29 February, page-48

Mike

1. When you are growing WIP, ( QPP PSD) it would obviously be cash negative.
2. While I think RT was a fool, business logic which suggests PSD ( excluding HL) has higher Gross margins than SGH still stands.
Cash positive when grown? We shall see. Certainly the whole QPP only had $100m borrowings ( much invoice discounting).
Currie the stand in post RT departure was "comfortable with borrowings"
3. The revised QPP 2013 accounts includes a note stating QPP did not have the capacity to progress the HL claims. Capacity in the note was not defined, but it seems PSD legal light processing may not have had the capability . It was not at the time apparent to shareholders.
4. If the WTG ( Formerly QPP) guidance to shareholders of $80M PAT fro the 52000 cases is near to the mark , and SGH find they have had to inject $110m into WIP , the $40M expected PAT which sticks to SGH will have been cheaply acquired.
5. You would obviously agree that Rose hoisted the flag of new probity, gave an unequivocal promise to shareholders about the size of the cash distribution to QPP shareholders asked to vote through the sale to SGH....then went back on the promise and retained 10% of the cash promised to shareholders (after an assurance subsequent to the EGM vote ) . He did trouser $8m . His choice to opt for near cash accounting would not have been likely had the sale to SGH not concluded. Do you know any large company not in liquidation which has opted for cash accounting? It is unhelpful to shareholders because it keeps the trading picture obscured.
6. You dont need to know that accountancy has fundamental bases ( one of which is consistent acc policy ) to see that KPMG audited the QPP accounts and could not agree the QPP P/L account after cash accounting was adopted. Your reference I had read some time ago . They refer to acquisition issues which are not relevant to SGH shareholders scrutinising the QPP PSD purchase

7. You will forgive me. I am not privy to the tax computation. I am no expert in legal tax computations and it is a few years since I negotiated with HMRC. My solicitor friend is, and his opinions are worth listening to. I asked the board if anyone knew which side kept the tax losses and you (probably?) know well enough that despite asset sales, it could be that one asset might have been a subsidiary full of tax losses. I need no expertise to see that SGH could use the tax losses .

8. In my view Rose sold the family silver and kept the dross.

Actually don't bother forgiving. Keep up the non sequiturs and muck searching. You are moderately good at it. Well done.

Mel