Small Cap Value Report (24 Jun 2015) - QPP, LTHM, BMS

Wednesday, Jun 24 2015 by

Good morning!

Quindell (LON:QPP)

FCA investigation - big news this morning, as Quindell shares have been suspended - the main reason looks likely to be that they won't be able to file 2014 audited accounts by the deadline of 30 June 2015.

There are two announcements today, the first one from Quindell, which I have summarised below;

  • Changes to 2013 & 2014 accounts will "materially impact" previously reported figures, following the accounting review by PWC.
  • Accounting changes are of historic interest only, since the main division has already been sold to Slater & Gordon.
  • A further review of historic transactions & acquisitions will soon reveal "more complete information", and "ensure that any related party transactions are fully disclosed, and make associated corrections". These are "largely non-cash items".
  • Shares have been suspended until this work is complete, and will be restored to trading once the 2014 accounts are published.
  • The FCA has recently begun an investigation into public statements made by Quindell re its accounts, in 2013 and 2014.

Furthermore, the FCA was hot on the heels with their own RNS this morning, confirming their investigation, and the possible involvement of "other agencies" - hopefully the SFO.


My opinion - obviously I don't want to pre-judge the investigations into QPP, but it seems to me that this investigation has been a long time coming. Tom Winnifrith did some remarkable investigative work on QPP last year, unearthing all sorts of peculiar & suspicious things.

Now it's true that Tom's style may not appeal to everyone - he's a bit over the top. Which is like saying that the Titanic was a bit wet! However, he deserves enormous praise for correctly identifying that things were badly wrong at QPP, and that fundamentally the company had a dishonest culture, and that the accounts could not be relied upon.

Without wishing to blow my own trumpet too much, I think I was the first commentator to point out red flags about Quindell's accounts, and indeed I warned readers here as early as Dec 2012 that my instincts were telling me that something wasn't right at Quindell, specifically (and prophetically) from my report of 18 Dec 2012:


I flagged rising debtors as a concern in my SCVR of 15 Jan 2013, then in my report of 9 May 2013 I unearthed details of how…

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Watchstone Group plc offers technology solutions to the insurance, automotive and healthcare industries. Its segments include Hubio, Healthcare (pt Health and InnoCare), and ingenie. Hubio provides integrated solutions to help organizations in the insurance and automotive sectors to build customer engagement and enable usage-based personalization. Healthcare includes ptHealth, a national healthcare company that owns and operates physical rehabilitation clinics across Canada, and InnoCare, a clinic management software platform and call center and customer service operation based in Canada. Its ingenie is an insurance broker. Using telematics technology, ingenie gives its community feedback, advice and discounts to help young drivers improve their driving skills. more »

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James Latham plc is a timber and panel products distributor. The Company is engaged in timber importing and distribution, carried out in approximately 10 locations. The Company offers a range of wood-based panel products, natural acrylic stone, hardwoods, high grade softwoods, flooring, cladding, decking and plastics. The Company also supplies commodity and specialist products to timber and builders' merchants. The Company offers a range of product categories, such as panels, solid surface, door blanks, hardwoods, softwoods, engineered timber, flooring, decking, cladding, modified timber and panels, fire retardant panels and technical panels. The Company caters to door and kitchen manufacturers, shop fitters and other market sectors. The Company's subsidiaries include Lathams Limited and James Latham Trustee Limited. Lathams Limited is engaged in importing and distribution of timber and panel products. James Latham Trustee Limited is a corporate trustee company. more »

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Braemar Shipping Services plc is an international provider of services to shipping, energy and insurance industries. The Company's segments include Shipbroking, Technical, Logistics and Central. Its Shipbroking division operates through, Braemar ACM Shipbroking Limited, provides specialized shipbroking and consultancy services to international clients, which include tanker chartering for crude and fuel oil, refined petroleum products, petrochemicals, gas, chemicals and liquefied natural gas, sale and purchase of second-hand vessels, newbuilding contracts, demolition of vessels, dry cargo chartering, ship valuation and research. Its Technical division includes Braemar Engineering, Braemar Howells Limited and Braemar incorporating the Salvage Association businesses. Its Logistics division includes Cory Brothers Shipping Agency Limited and Cory Logistics Limited. more »

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22 Comments on this Article show/hide all

JollyBiologist 24th Jun '15 3 of 22

In reply to post #101677

Couldn't agree more. The combination of stockopedia and Paul has transformed my investing success and enjoyment.

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pka 24th Jun '15 4 of 22


Congratulations on warning us about the issues with Quindell so early in this saga!

I could never understand the blind loyalty that this company invoked in some of its small shareholders, in the face of so much evidence of shenanigans by its management.

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herbie47 24th Jun '15 5 of 22

Yes good work by Paul. I wonder about Cenkos how will they be affected by this?

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Cisk 24th Jun '15 6 of 22

Hi Paul, great report this morning and look forward to your further commentary on things unwinding in the Quindell space.

A short time googling yesterday after my Silverdell rant on yesterday's report revealed more in terms of the crook Nutley, things like holding a company high & mid-level managerial meeting (after turning up in his brand new Aston V12 Vantage!), telling all present how well things are going, whilst one of their major subsidiaries had a winding up petition served against it. All this and also declaring via RNS that all is well. And of course the SFO does nothing.

Terry and Quindell should be made an example of - even if he didn't have complete knowledge of everything going on, it was on his watch and he must fall on his sword for it.

I echo your praise of Tom - his style is certainly abrasive, but he was on the money also with Silverdell. The city is generally such a hornet's nest of corruption, back scratching and general fleecing of investors (by, it seems, every party involved), it's a wonder how any of us make money.

I can only say how much your reports, and wider reading of common sense investors - think Buffet, Terry Smith etc, has helped me to dodge bullets. To me, minimising loses is as much an investment strategy as anything. I no longer chase any speculative miners or oil, and don't invest in things I cannot understand - of course though there are still a number of low-stock-rank, ultra speculative shares in my portfolio to counterbalance the sensible.

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herbie47 24th Jun '15 7 of 22

Paul, I see LTHM released their results today, I would be interested in your opinion if you have a chance, please.

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Camtab 24th Jun '15 8 of 22

Well done Paul and thanks. I have been in and out a few times but only trading and that is entirely don to your wise counsel.

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herbie47 24th Jun '15 9 of 22

Thanks Paul for the LTHM review. The figures look good but sp is down today. I don't understand the £1.8m exceptional profit which related to the pension scheme, is this a one off?

A word of warning the spread is large about 5% and I had a lot of trouble buying any this morning, so very illiquid.

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dasv 24th Jun '15 10 of 22

In reply to post #101681

Massive bull market esp. in small cap, fledgling index, FTSE250 is perhaps a factor in investment success?

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dasv 24th Jun '15 11 of 22

In reply to post #101687

yep Silverdell was scandalous. I read the Full year numbers in great detail. Got burnt. The damn shares still appear in my SelfTrade account. Grrr..

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Bezhe 24th Jun '15 12 of 22

A minor complaint. James Latham (LON:LTHM) may indeed be a very fine company, but I find it hard to take seriously a company that issues an RNS release in Comic Sans font. There is a hint in the name. Down with that sort of thing.

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Paul Scott 24th Jun '15 13 of 22

In reply to post #101705

Hi Bezhe,

Haha, yes it is a strange choice of font for an RNS, Comic Sans.
However, at least it's legible!

Some of the fonts people choose for RNS are so tiny that they're almost illegible! Don't they realise that most investors are over 40, so will have imperfect eyesight? Gets right up my goat! Same with iPhone Apps, some of them are ludicrous!! I have to keep a magnifying glass on a piece of string next to my computer #OldGit

I would love a smartphone that has some sort of pop up & out screen, which is bigger than the phone itself, but sadly that sounds like something in a cartoon, rather than real life.

Or those holographic displays you see in films.

Regards, Paul.

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Paul Scott 24th Jun '15 14 of 22

In reply to post #101695


Indeed, James Latham (LON:LTHM) shares are very illiquid. I intended mentioning that in the report today, but it slipped my mind. Thx for flagging. Often you can only trade 1,000 shares at a time, and on a wide spread.

Frustrating. But that's why it's best to treat shares like LTHM as very long term, and to just buy the dips over a period of time, rather than trying to buy a position in one go. Although occasionally you might meet a seller. Also not the sort of share you want to hold in any size if you might need the money urgently for something else, as there may not be a buyer at the time you want to sell.

Regards, Paul.

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cig 24th Jun '15 15 of 22

In reply to post #101708

Control-"+" should allow you to zoom in most web browsers and PDF viewers (control-"-" to decrease zoom level, control-0 to go back to default).

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Leven 24th Jun '15 16 of 22

If the FCA / SFO can't pin anything on Quindell & Terry they should all quit and the regulator should be disbanded, then at least there won't even be a pretense of regulation and investors will know exactly where they stand.

ps it would help if investors didn't keep backing promotions run by the likes of Terry, Timis, Bell etc

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Munday 24th Jun '15 17 of 22

I have just started reading Paul , so must reserve judgement on his comments for now.

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Gostevie 24th Jun '15 18 of 22

In reply to post #101686

Hi Herbie47,

Just curious as to how or why Cenkos Securities (LON:CNKS) might be affected by the Quindell stuff. genuine question as I hold Cenkos.

All the best,


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herbie47 24th Jun '15 19 of 22

In reply to post #101723

Cenkos were QPP's broker (Nomad). I used to hold Cenkos and thats the reason why I sold because of specualtion about how an investigation would affect Cenkos. Its possibily why the sp has not done much for the last year.

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Gostevie 24th Jun '15 20 of 22

In reply to post #101728

Ah, I see. Thanks.

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JoeKocsis 24th Jun '15 21 of 22

Hi Paul, as a holder of Quindell (LON:QPP) shares, I'm wondering when can we safely sell the shares (after suspension) to receive the distribution of the stated £500M.

I look forward to hearing from you

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Paul Scott 24th Jun '15 22 of 22

In reply to post #101738

Hi JoeKocsis,

I don't give advice on whether, nor when to buy or sell shares. The onus here is on readers taking control of their own decision-making process, for their own portfolio.

So my reports only give my personal opinions on companies.

You will be able to sell your QPP shares any time you like, after trading resumes, when the 2014 accounts have been filed. There doesn't seem to be a timescale given in today's statement, but I would imagine it's probably weeks rather than months.

As it's of paramount importance to holders of the shares, I am sure management will update you further on what is happening with the proposed cash return to shareholders. I'm not the right person to ask, you need to ask the company itself - I suggest giving them a ring, and asking to speak to a Director, or their IR contact.

Regards, Paul.

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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