Intelligent Investor

Things just keep getting worse for the world’s first listed law firm After promising an update in January on its 2016 first half operating cash flow, Slater & Gordon (ASX:SGH) recently demurred. Perhaps the reason for the delay is mundane but on top of the resignation of its long-serving CFO, admission of accounting errors, withdrawal of 2016 guidance, and the replacement of its auditor, I think skepticism is warranted. Even more so after the company confirmed earlier in January that its bankers – led by NAB (ASX:NAB) and Westpac (ASX:WBC) – had appointed McGrathNicol to examine its books. The firm’s half year result will be released later in February but in the meantime let’s discuss a few items that McGrathNicol will be looking at closely. A good rule of thumb is that a company’s liabilities are usually real so I’ll assume Slaters’ $1.6bn in liabilities are too. Note that the $150m+ in ‘off balance-sheet liabilities’ (operating leases and bank guarantees) revealed in the footnotes need to be added to the firm's $720m in borrowings. Read full article here: (VIEW LINK)


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