Copter,
Many are missing the point. They are equating cash flows with inflows. But that's only one side of the equation.
If you look at the AU results according to the Deed of Cross Guarantee (all AU, ex Nowicki), they were flat year on year and have continued that way into F16.
My issue is that there can be certain predictability regarding the inflows from settlements etc but that is not what is really letting SGH down at the moment. So any slippage in timing at all is virtually fatal to SGH going forward.
They do not have their expenses under control which are rising at an unsustainable pace (even allowing for differences on account of new acquisitions etc).
Even so called new premises' leases have been positive only on account of their rent free periods etc.
Salaries and employee expenses have not been tackled and continue to grow at rates well in excess of community standards. They have been paying CBD rates for suburban performances. Just one example of this was the instance of a suburban practitioner moving over to them in early 2015 except that whereas pay at 75 base plus benefits, super etc was the suburban norm, this quickly became 100+ Plus benefits, super etc in an SGH suburban setting. Who can compete with 3+ PQE experience brig paid at that sort of rate (effectively a near 140) effective employment cost once add ons are applied, etc.
So, planning on the timing /certainty of inflows comes virtually to very little if you do not have your expenses under proper or effective control.
The banking syndicate is onto this as is Millar and PWC. Simply put, for SGH to survive, they require the support of their bankers. For this banking support to be continued with, they need to cut their costs heavily (very heavily indeed).
So, in return for that banking support and in order to provide sufficient headroom to account for any timing differences /variations in cash collection (including slowdowns, miscalculated outcomes, and less successful results), the banking syndicate will demand a sharp reduction in OPEX (hence in real headline costs). To do this, that means cutting discretionary spending, heavily reducing their social media profile, consolidating premises, cutting staff and vetting /jettisoning average to marginal cases. Expect therefore with any announcement to the market for a serious cost economy drive to be started and for a number of staff to be let go. To date, they have never done this. Instead they have acquired and expanded whilst letting out the waist. No Jenny Craig. No going to the gym. No exercising discipline in the face of the opportunities faced. It's therefore just a question of who the banking syndicate have in mind for the role of Al Dunlop.
SGH Price at posting:
67.0¢ Sentiment: Sell Disclosure: Not Held
