Quindell Portfolio (LSE: QPP) has endured a rocky 2013 so far, with worries about cash collection and unclear financing schemes driving its share price down nearly 60% in early May. The shares have regained a lot of those losses since, and they climbed again this morning when the company released a trading statement.
Gross sales for the first six months of 2013 are expected to be £166m, which should generate £43.5m of pre-tax profits. Earnings per share came in at 0.9p.
Notably, this profit figure is after a £6m exceptional charge on an equity instrument Quindell used to finance an acquisition last year. Quindell had originally claimed this acquisition was funded by a placing of new shares, and the company seemingly remains very reluctant to explain exactly how this equity instrument works.
Cash is king
The large debtor figure in its 2012 balance sheet has caused some pundits to question whether the company could have problems with cash collection in future.
Quindell said its adjusted operating cash inflow for the period was £2.3m, well ahead of the budgeted £15-20m outflow it had been expecting with debtor collection ahead of plan. Although there was no specific guidance on what Quindell expects for the second half of the year, it does anticipate “significant adjusted operating cash inflow”.
Quindell said it ended the period with £35m of cash and net debt of £14m. This represents quite an alarming turnaround from the net funds of £17m it had on 31 December 2012, and shareholders may need to wait until the full interim results are released on 19 August to see what has happened here.
The company also said it lent other group companies £11.5m to fund growth during the period, but that only £3m of this was outstanding at 30 June.
Game changer?
Quindell certainly has no shortage of contract wins to boast of in recent months, and it has also begun to spread its tentacles overseas.
Today it announced an investment in Himex, which it claims could be a “game changer”. Himex provides usage based insurance solutions in the US, and Quindell has been appointed its sole and exclusive distributor in the UK, Canada and South America.
Quindell is paying £9m, mostly in the form of shares, for a 19% stake in the business. It is currently generating revenues of $0.4m a month from a “relatively small subscription base”, but is targeting 10m users over the next five years.
In early trading, Quindell shares were 3% higher at 11.1p. At this price, the company is valued at £490m. Later today, Quindell is hosting the second of three ‘teach-ins’, where it is hoping to better explain its business model to the investment community, ahead of a planned move from AIM to the Full List of the London Stock Exchange later this year.
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> Stuart does not own any share mentioned in this article.
