Slater & Gordon, the Australian listed law group, on Friday released a complex set of accounts full of restatements, unusual accounting policies and changes to the way the figures are prepared and presented.
The company under investigation by the Australian Securities and Investment Commission, but these are preliminary figures — and so not audited yet. Andrew Grech, managing director, signed a statement saying “The financial report is in the process of being audited and is not likely to be subject to audit dispute or qualification.” The accounting firm doing the work has not been named.
Slater & Gordon recently purchased almost all of the scandal hit UK group Quindell for A$1.3bn. More details from the results below, but first some highlights: the Australian group has significantly more debt than expected, the numbers don’t match the pro forma set presented at the time of the acquisition, and in a month of operation the businesses acquired managed to lose A$5m. Read more
Slater & Gordon, the Australian listed law group, will report full year results on Friday, the first since buying almost all of the UK listed basket case Quindell for A$1.2bn.
Presentation of the figures had been set for the 24th, but was pushed back four days. The reason, Slater & Gordon told us, was “to provide our shareholders with the fullest update possible on our FY15 results and our FY16 outlook”.
One risk here is that a full update will include the admission it bought a billion dollar basket case. We’ll consider that and other issues below, in search of an answer to the underlying question: why did Slater & Gordon get suckered by Quindell? Read more
Materiality is the rock upon which public corporate information rests. If something happens at a company which is material, out it goes into public view, either in the regular accounts or, if price sensitive and pertinent, in an ad hoc statement to the market.
Rock may be too solid a term, however, for something which is a matter of opinion. As a case in point, consider a recent announcement from Slater & Gordon, the Australian listed law group, of something immaterial. S&G, having recently acquired almost all of the operations of Quindell, a mess of UK legal and insurance related business, said last week that a large UK insurer would end a longstanding commercial agreement with the business.
The customer loss is “not expected to be material to FY16 earnings, but Slater and Gordon has elected in the current circumstances, to make this announcement nevertheless.” Read more
Quindell was once a Hampshire country club. Robert Terry took it and built a business that, to begin with at least, had something to do with technology and insurance. It bought and sold companies from and to Mr Terry and his associates. At one point his wife signed off on the accounts as finance director.
In 2011 it listed on Aim, London’s junior market, then went on a buying spree, exchanging shares promoted to small investors for a bewildering array of companies involved in law, loft conversion, insurance, garages, physiotherapy and technology. Quindell raised £200m from investors, and spent some of the cash on companies run by longtime associates of Mr Terry.
By 2014 it was the largest company on Aim, worth almost £3bn. Mr Terry promised his company would produce cash, but it never did. He sold some of his stock in controversial circumstances, left the company while pocketing £1.5m severance, then sold the rest.
It has taken the new management seven months to sort out the accounts. On Wednesday they published extensive restatements to past numbers, as staggering in their scale as they are for the careful politeness of the changes to accounting policy described. Following publication, the Serious Fraud Office announced a criminal investigation. Read more
Earlier this year Slater & Gordon, the Australian-listed legal group, paid £637m (A$1.2bn) in cash for the Professional Services Division of Quindell, a large UK law firm tied to a motley array of businesses. Slater & Gordon raised A$890m from stockholders to do so, and has about A$550m of debt.
The deal was conducted in a hurry, while PWC was reviewing Quindell’s past accounts, but Slater & Gordon said its due diligence was extensive and the underlying business of PSD was profitable.
On Wednesday Quindell published a brief set of figures, audited by KPMG, for the business it has just sold. According to those numbers, PSD lost £194m (A$411m) in 2013 and 2014. Operating cash flow was also negative in both years, a drain of £144m. Tangible net assets for the division are negative. The Serious Fraud Office is also investigating past accounting and business practices at Quindell. Read more
The Serious Fraud Office appears to have noticed the large restatements by Quindell, and got in touch. From the announcement:
Quindell Plc (AIM: QPP.L) announces that this afternoon, the Serious Fraud Office informed the Company that it had opened an investigation, which the Company understands relates to past business and accounting practices at the Company. The Company will continue to cooperate with all relevant regulatory and law enforcement authorities. Read more
Quindell has published accounts for 2014.
Shares in the rump of business left behind after almost all of the legal, insurance, telecoms, garage and solar panel conglomerate was sold to an Australian legal group have been suspended for over a month due to a failure to deliver financial statements.
There is a lot to read, and a media call at 12.15. Updates/further posts to follow. In the meantime… Read more
Five years ago the Australian law firm Slater & Gordon chose one of its senior partners, Paul Henderson, to congratulate a former colleague on becoming Australia’s first female prime minister. He reminisced about joining Julia Gillard for social events at her home, as well as her personal and professional support.
According to Mr Henderson’s LinkedIn page, he worked for Slater & Gordon for 29 years, until March this year. What is not mentioned is his directorship at Equal Access Funding, a lender against expected payouts in court cases, and in which he is a significant shareholder.
Slater & Gordon investors may be interested because the law firm is EA Funding’s only credit representative, guarantees the loans, and the lender lists as its business address Slater & Gordon’s Melbourne head office.
They may want to consider whether there is, or was, control exercised by Slater & Gordon over the entity, as well as the amount and character of the off balance sheet finance provided. The company said the funding is incurred by clients, and the arrangement is proper and appropriate. Read more
At the end of June, Slater & Gordon announced errors in its past accounts. We had sent the Australian-listed legal group some questions on a Friday, and on the Monday it put out a formal statement restating the amount of cash it has received from customers in the past two and a half years.
A spreadsheet error had led to some double counting, to the tune of A$92m. Our questions had focused on a gap — the difference between cash receipts implied by income statement and balance sheet figures, and the total recorded on the cash flow statement — and the restatement closed the gap for the 2013 and 2014 financial years.
However, what we didn’t do at the time was look at the gap for the first half of 2015. We should have, because there still appears to be an unexplained variance of about A$20m. Read more
Slater & Gordon is the Australian law group which has bought almost all of Quindell, the London-listed basket of businesses balanced atop a law firm. On Friday we asked them about the difficulty of reconciling some lines on the cash flow statement to other part of the accounts. On Monday the group issued a statement to the Australian Stock Exchange restating historic cash flow statements.
The company and its auditor have begun a detailed analysis of financial information to be provided to the Australian Securities and Investments Commission, and discovered “a consolidation error… in the reporting of historical UK cashflows”. Accounting firm E&Y has been appointed to oversee the responses to ASIC queries.
Also on Monday, Quindell announced it wouldn’t publish 2014 financial statements by the end of June deadline, and its shares remain suspended. Historic figures will also be restated following a review by PWC. Investors might ask, what is the problem with law firm accounting? Read more
The Australia listed law group Slater & Gordon held an investor day on Wednesday to talk about its purchase of almost all of Quindell, the UK listed jumble of legal, technology and insurance businesses.
Ahead of that, the Australian Financial Review reported the group had attracted the attention of the Australian Securities and Investment Commission, related to the ability of Slater & Gordon’s existing audit firm, Melbourne outfit Pitcher Partners, to scrutinise the enlarge UK operations.
What followed were two statements from Slater & Gordon with somewhat different responses to the story. Read more
Shares in what is left of Quindell — the former technology, garage, solar panel installation, law firm and physiotherapy conglomerate — were suspended on Wednesday morning, as the company announced an investigation…
on 23 June 2015, the Financial Conduct Authority informed the Company that it has commenced an investigation under the Financial Services and Markets Act 2000 in relation to public statements made regarding the financial accounts of the Company during 2013 and 2014. The Company will co-operate fully with the investigation.
The company also provided an update on the review of its accounting practices, and promised further detail on some related party transactions: Read more
The end of June approaches and with it the deadline for Quindell, the unsold rump of businesses loosely related to insurance claims processing, to publish accounts for 2014. The London Stock Exchange, which oversees London’s junior market, suspends trading in Aim-listed companies which do not publish financial statements.
An annual general meeting should follow. One topic investors might want to discuss: Quindell spent more than £200m to buy two companies, Himex and Ingenie, from longtime associates of the since departed founder and executive chairman, Robert Terry. Those companies are now considered worthless by the stock market. Read more
In 1935 Bill Slater and Hugh Gordon started a Melbourne law firm to serve local union members. Eighty years later the impetus is broadly the same, to offer decent legal services at an affordable price, but the ambition has changed. If regulators approve the takeover of Quindell professional services, Slater & Gordon will, by some distance, be the largest personal injury law group in both the UK and Australia.
When Andrew Grech took over as managing director in 2000 Slater & Gordon was still a partnership. It incorporated the following year, then listed in 2007, and he has bought more than 50 law firms to get to this point. “We’re not megalomaniacs; none of us set out to become bigger for its own purpose”, he told FT Alphaville. Rather, size is a means to offer specialist legal services to the greatest number of of clients at a reasonable price.
Still, industry roll-ups come with risks, the company is the only listed law group of size and legal accounting can be opaque. One way to assess the success of all the consolidation is to ask a question: what would happen if Slater & Gordon stopped buying law firms? Read more
Wondering what the mastermind behind Quindell plans next? Watch this space:
A quick trip to QuobPark.com tells us “The Quob Park Estate Strategy Evolution Team are working with and investing in companies that are focused on the benefits of Digital Disruption”. Read more
Another Quindell correction, this time to Monday’s announcement of a deal to sell nine-tenths of the company to Slater & Gordon, the Australian law group.
It comes after shares were suspended for more than five hours on Wednesday, provides partial answers to one of the outstanding questions — where had the rest of Quindell’s business gone? — while raising others about the nature of its operations, financial statements and previous announcements. From the RNS:
The Board has noted that there was a failure to fully transcribe profits related to entities forming part of the Disposal as disclosed in the Circular (predominantly in respect of iSaaS Technology Limited and Intelligent Claims Management Limited, entities previously included within the Company’s “Digital Solutions” division in historic financial information).
Quindell shareholders will soon be asked to approve the sale of substantially all of the company to Slater & Gordon, the Australian listed law group. The sale was agreed after S&G was granted the exclusive right to negotiate and conduct due diligence on the UK ambulance chasing law firm. Quindell is also strapped for cash and the list of alternative bidders seems small to non-existent.
Yet there remains a pertinent question: do Quindell shareholders have enough information to approve the sale?
PWC has conducted a review of Quindell’s accounting, one likely to lead to restatement of revenues and profits in recent years. S&G have seen the accountant’s work, yet shareholders have not. The review is price sensitive information – is it fair disclosure for the buyer to have seen it, but the selling investors to have been kept in the dark? Read more
Congratulations! Assuming Quindell shareholders give it the nod and UK financial and legal regulators approve, the Australian-listed law group Slater & Gordon will soon be the proud owner of Quindell’s professional services division.
What are you buying? The UK’s largest ambulance chasing law firm, for one, but rather more than that. We don’t have the answers, but here are the questions to ask about the deal, as well as the ongoing peculiarities of legal accounting.
First up: what is Quindell Professional Services? Read more
Quindell plc (AIM: QPP.L) announces that it has today entered into a conditional sale and purchase agreement to dispose of the Professional Services Division (“PSD”) to Slater and Gordon Limited (“SGH”) for an initial cash consideration of £637 million and further contingent cash consideration payable in respect of the future settlement of its clients’ noise induced hearing loss (“NIHL”) cases (“Disposal”).
Quindell’s law firm is to be sold to Slater & Gordon, the Australian listed law group, and shareholders will get half a billion returned to them in cash in the second half of 2015.
More disposals to come, restatement of past accounts likely, and a new chief executive is needed again, while the chief lingering question is what remains. Read more
The latest update from Quindell lands. Contrary to rumors circulating, the company is not talking to Australian law group Slater & Gordon about a takeover of the whole business, just the professional services division where the UK ambulance chasing law firm resides.
Meanwhile, an ongoing review of the books by accounting firm PWC continues, and has taken longer than expected due to “the high level of corporate activity” which went into the formation of a jumble of businesses loosely connected to insurance. Also:
Advice in relation to the Company’s main accounting policies (in particular revenue recognition in the Professional Services Division) is being further considered and no conclusions have been reached.
An update lands from Quindell regarding discussions with Slater & Gordon, the Australian listed law group.
Further to its announcement of 22 January 2015, Quindell Plc (AIM: QPP.L) notes the further press speculation and announces that it has extended Slater & Gordon Limited’s (“SGH”) exclusivity period relating to the possible disposal of the professional services division (“PSD”) of the Group to 31 March 2015. Discussions are progressing with SGH and the indicative terms being discussed would imply a significant premium to the Company’s market capitalisation at the close of trading on 20 February 2015. There can be no certainty that these discussions will lead to an offer for, or the disposal of, the PSD. Further announcements will be made, as appropriate, in due course.
Dear shareholder, no promises, but our stock could be worth more than the short-seller battered share price suggests… Read more
Quindell, an unusual collection of loosely related insurance, technological and legal businesses piled on top of a golf club by Robert Terry, can confound attempts to understand it. There is, however, one simple question which gets right to the heart of what has been going on.
What were the cash balances at Ingenie, the associate company it acquired last year?
As we’ll explain, there aren’t clear good answers to this question, just least bad ones. It is something for PWC and the company’s bankers to ask, because the answers should help show whether management of what was once the largest company on London’s junior market, AIM, was disingenuous, profligate, or something worse. Read more
Further to the announcement by Quindell that it has appointed two new executives in return for a bucket full of options and a corporate consulting gig, another statement follows with full terms of the grant to incoming and current executives.
Details after the jump, but the headline is 12.9 per cent of the company will potentially be handed to senior executives in return for keeping it afloat. Read more
Quindell, the description-defying collapsed stock promotion acquisition roll-up machine whose stake-selling founder lurks as a well remunerated consultant, has a new non-executive chairman, Richard Rose.
The former credit hire executive will be joined by Jim Sutcliffe as Strategy Director and Deputy Chairman, pending approval by the Solicitors Regulation Authority — the two have been tempted by £16m worth of short dated options.
The pair have a package which suggests a kill or cure approach is in prospect for a business which has struggled to generate cash flow, with those options vesting in stages over the next 12 months. Long term incentives and all that. Read more
Robert Terry, founder of the UK’s first listed golf course cum law firm cum scaffolding and insurance processing technology specialist, has sold more of his stock since stepping down as chairman last month.
The sale was disclosed by the company, which reports: Read more
Metaphorical stock, mind you. That rare thing on Monday, an announcement from Quindell that doesn’t involve the share count rising:
The Directors believe that the recent changes to the Board mark a natural point at which to take stock of the Group’s position. As set out below, PwC is being engaged to conduct an independent review.
Translation and context below but, for those who haven’t been following the Aim market stock promotion disaster story this year, first a quick reminder of the nature of Quindell and what’s been going on. Read more
The Financial Times can reveal that Roble is one of a clutch of shell companies based in the Cayman Islands created by Tiger Global, one of the world’s largest but lowest profile hedge funds. Tiger Global used a series of these structures to bet against at least a dozen European companies, including Quindell.
Terrific gumshoe work by the FT’s Miles Johnson, who has identified Tiger Global as the big US investment company using Cayman-registered special purpose vehicles to short European stocks without attracting attention.
One of them is the Spanish-sounding but Cayman-registered Roble SL, which held the biggest short position in Quindell this year as the controversial law firm and technology company’s stock collapsed. Read more
Much of our coverage of the controversial Quindell has focused on its transformation into one of the UK’s largest law firms. This rise has not received the wider attention it might, perhaps because Quindell was listed on Aim, London’s junior market, and until recently described itself in the garbled jargon of a technology company.
We suspect that could change. A stock market valuation of more than £2.7bn earlier this year has collapsed to less than a tenth of that total, posing a problem for a group that has funded both breakneck expansion and day-to-day expenses by issuing shares. Robert Terry, the company’s founder, recently sold stock during a period that he had promised would show Quindell’s ability to stop burning through cash, and has resigned as chairman.
Which prompts a question for the legal industry in general and the Solicitors Regulation Authority in particular: what would happen if a law firm managing 100,000-plus claims were to fail? Read more
Here is a selected chronology of recent events at Quindell, one of the UK’s largest law firms, whose share price has collapsed in the last month.
October 13 – A third-quarter trading statement says the company’s preferred measure of cash flow is ahead of expectations. (Share price 143p).
October 21 – Quindell announces what it calls a major contract win. Also, Canaccord Genuity gives notice of resignation as joint broker and financial advisor, which is not announced. (Share price 161p). Read more