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Quindell shares surge on disposal hopes

Quindell's shares surged on the prospect of a sale of its legal services division
February 24, 2015

Investors might have expected Quindell (QPP) to be dismantled and sold for spare parts. But the beleaguered insurance claims processor doesn't expect a fire-sale: based on early talks with Australian law firm Slater & Gordon, its professional services division could fetch significantly more than £330m - the group's market capitalisation before the announcement. Quindell's ever-volatile shares soared a quarter as exclusive discussions were extended through to the end of March.

IC TIP: Hold at 95p

Professional services account for roughly 90 per cent of Quindell's revenues and four-fifths of its cash profits. A disposal would leave Quindell with just its telematics business, which provides black boxes to motor insurers. Its Sydney-listed suitor may be seeking to accelerate its expansion into the UK personal-injury claims market.

Quindell is working to regain shareholders' trust after a slew of indiscretions that led to the ousting of chairman Rob Terry and the resignation of its joint broker. The company recently appointed new directors, and an independent report from PricewaterhouseCoopers - scheduled for the end of February - should shed welcome light on its accounting practices and cash flow guidance.

The group delivered a second-half underlying operating cash inflow of £13m - well below the targeted £30m to £40m detailed in its mid-October trading update. And although fourth-quarter operating cash flow rose in its professional services division, growth in cash receipts was lower than expected.