A pivotal year CPPGroup Plc Annual Report & Accounts 2022 Group overview Financial highlights 1 Strategic report At a glance 2 Strategic framework 4 Investment case 5 Chairman’s statement 6 Chief Executive Officer’s statement 8 Our business model 13 Market trends 14 Our strategic priorities 16 Core business review 18 Key performance indicators 23 Chief Financial Officer’s report 24 ESG 30 Risk management and principal risks 32 Section 172(1) statement 36 Corporate governance Board of Directors & Company Secretary 38 Corporate Governance Report 40 Report of the Nomination Committee 44 Report of the Audit Committee 45 Directors’ Remuneration Report 47 Directors’ Report 50 Statement of Directors’ responsibilities 52 Financial statements Independent Auditor’s Report 53 Consolidated income statement 58 Consolidated statement of comprehensive income 59 Balance sheets 60 Consolidated statement of changes in equity 61 Company statement of changes in equity 62 Consolidated cash flow statement 63 Notes to the financial statements 64 Glossary 100 Company offices 102 Shareholder information 103 Read more about CPP Group on our website corporate.cppgroup.com A new phase for CPP Group Our strategy is to migrate away from our declining Legacy operations to a product-led global InsurTech business, supported by our CPP India and CPP Turkey businesses. We are moving towards becoming a simpler business, with all units contributing to growth and improving returns for shareholders. We plan to: Simplify the Group Scale-up our Blink Parametric business Grow our operations in India and Turkey Address critical IT infrastructure We have a big agenda ahead but strategic priorities unite us and set us up to be more competitive and relevant for tomorrow’s customers and their needs. Group overview Financial highlights A resilient performance G r o u p o v e r v i e w Revenue £169.8m +19% 22 £169.8m 21 £142.8m 20 £135.6m EBITDA1 £6.9m -5% 22 £6.9m 21 £7.2m 20 £6.0m Revenue from Core operations £154.3m +25% 22 £154.3m 21 £123.2m 20 £112.3m EBITDA from Core operations £5.0m +20% 22 21 £5.0m £4.1m 20 £2.3m Profit before tax1 £2.4m -43% 22 £2.4m 21 £4.3m 20 £1.3m Net funds £16.3m -1% 22 £16.3m 21 £16.4m 20 £15.3m 1. 2021 EBITDA and profit before tax include a one-time benefit of £1.1 million from the release of a commission provision in the UK. All figures are for continuing operations only with 2020 and 2021 comparatives restated to reflect Mexico as a discontinued operation. Refer to note 15 on page 82 APM glossary on page 100 CPPGroup Plc Annual Report & Accounts 2022 1 Strategic report At a glance Making bad days better Everyday life can be challenging, complex, and fast paced. We provide products and services that help make bad days better through simplifying complexities and removing hassle when something goes wrong. We offer a range of products and services within six product categories My Travel Parametric solutions if consumers’ flights are cancelled, delayed or if their luggage is lost Parametric Flight Disruption Parametric Lost Luggage My Tech Keeping consumers connected and protected through theft and damage insurance and anti-virus software for phone and gadgets Phone and Gadget Insurance My Health Utilising technology to provide access to health check assessments, online doctor consultations and discounted medical, pharmacy, optician and dentistry services, supported with life and critical illness insurance LivCare My Digital Life Safeguarding consumers’ identities through the monitoring of online personal data, combined with practical, specialist support Dark Web Monitoring Identity Protection Mobile Payments Protection My Home Looking after homes through preventative maintenance services, extended warranties for appliances, home emergency assistance, combined with entertainment features Extended Warranty Home Emergency My Finances Immediate assistance and financial protection to protect payment cards and mobile banking Card Protection ATM Protection Our partners Our propositions are distributed through our partners to help them stay a step ahead Giving them differentiation, customer loyalty and enhancing the value of their own products 2 CPPGroup Plc Annual Report & Accounts 2022 Our Core businesses We have taken steps to simplify the CPP Group portfolio and now focus on three Core growth businesses. Blink Parametric (Blink) An award-winning, global InsurTech business, focused on delivering differentiated ‘white- label’ technology-led services to the travel sector. All products leverage a mix of consumer and big global data sets to deliver real-time protection and resolution services. Blink offers the potential for a value-accretive third pillar for CPP, with its scalable, higher margin technology-led products. The business is currently focused on realising its strong pipeline in North America, Asia and Europe, and building its travel sector propositions before addressing new product opportunities Customers1 0.8m (+251%) Revenue £0.5m (+39%)2 EBITDA Distribution partners £(0.4)m 10 1 Policy sales that included a Blink service 2 On a constant currency basis India India distributes its products and services primarily to major non-banking financial companies Its strength comes from designing products at a local market level and partnering with third parties to create propositions that local partners value This market also includes our interest in Globiva, a leading business process management (BPM) company The business will continue with its successful local market strategy, focused on providing digital, low-cost innovative product and service solutions to a growing distributor base, enabled by a new technology platform that will widen product and distribution capability Customers 9.8m (+2%) EBITDA £8.0m Revenue £150.6m (+20%)2 Distribution partners 9 Turkey A multi-partner, multi-product business with a growing reputation for new generation, real-time assistance and micro-insurance products to its distribution customers. CPP Turkey will follow an organic-led strategy focused on providing innovative products, entrenching relationships and winning new partners in the mobile, digital and financial services sectors, thereby providing a diverse mix of revenues despite economic turbulence Customers 1.1m (+27%) EBITDA £0.7m Revenue £3.2m (+42%)2 Distribution partners 19 CPPGroup Plc Annual Report & Accounts 2022 3 Strategic report Strategic framework How it fits together Purpose To reduce disruptions of everyday life. Strategy To withdraw from the Group’s Legacy businesses and migrate to an InsurTech business led by Blink, supported by CPP India and CPP Turkey. Strategic Direction Laying the foundations: 2023 Operational scaling to accelerate the growth of Blink, implement the new India IT platform and continue the withdrawal from our Legacy business Shaping the future: 2024 Continued withdrawal from Legacy businesses and a step-change in our capabilities through full deployment of a new IT platform in India and decommissioning of legacy IT platforms Transforming CPP: 2025 Establish Blink as a leading provider of parametric solutions to the global travel sector, product development in India and Central Functions refocused and reduced in size Key building blocks People Find, develop, and retain great people Creating a strong culture of people united by our purpose Products Exit from highly regulated legacy products and invest in higher-margin tech-based services. Technology Reduce dependency on legacy platforms and invest in scaling our new technology in India and Blink Distribution Invest in local market and sector experience to extend our multi-product, multi-partner strategies. Ways of working to execute the strategy Change Management Programme (CMP) Governance and Risk Management Read more on pages 9 and 12 Read more on pages 32 and 40 Our longer term deliverables A globally scalable business Differentiated suite of higher‑margin products Removal of the drag of the Legacy business on the Group’s value Read more on our Strategic Priorities on page 16 4 CPPGroup Plc Annual Report & Accounts 2022 Investment case Transforming CPP to an InsurTech business led by Blink Parametric Global opportunities through the Blink platform, supported by growth opportunities in both India and Turkey. Strong customer and retail growth We have established, well managed businesses in India and Turkey which have sustained strong customer and revenue growth for a number of years We have a customer base of 114 million and we continue to grow our partner base in our Core businesses further increasing opportunities Customers 11.4m Partnerships with leading global businesses We create products that bring our partners ancillary revenue streams, profit and enhanced customer loyalty; as well as delivering highly valued services to their customers Focused on sustainable growth with a lower cost base Renewed focus on four Core growth businesses (India, Turkey, Blink and Globiva) and accelerated withdrawal from Legacy businesses will increase sustainability of profits while full implementation of the CMP will lower the cost of delivery and benefit margins medium-term. InsurTech potential Parametric services are an InsurTech gamechanger globally and Blink’s strong partnerships and market-leading services in the Travel Disruption sector provide strong medium-term value creation potential Strong balance sheet A robust cash position at the end of 2022, along with expected future cash flows from growth in our Core businesses will provide the Group with sufficient resource to deliver the CMP as well as fund investment in both Blink and the new Indian IT platform CPPGroup Plc Annual Report & Accounts 2022 5 Strategic report Chairman’s statement Positioning ourselves for the future We have reset the course and have a great opportunity to build a purpose-driven InsurTech, with long-term sustainability for our colleagues, customers and shareholders. In October of last year, we set out the conclusions of an extensive strategy review, the future direction of the Group and the accompanying change management programme (CMP) This will see the Group exit from its Legacy operations, address critical IT infrastructure requirements, and migrate the Group towards an InsurTech business led by Blink and supported by CPP India and CPP Turkey It is a bold and ambitious strategy, and it is certainly not without risk, but I firmly believe that it is the right course setting a clear framework and direction of travel for the Group, which will improve outcomes for shareholders and other stakeholders “ We believe the new strategy is the right one, and with a simplified focus and strong leadership, we believe we have what we need to execute it.” David Morrison Non-Executive Chairman 6 CPPGroup Plc Annual Report & Accounts 2022 The Board pays full attention to governance issues and endorses the importance of independent directors as well as the benefits of diversity However, its primary focus during this period of transformation is on delivering a strategy for growth and returns from which all shareholders and other stakeholders will benefit. Outlook We have a had a positive start to the year with trading from continuing operations performing in line with expectations and we are encouraged by the good pipeline of new business within Blink Additionally, the CMP is being progressed with key milestones either being achieved or on track to being achieved in line with our plans Nevertheless, we remain cautious and measured, as there is much to do over the course of 2023 and 2024 David Morrison Non-Executive Chairman 27 March 2023 Strategy for growth Our new strategy reflects our starting point. We have two successful businesses in India and Turkey, a sub-scale business with considerable potential in Blink, and a Legacy business in terminal decline Over a period of three years, the Group will focus on new product and new partner development in India and Turkey, we will seek to build our InsurTech capability, with Blink at its core, whilst we withdraw from the Legacy businesses, and the liabilities associated with them The execution of this plan and the operational risks associated with it are not insignificant. Through the CMP, we have put in place, which is discussed in more detail in the Chief Executive Officer’s statement, we aim both to mitigate the risk and to exceed expectations However, we are mindful that not all such endeavours proceed exactly as planned and there may be disappointments and delays along the way Financial results Trading performance from Core operations (Blink, CPP India, CPP Turkey and Globiva) was robust, with revenues increasing by 25% to £154.3 million and EBITDA, which also includes central costs, increasing by £0.9 million to £5.0 million. Group revenues from continuing operations, which include results from our Legacy operations, increased by 19% to £169.8 million whilst EBITDA of £6.9 million was 12% better than the prior year (adjusting for the 2021 £1.1 million commission release in UK Legacy operations). Our balance sheet shows cash of £21.0 million (2021: £22.3 million), which allows the Group to fund its working capital and CMP commitments People The course we have set ourselves brings uncertainty, the need for adaptability and a willingness to embrace change It has also led, inevitably, to changes in personnel and to the departure of some colleagues who have served the Group with diligence for many years It is in that context that I, and my fellow Board members, would like to thank all of our colleagues for their professionalism, hard work and dedication during a year of substantive change During the course of the year, we began meeting and considering candidates for appointment to the Board, recognising the benefits brought by independent non-executive directors who can also add value through their knowledge of the sectors in which we operate or their experience of some of the challenges thrown up by the CMP Whilst that process continues the focus and engagement of the current Non-Executive Directors and their support for and challenges to the executive team has been immensely valuable as the revised strategy was being developed during the course of last year CPPGroup Plc Annual Report & Accounts 2022 7 Strategic report Chief Executive Officer’s statement Growing our strong Core operations and migrating CPP to an InsurTech business The short story We have made the decision to migrate away from our regulated Legacy businesses and to focus our energies on becoming an InsurTech business supported by CPP India and CPP Turkey Why we are doing this Our Legacy businesses are in decline and will soon become unprofitable. We are focusing resources on those businesses which already deliver profitable growth or offer realistic potential to do so Blink, our InsurTech business, offers a differentiated set of products and services and is a globally scalable business CPP exists to create products and services which enrich the offering of our business partners Our aim is to help our business partners increase the real and perceived value of their products and services to their customers and, in so doing, drive increased customer loyalty For our stakeholders, our aim is to transform CPP into a business which creates long-term sustainable value. Thank you to our colleagues and shareholders Change, even if absolutely necessary, is always difficult, but change we must and change we will We have set our course and speed of travel and I look forward to working with my colleagues across the Group as we look to transform our business over the next few years Finally, I want to thank my colleagues for their commitment and continued goodwill and support Simon Pyper Chief Executive Officer Moving from one business model to another is a significant undertaking. That we can commit to doing so, reflects the quality, dedication, and commitment of my colleagues from across the Group.” 8 CPPGroup Plc Annual Report & Accounts 2022 Introduction In many respects, the results for the 2022 financial year are the last set of results for the Group as historically constituted Our new strategy and accompanying CMP published in October of last year, sets a new course for the business, which will see the Group exit from its Legacy businesses, address critical IT infrastructure requirements, and migrate towards an InsurTech business led by Blink Parametric and supported by CPP India and CPP Turkey We have already made some good progress with regards to our Legacy business, withdrawing from China, Bangladesh, and Mexico Additionally, in the fourth quarter of last year, we agreed terms to exit from our legacy Spanish and Portuguese operations which included the transfer of some business to a third-party underwriter. Despite the progress thus far, the CMP, a complex set of eight inter-dependent projects, is not expected fully to conclude before the end of the 2025 financial year. The size and scope of the change being implemented is profound and challenging, but I remain firmly of the view, that we have set the right course for the business, which, over time, will deliver satisfactory returns for shareholders and other stakeholders A focused business Our organisational structure reflects our strategic intent, to grow Blink Parametric, our InsurTech business, and to grow CPP India and CPP Turkey Each of these businesses has their own management team with full responsibility for revenue and EBITDA growth Our Legacy business has its own experienced team which is responsible for the measured wind-down and closure now in train. The Centre’s role will also change, moving, over time, to a slimmer refocused model, which pressure-tests the businesses’ targets and strategies, allocates capital and, where appropriate, actively promotes the sharing of best practice A resilient financial performance Group revenue from continuing operations grew by 19% on a reported basis and by 15% on a constant currency basis Revenues from our Core operations, which exclude our Legacy business (UK and European back books), grew by 25% on a reported basis and by 21% on a constant currency basis Group EBITDA was marginally lower than prior year at £6.9 million (2021 restated: £7.2 million), albeit this is 12% higher when excluding the one-time £1.1 million commission release recognised in the UK in the prior year. Blink Parametric: Revenue £0.5 million (2021: £0.3 million) and EBITDA loss £0.4 million (2021: loss £0.3 million) Blink is a technology and software platform focused on providing innovative Travel Disruption (flight delay and lost luggage) solutions for the global travel sector Despite being part of CPP Group since 2017, little, if anything, was done to maximise on its potential – it was in many respects an orphaned asset During the year we set in place, as part of the CMP, two work streams, one focused on building capacity (people; processes; and structures) and the other on growth (new product development and sales and marketing) The benefits of these two work streams will probably not be seen until the second half of 2023 That said, some of the work we are undertaking has started to be recognised, and in 2022 Blink won several prestigious industry awards including: • Insurance Times Awards – ‘Excellence in Technology - Service Provider’ • ITIJ Awards – ‘Outstanding Industry Contribution of the year’ • InsurTech100 – Blink Parametric made FinTech Global’s InsurTech 100 for 2022 India: Revenue £150.6 million (2021: £119.3 million) and EBITDA £8.0 million (2021: £7.8 million) India is the Group’s largest operating business, generating circa 89% of total revenues. The business performed well, benefiting from both volume growth and favourable exchange rate movement On a constant currency basis, revenue growth for 2022 was 20% EBITDA growth was subdued reflecting, in part, an adverse change in revenue mix towards lower margin products and increased operating costs There are two constituent businesses: 1. CPP India: Reported revenue up 24% to £134.8 million (2021: £109.0 million), constant currency revenue growth of 18% CPP India works closely with its business partners to drive value by growing customer loyalty through the design and delivery of simple and innovative products, which fit seamlessly into the everyday life of consumers Revenue growth for 2022 was robust with the number of live polices at year end increasing by 2% to 98 million, but with some movement towards lower margin products such as LivCare Operating costs increased during the year due to additional third-party costs and improved incentives for the in-country executive team CPPGroup Plc Annual Report & Accounts 2022 9 Strategic report Chief Executive Officer’s statement continued A resilient financial performance continued India continued 2. Globiva: Reported revenue up 54% to £15.8 million (2021: £10.3 million), constant currency growth of 46% Globiva is 51% owned by the Group and is one of India’s fastest growing BPM companies, providing outsourced customer relationship management, back-office functionality, and automated human resource services to a growing roll of clients Revenue growth reflects several new business wins, a favourable exchange rate and, importantly, a full twelve months of trading without any COVID-19 disruption. Like the majority of India-based BPMs, Globiva’s largest operating cost relates to seat occupancy (employees), which has increased significantly over the past year which, in turn, had an adverse impact on EBITDA growth Turkey: Revenue £3.2 million (2021: £3.6 million) and EBITDA £0.7 million (2021: £0.8 million) CPP Turkey performed well during the year with revenue and EBITDA increasing by 42% and 36% respectively on a constant currency basis That the business has been able to deliver real growth in such a turbulent economic environment is a testament to the quality and strength of our proposition, of our relationships with our business partners, and of our management team CPP Turkey ended the year with a live policy count of 11 million, a major landmark and a substantial increase on the prior year In February 2023, a devastating earthquake hit the southern part of Turkey. Whilst our Turkish office is not located in the disaster area most colleagues have been impacted in some way through family, friends or business connections We continue to monitor the situation closely and are providing any support that is needed to our colleagues Legacy operations: Revenue £15.5 million (2021 restated: £19.7 million) and EBITDA £1.9 million (2021 restated: £3.3 million) Our Legacy operations (UK and European back books) are in terminal decline and will soon become unprofitable. To address this, the Group announced, in October of last year, its plans to exit from its Legacy operations in an orderly manner, effected by the CMP, which will take three years to conclude Live policies: Number of live policies at 31 December 11.4 million (2021 restated: 11.4 million) Live policy growth is a good indicator of business performance for CPP India, and CPP Turkey Live policies in our Core businesses have increased to 10.9 million (2021: 10.4 million) whilst, as expected, they have reduced in our Legacy operations to 05 million (2021 restated: 1.0 million). Central costs: £3.3 million down 22% in the year (2021 restated: £4.3 million) Central costs before allocation are £9.0 million (2021: £10.4 million) of which £3.5 million (2021: £4.0 million) relates to the cost of the Group’s IT operations The majority of the IT costs, which are recharged to the Group’s operating businesses, represent costs associated with maintaining regulatory compliant consumer data, in multiple geographies The Group is developing a new IT platform which is expected, once deployed, to deliver significant efficiencies from the second half of 2024 Net of recharges, central costs have reduced by £1.0 million year- on-year primarily due to a reduction in Board and executive costs along with the cost benefits from a 60% reduction in the Leeds Head Office space which was finalised during Q3. A simple strategy we can execute: Group The over-arching strategy is to exit the Legacy business and to migrate CPP to an InsurTech business led by Blink and supported by CPP India and CPP Turkey InsurTech businesses generally have attractive economics, they generate high levels of repeat business, they operate with high margins and are commonly valued more highly than their traditional insurance counterparts The strategy, if executed correctly, will simplify the business and its operations and, moreover, will set out a clear purpose for the Group, one that leverages the global nature of Blink’s parametric propositions 1) Where we will compete: The Group will focus on designing innovative assistance products and services which augment and create value (customer satisfaction, customer loyalty and new business) for its growing distribution business partner base 2) Base of competitive advantage: Differentiation, with a focus on new product development, product innovation, and quality of service to our current and future business partners 3) Strategic direction: Market penetration and development for Blink, CPP India and CPP Turkey Live policies (millions) CPP India CPP Turkey Legacy My Finances Vs Lyr % My Tech Vs Lyr % My Health Vs Lyr % My Home Vs Lyr % My Digital Life Vs Lyr % My Travel Vs Lyr % Total Vs Lyr % 33 +12% 18 -25% 25 +23% 22 -2% — n/a — n/a 9.8 +2% 03 +16% — n/a 01 >+999% — n/a 07 +28% — n/a 1.1 +27% 05 -34% — n/a — n/a — n/a — n/a — n/a 0.5 -39% 10 CPPGroup Plc Annual Report & Accounts 2022 Group 41 +4% 18 -25% 26 +24% 22 0% 07 +19% — n/a 11.4 0% 4) Method of implementation: Internal development with product acquisitions which enrich or enhance our proposition We will, at the same time, withdraw from our Legacy business and dispose of non-Core business investments. 5) Constraints: Management bandwidth as we are going through a period of substantial change Finding suitable acquisitions at an appropriate price Moving from an informal approach to a formal approach and structure, with a set of processes for continuous production, innovation, and development Our strategy is in two stages Stage one is to migrate away from the regulated Legacy business and to focus on Blink, CPP India and CPP Turkey Stage two is to develop CPP into a product-led, global InsurTech business (Blink), supported by CPP India and CPP Turkey Whilst this is a relatively simple strategy, it will take three years to implement fully Blink Parametric Global InsurTech business, initially focused on the Travel Disruption market Market development and penetration, with formal New Product Development approach Organic and acquisition-led approach with acquisitions biased towards product or technology gaps CPP India Market development and penetration with local market responsibility for new product development Organic approach Incentives to encourage management to build long-term shareholder value CPP Turkey Market development and penetration with local market responsibility for new product development Organic approach with some product acquisitions where appropriate The Centre Refocused model which is low cost and: • Oversees the business • Pressure tests business unit strategies and allocates resources • Enables functional expertise • Facilitates best practice • Manages key stakeholders A simple strategy we can execute: by business unit Blink Parametric: A differentiated suite of products with a focus on technology and innovation providing the basis for competitive advantage, particularly in the Travel Disruption (flight delay and lost luggage) market over the near to medium term With regard to Blink’s strategic direction, there are opportunities to introduce the suite of Travel Disruption products to new geographies including North and South America, India, and Asia Product development, either organic or through small bolt on acquisitions, will focus on identifying innovative digital solutions for our distributors and end customers The business today is not fully scalable and the ability to execute the strategy is somewhat constrained as there has, since acquisition in 2017, been insufficient investment in people, processes, and structures to facilitate growth This lack of investment is being addressed as part of the CMP We have set out what we believe to be an achievable strategy; one which, post the CMP, we can execute at pace CPP India: The business will continue with its successful local market strategy, which is focused on providing low-cost innovative product and service solutions to a growing distributor base The strategic direction for CPP India is one of increasing its distributor footprint and, where appropriate, developing a broader range of online and mobile app products and services, particularly within the Lifestyle and Healthcare markets While acquisition multiples in India remain beyond our reach, consequently both market and new product development will have to be internally led The strategy as set is an achievable one, though it is highly dependent upon the retention and incentivisation of the CPP India management team and the implementation of the new Indian IT platform scheduled for 2023 From a risk perspective the majority of CPP India’s revenues are currently generated from two long-standing distributor relationships, one of which is due for renewal around the end of 2024 Whilst we are confident that these arrangements will be renewed, our strategy, even if successfully implemented, will not materially rebalance this concentration risk in the foreseeable future CPP Turkey: Similar to CPP India, the business will continue with its successful local market strategy, which is focused on providing innovative products and services to a broad and diversified distributor base. CPP Turkey has an enviable track record of developing products which increase both the perceived and real value of those products offered by its distributors to the end consumer New product development is a critical part of the strategic process for CPP Turkey and this will continue, albeit via a more formalised process which focuses on shared learning and best practice The strategy is in many respects ‘more of the same’ though, similar to CPP India, it is highly dependent upon the retention and incentivisation of the local management team From an execution and delivery perspective, the strategy is an achievable one The key risk, in terms of outcomes, is continued economic turbulence in Turkey, which may either reduce demand for our products or services, or further weaken exchange rates, or both CPPGroup Plc Annual Report & Accounts 2022 11 Strategic report Chief Executive Officer’s statement continued A simple strategy we can execute: by business unit continued The Centre: Where the business units develop their own strategies (CPP India and CPP Turkey) and control many of the resources to execute those plans, the Centre will pressure-test the businesses’ targets and strategies, will actively promote the sharing of best practices, and will, where appropriate, provide select expertise or shared services In general, the business unit CEOs own their profit and loss accounts and make appropriate investment trade-offs. The Centre provides services only where it has better expertise or a lower cost than the businesses can provide on their own Legacy business: The Legacy UK and European Card Protection business has, since 2012, been in decline and will, if not addressed, become both unprofitable and a significant drain on the Group’s resources Our intention through the CMP to withdraw from these products and markets Withdrawal from the Legacy business will be a long and complex process, one with many regulatory and operational inter-dependencies and is very much dependent upon the goodwill of both our partners and colleagues As we progress, each decision we make and each action we implement will have due regard to the best interests and well-being of our partners and colleagues. Change Management Programme (CMP) The CMP is the process by which the Group will effect strategic change, exiting from its Legacy operations and building an InsurTech business supported by CPP India and CPP Turkey The CMP is a complex, inter-dependent set of eight projects which are expected to conclude late 2025 • Financial risk The complexity and duration of the CMP may lead to cost over runs particularly if key team members exit ahead of programme delivery • Complex interdependencies There are many interdependencies between the projects, with the risk of financial and people impacts disrupting multiple projects Additionally, the interdependencies have the potential to delay the decommissioning of the legacy IT platform • Third-party dependencies Legacy contracts often involve multiple parties and the agreements with them cannot be dissolved unilaterally by the Group The pace of change is often adversely impacted by third parties not operating to CPP’s timelines Financial implications of the CMP: • Dual running costs As we build out the IT platform for CPP India and migrate from the legacy systems, the Group will have a period of dual running costs whilst we operate both platforms We expect to suffer these dual running costs until the first quarter of 2025, after which we should be able to realise material cost savings • Restructure and retention costs Costs associated with the CMP will be substantial, as will the redundancy and retention packages which we will need to introduce We will provide guidance on these costs as we progress The CMP projects are summarised as: • Impact on Group’s cash resources and dividend • Legacy IT platform and new Indian IT platform development The development of a new customer service platform for CPP India, which will be delivered in two phases (Phase 1 - non-Card products; and Phase 2 - Card products). The new platform will ensure all customer data resides fully in India and that India has an independently managed customer IT infrastructure which enables the decommissioning of the Group’s legacy IT platform and improved efficiency to India’s operational model. • Cessation of UK & European legacy books A complex multi workstream programme which will accelerate the natural cessation of the UK and European back books enabling the decommissioning of the Group’s expensive legacy IT platform, removal of management focus on legacy/run off books and is intended to remove the drag of the Legacy business on the Group’s valuation • Blink scalability Currently a sub-scale business which is at an early stage of development, Blink requires a programme of activity to ensure that its operational processes are adequately robust to manage a substantially larger volume of transactions and to become the Group’s third business of strategic growth alongside CPP India and CPP Turkey Key risks associated with the CMP: Each project is supervised by the Executive Management Committee (EMC) and implemented by the Operational Board but, due to size and complexity, there will be some execution risks, namely: • People risk Key person dependencies have been considered with supporting plans developed in the event key team members leave the business before the CMP is concluded Capacity risk is also considerable in many areas, with several colleagues or team members involved in multiple projects People risk is likely to remain high for the duration of the CMP 12 CPPGroup Plc Annual Report & Accounts 2022 The dual running costs and costs associated with the restructure are material, however we expect to be able to service these costs from existing and forecast resources Due to the costs and uncertainties associated with the CMP, as previously announced, the Board has taken the decision to suspend dividend payments until further notice If circumstances change, the Board will review and update shareholders when appropriate to do so People The size, scope and complexity of our CMP should not be under- estimated It is a huge undertaking, one which at times can seem somewhat daunting, to re-engineer a business as complex as CPP and in so doing, move from one business model to another That we can contemplate such an undertaking reflects the quality, dedication, and commitment of my colleagues from across the Group Personally, I am humbled by their continued support, in what for some, can only be the most uncertain of times Their commitment to the task we have set ourselves is exemplary, for us at CPP our ‘grasp really does exceed our reach’. Outlook From a trading perspective our Core businesses are performing very much in line with expectations From an operational point of view, we continue to make good progress in implementing the CMP and expect to deliver on the objectives we have set ourselves for the 2023 financial year. Simon Pyper Chief Executive Officer 27 March 2023 Our business model Creating value Our business model allows us to create and deliver innovative, revenue-adding, products for our distribution partners and make a bad day better for consumers across the globe. This in turn enables us to create and share value with our stakeholders. Inputs and resources on which our business model depends What we have People We encourage a culture of putting innovation, distribution partners and consumers first. Technology Investment in the continuous improvement of our IT platforms to drive product development, operational efficiencies and scalable growth. Financials A robust cash position to fund the CMP and Core business initiatives to secure long-term value for shareholders Consumer and customer We use our local market and travel sector expertise to adapt to consumer needs and to foster strong partnerships Design and delivery of bespoke products, insurance and services, in combination with third-parties, to augment local partners’ propositions to fit commercial and consumer needs. What we do Creation of fully-managed, white label customer experiences Products and services are embedded or sold as an ancillary offering at relevant points in the partner customer journey Recurring customer revenue Customers pay monthly or annual premiums to CPP and we pay commission to our distribution partners These can be one-time revenue streams or policies that will convert to a renewal Creation of revenue Recurring partner revenue Partners pay recurring monthly fees to include our services into their core product on a wholesale basis SaaS revenue Distribution partners pay a minimum recurring per-user fee, alongside multi- year contracts, for service provision to our parametric software solutions Who we deliver for Consumers • Swift, affordable and transparent assistance products • 114 million customers protected (live base number) Business partners • Increase revenues • Cost efficiency • Differentiation • >50 partners Colleagues • Purposeful work and commitment to developing colleagues, their wellbeing and recognising their talent • 74% of colleagues are proud to work at CPP • 80% feel comfortable contributing ideas Shareholders • Strong revenue visibility • Investment for growth and deliver improved returns for our shareholders CPPGroup Plc Annual Report & Accounts 2022 13 Strategic report Market trends Meeting the needs of the market The environment we operate in is constantly changing. Understanding the influences on our business enables us to be prepared for change, to respond quickly, and to create value for the long term. Accelerated shift in digital and connectivity Increased demand for protection On-demand living What is happening? Technology is embedded into our lives, and our relationship with it grows increasingly complicated with 74% of global consumers uncomfortable with their online behaviour and personal information being tracked1 In addition, 55% of global consumers have concerns about their bank’s abilities to keep their details safe2 Nevertheless, the pandemic has increased consumers’ reliance on technology and many are embracing it to achieve greater health and productivity benefits. This has led to a shift in business models and offerings as our partners look to rapidly evolve their customer experiences Our response We have commenced work to scale Blink’s platform and our Indian platform to respond to the increasingly digital landscape, enabling improved integration and data analytics to deliver increasingly configurable propositions to our partners and their changing business models In addition, we have controls in place to mitigate and monitor cyber-attacks, and are PCI certified. What is happening? In an era of daily disruptions, trepidation over the economic outlook and the fast pace of change, consumers are feeling the effects - with 65% of UK consumers and 72% of consumers in India feeling overwhelmed, and 67% of UK consumers feeling burnt out by life3 With this feeling of being outpaced and overwhelmed consumers are looking for ways to safeguard health and financial security resulting in a 7% increase in global customer intent to buy insurance4 Our response We believe there is a growing appetite for assistance To respond to this evolving need we will roll out a Group New Product Development (NPD) framework in 2023 to encourage best practice and shared learning to ensure that we respond to ever-evolving consumer needs What is happening? Insurance is transitioning from the traditional ‘purchase and annual renewal’ model to a pay-as-you-go cycle, with more than 50% of consumers wanting usage-based insurance5 This may lead to products being disaggregated into micro- coverage elements and customised to consumer needs, and being increasingly embedded into the point of sale to aid convenience and enhance value Strong growth is forecast in embedded propositions with the embedded insurance market alone estimated at over $500 billion in the USA and $60 billion in Europe by 20326 Our response Insurers and partners will increasingly use technology-driven products to enable easier access to simpler, more affordable and relevant assistance and protection solutions offered at convenient and contextually relevant moments to their customers We believe that our Blink products fit well into this emerging model and intend to grow our distributor footprint to target this growing embedded assistance and protection segment Links to risks 2 5 7 Links to risks 1 Links to risks 1 14 CPPGroup Plc Annual Report & Accounts 2022 Links to risks Read more on our risks on page 32 1 Further with Ford Consumer Trends, 2022 2 YouGov, Do consumers trust banks on cybercrime?, October 2021 3 Further with Ford Consumer Trends, 2023 4 CapGemini World Payments Report, 2021 5 CapGemini, World Insurance Report, 2020 6 SwissRe, Embedded Insurance Peer Group Report, June 2022 7 World Travel & Tourism Council, Global Trends, August 2022 8. Amex Trendex, 2021 (survey of consumers in the US, UK, Australia, Japan, Mexico, India and Canada) 9 Consumer Intelligence, 2022 Cost of living Tourism remains a recovering and growing sector Sustainability expectations continue to rise What is happening? Consumers are increasingly aware of companies’ sustainability credentials and there is an expectation that businesses should help address broader societal and environmental challenges The pandemic has accelerated this shift by exposing inequalities in our society but also demonstrating what we can achieve as a society if we work together Our response We will develop our ESG roadmap in 2023 through colleague surveys, workshops and the establishment of an ESG Committee This will include the identification of ESG goals, targets and reporting standards to align to ensure progress towards our roadmap What is happening? It is clear that a volatile geopolitical picture, compounded by significant macro-economic pressures such as inflation, will impact market and business sentiment over the next 12 months Our response The cost of living crisis in the UK is impacting colleagues and we have identified ways to support our people through increasing our Flexible Benefits packages and reviewing our annual pay review approach supporting those likely to be struggling the most We will continue to review our People Policies in 2023 to identify additional areas where we can support colleague wellbeing We will also collaborate with our distributors to ensure that products are affordable and meet their and their end-customers’ needs. What is happening? The travel and tourism market is a significant contributor to the global economy, contributing to 103% of global GDP pre-pandemic7 and is expected to be an attractive growth market driven by people living longer, healthier lives; the growth of middle classes across the globe; and the desire for experiences after being homebound for two years The pandemic has also placed a new emphasis on wellness with 76% of consumers wanting to spend more on travel to improve their wellbeing, and 55% willing to pay for wellness extras on their holidays8 Consumers are also making their travel decisions with an increased focus on protecting their investment, with 58% of UK travellers stating they are more likely buy travel insurance now than before the pandemic9 Our response The travel sector can build that extra layer of customer care as travellers seek more ways to achieve peace of mind The increased consumer sentiment around wellness travel bodes well for Blink’s partnerships, in addition to our health assistance products in India and Turkey Links to risks 1 2 Links to risks 1 Links to risks 7 CPPGroup Plc Annual Report & Accounts 2022 15 Strategic report Our strategic priorities Targeting sustainable growth A strategy to simplify the business, foster organic growth opportunities and leverage the global nature of our InsurTech. Addressing issues and opportunities In October 2022, we announced our strategy to shift towards an InsurTech business led by Blink and supported by CPP India and CPP Turkey, whilst addressing the challenges presented by our declining legacy book But a sensible strategy is only a starting point; fulfilling our potential depends on delivering what we said we would We aim to do this through the CMP, which is a set of eight interdependent projects supervised by the EMC and implemented by our Operations Board The interdependent strategic projects include simplification of our Products through the exit of highly regulated legacy products and investing in higher-margin products that provide assistance when customers have a bad day; creation of a globally scalable business through investments in Technology, from scaling Blink’s parametric platform to the delivery of a standalone platform in India; and extending our Distribution partnerships to support Blink’s geographical expansion and reduce concentration risks within our partner base Links to risks Read more on our risks on page 32 16 CPPGroup Plc Annual Report & Accounts 2022 Laying the foundations: 2023 Operational scaling of Blink and continued withdrawal from Legacy businesses Products • Complete the exit of our Legacy operations in Spain and Portugal • Roll out the Group NPD framework to encourage best practice and shared learning across the Group • Refresh the brand identity to reflect our positioning of developing innovative solutions to consumers everyday challenges Technology • Complete the operational scaling of Blink, investing in ongoing innovation to realise the pipeline and position ourselves as thought leaders in parametric solutions for travel • Enhancement of Blink’s user experiences (UX) to further improve product usage and engagement • Implement the initial phase of the India IT platform to compete more effectively and widen distribution channels Distribution • Deepen Blink’s distribution paths with multi-national insurers and launch into the US travel insurance market. • Extension of our multi-partner distribution relationships in Turkey and India to protect against economic volatility and distributor concentration risk Links to risks 1 2 What the strategy gives us Shaping the future: 2024 Transforming CPP: 2025 A global product-led business Products • Well progressed withdrawal from the UK Legacy business. • New product development outside Blink’s non-core travel sector and where appropriate we will strengthen the Blink proposition through acquisitions Technology • Development of user experiences, and Blink platform enhancements to enable speed of delivery of new products in new markets Distribution • Development of multi-product contracts with a diverse distributor base across all of our Core businesses • Retention of large-scale distributor Blink contracts to provide certainty on future annualised revenue streams Continued Legacy business withdrawal and step-change in technology capabilities Products • Development of product roadmaps to ensure longevity of propositions • Enhancements to the Blink travel proposition to cement our position as market leader • Identification of opportunities for monetisation of customer engagement and context data to enhance Blink’s offering Technology • Complete the implementation of the India IT platform and transition India away from legacy systems • Decommission the Group’s legacy platforms • Continued development of the Blink platform and data set IP to ensure a market-leading position, and to aid expansion into non-travel propositions. Distribution • Increase market penetration in India and Turkey through existing products and product development targeting new customer segments • Extend Blink’s distributor relationships through multi-product offerings with global travel insurers, providing opportunities for greater annualised revenues Links to risks 2 4 6 Links to risks 1 A simpler business to understand A growth focused business A globally scalable business A differentiated suite of higher‑margin tech‑based products CPPGroup Plc Annual Report & Accounts 2022 17 Strategic report Core business review Strengthening and scaling Blink Parametric Blink is an InsurTech business which provides technology solutions to insurance companies across the globe. Overview Blink’s technology allows insurers to deliver real-time help to their customers when something goes wrong, when and where they need it, removing the need for complicated time-consuming claims processes Blink is at the forefront of innovation in the travel insurance sector which is forecast to be worth over $34 billion by 2025 (source: Statista, 2023). The business has in the past suffered from a lack of investment in key areas which was addressed in the second half of 2022 following the strategic review Blink provides the Group with its only global product set and is developing into a market-leading, high-quality global technology business Blink operates two primary products for travel insurers focused on flight disruption and delayed luggage These products are embedded into travel insurers’ core products allowing their customers to benefit from real-time support driving loyalty, increased retention and sales for our clients Progress Activity for the year has been focused on scaling Blink within the travel insurance sector and expanding into new geographies whilst building a pipeline of large global and regional insurance companies for future growth. In 2022, a high-quality pipeline has been developed supported by the re-bound of travel post-COVID-19 restrictions being lifted, which is expected to convert in 2023 into a step change in the number and scale of clients using Blink’s solutions Blink has ten active distribution customers in markets across North America, Europe, UK and Asia and in early 2023 has launched with its first client in the US market. This is an important milestone for the business as it is the largest travel market globally and presents a significant growth opportunity. Revenue £0.5m (2021: £0.3m) EBITDA £(0.4)m (2021: £(0.3)m) Sid Mouncey Blink Parametric CEO A reputation building year 18 CPPGroup Plc Annual Report & Accounts 2022 2 Ongoing innovation and optimisation of our platform, UX and data sets enables a range of travel disruptions products that can: • Be developed efficiently and cost effectively • Be insurer agnostic and white-labelled • Operate on a multi-region, multi- lingual and multi-currency basis • Be integrated quickly and easily for distributor deployments • Increase transparency and engagement • Improve saleability of products 1 Customisable parametric software solutions, available through APIs, to enable large scale, multi-national insurers and travel companies to embed parametric insurance products into their brand’s propositions Flexible platform and world‑class team Multiple customer benefits Blink’s business model Minimum contracts create attractive margins Large global travel market drives growth 4 Expanding distributor customer base buys products under per-user fee for service provision and multi-year contracts, creating: • Certainty of annualised recurring revenues • Attractive margins 3 The global travel market provides for a large total addressable market enabling: • An innovative and fast- growing business • A significant and promising distribution partner pipeline A primary focus for the business is to reduce lead times to move clients from prospect to launch Blink’s distribution customers often operate in highly regulated markets where decision-making and change times can be long. Once live, contract lengths are multi-year with consistent revenue predictability Our experience is once an insurer launches in market others follow to maintain a competitive position An operational scalability programme commenced in H2 2022 to put into place robust and high-quality foundations that can support the strong pipeline with confidence. This project has made good progress and will complete in Q1 2023, with an ongoing enhancement programme from that point forward The products have developed well in 2022, creating further differentiation against competitors and improving the quality and performance for clients and their customers This has been evidenced through notable award wins including the Insurance Times Awards ‘Excellence in Technology – Service Provider’, the ITIJ Awards ‘Outstanding Industry Contribution of the Year’ and inclusion in FinTech Global’s ‘InsurTech100’ for 2022. Looking ahead We are focused upon capturing as much of the global travel market as possible for travel related parametric solutions, including our entry into the US travel insurance market. The global travel insurance market was valued at approximately £13.3 billion in 20211 and we conservatively see Blink’s revenue opportunity in this sector to be worth over £20 million. The global nature of the business is exciting but brings risk – ensuring we have a clear view on regulatory, data and tax requirements in each major market we operate within will be very important We have an attractive pipeline of large global travel insurer distribution opportunities and we will seek to deepen distribution paths into their global businesses, initially starting in one geographical market and then using the partner to support our launch into other geographical territories This distribution strategy will be supported through the building out of our customer success function and doubling the overall Blink resource pool Further ahead, we will look at a programme of NPD to shore up and extend our existing travel offerings, enabling further penetration with existing and new clients 1 International Travel and Health Insurance Journal, October 2022 CPPGroup Plc Annual Report & Accounts 2022 19 Strategic report Core business review continued An exemplar for organic growth CPP India is our largest business and generated strong volume growth, through the creation of simple and innovative products that deliver value for local partners. Overview CPP India has continued its successful organic growth strategy of providing low-cost innovative product solutions to a growing base of nine business partners These products and services are managed through an extensive supplier and insurer framework alongside our headline products of LivCare, FoneSafe, Asset Secure and Card Protection The business delivered another year of double digit revenue growth, up 18% on a constant currency basis at £134.8 million. However, EBITDA only increased marginally to £5.6 million (2021: £5.4 million). Work continues on the development of a stand-alone technology platform to facilitate CPP India’s ability to improve its digital delivery and move to a lower cost operating model Progress The first half of 2022 started positively as we agreed a contract extension with Bajaj Finance Limited (Bajaj) until around December 2024, providing the Group with improved certainty over a significant proportion of its future revenues, albeit on improved commercial terms for the partner We witnessed a slowdown in economic growth over the summer due to a combination of erratic rainfall and inflation reducing private consumption Nevertheless, the business performed strongly and was bolstered by a strong Diwali festival season which stimulated the purchase and financing of electronics and white goods, providing opportunity for the distribution of our products in the Deepak Matai CPP India CEO Customers 9.8m second half of the year34+ Card Protection 34% FoneSafe 19% Asset Secure 21% LivCare 26% 20 CPPGroup Plc Annual Report & Accounts 2022 19 + + 21 + 26 + + R R The market remains dynamic with competitors currently operating with superior technology stacks, thereby enhancing their capability to deliver high-class customer experiences at a lower cost. Central to the execution of CPP India’s 2023 strategy is the delivery of our new IT platform to drive improvements in our technical capabilities including greater API integration, a unified digital claims journey and a self-service portal integrated within Bajaj’s app, ensuring further competitive advantage in the medium-term. Looking ahead We expect to see continuing growth as India is set to be the second-fastest growing economy in the G20, with economic growth forecast at 7% for 2023 In addition, the Indian market has made impressive progress in extending access to financial services to a larger portion of the population, including disadvantaged socio- economic groups We aim to capture these widening customer segments, deepen our relationship with Bajaj and access new verticals through the development of product propositions such as protection for used mobile phones targeted at the rural market We will drive organic growth through the targeting of new customer segments for tele-acquisitions in SBI Cards and Tata Capital. In addition, we will extend our multi-product distribution partnerships through the development of a broader range of digitally based products including health-based assistance, used car extended warranties and EMI (Equal Monthly Instalment) Protect products We see further growth opportunities through increasing our distributor footprint with large-scale banks and Non-Banking Financial Companies (NBFCs) to mitigate the concentration risks within our distributor base, this will be supported through the delivery of the Indian IT platform in 2023 Revenue £134.8m (2021: £109.0m) EBITDA margin 4.1% (2021: 4.9%) EBITDA £5.6m (2021: £5.4m) Customers 9.8m Globiva During the year, Globiva, in which we hold a 51% controlling stake, continued to diversify its client base through the addition of 12 new clients, supported with a headcount increase of 650 colleagues, and despite pandemic related challenges, Globiva posted strong financial results, registering 46% constant currency revenue growth on the previous year. However, EBITDA is flat with the prior year at £2.4 million, as it has invested to accelerate out of COVID-19 along with the impact of inflationary pressures on wage and energy costs and a reduction in business from international clients, which typically command higher margins than the domestic Indian market 2023 is set to be a challenging year for revenue growth primarily due to slowdowns in business with our tech-first clients who have seen their own funding capability reduce in the current investment environment. In addition, we expect inflation to continue to pressure our cost base However, Globiva has built an excellent operation that is heavily technology enabled which sets it apart from most of its domestic competitors Globiva is therefore well placed to adapt and create a future-ready workforce and business model Revenue £15.8m (2021: £10.3m) EBITDA £2.4m (2021: £2.4m) EBITDA margin 15.5% (2021: 23.9%) CPPGroup Plc Annual Report & Accounts 2022 21 Strategic report Core business review continued Resilient performance in Turkey While the Turkish market had a tough year in terms of economic volatility, CPP Turkey’s local currency performance improved in terms of revenue and EBITDA. Overview Revenue grew by 42% on a constant currency basis to £3.2 million and EBITDA of £0.7 million represents growth of 36%. The improvement on a local currency basis versus last year reflects CPP Turkey’s continued multi-product and multi-channel strategy. On a reported basis, both revenue and EBITDA declined as local progress has been wiped-out by the ongoing depreciation in the Turkish lira. Progress Our strong performance showcases the benefit of our multi-product and multi-partner strategy with 19 brands such as AXA, VakıfBank, Işbank, BBVA, BNP Cardif and Vodafone. We delivered nine new distribution partner projects in 2022, with 64% volume growth from the Türkiye Sigorta partnership (VakıfBank & Halkbank), and 49% volume growth from the Akbank & Aksigorta partnerships However, this good progress was not without its challenges with the official Turkish inflation rate for 2022 being in excess of 60% which increased overheads and supplier payments We have taken action to partially offset the inflationary impact through policy premium increases and have mitigated further volume declines amongst our distribution partnerships through the launch of new products, supported by our CPP in-house call centre capacity and a wider range of banking channels CPP Turkey’s reputation in providing digital-led innovations in the market continues to differentiate us, with our Mobile Payments Protection product winning the silver award for ‘Best Innovative Insurance Product’ at the recent smart-i awards 2022. This focus on local product innovation pushed the business to a major milestone of reaching one million customers, representing 27% growth on the previous year Looking ahead Despite the additional operational complexities presented by economic volatility, political risk, high inflation rates and the weakening currency, we expect 2023 to continue to provide opportunities, with new distribution projects and new product launches expected to account for approximately 20% of gross new sales We expect to see our newly launched Health Protection scale as well as aiming to deploy new propositions such as SME Protection, and Lifestyle assistance products The recent tragic earthquakes experienced in Turkey are likely to have a short-term impact on our business partner branch and outbound telemarketing sales channels and we will continue to review the response of the insurance industry to ensure our products and services evolve to our changing insurance partners’ needs Mehmet Gorguz and Esin Karakaya Acting Managing Directors, CPP Turkey Revenue £3.2m (2021: £3.6m) EBITDA £0.7m (2021: £0.8m) EBITDA margin 22.6% (2021: 23.8%) Customers 1.1m 22 CPPGroup Plc Annual Report & Accounts 2022 Key performance indicators Measuring our progress Live policies 11.4m 0% 22 11.4m 21 11.4m 20 11.2m Measure The total number of active policies that provide continuing cover or services to policyholders Performance The live policy base is flat year-on-year with a 27% growth in customer numbers in Turkey and 2% growth in India being offset by the continued reduction in the size of our UK and European renewal books Annual renewal rate 56.8% -6.4% Cost/income ratio 46.0% -5.1% 22 56.8% 21 63.2% 20 68.2% 22 46.0% 21 51.1% 20 52.3% Measure The net amount of annual retail policies remaining on book after the scheduled renewal date, as a proportion of those available to renew Measure Cost of sales (excluding commission) and administrative expenses1 as a percentage of revenue Performance The annual renewal rate for 2022 has decreased by 64 percentage points (ppt) The reduced rate reflects the negative mix impact from a greater weighting towards our Indian and Turkish books which typically renew at lower rates than our diminishing Legacy renewal books In addition, the rate in our India Card Protection book has reduced 11% following changes in RBI guidelines in late Q4 2021 to recurring credit card transactions Performance Our cost/income ratio has decreased 51 ppt year-on-year due to the mix benefit of growth in India which has a comparatively low cost base (excluding commissions) and a reduction in central costs 1 Cost of sales (excluding commission) and administrative expenses (excluding depreciation, amortisation and exceptional items) as a proportion of revenue EBITDA margin 4.0% -1.1% Revenue from major products £169.8m +19% 22 4.0% 21 5.1% 20 4.4% 22 £169.8m 21 20 £142.8m £135.6m Measure EBITDA as a percentage of revenue Performance Our EBITDA margin has decreased by 11 ppt year-on-year with 0.8 ppt relating to a one-time commission release benefit in the UK in the prior year The remaining reduction of 03 ppt reflects a shift to lower margin product variants in India and the impact of inflationary pressures across the Group, but most notably in Globiva and Turkey, being mostly offset by reducing central costs Measure Revenue from the Group’s major products and services (defined in note 5 to the financial statements). Performance Revenue in My Health and My Home has grown by 66% and 32% respectively in the year reflecting increased sales of LivCare and Asset Secure in India Other, which is predominantly BPM services through Globiva, has increased 50% as their partner base expands The continued decline in the renewal books in our traditional UK and European markets has led to a 17% decline in My Digital Life and a 5% decline in My Finances All KPI comparative information for 2020 and 2021 has been restated to remove Mexico which is a discontinued operation My Finances My Tech My Health My Home My Digital Life My Travel Other APM glossary on page 100 CPPGroup Plc Annual Report & Accounts 2022 23 Strategic report Chief Financial Officer’s report A stronger platform for growth The Group made good financial progress in the year, growing revenue and EBITDA in our Core operations. 2022 has been a pivotal year for the Group which announced the decision to exit from our Legacy businesses, which will complete in the medium term, and focus on a simplified proposition in our Core markets. Revenue growth 19% David Bowling Chief Financial Officer “We are investing in Blink to accelerate its growth and maximise on its potential in a fast-paced environment.” 24 CPPGroup Plc Annual Report & Accounts 2022 Gross profit reduced by 5% to £30.8 million (2021 restated: £32.3 million). This results in a reduction in the gross profit margin to 18.1% (2021 restated: 22.6%) which is a continuation of the change in market mix with growth in our Indian business which has higher costs of acquisition associated with sales than the UK and EU renewal books it is replacing. In addition, a shift to lower margin product variants and inflationary pressures are challenging our margins in India and Globiva Excluding the aforementioned £1.1 million commission release, gross profit is just 1% lower than the prior year. We expect our gross profit margins to continue to reduce in the medium-term as withdrawal from the Legacy markets is completed as part of the CMP before stabilising in 2025 and improving incrementally thereafter The Group’s results will remain weighted towards India which operates at a margin of approximately 11% EBITDA reduced marginally to £6.9 million (2021 restated: £7.2 million; £6.1 million excluding commission release), however this reflects a 12% increase on a like-for-like basis. The improvement follows a reduction in the cost base with administrative expenses, before depreciation and exceptional items, reducing by 4% in the year The reducing cost base demonstrates the expected savings from restructuring exercises across our Legacy operations and also cost savings from the Board and executive changes in 2021 and early 2022 Depreciation and amortisation charges have decreased to £2.5 million (2021 restated: £2.9 million). The Group’s depreciation charges are expected to increase in 2023 and beyond as the new technology platform is launched in India during H2 2023 and Globiva increases its operational capacity to facilitate growth The accelerated withdrawal from the Legacy markets through the CMP will reduce overall profitability and cash over the next two years, however, the Group is in a good financial position with which to embark on this important step which will improve outcomes for all shareholders and other stakeholders in the medium‑term. The strategy reset led to the disposal of our China business in January 2022 and our Mexico businesses in October 2022 As a result, they are presented as discontinued operations, with this review focusing on the performance of the Group’s continuing operations Group revenue increased by 19% (15% constant currency) to £169.8 million (2021 restated: £142.8 million). Revenue growth was driven by our Core operations which represent 91% of Group revenues and are 25% higher than last year at £154.3 million (2021: £123.2 million). New business has been particularly strong in CPP India and Globiva both of which were impacted in 2021 by COVID-19. EBITDA has reduced marginally to £6.9 million (2021 restated: £7.2 million), however the comparative figure for 2021 included a one-time release of a commission provision in the UK of £1.1 million, and therefore, when excluding this factor, Group EBITDA is 12% higher than the prior year The EBITDA improvement reflects good progress in our Core operations with increased profitability in India and a reduced central cost base following the Board and executive changes in 2021 and the early part of 2022 Continuing operations Revenue (£ millions) Gross profit (£ millions) EBITDA (£ millions)2 Operating profit (£ millions) Profit before tax (£ millions) Taxation (£ millions) Profit for the year (£ millions) 2022 169.8 30.8 6.9 2.6 2.4 (2.3) 0.1 Basic (loss)/earnings per share (pence) (1.73) Cash generated by operations (£ millions)3 Dividends (pence) 7.3 — 1. Restated to reflect Mexico as discontinued operations. 2 Excluding depreciation, amortisation and exceptional items 3 Includes cash generated from continuing and discontinued operations 2021 (Restated)1 1428 323 72 30 43 (37) 06 151 74 125 CPPGroup Plc Annual Report & Accounts 2022 25 Strategic report Chief Financial Officer’s report continued Exceptional items charged to operating profit total £1.7 million (2021 restated: £1.3 million) which comprises restructuring and closure costs of £1.2 million and a £0.5 million one-time payment to the Globiva Founders to compensate for unfulfilled commitments by CPP in the shareholder agreement The restructuring and closure costs includes settlement costs relating to the departure of the former CEO; redundancy and onerous contract costs in the UK MGA which is being wound down, and redundancy costs in Spain as we prepare to withdraw from the market Restructuring and closure costs will continue to be high in the medium-term as we withdraw from all Legacy markets as part of the CMP The marginal reduction in absolute EBITDA, in conjunction with higher exceptional costs, results in operating profit decreasing by 12% to £2.6 million (2021 restated: £3.0 million). The Group’s profit before tax was £2.4 million (2021 restated: £4.3 million), with the comparative benefiting from a one-time fair value gain of £1.5 million on our investment in KYND. Profit after tax is £0.1 million (2021 restated: £0.6 million). Core and Legacy 2022 2021 Continuing operations EBITDA Profit before tax (Loss)/profit after tax Core £’m 5.0 1.6 (0.4) Legacy £’m 1.9 0.8 0.5 Core £’m 41 12 (24) Legacy £’m 31 31 30 Post-tax profitability in Legacy currently exceeds the Core business, however the profit trajectory of the Legacy businesses is in terminal decline and costs have already been cut to a level where they are now essentially fixed, including an expensive central legacy IT estate Without action being taken, the Legacy businesses were shortly going to be loss-making with no route to a return to profitability. The Core performance will be impacted in the medium-term by dual IT running costs and investment in Blink capability as the business scales. Upon conclusion of the CMP central costs will reduce allowing the profitable performance of the Core business units to come to the fore Tax The tax charge from continuing operations was £2.3 million (2021: £3.7 million), which is an effective tax rate (ETR) of 96% (2021 restated: 87%). The ETR includes withholding taxes on dividend repatriations from overseas entities of £0.6 million (2021: £1.2 million). The local tax rates are higher than the current UK rate of tax of 19%, most notably in India which contributes a large portion of the Group’s profits and has a local tax rate of 25.2%. The total tax charge from our Indian operations is £1.6 million (2021: £2.0 million). The profitable operations in Turkey, Spain and Italy also have higher local tax rates Loss-making operations are unable to offset all of their losses and tax credits are unable to be recognised on these losses The CMP is expected to improve the ETR in the medium term once complete A high and volatile ETR is expected to persist in the short term, as the Legacy operations are exited, and additional costs are incurred to facilitate these closures against which it won’t be possible to recognise tax credits The reduction in volatility from one-off costs once the CMP has concluded is expected to result in the ETR stabilising and beginning to reduce towards the UK statutory rate of tax which will increase to 25% on 1 April 2023 APM glossary on page 100 Adjusted ETR 2022 Profit before tax Tax ETR Continuing operations Exceptional items2 Adjusted Core £’m 1.6 (2.0) Legacy £’m 0.8 (0.3) 124% 41% Total £’m 2.4 (2.3) 96% Core £’m 1.0 (0.1) 13% Legacy £’m 0.7 (0.1) 8% Total £’m 1.7 (0.2) 11% Continuing operations Exceptional items and one-offs2 2021 (restated1) Profit/(loss) before tax Tax ETR Core £’m 12 (36) 314% Legacy £’m 31 (01) 3% Total £’m 43 (37) 87% Core £’m 06 — 0% Legacy £’m (18) (02) Total £’m (12) (02) (9)% (14)% 208% Core £’m 2.6 (2.1) 82% Core £’m 18 (36) Legacy £’m 1.5 (0.4) 26% Adjusted Legacy £’m 13 (03) 21% Total £’m 4.1 (2.5) 61% Total £’m 31 (39) 128% 1. Restated to reflect Mexico as discontinued operations. 2. Comprises exceptional items of £1.7 million (2021 restated: £0.1 million credit) and a prior year one-time benefit from a commission provision release in the UK of £1.1 million. Further detail of exceptional items is provided in note 6 on page 75 The exceptional items in the year have reduced profit before tax by £1.7 million (2021 restated: £1.2 million increase) whilst there has been an associated reduction in tax of £0.2 million (2021: £0.2 million). Without the exceptional items the Group’s ETR would reduce to 61% (2021 restated: 128%). As the CMP progresses the Core performance of the business will increasingly provide a better indication of future performance The Core operations adjusted ETR is 82% (2021: 208%), which includes withholding taxes on dividend repatriations from India and Turkey and the loss-making Central Functions. Further details on the Core tax charge by location is provided in note 12 on page 79 26 CPPGroup Plc Annual Report & Accounts 2022 Discontinued operations The Group’s Chinese and Mexican businesses have both been recognised as discontinued following completion of their disposals in the current year. The total profit after tax from discontinued operations of £0.7 million comprises £0.6 million profit in relation to China and a £0.1 million profit from Mexico. Revenue EBITDA Operating profit/(loss) Profit/(loss) after tax Profit on disposal Profit for the year Net liabilities held for sale 2022 £’m 0.9 0.2 0.2 0.2 0.5 0.7 — 2021 (Restated)1 £’m 33 06 (02) (02) 26 24 (01) 1. Restated to reflect Mexico as discontinued operations. On 27 January 2022, the Group completed the sale of its China business to T-Link Holdings Limited (T-Link) for a nominal consideration of HK$1 The terms of the transaction included a working capital cash injection of £0.5 million immediately prior to completion. The transaction generated a profit on disposal of £0.7 million. China also generated trading losses of £0.1 million up to the disposal date (2021: £0.8 million losses representing a full year of trading) On 20 October 2022, the Group completed the sale of its Mexican business to Rafael Ortiz Moran and Silvia Daniela Rodriguez Gaona for a nominal consideration of $1 (Mexican peso) As part of the disposal, the Group left cash balances of £0.3 million in the business to cover initial working capital and other committed liabilities The transaction generated a loss on disposal of £0.1 million which was offset by a trading profit of £0.2 million up to the disposal date (2021: £0.1 million losses representing a full year of trading). Cash flow and net funds EBITDA Exceptional items1 Non-cash items Working capital movements Cash generated by operations Tax Operating cash flow Capital expenditure (including intangibles) Lease repayments Disposal of discontinued operations Net finance revenues Dividends Net movement in cash2 Net funds3 2022 £’m 7.0 (1.7) — 2.0 7.3 (3.5) 3.8 (2.7) (1.4) (0.9) 0.4 (0.7) (1.5) 16.3 2021 £’m 77 (16) 01 12 74 (28) 46 (19) (15) 23 01 (26) 10 164 1 Cash cost of exceptional items 2 Excluding the effect of exchange rates 3. Net funds comprise cash and cash equivalents of £21.0 million (2021: £22.4 million) less lease liabilities of £4.7 million (2021: £6.0 million). The net funds position has decreased marginally to £16.3 million (2021: £16.4 million), which includes cash of £21.0 million (2021: £22.4 million including discontinued operations). The Group had a net cash outflow of £1.5 million in the year which reflects the payment of upfront fees to extend the Bajaj contract and costs to develop the IT platform in India Cash generated by operations was broadly flat at £7.3 million (2021: £7.4 million) with a working capital benefit in India being offset by a reduction in operating cash flows. Tax paid has increased to £3.5 million (2021: £2.8 million) which is a combination of taxes payable on profits in our markets and withholding taxes on overseas dividends to the UK. The Group has a healthy cash balance of £21.0 million, however as the Group’s growth has shifted to overseas markets a material amount of the cash balance is generated in India and Turkey As a result, all our cash resources are not immediately available for distribution or on demand for working capital purposes around the Group In addition there are tax costs associated with returning overseas funds to the UK with our blended cost being approximately 10% At 31 December 2022, approximately 40% of the cash balances were considered ‘restricted’. Cash planning is important and will become increasingly crucial as the CMP is executed and previously cash generative businesses in the UK and Europe are wound down The Group has a £5.0 million revolving credit facility (RCF) which is in place until August 2023 The RCF is not currently drawn Discussions are at an advanced stage to extend the RCF for a further three year term APM glossary on page 100 CPPGroup Plc Annual Report & Accounts 2022 27 Strategic report Chief Financial Officer’s report continued Events after the balance sheet date On 6 February 2023, Turkey was hit by a devastating earthquake Turkey is one of the Group’s Core markets New sales activity has been impacted by approximately 50% in February and March following Government guidance on restricting telemarketing activity This guidance is expected to be relaxed in April There is currently no evidence of a notable deterioration in renewal rates The financial impact on the Group from the effects of the earthquake is currently uncertain but is not expected to be material All colleagues are receiving any support necessary The Group continues to closely monitor the situation Foreign exchange The general weakening of Sterling during 2022, particularly from the Group’s perspective against the Indian rupee, has led to a favourable exchange rate movement in the Group’s results The Indian rupee has appreciated by 5% (2021: 7% depreciation) which due to the relative size of our operations in India has more than compensated for the continued weakening in the Turkish lira which depreciated by 63% (2021: 37%). The reported results compared to 2021 include the following favourable foreign exchange movements: £4.5 million (2021 restated: £7.4 million adverse) within revenue; and £0.1 million (2021 restated: £0.9 million adverse) at an EBITDA level Segmental performance Revenue CPP India Globiva CPP Turkey Blink Core business units Central Functions Core total Legacy Share of loss in joint venture Group total EBITDA CPP India Globiva CPP Turkey Blink Core business units Central Functions Core total Legacy Share of loss in joint venture Group total 2022 £’m 134.8 15.8 3.2 0.5 154.3 — 154.3 15.5 — 169.8 2022 £’m 5.6 2.4 0.7 (0.4) 8.3 (3.3) 5.0 1.9 — 6.9 2021 (Restated) 1 £’m 1090 103 36 03 1232 — 1232 196 — 1428 2021 (Restated) 1 £’m 54 24 08 (03) 84 (43) 41 33 (02) 72 Change 24% 54% (10)% 38% 25% n/a 25% (21)% n/a 19% Change 4% (1)% (14)% (80)% (1)% 22% 20% (42)% 100% (5)% Constant currency change 18% 46% 42% 39% 21% n/a 21% (22)% n/a 15% Constant currency change (1)% (5)% 36% (76)% (2)% 22% 19% (42)% 100% (6)% 1. Restated to reflect Mexico as discontinued. 2. Legacy operations comprises UK, Spain, Italy, Portugal, Bangladesh and Malaysia. All percentage change figures in the segmental operating report below are stated on a constant currency basis to eliminate the effects of foreign exchange to enable better year-on-year comparison. 28 CPPGroup Plc Annual Report & Accounts 2022 Central Functions costs have reduced by 22% to £3.3 million (2021 restated: £4.3 million) due to a significant reduction in Board and executive costs following a change in the composition of both along with a reduction in IT costs Transfer pricing charges from the Centre to trading business units have reduced in the year as Legacy operations have declined or started to be wound down This is expected to continue further in 2023 as the first phase of India’s IT platform becomes operational whilst the costs associated with the Group’s legacy IT platform will remain until a position is reached to decommission the system The dual IT running costs from India and Legacy are expected to persist until late 2024 Legacy businesses (9% of Group revenue) Revenue decreased by 22% to £15.5 million (2021 restated: £19.6 million), reflecting the natural decline in the historic renewal books in the UK, Spain, Italy and Portugal. EBITDA fell by 42% to £1.9 million (2021 restated: £3.3 million) which reflects the lost profit from the revenue decline, although the like-for-like decline was lower once the £1.1 million release of a commission provision in 2021 is excluded The Group’s strategy is to withdraw from these markets in a sensible and compliant manner which is sensitive to the interests of both our partners and colleagues Good progress has been made in Spain and Portugal with agreements reached with underwriters during Q4 which will enable our exit from these markets over the next 12 months. In the UK and Italy we continue to renew policies with withdrawal plans being finalised, which will be communicated to all stakeholders at the appropriate time David Bowling Chief Financial Officer 27 March 2023 Core businesses (91% of Group revenue) Revenue increased by 21% to £154.3 million (2021: £123.2 million) and EBITDA increased to £5.0 million (2021 restated: £4.1 million). Our Indian business had another strong year with revenue increasing by 18% to £134.8 million (2021: £109.0 million), due in small part to the comparatives being impacted by COVID-19. The good performance has been fuelled by growth in LivCare and Asset Secure through Bajaj along with an encouraging resurgence of Card Protection in Q4 as our banking partners settled on amended processes following the changes to recurring card transactions introduced by the Indian regulator in Q4 2021. During the year, India also agreed contract extensions with its two largest partners, Bajaj and SBI Cards which is expected to drive revenue growth in the coming years The new IT platform is progressing well with the first phase (non-Card business) expected to go-live in Q3 2023 and the second phase (Card business) set to follow in Q1 2024 The new IT platform will be transformational for the Indian business in providing additional operating efficiencies and improved digital capability Globiva, in which we hold a 51% investment, has progressed well widening its partner base which has led to revenue growing by 46% to £15.8 million (2021: £10.3 million). The revenue mix has shifted in the year with Globiva’s business through international partners reducing which along with inflationary wage pressures has reduced the EBITDA margin to 16% (2021: 24%). As a result, EBITDA is flat on the prior year at £2.4 million (2021: £2.4 million). Globiva remains one of India’s fastest growing BPMs and continues to have a strong proposition engineered on quality Turkey has had another excellent year, in the face of an extremely difficult macro-economic environment. At a local performance level revenues have grown by 42% and EBITDA by 36% This has been achieved through growth in our partnership with Türkiye Sigorta which included the launch of a new Health Protection product Turkey is a prime example of the success that comes from a multi- partner, multi-product approach. Unfortunately, on a reported basis this very good local performance has been completely negated by the ongoing devaluation in the Turkish lira with reported revenue 10% lower in the year and EBITDA down 14% Blink has increased revenues by 39% to £0.5 million (2021: £0.3 million) reflecting four new partner launches, including a large deal in Asia, as well as growth in business through existing partnerships The prior year benefited from some one-time billing which has not repeated in 2022, therefore this year’s revenue is more sustainable and reflects an annual recurring revenue of £0.6 million (2021: £0.2 million). Blink is a cornerstone of the Group’s strategy and even though at an early stage in its development during the year a focus was placed on enhancing processes and ensuring a fully scalable proposition The headcount in Blink has been increased in all areas of the business to accelerate growth As a result, although revenue has increased, EBITDA losses have increased to £0.4 million (2021: £0.3 million). Investment in operational capability will continue in 2023 to capitalise on Blink’s strong pipeline and wider opportunities India revenue £134.8m +18% CPPGroup Plc Annual Report & Accounts 2022 29 Strategic report ESG Progressing our value in society In the ever more complex world we live in we must deliver against the needs of an increasing number of stakeholders, reflecting the growing expectations of our efforts in Environmental, Social and Governance (ESG). Through the development of our ESG framework, we have confirmed that improving consumer resilience is the strongest opportunity we have to deliver positive societal impact and contribute to business growth through our people and products, whilst contributing to improvements in social equity for people in our communities, creating more purchasing power, which drives market growth ESG framework Our purpose To reduce disruptions of everyday life. ESG and responsible business purpose To contribute to a sustainable future for our communities through the promotion of financial and social equality, and resilience. ESG and responsible business priorities Building consumer resilience Developing affordable, real- time assistance products that boost resilience and protection for consumers Contribute towards equality and inclusivity in our communities Improve the prosperity of our communities through training and job creation Improve the social equality of our communities through voluntary work and fundraising Empowering our colleagues to do more Promote and nurture conditions for diversity, inclusion, and wellbeing Being a responsible business Reduce and report the environmental impact of our operations Drive talent attraction and retention Raising our supplier and partner standards Promote a technology driven culture that promotes our purpose Strong governance ESG sustainable goals We will align our ESG programme with the UN Sustainable Development Goals (SDGs) that are relevant to CPP as they provide us with a recognised framework which we can use to evaluate our progress. 30 CPPGroup Plc Annual Report & Accounts 2022 Progress in 2022 We have conducted a materiality assessment to understand the sustainability issues that have the most impact on our ability to create value The topics are categorised into four key issue areas relating to our framework and have been identified through peer benchmarking, distribution partner priorities, internal priorities and a review of industry standards The process highlights the key areas of focus for the development of our ESG roadmap, which will be developed in 2023, in addition to informing the resources, data, metrics, targets and reporting required to monitor our progress Conducting business in an honest and ethical way We are committed to acting fairly and with integrity Mandatory training modules for Anti-Bribery, Data Security and Modern Slavery are in place and are supported by Group-wide policies to identify and mitigate risk in the business We continuously improve our practices to ensure that slavery and human trafficking are not taking place in any part of our business or supply chain through robust due diligence processes We recognise the need to reduce our environmental footprint, despite our business model lending itself to significantly lower consumption than most industries. We pro-actively manage office-based consumption through renewable energy sources in our Leeds office, and energy saving modes for lighting, and lower energy consumption laptops and workstations throughout the Group There is more to be done and our goals in relation to this will be developed in 2023 Colleagues are central to our success Our team, excluding Globiva, comprises 346 colleagues in six countries Given our size and geographic spread, we believe in the importance of successful internal communications to aid cohesion, and in 2022 we strengthened our resource in this area All colleagues have access to our intranet ‘CoCo’, which stands for Communication and Collaboration We have also increased the focus on monthly live ‘All Colleague’ Q&A events, thereby providing our people with the chance to engage with senior management, in addition to our Global Performance Conversations between colleagues and managers to discuss development and growth We are committed to listening to the voice of our people through the start of bi-annual engagement surveys to create a feedback loop that we can measurably track over time Our survey in September 2022 found that 74% of colleagues are proud to work at CPP, 69% feel they have a real sense of belonging and 75% agree that they can communicate openly with senior leaders Whilst some of these metrics are lower than we would want, it is reflective of a business undergoing fundamental change Looking to the future Through the development of CPP’s ESG Framework and Materiality Assessment we are now in a place where we can make inroads on the development of our ESG roadmap throughout 2023 At the end of the first half of 2023 we will establish an ESG Committee, chaired by NED Simon Thompson, to develop and coordinate projects for ESG integration and to ensure a systemic approach to initiatives, so that at every level, we do the right thing by our distribution partners, consumers, colleagues and our community We are mindful that this will be an ongoing and evolving process and initially, we will focus on making simple, practical changes that support people, such as investing in the development of our colleagues, and a widening of our policies including domestic abuse, menopause, anti-harassment, non-discrimination policies and diversity and inclusion Presently women comprise 56% of our total workforce and 55% of the EMC We will look to support equality and inclusion efforts further as part of our ongoing roadmap to cultivate a strong and innovative culture through access to a greater range of talent Through our Internal Communications team we will provide resources to increase understanding of broader societal issues and ways in which colleagues can support non-profit and community- based initiatives We are cognisant of the benefits of using measurable indicators in reporting our ESG activities and the ESG Committee will consider the most appropriate metrics in the context of our strategy, business model and most material issues to provide our stakeholders with sufficient levels of transparency on these topics. CPPGroup Plc Annual Report & Accounts 2022 31 Strategic report Risk management and principal risks Managing key risks This report explains the Group’s risk oversight arrangements along with an overview of what we consider the principal risks facing the Group. The Board devotes a section of its standing agenda to the oversight of the Group’s risk position, dedicating time to consideration of the most notable current and emerging risks along with assessing and challenging management’s mitigation plans During the year the Board has considered a broad range of risk, but given the scale and breadth of activity has given particular focus to the risks surrounding the Group’s CMP The implementation of the CMP has created a substantial level of change execution risk across the Group The programme is large and complex, with multiple project workstreams spanning different Group entities with intricate interdependencies and risks. The Board has given focus to: • People risks – our colleagues are the Group’s most valued resource Risk discussions have considered key person dependencies (KPDs), resource stretch and skill exposures inherent with the CMP The Board also closely monitors the risk associated with change impacting colleague moral and wellbeing • Information technology risk – the CMP includes large-scale technology development and structural change, as such there has been a focus on the future information technology strategy of the Group and the risks associated with choosing and developing new IT solutions • Financial risks – in-depth consideration has been given to the impact of the CMP on the Group’s financial position with appropriate contingency and stress analysis undertaken Risk management framework The Group has a formal structure for the identification and management of risk which is in use across all business units Reflecting the notable variations in risk environment within the countries that CPP operates, each country is responsible for setting its own risk appetite and managing its risks, with challenge and assurance oversight from Group control functions and independent review by Internal Audit Individual countries are responsible for the collation and reporting of risks and controls assurance on a quarterly basis supported and challenged by the Group’s Risk function The Group Internal Audit function provides independent monitoring and reporting into the Group’s Audit Committee Along with reporting at a country level the Group Risk function collates the Group’s risk position as reported to the Board, which includes ongoing risk assessment of the CMP Risk environment The Group operates in multiple countries and, as such, is impacted by events in each country along with their macro-economic environments Turkey continues to experience economic volatility and hyperinflation and has recently been impacted by a devastating earthquake all of which remain a challenge on achieving continued business growth within our Turkish business CPP Turkey retains a successful strategy of continued product and partner diversification to promote new business revenue channels to counter the impact of the hyperinflationary environment. Although not as marked, 2022 has seen increased inflation with a rise in energy costs and the associated cost of living issues within the UK and European countries. Although not a notable risk in 2022, inflation is a potential driver for increases to the cost base in the Group’s Legacy businesses and the extent of this emerging risk has been closely monitored Similarly, the volatility in Sterling and other relevant exchange rates has been closely monitored 32 CPPGroup Plc Annual Report & Accounts 2022 Principal risk areas 1. Business risk Mitigation Business risk is that posed by changes in the external environment in which the Group operates, which could damage the success of the business The Group is exposed to multiple potential sources of business risk including: • Revenue volatility due to macro-economic conditions, such as the hyper inflationary environment in Turkey. • Reliance on key business partners The Indian business continues to have strong business relationships with some of India’s most significant non-banking financial services businesses and although this has yielded successful growth, the Group recognises the concentration risk that this has brought • Competition from new market entrants or innovative service propositions or an inability to translate new and innovative products into scalable products in market The Group addresses these risks through its Strategic and Business Planning processes Business plans are formed for all Group entities on an annual basis and reviewed, challenged and monitored by both Executive Management and the Board with particular focus on areas of known risk exposure to ensure sustainable revenue growth and diversification. In 2022 the Group has placed significant focus on its new real-time flight delay and lost luggage products which provide modern and innovative new product channels for the Group on a global scale 2. Operational risk – change Mitigation The Group has an ambitious CMP which includes substantial technical development and strategic change within business units, including book closures and transfers and divestments, that are designed to accelerate the natural cessation of the Group’s Legacy businesses Aligned to this the Group is focused on the development of scalable infrastructure to support the growth of Blink, its parametric InsurTech business The scale of change creates many areas of potential risk. Particular areas of focus in 2022 have included the impact of change on: i) People change risks Discussions have considered: • KPDs focusing on where the Group relies on small teams with expert knowledge to execute key activities; • resource stretch, reflecting the scale of the project and reliance into key individuals at all levels; and • potential skills exposures where activities are not within colleagues core experience Along with this, the Board has closely monitored and discussed the most effective methods to address the risks associated with negative impact on colleague moral during transformational change ii) Information technology change risks Change workstreams include the development of a new customer services platform for the Group’s Indian business, as well as the sourcing of managed service technology solutions for the Legacy businesses within the UK and Italy. As a result, there has been a significant focus on the future IT strategy of the Group and the risks associated with developing and migrating to new IT solutions, including focus on the effective delivery of functional and secure solutions within planned timelines iii) Financial change risks The scale of the Group’s change programme means that it may potentially have a significant impact on the Group’s available cash and cost base. Where appropriate, and possible, the Group has used external specialist resource to supplement skill sets and outsourced provisions to mitigate KPD risks across the CMP The IT development workstreams have comprehensive project management and governance in place including a regular steering committee which includes the Executive Directors The Group utilises external specialist resources and outsourced service provision to augment its internal resource and reduce delivery risks As part of financial planning, detailed consideration has been given to the impact of enacting change on the Group’s financial position (including cash) across future years, with appropriate contingency and stress analysis undertaken to ensure no concerning exposures exist Close attention is being paid to potential emerging financial risks as the project progresses Increase Stable Improving CPPGroup Plc Annual Report & Accounts 2022 33 Strategic report Risk management and principal risks continued Principal risk areas continued 2. Operational risk – change continued Mitigation iv) Legal and regulatory change risks Legal and regulatory risks include the risks associated with accelerating the cessation of business within regulated entities, enacting changes to legal contracts and arrangements and the risks associated with ensuring effective data governance during a period of substantial change Specific workstreams have been established within the programme to focus on data governance requirements and oversee effective management of data throughout the CMP Where appropriate specialist/ local legal and regulatory advisory has been taken Overall mitigation The CMP has a comprehensive governance framework, with each change project reporting into the Group’s Operations Board on a weekly basis Detailed consideration is given to change plans and timelines, their impacts, risks and the adequacy of mitigation plans for those risks 3. Operational risk – people Mitigation As well as the specific risks within the CMP, the Board continues to pay particular attention to the risks associated with our colleagues across the Group We continue to see competitive recruitment markets in many of our territories with particularly buoyant markets for technical roles, both in the UK and India creating risk for these specialist areas. As part of its strategic planning the Group has sought to geographically spread its technical resource and where appropriate uses outsourced service support to help reduce the pressures of a single market and limit KPD 4. Operational risk – outsourced services Mitigation Across the Group there are a variety of material third-party suppliers that provide core services to entity propositions Consequently the Group pays close attention to supply chain risk and exposure Programmes of regular risk audits are in place for core suppliers along with annual due diligence assessments for key providers 5. Operational risk – information technology Mitigation Information technology includes the risks associated with the design, operational resilience and security of the Group’s IT infrastructure ensuring a comprehensive understanding of the Group’s IT risks remains a central focus with particular consideration given to: i) Cyber risk Cyber risk incorporates a wide array of potential threats to Group businesses which can include network or perimeter threats or a breach of online controls Controls to mitigate cyber-attacks are in place and managed by specialist colleagues with challenge and oversight by specialist resource within the risk team; this remains an ever evolving area of risk which is closely monitored ii) Business resilience Ensuring ongoing resilience of systems The Group’s operations utilise complex IT architecture comprising multiple systems managed across multiple countries and supported by a combination of internal and external technology teams Ongoing monitoring of systems resilience is in place along with disaster recovery planning and testing on a regular basis Increase Stable Improving 34 CPPGroup Plc Annual Report & Accounts 2022 6. Regulatory risk Mitigation Regulatory risk covers the risk of failure to comply with the regulation and legislation governing our Group businesses The Group focuses on compliance with the regulation and legislation governing our business activities across all territories to help ensure strong customer outcomes in all our activities We continue to see an increase in regulatory scope, focus and activity in many geographies Most notably in India which has seen active changes to consumer protection legislation Horizon scanning for relevant regulatory change is in place across the Group with regular updates to the Board on key regulatory changes and where appropriate change plans to ensure ongoing compliance 7. Data governance Mitigation Data governance remains a key area of focus GDPR regulations are well established in European entities and Turkey with further work expected in relation to the Indian Data Bill in 2023 Where relevant the Group complies with PCI standards and is certified annually along with the ongoing internal challenge around data governance and information security controls 8. Reputational risk Mitigation Reputational risk is the risk to earnings resulting from negative market, or public opinion Reputational risk in effect arises through the poor management of risks generally. The consequences would have a significant adverse effect on the Group’s future prospects The Board is responsible for overseeing adequate management of reputational risk across all Group entities This is done through oversight of the risk management framework, which includes quarterly assessments and challenge of all risk areas across the Group Increase Stable Improving CPPGroup Plc Annual Report & Accounts 2022 35 Strategic report Section 172(1) statement Maintaining stakeholder relationships The Directors fully understand their responsibilities under section 172(1) of the Companies Act to promote the success of the Company for the benefits of its members, having regard amongst other matters to: • the likely consequences of any decision in the long-term; • the interests of the Company’s employees; • the need to foster the Company’s business relationships with suppliers, customers and others; • the impact of the Company’s operations on the community and the environment; • the desirability of the Company in maintaining a reputation for high standards of business conduct; and • the need to act fairly between all members of the Company The Board confirms that, during the year, it has had regard to the matters set out above. The Board has identified its key stakeholders which are set out below, along with details of the forms of engagement undertaken by the Board Our shareholders Why they matter to us Our shareholders provide valuable insight into the market and the impact of our strategy, which are key to enabling us to grow and invest in the future success of the business Types of engagement • AGM • Regular communications such as Annual Report & Accounts, half yearly trading results, trading updates, RNS and RNS Reach announcements, press releases, and investor fact sheets • Investors’ section of the Group’s website • Non-Independent Non-Executive Director intermediation with respective sponsoring shareholders How the Board engages • CEO and CFO meetings with major shareholders and retail investors to outline performance and future direction of the business • CEO and CFO feedback to the Board on shareholder interactions • A nominee Director of each of the two major shareholders continue to be members of the Board 36 CPPGroup Plc Annual Report & Accounts 2022 Our colleagues Why they matter to us Our colleagues continue to be our most valuable resource, being key to the continuing success and growth of our business Types of engagement Maintaining colleague wellbeing and morale remained a major focus for the business in 2022, especially during a period of significant change With this in mind the following activities took place to support our colleagues: • All colleagues across the Group are invited to join regular video calls with the Group CEO • Group-wide colleague survey to understand colleague engagement and how they are feeling • Group intranet includes a ‘Stay Well’ section to help colleagues with their wellbeing • Long Service celebrations were held again across the Group for colleagues reaching 10, 15 and 20 years of service • Visibility of the Board members encouraged which gave colleagues the ability to meet the Chairman and other Board members informally How the Board engages • Continued investment in cultural development • Office visits to UK, Turkey and India to interact with local teams. Our business partners Why they matter to us The long-term sustainability of our business depends on building and maintaining long-lasting mutually beneficial relationships with our partners Types of engagement • Commercial discussions • Face to face meetings • Press releases • Communications such as Annual Report & Accounts, half yearly trading results, trading updates, and RNS Reach announcements How the Board engages • The Board retains oversight through regular face-to-face meetings along with communications between the executive team and in-country management and their feedback to the Board as a whole The Strategic Report section on pages 2 to 37 of this Annual Report has been reviewed and approved by the Board of Directors on 27 March 2023 Simon Pyper Chief Executive Officer CPPGroup Plc Annual Report & Accounts 2022 37 Strategic report Corporate governance Board of Directors & Company Secretary Leadership for a sustainable future David Morrison Chairman Appointment Appointed as Non-Independent Non-Executive Director in November 2020, and as Chairman in February 2021 Experience David has spent the majority of his career in private equity, starting with 3i plc, before spending 13 years with Abingworth Management, predominantly with responsibility for investment activity in the United States. In 1998 he started Prospect Investment Management, which was responsible for making and managing early-stage investments on behalf of a small group of investors Notable holdings included PayPoint plc and Venture Production plc, both of which became FTSE 250 companies whilst Prospect’s clients were shareholders External appointments David was appointed a Non-Executive Director of Record plc on 1 March 2023, he also sits on the board of various private companies and is a Member of the Council of Management and a Trustee of the Ditchley Foundation Skills brought to the Board Strategy and investment expertise Simon Pyper Chief Executive Officer Appointment Appointed as CFO in January 2022 and as CEO in February 2022 Experience Simon was formerly the Chief Executive Officer and Chief Financial Officer of digital marketing group Be Heard Group plc Prior to this, he was Chief Financial Officer of AIM listed GlobalData plc for ten years During his tenure, Simon oversaw its admission to AIM and facilitated its acquisition-led growth strategy. He has also held various financial and commercial positions with Musgrave UK and the Arcadia Group Simon is a member of the Chartered Institute of Management Accountants and holds an MBA from Henley Management College External appointments Simon is a Non-Executive Director of Brand Architekts Group Plc Skills brought to the Board Sector and financial expertise. David Bowling Chief Financial Officer Appointment March 2022 Experience A qualified Chartered Accountant, David has been with CPP Group for over ten years undertaking a number of senior roles within the Group Finance function, most recently as Group Finance Director Prior to CPP he was Group Accountant for Barchester Healthcare Limited External appointments None Skills brought to the Board Finance and sector expertise 38 CPPGroup Plc Annual Report & Accounts 2022 Board skills and experience 2 Strategy and investment expertise. 2 Finance and sector expertise. 1 Legal and company administration. 1 Strategic, compliance and governance matters. Simon Thompson Non‑Independent Non‑Executive Director Appointment June 2020 Jeremy Miller Independent Non‑Executive Director Appointment December 2021 Sarah Atherton General Counsel & Company Secretary Appointment January 2021 Experience Simon held senior positions in investment banks before becoming Managing Director at Barclays Global Investors He was chair of London Stock Exchange’s Institutional Investor Group and the Investment Association’s Dealing Committee He was a partner of hedge fund, Millgate Capital, before moving to Legal & General Investment Management as COO External appointments Simon is a Director of several private companies and a local charity chair alongside his work as a mentor and board adviser Skills brought to the Board Strategy and investment expertise Experience Jeremy who is a qualified Chartered Accountant, working with KPMG early in his career, has over 30 years’ investment banking experience working for leading financial services firms. He has held senior roles at Dresdner Kleinwort Wassertein, James Capel and most recently as London COO with Centerview Partners External appointments Jeremy remains a Non-Executive Director of This Land, Cenkos Securities and Non-Executive Chairman of the National Merchant Buying Society Skills brought to the Board Expertise in advising on strategic, compliance and governance matters Experience A qualified solicitor, Sarah joined CPP’s in-house legal team in 2010 from Walker Morris LLP Initially working for the Group’s UK businesses, Sarah later moved into Group legal roles, most recently taking up the role of General Counsel and Company Secretary External appointments None Skills brought to the Board Legal and company administration Key Audit Committee Remuneration Committee Nomination Committee Chair of Committee CPPGroup Plc Annual Report & Accounts 2022 39 Corporate governance Corporate Governance Report Chairman’s introduction to governance Principle 1: Establish a strategy and business model which promote long-term value for shareholders A full description of our business model and strategy are given on pages 4 and 13 2022 has seen the Group undertake a strategic review and establish a substantial CMP which will not be fully complete until 2025, more information is given in ‘our strategic priorities’ on pages 16 and 17 Key challenges to their execution are detailed under ‘Risk management and principal risks’ on pages 32 to 35 Principle 2: Seek to understand and meet shareholder needs and expectations The Board is committed to maintaining good relationships with shareholders The Chairman is responsible for ensuring that appropriate channels of communication are established between the Executive Directors and shareholders, ensuring that the views of shareholders are made known to the Board The Annual General Meeting (AGM) provides the Board with an opportunity to meet and communicate directly with private investors Principle 3: Take into account wider stakeholder and social responsibilities and their implications for longer-term success Our business model seeks to add value to the wider community, with particular reference to: • our business partners; • our shareholders; • our consumers; and • our colleagues Details of how we seek to create value for each of these stakeholders are given in the business model on page 13 An outline of how the Directors have discharged their duties in accordance with section 172(1) of the Companies Act 2006 can be found on pages 36 and 37 Chairman’s introduction On behalf of the Board I am pleased to present our Corporate Governance Report for the year ended 31 December 2022. As your Chairman, I am responsible for ensuring that the Board operates within a sound governance framework that underpins the Group’s ability to achieve its strategic goals. The Board has adopted the Quoted Companies Alliance Corporate Governance Code (the QCA Code) which remains well suited to the Group. The ten principles of the QCA Code are addressed below with an outline of how the Group complies with each principle, and any departures from the Code (principles 5 and 9). David Morrison Chairman 40 CPPGroup Plc Annual Report & Accounts 2022 Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation The Group’s risk framework enables risks to be identified, measured, managed, monitored and reported consistently and objectively, with regular risk updates provided to the Board for consideration A full description of the Group’s risk management framework and principal risks is given on pages 32 to 35 Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Board is undertaking an evaluation of its performance and effectiveness during the first quarter of 2023. Whilst this review is not externally invigilated, it is based on an externally facilitated questionnaire and is taking into account the views of both board members and other members of the Company’s senior management team Principle 5: Maintain the Board as a well- functioning, balanced team led by the Chair Principle 8: Promote a corporate culture that is based on ethical values and behaviours The Board believes that the ratio of Executive Directors to Non-Executive is appropriate, allowing the Board to exercise objectivity of decision-making and proper control of the Group’s business. The ratio of two Non-Independent Non-Executives to one independent is not satisfactory or sustainable in the medium-term. The Group had intended to appoint an additional Independent Non-Executive Director during the course of 2022 and had discussions with several parties, one of whom, in particular, was considered particularly appropriate, but who, as yet, has been unable to commit to the role The Board is, therefore, considering its position with regard to another appointment It remains the stated objective to appoint at least one additional Independent Director as soon as circumstances permit On joining the Board, Non-Executive Directors receive a formal appointment letter, which identifies the estimated time commitment expected of them The average anticipated time commitment is two days per month, although the nature of the role makes it impossible to be specific. Directors understand that they may be required to devote additional time in respect of preparation time and ad hoc matters that may arise from time to time A potential Director candidate is required to disclose all significant outside commitments prior to appointment and any future external appointments must be approved in advance by the Chairman The number of meetings attended by each Director during 2022 is given on page 43 Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities The members bring a diverse range of skills and experience to the Board, but it is recognised that a larger Board would, at a cost, be able to deliver greater diversity and broaden the skills present in the Board As noted above, it continues to be an issue under constant review Details of the experience and skills of each of the Directors are given on pages 38 and 39 The Board receives at its meetings detailed reports from senior management on the performance of the Group and other information as necessary Regular updates are provided on relevant legal and regulatory, corporate governance and financial reporting developments. All Directors have access to the advice and services of the Company Secretary and the Board also obtains advice from professional advisers as and when required Our business distributes products through long-term partnership arrangements. Quality of approach and a high level of integrity are essential for sustainable success and, having made good progress in fundamentally changing the organisation, we recognise the need to ensure we have the right people in the right place and in the right roles The Board continues to invest in a dedicated programme to address, formulate and implement an open, honest and authentic culture that extends consistently throughout the Group Further information may be found on page 31 Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision making by the Board Papers for Board and Committee meetings are circulated in advance of meetings, including to any Director who is unable to attend Each member of the Board has access to all information relating to the Group and to the advice and services of the Company Secretary, along with external advice at the expense of the Group, should they need it Details of our governance framework is given on page 42 The following departures from the QCA Code should be noted. The Remuneration Committee currently has a Non-Independent Non-Executive Chair and membership includes an additional Non-Independent Non-Executive Director. The Audit Committee’s membership also includes two Non-Independent Non-Executive Directors Given the small size of the Board, the Directors consider these departures to be necessary Principle 10: Communicate how the Company is governed and is performing by maintaining dialogue with shareholders and other relevant stakeholders The Company maintains a corporate website https://corporate.cppgroup.com which complies with AIM Rule 26 and contains a range of information of interest to institutional and private investors, including the Group’s annual and half yearly reports, trading statements and all regulatory announcements relating to the Group As soon as practicable after the conclusion of any general meeting, the voting results are released through a regulatory information service (RIS) with a copy of the announcement posted on the Company’s website at https://corporate.cppgroup.com/investors/stock-info/ All historical Annual Reports, Company circulars and notices of general meetings are available on the Company’s website at https://corporate.cppgroup.com/investors/shareholder-info/ CPPGroup Plc Annual Report & Accounts 2022 41 Corporate governance Corporate Governance Report continued Our governance framework Our Board As at the date of this report the Board comprises five Directors – the Chairman (Non-Independent), two Executive Directors, one Independent Non-Executive Director and one Non- Independent Non-Executive Director. See pages 38 and 39 Membership at 31 December 2022 The Board comprised five Directors – the Chairman, two Executive Directors, one Independent Non-Executive Director and one Non-Independent Non-Executive Director. Meetings held in 2022 Five, along with thirteen additional ad hoc Board meetings Key matters reserved for the Board • responsibility for the overall leadership of the Group and setting the Group’s values and standards; • approval of the Group’s long-term ambitions, objectives and commercial strategy; • material changes to the Group’s corporate structure, including any acquisitions or disposals; • ensuring maintenance of a sound system of internal control and risk management; • approval of annual and half year results and trading updates; • approval of the annual financial budget; • approval of the dividend policy; and • material capital investments The full schedule of matters reserved to the Board is available on the Company’s website, https://corporate.cppgroup.com Nomination Committee Audit Committee Remuneration Committee Key objectives Assist the Chairman in keeping the composition of the Board under review and lead the appointments process for nominations to the Board and other Board Committees Membership at 31 December 2022 • David Morrison (Chair with effect from 17 January 2022) • Simon Thompson • Jeremy Miller Key objectives To assist the Board in discharging its duties and responsibilities for financial reporting and internal financial control. Key objectives Recommend to the Board the remuneration of the Chairman, Executive Directors, Company Secretary and senior management Membership at 31 December 2022 • Jeremy Miller (Chair) • Simon Thompson • David Morrison Membership at 31 December 2022 • Simon Thompson (Chair with effect from 17 January 2022) • David Morrison • Jeremy Miller Meetings held in 2022 Two Meetings held in 2022 Five Meetings held in 2022 Six Read about our Nomination Committee on page 44 Read about our Audit Committee on pages 45 and 46 Read about our Remuneration Committee on pages 47 to 49 42 CPPGroup Plc Annual Report & Accounts 2022 Directors’ attendance at Board and Committee meetings in 2022 Board Audit Committee Remuneration Committee Nomination Committee Attendance David Morrison Simon Pyper David Bowling Simon Thompson Jeremy Miller Jason Walsh — — — — — — 100% 100% 100% 100% 100% 75% — — — Roles and responsibilities Chairman The Chairman, David Morrison, is responsible for the leadership of the Board and setting its agenda, ensuring that the Board as a whole plays a full and constructive part in the determination and development of the Group’s strategy and overall commercial objectives Chief Executive Officer The Chief Executive Officer, Simon Pyper, oversees the management of the business and, supported by his EMC, is responsible for the day-to-day running of the business. He is accountable to the Board for the Group’s operational and financial performance. Board Committees The Audit Committee, the Remuneration Committee and the Nomination Committee are standing Committees of the Board Written terms of reference of these Committees, including their objectives and the authority delegated to them by the Board, are available upon request from the Company Secretary or via the Company’s website at https://corporate.cppgroup.com Terms of reference are reviewed annually by the relevant Committee and approved by the Board The Company Secretary acts as secretary to all Board Committees; Committees also have access to independent expert advice, if required Internal control and compliance The Board and the Audit Committee receive regular reports on compliance with Group policies and procedures The Board, and the Audit Committee on its behalf, confirm that, through discharging their responsibilities under their terms of reference, they have reviewed the effectiveness of the Group’s system of internal controls and are able to confirm that necessary actions have been or are being taken to remedy any failings or weaknesses identified. Full details of the Group’s system of internal control and its relationship to the corporate governance structure are contained in the risk management and principal risks section of this report on pages 32 to 35 Conflicts of interest The Company Secretary keeps a record of any actual or potential conflict of interest declared by the Directors. Directors are required to declare any specific conflicts that arise from each Board agenda and a Director would be expected to refrain from voting on any matter that represented an actual or potential conflict of interest. CPPGroup Plc Annual Report & Accounts 2022 43 Corporate governance Report of the Nomination Committee David Morrison Chairman of the Nomination Committee Other members Jeremy Miller Simon Thompson Given the size and current circumstances of the business, this is an ‘ad hoc’ Committee that meets as and when required. Key objectives To assist the Board in ensuring that the Board and its Committees comprise individuals with the requisite skills, knowledge and experience to ensure they are effective in discharging their responsibilities Key responsibilities • carry out a formal selection process for Executive and Non-Executive Directors and propose to the Board any new appointments; • oversee succession planning for Directors and senior managers below Board level; • review the structure, size and composition of the Board (including the skills, knowledge, experience and diversity required); • make recommendations to the Board in respect of the membership of the Board Committees in consultation with the Chairmen of those Committees; and • make recommendations to the Board on the re-appointment of any Non-Executive Director at the conclusion of their specified term of office. Membership and meetings Current membership is David Morrison (Chairman), Jeremy Miller and Simon Thompson Other individuals and external advisers attend meetings at the request of the Committee Chairman The Committee met twice during the year Main activities of the Committee during the year The following principal items were dealt with during the year: • Consideration of the independence of the Board and conducting a search for an independent Non-Executive Director; and • Commencement of a Board evaluation exercise Board diversity The Board considers itself diverse in terms of the background and experience each individual member brings to the Board, and recognises the benefits that greater diversity at the most senior levels of the Company may bring The terms of reference of the Committee require that in each appointment to the Board, the Committee must ‘consider candidates on merit and against objective criteria, and with due regard for the benefits of diversity on the Board, including gender’ in identifying and recommending candidates David Morrison Chairman of the Nomination Committee 27 March 2023 44 CPPGroup Plc Annual Report & Accounts 2022 Report of the Audit Committee Jeremy Miller Chairman of the Audit Committee Other members David Morrison Simon Thompson On behalf of the Audit Committee, I am pleased to present the Audit Committee Report for the year ended 31 December 2022. The Audit Committee Report sets out details of its composition, responsibilities and an overview of the work undertaken by the Committee during the year. Meetings and membership Although only Committee members are entitled to attend meetings, the entire Board is invited and typically attends Others attend by invitation of the Committee Chairman During the year the External Auditor, the Group Head of Internal Audit, Global Head of Reporting and Tax and Group Chief Operations & Risk Officer attended meetings to report to the Committee and provide clarification and explanations where appropriate Details of attendance at the Committee can be found on page 43 Each Committee member is considered to possess recent and relevant financial experience and the Board is satisfied that the Committee, as a whole, has sufficient experience and competence relevant to the Group’s business Main activities during the year The Committee fully recognises its role in protecting the interests of shareholders and other stakeholders having responsibility for monitoring the integrity of published financial information, including the review of significant financial judgements; reviewing the selection and appointment of the External Auditor and the effectiveness of the external audit process; and monitoring performance of the internal audit function in assessing the Group’s internal control and risk management systems In 2022, the main activities of the Committee were: Key accounting items The Committee has received management papers providing regular updates on the development of the Group’s key accounting approaches during the year, including revenue recognition, hyperinflation accounting, segmental reporting and discontinued operations Financial statements The Committee reviewed and discussed financial disclosures made in the annual results announcement, the Annual Report & Accounts and the Half Year Report, together with any related management letters, letters of representation and reports from the External Auditor Key financial reporting and accounting issues The primary area of judgement considered by the Committee in relation to the 2022 financial statements and how it was addressed by management is shown below: Area of judgement Management action Revenue recognition The Committee has received detailed updates from senior management in relation to the revenue recognition approach across the Group during the year Revenue recognition matters considered cost base changes in our Indian products and treatment in Spain where contracts are being exited over time through a progressive revocation of CPP’s delegated authority to the insurer The Committee has concluded that revenue recognition continues to be dealt with appropriately The Committee also received various materials supporting statements on risk management, internal controls and long-term viability, which along with consideration of the accuracy, integrity and consistency of the messages conveyed within the Annual Report & Accounts have enabled the Committee to recommend the document to the Board as a fair, balanced and understandable reflection of the Group’s position. CPPGroup Plc Annual Report & Accounts 2022 45 Corporate governance Report of the Audit Committee continued Main activities during the year continued External Auditor The Committee has primary responsibility for overseeing the relationship with the External Auditor and approves the External Auditor’s engagement letter, audit fee and audit and client services plan (including the planned levels of materiality) The External Auditor attends meetings as appropriate and meets at least annually with the Committee without Executive Management present The Chairman of the Committee also meets privately with the External Auditor on a regular basis The Committee receives regular detailed reports from the External Auditor, including a formal written report dealing with the audit objectives, the Auditor’s qualifications, expertise and resource, the effectiveness of the audit process, the procedures and policies for maintaining independence and compliance with the ethical standards issued by the Financial Reporting Council The Committee is satisfied with the performance of the External Auditor during the year and the policies and procedures in place to maintain its objectivity and independence and has recommended that PKF Littlejohn LLP (PKF) be reappointed at the forthcoming AGM External Auditor’s independence, objectivity and effectiveness Fees paid to the External Auditor are shown in note 7 to the consolidated financial statements. The External Auditor may provide non-audit services from time to time. The Committee keeps under review the level of non-audit fees as a proportion of the total fees paid to PKF. There has been no non-audit work carried out during the year The following controls are in place to ensure that the External Auditor’s objectivity and independence are safeguarded: • a policy on the use of the External Auditor for non-audit work has been agreed by the Committee This ensures that work would usually only be awarded when, by virtue of the External Auditor’s knowledge, skills or experience, the External Auditor is clearly to be preferred over alternative suppliers; • the Committee receives and reviews each year an analysis of any non-audit work awarded to the External Auditor over the financial period; and • the Committee receives each year a report from the External Auditor outlining any matters that it considers bear on its independence and which need to be disclosed to the Audit Committee Internal Audit The Committee approves the annual Internal Audit Plan, monitors progress against this plan and receives reports after each audit performed. Progress against actions identified in these reports is monitored by the Committee In addition, the Committee receives and reviews all instances of whistleblowing in the business The Committee has assessed the resources available to the Internal Audit department During the year the Group moved from a co-sourced to a predominantly outsourced Internal Audit model. The model, with an in-house Group Head of Internal Audit supported by outsourced resource in India, Turkey, the UK and Europe is seen as an effective method of providing the required flexibility in coverage and specialist skills to effectively audit the Group The Internal Audit function uses a risk-based approach to provide assurance across Group companies and functional areas The Internal Audit Plan is regularly reviewed to ensure that it reflects change and business development across the Group Adjustments to the Internal Audit Plan were agreed by the Committee to ensure the most appropriate coverage for the Group The ambitious change agenda of the Group was heavily reflected in the focus of Internal Audit Plan, with a notable proportion of the team’s time devoted to change initiatives including the development of the new IT platform in India, along with foundation work for continued audits of change areas in 2023 The appointment and removal of the Group Head of Internal Audit is the responsibility of the Committee The Internal Audit department continues to have unrestricted access to all Group documentation, premises, functions and employees, as required The Group Head of Internal Audit has direct access to the Board and the Audit Committee and is jointly accountable to the Audit Committee Chairman and Group CFO Committee effectiveness During the year, the Committee carried out an effectiveness review based around the completion of a gap analysis against best practice No significant issues were identified. Jeremy Miller Chairman of the Audit Committee 27 March 2023 46 CPPGroup Plc Annual Report & Accounts 2022 Directors’ Remuneration Report Simon Thompson Chairman of the Remuneration Committee Other members David Morrison Jeremy Miller On behalf of the Remuneration Committee, I am pleased to present the Directors’ Remuneration Report (the Remuneration Report) for the year ended 31 December 2022. The Remuneration Report sets out details of the Remuneration Committee, including its composition and responsibilities, the Group’s executive remuneration policy and details of Directors’ remuneration for the year under review As an AIM-listed company, CPP is not required to prepare the Remuneration Report in accordance with the Directors’ Remuneration Report Regulations 2002 or the Large and Medium- sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (together, the Regulations) We do, however, support the principles of the Regulations and seek to follow them to the extent that they are relevant to CPP as an AIM-listed company. Role and responsibilities of the Remuneration Committee The Committee is responsible for recommending to the Board the remuneration of the Chairman, Executive Directors, Company Secretary and the EMC. The remuneration of Non-Executive Directors is a matter for the Chairman and the executive members of the Board The Committee also recommends and monitors the level and structure of remuneration for the EMC Activities during the year The main activities of the Committee during the year under review and up to the date of this report were: • reviewing and closing legacy long-term incentive plans; • reviewing new long-term incentive plans; • reviewing short-term incentive plans; • strategy for year end salary reviews against an inflationary environment; • agreeing terms for senior appointments and exits; and • review of Group Remuneration Policy Advisers to the Remuneration Committee The Committee received advice over the year from Eversheds Sutherland LLP (Eversheds) who provided no other services to the Company. Fees paid to Eversheds during the year totalled £37,000. The Committee also receives advice and support from the Group HR Director, the Group CEO, the Group CFO and the Company Secretary No other advisers have provided significant services to the Committee in the year CPPGroup Plc Annual Report & Accounts 2022 47 Corporate governance Directors’ Remuneration Report continued Remuneration policy The executive remuneration policy is designed to ensure that the remuneration of Executive Directors and the EMC is sufficient to recruit, retain and motivate high-quality individuals, whilst increasing the sustainable value of the business The Committee reviews the remuneration policy from time to time, taking whatever action it considers necessary to ensure that remuneration is aligned with the overall strategic objectives of the Group In accordance with its terms of reference, in considering executive pay, the Committee has regard to levels of remuneration and terms and conditions across the Company, especially when determining annual salary increases The Committee receives information about pay and conditions across the Group and, except in exceptional circumstances, executives ordinarily receive the same percentage increase as other employees in the country in which they operate Year end approach to salary reviews and flexible benefits There are inflationary and cost of living pressures in each of the markets in which we operate As a result of the pressures our colleagues are facing all UK-based EMC members (including the Executive Directors) are not taking a pay-rise in 2023, instead this has been re-distributed to UK colleagues who will be facing greater financial pressures. UK colleague pay-rises have been awarded on a sliding scale with the lowest paid receiving the greatest percentage uplift. At the same time the flexible benefits system in the UK has been re-vamped with bandings to better reward responsibility and development. The entry banding has been lifted to £3,000 (previously £2,500) increasing incrementally to £6,000. This has resulted in most colleagues (excluding EMC) receiving an increase in their benefits. Colleagues in other markets have received in line with inflation pay-rises. Executive Directors’ remuneration In the year under review, for the Executive Directors’ that remain in office, their total remuneration package comprised: • fixed pay, including base salary, pension contributions at a statutory level under the Group’s stakeholder pension plan, and an allowance to spend on a range of benefits available within the Group’s flexible benefits scheme; and • variable pay, comprising bonus opportunity and participation in the Group’s Deferred Share Bonus Plan (DBP) Service contracts and letters of appointment The Executive Directors have service contracts that are subject to six months’ notice by either party Non-Executive Directors receive written letters of appointment and their appointments are subject to one month’s notice Copies of Directors’ service contracts and letters of appointment are available for inspection by shareholders at the Group’s registered office. Directors’ remuneration (audited information) The remuneration of the Executive and Non-Executive Directors serving during the year was as follows: Executive Directors Simon Pyper1 David Bowling2 Jason Walsh3 Non-Executive Directors David Morrison Simon Thompson Jeremy Miller Base salary/ fees £’000 2022 Taxable benefits £’000 2022 286 163 184 110 60 77 5 8 9 — — — Bonus £’000 2022 125 66 — — — — Pension £’000 2022 Total £’000 2022 2021 14 6 7 — — — 430 243 200 110 60 77 — — 463 106 60 5 1. Simon Pyper was appointed as CFO on 1 January 2022 on a salary of £217,000 and was subsequently appointed CEO on 7 February 2022 on a salary of £300,000. The bonus figure includes a one-time payment of £50,000 to relinquish an external Non-Executive Director role. 2. David Bowling was appointed CFO on 7 March 2023. The figures reflect earnings since the date of appointment. 3. Jason Walsh resigned as CEO on 7 February 2022, and his employment with the Company ended on 28 February 2022. The base salary includes £138,000 payment in lieu of notice. In addition to the information above Jason received a settlement payment of £162,000 in the year. Bonuses Executive Director and senior management bonus awards are linked to both Group financial performance and the achievement of pre-agreed events, thus ensuring that Directors’ pay is aligned to the Group’s strategic priorities Share incentives Details of awards held, granted and exercised by the current Directors in the Group’s share plans are detailed below: Director Simon Pyper David Bowling Balance held at 1 January 2022 Number of share options granted in year Number of share options exercised in year Number of share options lapsed in year Balance held at 31 December 2022 — — — — — — — — — — Simon Pyper and David Bowling will be granted share option awards of 219,941 and 114,369 respectively under the DBP 48 CPPGroup Plc Annual Report & Accounts 2022 Current share plans 2016 Long Term Incentive Plan (2016 LTIP) This plan was introduced in January 2016, when options were awarded to Executive Directors and certain members of the senior management team Further awards were made in 2017, 2018 and 2019. Options vest, subject to the achievement of specified performance conditions, on the third anniversary of the date of grant, and will expire on the tenth anniversary of grant The three-year vesting period for the 2019 awards completed in the year and following an assessment of the performance conditions the awards vested at a level of 445% All 2019 awards that vested have been settled in cash rather than through the issue of shares Clawback and malus provisions apply to awards made under this plan Deferred Bonus Plan 2022 For the 2022 financial year only, a scheme was approved which recognised the need to reward and motivate the EMC, who are critical in the Group’s ability to deliver the extensive CMP which is pivotal in moving CPP forward sustainably and to the benefit of all shareholders. The 2022 short-term incentive plan (bonus plan) balances short-term incentives (cash bonus) with long-term engagement and retention (DBP) It is weighted more heavily to long-term engagement. This is in part to recognise the lack of effective LTIP in recent years, but also the importance of having a settled and aligned EMC that is engaged and retained for the duration of the CMP The exceptional scheme was deemed to be appropriate for 2022 due to the following: • The EMC are critical to delivering the extensive and complex CMP as well as driving business growth Many EMC members have long tenure resulting in extensive knowledge and experience of the Group which would be extremely difficult to replace. • Over a number of years the headcount at the Centre has been systematically reduced as part of rationalisation actions which has placed a greater reliance on EMC members to operate both at a strategic and operational level in order to deliver the numerous projects in plan • Many of the EMC have been recently promoted into their role, leaving a significant succession gap at the Centre which is a high risk If EMC members chose to leave within the next two years, external backfill would be required. Not only would replacement costs be high but the loss of company knowledge would be critical and would significantly slow execution of the CMP. Subject to financial thresholds being met, individuals will receive a maximum bonus equivalent to an agreed percentage of salary The maximum bonus award for the CEO is 100% of base salary and for the CFO is 90% of base salary The bonus will be split between a cash element and a share element that is valued on the 30 day average share price following the announcement of the CMP The cash element is expected to be paid in Q1 2023. The shares are expected to be granted in Q1 2023. However, to act as a longer-term incentive the shares granted will vest in two tranches where 50% will vest on 31 December 2023, and the remaining 50% will vest on 31 December 2024. The share options granted are nil-cost and carry no performance conditions other than continuous employment Clawback and malus provisions apply to awards made under this plan Long Term Incentive Plans closed during 2022 There were two cash-based incentive plans in place that were introduced in 2020 to replace the 2016 LTIP, they were designed to reward executives only if and when shareholders receive payments (in the form of ordinary or special dividends) The principle underlying these plans was that shareholders should receive at least 90% of any value distributed • The Realisation Proceeds Plan (RPP) covered any events over the ten years from its introduction which resulted in special dividend payments to shareholders (for example, following the partial or full sale of a business unit) If the event produced a gain for CPP (compared to a baseline value established at the end of 2020) and some or all of the proceeds are distributed then 10% of the distributed gain would have been be paid to participants Individuals were granted awards of units in the RPP equivalent to 80% of the maximum available, leaving flexibility for the Committee to award the remaining 20% of the units in future • The Dividend Matching Plan (DMP) was an annual plan which provided a bonus pool equivalent to 10% of any ordinary dividends declared within that year Individuals were awarded a share of the potential pool at the beginning of the year and any payments are made at the same time as dividends are paid to shareholders The Remuneration Committee reviewed these plans during 2022 and agreed to close them on the basis that they no longer aligned to strategy No payments have been made in either the current or prior year through the RPP, whilst £15,000 (2021: £261,000) has been paid through the DMP in the year Shareholder dilution The Group acknowledges the ABI guidelines that commitments to issue new shares or reissue treasury shares when aggregated with awards under all of the Company’s other schemes must not exceed 10% of the issued ordinary share capital in any rolling ten-year period commencing on admission of the Group’s shares to AIM However, given the importance of appropriately incentivising the EMC along with the need to balance long-term retention to execute the CMP, the options granted under the DBP will in aggregate exceed the ABI guidelines The Directors considers this necessary to stabilise the Group and deliver greater shareholder value Newly issued shares are currently used to satisfy the exercise of all equity-settled options. Directors’ shareholdings The Directors who were in post at the end of the year under review held the following beneficial interests in the Company’s ordinary shares: Ordinary shares held at 31 December 2022 Ordinary shares held at 31 December 2021 Interests in unexercised shares under incentive plans 19,881 3,153 — 3,153 — — Simon Pyper David Bowling Simon Thompson Chairman of the Remuneration Committee 27 March 2023 CPPGroup Plc Annual Report & Accounts 2022 49 Corporate governance Directors’ Report The Directors present their Annual Report and audited financial statements of the Group for the year ended 31 December 2022. Principal activities The principal activity of the Group is the provision of assistance products Further information on the Group’s business can be found in the following sections of the Annual Report, which are incorporated by reference into this report: • the Strategic Report on pages 2 to 37; • the Corporate Governance Report on pages 40 to 43; • the Report of the Nomination Committee on page 44; • the Report of the Audit Committee on pages 45 and 46; and • the Directors’ Remuneration Report on pages 47 to 49 Directors The Directors who served throughout the year and to the date of this report are shown in the table below David Morrison Simon Pyper Jason Walsh David Bowling Simon Thompson Jeremy Miller Chairman Chief Executive Officer Chief Executive Officer Chief Financial Officer Non-Independent Non-Executive Director Independent Non-Executive Director (appointed 1 January 2022) (resigned 7 February 2022) (appointed 7 March 2022) Under the Company’s Articles of Association any Director who has been a Director at each of the preceding two AGMs and who was not appointed or reappointed by the Company in general meeting at, or since, either such meeting shall retire by rotation Accordingly, none of the Directors will seek election at the forthcoming AGM Brief biographical details for each Director are set out on pages 38 and 39 Details of Committee memberships are set out in the Corporate Governance Report on page 42 Details of Directors’ beneficial interests in and options over the Company’s shares are set out in the Directors’ Remuneration Report on pages 47 to 49 Dividends The Directors are not recommending that a final dividend be paid in respect of 2022. A final dividend of 7.5 pence per share was paid for the year ended 31 December 2021 Insurance The Company has appropriate insurance cover in place in respect of any potential litigation against Directors Events after the balance sheet date Refer to note 37 on page 99 for details Annual General Meeting The AGM of the Company is to be held on 9 May 2023 The notice of the AGM and an explanation of any non-routine business are set out in the circular accompanying this Annual Report or on the Company’s website at https://international.cppgroup.com The notice of the meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be proposed at the meeting Change of control provisions Some agreements to which the Company or its subsidiaries are a party may be at risk of termination by counterparties in certain restricted circumstances in the event of a change of control of the Company The Directors are not aware of any agreements between the Company and its Directors or employees that provide for compensation for loss of office or employment that occurs because of a takeover bid Capital structure Details of the issued share capital, together with movements in the Company’s issued share capital for the period, can be found in note 32 on page 96 The Company’s capital comprises ordinary shares of £1 each, which carry no right to fixed income. Each fully paid share carries the right to one vote at a general meeting of the Company Details of the Group’s employee share schemes are set out in note 33 on pages 96 and 97 Business relationships The Board is fully aware that the long-term sustainability of our business depends on building and maintaining long-lasting mutually beneficial relationships with our partners. With a B2B2C operating model, insights and requests from business partners in terms of product and marketing strategies are key to the Board’s focus and development in these areas The Group CEO and CFO often meet with prospective and existing business partners, reporting back to the Board on the results of those meetings 50 CPPGroup Plc Annual Report & Accounts 2022 Substantial shareholdings On 31 December 2022, the Company had been notified, in accordance with the Disclosure and Transparency Rules of the FCA, of the notifiable interests in the ordinary share capital of the Company set out in the table below. As far as the Directors are aware, as at 31 December 2022 no person had a beneficial interest in 3% or more of the voting share capital except for the following: Name Funds managed by Phoenix Asset Management Partners Limited Milton Magna Limited (a company controlled by Mr Hamish Ogston) Mr Hamish Ogston Schroders plc Mr Hamish Ogston holds a beneficial interest in 40.75% of the issued shares of the Company. Under the terms of a relationship agreement between Mr Ogston and the Company dated 22 December 2014 and effective from the Company’s admission to AIM, for so long as Mr Ogston and any person or corporate body connected to him (a Controlling Shareholder) holds, in aggregate, 30% or more of the ordinary shares or the voting rights attaching to the shares, Mr Ogston shall not and shall procure that each Controlling Shareholder shall not: • vote in favour of or propose any resolution to amend the Articles of Association which would be contrary to the principle of the independence of the Company from the shareholder or any of the Controlling Shareholders; • take any action which precludes any member of the Group from carrying on its business independently of Mr Ogston or any Controlling Shareholder; or • take any action (or omit to take any action) to prejudice the Company’s status as a company admitted to AIM or its suitability for admission to AIM or the Company’s compliance with the AIM Rules, other than in the circumstances of a takeover or merger of the Company Going concern In reaching their view on the preparation of the Group’s financial statements on a going concern basis, the Directors are required to consider whether the Group can continue in operational existence for a period of at least 12 months from the date of this report The Group has a formalised process of budgeting, reporting and review along with procedures to forecast its profitability and cash flows. The plans provide information to the Directors which are used to ensure the adequacy of resources available for the Group to meet its business objectives, both in the short-term and in relation to its strategic priorities. The Group’s revenue, profit and cash flow forecasts are subject to robust downside stress testing which involves modelling the impact of a combination of plausible adverse scenarios focused on crystallisation of the Group’s key operational risks, including risks associated with the CMP and the recent devastating earthquake in Turkey This is done to identify risks to liquidity and covenant compliance and enable management to formulate appropriate and timely mitigation strategies Taking the analysis into consideration, the Directors are satisfied that the Group has the necessary resources to continue in operational existence for a period of at least 12 months from the date of this report Accordingly, they continue to adopt the going concern basis in preparing the financial statements. Employees The Group is committed to employment policies that provide equality of opportunity to all employees based only on their relevant skills and capabilities and that ensure no employee or applicant is treated unfairly on any grounds including: ethnic origin; religion; gender; sexual orientation; or disability. Ordinary shares 3,093,560 2,641,443 963,317 889,852 % 3497% 2986% 1089% 1006% Every possible support will be offered to any employee who becomes disabled during the course of their employment, with reasonable adjustments made wherever possible The Group communicates with employees by means of regular business updates and monthly CEO calls on the intranet Anti‑bribery and corruption The Group is committed to ensuring that it has effective processes and procedures in place to counter the risk of bribery and corruption. A formal anti-bribery policy is in place and appropriate training is provided according to the level of risk attached to a role Modern Slavery Act The Group has a zero-tolerance approach to modern slavery and will not knowingly support or deal with any business involved in slavery and/or human trafficking. Our Modern Slavery Policy reflects our commitment to maintaining ethical practices in all of our supply chains and across our business The steps taken to help manage the risks outlined by the legislation are detailed in our modern slavery statement published annually on our website https://corporate.cppgroup.com/modern-slavery-statement Streamlined Energy and Carbon Reporting (SECR) None of the Group’s UK-based entities individually or collectively meet the mandatory requirements of the SECR regulations in the UK. The Group actively considers how it can best minimise the environmental footprint its global operations create, however, it has opted to not voluntarily apply the SECR reporting guidance Auditor Each person who is a Director at the date of approval of this report confirms that: • so far as the Director is aware, there is no relevant audit information of which the Company’s Auditor is unaware; and • the Director has taken all the steps that he/she ought to have taken as a Director in order to make him/herself aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006 PKF Littlejohn LLP has expressed its willingness to continue in office as Auditor Accordingly, a resolution to reappoint PKF Littlejohn LLP will be proposed at the AGM By order of the Board Sarah Atherton General Counsel & Company Secretary 27 March 2023 CPPGroup Plc Annual Report & Accounts 2022 51 Corporate governance Statement of Directors’ responsibilities The Directors are responsible for preparing the Annual Report & Accounts in accordance with applicable law and regulations Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the consolidated financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK-adopted International Accounting Standards (UK IAS) and have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’. Under company law the Directors must not approve the accounts until they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing the consolidated financial statements, International Accounting Standard 1 requires that Directors: • properly select and apply accounting policies; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in UK IAS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance; and • make an assessment of the Group’s ability to continue as a going concern In preparing the Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether the Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ has been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the Company financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of 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 Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions We confirm that to the best of our knowledge: • the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit/loss of the Company and the undertakings included in the consolidation taken as a whole; and • the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties that they face By order of the Board Simon Pyper Chief Executive Officer 27 March 2023 David Bowling Chief Financial Officer 27 March 2023 52 CPPGroup Plc Annual Report & Accounts 2022 Financial statements Independent Auditor’s Report To the members of CPPGroup Plc Opinion We have audited the financial statements of CPPGroup Plc (the parent company) and its subsidiaries (the Group) for the year ended 31 December 2022 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and parent company balance sheets, the consolidated and parent company statements of changes in equity, the consolidated cash flow statement and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 Reduced Disclosure Framework (United Kingdom generally accepted accounting practice). In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2022 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; • the parent company financial statements have been properly prepared in accordance with United Kingdom generally accepted accounting practice; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going concern basis of accounting included: • A comparison of actual results for the year to past budgets to assess the forecasting ability/accuracy of management • Reviewing the two-year plan prepared by management for the period, providing challenge to key assumptions and reviewing the reasonableness of the following: • significant movements in forecasted cash flows and evaluating the reasoning for the changes; • the accuracy of the two-year plan forecasts by comparing the forecasts to historical trends and performance; and • substantiating the forecasts’ inputs with supporting documentation • Review of the parent company and its subsidiaries’ correspondence with regulators up to the date of signing our audit report • Review of the financial statements disclosures for the year ended 31 December 2022 and its supporting documents. CPPGroup Plc Annual Report & Accounts 2022 53 Financial statements Independent Auditor’s Report continued To the members of CPPGroup Plc Conclusions relating to going concern continued • Assessment of the risks faced by the Group and the parent company, which include: • credit risk, liquidity risk, currency risk, funding risk and capital risk (including minimum solvency capital requirements); • operational resilience and business continuity plans; • ability to continually provide services to customers; • compliance with regulations; and • maintaining appropriate oversight and control over the Group’s significant international components. • Reviewing post-year end RNS announcements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report Our application of materiality The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. The materiality applied to the Group financial statements was £1.71 million (2021: £1.46 million) based on 1% (2021: 1%) of revenue We based the materiality on revenue because we consider this to be the most relevant performance indicator of the Group and is a significant driver of profit or loss for the year. The performance materiality was £1.37 million (2021: £1.02 million). We set performance materiality at 80% (2021: 70%) of overall financial statement materiality to reflect the risk associated with the judgemental and key areas of management estimation within the financial statements. The materiality applied to the parent company financial statements was £153,000 (2021: £158,000) based on 5% (2021: 5%) of profit before tax, as there is no revenue recorded in the holding company. The performance materiality was £122,400 (2021: £110,600). For each component in the scope of our Group audit, we allocated a materiality that was less than our overall Group materiality As a Group which is in the process of growing certain parts of the business whilst simultaneously winding down others, component materiality was set with reference to either revenue, profit before tax or net assets. We agreed with those charged with governance that we would report all differences identified during the course of our audit in excess of £85,300 (2021: £73,000). No significant changes have come to light through the audit fieldwork which has caused us to revise our materiality figure. Our approach to the audit In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular we looked at areas involving significant accounting estimates and judgements by the Directors and considered future events that are inherently uncertain As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud Of all the 28 components of the Group, a full scope audit was performed on the complete financial information of 12 components, and for the components not considered significant, we performed a limited scope review which included analytical review together with substantive testing as appropriate on Group audit risk areas applicable to those components based on their relative size, risks in the business and our knowledge of the entity appropriate to respond to the risk of material misstatement Of all the 28 reporting components of the Group, three significant components are located outside the UK and audited by a PKF network firm operating under our instruction and the audit of the remaining components were performed in Leeds, conducted by PKF Littlejohn LLP using a team with specific experience of auditing companies operating in the insurance sector and publicly listed entities. The Senior Statutory Auditor interacted regularly with the component audit teams during all stages of the audit and was responsible for the scope and direction of the audit process This, in conjunction with additional procedures performed, gave us appropriate evidence for our opinion on the Group and parent company financial statements. 54 CPPGroup Plc Annual Report & Accounts 2022 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters Key audit matter Revenue recognition How our scope addressed this matter Under ISA (UK) 240 there is a rebuttable presumption that revenue recognition is a fraud risk IFRS 15 Revenue from Contracts with Customers requires that the Group, for each of its material revenue streams, identify the individual performance obligations owed to its customers, against which revenue is allocated and recognised We have carried out the following procedures: • documented our understanding of the internal control environment in operation for the significant income streams and undertook walkthroughs across all material revenue streams to gain assurance that the key controls within these processes have been operating in the period under audit; Due to the nature of the Group’s products, most notably in the Indian market, which involve the provision of different services over varying periods of time, the recognition of revenue is complex and involves the application of management judgement when identifying specific performance obligations. • assessed the design and tested the operating effectiveness of controls relating to the collation and apportionment of costs used in the revenue recognition calculations in the Group’s material territories We have also focused our controls testing in India on the accuracy of revenue recording; The key judgements applied include the identification of, and allocation of revenue between, different performance obligations, particularly in India where revenue growth is fastest and most complex • we also focused our controls testing in the UK on the Group’s governance over the revenue recognition policies applied in each territory, as well as considering and challenging the revenue allocation mechanisms adopted; Management judgement is also applied when determining the costs associated with discharging the Group’s various performance obligations, used as the basis for the revenue allocation calculations performed • obtained and agreed a sample of costs incurred to supporting information to assess the accuracy and completeness of revenue allocation calculations performed in the Group’s material territories; We consider that there is significant audit risk in relation to: • reviewed any new products developed during the year, the • the appropriateness and compliance of the Group’s revenue recognition policies under IFRS 15 for new and existing products; and • the accuracy of revenue allocation calculations performed across the Group, and the accuracy and completeness of underlying cost data upon which it is based appropriateness of revenue recognition policies adopted under IFRS 15 and their consistency of application across the Group; • reviewed legal opinions/correspondence and assessed whether this impacted management’s classification of their products for accounting purposes; • used data analytics to perform analytical procedures and performed substantive tests of detail in order to audit the underlying revenue balances in India, the UK, Spain and Turkey; and • reviewed intra-group revenue and ensured transactions are eliminated correctly on consolidation, along with any intra- group profits. CPPGroup Plc Annual Report & Accounts 2022 55 Financial statements Independent Auditor’s Report continued To the members of CPPGroup Plc Other information The other information comprises the information included in the Annual Report, other than the financial statements and our Auditor’s Report thereon The Directors are responsible for the other information contained within the annual report Our opinion on the Group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact We have nothing to report in this regard Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • 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; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters in relation to which 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 Responsibilities of Directors As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the Group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Group and parent company financial statements, the Directors are responsible for assessing the Group and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor’s Report that includes our opinion Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: • We obtained an understanding of the Group and the parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, industry research and the application of cumulative audit knowledge and experience of the sector • We determined the principal laws and regulations relevant to the Group and the Company in this regard to be those arising from the Companies Act 2006, FCA Handbook, Solvency II, AIM rules, GDPR, Employment Law, Health and Safety Law, Anti-bribery and Money Laundering Regulations and Quoted Companies Alliance Corporate Governance Code. Local laws and regulations in the UK, India, Spain, Ireland, Turkey and other locations where the Group operates, were also considered • There was regular interaction with the component auditors during all stages of the audit, including procedures designed to identify non-compliance with laws and regulations, including fraud. 56 CPPGroup Plc Annual Report & Accounts 2022 Auditor’s responsibilities for the audit of the financial statements continued • We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the Group or the Company with those laws and regulations. These procedures included, but were not limited to: • discussions with management regarding potential non-compliance; • review of legal and professional fees to understand the nature of the costs and the existence of any non-compliance with laws and regulations; and • review of minutes of meetings of those charged with governance and RNS announcements • We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that the potential for management bias was identified in relation to the revenue recognition policy of the Group and as noted above, we addressed this by challenging the assumptions and judgements made by management when auditing that critical accounting judgement • As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business and review of bank statements during the year to identify any large and unusual transactions where the business rationale is not clear Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: wwwfrcorguk/auditorsresponsibilities This description forms part of our auditor’s report Use of our report 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 Martin Watson (Senior Statutory Auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor 3rd Floor, One Park Row, Leeds, United Kingdom 27 March 2023 CPPGroup Plc Annual Report & Accounts 2022 57 Financial statements Consolidated income statement For the year ended 31 December 2022 2022 2021 Note Core £’000 Legacy £’000 Total £’000 Core £’000 Legacy £’000 Total (Restated*) £’000 Continuing operations Revenue Cost of sales Gross profit 5 154,267 15,516 169,783 123,160 19,663 142,823 (133,924) (5,087) (139,011) (104,319) (6,160) (110,479) 20,343 10,429 30,772 18,841 13,503 32,344 Administrative expenses (18,469) (9,689) (28,158) (17,543) (11,633) (29,176) Share of loss of joint venture Operating profit Analysed as: EBITDA Depreciation and amortisation Exceptional items Investment revenues Finance costs Other gains and losses Profit before taxation Taxation Profit/(loss) for the year from continuing operations Discontinued operations Profit for the year from discontinued operations Profit/(loss) for the year Attributable to: Equity holders of the Company Non-controlling interests Basic (loss)/earnings per share Continuing operations Discontinued operations Diluted (loss)/earnings per share Continuing operations Discontinued operations 21 5 6 10 11 6 12 15 Note 14 14 Note 14 14 — 1,874 4,928 (2,055) (999) 370 (630) — 1,614 (2,000) — 740 — 2,614 1,925 (452) (733) 116 (26) — 830 6,853 (2,507) (1,732) 486 (656) — 2,444 (343) (2,343) — 1,298 4,105 (2,220) (587) 195 (347) — 1,146 (3,600) (189) 1,681 3,141 (698) (762) 16 (19) 1,459 3,137 (107) (189) 2,979 7,246 (2,918) (1,349) 211 (366) 1,459 4,283 (3,707) (386) 487 101 (2,454) 3,030 576 — (386) 676 1,163 (640) 254 (386) 1,163 — 1,163 676 777 523 254 777 — (2,454) (2,897) 443 (2,454) 2,432 5,462 5,462 — 5,462 2022 2021 Core pence Legacy pence Total pence Core pence (7.24) — 5.51 7.64 (7.24) 13.15 (1.73) (3294) 7.64 5.91 — (3294) Legacy pence 3445 2765 6210 2022 2021 Core pence Legacy pence Total pence Core pence Legacy pence 2,432 3,008 2,565 443 3,008 Total (Restated*) pence 151 2765 2916 Total (Restated *) pence (7.24) — 5.51 7.64 (7.24) 13.15 (1.73) 7.64 5.91 (3211) — (3211) 3358 2696 6054 147 2696 2843 * Restated to reflect Mexico as discontinued operations. See note 2. 58 CPPGroup Plc Annual Report & Accounts 2022 Consolidated statement of comprehensive income For the year ended 31 December 2022 Profit for the year Items that may be reclassified subsequently to profit or loss: Fair value gain on equity investment Exchange differences on translation of foreign operations Exchange differences reclassified on disposal of foreign operations Other comprehensive expense for the year net of taxation Total comprehensive (expense)/income for the year Attributable to: Equity holders of the Company Non-controlling interests 2022 £’000 777 152 (2,052) 1,093 (807) (30) (286) 256 (30) 2021 £’000 3,008 — (695) (4) (699) 2,309 1,867 442 2,309 CPPGroup Plc Annual Report & Accounts 2022 59 Financial statements Balance sheets As at 31 December 2022 Non-current assets Goodwill Other intangible assets Property, plant and equipment Right-of-use assets Investments Equity investment Deferred tax assets Contract assets Current assets Inventories Contract assets Trade and other receivables Cash and cash equivalents Assets classified as held for sale Total assets Current liabilities Borrowings Income tax liabilities Trade and other payables Provisions Lease liabilities Contract liabilities Liabilities classified as held for sale Net current assets Non-current liabilities Borrowings Deferred tax liabilities Provisions Lease liabilities Contract liabilities Total liabilities Net assets Equity Share capital Share premium account Merger reserve Translation reserve ESOP reserve Retained earnings Equity attributable to equity holders of the Company Non-controlling interests Total equity Consolidated Company Note 2022 £’000 2021 £’000 2022 £’000 2021 £’000 16 17 18 19 20 21 30 23 22 23 24 25 15 28 26 29 27 23 15 28 30 29 27 23 32 34 544 4,710 1,243 3,936 — 2,041 230 275 12,979 87 5,764 19,841 20,984 46,676 — 46,676 59,655 23 (1,195) (26,210) (224) (966) (11,238) (39,810) — (39,810) 6,866 — (702) (145) (3,752) (773) (5,372) (45,182) 14,473 24,256 45,225 (100,399) (825) 17,212 27,201 12,670 1,803 14,473 540 3,603 1,335 5,109 — 1,889 396 564 13,436 102 4,020 13,605 22,319 40,046 478 40,524 53,960 — (1,362) (19,544) — (937) (9,190) (31,033) (550) (31,583) 8,941 58 (927) — (4,936) (1,200) (7,005) (38,588) 15,372 24,243 45,225 (100,399) 136 17,418 27,202 13,825 1,547 15,372 — — — — 15,545 — — — 15,545 — — 81,832 1,224 83,056 — 83,056 98,601 — — (11,230) — — — (11,230) — (11,230) 71,826 — — — — — — (11,230) 87,371 24,256 45,225 — — 10,586 7,304 87,371 — 87,371 — — — — 15,770 — 57 — 15,827 — — 81,941 5,368 87,309 — 87,309 103,136 — — (15,275) — — — (15,275) — (15,275) 72,034 — (47) — — — (47) (15,322) 87,814 24,243 45,225 — — 10,792 7,554 87,814 — 87,814 The notes on pages 64 to 99 form an integral part of these financial statements. The Company reported a profit for the financial year ended 31 December 2022 of £429,000 (2021: £1,239,000 loss). Approved by the Board of Directors and authorised for issue on 27 March 2023 and signed on its behalf by: Simon Pyper Chief Executive Officer Company registration number: 07151159 David Bowling Chief Financial Officer 60 CPPGroup Plc Annual Report & Accounts 2022 Consolidated statement of changes in equity For the year ended 31 December 2022 Share capital £’000 Share premium account £’000 Note Merger reserve £’000 Translation reserve £’000 ESOP reserve £’000 Retained earnings £’000 Non- controlling interests £’000 Total £’000 Total equity £’000 At 1 January 2021 Profit for the year Other comprehensive expense for the year Total comprehensive income for the year Equity-settled share-based payment credit Exercise of share options Deferred tax on share options Dividends paid 33 12 13 24,153 45,225 (100,399) — — — — 90 — — — — — — — — — — — — — — — — At 31 December 2021 24,243 45,225 (100,399) Profit for the year Other comprehensive expense for the year Total comprehensive expense for the year Equity-settled share-based payment credit Exercise of share options Deferred tax on share options Effects of hyperinflation Dividends paid 33 32 12 3 13 — — — — 13 — — — — — — — — — — — — — — — — — — — 834 — (698) (698) — — — — 136 — (961) (961) 17,490 27,327 14,630 1,105 15,735 — — — (72) — — — 2,565 2,565 443 3,008 — (698) (1) (699) 2,565 1,867 442 2,309 — (70) 9 (72) 20 9 (2,629) (2,629) — — — — (72) 20 9 (2,629) 17,418 27,202 13,825 1,547 15,372 — — — 523 523 254 777 152 (809) 2 (807) 675 (286) 256 (30) — — — — — (206) — — — — — (7) (9) 3 (206) 6 (9) 3 (663) (663) — — — — — (206) 6 (9) 3 (663) At 31 December 2022 24,256 45,225 (100,399) (825) 17,212 27,201 12,670 1,803 14,473 CPPGroup Plc Annual Report & Accounts 2022 61 Financial statements Company statement of changes in equity For the year ended 31 December 2022 At 1 January 2021 Loss and total comprehensive expense for the year Equity-settled share-based payment credit Exercise of share options Deferred tax on share options Dividends paid At 31 December 2021 Profit and total comprehensive income for the year Equity-settled share-based payment credit Exercise of share options Deferred tax on share options Dividends paid At 31 December 2022 Note 1 33 12 13 1 33 32 12 13 Share capital £’000 24,153 — — 90 — — Share premium account £’000 45,225 — — — — — ESOP reserve £’000 10,864 — (72) — — — 24,243 45,225 10,792 — — 13 — — — — — — — — (206) — — — 24,256 45,225 10,586 Retained earnings £’000 11,483 (1,239) — (70) 9 (2,629) 7,554 429 — (7) (9) (663) 7,304 Total £’000 91,725 (1,239) (72) 20 9 (2,629) 87,814 429 (206) 6 (9) (663) 87,371 62 CPPGroup Plc Annual Report & Accounts 2022 Consolidated cash flow statement For the year ended 31 December 2022 Net cash from operating activities Investing activities Interest received Purchases of property, plant and equipment Purchases of intangible assets Cash consideration in respect of sale of discontinued operations Costs associated with disposal of discontinued operations Cash disposed of with discontinued operations Net cash (used in)/from investing activities Financing activities Dividends paid Repayment of the lease liabilities Interest paid Issue of ordinary share capital Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Effect of foreign exchange rate changes Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Analysed as: Continuing operations Discontinued operations Note 35 18 17 15 15 13 25 2022 £’000 3,822 490 (526) (2,194) — (128) (823) (3,181) (663) (1,388) (75) 6 (2,120) (1,479) 54 22,409 20,984 2021 £’000 4,562 224 (525) (1,370) 2,366 — (112) 583 (2,629) (1,507) (76) 20 (4,192) 953 (400) 21,856 22,409 20,984 22,319 15 — 90 20,984 22,409 CPPGroup Plc Annual Report & Accounts 2022 63 Financial statements Notes to the financial statements 1. General information CPPGroup Plc (the Company) is a public company limited by shares incorporated in England and Wales under the Companies Act 2006 and domiciled in the United Kingdom. Its registered office is 6 East Parade, Leeds LS1 2AD. The Group comprises CPPGroup Plc and its subsidiaries The Group’s principal activity during the year was the provision of assistance products The consolidated and Company financial statements are presented in pounds sterling, the functional currency of the Company. All financial information is rounded to the nearest thousand (£’000) except where otherwise indicated. Foreign operations are included in accordance with the policies set out in note 3 The Company has taken advantage of the exemption in the Companies Act 2006, section 408, not to present its own income statement The Company reported a profit after tax for the year of £429,000 (2021: £1,239,000 loss). 2. Adoption of new Standards New Standards adopted The following Standards and Interpretations have become effective and have been adopted in these financial statements. Standard/Interpretation Subject IAS 37 IFRS 1 IFRS 9 Onerous Contracts: directly related costs are considered when determining if a contract is onerous, including incremental costs of fulfilling a contract and allocation of other direct costs. Subsidiary as a first time adopter. Fees in the 10 per cent test for derecognition of a financial liability. Standards not yet applied At the date of authorisation of these financial statements, the following relevant Standards and Interpretations, which have not been applied in these financial statements, were in issue but not yet effective and have been endorsed for the UK: Standard/Interpretation Subject IAS 1 IAS 8 IAS 12 IFRS 17 Classification of Liabilities as Current or Non-Current Definition of accounting estimates Deferred tax related to assets and liabilities arising from a single transaction Insurance contracts Period first applies (year ended) 31 December 2023 31 December 2023 31 December 2023 31 December 2023 The Group have assessed the standards not yet applied and have determined that IAS 1, IAS 8 and IFRS 17 will not have a material impact to the Group’s current accounting policies IAS 12 is under review in all jurisdictions and there is expected to be an impact to both deferred tax assets and deferred tax liabilities The impact varies depending on the local tax legislation, and the assessment is expected to be concluded by June 2023 3. Significant accounting policies Basis of preparation These consolidated financial statements on pages 58 to 99 present the performance of the Group for the year ended 31 December 2022 The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK-adopted International Accounting Standards (UK IASs). The consolidated financial statements have been prepared under the historical cost basis The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council (FRC). Accordingly, the financial statements have been prepared in accordance with FRS 101 Reduced Disclosure Framework as issued by the FRC incorporating the Amendments to FRS 101 issued by the FRC in July 2015 and July 2016. The Company financial statements have also been prepared under the historical cost basis As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available in relation to Standards not yet effective, presentation of a cash flow statement, share-based payments and related party transactions. Core and Legacy presentation In October 2022, the Board set out the findings of its strategic review, which will see the Group withdraw from its Legacy businesses and focus resources on its Core growth businesses in India, Turkey and its InsurTech, Blink. In order to aid users of the financial statements, additional columns have been added to the income statement and relevant notes to illustrate the income and cost base of the Core and Legacy businesses. The prior year presentation has also been represented to reflect these changes. This presentation is expected to continue throughout the closure period of the Legacy businesses Restatement of disclosures On 20 October 2022, the Group completed the sale of its wholly-owned subsidiaries Servicios de Asistencia a Tarjehabientes CPP Mexico S de RL de CV and Profesionales en Proteccion Individual S de RL de CV (together Mexico) In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, Mexico has been classified as discontinued within these financial statements. Accordingly, the comparative consolidated income statement information and appropriate disclosure notes have been restated 64 CPPGroup Plc Annual Report & Accounts 2022 3. Significant accounting policies continued Restatement of disclosures continued The Group has revised its segmental reporting from 1 January 2022 In accordance with IFRS 8 the operating segments have been changed to reflect the way in which the Group is now managed and how resources are allocated. The Group’s operating segments are identified as India, Turkey, Blink, Legacy and Central Functions These segments replace the Ongoing Operations, Restricted Operations and Central Functions basis that was previously in place. The prior period segmental information has been restated to reflect the change. Further detail is available in note 5 Going concern The Board of Directors has, at the time of approving the consolidated financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of at least 12 months from the date of this report. The assessment considers the Group’s modelling of the ongoing inflationary pressures, risks associated with its CMP and the recent devastating earthquake in Turkey Accordingly they continue to adopt the going concern basis of accounting in preparing the consolidated financial statements. Further details of the Directors’ assessment is set out in the Directors’ Report on page 50 Basis of consolidation The consolidated financial statements include the results, cash flows, assets and liabilities of the Company and the entities under its control. Control is achieved when the Company has power over the investee; is exposed or has rights to variable return from its involvement with the investee; and has the ability to use its power to affect its returns. Subsidiary undertakings are all entities over which the Group has the power to govern the financial and operating policies. The power to govern is also achieved when the Group is exposed to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity This power is generally accompanied by the Group having a shareholding of more than 50% of the voting rights The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal. Adjustments are made, where necessary, to the financial statements of subsidiaries to bring their accounting policies into line with Group policies. All intra-Group transactions, balances, income and expenses are eliminated on consolidation Exceptional items Items which are exceptional and within operating profit, being material in terms of size and/or nature, are presented separately from underlying business performance in the consolidated income statement The separate reporting of exceptional items contained within operating profit helps provide an indication of the Group’s underlying business performance. Items which are in other gains or losses and exceptional from their size or nature are identified in the exceptional note. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event; it is probable that the Group will be required to settle that obligation; and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third-party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably In the year, the Group has announced a new strategic direction, which will involve withdrawing from the Legacy UK and European businesses. Therefore, the Group has given additional consideration to whether this gives rise to onerous contracts and restructuring provisions A constructive obligation is determined to have occurred when a decision has been made by the Board, a formal plan for restructuring has been detailed and the implementation of this has commenced This is either via announcement to those affected or via the commencement of the restructuring plan In this scenario, each business unit will be considered to have a constructive obligation when the implementation of the restructuring has commenced and those affected informed, as a decision has already been made by the Board Following the strategic announcement, the Group have considered the costs required to fulfil existing contracts and when these are determined as onerous, whereby future costs are expected to exceed future income, they are recognised through an onerous contract provision Provisions are not recognised for future operating losses (unless within the onerous contract considerations) Hyperinflation The Group has operations in Turkey, which met the criteria to be classified as a hyperinflationary economy in the year. This is based on the Turkish Statistical Institute published consumer price index, which had cumulative inflation of 109.4% over a three-year period as at March 2022. IAS 29 Financial Reporting in Hyperinflationary Economies requires that inflation accounting is applied to the financial statements of entities where the cumulative inflation rate in three years approximates or exceeds 100%. Inflation accounting aims to restate the value of the assets, liabilities and income statement items of an entity in terms of the monetary values at the balance sheet date, to better represent their true and fair value. This is performed by applying a conversion factor calculated using the reporting date inflation index over the inflation index at the date of recognition to revalue non-monetary balance sheet and all income statement items. The CPI inflation index published by the Turkish Statistical Institute has been used for this calculation CPPGroup Plc Annual Report & Accounts 2022 65 Financial statements Notes to the financial statements continued 3. Significant accounting policies continued Hyperinflation continued In Turkey’s case, this has impacted other intangible assets, property, plant and equipment, right-of-use assets, prepayments, contract liabilities, deferred tax, share capital and all income statement items Monetary items are not restated as they are already recognised in terms of the monetary unit current at the balance sheet date. The exchange rate then used to retranslate all financial statement line items (including income statement items) is the period end exchange rate, which at 31 December 2022 was 2255 On initial adoption in the year ended 31 December 2022, the impact of inflation to the start of the year is recognised as a movement in retained earnings. Comparative balances are not restated. The inflation impact for the current year has been recognised within finance costs. The annual inflation rate was 64.3% at 31 December 2022. The overall impact of inflation accounting in Turkey in the year has been as follows: Net assets Profit before tax Taxation Profit after tax Retained earnings Year ended 31 December 2022 £’000 89 122 (36) 86 3 Share-based payments The Group’s current share plan under which it has issued share options is the 2016 Long Term Incentive Plan (2016 LTIP) Costs in relation to the 2016 LTIP are disclosed within administrative expenses All options under the 2016 LTIP have vested and remain available to exercise The Group has issued share options to certain employees through the Matching Share Plan (MSP) which is a legacy share plan There are no costs recognised in relation to this plan in the consolidated income statement All options under the MSP have vested and remain available for exercise Share options are treated as equity-settled if the Group has the ability to determine whether to settle exercises in cash or by the issue of shares Share options are measured at fair value at the date of grant, based on the Group’s estimate of shares that will eventually vest, and adjusted for the effect of non-market-based vesting conditions each year. Non-market vesting conditions include a change in control of the Group and are considered by the Directors at each year end. The fair value of equity-settled share-based payments is expensed in the consolidated income statement on a straight line basis over the vesting period, with a corresponding increase in equity, subject to adjustment for forfeited options Where the terms of an equity-settled award are modified, the cost based on the original award terms continues to be recognised over the remainder of the original vesting period In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the fair value of the original award and the fair value of the modified award, both as measured on the date of modification. No reduction is recognised if the difference is negative. For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability At each balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year. The fair value of share options is measured by use of the Black Scholes option pricing model and the Monte Carlo simulation model Revenue recognition Retail assistance revenue The Group provides a range of assistance products and services, under the My Finances, My Tech, My Health, My Home, My Digital Life and My Travel product ranges These may be insurance backed as well as including a bundle of assistance and other services Revenue attributable to the Group’s assistance products is comprised of the prices paid by customers for the assistance products net of any cancellations, sales taxes and underwriting fees dependent on the terms of the arrangement Revenue is recognised either immediately on inception of a policy or over the duration of the policy where there are ongoing obligations to fulfil with a customer. The Group’s performance obligations typically include a combination of intermediary services, claims handling, policy administration services and providing access to a range of relevant assistance benefits. This allocation of revenue is determined by each product and its features and is calculated on a cost plus margin basis Revenue recognised on inception relates to the Group’s role as intermediary in the policy sale and immediate delivery of certain features Revenue recognised over the life of the policy relates to the administration process and ongoing services where obligations exist to provide future services, such as claims handling The proportion of recognition on inception and over a period of time varies across the Group’s suite of products dependent on the services performed and product features included Provisions for cancellations are made at the time revenue is recorded and are deducted from revenue 66 CPPGroup Plc Annual Report & Accounts 2022 3. Significant accounting policies continued Revenue recognition continued Retail assistance revenue continued For certain other of the Group’s assistance products, there are no introduction fees In these arrangements, revenue is comprised of the subscriptions received from members, net of underwriting fees and exclusive of any sales taxes These subscriptions are recognised over the duration of the service provided Wholesale policies Wholesale revenue is generally comprised of fees billed directly to business partners, exclusive of any sales taxes, and is recognised as those fees are earned This encompasses the products within My Finances and My Travel Non-policy revenue Non-policy revenue is comprised of fees billed directly to customers or business partners for services provided under separate non-policy based arrangements Such revenue is recognised, exclusive of any sales taxes, as those fees are earned These are under the Other category of products Contract assets The Group recognises contract assets in the consolidated balance sheet Contract assets represent deferred income and costs that are incremental to obtaining a customer contract, typically commission costs Contract assets are recognised in the consolidated income statement in line with the profile of the associated revenue within the relevant customer contract. These assets have been classified as either current or non-current reflecting the period in which they are expected to be recognised through the consolidated income statement. Contract liabilities The Group recognises contract liabilities in the consolidated balance sheet Contract liabilities represent deferred income and have been classified as current or non-current, reflecting the period in which future performance obligations are expected to be satisfied and when the liability is to be recognised in the consolidated income statement Insurance revenue Within the My Finances products, there are insurance based revenues. Insurance contracts are those contracts that transfer significant insurance risk at the inception of the contract. Insurance risk is transferred when the Group agrees to compensate a policyholder if a specified uncertain future event (other than a change in a financial variable) adversely affects the policyholder. Revenue attributable to the Group’s insurance contracts comprises premiums paid by customers and is exclusive of any sales taxes and similar duties Premiums from insurance policies are recognised as revenue on a straight line basis over the life of the policy Provisions for unearned premiums are made, representing the part of gross premiums written that is estimated to be earned in the following or subsequent financial periods, on a straight line basis for each policy. The provision for unearned premiums is recorded under insurance liabilities on the consolidated balance sheet Acquisition costs are amortised over the life of the average policy Acquisition costs which are expensed in the following or subsequent accounting periods are recorded in the balance sheet as deferred acquisition costs and include a proportionate allowance for commissions and post-sale set-up costs incurred in respect of unearned premiums not amortised at the balance sheet date. Insurance claims provisions Claims incurred comprise the Group’s claims payments and internal settlement expenses during the period, together with the movement in the Group’s provision for outstanding claims over the period, including an estimate for claims incurred but not reported Differences between the estimated cost and subsequent settlement of claims are recognised in the consolidated income statement in the year in which they are settled Investments in subsidiaries Investments in subsidiaries in the Company balance sheet are stated at cost less accumulated impairment losses Investments are periodically reviewed for impairment by comparing the carrying value to value in use Business combinations The acquisitions of subsidiaries are accounted for using the acquisition method The consideration transferred for acquisition of a subsidiary is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquired business. The acquired identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are measured at their fair value at the acquisition date Acquisition-related costs are expensed as incurred. Joint arrangements Under IFRS 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Investments in joint ventures are accounted for using the equity method of accounting after being recognised initially at cost on the consolidated balance sheet. The investment is subsequently adjusted to recognise the Group’s share of post-acquisition profits or losses and the Group’s share of profit or loss is recognised in the consolidated income statement. Dividends received or receivable from joint ventures are recognised as a reduction in the carrying amount of the investment When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity The carrying amount of equity-accounted investments is tested for impairment in accordance with Group policy. Joint arrangements are de- recognised when a significant influence can no longer be demonstrated, in accordance with IAS 28 Investments in Associates and Joint Ventures. CPPGroup Plc Annual Report & Accounts 2022 67 Financial statements Notes to the financial statements continued 3. Significant accounting policies continued Equity investments Equity investments are initially recognised at fair value, in accordance with IFRS 9 They are revalued at reporting dates and an election has been made that the fair value gains or losses are recognised in other comprehensive income. This is due to the non-current nature of the equity investment and the Group’s intention to hold this as a long-term investment. The Group’s equity investment represents its shareholding in KYND Limited (KYND) on a fully diluted basis Non-controlling interests Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries that is not held by the Group and is presented within equity on the consolidated balance sheet, separately from the Company’s equity holdings. The Group recognises any non-controlling interest in acquired entities on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Goodwill Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised at cost and is subsequently measured at cost less any accumulated impairment losses Goodwill is not subject to amortisation but is tested for impairment annually On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the gain or loss on disposal Impairment of goodwill For the purpose of impairment testing, goodwill is allocated to cash generating units (CGUs). If the recoverable amount of a CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit. An impairment loss for goodwill is not reversed in a subsequent period Intangible assets Externally acquired software Externally acquired software is measured at purchase cost and is amortised on a straight line basis over its estimated useful life of four to five years. Internally generated software Internally generated intangible assets arising from the Group’s software development programmes are recognised from the point at which the following conditions are met: • an asset is created that can be identified; • it is probable that the asset created will generate future economic benefits; and • the development cost of the asset can be measured reliably Internally generated software is amortised on a straight line basis over its estimated useful life of four to five years. Intangible assets arising from business combinations Intangible assets arising from business combinations are initially stated at their fair values and amortised over their useful economic lives as follows: • Business partner relationships: in line with the relevant projected revenues. Property, plant and equipment Property, plant and equipment are shown at purchase cost, net of accumulated depreciation Depreciation is provided at rates calculated to write off the costs, less estimated residual value, of each asset over its expected useful life as follows: Computer systems: 4–5 years straight line Furniture and equipment: 4 years straight line Leasehold improvements: Over the shorter of the life of the lease and the useful economic life of the asset Impairment of intangible assets and property, plant and equipment Annually the Group reviews the carrying amounts of both its intangible assets and property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any The recoverable amount is the higher of the fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted at their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount An impairment loss is recognised as an expense immediately 68 CPPGroup Plc Annual Report & Accounts 2022 3. Significant accounting policies continued Property, plant and equipment continued Impairment of intangible assets and property, plant and equipment continued Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU may be increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or CGU in prior years. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and bank deposits with a term from inception of three months or less, less bank overdrafts where there is a right to offset Bank overdrafts are presented as current liabilities to the extent that there is no right to offset with cash balances in the same currency Assets and liabilities classified as held for sale and discontinued operations Assets and liabilities are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction and the sale is highly probable. Assets and liabilities classified as held for sale are stated at the lower of carrying amount and fair value less costs to sell They are not depreciated or amortised from the point they are recognised as held for sale Operations are classified as discontinued when they are either disposed or are part of a single co-ordinated plan to dispose, and represent a major line of business or geographical area of operation Discontinued operations include all income and expenses relating to the discontinued operations, including exceptional items, taxation, profit or loss on disposal and costs to sell. Leases The Group assesses whether a contract is or contains a lease at inception of the contract The Group’s leases include properties, equipment and motor vehicles. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and low value assets. For these leases, the Group recognises the lease payments as an expense through the consolidated income statement on a straight line basis over the term of the lease Lease liabilities The lease liability is initially measured at the present value of the lease payments, discounted by using the relevant incremental borrowing rate available to the Group in each territory where a lease is held. Lease liabilities include the net present value of the following: lease payments; fixed payments, including any incentives; variable lease payments; and amounts payable under residual value guarantees. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the consolidated income statement over the lease period providing a constant periodic rate of interest on the remaining balance of the liability for each period Right-of-use assets Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of lease liability and any lease payments made at or before the commencement date; less any lease incentives received, any initial direct costs and final committed restoration costs. The right-of-use asset is depreciated on a straight line basis over the shorter of the asset’s useful life and the lease term. Variable lease payments When a lease includes terms that change the future lease payments, such as index-linked reviews, the lease liability (and related right-of-use asset) is remeasured based on the revised future lease payments at the date on which the revision is triggered Extension and termination options A number of the Group’s lease arrangements include extension and termination options These terms are used to maximise operational flexibility in respect of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated), considering historical trends and circumstances of the lease arrangement Taxation Taxation on the profit or loss for the year comprises both current and deferred tax as well as adjustments in respect of prior years. Taxation is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the tax is also included within equity Current tax is the expected tax payable on the taxable income for the year using tax rates that have been enacted or substantively enacted by the balance sheet date Deferred tax is provided in full, using the liability method, on all taxable and deductible temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiary undertakings except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income tax levied by the same taxation authority and the Group/Company intends to settle its current tax assets and liabilities on a net basis Pension costs Pension costs represent contributions made by the Group to defined contribution pension schemes. These are expensed as incurred. CPPGroup Plc Annual Report & Accounts 2022 69 Financial statements Notes to the financial statements continued 3. Significant accounting policies continued Foreign currencies In preparing the financial information of the individual entities that comprise the Group, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences are classified as equity and transferred to the Group’s translation reserve Goodwill and fair value adjustments arising on the acquisition of foreign entities are treated as assets and liabilities of the foreign entity and are translated at the closing rate On disposal of foreign operations, the cumulative amount of exchange differences previously recognised directly in equity for that foreign operation are transferred to the consolidated income statement as part of the profit or loss on disposal. Financial instruments Financial assets and financial liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument These are derecognised when the contractual provisions have ceased or substantially all of the risks and rewards have been transferred Financial assets Trade receivables, loans, other receivables or cash and cash equivalents that have fixed or determinable payments that are not quoted in an active market are initially recorded at fair value and subsequently at amortised cost using the effective interest method, less allowance for any estimated irrecoverable amounts Investments in debt instruments are initially measured at fair value, including transaction costs directly attributable to the acquisition of the financial asset. Financial assets held at fair value through profit and loss are initially recognised at fair value and transaction costs are expensed Where debt instruments are designated as ‘fair value through profit and loss’, gains and losses arising from changes in fair value are included in the income statement for the period. For debt instruments designated as ‘fair value through other comprehensive income’ gains or losses arising from changes in fair value are recognised in other comprehensive income Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities Equity instruments are measured at fair value with gains or losses recognised through the other comprehensive income Classification Financial assets are classified at level 1 to 3 depending on if they are quoted instruments (level 1), have observable inputs (level 2) or have unobservable inputs (level 3) Financial liabilities Financial liabilities, including borrowings, are initially measured at the proceeds received, net of transaction costs They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis 4. Critical accounting judgements and key sources of estimation uncertainty The preparation of consolidated financial statements in accordance with IFRS requires the use of assumptions, estimates and judgements that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses Actual results in the future may differ from those reported Estimates and underlying assumptions are reviewed on an ongoing basis Revisions to estimates are recognised prospectively Critical judgements Revenue recognition The Group recognises revenue either immediately on inception of a policy or over the duration of a policy where there are ongoing obligations to fulfil to a customer. Certain of the Group’s contractual structures relating to product features require judgement in determining whether the Group carries an obligation to the customer over the term of the policy or if the exposure to that obligation has been transferred to a third-party on inception. This judgement determines when the Group has completed the performance obligation to the customer and can recognise revenue The Group allocates revenue on a cost plus margin basis The cost base may vary over time as product features are enhanced, suppliers are changed or underlying costs move Judgement is applied in determining if the resulting changes to the cost base represent a temporary or permanent adjustment in the allocation of revenue to performance obligations If a change is considered temporary, or within a materiality threshold, revenue recognition principles are not amended to aid consistency Classification of exceptional items Exceptional items are those items that are required to be separately disclosed by virtue of their size or incidence or have been separately disclosed on the income statement in order to improve a reader’s understanding of the financial statements. Consideration of what should be included as exceptional requires judgement to be applied Exceptional items are considered to be those which are material and outside of the normal operating practice of the Group 70 CPPGroup Plc Annual Report & Accounts 2022 4. Critical accounting judgements and key sources of estimation uncertainty continued Assumptions and estimation uncertainties Current tax The Group operates in countries with complex tax regulations, where filed tax positions may remain open to challenge by local tax authorities for several years. Corporation taxes are recognised by assessment of the specific tax law and likelihood of settlement. Where the Group has uncertain tax treatments it has recognised appropriate provisions reflecting the expected value calculated by the sum of the probability- weighted amounts in a range of possible outcomes Changes to the Group’s assessment of uncertain tax treatments would be reflected through the consolidated income statement. 5. Segmental analysis IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board of Directors to allocate resources to the segments and to assess their performance As at 1 January 2022, the Group changed the segmental reporting, reflecting how the Core business is now managed on a more geographical basis. Each segment has a distinct owner who is held accountable and expected to report on their segment performance The Group is now managed on the basis of five broad business units: • India (CPP India and Globiva); • Turkey; • Blink; • Central Functions – central cost base required to provide expertise and operate a listed group Central Functions is stated after the recharge of certain central costs that are appropriate to transfer to the relevant geographies for statutory purposes; and • Legacy (UK MGA, UK Legacy, Spain, Portugal and Italy). This replaces the Group’s previous operating segments which were Ongoing Operations, Restricted Operations The Central Functions segment remains unchanged within the new structure The prior period has been restated to reflect the new segmental reporting used by the Group. During the year Mexico was reclassified as discontinued, having previously been part of Legacy; accordingly, the comparatives have been restated Segment revenue and performance for the current and comparative periods are presented below: India £’000 Turkey £’000 150,613 3,212 (132,413) (1,448) 18,200 1,764 (10,168) (1,038) 8,032 (1,305) (519) 6,208 726 (129) — 597 Year ended 31 December 2022 Continuing operations Revenue – external sales Cost of sales Gross profit Administrative expenses excluding depreciation, amortisation and exceptional items EBITDA Depreciation and amortisation Exceptional items (note 6) Operating profit/(loss) Investment revenues Finance costs Profit before taxation Taxation Profit for the year from continuing operations Discontinued operations Profit for the year from discontinued operations Profit for the year Central Functions £’000 Legacy £’000 Total £’000 — — — 15,516 169,783 (5,087) (139,011) 10,429 30,772 Blink £’000 442 (63) 379 (837) (458) (208) — (3,372) (3,372) (413) (480) (666) (4,265) (8,504) (23,919) 1,925 (452) (733) 740 6,853 (2,507) (1,732) 2,614 486 (656) 2,444 (2,343) 101 676 777 CPPGroup Plc Annual Report & Accounts 2022 71 Financial statements Notes to the financial statements continued India £’000 Turkey £’000 Blink £’000 Central Functions £’000 Legacy £’000 Total (Restated*,**) £’000 119,273 (102,640) 16,633 (8,803) 7,830 — 7,830 (1,212) — 6,618 3,568 (1,658) 1,910 (1,062) 848 — 848 (209) — 639 319 (21) 298 (552) (254) — (254) (223) (348) (825) — — — 19,663 142,823 (6,160) (110,479) 13,503 32,344 (4,319) (4,319) — (4,319) (576) (239) (5,134) (10,173) (24,909) 3,330 (189) 3,141 (698) (762) 1,681 7,435 (189) 7,246 (2,918) (1,349) 2,979 211 (366) 1,459 4,283 (3,707) 576 2,432 3,008 2022 £’000 38,613 1,665 636 5,092 10,834 56,840 2,815 — 59,655 2021 (Restated**) £’000 29,252 1,959 406 5,840 13,200 50,657 2,825 478 53,960 5. Segmental analysis continued Year ended 31 December 2021 Continuing operations Revenue – external sales Cost of sales Gross profit Administrative expenses excluding depreciation, amortisation and exceptional items Segmental EBITDA Share of loss of joint venture EBITDA Depreciation and amortisation Exceptional items (note 6) Operating profit/(loss) Investment revenues Finance costs Other gains and losses (note 6) Profit before taxation Taxation Profit for the year from continuing operations Discontinued operations Profit for the year from discontinued operations Profit for the year * Restated to reflect Mexico as discontinued operations. See note 2. ** Restated for new segmental disclosure See note 2 Segment assets India Turkey Blink Central Functions Legacy Total segment assets Unallocated assets Assets relating to discontinued operations Consolidated total assets ** Restated for new segmental disclosure See note 2 Goodwill, deferred tax and equity investment are not allocated to segments 72 CPPGroup Plc Annual Report & Accounts 2022 5. Segmental analysis continued Capital expenditure Intangible assets Property, plant and equipment Right-of-use assets 2021 2021 2021 2022 £’000 (Restated*,**) £’000 2022 £’000 (Restated*,**) £’000 2022 £’000 (Restated*,**) £’000 Continuing operations India Turkey Blink Central Functions Legacy 1,814 36 158 14 172 712 — 151 47 460 Additions from continuing operations 2,194 1,370 Discontinued operations Additions from discontinued operations Consolidated total additions — 2,194 — 1,370 * Restated to reflect Mexico as discontinued operations. See note 2. ** Restated for new segmental disclosure See note 2 Revenues from major products Major product streams are disclosed on the basis monitored by senior management 277 106 3 140 — 526 — 526 430 698 24 2 8 60 524 1 525 98 — — 13 809 — 809 — 228 — 6 265 499 250 749 The Group has refreshed its product architecture and reporting to the Board has been on the following product categories: My Finances, My Tech, My Health, My Home, My Digital Life, My Travel and Other. The prior period has also been represented to reflect this change. Previously this was presented as retail assistance policies, retail insurance policies, wholesale policies, and non-policy revenue. Continuing operations My Finances My Tech My Health My Home My Digital Life My Travel Other Revenue from continuing operations Revenue from discontinued operations Total revenue * Restated to reflect Mexico as discontinued operations. See note 2. ** Restated for new segmental disclosure See note 2 2021 2022 £’000 (Restated*,**) £’000 39,239 39,059 46,614 22,301 5,064 448 17,058 169,783 922 41,237 38,964 28,065 16,859 6,116 224 11,358 142,823 3,266 170,705 146,089 ‘Other’ revenue predominantly represents revenue from BPM services provided by Globiva. The Group derives its revenue from contracts with customers for the transfer of goods and services which is consistent with the revenue information that is disclosed for each reportable segment under IFRS 8 CPPGroup Plc Annual Report & Accounts 2022 73 Financial statements Notes to the financial statements continued 5. Segmental analysis continued Timing of revenue recognition The Group derives revenue from the transfer of goods and services over time and at a point in time as follows: Continuing operations At a point in time Over time Revenue from continuing operations Discontinued operations At a point in time Over time Revenue from discontinued operations Total revenue 2022 £’000 2021 (Restated*) £’000 150,266 19,517 169,783 657 265 922 125,910 16,913 142,823 2,191 1,075 3,266 170,705 146,089 * Restated to reflect Mexico as a discontinued operation. See note 2. Geographical information The Group operates across a wide number of territories, of which India, the UK, Spain and Turkey are considered individually material. Revenue from external customers and non-current assets (excluding equity investment and deferred tax) by geographical location is detailed below: Geographical location for continuing operations India UK Spain Turkey Other Total for continuing operations Discontinued operations External revenues Non-current assets 2022 £’000 2021 (Restated*) £’000 2022 £’000 2021 £’000 150,613 119,273 9,073 8,481 4,960 3,212 2,517 10,750 6,341 3,568 2,891 375 204 244 812 169,783 142,823 10,708 922 3,266 — 7,721 1,585 323 249 1,273 11,151 — 170,705 146,089 10,708 11,151 * Restated to reflect Mexico as discontinued operations. See note 2. Information about major customers Revenue from the customers of one business partner in the Group’s Indian segment represented approximately £110,128,000 (2021: £84,159,000) of the Group’s total revenue. 74 CPPGroup Plc Annual Report & Accounts 2022 6. Exceptional items Exceptional items included in the table below detail all items, which are included in operating profit, other gains and losses and discontinued operations, as well as the associated taxation 2022 2021 Note Core £’000 Legacy £’000 Total £’000 Core £’000 Legacy £’000 Total (Restated*) £’000 Continuing operations Exceptional items included within operating profit Restructuring and closure costs IT asset impairment Globiva compensation payment Exceptional charge included in operating profit Exceptional items included within other gains and losses 7 17 36 Other gains and losses – gain on reclassification of investment 21 Exceptional gain included in other gains and losses Total exceptional charge/(gain) included in profit before tax Tax on exceptional items Exceptional charge/(gain) after tax for continuing operations Discontinued operations 480 — 519 999 — — 580 153 — 733 — — 1,060 153 519 1,732 — — 999 (131) 733 (61) 1,732 (192) 587 — — 587 — — 587 — 762 — — 762 1,349 — — 1,349 (1,459) (1,459) (1,459) (1,459) (697) (171) (110) (171) 14 868 672 1,540 587 (868) (281) Exceptional gain from discontinued operations 14,15 — 868 (535) 137 (535) 1,005 — 587 (2,120) (2,988) (2,120) (2,401) * Restated to reflect Mexico as discontinued operations. See note 2. Restructuring costs in the year, relate to the Group’s strategy to exit the Legacy markets and focus on the Core lines of business Restructuring and closure costs total £1,060,000 (2021: £1,349,000) and primarily relate to action taken to withdraw from Legacy operations. As a result, redundancy and associated costs have been recognised in Spain, UK Legacy, UK MGA and Central Functions. Core restructuring costs also includes settlement costs associated with the departure of the former CEO. In combination these total £812,000 (2021: £nil). Prior year restructuring costs relate to Spain and Blink, as well as closure of the Malaysian operation and head office operational restructuring. Included within restructuring and closure costs is a provision for onerous contracts relating to the UK MGA for £248,000 (2021: £nil), which relates to the costs required to fulfil and exit contractual commitments above the associated revenue receivable. This includes costs to 2025 and is held as a provision at the year end The impairment of the IT assets of £153,000 (2021: £nil) relates to the UK MGA. As a result of the decision to exit the UK MGA business, a value in use calculation was performed leading to recognition of an impairment The Globiva compensation payment represents a one-time additional management compensation payment to the Globiva founders. This followed a review of the original Shareholder Agreement signed in September 2018, which included commitments for operational seats from the Group that it is unable to fulfil. Further disclosure is provided in note 36. In the prior year, other gains and losses reflected the gain on reclassification of the investment in KYND from a joint venture to an equity investment of £1,459,000 (see note 21). CPPGroup Plc Annual Report & Accounts 2022 75 Financial statements Notes to the financial statements continued 7. Profit for the year Continuing operations Discontinued operations Total 2022 £’000 2021 (Restated*) £’000 2022 £’000 2021 (Restated*) £’000 Note 2022 £’000 2021 £’000 Profit for the year has been arrived at after charging/(crediting): Operating lease charges Net foreign exchange losses/(gains) Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Impairment of right-of-use assets Impairment of intangible assets Impairment of property, plant and equipment Loss on disposal of property, plant and equipment Loss on disposal of intangible assets Loss on disposal of right-of-use assets Other gains and losses Other restructuring and closure costs Staff costs Share-based payments Restructuring/redundancy costs Other staff costs Total staff costs Movement in the lifetime expected credit loss * Restated to reflect Mexico as discontinued operations. See note 2. 19 11 18 19 17 19 17 18 18 17 6 33,9 9 9 24 111 82 536 102 (270) 701 1,102 1,142 869 — 187 — 10 5 889 — 197 (246) 876 28,288 28,918 905 — 169 — 26 — — (1,459) 162 (64) 1,217 27,786 28,939 — — 6 52 2 — — — — — 5 — — — — — — 224 224 — 3 (115) 15 98 250 48 7 3 — — — — (4) 117 134 538 1,102 869 — 187 — 15 5 889 — 197 — 353 (246) 876 1,076 28,512 1,429 29,142 — — Fees payable to PKF Littlejohn LLP and its associates for audit and non-audit services are as follows: Payable to the Company’s Auditor for the audit of the Company and consolidated financial statements Fees payable to the Company’s Auditor and its associates for other services to the Group: – Audit of the Company’s subsidiaries, pursuant to legislation Total audit services Other services Total non-audit services 2022 £’000 129 242 371 — — 371 105 (385) 716 1,240 1,155 48 176 3 26 — — (1,459) 158 (64) 1,570 28,862 30,368 — 2021 £’000 103 226 329 — — 329 76 CPPGroup Plc Annual Report & Accounts 2022 8. Insurance revenues and costs Revenues and costs arising from all of the Group’s insurance contracts as defined by IFRS 4 are set out below. Insurance revenue and costs all relate to the Legacy business Revenue earned from insurance activities Gross premiums written Change in provision for unearned premiums Earned premiums Costs incurred from insurance activities Claims paid – Gross amount – Increase in provision for gross claims Acquisition costs – Costs incurred Other expenses 2022 £’000 199 14 213 2022 £’000 1 15 16 — 198 214 2021 £’000 539 853 1,392 2021 £’000 17 — 17 — 681 698 The following assumption has an impact on insurance revenues: • Unearned premiums on prepaid insurance policies are recognised as revenue on a straight line basis over the life of the policy. Changes to the expected life of classes of policies will therefore impact the period in which these items are recognised Other expenses are costs associated with servicing customers and administration costs related to operating a PRA-authorised insurance company in the UK. 9. Staff costs Staff costs during the year (including Executive Directors) Wages and salaries Social security costs Restructuring/redundancy costs Share-based payments (see note 34) Pension costs Continuing operations Discontinued operations Total 2022 £’000 25,409 2,263 876 (246) 616 28,918 2021 (Restated *) £’000 24,585 2,575 1,217 (64) 626 28,939 2022 £’000 206 18 — — — 2021 (Restated *) £’000 937 139 353 — — 2022 £’000 25,615 2,281 876 (246) 616 2021 £’000 25,522 2,714 1,570 (64) 626 224 1,429 29,142 30,368 * Restated to reflect Mexico as discontinued operations. See note 2. Staff costs during the year (including Executive Directors) attributable to Core and Legacy Continuing operations Core Legacy Total for continuing operations Discontinued operations Total 2022 £’000 2021 £’000 24,626 4,292 28,918 224 29,142 22,625 6,314 28,939 1,429 30,368 CPPGroup Plc Annual Report & Accounts 2022 77 Financial statements Notes to the financial statements continued 9. Staff costs continued Average number of employees Continuing operations India Turkey Blink Central Functions Legacy Total for continuing operations Discontinued operations Total 2022 (Restated *,**) 2021 4,771 93 7 71 125 5,067 4 5,071 3,084 115 8 88 153 3,448 18 3,466 * Restated to reflect Mexico as a discontinued operation. ** Restated to reflect the change in segmental reporting in the year. See note 2. The increase in average number of employees in India reflects the growth in Globiva in the current year. Average Globiva employees comprise 4,721 (2021: 3,036). The high number of employees reflects the nature of the Globiva as a BPM company. When excluding Globiva employees, the Group’s average employees for continuing operations are 346 (2021: 412). The Group utilises third-party service providers in a number of its overseas operations. Total staff costs incurred by the Company during the year were £1,392,000 (2021: £2,006,000) and the average number of employees was six (2021: seven). Details of the remuneration of Directors are included in the Directors’ Remuneration Report on pages 47 to 49 10. Investment revenues Interest on bank deposits Effects of hyperinflation Continuing operations Discontinued operations Total 2022 £’000 405 81 486 2021 (Restated*) £’000 211 — 211 2022 £’000 4 — 4 2021 (Restated*) £’000 13 — 13 2022 £’000 409 81 490 * Restated to reflect Mexico as discontinued operation. See note 2. 11. Finance costs Interest on borrowings Amortisation of capitalised loan issue costs Interest on lease liabilities Other – exchange movements Continuing operations Discontinued operations Total 2022 £’000 75 41 458 82 656 2021 (Restated*) £’000 76 40 520 (270) 366 2022 £’000 — — 1 52 53 2021 (Restated*) £’000 — — 8 (115) (107) 2022 £’000 75 41 459 134 709 * Restated to reflect Mexico as discontinued operations. See note 2. 2021 £’000 224 — 224 2021 £’000 76 40 528 (385) 259 78 CPPGroup Plc Annual Report & Accounts 2022 12. Taxation Continuing operations Current tax charge: UK corporation tax Foreign tax Adjustments in respect of prior years Current tax relating to continuing operations Deferred tax (credit)/charge: Origination and reversal of timing differences Impact of change in tax rates Adjustments in respect of prior years Deferred tax relating to continuing operations Tax charge relating to continuing operations Discontinued operations Tax charge relating to discontinued operations Total tax charge 2022 £’000 2021 £’000 — 2,679 (140) 2,539 94 (8) (282) (196) 2,343 — 2,343 142 3,386 (42) 3,486 304 (37) (46) 221 3,707 30 3,737 The following is a segmental review of the tax charge, in which withholding taxes arising on distributions are attributed to the country paying the distribution: Continuing operations Core: India Turkey Blink Central Functions Total Core Legacy Tax charge for continuing operations Discontinued operations Tax charge for discontinued operations 2022 £’000 2021 (Restated**) £’000 1,888 2,889 316 — (204) 2,000 343 2,343 — 2,343 554 — 157 3,600 107 3,707 30 3,737 ** Restated to reflect the change in segmental reporting in the year. See note 2. Overall, UK profits chargeable to corporation tax are offset by group relief surrendered from fellow UK entities. UK corporation tax is calculated at 19% (2021: 19%) of the estimated assessable profit for the year. The March 2021 Budget announced an increase to the main rate of corporate tax to 25% from April 2023 and this rate has been substantively enacted at the balance sheet date Deferred tax is provided at the rate which it is expected to reverse Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions – India 252% inclusive of surcharges (2021: 25.2%), Spain 25% (2021: 25%), Turkey 23% (2021: 25%), which is reducing to 20% in 2023, and Italy 27.5% (2021: 27.5%). Non-UK deferred tax is provided at the local prevailing tax rate which is expected to apply to the reversal of the timing difference. CPPGroup Plc Annual Report & Accounts 2022 79 Financial statements Notes to the financial statements continued 12. Taxation continued The charge for the year can be reconciled to the profit per the consolidated income statement as follows: Profit before tax from continuing operations Effects of: Tax at the UK corporation tax rate of 19% (2021: 19%) Unprovided deferred tax arising on losses(1) Other movement in unprovided deferred tax Recurring expenses not deductible for tax One-off costs not deductible for tax Provision for withholding tax on future distributions(2) Other expense not chargeable for tax purposes Higher tax rates on overseas earnings(3) Adjustments in respect of prior years Impact of change in future tax rates on deferred tax Deficit of share option charge compared to tax allowable amount Tax charged to the income statement for continuing operations Tax charged to the income statement for discontinued operations 2022 £’000 2,444 2021 (Restated*) £’000 4,283 464 796 124 241 32 621 96 403 (422) (8) (4) 2,343 — 2,343 814 792 153 409 (259) 1,217 250 471 (88) (36) (16) 3,707 30 3,737 * Restated to reflect Mexico as discontinued operations. See note 2. Effective tax charge The net tax charge of £2,343,000 on a profit before tax from continuing operations of £2,444,000 gives an effective tax rate of 96% (2021 restated: 87%), which is higher than the standard rate of 19%. Additional information is provided below: 1. Deferred tax has not been recognised on the losses arising in Legacy markets and Blink, as the short-term profit expectations do not support the recognition of deferred tax assets in these areas 2 There is a withholding tax burden arising on repatriation of funds from overseas countries which is included in the tax charge 3. Tax is chargeable at the local statutory rates in our profitable countries, which are higher than the UK corporate income tax rate of 19%. The Group’s effective tax rate is expected to be higher than the UK statutory tax rate in future years as withholding taxes are provided on overseas distributions and deferred tax credits are not taken on losses in markets that are not profitable. The withdrawal from the Legacy markets, is expected to result in a high and variable effective tax rate in the medium-term. In the longer-term, once the CMP has concluded, the Group expects the rate to reduce from its current level The Group maintains appropriate provisions in respect of tax uncertainties arising from operating in multiple overseas jurisdictions Income tax charged/(credited) to reserves during the year was as follows: Deferred tax Timing differences of equity-settled share-based charge Total deferred tax charge/(credit) and total tax charged/(credited) to reserves 13. Dividends Final dividend paid for the year ended 31 December 2021 of 7.5 pence per share (2020: 25 pence per share) Interim dividend paid for the year ended 31 December 2022 of nil pence per share (2021: 5 pence per share) Amounts recognised as distributions to equity holders in the year 2022 £’000 2021 £’000 9 9 2022 £’000 663 — 663 (9) (9) 2021 £’000 2,188 441 2,629 The Directors have not proposed a final dividend for the year ended 31 December 2022 (2021: 7.5 pence per ordinary share). 80 CPPGroup Plc Annual Report & Accounts 2022 14. Earnings/(loss) per share Basic and diluted (loss)/earnings per share has been calculated in accordance with IAS 33 Earnings per Share. Underlying earnings/(loss) per share has also been presented in order to give a better understanding of the performance of the business In accordance with IAS 33, potential ordinary shares are only considered dilutive when their conversion would decrease the earnings per share or increase the loss per share attributable to equity holders Profit/(loss) Profit/(loss) for the purposes of basic and diluted (loss)/earnings per share Exceptional items (net of tax) Profit/(loss) for the purposes of underlying basic and diluted earnings/(loss) per share Continuing operations Discontinued operations Total 2022 £’000 (153) 1,350 2021 (Restated*) £’000 133 (281) 2022 £’000 676 (535) 2021 (Restated*) £’000 2,432 (2,120) 2022 £’000 523 815 2021 £’000 2,565 (2,401) 1,197 (148) 141 312 1,338 164 * Restated to reflect Mexico as discontinued operations. See note 2. Profit/(loss) attributable to Core and Legacy 2022 2021 Core £’000 Legacy £’000 Continuing operations £’000 Core £’000 Legacy £’000 (Loss)/profit for the purposes of basic and diluted (loss)/earnings per share Exceptional items (net of tax) Profit/(loss) for the purposes of underlying basic and diluted earnings/(loss) per share (640) 678 487 672 (153) (2,897) 1,350 587 3,030 (868) 38 1,159 1,197 (2,310) 2,162 Continuing operations (Restated*) £’000 133 (281) (148) * Restated to reflect Mexico as discontinued operations. See note 2. The table above does not include discontinued operations Number of shares Weighted average number of ordinary shares for the purposes of basic (loss)/earnings per share and basic underlying earnings/(loss) per share Effect of dilutive ordinary shares: share options Weighted average number of ordinary shares for the purposes of diluted (loss)/earnings per share and diluted underlying earnings/(loss) per share 2022 Number (thousands) 2021 Number (thousands) 8,844 30 8,796 225 8,874 9,021 Basic (loss)/earnings per share Diluted (loss)/earnings per share Basic underlying earnings/(loss) per share Diluted underlying earnings/(loss) per share Continuing operations Discontinued operations Total 2022 pence (1.73) (1.73) 2021 (Restated*) pence 151 147 2022 pence 7.64 7.64 2021 (Restated*) pence 2765 2696 2022 pence 5.91 5.91 13.53 (168) 1.59 354 15.12 13.49 (168) 1.59 354 15.08 * Restated to reflect Mexico as a discontinued operation. See note 2. Basic (loss)/earnings per share Diluted (loss)/earnings per share Basic underlying earnings/(loss) per share Diluted underlying earnings/(loss) per share * Restated to reflect Mexico as a discontinued operation. See note 2. 2022 Legacy pence 5.51 5.51 13.10 13.06 Core pence (7.24) (7.24) 0.43 0.43 Continuing operations pence (1.73) (1.73) 13.53 13.49 Core pence (3294) (3211) (2626) (2626) 2021 Legacy pence 3445 3358 2458 2458 CPPGroup Plc Annual Report & Accounts 2022 81 2021 (Restated*) pence 2916 2843 186 186 Continuing operations (Restated*) pence 151 147 (168) (168) Financial statements Notes to the financial statements continued 14. Earnings/(loss) per share continued The Group has 171,650,000 (2021: 171,650,000) deferred shares which have no rights to receive dividends and only very limited rights on a return of capital The deferred shares have not been admitted to trading on AIM or any other stock exchange Accordingly, these shares have not been considered in the calculation of earnings/(loss) per share 15. Discontinued operations and assets and liabilities classified as held for sale On 27 January 2022, the Group completed the sale of its 100% shareholding in CPP Asia Limited and its wholly-owned subsidiary CPP Technology Services (Shanghai) Co Ltd (together China) Consideration on disposal was HK$1 On 20 October 2022, the Group completed the sale of its wholly-owned subsidiaries Servicios de Asistencia a Tarjehabientes CPP Mexico S de RL de CV and Profesionales en Proteccion Individual S de RL de CV (together Mexico) Consideration on disposal was $1 (Mexican peso) In the prior year, on 17 May 2021, the Group completed the sale of its 100% shareholding in CPP Creating Profitable Partnerships GmbH (‘Germany’). The final consideration on disposal was £2,366,000 (€2,752,000). In addition, the disposal of China was considered highly probable and therefore the assets and liabilities of China were classified as held for sale. Operating results for the year ended 31 December 2022 reflect the trading performance of China and Mexico up to the respective dates of disposal. The comparative information reflects a full year for China and Mexico, and Germany up to the date of disposal. China, Mexico and Germany were part of the Legacy segment 2021 China £’000 1,402 (547) 855 (1,721) (866) Mexico (Restated) £’000 Total (Restated) £’000 802 (229) 573 (651) (78) 3,266 (1,206) 2,060 282 2,342 Germany £’000 1,062 (430) 632 2,654 3,286 628 (322) 279 585 — 2,658 — 33 3,319 (30) 3,289 (285) (259) 1 66 (799) — (799) (78) (279) 12 8 (58) — (58) (363) 2,120 13 107 2,462 (30) 2,432 Total £’000 922 (351) 571 154 725 192 (2) 535 4 (53) 676 — 676 2022 2021 Mexico £’000 (122) — — (122) — (122) Total £’000 535 — — 535 — 535 Germany £’000 2,654 — 4 2,658 — China £’000 (72) (113) (74) (259) — Mexico (Restated) £’000 — — (279) (279) — Total (Restated) £’000 2,582 (113) (349) 2,120 — 2,658 (259) (279) 2,120 (i) Income statement Note 5 6 10 11 12 Revenue Cost of sales Gross profit Administrative expenses Operating profit/(loss) Analysed as: EBITDA Depreciation and amortisation Exceptional items Investment revenues Finance costs Profit/(loss) before taxation Taxation Profit/(loss) for the year (ii) Exceptional items Profit/(loss) on disposal Write down of assets on reclassification as held for sale Restructuring costs Exceptional items included in operating profit Tax on exceptional items Total exceptional items after tax 2022 Mexico £’000 808 (318) 490 (389) 101 China £’000 114 (33) 81 543 624 (33) 225 (2) (122) — (41) 60 — 60 — 657 4 (12) 616 — 616 China £’000 657 — — 657 — 657 82 CPPGroup Plc Annual Report & Accounts 2022 15. Discontinued operations and assets and liabilities classified as held for sale continued (iii) Profit on disposal The Group has recognised a profit/(loss) on disposal as follows: Proceeds Net (assets)/liabilities sold Costs associated with disposal Currency translation differences on disposal Profit/(loss) on disposal (iv) Summary of cash flows China £’000 — (424) — 1,081 657 2022 2022 Mexico £’000 — (45) (56) (21) (122) Total £’000 — (469) (56) 1,060 535 Germany £’000 2,366 284 — 4 2,654 2021 China £’000 — — (72) — (72) Total £’000 2,366 284 (72) 4 2,582 Net cash flows from operating activity Net cash flows from investing activity Net cash flows from financing activity Net cash (outflow)/inflow China £’000 (55) 4 (39) (90) Mexico £’000 175 (1) (523) (349) Total £’000 120 3 (562) (439) Germany £’000 (7,765) — 7,357 (408) (v) Assets and liabilities classified as held for sale Current assets Other intangible assets Property, plant and equipment Right-of-use assets Trade and other receivables Cash and cash equivalents Total assets held for sale Current liabilities Trade and other payables Contract liabilities Lease liabilities Total liabilities held for sale 2021 China £’000 54 2 (85) (29) Mexico £’000 (151) 12 320 181 Total (Restated) £’000 (7,862) 14 7,592 (256) 2022 £’000 2021 £’000 — — — — — — — — — — 98 10 138 142 90 478 (333) (68) (149) (550) In the prior year, following reclassification to held for sale; other intangible assets, property, plant and equipment, and right-of-use assets were impaired by £58,000 in total. The impairment charge was included within the exceptional charge on write down of assets on reclassification as held for sale. 16. Goodwill Cost and carrying value At 1 January Foreign exchange gain/(loss) At 31 December 2022 £’000 540 4 544 2021 £’000 612 (72) 540 Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination The Group’s only remaining goodwill balance is in relation to its acquisition of Globiva The carrying amount of goodwill in Globiva is £544,000 (2021: £540,000). The Group tests goodwill annually for impairment or more frequently if there is indication goodwill may be impaired The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are discount rates, growth rates and expected changes to selling prices and direct costs during the period Management estimates discount rates using rates that reflect current market assessments of the time value of money and risks specific to the CGU. The growth rates are based on business plans and reflect the development stage of the CGUs. The pre-tax rate used to discount the forecast cash flows of the CGU at 31 December 2022 is 9% (2021: 10%). CPPGroup Plc Annual Report & Accounts 2022 83 Financial statements Notes to the financial statements continued 17. Other intangible assets Cost At 1 January 2021 Additions Exchange adjustments Transfer of assets held for sale At 1 January 2022 Additions Disposals Exchange adjustments At 31 December 2022 Accumulated amortisation At 1 January 2021 Provided during the year Impairment Exchange adjustments Transfer of assets held for sale At 1 January 2022 Provided during the year Disposals Impairment Exchange adjustments At 31 December 2022 Carrying amount At 31 December 2021 At 31 December 2022 Business partner relationships £’000 Internally generated software £’000 Externally acquired software £’000 Total £’000 8,242 1,370 (199) (792) 8,621 2,194 (244) 32 3,949 1,192 (55) — 5,086 1,960 (82) 18 3,649 178 (144) (792) 2,891 126 (54) 14 6,982 2,977 10,603 1,334 705 — (20) — 2,019 629 (81) — 50 2,944 325 47 (100) (687) 2,529 158 (50) 86 9 4,501 1,155 169 (120) (687) 5,018 869 (239) 187 58 2,617 2,732 5,893 3,067 4,365 362 245 3,603 4,710 644 — — — 644 108 (108) — 644 223 125 122 — — 470 82 (108) 101 (1) 544 174 100 Amortisation of intangible assets totalling £869,000 (2021: £1,155,000) is recognised through administrative expenses in the consolidated income statement Internally generated software additions of £1,960,000 (2021: £1,192,000) reflect the capitalisation of staff and contractor costs in IT development projects Internally generated software includes £3,718,000 (2021: £1,956,000) relating to assets in development which are not yet operational and are not amortised. The assets held at 31 December 2022 are expected to become operational in Q3 2023. 84 CPPGroup Plc Annual Report & Accounts 2022 18. Property, plant and equipment Leasehold improvements £’000 Computer systems £’000 Motor vehicles £’000 Furniture and equipment £’000 Cost At 1 January 2021 Additions Disposals Exchange adjustments Transfer of assets held for sale At 1 January 2022 Additions Disposals Exchange adjustments At 31 December 2022 Accumulated depreciation At 1 January 2021 Provided during the year Disposals Exchange adjustments Transfer of assets held for sale At 1 January 2022 Provided during the year Disposals Exchange adjustments At 31 December 2022 Carrying amount At 31 December 2021 At 31 December 2022 932 62 (57) (106) — 831 170 (165) 20 856 582 138 (32) (76) — 612 74 (162) 60 584 219 272 3,587 274 (107) (181) (59) 3,514 203 (97) 50 3,670 2,492 479 (110) (128) (46) 2,687 358 (89) 74 3,030 827 640 — 185 — — — 185 118 — (2) 301 — 10 — — — 10 33 — (1) 42 175 259 479 4 (106) (47) — 330 35 (67) 7 305 254 89 (102) (25) — 216 73 (63) 7 233 114 72 Total £’000 4,998 525 (270) (334) (59) 4,860 526 (329) 75 5,132 3,328 716 (244) (229) (46) 3,525 538 (314) 140 3,889 1,335 1,243 CPPGroup Plc Annual Report & Accounts 2022 85 Financial statements Notes to the financial statements continued 19. Right‑of‑use assets The Group’s right-of-use assets are as follows: Property £’000 Motor vehicles £’000 Equipment £’000 Cost At 1 January 2021 Additions Disposals Exchange adjustments Transfer to assets held for sale At 1 January 2022 Additions Disposals Exchange adjustments At 31 December 2022 Accumulated depreciation At 1 January 2021 Provided during the year Disposals Exchange adjustments Transfer of assets held for sale At 1 January 2022 Provided during the year Disposals Exchange adjustments At 31 December 2022 Carrying amount At 31 December 2021 At 31 December 2022 7,641 512 (798) (128) (257) 6,970 712 (1,555) 21 6,148 1,766 1,077 (620) (51) (71) 2,101 928 (666) (7) 2,356 4,869 3,792 209 73 (36) (49) — 197 60 (56) (9) 192 138 49 (36) (24) — 127 51 (56) (1) 121 70 71 The Group has recognised the following amounts in profit for the year: Depreciation and impairment of right-of-use assets Interest expense on lease liabilities Expense relating to short-term leases Expense relating to leases of low value assets At 31 December 2022, the Group was committed to £2,000 (2021: £65,000) for short-term leases. The net cash outflow for leases amounts to £1,388,000 (2021: £1,507,000). 290 164 — (46) — 408 37 — (22) 423 139 114 — (15) — 238 123 — (11) 350 170 73 2022 £’000 1,102 459 117 — Total £’000 8,140 749 (834) (223) (257) 7,575 809 (1,611) (10) 6,763 2,043 1,240 (656) (90) (71) 2,466 1,102 (722) (19) 2,827 5,109 3,936 2021 £’000 1,240 528 96 7 86 CPPGroup Plc Annual Report & Accounts 2022 20. Investment in subsidiaries Company Cost At 1 January Acquisitions Disposals At 31 December Provisions for impairment At 1 January Recognised in the year At 31 December Carrying amount At 1 January At 31 December 2022 £’000 2021 £’000 16,499 15,597 — (225) 902 — 16,274 16,499 729 — 729 52 677 729 15,770 15,545 15,545 15,770 On 30 May 2022, the Company exited the 100% investment in the insurance preference shares of Windward Insurance PCC Limited – CPP Cell, which is part of Windward Insurance PCC Limited – a company registered and domiciled in Guernsey Investments in Group entities at 31 December 2022 were as follows: Investments in subsidiary undertakings held directly CPP Group Limited CPP Worldwide Holdings Limited CPP South East Asia Assistance Services Pte Limited Investments in subsidiary undertakings held through an intermediate subsidiary Card Protection Plan Limited CPP Assistance Services Limited CPP European Holdings Limited CPP Holdings Limited CPP Services Limited CPPGroup Services Limited Homecare (Holdings) Limited Homecare Insurance Limited Valeos (2013) Limited CPP Secure Limited CPP Innovation Limited CPP Assistance Services Private Limited Globiva Services Private Limited CPP Global Assistance Bangladesh Limited CPP Italia Srl CPP Malaysia Sdn Bhd CPP Mediacion Y Proteccion SL CPP Proteccion Y Servicios de Asistencia SAU CPP Real Life Services Support SL Key Line Auxiliar SL CPP Sigorta Aracilik Hizmetleri Anonim Sirketi CPP Yardim ve Destek Hizmetleri Anonim Sirketi Country of incorporation/ registration Class of shares held Percentage of share capital held England & Wales Ordinary shares England & Wales Ordinary shares Singapore Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares England & Wales Ordinary shares Ireland Ordinary shares India India Ordinary shares Ordinary shares Bangladesh Ordinary shares Italy Ordinary shares Malaysia Ordinary shares Spain Spain Spain Spain Ordinary shares Ordinary shares Ordinary shares Ordinary shares Turkey Ordinary shares Turkey Ordinary shares 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 51% 100% 100% 100% 100% 100% 100% 100% 100% 100% The principal activity of all the subsidiaries is to provide services in connection with the Group’s major product streams, or act as a holding company The individual entities’ registered addresses are shown in the Company offices section on page 102 CPPGroup Plc Annual Report & Accounts 2022 87 Financial statements Notes to the financial statements continued 20. Investment in subsidiaries continued The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the Act CPP Group Limited CPP Worldwide Holdings Limited CPP European Holdings Limited CPP Holdings Limited CPP Services Limited Valeos (2013) Limited 21. Investment in joint venture and equity investment Carrying amount at 1 January Fair value gain Acquisitions Carrying amount at 31 December Company number 06535283 07154018 04362765 01659493 03709675 08718589 2021 £’000 — — 1,889 1,889 2022 £’000 1,889 152 — 2,041 The equity investment in KYND is accounted for as a non-current asset investment, under IFRS 9. The initial recognition of the equity investment in KYND is at fair value at the date of acquisition This is revalued at the accounting dates and any movements in fair value is recognised through other comprehensive income On 23 December 2021, KYND received additional investment from the British Growth Fund, which diluted the Group’s shareholding to 147% in the form of A and B shares When considering share options within KYND on a fully diluted basis the Group’s holding is 133% Following the investment, the Group could not demonstrate significant influence and joint control and the investment could no longer be equity accounted as a joint venture Therefore, the investment in joint venture was derecognised and accounted for as an equity investment In the prior year, £1,459,000 was recognised as a fair value gain through other gains and losses (note 6) which reflected the net impact of the disposal of the joint venture and the recognition of the equity investment at fair value There have been no dividends received in the year (2021: £nil) from the KYND equity investment. Movement in the Group’s share in joint ventures is as follows: Carrying amount at 1 January Acquisitions Share of losses in the year Disposals Carrying amount at 31 December 2022 £’000 — — — — — 2021 £’000 450 168 (189) (429) — Up to 23 December 2021, the Group held a 20% share of KYND, whose registered office is Unit 3-4 The Grain Store, 70 Weston Street, London, SE1 3QH. The Group’s shareholding was in the form of preference and deferred shares. In the prior year, KYND incurred losses of £943,000. The Group’s share of loss in the joint venture was £189,000, which was recognised in the consolidated income statement. The carrying value of the investment was adjusted for these losses In the prior year, a loan to KYND was converted into equity, which was recognised as an addition to the joint venture carrying amount The summarised financial information of KYND for the prior year was as follows: Revenue Expenses Loss for the period Group’s share of loss for the period 88 CPPGroup Plc Annual Report & Accounts 2022 2021 £’000 846 (1,789) (943) (189) 22. Inventories Consumables and supplies 23. Contract assets and liabilities The Group has recognised the following assets and liabilities related to contracts with customers: Non-current contract assets Current contract assets Total contract assets 2022 £’000 87 2022 £’000 275 5,764 6,039 2021 £’000 102 2021 £’000 564 4,020 4,584 Contract assets represent deferred commission costs that are recognised in line with the pattern of recognition of the associated revenue Non-current contract assets will be charged to the balance sheet over a period of greater than 12 months from the balance sheet date. Non-current contract liabilities Current contract liabilities Total contract liabilities 2022 £’000 773 11,238 12,011 2021 £’000 1,200 9,190 10,390 Contract liabilities represent revenue which is recognised over the life of a policy. Non-current contract liabilities will be credited to the consolidated income statement over a period of greater than 12 months from the balance sheet date 24. Trade and other receivables Trade receivables Prepayments and accrued income Amounts due from Group entities Other debtors Total trade and other receivables Consolidated Company 2022 £’000 6,594 8,522 — 4,725 19,841 2021 £’000 7,501 2,100 2022 £’000 — 31 2021 £’000 — 59 — 81,785 81,841 4,004 16 41 13,605 81,832 81,941 The Group’s trade and other receivables are predominantly non-interest bearing. The Group’s trade receivables relate to retail customer payments awaiting collection and wholesale counterparties The Group is responsible for activating the collection process for certain of our retail customers. The collection is received within a specified period of processing the transaction resulting in credit risk being considered low for these items For other business partners, including a major customer, they activate the collection process on behalf of the retail customer and remit this to the Group on a weekly basis There has been no past experience of credit default for this business partner, due to the quality of the relationships and their credit rating Wholesale counterparty balances are assessed for expected credit losses based on past experience of credit default with those counterparties and the Group’s experience as a whole in relation to credit defaults The Group does not have any notable past experience of customer and counterparty credit defaults, due in part to the quality of the relationship it has with its counterparties and their credit ratings Where credit is offered to customers, the average credit period offered is 28 days (2021: 27 days). No interest is charged on trade receivables at any time Disclosures regarding credit risk relate only to counterparties or customers offered credit Overall exposure continues to be mainly spread over a large number of customers but where concentration exists this is with highly rated counterparties The Group has provided £43,000 (2021: £35,000) for any debtors included in the Group’s trade receivable balances which are past due at the reporting date There has been no material change in credit quality of our debtors Consistent with the prior year and our business model No debtors are provided for their lifetime expected credit loss, as there have been no indicators that this is required in the year The Company has amounts due from Group entities which are repayable on demand Interest has been charged on these balances in line with the Group’s external borrowing rate for the year, which was LIBOR plus 375% The Company has not recognised a provision for non-recoverability of inter-company loans in either the current or prior year. CPPGroup Plc Annual Report & Accounts 2022 89 Financial statements Notes to the financial statements continued 25. Cash and cash equivalents Consolidated cash and cash equivalents of £20,984,000 (2021: £22,319,000) comprises cash held on demand by the Group and short-term deposits. Cash and cash equivalents include £2,890,000 (2021: £274,000) required to be maintained by the Group’s insurance business for solvency purposes Concentration of credit risk is reduced, as far as practicable, by placing cash on deposit across a number of institutions with the best available credit ratings. The credit quality of counterparties is as follows: AA A BBB BB Rating information not available 2022 £’000 4,493 9,687 672 5,738 394 2021 £’000 4,239 11,422 413 5,432 813 20,984 22,319 Ratings are measured using Fitch’s long-term ratings, which are defined such that ratings ‘AAA’ to ‘BB’ denote investment grade counterparties, offering low to moderate credit risk. ‘AAA’ represents the highest credit quality, indicating that the counterparty’s ability to meet financial commitments is highly unlikely to be adversely affected by foreseeable events. Company cash and cash equivalents was £1,224,000 (2021: £5,368,000). The balance has decreased in the year following the payment of dividends, settlement of intercompany liabilities and ongoing central costs recognised in the Company The Company is party to a cross-guarantee in respect of a bank account netting arrangement in which it is a participant alongside certain other Group companies. Cash and cash equivalents for the Company includes £1,215,000 (2021: £5,360,000) which is held in a bank account subject to this arrangement 26. Trade and other payables Trade creditors and accruals Insurance liabilities Other tax and social security Other payables Amounts payable to Group entities Total trade and other payables Consolidated Company 2022 £’000 2021 £’000 22,147 17,703 83 1,782 2,198 — 82 1,416 343 — 26,210 19,544 2022 £’000 964 — 41 — 10,225 11,230 2021 £’000 1,110 — — — 14,165 15,275 Trade creditors and accruals comprise amounts outstanding for trade purchases and ongoing costs The average credit period for trade purchases is 34 days (2021: 39 days). Interest is not suffered on trade payables. The Group has financial management policies in place to ensure that all payables are settled within the pre-agreed credit terms. The Company has amounts payable to Group entities which are repayable on demand Interest has been charged on these balances in line with the Group’s external borrowing rate for the year, which was LIBOR plus 375% Insurance liabilities Claims reported Claims incurred but not reported Total claims Unearned premium Total insurance liabilities 2022 £’000 2021 £’000 — 15 15 68 83 — — — 82 82 Provisions for claims reported and processed are based on estimated costs from third-party suppliers. Provisions for claims incurred but not reported are an estimate of costs for the number of claims not yet processed at the year end Claims outstanding at the year end are expected to be settled within the following 12 months 90 CPPGroup Plc Annual Report & Accounts 2022 26. Trade and other payables continued Provision for unearned premiums At 1 January Written in the year Earned in the year At 31 December Unearned premiums are released as revenue on a straight line basis over the life of the relevant policy. Movement in claims provision Movements in the gross claims provision: At 1 January Increase in liabilities arising from current year claims At 31 December 27. Lease liabilities The maturity analysis of the Group’s lease liabilities is as follows: Year 1 Year 2 Year 3 Year 4 Year 5 After 5 years Less: unearned interest Total lease liabilities Non-current lease liabilities Current lease liabilities Total lease liabilities 2022 £’000 82 197 (211) 68 2022 £’000 — 15 15 2022 £’000 1,374 1,233 1,126 791 790 674 5,988 (1,270) 4,718 2022 £’000 3,752 966 4,718 2021 £’000 935 539 (1,392) 82 2021 £’000 — — — 2021 £’000 1,398 1,326 1,176 1,105 982 1,600 7,587 (1,714) 5,873 2021 £’000 4,936 937 5,873 28. Borrowings The carrying value of the Group’s financial liabilities, for short- and long-term borrowings, is as follows: Bank loans due in less than one year Less: unamortised issue costs Borrowings due within one year Bank loans due outside of one year Less: unamortised issue costs Borrowings due outside of one year Consolidated Company 2022 £’000 — (23) (23) — — — 2021 £’000 2022 £’000 2021 £’000 — — — — (58) (58) — — — — — — — — — — — — The Group’s bank borrowing facility is in the form of a £5,000,000 revolving credit facility (RCF). At 31 December 2022, the Group has £5,000,000 undrawn committed borrowing facilities (2021: £5,000,000). The RCF is available until 31 August 2023 and bears interest at a variable rate of LIBOR plus a margin of 3.75%. It is secured by fixed and floating charges on certain assets of the Group. The financial covenants of the RCF are based on the interest cover and minimum total cash balance of the Group The Group has been in compliance with these covenants since inception of the RCF The weighted average interest rate paid during the year on the bank loan was 1.5% (2021: 1.7%). The weighted average interest rate reflects the interest rate charged for the commitment on the undrawn element. CPPGroup Plc Annual Report & Accounts 2022 91 Financial statements Notes to the financial statements continued 29. Provisions At 1 January Charged to the income statement Utilised in the year At 31 December 2022 £’000 — 369 — 369 At the year end there are provisions for onerous contracts and dilapidations following the exit of a lease in the UK. The provisions are expected to be settled as follows; Within one year More than one year At 31 December 2022 £’000 224 145 369 2021 £’000 — — — — 2021 £’000 — — — 30. Deferred tax The following are the major deferred tax (liabilities)/assets recognised by the Group and the movements thereon during the current and prior years: Consolidated At 1 January 2021 Credited/(charged) to income statement Credited to equity Disposal of subsidiary Exchange differences At 1 January 2022 Credited/(charged) to income statement Charged to equity Exchange differences At 31 December 2022 Company At 1 January 2021 Credited to income statement Credited to equity At 1 January 2022 Credited to income statement Charged to equity At 31 December 2022 Withholding taxes on future dividends £’000 Share-based payments £’000 Other short-term timing differences £’000 (578) (378) — — — (956) 348 — — (608) 47 (47) 9 — — 9 — (9) — — 306 146 — — (36) 416 (152) — (128) 136 Tax losses £’000 504 16 — (520) — — — — — — Total £’000 279 (263) 9 (520) (36) (531) 196 (9) (128) (472) Share-based payments £’000 48 (47) 9 10 (1) (9) — Deferred tax assets and liabilities are stated at tax rates expected to apply on the forecast date of reversal, based on tax laws substantively enacted at the balance sheet date Certain deferred tax assets and liabilities have been offset where the Group or the Company is entitled to and intends to settle tax liabilities on a net basis. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes: Deferred tax assets Deferred tax liabilities 92 CPPGroup Plc Annual Report & Accounts 2022 Consolidated Company 2022 £’000 230 (702) (472) 2021 £’000 396 (927) (531) 2022 £’000 — — — 2021 £’000 57 (47) 10 30. Deferred tax continued At the balance sheet date, the Group has unrecognised tax losses of £48,917,000 (2021: £44,010,000) available for offset against future profits. No deferred tax assets have been recognised with respect to these losses due to the unpredictability of future profit streams in the underlying companies and restrictions on offset of taxable profits and losses between Group companies. The Group has recognised a deferred tax liability for withholding taxes arising on unremitted earnings from overseas subsidiaries, to the extent it is probable that a distribution will be made in the foreseeable future crystallising the withholding tax At the balance sheet date, the Company has unused tax losses of £21,345,000 (2021: £20,471,000) available for offset against future profits. No deferred tax asset has been recognised in respect of these losses due to the unpredictability of future profit streams in the Company and restrictions on offset of taxable profits and losses between Group companies. The losses can be carried forward indefinitely. 31. Financial instruments Capital risk management The Group manages its capital to safeguard its ability to continue as a going concern The Group does not have a target level of gearing but seeks to maintain an appropriate balance of debt and equity while aiming to provide returns for shareholders and benefits for other stakeholders. The Group’s principal debt facility during the year was a £5.0 million RCF, which expires on 31 August 2023 The Group makes adjustments to its capital structure in light of economic conditions To maintain or adjust the capital structure the Group may adjust a dividend payment to shareholders, return capital to shareholders or issue new shares The Directors have considered the capital requirements of completing the CMP and has suspended dividends until further notice Externally imposed capital requirement Three of the Group’s principal subsidiaries, Card Protection Plan Limited (CPPL), Homecare Insurance Limited (HIL) and CPP Secure, have capital requirements imposed by the FCA and PRA in the UK. All subsidiaries have complied with their respective imposed capital requirements throughout the current and prior year Card Protection Plan Limited and CPP Secure Limited CPPL and CPP Secure are regulated by the FCA as insurance intermediaries and are required to hold a minimum level of capital resources relative to regulated business revenue The ratio of current and future capital resources to regulated business revenue is reported monthly to management to ensure compliance There have been no instances of non-compliance in either the current or prior years. Homecare Insurance Limited HIL is authorised and regulated by the PRA and regulated by the FCA as an insurance underwriter and therefore maintains its capital resources in accordance with the PRA’s Rulebook HIL and its immediate parent company, Homecare (Holdings) Limited, calculate their Solvency Capital Requirement using the Solvency II Standard Formula and report this quarterly to the HIL Board and to the PRA As at 31 December 2022, HIL’s ratio of eligible funds to meet its Solvency Capital Requirement was 466% (2021: 147%) and the Minimum Capital Requirement was 119% (2021: 590%) (both the current and prior year are unaudited). There have been no instances of non-compliance in either the current or prior year Fair value of financial instruments The fair value of non-derivative financial instruments is determined using pricing models based on discounted cash flow analysis using prices from observable current market transactions; hence, all are classified as Level 2 in the fair value hierarchy. Financial assets and liabilities are carried at the following amounts: Financial assets Financial assets at amortised cost Financial assets at fair value through other comprehensive income 2022 £’000 32,301 2,041 34,342 2021 £’000 33,823 1,889 35,712 Financial assets at amortised cost comprise cash and cash equivalents, trade and other receivables, insurance assets and taxes receivable Financial assets at fair value comprise the non-current asset equity investment, which is held at fair value through other comprehensive income There is no significant difference between the fair value and carrying amount of any financial asset. Financial liabilities Financial liabilities at amortised cost 2022 £’000 32,423 2021 £’000 26,698 Financial liabilities at amortised cost comprise lease liabilities, borrowings, trade creditors, accruals, taxes payable, insurance claims and provisions There is no significant difference between the fair value and carrying amount of any financial liability, since liabilities are either short-term in nature or bear interest at variable rates CPPGroup Plc Annual Report & Accounts 2022 93 Financial statements Notes to the financial statements continued 31. Financial instruments continued Financial risk management objectives The Group’s activities expose it to the risks of changes in foreign exchange rates and interest rates The Board of Directors determines the Treasury Policy of the Group and delegates the authority for execution of the policy to the Treasury function Any changes to the Treasury Policy are authorised by the Board of Directors. The limited use of financial derivatives is governed by the Treasury Policy and derivatives are not entered into for speculative purposes Interest rate risk The Group is exposed to interest rate risk to the extent that short- and medium-term interest rates fluctuate. The Group manages this risk through the use of interest rate swaps, when appropriate, in accordance with its Treasury Policy There has been no use of interest rate derivatives in either the current or prior year. The interest cover (being defined as the ratio of underlying EBITDA to interest paid) at 31 December 2022 was 92x (2021: 91x). Interest rate sensitivity analysis The Group is mainly exposed to movements in the relevant inter-bank lending rates in the jurisdictions in which cash balances are held. The following table details the Group’s sensitivity to a 3% increase (2021: 2% increase) and a 1.5% decrease (2021: 1.5% decrease) in inter-bank lending rates throughout the year. These percentages represent the Directors’ assessment of a reasonably possible change in inter-bank lending rates across all geographical areas where cash is held. The sensitivity analysis includes the impact of changes in inter-bank lending rates on yearly average cash and bank loans Increase of 3% (2021: 2%) Increase in profit before tax Increase in shareholders’ equity Decrease of 1.5% (2021: 1.5%) Decrease in profit before tax Decrease in shareholders’ equity 2022 £’000 631 631 (315) (315) 2021 £’000 436 436 (327) (327) Foreign currency risk The Group has exposure to foreign currency risk where it has investments in overseas operations which have functional currencies other than sterling and are affected by foreign exchange movements The carrying amounts of the Group’s principal foreign currency denominated assets and liabilities are as follows: Euro Indian rupee Turkish lira Liabilities Assets 2022 £’000 2,062 17,980 851 2021 £’000 1,938 12,080 742 2022 £’000 3,276 16,646 1,150 2021 £’000 3,361 15,784 1,443 Foreign currency sensitivity analysis The following table details the Group’s sensitivity to a 25% (2021: 25%) decrease in the euro, Indian rupee and Turkish lira exchange rates with sterling This represents the Directors’ assessment of the reasonably possible change in foreign exchange rates The sensitivity analysis includes only foreign currency denominated financial instruments and adjusts their translation at the year end for a change in foreign currency rates. Profit before tax Shareholders’ equity Euro currency impact Indian rupee currency impact Turkish lira currency impact 2022 £’000 (10) (243) 2021 £’000 (43) (285) 2022 £’000 — 267 2021 £’000 — (741) 2022 £’000 (24) (60) 2021 £’000 (187) (140) Credit risk Credit risk refers to the risk that a counterparty defaults on its contractual obligations resulting in financial loss to the Group. The Group does not actively hedge its credit risk The Group’s retail trade and insurance receivables are mainly with a broad base of individual customers and are therefore not generally exposed to any one customer, resulting in low credit risk The Group’s wholesale activities can result in material balances existing with a small number of counterparties and therefore increased credit risk exists The Group continues to maintain some wholesale contracts and considers that it mitigates this credit risk through good quality relationships with counterparties and only partnering with counterparties with established credit ratings Counterparty credit limits are determined in accordance with the Treasury Policy for cash and cash equivalents and the Counterparty and Credit Risk Policy for receivables Any balance that falls into an overdue status is monitored Further details of the monitoring of and provision for overdue debts are outlined for trade and other receivables in note 24 The carrying amount of financial assets recorded in the consolidated financial statements, which are stated net of expected credit losses and impairment losses, represents the Group’s maximum exposure to credit risk 94 CPPGroup Plc Annual Report & Accounts 2022 31. Financial instruments continued Liquidity risk The Group has a policy of repatriation and pooling of funding where possible in order to maximise the return on surplus cash or minimise the level of debt required. The Group has significant available cash balances; however, increasingly cash is being generated through our Indian operation and is not currently available in its entirety for repatriation to the UK due to its distributable reserves position. Group Treasury continually monitors the level of short-term funding requirements and balances the need for short-term funding with the long-term funding needs of the Group Additional undrawn facilities that the Group had at its disposal to further reduce liquidity risk are included in note 28 Compliance with financial ratios and other covenant obligations of the Group’s bank loans is monitored on a monthly basis by Executive Directors and by the Board of Directors at each Board meeting Liquidity and interest risk tables Assets The following table details the Group’s expected maturity for its non-derivative financial assets, based on the undiscounted contractual maturities of the financial assets. Weighted average effective interest rate % Less than 1 month £’000 1–3 months £’000 3 months to 1 year £’000 2021 Non-interest bearing assets Variable rate instruments n/a 10% 2022 Non-interest bearing assets Variable rate instruments n/a 1.93% 7,424 22,099 29,523 5,789 15,231 21,020 1,486 219 1,705 2,489 2,767 5,256 1,606 1 1,607 2,328 2,986 5,314 1–5 years £’000 972 — 972 699 — 699 Over 5 years £’000 1,905 — 1,905 2,053 — 2,053 Total £’000 13,393 22,319 35,712 13,358 20,984 34,342 Liabilities The following table details the Group’s remaining contractual maturity for its financial liabilities, based on the undiscounted cash flows of financial liabilities and the earliest date at which the Group can be required to pay. The table includes both interest and principal cash flows and assumes no changes in future LIBOR rates Less than 1 month £’000 1–3 months £’000 3 months to 1 year £’000 1–5 years £’000 Over 5 years £’000 2021 Non-interest bearing liabilities Variable rate instruments Fixed rate instruments 2022 12,601 75 6 12,682 3,561 228 13 3,802 3,516 635 56 4,207 Non-interest bearing liabilities 5,440 17,325 4,070 Variable rate instruments Fixed rate instruments 81 6 248 13 637 31 5,527 17,586 4,738 610 3,487 50 4,147 649 3,122 — 3,771 536 1,449 — 1,985 221 630 — 851 Total £’000 20,824 5,874 125 26,823 27,705 4,718 50 32,473 CPPGroup Plc Annual Report & Accounts 2022 95 Financial statements Notes to the financial statements continued 32. Share capital Called-up and allotted At 1 January 2022 Issue of shares in connection with: Exercise of share options At 31 December 2022 Called-up and allotted At 1 January 2022 Issue of shares in connection with: Exercise of share options At 31 December 2022 Ordinary shares of £1 each (thousands) Deferred shares of 9 pence each (thousands) Total (thousands) 8,833 171,650 180,483 13 — 13 8,846 171,650 180,496 Ordinary shares of £1 each £’000 Deferred shares of 9 pence each £’000 Total £’000 8,830 15,413 24,243 13 — 13 8,843 15,413 24,256 Share capital at 31 December 2022 is £24,256,000 (2021: £24,243,000). To satisfy share option exercises in the year the Company has issued 12,847 £1 ordinary shares for a total equity value of £13,000 and cash consideration of £6,000. Of the 8,846,045 (2021: 8,833,198) ordinary shares in issue at 31 December 2022, 8,841,045 are fully paid (2021: 8,828,198) and 5,000 (2021: 5,000) are partly paid. The ordinary shares are entitled to the profits of the Company which it may from time to time determine to distribute in respect of any financial year or period. All holders of ordinary shares shall have the right to attend and vote at all general meetings of the Company On a return of assets on liquidation, the assets (if any) remaining, after the debts and liabilities of the Company and the costs of winding up have been paid or allowed for, shall belong to, and be distributed amongst, the holders of all the ordinary shares in proportion to the number of such ordinary shares held by them respectively Deferred shares have no voting rights, no rights to receive dividends and only very limited rights on a return of capital The deferred shares have not been listed for trading in any market and are not freely transferable 33. Share‑based payment Equity-settled share-based payments Current share plans Share-based payment charges comprise a credit relating to the 2016 LTIP of £206,000 (2021: £72,000) which is disclosed within administrative expenses No options have been granted in either the current or prior year as part of the 2016 LTIP 2016 LTIP Outstanding at 1 January Exercised during the year Lapsed during the year Forfeited during the year Outstanding at 31 December Exercisable at 31 December 2022 2021 Number of share options (thousands) Weighted average exercise price (£) Number of share options (thousands) Weighted average exercise price (£) 138 (17) (13) (105) 3 3 — — — — — — 329 (70) (69) (52) 138 9 — — — — — — Nil-cost options and conditional shares granted under the 2016 LTIP normally vest after three years, lapse if not exercised within ten years of grant and will lapse if option holders cease to be employed by the Group Vesting of 2016 LTIP options and shares are also subject to achievement of certain performance criteria including Group financial targets and non-financial events measured within the vesting period. The options outstanding in the 2016 LTIP had no remaining contractual life in either the current or prior year 96 CPPGroup Plc Annual Report & Accounts 2022 33. Share‑based payment continued Legacy share plans The MSP is closed and no further awards will be made under the plan Administrative expenses include no charge in either the current or prior year There were no options granted in either the current or prior year under the MSP Details of share options outstanding during the period under the MSP is as follows: MSP Outstanding at 1 January Exercised during the year Outstanding at 31 December Exercisable at 31 December 2022 2021 Number of share options (thousands) Weighted average exercise price (£) Number of share options (thousands) Weighted average exercise price (£) 8 (6) 2 2 1.00 1.00 1.00 1.00 28 (20) 8 8 100 100 100 100 All outstanding options granted under the MSP have vested and have an exercise price of £1 (2021: £1). The MSP options lapse if not exercised within ten years of the grant date and will lapse if option holders cease to be employed by the Group No further awards will be made under this plan and 6,000 were exercised during the year (2021: 20,000). The options outstanding in the MSP had no weighted average remaining contractual life in either the current or prior year Cash-settled share-based payments The Group granted certain employees with notional share options that require the Group to pay the intrinsic value of the notional share to the employee at the date of exercise The notional share options have the same requirements and conditions as the 2016 LTIP There have been no similar awards in 2022. The Group has recorded a total credit in relation to cash-settled awards in the year of £40,000 (2021: £8,000 expense) which is disclosed within administrative expenses. The Group has recorded liabilities for its cash-settled awards of £10,000 (2021: £137,000) which are included in trade creditors and other payables in note 26. 34. Non‑controlling interests The Group holds a 51% majority interest in Globiva, a company incorporated in India Summarised financial information and resultant non-controlling interest for Globiva are detailed below and disclosed before inter-company eliminations Summarised balance sheet Current assets Current liabilities Net current assets Non-current assets Non-current liabilities Net assets Accumulated net assets attributable to non-controlling interests at 49% Summarised income statement Revenue Profit before taxation Taxation Profit for the year Other comprehensive expense Total comprehensive income Total comprehensive income attributable to non-controlling interests 2022 £’000 5,856 2021 £’000 4,503 (3,084) (2,310) 2,772 3,959 2,193 4,365 (3,422) (3,770) 3,309 1,803 2022 £’000 16,870 680 (162) 518 4 522 256 2,788 1,547 2021 £’000 12,263 1,222 (318) 904 (1) 903 442 CPPGroup Plc Annual Report & Accounts 2022 97 Financial statements Notes to the financial statements continued 35. Reconciliation of operating cash flows Profit for the year Adjustments for: Depreciation and amortisation Share-based payment credit Impairment loss on intangible assets Impairment loss on property, plant and equipment Impairment loss on right-of-use assets Share of loss of joint venture Loss on disposal of property, plant and equipment Loss on disposal of intangible assets Profit from discontinued operations Effects of hyperinflation Investment revenues Finance costs Other gains and losses Income tax charge Operating cash flows before movements in working capital Decrease in inventories (Increase)/decrease in contract assets (Increase)/decrease in receivables Decrease in insurance assets Increase in payables Increase/(decrease) in contract liabilities Increase/(decrease) in insurance liabilities Increase in provisions Cash from operations Income taxes paid Net cash from operating activities Reconciliation of net funds Net cash per cash flow statement Financing activities: Lease liabilities Borrowings due outside of one year: – Unamortised issue costs Total movement from financing activities Total net funds 98 CPPGroup Plc Annual Report & Accounts 2022 2022 £’000 777 2,509 (246) 187 — — — 15 5 (535) 86 (490) 709 — 2,343 5,360 15 (1,481) (6,232) — 7,547 1,655 83 369 7,316 (3,494) 3,822 2021 £’000 3,008 3,111 (64) 176 3 48 189 26 — (2,582) — (224) 259 (1,459) 3,737 6,228 40 354 1,626 46 217 (276) (853) — 7,382 (2,820) 4,562 Note 25 27 28 At 1 January 2022 £’000 Cash flow £’000 Foreign exchange and other non-cash movements £’000 At 31 December 2022 £’000 22,409 (1,479) 54 20,984 (6,023) 1,388 (83) (4,718) 58 (5,965) 16,444 — 1,388 (91) (35) (118) (64) 23 (4,695) 16,289 36. Related party transactions Transactions with associated parties In the year, the Group incurred fees of £19,000 plus VAT (2021: £8,000) for services rendered from KYND, which was payable under 14-day credit terms. The creditor balance at the year end was £2,000 (2021: £1,000). Transactions with related parties China disposal On 27 January 2022, the Group completed the sale of China to T-Link Holdings Limited (T-Link) for nominal cash consideration of HK$1. As part of the disposal, the Group made a working capital cash injection into China of £0.5 million. The majority shareholder of T-Link is Wilson Chan, the CEO of China. The terms of the disposal reflect the ongoing cash losses and investment requirements of China. The Board concluded that sale of the business to T-Link rather than a closure was both the least costly for the Group and the right option for all stakeholders, enabling the Group to focus on its core markets while ensuring in China the smooth transition of colleagues and continuity of service to partners and their customers As Wilson Chan is CEO of China and a majority shareholder in T-Link, the disposal constitutes a related party transaction. The Directors consider, having consulted with the Company’s nominated adviser, Liberum Capital Limited (Liberum), that the terms of the disposal are fair and reasonable insofar as the Company’s shareholders are concerned Mexico disposal On 20 October 2022, the Group completed the sale of Mexico, to Rafael Ortiz Moran and Silvia Daniela Rodriguez Gaona for a nominal cash consideration of $1 (Mexican peso). As part of the disposal, the Group has left cash balances of £0.3 million to cover initial working capital requirements and other committed liabilities. Rafael Ortiz Moran is the Country Manager of Mexico. The sale terms reflect the run-off nature of the business which was forecast to become unprofitable again in 2023 and the Group’s desire to exit the Legacy markets in the most cost effective manner As Rafael Ortiz Moran is the Country Manager of Mexico, the disposal constitutes a related party transaction The Directors consider, having consulted with the Company’s nominated adviser, Liberum, that the terms of the disposal are fair and reasonable insofar as the Company’s shareholders are concerned Globiva In July 2022, the Group agreed to amend the Globiva Shareholder Agreement (SHA) and certain other arrangements The Group holds a 51% majority interest in Globiva, with the other 49% of share beneficially owned by the three founders. The Group agreed to provide additional funding of £0.5 million through an existing repayable interest-bearing loan which was utilised to make a one-time compensation payment to the Globiva founders The SHA further entitled, upon achievement of certain performance targets, the Globiva founders to either a cash payment or to buyback of 10% of the ordinary shares in Globiva from the Group. Under the amended arrangements, the Globiva founders will, on meeting performance targets, buyback 10% of the ordinary shares, however in the normal course of business, this cannot be triggered until 1 January 2026 at the earliest The compensation payment to the Globiva founders, who are also Directors of Globiva, along with the other arrangements constitute a related party transaction The Directors of CPP Group consider, having consulted with the Company’s nominated adviser, Liberum, that the terms of the transaction are fair and reasonable insofar as the Company’s shareholders are concerned Remuneration of key management personnel The remuneration of the Directors and senior management team, who are the key management personnel of the Group and Company, is set out below: Short-term employee benefits Post-employment benefits Termination benefits Share-based payments 2022 £’000 1,101 27 300 (206) 1,222 2021 £’000 1,788 74 203 (65) 2,000 Required disclosures regarding remuneration of the Directors are included in the Directors’ Remuneration Report on pages 47 to 49 37. Events after the balance sheet date On 6 February 2023, Turkey was hit by a devastating earthquake Turkey is one of the Group’s Core markets New sales activity has been impacted by approximately 50% in February and March following Government guidance on restricting telemarketing activity This guidance is expected to be relaxed in April. There is currently no evidence of a notable deterioration in renewal rates. The financial impact on the Group from the effects of the earthquake is currently uncertain but is not expected to be material All colleagues are receiving any support necessary The Group continues to closely monitor the situation CPPGroup Plc Annual Report & Accounts 2022 99 Financial statements Glossary Alternative performance measures In reporting financial information, the Group presents alternative performance measures (APMs), which are not defined or specified under the requirements of UK IAS. The Group believes that these APMs, which are not considered to be a substitute for or superior to UK IAS measures, provide stakeholders with additional helpful information on the performance of the business The APMs are consistent with how the business performance is planned and reported within the internal management reporting to the Board and Audit Committee Some of these measures are also used for the purpose of setting remuneration targets The key APMs that the Group uses include: EBITDA; and constant currency measures. Definitions of these are presented in the table below. APM Closest equivalent statutory measurement Reconciling to statutory measures Definition and purposes Core revenue Revenue EBITDA Operating profit Consolidated income statement and note 5 Core revenue exclude the Legacy businesses which are in the process of being exited or closed The Group considers this to be an important measure in illustrating the future performance of the Group Consolidated income statement and note 5 Operating profit before the impact of depreciation, amortisation and exceptional items The Group considers this to be an important measure of Group performance and is consistent with how the business performance is reported to and assessed by the Board and the Audit Committee Underlying earnings/(loss) per share Adjusted effective tax rate Earnings per share Note 14 Effective tax rate Page 26 Constant currency basis Revenue, operating profit Page 101 Live policies/customers Annual renewal rate None None Not applicable Not applicable Net funds None Not applicable Cost/income ratio None Not applicable Profit after tax attributable to equity holders of the Company and before the impact of exceptional items (adjusted for tax), divided by the weighted average number of ordinary shares in issue during the financial year. The Group’s profit before tax was impacted by one-off and/or exceptional events in 2022 and 2021; removing the impact of these discrete, material one-off events results in an underlying effective tax rate of 61% (2021 restated: 128%) compared to the actual effective rate of 96% (2021 restated: 87%). In general, the Group considers that the adjusted effective tax rate provides a more representative measure of the underlying effective tax rate of the ongoing business The year-on-year change in revenue and EBITDA from retranslating the prior year reported results at the exchange rates applied in the current year These measures are presented as a means of eliminating the effects of exchange rate fluctuations on the year-on-year reported results. The total number of active policies that provide continuing cover or services to policyholders The net amount of annual retail policies remaining on book after the scheduled renewal date, as a proportion of those available to renew Total cash and cash equivalents; plus net investment lease assets; less borrowings; and less lease liabilities. Cost of sales (excluding commission) and administrative expenses (excluding depreciation, amortisation and exceptional items) as a proportion of total revenue 100 CPPGroup Plc Annual Report & Accounts 2022 Constant currency tables (Restated*,**) Core operations Legacy operations India Turkey Blink Central Functions Core total Legacy Share of joint venture losses Total 2022 (£’000) Revenue EBITDA 2021 (£’000) Revenue EBITDA 150,613 8,032 119,273 7,830 3,212 726 3,568 848 Foreign exchange movements (£’000) Revenue EBITDA 5,875 480 (1,304) (316) 2021 at 2022 average exchange rates (£’000) Revenue EBITDA 125,148 8,310 2,264 532 442 (458) 319 (254) (1) (6) 318 (260) — 154,267 (3,372) 4,928 — 123,160 (4,319) 4,105 — — 4,570 158 — 127,730 (4,319) 4,263 Year-on-year movement at constant exchange rates (%) Revenue EBITDA 20% (3)% 42% 36% 39% (76)% — 22% 21% 19% * Restated to reflect Mexico as a discontinued operation. See note 2. ** Restated to reflect the change in operating segments. 15,516 1,925 19,663 3,330 (26) — 19,636 3,330 (21)% (42)% n/a — 169,783 6,853 n/a 142,823 (189) 7,246 n/a — 4,544 158 n/a 147,366 (189) 7,404 n/a 100% 15% (6)% CPPGroup Plc Annual Report & Accounts 2022 101 Financial statements Company offices Corporate centre CPPGroup Plc 6 East Parade Leeds LS1 2AD United Kingdom Tel: +44 (0)113 487 7350 https://corporate.cppgroup.com Country operation offices UK 6 East Parade Leeds LS1 2AD United Kingdom Tel: +44 (0)113 487 7350 Ireland Registered office address: Grant Thornton 13–18 City Quay Dublin 2 Ireland D02E D70 Tel: + 353 1 680 5805 Spain Parque Empresarial Alvento Via de los Poblados 1 Edif B, 6ª Planta 28033 Madrid Spain Tel: +34 91 121 16 00 Fax: +34 91 121 16 16 Italy Centro Direzionale Colleoni Via Paracelso, 26–1º Piano 20864 Agrate Brianza (MB) Italy Tel: +39 039 657 801 Portugal Rua Quinta das Palmeiras, 91 – 1 ºA Torre Madrid 2780-154 Oeiras Portugal Bangladesh CPP Global Assistance Bangladesh Limited 67 Dilkusha C/A (2nd floor) Dhaka-1000 Bangladesh Tel: +351 213 228 228 Tel: +880 2588 15247 Malaysia Registered office address: Unit 30-01, Level 30, Tower A, Vertical Business Suite Avenue 3, Bangsar South No 8, Jalan Kerinchi 59200 Kuala Lumpur WP Kuala Lumpur Malaysia Southeast Asia Registered office address: 68 Circular Road #02-01 Singapore 049422 Tel: +65 6955 7669 Turkey Bora Sokak, Nida Kule Göztepe Kat:19 34732 Kadıköy, Istanbul Turkey Tel: +90 216 665 25 25 Fax: +90 216 665 25 26 India Registered office address: A-370, Second Floor Kalkaji New Delhi – 110019 India Primary business address: Ground Floor, Wing-A Golf View Corp, Tower-A Golf Course Road, DLF-V Sector 42, Gurgaon–122002 Haryana India Tel: +91 124 409 3900 Fax: +91 124 404 1004 Globiva AIHP Signature 2nd Floor, 418–419 AIHP Signature Udyog Vihar, Phase-IV, Gurugram Haryana-122015 India Tel: +91 124 603 4900 102 CPPGroup Plc Annual Report & Accounts 2022 Shareholders who have a query regarding their shareholding should contact the Company’s share registrar at: Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL Tel: +44 (0)371 664 0300 When contacting the registrar please have the investor code and information relating to the name and address in which the shares are held Investor relations Requests for further copies of the Annual Report & Accounts, or other investor relations enquiries, should be addressed to the Company Secretary at the registered office. Shareholder information Registered office: CPPGroup Plc 6 East Parade Leeds LS1 2AD United Kingdom Tel: +44 (0)113 487 7350 The Company’s shares are listed on AIM Company information and share price details are available on the corporate website at https://corporate.cppgroup.com Company registration number: 07151159 Nominated adviser and broker: Liberum Capital Ropemaker Place Level 12 25 Ropemaker Street London EC2Y 9LY Auditor: PKF Littlejohn 3rd Floor One Park Row Leeds LS1 5HN Legal advisers: Squire Patton Boggs 6 Wellington Place Leeds LS1 4AP Media consultants: Alma PR 71–73 Carter Lane London EC4V 5EQ Investor Relations consultants: Radnor Capital Partners 1 King Street London EC2V 8AU CPPGroup Plc Annual Report & Accounts 2022 103 Financial statements www.cppgroup.com CPP Group, 6 East Parade, Leeds LS1 2AD, United Kingdom Tel: +44 (0)113 487 7350