like watching paint dry., page-8

Morley

Excellent post TU from me.

I was attracted to WHG by the cashflow of the business, but i now also see the high intangibles on the balance sheet combined with the low ROE as a real negative.

Its possibly another example of acquisition gone wrong.

240m of intangible and a ROE of 7% is a complete mismatch. It shows that the intangibles represent overpayment for past acquisitions more than any genuine 'assets' that contributed to the performance of the business.

Hard to find a business that produces a better looking cashflow statement than WHG, cash conversion is excellent and maintenance capex very low.

However declining earnings and ROE can only eventually lead to a writedown of the intangibles. The bulk of the intangibles relates to Bus. Services in Australia(130m), this business pod is performing better than the other two, but I would see a writedown from the NZ side of the business as increasingly likely.

Does Lombard have the fix? ie can he reinstall growth into the business?