WTG.L Regulatory News (WTG)

Embargoed for release until 7.00 21 October 2013

Quindell Portfolio Plc

("Quindell", the "Company" or the "Group")

Q3 Trading Statement

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 provide its trading statement for the third quarter ended 30 September 2013.

Highlights

o Gross sales of £98.1 million (H1:2013 £167.3 million)

o Revenue of £92.1 million (H1:2013: £163.3 million)

o Adjusted EPS1 of 0.65 pence (H1:2013: 1.1 pence)

o Basic EPS of 0.58 pence (H1:2013: 0.9 pence)

EBITDA

o Adjusted EBITDA2 of £34.5m (H1:2013: £54.0 million)

o EBITDA £33.3 million (H1:2013: £47.7 million)

o Adjusted EBITDA margin of 37.5% (H1:2013: 33%) based on Revenue

o Adjusted EBITDA margin of 35.2% (H1:2013: 32%) based on Gross Sales

Cash flow and Debtors

o The Group has continued its positive trend of operating cash flow generation

o Adjusted operating cash flow3 for Q3 of £4.5 million

o Operating cash flow (post exceptional costs) of £3.6 million

o Cash collection continues to be ahead of plan without the benefit of block settlements which are anticipated in Q4

o Strong debtor management. Average trade debtor days maintained at improved June 2013 levels of c.4.8 months

o Cash at 30 September 2013 of £23.3 million

Services Division 

o Recent wins mean Group is now delivering organic growth for H2 and beyond in excess of £300 million per annum

o Quindell is now active in some element of up to 1 in 4 of claims handled by insurers in the UK

o Momentum growing in Collaboration Model uptake. Expectation of 75% adoption supported by latest negotiations

o Expansion in North America with investment in PT Health, leading provider of rehabilitation services across Canada

o Strategic investment of 25.3% in NARS, the largest dedicated provider of accident repair services in the UK

o Four other significant telematics deals under final contract negotiation

Solutions Division

o Leading position in telematics based insurance technology confirmed

o Agreement reached with IBAO for first major telematics deal in Canada

o ingenie investment allows development of brand in Canada and over 25's in UK

Move to Full List

o Appointment of KPMG as Group Auditors in preparation for full Listing

o Board strengthened with appointments of new independent non-executive directors

o Full Listing and potential Canadian dual Listing targeted for March 2014

Rob Terry, Founder and Executive Chairman of Quindell said: "The Board are pleased to announce our tenth successive quarter meeting or exceeding market expectations in all key performance indicators. Taking in to consideration that volumes are subject to roll out, execution and industry claims frequencies, the Board is confident that the upper end of market expectations should be achieved for the full year for 2013 and that the Group's run rate performance in Q4, together with the recently announced contract wins, will clearly demonstrate that 2014 market expectations should also be significantly exceeded. It is now clear that in due course, the opportunity to deliver a billion+ pound business generating significant profits (long term guidance of margins of 25%+) with associated positive cash flows is within our grasp, subject to leveraging the significant market lead available to Quindell."

Notes

1. Adjusted EPS is Profit after tax, excluding exceptional costs and amortisation, divided by the weighted average number of shares in issue

2. Adjusted EBITDA is Profit before interest, tax, depreciation, amortisation and exceptional costs

3. Adjusted operating cash flow is cash generated by the operation before exceptional costs, tax and interest

Q3 Trading Statement

The Group's third quarter of 2013 has continued to be a period of significant progress for Quindell with it being a record three months in terms of revenue, as well as the Group's key measures of profitability and EPS. The Group has also, importantly, continued its positive trend of operating cash flow generation during this period of significant growth.

Overall, gross sales for the Group totalled £98.1 million for the quarter and Adjusted EBITDA was circa £34.5 million, an EBITDA margin of approximately 35.2%. Year to date, gross sales were £265.4 million and Adjusted EBITDA was circa £88.5 million, an EBITDA margin of approximately 33.3%. Adjusted EPS for Q3 was 0.65 pence and the year to date was 1.75 pence. The Group has continued its positive trend of operating cash flow generation during Q3, with cash flow for period (before exceptional outflows of £0.9 million) of £4.5 million, taking the year to date cash inflow to £6.8 million. Cash at 30 September 2013 was £23.3 million, with net debt of £35.1 million (including net debt of £6.8 million attributable to PT Health).

Services Division

The Group's Services Division had another strong quarter in terms of its trading performance and development of new organic business underpinning future growth. The Group is now actively involved in some form in between 1 in 5 and 1 in 4 claims handled by UK insurers. This growth arose in a large part due to the inclusion at the start of the period of the previously announced £100 million of new business, and the achievements made during the summer months in terms of new contract wins and organic growth this culminated in the announcement shortly after the end of the quarter of the Group's £50+ million per annum contract win with Direct Line Group together with the fact that in the few weeks preceding the Direct Line announcement, the Group had also reached agreement with 10 key brands of varying sizes for over £150 million of revenue per annum. These, together with previously announced new business, mean that the Group is now delivering organic growth in the second half of 2013 and beyond totalling in excess of £300 million per annum, the vast majority of which is commencing in the current financial year.

The Group's Collaboration Model (which enables Quindell and insurers to work together and to benefit in the reduction of car hire durations, and the offering of initiatives such as cash alternatives to car hire in certain cases) continues to provide the opportunity for significant block settlements of debtors in the rest of the current financial year and the first half of next year, as well as providing a fundamental change to the cash profile of a significant part of the Group's Services Division as insurer debt is settled within one month of presentation of an agreed invoice. In August 2013, the Group reported that its guidance was for circa 70% of the insurance market to sign up to the Collaboration Model. Following further work in this area and meetings with most of the major UK insurers, the Group's expectations are that the proportion of take up will ultimately increase to approximately 75%. Momentum in the pace of adoption of the Model is growing with two top tier insurers representing circa 15% of the market already live, and with a further circa 35% expected to go live in Q4. In combination these would bring the total operating under the model by the end of 2013 to half of the market, and represent over £9 million of Ai Claims Solutions historic aged debt. The remainder will conclude throughout the first half of 2014.

An equivalent Collaboration Model for the prepayment of legal costs is also continuing to be investigated by the Group, and the significant interest that had been expressed by some major insurers is being followed up with the expectation that this will result in the acceleration of payments with no significant loss of profitability, changing an industry model for all future Legal Services revenues for up to 50% of insurers by the end of the first half of financial year 2014.

In September 2013 the Group confirmed its expansion into North America with its 26% investment and option to acquire PT Healthcare Solutions Corp ("PT Health"), a leading provider of healthcare and rehabilitation services with over 100 physiotherapy and rehabilitation clinics across Canada. PT Health delivers healthcare and rehabilitation services across a range of disciplines from its 100+ clinics throughout Canada. As PT Health does not generate a significant amount of its profit from motor vehicle accidents this provides the opportunity for Quindell to enter the market and, by bringing volume from its partners, including the Insurance Broker Association of Ontario ("IBAO"), helping the Industry to stamp down the cost of claims in this area in Canada.

In September 2013 we also announced the acquisition of 25.3% of the issued share capital of Nationwide Accident Repair Services plc, the largest dedicated provider of accident repair services in the UK, and where possible, we will continue to look to build our holding to 29.9%. Having a direct ownership stake in a repair services network will enable us to take advantage of the volume we manage for our Clients and broaden our overall proposition in insurance outsourcing.

Solutions Division

The Group's Solutions Division has similarly experienced a positive third quarter of the year, with particular traction in the area of telematics insurance solutions continuing to be achieved in the UK and in North America.

Of particular significance in the quarter, and the first of a number that the Group expects to confirm in the coming months, was the agreement that was reached with the IBAO for telematics technology. Quindell will provide the technology for all of the IBAO's telematics initiatives to its membership base representing circa 12,000 brokers who directly or indirectly along with their insurance partners provide approximately 60% of auto insurance policies in Ontario, representing over 6 million policies. The agreement is valued at over C$6 million by the end of 2014 and implies more than C$20 million of technology revenues over the minimum five year exclusive contract term, although the full potential from this agreement to Quindell could be substantially in excess of the C$20 million. Over the forthcoming three years, the Group's Board, the IBAO and other industry analysts generally believe that between 10% to 30% of all Canadian auto insurance policies will transition to being telematics based, driven by initiatives such as this one being promoted by the IBAO. At a 10% to 30% adoption rate, technology revenue from this contract to Quindell could therefore potentially increase to in the region of C$70m to C$210m per annum over the next three years. All revenues associated with this contract are cash positive and in line with the Group's long term profitability guidance. The Group is in final contract negotiations with four other customers in relation to telematics deals, each of which represent a significant opportunity for the Group to grow its revenues significantly in this area in 2014 and beyond.

In July 2013, the Group announced its 19% investment in Himex Limited, a business focused on delivering disruptive insurance technology solutions enabling game changing usage based insurance propositions that leverage the full insurance value chain. Quindell has been working with Himex to implement an outsourced support service centre in Canada and on certain telematics related supply arrangements supporting the implementations for a number of top-twenty US insurers. Quindell was also appointed Himex's sole and exclusive distributor of Himex's gamification UBI products in the UK, Canada, Brazil and across South America, leveraging its unique market position in telematics.

During the quarter the Group increased its investment in ingenie to circa 43% and at the same time supported the development of its brand into Canada and for the over 25's demographic in the UK with a direct 40% investment in two new subsidiaries of ingenie. The Group has high confidence that ingenie will continue to achieve rapid and sustainable growth in both the UK and Canada as a result of its success to date in building its brand and its performance in terms of the underwriting result it is delivering. Prospective partnership discussions have already started with major brands in the UK who in combination represent over 25% of UK drivers and a number of core industry participants in the Canadian market, including the IBAO, who directly or indirectly cover over 60% of insurance in Ontario. These partnerships look set to deliver significant volumes to ingenie within a relatively short time frame from launch.

Cash Flow and Debtor Management

The Group's momentum in operating cash flow generation has increased as anticipated with much of the collection now being undertaken by the Group's own specialist debt recovery team, "Compass Law" and the management and collection of cash from trade debtors continues to be a specific area of focus during this period of significant growth for the business. As a result, cash collection across the business remains according to and in some cases, ahead of plan without the benefit of block settlements which are anticipated in Q4.

The Group has previously confirmed that in the first seven months of this financial year, the Services Division had collected cash representing over 82% of the debtor levels outstanding at the 2012 year end (including trade debtors, accrued income and other disbursements), and circa 105% for Quindell Business Process Services (previously Ai Claims Solutions) on a standalone basis, without the benefit of any block settlements. This trend has continued, with the figures to September 2013 being 107% (vs. 82%) and 132% (vs. 105%) for the whole division and Quindell Business Process Services respectively. This strong cash collection led to average trade debtor days at 30 September 2013 for the Group being maintained at approximately the same level as at 30 June 2013, which had improved to c.4.8 months.

Outlook

As previously stated, the Group's plan remains to proceed with a Full Listing at the time of announcing our results for the year to 31 December 2013 in March 2014, and also to consider alternatives including a North American dual listing, to ensure the Board achieves the optimum valuation for the Company's shareholders. At the present time, this dual listing is most likely as being on the Canadian stock exchange. The Group was pleased to be able to confirm two further important steps in its plans to move to the Full List with the appointment of KPMG as its auditor, and, following the retirement of Jason Cale as non-executive director, with the appointment of two new independent non-executive directors, and the appointment of Tony Bowers, the Group's senior independent non-executive director to the role of Vice Chairman.

During the quarter KPMG spent a considerable amount of time with our audit committee and finance teams, and visited a number of key sites and met with local management, as well as attending a number of our teach in events to ensure they were fully apprised of the Group, its business model, processes and policies prior to this appointment. 

Across its two divisions, the Group has a total pipeline of business in excess of £1.5 billion and it is now clear that in due course, the opportunity to deliver a billion pound plus business generating significant profits (long term guidance of EBITDA margins of over 25%) with associated positive cash flows is within the Group's grasp, subject to leveraging the significant market lead available to Quindell. The Group is therefore investigating the opportunity to accelerate the adoption of its collaboration model to include legal services and reviewing club banking facility to further increase its debt facilities and other debt financing options to allow it to exploit the opportunity this pipeline represents in parallel with its ongoing Full Listing process. 

Our increased activity, the Direct Line contract win, our success in Canada and the positive response to our Collaboration Model give the Board the confidence that, with volumes being subject to roll out, execution and industry claims frequencies, the Group will continue to deliver on its growth objectives and that the Group's run rate performance in Q4, and together with the recently announced contract wins, will clearly demonstrate that 2014 market expectations should also be significantly exceeded.

Issue of previously announced shares for prior acquisitions

The Group confirms that pursuant to its previous announcements on 18 September 2012, 9 April 2013 and 3 May 2013, primarily in relation to its acquisitions of Quintica International Limited, Abstract Legal Holdings Limited and Quindell Property Services, that it has issued 39,537,549 shares. The total number of shares remaining to be issued by the Group in relation to previous acquisitions to the end of December 2013 is circa 50 million.

Application has been made for 39,537,549 shares to be admitted to trading on AIM. Admission of the shares is expected to occur on 25 October 2013. Following Admission, Quindell will have 4,354,189,296 ordinary shares in issue. The Company has no ordinary shares held in treasury. The total of 4,354,189,296 ordinary shares may therefore be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or change in their interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.

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 entered the second half of 2013 with a run rate of gross sales of more than £350 million and with approaching £50 million of EBITDA earned in the first half of 2013. 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