By Peter Frankl.
In the sphere of publicly listed legal services businesses, the attention for most of the 2016/17 year was on Slater & Gordon skirting on the edge of oblivion and the amazing consolidation and listing activity in the intellectual property sector.
The analysis below considers the results from the perspective of shareholders for the 2016/17 financial year.
The first company to report was IPH Limited (17/8/17), presenting a “blue-chip” set of financial results that was unmatched by its listed counterparts. Read analysis at this link.
The second company to report was Shine Lawyers (25/8/17). By many metrics, Shine Lawyers is performing well. However the share price is still disappointing to those who bought shares at the IPO in 2013. Read more at this link.
Next to report was Xenith IP (29/8/17). Xenith IP started out as Shelston IP and became Xenith as part of its public listing in November 2015. During 2016/17 Xenith IP made two large acquisitions: Watermark in November 2016 and Griffith Hack in February 2017. It also launched an IP-related advisory business called Glasshouse Advisory in May 2017.
During the year there was a lot of attention and resources focused on integrating these businesses. The company added extra levels of management to handle the larger entity. Unfortunately for shareholders the transformational increase in scale had no immediate impact on scaling up the level of profits.
In 2015/16 the company generated $6.8 million of profit before tax on $37 million revenue. In 2016/17 profit was lower at $6.4 million (before tax) yet revenue more than doubled to $85 million.
Qantm Intellectual Property Limited is the combination of the pre-listing firms Davies Collison Cave and FPA Patent Attorneys. Qantm listed on 31 August 2016 and reported its 2016/17 financial results on 30/8/17.
The company did not meet prospectus forecasts, it states, because “the industry experienced a flat year in patent applications.”
Qantm generated $80.4 million in service revenue in 2016/17. Profit before income tax was $10 million. There were heavy costs associated with the IPO as well as retention payments to key people. These extra costs were worn by shareholders through lower profits.
In 2016/17 Qantm and Xenith were unable to match the labour productivity of IPH.
Slater & Gordon
Slater & Gordon reported on 31/8/17. The numbers speak (or cry) for themselves. Revenue was down 32.7% on the previous year. UK performed worse than Australia in terms of the revenue fall. Australian revenue was 14.6% down.
Australian Personal Injury was down but Class Action fees averted an even worse result. Slater & Gordon exited conveyancing services. Personal Injury services contributed 75.8% of revenue in Australia.
Slater & Gordon has been shedding staff. Compared to the previous year it cut its wages bill by $91 million or 22%.
Net loss after tax for 2016/17 was $548.6 million. This includes massive balance sheet write downs. However on a normalised basis the company is close to breakeven.
Investment bankers and fund managers now control the equity of Slater & Gordon. The company has been given a miraculous new beginning.
© 2017 Legal Practice Intelligence