Ann: CFO Appointment, page-19

Version:1.0 StartHTML:000000245 EndHTML:000148766 StartFragment:000148400 EndFragment:000148646 StartSelection:000148400 EndSelection:000148646 SourceURL:https://hotcopper.com.au/threads/ann-cfo-appointment.3700335/page-15?get_post=true SLATER & GORDON LIMITED (ASX:SGH) - Ann: CFO Appointment, 27410403, page-15 | HotCopper Forum

1. .................you have to be able to work out what they are up to, how and why are they presenting the company in the way they do, this requires a good understanding of how the company operates and what it does etc which is harder than just reading the books..................
   ................Nick - I always go straight to the cash flow statements - it's well worth understanding these and what to look for because even these are now prepared in ways intended to mislead. As a 'for instance' and not relevant to SGH, "purchased intangibles" is a good one to look out for. It means expenditure that has been taken to the balance sheet instead of the P&L account, the implication being that such expenditure has "long term value". My experience is that not much of it ever does so profits get overstated.
   Broadly speaking, over a representative period, recorded profits should result in cash generation that bears some resemblance to the level of profits stated. I ignored my own: "avoid this like the plague" benchmarks when I saw shorters tearing into SGH, taking the price from $8 to less than $1 in no time at all. I didn't put enough effort onto understanding why SGH was so over-geared, even before it raised and borrowed all the money it did to buy Quindell's PSD for a billion or whatever.
   I'm now as sure as I can be that previously reported profits didn't exist.
   Don't really want to discuss it - I've put it down to experience and have learned from my mistake: don't touch something that doesn't stack up in your own mind and certainly don't take any notice of people who are screaming 'buy', based on a share price having fallen off a cliff. In SGH's case, its share price should always have been at ground level because it wasn't making the profits it said it was - the dividends fooled a lot no doubt.
   AG & Co to me were and always will be 'business pygmies'. Way out of their depth. You already know why I think the PSD was acquired. When you start going down that route, you can't get off it - there's no stopping. Acquisition after acquisition, the next one always having to be bigger. PSD was the wrong choice; the attraction was its size. It had huge structural issues that were way beyond the pygmies' ability to manage, let alone bury the sins of the past in.
   As an aside, I'm not quite sure why Anchorage et al seem to think WTG (I have no financial interest in it) should pay them a billion, when half the crash was caused by the UK Chancellor's decisions about the PI industry and the other half by the inability of the pygmies to manage a sweet shop, let alone an international law organisation with all the problems SGH had.
   I'm a bit embarrassed I included so many "5 cents soon" comments at the foot of my posts over a long period (after I'd woken up and got out - apologies to those who may have been influenced by my original optimism about SGH's recovery). As they say in the north of England (where I'm pleased to report I don't live): "there's now't so queer as folk"; fancy thinking SGH is worth 7.5 cents in current circumstances.
   all imo/dyor