Thank you for standing by, and welcome to the Shine Justice Limited FY 22 full year results teleconference. All participants are in a listen-only mode. There'll 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 everyone to the FY 2022 results for Shine Justice. Can I start by introducing our team? Speaking with me today is our CFO, Ravin Raj. Ravin is a very experienced public company CFO. Was CFO of the then-listed company Watpac for more than 20 years. Does a tremendous job with us. With us also is our Company Secretary and General Counsel, Annette O'Hara. I'm pleased to advise Annette was awarded the Company Secretary of the Year at the Australian Law Awards a couple of weeks ago, so a great testament to Annette. Our Head of Investor Relations, John George. John is a former executive and director of the company, sits on other listed boards including Yellow Brick Road Holdings. I'm the Managing Director and CEO.
I've spent more than half of my career as a lawyer litigating in most areas of the business and in management for the balance. Let's get into the presentation. We'll start on slide number 3. The business, as people would well know by now, is broken broadly into 2 parts, what we call our personal injury practice, which sits across a number of the brands in the group. What we call new practice areas. They're not really new practice areas, but that's how we delineate them from the core. What they have in common are they are other areas of damages-based litigation across various brands. There are 3 things that really drive us, which we talk to each year. The first is we are very much a purpose-driven business.
Our raison d'être is to deliver damages for people who've been wronged, and it's something we take very seriously as a company. Secondly, and in the more recent history of the company, we've been working very hard at resetting our base for good growth again, and we're going to talk about that today. We've had three solid years of good growth and trending for further ahead. We haven't been immune to the pandemic, as most companies haven't but, notwithstanding that, we've demonstrated our ability to not only grow organically, but to continue to grow our revenues moving forward. A testament to the foundations of this company. Let's cut across to slide number six. Excuse me. We'll start with the key financial metrics. A good year for us. We're very happy with the outcome.
Revenue at AUD 215 million was up almost 15%, organically. NPAT at AUD 31 million, up nearly 22%. EBITDA AUD 63.09 million, up a shade over 14%. Cash was a bit off this year, deliberately so on our part. We made some key investments in growth of the company, and Ravin will talk us through some of those details a bit later in the presentation. We'll give you some color about where those investments have been made and the revenue that will come forward from that. Pleasingly, we declared a total dividend of AUD 0.06, a record for the company, and we'll have a little chat about dividends a bit later in the presentation. Finally, earnings per share up a very healthy 22% at AUD 0.1802.
All in all, a good set of numbers, and a good result for the company for the year. Let's move to slide seven. I just wanna walk you through what we've been up to in the year. First and foremost, we had said that we would deliver year-on-year earnings growth. We've done that, and we're now pegged for even further growth in the company. We have won the landmark Johnson & Johnson case. We're now in the back end of that litigation where we simply have to determine how much money Johnson & Johnson have to pay to the many thousands of group members. It's been a long battle for our company, but a really pleasing win and one, again, that has set our class action business for greater things.
We were really busy this year opening new offices, fueling more growth in the company. We opened in Adelaide, Darwin, Canberra, and Wollongong, and I'll touch on that a bit later in the presentation. We launched a new brand marketing campaign, which we are expecting to produce very good results for us in the year and years ahead. We filed 7 new class actions and settled 3, so our net movement was healthy. I'll walk you through the class action book, and I'll walk you through some court and pending regulatory changes, which we think will favor our class actions practice moving forward. A fantastic settlement we achieved in the 2022 year was another one of our mesh class actions against Boston Scientific, which settled for an incredible AUD 105 million.
The cash from that will land in the first half of FY 2023, which will be a healthy injection to our cash for the forthcoming year. With all of the new work coming into the company, we've grown our staffing levels. We'll talk about that in a moment, but we've kicked over 1,000 members across the group. Pleasingly, our engagement levels have held up in the organization at 83%, compared to a market average of 75% in our sector. Finally, we've been chipping away at trying to be the leader in all of the practice areas we're in. Again, pretty busy year for the company, and a busy year ahead. Over to slide eight. I'll quickly walk you through highlights of strategic things we were working on in the year.
Our Case Tracker that we've started socializing with the market in the last two presentations is gathering momentum. We think this will be a game changer for client services in our sector. We're expecting rollout of that, moving forward in the year. We've done some work with a recruiting branding agency to reposition our brand, for the recruitment market. Legal services is no different to other sectors at the moment. There is a real war for talent, and we are thrilled with that work that's been done, and we're expecting good results moving forward. I'll give you a flavor of the sheer number of people who've joined the business a bit later in the presentation.
One of the founders of Shine, Steve Bright, wrote a book about Shine called The Right Side of Wrong, which chronicles our journey in the last 45 years, and it's been backed up with a podcast platform. That's a really good read. I mentioned growth before. We opened in Darwin. Darwin has been a good market for us on a brownfield basis. We've been doing sex abuse and class action work up in that jurisdiction and building a real profile in the territory. We've opened an office staffed with lawyers, and it's already producing very good results. It's a market that doesn't have a lot of competition, and one we see as a great opportunity for Shine. We opened down in South Australia in Adelaide.
We took over some 60 cases on behalf of refugees who have been abused in detention in cases against the Commonwealth government, and again has launched us with a good profile in that state, so we're expecting good organic growth. At Canberra, we opened. Again, we've been attracting work from down that jurisdiction and handling it in other states, and it became too compelling, so we've opened offices down there with lawyers down there. Wollongong builds on our expansion in New South Wales down the south coast, and already that organic growth has been really strong. A great year for Shine in terms of growing out our footprint around the country. On the strength of Shine, we launched a new brand campaign, as I mentioned, and showing good signs already.
We've kept working on an internal operating model change, designed to help our margins moving forward. Finally, in innovation, we launched what we call Shine Tank, a bit of a play on Shark Tank, where we invite innovative ideas from all across the company. I'm pleased to announce that in the 2022 Shine Tank, a new innovation coming into the company will be a compressed working fortnight, a nine-day working fortnight, and we're expecting great gains in productivity and great gains in engagement. We're doing that process again in 2023. Over to slide nine. Just some extra data we wanted to share with the market. You've seen these numbers before, but we wanted to articulate to you the journey we've been on in growth in the last three years, both in revenue and earnings.
Revenue has gone from AUD 183 up to AUD 215 in that short period. Earnings, 51.1 up to 63.1. The trajectory is good. It's looking better as we move forward in the forthcoming years, and that has largely been organic growth, which is an added bonus for the company. Excuse me. Over to slide 10. Now, this is new information for the market, and we wanted to flesh out the investment we've been making in growing new work coming into the business and what it will reap for us downstream. Firstly, the black bars tell you what we call our new file fees. That's the value of forward revenue that we will get from new work coming into the business.
You can see that's been a pretty fast trajectory over the last three years, going from a base of AUD 188 million in FY 2020 through to AUD 278 million in 2022. Testament to the organic growth going on in the company. To do that work, we've got to add fee earners to the business. Adding fee earners adds revenue, which will add cash. We've had a good increase in fee earners from 454 in 2020 through to 600 in 2022. Against the war for talent going on in the marketplace to attract that number of people into the organization means we think we're doing that pretty well. Let's go to slide 11. Again, this is a different lens for the market.
What we're showing here is our effectively what's in our cabinets, so we can see what our forward revenues are for the working cabinet at the moment. In the current year, we have AUD 630 million of forward revenues available to us. We've completed AUD 332 million of work in progress, so we have good head height of organic work moving forward. You can see a nice increase year-on-year. I'll call out the WIP went backwards a little from 2020 to 2021. That was largely the billing off of our mesh class action against Johnson & Johnson, which was a big chunk of WIP in one hit. The percentage you see at the top is the percentage of WIP versus the total cabinet.
that percentage is going down, which is a healthy sign for us that we've got more work coming through and more profitable work to do as we go forward. A very good lead indicator that the organic health of this business is very strong. I'll pass to Ravin Raj now to give us a bit more color on financials. Over.
Thank you, Simon. I'm on slide 13, and if you look at the revenue, as Simon indicated, revenue was up 14.9% to AUD 215 million this year. NPAT was up 21.96%. EBITDA is up 14.2%. If you look at expenses, you'll note that employee benefits expense was significantly higher due to growth in our staff numbers, and that was really our reaction to a huge number of files inflows into the business in FY 2022.
Overheads were also higher than PCP, due to sort of increased investments in long-term projects such as our new marketing platform, brand refresh, and also establishment of new sites, as Simon indicated. When you break up the results in terms of the segment view, in terms of the PI segment, you'll note that the PI segment in revenue increased by 12%. Also, the margin has increased in the PI segment to 21%. We've been on a bit of a journey, as everyone knows, in terms of our businesses in New South Wales and Victoria to significantly restructure and reorganize those businesses in the past. This is now beginning to bear fruit. I think that looking forward, we'll see continued improvement in our margin in our PI business.
In terms of the NPA segment, we did have an increase in revenue of 18%, but there's been a small decline in the margin, which is standing at 37%, in that business in FY 2022. This drop in margin is mainly due to increased provisioning in our class actions business, under the revenue standard. In terms of segments moving forward, I'd just like to make one point. In FY 2023, we're moving our abuse business from the NPA segment to our core segment. This is really because we believe that we'd like to manage that business along state lines rather than on a centrally national basis. We believe that that will improve our file velocity and also improve our cash flow, in that business in the future.
Moving to page 14, the numbers that are for shareholders, EPS was up, as we indicated, 22.17%, and that mirrors NPAT. As Simon indicated, total dividend for the year is AUD 0.06 per share, up 14.29%. That is also in line with NPAT. The payout ratio is at the lower end of our range, but we believe that we will increase dividends in the future, consistent with improving cash conversion. Our balance sheet's on page 15. The key things to call out there, the balance sheet remains quite strong. Cash on hand includes mesh funds that we received in 2020, as a result of that initial judgment. We do wanna use that money for acquisitions and growth.
We've done DD on a couple of potential acquisition opportunities in FY 22, but we've elected not to use that cash until we find the right opportunity. In terms of other highlights in terms of the balance sheet, there's been a marginal drop in borrowings. Our debt equity remains at 18%. Our deferred tax liability has gone up a little bit because we have started to use up our tax losses. Given that we're moving into profitable situation over the last few years, our tax losses have now been utilized. Moving to page 16, this is our normal gross operating cash flow slide.
As Simon indicated, gross operating cash flow was down in FY 2022 to AUD 30.76 million, down about 9%, compared to PCP excluding mesh. Cash conversion is at the lower end of 48.75%, but we're still targeting 70%-80% range in the future. The waterfall chart reflects the Shine. We always have a low first half and a second half, and we're working to even out those cash flows in the future. In terms of FY 2022, we thought it would be worthwhile to reflect where our cash has gone in FY 2022.
You'll see that we're reporting a cash flow of GCF of AUD 30.7 million, but we've invested in a number of areas, and we believe that the GCF, had we not made those investments, will be sitting at 42%, which is approximately 65% conversion. Those areas are a new marketing platform that we talk about with AUD 550 thousand. Our brand refresh was AUD 1 million. Our fee earners, which grew by approximately 14 million dollars we spent on total employee costs, but our fee earners cost about AUD 8.9 million in the year. Those fee earners will generate revenue in the year.
While we incur those costs in FY 2022, those fee earners will generate revenue and cash moving into the future. Simon indicated we've also opened new sites in Darwin, Adelaide, Canberra, and Wollongong. Those offices will take a little bit of time to convert into cash flow, and probably a period of about 18 months to 2 years before they convert to cash. Back to you, Simon.
Thanks, Ravin Raj. We're on slide 19. Three key metrics that I just wanted to share with the market that we watch very carefully. Firstly, for those who've been with the company for a long time, you'll know that 2017 was the year we sort of started the reset to position ourselves for future growth. Just outlining how we've gone over that 5-year period, EBITDA has gone from AUD 36.5 back then to AUD 63.1 now. Revenue AUD 165-AUD 215. The second metric, which is our mix of core PI and specialist work or new practice area work. Again, for those who were with the company when we listed, you might recall that ratio looked like about 93% core PI and 7% for the balance.
Our greatest operating risk in the company is the threat of tort reform in the core PI area. Very deliberately, we've been evening that out over the period. As you'll see for the last couple of years, the new practice areas are actually ahead of core, and that's largely because of the growth in class actions and abuse. Thirdly, dividends. We didn't list as a big dividend payer at Shine, as you'll see dating back to FY 2017. We've gone from AUD 0.026 up to AUD 0.06 now. We're working year-on-year to improving our dividend ratios. Cash is obviously our key focus on that, but that's certainly something that's top of our minds. We move to slide 20. Just look at our class action book.
It's a very healthy book of current cases, new cases that we filed in the year and cases where there are about a dozen cases under investigation at the moment. A couple of key things that I will call out. You may recall there had been some reform in the class action arena off the back of a federal inquiry, and two key reforms were, firstly, that litigation funders were required to hold an AFSL license and funded class actions were deemed to be managed investment schemes. A significant decision came down in the Full Court of the Federal Court a couple of months ago, and it was a three-nil decision which effectively found that funded class actions are not managed investment schemes. That will change the landscape, we believe, to open up more competition again into the funding market.
We had a change of federal government in May, and there was a commitment by the Labor opposition then to wind back those reforms. We do envisage again that there will be greater opportunities moving forward in class actions. We are positioning ourselves, I think, very well across the class action market in Australia, where we have a very diverse portfolio of class actions. We don't weight them too heavily in one particular area, and that augurs well for long-term growth for the company in this really important area. If we move to slide 22 to round out just the outlook for FY 2023. Operationally, as you can see, we have a very, very busy year ahead of us with lots of work. A key focus is our cash conversion in FY 2023. Strategically, I'll just call out some highlights.
We want our Case Tracker, which we think will be a game changer, to be launched. We're working hard on further recruitment programs to bring more people into the business and good quality people. We will expand our network in Victoria in FY 2023. Finally, we will go around again with our innovation, Shine Tank. I'll look forward to letting you know what comes out of that process. In keeping with our confidence in the growth of the company, we have issued guidance for increasing EBITDA growth in FY 2023 in the order of a low double-digit % increase. That concludes the presentation. Ravin and I are very 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 using a speakerphone, please pick up the handset to ask your question. Your first question comes from Daniel Sini from Q Value Equity Research. Please go ahead.
Yeah, g'day, guys. I was just hoping you could provide a bit of color on the evolution of margins going forward. Obviously, the quality of the caseload has changed over the last little while, and there's a number of productivity initiatives underway in the business. How should that margin evolve going forward? In FY 2023, is there margin expansion assumed within that guidance you've given? Cheers.
Hi, Daniel. Ravin Raj here. Yes. I think you've been on the journey with the business for a while now. You would have seen that PI margins have been improved from circa 16, 17, 18. Now, we've reached 21%. Our target in PI is to get to 25%+. I think we're well on track to get that. The margins in our NPA business are around the 37, 35-40 range. We sort of fluctuate in that range depending on revenue standards and provisioning. I think those margins will remain relatively constant. Where the growth is likely to come is in the PI space in terms of margin growth.
Great. Thank you. Secondly, just on the M&A pipeline, you know, you've talked to the capital allocation strategy with the looming closure of the mesh case. Can you just update us on how that's evolving and you know, whether there's anything that might come through the woodwork there in the near term?
Yeah. Simon here, Daniel. We do run a pipeline of opportunities that we explore constantly. As Ravin mentioned, there were a couple that we did a fair bit of work on in FY 2022, but elected not to proceed with them in the end. There would be at least half a dozen opportunities that are currently under different forms of scrutiny. I did indicate we expected we would do something in 2022. We thought at least one of those we might do, but we pulled back in the end. I'd be confident there would be something happening in FY 2023, but we'll certainly keep the market appraised.
Excellent. Thanks, guys.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Nick Caley from Henslow. Please go ahead.
Hey, guys.
Hi, Nick.
Just a couple of quick ones. You just touched on M&A for FY 23. You think that'll be domestic?
Yes
Okay. Just note with interest that recent litigation against, not yourselves, but litigation against Ansell on supply workers' rights abuse and on supply chain. Do you see that as an emerging area?
Not specifically for us, Nick.
Right. Okay. No, that's fine. All right. That's all. Well done, guys.
Thanks, Peter.
Thank you. Your next question comes from Carta Ryan from Firetrail Investments. Please go ahead.
Hi, guys. Just a quick question on your guidance. Does that include any income from the Mesh case at all with that, low double-digit EBITDA growth for FY 2023?
No, it doesn't, Carta. The way the accounting standards work, we recognize the Mesh earnings as we're progressing through it. The impact that will change in 2023 will be the cash number, but that won't affect the earnings number.
Just to add to what Simon said. Carta, we do believe that there will be some sort of settlement or some sort of resolution of that case during this financial year. We have allowed some administration revenue from that case. But it's only part year. If we resolve that case this year, the full impact of that admin revenue will actually. You'll see the benefit of that in FY 2024 onwards.
Okay, great. Just also your medium-term, cash conversion, you said 70%-80%, in the long term is what you're aiming for while you're still going through the growth phase. I know, this year you had a few impacts with Mesh, et cetera, but what are you expecting going forward, I guess, while you're still in this growth phase?
Look, in looking at FY 2023, we've done our budgets. It will really depend on what the legal environment and the courts, how the courts operate in a post-COVID environment. We do have a lot of build-up on WIP, and we have the capacity to convert a lot of that WIP to cash. But it will depend on legal jurisdictions and legal markets. That's on the legal side. On the expense side, we're still going through a fair bit of growth and investment. I think you know, if you're looking FY 2023, it'll still be conservative. It'll be around the 45%-55% range.
Once we've gone through our initiatives, expense initiatives, then you'll see an upwards impact or an upward move to the numbers that we've talked about.
Okay, great. Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Morrison for closing remarks.
Thank you very much for joining us, and look forward to seeing people on the road next week. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.