Interim Results

RNS Release Embargoed until 7.00 am 19 August 2013

Quindell Portfolio Plc

("Quindell" or the "Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013

Quindell Portfolio Plc (AIM: QPP.L), the provider of sector leading expertise in software, consultancy and technology enabled outsourcing in its key markets of insurance, telecommunications and their related sectors announces its interim results for the six months ended 30 June 2013.

Highlights

· Gross sales increased by 33% to £167.3 million (H2:2012: £126.3m, FY:2012: £171.9m)

· Revenue increased by 78% to £163.3 million (H2:2012: £91.9m, FY:2012: £137.6m)

· Adjusted EPS1 of 1.1 pence (H2:2012: 0.94 pence, FY:2012 1.40 pence), an increase of 17%

· Basic EPS of 0.90 pence (H2:2012: 0.78 pence, FY:2012 1.17 pence), an increase of 15%

EBITDA

· EBITDA increased by 44% to £47.7m (H2:2012: £33.2m, FY:2012: £47.0m)

· Adjusted EBITDA2 increased by 45% to £54.0m (H2:2012: £37.2m, FY:2012: £52.2m)

· Adjusted EBITDA margin of 33% (FY2012: 38%) based on Revenue

· Adjusted EBITDA margin of 32% (FY2012: 30%) based on Gross Sales

Profit Before Tax

· Profit Before Tax increased by 49% to £43.4m (H2:2012: £29.1m, FY:2012: £41.2m)

· Adjusted Profit Before Tax increased by 50% to £52.5m (H2:2012: £35.1m, FY:2012: £49.2m)

Cash flow and Debtors

· 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

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

· Cash collection across the business according to or ahead of plan

· Average Group trade debtor days at June 2013 reduced to circa 4.8 months (December 2012: 6.5 months)

· Cash at 30 June 2013 also significantly ahead of expectations at £35.2 million

Services Division

· Successful conversion of 100% of pilot programs

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

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

Solutions Division

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

· Now believed to be clear market leader for European claims technology by substantial margin

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

Acquisitions & Strategy

· Focus on strong organic growth underpinned by major contract wins

· Smaller scale acquisition strategy in second half of FY13 following established criteria

· Move to Main Market remains a Board objective, targeted inline with 2013 full year results

Outlook

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

· H2 trading expected to be positive, accelerating and building on the Group's organic growth potential

· Momentum in cash generation is expected to increase in H2:2013

· Collaboration Model provides opportunity for significant bulk settlements and change to future cash profile

· Board confident of meeting the upper end of market expectations

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

Rob Terry, Founder and Executive Chairman of Quindell said: "The Group is pleased to report the continued progress during the first half of the year. Significant multiple contract wins have been achieved across the Group, with particularly strong growth in legal services and technology sales.

In Q2 the Group announced the signing of eight contracts in its Services Division that, in combination, are expected to increase the Group's run rate revenues by circa £100 million per annum from July 2013. The UK Services Division, and the Solutions Division across all key markets, particularly North America, are experiencing record levels of potential sales pipeline contract value and quantities.

These factors, the Group's existing run rate revenues and profits across both divisions, improved cash collection, and the other opportunities that we are signing in the market, underpin the Board's confidence in the Group's future success. The Board is confident that its growth and trading momentum shall continue into the second half of 2013 and beyond, meeting the upper end of market expectations."

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

INTERIM RESULTS STATEMENT 2013

Introduction

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. Within the following statement, the Group's performance for the current period has been compared with the preceding six months to 31 December 2012, rather than the six months to 30 June 2012, as this immediate prior period provides a more meaningful basis of comparison. This is due to a number of acquisitions either not having occurred in, or only being included in part, for the six month period to 30 June 2012, and the legal services businesses that were acquired in December 2012 were included in the six months to 31 December 2012 since the majority were under partnering agreements during this second half period.

Financial Review

The Group has enjoyed a strong first half of the current financial year. Gross Sales, which reflects the full scale of business in our legal services operation increased by 33% to £167.3 million (six months to 31 December 2012: £126.3 million, year to 31 December: £171.9 million). Revenues in the period were £163.3 million compared with £91.9 million for the prior six months to 31 December 2012 and £137.6 million for the whole of 2012. For the current period, the Software and Solutions revenues were £22.5 million (six month to 31 December 2012: £18.7 million) and the Technology Enabled Outsourcing Services revenues were £140.8 million (six months to 31 December 2012: £73.2 million). 

Adjusted EBITDA (which excludes exceptional costs totaling £6.3 million including those relating to acquisitions of £1.1 million and loss on the equity swap of £5.1 million, depreciation, amortisation and net finance expense) for the six months to 30 June 2013 was £54.0 million. This represents an increase of circa 45% on the prior six months to 31 December 2012, which was £37.2 million, and is £1.8 million ahead of the full year's figure for 2012 of £52.2 million. Despite the regulatory changes that came into effect on 1 April 2013 and the subsequent reduction in portal fees for legal services. Adjusted EBITDA margin for the Group at approximately 32% of gross sales (33% based on revenue) are still ahead of Management's guidance as the Group has continued to drive through efficiencies, integration savings and economies of scale.

Profit before tax for the period was £43.4 million (six months to 31 December 2012: £29.1 million, year to 31 December 2012: £41.2 million) and Adjusted profit before tax for the period was £52.5 million (six months to 31 December 2012: £35.1 million, year to 31 December 2012: £49.2 million). Profit after tax for the period was £34.3 million (six months to 31 December 2012: £22.3 million, year to 31 December: £31.9 million).

Basic EPS for the period was 0.9 pence per share (six months to 31 December 2012: 0.78 pence, year to 31 December: 1.17 pence), and Adjusted Basic EPS was 1.1 pence per share (six months to 31 December 2012: 0.94 pence, year to 31 December: 1.40 pence).

Cash Flow and Debtor Management

Through a focused approach to billing and trade debtor management, cash collection across the business continued to be according to and in some cases, ahead of plan. The Group has previously confirmed that in the first four months of this current financial year, the Services Division had collected cash representing approximately half of the debtor levels outstanding at the year end. By the end of July 2013, this had increased to over 82% for the Division as a whole, and circa 105% for Ai Claims Solutions, now trading as Quindell Business Process Services, on a standalone basis, without the benefit of any block settlements. This strong cash collection led to average trade debtor days at 30 June 2013 for the Group reducing to circa 4.8 months compared to circa 6.5 months as at 31 December 2012.

Total Gross Sales for the Group increased by 33% compared to the previous six months (with Gross Sales in H2:2012 including the legal services businesses acquired at the end of that year as the majority were under partnering agreements during this second half period). This growth was led by exceptionally strong growth in the legal services business following significant new business wins and as a result of the regulatory change introduced on 1 April 2013.

As a result of the Group's strong cash collection and a reduction in receivables in relation to acquisition related payments, total trade and other receivables increased by only 21% during the period to £243.9 million at 30 June 2013 (31 December 2012: £202.3 million) against Gross Sales growth of 33% and Revenue growth of 78%. Since their respective acquisition dates, Quindell Legal Services' receivables have increased by only 98% to £121.2 million as at 30 June 2013accounting for the vast majority of the increase in accrued income in the period  (December 2012: £61.3 million) despite case intake volumes increasing by 150% in the same period and Ai Claims Solutions receivables have reduced by 15% to £51.8 million at 30 June 2013 (April 2012: £61.3m), again despite recent growth in volumes.

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 the year. Cash at 30 June 2013 was £35.2 million, again significantly ahead of expectations, with net debt of £14.1 million.

In coming months, we anticipate that the Group's momentum in cash generation will increase, as the Group's approach to trade debtor management, now being undertaken by the Group's own specialist debt recovery team, "Compass Law", continues to gain traction. Compass Law have already taken responsibility for collection of the Mobile Doctors historic receivables, with collection rates per month increasing by almost 20% within the first two months of transfer, and overall responsibility for the Ai Claims Solutions historic receivables will be transferred by the last quarter of the current financial year.

Furthermore, the Group's Collaboration Model (which enables Quindell and insurers to work together and for both parties to benefit in the reduction of car hire durations, and the offering of initiatives such as cash alternatives to car hire in certain cases) provides the opportunity for significant block settlements of debt in the coming 12 months, as well as a providing a fundamental change to the cash profile of a significant part of the Group's Services Division as insurer debt is settled within up to one month of presentation of an agreed invoice.

Following recent discussions with insurers, the Group's guidance is now for circa 70% of the insurance market to sign up to the Collaboration Model. This is subject to final contract negotiation with elements signed in H2:2013 and H1:2014 as insurers representing circa 29.5% of the market (circa £5.8 million of Ai Claims Solutions historic aged debt) have already either signed up to or are at contract stage for adoption to the Collaboration Model. Insurers representing a further 28% of the market (circa £10.0 million of historic aged debt) have expressed formal interest and are moving to workshop stage for adoption to the Collaboration Model.

An equivalent Collaboration Model for the prepayment of legal costs is also now being investigated by the Group, and significant interest has been expressed by some major insurers as Quindell now represent approximately 1 in 5 of all claims they face. If successful, this represents a realistic opportunity to accelerate payment of over £50 million with no significant loss of profitability, changing an industry model for all future Legal Services revenues.

Exit of Equity Swap

The equity swap has now been exited by the Group. The Group recorded an exceptional non-cash charge of £5.1 million in the period for the six months to 30 June 2013 compared to the previously guided value of up to £6.0 million. The £5.1 million charge reflects in full the charge associated with the change in mark to market value of the swap receivable post the period end up to 1 August 2013, at which point the Group disposed of its interest in the equity swap, using it as consideration for the share element of its investment in Himex. The Group has no further exposure to the equity swap in the second half of 2013 or beyond and will not be required to take any further exceptional non-cash charges through its income statement.

Services Division

The first half of 2013 was a period of significant progress for the Group's Services Division with Gross Sales for technology enabled outsourcing services in the period of £140.8 million compared to £73.2 million for six month period to 31 December 2012.

The year started with the successful conversion of 100% of pilot programs to contract, and during the period 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 in revenue, 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 new contracts with major brands such as Renault and Honda and adding to the over 50 independent outsourcing and referral partners now providing significant volume to Quindell post the regulatory changes in the personal injury market that became effective in April 2013. This approach to different markets ensures that as a group, Quindell is not overly dependent on any one income source.

Key to the Group's success in this division and the driver of material organic growth is Quindell's ability to convert a high proportion of the opportunities provided by partners into serviced transactions. This, together with the quality of the end to end customer journey the Group offers, the high levels of customer satisfaction and its long held ethical approach of stamping down the cost of claims that is becoming increasingly important in the insurance industry, is leading to more partners wanting to use Quindell's services.

In April 2013, post the changes in the legal services market, the Group announced that it had both concluded its acquisition of Accident Advice Helpline, a leading ethical online consumer brand acting as the 'consumer champion' and providing access to justice for victims of non-fault accidents, and the acquisition of Compass Costs Consultants Limited, one of the UK's leading legal costs consultancy and costs drafting firms. At the end of June 2013, the Group acquired the accident rehabilitation and medical reporting specialists React and Recover, further enhancing its ability to service the growth and delivery of the Group's outsource proposition to the UK insurance sector.

Solutions Division

The Group's Solutions Division has similarly experienced a positive first half of the year. Revenues totaled £22.5 million for the period (compared to £18.8 million for the prior six month period to 31 December 2012) with £13.5 million, £6.0 million and £3.0 million being with Europe, North America and the Rest of the World respectively.

Quindell was recognised among the leading European providers of Insurance Claims Systems in Celent Claims Systems Vendors: European General Insurance 2012 and we now believe the Group, 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 March 2013, the Group acquired iSaaS Technology Limited, the leading cloud-based SaaS provider to the medico legal and legal services industries both in the UK and overseas. 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.

In May 2013, the Group acquired Quindell Property Services, a newly formed group bringing together a number of businesses owned by the vendors, related to the supply of outsourced property services and SaaS based enabling technologies. This transaction also enabled the Group to increase its shareholding in 360GlobalNet Limited from 19% to 60%. The Group's SaaS based technology and outsourcing property solution 'with you in five' was recently highlighted in the financial results presentation of one of the largest, innovative and influential direct insurers in the UK market. The Group is also now starting to develop what we expect will soon become a significant pipeline of opportunities in a number of the largest insurance markets around the world for this solution.

In July 2013, post the period end, 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. Himex is primarily focused on the US market and this provides significant synergies with Quindell as each business can cross fertilise use of both sets of their technologies to maximise on the global opportunities during this period of land grab and 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. Leveraging its unique market position in telematics, the Group is already negotiating five contracts for our usage and behavioral based insurance solutions in combination with Himex technology in our exclusive territories.

Acquisitions and Strategic Investments

Acquisitions represent a smaller part of the Group's growth strategy in 2013 than was the case for 2012, with any acquisitions during the remainder of the financial year typically being small relative to the size of the Group and likely to be of a tactical or in-fill nature. As previously announced the Group's criteria for acquisitions continues to be as follows:

Only pursuing earnings enhancing opportunities that have already been de-risked by working closely with the business prior to acquisition, and where significant synergistic growth is available.

Typically paying five to seven times profit after tax with a 12 month future warranted profit and cash generation targets, with claw backs if these warranted targets are not met.

Only issuing stock in respect of acquisitions at the greater of a 20% premium to current trading price or 17.5 pence per share, with the consideration stock locked-in for between 12 and 36 months and subject to orderly market restrictions.

The Group has a small number of existing strategic investments and is discussing increasing its shareholding in two of these investments via share-for-share transactions with the other investors as these are now reaching critical mass and delivering on mutually defined strategic goals which remain key to the Group's short and longer term strategy for its own shareholder value creation.

Integration

The integration of the business has moved ahead during the period with further consolidation of the Group's outsourcing teams, such as those involved in call centre and debt collection. These changes have provided, and will continue to provide, integration benefits to the Group, and it is expected that further integration benefits will be forthcoming 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.

By leveraging Quindell's Champion and Challenger technology to reengineer its own business processes the Group has already achieved close to 100% overall efficiency gain in cases per fee earner over the last six months whilst still seeing an increase in the average recoverable costs settled and a significant reduction from 6.5 to less than 5 months in the average case settlement period for MOJ portal cases. The volume growth that has been achieved within the legal services business is typically delayed by six weeks before it provides a waterfall effect of additional instructions for the Group's rehabilitation and medical reporting services which have also benefitted significantly from reengineering and volume benefits with the average cost per transaction to process in this business area reducing by approximately 60% in the last six months. Within Quindell Business Process Services the Group has also seen a circa 100% increase in revenue per capita and a significant improvement in margin now that the business' hire and repair volumes are more evenly matched. Looking at each of these business areas and their respective run rates at the start of the second half of the year, Quindell Business Process Services enters the new half year with run rate revenue of circa £100 million per annum and £7.2 million EBITDA. Quindell Legal Services enters with run rate revenue of circa £240 million and more than £60 million EBITDA. Following the six week delay in volume increase from legal to medical and rehabilitation from the Group's existing growth in case loads, the Quindell Health business area should also reach a run rate revenue of over £100 million and is already entering the second half of the year with run rate EBITDA of circa £7.2 million.

All these significant achievements could not be possible without the benefit of the Groups' technology platform, the quality of our people, consultancy led business process reengineering techniques and the fully integrated business model unique to Quindell.

Advisors and Full Listing or Potential Dual Listing

It remains the Board's intention for the Group to move to the Full List at the appropriate time, which is currently considered to be at the point of reporting the Full Year results for 2013 and at which time it is expected that the Company will also announce it's maiden dividend.

Important steps have been made during the period as part of the preparation process for the move across a number of areas to ensure that in each case, the Group's resultant position is commensurate with it's intended standing as a FTSE250 main market, or equivalent company.

Development of the Group's management team structure has progressed as Rob Terry's role was confirmed as Executive Chairman, the role of Chief Executive Officer was separated and two new divisional Chief Executive Officers, Robert Thomson (Solutions Division) and Robert Fielding (Services Division) were appointed. David Sandhu was appointed as Group Chief Operating Officer.

Towards the end of the period, the Group announced the appointment of Ian Farrelly as Head of Investor Relations, Group General Counsel and Company Secretary. Ian's role is to provide advice on all legal, regulatory and corporate governance matters affecting the Group as well as being responsible for overseeing the development of the Group's investor relations function to communicate the company's financial position, strategy, growth opportunities and business initiatives to investors and stakeholders. Ian joined Quindell from Genus Plc, following a 19 year legal and company secretarial career encompassing both UK and international roles in FTSE250 companies across the technology, business services and insurance sectors, and has a wide-ranging ability to deal with all legal and company secretarial requirements of international listed businesses as well as a listed company's move from AIM to the official list. In his role, Ian will also continue to develop and strengthen the Group's corporate governance regime including the creation of a global embedded risk management programme.

Looking ahead, the Company intends to increase the independent non-executive representation on the Board to ensure that the Group is fully compliant with best practice where applicable, for a FTSE250 main market company. It is currently anticipated that this will involve the appointment of at least three additional directors, two of whom are presently awaiting Solicitors Regulatory Authority approval prior to their appointment to the Board, and the retirement of one of the existing non-executives of the Board. It is also expected that the Board's senior non-executive role will be developed to that of non-executive Vice-Chairman.

On 2 July 2013, the Board appointed Canaccord Genuity Limited as joint broker and financial advisor and is now working alongside the Group's existing Nomad and broker, Cenkos Securities plc. In addition to this, the Group is commencing and progressing discussions with other existing and potential advisors as part of a tendering process to ensure it has the appropriate level of support for a FTSE250 candidate. Where appropriate, these will be announced in due course.

By the end of this year, the Group will have approximately 4.5 billion shares in issue when taking into consideration the c.110 million shares to be issued in the second half of 2013 as part of the Group's previous acquisitions including those associated with Accident Advice Helpline, Crusader, Quindell Motor Services and Quindell Property Services, and the potential activation of warrants over 250 million shares previously issued to the RAC. From a market capitalisation perspective, at any price above 13 pence per share, the Company would qualify for automatic entry into the FTSE250.

However it is the Board's intention to progress to full listing irrelevant of share price performance, and subject only to best advice from its appointed advisors. At the time of the move to Full Listing the Group shall also undertake a share consolidation as part of the listing process.

Taking into consideration the significant traction and progress that the business has already made and is expecting to continue to make in the second half of 2013 and beyond, the Board is also in discussions as to whether other alternatives should potentially be considered at this point, including a North American dual listing, to ensure the Board achieves the optimum valuation for the Company's shareholders.

Outlook

In the latter part of our first half year Quindell announced eight contracts in its Services Division 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. Growth in the Solutions Division is expected to continue and will be supported by our joint solution set with Himex and the implementation of solutions in a number of the top twenty North American insurers with a combined written premium of circa $6bn.

The UK Services Division, and the Solutions Division across all key markets, particularly North America, are experiencing record levels of potential sales pipeline contract value and quantities. These factors, the Group's existing run rate revenues and profits across both divisions, improved cash collection, and the other opportunities that we are signing in the market, underpin the Board's confidence in the Group's future success. The Board is confident that its growth and trading momentum shall continue into the second half of 2013 and beyond, meeting the upper end of market expectations.

Condensed Consolidated Income Statement

for the six months ended 30 June 2013

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2013

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 June 2013

Condensed Consolidated Statement of Financial Position

as at 30 June 2013

Condensed Consolidated Cash Flow Statement

for the six months ended 30 June 2013

1. Notes to the Condensed Consolidated Financial Statements

General information and basis of preparation

The consolidated interim financial statements include those of Quindell Portfolio Plc and all of its subsidiary undertakings (together "the Group") drawn up at 30 June 2013 and are neither audited or reveiwed. Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Subsidiaries are consolidated using the Group's accounting policies. Business combinations are accounted for using the acquisition method of accounting. This financial information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. Full accounts for the year ended 31 December 2012, which include an unqualified audit report, did not draw attention to any matters by way of emphasis, and did not contain statements under section 498 (2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies. The Group's audited consolidated financial statements for the year ended 31 December 2012 were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

Adoption of new and revised International Financial Reporting Standards

A number of new, revised or amended standards and interpretations are effective for the current financial year, but none have had any material impact on the condensed financial information.

Accounting policies

The unaudited consolidated interim financial information for the six months to 30 June 2013 has been prepared in accordance with accounting policies that are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2012, the key policies adopted being:

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the Income Statement in the period of acquisition.

Goodwill

Goodwill on the acquisition of a business is recognised as an asset at the date the business is acquired (the acquisition date) for both Group and subsidiary undertakings. Goodwill is measured as the excess of the sum of the consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the Group's interest in the fair value of the acquiree's identifiable net assets exceeds the sum of the consideration transferred the excess is recognised immediately in the Income Statement as a bargain purchase gain.

Goodwill is not amortised but is reviewed for impairment at least annually with any impairment recognised immediately in the Income Statement and not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of the goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis.

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, telecoms, finance, health, leisure and retail.

The Group's Outsourcing Division provides technology enabled 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 businesses, membership bodies or other non-profit making organisations. Where the Group enters into outsourced partnering agreements with third parties, revenue is recognised by the Group to the extent that it is contractually entitled to invoice or accrue amounts in respect of those revenues, that the amounts are determinable and that collection is reasonably assured.

Revenue earned by the Outsourcing Division

The Group earns revenue 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. In the case of certain of the Group's revenue streams the amount of revenue recognised is measured by reference to the total amounts likely to be invoiced less a suitable allowance to recognise the uncertainties remaining.

Income from fees that cover a delivery period is recognised over the related period. On certain sales and service contracts where there are fixed and contracted term lengths and no other services are required to be performed by the seller during the remainder of the contract, for example where the Group acts as a broker for the sale of a product on behalf of another party, then these revenues are recognised in full at the point of sale of the product or service to the third party.

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 are 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 Segments

The Group has two reportable operating segments, which are separately disclosed, together with a central cost centre which includes unallocated corporate costs.

* Adjusted EBITDA is EBITDA before exceptional costs

3. Exceptional costs

4. Taxation

The tax charge is £9,083,000 for the six month period ended 30 June 2013 (6 months ended 30 June 2012: £2,539,000, 12 months ended 31 December 2012: £9,339,000).

 5. Earnings per share

6. Cash Flow

Cash generated from operations

Reconciliation of net cash flow to movement in net funds

7. Acquisitions

The Company made two significant acquisitions during the current period, and four smaller acquisitions.

Accident Advice Helpline

On 8 April 2013 the Group acquired the entire issued share capital Abstract Legal Holdings Limited, the parent company of Accident Advice Helpline. Accident Advice Helpline is a leading ethical online consumer brand acting as the 'consumer champion' and providing access to justice for victims of non-fault accidents. The provisional fair value of the identifiable assets and liabilities of Accident Advice Helpline at acquisition date are set out below.

The goodwill of £51.0 million comprises 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.

Iter8

On 18 April 2013 the Group acquired the entire issued share capital of Iter8 Inc ("iter8"), a leading Software as a Service ("SaaS") based provider to the North American insurance broker and agent market. The provisional fair value of the identifiable assets and liabilities of iter8 at acquisition date are set out below.