Board changes cause surge up for Quindell yet again

After a 70% plus increase in the Quindell share price last week, the shares are up another 29% to 108p today after announcing some crucial board changes and an update on its cash position as well as a status update on the PwC review. The board changes were already being reported by Sky yesterday and published in the Telegraph after Quindell issued an RNS on Friday denying that appointments were imminent. It looks like the report by Sky forced the hand of the company to announce things quickly to investors.

Quindell’s shares collapsed in the low 20p-30p range in early December when it was announced that founder Rob Terry had sold over 25 million shares, many around the 40p market. Since then the confirmation that Toscafund had bought a stake of over 5% in Quindell has helped the shares recover from their lows. Interim Chairman, David Currie has done much to restore confidence since the dark days of December and today was the icing on the cake for those long on the shares.

The company announced today that, subject to Solicitors Regulation Authority approval and completion of appointment formalities, Richard Rose will join the Board as non-executive Chairman and Jim Sutcliffe will join as Strategy Director and Deputy Chairman. Upon Richard Rose’s appointment to the Board, David Currie will step down from his position as interim non-executive Chairman and his role will revert to non-executive director. To supplement the work of Richard Rose and Jim Sutcliffe, the Board has today entered into an agreement to receive consultancy services from BaxterBruce Limited , a consultancy firm of which Jim Sutcliffe is a Director. In addition to Jim Sutcliffe and Richard Rose, BaxterBruce will utilise its associates Marisa Cassoni and John Tomlins for this engagement with the Company.

Quindell also confirmed that trading in the Group’s business remains robust in both Professional Services and Digital Solutions with management satisfied with case volumes, case settlements and digital solutions revenues. The Group’s revenue and earnings are subject to the Independent Review of accounting policies and guidance will be given by the Board following conclusion of the Review.  Operating cash inflow for H2 2014 (before exceptional items but including initiatives that concluded in the period) was approximately £13 million. Cash generation remains a key focus of the Group and initiatives to improve the working capital profile of the Group continue to be pursued. The Board remains comfortable with the Group’s overall cash position and, taking into account the Group’s cash reserves and continued access to its three credit facilities, believes that the Group’s resources are sufficient to deliver on management’s current plans. As at 31 December 2014, the Group had gross cash of approximately £69 million and drawn banking facilities of approximately £52 million.

Talks with a third party to acquire some of Quindell’s assets are still ongoing and the review by PwC of the company’s accounting policies is due by the end of February.

The shares have fallen a long way in the last few months and if the PwC review and financials are reasonably satisfactory then the shares could continue to rise significantly especially with these heavyweight board announcements. It seems very unlikely that Sutcliffe and Rose would join the company if the problems were anything near as bad as Gotham City Research have alleged. After such a big rise in the last week some profit taking is bound to happen and that is fair enough for those tripling or quadrupling their money from the depths. Why on earth Rob Terry sold his considerable stake so low will remain a mystery for now and whether he is involved with the potential purchase of one of Quindell’s divisions will no doubt emerge soon. The excitement on Quindell continues in earnest but I will be joining some of them and banking some cash as the shares now sit above £1.12. Its been one heck of a ride so far in 2015!

Contrarian Investor UK

IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.