Well, it’s happened at long last. Quindell (LSE: QPP) has completed the sale of its Professional Services Division to Slater and Gordon Limited, and we have final confirmation of the results of PwC’s independent review into the company’s finances and accounting practices.
Although there’s nothing really surprising in any of it, it marks the end of a sorry chapter for shareholders in the company and gives them a clean start with what’s left of the firm under a new management team.
Aggressive accounting
Quindell’s sky-high share prices were made possible by very optimistic earnings forecasts, and those were in turn driven by the firm’s controversial policy of accruing sales that hadn’t even been agreed yet, based on Quindell’s own estimates of conversion rates especially in its noise induced hearing loss insurance business. Compared to conversion rates across the industry, Quindell’s assumptions just did not appear realistic.
That policy, along with some others relating to revenue and cost accounting, PwC says, “were largely acceptable but were at the aggressive end of acceptable practice“. And the only thing I can really say about that is that it reflects the woefully inadequate state of what AIM regulations appear to consider acceptable.
Cash handout
Of more interest looking forward is the news that the Professional Services Division disposal for an initial cash payment of £637m is complete, and the firm will now turn to its plan of reducing its capital by returning the majority of the cash to shareholders. Results to June will have to be audited, but the plan is to get the cash paid out by the end of November.
Those who pounced when Quindell shares were down around the 30p mark in December have done exceptionally well, and I take my hat off to them for recognizing there actually was significant value in the company when bears like me thought there was none.
But what does the future hold?
Well, we’ll have to wait until the cash handover is completed before we can really assess what’s left of the company, but at least it will be in new and, we are assured, more conservative hands. The new chairman, Richard Rose, is also non-executive Chairman of several other companies including AO World and Booker Group, and he’ll be assisted by the Right Honourable Lord Howard of Lympne, CH, QC as senior non-executive director.
Out with the old
Leaving the board are Laurence Moorse, Robert Bright, Robert Burrow and Vice Admiral Robert Cooling, and with CEO Robert Fielding having moved to Slater and Gordon, the search for a new boss is now on.
Whatever the future holds for Quindell, shareholders can look forward to a board that is no longer tainted by association with former chairman and major shareholder Rob Terry and his mates, whose version of honest management appeared to include telling everyone they were buying shares when they were actually selling.