WTG.L Regulatory News (WTG)

Embargoed for release at 7.00am 17 July 2013

Quindell Portfolio Plc

("Quindell" or the "Group")

Trading Statement, Investment and Exit of Equity Swap

Quindell Portfolio plc (AIM: QPP.L), a provider of sector leading expertise in software, consulting and technology enabled outsourcing in its key markets being insurance, telecommunications and other related sectors, is pleased to announce that the Group's KPIs are in line or ahead of half year expectations and guidance.

Highlights

Ø Gross sales for the six months ended 30 June 2013 are expected to be approximately £166 million

Ø Adjusted EPS1 of circa 1.1 pence (H2:2012: 0.94 pence, FY:2012 1.40 pence).

Ø Basic EPS of circa 0.9 pence (H2:2012: 0.78 pence, FY:2012 1.17 pence). 

EBITDA

Ø EBITDA of circa £48m (H2:2012: £13.7m, FY:2012: £47.0m)

Ø Adjusted EBITDA2 of circa £54m (H2:2012: £37.2m, FY:2012: £52.2m)

Ø Margin performance has continued to be maintained at or above historic run-rate levels

Profit Before Tax

Ø Profit Before Tax of circa £43.5m (H2:2012: £29.1m, FY:2012: £41.2m)

Ø Adjusted Profit Before Tax of circa £52.5m (H2:2012: £35.1m, FY:2012: £49.2m)

Cash flow

Ø Adjusted operating cash flow3 for the half year significantly ahead of expectations and guidance with £2.3 million inflow compared to guidance of £15-20 million outflow during significant growth in H1

Ø Operating cash outflow (post exceptional costs) of £2.6 million

Ø Cash at 30 June 2013 also significantly ahead at circa £35 million

Ø In anticipated scenarios for H2, the Board guides delivery of significant adjusted operating cash inflow

Ø Most optimistic cash flow scenarios include opportunity to significantly exceed full year expectations

The Services Division

Ø Strong first half achieved with multiple new significant contract wins driven by regulatory changes

Ø Over 50 independent outsourcing and referral partners providing significant volume to the Group

Ø Successful conversion of 100% of pilot programs

The Solutions Division

Ø Signed multiple new technology contracts and extensions across key markets and geographies

Ø Rapid expansion in North America with acquisition and establishment of Quindell Solutions Inc.

Ø Completed H1 with record level licence and subscription pipelines and growing traction in telematics

Strategic Investment

Ø Himex game changing Usage Based Insurance (UBI) technology - 19% strategic investment

Ø Exclusive distribution agreement in the UK, Canada and South America for key Himex technology

Exit of Equity Swap

Ø Quindell exits equity swap by using equity swap shares as part of investment consideration

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

H1 2013 Statement

The Group is pleased to report the continued significant progress of the business during the first six months of the current financial year, with multiple significant new contract wins being achieved by both the Group's two divisions, and with particularly strong growth in Legal Services and technology sales.

Services Division

The Group started the year with the successful conversion of 100% of its pilot programs in its Services Division to full relationships. With prospective customers needing to take into account the UK insurance market regulatory change that came into force on 1 April 2013, accelerated sales cycles led to further contract wins throughout the half year with new clients taking references from existing clients rather than initiating further pilots.

During the second quarter, the Group announced a series of significant contract wins for its 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. These included a 5 year contract with the RAC, enabling it to provide an offering to its members that own vehicles representing circa 10% of the UK auto market, a material contract with one of the UK's largest insurance brokers with over 1.2 million auto policy holders worth up to £100 million per annum, and a £20 million contract with one of UK's largest direct insurers. Success was also achieved by the Group outside of the traditional insurer and broker market with a major contract win with one of UK's largest accident management companies, aggregating volume from smaller brokers and other insurance intermediaries, and a new contract with Honda one of the UK's most innovative vehicle manufacturers and adding to the over 50 independent outsourcing and referral partners now providing significant volume to Quindell post regulatory changes. This approach ensures that as a group, Quindell is not overly dependent on any one income source.

Solutions Division

The Group's Solutions Division has similarly experienced a positive first half of the year. We were recognised among the leading European providers of Insurance Claims Systems in Celent Claims Systems Vendors: European General Insurance 2012 and we now believe Quindell, with its market leading ICE Challenger software suite of Policy, Claims, Analytics and Napier cloud based rating engine, is the clear market leader for European insurance technology by a significant margin, having delivered more deals in the last six months (including SaaS implementations) than Guidewire, SAP and Accenture together are accredited by Celent to have won in claims software over the last two years. Significant new deals with the RAC, Ageas, and one other of the top ten UK motor insurers, being amongst the highlights.

In April 2013, the Group marked its expansion into the North American Insurance market and the formation of Quindell Solutions Inc with its acquisition of Iter8 Inc, a company specialising in providing SaaS based solutions to the direct insurance and broker channels. At the time of the acquisition of Iter8, the Board stated its confidence that Quindell would be able to replicate its UK growth rate in insurance technology sales in North America, and performance to date, together with the growing sales pipelines in this region, particularly for telematics based solutions, for the Group continue to justify the Board's confidence that the Group's technology market leadership, already proven in Europe, is replicable in the North American market.

Group Structure and Integration

The Group's development of its management team structure has progressed this half year with the appointment of two new divisional Chief Executive Officers, Robert Thomson (Solutions Division) and Robert Fielding (Services Division), as well as the appointment of David Sandhu as Group Chief Operating Officer, and Ian Farrelly as Group General Counsel, Company Secretary and Head of Investor Relations. The integration of the business has similarly moved ahead with further consolidation of the Group's outsourcing teams, such as those involved in call centre and debt collection. These changes have, and will continue to, provide integration benefits to the Group, and we expect to see further integration benefits during the remainder of this year including those that can be rapidly achieved from the further integration of its businesses within Quindell Health Services (part of its Services Division). All significant acquired businesses have been delivering in line with or significantly ahead of warranted targets. 

Financial Performance

As anticipated, second quarter adjusted EBITDA was ahead of that achieved in the first quarter, with first half Adjusted EBITDA of circa £54 million and an Adjusted EPS of circa 1.1 pence, compared to £37.2 million and 0.94 pence for the previous six months, and £52.2 million and 1.40 pence for the full year to 31 December 2012. Despite the regulatory changes that came into effect on 1 April 2013 and the subsequent reduction in portal fees for legal services, Group margins at approximately 32% are still ahead of Management's longer term guidance of 20-25% as the Group has continued to drive through efficiencies, integration savings and economies of scale.

Through a focused approach to trade debtor management, cash collection across the business continues to be according to or ahead of plan in the first half of the year and the ageing of debtors remains consistent with our expectations. Adjusted operating cash inflow for the six months to 30 June 2013 was £2.3 million compared to previous guidance for operating cash flow for the half year of an outflow in the region of £15-20 million as the Group delivers on its strategy of growth. In line with our strategy to fund growth, circa £11.5 million was provided by the Group as loans primarily to our investments of which approximately only £3 million was outstanding and repayable to the Group in the second half of this year. Cash at 30 June 2013 was circa £35 million, again significantly ahead of expectations, with net debt of circa £14 million. For the second half of the current financial year, in all anticipated cash flow scenarios, the Board guides a positive momentum in the delivery of adjusted operating cash inflow, and in our most optimistic scenario this includes the opportunity for the Group to significantly exceed current cash flow expectations dependent on block settlement values, adoption by insurers into the Group's industry collaboration model and centralised debt management through our recently acquired business, Compass Costs.

Strategic Investment in Himex game changing UBI

Quindell is also pleased to announce today its strategic investment in Himex Limited ("Himex"). Himex is focused on delivering disruptive insurance technology solutions enabling game changing Usage Based Insurance propositions that leverage the full insurance value chain. Himex is primarily focused on the US market and this provides significant synergies with Quindell as we cross fertilise use of both sets of our technologies to maximise on the global opportunities during this period of land grab, as telematics reaches a critical tipping point in its adoption cycle for insurance.

Quindell has been working with Himex to implement an outsourced support service centre in Canada and on certain telematics related supply arrangements supporting the current and future implementations for a number of top-twenty US insurers. Quindell has also been appointed Himex's sole and exclusive distributor of Himex's gamification UBI products in the UK, Canada, Brazil and across South America.

Himex will use the investment to accelerate growth in its transaction subscription model, already generating revenues in combination with other services of over $400K per month, from a relatively small subscription base to target a land grab building its subscription base over the next five years to over 10 million users.

Within the exclusive territories now owned by Quindell, where revenues will be shared with Himex in this subscription model, the Board is confident that Quindell will be able to repeat this level of sign up to a subscription of over 10 million users, through its well established relationships with existing brands in the UK and Canada and certain opportunities in discussion in South America. This strategy is already well advanced in the UK where Quindell currently enjoys a dominant market share in telematics based insurance systems.

Quindell is taking a 19% investment in Himex , which accelerates Quindell's existing presence in the North American insurance market, particularly in the telematics marketplace. Consideration for the strategic stake is circa 64.8 million Quindell shares and £1.8 million in cash. The value of this consideration is broadly in line with the prices recently paid by other third parties for investment in Himex.

Founded in 2010, Himex is a privately-held company with headquarters in Scottsdale, Arizona that has developed a number of software applications including those for use in connection with telematics technology and a customer interface and related applications for use in the insurance and related industries. Further details on Himex can be found on their website www.himexubi.com. A background to the global telematics usage based insurance market and for the Himex investment will be discussed at the investor Teach-In taking place today. Presentation slides will be available on the investor section of the Quindell website (www.quindell.com) following completion of the event.

Exit of Equity Swap

As previously announced, activity on the equity swap was suspended on 10 May 2013 and the equity swap remains insignificant when compared to the strength of the Group's balance sheet, cash resources and its net assets.

The Group expects to record an exceptional non-cash charge in 2013 of up to £6 million provided that there is no further significant change in the Company's share price between now and the end of July 2013. Irrespective of this exceptional non-cash charge, there still remains no circumstance under which the Company would have to issue additional shares pursuant to the equity swap or have to pay out any cash regardless of its performance.

Payment for the share element of the above investment in Himex has been accomplished by the novation in its entirety as from 1 August 2013 of the remaining element of the Group's equity swap entered into in December 2012 which, being in respect of 64.8 million shares, therefore required no new Quindell shares to be issued to complete this investment.

Post 1 August 2013, the Group will have no further exposure to the equity swap's performance and will therefore not be required to take any further exceptional non-cash charges through its Income Statement.

Outlook

In the latter part of our first half year we announced eight contracts signed in the period that, in combination, are expected to increase the Group's run rate revenues in the region of £100 million per annum from July 2013. Already in July we have announced the signing of a new contract with Renault UK and today, that Quindell is working in support of Himex on the implementation of a number of the top twenty North American insurers with a combined written premium of circa $6bn. These, together with the Group's existing run rate revenues and profits across both divisions and the other opportunities that we are signing in the market are ensuring that Group's trading is continuing to be positive as we enter the second half of 2013.

This increased activity gives the Board the confidence that subject to continued successful execution we will continue to deliver on the Group's growth objectives and that when combined with business that is already visible, we should be able to comfortably meet the upper end of current market expectations for profit, cash and earnings per share. As per our strategy, we are continuing to be successful in driving down the cost of claims for the insurance industry whilst maintaining our own margin and profitability. Therefore, to meet the upper end of market expectations, the business needs to achieve gross sales of no more than £400 million for the full year, and this level of performance and growth can be expected to continue for the remainder of 2013 and beyond.

Quindell's interim results for the six months to 30 June 2013 will be formally announced on 19 August 2013.

Rob Terry, Founder and Executive Chairman of Quindell said: "The excellent results delivered as demonstrated by the trading update today, are only possible due to the hard work and dedication of our executive management team and staff and the support of the major brands we work with in the market. Our focus remains to continue to deliver disruptive and beneficial solutions that drive down the cost of claims for the insurance industry and therefore ultimately the cost of insurance for consumers.

Our strategic investment announced today in game changing usage based insurance, is yet another example of the disruptive technology that Quindell can bring to the insurance industry to the significant benefit of all participants. Following preliminary discussions already held with major players in the market, it is very clear that we will have their support in rapidly deploying these solutions in our key markets and therefore the Board is confident that the valuation paid for our investment in Himex game changing UBI shall prove to be extremely attractive to our shareholders."

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 enters 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