By Peter Frankl

After almost self-destructing, Slater & Gordon (Australia) has proved that it can survive. That’s what its financial year 2019 results show. 

If you’re assessing survivability don’t get distracted by the fancy, convoluted accounting numbers. Look at the cash flow. 

In Slater & Gordon’s case, the cash flow showed that it collected $229 million from customers in the 2019 financial year. In the previous year it collected $215 million. 

Payments to suppliers and employees in FY2019 were $222 million. In 2018 it was $212 million. 

For two years in a row, receipts from customers are more than payments to suppliers and employees. In this respect the company has achieved stability. 

However survivability / stability is not the game that is played on the ASX. The ASX wants growth and profitability. There is nowhere in the numbers that gives such a signal and hence the share price has steadily declined to a level that represents little more than liquidated value. 

Ironically, now could be the time that well-targeted law firm mergers and acquisitions could see the company rise again. The last time it aggressively pursued such a strategy it ended in tears. 

Slater & Gordon has cut back its service offering and effectively abandoned general practice areas and family law. Its focus now is on personal injury and class actions. 

Slater & Gordon has proved that it can survive. Sure, that is an achievement after its recent history but what it can achieve as a revenue-growing, profit-making company has not yet come to light.