How fickle are investors, speculators and hedge funds. Fresh from monstering shares in listed law firm Slater and Gordon (SGH) lower last week, they fled that ailing stock yesterday, taking their money with them (and presumably profits) and went for Dick Smith, which saw its shares slide more than 50%.
As a result, Slater & Gordon enjoyed a great day yesterday, jumping to close at 92.5 cents, for a gain of 34% – quite a different result of last week’s near 70% sell-off.
Slater & Gordon helped settle things by reaffirming its full-year guidance for the second time in 10 days (the previous was at the annual meeting on November 20), but it wouldn’t provide guidance for financial year 2017 as it waits to assess the impact of UK regulatory changes (announced in last week’s UK autumn budget) that helped hammer its share price lower last week.
And until it can either provide reassurance on 2017, or come clean on the impact of the UK law changes with actual figures, the shares will remain a target for short sellers and cynics.
Shortly after the market opened yesterday, the law firm’s shares jumped 35% to 93 cents and stayed around that level for the rest of the day in the wake of the pre-session statement.
SGH 1Y – Slater & Gordon regains ground after reaffirming guidance
.png)
Besides reaffirming the update, the company also confirmed the arrival of Bryce Houghton as the group’s chief financial officer, which was announced to the market on November 18.
Slater & Gordon said in yesterday’s update that it would meet its guidance for revenue of $1.15 billion and earnings before interest, depreciation, amortisation and movements in work and progress of $250 million.
Slater & Gordon was last week hit by the UK government’s announcement that it intends to remove the right to obtain general damages for minor injuries such as bruising, and increase the threshold for small claims from £1000 ($2100) to £5000 to cover a greater volume of injuries in small claims court. The measures are intended to reduce the cost of motor insurance.
Investors sold off the shares because they feared the changes would hit the company’s recent move to expand in the UK in its Solutions business, which relies largely on quickly processed road crash claims. The expansion saw it buy the claims business from a company called Quindell in April for $1.3 billion. Now there’s a fear the company overpaid for the business.
Slater & Gordon CEO Andrew Grech attempted to calm market fears on Monday, saying that while the assessing impact of the changes was difficult, they were unlikely to be implemented until April 2017.
"It is also important to note that the proposals (even if enacted in their current form) do not eliminate the right to claim compensation, or the opportunity to obtain advice and assistance with the claims processes.
"These proposals will not have any impact on the Slater & Gordon Lawyers business in Australia. Nor are they expected to have a material impact on the SGL business in the UK, given the practice diversity and the profile of clients for whom SGL acts,” he said in yesterday’s statement.
The company will not provide guidance for the 2017 year “until details of the final firm of any changes are released by the UK Government”, S&G said yesterday.
