Shares in struggling Slater and Gordon slipped to a fresh all-time low overnight after the firm told investors that recovery in its UK business is taking longer than expected.

In a trading update to the Australian stock exchange ahead of its half-year results on 27 February, the business said it is continuing to work on a recapitalisation plan with lenders. Negotiations are expected to be concluded 'in coming months'.

Based on performance expectations and liquidity, it added, 'the continued support of the company's lenders is fundamental, as current levels of bank debt exceed total enterprise value'.  

In the UK, the company said it expects half-year EBITDAW (profits before interest, depreciation, amortisation and movement in work in progress) and cash from operations to be an 'improvement' on the prior period. Revenue performance 'reflects slower than anticipated progress with various productivity improvement initiatives and (in some practice groups) slower than expected case settlement profiles'. The company forecasts stronger billings in the second half as the transformation programme, which includes staff cuts and office closures, continues.

The firm also warned its UK business was carrying A$327m (£201m) of goodwill at 30 June 2016 and this could be impaired. This is likely to be partly explained by the government's planned reforms of personal injury.

In 2015/16 the UK business reported a loss of £37m. 

In Australia, the statement said the firm has 'started to show signs of being impacted by negative sentiment about the business and increased competition in key segments'. As a result, fee and services revenue in the first half 'is expected to be lower than the prior comparative period', with declines across both personal injury law and general law. A performance review is also under way in Australia.

Overall, cashflow 'remains a challenge', the statement concludes. 'Net operating cash flow is expected to further improve... but will remain a net cash outflow.'

Slater and Gordon Limited's share price slipped to a new low of $A0.20 (15p), compared with an all-time high of over $8 in April 2015.

There is press speculation in Australia that a planned debt for equity swap that would see investors wiped out is foundering, because lenders Westpac and National Australia Bank are reluctant to take major stakes.

Both banks are believed to have around A$300m exposure each and are said to have already written down the loans, potentially enabling them to sell on the debt.