Slater & Gordon stems losses and says UK changes are “starting to bear fruit”
Grech: significant steps towards turning around the performance of the UK business
Slater & Gordon has seen its performance improve significantly in the first half of 2016 – with changes in the UK starting “to bear fruit” – and its upcoming annual results will show that the acquisition of Quindell’s professional services division has nearly doubled its turnover, the listed law firm has told the Australian Stock Exchange.
However, it has prepared the ground for an overall $A1bn loss (£585m) in its 2016 financial year, which ended on 30 June, and the company’s shares dipped 10% yesterday following the announcement.
In January Slater & Gordon unveiled an eye-watering A$958m loss for the first half of the financial year, A$876m of which was due to a write-down of goodwill arising from its acquisition from Quindell. However, the net loss for the second six months is expected to be a more modest A$59m.
The total expected loss of A$1.02bn will also include non-recurring restructuring expenditure – with offices closing in the UK, among other changes – and refinancing costs.
Second-half group earnings are forecast to be A$8.9m, compared to a half-year loss of A$58m.
Overall, Slater & Gordon expects its total revenue for the year to be A$908m. Last year’s figure, which included only one month of contribution from the Quindell acquisition, was A$522m. The year before it was A$411m.
However, net debt at 30 June 2016 is expected to be A$682m, up from A$614m the year before, with the company “noting there has been a material favourable foreign exchange translation impact with the post-Brexit weakening of the [UK pound]”.
Group managing director Andrew Grech said: “Slater & Gordon’s FY16 performance is a story of two different halves. The results from the first half were extremely disappointing and well below expectations.
“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.”
Meanwhile, Slater & Gordon’s main UK rival – Irwin Mitchell – announced yesterday that its revenue rose 8% to £221m in its 2016 financial year, although profits fell a quarter to £12.4m, with the completion of its acquisition of Thomas Eggar the main cause.
Chief executive Andrew Tucker said a decision to fast-track the integration of teams and all IT systems from Thomas Eggar into the wider group was “already reaping benefits”, however. The merger strengthens Irwin’s business and private client services – which now represent half of its turnover – and increases cross-selling opportunities, he explained.
He said: “There are many reasons for real confidence in our business, despite the reduction in profit this year. That is a short-term issue driven by the significant investment in the merger to ensure it was a success.
“The board is comfortable that sacrificing profit in the short term will deliver greater benefits to the business in the medium term as we reap the return on investment and the improved strength and breadth of depth the merger has given us.”
The firm also launched Irwin Mitchell Private Wealth in April, combining the private client teams of Irwin Mitchell, Thomas Eggar and previous acquisition Berkeley Law under one banner.
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