SLATER & GORDON FACES ANOTHER TOUGH DAY

SLATER & GORDON FACES ANOTHER TOUGH DAY

THE share landslide that smothered Slater & Gordon (ASX:SGH) yesterday continued this morning as investors wiped another $100 million from the embattled legal firm's value.

The shares fell as much as 30c in early trading to a low of 59.5c with more than 25 million shares changing hands in the first half hour of trading.

Shares in the company took a massive hit yesterday, freefalling 50 per cent primarily on news that changes to personal injury claims by the British Government could impact its newly acquired UK division.

Slater & Gordon shares have fallen more than 90 per cent from their record high of $8.07 reached in April, wiping out $2.5 billion in shareholder value. The rout of the past two days accounts for more than $400 million of those losses.

The listed Melbourne-based company has been rocked by news that the UK Government has clamped down on injury claims from traffic accidents, although the company yesterday assured the market this would not impact on profits.

"Whilst the government's announcement was unexpected, the company believes that the scale and diversity of the Slater Gordon Solutions business in the UK positions it well to deal with the potential impact of any future legislative change," says the company.

"Slater & Gordon does not expect there to be any impact on its FY16 performance, or the guidance recently confirmed at the company's AGM, arising from the government's announcement.

"Whilst very limited detail has been released pending a foreshadowed consultation process, the government's proposal, if implemented, would restrict the right of people injured in road traffic accidents to obtain compensation for pain and suffering in minor soft-tissue injury claims, whilst preserving the right to claim compensation for other loss."

Slater & Gordon posted a net profit of $83.8 million in FY15 from revenue of $627.3 million. The company revealed at its annual general meeting last week it was targeting revenue of $1.15 billion in FY16 and EBITDAW of $205 million.

However, it also confirmed that it would most likely have negative cashflow of $40 million in FY16.

The massive slide in the company's value has raised questions over its debt levels, which stood at $716 million at the end of June, and the company's position in relation to its debt covenants.

Slater & Gordon's shares have been under pressure since announcing in March the acquisition of Quindell Plc's Professional Services Division in the UK for $1.225 billion.

The company this year also was hit by an ASIC investigation into an accounting irregularity in its books and by a fraud squad investigation into the business practices of Quindell which are alleged to have occurred prior to the acquisition.

The company's forecast profit result also depends on a stable exchange rate, calculated at 48 pence per Australian dollar.

 

Enjoyed this article?

Don't miss out on the knowledge and insights to be gained from our daily news and features.

Subscribe today to unlock unlimited access to in-depth business coverage, expert analysis, and exclusive content across all devices.

Support independent journalism and stay informed with stories that matter to you.

Subscribe now and get 50% off your first year!

Four time-saving tips for automating your investment portfolio
Partner Content
In today's fast-paced investment landscape, time is a valuable commodity. Fortunately, w...
Etoro
Advertisement

Related Stories

Brisbane-based IT consultancy Exent acquired by Atturra for up to $8m

Brisbane-based IT consultancy Exent acquired by Atturra for up to $8m

Founder-led IT consultancy Exent is set to join the growing portfol...

Investors sour on Aussie Broadband's new challenger brand Buddy Telco with $10m marketing cost

Investors sour on Aussie Broadband's new challenger brand Buddy Telco with $10m marketing cost

After rival Superloop (ASX: SLC) scooped up its white labelling agr...

Golden handshakes to departing ASX100 CEOs hit 12-year high

Golden handshakes to departing ASX100 CEOs hit 12-year high

Around one in every six CEOs of ASX100 companies left their job&nbs...

Maggie Beer Holdings CEO Kinda Grange resigns just 16 months into the job

Maggie Beer Holdings CEO Kinda Grange resigns just 16 months into the job

The revolving door of leadership at Maggie Beer Holdings (ASX: MBH)...