The market hates Slater and Gordon

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Shares in law firm Slater and Gordon got demolished on news that the British government is considering changes to laws governing compensation cases, which could have a significant impact on its business in the UK.

More than $300 million was wiped from the company’s market capitalisation today alone.

At the close, the shares had lost 51.4% to 94 cents.

The company has lost more than 70% in value in a week, as investors abandon one of Australia’s biggest consumer law firms, founded in 1935 and with more than 5000 staff, over questions on its accounts and its future offshore earnings.

The shares started their slide on Friday after the company’s annual general meeting.

The UK business had a slower than expected start to the financial year, according to managing director Andrew Grech.

Analysts have also questioned whether Slater and Gordon can meet its full year guidance for total fees of $1.15 billion and earnings of $205 million.

And overnight in the UK, the British Government announced proposals, which if implemented, would impact on the rights of people injured in road traffic accidents.

This change in policy could cut into Slater and Gordon’s personal injury business.

“The government’s proposal if implemented would restrict the right of people injured in road traffic accidents to obtain compensation for pain and suffering in minor soft tissue injury claims,” Slater and Gordon said today.

The company says it believes the scale and diversity of its business in the UK positions it well to deal with the potential impact of any future legislative change.

At this stage, Slater and Gordon Limited says it does not expect there to be any impact on its 2016 performance.

At the AGM last week, chairman John Skippen apologised to shareholders for accounting errors.

ASIC reviewed the law firm’s accounting practices after financial reporting errors following the $1.2 billion acquisition in March of the professional services division of UK legal group Quindells.

The company has since reclassified certain balance sheet items for the last two financial years, including revenue recognition.

The problems with its accounts led to the replacement of Wayne Brown as CFO by Bryce Houghton, a former finance director of Navitas.

In August, Slater and Gordon announced a 7.7% rise in full year profit to $70.7 million. Revenue was up 27% to $521.9 million.

One of company’s most famous salaried partners was former prime minister Julia Gillard who did work for trade union officials in the mid 1990s that was subsequently investigated by the Royal Commission into trade union corruption.

Slater and Gordon held an internal investigation into Gillard’s conduct, but she left the firm in 1995 for politics. She has consistently denied any wrongdoing, but the law firm subsequently lost the Australian Workers Union account.

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