The world’s first publicly listed law firm faces losing the support of its bankers after making a near-A$1 billion first-half loss, largely as a result of the impairment of its recently acquired British assets.
The Melbourne-based Slater and Gordon reported a loss in its first half of A$958 million (£492 million), three times the combined profits it has made since it became the first law firm to float on a stock market in 2007. Its banking syndicate, led by Westpac and National Australia Bank, was reported by the Australian Broadcasting Corporation to have demanded that the firm, which aspired to be Britain’s largest personal injury law group, provide a new operational plan and restructuring proposal by the end of next month. If no agreement is reached, the banks can demand a full debt repayment — of about A$800 million — by the end of March next year.
The writedown related to the law firm’s acquisition of businesses from the British technology contractor previously known as Quindell, which was funded by an A$890 million equity-raising and a loan facility.
Andrew Grech, Slater and Gordon’s managing director, whose offer to resign was rejected by the board yesterday as the company faced crisis talks with its banks, said that “the impairment speaks for itself” when asked what could have been done differently in relation to the acquisition.
“The transaction is disappointing,” Mr Grech said. “I want to emphasise it’s important for us to focus on the future and make the best of the situation.”
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Slater and Gordon is best known in Britain for its £637 million takeover last April of Quindell’s professional services division, which it claimed would create Britain’s largest personal injury law group. However, the deal soured after Slater and Gordon admitted in June that it had misreported British cashflows.
A foreshadowed crackdown announced in November by George Osborne on driver and passenger compensation claims for minor injuries then halved the value of Slater and Gordon’s shares, which have plunged by nearly 90 per cent in the past 12 months.
The writedowns come after an eight-month review of the law firm’s book-keeping by the Australian Securities and Investment Commission. The commission said that it would pursue no further action against Slater and Gordon over its accounting issues.
Quindell is now known as the Watchstone Group.