Slater & Gordon’s core UK business lost A$64m (£37m) in the year to 30 June 2016, while it spent A$33m on reorganising operations over here, the listed firm’s annual results have revealed.
The company had already prepared the market for the group’s headline loss of A$1.02bn but still its shares fell 15% to 47.5c in trading on the Australian Stock Exchange.
The core UK business saw turnover inch up 1.8% to A$230m (£133m), but it turned a profit in 2015 of A$21m into a loss of A$64m.
The firm told the market that the “fundamental business reorganisation” that began this year – leading to a reduction in both offices and headcount – has led to improvements in its financial performance, with fee revenue growth on a “substantially lower overall cost base”. The A$33m was spent mainly on consultants, redundancy and “property rationalisation”.
As part of the reorganisation, fast-track road traffic accident and employers’ liability cases secured by the S&G brand were transferred to Slater Gordon Solutions (SGS, what used to be Quindell’s professional services division) to handle.
“Prompted brand awareness has continued to strengthen, despite a moderation in overall marketing investment, with the [S&G] brand now recognised by 28% of UK survey respondents. New client enquiry numbers also continued to grow,” the company added.
SGS achieved turnover of A$437m in its first full year of operation under S&G’s ownership. The impairment charge against the carrying value of its goodwill – which was announced at the start of the year – was the main cause of the huge loss. Without that, SGS recorded a loss of A$8m.
The company’s announcement said: “Management has driven consistent quarterly improvement in claims handling and resolution activity in SGS Claims, resulting in a 30% improvement in total billed revenue (from Q1 to Q4) in RTA claims, underpinned by a substantial improvement in productivity.
“While noise-induced hearing loss resolution levels remain lower than anticipated when the business was acquired, management has made significant progress with internal process improvements and engagement with key counterparts.”
S&G’s Australian business saw income rise 8% to A$265m, but record a A$101m loss due to goodwill impairment, “adverse movement in WIP” and restructuring costs.
Group chief executive Andrew Grech said: “Clearly our key priority is to continue to put the UK business on a sounder footing and complete executive of the UK performance improvement programme. In Australia, we will focus on improving profitability and cash generation.
“As a board and a management team, we have confidence in the business we have – its people, brands and leading market share positions in the UK and Australia.”