Release Date: February 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shine Justice Ltd (ASX:SHJ, Financial) achieved $29.11 million in gross operating cash flow for the half, marking a significant turnaround from the previous corresponding period (PCP).
- The personal injuries practice billed fees increased by more than 15% compared to the PCP.
- The company has resumed paying dividends due to strong cash performance.
- Shine Justice Ltd (ASX:SHJ) has embarked on a targeted advertising campaign, resulting in record inquiries for the firm.
- The company has made significant progress in reducing its debt, lowering it from $64 million to $49 million.
Negative Points
- Revenue was down 9.47% at $100 million compared to the PCP of $111 million.
- Adjusted EBITDA decreased by 17.48% to $22.2 million from the PCP of $26.91 million.
- Adjusted NPAT fell by 39.9% to $6.4 million from a PCP of $10.7 million.
- The company faced significant write-offs related to the Ethicon and Boston mesh cases, impacting earnings.
- Turnover and lost productivity due to the ongoing 'war for talent' in legal services remain issues for the firm.
Q & A Highlights
Q: Could you provide more details on the finalized restructure of the legal business and costs in the second half?
A: The first piece of work was aligning the fee earners to the size of the cabinet. The second piece involves reviewing parts of the practice that aren't generating desired profits and taking action on those. Additionally, we scaled back shared services costs to better align with the legal side of the business.
Q: Can you elaborate on the simplified business focus on PI and Class Action and its impact on NPA offerings?
A: NPA remains a pillar of the business, but the focus is on class actions and core PI due to their significant growth opportunities. The aim is to apply resources where the best growth potential lies.
Q: What progress has been made on case velocity, and what is required to reach internal goals?
A: Significant progress has been made, evidenced by the cash receipts in H1. The objective is to complete cases in the shortest possible timeframe, with a dedicated team working on this.
Q: Can you provide more color on what happened in PI in the first half, particularly regarding revenue declines?
A: Queensland remained strong, but New South Wales and Victoria dragged results. Decisions to exit certain sectors and write-offs in New South Wales and Victoria impacted revenue. The Abuse portfolio also slowed due to court decisions.
Q: Should we expect PI revenue to be lower in the second half compared to the second half of FY '23?
A: H2 revenue is expected to be higher than H1 but may not reach the levels of the previous corresponding period (PCP).
Q: Is there a significant step-up in revenue expected in new practice areas in the second half?
A: Not in FY '24. The second half revenue is expected to be broadly in line with the first half.
Q: What caused the increase in write-offs of unbilled disbursements, and why wasn't it backed out from normalized EBITDA?
A: The increase was primarily due to the Star case class action, where we lost carriage to another firm and had to write off incurred disbursements.
Q: What will the general OpEx build look like in the second half, and what are the moving parts?
A: The cost reduction efforts in H1 will benefit the second half, but the full impact will be felt in FY '25. Incremental improvements will be seen in the second half, with more significant annualized effects next financial year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
