This looks like the biggy Quindell (QPP:AIM) investors have been eagerly anticipating. Today's unveiling of a five-year deal with the RAC is by far the biggest, potentially seeing the insurance claims outsourcery business process as much as £500 million a year of claims, if early estimates are to be believed. That dwarfs the £120 million a year contract flagged last May.


Sure, much of that £500 million will not end up in Quindell's pocket, there'll be third party suppliers to pay out, vehicle hire suppliers and crash repairers for example. It's slice of the pie will depend very much on how value-added its processing software and services really are – it's key selling point. Volumes and margins squeezed from carrying out some of that repair work itself, via plans to expand a vast network of nationwide repair factories also count. Organising and managing the rehab of motorists injured in a prang, and any associated compensation, will be another important cog in the profit wheel as Quindell helps partners stamp down the cost of insurance claims.


QUINDELL PORTFOLIO - Comparison Line Chart (Rebased to first)


But the deal win also shows that there is substance in chief executive Rob Terry's strategy, and hard cash behind the hype. With around seven million members representing an estimated 10% of private vehicles on Britain's roads, the RAC's scale as an outsourcery partner should not be underestimated. That Britain's royal breakdown service is opting to take a 7% stake in Quindell as part of the deal, via warrants, is surely a strong vote of confidence in the future of the company.


Love it or hate it, Quindell is fast becoming a growth story that cannot be ignored. In less than two years it has emerged from the ashes of an Aim-listed cash shell and grown in to a multi-million pound business. Figures for 2012, due to be reported next month (7 May) are expected to show over £44 million of pre-tax profit from around £158 million of revenue. This year broker Cenkos anticipates £441.7 million of revenues and £126.3 million pre-tax profit.


It is just this sort of growth promise which has attracted a loyal and growing band of investors to the story, and the shares. Fans seem to watch the stock with the sort of obsessive zeal usually reserved for gold diggers and oil hunters, and while Quindell still has its sceptics, some are being won over. At a recent presentation, I witnessed a room of 40 or 50 fund managers, equity analysts and other City-types having their interest piqued by the firm's presentation.


I first picked up the story in June last year, with the stock trading at just 5.63p (read here), and have followed it closely ever since, writing about the story again at the end of December (read here). The share price has done its share of bobbing and weaving during those months, yet the shares today trade on a 2013 price/earnings multiple of just 5.3, based on Cenkos' 2.45p earnings per share estimate. Quindell could deliver nearer 3p a share in '13. How compelling that is will be for investors to decide for themselves.

Issue Date: 03 Apr 2013