SLATER AND GORDON REPORTS $33.7 MILLION HALF-YEAR PROFIT
Written on the 10 February 2015 by Antony Scholefield
MELBOURNE-BASED law firm Slater and Gordon (ASX: SGH) has reported a net profit after tax of $33.7 million for the six months ending December 31, 2014, despite difficulties surrounding its Queensland operations.
The company predicts total revenue for 2014-15 to exceed $500 million, up at least 20 per cent from the $420 million reported last financial year.
Slater and Gordon has 23 offices in Queensland, more than in Victoria or New South Wales, but faces "continued challenges" in the state.
Head of Australian operations Ken Fowlie says the biggest challenge was the Newman government's "effort to reduce claimant numbers by reducing claimants' rights."
Other challenges include a highly competitive market, and a company restructure that brought recent acquisition Trilby Misso under the Slater and Gordon name.
"We expected that change would have a disruptive effect," says Fowlie.
"We still see significant opportunities in Queensland."
Slater and Gordon's share price reached an all-time high of over 6.7c on February 10, 2015. Directors have declared an interim dividend of 3.5c, payable on April 23, with a record date of March 12.
Cash flow from operations was $26.5 million in the six months to December 2014, constituting nearly 78.6 of net profit after tax. The firm expects this rate to be over 70 per cent for 2014-15.
Fowlie says this result is "terrifically strong," despite cash flow from operations constituting nearly 90 per cent of net profit after tax in the last financial year.
He says different billing cycles for new acquisitions produced a skewed figure for 2013-14.
"The business has returned to its traditional trajectory after having a positive aberration," he says.
Slater and Gordon has also announced the proposed acquisition of two British consumer law firms: Walker Smith Way, and Leo, Abse and Cohen.
Group managing director Andrew Grech says the acquisitions will help Slater and Gordon fulfil its growth strategy of consolidation in the British consumer legal market.
"In the UK we are making substantial progress towards our objective of becoming a leading consumer law firm," he says.
"The integration of firms acquired last year is progressing well and only this week we achieved two key integration milestones, the move to our new premises in Manchester and the completion of phase one of the implementation of a single practice and case management system in the UK.
"We remain on track to complete these two important projects by the end of March this year."
The acquisitions would deliver a predicted $35 million per year in revenue and make Slater and Gordon the largest consumer law firm in Wales.
Total consideration for the acquisition will comprise payment of nearly $30 million in cash, including deferred and conditional cash consideration, and the issue of shares worth about $7.2 million.
Slater and Gordon's share price has soared since early 2013, after hovering at just under 2c between 2007 and 2012. It has market capital of nearly $1.4 billion.
Author: Antony Scholefield