Listed firm Slater and Gordon today announced it will break off its UK operation to focus fully on the Australian business.
Directors unanimously voted to support recapitalisation of the business to effectively hand over control to international hedge funds.
As part of the business plan, all UK operations and subsidiaries will be separated from the listed company and transferred to a new UK holding company, UK HoldCo, which will be wholly owned by the senior lenders.
The Gazette understands that, following separation, existing shareholders of the company will cease to have any interest in UK operations.
Slater and Gordon told the Australian Stock Exchange: ‘The company believes the separation of the UK operations provides the best option to enable both the Australian and UK operations to succeed in their own right and will enable the company to focus its management’s time and resources on the Australian business.’
The decision follows a tumultuous five years since Slater and Gordon, one of Australia's biggest law firms, invested in the UK market through the acquisition of Russell Jones & Walker. There followed a series of other acquisitions as the firm built a 20-strong network of offices across the UK that today employs more than 3,000 people (that number has fallen by around 10% since last year.
Senior lenders today committed to add to the existing A$40m debt facility announced in May with another A$50m (£30.1m), split between the two operations.
The announcement was one of a number of statements made to the Australian Stock Exchange, which included the company's much-awaired annual results for the year ending 30 June 2017.
The company suffered losses of more than A$1bn (then worth £585m) in 2015/16. Losses were almost halved to A$546.8m (£335m) for the 2016/17 year, with the rate of loss slowing significantly in the second half of the year. As at 30 June 2017, gross debt was A$780.9m (£478m), but the company says the new structure and financing ensures debt is at a 'sustainable level'.
Slater and Gordon Solutions, which effectively replaced the professional services division of Quindell purchased for £637m, saw revenue fall 38.5% year-on-year. Profits for this section of the business increased due to improved performance in the noise-induced hearing loss practice. Revenue at Slater and Gordon UK decreased by 31.4%, with losses also increasing due to reduced fees.
The accounts reveal the company paid almost £30m in restructuring costs during 2016/17, 41% more than the previous year. This included consultants' fees, redundancy payments and property disposals.
Personal injury law accounts for 61% of fee and services revenue in the UK, where surveys show the brand now has 35% recognition with members of the public.
John Skippen, outgoing chair of the company, said: 'Whilst the past two years have no doubt been one of the most difficult periods in the firm's history, what remains in place is the commitment of our people to serving the needs of our clients.'
He added: 'Regrettably the interests of existing shareholders will be significantly diluted and I and the board are deeply sorry for this.'