Slater and Gordon (ASX:SGH) informed the ASX this morning that the company notes Quindell plc’s release of its statutory financial report for the period ending December 2014, including a restatement of its historical financial accounts for the period ending December 2013.
Slater and Gordon acquired Quindell’s Professional Services Division in March this year. Following the acquisition Quindell came under investigation by UK’s corporate watchdog, the Financial Conduct Authority. To add to the panic, at the same time Slater came under ASIC investigation relating to “aggressive” accounting practices. This all caused Slater and Gordon’s share price to half in a matter of days.
Following the initial investigation, Quindell published its restated financial accounts and told investors it had revised its revenues down by £289 million to report a £137 million pound loss rather than a £175 million profit. The restated accounts will cast doubt over the £637 million ($1.3 billion) price tag forked out by Slater & Gordon in March this year in a deal described by chief executive Andrew Grech as "transformational".
Slater and Gordon stated in their market update that it is critical to separate issues associated with Quindell’s historical statutory accounts from Slater and Gordon’s assessment of the PSD ‘s value and go forward performance. Quindell’s accounting policies were not relied on by Slater and Gordon in its due diligence of the PSD. The assessment of the PSD, including its historical financial performance, was based on fundamental, bottom-up analysis.
Slater and Gordon has also noted that given its acquisition of the PSD was structured as an acquisition of the PSD entity rather than an acquisition of the common stock of Quindell Plc, the company is confident that it has no liability in relation to those ongoing investigations into Quindell by various authorities.
Slater and Gordons’s engagement with ASIC is ongoing and is progressing in a timely manner. EY Australia is continuing to assist the company in relation to its responses to ASIC’s queries.
Following this morning’s update, investor’s panicked and Slater and Gordon’s share price fell as much as 15 per cent. The company has since rebounded to opening levels as investor’s look for a bargain.
Author: Ben Visser
Aug 06, 2015
Ben is a Wise-owl equity analyst focusing on ASX blue-chips stocks. Ben has a Bachelor of Business in Finance majoring in property valuations and management. In his role at Wise-owl Ben conducts in-depth fundamental and technical analysis which helps him to find profitable investment opportunities on the ASX and abroad.