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54.5¢ slater & gordon limited

Notes to the accounts: 31 Business combinations, page-37

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Sector

35,472 Posts.

2863

27/11/15

17:05

Post #: 16496940
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Originally posted by Disagree ↑

Lets ignore the fact that you knew that it was total liabilities and take a look at some more fundamentals.

Here are a couple of things that you may have skipped over when deciding to take a punt on SGH.

In 2015:
Debtors were impaired by 76.1m
Days sales outstanding went from 179 to 357

Both of these provide us with a hint that SGH may have overestimated their receivables.

It is highly unlikely that every dollar would be recoverable if operations ceased tomorrow. Further evidence of this can be found within guidance where management told us that cash flow was negative for the first 6 months of the year. As a 3x business owner you must know that debtors are only worth what you receive in cash.

I would love to see any sort of rationale to why anyone should take receivables at face value.

Expand

My bad debts are minuscule, so I presume S&Gs are more secure than mine in a SME.

Would you consider 80% recovery as reasonable?
90+ for a law firm.

If you ran a business with even those percentages, you wouldn't last 5 years let alone 80.

Last edited by Sector: 27/11/15

SGH Price at posting: 69.0¢ Sentiment: Buy Disclosure: Held
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0 Great analysis

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