WTG.L Regulatory News (WTG)

RNS Release Embargoed until 7.00 am 19 March 2012

Quindell Portfolio Plc

("Quindell" or the "Group")

ANNUAL FINANCIAL REPORT FOR THE

15 MONTHS ENDED 31 DECEMBER 2011

Quindell Portfolio Plc (AIM: QPP.L), the brand extension company and a leading practice provider of consultancy, software and outsourcing in its key markets, is pleased to announce results for the 15 months ended 31 December 2011 that are significantly ahead of market expectations.

These results, which cover the period 1 October 2010 to 31 December 2011 following the decision to change the Company's year end from 30 September to 31 December, reflect the major acquisitions by the Company during the period and have been prepared by consolidating the performance of Quindell Limited, Business Advisory Service Limited and Mobile Doctors Group Plc from their individual acquisition dates. The results of the smaller acquisitions have also been consolidated from their dates of acquisition.

FINANCIAL HIGHLIGHTS:

STRONG SET OF RESULTS EXCEEDING MARKET EXPECTATION IN EVERY KEY PERFORMANCE INDICATOR

·; ALL REVENUE AND PROFIT EARNED IN 33 WEEKS POST RE-ADMISSION TO AIM

·; REVENUE increased to £13.7m (2010: £0.2m)

o SOFTWARE & CONSULTANCY increased to £6.8m

o TECHNOLOGY ENABLED OUTSOURCING increased to £6.9m

·; ADJUSTED EBITDA (1)

o EBITDA increased to £6.7m (2010: loss of £0.1m)

o EBITDA margin % increased to 49% (2010: (25%))

·; PROFIT BEFORE TAX

o Profit Before Tax increased to £4.1m (2010: loss of £0.1m)

o Adjusted Profit Before Tax (2) increased to £6.3m (2010: loss of £0.1m)

·; EARNINGS PER SHARE

o Adjusted Basic EPS (3) of 0.73 pence (2010: loss of 0.09 pence)

o Basic EPS of 0.47 pence (2010: loss of 0.09 pence)

·; EXCEPTIONAL Acquisition & Admission related costs £1.7m

·; ADJUSTED OPERATING CASH INFLOW of £5.5m

·; UNDERLYING EBITDA to CASH CONVERSION of 82%

·; IN DECEMBER 2011, MOBILE DOCTORS GROUP PLC ACQUIRED FOR £2.8m, (2010 financial results: Revenue £27m, EBITDA £1.3m)

·; CASH increased during the period by £3.1m to £3.7m.

·; NET DEBT of £13.4m at year end after assuming £16.1m of Mobile Doctors borrowings secured against £28m of debtors. BANKING FACILITY INCREASED TO £18.5M AND RENEWED to March 2013

·; BALANCE SHEET EXTREMELY ROBUST WITH £30M ADDITIONAL CASH RAISED POST YEAR END

·; LAST MONTH OF 2011 COMPLETED WITH ALL BUSINESS CONTRIBUTING TO RUN-RATE REVENUES OF CIRCA £50M AND EBITDA OF OVER £20M

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 5, Earnings Per Share, to these Results

OPERATING HIGHLIGHTS:

QUINDELL PORTFOLIO JOINED THE MARKET THROUGH MISSION CAPITAL PLC. The Group was readmitted ON 17 MAY 2011 following the acquisition of Quindell Limited and its White Labelled outsourcing operation Business & Home Advisory Service.

·; MAJORITY OF LEADERSHIP TEAM WORKING TOGETHER FOR OVER 18 YEARS ON TECHNOLOGY ENABLED "BRAND EXTENSION" VISION

·; QUINDELL LIMITED WAS PREVIOUSLY FUNDED BY TEAM TO ADDRESS COMPLETE SOFTWARE AND OUTSOURCING STRATEGY WITH OVER TWELVE MILLION POUNDS INVESTED BY QUINDELL FOUNDER

·; THIRD QUARTER, SEVEN NEW MAJOR CONTRACT WINS across Insurance, Telecoms and Utilities; CONTRIBUTING £3m additional outsourcing revenue per annum

·; FOURTH QUARTER, FURTHER MAJOR CONTRACTS WON; In aggregate with Q3 wins these contract wins should contribute OVER £6m OF ANNUALISED REVENUES

·; FOLLOWING TRADING UPDATES AND ACQUISITIONS, QUINDELL MARKET EXPECTATIONS INCREASED FOUR TIMES during the second half of 2011

·; SOFTWARE AND CONSULTANCY REVENUE TO DATE HAS MAINLY BEEN TELECOMS RELATED BUT NOW OUR BASE INSURANCE SOFTWARE SOLUTIONS ARE FULLY READY TO DEPLOY

·; BOARD AND MANAGEMENT INTERESTS ARE ALIGNED WITH SHAREHOLDERS by having 2012 AND 2013 Board and Executive bonuses and Share Options TARGETED ON EPS OF 1P AND 2P RESPECTIVELY.

Rob Terry, Chairman and Chief Executive of Quindell said: "I am delighted to be able to present our first set of full year results following the Group's re-admission to AIM and acquisition of Quindell Limited in May 2011. We have achieved a strong set of results exceeding market expectation in every key performance indicator in the process. Also the Board are delighted to confirm that the Group completed the last month of 2011 with all its businesses contributing to run rate revenues of approximately £50 million per year, and EBITDA of over £20 million. I would like to take this opportunity to thank our staff and advisors for helping us conclude 2011 successfully and I look forward with confidence to 2012 and the opportunity of helping our existing and prospective clients increase their profitability."

For further information:

Notes to Editors:

About Quindell Portfolio Plc

Quindell, the Brand Extension Company, helps its clients and partners to utilise their brands enabling them to achieve greater sales, provide better service and extend the brand into new product offerings and alternative routes to market.

The Group works with over 2,000 brands from SMEs to blue-chips around the globe, with solutions applying to the following Sectors & related Supply Chains:

·; Telecoms, Utilities, Retail & E-commerce

·; Finance, Insurance, Health & Legal

·; Government & Public Sector

Quindell Portfolio joined the market through Mission Capital Plc. The Group was readmitted to the market on 17 May 2011 following the acquisition of Quindell Limited. On 18 July 2011, the Company was renamed Quindell Portfolio Plc. In December 2011, Mobile Doctors Group Plc was acquired increasing run-rate revenue to over £50 million and staff levels to over 600 including our off-shore capability.

Our Solutions

In addition to extending our clients' brands, Quindell's solutions are focused on generating improvements in efficiency and effectiveness in sales and service transactions with savings of over 20% against industry norms achieved.

Our Consultancy drives the business transformation for our clients, and is supported by leading edge technology, outsourcing, membership schemes and social media via repeatable solutions.

Our Software provides cloud based industry solutions to deliver the necessary framework to meet online, office and field based sales and service expectations of our clients and their customers.

Our "Sales" Technology Enabled Outsourcing leverages our own Business & Home Advisory Service brands to provide a White Labelled proposition for partners to extend into offerings for Telecoms, Utilities, Finance, Insurance, Health and Legal Services.

Our "Service" Technology Enabled Outsourcing covers a broad range of solutions and in insurance, is already recognised as a market leader for independent medical evidence via a panel of circa 2,500 medical experts providing circa 11% of reports for UK Personal Injury claims.

For further information, please visit www.quindell.com 

Chairman and Group Chief Executive's Review

I am delighted to be able to present our first set of full year results following the Group's re-admission to AIM and acquisition of Quindell Limited in May this year. 2011 was a significant year for the Group and its shareholders and I am pleased to be reporting progress on a number of fronts that are instrumental in delivering our overall strategy, including the completion of key acquisitions and strategic investments, new contract wins and software sales and the delivery of synergies within our acquired businesses. We have achieved a strong set of results exceeding market expectation in every key performance indicator in the process.

Results for the period, which were in effect for the 33 weeks since the acquisition of Quindell Limited, and readmission to AIM on 17 May 2011. Revenues increased to £13.7 million (2010: £0.2million) incorporating Software and Consultancy Division Revenues which increased to £6.8 million, and Technology Enabled Outsourcing Division Revenues which increased to £6.9 million. Adjusted EBITDA (profit before tax excluding amortisation, depreciation, interest and the exceptional costs as described in the Consolidated Income Statement) increased to £6.7 million (2010: loss of £0.1 million) with EBITDA margin percentage increasing to 49% (2010: (25%)).

Profit Before Tax increased to £4.1 million (2010: loss of £0.1million) with Adjusted Profit Before Tax (excluding amortisation and exceptional costs) increasing to £6.3 million (2010: loss of £0.1million). Statutory Profit After Tax was £4.2 million (2010: loss of £0.1 million). We delivered a Basic EPS of 0.47 pence (2010: loss of 0.09 pence) with an Adjusted Basic EPS (see Note 5, Earnings Per Share, to these results) of 0.73 pence (2010: loss of 0.09 pence).The only exceptional costs in the period related to acquisition and admission costs amounting to £1.7 million.

The Group generated good levels of cash from its operations during 2011, with Operating Cash inflow (adjusted for exceptional items) for the period of £5.5 million (2010: breakeven) before exceptional costs of £1.0 million (2010: nil) with an underlying EBITDA to cash conversion of 82%. Cash increased during the period by £3.1 million to £3.7 million, compared to previous market expectations of £1.3 million as a result of strong cash flow performance in the last quarter of the year.

In December 2011 Mobile Doctors Group Plc was acquired for £2.8 million (2010 financial results: Revenue £27 million, EBITDA £1.3 million). Our net debt position is £13.4 million at year end, after assuming £16.1 million of Mobile Doctors borrowings, secured against £28 million of debtors. Since the year end our banking facility has been increased to £18.5 million and has been renewed through to March 2013. Overall, our Balance Sheet is extremely robust with £30 million in additional cash raised post year end.

Key Operating Milestones

Operationally, our overall focus is on continuing to deliver every day for our clients' brands and their customers, and on the successful integration of our acquired businesses and investments. The focus for me and our executive team is to sign further step change brand extension deals that have the capability of earning the Group significant additional revenues per annum.

The Group was readmitted to trading on AIM on 17 May 2011 following the acquisition of Quindell Limited and its White Labelled outsourcing operation Business and Home Advisory Service and on 14 July 2011 the Company was renamed Quindell Portfolio Plc. The majority of the leadership team had been working together for over 18 years on our technology enabled "Brand Extension" vision. Quindell Limited was funded by the team to address this complete software and outsourcing strategy, including over £12 million invested by me as founder. Prior to admission all Research and Development had been fully expensed. Post admission the Group's focus remains on working with Charter Clients and to therefore expense Research and Development work where appropriate. As a result we have only capitalised Research and Development of £0.1 million in the period.

During the third quarter we had seven new contract wins across Insurance, Telecoms and Utilities contributing £3 million additional outsourcing revenue per annum. In the fourth quarter further major contracts were won. In aggregate these contract wins should contribute over £6 million of annualised revenues. Following trading updates and acquisitions, Quindell market expectations increased four times during the second half of 2011.

Software and Consultancy Revenue to date has been mainly related to work with Telecoms and Utilities clients including traditional players, new entrants and Brand Extenders. A number of these clients have been worked on in partnership with our distribution partner SMI Telecoms. Together we work with over 30 major telecoms providers globally and host 12 within our hosting centre that generate click-fee revenue for the Group.

During the year we became the exclusive technology and marketing partner in Europe for SMI Telecoms, enabling us to expand our focus on providing our technology enabled software and consultancy solutions to the telecommunications industry through their industry solution "OS3". Our respective management and technical teams already have many years of association and this partnership is well timed for both companies to combine their respective strengths to enhance and extend the reach of the OS3 offerings into the global service provider market place. 

As of the fourth quarter 2011 our base Insurance Software Solutions were fully ready to deploy. Our Charter Client for these base solutions has been Ingenie, a digital brand based insurance broker, specifically created to address two of the largest issues for the auto insurance industry today, being young driver insurance, utilising telematics to reduce claims cost, and finding ways to reduce the cost of acquisition of customer for the insurance industry using new social media techniques that effectively reduce the reliance of the industry on aggregators such as comparethemarket.com.

Matthew Whiting, our Group Chief Technology Officer, and the majority of our development staff worked with the Ingenie team for over twelve months prior to its go-live at the end of September 2011. The Ingenie team has a substantial pedigree in the insurance community. Steve Broughton, Ingenie's Chairman, was Managing Director of RSA prior to stepping down to join the UK Board of Ageas and becoming Chairman of Tesco Underwriting. Richard King, Ingenie's Chief Executive, is the only founding member of the Innovation Group who is not working in Quindell today. I would like to take this opportunity to congratulate Richard on the amazing job he and the team have done with Ingenie in creating what will potentially be the most successful digital brand launched in insurance to date. Other key members of the Ingenie team include Chris McKee as Chief Underwriting Officer, formerly Executive Director of Direct Line and Matt Stone and Mark Sterritt who are Chief Marketing Officer and Chief Development Officer respectively and, who have both been key to its digital development strategy and having been involved in major digital projects in the past such as comparethemarket.com. The underwriters backing Ingenie to date have been Ageas and RSA. Other investors include Williams F1 and Gary Lineker, who are also both involved in the promotion of the brand.

In our insurance related pre-marketing to date we have had significant interest from insurers both in the UK and globally in the opportunities presented by our insurance solutions. However no sales can be contracted for areas involving telematics for young driver insurance, either policy or claims, until post July 2012 when the "First Mover Advantage" agreement with Ingenie expires. Quindell owns 3% of Ingenie and is currently in positive discussions to increase its holding to 19% for circa £3 million.

To ensure that the whole company remains focussed on long term profitable growth for our shareholders, all Board and Management interests are aligned with shareholders by having 2012 and 2013 Board and Executive bonuses and Share Options targeted on EPS of 1p and 2p respectively.

Our strategy

We are committed to growth through enabling business transformation by using our own champion / challenger based leading practice technology solutions.

We recognise that software solutions can now be categorised as Front office, Back Office and Enterprise-wide capabilities, traditionally provided by separate organisations. For example: Telecommunication and Utilities software will generally comprise retail and wholesale utility sales, customer service and engineering management components; Finance software will be designed for retail, wholesale, commercial and private banking; and insurance software will be utilised by life insurance, general insurance and reinsurance organisations. We recognise of course, that the same principle is just as applicable for Legal Services and Online Retail and these areas are also addressed by our solutions.

However many of the core functions required in the back office and enterprise arenas are common across the organisation, irrespective of primary business focus. As organisations develop there is increasing pressure to establish a commonality of business process and operational management across the enterprise.

Due to the evolutionary nature of the industry and the focus by brands on brand extension to gain individual or household wallet share through cross-selling and supporting lifestyle events e.g. the purchase of a car, moving house and the corresponding acquisition of brown and white goods, there is greater pressure on the business to provide a consistent and integrated front end to the consumer and the ability to integrate third party services under a single brand.

Our consultancy, software and technology enabled outsourcing solutions fully address this crucial need!

Quindell, as a brand extension company helps its clients and partners capitalise on their brands, enabling them to achieve greater sales, provide better service and extend their brand into new product offerings and alternative routes to market.

The Group works with over 2,000 brands from SMEs to blue-chips around the globe, with solutions applying to the following sectors and their related supply chains: Telecoms, Utilities, Retail and e-Commerce generating 70% of our revenue in the period; Finance, Insurance, Health and Legal, generating 29% of our revenue in the period; Government and Public Sector, generating only 1% of our revenue in the period but expected by the Board to grow significantly in the future.

In addition to extending our client's brands our solutions are focussed on generating improvements in efficiency and effectiveness in Sales and Service transactions, with savings of over 20% compared with industry norms being achieved. How do we achieve this? We fully utilise our unique selling point, being our 'Champion / Challenger' processing based software solutions using the principles of cognitive interviewing and neuro linguistic programming, improving sales and service conversions with our clients and in our own outsourcing operations.

As a Group we are firmly committed to growth, both organically and by acquisition, that enhances long term sustainable earnings per share. The Board intends to grow the business in four key ways:

·; By organically leveraging the cross-selling potential to the significant permission-based marketing customer base now available to the business;

·; Through establishing joint ventures, to gain access to larger customer bases currently loyal to a particular brand;

·; Through acquisition of companies that benefit and broaden Quindell's existing range of solutions, either in the areas of software, outsourcing or in model office environments to test new approaches to the market; and

·; Extending our geographic reach to enable Quindell to develop and sell globally.

The Outsourcing division incorporates our Home Advisory and Business Advisory brands selling our product offerings to consumer and business customers respectively. It also includes Mobile Doctors as part of our growing insurance outsourcing capability. Throughout 2011 the Group has been broadening the types of service offerings that it can provide organisations to enable members and the organisations themselves to profit in the process. We have also been taking advantage of the changing market conditions in the legal sector that will result from current deregulation and use of Alternative Business Structures. Our services are quick to implement for our customers and are fully backed by our established fulfilment services which means that they can be provided with little or no impact upon the brand or organisation promoting them.

Examples of services we can offer to membership organisation and brands include:

- Personal Injury related to Legal Services, including medical reporting and associated rehabilitation services under a pre‑authorisation model

- Access appointments with doctors via a new 'See My Doctor' service due to be rolled out in the second quarter of this year.

- Motor related consumer services to include car rental, vehicle servicing, insurance and non insurance claim related repair

- A Telecoms offering incorporating fixed line and mobile telecoms services under a mobile virtual network operator arrangement

- Utilities, offering best-fit energy provision from a panel of 11 of the largest UK providers

Our software and consulting division sells and uses our own Champion / Challenger based leading practice technology solutions which include decision support capabilities that can be provided on a cloud based SaaS and/or initial licence fee basis. We also provide these and other services effectively on a risk/reward basis dependent upon success, for example achieving a certain conversion ratio with a particular client or transitioning a particular book of business. In these risk reward circumstances we would recognise a one-time fee when the criteria have been met.

Acquisitions, disposals, strategic relationships and investments

The Board of the Company identified and completed the acquisition of Quindell Limited in the months leading up to May 2011. Since then, in line with its strategy, the Group has acquired ten further businesses in its strategy of developing its sales and service outsourcing capabilities, growing the product range and adding to its technology and consultancy capabilities. This was made possible following unanimous approval at a general meeting of the Company held in July 2011 in which, as well as renaming the company from 'Mission Capital PLC' to 'Quindell Portfolio Plc' enabled the company to adopt new articles of association, increase the Company's authorised share capital to 6 billion shares, provided the directors with the authority to buy back shares, allot shares up to the authorised limit and to waive existing shareholders' pre-emption rights.

Where we have acquired private companies, our acquisition terms have been on the basis of the vendors providing future period profit and cash flow warranties, the consideration shares being locked in for periods of typically 12 months, and shares being issued at a premium compared to the price at the time of issue.

The primary acquisition in the period to 30 June 2011, in addition to Quindell Limited, was that of the Business and Home Advisory Service, a related business that provided the White Labelled outsourcing operations for the Group.

On 25 July 2011 we acquired our first 8.3% investment in Mobile Doctors Group Plc, one of the leading providers of medico-legal reports for personal injury claims in the UK market which was a public company listed on AIM. This purchase was effected as a share-for-share exchange at a ratio of 5.833 Quindell shares for each Mobile Doctors share, the new Quindell shares were locked in for a period of 12 months. Over the subsequent four months we acquired a further 12.8 per cent. taking our holding to 21.1%, each purchase being on the same basis as the first. In December, we announced a proposed offer to acquire the remaining shares in Mobile Doctors, having already secured irrevocable undertakings for 92.4% of the shares that were not already owned by the Group. By the year end, this acquisition had been completed, at a total cost of approximately £2.8 million.

In addition to acquiring businesses, the Group has also made a small number of strategic relationships and investments during 2011 in businesses that, over time, we believe will prove to be extremely value enhancing.

In June 2011, we announced the agreement of a strategic alliance with 360GlobalNet Limited ("360") to work in partnership in certain consultancy engagements in the insurance sector. 360 is an innovative technology and consultancy company with specialisms 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.

In July, the Group announced that it had made a three per cent. investment in Ingenie Limited, the new digital insurance brand for drivers aged 17 to 25.

In December 2011, the Group acquired a 10 per cent. interest in SMI Telecoms LLC having seen the traction and potential that SMI's products were showing not only in Europe, but also in North America.

As at the year end, the Group had completed integration of the businesses it has acquired prior to its purchase of Mobile Doctors in December 2011, including the closure of four office locations and the consolidation of staff into the Group's other operating locations on and offshore, achieving run rate savings in excess of £500k per annum for 2012. Since the year end, work has continued on the integration of Mobile Doctors, the largest part of which is the transfer of some of its back office outsourced processes to the Group's operation in South Africa.

Recent news in the new financial year

Since the start of the new financial year, we have continued to win new contracts and engage with new brands across both of our two main divisions.

We have also announced the first few appointments to our Strategy and Integration Advisory Board (Advisory Board) the purpose of the Advisory Board being to provide independent thought leadership to the Group in its chosen markets, and to leverage the skills and experience of its members so that the risks associated with delivery of strategy and integration of the acquired business is minimised. The Advisory Board will include leading individuals from each of the sectors within which the Group operates, and we are pleased that Gillian Baker joined us and acts as chairperson of the Advisory Board as part of her broader role in the Group. Individuals who have been appointed to date are Paul Stanley and Mark Jones, both of whom have made major contributions to the insurance and financial services sectors, and Ian Shaw, who with over 30 years' experience working within the IT industry, and more than 20 of these spent with BUPA, brings with him a wealth of experience in driving strategic initiatives and business transformation within the health sector. We have also appointed Dave Peffer as our Group Programme Director to manage our integration programme. Dave has over 30 years' experience in IT Programme Management and was formerly Group IT Director for Aviva, overseeing the integration of Commercial Union and General Accident and subsequently CGU and Norwich Union.

Additional confirmed members of the Advisory Board include Robert Bright, Vice Admiral Robert Cooling, Sean Woodward and Paul Campbell from Tata Consulting Services (TCS), supported from time to time by other senior executives from the TCS organisation. Details relating to each of these members and their wider roles will be announced prior to inaugural meeting of the Board on 3 April 2012. However in combination the wealth of experience that they bring is without doubt as significant as that provided by those already announced.

In February 2012 we completed a share placing that raised circa £30 million through an oversubscribed placing with institutional investors of 470 million new shares. We were delighted with the support demonstrated by existing and new institutional shareholders and met with several blue-chip institutions, most of whom purchased shares in this Placing, having now fully understood the Company's market positioning and long term growth potential. 

Since the start of the new year we have also announced three major investments, two in companies operating in the UK insurance outsourcing sector, Silverbeck Rymer Solicitors and Ai Claims Solutions PLC, and the other, 360GlobalNet Limited.

Our agreement to acquire Silverbeck Rymer Solicitors, one of the UK's top five legal services firms operating primarily in the area of personal injury, values them at £19.31 million, and will be satisfied by the payment of £10.25 million in cash and the issue of up to 120.8 million Quindell shares subject to lock in arrangements ranging from 12 to 36 months (equating to a value of 7.5p per new Quindell share). The Acquisition will be one of the first instances in the UK of a legal practice being acquired by a quoted plc. Also in January, we announced a 29.9% investment in Ai Claims Solutions Plc, one of the UK's leading outsourcers for the management of motor claims. This was a share for share deal at a ratio of 3.2 Quindell shares for each Ai Claims share, locked in for 12 months, valuing Ai Claims at circa £16 million. Together these investments broaden our overall proposition in insurance to cover the three major problem areas for the industry relating to the costs of claims being personal injury, credit hire and accidental damage.

Outlook

The Group completed the last month of 2011 with all its businesses contributing to run rate revenues of approximately £50 million per year, and EBITDA of over £20 million. Trading in the first months of 2012 has continued to be strong, with recently announced deal wins adding further growth. Our investment in Ai Claims adds an associated contribution of circa £1 million per annum (based on their market expectations) and our expectations are that, at the latest, by the middle of this year we will have successfully concluded our acquisition of Silverbeck Rymer, which has historically made circa £6 million profit per annum. Recently, working with Quindell, the Silverbeck Rymer business has improved its conversion rates from 35% to circa 75% in its capture of new business. Obviously this will have a significant impact on the potential profit generation for the business.

The Executive Board has been working closely with our Strategy and Integration team who have already identified integration and business transformation savings of over £1.5 million per annum, post the acquisition of Mobile Doctors Group Plc, and our current plans are to see these benefits starting to flow through from as early as July 2012. In addition the Strategy and Integration team are driving through a number of other business transformation projects in order to capitalise on the synergies between the businesses, utilising our core technologies and delivering increased revenues to the group, targeting an additional £1 million in profit per annum with £0.5 million targeted in 2012. We are in discussions with major insurers, looking to offer them a combined accident management, credit hire, legal services and medical services solution that will be unique in the UK market place and that will lower the cost of claims for the insurance industry, enabling us to leverage our acquired assets significantly. We also have significant cash resources providing financing for the Group's acquisition strategy, as well as funds for further investment in existing investments and working capital to finance the initial start up of new deals. These factors, together with our share of profits from Ai Claims, organic growth from our recently won Technology Enabled Outsourcing contracts, as discussed above, combined with those in our order pipeline and new licence sales targeted for the latter part of 2012, give the Board confidence that we have the opportunity to generate the further profit required organically in the second half of 2012, which would ensure our internal performance-related targets, which remain well above current market expectations, could be met without further major acquisitions beyond those already identified.

Our interests remain firmly aligned with those of our shareholders as we stay committed to ensuring that our central costs remain low and, as previously stated by our Remuneration Committee, all bonuses and other income incentive schemes will be performance-related to the business achieving EPS of 1 pence per share in 2012, and 2 pence in 2013.

Thanks to a great team effort, we have concluded 2011 successfully and have already had a fantastic start to 2012 with real progress across a number of key areas. The team and I are looking forward with confidence to 2012 and the opportunity of helping our existing and prospective clients increase their profitability.

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 5.

These results cover the 15 month period 1 October 2010 to 31 December 2011 following the decision to change the Company's year end from 30 September to 31 December.

Results overview

At the start of the period, the Group was effectively a cash shell and on 14 March 2011 had been delisted from the Alternative Investment Market (AIM) as it had failed to find a suitable business to acquire. The Group was relisted on AIM on 17 May 2011, when it acquired Quindell Limited a reselling and sales outsourcing company. Since that date, the Group has acquired two other significant businesses, Business Advisory Service Limited in June 2011 and Mobile Doctors Group Plc in December 2011. It has also made a number of smaller acquisitions since readmission.

Total revenues in the period were £13.7 million compared with £0.2 million for the prior full year. The Software and Consulting Division recorded revenues of £6.8 million (49%) and the Technology Enabled Outsourcing Division, £6.9 million (51%) during the period.

Operating profit was £4.1 million for the current period (2010: loss of £0.1 million). Adjusted EBITDA, being Profit before tax, excluding interest, depreciation, amortisation and exceptional costs, totalled £6.7 million at a margin of 49% compared to an adjusted loss of £0.1 million for the prior full year. Exceptional costs of £1.7 million were incurred during the period relating to acquisition costs, including a share based payment charge of £0.7 million being the cost of warrants issued in connection with the acquisition of Quindell Limited.

The tax credit of £0.1 million (2010: nil) reflects the application of brought forward losses within Quindell Limited and Quindell Portfolio Plc. Note 4 provides details of the tax credit.

Profit after tax for the 15 months to 31 December 2011 was £4.2 million compared to a loss of £0.1 million for the prior year. Adjusted Basic EPS, as defined in note 5, for the 15 months ended 31 December 2011 was 0.73 pence per share, and Basic EPS was 0.47 pence per share (2010: a loss of 0.09 pence for both measures).

Acquisitions

Expansion of the Group's product range and its sales and service capabilities through acquisition, in addition to organic growth, is an important element of the Group's growth strategy. In total, the consideration of the Group's acquisitions during the period was £45.7 million, of which £43.7 million was in shares, and the remainder, £2.0 million, in cash. The provisional estimate for the fair value of goodwill was £44.7 million on these acquisitions. Details of the financial effects of these acquisitions are set out in note 8.

Financing, cash flow and dividends

The Group maintains a focus on managing its working capital and the generation of strong operating cash flow. The Group's operating cash flow was an inflow of £5.5 million before exceptional costs of £1.0 million for the current 15 month period (2010: breakeven). The underlying EBITDA to operating cash flow conversion ratio being 82%. Cash flows associated with exceptional acquisition costs included those incurred by Quindell Limited as a result of its acquisition by Quindell Portfolio Plc.

The purchase of intangible assets and tangible fixed assets were £1.4 million (2010: nil) and the net cash consideration of subsidiaries and investments was £2.2 million (2020: nil). The issue of shares during the period gave rise to an inflow of £2.4 million (2020: nil).

The Group's cash balance at the end of 31 December 2011 was circa £3.7 million. During the 15 months to 31 December 2011, net borrowings increased from a position of nil net funds to borrowings of £13.4 million primarily as a result of the £16.1 million of loans acquired with Mobile Doctors Group plc. Since the year end, the banking facility held by Mobile Doctors has been increased to £18.5 million and renewed until March 2013.

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 9.

The Board is not recommending the payment of any dividends for the current financial period. The Board currently intends to devote the Company's cash resources to its operations and therefore do not anticipate paying dividends in the short term.

Going Concern

As at 31 December 2011, the Group had cash of approximately £3.7 million. During February 2012, the Group undertook an institutional share placing raising approximately £30 million of cash net of fees. Approximately £10 million of this is earmarked for the Group's proposed acquisition of Silverbeck Rymer. Following the fund raising, the Group has available to it considerable financial resources, and an extremely robust balance sheet.

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 is characterised by technological changes, frequent introductions of new products and services and evolving industry standards. 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 development on a sustained basis.

Regulatory change

The pricing of products and services and the activities of major industry organisations 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. The Group will continue to seek to mitigate this resource risk by investing in and developing staff training programmes, competitive reward and compensation packages, management incentive schemes and succession planning.

Management of growth

The Group's plans to continue its growth will place further demands on its management, administrative 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.

The market

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

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Balance Sheet

The results were approved by the Board of Directors on 16 March 2012.

Consolidated Cash Flow Statement

1. General information

The Annual Report announcement was approved by the Board of Directors on 16 March 2012. The financial information set out in this Annual Report Announcement for the 15 months ended 31 December 2011 does not constitute the Group's statutory accounts as defined by s435 of the Companies Act but 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 498(2) or (3) of CA 2006. The financial information included in the Annual Report Announcement for the prior year ended 30 September 2010 has been extracted from the 2010 statutory accounts on which an unqualified audit report has been made by the then 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 year ended 30 September 2010 have been delivered to the Registrar of Companies. The Annual Report for the 15 months ended 31 December 2011 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.

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, finance, telecoms, health, leisure and retail.

The Group's Technology Enabled Outsourcing Division provides 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 business, membership bodies or other non-profit making organisations.

Revenue earned by the Technology Enabled Outsourcing 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 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 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 and geographical segments

Operating segments

For management purposes, the Group is organised into two operating divisions: Software and Consulting and Technology Enabled 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 Technology Enabled Outsourcing Division provides sales and service related outsourcing services. 

Segment information about these businesses is presented below. 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:

2011

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.

2010

Prior to the acquisition of Quindell Limited, the two divisions did not exist as part of the Group and therefore there are no 'other information' prior period comparatives

Geographical segments

As at the 31 December 2011, the Group's operations are 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.

3. Exceptional 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

Income tax for the UK is calculated at the standard rate of UK Corporation tax of 26% (2010: 28%) on the estimated assessable profit for the period. The total credit 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 £584,000 in respect of losses amounting to £2,246,000 that can be carried forward against future taxable income. In 2010 it did not recognise deferred tax assets of £329,000 in respect of losses of £1,175,000.

5. 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:

6. Trade and other receivables

7. Trade and other payables

8. Acquisitions and disposals

Acquisitions

The Company made three significant acquisitions during the current period, and eight smaller acquisitions. These acquisitions are primarily responsible for the significant changes in the value of assets and liabilities as presented in the Condensed Balance Sheet. In each case, the acquirer obtained control through a combination of control over voting rights, positions on the board and by virtue of its financial strength and size relative to the acquired company.

Quindell Limited

On 16 May 2011 the Group acquired the entire issued share capital of Quindell Limited. The primary reason for the acquisition was to enable the Group to benefit from the company's potential for growth. Quindell Limited develops, provides and utilises its own multi-channel e-business based Enterprise Resource Planning and Business Process Management solutions and related services to facilitate efficient and effective management of customer acquisition and servicing within finance, insurance, telecoms, utilities and other related industries. The provisional fair value of the identifiable assets and liabilities of Quindell Limited at acquisition date are set out below.

The goodwill of £22.0 million represents 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.

Business Advisory Service Limited

On 20 June 2011, the Group acquired the entire issued share capital of Business Advisory Service Limited (BAS). The primary reason for the acquisition was for BAS to provide the Group with a white labelled outsourcing service capability. The provisional fair value of the combined identifiable assets and liabilities of these acquisition at their respective acquisition dates are set out below.