As some have previously remarked (other threads, several weeks back), they should have gone into suspension either at the time of the Dec17 abandonment of guidance, or on Jan6 in reference to the McGrathNicol consultancy, or on Jan28 when they advised that they were not going to update the operating cashflow position (as previously advised back in December).
It has also been clear and apparent since at least Jan28 that they were going to report on Feb29. The following is what they said:
"The Company intends to report its audited first half financial results on 29 February 2016."
Today's announcement re-affirmed this, but then also said the following:
"The reason for the request is that there are certain material items in the half year results which are not yet finalised, including, as foreshadowed in December, testing and assessment of the goodwill values for impairment of the UK business. SGH continues to work with its auditors and external advisors to finalise and confirm those material items, and is not in a position to make an announcement until that work is concluded".
Back on Jan28 (in explanation of why the operating cashflow update wasn't being provided, the Company said:
"The Company continues to work with its auditors and advisors to finalise its half year result including statutory gross operating cashflow."
The Company also said (Jan28) that it "is considering its expectations for operating performance and cashflows for the balance of this financial year."
Last Saturday, it was reported in the Weekend Australian that Westpac had increased its provisioning and that this included in reference to SGH.
Since then, some other announcements (unrelated to SGH) have come out such as the Arrium capital raising /lending of last resort with commentary that the banks will have to take a significant haircut (including Westpac and NAB) and shareholders, almost a total haircut.
Elsewhere there are other comments illuminating the market of various actions, provisioning, etc being taken by the banks particularly as they are coming up to their interim results (31/3), for WBC, NAB, ANZ, MQG, etc.
Right at this moment, the banks are exerting pressure elsewhere and have started telling SME's to ensure that their accounts are in order (ie: not irregular beyond a certain number of days otherwise the accounts will go to collection, credit, etc).
In between all this, WBC late last week raised their business loan rates by 19bp with more to come. Risk is now starting to be priced in with wide ranges applying over and above the comparison rates, etc, depending upon where one's own individual risk profile stands.
What this all means is that the banks have started tightening their exposure positions elsewhere in the market and in the case of some are either having to take a very likely bad debt (Arrium) or an increased provision (SGH), or some measure of writeoff (Bluescope), or are expressing little or no interest in debt for equity swaps (again, Arrium).
Meantime, there has been a sharp increase in SME's going into external administration since late January (mainly VAs, as the winding up actions have only just really started for 2016).
Beyond this, when results have either been good, or have exceeded expectations or look positive going forward, companies have typically pre-announced without the fanfare of there being any trading halt or suspension. Similarly some companies such as BHP and RIO, even when the news hasn't been that good have also move quickly to pre-announce. Companies however that have been under stress or are distressed in some way have typically held on for much longer before either then announcing or going into a trading halt, suspension or otherwise. Others still, when they have recognised that something needs to be sorted have gone into a voluntary suspension. Shine is an example of this. Rarely however has a company gone into a suspension in the lead-up to its interim or annual results with this being the only reason.
Previously, SGH has gone into a halt on several occasions before announcing its results (usually, final results) as associated with the results announcement, there has been some other corporate activity also in play (for example, a capital raising, a strategic placement and /or new business acquisitions). Illustrations of these can be found back from the period 2009 through circa 2011 or indeed 2012. Examples here included the acquisitions of Keddies and of Trilby Misso and the first forays into the UK market.
As for a cross illustration of the current circumstances, there are none. The suspension therefore has everything to do with the interim results and with the very strong possibility that what is going to be announced will be material in nature. Indeed, to justify a suspension or TH, the impact would need to be price sensitive /material.
Likely then, what's going to be reported in the interim results will be more significant than what most are presently imagining which coupled with the abandonment of guidance, the -ve operating cashflow disclosure and the failure to update year end (2015) operating cashflow during January.
I'm therefore inclined of the view that with the results being announced significant financial adjustments will also be made, the major restructuring that I have been echoing about will be announced, and likely a revised, renewed or extended facility provided, with significant changes being made including as to amount, term, interest and repayment obligation.
As for a capital raising, I have long argued that this hasn't been necessary provided that the restructuring etc was done, but then again they've been taking their time to do anything to date, the results might now be more significant than previously thought, and the banks (spooked by Arrium, etc) may want to see less, not greater exposure, even though they will likely still stay there in support of the business. So, a CR cannot be ruled out of the equation. Even an Arrium styled CR which would potentially be extremely dilutive to shareholders.
Of course, this could all turn out wrong. They could announce record results, record profits, record dividends, etc, etc. But if they were to do so, then they would have pre-announced this ages ago. Indeed, if the news were going to be good, even bad but better than the worst expectations out there, they would already have pre-announced this. They haven't. So, it's not going to be that good, if indeed good at all. That's my summation of it.
Shine (reviewing, updating and revising the WIP, ARs, etc), Arrium (further finance at high cost obtained coupled with a heavily dilutive underwritten CR), RIO (cutting office expenses, salaries, etc, undertaking OPEX reduction exercise), BHP (cutting dividends as well as future expectations of these) and Bluescope (heavily restructuring and making it work) are 5 comparative examples here.
SGH Price at posting:
83.0¢ Sentiment: Hold Disclosure: Not Held
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