Slater and Gordon’s UK operation is more important to the company than ever despite posting massive losses for 2015/16, its accounts revealed today.
Slater and Gordon Lawyers UK lost around £37m before tax last year, in addition to massive losses already posted in relation to the acquisition of Quindell and as a result of revised accounting policies.
As the company warned last week, the Slater and Gordon group lost more than A$1bn (£585m) for the full year ending 30 June 2016. The previous year it posted profits of A$62m.
Revenue was up 52% group-wide from A$600m (£346m) to A$908m (£524m). The company confirmed that the directors have not declared a dividend in respect of the 2016 year.
In its announcement to the Australian stock exchange, Slater and Gordon said the results were heavily impacted by a A$814m write-down of goodwill in Slater Gordon Solutions (SGS), underperformance in the UK and an ‘adverse movement’ of A$41.3m in work in progress.
The announcement cited ‘several reasons’ for the UK underperformance including lower case resolutions from a disproportionately higher cost base in Slater and Gordon Lawyers UK, lower than anticipated road traffic accident and noise-induced hearing resolutions in SGS and lastly the impact of a range of significant non-recurring restructuring costs.
It added that performance in the UK in the first half of 2016 was ‘significantly below expectations’, prompting a reorganisation of its legal services business, changing structures, processes and technology.
‘This has involved ceasing operations in some locations and re-sizing the workforce,’ added the statement.
‘This component of the performance-improvement programme will be substantially completed by early 2017.’
The statement confirmed the cost of restructuring the UK business could come to around £19m, including consultancy fees, property transactions and redundancy payments.
Reliance on the UK market has continued to increase at the same time as performance in this country has been sluggish, with 72% of fee and services revenue now coming from the UK.
Almost two-thirds of revenue was derived last year from personal injury work. A year ago the company was reporting that 40% of revenue was derived from the UK.
The company confirmed that it employs 3,310 staff across 25 locations in the UK across SGS and SGL UK, ahead of the planned reorganisation. The group employs 4,640 in total.
While the company plans cutbacks across the UK operations, the financial report reveals the annual fee pool for board members has risen from A$650,000 before July 2015 to A$950,000 after July 2015.
Remuneration for board chair John Skippen has risen from around A$162,000 to more than A$240,000.
The current group chief financial officer has been paid A$189,000 in the last year in so-called ‘short-term incentives’ while the chief operating officer was paid 75% of her bonus for her work on the company refinancing exercise.
Managing director Andrew Grech said the full-year results had been a ‘story of two halves’.
‘The results for the first half were extremely disappointing and well below expectations,’ he said.
‘In the second half we have taken significant steps towards turning around the performance of the UK business. Whilst the UK performance improvement programme is still in its early stages, the second-half results indicate that our efforts are beginning to bear fruit.’
The company said brand awareness has increased in 2016, with a survey finding the Slater and Gordon brand is now recognised by 28% of people in the UK.
The group’s share price fell in value by 15.2% following the announcement of the financial results.
Slater and Gordon – timeline:
January 2012 – Slater and Gordon takes over top-100 firm Russell Jones & Walker, applies to become an alternative business structure
February 2013 – Group reveals a £2.4m profit for first six months of UK operations
August 2013 – Firm buys Manchester- and London-based personal injury practice Fentons Solicitors
September 2013 – £1m advertising campaign unveiled to instate S and G as a ‘household name’
December 2013 – ‘Substantial parts’ of Manchester practice Pannone are bought by Slater in a £33m deal
July 2014 – The Australia-based firm offers one million shares to its UK staff
August 2014 – Following its aggressive expansion strategy, Slater reveals full-year profits of £33.7m and £231m revenue
Source: Britta Campion/ Newspix/REX Shutterstock
April 2015 – Quindell shareholders give the green light for the sale of its professional services division to S and G for £637m. Quindell had said it was the world’s largest listed legal services provider
June 2015 – Shares in Slater and Gordon slide after the firm says it has uncovered two errors in the reporting of historical cashflow in the UK business
July 2015 – The firm announces that a key contract associated with the Quindell deal will end later in the year. Shares in Slater dip further
December 2015 – Australian firms consider class action against S and G on behalf of investors, as Slater downgrades its profit expectations
24 February 2016 – Slater suspends trading ahead of a profit announcement
29 February 2016 – The firm announces £493m losses and reveals UK office closure plans. Share price falls 25%
3 March 2016 – Firm says the majority of its UK sites will stay open
6 April 2016 – Slater’s full restructuring plan is revealed. Talks begin on the future of offices in Bristol, Halifax, Newcastle and Liverpool Waterloo