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Slaters halts slide, but uncertainty remains

Slaters halts slide, but uncertainty remains

stock market

After a dramatic drop on the stock market last week, Slater and Gordon shares have begun to rebound.

From Monday through to Friday last week, shares in the listed law firm fell by 70 per cent to close at 68.5 cents, following proposals to change personal injury regulations in the UK.

On Monday, prices recovered by 35 per cent to hit 93 cents. The rebound comes on the back of a public statement from the firm reaffirming it would hit its 2016 earnings guidance.

“These proposals [from the UK government] will not have any impact on the Slater and Gordon Lawyers business in Australia,” managing director Andrew Grech said in the statement.

“Nor are they expected to have a material impact on the SGL business in the UK, given practice diversity and the profile of clients for whom SGL acts.”

However, the firm was unable to reaffirm its guidance for 2017 until the impact of regulatory changes could be assessed.

“Given the [UK government] consultation process is yet to begin, it would be premature for the company to provide financial guidance post-FY16 and it will not do so until details of the final form of any changes are released by the UK government,” the statement read.

Alan McDonald, the managing director of employment law firm McDonald Murholme, warned that instability for Slater and Gordon could have wider effects on the legal profession.

“There is an ongoing need for confidence in the legal profession,” he said.

“When the share price falls, it can impact on not merely the particular public company, but in a more widespread manner when that is an industry leader.”

In particular, he warned defendant law firms may suffer if Slater and Gordon loses market share.

“There are a number of defendant firms which enjoy profitable business, because of the activity of Slater and Gordon as a prominent plaintiff firm,” he said.

“If their income stream is adversely affected, then the ripple effect for their employees can occur. When any industry leader runs into headwind, it can have a range of problems for all of the profession.”

He called on legal bodies – particularly the Law Institute of Victoria – to do more to reassure the public and support the firm.

“I would have thought the Law Institute of Victoria would have done a lot more over the last three months to instil confidence,” he said.

“They have powers – in consultation with the regulators – to get involved and support any legal practice. There is not much evidence that they have been doing that for Slater and Gordon.”

Like this story? Read more:

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Slaters halts slide, but uncertainty remains
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