With shareholders in Quindell (LSE: QPP) set to vote in favour of the 637m sale of its professional services division this week, the bulk of Quindell will no longer exist. In fact, Quindell is apparently planning on distributing around 500m to its investors and is in the process of making a raft of changes to its senior management team, as it seeks to turn a fresh page and rebuild a reputation that has deteriorated substantially in recent months.
However, is Quindell merely selling its crown jewel? And, with its professional services division gone, is it now uninvestable?
One of the main frustrations that the market has with Quindell is its poor communication. For example, there was the miscommunication regarding the sale and repurchase agreements of three of its board members last year which ultimately saw them leave the company. And, just recently, Quindell misstated the contribution of the professional services division to the companys bottom line in its initial announcement to shareholders, with a correction having to be subsequently made.
These examples have undoubtedly led to a decline in investor sentiment, with the remuneration packages of the new Chairman and Deputy Chairman also causing further dismay among investors, since they do not abide by the voluntary UK corporate governance code. And, with a lack of clarity regarding Quindells future post the sale of the professional services division, investors may be somewhat cautious about how quickly and how effectively Quindells management will communicate its next move.
The sale of Quindells professional services division is likely to be the first of a number of asset sales. After all, Quindell owns a plethora of companies, from energy brokers to scaffolding companies and from loft insulation companies to technology-based businesses and is, to all intents and purposes, a rather disorganised conglomerate. Although Quindell has stated that it plans to sell-off non-core businesses, there is uncertainty regarding the valuations of its assets and, as such, there can be no guarantee that any sizeable sums will be received for them. What is likely, though, is that the process of making Quindell a leaner and more efficient business will take a considerable amount of time and effort.
Of course, it could also be argued that Quindell is now a new business with a new management team that could put the disappointments of the last year behind it. And, with a new CEO set to replace Robert Fielding (who will move with the professional services division) and a new CFO, Mark Williams, being appointed this week, the future of the company could be much brighter now under a new management team.
However, at the present time, the outlook for Quindell is simply too uncertain for it to be worth buying. And, even when we know exactly the kind of business that the new CEO and his team wish to create, how easy it will be for Quindell to rationalise its business and rebuild investor sentiment is a known unknown. So, while Quindell is not uninvestable, the risk/reward profile on offer at the present time seems to be unfavourable at least until we know more about the plans for a new Quindell.
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