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Slater & Gordon rewarding failure, balance sheet still crocked

By Tom Winnifrith | Saturday 5 November 2016

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

You don't need the brains of Jason Donovan (irony BTW) to see that the purchase of the fraudulent legal assets of Quindell (QPP) by Slater & Gordon (SGH) was a dire error. Surely heads must roll at the Aussie poltroons? Er..no. In fact, with the shares now at A$0.34, down from A$8 at the time of the deal, failure must be rewarded.
Speaking at Slater's AGM, chairman John Skippen stated:

Shareholders have asked me why Andrew Grech is being issued any performance rights at all. At the time of the announcement of Slater & Gordon’s half year results, I told you Andrew Grech had offered his resignation to the board. I said at the time the board’s view was, (and this remains) that Andrew has the skills and experience needed to lead the company through this period of change. It is unlikely that the company would be able to successfully recruit a senior executive with the same mix of skills and industry knowledge. Following the criticism the board has asked shareholders to approve a plan to reward Grech with rights only if he delivers outcomes that are “aligned with shareholder value creation”.

In plain English: having cratered the share price, if Grech manages to claw back some of the monumental value destruction he has delivered he is quids in. Shareholders will still be massively out of pocket but Grech will be like a pig in muck, rolling in it.

As to Grech having the skills and knowledge needed....words fail me. Before S&G bought the Quenron assets the evidence of fraud was there in black and white on these pages and elsewhere. Grech oversaw a due diligence process on cases being acquired which subsequent performance shows to have been flawed. And Grech failed to get Quindell to agree to any contractual clauses that could have allowed S&G to reclaim cash if fraud emerged - which it has. Above all Grech knew Quindell was running on thin air and had to accept whatever offer he made. Had he offered £150 million for its business ( not £647 million) Quindell's banks wouold have forced it to accept.
The wretched Grech is a proven failure who has trainwrecked S&G. The fact that he is being rewarded not fired makes this company uninvestable.

Incidentally at the AGM fessed up that "group cash flow performance remains challenging" and the "liquidity position remains finely balanced". In plain English that means "we still may go bust." That admission also makes this company's shares uninvestable.

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