Slater and Gordon has slumped to a first-half loss of almost $1 billion after taking a huge hit on the value of its troubled UK business.
The board turned down managing director Andrew Grech’s offer to resign in the wake of the law firm’s near $1 billion first half loss.
Chairman John Skippen said the company should apologise to shareholders for the steep dive in the value of their holdings, but that Grech remained the right person for the job despite presiding over a $958.3 million first half net loss.
“The board does not believe it is appropriate to change leadership and therefore we have unanimously rejected his resignation,” said Mr Skippen, who added he would not consider his own position while the company was negotiating with its creditor banks.
The loss was due to a one-off goodwill impairment of $876.4 million, most of which related to the UK business it acquired for about $1.3 billion in 2015.
The law firm’s shares hit a new all-time low when they resumed trade on Monday after it unveiled a net loss for the six months to December 31 of $958.3 million.
That was due to a one-off goodwill impairment of $876.4 million, most of which related to the UK business it acquired for about $1.3 billion in 2015.
The total impairment is three times larger than Slater and Gordon’s market capitalisation of $292.5 million.
“Clearly today’s results are very disappointing. 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,” said managing director Andrew Grech, who helped oversee the UK expansion.
“We will therefore be taking a number of necessary and significant steps to improve the operational performance of both the UK business and the broader Slater and Gordon Group.”
The UK business, which includes what until last year was the Professional Services Division of UK law firm Quindell, will be subject to a reorganisation that will include redundancies.
The costs of that restructuring will be shown in the group’s full year results due in August.
Slater and Gordon said its priority is to cut debt that has swelled to $741.4 million.
There was no interim dividend and the law firm said it is unlikely to pay a full year dividend.
The company’s shares were valued at 83 cents when they were suspended from trade last week to allow the firm to finalise its six-month results.
They slumped as low as 47 cents when they resumed trading on Monday, 94.2 per cent down on April’ all-time high of $8.07 before concerns over the company’s accounts and UK proposals to clamp down on personal injury claims.
The stock was 19 cents, or 22.9 per cent, lower at 63 cents at 10.31am (AEDT).
In November, Slater and Gordon told investors spooked by the need for adjustments and corrections to its financial results that it was on track to meet its full year guidance.
It abandoned the guidance a month later, launched a review into how it forecasts its figures and promised to update investors in January, before scrapping that plan.
The Australian Securities and Investment Commission said on Monday its investigation into Slater and Gordon’s financial reports for the 2014 and 2015 financial years was complete following the writedown and its reduction in the value of its work in progress.
SLATER AND GORDON’S HUGE HALF YEAR HIT
* Revenue up 82.1pct to $487.5m
* Goodwill impairment of $876.4m
* Net loss of $958.3m vs net profit of $49.3m
* No interim dividend
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