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'.
John Hyde blog: Slater and Gordon has weeks to save itself
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.