Alternative business structure Quindell Portfolio has issued a “further clarification” over its financial position in a bid to stem a continuing slump in its share price.
Quindell shares rallied this morning, having fallen from 13.25p last Tuesday – when it issued its annual results – to 6p by close of business on Friday. At the time of writing they were trading at around 7.6p.
Having issued a statement on Thursday, the Quindell board followed it up today to say “the directors are not aware of any valid reason for the recent share price drop other than misinformed speculation and shorting activity”.
The focus is on an equity swap issued as part of the funding for the acquisition of Accident Advice Helpline and an active short position in relation to the company’s ordinary shares. “The active shorters have also called into question the quaility of the group’s debtors in relation to its outsourcing business as other companies in this sector have had issues in this area,” the board said.
It insisted the group has “a strong balance sheet, good debtor controls and continues to trade profitably with significant traction in the insurance sector”.
Quindell said the equity swap accounts for “only a small part of the group’s receivables being £13.3m of £202.3m at 31December 2012 and is not a material contract in relation to the size of the group.
“Included within trade and other receivables, as well as the equity swap of £13.3m, was the deposit payment for Accident Advice Helpline of £19.8m which is now no longer in other receivables as the acquisition was completed in April 2013 and this amount is therefore now included in the balance sheet as a cost of acquisition.”
It said the additional amount of cash to be received by the group from the equity swap is dependent on the performance of its ordinary shares over the periods in which the swap is in operation.
“The swap was based on a 17.5p share price so the amount of cash the company will receive from its £13.3m remaining receivable will be proportionate to the company’s average share price compared to 17.5p during such periods as the swap operates.
“The equity swap is not currently operating and as of Friday 10 May 2013 the company has agreed with the counterparty that the swap will not operate until the company requests its reactivation, which it does not intend to do until the share price is at substantially higher levels.
“For the avoidance of doubt there are no circumstances under which the company would have to issue more shares pursuant to the equity swap or have to pay out any further cash regardless of the performance of the equity swap.”
Average debtor days at 31 December 2012 is around six and a half months, “which is exceptionally good for our industry and is only possible due to the strong relationships we have with our insurance clients and the ethical stance we take by lowering the cost of claims for the industry as a whole, targeting over 20% saving compared to industry norms.
“Other claims management companies, which have taken a less ethical stance, have had problems with collections with debtor days averaging at some points nearer two years but we have never experienced this issue, nor have Ai Claims Solutions or the businesses contained within Quindell Legal Services during the last 10 years.”
Quindell has also announced a series of ‘teach-ins’ for analysts and institutional shareholders to help them better understand the business.