Embattled legal firm Slater and Gordon is facing further headwinds as management push ahead with restructuring its troubled UK operations amid concerns about its rising debt pile.
The UK unit - which was primarily responsible for the $1 billion full-year loss unveiled by Slater and Gordon on Tuesday - faces earnings pressure from proposed government changes to accident compensation laws and the possible fallout from Britain's decision to leave the European Union.
Managing director Andrew Grech said the group's key priority was continue to put the UK business on a "sounder footing" and complete the operational overhaul.
The group has so far axed 14 per cent of its UK staff, reorganised 10 locations and closed four offices at a cost of $33.3 million.
Slater Gordon Solutions - the former Quindell professional services division that the group acquired for $1.2 billion in May 2015 - made an underlying profit of $3.3 million for the year but the smaller UK business, Slater & Gordon Lawyers, swung to an underlying loss of $2.6 million due to a fall in new cases.
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The group has also flagged changes to improve the performance of its Australian operations after underlying earnings fell 13.7 per cent to $35.9 million due to rising costs as well as a drop in new cases.
Mr 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.
Investors dumped Slater and Gordon shares amid concern about the group's ability to pay down its $682 million debt, which was up from $614.1 million at July 1, 2015.
optionsXpress market analyst Ben Le Brun said the group's cash flow was disappointing, potentially making debt harder to handle and raising the possibility of a capital raising.
"They need to work out ways to pay that debt down," Mr Le Brun said.
Slater and Gordon on Tuesday revealed its annual earnings were overwhelmed by expenses, with the company reporting negative cash flow of $104.2 million, down from a $40.8 million gain a year earlier.
Slater and Gordon shares - which were valued at more than $8 in April 2015 before the business' UK woes started - closed down 8.5 cents, or 15.2 per cent, at 47.5 cents.
SLATER AND GORDON'S FULL-YEAR LOSS
* Net loss of $1.02b vs $62.4m profit
* Revenue up 52pct to $908.2m
* No final or full-year dividend
