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AFL to acquire national firm’s contested wills and estates practice
Following the release of its favourable half-year FY24 financial results, AF Legal Group has conditionally acquired the contested wills and estates practice of Armstrong Legal for more than $3 million.
Lauren Croft
In an announcement to the ASX this morning (1 March), AF Legal Group (AFL) confirmed its conditional acquisition of the contested wills and estates practice of Go To Court Lawyers (GTC) trading as Armstrong Legal, which has offices in five cities across the country.
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AFL, which opened its 20th office in late 2022, will acquire the key components of this division of Armstrong Legal’s business, being debtors, work-in-progress, client matters and direct staff, for an initial purchase price of $3 million and potential earnout payments of up to $750,000.
This comes after the group announced a trading halt on the ASX on Thursday (29 February), pending the release of a further announcement.
The acquisition will result in two potential earnout payments of up to $375,000 plus GST each, subject to meeting revenue targets and payable after FY24 and FY25 accounts (respectively) have been settled, according to AFL. The parties are aiming to complete the transaction by 2 April 2024.
To partly fund the acquisition, the AFL board has also announced a $2.95 million entitlement offer to issue approximately 19.7 million new shares in AFL. Eligible shareholders will be invited to purchase one new share at a discounted rate of $0.15 for every four existing shares they hold at 7pm (Sydney time) on 6 March.
The proceeds of this entitlement offer will be used for costs related to the entitlement offer, to partly fund the new acquisition, including integration costs and working capital requirements of the new business, and to “identify and fund future earning accretive acquisition opportunities”.
The group also reported its H1 FY24 results to the market on Thursday (29 February), showing a 21 per cent growth in revenue, up to $10.7 million – as well as a new half-yearly record in average weekly revenue.
Net profit before tax (NPBT) was $510,000, a $937,000 increase from the previous corresponding period (PCP).
“Main contributors to the revenue growth were the longstanding brands of Watts McCray and Withnalls. In addition, the newer offices within the Australian Family Lawyers brand of Wollongong, Gold Coast and Bayside have seen significant uplifts in revenue growth since their practices first began about 12 to 18 months ago and as their client lead generation matures. The remaining combined Australian Family Lawyers offices were flat compared to PCP but benefited from stronger performances from AFL Kordos and Australian Family Lawyers WA,” the group stated in its ASX announcement.
“Average weekly revenue (AWR) in H1 of $412k per week is a new half-yearly record for our business. Despite this, we acknowledge Q2 AWR performance dropped due to some seasonal issues that saw AWR deliver $398k per week in Q2 compared to Q1 FY24 of $426k per week. This demonstrates the challenges arising from the lack of scale in our business.”
This, AFL said, comes off the back of a new management structure following former legal practice director Grant Dearlove’s resignation in September 2023.
“The board and executive management team remain committed to the above combined growth strategy and will also continue to explore possible acquisition opportunities to grow the revenue base,” the group stated.
Lawyers Weekly has contacted Armstrong Legal for a statement but it has declined to comment at this time.
