP Turkey.
Key risks associated with the CMP:
Each project is supervised by the Executive Management Committee (EMC) and
implemented by the Operational Board but, due to size and complexity, there
will be some execution risks, namely:
· People risk
Key person dependencies have been considered with supporting plans developed
in the event key team members leave the business before the CMP is concluded.
Capacity risk is also considerable in many areas, with several colleagues or
team members involved in multiple projects. People risk is likely to remain
high for the duration of the CMP.
· Financial risk
The complexity and duration of the CMP may lead to cost over runs particularly
if key team members exit ahead of programme delivery.
· Complex interdependencies
There are many interdependencies between the projects, with the risk of
financial and people impacts disrupting multiple projects. Additionally, the
interdependencies have the potential to delay the decommissioning of the
legacy IT platform.
· Third-party dependencies
Legacy contracts often involve multiple parties and the agreements with them
cannot be dissolved unilaterally by the Group. The pace of change is often
adversely impacted by third-parties not operating to CPP's timelines.
Financial implications of the CMP:
· Dual running costs
As we build out the IT platform for CPP India and migrate from the legacy
systems, the Group will have a period of dual running costs whilst we operate
both platforms. We expect to suffer these dual running costs until the first
quarter of 2025, after which we should be able to realise material cost
savings.
· Restructure and retention costs
Costs associated with the CMP will be substantial, as will the redundancy and
retention packages which we will need to introduce. We will provide guidance
on these costs as we progress.
· Impact on Group's cash resources and dividend
The dual running costs and costs associated with the restructure are material,
however we expect to be able to service these costs from existing and forecast
resources. Due to the costs and uncertainties associated with the CMP, as
previously announced, the Board has taken the decision to suspend dividend
payments until further notice. If circumstances change, the Board will review
and update shareholders when appropriate to do so.
People
The size, scope and complexity of our CMP should not be under-estimated. It is
a huge undertaking, one which at times can seem somewhat daunting, to
re-engineer a business as complex as CPP and in so doing, move from one
business model to another. That we can contemplate such an undertaking
reflects the quality, dedication, and commitment of my colleagues from across
the Group.
Personally, I am humbled by their continued support, in what for some, can
only be the most uncertain of times. Their commitment to the task we have set
ourselves is exemplary, for us at CPP our 'grasp really does exceed our
reach'.
Outlook
From a trading perspective our Core businesses are performing very much in
line with expectations. From an operational point of view, we continue to make
good progress in implementing the CMP and expect to deliver on the objectives
we have set ourselves for the 2023 financial year.
Simon Pyper
Chief Executive Officer
27 March 2023
Chief Financial Officer's Report
Overview
The Group made good financial progress in the year, growing revenue and EBITDA
in our Core operations. 2022 has been a pivotal year for the Group which
announced the decision to exit from our Legacy businesses, which will complete
in the medium term, and focus on a simplified proposition in our Core markets.
The accelerated withdrawal from the Legacy markets through the CMP will reduce
overall profitability and cash over the next two years, however, the Group is
in a good financial position with which to embark on this important step which
will improve outcomes for all shareholders and other stakeholders in the
medium-term.
The strategy reset led to the disposal of our China business in January 2022
and our Mexico businesses in October 2022. As a result, they are presented as
discontinued operations, with this review focusing on the performance of the
Group's continuing operations.
Group revenue increased by 19% (15% constant currency) to £169.8 million
(2021 restated: £142.8 million). Revenue growth was driven by our Core
operations which represent 91% of Group revenues and are 25% higher than last
year at £154.3 million (2021: £123.2 million). New business has been
particularly strong in CPP India and Globiva, both of which were impacted in
2021 by COVID-19. EBITDA has reduced marginally to £6.9 million (2021
restated: £7.2 million), however the comparative figure for 2021 included a
one-time release of a commission provision in the UK of £1.1 million, and
therefore, when excluding this factor, Group EBITDA is 12% higher than the
prior year. The EBITDA improvement reflects good progress in our Core
operations with increased profitability in India and a reduced central cost
base following the Board and executive changes in 2021 and the early part of
2022.
Continuing operations 2022 2021 (Restated(1))
Revenue (£ millions) 169.8 142.8
Gross profit (£ millions) 30.8 32.3
EBITDA (£ millions)(2) 6.9 7.2
Operating profit (£ millions) 2.6 3.0
Profit before tax (£ millions) 2.4 4.3
Taxation (£ millions) (2.3) (3.7)
Profit for the year (£ millions) 0.1 0.6
Basic (loss)/earnings per share (pence) (1.73) 1.51
Cash generated by operations (£ millions)(3) 7.3 7.4
Dividends (pence) - 12.5
1. Restated to reflect Mexico as discontinued operations.
2. Excluding depreciation, amortisation and exceptional items.
3. Includes cash generated from continuing and discontinued
operations.
Gross profit reduced by 5% to £30.8 million (2021 restated: £32.3 million).
This results in a reduction in the gross profit margin to 18.1% (2021
restated: 22.6%) which is a continuation of the change in market mix with
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, a
shift to lower margin product variants and inflationary pressures are
challenging our margins in India and Globiva. Excluding the aforementioned
£1.1 million commission release in the UK, gross profit is just 1% lower than
the prior year. We expect our gross profit margins to continue to reduce in
the medium-term as withdrawal from the Legacy markets is completed as part of
the CMP before stabilising in 2025 and improving incrementally thereafter. The
Group's results will remain weighted towards India which operates at a margin
of approximately 11%.
EBITDA reduced marginally to £6.9 million (2021 restated: £7.2 million;
£6.1 million excluding commission release), however this reflects a 12%
increase on a like-for-like basis. The improvement follows a reduction in the
cost base with administrative expenses, before depreciation and exceptional
items, reducing by 4% in the year. The reducing cost base demonstrates the
expected savings from restructuring exercises across our Legacy operations and
also cost savings from the Board and executive changes in 2021 and early 2022.
Depreciation and amortisation charges have decreased to £2.5 million (2021
restated: £2.9 million). The Group's depreciation charges are expected to
increase in 2023 and beyond as the new technology platform is launched in
India during H2 2023 and Globiva increases its operational capacity to
facilitate growth.
Exceptional items charged to operating profit total £1.7 million (2021
restated: £1.3 million) which comprises restructuring and closure costs of
£1.2 million and a £0.5 million one-time payment to the Globiva Founders to
compensate for unfulfilled commitments by CPP in the shareholder agreement.
The restructuring and closure costs includes settlement costs relating to the
departure of the former CEO; redundancy and onerous contract costs in the UK
MGA, which is being wound down, and redundancy costs in Spain as we prepare to
withdraw from the market. Restructuring and closure costs will continue to be
high in the medium-term as we withdraw from all Legacy markets as part of the
CMP.
The marginal reduction in absolute EBITDA, in conjunction with higher
exceptional costs, results in operating profit decreasing by 12% to £2.6
million (2021 restated: £3.0 million).
The Group's profit before tax was £2.4 million (2021 restated: £4.3
million), with the comparative benefitting from a one-time fair value gain of
£1.5 million on our investment in KYND. Profit after tax is £0.1 million
(2021 restated: £0.6 million).
Core and Legacy
2022 2021
Continuing operations Core Legacy Core Legacy
£'m £'m £'m £'m
EBITDA 5.0 1.9 4.1 3.1
Profit before tax 1.6 0.8 1.2 3.1
(Loss)/profit after tax (0.4) 0.5 (2.4) 3.0
Post-tax profitability in Legacy currently exceeds the Core business, however
the profit trajectory of the Legacy businesses is in terminal decline and
costs have already been cut to a level where they are now essentially fixed,
including an expensive central legacy IT estate. Without action being taken,
the Legacy businesses were shortly going to be loss-making with no route to a
return to profitability.
The Core performance will be impacted in the medium-term by dual IT running
costs and investment in Blink capability as the business scales. Upon
conclusion of the CMP central costs will reduce allowing the profitable
performance of the Core business units to come to the fore.
Tax
The tax charge from continuing operations was £2.3 million (2021: £3.7
million), which is an effective tax rate (ETR) of 96% (2021 restated: 87%).
The ETR includes withholding taxes on dividend repatriations from overseas
entities of £0.6 million (2021: £1.2 million).
The local tax rates are higher than the current UK rate of tax of 19%, most
notably in India which contributes a large portion of the Group's profits and
has a local tax rate of 25.2%. The total tax charge from our Indian operations
is £1.6 million (2021: £2.0 million). The profitable operations in Turkey,
Spain and Italy also have higher local tax rates. Loss-making operations are
unable to offset all of their losses and tax credits are unable to be
recognised on these losses.
The CMP is expected to improve the ETR in the medium-term once complete. A
high and volatile ETR is expected to persist in the short-term, as the Legacy
operations are exited, and additional costs are incurred to facilitate these
closures against which it won't be possible to recognise tax credits. The
reduction in volatility from one-off costs once the CMP has concluded is
expected to result in the ETR stabilising and beginning to reduce towards the
UK statutory rate of tax which will increase to 25% on 1 April 2023.
Adjusted ETR
Continuing operations Exceptional items(2) Adjusted
2022 Core Legacy Total Core Legacy Total Core Legacy Total
£'m £'m £'m £'m £'m £'m £'m £'m £'m
Profit before tax 1.6 0.8 2.4 1.0 0.7 1.7 2.6 1.5 4.1
Tax (2.0) (0.3) (2.3) (0.1) (0.1) (0.2) (2.1) (0.4) (2.5)
ETR 124% 41% 96% 13% 8% 11% 82% 26% 61%
Continuing operations Exceptional items Adjusted
and one-offs(2)
2021 (Restated(1)) Core Legacy Total Core Legacy Total Core Legacy Total
£'m £'m £'m £'m £'m £'m £'m £'m £'m
Profit/(loss) before tax 1.2 3.1 4.3 0.6 (1.8) (1.2) 1.8 1.3 3.1
Tax (3.6) (0.1) (3.7) - (0.2) (0.2) (3.6) (0.3) (3.9)
ETR 314% 3% 87% 0% (9)% (14)% 208% 21% 128%
1. Restated to reflect Mexico as discontinued operations.
2. Comprises exceptional items of £1.7 million (2021 restated:
£0.1 million credit) and a prior year one-time benefit from a commission
provision release in the UK of £1.1 million. Further detail of exceptional
items is provided in note 5.
The exceptional items in the year have reduced profit before tax by £1.7
million (2021 restated: £1.2 million increase) whilst there has been an
associated reduction in tax of £0.2 million (2021: £0.2 million). Without
the exceptional items the Group's ETR would reduce to 61% (2021 restated:
128%).
As the CMP progresses the Core performance of the business will increasingly
provide a better indication of future performance. The Core operations
adjusted ETR is 82% (2021: 208%), which includes withholding taxes on dividend
repatriations from India and Turkey and the loss-making Central Functions.
Further details on the Core tax charge by location is provided in note 6.
Discontinued operations
The Group's Chinese and Mexican businesses have both been recognised as
discontinued following completion of their disposals in the current year. The
total profit after tax from discontinued operations of £0.7 million comprises
£0.6 million profit in relation to China and a £0.1 million profit from
Mexico.
2022 2021 (Restated(1))
£'m £'m
Revenue 0.9 3.3
EBITDA 0.2 0.6
Operating profit/(loss) 0.2 (0.2)
Profit/(loss) after tax 0.2 (0.2)
Profit on disposal 0.5 2.6
Profit for the year 0.7 2.4
Net liabilities held for sale - (0.1)
1. Restated to reflect Mexico as discontinued operations.
On 27 January 2022, the Group completed the sale of its China business to
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 transaction generated a profit on
disposal of £0.7 million. China also generated trading losses of £0.1
million up to the disposal date (2021: £0.8 million losses representing a
full year of trading).
On 20 October 2022, the Group completed the sale of its Mexican business to
Rafael Ortiz Moran and Silvia Daniela Rodriguez Gaona for a nominal
consideration of $1 (Mexican peso). As part of the disposal, the Group left
cash balances of £0.3 million in the business to cover initial working
capital and other committed liabilities. The transaction generated a loss on
disposal of £0.1 million which was offset by a trading profit of £0.2
million up to the disposal date (2021: £0.1 million losses representing a
full year of trading).
Cash flow and net funds
2022 2021
£'m £'m
EBITDA 7.0 7.7
Exceptional items(1) (1.7) (1.6)
Non-cash items - 0.1
Working capital movements 2.0 1.2
Cash generated by operations 7.3 7.4
Tax (3.5) (2.8)
Operating cash flow 3.8 4.6
Capital expenditure (including intangibles) (2.7) (1.9)
Lease repayments (1.4) (1.5)
Disposal of discontinued operations (0.9) 2.3
Net finance revenues 0.4 0.1
Dividends (0.7) (2.6)
Net movement in cash(2) (1.5) 1.0
Net funds(3) 16.3 16.4
1. Cash cost of exceptional items.
2. Excluding the effect of exchange rates.
3. Net funds comprise cash and cash equivalents of £21.0 million (2021:
£22.4 million) less lease liabilities of £4.7 million (2021: £6.0 million).
The net funds position has decreased marginally to £16.3 million (2021:
£16.4 million), which includes cash of £21.0 million (2021: £22.4 million
including discontinued operations). The Group had a net cash outflow of £1.5
million in the year which reflects the payment of upfront fees to extend the
Bajaj contract and costs to develop the IT platform in India.
Cash generated by operations was broadly flat at £7.3 million (2021: £7.4
million) with a working capital benefit in India being offset by a reduction
in operating cash flows. Tax paid has increased to £3.5 million (2021: £2.8
million) which is a combination of taxes payable on profits in our markets and
withholding taxes on overseas dividends to the UK.
The Group has a healthy cash balance of £21.0 million, however as the Group's
growth has shifted to overseas markets a material amount of the cash balance
is generated in India and Turkey. As a result, all our cash resources are not
immediately available for distribution or on demand for working capital
purposes around the Group. In addition, there are tax costs associated with
returning overseas funds to the UK with our blended cost being approximately
10%. At 31 December 2022, approximately 40% of the cash balances were
considered 'restricted'. Cash planning is important and will become
increasingly crucial as the CMP is executed and previously cash generative
businesses in the UK and Europe are wound down.
The Group has a £5.0 million revolving credit facility (RCF) which is in
place until August 2023. The RCF is not currently drawn. Discussions are at an
advanced stage with the lender to extend the RCF for a further three year
term.
Events after the balance sheet date
On 6 February 2023, Turkey was hit by a devastating earthquake. Turkey is one
of the Group's Core markets. New sales activity has been impacted by
approximately 50% in February and March following Government guidance on
restricting telemarketing activity. This guidance is expected to be relaxed in
April. There is currently no evidence of a notable deterioration in renewal
rates. The financial impact on the Group from the effects of the earthquake is
currently uncertain but is not expected to be material. All colleagues are
receiving any support necessary. The Group continues to closely monitor the
situation.
Foreign exchange
The general weakening of Sterling during 2022, particularly against the Indian
rupee, has led to a favourable exchange rate movement in the Group's results.
The Indian rupee has appreciated by 5% (2021: 7% depreciation) which due to
the relative size of our operations in India has more than compensated for the
continued weakening in the Turkish lira which depreciated by 63% (2021: 37%).
The reported results compared to 2021 include the following favourable foreign
exchange movements: £4.5 million (2021 restated: £7.4 million adverse)
within revenue; and £0.1 million (2021 restated: £0.9 million adverse) at an
EBITDA level.
Segmental performance
£ millions REVENUE EBITDA
2022 2021 (Restated(1)) Change Constant currency change 2022 2021 Change Constant currency change
(Restated(1))
CPP India 134.8 109.0 24% 18% 5.6 5.4 4% (1)%
Globiva 15.8 10.3 54% 46% 2.4 2.4 (1)% (5)%
CPP Turkey 3.2 3.6 (10)% 42% 0.7 0.8 (14)% 36%
Blink 0.5 0.3 38% 39% (0.4) (0.3) (80)% (76)%
Core business units 154.3 123.2 25% 21% 8.3 8.4 (1)% (2)%
Central Functions - - n/a n/a (3.3) (4.3) 22% 22%
Core total 154.3 123.2 25% 21% 5.0 4.1 20% 19%
Legacy(2) 15.5 19.6 (21)% (22)% 1.9 3.3 (42)% (42)%
Share of loss in joint venture - - n/a n/a - (0.2) 100% 100%
Group total 169.8 142.8 19% 15% 6.9 7.2 (5)% (6)%
1. Restated to reflect Mexico as discontinued
2. Legacy comprises UK, Spain, Italy, Portugal, Bangladesh and Malaysia.
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.
Core businesses (91% of Group revenue):
Revenue increased by 21% to £154.3 million (2021: £123.2 million) and EBITDA
increased to £5.0 million (2021 restated: £4.1 million).
Our Indian business had another strong year with revenue increasing by 18% to
£134.8 million (2021: £109.0 million), due in small part to the comparatives
being impacted by COVID-19. The good performance has been fuelled by growth in
LivCare and Asset Secure through Bajaj Finance Limited (Bajaj) along with an
encouraging resurgence of Card Protection in Q4 as our banking partners
settled on amended processes following the changes to recurring card
transactions introduced by the Indian regulator in Q4 2021. During the year,
India also agreed contract extensions with its two largest partners, Bajaj and
SBI Cards which is expected to drive revenue growth in the coming years. The
new IT platform is progressing well with the first phase (non-Card business)
expected to go-live in Q3 2023 and the second phase (Card business) set to
follow in Q1 2024. The new IT platform will be transformational for the Indian
business in providing additional operating efficiencies and improved digital
capability.
Globiva, in which we hold a 51% investment, has progressed well widening its
partner base which has led to revenue growing by 46% to £15.8 million (2021:
£10.3 million). The revenue mix has shifted in the year with Globiva's
business through international partners reducing which along with inflationary
wage pressures has reduced the EBITDA margin to 16% (2021: 24%). As a result,
EBITDA is flat on the prior year at £2.4 million (2021: £2.4 million).
Globiva remains one of India's fastest growing BPM's and continues to have a
strong proposition engineered on quality.
Turkey has had another excellent year, in the face of an extremely difficult
macro-economic environment. At a local performance level revenues have grown
by 42% and EBITDA by 36%. This has been achieved through growth in our
partnership with Turkiye Sigorta which included the launch of a new Health
Protection product. Turkey is a prime example of the success that comes from a
multi-partner, multi-product approach. Unfortunately, on a reported basis this
very good local performance has been completely negated by the ongoing
devaluation in the Turkish lira with reported revenue 10% lower in the year
and EBITDA down 14%.
Blink has increased revenues by 39% to £0.5 million (2021: £0.3 million)
reflecting four new partner launches, including a large deal in Asia, as well
as growth in business through existing partnerships. The prior year benefited
from some one-time billing which has not repeated in 2022, therefore this
year's revenue is more sustainable and reflects an annual recurring revenue of
£0.6 million (2021: £0.2 million). Blink is a cornerstone of the Group's
strategy even though at an early stage in its development and during the year
a focus was placed on enhancing processes and ensuring a fully scalable
proposition. The headcount in Blink has been increased in all areas of the
business to accelerate growth. As a result, although revenue has increased,
EBITDA losses have increased to £0.4 million (2021: £0.3 million).
Investment in operational capability will continue in 2023 to capitalise on
Blink's strong pipeline and wider opportunities
Central Functions costs have reduced by 22% to £3.3 million (2021 restated:
£4.3 million) due to a significant reduction in Board and executive costs
following a change in the composition of both along with a reduction in IT
costs. Transfer pricing charges from the Centre to trading business units have
reduced in the year as Legacy operations have declined or started to be wound
down. This is expected to continue further in 2023 as the first phase of
India's IT platform becomes operational whilst the costs associated with the
Group's legacy IT platform will remain until a position is reached to
decommission the system. The dual IT running costs from India and Legacy are
expected to persist until late 2024.
Legacy businesses (9% of Group revenue)
Revenue decreased by 22% to £15.5 million (2021 restated: £19.6 million),
reflecting the natural decline in the historic renewal books in the UK, Spain,
Italy and Portugal. EBITDA fell by 42% to £1.9 million (2021 restated: £3.3
million) which reflects the lost profit from the revenue decline, although the
like-for-like decline was lower once the £1.1 million release of a commission
provision in 2021 is excluded. The Group's strategy is to withdraw from these
markets in a sensible and compliant manner which is sensitive to the interests
of both our partners and colleagues. Good progress has been made in Spain and
Portugal with agreements reached with underwriters during Q4 which will enable
our exit from these markets over the next 12 months. In the UK and Italy, we
continue to renew policies with withdrawal plans being finalised, which will
be communicated to all stakeholders at the appropriate time.
David Bowling
Chief Financial Officer
27 March 2023
Consolidated income statement
For the year ended 31 December 2022
2022 2021
Core Legacy Total Core Legacy Total
(Restated*)
Note £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 4 154,267 15,516 169,783 123,160 19,663 142,823
Cost of sales (133,924) (5,087) (139,011) (104,319) (6,160) (110,479)
Gross profit 20,343 10,429 30,772 18,841 13,503 32,344
Administrative expenses (18,469) (9,689) (28,158) (17,543) (11,633) (29,176)
Share of loss of joint venture - - - - (189) (189)
Operating profit 1,874 740 2,614 1,298 1,681 2,979
Analysed as:
EBITDA 4 4,928 1,925 6,853 4,105 3,141 7,246
Depreciation and amortisation (2,055) (452) (2,507) (2,220) (698) (2,918)
Exceptional items 5 (999) (733) (1,732) (587) (762) (1,349)
Investment revenues 370 116 486 195 16 211
Finance costs (630) (26) (656) (347) (19) (366)
Other gains and losses 5 - - - - 1,459 1,459
Profit before taxation 1,614 830 2,444 1,146 3,137 4,283
Taxation 6 (2,000) (343) (2,343) (3,600) (107) (3,707)
Profit/(loss) for the year from continuing operations (386) 576
487 101 (2,454) 3,030
Discontinued operations
Profit for the year from discontinued operations 8 2,432
- 676 676 - 2,432
Profit/(loss) for the year (386) 1,163 777 (2,454) 5,462 3,008
Attributable to:
Equity holders of the Company (640) 1,163 523 (2,897) 5,462 2,565
Non-controlling interests 254 - 254 443 - 443
(386) 1,163 777 (2,454) 5,462 3,008
Basic (loss)/earnings per share Core Total
(Restated*) pence
pence Legacy Total Core Legacy
pence pence pence pence
Continuing operations 7 (7.24) 5.51 (1.73) (32.94) 34.45 1.51
Discontinued operations 7 - 7.64 7.64 - 27.65 27.65
(7.24) 13.15 5.91 (32.94) 62.10 29.16
Diluted (loss)/earnings per share Core Total
(Restated*) pence
pence Legacy Total Core Legacy
pence pence pence pence
Continuing operations 7 (7.24) 5.51 (1.73) (32.11) 33.58 1.47
Discontinued operations 7 - 7.64 7.64 - 26.96 26.96
(7.24) 13.15 5.91 (32.11) 60.54 28.43
*Restated to reflect Mexico as discontinued operations. See note 2.
Consolidated statement of comprehensive income
For the year ended 31 December 2022
2022 2021
£'000 £'000
Profit for the year 777 3,008
Items that may be reclassified subsequently to profit or loss:
Fair value gain on equity investment 152 -
Exchange differences on translation of foreign operations (2,052) (695)
Exchange differences reclassified on disposal of foreign operations 1,093 (4)
Other comprehensive expense for the year net of taxation (807) (699)
Total comprehensive (expense)/income for the year (30) 2,309
Attributable to:
Equity holders of the Company (286) 1,867
Non-controlling interests 256 442
(30) 2,309
Consolidated balance sheet
As at 31 December 2022
2022 2021
Note £'000 £'000
Non-current assets
Goodwill 544 540
Other intangible assets 9 4,710 3,603
Property, plant and equipment 1,243 1,335
Right-of-use assets 3,936 5,109
Equity investment 2,041 1,889
Deferred tax assets 230 396
Contract assets 275 564
12,979 13,436
Current assets
Inventories 87 102
Contract assets 5,764 4,020
Trade and other receivables 19,841 13,605
Cash and cash equivalents 20,984 22,319
46,676 40,046
Assets classified as held for sale - 478
46,676 40,524
Total assets 59,655 53,960
Current liabilities
Borrowings 23 -
Income tax liabilities (1,195) (1,362)
Trade and other payables (26,210) (19,544)
Provisions (224) -
Lease liabilities (966) (937)
Contract liabilities (11,238) (9,190)
(39,810) (31,033)
Liabilities classified as held for sale - (550)
(39,810) (31,583)
Net current assets 6,866 8,941
Non-current liabilities
Borrowings - 58
Deferred tax liabilities (702) (927)
Provisions (145) -
Lease liabilities (3,752) (4,936)
Contract liabilities (773) (1,200)
(5,372) (7,005)
Total liabilities (45,182) (38,588)
Net assets 14,473 15,372
Equity
Share capital 10 24,256 24,243
Share premium account 45,225 45,225
Merger reserve (100,399) (100,399)
Translation reserve (825) 136
ESOP reserve 17,212 17,418
Retained earnings 27,201 27,202
Equity attributable to equity holders of the Company 12,670 13,825
Non-controlling interests 1,803 1,547
Total equity 14,473 15,372
Consolidated statement of changes in equity
For the year ended 31 December 2022
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 2021 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 - - - - (72) - (72) - (72)
Exercise of share options 90 - - - - (70) 20 - 20
Deferred tax on share options 6 - - - - - 9 9 - 9
Dividends paid - - - - - (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
Profit for the year - - - - - 523 523 254 777
Other comprehensive expense for the year - - - (961) - 152 (809) 2 (807)
Total comprehensive expense for the year - - - (961) - 675 (286) 256 (30)
Equity-settled share-based payment credit - - - - (206) - (206) - (206)
Exercise of share options 10 13 - - - - (7) 6 - 6
Deferred tax on share options 6 - - - - - (9) (9) - (9)
Effects of hyperinflation - - - - - 3 3 - 3
Dividends paid - - - - - (663) (663) - (663)
At 31 December 2022 24,256 45,225 (100,399) (825) 17,212 27,201 12,670 1,803 14,473
Consolidated cash flow statement
For the year ended 31 December 2022
2022 2021
Note £'000 £'000
Net cash from operating activities 11 3,822 4,562
Investing activities
Interest received 490 224
Purchases of property, plant and equipment (526) (525)
Purchases of intangible assets 9 (2,194) (1,370)
Cash consideration in respect of sale of discontinued operations 8 - 2,366
Costs associated with disposal of discontinued operations (128) -
Cash disposed of with discontinued operations (823) (112)
Net cash (used in)/from investing activities (3,181) 583
Financing activities
Dividends paid (663) (2,629)
Repayment of the lease liabilities (1,388) (1,507)
Interest paid (75) (76)
Issue of ordinary share capital 10 6 20
Net cash used in financing activities (2,120) (4,192)
Net (decrease)/increase in cash and cash equivalents (1,479) 953
Effect of foreign exchange rate changes 54 (400)
Cash and cash equivalents at 1 January 22,409 21,856
Cash and cash equivalents at 31 December 20,984 22,409
Analysed as:
Continuing operations 20,984 22,319
Discontinued operations - 90
20,984 22,409
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 2023.
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 December 2022 or 31
December 2021 but is derived from the 2022 financial statements. Statutory
financial statements for 2021 for the Company prepared in conformity with
UK-endorsed International Financial Reporting Standards have been delivered to
the Registrar of Companies and those under UK IAS for 2022 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 2022 financial statements were approved by the Board of Directors on 27
March 2023.
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 2022. The
following Standards and Interpretations have become effective and have been
adopted in these condensed financial statements. No Standards or
Interpretations have been adopted early in these condensed financial
statements.
Standard/Interpretation Subject
IAS 37 Onerous Contracts: directly related costs are considered when determining if a
contract is onerous, including incremental costs of fulfilling a contract and
allocation of other direct costs.
IFRS 1 Subsidiary as a first time adopter.
IFRS 9 Fees in the 10 per cent test for derecognition of a financial liability.
Core and Legacy presentation
In October 2022, the Board set out the findings of its strategic review, which
will see the Group withdraw from its Legacy businesses and focus resources on
its Core growth businesses in India, Turkey and its InsurTech, Blink. In order
to aid users of the financial statements, additional columns have been added
to the income statement and relevant notes to illustrate the income and cost
base of the Core and Legacy businesses. The prior year presentation has also
been represented to reflect these changes. This presentation is expected to
continue throughout the closure period of the Legacy businesses.
Restatement of disclosures
On 20 October 2022, the Group completed the sale of its wholly-owned
subsidiaries Servicios de Asistencia a Tarjehabientes CPP Mexico S de RL de CV
and Profesionales en Proteccion Individual S de RL de CV (together Mexico).
In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, Mexico has been classified as discontinued within these financial
statements. Accordingly, the comparative consolidated income statement
information and appropriate disclosure notes have been restated.
The Group has revised its segmental reporting from 1 January 2022. In
accordance with IFRS 8 the operating segments have been changed to reflect the
way in which the Group is now managed and how resources are allocated. The
Group's operating segments are identified as India, Turkey, Blink, Legacy and
Central Functions. These segments replace the Ongoing Operations, Restricted
Operations and Central Functions basis that was previously in place. The prior
period segmental information has been restated to reflect the change. Further
detail is available in note 4.
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 inflationary
pressures, risks associated with its CMP and the recent devastating earthquake
in Turkey. This is done to identify risks to liquidity and covenant compliance
and enable management to formulate appropriate and timely mitigation
strategies.
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.
Hyperinflation
The Group has operations in Turkey, which has met the criteria to be
classified as a hyperinflationary economy in the year. This is based on the
Turkish Statistical Institute published consumer price index, which had
cumulative inflation of 109.4% over a three year period as at March 2022. IAS
29 Financial Reporting in Hyperinflationary Economies requires that inflation
accounting is applied to the financial statements of entities where the
cumulative inflation rate in three years approximates or exceeds 100%.
Inflation accounting aims to restate the value of the assets, liabilities and
income statement items of an entity in terms of the monetary values as at the
balance sheet date, to better represent their true and fair value.
This is performed by applying a conversion factor calculated using the
reporting date inflation index over the inflation index at the date of
recognition to revalue non-monetary balance sheet and all income statement
items. The CPI inflation index published by the Turkish Statistical Institute
has been used for this calculation. In Turkey's case, this has impacted other
intangible assets, property, plant and equipment, right-of-use assets,
prepayments, contract liabilities, deferred tax, share capital and all income
statement items. Monetary items are not restated as they are already
recognised in terms of the monetary unit current at the balance sheet date.
The exchange rate then used to retranslate all financial statement line items
(including income statement items) is the period end exchange rate, which as
at 31 December 2022 was 22.55.
On initial adoption in the year ended 31 December 2022, the impact of
inflation to the start of the year is recognised as a movement in retained
earnings. Comparative balances are not restated. The inflation impact for the
current year has been recognised within finance costs. The annual inflation
rate was 64.3% as at 31 December 2022.
The overall impact of inflation accounting in Turkey in the year has been as
follows:
Year ended 31 December 2022
£'000
Net assets 89
Profit before tax 122
Taxation (36)
Profit after tax 86
Retained earnings 3
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 Operating Segments requires operating segments to be identified on the
basis of internal reports about components of the Group that are regularly
reviewed by the Board of Directors to allocate resources to the segments and
to assess their performance. As at 1 January 2022, the Group changed the
segmental reporting, reflecting how the Core business is now managed on a more
geographical basis. Each segment has a distinct owner who is held accountable
and expected to report on their segment performance.
The Group is now managed on the basis of five broad business units:
· India (CPP India and Globiva);
· Turkey;
· Blink;
· 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 relevant geographies
for statutory purposes; and
· Legacy (UK MGA, UK Legacy, Spain, Portugal, Italy)
This replaces the Group's previous operating segments which were Ongoing
Operations and Restricted Operations. The Central Functions segment remains
unchanged within the new structure.
The prior period has been restated to reflect the new segmental reporting used
by the Group.
During the year, Mexico was reclassified to discontinued operations, having
previously been part of Legacy; accordingly, the comparatives have been
restated.
Segment revenue and performance for the current and comparative periods are
presented below:
Year ended 31 December 2022 India Turkey Blink Central Functions Legacy Total
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue - external sales 150,613 3,212 442 - 15,516 169,783
Cost of sales (132,413) (1,448) (63) - (5,087) (139,011)
Gross profit 18,200 1,764 379 - 10,429 30,772
Administrative expenses excluding depreciation, amortisation and exceptional (10,168) (1,038) (837) (23,919)
items
(3,372) (8,504)
EBITDA 8,032 726 (458) (3,372) 1,925 6,853
Depreciation and amortisation (1,305) (129) (208) (413) (452) (2,507)
Exceptional items (note 5) (519) - - (480) (733) (1,732)
Operating profit/(loss) 6,208 597 (666) (4,265) 740 2,614
Investment revenues 486
Finance costs (656)
Profit before taxation 2,444
Taxation (2,343)
Profit for the year from continuing operations 101
Discontinued operations
Profit for the year from discontinued operations 676
Profit for the year 777
Year ended 31 December 2021 India Turkey Blink Central Total (Restated*(,)**)
£'000 £'000 £'000 Functions Legacy £'000
£'000 £'000
Continuing operations
Revenue - external sales 119,273 3,568 319 - 19,663 142,823
Cost of sales (102,640) (1,658) (21) - (6,160) (110,479)
Gross profit 16,633 1,910 298 - 13,503 32,344
Administrative expenses excluding depreciation, amortisation and exceptional (8,803) (1,062) (552) (4,319) (10,173) (24,909)
items
Segmental EBITDA 7,830 848 (254) (4,319) 3,330 7,435
Share of loss of joint venture - - - - (189) (189)
EBITDA 7,830 848 (254) (4,319) 3,141 7,246
Depreciation and amortisation (1,212) (209) (223) (576) (698) (2,918)
Exceptional items (note 5) - - (348) (239) (762) (1,349)
Operating profit/(loss) 6,618 639 (825) (5,134) 1,681 2,979
Investment revenues 211
Finance costs (366)
Other gains and losses (note 5) 1,459
Profit before taxation 4,283
Taxation (3,707)
Profit for the year from continuing operations 576
Discontinued operations
Profit for the year from discontinued operations 2,432
Profit for the year 3,008
* Restated to reflect Mexico as discontinued operations. See note 2. ** Restated for new segmental disclosure. See note 2.
Segment assets
2022 2021
£'000 (Restated**)
£'000
India 38,613 29,252
Turkey 1,665 1,959
Blink 636 406
Central Functions 5,092 5,840
Legacy 10,834 13,200
Total segment assets 56,840 50,657
Unallocated assets 2,815 2,825
Assets relating to discontinued operations - 478
Consolidated total assets 59,655 53,960
** Restated for new segmental disclosure. See note 2.
Goodwill, deferred tax and equity investment are not allocated to segments.
Capital expenditure
Intangible assets Property, plant and equipment Right-of-use assets
2022 2021 (Restated*(,)**) 2022 2021 (Restated*(,)**) 2022 2021 (Restated*(,)**)
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
India 1,814 712 277 430 698 -
Turkey 36 - 106 24 98 228
Blink 158 151 3 2 - -
Central Functions 14 47 140 8 - 6
Legacy 172 460 - 60 13 265
Additions from continuing operations 2,194 1,370 526 524 809 499
Discontinued operations
Additions for discontinued operations - - - 1 - 250
Consolidated total additions 2,194 1,370 526 525 809 749
* Restated to reflect Mexico as discontinued operations. See note 2. **
Restated for new segmental disclosure. See note 2.
Revenues from major products
Major product streams are disclosed on the basis monitored by senior
management.
The Group has refreshed its product architecture and reporting to the Board
has been on the following product categories; My Finances, My Tech, My Health,
My Home, My Digital Life, My Travel and Other. The prior period has also been
represented to reflect this change.
Previously this was presented as retail assistance policies, retail insurance
policies, wholesale policies, and non-policy revenue.
2022 2021
(Restated*(,)**)
£'000
£'000
Continuing operations
My Finances 39,239 41,237
My Tech 39,059 38,964
My Health 46,614 28,065
My Home 22,301 16,859
My Digital Life 5,064 6,116
My Travel 448 224
Other 17,058 11,358
Revenue from continuing operations 169,783 142,823
Revenue from discontinued operations 922 3,266
Total revenue 170,705 146,089
* Restated to reflect Mexico as discontinued operations. See note 2. **
Restated for new segmental disclosure. See note 2.
'Other' revenue predominantly represents revenue from BPM services provided by
Globiva.
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:
2022 2021
(Restated*)
£'000
£'000
Continuing operations
At a point in time 150,266 125,910
Over time 19,517 16,913
Revenue from continuing operations 169,783 142,823
Discontinued operations
At a point in time 657 2,191
Over time 265 1,075
Revenue from discontinued operations 922 3,266
Total revenue 170,705 146,089
* Restated to reflect Mexico as discontinued operations. See note 2.
Geographical information
The Group operates across a wide number of territories, of which India, the
UK, Spain and Turkey are considered individually material. Revenue from
external customers and non-current assets (excluding equity investment and
deferred tax) by geographical location are detailed below:
External revenues Non-current assets
2022 2021 2022 2021
(Restated*)
(Restated*)
£'000
£'000
£'000 £'000
India 150,613 119,273 9,073 7,721
UK 8,481 10,750 375 1,585
Spain 4,960 6,341 204 323
Turkey 3,212 3,568 244 249
Other 2,517 2,891 812 1,273
169,783 142,823 10,708 11,151
Discontinued operations 922 3,266 - -
170,705 146,089 10,708 11,151
* Restated to reflect Mexico as discontinued operations. See note 2.
Information about major customers
Revenue from the customers of one business partner in the Group's Indian
segment represented approximately £110,128,000 (2021: £84,159,000) 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.
2022 2021
Note Core Legacy Total Core Legacy Total
£'000 £'000 £'000 £'000 £'000 (Restated*) £'000
Continuing operations
Exceptional items included within operating profit
Restructuring and closure costs 480 580 1,060 587 762 1,349
IT asset impairment - 153 153 - - -
Globiva compensation payment 519 - 519 - - -
Exceptional charge included in operating profit 999 733 1,732 587 762 1,349
Exceptional items included within other gains and losses
Other gains and losses - gain on reclassification of investment - - - - (1,459) (1,459)
Exceptional gain included in other gains and losses - - - - (1,459) (1,459)
Total exceptional charge/(gain) included in profit before tax 999 733 1,732 587 (697) (110)
Tax on exceptional items (131) (61) (192) - (171) (171)
Exceptional charge/(gain) after tax for continuing operations 7 868 672 1,540 587 (868) (281)
Discontinued operations
Exceptional gain from discontinued operations 7, 8 - (535) (535) - (2,120) (2,120)
868 137 1,005 587 (2,988) (2,401)
* Restated to reflect Mexico as discontinued operations. See note 2.
Restructuring and closure costs total £1,060,000 (2021: £1,349,000) and
primarily relate to action taken to withdraw from Legacy operations. As a
result, redundancy and associated costs have been recognised in Spain, UK
Legacy, UK MGA and Central Functions. Core restructuring costs also includes
settlement costs associated with the departure of the former CEO. In
combination these total £812,000 (2021: £nil). Prior year restructuring
costs relate to Spain and Blink, as well as closure of the Malaysian operation
and head office operational restructuring.
Included within restructuring and closure costs is a provision for Onerous
Contracts relating to the UK MGA for £248,000 (2021: £nil), which relates to
the costs required to fulfil and exit contractual commitments above the
associated revenue receivable. This includes costs to 2025 and is held as a
provision at the year end.
The impairment of the IT assets of £153,000 (2021: £nil) relates to the UK
MGA. As a result of the decision to exit the UK MGA business, a value in use
calculation was performed leading to recognition of an impairment.
The Globiva compensation payment represents a one-time additional management
compensation payment to the Globiva founders. This followed a review of the
original Shareholder Agreement signed in September 2018, which included
commitments for operational seats from the Group that it is unable to fulfil.
Further disclosure is provided in note 12.
In the prior year, other gains and losses reflected the gain on
reclassification of the investment in KYND Limited (KYND) from a joint venture
to an equity investment of £1,459,000.
6. Taxation
2022 2021
£'000 £'000
Continuing operations
Current tax charge:
UK corporation tax - 142
Foreign tax 2,679 3,386
Adjustments in respect of prior years (140) (42)
Current tax relating to continuing operations 2,539 3,486
Deferred tax (credit)/charge:
Origination and reversal of timing differences 94 304
Impact of change in tax rates (8) (37)
Adjustments in respect of prior years (282) (46)
Deferred tax relating to continuing operations (196) 221
Tax charge relating to continuing operations 2,343 3,707
Discontinued operations
Tax charge relating to discontinued operations - 30
Total tax charge 2,343 3,737
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:
2022 2021 (Restated**)
£'000 £'000
Continuing operations
Core:
India 1,888 2,889
Turkey 316 554
Blink - -
Central Functions (204) 157
Total Core 2,000 3,600
Legacy 343 107
Tax charge for continuing operations 2,343 3,707
Discontinued operations
Tax charge for discontinued operations - 30
2,343 3,737
**Restated to reflect the change in segmental reporting in the year. 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% (2021: 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 (2021: 25.2%),
Spain 25% (2021: 25%), Turkey 23% (2021: 25%), which is reducing to 20% in
2023, and Italy 27.5% (2021: 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:
2022 2021 (Restated*)
£'000 £'000
Profit before tax from continuing operations 2,444 4,283
Effects of:
Tax at the UK corporation tax rate of 19% (2021: 19%) 464 814
Unprovided deferred tax arising on losses(1) 796 792
Other movement in unprovided deferred tax 124 153
Recurring expenses not deductible for tax 241 409
One-off costs not deductible for tax 32 (259)
Provision for withholding tax on future distributions(2) 621 1,217
Other expense not chargeable for tax purposes 96 250
Higher tax rates on overseas earnings(3) 403 471
Adjustments in respect of prior years (422) (88)
Impact of change in future tax rates on deferred tax (8) (36)
Deficit of share option charge compared to tax allowable amount (4) (16)
Tax charged to income statement for continuing operations 2,343 3,707
Tax charged to the income statement for discontinued operations - 30
2,343 3,737
* Restated to reflect Mexico as discontinued operations. See note 2
Effective tax charge
The net tax charge of £2,343,000 on a profit before tax from continuing
operations of £2,444,000 gives an effective tax rate of 96% (2021 restated:
87%) which is higher than the standard rate of 19%. Additional information is
provided below:
1. Deferred tax has not been recognised on the losses arising in Legacy
markets and Blink, as the short-term profit expectations do not support the
recognition of deferred tax assets in these areas.
2. There is a withholding tax burden arising on repatriation of funds from
overseas countries which is included in the tax charge.
3. Tax is chargeable at the local statutory rates 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 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 not profitable. The withdrawal from the Legacy markets, is expected to
result in a high and variable effective tax rate in the medium term. In the
longer term, once the CMP has concluded, the Group expects the rate to reduce
from its current level. The Group maintains appropriate provisions in respect
of tax uncertainties arising from operating in multiple overseas
jurisdictions.
Income tax charged/(credited) to reserves during the year was as follows:
2022 2021
£'000 £'000
Deferred tax
Timing differences of equity-settled share-based charge 9 (9)
Total deferred tax charge/(credit) and total tax charged/(credited) to 9 (9)
reserves
7. Earnings/(loss) per share
Basic and diluted (loss)/earnings 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
2022 2021 (Restated*) 2022 2021 (Restated*) 2022 2021
£'000
£'000
£'000
£'000
£'000 £'000
Profit/(loss) for the purposes of basic and diluted (loss)/earnings per share (153) 133 676 2,432 523 2,565
Exceptional items (net of tax) 1,350 (281) (535) (2,120) 815 (2,401)
Profit/(loss) for the purposes of underlying basic and diluted earnings/(loss) 1,197 (148) 141 312 1,338 164
per share
* Restated to reflect Mexico as discontinued operations. See note 2
Profit/(loss) attributable to Core and Legacy
2022 2021
Core Continuing operations Legacy Continuing operations
£'000
£'000
£'000 (Restated*)
Legacy Core £'000
£'000
£'000
(Loss)/profit for the purposes of basic and diluted (loss)/earnings per share (640) 487 (153) (2,897) 3,030 133
Exceptional items (net of tax) 678 672 1,350 587 (868) (281)
Profit/(loss) for the purposes of underlying basic and diluted earnings/(loss) 38 1,159 1,197 (2,310) 2,162 (148)
per share
* Restated to reflect Mexico as discontinued operations. See note 2.
The table above does not include discontinued operations.
Number of shares
2022 2021
Number Number
(thousands) (thousands)
Weighted average number of ordinary shares for the purposes of basic 8,844 8,796
(loss)/earnings per share and basic underlying earnings/(loss) per share
Effect of dilutive ordinary shares: share options 30 225
Weighted average number of ordinary shares for the purposes of diluted 8,874 9,021
(loss)/earnings per share and diluted underlying earnings/(loss) per share
Continuing operations Discontinued operations Total
2022 2021 2022 2021 2022 2021
pence (Restated*) pence (Restated*) pence pence
pence
pence
Basic (loss)/earnings per share (1.73) 1.51 7.64 27.65 5.91 29.16
Diluted (loss)/earnings per share (1.73) 1.47 7.64 26.96 5.91 28.43
Basic underlying earnings/(loss) per share 13.53 (1.68) 1.59 3.54 15.12 1.86
Diluted underlying earnings/(loss) per share 13.49 (1.68) 1.59 3.54 15.08 1.86
* Restated to reflect Mexico as discontinued operations. See note 2.
2022 2021
Core Legacy Continuing operations Core Legacy Continuing operations
pence pence pence pence pence (Restated*)
pence
Basic (loss)/earnings per share (7.24) 5.51 (1.73) (32.94) 34.45 1.51
Diluted (loss)/earnings per share (7.24) 5.51 (1.73) (32.11) 33.58 1.47
Basic underlying earnings/(loss) per share 0.43 13.10 13.53 (26.26) 24.58 (1.68)
Diluted underlying earnings/(loss) per share 0.43 13.06 13.49 (26.26) 24.58 (1.68)
* Restated to reflect Mexico as discontinued operations. See note 2.
The Group has 171,650,000 (2021: 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.
8. Discontinued operations
On 27 January 2022, the Group completed the sale of its 100% shareholding in
CPP Asia Limited and its wholly owned subsidiary CPP Technology Services
(Shanghai) Co. Ltd (together China). Consideration on disposal was HK$ 1.
On 20 October 2022, the Group completed the sale of its wholly-owned
subsidiaries Servicios de Asistencia a Tarjehabientes CPP Mexico S de RL de CV
and Profesionales en Proteccion Individual S de RL de CV (together Mexico).
Consideration on disposal was 1 Mexican peso.
In the prior year, on 17 May 2021, the Group completed the sale of its 100%
shareholding in CPP Creating Profitable Partnerships GmbH (Germany). The final
consideration on disposal was £2,366,000 (€2,752,000).
In addition, the disposal of China was considered highly probable and
therefore the assets and liabilities of China were classified as held for
sale.
Operating results for the year ended 31 December 2022 reflect the trading
performance of China and Mexico up to the respective dates of disposal. The
comparative information reflects a full year for China and Mexico, and Germany
up to the date of disposal. China, Mexico and Germany were part of the Legacy
segment.
(i) Income statement
2022 2021
Note China Mexico Total Germany China Mexico (Restated) Total (Restated)
£'000
£'000
£'000
£'000
£'000 £'000 £'000
Revenue 114 808 922 1,062 1,402 802 3,266
Cost of sales (33) (318) (351) (430) (547) (229) (1,206)
Gross profit 81 490 571 632 855 573 2,060
Administrative expenses 543 (389) 154 2,654 (1,721) (651) 282
Operating profit/(loss) 624 101 725 3,286 (866) (78) 2,342
Analysed as:
EBITDA (33) 225 192 628 (322) 279 585
Depreciation and amortisation - (2) (2) - (285) (78) (363)
Exceptional items 5 657 (122) 535 2,658 (259) (279) 2,120
Investment revenues 4 - 4 - 1 12 13
Finance costs (12) (41) (53) 33 66 8 107
Profit/(loss) before taxation 616 60 676 3,319 (799) (58) 2,462
Taxation 6 - - - (30) - - (30)
Profit/(loss) for the year 616 60 676 3,289 (799) (58) 2,432
(ii) Exceptional items
2022 2021
Mexico Total
China Mexico Total Germany China (Restated) (Restated)
£'000
£'000
£'000
£'000
£'000 £'000 £'000
Profit/(loss) on disposal 657 (122) 535 2,654 (72) - 2,582
Write down of assets on reclassification as held for sale - - - - (113) - (113)
Restructuring costs - - - 4 (74) (279) (349)
Exceptional items included in operating profit 657 (122) 535 2,658 (259) (279) 2,120
Tax on exceptional items - - - - - - -
Exceptional items after tax 657 (122) 535 2,658 (259) (279) 2,120
(iii) Profit on disposal
The Group has recognised a profit on disposal as follows:
2022 2021
China Mexico Total Germany China Total
£'000 £'000 £'000 £'000 £'000 £'000
Proceeds - - - 2,366 - 2,366
Net (assets)/liabilities sold (424) (45) (469) 284 - 284
Costs associated with disposal - (56) (56) - (72) (72)
Currency translation differences on disposal 1,081 (21) 1,060 4 - 4
Profit/(loss) on disposal 657 (122) 535 2,654 (72) 2,582
(iv) Summary of cash flows
2022 2021
China Mexico Total Germany China Mexico Total
£'000
£'000
£'000
£'000
£'000 £'000 £'000
Net cash flows from operating activity (55) 175 120 (7,765) 54 (151) (7,862)
Net cash flows from investing activity 4 (1) 3 - 2 12 14
Net cash flows from financing activity (39) (523) (562) 7,357 (85) 320 7,592
Net cash (outflow)/inflow (90) (349) (439) (408) (29) 181 (256)
9. Other intangible assets
Business partner relationships Internally generated software Externally acquired software Total
£'000
£'000
£'000
£'000
Cost:
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 1 January 2022 644 5,086 2,891 8,621
Additions 108 1,960 126 2,194
Disposals (108) (82) (54) (244)
Exchange adjustments - 18 14 32
At 31 December 2022 644 6,982 2,977 10,603
Accumulated amortisation:
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 1 January 2022 470 2,019 2,529 5,018
Provided during the year 82 629 158 869
Disposals (108) (81) (50) (239)
Impairment 101 - 86 187
Exchange adjustments (1) 50 9 58
At 31 December 2022 544 2,617 2,732 5,893
Carrying amount:
At 31 December 2021 174 3,067 362 3,603
At 31 December 2022 100 4,365 245 4,710
Amortisation of intangible assets totalling £869,000 (2021: £1,155,000) is
recognised through administrative expenses in the consolidated income
statement.
Internally generated software additions of £1,960,000 (2021: £1,192,000)
reflect the capitalisation of staff and contractor costs in IT development
projects.
Internally generated software includes £3,718,000 (2021: £1,956,000)
relating to assets in development which are not yet operational and are not
amortised. The assets held at 31 December 2022 are expected to become
operational in Q3 2023.
10. Share capital
Ordinary Deferred Total
shares of shares of (thousands)
£1 each 9 pence
(thousands) each
(thousands)
Called-up and allotted
At 1 January 2022 8,833 171,650 180,483
Issue of shares in connection with:
Exercise of share options 13 - 13
At 31 December 2022 8,846 171,650 180,496
Ordinary Deferred Total
shares of shares of £'000
£1 each 9 pence
£'000 each
£'000
Called-up and allotted
At 1 January 2022 8,830 15,413 24,243
Issue of shares in connection with:
Exercise of share options 13 - 13
At 31 December 2022 8,843 15,413 24,256
Share capital at 31 December 2022 is £24,256,000 (2021: £24,243,000). To
satisfy share option exercises in the year the Company has issued 12,847 £1
ordinary shares for a total equity value of £13,000 and cash consideration of
£6,000.
Of the 8,846,045 (2021: 8,833,198) ordinary shares in issue at 31 December
2022, 8,841,045 are fully paid (2021: 8,828,198) and 5,000 (2021: 5,000) are
partly paid.
11. Reconciliation of operating cash flows
2022 2021
£'000 £'000
Profit for the year 777 3,008
Adjustments for:
Depreciation and amortisation 2,509 3,111
Share-based payment credit (246) (64)
Impairment loss on intangible assets 187 176
Impairment loss on property, plant and equipment - 3
Impairment loss on right-of-use assets - 48
Share of loss in joint venture - 189
Loss on disposal of property, plant and equipment 15 26
Loss on disposal of intangible assets 5 -
Profit from discontinued operations (535) (2,582)
Effects of hyperinflation 86 -
Investment revenues (490) (224)
Finance costs 709 259
Other gains and losses - (1,459)
Income tax charge 2,343 3,737
Operating cash flows before movements in working capital 5,360 6,228
Decrease in inventories 15 40
(Increase)/decrease in contract assets (1,481) 354
(Increase)/decrease in receivables (6,232) 1,626
Decrease in insurance assets - 46
Increase in payables 7,547 217
Increase/(decrease) in contract liabilities 1,655 (276)
Increase/(decrease) in insurance liabilities 83 (853)
Increase in provisions 369 -
Cash from operations 7,316 7,382
Income taxes paid (3,494) (2,820)
Net cash from operating activities 3,822 4,562
Reconciliation of net funds
At Cash flow Foreign exchange and other non-cash movements At
1 January £'000 £'000 31 December
2022 2022
£'000 £'000
Net cash per cash flow statement 22,409 (1,479) 54 20,984
Financing activities:
Lease liabilities (6,023) 1,388 (83) (4,718)
Borrowings due outside of one year
- Unamortised issue costs 58 - (35) 23
Total movement from financing activities (5,965) 1,388 (118) (4,695)
Total net funds 16,444 (91) (64) 16,289
12. Related party transactions
Transactions with associated parties
In the year, the Group incurred fees of £19,000 plus VAT (2021: £8,000) for
services rendered from KYND, which was payable under 14-day credit terms. The
creditor balance at the year end was £2,000 (2021: £1,000).
Transactions with related parties
China disposal
On 27 January 2022, the Group completed the sale of China to T-Link Holdings
Limited (T-Link) for nominal cash consideration of HK$1. As part of the
disposal, the Group made a working capital cash injection into China of £0.5
million.
The majority shareholder of T-Link is Wilson Chan, the CEO of China. The terms
of the disposal reflect the ongoing cash losses and investment requirements of
China. The Board concluded that sale of the business to T-Link rather than a
closure was both the least costly for the Group and the right option for all
stakeholders, enabling the Group to focus on its core markets while ensuring
in China the smooth transition of colleagues and continuity of service to
partners and their customers.
As Wilson Chan is CEO of China and a majority shareholder in T-Link, the
disposal constitutes a related party transaction. The Directors consider,
having consulted with the Company's nominated adviser, Liberum Capital Limited
(Liberum), that the terms of the disposal are fair and reasonable insofar as
the Company's shareholders are concerned.
Mexico disposal
On 20 October 2022, the Group completed the sale of Mexico, to Rafael Ortiz
Moran and Silvia Daniela Rodriguez Gaona for a nominal cash consideration of
$1 (Mexican peso). As part of the disposal, the Group has left cash balances
of circa £280,000 to cover initial working capital requirements and other
committed liabilities. Rafael Ortiz Moran is the Country Manager of Mexico.
The sale terms reflect the run-off nature of the business which was forecast
to become unprofitable again in 2023 and the Group's desire to exit the Legacy
markets in the most cost effective manner.
As Rafael Ortiz Moran is the Country Manager of Mexico, the disposal
constitutes a related party transaction. The Directors consider, having
consulted with the Company's nominated adviser, Liberum, that the terms of the
disposal are fair and reasonable insofar as the Company's shareholders are
concerned.
Globiva
In July 2022, the Group agreed to amend the Globiva Shareholder Agreement
(SHA) and certain other arrangements. The Group holds a 51% majority interest
in Globiva, with the other 49% of shares beneficially owned by the three
founders. CPP agreed to provide additional funding of £0.5 million through an
existing repayable interest-bearing loan which was utilised to make a one-time
compensation payment to the Globiva founders. The SHA further entitled, upon
achievement of certain performance targets, the Globiva founders to either a
cash payment or to buyback of 10% of the ordinary shares in Globiva from CPP.
Under the amended arrangements, the Globiva founders will, on meeting
performance targets, buyback 10% of the ordinary shares, however in the normal
course of business, this cannot be triggered until 1 January 2026 at the
earliest.
The compensation payment to the Globiva founders, who are also Directors of
Globiva, along with the other arrangements constitute a related party
transaction. The Directors of the Group consider, having consulted with the
Company's nominated adviser, Liberum, that the terms of the transaction are
fair and reasonable insofar as the Company's 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:
2022 2021
£'000 £'000
Short-term employee benefits 1,101 1,788
Post-employment benefits 27 74
Termination benefits 300 203
Share-based payments (206) (65)
1,222 2,000
13. Events after the balance sheet date
On 6 February 2023, Turkey was hit by a devastating earthquake. Turkey is one
of the Group's Core markets. New sales activity has been impacted by
approximately 50% in February and March following Government guidance on
restricting telemarketing activity. This guidance is expected to be relaxed in
April. There is currently no evidence of a notable deterioration in renewal
rates. The financial impact on the Group from the effects of the earthquake is
currently uncertain but is not expected to be material. All colleagues are
receiving any support necessary. The Group continues to closely monitor the
situation.
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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