Quindell’s Currie aims to draw line in the sand

After months of turmoil at Quindell, culminating in the resignation of founder Rob Terry in November, the interim non-executive Chairman David Currie today announced steps to try and dispel the allegations being made against it in a report first issued by Gotham City Research in April this year.

The company announced an independent review of its accounting policies by PwC, seperate to its auditors KPMG in an attempt to take on the numerous criticisms levelled at it. Despite recent allegations, the company doesn’t look like its going bust any time soon with Quindell saying that “The Group’s business remains robust in both of its divisions: Professional Services and Digital Solutions. In particular, case numbers across its broad base of cases in the Professional Services division remain in line with management’s expectations.”. Chief Executive Rob Fielding commented that “The Group’s business remains robust and we believe we have sufficient resources to deliver on management’s plans”. The latter comment appears to confirm that a cash call or refinancing is not required.

However, Rob Terry’s previous assumptions around cash flow seem to be have over optimistic with the comment that “Cash flow from operations in the Professional Services division continues to grow as the cases within Legal Services progress through to settlement, and cash receipts in this area are greater than in comparison to previous quarters. The growth in cash receipts in the final quarter of the year has not been as significant as previously anticipated. The Board remains comfortable with the Group’s overall cash position; 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 believes, taking into account the Group’s cash reserves and continued access to its three credit facilities, that the Group’s resources are sufficient to deliver on management’s current plans.”

So it seems that Currie is trying to draw a line in the sand and put Quindell’s problems and dubious reputation behind it as they continue the search for a successor to Rob Terry. The company’s main divisions seem to be performing but not as well as hoped and Currie seems determined to now put reality over hope. PwC’s audit should once and for all put any questions about accounting policy to bed and enable the company to move forward in 2015 with a more conservative approach to business acquisitions and financial reports. With the company valued around £243 million, and down from a 52 week high of £6.60 at a current 53p, the market has been pricing Quindell on the basis of a high probability of it going bust. From today’s statements it looks like this was probably too pessimistic and visibility of the full 2014 numbers, appointment of a new Chairman and a green light by PwC on accounting policy may see a re-rate from these bombed out levels.

Quindell’s legal services division was collecting £760,000 a day in the three months to September, compared with £500,000 per business day in the previous quarter and today’s RNS confirmed that …”cash receipts in this area are greater than in comparison to previous quarters”. Cash collection will be below previous announcements but how far below the £30-40 million second half forecast will be keenly awaited. Given the comments about legal services perhaps not dramatically lower.

The company has a reputational mountain to climb to restore credibility – the next few weeks should certainly be interesting and there’s a long way to go but perhaps the worst is behind it. The company’s share price has swung from 43p to 93p in recent weeks, could this finally be the long-awaited floor? The fight between the bulls and bears continues on Quindell.

Contrarian Investor UK

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