2nd Sep 2014 06:59
LONDON (Alliance News) - Quindell PLC Tuesday said it is acquiring the RAC's stake in the two companies' telematics joint venture, Connected Car Solutions (CCS), just months after they inked the deal to distribute combined connected car products.
In a statement, Quindell, which calls itself a provider of professional services and digital solutions, said its net cost of the restructuring is GBP3.5 million, which it will pay in cash over 18 months. However, Quindell said that the restructuring will have no negative effect on its profit expectations, which it said will now be delivered on lower turnover with an improved cash profile, as it will receive all of the profits from CCS.
Quindell has come under pressure in recent months, with shares sliding since the appearance of a 74 page report published in April by Gotham City Research LLC named "Quindell PLC: A Country Club Built On Quicksand." Last month, Quindell's shares fell by as much as a double digit percentage on the day its half yearly report was published, despite posting an increase in pretax profit to GBP153.7 million from GBP39.2 million in the corresponding period a year earlier.
The deal also means the cancellation of the warrants over 16.7 million shares in Quindell issued to RAC as part of the the joint investment arrangement disclosed in April. However, the warrants over an equal number of shares in Quindell issued to RAC as part of an April outsourcing contract remain and are subject to the initially agreed lock-in arrangements.
"Due to market conditions beyond the control of either Quindell or RAC, the parties have concluded that it is not the best use of capital for either party to finance a free telematics roll out to consumers as initially planned," Quindell said in a statement.
"It is now in the best interests of both parties to restructure CCS and for Quindell to acquire RAC's interest in CCS and continue their strong working relationship both in respect of existing contracts and in the future," Quindell added.
Despite the acquisition of RAC's stake in their joint venture, Quindell said the two companies have a "strong and significant ongoing relationship".
Quindell said it will continue to execute on the companies' existing five-year outsourcing contract and to supply technology to RAC. It also noted the intention for Quindell to process claims arising from RAC's telematics for breakdown members. It also said the two companies are discussing the use of Quindell's ingenie insurance proposition for RAC members.
Quindell also said it "confirms confidence in a target of 12 million paying subscriber connections". It said it currently has more than 600,000 connections, including about 200,000 phone-based apps, in global connected car solutions. It said these are "growing rapidly, through new and existing relationships."
"Net connections are expected to grow at a rate of circa 20,000 subscribers per month in 2015," Quindell added.
Quindell said the revised terms of the RAC joint venture allow it to offer a "single connected car strategy across all global markets and brands including in primarily consumer brands: ingenie and Road Angel."
"Quindell has a number of exciting new contracts in the telematics and connected car space and is confident of achieving its targets in this area. The board continues to have confidence in its previous guidance in respect of cash and profitability for 2014 and beyond," Quindell Chairman Rob Terry said in a statement.
Quindell shares Monday closed at 169.04 pence.
By Samuel Agini; [email protected]; @samuelagini
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