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RNS Number : 1547E
Quindell PLC
07 April 2014
Embargoed to 7am on 7 April 2014
Quindell Plc
("Quindell" or the "Group")
Potential for Largest Telematics Rollout Globally
Quindell Plc (AIM: QPP.L), the provider of sector leading
expertise in software, consultancy and technology enabled
outsourcing in its key markets, being Insurance, Telecommunications
and their related sectors is pleased to announce that it has signed
the world's largest telematics contract to date. The contract takes
the form of a joint investment with the RAC in a new company,
Connected Car Solutions Limited ("CCS") to distribute Quindell and
the RAC's combined connected car capabilities.
-- Initial investment for Connected Car Solutions of GBP30
million
o CCS is now owned 51% by Quindell and 49% by the RAC
o Further GBP70 million to be invested longer term subject to
key milestones
o RAC brand licensed to CCS in relation to connected car
solutions
o Quindell not raising capital to meet its 51% share of
investment or planned organic growth
-- Quindell target for paying subscribers upgraded by 20%
o Circa four million paying subscribers targeted by CCS longer
term excluding RAC breakdown members
o Roll out of RAC telematics proposition to 2.1 million
consumers commencing in July 2014
o Group target of 10 million paying subscribers generating high
margin technology revenues increased to 12 million paying
subscribers due to existing contracts and opportunities working
with RAC
o Quindell target is for subscriber base to be each paying
between $5 to $15 per month equating to $720 million to $2.2
billion per annum in high margin recurring technology revenues
o Joint work with major telecoms partners provides potential for
further significant upgrades
o Potential use of Connected Car Big Data from Himex Digital
World will enhance customer experience
-- Potential cost of claims addressed over GBP4 billion
o The RAC and Quindell have agreed that CCS will take 100% of
the benefit from addressing the cost of claims from RAC connected
car consumers whilst focusing on driving down the cost of claims
and improving the customer journey following an accident or
breakdown related event
o Potential addressable claims costs in relation to the RAC
beyond its existing revenue with Quindell is over GBP4 billion of
UK auto claims costs in first 10 years post roll out
o Existing Quindell outsourcing remains in place for
non-connected car RAC breakdown consumers
o Longer term additional big data value to be generated beyond
connected car utilising Himex Digital World for initiatives
including connected home and connected health subject to final
agreements
-- Value created for ingenie in under 25's and over 25's in UK
with significant growth potential
o Quindell, Himex and ingenie via CCS will work with the RAC to
develop a connected car RAC Driver Score, RAC
Journey Score and RAC Care Score feature within the Himex
Digital World technology
o RAC members who choose to opt in to this RAC Score feature
will see the savings they could generate by switching their
insurance to telematics whilst maintaining the privacy of their
data
o Initial providers of telematics insurance are ingenie and RAC,
further providers to be invited over time
o Significant support indicated from key existing and
prospective underwriters of ingenie due to the typical 49% saving
for ingenie customers by renewal and improvement in underwriting
result
o The success of the ingenie proposition's influence on driver
behavior was recently recognised with ingenie being awarded the
prestigious Prince Michael International Road Safety Award for
2013
Scope of New Venture in Connected Car with the RAC
Quindell and the RAC have appointed CCS to distribute Quindell
and the RAC's combined connected car capabilities within the UK and
Canada, to vehicle manufacturers globally and to address together
some other global opportunities, including fleet in Europe (the
"Scope"). The RAC has also transferred intellectual property rights
in relation to its connected car solutions. Whilst the joint
investment is called Connected Car Solutions, the business will
trade as both Quindell Connected Car Solutions and RAC Connected
Car Solutions. The Quindell brand will primarily be used for
existing insurance relationships, and the RAC brand, which has been
licensed to CCS in relation to connected car solutions, will be
used primarily for fleet, and consumer relationships.
Taking into account the proportion of CCS that is held by RAC,
Quindell will reduce its profit retained by the Group on certain
existing and future contracts, but this is more than offset by the
increased opportunity brought in fleet in conjunction with the RAC
and a number of other telematics contracts and opportunities that
will transfer into CCS that are associated with this
transaction.
To compensate the RAC for the unique positioning Quindell will
achieve in the global connected car market, and in recognition of
the value which the RAC brand and customer base brings to achieving
a critical mass for connected car solutions globally, Quindell has
agreed to issue further share warrants to the RAC. These new
warrants, which will be over a further 250 million shares in the
capital of Quindell, are exercisable at GBP0.50 per share, equating
to a value of GBP125 million. The warrants will be exercisable at
any time by the RAC during the following 24 months, subject to
certain vesting conditions in relation to the consumer roll-out.
Any profits achieved above the cost of the warrants will be subject
to lock in arrangements ranging from 12 to 36 months. Quindell has
also agreed to waive the requirement for the warrants issued to the
RAC in June 2013 to be exercised at the time of Quindell's move to
a full LSE Listing.
Initial investment for Connected Car Solutions of GBP30
million
In order to fund CCS, both Quindell and RAC have agreed initial
funding of approximately GBP15 million each, and have both
committed, subject to certain events, to fund the business in
combination up to approximately GBP100 million in order to maximise
the opportunity available to it. CCS will be owned 51% by Quindell
and 49% by the RAC. Quindell is able to meet its share of the
initial funding as part of the GBP50 million it had set aside for
acquisitions and investments from its recent GBP200 million
fundraise, having spent approximately GBP30 million of this to
date. The remaining GBP150 million raised was set aside to support
GBP450 million of organic growth, with this target being exceeded
having won new business valued at GBP500+ million per annum since
the November 2013 fundraise.
Quindell does not foresee any requirement for it to raise new
capital to meet its funding obligations for CCS, or to meet its
planned organic growth. CCS is expected to have a small operating
cash outflow in 2014, but be significantly operating cash flow
generative from 2015 onwards.
Target for paying subscribers upgraded by 20%
The Group has previously highlighted the opportunity, led by the
Group's telematics insurance and its other Connected Car
initiatives, to build a 10 million subscriber base each paying
between $5 to $15 per month. With CCS announced today, the Board is
confirming that this opportunity is increased to 12 million
subscribers due to existing contracts and opportunities working
with RAC, equating to $720 million to $2.2 billion per annum in
high margin recurring technology revenues in the medium to longer
term. Of the 12 million target, approximately four million
subscribers are being targeted by CCS longer term excluding RAC
breakdown members. The result of sharing the profit on these
subscribers within CCS is more than offset by the 2 million
increase in target and other revenue opportunities that CCS
provides. Joint work with major telecoms partners provides
potential for further significant upgrades in the number of
subscribers being targeted. The board would like to remind
investors that this target is a base case target for Quindell and
the market position that Quindell currently enjoys, taking into
consideration its current global telematics related contract
pipelines and the recent development in the US with regards to
industry patents that this target has the potential to be
significantly exceeded.
The roll out of RAC telematics proposition to 2.1 million
individual members is commencing in July 2014, with additional
members still to be addressed relating to RAC's corporate
partnerships.
Potential cost of claims addressed over GBP4 billion
The joint investment announced today represents the largest
contract that the Group has entered into to date as revenues grow
during 2014 and beyond, enabling an offering to RAC members that
own vehicles representing circa 10% of the UK auto market.
The cost of claims for the UK auto market is over GBP10 billion
pounds per annum and the offering addresses over 5% of this UK auto
claims cost per annum, subject to claims reported and expected
conversion into service. Consequently, the potential addressable
claims spend in relation to this investment is over GBP4 billion of
UK auto claims costs in the first 10 years post roll out. This is
in addition to Quindell's existing outsourcing contract with the
RAC which remains in place for non-connected car breakdown
consumers. The RAC and Quindell have agreed that CCS will take 100%
of the benefit from addressing the cost of claims from RAC
connected car consumers whilst focusing on driving down the cost of
claims and improving the customer journey following an accident or
breakdown related event
RAC is one of the UK's most trusted and progressive motoring
organisations with over 7 million members and this significant new
agreement will see the RAC members using Quindell's end to end
proposition, led by telematics, of a complete supply chain offering
for Personal Injury claims, Medical Reporting, Multi Disciplined
Rehabilitation plus Auto Accident Repair including Vehicle Hire
Services and other Brand Extension Services.
The joint investment follows a successful year of operation of
Quindell's existing outsourcing contract with the RAC, which had
resulted in improved member awareness of the service offering for
RAC compared with the levels of performance over the previous 3
years. This has resulted in significant improvements in members'
customer journeys whilst still ensuring that the service offered is
operated in an ethical manner and delivers a 20% reduction in the
total cost of claims. This is achievable by addressing the total
cost of claims, including the provision of a quality legal and
rehabilitation service for members, rather than simply focusing on
recovering and repairing members' vehicles.
Value created for ingenie in under 25's and over 25's in UK with
significant growth potential
The Connected Car Solutions joint investment is expected to
create significant growth and resultant value for ingenie with the
opportunity to quote, subject to consumer opt-in, for insurance to
a unique segment of the market which represents up to 10% of UK
drivers with a target of switching a large proportion of these to
telematics insurance.
Quindell, Himex and ingenie, through CCS will work with the RAC
to develop a connected car RAC Driver Score, RAC Journey Score and
RAC Care Score feature within the Himex Digital World technology.
Using these, RAC members who choose to opt in to this RAC Score
feature will, through the Himex Digital World Technology, be able
to see the savings they could generate by switching their insurance
to telematics, whilst maintaining the privacy of their data.
Initial providers of telematics insurance are ingenie and RAC, with
further providers being invited to offer insurance over time.
Significant support has already been indicated from key existing
and prospective underwriters of ingenie. This has been due to the
typical 49% saving for ingenie customers by renewal and the
improvement in underwriting result that can be offered through
telematics. The success of the ingenie proposition's influence on
driver behavior was recognised with ingenie being awarded the
prestigious Prince Michael International Road Safety Award for
2013.
Kerry Michael, RAC Commercial Director, said: "RAC has been
looking after our members and their needs for more than 115 years.
The formation, in association with Quindell, of Connected Car
Solutions will enable us to continue delivering groundbreaking
solutions into the future. Together, we will continue to improve
the customer journey for our members whilst driving down the cost
of claims for the industry as a whole.
Quindell's technology and integrated outsourcing offering is
outstanding and we believe offers our members and commercial
partners a best of breed solution that will enhance their driving
experience."
Rob Terry, Founder and Executive Chairman of Quindell said: "We
are delighted to announce this significant new contract with such a
distinguished and respected brand as RAC. This agreement once again
validates Quindell's significant market leading model, which we
believe will revolutionise the insurance industry, through a
combination of innovative technology and integrated supply chain
stamping down the cost of claims whilst above all improving the
customer experience for the brands who choose to partner with
Quindell.
After working on this development for many years building the
foundation of our combined Quindell business offering; this
contract demonstrates the value of our complete strategy in
connected car bringing together Quindell's technologies to enable
the proposition, Quindell's outsourcing to drive down the cost of
claims for the industry, the Quindell Himex digitial platform to
deliver an outstanding customer experience and an engaging
environment for RAC members and lastly, leveraging the significant
expertise and proven track record of ingenie and RAC in improving
road safety, whilst delivering to our mutual underwriting partners
an exceptional loss ratio well below industry norms, thereby
reducing the cost of insurance for members that choose to use the
RAC score as the basis for future insurance purchases."
For further information:
Quindell Plc
Rob Terry, Founder and Executive Chairman Tel: 01489 864201
terryr@quindell.com
Laurence Moorse, Group Finance Director Tel: 01489 864205
moorsel@quindell.com
Cenkos Securities plc
Joint Broker and Nominated Advisor Tel: 020 7397 8900
Stephen Keys/Bobbie Hilliam
Canaccord Genuity Limited Tel: 020 7523 8000
Joint Broker and Financial Advisor
Simon Bridges
Bruce Garrow
Media Enquiries
Redleaf Polhill Limited
Rebecca Sanders-Hewett Tel: 020 7382 4730
Jenny Bahr quindell@redleafpr.com
Notes to Editors:
About Quindell Plc
Quindell Plc is a provider of sector leading expertise in
software, consultancy and technology enabled outsourcing in its key
markets being insurance, telecommunications and their related
sectors. Quindell enters 2014 with a run rate of gross sales
approaching GBP600 million and approaching GBP200 million of
EBITDA, and has announced new contract wins since the start of 2014
that amount to a further GBP500+ million due to start during 2014.
Our award winning business transformational, software, consultancy
and outsourcing solutions are recognised as delivering significant
savings and additional sales to our customers every year. For
further information, please visit www.quindell.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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