I do not like to see much goodwill in a balance sheet per se,...

I do not like to see much goodwill in a balance sheet per se, and secondly, it usually springs from acquisitions, which I also do not like. I hold SGH in the belief that management are going to hold back on further acquisitions in favour of organic growth - or so they said. If management focus on optimising the current business, we should see ROE, EPS and dividends improve - that's what I am banking on, and it may take a while to wobble into reality, and it may not do so if management fails.

Most of the wobbliness will, I think, flow from accounting policy, rather than the underlying business. For instance, amortising goodwill and being more conservative in respect to provisions, mainly in respect to the value of WIP.

I bought at $1.68 in October 2010, so SGH has neither been a disaster nor a bonanza. I hold, watch and wait. In theory, SGH should be a good business for the following reasons:

1) SGH's business should not be at the mercy of various cyclical downturns and macro-economic swings that impact many other firms listed on the ASX.
2) There is the potential to extend the style of business that works well (e.g., personal injury in Victoria) to other lines of business (e.g., conveyancing and family law) and to extend into other geographic catchment areas.
3) Advertising can be more effective if SGH has a range of services applicable to the target demographic (the Joes and Janes of Australia - now extended to the UK), and if there is national coverage. Unlike top-end law firms servicing big organisations, SGH draws its business from a demographic that only needs a legal service once or twice in a lifetime, and so advertising in the popular media is required to gain brand recognition - something that is difficult for a small localised legal practice to achieve if it is in the Joe-and-Jane business.

It is management that will make or break SGH. The intrinsic dynamics of this style of business are sound. I would be loath to recommend anybody to either buy or sell SGH.