Motley Fool article on SGH, page-7

t1obrien

What utter tosh. If businesses did not place value on work in progress then a high % of businesses would be bust. It is nonsense to say WIP has no value. Statistics can prove what value there is where there is an established pattern of business.

Indeed its worse than nonsense. No value in WIP enables the professions to avoid /evade/cheat on tax liabilities. In the USA the corporate lawyers earn stratospheric fees. In the US they have begun to address the tax avoidance issue by insisting WIP is not written down to ludicrous levels.

Edison research calculated that in the year to June 17 EBIT in SGH would reach $314M . SHG ( according to Wilson research are planning to reduce overall case throughput by 10--15% ) That should generate $50/60M cash over a case cycle. NIHL case processing has obviously been delayed by the takeover and office move. QPP used to point to 18-24 month NIHL case cycle - that puts the income stream in June 16-June 17
and on the tin -its BIG. QPP had spent $144M on NIHL. SGS has spent a further $30M . By the time they have finished SGS may have spent $100M. Cash Income and 90% exit of NIHL arena could divy up $300M + and knock a $180M hole net in borrowings leaving a goodly chunky profit. ( I am not saying Edison or Wilson have hit the nail on the head - but their calculations are entirely coherent and conclusions are unlikely to be out by 20%)

SGS ( was QPP PSD) actually has the capability of earning $200M EBIT. Odd it would be if the next 18 months does not see it earning above $150M . It is likely to become that part of SGH wth the highest ROCE and quickest case cycles. It was NOT a disaster purchase. It was brilliant and cheap and time will show that to be the case.

It is very very difficult not to believe there is NO basis for your statements . Lip curling effort to damage SGH. Do you work fro someone trying to accumulate on the cheap or short the shares?

Mel