Law firm Slater and Gordon has posted a $958.3 million loss for the second half of 2015, hit by underperformance and write-downs in its UK operations.
The result included a $876.4 million goodwill impairment charge, with $814.2 million of that due to the poorer-than-anticipated financial performance of its UK arm, attributed to its ambitious and ill-fated $1.3 billion purchase of Quindell’s professional services arm in March 2015.
A goodwill impairment charge means the reputation and brand name of the firm are now worth less than they were estimated to be at the time of purchase.
A further $21.3 million charge was attributed to provisioning for debtors in Australia and the UK. The company had made a net profit of $49.3 million a year prior.
“Clearly today’s results are very disappointing,” said Slater and Gordon’s managing director Andrew Grech in a statement to the Australian Securities Exchange.
“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.”
Slater and Gordon on life support
After writing off nearly $900 million in ‘goodwill’, Slater and Gordon is relying on the goodwill of its lenders for its survival.
Mr Grech said the firm’s priority for 2016 would be on reducing debt and re-establishing a sustainable capital structure.
In November, the British Government announced it planned to limit compensation for car accidents, causing Slater and Gordon’s share price to plummet on worries about the firm’s earnings, and a class action was flagged on behalf of burned shareholders.
Slater and Gordon’s share price plunged 86 per cent in 2015. Shares in the firm slumped as much as 43 per cent to an intraday low of 47 cents following the profit results release this morning, but have since recovered to be down 14 per cent at 71 cents by 11:39am (AEDT).
Meanwhile, the Australian Securities and Investments Commission (ASIC) said it has completed its inquiries into Slater and Gordon’s financial reports after the law firm slashed the value of its assets in its latest half-year profit report.
Last June, the firm announced that it was being probed by ASIC and that it had uncovered accounting errors in one of its UK operations.