12th Jan 2015 13:36
LONDON (Alliance News) - Shares in Quindell PLC rose on Monday after the insurance outsourcing company made two appointments to its board, said trading remains "robust" and said it remains in talks over the sale of a still-unnamed part of its business.
Quindell has named Richard Rose as its non-executive chairman and has hired Jim Sutcliffe as its deputy chairman and strategy director. The pair have been allocated share options as part of their remuneration and incentive packages for the roles, with Rose to get 8.7 million shares and Sutcliffe to get 10.9 million.
Shares in the company were up 24% to 105.5 pence on Monday, one of the best performers on the AIM All-Share index. At that price, the award to Rose is worth GBP9.1 million, while Sutcliffe's shares are worth GBP11.5 million.
The Financial Times noted the option awards could prove controversial as the UK Corporate Governance Code advises that non-executive directors should not be granted share options or "other performance-related elements" within their remuneration. The code says that if options are granted, shareholder approval for the pay packages should be sought.
Rose is currently chairman of both Booker Group PLC and AO World PLC, while Sutcliffe is the former chief executive of Old Mutual PLC and the former head of Prudential's UK business. Sutcliffe currently works as the chairman of the Codes and Standards Committee of accounting watchdog the Financial Reporting Council.
Rose will replace interim chairman David Currie, who will revert to his role as an independent non-executive director, and his appointment comes after the resignation of founder Robert Terry in November. Terry stepped down amidst a furore over a series of loan-for-stock dealings done by directors of Quindell.
Non-Executive Director Steve Scott also stepped down following the controversy, while finance director Laurence Moorse will be stepping down after its 2015 annual general meeting.
In addition to the appointments of Rose and Sutcliffe, Quindell said it has entered into a deal to receive consultancy services from BaxterBruce Ltd. That will see the company work with Marisa Cassoni, the former Royal Mail PLC finance director, and John Tomlins, a former colleague of Sutcliffe, as its consultants.
Quindell also said its current trading remains "robust", saying its management team is "satisfied" with case volumes, case settlements and digital solutions revenue. It said its earnings and revenue are subject to independent review by accountancy firm PwC and it would provide guidance following the conclusion of the review.
PwC was appointed to handle the review in early December and is looking into Quindell's main accounting policies and expectations for cash generation in 2015. Quindell expects the review to be completed by the end of February.
Operating cash inflow for the second half of 2014 was around GBP13 million, Quindell said, adding that cash generation is a key focus for the company and that it is continuing to work on schemes to improve its working capital. The company said the cash inflow figure is before exceptional items but including initiatives that concluded in the period. It did not provide information on the cash inflow volume for the second half of 2013, but said that for the year to December 31, 2013, its operating cash inflow was GBP3.2 million.
Quindell said its board remains "comfortable" with its cash position, with gross cash at GBP69 million at the end of December. The number is significantly lower than the GBP200 million it reported at the end of 2013.
It also said it is still in discussions under an exclusivity arrangement with one third party over the sale of an operating business and is in talks with a range of other parties regarding possible deals relating to a number other operating businesses. It did not provide any information on the parties involved in the talks, nor the parts of its business on the table.
So far in 2015, Quindell shares are up 180%, recovering part of the losses it made last year following the publication of a research report by Gotham City Research in April last year, when the shortseller accused Quindell of being a "country club built on quicksand". Today's rise in its shares come after they rose 30% last week following news UK hedge fund Toscafund Asset Management LLP has acquired a stake of more than 5% in the business.
In September, Quindell said it had received judgement in its favour in a libel action against Gotham City. But in spite of the victory, Quindell has consistently been forced to reassure the market since the Gotham report amid weakness in its share price, an issue exacerbated by the controversy around the share dealings.
Today, Gotham City tweeted that it was once again scrutinising the company, only hours after Quindell had issued its statement. ""We have lowered our intrinsic value estimates for Quindell. We anticipate issuing a follow-on report in the not-too-distant future," it tweeted this morning.
Quindell was also given a boost this morning by Nationwide Accident Repair Services PLC, in which it holds a 25.3% stake. Nationwide said it expects its underlying pretax profit for 2014 to be ahead of its expectations following a strong end to the year, and for its net cash position to be "significantly" ahead of forecasts.
Shares in Nationwide were up 17% to 80.9 pence on Monday, joining Quindell among the best AIM All-Share performers.
By Sam Unsted; [email protected]; @SamUAtAlliance
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