Good morning, everyone, and thank you for joining. My name is Allen Chan from Bridge Street Capital Partners, and I'm pleased to be hosting Shine Justice for their full year presentation. Today we have Simon Morrison, MD and CEO, CFO, Ravin Raj, and investor relations, John George, on the call. Matter of housekeeping matters, this webinar is being recorded. At the end, we will have time for Q&A, so if you could please enter your questions into the chat, and I'll address them at the end, following the presentation. Simon and Ravin, over to you guys. Thank you.
Thank you, Allen, and good morning, everyone. Welcome to the FY 2024 results. Allen, let's start at slide number 6, and I want to open by taking you back to the listing of Shine on the Australian Stock Exchange in 2013. Some core numbers for the company back then, we had revenue of AUD 107 million. We were located across 35 sites in Australia and had about 337 fee earners in the business. Fast-forward to 2024, revenue has almost doubled to just under AUD 200 million. We have 51 offices across Australia and 2 affiliate offices in New Zealand, and we have 533 fee earners in the practice.
A breakdown of some of those numbers across our segments, we have 403 fee earners in our personal injury business, which is the core of the practice. We have 80 fee earners in our class actions practice, which is growing, and we have 50 fee earners in our adjacent legal services, which I'll come to in a later slide. 51 offices, as I've said. Our market position, we are the number one personal injury practice in Australia. We are the number two class action practice in Australia. The breakdown of our revenues across those segments in FY 2024, just under AUD 150 million in the personal injury practice, AUD 21 million in the class action practice, and AUD 29 million in the adjacent services. Let's move to slide 7, and firstly, just a breakdown of what's inside those segments.
So we'll start with the class actions and NPA segments, but the primary contributor there is our class action business, which we'll talk a lot more about in a later slide. Our adjacent services are superannuation and disability claims, dust diseases litigation, medical negligence litigation, and one family law practice. Our personal injury business comprises four key practice areas: motor vehicle claims, workplace claims, public liability litigation, and abuse litigation. And we run the core across four different brands in Australia, Shine Lawyers across the eastern seaboard, Sciacca's in Brisbane, a bespoke union practice, and Stephen Browne and Bradley Bayly in the west. Moving over to the map, you can see we have a heavy concentration on the eastern seaboard. We do have plans to improve our footprint, which I'll come to a bit later.
We track how much we recover by way of damages for our clients in real time, and I can report to you that for the year ending 30 June 2024, since inception, we have recovered AUD 8.8 billion in damages for 87,000 clients across Australia. Let's move to slide eight. Thanks, Alan. We'll start with our ASX data, our symbol SHJ. We have circa 173 million shares on issue. As at 30 June, share trading price AUD 0.71, with a market cap of AUD 123 million. A breakdown of our top shareholders in the company, myself and the other co-founder, Stephen Roche, have just over 50% of the shares.
Two key shareholders, firstly, Fidelity out of Singapore, have just over 10%, and Aline Partners out of Switzerland have just over 10%. Our staff holds 7% of the shares in the company, and the remaining 23% is a mix of institutional and retail holders. Our board is ably led by Graham Bradley AM, who is known to many. He is a very prominent public company director and chair, together with directors Theresa Dyson, David Bayes, and Rod Douglas. Theresa and David have very broad experience in large public companies. Rod Douglas is a specialist in founder-led businesses. Our management team, Ravin Raj, our Chief Financial Officer. As we've reported, I'd like to acknowledge, Ravin will be retiring from the company after eight years of great service to Shine.
He has been a public company CFO for over three decades, and I want to acknowledge the enormous work he has done at Shine, particularly the heavy lifting to reset our company for good things ahead. We have Lisa Flynn, our Chief Legal Officer. She is a litigator in the practice of 25 years standing. She has practiced in all areas of the business and been in management roles for many years. Our Chief Operating Officer, Jodie Willey, similarly, 25 years plus in the business, litigated in most areas, and held key management roles. I'm the MD and CEO. I've been a litigator and a manager and have clocked up 36 years at Shine. I'll pass now to Ravin to talk us... I think I'll finish off on this slide, Ravin, and then pass through some key financials. Let's go to slide 10.
Thanks, Allen. I'll just walk you through some highlights. Ravin will talk to more of the detail. Start with revenue on adjusted EBITDA. Both numbers were down on PCP. A fair chunk of that is to do with the reset work we've been busy working on during the FY 2024 year, and Ravin may give some color on that. We had a very good result in gross operating cash flow at AUD 51.8 million, a near record for the company, which we are very pleased about. We have announced a total dividend for the year of AUD 0.055, a reflection of the very strong cash production in the company in FY 2024, and again, a year record on dividend.
Cash at bank is very strong at just a shade under AUD 30 million, and we've had a good reduction in our debt in the year consequent to the cash production. If I talk briefly to the key achievements, we'll start with strategy. FY 2024, as we flagged in 2023, was going to be a year where we did some reset work in the business. I'll talk through that in a bit more detail, and I'm pleased to say we executed on those plans. We divested our non-core businesses, and that divestment had a role to play in headcount reduction and some revenue reduction in the FY 2024 year. We decided to simplify the focus of the business in two main segments, being the class actions practice and the personal injury practice, and I'll come to those reasons shortly.
So far as profit and cash is concerned, as I said, one of our best cash results in history. We delivered on our cost reduction program. We had a key focus on getting rid of some older cases that had been sitting around for a while. The good news is that was good cash in the door in the financial year. We had to take some WIP write-off to get those cases to conclusion. Finally, we've been working hard on improving the efficiency in the PI process to try and speed up the rate at which we convert WIP into cash. Across the practices operationally, we resolved more than 5,000 cases in FY 2024 for over AUD 810 million in damages for our clients. We achieved some landmark results in firstly, silicosis litigation and more recently, black lung.
We received a record judgment of AUD 3.2 million in the Dust Diseases Tribunal for coal miners suffering from black lung disease, a first in Australian legal history. We achieved class action settlements totaling AUD 171 million against two entities: the Commonwealth Government for the PFAS firefighting foam litigation and the Evans Dixon class action. We settled a major class action against the Western Australian Government for stolen wages on behalf of Aboriginal workers for up to AUD 180 million. That case is pending approval by the court. We got busy filing class actions in the year. We filed class actions against KFC, Rest, Aussie Home Loans, and through our affiliates in New Zealand, Toyota and the Edgecombe Floods class action.
And finally, we're in the final stages of our preparation on the Ethicon interest application, the last step for us in this long-running case. I'll now pass to Raj.
Thank you, Simon. Go to the next page, Allen. I'll just run through a summary of the financial results. As Simon indicated, our revenue was down 12% to AUD 198.6 million. Adjusted EBITDA was down 26% to AUD 45 million. Unadjusted EBITDA, however, was up 14% to AUD 33.8 million. And similarly, net profit after tax was up 89% to AUD 6 million. In terms of the adjusted results, there were three main items that were impacting FY 2024, and they added up to AUD 11.2 million as a group. Ethicon and Boston Scientific billing write-offs, which we reported in H1. A fair value adjustment that we made on the M&A receivable that's in our balance sheet of almost AUD 2 million.
As Simon indicated, we did do a fair bit of work in resetting the business, but that cost us about AUD 1.6 million in the year. The tax rate, when you look at the tax for the year, was up to 37%, and that was mainly due to the fact that the write-off of the M receivable is a non-deductible. When you look at employee benefits expense, it. We maintained the expenditure between FY 2023 and FY 2024, even though there were lesser fee earners and shared service personnel. In terms of overheads, they were controlled quite well between the two financial years, notwithstanding a 3% salary increase across the board, as well as increased costs from suppliers.
In looking at the results on a segmental basis, in the financial statements, you'll see that the PI segment reflects a 5% decrease in revenue, and also a decline in margin to 21.7%. As indicated, this segment, this segment's revenue was largely impacted by larger write-offs than normal in the strategy of improving cash conversion, but at the same time, we wanted to clear some older cases. This segment will see an immediate improvement in financial performance in FY 2025, including EBITDA margin. In terms of the NPA segment, the results reflect a 28% decrease in revenue, as well as a decline in EBITDA margin, which stood at 25%. Most areas were behind in FY 2024, including a drop in revenue in class actions, medical law, family law, and loss recovery.
Class Actions revenue and EBITDA margin was significantly impacted, not only by the Ethicon and billing write-offs, but also from the loss of the carriage on the Star Casino case, as well as a couple of cases that were brought across through the ACA class action. Next page, please. In terms of dividend, EPS essentially mirrors NPAT, which is sitting at AUD 0.035 a share. However, adjusted EPS is AUD 0.083 per share. Investors will remember that there was no final dividend in FY 2023 due to negative cash in that year.... But the board have decided to return the dividends, given the strong cash returns in FY 2024. The final dividend is AUD 0.04 a share, making total dividend for the year at AUD 0.055 per share.
This payout ratio is 157% of EPS and 66% of adjusted EPS. The board hope to continue to increase dividends in the future, as long as we, the business continues to produce strong cash conversion. Hey, next slide, please. This is our abridged version of our statement of cash flows. As Simon indicated, we had one of our best years in terms of GOCF outcome. We produced AUD 51.5 million of GOCF during the year, compared to PCP of negative AUD 3 million last year. Our cash conversion ratio on adjusted EBITDA is at 115%, and we used the cash in terms of capital management. We retired AUD 17 million of debt in terms of the use of that cash.
As Simon indicated, we believe we've now got to the stage where the business is more focused on cash conversion, and we hope to produce cash conversion 70% plus in future years. Next slide, please. In terms of the balance sheet, because of the good cash year, the balance sheets remain strong. Cash on hand has improved. We have had a drop in WIP, reflecting the deeper focus on resolving cases. Our provisioning, the figure that you see for work in progress there is net of provisioning, and we carry provisioning of AUD 90 million as at FY 2024. And you, you'll see the decrease in borrowings due to the surplus cash conversion. Back to you, Simon.
Thanks, Ravin. Let's move to Slide 16, please, Allen. So I want to speak briefly to the reset initiatives that we first flagged in FY 2023, and those initiatives were designed to underpin future growth in our EBITDA, and there were four parts to the reset plan. The first and primary part is to simplify the business structure and operations. Secondly, to focus on meaningful revenue growth and improved earnings by concentrating on the practice areas that we know that we can grow. The third part was to identify areas where we could remove corporate cost within business units. And then finally, expansion of our operating footprint across the Eastern Seaboard. Let's move to Slide 17 for a bit more detail on that. Thanks, Alan. I'll walk you through four key components.
On the cost reduction side, we executed most of those initiatives through FY 2024. They will deliver in-built future cash savings of AUD 14.7 million into the business and expense savings of AUD 12 million. In the simplification of the business, we targeted our activities to focus on two major parts of the business moving forward, being the personal injury practice and the class actions and NPA practices. And the common element to both is they are practices that we know very well and that we know we can grow and scale. Thirdly, we retired non-core businesses from the practice, and that included winding down of areas like commercial disputes, travel, estate litigation, and family law. That work continues into FY 2025. And then finally, we've been working on the expansion plans for the operating footprint for FY 2025 and beyond.
I'll go back to Ravin now just to talk to us a little bit about the debt profile of the company. Next slide, Allen.
Thank you. Thank you, Simon. When you review the financial statements, I made the point earlier that gross debt has reduced to AUD 55 million from AUD 72 million in FY 2023. Debt increased in FY 2023, mainly through a working capital line, and we drew on the working capital line because we had to because we did not produce much cash in FY 2023. Net debt has reduced to AUD 26.1 million from AUD 51 million previous year in FY 2023. We have a long-term relationship with CBA. The average cost of debt is 7%, and from a debt equity ratio, we're sitting at 20.4%, well below industry standard.
In terms of CapEx, the company's not doing too much CapEx at the moment, and any investment that we've made in CapEx and drawn debt to fund that CapEx, you'll see a reduction in that debt component through twenty twenty-five.
Let's move now to Slide twenty-one. Thanks, Allen, and I'll break into some of the segment activities in both PI and class actions NPA. We'll start with the personal injury market overview. The data that I'm about to walk you through is publicly available in the IbisWorld reporting. We'll start with the market share. As we've reported previously, it's a very wide-open market in the personal injury segment in Australia. Shine is the largest player at 9.4% of the Australian PI market. One of our competitors, Slater and Gordon, is at 8.4%, and another competitor, Maurice Blackburn, at 7.4%. That leaves just under 75% of the market occupied by other practices, which will form part of our growth plans for the organic part of the PI business.
A breakdown of where that work sits is the second pie chart. It's broadly broken into three areas. Motor accident litigation is just over 35% of that work. Workplace injuries comes in next at twenty-eight percent. I beg your pardon, at thirty-six point five percent. And then other comprises areas like public liability, medical negligence, and abuse, all practice areas that Shine prominently is involved in. We've moved to slide 22. Thanks, Alan. We'll just give you a breakdown of the last sort of four years, five years journey over some of these measurements. Across that period, we've averaged net revenues of circa AUD 150 million plus, with plans to grow it. Personal injury still remains the core part of the business, albeit the class action practice is experiencing very fast growth.
Our strong emphasis in 2024 was cash conversion and resolving aging cases. As I said, the upside was an increase in cash into the business. The downside, we had to let go of some WIP and write it off in the process. We will continue that practice of trying to get rid of the older cases, so we have a cleaner balance sheet moving forward. The short-term outlook in the PI business is to keep focusing on revenue and gross margin. And the final comment I'll make is the data reflects some movement of business units over years. So for example, those who've followed the company will know that, abuse litigation previously sat in the NPA segment, but we've moved it into the PI segment. We've moved to slide 23. Thanks, Allen.
These are our growth plans for FY twenty-five in the PI business. Our marketing team are working very hard and restructuring to focus on file growth on a branch-by-branch basis, as opposed to through a central strategy to attract new work into the business. We've done a lot of work to reorganize our call center to improve both the rate at which inquiry comes into the business and the rate at which we convert, can convert that inquiry into new cases. We've been working hard on strategies aimed at staff retention. We're not immune to turnover issues that many experience in other sectors, and so strategies in place, we have a profit share incentive scheme, very tightly aligned to both cash and EBITDA performance.
We have an equity scheme for our employees, and 154 of our people participate in that scheme currently. The final piece of work is we've done some work on our capacity management to ensure that we have the right level of fee earners across the right business units. Let's move to slide 24. Thanks, Alan. Now, let's move to the medium-term plans for the growth of the personal injury practice. There are three parts to this plan. First is organic, and the two areas we're concentrating on are the file intake that I just spoke to and the revenue and market share opportunities. The second plan is to return to acquisition of files.
It's a practice we had done previously but had paused, and this involves literally Shine buying files from other firms who, for varying reasons, most of which is capacity, can't continue to run the cases. We look for files that are at lower completion levels, giving us more upside on the completion of the work. We work to a payback of about two years, and that allows the cash to recycle through completion. So it's a good strategy for the company and one we want to accelerate. And then the third arm is business acquisition, where we're more active in the earlier years of listing on business acquisition. It's a practice we do want to return to. We do manage a portfolio of opportunities that we assess.
As I said earlier, 75% of the market resides in what we call the tier two and tier three law firms. The payback metric that we work to for acquisitions is a three-year payback. Let's move to slide 26. Thanks, Alan. We'll go into the class action segment. So again, a similar data for you to see over a five-year period. The two things I'll call out in that data is what's embedded in that is obviously the retiring of some parts of the business as part of our reset activities and transfer of some parts into personal injury. But the class action practice is really the major focus of this segment as we move forward. In 2024, its contribution to revenue was 17%, and our strategy is to increase that revenue. Let's move, Alan, to slide 27.
This is a high-level overview of our class action practice. The practice started in Queensland, many, many years ago. We now have operations in New South Wales, Victoria, and through our affiliate in New Zealand. We are the second largest class actions practice operating in Australia. It is the fastest growing part of the business and one we're giving a lot of focus to. A bespoke strategy of Shine is that we have formed working relationships with a number of United States law firms, where we can transfer US-domiciled class actions into Australia and litigate them here. We'll move to slide 28. Thanks, Alan. A little bit about the portfolio. So the book we have is designed very deliberately to have a wide variety of cases, so we are not exposed to any one particular segment too much.
The reason for that is to manage against any potential reform risk. Our pipeline continues to grow. I'll come to that in a moment. Our medium-term growth will, in no small part, come from our strategies in the United States. Looking at the current class actions, and when we say current, these are the litigated cases in the court system at the moment. There are 25 litigated cases running as we speak. There are more than double that number in pipeline coming through. The breakdown of cases involve employment cases, which are largely wages-type cases. We have a strong emphasis on First Nations and social justice cases, and we're very proud of the results we've obtained in that area. We run shareholder class actions, consumer class actions, fin services, environmental, and one ratepayer class action.
Let's move to slide 29. Thanks, Allen. So I just want to talk a little bit about litigation funding, which has been topical in this country. So our strategy at Shine is to continue to work with litigation funders, for two reasons. One is it enables us to grow volume into the business while de-risking our balance sheet at the same time and unlocking cash flow. The way we run with litigation funders is the work is performed and billed monthly and paid by the funder, so that improves the cash in the business. Just some metrics. Of the total number of cases we have undertaken, 74% of our cases are litigation funded, 17% are Shine funded and reducing, and we have 9% in the new group costs order jurisdiction in Victoria.
Typically, funders will pay us anywhere between 70% and 100% of the work required and typically 100% of the disbursements. Any work that we do on non-funded class actions has bespoke provisioning attached to it, so typically, we could carry anywhere up to 30% of the work in progress on a funded case, which gets paid at the conclusion of the litigation, and in some circumstances, we can get a 25% risk uplift on top of those fees. Let's move to slide 30. Thanks, Alan. The Australian class action strategy is to continue to work with our litigation funders to keep growing that part of our business.
Expanding our footprint, Victoria is now becoming a very important part of the class action landscape, and we've established a Victorian presence with a senior lawyer running that part of our business. We want to continue to grow the class actions practice across the country and through our affiliate in New Zealand, where we see key opportunity. The U.S. strategy is a strategic intention for Shine to accelerate both what we call class actions and international mass torts. So these are U.S.-originated cases already run by American lawyers that we can transfer into Australia with the assistance of U.S. law firms. So we've been working pretty hard the last two years to source and build up those relationships with United States law firms. Let's move to slide thirty-two for the outlook.
So Shine is what we call a strong defensive business, and what I mean by that is we are relatively immune to economic cycles. So far as the outlook this year is concerned, we want to continue the strategy of focusing on those two operating segments that I spoke to, NPI and class actions. We want to accelerate organic growth opportunities. We are in discussions with U.S. litigation funders to assist in the insource of that work. We want to keep our focus on expense management. Cash generation, albeit a fantastic year in 2024, we continue to plan for future growth and cash generation in the business, aiming to a long-term target of 70% cash conversion. So for the year ahead, we have budgeted to grow in both personal injury and class actions. So that concludes the formal presentation.
Alan, we're happy to move into questions.
Right. First question from Daniel Seeney. With the reset year behind the business now and revenue close to double since IPO, where do you see the business in another five to ten years' time in terms of potential group revenue?
Yeah. So clearly, the work that we've done in recent times has all been designed to get back to future growth of revenue, both organically and through acquisition. I would see much stronger rates of growth annually moving forward than we've seen in recent times. If you want to add to that, Ravin?
Yeah, I think just putting the last couple of years aside, the core PI business had been growing at an average rate of 8% per annum revenue. So, I think, in 10 years' time, you could see the core business doubling, subject to value of files coming into the business. And certainly from a class actions point of view, we'd certainly want to be seeing, with all the work happening in the U.S., and also in Australia, we'd certainly be seeing a doubling class actions revenue as it stands today, if not more, within 10 years.
Thank you. Another from Daniel. Why does the company need offices in regional centers? How important is this as part of the marketing and client engagement? And could we see a consolidation of that footprint over time with an expanded market leadership position and brand awareness?
Yeah, excellent question. So let's deal with the first question. The strategy of Shine is to expand across the regions, and strategy occurs for this reason: What we want to do is bring specialist lawyers into regional areas so that we offer a far better service for clients in regional areas than what I would call general practitioners. We do have hubs in our metropolitan offices, but we see a key advantage for having specialist lawyers in the regions and don't see any great change to that strategy moving forward. In terms of consolidation, clearly, that's something we'll keep an eye on, but for now, we think the strategy for Shine is to continue to accelerate the regionalization program.
Thank you, Simon. Next question: Can you provide a view on the earner productivity at present versus optimal? How much opportunity is there in the driving productivity over the next few years?
I can start and you can take over. Look, there's two ways of looking at productivity. One is utilization, and it's something that we've been talking about for quite a while now. And what that really means is we want fee earners to be operating at optimal. And early indications are, in terms of FY twenty-five, that the number of fee earners is down, but we're actually producing more productivity, which means that utilization is increasing in the business. And I think the business has reached a stage where utilization is on the improve.
Simon mentioned earlier that we did a bit of a cabinet review and capacity review, and we're getting better at having the right number of people in terms of versus the right number of files, and that's improving productivity organically. The third way of improving productivity is having more files coming into the business and employing more lawyers. That's the best way of improving productivity. But I think in my mind, the real value is through improving utilization.
Yeah, the only thing I'd add to that, Ravn's covered that well, is that, so to answer the question, yes, we have head height opportunity, there's no doubt about that. Recoverable productivity, for me, is the key. In other words, what percentage of that work in progress ultimately converts to cash is the ultimate objective.
Thank you. Are there any other adjacent services slash segments that may be attractive additions to the company over time?
Yeah, another good question. So for those who followed the company since we floated, we actually did go on a diversification program for some years, moving into other areas. More recently, we took the decision that we are better concentrating, as I said earlier, on areas we know we can run well and that we can scale. So that's certainly our immediate focus moving forward. That's not to say we won't keep an eye on opportunities that are coming. I made the comment when Shine first listed on the stock exchange that litigation will be around forever, in my view. It might look different in ten years' time, but there will always be wrongdoing occurring somewhere, and there will always be the remedy of damages for that wrongdoing.
So that's a watching brief, but in the short to sort of near term, our focus is on those two key areas that we've outlined today.
Simon, can I just add to that?
Yeah.
With the change in the business to focus on those two areas, which is class actions and personal injury, as you've probably noted, there are still some businesses that are left in what we used to call NPA. And over a period of time, ideally, for better visibility and better clarity, it's a good strategy for the business to move those businesses into PI. So moving forward, you'll have a clear PI business and a more clear class actions business in terms of the metrics that the business will provide to investors.
Thank you. Next question. How do you see wage inflation and skilled labor availability looking to FY twenty-five?
Yeah, another very pertinent question, and across many industries, not the least of which is ours. Post-COVID, we went through a period where competitors were offering significantly larger salaries, and Shine had to compete in that market without making decisions that really put the business at risk. I think it's fair to say that that pressure is starting to abate. There are strategies we've employed to combat that. For example, in the last 18 months, we recruited something like 13 or 14 lawyers from the United Kingdom. That's been a strategy of Shine for more than 20 years, that we will source litigation lawyers out of that country. We do that for two reasons. One is, it's the home of common law litigation, and so the skill levels of those lawyers tends to be very high.
We typically concentrate on lawyers who are looking for a scene change, if I can use that phrase. So that's a strategy that works nicely for the business that we will keep an eye on moving forward. But I have to say, the price pressure and the supply pressure has probably come off in the more recent times.
All right. Thank you. From Daniel: Net debt has come down significantly in FY twenty-four. What do you think is a normalized level of debt that this business should carry going forward?
Yeah, I think I made the point earlier that our debt went up from AUD 50-odd million to AUD 72 million last year, mainly because the business didn't produce cash in FY 2023, and we used a working capital line during the year to fund the business. Given that we've had a fantastic year, we've repaid that line, so that was a come and go line. So look, I think, assuming normal operations, and assuming no new acquisitions, which we can't fund out of cash, I think, gross debt can remain at sort of 50 to 55, will remain at AUD 50-55 million for a while, and then slowly amortizing from 55 down to 50.
Next question. It seems like the recoverability of WIP is an ongoing concern for investors and for Shine. These reports are regularly filled with once-off adjustments, which is not ideal, and which are forecasting further doubts.... How have you seen forecasting been affected by what you've observed in the data? Are you trending to forecast maybe more conservatively?
Yeah, good, good question, so let's break that into a few parts. Firstly, when it comes to the one-off adjustments, there are two components to that. A big contributor to those adjustments were a couple of legacy 100% self-funded class actions, an area that we've moved away from. So I think we can say with some confidence that you won't see a repeat of those types of things. The second part, which I talked about in an earlier slide, was a deliberate decision to move off older cases, and we did take some WIP reductions, which result in write-offs, as a consequence of that deliberate strategy, and again, we have some confidence that when we look across our portfolio, that position is improving.
In terms of how it affects our forecasting, we have a very bespoke model of provisioning against our work in progress, which is linked to real-time results. So we do cater at the other end for increased provisioning when we need to on the balance sheet, so we're relatively comfortable that that's in hand.
Sure. I'll give you the metric, Allen, that we've used for provisioning is that it's almost 20%, so the work in progress that you see in the balance sheet is net of 20% provisioning that we've taken. So it's a pretty large number, AUD 90.4 million compared to our net WIP. And so we believe that we're carrying adequate provisioning, and it's conservative, and it's prudent in terms of the no win no fee business that we have.
Thank you. Just on the U.S. strategy, is Shine searching for acquisitions in the U.S. market or just partner?
Yeah. So for now, we're just, it's a partner strategy, and the reason for that is the work that we're sourcing from the United States are, in fact, Australian class actions, but we're tapping into the IP of our U.S. partners who've run these cases in that jurisdiction. So it doesn't require any activity by way of acquisition. Downstream, we will see how that develops, but we think the smarter and more conservative strategy we can adopt is to organically grow that opportunity for the business, and we'll reassess downstream.
Thank you. Question here. Does the board believe that Shine is currently undervalued on the ASX? And if so, any considerations of a share buyback to support investors?
Yes, Shine board does believe the stock is undervalued, and yes, there is consideration in respect to share buyback. It's a topic that's been discussed around the board table for some time.
Yeah. A question from Peter Drew: How should we think about OpEx growth, including wages in FY twenty-five? Are there savings from FY twenty-four initiatives to flow into FY twenty-five?
Yeah, Pete, I think within your modeling, I think OpEx will be flat when you compare it to FY 2024 in FY 2025. So, that's really the benefit of the work that's been done in FY 2024.
Another question. What changes in litigation funding are being made to avoid a repeat of Boston/Ethicon?
Yeah, another good question. So the short answer is the litigation funding market has changed demonstrably, and I'll speak mainly to the Ethicon case because it's the oldest. That case started back in two thousand and twelve. There was pretty well only one player in the lit funding market in Australia back then, which is Omni Bridgeway, then called IMF. A decade on, we have a lot of funders in play, and particularly we have international funders, large international funders that we work with. So Shine is working with key funders out of the United Kingdom and talking to funders out of the United States. So Shine's strategy is an Ethicon-type case wouldn't proceed without litigation funding, clearly to avoid the lessons we've learned in that case.
So, another one from Peter: Are the revenue results FY 2024 for each segment a fair representation of base to grow from in FY 2025, or are there further write-downs expected?
I think they're a fair representation of a base to grow into FY 2025. I think there's adequate provisioning. We're carrying adequate provisioning to hopefully not have any further WIP write-offs impacting revenue.
Peter, question: Can you provide an update on a potential recovery of the disbursed interest related to Mesh?
Yeah, as I mentioned earlier, we're near the end of preparing the material. The judgment at first instance was a very comprehensive judgment by His Honor, raising a number of issues that we were to address, and the team have been working diligently away at those. So, we are hoping we're near the end of that preparation for that application.
Thank you. Question from Daniel Yen: Can you expand on the recent changes in the employee incentive program? How significant is this in terms of staff turnover and cash conversion going forwards, in your view?... You want to take a little?
Yeah, look, very simply, the incentive program has changed almost every year since I've been with Shine, but I think we've got the formula right moving forward in terms of FY 2024 and FY 2025. There is a gateway in terms of being eligible for the incentive program in terms of meeting EBITDA targets, but what we're now doing is that the cash target, the person will get a higher incentive, the higher cash result they achieve. So, so the more cash you achieve, the bigger your STI will be. Whereas previously, it's been relatively flat. And so what we're saying is, if you achieve more cash flow, your bonus will be much, much higher. It sounds simple, but it's taken a while to get there.
Thank you. Simon, one for you from Lindsay Adams. Does Simon Morrison have any plans for retirement?
Hi, Lindsay, and thanks for the question. I don't have any plans for retirement.
Sure, that's it. Thank you. Question from Daniel: The pipeline for class actions looks very strong. How much capacity is there in the business to take on new cases from the U.S. lead generation strategy, and should this start to ramp rapidly?
Yeah, a very good question. So one of the areas we are ramping up in terms of headcount in 2025 is the class actions practice. With the establishment of the Victorian arm of the business now, we are recruiting people moving forward for those opportunities. But like the other parts of the business, that's a capacity question we have to manage and make sure that we don't bring on too many cases and not have enough lawyers to run them. But clearly, there is recruitment going on in that part of the business.
Thank you, Simon. Just looking at the time, any further questions, please type into the chat box, please. Okay, that will be the end of the Q&A. Simon, Ravin, I'll get back to you guys for some final remarks, please.
Thank you very much, Allen. Thank you, everyone, for attending the call, and we look forward to seeing people on the roadshow starting Monday morning. Thank you very much.
Thank you. Bye, guys.