Despite gross operating cash flow (GOCF) up 426.9 per cent to $29.1 million – which the group attributed largely to the settlement of class actions – Shine’s net profit after tax (NPAT) dropped by 98 per cent to $0.18 million, plummeting from $10.65 million the previous year. This comes after the group recorded a 90 per cent drop in profits in the financial year 2023 following an “unfavourable judgment”.

Shine’s total revenue dropped by 9.5 per cent, from $111.2 million to $100.6 million. The group’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) dropped by more than 50 per cent to $13.3 million – however, Shine said that this was impacted by the partial recovery of Shine’s fees in the Ethicon and Boston Scientific Mesh class actions, which settled for more than $400 million.

In relation to that class action, Shine said it was preparing submissions related to the recovery of interest on the disbursement funding facilities used.

“As a result, an adjustment against revenue of $7.3 million was brought to account in the first half, which, together with other one-off costs related to restructuring and discontinued operations, resulted in adjusted EBITDA of $22.2 million,” the firm stated in an announcement to the ASX.

Managing director and chief executive Simon Morrison said the financial results were impacted by non-recurring events and general sector conditions and said that the priority in the second half of the year is to “focus on organic growth and cost reduction initiatives to position the business for delivery of shareholder value”.

“The group produced strong cash flow in the first half from class actions as well as resolution of cases in our core PI business. The second half is expected to see a continuation of stronger cash conversion. The group’s strategy remains focused on business organic file growth and recoverability, including adjusting the company’s cost base. Improved process initiatives remain a key focus for the company. We continue to assess non-core business lines as part of our strategic review program,” Shine stated.

“The legal sector continues to experience higher than usual employee turnover, which has a latent effect on case management and resolution. To address these headwinds, the company strives to create an environment that attracts and retains talent. Further, the company has consolidated operations and fee earners and will continue to review overhead cost structure in the second half.”

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Shine declared an interim dividend of 1.5¢ for the first half of FY24, based on the strong cash conversion in the first half and adjusted earnings per share of 3.6¢. Because of these results, Shine also said it was “no longer expecting adjusted EBITDA to exceed FY23 Adjusted EBITDA”.

Shine also implemented a “company-wide cost reduction program, which included overhead costs as well as right-sizing legal teams” in the first half of FY24, which it said will result in “future improvements in GOCF and EBITDA”.