REG - CPPGroup Plc - FULL YEAR RESULTS FOR YEAR ENDED 31 DECEMBER 2023
26/03/2024 07:00
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RNS Number : 2371I CPPGroup Plc 26 March 2024
26 March 2024
CPPGroup Plc
("CPP Group"; "the Group"; or "the Company")
FULL YEAR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023
DELIVERY OF STRATEGY ON TRACK
CPP Group (AIM: CPP), provider of real-time, digitally delivered assistance
products which reduce disruptions to everyday life for millions of people
across the world is pleased to announce its full year results for the 12
months ended 31 December 2023.
Financial Highlights:
· Group revenue increased by 14% to £193.0 million (2022: £169.8
million).
· EBITDA(1) at £4.8 million (2022: £6.9 million).
· Core business units(3) revenues increased by 17% to £181.0
million (2022: £154.3 million).
· EBITDA from Core business units(3) at £7.4 million (2022: £8.3
million).
· Exceptional items total £8.4 million (2022: £1.7 million)
primarily relating to planned Legacy business closures.
· Loss before tax of £6.1 million (2022: £2.4 million profit).
· Cash balance of £19.0 million at 31 December 2023 (31 December
2022: £21.0 million).
Operational Highlights:
· Group re-focused on three Core businesses (Blink Parametric; CPP
India; and CPP Turkey).
· Simplified proposition away from "insurance" to "digital
assurance" services.
· Core business(3) performing well.
o Seven new business partners and a 100% renewal rate for Blink Parametric
o Strong growth in CPP India and CPP Turkey
· Change Management Programme proceeding as planned, with Phase 1
of the new Indian IT platform delivered.
· Exit from Legacy operations progressing as expected and at pace.
· Planned divestment of Globiva over three years for approximately
£5.1 million announced in November 2023.
· Disposal of minority interest in KYND Limited ("KYND") for £2.6
million announced post period end.
· Post period, due to regulatory changes in India, a subset of
LivCare business with Bajaj Finance Limited ("Bajaj") has transferred from the
Group.
Simon Pyper, CEO of CPP Group, commented:
"That we have been able to implement and execute the Change Management
Programme ("CMP"), to divest non-core businesses such as Globiva and KYND, and
at the same time, to deliver growth from our core business, is I believe, a
testament to the quality of the people that I have the privilege to work with.
From a trading perspective the Group's key Indian and Turkish markets, despite
currency headwinds, performed well. Both businesses added new partners and new
products and are well positioned to make further progress in 2024. Blink, the
Group's parametric business primarily focused on the global travel market,
also made good progress, securing seven new business partners, and achieving a
100% renewal rate of its existing client base, both of which are further proof
points of the value our services provide to both the Insurer and end customer.
Despite the good revenue growth, EBITDA from our core business units was lower
than prior year at £7.4 million reflecting the planned investment in Blink, a
mix change in CPP India product sales, and £0.8 million adverse currency
movements.
From an operational perspective, the Group is now at the implementation stage
of its CMP which, at its conclusion, will see the Group exit from its Legacy
businesses and focus on growing its core Blink, Indian, and Turkish
operations. The Group achieved the majority of the objectives that it set
for itself for 2023, having over the past year delivered a new IT platform for
its business in India, exited from its legacy operations in Spain, and
commenced the closure process for its legacy UK businesses. As expected, the
legacy closure activity has led to substantial exceptional provisions in our
financial statements and moreover, is expected to consume cash as the
businesses are wound down over the medium-term.
Whilst much has been achieved, there remains much to be done before we fully
realise our ambition to transform CPP into a digitally led parametric
business. Progress may never be as fast as I would like, but I am confident
that we are travelling in the right direction and at an appropriate speed."
Financial and non-financial highlights - continuing operations
£ millions 31 December 2023 31 December 2022 Change
Financial highlights:
Group
Revenue 193.0 169.8 14%
EBITDA(1) 4.8 6.9 (30)%
Operating (loss)/profit
- Reported (6.4) 2.6 (345)%
- Underlying(2) 2.0 4.3 (54)%
(Loss)/profit before tax
- Reported (6.1) 2.4 (351)%
- Underlying(2) 2.3 4.1 (46)%
(Loss)/profit for the year
- Reported (8.1) 0.1 >(999)%
- Underlying(2) 0.1 1.6 (96)%
Basic (loss)/earnings per share (pence)
- Reported (97.84) (1.73) >(999)%
- Underlying(2) (5.56) 15.12 (137)%
Cash and cash equivalents 19.0 21.0 (9)%
Segmental
Revenue
- Core(3) 181.0 154.3 17%
- Legacy(4) 12.0 15.5 (22)%
EBITDA(1)
- Core(3) 3.0 5.0 (39)%
- Legacy(4) 1.8 1.9 (8)%
Non-financial highlights:
Customer numbers (millions) 10.5 11.4 (8)%
1. EBITDA represents earnings before interest, taxation, depreciation,
amortisation, and exceptional items.
2. Underlying operating profit and underlying profit before tax
excludes exceptional items of £8.4 million (2022: £1.7 million). The tax
effect of the exceptional items is £0.2 million (2022: £0.2 million).
Further detail of exceptional items is provided in note 5 of the condensed
consolidated financial statements.
3. Core business units comprises revenue and EBITDA from CPP India,
CPP Turkey, Blink Parametric and Globiva. Core total also includes central
costs of £4.4 million (2022: £3.3 million).
4. Legacy business primarily comprises the UK and European renewal
books of business, which are principally Card Protection and Identity
Protection policies.
Enquiries:
CPP Group plc
Simon Pyper, Chief Executive Officer Tel: +44 (0)7917 795601
David Bowling, Chief Financial Officer
Liberum Capital Limited
(Nominated Adviser and Sole Broker) Tel: +44 (0)20 3100 2000
Richard Lindley
Will King
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 Group is listed on AIM, operated by
the London Stock Exchange.
For more information on CPP visit https://corporate.cppgroup.com/
(https://corporate.cppgroup.com/)
Chairman's Statement
The last year has been one of notable progress for the Group, as it set about
implementing the outcomes of its strategy review concluded in October 2022.
The accompanying Change Management Programme (CMP), a set of detailed
operational plans and activities by which the Group will achieve its desired
outcomes, will, at its conclusion, see the business exit fully from its Legacy
operations and migrate towards a digitally focused parametric business, led by
Blink and supported by CPP India and CPP Turkey.
We have made good progress; the Group achieved almost all of the objectives it
set itself for 2023, with only the second and smaller phase of the new IT
platform for its Indian business being delayed until the spring of 2024.
However, we will not rest on our collective laurels as we look to build a
business which delivers sustainable long-term value for shareholders.
Strategy for growth
Our strategy remains unchanged, and there have, particularly in the last
quarter of 2023, been several indicators that suggest it is both robust and
appropriate:
· Blink, the Group's parametric business primarily focused on
providing digitally delivered assistance products to the global travel market,
has secured seven new client wins and exited the year with a record pipeline
of new business opportunities. In addition, Blink achieved a 100% renewal rate
of its existing client base, and, in most instances, secured volume growth.
· Our businesses in India and Turkey, despite currency head winds,
have achieved growth in revenues and profitability.
· The Group's Legacy businesses, which, as expected, continued
their decline in 2023, have started to be closed or wound down. During the
year the Group exited from its operations in Spain and commenced the closure
process for its business in the UK.
Change Management Programme
The CMP consists of seven inter-dependent projects, which include the delivery
of a new standalone IT platform for CPP India, a capacity and functional build
for Blink, and an orderly exit programme from our Legacy operations.
Some key highlights on the good progress achieved in 2023:
· new IT platform (Phase 1) for Indian business delivered in August
2023;
· investment in Blink's operational capacity to support future
growth;
· closure of Legacy operations in Spain;
· closure planning for the Legacy UK business completed, with
closure process to commence in 2024; and
· planned divestment of Globiva for approximately £5.1 million
announced in November 2023.
The plans and objectives that we have set ourselves for 2024, particularly
those relating to the closure of the Legacy businesses and associated IT
platforms, are demanding. We are, as ever, mindful that not all such
endeavours proceed exactly as planned and there may well be disappointments
and delays along the way. However, through the CMP that we have put in place,
we aim to mitigate risk and meet expectations.
Financial results
Group revenues, which include results from our Legacy operations, increased by
14% to £193.0 million whilst EBITDA of £4.8 million (2022: £6.9 million)
was, as expected, lower than the prior year.
The trading performance from Core operations (Blink, CPP India, CPP Turkey and
Globiva) was robust, with revenues increasing by 17% to £181.0 million whilst
EBITDA, which also includes central costs, reduced to £3.0 million (2022:
£5.0 million).
Our balance sheet shows cash of £19.0 million (2022: £21.0 million), which
allows the Group to fund its working capital and CMP commitments.
People
I am firmly of the view that there are few businesses of our size and
resources which could have contemplated the challenge of transforming from one
business model to another. That we have chosen to do so, achieved so much and
still delivered revenue growth from our Core operations, is a clear testament
to the quality, dedication and hard work of our colleagues across the Group,
for which I would like to express my gratitude.
Board and shareholders
Following certain allegations made against Hamish Ogston in a newspaper
article in the latter part of last year, I stood down as his nominee on the
Board, but was invited to remain in post as an independent Non-Executive
Director and Chairman. For the avoidance of doubt, Mr Ogston remains a
substantial and supportive shareholder, but he has had no active engagement in
the Company since 2013. Subsequent to the article in question, it was not
considered an appropriate time to continue with the process to find an
additional Non-Executive Director, and there is currently no search in train.
However, the membership of the Board will be reviewed again during the course
of this year.
Outlook
We have had a positive start to the year with trading performing in line with
expectations and we are encouraged by the good pipeline of new business within
Blink. There is much to be satisfied with, but we remain cautious and
measured, as there is much to do between now and the end of this year and
next.
David Morrison
Non-Executive Chairman
25 March 2024
Chief Executive Officer Statement
Full year performance
That we have been able to implement and execute the CMP, to divest non-core
businesses such as Globiva and KYND, and, at the same time, to deliver growth
from our Core business is, I believe, a testament to the quality of the people
that I have the privilege to work with.
The Group's key Indian and Turkish businesses, despite currency headwinds,
performed well. Both businesses added new partners and new products and are
well positioned to make further progress in 2024. Blink, the Group's
parametric business primarily focused on the global travel market, also made
good progress, securing seven new business partners, and achieved a 100%
renewal rate of its existing client base. These are further proof points of
the value Blink provides to both the insurer and end customer.
Despite good revenue growth, EBITDA from our Core business units was lower
than prior year at £7.4 million (2022: £8.3 million) reflecting the
investment in Blink and a mix change in CPP India product sales, both of which
were expected, and £0.8 million adverse currency movements, which were
outside of our control.
1. Blink investment: Blink is the Group's only global product, one
currently focused on delivering parametric InsurTech solutions to the
worldwide travel insurance market. It forms a key part of the Group's strategy
and requires sustained investment over the near- to medium-term if it is to
realise its full potential. Blink reported an EBITDA loss of £1.8 million
compared to a marginal loss in the prior year.
2. Indian margin erosion: as expected, CPP India's gross profit margin
has been adversely impacted by the growth of lower margin products such as
LivCare and, to a lesser extent, the customer acquisition costs associated
with a growing Card business. CPP India's gross profit margin reduced by 1.2
percentage points to 9.3% (2022: 10.5%).
3. Currency headwinds: the Group derives 91% of its revenues in Indian
rupees which weakened by 6% against sterling during the period. On a constant
currency basis, the Group would have reported an additional £0.8 million of
EBITDA. A comparatively weak position with our main trading currencies may
well continue for the foreseeable future.
The operating loss of £6.4 million (2022: £2.6 million profit) includes
depreciation charges of £2.8 million (2022: £2.5 million) and exceptional
items of £8.4 million (2022: £1.7 million) which are associated with the
CMP.
Business unit performance:
£ millions REVENUE EBITDA(1)
2023 2022 CHANGE 2023 2022 CHANGE
CPP India 161.0 134.8 19% 5.8 5.6 5%
Globiva 14.5 15.8 (8)% 2.2 2.4 (10)%
CPP Turkey 4.7 3.2 46% 1.2 0.7 59%
Blink 0.8 0.5 85% (1.8) (0.4) (291)%
Core business units 181.0 154.3 17% 7.4 8.3 (11)%
Central Functions - - n/a (4.4) (3.3) (30)%
Core total 181.0 154.3 17% 3.0 5.0 (39)%
Legacy(2) 12.0 15.5 (22)% 1.8 1.9 (8)%
Group total 193.0 169.8 14% 4.8 6.9 (30)%
1. EBITDA represents earnings before interest, taxation, depreciation,
amortisation and exceptional items.
2. Legacy comprises the UK, Spain, Italy and Portugal.
CPP India: EBITDA of £5.8 million (2022: £5.6 million), EBITDA margin of
3.6% (2022: 4.1%)
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
has increased by £26.2 million or 19% versus prior year and by 27% on a
constant currency basis. Growth has been driven by LivCare, which is a health
and wellness product sold via our largest business partner, Bajaj. Whilst this
product does secure strong new business for both the Group and Bajaj, it is,
and will continue to be, a relatively low margin product for CPP India. The
resulting mix change in sales volumes from higher margin products to LivCare
reduced CPP India's gross profit margin by 1.2 percentage points to 9.3%
(2022: 10.5%), which equates to £1.9 million in gross profit.
In August, the Group delivered Phase 1 of a new IT platform for CPP India,
which is now operational servicing Bajaj policies. Phase Two, due to go live
in the spring of 2024, will allow CPP India to operate independently from the
Centre and to service its growing partner base more effectively. Additionally,
once the new IT platform is fully operational the Group will be able to close
down its costly legacy IT operations.
The EBITDA margin reduced by 0.5 percentage points reflecting both the
reduction in the gross profit margin and the increase in operating costs, some
of which reflects the profit-based reward structure for the in-country
executive team.
Bajaj has informed the Group that due to regulatory changes it is transferring
a portion of its LivCare book to locally based insurers. The sale of these
LivCare policies ceased in March 2024. However, due to the benefits derived
from the CMP, the Group expects to absorb the estimated EBITDA shortfall from
LivCare within its current market estimates.
Globiva: EBITDA of £2.2 million (2022: £2.4 million), EBITDA margin of 15.2%
(2022: 15.5%)
Globiva is 51% owned by the Group and provides outsourced customer
relationship management, back-office functionality and automated human
resource services to a predominantly tech-focused client base. As a
consequence of the well-publicised global tech downturn, the business, which
has a significant number of tech companies on its roster, has seen a softening
in seat occupancy and consequently revenues. In addition, given the relatively
high operational gearing of such businesses, the softening in revenues has had
an immediate, albeit modest, adverse impact on EBITDA growth.
In November 2023, the Group announced a phased divestment of its shareholding
in Globiva for an aggregate consideration of approximately £5.1 million. The
divestment of Globiva, which will be completed in early 2027, is consistent
with Group's strategy and, moreover, provides a satisfactory outcome for both
parties.
Turkey: EBITDA of £1.2 million (2022: £0.7 million), EBITDA margin of 24.6%
(2022: 22.6%)
CPP Turkey performed well during the year with EBITDA increasing by 59%. That
the business has been able to deliver real growth following the earthquake in
February and in such a turbulent economic environment reflects the quality and
strength of our proposition, of our relationships with our business partners
and of our newly formed management team.
Blink: EBITDA loss of £1.8 million (2022: £0.4 million loss)
Blink is a technology and software platform provider focused on delivering
innovative travel disruption (flight delay and lost luggage) solutions for the
global travel sector. It is the Group's only offering which can be sold,
serviced and delivered across multiple geographies. Blink is, along with CPP
India and CPP Turkey, the future of CPP Group.
Towards the end of last year as part of the Group's CMP, we set in place two
work streams, one focused on building capacity (people, processes and
structures) and the other on growth (new product development and sales and
marketing). These work streams will not fully conclude until Q1 2024. The
necessary investment into Blink as part of this has led to the increased full
year EBITDA losses compared to prior year.
Whilst it is too early to draw conclusions from our full year results, there
are a number of proof points, such as, seven new client wins including several
blue-chip insurance clients, the 100% renewal of partner contracts in 2023
(including Blue Cross in Canada) and numerous Industry awards, all of which
suggest that both our approach and strategy are sound. At the same time, Blink
has also demonstrated the quality and value of its proposition to its partners
with policies sold which includes Blink's services increasing by 46%, the
volume of flights tracked by Blink increasing 78% and claims paid using
Blink's technology increasing 63%.
Legacy business: EBITDA of £1.8 million (2022: £1.9 million)
Following the withdrawal from China, Mexico and Bangladesh in 2022, we
continue to make good progress with exiting our Legacy businesses. As
forecast, revenue from the UK and European back books (predominantly Card
Protection and Identity Protection) continued to decline. However, EBITDA
reduced modestly by £0.1 million as the commencement of closure activities
across our Legacy markets reduced costs, most notably in Spain which included
beneficial commission terms on the transfer of certain business to
underwriters.
In the final quarter of 2023, the Group completed the closure of its Spanish
business and commenced the wind-down and closure process for its UK
operations.
Central costs: £4.4 million (2022: £3.3 million)
Central overheads before appropriate recharge to business units are £10.1
million (2022: £9.0 million), of which £3.7 million (2022: £3.5 million)
relates to the cost of the Group's IT operations. The new IT platform for our
Indian business when fully deployed will enable the decommissioning of our
expensive legacy IT systems. There will be dual-running costs into H1 2024,
but we expect a significant reduction in the running cost of the Group's IT
estate thereafter. Net of recharges, our reported central costs have increased
by £1.1 million (30%) due to costs associated with Legacy closures,
preparations for decommissioning Legacy IT platforms, and additional share
scheme charges.
Operational highlights
From an operational perspective, the Group is now at the implementation stage
of its CMP which, at its conclusion, will see the Group exit from its Legacy
businesses and focus on growing its Core Blink, Indian and Turkish operations.
The Group achieved the majority of its 2023 objectives, having over the past
year delivered a new IT platform for its business in India, exited from its
Legacy operations in Spain, and commenced the closure process for its legacy
UK business.
Change Management Programme
In October 2022, we announced our strategy to shift towards an InsurTech
business led by Blink and supported by CPP India and CPP Turkey, whilst
addressing the challenges presented by our declining Legacy book. The CMP is
the 'how' we build a better future for the Group, one which on completion will
provide better outcomes for all shareholders and other stakeholders.
Planning: Implementation: Implementation: Implementation:
• Established a Change Management Programme and timeline for implementation. • India IT platform Phase 1 (Bajaj products) operational in August. • India IT platform Phase 2 (Card products) operational in the spring. • Legacy books continue to run-off/close in line with plan to minimise
residual activity.
• All material Legacy books in run-off. • Legacy IT platforms decommissioned.
• Central model adjusted in line with requirements.
• Initial Blink scalability requirements complete. • Legacy books continue to run-off/close.
• CMP complete.
• Globiva disposal agreed. • Legacy customer data minimised and securely stored.
• KYND disposal completed.
2022 2023 2024 2025
In 2023 we achieved all but one of the objectives that we set ourselves, with
only Phase 2 of the new IT platform for CPP India delayed to the spring of
2024.
During the year we delivered:
1. Phase 1 of new IT platform for CPP India delivered in August. The
platform is fully operational with over 5 million live policies being
administered and serviced.
2. Blink launched a new market-leading, white-labelled online user
experience platform. The scalability and speed of deployment increased, with a
step change in infrastructure and operational capability supported by hiring
of senior operational, customer service and technical management roles.
3. Spanish Legacy business closed in November.
4. Italian portfolio transferred from legacy IT systems to a third
party fully managed service provider in June.
5. Wind-down and closure programme for the UK business is underway.
6. Planning finalised for the decommissioning of the Group's expensive
legacy IT systems. Decommissioning is expected to be complete in H1 2024.
Our objectives for 2024 include: the decommissioning of legacy IT platforms;
migration of legacy customer data to lower cost third party platforms;
continued investment in Blink; and the delivery of Phase 2 of the new India IT
platform.
Our colleagues
I would like to thank all my colleagues for their commitment, hard work and
professionalism. We should take pride in what we have achieved thus far and
we should be confident about our future and the business we are building
together.
Outlook
We are confident about the outlook and growth prospects for our Core
operations although adverse currency headwinds look set to continue for the
foreseeable future. The CMP is expected to consume cash as we continue to exit
from our Legacy business and incur closure costs, such as redundancies. That
aside, our focus remains unchanged, on reshaping and building a business which
will improve outcomes for all stakeholders over the longer-term. Whilst
progress is never as fast as I would like, I remain confident that we are
travelling in the right direction and at an appropriate speed.
Simon Pyper
Chief Executive Officer
25 March 2024
Chief Financial Officer Statement
Overview
The Group made good financial progress in the year, growing revenue in its
Core operations. The CMP has progressed to plan with Legacy operations being
wound down or exited, Phase 1 of the new Indian IT platform in operation and
servicing the business, and Blink continuing to grow. As a result, and as
expected, EBITDA has reduced whilst the Group repositions itself as a
technology-led business focused on three Core businesses. The withdrawal from
the Legacy markets through the CMP will continue to reduce cash in the
medium-term, yet the Group is in a solid financial position with which to
complete its simplification in order to improve outcomes for all
stakeholders.
The Group has made other positive strides in its simplification with the
planned exit from Globiva over three years for consideration of approximately
£5.1 million and the post-period disposal of its interest in KYND for £2.6
million. The cash consideration from these transactions will support the CMP
and further investment required to scale Blink.
Group revenue increased by 14% (21% constant currency) to £193.0 million
(2022: £169.8 million). Revenue growth was driven by our Core operations
which represent 94% of Group revenues and were 17% higher than last year at
£181.0 million (2022: £154.3 million). New business has been particularly
strong in India increasing by 19% principally through the relationship with
Bajaj. EBITDA has, as expected, reduced to £4.8 million (2022: £6.9
million). The reduction in EBITDA reflects additional investment in Blink, a
softening of margins in India and currency headwinds.
Continuing Operations 2023 2022
Revenue (£ millions) 193.0 169.8
Gross profit (£ millions) 30.9 30.8
EBITDA (£ millions)(1) 4.8 6.9
Operating (loss)/profit (£ millions) (6.4) 2.6
(Loss)/profit before tax (£ millions) (6.1) 2.4
Taxation (£ millions) (2.0) (2.3)
(Loss)/profit for the year (£ millions) (8.1) 0.1
Basic loss per share (pence) (97.84) (1.73)
Cash generated by operations (£ millions) 5.5 7.3
1. Excluding depreciation, amortisation and exceptional items.
Gross profit remained broadly flat at £30.9 million (2022: £30.8 million).
However, the gross profit margin has decreased to 16.0% (2022: 18.1%) which is
a continuation of the change in market mix with growth in our Indian business
which has higher costs of acquisition from new sales than the Legacy renewal
books it is replacing. In addition, a shift to lower margin product variants
and inflationary pressures have impacted our margins in India and Globiva. We
expect our gross profit margins to continue to reduce in the short- to
medium-term as withdrawal from the Legacy markets is completed as part of the
CMP before stabilising in 2025 and improving incrementally thereafter. The
margin will continue to be weighted towards India, which is operating at a
gross margin of approximately 9%.
EBITDA reduced to £4.8 million (2022: £6.9 million) reflecting additional
investment in Blink's operational capability as the business is prepared for
scale, the softening margins in India and adverse currency movements in the
rupee and lira. On a constant currency basis EBITDA would have been £5.6
million which is £0.8 million higher than reported. Administrative expenses,
before depreciation and exceptional items, continue to be closely monitored,
albeit there has been an increase in the year as a result of business growth
in India and Turkey, scaling Blink and general inflationary pressures. The
cost base is expected to reduce in 2024 as the benefits of closing Legacy
operations and decommissioning the Legacy IT platforms come through.
Depreciation and amortisation charges have increased to £2.8 million (2022:
£2.5 million). The increase reflects the Phase 1 launch of the Group's new
technology platform in India in August 2023. The Group's depreciation charges
are expected to increase further in 2024 as Phase 2 of the platform is
launched in the Spring.
Exceptional items
As expected, the Legacy closure activity led to substantial exceptional
charges of £8.4 million (2022: £1.7 million) which relate to:
· onerous contract provision of £3.4 million (2022: £0.2 million)
reflecting an estimate for future contractual losses in the UK and Spain as
the businesses are wound down and the Group's legacy IT systems are
decommissioned;
· restructuring and closure costs of £3.7 million (2022: £0.8
million) comprising redundancy and settlement costs in Spain, the UK and
Turkey, along with charges for retention schemes established to safeguard the
delivery of the CMP activities over an extended period of time;
· IT impairments charges of £0.2 million (2022: £0.2 million)
relating to closure activities; and
· Deferred Bonus Plan (DBP) charges of £1.1 million (2022: £nil).
The DBP is a share-based retention measure for the Executive Management
Committee (EMC) whereby participants agreed to defer a portion of their 2022
annual bonus in return for share options.
The IT impairment and DBP charges are non-cash items. At the balance sheet
date, £5.9 million remains to be paid over the next three years to settle CMP
liabilities.
The substantial exceptional costs, result in an operating loss of £6.4
million (2022: £2.6 million profit). Consequently, the Group is reporting a
loss before tax of £6.1 million (2022: £2.4 million profit), and a loss
after tax of £8.1 million (2022: £0.1 million profit).
Tax
The tax charge for the year is £2.0 million (2022: £2.3 million), which is
an effective tax rate (ETR) of negative 32% (2022: positive 96%). The tax
charge includes £1.5 million (2022: £1.6 million) relating to India.
The negative tax rate reflects the substantial CMP exceptional charges and
increased operational investment in Blink; against both of these factors the
Group is unable to offset all the losses or recognise tax credits. At the same
time the Group continues to generate taxable profits in India and Turkey.
Adjusted ETR
Continuing Operations Exceptional items Adjusted
2023 Core Legacy Total Core Legacy Total Core Legacy Total
£'m £'m £'m £'m £'m £'m £'m £'m £'m
(Loss)/profit before tax (0.7) (5.4) (6.1) 1.4 7.0 8.4 0.7 1.6 2.3
Tax (1.8) (0.2) (2.0) - (0.2) (0.2) (1.8) (0.4) (2.2)
ETR (248)% (4)% (32)% 4% 3% 3% 277% 24% 97%
Continuing Operation Exceptional items Adjusted
2022 Core Legacy Total Core Legacy Total Core Legacy Total
£'m £'m £'m £'m £'m £'m £'m £'m £'m
Profit/(loss) 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%
The exceptional items in the year have reduced profit before tax by £8.4
million (2022: £1.7 million) whilst there has been an associated reduction in
tax of £0.2 million (2022: £0.2 million). Without the exceptional items the
Group's ETR would be 97% (2022: 61%).
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 277% (2022: 82%), which includes withholding taxes on dividend
repatriations from India and Turkey and the loss-making Central Functions. The
notable increase in Core adjusted ETR reflects the increased losses generated
by additional operational investment in Blink and higher central costs.
A high and volatile Group ETR is expected to persist until Legacy operations
are exited. The CMP is expected to improve both the Group and Core operations
ETR in the medium-term as the simplification of the Group enables UK-based
central costs to be further reduced and Blink moves towards profitability.
Dividend
Due to the costs and uncertainties associated with the CMP, the dividend
payment remains suspended until further notice. If circumstances change, the
Board will review and update shareholders when appropriate to do so.
Foreign exchange
The general weakening against sterling of the Group's main trading currencies,
the Indian rupee and Turkish lira, has led to an adverse exchange rate
movement in the Group's results. The Indian rupee has depreciated by 6% (2022:
5% appreciation) whilst the Turkish lira has continued to weaken with a
further 48% reduction in 2023 (2022: 63% reduction).
The reported results compared to 2023 include the following adverse foreign
exchange movements: £10.3 million (2022: £4.5 million favourable) within
revenue; and £0.8 million (2022: £0.1 million favourable) at an EBITDA
level.
Cash flow and net funds
2023 2022
£'m £'m
EBITDA 4.8 7.0
Exceptional items(1) (7.2) (1.7)
Non-cash items 0.1 -
Working capital movements(2) 7.8 2.0
Cash generated by operations 5.5 7.3
Tax (1.9) (3.5)
Operating cash flow 3.6 3.8
Capital expenditure (including intangibles) (3.9) (2.7)
Lease repayments (1.4) (1.4)
Disposal of discontinued operations - (0.9)
Net finance revenues 0.7 0.4
Costs of refinancing the bank facility (0.1) -
Dividends - (0.7)
Net movement in cash(3) (1.1) (1.5)
Net funds(4) 15.3 16.3
1. Cash-based exceptional items, being onerous contract
provisions and restructuring and closure costs. The other exceptional items in
the year were non-cash.
2. Working capital includes £5.9 million (2022: £0.4 million)
relating to exceptional items not yet paid.
3. Excluding the effect of exchange rates.
4. Net funds comprise cash and cash equivalents of £19.0
million (2022: £21.0 million) and a borrowing asset of £0.1 million (2022:
£nil) less lease liabilities of £3.8 million (2022: £4.7 million).
The net funds position has decreased to £15.3 million (2022: £16.3 million),
which includes cash of £19.0 million (2022: £21.0 million). The Group had a
net cash outflow of £1.1 million (2022: £1.5 million) in the year following
an acceleration in costs to develop the IT platform in India, which enabled
the successful launch of Phase 1 in August and progress on Phase 2 which is
expected to launch in spring 2024.
Cash generated by operations has reduced to £5.5 million (2022: £7.3
million) reflecting increased investment to scale Blink and restructuring
costs as closure activities progress in Spain and the UK, including the
UK-based IT function. There is a net working capital benefit in the year of
£7.8 million which in part reflects restructuring costs and onerous contract
provisions that have been recognised but not yet paid. Tax paid has decreased
to £1.9 million (2022: £3.5 million) which is due to lower taxable profits
in India and a reduction in overseas dividends to the UK which typically
suffer withholding taxes.
The Group had cash balances of £19.0 million; however, cash is expected to
progressively reduce in the medium-term as the UK is run-off, other CMP
liabilities are settled and investment continues to scale Blink. In addition,
as the Group's growth has shifted to overseas markets a substantial amount of
the cash balance is generated in India and Turkey. As a result, not all of our
cash resources are immediately available for distribution or on demand for
working capital purposes around the Group. At 31 December 2023, approximately
40% of the cash balances were considered 'restricted'. There are also tax
costs associated with returning overseas funds to the UK so cash planning is
increasingly crucial as the Group's cash resources reduce over the
medium-term.
In June 2023, the Group renewed its £5.0 million revolving credit facility
(RCF) for a further three-year term to August 2026. The RCF renewal, which is
on improved terms, is a positive endorsement of the Group's strategic
direction and will provide cash flow flexibility as the business progresses
through the CMP. The RCF is currently undrawn.
Events after the balance sheet date
On 15 February 2024, the Group disposed of its 13.3% (fully diluted basis)
shareholding in KYND for a cash consideration of £2.6 million. The investment
in KYND was non-core to the Group. The transaction is another positive step in
the simplification of the Group and will provide additional cash resources to
support the CMP and investment in Blink.
David Bowling
Chief Financial Officer
25 March 2024
Consolidated income statement
For the year ended 31 December 2023
2023 2022
Core Legacy Total Core Legacy Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 4 181,010 12,026 193,036 154,267 15,516 169,783
Cost of sales (159,031) (3,060) (162,091) (133,924) (5,087) (139,011)
Gross profit 21,979 8,966 30,945 20,343 10,429 30,772
Administrative expenses (22,739) (14,608) (37,347) (18,469) (9,689) (28,158)
Operating (loss)/profit (760) (5,642) (6,402) 1,874 740 2,614
Analysed as:
EBITDA 4 3,013 1,770 4,783 4,928 1,925 6,853
Depreciation and amortisation (2,408) (362) (2,770) (2,055) (452) (2,507)
Exceptional items 5 (1,365) (7,050) (8,415) (999) (733) (1,732)
Investment revenues 521 228 749 370 116 486
Finance costs (471) (15) (486) (630) (26) (656)
(Loss)/profit before taxation (710) (5,429) (6,139) 1,614 830 2,444
Taxation 6 (1,761) (199) (1,960) (2,000) (343) (2,343)
(Loss)/profit for the year from continuing operations (2,471) (386)
(5,628) (8,099) 487 101
Discontinued operations
Profit for the year from discontinued operations
- - - - 676 676
(Loss)/profit for the year (2,471) (5,628) (8,099) (386) 1,163 777
Attributable to:
Equity holders of the Company (3,027) (5,628) (8,655) (640) 1,163 523
Non-controlling interests 556 - 556 254 - 254
(2,471) (5,628) (8,099) (386) 1,163 777
Basic and diluted (loss)/earnings per share Core Total
pence
pence Legacy Total Core Legacy
pence pence pence pence
Continuing operations 7 (34.22) (63.62) (97.84) (7.24) 5.51 (1.73)
Discontinued operations 7 - - - - 7.64 7.64
(34.22) (63.62) (97.84) (7.24) 13.15 5.91
Consolidated statement of comprehensive income
For the year ended 31 December 2023
2023 2022
£'000 £'000
(Loss)/profit for the year (8,099) 777
Items that may be reclassified subsequently to profit or loss:
Fair value gain on equity investment 610 152
Exchange differences on translation of foreign operations (696) (2,052)
Exchange differences reclassified on disposal of foreign operations 68 1,093
Other comprehensive expense for the year net of taxation (18) (807)
Total comprehensive expense for the year (8,117) (30)
Attributable to:
Equity holders of the Company (8,571) (286)
Non-controlling interests 454 256
(8,117) (30)
Consolidated balance sheet
As at 31 December
2023
2023 2022
Note £'000 £'000
Non-current assets
Goodwill 513 544
Other intangible assets 8 6,619 4,710
Property, plant and equipment 932 1,243
Right-of-use assets 3,122 3,936
Equity investment - 2,041
Deferred tax assets 693 230
Contract assets 208 275
12,087 12,979
Current assets
Inventories 9 87
Contract assets 6,716 5,764
Trade and other receivables 13,761 19,841
Cash and cash equivalents 19,001 20,984
39,487 46,676
Assets classified as held for sale 2,631 -
42,118 46,676
Total assets 54,205 59,655
Current liabilities
Borrowings - 23
Income tax liabilities (1,004) (1,195)
Trade and other payables (25,696) (26,210)
Provisions (1,877) (224)
Lease liabilities (907) (966)
Contract liabilities (11,581) (11,238)
(41,065) (39,810)
Net current assets 1,053 6,866
Non-current liabilities
Borrowings 105 -
Deferred tax liabilities (646) (702)
Provisions (1,588) (145)
Lease liabilities (2,892) (3,752)
Contract liabilities (604) (773)
(5,625) (5,372)
Total liabilities (46,690) (45,182)
Net assets 7,515 14,473
Equity
Share capital 9 24,257 24,256
Share premium account 45,225 45,225
Merger reserve (100,399) (100,399)
Translation reserve (1,351) (825)
ESOP reserve 18,334 17,212
Retained earnings 19,192 27,201
Equity attributable to equity holders of the Company 5,258 12,670
Non-controlling interests 2,257 1,803
Total equity 7,515 14,473
Consolidated statement of changes in equity
For the year ended 31 December 2023
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 2022 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)/income for the year - - - (961) - 152 (809) 2 (807)
Total comprehensive (expense)/income for the year - - - (961) - 675 (286) 256 (30)
Equity-settled share-based payment credit 10 - - - - (206) - (206) - (206)
Exercise of share options 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
(Loss)/profit for the year - - - - - (8,655) (8,655) 556 (8,099)
Other comprehensive (expense)/income for the year - - - (526) - 610 84 (102) (18)
Total comprehensive (expense)/income for the year - - - (526) - (8,045) (8,571) 454 (8,117)
Equity-settled share-based payment charge 10 - - - - 1,122 - 1,122 - 1,122
Exercise of share options 9 1 - - - - (1) - - -
Effects of hyperinflation - - - - - 37 37 - 37
At 31 December 2023 24,257 45,225 (100,399) (1,351) 18,334 19,192 5,258 2,257 7,515
Consolidated cash flow statement
For the year ended 31 December 2023
2023 2022
Note £'000 £'000
Net cash from operating activities 11 3,610 3,822
Investing activities
Interest received 749 490
Purchases of property, plant and equipment (335) (526)
Purchases of intangible assets 8 (3,551) (2,194)
Costs associated with disposal of discontinued operations - (128)
Cash disposed of with discontinued operations - (823)
Net cash used in investing activities (3,137) (3,181)
Financing activities
Dividends paid - (663)
Costs of refinancing the bank facility (128) -
Repayment of the lease liabilities (1,396) (1,388)
Interest paid (69) (75)
Issue of ordinary share capital 9 - 6
Net cash used in financing activities (1,593) (2,120)
Net decrease in cash and cash equivalents (1,120) (1,479)
Effect of foreign exchange rate changes (863) 54
Cash and cash equivalents at 1 January 20,984 22,409
Cash and cash equivalents at 31 December 19,001 20,984
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 2024.
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 December 2023 or 31
December 2022 but is derived from the 2023 financial statements. Statutory
financial statements for 2022 for the Company prepared under UK IAS have been
delivered to the Registrar of Companies and those for 2023 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 2023 financial statements were approved by the Board of Directors on 25
March 2024.
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 1 Disclosure of accounting policies
IAS 8 Definition of accounting estimates
IAS 12 Deferred tax related to assets and liabilities arising from a single
transaction
IFRS 17 Insurance contracts
IFRS 17 is applicable for the first time in the current period. The Group's
insurance operations are not material and as a result, no adjustment has been
made for this accounting standard change as the valuation of the remaining
insurance contract balances in the Group's consolidated financial statements
will be materially the same under both IFRS 17 and IFRS 4.
Amendments to IAS 1, IAS 8 and IAS 12 have not had a material impact to the
Group on adoption.
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.
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.
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 are reflected
through the consolidated income statement.
Onerous contract provisions
The Group has recognised substantial provisions for onerous contracts in the
current year. These represent a best estimate as at the balance sheet date of
the costs to deliver contractual commitments over the remaining term of these
contracts, which is up to 36 months from the balance sheet date. These
estimates are reviewed at every reporting date; however, there are a number of
factors which could influence the amount required for these provisions,
including policy cancellations and staff costs.
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.
The Group is 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)
Segment revenue and performance for the current and comparative periods are
presented below:
Year ended 31 December 2023 India Turkey Blink Central Functions Legacy Total
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue - external sales 175,519 4,675 816 - 12,026 193,036
Cost of sales (157,118) (1,834) (79) - (3,060) (162,091)
Gross profit 18,401 2,841 737 - 8,966 30,945
Administrative expenses excluding depreciation, amortisation and exceptional (10,353) (1,689) (2,529) (26,162)
items
(4,395) (7,196)
EBITDA 8,048 1,152 (1,792) (4,395) 1,770 4,783
Depreciation and amortisation (1,852) (139) (162) (255) (362) (2,770)
Exceptional items (note 5) - (223) - (1,142) (7,050) (8,415)
Operating profit/(loss) 6,196 790 (1,954) (5,792) (5,642) (6,402)
Investment revenues 749
Finance costs (486)
Loss before taxation (6,139)
Taxation (1,960)
Loss for the year (8,099)
Year ended 31 December 2022 India Turkey Blink Central Total
£'000 £'000 £'000 Functions Legacy £'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
Segment assets
2023 2022
£'000 £'000
India 36,677 38,613
Turkey 2,293 1,665
Blink 873 636
Central Functions 958 5,092
Legacy 9,567 10,834
Total segment assets 50,368 56,840
Unallocated assets 1,206 2,815
Assets classified as held for sale 2,631 -
Consolidated total assets 54,205 59,655
Goodwill, deferred tax and equity investment (classified as held for sale in
the year ended 31 December 2023) are not allocated to segments.
Capital expenditure
Intangible assets Property, plant and equipment Right-of-use assets
2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
India 2,970 1,814 157 277 87 698
Turkey 14 36 105 106 294 98
Blink 251 158 27 3 - -
Central Functions 138 14 19 140 - -
Legacy 178 172 27 - 6 13
Total additions 3,551 2,194 335 526 387 809
Revenues from major products
Major product streams are disclosed on the basis monitored by senior
management.
2023 2022
£'000
£'000
Continuing operations
My Finances 43,519 39,239
My Tech 49,836 39,059
My Health 59,298 46,614
My Home 18,605 22,301
My Digital Life 5,690 5,064
My Travel 608 448
Other 15,480 17,058
Revenue from continuing operations 193,036 169,783
Revenue from discontinued operations - 922
Total revenue 193,036 170,705
'Other' revenue predominantly represents revenue from Businesses Process
Management (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:
2023 2022
£'000
£'000
Continuing operations
At a point in time 170,368 150,266
Over time 22,668 19,517
Revenue from continuing operations 193,036 169,783
Discontinued operations
At a point in time - 657
Over time - 265
Revenue from discontinued operations - 922
Total revenue 193,036 170,705
Geographical information
The Group operates across a 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
2023 2022 2023 2022
£'000
£'000 £'000 £'000
India 175,519 150,613 9,867 9,073
UK 7,283 8,481 35 375
Turkey 4,675 3,212 584 244
Spain 3,127 4,960 - 204
Other 2,432 2,517 908 812
193,036 169,783 11,394 10,708
Discontinued operations - 922 - -
193,036 170,705 11,394 10,708
Information about major customers
Revenue from the customers of one business partner in the Group's Indian
segment represented approximately £134,637,000 (2022: £110,128,000) 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 and discontinued operations, as well as
the associated taxation.
2023 2022
Note Core Legacy Total Core Legacy Total
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Restructuring and closure costs 299 3,484 3,783 480 332 812
Onerous contract provision - 3,388 3,388 - 248 248
DBP charges 10 1,066 - 1,066 - - -
IT asset impairment 8 - 178 178 - 153 153
Globiva compensation payment - - - 519 - 519
Exceptional charge included in profit before tax 1,365 7,050 8,415 999 733 1,732
Tax on exceptional items (56) (196) (252) (131) (61) (192)
Exceptional charge after tax for continuing operations 7 1,309 6,854 8,163 868 672 1,540
Discontinued operations
Exceptional gain from discontinued operations 7 - - - - (535) (535)
1,309 6,854 8,163 868 137 1,005
Exceptional costs in the year, relate to the Group's strategy to exit its
Legacy markets and focus on its Core operations.
Restructuring and closure costs total £3,783,000 (2022: £812,000) 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. Restructuring costs include necessary
retention provisions as part of the closure process. Core restructuring costs
also includes settlement costs relating to Turkey. Prior year restructuring
costs related to Legacy operations, as well as settlement costs related to the
departure of the Group CEO.
The onerous contract provisions of £3,388,000 (2022: £248,000) relate to UK
Legacy, Spain and Portugal and the decommissioning of the Group's legacy IT
platforms. In the prior year, onerous contracts provisions were recognised
relating to the UK MGA. All onerous contract provisions recognised relate to
the costs required to fulfil and exit contractual commitments above the
associated revenue receivable. This includes costs to 2027 and is held as a
provision at the balance sheet date.
DBP charges of £1,066,000 (2022: £nil) relate to a share-based retention
plan for the EMC whereby participants agreed to defer a portion of their 2022
annual bonus in return for share options. The plan was established to
recognise the importance of having a settled and aligned EMC that is engaged
and retained for the duration of the CMP.
The impairment of the IT assets of £178,000 (2022: £153,000) relates to the
UK Legacy business. Following the decision to exit the UK Legacy business, a
value in use calculation was performed leading to recognition of an
impairment. The prior year related to an impairment of assets in the UK MGA
business.
In the prior year, the Globiva compensation payment represented a one-time
additional management compensation payment to the Globiva founders following a
review of commitments in the original Shareholder Agreement.
6. Taxation
2023 2022
£'000 £'000
Continuing operations
Current tax charge/(credit):
UK corporation tax - -
Foreign tax 2,504 2,679
Adjustments in respect of prior years 23 (140)
Current tax relating to continuing operations 2,527 2,539
Deferred tax (credit)/charge:
Origination and reversal of timing differences (151) 94
Impact of change in tax rates (35) (8)
Adjustments in respect of prior years (381) (282)
Deferred tax relating to continuing operations (567) (196)
Tax charge relating to continuing operations 1,960 2,343
Discontinued operations
Tax charge relating to discontinued operations - -
Total tax charge 1,960 2,343
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:
2023 2022
£'000 £'000
Continuing operations
Core:
India 1,485 1,888
Turkey 370 316
Blink (94) -
Central Functions - (204)
Total Core 1,761 2,000
Legacy 199 343
Tax charge for continuing operations 1,960 2,343
Discontinued operations
Tax charge for discontinued operations - -
1,960 2,343
Overall, UK profits chargeable to corporation tax are offset by group relief
surrendered from fellow UK entities.
UK corporation tax is calculated at 23.5% (blended rate of 19% to March 2023
increasing to 25% from April 2023) (2022: 19%) of the estimated assessable
profit for the year. Deferred tax is provided at the rate at 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 (2022: 25.2%),
Spain 25% (2022: 25%), Turkey 25% (2022: 23%), and Italy 27.5% (2022:
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 (loss)/profit per the
consolidated income statement as follows:
2023 2022
£'000 £'000
(Loss)/profit before tax from continuing operations (6,139) 2,444
Effects of:
Tax at the UK corporation tax rate of 23.5% (2022: 19%) (1,443) 464
Unprovided deferred tax arising on losses(1) 3,016 796
Other movement in unprovided deferred tax - 124
Recurring expenses not deductible for tax (179) 241
One-off costs not deductible for tax - 32
Provision for withholding tax on future distributions(2) 654 621
Other expense not chargeable for tax purposes (85) 96
Higher tax rates on overseas earnings(3) 123 403
Adjustments in respect of prior years (358) (422)
Impact of change in future tax rates on deferred tax (35) (8)
Deficit of share option charge compared to tax allowable amount 267 (4)
Tax charged to income statement for continuing operations 1,960 2,343
Tax charged to the income statement for discontinued operations - -
1,960 2,343
Effective tax charge
The net tax charge of £1,960,000 on a loss before tax from continuing
operations of £6,139,000 gives an effective tax rate (ETR) of negative 32%
(2022: positive 96%) which is lower than the standard rate of 23.5%.
Exceptional items of £8,415,000 in the current year have led to an overall
loss before tax; however, tax is still payable in our profitable Indian and
Turkish markets, resulting in a negative ETR. Further 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 23.5%.
The Group's ETR 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 ETR 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 to reserves during the year was as follows:
2023 2022
£'000 £'000
Deferred tax
Timing differences of equity-settled share-based charge - 9
Total deferred tax charge and total tax charged to reserves - 9
7. (Loss)/earnings per share
Basic and diluted (loss)/earnings per share have been calculated in accordance
with IAS 33 Earnings per Share. Underlying (loss)/earnings per share have also
been presented in order to give a better understanding of the performance of
the business. In accordance with IAS 33, potential ordinary shares are only
considered dilutive when their conversion would decrease the earnings per
share or increase the loss per share attributable to equity holders.
(Loss)/profit
Continuing operations Discontinued operations Total
2023 2022 2023 2022 2023 2022
£'000
£'000
£'000
£'000
£'000 £'000
(Loss)/profit for the purposes of basic and diluted (loss)/earnings per share (8,655) (153) - 676 (8,655) 523
Exceptional items (net of tax) 8,163 1,350 - (535) 8,163 815
(Loss)/profit for the purposes of underlying basic and diluted (loss)/earnings (492) 1,197 - 141 (492) 1,338
per share
(Loss)/profit attributable to Core and Legacy
2023 2022
Core Continuing operations Legacy Continuing operations
£'000
£'000
£'000 £'000
Legacy Core
£'000
£'000
(Loss)/profit for the purposes of basic and diluted (loss)/earnings per share (3,027) (5,628) (8,655) (640) 487 (153)
Exceptional items (net of tax) 1,309 6,854 8,163 678 672 1,350
(Loss)/profit for the purposes of underlying basic and diluted (loss)/earnings (1,718) 1,226 (492) 38 1,159 1,197
per share
The table above does not include discontinued operations.
Number of shares
2023 2022
Number Number
(thousands) (thousands)
Weighted average number of ordinary shares for the purposes of basic 8,846 8,844
(loss)/earnings per share and basic underlying (loss)/earnings per share
Effect of dilutive ordinary shares: share options 295 30
Weighted average number of ordinary shares for the purposes of diluted 9,141 8,874
(loss)/earnings per share and diluted underlying (loss)/earnings per share
Continuing operations Discontinued operations Total
2023 2022 2023 2022 2023 2022
pence pence pence pence pence pence
Basic and diluted (loss)/earnings per share (97.84) (1.73) - 7.64 (97.84) 5.91
Basic underlying (loss)/earnings per share (5.56) 13.53 - 1.59 (5.56) 15.12
Diluted underlying (loss)/earnings per share (5.56) 13.49 - 1.59 (5.56) 15.08
2023 2022
Core Legacy Continuing operations Core Legacy Continuing operations
pence pence pence pence pence pence
Basic and diluted (loss)/earnings per share (34.22) (63.62) (97.84) (7.24) 5.51 (1.73)
Basic underlying (loss)/earnings per share (19.42) 13.86 (5.56) 0.43 13.10 13.53
Diluted underlying (loss)/earnings per share (19.42) 13.86 (5.56) 0.43 13.06 13.49
The Group has 171,650,000 (2022: 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. Other intangible assets
Business partner relationships Internally generated software Externally acquired software Total
£'000
£'000
£'000
£'000
Cost:
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 1 January 2023 644 6,982 2,977 10,603
Additions - 3,221 330 3,551
Disposals - (20) (824) (844)
Hyper-inflation adjustment - - 17 17
Exchange adjustments - (354) (71) (425)
At 31 December 2023 644 9,829 2,429 12,902
Accumulated amortisation:
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 1 January 2023 544 2,617 2,732 5,893
Provided during the year 66 949 173 1,188
Disposals - (11) (802) (813)
Impairment - 171 7 178
Hyper-inflation adjustment - - 11 11
Exchange adjustments (15) (102) (57) (174)
At 31 December 2023 595 3,624 2,064 6,283
Carrying amount:
At 31 December 2022 100 4,365 245 4,710
At 31 December 2023 49 6,205 365 6,619
Amortisation of intangible assets totalling £1,188,000 (2022: £869,000) is
recognised through administrative expenses in the consolidated income
statement.
Internally generated software additions of £3,221,000 (2022: £1,960,000)
reflect the capitalisation of staff and contractor costs in IT development
projects.
Internally generated software includes £1,205,000 (2022: £3,718,000)
relating to assets in development which are not yet operational and are not
amortised. The assets held at 31 December 2023 are expected to become
operational in Q2 2024.
9. Share capital
Ordinary Deferred Total
shares of shares of (thousands)
£1 each 9 pence
(thousands) each
(thousands)
Called-up and allotted
At 1 January 2023 8,846 171,650 180,496
Issue of shares in connection with:
Exercise of share options 1 - 1
At 31 December 2023 8,847 171,650 180,497
Ordinary Deferred Total
shares of shares of £'000
£1 each 9 pence
£'000 each
£'000
Called-up and allotted
At 1 January 2023 8,843 15,413 24,256
Issue of shares in connection with:
Exercise of share options 1 - 1
At 31 December 2023 8,844 15,413 24,257
Share capital at 31 December 2023 is £24,257,000 (2022: £24,256,000). To
satisfy share option exercises in the year the Company has issued 1,100 £1
ordinary shares for a total equity value of £1,000 and £nil cash
consideration.
Of the 8,847,145 (2022: 8,846,045) ordinary shares in issue at 31 December
2023, 8,842,145 are fully paid (2022: 8,841,045) and 5,000 (2022: 5,000) are
partly paid.
10. Share based payments
Equity-settled share-based payments
Current share plans
Share-based payment charges comprise DBP charges of £1,066,000 (2022: £nil)
and 2023 LTIP charges of £56,000 (2022: £nil). These costs are disclosed
within administrative expenses, although the DBP share-based payment charge is
not included within EBITDA. There have been 635,000 options granted in the
current year as part of the DBP and 1,092,000 options granted as part of the
2023 LTIP; neither plan was in operation in the prior year.
2023 2022
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
(thousands) price (thousands) price
(£) (£)
DBP
Outstanding at 1 January - - - -
Granted during the year 635 - - -
Outstanding at 31 December 635 - - -
Exercisable at 31 December 317 - - -
2023 LTIP
Outstanding at 1 January - - - -
Granted during the year 1,092 - - -
Outstanding at 31 December 1,092 - - -
Exercisable at 31 December - - - -
Nil-cost options and conditional shares granted under the DBP will vest in two
tranches with 50% vesting after 0.75 years and the other 50% after 1.75 years.
The options will lapse if not exercised within ten years of grant and will
lapse if option holders cease to be employed by the Group. Vesting of DBP
options and shares carries no performance conditions.
The options outstanding in the DBP have a remaining contractual life of 0.5
years (2022: n/a).
Nil-cost options and conditional shares granted under the 2023 LTIP are not
linked to a time-based schedule but will vest subject to certain performance
conditions, as follows:
Tranche Share options (number) Share price target* Maximum vesting period
1 168,073 £3.70 3 years
2 252,114 £4.75 4 years
3 420,185 £6.00 5 years
Super-Max 252,114 £9.00 6 years
* The share options will vest if the average closing share price of a share on
AIM over a period of 90 consecutive calendar days equals or exceeds the share
price target.
The options will also lapse if not exercised within ten years of grant and
will lapse if option holders cease to be employed by the Group.
The options outstanding in the 2023 LTIP have a remaining contractual life of
4.4 years (2022: n/a).
The principal assumptions underlying the valuation of the options granted
during the year at the date of grant are as follows:
DBP 2023 LTIP
Tranche 1 Tranche 2 Tranche 1 Tranche 2 Tranche 3 Super-Max
Valuation model Black Scholes Monte Carlo
Weighted average share price £2.35 £1.35
Weighted average exercise price - -
Expected volatility n/a 60%
Expected life 0.75 years 1.75 years 2.17 years 2.92 years 3.67 years 4.50 years
Risk-free rate n/a 4.41%
Dividend yield n/a 0%
The aggregate estimated fair value of the options and shares granted in the
current year under the DBP was £1,493,000 and under the 2023 LTIP was
£723,000.
Legacy share plans
Administrative expenses include no charge (2022: £206,000 credit) arising
from the 2016 LTIP and the MSP. Both the 2016 LTIP and MSP are closed and no
further awards will be made under these plans. There were no options granted
in either the current or prior year under either plan.
Details of share options outstanding during the period under these plans are
as follows:
2023 2022
Number Weighted Number Weighted
of share average of share average
options exercise options exercise
(thousands) price (thousands) price
(£) (£)
2016 LTIP
Outstanding at 1 January 3 - 138 -
Exercised during the year (1) - (17) -
Lapsed during the year (1) - (13) -
Forfeited during the year - - (105) -
Outstanding at 31 December 1 - 3 -
Exercisable at 31 December 1 - 3 -
MSP
Outstanding at 1 January 2 1.00 8 1.00
Exercised during the year - 1.00 (6) 1.00
Lapsed during the year (2) 1.00 - 1.00
Outstanding at 31 December - n/a 2 1.00
Exercisable at 31 December - n/a 2 1.00
All outstanding nil-cost options and conditional shares granted under the 2016
LTIP have vested. These options will lapse if not exercised within ten years
of grant and will lapse if option holders cease to be employed by the Group.
There have been 1,000 (2022: 17,000) 2016 LTIP options exercised in the
current year.
The options outstanding in the 2016 LTIP had no remaining contractual life in
either the current or prior year.
There are no outstanding options remaining under the MSP.
Cash-settled share-based payments
CAP
The CAP is a cash-based plan targeted at certain EMC members. The maximum
aggregate amount that can be paid under the CAP is £1,500,000.
Tranche CAP amount Share price target Maximum vesting period
1 £150,000 £3.70 3 years
2 £600,000 £4.75 4 years
3 £750,000 £6.00 5 years
The performance conditions associated with the CAP are the same as those under
Tranches 1, 2, and 3 of the 2023 LTIP.
The Group has recognised CAP charges in the year of £15,000 (2022: £nil)
which is disclosed within administrative expenses. The Group has recorded
liabilities for the CAP of £15,000 (2022: £nil) which are included in trade
creditors and other payables.
2016 LTIP
The Group granted certain employees with notional share options that require
the Group to pay the intrinsic value of the notional share to the employee
at the date of exercise. The notional share options have the same requirements
and conditions as the 2016 LTIP. No further awards will be made under the 2016
LTIP. The Group has recorded a total credit in relation to cash-settled awards
in the year of £3,000 (2022: £40,000) which is disclosed within
administrative expenses. The Group has recorded liabilities for its
cash-settled awards of £7,000 (2022: £10,000) which are included in trade
creditors and other payables.
11. Reconciliation of operating cash flows
2023 2022
£'000 £'000
(Loss)/profit for the year (8,099) 777
Adjustments for:
Depreciation and amortisation 2,770 2,509
Share-based payment charge/(credit) 1,134 (246)
Impairment loss on intangible assets 178 187
Impairment loss on property, plant and equipment 40 -
Loss on disposal of property, plant and equipment 24 15
Loss on disposal of intangible assets 31 5
Profit from discontinued operations - (535)
Effects of hyperinflation (82) 86
Investment revenues (749) (490)
Finance costs 486 709
Income tax charge 1,960 2,343
Operating cash flows before movements in working capital (2,307) 5,360
Decrease in inventories 78 15
Increase in contract assets (1,259) (1,481)
Decrease/(increase) in receivables 4,270 (6,232)
Increase in payables 832 7,547
Increase in contract liabilities 833 1,655
(Decrease)/increase in insurance liabilities (6) 83
Increase in provisions 3,096 369
Cash from operations 5,537 7,316
Income taxes paid (1,927) (3,494)
Net cash from operating activities 3,610 3,822
Reconciliation of net funds
At Cash flow Foreign exchange and other non-cash movements At
1 January £'000 £'000 31 December
2023 2023
£'000 £'000
Net cash per cash flow statement 20,984 (1,120) (863) 19,001
Financing activities:
Lease liabilities (4,718) 1,396 (477) (3,799)
Borrowings due outside of one year:
- Unamortised issue costs 23 128 (46) 105
Total movement from financing activities (4,695) 1,524 (523) (3,694)
Total net funds 16,289 404 (1,386) 15,307
12. Related party transactions
Transactions with associated parties
In the year, the Group incurred fees of £10,000 plus VAT (2022: £19,000) for
services rendered from KYND, which were payable under 14-day credit terms. The
creditor balance at the year end was £1,000 (2022: £2,000).
Transactions with related parties
Globiva
In November 2023, the Group announced its planned divestment of Globiva, an
Indian Business Processes Management company. The Group currently holds a 51%
majority investment. The disposal has been agreed at approximately £5.1
million (subject to currency fluctuations), for the Group's 51% majority
interest through the amendment of the existing Shareholder Agreement, with the
original Globiva Founders - who currently own the remaining 49% investment.
The transaction will provide an exit path for the Group at an acceptable
return and will provide additional cash flows for the Group.
The sale and transfer of ownership will be conducted over a three-year period
concluding in Q1 2027. This is based on a blended 7.1x multiple of forecast
EBITDA (Indian Accounting Standards) for 2023, 2024 and 2025 calendar years.
The Group's shareholding is expected to reduce to 35% in Q1 2025, 13% in Q1
2026 and 0% in Q1 2027. This will be performed through Globiva operating a
share buy-back mechanism.
The transaction constitutes a related party transaction, pursuant to Rule 13
of the AIM Rules for Companies, as the Globiva Founders are Directors of
Globiva. The Directors consider, having consulted with the Company's nominated
adviser, Liberum Capital Limited, 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:
2023 2022
£'000 £'000
Short-term employee benefits 1,412 1,101
Post-employment benefits 20 27
Termination benefits - 300
Share-based payments 593 (206)
2,025 1,222
13. Events after the balance sheet date
On 15 February 2024, the Group disposed of its 13.3% (fully diluted basis)
shareholding in KYND for cash consideration of £2.6 million. The investment
in KYND was considered non-core to the Group. The transaction will provide
additional cash resources to support the CMP and investment in Blink.
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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