Quindell gets sums wrong

Quindell shares were suspended an hour and 40 minutes after the market opened Wednesday and 126 trades executed between 9.40am and 9.42am were cancelled. Six hours later and the shares are trading again after Quindell issued a statement detailing changes to profit forecasts for the professional services division (PSD) being sold to Slater & Gordon (S&G).

On Monday, Quindell said Aussie law firm S&G had agreed to pay £637 million plus extras from noise induced hearing loss (NIHL) cases for PSD. It said the division made a pre-tax profit of £82.5 million in 2013 and £113.4 million in the six months ended 30 June 2014.

Now, the company has spotted "a failure to fully transcribe profits related to entities forming part of the disposal as disclosed in the Circular". That means profits at iSaaS Technology Limited and Intelligent Claims Management Limited were left out of the original equation. Now, profit made by companies being sold to S&G made £96 million in 2013 and £130.7 million in the first half of 2014.

Quindell also says adjusted profit before tax made by the retained businesses was worth £6.8 million to the group in 2013, and £8.5 million in the first half.

Crucially, Quindell says the recommendation of the sale of PSD, confirmed Monday, is "not impacted by the transcription error".

In addition, the company says it will return proceeds from the sale of PSD in a tax-efficient manner, not via a special dividend, and repeated its estimate that this would be at least 100p a share.

However, it remains unclear how the company's "more conservative approach to accounting for revenue and profit in the Professional Services Division" will impact historic results.

"The board has not yet finalised either the precise policies to be adopted or their financial impact and so it is not currently possible to provide a definitive view of the historical results on this basis although the changes will likely result in a reduction of revenue and profit," it said Wednesday.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.