Cppgroup Regulatory News (CPP)

CPPGROUP PLC

18 AUGUST 2016

HALF YEAR REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2016

CPPGroup Plc- Half year report for the six months ended 30 June 2016

CPPGroup Plc (CPP or the Group), the international assistance business, today announces its results for the six months ended 30 June 2016.

Operational highlights

· New Chief Executive Officer (Jason Walsh), new Executive Director (Justine Shaw) and new Non-Executive Directors (Sir Richard Lapthorne, Mark Hamlin and Nick Cooper) appointed

· Strategic priorities identified to drive sustainable focused growth

· New product development well advanced; with OwlDetect, a new global cybersecurity proposition, targeted for launch in September 2016

· Commenced a review of options to focus on development of a cost effective IT platform more suited to the Group's needs

· Regulatory fine cleared, with the final scheduled instalment paid in July 2016

Financial highlights

· Improved underlying operating profit from continuing operations of £3.6 million (H1 2015: £1.9 million)

· Group revenue from continuing operations of £35.4 million (H1 2015: £38.9 million), which includes £5.6 million (H1 2015: £2.8 million) from India

· The Group's annual renewal rate has remained stable at 72.9% (31 December 2015: 72.9%); an endorsement of the value customers continue to place on our products

· Live policy base returns to growth at 3.9 million (31 December 2015: 3.8 million); a significant milestone representing the first period of increased policy numbers since the end of 2011

Jason Walsh, Chief Executive Officer, commented:

"CPP delivered a solid underlying performance in the first half of the year, which demonstrated the resilience of the core business. Since I was appointed CEO in May we have been developing a strategic plan that will take this core strength and build on it and return the business to sustainable growth. We are actively developing new products and are very encouraged by the global potential for OwlDetect, our cybersecurity alert service, which we plan to launch next month.

Looking ahead it is vital that we return CPP to revenue growth, which will be supported by new product development. For this reason we were very encouraged by the rise in customer numbers to 3.9 million during the first half of the year, although we believe that we are still only scratching the surface of the potential market for our services. Meanwhile we continue to address our cost base, to ensure that the Group has the appropriate resources and tools to support its planned development."

1. Underlying operating profit excludes an exceptional item of £0.5 million (H1 2015: £18.9 million credit) and Matching Share Plan charges of £0.5 million (H1 2015: £0.3 million). Further detail of the exceptional item is provided in note 4 to the condensed consolidated interim financial statements.

2. Profit for the period includes profit after tax from continuing and discontinued operations.

3. Cash used in operations includes cash flows from continuing and discontinued operations. Cash flows include £6.4 million payment of the regulatory fine (H1 2015: £nil).

4. Net funds comprise cash and cash equivalents of £33.2 million (H1 2015: £38.0 million) partially offset by borrowings of £3.7 million (H1 2015: £1.1 million). Cash and cash equivalents includes cash held in the UK's regulated entities of £25.4 million (H1 2015: £33.3 million) which is either for regulatory purposes or restricted by the terms of the Voluntary Variation of Permissions (VVOP). 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 redress purposes.

Enquiries

CPPGroup Plc

Jason Walsh, Chief Executive Officer

Michael Corcoran, Chief Financial Officer

Tel: +44 (0)1904 544500

Nominated Adviser and Broker

Investec Bank plc: Sara Hale, James Rudd, Carlton Nelson

Tel: +44 (0)20 7597 4000

Media

Maitland: Neil Bennett, Daniel Yea

Tel: +44 (0)20 7379 5151

About CPP

CPP provides a range of assistance based services to customers in the UK and Ireland and in a number of international markets across Asia, Europe and Latin America. The Company's core propositions provide peace of mind for customers covering a range of areas including lost and stolen credit cards, identity theft, insurance of mobile devices, and passport assistance.

For more information on CPP visit www.cppgroupplc.com

REGISTERED OFFICE

CPPGroup Plc

Holgate Park

York

YO26 4GA

Registered number: 07151159

CHIEF EXECUTIVE'S STATEMENT

Introduction and first impressions

My appointment as CEO on 16 May 2016, followed a period of uncertainty triggered on 18 March 2016 by a requisition made by Schroder Investment Management Limited, one of the Group's major shareholders, to replace the former Non-Executive Directors and the CEO. The general meeting that followed in early May resulted in the resolutions being passed, leading to my appointment and that of the new Non-Executive Directors.

An early assessment has been made to understand the immediate issues and priorities that the business faced and has had to deal with and focus on. The four immediate priorities for the business are:

· New revenue and customer volume growth;

· Investing in new product development, innovation and branding;

· Designing an appropriate organisation structure with an appropriate IT platform and focused supporting resources; and

· Promoting colleague engagement and development.

The executive team is strong and ownership of these priorities is allocated to members of the team who are directly accountable for their delivery. Colleague determination, morale and quality is evident and are critical ingredients to making a success of the business. This is demonstrated right across the Group with some of our overseas businesses showing some great growth and new business opportunities.

New revenue and customer volume growth

This is fundamental to the success of the Group and we are being innovative in how this will be achieved by deviating from our standard models. Upfront marketing investment to support direct to consumer channels in addition to traditional business models are part of our new positioning which is serving to open up additional opportunities. There are exciting opportunities in our Asian markets with more 'traditional' products and services in addition to the positive response received across a large number of our markets towards our new product development. Customer volume will become an important metric as we open up our products to these new distribution strategies.

Investing in new product development, innovation and branding

New product development and innovation is being driven by consumer insight and needs. Our newest product, OwlDetect, which is targeted for launch in September 2016, is a service that alerts a customer if any of their personal confidential information is being used or traded on the dark web. We are very excited about the global potential for OwlDetect, which draws on our deep understanding of customer needs and concerns and is absolutely in keeping with CPP's tradition of providing excellent value services that address key issues of consumer concern.

The next range of products currently under development, and soon to be launched, will centre around card loss and repatriation services delivered digitally and represent a real step forward in embracing new technology in an exciting way to deliver familiar products and services. This suite of products has both appeal and applicability across the Group; additionally they are service based propositions meaning that they can be traded in the UK without restriction. We are excited by our new product development pipeline and associated channel development which we believe will position us well to maximise current and future market opportunities.

In another important step in the redevelopment of the Group, our marketing team have embarked on an exercise to re-brand the business. We have been trading successfully in many markets for a number of years, however, the time is now right to look for a fresh start under a new image, corporate identity and branding.

Designing an appropriate organisation structure

The Group's structure will be redesigned to allow for a more cost effective and growth orientated operating model. This will look at our UK subsidiaries and how they are set up to promote good governance and customer treatment and also at new company structures, both in the UK and overseas, to promote and grow our new product initiatives.

A significant part of the cost base is invested in our IT platform. We have recently completed an in-depth review of our current IT arrangements and likely needs over the coming years. Following this we have started negotiations with SSP Limited, our current IT development partner, over a number of options that would reduce our IT spend and create a platform more suited to the Group's current and future needs.

Promoting colleague engagement and development

Our colleagues are central to the business and are at the heart of providing great products and services to our customers. The importance we place in this is demonstrated through making our existing People & Culture Director a Board level executive appointment. This will create greater influence at the right levels to drive colleague engagement and performance.

Operational review

The Group operates internationally in three regions: UK and Ireland which accounts for 45% of Group revenue; Europe and Latin America which accounts for 37% of Group revenue; and Asia Pacific which accounts for 18% of Group revenue. This distribution of revenue across the Group continues to change and due to good growth in our Asia market the dependency on the UK has reduced.

Our key international markets continue to make progress, particularly in Asia Pacific where we are developing a clear growth strategy supported by established and valued local partnerships. We have commenced a number of new campaigns in the period across key markets such as India, China and Turkey, with further opportunities identified in the majority of our other markets. During the period the UK has also implemented the price reductions and content enhancements indicated in the 2015 Annual Report. Whilst conditions in some of our markets continue to be challenging, the Group's annual renewal rate has remained encouraging at 72.9%, an endorsement of the value that existing customers place in our products. Overall, our net live customer base is growing again and is now 3.9 million.

Financial Review

Summary

Group revenue has declined by 9% for the half year to £35.4 million, continuing to reflect the natural decline in the UK renewal book as new regulated sales remain restricted through the terms of the VVOP. The UK decline has been partly mitigated by significant growth in India, where strong partnerships are emerging and future prospects look good.

Reported operating profit in the first half of the year is £2.6 million (H1 2015: £20.5 million, which included a net benefit of £18.6 million from exceptional items and Matching Share Plan (MSP) charges). Underlying operating profit, which excludes £0.5 million exceptional items and £0.5 million MSP charges, has improved to £3.6 million (H1 2015: £1.9 million). The improvement reflects increased profits in both India and the UK, and whilst trading conditions remain difficult in certain of our European markets, profit performance has remained broadly stable across all our other countries. Following the decision in 2015 to cease commission payments to UK Business Partners where they have no ongoing involvement in the renewal process and do not provide any service to the customer, investment through these ongoing savings has been made during the period into improving the customer value experience through product enhancements and price reductions. Certain Business Partners have acknowledged agreement with the Group's approach to commissions and the principle of it being to the benefit of customers, although the position with the majority of impacted Business Partners is not yet finalised.

Net finance costs and taxation total £0.3 million resulting in a profit after tax from continuing operations of £2.3 million (H1 2015: £16.9 million).

There are no discontinued operations in the current period (H1 2015: £0.2 million profit). The Group's reported profit for the period is therefore £2.3 million (H1 2015: £17.1 million).

Redress

The Group has a remaining customer redress and associated cost provision at 30 June 2016 of £1.3 million, which reflects the Group's current estimate of the cost to complete residual customer redress activity. There has been no additional provision made in the first half of the year. The regulatory fine has been cleared with £6.4 million paid during the period and the final scheduled instalment of £2.1 million paid in July 2016.

Balance sheet, financing and cash flow

The Group has continued to improve its financial position, increasing net assets to £12.9 million (31 December 2015: £10.0 million).

The Group's borrowing arrangements comprise a £5.0 million revolving credit facility which is available until February 2018, and a commission deferral balance of £1.4 million which is due for repayment in January 2017. At 30 June 2016, £2.5 million of the committed facility was utilised.

The Group's net funds position has decreased to £29.5 million at 30 June 2016 (31 December 2015: £37.6 million) as a result of capital expenditure on the Group's core platform IT system and payment of the regulatory fine. The net funds figure includes £25.4 million cash held in the UK's regulated entities which cannot be distributed to the wider Group without regulator approval. These cash balances are either held 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.

Summary and outlook

The outlook for the business is positive, although we recognise the economic uncertainty currently present in some of our markets following the UK's decision to leave the EU and recent political events in Turkey. Colleague morale is good and all the early indicators are that our focus is on the right priorities to enable us to deliver against our growth objectives.

The Group's expectations for the full year remain unchanged, but we expect to see reduced performance levels in the remainder of the year due to the ongoing decline of the existing UK customer base, the investment in a better customer value experience in the UK and the effect of some delays in the launch of new products. Growth in new customer sales globally is expected to provide improved performance in 2017 and beyond.

The strategy and longer term viability of the business is based on the successful launch of new products globally and uncertainty in the medium term remains as this work is ongoing. However, new product development and innovation is gathering pace and the business is developing new propositions which will be fit for global application and launch in the coming months. This, coupled with our new branding initiative, will help to create the CPP of the future.

Jason Walsh

Chief Executive Officer

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1 General information

The condensed consolidated interim financial statements for the six months ended 30 June 2016 do not constitute statutory accounts as defined under Section 434 of the Companies Act 2006. The financial statements for the year ended 31 December 2015 were approved by the Board on 6 April 2016 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 2016 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.

The condensed consolidated interim financial statements should be read in conjunction with the Annual Report and Financial Statements for the year ended 31 December 2015, 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 17 August 2016.

In preparing the condensed consolidated interim financial statements the comparative amounts for the six months ended 30 June 2015 have been restated to reflect the Airport Angel business as discontinued.

The accounting policies applied are consistent with those used in preparing the statutory financial statements for the year ended 31 December 2015, except for the adoption of new standards and interpretations effective as of 1 January 2016. There are no new IFRSs or IFRICs that are effective for the first time for the six months ended 30 June 2016 which have a material impact on the Group.

Going concern

The Group has continued to trade profitably in the first half of 2016 and residual redress activities are substantially complete. Whilst there continues to be some uncertainty from medium term trading and strategic risk, the Group's forecasts show that the Group has the necessary resources to trade and operate within the level of its borrowing facilities.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

3 Segmental analysis

Segment revenue and performance for the current and comparative periods have been as follows:

For the purposes of resource allocation and assessing performance, operating costs and revenues are allocated to the regions in which they are earned or incurred. The above does not reflect additional annual net charges of central costs of £1,704,000 presented within UK and Ireland in the table above which has been charged to other regions for statutory purposes.

Segmental assets

Deferred tax is not allocated to segments.

Capital expenditure

Revenue from major products

Major product streams are disclosed on the basis monitored by the Board of Directors. For the purpose of this product analysis, "retail assistance policies" are those which may be insurance backed but contain a bundle of assistance and other benefits; "retail insurance policies" are those which protect against a single insurance risk; "wholesale policies" are those which are provided by Business Partners to their customers in relation to an ongoing product or service which is provided for a specified period of time; "non-policy revenue" is that which is not in connection with providing an ongoing service to policyholders for a specified period of time.

Geographical information

The Group operates across a wide number of territories, of which the UK, Spain and India are considered individually material. Revenue from external customers and non-current assets (excluding deferred tax) by geographical location are detailed below:

4 Exceptional items

Requisition costs in the six month period of £549,000 (H1 2015: £nil; year ended 31 December 2015: £nil) relates to professional costs associated with the shareholder general meeting requisition and the subsequent interim injunction proceedings.

5 Taxation

The effective tax rate at the half year is 9.1% (H1 2014: 12.2% restated; year ended 31 December 2015: 15.4%). The effective rate is lower than the standard rate of corporation tax in the UK due to brought forward UK losses and overseas tax losses, for which deferred tax assets were not previously recognised. The effective rate is partly impacted by higher rates of tax on overseas profits. The 2016 full year rate may vary from this due to the territory mix of future 2016 profits.

6 Dividends

The Directors have not proposed an interim dividend for 2016.

7 Earnings per share

Basic and diluted earnings per share have been calculated in accordance with IAS 33 "Earnings per Share". Underlying earnings per share have also been presented in order to give a better understanding of the performance of the business.