WTG.L Regulatory News (WTG)

RNS for Release 7.01 am 4 September 2012

Quindell Portfolio Plc

("Quindell", the "Company")

Interim Results

Quindell Portfolio Plc (AIM: QPP.L), the provider of sector leading expertise in software, consultancy and technology enabled outsourcing in its key markets, being Insurance, Telecommunications and their Related Sectors, is pleased to announce its unaudited interim results for the six months ended 30 June 2012.

THE GROUP HAS HAD AN EXCEPTIONALLY STRONG FIRST HALF OF 2012, CONTINUING THE POSITIVE DEVELOPMENTS ACHIEVED IN 2011.

Financial Highlights

·; REVENUE increased 2,404% to £45.6m (2011: £1.8m)

o SOFTWARE & CONSULTANCY increased to £11.3m

o TECHNOLOGY ENABLED OUTSOURCING increased to £34.3m

·; ADJUSTED EBITDA (see note 1)

o EBITDA increased 1,674% to £15.0m (2011: £0.8m)

o EBITDA margin % of 33% (2011: 46%)

·; PROFIT BEFORE TAX

o Profit Before Tax increased to £12.2m (2011: £0.0m)

o Adjusted Profit Before Tax (see note 2) increased to £14.0m (2011: £0.8m)

·; EARNINGS PER SHARE

o Adjusted Basic EPS (see note 3) increased 92% to 0.46 pence (Q1:0.18p, Q2:0.28p) (2011: 0.24 pence)

o Basic EPS of 0.39 pence (2011: 0.01 pence)

·; EXCEPTIONAL Acquisition & integration related costs of £1.3m

·; ADJUSTED OPERATING CASH INFLOW increased 995% to £9.8m (2011: £0.9m)

·; UNDERLYING EBITDA to CASH CONVERSION of 65%

·; IN FEBRUARY 2012, c.£30m FUNDRAISING through OVERSUBSCRIBED PLACING with institutional shareholders

·; IN APRIL 2012, AI CLAIMS SOLUTIONS PLC ACQUIRED FOR c£14m, (2011 financial results: Revenue £117.6m, EBITDA £5.7m)

·; CASH increased 477% during the period to £21.4m

·; NET DEBT of £10.9m at period end after assuming £20.0m of Ai Claims Solutions borrowings secured against £58m of debtors. £4.8m of working capital facilities repaid during the period

Notes:

1. Profit before tax, excluding amortisation, depreciation, net finance expense and exceptional costs as described in the Consolidated Income Statement

2. Profit before tax, excluding amortisation and exceptional costs

3. See Note 5, Earnings Per Share, to these Results

Operating Highlights

·; SOFTWARE AND CONSULTANCY

o Finished H1 2012 with new record level license pipelines

o Agreed multiple new contracts and extensions across key markets and a range of geographies

o Delivered over £8 million of revenue in Q2

o Technology recognised as market leading by various industry bodies and publications

·; TECHNOLOGY ENABLED OUTSOURCING

o Acquisition of Ai Claims Solutions Plc

o Agreed acquisition of Silverbeck Rymer solicitors

o Announced its first major new contract valued at circa £120 million over next three years

o Signed significant new business towards the end of the period for legal services, accident management and credit hire, increasing run rate volumes

o Our core brand extension businesses have continued to trade ahead of business plan

·; BOARD REMAINS EXTREMELY CONFIDENT OF MEETING MARKET EXPECTATIONS FOR THE FULL YEAR

Rob Terry, Chairman and Group Chief Executive of Quindell said: "The first six months of 2012 have continued the significant progress the Group has made since our listing. Our pipeline for new business is strong and we have a significant number of contracts currently under discussion with a number of pilots already underway with key industry participants. The exceptional performance throughout the year has meant that we are extremely confident of meeting current year market expectations and, with our growth strategy clearly delivering, also meeting the expectations beyond the current year."

For further information:

Notes to Editors:

About Quindell Portfolio Plc

Quindell Portfolio Plc is a provider of sector leading expertise in Software, Consulting and Technology Enabled Outsourcing in its key markets being Insurance, Telecommunications and their Related Sectors.

Quindell joined the market through Mission Capital Plc, now renamed Quindell Portfolio Plc. The Company was readmitted to the market on 17 May 2011 following the acquisition of Quindell Limited prior to the immediate acquisition of Quindell's technology and outsourcing partners. In December 2011, Mobile Doctors Group Plc was acquired increasing 2012 run-rate revenue to over £50 million. On the 1 April 2012, Ai Claims Solutions Plc became a subsidiary of Quindell, increasing run rate revenue to over £150 million.

Our Industry Sectors

In today's digital world the line between traditional industry sectors continues to blur, however the focus on tight service management is common to them all. We believe that excellent customer service, tight cost control and integrated supply chain management is not the prerogative of any single industry sector and with our solutions in multiple industry sectors savings of over 20% against industry norms are being delivered to the bottom line.

Our Solutions

The pressures on an organisation can come simultaneously from multiple directions including the need to add customers, increase wallet share, reduce costs and improve customer satisfaction. At Quindell we have the People, the Processes and the Supply Chains, underpinned by our sophisticated Champion and Challenger Business Process Management Technology Platform and Industry Solutions to help our customers tackle these efficiently and effectively.

With a clear understanding that having the best products and services on offer is not always enough and that getting your customers to use or adopt them is key, effective conversion lies at the core of our unique Champion and Challenger tools and techniques. Using these solutions Quindell has helped its customers achieve sales and service conversion rates ranging from 75% to 90%, way above industry norms. But life does not stand still, and complacency can kill any business, so the embedded Champion and Challenger continual improvement focus of our Learning Solutions is at the heart of all we offer. Using our industry insight and expertise, Quindell takes the holistic view of our client's challenges.

For example, when considering the Insurance industry today where 50% of the cost of an auto claim is associated with Personal Injury, including legal services, medical reporting and rehabilitation, it is clear that an organisation will not be able to achieve the levels of savings and customer satisfaction desired without addressing the injury to the driver as well as the repair of the vehicle. This is why at Quindell we have designed our insurance solutions and supply chains to address the full end to end cycle, with the ability and expertise to treat an injured party as well as repairing their vehicle. This makes Quindell a truly unique and ethically based proposition for the insurance industry today.

Our Customers

Quindell Portfolio's companies have worked with over 2000 brands from Small to Medium Enterprises and Blue-chip organisations around the globe. Today we count a number of the world's top Insurance and Telecommunications blue chip companies within our client base, as well as hundreds of customer centric organisations working in both the distribution and supply of their services.

Our award winning Business Transformational, Software, Consulting and Outsourcing Solutions are recognised as delivering significant savings and additional sales to our customers every year.

For further information, please visit www.quindell.com

Interim Statement

We are pleased to present to shareholders interim results for the six months ended 30 June 2012. The first six months of 2012 have continued the significant progress the Group has made since listing having recorded our best results to date, concluded the acquisitions of Ai Claims Solutions Plc and IT-Freedom Limited, and reached agreement to acquire the solicitors firm Silverbeck Rymer as soon as the regulatory approvals have been obtained allowing us to benefit from joint revenues and profits in the second half of this year. We are also now in the position where our pipeline for new business exceeds £500 million of contracts currently under discussion, and have a number of pilots already underway with key market participants.

We now have over 1,000 staff in the UK, based primarily in Blackpool, Liverpool and Fareham. Globally, we have a further circa 250 staff at our operating centres in the US, South Africa, Malta and the Far East. Our products and services address the insurance and telecoms markets, which combined represent an industry with revenues in excess of $3 trillion. Both industries are experiencing changes that Quindell is well positioned to address: Organisations operating in these sectors are using technology much of which is more than 30 years old. Telecoms companies are looking to extend their services in to other markets and brand extension into the insurance sector is about to start, a trend validated in a 2012 Marketforce survey which identified that mobile network operators and telecoms companies are viewed as a potential threat to traditional insurance companies with 62% expecting one of these to take business from insurers within the next five years. Furthermore, the insurance market is experiencing significant change with the advent of telematics based insurance, and within the UK, changes in referral fee structures and the ability to own legal services companies under alternative business structures.

Financially, the Group delivered a strong set of first half results. Revenue was £45.6 million, with Adjusted EBITDA (as defined in the as described in the Consolidated Income Statement) of £15.0 million, an EBITDA margin of approximately 33%, ahead of our internal plan and our pre-close statement on 9 July 2012. The Group also continued to generate good levels of cash from its operations, with an operating cash flow to EBITDA conversion ratio of over 65% for the six months to 30 June 2012, 8% above full year market expectations. Adjusted Basic EPS for the six months was 0.46 pence per share, again ahead of internal plan and circa 5% above our pre-close statement. Adjusted Basic EPS for our Second Quarter was 0.28 pence, and we have visibility that in line with our guidance of at least 33% year-on-year quarterly EPS growth we will deliver Adjusted Basic EPS of at least 0.30 pence in our third quarter, with this minimum level of growth clearly evident from our performance in the first two months of the current quarter, leaving EPS of only 0.24 pence to achieve in our Fourth Quarter to meet consensus market expectations of 1 penny for 2012.

The Group's Solutions Division provides software and consulting services. Within this division, Second Quarter revenues, including initial licence fees, other success or milestone based fees and other software and consulting revenues in combination exceeded £8 million in a quarter for the first time and this has resulted in the Division delivering £11.3 million revenue in total for the first half of 2012. During the period we agreed multiple new contracts and extensions to existing client contracts across our key markets of insurance and telecoms, and a broad range of geographies including the UK, South Africa, North America, Australia and Continental Europe. In addition, we have also received a number of letters of intent from customers across both insurance and telecoms in relation to new software and consulting projects and we are now signing deals at a faster rate than we have done previously, enabling the Group to finish the first half of 2012 with licence pipelines at new record levels. This success is largely due to the speed of implementation of our solutions compared to that of other technology companies - in the past two years we have successfully delivered over 40 implementations with an average go-live timescale of 14 weeks - and this is proving to be a key competitive advantage in us winning business on a global scale. Our clients now include blue chip brands in each of our major markets with a mixture of "on premise" and "Software as a Service" hosted applications, demonstrating the viability and global applicability of our industry technology solutions.

The Group is yet to see the full benefit and scale of revenues that will come from its insurance solutions due to the first mover advantage provided by us to our associate ingenie. Having now concluded this period and having continued to develop our solutions and integrated IT-Freedom, our base insurance software solutions are fully ready to deploy. Our insurance software solutions have continued to gain recognition within the insurance market with inclusion in independent market research including Celent's insurance industry technology reports, and with our 'Challenger ICE' insurance claims solution being shortlisted for the Technology Award through our joint submission with insurethebox for the 2012 British Insurance Awards.

As well as investing in and growing our own core technology business, the Group also increased its shareholding in its three associates to c.19.9%: 360GlobalNet, the innovative technology and consultancy company specialising in the business use of video, and rapid data-mining of all data formats with particular emphasis on fraud prevention and compliance monitoring within the financial sector; ingenie, the insurance intermediary digital brand for young drivers that is addressing two of the largest issues facing the motor insurance industry today: the prohibitive cost of young car driver insurance and the high customer acquisition costs primarily through the use of telematics technology and SMI Telecoms, provider of software solutions to the telecommunications industry through their Telecoms OSS solution 'OS3', and for which the Group now has global distribution rights.

The first half of 2012 has also been a period of significant progress for our Services Division, providing our clients with technology enabled outsourcing services with a value of £34.3 million.

In April 2012 we acquired Ai Claims Solutions Plc (Ai Claims), the UK's third largest motor claims outsourcing business, having already acquired Mobile Doctors, the UK's third largest medico legal reporting and multi discipline rehabilitation specialist in 2011. In June 2012, we concluded, subject to regulatory approval, the purchase of Silverbeck Rymer Solicitors, the UK's fourth largest personal injury specialist law firm. Together, these make Quindell the second largest claims management outsourcing business to the UK motor insurance industry and the only organisation ethically addressing the total cost of claims, including personal injury and rehabilitation.

In May 2012 we were pleased to be able to announce that we had won a contract worth c. £120 million over a three year period, which was the first of what we anticipate will be a number of major deals that use a combination of one or more of our insurance outsourcing service offerings. In addition to this major contract, our legal services, accident management and credit hire outsourcing businesses have signed significant new business, increasing run rate volumes towards the end of the period. Key to our success in this Division and consequently driving our organic growth is proving to be our ability to convert a high proportion of the opportunities provided by partners in to serviced transactions. This, together with the quality of the end-customer journey we offer, the high levels of customer satisfaction and our long held ethical approach stamping down the cost of claims that is becoming increasingly important as the insurance industry focuses more on these matters, is leading to more partners wanting to use our services. The pipeline is extremely healthy at the moment with over £500 million of contracts currently under discussion. During the past six months, our core Brand Extension business has also continued to perform well, trading ahead of business plan and generating strong cash flows. In August 2012 we were pleased to report that both Business Advisory Service Limited and Utility Switch Limited, two of the sales outsourcing operations which form part of this business delivering both products and services to our insurance and telecoms clients, had concluded their warranty periods achieving 162% and 178% against their respective targets, providing further validation of our warranted profit and cash flow target approach to acquisitions.

Financial review

Total revenues in the period were £45.6 million (Q1: £11.8 million, Q2: £33.8 million) compared with £1.8 million for the comparative 9 months to June 2011. For the current period, Software and Consulting revenues were £11.3 million (25%) and Technology Enabled Outsourcing revenues were £34.3 million (75%).

Adjusted EBITDA (which excludes exceptional costs relating to acquisitions of £1.3 million, depreciation, amortisation and net finance expense) totalled £15.0 million (Q1: £5.5 million, Q2: £9.5 million) compared to £0.8 million for the comparative 9 months to June 2011. Profit before tax for the period was £12.2 million (9 months ended 30 June 2011: £0.0 million) and Profit after tax for the period was £9.6 million (9 months ended 30 June 2011: £0.0 million).

Basic EPS for the six months ended 30 June 2012 was 0.39 pence per share (30 June 2011: 0.01 pence), and Adjusted Basic EPS was 0.46 pence per share (30 June 2011: 0.24 pence).

The Group's operating cash flow was an inflow of £9.8 million for the current period (9 months ended 30 June 2011: £0.9 million). Net operating cash flow for the period was £8.8 million (30 June 2011: £0.5 million) after exceptional acquisition related cash outflows of £0.5 million (30 June 2011: £0.4 million) and interest and tax payments of £0.5 million (30 June 2011: £0.0 million).

The Group's cash balance at the end of June 2012 was £21.4 million (30 June 2011: £1.1 million; 31 December 2011: £3.7 million), an increase of £17.7 million during the period. The Group's net debt position as at 30 June 2012 was £10.9 million (30 June 2011: net funds of £0.2 million; 31 December 2011: net debt of £13.4 million). Broadly, this reduction in net debt of £2.4 million since the start of the year reflects the operating cash inflow of £8.8 million, £30.2 million cash raised primarily in February 2012 through an oversubscribed placing with institutional shareholders, £16.4 million outflow relating to acquisitions, investments and capital expenditure, together with the assumption of £20.0 million of borrowings and lending facilities secured against £58.0 million of debtors following the acquisition of Ai Claims.

In total, as a result of our strong cash flow in the period, we repaid £4.8 million of our working capital facilities. Throughout the period we have continued to work with the two banks that already have a significant lending relationship with the Group following our acquisition of Mobile Doctors and Ai Claims, introducing them to the other parts of the Group, and our relationship with them remains strong. Since the half year end, we have also been offered further working capital facilities with a third major bank providing us with confidence that together with our own cash, we have ample room within the facilities available to us to enable us to manage the anticipated growth of the business.

The Group completed two major acquisitions in the current period: the acquisition of Ai Claims in April 2012 and the acquisition of IT-Freedom Limited at the end of May 2012. Ai Claims was acquired in exchange for 113.5 million shares in the Company and cash of £5.7 million. IT-Freedom Limited was purchased for 49.7 million shares, cash of £0.5 million and deferred cash, payable between July 2013 and 2015, of £3.0 million. Provisional estimates for fair values give goodwill values of £2.5 million and £6.4 million for Ai Claims Solutions Plc and IT-Freedom Limited respectively.

In June 2012, the Group signed a binding agreement for the acquisition of Silverbeck Rymer, subject only to approval from the Solicitors Regulation Authority and the Financial Services Authority. The consideration for the acquisition of Silverbeck Rymer will be satisfied by the payment of £12 million in cash and the issue of 96.7 million Quindell shares, which will be subject to lock in arrangements ranging from 12 to 36 months.

Outlook

As a Board, we are extremely pleased with the way in which the business is developing, with the contributions that are being made to the Group by the talented people in the businesses that we have acquired and with the scale of the opportunities that are being presented now that our vision of providing an ethical and open approach delivering a wide range of professional services to both telecoms and insurance customers is being more widely established. The Directors therefore continue to believe that the Group has significant potential for growth, both organically and, as our existing value is recognised by the market or by potential vendors, through further earnings enhancing acquisitions. As an executive team, we are therefore all working hard to deliver on the significant opportunity that we have in front of us, with all bonuses and options remaining tied to achieving 1 and 2 pence EPS in 2012 and 2013 respectively.

Some areas where we expect major growth will come are as a result of the following: In the area of personal injury, where at the end of June 2012 the Group broadened its partnering agreement with Silverbeck Rymer in providing a joint outsourcing offering to the UK insurance claim market, and subsequently when the acquisition of Silverbeck Rymer receives regulatory approval. As a result of working with ICM over the past months, the cloud based claims management network company acquired by the Group in August 2012, where already a number of joint client contracts have been achieved validating our shared vision for the use of technology to facilitate change within the insurance industry to stamp down the cost of claims. These wins and other initial pilots won independently of ICM with a number of major brands have ensured that July has been the strongest month in Quindell's history, with regards to all key performance indicators (including profit, cash generation and EPS) providing a great foundation for the second half of 2012.

Adjusted Basic EPS for the six months to June 2012 was 0.46 pence per share, and for our most recent quarter was 0.28 pence. We have visibility that in line with our guidance of at least 33% year-on-year quarterly EPS growth we will deliver Adjusted Basic EPS of at least 0.30 pence in our third quarter, with this level of growth clearly evident from our performance in the first two months of the current quarter, leaving EPS of 0.24 pence to achieve in the Fourth Quarter to meet consensus market expectations of 1 penny for 2012.

Strategic agreements, initial proof of concepts and contract wins across the main areas of the business during the first half of the year have provided confidence for the Directors that the Group will continue to demonstrate significant growth in the second half of the year and thus we remain extremely confident of both meeting current year market expectations, and with our growth strategy delivering, also meeting the expectations beyond the current year. 

Condensed Consolidated Income Statement

for the six months ended 30 June 2012

All results relate to continuing activities.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2012

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 June 2012

Condensed Consolidated Statement of Financial Position

as at 30 June 2012

Condensed Consolidated Cash Flow Statement

for the six months ended 30 June 2012

1. Notes to the Condensed Consolidated Financial Statements

General information and basis of preparation

The consolidated interim financial statements include those of Quindell Portfolio Plc and all of its subsidiary undertakings (together "the Group") drawn up at 30 June 2012 and are neither audited or reveiwed. Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Subsidiaries are consolidated using the Group's accounting policies. Business combinations are accounted for using the acquisition method of accounting. This financial information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. Full accounts for the fifteen months ended 31 December 2011, which include an unqualified audit report, did not draw attention to any matters by way of emphasis, and did not contain statements under section 498 (2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies. The Group's audited consolidated financial statements for the fifteen months ended 31 December 2011 were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

Adoption of new and revised International Financial Reporting Standards

A number of new, revised or amended standards and interpretations are effective for the current financial year, but none have had any material impact on the condensed financial information.

Accounting policies

The unaudited consolidated interim financial information for the six months to 30 June 2012 has been prepared in accordance with accounting policies that are consistent with those followed in the preparation of the Group's annual financial statements for the fifteen months ended 31 December 2011, the key policies adopted being:

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the Income Statement in the period of acquisition.

Goodwill

Goodwill on the acquisition of a business is recognised as an asset at the date the business is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is not amortised but is reviewed for impairment at least annually with any impairment recognised immediately in the Income Statement and not subsequently reversed.

Revenue recognition

The Group derives its revenues from the provision of technology enabled sales and service based outsourcing services, software, business and technology consulting services, administration and management services, white labelled solutions, e-commerce, SaaS solution sales and other services to a range of industries including insurance, finance, telecoms, health, leisure and retail.

The Group's Services Division provides technology enabled outsourcing sales and service based services. The Solutions Division provides software, business and technology consulting services, administration and management services, white labelled solutions, e-commerce, membership services, SaaS solutions and other services. Customers for each division can be consumers, other business, membership bodies or other non-profit making organisations.

Revenue earned by the Services Division

The Group receives payments either as principal or agent, differentiated by the extent to which the Group is at risk for the transaction, and whether it is acting in its capacity as broker or as agent. Where the Group acts as broker or agent, the Group's customer retains the obligations for delivery of the contract between the customer and its client, and the Group's revenue is recorded solely as the fee relating to the provision of services provided by the Group on that transaction. Where the Group retains the liability for the delivery or settlement of some or all of the contract, revenue is accounted for gross.

Revenues are recognised in line with the delivery of the related services or referred work including, where appropriate, an assessment of accrued income. Income from fees that cover a delivery period is recognised over the related period. On certain sales and service contracts where there is fixed and contracted term lengths and no other services are required to be performed during the remainder of the contract, then under IFRS requirements these receivables under the contracts are recognised at the point of sale.

Revenue earned by the Solutions Division

The Solutions Division receives its income through Software ILF (Initial Licence Fee), SaaS (Software as a Service), consulting fees, management charges, membership fees, e-commerce revenues, click fees and other success based one-time fees.

When selling software, new solution sales typically involve software licences being sold together with Post Customer Support (PCS) services and/or implementation services. Where the commercial substance of such a combination is that the individual components operate independently of each other and fair values can be attributed to each of the components, each are then recognised in accordance with their respective policies described below. Where it is not possible to attribute reliable fair values to two or more components these are viewed as a combination and revenue is recognised on the combined revenue streams as the combined service is delivered. For example, when software licences are sold together with implementation services and the fair value of either element is not determinable, both software licence and the implementation services are recognised using the percentage of completion method with provisions for estimated losses on uncompleted contracts being recorded in the period in which such losses become probable based on the current contract cost estimates. When software licences are sold together with PCS services and the fair value of either revenue stream is not determinable, the licence income is recognised over the period of the PCS services.

The revenue recognition policies for separately identifiable revenue streams are as follows:

Initial licence fees, SaaS and other success based one time fees

Revenues are recognised when pervasive evidence of an arrangement exists, delivery has occurred, the licence or other one time fee is fixed or determinable, the collection of the fee is reasonably assured, no significant obligations with regard to success, installation or implementation of the software or service remain, and customer acceptance, when applicable, has been obtained. On certain SaaS contracts where there is fixed and contracted term lengths and no other services are required to be performed during the remainder of the contract, then under IFRS requirements these receivables under the contracts are recognised at the point of sale.

Maintenance, Hosting and other PCS Services

Maintenance, Hosting and PCS services are either billed on a periodic basis in advance, in which case the Group recognises this revenue spread over the period of the contract, or as invoiced on a monthly basis, in which case revenue is recognised in the month of invoicing.

Solution Delivery Implementation Services

Revenues for all fixed fee contracts are recognised on a percentage complete basis. Where the percentage complete does not coincide with payment milestones the revenue is accrued or the payment shown on account. The Group calculates the percentage to complete by comparing the number of man days utilised at each period end with the total number of man days required to complete the project. Where the contract includes explicit acceptance criteria associated to the milestones the revenue is recognised in stages of the achievement of those milestones and customer acceptance. Project plans are reviewed on a regular basis with losses recognised immediately in the period in which such losses become probable based on the current contract cost estimates. 

2. Business Segments

The Group has two reportable operating segments, which are separately disclosed, together with a central cost centre which includes unallocated corporate costs.

* EBITDA is shown before exceptional costs

3. Exceptional costs

Exceptional costs in 2012 relate to costs of acquisition, primarily in relation to the Group's purchase of Ai Claims Solutions plc and proposed acquisition of Silverbeck Rymer, together with one-off integration costs. Exceptional costs in 2011 relate to cost of acquisition, primarily in relation to the Group's purchase of Quindell Limited and Mobile Doctors Group plc.

4. Taxation

The tax charge is £2,539,000 for the six month period ended 30 June 2012 (9 months ended 30 June 2011: £nil, 15 months ended 31 December 2011: credit of £93,000).

5. Earnings per share

6. Cash Flow

Cash generated from operations

Reconciliation of net cash flow to movement in net funds

7. Acquisitions

The Company made two significant acquisitions during the current period. These acquisitions are primarily responsible for the significant changes in the value of assets and liabilities as presented in the Condensed Consolidated Statement of Financial Position.

Ai Claims Solutions PLC

On 24 January 2012 the Group acquired a shareholding of approximately 29.9% in Ai Claims Solutions Plc ("Ai Claims"). On 2 April 2012, the Group acquired a further 47.7% and announced a Recommended mandatory cash offer with share alternative for the remaining 22.4%. As at the balance sheet date, the Group had a shareholding of approximately 97.7%. Ai Claims is one of the UK's leading outsourcers for the management of motor claims, providing end to end solutions, including accident management and credit hire, that aim to deliver a market leading customer service, underpinned by its ethos to control claims cost inflation.

The provisional fair value of the identifiable assets and liabilities of Ai Claims at acquisition date are set out below.

The goodwill of £2.5 million comprises the value to the Group that can be driven from these underlying assets over the life of the acquired business and comprises the value of expected synergies arising from the acquisition together with the workforce, which is not separately recognised.

IT-Freedom Limited

On 24 May 2012 the Group acquired the entire issued share capital of IT-Freedom Limited. IT-Freedom Limited is a software solutions delivery company, with a demonstrable track record in the insurance sector, including the application of telematics within the insurance sector.

The provisional fair value of the identifiable assets and liabilities of IT-Freedom Limited at acquisition date are set out below.

The goodwill of £6.4 million comprises the value to the Group that can be driven from these underlying assets over the life of the acquired business and comprises the value of expected synergies arising from the acquisition together with the workforce, which is not separately recognised.

The above values for the acquired identifiable assets and liabilities are provisional fair values as both acquisitions were completed close to the period end and consequently work is continuing to be carried out on their identification.

8. Other creditors

Included within Other creditors at 30 June 2012 is an amount totalling £3,000,000 representing the deferred consideration on the acquisition of IT-Freedom Limited that is payable in installments of £1 million in each of July 2013, July 2014 and July 2015 (30 June 2011: £2,858,000 representing the Board's estimate of the deferred consideration payable on Quindell Limited's purchase of TMC (Southern) Limited's contracts which was settled by the issue of Ordinary shares of 1 penny each in the Company; 31 December 2011 £nil).

9. Share capital

Ordinary shares of 1 penny each in the Company were issued during the period 1 January 2012 to 30 June 2012 as follows: