REG - CPPGroup Plc - Half Yearly Report <Origin Href="QuoteRef">CPPG.L</Origin> - Part 2
21/08/2015 07:00
- Part 2: For the preceding part double click ID:nRSU6806Wa
December
2014 were approved by the Board on 30 March 2015 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 2015 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 ("the Financial Statements") for the year ended 31 December 2014, 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 20 August 2015.
New and amended standards and interpretations need to be adopted in the interim financial statements issued after their
effective date (or date of early adoption). There are no new IFRSs or IFRICs that are effective for the first time for the
six months ended 30 June 2015 which have a material impact on the Group.
Going concern
The Group is in a stable financial position following the completion of the UK Scheme of Arrangement and the successful
equity raise, restructure of liabilities and refinancing in February 2015. Whilst there continues to be uncertainty from
medium term trading and strategic risk, the Group's forecasts show that the Group should have 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 Total
Pacific
Six months ended 30 June 2015 (Unaudited) £'000 £'000 £'000 £'000
Continuing operations
Revenue - external sales 28,436 12,926 3,823 45,185
Regional operating profit/(loss) before exceptional items and Matching Share Plan charges 156 2,102 (95) 2,163
Exceptional items (note 4) 18,902
Matching Share Plan charges (348)
Operating profit after exceptional items and Matching Share Plan charges 20,717
Investment revenues 131
Finance costs (1,416)
Profit before taxation 19,432
Taxation (2,351)
Profit for the period from continuing operations 17,081
Discontinued operations
Loss for the period from discontinued operations -
Profit for the period 17,081
UK and Ireland Europe and Latin America Asia Total
Pacific
Six months ended 30 June 2014 (Unaudited) £'000 £'000 £'000 £'000
Continuing operations
Revenue - external sales 38,490 17,034 3,143 58,667
Regional operating (loss)/profit before exceptional items (3,298) 3,271 24 (3)
Exceptional items (note 4) (262)
Operating loss after exceptional items (265)
Investment revenues 287
Finance costs (1,164)
Loss before taxation (1,142)
Taxation (780)
Loss for the period from continuing operations (1,922)
Discontinued operations
Loss for the period from discontinued operations (785)
Loss for the period (2,707)
UK and Ireland Europe and Latin America Asia Total
Pacific
Year ended 31 December 2014 (Audited) £'000 £'000 £'000 £'000
Continuing operations
Revenue - external sales 69,690 32,463 6,653 108,806
Regional operating (loss)/profit before exceptional items (4,404) 5,162 (233) 525
Exceptional items (note 4) (6,323)
Operating loss after exceptional items (5,798)
Investment revenues 432
Finance costs (2,296)
Loss before taxation (7,662)
Taxation 1,698
Loss for the year from continuing operations (5,964)
Discontinued operations
Loss for the year from discontinued operations (785)
Loss for the year (6,749)
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
£1,845,000 presented within UK and Ireland in the tables above which has been charged to other regions for statutory
purposes.
Segmental assets
30 June 2015 30 June 2014 31 December 2014
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
UK and Ireland 50,525 68,254 51,673
Europe and Latin America 5,720 8,455 7,012
Asia Pacific 2,829 2,740 2,937
Total segment assets 59,074 79,449 61,622
Unallocated assets 489 2 2,248
Consolidated total assets 59,563 79,451 63,870
Deferred tax is not allocated to segments.
Revenue from major products
6 months ended 30 June 2015 6 months ended 30 June 2014 Year ended 31 December 2014
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Continuing operations
Retail assistance policies 34,229 43,546 82,652
Retail insurance policies 3,156 6,092 10,229
Packaged and wholesale policies 7,320 8,655 15,080
Non-policy revenue 480 374 845
Revenue from continuing operations 45,185 58,667 108,806
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; "packaged and wholesale
policies" are those which are provided by Business Partners to their customers in relation to an on-going 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 on-going service to policyholders for a specified period of time.
Geographical information
The Group operates across a wide number of territories, of which the UK and Spain 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 2015 6 months ended 30 June 2014 Year ended 31 December 2014 30 June 2015 30 June 2014 31 December 2014
£'000 £'000 £'000 £'000 £'000 £'000
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
Continuing operations
UK 27,969 37,751 68,412 6,145 5,415 4,100
Spain 6,231 8,079 15,215 131 358 176
Other 10,985 12,837 25,179 191 763 352
Total continuing operations 45,185 58,667 108,806 6,467 6,536 4,628
4 Exceptional items
6 months ended 30 June 2015 6 months ended 30 June 2014 Year ended 31 December 2014
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Commission deferral compromise and associated costs (19,388) - 744
Restructuring costs 486 262 2,579
Customer redress and associated costs - - 3,000
Exceptional (credit)/charge included in operating profit or loss (18,902) 262 6,323
Tax on exceptional items 1,910 (54) (646)
Total exceptional (credit)/charge after tax (16,992) 208 5,677
The gain from the commission deferral compromise and associated costs in the six month period of £19,388,000 (H1 2014:
£nil, year ended 31 December 2014: £744,000 charge) relates to the gain from the settlement in full of the Commission
Deferral Agreement for a payment of £1,304,000, net of costs associated with finalising the agreement to compromise.
The restructuring costs in the six month period of £486,000 (H1 2014: £262,000, year ended 31 December 2014: £2,579,000)
relate to redundancy programmes and associated costs across the Group.
5 Taxation
The effective tax rate at the half year is 12.1% (H1 2014: negative 68.3%, year ended 31 December 2014: 22.2%). The
effective rate is lower than the standard rate of corporation tax in the UK due to capital allowances and other tax
deductions, for which deferred tax assets were not previously recognised, that are now available for offset against UK
taxable profits. The UK impact on the effective rate is partly offset by higher rates of tax on overseas profits. The 2015
full year rate may vary from this due to the territory mix of future 2015 profits.
6 Dividends
The Directors have not proposed an interim dividend for 2015.
7 Earnings/(loss) per share
Basic and diluted earnings/(loss) per share have been calculated in accordance with IAS 33 "Earnings per Share". Underlying
earnings/(loss) per share have also been presented in order to give a better understanding of the performance of the
business.
Six months ended 30 June 2015 (Unaudited) Continuing operations Discontinued operations Total
Earnings £'000 £'000 £'000
Profit for the purposes of basic and diluted earnings per share 17,081 - 17,081
Exceptional items (net of tax) (16,992) - (16,992)
Matching Share Plan charges (net of tax) 283 - 283
Earnings for the purposes of underlying basic and diluted earnings per share 372 - 372
Number of shares Number(thousands)
Weighted average number of ordinary shares for the purposes of basic earnings 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 earnings per share 2.50 - 2.50
Diluted earnings per share 2.48 - 2.48
Basic and diluted underlying loss per share 0.05 - 0.05
Six months ended 30 June 2014 (Unaudited) Continuing operations Discontinued operations Total
Loss £'000 £'000 £'000
Loss for the purposes of basic and diluted loss per share (1,922) (785) (2,707)
Exceptional items (net of tax) 208 (311) (103)
Loss for the purposes of underlying basic and diluted loss per share (1,714) (1,096) (2,810)
Number of shares Number(thousands)
Weighted average number of ordinary shares for the purposes of basic and diluted loss per share 171,605
Loss per share Continuing operations Discontinued operations Total
Pence Pence Pence
Basic and diluted loss per share (1.12) (0.46) (1.58)
Basic and diluted underlying loss per share (1.00) (0.64) (1.64)
Year ended 31 December 2014 (Audited) Continuing operations Discontinued operations Total
Loss £'000 £'000 £'000
Loss for the purposes of basic and diluted loss per share (5,964) (785) (6,749)
Exceptional items (net of tax) 5,677 (311) 5,366
Loss for the purposes of underlying basic and diluted loss per share (287) (1,096) (1,383)
Number of shares Number(thousands)
Weighted average number of ordinary shares for the purposes of basic and diluted loss per share 171,622
Loss per share Continuing operations Discontinued operations Total
Pence Pence Pence
Basic and diluted loss per share (3.48) (0.46) (3.94)
Basic and diluted underlying loss per share (0.17) (0.64) (0.81)
8 Tangible and intangible assets
Other intangible assets Property, plant and equipment Total
£'000 £'000 £'000
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
Six months ended 30 June 2014 (Unaudited)
Carrying amount at 1 January 2014 3,299 5,061 8,360
Additions 58 37 95
Amortisation/depreciation (1,434) (442) (1,876)
Exchange adjustments (8) (35) (43)
Carrying amount at 30 June 2014 1,915 4,621 6,536
Year ended 31 December 2014 (Audited)
Carrying amount at 1 January 2014 3,299 5,061 8,360
Additions 406 190 596
Disposals (4) (39) (43)
Amortisation/depreciation (2,884) (1,271) (4,155)
Exchange adjustments (9) (35) (44)
Impairment - (86) (86)
Carrying amount at 31 December 2014 808 3,820 4,628
The carrying value of other intangible assets includes £2,621,000 (H1 2014: £nil, 31 December 2014: £373,000) relating to
the development of the core IT policy platform, which is an asset under construction and will not be amortised until it
becomes operational.
9 Cash and cash equivalents
Cash and cash equivalents of £38,019,000 (H1 2014: £53,613,000; 31 December 2014: £40,599,000) comprises cash held on
demand by the Group and short term deposits.
Cash and cash equivalents includes the following:
i) £15,790,000 (H1 2014: £20,375,000; 31 December 2014: £21,542,000) cash maintained by the Group's insurance
business for solvency purposes; and
ii) £17,475,000 (H1 2014: £24,441,000; 31 December 2014: £13,380,000) cash held in the UK's regulated entities CPPL
and HIL which is restricted by the terms of the VVOP and cannot be distributed to the wider Group without FCA approval.
This 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 Borrowings
30 June 2015 30 June 2014 31 December 2014
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Bank loans due outside of one year - 13,000 13,000
Less: unamortised issue costs (190) (1,333) (969)
Deferred commission 1,320 20,349 20,702
Borrowings due outside of one year 1,130 32,016 32,733
The Group's bank debt is in the form of a revolving credit facility (RCF). The current RCF became effective on 11 February
2015 and has a commitment of £5,000,000. The Group is entitled to roll over repayment of amounts drawn down, subject to all
amounts outstanding falling due for repayment on expiry of the facility on 28 February 2018.
On 11 February 2015, the Group also agreed to settle all the liabilities of the Commission Deferral Agreement with certain
Business Partners for a compromise payment of £1,304,000 and further deferral of commission of up to £1,304,000. On
conclusion of the deferral period, commission deferred within the Second Commission Deferral Agreement has totalled
£1,304,000, which has a repayment date of 31 January 2017.
The borrowing facilities are secured by fixed and floating charges on certain assets of the Group.
At 30 June 2015, the Group has undrawn committed borrowing facilities of £5,000,000 (H1 2014: £nil; 31 December 2014:
£nil).
11 Provisions
Customer redress and associated costs Onerous leases Total
£'000 £'000 £'000
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
Six months ended 30 June 2014 (Unaudited)
At 1 January 2014 37,398 - 37,398
Customer redress and associated costs paid in the period (23,364) - (23,364)
At 30 June 2014 14,034 - 14,034
Year ended 31 December 2014 (Audited)
At 1 January 2014 37,398 - 37,398
Charged to the income statement 3,000 1,658 4,658
Customer redress and associated costs paid in the year (34,042) - (34,042)
At 31 December 2014 6,356 1,658 8,014
The customer redress and associated costs provision comprises anticipated compensation payable to customers through
residual customer redress exercises and associated professional fees. The outstanding regulatory fine of £8,500,000 is
included in current and non-current payables.
The onerous lease provision reflects the future lease payments and associated costs in the expected non-utilisation period
at our vacated offices in the UK.
Customer redress and associated costs are expected to be settled within one year of the balance sheet date and onerous
lease provisions are expected to be settled within two years of the balance sheet date.
12 Share capital
Ordinary shares of 10 pence each(thousands) Ordinary shares of 1 penny each(thousands) Deferred shares of 9 pence each(thousands) Ordinary shares of 10 pence each£'000 Ordinary shares of 1 penny each£'000 Deferred shares of 9 pence each£'000
Called-up and allotted:
At 1 January 2015 171,650 - - 17,126 - -
Capital reorganisation (171,650) 171,650 171,650 (17,126) 1,713 15,413
February placement - 666,667 - - 6,667 -
June share issue - 8,550 - - 86 -
Exercise of share options - 31 - - - -
At 30 June 2015 - 846,898 171,650 - 8,466 15,413
On 20 January 2015, each of the Company's 10 pence ordinary shares was subdivided and redesignated into one new ordinary
share of 1 penny each and one new deferred share of 9 pence each. Each new ordinary share of 1 penny carries the same
rights as the old 10 pence ordinary share. Deferred shares have no voting rights, no rights to receive dividends and only
very limited rights on a return of capital. The deferred shares have not been listed for trading in any market and are not
freely transferable.
On 11 February 2015, the Company transferred the trading of its shares from the main market of the London Stock Exchange to
AIM. On transfer to AIM, as part of a placing the Company also issued 666,666,667 1 penny ordinary shares for cash
consideration of £20,000,000. Costs of the share issue of £1,686,000 have been charged to the share premium account.
On 25 June 2015, the Company issued 8,550,000 ordinary shares as part of the Group's new share incentive scheme, the MSP.
The newly issued shares, which represent Investment Shares in the terms of the plan, were purchased for total consideration
of £257,000.
During the period the Company issued 31,720 ordinary shares for cash consideration of £nil to option holders under its
other share option schemes.
13 Share based payment
On 25 June 2015, the Group implemented a new share incentive scheme, the MSP. Under the terms of the plan, participants
acquire Investment Shares, refer to note 12. Each Investment Share is awarded options over three Matching Shares with an
exercise price of one penny per share. The total number of options awarded in this plan and outstanding at the balance
sheet date is 25,650,000.
The MSP options vest over a period of three years, with 25% vesting on the first anniversary of the grant date, 25% vesting
on the second anniversary and 50% vesting on the third anniversary. Options lapse if not exercised within ten years of
grant and may lapse if option holders cease to be employed by the Group.
The MSP charges in the income statement of £348,000 (H1 2014: £nil, 31 December 2014: £nil) principally relate to the share
based payment charge on the acquisition of shares under the Plan.
14 Reconciliation of operating cash flows
6 months ended 30 June 2015 6 months ended 30 June 2014 Year ended 31 December 2014
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Profit/(loss) for the period 17,081 (2,707) (6,749)
Adjustment for:
Depreciation and amortisation 578 1,876 4,155
Equity settled share based payment expense 332 198 203
Impairment loss on intangibles and property, plant and equipment 21 - 86
Loss on disposal of property, plant and equipment 9 - 43
Profit associated with disposal of discontinued operation - (311) (311)
Commission deferral compromise and associated costs (19,388) - 744
Share of loss of joint venture - 1,096 1,096
Investment revenues (131) (287) (432)
Finance costs 1,416 1,164 2,296
Income tax expense/(credit) 2,351 780 (1,698)
Operating cash flows before movement in working capital 2,269 1,809 (567)
Decrease in insurance assets 142 3,011 2,794
Decrease in inventories 4 28 56
Decrease in receivables 254 1,245 5,202
Decrease in insurance liabilities (368) (1,378) (1,970)
Decrease in payables (3,310) (4,334) (9,892)
Decrease in provisions (2,971) (23,364) (29,384)
Cash used in operations (3,980) (22,983) (33,761)
Income taxes (paid)/repaid (187) 1,858 855
Net cash used in operating activities (4,167) (21,125) (32,906)
15 Related party transactions
Ultimate controlling party
On 11 February 2015, Mr Hamish Ogston's holding in the Company reduced from 56.12% to 43.00%, resulting in the Group no
longer having a controlling party.
Transactions with related parties
As part of the placing of 666,666,667 ordinary shares by the Company on 11 February 2015, Mr Hamish Ogston acquired
264,144,352 ordinary shares through his family investment vehicle Milton Magna Limited for consideration of £7,924,000 and
Schroder Investment Management Limited acquired 61,437,285 ordinary shares for consideration of £1,843,000. Both parties
were substantial shareholders in the Group prior to the placing.
As part of the MSP, key management personnel of the Group purchased investment shares on 25 June 2015, for total
consideration of £210,000.
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 2015 6 months ended 30 June 2014 Year ended 31 December 2014
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Short term employee benefits 1,322 875 2,133
Post-employment benefits 48 45 100
Termination benefits 235 - -
Share based payments 265 9 8
1,870 929 2,241
This information is provided by RNS
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