Slater and Gordon crashes to a $1b loss

Tuesday, 30 Aug 2016 08:55:46 | Stephen Letts

Law firm Slater and Gordon has lost more than 90 per cent of its market valuation. (Stephen Hird: Reuters)

Slater and Gordon chief executive Andrew Grech's description of "disappointing and below expectations" is one way of putting a $1 billion loss.

Fulminating shareholders may well have a colourful and blunt description of the dire full year result from the listed law firm and one time market darling.

Slater and Gordon reported a net loss of $1.02 billion, which the company calculated was 1,731 per cent down on the previous year.

The company also found that it overstated its 2015 profit, winding it back from $82 million to $62 million in this year's accounts.

As Mr Grech pointed out, "total revenue of $908 million did not translate meaningfully to the earnings line" given the massive loss.

What did translate in a meaningful way was an impairment charge of $879 million against the company's carrying value of goodwill.

Goodwill is an accounting intangible, related to the company's brand name and such things as its customer base and customer and employee relations.

Quindell impairment

The bulk of the impairment - $814 million - was charged against the disastrous $1.2 billion acquisition of the Quindell insurance business in the UK in April last year.

However the Australian business was also hit with a $52 million impairment charge to its general law and personal injury divisions.

Action from the Australian Securities and Investments Commission (ASIC) over the way the company accounted for work-in-hand of its "No Win, No Fee" policy also ripped another $41 million out of the profit.

Slater and Gordon has lost more than 90 per cent of its market valuation, tumbling from almost $8 a share in April last year, since the UK expansion was announced.

Mr Grech described the impairment charge as disappointing but necessary due to both the poorer than expected UK performance to date and the increased risk associated with potential UK legislative change.

Soon after the acquisition the UK Chancellor announced plans to tighten personal injury claims, an area which dominated the earnings of the Quindell business.

Despite the magnitude of the impairments already being known, investors were unimpressed with the nature of the results and once again fled to the exits with Slater and Gordon's share price tumbling another 13 per cent on opening to 48 cents per share.

More to come.

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Slater and Gordon crashes to a $1b loss

Quindell impairment

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