Dot Joining - the Jock way, page-5

Recent dot joining.

1. AG got the samurai out , like it says in the literature on Turnarounds .
2. 1 is good because AG led the balance sheet shape and gearing ratios to OMG picture
3. Seems underlying SGS had more prunes than fruit and now cut back.
4. Business transferred from UK Legal to SGS. Makes SGS look worse than I expected.
5. Oz business retreat but to be expected when heading for cash generation.
6. The ability to replicate Oz busieness shape in UK - not proven but remain hopeful.
7. AG didnt answer the question re market share in UK.
8. Had AG had an accountants mindset, he would have rebutted the difficult questions better by pointing at value in w/off WIP and found a form of words which pointed at higher profit margins and cash as a consequence of the write offs. He didnt say so we dont know but I still think that is likely.
9. A prune could eke out 9 fig profits contribution ( EBITDAW) in FY 17. If that is closer to $100m than $200m - it would be poor . If a large slug of that is one off profits from written off WIP - very poor.
10 Then there is NIHL. I remain hopeful that a lot of the portfolio turns to cash and profits - but AG
has left us none the wiser ....I am surprised there wasn't room for pointers. Could be toast but hope not. It is a material issue and uncertainty. ( Wonder what WTG accounts will say about NIHL?)

So actually dot joining hasn't brought about the picture of future underlying ongoing profits yet. Am wondering why picture isn't a bit more clear and guided.

One element which has ensured I am confident there is a good ongoing business comes from the story of the trials and tribulations and recovery of Redde Plc in UK. It is VERY similar to SGS. The market seems to like the Redde story and if Redde can , I presume SGS can.

I have no idea whether the non SGS bits in the UK will come good but I do know it is highly competitive, consolidation seems sensible, No money "oop north" , and No Value in new WIP , so from a balance sheet/financing point of view there is a disincentive in taking any risks.

The real questions are - post mist -

A. can SGH get overall debt below $500m in FY17? It is possible if NIHL comes good
..............if NIHL does not come good the probability of dilution is a lot greater.
B. can SGS fire on all cylinders like Redde after the samurai and culture change treatment? Possible.
C. Can SGH grow. Yes.
D. Is this like a normal Turnaround. Yes so far. Is it all good? ...never is. Misty.
E. Should SGH complete the take over of QPP and break it up/sell bits, pocket a pile of dosh/fix debt ratios and nurture telematics?
It is a good question , but AG made it clear at SGS deal time he wasn't interested in car telematics data management service. If there is a very high ROCE in a mkt segment about to rocket - why not?

One conclusion is that we wont see the EBITDAW profit levels projected by Edison and Wilson research any time soon. 9 fig profits - yes.

Melissa ( In sweet mode)