After a disastrous year at insurance software firm Quindell (LSE: QPP) shareholders might start to see their fortunes improve before Christmas. Quindell had originally planned a one-off cash payment of “at least £1 per ordinary share targetted for Autumn 2015“, from the proceeds of the sale of its Professional Services Division (PSD) to Australian law firm Slater & Gordon. Early suggestions were that it would hopefully be paid sometime in November.
There’s now been a change of plan, and the firm has reduced the size of its intended handout this year to 90p per share, to be payable “in December 2015 at a total cost of approximately £415 million“. The share price responded mildly to the news, with a drop of 1.7% to 100.5p at lunchtime — it’s been stable at around the £1 level for the past couple of months.
More next year, maybe
Further payouts are expected, with another 10p on the cards for the end of 2016, by which time Quindell expects to have the remaining £50m from the PSD sale released from escrow. And there should be more cash to come should contingency payments from PSD come good.
But before you pile in for a share of the cash, there are a few cautions you need to be aware of.
The first hurdle is that Quindell needs court approval to make any cash payments, and whilst the company is talking almost as though that’s a done deal, it most certainly isn’t. The court will have to decide whether Quindell is retaining a prudent amount of cash sufficient to deal with potential liabilities, and there could be some of those.
Can’t ignore the SFO
For one thing, there’s an inquiry by the Serious Fraud Office ongoing into the affairs of the company under the leadership of ousted ex-chairman Rob Terry. It commenced after an independent accounting analysis forced the company to restate its accounts for the last few years, turning profits into losses and reporting a pre-tax loss of more than £280m in 2014.
It’s likely to be some time before we hear the results of that, and if the court thinks there might be any liabilities to come from it, it might well have something to say about the intended handing over of 90p per share to shareholders.
Then we have legal action being pursued by law firm Your Legal Friend on behalf of a group of shareholders, with an estimate of claims of up to £9m before costs — and there is apparently a second group enquiring about similar action, which would be amount to a similar sum.
Less than the sum of its parts?
Then, of course, you’d need to think about what the remainder of the company is worth.
It now consists largely of two telematics subsidiaries, Ingenie and Himex, which are making losses. And there’s the loss-making PT Healthcare, of which Quindell acquired the 50% it did not own in September. New chief executive Indro Mukerjee has said he will address these losses, but I don’t see any realistic hope of these subsidiaries making profits any time soon.
So should you shell out £1 today to maybe get 90p next month together with your share of the ongoing losses at Quindell’s subsidiaries? Well, that’s up to you, but my pound is staying firmly in my pocket.