SLATER and Gordon's losses continue to mount following its disastrous entry in to the UK market.
The company today announced a $425.1 million loss for the six months to 31 December 2016, which follows a $958.3 million loss in the previous corresponding period.
On the ASX, Slater and Gordon closed down 22 per cent at $0.125 per share. In April 2015, the company was trading at $7.85.
Today's result was significantly affected by a $350.3 million impairment charge against the carrying value of Slater and Gordon's UK intangible assets.
Group managing director, Andrew Grech, says it reflects a business in a major transition.
"While we have made progress in the UK in the past 12 months, the turnaround is taking longer than we anticipated and billed revenue performance in segments of the business is lower than expected. The full impact of the performance improvement initiatives will take time," says Grech.
Overall revenue was $322.7 million compared to $487.5 million the previous corresponding period.
Grech acknowledged that the negative publicity and sentiment surrounding Slater and Gordon is hurting the company.
"Despite this, we have serviced the legal needs of 70,000 clients last financial year. This is a great credit to our 1,200 strong Australian workforce located across 54 regional and suburban locations," he says.
The company is facing a class action from its main rival in Australia, Maurice Blackburn, for allegedly breaching its continuous disclosure obligations to the ASX.
This is an embarrassing position for Slater and Gordon, which has litigated several class actions against other companies for the same offence.
Loss of confidence in the company is reflected in its fees and services revenue, which was down 17.5 per cent in Australia to $114.2 million on the pcp, while the UK business was down 34.6 per cent at $75.6 million and Slater Gordon Solutions dropped 39.9 per cent to $140.7 million.
Net operating cash flow continued to improve, but remained an outflow of $11.4 million for the half, compared to $20.9 million pcp. When normalised, gross operating cash flow was positive at $7.1 million.
The performance improvement programme has reduced operating costs across the business in areas such as material labour and marketing.
Grech says negotiation will continue with Slater and Gordon's lenders to recapitalise the company.
"It is clear that based on current performance expectations the continued support of the Company's lenders is fundamental, as current levels of bank debt exceed total enterprise value," says Grech.
"Discussions with lenders on the recapitalisation plan are ongoing and the board has reason to believe that a successful outcome will be concluded in coming months."
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