Way worse? I find that somewhat surprising. The Balance Sheet now shows -ve net assets. That is, >100% of equity funds have been wiped out.
Cash is down to $56m against Payables of $430m, so there is evidence there of SGH stretching out trade terms in order to preserve cash.
Going forward, note 1.2 now admits that they cannot repay those facilities which otherwise will be falling due in May 2018. Indeed, the Note goes further than this in saying that "there is some risk that (SGH) may not meet minimum cash balances specified in the SFA". They are already very close to breaching this minimum threshold which is likely pegged at 1x required payroll + lease payments for the month (ie: ~$35 - 40m).
The support of the banks is now so significant that, with nil facility capacity, a rapidly shrinking cash pile, minimalist "normalised CF generation (of $7m), even payment of the daily bills is now likely having to be cleared with the bankers.
Some might say that there are some green shots of recovery sprouting out there. Perhaps they are right but right now, SGH's future is about to be measured in 3 ways:
1) by the banks;
2) by the rgeulator /ASIC; and
3) by the legal regulators.
With the banks, it is quite clear that the 2018 part facility maturity date no longer applies. This has all now been brought forward to 27/5/17. That is, if a satisfactory recapitalistaion plan has not been agreed to by this date, then the entire SFA, meaning 100% of "the borrowings under the SFA may become due and payable within a further 14 days of this date". SGH's prepared notes then go on to bluntly state: "The Group will not have sufficient free cash flow to pay interest and repay the facilities in May 2018, or earlier".
This is the first time that SGH has stated /suggested that they may not now even be able to pay interest going forward. The banks being told that they may not get repaid their facility values, nor interest, is such that the alarm bells will likely today be ringing across the banking syndicate. Certainly, the banks will not and have not extended /granted any new facilities, so there is absolutely nothing left there to shore the Company up against any rogue attacks by trade creditors (who were owed collectively $430m at Dec31, and are now still owed that amount or higher, as at today's date).
Words of warning have also been given towards the class actions being mounted, namely that there will be nothing left of the carcass to pick over (not even the entrails), except for the insurance policies in place. Trouble is, unless the recapitalisation (which is now critical rather than being a must have) is sufficient to also cover against the trade creditors and the risk of an adverse CA decision, SGH will have multiple, repeating, bumps, hurdles and IED days ahead of it.
To therefore suggest that the Company is in the green, is sprouting the first seeds of recovery, or can survive this, belies the fact the recapitalisation must effectively address the $738m (FX adjusted) owed in facilities, the $430m owed in trade creditors and an unknown amount, on a contingency risk basis, in relation to the CA. That's likely to mean a required recapitalisation amount that (if proceeded with) will dilutet shareholders into oblivion.
Make no mistake about this, the trainwreck that SGH has become is still being led by 2 figures who have retained their places on the board, have made no apologies for any of this, and are completely oblivious to the damage that they are causing to their shareholders, their staff, their trade suppliers and to the legal profession overall.
Beyond the significant material uncertainty that now challenges SGH is the fact that ASIC is actually now investigating possible breaches of the Victorian Crimes Act, so it just gets better and better for them.
All of this though will likely pale into insignificance particularly given the myriad of legal regulators that SGH has to comply with. Receivers have been appointed to firms in the past (not by the banks but by the legal regulator, such as the LSC here in Victoria, headed up by McGarvie whose wife is connected to SGH (The Australian, 18/3/2016):
==>
http://www.theaustralian.com.au/bus...e/news-story/3dbe454f00fefe1c16cb30b650c98f50
The position therefore is such that every single day forward will indeed be a new day, but just exactly whether or not it will be good, bad or indifferent will be a challenge to most, if not all. The next few months are not going to be nice within SGH itself, let alone for any of its shareholders, whilst the rest of the profession will be waiting on with baited breath for how this might all affect them, as well.
Certainly however if SGH were taking this seriously, both Skippen (especially) and Grech (likely) would have gone today. Instead, it looks like that either O'Donnell said "enough's enough" or was pushed out the exit. Either way, for so long as Skippen remains about the place, the damage that keeps on being cause will keep on giving. This is now very much a week by week proposition, if not indeed a twice weekly or more proposition.
When they had the chance, they didn't cut anywhere near hard enough and now, with revenue falling >32% (they didn't forewarn or pre-disclose about this on the 16th) it's only getting worse, not better.
I'm intending on looking more deeply at the numbers, later, but for now its off to several meetings.
