WTG.L Regulatory News (WTG)

RNS Release Embargoed until 7.00 am 7 May 2013

Quindell Portfolio Plc

("Quindell" or the "Group")

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2012

·; SECOND YEAR OF STRONG RESULTS

·; EXCEEDED MARKET EXPECTATIONS IN EACH KEY PERFORMANCE INDICATOR

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 results for the year ended 31 December 2012 that are significantly ahead of market expectations.

FINANCIAL HIGHLIGHTS:

·; REVENUE increased by 904% to £137.6 million (2011: £13.7 million)

·; GROSS SALES (including legal services) increased by 1,154% to £171.9 million (2011: £13.7 million)

·; ADJUSTED EBITDA (1)

o EBITDA increased by 681% to £52.2 million (2011: £6.7 million)

o EBITDA margin of 38% (2011: 49%) of Revenue

o EBITDA margin of 30% (2011: 49%) of Gross Sales

·; PROFIT BEFORE TAX

o Profit Before Tax increased by 915% to £41.2 million (2011: £4.1 million)

o Adjusted Profit Before Tax (2) increased by 680% to £49.2 million (2011: £6.3 million)

·; EARNINGS PER SHARE

o Adjusted Basic EPS (3) of 1.40 pence, an increase of 92% (2011: 0.73 pence)

o Basic EPS of 1.17 pence, an increase of 148% (2011: 0.47 pence)

·; ADJUSTED OPERATING CASH INFLOW (4) of £38.8 million (2011: £5.5 million)

·; OPERATING CASH FLOW of £34.1 million (2011: £4.4 million)

·; UNDERLYING EBITDA to CASH CONVERSION of 74% DURING SIGNIFICANT GROWTH PHASE

·; CASH increased during the period by £43.5 million to £47.2 million

·; NET FUNDS of £16.6 million at year end

Notes:

1: Profit before tax, excluding amortisation, depreciation, interest and exceptional costs as described in the Consolidated Income Statement

2: Profit before tax, excluding amortisation and exceptional costs

3: See Note 6, Earnings Per Share, to these Results

4. Operating cash flow pre exceptional costs, tax and interest

OPERATING HIGHLIGHTS:

STRATEGY

·; FOCUS ON ORGANIC GROWTH AND EARNINGS ENHANCING ACQUISITIONS

·; THREE MATERIAL ACQUISITION GROUPS: Legal, Health and Claims with ALL CORE FUNCTIONS INTEGRATED

·; INTEGRATED MANAGEMENT TEAM IN PLACE two divisional CEO's, Group COO and Group CFO

·; PROVEN RECORD IN EARNING ENHANCING ACQUISITIONS supported by Advisory Board

·; FURTHER EARNING ENHANCING VERTICAL INTEGRATION OPPORTUNITIES STILL EXIST IN 2013

SERVICES

·; TECHNOLOGY ENABLED OUTSOURCING increased 1,449% to £107.5 million (2011: £6.9 million)

·; COMBINED SERVICES OFFERING continues to DRIVE NEW BUSINESS SUCCESS with 100% conversion

·; SIGNIFICANT GROWTH opportunities still AVAILABLE DUE TO UNIQUE OFFERINGS AND REGULATORY CHANGE

·; ALL NEW SERVICE BUSINESS DELIVERED ON OUR OWN SINGLE TECHNOLOGY ENABLED PLATFORM

SOLUTIONS

·; SOFTWARE & CONSULTANCY increased 344% to £30.1 million (2011: £6.8 million)

·; RECOGNISED AS JOINT MARKET LEADER FOR EUROPEAN CLAIMS DEALS BY CELENT

·; NOW believed to be CLEAR MARKET LEADER FOR EUROPEAN CLAIMS TECHNOLOGY BY SUBSTANTIAL MARGIN

FUNDING

·; BLOCK SETTLEMENT OF CLAIMS DEBT reduces debtors BY OVER £11 million with NO NET WRITEDOWN

·; OVER £40 MILLION OF CLAIMS DEBT PROVIDES OPPORTUNITY FOR BLOCK SETTLEMENT IN 2013

·; EXTREMELY STRONG BANKING RELATIONSHIPS with core FACILITIES RENEWED FOR TWO YEARS

·; WORKING CAPITAL TO SUPPORT ADDITIONAL SIGNIFICANT ORGANIC GROWTH

OUTLOOK

·; QUARTER ONE 2013 DELIVERS OVER £25 million ADJUSTED EBITDA up 10% on quarter four 2012

·; RECENT MAJOR WINS RAC, LEADING BROKER, LARGEST DIRECT INSURER, MAJOR ACCIDENT MANAGER

·; MAJOR WINS underpin potential for £100s of millions of ORGANIC REVENUE GROWTH

·; RECENT ENTRY INTO PROPERTY CLAIMS AND NORTH AMERICA ACCELERATING ORGANIC GROWTH

Rob Terry, Chairman and Group Chief Executive of Quindell said: "This is the second year that the Group has delivered strong results, exceeding market expectations in every key performance indicator. Just as importantly, we have delivered on our high level strategy to focus on earning enhancing acquisitions which have been identified and prepared for integration over a significant period within our two core markets, Insurance and Telecoms. This strategy provided a platform to deliver disruptive business transformation solutions that improve efficiency and effectiveness in our core markets, whilst driving down costs. At the same time, it enables us to develop combined propositions that are compelling for the marketplace to achieve significant organic growth in this period of major technology and regulatory change.

"We plan to continue on the same path, looking to grow organically with new clients, to add more services to existing ones and actively seeking out value-enhancing acquisitions that are focused on our target market. The Board is confident that we are very well positioned for continued growth in 2013, expects to rapidly progress our move towards a full listing. It is the Board's current intention to pay a maiden dividend to shareholders in early 2014 in respect of the Group's performance for year ended December 2013."

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. Post gaining approval by the Solicitors Regulation Authority and the acquisition of our legal businesses in December 2012, including the law firm Silverbeck Rymer, Quindell finished 2012 with run rate revenue of more than £300 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

Chairman and Group Chief Executive's Review

Introduction

I am delighted to report that 2012 was a year of significant progress for the Group. This is the second year that the Group has delivered strong results, exceeding market expectations in every key performance indicator. Just as importantly, the Group has delivered on our high level strategy to focus on earning enhancing acquisitions which have been identified and prepared for integration over a significant period in part prior even to our listing, within our two core markets, Insurance and Telecoms. This strategy provided a platform to deliver disruptive business transformation solutions that improve efficiency and effectiveness in our core markets, whilst driving down costs. At the same time, this strategy enables us to use this platform to develop combined propositions that are compelling beyond traditional silo offerings, for the marketplace to achieve significant organic growth in this period of major technology and regulatory change.

Quindell is now the largest technology enabled claims management outsourcing business to the UK motor industry and the only organisation ethically addressing the total cost of claims including personal injury and rehabilitation. We are committed to an ethical and open approach delivering a wide range of professional services to both telecoms and insurance customers. We carefully manage the total cost of ownership of our solutions and the settlement of claims to the benefit of the insurance market and its associated service providers delivering 20%+ saving (eg. 13.5 hire days vs. 19 OFT average).

Primarily based in Blackpool, Liverpool, Stanmore and Fareham, our head office location, we averaged circa 600 staff distributed across the UK in 2012 and our global operating centres to support the implementation of our technology solutions worldwide and provide back office support to reduce the administrative cost of our on-shore contact centres. In 2013 our staff numbers have grown to circa 1,700 - this growth has been in all key areas of the Group.

Financial Results

Revenues for the year increased by 904% to £137.6 million (2011: £13.7 million). Adjusted EBITDA for the year (profit before tax excluding amortisation, depreciation, interest and the exceptional costs as described in the Consolidated Income Statement) increased by 675% to £52.2 million (2011: £6.7 million) with EBITDA margin percentage of 38% of Revenue and 30% of Gross Sales (2011: 49%).

For financial year 2012 gross sales increased by 1,154% to £171.9 million (2011: £13.7 million), including the sales of the legal services businesses of £34.4 million, that were under partnering agreements prior to their acquisition by the Group. The acquisition of these businesses was completed following approval by the Solicitors Regulation Authority (SRA) as an Alternative Business Structure (ABS) in December.

Profit Before Tax increased by 915% to £41.2 million (2011: £4.1 million) with Adjusted Profit Before Tax (excluding amortisation and exceptional costs) increasing by 675% to £49.2 million (2011: £6.3 million). Profit After Tax was £31.9 million, an increase of 667% on 2011 which was £4.2 million. We delivered a 148% increase in Basic EPS of 1.17 pence (2011: 0.47 pence) with an Adjusted Basic EPS (see Note 6, Earnings Per Share, to these results) of 1.40 pence (2011: 0.73 pence), an increase of 92%.

At the same time as achieving this growth, the Group continued to generate good levels of cash from its operations, outperforming market expectations in the final stages of 2012 with adjusted operating cash inflow for the year of £38.8 million (2011: £5.5 million) before exceptional costs of £2.1 million (2011: £1.0 million). This is an underlying adjusted EBITDA to cash conversion of 74% throughout a period of significant growth. Cash and net funds at the end of the year was £47.2 million and £16.6 million compared to market expectations of £41.5 million and £9.5 million respectively.

The year in review

Our acquisition focus this year has primarily been driven by growth in the insurance sector, falling into three primary groups; legal services, health services and claims outsourcing services, as well as the underlying technology platform necessary to support these outsourced services in a disruptive and transformational manner.

There are still further earnings enhancing vertical opportunities available to the Group, which provide us with a unique offering in both of our core markets. This will drive significant organic growth during a period of market share grab that only comes along once in a decade and with our unique combined offering and marketing leading technology it is quite clear that we are in pole position to capitalise on this opportunity. Significant market share win during this period of technology and regulatory change should underpin the Group's success for the next decade and beyond.

Since our IPO two years ago now, our share price has significantly outperformed the market with an increase of 10.4% for the FTSE Allshare and over 400% for Quindell in the same period. This has inevitably led to a certain amount of profit taking and the pace of acquisitions has caused nervousness with some investors, however our clients in the industry clearly understand the lead that we have established, as demonstrated by our significant contract wins announced recently, with the potential to deliver hundreds of millions of recurring revenue per annum with a long term guidance of 20-25% EBITDA margin. The Board remains convinced that its strategy must be implemented to completion while the opportunity remains to take advantage of regulatory change and while we still have the flexibility on AIM to take advantage of this window. We will proceed as rapidly as possible in the second half of 2013 towards a full listing, so the appropriate valuation for the Company can be established.

The Board has already completed a significant amount of preparatory work for this move to full listing including consultations with advisors on a suitable Board and Governance structure that will see my own role remain as Executive Chairman but with additional independent Non Executive representation on the Board to ensure that in most regards we are fully compliant with best practice for a fully listed company. It is our hope that the Board shall include as one of these Non Executives, at least one of the current members of our Strategy and Integration Advisory Board, as they are already fully up to speed on the Company's overall growth strategy.

The Board's ultimate ambition remains to build a £1billion+ revenue company that has a significant proportion of recurring revenue, that is sufficiently cash generative to pay a healthy dividend and is of an appropriate quality to one day be included in the FTSE 100. Subject to not being held back on the successful execution of our strategy, we see no reason why this is not achievable.

Acquisition Criteria

As we have explicitly stated, our focus remains on ensuring that we only pursue earning enhancing opportunities that have already been de-risked by working closely with the business prior to acquisition, typically for a period of no less than six to nine months and in some cases for many years. We have a strict acquisition criteria and only typically pay five to seven times profit after tax with a 12 month future warranted profit target and cash generation target with claw backs if these warranted targets were not to be met, effectively underwriting earnings accretion. Consideration shares which will have been issued at a premium compared to the price at the time of issue are locked in for periods of typically between 12 and 36 months.

Opportunities are only pursued, where synergistic growth is available that allows the group to significantly exceed these profit targets, either through adding in our existing volume to the acquisitions or by the volume that the acquired business is able to provide to us, or where there is a significant cross selling opportunity available. For example, recent acquisitions have included a business with a profit after tax target of £2 million, where we fully expect with the benefit of our volume, the business will target profit after tax of £8 million, but the benefit of this volume does not count towards them meeting their warranted target. An organisation wishing to join our portfolio has to fully understand the effect we are currently having on the market, and be willing to accept stock at a 20% premium to our current trading price or 17.5p whichever is the greater as the basis of any share consideration to be used. Therefore in the example above, this resulted in the Group paying less than 1.5 times the future profit after tax target (with synergistic growth in profit included) and this level of accretion has been typical of our recent acquisitions, underpinning the 92% year on year growth seen in 2012 for Adjusted EPS and providing us with a high level of confidence of our ability to exceed current market expectations for 2013.

As already stated, although the pace of acquisitions has caused nervousness with some investors, our clients in the industry clearly understand the lead that we have established, as demonstrated by our significant contract wins since period end, with the potential to deliver hundreds of millions of recurring revenue per annum with a long term guidance of 20-25% EBITDA margin.

Integration

With the integration of our core outsourcing services operations during the year complete, and the excellent performance in each of our two divisions, the Group delivered strong performance in the year, setting a record for profit, cash generation and earnings per share. Our core business platform is now in place and integrated with a single Executive Management team and even without another acquisition being completed in 2013, the Board remain extremely confident of exceeding market expectations.

Having delivered on our high level strategy, we now have a clearly proven record in earning enhancing acquisitions, having seen our adjusted EPS grow by 92% over last year alone. I would like to thank our Strategy and Integration Advisory Board as a team and particularly Steve Broughton as he has been invaluable in helping create the Group's vision and philosophy and his skills, contacts and influence in the marketplace and the value of his contribution is in part due to his knowledge of the market, as formerly Managing Director of Royal & Sun Alliance Insurance UK (RSA) where he served as the Chairman of the Board of Polaris UK Ltd and previously RSA's representative Director on the Board of the Motor Insurers Bureau (MIB), Steve was also appointed by RSA as Chairman of Swinton Insurance Ltd. Steve was also the Non Executive Chairman of Ai Claims Solutions our core acquisition within claims outsourcing and is currently the Non Executive Chairman of ingenie in which we hold a circa 19% Investment. He is also the Chairman of Tesco Underwriting Limited and Non Executive Director of Ageas Group. The pedigree, influence and background of a number of the other members of our advisory board has been, and continues to be, similarly impressive and valuable to the group.

The excellent progress that we have made this year is only possible with the continued commitment, talent and teamwork displayed by our employees. On behalf of the Board, I would like to take this opportunity to thank all our employees for their significant contribution, and to highlight some key appointments and achievements during the year:

Services Division

The Group's Technology Enabled Outsourcing Services Division increased revenues by 1,449% to £107.5 million (2011: £6.9 million), with adjusted EBITDA of £32.2 million (30% margin). This division is led by Robert Fielding, our divisional Chief Executive, who has made a significant contribution in the delivery of this result and in supporting our success and delivering on additional contract wins in 2013. This is in no small part due to the fact that Robert had a significant amount of knowledge of our outsourcing acquisitions having previously been prior to our ownership, the Chief Operating Officer of Mobile Doctors, our largest acquisition within Quindell Health Services and latterly nine months prior to our acquisition of Silverbeck Rymer into Quindell Legal Services, Robert was appointed by the partnership as Chief Executive of this organisation. Prior to joining Mobile Doctors Robert had over twenty years experience in the insurance, healthcare and broking markets running successful insurance, outsourcing and third party administration businesses for Sedgwick, Royal and Sun Alliance and First Assist. This approach of having people known to us that really understand the business as part of our on-going operation is consistent with our acquisition strategy, which minimises risk as any major acquisition is largely already operating under a governance model equivalent to our own as a listed plc, prior to any final decision to acquire.

It has been our combined services offering that continues to drive new business success with 100% of pilots converting into long term agreements during this period of significant technology and regulatory change within the insurance market. The unique selling points of our combined services offering are that Quindell is positioned to take advantage of regulatory change and provide its clients with a viable means of outsourcing to maintain or even increase their level of financial benefit in a transparent and ethical model pre and post the ban of referral fees. We use an Open Book approach with a flexible business model including price per policy or transaction, off-settings, bilateral equivalents and profit share all supported and the financial benefit can be income generating or used to improve combined operating ratio. The Group is a Portfolio of established Ethical, Industry Trusted, Expert Technology and Business Process Service companies and therefore does not have the associated risk of an unproven external or in-house startup operation or the reputational risk of alternative partners.

In addition, the Company was formed with a focus on 'stamping down' the total costs of claims, initially in motor, addressing not just the vehicle costs but also the biggest issues today being personal injury cost and the associated customer journey. Quindell has a management team and advisory board consisting of knowledgeable and trusted industry figures - individually experienced and informed on all aspects of the Quindell Portfolio.

We offer our major clients and their supply chain partners the benefit of its core and industry hub technology solutions (subject to minimum outsourcing volumes each year). This includes Quindell's state of the art capabilities in digital claims, e-procurement, supply chain management, business analytics, social media and telematics with proven advantages in speed to market, customer acquisition and retention, advanced decision support in liability confirmation and conversion into services.

All new business process services business is now delivered directly onto our own single technology enabled platform, which also forms the basis of our software and consultancy enterprise and SaaS based sales. This gives us our final unique selling point within the market as our nearest competitor in claims software in Europe does not have an outsourcing capability or an established SaaS offering and the only other competitor that does provide this outsourcing and technology combination does not use its own current technology within its UK outsourcing operations which gives us a significant advantage when establishing our credibility and outstanding reference ability for our solutions.

Solutions Division

Our global Software and Consulting Solutions Division, increased revenues by 344% to £30.1 million (2011: £6.8 million) and adjusted EBITDA of £24.0 million (80% margin). Robert Thomson, our divisional Chief Executive responsible for this division has without doubt also played a significant role, working closely with Simon Hall Chief Revenue Officer Services Division, in securing some of the largest contracts seen in the insurance industry in recent years. Robert, has over twenty five years experience working in the insurance and technology market thirteen of which were for IBM and over the last year, post restrictions from his prior position with a competitor organisation, was able to work directly with the Board on our overall sales process and business development strategy, leveraging the unique propositions that have been developed by Quindell in this time of significant technology and regulatory change.

Key achievements by the Software and Consulting Solutions Division during the year include being recognised by Research and Consulting firm Celent as a joint market leader for European Claims deals. Celent notes that Quindell and Guidewire have brought on board more clients over the last two years than all their competitors, acquiring 23% of new deals, followed by SAP at 15% and Accenture at 5%. The report also confirms Quindell has significant market share at 15%.

Quindell's strengths against Guidewire include its speed of implementation averaging at 14 weeks, combined with a customer satisfaction rating of 5.6 out of 6, the Group's ability to offer its clients commercial terms covering both outsourcing and supply of market leading technology and the Group's unique position with telematics in the market has all contributed to recent contract wins. Quindell is now a clear market leader in the telematics based insurance space with two of the top four leading telematics based insurance players; being ingenie the Group's charter client and insurethebox.

However, post year end, we now believe we are the clear market leader for European claims technology by a significant margin, having delivered more deals over the last four months (including SaaS implementations) than Guidewire, SAP and Accenture together are accredited to have won by Celent over the last two years. Of the Software & Consulting Division's revenues during the period, £10.7 million of revenue representing more than one third was earned outside of the UK demonstrating the global reach and applicability of our technology and consultancy solutions.

Group Functions

As well as our two divisional CEO's reporting directly to me, my other primary direct report will be David Sandhu as Group Chief Operating Officer, once the necessary regulatory approvals have been gained. David is currently Chief Executive Officer of Ai Claims Solutions, which now forms part of our Services Division. I am sure David will prove invaluable in helping to structure the overall corporate governance of the Group and our focus on service delivery excellence for our clients, having already overseen the significant growth that was delivered by Ai Claims Solutions as an independent public company.

Laurence Moorse as Group Finance Director will be supported by Peter Harrison as Group Chief Financial Officer, once the necessary regulatory approvals have been gained. Peter is currently Finance Director of Ai Claims Solutions, overseeing its exceptional track record of never writing down any material debt in the last eight years, an exceptional performance from any significant player in the claims outsourcing space, only possible due to appropriate focus on managing the relationship within insurers and an ethical approach to drive down the cost of claims to the industry as a whole, ensuring that clients are always happy to pay our debts compared to the alternative bills they would have received from competitive organisations. Peter has worked extremely closely with Laurence over the last few months, to ensure that we are on exemplary standing with all of our core banking relationships resulting in the acquired businesses for the first time in their recent history having their banking facilities renewed on a two year basis rather than the normal annual review that they have experienced in the past. This is a clear signal by the banks in their faith in the performance of the enlarged Group.

The banks have gained confidence following both focussed due diligence on Quindell and also the quality of its team. Adding to this is seeing that block settlements of Ai Claims Solutions debt have reduced debtors by over £11 million, by the end of 2012 with no net write-downs having been required. Also that the profile of these block settlements were representative of the overall debtor book within Ai Claims Solutions and therefore further opportunities exist for block settlements in 2013 with over £40 million of debt outstanding. This position helps to underpin the Board's confidence that with no shortage of business being available for organic growth, that market expectations can be exceeded as working capital is also in place to support this additional organic growth, subject to our continued strong cash management and debtor control to fund this growth.

Customers

Together, the top twenty UK auto market participants represent over 90% of the UK auto insurance market. It is encouraging therefore to now be in a position whereby the Group has agreements in place with a significant proportion of these. Our outsourcing and referral partners include telecoms companies, insurance companies, brokers, body shops, vehicle manufacturers, and fleet companies as well as other intermediaries. Over 40 independent outsourcing and referral partners have now agreed to and are providing significant outsourcing volume to Quindell post the Legal Aid, Sentencing and Punishment of Offenders reforms ("LASPO") coming into effect in April 2013. Many of these are top-tier within their sector, ensuring that as a group, we are not overly dependent on any one income source.

Quindell enables business transformation using our own 'Champion/Challenger' based leading practice technology solutions and provides a broad range of outsourcing services including legal services, medical reporting, rehabilitation, accident management, credit hire, replacement vehicles, and credit repair as well as other brand extension services within financial services, utilities and telecoms.

Within the insurance sector, Quindell operates a model comprising these services that is significantly ahead of the market and one that we believe will revolutionise the UK auto insurance industry through its combination of our deep sector knowledge, innovative technology and integrated supply chain, stamping down the cost of claims whilst above all, improving the customer experience for the brands who choose to partner with Quindell. We do this by addressing the cost of claims in all key areas including personal injury and vehicle hire and repair, which account for approximately two-thirds of all motor claims costs, in a manner that is truly ethical in its delivery. Our solutions also maintain levels of ancillary income for our outsourcing and referral partners, providing them with competitive advantage.

Key operating milestones

Operationally, our overall focus during 2012 has been to continue to deliver every day for our clients' brands and their customers, to successfully integrate our acquired businesses, and to sign further outsourcing contracts that have the capability of earning the Group significant additional revenues per annum.

Throughout the year we agreed new contracts and extensions to existing client contracts in our key markets of insurance and telecoms and across a broad range of geographies. Together, additional business wins from both new and existing customers and acquired growth have enabled the Group to achieve a year on year increase in gross sales of 1,154%.

The majority of this new business by volume uses the Outsourcing Division's end-to-end proposition of a complete insurance supply chain offering. Validating Quindell's ethical and significant market leading model, through a combination of innovative technology and integrated supply chain, this proposition stamps down the cost of claims whilst improving the consumer customer experience for the brands who choose to partner with Quindell.

In May 2012 we announced our first significant contract win for a combination of the Group's insurance outsourcing service offerings with one of the UK's largest insurance intermediaries, worth circa £120 million over a three-year period. Over the summer months we continued to sign significant new business, increasing run rate volumes and strengthened further our pipeline of contracts with a number of new pilot projects and active contract discussions with a number of top tier insurers. By October 2012, the Group had received verbal agreements on five of these projects and contract discussions had progressed significantly on an initial three with values at a similar scale or larger than the previous £120 million contract announced. In addition to this, we announced that the business has signed with a number of smaller, mid-tier insurance related brands with an additional £30m per annum of outsourcing work across all areas of the supply chain, with contracts typically three years in duration. In December 2012 we announced that Quindell had converted further of its outsourcing partnership pilots.

This growth in scale, which continued into 2013 leads us to now believe Quindell Legal Services is now the largest provider of personal injury claims services in the UK, helping tens of thousands of injured people every year get the compensation they deserve.

The Group's Software and Consulting Division also agreed a series new contracts and extensions over the year, across its key markets and a range of geographies, delivering over £30 million of revenue of which circa 67% came in the second half as our previous restrictions in selling our technology within the insurance sector came to an end. In September we announced the signing of a major new contract in South Africa, in conjunction with the acquisition of Quintica, with a leading multi-national telecoms group, for Quindell's Challenger OSS technology. In November the Group signed a 5-year property claims contract with on-going maintenance and support, for market leading claims and analytics software with one of the world's leading risk managers. In December, we announced a 200 user technology project valued in excess of £3.1 million with subsequent phases planned for the implementation of the technology into other areas of the business and to support other jointly planned initiatives, as well as the signing of a letter of intent in relation to a five-year multi million pound contract with a top six UK motor insurance company, enabling the insurer to deal efficiently and effectively with all motor insurance claims it receives in the UK.

Acquisitions, Investments and Strategic Relationships

Having acquired Mobile Doctors in December 2011, we announced over two successive days in January 2012 an agreement to acquire the legal services firm Silverbeck Rymer and our 29.9% investment in Ai Claims Group Plc ("Ai Claims Solutions"), one of the UK's leading outsourcers for the management of motor claims. This swift move ensured that our competitors were unaware of our plans for our insurance outsourcing offering, maintained our first mover advantage, commenced marketing of our joint insurance proposition and enabled us to commence our application to the Solicitors Regulation Authority to obtain a licence as an Alternative Business Structure ("ABS") to operate as a legal services business.

In April 2012 we announced a further investment in Ai Claims Solutions, taking our holding to 77.6% and announced a public offer for the remaining 22.4%, which resulted in the Group owning circa 98.4% of Ai Claims Solutions.

In May 2012 the Group acquired IT-Freedom, a software solutions company, with a demonstrable track record in the insurance sector, completing the Group's platform for the provision of insurance services.

In September 2012 the Group acquired Quintica, a specialist systems integrator and outsource service provider to the telecommunications marketplace throughout the Middle East and Africa, delivering a combination of technology solutions and supply chain management services to a number of the major national carriers and multinational telecom groups. The acquisition further strengthened Quindell's systems integration capability for its technology solutions and provides a platform for further expansion into a geography where the demand for software and services continues to expand at a rapid rate.

At the end of the same month the Group acquired Overland Health, an integrated rehabilitation supplier offering physiotherapy, psychological counselling and injury case management including specialist medical treatments through the use of its cloud-based technology, evidence-based assessment and management tools, and outcome focused programmes.

Having obtained its ABS licence with effect from 21 December 2012, the Group acquired the trade and assets of three of the legal firms that it had partnered with during the latter half of the year: Silverbeck Rymer, acquired on 21 December, and Pinto Potts and The Compensation Lawyers, acquired in the last week of December 2012. In doing so the Group legal services business, Quindell Legal Services Limited, acquired an enviable presence in the market with over 60 years' experience, working in partnership with many leading brands and operating a fully in-house 24/ 7 service from multiple locations in the UK. Quindell Legal Services now offers a range of specialist personal injury claims services including those related to road traffic accidents, employer's liability and public liability.

The Group has also continued to develop its relationships with its investments and distribution partners during the year.

In February 2012, we increased our holding in 360GlobalNet Limited to circa 19%. During the year 360Globalnet has continued to develop its innovative technology and provide consultancy in the business use of video, and rapid data-mining of all data formats with particular emphasis on fraud prevention and compliance monitoring. Post the year end in May, the Group announced the acquisition of Quindell Property Services, a newly formed group bringing together a number of businesses owned by the vendors, related to the supply of outsourced property services and SaaS based enabling technologies. This transaction enabled Quindell to increase its shareholding in 360GlobalNet Limited from 19% to 60% as well as acquiring associated companies. The vendors have now agreed to a significant element of their consideration being tied to achieving £10 million profit before tax in each of 2014 and 2015 from the provision of property services.

In April 2012, the Group increased to 19.7% its holding in ingenie, a brand that addresses 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. Ingenie, whose co-shareholders include Royal Sun Alliance and Ageas, uses telematics technology developed in partnership with Williams F1 Team to reduce claims costs, whilst pioneering an innovative social media strategy, effectively reducing the traditional reliance on aggregators. During the year, Ingenie made significant progress in its objectives, demonstrating a combination of extremely low cost of acquisition of new customers compared to traditional brokers through its use of social media and enviable claims ratios as a result of its technology and training program.

The Group extended its partnership agreement with SMI Telecoms LLC throughout the year, increasing its shareholding to 19% and in May 2012 becoming the sole and exclusive distributor for SMI products on a global basis.

In November 2012, the Group agreed a solution partnership with Global IT innovator, NTT DATA in the UK, to help telecommunications Service Providers and Network Operators improve their customer service delivery. The partnership delivers Integrated Service Management transformation solutions that help improve quality, reduce outages and save 30 per cent in cost and efficiency.

Finally, in December 2012 Quindell entered into an exclusive partnering agreement with Abstract Legal Holdings, the parent company of Accident Advice Helpline ("AAH") whereby Quindell became its exclusive provider of all legal services. AAH is one of the UK's leading ethical online consumer brands acting as the 'consumer champion' through which the general public can gain access to justice via its panel of law firms. In addition to the partnering agreement, the Group entered into an acquisition agreement enabling it to acquire AAH in 2013, adding a proven, trusted, direct consumer channel to Quindell's business model ensuring that the Group can process claims from the full range of sources through our managed, ethical supply chain, and supporting our stance that we are driving down the cost of claims for the industry. Quindell paid a non-refundable deposit towards this transaction in December 2012, with the additional consideration for the acquisition of AAH satisfied on completion on 8 April 2013.

Post year end news

The Group has enjoyed a strong start to the new financial year with Adjusted EBITDA for the first quarter ended 31 March 2013 in excess of £25 million. This represents an increase of circa 350% on first quarter 2012 of £5.5 million and an increase of circa 10% on the last quarter of 2012, which was £23.2 million.

EBITDA margins for the first quarter were ahead of our long term guidance of 20 to 25%. As from 1 April 2013, the start of our second quarter, LASPO reforms begin to come into effect, and overall margin percentages will revert towards our long term guidance levels. However, provided within Quindell Legal Services (part of our Services Division) we conduct a pro-active approach toward litigation where appropriate and agree where possible to charge a percentage of damages on successful cases to the claimant then the margin difference post LASPO is minimal.

The Group has continued to be successful during the first part of 2013 in converting pilots to full relationships, achieving a 100% success rate, with all the major outsourcing and partnership pilots that the Group announced as being in progress during the latter stages of 2012, now successfully converted into contract or ongoing relationships.

The Group has continued to focus on contracting new business on terms which minimise the Group's working capital requirements in this period of growth. The majority of the Group's outsourcing volumes are now the subject of long term commitments of up to five years, providing confidence on activity levels and enabling us to continue to leverage this position across the Group and with our supply chain partners.

Conversion of our pipeline has been a priority for our executive team during the first quarter of the current financial year, and will remain so for the rest of these first six months. It was particularly pleasing therefore to be able to announce in April 2013 that our five year contracts with the RAC, one of the UK's most trusted and progressive motoring organisations with over 7 million members, had been finalised.

The RAC agreements, which are for a combination of Quindell's technology enabled outsourcing services and market leading software and consultancy once again validate Quindell's significant market leading model, are significant from day one and have the potential to be the largest that the Group has entered into to date as revenues grow during 2013 and beyond. Our outsourcing services contract with the RAC is for our end to end proposition of a complete supply chain offering for personal injury claims, medical reporting, multi disciplined rehabilitation plus auto accident repair including vehicle hire services and other brand extension services enabling an offering to RAC members that own vehicles representing circa 10% of the UK auto market. The cost of claims for the UK auto market is over ten billion pounds per annum and the offering therefore has the potential to address over 5% of this UK auto claims cost per annum, subject to claims reported and growth in conversion into service over the life of the contract. The signing of this contract followed an initial pilot period until early 2013, which had resulted in an improvement of more than 50% on conversion rates and improved member awareness of service offering for RAC compared with the levels of performance over the previous three years. This has resulted in significant improvements in members' customer journeys whilst still ensuring that the service offered is operated in an ethical manner and delivers a 20% reduction in the total cost of claims. This is achievable by addressing the total cost of claims, including the provision of a quality legal and rehabilitation service for members, rather than simply focusing on recovering and repairing members' vehicles.

The initial phase of the technology element of the RAC agreement is valued at circa £4 million, with the majority of these revenues being earned before the end of 2013, with subsequent phases being discussed for the implementation of the technology into other areas of the business. RAC is also working with Quindell to support other jointly planned initiatives including some areas of RAC's recently announced telematics based initiatives. After extensive market evaluation, RAC chose to implement Quindell's award winning Challenger ICE Claims and ICE Track analytics and business intelligence technology platform. Quindell's Challenger ICE technology platform will underpin RAC's business processes and give RAC the flexibility to adapt and react rapidly to market changes within the accident management arena. In addition, it will help RAC achieve increased customer conversion, increase cross-selling and enable RAC to operate multiple processes in parallel. This will allow RAC to continue to challenge existing champion processes and continue to improve the customer journey of its members.

In line with Quindell's strategy to become a central claims hub for the insurance industry to help drive down the total cost of claims and to therefore encourage stake holding by key members of the industry, the RAC has been granted warrants over 250 million shares in the capital of Quindell exercisable at £0.13 per share (equating to a value of £32.5 million), or the average trading price in the 30 days prior to the move to full LSE listing if lower. These warrants shall be exercisable at any time by the RAC during the next 24 months or until Quindell's AIM listing moves to a full LSE listing, if earlier. Any profits achieved above the cost of the warrants will be subject to lock in arrangements ranging from 12 to 36 months.

In March, the Group acquired iSaaS Technology Limited, the leading cloud-based SaaS provider to the medico legal and legal services industries both in the UK and overseas. The acquisition is earnings enhancing in the current year and allows Quindell to benefit from market share beyond that which it is servicing directly. The team at iSaaS has a progressive and disruptive approach to their market, which we believe delivers significant benefits beyond our own operations and we are pleased that we are now able to formalise this relationship through this acquisition.

In April, the Group announced two bolt-on acquisitions. The first was Compass Costs Consultants Limited one of the UK's leading legal costs consultancy and costs drafting firms. This acquisition is earnings enhancing in the current year and significantly earnings enhancing for 2014 and fast tracks Quindell's growth in this key legal services area and also ensures our legal operation now includes the largest costs practice in the UK. The second was Crusader Assistance Group Holdings Limited, subject to FSA approval, a specialist provider of full claims management services for a number of the UK's leading auto insurance brokers as well as one of the UK's most innovative claims outsourcers. This acquisition fast tracks Quindell's growth in brand extension services to brokers with new product offerings and provides synergistic revenue for Quindell. Operating for over twenty years, Crusader manages hundreds of thousands of policies per annum on behalf of their broker customers, developing brand extension services via the offering of white labelled niche policy products such as excess protect and reward, vehicle replacement, motor breakdown and legal assistance policies. Crusader, which will operate as a business within Quindell's Services Division, will assist Quindell to increase the volume that it can take on during this period of significant organic growth and further enhance the Group's ability to deliver its insurance market offering maintaining its leading position in an evolving market place in light of the recent Ministry of Justice costs reforms and LASPO implementation.

The Group also made a strategic acquisition that it had been planning even prior to its public listing of Iter8, a leading SaaS based provider to the North American insurance broker and agent market which marks Quindell's entry into North American Insurance market. Quindell's technology market leadership, proven in Europe, which is replicable in the North American market and Iter8 has a significant position in the North American market, being particularly dominant in Canada as a result of its specialism in providing SaaS based solutions to the direct insurance and broker channels, which accounts for more than 70% of the Canadian insurance distribution market along with insurance agents. With over 40 major implementations for clients ranging from large multinational carriers including Aviva, Allstate, Allianz, Chubb, RSA, Wawanesa Insurance and Zurich to smaller niche players, Iter8's product lines include personal auto and property and commercial business owners, general liability, commercial packages, farm and specialty lines.

In April, the Group secured a material new contract with one of the UK's largest insurance brokers. The leading UK broker has agreed to extend via a new outsourcing contract its relationship with Quindell to 31st March 2014. This initial term included a trial period where a significantly improved customer journey was achieved compared to industry norms experienced from previous partners. This contract is very material to Quindell's future revenues and the largest signed, for the year ended 31 December 2013. The outsourcing partner is one of the UK's largest insurance brokers with over 1.2 million auto insurance policy holders.

The Group also announced that multiple contract terms have been agreed for the direct operation of one of the UK's largest insurers. The initial contracts, for up to three years, forge a multi-year relationship and in combination are expected to generate approaching £20m of revenue. These will see the Group provide a range of business process outsourcing services to the client including medical reporting and rehabilitation, credit hire and deployment of repair, all underpinned by the Group's marketing leading SaaS based technology.

In May, contract terms were agreed with one of the UK's largest accident management companies aggregating volume from smaller brokers and other insurance intermediaries. This contract win with revenue already run rating over £36 million per annum, adds to the 40+ independent outsourcing and referral partners now providing significant volume post LASPO and is targeting to deliver over 1,000 injury claims per month to the Group on a six month rolling contract.

Outlook

Our combined offerings continue to generate substantial interest in the insurance market and the implementation of regulatory changes continues to provide us with the opportunity to win additional new business. The Group therefore expects to win additional major customers that are currently within its sales pipeline over the remainder of the year with the Group targeting to convert first those relationships where the cash profile is optimum. With our combined model and diversified offering, the Group will continue to be able to operate a profitable business model as Quindell grows during this period of significant industry consolidation.

Recent market developments mean that most of the largest insurance players in the UK, following pressure on profitability and changes in regulation, are now rapidly looking to introduce schemes for telematics based motor insurance and we believe Quindell, as a clear market leader, is in a strong position to capitalise on this. Our strategy is to leverage both this position in the fast growing telematics segment and our strength in technology enabled outsourcing.

Along with the Quindell team, I am looking forward to 2013 with confidence and the opportunity of continuing to help our existing and prospective clients maintain or improve historic income levels whilst operating in a manner which is both ethical and drives down the cost of claims for the industry as a whole. We plan to continue on the same path, looking to grow organically with new clients, to add more services to existing ones and actively seeking out value-enhancing acquisitions that are focused on our target market. The Board is confident that we are very well positioned for continued growth in 2013, expects to rapidly progress our move towards a full listing and It is the Board's current intention to pay a maiden dividend to shareholders in early 2014 in respect of the Group's performance for year ended December 2013.

Robert Terry

Chairman and Group Chief Executive

Financial review

Basis of reporting

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use in the EU, together with the associated International Financial Reporting Interpretation Council (IFRIC) interpretations and those parts of the Companies Act 2006 applicable to entities reporting under IFRS. The Group has reviewed its accounting policies in accordance with IAS 8 and determined that they are appropriate for the Group and have been consistently applied. Within these financial statements and its accompanying reports, reference is made to Adjusted EBITDA and Adjusted Earnings Per Share. These measures are two of the metrics used by the Board to monitor the underlying performance of the Group. As described in the Consolidated Income Statement, Adjusted EBITDA is the profit before tax excluding amortisation, depreciation, net interest and exceptional costs. Adjusted Earnings Per Share is as described in note 6.

Results overview

2012 has been another year of significant progress for Quindell. The Group completed further acquisitions, including its purchase of the Aim listed group Ai Claims Solutions Plc, and, having obtain regulatory approval to operate as a licenced Alternative Business Structure for legal services in December, acquiring the trade and assets of three personal injury law firms including one of the market leaders Silverbeck Rymer. The Group also saw success in achieving its first major contract wins for the combined businesses, validating its business model for the UK auto insurance market.

Total revenues in the year were £137.6 million compared with £13.7 million for the prior year. The Software and Consulting Division recorded revenues of £30.1 million (22%) and the Technology Enabled Outsourcing Division, £107.5 million (78%) during the year.

Operating profit was £42.3 million for the year (2011: £4.1 million). Adjusted EBITDA, being Profit before tax, excluding interest, depreciation, amortisation and exceptional costs, totalled £52.2 million at a margin to revenue of 38% compared to £6.7 million at a margin of 49% for the prior year. Exceptional costs of £5.3 million were incurred during the year relating to acquisition costs, and the costs of raising finance. The tax charge was £9.3 million (2011: credit of £0.1 million).

Profit after tax for the year was £31.9 million compared to £4.2 million for the prior year. Adjusted Basic EPS, as defined in note 6, for the year was 1.40 pence per share, and Basic EPS was 1.17 pence per share (2011: Adjusted Basic EPS 0.73 pence and Basic EPS 0.47 pence).

Acquisitions

Expansion of the Group's product range and its sales and service capabilities through acquisition, in addition to organic growth, continued to be an important element of the Group's growth strategy. In total, the consideration of the Group's acquisitions during the period was £96.4 million including deferred cash of £4.5 million. The provisional estimate for the fair value of goodwill was £68.1 million on these acquisitions. Details of the financial effects of these acquisitions are set out in note 9.

Financing, cash flow and dividends

The Group maintains a focus on managing its working capital and targets the generation of strong operating cash flow within the business areas that can support the needs of those other areas where the growth profile places demands on working capital in the short term. For 2012, the Group's operating cash flow was an inflow of £38.8 million before exceptional costs, tax and net finance costs of £4.7 million (2011: an inflow of £5.5 million before costs of £1.1 million). The underlying EBITDA to operating cash flow conversion ratio being 74%.

The purchase of intangible assets and tangible fixed assets were £4.2 million (2011: £1.4 million) and the net cash consideration of subsidiaries and investments was £58.4 million (2011: £2.7 million). The issue of shares during the period gave rise to an inflow of £91.0 million (2011: £2.4 million). During the year, the Group made loans to other parties of £15.1 million.

The Group's cash balance at the end of 31 December 2012 was £47.2 million. During the year to 31 December 2012, net funds increased from a position of net debt of £13.4 million to net cash of £16.6 million as a result of cash inflow of £49.7 million, and reduced by the net debt that was acquired with subsidiaries, the majority of which came through the Group's acquisition of Ai Claims Group plc. Further detail relating to the cash flows and movements in net funds of the Group is given in the consolidated cash flow statement and in note 10.

The Board is not recommending the payment of any dividends for the current financial year. It is the Board's current intention to pay a maiden dividend to shareholders in early 2014 in respect of the Group's performance for year ended December 2013, although it will continue to devote the majority of its cash resources to its operations during this continued period of growth.

Going Concern

The Group has available to it considerable financial resources, and a robust balance sheet. As at 31 December 2012, the Group had cash of approximately £47.2 million, and undrawn banking facilities taking the total working capital available to the Group above £80 million. Since the year end, the Group has successfully renewed and extended its two core banking facilities to April 2015, and is continuing to work closely with each of its providers of debt finance, and manage cash resources to ensure that the Group continues to have headroom in working capital for the growth that is being achieved in the 2013.

The directors have a reasonable expectation that the Group has adequate resources and business demand drivers to continue in operational existence for the foreseeable future. No material uncertainties related to events or conditions that may cast significant doubt about the ability of the Group to continue as a going concern have been identified by the directors. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

Risks

The Group is exposed to a number of risks and uncertainties which could have a material impact on its long term performance. The directors have identified those which they regard as being the principal risks and these are set out below.

Technological change

The markets for the Group's services can be affected by technological changes, resulting in the introduction of new products and services, evolving industry standards and changes to consumer behaviour and expectations. The Group regularly monitors trends in technological advancement so as to anticipate and plan for future changes and maintains close relationships with businesses and organisations which it believes will keep it to the forefront of product and service development on a sustained basis.

Regulatory change

The pricing of products and services, the activities of major industry organisations, and the Group's ability to operate and contract in the manner that it has done so in the past or expects to do so in the future, may be affected by the actions of regulatory bodies both in the UK and internationally. Such action could affect the Group's profitability either directly or indirectly. The Group continually monitors and assesses the likelihood, potential impact and opportunity provided by regulatory change, and adapts is plans and activities accordingly.

Key personnel and resources

The success of the Group depends to a large extent upon its current executive management team and its ability to recruit and retain high calibre individuals at all relevant levels within the organisation. The Group will continue to seek to mitigate this resource risk by investing in and developing staff training programmes, competitive reward and compensation packages, incentive schemes and succession planning.

Regulatory and reputational risks

The Group operates in regulated environments, including parts of the Group that are regulated by the Financial Conduct Authority and Solicitors Regulation Authority. As a data controller and a business that provides services on behalf of its customers to consumers and individuals, the Group is also subject to risks related to matters such as data processing and security, data and service integrity. In the event of a breach, these risks may give rise to reputational, financial or other sanctions against some or all of the Group. The Group considers these risks seriously and designs, maintains and reviews its policies and processes so as to mitigate or avoid these risks.

Management of growth

The Group's plans to continue its growth will place further demands on its management, administrative processes and deal sourcing resources. In order to minimise this risk, the Group has formed its Strategy and Integration Advisory Board, one of the purposes of which is to support business integration, drawing upon the specific skills and experience of its members.

Market conditions

Market conditions, including general economic conditions and their affect on exchange rates, interest rates and inflation rates, may impact the ultimate value of the Group regardless of its operating performance. The Group also faces competition from other organisations, some of which may have greater resources that the Group, or be more established in a particular territory or product area. The Group's strategy is to target a balance of markets, offering a range of tailored or specialised products and services.

Laurence Moorse

Group Finance Director

The results were approved by the Board of Directors on 7 May 2013.

The Annual Report announcement was approved by the Board of Directors on 7 May 2012. The financial information set out in this Annual Report Announcement for the year ended 31 December 2012 does not constitute the Group's statutory accounts as defined by s435 of the Companies Act but has been extracted from the 2012 statutory accounts on which an unqualified audit report has been made by the auditors, and which did not contain an emphasis of matter paragraph nor a statement under section 498(2) or (3) of CA 2006. The financial information included in the Annual Report Announcement for the prior 15 months ended 31 December 2011 has been extracted from the 2011 statutory accounts on which an unqualified audit report has been made by the auditors, and which did not contain an emphasis of matter paragraph nor a statement under section 237(2) or (3) of CA 1985.

The Group's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"). The accounting policies have been consistently applied to all periods presented.

The audited financial statements for the period ended 31 December 2011 have been delivered to the Registrar of Companies. The Annual Report for the year ended 31 December 2012 will be mailed to shareholders in the coming weeks and will be delivered to the Registrar of Companies following the Annual General Meeting, details of which will be published in due course.

2. Accounting Policy for 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, telecoms, finance, health, leisure and retail.

The Group's Outsourcing Division provides technology enabled sales and service based outsourcing services. The Software and Consulting 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 businesses, membership bodies or other non-profit making organisations. Where the Group enters into outsourced partnering agreements with third parties, revenue is recognised by the Group to the extent that it is contractually entitled to invoice or accrue amounts in respect of those revenues, that the amounts are determinable and that collection is reasonably assured.

Revenue earned by the Outsourcing Division

The Group earns revenue 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. In the case of certain of the Group's revenue streams the amount of revenue recognised is measured by reference to the total amounts likely to be invoiced less a suitable allowance to recognise the uncertainties remaining.

Income from fees that cover a delivery period is recognised over the related period. On certain sales and service contracts where there are fixed and contracted term lengths and no other services are required to be performed by the seller during the remainder of the contract, for example where the Group acts as a broker for the sale of a product on behalf of another party, then these revenues are recognised in full at the point of sale of the product or service to the third party.

Revenue earned by the Software and Consulting Division

The Software and Consulting 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 are 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.

3. Revenue, operating and geographical segments

The analysis of the Group's revenue is as follows:

During 2012 the Group commenced activities in the area of legal services. These activities included application to the Solicitors Regulation Authority to obtain regulatory approval to operate as an Alternative Business Structure, permission for which was granted with effect from 21 December 2012. Prior to being permitted to perform legal based services in its own right, the Group entered into partnering agreements with four businesses operating in this sector, three of which it acquired during December 2012, one it acquired in April 2013. The Group has invoiced sales totalling £63.7 million under these arrangements. Only the net profit under these arrangements of £29.3 million has been recognised as revenue. Had the four businesses been consolidated as part of the Group from the inception of the partnering agreements, revenues of the Group would have increased by £34.4 million, taking gross sales attributable to the whole group to £171.9 million, with no difference in the Group's reported profit for the year.

Operating segments

For management purposes, the Group is organised into two operating divisions: (1) Software and consulting and (2) Outsourcing. These divisions are supported by a group cost centre. These two divisions are the basis on which the Group reports its primary segment information.

The principal activities of each segment are as follows. The Software and consulting division provides software, business and technology consulting services, administration and management services, white labelled solutions, e-commerce, membership services, SaaS solutions and other services. The Outsourcing division provides technology enabled sales and service related outsourcing services.

Segment information about these businesses is presented below. The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 3. Segment profit represents the profit earned by each segment before the allocation of specific central head office and research and development costs, exceptional costs, finance costs and income tax expense and is a measure reported to the Group Chief Executive and the Board for the purpose of resource allocation and assessment of segment performance.

* EBITDA is shown before exceptional costs

Other information:

Segment assets and liabilities are those assets and liabilities that are employed by a division in its operating activities. Segment assets include intangible assets, property, plant and equipment, inventories, trade and other receivables, cash and cash equivalents. Segment liabilities include borrowings, trade and other payables. Unallocated assets and liabilities include cash balances and property, plant and equipment, trade payables and deferred tax liabilities.

Geographical segments

2011

As at 31 December 2011, the Group's operations were primarily located in the UK. The Group also has offshore back office facilities in South Africa and utilises a strategic partnership with third party operations in India.

4. Exceptional costs

2012

Exceptional costs relate to the cost of acquisitions listed in note 9, together with costs associated with the Group's capital raising activities.

2011

Exceptional costs relate to the cost of acquisition, primarily in relation to the Group's purchase of Quindell Limited and Mobile Doctors Group plc.

5. Taxation

Income tax for the UK is calculated at the standard rate of UK Corporation tax of 24.4% (2011: 26%) on the estimated assessable profit for the period. The total charge for the period can be reconciled to the accounting profit as follows:

Deferred tax assets are recognised for tax losses available for carrying forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The group has recognised deferred tax assets of £101,000 (2011: £584,000) in respect of losses amounting to £441,000 (2011: £2,246,000) that can be carried forward against future taxable income.

6. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares where, on warrants, exercise price is less than the average market price of the Company's ordinary shares during the period. The calculation of the basic and diluted earnings per share is based on the following data:

7. Trade and other receivables

8. Trade and other payables