Last updated: June 19, 2014 8:27 pm

Quindell’s Terry cuts back role after lending ear to investors

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He sees deafness as a market opportunity – but on Thursday Rob Terry sought to show investors that he is listening.

The ever-bullish entrepreneur will relinquish some of his executive responsibilities at insurance company Quindell, in an apparent attempt to restore calm following an attack by short-sellers and a failure to win a listing on London’s main stock market.

The move comes just days after Mr Terry told investors that Quindell had identified a new source of growth in processing potentially thousands of claims related to noise-induced hearing loss.

Robert Fielding, formerly the head of the company’s legal services business, will now become the group’s chief executive, a new role that is likely to deflect attention from Mr Terry, who will remain chairman.

Mr Terry has won a reputation for his almost unrivalled bullishness since Quindell’s flotation three years ago, issuing hyperbolic market statements that bemused even some of the company’s own customers.

He claimed Quindell would “revolutionise the insurance industry” with its black-box technology, and could join the FTSE 100 as soon as this year, just five years after its major business activities had included running a golf club in Hampshire.

However, Quindell’s share price halved following the publication of allegations by short-sellers Gotham City Research.

The company denied the claims, but this month admitted it would be unable to pursue a full listing on London’s stock market, leading Mr Terry, who had called the listing “a tick-box process”, to apologise to investors.

Quindell said Mr Fielding’s promotion continued “the development of the Group’s governance and succession planning.”

The new chief executive faces an uphill battle in seeking to recover investor confidence at Quindell.

Short-sellers continue to rent more than 6 per cent of the company’s shares, betting that its market value will fall further.

Hedge funds have raised particular questions about Quindell’s failure to generate cash to match its soaring reported profits.

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An exuberant trading update on Thursday provided no precise comparisons for cash flow, revenues or profits.

However, Quindell said its legal services arm – its biggest division – had collected “c. £500,000 per day during the second quarter” from its customers, insurance companies.

At the same time, revenues were running about £650m on an annualised basis, the company said.

That suggests that, while the legal services division is recording sales of more than £2m a day, it is being paid only £0.5m a day because of the long cycle in processing claims.

The trading update said Quindell had signed contracts worth £250m per year, meaning that legal services revenues would reach an annualised rate of £900m from July.

Quindell has grown by acquisitions, buying legal, medical and other companies in order to deal with all aspects of an insurance claim.

It withdrew its plans for a premium listing this month, saying it had struggled to meet rules, “particularly” the criterion that the applicant’s business must not have undergone significant change in scale or operations during the past three years.

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One of the company’s own brokers, Canaccord, has no rating on the company, following Gotham City Research’s attack.

Observers said Mr Terry was likely to remain a significant presence at Quindell, in which his 11 per cent stake is worth about £120m.

“He has such a large shareholding and standing within the company that we would be surprised if he didn’t retain a strong voice,” said Lorne Daniel, an analyst at Finncap.

Mr Terry has been the face of Quindell during its rise – aggressively highlighting its multibillion-dollar market opportunity, increasing revenue run-rates and “substantial” new contracts, subject to “claims frequencies”.

As Quindell’s chief executive then executive chairman, and now chairman, he has won a loyal following among small shareholders for his vision for the application of telematics by car insurers.

However, some analysts have compared Quindell with Mr Terry’s previous insurance claims venture, The Innovation Group, whose shares boomed during the dotcom period, only to crash shortly after.

The Innovation Group’s shares remain down more than 96 per cent from their peak in 2000. Quindell’s shares fell 4 per cent on Thursday to 17p.

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Robert Fielding has run the company’s services division for more than a year, a period in which Quindell has explicitly targeted top-line growth ahead of generating free cash flow.

That will give fodder to critics who argue that Quindell lacks independent-minded executives or board directors to counterbalance Rob Terry, the founder and chairman.

However, unlike other possible candidates, Mr Fielding is not a former executive of The Innovation Group, the insurance processor that Mr Terry founded in 2000.

Several former Innovation Group executives have landed at Quindell, an unnerving sign for shareholders who bet the farm on the company during the dotcom boom – and saw its share price crash in the subsequent bust.

Mr Fielding’s experience is in processing legal claims on behalf of insurers, rather than in the software development that Quindell has sought to emphasise. After working at Bupa, RSA and other insurers, he joined the law firm Silverbeck Rymer and then jumped off to Quindell, one of its biggest customers.

Quindell subsequently acquired Silverbeck Rymer in 2012, and later restated its accounts to reflect the close relationship between the companies before the acquisition.

Mr Fielding is likely to preside over a less acquisitive period for Quindell, which is now unable to call upon a rising share price to finance expansion.

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