Slater and Gordon (S&G) is to restructure its UK operation after posting an A$958m (£493m) loss for the six months ending 31 December 2015, primarily due to a hefty writedown of its UK business.
The Australian-listed firm has been given a two month deadline by its banks to deliver a repayment plan as it faces debt of A$741m.
Shares in the personal injury company closed at AU$0.58 on the ASX, dropping 30% in reaction to its half year results and subsequent announcements.
S&G managing director Andrew Grech said: ‘Clearly today’s results are very disappointing. In particular the decline in business performance in the UK is of serious concern to all at S&G and will equally be of concern to our investors. We will therefore be taking a number of necessary and significant steps to improve the operational performance of both the UK performance and the broader S&G group.’
Last month S&G, which makes about 45% of its revenue in the UK, confirmed it was consulting on the closure of two its UK offices, which would affect 51 staff.
The company reported that in the UK while general law revenue was in line with expectations, personal injury law revenue was ‘materially weaker than expected’, and S&G said a new practice and case management system caused a loss of productivity in the first half.
The profits were significantly affected by a non-cash impairment charge of A$876.4m against goodwill, mostly due to a A$814.2m impairment in goodwill for its Slater Gordon Solutions unit, previously known as Quindell. The firm said the potential impact of the government’s planned changes which would limit personal injury claims, was a significant factor in the goodwill impairment.
It has been a turbulent year for the firm, which last week asked trading in its shares to be halted while it worked with auditors and advisers to finalise earnings.
In February the firm’s UK chief, Neil Kinsella, announced his retirement as UK head of general law, with Siri Siriwardene replacing him. The announcement coincided with media reports that S&G was in talks over debt restructuring and brought in FTI Consulting in a bid to address its financial health.
In the same month the company’s lenders appointed their own investigative accountants to look at the firm’s books. Red flags were raised after the firm withdrew earnings guidance late last year prompting rival firm Maurice Blackburn to open registrations to shareholders wanting to pursue a class action.
After S&G’s £637m purchase of insurance claims handler Quindell’s professional services division (PSD) in May last year, it was announced the Serious Fraud Office was investigating Quindell’s ‘business and accounting practices’ as the company published revised annual accounts for 2014 showing a £312m swing from profit to loss in its PSD. The change saw what was logged as a £175m pre-tax profit for the PSD corrected to a £137m loss.