Slater and Gordon knew of poor UK results a week before it told the market

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Draft results from Slater and Gordon’s UK business were circulated to its senior executives a week before the law firm told the market it had abandoned its profit guidance.

A short time ago, Slater and Gordon shares fell a further 5.7% to $0.782. A month ago the shares were trading at more than $3 each. In March they reached a year high of $8.07.

In a reply to a query from the ASX, Slater and Gordon today said draft November results from the UK were distributed internally on the night of December 9.

However, the company says the draft was internal management information only and was insufficiently definite to warrant disclosure to the market.

The company needed to make a “fullsome” assessment of that information which continued to be classed as confidential. This process of clarification, verification and confirmation was completed on the night of December 16.

A phone meeting of the board of directors was held at 8am the next day.

The company then told the market the same day that there was a significant risk that full-year profit guidance would not be met because of slower than expected resolution of cases in the UK.

Its 2016 financial year guidance was for $1.15 billion in fee revenue and $205 million in earnings.

The market cap of the business is now $276 million, down from $2.8 billion in April. The company’s net debt is $650 million.

“It is now clear to us that the slower rate of case resolutions in the first half has had a larger impact than previously thought, and that this may well flow through to a reduced profit for the full year,” said group managing director Andrew Grech last week.

“For this reason we have withdrawn our full year guidance and we are conducting a review of our forecasting methods so that we can provide the market with greater clarity.”

Law firm ACA Lawyers is considering a class action lawsuit against Slater and Gordon on behalf of investors who have lost money from the falling share price.

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