Slater and Gordon writes down £216m of UK business

 Revenues at embattled firm Slater and Gordon dropped 34% year-on-year as the firm continued to show few signs of recovery, half-yearly results revealed today.

The Australian listed firm, which was forced to restructure its UK operations last year, posted total revenue of less than £200m in the second half of 2016 - down from £300m in the same period of 2015.

The firm still recorded half-year losses of £262m, which was said to equal net losses of £22.5m after non-recurring costs were removed. The results were heavily impacted by a £216m ‘impairment charge’ which effectively wrote down value in the UK business.

The results will do little to persuade investors that the business can be viable going forward, and the firm admitted that its ability to continue as a going concern relies on the continued support of its lenders.

The group has presented revised financial forecasts to lenders and their financial advisers covering the period up to June 2020 and a number of recapitalisation options. Slater and Gordon’s board says it has ‘reason to believe that a successful outcome will be concluded in the coming months’, although a majority of lenders by value must agree to a satisfactory recapitalisation plan by 26 May.

Lending provided under a syndicated facility agreement made in December means the company has borrowings of more than £450m, more than half of which (around £260m) is repayable in May 2018.

Meanwhile, the cloud of a potential group action from shareholders relating to the disastrous acquisition of Quindell’s professional services division continues to hang over the firm, with a deadline of 19 June to issue court proceedings or settle the claims.

Slater and Gordon reported underperformance across its UK and Australia operations in relation to the resolution of personal injury claims.

SGL UK was said to have ‘continued to underperform’ during the second half of 2016 due to the disruption caused by the transformation activity, staff turnover and the impact of ‘negative sentiment’ on the business.

Slater and Gordon group managing director Andrew Grech said the results reflected a business ‘still very much in the midst of 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,’ he said. ‘The full impact of the performance improvement initiatives will take time. Slater Gordon Solutions delivered positive earning and operating cash flow.’

Slater and Gordon Solutions did indeed turn a £15m loss the previous year into a £5.7m profit, although the rest of the UK business continued to suffer losses, albeit reduced by 29.4% to £4.4m. Revenues at SGL UK fell 34.6% to £47, while revenues at SGS dropped almost 40% to £87m.

Much of the bold ambition and attempts to ensure maximum market reach appear to have gone: while its early years after arriving in the UK were characterised by expansion, the firm has instead ceased operations at 18 out of 48 sites in the past six months and reduced headcount by 20%.

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Slater and Gordon writes down £216m of UK business