By Peter Frankl.

Stopping the losses is challenging enough when revenue is stable but when revenue is declining, the degree of difficulty is at another level.

Previous shareholders and lenders have taken their losses and drawn a line with their Slater and Gordon experience.

The new owners, headed by Anchorage Capital Group, have been described by various labels including vulture fund and turnaround fund. It will have to be a genuine turnaround for the new owners to avoid being the next in line to see their investment wiped out. 

In February 2018, John Somerville was appointed the new CEO of Slater and Gordon. His background is professional services – managing KPMG (Advisory) – and he has been an advisor to corporations seeking change. He is not a lawyer.

On 15 December 2017, the UK subsidiaries were separated from the ASX-listed entity and transferred to a new UK holding company. The company’s view is that both businesses (AU and UK) can now focus independently on their differing strategic initiatives without the distractions of broader operations in different jurisdictions.

The UK EBITDA loss disclosed in the December 2017 half year report was more than three times the magnitude of the loss of the Australian operation. The Australian half-year loss on an EBITDA basis was $8.7 million.

It was the strength of the Australian legal business, specifically in the personal injury market, that provided the foundation for the firm’s expansion in Australia and then in the UK. 

For the December half year, Australian personal injury revenue for the firm was $83 million. This represents a 4.75% decline compared to the equivalent six month period of the previous year.

Its general law division generated $13 million in the half year. The company recently announced that it will be discontinuing most of these areas of general law. 

To state the obvious, break-even in its Australian business can be achieved by reducing expenses or increasing revenue or a combination of both of these factors.

However, personal injury revenue has been declining for the firm at least since 2014 when it reported December half-year revenue of $99 million. 

Putting all available resources into its core practice areas has become a key part of the turnaround mission.

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