Thank you for standing by, and welcome to the Shine Justice Ltd FY 2023 full year results teleconference. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key, followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Simon Morrison, Managing Director and CEO. Please go ahead.
Thank you, and welcome to the FY 2023 full year results call. Can I start by introducing our team here today? Firstly, with me is our Chief Financial Officer, Ravin Raj , our Head of Investor Relations, John George, our Company Secretary, Annette O'Hara, and I'm the Managing Director and CEO. Start with slide 6 of the deck. To summarize, FY 2023 ended up being one of our most challenging and difficult years on record. Revenue was up pleasingly by 7.7% and continues to rise, which we are encouraged by. Our adjusted EBITDA was 2.35% below PCP, AUD 61.61 million, largely impacted by some late movements that Robin will address in the financials.
Our NPAT was markedly down, predominantly impacted by our decision to take up a full provision or adjustment of AUD 32 million interest associated with the Ethicon class action, pending further submissions to the court for an alternate amount of recovery that we have previously flagged to the market. Gross operating cash flow was down and largely due to delays in billings and settlements, which we'll talk about in a moment, and the impact of the Ethicon case, which Robin will address. Consequently, the directors declared that we wouldn't declare a dividend for the second half of FY 2023, but our intention is to return to dividends during FY 2024, subject, of course, to our improving cash position. Flowing through, from the Ethicon adjustment, of course, the EPS is well down at AUD 0.0192.
If we move to slide 7, we'll summarize what's happened during FY 2023. Firstly, learnings for the business. Like many businesses, the labor market has impacted ours. Competition is high. There is still some overlay of fatigue from COVID. We held our own pretty well, but, but nonetheless, it was challenging here. Probably the biggest issue that impacted our business in 2023 was our delayed settlements in parts of the business and approval of settlements, which affected our cash flow significantly. The good news is, most of this is timing related and will flow through to strong cash in future years, which I will address shortly. We did make some key changes in our class action practice. It's part of the business we are investing in heavily and will be improving efficiencies as we move forward.
We did make some decisions to reshape our legal and management structures, to, largely to concentrate on reducing the cycle times so we can get our cases resolved faster. Against that, there were a number of achievements that I wanted to call out for the FY 2023 year. Firstly, our mainline core PI business continued to be a very strong performer in the group. We had one of the busiest years on record, settling class actions, settling 6 in total, which is an extraordinary number in one financial year. For total compensation for our clients, just over AUD 670 million. In the same year, we commenced 3 new class actions for approximately 25,000 new group members. We did resolve the largest medical device product liability case in Australian legal history, and I can't overstate the significance of this 10-year legal battle.
As indicated, we reviewed our legal and operational cost base so that we can focus on parts of the business that we know will get us good returns moving forward. And finally, looking forward, our intentions for FY 2024. FY 2024 will be a strong cash flow year for the company for the reasons I've outlined moments ago. We have continued to grow the baseline for our class action practice to build forward revenues. And importantly, we did a review of our cost base, particularly our management structure, to assist with future EBITDA, which we will touch on later in the presentation. Can I move to slide 8? And against that backdrop, I just wanted to walk you through the past four-year journey of the company. We have seen steady improvement in our revenues over the last four-year period, which we are encouraged by.
Aside from the FY 2023 adjustments, which Robin will speak to, we've also enjoyed steady improvements in our EBITDA. If we move to slide 9, importantly, we have a very healthy forward book of work. We have some AUD 670 million of forward cash revenues in our cabinets at the moment, backed by AUD 386 million of work in progress to date. So the company is in good shape in terms of future work ahead for me. I'll now pass to Ravin to give us a deeper dive on the financials.
Thank you, Simon. On page 11 of the pack, just repeating some of the numbers that Simon mentioned. Revenue was up 7.6% to AUD 231.64 million. EBITDA was AUD 61.61 million, down slightly on at 2.35%. NPAT was AUD 3.31 million, down 89%-
...The financial results were really impacted by the fair value adjustment of AUD 32.4 million of interest relating to funded disbursements on the Ethicon case, which we'll talk about later. The financial performance was also impacted quite late in the piece by a number of actions that settled in mid to late August. There were three actions, three class actions that settled, two class actions that settled in late August, but there was one other class action we were hoping to get a recovery on, which did not happen by the time we finalized the accounts. In terms of moving on, in terms of expenses, as, as we said at the half year, expenses were going to be high in FY 2023 because we had commenced a particular journey.
Overall, overheads were higher than PCP, mainly due to cybersecurity costs, marketing, new marketing platform, establishment of new sites, staff training and travel, interest, HR, amortization, and depreciation. Our employee costs were also higher, mainly due to growth in staff numbers. We grew approximately 57 staff in a year, and also increase in wage rates. Simon will talk about how we're arresting the growth in expenses moving forward. In terms of looking at the results a little bit deeper, in terms of the segments, you'll see that the PI segment had an 11.5% increase in revenue and also an improvement in EBITDA margin, which is now standing at 28.8%.
The business has been on a bit of a journey, in terms of our New South Wales and Victorian businesses, to reorganize both businesses because they had previously been a drag on performance. The news, like pleasing to report, that the New South Wales business is now showing signs of improvement, but further work needs to be done in Victoria. The abuse practice also had lower performance in FY 2023, and this also impacted the segment. However, notwithstanding that, we believe that the PI segment margin will continue to improve in future years. If looking at the NPA segment, it reflected only a less than 1% increase in revenue, but also a large decline in EBITDA margin.
The cases that I talked about, the two class action cases that I talked about, significantly impacted the margin in that business, which dropped to 25% in FY 2023. Again, I think that, looking forward, we're expecting that margin to return to normal in FY 2024. Moving to slide 12. Simon indicated that EPS is down AUD 0.0192 compared to PCP of AUD 0.8002. That's mainly impacted by the AUD 32.4 million fair value adjustment that we talked about. In terms of the dividend, obviously, lower profitability and lower GOCF resulted in the board not declaring a final dividend. So the full year dividend is AUD 0.015, which is in fact the half year dividend.
In terms of dividend policy, Simon's indicated that the business looks to resume paying dividends in FY 2024. Moving to slide 13. This is a bridge in terms of where the business was heading in terms of our financial results. As indicated on the bridge, we're reporting EBITDA of AUD 61.6 billion, but we had a number of class actions and also a major case, which had adverse results pretty close to finalization of the year-end results, and hence, we had to take up those provisions and write-offs. We also did a bit of balance sheet cleanup, and if you add those items back, our normalized EBITDA, in terms of what we presented to our board initially, was sitting around AUD 66.23 million. Moving to the balance sheet.
The balance sheet remains strong. You'll note that cash has reduced by about AUD 30 million. We had to use that cash because we had a low cash year. We had to use cash to fund operational activities in FY 2023. We did do a fair bit of work during the year, so you'll see growth in WIP, particularly in class actions, medical law, and head trauma, and we'll see recovery of that in future years. Unbilled disbursements have reduced by the provisioning or the write-off that we've taken of AUD 32.4 million. Borrowings have also gone up, and they've gone up marginally, but the ratio, the debt equity ratio, sitting at 23%, is still pretty low by industry standards.
Apart from that, there were no significant other movements in the balance sheet to PCP. Moving to gross operating cash flow. For those who were on the call at the half year, the second half, we really had a much better second half in terms of GOCF. But overall, we're reporting a negative GOCF of negative AUD 3.9 million. The GOCF number for FY 2023 includes approximately AUD 15.6 million of fees that we received on the Mesh case, but we ended up paying that to Omni Bridgeway to reduce our interest burden on that particular case. Our cash conversion was, as Simon indicated, conversion was lower than desired, but we expect to get the normal conversion of 65%-70% in FY 2024.
On Slide 16, we've got the bridge there, which reflects an adjusted GOCF. We've got the reported GOCF of AUD -3.9. We've got the orange item there, which is the Ethicon proceeds repaid to funder. We also had some delays in terms of our litigation funder, which continued on from the half. If we add all of those items up, we would have reported a GOCF notwithstanding our core business not performing. Just those items would have resulted in the GOCF of AUD 21.1 billion. It's pleasing to note that in respect of the litigation funder amount of AUD 9.4, the majority of that has now settled, and we should pick all of that up in H2. Back to you, Simon.
Thanks, Robin. So let's turn to operational update, Slide 18. As I said, we continue to invest in our class action practice. In our current class actions, we have a very diverse mix. We do that deliberately so that it positions the company very well, both from a competition and performance perspective. The 3 filed class actions in FY 2023 were evenly spread across product lines, and our investigations pipeline is also a good mix. Moving to Slide 19. It is 10 years since the company listed on the ASX, and during that time, we've seen good increases in the number of clients, fee earners, officers, revenue, and EBITDA, subject to the FY 2023 adjustments, showing steady growth for the company over the period. Let's move then to Slide 21 and the outlook for FY 2024.
Obviously, our primary focus for the next 12 months will be the cash in the business, and there are 3 core areas that we are concentrating on. Firstly, in our BAU operations, there is significant focus on cycle time reduction strategies to get as many cases knocked over and billed as possible. As I touched on a moment ago, we are involved in a cost reduction program which will benefit both operating cash and EBITDA. And finally, as Robin indicated, we have a number of class actions that have now settled and expect strong receipts for those class actions, particularly in H1. I am pleased to announce that on Friday, just gone, the 25th of August, the Federal Court approved our Seven PFAS class action settlement in the sum of some AUD 132 million. The deed says 123.
AUD 132 million, which includes AUD 8.45 million of cash that will be payable to Shine. Moving to Slide 22. I want to speak briefly to the cost base reduction program, that we're going through. We did commence a broad review of the business. We want to simplify the operating structure and particularly the overhead lines supporting it. We want to focus our resources on the areas that will give us meaningful growth. The program is aimed at a reduction of annualized costs at both corporate and business unit level. We will continue expansion of our footprint on the East Coast, but in specific markets, and we will see material savings from this program throughout the course of FY 2024.
So to close out our outlook for FY 2024, while the company is expecting a strong cash year ahead and improving EBITDA, we have elected not to issue formal guidance at this point. We will, of course, review this at the end of the first half. That concludes the formal presentation. Robin and I are happy to take questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ashley Dillon, a private investor. Please go ahead. Ashley Dillon, your line is now live. Please proceed with your question.
Thank you, team, for taking my questions. I've got a few, if you don't mind. The first one was around litigation fundings, payments being delayed, and that it was stated that they should be recovered by this half. If you were to attribute a percent of certainty around that, what percentage would you give?
Hundred percent.
100? Okay. The second question is related to some funding decisions around Ethicon. There's been a lot of speculation that Ravin Raj led those decisions. I'm just wondering what level of support he's currently got from the board, and why would you attribute that support?
Look, I'll answer the question this way. The decisions taken were proper decisions to resource that long-standing class action. Because the question of the interest recovery is pending in further submissions, there's not much more we can say at this point. We'll certainly have a bit to say about it after the conclusion of the court process.
Okay, thank you. Next question is related to the value of WIP. There's, there's quite a lot of doubt in the market and the media about the value of WIP. Is there any kind of plans to address these concerns by producing any data around the recoverability of WIP of WIP around forecasts and actuals? And if not, given the significant benefit that it would have to earnings, why not?
I can answer that question in a financial sense, and then Simon can talk about it in a qualitative sense. But in a quantitative sense, the business, the recovery that we're getting on cases is pretty high. Our payout recovery is around 85% mark, or 84%-85% mark, which is pretty strong. It's the strongest that it's been in the business. The situation that we had in FY 2023, and probably to some extent in FY 2022, is that, as Simon alluded to, there were certain parts of the business where the cases weren't being resolved for any number of reasons, and I'll get Simon to talk about that in a minute.
But also, we were going through a growth phase in our class actions business where we're, where we're building up width. And, you'll see the benefit of that, in, H1 FY 2024. But, just to, just to answer your question, to, allay your fears, it would. The reason WIP went up in FY 2023 was mainly because we didn't resolve as many cases as we thought, as we thought we would. Simon, do you want to add anything to that?
Yeah. I'll, I'll speak to the qualitative aspects. Thanks for the question. So firstly, our provisioning rates of our WIP are actually predicated on our recovery rates by practice area. We are seeing that rate improving, so that's a good sign that we've got a quality WIP in the capital. Now, having said that, we are in the game of risk as a no-win, no-fee law practice, and we are not going to recover all of our work in progress. Well, that's just part of the risk that we build into running the business. So that's the nature of the game that we're in. The third point I'd like to make, and that goes to the restructures in the legal parts of the business.
What we are focusing on, particularly, are those parts of the business where we haven't enjoyed strong recovery of WIP and reallocating our resources moving forward to parts of the business where we do.
Thank you. And just following up on that, you mentioned that WIP may not be fully recovered. Is there a plan then to write off, write off any WIP off the balance sheet if it's just sitting there stale?
Yeah. So we regularly write work in progress off the balance sheet. It's provisioned constantly. Do you want to add?
Yeah, look, I just thought I'd add to what Simon said. The net figure that you see on the balance sheet has a provision of AUD 82 million against it. So, we've already provided significant provisioning against the WIP, the net WIP that's sitting on the balance sheet.
Okay. Thank you. Appreciate it.
Once again, if you wish to ask a question, please press star one on your telephone. We'll now pause a short moment to allow questions to be registered. Thank you. There are no further questions at this time. I'll now hand back to Mr. Morrison for closing remarks.
Just in closing, thank you for joining us on the call. I just summarize again, it has been a difficult, challenging year for the company. We are looking forward to FY 2024 being a very productive year for Shine moving forward, and we look forward to talking to investors on the roadshow. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.