Acquisition

3 July 2014

Xchanging plc

Acquisition of insurance software business Total Objects

Xchanging plc ('Xchanging'), the business process, procurement and technology services provider, today announces it has signed an agreement to acquire 100% of insurance software business, Total Objects Limited ('Total Objects'), for a potential total cash consideration of up to £21 million on a cash-free debt-free basis, subject to clearance by the Competition and Markets Authority ('CMA').

Total Objects provides the London and global markets with (re)insurance software that fully automates the insurance lifecycle. The acquisition will enable Xchanging to realise product development synergies in the Binder market by combining its Binder360 offering with the Total Objects BinderCloud software offering*. Total Objects also offers further potential synergies with Xchanging's Xuber insurance software.

Xchanging's strategy is to grow both organically by increasing market share but also by acquisition, in particular of leading technology businesses which bring both intellectual property and an enhanced technology offering. Total Objects is a well-respected developer of software with a reputation for innovation: its offering is highly complementary to Xchanging's and enhances its position in an important market segment.

On CMA clearance, Xchanging will pay a total cash consideration of up to £21 million for the acquisition on a cash-free, debt-free basis, to be satisfied from Xchanging's existing cash resources. Of this, £11.5 million is payable on completion, and up to a further £9.5 million is payable in 2015, 2016 and 2017, of which £1.5 million is deferred and the balance is subject to certain performance targets being achieved.

Total Objects' employees and management will join Xchanging, including the three founder shareholders, Larry Sullivan (Total Objects' non-executive Chairman), Jim Barry (Total Objects' Managing Director), and Vladimir Serbin (President of Total Objects' Russia).

The value of the gross assets being acquired is £4.6 million for the year ended 31 December 2013. The EBITDA for that year was £0.5 million. The acquisition is expected to be earnings neutral in the financial year ending 31 December 2014, and to be marginally earnings accretive in the financial year ending 31 December 2015.

Ken Lever, Xchanging Chief Executive, commented: "Insurance is a core market for our services, and Total Objects will contribute to the further development of our presence in the Binder market as well as providing synergies with our Xuber insurance software. Total Objects has a talented team with a proven track record of product development: it will fit very well with our growing insurance software business. I am pleased to announce today's acquisition and look forward to welcoming the Total Objects business into Xchanging. "

Enquiries

Xchanging plc Tel: +44 (0) 203 604 6999

David Bauernfeind, Chief Financial Officer

Alexandra Hockenhull, Director of Corporate Communications

and Investor Relations

Maitland Tel: +44 (0) 207 379 5151

Peter Ogden

Martin Barrow

www.xchanging.com

@XchangingGroup

Linkedin/company/xchanging

*Notes for Editors

Binders (or Binding Authorities) are legal agreements granted by an insurer to a third party that enable the third party to seek insurance business on behalf of that insurer, within the terms and conditions of the agreement between them. Binders are particularly widely used in the Property & Casualty insurance market where, for example, a London-based insurer wants to develop business in a wider global market via third parties.

Cautionary Statement: 

This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Xchanging's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approval or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects.