LONDON (Alliance News) - Shares in insurance outsourcing and technology company Quindell PLC rose on Monday after the company confirmed it has struck a deal to sell its professional services arm to Australian law firm Slater & Gordon Ltd, with the majority of its board to leave following the deal.
It also said it has received initial results from the review into its accounting practices undertaken by PricewaterhouseCoopers LLP.
Quindell will be paid GBP637 million upfront for the division, with a further deferred cash consideration due on fees from the division's legacy noise-induced hearing loss claims.
Quindell said the majority of the cash proceeds from the sale will be used to fund a "substantial" cash return to shareholders, expected to be made in the second half of the year. Quindell said it expects the initial tranche of the shareholder return to be around GBP500 million, or in excess of GBP1 per share.
It added any further cash disposals would be dependent on the deferred cash consideration due related to the net fees from the settlement of noise-induced hearing loss cases handled by the professional services division. Quindell expects to receive 50% of the net fees from these cases, though it did not provide any guidance on how much it expects this to be, though it said that at March 29, the division was acting for clients on approximately 53,000 cases.
In addition to the deferred consideration, Quindell said any further cash distributions would be dependent on further non-core disposals and the underlying performance of the business.
Quindell shares were up 4.2% to 143.81 pence on Monday.
The company said the deal will leave it focused on three technology-based divisions, comprising connected car and telematics, insurance claims management systems and insurance brokerage services using telematics and other technology.
Quindell added that, should the deal be successfully completed, Chief Executive Robert Fielding will resign from his role and will transfer to Slater & Gordon along with the professional services arm. In addition, the company said Richard Rose will become non-executive chairman, as was announced back in January, with current interim chairman David Currie to become a non-executive director.
But Jim Sutcliffe, who was appointed deputy chairman in January at the same time that Rose was hired, will no longer join the board of the company and will instead terminate his employment on June 30. It said Sutcliffe's departure was down to the resulting change in scale and activities of the group. Sutcliffe is the former chairman of the Codes and Standards Committee of the Financial Reporting Council, the UK accounting watchdog.
Both Sutcliffe and Rose were appointed by Quindell in a move widely seen as a bid by the company to attempt to restore its reputation following a tough 2014 in which it saw its share price dive following a report which questioned the legitimacy of the company and after founder Robert Terry stepped down amid controversy surrounding share dealings.
Rose is the chairman of wholesaler Booker Group PLC and electrical appliances retailer AO World PLC, while Sutcliffe, in addition to his role at the FRC, is the former chief executive of Anglo-South African insurer Old Mutual PLC and the former head of the UK arm of Prudential PLC.
Quindell also confirmed Finance Director Laurence Moorse, one of those also involved in the controversial share dealings which resulted in Robert Terry's departure, would step down following completion of the deal. Moorse's departure had already been flagged by Quindell earlier this year, when it said he would leave the company following its 2015 annual general meeting.
Independent non-executive directors Robert Bright, Robert Burrow and Robert Cooling will also leave the board upon, or shortly after, completion of the deal.
In addition, Quindell said that, though not finalised, PwC's review into its accounting practices has found certain policies employed by the company, in respect of recognising revenue and deferring case acquisition costs in a number of product areas, were "largely acceptable" but were "at the aggressive end of acceptable practice".
PwC also identified that some of Quindell's policies are not acceptable, principally the noise-induced hearing loss revenue and related balances which became significant for the company in 2014. Quindell said these issues were down to a lack of historical internal data relating to noise-induced hearing loss claims settlements.
Having undertaken an internal review and considered the draft findings from the PwC report, Quindell said it expects to conclude that it will take a more conservative approach to accounting for revenue and profit in the professional services division, which it is selling to Slater & Gordon. Quindell said it has yet to finalise the precise policies that will be adopted or the financial impact this will have, adding it is therefore not possible at present to provide a definitive view on what effect the changes will have on its historical revenue and profit numbers.
Quindell said any change in accounting policies will likely mean its financial statements for the year to the end of December 2014 will be prepared using more conservative policies, with the comparative figures for 2013 potentially to be adjusted to reflect those changes.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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