Slater and Gordon has reported a first half loss of almost $1 billion due to a huge writedown linked its business in Britain.
The law firm’s net loss for the six months to December 31, 2015, was $958.3 million, with the company booking a one-off goodwill impairment of $876.4 million related to the UK business it acquired for $1.3 billion in March 2015.
“The decline in business performance in the UK is of serious concern to all at Slater and Gordon and equally will be of concern to our investors,” managing director Andrew Grech said.
There was no interim dividend and the law firm said it was unlikely to pay a full year dividend.
A goodwill impairment charge means the reputation and brand name of the firm are now worth less than they were estimated to be at the time of purchase.
A further $21.3 million charge was attributed to provisioning for debtors in Australia and the UK. The company had made a net profit of $49.3 million a year prior.
“Clearly today’s results are very disappointing,” said Slater and Gordon’s managing director Andrew Grech in a statement to the Australian Securities Exchange.
“In particular the decline in business performance in the UK is of serious concern to all at Slater and Gordon and equally will be of concern to our investors.”
Mr Grech said the firm’s priority for 2016 would be on reducing debt and re-establishing a sustainable capital structure.
In November, the British Government announced it planned to limit compensation for car accidents, causing Slater and Gordon’s share price to plummet on worries about the firm’s earnings, and a class action was flagged on behalf of burned shareholders.
Slater and Gordon’s share price plunged 86 per cent in 2015. Shares in the firm slumped as low as 47 cents following the profit results being released this morning, but have since recovered to be down 22 per cent for the day at 65 cents by 11:09am (AEDT).
Meanwhile, the Australian Securities and Investments Commission (ASIC) said it has completed its inquiries into Slater and Gordon’s financial reports after the law firm slashed the value of its assets in its latest half-year profit report.
Last June, the firm announced that it was being probed by ASIC and that it had uncovered accounting errors in one of its UK operations.