3362 days ago
Long, long chats yesterday with a Liverpool lawyer and a helpful reader email allow me, I think, to explain why the underlying cashflow miss at Quindell in H2 2014 was in fact UP TO £85 million ( not the £45-60 million I had demonstrated). And I think the key to the miss is accruals and when Quenron started its Industrial Deafness push and how it accrues for it. This is a bit geeky but I believe explains the mystery in full. It has clear implications for the Rob Terry insider dealing case, demonstrates clear market abuse and also if one reads through to 2015 shows why Quindell is insolvent. I also try to explain why I have never had the surname Cochrane (sorry Quindell Quislings). And I cover the importance of the Tosca news.
To support our continuing campaign against fraud on the AIM casino (but also main market listed frauds) click HERE
3417 days ago
I am asked by a reader to speculate on what the PWC Report into Quindell (QPP) will say? I guess that the bean counters are almost done by now so IMHO here is what to expect.
First up PWC will look at accruals, largely for industrial deafness. That income is not coming in as expected – hence the statement about Q4 cashflows. At the H1 stage accruals were in at £308 million and that number would have risen in Q3 and I suspect that in a kitchen sink job as this will be it will all be written off. So let’s call that a £350 million write-down.
Trade receivables
3503 days ago
Both companies have engaged in aggressive accounting with regard to accruals. One has already been shown to have overstated profits, managers have been fired, the forensic accountants are in and the Serious Fraud Office is now said to be looking into the matter. The other is Quindell (QPP).
There are two big differences between the two. One is that Tesco (TSCO) has admitted that it has overstated profits. Quindell is yet to fess up. The other is the scale of the overstatement. In the case of Tesco £250 million reduces profits forecasts by c23%. Quindell will book almost 40% of its revenues this year on an accrual basis. This has the scope to wipe out its stated profits completely.
But there are similarities too and most striking to me is how both companies have dealt with difficult analysts and also hard questions from the press.
3505 days ago
The Bulletin Board Morons do not seem to understand that if an Industrial Deafness case is lost Quindell (QPP) earns nothing it just incurs cost. So the mushrooming of bogus claims will not generate any cash for Quenron although it is happily accruing income on the basis that it takes on and wins 6,000 cases a month. Given that the number of claims settles has not risen above 20,000 across the while UK for many years, it is inevitable that at some stage it will have to write back all or nearly all of its accrued income from ID, prompting a profits warning. It will also mean that Quindell runs out of cash. The only question is when?
As such as a reminder of what is going on I bring you an article from The Times out today flagging up statements made by Insurance giant RSA. It reads:
3523 days ago
Who was the 41% customer of Quindell in 2011? Was it TMC which had a spare £5.5 million (more than 100% of stated PTP and cashflows) thanks to the Quindell shares it was issued with and flogged? I only ask because of a revelation regarding Quindell flogging shares it issued to itself in today’s interims. That stands out but what about those accruals? Boy oh boy.
So earnings come in at 30p and Quindell insists that it will hit all targets. I expected nothing less. But I serve up for you a stack of red flags.
3561 days ago
In 2014 Quindell (QPP) will book revenue of £228 million (28% of group sales) from Industrial Deafness claims where it will generate not a cent of cash. Those revenues are based on the estimates provided by Mr 2+2 Can =5 Rob Terry and his fellow directors and will ensure Quindell hits EPS forecasts. But anyone looking at this industry must recognise that Terry is bullshitting. Here’s why. Meet The Hearing Clinic.
The Quindell assumption is that as of June it will do 6,000 cases a month. It assumes it will them all. And that it will earn £9,000 per case. Assuming a 15 month average conclusion (the industry average is 20-36 months) it is booking £6500 of revenue for EVERY case taken on within 12 months.
Last year there were less than 20,000 successful cases in the whole of the UK. That number has been static (actually falling a bit) for a while. There were however 60,000 failed cases as ambulance chasers moved into this area from whiplash.
That should tell you that Quindell has not got a hope in hell of generating 72,000 winning cases a year.
So where are the new claims coming from?
