On cost of sales/advertising and marketing expense, two items that jumped out in the P&L. The increases in both items are directly attributable to SGS, as stated in the Review of Operations. Advertising and marketing expense I agree will certainly be tightened - you would assume that this would be one of the first areas mgmt would look to constrict. However, how are we to assume that cost of sales as a ratio of services revenue will decrease significantly, or disappear as you say? I may be interpreting this incorrectly, but as cost of sales is associated with services revenue, a 100% reduction in cost of sales would also imply a 100% reduction in services revenue. Improvements are to be expected, but I would hazard that a 20-30% reduction is realistic, if not ambitious.
SGH Price at posting:
67.5¢ Sentiment: Hold Disclosure: Held
