Interesting article from one of my favourite references -
Legal Futures UK - maybe we're being a tad hysterical down here - UK based PI firms only having a mild reaction.
SGH has several financing options if necessary - including convertible notes, preference shares etc- when current tumult dies down, as it will.
Slater & Gordon share price continues to plummet, while UK-listed ABSs also hit
27 November 2015
Stock exchange: AIM shares fall
Slater & Gordon’s share price continued to tumble in the wake of the Autumn Statement, with another 27% wiped off their value overnight, while the two listed UK alternative business structures with exposure to personal injury have also fallen – albeit far less precipitously.
This is on top of
an initial 50% fall. The Australian-listed law firm stock is now priced at an all-time low of A$0.69, having started the week on A$2.65 and been nearly A$8 earlier this year.
According to the
Sydney Morning Herald, the company’s market capitalisation is now about A$244m (£117m), down from A$944m last Friday, and well off its peak of A$2.7bn in June.
The initial blow was caused by last Friday’s announcement that the firm was likely to miss its cash flow target, but the personal injury reforms announced by Chancellor George Osborne have sent the shares into freefall.
Slater & Gordon told disallowed yesterday that the reforms would not have an impact on its forecasts for its 2016 financial year, which ends on 30 June 2016, but analysts are expecting them to take a heavy toll thereafter.
Deutsche Bank analyst Dominic Rose was quoted in
The Australian newspaper as saying that a “bear case” scenario would see the reforms wipe out 27% of Slater & Gordon earnings before interest, tax, depreciation, amortisation and write-offs.
The
Sydney Morning Herald said Macquarie researchers were concerned about the level of company debt. They said: “The proposals put forward, if implemented, would in our view have a significant impact on the earnings generation capability of the UK operations.
“With over A$650m net debt [taken on to fund the acquisition of Quindell’s professional services division], Slater & Gordon’s balance sheet position in our view does not afford much flexibility to withstand a significant earnings hit.”
However, Morgans analyst Alexandra Clarke told
The Australian that while the announcement created uncertainty, the firm “has proven over the years its ability to adapt and benefit from legislative change”.
The
Australian Financial Review, meanwhile, reported: “It is believed the company’s banks remain firmly behind the company.”
The two AIM-listed UK alternative business structures in the personal injury market have seen their shares fall too.
Redde, the accident management company that owns NewLaw Solicitors, has gone from 168p ahead of the Autumn Statement to 145p at the time of writing.
Fairpoint, which owns Simpson Millar and Colemans-ctts, was 190p on Wednesday morning, but is trading at 175p this morning.
