Slater and Gordon plans UK closures after £493m losses

Topics: Alternative business structures,Personal injury & clinical negligence,Financial results,Industrial injury

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Australia-listed firm Slater and Gordon is planning a major programme of office closures as part of a reorganisation of the UK business after posting a huge loss.

In a series of announcements to the Australian stock exchange today, the firm said it was likely that ‘a number’ of current sites will close, with an unknown number of potential redundancies.


The consultation process will begin this week with some employees and will continue over ‘several’ months. The company has already identified two sites for closure, but the announcement appears to suggest something much more sweeping.

The decision follows massive losses during the second half of 2015: the company today posted a net loss after tax of £492.5m across Australia and the UK. Around £435m of that was accounted for by writedowns relating to Slater Gordon Solutions, representing the businesses assets acquired from Quindell PLC.

A further £38m was lost in Australia, and £19.5m lost in six months across the group’s other UK entities. Revenue increased 82% in the whole group compared with the same period of 2014, but UK income was up just 7.7%.

Net debt stood at around £380m at the end of December, up more than £60m in the space of six months.

The firm said ‘under-performance in the UK operations’, including both intake and resolution of personal injury claims and fewer resolutions than expected in noise-induced hearing loss claims, has contributed to poor financial performance.

Managing director Andrew Grech said the results are ‘clearly very disappointing’ and have brought about a review of all UK operations. ‘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, he said.

‘We will therefore be taking a number of necessary and significant steps to improve the operational performance of both the UK businesses and the broader Slater and Gordon group.’

The firm intends to operate three specialised legal services divisions across the UK in future: fast track personal injury claims, serious and specialist personal injury claims and general law services.

Personal injury law services will be provided through a ‘more limited number of regional centres’ while specialist and general law services will also be ‘consolidated into specialised units at selected, strategically important locations'.

A resultant reduction in the total number of UK employees will come through a combination of ‘natural attrition and redundancy’ over the next 12 months.

Grech, who it emerged during a conference call had offered to resign, added: ‘Clearly our key priority for the 2016 financial year is refinancing debt and focusing on re-establishing a sustainable capital structure to support and transformation programme.

‘We have a clear plan which we have begun to implement which will place our UK business on a sounder footing and which is responsive to the evolving market environment. The changes we are making, whilst difficult, will help to ensure that our UK business is sustainable and thrives over the long term.’

The company made clear that it expects claims below £5,000 to be ‘significantly impacted’ by chancellor George Osborne’s proposals to raise the small claims limit to that figure. 

On its accounting practices, the company has vowed to stop recognising revenue when it is just ‘probable’ that it will come in. The new standard, adopted retrospectively from July 2014, requires income under no win, no fee agreements to be recognised only when it is ‘highly probable that a significant reversal of revenue recognised will not occur’. 

It will not pay an interim dividend and said it is unlikely to pay a dividend for the full financial year.

It was confirmed that the Australian Securities and Investments Commission has discontinued its inquiries in relation to financial reports for the years ended June 2014 and June 2015.

After a week's voluntary suspension, the company returned to trading on the Australian Stock Exchange today after the announcements, with the share price down 25% within an hour of the news.

Readers' comments (57)

  • I feel sorry for all employees . It is never easy to receive such news and will be shattering for some.

    For those who have consistently criticised this flawed concept we feel little satisfaction in being vindicated, but would prefer that urgent steps are taken to limit further experiments with law firm structures.
    Experimentation in the guise of "innovation" has cost the profession dear in terms of loss of reputation.

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  • Anyone who seriously thought after less than one year that noise induced hearing loss claims would contribute to putting the SG group in a healthy financial position is seriously, I mean seriously deluded.

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  • The model was always flawed: mass market work means lower costs base and technically limited fee earners to make a profit.

    What is surprising from the announcement this morning is they are going to continue this approach but from less places. The LSA 2007 was going to create the opportunity for a small group of firms to punch through and thrive (dominate? I personally doubt but others think may happen) but the risks were always enormous. The majority of firms who try to punch through will not achieve their aims - simply because it's so difficult to do and requires a huge cash injection which is against the partnership or shareholder model (drawings or dividends anyone?).

    Purchasing other firms or CMC's just adds to the problems. Growth organically means quality and consistency - growth by acquisition contains more risks.

    In fairness to S&G some of their less high profile deals had real quality within them but a handful of quality people and practice areas in a volume practice will not buck the trend.

    Lessons for others:

    1. Focus on the cost base;
    2. Be either low cost mass market or quality - the two are mutually exclusive.

    My thoughts are with the staff who will inevitably be the people who suffer for others poor decisions in an effort to be the first or the biggest and whose futures are now in question due to the difficult decisions ahead.

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  • I left one thing out above: the firms who have had a go at changing the market after the LSA 2007 are brave - we may disagree with their decisions and approach but it is fascinating to watch and when someone makes it or elements work as a sector we need to learn from their innovations not just criticise the elements that do not quite work.

    For Slater and Gordon their PR is a lesson to all they are the newsrooms commentators of choice - always have someone available and have a view on national stories.

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  • Clearly a very poorly run business and I hope the senior management of S&G are amongst those who are being made redundant after some shockingly bad decisions in recent times.

    What must their insurance partner customers be thinking this morning and what this impact has on their customers!

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  • The Slater & Gordon results announcement states, inter alia, that one reason for the poor performance of the UK division included "the deployment of a new practice and case management system which caused a loss of productivity in the first half.

    A quick search on Google showed that in April 2014 "Aderant, the world’s largest independent legal software company, announced today that the global firm Slater & Gordon will deploy the Aderant Expert practice and financial management system across all offices worldwide." The press release went on to comment that "Unifying the firm on Aderant Expert will ... lead to higher productivity and efficiency, greater business insights, and reduced risk."

    So yet again we have an IT company over promising yet under delivering in practice. I have come across many firms that have introduced new software that was supposed to improve matters but fails to do so. Maybe this is a wake up call to the IT industry to improve its performance.

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  • In any event, rarely has the term "piercing the corporate veil" seemed more appropriate.

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  • Having been through a redundancy process I feel for the employees. Difficult times ahead but believe in yourselves and you will get through this. Good luck to you all.

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  • "Net debt stood at around £380m at the end of December, up more than £60m in the space of six months"

    On a straight reading of the article, debt didn't go up from £60m to £380m in six months; it went up £60m from (presumably) £320m to £380m.

    Though I'm struggling to understand how there can be such losses and yet only a £60m increase in debt.

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  • Mainly the losses aren't trading losses, they are writing down the value of the assets they acquired from Quindells.

    £38 million lost in Australia, 19.5 in the UK aside of Quindells, Roughly £435 million at Quindells. adds up to £492.5

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