RE: RE: RE: goodwill exceeds market cap Much of the detail came from listening to earnings calls, which can be found here. Jack Shevel is not shy about telling stakeholders where the problems are/ have been (at least to some degree), and he specifically mentions the under performance at BW (although did not mention BW suspension). I haven't followed up on why Sanjeev was suspended due to time constraints; if you get some info please send it this way.
Basic Google searches come up with an array of positive & negative responses to BW surgery performance. I have read a number of posts claiming Sanjeev left large scaring, etc, and I imagine only a few bad outcomes will do much damage to a center that specializes in aesthetic surgery. With that said, if they rebrand BW as Centric, it may help wipe away past negative outcomes. Another consideration is how much BW means to Centric going forward. I think I underestimated the vision behind Centric, and if the company executes then BW may be an insignificant issue going forward.
As for future write downs, I don't see any other outcome if the company decides to cut its losers. Unless IFRS has a different method than GAAP of accounting for write downs, management will have to look at the future benefit of goodwill vs the current book value. If I buy companies A, B, & C, each consisting of 1/3 GW, and then I decide to cut A then there is no value left in that 1/3 portion of goodwill, and hence a write down. Obviously there are other issues to consider such as 1) I think GW is analyzed per division so if you have 3 operations in 1 division and the other 2 of those 3 are doing very well it's possible that the calculation of future benefits will be high enough as to warrant no write down even if you scrap one of the 3 operations, and 2) if Centric can sell the bad division vs scrapping it there may be less of/ no write down depending on the price. Don't quote me here, I think this is the general way write downs are analyzed but talking to an accountant may be a good idea.
A write down here may not be a terrible thing here however. Obviously the stock is in the toilet, there is more work to do, and if management can kill some of that GW now ROA in the future will be dramatically enhanced. And keep in mind that this business is has low capex requirements.
So to close, here is a quick update on my thoughts about Centric. I originally thought this company was very likely a bust. On the surface you see subpar surgery at BW, acquisition of methadone clinics, struggles to find good CEO, huge GW balance with low (basically no) good assets like land to cushion, etc. But after reading more about mgmt and listening to the webcasted investor day presentation (it was on Oct 23 and if you haven't yet I highly suggest you listen to it) I think Centric has massive potential. The company is gaining substantial ground through Canada, is potentially riding under the wings of a long-term tail wind, and is slowly putting in place a team that can support the model.
My two main questions are 1) can mgmt pull this off- I think they can 2) if they can, where do shareholders fit in the puzzle- this is hard to determine because one must forecast what the company needs, financing wise, in order to operate & grow, and how this financing will affect shareholders. Centric already breached covenants and they don't have much wiggle room for mishaps. But we know mishaps are likely. In addition, the company continues to look for new growth via acquisitions and plans to implement lots of info tech. Where will they get the funds? Additional bought deals at this price will be a huge punch in the face to current shareholders. Mgmt has commented on doing more all equity acquisitions, which will obviously cause additional dilution. They have also commented on partnering with insurance or pensions. What will that do to current shareholders? So overall, lots of potential for Centric to win, but will shareholders win along side... At current prices I would like to see top management start buying.
Here is a link to a nice write up on the Co.
Pleas share any thoughts, info, etc that you come up with.
Cheers