Ann: Half year results, management changes and guidance, page-25

NTA includes Goodwill?

By definition, goodwill isn’t a tangible asset at all.  It’s the difference between the purchase price of a business and the fair value of the assets acquired.  Hence for the acquisition of a dental practice that would the difference in what was paid and the fair value of the fixed assets at the practice, debtors/cash if applicable less any liabilities that came across.

I would suggest that anyone looking at the accounts of SIL have more than a cursory look at the prospectus and annual accounts given the operating model.  Given that the vendors have phantom equity in their practices and SIL is no place to do a buy back and has very little cash reserves plus their working capital facility is at some risk given their need to seek a waiver on covenants (likely their interest cover ratio with their poor results will be missing by miles) then you have to wonder if the dentists are motivated at all.

The vendor of the big practice who signed up just after IPO was in the Top 20 shareholders not long afterwards so must be wondering why he sold and reinvested a good portion of proceeds into SIL as the value of those proceeds is essentially worth pennies.  He will have unenviable position of having sold control and title to the practice and having very little to show for it and may not get any further instalments of purchase price or have any ability to shed himself of the 40% phantom equity.  Worse if SIL does not get a lifeline in working capital then it could be running out of cash to pay the bills.

This is a train wreck - there is no other way to describe it.  I’ve been surprised from the start that this doomed venture ever got off the ground.