SHINING LIGHT OF PUBLIC LAW

Written on the 8 July 2013

SHINING LIGHT OF PUBLIC LAW

SHINE Lawyers (ASX: SHJ) delivered an immediate profit to investors when it listed on May 15, becoming the largest Australian law firm to do so since Slater and Gordon in 2007.

The company opened at $1.54, a 54 per cent premium on the IPO value of $1 per share and it held those gains in its first week.

Under the custodianship of directors Simon Morrison (pictured) and Stephen Roche, the company founded by Kerry Shine in 1976 has grown to become one of the country’s largest litigators.

The company offered 45 million shares at $1.00 each, with the total number of shares on issue following the offer at 155 million.

Shine Lawyers posted revenue of $48.8 million in the half year to December 31, with a $7.9 million profit after income tax. Full-year revenue to June 30 last year was $88.4 million with profit after income tax $7.69 million.

Morrison, who started with the business as an articled clerk in 1988, has spent most of his career as a litigation lawyer and tells Brisbane Business News he has enjoyed guiding the company through the long process to list publicly.

Even with the added duty to shareholders, Morrison says the Brisbane-based firm will continue to hold to its long-term value of fighting for the “little guy”.

“Our motto has been very simple, and that is to look after our clients,” he says.

“Our value has always been to stand up for the little guy; that is what drives the business.”

What was the thinking behind the decision to take Shine Lawyers public?

There were a couple of things on our mind. The first was that of all the vehicles available to us, listing was a good way for everyone in the business to take ownership in the company if they wanted ownership. It is the most flexible way for the staff, in that they are able to invest and sell their stake in the business at any time.

In Queensland, it wasn’t until recently that non-lawyers could take a stake in a law firm. We want everyone to share in it right down to the administration clerk, who can have a slice if they want to. Secondly, it is really about growth. Historically, when we have looked at growth, we have financed through retained earnings and recently we have moved to use some debt. Equity will be a very good way to grow the business.

How long did you ponder the decision?

Queensland law firms have been able to incorporate since 2007. We have been considering the move for a while. We
watched Slater and Gordon list in 2007 and can see the benefits. Slaters have done a good job in practice and we have been thinking about it for a few years.

Did you consider a merger with a larger international firm, rather than listing?

What we have been seeing is commercial firms with international branding coming into Australia looking for opportunities and there are opportunities for us offshore and we are looking to grow in other markets. Slater and Gordon bought a practice in the UK and we have been looking at the United Kingdom as well as other markets.

What has it been like working with bankers like RBS Morgans during this process?

It has been fascinating. It is a new experience for us being a private law firm moving into this space. We are working with people who know what they are doing: Bell Potter have been very good, as has McCollough Robertson and Ernst and Young. It has been a good experience.

You have mentioned Slater and Gordon, have you taken a lot from its experience?

They have obviously been the benchmark, being the first law firm to list. Another smaller firm from Perth has since made the move as well. Slaters have done a very good job and I think we owe them a debt of gratitude in forging this path; they have developed a very good model.

How will you use the capital raised by the listing?

It is likely to be a mix of working capital and capital for acquisitions, although we have nothing bedded down. We have traditionally grown more strongly through organic growth than acquisitions, but we have completed a number of them and will continue to do so. Our motto is simply to keep running the business well, growing organically and through acquisitions.

Will there be any changes to staffing levels?

What we did a couple of years ago, while thinking about this space, was to put in place more infrastructure in our management team. We have embedded our staffing levels in the business and that was done a long while ago. We recently made a couple of changes to the board. We brought in a chairman with ASX experience in Tony Bellas, the former CEO of Ergon Energy and the Seymour Group and who is currently chairman for a range of other listed companies. We also bought in a new finance director in Greg Moynihan, the former CEO of Metway Bank. We felt that while we had good directors on the board, we needed that ASX experience around us.

Will it be difficult to balance Shine’s duty to the court and clients with its duty to shareholders? How will you manage this?

It is certainly unique to the legal industry. Slaters made that very clear. Our first duty is to the court, our second is to the client and our third will be to the shareholders. If we run the practice well, the duties sit nicely. We have certainly made revisions to our charter to pick up the changes we will have to make.

Will Shine move into other areas of law further to personal injury litigation?

The strategy of our business is to remain as litigators. It is what we do well and it is where we will stay. Personal injury litigation is our backbone, but we will move into other areas as the business develops. We started three years ago developing those new areas.


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