Everything is on track at Quindell PLC (LON:QPP) (OTCMKTS:QUPPF), according to Quindell, as its automotive tracking device deal appears to find trouble.
Quindell’s aggressive PR campaign to re-energize investors
The company issued a press release in front of release of their six months interim fiscal results, part of an aggressive PR campaign to re-energize investors in the wake of a devastating research report from Gotham City Research that accused the company of fraud.
The release claims that the technology consulting and software company hit its key metrics in July and that margins in the services business “remain particularly strong.”
A key issue Gotham uncovered centered not on the reported profits, but the quality of those numbers. The report also cited unseemly business relationships between the CEO and a private company he owned that was doing business with Quindell PLC (LON:QPP) (OTCMKTS:QUPPF). The CEO was since removed, addressing one key concern with the firm. It is the quality of the numbers and how revenue is being accounted for that is the primary issue, however.
Quindell may be addressing the troublesome issue
In their recent release, Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) gave clues it may be addressing this troublesome issue. ”Certain contracts being restructured to ensure the optimum return on cash resources but both profit and cash guidance are not dependent on any upside from these initiatives,” the press release said, pointing to an issue regarding how its consulting contracts are accounted for in terms of profitability.
This note came after the release re-affirmed prior cash guidance and then made an important statement.
“Our focus remains on cash over growth as previously stated,” the statement said. In other words, rather than take the “tech boom” crazy approach of valuing potential growth at a significant multiple, the company was going to focus on the here and now.
In an ideal world it potentially might mean getting back to a focus on simple accounting where a balance sheet defined income as the amount of cash that actually came into the business minus actual cash expenses the business had during the quarter. These were the old school accounting principles from a simpler time, a time before PhDs in financial engineering made a game out of creating complexity in order to “enhance shareholder value.” This could be interpreted as accounting tricks used to puff up a company’s balance sheet, a charge made by Gotham.
Quindell’s accounting practices
For the sake of long term investors, Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) could answer concerns regarding its accounting practices in the same fashion it addressed the CEO issue.
In terms of the future? Their scheme to install tracking devices in automobiles might be short sighted in its revenue projections. The individual tracking of automobiles is something the NSA and related domestic security surveillance agencies might pay for much in the same way they pay US tech firms for access to spy on individuals with no connection to terrorist activity whatsoever.