LONDON (Alliance News) - Insurance technology and claims processing company Quindell PLC on Friday said it has completed the sale of its professional services division to Australian law firm Slater & Gordon Ltd for GBP637 million and announced the composition of its new board following the deal, including the appointment of former Tory party leader Michael Howard.
Quindell also outlined the final findings from the review conducted by PricewaterhouseCoopers into its accounting policies, which found its approach had been at the "aggressive end of acceptable".
Due to those findings, Quindell said it intends to adopt a more conservative accounting approach and said this will result in a fall in profit and revenue in its 2014 results, along with lower figures for restated 2013 results.
Shares in Quindell were trading up 0.3% at 130.08 pence on Friday.
Quindell said that following the sale of the professional services arm to Slater & Gordon, for GBP637 million upfront plus a further deferred cash consideration due on fees from the division's legacy noise-induced hearing loss claims, new non-executive directors have been appointed to the board under Non-Executive Chairman Richard Rose. The company's existing interim chairman, David Currie, will become a non-executive director.
The most notable of the appointments is Howard, the former leader of the Conservative Party, who has been appointed as senior non-executive director. Howard led the Conservatives in the 2005 election, when he lost to Tony Blair, before being replaced by now Prime Minister David Cameron. He also unsuccessfully bid for the leadership for the 1997 election, but was pipped by William Hague. He served as the minister for local government under Margaret Thatcher and was the Secretary of State for Employment and Home Secretary under John Major.
He is perhaps best known for a comment made about him by Ann Widdecombe, a Conservative politician and Howard's former minister of state at the Home Office, who said "there is something of the night about him". He also is remembered for an incident on the BBC's Newsnight in 1997 when he was posed the same question by presenter Jeremy Paxman 12 times, which he attempted to avoid answering.
Also joining the Quindell board are David Young and Tony Illsley, both as non-executive directors. Young has held non-executive positions with the likes of Partnership Assurance Group PLC and British Gas Insurance in the past, while Ilsley currently serves as a senior non-executive director of telecoms company KCOM Group PLC and is a non-executive director on the board of two subsidiaries of Camelot, the operator of the National Lottery.
Mark Williams now takes up his position as the group finance director of Quindell following the deal, while his predecessor Laurence Moorse steps down. Williams' appointment was announced in April and he takes up the role having served as part of the consultancy team hired to assist the Quindell board in January. Moorse departure had been long-flagged after he was among those involved in a controversial share dealing scheme uncovered in 2014, which resulted in Robert Terry, the company's founder and executive chairman, stepping down.
Robert Fielding, Quindell's chief executive, steps down from his position in order to join Slater & Gordon, as the company has previously announced, and the company said it is making progress on identifying a replacement for him.
Quindell also said it expects to return capital from the sale of the professional services division to shareholders in November this year. It is intending to return up to GBP500 million and will do so after it has conducted a reduction of capital, which will take place following the audit review of its 2015 half-year results.
"This announcement represents a significant milestone in the transformation of Quindell. We are pleased to be able to put in place a board with the skills necessary to guide Quindell as it begins life as a very different company," Rose said. Rose is also the chairman of kitchen appliances retailer AO World PLC and is the outgoing chairman of food wholesaler Booker Group PLC, a position he is set to leave following the company's annual general meeting in July.
Rose was appointed by Quindell in January in a move widely seen as a bid by the company as an attempt to restore its reputation following a tough 2014, when its share price plunged following a highly critical report published by short-seller Gotham City Research, which questioned the legitimacy of the company.
Rose was appointed alongside Jim Sutcliffe, who was made deputy chairman, but when announcing the sale of the professional services arm to Slater & Gordon, Quindell said Sutcliffe would no longer join the board and would leave the company on June 30. It attributed the decision to the resulting change in the scale and activities of the company following the disposal. Sutcliffe is the former chairman of the Codes and Standards Committee of the Financial Reporting Council, the UK accounting watchdog.
In addition to the sweeping board changes, Quindell said the review conducted by PricewaterhouseCoopers into its accounting policies has now been finalised. Quindell said the review concluded that the accounting policies historically used by the company in respect of recognising revenue and deferring case acquisition costs in a number of its disposed of businesses "were largely acceptable but were at the aggressive end of acceptable practice".
PwC also found that some of the practices used by Quindell were "not appropriate", in particular with regards to revenue from noise-induced hearing-loss cases and related balances which became significant during the course of 2014.
Quindell said that, having undertaken its own review of PwC's findings, it has decided to adopt "a more conservative approach to accounting for revenue and profit" as regards its Professional Services arm, which has now been sold to Slater & Gordon. As a result, Quindell will provide a "definitive view" of the historical results using a more conservative accounting approach and said the changes will result in a fall in profit and revenue.
Quindell said it is in talks with auditors on the financial effect on its historical results and said these talks will be included in its results for 2014, which it said it expects to publish before the end of June.
Shares in Quindell collapsed in 2014, dropping 94% from highs hit in April, initially due to the Gotham City, which called the company a "country club built on quicksand". Some of that share price fall has been recouped, with shares having more than tripled in value since the start of 2015, but they remain well below the 667.5p price hit just prior to the publication of the Gotham City report.
Though Quindell in September last year then received a judgement in its favour in a libel action against Gotham City, it has been consistently forced to reassure markets since the report was published due to continued weakness in its share price, an issue then exacerbated by the controversy which surrounding shares dealings involving its executives, including Terry and Moorse.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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