REG - CPPGroup Plc - Half-year Report <Origin Href="QuoteRef">CPPG.L</Origin> - Part 1

CPPGroupAnnouncement

19/08/2016 13:40

RNS Number : 4721H
CPPGroup Plc
18 August 2016
CPPGROUP PLC
18 AUGUST 2016
HALF YEAR REPORT
FOR THE SIX MONTHS ENDED 30 JUNE 2016
CPPGroup Plc- Half year report for the six months ended 30 June 2016
CPPGroup Plc (CPP or the Group), the international assistance business, today announces its results for the six months ended 30 June 2016.
Operational highlights
 New Chief Executive Officer (Jason Walsh), new Executive Director (Justine Shaw) and new Non-Executive Directors (Sir Richard Lapthorne, Mark Hamlin and Nick Cooper) appointed
 Strategic priorities identified to drive sustainable focused growth
 New product development well advanced; with OwlDetect, a new global cybersecurity proposition, targeted for launch in September 2016
 Commenced a review of options to focus on development of a cost effective IT platform more suited to the Group's needs
 Regulatory fine cleared, with the final scheduled instalment paid in July 2016
Financial highlights
 Improved underlying operating profit from continuing operations of 3.6 million (H1 2015: 1.9 million) 
 Group revenue from continuing operations of 35.4 million (H1 2015: 38.9 million), which includes 5.6 million (H1 2015: 2.8 million) from India 
 The Group's annual renewal rate has remained stable at 72.9% (31 December 2015: 72.9%); an endorsement of the value customers continue to place on our products 
 Live policy base returns to growth at 3.9 million (31 December 2015: 3.8 million); a significant milestone representing the first period of increased policy numbers since the end of 2011
Jason Walsh, Chief Executive Officer, commented:
"CPP delivered a solid underlying performance in the first half of the year, which demonstrated the resilience of the core business. Since I was appointed CEO in May we have been developing a strategic plan that will take this core strength and build on it and return the business to sustainable growth. We are actively developing new products and are very encouraged by the global potential for OwlDetect, our cybersecurity alert service, which we plan to launch next month.
Looking ahead it is vital that we return CPP to revenue growth, which will be supported by new product development. For this reason we were very encouraged by the rise in customer numbers to 3.9 million during the first half of the year, although we believe that we are still only scratching the surface of the potential market for our services. Meanwhile we continue to address our cost base, to ensure that the Group has the appropriate resources and tools to support its planned development."
Highlights - continuing operations
Six months ended 30 June 2016
(Unaudited)
Six months ended 30 June 2015
(Unaudited)
Revenue ( millions)
35.4
38.9
Operating profit ( millions)
 Reported
2.6
20.5
 Underlying1
3.6
1.9 
Profit for the period ( millions)2
2.3
17.1
Basic earnings per share (pence)
0.27
2.48
Cash used in operations ( millions)3
(5.6)
(4.0)
Net assets ( millions)
12.9
5.3
Net funds ( millions)4
29.5
36.9
1. Underlying operating profit excludes an exceptional item of 0.5 million (H1 2015: 18.9 million credit) and Matching Share Plan charges of 0.5 million (H1 2015: 0.3 million). Further detail of the exceptional item is provided in note 4 to the condensed consolidated interim financial statements.
2. Profit for the period includes profit after tax from continuing and discontinued operations.
3. Cash used in operations includes cash flows from continuing and discontinued operations. Cash flows include 6.4 million payment of the regulatory fine (H1 2015: nil).
4. Net funds comprise cash and cash equivalents of 33.2 million (H1 2015: 38.0 million) partially offset by borrowings of 3.7 million (H1 2015: 1.1 million). Cash and cash equivalents includes cash held in the UK's regulated entities of 25.4 million (H1 2015: 33.3 million) which is either for regulatory purposes or restricted by the terms of the Voluntary Variation of Permissions (VVOP). Whilst not available to the wider Group, the restricted cash is available to the regulated entity in which it exists including for operational and residual redress purposes.
Enquiries
CPPGroup Plc
Jason Walsh, Chief Executive Officer
Michael Corcoran, Chief Financial Officer
Tel: +44 (0)1904 544500
Nominated Adviser and Broker
Investec Bank plc: Sara Hale, James Rudd, Carlton Nelson
Tel: +44 (0)20 7597 4000
Media
Maitland: Neil Bennett, Daniel Yea
Tel: +44 (0)20 7379 5151
About CPP
CPP provides a range of assistance based services to customers in the UK and Ireland and in a number of international markets across Asia, Europe and Latin America. The Company's core propositions provide peace of mind for customers covering a range of areas including lost and stolen credit cards, identity theft, insurance of mobile devices, and passport assistance.
For more information on CPP visit www.cppgroupplc.com
REGISTERED OFFICE
CPPGroup Plc 
Holgate Park
York
YO26 4GA
Registered number: 07151159
CHIEF EXECUTIVE'SSTATEMENT
Introductionand first impressions
My appointment as CEO on 16 May 2016, followed a period of uncertainty triggered on 18 March 2016 by a requisition made by Schroder Investment Management Limited, one of the Group's major shareholders, to replace the former Non-Executive Directors and the CEO. The general meeting that followed in early May resulted in the resolutions being passed, leading to my appointment and that of the new Non-Executive Directors. 
An early assessment has been made to understand the immediate issues and priorities that the business faced and has had to deal with and focus on.The four immediate priorities for the business are:
 New revenue and customer volume growth;
 Investing in newproduct development,innovationand branding;
 Designing an appropriate organisation structure with an appropriate IT platform and focused supporting resources; and
 Promoting colleagueengagementand development.
The executive team is strong and ownership of these priorities is allocated to members of the team who are directly accountable for their delivery. Colleague determination, morale and quality is evident and are critical ingredients to making a success ofthebusiness. This is demonstrated right across the Group with some of our overseas businesses showing some great growth and new business opportunities.

New revenue and customer volume growth
This is fundamental to the success of the Group and we are being innovative in how this will be achieved by deviating from our standard models. Upfront marketing investment to support direct to consumer channels in addition to traditional business models are part of our new positioning which is serving to open up additional opportunities. There are exciting opportunities in our Asian markets with more 'traditional' products and services in addition to the positive response received across a large number of our markets towards our new product development. Customer volume will become an important metric as we open up our products to these new distribution strategies.
Investing in new product development, innovation and branding
New product development and innovation is being driven by consumer insight and needs. Our newest product, OwlDetect, which is targeted for launch in September 2016, is a service that alerts a customer if any of their personal confidential information is being used or traded on the dark web. We are very excited about the global potential for OwlDetect, which draws on our deep understanding of customer needs and concerns and is absolutely in keeping with CPP's tradition of providing excellent value services that address key issues of consumer concern.
The next range of products currently under development, and soon to be launched, will centre around card loss and repatriation services delivered digitally and represent a real step forward in embracing new technology in an exciting way to deliver familiar products and services. This suite of products has both appeal and applicability across the Group; additionally they are service based propositions meaning that they can be traded in the UK without restriction. We are excited by our new product development pipeline and associated channel development which we believe will position us well to maximise current and future market opportunities. 
In another important step in the redevelopment of the Group, our marketing team have embarked on an exercise to re-brand the business. We have been trading successfully in many markets for a number of years, however, the time is now right to look for a fresh start under a new image, corporate identity and branding.
Designing an appropriate organisation structure 
The Group's structure will be redesigned to allow for a more cost effective and growth orientated operating model. This will look at our UK subsidiaries and how they are set up to promote good governance and customer treatment and also at new company structures, both in the UK and overseas, to promote and grow our new product initiatives.
A significant part of the cost base is invested in our IT platform. We have recently completed an in-depth review of our current IT arrangements and likely needs over the coming years. Following this we have started negotiations with SSP Limited, our current IT development partner, over a number of options that would reduce our IT spend and create a platform more suited to the Group's current and future needs. 
Promoting colleague engagement and development
Our colleagues are central to the business and are at the heart of providing great products and services to our customers. The importance we place in this is demonstrated through making our existing People & Culture Director a Board level executive appointment. This will create greater influence at the right levels to drive colleague engagement and performance.
Operational review
The Group operates internationally in three regions: UK and Ireland which accounts for 45% of Group revenue; Europe and Latin America which accounts for 37% of Group revenue; and Asia Pacific which accounts for 18% of Group revenue. This distribution of revenue across the Group continues to change and due to good growth in our Asia market the dependency on the UK has reduced. 
Our key international markets continue to make progress, particularly in Asia Pacific where we are developing a clear growth strategy supported by established and valued local partnerships. We have commenced a number of new campaigns in the period across key markets such as India, China and Turkey, with further opportunities identified in the majority of our other markets. During the period the UK has also implemented the price reductions and content enhancements indicated in the 2015 Annual Report. Whilst conditions in some of our markets continue to be challenging, the Group's annual renewal rate has remained encouraging at 72.9%, an endorsement of the value that existing customers place in our products. Overall, our net live customer base is growing again and is now 3.9 million.
Financial Review
Summary
Group revenue has declined by 9% for the half year to 35.4 million, continuing to reflect the natural decline in the UK renewal book as new regulated sales remain restricted through the terms of the VVOP. The UK decline has been partly mitigated by significant growth in India, where strong partnerships are emerging and future prospects look good.
Reported operating profit in the first half of the year is 2.6 million (H1 2015: 20.5 million, which included a net benefit of 18.6 million from exceptional items and Matching Share Plan (MSP) charges). Underlying operating profit, which excludes 0.5 million exceptional items and 0.5 million MSP charges, has improved to 3.6 million (H1 2015: 1.9 million). The improvement reflects increased profits in both India and the UK, and whilst trading conditions remain difficult in certain of our European markets, profit performance has remained broadly stable across all our other countries. Following the decision in 2015 to cease commission payments to UK Business Partners where they have no ongoing involvement in the renewal process and do not provide any service to the customer, investment through these ongoing savings has been made during the period into improving the customer value experience through product enhancements and price reductions. Certain Business Partners have acknowledged agreement with the Group's approach to commissions and the principle of it being to the benefit of customers, although the position with the majority of impacted Business Partners is not yet finalised. 
Net finance costs and taxation total 0.3 million resulting in a profit after tax from continuing operations of 2.3 million (H1 2015: 16.9 million). 
There are no discontinued operations in the current period (H1 2015: 0.2 million profit). The Group's reported profit for the period is therefore 2.3 million (H1 2015: 17.1 million). 
Redress
The Group has a remaining customer redress and associated cost provision at 30 June 2016 of 1.3 million, which reflects the Group's current estimate of the cost to complete residual customer redress activity. There has been no additional provision made in the first half of the year. The regulatory fine has been cleared with 6.4 million paid during the period and the final scheduled instalment of 2.1 million paid in July 2016.
Balance sheet, financing and cash flow
The Group has continued to improve its financial position, increasing net assets to 12.9 million (31 December 2015: 10.0 million). 
The Group's borrowing arrangements comprise a 5.0 million revolving credit facility which is available until February 2018, and a commission deferral balance of 1.4 million which is due for repayment in January 2017. At 30 June 2016, 2.5 million of the committed facility was utilised.
The Group's net funds position has decreased to 29.5 million at 30 June 2016 (31 December 2015: 37.6 million) as a result of capital expenditure on the Group's core platform IT system and payment of the regulatory fine. The net funds figure includes 25.4 million cash held in the UK's regulated entities which cannot be distributed to the wider Group without regulator approval. These cash balances are either held for regulatory purposes or are restricted by the terms of the VVOP. The restricted cash is, however, available to use in the regulated entity in which it exists.
Summary andoutlook
The outlook for the business is positive, although we recognise the economic uncertainty currently present in some of our markets following the UK's decision to leave the EU and recent political events in Turkey. Colleague morale is good and all the early indicators are that our focus is on the right priorities to enable us to deliver against our growth objectives.
The Group's expectations for the full year remain unchanged, but we expect to see reduced performance levels in the remainder of the year due to the ongoing decline of the existing UK customer base, the investment in a better customer value experience in the UK and the effect of some delays in the launch of new products. Growth in new customer sales globally is expected to provide improved performance in 2017 and beyond. 
The strategy and longer term viability of the business is based on the successful launch of new products globally and uncertainty in the medium term remains as this work is ongoing. However, new product development and innovation is gathering pace and the business is developing new propositions which will be fit for global application and launch in the coming months. This, coupled with our new branding initiative, will help to create the CPP of the future. 
Jason Walsh
Chief Executive Officer
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
6 months ended 
30 June 2016
6 months ended 
30 June 2015
restated (note 2)
Year ended
31 December 2015
'000
'000
'000
Note
(Unaudited)
(Unaudited)
(Audited)
Continuing operations
Revenue
35,441
38,908
76,771
Cost of sales
(12,230)
(18,073)
(32,346)
Gross profit
23,211
20,835
44,425
Administrative expenses
(20,586)
(383)
(21,443)
Operating profit
2,625
20,452
22,982
Analysed as:
Underlying operating profit
3
3,650
1,867
6,863
Exceptional items
4
(549) 
18,933
17,777
MSP charges
13
(476)
(348)
(1,658)
Investment revenues
120
131
282
Finance costs
(224)
(1,320)
(1,362)
Profit before taxation
2,521
19,263
21,902
Taxation
5
(230)
(2,351)
(3,374)
Profit for the period from continuing operations
2,291
16,912
18,528
Discontinued operations
Profit for the period from discontinued operations
-
169
2,309
Profit for the period attributable to equity holders of the Company
2,291
17,081
20,837
Basic earnings per share:
Continuing operations
7
0.27
2.48
2.42
Discontinued operations
7
-
0.02
0.30
0.27
2.50
2.72
Diluted earnings per share:
Continuing operations
7
0.26
2.46
2.41
Discontinued operations
7
-
0.02
0.30
0.26
2.48
2.71
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months ended 30 June 2016
6 months ended 30 June 2015
Year ended 
31 December 2015
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
Profit for the period
2,291
17,081
20,837
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
(10)
296
271
Other comprehensive (expense)/income for the period net of taxation
(10)
296
271
Total comprehensive income for the period attributable to equity holders of the Company
2,281
17,377
21,108
CONSOLIDATED BALANCE SHEET
30 June 2016
30 June 2015
31 December 2015
'000
'000
'000
Note
(Unaudited)
(Unaudited)
(Audited)
Non-current assets
Intangible assets
8
7,893
2,810
4,825
Property, plant and equipment
8
3,545
3,657
3,502
Deferred tax asset
274
489
652
11,712
6,956
8,979
Current assets
Insurance assets
209
451
317
Inventories
37
89
43
Trade and other receivables
12,281
14,048
12,106
Cash and cash equivalents
9
33,222
38,019
39,810
45,749
52,607
52,276
Total assets
57,461
59,563
61,255
Current liabilities
Insurance liabilities
(970)
(1,651)
(1,189)
Income tax liabilities
(2,317)
(2,923)
(2,483)
Trade and other payables
(35,565)
(41,398)
(42,629)
Borrowings
(1,367)
-
-
Provisions
10
(1,771)
(4,437)
(2,254)
(41,990)
(50,409)
(48,555)
Net current assets
3,759
2,198
3,721
Non-current liabilities
Borrowings
11
(2,384)
(1,130)
(2,191)
Deferred tax liabilities
(141)
(13)
(308)
Trade and other payables
- 
(2,125)
- 
Provisions
10
- 
(606)
(186)
(2,525)
(3,874)
(2,685)
Total liabilities
(44,515)
(54,283)
(51,240)
Net assets
12,946
5,280
10,015
Equity
Share capital
12
23,975
23,879
23,939
Share premium account
45,225
45,109
45,225
Merger reserve
(100,399)
(100,399)
(100,399)
Translation reserve
981
1,016
991
Equalisation reserve
5,328
6,870
6,243
ESOP reserve
13,889
12,223
13,093
Retained earnings
23,947
16,582
20,923
Total equity attributable to equity holders of the Company
12,946
5,280
10,015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital
Share premium account
Merger
reserve
Translation reserve
Equalisation reserve
ESOP reserve
Retained earnings
Total
'000
'000
'000
'000
'000
'000
'000
'000
6 months ended 
30 June 2016 
(Unaudited)
At 1 January 2016
23,939
45,225
(100,399)
991
6,243
13,093
20,923
10,015
Total comprehensive income
- 
- 
- 
(10)
- 
- 
2,291
2,281
Movement on equalisation reserve
- 
- 
- 
- 
(915)
- 
915
- 
Current tax charge on equalisation reserve movement
- 
- 
- 
- 
- 
- 
(182)
(182)
Equity settled share-based payment charge
- 
- 
- 
- 
- 
796
- 
796
Exercise of share options
36
-
- 
- 
- 
-
- 
36
At 30 June 2016
23,975
45,225
(100,399)
981
5,328
13,889
23,947
12,946
6 months ended 
30 June 2015
(Unaudited)
At 1 January 2015
17,126
33,291 
(100,399)
720
7,487
11,891
(991)
(30,875)
Total comprehensive income
- 
- 
- 
296
- 
- 
17,081
17,377
Movement on equalisation reserve
- 
- 
- 
- 
(617)
- 
617
- 
Current tax charge on equalisation reserve movement
- 
- 
- 
- 
- 
- 
(125)
(125)
Equity settled share-based payment charge
- 
- 
- 
- 
- 
332
- 
332
Other ordinary share issues
6,753
11,818
-
-
-
- 
- 
18,571
At 30 June 2015
23,879
45,109
(100,399)
1,016
6,870
12,223
16,582
5,280
Year ended 
31 December 2015
(Audited)
At 1 January 2015
17,126
33,291 
(100,399)
720
7,487
11,891
(991)
(30,875)
Total comprehensive income
- 
- 
- 
271
- 
- 
20,837
21,108
Movement on equalisation reserve
- 
- 
- 
- 
(1,244)
- 
1,244
- 
Current tax charge on equalisation reserve movement
- 
- 
- 
- 
- 
- 
(252)
(252)
Equity settled share-based payment charge
- 
- 
- 
- 
- 
1,466
- 
1,466
Deferred tax on share-based payment charge
- 
- 
- 
- 
- 
-
86
86
Purchase of ordinary shares
-
-
-
-
-
(264)
-
(264)
Exercise of share options
1
(1)
-
-
-
-
(1)
(1)
Other ordinary share issues
6,812
11,935
- 
- 
- 
- 
- 
18,747
At 31 December 2015
23,939
45,225 
(100,399)
991
6,243
13,093
20,923
10,015
CONSOLIDATED CASH FLOW STATEMENT
Note
6 months ended 
30 June 2016
6 months ended 
30 June 2015
Year ended 
31 December 2015
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
Net cash used in operating activities
14
(6,098)
(4,167)
(1,360)
Investing activities
Interest received
120
131
282
Purchases of property, plant and equipment
(186)
(140)
(194)
Purchases of intangible assets
(2,513)
(2,327)
(4,435)
Net cash used in investing activities
(2,579)
(2,336)
(4,347)
Financing activities
Proceeds from/(repayment of) bank loans
1,500
(13,000) 
(12,000) 
Repayment of the Commission Deferral Agreement
- 
(1,304)
(1,304)
Proceeds from the Second Commission Deferral Agreement
-
1,304
1,304
Interest paid
(189)
(882)
(903)
Cost of refinancing
- 
(220) 
(220) 
Cost of compromising the Commission Deferral Agreement
- 
(743)
(743)
Issue of ordinary share capital and associated costs
36
19,069
18,980
Net cash generated by financing activities
1,347
4,224
5,114
Net decrease in cash and cash equivalents
(7,330)
(2,279)
(593)
Effect of foreign exchange rate changes
742
(301)
(196)
Cash and cash equivalents at start of period
39,810
40,599
40,599
Cash and cash equivalents at end of period
33,222
38,019
39,810
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1 General information
The condensed consolidated interim financial statements for the six months ended 30 June 2016 do not constitute statutory accounts as defined under Section 434 of the Companies Act 2006. The financial statements for the year ended 31 December 2015 were approved by the Board on 6 April 2016 and have been delivered to the Registrar of Companies. The Auditor, Deloitte LLP, reported on these financial statements; their report was unqualified, did not contain an emphasis of matter paragraph and did not contain statements under s498 (2) or (3) of the Companies Act 2006. 
2 Accounting policies
Basis of preparation
The unaudited condensed consolidated interim financial statements for the six months ended 30 June 2016 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.
The condensed consolidated interim financial statements should be read in conjunction with the Annual Report and Financial Statements for the year ended 31 December 2015, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The condensed consolidated interim financial statements were approved for release on 17 August 2016.
In preparing the condensed consolidated interim financial statements the comparative amounts for the six months ended 30 June 2015 have been restated to reflect the Airport Angel business as discontinued.
The accounting policies applied are consistent with those used in preparing the statutory financial statements for the year ended 31 December 2015, except for the adoption of new standards and interpretations effective as of 1 January 2016. There are no new IFRSs or IFRICs that are effective for the first time for the six months ended 30 June 2016 which have a material impact on the Group. 
Going concern
The Group has continued to trade profitably in the first half of 2016 and residual redress activities are substantially complete. Whilst there continues to be some uncertainty from medium term trading and strategic risk, the Group's forecasts show that the Group has the necessary resources to trade and operate within the level of its borrowing facilities. 
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.
3 Segmental analysis
Segment revenue and performance for the current and comparative periods have been as follows:
UK and Ireland

Europe and Latin America
Asia
Pacific
Total
Six months ended 30 June 2016 (Unaudited)
'000
'000
'000
'000
Continuing operations
Revenue - external sales
15,482
13,441
6,518
35,441
Regional underlying operating profit
656
2,302
692
3,650
Exceptional items (note 4)
(549)
MSP charges
(476)
Operating profit
2,625
Investment revenues
120
Finance costs
(224)
Profit before taxation
2,521
Taxation
(230)
Profit for the period from continuing operations
2,291
Discontinued operations
Profit for the period from discontinued operations
-
Profit for the period
2,291
UK and Ireland

Europe and Latin America
Asia
Pacific
Total
Six months ended 30 June 2015 - restated (note 2) (Unaudited)
'000
'000
'000
'000
Continuing operations
Revenue - external sales
22,159
12,926
3,823
38,908
Regional underlying operating (loss)/profit
(140)
2,102
(95)
1,867
Exceptional items (note 4)
18,933
MSP charges
(348)
Operating profit 
20,452
Investment revenues
131
Finance costs
(1,320)
Profit before taxation
19,263
Taxation
(2,351)
Profit for the period from continuing operations
16,912
Discontinued operations
Profit for the period from discontinued operations
169
Profit for the period
17,081
UK and Ireland

Europe and Latin America
Asia
Pacific
Total
Year ended 31 December 2015 (Audited)
'000
'000
'000
'000
Continuing operations
Revenue - external sales
42,979
25,455
8,337
76,771
Regional underlying operating profit
1,989
4,594
280
6,863
Exceptional items (note 4)
17,777
MSP charges
(1,658)
Operating profit
22,982
Investment revenues
282
Finance costs
(1,362)
Profit before taxation
21,902
Taxation
(3,374)
Profit for the year from continuing operations
18,528
Discontinued operations
Profit for the year from discontinued operations 
2,309
Profit for the year
20,837
For the purposes of resource allocation and assessing performance, operating costs and revenues are allocated to the regions in which they are earned or incurred. The above does not reflect additional annual net charges of central costs of 1,704,000 presented within UK and Ireland in the table above which has been charged to other regions for statutory purposes.
Segmental assets
30 June 2016
30 June 2015
restated (note 2)
31 December 2015
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
UK and Ireland
42,344
48,323
47,667
Europe and Latin America
8,773
5,720
8,074
Asia Pacific
6,070
2,829
4,065
Total segment assets
57,187
56,872
59,806
Assets relating to discontinued operations
-
2,202
797
Unallocated assets
274
489
652
Consolidated total assets
57,461
59,563
61,255
Deferred tax is not allocated to segments.
Capital expenditure
Intangible assets
Property, plant and equipment
6 months ended 30 June 2016
6 months ended 30 June 2015
Year ended 
31 December 2015
30 June 2016
30 June 2015
31 December 2015
'000
'000
'000
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
(Unaudited)
(Unaudited)
(Audited)
Continuing operations
UK and Ireland
3,082
2,357
4,415
165
125
129
Europe and Latin America
27
-
21
12
8
48
Asia Pacific
-
-
-
9
7
17
Total continuing operations
3,109
2,357
4,436
186
140
194
Revenue from major products
6 months ended 30 June 2016
6 months ended 30 June 2015
restated (note 2)
Year ended 
31 December 2015
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
Continuing operations
Retail assistance policies
32,401
34,229
68,139
Retail insurance policies
1,507
3,156
5,384
Wholesale policies
1,188
1,043
2,344
Non-policy revenue
345
480
904
Revenue from continuing operations
35,441
38,908
76,771
Major product streams are disclosed on the basis monitored by the Board of Directors. For the purpose of this product analysis, "retail assistance policies" are those which may be insurance backed but contain a bundle of assistance and other benefits; "retail insurance policies" are those which protect against a single insurance risk; "wholesale policies" are those which are provided by Business Partners to their customers in relation to an ongoing product or service which is provided for a specified period of time; "non-policy revenue" is that which is not in connection with providing an ongoing service to policyholders for a specified period of time.
Geographical information
The Group operates across a wide number of territories, of which the UK, Spain and India are considered individually material. Revenue from external customers and non-current assets (excluding deferred tax) by geographical location are detailed below:
External revenues
Non-current assets
6 months ended 30 June 2016
6 months ended 30 June 2015
restated (note 2)
Year ended 
31 December 2015
30 June 2016
30 June 2015
31 December 2015
'000
'000
'000
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
(Unaudited)
(Unaudited)
(Audited)
Continuing operations
UK
15,264
21,692
42,179
11,180
6,145
8,062
Spain
6,067
6,231
11,873
111
131
122
India
5,575
2,779
6,256
15
11
14
Other
8,535
8,206
16,463
132
180
129
Total continuing operations
35,441
38,908
76,771
11,438
6,467
8,327
4 Exceptional items
6 months ended 30 June 2016
6 months ended 30 June 2015
restated (note 2)
Year ended 
31 December 2015
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
Requisition costs
549
-
-
Commission deferral compromise and associated costs
- 
(19,388)
(19,388)
Restructuring costs
-
455
711
Customer redress and associated costs 
-
- 
900 
Exceptional charge/(credit) included in operating profit
549
(18,933)
(17,777)
Tax on exceptional items
-
1,916 
2,344
Total exceptional charge/(credit) after tax
549
(17,017)
(15,433)
Requisition costs in the six month period of 549,000 (H1 2015: nil; year ended 31 December 2015: nil) relates to professional costs associated with the shareholder general meeting requisition and the subsequent interim injunction proceedings.
5 Taxation
The effective tax rate at the half year is 9.1% (H1 2014: 12.2% restated; year ended 31 December 2015: 15.4%). The effective rate is lower than the standard rate of corporation tax in the UK due to brought forward UK losses and overseas tax losses, for which deferred tax assets were not previously recognised. The effective rate is partly impacted by higher rates of tax on overseas profits. The 2016 full year rate may vary from this due to the territory mix of future 2016 profits.
6 Dividends
The Directors have not proposed an interim dividend for 2016.
7 Earnings per share
Basic and diluted earnings per share have been calculated in accordance with IAS 33 "Earnings per Share". Underlying earnings per share have also been presented in order to give a better understanding of the performance of the business.
Six months ended 30 June 2016 (Unaudited)
Continuing operations
Discontinued operations
Total
Earnings
'000
'000
'000
Profit for the purposes of basic and diluted earnings per share
2,291
-
2,291
Exceptional items (net of tax)
549
-
549
MSP charges (net of tax)
476
-
476
Earnings for the purposes of underlying basic and diluted earnings per share
3,316
-
3,316
Number of shares
Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic earnings per share
852,854
Effect of dilutive potential ordinary shares: share options
27,902
Weighted average number of ordinary shares for the purposes of diluted earnings per share
880,756
Earnings per share
Continuing operations
Discontinued operations
Total
Pence
Pence
Pence
Basic earnings per share
0.27
-
0.27
Diluted earnings per share
0.26
-
0.26
Basic underlying earnings per share
0.39
-
0.39
Diluted underlying earnings per share
0.38
-
0.38
Six months ended 30 June 2015 - restated (note 2) (Unaudited)
Continuing operations
Discontinued operations
Total
Earnings
'000
'000
'000
Earnings for the purposes of basic and diluted earnings per share
16,912
169
17,081
Exceptional items (net of tax)
(17,017)
25
(16,992)
MSP charges (net of tax)
283
-
283
Earnings for the purposes of underlying basic and diluted earnings per share
178
194
372
Number of shares
Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic and diluted loss per share
683,863
Effect of dilutive potential ordinary shares: share options
4,228
Weighted average number of ordinary shares for the purposes of diluted earnings per share
688,091
Earnings per share
Continuing operations
Discontinued operations
Total
Pence
Pence
Pence
Basic and diluted earnings per share
Basic
2.48
0.02
2.50
Diluted
2.46
0.02
2.48
Basic and diluted underlying earnings per share
0.02
0.03
0.05
Year ended 31 December 2015 (Audited)
Continuing operations
Discontinued operations
Total
Earnings
'000
'000
'000
Earnings for the purposes of basic and diluted earnings per share
18,528
2,309
20,837
Exceptional items (net of tax)
(15,433)
(38)
(15,471)
MSP charges (net of tax)
1,318
-
1,318
Earnings for the purposes of underlying basic and diluted earnings per share
4,413
2,271
6,684
Number of shares
Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic earnings per share
766,667
Effect of dilutive potential ordinary shares: share options
2,748
Weighted average number of ordinary shares for the purposes of diluted earnings per share
769,415
Earnings per share
Continuing operations
Discontinued operations
Total
Pence
Pence
Pence
Basic and diluted earnings per share
Basic
2.42
0.30
2.72
Diluted
2.41
0.30
2.71
Basic and diluted underlying earnings per shares
Basic
0.58
0.30
0.88
Diluted
0.57
0.30
0.87
8 Intangible and tangible assets
Intangible assets
Property, plant and equipment
Total
'000
'000
'000
Six months ended 30 June 2016 (Unaudited)
Carrying amount at 1 January 2016
4,825
3,502
8,327
Additions
3,109
186
3,295
Disposals
- 
(15)
(15)
Amortisation/depreciation
(49)
(149)
(198)
Exchange adjustments
8
21
29
Impairment
- 
-
-
Carrying amount at 30 June 2016
7,893
3,545
11,438
Six months ended 30 June 2015 (Unaudited)
Carrying amount at 1 January 2015
808
3,820
4,628
Additions
2,357
140
2,497
Disposals
(1)
(8)
(9)
Amortisation/depreciation
(325)
(253)
(578)
Exchange adjustments
(8)
(42)
(50)
Impairment
(21)
-
(21)
Carrying amount at 30 June 2015
2,810
3,657
6,467
Year ended 31 December 2015 (Audited)
Carrying amount at 1 January 2015
808
3,820
4,628
Additions
4,436
194
4,630
Disposals
(1)
(15)
(16)
Amortisation/depreciation
(391)
(465)
(856)
Exchange adjustments
(6)
(32)
(38)
Impairment
(21) 
- 
(21)
Carrying amount at 31 December 2015
4,825
3,502
8,327
The carrying value of intangible assets includes 7,667,000 (H1 2015: 2,621,000, 31 December 2015: 4,585,000) relating to the development of the core platform IT system, which is an asset under construction and will not be amortised until it becomes operational. The Group's contract with SSP Limited includes a minimum future commitment for costs relating to licensing and running the system of approximately 6,500,000.
9 Cash and cash equivalents
Cash and cash equivalents of 33,222,000 (H1 2015: 38,019,000; 31 December 2015: 39,810,000) comprises cash held on demand by the Group and short term deposits. 
Cash and cash equivalents includes 25,402,000 (H1 2015: 33,265,000; 31 December 2015: 33,879,000) cash held in the UK's regulated entities CPPL and HIL. This cash is either maintained by the Group's insurance business for solvency purposes or restricted by the terms of the VVOP. The VVOP restricted cash cannot be distributed to the wider Group without FCA approval. The restricted cash whilst being unavailable to distribute to the wider Group, is available to the regulated entity in which it exists including for operational and residual customer redress purposes. 
10 Provisions
Customer redress and associated costs
Onerous leases
Total
'000
'000
'000
Six months ended 30 June 2016 (Unaudited)
At 1 January 2016
1,611
829
2,440
Customer redress and associated costs paid in the period
(346)
-
(346)
Utilisation of onerous lease provision in the period
-
(323)
(323)
At 30 June 2016
1,265
506
1,771
Six months ended 30 June 2015 (Unaudited)
At 1 January 2015
6,356
1,658
8,014
Customer redress and associated costs paid in the period
(1,829)
-
(1,829)
Utilisation of onerous lease provision in the period
-
(318)
(318)
Transfer to trade and other payables
(824)
-
(824)
At 30 June 2015
3,703
1,340
5,043
Year ended 31 December 2015 (Audited)
At 1 January 2015
6,356
1,658
8,014
Charged/(credited) to the income statement
900
(97)
803
Customer redress and associated costs paid in the year
(4,821) 
-
(4,821)
Utilisation of onerous lease provision in the year
-
(732)
(732)
Transfer to trade and other payables
(824)
-
(824)
At 31 December 2015
1,611
829
2,440
The customer redress and associated costs provision comprises anticipated compensation payable to customers through residual customer redress exercises. 
The onerous leases provision reflects the future lease payments and associated costs in the expected non-utilisation period at a vacated office in the UK.
The customer redress and associated costs and onerous leases provisions are both expected to be settled within one year of the balance sheet date.
11 Borrowings
30 June 2016
30 June 2015
31 December 2015
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
Second Commission Deferral Agreement
1,367
-
-
Borrowings due within one year
1,367
-
-
Bank loans due outside of one year
2,500
-
1,000
Less: unamortised issue costs
(116)
(190)
(152)
Second Commission Deferral Agreement
-
1,320
1,343
Borrowings due outside of one year
2,384
1,130
2,191
The borrowing facilities are secured by fixed and floating charges on certain assets of the Group.
At 30 June 2016, the Group had undrawn committed borrowing facilities of 2,500,000 (H1 2015: 5,000,000; 31 December 2015: 4,000,000).
12 Share capital
Share capital at 30 June 2016 amounted to 23,975,000, having increased from 23,939,000 at 31 December 2015. During the period the Company issued 3,646,875 ordinary shares for cash consideration of 36,000 to option holders under its share option schemes.
13 Share-based payment
Share-based payment charges for the six month period to 30 June 2016 comprise MSP charges of 500,000 (H1 2015: 310,000; 31 December 2015: 1,457,000) and Long Term Incentive Plan 2016 (2016 LTIP) charges of 296,000 (H1 2015: nil; 31 December 2015: nil). These costs are disclosed within administrative expenses, although the MSP share-based payment charge forms part of MSP charges not included in underlying operating profit.
Number of share options
Weighted average exercise price
(thousands)
()
Six months ended 30 June 2016 (Unaudited)
MSP
Outstanding at 1 January 2016
36,135
0.01
Forfeited during the period
(10,500)
0.01
Exercised during the period
(3,647)
0.01
Outstanding at 30 June 2016
21,988
0.01
Exercisable at 30 June 2016
47
0.01
2016 LTIP
Outstanding at 1 January 2016
-
-
Granted during the period
26,050
-
Forfeited during the period
(8,000)
-
Outstanding at 30 June 2016
18,050
-
Six months ended 30 June 2015 (Unaudited)
MSP
Outstanding at 1 January 2015
-
-
Granted during the period
25,650
0.01
Outstanding at 30 June 2015
25,650
0.01
Year ended 31 December 2015 (Audited)
MSP
Outstanding at 1 January 2015
-
-
Granted during the year
38,010
0.01
Forfeited during the year
(1,875)
0.01
Outstanding at 31 December 2015
36,135
0.01
Nil cost options and conditional shares granted under the 2016 LTIP normally vest after three years, lapse if not exercised within ten years of grant and will lapse if option holders cease to be employed by the Group. Vesting of 2016 LTIP options and shares are also subject to achievement of performance criteria including a share price measure and an underlying operating profit target over the vesting period.
The options outstanding at 30 June 2016 had a weighted average remaining contractual life of two years (30 June 2015: two years; 31 December 2015: two years) in the MSP and three years (30 June 2015: n/a; 31 December 2015: n/a) in the 2016 LTIP.
The principal assumptions underlying the valuation of the 2016 LTIP options granted during the period at the date of grant are as follows:
Weighted average share price
0.12
Weighted average exercise price
-
Expected volatility
150%
Expected life
3 years
Risk-free rate
0.67%
Dividend yield
0%
There have been 26,050,000 share options granted in the current period. The aggregate estimated fair value of the options granted in the current period under the 2016 LTIP was 2,852,000.
14 Reconciliation of operating cash flows
6 months ended 30 June 2016
6 months ended 
30 June 2015
Year ended 
31 December 2015
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
Profit for the period
2,291
17,081
20,837
Adjustment for:
Depreciation and amortisation
198
578
856
Equity settled share-based payment expense
796
332
1,466
Impairment loss on intangible assets
-
21
21
Loss on disposal of property, plant and equipment
15
9
16
Commission deferral compromise and associated costs
- 
(19,388)
(19,388)
Investment revenues
(120)
(131)
(282)
Finance costs
224
1,416
1,523
Income tax expense
230
2,351
3,017
Operating cash flows before movement in working capital
3,634
2,269
8,066
Decrease in insurance assets
108
142
276
Decrease in inventories
5
4
50
Decrease in receivables
590
254
2,234
Decrease in insurance liabilities
(219)
(368)
(830)
Decrease in payables
(9,093)
(3,310)
(4,410)
Decrease in provisions
(669)
(2,971)
(5,574)
Cash used in operations
(5,644)
(3,980)
(188)
Income taxes paid
(454)
(187)
(1,172)
Net cash used in operating activities
(6,098)
(4,167)
(1,360)
15 Related party transactions
Transactions with related parties
The Group has agreed to settle legal fees incurred by Mr Hamish Ogston in relation to the interim injunction proceedings which were announced on 11 April 2016 and subsequently withdrawn on 25 April 2016. Payment of these costs is outstanding, but will not exceed 218,000. Mr Ogston is a substantial shareholder in the Group.
Remuneration of key management personnel
The remuneration of the Directors and Senior Management Team, who are the key management personnel of the Group, is set out below:
6 months ended 
30 June 2016
6 months ended 
30 June 2015
Year ended 
31 December 2015
'000
'000
'000
(Unaudited)
(Unaudited)
(Audited)
Short term employee benefits
1,284
1,322 
4,098 
Post-employment benefits
72
48 
121 
Termination benefits
-
235 
239 
Share-based payments
568
265 
1,128 
1,924
1,870 
5,586 

This information is provided by RNS
The company news service from the London Stock Exchange
  END
IR GGUQARUPQGCM