like watching paint dry., page-6

Intangible write-downs, in and of themselves, seem unlikely to send the share price tumbling to 20cps. However, since write-downs in goodwill would imply a reduction in future cashflows, either by change to the forecast budget, growth assumptions or discount rate, then those underlying factors would be negative - although 20cps seems a big call. That would seem to imply margins more than halving.

The cashflows could well fall a bit without necessarily triggering write-downs. For instance, the company has flagged the possibility that the NZ-based goodwill could be impaired if the contribution were to fall by 8.5% in the coming year. However they state that the Australian business units are unlikely to be impaired on any foreseeable conditions.

On the other hand, it's always possible the new MD could look for a clean slate approach and try to remove some goodwill off the books to improve future ROE... dropping growth forecasts out of the value calculation might work.

My biggest problems with WHG are:

1. The agm presentation was a bit directionless, gave no clear indications on outlook and seemed to place over-emphasis on employee remuneration and getting the right employees.

2. This seemed to go hand in hand with the new (and relatively young) M.D. getting a much bigger base-salary than his predecessor ($750k) as well as very generous bonus component (up to 100% of base for achieving stretch targets in the short term) and long term performance shares worth at least $1.4m if the share price makes it above $1.40 by mid 2014. Given where the share price came from before the financial crisis, it wouldn't seem too much of a stretch for it to head back there.

3. The ongoing repayment of Macquarie Bank convertible notes makes no sense on the basis of information presented to shareholders. There seems little reason to want to avoid conversion at prices above $1 by paying them back prematurely, particularly given the favourable interest rates currently applied.

Overall, I'd want to see signs the new MD has what it takes to be worth his salary. I'd like to see more openness with shareholders and a feeling that they are being consistent in what is said. For now, there is just the lingering impression that things aren't quite right here. However, it could still add up to a great turnaround story should they prove able to smarten up performance.