TIDMBRT
RNS Number : 6336G
Brightside Group PLC
08 May 2014
8 May 2014
Brightside Group plc
("Brightside", "the Group" or "the Company")
Final Results
Major steps towards a longer term growth
Brightside, the specialist insurance broker, is pleased to
announce its audited Final Results for the 12 months to 31 December
2013.
Financial Highlights:
-- Revenue decreased by 2.9% to GBP88.6m (2012: GBP91.2m);
-- Gross profit decreased by 3.7% to GBP60.6m (2012: GBP62.9m);
-- Profit before tax decreased by 36.0% to GBP11.2m (2012: GBP17.5m);
-- EBITDA before share based payments charges decreased by 16.9% to GBP18.7m (2012: GBP22.5m);
-- Earnings per share decreased by 39.2% to 1.69p (2012: 2.78p); and
-- Cash at bank and in hand GBP2.3m (2012: GBP7.8m).
Operational Highlights:
-- Paul Williams appointed as Chief Executive Officer;
-- Total insurance policy sales increased by 2.4% to 476,708 (2012: 465,726);
-- Annual insurance policy sales increased by 7.9% to 431,695 (2012: 400,210);
-- Premium finance funding of new loans decreased to GBP143.8m
in 2013 (2012: GBP167.0m), down 13.9%;
-- Secured additional underwriting capacity creating a broader
underwriting footprint for 2014; and
-- Offer for Company valuing Brightside at approximately GBP127 million.
Commenting on today's results, Paul Chase Gardener, Finance
Director of Brightside said:
"2013 has been a year of transition for Brightside and whilst
the Group's results did not deliver all that was hoped for, a
significant amount of fundamental groundwork has been undertaken in
the period."
"The Company today has announced, alongside this results
statement, that it has reached agreement on the terms of a
recommended cash acquisition by which the entire issued and to be
issued ordinary share capital of Brightside will be acquired by a
newly incorporated company indirectly owned by AnaCap II, LP, a
fund managed by AnaCap GP Limited which is advised by AnaCap LLP
("AnaCap"), to be effected
by means of a Scheme of Arrangement."
"The appointment of Paul Williams as our new Chief Executive
Officer also marks a significant step forward for Brightside, and
we were pleased to welcome him into the Group in February 2014.
Paul brings with him a wealth of market and industry experience and
his expertise will ensure that we continue towards our goal of
establishing Brightside as the Insurance provider of choice to
customers and insurers in the UK market."
Brightside Group plc
Paul Williams (CEO) +44 (0)1454 63 4194
Paul Chase-Gardener (Finance Director) +44 (0)1454 63 4194
Cenkos Securities plc (Nominated Advisor and Joint Corporate
Broker)
Bobbie Hilliam / Harry Pardoe +44 (0)20 7397 8900
finnCap (Joint Corporate Broker)
Stuart Andrews / Simon Johnson +44 (0)20 7220 0500
Yellow Jersey PR Limited (Financial PR & IR)
Dominic Barretto / Anna Legge +44 (0)774 778 8221
Notes to Editors
Brightside Group plc, (AIM:BRT) is a top 20 UK insurance broker
with a history of rapid growth. The Group delivers market-leading
and specialist insurance solutions to individuals and businesses
across the UK, both online, directly through its websites and via
leading comparison sites, and offline, through its UK call
centres.
The Group's insurance products are distributed through its own
brands, which include One Insurance Solution, Commercial Vehicle
Direct and eCar Insurance, and also through its Affinity Partners.
These partnerships enable Brightside to develop fully white
labelled insurance products with well known brands, including ASDA
and Debenhams, which generate new income streams by bringing
together the insurance expertise of the Group and the brand loyalty
of its partners. Brightside's core insurance broking business is
supported by its premium finance, medical reporting and lead
generation services.
The Group's success has come as a result of the unique blend of
innovative use of technology and high performing industry experts
who work within the business. With the aim of becoming the
insurance broker and service provider of choice for customers and
insurers, and the employer of choice, Brightside remains focused on
commercial growth and outstanding customer service.
For further information see - www.brightsidegroup.co.uk
Finance Director's Review
Overview
2013 has been a year of transition for Brightside and whilst the
Group's results did not deliver all that was hoped for, a
significant amount of fundamental groundwork has been undertaken in
the period.
To support this groundwork we are pleased to welcome our new
Chief Executive Officer- Paul Williams, who joined the Group at the
end of February 2014. Paul joins us with a demonstrable track
record, direct from Towergate Partnership Limited, Europe's largest
independently owned insurance intermediary writing in excess of
GBP2 billion of gross written premiums per annum. Paul's industry
and M&A experience will ensure that we continue towards our
goal of establishing Brightside as the insurance provider of choice
to customers and insurers in the UK market.
With regards to operations, the Group's like for like total
policy sales increased by 2% to 476,708 policies (2012: 465,726)
and annual policy sales, our main benchmark of sales activity,
increasing by 8% like for like to 431,695 policies (2012: 400,210).
Sales performance however should be viewed in two distinct parts;
H1 2013 saw annual policy sales of 232,536, a 19% like for like
increase from the prior year. In contrast, H2 2013 saw annual
policy sales of 199,159, a like for like 3% decrease from prior
year. The performance in H1 2013 was driven by Affinity sales, for
which there were no sales in the corresponding period of 2012 as
the relationships began in H2 2012. The performance in H2 2013 was
impacted by capacity constraints driven by the reduction in trading
with Southern Rock Insurance Company Limited ("Southern Rock"), a
former related party, which provided in excess of 40% of the
Group's gross written premium ("GWP") in 2012, and the approach
from Markerstudy Holdings Limited ("Markerstudy") which led to
other insurers adopting a 'wait and see' approach before offering
capacity to the Group. However, changes to the insurer panel have
resulted in the Group finishing the year with a significantly
stronger and more balanced panel, which importantly is not
dominated by any one insurer.
Despite the policy sales, the Group's income and profitability
fell during 2013. This was primarily due to the available insurance
underwriting capacity providing less competitive rates than
previously, resulting in the achievement of a lower income per
policy sold and an increase in the proportion of policies sold
through our Affinity brands which attract a higher commission rate
per sale. Furthermore, staff costs have increased from the prior
year as a result of further investment in human capital to support
the future growth plans of the business. The aforementioned
approach from Markerstudy also detracted key management time away
from the day to day work proving to be far more disruptive than we
would have liked.
2014 has started positively with the announcement of new trading
relationships with Rated People, the Co--operative and a leading
FTSE 250 insurance business, in addition to announcing the
extension of our existing relationship with Asda. Looking ahead we
anticipate these to be the first of many new initiatives as we look
to drive the Group forward.
In January 2014 the Group completed a new share placing to raise
GBP6.45m net of expenses. The fund raising was undertaken in order
to prevent the possibility that the Group may breach a bank
covenant linked to our premium finance facility. Despite the strong
operational cash profile of the Group, the possibility of a breach
had arisen due to a short term cash shortfall following the payment
of legacy deferred consideration and advanced commission, and the
covenant testing date falling during the Group's seasonally low
cash period.
Brightside and the insurance market
Brightside is a distributor of insurance products through both
online and call centre based sales channels together with a
provider of ancillary services including its own premium financing
products.
In recent years, the insurance industry has seen that rising
claims costs, caused by an increase in personal injury claims and
fraud, have led to a cycle of rising premiums across the UK motor
insurance market - a 'hard' market. The hardening of the general
motor insurance market slowed in 2012 and we saw a gradual move
towards more stable prices. As 2013 progressed the insurance cycle
once more moved into a new phase with increased competition between
insurers and improved results leading to falling premiums.
A change in market conditions from, a 'hard' to a 'soft' market,
brings mixed fortunes for insurance brokers. A soft--market
typically results in lower broker commissions as commission income
is typically calculated as a percentage of the premium written.
However, during soft market periods, there is potential for growth
in margins and policy numbers, as existing customers are less
encouraged to shop around for the cheapest price and new business
customers who are inclined to shop around, are more easily
converted from a quote to a sale due to the attractive looking
prices being offered by brokers in comparison to their existing
premiums.
Additionally, in a soft market, insurers will look to favoured
brokers to help reinforce their premium distribution. Therefore,
maintaining strong and profitable accounts with insurers will
remain central to the ongoing success of Brightside.
The increase in popularity of price comparison sites also
fuelled change in consumer behaviour. For a broker with
competitively priced underwriting capacity, coupled with efficient
processes, price comparison sites provide a continuous stream of
sales opportunities. However, at renewal stage customer loyalty is
severely limited as those customers who initially made their buying
decision based on price once again look to take advantage of the
cheapest quote offered.
Brightside's offline businesses were historically developed
using a broad base of competitive insurers providing a range of
different products and prices. Going forward, a key part of the
strategy is to replicate the panel approach within our on line
businesses to ensure no reliance on any single insurer.
We continue to have strong relationships with our existing
insurer partners and remain focused on undertaking intelligent
verification of policy holder details to ensure that our customers
pay a fair price relative to their underlying risk profile. These
strong relationships have also allowed us to develop exclusive
schemes that help us to offer tailored policies which assist
conversion in this highly competitive industry. In addition to our
existing relationships, we were delighted to welcome new insurers
to our online underwriting panel in 2013, with further insurers
expected to join in 2014.
We are also making good progress in our strategy to expand our
strategic partnerships. A number of new partnerships struck in 2014
include a leading FTSE 250 insurance business, Rated People and the
Co--operative. This, in turn, has helped us to further grow policy
number and achieve a greater market share. We have strong
relationships with our existing key partners and benefit mutually
from growth in this area. We remain focused on using these
relationships to obtain a greater proportion of leads directly and
not through price comparison sites, which will reduce our average
acquisition cost and dependency on price comparison sites as a
source of new business. Directly obtained business should also
further support future renewal retention rates.
Brightside also continues to focus on maximising conversion
rates, cross selling and premium finance opportunities. Activity
within these areas is continually under review with continued
investment in the customer journey seen as an important step in
maximising our potential.
As noted in previous statements, we continue to explore areas of
the insurance broking market where historically we have not traded
or currently have a sub scale offering, such as large commercial
and online commercial policies. New sectors and routes to market
represent further opportunities and we are continuing to explore
areas to ascertain market size and potential profitability.
Additionally, we will continue to develop the Group's non--core
areas including Quote Exchange and Injury QED Limited ("IQED"). In
particular, the Group has been working to utilise the Quote
Exchange pricing functionality to extend our market reach, to
enhance our core business streams. Our overall aim for Quote
Exchange is to become the dominant third party technology provider
in the aggregator market and first choice for new entrants, new
channels, and for insurers distributing new products.
Developments in the year
During the first half of the year, the Group saw significant
changes in its ownership profile with the sale of the entire
holdings of two of the founding Directors, Arron Banks and John
Gannon, and the purchase of a significant strategic stake by
Markerstudy, a Gibraltar based insurance company and an important
trading partner. Following the purchase of a significant stake in
Brightside the Board was approached by Markerstudy regarding a
possible offer for the Group. Following a period of due diligence
over the summer months, Markerstudy, having been granted a four
week extension, requested a further extension to the deadline for
making a formal offer for the Group, and at the same time indicated
that its eventual offer would be in the range of 20p--22p per
share. We believed that an offer of this magnitude would
significantly undervalue the Group and, consequently, terminated
talks on 10 September 2013.
The period has also been heavily characterised by the
finalisation of outstanding matters arising from the historical
related party trading relationship with Southern Rock and its
holding company Rock Holdings Limited. A total payment of GBP27.1m
was paid to Southern Rock in 2013 to settle the remaining legacy
issues between the companies, following the separation of
directorships and shareholdings.
On 27 February 2014 it was also announced that NewLaw
Solicitors, a historic related party, would be purchased by
Helphire Group plc. The Group was connected to NewLaw Solicitors by
virtue of Paul S Chase- Gardener and Helen Molyneux, who were
common Directors. Following the resignation of Paul S Chase-
Gardener from NewLaw on 28 February 2014, NewLaw are no longer
considered a related party as there are no longer common Directors
with significant influence.
Balance sheet
The Group's balance sheet has net assets of GBP85.6m at 31
December 2013 (2012: GBP80.1m). Some GBP78.9m (2012: 67.3m) of the
net assets are intangible assets which primarily relate to the
amount paid to acquire insurance policy books and the system assets
that support our on line sales. The continued growth of our core
broking businesses demonstrates that the current value of these
intangible assets would now be significantly in excess of their
book value.
Within trade and other receivables the premium finance loan book
stood at GBP25.2m, of which GBP2.3m was deferred interest,
representing a like for like decrease of 28% (2012: GBP35.6m). The
reduction in size of our on balance sheet premium finance loan
books was undertaken in order to manage our cash resources to make
the required payments to Southern Rock as noted above. The GBP25.3m
loan book balance was financed with internal cash resources and the
use of our banking facility which was drawn to GBP20.5m at the year
end. To compensate for the reduction in on balance sheet premium
finance lending the Group increased its utilisation of third party
premium finance funders during the year.
The IQED receivables have remained consistent tracking the
settlement profile of the case loads being represented with
balances due at 31 December 2013 of GBP12.1m (2012: GBP12.4m). Of
the IQED receivable GBP7.3m (2012: GBP10.4m) relates to a related
party receivable from New Law (see related party note 29).
The return on average capital employed (calculated as operating
profit over total equity and long term borrowings) was 14% in 2013
(2012: 25%) demonstrating a high level of profits that are driven
from our balance sheet.
Cash and cash equivalents have decreased GBP5.5m from prior year
driven by the settlement payments made to Southern Rock in the
year.
The trade and other payables have fallen slightly from prior
year representing the overall decline in the value of business
written over the second half of the year compared to prior
year.
Total current liabilities have decreased by GBP17.6m from the
prior year, which is mainly due to the payment of deferred
consideration of GBP17.0 made in H2 2013. The deferred
consideration related to the acquisition of the eCar policy
books.
Cash generation
During the period under review, Brightside generated GBP18.7m
(2012: GBP22.5m) of EBITDA from the trading operations throughout
the Group. See note 7 and 27.
The funds that have been generated have primarily been used to
pay the Southern Rock settlement balance of GBP27.1m. At 31
December 2013 draw down on our committed facility stood at GBP20.5m
(2012: GBP17.5m), and as such undrawn facilities of GBP9.5m
remained in place at the year end. The cash position is therefore
supported by a committed banking facility of GBP30m against the
Panacea Finance loan book receivable and a working capital
overdraft of GBP3m, reverting to GBP1m as of February 2014.
Brightside continues to utilise the facility against the premium
finance loan book noted above as GBP25.5m at December 2013 as well
as continuing to use generated trading cash, and the placement
noted below, to fund the book.
GBP000's
------------------------------------------------------ ---------
Opening net cash 7,812
------------------------------------------------------ ---------
EBITDA (note 7) 18,715
------------------------------------------------------ ---------
Acquisitions of other property, plant and equipment,
and intangibles (net of proceeds on disposals) (18,341)
------------------------------------------------------ ---------
Payment of deferred consideration (16,973)
------------------------------------------------------ ---------
Drawdown of loan facility 3,000
------------------------------------------------------ ---------
Loan book movement 10,330
------------------------------------------------------ ---------
Dividends paid (2,281)
------------------------------------------------------ ---------
Corporation tax (4,463)
------------------------------------------------------ ---------
Other 4,498
------------------------------------------------------ ---------
Closing net cash 2,297
------------------------------------------------------ ---------
The Group's access to available cash has decreased from prior
year following the settlement of the Southern Rock deals.
2013 2012
------------------------------------------------- --------- ---------
GBP000's GBP000's
------------------------------------------------- --------- ---------
Cash (excluding client cash) 1,535 6,227
------------------------------------------------- --------- ---------
Available and undrawn premium finance facility* 9,500 12,500
------------------------------------------------- --------- ---------
Total available cash 11,035 18,727
------------------------------------------------- --------- ---------
* Note that the premium finance facility can only be used for
the premium finance business.
Key Performance Indicators
The Group uses a variety of Key Performance Indicators ("KPI's")
to measure the success of its individual business units. These
include daily and monthly financial KPI's, measured against
budgeted targets which are set annually. Examples of such KPI's are
quote to sale conversion rate, renewal retention rate, and income
per policy, all of which vary across the different Group
businesses. In order to measure the success of its premium finance
operation, the Group measures the premium finance penetration rate,
which varies by insurance broking business, the average loan value
and the number of loans processed per member of staff.
On a monthly basis, the Group prepares a number of
non--financial KPI's to monitor the operational efficiency of its
businesses. These include:
-- the number of sales per head, which management uses to
identify efficiencies and motivate staff;
-- the number of medical reporting instructions received, and
experts instructed, which enables management to identify the growth
of the medical reporting agency;
-- the number of leads transferred internally and externally,
which enables management to measure the exposure to varying income
streams within the lead generation unit;
-- total headcount which enables management to identify the
growth and success of the business units; and
-- staff absenteeism rates, which management use to compare
across business units and industry standards.
Dividend policy
The Board remains committed to the principle of a progressive
and sustainable dividend policy while it is a listed company,
subject to the availability of cash resources and on-going bank
facilities. However due to the announcement today that the Company
has reached agreement on the terms of a recommended cash
acquisition of the Company by AnaCap, the Board will not be making
any final dividend payment for 2013. The non-payment of a dividend
follows negotiations with AnaCap in reaching the offer price for
the Company.
The regulatory environment and challenges ahead
2013 brought change in the regulatory environment with the
Financial Conduct Authority (FCA) and the Prudential Regulation
Authority ("PRA") taking over from the outgoing Financial Services
Authority on 1 April 2013. For general insurance intermediaries,
the FCA became the new regulator and as anticipated the FCA has
taken a more pre--emptive approach to supervising firms by
intervening earlier to prevent problems crystallising.
Although classified as a flexible portfolio Group for FCA
purposes, meaning that the Group is subject to a "touch point" once
during a four year cycle, the Group continued to strengthen its
compliance posture throughout the year, working in close
co--operation with the Risk Manager and Internal Audit Department
to evaluate regulatory risks and improve governance
arrangements.
Brightside embarked on a review of its sale procedures
(including disclosure and suitability of optional extras) and
incentivisation scheme, in order to ensure that customers are
treated fairly at all times. A Treating Customers Fairly ("TCF")
committee was also established, with the specific objective of
ensuring that the Group remains compliant with the 6 customer
outcomes required by the regulator whilst implementing a system of
continuous improvement to enhance the customer experience.
The independent review of corporate governance commissioned in
late 2012 was completed early 2013 and all recommendations
implemented.
2014 will see the control of regulatory responsibility for
consumer credit legislation transferring from the Office of Fair
Trading to the FCA. This will mainly affect Panacea Finance Ltd.
Whilst a more interventionist approach is expected, Brightside is
well placed for a smooth transition to the new regime.
Outlook and Offer
Whilst we have firm plans in place to address the capacity
issues experienced during 2013, these plans have a significant
delivery lead time and as a result trading in Q1 2014 has continued
to be adversely affected by lower than expected capacity. In
addition unfavourable insurer rating changes affecting much of the
UK motor sector have impacted on our relative competitiveness and
the income per policy achieved on each policy sale. The Board
therefore expects the trading performance for the first half of
2014 to be disappointing.
In February 2014, Paul Williams joined the Board as Chief
Executive Offer. As part of Paul Williams appointment the Board has
considered the mid-long term strategic direction of the Group. To
this end, the Board remains convinced its focus on expanding its
underwriting panel, increasing the business it undertakes through
affinity relationships and expansion of both the online and offline
niche areas is in both the businesses and shareholders best
interests. The Board also believes that significant further
investment in the development of the Company IT platform together
with potential acquisitions will be needed to increase competitive
advantage, extend its trading niches and to increase the level of
revenue achieved by the Group. Based on the restructuring, the
further investment required in the Company and the time it will
take to implement this strategy the Board believes it is the
correct time to consider a sale of the business.
In line with the above, the Company today has announced,
alongside this results statement, that it has reached agreement on
the terms of a recommended cash acquisition by which the entire
issued and to be issued ordinary share capital of Brightside will
be acquired by a newly incorporated company indirectly owned by
AnaCap, to be effected by means of a Scheme of Arrangement. Under
the terms of the Scheme, each Brightside Shareholder will be
entitled to receive 25 pence in cash for each Brightside Share,
valuing Brightside's existing issued and to be issued ordinary
share capital at approximately GBP127 million.
The Directors believe the offer price reflects a fair price for
the Brightside Group and provides Shareholders with an opportunity
to realise their entire shareholding in cash at a substantial 32
per cent premium to the Brightside share price prevailing on 7 May
2014 (being the last Business Day prior to the Announcement). The
Directors note that there can be no guarantee that Brightside
Shareholders would otherwise be able to realise their shareholdings
in Brightside at a price of 25 pence per Brightside Share or higher
in the short to medium term.
Taking these factors into account, the Directors unanimously
recommend that Brightside Shareholders vote in favour of the Scheme
at the Court Meeting and the Special Resolutions to be proposed at
the General Meeting.
Our staff
As always, I would like to recognise the huge contribution made
by our staff, our management team and Board of Directors to making
Brightside the hugely successful business it is today. In a year
where we have taken some major steps towards our longer term growth
it is imperative that I recognise the most important driving force
behind this growth; our people, their unfailing dedication and
enthusiasm. It is our aim to become the employer of choice for
staff and it is in response to the continued support we receive
from our loyal staff base that we continue to develop and promote
our people from within at every opportunity. Our staff remain
motivated and committed to the achievement of our agreed 2014
business plan, which projects further growth across all aspects of
the Group.
P S Chase--Gardener
Finance Director
Brightside Group plc
Report of the Directors for the Year Ended 31 December 2013
Principal Activities
The principal activities of Brightside Group plc, "Brightside"
or "the Group" in the year under review were those of insurance
broker, premium finance provider, medical reporting agency, lead
generator, and provider of software and web services.
Dividends
The Board remains committed to the principle of a progressive
and sustainable dividend policy while it is a listed company,
subject to the availability of cash resources and on-going bank
facilities. However due to the announcement today that the Company
has reached agreement on the terms of a recommended cash
acquisition of the Company by AnaCap, the Board will not be making
any final dividend payment for 2013. The non-payment of a dividend
follows negotiations with AnaCap in reaching the offer price for
the Company.
Directors
The following directors served in the year:
-- Paul Chase--Gardener;
-- John Gannon (resigned 31 May 2013);
-- Martyn Holman (resigned 28 November 2013);
-- Christopher Fay;
-- Helen Molyneux;
-- Julian Telling;
-- Stuart Palmer;
Audit Committee
The Audit Committee throughout the year comprised of the
following non--executive Directors:
-- Stuart Palmer (Chairman);
-- Helen Molyneux; and
-- Julian Telling.
The Board considers that the committee members have the relevant
expertise and experience to carry out their responsibilities.
The committee met three times during 2013, and the Audit
Committee Chairman and Julian Telling were present for all, Helen
Molyneux for two. The meetings are attended, by invitation from the
Chairman, to the Chief Executive, the Finance Director and the
Company Secretary. The Committee also meets the external auditor in
the absence of any other Executives. The audit committee chairman
meets separately with the external and internal auditors during the
year.
The Audit Committee is responsible for :
-- reviewing the interim and full year financial statements
together with any additional announcements
made during the year;
-- reviewing the accounting principles, policies and practices
adopted in the preparation of the interim and year end statutory
accounts;
-- overseeing the compliance with FRC rules and regulations;
-- reviewing the scope and findings of the external audit;
-- making recommendations to the Board on the terms of
appointment and fees of the external auditors;
-- reviewing the framework of internal control as well as the risk management systems; and
-- reviewing management reports by the internal audit department
as well as agreeing the plan for the forthcoming year.
The committee keeps under constant review the external auditor's
independence, including any non audit services that are to be
provided by the external auditor (details of these fees can be
found in Note 8). The external auditor reports to the Audit
Committee each year on the actions they have taken to comply with
professional and regulatory requirements to ensure their
independence. In addition the external auditor operates a policy of
audit partner rotation as well as using an independent Principal
and a Technical Review department.
There is a formal whistleblowing policy which is reviewed on an
annual basis by the Board.
Remuneration Committee
The Remuneration Committee is comprised of the following non
executive Directors:
-- Julian Telling (Chairman);
-- Christopher Fay;
-- Helen Molyneux; and
-- Stuart Palmer.
The Remuneration Committee is responsible for making
recommendations to the Board on the remuneration and benefits of
the executive Directors and senior executives of the Group.
Budgets & Reporting
Each year the Board approves the annual budget, which includes
an assessment of key risk areas. Performance against budget is
monitored throughout the year with the Board receiving regular
reports on actual performance against budget.
Underpinning the budget is a system of internal financial
control, based on authorisation limits and tiers of authority.
Management Structure
The Board has overall responsibility for the Group and focuses
on the overall Group strategy and the interests of shareholders.
There is a schedule of matters specifically reserved for decisions
by the Board. The Board has an organisational structure with
clearly defined responsibilities and lines of accountability and
the executive Director has been given responsibility for specific
aspects of the Group's affairs.
Quality & Integrity of Personnel
The integrity and competence of personnel are ensured through
high recruitment standards and subsequent training courses.
High quality personnel are seen as an essential part of the
control environment.
Corporate Governance
The Board recognises the value of good corporate governance and
has set out its corporate governance statement on pages 22 to
24.
Employees
The Group is committed to providing employment practices and
policies which recognise the diversity of our workforce and ensure
equality for employees regardless of sex, race, disability, age,
sexual orientation or religious belief.
Employees are kept closely informed of major changes affecting
them through such measures as team meetings, briefings and internal
communications. There are well established procedures to ensure
that the views of employees are taken into account in reaching
decisions, and ongoing training is provided when required.
Full and fair consideration is given to all applications for
employment received from disabled people. Disabled employees and
those individuals becoming disabled during the course of their
employment with the Group receive full and fair access to training
offered by the Group, and to career development and promotion
opportunities available.
Payables Payment Policy
The Group aims to pay all of its creditors promptly. For trade
payables it is Group policy to:
-- agree the terms of trade at the start of business with each supplier; and
-- pay its suppliers in accordance with the agreed terms of trade.
Substantial Shareholdings
As at the 7 May 2014, the Board is aware of the following
substantial interests in the issued share capital of the Group,
other than those of the Directors of the Group:
% Holding
Schroders Investment Management
Limited 15.38
Markerstudy International Limited 12.07
Moore Capital Management 8.31
L Hughes 6.21
Aviva Investors Global Services 5.98
Stena International Sarl 5.94
J H Bowers 5.88
Health and Safety
The Group has defined procedures to ensure compliance with
Health and Safety Regulations. In addition, there is regular
communication with employees on safety matters.
Environment
The Group is committed to the protection of the environment and
aims to minimise the impact of its business activities by ensuring
effective environmental management and compliance with all relevant
laws and regulations. Management review environmental
considerations as part of their decision making process and will
strive to improve performance by minimising waste and maximising
recycling wherever possible. Management communicate with interested
parties on environmental issues, and provide training where
appropriate.
Political and Charitable Donations
The Group made charitable donations of GBP19k (2012: GBP6k) to
various local and national charities to support their charitable
causes during the year. No political donations were made during the
year (2012: nil).
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Strategic
report, Directors' report and the financial statements in
accordance with applicable laws and regulations.
Company law requires the Directors to prepare Group and Company
Financial Statements for each financial year. The Directors are
required by the AIM Rules of the London Stock Exchange to prepare
Group financial statements in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union ("EU") and have elected under Company Law to prepare the
Company financial statements in accordance with IFRS as adopted by
the EU.
The financial statements are required by law and IFRS adopted by
the EU to present fairly the financial position of the Group and
the Company, and the financial performance of the Group. The
Companies Act 2006 provides in relation to such financial
statements that references in the relevant part of that Act to
financial statements giving a true and fair view are references to
their achieving a fair presentation.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group for that period.
In preparing each of the Group and Company financial statements,
the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRSs adopted by the EU; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and to
enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Brightside Group plc website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
So far as the Directors are aware:
-- there is no relevant audit information of which the Group's auditor is unaware; and
-- each Director has taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that information.
Auditor
The auditor, Baker Tilly UK Audit LLP, will be proposed for
re--appointment in accordance with Section 485 of the Companies Act
2006.
ON BEHALF OF THE BOARD
P S Chase--Gardener
Director
7 May 2014
Strategic Report for the year ended 31 December 2013
Business Review and Future Developments
Insurance Broking
Overall our core broking businesses performed strongly during
the year and continue to drive growth within the Group. Total
policy sales increased by 2% to 476,708 (2012: 465,726).
2013 Policy Sales 2012 Policy Sales
Policy Type (number) (number) % Increase / (Decrease)
------------------------ ------------------ ------------------ --------------------------
eCar & Affinity 250,958 179,152 40%
------------------------ ------------------ ------------------ --------------------------
eBike 29,255 42,137 (31%)
------------------------ ------------------ ------------------ --------------------------
Van insurance --
online 4,630 21,618 (79%)
------------------------ ------------------ ------------------ --------------------------
Online Sub--total 284,843 242,907 17%
------------------------ ------------------ ------------------ --------------------------
Commercial 36,413 33,447 9%
------------------------ ------------------ ------------------ --------------------------
Van insurance --
offline 81,751 91,196 (10%)
------------------------ ------------------ ------------------ --------------------------
Personal Lines,
Taxi, and Minibus
& Affinity Home 28,688 32,660 (12%)
------------------------ ------------------ ------------------ --------------------------
Offline Sub--total 146,852 157,303 (7%)
------------------------ ------------------ ------------------ --------------------------
Total annual policies 431,695 400,210 8%
------------------------ ------------------ ------------------ --------------------------
Total monthly policies 36,136 54,095 (33%)
------------------------ ------------------ ------------------ --------------------------
Online Home 2,166 3,636 (40%)
------------------------ ------------------ ------------------ --------------------------
GAP 6,711 7,524 (11%
------------------------ ------------------ ------------------ --------------------------
Life -- 261 (100%)
------------------------ ------------------ ------------------ --------------------------
Total other policies 8,877 11,421 (22%)
------------------------ ------------------ ------------------ --------------------------
Total 476,708 465,726 2%
------------------------ ------------------ ------------------ --------------------------
In addition, the Group sold a further 20,786 short term car
insurance policies during the year (2012: 26,787). These policies
have an average duration of 2--3 days.
Overall, we have seen a growth in policy count by 2% but a
slight decline in revenue compared to prior year. The trend of
policy sales growing faster than revenue is characteristic of the
soft market, as decreasing premiums naturally decrease broker
commissions and signify an increase in competition for business
between insurers.
As a broker our strategy is to continue driving forward in our
traditional areas of strength, which are the SME and motor sectors
(comprising both commercial and personal lines products) combined
with a further focus on improving our processes to derive better
profitability. We have also invested in improving our customer
journey to support the strategy of increasing our renewal retention
rate. In addition, we continue to explore sectors and routes to
market where historically we have not traded or currently have a
sub--scale offering, such as large commercial and online commercial
policies, to ascertain the market size and potential
profitability.
Online Broking
Our strategy through 2013 has been to focus on our key online
and affinity partner sales which have grown by 40% from prior year.
This does come with mixed fortunes, however, as this growth is
partly offset by a fall in online bike and van policies as a result
of underwriters withdrawing a proportion of their capacity from
these areas.
During 2013 we have been working with our insurer partners to
support our 'online' brands. We are therefore pleased to announce
that we will be going live with a number of new insurers in 2014
across our Brands; eCar, ASDA Money and Debenhams Personal Finance.
New insurers to the panel include Ageas, LV, AXA, Aviva and
RSA.
The ASDA brand forms a major offering in our Affinity
partnerships and we are pleased to report that we have agreed a new
exclusive four year agreement with ASDA to provide both car and van
insurance products under the ASDA Money personal finances brand. As
part of this agreement, ASDA are committed to provide a minimum of
400,000 direct quotes via the ASDA Money site. This new agreement
brings significant strength to our Affinity offering with direct
quotes being supported by our extended underwriting panel. In
addition, we have been in negotiations with another of our white
label partners, Debenhams, to provide them with exclusive car
insurance products for their 'store card holder' and 'loyalty'
customer base, which is due to launch in H1 2014.
As per our strategic aim we look to partner with household
affinity brands to negate an over reliance on the price comparisons
sites, and I am sure there will be significant announcements of
partners through 2014. In Q1, 2014, we aim to partner with a new
digital marketing agency with the aim to acquire more customers for
eCar, eBike and eVan, again to further widen our channels to
market.
Utilising our quote exchange technology to exploit untouched
areas of the market has been a key objective of the year and we are
delighted to announce that from Q1 2014, we will be operational
with a niche car insurance brand "Logical Choice" to acquire
customers via the price comparison sites and complete the sale
offline. By using our quote exchange technology in this way we have
been able to provide specialist rates to customers. We are
continually working to identify the next opportunity for using our
bespoke technology and will work to continue its integration in
2014.
A key focus of our year has been on improving our processes to
derive better profitability, with a keen focus on improving the
customer journey. We have particularly focused on our validations
process, integrating new technology which validates customers at
point of sale. The introduction of this new validations measure is
our commitment to combat fraud and demonstrates our intention to
become "broker of choice." Improving validation techniques protects
our insurance partners from exposure to fraud and consequently
allows us to provide better rates to customers as the majority of
insurers have already confirmed additional discounts or enhanced
rates on the back of our latest validation measures. This
initiative will be rolled out to the other business units later in
2014.
Offline Broking
Our offline broking units have experienced a year of transition
in 2013. The strategy for this business is to continue to offer
tailored advice, expertise and a diversity of offerings at the
point of sale. We have delivered a robust performance in terms of
policy sales and as the market becomes increasingly more
competitive in retaining existing customers, we have focused our
strategy on maximising renewals and targeting our marketing spend
on the most profitable channels.
We are pleased to announce Brightside's new partnership with a
leading FTSE 250 insurance business, to provide commercial vehicle
insurance for two major brands after winning a three year contract
in 2013. The partnership, which sees Brightside delivering fully
serviced commercial vehicle insurance, launches in the first
quarter of 2014 with customers able to buy commercial vehicle
insurance online or over the telephone. Brightside expects to write
GBP44m of commercial vehicle premium over the 3 year partnership.
The additional 64,000 commercial vehicle policies will also present
a significant opportunity for our established SME cross sales
business model. We are delighted with this new partnership and hope
to build on this relationship over the next three years.
It is with pleasure that we can report that from February 2014,
Brightside will be partnering with RatedPeople.com, the UK's
largest online trade recommendation service, and became their sole
insurance partner. Brightside will be offering its' commercial
vehicle and public liability insurance to RatedPeople.com's 34,000
registered trade members and expects to receive circa 18,000 direct
leads in the 12 months of the partnership. There will also be
opportunities for Brightside's established SME cross sales business
model. Both Brightside and RatedPeople.com have a strong focus on
innovation and delivery and we are delighted by this partnership
and the value it is going to bring to the market.
We have been working with our Quote Exchange technology to
deliver a quotation facility initially for Taxi (Minibus and Non
Standard Van) which will reduce quote times from 45 minutes to 15
minutes. The reduction in handling time is an exciting step forward
in the efficiency of our customer journey and will enable us to
increase the volume of quotations we can handle, and in turn
deliver an aggregator solution that will generate additional leads
at a lower acquisition cost.
Lastly, we have been appointed on an exclusive basis by the
Rugby Football League for the Super League and Championship
provider. This will generate approximately 1,000 opportunities for
the sale of all Pro Sport products and opportunities for cross sale
to Private Car, Household and Personal Accident Products. In
addition, we have purchased the QBE Minibus Club Account website in
2013 which we anticipate will generate us around 200 quotes per
month which will directly feed into our offline broking
offering.
Alongside these exciting partnerships, Brightside are to
commence a six month trial in 2014 with The Co--Operative Insurance
to monetise commercial vehicle insurance enquiries that are either
outside of the Co--Operative's underwriting footprint, or that did
not result in a sale. This opportunity will enable Brightside to
use its access to specialist schemes to fulfil the customers'
insurance needs and provides an exciting new opportunity for the
Group.
As previously reported, our monthly, online Home, GAP and Life
products are being scaled back to allow the Group to focus on
annual policy sales and as a result total policy sales grew by 2%,
against 8% growth in annual policy sales. Following a previous
decision to scale back our life insurance brokerage in 2012, we
continue to provide a service to our existing policy holders in
order to limit any potential claw back resulting from the
cancellation of our existing policy base.
Premium Finance
During the year our premium finance unit processed 274,485 loans
(2012: 269,603), an increase of 1.8% on the prior year. These loans
represented GBP143.8m of new premium finance (2012: GBP167.0m), of
which GBP85.9m or 157,047 loans were funded through the Group's
balance sheet (2012: GBP119.6m or 191,364 loans). The trend of a
higher number of loans financed with a lower overall premium is
indicative of a softening market where policies are sold at a lower
premium.
The increase in the volume of loans processed can be attributed
to a combination of an increase in the number of policies sold by
the Group's brokerages, and an improved premium finance penetration
rate achieved by the Group. In particular, higher penetration rates
on the Affinity products during 2013 contributed to the income
prospects for the premium finance division.
During the period, 57.2% of the premium finance loans generated
were financed on the Group's balance sheet against 71.0% in 2012.
In terms of absolute value, this represents a reduction of GBP34m
financed by the Group's premium finance unit, which instead have
been placed with our third party finance provider, Close. The
decision on where to fund policies is dependent on the day to day
liquidity of the Group.
Moving forward, the unit will continue to focus on delivering a
high quality, increasingly automated service to its customers
supported by a well--trained and helpful customer service team. The
customer journey has been a key part of this review and
developments are underway in Panacea to improve the customer
payment portal to ensure faster transaction times in addition to
looking at alternative payment arrangements for customers.
The continued growth in the policy sales achieved by the Group's
insurance broking division is expected to translate into further
premium finance opportunities. Consequently, the unit will continue
to work with its funding providers to ensure it has sufficient
capacity to fund all of the opportunities generated, and to
maximise the number of those opportunities which can be funded
internally.
Lead Generation and Debt Management
Our lead generation business, Connect, supports our offline
brokers' new business sales by generating leads for the sales teams
to convert. An integral part of this offering is our Quote Exchange
unit which designs and builds specialist technology which is used
by price comparison and aggregator websites to obtain data from
insurers and brokers for presentation to the end customer.
Quote Exchange has seen some major developments in the year,
being used in both the online field to capture the niche high end
car broking, and offline, as a quotation assistant for the Taxi
offering. By using this technology we have managed to extend our
footprint to previously untouched areas of the market. Both of
these offerings illustrate our continued development and use of the
Quote Exchange technology to improve our processes and widen our
underwriting footprint.
Our lead generation business showed a robust performance during
2013, focusing on improving the quality of leads transferred to the
sales team and on efficiencies within the unit to reduce costs.
Notably, the unit has reduced its external transfer of leads in
2013 to focus on delivering the best leads possible to the internal
broking units. This process of re focusing on internal conversion
quality rather than quantity of leads transferred will continue in
2014, with greater integration with our off line broking businesses
expected to benefit the Group's profitability.
Following the strategic review of the future direction of the
Group, the Directors made the decision to dispose of the debt
management arm of the business, "Debt Help." This arm of the
business was immaterial in size and generated a profit on disposal
of GBP0.1m.
Medical Reporting
IQED, the Group's medical reporting agency continues to support
the Group's policy holders by providing them with medical reports
in relation to claims made for personal injury, generally following
a road traffic accident.
As a result of referrals received from the Group's policy base,
and also from other third party sources, IQED processed 37,291
instructions for medical reports and rehabilitation treatment in
2013, against 36,282 instructions in 2012, an increase of 3%.
During 2013 the personal injury sector was subject to a
significant amount of regulatory scrutiny and reform, with the most
significant event being the introduction of the Legal Aid,
Sentencing and Punishment of Offenders Act 2012, in April 2013.
This new legislation, which restricted lawyers from paying for
instructions from third parties or from receiving payment for
instructions made to third parties, combined with a reduction in
the fees a lawyer receives for undertaking personal injury work,
had a significant impact on the sector as many law firms and claims
management companies had built their business on a referral fee
model.
These changes impacted the medical reporting sector in a number
of ways, with some solicitors exiting the personal injury sector
altogether, whilst others have looked to take medical reporting
more in house or settle more cases without the need to obtain
medical evidence. Although this new legislation has now been in
place for 1 year the industry still remains in a state of
uncertainty with further regulatory reforms on the horizon covering
areas such as expanding the fixed fee regime for solicitors
processing personal injury claims and introducing approved expert
panels to undertake the assessment of personal injury claims. This
uncertainty is likely to further impact the personal injury sector,
including both the wider medical reporting industry and IQED over
the coming months.
To combat the structural changes within the industry, IQED
worked closely with the Group's insurer relations team during 2013,
to identify prospective insurance industry partners who could refer
work to IQED alongside any existing relationship they already have
with the Group's insurance broking division. During the course of
2014 these opportunities will continue to be assessed and where
possible developed into active relationships for IQED.
In addition the unit continues to develop its network of
referrers and business partners and continues to investigate work
streams which require the provision of a medical report both inside
and outside of the personal injury arena.
Software and web services
The software and web services division consists of three units
which come together to support our online system; firstly E Systems
Limited owns the eSystem which is the Group's bespoke on line
system used to distribute and administer eInsurance and Affinity
partnership branded products, secondly E Development Limited which
develops and provides maintenance for the bespoke on line system,
and lastly Quote Exchange Limited which underpins the Group's
eCommerce product offerings and Affinity partnerships. The eSystem
is in a constant state of rapid development and our objective is to
ensure that it is fully scalable and adaptable to the introduction
of customer and insurer offerings alike.
Quote Exchange together with the eSystem provides the Group with
agility and the technical resource to enhance our own brand and our
Affinity partnership brands to quickly take advantage of
opportunities as they arise. This has been illustrated both in the
online and offline sections of this report with Quote Exchange
technology being used to capture the niche high end car broking
offering through Logical Choice, and offline, as a quotation
assistant for the Taxi offering.
Through our strategic review of processes and efficiencies
conducted in the year, we have identified a number of initiatives
to reduce costs in the coming year, including negotiating better
deals for our online hosting environment and working towards
creating a single network provider, to provide a higher quality
service that provides enhanced security measures.
Developments are also underway for the infrastructure that
supports our online product offerings; Brightside Group IT owns the
applications that make up the eSystem, a system developed and
hosted solely for the Brightside Group. It therefore has
responsibility for its strategic direction. We recognise that the
legacy architecture of these applications limits the business
agility and as such have initiated a continuous improvement project
of redevelopment.
Principal Risks and Uncertainties
There is a continuous process for identifying, evaluating and
managing risks and uncertainties faced by Brightside.
The Group operates a process of reasoned judgements that takes
into consideration the likelihood and consequences of each risk,
when assessing those risks it considers to be significant. The
principal risk identified, their control mechanisms and mitigation
strategies are discussed at each Audit Committee meeting. The Board
receives regular reports on any major issues that arise during the
year and makes an annual assessment of how the risks have changed
over the period under review.
The risk profile of the business has not changed significantly
this year and the Board has identified the following principal
risks and uncertainties which could impact upon the Group's ability
to achieve its objectives. The list does not include all the risks
that the Group faces and they are not presented in any order of
priority.
Risk Type Risk Mitigating factors/controls
----------------------------- ------------------------------ ----------------------------------
Business resilience Major loss or damage To reduce the impact
to the Group's infrastructure of such an event, business
would impair its ability continuity plans are
to operate effectively periodically tested.
and would have a negative The Group has invested
effect on profitability. in a workplace recovery
facility hosted by a
third party, which allows
it to relocate to an
alternative site.
Financial exposure is
further reduced through
an appropriate insurance
programme protecting
both the capital assets
and revenue of the business.
----------------------------- ------------------------------ ----------------------------------
Client data security The business handles The Group takes a pro--active
a considerable volume approach to data security
of data including payment through its IT Security
transaction information. Policy and employment
Data leakage, whether of a dedicated IT Security
through unauthorised Manager. Compliance with
access to the Group's the Payment Card Industry
IT network, loss of data Data Security Standard
transmitted over public is managed through a
networks or loss by any system of re--engineering
other cause, would adversely to reduce the type of
impact the business. data stored and through
the deployment of a Qualified
Security Assessor.
Regular network testing
and vulnerability scanning
is carried out to ensure
that the Group's IT environment
remains secure.
----------------------------- ------------------------------ ----------------------------------
Underwriting capacity The Group is exposed The Group continues to
to the cycles of the work with quality insurance
insurance market and providers and is continually
the potential failure seeking out and adding
or loss of individual new members to its panel.
insurers. The Group works We believe our capacity
to constantly ensure exposure risk will be
that it has adequate reduced by increasing
capacity available to the number and quality
service its customers of members together with
particularly in the on--line our fraud detection techniques
channel. producing the underwriting
results the providers
expected.
----------------------------- ------------------------------ ----------------------------------
Risk Type Risk Mitigating factors/controls
----------------------------- ------------------------------ ----------------------------------
Strategic risk The Group's future growth Future strategy is developed
is dependent on its ability by the Chief executive
to implement its strategy office and senior executive
in a competitive environment team members and is considered
whilst improving efficiency and approved by the Board.
and maintaining strong To ensure that the strategy
financial controls. Failure is communicated and understood,
to do so could have an the Group engages with
adverse effect on the a wide range of stakeholders.
Group's financial condition. This process helps to
The business model is ensure that the strategy
open to value adding remains relevant and
acquisitions. improves the likelihood
of success. The executive
team is mindful of current
economic conditions and
the need to control costs
across the business.
Acquisitions are subject
to a full due diligence
process.
----------------------------- ------------------------------ ----------------------------------
Changes in customer behaviour The growth of the internet The risk is reduced by
and online competition increases competition having a forward thinking
faced by call centre strategy to deliver both
operations. Any changes online and offline products
in product distribution, according to our clients
and in particular aggregator needs, thus satisfying
models, could affect the changing purchasing
long--term profitability. behaviour of customers.
The Group's experience
in successfully bringing
innovative electronic
products to the market
ensures it is able to
adapt to the changing
online competition.
In order to deliver profitability
to product underwriters,
and a competitive pricing
proposition to customers,
the Group has market
leading underwriting
controls.
----------------------------- ------------------------------ ----------------------------------
Conduct of business and Many activities of the The Group mitigates this
prudential regulation Group are subject to risk through a dedicated
conduct of business and (and recently strengthened)
prudential regulations Compliance Team which
as laid down by the Financial conducts regular monitoring
Services and Markets of the systems and controls
Act 2000. Failure to that have been implemented
comply with the rules to ensure conformity
and regulations of the with FCA rules and Consumer
UK regulator, the Financial Credit legislation. This
Conduct Authority (FCA), is supplemented by a
could affect the trading system of focused reviews
activity of a subsidiary that is carried out by
company or result in the Group's Internal
withdrawal of authority Audit Department. The
to carry out regulated Group finance department
activities. closely monitors compliance
with the minimum capital
requirements and ensures
that other prudential
requirements are fulfilled.
----------------------------- ------------------------------ ----------------------------------
Risk Type Risk Mitigating factors/controls
----------------------------- ------------------------------ ----------------------------------
Liquidity and other financial The Group is exposed Please refer to financial
risks to financial risks through risk management in Note
its use of financial 3 to the financial statements.
instruments in the ordinary
course of business.
----------------------------- ------------------------------ ----------------------------------
Internal Control and Risk Management
The Board of Directors is responsible for the Group's system of
internal control. Although no system can provide absolute assurance
against material misstatement or loss, the Group's system is
designed to provide the Directors with reasonable assurance that
problems are identified on a timely basis and dealt with
appropriately. Key procedures that have been established, and are
designed to provide effective internal control, include:
-- daily reconciliation of cash balances;
-- on--going monitoring of expenditure through a stringent
purchase order sign off process and budgetary review process;
and
-- regular financial performance monitoring within a financial
planning and budgetary framework.
The Group's risk management strategy provides a structured way
of ensuring all material risks are identified, prioritised and
mitigated. The Audit Committee receives a report from the Risk and
Compliance Officer each time it meets and is thereby able to
monitor risk management activity. Risk controls were in place for
the period of this report and up to the date of approval of the
report.
Financial Risk Management Objectives and Policies
The Group's activities expose it to a variety of financial
risks, including liquidity risk, interest rate risk and credit
risk.
The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse affects of the Group's financial performance.
Risk management is carried out by the central treasury function,
implementing policies approved by the Board of Directors.
Liquidity Risk / Cash Flow Risk
The Group seeks to manage financial risk by ensuring sufficient
liquidity is available to meet its forseeable needs and by
investing cash assets safely and profitably. To manage liquidity
risk the Group continually monitors forecast and actual cashflows
to ensure it has sufficient cash to meet operational needs while
maintaining sufficient headroom to provide cover for unexpected
events.
During the year the Group negotiated the renewal of the banking
facilities with Clydesdale Bank to support its premium financing
activities.
Interest Risk
The Group is exposed to interest rate risk as the Group borrows
at fluctuating (bank borrowing) interest rates and provides premium
finance at fixed rates. The Group monitors its banking facilities
and compliance with related covenants as required. In January 2014,
in response to a potential covenant breach linked to the Company's
premium finance facility, the Group completed a new share placing
to raise GBP6.45m net of expenses. Group monies are also monitored
to ensure that the minimum interest charges are paid on borrowings
by ensuring that available cash balances are used to offset
overdrafts before being deposited at lower interest rates.
Credit Risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss.
The principal credit risk for the Group arises from its trade
receivables in its insurance broking, premium finance, lead
generation, and medical reporting businesses. In order to manage
credit risk the Directors have incorporated a range of credit
control procedures to monitor receivables across the Group and to
ensure that any amounts due are collected on a timely basis. Credit
searches are also performed on clients above a certain value to
minimise the risk in this area.
Post Balance Sheet Events
On 24 January 2014 Brightside plc issued an additional
45,627,400 new ordinary shares of 1pence each, raising
GBP6,844,110. The placing was supported by existing institutional
shareholders of the Group.
Outstanding at the date of signing is a pending litigation case
with Southern Rock Group regarding a number of specific issues
relating to the termination of contracts. Brightside Group plc is
currently preparing a positioning statement in advance of
mediation, however, at this stage an estimate of the financial
effect of the litigation cannot be made.
The information usually required by IAS 37 Provisions,
Contingent Liabilities and Contingent Assets is not disclosed on
the grounds that it can be expected to prejudice seriously the
outcome of the litigation. The directors are of the opinion that
the claims made by Southern Rock Group can be successfully resisted
by the Group.
The Company today has announced, alongside this results
statement, that it has reached agreement on the terms of a
recommended cash acquisition by which the entire issued and to be
issued ordinary share capital of Brightside will be acquired by a
newly incorporated company indirectly owned by AnaCap, to be
effected by means of a Scheme of Arrangement. Under the terms of
the Scheme, each Brightside Shareholder will be entitled to receive
25 pence in cash for each Brightside Share, valuing Brightside's
existing issued and to be issued ordinary share capital at
approximately GBP127 million.
The Directors believe the offer price reflects a fair price for
the Brightside Group and provides Shareholders with an opportunity
to realise their entire shareholding in cash at a substantial 32
per cent premium to the Brightside share price prevailing on 7 May
2014 (being the last Business Day prior to the Announcement). The
Directors note that there can be no guarantee that Brightside
Shareholders would otherwise be able to realise their shareholdings
in Brightside at a price of 25 pence per Brightside Share or higher
in the short to medium term.
ON BEHALF OF THE BOARD
P S Chase--Gardener
Director
7 May 2014
Officers for the year ended 31 December 2013
Dr Christopher Fay CBE - Non Executive Chairman PhD. BSc, C.Eng,
FREng, FRSE, FICE & FEI
In addition to his role as the Non--Executive Chairman of
Brightside, Dr Fay is also currently the Non--Executive Chairman of
Iofina plc, and a Non--Executive director of Stena International
Sarl. From 1999--2011 Dr. Fay was a Director, Chairman of the
S&SD Committee and a member of the Remuneration and Audit
Committees for Anglo--American plc. From 1993--1998, Dr. Fay was
Chairman and Chief Executive of Shell U.K. Limited, a leading
integrated oil, gas and chemical company in the UK. Dr. Fay was
non--executive director of The Weir Group plc 2001--2003, senior
non--executive director of BAA plc 1998--2006, Chairman of ACBE
(Government Advisory Committee on Business and the Environment)
1999--2003. Educated at Leeds University where he received a BSc
and a PhD in civil engineering, Dr. Fay was awarded a CBE in 1999
for services to the gas and oil industry.
Paul Williams -- Chief Executive Officer (appointed 24 February
2014)
Paul Williams joined Brightside Group plc as Chief Executive
Officer in February 2014.
Since beginning his career on the Royal Insurance graduate
scheme focusing on commercial underwriting and sales, Paul has held
many senior positions in the insurance industry.
He then went on to head up a number of broking organisations
including Hill House Hammond Business, before becoming Regional
Managing Director at the Towergate Partnership Ltd in 2004, where
he spent ten years and ultimately progressed to UK Broking Director
controlling GBP1.2bn of premium.
A graduate of the Ashridge Business School Executive Leadership
Programme, Paul has significant leadership experience, excellent
connections across the industry and a proven record of income
growth in commercial broking
Paul Chase--Gardener ACA - Interim Chief Executive Officer and
Finance Director
Paul originally co--founded Brightside in February 2005.
In addition to being one of the co founders of Brightside, Paul
was previously the Chairman and Finance Director of Group Direct
Limited, which was subject to a reverse takeover by Brightside in
June 2008.
Paul is a chartered accountant having trained and qualified with
Price Waterhouse.
Paul is also a non executive director of Iofina plc, an AIM
listed iodine production company based in the USA.
Helen Molyneux - Non Executive Director
Helen qualified as a solicitor in 1990, subsequently becoming a
partner at Eversheds. In 2004, Helen set up NewLaw, a Cardiff based
law firm specialising in providing claims management services to
insurers and brokers.
Helen became a Director of Brightside in September 2006.
Julian Telling - Non Executive Director
Prior to joining Brightside, Julian built up Sumus into one of
the largest independent financial advisers (IFAs) in the UK. The
business was admitted to AIM in 2005 and merged with Lighthouse plc
during 2008. After 25 years, Julian left the company to pursue
other business interests in finance, property and aviation. He
holds a variety of Directorships including a number of pro bono
positions.
Stuart Palmer - Non Executive Director
Stuart is a chartered accountant having qualified with Touche
Ross. Prior to joining the Board of Brightside, Stuart held a
number of senior finance positions within companies including WPP,
Crest Nicholson and Lafarge.
Corporate Governance
Being AIM listed, the Group is not required to comply with the
UK Corporate Governance Code on corporate governance. However, the
Board of Directors is committed where practicable to developing and
applying high standards of corporate governance appropriate to the
Group's size.
This statement sets out measures taken by the Board with regard
to good corporate governance in the year ended 31 December 2013 and
to the date of the Directors' Report.
Board of Directors
All Directors are able to take training and/or independent
professional advice in the furtherance of their duties if
necessary. All Directors also have access, at the Company's
expense, to experienced legal advice through the Company's legal
advisors and other independent professional advisors as
required.
The Board currently meets on a quarterly basis, with additional
special meetings as required.
The Board acts in an oversight capacity for the Group, with
particular responsibility for:
-- reviewing trading performance;
-- ensuring that the Group is operating with adequate resources;
-- ensuring standards of conduct;
-- ensuring the Group has adequate funding;
-- setting and monitoring strategy; and
-- reporting to shareholders.
To enable the Board to discharge its duties, all Directors
receive appropriate information from the management of the Group.
However, all Directors are also free to make further enquiries
where they feel it necessary, and to take independent advice as
required.
The Group has two Board committees, which operate within defined
terms of reference.
Audit Committee
The Audit Committee is now comprised of the following non
executive Directors:
-- Stuart Palmer (Chairman);
-- Helen Molyneux; and
-- Julian Telling.
The Audit Committee is responsible for reviewing the interim
accounts and year end statutory accounts. It is also responsible
for making recommendations to the Board on the appointment of the
external auditor, for reviewing the accounting principles, policies
and practices adopted in the preparation of the interim and year
end statutory accounts and for reviewing the scope and findings of
the external audit. In addition, the Audit Committee monitors the
framework of internal control.
The committee keeps under review the external auditor's
independence, including any non audit services that are to be
provided by the external auditor.
Remuneration Committee
The Remuneration Committee is comprised of the following non
executive Directors:
-- Julian Telling (Chairman);
-- Christopher Fay;
-- Helen Molyneux; and
-- Stuart Palmer.
The Remuneration Committee is responsible for making
recommendations to the Board on the remuneration and benefits of
the executive Directors and senior executives of the Group. The
Report of Directors' Remuneration on pages 25 to 27 details the
salaries and benefits for each Director serving during the
year.
Board re--election
The re--election of all directors is put to shareholder vote on
an annual basis.
Internal Control
The Directors are responsible for the Group's system of internal
control. Although no system can provide absolute assurance against
material misstatement or loss, the Group's system is designed to
provide the Directors with reasonable assurance that problems are
identified on a timely basis and dealt with appropriately. Key
procedures that have been established and are designed to provide
effective internal control are described below:
-- daily reconciliation of cash balances;
-- ongoing monitoring of expenditure through a stringent
purchase order sign off process and budgetary review process;
and
-- regular staff appraisal against predefined KPI targets.
The Group internal control is further strengthened by its
internal audit department, which focuses on the review of controls
and monitoring of risk areas.
Budgets & Reporting
Each year the Board approves the annual budget, which includes
an assessment of key risk areas. Performance against budget is
monitored throughout the year with the Board receiving regular
reports on actual performance against budget. Underpinning the
budgets is a system of internal financial control, based on
authorisation limits and tiers of authority.
Management Structure
The Board has overall responsibility for the Group and focuses
on the overall Group strategy and the interests of shareholders.
There is a schedule of matters specifically reserved for decisions
by the Board. The Board has an organisational structure with
clearly defined responsibilities and lines of accountability and
the executive Director has been given responsibility for specific
aspects of the Group's affairs.
Quality & Integrity of Personnel
The integrity and competence of personnel are ensured through
high recruitment standards and subsequent training courses. High
quality personnel are seen as an essential part of the control
environment.
Going Concern
The Group generated a profit for the year of GBP7.7m (2012:
GBP12.7m).
Group income and profitability fell during 2013 compared to
prior year primarily due to the available insurance underwriting
capacity providing less competitive rates than previously. This
resulted in the achievement of a lower income per policy sold and
an increase in the proportion of policies sold through our Affinity
brands which attract a higher commission rate per sale.
Furthermore, staff costs have increased from prior year as a result
of further investment in human capital to support the future growth
plans of the business.
The capacity constraints experienced in 2013 were driven by two
main events; firstly by the reduction in trading with Southern
Rock, a former related party, which provided in excess of 40% of
Group gross written premium ("GWP") in 2012. Secondly, the approach
from Markerstudy which led to other insurers adopting a wait and
see approach before offering capacity to the Group.
As a result of these events, the Group completed a new share
placing in January 2014 to raise GBP6.45m net of expenses. The fund
raising was undertaken in order to prevent a short term cash
squeeze at the year end . As noted the placing will be used to
continue to support the premium finance facility. Despite the
strong operational cash profile of the Group, the short term cash
shortfall had resulted following the payment of legacy deferred
consideration and advanced commission, together with the insurer
capacity continuing to restrict the policy sales towards the year
end while the alternative capacity was being brought online which
coincided with the Company's seasonally low cash period.
To ensure all banking covenants continue to be met going
forward, the Group is now in advanced negotiations with our bankers
with a signed agreement in principle to extend the terms of the
premium finance facilities through to August 2015, with appropriate
covenant calculations being agreed between both parties.
Report of Directors Remuneration for the year ended 31 December
2013
The Board of Directors is committed to developing and applying
high standards of corporate governance appropriate to the Group's
size. This commitment extends to Directors' remuneration and
therefore information relating to Directors remuneration is
disclosed in the following report.
Remuneration Policy
The Group's policy on remuneration is to attract, retain and
incentivise the Directors and staff in a manner consistent with the
goals of good corporate governance. In setting the Company's
remuneration policy, a number of factors are considered, including
basic salary, incentives and benefits available to executive
Directors and senior managers and staff of comparable companies.
Consistent with this policy, the Group's remuneration packages are
intended to be competitive, and align employees and shareholders'
interests.
Annual Remuneration of Directors
For the year ending 31 December 2013, the Directors who held
office during the year received the following remuneration:
Audited
2013 2013 2013 2013 2013 2013
Salary/Fees Benefits Bonus Severance Pension Total
Directors GBP GBP GBP GBP GBP GBP
-------------------- ------------ --------- ------ ---------- -------- -------
P S Chase--Gardener 250,000 25,978 25,000 -- 25,000 325,978
-------------------- ------------ --------- ------ ---------- -------- -------
J W Gannon 77,083 8,695 18,500 -- 9,250 113,528
-------------------- ------------ --------- ------ ---------- -------- -------
M Holman 250,000 9,107 25,000 -- 25,000 309,107
-------------------- ------------ --------- ------ ---------- -------- -------
C E Fay 85,000 -- -- -- -- 85,000
-------------------- ------------ --------- ------ ---------- -------- -------
H Molyneux 30,000 -- -- -- -- 30,000
-------------------- ------------ --------- ------ ---------- -------- -------
J Telling 30,000 -- -- -- -- 30,000
-------------------- ------------ --------- ------ ---------- -------- -------
S Palmer 40,000 -- -- -- -- 40,000
-------------------- ------------ --------- ------ ---------- -------- -------
Total 762,083 43,780 68,500 -- 59,250 933,613
-------------------- ------------ --------- ------ ---------- -------- -------
For the year ended 31 December 2012, the Directors who held
office in Brightside Group plc during the year received the
following remuneration:
Audited
2012 2012 2012 2012 2012 2012
Salary/Fees Benefits Bonus Severance Pension Total
Directors GBP GBP GBP GBP GBP GBP
-------------------- ------------ --------- ------ ---------- -------- ---------
P S Chase--Gardener 247,500 10,386 -- -- 11,380 269,266
-------------------- ------------ --------- ------ ---------- -------- ---------
J W Gannon 180,000 6,932 -- -- 62,876 249,808
-------------------- ------------ --------- ------ ---------- -------- ---------
M Holman 209,583 -- 15,000 -- 6,250 230,833
-------------------- ------------ --------- ------ ---------- -------- ---------
A F A Banks 90,128 544 -- 250,000 -- 340,672
-------------------- ------------ --------- ------ ---------- -------- ---------
C E Fay 85,000 -- -- -- -- 85,000
-------------------- ------------ --------- ------ ---------- -------- ---------
L Hughes 15,000 -- -- -- -- 15,000
-------------------- ------------ --------- ------ ---------- -------- ---------
H Molyneux 30,000 -- -- -- -- 30,000
-------------------- ------------ --------- ------ ---------- -------- ---------
J Telling 30,000 -- -- -- -- 30,000
-------------------- ------------ --------- ------ ---------- -------- ---------
S Palmer 32,500 -- -- -- -- 32,500
-------------------- ------------ --------- ------ ---------- -------- ---------
Total 919,711 17,862 15,000 250,000 80,506 1,283,079
-------------------- ------------ --------- ------ ---------- -------- ---------
Directors' Interests in the Share Capital of the Company
The interests of the Directors who held office as at 31 December
2013 and 31 December 2012 were:
Director 31 December 2013 31 December 2012
--------------------------------- ---------------- ----------------
P S Chase--Gardener 40,566,205 33,700,286
--------------------------------- ---------------- ----------------
C E Fay 2,400,000 2,400,000
--------------------------------- ---------------- ----------------
H Molyneux 8,355,000 8,355,000
--------------------------------- ---------------- ----------------
J Telling 415,682 415,682
--------------------------------- ---------------- ----------------
S Palmer 187,500 187,500
--------------------------------- ---------------- ----------------
J Gannon (resigned 31 May 20013) -- 37,163,728
--------------------------------- ---------------- ----------------
M Holman (resigned 28 November
2013) -- 5,151,500
--------------------------------- ---------------- ----------------
Total 51,924,387 87,373,696
--------------------------------- ---------------- ----------------
Of the 40,566,205 Ordinary shares representing P S
Chase--Gardener's interest in Brightside Group plc at 31 December
2013, 940,000 (2012: 650,000) shares are held by his wife.
Details of Share Options Granted to Directors
On 20 November 2013 the Company offered Board Directors the
opportunity to rebase existing share options, all of which were
granted at 27.5 pence per share, for a reduced number of share
options, with an exercise price of 24 pence per share, and which
will vest on 20 November 2014. Options granted to Directors who
held office at 31 December 2013 are:
Share options prior to modification
No. of share Option price Date first
Director Grant Date options granted (pence) exercisable Expiry Date
-------------------- ------------- ---------------- ------------ ------------ -------------
P S Chase--Gardener 23/07/2008 5,000,000 27.5 22/07/2010 22/07/2018
-------------------- ------------- ---------------- ------------ ------------ -------------
P S Chase--Gardener 29/07/2010 872,727 27.5 28/07/2012 28/07/2020
-------------------- ------------- ---------------- ------------ ------------ -------------
C E Fay 23/07/2008 750,000 27.5 22/07/2010 22/07/2018
-------------------- ------------- ---------------- ------------ ------------ -------------
C E Fay 29/07/2010 272,727 27.5 28/07/2012 28/07/2020
-------------------- ------------- ---------------- ------------ ------------ -------------
H Molyneux 23/07/2008 250,000 27.5 22/07/2010 22/07/2018
-------------------- ------------- ---------------- ------------ ------------ -------------
Share options following modification
Resultant Remaining
number of number of
Original share options share options Date first
Director Grant Date rebased to held at exercisable Expiry Date
24p 27.5p
-------------------- ------------- --------------- --------------- -------------- --------------
P S Chase--Gardener 23/07/2008 4,000,000 -- 20/11/2014 22/07/2018
-------------------- ------------- --------------- --------------- -------------- --------------
P S Chase--Gardener 29/07/2010 774,575 -- 20/11/2014 28/07/2020
-------------------- ------------- --------------- --------------- -------------- --------------
C E Fay 23/07/2008 600,000 -- 20/11/2014 22/07/2018
-------------------- ------------- --------------- --------------- -------------- --------------
C E Fay 29/07/2010 231,485 -- 20/11/2014 28/07/2020
-------------------- ------------- --------------- --------------- -------------- --------------
H Molyneux 23/07/2008 -- 250,000 22/07/2010 22/07/2018
-------------------- ------------- --------------- --------------- -------------- --------------
Incentive Scheme
The Group has awarded share options under approved and
unapproved share option schemes to members of the Board and
selected key employees. The Board considers the performance of
staff in conjunction with the performance of the Group during the
annual salary review process.
Service Contracts
Each of the executive Directors has entered into a service
agreement with the Company. The service agreements are terminable
on not less than 6 months notice by either party to the other at
any time. The service agreements contain provisions for early
termination, inter alia, in the event of a breach by the Director
in question.
The services of the non executive Directors are provided under
the terms of letters of appointment between them and the Group, and
are terminable on not less than 3 months notice by either party to
the other at any time.
Julian Telling
Chairman of the Remuneration Committee
Report of the Independent Auditor to the Members of Brightside
Group plc for the year ended 31 December 2013
We have audited the group and parent company financial
statements ("the financial statements") on pages 29 to 82. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and auditors
As more fully explained in the Directors' Responsibilities
Statement set out on pages 10 and 11, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board's (APB's) Ethical Standards for
Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council's website at
http://www.frc.org.uk/Our--Work/Code--Standards/Audit--and--assurance/Standards--and--guidance--for--auditors/Scope--of--audit/UK--Private--Sector--Entity--(issued--1--December--2010).aspx
Opinion on financial statements
In our opinion
-- the financial statements give a true and fair view of the
state of the Group's and the Parent's
affairs as at 31 December 2013 and of the Group's profit for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with IFRSs as adopted
by the European Union;
-- the Parent financial statements have been properly prepared
in accordance with IFRSs as adopted
by the European Union and as applied in accordance with the Companies Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in the Strategic Report and
the Directors' Report for the financial year for which the
financial statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of Directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Heather Wheelhouse (Senior Statutory Auditor)
For and on behalf of BAKER TILLY AUDIT LLP, Statutory
Auditor
Chartered Accountants
Hartwell House
55--61 Victoria Street
Bristol
BS1 6AD
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2013
Consolidated
-----------------------------------
2013 2012
Note GBP 000's GBP 000's
----------------- ----------------
Revenue 5. 88,613 91,241
Cost of sales 6. (27,998) (28,352)
----------------- ----------------
Gross profit 60,615 62,889
Administrative expenses 6. (48,955) (44,104)
Operating profit 11,660 18,785
Finance costs (net) 11. (481) (1,244)
Profit before income tax 11,179 17,541
Income tax expense 13. (3,479) (4,857)
----------------- ----------------
Profit for the year 7,700 12,684
Attributable to:
Owners of the parent 7,700 12,684
----------------- ----------------
All activities relate to continuing operations.
Consolidated earnings per share from profit attributable to the
owners of the parent during the year:
2013 2012
Note Pence Pence
Basic (pence) 12. 1.69 2.78
Diluted (pence) 12. 1.68 2.78
The notes on pages 34 to 82 are an integral part of these
consolidated financial statements.
Consolidated & Company Balance Sheets as at 31 December
2013
Consolidated Company
------------------------------------- ------------------------------------
2013 2012 2013 2012
Note GBP 000's GBP 000's GBP 000's GBP 000's
----------------- ------------------ --------------- -------------------
ASSETS
Non--current assets
Property, plant and equipment 18. 4,292 4,265 - -
Intangible assets 15. 78,896 67,319 34,786 34,994
Investment in subsidiaries 17. - - 87,442 87,013
Deferred income tax asset 25. 851 1,298 - 1
----------------- ------------------ --------------- -------------------
Total non--current assets 84,039 72,882 122,228 122,008
----------------- ------------------ --------------- -------------------
Current assets
Cash and cash equivalents 20. 2,297 7,812 - -
Trade and other receivables 19. 39,395 57,285 11,821 6,043
----------------- ------------------ --------------- -------------------
Total current assets 41,692 65,097 11,821 6,043
----------------- ------------------ --------------- -------------------
TOTAL ASSETS 125,731 137,979 134,049 128,051
----------------- ------------------ --------------- -------------------
EQUITY AND LIABILITIES
Capital and reserves
attributable
to the owners of the Parent
Share capital 26. 4,563 4,563 4,563 4,563
Share premium 26. 28,339 28,339 28,339 28,339
Reverse acquisition reserve 2,530 2,530 56,250 56,250
Share based payments reserve 1,832 1,765 1,826 1,759
Retained earnings 48,365 42,946 26,276 20,654
----------------- ------------------ --------------- -------------------
Total equity 85,629 80,143 117,254 111,565
----------------- ------------------ --------------- -------------------
Non current liabilities
Provisions for other
liabilities
and charges 24. 17 31 - -
Long term borrowings 21. 204 338 - -
----------------- ------------------ --------------- -------------------
Total non current liabilities 221 369 - -
----------------- ------------------ --------------- -------------------
Current liabilities
Current income tax liabilities 653 2,177 - -
Trade and other payables 22. 18,145 20,750 16,795 -
Provisions for other
liabilities
and charges 24. 35 145 - -
Deferred consideration 16. - 16,486 - 16,486
Borrowings 21. 21,048 17,909 - -
----------------- ------------------ --------------- -------------------
Total current liabilities 39,881 57,467 16,795 16,486
----------------- ------------------ --------------- -------------------
TOTAL EQUITY AND LIABILITIES 125,731 137,979 134,049 128,051
----------------- ------------------ --------------- -------------------
The notes on pages 34 to 82 are an integral part of these
consolidated financial statements.
The financial statements were approved by the Board of Directors
on 7 May 2014 and were authorised for issue on its behalf by:
P S Chase--Gardener
Director
7 May 2014
Company number 05941335
Consolidated & Company Statement of changes in shareholders'
equity for the year ended 31 December 2013
Consolidated
2012 Attributable to the owners of the parent
-----------------------------------------------------------------------------------------------------------------------
Reverse Share Based
Acquisition Payments Retained
Share capital Share Premium Reserve Reserve Earnings Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
----------------- ---------------- ----------------- ------------------- -------------------- -------------------
Equity as at 1
January
2012 4,563 28,339 2,530 1,521 31,266 68,219
Comprehensive
income
Profit for the
year - - - - 12,684 12,684
Total
comprehensive
income for the
year - - - - 12,684 12,684
Transactions
with the
owners
Dividend - - - - (1,004) (1,004)
Share based
payments
charge - - - 244 - 244
----------------- ---------------- ----------------- ------------------- -------------------- -------------------
Total
transactions
with the
owners - - - 244 (1,004) (760)
Equity as at 31
December
2012 4,563 28,339 2,530 1,765 42,946 80,143
----------------- ---------------- ----------------- ------------------- -------------------- -------------------
Consolidated
2013 Attributable to owners of the parent
--------------------------------------------------------------------------------------------------------------------------
Reverse Share Based
Acquisition Payments Retained
Share capital Share Premium Reserve Reserve Earnings Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
----------------- ---------------- ----------------- -------------------- --------------------- --------------------
Equity as at 1
January
2013 4,563 28,339 2,530 1,765 42,946 80,143
Comprehensive
income
Profit for the
year - - - - 7,700 7,700
----------------- ---------------- ----------------- -------------------- --------------------- --------------------
Total
comprehensive
income for the
year - - - - 7,700 7,700
Transactions
with the
owners
Dividend - - - - (2,281) (2,281)
Share based
payments
charge - - - 67 - 67
----------------- ---------------- ----------------- -------------------- --------------------- --------------------
Total
transactions
with owners - - - 67 (2,281) (2,214)
Equity as at 31
December
2013 4,563 28,339 2,530 1,832 48,365 85,629
----------------- ---------------- ----------------- -------------------- --------------------- --------------------
The profit for the year represents the total comprehensive
income for the years 2013 and 2012.
The reverse acquisition reserve has been created to enable the
presentation of a consolidated balance sheet which combines the
equity structure of the legal parent with the non statutory
reserves of the legal subsidiary.
The share based payments reserve reflects the fair value of the
employee services received in exchange for the share options
granted to those specific employees.
Company 2012 Attributable to owners of the parent
----------------------------------------------------------------------------------------------------------------------
Reverse Share Based
Acquisition Payments Retained
Share capital Share Premium Reserve Reserve Earnings Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
----------------- ---------------- ---------------- ------------------- -------------------- -------------------
Equity as at 1
January
2012 4,563 28,339 56,250 1,515 22,973 113,640
Comprehensive
Income
Loss for the
year - - - - (1,315) (1,315)
Total
comprehensive
income for the
year - - - - (1,315) (1,315)
Transactions
with the
owners
Dividend - - - - (1,004) (1,004)
Share based
payments
charge - - - 244 - 244
----------------- ---------------- ---------------- ------------------- -------------------- -------------------
Total
transactions
with the
owners - - - 244 (1,004) (760)
Equity as at 31
December
2012 4,563 28,339 56,250 1,759 20,654 111,565
----------------- ---------------- ---------------- ------------------- -------------------- -------------------
Company 2013 Attributable to owners of the parent
-------------------------------------------------------------------------------------------------------------------------
Reverse Share Based
Acquisition Payments Retained
Share capital Share Premium Reserve Reserve Earnings Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
----------------- ---------------- ---------------- -------------------- --------------------- --------------------
Equity as at 1
January
2013 4,563 28,339 56,250 1,759 20,654 111,565
Comprehensive
Income
Loss for the
year - - - - 7,903 7,903
Total
comprehensive
income for the
year - - - - 7,903 7,903
Transactions
with the
owners
Dividend - - - - (2,281) (2,281)
Share based
payments
charge - - - 67 - 67
----------------- ---------------- ---------------- -------------------- --------------------- --------------------
Total
transactions
with the
owners - - - 67 (2,281) (2,214)
Equity as at 31
December
2013 4,563 28,339 56,250 1,826 26,276 117,254
----------------- ---------------- ---------------- -------------------- --------------------- --------------------
The profit / (loss) for the year represents the total
comprehensive income for the year 2013 and 2012. The share based
payments reserve reflects the fair value of the employees services
received in exchange for the share options granted to those
specific employees.
Consolidated &Company Cash Flow Statement for the year ended
31 December 2013
Consolidated Company
-------------------------------------------------- -----------------------------------------------
2013 2012 2013 2012
Note GBP000's GBP000's GBP000's GBP000's
------------------------ ------------------------ ----------------------- ----------------------
Profit/(loss)
before income
tax 11,179 17,541 (4,097) (4,669)
Adjustments
for non--cash
items 27. 7,536 4,947 275 1,976
EBITDA 18,715 22,488 (3,822) (2,693)
Other
adjustments for
non--cash
items
Loss/(Profit)
on disposal
of property,
plant and
equipment 12 (72) - -
Change in
working capital
Trade and
other
receivables 7,560 (3,843) 3,513 32,514
Trade and
other
payables (2,823) 487 309 (33,208)
------------------------ ------------------------ ----------------------- ----------------------
Cash generated
from/(used
in) operations 23,464 19,060 - (3,387)
Loan book
movement 10,330 2,390 - -
Interest
received 42 46 - -
Income tax
paid (4,463) (4,069) - -
Net cash
generated
from/(used
in) operating
activities 29,373 17,427 - (3,387)
------------------------ ------------------------ ----------------------- ----------------------
Cash flows from
investing
activities:
Payments to
acquire property,
plant and
equipment (1,088) (777) - -
Payments to
acquire
intangible
assets (17,979) (5,123) - -
Payments to
acquire
subsidiaries,
net of cash
acquired - (3,000) - -
Proceeds on
disposal of
property, plant
and equipment 27. 463 657 - -
Payments for
deferred
consideration (16,973) (2,500) - -
----------------------- ---------------------- -------------------- --------------------
Net cash flows used
in investing
activities (35,577) (10,743) - -
----------------------- ---------------------- -------------------- --------------------
Cash flows from
financing
activities:
Drawdown/(payments)
of borrowings 3,000 (12,000) - -
Borrowings 5 429 - -
Interest paid (35) (122) - -
Dividends paid (2,281) (1,004) - -
------------------------- ---------------------- -------------------- --------------------
Net cash flows
generated
from financing
activities 689 (12,697) - -
------------------------- ---------------------- -------------------- --------------------
Net cash (decreases) in
cash and cash equivalents (5,515) (6,013) - (3,387)
Cash and cash equivalents
at beginning of year 7,812 13,825 3,387
Cash and cash equivalents
at end of year 2,297 7,812 -
---------------------- --------------------- -------------- ---------------------
The dividend of GBP2.3m was paid in cash from Group Direct
Marketing Ltd (T/A EMarketing Ltd), a subsidiary of Brightside
Group plc.
Notes to the Financial Statements for the year ended 31 December 2013
1. General information
The principal activities of Brightside Group plc ("the Company")
and its subsidiaries (together "the Group") are those of insurance
broker, premium finance provider, medical reporting agency, lead
generator, and provider of software and web services.
The Company is a public limited company, incorporated and
domiciled in the United Kingdom, with its shares listed on the
Alternative Investment Market of the London Stock Exchange. The
address of its registered office is MMT Centre, Severn Bridge,
Aust, Bristol, BS35 4BL.
The Financial Statements have been presented in sterling as all
transactions are denominated in sterling and it is the functional
currency of each group company as all the businesses are located in
the United Kingdom.
2. Summary of significant accounting policies
i. Basis of preparation
The consolidated and company financial statements of the Group have
been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the
EU), IFRIC interpretations and the Companies Act 2006 applicable to
companies reporting under IFRS. The consolidated and parent financial
statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires
the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the
Group's accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements, are disclosed
in note 4.
In the current year, the Group has adopted all of the new and revised
Standards and Interpretations issued by the International Accounting
Standards Board (the IASB) and the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB that are relevant to
its operations and effective for accounting periods beginning on 1
January 2013.
a. Standards, amendments and interpretations effective in 2013
-- Amendment to IFRS 7 Financial Instruments : Disclosures --
Offsetting financial assets and financial liabilities (Endorsed for
use in EU on 31 December 2012)
-- IFRS 13 "Fair Value Measurement" (Endorsed for use in EU on 11 December 2012)
b. Standards, amendments and interpretations to existing standards
that are not yet effective and have not been early adopted by the
Group
The following standards, amendments and interpretations to
existing standards have been published that are mandatory for the
Company's accounting periods beginning on or after 1 January 2014
or later periods but which the Company has not early adopted:
-- IFRS 10 "Consolidated Financial Statements" (Endorsed for use in EU on 11 December 2012)
-- IFRS 12 "Disclosure of Interests in Other Entities" (Endorsed
for use in EU on 11 December 2012)
-- IAS 27 (amended 2011) "Separate Financial Statements"
(Endorsed for use in EU on 11 December 2012)
-- IAS 32 Offsetting Financial Assets and Financial Liabilities
(Endorsed for use in EU on 13 December 2012)
-- IAS 36 Recoverable Amount Disclosures for Non--Financial Asset
Management have considered the early adoption of the above
adjustments to existing standards, and believe there would be no
material effect on the financial statements for the Group.
ii. Company Statement of Comprehensive Income
As permitted by s408 Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income. The profit for
the year, recognised by the Company was GBP5.62m (2012 loss:
GBP2.32m).
Dividends received by the Company from other Group Companies
totalled GBP12m (GBP6m from Panacea Finance Limited and GBP6m from
Brightside Insurance Services Limited (formerly Commercial Vehicle
Direct Insurance Services Limited).
iii. Basis of consolidation
The consolidated financial statements of the Group incorporate
the financial statements of the Company and entities controlled by
the Company (the subsidiaries) made up to 31 December each
year.
The purchase method of accounting has been used to account for
the acquisition of subsidiaries and business combinations by the
Group. The cost of an acquisition is measured as the fair value of
the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange. Acquisition related
costs are generally recognised in the Statement of Comprehensive
Income as incurred. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are
measured initially at their values at the acquisition date,
irrespective of the extent of any minority interest.
The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is regarded
as goodwill. If the fair value of identifiable assets and
liabilities acquired exceeds the cost of the business combination
(i.e. discount on acquisition), the difference is recognised
directly in the Statement of Comprehensive Income.
All intra--Group transactions, balances, and unrealised gains
and losses on transactions between Group companies are eliminated
on consolidation.
iv. Going concern
These accounts have been prepared on the going concern basis as
the Directors believe that the Group has sufficient funds for the
foreseeable future to meet its liabilities as and when they fall
due.
In reaching this conclusion the Directors have taken account
of:
-- the Group's strong balance sheet, with total assets of GBP125.73m.
-- the Group's year end trade and other receivables balance of GBP39.40m;
-- the Group's year end total liabilities of GBP40.10m;
-- the profitable trading record of the Group;
-- the Group's five year forecasts to December 2018;
-- renewal and availability of banking facilities;
-- the prevention of breaching all bank covenants; and
-- a further issue of shares after the balance sheet date with
net proceeds totalling GBP6.45m.
In reaching this conclusion with respect to the Company, the
directors have taken account of:
-- the Company's strong balance sheet, with total assets of GBP134.05m.
Going concern is also referenced in the Corporate Governance
section on page 23.
v. Property, plant and equipment
Property, plant and equipment is stated at historical cost, net
of depreciation.
Depreciation is calculated using the straight--line method to
write off the cost of assets, less their estimated residual values,
over their estimated useful lives. The rates generally applicable
are:
Property 2.5% on a straight line basis
Fixtures and Fittings 20% on a straight line basis
IT Hardware 33% on a straight line basis
Motor Vehicles 25% on a straight line basis
vi. Intangible assets
(a) Separately identifiable intangible assets
Intangible assets with finite useful lives that are acquired
separately are carried at cost lessaccumulated amortisation.
Amortisation is recognised over their useful economic lives, with
the charge included in administrative expenses in the Statement of
Comprehensive Income. Intangible assets with infinite useful lives
that are acquired separately are carried at cost less accumulated
impairment losses.
Computer software, which is not an integral part of the related
hardware, is stated at historical cost less amortisation.
Amortisation is provided at rates calculated to write off the cost,
less estimated residual value, on a straight--line basis over their
useful economic life. The current maximum estimated economic life
of these assets is 3 years .
Assets in the course of construction are carried at cost, less
any identified impairment loss. Amortisation of these assets
commences when the assets are ready for their intended use.
Development costs to enhance the eSystem asset are stated at
hours worked, calculated at the respective rate of work carried
out. Amortisation is provided at rates calculated to write off the
cost, less estimated residual value, on a straight line basis over
their useful economic life. The current maximum estimated economic
life of enhancements to the eSystem is 20 years.
The eVan, eCar, eBike and Affinity policy books categorised
within intangibles are stated at historical cost less amortisation.
Amortisation is provided at rates calculated to write off the cost
of the policy books over their useful economic life. The maximum
useful economic life of the policy books is estimated to be five
years with amortisation being provided on the basis of expected
customer renewals each year from the acquired policy books as a
percentage of total expected renewals from the acquired policy
books.
(b) Goodwill
All goodwill is deemed to have an indefinite useful economic
life.
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the identifiable net
assets of the acquired subsidiary/associate at the date of
acquisition. Goodwill on acquisition of subsidiaries is included in
'intangible assets', and is tested annually for impairment, and
carried at cost less accumulated impairment losses. Impairment
losses are charged to administrative expenses in the Statement of
Comprehensive Income.
vii. Investment in subsidiary undertakings
Subsidiaries are entities that are directly or indirectly
controlled by the Company. Control exists where the Company has the
power to govern the financial and operating policies of the entity
so as to obtain benefits from its activities. In assessing control,
potential voting rights that are currently exercisable or
convertible are taken into account.
Transactions, balances, unrealised gains and unrealised losses
on transactions between Group companies are eliminated on
consolidation. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies
adopted by the Group.
viii. Impairment of non financial assets
Assets with either an indefinite or infinite useful life, for
example goodwill, are not subject to amortisation and are tested
annually for impairment. Assets that are subject to amortisation
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cashflows (cash--generating units).
Non--financial assets other than goodwill that have previously been
impaired are reviewed for possible reversal of the impairment at
each balance sheet date.
ix. Financial assets classification
The Group classifies its financial assets between loans and
receivables. Management determines the classification of its
financial assets at initial recognition.
Loans and receivables are non--derivative financial assets with
fixed or determinable payments that are not quoted on the active
market. They are included in current assets, except for those with
maturities greater than 12 months after the balance sheet date.
These are classified as non--current assets. Loans and receivables
are classified as 'trade and other receivables' in the balance
sheet.
Recognition and measurement
Regular purchases and sales of financial assets are recognised
on the trade--date, which is the date on which the Group commits to
purchase or sell the asset. Investments not carried at fair value
through the Statement of Comprehensive Income are initially
recognised at fair value. Financial assets carried at fair value
through the Statement of Comprehensive Income are initially
recognised at fair value, and transaction costs are expensed in the
Statement of Comprehensive Income. Financial assets are
derecognised when the rights to receive cash flows from the
investments have expired or have been transferred and the Group has
transferred substantially all risks and rewards of ownership.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the Balance Sheet when there is a legally enforceable
right to offset the recognised amounts and there is an intention to
settle on a net basis, or realise the asset and settle the
liability simultaneously.
Impairment of financial assets
Assets carried at amortised cost
The Group assesses at each balance sheet date whether there is
objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or group of financial assets
is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one or more events
that occurred after the initial recognition of the asset (a "loss
event") or that loss event (or events) has an impact on the
estimated future cash flows of the financial assets or group of
financial assets that can be reliably estimated.
The criteria that the Group uses to determine that there is
objective evidence of an impairment loss includes:
-- significant financial difficulty of the insurer or obligor;
-- a breach of contract, such as a default or delinquency in interest or principal payments;
-- the borrower requesting a change in financial terms of an agreed repayment schedule;
-- it becomes probable that the borrower will enter bankruptcy
or other financial reorganisation;
-- the disappearance of an active market for that financial
asset because of financial difficulties; or
-- observable data indicating that there is a measurable
decrease in the estimated future cash flows from a portfolio of
financial assets since the initial recognition of those assets,
although the decrease cannot yet be identified with the individual
financial assets in the portfolio, including:
1) adverse changes in the payment status of borrowers in the portfolio; and
2) national or local economic conditions that correlate with
defaults on the assets in the portfolio.
The amount of any loss is measured as the difference between the
asset's carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset's original effective
interest rate. The carrying amount of the asset is reduced and the
amount of the loss is recognised in the Statement of Comprehensive
Income. If a loan or held--to--maturity investment has a variable
interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate determined under the
contract. As a practical expedient, the Group may measure
impairment on the basis of an instrument's fair value using an
observable market price.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an
improvement in the receivable's credit rating), the reversal of the
previously recognised impairment loss is recognised in the
Statement of Comprehensive Income.
x. Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision for
impairment. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of the receivables.
xi. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short--term highly liquid investments with
original maturities of three months or less, and for the purposes
of the cash flow statement, bank overdrafts. Bank overdrafts are
shown within borrowings in current liabilities on the balance
sheet.
xii. Share capital
Ordinary shares are classified as equity in the balance sheet
and are recorded as the proceeds received net of direct issue
costs.
The costs related to issuing share capital are taken to the
share premium account in accordance with IAS 32 'Financial
Instruments: Presentation'.
xiii. Trade payables
Trade payables are not interest bearing and are initially
recognised at fair value, and subsequently at amortised cost using
the effective interest method.
xiv. Deferred contingent consideration
Deferred consideration is recognised within the accounts at fair
value. Deferred consideration is defined as additional
consideration payable at a future date which is not dependent on
the results of future events. Deferred consideration payable later
than 12 months after the balance sheet date is discounted to
current value using the Group's weighted average cost of capital
with the unwinding of the discounted amount recognised in finance
costs.
Changes in the fair value of deferred contingent consideration
that the Group recognises after the acquisition date that are the
result of additional information that the Group obtained after that
date about facts and circumstances that existed at the acquisition
date are measurement period adjustments. However, changes resulting
from events after the acquisition date, such as meeting a profit
target, are not measurement period adjustments. The Group accounts
for changes in the fair value of contingent consideration
classified as an asset or a liability that are not measurement
period adjustments by measuring the balance at fair value, with any
resulting gain or loss recognised either in profit or loss or in
other comprehensive income as appropriate. Contingent consideration
where payment is deferred until a later date is discounted to
current value using the Group's weighted average cost of capital
with the unwinding of the discounted amount recognised in finance
costs.
xv. Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost.
Borrowings are classified as current liabilities unless the
Company has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Borrowing costs are recognised in the Statement of Comprehensive
Income in the period in which they are incurred.
xvi. Taxation
The current tax expense is based on the taxable profits for the
year, after any adjustments in respect of prior years.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the
consolidated financial statements.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary difference will be utilised.
Deferred income tax is determined using tax rates that have been
enacted or substantively enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
xvii. Employee benefits
Throughout the year the Group provided a non--contributory
employer stakeholder pension scheme. The Group reached its Auto
Enrolment staging date on 1 October 2013 but postponed enrolment
for all employees until 1 January 2014. From January 2014 the Group
offers two Auto Enrolment pension schemes, enrolment into which is
dependent upon salary band.
The Group has applied the requirements of IFRS 2 Share--based
payments which require the fair value of share--based payments to
be recognised as an expense.
Certain employees and Directors of the Group have received
remuneration in the form of share options over the un--issued
shares of the ultimate parent Company. The fair value of the equity
instruments granted is measured on the date at which they were
granted using the Black--Scholes model, and is expensed in the
Statement of Comprehensive Income over the appropriate vesting
period. At the end of each reporting period, the Group revises its
estimate of the number of options expected to vest in calculating
the appropriate annual charge.
xviii. Revenue recognition
Group revenue represents insurance commission and brokerage
fees, interest received from its premium financing business,
management fees from the management of third party premium finance
loan books, administration charges generated from its debt
management business, income generated from the sale of leads and
fee income generated by its medical reporting business, insurer
commission, and software service and build income.
Where work is performed over a period of time, revenue is
recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably
measured. Revenue is not recognised until the significant risks and
rewards of ownership of the services have passed to the client and
the amount of revenue can be measured reliably. Full provision is
made for all known expected losses at the point that such losses
are forecast.
Insurance commission and fee income is recognised on the date
the underlying insurance policy goes on risk. Fee income relating
to the medical reporting business is recognised when the medical
report is provided to the business.
Interest derived from premium financing activities is spread
across the life of the loan, at the effective interest rate.
Management fees generated from the administration of third party
loan books are recognised in the month the policy is financed.
Administration charges generated from debt management activities
are recognised at the time the service is provided.
Insurer commissions, software services and software build income
are recognised during the month in which the service is
provided.
xix. Operating profit
Operating profit is calculated as profit before income tax and
finance costs.
xx. Segmental reporting
The Group has adopted IFRS 8 "Operating Segments". IFRS 8
requires operating segments to be determined based on the Group's
internal reporting to the Chief Operating decision maker which is
used to allocate resources to segments and to assess segmental
performance. The Chief Operating decision maker has been identified
as the Board of Directors.
xxi. Leases
Assets held under finance leases or hire purchase contracts are
recognised as assets of the Group. They are capitalised in the
Balance Sheet at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the
inception of the lease and depreciated over their estimated useful
lives or the lease term, whichever is shorter.
The corresponding liability to the lessor is included in the
Balance Sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and the reduction of lease
obligation so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged
directly against income, unless they are directly attributable to
qualifying assets, in which case they are capitalised in accordance
with the Group's general policy on borrowing costs.
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the Statement of
Comprehensive Income on a straight--line basis over the period of
the lease.
xxii. Call options
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently
re--measured at their fair value.
3. Financial risk management
The Group's activities expose it to a variety of financial
risks, including liquidity risk, interest rate risk and credit
risk.
The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks
to minimise potential adverse affects of the Group's financial
performance.
Risk management is carried out by the central treasury function,
implementing policies approved by the Board of
Directors.
i. Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient
liquidity is available to meet its foreseeable needs and by
investing cash assets safely and profitably. To manage liquidity
risk the Group continually monitors forecast and actual cashflows
to ensure it has sufficient cash to meet operational needs while
maintaining sufficient headroom to provide cover for unexpected
events.
At the balance sheet date the Group had cash balances, net of
client account balances of GBP1.54m (2012: GBP6.23m), trade and
other receivables of GBP39.40m (2012: GBP57.29m) and total
liabilities of GBP40.05m (2012: GBP57.84m). During the year the
Group negotiated the renewal of the banking facilities with
Clydesdale Bank to support its premium financing activities.
The Group's non--derivative financial liabilities are analysed
into borrowings and trade and other payables. The maturity profile
of the borrowings are shown in note 21. Trade and other payables at
31 December 2013 were GBP18.15m (2012: GBP20.75m) and are due
within 1 year of the balance sheet date.
ii. Interest rate risk
The Group is exposed to interest rate risk as the Group borrows
at fluctuating (bank borrowing) interest rates and provides premium
finance at fixed rates. The Group monitors its banking facilities
and compliance with related covenants as required. Group monies are
also monitored to ensure that the minimum interest charges are paid
on borrowings by ensuring that available cash balances are used to
offset overdrafts before being deposited at lower interest
rates.
At the balance sheet date the Group had total bank borrowings of
GBP20.50m (2012: GBP17.50m). This borrowing was held with
Clydesdale Bank to support its premium financing activities. Apart
from the borrowing for premium finance purposes the Group does not
have any structural debt.
iii. Interest rate sensitivity
The Group is subject to interest rate sensitivity as its bank
borrowings and other loans have fluctuating interest rates.
If interest rates had been 100 basis points higher/lower and all
other variables were held constant, the Group's profit for the year
would have decreased/increased by GBP206k (2012: GBP245k).
The Group policy is to manage interest rate risk so that
fluctuations in variable rates do not have a material impact on its
results.
iv. Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss.
The principal credit risk for the Group arises from its trade
receivables in its insurance broking, premium finance, lead
generation, and medical reporting businesses. In order to manage
credit risk the Directors have incorporated a range of credit
control procedures to monitor receivables across the Group and to
ensure that any amounts due are collected on a timely basis. Credit
searches are also performed on clients above a certain value to
minimise the risk in this area.
The Group had total receivables at the balance sheet date of
GBP39.40m (2012: GBP57.29m). Of this amount GBP25.23m (2012:
GBP35.56) related to amounts owed to our premium finance business.
This balance is not deemed to represent an exposure to credit risk
as a failure by the individual debtor to repay the amounts due
would result in the Group cancelling their underlying insurance
policy, and therefore recovering any amounts due from the insurance
company rather than the individual themselves. The Group's maximum
credit risk exposure is therefore deemed to equate to it's non
premium finance trade receivables balance of GBP14.17m (2012:
GBP21.73m).
The receivables balance of GBP14.17m is deemed to be of low
credit risk. GBP7.30m is due from NewLaw solicitors, a related
party to the Group, for whom there is a long standing relationship
with very minimal credit risk. GBP2.26m represents prepayments and
accrued income. It is considered that this and any further trading
debt is highly recoverable.
No terms of the Group's financial assets including its trade
receivables have been renegotiated during either the current or the
prior year which would otherwise have resulted in the balance being
past due or impaired.
v. Financial liabilities
Financial liabilities include bank overdrafts and other loans.
See note 21 for the maturity profiles applicable to these. The
weighted average interest paid on the bank overdrafts during the
year ended 31 December 2013 was 2.5% (2012: 2.5%).
vi. Financial assets
Other than trade receivables due to the Group's finance
provider, the Group holds no fixed rate financial assets (2012:
nil).
Floating rate assets comprise sterling cash balances.
vii. Capital management
The Group's objectives when managing capital are to safeguard
its ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to minimise the cost of
capital.
In order to maintain or adjust the capital structure, the Group
may issue new shares or sell assets to reduce debt. Going forward
the Group will also consider the level and timing of dividend
payments when assessing its capital structure.
Total capital is calculated as 'equity' as shown in the
consolidated balance sheet plus net debt. Net debt is calculated as
total 'current and non current borrowings' as shown in the
consolidated balance sheet.
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
the future development of the business. The Board of Directors
monitors the return on capital which it defines as net operating
income divided by total shareholder's equity.
The return on average capital employed (calculated as operating
profit over total equity and long term borrowings) was 14% in 2013
(2012: 25%).
The gearing ratios of the Group as at 31 December 2013 and 2012
were as follows:
2013 2012
-------------------------------------------- -------- --------
GBP000's GBP000's
-------------------------------------------- -------- --------
Total equity 85,629 80,143
-------------------------------------------- -------- --------
Adjusted net cash excluding Panacea finance
facility 783 5,480
-------------------------------------------- -------- --------
Gearing nil nil
-------------------------------------------- -------- --------
The reconciliation from the balance sheet to adjusted net cash
excluding Panacea finance facility is as follows:
2013 2012
----------------------------------------------------------- ----------- ----------
GBP000's GBP000's
----------------------------------------------------------- ----------- ----------
Current borrowings 21,048 17,909
---------------------------------------------------------------------- ----------- ----------
Non--current borrowings 204 338
---------------------------------------------------------------------- ----------- ----------
Total borrowings 21,252 18,247
---------------------------------------------------------------------- ----------- ----------
Panacea finance facility (20,500) (17,500)
---------------------------------------------------------------------- ----------- ----------
Underlying borrowings 752 747
---------------------------------------------------------------------- ----------- ----------
Cash (excluding client cash) 1,535 6,227
---------------------------------------------------------------------- ----------- ----------
Adjusted net cash excluding Panacea finance
facility 783 5,480
---------------------------------------------------------------------- ----------- ----------
Of the total Group borrowings GBP20.5m (2012: GBP17.5m) relates
to borrowings used to support the premium finance loan book. As a
result the board considers that the Group has no structured debt.
The Group is subject to a number of covenants imposed by Clydesdale
Bank, where the criteria are reported against on a quarterly basis.
These relate to leverage, capital expenditure, EBITDA, and debt as
a proportion of the net loan book balance. These covenants have been
met by the Group during the year 31 December 2013.
viii. External capital requirements
The Group's business is subject to regulatory and solvency
requirements of the Financial Services Authority (FSA). The FSA
impose specific solvency requirements on regulated group companies.
All of the regulated Group companies exceeded their solvency
requirements at all times during the years ended 31 December 2013
and 2012.
4. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Goodwill
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the accounting policy stated in note
2, section vi. These calculations require the use of estimates and
assumptions prepared by the Directors as detailed in note 15. The
value of goodwill currently held in the balance sheet is GBP43.74m
(2012: GBP43.74m).
Deferred Tax Asset
As at 31 December 2013, David & Co. Consultants Limited held
a deferred tax asset of GBP0.82m (2012: GBP1.01m) resulting from
historic trading losses arising from the lead generation trade.
These losses can only be utilised if the lead generation trade
continues to produce profits in the future. The recoverability of
the deferred tax asset has been assessed based on the pre--tax cash
flows obtained from financial budgets approved by management
covering the five year period ended 31 December 2018.
The key assumptions used to prepare the financial budgets are as
follows:
-- availability of data for lead generation purposes;
-- growth in leads generated through lead generation activities; and
-- average income per lead generated.
Business Combinations
After apportioning fair values to any tangible assets and
liabilities, all business combinations are reviewed to attribute
fair values to separately identifiable intangible fixed assets. The
excess of the cost of the acquisition over the fair value of the
identifiable net assets acquired is recorded as goodwill. If any
deferred consideration is due on the purchase the fair value is
assessed and where applicable discounted using the Group's weighted
average cost of capital and included in the cost of acquisition.
The fair value of the deferred consideration is reviewed at each
reporting date and any change is posted to the Statement of
Comprehensive Income.
During the year all remaining deferred consideration was settled
in full (see Note 16).
Trade and other receivables
Within the balance sheet the Group has recognised GBP39.40m of
trade and other receivables (2012: GBP57.29m) of which GBP1.48m are
past due but not impaired (2012: GBP1.12m).
An amount of trade and other receivable of GBP25.23m related to
premium finance businesses. These balances are not deemed to
represent an exposure to credit risk as a failure by the individual
debtor to repay the amounts due would result in the Group
cancelling their underlying insurance policy, and therefore
recovering any amounts due from the insurance company rather than
the individual themselves. Consequently, Panacea has had extremely
minimal bad debts in its history of trading. The Group's maximum
credit risk exposure is therefore deemed to equate to its non
premium finance trade receivables balance of GBP14.17.10m (2012:
GBP21.73m).
Against the receivables balance the Group has recognised a
provision for impairment of GBP1.75m (2012: GBP1.53m), representing
3.72% (2012: 2.61%) of the overall trade receivables balance.
If the actual percentage of bad debts experienced by the Group
differed by 1% to that estimated, the provision made would be under
/ over stated by GBP411k (2012: GBP588k).
Southern Rock Litigation
Outstanding at the date of signing is a pending litigation case
with Southern Rock Group regarding a number of specific issues
relating to the termination of contracts. Brightside Group plc are
currently preparing a positioning statement in advance of
mediation, however, at this stage an estimate of the financial
effect of the litigation cannot be made.
The information usually required by IAS 37 Provisions,
Contingent Liabilities and Contingent Assets is not disclosed on
the grounds that it can be expected to prejudice seriously the
outcome of the litigation. The directors are of the opinion that
the claims made by Southern Rock Group can be successfully resisted
by the Group.
5. Revenue by nature
The breakdown of revenue by category is as follows:
2013 2012
GBP000's GBP000's
----------------- -----------------
Insurance broking commission and fees 51,925 53,381
Medical reporting 12,058 11,337
Finance provider fees 5,810 5,522
Finance provider interest 10,081 13,874
Other fees 8,739 7,127
Total 88,613 91,241
----------------- -----------------
6. Expenses by nature
Profit from continuing operations has been arrived at after
charging:
2013 2012
GBP000's GBP000's
------------------ ------------------
Marketing costs 27,336 27,670
Employee benefit expense (see note 9) 29,877 28,947
Staff recruitment and agency workers 964 618
Staff training 459 391
Other staff costs 661 942
Depreciation charge (see note 18) 597 402
Amortisation of intangible assets (see note 15) 6,391 3,057
Loss/ (Profit) on disposal of property, plant
and equipment 12 (72)
Operating lease rentals -- Land and Buildings 402 188
Building rates and service charges 888 845
Operating lease rentals -- Other 1,028 898
Computer operating expenses 3,643 3,686
Auditor's remuneration (see note 8) 228 184
Postage costs 1,209 1,268
Telephone costs 1,346 1,436
Loan book bank facility costs 931 928
Other expenses 981 1,068
Total cost of sales and administrative expenses 76,953 72,456
------------------ ------------------
7. Earnings before exceptional other income, interest, tax, depreciation,
amortisation, and share based payments charge
2013 2012
GBP000's GBP000's
------------------ ------------------
Profit for the year 7,700 12,684
Finance costs (net) 481 1,244
Income tax expense 3,479 4,857
Depreciation 597 402
Amortisation 6,391 3,057
Share based payments charge 67 244
EBITDA before exceptional other income and share
based payments charge 18,715 22,488
------------------ ------------------
8. Auditor remuneration
During the year the Group obtained the following services from
the Group's auditor at costs detailed below:
2013 2012
GBP 000's GBP 000's
------------------- -------------------
Fees payable to the company's auditor for the
audit of the parent company and consolidated financial
statements 22 30
Fees payable to the company's auditor and its
associates for other services:
* The audit of the company's subsidiaries pursuant to
legislation 157 121
* Other services pursuant to legislation 13 12
* Other services 30 14
Fees paid to the company's auditor and its associates
for other services relating to the prior year:
* The audit of the parent company and consolidated
financial statements 5 10
* Other services pursuant to legislation 1 3
* Other services - (6)
------------------- -------------------
Total 228 184
------------------- -------------------
During 2013, the GBP30k (2012: GBP14k) fees incurred for other
services was in respect of reviewing the interim accounts. The
GBP6k credit for other services in respect of the prior year
relates to due diligence work relating to the acquisition of E
Systems Limited and E Development Limited.
9. Employee benefit expense
2013 2012
GBP 000's GBP 000's
------------------ ------------------
Wages and salaries 27,160 26,099
Social security costs 2,574 2,501
Pension costs 76 103
Share based payments charge 67 244
------------------ ------------------
Total 29,877 28,947
------------------ ------------------
The average number of employees of the Group during the year
was:
2013 2012
Number Number
------------------- -------------------
Directors 6 7
Sales and administration 1,024 964
------------------- -------------------
Total 1,030 971
------------------- -------------------
The Directors shown above are those of Brightside Group plc
only. The Company has no employees, other than those Directors
detailed in the Officers report on page 21.
Employee benefit expenses are charged to administrative expenses
in the Consolidated Statement of Comprehensive Income.
10. Share options
The Brightside Group operates two equity settled share option
schemes: an approved scheme and an unapproved scheme. During the
year, Board members and employees of the Group were granted
5,249,073 options (2012: 3,750,000) under the unapproved share
scheme and 14,892,534 options (2012: nil) under the approved share
scheme.
Unapproved share scheme
The Group granted share options through the unapproved share
scheme as follows:
Share option Share options
Date Granted to : price (number)
(pence)
------------------ --------------------------- ------------- --------------
23 July 2008
* Board members & employees 27.50 15,699,153
------------------ --------------------------- ------------- --------------
29 July 2010
* Board members & employees 27.50 5,119,180
------------------ --------------------------- ------------- --------------
24 September
2012 Board members 20.00 3,750,000
------------------ --------------------------- ------------- --------------
1 May 2013 Employees 24.75 1,378,788
------------------ --------------------------- ------------- --------------
20 November 2013 Employees 20.13 3,870,285
------------------ --------------------------- ------------- --------------
These options are subject to the achievement of specified
performance conditions. The options vest in 2 equal instalments,
two and three years after the grant date.
Approved share scheme
The Group granted share options through the approved share
scheme as follows:
Share option Share options
Date Granted to: price (number)
(pence)
-------------- -------------------------- ------------- --------------
23 July 2008
* Employees 27.50 5,450,290
-------------- -------------------------- ------------- --------------
29 July 2010
* Board member & employees 27.50 3,266,921
-------------- -------------------------- ------------- --------------
1 May 2013 Employees 24.75 121,212
-------------- -------------------------- ------------- --------------
20 November
2013 Employees 20.13 14,771,322
-------------- -------------------------- ------------- --------------
These options are subject to the achievement of specified
performance conditions. The options vest in 2 equal instalments,
three and four years after the grant date.
* On 20 November 2013, the Company offered existing share option
holders, excluding Board Directors and specified senior management,
the opportunity to rebase their existing share options, all of
which were granted at 27.5 pence per share, for a reduced number of
nil cost share options, which will vest on 20 November 2014.
* On 20 November 2013, the Board Directors and specified senior
management, were given the opportunity to rebase their existing
share options, all of which were granted at 27.5 pence per share,
for a reduced number of share options with an exercise price of 24
pence per share, which will vest on 20 November 2014.
The cost in relation to these share options has already been
recognised by the Company. The exchange ratio used for rebasing the
27.5 pence share options into nil cost share options and 24 pence
share options was such that no additional cost will be incurred.
The fair value of the reduced number of share options, at the
reduced exercise price, equates to the fair value of the original
number of share options with an exercise price of 27.5 pence, as at
20 November 2013.
The Group has used the Black--Scholes model to calculate the
fair value of options granted. The key inputs relating to the Group
are as follows:
Share
price
at date Exercise Expected
of grant price Expected life (years) Risk free Dividend Discount
Share scheme (pence) (pence) volatility rate yield factor
----------------- ---------- ----------- ------------- --------------- ------------ ----------- -----------
Unapproved 2008 27.5 27.5 25.0% 6.25 5.0% 0% 35%
----------------- ---------- ----------- ------------- --------------- ------------ ----------- -----------
Unapproved 2010 27.5 27.5 39.8% 4.00 3.4% 0% 0%
----------------- ---------- ----------- ------------- --------------- ------------ ----------- -----------
Unapproved 2012 23.7 20.0 28.1% 6.50 0.7% 0.93% 0%
----------------- ---------- ----------- ------------- --------------- ------------ ----------- -----------
Unapproved 2013 20.4 20.0 32.6% 6.00 3.0% 2.45% 0%
----------------- ---------- ----------- ------------- --------------- ------------ ----------- -----------
Approved 2008 27.5 27.5 25.0% 6.75 5.0% 0% 35%
----------------- ---------- ----------- ------------- --------------- ------------ ----------- -----------
Approved 2010 27.5 27.5 39.8% 4.50 3.4% 0% 0%
----------------- ---------- ----------- ------------- --------------- ------------ ----------- -----------
Approved 2013 20.4 20.0 32.6% 6.50 3.0% 2.45% 0%
----------------- ---------- ----------- ------------- --------------- ------------ ----------- -----------
In calculating the fair value of the rebased share options, the
following key inputs have been used:
Share price
at date
of grant Exercise Expected
Share scheme rebased (pence) price Expected life (years) Risk Dividend Discount
on 20 November 2013 (pence) volatility free yield factor
rate
------------------------ ------------ ----------- ------------- --------------- ------- ----------- -----------
Directors 2008 schemes 19.75 24.0 32.98% 4.44 3.0% 2.5% 0%
------------------------ ------------ ----------- ------------- --------------- ------- ----------- -----------
Directors 2010 schemes 19.75 24.0 32.98% 6.46 3.0% 2.5% 0%
------------------------ ------------ ----------- ------------- --------------- ------- ----------- -----------
Other staff 2008
schemes 19.75 0.0 32.98% 2.09 3.0% 2.5% 0%
------------------------ ------------ ----------- ------------- --------------- ------- ----------- -----------
Other staff 2010
schemes 19.75 0.0 32.98% 3.10 3.0% 2.5% 0%
------------------------ ------------ ----------- ------------- --------------- ------- ----------- -----------
During the period to 20 November 2013 the following movements
occurred with respect to the share option schemes:
Type of Share At 1 January Awards Forfeited At 20 November
Option Scheme Price Awarded Exercisable 2013 in period in period 2013
(pence) (Date) (Number) (Number) (Number) (Number)
HMRC approved 27.50 23/07/2008 22/07/2011--22/07/2018 2,697,848 -- (654,167) 2,043,681
HMRC approved 27.50 28/07/2010 22/07/2013--22/07/2020 2,201,936 97,301 (285,649) 2,013,588
HMRC approved 24.75 01/05/2013 01/05/2016--30/04/2023 -- 121,212 -- 121,212
Unapproved 24.75 01/05/2013 01/05/2015--30/04/2023 -- 1,378,788 -- 1,378,788
Unapproved 20.0 24/09/2012 24/09/2015--24/09/2022 3,750,000-- -- -- 3,750,000
Unapproved 27.5 23/07/2008 22/07/2010--22/07/2018 10,898,872 -- (3,723,378) 7,175,494
Unapproved 27.5 28/07/2010 22/07/2012--22/07/2020 3,865,633 888,518 (551,736) 4,202,415
------------ ---------- ----------- --------------
Total 23,414,289 2,485,819 (5,214,930) 20,685,178
------------ ---------- ----------- --------------
These share options were split as follows prior to the rebasing
on 20 November 2013:
Share options
Share options Share options Share options as at 20 November
Staff type issued at issued at 20.0p issued at 24.75p 2013
27.5p
----------------- ---------------- ------------------ ------------------- -------------------
Board Directors 8,004,545 3,750,000 -- 11,754,545
----------------- ---------------- ------------------ ------------------- -------------------
Other staff 7,430,633 -- 1,500,000 8,930,633
----------------- ---------------- ------------------ ------------------- -------------------
Total 15,435,178 3,750,000 1,500,000 20,685,178
----------------- ---------------- ------------------ ------------------- -------------------
On 20 November 2013 the 27.5p share options were rebased to give
a modified number of share options of:
Share options
as at 20 November
Modified share Unmodified 2013 after
Staff type options price share option rebasing
price
----------------------- ----------------- --------------- -------------------
Board Directors 24p -- 6,304,508
----------------------- ----------------- --------------- -------------------
Board Directors -- 27.5p 250,000
----------------------- ----------------- --------------- -------------------
Board Directors -- 20.0p 3,750,000
----------------------- ----------------- --------------- -------------------
Total Board Directors 10,304,508
----------------------- ----------------- --------------- -------------------
Other staff 24p -- 1,676,275
----------------------- ----------------- --------------- -------------------
Other staff nil -- 1,197,946
----------------------- ----------------- --------------- -------------------
Other staff -- 27.5p 98,835
----------------------- ----------------- --------------- -------------------
Other staff -- 24.75p 1,500,000
----------------------- ----------------- --------------- -------------------
Total other staff 4,473,056
----------------------- ----------------- --------------- -------------------
Total 14,777,564
----------------------- ----------------- --------------- -------------------
During the period 20 November 2013 to 31 December 2013 the
following movements occurred with respect to the share option
schemes:
At 20
Type of Share November Awards Forfeited At 31 December
Option Scheme Price Awarded Exercisable 2013 in period in period 2013
(pence) (Date) (Number) (Number) (Number) (Number)
HMRC approved 27.5 23/07/2008 22/07/2011--22/07/2018 67,400 -- (28,000) 39,400
HMRC approved 27.5 28/07/2010 22/07/2013--22/07/2020 31,435 -- (10,182) 21,253
HMRC approved 24.75 01/05/2013 01/05/2016--30/04/2023 121,212-- -- -- 121,212
HMRC approved 20.13 20/11/2013 20/11/2016--20/11/2023 -- 14,771,322 (1,276,503) 13,494,819
Unapproved 24.75 01/05/2013 01/05/2015--30/04/2023 1,378,788 -- -- 1,378,788
Unapproved 20.0 24/09/2012 24/09/2015--24/09/2022 3,750,000 -- (3,750,000) --
Unapproved 27.5 23/07/2008 22/07/2010--22/07/2018 250,000 -- -- 250,000
Unapproved 20.13 20/11/2013 20/11/2015--20/11/2023 -- 3,870,285 -- 3,870,285
Modified scheme nil 20/11/2013 20/11/2014--20/11/2020 1,197,946 -- (39,108) 1,158,838
Modified scheme 24.0 20/11/2013 20/11/2014--20/11/2020 7,980,783 -- (698,448)-- 7,282,335
---------- ----------- ----------- ----------------
Total 14,777,564 18,641,607 (5,802,241) 27,616,930
---------- ----------- ----------- ----------------
The total amount charged to the Statement of Comprehensive
Income for 2013 in relation to share based payments is GBP67k
(2012: GBP244k).
11. Finance costs
2013 2012
GBP 000's GBP 000's
------------------ ------------------
Bank borrowings (663) (735)
Unwinding of discount on deferred consideration (487) (1,168)
Other interest expense (35) (70)
------------------ ------------------
Total finance costs (1,185) (1,973)
------------------ ------------------
Other interest received 42 46
Net finance costs (1,143) (1,927)
------------------ ------------------
Bank interest relating to finance of loan book
(included within cost of sales) 662 683
Net finance costs as per income statement (481) (1,244)
------------------ ------------------
12. Earnings per share
The post tax earnings, all of which relate to continuing
operations in the year, and weighted average number of ordinary
shares used in the calculation of basic and diluted earnings per
share are as follows:
2013 2012
GBP000's GBP000's
Retained profit for the year 7,700 12,684
Weighted average number of shares Number Number
in issue
Issued ordinary shares at 1 January 456,274,109 456,274,109
Basic
---------------------- ----------------------
Weighted average number of shares
in issue 31 December 456,274,109 456,274,109
Effect of share options on weighted 3,312,803 -
average
Diluted
---------------------- ----------------------
Weighted average number of shares
in issue 31 December 459,586,912 456,274,109
---------------------- ----------------------
Basic earnings per share 1.69p 2.78p
Diluted earnings per share 1.68p 2.78p
Basic earnings per share is calculated by dividing the total
comprehensive income for the period attributable to the owners of
the parent by the weighted average number of ordinary shares in
issue during the period.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all potentially dilutive ordinary shares.
In accordance with IAS 33 there are no potentially dilutive
effects on the earnings per share calculation in 2012 as the
average market price of ordinary shares in the Brightside Group
during the period was below the exercise price of the outstanding
share options granted.
13. Income tax expense
2013 2012
GBP 000's GBP 000's
------------------ ------------------
Current Tax
Current tax on profits in period 2,763 4,726
Adjustments in respect of prior periods 267 (291)
------------------ ------------------
3,030 4,435
Deferred Tax (note 25)
Origination and reversal of temporary differences 320 422
Effect of changes in tax rate 129 -
Tax charge for the year 3,479 4,857
------------------ ------------------
Taxation differs from the standard rate of corporation tax in
the UK of 23.25% (2012 : 24.50%) as applied to the profits as
explained below:
2013 2012
GBP 000's GBP 000's
------------------- ------------------
Profit before taxation 11,179 17,541
------------------- ------------------
Profit on ordinary activities multiplied by the
average standard rate of corporation taxation
of 23.25% (2012 : 24.50%) 2,599 4,300
Effects of:
Amounts not deductible for tax purposes 420 716
Utilisation of losses (248) (375)
Origination and reversal of temporary differences 320 422
Effect of changes in tax rate 129 -
Adjustments in respect of prior periods 267 (291)
Difference between capital allowances and depreciation 33 -
Short term temporary differences - 82
Utilisation of tax losses and credits (group relief) (2) 24
Unused tax credit losses and credits (39) (21)
------------------- ------------------
Tax charge for the year 3,479 4,857
------------------- ------------------
The Finance Act 2013 reduced the main rate of corporation tax
from 24% to 23% from 1 April 2013. Accordingly, the Group's profits
for this accounting period are taxed at an effective rate of
23.25%. The Act also included legislation to further reduce the
main rate to 21% from 1 April 2014 and 20% from 1 April 2015.
14. Segment information
Business segments (primary segment)
Operating segments
IFRS 8 requires operating segments to be determined based on the
Group's internal reporting to the Chief Operating decision maker
which is used to allocate resources to segments and to assess
performance. The Chief Operating decision maker has been identified
as the Board of Directors. The Board of Directors review the
Group's consolidated management accounts in order to assess the
operational performance of the Group's operating segments.
Monthly management accounts are prepared for each statutory
entity within the Group. These are subsequently consolidated to
form monthly management accounts for the combined Group. The
information contained within the consolidated management accounts
includes a Statement of Comprehensive Income, Balance Sheet, Cash
Flow Statement and other supporting schedules, broken down by
statutory entity within the Group.
To assess the performance of the individual operating segments
and for the purpose of strategic decision making, the Board of
Directors will consider a number of different measures of
operational achievement including revenue growth, profit after tax,
profit before tax and profit before interest, tax, non cash
expenses and exceptional items.
Management considers that the Group operates within the
following distinct operating segments, offline insurance broking,
online insurance broking, the provision of premium finance, the
provision of medical reporting, lead generation and debt
management, and software and web services.
Whilst the Group operates from a number of different
geographical locations, these locations all provide services to
customers across the UK irrespective of their geographical
location. Therefore it has not been deemed appropriate to provide
segmental analysis on a geographical basis.
The operating segments within the Group primarily trade with
customers external to the Group, however the lead generation and
premium finance functions also trade with other Group companies.
Whilst information provided within the individual management
accounts is presented on a gross basis, any intra Group trading is
excluded from the consolidated management accounts through
consolidation adjustments. The revenue figures reported in the
segmental analysis have been prepared showing the net revenue
figure.
In the segmental analysis, the intangibles balance on the
balance sheet has been split between goodwill and intangibles.
Intangibles represents balances generated on acquisition, computer
software and licences, and assets in course of construction. In the
prior year financial accounts, goodwill was included within the
intangibles balance. Note 15 provides a detailed split of goodwill
and intangibles. As management consider each balance individually
for impairment and value in use, the current split between segments
is a clearer representation of the individual balances. The prior
year figures have been restated to move GBP31,290k from offline
insurance broking to online insurance broking, GBP30,953k
representing the goodwill on the acquisitions of eCar, eBike and
eVan. GBP4,449k has been restated in the prior year from Lead
Generation and Debt Management to Software and Web Services
representing the intangible balance specific to the eSystem.
Offline Online Insurance Finance Medical Lead Generation Software All other Consolidated
Insurance Broking Provider Reporting and Debt and Web Services segments
Broking Management
----------------------- ------------------------ -------------------------- ------------------------- ------------------------- ------------------------ ------------------------ -----------------------
2012 2012 2012 2012
2013 Restated 2013 Restated 2013 2012 2013 2012 2013 Restated 2013 Restated 2013 2012 2013 2012
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
000's 000's 000's 000's 000's 000's 000's 000's 000's 000's 000's 000's 000's 000's 000's 000's
----------- ---------- ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total net
revenue 26,494 26,347 27,684 27,519 15,803 19,355 12,058 11,551 2,510 2,189 3,915 3,711 149 569 88,613 91,241
----------- ---------- ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------
Operating
profit 3,549 3,854 3,349 6,091 6,140 7,297 1,113 2,475 742 633 3,897 2,422 587 400 19,377 23,172
Share based
payments
charge (46) (166) (9) (35) (7) (27) (5) (16) - - - - - - (67) (244)
Depreciation (217) (108) (103) (66) (23) (8) (86) (34) (11) - (60) (155) (97) (31) (597) (402)
Amortisation (441) (417) (1,398) (564) (22) (56) (87) (35) - - (3,230) (892) (1,213) (1,093) (6,391) (3,057)
Net financing
costs (7) (119) (479) (1,229) (618) (488) (37) (48) (2) (4) - (40) - - (1,143) (1,928)
Profit for
the
period
before
tax 2,838 3,044 1,360 4,197 5,470 6,718 898 2,342 729 629 607 1,335 (723) (724) 11,179 17,541
Segment
current
assets 2,861 6,261 - - 26,338 35,932 12,357 12,995 121 9,448 - - 15 461 41,692 65,097
Property,
plant
and
equipment 348 323 - - 30 6 145 118 510 802 - - 3,259 3,016 4,292 4,265
Goodwill 2,203 2,203 30,953 30,953 - - 5,171 5,171 5,408 5,408 - - - - 43,735 43,735
Intangibles 666 1,370 3,939 337 113 30 213 103 20,253 17,295 9,977 4,449 - - 35,161 23,584
Total assets
excluding
tax 6,078 10,157 34,892 31,290 26,481 35,968 17,886 18,387 26,292 32,953 9,977 4,449 3,274 3,477 124,880 136,681
----------- ---------- ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total
liabilities
excluding
tax 557 7,715 - - 23,791 15,845 2,999 2,640 12,102 29,135 - - - 324 39,449 55,659
----------- ---------- ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------
15. Intangible assets
Consolidated
----------------------------------------------------------------------------------------
Computer
Other Software
Goodwill Intangibles and Licences AICC Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
-------------- ---------------- ------------------- ------------ ------------------
Cost
Opening balance as at 1
January
2013 45,621 15,260 18,036 4,703 83,620
Additions - 12,522 1,455 4,002 17,979
Transfers - - 6,858 (6,858) -
Disposals - - (12) - (12)
Balance at 31 December 2013
31 December 2013 45,621 27,782 26,337 1,847 101,587
-------------- ---------------- ------------------- ------------ ------------------
Amortisation and
impairment
losses
Opening balance as at 1
January
2013 (1,886) (9,586) (4,829) - (16,301)
Amortisation - (4,115) (2,276) - (6,391)
Disposals - - 1 - 1
Balance at 31 December 2013
31 December 2013 (1,886) (13,701) (7,104) - (22,691)
-------------- ---------------- ------------------- ------------ ------------------
Net book value
At 31 December 2012 01
January
2013 43,735 5,674 13,207 4,703 67,319
-------------- ---------------- ------------------- ------------ ------------------
At 31 December 2013 31
December
2013 43,735 14,081 19,233 1,847 78,896
-------------- ---------------- ------------------- ------------ ------------------
Consolidated
-----------------------------------------------------------------------------------
Computer
Other Software
Goodwill Intangibles and Licences AICC Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
-------------- ---------------- ----------------- ------------ ---------------
Cost
Opening balance at 1 January
2012 45,621 15,260 14,653 2,963 78,497
Additions - - 420 4,703 5,123
Transfers - - 2,963 (2,963) -
Balance at 31 December 2012
31 December 2012 45,621 15,260 18,036 4,703 83,620
-------------- ---------------- ----------------- ------------ ---------------
Amortisation and impairment
losses
Opening balance as at 1 January
2012 (1,886) (7,929) (3,429) - (13,244)
Amortisation - (1,657) (1,400) - (3,057)
Balance at 31 December 2012
31 December 2012 (1,886) (9,586) (4,829) - (16,301)
-------------- ---------------- ----------------- ------------ ---------------
Net book value
At 31 December 2011 43,735 7,331 11,224 2,963 65,253
-------------- ---------------- ----------------- ------------ ---------------
At 31 December 2012 43,735 5,674 13,207 4,703 67,319
-------------- ---------------- ----------------- ------------ ---------------
Company
----------------------------------------------------------------------------
Computer
Other Software
Goodwill Intangibles and Licences AICC Total
GBP000's GBP000's GBP000's GBP000's GBP000's
-------------- ---------------- ------------- --------- ---------------
Cost
Opening balance as at 1 January
2013 33,156 6,068 - - 39,224
Balance at 31 December 2013 33,156 6,068 - - 39,224
-------------- ---------------- ------------- --------- ---------------
Amortisation and impairment
losses
Opening balance as at 1 January
2013 - (4,230) - - (4,230)
Amortisation - (208) - - (208)
Balance at 31 December 2013 - (4,438) - - (4,438)
-------------- ---------------- ------------- --------- ---------------
Net book value
At 31 December 2012 33,156 1,838 - - 34,994
-------------- ---------------- ------------- --------- ---------------
At 31 December 2013 33,156 1,630 - - 34,786
-------------- ---------------- ------------- --------- ---------------
Company
---------------------------------------------------------------------------------
Computer
Other Software
Goodwill Intangibles and Licences AICC Total
GBP000's GBP000's GBP000's GBP000's GBP000's
-------------- ---------------- ----------------- --------- ----------------
Cost
Opening balance as at 1 January
2012 33,156 6,068 736 - 39,960
Disposals - - (736) - (736)
Balance at 31 December 2012 33,156 6,068 - - 39,224
-------------- ---------------- ----------------- --------- ----------------
Amortisation and impairment
losses
Opening balance as at 1 January
2012 - (3,666) (237) - (3,903)
Amortisation - (564) - - (564)
Intra--group transfer - - 237 - 237
Disposals - - - - -
Balance at 31 December 2012 - (4,230) - - (4,230)
-------------- ---------------- ----------------- --------- ----------------
Net book value
At 31 December 2011 33,156 2,402 499 - 36,057
-------------- ---------------- ----------------- --------- ----------------
At 31 December 2012 33,156 1,838 - - 34,994
-------------- ---------------- ----------------- --------- ----------------
The amortisation charge for 2013 and 2012 has been included
within administrative expenses in the Statement of Comprehensive
Income.
Detailed below is a breakdown of the Other Intangibles
balances.
Consolidated
---------------------------------------------------------------------------
Net Book
Cost Amortisation Value
GBP000's GBP000's GBP000's
---------------------- --------------------- ------------------------
At 1 January 2012
Database of experts 1,189 (1,189) -
Policy books 6,976 (6,076) 900
Intangible balance resulting from
reverse acquisition 107 - 107
Aggregator software 2,169 (664) 1,505
On--line insurance broking system 4,819 - 4,819
---------------------- --------------------- ------------------------
Total 15,260 (7,929) 7,331
---------------------- --------------------- ------------------------
At 31 December 2012
Database of experts 1,189 (1,189) -
Policy books 6,976 (6,640) 336
Intangible balance resulting from
reverse acquisition 107 - 107
Aggegator software 2,169 (1,387) 782
On--line insurance broking system 4,819 (370) 4,449
---------------------- --------------------- ------------------------
Total 15,260 (9,586) 5,674
---------------------- --------------------- ------------------------
At 31 December 2013
Database of experts 1,189 (1,189) -
Policy books 6,976 (6,848) 128
Intangible balance resulting from
reverse acquisition 107 - 107
Aggregator software 2,169 (2,110) 59
Affinity policy book fees 5,000 (1,190) 3,810
On--line insurance broking system 4,819 (860) 3,959
Rights to Affinity fees 7,522 (1,504) 6,018
---------------------- --------------------- ------------------------
Total 27,782 (13,701) 14,081
---------------------- --------------------- ------------------------
Company
----------------------------------------------------------------------------------
Net Book
Cost Amortisation Value
GBP000's GBP000's GBP000's
---------------------- --------------------- ------------------------
At 1 January 2012
Database of experts - - -
Policy books 4,539 (3,666) 873
Intangible balance resulting from
reverse acquisition 1,529 - 1,529
Aggregator software - - -
On--line insurance broking system - - -
---------------------- --------------------- ------------------------
Total 6,068 (3,666) 2,402
---------------------- --------------------- ------------------------
At 31 December 2012
Database of experts - - -
Policy books 4,539 (4,230) 309
Intangible balance resulting from
reverse acquisition 1,529 - 1,529
Aggegator software - - -
On--line insurance broking system - - -
---------------------- --------------------- ------------------------
Total 6,068 (4,230) 1,838
---------------------- --------------------- ------------------------
At 31 December 2013
Database of experts - - -
Policy books 4,539 (4,438) 101
Intangible balance resulting from
reverse acquisition 1,529 - 1,529
Aggregator software - - -
Affinity policy book fees - - -
On--line insurance broking system - - -
Rights to Affinity fees - - -
---------------------- --------------------- ------------------------
Total 6,068 (4,438) 1,630
---------------------- --------------------- ------------------------
15. Intangible assets continued
Details concerning the movements in intangible assets and the
split of 'Other Intangibles' are provided in this note. Other
Intangible assets detailed below also includes Computer Software
and Licences, and AICC.
The intangible asset additions in 2012 relate to the
following:
Other Intangible 2012
Assets Goodwill Total
GBP000's GBP000's GBP000's
--------------------- ------------- --------------------
Computer Software and licences
Software platform 3,383 3,383
AICC
Assets in course of construction 1,740 - 1,740
--------------------- ------------- --------------------
Total 5,123 - 5,123
--------------------- ------------- --------------------
The intangible asset additions in 2013 relate to the
following:
Other Intangible 2012
Assets Goodwill Total
GBP000's GBP000's GBP000's
--------------------- ------------- --------------------
Other intangibles
Affinity policy book fees 5,000 5,000
Rights to Affinity fees 7,522 7,522
Computer Software and Licences
Software platform 1,455 - 1,455
AICC
Assets in course of construction 4,002 - 4,002
--------------------- ------------- --------------------
Total 17,979 - 17,979
--------------------- ------------- --------------------
Affinity policy book fees
The Group purchased the renewal and forward marketing rights of
an affinity partner, previously serviced as a direct write product
of Southern Rock, for GBP5m. This purchase secured the renewal
rights to a book of 75,000 policies.
Rights to Affinity fees
The Group purchased the rights to the Asda mid--term adjustment
and cancellation fees in perpetuity from Sothern Rock Management
Services ( SRMS) for GBP7.5m. As part of this agreement SRMS
undertakes to make scheduled payments to third parties ( including
a Brightside director, Christopher Fay) who provided them loan
finance for the purposes of obtaining and developing the E--system
platform currently used by the Group.
15. Intangible assets continued
Assets in Course of Construction (AICC)
The AICC relates to the development of the E--System asset.
During the year any increases in AICC relate to the ongoing system
development work, yet to be completed. As the system development
work is completed the asset is transferred to software.
Impairment tests for goodwill
Goodwill is allocated to the Group's cash generating units
identified according to operating segment. The carrying values of
goodwill are as follows:
-- arising on acquisition of Injury QED Limited GBP5,171k
-- arising on acquisition of Brightside Group plc GBP3,525k
-- arising on acquisition of minority interests in insurance broking business GBP2,203k
-- arising on acquisition of eVan business GBP3,455k
-- arising on acquisition of eCar business GBP24,284k
-- arising on acquisition of eBike business GBP3,214k
-- arising on acquisition of Quote Exchange business
GBP1,661k
-- arising on acquisition of eDevelopment business GBP222k
The recoverable amount is determined on the basis of value in
use calculations. These calculations use pre tax cash flow
projections based on financial budgets approved by management
covering the five year period ended 31 December 2018.
The key assumptions used to prepare the financial budgets are as
follows:
Acquisition of Injury QED Limited
-- growth rate of new instructions received; and
-- average net income per instruction received.
Acquisition of Brightside Group plc
-- growth in leads generated through the lead generation activities; and
-- average income per lead generated.
15. Intangible assets continued
Acquisition of Minority Interest in CVD Commercial Insurance
Services Limited, Motor and Home Direct Insurance Services Limited
and Taxi Direct Insurance Services Limited.
-- growth of new policy quotes;
-- new policy quote to sale conversion rate;
-- renewal retention rate; and
-- income per policy sold.
Acquisition of eVan, eCar and eBike businesses
-- growth of new policy quotes;
-- new policy quote to sale conversion rate;
-- renewal retention rate; and
-- income per policy sold.
Acquisition of Quote Exchange business
-- growth rate of new business received for its software and web services;
-- average net commission received; and
-- average contract rates.
Acquisition of eDevelopment Limited business
-- average utilisation rates of its developers; and
-- average income per head.
The key assumptions used to prepare the financial budgets are
based on historical experience, which includes the Group's actual
achievement against budget. Other information relating to current
trading performance, which includes business statistics produced on
a daily and monthly basis, allow projections to be based on the
most up to date information. Projections are also based on current
industry knowledge and trends.
The cash flow forecasts used in the value in use calculations
have been extended beyond the five year period covered by
management's financial forecasts over the remaining useful life
using a nil growth rate. A discount rate of 8.18% has been applied
to all cash flow projections.
From the annual impairment review of the goodwill balances
relating to the acquisition of Injury QED Limited, the acquisition
of the Brightside Group plc, the acquisition of minority interest
in the Group's broking business, the acquisition of the eVan and
eBike businesses, the acquisition of the Quote Exchange Limited
business and the acquisition of the eDevelopment Limited business,
no reasonably possible changes in key assumptions were identified
which would result in the goodwill balance exceeding the
recoverable amount.
For the acquisition of eCar, which represents 55.53% of the
goodwill balance for the Group, the value in use exceeds the
carrying value of the cash generating unit by approximately
GBP79.8m. An increase in the discount rate from 8.18% to a revised
assumption of 28.83% or more would cause the recoverable amount to
fall below the carrying value.
16. Deferred consideration movement
eCar eBike eSystems Total
GBP000's GBP000's GBP000's GBP000's
-------- ------------- ------------- -----------------
As at 1 January 2012 15,372 1,446 1,000 17,818
Unwinding of discount on deferred
consideration 1,114 54 -- 1,168
Payment of deferred consideration -- (1,500) (1,000) (2,500)
-------- ------------- ------------- -----------------
As at 31 December 2012 16,486 -- -- 16,486
-------- ------------- ------------- -----------------
Unwinding of discount on deferred
consideration 487 -- -- 487
Payment of deferred consideration (16,973) -- -- (16,973)
-------- ------------- ------------- -----------------
As at 31 December 2013 -- -- -- --
-------- ------------- ------------- -----------------
17. Investments in subsidiary undertakings
Company
2013 2012
GBP000's GBP000's
-------------------- ---------------------
Shares in Group undertakings
At 1 January 87,013 87,079
Intragroup transfer of investments 429 -
Reduction in subsidiary share capital - (64)
Intragroup transfer of shares - (2)
-------------------- ---------------------
At 31 December 87,442 87,013
-------------------- ---------------------
Investments in Group undertakings are stated at cost.
18. Property, plant and equipment
The depreciation charge for 2013 and 2012 has been included
within administrative expenses in the Consolidated Statement of
Comprehensive Income.
Consolidated
-------------------------------------------------------------------------------------------------------
Fixtures,
Fittings Motor
Property and Equipment Vehicles IT Hardware Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
---------------------- -------------------- ----------------- ----------------- ------------------
Cost
Opening
balance at 1
January
2013 3,000 1,295 73 1,562 5,930
Additions 6 508 - 574 1,088
Disposals - (38) - (463) (501)
Balance at 31
December 2013
31 December
2013 3,006 1,765 73 1,673 6,517
---------------------- -------------------- ----------------- ----------------- ------------------
Depreciation
and
impairment
losses
Opening
balance at 1
January
2013 (31) (560) (31) (1,043) (1,665)
Depreciation (38) (277) (17) (265) (597)
Disposals - 2 - 35 37
Balance at 31
December 2013
31 December
2013 (69) (835) (48) (1,273) (2,225)
---------------------- -------------------- ----------------- ----------------- ------------------
Net book
value
At 31 December
2012 2,969 735 42 519 4,265
---------------------- -------------------- ----------------- ----------------- ------------------
At 31 December
2013 2,937 930 25 400 4,292
---------------------- -------------------- ----------------- ----------------- ------------------
Consolidated
-----------------------------------------------------------------------------------------------------
Fixtures,
Fittings Motor
Property and Equipment Vehicles IT Hardware Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
--------------------- ------------------- ----------------- ----------------- ------------------
Cost
Opening
balance as at
1 January
2012 - 1,229 73 1,521 2,823
Additions 3,000 157 - 620 3,777
Disposals - (91) - (579) (670)
Balance at 31
December 2012
31 December
2012 3,000 1,295 73 1,562 5,930
--------------------- ------------------- ----------------- ----------------- ------------------
Depreciation
and
impairment
losses
Opening
balance as at
1 January
2012 - (439) (13) (896) (1,348)
Depreciation (31) (132) (18) (221) (402)
Disposals - 11 - 74 85
Balance at 31
December
201231
December 2012 (31) (560) (31) (1,043) (1,665)
--------------------- ------------------- ----------------- ----------------- ------------------
Net book
value
At 31 December
2011 - 790 60 625 1,475
--------------------- ------------------- ----------------- ----------------- ------------------
At 31 December
2012 2,969 735 42 519 4,265
--------------------- ------------------- ----------------- ----------------- ------------------
As at 31 December 2013 the Company held no property, plant and
equipment. The Company held no property, plant and equipment as at
31 December 2012, and no additions occurred during 2013.
Company
----------------------------------------------------------------------------------------------------
Fixtures,
Fittings Motor
Property and Equipment Vehicles IT Hardware Total
GBP000's GBP000's GBP000's GBP000's GBP000's
------------- --------------------- ---------------------- ----------------- -----------------
Cost
Opening balance as at 1
January
2012 - 597 51 362 1,010
Disposals - (597) (51) (362) (1,010)
----------------- --------------------- ---------------------- ----------------- -----------------
Balance at 31 December
2012 - - - - -
------------- --------------------- ---------------------- ----------------- -----------------
Depreciation and
impairment
losses
Opening balance as at 1
January
2012 - (58) (2) (123) (183)
Disposals - 58 2 123 183
----------------- --------------------- ---------------------- ----------------- -----------------
Balance at 31 December
2012 - - - - -
------------- --------------------- ---------------------- ----------------- -----------------
Net book value
At 31 December 2011 - 539 49 239 827
----------------- --------------------- ---------------------- ----------------- -----------------
At 31 December 2012 - - - - -
------------- --------------------- ---------------------- ----------------- -----------------
19. Trade and other receivables
Consolidated Company
------------------------------------------------- ----------------------------------------------------
2013 2012 2013 2012
GBP 000's GBP 000's GBP 000's GBP 000's
-------------------- ------------------------- ---------------------------- ---------------------
Loans and advances due from
clients 25,225 35,555 - -
Prepayments and accrued
income 2,263 2,881 - -
Receivables from Group
undertakings - - 11,792 6,043
Receivables from related
parties
on medical reporting 7,295 10,355 - -
Receivable from other
related
parties - 1,723 - -
Other receivables 6,364 8,305 29 -
Less: provision for
impairment
of receivables (1,752) (1,534) - -
-------------------- ------------------------- ---------------------------- ---------------------
39,395 57,285 11,821 6,043
-------------------- ------------------------- ---------------------------- ---------------------
Current portion 39,395 57,285 11,821 6,043
-------------------- ------------------------- ---------------------------- ---------------------
The Directors consider that the carrying value of trade and
other receivables approximates their fair value.
At 31 December 2013, trade receivables of GBP1,480k (2012 :
GBP1,117k) were past due but not impaired. These relate to a number
of individual customers for whom there is no history of default.
The ageing analysis of these trade receivables is as follows:
2013 2012
GBP 000's GBP 000's
----------------- ------------------
Up to one month 247 347
Up to two months 165 130
Up to three months 188 75
Over three months 880 565
----------------- ------------------
Total 1,480 1,117
----------------- ------------------
The creation and release of a provision for impaired trade
receivables has been included in 'administrative expenses' in the
Consolidated Statement of Comprehensive Income.
Movements on the Group provision for impairment of trade
receivables are as follows:
2013 2012
GBP 000's GBP 000's
----------------- ------------------
At 1 January 1,534 477
Provision for receivables impairment 327 1,057
Unused amounts reversed (109) -
----------------- ------------------
At 31 December 1,752 1,534
----------------- ------------------
The other classes within trade and other receivables do not contain
impaired assets.
20. Cash and cash equivalents
Consolidated Company
------------------------------------- --------------------------------------
2013 2012 2013 2012
GBP000's GBP000's GBP000's GBP000's
----------------- ----------------- ----------------- ------------------
Current accounts 1,535 6,227 - -
Client accounts 762 1,585 - -
----------------- ----------------- ----------------- ------------------
Total 2,297 7,812 - -
----------------- ----------------- ----------------- ------------------
The client account balances cannot be utilised by the Group for
general purposes.
21. Borrowings
Consolidated Company
-------------------------------------- -----------------------
2013 2012 2013 2012
GBP000's GBP000's GBP000's GBP000's
----------------- ------------------ ---------- ----------
Non current borrowings
Other loans 204 338 - -
Total non current borrowings 204 338 - -
----------------- ------------------ ---------- ----------
Current borrowings
Other loans 548 409 - -
Bank borrowings 20,500 17,500 - -
----------------- ------------------ ---------- ----------
Total current borrowings to
support premium finance loan
book 20,500 17,500 - -
----------------- ------------------ ---------- ----------
Total current borrowings 21,048 17,909 - -
----------------- ------------------ ---------- ----------
Total borrowings 21,252 18,247 - -
----------------- ------------------ ---------- ----------
The bank borrowings bear interest at the rate offered by the
bank to leading banks in the London Interbank Market (LIBOR rate)
plus 2.25%.
The Group pays the bank a fee computed at the rate of 1.125% per
annum on the available commitment for the availability period.
The bank borrowings are secured by a fixed and floating charge
over all of the current and future assets of the Company and all
other Group companies. They are also secured by the assignment over
a life policy relating to P S Chase--Gardener.
The fair value of bank borrowings and other loans equals their
carrying amount, as the impact of discounting is not considered
material.
All bank borrowings are denominated in pounds sterling.
The Group had undrawn borrowing facilities at 31 December 2013
of GBP9.5m (2012 : GBP12.5m).
Bank overdrafts, borrowings and other loans
Consolidated Company
------------------------------------------ ----------------------------
2013 2012 2013 2012
GBP000's GBP000's GBP000's GBP000's
------------------ ------------------ --------------- ----------
Amounts falling due within
one year or on demand
Bank borrowings 20,500 17,500 - -
Other loans 548 409 - -
------------------ ------------------ --------------- ----------
Amounts falling due between
one and two years
Other loans 204 338 - -
Total 21,252 18,247 - -
------------------ ------------------ --------------- ----------
22. Trade and other payables
Consolidated Company
------------------------------------------ ----------------------------
2013 2012 2013 2012
GBP 000's GBP 000's GBP 000's GBP 000's
------------------ ------------------ --------------- ----------
Trade payables 12,017 6,449 - -
Payable to related parties 56 3,927 - -
Payable to Group undertakings - - 16,795 -
Tax and social security costs 659 1,413 - -
Accruals and deferred income 5,413 8,961 - -
Total trade and other payables 18,145 20,750 16,795 -
------------------ ------------------ --------------- ----------
The Directors consider that the carrying value of trade and
other payables approximate their fair value.
See note 29 for details of payables to related parties.
23. Financial instruments
Consolidated Company
-------------------------------------------------------------- ----------------------------------------
Premium
Finance Loans and Loans and
loan book receivables Total receivables Total
GBP000's GBP000's GBP000's GBP000's GBP000's
------------------ ------------------- -------------------- ------------------ -------------------
31 December 2013
Assets as per balance
sheet
Trade and other
receivables
excluding prepayments 25,225 11,907 37,132 11,821 11,821
Cash and cash
equivalents - 2,297 2,297 - -
------------------ ------------------- -------------------- ------------------ -------------------
Total 25,225 14,204 39,429 11,821 11,821
------------------ ------------------- -------------------- ------------------ -------------------
Consolidated Company
-------------------------------------------------------------- -----------------------------------------
Premium
Finance Loans and Loans and
loan book receivables Total receivables Total
GBP000's GBP000's GBP000's GBP000's GBP000's
------------------ ------------------- -------------------- ------------------- --------------------
31 December
2012
Assets as
per balance
sheet
Trade and
other
receivables
excluding
prepayments 35,555 18,849 54,404 6,043 6,043
Cash and cash
equivalents - 7,812 7,812 - -
------------------ ------------------- -------------------- ------------------- --------------------
Total 35,555 26,661 62,216 6,043 6,043
------------------ ------------------- -------------------- ------------------- --------------------
Consolidated Company
------------------------------------------- -----------------------------------------
Other Other
financial financial
Liabilities liabilities Liabilities liabilities
at fair at amortised at fair at amortised
value cost Total value cost Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------ ------------- ------------- ----------- ------------- -------------
31 December 2013
Liabilities as per balance
sheet
Trade and other payables
excluding statutory
liabilities - 17,486 17,486 - 16,795 16,795
Borrowings - 21,252 21,252 - - -
----------- ------------- ------------- ----------- ------------- -------------
Total - 38,738 38,738 - 16,795 16,795
----------- ------------- ------------- ----------- ------------- -------------
Consolidated Company
-------------------------------------------- -----------------------------------------
Other
Other financial
financial liabilities
Liabilities liabilities Liabilities at
at fair at amortised at fair amortised
value cost Total value cost Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------- ------------- ------------- ------------- ----------- -------------
31 December 2012
Liabilities as per
balance
sheet
Trade and other payables
excluding statutory
liabilities - 19,337 19,337 - - -
Deferred consideration 16,486 - 16,486 16,486 - 16,486
Borrowings - 18,247 18,247 - - -
------------- ------------- ------------- ------------- ----------- -------------
Total 16,486 37,584 54,070 16,486 - 16,486
------------- ------------- ------------- ------------- ----------- -------------
24. Provisions for other liabilities and charges
Analysis of total provisions Consolidated
2013 2012
GBP000's GBP000's
------------------ ------------------
Non--current 17 31
Current 35 145
Total 52 176
------------------ ------------------
The movement in provisions for other liabilities and charges
during the year is as follows:
Lapse provision Total
GBP000's GBP000's
------------------ -----------------
At 1 January 2013 176 176
Provision released to Statement of Comprehensive
Income (124) -
At 31 December 2013 52 176
------------------ -----------------
Following our decision to scale back our life insurance
business, the sale of new policies ceased in 2012. This provision
provides for the future lapse/cancellations where we would be
required to pay back commission.
The Company has a continuing joint and several liability to H M
Revenue and Customs under the Group registration for VAT.
25. Deferred tax
Consolidated Company
-------------------------------------- --------------------------------
2013 2012 2013 2012
GBP000's GBP000's GBP000's GBP000's
----------------- ------------------ ---------- -------------------
Deferred tax assets
Deferred tax asset to be recovered
after more than 12 months 689 1,130 - -
Deferred tax asset to be recovered
within 12 months 162 168 - 1
Total 851 1,298 - 1
----------------- ------------------ ---------- -------------------
The gross movement on the deferred tax account is as
follows:
Consolidated Company
-------------------------------------- ---------------------------------------
2013 2012 2013 2012
GBP000's GBP000's GBP000's GBP000's
----------------- ------------------ ------------------ -------------------
At 1 January 1,298 1,364 1 53
Credited/(Charged) to Statement
of Comprehensive Income (447) (66) (1) (52)
At 31 December 851 1,298 - 1
----------------- ------------------ ------------------ -------------------
Consolidated Company
----------------------------------------------------------------------------- --------------------------------------
Adjustments Unutilised
to tax rate historic
Accelerated on opening trading Temporary
tax depreciation balances losses Total differences Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------------ ----------------------- --------------- -------------- -------------------- ----------------
At 1 January
2012 299 (65) 1,130 1,364 53 53
Charged to
Statement
of
Comprehensive
Income 178 65 (309) (66) (52) (52)
At 31 December
2012 477 - 821 1,298 1 1
Charged to the
Statement
of
Comprehensive
income (103) (129) (215) (447) (1) (1)
At 31 December
2013 374 (129) 606 851 - -
------------------ ----------------------- --------------- -------------- -------------------- ----------------
The unutilised historic trading losses were incurred by David
& Co. Consultants Limited. Management forecasts are that lead
generation trade will generate profits for the foreseeable future,
and the asset will therefore be utilised against these profits in
future years.
26. Share capital and premium
Share capital
2013 2012
GBP 000's GBP 000's
----------------- -----------------
Allotted, called up and fully paid
456,274,109 (2012: 456,274,109) ordinary shares
of GBP0.01 each 4,563 4,563
----------------- -----------------
The Company has ceased to have authorised share capital. As at
31 December 2013 the share capital is unlimited.
Ordinary shares carry one vote per share and carry the right to
receive dividends when declared. They rank pari passu with each
other in all respects including receipt of dividends and proceeds
on the winding up of the Company.
At 31 December 2013, directors and employees held outstanding
options over 27,616,930 ordinary shares of the Company. These
options will be satisfied from unissued share capital.
Share premium
2013 2012
GBP000's GBP000's
---------------- ----------------
At 1 January 28,339 28,339
At 31 December 28,339 28,339
---------------- ----------------
Share Movements
During the year there was no movement in share capital and
premium:
Share Share
Capital Premium Shares
GBP000's GBP000's No.
-------------------- ------------- -----------------
At 31 December 2011 4,563 28,339 456,274,109
-------------------- ------------- -----------------
At 31 December 2012 4,563 28,339 456,274,109
-------------------- ------------- -----------------
At 31 December 2013 4,563 28,339 456,274,109
-------------------- ------------- -----------------
27. Cash generated from/(used in) operations
Consolidated Company
------------------------------------------- -----------------------------------------
2013 2012 2013 2012
GBP000's GBP000's GBP000's GBP000's
----------------- ----------------------- --------------------- -----------------
Profit/(Loss) before income
tax 11,179 17,541 (4,097) (4,669)
Adjustments for:
Depreciation 597 402 - -
Amortisation of intangible
assets 6,391 3,057 208 564
Share based payments expense 67 244 67 244
Finance charges -- net 481 1,244 - 1,168
----------------- ----------------------- --------------------- -----------------
Adjustments for non--cash
items 7,536 4,947 275 1,976
----------------- ----------------------- --------------------- -----------------
EBITDA (see Note 7) 18,715 22,488 (3,822) (2,693)
----------------- ----------------------- --------------------- -----------------
Other adjustments for
non--cash
items
Loss/(Profit) on disposal of
property, plant and
equipment 12 (72) - -
Changes in working capital
Trade and other receivables 7,560 (3,843) 3,513 32,514
Trade and other payables (2,823) 487 309 (33,208)
Cash generated from/(used in)
operations 23,464 19,060 - (3,387)
----------------- ----------------------- --------------------- -----------------
In the Cash Flow Statement, proceeds from sale of property,
plant and equipment comprises:
Consolidated Company
------------------------------------- ----------------------
2013 2012 2013 2012
GBP000's GBP000's GBP000's GBP000's
----------------- ----------------- --------- ----------
Net book amount 475 585
Profit / (Loss) on disposal
of property, plant and equipment (12) 72 - -
Proceeds from disposal of property,
plant and equipment 463 657 - -
----------------- ----------------- --------- ----------
28. Commitments
a. Capital commitments
Group and Company
There were no capital commitments at 31 December 2013 (2012:
nil), that were contracted for, but not provided for in these
financial statements.
b. Operating lease commitments -- Group as lessee
The Group leases various offices under non--cancellable
operating lease agreements. The majority of lease agreements are
renewable at the end of the lease period at market rate.
The Group also leases various plant and machinery under
non--cancellable operating lease agreements. The amount of the
lease charges within the Statement of Comprehensive income is shown
in Note 6.
Group
The future aggregate minimum lease payments under
non--cancellable operating leases are as follows:
2013 2012
-------------------------------------- -------------------------------------
Land & Buildings Other Land & Buildings Other
GBP000's GBP000's GBP000's GBP000's
----------------- ------------------ ----------------- ------------------
In one year or less 402 893 402 874
Between one and five years 952 520 1,008 667
Total 1,354 1,413 1,410 1,541
----------------- ------------------ ----------------- ------------------
Company
The Company has no operating lease commitments.
29. Related party transactions
The following transactions were carried out with related
parties:
Consolidated Company
----------------------------------------- ------------------------------------
2013 2012 2013 2012
GBP000's GBP000's GBP000's GBP000's
-------------------- ------------------ ---------------- ------------------
(a) Trading transactions:
Entities controlled by key
management
(see below)
Sales 6,635 27,436 - -
Purchases 535 4,355 - -
(b) Year end balances arising
from trading transactions
Receivables from related parties
Entities controlled by key
management 7,295 12,078 - -
Other Group undertakings - - 11,792 6,043
-------------------- ------------------ ---------------- ------------------
7,295 12,078 11,792 6,043
--------------------------------- -------------------- ------------------ ---------------- ------------------
Payables to related parties
Entities controlled by key
management 56 3,927 - -
Other Group undertakings - - 16,795 -
-------------------- ------------------ ---------------- ------------------
56 3,927 16,795 -
--------------------------------- -------------------- ------------------ ---------------- ------------------
The balances relate mainly to purchase transactions and bears no
interest.
Trading transactions
Consolidated trading transactions in the year
Trading transactions for the Group include the following
amounts:
Sales to entities controlled by key 2013 2012
management
GBP000's GBP000's
Southern Rock Insurance Company Limited -- 16,072
NewLaw Solicitors 6,421 9,047
Panacea Limited (Gibraltar) 186 1,267
Rock Services Limited 26 691
Eldon Insurance Services Limited 2 338
Rock Holdings Limited -- 20
Group Legal Limited -- 1
Total Sales 6,635 27,436
-------- --------
Purchases from entities controlled by 2013 2012
key management
GBP000's GBP000's
Southern Rock Management Services Limited 135 2,401
Rock Services Limited -- 532
NewLaw Solicitors 305 315
Panacea Limited (Gibraltar) 93 1,105
Centreline Air Charter Limited -- 18
Group Legal Limited 2 2
Total Purchases 535 4,373
-------- --------
Company trading transactions in the year
In addition to the amounts described above, the Company
transactions include:
Sales
Sales to other Group Companies 2013 2012
GBP000's GBP000's
Brightside Insurance Services Limited
(formerly Commercial Vehicle Direct
Insurance Services Limited) -- 564
Group Direct Marketing Limited (T/A
EMarketing Limited) -- 2,574
Total Sales -- 3,138
--------- --------
Group year end balances
Receivables from entities controlled
by key management 2013 2012
GBP000's GBP000's
NewLaw Solicitors 7,295 10,355
Panacea Limited GIB -- 1,298
Southern Rock Management Services
Ltd -- 175
Rock Services Limited -- 127
Eldon Insurance Services Limited -- 64
Southern Rock Insurance Company Limited -- 59
Total Receivables 7,295 12,078
-------- --------
Payables to entities controlled by 2013 2012
key management
GBP000's GBP000's
Southern Rock Insurance Company Ltd -- 2,894
Panacea Limited (Gibraltar) -- 963
NewLaw Solicitors 56 69
Group Legal -- 1
Total Payables 56 3,927
-------- --------
Company year end balances
Receivables from other Group companies 2013 2012
GBP000's GBP000's
Group Direct Marketing T/A E Marketing
Limited -- 5,479
Panacea Finance Limited 6,000 --
Brightside Insurance Services Limited
(formerly Commercial Vehicle Direct
Insurance Services Limited) 5,792 564
Total Receivables 11,792 6,043
--------- ---------
Payables to other Group companies 2013 2012
GBP000's GBP000's
Group Direct Marketing Limited (T/A 16,795 --
EMarketing Limited)
Total Payables 16,795 --
-------- --------
Included within the trading transactions are transactions with
NewLaw Solicitors.
The Group is connected to NewLaw Solicitors, as P S
Chase--Gardener and H Molyneux are directors in NewLaw Solicitors.
The transactions in the year include sales from Injury QED Limited
to NewLaw Solicitors, in relation to the provision of medical
reports, and recharges of facilities and administrative expenses to
NewLaw Solicitors from the Group.
The other transactions in (a) above include goods and services
recharged with companies that have common ownership on normal
commercial terms and conditions.
Included within trading transactions are transactions with
Southern Rock Insurance Company Limited ("SRICL"). The Group was
connected to SRICL until 12 February 2013, by virtue of Mr P S
Chase--Gardener being a Director of both the Group and SRICL. The
transactions with SRICL include the sale of insurance policies by
the Group's insurance broking units which were underwritten by
SRICL.
The Group is connected to the following companies by common
control;
Company Common Directors
NewLaw Solicitors P S Chase--Gardener, H Molyneux
Group Legal Limited P S Chase--Gardener, H Molyneux
On the 27 February 2014 it was announced that NewLaw Solicitors,
a historic related party, would be purchased by Helphire Group plc.
The Group was connected to NewLaw Solicitors by virtue of P S
Chase--Gardener and H Molyneux who were common Directors. Following
the resignation of P S Chase--Gardener from NewLaw on the 28
February 2014, NewLaw are no longer considered a related party as
there are no longer common Directors with significant
influence.
During the year the Group was also connected to the following
companies by common control;
Company Common Directors
Panacea Limited (Gibraltar) P S Chase--Gardener
*
Rock Services Limited * P S Chase--Gardener
Eldon Insurance Services Limited P S Chase--Gardener
*
Southern Rock Insurance Company P S Chase--Gardener
Limited **
E Development (2) Limited * P S Chase--Gardener
* On the 12 February 2013 Mr P S Chase--Gardener resigned from
directorships of these companies, and as such these companies
ceased being related parties from this date.
** On 31 December 2012 Mr P S Chase--Gardener resigned as a
director of Southern Rock Insurance Company Limited. Until 12
February 2013 he held a directorship in Rock Holdings Limited, the
parent company of Southern Rock Insurance Company Limited, and
therefore this company ceased being a related party from that
date.
Key management compensation
Details relating to the directors remuneration are set out in
the Report of Directors' Remuneration (audited Section).
Subsidiaries
Group
The Group's investments at the balance sheet date in the share
capital of unlisted Group undertakings include the following:
Class Proportion
Subsidiary Undertaking of shares held Principal activity
Group Direct Limited Ordinary 100% Intermediate Holding
Company
Injury QED Limited Ordinary 100% Medical Reporting
Brightside Insurance Services Ordinary 100% Insurance Broker
Limited (formerly Commercial
Vehicle Direct Insurance
Services Limited)
Panacea Finance Limited Ordinary 100% Finance Provider
Group Direct Marketing Limited Ordinary 100% Facilities Recharge
(Trading as E Marketing Complete Company
Limited)
MMT Centre Investments Limited Ordinary 100% Facilities Management
Company
All the Group companies are registered in England and Wales.
All of these companies were 100% subsidiaries of the Group
throughout 2013.
The Group holds investments in many dormant companies. As per
IAS 27 these investments are not significant and therefore the
Group has elected not to disclose these companies.
30. Post balance sheet event
On 24 January 2014 Brightside plc issued an additional
45,627,400 new ordinary shares of 1 pence each, raising
GBP6,844,110. The placing was supported by existing institutional
shareholders of the Group.
Outstanding at the date of signing is a pending litigation case
with Southern Rock Group regarding a number of specific issues
relating to the termination of contracts. Brightside Group plc are
currently preparing a positioning statement in advance of
mediation, however, at this stage an estimate of the financial
effect of the litigation cannot be made.
The information usually required by IAS 37 Provisions,
Contingent Liabilities and Contingent Assets is not disclosed on
the grounds that it can be expected to prejudice seriously the
outcome of the litigation. The directors are of the opinion that
the claims made by Southern Rock Group can be successfully resisted
by the Group.
The Company today has announced, alongside this results
statement, that it has reached agreement on the terms of a
recommended cash acquisition by which the entire issued and to be
issued ordinary share capital of Brightside will be acquired by a
newly incorporated company indirectly owned by AnaCap, to be
effected by means of a Scheme of Arrangement. Under the terms of
the Scheme, each Brightside Shareholder will be entitled to receive
25 pence in cash for each Brightside Share, valuing Brightside's
existing issued and to be issued ordinary share capital at
approximately GBP127 million.
The Directors believe the offer price reflects a fair price for
the Brightside Group and provides Shareholders with an opportunity
to realise their entire shareholding in cash at a substantial 32
per cent premium to the Brightside share price prevailing on 7 May
2014 (being the last Business Day prior to the Announcement). The
Directors note that there can be no guarantee that Brightside
Shareholders would otherwise be able to realise their shareholdings
in Brightside at a price of 25 pence per Brightside Share or higher
in the short to medium term.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSAFDAFLSEII
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