Not a good week for the floated law firm as the following reports attest.
Herald Sun (Aus)
Slater and Gordon shares plunge 25%
http://www.heraldsun.com.au/business/breaking-news/slater-and-gordon-admits-mistakes/story-fnn9c0hb-1227419584468
Shares in Australian-listed law firm Slater and Gordon have once again plummeted, after the group admitted to misreporting revenues from its UK business for more than three years, but says the errors have no impact on net cash results for the division.
Slater and Gordon shares dropped 25 per cent to $3.78, against a benchmark index fall of 2.2 per cent, by the 4.15pm (AEST) market close — the stock’s biggest fall on record.
The company said today it had identified errors in the reporting of its cash flows from its UK operations going back to the 2012 financial year as part of a detailed analysis of its financial information to be provided to the Australian Securities and Investments Commission.
The corporate watchdog had examined Slater and Gordon’s auditor Pitcher Partners as part of ASIC’s routine review of publically listed company audits.
Salter and Gordon said Pitcher Partners on Friday told it that ASIC was planning to “raise some queries” with the firm.
In April, Slater and Gordon acquired London firm Quindell’s Professional Services Division for $1.3 billion with the assistance of EY auditors, which the firm reiterated following reports the corporate watchdog had questioned whether Pitcher Partners had the resources to conduct an “extensive and complex” international audit.
Slater and Gordon said the contentions in the report were “incorrect and misleading”.
On Thursday, the firm’s shares suffered, what was then, their biggest plunge on record after the UK’s Financial Conduct Authority started an investigation into the accounts of Quindell.
Quindell said its accounting policies were “largely acceptable but were at the aggressive end of acceptable practice” in a release to the London stock exchange.
Slater and Gordon said, in a statement today, there were two errors in the method used to report receipts from customers and payments to suppliers and employees by the UK business, reporting receipts on a gross, rather than net, basis.
It also said the UK’s value-added tax was included twice in customers receipts in its financial statements in June and December 2014.
Slater and Gordon identified a consolidation error in the historical cashflows from its UK operations, but said the mistakes have no impact on net cash results for the division.
The firm said any findings made against Quindell would not expose Slater and Gordon to any material financial risk.
The firm provided a draft note which it will affix its full-year financial statements, which Slater and Gordon had been advised was the usual way of dealing with such errors.
Slater and Gordon stock has fallen around 40 per cent in its last four sessions, and has now lost more than half its value since hitting a peak of near $8 earlier this year.
– With AAP
And……………
NZ investor may exit Slater and Gordon
“We have a portfolio of over 100 stocks and some are more high risk than others,” executive director Brian Gaynor said on Tuesday.
“Slater and Gordon is higher risk and we’ve done very well to date out of it but there will always be winners and losers.”
The law firm’s investors have been shocked by news that it made mistakes in the reporting of cash receipts from its UK business going back to the 2011/12 financial year.
Meanwhile, UK authorities are probing the accounts of insurance technology group Quindell, which Slater and Gordon recently bought a slice of for $1.2 billion.
The Australian corporate watchdog is also carrying out a routine review of the law firm’s auditor, Pitcher Partners.
Mr Gaynor said it was difficult to know exactly what was going on with the investigations because regulators don’t provide full information on their inquiries.
“We’re still pretty confident that this is something the company will get over but we don’t really know yet,” he said.
Milford has three funds invested in Slater and Gordon, with its Milford Dynamic Fund holding a 7.4 per cent stake and its Trans Tasman Fund with 1.4 per cent.
Slater and Gordon is also the biggest Australian investment for its Milford’s Active Growth Fund, which has a 2.9 per cent stake.
Shares in Slater and Gordon continued their downward spiral on Tuesday, losing another 22 cents, or 5.8 per cent, to close at a 32-month low of $3.56.
The stock has lost 45 per cent in the past week, when the concerns about the law firm began to emerge.
UBS analysts Martin Byers and Jack Briggs have downgraded the stock to neutral from buy and slashed the investment bank’s 12-month price target to $3.70 from $7.90.
However they still expect the law firm will lift its net profit by 25 per cent to $75.3 million in 2014/15.
In a note to clients, the analysts said Slater and Gordon was facing some serious issues which bring into question the accuracy of its historical financial statements.
“Until the findings of ASIC’s investigation are provided, forming a view on underlying earnings and valuation is challenging,” they said.
However Deutsche Bank research analyst Dominic Rose has maintained a buy rating on the stock, noting its recent hefty falls.
Australian Financial Review
http://www.afr.com/brand/chanticleer/slater–gordon-pays-the-price-for-mistakes-20150629-gi0dym
