Slater & Gordon, an Australian based law firm, announced a net loss after tax of $958.3 million for the first-six-month period of 2016. The company's shares dropped 33.2% to 38.8 cents following the earnings result. Loss per share amounted to 272.6 cents during the first-half of 2016.
The company reported six-month revenue of $487.5 million, an increase of 82.1% from $267.7 million in the previous year period. Operating revenue increased 122.9% to $496.1 million from $222.6 million in the same period in 2015. Total debt during the reporting period totalled $741.4 million. The law firm reported a negative total operating cash flow of $83.3 million for the first six-month period of 2016.
Operating revenues from SGL Australia amounted to $139.3 million during the firs-half period, up 22.7% from $113.5 million in the year ago period. SGL UK's revenues rose 7.7% to $117.5 million from $109.1 million in the corresponding period in 2015.
On a normalised basis, Slater & Gordon's loss after tax totalled $42.1 million in the first six-month period of 2016. While, normalised loss per share for the period was 11.9 cents. According to Slater, the SGL Australia's performance is in line with the company's expectations. Although SGL UK performed well in the second quarter, its case resolutions were lower than it was anticipated.
The Sydney Morning Herald cited industry sources, which said that Construction, Forestry, Mining and Energy Union (CFMEU) is having an eye on the prevailing situation in the law firm. The shares of the company lurched by over 30% in an unstable trading session over investors' curiosity on the solvency of the firm. The company's shares lost 95% of its value from April 2015, when its market capitalisation was $2.75 billion. Senior executives of the company have been calling their clients to ensure that the company will be available during their court cases, reports said.
According to analysts at Macquarie, it is hard to predict the prospect of the company's performance owing to many difficulties like the combination issue in Slater's new acquisition. Deutsche Bank analysts called the company's financial result as 'materially weaker than anticipated". The analysts pointed out to the increased debt level in the UK segment.
Andrew Grech, managing director of the group, said that the company is implementing many policies to boost the performance of UK operations and Slater & Gordon group. The company purchased Quindell's business service unit for £673 million and relabelled the firm as Watchstone. Bruce Clarke, ACA Lawyers' principal, said that investors have several questions regarding the acquisition and that the company's directors need to give a detailed explanation to them, The Guardian said.
Despite the challenges facing Slater & Gordon, the representatives are trying hard to get the company back to its normal position. The company is hopeful regarding the future of its balance sheet.
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