Final Results

7 December 2010

The Innovation Group plc

("Innovation" or the "Group")

Preliminary Results for the year ended 30 September 2010

The Innovation Group plc, a global provider of business process outsourcing and software solutions to the insurance, fleet, automotive and property industries is pleased to report preliminary results for the year ended 30 September 2010 that are in line with market expectations.

Financial Highlights

* Adjusted profit before tax is loss before tax after adding back amortisation on acquired intangible assets of £3.5m (2009: £4.1m), impairment of £0.4m (2009: £21.5m), share based payments credit of £0.9m (2009: charge £2.8m), exceptional costs of £8.5m (2009:£2.6m) and utilisation of pre-acquisition brought forward tax losses £nil (2009:£0.1m) as analysed on the face of the income statement.

Performance Indicators

* Outsourcing revenues at constant currency are calculated by applying the 2010 average exchange rates to the 2009 revenues.

Operational Highlights

·; A year of transition with change programme now substantially complete

·; Business fundamentally restructured, de-layered and re-focused on the BPO opportunity

·; All regions operating profitably as of Q4 FY 2010

·; Enterprise implementation completed in France and Spain, continues on schedule in Germany

·; Increases in both Group and Outsourcing gross margin achieved, with Outsourcing now accounting for 87% of Group revenue

·; A leaner, more focused and better equipped Group stands ready to pursue growth in 2011 and beyond

Andrew Roberts, Chief Executive Officer of The Innovation Group commented:

"This has been a hard and challenging year but it has also proven to be a successful one for The Innovation Group. Our long term goal is to create a sustainable, profitable and technology-led outsourcing leader for the insurance sector. To make sure we achieve that goal, we have placed significant emphasis over the past twelve months on ensuring that the Group is 'fit for purpose.' Much of this has involved stripping back our operations, de-layering complex management structures and removing unnecessary cost. But there has also been investment, both in terms of key people and key technology. All of these transition efforts add up to a leaner, more focused and better equipped business as we start to pursue sustainable and profitable revenue growth in 2011 and beyond."

Enquiries:

Notes to Editors

The Innovation Group plc (LSE: TIG.L) is a global provider of business process outsourcing and software solutions to the insurance, fleet, automotive and property industries. Innovation Group provides contact centres, repair networks, process management, supply chain and technology operations and decision support analytics to support accident management, repair and estimation and claims management services. Innovation Group has over 800 global clients including AXA, Insurance, RSA, American Modern Insurance Group, LeasePlan, The Ford Motor Company, Aviva, Toyota and Zurich. The Group processes more than 4 million claims per year with 20 per cent direct claims cost saving achieved. Innovation Group's 2,300 people are located in the United Kingdom, Australia, Belgium, Canada, France, Germany, Japan, India, Pakistan, South Africa, Spain and United States. www.innovation-group.com 

Chairman's Statement

Our objectives for 2010 were to reverse the performance in our loss making regions and improve margins in our profitable businesses to ensure that we can continue to deliver a sustainable and profitable run rate in the Group's outsourcing business. As a result considerable change in our organisational strategy and leadership team was necessary whilst at the same time maintaining our sales momentum across all regions and implementing cost management and restructuring actions. The Board set out three priorities in the short term: firstly, to grow our revenues and manage our sales mix; secondly, to better match costs to existing volumes and thirdly to deliver our technology investment programme on time and budget. These were successfully achieved against a background of some difficult market conditions.

Given this was a year of substantial change, our financial performance has been commendable and has met expectations. The Group's revenues for the year were £162.1m (2009: £155.9m) with outsourcing revenues, having grown by 9% at constant exchange rates, now representing 87% of total revenues. Net cash at the year end was £28.8m (2009: £11.7m) and was considerably ahead of expectations. It is pleasing to see the business recording a significant number of high profile new business wins across the Group with total orders, over the length of these contracts amounting to over £75.0m.

I would like to pay tribute to the teamwork and commitment to clients displayed by our employees during this challenging year. Innovation continues to attract and retain some of the best people in the industry and we recognise them as the foundation of our success.

Board Change

Andrew Roberts was appointed Chief Executive Officer on 11 February 2010 and I became Non-executive Chairman on the same day.

On 15 September 2010, Professor Dr. Kurt J. Lauk retired from the Board to concentrate on his other commitments. After eight years as a Non-executive Director, Chris Banks will step down from the Board at the conclusion of the AGM in March 2011. The Board would like to thank both Chris and Kurt for their service and commitment to the Group and its development. The Board has engaged a professional search company to find a replacement Non-executive Director.

Outlook

This year has, by necessity, been one of transition, focused on re-setting some fundamentals to provide a solid platform for profitable growth in 2011 and beyond. We are pleased with the outcome of the actions taken this year and believe that, barring any further economic down-turn, the restructuring of the business is now fundamentally complete. The Board is pleased with the number of new proofs of concept underway across our business and is confident that several will convert to full-term contracts in the coming year. This, together with the stronger management team now in place, the leaner cost base and the ongoing successful roll-out of Enterprise across the identified regions gives us confidence in the Group's ability to achieve our expectations for 2011 and beyond.

David Thorpe

Non-executive Chairman

Operational and Financial Review

Introduction

This year has been one of transition for The Innovation Group. Our efforts as a management team have focused on re-setting some of the fundamentals of our business in order to provide us with a solid platform on which to build profitable growth in 2011 and beyond. During the first half of 2010, we set three key objectives; firstly to re-structure, de-layer and re-focus the business on achieving profitability and strong cash conversion from the outsourcing division; secondly, to improve client relationships and increase pipeline across all of our geographies: and thirdly to reshape the Group's technology investment programme for optimum return. We are pleased with the progress we have made against these objectives and believe that our transition phase is now substantially complete.

During the second half of the year the Group completed a restructuring programme to refocus loss-making operations, de-layer senior management and reduce operating costs so that they match more closely the current levels of business activity across all geographies. Significant changes have been made to key management in the UK, US and Technology divisions and management reporting lines have been simplified to drive greater efficiencies.

As we have begun to move into a new phase where we start to build for growth, the global economic environment has remained challenging. Motor industry statistics show that new car registrations and claims volumes are still below 2008 and 2009 levels. Nevertheless, against this backdrop, we have already begun to deliver on our key objective of building the business pipeline across all regions. New business wins with both new and existing customers have enabled us to achieve a 9% increase in outsourcing revenue at constant currency. This increase not only confirms the strength of our products and services, but also underpins the Group's objective to move to a more sustainable and predictable level of profitability and cash generation going forward.

Our own technology platform, Enterprise, is an important underpinning of this objective and has been successfully implemented in France and Spain, with planned efficiency benefits and margin enhancements there now being realised. The roll-out of this platform continues with implementation in Germany. This region requires the greatest functionality but has the potential to deliver the largest cost benefit to the Group, and implementation here remains on course.

In December 2009, the Group raised approximately £20.0m for specific margin-enhancing projects and fundamental re-structuring, particularly in the under-performing regions of the UK and US. These funds have been applied to the business as follows:

·; Restructuring, right-sizing and de-layering the business;

·; Working capital for the German rapid payment initiative;

·; Funding customer proofs of concept in all key geographies;

·; Repayment of approximately £4.0m (ZAR45.0m) of the high interest bearing Black Economic Empowerment loan in South Africa; and

·; Repayment in full of our £5.7m short term revolving credit facility.

Each of these initiatives has, in turn, contributed positively to our overall efforts to enhance, streamline and invigorate our business and our operating model.

New Business

Demand for our services and technology continues to grow and we have been successful in augmenting our pipeline across all regions this year. In addition to several new contract wins, the Group has also been successful in securing numerous sizeable contract renewals with long standing customers in all regions.

The Group is moving towards securing larger, longer term contracts. A typical first step in securing such contracts is to conduct a 3-12 month pilot exercise (proof of concept) to provide the client with the necessary outcome data on which to base their decision to proceed with a full contract and to give the Group confidence that any such contract will deliver expected profitability and returns. To this end, the Group has embarked on a number of proofs of concept with major customers in the UK, North America, South Africa and Australia.

Although these pilots create additional costs in the short term, they are an important route to increase both the number of customers we work with and the volume of claims handled by our platform. Indeed, in the UK, North America and South Africa, three of these pilots have already been converted into full-term contracts, with the estimated revenues over the contract term being £25.0m, £6.0m and £31.0m respectively.

The Group is continuing with a number of proofs of concept globally and remains confident that several will convert to full-term contracts in the coming year generating profit for the Group in 2011 and beyond.

Financial Overview

Group revenues for the year have risen 4% to £162.1m (2009: £155.9m) with no significant acquisitions in the year. Adjusted profit is £9.8m (2009: £11.3m) with adjusted earnings per share of 0.63 pence (2009: 1.05 pence). The loss before tax is £1.7m (2009: £19.8m) with a basic loss per share of 0.58 pence (2009: 3.19 pence).

The Group's revenue is derived from two principal sources; the sale of business process outsourcing services ("outsourcing" or "BPO") and software solutions. Outsourcing revenue, comprising primarily motor (including the sale of motor parts in Germany) and property increased by 13% to £141.8m (2009: £125.0m) and now represents 87% of total revenue (2009: 80%). Revenue from motor is £113.4m (2009: £97.4m) and represents 80% of total outsourcing revenue (2009: 78%). As anticipated, we continue to move away from licence sales towards more predictable BPO revenues and as a consequence software revenue, which comprises one-time licence fees, implementation revenue and recurring software fees decreased by 34% to £20.3m (2009: £30.9m). The largest area of reduction was one-time licence fees which decreased to £1.8m from £10.0m in 2009. We are particularly pleased with the continuing shift to outsourcing revenue and the reduced reliance on one-time licence fees.

The Group operates internationally and results for the year are subject to movements in exchange rates. The Group has a policy of not hedging translation movements that arise whether positive or negative, although material transactions are hedged at the point they become more likely than not to occur. During 2010 the Group has benefited in particular from the strengthening of the South African Rand and Australian Dollar. As a consequence, organic revenue growth at constant exchange rates is 1%, comprising an increase of 9% in outsourcing revenues and a decline of 36% in software revenues.

Gross margin was 39% (2009: 38%). We are very encouraged that an increase in overall gross margin has been achieved despite a considerable reduction in high margin one-time licence revenue this year. This is due primarily to the re-sizing of our BPO operations carried out across all regions, which resulted in an increase in outsourcing gross margin to 38% from 34% in 2009.

Adjusted profit of £9.8m (2009: £11.3m) comprises loss before tax of £1.7m (2009: £19.8m) after adding back amortisation on acquired intangible assets of £3.5m (2009: £4.1m), impairment of £0.4m (2009: £21.5m), a share-based payments credit of £0.9m (2009: £2.8m charge), utilisation of pre-acquisition tax losses of £nil (2009: £0.1m) and exceptional restructuring and property rationalisation costs of £8.5m (2009: £2.6m).

Adjusted profit before tax includes a one-off gain of £1.1m (£0.8m at the half year) relating to a change in accounting estimates in relation to administration fees recognised in the Group's property subsidence operations. Substantial growth is anticipated in this area of the business over the next twelve months and management believe this change better reflects revenue and profit in line with service delivered over the lifecycle of a claim. More detail is provided under critical accounting estimates and judgements in the full financial statements. As reported in the Interim Management Statement of 18 August 2010, towards the end of 2009 a Tier 1 European insurer withdrew funding from one of our software clients in Japan and as a consequence the client has been unable to satisfy an outstanding debt due to the Group. Therefore, a bad debt charge of £0.7m is included in adjusted profit. Included within finance income is £0.8m relating to the write back of a loan which was waived in the year.

As advised in previous announcements, undiscounted exceptional restructuring and property rationalisation costs were £9m (2009: £2.6m). Although there were some small charges in other regions, these costs relate primarily to redundancy costs in the Group's underperforming BPO regions in the UK and North America and the Technology operation, included in Central costs below, plus the rationalisation of properties in the UK, US and Germany. The exceptional property charge relates to both the write down on fixed assets and a provision for the costs of the properties to the end of their respective leases and, in accordance with IFRS, has been discounted to reflect the time value of money at a rate of 5%. This discounting has reduced the exceptional charge by £0.5m, reducing the cost to £8.5m. The related cash outflow will arise over the terms of the leases, concluding in August 2018.  The overall charge is attributable to the operating segments as follows:

These actions are expected to generate annualised cost savings of approximately £4.2m and barring any further economic downturn, conclude the Group's restructuring and cost reduction programme. Cost savings in the second half of the current year as a result of the above actions were approximately £1.7m.

The share-based payment credit of £0.9m (2009: charge £2.8m) arose due to the number of options forfeited following the departure of the former CEO and several members of the senior management team in the subsequent restructuring. The share-based payments charge is expected to return to more historic levels in 2011.

The Group's adjusted basic EPS is 0.63 pence per share (2009: 1.05 pence per share). The disparity in the reduction in the Group's EPS when compared to the Group's adjusted profit is due to the additional 210m shares issued as a consequence of the share placing in December 2009. Basic loss per share is 0.58 pence (2009: 3.19 pence).

The Group's tax charge is £2.7m (2009: £2.2m). This represents an effective tax rate of 33% (2009: 25%), being the tax charge prior to deferred tax on IFRS acquired intangibles of £0.6m expressed as a percentage of adjusted profit and is in line with the guidance given at the half year. The tax rate is higher than previous years due to the relative increase in profits from Germany and South Africa, both of which are taxpaying regions with no tax losses available for offset against profits. The Group continues to carry forward significant unrecognised tax losses in certain UK and US entities.

The Group ended the year with net cash of £28.8m (2009: £11.7m) comprising gross cash of £42.2m and debt of £13.4m (2009: gross cash £36.5m, debt £24.8m). Included within gross cash is £10.8m (2009: £7.9m) of cash available for use within our South African business which continues to be subject to the normal government imposed exchange controls for that country. Included within debt is £7.4m (2009: £11.0m) related to a Black Economic Empowerment loan in the same territory.

Operating cash inflow was £7.7m (2009: £8.3m) and includes the exceptional cash costs relating to the above exceptional charges incurred by the Group this year. Operating cash inflow, adjusted for exceptional and taxation payments represents 119% conversion of Group EBITDA. The Group converted some £3.0m of accrued income to cash during the year, in line with the terms of a large UK property contract, and expects operating cash flow conversion as a percentage of EBITDA will normalise to approximately 85% conversion in 2011.

The net cash out flow from investing activities was £7.1m (2009: £9.2m). This includes interest received of £0.9m (2009: £1.1m), purchase of subsidiary and associated undertakings of £0.6m (2009: £0.3m) and net fixed asset additions of £7.4m (2009: £10.1m) of which £4.0m (2009: £6.5m) is the capitalisation of costs relating to Project Enterprise as described in more detail below.

Financing cash inflow of £4.9m (2009: £1.2m outflow) includes interest paid of £1.8m (2009: £2.0m), repayment of borrowings of £12.2m (2009: £2.9m), dividends paid to minorities of £0.9m (2009: £0.8m) and net proceeds from a share placing of £19.8m (2009: £4.8m).

Geographic Performance

The Group continues to provide segmental reporting by geography to reflect the way the business is structured and managed. One of the core goals two years ago was to move all regions into sustainable profitability and cash generation. This has now been achieved as the Group moves out of the last quarter and into the new financial year.

Revenue in our European business was £87.1m (2009: £87.4m). This comprises growth of 8% in the BPO business and a significant decline of 38% in software revenues in the UK. We are particularly pleased with the performance from the Rest of Europe this year with revenue growth of 28% and adjusted profit growth in excess of 300%. The Rapid Payment initiative implemented in Germany in the second half has led to a 44% improvement in adjusted profit half year over half year. Adjusted profit for Europe is £8.4m (2009: £11.2m) with UK, Germany and Rest of Europe contributing £1.9m (2009: £5.2m), £5.7m (2009: £5.8m) and £0.8m (2009: £0.2m) respectively.

Our South African business, assisted by the strength of the South African Rand, achieved revenue growth of 23%, or 6% in local currency. During the year the business signed a significant five year contract to provide Nedbank, one of the largest banks in South Africa, with a range of outsourced insurance services. This is the largest contract in the Group's history and is expected to generate approximately £31.0m (ZAR350.0m) in revenue for the Group over the term. Adjusted profit for the year is £5.5m (2009: £4.3m) representing an increase of 28% from the previous year.

Whilst overall revenue in North America fell by 8% as a result of a 42% reduction in software revenues, we are pleased with the progress made in the US BPO business this year which achieved revenue growth of 16% and a significant improvement in gross margin percentage from 21% in 2009 to 43% in 2010.  Overall, the North American region achieved break even at the adjusted profit level, a marked improvement from an underlying adjusted loss of £3.0m in 2009 before a non-recurring £1.0m exchange gain.

Revenue in Australia and Asia has increased by 20% due primarily to a 33% increase in the motor BPO business. Adjusted profit has remained constant at £0.5m (2009: £0.5m) however, as previously announced in the August 2010 Interim Management Statement, the 2010 result includes a cost of £0.7m relating to a bad debt charge for a doubtful debt receivable from a software client in Japan.

Allstate Litigation

There have been no developments with regard to this litigation which is at a preliminary stage. Pleadings are complete and documentary discovery is almost concluded. Oral examinations for discovery have yet to take place. As previously announced, the Company considers the litigation to be speculative in the extreme and without foundation. The Company will continue to defend the claim vigorously and pursue the Group's filed counterclaim.

Risks and Uncertainties

While we are confident about our future prospects, significant risks and uncertainties exist that need to be managed and mitigated appropriately. The Group operates a risk register and identifies risk under the following categories; strategic, financial, operational and environmental. The key risks and mitigation factors under each category are shown below:

Strategic

·; Retaining competitive advantage- As our outsourcing business has relatively low barriers to entry the Group must ensure it remains competitive through the use of technology. Our own-use software, Enterprise, gives us a unique platform to improve efficiency and provide additional products and services to our clients. Our claims, policy and analytics software products must remain technologically competitive and therefore the Group continues to invest significantly in this area and engages regularly with industry analysts to validate the technology roadmap.

·; Ensuring profitability of the US BPO business - Over the past three years the results of the US BPO business have adversely impacted the Group's overall performance. Profitable growth in this region has been slower than anticipated following a large acquisition in 2006. Significant changes to key management have been made this year and the business has been resized to match current volumes.

·; Technology investment programme does not achieve planned benefits - The Group has invested heavily in Enterprise and its claims, policy and analytics software products over the last two years. The roll-out of Enterprise is being closely monitored and will only be implemented in those regions where payback through efficiencies is sufficiently attractive. The Group has a history of selling software and our technology roadmap for the current software products is continually reviewed and validated by industry analysts to ensure its applicability to the market.

Financial

·; Economic down-turn continues- As evidenced in the industry as a whole, the Group has experienced a reduction in claims volumes from existing customers over the last two years and current volumes remain below 2008 levels. Continued uncertainty may adversely affect revenue and profits. However, the Group has right-sized its operations this year, as evidenced by the increase in BPO gross margin percentage, to match the current volumes and through the implementation of Enterprise is well placed to grow revenues without significant increase in capacity.

·; Exchange rate risk - The Group undertakes operations on a global basis and approximately 75% of business is transacted in currencies other than Sterling. Therefore consolidated results and net assets are subject to exchange rate fluctuations. The Group has a policy of not hedging translation movements, although material transactions are hedged at the point they become more than likely to occur.

·; Credit facilities and banking covenants- At 30 September 2010 the Group is in a net cash position and currently has an undrawn revolving credit facility of £5.7m which expires in July 2011. Any significant down-turn in business may require the use of this facility and therefore the Group intends to re-finance this facility before its expiry. The revolving credit facility and the Group's other long-term borrowings are subject to stringent banking covenants which must be tested quarterly. The Group prepares detailed profit and cash flow forecasts to test these covenants on a forward looking basis and expects to remain compliant.

Operational

·; Failure to deliver - The Group's reputation is dependent upon our ability to deliver mission-critical software and outsourcing services. Any failure to deliver to contracted terms may harm our reputation, create legal liabilities and adversely impact on financial performance. In the majority of contracts the Group is subject to strict Service Level Agreements (SLAs) which are routinely measured and reported to the client. Likewise, the Group imposes and monitors similar SLAs on the vast network of body shops and property contractors it manages in all regions.

·; Continuity and security of IT systems - Due to the nature of the Group's business it hosts significant amounts of customer and internal data on its servers. Business interruption or IT security issues may result in loss of service or compromise of this data. The Group operates two hosting centres both located in the UK so that any disruption which might affect either is minimised. In addition the Group has invested significantly in its IT infrastructure therefore ensuring high availability of services and applications to its clients.

·; Susceptibility to fraud- The Group handles millions of claims a year on behalf of its customers and in doing so transacts with thousands of body shops, repairers and other suppliers. Given these large volumes and the significant business in the motor industry and emerging markets the Group is vigilant about the continuing risk of fraudulent practices.

Environmental

·; Revenue may be significantly affected by weather conditions - The majority of the Group's outsourcing revenue is derived from handling motor or property claims. Extreme weather conditions, for example hurricanes, hail, floods, droughts or icy roads, will generally lead to an increase in claims volume. The Group continues to be able to respond quickly so as to handle any increase in volumes whilst still maintaining customer service.

·; Increased customer requirements for sustainability - The Group is increasingly seeing key customers introducing sustainability key performance indicators (KPIs) into contracts. As a responsible company and business partner it is crucial that we develop a clear understanding of the potential business implications of sustainability and demonstrate to our clients and stakeholders how we intend to manage these. This year the Group has developed a sustainability framework and is in the process of developing a number of KPIs and associated targets against which our business operations will be assessed.

This is not an exhaustive list and other factors may impact the Group.

The Innovation Group plc

Consolidated Income Statement

For the year ended 30 September 2010

Dividends paid or authorised are shown in the consolidated statement of changes in equity.

The Innovation Group plc

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2010

The Innovation Group plc

Consolidated Balance Sheet

At 30 September 2010

The results were approved by the Board of Directors on 6 December 2010.

The Innovation Group plc

Consolidated statement of changes in equity

At 30 September 2010

Attributable to equity holders of the parent

The Innovation Group plc

Consolidated Cash Flow Statement

For the year ended 30 September 2010

Cash held and available for use within the business in our South African operation of £10,770,000 (2009: £7,875,000) continues to be subject to the normal government imposed exchange controls for that country.

The Innovation Group plc

Notes to the Results

For the year ended 30 September 20010

1. BASIS OF PREPARATION

The preliminary announcement was approved by the Board of Directors on 6 December 2010.

The financial information set out in this Annual Financial Report announcement for the year ended 30 September 2010 does not constitute the Group's statutory accounts as defined by s435 of the Companies Act but has been extracted from the 2010 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 2009 has been extracted from the 2009 stat accounts on which an unqualified audit report has been made by the auditors, and which did not contain an emphasis of matter paragraph nor a statement under section 237(2) or (3) of CA 1985.

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

The audited financial statements for the year ended 30 September 2009 have been delivered to the Registrar of Companies. The Annual Report for the year ended 30 September 2010 will be mailed to shareholders at the end of January 2011 and will be delivered to the Registrar of Companies following the Annual General Meeting which will be held in March 2011 at the Company's office at Yarmouth House, 1300 Parkway, Solent Business Park, Whiteley, Hampshire, PO15 7AE.

2. SEGMENT INFORMATION

The Group is organised into regional business units and a central cost centre. The Group has six reportable operating segments which are separately disclosed together with a central cost centre which includes unallocated corporate costs, expensed development costs and transfer pricing royalties. Operating segments have been aggregated where the aggregation criteria have been met. More specifically, Asia Pacific includes Australia, India and Japan, the Rest of Europe includes France, Spain and Benelux and North America includes the US and Canada.

Management monitors the operating results of its business units separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on adjusted profit which is the Group's internal principal measure of profit. Segment revenue excludes transactions between business segments. Segment adjusted profit as reflected below, includes both royalty charges and transfer pricing adjustments for reallocating corporate costs to the regional business units. Royalty charges are made by the Central Costs segment to: UK £0.8m, (2009: £0.6m), Asia Pacific £1.2m, (2009: £1.2m) and North America £1.0m (2009: £1.8m). Transfer pricing adjustments for reallocating corporate costs of £1.3m (2009: £1.8m) from the Central Costs segment to: UK £0.4m (2009: £0.5m), Germany £0.1m (2009: £0.1m), Rest of Europe £0.1m (2009: £0.1m), South Africa £0.3m (2009: £0.3m), North America £0.3m (2009: £0.7m) and Asia Pacific £0.1m (2009: £0.1m).

Management do not monitor the balance sheets of its business units separately for the purposes of making decisions and therefore segmental assets, additions to non-current assets and segmental liabilities have not been disclosed. Non-current assets in the segmental disclosure comprise of investments, intangible assets and property, plant and equipment.

The Group's revenues are derived from the following products and services:

- Motor Business Process Outsourcing (BPO) and networks;

- Property Business Process Outsourcing (BPO) and networks;

- Other Business Process Outsourcing (BPO) and networks; and

- Software.

Information regarding the Group's six operating segments and its central cost centre is reported below.

The Group's revenues are attributed to business units based on customer location. The total external revenue attributable to all countries other than the UK was £128.9m (2009: £116.4m).

Year ended 30 September 2010

* EBITDA is shown before share-based payments credit, impairment of goodwill and financial assets and exceptional items

** Central costs include unallocated corporate costs, expensed development costs and transfer pricing royalties.

*** Included within Motor BPO & networks and Software are amounts relating to the sale of goods (motor parts and software licences) of £19,541,000 and £1,788,000 respectively.

Year ended 30 September 2009

* EBITDA is shown before share based payments costs, impairment of goodwill and financial assets and exceptional items

** Central costs include unallocated corporate costs, expensed development costs and transfer pricing royalties.

*** Included within Motor BPO & networks and Software are amounts relating to the sale of goods (motor parts and software licences) of £17,403,000 and £10,012,000 respectively.

^ An adjustment has been made to reallocate £698,000 of amortisation of non-acquired intangibles from the UK to the central costs segment. This is offset by an adjustment to reallocate £698,000 of depreciation from the central costs segment to the UK. This adjustment has been made to bring the comparative disclosure in line with the reporting methodology used in the current year. There has been no change to segmental EBITDA and adjusted profit.

3. EXCEPTIONAL COSTS

Other restructuring costs mainly relate to employee redundancy costs in underperforming divisions during the first half of the year. These costs and the right-sizing of operations across all regions have generated savings to adjusted profit during the last six months of the financial year. As a result of this restructuring the Group reviewed its property requirements in the US, UK and Germany and consolidation opportunities were identified to reduce the number of occupied leased properties. The property restructuring costs include the discounted future cash flows that will arise until the end of the leases along with the write down of associated fixed assets. The discounted future cash flows may be partly offset by any future sub-leasing income.

In 2009 a global cost reduction programme was undertaken during the last quarter in response to the reduced claims volumes experienced by the Group due to external economic factors. The costs shown above are the costs incurred in implementing the cost reduction plan and relate mainly to employee redundancy costs and office closure

4. TAXATION

5. EARNINGS PER SHARE

At 30 September 2010 there were 935,427,013 shares in issue (2009: 714,167,456).

6. DIVIDENDS