Slater Gordon Holdings - SGH

[dingoNZ]

Slater Gordon - SGH are one of the two legal firms listed on the ASX, the other being Shine Lawyers (SHJ). SGH is a leading consumer legal firm in Aus with a growing presence in the UK market (currently estimated to be 6x the Aus market potential). They employ 1,300 people currently and have 66 Aus offices and 13 UK offices.

Really like the look of these guys and see huge growth potential. They have made a name for themselves in personal grievance cases. Their growth since listing in 2007 has been impressive to say the least and with so much potential growth.

Anyone else a holder, what are your thoughts?

http://www.slatergordon.com.au/files/editor_upload/file/investors/fy14%20results%20presentation%20final.pdf

[blocker3]

Hi dingoNZ

I'm a holder of this stock.

It has done well for me. A real growth stock on the ASX.

Other growth stocks I own are GXL and GEM. Do take a look at the 2 year graph's of these stocks also.

http://www.asx.com.au/asxpdf/20140811/pdf/42rdch0s41pkf3.pdf

http://www.asx.com.au/asxpdf/20140821/pdf/42rmgkm674zc0q.pdf


Cheers
Blocker3

[dingoNZ]

Thanks Blake, I'll have a read over the day. GXL I've heard a lot about and will follow them post announcement from Friday.

[Westboy]

Initially I did not like this biz as cashflow was not great against reported revenues but have changed my mind, I think this one will double in the next few years, they have some serious growth opps IMHO!

[dingoNZ]

They have some very strong momentum at the moment, i'll be looking to topup in the bigger dips as they occur. Very happy with their potential and performance.

[blocker3]

They have some very strong momentum at the moment, i'll be looking to topup in the bigger dips as they occur. Very happy with their potential and performance.

I could not wait for the dip's dingoNZ.

Put my toes into the water and topped up today.

Cheers
Blocker3

[dingoNZ]

I'll probably be buying a few more next week Blocker3, seriously impressed with these guys.


Also Shine (SHJ) up 8.5% for the day - very solid!

[dingoNZ]

Latest piece of research out (dated 16/12/14) - https://media.slatergordon.com.au/141215_taking_share.pdf

My model spits out a price of $7.56, looking like a positive year, we shall see come 10 February when the interim results are released.

Our recent trip to the UK has alleviated the near term risks we previously highlighted around Slaters’ consolidation of the UK personal injury (“PI”) market. Multi-track legal fees have not declined and insolvencies continue to increase, giving us confidence that Slaters’ market share can double to ~10% by FY17. Despite the Australian PI business appearing to have gone ex-growth, we expect a positive performance from the UK and General Law to more than offset any weakness at the FY15 result. We upgrade our Eps forecasts by 5-6% p.a and our recommendation to BUY.

[blocker3]

Latest piece of research out (dated 16/12/14) - https://media.slatergordon.com.au/141215_taking_share.pdf

My model spits out a price of $7.56, looking like a positive year, we shall see come 10 February when the interim results are released.

Our recent trip to the UK has alleviated the near term risks we previously highlighted around Slaters’ consolidation of the UK personal injury (“PI”) market. Multi-track legal fees have not declined and insolvencies continue to increase, giving us confidence that Slaters’ market share can double to ~10% by FY17. Despite the Australian PI business appearing to have gone ex-growth, we expect a positive performance from the UK and General Law to more than offset any weakness at the FY15 result. We upgrade our Eps forecasts by 5-6% p.a and our recommendation to BUY.

Lots of good information dingoNZ. Thank you

Not much activity on this chat forum about Slater & Gordon . Its a good stock to have in my eyes.

Disc : I own SHJ also.

Cheers

[dingoNZ]

UK management shares out of escrow today, have seen some selling pressure as a result. Good opportunity to topup (IMO) before the result in Feb.

[blocker3]

UK management shares out of escrow today, have seen some selling pressure as a result. Good opportunity to topup (IMO) before the result in Feb.

I agree ,topup time.

[NZSilver]

http://www.ft.com/intl/cms/s/0/a906c89a-a250-11e4-aba2-00144feab7de.html#axzz3PbXbCb3m

[dingoNZ]

Cheers - just adding to one of their many acquisitions :)

Results out in a couple of weeks I expect it to head up towards the $7 mark

[dingoNZ]

Another all time high today @ $6.78, gearing up for results out next Tuesday :)

[blocker3]

Another all time high today @ $6.78, gearing up for results out next Tuesday :)

Fingers crossed for tomorrow dingoNZ.

DISC.. own as well

[dingoNZ]

Expecting some disclosure on the deal with Quindell, I'm also expecting a new high tomorrow..

More concerned about the details of the Quindell situation above everything else :)

[blocker3]

Report for 6 mths Ending Dec 2014

Revenues up 37.6%
Profit up 46.8%
Net Profit up 46.8%

Nothing wrong with that.....

[dingoNZ]

Report for 6 mths Ending Dec 2014

Revenues up 37.6%
Profit up 46.8%
Net Profit up 46.8%

Nothing wrong with that.....


Fantastic result, showing excellent progress in the UK.

Most exiting part in the announcement for me is this - HUGE potential win if they join forces, massive market share and portfolio if they proceed

Slater and Gordon also recently announced that it had entered into exclusivity arrangements with Quindell plc ("Quindell"), in respect of due diligence relating to the possible acquisition of operating assets of Quindell. These discussions are ongoing and remain preliminary and incomplete.
The purpose of the due diligence process is to assess whether the assets are a strategic fit and to determine their fair value for the purposes of any offer to acquire assets being made. The due diligence process may or may not result in an offer being made and any such offer may or may not be accepted by Quindell.
Slater and Gordon is also completing due diligence on a portfolio of Quindell personal injury litigation case files with rights to take a transfer of files over the coming months. This file transaction, if it occurs, will not have a material impact on FY15.

[blocker3]

Fantastic result, showing excellent progress in the UK.

Most exiting part in the announcement for me is this - HUGE potential win if they join forces, massive market share and portfolio if they proceed

Slater and Gordon also recently announced that it had entered into exclusivity arrangements with Quindell plc ("Quindell"), in respect of due diligence relating to the possible acquisition of operating assets of Quindell. These discussions are ongoing and remain preliminary and incomplete.
The purpose of the due diligence process is to assess whether the assets are a strategic fit and to determine their fair value for the purposes of any offer to acquire assets being made. The due diligence process may or may not result in an offer being made and any such offer may or may not be accepted by Quindell.
Slater and Gordon is also completing due diligence on a portfolio of Quindell personal injury litigation case files with rights to take a transfer of files over the coming months. This file transaction, if it occurs, will not have a material impact on FY15.

WOW..... dingoNZ, you have done great research on this company. Well done. Thank You for the information.
I will be purchasing more shares of this company on the uptrend.
Cheers

[dingoNZ]

WOW..... dingoNZ, you have done great research on this company. Well done. Thank You for the information.
I will be purchasing more shares of this company on the uptrend.
Cheers


I'm a huge fan of these guys, excellent management, still massive growth going forward both natural (cracking into QLD for example) and via acquisitions.

Give it another year or so and the share price will be trading double what it is today, IMHO :t_up:

[blocker3]

I'm a huge fan of these guys, excellent management, still massive growth going forward both natural (cracking into QLD for example) and via acquisitions.

Give it another year or so and the share price will be trading double what it is today, IMHO :t_up:


IYHO dingoNZ, Is $6.83 a BUY still today or should I wait for the dust to settle?

[dingoNZ]

IYHO dingoNZ, Is $6.83 a BUY still today or should I wait for the dust to settle?


Not too sure, I picked up a few extra yesterday in anticipation, but in the scheme of things a few cents here and there is negligible if you're a LT holder and in for the end prize :)

[NZSilver]

Yeh agree with you dingo. Blocker if you are interested I would pick up a few and then a few more when price drops (ie if i wanted $5000 worth id buy 2500 and then 2500 later - its a good way to make yourself feel better if price does drop). id say there ill be a chance to get some at a lower price in the future. In saying all of that LT id say it will be higher in 5 years then it is now.

[blocker3]

Not too sure, I picked up a few extra yesterday in anticipation, but in the scheme of things a few cents here and there is negligible if you're a LT holder and in for the end prize :)


Yeh agree with you dingo. Blocker if you are interested I would pick up a few and then a few more when price drops (ie if i wanted $5000 worth id buy 2500 and then 2500 later - its a good way to make yourself feel better if price does drop). id say there ill be a chance to get some at a lower price in the future. In saying all of that LT id say it will be higher in 5 years then it is now.

Thanks for the information dingoNZ and NZ Silver.

PS: I am a long term holder unless SGH runs off the rails in the future.
Also to cover my bets I do have a few SHJ shares also

[blocker3]

Just came across this link for another point of view.

http://www.fool.com.au/2015/02/10/slater-gordon-limited-reports-strong-results-should-you-buy/

[blocker3]

WOW now $7.13 up 52c . 7.9%

It has passed your $7.00 dingoNZ

Great stuff . Will let it settle before topping up.

[dingoNZ]

WOW now $7.13 up 52c . 7.9%

It has passed your $7.00 dingoNZ

Great stuff . Will let it settle before topping up.


Solid surge this morning too, likely international players wanting to get in following the result and some very positive articles in the media (in Aus and UK).

Happy holding chaps :)

[blocker3]

At $7.55 today I will be back later for a top up.

[dingoNZ]

Sorry guys - been as bit busy for an update!


Aussies close in on Quindell deal

Ben Harrington Published: 15 March 2015

AUSTRALIA’S largest law firm is on the verge of sealing a takeover of Quindell’s legal services division that could eventually value the unit at up to £900m.

City sources said Quindell’s board is on the verge of recommending a £640m cash offer from Slater & Gordon, which is listed on the Australian stock market.

Quindell’s legal services division provides solicitors and barristers to insurance companies when they receive claims from motor accidents.

In addition to the £640m up-front price, Slater & Gordon is expected to pay Quindell 50% of receipts from noise-induced hearing loss cases.

The receipts are expected to pay Quindell between £100m and £300m over the next three years, said one source. Slater & Gordon is understood to have completed due diligence on Quindell and both companies could announce a deal by March 23, when the Australian group’s “exclusivity” agreement runs out. Quindell and Slater & Gordon declined to comment.

If Slater & Gordon completes the takeover bid, it would mark a remarkable turnaround in fortunes for AIM-listed Quindell, whose travails have gripped the City over the past 18 months.

Its shares soared — at one stage it was on course to join the FTSE 250 — then slumped after an attack by a short-seller. A series of gaffes then led to the departure of chief executive Rob Terry in November. On Friday, Quindell’s shares closed at 98½p, giving the company a market value http://images.intellitxt.com/ast/adTypes/icon1.png (http://www.lse.co.uk/ShareChat.asp?ShareTicker=QPP&share=quindell) of £433m.

Based of this, should SGH proceed, they may need to raise up to $700m AUD (about 45% of their current market cap, depending on how the deal would be structured). The market initially reacted negatively to this when it was 'leaked' seen the price hammered down 9% as low as $6.64 before rebounding back to down ~1.5%. I see this as a massive positive for SGH if it passes all due diligence and they decide to proceed. We shall see in the next week or two!

Keep watching guys, exciting times ahead!

[dingoNZ]

Update: expecting a market announcement either today or tomorrow, this is a MASSIVE win for SGH and their UK market share, currently 5%, post deal >10% and make their growth channels significantly stronger.

Will be interesting to see what price the equity is raised at (I assume a premium)..

Slater & Gordon carves up in UK with Quindell acquisition (http://www.afr.com/street-talk/slater--gordon-carves-up-in-uk-with-quindell-acquisition-20150329-1ma5qf)



Mar 30 2015 at 12:15 AM
Updated Mar 30 2015 at 12:15 AM
Edited by Sarah Thompson, Anthony Macdonald and Jake Mitchell

ASX-listed legal eagle Slater & Gordon is poised to acquire the professional services division of British insurance claims processor Quindell, lending sources told Street Talk.
A deal has been struck at roughly $1.2 billion or seven times earnings before interest, tax, depreciation and amortisation. The purchase will be predominantly funded by an $890 million equity raising, managed by Citigroup and Macquarie Capital.
Sources said an agreement was close to being finalised on Sunday night with the transaction set to be announced as early as Monday morning
Quindell, which is listed on London's Alternative Investment Market, has been in exclusive negotiations with Slater & Gordon since January. As part of the transaction's due diligence, it's understood over 8000 case files were reviewed by a team of 70 lawyers over six weeks.
Analysts said the acquisition, which brings the No.1 and No.3 UK players together, was likely to be more than 30 per cent earnings accretive. It will double Slater & Gordon's UK market share and propel the company into the ASX-100, potentially putting it on the radar of large cap fund managers.
Slater & Gordon shareholders are known to be supportive of the purchase. As part of the deal, the two parties are understood to have agreed to an innovative earn-out agreement around Quindell's troubled noise-induced hearing loss unit.
Since becoming the world's first publicly listed law firm in 2007, Slater & Gordon has grown significantly via acquisitions.
It has grown personal injury claims market share in Australia to 26 per cent from 8 per cent since listing. In the UK, which is five times the size of the Australian market, it has grown to a forecast 5 per cent share this year from nothing in fiscal year 2011.
The UK accounted for nearly half of Slater & Gordon's $418.5 million revenue last year.
Quindell's professional services division is the largest personal injury legal business in the UK, with an estimated 7 per cent slice of the market.
Citi and Greenhill Australia advised Slater & Gordon.

[dingoNZ]

:t_up:Announced this morning: Huge news for these guys, looking like a very bright future ahead.

FY15 Outlook:
Slater and Gordon confirms its FY15 guidance for existing operations:
- Total revenue of A$500 million (excluding announced UK acquisitions)
- Normalised EBITDA margin of 23 – 24%
- Cash from operations (as % NPAT) of >70%

Key Entitlement Offer Details:
- Fully underwritten 2 for 3 Entitlement Offer to raise approximately A$890 million
- Offer price of A$6.37 per new share (the “Offer Price”)
- The institutional component of the Entitlement Offer (“Institutional Entitlement Offer”) is accelerated

The Offer Price of A$6.37 per new share represents:
- A 10.0% discount to the theoretical ex-rights price (“TERP”)12; and
- A 15.6% discount to last closing price of $7.55

[NZSilver]

Thanks for that dingo, yeh looks good to me. Do you know how many more shares interms of. $$ they are offering to retail?

[NZSilver]

I see it now rights issue -

From MF

After months of speculation, Australia’s leading personal injury (PI) law firm, Slater & Gordon Limited (ASX: SGH), has announced it will acquire the Professional Services Division (PSD) of the UK firm, Quindell PLC.

The deal, worth $1,225 million, will see Slater & Gordon become the largest PI firm in the UK, jumping up from its rank at number three.

Quindell is believed to control 7% of the approximate $4.81 billion UK market.

In the past year, FTSE-listed shares of Quindell PLC have fallen over 76% as the group is subject to a probe into potentially poor accounting practices.

To fund the landmark deal for the PSD, Slater & Gordon will take on $375 million of bank debt and undertake an $890 million two-for-three pro rata accelerated renounceable entitlement offer.

That means, shareholders on the company’s registry as of 7pm (Melbourne time) on Thursday 2 April 2015, will have the right to buy two new shares for every three they already hold at a price of $6.37.

Slater & Gordon shares closed at $7.55 on Friday.

The deal is subject to a majority vote from Quindell shareholders, which will be held on 17 April 2015. If successful, the deal is expected to close in May 2015.

What the deal will do for Slater & Gordon

Slater & Gordon say the deal features a number of significant benefits, including:

Positioning it as the UK’s leading PI law firm
Providing channels for new business whilst complementing and extending current processes and infrastructure
Upside potential from a revival of the PSD business
30% earnings per share accretive
Potentially enabling the company for entry into the S&P/ASX 100 (Index: ^AXTO) (ASX: XTO)
In an ASX announcement this morning, Slater & Gordon’s Managing Director Andrew Grech said, “The acquisition is a transformational opportunity, and will allow Slater & Gordon to further penetrate the highly fragmented £2.5bn UK personal injury market… The combination of Slater & Gordon and PSD creates the number one personal injury law firm group in the UK…It further diversifies our sources of legal work, broadening access to claims management companies, insurers and insurance brokers.”

Following the acquisition, Slater and Gordon is expected to have gearing of between 30% and 40%, with net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) of 1.9 times.

Should you buy Slater & Gordon shares?

This is a landmark deal for Slater & Gordon and its most brazen. Whilst the firm said it has reviewed 8,000 case files whilst conducting its due diligence, a number of teething issues could result from such a large acquisition over time.

Indeed, despite Slater & Gordon confirming its 2015 financial year revenue and cash flow guidance, investors should remain cautiously optimistic about the deal.

As always, before committing to take up of your offer for new shares, it’s important to maintain prudent levels of diversification within your portfolio and refrain from being heavily exposed to any one sector or company.

[dingoNZ]

Insto placement completed, shortfall price set @ $7.50, expect this puppy to go well north today. Strong insto support is always good!

[dingoNZ]

Quindell - QDD have approved the takeover of their Professional Services Division (PSD), meaning the ~₤637m acquisition will proceed pending meeting the regulatory requirements.

This is huge news for SGH, this means they will go from ~4% market share to approximately ~12% in the UK, making their the largest market player in their field. Post the consolidation of PSD, Slater & Gordon will have annual revenue over AUD$1.1 billion and EBIT close to A$200 million. It will have offices in more than 20 UK cities and employ around 5,000 people globally. Since 2007 earnings per share will have increased from 13 cents to about 60 cents, an impressive annual growth rate of 19%.

Prior to acquiring Quindell’s PSD, Slater & Gordon traded at a valuation of 17x earnings. It is now trading at only 13x earnings due to the large issue of new shares and integration risk.

Here is an article written by Milford on their history, very good piece if you've got time - http://milfordasset.com/slater-gordon-from-a-small-melbourne-firm-to-united-kingdom-powerhouse/

[NZSilver]

Hopefully the quality management can integrate the very large acquisition successfully - I'm hopeful. (Fully paid for my rights) nb price dropping quickly towards right price... I think it's a winner long term. Might be time to top up even. Markets seem to be trading downwards

[NZSilver]

There ya go - below rights price....

[dingoNZ]

There ya go - below rights price....


UBS and NAB, the shorters club... I'm not to concerned, I'll happily topup along the way.

[NZSilver]

Serious uncertainty here. So below $4!!!!

[mark100]

I think this statement in the AFR says it all

"It's not a good look when a global law firm that profits off the mistakes of other corporates and relies on a reputation for accuracy admits to some serious accounting errors stretching back years."

[babymonster]

oh well, i was brave yesterday and last friday...

[winner69]

Ouch - margin calls

From The Australian: Market sources told The Australian a number of the firm’s lawyers and other employees had borrowed against their holdings to participate in the offer, which was priced at $6.37 a share for retail investors. Institutional investors, which included the company’s senior management, purchased shares at $7.50. Those shares have fallen 42 per cent and 51 per cent respectively since their issues.

[dingoNZ]

Ouch - margin calls

From The Australian: Market sources told The Australian a number of the firm’s lawyers and other employees had borrowed against their holdings to participate in the offer, which was priced at $6.37 a share for retail investors. Institutional investors, which included the company’s senior management, purchased shares at $7.50. Those shares have fallen 42 per cent and 51 per cent respectively since their issues.


I'm in the red now, ave price is $4.57, I am still firm on the stock and think the results will speak for themselves in due course. Hurting a heck of a lot atm however.

[babymonster]

As long as there is no more bad news, we should see it back to mid 4 easily

[Buffett Jr]

As long as there is no more bad news, we should see it back to mid 4 easily

Hope so, bought in quite heavily yesterday.

I was really scratching my head on why the market reacted so badly to the news. I've spent the last two weeks researching all about this company, the future of it, the complications with the recent UK purchase, etc and think the market has severely over-reacted.

Should be able to achieve my 15% p/a return that I'm wanting for long term with this company.

[babymonster]

Not so good today. The support seems to be around this level

[Joshuatree]

3 Articles in The BULL re SGH ; tried to put them on here but this blimen iMac played up so I'm not doing it again but the articles are free. Very int .Up re 12c on Friday ; but way below even the 30DMA.

[Joshuatree]

Ok heres two:t_up:

Market over-reaction to Slater & Gordon (http://www.thebull.com.au/about_us/about+us.html)

More (http://www.thebull.com.au/premium/a/54663-18-share-tips---13-july-2015.html)

[PSE]

Sorry for long term holders but nothing like a 50% shareprice fall to attract my interest.
I am sniffing a bit, trying to suss it out.
Errors sounds suspicious and makes me nervous I always assume that errors are a euphemism for fraud.
On the other hand it is cheap on analyst forecasts of future earnings as it digests this huge acquisition.

[PSE]

Seems fairly innocent, I don't see what has has happened that would justify the shareprice fall.

[PSE]

A relevant question is what happened to the previous owners of Quindell and will it happen again to the new owners at SGH.

http://gothamcityresearch.com/2014/04/22/quindell-plc-a-country-club-built-on-quicksand/

[PSE]

Nup, I am happy to leave this one alone given the history at Swindell. These shortsellers seem to have a sense of humour, they called it a lemon and now they are telling people to stay clear.
Fair enough.

http://www.independent.co.uk/news/business/comment/theres-not-much-comic-about-quindells-recent-behaviour-10145126.html

[PSE]

Looking at the Craigs research they think that the outcome of the review of accounting practices will be that SGH has already reconciled Quindell's dodgy books. If this is correct the company is a bargain but I am not in a position to evaluate.
Given the history here I think holders should at least be careful, I don't want to talk them out of a good investment but ..
I like to read what the short sellers say in their colourful language, they tend to exaggerate as they want to make shareholders freak out. I also think they do the market a favour by revealing companies in trouble.
I would be interested in holders views of Quindell, those that have dug a bit deeper?

[winner69]

If you were brave and quick of the mark a fortune to be made after the 20% early plunge today

Seems very prone to the rumour mill

[PSE]

Not surprising is it Winner, with the stench of fraud in the air no-one can tell if it is a bargain or a ripoff.
They found one cockroach in the kitchen, maybe naive to think there are no more.

[DarkHorse]

Shine corporation is another law firm growing by acquisition which has fallen 25% in the last few months seemingly in sympathy with SGH - without major risk or "bad smells" surrounding it. Would be a safer play on a sector which does have potential.
When my brother became CEO of a law firm he oversaw a huge increase in profits by modernising structures - and particularly by increasing the number of staff solicitors per partner...the old partners just needed a bit of a push out of their comfort zones - ie motivation to bring in more clients.

[DarkHorse]

I don't hold SGH (or Shine) so haven't looked at their accounting issues closely. But I do hold IMF, which is a somewhat different animal (and definitely the dog of my otherwise healthy ST stock picks ^^). Media reports suggest the issues all relate to accounting for VAT in the UK. I'd appreciate if you could elaborate on or point me to links regarding the work in progress issue KW :).

[PSE]

I don't hold SGH (or Shine) so haven't looked at their accounting issues closely. But I do hold IMF, which is a somewhat different animal (and definitely the dog of my otherwise healthy ST stock picks ^^). Media reports suggest the issues all relate to accounting for VAT in the UK. I'd appreciate if you could elaborate on or point me to links regarding the work in progress issue KW :).

Thanks for sharing your thoughts Darkhorse.
As I understand it the Work In Progress issue relates to cashflow and current assets, in practice many cases are settled rather than going through to completion.
I am not an accountant but this seems less of an issue and shouldn't tar the whole sector with the same brush as SGH. It's either overly aggressive or conservative accounting but not fraudulent.
SGH is a different beast altogether because of Quindell.
As mentioned in my previous comments/links this company was a golf club 5 years ago which grew by acquisition into a heap of unrelated businesses. The shareprice bubble was popped by a short seller calling itself Gotham City Research, pointing out the emperor had no clothes.
Quindell has more serious problems than WIP accounting, just check out one of their annual reports and it sticks out like dogs bollocks.
Gotham City Research now says the company that SGH paid $1.2 billion for is worth nothing, Mac Bank is sticking to its guns saying Quindell was a savvy buy.
These are the cockroaches in the SGH kitchen and if they are driving down the price of otherwise healthy companies that's just a good opportunity to buy if you are a value investor.

[DarkHorse]

It goes back to the use of those "aggressive accounting policies" that have been referred to - which translated from lawyer speak means "we are not sure its legal, but it hasnt been tested in court yet, so its not technically illegal"
http://ftalphaville.ft.com/2014/07/14/1897222/feeling-the-wip-and-recognising-the-law-at-quindell/

http://ftalphaville.ft.com/2015/04/21/2126042/what-is-slater-gordon/

http://www.afr.com/brand/chanticleer/lessons-from-slater--gordons-trials-and-tribulations-20150721-gihdba

Basically just Google Slater and Gordon or Quindell and Work in Progress Accounting - you'll get the gist of it. And all the listed law firms do this - so if one gets pinged for it, all will have to change their accounting methods, especially if the accounting bodies feel the need to legislate and regulate the treatment of WIP in order to avoid abuses.

Thanks for the info KW. I think however that PSE's on the right track. Boosting the value of WIP might boost profits in the first year, but to the extent that over-estimated fee receipts have to be written off in the subsequent period I would think the effect will be short-term - true performance will reveal itself over time (as long as the accounts are not plain fraudulent). We just need to look at performance over several years and focus on cashflow as much as profits, which of course is good practice in analysing any company. (And why I've gone off TFS).

[ratkin]

Massive swings today, opened high but now beaten back

[ratkin]

Couldnt resist had a nibble at 3.06 after watching it open and go over 3.50 then back to 3.02. First time owner

[dingoNZ]

I've averaged down to over the past 8 weeks and now have this as by far the biggest position in my portfolio. I have a lot of faith in management and firmly believe the ASIC findings will conclude no wrong doing. I was excited to see them proactively change their policies in todays announcement.

Long time hold and happy to see the the growth continue. The valuation will catch up to the fundamentals eventually. However as a great man once said markets can stay irrational longer than you can stay solvent.

I plan on holding for the long term :)

[PSE]

You should know that there is no problem not have "faith" in management or "believe" that things will work out alright if you are doubling down and have a lot riding on it. Just because the price has fallen doesn't mean the company is cheap.
Best to start from a position of cynicism and rely on evidence to change your mind.

[NZSilver]

Well who's been buying at these levels? I bought a year or so ago and put a bit more in during the cap raise. I've sold a lot of stock lately with market turmoil to preserve capital however I'm still holding onto my relatively small Sgh holding. Seems like audited results out on 30sep and not sure when asci review comes through. It could go either way so it makes it speculative as could be a decent jump or fall in sp. currently trading on Pe 7,

[ratkin]

Well who's been buying at these levels? I bought a year or so ago and put a bit more in during the cap raise. I've sold a lot of stock lately with market turmoil to preserve capital however I'm still holding onto my relatively small Sgh holding. Seems like audited results out on 30sep and not sure when asci review comes through. It could go either way so it makes it speculative as could be a decent jump or fall in sp. currently trading on Pe 7,

. Company been all over british media during last week, talking on sky news UK about the Volkswagon debacle, if they can navigate the next few hurdles there could be some decent upside

[dobby41]

What's up with the big jump up and now the big drop down again?

[Buffett Jr]

What's up with the big jump up and now the big drop down again?

I'm scratching my head at this too. I liked what the latest reports/releases had to say so I'm topping up my holding today after the 19% drop yesterday.

Love me a pre Xmas sale in my favourite shop (ASX).

[ratkin]

Problem is they starting to look like a deceiving bunch of slippery lawyers. No surprise there i guess
There should be some sort of enquiry (again) Market not believing a word they say now

[Joshuatree]

Sure is out of favour guys, a contrarian buy? Well craigs think so, maintaining a buy with reduced T/P of $3.50 from ,phew $5, cash earnings guidance reaffirmed, and asoft 1H. Expecting s/p to remain under pressure in the short term , investor sentiment negative etc, but with the stock trading @ 6.4x yr fwd earnings and 5% yield its a buy.PE est for 2016 4.8 17 4.3

[Buffett Jr]

Problem is they starting to look like a deceiving bunch of slippery lawyers. No surprise there i guess
There should be some sort of enquiry (again) Market not believing a word they say now

Reminds me of the time my old man did this in 1963.

https://www.intelligentinvestor.com.au/salad-oil-making-warren-buffett

[Buffett Jr]

I'm looking at the bigger picture of all this.

If I'm a customer wanting legal services in Australia or the UK. Say I have relationship, employment or personal injury issues that I need a lawyer for. I hop onto Google, or through word of mouth hear about Slater and Gordon based lawyers.

Do I care that their annual report showed some mis-guiding figures? Do I care that their share price is volatile?

No, I don't at all. I don't consider this when I'm going to buy products and/or services. I'll still pay my lawyers fee, Slater and Gordon will clip the ticket and their profits will continue to come in.

Sure, there is market uncertainty and I'm not over the moon that my investments into this company are currently 18% down on the purchase price. However, come February when they put out their half yearly report, I'm expecting good things. When they put out their annual report next year, I expect the majority of people to have forgotten about this "scandal" and bid the price up in line with the expected doubling of EPS (if analysts forecasts are to be believed).

I've found that the best investment decisions I've made in the past have always been when the company is going through some sort of scandal, bad news, etc.

[h2so4]

Well I care.

These guys are lawyers. Ya know people you can trust. Their credibility has been smashed and it wont be regained easily.

[Buffett Jr]

Well I care.

These guys are lawyers. Ya know people you can trust. Their credibility has been smashed and it wont be regained easily.


Yes, but you are a stock investor and have read annual reports on Slater and Gordon.

The average man on the street who just wants some basic legal advice because he has been in a car crash is dealing with one lawyer from his local office, not the CFO/board of directors or the accounting/finance team in the head office.

Example would be somewhere I shop regularly, Pak n Save. Say if the Pak n Save accounting department cooked the books and had a scandal that instead of me getting 1x litre in my milk, they were only giving me 900mls. I would initially be pretty unhappy about it, but I'd still continue to shop at Pak n Save because they are local, everything else I bought there I was happy with and the people at the check out gave me good enough service and I get a good price.

[stoploss]

I'm looking at the bigger picture of all this.

If I'm a customer wanting legal services in Australia or the UK. Say I have relationship, employment or personal injury issues that I need a lawyer for. I hop onto Google, or through word of mouth hear about Slater and Gordon based lawyers.

Do I care that their annual report showed some mis-guiding figures? Do I care that their share price is volatile?

No, I don't at all. I don't consider this when I'm going to buy products and/or services. I'll still pay my lawyers fee, Slater and Gordon will clip the ticket and their profits will continue to come in.

Sure, there is market uncertainty and I'm not over the moon that my investments into this company are currently 18% down on the purchase price. However, come February when they put out their half yearly report, I'm expecting good things. When they put out their annual report next year, I expect the majority of people to have forgotten about this "scandal" and bid the price up in line with the expected doubling of EPS (if analysts forecasts are to be believed).

I've found that the best investment decisions I've made in the past have always been when the company is going through some sort of scandal, bad news, etc.

B Jr, I'm not too sure about your comparison ....Amex had 60 % of the world travellers Cheques market and was market leader in Credit Cards.
There are a heap of lawyers out there with good reputations , are you saying SGH have a near monopoly on legal services ? are SGH renowned as #1 legal service in the World ....
Milford have/had a chunk of this so I hope for my Kiwisaver sake you are right but I'd rather be in something else .

[Buffett Jr]

Take for example an acquisition that they made in the past financial year; Cox West Lawyers.

http://coxwest.com.au/

https://www.slatergordon.com.au/media-centre/media-releases/penrith-law-firm-cox-west-lawyers-joins-slater-and-gordon

If my Dad went there for his legal services and thought they were good, would I automatically not go there because they are now associated with untrustworthy Slater and Gordon?

No, I'd more than likely still go there because the directors John Cox and Adam West were good lawyers.

The association to Slater and Gordon for me wouldn't be something of bother. Especially if I was someone who didn't invest into stocks and know previously of Slater and Gordon.

[Buffett Jr]

B Jr, I'm not too sure about your comparison ....Amex had 60 % of the world travellers Cheques market and was market leader in Credit Cards.
There are a heap of lawyers out there with good reputations , are you saying SGH have a near monopoly on legal services ? are SGH renowned as #1 legal service in the World ....
Milford have/had a chunk of this so I hope for my Kiwisaver sake you are right but I'd rather be in something else .

My argument is more that your local average customer on the street is dealing with the individual lawyer from the local law firm and more than likely doesn't read Slater and Gordon annual reports before getting basic legal advice.

[h2so4]

Yes, but you are a stock investor and have read annual reports on Slater and Gordon.

The average man on the street who just wants some basic legal advice because he has been in a car crash is dealing with one lawyer from his local office, not the CFO/board of directors or the accounting/finance team in the head office.

Example would be somewhere I shop regularly, Pak n Save. Say if the Pak n Save accounting department cooked the books and had a scandal that instead of me getting 1x litre in my milk, they were only giving me 900mls. I would initially be pretty unhappy about it, but I'd still continue to shop at Pak n Save because they are local, everything else I bought there I was happy with and the people at the check out gave me good enough service and I get a good price.

Well I wouldn't buy baby formula from pak n save that's for sure.

[Joshuatree]

Slater & Gordon needs six years of cash flow in six months to hit guidance (https://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwipyoSog6rJAhUBwJQKHa0bDnwQqQIIHDAA&url=http%3A%2F%2Fwww.afr.com%2Fmarkets%2Fequity-markets%2Fwhy-slater--gordon-needs-six-years-of-cashflow-in-six-months-to-hit-guidance-20151122-gl55lf&usg=AFQjCNHXMCwcRyqCiI5xUCG1opzyMNNdpw&sig2=jRWxw-_cfENDUiiQzV6j7g)

[Buffett Jr]

Slater & Gordon needs six years of cash flow in six months to hit guidance (https://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwipyoSog6rJAhUBwJQKHa0bDnwQqQIIHDAA&url=http%3A%2F%2Fwww.afr.com%2Fmarkets%2Fequity-markets%2Fwhy-slater--gordon-needs-six-years-of-cashflow-in-six-months-to-hit-guidance-20151122-gl55lf&usg=AFQjCNHXMCwcRyqCiI5xUCG1opzyMNNdpw&sig2=jRWxw-_cfENDUiiQzV6j7g)

Can't view it as I'm not a subscriber.

Agree to disagree I think. Will be interesting to see how this one plays out though.

[Joshuatree]

Its free Buffett

In a tightly packed hotel conference room in the middle of a scorching Sydney day, angry shareholders of Slater & Gordon rounded on predatory short-sellers for decimating their investment in the ASX-listed law firm. (http://www.afr.com/business/legal/slater--gordon-chair-slams-shortsellers-as-market-doubts-guidance-20151120-gl3vdr)
Chairman John Skippen couldn't help but nod his head in emphatic agreement. But managing director Andrew Grech told them it's time to move on and focus on performance.
He's right.
The big issue now among shareholders and short-sellers is not about the state of its bookkeeping, or even the outcome of a regulatory probe that has yet to conclude.

Slater & Gordon's share price the past 52 weeks.
The Slater & Gordon story is now largely about trust in the earnings guidance and whether management can meet its ambitious, full-year target even as its cash flow heads south in a hurry.
Before its annual meeting Slater & Gordon reiterated full-year guidance of $205 million EBITAW (special Slaters earnings before interest, tax, depreciation and amortisation figure that includes net movement in "work in progress"), but at the same time it warned investors its first-half group operating cash flow would be negative about $30 million to $40 million.
That spooked shareholders because the company is asking them to believe in a dramatic "hockey-stick" pick-up in the group's second-half earnings.
LENDERS ON EDGE

RELATED QUOTES

SGH (http://www.afr.com/markets/equity-markets/why-slater--gordon-needs-six-years-of-cashflow-in-six-months-to-hit-guidance-20151122-gl55lf#)


SLATER & G FPO (SGH)$2.000.000.00%volume 0value 0.0



5 YEARS (http://www.afr.com/markets/equity-markets/why-slater--gordon-needs-six-years-of-cashflow-in-six-months-to-hit-guidance-20151122-gl55lf#quotes-five-years)
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Last updated: Wed Nov 25 2015 - 10:54:13 am NZDT



VIEW FULL QUOTE (http://tools.afr.com/research-tools/quotes-news/?code=SGH)
Company ProfileA consumer law firm with key practices in asbestos litigation, personal injuries litigation, commercial litigation, wills, probate and estate litigation, industrial and employment law, family law and advisory services.
http://www.slatergordon.com.au (http://www.slatergordon.com.au/)
Diversified Consumer Services (253020)
ASIC 097297400



ASX Announcements



20/11/15
Results of Meeting (http://asxcomnewspdfs.fairfaxmedia.com.au/2015/11/20/01687428-488777049.pdf)



20/11/15
Annual General Meeting Presentation to Shareholders (http://asxcomnewspdfs.fairfaxmedia.com.au/2015/11/20/01687265-2079826605.pdf)



20/11/15
Managing Director's Address to Shareholders (http://asxcomnewspdfs.fairfaxmedia.com.au/2015/11/20/01687258-751679861.pdf)



20/11/15
Chairman's Address to Shareholders (http://asxcomnewspdfs.fairfaxmedia.com.au/2015/11/20/01687248-36142313.pdf)



19/11/15
Appendix 3B (http://asxcomnewspdfs.fairfaxmedia.com.au/2015/11/19/01686928-1171337917.pdf)



VIEW ALL ANNOUNCEMENTS (http://tools.afr.com/research-tools/quotes-news/announcements.aspx?code=SGH)




Failure to do so, some fear, could have its lenders on edge, which could help explain why the company is sticking to its target.
The weight of money is expressing scepticism that Slater & Gordon can pull it off. The share price plunged 12.1 per cent on Friday to $2.68, unwinding what had been a solid rise in the stock, to $3.31 from $2.80 over the week. The share price fall is almost as though the company did downgrade its numbers. On Monday, shortly after the opening, Slater & Gordon shares were down 3.4 per cent at $2.59
The full-year guidance has always appeared a tad optimistic, based on past performance. As The (http://www.afr.com/business/legal/slater--gordon-chair-slams-shortsellers-as-market-doubts-guidance-20151120-gl3vdr)Australian Financial Review wrote at the time of the full-year results (http://www.afr.com/business/legal/slater--gordons-andrew-grech-yet-to-convince-analysts-20150831-gjbpn8), Deutsche Bank numbers suggested group EBITDA must more than double to $305 million from $122 million to hit the number, before adjusting $100 million for the contribution of "work in progress".
And now with negative cash flow flagged, analysts are expressing more serious doubts.


UBS "questioned" Slater & Gordon's ability to meet its full-year guidance, which "implies an incredibly strong second half".
How strong? CLSA's Oscar Oberg said it would require six years of gross cash flow in the second half to achieve its full-year earnings guidance – assuming a full-year "gross cash flow/EBITAW" target of 100 per cent.
FAIR GAMEThe dreaded "c" word – covenants – is fair game now for analysts. They are questioning whether an inability to deliver the second-half recovery could make its bank covenants relevant.


CLSA said the prospect of negative cash flow and the falling currency could increase Slater & Gordon's net debt to earnings to about 2.8 times by December, making it "critical" for the company to turn around its cash flow in the second half "to reduce possible pressure on its debt covenants" (the company's bank covenants are not disclosed but the broker assumed that a net debt to earnings level of three times might begin to "concern" lenders).
Slater & Gordon management seemed to raise the issue itself. In its annual meeting preamble it told shareholders it was "taking a range of actions to mitigate" the risks of further cash flow declines, while expressing confidence it will meet full-year guidance and remain "in compliance with our obligation to financiers".
The company already surprised investors when it told them at the full-year results the gearing ratio had exceeded its board's soft target of 30 to 40 per cent and if cash flow didn't improve it would rise further.
But Grech confidently fended off questions from institutional and individual investors at the annual meeting.
His message was that while "some ground was lost that couldn't be claimed back", the issues that had contributed to a weak first half were temporary, not permanent. Some were a result of teething problems with the British government's new "Medco" platform, while Slater and Gordon's own efforts to built an integrated platform to process cases also had an impact.
DOESN'T SPOILBut he assuredly told investors: "This type of inventory doesn't spoil". They know the case portfolio, which is predominantly in predictable personal injury claims. The firm would only target claims within a year of an incident to reduce friction with insurers and speed up payments, he said.
His ability to win over shareholders was on full display on Friday, as he explained in great detail why the firm "hadn't bitten off more than they can chew" with its $1.3 billion Quindell acquisition in Britain. (http://www.afr.com/business/slater-and-gordons-quindell-deal-a-country-club-built-on-quicksand-20150827-gj9k49)
In the medium term, Slater & Gordon's success depends on the firm delivering on its plan. In the short term, however, an investment in the stock is now, even more than ever, an expression of in faith in management's guidance.
That means another few months until loyal shareholders can know if their trust is vindicated by a second-half earnings blitz.
Until then they can take comfort from the fact that, as Grech has pointed out, the group has not taken the confirmation lightly. His confidence has to be well founded.








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[winner69]

Slater & Gordon needs six years of cash flow in six months to hit guidance (https://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwipyoSog6rJAhUBwJQKHa0bDnwQqQIIHDAA&url=http%3A%2F%2Fwww.afr.com%2Fmarkets%2Fequity-markets%2Fwhy-slater--gordon-needs-six-years-of-cashflow-in-six-months-to-hit-guidance-20151122-gl55lf&usg=AFQjCNHXMCwcRyqCiI5xUCG1opzyMNNdpw&sig2=jRWxw-_cfENDUiiQzV6j7g)

Good article

One look at that picture of the MD would put me off to start with .....but then such looking guys probably have the wherewithal to make things happen

Meeting guidance - I get the sense of where's there a will a way, ie guidance will be met

[Buffett Jr]

Thanks for the article. Not sure why it wasn't working before.

I haven't been doing much work today! I've been researching the pants off SGH.

[Joshuatree]

So what do you think of the article Buffett, sometimes they have an agenda and are way off, appreciate your opinion.

[Buffett Jr]

So what do you think of the article Buffett, sometimes they have an agenda and are way off, appreciate your opinion.

The article has definitely rattled my confidence in the company.

I think it has some very important points, stating that the 30-40million cash deficit could be a big problem if it doesn't get turned around within the next 6-12 months. Since purchasing the UK business, they did take on a lot more debt to do so. I remember reading a book on Warren Buffett's purchasing criteria and he doesn't like to buy anything with debt:equity above 1.5 (e.g. 150million debt, 100million equity). SGH are hovering around this.

However, the company has stated that this is due to 'one offs' that aren't likely to re-occur going forward. Their forecasts for the full year and the fact that they aren't likely to make more acquisitions in the next 12 months and their focus is on reducing debt and making their current businesses more profitable is great news to my ears.

However, still in the back of my mind is that people will still continue to use lawyers. Technology won't change this fact. If I want a sale/purchase agreement, or to use an employment dispute lawyer, etc I'm likely to continue going to a company like SGH.

I originally bought in around the $2.60 mark and then increased my holding yesterday at $1.98.

I don't really see the company going bankrupt or into liquidation because of this. I genuinely think that the company with their consolidating and streamlining efforts since making the UK acquisition will come out a pretty decent company over the next 12-24 months.

A combination of the UK acquisition, the accounting issues and the ASX investigation, not to mention all this talk of short selling over the past few days have definitely caused a lot of fear in the market. I've always been contrarian and the old quote buy when there is blood in the streets I try to live by.

Well, there is definitely a whole lot of it in the streets of SGH, so if there is any time to buy into the company, now is as good of a time as any.

[h2so4]

Why not wait until they are a decent company and then invest?

[Buffett Jr]

Why not wait until they are a decent company and then invest?

Because then the share price will be at a price too high than what I'd be willing to pay.

Buying when everything is rosy generally equates with the share price no longer being cheap.

[winner69]

BuffettJr.....Buffett's purchasing criteria and he doesn't like to buy anything with debt:equity above 1.5 (e.g. 150million debt, 100million equity). SGH are hovering around this.

Should have listened to Dad when he explained that ratio

In round numbers SGH debt $700m Equity $1,400m

So debt/equity 0.5 or as some prefer to use debt/(debt + equity) is 0.3

Wouldn't call it outrageous

I doubt whether your Dad would have ever had considered looking at a company with a 1.5 ratio.

[h2so4]

Because then the share price will be at a price too high than what I'd be willing to pay.

Buying when everything is rosy generally equates with the share price no longer being cheap.

Of course.

[dobby41]

Down to 90.5c.
https://au.finance.yahoo.com/news/slater-gordon-shares-plunge-011918978.html

[h2so4]

Down to 90.5c.
https://au.finance.yahoo.com/news/slater-gordon-shares-plunge-011918978.html

I guess no one believes them.

[Joshuatree]

Thanks dobby. Youch.Hope it comes right for you buffett, def blood on the streets right now with this one. A local broker recently put a buy on it too with a price target above $3.

"Whilst the government's announcement was unexpected, the company believes that the scale and diversity of the Slater Gordon Solutions business in the UK positions it well to deal with the potential impact of any future legislative change," Slater and Gordon said in a statement on Thursday.

[ratkin]

Some amazing moves today, those buying at the bottom have doubled their money in an hour. Well not quite, but some big gains

[stoploss]

The article has definitely rattled my confidence in the company.

I think it has some very important points, stating that the 30-40million cash deficit could be a big problem if it doesn't get turned around within the next 6-12 months. Since purchasing the UK business, they did take on a lot more debt to do so. I remember reading a book on Warren Buffett's purchasing criteria and he doesn't like to buy anything with debt:equity above 1.5 (e.g. 150million debt, 100million equity). SGH are hovering around this.

However, the company has stated that this is due to 'one offs' that aren't likely to re-occur going forward. Their forecasts for the full year and the fact that they aren't likely to make more acquisitions in the next 12 months and their focus is on reducing debt and making their current businesses more profitable is great news to my ears.

However, still in the back of my mind is that people will still continue to use lawyers. Technology won't change this fact. If I want a sale/purchase agreement, or to use an employment dispute lawyer, etc I'm likely to continue going to a company like SGH.

I originally bought in around the $2.60 mark and then increased my holding yesterday at $1.98.

I don't really see the company going bankrupt or into liquidation because of this. I genuinely think that the company with their consolidating and streamlining efforts since making the UK acquisition will come out a pretty decent company over the next 12-24 months.

A combination of the UK acquisition, the accounting issues and the ASX investigation, not to mention all this talk of short selling over the past few days have definitely caused a lot of fear in the market. I've always been contrarian and the old quote buy when there is blood in the streets I try to live by.

Well, there is definitely a whole lot of it in the streets of SGH, so if there is any time to buy into the company, now is as good of a time as any.

Jr, there is a good thread on Sharetrader I think started by KW about never buying in a downtrend . Well worth reading .
It is ok if you are Warren and you can keep buying all the way down until you effectively own the company . However this share can stay irrational and in a downtrend longer than you can stay solvent . Just because it was $ 3.00 does not make it cheap @ 2.00 or even 1.00...... h2s04 was I think pointing to the same thing , wait till all the bad news is out and they are in an uptrend .
There are thousands of stocks in the world , no need to dabble with the ugly ducklings .
I've learned from making the same mistakes myself hence the moniker S/L , you have to set them and get out ......

[bull....]

been in and out this one last few days, just got the bounce sold at 1.26 great trading

[Joshuatree]

How did you do that bull, gen int.Did you lose on the drop and buy back in and recover some or?

[Buffett Jr]

Jr, there is a good thread on Sharetrader I think started by KW about never buying in a downtrend . Well worth reading .
It is ok if you are Warren and you can keep buying all the way down until you effectively own the company . However this share can stay irrational and in a downtrend longer than you can stay solvent . Just because it was $ 3.00 does not make it cheap @ 2.00 or even 1.00...... h2s04 was I think pointing to the same thing , wait till all the bad news is out and they are in an uptrend .
There are thousands of stocks in the world , no need to dabble with the ugly ducklings .
I've learned from making the same mistakes myself hence the moniker S/L , you have to set them and get out ......

It's a good learning curve. I'm only 27 so would rather learn lifelong investing lessons now than when I'm 55 and have a wife and kids to feed.

I still won't be selling though. Give it 12-24 months and I think things will be back on track.

It just isn't much fun reading the business news each day with my largest holding being on the front page, saying it is "tanking"

[bull....]

How did you do that bull, gen int.Did you lose on the drop and buy back in and recover some or?

no i sell short, posted a sell on hotcopper way back amonst all the other loony posts lol buy back today and then long after drop then sell again at 1.26 no more now finish for day to hot

[NZSilver]

Wow, what a ride! proves there is never any guarantees, i did my due diligence on these guys and everything really looked solid. I decided to hold and still do, now the worst performer on my portfolio, it just seems to be one bad bit of news after the other - and it keeps building. Here is a good summation; Scary to think there Mcap is $300 mill, and the acquisition 6 month ago coast $1.2 Billion! Debt very high cf Mcap....

http://www.abc.net.au/news/2015-11-26/questions-over-slater-and-gordons-future-as-share-price-dives/6978296

[NZSilver]

anyone dare to average down? absolute madness or possibly great value... I think a bit of both...

[dobby41]

anyone dare to average down? absolute madness or possibly great value... I think a bit of both...

Contemplating!

[NZSilver]

Contemplating!

This would definitely break the rule of not buying in a downtrend! Seems no one actually know to what level this change in the UK will affect SGH's revenues, but could be potentially a big chunk!

[bull....]

This would definitely break the rule of not buying in a downtrend! Seems no one actually know to what level this change in the UK will affect SGH's revenues, but could be potentially a big chunk!

from afr - RTA account for 90% of the newly aquired slater and gordon business and the regulatory changes will have a significant dent in the companies earnings from 2017.


also you gotta remeber they got heaps of debt to service now 700mil odd i think from the aquisition so reduced earnings in 2017 gonna make it tough

also wouldnt it be ironic if a class action was taken against sgh? being talked about

[h2so4]

....and cashflow negative.

[NZSilver]

....and cashflow negative.

and now 63c

[h2so4]

Oh dear that's silly. There 1.5b in equity in SGH that is $4 per share.....and there is or was $96m sitting in cash or cash equivalents.

[dobby41]

Oh dear that's silly. There 1.5b in equity in SGH that is $4 per share.....and there is or was $96m sitting in cash or cash equivalents.

the cash is the only real equity.
The rest is WIP which may or may not become real cash

[h2so4]

......must be some very nervous panic stricken share holders selling.

[h2so4]

I'll take the cash but their practices must have some value?

[stoploss]

As of 31 Oct Milford Active Growth fund had a holding of 1.32 % of the fund in SGH, hope this balanced out against 2.2 % of the fund in ATM........

I went to a presentation where they said"we normally sell at the first sign of trouble " and words to the effect we have looked at this one and are backing ourselves on this ......

Luckily my Kiwisaver is not the growth fund.

[h2so4]

Oh dear that's silly. There 1.5b in equity in SGH that is $4 per share.....and there is or was $96m sitting in cash or cash equivalents.

Well I purchased a few? I'm not valuing SGH at $4 but I do expect their businesses to continue.

[Buffett Jr]

I'll take the cash but their practices must have some value?

They can always sell back the local law firm back to the directors that they bought it from for multiples of 3-5x EBIT to generate cash. Local law firms are rather stable businesses, many have been operating for decades.

I remember Mohnish Pabrai came across a similar situation with funeral homes.

http://www.barelkarsan.com/2009/09/dhandho-investor-chapter-13.html

[h2so4]

Yes exactly but there is no need to work out a value if you expect the businesses to continue.

Couldn't get the link to work or at least take me to the right place.
Cheers

[Buffett Jr]

I've changed the link. Give the new one a whirl.

[h2so4]

Shares don't zoom up when I buy.
Must have got lucky.

[h2so4]

.......or mispriced.

[mayday]

.......or mispriced.

http://www.fool.com.au/2015/12/01/slater-gordon-limited-share-price-soars-again-after-horror-week/

my target is 1.30 then I will sell mine, what is your target price h2?

[bull....]

after selling out at 1.26 last bounce I brought again at 70c and now out

[Buffett Jr]

http://www.fool.com.au/2015/12/01/slater-gordon-limited-share-price-soars-again-after-horror-week/

my target is 1.30 then I will sell mine, what is your target price h2?

Why $1.30?

[h2so4]

http://www.fool.com.au/2015/12/01/slater-gordon-limited-share-price-soars-again-after-horror-week/

my target is 1.30 then I will sell mine, what is your target price h2?

Don't have one.
My rule book says you have no reason to hold but my gambling instinct says you are onto a winner.
I'll probably pull the plug soon.

[mayday]

Why $1.30?

coz I bought at 0.65, by 2 = $1.30 :D stop-gain target

[NZSilver]

coz I bought at 0.65, by 2 = $1.30 :D stop-gain target

Nice work mayday, she's a traders dream at the moment! big movements and plenty of volume. I'm hoping for it to rise from the ashes, but unfortunately in this case all i have is hope, because both technically and fundamentally its a disaster. Plenty of debt, SGH has a negative cash flow and all this WIP or work in progress is suppose to bring home the bacon, but lets see what management (pack of lawyers) can do......

Hope as an investment thesis usually dosn't end well.

I suppose you bought IQE at 0.35 too!

[h2so4]

What a shocking announcement.

[NZSilver]

What a shocking announcement.

yep SGH is a pretty sick dog! Two stains in my portfolio - SGH and IQE

[h2so4]

yep SGH is a pretty sick dog! Two stains in my portfolio - SGH and IQE
http://www.asx.com.au/asxpdf/20151217/pdf/433w5v0mz00z5b.pdf
There goes guidance.
As my mother used to say,"I wouldn't trust them as far as I could throw them."

[h2so4]

Brokers heading for the doors with downgrades and sell recommendations.

[winner69]

Found this series of articles in alphaville fascinating

http://ftalphaville.ft.com/tag/slater-gordon/

That guy Dan been right all along with Quindell and know SGH

[winner69]

Still trying to see how bad the result is .........voluntary suspension in the meantime

[silverblizzard888]

Still trying to see how bad the result is .........voluntary suspension in the meantime

At these prices any impairment is fine as long as they deliver good cash flows consider the original forecast was 200 plus million, even half of that would make its a very good value stock at these prices. Suspension must be signalling a big write down of the UK business in my opinion, which is very material, though I think thats expected. There will be nothing rosy about the financials if you bought in at a high price, but for the recent buyers its only an upside for them. Managing Director is in UK firing and restructuring and the banks are happy enough for them to keep running with the suggestion they have more room to borrow and even more as the year goes on so I don't see too much more turmoil once the write downs are done and cash flow and profits reduced. The financials are bad for a 2 billion dollar valuation but not likely for a 200 million valuation.

[winner69]

Didn't Greech say that would have negative cash flow of up to $40m for the first half of the year.?

[silverblizzard888]

I don't have a figure but yeah it was hinted first half will be negative, but even with that the full year was expected to be 200 million on prior forecast due to delayed cases and revenue coming in. So even if first half is negative, we can expect a big revenue streaming coming in in the second half.

2 points about the trading suspension:
The impairment will be sizeable and material
They worry about insider information as there are many parties in the review and the stock price has been going up so possible questions asked if it is positive.

[DarkHorse]

Bizzare the extent to which other firms related to the sector have fallen 'in sympathy'. IMF looks ridiculously cheap despite having virtually nothing in common with SGH.

[silverblizzard888]

Bizzare the extent to which other firms related to the sector have fallen 'in sympathy'. IMF looks ridiculously cheap despite having virtually nothing in common with SGH.

Well uncertainty will make anything cheap, but thats because the risk becomes so much higher. SGH and IMF are in a lot of uncertainty regarding what their financials will be like since they haven't been performing as people wanted. The idea of cheap is more opinionated in some sense cause you'd never put you life savings on stocks like this, the risk is too high where the ongoing future of the companies is too uncertain so the compensation is justified for the gains that could be made. Of course if you do enough of your homework and there are high odds that the company survives to fight another day soon enough you are making very good calculated risk and making some good gains. Best to keep emotions out of it, clouds judgement.

[winner69]

Very perceptive man that Mr Greech


“Clearly today’s results are very disappointing,” managing director Andrew Grech said. “In particular the decline in business performance in the UK is of serious concern to all at Slater and Gordon and equally will be of concern to our investors.”

[winner69]

Didn't Greech say that would have negative cash flow of up to $40m for the first half of the year.?

Jeez - operating cash flow $83m negative and investment $26m

Free cash flow negative $109m

Going to be some around 2nd half to get that $200m positive cash flow silverblizzard

[macduffy]

Facing possible class acrion?

http://www.theage.com.au/business/slater--gordon-class-action-almost-certain-maurice-blackburn-says-20160229-gn69df.html

[babymonster]

They are first test will be in April to make the banks happy

[dobby41]

So not really a lot of hope for the company then?

[macduffy]

So not really a lot of hope for the company then?

Here's one view.

http://www.theage.com.au/business/comment-and-analysis/how-slater--gordons-lawyers-lost-958-million-20160229-gn6dhx.html

[winner69]

Jeez - big sell off today and all way down to 31.5

I can see. Baby and silverblizzard backing the truck up at these levels

I'm not brave enough ....yet

[macduffy]

Jeez - big sell off today and all way down to 31.5

I can see. Baby and silverblizzard backing the truck up at these levels

I'm not brave enough ....yet


Don't think I will be - ever!

:ohmy:

[Hectorplains]

Don't think I will be - ever!

:ohmy:

No way I'd touch this now, not even with someone else's barge pole. I plumped for ASH over SGH for a spec play late last year. Ash might have given me fleas, but this thing would've ripped my arm off.

[winner69]

Anybody double their money today?

I didn't

Bit more breathing space for them

[Hectorplains]

http://www.afr.com/brand/chanticleer/slater--gordon-wins-confidence-of-its-banks-with-amended-debt-facility-20160502-gojuy9
"Grech is under pressure to generate enough cash to pay staff and to pay back the banks. Shareholders will be last in the queue. They will not receive dividends for many years to come."

A bit of over excitement, nice for anyone who got in sub 30c. Great opportunity to exit!

[babymonster]

1st time I have stock rallied 100% in a day. Gutted I didn't top up before yesterday anyway paper lost is now half to 36%:(

[Hectorplains]

Debt for equity swap is the word. Massive dilution looming...

[winner69]

Obviously another disappointing announcement today

http://stocknessmonster.com/news-item?S=SGH&E=ASX&N=465089

[Hectorplains]

Obviously another disappointing announcement today

http://stocknessmonster.com/news-item?S=SGH&E=ASX&N=465089

Hard to believe that the share price has held up as well as it has. What a mess.

[winner69]

Seems not going to be much ion this debacle for existing shareholders - even if it survives