What are SGH Shares Worth ?, page-3

mike, you talk about the right issues but interpretation is incorrect in my view.

1. EBITDA guidance is greater than $205m, need to add change in WIP to that figure, allowing for the $40m adjustment already flagged EBITDA is likely to come in at $240m and provided no intangible impairment NPAT approx. $145m
2. The limit info provided on 1hFY16 can lead to the wrong conclusion. There is reason to think the negative first half cash is not so much due to low incomings more so higher outgoings reducing current liabilities. The firm commitment to guidance is a strong indicator, the nature of work in the type of business is such that short term (6 month) can be reasonable assured.

3. Goodwill should not be spoken about in a general sense without interpreting the make up of that goodwill. By definition goodwill is simply the excess paid over identified assets valued at fair value. The company have stated that no value was added to NIHL at year report and some other (not quantified) WIP were not valued. This is not because they are worthless as a tangible asset but because it was too early too apply Slater conservative approach to valuing those assets. Following on from that accounting standards permit a reassessment of fair value in the following full reporting period. There is high probability a quantum of goodwill will have converted to cash during FY16 and/or reverted to a fair value WIP

4. Ernst and Young are the auditors, they have audited UK accounts on behalf of Pitcher Partners. Re-valuation of fair value assets is always a possibility for any company. It is no more likely or unlikely for Slater than any other company. I would argue because of sensitivity surrounding Slater accounts FY15 the conservative approach previously applied by Slater and confirmed by their auditors was more robust than would normally be the case for a corporation.

5. regulatory environment tis a big unknown. At this stage it may be prudent to consider whether a government is going to legislate away peoples right to be compensated for damages incurred in wrongs. At a high level that is so remote it is hardly bears thinking about. The consequences for a democratic society are beyond comprehension. It would throw back the UK into the Victorian era and dark satanic mill culture. It isn't going to happen. What will happen I feel is a compromise. There will be a concerted effort by government, insurers and law society to improve the system by weeding out fraud. A large scale efficient operation is better geared to provide that first level of detection than multiple small two-man practices, I would say. This is the basis for often spoken consolidation in the industry.

I agree SGH are not doing a greta job at communicating what is happening considering the share price plunge.

A logical explanation, I feel is: they are hunkering down and getting on with business, said as much on numerous occasions. While it is a lilt nerve-wracking at the end of the day I would prefer a company that is getting on with business to one that keep popping up with defensive comments and flowery presentations trying to convince the masses. The boards reaction smacks of what one might expect from a professional outfit - not get lulled into tittle tattle just getting down to business.