Slater & Gordon board shake-up follows huge loss

Besieged law firm Slater & Gordon has confirmed a loss of over $1bn and announced a board shake-up.

Andrew Grech, managing director of law firm Slater & Gordon.

Besieged law firm Slater and Gordon has confirmed a loss of over $1 billion for fiscal 2016 and announced a sudden shake-up of its board that will see three directors depart and just one replaced.

The developments contributed to another sell-off in the group’s depressed share price, with investors wiping as much as 18 per cent from its valuation. At 11am (AEST), its shares traded down 10.7 per cent at 50c.

For the 12 months to June 30, Slater and Gordon (SGH) reported a loss of $1.02 billion, in line with its revised guidance offered last week.

The stunning red figure was largely driven by an impairment charge of $879.5 million against its goodwill, with the majority realised in the first half.

In a statement to the market, the ASX-listed law firm said its fortunes had improved through the second half, but the group was still seen leaking cash with outflows of $20.9m.

For the first half the group had noted outflows of $83.3m, meaning it leaked $104.2m for the full year.

Even after stripping out provisions, writedowns, finance costs and restructuring charges the group reported a “normalised loss” of $48.7m.

“Slater and Gordon’s FY16 performance is a story of two different halves,” the group’s managing director Andrew Grech said.

“The results for 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 program is still in its early stages, the second half results indicate that our efforts are beginning to bear fruit.”

Mr Grech added the Australian environment had been “challenging”, with new strategies implemented in a bid to return to historical growth rates.

“We are confident we have the strategy and people in place to stabilise financial performance during the 2017 financial year,” he said.

The commentary came after Mr Grech recently offered his resignation to the board, but was compelled to stay on by his fellow directors.

It also coincided with news of a board shake-up, with Tom Brown joining as a director and Erica Lane, Ian Court and Ken Fowlie stepping aside with immediate effect.

“Slater and Gordon will continue the ongoing process of developing the breadth of skills and experience at board level with the appointment of an additional non-executive director in the course of FY17,” the group said.

Mr Grech said the focus for the coming year would be on cash generation, with no specific guidance offered by the beleaguered group.

“Clearly our key priority is to continue to put the UK business on a sounder footing and complete execution of the UK Performance Improvement Program,” he said.

“In Australia, we will focus on improving profitability and cash generation.”

Slater and Gordon opted against offering a dividend.