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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Cppgroup Plc | LSE:CPP | London | Ordinary Share | GB00BMDX5Z93 | ORD GBP1.00 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 162.00 | 156.00 | 171.00 | 0.00 | 08:00:22 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Security Systems Service | 193.04M | -8.66M | -0.9783 | -1.66 | 14.33M |
TIDMCPP
RNS Number : 1135L
CPPGroup Plc
04 September 2019
CPPGROUP PLC
4 SEPTEMBER 2019
HALF YEAR REPORT
FOR THE SIX MONTHSED 30 JUNE 2019
CPPGROUP PLC
HALF YEAR REPORT FOR THE SIX MONTHSED 30 JUNE 2019
International expansion driving growth and building value
CPPGroup Plc (CPP or the Group), the partner focused, global product and services company, today announces its results for the six months ended 30 June 2019.
The Group has seen continued expansion in its international revenues and customer numbers led by India. New business partners continue to be added to our portfolio and further investment has been made in our InsurTech capabilities to deliver strategic advantage.
Highlights
-- Group revenue increased by 17% to GBP60.2 million (H1 2018: GBP51.3 million) continuing the strong growth trajectory from previous periods.
-- Revenue from Ongoing Operations increased by 28% to GBP51.4 million (H1 2018: GBP40.0 million), which includes a 45% increase in Indian revenue to GBP40.9 million (H1 2018: GBP28.3 million).
-- Adjusted EBITDA increased by 25% to GBP3.6 million (H1 2018: GBP2.9 million). -- EBITDA increased by 30% to GBP2.3 million (H1 2018: GBP1.8 million).
-- Overall, currency movements across our international markets adversely impacted reported results. At constant currency:
-- Group revenue increased 19%. -- Revenue from Ongoing Operations increased 30%. -- Adjusted EBITDA increased by 34%. -- EBITDA increased by 44%. -- Profit before tax reduced by 36% to GBP0.9 million (H1 2018: GBP1.3 million).
-- Customer numbers have increased to 9.0 million (H1 2018: 6.7 million; 31 December 2018: 8.2 million).
Strategic progress
-- Diversification of our Indian business gathers pace through the launch of a new product line, LivCare, and new business partner contracts with Tata Capital Financial Services (Tata) and American Express.
-- Strong existing and exciting new partners, such as Chinese banking giant Bank of Communications (BoCom), gives potential access to over 200 million customers.
-- Pioneering parametric insurance platform(1) developed by Blink to transform the events-based insurance market.
-- Globiva performing ahead of expectations, forming partnerships with global brands and colleague numbers increasing to over 1,400.
1. Parametric insurance is a type of insurance that does not indemnify the pure loss, but instead agrees to make a payment upon the occurrence of a triggering event. Blink focuses on flight disruption solutions and has developed an innovative technology platform to deliver customers a proactive, real-time service.
Note - All subsequent percentage change figures within this report are presented on a constant currency basis, unless otherwise stated. The constant currency basis, which is an Alternative Performance Measure (APM), retranslates the previous period measures at the average actual periodic exchange rates used in the current financial period. This approach is applied as a means of eliminating the effects of exchange rate movements on the period-on-period reported results.
Financial highlights
Six months ended 30 June 2019 Six months ended 30 June 2018(1) GBP millions (Unaudited) (Unaudited) Change Constant currency change ----------------- ------------------------------ --------------------------------- ------ ------------------------ Group Revenue 60.2 51.3 17% 19% Adjusted EBITDA(3) 3.6 2.9 25% 34% Investments in business growth projects(4) (1.3) (1.1) (18)% (18)% EBITDA(2) 2.3 1.8 30% 44% Profit before tax 0.9 1.3 (36)% (31)% Basic (loss)/earnings per share (pence) (0.01) 0.05 (126)% n/a Net funds(5) 15.8 29.5 (46)% n/a Segmental revenue Ongoing Operations 51.4 40.0 28% 30% Restricted Operations 8.8 11.3 (21)% (21)% ================= ============================== ================================= ====== ========================
1. IFRS 16 Leases was effective from 1 January 2019, in accordance with transition provisions allowed within the new standard the rules have been applied retrospectively and as a result 2018 comparative figures have not been restated.
2. EBITDA represents earnings before interest, taxation, depreciation, amortisation, exceptional items and Matching Share Plan (MSP) charges.
3. Adjusted EBITDA excludes costs associated with investments in business growth projects.
4. Investments in business growth projects of GBP1.3 million (H1 2018: GBP1.1 million) comprises start-up costs relating to the UK GBP0.4 million (H1 2018: GBP0.2 million), Blink GBP0.5 million (H1 2018: GBP0.8 million), Bangladesh GBP0.1 million (H1 2018: GBPnil), Southeast Asia GBP0.1 million (H1 2018: n/a) and our share of losses in KYND GBP0.2 million (H1 2018: GBP0.1 million).
5. Net funds comprise cash and cash equivalents of GBP22.4 million (H1 2018: GBP29.4 million), a borrowing asset of GBPnil (H1 2018: GBP0.1 million) and net investment lease assets of GBP0.2 million (H1 2018: GBPnil) less lease liabilities of GBP6.8 million (H1 2018: GBPnil). Lease liabilities and net investment lease assets have been recognised following the adoption of IFRS 16 Leases on 1 January 2019, further detail is provided in note 10 to the condensed consolidated interim financial statements.
Jason Walsh, Chief Executive Officer, commented:
"We are starting to see the rewards from the assembly of our capabilities, each of which plays its part in supporting the Group's operations. Blink is our InsurTech business where already over 250,000 customers have had access to its parametric insurance platform and Globiva, the start-up business process management company, is growing rapidly and now has over 1,400 billable seats and boasts global brands like Ola, American Express and Tui amongst its third party clients.
We continue to grow our international revenues, with the strong performance that we saw in 2018 being continued through the first half of 2019. Our Indian operations have once again been the star performer significantly growing its revenue, profitability and customer numbers.
Ultimately, our success is built on our business partner relationships which we continue to deepen and importantly we are forming new partnerships with major brands in our strategically important markets. These new and existing relationships will develop over time and fuel the continued growth in our business. We are investing in our technology-led capability which will continue to strengthen our partnerships and enable more nimble and cost-effective proposition delivery as well as an exceptional customer experience."
Enquiries
CPPGroup Plc
Jason Walsh, Chief Executive Officer
Oliver Laird, Chief Financial Officer
Tel: +44 (0)113 487 7350
Nominated Adviser and Broker
Investec Bank plc: Sara Hale, James Rudd, Carlton Nelson
Tel: +44 (0)20 7597 5970
About CPP
CPP Group is a partner focused, global product and services company, specialising in the financial services and insurance markets. We use our local knowledge from 12 country markets within Asia, Europe and Central America to provide our business partners with technology-led product, marketing and distribution expertise that deliver commercial benefits and bring meaningful solutions to over 9 million end customers worldwide.
CPP's diverse range of insurance and assistance products can be designed to suit the bespoke needs of our business partners through providing their customers with peace of mind by reducing the stresses of everyday life, ranging from protection of mobile phones, payment cards and household belongings to keeping travel plans moving and the monitoring of compromised personal data.
For more information on CPP visit https://international.cppgroup.com
REGISTERED OFFICE
CPPGroup Plc
6 East Parade
Leeds
LS1 2AD
Registered number: 07151159
CHIEF EXECUTIVE'S STATEMENT
Financial performance
Constant 2019 2018(1) currency Six months ended 30 June GBP'm GBP'm Change change Revenue 60.2 51.3 17% 19% ------- -------- ------- ---------- EBITDA 2.3 1.8 30% 44% ------- -------- ------- ---------- Operating Profit 0.9 1.2 (25)% (18)% ------- -------- ------- ---------- Profit Before Tax 0.9 1.3 (36)% (31)% ------- -------- ------- ----------
1. IFRS 16 has been retrospectively applied and as a result 2018 comparatives have not been restated.
Group revenue of GBP60.2 million (H1 2018: GBP51.3 million) has grown by 19% and customer numbers have increased by 10% to 9.0 million (H1 2018: 6.7 million; 31 December 2018: 8.2 million) we have also increased our active business partners by 13%. This growth has been led by our Indian market which has seen revenue increase by 44% as we continue to deepen existing partner relationships through additional product launches and opening up incremental channels. In addition, we are expanding our partner base in India with deals signed with Tata and American Express.
As a business we focus on EBITDA which has increased to GBP2.3 million (H1 2018: GBP1.8 million). The Group has opted not to restate 2018 results for IFRS 16, however to aid comparability, H1 2018 EBITDA on an IFRS 16 basis would have been GBP0.3 million higher at GBP2.1 million. The marginal increase in EBITDA of GBP0.2 million on a like-for-like basis reflects business growth in India along with the benefit of restructuring activities in our European markets, partly offset by the continued decline in our European back books. Our adjusted EBITDA, which excludes the impact of investment in business growth projects, has increased by 34% to GBP3.6 million (H1 2018: GBP2.9 million).
The profile of our business continues to shift. Revenue and customer growth is being led by our developing markets, whilst the historic European renewal books continue to naturally decline. Whilst this dynamic is driving revenue growth it is naturally pressuring our gross profit margins as our Indian operation in particular has higher costs associated with sales than the European back books it is replacing. This is reflected in the reduced gross profit margin of 32% (H1 2018: 39%), which we expect to settle at a lower level in the medium term. We expect to generate longer-term margin improvements through investment in the value chain and digital capability.
Operating profit has reduced to GBP0.9 million (H1 2018: GBP1.2 million) reflecting our EBITDA growth offset by higher depreciation charges associated with IFRS 16. As a result, profit before tax has reduced to GBP0.9 million (H1 2018: GBP1.3 million).
The Group's effective tax rate of 118% (H1 2018: 68%) continues to be significantly higher than the standard UK corporation tax rate of 19%. The rate reflects charges on taxable profits in India and our EU Hub where tax rates are higher than the UK. However, the main driver of the rate is our policy to only recognise deferred tax assets on start-up losses when profit forecasts indicate short-term tax loss utilisation. The effective rate is expected to continue to be high whilst we invest in business growth projects which generate short-term start-up losses. As a result we report a loss after tax of GBP0.2 million (H1 2018: GBP0.4 million profit).
Segmental performance
H1 2019 H1 2018 Constant currency Revenue GBP'm GBP'm Change change Ongoing Operations: -------- -------- ------- ------------------ India 40.9 28.3 45% 44% -------- -------- ------- ------------------ EU Hub 6.8 8.1 (17)% (15)% -------- -------- ------- ------------------ Turkey 2.1 2.5 (15)% 10% -------- -------- ------- ------------------ Rest of World(1) 1.6 1.1 41% 37% -------- -------- ------- ------------------ Total Ongoing Operations 51.4 40.0 28% 30% -------------------------- -------- -------- ------- ------------------ Restricted Operations 8.8 11.3 (21)% (21)% -------- -------- ------- ------------------ Group revenue 60.2 51.3 17% 19% ========================== ======== ======== ======= ==================
1. Rest of World comprises China, Malaysia, Mexico, the UK, Blink, Bangladesh and Southeast Asia.
Constant H1 2019 H1 2018 currency EBITDA GBP'm GBP'm Change change Ongoing Operations: -------- -------- ------- ---------- India 2.2 0.6 263% 262% -------- -------- ------- ---------- EU Hub 0.9 0.3 181% 191% -------- -------- ------- ---------- Turkey 0.5 0.4 18% 91% -------- -------- ------- ---------- Rest of World (1.5) (1.7) 12% 12% -------- -------- ------- ---------- Total Ongoing Operations 2.1 (0.4) 589% 452% -------------------------- -------- -------- ------- ---------- Restricted Operations 3.2 5.5 (42)% (42)% -------- -------- ------- ---------- Central Functions (2.8) (3.2) 14% 14% -------- -------- ------- ---------- Segmental EBITDA 2.5 1.9 34% 48% -------- -------- ------- ---------- Share of loss of joint venture (0.2) (0.1) (129)% (129)% -------- -------- ------- ---------- Group EBITDA 2.3 1.8 30% 44% ========================== ======== ======== ======= ==========
Ongoing Operations
Revenue has increased 30% to GBP51.4 million (H1 2018: GBP40.0 million) due to strong new customer acquisitions in India and the rapid expansion of Globiva, our majority owned business process management (BPM) company in India. This growth has been partly offset by a revenue reduction in our EU Hub where the renewal book decline is outweighing new revenue generation.
EBITDA has increased significantly to GBP2.1 million (H1 2018: GBP0.4 million loss), fuelled by the growth in India, along with reduced costs in our EU Hub following the restructuring activity in 2018. The investments in business growth projects have increased marginally period-on-period to GBP1.1 million (H1 2018: GBP1.0 million). These costs are included in Rest of World and comprise the UK, Blink, Bangladesh and Southeast Asia.
The move to profit and a strongly growing EBITDA in our Ongoing Operations segment represents a significant milestone for the Group and one which will see us being much less dependent on our historic legacy business which is in a natural decline.
Restricted operations
Revenue has decreased by 21% to GBP8.8 million (H1 2018: GBP11.3 million) reflecting the natural decline in the legacy renewal books of Card Protection Plan Limited (CPPL) and Homecare Insurance Limited (HIL), although renewal rates across these books of customers remain strong at 84%. This decline along with marginally higher transfer pricing charges, has led to a 42% reduction in EBITDA to GBP3.2 million (H1 2018: GBP5.5 million). The prior period also benefitted from a review of contractual provisions. Due to the timing of headcount reductions the full cost benefit from the 2018 restructuring activities in CPPL will be realised in future periods.
Central Functions
The central cost base was reduced by 14% to GBP2.8 million (H1 2018: GBP3.2 million) following contractual savings and initial steps in streamlining our UK-based IT function. Our decentralised IT strategy is expected to generate further central cost savings in the future.
Adjusted EBITDA
H1 2019 H1 2019 H1 2018 H1 2018 Investment in business growth adjusted adjusted adjusted adjusted H1 2019 projects(1) EBITDA margin(2) EBITDA margin Constant currency GBP'm GBP'm GBP'm % GBP'm % Change change Ongoing Operations 2.1 1.1 3.2 6% 0.6 2% 416% 614% -------- ------------- ---------- ------------ ---------- ---------- ------- ---------- Restricted Operations 3.2 - 3.2 36% 5.5 49% (42)% (42)% -------- ------------- ---------- ------------ ---------- ---------- ------- ---------- Central Functions (2.8) - (2.8) (100)% (3.2) (100)% 14% 14% -------- ------------- ---------- ------------ ---------- ---------- ------- ---------- Segmental EBITDA 2.5 1.1 3.6 6% 2.9 6% 25% 34% -------- ------------- ---------- ------------ ---------- ---------- ------- ---------- Share of loss of joint venture (0.2) 0.2 - n/a - n/a n/a n/a -------- ------------- ---------- ------------ ---------- ---------- ------- ----------
Group EBITDA 2.3 1.3 3.6 6% 2.9 6% 25% 34% ==================== ======== ============= ========== ============ ========== ========== ======= ==========
1. Investment in business growth projects in Ongoing Operations are UK GBP0.4 million (H1 2018: GBP0.2 million), Blink GBP0.5 million (H1 2018: GBP0.8 million), Bangladesh GBP0.1 million (H1 2018: GBPnil) and Southeast Asia GBP0.1 million (H1 2018: GBPnil). These projects are disclosed within Rest of World.
2. Adjusted margin is defined as adjusted EBITDA divided by revenue.
The Group's adjusted EBITDA is GBP3.6 million (H1 2018: GBP2.9 million). Adjusted EBITDA excludes investments in business growth projects which reflect start-up losses in markets that will contribute to growth in the future. The Group's adjusted EBITDA margin, which is reflective of our more mature business, is 6% (H1 2018: 6%) compared to the reported margin of 4% (H1 2018: 3%). Importantly, adjusted EBITDA in our Ongoing Operations is now at the same level as the EBITDA from our Restricted Operations demonstrating the shift in focus and dependency to growing markets which will take the business forward.
Building value
The Group continues to follow its strategic principles, which provide the foundations upon which future value will be built. CPP is a diverse Group where structural, geographical and technical differences in our countries mean that they drive and build value for themselves and the Group in different ways. Following these principles will mean that the Group will continue to focus on value creation of its individual business lines as a route to increasing overall Group valuation.
We operate a business to business to consumer (B2B2C) model and recognise that the key to our success is the strength of the reciprocal business partner relationships that we build and nurture. Our priority is to establish strong relationships with market-leading partners that have large accessible customer bases where we can build trust and demonstrate the ability to deliver innovative solutions. We are experts in providing technology-led propositions that deliver additional revenue and customer loyalty for our partners in a fully managed, brand enhancing customer experience. It is this expertise that enables us to deepen our partner relationships and gain access to a greater proportion of their customer base through product and channel expansion. Our existing partner base already allows us potential access to over 200 million customers.
In India, where we have successfully followed this strategy, we are continuing to grow rapidly and are delivering increasingly robust profits. We have a strong trusted relationship with the Bajaj Group (Bajaj), successfully launching new innovative products including, most recently in April 2019, a new life insurance and wellness product, LivCare. New partnership deals with international businesses like American Express add greatly to our potential customer base whilst enhancing our market reputation. India demonstrates how we identify and create propositions to fulfil the needs of our partner's customers, whilst at the same time significantly boosting our customer numbers, revenue streams and market value.
Our strategy also includes investing in growth markets and technology innovation. We have achieved this through shrewd targeted investment in start-up companies like Blink and Globiva. These companies, whilst providing different competitive advantages to the Group, are similar in their innovative nature and drive to grow at pace, which will over time add significant value to the Group.
Blink is part of our investment in the InsurTech market and with its in-house developed event-based parametric insurance platform is pioneering technology that promises to transform the core travel insurance market. Placing technology at the forefront of its proposition delivery means that insurance solutions are delivered in a customer-focused way with minimal ongoing delivery costs. Whilst providing the necessary oversight and support, the Group has deliberately not fully integrated Blink allowing it to operate autonomously when delivering product and platform solutions to partners. Blink already has two live campaigns in Canada with Blue Cross and Manulife and there are more at final contract stage in other parts of the world. We are excited by Blink's prospects and the market value it represents both on a standalone basis and as part of the Group.
Globiva forms an important part of the Group's margin expansion plans as well as generating third party business relationships and opportunities. Since acquisition, Globiva has grown rapidly, exceeding our initial expectations, with international brands such as Ola, American Express and TUI using the services. This growth has resulted in the business expanding to three locations (two in Delhi and one in Kolkata) with over 1,400 colleagues employed. Globiva operates within a buoyant Indian economy and with growth expected to continue over the next three years to in excess of 3,000 colleagues, we believe that the market value of the business is already significantly in excess of our investment.
Building strategic advantage through technology
We understand the impact technology has on the successful creation of value within any organisation. Our focus is on being a technology-led business that invests in digital capabilities to deliver strategic advantage to our partners by enhancing their customer journeys and helping them to monetise their data.
We have commenced the build of our global technology platform that can be delivered in-country according to local business partner requirements. This will enable a nimble, responsive platform to be created by local specialists at a cost that is appropriate to that market. We will also be better positioned to meet the global challenge that companies are facing where in-country data residency and ownership is increasingly a demand of local legislation. This decentralised approach to IT will prove to be a competitive strength, although technology risk associated with successfully executing our IT strategy remains in the short-term. Focusing on this part of our technology journey will also enable us to move away from inflexible legacy systems which will generate further cost and operational efficiencies.
Operational review
Our Indian business has continued to grow rapidly with customer numbers increasing by 1.0 million in H1 to 6.9 million (H1 2018: 4.4 million; 31 December 2018: 5.9 million) and is becoming increasingly robust as we successfully diversify the partner and product base. Bajaj continues to represent our most significant partnership, however, importantly we have signed new Card Protection campaigns with SBI Cards and Axis Bank which will lead to a notable increase in customer numbers and strength in our renewal business.
China is a strategically important market and we are pleased that, under new leadership, revenue has grown by 84% period-on-period. This reflects innovative marketing strategies with key partners Ping-An Bank and SPDB to increase sales of our Card Protection and Smart Travel products. In addition, we were pleased to launch a new campaign with banking giant BoCom. Powered by our standalone IT infrastructure we see further opportunities for product and sector diversification in this market.
In our EU Hub the renewal books continue to perform well with renewal rates of 82% (H1 2018: 84%). The profitability of the EU Hub has improved reflecting the cost efficiencies generated through the restructuring activities in H2 2018. EBITDA has increased to GBP0.9 million (H1 2018: GBP0.3 million) at an EBITDA margin of 14% (H1 2018: 4%). The restructuring has been successful and is in line to deliver the expected annualised savings of GBP4.0 million to GBP4.5 million (which includes CPPL savings which are not part of the EU Hub).
Turkey has performed well against the backdrop of challenging economic conditions, increasing revenue by 10% and EBITDA by 91% and we have made good progress in a number of our other markets. We have signed a new Card Protection contract with a second bank in Bangladesh. The device protection segment in Bangladesh has huge potential and we are close to agreeing our first Phone Insurance deal with a leading market player. Following our re-entry in the UK market, we continue to develop our product suite. We have a strong pipeline with partner agreements in place that are expected to generate new business in the second half of the year. Our Southeast Asia expansion continues with a regional hub established in Singapore led by an experienced dynamic regional CEO. With a solid presence already established in Malaysia we continue to assess the best markets in Southeast Asia to launch our product suite.
Financial position
The Group's net asset position is broadly unchanged at GBP16.3 million (31 December 2018: GBP16.3 million). Our net funds position has reduced in the period to GBP15.8 million (31 December 2018: GBP26.0 million) reflecting the recognition of lease liabilities totalling GBP6.8 million following the adoption of IFRS 16 along with our investment in technology and technology-led services, such as the Blink parametric platform and digital services in India. Our cash balances are GBP22.4 million which includes GBP1.1 million required to be held in the UK for regulatory purposes and therefore the Group's available cash balance is GBP21.3 million. Whilst this represents a strong available cash position our borrowing facility includes a cash covenant and increasingly cash is being generated in India which is not currently available for repatriation in its entirety due to historic trading losses. In the future our Indian funds will become available for repatriation however a return of cash is likely to suffer significant taxation costs. The cash located in the UK and generated through the historic back books currently supports Group IT, central support functions and key strategic markets that are
presently loss-making. The Group is not currently utilising its GBP5.0 million borrowing facility.
Outlook
Our success is built on our business partner relationships which we continue to deepen and importantly we are forming new partnerships with major brands in our strategically important markets. These new and existing relationships will develop over time and fuel the continued growth in our business. We are investing in our technology-led capability which will continue to strengthen our partnerships and enable more nimble and cost-effective proposition delivery as well as an exceptional customer experience.
We have continued to grow significantly in India and following the successful launch of LivCare and expanded Card Protection contracts with major banking partners, we expect revenue in 2019 to exceed current market consensus. EBITDA margins in India are typically 5% and other parts of the business that are currently loss-making have progressed slower than expected, therefore although revenue is expected to be higher our EBITDA expectations for 2019 remain unchanged.
Jason Walsh
Chief Executive Officer
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
6 months ended Year ended 30 June 2019 6 months ended 30 June 2018 31 December 2018 GBP'000 GBP'000 GBP'000 Note (Unaudited) (Unaudited) (Audited) Revenue 3 60,229 51,264 110,070 Cost of sales (40,730) (31,020) (68,993) Gross profit 19,499 20,244 41,077 Administrative expenses (18,448) (18,984) (41,031) Share of loss of joint venture (152) (66) (199) Operating profit/(loss) 899 1,194 (153) Analysed as: EBITDA 3 2,319 1,779 3,911 Depreciation and amortisation (1,420) (364) (866) Exceptional items - (153) (3,137) MSP charges - (68) (61) ------------------------------------ ----- Investment revenues 253 252 531 Finance costs (302) (112) (51) Profit before taxation 850 1,334 327 Taxation 4 (1,006) (902) (712) (Loss)/profit for the period (156) 432 (385) =============== ============================ ================== Attributable to: Equity holders of the Company (113) 432 (380) Non-controlling interests (43) - (5) --------------- ---------------------------- ------------------ (156) 432 (385) =============== ============================ ================== (Loss)/earnings per share Pence Pence Pence Basic (loss)/earnings per share 6 (0.01) 0.05 (0.04) =============== ============================ ================== Diluted (loss)/earnings per share 6 (0.01) 0.05 (0.04) =============== ============================ ==================
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 6 months ended 30 June 2019 6 months ended 30 June 2018 31 December 2018 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) (Loss)/profit for the period (156) 432 (385) Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations 20 (173) (286) Other comprehensive income/(expense) for the period net of taxation 20 (173) (286) ---------------------------- ---------------------------- ------------------ Total comprehensive (expense)/income for the period (136) 259 (671) ============================ ============================ ================== Attributable to: Equity holders of the Company (93) 259 (666) Non-controlling interests (43) - (5) ---------------------------- ---------------------------- ------------------ (136) 259 (671) ============================ ============================ ==================
CONSOLIDATED BALANCE SHEET
30 June 2019 30 June 2018 31 December 2018 GBP'000 GBP'000 GBP'000 Note (Unaudited) (Unaudited) (Audited) Non-current assets Goodwill 7 1,492 880 1,492 Other intangible assets 7 3,168 1,507 2,788 Property, plant and equipment 7 2,236 1,590 1,717 Right-of-use asset 10 6,087 - - Investment in joint venture 882 438 1,034 Deferred tax asset 1,376 1,203 1,225 Net investment lease assets 10 63 - - Contract assets 578 780 479 ------------- ------------- ----------------- 15,882 6,398 8,735 ------------- ------------- ----------------- Current assets Insurance assets - 30 24 Inventories 142 68 159 Net investment lease assets 10 168 - - Contract assets 4,969 3,095 4,553 Trade and other receivables 13,263 10,016 13,704 Cash and cash equivalents 22,372 29,438 25,955 ------------- ------------- ----------------- 40,914 42,647 44,395 Total assets 56,796 49,045 53,130 ------------- ------------- ----------------- Current liabilities Insurance liabilities (471) (639) (617) Income tax liabilities (779) (1,437) (536) Trade and other payables (19,109) (20,364) (22,906) Provisions (70) (369) (571) Lease liabilities 10 (1,390) - -
Contract liabilities (11,971) (8,370) (10,934) ------------- ------------- ----------------- (33,790) (31,179) (35,564) ------------- ------------- ----------------- Net current assets 7,124 11,468 8,831 ------------- ------------- ----------------- Non-current liabilities Borrowings 71 116 90 Deferred tax liabilities (90) - (90) Provisions (310) - (291) Lease liabilities 10 (5,440) - - Contract liabilities (926) (1,846) (1,009) (6,695) (1,730) (1,300) ------------- ------------- ----------------- Total liabilities (40,485) (32,909) (36,864) ------------- ------------- ----------------- Net assets 16,311 16,136 16,266 ============= ============= ================= Equity Share capital 8 24,040 23,995 24,021 Share premium account 45,225 45,225 45,225 Merger reserve (100,399) (100,399) (100,399) Translation reserve 498 591 478 ESOP reserve 16,249 15,476 15,884 Retained earnings 29,882 31,248 30,323 ------------- ------------- ----------------- Equity attributable to equity holders of the Company 15,495 16,136 15,532 Non-controlling interests 816 - 734 ------------- ------------- ----------------- Total equity 16,311 16,136 16,266 ============= ============= =================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Premium Merger Translation ESOP Retained Non-controlling Total Capital Account reserve reserve reserve earnings Total interest equity Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 6 months ended 30 June 2019 (Unaudited) At 1 January 2019 24,021 45,225 (100,399) 478 15,884 30,323 15,532 734 16,266 Change of accounting policy - IFRS 16 10 - - - - - (203) (203) - (203) Loss for the period - - - - - (113) (113) (43) (156) Other comprehensive income for the period - - - 20 - - 20 - 20 Equity-settled share-based payment charge 9 - - - - 365 - 365 - 365 Exercise of share options 8 19 - - - - - 19 - 19 Movement in non-controlling interest - - - - - (125) (125) 125 - -------- -------- ---------- ------------ -------- --------- -------- ---------------- -------- At 30 June 2019 24,040 45,225 (100,399) 498 16,249 29,882 15,495 816 16,311 ======== ======== ========== ============ ======== ========= ======== ================ ======== 6 months ended 30 June 2018 (Unaudited) At 1 January 2018 23,978 45,225 (100,399) 764 15,114 30,816 15,498 - 15,498 Profit for the period 432 432 - 432 Other comprehensive expense for the period - - - (173) - - (173) - (173) Equity-settled share-based payment charge 9 - - - - 362 - 362 - 362 Exercise of share options 17 - - - - - 17 - 17 -------- -------- ---------- ------------ -------- --------- -------- ---------------- -------- At 30 June 2018 23,995 45,225 (100,399) 591 15,476 31,248 16,136 - 16,136 ======== ======== ========== ============ ======== ========= ======== ================ ======== Year ended 31 December 2018 (Audited) - At 1 January 2018 23,978 45,225 (100,399) 764 15,114 30,816 15,498 - 15,498 Loss for the year - - - - - (380) (380) (5) (385) Other comprehensive expense for the year - - - (286) - - (286) - (286) Equity-settled share-based payment charge 9 - - - - 770 - 770 - 770 Deferred tax on share-based payment charge - - - - - (113) (113) - (113) Exercise of share options 43 - - - - - 43 - 43 Non-controlling interest on acquisition of a subsidiary - - - - - - - 739 739 -------- -------- ---------- ------------ -------- --------- -------- ---------------- -------- At 31 December 2018 24,021 45,225 (100,399) 478 15,884 30,323 15,532 734 16,266 ======== ======== ========== ============ ======== ========= ======== ================ ========
CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year ended Note 30 June 2019 30 June 2018 31 December 2018 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) Net cash used in operating activities 11 (1,406) (160) (833) Investing activities Interest received 248 252 531 Purchases of property, plant and equipment (836) (582) (792) Purchases of intangible assets (844) (748) (1,931) Acquisition of a subsidiary, net of cash acquired - (126) (704) Investment in joint venture - (480) (1,224) Net cash used in investing activities (1,432) (1,684) (4,120) --------------- --------------- ------------------ Financing activities Costs of refinancing the bank facility - (83) (126) Capital lease repayments 10 (837) - - Lessor capital receipts 10 78 Interest paid (61) (89) (51) Issue of ordinary share capital 8 19 17 43 Net cash used in financing activities (801) (155) (134) --------------- --------------- ------------------ Net decrease in cash and cash equivalents (3,639) (1,999) (5,087) Effect of foreign exchange rate changes 56 (28) (423) Cash and cash equivalents at start of period 25,955 31,465 31,465 Cash and cash equivalents at end of period 22,372 29,438 25,955 =============== =============== ==================
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1 General information
The condensed consolidated interim financial statements for the six months ended 30 June 2019 do not constitute statutory accounts as defined under Section 434 of the Companies Act 2006. The Annual Report and Financial Statements (the 'Financial Statements') for the year ended 31 December 2018 were approved by the Board on 26 March 2019 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 2019 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 Financial Statements for the year ended 31 December 2018, 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 3 September 2019.
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). The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2019:
-- IFRS 16 Leases -- IFRIC 23 Uncertainty over tax treatments -- IAS 28 (amendments) Long-term interests in Associates and Joint Ventures -- Annual improvements to IFRSs 2015 - 2017 cycle
Following the adoption of IFRS 16, the Group has changed its accounting policies and made certain transition adjustments, which are disclosed in note 10. All other new or amended standards and interpretations applied for the first time in the period commencing 1 January 2019 have not had a material impact on the Group.
The Group has revised income statement and segmental reporting formats to include EBITDA from 1 January 2019. EBITDA is an APM prior to which the Group used an alternative APM, underlying operating profit. The Group is investing in technology, which will be an ongoing focus, and as a result EBITDA provides a better understanding of the underlying performance of our business. The prior period income statement and relevant notes have been represented to reflect the change.
The comparative balance sheet position as at 30 June 2018 has been represented to reflect a change applied subsequent to the approval of the 2018 Half Year Report in our transitionary accounting for IFRS 15 Revenue from contracts with customers. As a result, net assets have increased GBP320,000 compared to original presentation, comprising an increase in current contract assets of GBP588,000 and a reduction in deferred tax asset of GBP268,000.
Going concern
After making enquiries, the Directors have satisfied themselves that taking account of reasonably possible changes in trading performance, the Group's forecasts show 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.
Leases
The adoption of IFRS 16 Leases with effect from 1 January 2019 has led to amendments in the Group's accounting policy for leases. The revised sections of the policy are below.
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group's leases include properties, equipment and motor vehicles. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and low value assets. For these leases, the Group recognises the lease payments as an expense through the consolidated income statement on a straight-line basis over the term of the lease.
Lease liabilities
The lease liability is initially measured at the present value of the lease payments, discounted by using the relevant incremental borrowing rate available to the Group in each territory where a lease is held. Lease liabilities include the net present value of the following: lease payments; fixed payments, including any incentives; variable lease payments; and amounts payable under residual value guarantees.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the consolidated income statement over the lease period providing a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets
Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of lease liability and any lease payments made at or before the commencement date; less any lease incentives received, any initial direct costs and final committed restoration costs.
The right-of-use asset is depreciated on a straight line basis over the shorter of the asset's useful life and the lease term.
Variable lease payments
When a lease includes terms that change the future lease payments, such as index-linked reviews, the lease liability (and related right-of-use asset) is re-measured based on the revised future lease payments at the date on which the revision is triggered.
Extension and termination options
A number of the Group's lease arrangements include extension and termination options. These terms are used to maximise operational flexibility in respect of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated), considering historic trends and circumstances of the lease arrangement.
3 Segmental analysis
IFRS 8 Operating segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board of Directors to allocate resources to the segments and to assess their performance. The Group's operating segments are:
-- Ongoing Operations; India, China, Turkey, Spain, Germany, Portugal, Italy, Mexico, Malaysia, UK, Bangladesh, Blink and Southeast Asia. We continue to invest and drive new business opportunities in these markets.
-- Restricted Operations: historic renewal books of our UK regulated entities; CPPL, including its overseas branches; and HIL.
-- Central Functions: central cost base required to provide expertise and operate a listed Group. Central Functions is stated after the recharge of certain central costs that are appropriate to transfer to both Ongoing Operations and Restricted Operations for statutory purposes.
Segment revenue and performance for the current and comparative periods are presented below:
Ongoing Restricted Central Operations Operations Functions Total Six months ended 30 June 2019 GBP'000 GBP'000 GBP'000 GBP'000 (Unaudited) Revenue - external sales 51,362 8,867 - 60,229 Segmental EBITDA 2,057 3,197 (2,783) 2,471 ------------- ------------ ----------- Share of loss of joint venture (152) -------- EBITDA 2,319 Depreciation and amortisation (1,420) Operating profit 899 Investment revenues 253 Finance costs (302) -------- Profit before taxation 850 Taxation (1,006) -------- Loss for the period (156) ======== Ongoing Restricted Central Operations Operations Functions Total Six months ended 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000 (Unaudited) Revenue - external sales 40,005 11,259 - 51,264 Segmental EBITDA (421) 5,513 (3,247) 1,845 ------------ ------------ ----------- Share of loss of joint venture (66) -------- EBITDA 1,779 Depreciation and amortisation (364) Exceptional items (153) MSP charges (68) Operating profit 1,194 Investment revenues 252 Finance costs (112) -------- Profit before taxation 1,334 Taxation (902) -------- Profit for the period 432 ======== Ongoing Restricted Central Operations Operations Functions Total Year ended 31 December 2018 GBP'000 GBP'000 GBP'000 GBP'000 (Audited) Revenue - external sales 88,033 22,037 - 110,070 Segmental EBITDA 13 10,097 (6,000) 4,110 ------------ ------------ ----------- Share of loss of joint venture (199) -------- EBITDA 3,911 Depreciation and amortisation (866) Exceptional items (3,137) MSP charges (61) -------- Operating loss (153) Investment revenues 531 Finance costs (51) Profit before taxation 327 Taxation (712) -------- Loss for the year (385) ========
Segmental assets
30 June 2019 30 June 2018 31 December 2018 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) Ongoing Operations 36,931 23,305 30,637 Restricted Operations 14,021 18,886 17,114 Central Functions 2,094 4,333 1,628 Total segment assets 53,046 46,524 49,379 Unallocated assets 3,750 2,521 3,751 Consolidated total assets 56,796 49,045 53,130 ============= ============= =================
Goodwill, deferred tax and investment in joint venture are not allocated to segments.
Capital expenditure
Other intangible assets Property, plant and equipment ----------------------------------------- ------------------------------------------ 6 months 6 months ended ended Year ended 30 June 30 June 31 December 30 June 30 June 31 December 2019 2018 2018 2019 2018 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited) Ongoing Operations 502 389 1,387 528 434 728 Restricted Operations 32 - 20 137 3 61 Central Functions 310 363 878 171 151 277 Total assets 844 752 2,285 836 588 1,066 ============ ============ ============= ============ ============ ============
Right-of-use asset additions in the period of GBP1,569,000 following the adoption of IFRS 16 from 1 January 2019 are not included in the table above. The right-of-use asset additions are located in our Ongoing Operations segment. Further information relating to IFRS 16 is included in note 10
Timing of revenue recognition
The Group derives revenue from the transfer of goods and services over time and at a point in time as follows:
6 months ended 30 June 2019 6 months ended 30 June 2018 Year ended 31 December 2018 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) At a point in time 49,070 43,478 89,116 Over time 11,159 7,786 20,954 ---------------------------- ---------------------------- ---------------------------- 60,229 51,264 110,070 ============================ ============================ ============================
Revenue from major products
Year ended 6 months ended 30 June 2019 6 months ended 30 June 2018 31 December 2018 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) Retail assistance policies 56,627 49,509 105,006 Retail insurance policies 96 168 336 Wholesale policies 1,682 1,375 4,162 Non-policy revenue 1,824 212 566 ---------------------------- ---------------------------- ------------------ Consolidated revenue 60,229 51,264 110,070 ============================ ============================ ==================
Major product streams are disclosed on the basis monitored by the Board of Directors. For the purpose of this product analysis, "retail assistance policies" are those which may be insurance backed but contain a bundle of assistance and other benefits; "retail insurance policies" are those which protect against a single insurance risk; "wholesale policies" are those which are provided by business partners to their customers in relation to an ongoing product or service which is provided for a specified period of time; "non-policy revenue" is that which is not in connection with providing an ongoing service to policyholders for a specified period of time.
The increase in non-policy revenue period-on-period reflects third party revenues earned by Globiva.
Geographical information
The Group operates across a wide number of territories, of which India, the UK and Spain are considered individually material. Revenue from external customers and non-current assets (excluding investment in joint venture and deferred tax) by geographical location is detailed below:
External revenues Non-current assets ----------------------------------------- ------------------------------------------ 6 months 6 months ended ended Year ended 30 June 30 June 31 December 30 June 30 June 31 December 2019 2018 2018 2019 2018 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited) India 40,894 28,267 65,326 6,347 855 2,115 UK 7,174 9,223 18,051 4,406 2,483 2,468 Spain 4,415 5,452 10,514 564 282 281 Other 7,746 8,322 16,179 2,307 1,137 1,612 Total 60,229 51,264 110,070 13,624 4,757 6,476 ============ ============ ============= ============ ============ ============
Non-current assets at 30 June 2019 include GBP6,087,000 right-of-use assets recognised following adoption of IFRS 16 effective from 1 January 2019. Further details on IFRS 16 are included in note 10.
Information about major customers
Revenue from customers of one business partner in our Ongoing Operations segment represented approximately GBP27,708,000 (H1 2018: GBP20,577,000; year ended 31 December 2018: GBP48,158,000) of the Group's total revenue.
4 Taxation
The effective tax rate at the half year is 118.4% (H1 2018: 67.6%; year ended 31 December 2018: 217.7%). The tax charge of GBP1,006,000 (H1 2018: GBP902,000; year ended 31 December 2018: GBP712,000) reflects charges on taxable profits arising in India and our EU Hub. The corporate income tax in these overseas jurisdictions is higher than the UK corporate income tax rate of 19%. Profits from UK entities are expected to be covered by group relief from losses arising in other UK entities, brought forward tax losses and double taxation relief.
The Group's effective tax rate is significantly higher than the UK corporate income tax rate due to losses in our developing markets which do not in the short-term indicate sufficient certainty of future profitability to recognise deferred tax assets. The Group's policy is to recognise deferred tax assets when profit forecasts indicate that tax losses can be utilised in the short-term. The 2019 full year rate may vary from the H1 2019 rate as the territory mix of future 2019 profits or losses may differ, however it is expected to continue to be significantly higher than the UK rate in the future.
5 Dividends
The Directors have not proposed an interim dividend for 2019. Neither an interim or final dividend was proposed in 2018.
6 (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, which exclude exceptional items and MSP charges, have also been presented in order to give a better understanding of the performance of the business. In accordance with IAS 33, potential ordinary shares are only considered dilutive when their conversion would decrease the earnings per share or increase the loss per share attributable to equity holders. The diluted loss per share is therefore equal to the basic loss per share in the six months ended 30 June 2019 and year ended 31 December 2018.
Six months ended 30 June 2019 (Unaudited) Total Losses GBP'000 Loss for the purposes of basic and diluted earnings per share and underlying earnings per share (113) =========== Number of shares Number (thousands) Weighted average number of ordinary shares for the purposes of basic and diluted loss per share 862,015 Loss per share Total Pence Basic and diluted loss per share (0.01) Basic and diluted underlying loss per share (0.01) Six months ended 30 June 2018 (Unaudited) Total Earnings GBP'000 Earnings for the purposes of basic and diluted earnings per share 432 Exceptional items (net of tax) 153 MSP charges (net of tax) 39 Earnings for the purposes of underlying basic and diluted earnings per share 624 Number of shares Number (thousands) Weighted average number of ordinary shares for the purposes of basic earnings per share 856,902 Effect of dilutive potential ordinary shares: share options 19,616 Weighted average number of ordinary shares for the purposes of diluted earnings per share 876,518 Earnings per share Total Pence Basic and diluted earnings per share: Basic 0.05 Diluted 0.05 Basic and diluted underlying earnings per share: Basic 0.07 Diluted 0.07 Year ended 31 December 2018 (Audited) Total (Loss)/earnings GBP'000 Loss for the purposes of basic and diluted loss per share (380) Exceptional items (net of tax) 2,289 MSP charges (net of tax) 55 Earnings for the purposes of underlying basic and diluted earnings per share 1,964 Number of shares Number (thousands) Weighted average number of ordinary shares for the purposes of basic and diluted loss per share and basic underlying earnings per share 858,474 Effect of dilutive potential ordinary shares: share options 28,308 Weighted average number of ordinary shares for the purposes of diluted underlying earnings per share 886,782 (Loss)/earnings per share Total Pence Basic and diluted loss per share (0.04) Basic and diluted underlying earnings per share: Basic 0.23 Diluted 0.22 7 Tangible and intangible assets
Property, Other intangible plant and Goodwill assets equipment Total GBP'000 GBP'000 GBP'000 GBP'000 Six months ended 30 June 2019 (Unaudited) Carrying amount at 1 January 2019 1,492 2,788 1,717 5,997 Additions - 844 836 1,680 Disposals - (7) (32) (39) Amortisation/depreciation - (471) (293) (764) Exchange adjustments - 14 8 22 Carrying amount at 30 June 2019 1,492 3,168 2,236 6,896 Six months ended 30 June 2018 (Unaudited) Carrying amount at 1 January 2018 776 882 1,281 2,939 Additions 104 752 588 1,444 Disposals - - (7) (7) Amortisation/depreciation - (128) (236) (364) Exchange adjustments - 1 (36) (35) Carrying amount at 30 June 2018 880 1,507 1,590 3,977 Year ended 31 December 2018 (Audited) Carrying amount at 1 January 2018 776 882 1,281 2,939 Additions 716 1,931 792 3,439 Acquisition of subsidiaries - 354 274 628 Disposals - (11) (75) (86) Amortisation/depreciation - (412) (454) (866) Impairment - - (71) (71) Exchange adjustments - 44 (30) 14 Carrying amount at 31 December 2018 1,492 2,788 1,717 5,997 8 Share capital
Share capital at 30 June 2019 is GBP24,040,000 (H1 2018: GBP23,995,000; 31 December 2018: GBP24,021,000). To satisfy share option exercises in the six month period to 30 June 2019 the Company has issued 1,894,000 ordinary shares for a total consideration of GBP19,000.
9 Share-based payment
Equity-settled share-based payments
Share-based payment charges for the six month period to 30 June 2019 comprise Long Term Incentive Plan 2016 (2016 LTIP) charges of GBP365,000 (H1 2018: GBP294,000; 31 December 2018: GBP680,000). There have been no MSP charges in the period (H1 2018: GBP68,000; 31 December 2018: GBP90,000). These costs are disclosed within administrative expenses, although the MSP share-based payment charge formed part of the MSP charges not included in EBITDA.
There have been 18,092,000 options granted in the six month period to 30 June 2019 as part of the 2016 LTIP (30 June 2018 and 31 December 2018: 16,071,000 options granted). There have been no MSP options granted in either the current period or the comparative periods.
Number of share options Weighted average exercise price (thousands) (GBP) Six months ended 30 June 2019 (Unaudited) 2016 LTIP Outstanding at 1 January 2019 37,981 - Granted during the period 18,092 - Lapsed/forfeited during the period (11,886) - Outstanding at 30 June 2019 44,187 - MSP Outstanding at 1 January 2019 6,343 0.01 Exercised during the period (1,894) 0.01 Outstanding at 30 June 2019 4,449 0.01 Exercisable at 30 June 2019 4,449 0.01 Six months ended 30 June 2018 (Unaudited) 2016 LTIP Outstanding at 1 January 2018 22,551 - Granted during the period 16,071 - Forfeited during the period (641) - Outstanding at 30 June 2018 37,981 - MSP Outstanding at 1 January 2018 10,669 0.01 Forfeited during the period (53) 0.01 Exercised during the period (1,703) 0.01 Outstanding at 30 June 2018 8,913 0.01 Exercisable at 30 June 2018 5,944 0.01 Number of share options Weighted average exercise price (thousands) (GBP) Year ended 31 December 2018 (Audited) 2016 LTIP Outstanding at 1 January 2018 22,551 - Granted during the year 16,071 - Forfeited during the year (641) - Outstanding at 31 December 2018 37,981 - MSP Outstanding at 1 January 2018 10,669 0.01 Forfeited during the year (52) 0.01 Exercised during the year (4,274) 0.01 Outstanding at 31 December 2018 6,343 0.01 Exercisable at 31 December 2018 6,343 0.01
Nil cost options and conditional shares granted under the 2016 LTIP normally vest after three years, lapse if not exercised within ten years of grant and will lapse if option holders cease to be employed by the Group. Vesting of 2016 LTIP options and shares are also subject to achievement of certain performance criteria including revenue and profit-based targets and non-financial event measures over the vesting period.
The options outstanding at 30 June 2019 had a weighted average remaining contractual life of two years (30 June 2018: two years; 31 December 2018: two years) in the 2016 LTIP and no years (30 June 2018: no years; 31 December 2018: no years) in the MSP.
The principal assumptions underlying the valuation of the 2016 LTIP options granted during the period at the date of grant are as follows:
LTIP 2016 April 2019 Weighted average share price GBP0.05 Weighted average exercise price - Expected volatility n/a Expected life 3 years Risk-free rate n/a Dividend yield 0%
There have been 18,092,000 share options granted in the current period. The aggregate estimated fair value of the options granted in the current period under the 2016 LTIP was GBP950,000.
Cash-settled share-based payments
On 29 April 2019, the Group granted certain employees with notional share options that require the Group to pay the intrinsic value of the notional share to the employee at the date of exercise. The fair value of the notional share options has been determined by the Black Scholes model using the assumptions noted in the table above. The Group has recorded a total expense in relation to this award in the six months to 30 June 2019 of GBP24,000 (H1 2018: GBPnil; year ended 31 December 2018: GBP30,000). The Group has recorded liabilities of GBP24,000 (30 June 2018: GBPnil and 31 December 2018: GBP30,000) in relation to these notional awards.
10 Change in accounting policy
The Group adopted IFRS 16 Leases effective from 1 January 2019, which has led to updates in the Group's accounting policy for leases. In accordance with the transition provisions for IFRS 16, the Group has adopted the new rules retrospectively and has opted not to restate comparative reporting periods. As a result, the reclassification and adjustments arising from the new leasing rules are recognised in the opening balance sheet on 1 January 2019. The new accounting policies are disclosed in note 2.
On adoption of IFRS 16, the Group has recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. The lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as at 1 January 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 7.1%.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases with reasonably similar characteristics, including geographical location;
-- the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases;
-- the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application;
-- the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and
-- relying on previous assessment of whether a lease is onerous.
The Group has also elected not to apply IFRS 16 to contracts that were not identified as containing a lease under IAS 17 and IFRIC 4 Determining whether an arrangement contains a lease.
Measurement of lease liabilities GBP'000 Operating lease commitments as at 1 January 2019 5,532 Operating lease commitments as at 1 January 2019 restated net of VAT 5,291 Discounted using the lessee's incremental borrowing rate of 7.1% (656) Add: finance lease liabilities recognised as at 1 January 2019 1,347 (Less): short-term leases recognised as expense on a straight line basis (146) (Less): contracts re-assessed as service agreements (102) Add: adjustments as a result of reassessment of extension and termination options 83 Lease liability recognised at 1 January 2019 5,817 Comprising: Non-current lease liabilities 4,530 Current lease liabilities 1,287 5,817
The movement in the lease liability in the period is as follows:
Lease liability 30 June 2019 GBP'000 (Unaudited) At 1 January 2019 5,817 Additions 1,569 Interest 220 Lease payments (837) Exchange adjustments 61 At 30 June 2019 6,830 Comprising: Non-current lease liabilities 5,440 Current lease liabilities 1,390 6,830
Measurement of right-of-use assets
The associated right-of-use assets for all leases were measured on a retrospective basis as if the new rules had always been applied. Any identified restoration costs were added to the initial costs of the right-of-use assets. Any right-of-use assets associated with leases previously deemed to be onerous were impaired where the previous assessment of the nature of the onerous lease remained appropriate. Right-of-use assets are depreciated using a straight-line approach over their deemed useful economic life, which is based on interpretation of lease contract length in line with the requirements of the standard.
30 June 2019 1 January 2019 GBP'000 GBP'000 (Unaudited) (Unaudited) Properties 5,854 4,873 Motor vehicles 203 213 Equipment 30 37 Total right-of-use assets 6,087 5,123
The movement in the right-of-use asset in the period is as follows:
Right-of-use asset 30 June 2019 GBP'000 (Unaudited) At 1 January 2019 5,123 Additions 1,569 Depreciation (656) Exchange adjustments 51 At 30 June 2019 6,087
Lessor accounting
The Group has certain finance lease arrangements where it acts as a lessor and has made adjustments to accounting for the associated sublet assets. The subleases were previously accounted for as operating leases under IAS 17. On adoption of IFRS 16, the Group recognised a net investment asset through reclassification of the associated right-of-use assets.
The net investment asset is measured at the present value of the remaining future minimum sub lease payments to be received, discounted using the relevant incremental borrowing rate as at 1 January 2019. The right-of-use asset reclassified is measured at the proportion of the existing right-of-use assets that are sublet to the lessees in the arrangement. Any resulting differences are recognised as a gain or loss in the consolidated income statement.
Reconciliation of sublease future minimum payments to net investment assets 1 January 2019 GBP'000 (Unaudited) Future minimum sublease payments disclosed as at 1 January 2019 278 (Less): adjustments as a result of reassessment of extension and termination options (3) Add: residual value of sub-leased asset returned on conclusion of sublease 41 Discounted using the incremental borrowing rate (12) Net investment asset recognised at 1 January 2019 304 Comprising: Non-current net investment assets 148 Current net investment assets 156 304 Net investment lease assets 30 June 2019 GBP'000 (Unaudited) At 1 January 2019 304 Payments received (78) Interest 5 At 30 June 2019 231 Comprising: Non-current net investment assets 63 Current net investment assets 168 231
In addition to lease liabilities, right-of-use assets and net investment lease assets, the transition also reduced provisions. Overall, the change in accounting policy impacted the balance sheet on 1 January 2019 by increasing assets by GBP5,427,000 and increasing liabilities by GBP5,630,000. The net impact on retained earnings on 1 January 2019 was GBP203,000 reduction.
At 30 June 2019 assets were affected by an increase of GBP6,318,000 and liabilities by an increase of GBP6,995,000.
11 Reconciliation of operating cash flows
6 months ended Year ended 6 months ended 30 June 2019 30 June 2018 31 December 2018 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) (Loss)/profit for the period (156) 432 (385) Adjustments for: Depreciation and amortisation 1,420 364 866 Share-based payment expense 389 362 800 Impairment loss on intangible assets - - 71 Loss on disposal of intangible assets 6 - 11 Loss on disposal of property, plant and equipment 31 6 75 Share of loss of joint venture 152 66 199 Investment revenues (253) (252) (531) Finance costs 302 112 51 Income tax charge 1,006 902 712 Operating cash flows before movement in working capital 2,897 1,992 1,869 Decrease/(increase) in inventories 17 9 (82) Increase in contract assets (443) (600) (1,756) Decrease/(increase) in receivables 321 (49) (2,691) Decrease in insurance assets 24 - 6 (Decrease)/increase in payables (3,700) (2,198) 1 Increase in contract liabilities 846 780 2,407 Decrease in insurance liabilities (146) (67) (89) (Decrease)/increase in provisions (482) (121) 372 Cash (used in)/from operations (666) (254) 37 Income taxes (paid)/received (740) 94 (870) Net cash used in operating activities (1,406) (160) (833)
12 Related party transactions
Transactions with related parties
ORConsulting Limited (ORCL) is an organisation used by the Group for consulting services in relation to leadership coaching. Organisation Resource Limited (ORL), a company owned by Mark Hamlin who is a Non-Executive Director of the Group, retains intellectual property in ORCL for which it is paid a license fee. In the six months to 30 June 2019, the Group has paid GBP25,000 plus VAT (six months ended 30 June 2018: GBP25,000; year ended 31 December 2018: GBP90,000) to ORCL, which was payable under 30 days credit terms.
OR Talent Inc (ORTI) is an organisation which provides advice to the Group in senior leadership recruitment and integration. ORTI is a wholly owned subsidiary of OR Talent Limited (ORTL) in which Mark Hamlin holds 75% of the voting rights. In the six months to 30 June 2019, the Group has paid GBP25,000 (six months ended 30 June 2018; GBPnil; year ended 31 December 2018: GBPnil) to ORTI, which was payable under 30 days credit terms.
Mark Hamlin is the Chairman of Globiva. The fees for this role are paid to his consultancy company, ORL. The fee paid to ORL by the Group in the six months ended 30 June 2019 was GBP38,000 (six months ended 30 June 2018: GBPnil; year ended 31 December 2018: GBP28,000) and was payable under 25 day credit terms.
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 2019 30 June 2018 31 December 2018 GBP'000 GBP'000 GBP'000 (Unaudited) (Unaudited) (Audited) Short-term employee benefits 1,107 1,070 2,248 Post-employment benefits 43 42 82 Share-based payments 317 217 512 1,467 1,329 2,842
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(END) Dow Jones Newswires
September 04, 2019 02:00 ET (06:00 GMT)
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