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Slater & Gordon falls on debt fears

AAP logoAAP 29/08/2016 Lilly Vitorovich

Investors are dumping Slater and Gordon shares amid concern about the embattled legal group's ability to pay down its $682 million debt after it reported a $1 billion full-year loss.

The group's hefty annual loss was due to writedowns of $879.5 million, mostly related to its troubled UK unit.

optionsXpress market analyst Ben Le Brun said the group's cash flow generation was disappointing, potentially making debt harder to handle and raising the possibility of a capital raising.

That comes amid a tough regulatory environment in the UK, where proposed changes to accident compensation laws would hit the group's earnings pipeline.

The group's net debt rose to $682.3 million at end of June from $614.1 million at July 1, 2015.

"They need to work out ways to pay that debt down," Mr Le Brun said.

Slater and Gordon on Tuesday revealed its earnings were overwhelmed by expenses, with the company reporting negative cash flow of $104.2 million for the year to June 30, down from a $40.8 million gain a year earlier.

Managing director Andrew Grech said the group's 2016 performance was a "story of two different halves" as the group kicked off restructuring changes to turn around its UK operations in the second half.

Mr Grech said the group's key priority was continue to put the UK business on a sounder footing and complete the restructuring.

In Australia, management will focus on improving profitability and cash generation, Mr Grech said.

Slater and Gordon shares - which were valued at more than $8 in April 2015 before the business' UK woes started - fell as much as 17.8 per cent to 46 cents in early morning trade on Tuesday.

Slater and Gordon raised its total impairment charge for the year from the $876.4 million revealed in its first-half results and announced $33.3 million in restructuring costs related to the UK business it bought in May 2015.

At 1306 AEST, the shares were down 6.25 cents, or 11.2 per cent, at 49.75 cents in a higher Australian market.


* Net loss of $1.02b vs $62.4m profit

* Revenue up 52pct to $908.2m

* No final or full-year dividend

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