TIDMCPP
RNS Number : 2417M
CPPGroup Plc
22 August 2013
CPPGROUP PLC
22 AUGUST 2013
HALF YEAR REPORT
FOR THE SIX MONTHS ENDED 30 JUNE 2013
CPPGroup Plc
Half year report for the six months ended 30 June 2013
CPPGroup Plc ("CPP" or the "Group") today publishes its results
for the six months ended 30 June 2013.
Overview
-- Important milestones achieved from which the Group can move forward
o Secured three-year refinancing totalling approximately GBP36.0
million
o Disposal of North American business completed for a
consideration of GBP26.1 million
o Cost reduction programme expected to result in approximately
GBP9.0 million annualised benefit
-- As expected, challenging trading conditions continue
o Group revenue from continuing operations of GBP99.7 million
(H1 2012 (restated): GBP136.9 million)
o Underlying operating loss from continuing operations of GBP3.5
million (H1 2012 (restated): profit GBP14.0 million)
o Loss for the period from continuing and discontinued
operations is GBP2.6 million (H1 2012: profit GBP4.4 million)
-- Renewal rates have declined from 73.5% at the year end to
71.3%; although stabilised in recent months
-- Live policy base reduced to 7.9 million (H1 2012: 10.1
million) impacted by our performance in the UK
-- Net funds position of GBP38.8 million (H1 2012: GBP8.0
million) - see note 5 to highlights table for analysis of net
funds
-- Past business review programme through a proposed Scheme of
Arrangement formalised with the FCA and certain of the Group's
Business Partners
-- Outlook: despite the short to medium term challenges that
remain, particularly until redress is completed, the Group's
developing markets and focused new product development initiatives
are expected to provide longer term growth prospects for the
Group
Paul Stobart, Chief Executive Officer, commented:
"In the first half of the year, the Group has made good
progress. A number of milestones have been achieved against the
background of the current operating environment, which continues to
affect our trading performance. We have refinanced the Group,
disposed of the North American business, restructured our UK
business and reduced our costs for the next phase of the Group's
development.
We are in the early stages of rebuilding the Group and although
challenges and uncertainties remain, particularly in relation to
the upcoming past business review programme, we are focused on
moving the business forward with a view to realising the potential
opportunities that will deliver our future growth."
As announced on 3 May 2013, the Group completed the sale of its
North American business to AMT Warranty Corp. ("AmTrust"). As a
result, this statement focuses on the performance of the continuing
operations of the Group.
Highlights - Continuing Operations Six months ended 30 June 2013 Six months ended 30 June 2012(1)
------------------------------------------------ ------------------------------ ---------------------------------
Revenue (GBP millions) 99.7 136.9
Operating (loss)/profit (GBP millions)
- Reported (9.7) 2.3
- Underlying(2) (3.5) 14.0
(Loss)/profit before tax (GBP millions)
- Reported (11.7) 1.7
- Underlying(2) (5.4) 13.4
(Loss)/profit after tax (GBP millions)
- Reported (15.8) 0.7
- Underlying(3) (9.6) 9.6
(Loss)/profit for the period(4) (GBP millions) (2.6) 4.4
Basic (loss)/earnings per share (pence)
- Reported (9.23) 0.44
- Underlying (5.60) 5.65
Net funds(5) (GBP millions) 38.8 8.0
1. Restated to reflect the North American operation as discontinued.
2. Underlying operating (loss)/profit and underlying
(loss)/profit before tax exclude exceptional items GBP6.2 million
(H1 2012: GBP11.8 million). Further detail is provided in note 4 to
the condensed financial statements.
3. Underlying (loss)/profit after tax exclude exceptional items
net of tax GBP6.2 million (H1 2012: GBP8.9 million). The tax effect
of the exceptional items is GBPnil (H1 2012: GBP2.9 million).
Further detail is provided in note 4 to the condensed financial
statements.
4. (Loss)/profit for the period includes profit after tax from
continuing and discontinued operations.
5. Net funds comprises cash and cash equivalents of GBP62.6
million (H1 2012: GBP51.2 million) partially offset by bank loans
of GBP23.8 million (H1 2012: GBP43.2 million). Cash and cash
equivalents includes cash held for regulatory purposes of GBP21.8
million (H1 2012: GBP22.8 million) and cash restricted by the terms
of the VVOPs within the UK's regulated entities of GBP29.8 million
(H1 2012: GBPnil). Whilst not available to the wider Group, the
restricted cash is available to the regulated entity in which it
exists including for operational and customer redress purposes.
A conference call for investors and analysts will be held on 22
August 2013 at 8:00 a.m. (BST). For dial in details please contact
Tulchan Communications on 020 7353 4200 or via e-mail
cpp@tulchangroup.com
Note: Financial Conduct Authority ("FCA") (or, as the context
may require, the Financial Services Authority as predecessor entity
thereto prior to 1 April 2013)
Enquiries
Investor Relations
CPPGroup Plc
Paul Stobart, Chief Executive Officer
Shaun Parker, Chief Financial Officer
Tel: +44 (0)1904 544702
Helen Spivey, Head of Corporate and Investor Communications
Tel: +44 (0)1904 544387
Media
Tulchan Communications: David Allchurch; Martin Robinson
Tel: +44 (0)20 7353 4200
This half year report is available for download at
www.cppgroupplc.com
REGISTERED OFFICE
CPPGroup Plc
Holgate Park
York
YO26 4GA
Registered number: 07151159
NOTES TO EDITORS
CPPGroup Plc ("CPP" or "The Group") is an International
Assistance business operating in the UK and overseas with more than
200 Business Partners worldwide. Via its Business Partners, CPP
provides Life Assistance products to consumers, which includes
annually renewed and packaged products that provide assistance and
insurance across a wide range of market sectors designed to make
everyday life easier to manage.
CHIEF EXECUTIVE OFFICER'S REVIEW
OVERVIEW
The Group has achieved much in the first half of 2013 to support
the repositioning of the Group and stabilise the business for the
future. We successfully refinanced the Group, disposed of our North
American business, implemented a restructuring programme in the UK
and put in place initiatives aimed at cost reduction and cash
management. In parallel, we have continued the work to reposition
the Group as a customer-led business as well as made further
on-going improvements to our governance, compliance and risk
management capabilities.
A key priority for the Group in the period has been to ensure
that we have appropriate borrowing facilities in place. As
announced on 31 July 2013, we have agreed new financing
arrangements comprising an extended three year facility with our
existing lenders and an agreement with certain Business Partners to
defer future commission payments for up to four years. The new
financing arrangements will support the payment of redress to
customers where required and provide working capital for the Group.
The redress is estimated at response rates that the Board, on
advice, believes to be appropriate; however, there remains material
uncertainty as to the total amount payable under the Scheme of
Arrangement.
In May 2013, the Group announced its intention to reposition the
business model and reduce costs substantially in order to align its
cost base with its current circumstances. The resulting
restructuring programme is delivering against its objectives and
was completed as planned in the UK, incurring an exceptional charge
of GBP3.9 million. The annual net reduction in costs is expected to
be approximately GBP9.0 million. Regrettably, our people have been
impacted as a result of cost-reduction initiatives, particularly in
the UK, which have inevitably resulted in many long standing and
valued colleagues leaving the business.
As part of the restructuring and reflecting the Group's much
reduced scale, Shaun Parker, CFO, and I will step down from our
respective roles once an appropriate handover period is completed.
The Group is at an advanced stage to appoint successors who will
lead the Group forward. In addition, as announced in June 2013, Mr
Hamish Macgregor Ogston CBE, a Non-Executive Director and founder
of the business stepped down from the Board with effect from 28
June 2013.
OPERATIONAL PERFORMANCE
The Group's operating performance for the first half, as
expected, continues to reflect the difficult operating environment.
Group revenue from continuing operations has declined to GBP99.7
million (H1 2012 (restated): GBP136.9 million). This is primarily
due to reduced Card Protection and Identity Protection renewal
revenue and reduced Mobile Phone Insurance ("MPI") revenue in the
UK together with adverse economic and market conditions in some of
our operations overseas. This results in an underlying operating
loss from continuing operations of GBP3.5 million (H1 2012
(restated): profit GBP14.0 million). The loss for the period from
continuing and discontinued operations is GBP2.6 million (H1 2012:
profit GBP4.4 million). Renewal rates have declined from 73.5% at
the year end to 71.3% (H1 2012: 75.3%), although have stabilised in
recent months. The live policy base has reduced to 7.9 million (H1
2012: 10.1 million) reflecting the decline in retail assistance
policies principally due to a reduction in UK Card Protection and
Identity Protection policy holders and loss of the RBS MPI contract
in the UK when it expired in March 2013.
REFINANCING
On 3 May 2013, the Group completed the sale of the North
American business (CPPNA Holdings Inc. and its subsidiaries) to
AmTrust for a total cash consideration of GBP26.1 million ($40
million). The sale allowed the Group to amend and extend its
existing bank facility until 30 September 2013, subsequently
leading to the refinancing agreed with our existing lenders and
certain Business Partners as announced on 31 July 2013. This
financing, of approximately GBP36.0 million, comprises a total
amount available under an extended facility with our existing
lenders of GBP13.0 million, which will fall due for repayment on 31
July 2016, together with a total amount of commission due for
payment to certain Business Partners between July 2013 and June
2014 of approximately GBP23.0 million, which will be deferred for
repayment on 31 July 2017. As previously communicated on 31 July
2013, the bank facility contains covenants and events of default.
There is a significant risk that trading and customer redress
uncertainties could impact the Group's ability to comply with the
terms of these borrowing facilities.
CUSTOMER REDRESS
The Group and certain of its Business Partners have now
formalised a past business review programme with the FCA. The
solvent Scheme of Arrangement ("Scheme") is the proposed vehicle
through which CPP and certain of its Business Partners can review
claims and, where appropriate, pay redress to customers that may
have been affected as a result of historical issues in the UK
business, in and before 2011. The proposed Scheme requires a vote
in favour from customers and approval by the Court before it
becomes effective. Initial customer contact letters will be issued
towards the end of August and customers will then be invited
towards the end of the year to vote on the Scheme and to return
their voting forms. If customers vote in favour of the Scheme it
then requires approval from the High Court, expected to be in the
first quarter of 2014. Only once the Scheme is approved by the
Court will the claims review process commence and redress paid as
appropriate to those who are entitled.
The Group will only be responsible for funding redress paid
under the Scheme to customers to whom it sold the products
directly. Due to the uncertainty of how many customers will respond
to the past business review programme through the proposed Scheme,
there remains material uncertainty as to the total amount payable
under the Scheme, which is currently expected to be determined in
the first quarter of 2015. Consequently, the Group will continue to
face uncertainty in the short to medium term.
Total costs and provisions made in the Group's financial
statements have increased from GBP51.7 million at 31 December 2012
to GBP54.0 million. The fine instalment of GBP2.0 million, due by 1
June 2013 under the settlement agreed with the FCA, has, with FCA
agreement, been deferred until April 2014, on the basis that the
Scheme of Arrangement goes ahead.
LOOKING AHEAD
Our priorities place great emphasis on reshaping our business
model and reducing our costs to reflect the Group's changed
circumstances. In parallel, our commitment is to manage redress
effectively through the proposed Scheme and continue to work on the
initiatives and enhancements agreed with the FCA which has placed
restrictions on the Group's regulated entities in the form of the
Voluntary Variations of Permissions ("VVOP") agreed with the FCA in
November 2012. We will also work towards developing differentiated
products and service offerings as we seek to generate future
revenue with particular focus on emerging and developing markets.
We intend to maintain and strengthen current Business Partner
relationships as well as secure new partnerships.
We are in the early stages of rebuilding the Group and there is
much work ahead. Our efforts are clearly focused on moving the
business forward and realising the potential opportunities which
will deliver growth in the future. In the longer term and once
customer redress is concluded, the Group will have a stronger
position to take advantage of future opportunities. Nonetheless,
challenges and uncertainties remain and performance for 2013 is
expected to be significantly lower than 2012 reflecting the trends
of the first half of the year. The Group, however, is expected to
continue to generate operating cash flow during 2013. The Board
believes that the changes we have made and the actions we are
taking to reshape our business represent the right combination,
providing a more stable environment from which we can accomplish
our goals.
FINANCIAL AND OPERATING REVIEW
SUMMARY
This review includes analysis of the underlying performance of
the Group, which excludes exceptional items. We believe that the
underlying figures aid comparison and understanding of the Group's
financial performance.
The Group completed the sale of its North American business,
CPPNA Holdings Inc. and its subsidiaries to AmTrust on 3 May 2013
for a consideration of GBP26.1 million ($40 million). Consequently
the North American business is presented as a discontinued
operation within this review. This review focuses on the
performance of the continuing operations of the Group.
On a constant currency basis, Group revenue has declined by 28%
for the half year to GBP99.7 million, principally due to the UK
from reduced Card Protection and Identity Protection renewals and
the loss of the T-Mobile and RBS MPI contracts in October 2012 and
March 2013 respectively.
Our performance in the first half of the year changed from a
reported operating profit in 2012 to a reported operating loss of
GBP9.7 million (H1 2012: profit GBP2.3 million). Underlying
operating loss, which excludes exceptional items is GBP3.5 million
(H1 2012: underlying operating profit GBP14.0 million). This has
been impacted by UK factors including lower Card Protection and
Identity Protection sales and increased Packaged and wholesale
direct costs, partially offset by reduced overheads, which reflects
the benefit of measures taken in 2012 to reduce the overhead
base.
In calculating underlying operating loss, the Group's results
are adjusted to arrive at measures that better reflect its
underlying performance. Reported operating loss is adjusted for
customer redress and associated costs for the period which are
GBP2.4 million; this additional provision reflects our latest
estimate of customer redress and associated costs to the Group. A
further adjustment for restructuring costs of GBP3.9 million
relates to redundancy costs that have been incurred as part of the
Group's overall review of its cost base, along with costs
associated with the closure of the Chesterfield office in the UK.
Further detail of the exceptional items is provided in note 4 to
the condensed financial statements.
Our performance after tax from continuing operations has moved
from a reported profit after tax in 2012 to a reported loss after
tax of GBP15.8 million (H1 2012: profit after tax GBP0.7 million).
Underlying loss after tax, which excludes exceptional items, is
GBP9.6 million. Underlying loss per share is 5.60 pence (H1 2012:
underlying earnings per share 5.65 pence); basic loss per share is
9.23 pence (H1 2012: earnings per share 0.44 pence).
In light of current operating performance, the Group will not be
declaring an interim dividend for 2013 and is unlikely to declare
dividends during 2014.
Discontinued operations, which represent the Group's North
American business, delivered profit after tax of GBP13.3 million,
which includes GBP10.4 million profit on the disposal of the
business and GBP2.9 million profit after tax in relation to the
trading results of the segment prior to disposal. Further detail is
provided in note 8 to the condensed financial statements.
The Group's reported loss for the period is GBP2.6 million (H1
2012: profit GBP4.4 million), which reflects the total of
continuing and discontinued operations.
Net funds at 30 June 2013 were GBP38.8 million, an increase of
GBP25.2 million from our position at 31 December 2012, due
principally to the disposal of the North American business, the net
proceeds of which were used to part repay the existing bank
facility.
KEY PERFORMANCE INDICATORS
Six months ended Year ended
Six months ended 30 June 2012 31 December 2012
Continuing operations 30 June 2013 (restated)(1) (restated)(1)
New assistance income
(GBP millions) (see
table below) 14.0 21.6 43.9
========================= ================ ================ =================
Annual renewal rate (%) 71.3 75.3 73.5
========================= ================ ================ =================
Live policies (millions)
(see table below) 7.9 10.1 9.1
========================= ================ ================ =================
Cost/income ratio (%) 74 60 61
========================= ================ ================ =================
Operating (loss)/profit
margin (%)(2) (3.5) 10.3 9.7
---------------- ---------------- -----------------
1. Continuing operations have been restated to reflect the North
American operation as discontinued.
2. Underlying operating (loss)/profit as a percentage of revenue.
New assistance income Six months ended Six months ended Year ended
(GBP millions) 30 June 2013 30 June 2012 31 December 2012
Retail products 5.1 7.2 14.9
======================= ================ ================ =================
Packaged and wholesale 8.9 14.4 29.0
---------------- ---------------- -----------------
Total 14.0 21.6 43.9
---------------- ---------------- -----------------
Six months ended Six months ended Year ended
Live policies (millions) 30 June 2013 30 June 2012 31 December 2012
Retail assistance policies 4.4 5.6 5.0
=========================== ================ ================ =================
Retail insurance policies 0.4 0.6 0.5
=========================== ================ ================ =================
Packaged and wholesale
policies 3.2 3.9 3.7
---------------- ---------------- -----------------
Total 7.9 10.1 9.1
---------------- ---------------- -----------------
New assistance income for the half year decreased 35% to GBP14.0
million. The decline is principally due to reduced Packaged Account
and Airport Angel sales in the UK, which reflects lost contracts in
the period.
The Group annual renewal rate at 71.3%, calculated on a moving
annual total basis, has declined from 73.5% at 31 December 2012.
This is the result of the expected decline in Card Protection and
Identity Protection renewal rates in the UK due to a combination of
changes in the renewal process implemented in late 2012, continued
adverse publicity surrounding the Group and general economic
factors in the UK. However, notwithstanding the impact of these
factors, the UK rate is beginning to stabilise.
The live policy base is 1.2 million lower than reported at 31
December 2012, mostly reflecting the loss of the RBS MPI contract
in the UK when it expired in March 2013. Outside of the UK the
policy base has declined marginally.
The cost/income ratio has increased from 60% to 74% due largely
to the UK as a result of declining Card Protection and Identity
Protection renewal revenue and increasing direct costs attached to
our wholesale MPI, partly offset by a reducing overhead base
following the redundancy programme in 2012.
As expected, the underlying operating margin at the half year
has moved from a profit in 2012 to a loss of 3.5% (H1 2012: profit
10.3%). This movement is due to a decline in Card Protection and
Identity Protection renewal revenue and reduced wholesale margins
in the UK as a result of increased direct costs.
REGIONAL PERFORMANCE
Northern Europe
Operating in the UK, Ireland, Germany and Turkey; Northern
Europe, which accounts for 79% of Group half year revenue,
continued to be impacted by a challenging operating environment
primarily as a result of restricted sales and reduced Card
Protection and Identity Protection renewal revenues in the UK and
loss of Business Partner contracts. Revenue has decreased 30% on a
constant currency basis compared to the same period in 2012 to
GBP79.2 million (H1 2012: GBP113.6 million) resulting in an
underlying operating loss for the half year to GBP6.3 million (H1
2012: profit GBP10.4 million).
In the UK, as a consequence of the challenging operating
environment revenue for the six months to 30 June 2013 declined 33%
due to the impact of reduced Card Protection and Identity
Protection renewal revenue and reduced MPI revenue following the
loss of the T-Mobile and RBS contracts in October 2012 and March
2013 respectively. This combination has resulted in a much reduced
operational scale in the UK and subsequently, a significant
restructuring programme has recently been completed.
Within the UK business, we have implemented a new organisation
structure in order to reduce our costs in line with our current
circumstances. This has also resulted in a reduction in the number
of roles in the UK, including senior management. Shaun
Astley-Stone, interim UK Managing Director, has now stepped down
following completion of a planned handover period. The UK operation
has transitioned from our previous framework of four strategic
business units to two strategic business units focused on insurance
(intermediation and underwriting) and assistance products
(including Airport Angel) respectively, each led by a General
Manager.
The Santander (UK) contract for the provision of benefits and
services relating to Packaged Accounts in the UK will cease from
October 2013, as previously indicated. This will result in reduced
revenue from the fourth quarter of 2013 and significantly lower
revenue and profit for the Packaged Account business in the UK in
2014 and beyond.
Revenue reduced in our Airport Angel business due to the loss of
a significant Business Partner in the period. Our focus continues
to be to develop the product offering and grow the customer base to
support future revenue growth. We were pleased to secure a new
contract in the first half of 2013.
Our revenue performance in Ireland, Germany and Turkey has
developed in line with our expectations during the period.
Home 3, the Group's joint venture with Mapfre Asistencia has
developed at a slower rate than anticipated. In view of the
requirement to reposition the business model and review of the
Group's core propositions, the Group is currently reviewing the
strategic fit of this joint venture.
Southern Europe and Latin America
Operating in Spain, Italy, Portugal, France, Brazil and Mexico;
Southern Europe & Latin America, which accounts for 17% of
Group half year revenue, has continued the trends reflective of the
challenging operating environment, primarily in the Eurozone.
Revenue has decreased 17% on a constant currency basis compared to
the same period in 2012 to GBP17.2 million (H1 2012: GBP20.0
million). Reflective of the operating environment and as a result
of the UK VVOP restrictions which had an impact in Italy, Portugal
and Spain, underlying operating profit has consequently declined to
GBP3.8 million (H1 2012: GBP4.6 million), 20% lower on a constant
currency basis. The Group has implemented changes to reduce the
impact of these restrictions which has included obtaining local
authorisation to sell insurance products. We were pleased to
confirm relationships with new Business Partners, including Samsung
in Italy providing MPI, and in addition have launched new campaigns
in Spain. Our performance in Latin America has realised revenue
growth in Mexico and market entry activities continued in
Brazil.
Asia Pacific
Asia Pacific, which represents 3% of Group half year revenue,
operates in Hong Kong, Singapore, Malaysia, India and China.
Revenue reduced marginally, by 1% on a constant currency basis
compared to the same period in 2012 at GBP3.3 million (H1 2012:
GBP3.3 million). Operating losses reduced on a constant currency
basis by 14% to GBP0.7 million (H1 2012: GBP0.8 million), although
the development of this region continues to be impacted by
challenging trading conditions.
North America
Disposal
On 3 May 2013 the Group completed the sale of its North American
business for a total cash consideration of GBP26.1 million ($40
million) to AmTrust, a Delaware corporation and wholly owned
subsidiary of AmTrust Financial Services, Inc.
TOTAL CUSTOMER REDRESS AND ASSOCIATED COSTS
H1 2013 2012 2011 Total
GBP'm GBP'm GBP'm GBP'm
Redress of CPP direct sales 1.4 8.4 7.7 17.5
------- ------- ------ ------
Other redress 0.5 5.8 2.1 8.4
------- ------- ------ ------
Complaints redress 0.5 2.7 - 3.2
------- ------- ------ ------
Regulatory penalties(1) - 8.5 2.0 10.5
------- ------- ------ ------
Advisor fees - 9.4 5.1 14.5
------- ------- ------ ------
Total 2.4 34.8 16.9 54.0
------- ------- ------ ------
1. GBP2.0 million of which has been paid and GBP8.5 million is
recognised in current and non-current payables
The Group has incurred expenditure on, and provided for,
customer redress and associated costs and regulatory penalties. The
total cost is currently estimated to be GBP54.0 million, of which
GBP51.7 million has been recognised in prior periods. GBP20.7
million of the provision within the balance sheet has already been
utilised. The remaining provision at 30 June 2013 is GBP24.8
million, with GBP21.0 million estimated as the remaining cost of
the customer redress element of the overall provision.
TAXATION
Our effective tax rate at the half year is negative 35.9% (H1
2012: 60.1%) as a result of UK trading losses and overseas trading
profits which cannot be offset. In addition to this, the
de-recognition of a deferred tax asset in respect of capital
allowances in the UK has further increased the charge as the Group
does not expect taxable profits to arise within the UK in the
immediate future. Similarly, no deferred tax asset has been
recognised on surplus taxable losses arising in the period. All
taxable profit has been generated in overseas territories.
BALANCE SHEET, FINANCING AND CASH FLOW
June 2013 December 2012
GBP'm GBP'm
Non-current assets 26.3 33.2
----------------------------------- --------- -------------
Assets held for sale - 20.0
=================================== ========= =============
Other current assets 100.2 109.8
--------- -------------
100.2 129.8
=================================== ========= =============
Provisions (26.5) (29.0)
=================================== ========= =============
Bank loan (23.8) (43.4)
=================================== ========= =============
Other current liabilities (66.3) (66.5)
=================================== ========= =============
Liabilities associated with assets
held for sale - (7.1)
--------- -------------
(116.6) (146.0)
--------- -------------
Net current liabilities (16.4) (16.2)
--------- -------------
Non-current liabilities (4.0) (7.2)
--------- -------------
Total net assets 5.9 9.7
--------- -------------
At the balance sheet date, the Group has consolidated net assets
of GBP5.9 million, a decrease from the position at the 31 December
2012 due to the losses recognised in the period. Net assets held
for sale are GBPnil (31 December 2012: GBP12.9 million) reflecting
the disposal of the North American business on 3 May 2013.
Provisions of GBP26.5 million (31 December 2012: GBP29.0 million)
are predominantly for customer redress and associated costs. It is
anticipated that the provision will be fully utilised within twelve
months. Bank loans have reduced to GBP23.8 million (31 December
2012: GBP43.4 million), reflecting an GBP18.5 million repayment in
the period funded principally by the disposal of the North American
business.
On 31 July 2013, the Group confirmed new financing arrangements
totalling approximately GBP36.0 million. The arrangement comprises
GBP13.0 million being provided by a three year extension of the
debt facility to 31 July 2016 and approximately GBP23.0 million
being provided through a twelve month deferral of future commission
payments to certain Business Partners, with repayment due on 31
July 2017. The agreements, of which the commission deferral is
subordinate to the bank facility, are subject to certain covenants
and events of default as announced on 31 July 2013. There is a
significant risk that trading and customer redress uncertainties
could impact the Group's ability to comply with the terms of these
agreements.
As a result of the financing arrangement noted above, the shape
of the balance sheet is changing post 30 June 2013. The bank loan
of GBP23.8 million (GBP25.0 million debt net of GBP1.2 million debt
issue costs) disclosed in current liabilities has now been replaced
by a GBP13.0 million non-current liability representing the three
year facility. The commission deferral agreement will result in the
incremental build-up of a non-current liability as the commissions
are deferred on a monthly basis over a period of twelve months to
June 2014. The new financing arrangements will therefore, result in
current borrowings being replaced by non-current borrowings,
reflecting the medium term stability the arrangement provides.
Net finance costs for the half year have increased by GBP1.3
million to GBP1.9 million, reflecting the amortisation of GBP1.3
million (H1 2012: GBP0.4 million) debt issue costs in the period
and GBP0.3 million arrangement fee in relation to the two week
facility extension in April 2013.
The Group had net funds of GBP38.8 million at 30 June 2013 an
increase from GBP13.6 million at 31 December 2012, as a result of
net disposal proceeds from the North American business and
favourable working capital movements, partially offset by fees paid
in relation to the refinancing arrangements. The Group's insurance
business maintains cash deposits for solvency purposes which were
GBP21.8 million (H1 2012: GBP22.8 million) at 30 June 2013. The
working capital requirement has reduced by GBP14.2 million (H1
2012: increase GBP10.2 million) during the period reflecting the
conclusion of certain Packaged Account and wholesale contracts and
settlement of associated balances along with a reduction in the
Group's insurance balances.
CONTINGENT LIABILITIES
There remains material uncertainty in some of the Group's
operations and the industry in which it operates in the UK. The
uncertainties include possible industry-wide action by the FCA with
regard to products that the UK business sells together with the
thematic review conducted by the FCA into MPI products, which could
result in claims or other matters being raised against the
Group.
The Directors have considered the above matters and have decided
no definitive conclusions can be formed at this stage. Therefore,
there is no provision of any related contingent liabilities.
Further detail is provided in note 15 to the condensed financial
statements.
RELATED PARTY TRANSACTIONS
Related party transactions, comprise transactions with our Home
3 joint venture, an agreement to reimburse certain costs incurred
by Mr Hamish Macgregor Ogston CBE, incentive arrangements with
certain North America employees in relation to the disposal of the
North American business and remuneration of key management
personnel. These related party transactions are disclosed in note
17 to the condensed financial statements. There have been no
material changes to the related party transactions described in our
2012 Annual Report and Accounts.
RISKS AND UNCERTAINTIES
The Group's risk management framework is designed to identify
and assess the likelihood and consequences of risk and to manage
the actions necessary to mitigate their impact.
Set out below are the known principal risks and uncertainties
which could have a material impact on the Group together with the
corresponding mitigating actions that have been taken. Additional
risks not currently known, or which are currently regarded as
immaterial, could also affect future performance.
Financial risks
Risk:Liquidity/Capital.
Status:High risk; Improving from year end.
Nature of risk and potential impact:
There remains uncertainty as to the total amount payable under
the past business review programme through the proposed Scheme.
This, together with the on-going regulatory restrictions in respect
of regulated sales in the UK, continues to place constraints on the
Group's cash flow.
There is a risk that trading and customer redress uncertainties
could impact the Group's ability to comply with the terms of the
borrowing facilities. Further detail on the risk is provided in the
going concern statement.
Mitigation:
The Group has considerably reduced its cost base following the
restructure programme announced on 16 May 2013 and has introduced
new controls to ensure that all expenditure is necessary and timed
appropriately. These measures are to ensure that the Group is able
to comply with the terms of the new financing arrangements.
Market risks
Risk:Economic and political.
Status:Medium risk; No change from year end.
Nature of risk and potential impact:
The Group operates in a number of countries including some in
the Eurozone. This means that the Group is exposed to economic,
political and business risks such as global recession, sudden
regulatory change, currency controls and volatility of taxes.
Mitigation:
The Group Executive Committee ("GEC") and Group Operations
Committee ("GOC") monitor macro-economic trends, industry specific
and internal indicators.
Operating in diversified geographic markets mitigates the risk
of over-exposure to any one country.
Risk:Competitive markets.
Status:Medium risk; No change from year end.
Nature of risk and potential impact:
The Group operates in a very competitive market place where
customer decisions are typically based on quality, price and
service. On-going media speculation may also result in customers
seeking alternative suppliers for their insurance and assistance
service requirements.
Mitigation:
The GEC closely monitors market activity.
The Group's strategy is to place the customer at the heart of
its consideration of any potential developments.
The Group constantly seeks new distribution partners and
conducts research and strategy planning towards innovative product
development.
Operational risks
Risk:Regulatory.
Status:High risk; Reduced from year end.
Nature of risk and potential impact:
Although the Group has worked closely to address issues
identified by the FCA, there can be no certainty the FCA will not
seek to pursue further action against parts of the Group.
Improved controls in our UK business have identified further
areas for improvement around systems, processes and business rules.
It is possible that as our improved governance process and policies
are rolled out across our overseas territories, similar weaknesses
to those already known in the UK may be identified.
Mitigation:
The management are in constant communication with the FCA with a
view to concluding the necessary outstanding actions.
The UK business has worked closely with the FCA on a series of
agreed improvement activities and continues to work on an
improvement programme that is expected to extend into 2014.
At the same time the Board recognises the need to continue to
improve its oversight of activities in the territories outside the
UK and has already taken steps to ensure that it has improved
management information. During the second half of 2013, a new
self-certification programme will be introduced to demonstrate
compliance with a set of Group wide operational standards.
Risk: Key Supplier Contracts.
Status:Medium risk; Reduced from year end.
Nature of risk and potential impact:
The Group places considerable reliance on external suppliers for
the fulfilment of services. Due to the nature of the operations
there are occasions where the Group has an exposure to, and is at
risk from the failure of a single supplier.
Mitigation:
The Group has taken the opportunity to improve its controls and
where possible consider ways to mitigate the risks posed by
exposure to a single supplier. This has included identifying and
contracting with alternative suppliers.
Risk:Business Partner Retention/Attraction.
Status:High risk; No change from year end.
Nature of risk and potential impact:
The reputational damage arising from the publicity of the
regulatory actions in the UK and in addition, the sales
restrictions as a result of the VVOP in the UK and its impact on
EEA jurisdictions may result in increased difficulty to retain
commercial relationships or create new partnerships. This may have
a detrimental impact on anticipated future revenue.
Mitigation:
With three year refinancing secured, the Board and senior
management team are working on a new strategy for the UK that
includes the development of new innovative products, new market
sectors and diversified channels to market.
Risk:Data Security.
Status:Medium risk; No change from year end.
Nature of risk and potential impact:
The nature of the Group's business means that either the Group
or its key Business Partners retain a considerable amount of
sensitive data on behalf of its customers. Any breach of data
security may result in a significant adverse impact on customers
and damage to the reputation of the Group.
Mitigation:
The Group has a programme of work to support the implementation
of solutions which meet PCI DSS standards.
Risk:People & Resources.
Status:High risk; Increased from year end.
Nature of risk and potential impact:
In order to reduce costs and align resources to the restructured
business model, the Group has implemented a redundancy programme in
the first half of 2013. This, together with attrition due to
uncertainty around the future of the Group, has placed increased
workload on those people who remain. In addition, changes to the
Board and senior management may result in a period of uncertainty
and further loss of business knowledge.
Mitigation:
The Directors have in place a monitoring system to understand
the impact on the Group and its employees to ensure that the Group
continues to improve its customer centricity and improved
operational efficiency.
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 the foreseeable future.
The Group has made progress since the release of the Annual
Report and Accounts in April 2013. The Group has agreed new
financing arrangements for a total of approximately GBP36 million,
with GBP13 million being provided by a three year extension of the
debt facility to 31 July 2016 and approximately GBP23 million being
provided through a twelve month deferral of commission payments to
certain Business Partners, with repayment due on 31 July 2017. The
disposal of the North American business has been completed with the
net disposal proceeds being used to repay part of the debt
facility. Additionally measures taken by the Group to address its
cost base, such as redundancy programmes in the UK in 2012 and
2013, closure of the Chesterfield site in the UK in May 2013, a
streamlining of the Group's organisational structure and other cost
saving initiatives, such as reductions in capital expenditure, have
had and will continue to have a beneficial impact on the Group's
overhead base.
Nevertheless, in spite of this progress a level of uncertainty
remains. The Directors have considered the risks and uncertainties
facing the Group, which include trading, customer redress and
liquidity, together with actions taken by the Directors to address
them. In this assessment the Directors have, amongst other things,
taken the following into consideration:
Operational and trading matters
-- The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chief Executive Officer's review. The trading
results, particularly in the UK have been and will continue to be
adversely affected by the agreement of the Group's subsidiaries
Card Protection Plan Ltd ("CPPL") and Homecare Insurance Limited
("HIL") with the FCA to the VVOPs in November 2012. Amongst other
requirements, the VVOPs do not permit CPPL or HIL to make new sales
of regulated retail products. CPPL and HIL make up the majority of
the Group's sales in the UK and in certain EEA countries
specifically Italy, Ireland and Portugal. In addition, the CPPL
past business review exercise agreed with the FCA, together with
the associated publicity, will have an adverse impact on the
Group's ability to generate new business and renew business with
existing customers.
-- As noted above, the Group has taken a number of actions to
align its operations with the reduced size of its business,
particularly in the UK. There is a risk that following
implementation of these initiatives, operational resources may be
impacted adversely in the short term, preventing the business from
continuing to operate effectively.
Regulatory issues and customer redress uncertainties
-- The potential impact of customer redress on the continued
resources which may be required by the business, including a number
of assumptions around the customer response rates within a past
business review exercise. There is a risk that the response rates
may reach a level which cannot be funded under the revised funding
arrangements. Although the Scheme has been formalised, it is not
certain that the Scheme will proceed.
-- The Directors have identified and disclosed contingent
liabilities which are detailed in note 15 of the condensed
financial statements. These contingencies relate to uncertainty in
some of the Group's operations and the industry in which it
operates in the UK. These include possible industry-wide action by
the FCA with regard to products that the UK business sells together
with a thematic review conducted by the FCA into Mobile Phone
Insurance products which could result in other claims or matters
being raised against the Group. However, at present the FCA has not
expressed any final view and as a result the Directors have
determined that no definitive conclusions can be formed at this
stage.
Uncertainties relating to liquidity
-- As noted above, the Group has agreed to a financing
arrangement for approximately GBP36 million, comprising a GBP13
million extension to the bank debt facility and approximately GBP23
million debt via future Business Partner commission deferral. The
extended debt facility is subject to a number of financial
covenants, which include a covenant relating to a maximum level of
response rates in a past business review exercise. The Business
Partner commission deferral agreement, although subordinate,
provides substantially the same security as that granted under the
bank debt facility. There is a risk that response rates in a past
business review exercise or continued business performance result
in the Group being unable to satisfy the covenants, which could
lead to the lending banks or Business Partners seeking repayment of
the facility or exercising their right to security over assets.
-- The financial position of the Group, its cash flows and
liquidity position are described in the Financial and Operating
Review. The Group's liquidity has been impacted by the requirement
to fund redress and the CPPL and HIL VVOPs which restrict the
disposition of their assets, which has resulted in significant cash
balances being held and maintained in these entities.
Given the possible impact of trading and customer redress
uncertainties, and the effect this could have on compliance with
the terms of the borrowing facilities, there is material
uncertainty that casts significant doubt as to the Group's ability
to continue as a going concern, and therefore it may be unable to
realise its assets and discharge its liabilities in the normal
course of business.
However, having considered the above uncertainties and all the
available information, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future and accordingly the Directors
have continued to adopt the going concern basis in preparing the
condensed financial statements.
On behalf of the Board
Paul Stobart Shaun Parker
Chief Executive Officer Chief Financial Officer
21 August 2013
CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
6 months ended
6 months ended 30 June 2012 Year ended
30 June 2013 restated (note 2) 31 December 2012
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Continuing operations
Revenue 99,705 136,904 269,869
Cost of sales (63,871) (81,083) (162,295)
Gross profit 35,834 55,821 107,574
Administrative expenses
--------------- ------------------- ------------------
Exceptional items 4 (6,231) (11,788) (43,942)
Other administrative expenses (39,101) (41,617) (80,902)
Total administrative expenses (45,332) (53,405) (124,844)
Share of loss of joint venture (226) (156) (477)
Operating (loss)/profit
--------------- ------------------- ------------------
Operating (loss)/profit before exceptional items (3,493) 14,048 26,195
--------------- ------------------- ------------------
Operating (loss)/profit after exceptional items (9,724) 2,260 (17,747)
Investment revenues 185 298 580
Other gains and losses - - (891)
Finance costs (2,113) (897) (1,869)
(Loss)/profit before taxation (11,652) 1,661 (19,927)
Taxation 5 (4,181) (999) (1,474)
(Loss)/profit for the period from continuing
operations (15,833) 662 (21,401)
--------------- ------------------- ------------------
Discontinued operations
Profit for the period from discontinued operations 8 13,257 3,786 4,171
--------------- ------------------- ------------------
(Loss)/profit for the period (2,576) 4,448 (17,230)
--------------- ------------------- ------------------
Attributable to:
Equity holders of the Company (2,576) 4,535 (17,118)
Non-controlling interests - (87) (112)
--------------- ------------------- ------------------
(2,576) 4,448 (17,230)
--------------- ------------------- ------------------
Basic (loss)/earnings per share:
Continuing operations 7 (9.23) 0.44 (12.42)
Discontinued operations 7 7.73 2.21 2.43
--------------- ------------------- ------------------
(1.50) 2.65 (9.98)
--------------- ------------------- ------------------
Diluted (loss)/earnings per share:
Continuing operations 7 (9.23) 0.43 (12.42)
Discontinued operations 7 7.73 2.16 2.43
--------------- ------------------- ------------------
(1.50) 2.60 (9.98)
--------------- ------------------- ------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended
6 months ended 30 June 2013 6 months ended 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
(Loss)/profit for the period (2,576) 4,448 (17,230)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign operations 264 (8) (616)
Currency translation differences
reclassified on disposal (1,618) - -
Other comprehensive expenses for the
period net of taxation (1,354) (8) (616)
---------------------------- ---------------------------- ------------------
Total comprehensive (expense)/income
for the period (3,930) 4,440 (17,846)
---------------------------- ---------------------------- ------------------
Attributable to:
Equity holders of the Company (3,930) 4,527 (17,734)
Non-controlling interests - (87) (112)
---------------------------- ---------------------------- ------------------
(3,930) 4,440 (17,846)
============================ ============================ ==================
CONSOLIDATED BALANCE SHEET
30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Non-current assets
Goodwill 9 1,478 16,362 1,478
Other intangible assets 9 12,664 19,475 15,458
Property, plant and equipment 9 12,186 13,640 13,316
Investment in joint venture - - -
Deferred tax asset 7 1,961 2,902
------------- ------------- -----------------
26,335 51,438 33,154
------------- ------------- -----------------
Current assets
Insurance assets 9,774 36,143 27,241
Inventories 312 331 299
Trade and other receivables 27,517 36,895 29,034
Cash and cash equivalents 10 62,554 51,205 53,198
100,157 124,574 109,772
Assets classified as held for sale 8 - - 20,007
------------- ------------- -----------------
100,157 124,574 129,779
------------- ------------- -----------------
Total assets 126,492 176,012 162,933
------------- ------------- -----------------
Current liabilities
Insurance liabilities (6,823) (8,276) (7,525)
Income tax liabilities (2,817) (2,467) (2,379)
Trade and other payables (56,665) (68,836) (56,587)
Bank loans 11 (23,768) (43,225) (43,408)
Provisions 12 (26,532) (20,339) (28,967)
(116,605) (143,143) (138,866)
------------- ------------- -----------------
Liabilities directly associated with assets held for sale 8 - - (7,130)
------------- ------------- -----------------
(116,605) (143,143) (145,996)
------------- ------------- -----------------
Net current liabilities (16,448) (18,569) (16,217)
------------- ------------- -----------------
Non-current liabilities
Deferred tax liabilities (745) (832) (716)
Trade and other payables (3,250) - (6,500)
------------- ------------- -----------------
(3,995) (832) (7,216)
------------- ------------- -----------------
Total liabilities (120,600) (143,975) (153,212)
------------- ------------- -----------------
Net assets 5,892 32,037 9,721
============= ============= =================
Equity
Share capital 13 17,118 17,109 17,111
Share premium account 33,293 33,299 33,297
Merger reserve (100,399) (100,399) (100,399)
Translation reserve 486 2,448 1,840
Equalisation reserve 8,140 7,188 7,984
ESOP reserve 11,708 11,856 11,638
Retained earnings 35,546 60,787 38,250
------------- ------------- -----------------
Total equity attributable to equity holders of the company 5,892 32,288 9,721
Non-controlling interests - (251) -
------------- ------------- -----------------
Total equity 5,892 32,037 9,721
============= ============= =================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Non-
Share premium Merger Translation Equalisation ESOP Retained controlling Total
capital account reserve reserve reserve reserve earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6 months ended
30 June 2013
(Unaudited)
At 1 January 2013 17,111 33,297 (100,399) 1,840 7,984 11,638 38,250 9,721 - 9,721
Total
comprehensive
income - - - (1,354) - - (2,576) (3,930) - (3,930)
Movement on
equalisation
reserve - - - - 156 - (156) - - -
Current tax charge
on equalisation
reserve movement - - - - - - 36 36 - 36
Equity settled
share based
payment charge - - - - - 70 - 70 - 70
Exercise of share
options 7 (4) - - - - (8) (5) - (5)
At 30 June 2013 17,118 33,293 (100,399) 486 8,140 11,708 35,546 5,892 - 5,892
======== ======== ========== ============ ============= ======== ========= ========= ============ =========
6 months ended
30 June 2012
(Unaudited)
At 1 January 2012 17,106 32,300 (100,399) 2,456 6,423 11,606 56,824 27,316 (164) 27,152
Total
comprehensive
income - - - (8) - - 4,535 4,527 (87) 4,440
Movement on
equalisation
reserve - - - - 765 - (765) - - -
Current tax charge
on equalisation
reserve movement - - - - - - 193 193 - 193
Equity settled
share based
payment - - - - - 253 - 253 - 253
Exercise of share
options 3 (1) - - - (3) - (1) - (1)
At 30 June 2012 17,109 33,299 (100,399) 2,448 7,188 11,856 60,787 32,288 (251) 32,037
======== ======== ========== ============ ============= ======== ========= ========= ============ =========
Year ended
31 December 2012
(Audited)
At 1 January 2012 17,106 33,300 (100,399) 2,456 6,423 11,606 56,824 27,316 (164) 27,152
Total
comprehensive
income - - - (616) - - (17,118) (17,734) (112) (17,846)
Movement on
equalisation
reserve - - - - 1,561 - (1,561) - - -
Current tax charge
on equalisation
reserve movement - - - - - - 382 382 - 382
Equity settled
share based
payment charge - - - - - 34 - 34 - 34
Deferred tax on
share based
payment charge - - - - - - (1) (1) - (1)
Exercise of share
options 5 (3) - - - (2) - - - -
Adjustment arising
from change in
non-controlling
interest - - - - - - (276) (276) 276 -
At 31 December
2012 17,111 33,297 (100,399) 1,840 7,984 11,638 38,250 9,721 - 9,721
======== ======== ========== ============ ============= ======== ========= ========= ============ =========
CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year ended
Note 30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Net cash from operating activities 14 11,279 509 11,086
Investing activities
Interest received 196 303 589
Purchases of property, plant and equipment (240) (1,028) (2,485)
Purchases of intangible assets (1,677) (2,461) (3,807)
Cash consideration in respect of sale of discontinued
operations 26,086 - -
Costs associated with disposal of discontinued
operations (4,841) - (905)
Cash disposed of with discontinued operations (3,731) - -
Investment in joint venture (226) (156) (477)
Net cash generated by / (used in) investing activities 15,567 (3,342) (7,085)
--------------- --------------- ------------------
Financing activities
Repayment of bank loans (18,500) - -
Interest paid (529) (735) (1,520)
Cost of refinancing (2,724) - -
Issue of ordinary share capital 3 2 2
Net cash used in financing activities (21,750) (733) (1,518)
--------------- --------------- ------------------
Net increase / (decrease) in cash and cash equivalents 5,096 (3,566) 2,438
Effect of foreign exchange rate changes 423 (153) (372)
Cash and cash equivalents at start of period 57,035 54,924 54,924
Cash and cash equivalents at end of period 62,554 51,205 57,035
=============== =============== ==================
Analysed as:
Continuing operations 10 62,544 46,704 53,198
Discontinued operations - 4,501 3,837
62,544 51,205 57,035
======= ======= =======
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1 General information
The information for the year ended 31 December 2012 does not
constitute statutory accounts as defined under Section 434 of the
Companies Act 2006. A copy of the statutory financial accounts for
that year has been delivered to the Registrar of Companies. The
Auditor, Deloitte LLP, reported on these financial statements;
their report was unqualified, but contained an emphasis of matter
paragraph referring to material uncertainties relating to the
Group's ability to continue as a going concern in the light of
operational and trading uncertainties; regulatory issues and
customer redress uncertainties; and uncertainties relating to
liquidity and funding; as well as material uncertainties in
relation to the quantification of the provision in relation to
customer redress and possible future contingent expenditures. The
report of the auditors on these financial statements did not
contain statements under s498 (2) or (3) of the Companies Act
2006.
2 Accounting policies
Basis of preparation
This unaudited condensed consolidated interim financial
information for the six months ended 30 June 2013 has been prepared
in accordance with the Disclosure and Transparency Rules ("DTR") of
the Financial Conduct Authority and with IAS 34 'Interim Financial
Reporting' as adopted by the European Union.
This condensed consolidated financial information should be read
in conjunction with the Annual Report and Financial Statements
("the Financial Statements") for the year ended 31 December 2012,
which have been prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
The condensed consolidated interim financial information was
approved for release on 21 August 2013.
In preparing the condensed consolidated interim financial
information the comparative amounts for the six months ended 30
June 2012 have been restated to reflect the North American
operation as discontinued.
In the current financial year, the Group has adopted the
amendments to IAS 1 "Presentation of Items of Other Comprehensive
Income", IAS 19 (revised 2011) "Employee Benefits" and IFRS 13
"Fair Value Measurement". The adoption of these standards has not
had any material impact on the Group. Otherwise, the same
accounting policies, presentation and methods of computation are
followed in the condensed set of financial statements as applied in
the Group's latest annual audited financial statements.
The amendments to IAS 1 require items of other comprehensive
income to be grouped by those items that will be reclassified
subsequently to profit or loss and those that will never be
reclassified, together with their associated income tax. The
amendments have been applied retrospectively, and hence the
presentation of items of comprehensive income has been restated to
reflect the change. The effect of these changes is evident from the
condensed consolidated statement of comprehensive income.
Going concern
The Directors have considered the Group's business activities
and financial resources, together with the principal risks,
uncertainties and other factors likely to affect its future
development, performance and position. Having taken account of
these factors the Directors have, at the time of approving the
condensed financial statements, a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. For this reason they continue to adopt
the going concern basis in preparing the condensed financial
statements. Further details of the Directors' assessment are set
out in the Financial and Operating Review.
3 Segmental analysis
Segment revenues and performance for the current and comparative
periods have been as follows:
Northern Southern Asia Total
Europe Europe Pacific
and Latin
America
Six months ended 30 June 2013 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited)
Continuing operations
Revenue - external sales 79,186 17,236 3,283 99,705
--------- ----------- --------- ---------
Regional operating (loss)/profit
before exceptional items and
joint ventures (6,343) 3,814 (738) (3,267)
--------- ----------- ---------
Exceptional items (note 4) (6,231)
Share of loss of joint venture (226)
---------
Operating loss after exceptional
items and joint ventures (9,724)
Investment revenues 185
Finance costs (2,113)
---------
Loss before taxation (11,652)
Taxation (4,181)
---------
Loss for the period from continuing
operations (15,833)
---------
Discontinued operations
Profit for the period from discontinued
operations (note 8) 13,257
---------
Loss for the period (2,576)
=========
Northern Southern Asia Total
Europe Europe and Pacific
Latin America
Six months ended 30 June 2012 GBP'000 GBP'000 GBP'000 GBP'000
-restated (note 2) (Unaudited)
Continuing operations
Revenue - external sales 113,566 20,043 3,295 136,904
--------- --------------- --------- ---------
Regional operating profit /
(loss) before exceptional items
and joint ventures 10,443 4,574 (813) 14,204
--------- --------------- ---------
Exceptional items (note 4) (11,788)
Share of loss of joint venture (156)
---------
Operating profit after exceptional
items and joint ventures 2,260
Investment revenues 298
Finance costs (897)
---------
Profit before taxation 1,661
Taxation (999)
---------
Profit for the period from
continuing operations 662
---------
Discontinued operations
Profit for the period from
discontinued operations (note
8) 3,786
---------
Profit for the period 4,448
=========
Northern Southern Asia Total
Europe Europe and Pacific
Latin America
Year ended 31 December 2012 GBP'000 GBP'000 GBP'000 GBP'000
(Audited)
Continuing operations
Revenue - external sales 225,775 37,550 6,544 269,869
--------- --------------- --------- ---------
Regional operating profit /
(loss) before exceptional items
and joint ventures 19,669 8,110 (1,107) 26,672
--------- --------------- ---------
Exceptional items (note 4) (43,942)
Share of loss of joint venture (477)
---------
Operating loss after exceptional
items and joint ventures (17,747)
Investment revenues 580
Other gains and losses (891)
Finance costs (1,869)
Loss before taxation (19,927)
Taxation (1,474)
---------
Loss for the year from continuing
operations (21,401)
---------
Discontinued operations
Profit for the year from discontinued
operations (note 8) 4,171
---------
Loss for the year (17,230)
=========
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
GBP1,542,000 presented within Northern Europe in the tables above
which has been charged to other regions for statutory purposes.
Segmental assets
30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Northern Europe 115,715 138,347 127,732
Southern Europe and Latin America 6,886 7,947 8,244
Asia Pacific 2,406 1,873 2,570
Total segment assets 125,007 148,167 138,546
Assets relating to discontinued operations - 9,522 7,783
Unallocated assets 1,485 18,323 16,604
Consolidated total assets 126,492 176,012 162,933
Goodwill, deferred tax and investments in joint ventures are not
allocated to segments.
Revenues from major products
6 months ended 30 6 months ended 30 Year ended
June 2013 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Continuing operations
Retail assistance policies 61,801 86,237 163,766
Retail insurance policies 16,411 20,751 41,174
Packaged and wholesale policies 20,719 26,279 56,649
Non-policy revenue 774 3,637 8,280
--------------------- --------------------- ------------------
Total continuing operations 99,705 136,904 269,869
Discontinued operations 15,634 26,005 49,802
115,339 162,909 319,671
===================== ===================== ==================
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" are those which are
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 investments in
joint ventures and deferred tax) by geographical location are
detailed below.
External revenues Non-current assets
-----------------------------------------
6 months 6 months 6 months
6 months ended Year ended ended ended Year ended
ended 30 30 June 31 December 30 June 30 June 31 December
June 2013 2012 2012 2013 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
Continuing operations
UK 71,637 106,290 211,186 24,328 34,999 28,159
Spain 10,650 11,896 21,620 508 510 529
Other 17,418 18,718 37,063 1,492 990 1,564
------------ ------------ ------------- ------------ ------------ -------------
Total continuing
operations 99,705 136,904 269,869 26,328 36,499 30,252
Discontinued operations 15,634 26,005 49,802 - 12,978 12,481
115,339 162,909 319,671 26,328 49,477 42,733
============ ============ ============= ============ ============ =============
4 Exceptional items
Year ended
6 months ended 30 June 2013 6 months ended 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Customer redress and associated
costs 2,350 7,495 26,273
Regulatory penalties - - 8,500
Restructuring costs 3,926 4,097 4,874
Strategic project costs (45) - 388
Impairment of goodwill and
intangible assets - - 3,711
Legacy scheme share based payments - 196 196
Exceptional items included in
operating (loss)/profit 6,231 11,788 43,942
Tax on exceptional items - (2,851) (5,663)
---------------------------- ---------------------------- -------------------
Total exceptional items after tax 6,231 8,937 38,279
============================
The GBP2,350,000 customer redress and associated costs in the
six month period relate to the further costs estimated to
compensate customers and professional fees associated with a
customer redress exercise.
The GBP3,926,000 restructuring costs in the six month period
relate to redundancy programmes and associated costs across the
Group, along with costs associated with the closure of the
Chesterfield office. The majority of this cost is recognised in the
UK.
The tax credit arising in respect of these items is GBPnil (H1
2012: GBP2,851,000) as a result of no tax relief being available
due to surplus tax losses existing in the UK Group.
5 Taxation
Tax for the six month period is charged at negative 35.9% (six
months ended 30 June 2012; 60.1%, year ended 31 December 2012:
negative 7.4%), a result of UK trading losses and overseas trading
profits which cannot be offset. In addition to this, the
de-recognition of a deferred tax asset in respect of capital
allowances in the UK has further increased the charge as the Group
does not expect taxable profits to arise within the UK in the
immediate future. No deferred tax asset has been recognised on
surplus taxable losses arising in the period. The 2013 full year
rate may vary from this due to the territory mix of future 2013
profits.
6 Dividends
The Directors have not proposed an interim dividend for
2013.
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.
Continuing Discontinued
Six months ended 30 June 2013 (Unaudited) operations operations Total
(Loss)/earnings GBP'000 GBP'000 GBP'000
(Loss)/earnings for the purposes of basic and diluted earnings
per share (15,833) 13,257 (2,576)
Exceptional items (net of tax) 6,231 (10,398) (4,167)
(Loss)/earnings for the purposes of underlying basic and diluted
earnings per share (9,602) 2,859 (6,743)
Number of shares Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic
and diluted (loss)/earnings
per share 171,515
(Loss)/earnings per Continuing Discontinued
share operations operations Total
Pence Pence Pence
Basic and diluted (loss)/earnings per share:
Basic and diluted shares (9.23) 7.73 (1.50)
Basic and diluted underlying (loss)/earnings per share:
Basic and diluted shares (5.60) 1.67 (3.93)
Six months ended 30 June 2012 (Unaudited) Continuing operations Discontinued operations Total
Earnings GBP'000 GBP'000 GBP'000
Earnings for the purposes of basic and diluted earnings
per share 749 3,786 4,535
Exceptional items (net of tax) 8,937 - 8,937
Earnings for the purposes of underlying basic and diluted
earnings per share 9,686 3,786 13,472
Number of shares Number
(thousands)
Weighted average number of ordinary shares for the
purposes of basic earnings per share 171,439
Effect of dilutive potential ordinary shares: share
options 3,112
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 174,551
Earnings per share Continuing operations Discontinued operations Total
Pence Pence Pence
Basic and diluted earnings per share:
Basic shares 0.44 2.21 2.65
Diluted shares 0.43 2.16 2.60
Basic and diluted underlying earnings per share:
Basic shares 5.65 2.21 7.86
Diluted shares 5.55 2.16 7.72
Continuing Discontinued
Year ended 31 December 2012 (Audited) operations operations Total
(Loss)/earnings GBP'000 GBP'000 GBP'000
(Loss)/earnings for the purposes of basic and diluted earnings per
share (21,289) 4,171 (17,118)
Exceptional items (net of tax) 38,279 2,608 40,887
Earnings for the purposes of underlying basic and diluted earnings per
share 16,990 6,779 23,769
Number of shares Number
(thousands)
Weighted average number of ordinary shares for the purposes of basic
and diluted (loss)/earnings
per share 171,457
Effect of dilutive potential ordinary shares on underlying
earnings: share options 4,095
Weighted average number of ordinary shares for the purposes of
underlying diluted earnings
per share 175,552
(Loss)/earnings Continuing Discontinued
per share operations operations Total
Pence Pence Pence
Basic and diluted (loss)/earnings per share:
Basic and diluted shares (12.42) 2.43 (9.98)
Basic and diluted underlying earnings per share:
Basic shares 9.91 3.95 13.86
Diluted shares 9.68 3.86 13.54
8 Discontinued operations
On 3 May 2013, the Group completed the sale of CPPNA Holdings
Inc. and its subsidiaries, which carried out all of the Group's
North American operations. The gross consideration on disposal was
fixed at GBP26.1 million ($40 million). The effect of the disposal
is as follows:
6 months ended
30 June 2013
GBP'000
(Unaudited)
Proceeds 26,086
Net assets sold (14,042)
Costs associated with disposal (3,264)
Currency translation differences reclassified on disposal 1,618
Profit on disposal 10,398
Profit from discontinued operations comprises the following:
6 months ended 6 months ended Year ended
30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Revenue 15,634 26,005 49,802
Cost of sales (7,962) (14,139) (26,578)
Gross profit 7,672 11,866 23,224
Administrative expenses (3,902) (6,708) (13,138)
Operating profit 3,770 5,158 10,086
Investment revenues 10 5 9
Finance costs - (18) (18)
Profit before taxation 3,780 5,145 10,077
Taxation (921) (1,359) (3,191)
Profit after tax 2,859 3,786 6,886
Profit/(loss) on disposal 10,398 - (2,715)
Total profit 13,257 3,786 4,171
Operating results for the 6 months ended 30 June 2013 reflects
the trading performance of the North American business up to the
disposal date, being 3 May 2013. Comparative information reflects a
complete six month and twelve month period respectively.
Following the sale of the North American operation, the Group
has no assets or liabilities classified as held for sale. The major
classes of assets and liabilities of the North American operation
held for sale at 31 December 2012 were as follows:
Year ended
31 December 2012
GBP'000
(Audited)
Assets
Non-current assets
Goodwill 11,934
Other intangible assets 204
Property, plant and equipment 343
Deferred tax asset 290
12,771
Current assets
Trade and other receivables 3,399
Cash and cash equivalents 3,837
7,236
Total assets held for sale 20,007
Liabilities
Current liabilities
Trade and other payables (6,530)
Income tax liabilities (469)
(6,999)
Non-current liabilities
Other creditors (131)
(131)
Total liabilities held for sale (7,130)
Net Assets held for sale 12,877
9 Tangible and intangible assets
Goodwill Other intangible assets Property, plant and equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Six months ended 30 June 2013 (Unaudited)
Carrying amount at 1 January 2013 1,478 15,458 13,316 30,252
Additions - 810 131 941
Disposals - (113) (45) (158)
Depreciation / amortisation - (3,486) (1,285) (4,771)
Exchange adjustments - (5) 69 64
Carrying amount at 30 June 2013 1,478 12,664 12,186 26,328
Six months ended 30 June 2012 (Unaudited)
Carrying amount at 1 January 2012 16,521 22,626 14,473 53,620
Additions - 1,360 687 2,047
Disposals - (64) (2) (66)
Depreciation / amortisation - (4,458) (1,543) (6,001)
Exchange adjustments (159) 11 25 (123)
Carrying amount at 30 June 2012 16,362 19,475 13,640 49,477
Year ended 31 December 2012 (Audited)
Carrying amount at 1 January 2012 16,521 22,626 14,473 53,620
Additions - 3,549 2,177 5,726
Disposals - (519) (28) (547)
Depreciation / amortisation - (8,750) (2,898) (11,648)
Exchange adjustments (539) (103) (65) (707)
Impairment (2,570) (1,141) - (3,711)
Transfer to assets classified as held for
sale (11,934) (204) (343) (12,481)
Carrying amount at 31 December 2012 1,478 15,458 13,316 30,252
10 Cash and cash equivalents
Cash and cash equivalents of GBP62,554,000 includes cash
deposits maintained by the Group's insurance businesses for
solvency purposes of GBP21,779,000 (H1 2012: GBP22,839,000). The
terms of the VVOPs agreed with the FCA restrict the disposition of
assets within the UK's regulated entities CPPL and HIL. Cash
balances held within CPPL and HIL which cannot be distributed to
the wider Group, without FCA approval, amounts to GBP29,829,000.
This restricted cash although unavailable to distribute to the
wider Group, is available to the regulated entity in which it
exists including for operational and customer redress purposes.
Since the balance sheet date the Group's restricted cash balances
have reduced following FCA approval to release GBP12,000,000 of the
balance held in CPPL to part repay the extended bank facility.
11 Bank loans
30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Repayments due within one year 25,000 43,500 43,500
Less: unamortised issue costs (1,232) (275) (92)
Bank loans due within one year 23,768 43,225 43,408
The Group has extended the term of the existing bank facility
for a period of three years to 31 July 2016, further details are
provided in note 16.
The bank facility is secured by fixed and floating charges on
certain assets of the Group.
12 Provisions
Cash settled Customer redress
share based and associated Restructuring
payments costs costs Total
GBP'000 GBP'000 GBP'000 GBP'000
Six months ended 30 June 2013
(Unaudited)
At 1 January 2013 - 28,967 - 28,967
Charged to the income statement - 2,350 1,750 4,100
Customer redress and associated costs
paid in the period - (6,535) - (6,535)
At 30 June 2013 - 24,782 1,750 26,532
Six months ended 30 June 2012
(Unaudited)
At 1 January 2012 894 14,778 - 15,672
Charged to the income statement 3 7,495 - 7,498
Customer redress and associated costs
paid in the period - (1,934) - (1,934)
Loan notes repaid in the period (897) - - (897)
At 30 June 2012 - 20,339 - 20,339
Year ended 31 December 2012 (Audited)
At 1 January 2012 894 14,778 - 15,672
Charged to the income statement 3 26,273 - 26,276
Customer redress and associated costs
paid in the period - (12,084) - (12,084)
Loan notes repaid in the period (897) - - (897)
At 31 December 2012 - 28,967 - 28,967
Provisions in respect of cash settled share based payments
represent loan notes issued by employees to the Group. The loan
notes became fully vested in March 2012 and were redeemed in full
at that time.
The customer redress and associated cost provision comprises
anticipated compensation payable to customers through a redress
exercise and professional fees associated with the customer redress
exercise. Customer redress and associated costs are expected to be
settled within one year of the balance sheet date.
The restructuring cost provision relates to costs associated
with restructuring programmes.
13 Share capital
Share capital at 30 June 2013 amounted to GBP17,118,000, having
increased from GBP17,111,000 at 31 December 2012. During the period
the Company issued 75,847 ordinary shares for cash consideration of
GBP3,000 to option holders under its share option schemes.
14 Reconciliation of operating cash flows
6 months ended Year ended
6 months ended 30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
(Loss)/profit for the period (2,576) 4,448 (17,230)
Adjustment for:
Depreciation and amortisation 4,771 6,001 11,648
Equity settled share based payment expense 70 253 34
Impairment loss on goodwill and intangible assets - - 3,711
Loss on disposal of property, plant and equipment 158 62 135
(Profit)/loss associated with disposal of discontinued
operation (10,398) - 2,715
Share of loss of joint venture 226 156 477
Investment revenues (196) (303) (589)
Other gains and losses - - 891
Finance costs 2,113 915 1,887
Income tax expense 5,102 2,358 4,665
Operating cash flows before movement in working
capital (730) 13,890 8,344
(Increase) / decrease in inventories (13) (2) 30
Decrease / (increase) in receivables 1,575 (6,393) (2,063)
Decrease / (increase) in insurance assets 17,467 (11,591) (2,689)
(Decrease) / increase in payables (1,677) 2,819 916
Decrease in insurance liabilities (702) (602) (1,353)
(Decrease) / Increase in provisions (2,435) 5,564 14,192
Cash generated by operations 13,485 3,685 17,377
Exercise of share options - (897) (899)
Income taxes paid (2,206) (2,279) (5,392)
Net cash from operating activities 11,279 509 11,086
15 Contingent liabilities
There can be no guarantee that the proposed solvent scheme of
arrangement to redress customers will be approved by CPPL's
creditors or sanctioned by the High Court, and what the
consequences of this will be in relation to UK sales of the Group's
Card Protection and Identity Protection products that are not
within the scope of the Group's past business review.
It is unclear what, if any, action the FCA may wish to take in
respect of any similar products available to the market from other
providers. There can be no guarantee that the FCA will not seek to
take action on a wider industry basis. Until such time as the FCA
makes a determination on these issues, and the repercussions are
understood for the industry as a whole, it is possible that other
claims or matters may arise against the Group which could take a
number of forms and therefore have a financial effect that cannot
presently be estimated.
The FCA has undertaken a thematic review in relation to the sale
of MPI products and the Group co-operated with the FCA as part of
this project in relation to sales of MPI products by one of its
companies. The thematic review considered if MPI is designed with
the consumers interests in mind, and evaluated the sales,
administration and claims handling process across a population of
firms who have a significant market share. The FCA has not at
present indicated that it will seek to take any regulatory action
against the Group. Although the thematic review is now complete,
the Directors cannot be certain that the FCA may not seek to take
steps against the Group in the future relating to sales of MPI
products and seek to require redress for customers who purchased
MPI products.
In addition, the Group commissioned an independent report on the
process used by one of its companies to sell MPI policies through
voice channels. This report identified some potential failings and
areas to improve in the sales process. The Group is in discussions
with the FCA on this matter, but no conclusion can yet be formed on
the outcome of these discussions.
The Directors have considered the probability of such claims or
matters crystallising, and as a result do not deem them probable
enough to recognise a provision.
16 Events after the balance sheet date
On the 31 July 2013 the Group announced that it had agreed new
borrowing facilities to refinance the Group for a period of three
years with its existing lenders and an agreement with certain
Business Partners to defer payment of commission that would
otherwise become due over the twelve months up to 30 June 2014 for
a period of up to four years. The new financing arrangements
together represent a value of approximately GBP36 million to the
Group.
The total amount available under the extended bank facility has
been reduced to GBP13 million and has been agreed for a term of
three years falling due for repayment on 31 July 2016. The extended
facility contains covenants and events of default, as announced on
31 July 2013. In addition to this the Group has granted security in
favour of the lenders on substantially similar terms to the
previous facility.
The total amount of commission to be deferred under the
commission deferral agreement is expected to be approximately GBP23
million by 30 June 2014, with repayment due on 31 July 2017. This
agreement, although subordinate to the bank facility, provides the
participating Business Partners with security over CPPL in
substantially similar form and terms as the extended bank
facility.
17 Related party transactions
Transactions with joint ventures
The Group has undertaken the following transactions with its
joint venture entity, Home 3 Assistance Limited ("Home 3"):
Year ended
6 months ended 30 June 2013 6 months ended 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Costs rechargeable to Home 3 incurred
by the Group 139 163 743
Balance receivable from Home 3 1,789 1,945 2,565
Amounts receivable from Home 3 include GBP1,700,000 (H1 2012:
GBP1,700,000) of subordinated loan notes, GBP1,200,000 of which
fall due for repayment on 30 December 2013 and GBP500,000 falls due
for repayment on 31 May 2014. The subordinated loan notes have been
accounted for as an investment in Home 3 with losses fully
recognised against the balance.
On 23 March 2013 the Group entered into an agreement with Mr
Hamish Macgregor Ogston CBE to reimburse on demand any legal fees,
costs and expenses which Mr Hamish Macgregor Ogston CBE has
incurred or may be incurred on his behalf in relation to the
refinancing activities of the Group. The aggregate amount of costs
to be reimbursed by the Group is limited to GBP470,000.
In contemplation of the disposal of CPPNA Holdings Inc., and in
order to incentivise and retain certain key employees of the North
American companies, agreements were entered into with certain key
employees in October 2012 ("the Arrangements"). The key employees
who entered into the Arrangements included David Pearce and Gregory
Mazza who are directors of CPP North America LLC, a subsidiary of
CPPNA Holdings Inc.
The Arrangements provided (amongst other things) for the payment
of a 'sale' retention bonus of approximately 1.5 times annual
salary in the event the disposal was consummated prior to 1 July
2013. Under the terms of the Arrangements, the aggregate amount
payable is $465,000 in the case of David Pearce and $312,000 in the
case of Gregory Mazza.
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 6 months ended Year ended
30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Short term employee benefits 2,149 2,220 3,782
Post employment benefits 90 128 229
Termination benefits 977 323 684
Share based payments (69) 58 (91)
3,147 2,729 4,603
DIRECTORS' RESPONSIBILITIES STATEMENT
We confirm that to the best of our knowledge:
a) The condensed financial statements have been prepared in
accordance with IAS 34 "Interim Financial Reporting"
b) The Chief Executive Officer's report and Financial and
Operating report together include a fair review of the information
required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) The Financial and Operating report includes a fair review of
the information required by DTR 4.2.8R (disclosure of related
parties' transactions and changes therein).
By order of the Board
Paul Stobart Shaun Parker
Chief Executive Officer Chief Financial Officer
21 August 2013
CAUTIONARY STATEMENT
This Half Year Report has been prepared solely to provide
additional information to shareholders as a body to meet the
relevant requirements of the UK Listing Authority's Disclosure and
Transparency Rules. The Half Year Report should not be relied on by
any other party or for any other purpose.
The Half Year Report 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 Half Year Report 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's Disclosure and Transparency Rules and Listing
Rules, 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 Half Year
Report.
The Half Year Report has been prepared for the Group as a whole
and therefore gives greater emphasis to those matters which are
significant to CPPGroup Plc and its subsidiary undertakings when
viewed as a whole.
INDEPENDENT REVIEW REPORT TO CPPGROUP PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2013 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and
related notes 1 to 17. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2013 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In forming our review conclusion on the condensed financial
statements in the Half Year Report, we have considered the adequacy
of the disclosure made in the Financial and Operating Review, and
in notes 1 and 15 to the condensed financial statements concerning
operational and trading uncertainties; regulatory issues and
customer redress uncertainties; uncertainties relating to liquidity
and funding; and the Group's ability to continue as a going concern
in the light of these factors. This disclosure includes material
uncertainties in relation to the quantification of the provision in
relation to customer redress and possible future contingent
expenditures for which reliable estimates cannot be made.
The total financial impact of these matters is subject to
significant uncertainty in that they are dependent upon certain
factors outside the control of the Group. These conditions indicate
the existence of a material uncertainty which may cast doubt about
the Group's ability to continue as a going concern and, therefore,
that it may be unable to realise its assets and discharge its
liabilities in the normal course of business.
Having considered these matters, the directors have concluded
that it is appropriate to prepare these financial statements on a
going concern basis. The financial statements do not include the
adjustments that would result if the Group were unable to continue
as a going concern. Our opinion is not qualified in respect of
these matters.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Leeds, United Kingdom
21 August 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
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