Green Light and Go., page-29

To answer this, you need to look at what lines of work SGH are active in and then relate them back to the state of the economy, etc.

For example, PIL matters are not dependent upon the economy or any change in economic conditions. MVAs still happen regardless of where you are in the cycle although with a shifting emphasis depending on time of year. Workplace or industrial accidents can happen for any number of reasons, so workcover styled claims, etc are not dependent upon economic conditions. It is actually a furphy to suggest that deteriorating economic conditions bring about more claims being made. If anything, this is when claims at the margin increase which, given SGH's filtering system would likely be weeded out before they got too far.

PIL therefore is not economically tied to either the economy, time of year or prevailing conditions. So, in this regard, the stock could well be considered defensive.

As for GL (General Law) matters, however, this is an entirely different proposition.

SGH (thinking locally) acts in the GL areas of:
* Family Law - more timing of the year, etc with the greatest uptick following family events (ie: birthdays, etc), school holidays, or end of year such as Christmas (ie: will try and make a go of it, but then come back even more down beat than before, so then upticks from February onwards).
* Estate Planning + Probate - not economically dependent as to Probate, but may be as to Estate Planning.
* Wills + Will Disputes - as above, but otherwise, steady as to Wills whilst Will Disputes might uptick due to deteriorating economic conditions. You still however have to fit within the rules /boundaries of what is claimable, by when, etc.
* Criminal Law - court matters appear to actually be driven more by the time of year, rather than by economic conditions. There is ample evidence /studies to suggest that crime is more rampant during the "good times" than the "bad" especially as concerns society driven crimes, assaults to person, injury or worse, economic crimes, substance abuse, nicking of cars, criminal damage, drunkenness, etc. In "bad" times, lower value economic crimes tend to prevail (ie: larceny, shop lifting, opportunistic thefts, hold ups, etc) either to fuel a habit, out of necessity, or as a result of a brain fade, etc. More serious crimes however are not driven or determined by economic conditions, but more by motive, opportunity and timing. Family hate crimes though do increase primarily due to time of year, etc, whilst there will also be some economic influences in play.
* Conveyancing - is clearly economically driven, as well as influenced by the time of year. If selling rates /habits are down, then so too is the conveyancing works.
* Employment Law /union matters - these are influenced by economic conditions as people lose their jobs, etc. But the uptick is not as great as people might otherwise think. That is, it certainly increases but only proportionately so.
* Class Actions - these are entirely event driven without either reference to time of year or economic conditions, etc.
* Commercial or Business Law - SGH has very little indeed to do with any of these areas as they lack the mandatory skills to effectively represent the area. Equally, given their union underside, they also have a reputational bias that translates as a risk (whether real or perceived) against anyone who comes from the ownership, business, or corporate side of the equation.
* Family or small business - again SGH has limited involvement here. Both areas however are more event driven rather than economically tied. Of course, there will likely be some external influences or shocks at play but these often reinforce matters that are either already under way or somewhat in discussion.
* Litigation - driven by competing factors some of which are economic, but not always. The court however have their own peculiar nuances, such as how long it takes for matters to get on, etc. Those matters which are urgently or quickly convened tend to be business or corporate matters which the likes of Freehills, Allens, Corrs, etc all handle rather than an SGH type firm.

So, to bring it back full circle, the types of increased litigation during the "bad" times will typically concern 1* employment matters, 2* business /corporate disputes, 3* contract breaches, 4* insolvency matters, 5* property disputes (ie: to get out of contracts), 6* building disputes, etc. SGH has exposure to 1* and maybe to some elements of 4* but not to 2*, 3*, broadly 4*, 5* or 6*.

GL is therefore not defensive to SGH whilst PIL can be considered defensive.

That said, if you look at their EBITDA bridge, from F14 base, GL contributed $3.8M (AU) and $0.8M (UK) in F15. Overall GL EBITDAW was $5.6M on $104.5M revenue (<20%). So, to the extent that PIL is still 80% of their business, then "yes" it can be considered as a defensive stock, although the one qualifier to this is that during the "bad" times, all manner of lead times, etc all tend to push out, regardless of matter or circumstance.

My conclusion therefore is defensive, but only as to PIL with extended timing which, if I were to hazard a guess at would be +6m (broadly, through +9m) on any existing matter. In contrast, GL is heavily exposed to them in this regard absent them having the proper GL categories of experience in place that can actually make a difference. That's reflecting both on my own thoughts and experience in all this.