By Tom Winnifrith, The Sheriff of AIM | Saturday 28 May 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
You remember how Noise Induced Hearing Loss (NIHL) was going to transform the profits of Quindell (QPP)? Okay, there had always been sub 20,000 successful claims a year but fraudster Rob Terry was accruing profits on the basis that Quindell was going to win 72,000 a year. Yes a 360% market share and the City analysts, mug punters, auditors KPMG et al believed him! Jesus how could they be so thick or corrupt? We did warn them. Anyhow, have a butchers at Note 37 of the Watchstone (WTG) - Quenron as was - accounts yesterday. It states:
Professional Services Division.
On 29 May 2015, the Group disposed of the PSD (i.e. its interests in its legal, claims management and health service businesses) to S&G for a total consideration of £644,867,000 together with further contingent cash consideration payable in respect of the future settlement of its clients’ noise induced hearing loss (“NIHL”) cases. The initial consideration of £644,867,000 consisted of cash consideration at completion of £636,820,000 (of which £55,000,000 is held in escrow) and an incremental advance payment of £8,047,000 (which had been received in December 2014).
Given the inherent uncertainties of the NIHL business line, the parties could not agree on an appropriate valuation at completion and so the agreement provides that the Group will receive 50% of the net after tax receipts (after allowing for administrative costs) collected on the NIHL cases outstanding at completion. Approximately 53,000 NIHL cases were active and transferred at completion. Such amounts will be determined on a six monthly basis commencing on 31 December 2015.
The process will continue until 30 June 2017 when a terminal value projection of expected receipts will be agreed. If no agreement is reached, the process will continue with payments every six months until the earlier of the date when a terminal value is agreed or 31 December 2018. Based on an assessment of the costs that S&G will need to incur to pursue the NIHL cases and the potential outcome of the NIHL cases, the fair value of the contingent consideration has been determined as £nil.”
The underline is mine. You will note two things:
a) S&G advanced Quindell £8 million in December 2014. Now here is a statement from January 12 2015 signed off by Robert Fielding ( the CEO who took a £2 million bung on the deal with the convicted Nigerian fraudster Andrew O'Dua) and David Currie ( the chairman who knew about that bung but screamed out a whistleblower who complained about it):
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.
I put it to you that £8 million of that operating cashflow came from S&G (and was undeclared as such) and another £10 million came from moving the monthly payroll date (undeclared). The number given for operating cashflow was thus misleading. Quindell was in reality insolvent as at pay day January 2015 ( ie for December 2014) without that - undeclared - S&G advance.
That means that Fielding & Currie misled investors with Nomad Cenkos happy to sign off on the bullshit without checking. I trust the SFO will look into that. If Fielding wants to know where he stands legally perhaps he could consult with former Quindell HR officer Mrs Jill Harrison?
b) It means that NIHL is worthless. That is not going to help S&G stave off bankruptcy. It shows that the "prudent" accounts for Watchstone for 2014 are again shown to be reckless and misleading. I flagged this up yesterday re Himex goodwill now we see that an asset valued at £40 million a year ago ( the NIHL run-off) is worth nil. Truly the new management at Watchstone could not predict anything about the crock of shit they inherited.
The big loser from the admission that NIHL is worthless is the fraudster Robert Simon Terry. I wrote numerous times that NIHL was a rum and coke. For my troubles I got two lawyers letters (including a real bully boy effort from Schillings) but Terry used bogus accrued profits from NIHL to ramp the shares to place stock for Quenron and also to sell his own shares. That is fraud and another reason that Rob Terry is heading forf the slammer, something you can celebrate in our caption contest here
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