Result. Joining us today, we have Simon Morrison, MD, Carolyn Barker, newly appointed CEO, and CFO Mark Devine. Before we start, we will have a Q&A session after the presentation, and if you would like to put in a question into the chat box, I'll address it at the end. Simon, Mark, over to you. Thank you.
Thank you, Alan, and welcome everyone to the Half Presentation for FY2025. Can I start by just introducing the team here today? Firstly, welcoming our CFO, Mark Devine, who joined us during the year, the financial year. He's been on board now five months. Mark has come from being the CFO of ASX-listed airline, Alliance Airlines, held that role for seven years.
Prior to that, worked in health services in key financial roles. At the same time, I want to pay tribute to our outgoing CFO, Ravin Raj, who retired during the first half. Ravin was with the company for eight years and did an extraordinary job during that time. Thank you, Ravin. Welcome our incoming CEO, Carolyn Barker, a very highly experienced CEO and well-known to this company. I'll have a lot more to say about Carolyn during the course of the presentation.
Finally, John George, our Head of Investor Relations, joins us. John is a former non-executive director of the company. He's ex-ASIC. He runs a business consultancy advising businesses. He's a former non-executive director of another ASX-listed company. Let's kick off at slide number four. I'll start with the work that we've been doing now for a couple of years to try and simplify the business. We decided there are two parts of the business we want to focus on, those being our personal injury practice and our class action practice.
We have been busy either retiring or running down other parts of the business so that we can reallocate our resources to these two key parts of Shine. The personal injury business comprises a number of practice areas: motor accident practice, workplace injuries, public liability claims, abuse, superannuation and disability, dust disease, and medical negligence.
That is a national profile that we hold. Our class action practice is quite diverse, and we will talk about both of these businesses shortly, but it involves consumer class actions, employment, environmental, financial services, First Nations. We are probably the most prolific firm helping First Nations people in class action litigation in the country, medical product liability cases, data breach, and securities cases. Our footprint, we have just under 50 offices all around the country and two via our affiliate in New Zealand.
We do have the largest footprint of our peers in the country, and we do hope to expand on that footprint. We track in real time the damages that we recover and the number of clients that we recover damages for. I am pleased to report that we are currently at AUD 9.2 billion for just shy of 90,000 clients across the country.
We are fast approaching the AUD 10 billion mark, which will be a major milestone for the company. I expect that will coincide with our 50-year celebration next year, where Shine will have been operating for half a century. Let's move to slide five, and we'll talk to the headline metrics. Mark will go into more detail, but I'll just give you the overview. Revenue was healthy for the half. We did declare a fully franked interim dividend of AUD 0.015.
We regard this as a key milestone in the company. We have been unfranked for much of our life as a listed company, and that is good news that we've moved into franking. Our class action business continues to develop, and I'll talk more about what's happening behind the scenes there, but we're looking for a good second half in class actions.
Our EBITDA numbers were impacted by a $4 million non-cash loss we took on the deferred consideration of the sale of one of our subsidiary businesses, so not connected to the underlying operations of the company. Our cash flow at $4 million or $4.1 million was impacted by the delay in receipt of some $14 million from an approved class action that we expected we'd get in H1, but we will now get in H2, which will be an added bolster to our cash flows. We had a busy six months in our cases. We knocked over 2,264 cases. I think that's almost a record for the half of $579 million in damages, so that augurs well. In the class action space, we got approval on the WA Stolen Wages case that we have previously reported on.
Of most significance is we have approved that AUD 14 million of cash receipts that will come to us in the second half. We settled another Indigenous class action during half, the Northern Territory case, for a record AUD 202 million. That case is pending approval in the Federal Court as we speak. We moved to slide six. For those who've been following the company, you'll be familiar with this data. This is public data published by IBISWorld. The good news for Shine is we are gaining market share. In the last 12 months, we have increased by 8.8%. We're clawing into that part of the market not occupied by the large three players. We are encouraged by that move. I'll have a bit more to say about the execution of PI business later in the presentation.
We'll move to slide seven, where we will talk about the PI business. Net income was pretty solid at AUD 82 million. That was impacted by a take-up in effective provision in respect mainly to our abuse practice. That was a AUD 5 million take-up that we took, impacting both the revenue and EBITDA lines. That take-up was largely off the back of a couple of adverse High Court decisions in the abuse practice area. One of them we were successful in overturning in a subsequent High Court case, which we talked about in the announcement.
We hope that is good news in terms of those recoveries moving forward. Finally, we have been on a program of works that we've previously reported on that we call our WIP to Cash program, where we're trying to move older cases that have been sitting around.
The good news is that helps cash receipts. The challenge is that does impact WIP recoveries, but we are well through that program. To round out the PI business for the half, the good news is we are sitting well in terms of our organic position and incoming work, and I'll talk to that a bit later in the presentation.
The thing we need to focus on, obviously, is the execution of the cases once they're in the door. You'll hear me explain that Carolyn's role as CEO will play a key role in improving that execution. We move to slide eight, our class actions overview. These are familiar pie charts for those who followed us. I'll start with our investigations. We have 27 cases in investigation at varying levels of maturity. Some of those are almost ready to be filed in the courts.
Others were in early stage. The most significant thing I'll draw to your attention on our investigations is that we are very deliberate in the diversification of the class action business, and we do that for two reasons. One is what we call competition risk. There are some aspects of class action work where we see a lot of competition, and our strategy as a company is to have a very diverse portfolio to mitigate any of those competition issues.
The second one is regulatory risk. For those who followed the company for a time, you'll know that there are particular types of class actions that are in the firing line for regulatory risk and securities cases, chief amongst them. On our current cases, we have 23 in litigation at the moment, and again, reasonably well split across the portfolio.
If we move to slide nine, we'll drill into the class action business in a bit more detail. Can I speak firstly to the graphs? Because they may at first blush appear odd. The data in the graphs does include what we call the special practice areas. So previously, class actions were in another segment we called special practice areas and included other parts of the business.
When you strip those out and we have a pure class actions to class actions comparator, those numbers tend to smooth out a lot more. The second thing I'll point out is under the accounting standards for all of the class action investigation work we do, and there's significant volumes of work being done on investigations. We don't record any effective revenue until such time as those cases have been approved for funding or have been filed in the courts.
We do have a bank of work done that we are expecting to convert to both earnings and cash flow once those cases move through. In terms of the performance of the class action business, for the first half, we did expect filings more than we achieved. They will flow into the second half. For the reasons I just explained, that defers the upside of both earnings and cash flow for those cases.
We have been very busy building the pipeline, and I am pleased to say that we have a very healthy incoming pipeline, both domestically and internationally. As people know, we have been concentrating on bringing work in, notably from the United States, to bolster our class action practice in Australia. The third piece we're working on is to find a better funding solution for our class action practice.
At the moment, it's what we call silo funded. We go and seek funding case by case, and we're looking for a more portfolio-based solution. It's a significant piece of work the company is focused on at the moment, but once secured, it will be a game changer in terms of both earnings and cash in future periods. To round out the class action practice, the good news is incoming work is strong, both inside Australia and from the US. Our challenge in that business from an execution point of view is getting cases filed in the courts faster and getting funding faster. I'll now hand over to Mark to talk us through the financials in a bit more detail.
Thanks, Simon. Thanks for stealing my thunder around accounting standards. It's not often that I get to talk about that, but anyway. Morning, everyone. I'm glad to be here, and I'm just going to run through some of the highlights from the P&L statement, balance sheet, and cash flow. Some of this may be a little bit repetitive, but I'll try not to go into much detail on what Simon's already explained. I think headline number, revenue and income up by AUD 2.4 million.
Considering, as Simon mentioned, that includes an additional constraint of AUD 5 million, that's a pretty good outcome for the half. Obviously, as we move into the future, we're hoping to reduce that constraint each month that goes by. Adjusted EBITDA, again, AUD 16.2 million this half, as opposed to AUD 22.2 million in the prior comparative period. In that prior comparative period, there's an adjustment right back of AUD 7.3 million, which related to a write-off of some mesh revenue, and also just AUD 1.5 million worth of other items, including some one-off costs, transformation costs.
$16.2 million in the current half is the statutory EBITDA plus the inclusion, or the add-back, I should say, of the $4 million of the fair value losses in the half. That is how we get to those numbers. Loss after tax, it is a bit of a quirky one, this one. Due to the fact that we have recognized that $4 million of fair value loss, you actually cannot claim that as a tax deduction.
In the tax line, there is $1.2 million of tax expense, which is actually calculated off, on the face of it, a loss before tax number. That explains the reason why there is a tax expense line, even though we are in a loss position before tax. I will touch on employee benefit expense. We had an increase by 3.2% in the half, even though we had fewer fee earners during the same period.
I think the average increase in staff costs that came into effect on 1 July was around 3%, which is part of the reason for that increase. There was also AUD 1 million worth of bonuses that carried forward from the last financial year, which was not actually recognized last financial year. That has hit the numbers this year. We hope that that cost line now sort of stays pretty flat. I guess the pleasing thing there is that even though there were fewer employees and, sorry, fee earners, the revenue numbers were still above what they had been in previous periods. The operating costs, excluding that fair value loss, were pretty much stable. AUD 96.9 million for this half versus AUD 97.1 million in the prior comparative.
Again, I think the company's focus on controlling its costs, whilst at the same time trying to increase the revenue, is definitely showing through that overhead and operating costs number. We'll move on to slide 11. Cash flows. I guess the main point here, as Simon mentioned, is that the GOCF is AUD 4.1 million, and the operating cash flow comes out at negative AUD 1.8 million.
The reason for those two sort of lower than expected numbers is definitely the AUD 14 million in class action money that we were expecting to come in the first half. Good that it will come in the second half, but it hasn't shown those numbers as too positive in the first half. Pleasingly, the personal injury cash fees billed was 5% higher in the first half this year as opposed to the prior comparative period. Again, personal injury, a good outcome.
In class action, unfortunately, with the delay in those receipts, it's shown in the numbers. I guess as a result of the operating costs being pretty stable, the payments to suppliers are pretty much in the same ballpark as the prior comparative period. Disbursements paid was also lower. I guess that's a result in some cases of WIP increase and us holding more matters until settlement without having to pay them. Finance costs reduced by AUD 1.3 million in the half year. I think the group's managed debt and interest a lot better over the last, well, a lot better, which is a result of lower costs over the last 12 months. In the main, that reduction in finance costs is due to debt reduction, both in our self-sort of funded disbursement category and the reduction in borrowings as well.
Obviously, the income tax being paid there for AUD 4 million for the year, which has allowed us to obviously provide some fully franked dividends as well. We are in a cash tax payable position now and into the future. It is a good outcome in some ways. PP&E increased by AUD 600,000 during the year, mainly on IT asset refresh and a fit out of a new office in Adelaide.
Also in that investing line, we received AUD 1 million for some files that we previously sold, which is a good outcome on those files. In financing activity, in the main, that move relates to the AUD 7 million of dividends that were paid during the year. There is AUD 4 million of principal lease payments. Obviously, having 49 offices is quite a substantial amount that goes out in rentals. AUD 3.3 million reduction in borrowings.
The rest just relates to small movements in the disbursement category. Nothing unexpected there. Move to the balance sheet, which is quite stable and strong still, which is great. Cash reduction over the period, obviously, is a result of sort of everything I mentioned in the past, mainly tax, dividends, and obviously the fees billed for class action. If that had come in, then that would be quite a healthy cash and bank balance for the half. Receivables reduced over time.
I think there was a number of outstanding items at 30 June, which have been paid, and that debt has not been repaid as of 31 December. The WIP has increased by AUD 15.2 million or 4.2% in the half. A lot of that WIP increase relates to not being able to bill those class action matters. We obviously release the WIP once those matters are billed.
Obviously, we mentioned the personal injury WIP increased in the half, but some of that was offset by that additional provision that we took up. Just on the provision that now sits at AUD 102 million, which is up from AUD 87 million. Again, as Simon mentioned, a large portion of that WIP increase is to do with class action investigations, which we cannot actually recognize any revenue for until it is filed. It is fully provisioned at 100% until that time. Not much other material movements on the balance sheet. PP&E and other, there was a reduction on the face of it in the half by about AUD 8 million. That has to do with us bringing across Shine Lawyers New Zealand, under accounting control. They are now consolidated into the group.
What that has meant for that line is that the previous line that was out to that company is now consolidated and eliminated on consolidation. That is the reason for that movement. Disbursement creditors and borrowers, that is where we refinanced AUD 18.8 million worth of disbursement creditors.
We took out disbursement creditors and refinanced them through the Commonwealth Bank to achieve a much lower interest rate for ourselves and enable us to save some money on some interest. Those numbers are pretty much like for like if you look at the movements on either side. Move to pay slide 13. Just to touch on the debt. It obviously looks like we have increased debt. We have. The majority of those are AUD 18.8 million. Overall, if you look at debt and disbursement funding, no real increase. From a borrowing perspective, that AUD 18.8 million is now included.
Gross debt at AUD 72 million, net debt up to AUD 61.2 million from AUD 26.1 million. Now, that's again a substantial number. However, AUD 18.8 million of that is from the debt swap, and the balance is pretty much the delay in those receipts from the class actions filing. Again, taking those two numbers into consideration, it's not a bad outcome.
Probably the last thing on the debt post the year-end, we actually finalized the restructure of the debt facilities with the Commonwealth Bank, simplified the facilities, had a number of different debt pieces in the deck, simplified those, achieved probably no interest saving from that piece, but no interest increase, and also extended the debt out to three years. Now that can sit there for three years, and we can continue to focus on running the business and trying to deliberate the appropriate time.
On the next slide, 14, as Simon alluded to, the first fully franked interim dividend declared since 2018, AUD 0.01. I think that's a very good outcome for the half year. Obviously, with the knowledge of the AUD 14 million coming in in the first half, sorry, in the second half, that provides the board with the company to be able to declare and pay the dividend. At the same time, we've still got the share buyback in play, which will recommence post the results. We'll continue to focus on capital management in the interest of shareholders.
Thanks, Mike. Let's move to slide 15. I just want to highlight three key strategies that we're focused on in the organization right now. The first we've spoken about a lot, which is the simplification of the business. We're largely there with PI and class actions practice. The good news from the company's point of view moving forward is we have more resourcing to bolster both those important parts of the business. The second part of our strategy is the driving of revenue into the businesses. As I talked to earlier, in both the PI and class actions business, the inflows are very strong. We're very comfortable with that. The area we want to concentrate heavily on now is obviously the execution of those cases and making sure we get the best outcomes as they move through the process to billing.
The final piece, driven by our increase in market share in Australia, is that we do have the largest footprint, but we do want to gain on that footprint to help more people around the country. Can we move to slide 16? I am delighted to announce the appointment of Carolyn Barker as the Chief Executive Officer of Shine. I have known Carolyn for 20 years or more. She is a seasoned CEO in both listed and private equity-owned companies in Australia. She is a very experienced company director. Her appointment takes place effective today. I can tell you she is already busy in meetings with legal managers this morning, focusing on the execution issues I just spoke to. She will be responsible for the leadership and direction of running the day-to-day operations, reporting to me as the Managing Director.
My focus, obviously, will be overseeing the company as I have done for the last decade. It will allow me to devote more time to the development of our international inflow practice into the class action business. That is a key strategic initiative of this company where we see significant opportunities for revenue moving forward.
Carolyn has a long history with Shine. She joined us back in 2009. She was the first non-executive director on our board as a private company back then, and she was the only director to move over into the listed space. She stayed on as a non-executive director until 2020 when the board was renewed. I am thrilled she is on board, and she is heavily focused, as I said, on the execution of our operations, which will be a great addition to our resourcing. We move to slide 17, the outlook.
I just want to update you on where we are up to after the half with the key initiatives. I have spoken at length about the focus on the two operating segments, which, as I said, we are nearly there. Organic growth has been strong. I have spoken to the increase in market share. I have spoken to the number of class action opportunities coming into the business.
Our US strategy is developing very well. We have now launched three class action investigations from our US pipeline. All three are very significant class action opportunities for the company. We have a portfolio significantly greater that we are examining to bring more cases in. We introduced our new marketing system into the business, and we have had extraordinary results in the short time that it has been in operation.
It has been reported to me we have seen a 17% increase in inquiry into the personal injury business. That all goes very well into the inflows of work for the business. As Mark and I have both spoken to, the injection of AUD 14 million in class actions will get us off to a great start in H2, where we expect a good performance in respect to cash generation. I cannot underscore enough the significant work going on in putting together a portfolio funding solution into the class action business that will just take us to a different level in terms of our ability to execute, produce earnings, and produce cash in the business. That concludes the formal part of the presentation. Alan, we're happy to take questions.
Sure. Thank you, Simon and Mark. The first question comes from Daniel on class actions. Can you provide some more color on how advanced the new funding solution for class action business is and your expected timeline to finalize this?
Certainly. A series of meetings were held in the first half with big funders out of the United States. John George and I attended those funding meetings in New York City. We have a short list of funders that we are focused on for the portfolio. We are hoping that we can have that bedded down no later than 30 June 2025, but we will report on progress.
Thank you. Another question from Daniel. How many fee earners were in the business at 31st December? In the current half, do you expect this to increase or decrease?
I can't tell you off the top of my head how many were in the business, but the averages were average in the first half of this period, 507. Average in the same corresponding period, 559. Quite a reduction. I think I alluded to the fact that our current fee earners are more productive. They're billing more hours and putting more revenue through. At this stage, I think if there is any increase in headcount, it might be material. I guess we'd like to try and reach those productivity levels. Also, that is a focus for now rather than just getting more headcount out to try and get the same outcome.
Thank you. In regards to the PI market, what sort of market share target do you think Shine can aspire to in the Australian PI market over the next three to five years?
Yeah, it's a great question. I think when IBISWorld first started publishing data, which was maybe three or four years ago, I think we started at circa 6.8%, something like that, maybe 7%. We're just shy of 10% now, three years on. It has been slow. We have seen a jump in our market share in this period, which I'm encouraged by. The other thing that does give me more confidence is the new marketing system that's been put into the business has produced extraordinary results in a short space of time. That certainly gives me confidence that we should be able to move the needle faster than we have in the last three to four year period.
I don't know that I would make a prediction yet, Daniel, as to what that would look like, but I suspect in the next 12 months, we'll have more clarity over what the trajectory is looking like.
Thank you. Next question. Can you provide any sort of update on how the first two months of the second half are tracking and what the market should be expecting in terms of revenue growth and margins in the second half compared to the first half?
It's a very hard question, not hard question to answer, but it's a question I don't know if I should be answering. Look, I guess, as we've alluded to, personal injury in the first half, in fees billed higher than the prior comparative period, we did take up an additional constraint on the WIP for the abuse matters, which we're hoping to reverse over time. Likewise, with the class action segment, being able to file some of those cases in the second half will release a lot of WIP back into revenue. We are confident of increases in both of those metrics in the second half. As to what extent, it really depends on how on the class action side, how many cases we can file and what we can settle on top of what we know.
The personal injury side, it's literally, like I just mentioned, around productivity of fee earners and how many cases we can settle. We do, I think we put in the outlook statement, and even at the bottom of this chart here, we do expect growth in both parts of the business. I guess the question is pretty much at what level. That's something that we can't answer for now.
Thanks, Mark. That was the last question so far. Sorry. What question, please? Just on capital management, how is the board weighing up the buyback versus dividends? How does this change with the ability now to pay franked dividends?
Again, very good question, Alan. Thanks for letting me be here five months. Look, I think, I mean, it's obviously a topic of conversation with the board as to if there is excess capital, which way to go about recognizing that value for shareholders. I think the frank dividends at this stage is an option that a lot of shareholders will be quite happy with. I think that shows through in the AUD 0.015 being declared for the interim dividend. I do not think the board are locked into any specific way at this stage, but obviously, I think there's some intent shown here with the interim dividend being declared at that level and with the expectations of increased cash flow in the second half. Obviously, there's a desire to be able to provide more dividends to the shareholders.
Not to say we won't focus on the capital management program, but I guess we'll weigh everything up at the time that we can.
Yeah. Yeah, that was the last question queued. If there are any final questions, if you could please enter them in the system, and I'll address them. Okay. That concludes the questions. Again, the webinar is recorded. Simon and Mark, thank you. Simon, if there's any final remarks you'd like to make.
I guess thank you, everyone, for attending. We're very grateful. We commence roadshows Monday morning in Sydney and conclude in Melbourne on Wednesday. We look forward to talking to everyone at the full year result.
Fantastic. Thank you, Simon. Thank you, Mark.
Thank you.
Thank you, John.
Thank you, guys.