Annual Financial Report

RNS Number : 9253I

CPPGroup Plc

31 March 2015

 



CPPGROUP PLC

31 MARCH 2015

FULL YEAR REPORT

FOR THE YEAR ENDED 31 DECEMBER 2014

CPPGroup Plc - Full year report for the year ended 31 December 2014

CPPGroup Plc (CPP or the Group) is an assistance business operating internationally within the financial services, telecommunications and travel sectors. CPP primarily operates a business-to-business-to-consumer (B2B2C) business model providing its assistance products to customers through Business Partners and direct to consumer. The Group's core assistance and travel service products are designed to make everyday life easier to manage.

Overview

·       Significant progress made to strengthen and secure the future of the Group

o Successfully secured new equity funding of £20.0 million (£17.9 million net of expenses), significantly restructured the Group's liabilities and refinanced the Group's debts in early 2015

o Substantially reduced the cost base and restructured the business

o Progressed product development and new IT system plans

o Evolving digital capabilities

o Closure of the UK Scheme of Arrangement

·       Trading performance

o Return to underlying operating profit at £0.5 million (2013: £1.8 million loss)

o Group revenue of £108.8 million (2013: £178.0 million)

o Loss for the year from continuing and discontinued operations reduced to £6.7 million (2013: £32.9 million)

o Renewal rates stronger at 71.4%, on a moving annual total basis, from half year position of 69.5%

o Live policy base lower at 5.1 million, from half year position of 6.1 million

·       Net funds position of £7.9 million (2013: £44.3 million); reduced significantly as a result of funding the UK Scheme of Arrangement (see footnote 5 to highlights table for analysis of net funds). The successful completion of the equity raise and debt restructure in February 2015 has improved this position significantly.

·       Medium term strategic business plan focused on trading from a platform for growth.

·       Outlook: The Group is focused on its strategic priorities, which support its existing revenue, new income generation and growth ambitions. Challenges and risks remain in the execution and delivery of the Group's strategic plans and further action is required before the business achieves its full potential.

Eric Anstee, Executive Chairman, commented:

"CPP has come a long way in 2014. The UK Scheme of Arrangement was a significant undertaking and its completion marked the closure of a challenging period in the Group's history. The subsequent restructuring and substantial new investment has set the Group on a new path that I believe will bring new opportunities for this business.

"I was appointed to the Board at the end of 2014 and, despite the significant challenges that the Group traversed last year, I have been struck by the renewed energy and enthusiasm within the Company. CPP has many strengths - longstanding relationships with a broad range of Business Partners around the world, an international footprint and people that have the ability to develop important products that customers like and trust.

"These qualities are the foundations on which we will continue to build CPP's future in the year ahead. The future will be digital-led and we have recently announced critical investment in a new IT system that will support our ambitions in this area. This is an important first step on a new path for CPP, on which we are focused on taking action to drive improved business performance and maximise value for our shareholders."

Highlights - Continuing operations Year ended	31 December 2014	31 December 2013
Revenue (£ millions)	108.8	178.0
Operating profit/(loss) (£ millions)
− Reported	(5.8)	(39.3)
− Underlying1	0.5	(1.8)
Loss before tax (£ millions)
− Reported	(7.7)	(43.2)
− Underlying1	(1.3)	(5.7)
Loss after tax (£ millions)
− Reported	(6.0)	(45.3)
− Underlying²	(0.3)	(8.0)
Loss for the year (£ millions) 3	(6.7)	(32.9)
Reported loss per share (pence)
− Basic and diluted	(3.48)	(26.43)
Cash (used in)/generated by operations (£ millions) 4	(33.8)	23.0
Net funds (£ millions) 5	7.9	44.3

1.     Underlying operating profit/(loss) and underlying loss before tax exclude exceptional items of £6.3 million (2013: £37.5 million). Further detail is provided in note 5 to the condensed financial statements.

2.     Underlying loss after tax excludes exceptional items net of tax of £5.7 million (2013: £37.3 million). The tax effect of the exceptional items is £0.6 million (2013: £0.2 million). Further detail is provided in note 5 to the condensed financial statements.

3.     Loss for the year includes (loss)/profit after tax from continuing and discontinued operations.

4.     Includes cash flows from continuing and discontinued operations.

5.     Net funds comprise cash and cash equivalents of £40.6 million (2013: £66.9 million) partially offset by borrowings of £32.7 million (2013: £22.6 million). Cash and cash equivalents includes cash held for regulatory purposes of £21.5 million (2013: £27.8 million) and cash restricted by the terms of the VVOP within the UK's regulated entities of £13.4 million (2013: £32.7 million). Whilst not available to the wider Group, the restricted cash is available to the regulated entity in which it exists including for operational and residual customer redress purposes.

A video with the Chief Financial Officer and Chief Operating Officer is available on the Group's website at www.cppgroupplc.com.

Enquiries

Investor Relations

CPPGroup Plc  

Craig Parsons, Chief Financial Officer

Tel: [phone]

Helen Spivey, Head of Corporate and Investor Communications

Tel: [phone]

Nominated Adviser and Broker

Numis Securities Limited: Robert Bruce; Stuart Skinner; Charles Farquhar

Tel: [phone]

Media

Tulchan Communications: Martin Robinson

Tel: [phone]

For more information on CPP visit www.cppgroupplc.com

REGISTERED OFFICE

CPPGroup Plc

Holgate Park

York

YO26 4GA

Registered number: 07151159

EXECUTIVE CHAIRMAN'S STATEMENT

Introduction

I worked with the previous Chairman and the Board in late 2014 to formalise plans to improve the financial position of the Group and joined the Board in December 2014. I was appointed Executive Chairman in February 2015 and I am pleased to have joined CPP as it embarks on the next stage of its development as an international assistance business. Significant progress has been made and positive steps achieved during 2014 to restructure, stabilise and strengthen the Group.  

Our progress

The Group has continued its journey to stabilise the business and develop its transformation programme. I am encouraged by the considerable progress that has been made to add value to the Group and ultimately support the successful equity raise and substantial improvement in the financial position of the business in February 2015. As a result, we are in a stronger position, with a stable foundation and renewed confidence that provides us with the opportunity to take the Group forward for the future. 

During 2014, the actions taken and significant milestones achieved successfully repositioned the Group for the future and comprised:

·      formalising essential plans to restructure the balance sheet and strengthen the capital position of the Group at the end of the year;

·      substantially reducing the cost base, with administrative costs circa £20 million lower in the year;

·      restructuring and consolidation resulting in the closure of two out of three offices in the UK and further closures in France, Singapore, Hong Kong and Brazil;

·      the sale of our shareholding in Home3 (a joint venture with Mapfre);

·      improving processes and governance;

·      strengthening regulatory relationships and agreement with the FCA to enable an initial change to the UK Voluntary Variation of Permissions (VVOP), reverting to an industry standard 'cooling off' period for renewing policies;

·      progressing product development plans and as announced in March 2015, selecting a new IT system from SSP Limited to provide a new international single platform; and

·      closure of the UK Scheme of Arrangement (UK Scheme) claims period.

In addition, our focus on evolving and increasing our digital capabilities across the Group during the year included:

·      launching new online members' areas and acquisition sites in a number of countries, with the remaining countries to follow in 2015;

·      launching Airport Angel membership sales online and upgrading the mobile app;

·      launching sales through ATMs in Turkey; and

·      developing opportunities in India relating to Mobile Phone Protection products.

A critical step to secure our future was achieved at the beginning of 2015, as I noted in my opening remarks. I am pleased that the Group successfully secured new equity funding of £20.0 million (£17.9 million net of expenses), significantly restructured the Group's liabilities, refinanced the Group's debts and commenced trading on the Alternative Investment Market (AIM) of the London Stock Exchange. As a result, and following the closure of the UK Scheme, the future of the Group is now more certain. CPP today is providing an improved service to our 5.1 million policyholders internationally and I look forward to building on this success for our people, customers, Business Partners and shareholders. In particular, during 2015 and as previously announced, the Group will further invest in its digital interfaces and new core IT platform across its international operations.

Our performance

The Group's headline financial results for 2014 remained constrained, reflecting the overall challenges of our operating environment during the year, particularly in the UK. Revenue reduced to £108.8 million (2013: £178.0 million) whilst underlying operating performance which excludes exceptional items improved to a profit of £0.5 million (2013: £1.8 million loss). Group exceptional items in the period were £6.3 million (2013: £37.5 million), mainly comprising further residual customer redress and associated costs and restructuring costs. As a result, the Group reduced its reported operating loss to £5.8 million (2013: £39.3 million). At a Group level, renewal rates for the year were stronger at 71.4% (2013: 69.4%) and Group live policies totalled 5.1 million (2013: 7.1 million).

The Group worked hard to ensure it had sufficient financial resources to complete the Scheme in the UK and the closure of the Scheme represented a significant milestone for the business. Its impact, nonetheless, was considerable and consequently, the Group's financial resources and liquidity were significantly reduced. The Group made positive progress regarding its financial stability towards the end of 2014 and in February 2015, successfully secured new equity funding of £20.0 million, restructured the Group's liabilities and refinanced the Group's debts. This has significantly improved our balance sheet position.

The Directors have decided not to recommend the payment of a dividend. The Board continues to believe it is not appropriate to pay a dividend until cash generated by operating activities is more than adequate to cover the Group's future investment plans.

Partnerships remain a key priority and the Group placed emphasis on engaging and improving current Business Partner relationships and developing new commercial opportunities during 2014. It is encouraging that during the year, new contracts were secured with new Business Partners and new campaigns launched with established Business Partners across the Group, internationally.

Our Board

In August 2014, Duncan McIntyre announced his intention to step down as Non-Executive Chairman and in January 2015, I was appointed as Non-Executive Chairman. I would like to thank Duncan for his leadership, guidance and support to the Group, which has successfully enabled CPP to reposition for the future. In February 2015, Brent Escott, Chief Executive Officer stepped down from his role. The process to identify a new Chief Executive Officer is on-going and in the interim, I have assumed the role of Executive Chairman.

Following the successful conclusion of the General Meeting in January 2015, Les Owen stepped down as an Independent Non-Executive Director and a process to identify a suitable successor is well advanced.

In January 2015, Shaun Astley-Stone was appointed as Chairman of the Risk & Compliance Committee.

The Board is committed to continue to maintaining and strengthening a strong governance framework throughout the business, supported by our Board Committees.

Our plan going forward

With greater certainty as we move into 2015, we can now begin to finalise and implement our strategic business plan, focused on trading from a platform for growth.

In the medium term, in order to deliver sustainable, attractive returns, the Group is focused on the following four strategic priorities, which support its existing revenue, new income generation and growth ambitions. These are to;

·      implement an enhanced market-led business model;

·      innovate and leverage existing capacity and resource;

·      optimise financial performance; and

·      trade from an improved and effective operating environment, embracing new digital technology to allow customers multi-channel access to services.

Work is well advanced with the Group's transformation plan as well as its product, digital and commercial development plans, which support the four strategic priorities and will allow CPP to regrow and evolve as an international assistance business.  

The core areas of focus include: maximising value from the established product portfolio; launching assistance products and providing channel capability, particularly in the digital and mobile space which further develop and increase the Group's digital capabilities and support customers and Business Partners resulting in lower cost service delivery and enhanced customer satisfaction; replacing the existing IT systems to deliver a modern, cost effective IT infrastructure; enhancing consistency of controls and governance throughout the Group; simplifying and improving business processes that support product innovation and testing pilot products through to launch; and further developing our range of international Business Partners.

This is a significant change programme that will support the Group's efforts to embed and trade from a platform for growth and importantly, as the Group works towards applying to remove the restrictions on the regulatory selling and other permissions under the UK VVOP.

We intend to draw on the core competencies across the Group internationally, to develop new revenue streams to support future growth.

Looking ahead

The Group is stronger than a year ago and with a medium term business plan supported by new investment, a much reduced cost base and the confidence of stakeholders, we can now drive the business forward.  

Our core priority is focused on our strategy for growth, which will enable us to maximise the value from the existing business and realise the new commercial opportunities that exist. Much work will continue to take place as we embed our plans and complete the actions required to transform the Group, which in time will create a sustainable business proposition for the long term.

I look forward to progressing the Group's strategic plans and a successful 2015. I would like to thank everyone at CPP for their hard work and also express my thanks to new and existing shareholders for their support and in particular our Business Partners and Lenders for their support and on-going commitment.

Eric Anstee

Executive Chairman

30 March 2015

OPERATING REVIEW

The Group operates internationally as three regions: the UK and Ireland; Europe and Latin America; and Asia Pacific.

Year ended	2014 £'m	2013 £'m	Growth	Constant currency growth
UK and Ireland
- Revenue	69.7	129.0	(46)%	(46)%
- Underlying operating loss1	(4.4)	(8.1)	46%	46%
Europe and Latin America
- Revenue	32.5	42.6	(24)%	(18)%
- Underlying operating profit1	5.2	7.1	(28)%	(25)%
Asia Pacific
- Revenue	6.7	6.4	3%	11%
- Underlying operating loss1	(0.2)	(0.8)	72%	73%

1 Excluding exceptional items.

UK and Ireland

Financial performance

Revenue for 2014 decreased 46% on a constant currency basis compared to the same period in 2013, to £69.7 million (2013: £129.0 million). Underlying operating loss has reduced for the full year to £4.4 million (2013: £8.1 million loss).

Review

Operating in the UK and Ireland during 2014, the region accounts for 64% of Group full year revenue. Performance during 2014 continued to reflect the on-going restriction on retail sales, reduced Card Protection and Identity Protection renewal revenues and the impact of historical Business Partner losses. Airport Angel, our travel services business, continued to develop new Business Partner opportunities and will continue to make improvements whilst establishing profitable growth opportunities both in the UK and internationally. During the year, the region made good progress in establishing the appropriate structure and operating capabilities, resources and reducing the cost base so that it reflects the current scale of the business. In Ireland, renewal performance has been in line with expectations.

Europe and Latin America

Financial performance

Revenue has decreased 18% on a constant currency basis compared to the same period in 2013, to £32.5 million (2013: £42.6 million). Underlying operating profit has consequently reduced for the full year to £5.2 million (2013: £7.1 million), 25% lower on a constant currency basis.

Review

During 2014, this region operated in Spain, Italy, Portugal, France, Germany, Turkey, Mexico and Brazil; Europe and Latin America accounts for 30% of Group full year revenue. Performance during the year in Europe has been constrained, reflecting reduced renewal rates and campaign delays, although in Mexico revenue continued to improve. As previously announced, the Group completed the exit from France at the end of the year and following an evaluation of the market opportunities, the Group will exit Brazil in 2015. 

Asia Pacific

Financial performance

Revenue is 11% higher on a constant currency basis compared to the same period in 2013, at £6.7 million (2013: £6.4 million). The underlying operating loss has reduced for the full year to £0.2 million (2013: £0.8 million).

Review

During 2014, this region operated in India, China, Malaysia, Hong Kong and Singapore; Asia Pacific represents 6% of Group full year revenue. India and China continued to increase revenue during the period. A new pilot product in India within the Mobile Phone sector was successfully tested during the year. In Malaysia, revenue continued to decline following delays to new campaign launches and the Group continues to evaluate this market for future growth opportunities. The sale of the Card Protection book in Singapore was completed as planned during the year. Plans are underway to exit from Hong Kong to right-size in accordance with the reduced scale of the business.  

FINANCIAL REVIEW

Overview

The equity raise and debt restructure, which completed in February 2015, is a significant milestone as the Group rebuilds. The transaction involved an equity raise of £20.0 million (£17.9 million net of expenses), part of which was used to reduce the bank debt from £13.0 million to £5.0 million and part to settle in full the existing commission deferral balance of £20.9 million for a compromise payment of £1.3 million and further deferral of commission of up to £1.3 million. The improved financial stability this transaction provides underpins the next stage of the Group's development.

In 2014, the Group experienced another difficult year in trading performance. The UK Scheme had a substantial direct impact on the UK business, resulting in redress payments of approximately £32.0 million and a reduction in the Group's existing policy base. It is recognised that right-sizing the UK business remains crucial and consequently in the year it was decided to close two of the three office sites in the UK. Whilst there are some exceptions, the overseas markets did not deliver growth with the southern European economic climate, in particular, continuing to have an impact. In the year, the decision was made to exit from Hong Kong and Brazil and as planned operations in France have now closed and the sale of the Card Protection book in Singapore has completed. We continue to review our international presence.

	2014	2013	Change
Revenue (£ millions)	108.8	178.0	(69.2)
Gross profit (£ millions)	48.0	65.9	(17.8)
Other administrative expenses (£ millions)	(47.5)	(67.7)	20.2
Underlying operating profit/(loss) (£ millions)	0.5	(1.8)	2.3
Exceptional items (£ millions)	(6.3)	(37.5)	31.2
Reported operating loss (£ millions)	(5.8)	(39.3)	33.5
Net finance costs (£ millions)	(1.9)	(3.9)	2.0
Reported loss before tax (£ millions)	(7.7)	(43.2)	35.6
Underlying loss per share (pence) Basic and diluted	(0.17)	(4.69)	4.52
Net funds (£ millions)	7.9	44.3	(36.4)

Summary

Group revenue has declined by 39% to £108.8 million as a result of revenue reducing by 46% in the UK and Ireland and 24% (18% on a constant currency basis) in Europe and Latin America. Revenue in Asia Pacific has grown marginally by 3% (11% on a constant currency basis).

The underlying operating profit in the year was £0.5 million, which is a £2.3 million improvement on 2013. This improvement is largely a result of the actions taken by the Group during 2013 and 2014 to reduce its cost base to align with the Group's operational size, which along with reduced depreciation charges following the 2013 asset impairments, has seen a reduction in administrative costs of circa £20 million in the year. The measures taken in 2014 will also continue to reduce the cost base in 2015.

Exceptional items of £6.3 million have been recorded in the year, mainly reflecting further residual customer redress activity of £3.0 million and restructuring costs resulting from the Group's cost saving measures of £2.6 million.

The exceptional items contributed to a reported operating loss of £5.8 million (2013: £39.3 million).

Net interest and finance costs of £1.9 million (2013: £3.9 million) were 52% lower than 2013, reflecting the costs incurred in the prior year relating to the six month extension of the loan facility, which preceded the agreement of a three year term.

As a result, the reported loss before tax was £7.7 million (2013: £43.2 million) and underlying loss before tax was £1.3 million (2013: £5.7 million).

Underlying loss after tax from continuing operations, excluding exceptional items, was £0.3 million (2013: £8.1 million). Exceptional items after tax during the year were £5.7 million. This resulted in a reported loss after tax from continuing operations of £6.0 million (2013: £45.3 million).

Discontinued operations, which represent the Home3 joint venture, reported a loss after tax of £0.8 million (2013: £12.5 million profit). The comparative includes trading and the profit on disposal of the North American business of £13.3 million. The disposal of the North American business completed in May 2013.

Underlying loss per share from continuing operations has improved from 4.69 pence in 2013 to 0.17 pence for 2014. The basic loss per share from continuing operations has also improved from 26.43 pence in 2013 to 3.48 pence in 2014.

Key Performance Indicators

	2014	2013	Change
Live policies (millions) (see table below)	5.1	7.1	(29)%
Annual renewal rate (%)	71.4	69.4	2.0
Revenue by major product (£ millions) (see table below)	108.8	178.0	(39)%
Cost/income ratio (%)	70.4	70.7	0.3
Underlying operating profit/(loss) margin (%)	0.5	(1.0)	1.5
Group cash balances (£ millions) (see table below)	40.6	66.9	(39)%

Live policies (millions)	2014	2013	Change
Retail assistance policies	2.7	3.8	(29)%
Retail insurance policies	0.1	0.3	(71)%
Packaged and Wholesale policies	2.2	3.0	(25)%
Total	5.1	7.1	(29)%

Revenue by major product (£ millions)	2014	2013	Change
Retail assistance revenue	82.7	117.1	(29)%
Retail insurance revenue	10.2	28.2	(64)%
Packaged and Wholesale revenue	15.1	32.3	(53)%
Non-policy revenue	0.8	0.5	56%
Total	108.8	178.0	(39)%

Group cash balances (£ millions)	2014	2013	Change
Regulated cash	21.5	27.8	(23)%
VVOP restricted cash	13.4	32.7	(59)%
Free cash	5.7	6.4	(11)%
Total	40.6	66.9	(39)%

Live policies: the total number of policies that are available to use by policyholders. The live policy base is 2.0 million lower than 31 December 2013, due to UK factors including declining retail Card Protection and Identity Protection policies, which include the impact of policies cancelled through the Scheme and a reduction in Packaged and Wholesale policies in the UK following the loss of a historical Business Partner contract. Live policies outside of the UK have declined marginally.

The Group annual renewal rate: the net amount of annual retail policies remaining on book after the scheduled renewal date, as a proportion of those available to renew. The annual renewal rate for 2014 has increased by 2.0 percentage points since 31 December 2013, mainly due to a high level of cancellations in the prior year resulting from adverse media attention prior to commencement of the UK Scheme; and the positive impact of an initial change to the UK VVOP in the latter part of 2014, reverting to an industry standard 'cooling off' period for UK renewing policies. The annual renewal rate does not include cancellations that have occurred during the UK Scheme, as they are not considered available to renew in the normal course of business. If UK Scheme cancellations were included the annual renewal rate would be 5.6 percentage points lower at approximately 65.8%.

Revenue by major product: revenue from the Group's major product offerings (defined in note 4 of the condensed financial statements). Revenue from retail assistance policies has declined compared to 2013 reflecting the decline in Card Protection and Identity Protection renewals in the UK. The continued new retail sales restrictions associated with the UK VVOP restrict the Group's ability to grow retail revenue. Retail insurance and Packaged and Wholesale revenue has declined in the year due to the impact of lost Business Partner contracts in the UK.

Cost/income ratio: cost of sales (excluding commission), and other administrative expenses as a percentage of revenue. Our cost/income ratio has remained broadly stable year-on-year largely due to the impact of declining Card Protection and Identity Protection renewal revenue in the UK, being offset by a significant reduction of circa £20 million year-on-year in other administrative costs following the actions taken by the Group in 2013 and 2014 to reduce its cost base.

Underlying operating profit/(loss) margin: Operating profit/(loss) before exceptional items as a percentage of revenue. Our underlying operating margin has increased 1.5 percentage points due mainly to the actions taken by the Group in 2013 and 2014 to reduce its cost base which has resulted in other administrative costs being circa £20 million lower year-on-year. This is partly offset by a reduction in Card Protection and Identity Protection renewal revenue in the UK.

Group cash balances: Allocated between regulatory funds, VVOP restricted funds and free cash available to utilise throughout the Group. Regulatory and VVOP restricted funds have decreased year-on-year mainly reflecting the funding of the UK Scheme in Card Protection Plan Ltd (CPPL). The free cash has declined marginally, which reflects cash used by the wider Group compared to the cash generated principally by its overseas operations and approved distributions from one of our regulated entities. The decline is mainly due to Group overhead requirement and continued investment in developing markets. This position has improved in February 2015 following completion of the equity raise.

Total customer redress and associated costs

The UK Scheme closed for claims on 30 August 2014 and the value of Scheme redress claims in respect of direct sales made by the Group was £32.0 million.

The Group provided an additional £3.0 million in the year reflecting the latest estimate of residual customer redress activity. The total cost provided for customer redress and associated costs from 2011 to 2014 is £72.8 million, of which £14.9 million remains not utilised, representing £6.4 million in remaining customer redress and associated costs and £8.5 million in respect of the outstanding regulatory fine levied by the FCA in November 2012 (the remaining instalments are expected to be paid in 2016).

Tax

In 2014, there was a tax credit on continuing operations of £1.7 million (2013: £2.1 million charge) principally due to deferred tax credits in the UK and Spain. This is partially offset by current tax charges relating to profitable overseas jurisdictions; no further relief is available on other Group losses. Similar to 2013, the effective tax rate is not a representative measure.

Discontinued operations

On 24 March 2014, the Group completed the disposal of its share of the Home3 joint venture to Mapfre. This discontinued operation reported a loss after tax of £0.8 million, which includes £1.1 million loss after tax in relation to historical trading results prior to disposal, partially offset by £0.3m profit on disposal.

Cash flow¹ and net funds

	2014 £'m	2013 £'m
Underlying operating profit/(loss)2	0.5	(1.8)
Exceptional items3	(5.5)	(23.6)
Operating profit from discontinued North American operation	-	3.8
Depreciation, amortisation and other non-cash items	4.4	9.8
(Decrease)/increase in provisions	(29.4)	8.4
Working capital	(3.8)	26.4
Cash (used in)/generated by operations	(33.8)	23.0
Tax	0.9	(2.8)
Operating cash flow	(32.9)	20.2
Capital expenditure (including intangibles)	(0.6)	(2.8)
Investment in joint venture	(1.0)	(0.8)
Net proceeds from disposal of discontinued operations	0.3	18.1
Net finance costs	(0.1)	(0.7)
Commission deferral compromise and associated costs	(0.2)	-
Costs of refinancing	-	(4.6)
Share issue costs	(0.5)	-
Net movement in cash/borrowings4	(35.0)	29.4
Net funds5	7.9	44.3

1.     Cash flow from continuing and discontinued operations.

2.     Continuing Group operating profit/(loss) excluding exceptional items.

3.     Excludes exceptional impairments that are non-cash items £0.1 million (2013: £13.9 million) and
  commission deferral compromise and associated costs £0.7 million (2013: £nil).

4.     Excluding effect of exchange rates, capitalised interest and amortisation of debt issue costs.

5.     Includes unamortised debt issue costs.

Cash used in operations amounted to £33.8 million (2013: £23.0 million cash generated by operations) and results primarily from funding the UK Scheme. Additionally, the prior year benefited from a one-off reduction in working capital. Cash, excluding movements in borrowings, has also decreased by £35.0 million following UK Scheme funding.

As a result, as expected the Group's net funds position has decreased in the year by £36.4 million to £7.9 million. The successful completion of the equity raise and debt restructure in February 2015 has improved this position significantly. The net funds figure includes cash balances of £34.9 million in the UK's regulated entities, CPPL and Homecare Insurance Limited (HIL). These cash balances cannot be distributed to the wider Group as they are held either for regulatory purposes or are restricted by the terms of the VVOP. The restricted cash is, however, available to use in the regulated entity in which it exists.

Dividend

The Directors have decided not to recommend the payment of a dividend. Furthermore, the Board continues to believe it is not appropriate to pay a dividend until cash generated by operating activities is more than adequate to cover the Group's future investment plans.

Balance sheet and financing

At 31 December 2014, the Group had net liabilities of £30.9 million which is an increase of £6.6 million from the 2013 net liabilities position of £24.3 million. This position includes bank borrowings of £13.0 million (excluding unamortised debt issue costs) and borrowings under the commission deferral agreement of £20.7 million (including capitalised interest).

The equity raise and debt restructure which completed in February 2015, represents a material subsequent event and has changed the shape of the Group's balance sheet significantly in 2015. In isolation, the transaction will have a beneficial impact on the Group's existing net liabilities position of approximately £37.1 million. As detailed in the proforma below, existing borrowings have reduced by approximately £26.6 million and the transaction has provided essential additional capital for the business of approximately £9.7 million. Further detail on the transaction is provided in note 13 of the condensed financial statements.

The unaudited proforma statement of consolidated assets below has been produced for illustrative purposes only and by its nature addresses a hypothetical situation and, therefore, does not represent the continuing Group's actual financial position or results.

	31 December 2014 (Audited) £'m	Equity raise (net of expenses) (notes 1,2,3) £'m	Business Partner debt restructure (note 4) £'m	Second Commission Deferral (note 5) £'m	Amended and Restated Facility (note 6) £'m	Proforma continuing Group (notes 7, 8) £'m
Non-current assets	6.9	-	-	-	-	6.9
Current assets
Trade and other receivables	15.7	(1.0)	-	-	-	14.7
Cash and cash equivalents	40.6	18.4	(1.3)	1.3	(8.7)	50.3
Other current assets	0.7	-	-	-	-	0.7
Total assets	63.9	17.4	(1.3)	1.3	(8.7)	72.6
Current liabilities	(51.9)	1.1	0.2	-	-	(50.6)
Non-current liabilities
Bank loans	(12.0)	-	-	-	7.2	(4.8)
Commission deferral agreement	(20.7)	-	20.7	(1.3)	-	(1.3)
Other non-current liabilities	(10.1)	-	-	-	0.5	(9.6)
Total liabilities	(94.7)	1.1	20.9	(1.3)	7.7	(66.3)
Net (liabilities)/assets	(30.9)	18.5	19.6	-	(1.0)	6.3

1.     The cash movement of £18.4 million reflects the equity raise of £20.0 million net of the remaining transaction fees to be paid of £1.6 million. (Total transaction fees are expected to be £2.1 million with £0.5 million already paid at 31 December 2014).

2.     £1.1 million current liabilities movement reflects transaction fees invoiced or accrued at 31 December 2014 but not paid. The payment of these items is included in the £1.6 million remaining transaction fees to be paid referenced in note 1.

3.     £1.0 million other receivable movement reflects the costs incurred at 31 December 2014 that have been transferred to share premium now the transaction has completed.

4.     £20.7 million deferred commission balance and capitalised interest (totalling £20.9 million) compromised for a cash payment of £1.3 million.

5.     The transaction included further deferral of commission of up to £1.3 million.

6.     The cash movement of £8.7 million comprises bank loan prepayment in part of £8.0 million, prepayment fees of £0.5 million (accrued at 31 December 2014) and refinancing fees of £0.2 million. The bank loans movement of £7.2 million reflects the £8.0 million loan prepayment net of a £0.8 million movement in unamortised issue costs.

7.     The Amended and Restated Facility borrowings of £5.0 million are stated net of £0.2 million transaction costs which are capitalised and amortised over the term of the facility.

8.     Other than as described above, no adjustment has been made to the unaudited proforma financial information to reflect trading or cash flows of the Group subsequent to 31 December 2014.

Craig Parsons

Chief Financial Officer

30 March 2015

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.

The Group has a risk framework that enables risks to be identified, assessed, controlled and monitored, consistently and objectively. We continue to progress the implementation of the framework throughout the Group and revise our risk framework as necessary to maintain its effectiveness. The key elements of our framework include: leadership and culture, risk appetites, risk identification and assessment, management and control of risk exposures, business incident management process and a robust policy and minimum standard framework.

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.

Strategic risks

Risk: Transformation.

Status: Increased on prior year.

Nature of risk and potential impact:

The Group has embarked on a significant and wide ranging transformation programme that includes new offerings/product development and replacement of the core IT policy platform. This transformation is vital for our future growth and sustainability. There are risks that the complexity and nature of these programmes impact the business adversely, and fails to facilitate the necessary growth and development of our business.

Mitigation:

The Group has a robust governance and delivery framework which is applied throughout transformation.

We have an internally and externally resourced programme to support the evolution of our business strategy.

We regularly assess and review progress and deliverables to ensure these are being effectively controlled.

Risk: Stability of the Group.

Status: Decreased on prior year.

Nature of risk and potential impact:

There is a risk that the Group could be destabilised by events that would significantly impact the delivery to time/cost of the overall strategy. 

The Group has specific exposures, for example as a result of a highly concentrated shareholder base.

Mitigation:

The Board actively engages on a regular basis with our largest shareholders to mitigate this risk, discussing rationale and seeking support for the Board and its business plans.

Regulatory risks

Risk: Operating Markets.

Status: No change on prior year.

Nature of risk and potential impact:

The Group operates in regulated markets worldwide. Each business has different operating models, and as such the impact of any specific local regulatory/legislative changes may adversely impact our ability to conduct business in a particular territory. The risk may be exacerbated as we operate a central IT platform, and product propositions that are derived from the original model implemented in the UK.

Mitigation:

The Board has sought to mitigate this risk through further enhancement of its risk, compliance and governance processes including the application of minimum standards self-certification, as well as the recording and tracking of business incidents/risks. Where appropriate we work with local specialist advisers.

Operational risks

Risk: People and Resources.

Status: Increased on prior year.

Nature of risk and potential impact:

In recent years the Group has lost (either through redundancy or attrition) a significant number of people from the business. This not only represents a risk in terms of knowledge and experience lost, but has increased the demands on our remaining colleagues. There is a risk that any further significant attrition of key individuals could impact adversely on the business and its transformation.

Mitigation:

The Group has identified key skills and role dependencies and takes steps to recruit and retain these within the business. The business also uses interim contractors and consultants where appropriate. The Group has stated its intention to establish an incentivisation scheme to target retention.

Risk: Business Partner Retention/Attraction.

Status: No change on prior year.

Nature of risk and potential impact:

The Group continues to have a dependency on retention and development of key Business Partners. There is a significant risk that without on-going engagement, our primary route to market would be constrained.

Mitigation:

The Group continues to engage with existing, and previous Business Partners in order to retain or build confidence.

Financial risks

Risk: Liquidity.

Status: Decreased on prior year.

Nature of risk and potential impact:

Whilst short term liquidity has improved there is a risk that, should the business not successfully generate revenue through legacy products and the development of compelling new products, in the medium term the Group's liquidity position may be adversely impacted.

Mitigation:

Management actively manages the overall liquidity profile, ensuring that the business plans are effective and aligned.

A programme is in place to develop and deploy new products and offerings.

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.

During the year significant progress has been made; the UK Scheme is now complete and the Group has successfully raised equity capital since the year end of £20.0 million (£17.9 million net of expenses) with the transaction completing on 11 February 2015. As part of this transaction, it was agreed that the Business Partner deferred commission debt of £20.9 million at the date of the transaction would be compromised for a payment of £1.3 million and further deferral of commission of up to £1.3 million and the Lender borrowing facility would be prepaid in part reducing from £13.0 million to £5.0 million. The remaining funds from the equity capital raise will provide additional liquidity for the Group's on-going activities. Whilst there continues to be uncertainty from trading and residual redress risk, along with medium term strategic risk, the Group's forecasts, taking account of the new capital structure, show that the Group should have the necessary resources to trade and operate within the level of its agreed facilities. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

RESPONSIBILITY STATEMENT

The responsibility statement below has been prepared in connection with the Company's full Annual Report and Accounts for the year ended 31 December 2014. Certain parts thereof are not included within this announcement.

We confirm that to the best of our knowledge:

·    The financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and loss of the Company and the undertakings included in the consolidation taken as a whole; and

·    The Strategic report, which is incorporated in the Annual Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face: and

·    The Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

By order of the Board

Eric Anstee	Craig Parsons
Executive Chairman	Chief Financial Officer
30 March 2015	30 March 2015

Consolidated income statement

		2014	2013
	Note	£'000	£'000
Continuing operations
Revenue	4	108,806	178,031
Cost of sales		(60,774)	(112,174)
Gross profit		48,032	65,857
Administrative expenses
Exceptional items	5	(6,323)	(37,506)
Other administrative expenses		(47,507)	(67,663)
Total administrative expenses		(53,830)	(105,169)
Operating loss
Operating profit/(loss) before exceptional items	4	525	(1,806)
Operating loss after exceptional items		(5,798)	(39,312)
Investment revenues		432	394
Finance costs: non-derivative instruments		(2,296)	(4,305)
Loss before taxation		(7,662)	(43,223)
Taxation		1,698	(2,112)
Loss for the year from continuing operations		(5,964)	(45,335)
Discontinued operations
(Loss)/profit for the year from discontinued operations	7	(785)	12,468
Loss for the year attributable to equity holders of the Company		(6,749)	(32,867)
Basic and diluted (loss)/earnings per share		Pence	Pence
Continuing operations	6	(3.48)	(26.43)
Discontinued operations	6	(0.46)	7.27
Total		(3.94)	(19.16)

Consolidated statement of comprehensive income

		2014	2013
		£'000	£'000
Loss for the year		(6,749)	(32,867)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations		111	387
Currency translation differences reclassified on disposal		-	(1,618)
Other comprehensive income/(expense) for the year net of taxation		111	(1,231)
Total comprehensive expense for the year attributable to equity holders of the Company		(6,638)	(34,098)

Consolidated balance sheet

As at 31 December

		2014	2013
	Note	£'000	£'000
Non-current assets
Other intangible assets		808	3,299
Property, plant and equipment		3,820	5,061
Investment in joint venture	7	-	-
Deferred tax asset		2,248	142
		6,876	8,502
Current assets
Insurance assets		593	3,387
Inventories		93	149
Trade and other receivables		15,709	20,511
Cash and cash equivalents	8	40,599	66,900
		56,994	90,947
Total assets		63,870	99,449
Current liabilities
Insurance liabilities		(2,019)	(3,989)
Income tax liabilities		(2,231)	(742)
Trade and other payables		(40,631)	(49,004)
Provisions	10	(7,041)	(37,398)
		(51,922)	(91,133)
Net current assets/(liabilities)		5,072	(186)
Non-current liabilities
Borrowings	9	(32,733)	(22,597)
Deferred tax liabilities		(126)	(527)
Trade and other payables		(8,991)	(9,494)
Provisions	10	(973)	-
		(42,823)	(32,618)
Total liabilities		(94,745)	(123,751)
Net liabilities		(30,875)	(24,302)
Equity
Share capital	11	17,126	17,120
Share premium account		33,291	33,292
Merger reserve		(100,399)	(100,399)
Translation reserve		720	609
Equalisation reserve		7,487	8,129
ESOP reserve		11,891	11,688
(Accumulated losses)/retained earnings		(991)	5,259
Total equity attributable to equity holders of the Company		(30,875)	(24,302)

Consolidated statement of changes in equity

		Share	Share premium	Merger	Translation	Equalisation	ESOP	(Accumulated losses)/retained
		capital	account	reserve	reserve	reserve	reserve	earnings	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2013		17,111	33,297	(100,399)	1,840	7,984	11,638	38,250	9,721
Total comprehensive expense		-	-	-	(1,231)	-	-	(32,867)	(34,098)
Movement on equalisation reserve		-	-	-	-	145	-	(145)	-
Current tax credit on equalisation reserve movement		-	-	-	-	-	-	31	31
Equity settled share based payment charge		-	-	-	-	-	50	-	50
Deferred tax on share based payment charge		-	-	-	-	-	-	(1)	(1)
Exercise of share options	11	9	(5)	-	-	-	-	(9)	(5)
At 31 December 2013		17,120	33,292	(100,399)	609	8,129	11,688	5,259	(24,302)
Total comprehensive expense		-	-	-	111	-	-	(6,749)	(6,638)
Movement on equalisation reserve		-	-	-	-	(642)	-	642	-
Current tax charge on equalisation reserve movement		-	-	-	-	-	-	(138)	(138)
Equity settled share based payment charge		-	-	-	-	-	203	-	203
Deferred tax on share based payment charge		-	-	-	-	-	-	1	1
Exercise of share options	11	6	(1)	-	-	-	-	(6)	(1)
At 31 December 2014		17,126	33,291	(100,399)	720	7,487	11,891	(991)	(30,875)

Consolidated cash flow statement

		2014	2013
	Note	£'000	£'000
Net cash (used in)/generated by operating activities	12	(32,906)	20,158
Investing activities
Interest received		432	404
Purchases of property, plant and equipment		(190)	(332)
Purchases of intangible assets		(406)	(2,460)
Cash consideration in respect of sale of discontinued operation	7	275	26,086
Credit/(costs) associated with disposal of discontinued operation	7	28	(4,215)
Cash disposed of with discontinued operation	7	-	(3,731)
Investment in joint venture	7	(1,000)	(780)
Net cash (used in)/from investing activities		(861)	14,972
Financing activities
Repayment of bank loans		-	(30,500)
Proceeds from new borrowings		8,831	11,249
Interest paid		(514)	(1,089)
Costs of refinancing		-	(4,633)
Cost of compromising the Commission Deferral Agreement		(193)	-
Issue of ordinary share capital and associated costs		(499)	(5)
Net cash from/(used in) financing activities		7,625	(24,978)
Net (decrease)/increase in cash and cash equivalents		(26,142)	10,152
Effect of foreign exchange rate changes		(159)	(287)
Cash and cash equivalents at 1 January		66,900	57,035
Cash and cash equivalents at 31 December	8	40,599	66,900

Notes to condensed financial statements

1. General information

While the financial information included in this annual results announcement has been computed in accordance with the recognition and measurement criteria of International Financial Reporting Standards as adopted for use by the European Union ('IFRS') and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company will publish full financial statements that comply with IFRS in April 2015.

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 31 December 2014 or 31 December 2013, but is derived from the 2014 financial statements. Statutory financial statements for 2013 for the Company prepared under IFRS have been delivered to the Registrar of Companies and those for 2014 for the Company will be delivered following the Company's Annual General Meeting. The Auditor, Deloitte LLP, has reported on these financial statements; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) of the Companies Act 2006. These 2014 financial statements were approved by the Board of Directors on 30 March 2015.

2. Accounting policies

The same accounting policies, presentation and methods of computation are followed in the condensed financial statements as were applied in the Group's audited financial statements for the year ended 31 December 2013 except that the following Standards and Interpretations have become effective and have been adopted in these condensed financial statements. Their adoption has not had any material impact on the Group. No Standards or Interpretations have been adopted early in these condensed financial statements.

Standard/Interpretation	Subject
Amendments to IAS 32 (December 2011)	Offsetting financial assets and financial liabilities
Amendments to IAS 36	Recoverable amount disclosure for non-financial assets

3. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying accounting policies

Going concern

The financial statements have been prepared on a going concern basis, as the Board of Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The going concern assessment considered the risks and uncertainties facing the Group, which include trading, residual customer redress and the medium term strategy. Further details of the assessment are provided in the going concern section earlier in this statement.

Key sources of estimation uncertainty

Customer redress and associated costs

The customer redress and associated costs provision relates to costs associated with residual redress exercises. At 31 December 2014 the remaining balance of the provision is £6.4 million. The provision includes anticipated compensation payable to customers through the residual customer redress exercises together with professional fees associated with these exercises.

The residual customer redress exercises in some instances are dependent on customer response rates; changes to the assumptions on response rates would lead to a change in the customer redress provision which would be reflected through the consolidated income statement.

Provision for onerous leases

The onerous lease provision relates to the expected non-utilisation of our vacated offices in the UK. At 31 December 2014, the onerous lease provision is £1.7 million, which includes future lease payments and other associated costs.

Any changes to the estimate of the non-utilisation period of the properties or other associated costs will be reflected in the consolidated income statement.

4. Segmental analysis

IFRS 8 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 is managed on the basis of three broad geographical regions:

-  UK and Ireland (UK and Ireland);

-  Europe and Latin America (Spain, Italy, Germany, Turkey, Mexico, Portugal, France and Brazil);

-  Asia Pacific (India, Hong Kong, China, Malaysia and Singapore).

Segment revenues and performance have been as follows:

	UK and Ireland 2014 £'000	Europe and Latin America 2014 £'000	Asia Pacific 2014 £'000	Total 2014 £'000
Year ended 31 December 2014
Continuing operations
Revenue - external sales	69,690	32,463	6,653	108,806
Cost of sales	(40,798)	(16,357)	(3,619)	(60,774)
Gross profit	28,892	16,106	3,034	48,032
Depreciation and amortisation	(1,325)	(784)	(34)	(2,143)
Other administrative expenses	(31,971)	(10,160)	(3,233)	(45,364)
Regional operating (loss)/profit before exceptional items	(4,404)	5,162	(233)	525
Exceptional items (note 5)				(6,323)
Operating loss after exceptional items				(5,798)
Investment revenues				432
Finance costs: non-derivative instruments				(2,296)
Loss before taxation				(7,662)
Taxation				1,698
Loss for the year from continuing operations				(5,964)
Discontinued operations
Loss for the year from discontinued operations (note 7)				(785)
Loss for the year				(6,749)

For the purposes of resource allocation and assessing performance, operating costs and revenues are allocated to the regions in which they are earned or incurred. The above does not reflect additional net charges of central costs of £1,845,000 presented within UK and Ireland in the table above which have been charged to other regions for statutory purposes.

	UK and Ireland 2013 £'000	Europe and Latin America 2013 £'000	Asia Pacific 2013 £'000	Total 2013 £'000
Year ended 31 December 2013
Continuing operations
Revenue - external sales	128,990	42,603	6,438	178,031
Cost of sales	(87,825)	(21,317)	(3,032)	(112,174)
Gross profit	41,165	21,286	3,406	65,857
Depreciation and amortisation	(5,869)	(548)	(40)	(6,457)
Other administrative expenses	(43,402)	(13,605)	(4,199)	(61,206)
Regional operating (loss)/profit before exceptional items	(8,106)	7,133	(833)	(1,806)
Exceptional items (note 5)				(37,506)
Operating loss after exceptional items				(39,312)
Investment revenues				394
Finance costs: non-derivative instruments				(4,305)
Loss before taxation				(43,223)
Taxation				(2,112)
Loss for the year from continuing operations				(45,335)
Discontinued operations
Profit for the year from discontinued operations (note 7)				12,468
Loss for the year				(32,867)

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 net charges of central costs of £1,983,000 presented within UK and Ireland in the table above which have been charged to other regions for statutory purposes.

Segment assets

	2014 £'000	2013  £'000
UK and Ireland	51,673	85,913
Europe and Latin America	7,012	11,002
Asia Pacific	2,937	2,392
Total segment assets	61,622	99,307
Unallocated assets	2,248	142
Consolidated total assets	63,870	99,449

Deferred tax is not allocated to segments.

Capital expenditure

	Intangible assets			Property, plant and equipment
	2014 £'000	2013 £'000		2014 £'000	2013 £'000
Continuing operations
UK and Ireland	393	1,450		118	194
Europe and Latin America	13	128		61	42
Asia Pacific	-	26		11	5
Additions from continuing operations	406	1,604		190	241

Revenues from major products

	2014 £'000	2013 £'000
Continuing operations
Retail assistance policies	82,652	117,066
Retail insurance policies	10,229	28,153
Packaged and Wholesale policies	15,080	32,272
Non-policy revenue	845	540
Revenue from continuing operations	108,806	178,031
Discontinued operations	-	15,634
Consolidated total revenue	108,806	193,665

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 revenues" 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 deferred tax) by geographical location are detailed below:

	External revenues		Non-current assets
	2014 £'000	2013 £'000	2014 £'000	2013 £'000
Continuing operations
UK	68,412	125,432	4,100	7,008
Spain	15,215	19,767	176	432
Other	25,179	32,832	352	920
Total continuing operations	108,806	178,031	4,628	8,360
Discontinued operations	-	15,634	-	-
	108,806	193,665	4,628	8,360

Information about major customers

There are no customers either in the current or prior year from which the Group earns more than 10% of its revenue.

5. Exceptional items

	Note	2014 £'000	2013 £'000
Customer redress and associated costs	10	3,000	18,168
Restructuring costs		2,579	5,503
Commission deferral compromise and associated costs		744	-
Impairment of IT assets		-	8,058
Impairment of goodwill, intangible assets and freehold		-	5,822
Other		-	(45)
Exceptional items included in operating loss		6,323	37,506
Tax on exceptional items		(646)	(222)
Total exceptional items after tax		5,677	37,284

The customer redress and associated costs of £3,000,000 (2013: £18,168,000) relates to the latest estimate with respect to residual customer redress activity.

The restructuring costs of £2,579,000 (2013: £5,503,000) principally relate to redundancy programmes and associated costs across the Group, along with onerous lease provisioning following closure of the Tamworth and Manchester sites in the UK. The majority of this cost is located in the UK.

The commission deferral compromise and associated costs of £744,000 (2013: £nil) relates to professional fees associated with the agreement to compromise the Commission Deferral Agreement which has completed in 2015.

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 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 increase the loss per share from continuing operations attributable to equity holders. The diluted loss per share is therefore equal to the basic loss per share for the current and prior year.

 (Loss)/earnings

	Continuing operations			Discontinued operations			Total
	2014 £'000	2013 £'000	2014 £'000		2013 £'000	2014 £'000		2013 £'000
(Loss)/earnings for the purposes of basic and diluted (loss)/earnings per share	(5,964)	(45,335)	(785)		12,468	(6,749)		(32,867)
Exceptional items (net of tax)	5,677	37,284	(311)		(10,389)	5,366		26,895
(Loss)/earnings for the purposes of underlying basic and diluted (loss)/earnings per share	(287)	(8,051)	(1,096)		2,079	(1,383)		5,972

Number of shares

	Number (thousands)	Number (thousands)
Weighted average number of ordinary shares for the purposes of basic and diluted (loss)/earnings per share	171,622	171,546

	Continuing operations		Discontinued operations		Total
	2014 Pence	2013 Pence	2014 Pence	2013 Pence	2014 Pence	2013 Pence
Basic and diluted  (loss)/earnings per share	(3.48)	(26.43)	(0.46)	7.27	(3.94)	(19.16)
Basic and diluted underlying (loss)/earnings per share	(0.17)	(4.69)	(0.64)	1.21	(0.81)	(3.48)

On 13 January 2015, the Company's existing 10 pence ordinary share capital was subdivided and redesignated into one new ordinary share of 1 penny each and one new deferred share of 9 pence each. The new deferred shares have no rights to receive dividends and will only have very limited rights on a return of capital. Additionally they will not be admitted to trading on AIM or any other stock exchange. Accordingly, the additional deferred shares have not been considered in the calculation of (loss)/earnings per share.

On 11 February 2015, the Company issued 666,666,667 new ordinary shares as part of a £20.0 million equity raise; further detail is available in note 13. This share issue occurred after the period end and as such the shares are not included in the current year (loss)/earnings per share calculation.

7. Discontinued operations

On 24 March 2014, the Group completed the sale of its 49% shareholding in Home3 Assistance Limited (Home3). The gross consideration on disposal was £275,000.

In accordance with IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" this operation has been presented as discontinued operations, which is consistent with the prior year. The comparative figure includes the disposal of our North American operation which completed in May 2013.

The consolidated income statement, summary of cash flows and assets and liabilities of this business is set out below:

 (i) Consolidated income statement

	2014			2013
	Home3 £'000	North America £'000	Total £'000	Home3 £'000	North America £'000	Total £'000
Revenue	-	-	-	-	15,634	15,634
Cost of sales	-	-	-	-	(7,962)	(7,962)
Gross profit	-	-	-	-	7,672	7,672
Administrative expenses	-	-	-	-	(3,902)	(3,902)
Share of loss of joint venture	(1,096)	-	(1,096)	(780)	-	(780)
Operating (loss)/profit	(1,096)	-	(1,096)	(780)	3,770	2,990
Investment revenues	-	-	-	-	10	10
(Loss)/profit before taxation	(1,096)	-	(1,096)	(780)	3,780	3,000
Taxation	-	-	-	-	(921)	(921)
(Loss)/profit after tax	(1,096)	-	(1,096)	(780)	2,859	2,079
Profit/(loss) on disposal	265	46	311	(14)	10,403	10,389
(Loss)/profit for the year	(831)	46	(785)	(794)	13,262	12,468

On 24 March 2014, the Group completed the sale of its joint venture, Home3, to Mapfre Abraxas Software Limited.

	2014			2013
	Home3 £'000	North America £'000	Total £'000	Home3 £'000	North America £'000	Total £'000
Proceeds	275	-	275	-	26,086	26,086
Net assets sold	-	-	-	-	(14,042)	(14,042)
(Costs)/credit associated with disposal	(10)	46	36	(14)	(3,259)	(3,273)
Currency retranslation differences reclassified on disposal	-	-	-	-	1,618	1,618
Profit/(loss) on disposal	265	46	311	(14)	10,403	10,389

 (ii) Summary of cash flows

	2014 £'000	2013 £'000
Net cash flows from operating activities	-	2,216
Net cash flows from investing activities	-	(27)
Net cash flows from financing activities	-	(1,266)
Cash consideration in respect of sale of discontinued operation	275	26,086
Credit/(costs) associated with the disposal of discontinued operation	28	(4,215)
Cash disposed of with discontinued operation	-	(3,731)
Investment in joint venture	(1,000)	(780)
Net cash (outflow)/inflow	(697)	18,283

(iii) Assets and liabilities

Movements in the Group's share in its joint venture are as follows:

	2014 £'000	2013 £'000
Carrying amount at 1 January	-	-
Increase in investment	1,096	780
Losses recognised for the year	(1,096)	(780)
Carrying amount at 31 December	-	-

The Group had a 50% economic interest in Home3, with 49% of the issued ordinary share capital being allotted to the Group. As part of the disposal transaction the Group invested a further £1,000,000 to absorb its share of unrecognised losses as well as capitalising further residual balances due from Home3 prior to disposal. These balances have been accounted for as investments in Home3 with the trading losses recognised limited to the level of investment.

8. Cash and cash equivalents

Cash and cash equivalents of £40,599,000 (2013: £66,900,000) comprises cash held on demand by the Group and short term deposits.

Cash and cash equivalents includes the following:

i) £21,542,000 (2013: £27,815,000) cash maintained by the Group's insurance businesses for solvency purposes; and

ii) £13,380,000 (2013: £32,706,000) cash held in the UK's regulated entities CPPL and HIL which is restricted by the terms of the VVOP and cannot be distributed to the wider Group without FCA approval. This restricted cash whilst being unavailable to distribute to the wider Group, is available to the regulated entity in which it exists including for operational and residual customer redress purposes.

Concentration of credit risk is reduced, as far as practicable, by placing cash on deposit across a number of institutions with the best available credit ratings. Credit quality of counterparties are as follows:

	2014 £'000	2013 £'000
AA	1,537	1,607
A	37,069	62,444
BBB	1,000	2,559
BB	978	167
Rating information not available	15	123
	40,599	66,900

Ratings are measured using Fitch's long term ratings, which are defined such that ratings "AAA" to "BBB" denote investment grade counterparties, offering low to moderate credit risk. "AAA" represents the highest credit quality, indicating that the counterparty's ability to meet financial commitments is highly unlikely to be adversely affected by foreseeable events.

9. Borrowings

The carrying value of the Group's financial liabilities, for short term borrowings and long term borrowings, are as follows:

	2014 £'000	2013 £'000
Bank loans due outside of one year	13,000	13,000
Less: unamortised issue costs	(969)	(1,653)
Commission deferral agreement	20,702	11,250
Borrowings due outside of one year	32,733	22,597

Analysis of repayments:

	2014 £'000	2013 £'000
Within one year	-	-
In the second year	13,000	-
In the third to fifth years	20,702	24,250
Total repayments	33,702	24,250
Less: unamortised issue costs	(969)	(1,653)
Total carrying value	32,733	22,597

The Group's bank debt is in the form of a revolving credit facility (RCF). The Group is entitled to roll over repayment of amounts drawn down, subject to all amounts outstanding falling due for repayment on expiry of the facility on 31 July 2016.

The RCF bears interest at a variable rate of LIBOR plus a margin of 4%. It is secured by fixed and floating charges on certain assets of the Group. The RCF includes a prepayment fee which increases over the term of the loan to a maximum level of 8% of the outstanding principal balance. The financial covenants of the RCF are based on the interest cover, leverage and minimum total cash balance of the Group. The Group has been in compliance with these covenants since inception of the RCF.

All amounts outstanding in the Commission Deferral Agreement fall due for repayment on expiry of the agreement on 31 July 2017. The Commission Deferral Agreement bears interest at a fixed rate of 3.5% and is secured by charges over the assets of CPPL in substantially similar form and terms to the security granted under the RCF.

On 11 February 2015, the Amended and Restated RCF became effective following prepayment in part of the existing RCF, extending the term to 28 February 2018. The Amended and Restated RCF is on substantially the same terms as the facility it replaced, with the exception of the available balance reducing to £5.0 million, the removal of the leverage covenant and the removal of the prepayment fee. At the same time the Group agreed to settle all the liabilities of the Commission Deferral Agreement with certain Business Partners for a compromise payment of £1.3 million and further deferral of commission of up to £1.3 million. The Second Commission Deferral Agreement has a repayment date of 31 January 2017 and is on the same terms as the Commission Deferral Agreement. Further detail is provided in note 13.

The weighted average interest rates paid during the year were as follows:

	2014 %	2013 %
Bank loans	4.5	3.8
Commission deferral agreement	3.5	3.5
Weighted average	3.9	3.8

At 31 December 2014, the Group does not have any undrawn committed borrowing facilities (2013: £nil).

10. Provisions

	Onerous leases 2014 £'000	Customer redress and associated costs 2014 £'000	Total 2014 £'000	Restructuring costs 2013 £'000	Customer redress and associated costs 2013 £'000	Total 2013 £'000
At 1 January	-	37,398	37,398	-	28,967	28,967
Charged to the income statement	1,658	3,000	4,658	1,750	18,168	19,918
Customer redress and associated costs paid in the year	-	(34,042)	(34,042)	-	(9,737)	(9,737)
Transfer to trade and other payables	-	-	-	(1,750)	-	(1,750)
At 31 December	1,658	6,356	8,014	-	37,398	37,398

The customer redress and associated cost provision comprises anticipated compensation payable to customers through residual customer redress exercises and associated professional fees. The outstanding regulatory fine of £8.5 million is included in non-current payables.

The onerous lease provision reflects the future lease payments and associated costs in the expected non-utilisation period at our vacated offices in the UK.

Customer redress and associated costs are expected to be settled within one year of the balance sheet date and onerous lease provisions are expected to be settled within three years of the balance sheet date.

Provisions are expected to be settled in the following periods:

	Onerous leases 2014 £'000	Customer redress and associated costs 2014 £'000	Total 2014 £'000	Restructuring costs 2013 £'000	Customer redress and associated costs 2013 £'000	Total 2013 £'000
Within one year	685	6,356	7,041	-	37,398	37,398
Outside of one year	973	-	973	-	-	-
At 31 December	1,658	6,356	8,014	-	37,398	37,398

11. Share capital

	2014 Number (thousands)	2014 £'000	2013 Number (thousands)	2013 £'000
Called-up and allotted: Ordinary Shares of 10 pence each
At 1 January	171,588	17,120	171,487	17,111
Issue of shares in connection with:
Exercise of share options	62	6	101	9
At 31 December	171,650	17,126	171,588	17,120

During the year, the Company issued 61,529 shares to option holders for total consideration of £6,000.

Of the 171,649,941 ordinary shares issued at 31 December 2014, 171,149,942 are fully paid and 499,999 are partly paid.

The ordinary shares are entitled to the profits of the Company which it may from time to time determine to distribute in respect of any financial year or period.

All holders of ordinary shares shall have the right to attend and vote at all general meetings of the Company. On a return of assets on liquidation the assets (if any) remaining, after the debts and liabilities of the Company and the costs of winding up have been paid or allowed for, shall belong to, and be distributed amongst, the holders of all the ordinary shares in proportion to the number of such ordinary shares held by them respectively.

As announced on 13 January 2015, subsequent to the year end and prior to admission to the AIM market, each of the Company's existing 10 pence ordinary share capital was subdivided and redesignated into one new ordinary share of 1 penny each and one new deferred share of 9 pence each. Each new ordinary share of 1 penny will carry the same rights as each existing ordinary share. Each deferred share will have no voting rights, no rights to receive dividends and will only have very limited rights on a return of capital. The deferred shares will not be admitted to trading on AIM or listed on any other stock exchange and will not be freely transferable. Further detail is included in note 13.

12. Reconciliation of operating cash flows

	2014 £'000	2013 £'000
Loss for the year	(6,749)	(32,867)
Adjustment for:
Depreciation and amortisation	4,155	9,552
Equity settled share based payment expense	203	50
Impairment loss on goodwill, intangible assets and property, plant and equipment	86	5,822
Impairment of IT assets	-	8,058
Loss on disposal of property, plant and equipment	43	200
Profit on disposal of discontinued operations	(311)	(10,389)
Commission deferral compromise and associated costs	744	-
Share of loss of joint venture	1,096	780
Investment revenues	(432)	(404)
Finance costs: non-derivative instruments	2,296	4,305
Income tax (credit)/expense	(1,698)	3,033
Operating cash flows before movements in working capital	(567)	(11,860)
Decrease in inventories	56	150
Decrease in receivables	5,202	8,464
Decrease in insurance assets	2,794	23,854
Decrease in payables	(9,892)	(2,526)
Decrease in insurance liabilities	(1,970)	(3,535)
(Decrease)/increase in provisions	(29,384)	8,431
Cash (used in)/generated by operations	(33,761)	22,978
Income taxes repaid/(paid)	855	(2,820)
Net cash (used in)/generated by operating activities	(32,906)	20,158

13. Events after the balance sheet date

On 23 December 2014, the Group announced a number of proposals, which were subject to shareholder approval in a general meeting. These proposals were formally approved by the shareholders at a general meeting on 13 January 2015 and were subsequently completed on 11 February 2015.  The transaction comprised the following elements:

i) an equity placing to raise in aggregate £20.0 million (approximately £17.9 million net of expenses) by way of a non-preemptive placing of 666,666,667 placing shares at a price of 3 pence per placing share (the Placing);

ii) the reorganisation of CPPGroup Plc share capital to subdivide and re-designate each of the existing ordinary shares of 10 pence each into one new ordinary share of 1 penny each and one deferred share of 9 pence each. Each new ordinary share of 1 penny carries the same rights as the old 10 pence ordinary share. Each deferred share of 9 pence has no voting rights, no rights to receive dividends and only has very limited rights on a return of capital. The deferred shares have not been admitted to trading on AIM or any other stock exchange and are not freely transferable. The Placing shares represented new ordinary shares of 1 penny each;

iii) the inter-conditional cancellation of the Group's shares from the Main Market and admission to trading on AIM;

iv) prepayment in part of the Group's current bank facility and related costs of £8.5 million, together with the refinancing of the remaining £5.0 million through an Amended and Restated Facility; and

v) settlement of all the liabilities of the Commission Deferral Agreement with certain of its Business Partners for a compromise payment of £1.3 million and further deferral of commission of up to £1.3 million. This element of the transaction will result in the recognition of an exceptional gain of approximately £19 million in the 2015 consolidated income statement.

Included in the Placing shares of 666,666,667 were acquisitions by Phoenix Asset Management Partners Limited (335,326,643), Mr Hamish Ogston (264,144,352), through his family investment vehicle Milton Magna Limited, and Schroder Investment Management Limited (61,437,285). Mr Hamish Ogston and Schroder Investment Management Limited were both substantial shareholders in the Group prior to the Placing; therefore their participation in the Placing constituted related party transactions.

Following the Placing, the ordinary share capital of the Group is 838,316,608, with Phoenix Asset Management holding 40.00% of this capital. Mr Hamish Ogston holds 43.00% (reduced from 56.12% prior to the Placing) and Schroder Investment Management hold 9.99% (reduced from 13.00% prior to the Placing). 

14. Related party transactions and control

Ultimate controlling party

During the year, the Group was controlled by the Company's majority shareholder, Mr Hamish Ogston. On 11 February 2015, Mr Hamish Ogston's holding in the Company reduced to 43.00%, resulting in the Group no longer having a controlling party, see note 13.

Transactions with joint ventures

During the year the Group disposed of its shareholding in its joint venture entity, Home3. Transactions between the Group and its joint venture prior to disposal represent related party transactions.

The Group undertook the following transactions with its joint venture entity, Home3, prior to the disposal:

	2014 £'000	2013 £'000
Costs rechargeable to Home3 incurred by the Group	-	138
Balance receivable from Home3 at 31 December	-	2,299

The disposal of Home3 completed on 24 March 2014. As part of the disposal agreement the balance receivable from Home3 prior to disposal of £2,350,000 was capitalised as an investment in the joint venture. £2,254,000 of this balance has already been provided through the consolidated income statement between 2011 and 2013. The remaining balance of £96,000 has been recognised in the consolidated income statement in the year ended 31 December 2014.

Transactions with related parties

There have been no transactions with related parties in the year, other than the remuneration of key management personnel. Subsequent to the year end, Mr Hamish Ogston and Schroder Investment Management Limited participated in the Placing; further detail is provided in note 13.

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:

	2014 £'000	2013 £'000
Short term employee benefits	2,133	3,769
Post employment benefits	100	184
Termination benefits	-	547
Share based payments	8	(144)
	2,241	4,356

Cautionary statement                      

This announcement has been prepared solely to provide additional information to shareholders as a body to meet the relevant requirements of the UK Listing Authority. The announcement should not be relied on by any other party or for any other purpose.

The announcement 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 announcement 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, 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 announcement.

 

END

 

 

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