Team Internet Regulatory News (TIG)

5 December 2012

The Innovation Group plc 

("Innovation" or the "Group") 

Preliminary results for the year ended 30 September 2012

The Innovation Group plc, a global provider of business process services and software solutions to the insurance, fleet, automotive and property industries is pleased to report results for the year ended 30 September 2012 that are slightly ahead of market expectations.

Financial Highlights

* Adjusted profit before tax of £18.5m (2011: £15.1m) comprises profit before tax of £11.8m (2011: £10.2m) after adding back amortisation of acquired intangible assets of £3.3m (2011: £3.4m), impairment charges of £0.1m (2011: £nil) a share-based payment charge of £1.8m (2011: £1.6m), exceptional costs of £1.5m (2011: £nil) and a profit on disposal of investments of £nil (2011: £0.2m).

Highlights

·; Significant new business success delivered, with increasing number of wins combining multiple elements of our offering

·; 34% underlying adjusted profit growth at constant currency

·; Strong double digit revenue growth

·; Conversion of adjusted EBITDA to cash remains high at 95%

·; 3 acquisitions completed during the year, each integrated and contributing to our performance

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

"This has been a strong and positive year for our Group. We have worked hard to deliver significant growth in both revenue and profit and we have continued to execute to our plan, embedding ourselves more deeply with customers, building out our offering via acquisition, and leading the market in terms of innovation. This will continue in the year ahead and we remain confident that we have the right strategy to deliver profitable growth at good margins this year and in the years to come."

Enquiries:

Notes to Editors

The Innovation Group plc (LSE: TIG.L) provides business process services ('BPS') and software solutions for the global insurance, fleet, automotive and property industries. Among other offerings, the Group provides contact centres, repair networks, process management, supply chain and technology operations and decision support analytics to support accident management, repair and estimation and claims management services. With over 800 global clients including AXA, RBSI, RSA, American Modern Insurance Group, LeasePlan, The Ford Motor Company, Aviva, Toyota and Zurich, the Group processes more than 4 million claims per year with 20 per cent direct claims cost saving achieved. Innovation Group's 2,600 people are located in the United Kingdom, Australia, Belgium, Canada, France, Germany, Japan, India, Pakistan, South Africa, Spain and United States. www.innovation-group.com 

CHAIRMAN'S STATEMENT

The Group delivered a strong performance and demonstrated excellent cash generation, whilst at the same time achieving a number of key strategic initiatives. These included the launch of Insurer V7.0, the acquisitions of Claims Services Australia, Marishal Thompson and Value Partners, as well as sizeable new contract wins in Business Process Services ("BPS") and Software. These will provide a springboard for continued growth.

Progress in the second half of the year was particularly encouraging, with strong growth achieved in both BPS and in Software. This growth has been achieved against an uncertain economic backdrop and in spite of cyclical weaknesses in a number of our markets. The strength of our full year results bear testament to the robustness of our business, our geographical mix and the strength of our customer relationships, as well as the actions that have been taken to manage costs and cash flow.

Our teams continue to make great progress in delivering and selling both BPS and our software into the market. This year has seen us secure a number of new long-term contracts where customers have taken a platform offering from us, comprising both elements of our business, to significant effect. When customers take a platform offering from us, they benefit from our depth of knowledge, our experience and our understanding, borne of many years of investment and industry insight. These long-term, multi-year contracts provide us with our own platform for growth, contributing significantly to our continued resilience against economic or environmental challenges, while creating significant value for our shareholders.

I would like to acknowledge the continued commitment and talent shown by all our employees. Every day and at all levels our teams work hard to deliver outstanding service to customers, whether internal to the Group, directly into a customer's operations, or through to our customer's customers in call centres, repair centres or assessors. On behalf of the Board, I would like to thank all of our people for their efforts and contribution to the Group's achievements during the last twelve months.

Outlook

The business has now successfully completed the phases of transformation and of investment required to provide a sound platform in all our regions that can deliver strong, sustainable growth. I believe this is in large part due to our strong, stable and high quality management team. In addition, we continue to invest in talent management through our Kairos management programme from which we hope to reap the benefits in the coming years. All of these factors contribute greatly to the Board's confidence today.

With this successful and profitable year behind us and with many of our strategic initiatives now starting to bear fruit, the Board looks forward to the year ahead. The Board believes that the Group can continue to deliver sustainable, organic growth in both our Software and BPS businesses. We have confidence that we can maintain our success in securing new customers, building and extending our existing customer relationships and adding bolt-on acquisitions where beneficial.

As a result, the Board is confident the Group will continue to grow at attractive margins over the coming year and beyond.

David Thorpe

Non-executive Chairman

STRATEGY AND MARKET REVIEW

Responding to an Evolving Market

All markets evolve with economic trends and consumer behaviour and the insurance market is no different. Over the last year, the global insurance market has been shaped by regulatory change, new technology, weather events and the challenging economic climate. We have worked hard over the last year to keep pace with these changes, carefully protecting our market position and re-energising our competitive offering to support ongoing, sustainable growth for our business.

In the UK, the proposed ending of Claims Referral Fees will fundamentally alter the way insurers operate with each other and impact the behaviour of third parties such as lawyers and specialist claims management businesses. Having never directly benefitted from these referral fees, Innovation Group is very well placed to benefit from this fundamental change having built strong relationships with partners who are now having to restructure their businesses to operating more efficiently and profitably in this new landscape.

We have also moved to keep pace with technological innovations, such as the rise of smartphone and tablet technology which is creating real opportunities to reduce the cost of estimation in both motor and property insurance. We believe that our work here is not only a response to this change, but that in many ways we are seeking to drive change forward, leading the market in offering insurers and associated businesses solutions that are fit for the mobile world. A key element of this can be seen in our Insurer Rapid Assess product. Here we are directly improving the claimant's experience of the repair process, offering them direct access to portals through which they can upload information as well as keep track of the progress of repair. This is a revolutionary approach and it is generating excitement in the industry.

The increase in catastrophic weather events and disrupted weather patterns, is testing the ability of insurers to respond effectively under increased pressure. Weather is outside of our control, but there are many ways in which insurers can anticipate and respond to it better. We are working in close alignment with our customers to help them, using sophisticated analytics tools, to manage surges in claim volumes better and more profitably.

We believe our ability to see and respond to trends, participate in change, and build solutions using innovative combinations of software and business process services marks out a new and significant positioning for the business. This flexibility and resilience we call 'Future-Ready.' It is this proposition that we take to market and it is this proposition that is helping us to win.

Sales Approach

We have continued to build on the sales momentum we began last year and are regularly delivering new wins for both software and services and, increasingly, for an integrated combination of the two. In each region, we have grown our pipeline significantly. However, mapped against this is the challenge of finalising contracts in the current economic climate. To counter this; we have begun a significant programme to introduce a common sales process globally.

People Building

Last year, we launched 'Kairos', an initiative to give high-performing and high potential employees from across our global operations a year-long management skills & development programme, using Innovation Group as a live case study. Following on from the successes of the first twenty four graduates, we have now extended this programme to a second group of twenty four.

Solution Building

We have been working on developing a coherent global portfolio. Starting with a project initiated by the first Kairos graduates, we have mapped every solution set offered to our customers across each of our regions. This has resulted in a complete glossary of terms, enabling the sharing of solutions across regions, and the opening up of new opportunities where resources from one region can be deployed easily and powerfully in another.

Advances in our Technology

Our technology teams have been busy. Not only have they brought Innovation Insurer V7.0 Policy and Claims to market, and won awards along the way, they have also launched Insurer Analytics; a new fully-featured dedicated insurance business intelligence and decision support system. During the last quarter, they have also brought to market 'Rapid Assess', an advanced mobile estimating solution and 'Gateway', a client-centric repair management solution. We believe that these technologies position the Group at the forefront of a drive to reduce the cost of claim in the motor insurance industry.

We have continued the roll-out of Enterprise, our in-house adoption of our own Insurer technology into our Business Process Services operations. This year we have focused our efforts on implementing Enterprise in Australia, following our recent acquisition there, and on introducing back office functionality in Germany.

In Summary

Despite the tough economic climate, we are thriving, building a fitter and better business, one that is able to take advantage of change opportunities and manage unexpected events. As an organisation, we are both resilient and determined to continue along this path to achieve profitable growth.

OPERATIONAL AND FINANCIAL REVIEW

Profitable Growth & New Business

Our sales focus continues to be to provide motor and property insurers with operational and indemnity savings through our innovative technology and unrivalled management of repair networks. Our business model continues to prove its value and resilience being built on a mix of insurance-specific software and services that are deliverable to international markets. Demand for our services and technology continues, resulting in some significant new wins during the year and substantial growth in the pipeline for both insurance services and software. We have focused hard on the sales execution this year and as well as augmenting the sales capability in all of our major geographies we have invested heavily in rolling out consistent and proven sales methodologies and processes. Customer retention remains high and over the year the Group has also secured some significant contract renewals.

A key win in our Business Process Services ("BPS") business was a contract with a Tier 1 insurer in the US to provide a range of motor and property insurance services. The contract was estimated to be worth £2.9m over three and a half years. This client, also a user of the Group's technology products, is a clear example of an emerging trend to combine software and BPS offerings. It is the combination of these offerings that provides the Group with its competitive edge and generates the greatest value and benefit for the customer.

In our software business, following the launch of Insurer V7.0 last year, the Group has secured some significant contract wins for all components of the Insurer suite: Policy, Claims and Analytics. In the US, the Group signed a new contract for Insurer Claims with a Tier 2 insurer valued at £3.0m. This customer was an existing user of the Group's policy product and the new contract win further demonstrates the strength of Innovation Group's customer relationships. Our Australian business signed a contract extension for the Group's policy software which generated licence revenue of £1.7m. This contract enabled the customer to consolidate its policy administration for multiple insurance brands onto one system, replacing a number of separate systems, and hence processing all of its personal lines business on Innovation's policy software. In addition to these large contracts, following the launch of Insurer Analytics in February 2012, the Group has also secured some smaller Insurer Analytics deals where the individual contract value is typically £0.3m.

The Group is also starting to see more interest in solutions sold as "Software as a Service". In the UK, the Group and its partner Symbility Solutions Inc. signed a five year contract with Direct Line Insurance Group, the UK's largest personal lines insurer, for its market leading claims scoping and supplier management solution. The contract, estimated to be worth £5.0m, will be charged on a transactional basis and will see Direct Line Group progress its domestic property insurance claims in order to provide a single, transparent claims experience to its customers.

Along with the significant deals above, our sales teams continue to build new business on an upsell and cross-sell basis through to existing and new clients. Good examples of this activity can be seen in Australia and North America.

In Australia, in the fleet sector a new range of risk mitigation services contributed approximately £0.7m to revenue in the year and revenues from a range of new smaller clients added a further £0.9m. In addition, although still small, revenues from the new agricultural assessing business doubled in the year.

In North America, in addition to the BPS win mentioned above the business has been very successful in increasing volumes with a significant number of existing customers in both motor and property. We have experienced volume increases from key customers of between 10% and 80%. In addition, the First Notice of Loss ("FNOL") within our US BPS division secured a sizable new contract, with an existing technology customer, to process approximately 8,000 FNOL claims per month.

Financial Overview

The Board consider the Group's KPIs to be:

·; adjusted profit;

·; revenue;

·; cash conversion as a percentage of adjusted EBITDA; and

·; adjusted earnings per share.

Adjusted profit is calculated as being profit before tax, adding back amortisation of acquired intangible assets, impairment charges, share-based payment charges, any exceptional costs and loss or profit on disposal of investments. Adjusted EBITDA is calculated by taking adjusted profit adding back depreciation, amortisation of non-acquired IFRS 3 amortisation and net finance costs.

Group revenues for the year have risen 10% to £193.7m (2011: £175.9m). Revenue growth at constant currency was 15%. Excluding revenue from the three acquisitions made in the year, which amounted to £11.5m, organic growth was 3% or 8% at constant currency. The profit before tax was £11.8m (2011: £10.2m), an increase of 15%, with a basic profit per share of 0.71 pence (2011: 0.56 pence). Adjusted profit was £18.5m (2011: £15.1m) an increase of 22% or 34% at constant currency. Adjusted earnings per share was up by 28% at 1.33 pence (2011: 1.04 pence).

The Group's revenue was derived from two principal sources: the sale of BPS and software solutions. BPS revenue, comprising motor (including the sale of parts in Germany), property and other BPS represented 88% of total revenue (2011: 87%). Revenue from motor BPS was £125.1m (2011: £123.1m) and represented 73% of total services revenue (2011: 80%). The reduction in the percentage attributable to motor was predominantly due to the 89% increase in revenues in our property division from £19.8m in 2011 to £37.4m in the current year, being a combination of organic growth in the UK and acquisition growth in Australia. In addition, the background of lower volumes in the industry due the general economic climate and more benign weather conditions, have impacted the ability of the motor division to provide underlying growth at the same rate as the property division. Software revenue, which comprised one-time licence fees, implementation revenue and recurring software fees totalling £22.5m was in line with the prior year (2011: £23.1m). One-time licence fees in the year were £3.8m (2011: £3.4m).

The Group operates internationally and results for the year are subject to movements in currency exchange rates. The Group has a policy of not hedging translation movements that arise, although material transactions are hedged at the point they become more likely than not to occur. During 2012 the Group has been impacted by the weakening of the South African Rand and the Euro. Organic revenue growth at constant exchange rates was 8% (2011: 6% increase), comprising an increase in BPS revenues of 9% (2011: 5% increase) and fall in software revenues of 1% (2011: 13% increase).

Gross margin was 41% (2011: 41%). Gross margin in the BPS business was 39% (2011: 39%). The Group's target gross margin over the next twelve months from the BPS business remains at 40%. Gross margin in the software business was 57% (2011: 56%).

Adjusted profit before tax of £18.5m (2011: £15.1m) comprises profit before tax of £11.8m (2011: £10.2m) after adding back amortisation of acquired intangible assets of £3.3m (2011: £3.4m), impairment charges of £0.1m (2011: £nil) a share-based payment charge of £1.8m (2011: £1.6m), exceptional costs of £1.5m (2011: £nil) and a profit on disposal of investments of £nil (2011: £0.2m)

Adjusted profit for the year included two significant items in the South African business, both of which were highlighted in the Group's interim financial statements. The Group has benefitted from a £1.4m gain (2011: £0.5m) from its associate Guardrisk, of which £1.3m resulted from the revision of estimates for future reserves required in the administration of warranty plans. However, this has been almost offset by a charge of £1.0m relating to one-off move costs and an increase in property lease rental costs caused by the accounting requirement to smooth leasing costs over the term of the ten year contract, following a move to new premises in October 2011.

During the year, the Group incurred total exceptional costs of £1.5m (2011: £nil) comprising £0.5m relating to the restructuring of the UK and Spanish motor divisions, £0.3m of acquisition deal costs and £0.7m for the reorganisation of the South African business which resulted in Zico Capital acquiring the 25% of the South African business previously owned by Jala Capital in December 2011. We welcome them to the Group and look forward to continuing to work with them to explore new opportunities within South Africa. The disposal of this 25% share in the South African business resulted in a £6.5m gain on disposal, which has been recognised within reserves and has no impact on the income statement as the Group retains overall control of the business. The £0.7m charge includes the charge incurred on breaking an interest rate swap of £0.5m. All cash flows relating to these exceptional costs have been incurred within the current financial year.

The share-based payment charge this year was £1.8m (2011: £1.6m). The Group made three further awards under the PSP scheme during the year and for the first time invited all Group employees (who met certain eligibility criteria) to join in the potential for growth with the establishment of a Sharesave scheme. Approximately 13% of employees enrolled, which is in line with expectations for the launch of such a scheme.

The Group's tax charge was £2.9m (2011: £4.5m). After adding back the deferred tax credit recognised against IFRS acquired intangible asset amortisation of £0.6m (2011: £0.5m), the deferred tax credit recognised against share based payments of £0.5m (2011: £nil) and deducting the tax effect of exceptional costs of £0.3m (2011: £nil), this gives an adjusted tax charge of £3.7m (2011: £5.0m). When expressed as a percentage of adjusted profit, this represents an adjusted effective tax rate of 20% (2011: 33%) and is lower than the guidance given at the half year. The Group's adjusted effective tax rate is lower due to a higher profit contribution from the UK region where tax losses exist and the recognition of deferred tax assets, the most significant of these being in France, where a deferred tax asset of £0.4m (2011: £0.2m) has been recognised in the current year. The Group continues to carry forward significant unrecognised tax losses in certain UK and US entities.

The Group ended the year with net cash of £26.0m (2011: £32.7m) comprising gross cash of £44.7m (2011: £43.1m) and debt of £18.7m (2011: £10.4m). On 2 December 2011, the Group refinanced its borrowing facility with Barclays Bank plc. The new facility is a £20.0m, multi-currency revolving credit facility expiring in December 2015. This facility has been used to fund acquisitions during the year. Also in December 2011, the Group settled in full the debt relating to a Black Economic Empowerment loan in South Africa (2011: outstanding balance £6.5m). Included within gross cash is £14.2m (2011: £11.3m) of cash available for use within our South African business which continues to be subject to normal government imposed exchange controls for that country.

Operating cash inflow was £16.7m (2011: £16.9m) and includes the payment of exceptional cash costs of £1.8m (2011: £2.7m) relating to exceptional charges in the current year and those accrued from previous years. Operating cash inflow, adjusted for exceptional and taxation payments represents a conversion of cash relative to adjusted EBITDA of 95% (2011: 103%). Adjusted EBITDA is calculated by adding to adjusted profit, depreciation, amortisation on non-IFRS 3 items and net finance income.

The net cash outflow from investing activities was £21.4m (2011: £10.6m). This includes interest received of £1.0m (2011: £0.9m), purchase of subsidiary undertakings net of cash received of £19.0m (2011: £2.8m), cash from the sale of a non-current asset investment of £0.1m (2011: £0.3m) and fixed asset additions of £10.5m (2011: £9.0m) of which £5.3m (2011: £5.5m) is the capitalisation of costs relating to the Insurer Product and Project Enterprise.

Financing cash inflow of £8.6m (2011: outflow £4.3m) includes interest paid of £1.5m (2011: £0.8m) - including £0.5m relating to the break of the interest rate swap, repayment of borrowings of £8.3m - including £6.5m in respect of the South African Black Economic Empowerment loan (2011: £2.5m), new bank loans of £16.5m (2011: £nil), dividends paid to minorities of £1.5m (2011: £1.3m) and net proceeds from issue of shares of £3.5m (2011: £0.4m).

Total deferred income has increased by £2.9m from £16.5m to £19.4m. Significant movements are attributable to an increase in three to five year term policies for warranty and service plans sold in our South African business and an increase in upfront payments on subsidence claims in the UK. Accrued income has increased by £7.0m from £14.0m to £21.0m. Approximately £6.3m of this increase is due to the recognition of profit shares generated in the Group's UK subsidence business, predominantly as a result of the large contract won in August 2011. The level of accrued income is high both due to the size of the contract and the fact that the first cash settlement of these profit shares is not contractually due until January 2013. In addition, increased BPS revenue throughout the Group has resulted in a higher level of work in progress on open claims at the year end.

Geographic Performance

The Group continues to provide segmental reporting by geography to reflect the way the business is structured and managed. The Group has achieved profitability in all reportable segments this financial year.

Revenue in our European business was £104.6m (2011: £97.6m) with UK, Germany and Rest of Europe contributing £42.0m (2011: £34.8m), £51.0m (2011: £52.0m) and £11.6m (2011: £10.8m) respectively. The Spanish economy has continued to be particularly difficult with revenue, predominantly in the motor fleet sector, falling again by 27% (2011: 36%). A restructuring plan was implemented in June 2012 to remove significant costs from this business. Adjusted profit for Europe is £13.0m (2011: £10.9m) comprising UK £5.1m (2011: £3.1m), Germany £7.4m (2011: £7.6m) and Rest of Europe £0.5m (2011: £0.2m).

Our South African business, despite the weakening of the South African Rand, has performed very strongly, with adjusted profit up by 15%. At constant currency adjusted profit and revenue grew by 31% and 12% respectively. The increase in adjusted profit is partly attributable to the one-off reserving change in its associate, Guardrisk, net of additional costs incurred because of the property move made in the first half of the year. Other contributory factors to the improved performance include the reduction in interest costs through the repayment of the Black Empowerment loan and economies of scale generated through revenue growth.

Revenue in Asia Pacific has doubled in the year as a result of both the acquisition of Claims Services Australia (Pty) Ltd which contributed revenue of £8.7m but also three sizeable software deals signed in the year. Adjusted profit has increased from £1.0m to £2.6m.

Revenues in North America have fallen by 5% due to a reduction in software revenues in the first half of the year. Revenues from business process services grew by 11%. Performance in the second half of the year was much improved. The US technology business has signed a significant software deal post year end which helps underpin the budgeted 2013 growth in that division.

Acquisitions

During the year the Group completed three acquisitions for a maximum total cost of £22.3m, of which up to £21.5m is payable in cash. The Group remains focused on identifying acquisitions which complement and broaden the Group's existing range of insurance services in existing territories.

On 6 December 2011, the Group successfully completed the acquisition of CSA (Claims Services Australia (Pty) Ltd) for a total cash consideration of £13.1m (AU$20.0m). This acquisition, when combined with the Group's existing Australian business, creates Australia's leading specialist outsourced claims management company. The acquisition complements the existing Australian motor insurance and fleet claims handling business and provides the Group with the opportunity to expand into the property claims handling sector.

On 23 May 2012 the Group acquired Marishal Thompson & Co (Environmental) Ltd ("MT") for cash consideration of £5.2m. MT is one of the UK's leading providers of environmental consultancy, specialising in the provision of site investigation, mitigation, arboriculture, ecology, soil and root analysis with a core focus on subsidence insurance claims. MT is an excellent fit for the Group, having unique solutions to help differentiate the Group's subsidence offering in the marketplace and creating a true competitive advantage as well as significant value for the customer.

The Group acquired Value Partners N.V. ("VP") on 14 June 2012 for a maximum total cost of £4.0m (€5.0m) of which £1.2m (€1.5m) was an initial cash payment on the date of completion, with a further £0.8m (€1.0m) paid to settle existing shareholder loans within the business on the date of acquisition. A further £2.0m (€2.5m) is payable as contingent consideration based on achieving specific profit and volume targets. Of the contingent consideration, up to £0.8m (€1.0m) will be settled by the issue of a maximum of 4,000,000 new Innovation Group shares subject to performance targets being met. The final amount will be 40% of the total contingent consideration paid. The business provides a 24x7 helpdesk to independent brokers on a subscription basis and also provides telesales and claims management services to insurance companies. The acquisition provides the Group's existing business in Belgium the opportunity to increase managed accident repair volumes through access to the claims currently being handled by VP.

The revenue and adjusted profit before tax from acquisitions in the year were £11.5m and £1.4m respectively.

Allstate Litigation

In June 2012 Innovation signed a full and final settlement, at no further cash cost to the Group, with Allstate Insurance Company of Canada ('Allstate') in respect of all outstanding litigation by Allstate against Innovation and Innovation Canada.

The Innovation Group plc

Consolidated Income Statement

For the year ended 30 September 2012

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

The Innovation Group plc

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2012

None of the adjustments through other comprehensive income have had any tax impact in either the current or preceding financial year.

The Innovation Group plc

Consolidated Balance Sheet

At 30 September 2012

The results were approved by the Board of Directors on 4 December 2012.

The Innovation Group plc

Consolidated statement of changes in equity

At 30 September 2012

Attributable to equity holders of the parent

The Innovation Group plc

Consolidated Cash Flow Statement

For the year ended 30 September 2012

Cash held and available for use within the business in our South African operation of £14,179,000 (2011: £11,341,000) continues to be subject to the normal government imposed exchange controls for that country.

The Innovation Group plc

Notes to the Results

For the year ended 30 September 2012

1. BASIS OF PREPARATION

The Annual Financial Report announcement was approved by the Board of Directors on 4 December 2012.

The financial information set out in this Annual Financial Report announcement for the year ended 30 September 2012 does not constitute the Group's statutory accounts as defined by s435 of the Companies Act but has been extracted from the 2012 statutory accounts on which an unqualified audit report has been made by the auditors, and which did not contain an emphasis of matter paragraph nor a statement under section 498(2) or (3) of CA 2006. The financial information included in the annual report announcement for the prior year ended 30 September 2011 has been extracted from the 2011 statutory accounts on which an unqualified audit report has been made by the auditors, and which did not contain an emphasis of matter paragraph nor a statement under section 237(2) or (3) of CA 1985.

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

The audited financial statements for the year ended 30 September 2011 have been delivered to the Registrar of Companies. The Annual Report for the year ended 30 September 2012 will be mailed to shareholders at the end of January 2012 and will be delivered to the Registrar of Companies following the Annual General Meeting which will be held in March 2012 at the Company's office at Yarmouth House, 1300 Parkway, Solent Business Park, Whiteley, Hampshire, PO15 7AE.

2. SEGMENT INFORMATION

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

Management monitors the operating results of its business units separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on adjusted profit which is the Group's internal principal measure of profit. Segment revenue excludes transactions between business segments. Segment adjusted profit as reflected in the tables within this note, includes both royalty charges and transfer pricing adjustments for reallocating corporate costs to the regional business units. Management does not monitor the balance sheets of its business units separately for the purposes of making decisions and therefore segmental assets, additions to non-current assets and segmental liabilities have not been disclosed. Non-current assets in the segmental disclosure comprise investments, intangible assets and property, plant and equipment.

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

- Motor Business Process Services (BPS) and networks;

- Property Business Process Services (BPS) and networks;

- Other Business Process Services (BPS) and networks; and

- Software.

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

The Group's revenues are attributed to business units based on customer location. The total external revenue attributable to all countries other than the UK was £151.8m (2011: £141.1m).

Year ended 30 September 2012

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

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

*** Included within Motor BPS & networks and Software are amounts relating to the sale of goods (motor parts and software licences) of £25,094,000 and £3,844,000 respectively.

Year ended 30 September 2011

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

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

*** Included within Motor BPS & networks and Software are amounts relating to the sale of goods (motor parts and software licences) of £24,628,000 and £3,378,000 respectively.

3. EXCEPTIONAL COSTS

Exceptional costs incurred on reorganisation of the South African business relate to the disposal of 25% of the main South African trading subsidiary to Zico Capital for total cash consideration of R92m (£7.1m) and the subsequent settlement of the ZAR loan. These include the finance costs incurred through the break of the interest rate swap (£0.5m), which has been included in finance costs in the income statement and is also disclosed further in the Consolidated Statement of Comprehensive Income and £0.2m in regards to advisor costs which have been included within operating expenses in the income statement.

Exceptional costs incurred on acquisition relate to the deal costs incurred on the three acquisitions completed in the year and disclosed as part of Note 17. These costs have been included in operating expenses in the income statement.

Other exceptional costs relate to redundancy and compromise costs incurred due to a restructuring of the motor divisions within Europe.

No exceptional costs were incurred in the year ended 30 September 2011.

4. TAXATION

5. EARNINGS PER SHARE