Ann: FY17 Half Year Results Announcement Date, page-95

This is good , the more people push this the less the board of directors can get away with, but change wont happen until the board feels the pressure. John is lovely, I had a half hour chat with him today and he has advised me the Executive of the Board has received my email. I have asked, nay demanded that the Board:
1) keep provisioning constant, and only change it once they can sight and advise on, an official review ( actuarial preferred)
2) Only review goodwill for the company as a whole, and not decrease one component separate from the underlying significant increase in goodwill from the company derivable from the profit
3) Stop knee jerking profit and smooth it out. I have challenged their actions have ( intentional or otherwise) which have reduced the P/E marker and put off actual profit and made it look like the company zig zags ( i.e is unstable) when its looks more like its Board " Discretion" causing this
4) Address the SP by buying Shares on market
5) Stop treating an ASX entity as if it was a PTY LTD business. Everything they're doing is as I see it technically legal ( and encouraged by ASIC.) However I do not believe they will ever be able to convince shareholders pushing all of this profit into future years is in their " best interest" and the first burden of proof for them will be explaining the share price and its deviation from true value.

There appears to be over $20M of OVER, OVER, OVER, OVER , OVER Provisioning sitting on the accounts. There's another $5M ( a lot more but a simple reversal will do) that could be released following a "test" of goodwill based on market standards ( and/or acquisition methodology.)

Shareholders need to FORCE the board to release this profit and value the company accordingly.

This Ocean liner is almost set, its halfway through H2 and could not change course if it tried. So what do we know and what so we need to assume and what can we expect from H2.

A) Billable hours will go up , They may will exceed $75M most probably and they have historically converted 28-30% of Billable hours to profit. This $21M + $2-$3M in disbursements is the hard floor of profitability that should have seen SHJ's profits slowly increment rather than Zig Zag. IMO this is how much they actually made H1 even though it was hidden and shown as a miserable $10M

B) Gross WIP should continue UP, if we assume $13M with H1 = H2 then Gross WIP equals $283M

C) Profit will increase but the company most probably wont alter Goodwill

Billable hours UP , WIP UP so this only leaves PROVISIONING. This is the million dollar question. So how is it done ? How does the board determine H2 profit ? For ease lets excluding unbilled work and its NZ claims consultancy.

Starting point $270M WIP at 21.1% equals $213M NET WIP to start off H2

$75m New Work + $283M GROSS WIP = $358M GROSS Work Completed but not Paid. Now what provisioning will the board apply this Half ????????????

Existing 21.1% This assumes the ridiculously unsubstantiated provision is maintained.
$358M X 79.9% = $286M ( minus $213M ) is $73M Revenue
Profit margin of 28-30% on $73M Revenue equals $21M plus $3M ( disbursements, etc)
Total EBIT $24M NET 16.8M = 9.8 EPS equals 4c Dividend.
Net Assets increase by $10M to $200M

Midpoint between prospectus and Existing 18% . This assumes the Board responds to pressure and start tacking back provisioning to what it sold the company at. This is what shareholders must demand as a minimum.
$358M X 82% = $293M ( minus $213M) is $80.5M Revenue
Profit margin of 28-30% on $73M Revenue equals $21M
Profit margin of 100% on 7.5M Revenue equals $7.5M
TOTAL $28.5M plus $3M ( disbursements, etc)
Total EBIT $31.5M NET $22.05M = 12.7cEPS equals 5c Dividend.
Net Assets increase by $13M to $203M

Prospectus 14.5% . This is the Board realises they need to get back to the level it sold the company at unless they can explain the deviation using actuarial support.
$358M x 85.5% = $306M ( minus $213M) is $93M Revenue
Profit margin of 28-30% on $73M Revenue equals $21M
Profit margin of 100% on 20M Revenue equals $20M plus $3M ( disbursements, etc)
Total EBIT $44M NET $30.8M = 17.8cEPS equals 7c Dividend.
Net Assets increase by $18M to $208M

Peer 9% .This is the Board adapting the same provisions as its peers, for a very very similar book. Audited by the same Auditors ( EY). This is also the level at which the prospectus indicated was their former carrying position based on empirical evidence.
$358M X 91% = $325M ( minus $213M) is $112M Revenue
Profit margin of 28-30% on $73M Revenue equals $21M
Profit margin of 100% on 39M Revenue equals $39M plus $3M ( disbursements, etc)
Total EBIT $63M NET $44.1M = 25.5cEPS equals 10c Dividend.
Net Assets increase by $26M to $216M


Personally I don't need to get back to prospectus in one go , but if SHJ hold this above 18% then without supporting evidenced advised to the market you can assume they're playing with the numbers. As such everyone needs to ring up or bombard Simon with demands for him to SHOW the supporting evidence , Advise of the MATERIAL change or make its way back to where it all started at 14.5% only 1000 days ago and release the ACTUAL profits to the people he now works for.

OR

BUYBACK THE COMPANY AT FAIR VALUE of > $250M.