The firm laid bare the full financial catastrophe on Monday, reporting a first half loss of $958 million. Credit:Jessica Shapiro Just how this can be achieved is a head-scratcher. In the half to December it reported negative net operating cash flow of $83.3 million, a net loss after tax of $42 million (even before the impairments) and net debt of $741 million. The company now has a market capitalisation of about $235 million. For the time being chief executive Andrew Grech gets to keep his job, having offered his resignation and having this rejected by the board. While it might seem outrageous for Grech to remain in place he might also be the best person to navigate through the mess in the UK which is where he will be spending most of his time from here.

It is also difficult to imagine who would want the job of replacing him given the challenges that lie ahead. The banks have already installed their own insolvency experts, McGrathNicol and FTI Consulting, to oversee the operations and pore over the firm's documents – which suggests the management would not be able to move without getting an OK from these overseers. As for chairman John Skippen, he apologised to shareholders for the financial losses on behalf of the board. The company's share price was trading at $7.85 less than a year ago and those holding on to stock today which is trading at less than 70 cents are taking a punt. On Monday he asked the rhetorical question of investors, "You might question whether I should remain as chair ... it is in the best interests of stability". Not all shareholders would share that view. In an interview last August Skippen, who is not a lawyer and is considered more entrepreneurial than most chairman, was asked whether Slater & Gordon had grown too fast.

"I simply don't agree. Slater & Gordon has built a very strong record in delivering shareholder wealth since it listed on the ASX. Management has done a terrific job implementing a program of acquisitions and growing profits strongly at the same time. "Yes, PSD is a big acquisition, but we have demonstrated, over a long period, that we have the bench strength and management strength to pull it off. It's totally unjustified to argue we have grown too quickly." Thus the regime that announced last year that the $1.3 billion UK acquisition would be transformational now have the responsibility to transform the company back to profitability. The majority of this goodwill amount has now been written down but it also took a $60 million charge on its Australian and UK general law practices. How the company has accounted for goodwill and work in progress has been a contentious issue for a while and the subject of scrutiny from the Australian Securities and Investments Commission.

On closing the book on its investigation ASIC said it had made inquiries of S+G in relation to its financial report for the year ended June 30, 2014 and had subsequently raised questions in relation to the financial report for the year ended June 30, 2015. ASIC's inquiries mainly concerned the recoverable amount of goodwill attributable to the company's Australian and UK businesses, the recognition of fee revenue and related WIP (work in progress), provisioning against debtors and disbursement assets, and the basis for classifying WIP and disbursement assets as current assets. What this reduction in the value of the firm's assets says about future profitability is a reasonable question. Not surprisingly the company says it is working on performance improvement programs in the UK and Australia aimed at improving profits and operating cash flow. The banks will undoubtedly be expecting some ruthless cost-cutting. But before the management need even address that question, the more urgent task is existential.