Quindell PLC Preliminary Results (5494D)

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RNS Number : 5494D

Quindell PLC

31 March 2014

RNS Release Embargoed until 7.00 am 31 March 2014

Quindell Plc

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

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013

Quindell Plc (AIM: QPP.L), the provider of sector leading expertise in software, consultancy and technology enabled outsourcing in its key markets, being insurance, telecommunications and their related sectors is pleased to announce results for the year ended 31 December 2013.

FINANCIAL HIGHLIGHTS:

   --      Revenue increased by 133% to GBP380.1 million (2012: GBP163.0 million) 
   --      Gross sales(1) increased by 134% to GBP398.7 million (2012: GBP170.2 million) 
   --      Basic EPS of 1.98 pence (2012: 1.00 pence), an increase of 98% 
   --      Adjusted EPS(1) of 2.54 pence (2012: 1.45 pence), an increase of 75% 

Adjusted EBITDA(1)

   --      Adjusted EBITDA  increased by 164% to GBP137.7 million (2012: GBP52.2m) 
   --      Adjusted EBITDA margin of 36% (2012: 32%) based on Revenue 
   --      Adjusted EBITDA margin of 35% (2012: 31%) based on Gross Sales 

Profit Before Tax

   --      Profit Before Tax increased by 202% to GBP107.0 million (2012: GBP35.4 million) 
   --      Adjusted Profit Before Tax(1) increased by 172% to GBP133.7 million (2012: GBP49.2 million) 

Full Listing Preparation progressing to Plan

-- Prospectus will be submitted to UKLA by mid April, with listing targeted before the FTSE indices review in early June

-- Success of Quindell original strategy validated with margins increasing now operations are fully integrated

-- Last two years results now fully validated - no fundamental changes to Accounting Policies or KPI's

-- Significant Organic Growth now delivered with market expectations being exceeded for twelve quarters in succession

   --      Longer term Adjusted EBITDA margin guidance increased to 30%+ from 25%+ 

-- All 2013 KPI's (except Gross Sales, due to success in driving down claims costs) exceeded market expectations

2012 Statutory reported numbers updated to reflect early adoption of IFRS 10 in preparation for Full Listing

-- IFRS 10 changes definition of control which has resulted in earlier consolidation of acquired legal services businesses

-- Revenue increased by GBP25.4 million, Profit after tax reduced by GBP3.7 million and Net assets increased by GBP21.0 million

-- Operating Cash flow lower with earlier consolidation and elimination of pre-acquisition loans but Net Cash increased by GBP0.8 million

2013 Cash flow and Debtors

-- Adjusted operating cash inflow(1) of GBP20.1 million during period of funding significant organic growth (2012: GBP38.8 million)

   --      Operating cash inflow(2) of GBP3.2 million (2012: GBP18.4 million) 

-- Cash collection across the business according to or ahead of plan in all key areas during 2013 and in Q1 2014

-- Cash generation of business model validated during 2013 with over GBP270 million of cash collected - circa 185% of the value of total trade related receivables (including accrued income) as at 31 December 2012

-- Trade receivable days at December 2013 reduced to circa 4.7 months (December 2012: 6.5 months, June 2013: 4.8 months)

-- Trade receivables over 12 months reduced by GBP6m (20%) during 2013 with Collaboration model adoption and by litigating as required

-- Cash at December 2013 GBP199.6 million (2012: GBP48.1 million); Net Funds of GBP140.2 million (2012: GBP17.4 million)

Laurence Moorse, Group Finance Director of Quindell said "2013 has been another year of significant progress for Quindell, having completed the majority of our acquisitions in 2012 creating a market leading technology enabled outsourcing platform for the servicing of claims for the UK insurance industry. It has been a year for delivery of new customer wins and organic growth with only 11% of revenue coming from acquired businesses in the year.

At the same time, the Group's Solutions Division has exceeded all market expectations, and has been developing its market leading position in Connected Car solutions (telematics) providing a platform for significant growth in this emerging global market. Already, almost as much Solutions revenue is derived from North America as is achieved in Europe. The Group's financial strength, and the opportunities that it has to capitalise on its market position leads us to increase our longer term Adjusted EBITDA margin guidance by five percentage points for the second time in six months to 30%+ as the strength of our business model is demonstrated."

Notes

1. See note 4 for adjusted measures.

2. Operating cash flow after exceptional costs and before net finance costs and taxation

OPERATING HIGHLIGHTS:

   --      Focus on organic growth and earnings enhancing acquisitions throughout 2013 

-- Three material acquisition groups: Legal, Health and Claims with all core functions integrated

   --      Integrated management team in place with two divisional Group CEO's, 
   --      Proven record in earning enhancing acquisitions supported by Advisory Board 
   --      Further earning enhancing vertical integration opportunities exist 

Services Division

-- Significant contract wins announced throughout 2013 driven by regulatory changes c.GBP450 million per annum additional revenue

-- Gross sales increased by 125% year on year to GBP318.3 million (2012: GBP140.1m) at an Adjusted EBITDA margin of 29%

-- Over 60 independent outsourcing and referral partners providing significant volume to the Group

   --      Margin continues to increase due to technology enablement and scale of business 

Solutions Division

-- Software & consultancy revenue increased 168% to GBP80.4m significantly exceeding market expectations (2012: GBP30.1m)

   --      Recognised as joint market leader for European claims by Celent 
   --      Now believed to be clear market leader for European claims technology by substantial margin 
   --      Signed multiple new technology contracts and extensions across key markets and geographies 

-- Sales to North America of GBP33.8 million now almost match those to Europe of GBP39.5 million

Connected Car and Telematics

-- Independent study by Ptolemus confirms Quindell/Himex as global leader in all three segments: black box, OBD dongle, smartphone

-- Our position in insurance telematics well advanced in the UK with brands representing 80% of 2013 growth using Quindell solutions

-- Group already in telematics roll out with three of the top twenty US insurance providers, and pilots conducted with another four

Recent news and Outlook

   --      Q1 2014 anticipated to deliver over GBP50m Adjusted EBITDA up 100% on Q1 2013 

-- All KPIs to date ahead of market expectations being profitability, cash generation and EBITDA margin

   --      Organic growth represents an increasing percentage of overall strategy 
   --      Over GBP450 million of outsourcing revenue per annum wins announced in Q1 
   --      Market expectations  for technology revenues  likely to be significantly exceeded in 2014 

-- Criteria for acquisition remains but with any shares issued at greater of 20% premium or 50p (2012: 17.5p)

   --      Progressive dividend policy being adopted with maiden dividend of 0.1 pence announced today 

Rob Terry, Founder and Executive Chairman of Quindell said: "Our strategy, set at the time of our listing on AIM in May 2011, needed to be proven to the market, to our industry and to all other stakeholders during 2013. By doing so, Quindell has the potential to be rewarded with a market rating that is more appropriate for the growth and high quality revenue visibility that it provides for any investor. So in summary, 2013 was a year to provide "proof". We delivered on our goal of significantly exceeding market expectations with 168% growth in technology solutions revenue, our highest margin and most cash generative segment.

I am therefore pleased to be able to present today to shareholders, employees and other stakeholders a very positive picture of our strategy being reality, and being able to confirm that as a Group, we have established the scale and substance from which we will be able to grow further on a global basis and create additional significant value for all stakeholders.

Trading in 2014 has also been ahead of plan for all key performance indicators, being profitability, cash generation and EBITDA margin. We are determined to ensure we achieve the optimum valuation for the Company's shareholders, the best and most innovative services and technology for our clients, and a great place to work for our staff. All of this gives me and our team, immense confidence in our ability to grow from this platform and continue the success in 2014 and beyond exceeding current market expectations."

For further information:

 
 Quindell Plc 
  Rob Terry, Founder & Executive Chairman          Tel: [phone] 
                                                 [e-mail] 
  Laurence Moorse, Group Finance Director          Tel: [phone] 
                                                [e-mail] 
 Cenkos Securities plc 
  Joint Broker and Nominated Adviser              Tel: [phone] 
  Stephen Keys/Bobby Hilliam 
 
  Canaccord Genuity Limited                       Tel: [phone] 
  Joint Broker and Financial Advisor 
  Simon Bridges/Bruce Garrow 
 
   Media Enquiries 
   Redleaf Polhill Limited                        Tel: [phone] 
   Rebecca Sanders-Hewett/Jenny Bahr          [e-mail] 
 

EXECUTIVE CHAIRMAN'S REVIEW

Introduction

Our strategy, set at the time of our listing on AIM in May 2011, needed to be proven to the market, to our industry and to all other stakeholders during 2013. By doing so, Quindell has the potential to be rewarded with a market rating that is more appropriate for the growth and high quality revenue visibility that it provides for any investor. So in summary, 2013 was a year to provide "proof".

It was also a year for delivery, a year in which key decisions were taken with shareholders and one of achieving our major objectives for the year. These objectives included signing new contracts representing significant organic growth. We delivered, with over GBP550 million per annum of business announced in the period up to the end of 2013 (subject as always to future claims frequencies). Together with new business wins announced so far in 2014, this figure now stands at approaching GBP1 billion per annum, with multiple material contract wins being achieved by both of the Group's two divisions. We have also delivered on our objective of particularly strong growth in legal, health and rehabilitation services which are the highest generators of margin within our technology enabled outsourcing business. In addition, we delivered on our goal of significantly exceeding market expectations with 168% growth in technology solutions revenue, our highest margin and most cash generative segment.

Connected Car Solutions

Most importantly, and a key objective for the Board, circa 50% of technology solutions revenue growth came from Connected Car Solutions, approximately GBP15 million of which was in relation to our work in partnership with Himex in the US and GBP9.4 million of which was in relation to our work with ingenie and its underwriting partners in the UK, Canada and the US. Included within these revenues in relation to Himex and ingenie is approximately GBP6 million for the provision of telematics devices on a correspondingly lower margin than the remainder of our business in this area. In Connected Car Solutions, Quindell is recognised as a global market leader in black box, OBD dongle and smart phone based telematics. Independent analysis as recently as December 2013 confirmed Quindell (including Himex) as the only vendor in the top three globally in all three categories, but, announcements made by the Group during 2014 should, we believe, ensure the market is in no doubt that we are the clear number one telematics service provider globally.

The confirmation of our leading position in Connected Car Solutions could not come at a better time for the Group with certain key patents in the US that previously prohibited growth in the insurance sector now being dismissed by the US Government. This opens the way for mass market adoption in a region that already generates nearly as much technology solutions revenue for Quindell as our home territory Europe and where the Group is already rolling out with three of the top twenty insurance providers in the US, and pilots have been conducted with another four. Our pipelines are also growing beyond all prior expectations.

We enter 2014 with massive growth potential in a segment that is supported by predictions from all independent analysts covering the space. The Board recognises the scale of this opportunity and proof of this is provided by the recent contracts announced, the recent distribution deal announced for Asia and the Middle East, and our prediction that the business can grow to 10 million subscribers for which we will be paid recurring revenues in the medium to longer term. This area of the business will be a focus of future investment for the Group to enable it to make further upgrades to the subscription targets and to maximise on the significant growth potential during this period of global land grab.

Working capital vs growth

During 2013 a key decision had to be made. Should we focus on delivering the best operating cash generation we could, as we did to prove the sceptics wrong at our half year results for 2013, or should we reinvest our cash generated from both divisions to deliver even more sustainable EPS growth for our investors over the long term? We canvassed opinion of the key influencers of the business. Our customers, who wanted us to continue to win business to help drive down the cost of claims for the industry, our internal stakeholders that are key to delivering our success, and our existing investors as the owners of the Company. They left us in no doubt. They all wanted growth, with major brand wins in the mix, to ensure we had long term contracts and clear independent industry references supporting the success of our strategy. We acted, delivering a major contract with Direct Line Group and contracts with numerous other key brands. But our investors wanted more, and our 100% success in converting pilots into long term contracts indicated we could deliver it. So in November 2013, with very good support from our existing and key new shareholders, we raised a further GBP200 million (net of expenses) to provide the capital to underpin continued significant organic growth during 2014, and set ourselves a target for more contract wins that would represent a further GBP450 million of outsourcing revenue per annum. Since then, we have again delivered on our promise, signing all the contracts needed within fourteen weeks of the fundraise, thus ensuring we can exceed the growth objective set at the time of raising the capital. Since which time our share price has more than doubled, providing a good level of return for those that supported the fundraise.

We continue to have sufficient working capital resources available including cash at bank, cash generation and debt facilities to deliver over 4p of EPS in 2014. Our last objective in this area was that post the fundraise in November the Group should not need to raise any more capital to support its expectations of organic growth within the Services Division in 2014 and beyond. This of course can only be achieved by continuing to be selective in terms of the work and the amount of growth we take on and therefore by turning away business, for internal processing, beyond the 16,000 cases per month that our legal services operation has budgeted for where it incurs an upfront cost of acquisition of up to GBP800 per case (in aggregate being circa GBP12 million per month). This is sustainable due to the significant cash generation that is already being achieved from historic cases and through the cash generation and working capital available within the rest of the Group. This level of case acquisition within legal services remains our internal budget for 2014 and beyond and would represent a run rate of circa GBP650 million per annum of legal services revenues on this volume of cases. This would imply circa GBP110 million in health and rehabilitation services and with a budgeted GBP130 to GBP150 million of non-fault hire and repair on run rate. These run rate levels would all be expected to be achieved prior to the end of June 2014 and by taking into consideration the announcements the Group has already made. The Solutions Division is already generating significant operating cash inflows for the Group, so clearly has no need for additional funds to meet its ongoing cash commitments and has in fact been a major support to the cash requirements of the Services Division during this period of significant growth.

We would not have achieved the level of support for the fundraise, which was significantly over subscribed, in November if we had not met another key objective for 2013 which was to make it clear that our business model today is already generating significant amounts of cash. Cash generated by the Group during 2013 was significant with over GBP270 million collected from customers. This represents circa 185% of the value of total trade related receivables (including accrued income) as at 31 December 2012, demonstrating our ability to convert our profit into cash. Ongoing improvements also continue to be made in trade receivable days, which at December 2013 has reduced to circa 4.7 months (December 2012: 6.5 months, June 2013: 4.8 months) and with significant further progress expected during 2014. The small proportion of our total receivables, all of which were inherited with our acquisitions, and that are over 12 months at year end reduced, with debts past due over a year old reducing by a further GBP6.0 million (a 20% reduction) during 2013. This has been achieved in part by adoption of the Collaboration model for hire and repair contracts and associated block settlements without write-downs, and more recently, post our acquisition of Compass Cost, by litigating if required. These actions in combination are proving very successful in ensuring earlier debt collections. We have rigorous enforced provisions in place across all categories of our trade receivables which of course have now also been audited.

Organic growth

We set out to demonstrate that the majority of our growth would be delivered organically. Of the circa GBP400 million of gross sales for 2013, which included growth of GBP228 million, only GBP40 million of this revenue was associated with businesses acquired in the year and in reality more than a third of the revenue that was earned by these businesses would not have been possible had they not been acquired by Quindell. So only circa 10% of our revenue came from acquired or synergistic revenue during 2013 and 90% was delivered organically. Clearly the quantum of organic growth that will be delivered during 2014 having announced new contracts of circa GBP1 billion per annum even with the timing of the roll out of these contracts across the year, it is clear that the growth in 2014 will significantly dwarf that of 2013. This provides further proof of our organic growth delivery.

Industry contribution

Another objective was to not only be recognised for our financial success but also our contribution we made to the industries that we serve. The Group has won numerous awards during 2013 and already in 2014 has been shortlisted for a significant number of awards to be concluded over the next few months. So now, Quindell is recognised by both financial and trade analysts as number one in insurance technology in Europe and a leader in Usage and Behaviour Based Insurance globally. It is the largest technology-enabled claims outsourcing business for the UK insurance industry, and the only organisation ethically addressing the total cost of claims including personal injury and rehabilitation. Quindell is recognised as being committed to an ethical and open approach delivering a wide range of professional services to both telecoms and insurance customers. Through our services, we carefully manage the total cost of ownership of our solutions and the settlement of claims to the benefit of the insurance market and its associated service providers, delivering 20%+ saving through programs such as our collaboration protocol with at-fault insurers. These in turn drive down turnover for the Group whilst maintaining or improving the Group's margins.

Fulfilling on the Group's strategy to date has provided a platform to deliver disruptive business transformation solutions that improve efficiency and effectiveness in our core markets, whilst driving down costs. At the same time, this strategy is enabling us to use this platform to develop combined propositions that are compelling beyond traditional silo offerings, for the marketplace to achieve significant organic growth through extension of their brands in this period of major technology and regulatory change. This approach was all a core part of Quindell's original brand extension strategy when we listed the business in 2011.

More broadly, our ambition is to build the number one technology and outsource supplier to the Global P&C (property and casualty) insurance industry along with its related sectors. We believe that our unique combination of services and technology, including our Connect Car solutions, expressed in our collaboration protocols and other industry initiatives will halt and then reverse the trend of declining underwriting results for our insurer customers. Quindell's original ambition to deliver a business of over GBP1 billion of revenue is clearly within our grasp, but this ambition no longer seems relevant when it is clear that the market opportunity now exists to comfortably double this goal within the medium to longer term.

I am therefore pleased to be able to present today to shareholders, employees and other stakeholders a very positive picture of our strategy being reality, and being able to confirm that as a Group, we have established the scale and substance from which we will be able to grow further on a global basis and create additional significant value for all stakeholders.

Progressive dividend policy

In light of the confidence we have with the Group's position and future prospects, I am pleased to be able to confirm the Board's decision to declare a maiden dividend to shareholders at a value of 0.1 pence per share and that payment will be made on 2 May 2014 to shareholders on the register as at 11 April 2014. The Company will also be adopting a progressive dividend policy from this day forward. Further proof that we once again deliver on the promises that we make to shareholders. It is clear that the Company has the potential to pay a much higher dividend, but we have paid exactly what we indicated we said we would as at this time as we can best serve shareholders by continuing to leverage the capital within the Company so they can continue to enjoy the return on capital that we have delivered, being an average of 22% over the last two years provided that our strategy continues to deliver, which the Board has every confidence it will, as it has since our listing in May 2011.

Full Listing and potential dual listing

Our final proof was to prepare the business for a UK full Listing and a potential North American listing post the announcement of our 2013 audited results. The Board is pleased to report that its Full Listing is progressing to plan. We now have each of our last two years results fully validated with no fundamental changes to accounting policies or Key performance indicators resulting from that review other than to reflect as needed the adoption of new accounting standards that have come in force since last year. Our prospectus will be submitted to UKLA by mid April, with Listing targeted for early June in order that we are Listed in time for the reviews which takes place at the end of June. At which time, as a Premium listed company with a market cap of our scale (subject to share price movement), we would expect to join either the FTSE250 or if appropriate the FTSE100. The business is required to show a three year track record following its original strategy and under the guidance of materially the same board and management team. Quindell has followed the same strategy since its inception, has completed a number of acquisitions but none of which are material compared to the significant organic growth which has now been delivered. Our strategy is clearly working with market expectations being exceeded by the Group for twelve quarters in succession.

Important steps have been made both during 2013 and since the year end as part of the preparation process for the move to Premium UK Listing. These steps have been 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 or FTSE100 main market participant, or equivalent company.

Development of the Group's management team structure has progressed as my role was confirmed as Executive Chairman, and was supported as such long term by the majority of the Group's major shareholders. The role of Group Chief Executive Officer was separated and two new divisional Group Chief Executive Officers, Tim Scurry (Digital Solutions Division) and Robert Fielding (Services Division) have been appointed. Robert Thomson, who was previously Group Chief Executive Officer for the Digital Solutions Division is now deputy Group Chief Executive Officer for the Services Division to ensure breadth of management is in place as we start to scale this part of the business internationally and since this area of the business represents close to two-thirds of the profit of the Group.

During the year, the Company increased the independent non-executive representation on the Board and we were delighted that in September 2013, Robert Bright and Bob Cooling agreed to join the Board having both been members of our Strategy Integration and Advisory Board since 2012. The Group has grown significantly in the last two years and these changes reflect this, with the appointment of two new independent non-executive directors who between them have significant experience, particularly in regards to the international insurance sector and the management and development of large people-based organisations.

Also, the Board's senior non-executive role was developed to that of non-executive Vice-Chairman. I was and remain personally delighted that Tony agreed to broaden his role as senior independent non-executive director. Tony's experience, challenge and input is very much valued and in this new role, he has already been able to provide further contribution to the Group's overall leadership and governance. The contribution of our non-executive board and advisory board has also been invaluable in helping to define and deliver on our unique selling points for insurance and to ensure compliance with our overall governance objectives and acquisition criteria.

In July 2013, the Board appointed Canaccord Genuity Limited as joint broker and financial advisor and since this date has been working alongside the Group's existing Nomad and broker, Cenkos Securities plc. and both supported the fundraise in November 2013. Further key appointments have been made in 2014 in relation to corporate development and investor relations, adding in both cases people that have significant experience working at blue chip investment banks. Additional potential non-executive directors are having applications prepared for review by the Solicitors Regulation Authority before we can confirm their appointment. Subsequent announcements are expected to be made confirming these appointments in due course as we progress on our Full Listing process.

In further preparation for this event, we have been advised to consider future changes to accounting standards and have chosen to take early adoption of IFRS 10 so that for listing, our published results already reflect the required presentation of the business now that the standard has become mandatory in 2014. IFRS 10 changes the definition of control. This has resulted in earlier consolidation of our acquired legal services businesses for both 2012 and 2013, and has changed a number of statutory reported numbers for 2012. Revenue has increased by GBP25.4 million, Profit after tax has reduced by GBP3.7 million, Net assets have increased by GBP21.0 million and the operating Cash flow during 2012 is now lower due to the earlier consolidation and elimination on consolidation of loans provided to these businesses pre-acquisition. However, the ultimate net effect of this is at the 2012 year end there is actually an increase in net cash of GBP0.8 million on the balance sheet.

Future margins and working capital

The success of the Quindell original strategy has also been further validated in both 2012 and 2013 with margin guidance being increased now that our operations are fully integrated and the mix of our long term business established. I am pleased to confirm that the Board has agreed to once again increase its longer term Adjusted EBITDA margin guidance to 30%+ from its current guidance of 25%+. The background to which is further detailed in Laurence's Financial Review. I would like to take this opportunity to thank our two divisional Group Chief Executive Officers, their teams and the Group's finance teams on the hard work that has gone into delivering this fantastic development of our business.

Lastly, demonstrating the Group's future working capital needs is also a key component of the listing process. Our working capital model demonstrates that our needs are fully covered and in fact with any reduction in volume or cessation of significant growth, the business very quickly becomes significantly more cash generative. I am pleased to report that the Group's performance in Q1 in relation to cash generation is significantly ahead of the guidance we gave at the time of our fundraise. In fact, all 2013 KPI's as well as KPIs in Q1 2014 (except Gross sales, due to our success in driving down claims costs) have significantly exceeded market expectations yet again. With regards to the potential dual or North American listing, we are conducting an investor roadshow in late April with a major US based investment bank following our 2013 results roadshow to confirm appetite and demand for any potential dual listing in the US market. We are also attending technology conferences in the US with two leading investment banks during the summer. Once the business has been fully listed in the UK the Board will review the appropriateness of pursuing a second listing taking into consideration the results of these prior activities.

Financial Review

Revenues in the year increased by 133% to GBP380.1 million (2012: GBP163.0 million). Gross Sales, which reflects the full scale of business in our legal services operation increased by 134% to GBP398.7 million (2012: GBP170.2 million). Within this, Solutions revenues were GBP80.4 million (2012: GBP30.1 million) and the technology enabled outsourcing Services revenues were GBP299.7 million (2012: GBP132.9 million).

Adjusted EBITDA for the year (profit before tax excluding amortisation, IFRS 10 adjustment, share based payments, depreciation, interest and the exceptional costs as described in note 2 increased by 164% to GBP137.7 million (2012: GBP52.2 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 36% of revenue (34% based on gross sales) are still ahead of the Group's longer term guidance as the Group has continued to drive through efficiencies, integration savings and economies of scale. Note 4 describes the Group's key performance indicators as well as the Group's key performance indicators including the IFRS 10 adjustment.

Profit before tax for the year increased by 204% to GBP107.0 million (2012: GBP35.4 million) and Adjusted profit before tax for the period increased by 183% to GBP133.7 million (2012: GBP49.2 million). Profit after tax for the period increased by 203% to GBP82.7 million (2012: GBP27.4 million).

Basic EPS for the period was 1.97 pence per share a 96% increase (2012: 1.00 pence), and Adjusted Basic EPS was 2.54 pence per share (2012: 1.45 pence), an increase of 75%.

Operating cash flow after exceptional items before interest and tax was an inflow of GBP3.2 million (2012: GBP18.4 million). Adjusted operating cash flow, which excludes exceptional costs, interest, tax and adjustments arising from the adoption of IFRS 10 was GBP20.1 million for 2013, significantly ahead of market expectations (2012: GBP38.8 million). Both of these measures reflect a strong performance in a business that is delivering significant, sustainable organic growth.

The Group's cash balance at 31 December 2013 was GBP199.6 million and total borrowings were GBP59.4 million, leading to net funds of GBP140.2 million (2012: GBP17.4 million). The Group's year end balance sheet position for 2013, which recorded net current assets of GBP330.7 million (2012: 100.2 million), is the strongest in the Group's history.

The Group's operating cash inflow for the final quarter for 2013 was ahead of market expectations despite some block settlements with at-fault insurers being completed in Q1 and Q2 2014. This over performance was due to strong cash management and debtor controls and in particular, performance ahead of plan regarding cash collection from the Solutions Division.

Collaboration protocols

The Group's new and innovative collaboration protocols were launched during the year enabling Quindell and at-fault insurers to work together and for both parties to benefit in the reduction of costs. In the case of collaboration within car hire, benefits include reduced car hire durations, and the offering of initiatives such as cash alternatives to car hire in certain cases. From Quindell's perspective, it also provides the opportunity for continued significant block settlements of debt, 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. During the year, meetings were held with most of the major UK insurers, and the Group communicated its expectations that the proportion of take-up of collaboration protocols would ultimately increase to approximately 75% to 80% of the market. Momentum in the pace of adoption of the Model grew throughout the second half of 2013 and has continued to increase into 2014 providing confidence that this guidance will be met or exceeded during the first half of 2014.

A second collaboration protocol, for legal services leading to the prepayment of legal costs is also continuing to be developed by the Group. Significant interest continues to be expressed by some major insurers in this protocol with the expectation that this will result in a change in the model for the industry that will reduce costs for insurers and accelerate payment of fees to Quindell without any net loss of profitability whilst maintaining protection for consumers. The Group expects that ultimately up to 75-80% of insurers will be operating under this protocol by the end of the financial year 2014, but that roll out will not commence until the collaboration protocol for hire has been completed as ultimately it is the same teams within insurers that will engage on both.

Services Division

The Group's Services division increased revenues by approximately 126% year on year to GBP299.7 million (2012: GBP132.9m), and gross sales by 127% to GBP318.3 million (2012: GBP140.1 million) at an Adjusted EBITDA of GBP91.0 million and 29% margin based on gross sales. Quindell's Services Division is the largest technology enabled claims outsourcing business for the UK P&C insurance industry handling some element of between 25 to 30% of all auto claims, and is the only UK outsourcing organisation ethically addressing the total cost of claims including personal injury and rehabilitation.

At the start of the year prospective customers were needing to address the impacts of regulatory change that were coming into force within the UK insurance market on 1 April 2013. This led to accelerated sales cycles and further contract wins throughout the year for the Group's 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. The Group was successful in converting 100% of pilot programs to contract, and the already accelerated sales cycles were also subsequently assisted by new clients taking references from existing clients rather than initiating further pilots.

Throughout the year the Group has announced a series of significant contract wins. 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 GBP100 million per annum in revenue, and a GBP20 million contract with one of UK's largest direct insurers.

In September 2013 the Group confirmed its expansion into North America with its 26% investment and option to acquire PT Healthcare Solutions Corp ("PT Health"), a leading provider of healthcare and rehabilitation services with over 100 physiotherapy and rehabilitation clinics across Canada. Motor vehicle accidents are not one of its key sources of work currently, and this provides the opportunity for Quindell to enter the market and to bring volume from its own partners, including the Insurance Broker Association of Ontario ("IBAO"), with whom Quindell has been building a relationship during 2013,.thereby assisting the industry within Canada to stamp down the cost of claims in this important area of claims leakage.

In September 2013 the Group also announced the acquisition of 25.3% of the issued share capital of Nationwide Accident Repair Services plc, the largest dedicated provider of accident repair services in the UK. Ultimately, having a direct ownership stake in a repair services network will enable us to take advantage of the volume we manage for our clients and broaden our overall proposition in insurance and motor related outsourcing.

In October 2013, we announced that the Group has reached agreement with 10 key brands of varying sizes for over GBP150 million of revenue per annum as well as a GBP50 million per annum contract win with Direct Line Group the largest retail general insurer in the UK. This new hire contract was significant from day one, being worth over GBP150 million during its three year period and followed a competitive market evaluation, rigorous due diligence and selection process by Direct Line Group. Of these GBP200 million additional annual run rate revenues, circa GBP150 million per annum commenced in Q4 2013 and circa GBP50 million commenced as from Q1 2014.

Solutions Division

The Group's Solutions Division has similarly experienced a positive year. Revenues totalled GBP80.4 million during 2013 (2012: GBP30.1) with GBP39.5 million, GBP33.8 million and GBP7.1 million coming from Europe, North America and the Rest of the World respectively. Adjusted EBITDA was GBP51.4 million, a margin of 64% (2012: GBP24 million at 80%) representing a contribution of approximately 37% of the Group's Adjusted EBITDA in the year, and with a particularly strong cash generation profile.

Quindell's Solutions Division is recognised in the industry by both financial and trade analysts as number one in P&C insurance claims technology in Europe. Quindell is a global technology supplier of P&C complete insurance ERP solutions, a global technology supplier in telecoms with expertise in OSS/BSS, and have unique expertise in online/social media sales and service. In addition we are seen as the global leader for 'Black Box Telematics' Usage and Behaviour Based Insurance. As a result, the Division has experienced rapid expansion in North America with acquisition of iter8 and establishment of Quindell Solutions Inc., and signed multiple new technology contracts and extensions across key markets and geographies including major contracts in telematics.

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 first six months of 2013, 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 for Quindell.

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.

Connected Car and Telematics

The Board believes that the scale of the opportunity of this Division is not fully reflected in current market expectations, particularly with regard to telematics led contracts which in 2013 already represented approaching GBP40 million of high margin, cash generative revenue for the Group and with more than half from North America.

For Quindell, our charter clients for telematics, including our associate ingenie, were more than simply car insurance for young drivers and represented more than 'niche' segments of the market. Rather, they represented a whole new approach to motor insurance, and one that in time has the potential to become mainstream as a result of the superior underwriting results it offers to insurers and the access to reduced premiums that insured drivers can enjoy. Telematics and the concept of a learning solution which enables the insurer to offer reducing premiums is revolutionary for car insurance, but the technique is now accepted, and a tipping point in its application is being reached. This change, we feel, is as significant as telephone sales were for the insurance industry and the resultant success of Direct Line Group.

Globally, the Group's strong positioning is supported by the findings of Ptolemus Consulting, which in its 2013 Global Study into Usage Based Insurance the Quindell/Himex proposition was the only solution out of the 77 providers surveyed that was listed in the top three in all categories: black box, OBD dongle and smartphone. The Group has previously highlighted the opportunity to build a 10 million subscriber base each paying between $5 to $15 per month, equating to $600 million to $1.8 billion per annum in high margin recurring technology revenues in the medium to long term. This is led by the Group's telematics insurance and its other Connected Car initiatives.

The Group's position in insurance based telematics is already well advanced in the UK where Quindell currently enjoys a dominant market share. Over the last year, the UK market has seen a growth in the number of telematics policies sold by circa 116,000, with ingenie representing approximately 20% of black box insurance growth. Further, in combination with its other clients, the Group is providing technology to leading brands in the telematics space that in combination represent approximately 80% of the growth over the last year in the UK.

In July 2013, the Group announced its 19% investment in Himex Limited, a business focused on delivering disruptive insurance technology solutions enabling game changing usage based insurance propositions that leverage the full insurance value chain. 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 had 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 was also appointed during 2013 as 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 negotiated a number of significant contracts for its usage and behavioral based insurance solutions in combination with Himex technology in our exclusive territories.

Of particular significance was the agreement that was reached with the Insurance Brokers Association of Ontario ("IBAO") for telematics technology. Quindell will provide the technology for all of the IBAO's telematics initiatives to its membership base representing circa 12,000 brokers who directly or indirectly along with their insurance partners provide approximately 60% of auto insurance policies in Ontario, representing over 6 million policies. The agreement is valued at over C$6 million by the end of 2014 and implies more than C$20 million of technology revenues over the minimum five year exclusive contract term, although the full potential from this agreement to Quindell could be substantially in excess of the C$20 million.

At the end of October 2013, we announced that RSA and Gore Mutual are first movers for broker-owned telematics in Canada. RSA and Gore Mutual are amongst first movers to the Insurance Brokers Association of Ontario broker-owned telematics offering which is supported by Quindell's technology and outsourcing solutions.

In November 2013 we announced a telematics and outsourcing win with CAA and CAA Insurance, covering circa 1.9 million members in Southern Ontario and with sister organisations across Canada covering a combined 5.8 million members. The contract represented the second of several contracts for Quindell's telematics offering and to date the largest North American deal for Quindell. Based on a 10% to 30% telematics take-up in Canada with automobile association members, there is revenue potential of C$79m to C$237m per annum. CAA South Central Ontario (CAA SCO), has also contracted with Quindell to provide their auto club members and insurance customers with new telematics technology and services.

Acquisitions and Strategic Investments

Acquisitions represent a smaller part of the Group's growth strategy in 2014 than in any prior period when compared to the size of the enlarged Group, 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:

-- The Group remains focused on only making acquisitions that would be earnings enhancing on a standalone basis, before taking into account additional earnings that can be generated by the 'waterfall effect' of using the acquired companies for the Group's existing volumes.

-- 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, now upgraded to 50 pence per share, with the consideration stock locked-in for between 12 and 36 months and subject to orderly market restrictions.

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

Integration

The initial integration of the business has now been completed with further consolidation of the Group's outsourcing teams, such as those involved in call centre and debt collection. These changes provided integration benefits to the Group including those from the integration of businesses within Quindell Health Services (part of its Services Division) in the second half of the year. All significant acquired businesses delivered 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 achieved close to 100% overall efficiency gain in cases per fee earner over the year whilst still seeing an increase in the average recoverable costs settled and a significant reduction from 6.5 to as low as 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%. 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.

All these significant achievements could not be possible without the benefit of the Group's technology platform, the quality of our people, consultancy led business process reengineering techniques and the fully integrated business model unique to Quindell. Reflective of the Group's completed integration of its acquired businesses, the Company removed the word 'Portfolio' from its name, becoming "Quindell Plc" in December 2013.

Recent news

Trading in the first quarter of 2014 has continued in an extremely positive manner. The Board believe that current market expectations for its technology revenues are likely to be significantly exceeded in 2014, and that these revenues are expected to grow significantly towards the second half of 2014 as the telematics subscriber base grows within client implementations. Both the growth in the Group's technology business and the nature of the broking business conducted by ingenie have a very favourable cash profile compared to that of the improving profile of the Group's Services Division, and this is expected to provide further support to the growth in the Services Division, further reducing overall Group trade debtor days.

In January 2014, the Group acquired 100% of ACH Manchester and associated companies. The terms of the acquisition were satisfied by the issue of 117,812,500 shares in January 2014 and the payment of GBP5,000,000 in cash . Prior to acquisition by the Group, ACH Manchester was a referral source to Quindell's Legal Services businesses, with specific sector expertise. Also in January, following receipt of FCA approval for the acquisition of the Crusader Group, 34,285,714 shares were issued together with the payment of GBP1 million cash to satisfy the terms of this acquisition (100%). Two further payments of GBP1 million after the end of each of the two annual warranted profit periods will also be payable. The primary reason for the acquisition was to enable the group to increase its rate of organic growth in full claims management services for a number of UK insurance brokers.

In February 2014, following an analyst and institutional investor teach-in held to explore the strong growth trends being experienced by the Group's Solutions Division, and profiling telematics contracts and the expansion of ingenie into North America, the Group announced the acquisition of a controlling interest in the Himex Group ("Himex"), and a further investment and option over all remaining shares in ingenie Limited. The Group's rationale for acquiring a significant controlling interest in Himex is that it is in live implementations with three out of the top 20 US insurers and in pilots with a further four, as well as being in joint work in the UK and in Canada and seeing initial successes in continental Europe.

The Group increased its investment in Himex in total by 66% to circa 85% by the immediate payment of GBP23 million in cash and the issue of 325 million Quindell shares, being approximately 5% of the fully diluted share capital of the Company. The transaction ensured that the Group can fully leverage the unique market lead it has been establishing in the UK, Canada and the US. It also helps maximise the potential from the significant traction that the Group is seeing in continental Europe. It addition, it ensures it possesses all the key components to support the distribution arrangement for key territories within Asia and the Middle East which has also now been completed and which it is anticipated will provide a significant first mover advantage in these markets.

Quindell increased its investment in ingenie Limited by 6% to circa 49% and was granted an option from shareholders over all its remaining shares. The terms of the option, which can be exercised up to 31 January 2015, would result in the Group issuing a maximum of 190 million shares to achieve 100% ownership. Since announcing the ingenie option in February 2014, the Group has already accessed new opportunities for Quindell and ingenie to consider that could significantly accelerate the level of growth planned in the US and in Continental Europe beyond previous expectations. These opportunities for major growth, in partnership with leading insurance related brands, will be fully investigated in due course, but are likely to further encourage the activation of the ingenie Option by the end of H1 2014.

On 26 September 2013 the Group acquired a 26% stake in PT Healthcare Solutions Corp ("PT Health") with an option to acquire the remaining 74% of business in exchange for the issue of 242,000,000 shares in the Company. As at 31 December 2013, the Directors concluded that the Group controlled PT Health by virtue of the put and call options (the "Initial Option") that existed regarding the acquisition of the remaining equity shares in PT Health by the Group, and by virtue of the funding that the Group had provided to PT Health since it took its 26% investment. On 28 March 2014, without either party having exercised the Initial Option, the Group and PT Health amended their agreement. On 28 March 2014, the Company issued 100,000,000 shares, acquiring a further 23.9% stake in PT Health as part of a share-for-share exchange. A put and call option was also agreed, expiring on 30 June 2014, enabling the acquisition of the remaining equity shares in PT Health by the Group in exchange for 142,000,000 of the Company's shares.

Outlook

The 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 total quantum of additional new business confirmed since December 2013 is in excess of GBP480 million, ahead of the target of GBP450 million per annum set at the time of the fundraise in November 2013, and with margins ahead of guidance. These new contracts are expected to reach full run rate during the first half of 2014. The Board is pleased that the Group has now achieved the organic growth potential previously indicated. This growth has been achieved whilst being selective about the type of new business we have contracted to ensure the best quality of work, margin potential and cash performance for the Group whilst maintaining our focus on driving down the cost of claims, protecting consumer rights and ensuring the best possible customer experience.

The mix of business that has now been contracted and that can be generated through our own direct and indirect consumer channels ensures that the Group shall have no reliance on any single segment of the market, type of work or referral partner to deliver on its longer term growth potential. Trading in 2014 to date has also been ahead of plan for all key performance indicators, being profitability, cash generation and EBITDA margin. We are determined to ensure we achieve the optimum valuation for the Company's shareholders, the best and most innovative services and technology for our clients, and a great place to work for our staff. All of this gives me and our team, immense confidence in our ability to grow from this platform and continue the success in 2014 and beyond exceeding current market expectations.

Robert Terry

Founder and Executive Chairman

Financial review

Overview

2013 has been another year of significant progress for Quindell, having completed the majority of our acquisitions in 2012 creating a market leading technology enabled outsourcing platform for the servicing of claims for the UK insurance industry. It has been a year for delivery of new customer wins and organic growth with only 11% of revenue coming from acquired businesses in the year. At the same time, the Group's Solutions Division has exceeded all market expectations, and has been developing its market leading position in Connected Car solutions (telematics) providing a platform for significant growth in this emerging global market. Already, almost as much Solutions revenue is derived from North America as is achieved in Europe. The Group's financial strength, and the opportunities that it has to capitalise on its market position leads us to increase our longer term Adjusted EBITDA margin guidance by five percentage points for the second time in six months to 30%+ as the strength of our business model is demonstrated.

 
 Revenue                      2013    2012   Growth 
                              GBPm    GBPm        % 
 Solutions Division           80.4    30.1      168 
 Services Division           299.7   132.9      126 
--------------------------  ------  ------  ------- 
 Group Revenue               380.1   163.0      133 
--------------------------  ------  ------  ------- 
                              18.6     7.2      158 
--------------------------  ------  ------  ------- 
 Gross sales (See Note 4)    398.7   170.2      134 
--------------------------  ------  ------  ------- 
 

Total revenues in the year were GBP380.1 million compared with GBP163.0 million for the prior year. Gross sales, which includes disbursements transacted by the Group's legal services business that are provided by non-Group parties, and invoiced on to at fault insurers, increased by 134% from GBP170.2 million in 2012 to GBP398.7 million in 2013. The Solutions Division recorded revenues of GBP80.4 million (21% of Group revenue) during the year, significantly ahead of market expectation and representing year on year growth of 168%. Approximately GBP39.5 million of this was sales to Europe, GBP33.8 million sales into North America, a strong area of growth during the year and almost as much as was sold within Europe, and GBP7.1 million to the rest of the world. The proportion of the Group's Solutions revenues that related to telematics increased significantly during the year to approximately GBP40 million. This included sales to Himex of GBP15.1 million, including licencing for onward US distribution of telematics sales and the supply of telematics devices for joint opportunities and sales to the ingenie group of GBP9.4 million which again included licences, services and devices associated with its supply to underwriters of its telematics insurance solutions. Other significant clients in this area included insurethebox (together with Drive like a girl), the Canadian Automobile Association, the RAC and Insurance Brokers Association of Ontario as well as Himex led opportunities in the USA. The Services Division, achieved revenues of GBP299.7 million (79% of Group revenue), an increase of 126% on 2012. GBP290.3 million of sales were within the UK and GBP9.4 million was in Canada. The amount of organic new business generated across the Services Division was signficant at GBP157.3 million, including major contracts with the RAC, Direct Line Group, and over 60 other referal sources including one of the UK's largest direct insurers, one of the UK's largest accident management companies and the UK's largest insurance broker.

Profit and margin for the year

 
                             2013    2012   Growth 
                             GBPm    GBPm        % 
-------------------------  ------  ------  ------- 
 Group Operating Profit     108.7    36.4      199 
 Adjusted EBITDA            137.7    52.2      164 
-------------------------  ------  ------  ------- 
 Adjusted EBITDA Margins 
 Solutions Division           64%     80%     (16) 
 Services Division            30%     24%        6 
-------------------------  ------  ------  ------- 
 Group                        35%     31%        4 
-------------------------  ------  ------  ------- 
 

Group operating profit was GBP108.7 million for the year (2012: GBP36.4 million). Adjusted EBITDA, being Profit before tax, excluding interest, depreciation, amortisation, IFRS 10 adjustment, share based payments and exceptional costs, totalled GBP137.7 million compared to GBP52.2 million for the prior year. Overall Adjusted EBITDA margins at 35% were ahead of long term guidance of 25+% and prior year of 31%. Within the Solutions Division, blended margins reduced to 64%, but across the main areas of Initial licence fees, SaaS and other and Consulting margins remained strong at 77% and 60% respectively. From an onward guidance viewpoint, these margins for the Solutions Division are now at a long term sustainable position considering the broader geographic and revenue mix of the division. Margins achieved within the Services Division increased by 6 percentage points to 30%, due to increased volumes being handled by the Group's legal services and health operations, where the Division's margins are strongest. The Group's tax charge represents 22.7% of profit before tax compared to the standard rate of UK corporation tax of 23.25%. The tax charge benefitted from the lower rate of overseas tax and a reduction in respect of deferred tax rates. Profit after tax for the year was GBP82.7 million compared to GBP27.4 million for the prior year.

Application of new accounting standards

At the start of 2013, IFRS 10, the accounting standard relating to Consolidated Financial Statements became effective for the first time. Even though it was not mandatory this year, it was considered prudent to adopt this new standard as part of the Group's preparation for Full Listing with advisors and the need to provide a three year review as part of the listing requirements. The impact of the new standard was primarily in relation to 2012 legal services based acquisitions and the assessment as to the point at which the Group had control over these businesses. In each case, this was from an earlier date than we had originally applied, but in some cases was after the date that the Group's partnering agreement had commenced, being the basis of the results previously presented for 2012. The resultant changes, which also include the consolidation of Accident Advice Helpline in 2012, rather than in 2013 when it legally completed, are described in detail in note 2. Application of this new standard has resulted in no changes to any of our key performance indicators, however the Group's statutory reported numbers for 2012 have changed for the Group, increasing revenue by GBP25.4 million from GBP137.6 million to GBP163.0 million, whilst reducing profit after tax for that year from GBP31.9 million to GBP27.4 million. Net assets at 31 December 2012 increased from GBP253.7 million to GBP272.2 million and the Group's operating cash flow before interest and tax reduced by GBP18.3 million to GBP18.4 million, reflecting the working capital cycle of these business that are now consolidated, and reducing what was largely previously shown as Loans to investments and other parties.

Full analysis of these changes, including our adjusted KPI measures pre and post the IFRS 10 adjustment, is shown in notes 2 and 4.

Exceptional costs and share based payments

Exceptional costs for 2013 totalled GBP13.7 million. Of these, acquisition costs were GBP3.0 million and the non-cash loss recorded on the Equity Swap, which was exited by the Group in July 2013, was GBP5.1 million. Having exited the swap, the Group will has no further exposure to its performance and will therefore not be required to take any further exceptional non-cash charges through its Income Statement. A further GBP1.0 million related to the acquisition costs of IT Freedom (acquired in 2012), which under IFRS is required to be treated as post combination vendor remuneration rather than cost of acquisition as the vendors agreed to 'bad leaver' clauses as part of this acquisition. Share based payments within exceptional costs were GBP5.5 million. Of this, GBP4.6 million related to a one-off cost of the warrants issued to the RAC in June 2013. Other share based payment charges comprised of IFRS2 costs in respect of post combination vendor consideration of GBP2.5 million (2012: GBP0.3m) and costs in respect of options of GBP0.3 million (2012: GBPnil).

Earnings per share and return on capital employed

Basic EPS was 1.97 pence per share. Adjusted Basic EPS, as defined in note 8, was 2.54 pence per share, growth of 97% and 75% respectively (2012: Basic EPS 1.00 pence and Adjusted Basic EPS 1.45 pence). The Group's return on average capital employed was strong at 23.1% (2012: 22.3%). Before exceptional costs and share based payments, the return was 26.7% and 26.0% for 2013 and 2012 respectively.

Dividends

No dividends were paid during 2013. However, as has been previously stated, the Board is pleased confirm its decision to pay a maiden dividend to shareholders at a value of 0.1 pence per share. Payment will be made on 2 May 2014 to shareholders on the register as at 11 April 2014. Whilst the Board intends to continue to devote the majority of its cash resources to its operations during this period of continued growth, as previously guided, it also expects to be implementing a progressive dividend policy from 2015 onwards as the Group's operating EBITDA to cash flow ratio normalises following its period of rapid organic growth within the Services Division, and consistent with the long-term earnings potential of the Group.

Acquisitions and investments

Expansion of the Group's product range and extending its sales and service capabilities through acquisition, including extending more significantly into Canada, continued to be an integral part of the Group's medium to long growth strategy during 2013. In total, the consideration for the Group's acquisitions during the year was GBP128 million. The Group took investments in Himex and Nationwide Accident Repair Group plc, and made investments in new subsidiaries within the ingenie group addressing further telematics insurance markets in the UK, US and Canada. Importantly, the Group also increased its shareholding in ingenie Limited, the parent company of the ingenie group, from 19% to 43% during the year. ingenie has developed significantly both as a brand and as a leading telematics broker during 2013. With this has come a commensurate increase in its value, leading to the Group recognising a net gain on re-measurement within Other income of GBP4.2 million in 2013 (2012: GBP0.3 million) as the investment became an associate. This progress at ingenie has been led by typical 49% savings for ingenie customers by renewal and the improvement in underwriting result that can be offered through telematics. The success of their proposition's influence on driver behaviour was also recently recognised, with ingenie being awarded the prestigious Prince Michael International Road Safety Award for 2013.

Goodwill recorded in the Statement of Financial Position at the end of December 2013 totalled GBP235.6 million of which GBP181.4 million was in relation to the Group's Services Division and GBP54.2 million in relation to the Solutions Division. Deferred and contingent payments still to be made in relation to acquisitions as at December 2013 totalled GBP79.0 million, of which up to GBP74.5 million of issue value is payable by way of new share issues (up to a fixed 494.4 million new shares over the next three years) and deferred cash of GBP4.5 million payable between now and July 2015.

Financing and cash flow

The Group has delivered strong growth during 2013 across both Divisions and, as expected, this has required investment in working capital for the Services Division, where cash cycles are traditionally longer. This investment unwinds in subsequent periods as evidenced by cash collections during 2013 of over GBP270 million, circa 185% of the value of total trade related receivables for the Group as at 31 December 2012.

The Group has maintained its focus on managing its working capital, targeting the generation of strong operating cash flow within the business areas that can support the needs of those other areas where the growth profile places demands on working capital in the short term.

The Group's operating cash inflow for the final quarter for 2013 was ahead of market expectations despite some block settlements with at-fault insurers being completed in the first half of 2014. This over performance was due to strong cash management and debtor controls and in particular, performance ahead of plan regarding cash collection from the Solutions Division. The Group's momentum in operating cash flow generation increased in the second half of 2013 as anticipated with much of the collection now being undertaken by the Group's own specialist debt recovery team, "Compass Law".

 
                                             2013    2012   Change 
                                             GBPm    GBPm        % 
-----------------------------------------  ------  ------  ------- 
 Cash generated from operations 
  before exceptional costs and IFRS 
  10 adjustment (see note 2)                 20.1    38.8     (48) 
 Adjusted EBITDA to cash flow conversion      15%     74%     (59) 
-----------------------------------------  ------  ------  ------- 
 

For 2013 as a whole, the Group's operating cash flow was an inflow of GBP20.1 million before exceptional costs, IFRS 10 adjustment, tax and net finance costs (2012: an inflow of GBP38.8 million). The Adjusted EBITDA to operating cash flow conversion ratio being 15%, ahead of expectations in a period of very strong growth.

Purchases of intangible and tangible fixed assets totalled GBP23.8 million (2012: GBP4.2 million) and the net cash consideration of subsidiaries and investments was GBP31.6 million (2012: GBP53.2 million). The issue of shares during the year gave rise to an inflow of GBP200.4 million (2012: GBP91.0 million). During the year, the Group made loans to investments and other parties of GBP4.9 million.

The Group's cash balance at the end of 31 December 2013 was GBP199.6 million. During the year to 31 December 2013, net funds increased from a position of net funds of GBP17.4 million to GBP140.2 million.

Debtors management

 
 Trade related receivables:     2013    2012 
                                GBPm    GBPm 
 Trade receivables              85.6    73.7 
 Legal disbursements            57.5    26.5 
 Accrued income                151.7    47.9 
----------------------------  ------  ------ 
 Total                         294.8   148.1 
----------------------------  ------  ------ 
 

Total trade related receivables increased by circa 100% during the year to GBP294.8 million compared to gross sales growth of 134%, demonstrating our significant progress in cash collection, with over 70% of the increase being in accrued income. This increase during the year was attributable to the growth in revenue, primarily in relation to legal services, and was particularly pronounced in the second half of the year, in line with the ramp up of new contracts signed throughout this period.

Trade receivables increased by only 16% year on year despite the strong sales growth of 134%. Cash collected by the Services Division during 2013, the part of the business with longest cash cycles, represented 155% of the total value of trade related receivables for that division as at 31 December 2012. Continued strong cash collection also led to average trade receivables days at 31 December 2013 for the Group being maintained at 4.7 months, compared to 4.8 months as at 30 June 2013, which itself had improved from 6.5 months as at 31 December 2012. This remains exceptionally good for our industry and is only possible due to the strong relationships the Group has with its insurance clients and the ethical stance it takes by lowering the cost of claims for the industry as a whole, targeting over 20% saving compared to industry norms. The percentage of trade receivables aged one year or over decreased both in quantum and percentage from GBP30.3 million (43.5%) to GBP24.3 million (33.2%) year on year as the Group has continued to address these older balances through normal collection processes, block settlements as insurers entered into our collaboration model and in certain instances, as the Group started to take a litigated approach via Compass Costs to collect amounts from the small percentage of the UK insurance market that are not engaging in the Group's collaboration model. The Group's collaboration model for hire and repair continues to moves towards the Group's expected take up of 75% and the Board remains extremely confident of reaching this target. Due to the nature of the Group's business, the majority of its debts are due from UK insurers, and the concentration of debt due from any one counterparty is proportionally low.

Accrued income increased from GBP47.9 million as at 31 December 2012 to GBP93.0 million by 30 June 2013 and to GBP151.7 million as at 31 December 2013. This year on year 216% increase was again in line with expectations and against a backdrop of dramatically increased legal services case intake but with overall Total trade related receivables increasing by only 100% during the year compared to gross sales gowth of 134%. As with other professional services firms, almost all the Group's legal services revenues remain in accrued income until billed, where upon they are typically settled by the at-fault insurer promptly within 15-30 days. Consistent with industry standards, approximately 55% of accrued income as at 31 December 2013 was within 6 months of initiation of work, and over 80% within 12 months. Legal disbursements relating to incidental costs incurred on a case, which are recovered at the same time as our fee settlement increased by 117% to GBP57.5 million year on year, again in line with the growth in volumes handled by the Group. The Group continues to have arrangements in place with external suppliers relating to disbursements incurred, where it is not performing the work itself which broadly mirror the settlement period on its own cases. The disbursement creditor at 31 December 2013 amounted to GBP44.8 million, 78% of the related disbursement debtor balance.

Capital management and going concern

The Group's capital management objective is to maintain a balance sheet structure that is efficient in terms of providing long term returns to shareholders and safeguards the Group's financial position through economic cycles.

The Group has available to it considerable financial resources, and a robust balance sheet. As at 31 December 2013, the Group had cash of approximately GBP200 million, and undrawn banking facilities taking the total working capital available to the Group to approximately GBP220 million. In combination, the Group has sufficient working capital resources available to it to comfortably exceed 4p earnings per share in 2014. During 2013, the Group successfully renewed and extended two of its core banking facilities to April 2015, and extended its third to December 2015. The Group is continuing to work closely with each of its primary providers of debt finance, as well as engaging with other prospective providers of finance to ensure that the Group continues to have the appropriate sources of working capital for the business that are consistent with its plans for the future.

In terms of the assessing the Group's resiliance, whilst it has no need to, ultimately if required the Group can choose to adjust its capital structure by varying the scale and mix of its trading activities to reduce any requirement to fund working capital. It can also seek to liquidate receivables at a faster rate than normal if it chose to through payment protocols and additional block settlements of debt, although there would likely be a cost in the form of a discount to this. As a result, the Directors have a reasonable expectation that the Group has adequate resources and business demand drivers to continue in operational existence for the foreseeable future. No material uncertainties related to events or conditions that may cast significant doubt about the ability of the Group to continue as a going concern have been identified by the directors. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

Principal risks and uncertainties

The Group is exposed to a number of risks and uncertainties which could have a material impact on its long term performance. The directors have identified those which they regard as being the principal risks and these are set out below.

Strategic risk

The take up rate of telematics by consumers globally over the next three to five years, influenced by factors such as end-user perceptions, rate of adoption of new technologies, regulatory drivers and the economic climate could put at risk the Group's ability to meet its strategic objectives in the areas of telematics and connected car solutions. The Group may fail to execute its ongoing strategic plan in relation to connected car and the expected benefits of that plan may not be achieved at the time or to the extent expected. The Group monitors local and global trends alongside other market commentators and analysts. Through its activities within the industry, the Group aims to be at the forefront of connected car intitiatives globally. As a result of these, the Group believes that its solutions are ahead of the rest of the market by a number of years, that the likely adoption rate of telematics and readiness of the market for connected car solutions is strong and that the Group's market position will enable it to maximise on the opportunity.

Technological change

The markets for the Group's services can be affected by technological changes, resulting in the introduction of new products and services, evolving industry standards and changes to consumer behaviour and expectations. The Group regularly monitors trends in technological advancement so as to anticipate and plan for future changes and maintains close relationships with businesses and organisations which it believes will keep it to the forefront of product and service development on a sustained basis.

Key personnel and resources

The success of the Group depends to a large extent upon its current executive management team and its ability to recruit and retain high calibre individuals at all relevant levels within the organisation. The Group will continue to seek to mitigate this resource risk by investing in and developing staff training programmes, competitive reward and compensation packages, incentive schemes and succession planning.

Regulatory and reputational risks

The Group operates in regulated environments, including parts of the Group that are regulated in the UK by the Financial Conduct Authority and Solicitors Regulation Authority. As a data controller and a business that provides services on behalf of its customers to consumers and individuals, the Group is also subject to risks related to matters such as data processing and security, data and service integrity. In the event of a breach, these risks may give rise to reputational, financial or other sanctions against some or all of the Group. The Group considers these risks seriously and designs, maintains and reviews its policies and processes so as to mitigate or avoid these risks.

The pricing of products and services, the activities of major industry organisations, and the Group's ability to operate and contract in the manner that it has done so in the past or expects to do so in the future, may be affected by the actions of regulatory bodies both in the UK and internationally. Such action could affect the Group's profitability either directly or indirectly. The Group continually monitors and assesses the likelihood, potential impact and opportunity provided by regulatory change, and adapts is plans and activities accordingly.

The Competition Commission ("CC") is currently reviewing certain aspects of the UK Private Motor Insurance market and is due to report in final form by September 2014. The CC released their provisional findings in December 2013 and is currently in discussion with insurers, claims management companies and other interested parties about their findings. The Group is participating fully in these discussions and assisting the CC in its ongoing evidence gathering. The Group does not currently believe there are grounds for any fundamental change to the present legal basis and functioning of the UK motor insurance market and is taking appropriate steps to respond to any risks and maximise on opportunities, such as developing its collaboration protocols which it sees as being even more successful in light of the CC's review, leading up to and following the publication of the CC's final report.

Liquidity risk

The Group borrows to principally fund its working capital needs. The timing of receipts from the parties from whom the Group seeks to recover its charges is uncertain and can be protracted. The Group actively forecasts, manages and reports its working capital requirements, including sensitivity analysis on a regular basis to ensure that it has sufficient funds for its operations. The Group is also actively pursuing its collaboration settlement protocol to both speed up and bring greater certainty to the timing of receipts.

Management of growth

The Group's plans to continue its growth will place further demands on its management, administrative processes and deal sourcing resources. In order to minimise this risk, the Group formed its Strategy and Integration Advisory Board, one of the purposes of which is to support business integration, drawing upon the specific skills and experience of its members. The Group has continued to appoint experienced staff across its business into senior roles in order that this risk is managed effectively.

Market conditions

Market conditions, including general economic conditions and their affect on exchange rates, interest rates and inflation rates, may impact the ultimate value of the Group regardless of its operating performance. The Group also faces competition from other organisations, some of which may have greater resources than the Group, or be more established in a particular territory or product area. The Group's strategy is to target a balance of markets, offering a range of tailored or specialised products and services.

Laurence Moorse

Group Finance Director

Consolidated Income Statement

 
                                                   Restated 
                                                   See Note 
                                                          2 
                                             2013      2012 
                                  Note    GBP'000   GBP'000 
Revenue 
 - Solutions                               80,441    30,068 
 - Services                               299,690   132,936 
--------------------------------  ----  ---------  -------- 
                                          380,131   163,004 
--------------------------------  ----  ---------  -------- 
Cost of sales                           (197,815)  (91,216) 
Gross profit                              182,316    71,788 
Administrative expenses 
 - Normal                                (61,441)  (29,591) 
 - Share based payments                   (2,819)     (272) 
 - Exceptional costs               6     (13,744)   (5,803) 
--------------------------------  ----  ---------  -------- 
 - Total administrative 
  expenses                               (78,004)  (35,666) 
 
Other income                                4,186       336 
Share of results of associates                242      (19) 
Group operating 
 profit                                   108,740    36,439 
Finance income                                383       153 
Finance expense                           (2,077)   (1,233) 
Profit before taxation                    107,046    35,359 
Taxation                           7     (24,350)   (7,964) 
--------------------------------  ----  ---------  -------- 
Profit for the year                        82,696    27,395 
--------------------------------  ----  ---------  -------- 
 
Attributable to: 
Equity holders of 
 the parent                                82,949    27,302 
Non-controlling 
 interests                                  (253)        93 
--------------------------------  ----  ---------  -------- 
                                           82,696    27,395 
 -------------------------------  ----  ---------  -------- 
 
                                            pence     pence 
Basic earnings per 
 share                             8        1.971     1.005 
                                        =========  ======== 
Diluted earnings 
 per share                         8        1.952     0.998 
                                        =========  ======== 
 

Consolidated Statement of Comprehensive Income

 
                                                                         Restated 
                                                                         See Note 
                                                                                2 
                                                                  2013       2012 
                                                               GBP'000    GBP'000 
 
 Profit after taxation                                          82,696     27,395 
 
 Items that may be reclassified in the Consolidated 
  Income Statement: 
   Exchange differences on translation of foreign 
    operations                                                 (4,237)        (1) 
 
 Fair value movements on available for sale assets: 
   Fair value increase on available for sale assets              4,186        336 
 
 Fair value movements on available for sale assets 
  taken to the Consolidated Income Statement: 
   Previous fair value gain recognised in the Consolidated 
    Income Statement in respect of an investment becoming 
    an associate on a stepped acquisition                      (4,186)          - 
   Previous fair value gain recognised in the Consolidated 
    Income Statement in respect of an associate becoming 
    a subsidiary on a stepped acquisition                            -      (336) 
 
 Total comprehensive income for the year                        78,459     27,394 
------------------------------------------------------------  --------  --------- 
 
 Attributable 
  to: 
 Equity holders of the 
  parent                                                        78,712     27,301 
 Non-controlling 
 interests                                                       (253)         93 
------------------------------------------------------------  --------  --------- 
                                                                78,459     27,394 
 -----------------------------------------------------------  --------  --------- 
 

Consolidated Statement of Changes in Equity

 
 
 
 
                                                                                        Foreign 
================================== 
                                                Share             Shares               currency         Non- 
                                      Share   premium   Merger     to be     Other  translation  controlling  Retained 
                                    capital   account  reserve    Issued  reserves      reserve     interest  earnings 
================================== 
                                    GBP'000   GBP'000  GBP'000   GBP'000   GBP'000      GBP'000      GBP'000   GBP'000 
================================== 
 
At 1 January 2013 Restated(1)        36,216   102,026   74,318    30,178   (1,188)          (1)          275    30,336 
Profit for the year                       -         -        -         -         -            -        (253)    82,949 
Other comprehensive income                -         -        -         -         -      (4,237)            -         - 
                                                                          ======== 
Issue of share capital               20,484   226,744   50,381  (30,178)         -            -            -         - 
Directly attributable 
 costs incurred in issuing 
 of equity shares                         -  (10,593)        -         -         -            -            -         - 
Shares to be issued                       -         -        -    54,151         -            -            -         - 
Shares treated as held 
 in treasury                              -         -        -         -   (5,209)            -            -         - 
Share based payments                      -         -        -         -     7,395            -            -         - 
Transfer of prior year 
 gain on sale of shares 
 held in treasury                         -     3,231        -         -         -            -            -   (3,231) 
Non-controlling interest 
 at acquisition                           -         -        -         -         -            -        3,838         - 
Cost of acquiring non-controlling 
 interest                                 -         -        -         -         -            -        (114)         - 
At 31 December 2013                  56,700   321,408  124,699    54,151       998      (4,238)        3,746   110,054 
----------------------------------  -------  --------  -------  --------  --------  -----------  -----------  -------- 
 
At 1 January 2012                    20,041     8,145   25,825       106        54            -          (3)       307 
Profit for the year                       -         -        -         -         -            -           93    27,302 
Other comprehensive income                -         -        -         -         -          (1)            -         - 
Issue of share capital               16,175    98,878   48,493     (106)   (1,514)            -            -         - 
Shares to be issued                       -         -        -    30,178         -            -            -         - 
Directly attributable 
 costs incurred in issuing 
 of equity shares                         -   (4,997)        -         -         -            -            -         - 
Gain on sale of shares 
 held in treasury                         -         -        -         -         -            -            -     3,231 
Cancellation of share 
 options in subsidiary                    -         -        -         -         -            -            -     (624) 
Share-based payments                      -         -        -         -       272            -            -       120 
Non-controlling interest 
 at acquisition                           -         -        -         -         -            -        3,276         - 
Cost of acquiring non-controlling 
 interest                                 -         -        -         -         -            -      (3,091)         - 
----------------------------------  -------  --------  -------  --------  --------  -----------  -----------  -------- 
At 31 December 2012 Restated(1)      36,216   102,026   74,318    30,178   (1,188)          (1)          275    30,336 
----------------------------------  -------  --------  -------  --------  --------  -----------  -----------  -------- 
 
 

Note 1: Restated - See Note 2

Consolidated Statement of Financial Position

 
                                                              Restated 
                                                              See Note 
                                                                     2 
                                                      2013        2012 
                                          Note     GBP'000     GBP'000 
 
 Non-current assets 
 Goodwill                                          235,621     144,570 
 Other intangible assets                            55,659      29,639 
 Property, plant and equipment                       9,357       7,296 
 Interests in associates                            49,869           - 
 Investments                                         3,188       7,143 
---------------------------------------  -----  ----------  ---------- 
                                                   353,694     188,648 
---------------------------------------  -----  ----------  ---------- 
 
 Current assets 
 Inventories                                           318         160 
 Trade and other receivables               9       327,873     177,871 
 Cash                                              199,596      48,050 
---------------------------------------  -----  ----------  ---------- 
                                                   527,787     226,081 
---------------------------------------  -----  ----------  ---------- 
 
 Total assets                                      881,481     414,729 
---------------------------------------  -----  ----------  ---------- 
 
 Current liabilities 
 Bank overdraft                                   (19,642)    (15,871) 
 Borrowings                                       (26,501)     (6,280) 
 Trade and other payables                  10    (125,942)    (95,238) 
 Corporation tax                                  (24,346)     (7,460) 
 Obligations under finance leases                    (610)       (479) 
 Deferred tax liabilities                             (56)       (533) 
---------------------------------------  -----  ----------  ---------- 
                                                 (197,097)   (125,861) 
---------------------------------------  -----  ----------  ---------- 
 
 Non-current liabilities 
 Borrowings                                       (11,961)     (7,475) 
 Trade and other payables                  10      (1,896)     (6,032) 
 Obligations under finance leases                    (661)       (568) 
 Deferred tax liabilities                          (2,348)     (2,633) 
---------------------------------------  -----  ----------  ---------- 
                                                  (16,866)    (16,708) 
---------------------------------------  -----  ----------  ---------- 
 
 Total liabilities                               (213,963)   (142,569) 
---------------------------------------  -----  ----------  ---------- 
 
 Net assets                                        667,518     272,160 
---------------------------------------  -----  ----------  ---------- 
 
 Equity 
 Share capital                                      56,700      36,216 
 Share premium account                             321,408     102,026 
 Merger reserve                                    124,699      74,318 
 Shares to be issued                                54,151      30,178 
 Other reserves                                        998     (1,188) 
 Foreign currency translation reserve              (4,238)         (1) 
 Retained earnings                                 110,054      30,336 
---------------------------------------  -----  ----------  ---------- 
 Equity attributable to equity holders 
  of the parent                                    663,772     271,885 
 Non-controlling interests                           3,746         275 
---------------------------------------  -----  ----------  ---------- 
 Total equity                                      667,518     272,160 
---------------------------------------  -----  ----------  ---------- 
 

The results were approved by the Board of Directors on 29 March 2014.

Consolidated Cash Flow Statement

 
                                                                   Restated 
                                                                   See Note 
                                                                          2 
                                                            2013       2012 
                                                 Note    GBP'000    GBP'000 
 Cash flows from operating activities 
 Cash generated from operations before 
  exceptional costs, net finance expense 
  and tax                                         12      10,433     20,459 
 Cash outflow from exceptional costs                     (7,268)    (2,101) 
----------------------------------------------  -----  ---------  --------- 
 Cash generated from operations before 
  net finance expense and tax                              3,165     18,358 
 Net finance expense paid                                (1,694)    (1,235) 
 Corporation tax paid                                   (10,409)    (2,514) 
 Net cash (used by)/generated from operating 
  activities                                             (8,938)     14,609 
----------------------------------------------  -----  ---------  --------- 
 Cash flows from investing activities 
 Purchase of property, plant and equipment               (2,484)    (1,317) 
 Purchase of intangible fixed assets                    (21,359)    (2,899) 
 Proceeds on disposal of property, plant 
  and equipment                                              360         36 
 Proceeds from sale of subsidiary undertaking 
  and sale of operations                                   2,480          - 
 Acquisition of subsidiaries net of cash 
  acquired                                              (11,533)   (49,072) 
 Purchase of associated undertakings                    (20,068)          - 
 Purchase of fixed asset investments                           -    (4,101) 
 Deposits held in escrow                                 (1,500)          - 
 Loans to investments and other parties                  (4,898)          - 
 Dividends received from associates                          109          - 
 Net cash used in investing activities                  (58,893)   (57,353) 
----------------------------------------------  -----  ---------  --------- 
 Cash flows from financing activities 
 Issue of share capital                                  200,406     90,953 
 Finance lease repayments                                  (635)      (888) 
 Additional/(repayment of) secured loans                  12,125    (3,790) 
 Additional unsecured loan monies received                   518        520 
 Receipts/(payments) on Equity Swap                        3,192   (15,583) 
----------------------------------------------  -----  ---------  --------- 
 Net cash generated from financing activities            215,606     71,212 
----------------------------------------------  -----  ---------  --------- 
 
 Net increase in cash and cash equivalents        12     147,775     28,468 
 Cash and cash equivalents at the beginning 
  of the year                                             32,179      3,711 
----------------------------------------------  -----  ---------  --------- 
 Cash and cash equivalents at the end of 
  the year                                               179,954     32,179 
----------------------------------------------  -----  ---------  --------- 
 
   1.             General information 

The Annual Report announcement was approved by the Board of Directors on 29 March 2014. The financial information set out in this Annual Report does not constitute the Group's statutory accounts for the years ended 31 December 2013 or 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies, and those for 2013 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

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.

   2.             Impact of prior year adjustment ("PYA") together with new and revised Standards 

A package of five standards on consolidation, joint arrangements, associates and disclosures was issued by the International Accounting Standards Board in May 2011. Four of these have been been identified as being applicable to the Group (IFRS 10, IFRS 11, IFRS 12 and IAS 28 (as revised in 2011)) and the other, IAS 27 (as revised in 2011) Separate Financial Statements, is not applicable to the Group as it deals only with separate financial statements. Subsequently, amendments to IFRS 10, IFRS 11 and IFRS 12 were also issued to clarify certain transitional guidance on the first-time application of the standards. The standards are effective for periods beginning on after 1 January 2014 but are available for early adoption.

Accordingly, the Group has adopted these standards for the first time in the current year. IFRS 11 and IAS 28 (as revised in 2011) have had no material impact on the financial result or financial position. The impact of the remaining new standards is discussed below.

Application of IFRS 10 Consolidated Financial Statements (2011)

IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities. IFRS 10 changes the definition of control such that an investor has control over an investee when a) it has power over the investee, b) it is exposed, or has the rights, to variable returns from its involvement with the investee and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The Group, through its subsidiary Quindell Legal Services Limited, was granted permission to operate as an Alternative Business Structure with effect from 21 December 2012. Prior to being permitted to perform legal based services in its own right, the Group entered into partnering agreements with four businesses operating in the legal sector, the equity of three of which it acquired during December 2012 (Silverbeck Rymer, Pinto Potts and The Compensation Lawyers), with the equity of the remainder acquired in April 2013 (Accident Advice Helpline ("AAH")). Under IAS 27, the group accounted for the businesses as subsidiaries from the date at which it acquired their equity.

Following their assessment of these partnering agreements, the Board has determined that under IFRS 10, the point at which control passed in each of these acquisitions was earlier than the date on which it acquired their equity but, in some cases, later than the date that the partnering agreement commenced. On that basis, the acquisition date of AAH under IFRS 10 has been determined to be 24 July 2012 rather than 9 April 2013. The acquisition date for the remaining three legal businesses has been changed to be earlier in 2012 than was the case when applying IAS 27 (as set out in note 11).

The comparative amounts for 2012 have been re-stated to reflect the earlier date of acquisition of these subsidiaries. The effect of the restatement is to: remove the previously recorded net income from the partnering arrangement for the period in which they are controlled under IFRS 10; remove the investment in AAH recorded in the balance sheet at 31 December 2012; consolidate the income statements of the subsidiaries for the period in which they were controlled under IFRS 10; consolidate the balance sheet of AAH at 31 Decembet 2012; and restate the acquisition accounting for the subsidiaries at their revised acquisition date. The effect of the restatement is set out in notes 2a to 2d.

Prior Year Adjustment - Share based payments for acquisition consideration treated as vendor remuneration

A portion of contingent consideration previously treated as a cost of acquisition (and shown within Goodwill) in respect of the of IT Freedom Limited acquisition on 24 May 2012 was payable only if certain employees remained in employment with the Group post acquisition. In accordance with IFRS 3, the prior year acquisition, has been re-stated to reflect that the consideration should be treated as post combination vendor remuneration.

As a consequence Goodwill arising in 2012 has been reduced by GBP4.8 million and GBP0.8m of adminstrative cost charges have been recognised in 2012 (GBP0.3 million of which relates to share based payments and the balance to cash remuneration) and GBP1.4m in 2013 (GBP0.4 million of which relates to share based payments and the balance to cash remuneration). Future administrative cost charges are expected to be recorded in 2014 and 2015.

The financial statement line items impacted by this prior year adjustment can be seen in notes 2a to 2c on the following pages. There is no impact on the 2012 Consolidated Cash Flow statement from this adjustment other than reclassification of share based payments between operating profit and cash generated from operations.

Prior Year Adjustment - Fair value of consideration

In accordance with IFRS 3, the consideration transferred in a business combination is stated at its fair value at the acquisition date. In the prior period, shares were issued in respect of the Accident Advice Helpline, Legal Services and Quintica acquisitions that were subject to certain restrictions. The fair value of those shares used in the acquisition accounting in the prior year did not take into account those restrictions. The prior year acquisitions have therefore been restated to reduce the fair value of consideration paid for those acquisitions to its fair value at the acquisition date. This adjustment reduces Goodwill (via reduced consideration) and Share Premium by GBP12.0m at 31 December 2012. There is no other impact of this re-statement. Note 2c below includes GBP11.5 million of this adjustment in relation to the acquisitions of Accident Advice Helpline and the Legal Services businesses in their restated acquisition accounting in the IFRS 10 adjustment column with the remaining GBP0.5 million included in the IFRS 3 column.

Prior Year Adjustment - Cash Flow Statement of treatment of Equity Swap

In the prior year the cash flows associated with the Equity Swap were treated as an investing activity. As disclosed in the current year Strategic Report and in the 2012 financial statements, the Equity Swap entered into by the Group was linked to the acquisition of Accident Advice Helpline ("AAH"). As a consequence the cash flows associated with the swap have been treated as financing activities in the current year and the comparative cash flow statement has been restated accordingly. There is no overall net impact on the 2012 Consolidated Cash Flow Statement.

Application of IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of IFRS 12 has resulted in some further extensive disclosures in the consolidated financial statements.

   2a            Impact of new and revised Standards: Consolidated Income Statement 
 
                                                                              IFRS             IFRS    Restated 
                                                                                 3               10 
                                                    2013        2012    adjustment       adjustment        2012 
                                                 GBP'000     GBP'000       GBP'000          GBP'000     GBP'000 
 
Revenue                                          380,131     137,558             -           25,446     163,004 
-------------------------   ---------------  -----------  ----------  ------------  ---------------  ---------- 
Analysed as: 
 - Solutions                                      80,441      30,068             -                -      30,068 
 - Services                                      299,690     107,490             -           25,446     132,936 
                                                                      ------------  ---------------  ---------- 
 
Cost of 
 sales                                         (197,815)    (69,562)             -         (21,654)    (91,216) 
                                                                      ------------  ---------------  ---------- 
Gross profit                                     182,316      67,996             -            3,792      71,788 
Administrative expenses 
 - Normal                                       (61,441)    (20,702)             -          (8,889)    (29,591) 
 - Share based payments                          (2,819)           -         (272)                -       (272) 
 - Exceptional costs                            (13,744)     (5,265)         (538)                -     (5,803) 
                                             -----------  ----------  ------------  ---------------  ---------- 
 - Total administrative 
  expenses                                      (78,004)    (25,967)         (810)          (8,889)    (35,666) 
                                             -----------  ----------  ------------  ---------------  ---------- 
Other income                                       4,186         336             -                -         336 
Share of results of associates                       242        (19)             -                -        (19) 
Group operating 
 profit                                          108,740      42,346         (810)          (5,097)      36,439 
Finance income                                       383         127             -               26         153 
Finance expense                                  (2,077)     (1,232)             -              (1)     (1,233) 
Profit before taxation                           107,046      41,241         (810)          (5,072)      35,359 
Taxation                                        (24,350)     (9,339)             -            1,375     (7,964) 
---------------    ------------------------  -----------  ----------  ------------  ---------------  ---------- 
Profit for the year                               82,696      31,902         (810)      [1] (3,697)      27,395 
-------------------------   ---------------  -----------  ----------  ------------  ---------------  ---------- 
 
Attributable to: 
Equity holders of 
 the parent                                       82,949      31,809         (810)          (3,697)      27,302 
Non-controlling 
 interests                                         (253)          93             -                -          93 
-------------------------   ---------------  -----------  ----------  ------------  ---------------  ---------- 
                                                  82,696      31,902         (810)          (3,697)      27,395 
-------------------------   ---------------  -----------  ----------  ------------  ---------------  ---------- 
 
 
       Adjusted Profit before taxation 
        excluding IFRS 10 adjustment and 
        Adjusted EBITDA excluding IFRS 
        10 adjustment: 
 Profit before taxation                              107,046      41,241             (810)  [1] (5,072)     35,359 
 Depreciation                                          2,220       1,976             -                -      1,976 
 Amortisation                                          7,265       2,649                 -          571      1,220 
 Exceptional costs                                    13,744       5,265               538            -      5,803 
 Share based payments                                  2,819           -               272            -        272 
 Net finance expense                                   1,694       1,105                 -         (25)      1,080 
                                                 -----------  ----------  ----------------  -----------  --------- 
 Adjusted EBITDA including IFRS 
  10 adjustment                                      134,788      52,236                 -      (4,526)     47,710 
 IFRS 10 adjustment                                    2,863           -                 -        4,526      4,526 
                                                 -----------  ----------  ----------------  -----------  --------- 
 Adjusted EBITDA excluding 
  IFRS 10 adjustment                                 137,651      52,236                 -            -     52,236 
                                                 -----------  ----------  ----------------  -----------  --------- 
 
 Profit before taxation                              107,046      41,241             (810)  [1] (5,072)     35,359 
 Amortisation                                          7,265       2,649                 -          571      3,220 
 Exceptional costs                                    13,744       5,265               538            -      5,803 
 Share based payments                                  2,819           -               272            -        272 
                                                 -----------  ----------  ----------------  -----------  --------- 
 Adjusted Profit before taxaxtion 
  including IFRS 10 adjustment                       130,874      49,155                 -      (4,501)     44,654 
 IFRS 10 adjustment                                    2,857           -                 -        4,501      4,501 
                                                 -----------  ----------  ----------------  -----------  --------- 
 Adjusted Profit before taxation 
  excluding IFRS 10 adjustment                       133,731      49,155                 -            -     49,155 
                                                 -----------  ----------  ----------------  -----------  --------- 
 
 
 

Note

1: The net impact on the Consolidated Income Statement for 2012 represents the impact of certain companies being determined to have been consolidated from earlier dates which were after the date the Group's partnering arrangements had commenced for those acquisitions. Consequently the pre-existing relationship before the date of effective control have been settled in accordance with IFRS 3, resulting in an adjustment to the accounting for the business combinations and profit before tax of GBP5.1m.

   2b            Impact of new and revised Standards: Consolidated Statement of Comprehensive Income 
 
                                                                                                       IFRS 
                                                                                                     3 & 10   Restated 
                                                                               2013      2012  adjustmentss       2012 
                                                                            GBP'000   GBP'000       GBP'000    GBP'000 
 
                                         Profit after taxation               82,696    31,902       (4,507)     27,395 
 Items that may be recognised in the Consolidated 
  Income Statement: 
   Exchange differences on translation 
    of foreign operations                                                   (4,237)       (1)             -        (1) 
 
 Fair value movements on available 
  for sale assets: 
   Net gain on re-measurement of 
    investments on becoming associates 
    and associates on acquisition 
    of control                                                                4,186       336             -        336 
 
 Fair value movements on available for 
  sale assets taken to the Consolidated 
  Income Statement: 
   Net gain on re-measurement of 
    investments on becoming associates 
    and associates on acquisition 
    of control                                                              (4,186)     (336)             -      (336) 
--------------------------------------------------------------  -------  ----------  --------  ------------  --------- 
 Total comprehensive income 
  for the year                                                               78,459    31,901       (4,507)     27,394 
----------------------------------------------------   ----------------  ----------  --------  ------------  --------- 
 
 Attributable to: 
 Equity holders of the 
  parent                                                                     78,712    31,808       (4,507)     27,301 
 Non-controlling interests                                                    (253)        93             -         93 
------------------------------------------     ------------------------  ----------  --------  ------------  --------- 
                                                                             78,459    31,901       (4,507)     27,394 
   ---------------   --------------------------------------------------  ----------  --------  ------------  --------- 
 
 

The impact of the IFRS 10 adjustment on the Consolidated Statement of Comprehensive Income and Consolidated Statement of Changes in Equity is limited to a GBP3,697,000 Profit After Tax reduction figure for 2012. The impact of the IFRS3 adjustment on the same statements is limited to a GBP810,000 Profit After Tax reduction figure for 2012.

The impact of the IFRS 10 restatement on basic and diluted earnings per share in 2012 was to decrease basic earnings per share by 0.136 pence to 1.035 pence and decrease diluted earnings per share by 0.135 pence to 1.027 pence.

The impact of the IFRS3 restatement on basic and diluted earnings per share in 2012 was to decrease basic earnings per share by a further 0.030 pence to 1.005 pence and decrease diluted earnings per share by a further 0.029 pence to 0.998 pence.

The combined impact of the IFRS 10 and IFRS3 restatements on basic and diluted earnings per share in 2012 was to decrease basic earnings per share by 0.166 pence to 1.005 pence and decrease diluted earnings per share by 0.164 pence to 0.998 pence.

   2c            Impact of new and revised Standards: Consolidated Statement of Financial Position 
 
                                                               IFRS 
                                                                  3      IFRS 10    Restated 
                                       2013        2012  adjustment   adjustment        2012 
                                                         ==========  ===========  ========== 
                                    GBP'000     GBP'000     GBP'000      GBP'000     GBP'000 
                                                         ==========  ===========  ========== 
 Non-current assets 
 Intangible assets                  291,280     142,640   4 (5,316)     2 36,885     174,209 
                                             ========== 
 Property, plant and 
  equipment                           9,357       7,224           -           72       7,296 
 Interests in associates 
  and investments                    53,057       7,143           -            -       7,143 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
                                    353,694     157,007     (5,316)       36,957     188,648 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 Current assets 
 Inventories                            318         160           -            -         160 
 Trade and other receivables        327,873     202,340           -     (24,469)     177,871 
 Cash                               199,596      47,230           -          820      48,050 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
                                    527,787     249,730           -     (23,649)     226,081 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 
 Total 
  assets                            881,481     406,737     (5,316)       13,308     414,729 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 
 Current liabilities 
 Bank overdraft                    (19,642)    (15,871)           -            -    (15,871) 
 Borrowings                        (26,501)     (6,280)           -            -     (6,280) 
 Trade and other 
  payables                        (125,942)   (102,836)         783        6,815    (95,238) 
 Corporation tax                   (24,346)     (7,457)           -          (3)     (7,460) 
 Obligations under 
  finance leases                      (610)       (479)           -            -       (479) 
 Deferred tax liabilities              (56)       (533)           -            -       (533) 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
                                  (197,097)   (133,456)         783        6,812   (125,861) 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 Non-current liabilities 
 Borrowings                        (11,961)     (7,475)           -            -     (7,475) 
 Trade and other payables           (1,896)     (8,032)       2,000            -     (6,032) 
 Obligations under 
  finance leases                      (661)       (568)           -            -       (568) 
 Deferred tax liabilities           (2,348)     (3,473)           -          840     (2,633) 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
                                   (16,866)    (19,548)       2,000          840    (16,708) 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 
 Total liabilities                (213,963)   (153,004)       2,783        7,652   (142,569) 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 
 Net assets                         667,518     253,733     (2,533)     3 20,960     272,160 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 
 Equity 
 Share capital                       56,700      36,216           -            -      36,216 
 Share premium account              321,408     102,026           -            -     102,026 
 Merger reserve                     124,699      80,320       (802)      (5,200)      74,318 
 Shares to be issued                 54,151           -         321       29,857      30,178 
                                 ==========              ==========  =========== 
 Other reserves                         998          54     (1,242)            -     (1,188) 
 Foreign currency translation 
  reserve                           (4,238)         (1)           -            -         (1) 
 Retained earnings                  110,054      34,843       (810)      (3,697)      30,336 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 Equity attributable to equity 
  holders of the parent             663,772     253,458     (2,533)       20,960     271,885 
 Non-controlling 
  interests                           3,746         275           -            -         275 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 Total 
  equity                            667,518     253,733     (2,533)       20,960     272,160 
-------------------------------  ----------  ----------  ----------  -----------  ---------- 
 

Notes

2: The IFRS 10 movement in intangible assets in 2012 was an increase of GBP36.9 million. This represents additional intangible assets of GBP5.0 million identified on the acquisition of AAH, now consolidated from an earlier date, net of GBP0.6 million additional amortisation charged in the year. Goodwill increased by GBP32.5 million, representing GBP39.3 million of Goodwill on the acquisition of AAH and a GBP6.8 million reduction to the Goodwill previously recognised on the acquisition of the Legal Services businesses (GBP5.2 million of which relates to the adjustment to the value of the consideration shares which has been discounted by the Group's cost of equity to take account of the time value of the consideration and GBP1.8m in respect of a reduction in the fair value of the deferred tax liability arising on acquistion). See further information in note 11.

3: The movement in the remaining aspects of the composition of the balance sheet for the restatement is the consequence of ALH being consolidated from an earlier date during 2012. The major impact being that the 2012 deposit of GBP19.9 million in relation to the ALH acquisition previously shown in Prepayments at the year-end has been amended and included in the acquisition and Goodwill calculation. Likewise the GBP29.9 million of deferred share consideration in respect of the AAH acquisition is now included in 2012 in the Shares to be issued reserve. Also see note 11.

4: Included in the GBP5.3m adjustment to intangible assets is a decrease of GBP4.8m related to the prior year adjustment in respect of post business combination remuneration as set out in note 2. The remaining GBP0.5m decrease is in relation to part of the fair value of consideration adjustment as set out in Note 2, for acquisitions where the date of consolidation has not been reassessed. The remaining GBP5.2m in relation to the fair value of consideration adjustment has been included in the IFRS 10 column as noted in note 2 above as this relates to acquisitions where the date of consolidation has been reassessed.

   2d            Impact of new and revised Standards: Consolidated Cash Flow Statement 
 
 
                                                                                                          IFRS 
                                                                                                            10   Restated 
                                                              2013       2012  Reclassification     adjustment       2012 
                                                           GBP'000    GBP'000           GBP'000        GBP'000    GBP'000 
 Cash flows from operating 
  activities 
 Cash generated from/(used by) operations 
  before exceptional costs, net finance 
  expense and tax                                           10,433     38,798                 -   (5) (18,339)     20,459 
 Cash outflow from 
  exceptional 
  costs                                                    (7,268)    (2,101)                 -              -    (2,101) 
---------------------------  ----------    ------------  ---------  ---------  ----------------  -------------  --------- 
 Cash generated from operations before 
  net finance expense and tax                                3,165     36,697                 -       (18,339)     18,358 
 Net finance expense paid                                  (1,694)    (1,105)                 -          (130)    (1,235) 
 Corporation tax paid                                     (10,409)    (1,477)                 -        (1,037)    (2,514) 
 Net cash (used by)/generated from 
  operating activities                                     (8,938)     34,115                 -       (19,506)     14,609 
-------------------------------------------------------  ---------  ---------  ----------------  -------------  --------- 
 Cash flows from investing 
  activities 
 Purchase of property, plant 
  and equipment                                            (2,484)    (1,289)                 -           (28)    (1,317) 
 Purchase of intangible 
  fixed assets                                            (21,359)    (2,899)                 -              -    (2,899) 
 Proceeds on disposal of property, 
  plant and equipment                                          360         36                 -              -         36 
 Proceeds on sale of subsidiary undertaking 
  and sale of operations                                     2,480          -                 -              -          - 
 Acquisition of subsidiaries 
  net of cash acquired                                    (11,533)   (54,319)                 -          5,247   (49,072) 
 Purchase of associated 
  undertakings                                            (18,261)          -                 -              -          - 
 Purchase of fixed asset 
  investments                                              (1,807)    (4,101)                 -              -    (4,101) 
 Deposits held in escrow                                   (1,500)          -                 -              -          - 
 Loans to investments and 
  other parties                                            (4,898)   (15,107)                 -     (5) 15,107          - 
 Dividends received from 
  associates                                                   109          -                 -              -          - 
 Receipts/(payments) on 
  Equity Swap                                                    -   (15,583)        (6) 15,583              -          - 
-------------------------------    ----------  --------  ---------  ---------  ----------------  -------------  --------- 
 Net cash used in investing 
  activities                                              (58,893)   (93,262)            15,583     (7) 20,326   (57,353) 
-----------------------------------   ----------  -----  ---------  ---------  ----------------  -------------  --------- 
 Cash flows from financing 
  activities 
 Issue of share 
  capital                                                  200,406     90,953                 -              -     90,953 
 Finance lease 
  repayments                                                 (635)      (888)                 -              -      (888) 
 Additional/(repayment of) secured 
  loans received                                            12,125    (3,790)                 -              -    (3,790) 
 Additional unsecured 
  loan monies received                                         518        520                 -              -        520 
 Receipts/(payments) on 
  Equity Swap                                                3,192          -      (6) (15,583)              -   (15,583) 
-----------------------------------   ----------  -----  ---------  ---------  ----------------  -------------  --------- 
 Net cash generated from 
  financing activities                                     215,606     86,795          (15,583)              -     71,212 
-----------------------------------   ----------  -----  ---------  ---------  ----------------  -------------  --------- 
 
 Net increase in cash and 
  cash equivalents                                         147,775     27,648                 -          7 820     28,468 
 Cash and cash equivalents at the 
  beginning of the year                                     32,179      3,711                 -              -      3,711 
---------------------------------------------------      ---------  ---------  ----------------  -------------  --------- 
 Cash and cash equivalents 
  at the end of the year                                   179,954     31,359                 -            820     32,179 
---------------------------------------  ----------      ---------  ---------  ----------------  -------------  --------- 
 
 Adjusted Operating cash flow (before exceptional 
  costs, tax and net finance expense): 
 Adjusted Operating cash flow (as 
  defined above) including IFRS 10 
  adjustment                                                10,433     38,798                 -       (18,339)     20,459 
 IFRS 10 adjustment                                          9,645          -                 -         18,339     18,339 
                                                         --------- 
   Adjusted Operating cash flow (as 
    defined above) excluding 
    IFRS 10 adjustment                                      20,078     38,798                 -              -     38,798 
-------------------------------------------------------  ---------  ---------  ----------------  -------------  --------- 
 
 

Notes

5: The impact on Operating cash flow and conversley on Investing activities is a consequence of the change in treatment of the Group's acquisitions with certain acquisitions under the application of IFRS 10, with each business being consolidated from an earlier date, requiring that certain cash flows being re-stated as intra-group rather than external, as previously recorded.

6: As described earlier in this note 2.

7: The net movement in the Consolidated Cash Flow Statement represents cash held by ALH at the 2012 year-end. ALH was previously deteremind to have been acquired at the contractual acquisition date of 9 April 2013.

   3.             Significant accounting policies 

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 year of acquisition. Where consideration is locked in for future periods, due to performance conditions, the value of this consideration is discounted by the group's cost of equity for the time value of money. Where the group acquires a business with which it had a previous relationship, to the extent that is necessary, any settlement of a pre-existing relationship is separated from the business combination accounting.

Revenue recognition

The Group derives its revenues from the provision of services through its Services and Solutions divisions. Material income streams arising within those divisions are described below.

Revenue earned by the Services Division

Revenue is measured at the fair value of the consideration received and represents amounts receivables for services provided in the ordinary course of business, net of discounts and sales taxes.

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 retains the liability for the delivery or settlement of some, or all, of the contract, revenue is accounted for gross. Where the Group acts as broker or agent, the Group's revenue is recorded solely as the fee relating to the provision of services provided by the Group on that transaction.

The material revenue streams of the Services Division relates ultimately to the servicing of parties involved in Road Traffic Accidents (RTA's) or non RTA related personal injury cases. RTA cases typically comprise the provision of all or some of the following services: replacement vehicle hire, vehicle repair, management of personal injury cases, provision of medical reports and rehabilitation. Claims are typically presented to insurers, acting for the not at fault or fault party. Amounts are set aside for settlement adjustments which insurers, in certain limited circumstances (e.g. administrative delays or when facts about a case change) seek to negotiate. Such amounts are recognised within revenue as they relate to revisions of income estimates, not collectability (credit risk).

Replacement vehicle charges are recognised on a daily basis in accordance with charges under the General Tariff Agreement of the Association of British Insurers ("GTA") or in line with specific contractual terms. The hire cost is known, generally being based on prices agreed with third party hirers.

Repair revenue is recognised based on the estimated stage of completion at the period end date. The repair work is conducted by third parties and the stage of completion is estimated based on information provided by these suppliers. Repair revenue can be reliably estimated based on prices agreed with insurers. Repair costs can likewise be reliably measured and are either based on the (third party repairer supplied) estimated cost to repair the vehicle concerned or, if the service is complete, the repairer's invoice.

Revenue from legal services is recognised based on the estimated stage of completion at the period end date. Income can be reliably estimated based on fixed fees established by the Civil Procedures Rules used by the courts in England and Wales and estimates of any fixed and variable fees agreed with clients.

Individual case life may span a number of months. Revenue is recognised across the expected life of each case, in line with the typical level of effort expended in relation to that case type, taking into account the total income expected to be earned on that case type. This will include an assessment of fees for cases that are anticipated to be concluded successfully. Costs incurred during the life of a case can be reliably estimated based on contractual terms with suppliers and estimates of internal resource. Such costs are recognised in the income statement across the expected life of the case, on the same basis as the revenue is recognised.

Amounts incurred by the Group with third parties in relation to legal disbursements are recorded within Trade and other payables. To the extent that these are recoverable from third parties, an asset is recorded within Other debtors.

Income arising from medical and rehabilitation services is recognised on delivery of service. Income can be reliably estimated based on agreed charges with customers or instructing parties. Where services are delivered by external parties costs can be reliably estimated based on contractual charges agreed with those suppliers.

Where the Group acts as a broker or agent for the sale of a product on behalf of another party, revenue represents brokerage fees and is recognised as services are rendered and in accordance with agreed contractual terms. Where services are subject to a claw back of revenue during the duration of a contract, an initial estimate of claw back is made based on historical data and adjustment made to revenue initially recognised.

Revenue earned by the Solutions Division

The Solutions 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. Intellectual property rights ("IPR") or distribution rights to IPR are sold and recognised on the delivery of IPR or granting of the rights to the customer.

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 using the percentage of completion method. Provisions for estimated losses on uncompleted contracts are recorded in the year in which such losses become probable, based on contract cost estimates.

When selling products such as telematics devices, a sale is recognised when legal title has passed to the customer. This may be under bill and hold style arrangements when agreed with the customer.

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, receivables under the contracts are recognised at the point of sale.

Maintenance, Hosting and other PCS Services

Maintenance, Hosting and PCS services are billed on a periodic basis in advance. The Group recognises revenue on these services evenly over the period of the contract.

Solution Delivery Implementation Services

Revenues for all fixed fee contracts are recognised on a percentage complete basis. The Group calculates the percentage to complete by comparing the number of man days utilised at the period end with the total number of man days required to complete the project. Project plans are reviewed on a regular basis with any losses recognised immediately in the period in which such losses become probable based on contract cost estimates.

Share-based payments

Warrants

The Company issued warrants in connection with its acquisition of Quindell Limited in May 2011, the fair value of which was calculated at the time of issue and charged immediately to the Income Statement. Similarly, on 17 June 2013 the Company issued warrants to the RAC. The Group has adopted a Black-Scholes model to calculate the fair value of warrants.

Options

The fair value of options granted to individuals is recognised as an expense, with a corresponding increase in equity, over the period in which the unconditional entitlement occurs. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options expected to vest. Upon the exercise of share options, the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium.

The Group adopted a Black Scholes model to calculate the fair value of options granted. Costs relating to employees of subsidiaries has been accounted for by increasing the Company's cost of investment of those subsidiaries.

Post combination vendor remuneration

Where consideration towards an acquisition is linked to ongoing employment within the Group this consideration is not treated as a cost of the acquisition. It is treated as post combination remuneration and is recognised in the Income Statement over the period in which the employment services are delivered. The valuation of such amounts, where the form of the payment is in shares, uses an option valuation model. Where such costs relate to employees of subsidiaries, this has been accounted for by increasing the Company's cost of investment of those subsidiaries.

   4.             Key performance indicators 
 
                                                                         Restated 
                                                                         See Note 
                                                                                2 
                                                                   2013      2012 
                                                                GBP'000   GBP'000 
     Adjusted Revenue: 
     Solutions Division revenue                                  80,441    30,068 
     --------------------------------------------------------  --------  -------- 
     Services Division revenue                                  299,690   132,936 
     Legal Services related sales(1)                             18,605     7,154 
     --------------------------------------------------------  --------  -------- 
     Services Division Gross sales                              318,295   140,090 
     --------------------------------------------------------  --------  -------- 
     Total Gross Sales                                          398,736   170,158 
     --------------------------------------------------------  --------  -------- 
 
     Adjusted EBITDA: 
 Profit before taxation                                         107,046    35,359 
 Depreciation                                                     2,220     1,976 
 Amortisation                                                     7,265     3,220 
 Exceptional costs                                               13,744     5,803 
 Share based payments                                             2,819       272 
 Net finance expense                                              1,694     1,080 
 Adjusted EBITDA including IFRS 10 adjustment                   134,788    47,710 
 IFRS 10 adjustment(2)                                            2,863     4,526 
 Adjusted EBITDA excluding IFRS 10 adjustment                   137,651    52,236 
 --------------------------------------------------  --------  --------  -------- 
 
     Adjusted Profit before taxation: 
 Profit before taxation                                         107,046    35,359 
 Amortisation                                                     7,265     3,220 
 Exceptional costs                                               13,744     5,803 
 Share based payments                                             2,819       272 
 Adjusted Profit before taxation including IFRS 
  10 adjustment                                                 130,874    44,654 
 IFRS 10 adjustment(2)                                            2,857     4,501 
 Adjusted Profit before taxation excluding IFRS 
  10 adjustment                                                 133,731    49,155 
 --------------------------------------------------  --------  --------  -------- 
 
    Adjusted Operating cash flow (before exceptional 
     costs, tax and net finance expense): 
 Adjusted Operating cash flow (as defined above) 
  including IFRS 10 adjustment                                   10,433    20,459 
 IFRS 10 adjustment                                               9,645    18,339 
 Adjusted Operating cash flow (as defined above) 
  excluding IFRS 10 adjustment                                   20,078    38,798 
 --------------------------------------------------  --------  --------  -------- 
 
    Adjusted EPS (See Note 8): 
 Profit for the year attributable to equity 
  holders of the parent                                          82,949    27,302 
 Adjusted basic profit for the year (See Note 
  8)                                                            106,700    39,474 
 ================================================== 
 
 Basic earnings per share                                         1.971     1.005 
 Diluted earnings per share                                       1.952     0.998 
 
 Adjusted basic earnings per share                                2.535     1.453 
 Adjusted diluted earnings per share                              2.511     1.442 
 --------------------------------------------------  --------  --------  -------- 
 
 
 

Notes

1: The adjustment to obtain Gross sales is the inclusion of disbursements transacted by the Group's legal services business that are provided by non-Group parties, incurred by the Group and invoiced on to at-fault insurers.

2: Adjusted profit before taxation and Adjusted EBITDA excludes the impact of the first time application of IFRS 10 which, as outlined in Note 2, has changed the treatment of a number of acquisitions that the Group entered into in 2012 and 2013.

   5.             Business and geographical segments 

Operating segments

For management purposes, the Group is organised into two operating divisions: Solutions and Services. These divisions are supported by a group cost centre. These two divisions are the basis on which the Group reports its primary segment information.

The principal activities of each segment are as follows. The Solutions division provides software, business and technology consulting services, administration and management services, white labelled solutions, e-commerce, membership services, SaaS solutions and other services. The Services division provides technology enabled sales and service related outsourcing services.

Segment information about these businesses is presented below. Segment profit represents the profit earned by each segment before the allocation of specific central head office and research and development costs, exceptional costs, share based payments, finance costs and income tax expense and is a measure reported to the Executive Chairman and the Board for the purpose of resource allocation and assessment of segment performance. Intra-segmental transactions have been eliminated in analysis below.

 
                                         Solutions   Services    Central      Total 
                                           GBP'000    GBP'000    GBP'000    GBP'000 
 2013 
 Software and consulting (management 
  and one time fees, e-commerce 
  and click fees) revenue                   80,441          -          -     80,441 
 Technology enabled outsourcing 
  (sales, service, other) revenue                -    299,690          -    299,690 
--------------------------------------  ----------  ---------  ---------  --------- 
 Total revenue                              80,441    299,690          -    380,131 
--------------------------------------  ----------  ---------  ---------  --------- 
 Adjusted EBITDA(1) before central 
  costs 
 Software and consulting                    51,387          -          -     51,387 
 Technology enabled outsourcing                  -     90,780          -     90,780 
--------------------------------------  ----------  ---------  ---------  --------- 
 Adjusted EBITDA(1) before central 
  costs                                     51,387     90,780          -    142,167 
--------------------------------------  ----------  ---------  ---------  --------- 
 
 Group costs                                     -          -    (8,944)    (8,944) 
 Other income and share of results 
  of associate                                   -        183      4,245      4,428 
--------------------------------------  ----------  ---------  ---------  --------- 
 Adjusted EBITDA(1)                         51,387     90,963    (4,699)    137,651 
--------------------------------------  ----------  ---------  ---------  --------- 
 
 Exceptional costs and share based 
  payments                                 (3,557)      (959)   (12,047)   (16,563) 
 IFRS 10 adjustments(1)                          -    (2,863)          -    (2,863) 
 Depreciation and amortisation             (1,498)    (2,310)    (5,677)    (9,485) 
 Net finance expense                          (84)    (2,096)        486    (1,694) 
--------------------------------------  ----------  ---------  ---------  --------- 
 Profit/(loss) before taxation              46,248     82,735   (21,937)    107,046 
 Taxation                                 (10,520)   (18,820)      4,990   (24,350) 
--------------------------------------  ----------  ---------  ---------  --------- 
 Profit/(loss) after taxation               35,728     63,915   (16,947)     82,696 
--------------------------------------  ----------  ---------  ---------  --------- 
 
 
 2012 Restated - See Note 2 
 Software and consulting (management 
  and one time fees, e-commerce 
  and click fees) revenue                   30,068          -          -     30,068 
 Technology enabled outsourcing 
  (sales, service, other) revenue                -    132,936          -    132,936 
--------------------------------------  ----------  ---------  ---------  --------- 
 Total revenue                              30,068    132,936          -    163,004 
--------------------------------------  ----------  ---------  ---------  --------- 
 Adjusted EBITDA(1) before central 
  costs 
 Software and consulting                    24,042          -          -     24,042 
 Technology enabled outsourcing                  -     32,176          -     32,176 
--------------------------------------  ----------  ---------  ---------  --------- 
 Adjusted EBITDA(1) before central 
  costs                                     24,042     32,176          -     56,218 
--------------------------------------  ----------  ---------  ---------  --------- 
 
 Group costs                                     -          -    (4,299)    (4,299) 
 Other income and share of results 
  of associate                                   -       (19)        336        317 
--------------------------------------  ----------  ---------  ---------  --------- 
 Adjusted EBITDA(1)                         24,042     32,157    (3,963)     52,236 
--------------------------------------  ----------  ---------  ---------  --------- 
 
 Exceptional costs and share based 
  payments                                 (1,077)    (2,162)    (2,836)    (6,075) 
 IFRS 10 adjustments(1)                          -    (4,526)          -    (4,526) 
 Depreciation and amortisation             (2,093)    (1,654)    (1,449)    (5,196) 
 Net finance expense                          (60)    (1,045)         25    (1,080) 
--------------------------------------  ----------  ---------  ---------  --------- 
 Profit/(loss) before taxation              20,812     22,770    (8,223)     35,359 
 Taxation                                  (4,250)    (3,443)      (271)    (7,964) 
--------------------------------------  ----------  ---------  ---------  --------- 
 Profit/(loss) after taxation               16,562     19,327    (8,494)     27,395 
--------------------------------------  ----------  ---------  ---------  --------- 
 Note: (1) Adjusted EBITDA in the tables above excludes exceptional 
  costs, share based payments and the impact of the first time application 
  of IFRS 10 which, as outlined in Note 2, has changed the treatment 
  of a number of acquisitions that the Group entered into in 2012 
  and 2013. 
 

Other information:

 
                                                               Unallocated 
                                                                 corporate 
                                      Solutions     Services        assets       Total 
                                        GBP'000      GBP'000       GBP'000     GBP'000 
 2013 
 Capital additions                       30,865      103,308         1,864     136,037 
                                   ============  ===========  ============  ========== 
 
 Statement of financial position 
 Assets                                 121,727      562,962       196,792     881,481 
                                   ============  ===========  ============  ========== 
 Liabilities                           (19,939)    (169,506)      (24,518)   (213,963) 
---------------------------------  ============  ===========  ============  ========== 
 
 2012 Restated - See Note 2 
 Capital additions                       23,524      107,733         1,303     132,560 
 
 Statement of financial position 
 Assets                                  57,704      275,189        81,836     414,729 
 Liabilities                           (15,875)    (109,003)      (17,691)   (142,569) 
---------------------------------  ------------  -----------  ------------  ---------- 
 

Segment assets and liabilities are those assets and liabilities that are employed by a division in its operating activities. Segment assets include intangible assets, property, plant and equipment, inventories, trade and other receivables, cash and cash equivalents. Segment liabilities include borrowings, trade and other payables. Unallocated assets and liabilities include cash balances and property, plant and equipment, trade payables and deferred tax liabilities.

Geographical segments

 
 
                                 United     Rest of 
                                Kingdom       World     Total 
                                GBP'000     GBP'000   GBP'000 
 2013 
 Revenue                        321,576      58,555   380,131 
----------------------------  =========  ==========  ======== 
 
 Other segment information 
 Assets                         551,510      38,691   590,201 
                              =========  ==========  ======== 
 Intangible assets              226,334      64,946   291,280 
----------------------------  =========  ==========  ======== 
 Total assets                   777,844     103,637   881,481 
----------------------------  =========  ==========  ======== 
 
 Capital expenditure 
 Tangible assets                  3,241       3,698     6,939 
                              =========  ==========  ======== 
 Intangible assets               64,763      64,335   129,098 
----------------------------  =========  ==========  ======== 
 
 2012 Restated - See Note 2 
 Revenue                        152,271      10,733   163,004 
----------------------------  ---------  ----------  -------- 
 
 Other segment information 
 Assets                         233,589       6,931   240,520 
 Intangible assets              168,144       6,065   174,209 
----------------------------  ---------  ----------  -------- 
 Total assets                   401,733      12,996   414,729 
----------------------------  ---------  ----------  -------- 
 
 Capital expenditure 
 Tangible assets                  5,725         696     6,421 
 Intangible assets              120,131       6,008   126,139 
----------------------------  ---------  ----------  -------- 
 
   6.             Exceptional costs 
 
                                                                                             Restated 
                                                                                             See Note 
                                                                                                    2 
                                                                                      2013 
 
                                                                                      2013       2012 
                                                                                   GBP'000    GBP'000 
 Acquisition costs: 
                Acquisition related 
                 fees                                                                1,889      1,837 
                Costs of integration and associated 
                 redundancies                                                        1,084        782 
                Post combination vendor remuneration (cash element)                    962        538 
                Share based payments: share options of a subsidiary                      -        120 
 Cost of raising finance, including loss on Equity 
  Swap                                                                               5,233      2,526 
--------------------------------------------------------------------------------  --------  --------- 
 Exceptional costs excluding share 
  based payments                                                                     9,168      5,803 
 Exceptional share based payments: warrants granted 
  in respect of a customer agreement                                                 4,576          - 
 Total exceptional costs                                                            13,744      5,803 
----------------------------------------------   -------------------------------  --------  --------- 
 
 
   7.             Taxation 
 
                                           Restated 
                                           See Note 
                                                  2 
                                    2013       2012 
                                 GBP'000    GBP'000 
 The taxation charge/(credit) 
  comprises: 
 Current tax: 
  - Current year                  27,190      7,833 
  - Adjustments in respect 
   of prior year                   (387)         14 
------------------------------  --------  --------- 
 Total current 
  tax                             26,803      7,847 
------------------------------  --------  --------- 
 Deferred tax: 
  - Current year                 (1,496)        117 
  - Adjustments in respect 
   of prior year                   (957)          - 
------------------------------  --------  --------- 
 Total deferred tax              (2,453)        117 
------------------------------  --------  --------- 
 Taxation                         24,350      7,964 
------------------------------  --------  --------- 
 

Income tax for the UK is calculated at the standard rate of UK corporation tax of 23.25% (2012: 24.50%) on the estimated assessable profit for the year. The total charge for the year can be reconciled to the accounting profit as follows:

 
                                                                                          Restated 
                                                                                          See Note 
                                                                                                 2 
                                                                                   2013       2012 
                                                                                GBP'000    GBP'000 
 
 Profit on ordinary activities before tax                                       107,046     35,359 
------------------------------------------------------------     ------------  --------  --------- 
 Tax at 23.25% (2012: 24.50%) thereon                                            24,888      8,663 
 
 Effect of: 
 Expenses not deductible for tax purposes                                         2,231        268 
 Effect of lower rate tax overseas                                              (1,082)          - 
 Research and development tax credit claim                                        (161)      (981) 
 Reduction in rate of deferred tax                                                (182)          - 
 Adjustments to tax charge in respect of prior 
  periods                                                                       (1,344)         14 
 Total tax charge for the year                                                   24,350      7,964 
------------------------------------------------------------     ------------  --------  --------- 
 
 
   8.             Earnings per share 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares where, on warrants or options, exercise price is less than the average market price of the Company's ordinary shares during the year.

The calculation of the basic and diluted earnings per share is based on the following data:

 
                                                 Restated 
                                                 See Note 
                                                        2 
                                          2013       2012 
                                       GBP'000    GBP'000 
 
 Profit for the year                    82,949     27,302 
------------------------------------  --------  --------- 
 Adjustments: 
  - exceptional costs                   13,744      5,803 
  - share based payments                 2,819        272 
  - amortisation                         7,265      3,220 
  - IFRS 10 adjustment(1)                2,857      4,501 
  - tax effect on the above            (2,934)    (1,624) 
------------------------------------  --------  --------- 
 Adjusted basic profit for the year    106,700     39,474 
------------------------------------  --------  --------- 
 
 
                                             2013        2012 
                                           Number      Number 
                                            '000s       '000s 
 
 Weighted average number of shares in 
  issue in the year                     4,209,532   2,716,720 
 Dilutive potential ordinary shares 
  - Deferred consideration shares          15,500       3,205 
  - Share based payments                   11,147           - 
  - Warrants                               12,996      16,779 
--------------------------------------  ---------  ---------- 
 Shares used to calculate diluted and 
  adjusted diluted earnings per share   4,249,175   2,736,704 
--------------------------------------  ---------  ---------- 
 
                                                     Restated 
                                                     See Note 
                                                            2 
                                             2013        2012 
                                            Pence       Pence 
 
 Basic earnings per share                   1.971       1.005 
 Diluted earnings per share                 1.952       0.998 
 
 Adjusted basic earnings per share          2.535       1.453 
 Adjusted diluted earnings per share        2.511       1.442 
--------------------------------------  ---------  ---------- 
 

Note

(1) Adjusted basic profit for the year excludes exceptional costs, share based payments, amortisation and the impact of the first time application of IFRS 10 which, as outlined in Note 2, has changed the treatment of a number of acquisitions that the Group entered into in 2012 and 2013.

    9.             Trade and other receivables 
 
                                                   Restated 
                                                   See Note 
                                                          2 
                                            2013       2012 
                                         GBP'000    GBP'000 
 
 Trade receivables (net of impairment 
  provision)                              85,632     73,694 
                                        ======== 
 Other receivables: 
  - relating to legal disbursements 
   due from insurance companies           57,473     26,549 
                                        ========  ========= 
  - other                                 20,120      7,977 
                                        ======== 
 Prepayments                              12,955      8,426 
                                        ========  ========= 
 Accrued income                          151,693     47,928 
                                        ======== 
 Derivative financial instruments              -     13,297 
--------------------------------------  ========  ========= 
                                         327,873    177,871 
--------------------------------------  ========  --------- 
 
   10.           Trade and other payables 
 
                                                 Restated 
                                                 See Note 
                                                        2 
                                          2013       2012 
                                       GBP'000    GBP'000 
 Current liabilities 
 Trade payables                         21,346     12,166 
                                      ======== 
 Payroll and other taxes including 
  social security                       13,518     17,557 
                                      ======== 
 Accruals                               33,153     21,722 
                                      ======== 
 Deferred income                         4,978      2,180 
                                      ======== 
 Other liabilities: 
  - relating to legal disbursements     44,811     28,692 
                                      ========  ========= 
  - other                                8,136     12,921 
------------------------------------  ========  ========= 
                                       125,942     95,238 
------------------------------------  ========  --------- 
 Non-current liabilities 
 Other liabilities                       1,896      6,032 
                                         1,896      6,032 
------------------------------------  ========  --------- 
 
   11.           Acquisitions 

2013

The Group made three significant acquisitions during the year, and three smaller acquisitions. In each case, the acquirer obtained control through a combination of control over voting rights, positions on the board or by virtue of put and call options that were entered into and which are then accounted for under the anticipated acquistion method for accounting for business combinations. Where the Company's own shares formed part of the consideration of an acquisition, these have been been valued according to the opening bid price (as recorded by AIM) on the day legal title passed or, where the anticipated acquistion method for accounting for business combinations has been elected to be used, the day the Group concluded that it controlled the acquired entity, discounted by the Group's cost of equity to factor in the time value of the consideration.

For all acquisitions in the current year, where contingent or deferred consideration (cash or shares) that is linked to future performance conditions is included in the cost of acquisition, the maximum amount, be that in cash or by way of issuing shares has been included based on a current assessment of performance of each business against those future performance conditions. In the event that any performance conditions are not met then these contingent elements are subject to clawback provisions. The range of potential outcomes that could arise is as shown in the table below, whereby an amount up to the full value of the contingent or deferred consideration could be recovered. However, consistent with the current judgement noted above, no amounts are currently expected to be clawed back and as a result, no indemnification asset has been recognised.

Iter8 Inc ("iter8")

On 18 April 2013 the Group acquired the entire issued share capital of iter8, a leading Software as a Service ("SaaS") 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:

 
                                     Carrying 
                                        value  Fair value 
                                      GBP'000     GBP'000 
                                     ========  ========== 
 
Tangible fixed assets                     168         168 
                                     ========  ========== 
Intangible assets                       3,983       2,256 
                                     ========  ========== 
Trade and other receivables             1,614       1,614 
                                     ========  ========== 
Cash and cash equivalents                   9           9 
                                     ========  ========== 
Trade and other payables              (4,518)     (4,518) 
===================================  ======== 
Deferred tax asset                          -         397 
                                     ========  ========== 
Net assets/(liabilities) acquired       1,256        (74) 
===================================  ========  ========== 
Consideration: 
 - Cash                                             2,500 
                                               ========== 
 - Deferred cash                                    2,500 
                                               ========== 
 - Deferred shares (19,004,571 out 
  of 90,285,713)                                    2,052 
===================================  --------  ========== 
Total consideration                                 7,052 
                                               ========== 
Goodwill arising from acquisition                   7,126 
===================================  --------  ========== 
 

The deferred shares are issuable over three years from the date of acquisition and are subject to lock in conditions. The value of the shares has been discounted by the Group's cost of equity to take account of the time value of the consideration. The discount amount was GBP418,000. Of the 90,285,713 deferred shares, 19,004,571 have been treated as consideration for the acquisition (as above). The remaining 71,281,142 shares have been treated as linked to post combination vendor remuneration as entitlement to these shares, issued as consideration to three of the vendors was linked to their ongoing employment with the Group. The 71,281,142 shares have been valued under share based payment rules and a share based payment charge recognised for the charge to the Consolidated Income Statement in the current year.

The resultant goodwill of GBP7.1 million represents 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. Acquired receivables are included within the Trade and other receivables balances above and the carrying value of these is considered to be their fair value. No significant trade receivable provision was acquired, nor adjusted. Included within the fair value adjustments above is a GBP3.9 million adjustment to revalue licence and distribution agreements previously capitalised in the acquired entity. Prior to the acquisition, the Group had supplied to iter8 a licence and software with a value of GBP3.9m. This pre-existing relationship was settled on acquisition. The underlying software acquired was then separately valued at fair value at the date of acquisition.

Acquisition costs of GBP306,000 were incurred and included as exceptional costs within administrative expenses. The deferred cash is due to be paid in April 2014, and the additional share consideration of 19,004,571 shares is due to be issued in three equal annual instalments commencing April 2014.

PT Healthcare Solutions Corp ("PT Health")

On 26 September 2013 the Group acquired a 26% stake in PT Healthcare Solutions Corp (via a share-for-share exchange) with an option to acquire the remaining 74% of business. Whilst the Group's shareholding in PT Health is only 26% as at 31 December 2013, the Directors have concluded that the Group controls PT Health by virtue of the put and call options that exist regarding the acquisition of the remaining equity shares in PT Health by the Group, and by virtue of the funding that the Group had provided to PT Health since it took its 26% investment. The terms of the put and call option include the unconditional ability to exercise the call option, expiring 31 March 2014. As a consequence, PT Health has been consolidated as a subsidiary undertaking using the anticipated acquisition method, consistent with IFRS 3, on the basis that the put and call option provides substantive potential voting rights in accordance with IFRS 10. PT Health is a leading provider of healthcare and rehabilitation services in Canada. The primary reason for acquisition was to enable the Group to enhance the range of products that it could offer to customers.

The provisional fair value of the identifiable assets and liabilities of PT Health at acquisition date are set out below:

 
                                            Carrying 
                                               value  Fair value 
                                             GBP'000     GBP'000 
 
Tangible fixed assets                          3,213       3,213 
Intangible assets                              1,232       1,593 
Inventories                                      252         252 
Trade and other receivables                    5,014       5,014 
Cash and cash equivalents                        113         113 
Other secured loans                          (5,875)     (5,875) 
Unsecured loans                                (498)       (498) 
Cumulative redeemable preference shares      (5,939)     (5,939) 
Finance leases                                   (5)         (5) 
Trade and other payables                     (4,995)     (5,085) 
Deferred tax liabilities                           -        (72) 
Net liabilities acquired                     (7,488)     (7,289) 
Consideration: 
 - Fair value of non-controlling interest                    716 
 - Deferred shares (242,000,000)                          33,924 
------------------------------------------  --------  ---------- 
Total consideration                                       34,640 
Goodwill arising from acquisition                         41,929 
------------------------------------------  --------  ---------- 
 

The deferred shares included in consideration in the table above relates to the put and call option shares. The Company's shares issued for the share-for-share exchange on acquisition have been accounted for as if they treasury shares. The value of the shares has been discounted by the Group's cost of equity to take account of the time value of the consideration. The discount amount was GBP6,914,000. The goodwill of GBP41.9 million represents 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. Acquired receivables are included within the trade and other receivables balances above and the carrying value of them is considered to be their fair value. No significant trade receivable provision was acquired, nor adjusted. The non-controlling interest recognised on acquisition is in respect of PT Health's cumulative redeemable preference shares. Acquisition costs of GBP104,000 were incurred and included as exceptional costs within administrative expenses.

Quindell Property Services Limited

On 3 May 2013 the Group acquired the entire share capital of Quindell Property Services, a newly formed group bringing together a number of businesses, related to the supply of outsourced property services and SaaS based technology solutions including the disruptive use of video within the insurance property supply chain. The services provided by Quindell Property Serviceswill enable Quindell to accelerate the development of new products and propositions in the property claims sector, with the opportunity to build on Quindell Property Services' capabilities using Quindell's existing insurance and affiliate clients, help clients to create further differentiation in product offering, improve customer retention and drive down the cost of property claims.

The provisional fair value of the identifiable assets and liabilities of Quindell Property Servicesat acquisition date are set out below:

 
                                              Carrying 
                                                 value  Fair value 
                                               GBP'000     GBP'000 
                                              ========  ========== 
 
Tangible fixed assets                              153         153 
                                              ========  ========== 
Intangible assets                                1,451       2,811 
                                              ========  ========== 
Trade and other receivables                      3,270       3,270 
                                              ========  ========== 
Cash and cash equivalents                         (38)        (38) 
                                              ========  ========== 
Trade and other payables                       (2,752)     (2,793) 
============================================  ========  ========== 
Deferred tax liabilities                             -       (313) 
                                              ========  ========== 
Net assets acquired                              2,084       3,090 
============================================  ========  ========== 
Consideration: 
 - Cash                                                      1,375 
                                                        ========== 
 - Shares (97,274,047)                                      11,846 
                                                        ========== 
 - Deferred contingent shares (162,066,225)                 18,175 
============================================            ========== 
 - Fair value of non-controlling interest                    3,122 
============================================            ========== 
 - Revaluation of initial investment 
  at the point of gaining control                            (880) 
============================================  --------  ========== 
Total consideration                                         33,638 
                                                        ========== 
Goodwill arising from acquisition                           30,548 
============================================  --------  ========== 
 

The fair value of non-controlling interest included in the table above relates to an acquired subsidiary of Quindell Property Services.

The shares already issued are subject to lock in conditions over three years from the date of acquisition. The deferred shares are issuable over three years from the date of acquisition and are then also subject to lock in conditions. The value of the deferred shares and shares already issued has been discounted by the Group's cost of equity to take account of the time value of the consideration. The discount amount was GBP4,423,000. The goodwill of GBP30.5 million represents 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. Acquired receivables are included within the trade and other receivables balances above and the carrying value of them is considered to be their fair value. No significant trade receivable provision was acquired, nor adjusted. The non-controlling interest recognised on acquisition is in respect of a subsidiary in the Quindell Property Services group. Acquisition costs of GBP245,000 were incurred and included as exceptional costs within administrative expenses.

Other acquisitions

During the year, the Group also made a series of smaller acquisitions of companies as follows:

 
                                                                     Consideration 
                                        Date of acquisition    Shares      Cash     Total 
 Company                                             (2013)   GBP'000   GBP'000   GBP'000 
 
 Compass Costs Consultants 
  Limited ("Compass Costs")                      6 February     6,978         -     6,978 
 iSaaS Technology Limited ("iSaaS")                25 March     3,715     1,340     5,055 
 React & Recover Medical Group 
  Limited ("R&R")                                  25 March     6,608       625     7,233 
------------------------------------  ---------------------  --------  --------  -------- 
                                                               17,301     1,965    19,266 
 ----------------------------------------------------------  --------  --------  -------- 
 

The primary reasons for the acquisitions was to enable the Group to enhance the range of products that it could offer to customers, and to increase its outsourcing and solutions capabilities. The provisional fair value of the combined identifiable assets and liabilities of these acquisitions at their respective acquisition dates are set out below:

 
                                     Carrying 
                                        value  Fair value 
                                      GBP'000     GBP'000 
 
Tangible fixed assets                     177         177 
Intangible assets                           -       7,405 
Trade and other receivables             5,960       5,960 
Cash and cash equivalents                (14)        (14) 
Finance leases                           (19)        (19) 
Trade and other payables              (4,895)     (4,895) 
Deferred tax liabilities                  (3)     (1,703) 
Net assets acquired                     1,206       6,911 
Consideration: 
 - Shares (188,771,429 in total)                   17,301 
 - Cash                                             1,965 
Total consideration                                19,266 
Goodwill arising from acquisitions                 12,355 
-----------------------------------  --------  ---------- 
 

Included in goodwill of GBP12.4 million is GBP4.9 million in respect of the Compass Costs, GBP3.0 million in respect of iSaaS and GBP4.5 million in respect of R&R. This represents 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 acquisitions together with the workforce, which is not separately recognised. Acquired receivables are included within the trade and other receivables balances above and the carrying value of them is considered to be their fair value. Included within Trade and other receivable balances acquired with R&R of GBP3.2 million which represents gross trade receivables of GBP4.4 million offset by a provision of GBP1.2 million. Other than this, no significant trade receivable provision was acquired, nor adjusted. Acquisition costs of GBP413,000 were incurred and included as exceptional costs within administrative expenses.

All shares issued as part of the above acquisitions are subject to lock in arrangements over three years, and have been discounted by the Group's cost of equity to factor in the time value of the consideration. The discount amount was GBP3,526,000. This is split across the above acquisitions as follows: Compass Costs GBP1,422,000, iSaaS GBP757,000 and R&R GBP1,347,000 million.

2012 Restated (See Note 2)

The Company made six significant acquisitions during the year and eight smaller acquisitions. In each case, the acquirer obtained control through a combination of control over voting rights and positions on the board. As disclosed in note 2, consistent with the treatment of 2013 acquisitions, prior year acquisitions have been restated to recognise the time value of money where consideration was locked in to future conditions. The total adjustment was GBP12.0 million and further information is included below showing the split of this across the relevant acquisitions.

Abstract Legal Holdings Limited ("AAH") - Restated (See Note 2)

On 8 April 2013 the Group acquired the entire issued share capital of Abstract Legal Holdings Limited the parent company of Accident Advice Helpline Limited. AAH is a leading ethical online consumer brand providing access to justice victims of non-fault accidents under a no-win, no-fee agreement. The primary reason for the acquisition was to enable the Group to enhance the range of products that it could offer to customers.

As disclosed in note 2, the acquisition date for AAH is now determined to be earlier under IFRS 10 and, therefore has been assessed as 24 July 2012. The table below sets out the revised fair value of the identifiable assets and liabilities of AAH at the revised acquisition date rather than the contractual acquisition date of 9 April 2013:

 
                                           Carrying 
                                              value  Fair value 
                                            GBP'000     GBP'000 
 
Tangible fixed assets                            44          44 
Intangible assets                                 -       5,000 
Trade and other receivables                   7,237       7,237 
Cash and cash equivalents                     5,247       5,247 
Trade and other payables                    (9,074)     (9,074) 
Deferred tax liabilities                          -     (1,150) 
Net assets acquired                           3,454       7,304 
Consideration: 
 - Shares (296,371,429)                                  34,817 
 - Cash                                                  16,513 
 - Settlement of pre-existing partnering 
  agreement                                             (4,716) 
-----------------------------------------  --------  ---------- 
Total consideration                                      46,614 
Goodwill arising from acquisition                        39,310 
-----------------------------------------  --------  ---------- 
 

The value of the shares has been discounted by the Group's cost of equity to take account of the time value of the consideration. The discount amount was GBP6,300,000. The goodwill of GBP39.3 million represents 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.

Legal Services businesses - Restated (See Note 2)

On 21 December 2012 and 31 December 2012, the Group acquired the trade and certain assets and liabilities of three legal service businesses: Silverbeck Rymer, Pinto Potts and The Compensation Lawyers. Each of these businesses were providers of legal services in relation to personal injury. The primary reason for the acquisition was to enable the Group to enhance the range of products that it could offer to customers.

As disclosed in note 2, the acquisition date for these businesses, aggregated to form Quindell Legal Services is now considered to be earlier under IFRS 10. These acquisitions are now consolidated into the group results from the following dates: Silverbeck Rymer: 1 July 2012, Pinto Potts: 17 August 2012 and The Compensation Lawyers: 24 July 2012. Below sets out the revised fair value of the identifiable assets and liabilities of Quindell Legal Services at the revised acquisition dates:

 
                                           Carrying 
                                              value  Fair value 
                                            GBP'000     GBP'000 
 
Tangible fixed assets                           360         360 
Intangible assets                                 -       7,997 
Trade and other receivables                  34,626      34,626 
Cash and cash equivalents                     3,680       3,680 
Trade and other payables                   (28,818)    (28,818) 
Net assets acquired                           9,848      17,845 
Consideration: 
 - Shares (187,166,666 in stages)                        24,968 
 - Cash                                                  13,530 
 - Deferred cash                                          1,500 
 - Settlement of pre-existing partnering 
  agreement                                               (281) 
-----------------------------------------  --------  ---------- 
Total consideration                                      39,717 
Goodwill arising from acquisition                        21,872 
-----------------------------------------  --------  ---------- 
 

The net impact of the restatement under IFRS 10 on Quindell Legal Services is that the net assets acquired were GBP0.2 million lower than previously estimated which was offset by a GBP1.8 million decrease in the provisional fair value of the deferred tax liabilities arising on the acquisition. In addition, the fair value of the consideration shares has been reviewed to take account of the time value of the it by discounting by the Group's cost of equity - the discount amount was GBP5,200,000 which has reduced goodwill accordingly. The timing impact of IFRS 10 was insignificant due to the partnering agreement dates and revised acquisition dates being closely aligned. The goodwill of GBP21.9 million represents 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.

IT Freedom Limited - Restated (See Note 2)

On 24 May 2012, the Group acquired the entire issued share capital IT Freedom Limited ("IT Freedom"), a software solutions delivery company. The primary reason for the acquisition was for IT Freedom to provide delivery capacity to cope with the significant pipelines already established by the Group.

As explained in note 2 above, a restatement has taken place as 33,031,533 (out of 49,713,669) shares and GBP3,000,000 deferred cash consideration previously treated as consideration for the acquisition have now been treated as linked to post combination vendor remuneration as entitlement to certain shares issued as consideration to two of key vendors was linked to their ongoing employment with the Group. Removing the 33,031,533 shares and GBP3,000,000 cash from the acquisition accounting has reduced goodwill by GBP4.8 million. The 33,031,533 shares have been valued under share based payment rules and a share based payment charge recognised in the Consolidated Income Statement in the current and prior year. The GBP3,000,000 cash is being recognised as an exceptional cost across the three year period with a GBP962,000 charge in the current year (2012: GBP538,000).

Below sets out the revised acquisition note for IT Freedom at the acquisition date amending for the reduced consideration.The resultant reduction in goodwill was GBP4,816,000.

 
                                               Carrying 
                                                  value  Fair value 
                                                GBP'000     GBP'000 
                                               ========  ========== 
 
Tangible fixed assets                                 4           4 
=============================================  ========  ========== 
Intangible assets                                 1,669       2,630 
=============================================  ========  ========== 
Trade and other receivables                         277         277 
=============================================  ========  ========== 
Cash and cash equivalents                            70          70 
=============================================  ========  ========== 
Other secured loans                               (181)       (181) 
=============================================  ========  ========== 
Trade and other payables                        (2,229)     (2,229) 
=============================================  ========  ========== 
Deferred tax liabilities                          (376)       (597) 
=============================================  ========  ========== 
Net assets acquired                               (766)        (26) 
=============================================  ========  ========== 
Consideration: 
============================================= 
 - Shares (16,682,136 previously 49,713,669) 
  - re-stated                                                   918 
=============================================            ========== 
 - Cash                                                         500 
=============================================            ========== 
 - Deferred cash - re-stated (previously 
  GBP3,000,000)                                                   - 
---------------------------------------------  --------  ========== 
Total consideration - re-stated (previously 
 GBP6,234,000)                                                1,418 
=============================================            ========== 
Goodwill arising from acquisition - 
 re-stated (previously GBP6,260,000)                          1,444 
=============================================  --------  ========== 
 

Quindell Business Process Services Limited (formerly Ai Claims Solutions plc)

On 25 January 2012 the Group acquired a 29.9% stake in Quindell Business Process Services. On 2 April 2012 the Group acquired a further 47.7% and announced a public offer for the remaining 22.4%, which resulted in the Group owning circa 98.4% of Quindell Business Process Services. The group's effective control date over Quindell Business Process Services was 2 April 2012 and the business was consolidated into the group's results from that date. In the first year since acquisition, the Directors have reviewed and amended the provisional fair values reported in 2012 of the identifiable assets and liabilities of Quindell Business Process Services acquired and the goodwill thereon. The effect of this change is to reduce the value of trade and other receivables acquired on acquisition by GBP1,295,000 which has had a corresponding increase to the goodwill associated with the Quindell Business Process Servicesacquisition from GBP3.2 million (as previously stated) to GBP4.5 million. This increase to goodwill has been reported as a 2013 goodwill addition in note.

Quintica Holdings Limited ("Quintica")

On 18 September 2012 the Group acquired a 100% shareholding in Quintica. Within the first year post-acquisition, the Directors have reviewed and amended the provisional fair values reported in 2012 of the identifiable assets and liabilities of Quintica acquired and the goodwill thereon. In addition, the value of the consideration shares has been discounted by the Group's cost of equity to take account of the time value of the consideration - the discount amount was GBP500,000. The effect of this change is to increase the value of trade and other payables assumed on acquisition by GBP609,000 and increase the goodwill associated with the Quintica acquistion by GBP109,000 from GBP5.7 million (as previously stated) to GBP5.8 million. This increase to goodwill has been reported as a 2013 goodwill addition.

Other acquisitions

The fair value of the identifiable assets and liabilities of the remaining entities acquired in 2012 in aggregate at acquisition date totalled net assets of GBP1.2 million, with consideration of GBP31.5 million resulting in goodwill of GBP30.3 million.

   12.           Cash flow 
 
                                                                            Restated 
                                                                            See Note 
                                                                                   2 
                                                                   2013         2012 
                                                                GBP'000      GBP'000 
 
 Operating profit                                               108,740       36,439 
 Adjustments for: 
   Exceptional costs                                              7,268        2,101 
                                                             ========== 
   Loss on Equity Swap                                            5,140        2,286 
                                                             ========== 
   Share based payments                                           8,357          930 
                                                             ========== 
   Depreciation of property, plant and equipment                  2,220        1,976 
   Amortisation of intangible fixed assets                        7,265        3,220 
   Share of (profit)/loss of associates                           (242)           19 
   Net gain on re-measurement of investments 
    on becoming associates and associates 
    on acquisition of control                                   (4,186)        (336) 
   Negative goodwill released to income                               -      (1,049) 
   Loss on disposal of plant, property and 
    equipment                                                        34            - 
   Profit on disposal of interests in property, subsidiary 
    undertaking and operation                                      (37)            - 
-----------------------------------------------------------  ----------  ----------- 
   Operating cash flows before movements 
    in working capital and provisions                           134,559       45,586 
                                                             ========== 
   Decrease/(increase) in inventories                                94         (45) 
                                                             ========== 
   Increase in trade and other receivables                    (137,605)        (965) 
                                                             ========== 
   Increase/(decrease) in trade and other 
    payables                                                     13,385     (24,117) 
-----------------------------------------------------------  ==========  ----------- 
   Cash generated from operations before 
    exceptional costs                                            10,433       20,459 
-----------------------------------------------------------  ==========  ----------- 
 
 

Reconciliation of net cash flow to movement in net funds

 
                                                            Cash flow   Non-cash 
                                   1 January  Acquisitions  movements  movements  31 December 
                                     GBP'000       GBP'000    GBP'000    GBP'000      GBP'000 
2013 
Cash                                  48,050         1,085    150,461          -      199,596 
                                              ============  =========  =========  =========== 
Overdrafts and bank loans           (15,871)       (1,015)    (2,756)          -     (19,642) 
---------------------------------  ---------  ============  =========  =========  =========== 
Cash and cash equivalents             32,179            70    147,705          -      179,954 
                                              ============  =========  =========  =========== 
Other secured loans < 1 
 year                                (6,052)       (5,875)   (13,157)       (61)     (25,145) 
                                              ============  =========  =========  =========== 
Other secured loans > 1 
 year                                (7,171)             -      1,032          -      (6,139) 
                                              ============  =========  =========  =========== 
Cumulative redeemable preference 
 shares < 1 year                           -         (540)          -       (64)        (604) 
                                              ============  =========  =========  =========== 
Cumulative redeemable preference 
 shares > 1 year                           -       (5,399)          -        373      (5,026) 
                                              ============  =========  =========  =========== 
Unsecured loans < 1 year               (228)         (498)       (26)          -        (752) 
                                              ============  =========  =========  =========== 
Unsecured loans > 1 year               (304)             -      (492)          -        (796) 
                                              ============  =========  =========  =========== 
Finance leases < 1 year                (479)          (24)        636      (743)        (610) 
                                              ============  =========  =========  =========== 
Finance leases > 1 year                (568)             -          -       (93)        (661) 
---------------------------------  ---------  ============  =========  =========  =========== 
Net funds                             17,377      (12,266)    135,698      (588)      140,221 
---------------------------------  ---------  ============  =========  =========  =========== 
 
2012 Restated 
Cash                                   3,711         6,367     37,972          -       48,050 
Overdrafts and bank loans                  -      (18,959)      3,088          -     (15,871) 
---------------------------------  ---------  ------------  ---------  ---------  ----------- 
Cash and cash equivalents              3,711      (12,592)     41,060          -       32,179 
Other secured loans < 1 
 year                                (5,874)         (183)          5          -      (6,052) 
Other secured loans > 1 
 year                               (10,223)         (745)      3,797          -      (7,171) 
Unsecured loans < 1 year                   -             -      (228)          -        (228) 
Unsecured loans > 1 year                   -             -      (304)          -        (304) 
Finance leases < 1 year                (291)         (241)        888      (835)        (479) 
Finance leases > 1 year                (684)          (75)          -        191        (568) 
---------------------------------  ---------  ------------  ---------  ---------  ----------- 
Net (debt)/funds                    (13,361)      (13,836)     45,218      (644)       17,377 
---------------------------------  ---------  ------------  ---------  ---------  ----------- 
 
   13.           Post balance sheet events 

Since 31 December 2013, the following events have occurred:

Issue of ordinary shares

 
                                                 Date of                      Shares 
Reason for issue                                   issue   Issue price        issued 
                                                  (2014)         Pence        Number 
Acquisitions: 
 ACH Manchester and associated companies      14 January        22.125   117,812,500 
 Crusader Group of companies                  14 January        22.125    34,285,714 
 Enzyme International Limited (deferred 
  consideration)                              14 January        22.125    20,500,000 
 Himex Group of companies                    17 February        39.625   325,000,000 
                                                          ============ 
PT Healthcare Solutions Corp.                   28 March         38.75   100,000,000 
 
Investments and associates: 
 ingenie Limited                              4 February        31.125    15,348,836 
 
Exercise of warrants                          4 February         2.470     4,048,583 
                                                                         616,995,633 
 -------------------------------------------------------  ------------  ------------ 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

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