Shine Justice sells subsidiary Emanate back to founder

A Brisbane-based law firm behind class-action lawsuits against McDonald's, AMP (ASX: AMP) and Westpac (ASX: WBC) has announced it will sell subsidiary Emanate back to founder Barry Taylor in a bid "to recover" its investment in the company.

Emanate was one of two firms purchased in 2014 for up to $35.5 million by Shine Justice (ASX: SHJ) and will be sold for an undisclosed amount to Strand Legal – owned by legal agribusiness specialist Taylor - before the end of the month.

The subsidiary showed signs of trouble in early 2019 when Shine announced Emanate “was recovering at a slower than anticipated rate, despite a steady improvement in new file openings”, resulting in a $5 million impairment charge.

At the time Shine's board was optimistic that "major infrastructure and mining projects" would increase "business activity" for Emanate, but has not indicated if such opportunities materialised.

In a recent ASX announcement, SHJ said Emanate “has operated in the challenging land access, energy and resources sector."

“The sale is consistent with the growth strategy and direction of Shine Justice,” the company said.

“We are pursuing organic and acquisition growth opportunities that meet our investment criteria and anticipate strong growth of several of our practice areas, including personal injuries, class actions, abuse law and medical law.”

Previously known as Suthers Taylor, Emanate provides legal services in the energy, finance, property, mining, agriculture and corporate sectors, with offices in dispersed Queensland locations of Brisbane, Townsville and Roma.

"Consideration for the sale is anticipated to enable Shine to recover its investment in Emanate, subject to collection of work in progress and debtors on Emanate files (some of which is contingent) over a five year period," Shine said in a recent ASX announcement.

"Shine Justice will have review rights in relation to the collection of work in progress and debtors and will take security over Emanate's work in progress and debtors and a guarantee from the Emanate principal."

Shine Justice reported revenue grew from $93.57 million to $105.67 million in its half-year FY22 results, reflecting a 13 per cent increase year-on-year. The company’s net profit also grew by 30 per cent to $13.5 million.

The group's staff also grew to more than 1,000 for the first time with the addition of new offices in Darwin, Canberra and Wollongong.

Shine Justice managing director and CEO Simon Morrison said the increase was attributed to “growth in new practice areas” such as “class actions, abuse, law, superannuation, disability” and personal injury.

“We are very pleased with our strong market position and solid earnings growth so far in FY22,” he said.

“The financial performance and outstanding results for our clients demonstrate the group’s adaptability, innovation and organisational discipline.

“We implemented a range of initiatives to maintain communication, workflow continuity and importantly to ensure our team remained motivated and in good health.”