Outsourcer continues to target main London listing despite share price nosedive

Insurance outsourcer Quindell has issued a 12,300-word, point-by-point rebuttal of claims made about the firm by little-known research outfit Gotham City.

Gotham City’s report, released on Tuesday, attacked Quindell’s business model and founder Rob Terry, sending the outsourcer’s share price into free-fall.

One of Gotham City’s main allegations was that between 42% and 80% of Quindell’s profits are “suspect” because the profits from individual entities do not add up to the total profit the group reported.

Gotham added up the historical earnings of the companies Quindell has bought, leading to a total of £67.8m – 42% lower than Quindell’s 2013 audited earnings before interest, tax, depreciation and amortisation (EBITDA) of £116.5m.

Quindell said many of Gotham’s assumptions about post-acquisition EBITDA of the divisions were “inaccurate”. The outsourcer argues Gotham gave the company no credit for increased claims volumes coming from contracts won in 2012 and 2013 by either of its two main operating divisions,.

The outsourcer said: “No allowance is made for an increase in cases generated by the Group’s own consumer channel which in fact grew from circa 1,000 cases per month at the point of acquisition to circa 3,500 per month today nor from any increased case work efficiencies in the legal services or health businesses.”

Quindell senior independent non-executive director and vice-chairman Tony Bowers said:  “It is disappointing that my executive directors have been forced to spend time responding to these allegations.

“As previously announced, the company’s lawyers have initiated legal action against those responsible for this coordinated shorting attack. I hope with this extensive response to the Gotham “research” that investors will be reassured as to the company’s transparent approach to investor relations.”

The rebuttal has not yet improved Quindell’s share price. The shares are currently trading at 24.48p, down 2% on Thursday’s closing price of 25p. This is still sharply down on the 39p the shares were trading at on  the day before Gotham City released its report.

Despite this, the AIM-listed  company is pushing ahead with plans for a full London listing. Bowers said: “The board continues to target the Company’s move to the Main Market, as stated previously, and is looking forward to our US investor roadshow next week.”

He also said that a number of Quindell directors intend to buy shares in the company once they receive the appropriate regulatory clearance.