Splashed over the front page of today's heraldsun in Melbourne
Typical of rear vision reporting trying to scare the horses
Where were they 6 months ago with their reporting & who are their sources for the article?
Hindsight is a wonderful thing!
Slater & Gordon missed warning signs over UK Quindell deal that crippled the firm 47 minutes ago Stephen Drill, Charles Miranda, Jeff WhalleyHerald Sun News Slater & Gordon missed warning signs over UK Quindell deal that crippled the firm 47 minutes ago Stephen Drill, Charles Miranda, Jeff WhalleyHerald Sun Slater & Gordon paid $100 million too much for their UK purchase.
SLATER & Gordon ignored multiple warnings and paid at least $100 million too much for a UK business in a disastrous deal that has brought the Melbourne law firm to its knees.
Angry mum-and-dad investors are now asking why it spent $1.3 billion buying a division of British legal company Quindell this year, despite well-publicised changes coming to the UK’s whiplash-claim laws that will hurt the division’s profits.
An investigation by the Herald Sun has also found that not only was the London Stock Exchange laughing at the Aussie buy-up, but was stunned when it paid over the odds.
The British Government’s crackdown on “ambulance-chasing” small claims, which has now gutted Slater & Gordon’s shares, was flagged in 2012.
Slater & Gordon shares closed at $1.13 last night, from a high of $8.07 in April, with more than $750 million of the firm’s value wiped off in a week.
Leading UK financial experts told the Herald Sun that Slater & Gordon had paid well above market value for Quindell, which is also currently under investigation by the UK Serious Fraud Office.
“There was plenty of distrust in the stock market about Quindell’s financial position at the time S & G made the acquisition,” said one.
“Among investors and analysts, clear question had been raised. And in fact, Slater & Gordon had disputes with investment analysts over its views of the (Quindell division) position. It turned out they were to some extend justified,” said analyst Lorne Daniel of top London brokerage and market adviser finnCap.
revenue from compensation cases, raising questions about future earnings.
British Prime Minister David Cameron alerted the legal industry in 2012 to plans to tighten regulation on compensation claims, which are Slater & Gordon’s bread and butter business.
Another warning bell sounded in April 2013, when the UK introduced rules banning “success fees” for failed cases. And in April 2014, a scathing financial report on Quindell raised serious concerns about that company.
Adding insult to injury, Slater & Gordon held a swanky Docklands Christmas party for its union mates on Thursday night, where partygoers could get “anything you want”.
Slater & Gordon spokeswoman Angela Bell said “most industry observers were not expecting the announcement” about the proposed “whiplash law” changes in the UK.
“At this stage, the (British) Ministry of Justice has indicated that it will undertake a period of consultation which will start next year. And it’s expected at that time that greater detail will be released,” she said.
“First and foremost, we don’t support any changes to the law which will have a detrimental impact on people’s rights, but, as history has shown, such changes ultimately lead to a consolidation of the legal sector, which tends to favour larger firms such as Slater & Gordon.”
The London Stock Exchange was laughing at the Slater & Gordon buy-up.
Mulgrave warehouse worker Paul Shackson, 42, lost $16,000 on his Slater & Gordon shares last week, before buying at the lower price to recover some of his losses.
He said he was concerned about the firm’s rampant expansion plans, despite the UK Government flagging changes to the compo claims sector.
“They knew this legislation could come out,” he said.
Anthony Forrest, of Hawthorn East, said he was concerned about his investment.
“As a legal firm they look pretty bad to the rest of the business world,” he said.
Ms Bell also added that the company had reaffirmed its financial outlook for the 2016 financial year.
“In the UK, our Slater and Gordon Solutions business is already turning a corner,” she said.
“We have introduced a new focus on clients based on our values and our years of legal experience.
“As was stated publicly this week in an ASX, Slater and Gordon Solutions continues to improve and the overall UK business is expected to contribute positively to gross operating cashflow from this month.
“More broadly, our outlook for the UK is a positive one given that it is about four to five times the size of the Australian market. This provides us with an unprecedented opportunity to deliver more legal services, affordably.”
Shares tumble takes its toll
MELBOURNE retiree Geoff Bowd is counting the cost of his investment in Slater & Gordon earlier this year.
Mr Bowd, a company monitor at the Australian Shareholders Association, bought a small parcel of shares in July when they were trading at about $6.
Now he is looking at a loss, as the price was hovering around $1.13 yesterday afternoon.
“I’ve taken a haircut, there’s no doubt about that,” he said.
Mr Bowd, 75, of Ashburton, said he had been surprised by the company’s dramatic share-price drop last week, which has been blamed on its purchase of a chunk of Quindell.
He had been monitoring the stock for more than 12 months before he bought in, and was hopeful of a return to a higher share price.
“There was an over-reaction to minor accounting errors and fundraising, they were battered by short selling,” he said.
And he believed the company had a foggy outlook until the impact of any major changes to Britain’s “whiplash fraud” laws took effect, which would be well into 2017.
Geelong’s Jed Bews was caught up in the share price plunge.
Mr Bowd said the company directors, many of whom owned significant shareholdings, would be working hard to turn the firm around.
Geelong footballers Mark Blicavs and Jed Bews have also lost, on paper, up to $40,000 from the Slater & Gordon share price crash.
But retired Carlton star Chris Judd and his weather-presenter wife, Rebecca, dodged a bullet by selling their shares before the price crash.
Bews, 21, said he was licking his wounds on the 4940 shares he bought in July, when they were selling for about $4 each.
Last week’s crash took his paper loss to approximately $15,000.
“I guess that’s the risk you take,” he said. [email protected] @steveheraldsun
SGH Price at posting:
$1.13 Sentiment: Buy Disclosure: Held
(20min delay)