Quindell Portfolio Plc announces acquisition of PT Health

Expansion of Quindell Outsourcing into North America

  • Extends presence in the North American insurance market
  • PT Health to be centralised outsourcing platform, lowering cost of claims for insurance industry in Canada
  • Opportunities to drive significant volume from existing Quindell partners through PT Health
  • Investment and acquisition option highly accretive

Hampshire, UK (Sept. 26, 2013) – Quindell Portfolio Plc, 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 a 26% investment and option to acquire PT Healthcare Solutions Corp, a leading provider of healthcare and rehabilitation services with over 100 physiotherapy and rehabilitation clinics across Canada.

Background and investment rationale

PT Health delivers healthcare and rehabilitation services across a range of disciplines from its 100+ clinics throughout Canada. Approximately 15% of its 10,000 sessions a day are due to insurance related incidents, including rehabilitation following accidents. The management accounts for the year to 31 March 2013 for PT Health showed turnover of circa C$77 million and EBITDA margin excluding exceptional costs in the region of 10% despite having more than one-third spare capacity available within the business to support additional volume.

As PT Health does not generate a significant amount of its profit from motor vehicle accidents this provides the opportunity for Quindell to enter the market. Quindell can do this by bringing volume from and leveraging its relationships with its partners, including the Insurance Brokers Association of Ontario (the “IBAO”), helping the industry to stamp down the cost of claims in this area in Canada as it has in this area in the UK, targeting a year-one saving of 20% to 30% compared to industry averages for the at-fault insurers and their broker partners. Consumers will benefit from the best customer care and service experience based upon a multi-disciplinary approach to rehabilitation and PT Health will benefit from efficiency improvements and streamlined billing, improving already strong cash generation, by using Quindell technology to automate processes and provide direct links to brokers and insurers.

The terms of the initial 26% investment in PT Health were satisfied by the issue of 31,551,270 Quindell shares.

The investment announced today by Quindell will therefore enable the Group to benefit substantially through the provision of additional cases to PT Health, with PT Health being used as the base from which the Group’s outsourcing services within Canada, and in due course into the USA, will be further developed organically. As a result, the investment and potential acquisition detailed below are expected to be slightly earnings enhancing in the current year and significantly earnings enhancing in 2014 and beyond due to the brand’s own organic growth (which is warranted by the vendors) and due to the significant additional volumes that Quindell will be able to provide which will be at a high incremental margin due to the significant capacity that exists in PT Health’s business.

Put and call option

In addition, Quindell has agreed a put and call option with the vendors of PT Health enabling Quindell to acquire the remaining 74% at any time up to 1 April 2014 and, conditional upon a business plan being presented that demonstrates that PT Health can achieve a warranted EBITDA of C$12.0 million and C$9.0 million operating cash inflow for the year ending 31 March 2015 (in the majority organically and without benefitting from volume from Quindell sources), enabling the vendors to require Quindell to purchase the remaining 74% on 1 April 2014. In the event that PT Health misses its warranted profit or cash target, the Group will receive compensation from the vendors in the form of cash equal to the greater of seven times the shortfall relative to either target.

The above acquisition of the remaining 74% is to be satisfied by the issue of up to 242 million Quindell shares (“Option Shares”). The Option Shares, representing approximately 6% of the Group’s issued share capital, will be subject to lock in of between 12 and 36 months from the date of issue.

Quindell already has existing relationships with leading insurance companies and intermediaries within Canada whose members directly or indirectly distribute approximately 60% of insurance in Ontario, including a five year exclusive agreement with the IBAO. Together, the Boards of Quindell and PT Health are extremely confident following discussions with a number of core industry participants in the Canadian markets, including the IBAO, that insurance related revenue can be grown rapidly during 2014 to utilise the additional capacity available within PT Health. This will improve margins at PT Health to a level at or above the Group’s long term guidance as the majority of the staff and infrastructure necessary to provide this additional volume is already in place.

Rob Terry, Founder and Executive Chairman of Quindell, said: “We are thrilled to announce our investment in PT Health at a time when we are seeing real traction in the Canadian market. This investment and potential acquisition is in line with our core strategy of only paying for the existing business we acquire and not for the effect we can have on those businesses by bringing additional volume or improving it with our technology, thereby underpinning significant earnings growth and strong return on capital for our shareholders. The investment metrics supporting the acquisition are therefore already strong, but our agreed consideration will be close to a ratio of two times profit before tax if we can deliver on providing the additional volume already identified with our partners. We have been able to provide volume from organic new business wins for many of our acquisitions in the UK already, driving significant accretion in earnings for our shareholders through this combination of acquired and organic growth, and are confident of the team’s ability to do the same in Canada for PT Health.”

Mark Cho, Founder and President of PT Health, said: “PT Health and its founding clinics have been one of the fastest growing health care companies in Canada over the last 18 years, with the provision of our services and patient care centered on the principles of integrity, passion, and trust. We look forward to working in combination with Quindell and to addressing together the insurance market with our combination of services.

Randy Carroll, Chief Executive of IBAO, said: “We are excited by the prospect of being able to work with Quindell to actively promote their rehabilitation solution that will have a fundamental effect on stamping down the cost of claims whilst delivering excellent service to consumers. The high cost of providing rehabilitation following a motor vehicle accident is a significant issue for the Canadian insurance market, and there is a clear need for someone to provide an efficient and effective service. Quindell’s outsourced services are exactly the kind of initiative that is needed in the market place and we look forward to leveraging them to the benefit of consumers, our brokers and the insurance supply chain as a whole.”

Application has been made for 31,551,270 shares to be admitted to trading on AIM. Admission of the shares is expected to occur on 3 October 2013. Following Admission, Quindell will have 4,308,864,075 ordinary shares in issue. The Company has no ordinary shares held in treasury. The total of 4,308,864,075 ordinary shares may therefore be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or change in their interest in, the share capital of the Company under the FCA’s Disclosure and Transparency Rules.

About Quindell Portfolio Plc

Quindell Portfolio Plc (AIM: QPP.L) is a provider of sector leading expertise in Software, Consulting and Technology Enabled Outsourcing in its key markets being Insurance, Telecommunications and their Related Sectors. Quindell enters the second half of 2013 with a run rate of gross sales of more than �350 million and with approaching �50 million of EBITDA earned in the first half of 2013. Our award winning Business Transformational, Software, Consulting and Outsourcing Solutions are recognised as delivering significant savings and additional sales to our customers every year.

For further information, please visit www.quindell.com.

Source: Quindell Portfolio Plc