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SGH

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54.5¢ slater & gordon limited

Intelligent Investor on SGH, page-52

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1,775 Posts.

169

07/03/16

10:19

Post #: 17203960
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Originally posted by MazC ↑

Jimk lets see..
1. Quindell shorters were foaming at the mouth and rubbing hands together when sgh bought the business. An easy target.
2. Gothem report publicly sparked the doubts and shorts piled in.
3. Grech had a weak cfo who could not handle this situation.
4. Grech, bod and IR were not proactive and had no experience in handling this situation.
5. A combination of factors came down on them including loss of Swinton, problems with Medco, threat of regulation change and also insurers bucking against settling of NIHL. Also, I believe NIHL needed a lot more milling and sorting than anticipated which meant more money being plugged in and slower resolution.
6. New cfo Houghton needed time to get up to speed so Grech was left hanging while Houghton looked over the books.
7. ASIC were working to change wip to 70% success and so it became obvious guidance was not going to be met.
8. Houghton said look... Since the first half is all doom and gloom and the share price is already smashed, we will take this opportunity to price everything into this half and set ourselves up for less tax payable, future surprise to the upside and a new base to work from including possible refreshed bank facility/ loan agreements. We'll look like idiots for now, but all these one off write downs and one off costs will be over with and we can move forward from there.
9. Grech is tough he can handle the short term embarrassment and take the blame.
10. In actual fact sgs was cash positive. Apart from NIHL which sucked 24 mil out. So how can we say it's a dog when in actual fact it looks pretty good to me. Once the NIHL money comes in, and the 300 staff are no longer needed, then the true value of SGS can be seen.
So.. In my view it was poor communication from the company and a long period of time where nothing could be said while ASIC and Houghton and banks looked at numbers, by which time the share price has dropped so much from fear of the worst. Fear of the unknown.
In the end, I believe most of the drop was driven by the period of silence and fear. Houghton has taken advantage of that to strip the books. He will look like a hero soon and Grech will remain humble having overseen the whole tiring saga.
Soon, sgh will enjoy large market share in the UK. Books will be kept well, cost cutting will continue and the company can do what it does best - provide excellence in legal service.
It should all make sense in H2.

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"we will take this opportunity to price everything into this half and set ourselves up for less tax payable, future surprise to the upside and a new base to work from". Exactly.

SGH Price at posting: 40.5¢ Sentiment: Buy Disclosure: Held
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