8 May 2014 Brightside Group plc ("Brightside", "the Group" or "the

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:
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Revenue decreased by 2.9% to £88.6m (2012: £91.2m);
Gross profit decreased by 3.7% to £60.6m (2012: £62.9m);
Profit before tax decreased by 36.0% to £11.2m (2012: £17.5m);
EBITDA before share based payments charges decreased by 16.9% to £18.7m (2012: £22.5m);
Earnings per share decreased by 39.2% to 1.69p (2012: 2.78p); and
Cash at bank and in hand £2.3m (2012: £7.8m).
Operational Highlights:
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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 £143.8m in 2013 (2012: £167.0m), down 13.9%;
Secured additional underwriting capacity creating a broader underwriting footprint for 2014; and
Offer for Company valuing Brightside at approximately £127 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)
Paul Chase-Gardener (Finance Director)
+44 (0)1454 63 4194
+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
£2 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 £6.45m 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 £27.1m 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 £85.6m at 31 December 2013 (2012: £80.1m). Some £78.9m (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 £25.2m, of which £2.3m was deferred
interest, representing a like for like decrease of 28% (2012: £35.6m). 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 £25.3m loan book balance was financed with internal cash
resources and the use of our banking facility which was drawn to £20.5m 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 £12.1m (2012: £12.4m). Of the IQED receivable £7.3m
(2012: £10.4m) 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 £5.5m 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 £17.6m from the prior year, which is mainly due to the payment of
deferred consideration of £17.0 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 £18.7m (2012: £22.5m) 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
£27.1m. At 31 December 2013 draw down on our committed facility stood at £20.5m (2012: £17.5m), and as
such undrawn facilities of £9.5m remained in place at the year end. The cash position is therefore supported by a
committed banking facility of £30m against the Panacea Finance loan book receivable and a working capital
overdraft of £3m, reverting to £1m as of February 2014. Brightside continues to utilise the facility against the
premium finance loan book noted above as £25.5m at December 2013 as well as continuing to use generated
trading cash, and the placement noted below, to fund the book.
Opening net cash
EBITDA (note 7)
Acquisitions of other property, plant and equipment, and intangibles (net of proceeds on
disposals)
Payment of deferred consideration
Drawdown of loan facility
Loan book movement
Dividends paid
Corporation tax
Other
Closing net cash
£000's
7,812
18,715
(18,341)
(16,973)
3,000
10,330
(2,281)
(4,463)
4,498
2,297
The Group's access to available cash has decreased from prior year following the settlement of the Southern Rock
deals.
2013
£000's
Cash (excluding client cash)
1,535
Available and undrawn premium finance facility*
9,500
Total available cash
11,035
* Note that the premium finance facility can only be used for the premium finance business.
2012
£000's
6,227
12,500
18,727
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:
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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;
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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 £127 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
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:
Schroders Investment Management Limited
Markerstudy International Limited
Moore Capital Management
L Hughes
Aviva Investors Global Services
Stena International Sarl
J H Bowers
% Holding
15.38
12.07
8.31
6.21
5.98
5.94
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 £19k (2012: £6k) 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).
Policy Type
eCar & Affinity
eBike
Van insurance - online
Online Sub-total
2013 Policy Sales
(number)
250,958
29,255
4,630
284,843
2012 Policy Sales
(number)
179,152
42,137
21,618
242,907
% Increase / (Decrease)
40%
(31%)
(79%)
17%
Commercial
Van insurance - offline
Personal Lines, Taxi, and
Minibus & Affinity Home
Offline Sub-total
36,413
81,751
28,688
33,447
91,196
32,660
9%
(10%)
(12%)
146,852
157,303
(7%)
Total annual policies
431,695
400,210
8%
Total monthly policies
36,136
54,095
(33%)
Online Home
GAP
Life
Total other policies
2,166
6,711
8,877
3,636
7,524
261
11,421
(40%)
(11%
(100%)
(22%)
476,708
465,726
2%
Total
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 £44m 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 £143.8m of new premium finance (2012: £167.0m), of which £85.9m or
157,047 loans were funded through the Group’s balance sheet (2012: £119.6m 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 £34m 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 £0.1m.
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
Business resilience
Risk
Major loss or damage to the Group's
infrastructure would impair its ability
to operate effectively and would
have
a
negative
effect
on
profitability.
Mitigating factors/controls
To reduce the impact of such an
event, business continuity plans are
periodically tested. The Group has
invested 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
a
considerable volume of data
including
payment
transaction
information. Data leakage, whether
through unauthorised access to the
Group's IT network, loss of data
transmitted over public networks or
loss by any other cause, would
adversely impact the business.
The Group takes a pro-active
approach to data security through its
IT Security Policy and employment
of a dedicated IT Security Manager.
Compliance with the Payment Card
Industry Data Security Standard is
managed through a system of
re-engineering to reduce the type of
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 to the cycles
of the insurance market and the
potential failure or loss of individual
insurers. The Group works to
constantly ensure that it has
adequate capacity available to
service its customers particularly in
the on-line channel.
The Group continues to work with
quality insurance providers and is
continually seeking out and adding
new members to its panel. We
believe our capacity exposure risk
will be reduced by increasing the
number and quality of members
together with our fraud detection
techniques
producing
the
underwriting results the providers
expected.
Risk Type
Strategic risk
Risk
The Group's future growth is
dependent on its ability to implement
its strategy in a competitive
environment
whilst
improving
efficiency and maintaining strong
financial controls. Failure to do so
could have an adverse effect on the
Group's financial condition. The
business model is open to value
adding acquisitions.
Changes in customer behaviour and The growth of the internet increases
online competition
competition faced by call centre
operations. Any changes in product
distribution, and in particular
aggregator models, could affect
long-term profitability.
Conduct of business and prudential Many activities of the Group are
regulation
subject to conduct of business and
prudential regulations as laid down
by the Financial Services and
Markets Act 2000.
Failure to
comply with the rules and
regulations of the UK regulator, the
Financial Conduct Authority (FCA),
could affect the trading activity of a
subsidiary company or result in
withdrawal of authority to carry out
regulated activities.
Mitigating factors/controls
Future strategy is developed by the
Chief executive office and senior
executive team members and is
considered and approved by the
Board. To ensure that the strategy is
communicated and understood, the
Group engages with a wide range of
stakeholders. This process helps to
ensure that the strategy remains
relevant and 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.
The risk is reduced by having a
forward thinking strategy to deliver
both online and offline products
according to our clients needs, thus
satisfying the changing purchasing
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.
The Group mitigates this risk through
a
dedicated
(and
recently
strengthened) Compliance Team
which conducts regular monitoring of
the systems and controls that have
been implemented to ensure
conformity with FCA rules and
Consumer Credit legislation. This
is supplemented by a system of
focused reviews that is carried out by
the
Group’s
Internal
Audit
Department.
The Group finance
department
closely
monitors
compliance with the minimum capital
requirements and ensures that other
prudential requirements are fulfilled.
Risk Type
Liquidity and other financial risks
Risk
The Group is exposed to financial
risks through its use of financial
instruments in the ordinary course of
business.
Mitigating factors/controls
Please refer to financial risk
management in Note 3 to the
financial statements.
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 £6.45m 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
£6,844,110. 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 £127 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 £1.2bn 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 £7.7m (2012: £12.7m).
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 £6.45m 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
Directors
P S Chase-Gardener
J W Gannon
M Holman
C E Fay
H Molyneux
J Telling
S Palmer
Total
2013
Salary/Fees
£
250,000
77,083
250,000
85,000
30,000
30,000
40,000
762,083
2013
Benefits
£
25,978
8,695
9,107
43,780
2013
Bonus
£
25,000
18,500
25,000
68,500
2013
Severance
£
-
2013
Pension
£
25,000
9,250
25,000
59,250
2013
Total
£
325,978
113,528
309,107
85,000
30,000
30,000
40,000
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
Directors
P S Chase-Gardener
J W Gannon
M Holman
A F A Banks
C E Fay
L Hughes
H Molyneux
J Telling
S Palmer
Total
2012
Salary/Fees
£
247,500
180,000
209,583
90,128
85,000
15,000
30,000
30,000
32,500
919,711
2012
Benefits
£
10,386
6,932
544
17,862
2012
Bonus
£
15,000
15,000
2012
Severance
£
250,000
250,000
2012
Pension
£
11,380
62,876
6,250
80,506
2012
Total
£
269,266
249,808
230,833
340,672
85,000
15,000
30,000
30,000
32,500
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
P S Chase-Gardener
C E Fay
H Molyneux
J Telling
S Palmer
J Gannon (resigned 31 May 20013)
M Holman (resigned 28 November 2013)
Total
31 December 2013
40,566,205
2,400,000
8,355,000
415,682
187,500
51,924,387
31 December 2012
33,700,286
2,400,000
8,355,000
415,682
187,500
37,163,728
5,151,500
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
Director
P S Chase-Gardener
P S Chase-Gardener
C E Fay
C E Fay
H Molyneux
Grant Date
23/07/2008
29/07/2010
23/07/2008
29/07/2010
23/07/2008
No. of share
options granted
5,000,000
872,727
750,000
272,727
250,000
Option price
(pence)
27.5
27.5
27.5
27.5
27.5
Date first
exercisable
22/07/2010
28/07/2012
22/07/2010
28/07/2012
22/07/2010
Expiry Date
22/07/2018
28/07/2020
22/07/2018
28/07/2020
22/07/2018
Remaining
number of
share options
Date first
held at 27.5p exercisable
20/11/2014
20/11/2014
20/11/2014
20/11/2014
250,000
22/07/2010
Expiry Date
22/07/2018
28/07/2020
22/07/2018
28/07/2020
22/07/2018
Share options following modification
Director
P S Chase-Gardener
P S Chase-Gardener
C E Fay
C E Fay
H Molyneux
Original Grant
Date
23/07/2008
29/07/2010
23/07/2008
29/07/2010
23/07/2008
Resultant
number of
share options
rebased to 24p
4,000,000
774,575
600,000
231,485
-
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
Note
2013
2012
£ 000's
£ 000's
5.
6.
88,613
(27,998)
91,241
(28,352)
Gross profit
Administrative expenses
6.
60,615
(48,955)
62,889
(44,104)
Operating profit
Finance costs (net)
11.
11,660
(481)
18,785
(1,244)
Profit before income tax
Income tax expense
13.
11,179
(3,479)
17,541
(4,857)
7,700
12,684
7,700
12,684
Revenue
Cost of sales
Profit for the year
Attributable to:
Owners of the parent
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)
Diluted (pence)
12.
12.
The notes on pages 34 to 82 are an integral part of these consolidated financial statements.
1.69
1.68
2.78
2.78
Consolidated & Company Balance Sheets as at 31 December 2013
Consolidated
Note
Company
2013
2012
2013
2012
£ 000's
£ 000's
£ 000's
£ 000's
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Deferred income tax asset
18.
15.
17.
25.
Total non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
20.
19.
Total current assets
TOTAL ASSETS
4,292
78,896
851
4,265
67,319
1,298
34,786
87,442
-
34,994
87,013
1
84,039
72,882
122,228
122,008
2,297
39,395
7,812
57,285
11,821
41,692
65,097
11,821
6,043
125,731
137,979
134,049
128,051
4,563
28,339
2,530
1,832
48,365
4,563
28,339
2,530
1,765
42,946
4,563
28,339
56,250
1,826
26,276
4,563
28,339
56,250
1,759
20,654
85,629
80,143
117,254
111,565
17
204
31
338
-
-
221
369
-
-
653
18,145
35
21,048
2,177
20,750
145
16,486
17,909
16,795
-
16,486
-
39,881
57,467
16,795
16,486
125,731
137,979
134,049
128,051
6,043
EQUITY AND LIABILITIES
Capital and reserves attributable to the owners of the Parent
Share capital
Share premium
Reverse acquisition reserve
Share based payments reserve
Retained earnings
26.
26.
Total equity
Non current liabilities
Provisions for other liabilities and charges
Long term borrowings
24.
21.
Total non current liabilities
Current liabilities
Current income tax liabilities
Trade and other payables
Provisions for other liabilities and charges
Deferred consideration
Borrowings
Total current liabilities
TOTAL EQUITY AND LIABILITIES
22.
24.
16.
21.
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
Share capital
£ 000's
Equity as at 1 January 2012
4,563
Share
Premium
£ 000's
Reverse
Acquisition
Reserve
£ 000's
28,339
Share Based
Payments
Reserve
£ 000's
2,530
Retained
Earnings
£ 000's
1,521
Total
£ 000's
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
Share based payments charge
-
-
-
-
(1,004)
(1,004)
244
Total transactions with the owners
-
-
-
244
(1,004)
(760)
1,765
42,946
80,143
Equity as at 31 December 2012
4,563
28,339
Consolidated 2013
244
2,530
-
Attributable to owners of the parent
Share capital
£ 000's
Equity as at 1 January 2013
4,563
Share
Premium
£ 000's
Reverse
Acquisition
Reserve
£ 000's
28,339
Share Based
Payments
Reserve
£ 000's
2,530
Retained
Earnings
£ 000's
1,765
Total
£ 000's
42,946
80,143
Comprehensive income
Profit for the year
-
-
-
-
7,700
7,700
Total comprehensive income for the
year
-
-
-
-
7,700
7,700
-
-
-
-
(2,281)
(2,281)
Share based payments charge
Total transactions with owners
-
-
-
Transactions with the owners
Dividend
Equity as at 31 December 2013
4,563
28,339
67
2,530
-
67
67
(2,281)
(2,214)
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
Share capital
£000's
Equity as at 1 January 2012
Comprehensive Income
Loss for the year
4,563
-
Share
Premium
£000's
Reverse
Acquisition
Reserve
£000's
28,339
56,250
-
-
Share Based
Payments
Reserve
£000's
1,515
-
Retained
Earnings
£000's
Total
£000's
22,973
113,640
(1,315)
(1,315)
Total comprehensive income for the
year
-
-
-
-
Transactions with the owners
Dividend
Share based payments charge
-
-
-
-
Total transactions with the owners
-
-
-
28,339
56,250
Equity as at 31 December 2012
4,563
Company 2013
(1,315)
(1,315)
(1,004)
(1,004)
244
244
(1,004)
(760)
1,759
20,654
111,565
244
-
Attributable to owners of the parent
Share
capital
Share
Premium
Reverse
Acquisition
Reserve
£000's
£000's
£000's
Equity as at 1 January 2013
4,563
28,339
56,250
Share
Based
Payments
Reserve
Retained
Earnings
Total
£000's
£000's
£000's
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
-
-
-
-
(2,281)
(2,281)
Share based payments charge
Total transactions with the owners
-
-
-
28,339
56,250
Transactions with the owners
Dividend
Equity as at 31 December 2013
4,563
67
-
67
67
(2,281)
(2,214)
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
Note
2013
2012
2013
2012
£000's
£000's
£000's
£000's
Profit/(loss) before income tax
Adjustments for non-cash items
Company
27.
EBITDA
Other adjustments for non-cash items
Loss/(Profit) on disposal of property, plant and
equipment
Change in working capital
Trade and other receivables
11,179
17,541
(4,097)
(4,669)
7,536
4,947
275
1,976
18,715
22,488
(3,822)
(2,693)
12
(72)
-
-
7,560
(3,843)
3,513
32,514
(2,823)
487
309
(33,208)
23,464
19,060
10,330
2,390
42
46
(4,463)
(4,069)
-
Net cash generated from/(used in) operating
activities
29,373
17,427
-
Cash flows from investing activities:
Payments to acquire property, plant and equipment
(1,088)
(777)
-
-
(17,979)
(5,123)
-
-
-
(3,000)
-
-
463
657
(16,973)
(2,500)
-
-
(35,577)
(10,743)
-
-
3,000
(12,000)
-
-
5
429
-
-
Trade and other payables
Cash generated from/(used in) operations
Loan book movement
Interest received
Income tax paid
Payments to acquire intangible assets
Payments to acquire subsidiaries, net of cash
acquired
Proceeds on disposal of property, plant and
equipment
Payments for deferred consideration
Net cash flows used in investing activities
Cash flows from financing activities:
Drawdown/(payments) of borrowings
Borrowings
Interest paid
Dividends paid
Net cash flows generated from financing
activities
Net cash (decreases) in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
27.
(3,387)
(3,387)
-
(35)
(122)
-
-
(2,281)
(1,004)
-
-
689
(12,697)
-
-
(5,515)
7,812
(6,013)
13,825
-
2,297
7,812
(3,387)
3,387
-
The dividend of £2.3m 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 £5.62m (2012 loss:
£2.32m).
Dividends received by the Company from other Group Companies totalled £12m (£6m from Panacea
Finance Limited and £6m 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 £125.73m.
-
the Group's year end trade and other receivables balance of £39.40m;
-
the Group's year end total liabilities of £40.10m;
-
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 £6.45m.
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 £134.05m.
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:
vi.
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
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 £1.54m
(2012: £6.23m), trade and other receivables of £39.40m (2012: £57.29m) and total liabilities of
£40.05m (2012: £57.84m). 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 £18.15m (2012: £20.75m) 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 £20.50m (2012: £17.50m). 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 £206k (2012: £245k).
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 £39.40m (2012: £57.29m). Of this amount
£25.23m (2012: £35.56) 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 £14.17m (2012: £21.73m).
The receivables balance of £14.17m is deemed to be of low credit risk. £7.30m is due from NewLaw
solicitors, a related party to the Group, for whom there is a long standing relationship with very minimal
credit risk. £2.26m 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
£000's
£000'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
£000's
£000'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)
Adjusted net cash excluding Panacea finance facility
1,535
6,227
783
5,480
Of the total Group borrowings £20.5m (2012: £17.5m) 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 £43.74m (2012:
£43.74m).
Deferred Tax Asset
As at 31 December 2013, David & Co. Consultants Limited held a deferred tax asset of £0.82m (2012: £1.01m)
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 £39.40m of trade and other receivables (2012: £57.29m) of
which £1.48m are past due but not impaired (2012: £1.12m).
An amount of trade and other receivable of £25.23m 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 £14.17.10m (2012: £21.73m).
Against the receivables balance the Group has recognised a provision for impairment of £1.75m (2012: £1.53m),
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 £411k (2012: £588k).
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
£000's
6.
£000's
Insurance broking commission and fees
Medical reporting
Finance provider fees
Finance provider interest
Other fees
51,925
12,058
5,810
10,081
8,739
53,381
11,337
5,522
13,874
7,127
Total
88,613
91,241
Expenses by nature
Profit from continuing operations has been arrived at after charging:
7.
2013
2012
£000's
£000's
Marketing costs
Employee benefit expense (see note 9)
Staff recruitment and agency workers
Staff training
Other staff costs
Depreciation charge (see note 18)
Amortisation of intangible assets (see note 15)
Loss/ (Profit) on disposal of property, plant and equipment
Operating lease rentals - Land and Buildings
Building rates and service charges
Operating lease rentals - Other
Computer operating expenses
Auditor's remuneration (see note 8)
Postage costs
Telephone costs
Loan book bank facility costs
Other expenses
27,336
29,877
964
459
661
597
6,391
12
402
888
1,028
3,643
228
1,209
1,346
931
981
27,670
28,947
618
391
942
402
3,057
(72)
188
845
898
3,686
184
1,268
1,436
928
1,068
Total cost of sales and administrative expenses
76,953
72,456
Earnings before exceptional other income, interest, tax, depreciation, amortisation, and share based
payments charge
2013
2012
£000's
Profit for the year
Finance costs (net)
Income tax expense
Depreciation
Amortisation
Share based payments charge
EBITDA before exceptional other income and share based payments
charge
£000's
7,700
481
3,479
597
6,391
67
12,684
1,244
4,857
402
3,057
244
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
£ 000's
£ 000's
Fees payable to the company's auditor for the audit of the parent company and
consolidated financial statements
Fees payable to the company's auditor and its associates for other
services:
- The audit of the company's subsidiaries pursuant to legislation
- Other services pursuant to legislation
- Other services
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
- Other services pursuant to legislation
- Other services
22
30
157
13
30
121
12
14
5
1
10
3
(6)
228
184
-
Total
During 2013, the £30k (2012: £14k) fees incurred for other services was in respect of reviewing the interim
accounts. The £6k 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
£ 000's
£ 000's
Wages and salaries
Social security costs
Pension costs
Share based payments charge
27,160
2,574
76
67
26,099
2,501
103
244
Total
29,877
28,947
The average number of employees of the Group during the year was:
2013
2012
Number
Number
Directors
Sales and administration
6
1,024
7
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 price
Date
Granted to :
(pence)
23 July 2008 *
Board members & employees
27.50
29 July 2010 *
Board members & employees
27.50
24 September 2012
Board members
20.00
1 May 2013
Employees
24.75
20 November 2013
Employees
20.13
Share options
(number)
15,699,153
5,119,180
3,750,000
1,378,788
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 price
Date
Granted to:
(pence)
23 July 2008 *
Employees
27.50
29 July 2010 *
Board member & employees
27.50
1 May 2013
Employees
24.75
20 November 2013
Employees
20.13
Share options
(number)
5,450,290
3,266,921
121,212
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 scheme
Unapproved 2008
Share
price at
date of
grant
(pence)
27.5
Exercis
e price
(pence)
27.5
Expected
volatility
25.0%
Expected
life
(years)
6.25
Risk free
rate
5.0%
Dividend Discount
yield
factor
0%
35%
Unapproved 2010
Unapproved 2012
Unapproved 2013
Approved 2008
Approved 2010
Approved 2013
27.5
23.7
20.4
27.5
27.5
20.4
27.5
20.0
20.0
27.5
27.5
20.0
39.8%
28.1%
32.6%
25.0%
39.8%
32.6%
4.00
6.50
6.00
6.75
4.50
6.50
3.4%
0.7%
3.0%
5.0%
3.4%
3.0%
0%
0.93%
2.45%
0%
0%
2.45%
In calculating the fair value of the rebased share options, the following key inputs have been used:
Share
price at
date of
Exercise
Expected
Share scheme rebased
grant
price
Expected
life
Risk
Dividend
on 20 November 2013
(pence)
(pence) volatility
(years) free rate
yield
Directors 2008 schemes
19.75
24.0
32.98%
4.44
3.0%
2.5%
Directors 2010 schemes
19.75
24.0
32.98%
6.46
3.0%
2.5%
Other staff 2008 schemes
19.75
0.0
32.98%
2.09
3.0%
2.5%
Other staff 2010 schemes
19.75
0.0
32.98%
3.10
3.0%
2.5%
0%
0%
0%
35%
0%
0%
Discount
factor
0%
0%
0%
0%
During the period to 20 November 2013 the following movements occurred with respect to the share option
schemes:
Type of Share Option
Scheme
HMRC approved
HMRC approved
HMRC approved
Unapproved
Unapproved
Unapproved
Unapproved
Total
Price
(pence)
27.50
27.50
24.75
24.75
20.0
27.5
27.5
Awarded
(Date)
23/07/2008
28/07/2010
01/05/2013
01/05/2013
24/09/2012
23/07/2008
28/07/2010
Exercisable
22/07/2011-22/07/2018
22/07/2013-22/07/2020
01/05/2016-30/04/2023
01/05/2015-30/04/2023
24/09/2015-24/09/2022
22/07/2010-22/07/2018
22/07/2012-22/07/2020
At 1 January
2013
(Number)
2,697,848
2,201,936
3,750,00010,898,872
3,865,633
23,414,289
Awards in
period
(Number)
97,301
121,212
1,378,788
888,518
2,485,819
Forfeited in At 20 November
period
2013
(Number)
(Number)
(654,167)
2,043,681
(285,649)
2,013,588
121,212
1,378,788
3,750,000
(3,723,378)
7,175,494
(551,736)
4,202,415
(5,214,930)
20,685,178
These share options were split as follows prior to the rebasing on 20 November 2013:
Staff type
Board Directors
Other staff
Total
Share options
issued at 27.5p
8,004,545
7,430,633
15,435,178
Share options
issued at 20.0p
3,750,000
3,750,000
Share options
issued at 24.75p
1,500,000
1,500,000
Share options as
at 20 November
2013
11,754,545
8,930,633
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 share
2013 after
Staff type
options price
option price
rebasing
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
Other staff
Other staff
Other staff
Total other staff
Total
24p
nil
-
27.5p
24.75p
1,676,275
1,197,946
98,835
1,500,000
4,473,056
14,777,564
During the period 20 November 2013 to 31 December 2013 the following movements occurred with respect to
the share option schemes:
Type of Share Option
Scheme
HMRC approved
HMRC approved
HMRC approved
HMRC approved
Unapproved
Unapproved
Unapproved
Unapproved
Modified scheme
Modified scheme
Total
Price
(pence)
27.5
27.5
24.75
20.13
24.75
20.0
27.5
20.13
nil
24.0
Awarded
(Date)
23/07/2008
28/07/2010
01/05/2013
20/11/2013
01/05/2013
24/09/2012
23/07/2008
20/11/2013
20/11/2013
20/11/2013
Exercisable
22/07/2011-22/07/2018
22/07/2013-22/07/2020
01/05/2016-30/04/2023
20/11/2016-20/11/2023
01/05/2015-30/04/2023
24/09/2015-24/09/2022
22/07/2010-22/07/2018
20/11/2015-20/11/2023
20/11/2014-20/11/2020
20/11/2014-20/11/2020
At 20
November
2013
(Number)
67,400
31,435
121,2121,378,788
3,750,000
250,000
1,197,946
7,980,783
14,777,564
Awards in
period
(Number)
14,771,322
3,870,285
18,641,607
Forfeited in At 31 December
period
2013
(Number)
(Number)
(28,000)
39,400
(10,182)
21,253
121,212
(1,276,503)
13,494,819
1,378,788
(3,750,000)
250,000
3,870,285
(39,108)
1,158,838
(698,448)7,282,335
(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 £67k (2012: £244k).
11. Finance costs
2013
2012
£ 000's
£ 000's
(663)
(487)
(35)
(735)
(1,168)
(70)
Total finance costs
Other interest received
(1,185)
42
(1,973)
46
Net finance costs
Bank interest relating to finance of loan book (included within cost of sales)
(1,143)
662
(1,927)
683
(481)
(1,244)
Bank borrowings
Unwinding of discount on deferred consideration
Other interest expense
Net finance costs as per income statement
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:
Retained profit for the year
2013
£000's
7,700
2012
£000's
12,684
Weighted average number of shares in issue
Issued ordinary shares at 1 January
Number
456,274,109
Number
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 average
Diluted
Weighted average number of shares in issue 31
December
3,312,803
459,586,912
456,274,109
Basic earnings per share
Diluted earnings per share
1.69p
1.68p
2.78p
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
£ 000's
£ 000's
Current Tax
Current tax on profits in period
Adjustments in respect of prior periods
2,763
267
4,726
(291)
3,030
4,435
320
129
422
Deferred Tax (note 25)
Origination and reversal of temporary differences
Effect of changes in tax rate
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:
Profit before taxation
2013
2012
£ 000's
£ 000's
11,179
17,541
2,599
4,300
420
(248)
320
129
267
33
716
(375)
422
Profit on ordinary activities multiplied by the average standard rate of
corporation taxation of 23.25% (2012 : 24.50%)
Effects of:
Amounts not deductible for tax purposes
Utilisation of losses
Origination and reversal of temporary differences
Effect of changes in tax rate
Adjustments in respect of prior periods
Difference between capital allowances and depreciation
Short term temporary differences
Utilisation of tax losses and credits (group relief)
Unused tax credit losses and credits
Tax charge for the year
-
(291)
-
(2)
(39)
82
24
(21)
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 £31,290k from
offline insurance broking to online insurance broking, £30,953k representing the goodwill on the acquisitions
of eCar, eBike and eVan. £4,449k 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 Insurance
Broking
2013
£ 000's
2012
Restated
£ 000's
Online Insurance
Broking
2013
£ 000's
2012
Restated
£ 000's
Finance Provider
Medical Reporting
Lead Generation
and Debt
Management
2013
£ 000's
2013
£ 000's
2013
£ 000's
2012
£ 000's
2012
£ 000's
2012
Restated
£ 000's
Software and Web
Services
2013
£ 000's
2012
Restated
£ 000's
All other segments
2013
£ 000's
2012
£ 000's
Consolidated
2013
£ 000's
2012
£ 000's
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
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
(46)
(166)
(9)
(35)
(7)
(27)
(5)
(16)
(67)
(244)
Depreciation
(217)
(108)
(103)
(66)
(23)
(8)
(86)
(34)
Amortisation
(441)
(417)
(1,398)
(564)
(22)
(56)
(87)
(35)
(7)
(119)
(479)
(1,229)
(618)
(488)
(37)
(48)
(2)
(4)
-
2,838
2,861
3,044
6,261
1,360
-
4,197
-
5,470
26,338
6,718
35,932
898
12,357
2,342
12,995
729
121
629
9,448
-
Total net revenue
Operating profit
Share based payments charge
Net financing costs
Profit for the period before tax
Segment current assets
Property, plant and equipment
Goodwill
348
323
2,203
2,203
30,953
30
30,953
-
6
-
-
-
(11)
-
-
-
-
-
(60)
(155)
(97)
(31)
(597)
(402)
-
(3,230)
(892)
(1,213)
(1,093)
(6,391)
(3,057)
(40)
607
1,335
-
-
-
(1,143)
(1,928)
(723)
15
(724)
461
11,179
41,692
17,541
65,097
3,016
145
118
510
802
-
-
3,259
5,171
5,171
5,408
5,408
-
-
-
666
1,370
3,939
337
113
30
213
103
20,253
17,295
9,977
4,449
-
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
Total liabilities excluding tax
557
7,715
23,791
15,845
2,999
2,640
12,102
29,135
-
Intangibles
-
-
-
-
-
4,292
4,265
43,735
43,735
35,161
23,584
3,477
124,880
136,681
324
39,449
55,659
-
15. Intangible assets
Consolidated
Goodwill
£ 000's
Computer
Software
and
Licences
£ 000's
Other
Intangibles
£ 000's
AICC
£ 000's
Total
£ 000's
Cost
Opening balance as at 1 January 2013
Additions
Transfers
Disposals
45,621
-
15,260
12,522
-
18,036
1,455
6,858
(12)
4,703
4,002
(6,858)
-
83,620
17,979
(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
Amortisation
Disposals
(1,886)
-
(9,586)
(4,115)
-
(4,829)
(2,276)
1
-
(16,301)
(6,391)
1
Balance at 31 December 2013 31 December 2013
(1,886)
(13,701)
(7,104)
-
(22,691)
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
Net book value
Consolidated
Goodwill
£ 000's
Computer
Software
and
Licences
£ 000's
Other
Intangibles
£ 000's
AICC
£ 000's
Total
£ 000's
Cost
Opening balance at 1 January 2012
Additions
Transfers
45,621
-
15,260
-
14,653
420
2,963
2,963
4,703
(2,963)
78,497
5,123
-
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
Amortisation
(1,886)
-
(7,929)
(1,657)
(3,429)
(1,400)
-
(13,244)
(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
Goodwill
£000's
Other
Intangibles
£000's
Computer
Software
and
Licences
£000's
AICC
£000's
Total
£000'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
Goodwill
£000's
Other
Intangibles
£000's
Cost
Opening balance as at 1 January 2012
Disposals
33,156
-
Balance at 31 December 2012
33,156
Amortisation and impairment losses
Opening balance as at 1 January 2012
Amortisation
Intra-group transfer
Disposals
-
(3,666)
(564)
-
Balance at 31 December 2012
-
(4,230)
Net book value
At 31 December 2011
33,156
2,402
At 31 December 2012
33,156
1,838
Computer
Software
and
Licences
£000's
6,068
736
(736)
Total
£000's
-
39,960
(736)
-
39,224
-
-
(3,903)
(564)
237
-
-
-
(4,230)
-
36,057
-
34,994
6,068
AICC
£000's
-
(237)
237
499
-
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
At 1 January 2012
Database of experts
Policy books
Intangible balance resulting from reverse acquisition
Aggregator software
On-line insurance broking system
Total
At 31 December 2012
Database of experts
Policy books
Intangible balance resulting from reverse acquisition
Aggegator software
On-line insurance broking system
Total
At 31 December 2013
Database of experts
Policy books
Intangible balance resulting from reverse acquisition
Cost
Amortisation
Net Book
Value
£000's
£000's
£000's
1,189
6,976
107
2,169
4,819
(1,189)
(6,076)
(664)
-
15,260
(7,929)
1,189
6,976
107
2,169
4,819
(1,189)
(6,640)
(1,387)
(370)
15,260
(9,586)
1,189
6,976
107
(1,189)
(6,848)
-
900
107
1,505
4,819
7,331
336
107
782
4,449
5,674
128
107
Aggregator software
Affinity policy book fees
On-line insurance broking system
Rights to Affinity fees
Total
2,169
5,000
4,819
7,522
(2,110)
(1,190)
(860)
(1,504)
59
3,810
3,959
6,018
27,782
(13,701)
14,081
Company
At 1 January 2012
Database of experts
Policy books
Intangible balance resulting from reverse acquisition
Aggregator software
On-line insurance broking system
Cost
Amortisation
Net Book
Value
£000's
£000's
£000's
4,539
1,529
6,068
Total
At 31 December 2012
Database of experts
Policy books
Intangible balance resulting from reverse acquisition
Aggegator software
On-line insurance broking system
4,539
1,529
6,068
Total
At 31 December 2013
Database of experts
Policy books
Intangible balance resulting from reverse acquisition
Aggregator software
Affinity policy book fees
On-line insurance broking system
Rights to Affinity fees
Total
4,539
1,529
6,068
(3,666)
-
873
1,529
-
(3,666)
(4,230)
-
2,402
309
1,529
-
(4,230)
(4,438)
(4,438)
1,838
101
1,529
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
Assets
Goodwill
2012
Total
£000's
£000's
£000's
Computer Software and licences
Software platform
3,383
AICC
Assets in course of construction
1,740
-
1,740
Total
5,123
-
5,123
3,383
The intangible asset additions in 2013 relate to the following:
Other
Intangible
Assets
Goodwill
2012
Total
£000's
£000's
£000's
Other intangibles
Affinity policy book fees
Rights to Affinity fees
5,000
7,522
Computer Software and Licences
Software platform
1,455
-
1,455
AICC
Assets in course of construction
4,002
-
4,002
17,979
-
17,979
Total
5,000
7,522
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 £5m. 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 £7.5m. 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
£5,171k
-
arising on acquisition of Brightside Group plc
£3,525k
-
arising on acquisition of minority interests in insurance broking business
£2,203k
-
arising on acquisition of eVan business
£3,455k
-
arising on acquisition of eCar business
£24,284k
-
arising on acquisition of eBike business
£3,214k
-
arising on acquisition of Quote Exchange business
£1,661k
-
arising on acquisition of eDevelopment business
£222k
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 £79.8m. 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
As at 1 January 2012
Unwinding of discount on deferred consideration
Payment of deferred consideration
As at 31 December 2012
Unwinding of discount on deferred consideration
Payment of deferred consideration
As at 31 December 2013
eCar
£000's
15,372
1,114
16,486
487
(16,973)
-
eBike
£000's
1,446
54
(1,500)
-
eSystems
£000's
1,000
(1,000)
-
Total
£000's
17,818
1,168
(2,500)
16,486
487
(16,973)
-
17. Investments in subsidiary undertakings
Company
2013
2012
£000's
£000's
Shares in Group undertakings
At 1 January
Intragroup transfer of investments
Reduction in subsidiary share capital
Intragroup transfer of shares
87,013
429
-
87,079
(64)
(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
Property
£ 000's
Cost
Opening balance at 1 January 2013
Additions
Disposals
3,000
6
1,295
508
(38)
3,006
(31)
(38)
-
Balance at 31 December 2013 31 December 2013
Depreciation and impairment losses
Opening balance at 1 January 2013
Depreciation
Disposals
Fixtures,
Fittings and
Equipment
£ 000's
-
Motor
Vehicles
£ 000's
IT Hardware
£ 000's
Total
£ 000's
73
1,562
574
(463)
5,930
1,088
(501)
1,765
73
1,673
6,517
(560)
(277)
2
(31)
(17)
(1,043)
(265)
35
(1,665)
(597)
37
-
-
(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
Balance at 31 December 2013 31 December 2013
Consolidated
Property
£ 000's
Cost
Opening balance as at 1 January 2012
Additions
Disposals
-
1,229
157
(91)
3,000
(31)
-
Balance at 31 December 201231 December 2012
Net book value
At 31 December 2011
3,000
-
Balance at 31 December 2012 31 December 2012
Depreciation and impairment losses
Opening balance as at 1 January 2012
Depreciation
Disposals
Fixtures,
Fittings and
Equipment
£ 000's
(31)
-
At 31 December 2012
2,969
Motor
Vehicles
£ 000's
IT Hardware
£ 000's
Total
£ 000's
73
1,521
620
(579)
2,823
3,777
(670)
1,295
73
1,562
5,930
(439)
(132)
11
(13)
(18)
(896)
(221)
74
(1,348)
(402)
85
(560)
(31)
(1,043)
(1,665)
790
60
625
1,475
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
Property
£000's
Cost
Opening balance as at 1 January 2012
Disposals
Balance at 31 December 2012
Depreciation and impairment losses
Opening balance as at 1 January 2012
Disposals
Fixtures,
Fittings and
Equipment
£000's
-
Motor
Vehicles
£000's
597
(597)
-
51
(51)
-
(58)
58
IT Hardware
£000's
362
(362)
-
(2)
2
Total
£000's
1,010
(1,010)
-
(123)
123
(183)
183
Balance at 31 December 2012
-
Net book value
At 31 December 2011
-
At 31 December 2012
-
-
539
-
-
-
49
239
-
827
-
-
19. Trade and other receivables
Consolidated
Loans and advances due from clients
Prepayments and accrued income
Receivables from Group undertakings
Receivables from related parties on medical
reporting
Receivable from other related parties
Other receivables
Less: provision for impairment of receivables
Current portion
Company
2013
2012
2013
2012
£ 000's
£ 000's
£ 000's
£ 000's
25,225
2,263
-
35,555
2,881
-
11,792
-
7,295
-
6,364
(1,752)
10,355
1,723
8,305
(1,534)
-
39,395
57,285
11,821
6,043
39,395
57,285
11,821
6,043
-
29
-
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 £1,480k (2012 : £1,117k) 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
£ 000's
247
165
188
880
347
130
75
565
1,480
1,117
Up to one month
Up to two months
Up to three months
Over three months
Total
£ 000's
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
£ 000's
£ 000's
At 1 January
Provision for receivables impairment
Unused amounts reversed
1,534
327
(109)
At 31 December
1,752
The other classes within trade and other receivables do not contain impaired assets.
477
1,057
1,534
20. Cash and cash equivalents
Consolidated
Company
2013
2012
2013
2012
£000's
£000's
£000's
£000's
Current accounts
Client accounts
1,535
762
6,227
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
£000's
£000's
£000's
£000's
Non current borrowings
Other loans
204
338
-
-
Total non current borrowings
204
338
-
-
Current borrowings
Other loans
Bank borrowings
548
20,500
409
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 £9.5m (2012 : £12.5m).
Bank overdrafts, borrowings and other loans
Consolidated
Amounts falling due within one year or
Company
2013
2012
2013
2012
£000's
£000's
£000's
£000's
on demand
Bank borrowings
Other loans
20,500
548
17,500
409
-
-
204
338
-
-
21,252
18,247
-
-
Amounts falling due between one and
two years
Other loans
Total
22. Trade and other payables
Consolidated
Company
2013
2012
2013
2012
£ 000's
£ 000's
£ 000's
£ 000's
Trade payables
Payable to related parties
Payable to Group undertakings
Tax and social security costs
Accruals and deferred income
12,017
56
659
5,413
1,413
8,961
16,795
-
-
-
Total trade and other payables
18,145
20,750
16,795
-
6,449
3,927
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
Premium
Finance loan
book
£000's
Loans and
receivables
£000's
Company
Total
£000's
Loans and
receivables
£000's
Total
£000's
31 December 2013
Assets as per balance sheet
Trade and other receivables excluding
prepayments
Cash and cash equivalents
25,225
-
Total
25,225
11,907
2,297
37,132
2,297
14,204
39,429
11,821
11,821
Consolidated
Premium
Finance loan
book
£000's
Loans and
receivables
£000's
11,821
11,821
Company
Total
£000's
Loans and
receivables
£000's
Total
£000's
31 December 2012
Assets as per balance sheet
Trade and other receivables excluding
prepayments
Cash and cash equivalents
Total
35,555
35,555
18,849
7,812
54,404
7,812
26,661
62,216
6,043
-
6,043
-
6,043
6,043
Consolidated
Other
financial
liabilities at
Liabilities at amortised
fair value
cost
£000's
£000's
Company
Total
£000's
Other
financial
liabilities at
Liabilities at amortised
fair value
cost
£000's
£000's
Total
£000's
31 December 2013
Liabilities as per balance sheet
Trade and other payables excluding statutory
liabilities
Borrowings
-
17,486
21,252
17,486
21,252
-
16,795
-
16,795
-
Total
-
38,738
38,738
-
16,795
16,795
Consolidated
Other
financial
liabilities at
Liabilities at amortised
fair value
cost
£000's
£000's
Company
Total
£000's
Other
financial
liabilities at
Liabilities at amortised
fair value
cost
£000's
£000's
Total
£000's
31 December 2012
Liabilities as per balance sheet
Trade and other payables excluding statutory
liabilities
Deferred consideration
Borrowings
16,486
-
19,337
18,247
19,337
16,486
18,247
16,486
-
-
16,486
-
Total
16,486
37,584
54,070
16,486
-
16,486
24. Provisions for other liabilities and charges
Analysis of total provisions
2013
2012
£000's
£000's
Non-current
Current
17
35
31
145
Total
52
176
The movement in provisions for other liabilities and charges during the year is as follows:
Lapse
provision
£000's
At 1 January 2013
Provision released to Statement of Comprehensive Income
At 31 December 2013
Total
£000's
176
(124)
52
176
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
£000's
£000's
£000's
£000's
-
Deferred tax assets
Deferred tax asset to be recovered after
more than 12 months
Deferred tax asset to be recovered within 12
months
689
1,130
-
162
168
-
1
Total
851
1,298
-
1
The gross movement on the deferred tax account is as follows:
Consolidated
At 1 January
Credited/(Charged) to Statement of
Comprehensive Income
Company
2013
2012
2013
2012
£000's
£000's
£000's
£000's
1,298
1,364
1
53
(447)
(66)
(1)
(52)
851
1,298
At 31 December
-
1
Consolidated
Company
Adjustments Unutilised
Accelerated to tax rate on historic
tax
opening
trading
depreciation
balances
losses
£000's
£000's
£000's
Total
Temporary
differences
Total
£000's
£000's
£000's
At 1 January 2012
Charged to Statement of
Comprehensive Income
299
(65)
1,130
1,364
53
53
178
65
(309)
(66)
(52)
(52)
At 31 December 2012
Charged to the Statement of
Comprehensive income
477
821
1,298
1
1
(1)
(1)
At 31 December 2013
-
(103)
(129)
(215)
(447)
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
Allotted, called up and fully paid
2013
2012
£ 000's
£ 000's
4,563
456,274,109 (2012: 456,274,109) ordinary shares of £0.01 each
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
£000's
£000'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
Capital
£000's
Share
Premium
£000's
Shares
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
£000's
£000's
£000's
£000's
11,179
17,541
Adjustments for:
Depreciation
Amortisation of intangible assets
Share based payments expense
Finance charges - net
597
6,391
67
481
402
3,057
244
1,244
Adjustments for non-cash items
7,536
Profit/(Loss) before income tax
EBITDA (see Note 7)
Other adjustments for non-cash items
Loss/(Profit) on disposal of property, plant and
equipment
Changes in working capital
Trade and other receivables
Trade and other payables
(4,097)
(4,669)
-
208
67
564
244
1,168
4,947
275
1,976
18,715
22,488
(3,822)
(2,693)
12
(72)
-
-
7,560
(2,823)
(3,843)
487
-
3,513
309
32,514
(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
£000's
£000's
£000's
£000's
Net book amount
Profit / (Loss) on disposal of property, plant and
equipment
475
585
(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
£000's
£000's
£000's
£000's
In one year or less
Between one and five years
Total
Company
The Company has no operating lease commitments.
402
952
893
520
402
1,008
874
667
1,354
1,413
1,410
1,541
29. Related party transactions
The following transactions were carried out with related parties:
Consolidated
Company
2013
2012
2013
2012
£000's
£000's
£000's
£000's
(a) Trading transactions:
Entities controlled by key management (see below)
Sales
Purchases
6,635
535
27,436
4,355
-
-
7,295
12,078
-
11,792
-
12,078
11,792
3,927
16,795
-
3,927
16,795
-
(b) Year end balances arising from trading
transactions
Receivables from related parties
Entities controlled by key management
Other Group undertakings
7,295
Payables to related parties
Entities controlled by key management
Other Group undertakings
56
-
56
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 management
Southern Rock Insurance Company Limited
NewLaw Solicitors
Panacea Limited (Gibraltar)
Rock Services Limited
Eldon Insurance Services Limited
Rock Holdings Limited
Group Legal Limited
2013
£000's
6,421
186
26
2
-
2012
£000's
16,072
9,047
1,267
691
338
20
1
Total Sales
6,635
27,436
Purchases from entities controlled by key management
2013
£000's
135
305
2012
£000's
2,401
532
315
Southern Rock Management Services Limited
Rock Services Limited
NewLaw Solicitors
6,043
6,043
Panacea Limited (Gibraltar)
Centreline Air Charter Limited
Group Legal Limited
93
2
1,105
18
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
£000's
-
2012
£000's
564
-
2,574
-
3,138
NewLaw Solicitors
Panacea Limited GIB
Southern Rock Management Services Ltd
Rock Services Limited
Eldon Insurance Services Limited
Southern Rock Insurance Company Limited
2013
£000's
7,295
-
2012
£000's
10,355
1,298
175
127
64
59
Total Receivables
7,295
12,078
Payables to entities controlled by key management
2013
£000's
56
-
2012
£000's
2,894
963
69
1
56
3,927
2013
£000's
6,000
5,792
2012
£000's
5,479
564
Brightside Insurance Services Limited (formerly
Commercial Vehicle Direct Insurance Services Limited)
Group Direct Marketing Limited (T/A EMarketing Limited)
Total Sales
Group year end balances
Receivables from entities controlled by key
management
Southern Rock Insurance Company Ltd
Panacea Limited (Gibraltar)
NewLaw Solicitors
Group Legal
Total Payables
Company year end balances
Receivables from other Group companies
Group Direct Marketing T/A E Marketing Limited
Panacea Finance Limited
Brightside Insurance Services Limited (formerly
Commercial Vehicle Direct Insurance Services Limited)
Total Receivables
11,792
6,043
Payables to other Group companies
Group Direct Marketing Limited (T/A EMarketing Limited)
2013
£000's
16,795
2012
£000's
-
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
NewLaw Solicitors
Group Legal Limited
Common Directors
P S Chase-Gardener, H Molyneux
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
Panacea Limited (Gibraltar) *
Rock Services Limited *
Eldon Insurance Services Limited *
Southern Rock Insurance Company Limited **
E Development (2) Limited *
Common Directors
P S Chase-Gardener
P S Chase-Gardener
P S Chase-Gardener
P S Chase-Gardener
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 of Proportion
Subsidiary Undertaking
shares
held
Principal activity
Group Direct Limited
Ordinary
100%
Intermediate Holding Company
Injury QED Limited
Ordinary
100%
Medical Reporting
Brightside Insurance Services Limited
Ordinary
100%
Insurance Broker
(formerly Commercial Vehicle Direct
Insurance Services Limited)
Panacea Finance Limited
Ordinary
100%
Finance Provider
Group Direct Marketing Limited
Ordinary
100%
Facilities Recharge Company
(Trading as E Marketing Complete
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 £6,844,110. 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 £127 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.