Does anyone have an opinion, they are willing to share, with respect to the title topic?
You are probably all aware of the following details, but for anyone that isn't...
Over FY's 2014 and 2015 the bulk of the European operations were placed in administration (some were sold, but the bulk were placed in receivership). This removed about $1630 m AUD of asses and about $1420 m AUD of liabilities from SRS's books.
I'm am unsure what proportion of the above were sold, as distinct from going into receivership, but I would be surprised if that sold amounted to anywhere near 20% of the total. If we work with this 20% figure then we can say that $1300m of assets and $1140m of liabilities went into administration. The bulk of the assets were receivables and to a lesser extent inventories. If receivables here have been achieving realisation rates of say 85% and inventories of say 70% (and I have no idea how accurate these realisation rates are) then that will place those entities in administration in the red, to the tune of $50m. Critically, any lowering of these realisation rates will vastly increase the shortfall. For instance, reducing the receivables realisation to 80% will result in a shortfall of over $100m.
These sorts of liabilities (if they are realistic) look rather large in the context of SRS's current total provisions of $1.5m (June 2017), book value of about $130m and NTA of $105m.
And this is before we even talk about any liabilities resulting from employee retrenchments (over $200m of annual wages were put into administration over the period).
The notes in the SRS accounts regarding contingent liabilities do not clarify, I don't think, risks in this regard.
