Alternative business structure Quindell has called in PwC to conduct an independent review of the business, with the issue of its cash flow a key focus, it announced this morning.
It has taken the step despite being “satisfied with the overall trading performance of the group throughout a period in which a number of distractions have been encountered”.
These distractions include a plunging share price, the resignation of founder and executive chairman Rob Terry, the resignation of two other directors, the resignation of one of its brokers, and a failure to list on the main market.
In a statement to the stock exchange today, the AIM-listed outsourcer said: “The directors believe that the recent changes to the board mark a natural point at which to take stock of the group’s position.”
Among other things, PwC will review the group’s main accounting policies and expectations as to cash generation into 2015.
Cash flow has been a consistent issue for investors, given Quindell’s practice of accounting for the expected revenue from cases in advance of actually receiving the cash. But the board said it remains “comfortable” with the group’s overall cash position.
It said personal injury case numbers “remain in line with management’s expectations” – in October, Quindell had 45,000 noise-induced hearing loss cases on the go – and cash flow 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”.
At the same time, “the growth in cash receipts in the final quarter of the year has not been as significant as previously anticipated”.
It concluded: “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.”
David Currie, interim non-executive chairman, said: “The appointment of PwC to conduct an independent review is the natural next step to give additional support to the board’s confidence in the business and will also assist the company in assessing its future strategy and outlook.”
As at 10am today, Quindell’s share price had dipped nearly 5% on the announcement to 53p; its recent low was 44p, although in early 2014 the price was as high as 660p.