REG - Quindell PLC - Interim Results <Origin Href="QuoteRef">PHNX.L</Origin> <Origin Href="QuoteRef">QPP.L</Origin> - Part 2
29/10/2014 14:21
- Part 2: For the preceding part double click ID:nRSU6811Pa
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 Terms of 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
receivables.
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 Digital Solutions Division
The Digital 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.
2. Key Performance Indicators
Unaudited Unaudited Audited
6 months 6 months 12 months
30 June 14 30 June 13 31 Dec 13
£000 £000 £000
Adjusted Revenue:
Digital Solutions Division revenue 64,058 22,496 80,441
Professional Services Division revenue 293,277 140,817 299,690
Legal Services related sales1 6,887 4,032 18,605
Professional Services Division Gross sales 300,164 144,849 318,295
Total Gross sales 364,222 167,345 398,736
Adjusted EBITDA:
Profit before taxation 153,703 39,226 107,046
Depreciation 1,745 820 2,220
Amortisation 5,363 2,803 7,265
Exceptional costs 2,435 6,769 13,744
Share based payments 6,603 819 2,819
Net finance expense 681 683 1,694
Gain on re-measurement of acquisitions/investments (14,522) - -
Adjusted EBITDA including IFRS 10 adjustment 156,008 51,120 134,788
IFRS 10 adjustment2 - 2,863 2,863
Adjusted EBITDA excluding IFRS 10 adjustment 156,008 53,983 137,651
Adjusted Profit before taxation:
Profit before taxation 153,703 39,226 107,046
Amortisation 5,363 2,803 7,265
Exceptional costs 2,435 6,769 13,744
Share based payments 6,603 819 2,819
Gain on re-measurement of acquisitions/investments (14,522) - -
Adjusted Profit before taxation including IFRS 10 adjustment 153,582 49,617 130,874
IFRS 10 adjustment2 - 2,857 2,857
Adjusted Profit before taxation excluding IFRS 10 adjustment 153,582 52,474 133,731
Adjusted Operating cash flow (before exceptional costs, tax and net finance expense):
Adjusted Operating cash flow (as defined above) (51,173) (7,323) 10,433
including IFRS10 adjustment
IFRS 10 adjustment - 9,645 9,645
Adjusted Operating cash flow (as defined above) excluding IFRS 10 adjustment (51,173) 2,322 20,078
Adjusted EPS (see note 8):
Profit for the year attributable to equity holders of the parent 122,182 30,169 82,949
Adjusted basic profit for the year 119,817 39,154 106,700
pence Pence Pence
Basic earnings per share 30.12 11.81 29.56
Diluted earnings per share 28.89 11.62 29.28
Adjusted basic earnings per share 29.60 16.46 38.02
Adjusted diluted earnings per share 28.39 16.20 37.67
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, in 2013, of IFRS 10 which, as disclosed in the
Statutory Accounts to 31 December 2013, changed the treatment of a number of
acquisitions that the Group entered into in 2012 and 2013.
3. Business Segments
The Group has two reportable operating segments, which are separately
disclosed, together with a central cost centre which includes unallocated
corporate costs.
6 months ended 30 June 2014
Digital Solutions Professional Services Central Total
£000 £000 £000 £000
Revenue
Software and consulting (management and one time fees, e-commerce and click fees) revenue 64,058 - - 64,058
Technology enabled outsourcing (sales, service, other) revenue - 293,277 - 293,277
Total revenue 64,058 293,277 - 357,335
Adjusted EBITDA1 before central costs
Software and consulting 44,081 - - 44,081
Technology enabled outsourcing - 120,275 - 120,275
Adjusted EBITDA1 before central costs 44,081 120,275 - 164,356
Group costs - - (9,739) (9,739)
Share of result of associates 979 412 - 1,391
Adjusted EBITDA1 45,060 120,687 (9,739) 156,008
Exceptional costs and share based payments (2,165) (180) (6,693) (9,038)
Gain on re-measurement of acquisitions - - 14,522 14,522
Depreciation and amortisation (1,362) (2,084) (3,662) (7,108)
Net finance expense (50) (2,085) 1,454 (681)
Profit before taxation 41,483 116,338 (4,118) 153,703
Taxation (10,309) (23,918) 3,558 (30,669)
Profit after taxation 31,174 92,420 (560) 123,034
6 months ended 30 June 2013
Digital Solutions Professional Services Central Total
£000 £000 £000 £000
Revenue
Software and consulting (management and one time fees, e-commerce and click fees) revenue 22,496 - - 22,496
Technology enabled outsourcing (sales, service, other) revenue - 140,817 - 140,817
Total revenue 22,496 140,817 - 163,313
Adjusted EBITDA1 before central costs
Software and consulting 16,357 - - 16,357
Technology enabled outsourcing - 40,649 - 40,649
Adjusted EBITDA1 before central costs 16,357 40,649 - 57,006
Group costs - - (3,023) (3,023)
Adjusted EBITDA1 16,357 40,649 (3,023) 53,983
Exceptional costs and share based payments (135) (828) (6,625) (7,588)
Depreciation and amortisation (1,301) (1,682) (640) (3,623)
IFRS 10 adjustment - (2,863) - (2,863)
Net finance expense (26) (897) 240 (683)
Profit before taxation 14,895 34,379 (10,048) 39,226
Taxation (3,119) (7,796) 1,832 (9,083)
Profit after taxation 11,776 26,583 (8,216) 30,143
12 months ended 31 December 2013
DigitalSolutions Professional Services Central Total
£000 £000 £000 £000
Revenue
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 - 299,960 - 299,960
Total revenue 80,441 299,960 - 380,131
Adjusted EBITDA1 before central costs
Software and consulting 51,387 - - 51,387
Technology enabled outsourcing - 90,780 - 90,780
Adjusted EBITDA1 before central costs 51,387 90,780 - 142,167
Group costs - - (8,944) (8,944)
Other income and share of result of associates - 183 4,245 4,428
Adjusted EBITDA1 51,387 90,963 (4,699) 137,651
Exceptional costs and share based payments (3,557) (959) (12,047) (16,563)
IFRS 10 adjustment - (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 before taxation 46,248 82,735 (21,937) 107,046
Taxation (10,520) (18,820) 4,990 (24,350)
Profit after taxation 35,728 63,915 (16,947) 82,696
Note: 1. Adjusted EBITDA in the tables above excludes share based payments,
gain on re-measurement of acquisitions/investments for 2014 and exceptional
costs
4. Exceptional costs
Unaudited6 months30 June 14 £000 Unaudited6 months30 June 13£000 Audited12 months31 Dec 13£000
Acquisition costs:
Acquisition related fees 1,551 817 1,889
Costs of integration and associated redundancies 384 303 1,084
Post combination vendor remuneration (cash element) 500 481 962
Cost of raising finance, including loss on Equity Swap - 5,168 5,233
Exceptional costs 2,435 6,769 9,168
Exceptional share based payments: warrants granted in respect of a customer agreement - - 4,576
Total exceptional costs 2,435 6,769 13,744
5. Other income
Unaudited6 months30 June 14 £000 Unaudited6 months30 June 13£000 Audited12 months31 Dec 13£000
Gain on re-measurement of acquisitions/investments 14,522 - 4,186
The gain on re-measurement of acquisitions/investments in the six months to 30
June 2014 represents the provisional estimate of the gain in relation to the
Himex group of Companies acquisition. See note 10.
6. Taxation
The tax charge is £30,669,000 for the six month period ended 30 June 2014 (6
months ended 30 June 2013: £9,083,000, 12 months ended 31 December 2013:
£24,350,000).
7. Dividend
Unaudited6 months30 June 14 £000 Unaudited6 months30 June 13£000 Audited12 months31 Dec 13£000
Paid during period/year 6,180 - -
8. Earnings per share
Unaudited6 months30 June 14 £000 Unaudited6 months30 June 13 £000 Audited12 months31 Dec 13£000
Basic profit for the period/year 122,182 30,169 82,949
Adjustments:
- exceptional costs 2,435 6,769 13,744
- share based payments 6,603 819 2,819
- amortisation 5,363 2,803 7,265
- IFRS 10 adjustment - 2,857 2,857
- gain on re-measurement of acquisitions/investments (14,522) - -
- tax effect on the above (1,986) (1,380) (2,934)
Adjusted basic profit for the period/year 120,075 42,037 106,700
Number'000 Number'000 Number'000
Weighted average number of shares in issue in the period/year 405,717 255,385 280,635
Dilutive potential ordinary shares
- Deferred consideration shares 8,803 3,944 1,033
- Share based payments 7,981 - 743
- Warrants 434 215 867
Shares used to calculate diluted and adjusted diluted earnings per share 422,935 259,544 283,278
Pence Pence Pence
Basic earnings per share 29.82 11.81 29.56
Diluted earnings per share 28.61 11.62 29.28
Adjusted basic earnings per share 29.60 16.46 38.02
Adjusted diluted earnings per share 28.39 16.20 37.67
The earnings per share for the periods ending 30 June 2013 and 31 December
2013 have been restated to reflect the 1 for 15 share consolidation on 20 June
2014.
9. Cash Flow
Cash generated from operations
Unaudited6 months30 June 14 Unaudited6 months30 June 13 Audited12 months31 Dec 13
£000 £000 £000
Operating profit 154,384 39,909 108,740
Adjustments for:
Exceptional costs 2,435 5,412 7,268
Depreciation of property, plant and equipment 1,745 820 2,220
Amortisation intangible fixed assets 5,363 2,803 7,265
Share of profit of associates (1,391) (4) (242)
Gain on re-measurement of acquisitions/investments (14,522) - (4,186)
Loss on derivative instrument - 5,140 5,140
Loss on disposal of plant, property and equipment - - 34
Profit on disposal of interests in property, subsidiary undertaking and operation - - (37)
Share based payments 6,603 819 8,357
Operating cash flows before movements in working capital 154,617 54,899 134,559
(Increase)/decrease in inventories (1,072) (69) 94
Increase in trade and other receivables (225,797) (61,458) (137,605)
Increase/(decrease) in trade and other payables 21,079 (695) 13,385
Cash (used in)/generated from operations (51,173) (7,323) 10,433
Reconciliation of net cash flow to movement in net funds
Unaudited6 months30 June 14£000 Unaudited6 months30 June 13£000 Audited12 months31 Dec 13£000
Net (decrease)/increase in cash and cashequivalents in the period/year (115,499) (24,738) 147,775
Movement in debt (5,377) (6,561) (11,759)
Finance leases acquired (308) (167) (836)
Debt acquired with subsidiaries (121) (18) (12,336)
Net funds at the beginning of the period/year 140,221 17,377 17,377
Net funds/(debt) at the end of the period/year 18,916 (14,107) 140,221
10. Acquisitions
The Company made one significant acquisition and three other acquisitions
during the current period.
Himex group of companies ("Himex")
On 4 February 2014 the Group increased its investment in Himex in total by 66%
to circa 85% ("Himex Investment"). The terms of the Himex Investment were
satisfied by the payment of approximately £23 million of cash and the issue of
325 million shares. The primary reason for the acquisition was to enhance the
Group's Connected Car proposition and increase margins using the Himex
software alongside the Group's current proposition in the telematics market.
The provisional fair value of the identifiable assets and liabilities of Himex
at acquisition date are set out below:
Carrying value Fair value
£000 £000
Tangible fixed assets 896 896
Investments 2,376 2,376
Intangible assets 12,475 28,375
Inventories 7,326 7,326
Trade and other receivables 1,918 1,918
Cash and cash equivalents 9,160 9,160
Trade and other payables (15,356) (15,356)
Deferred tax - (5,000)
Net assets acquired 18,795 29,695
Consideration
Shares (389,972,171) 68,708
Cash 24,807
Fair value of non-controlling interest 2,876
Revaluation of initial investment at the point of gaining control 14,522
Total consideration 110,913
Goodwill arising from acquisition 81,218
The shares issued are subject to various lock in arrangements of up to three
years from the date of acquisition. The value of the shares 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 £4,205,000.
Included within fair value adjustments for intangible assets are separable
assets identified at acquisition in relation to technology assets, brands and
customer contracts all of which are required to be separated from Goodwill.
The above table includes the provisional estimate for these separate assets.
Valuation work is continuing to finalise this provisional estimate.
The resultant goodwill of £81.2 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.
Acquisition costs of £467,000 were incurred and included as exceptional costs
within administrative expenses
Other acquisitions
During the period 1 January 2014 to 30 June 2014, the Group also made a series
of smaller acquisitions of companies as follows:
Consideration
Date of acquisition Shares Cash Warrants Total
Company (2014) £'000 £'000 £'000 £'000
Crusader group, Enzyme 14 January 6,870 1,402 - 8,272
ACH Manchester and associated companies 14 January 23,606 5,000 - 28,606
Connected Car Solutions Limited 5 April - - 23,582 23,582
30,476 6,402 23,582 60,460
All shares or cash which are subject to lock in conditions from the date of
acquisition have been discounted by the Group's cost of equity to take account
of the time value of the consideration. The discount in aggregate was
£3,176,000.
The provisional fair value of the identifiable assets and liabilities of these
acquisitions at their respective acquisition dates are set out below.
Carrying value Fair value
£000 £000
Tangible fixed assets 167 167
Intangible assets 18,112 16,850
Trade and other receivables 10,931 12,811
Cash and cash equivalents 1,071 1,071
Trade and other payables (17,794) (17,794)
Deferred tax - (3,370)
Provisions - (1,880)
Net liabilities acquired 12,487 7,855
Consideration
Shares (152,098,214) 30,476
Warrants 23,582
Cash 6,000
Deferred cash 402
Sub-total consideration 60,460
Settlement of pre-existing partnering agreement (1,999)
Non-controlling interest 15,000
Total consideration 73,461
Goodwill arising from acquisitions 65,606
The resultant goodwill of £65.6 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.
Total acquisition costs of £597,000 were incurred and included as exceptional
costs within administrative expenses.
11. Trade and other receivables
Unaudited30 June 14 £000 Unaudited30 June 13£000 Audited31 Dec 13£000
Trade receivables 89,726 77,600 85,632
Other receivables
- relating to legal disbursements due from insurance companies 92,986 40,908 57,473
- other 27,538 16,463 20,120
Prepayments 18,539 10,451 12,955
Legal cases prepaid 23,347 3,768 7,366
Accrued income 308,639 89,219 144,327
Derivative financial instruments - 5,555 -
560,775 243,964 327,873
12. Trade and other payables
Unaudited30 June 14 £000 Unaudited30 June 13£000 Audited31 Dec 13£000
Current liabilities:
Trade payables 20,766 21,512 21,346
Payroll and other taxes including social security 9,015 13,984 13,518
Accruals 49,882 28,605 33,153
Deferred income 7,000 3,892 4,978
Other liabilities:
- relating to legal disbursements 66,618 32,660 44,811
- other 17,609 12,340 8,136
170,890 112,993 125,942
Non-current liabilities:
Other payables 1,362 27,976 1,896
172,252 140,969 127,838
13. Cash and cash equivalents
Unaudited30 June 14 £000 Unaudited30 June 13£000 Audited31 Dec 13£000
Cash and cash equivalents 84,977 35,211 199,596
Bank overdrafts (20,522) (27,770) (19,642)
64,455 7,441 179,954
14. Borrowings
Unaudited30 June 14 £000 Unaudited30 June 13£000 Audited31 Dec 13£000
Current:
Bank overdrafts 20,522 27,770 19,642
Cumulative redeemable preference shares 604 - 604
Other secured loans 31,286 11,929 25,145
Unsecured loans 496 806 752
Finance leases 594 487 610
53,502 40,992 46,753
Non-current:
Other secured loans 6,029 7,626 6,139
Cumulative redeemable preference shares 5,125 - 5,026
Unsecured loans 766 255 796
Finance leases 639 445 661
12,559 8,326 12,622
Total 66,061 49,318 59,375
15. Share capital
Issued and fully paid: Number'000s NominalValue£000
At 1 January 2014 5,669,978 56,700
Issued in the period to 19 June 2014 516,996 5,170
6,186,974 61,870
Share consolidation (1 for 15) 20 June 2014 412,465 61,870
Issued 23 June 2014 6,667 1,000
At 30 June 2014 419,132 62,870
The acquisition of 26% of PT Healthcare Solutions Corp ("PT Health") in 2013
and a further 23.9% in the current period involved two share-for-share
exchanges which resulted in the Company's own ordinary share capital being
held by one of its consolidated subsidiaries, PT Health. In accordance with
IAS32.33, and consistent with the treatment in 2013, the Group has therefore
accounted for these equity instruments held by PT Health as if they were
treasury shares. Included within the ordinary share capital, as at 30 June
2014, are 6,666,667 shares (30 June 2013: nil, 31 December 2013: 2,050,833)
with a carrying value of £14,018,000 (30 June 2013: £nil, 31 December 2013:
£5,209,000) held by PT Healthcare Solutions Corp. Any gains or losses
recognised in the subsidiary's Income Statement have been removed on
consolidation, and any proceeds from the sale of these shares recorded within
Cash flows from financing activities within the Consolidated Cash flow
statement.
On 20 June 2014, the shares of Quindell Plc were consolidated. The share
consolidation replaced every 15 existing ordinary shares of 1p each with 1 new
ordinary share of 15p each. The impact of the share consolidation on the
number of allotted, called up and fully paid shares is 5,775 million.
There is no change in the total value of the Company's issued share capital.
The number of Ordinary shares of 15 pence in issue at 30 June 2014 amounted to
419,131,627 shares (Ordinary shares of 1 pence at 30 June 2013: 4,137,518,768,
31 December 2013: 5,669,978,796).
16. Post Balance Sheet Events
Since 30 June 2014 the following events have occurred:
Himex - On 14 July 2014 the Group increased its investment in the Himex group
to circa 100% through the issue of 2,676,479 new Quindell shares, all of which
will be subject to ongoing orderly market restrictions and with 25% subject to
one year lock-in and a further 25% locked in for two years.
ingenie - On 14 July 2014 the Group increased its investment in the ingenie
group to 100% through the issue of 12,632,557 Quindell shares. All shares
issued are subject to ongoing orderly market restrictions, with 25% subject to
one year lock-in and a further 25% locked in for two years.
This information is provided by RNS
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