Australia: S&G share price in the doldrums

Slater & Gordon recorded a profit after tax of nearly £20m on turnover of £128m from its UK operation in the last financial year, its audited results have shown.

The first month of Slater Gordon Solutions (SGS) – the new name for the professional services division acquired from Quindell – brought in £17m of income, at a net loss of £2.1m.

Overnight the Australian-listed firm published its audited accounts for the year to 30 June 2015, which showed a better performance than indicated in the unaudited figures put out a month ago.

The Australian end of the business saw a net profit of £21m on income of £145m.

Last month’s announcement revealed that around 80% of Slater & Gordon’s UK income came from personal injury. With the SGS acquisition, its aim is to become the leading personal injury practice.

It also said that internal research indicated that one in four people in the UK recognised the Slater & Gordon name; in Australia it was nearly three in four.

The results said that the purchase of SGS was structured as an acquisition of the 52 different entities that made up the business, rather than an acquisition of the common stock of Quindell.

“Moreover, Quindell plc provided detailed warranties to the company in relation to the operations of the assets comprising SGS. Those warranties are secured by a warranty escrow account holding £50m.”

Slater & Gordon reiterated its confidence that it would not be affected by the Serious Fraud Office investigation into Quindell’s business and accounting practices.

It added: “In the course of preparing these financial statements, the directors have sought to identify, understand and properly account for all relevant prior transactions undertaken by entities within SGS.

“Despite reasonable enquiries, including of current directors of Quindell plc, the directors are unable to identify or rationalise every historic transaction undertaken by the former directors of the various entities and have made fair value adjustments as appropriate.

“The directors believe that none of the known transactions relate to the fundamental business activities or economics of SGS and none of the known transactions are material in value or effect to the company.”

It put the goodwill acquired by Slater & Gordon on the purchase of SGS at £462m, mainly attributed to “the capacity of SGS to underpin strategic growth of the personal injuries practice within the UK market”.

The Slater & Gordon share price remains in the doldrums, however. It rose slightly to A$2.94 following publication of the results, but had been as high as A$8 earlier in the year, before the SGS acquisition and various accounting issues were identified.