REG - CPPGroup Plc - Half-year Report <Origin Href="QuoteRef">CPPG.L</Origin> - Part 2
24/08/2017 07:06
- Part 2: For the preceding part double click ID:nRSX8357Oa
Total continuing operations 138 3,109 3,812 236 186 592
Revenue from major products
6 months ended 30 June 2017 6 months ended 30 June 2016 Year ended 31 December 2016
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Continuing operations
Retail assistance policies 39,910 32,401 68,013
Retail insurance policies 563 1,507 2,473
Wholesale policies 1,097 1,188 2,503
Non-policy revenue 252 345 660
Revenue from continuing operations 41,822 35,441 73,649
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 India, the UK and Spain are considered individually
material. Revenue from external customers and non-current assets (excluding goodwill and deferred tax) by geographical
location are detailed below.
External revenues Non-current assets
6 months ended 30 June 2017 6 months ended 30 June 2016 Year ended 31 December 2016 30 June 2017 30 June 2016 31 December 2016
£'000 £'000 £'000 £'000 £'000 £'000
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
Continuing operations
India 15,731 5,575 15,163 88 15 90
UK 11,363 15,264 28,358 2,532 11,180 7,074
Spain 5,830 6,067 11,997 146 111 92
Other 8,898 8,535 18,131 271 132 196
Total continuing operations 41,822 35,441 73,649 3,037 11,438 7,452
4 Exceptional items
6 months ended 30 June 2017 6 months ended 30 June 2016 Year ended 31 December 2016
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Reversal of freehold property impairment (601) - (1,534)
Customer redress and associated costs (165) - (100)
Aborted IT platform and associated contractual settlement costs - - 9,104
Restructuring costs - - 1,170
Requisition costs - 549 532
Exceptional (credit)/charge included in operating profit (766) 549 9,172
Tax on exceptional items - - (436)
Total exceptional (credit)/charge after tax (766) 549 8,736
Reversal of freehold property impairment is a credit of £601,000 (H1 2016: £nil; year ended 31 December 2016: £1,534,000)
and reflects the write-back of the asset to its disposal value less costs to sell.
Customer redress and associated costs are a credit of £165,000 (H1 2016: £nil; year ended 31 December 2016: £100,000) and
relate to a release of provision in line with the latest estimate of residual customer redress activity.
5 Taxation
The effective tax rate at the half year is negative 0.7% (H1 2016: positive 9.1%; year ended 31 December 2016: positive
71.6%). The effective rate is lower than the standard rate of corporation tax in the UK due to the release of tax
liabilities that are now considered remote partly offset by higher rates of tax on overseas profits. The 2017 full year
rate may vary from this as the release of the tax liabilities has a one-off impact and the territory mix of future 2017
profits may vary.
6 Dividends
The Directors have not proposed an interim dividend for 2017.
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 2017 (Unaudited) Continuing operations Discontinued operations Total
Earnings £'000 £'000 £'000
Profit for the purposes of basic and diluted earnings per share 2,623 - 2,623
Exceptional items (net of tax) (766) - (766)
MSP charges (net of tax) 198 - 198
Earnings for the purposes of underlying basic and diluted earnings per share 2,055 - 2,055
Number of shares Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic earnings per share 856,481
Effect of dilutive potential ordinary shares: share options 18,709
Weighted average number of ordinary shares for the purposes of diluted earnings per share 875,190
Earnings per share Continuing operations Discontinued operations Total
Pence Pence Pence
Basic and diluted earnings per share
Basic 0.31 - 0.31
Diluted 0.30 - 0.30
Basic and diluted underlying earnings per share
Basic 0.24 - 0.24
Diluted 0.23 - 0.23
Six months ended 30 June 2016 (Unaudited) Continuing operations Discontinued operations Total
Earnings £'000 £'000 £'000
Earnings 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 and diluted earnings per share
Basic 0.27 - 0.27
Diluted 0.26 - 0.26
Basic and diluted underlying earnings per shares
Basic 0.39 - 0.39
Diluted 0.38 - 0.38
Year ended 31 December 2016 (Audited) Continuing operations Discontinued operations Total
(Loss)/earnings £'000 £'000 £'000
(Loss)/earnings for the purposes of basic and diluted (loss)/earnings per share (533) 579 46
Exceptional items (net of tax) 8,736 - 8,736
MSP charges (net of tax) 698 - 698
Earnings for the purposes of underlying basic and diluted earnings per share 8,901 579 9,480
Number of shares Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic (loss)/earnings per share and basic underlying earnings per share 854,677
Effect of dilutive potential ordinary shares: share options 28,506
Weighted average number of ordinary shares for the purposes of diluted underlying earnings per share 883,183
(Loss)/earnings per share Continuing operations Discontinued operations Total
Pence Pence Pence
Basic and diluted (loss)/earnings per share
Basic (0.06) 0.07 0.01
Diluted (0.06) 0.07 0.01
Basic and diluted underlying earnings per shares
Basic 1.04 0.07 1.11
Diluted 1.00 0.07 1.07
8 Tangible and intangible assets
Goodwill Other intangible assets Property, plant and equipment Total
£'000 £'000 £'000 £'000
Six months ended 30 June 2017 (Unaudited)
Carrying amount at 1 January 2017 - 2,136 5,316 7,452
Additions 776 138 236 1,150
Disposals - - (5,040) (5,040)
Amortisation/depreciation - (116) (232) (348)
Exchange adjustments - - (2) (2)
Impairment reversal - - 601 601
Carrying amount at 30 June 2017 776 2,158 879 3,813
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
Carrying amount at 30 June 2016 - 7,893 3,545 11,438
Year ended 31 December 2016 (Audited)
Carrying amount at 1 January 2016 - 4,825 3,502 8,327
Additions - 3,812 592 4,404
Disposals - - (19) (19)
Amortisation/depreciation - (104) (400) (504)
Exchange adjustments - 7 107 114
(Impairment)/impairment reversal - (6,404) 1,534 (4,870)
Carrying amount at 30 June 2016 - 2,136 5,316 7,452
Goodwill of £776,000 was generated on the acquisition of Blink. Further detail of the acquisition is included in note 14.
During the year, the Group has recognised a £601,000 reversal of prior year impairment of freehold land and property to
reflect its disposal value less costs to sell. The impairment reversal has been recognised as an exceptional credit through
the consolidated income statement. On 30 June 2017, the Group disposed of the freehold land and property for total
consideration of £5,325,000.
9 Cash and cash equivalents
Cash and cash equivalents of £32,199,000 (H1 2016: £33,222,000; 31 December 2016: £28,250,000) comprises cash held on
demand by the Group and short term deposits.
Cash and cash equivalents includes £2,571,000 cash maintained by the Group's insurance business for solvency purposes.
During the period the VVOP asset restrictions previously in place with the Group's regulated entities, HIL and CPPL, have
been lifted. The VVOP prevented cash held within HIL and CPPL being distributed to the wider Group without FCA approval.
The comparative cash and cash equivalents therefore included H1 2016: £25,402,000; and 31 December 2016: £18,727,000 which
was held in HIL and CPPL either for solvency purposes or due to the VVOP restrictions.
10 Borrowings
30 June 2017 30 June 2016 31 December 2016
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Bank loans due within one year 2,500 - -
Less: unamortised issue costs (43) - -
Second Commission Deferral Agreement - 1,367 1,391
Borrowings due within one year 2,457 1,367 1,391
Bank loans due outside of one year - 2,500 -
Less: unamortised issue costs - (116) (80)
Borrowings due outside of one year - 2,384 (80)
The Group's bank debt is in the form of a £5,000,000 revolving credit facility (RCF). At 30 June 2017, the Group has an
undrawn committed borrowing facility of £2,500,000 (H1 2016: £2,500,000; 31 December 2016: £5,000,000).
The RCF is secured by fixed and floating charges on certain assets of the Group.
11 Provisions
Customer redress and associated costs Onerous leases Total
£'000 £'000 £'000
Six months ended 30 June 2017 (Unaudited)
At 1 January 2017 476 667 1,143
Credited to the income statement (165) - (165)
Customer redress and associated costs paid in the period (110) - (110)
Utilisation of onerous lease provision in the period - (667) (667)
At 30 June 2017 201 - 201
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
Year ended 31 December 2016 (Audited)
At 1 January 2016 1,611 829 2,440
(Credited)/charged to the income statement (100) 500 400
Customer redress and associated costs paid in the year (1,035) - (1,035)
Utilisation of onerous lease provision in the year - (662) (662)
At 31 December 2016 476 667 1,143
The customer redress and associated costs provision is expected to be settled within one year of the balance sheet date.
The Group has made certain commercial and contractual decisions that are not yet agreed with all affected parties. The
Group is satisfied with its position from both a legal and regulatory perspective. Appropriate financial provisions are in
place in respect of these matters and are included in trade and other payables.
12 Share capital
Share capital at 30 June 2017 amounted to £23,975,000 (H1 2016: £23,975,000; 31 December 2016: £23,975,000). Share option
exercises in the six month period to 30 June 2017 total 2,595,483 and have been satisfied through ordinary shares held by
the Employee Benefit Trust (EBT). The number of ordinary shares held by the EBT at 30 June 2017 is 1,455,643.
13 Share-based payment
Share-based payment charges for the six month period to 30 June 2017 comprise MSP charges of £188,000 (H1 2016: £500,000;
31 December 2016: £902,000) and Long Term Incentive Plan 2016 (2016 LTIP) charges of £213,000 (H1 2016: £296,000; 31
December 2016: £582,000). 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. MSP charges in the income statement are
different to the share-based payment charge due to the recognition of employer's national insurance relating to future
option exercises.
Number of share options Weighted average exercise price
(thousands) (£)
Six months ended 30 June 2017 (Unaudited)
MSP
Outstanding at 1 January 2017 17,665 0.01
Forfeited during the period (2,611) 0.01
Exercised during the period (2,590) 0.01
Outstanding at 30 June 2017 12,464 0.01
Exercisable at 30 June 2017 2,340 0.01
2016 LTIP
Outstanding at 1 January 2017 15,081 -
Granted during the period 14,924 -
Forfeited during the period (5,485) -
Outstanding at 30 June 2017 24,520 -
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 -
Year ended 31 December 2016 (Audited)
MSP
Outstanding at 1 January 2016 36,135 0.01
Forfeited during the year (14,111) 0.01
Exercised during the year (4,359) 0.01
Outstanding at 31 December 2016 17,665 0.01
Exercisable at 31 December 2016 1,810 0.01
2016 LTIP
Outstanding at 1 January 2016 - -
Granted during the period 26,050 -
Forfeited during the period (10,969) -
Outstanding at 31 December 2016 15,081 -
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 underlying operating profit targets and either
a share price or a non-financial events measure over the vesting period.
The options outstanding at 30 June 2017 had a weighted average remaining contractual life of one year (30 June 2016: two
years; 31 December 2016: one year) in the MSP and two years (30 June 2016: three years; 31 December 2016: two years) 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 £0.1575
Weighted average exercise price -
Expected volatility n/a
Expected life 3 years
Risk-free rate n/a
Dividend yield 0%
There have been 14,924,000 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 £2,351,000.
14 Acquisition of a subsidiary
On 17 March 2017, the Group acquired 100% of the issued share capital of Blink for initial cash consideration of E1
million. The acquisition also allows for a further earn-out based on future profits and product development which is
considered to represent remuneration rather than contingent consideration.
The net assets acquired and their provisional fair values at 17 March 2017 were:
Book value Fair value
£'000 £'000
Intangible assets - 86
Net assets acquired - 86
Goodwill - 776
Cash consideration paid 862
Cash consideration paid 862
Acquisition costs 128
Cash acquired on acquisition -
Total cash outflow 990
On acquisition, the carrying value of the net assets of Blink was £nil. The Group have made a fair value adjustment of
£86,000 to recognise an intangible asset relating to the development of the Blink website. The acquisition remains within
the measurement period and the Group continues to evaluate all identifiable assets and liabilities.
Goodwill of £776,000 reflects the discounted future cash flows of Blink's product offering (cancelled flight resolution),
future development opportunities from the Blink team, as well as synergies to the Group from the acquired team's
expertise.
Acquisition costs of £128,000 have been recognised as an administrative expense through the condensed consolidated interim
income statement.
Included within the Group's condensed consolidated interim income statement is revenue of £nil and a loss before tax of
£126,000 relating to Blink since the acquisition date and is the same had the acquisition occurred on 1 January 2017.
15 Reconciliation of operating cash flows
6 months ended 30 June 2017 6 months ended 30 June 2016 Year ended 31 December 2016
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Profit for the period 2,623 2,291 46
Adjustment for:
Depreciation and amortisation 348 198 504
Equity settled share-based payment expense 401 796 1,486
Impairment loss on intangible assets - - 6,404
Reversal of freehold property impairment (601) - (1,534)
Loss on disposal of property, plant and equipment 2 15 20
Investment revenues (84) (120) (243)
Finance costs 160 224 325
Income tax (credit)/expense (18) 230 (1,342)
Operating cash flows before movement in working capital 2,831 3,634 5,666
Decrease in inventories 11 5 2
(Increase)/decrease in receivables (6,223) 590 (3,542)
Decrease in insurance assets 14 108 255
Increase/(decrease) in payables 3,455 (9,093) (6,718)
Decrease in insurance liabilities (128) (219) (326)
Decrease in provisions (943) (669) (1,296)
Cash used in operations (983) (5,644) (5,959)
Income taxes paid (426) (454) (1,250)
Net cash used in operating activities (1,409) (6,098) (7,209)
16 Related party transactions
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 2017 6 months ended 30 June 2016 Year ended 31 December 2016
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Short term employee benefits 1,261 1,284 2,697
Post-employment benefits 52 72 142
Termination benefits 253 - 817
Share-based payments 330 568 1,028
1,896 1,924 4,684
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