Good morning, everyone, and thank you for joining us today. My name is Alan Chen from Bridge Street Capital, and today we have Shine Justice to deliver their FY 2025 full-year results. Today we have Simon Morrison, who is the Managing Director, Carolyn Barker, who is the CEO, and Marc Devine, CFO. This is being recorded, and we'll also have a Q&A session after the presentation. If you can enter your questions, address them at the end. Simon, thank you, and over to you.
Thank you, Alan, and good morning, everyone. Welcome to the FY 2025 Results presentation for Shine Justice . May I start by introducing our team? Firstly, Carolyn Barker, our CEO at Shine. Carolyn has a long association with the company. She was one of the first directors back when we were a private company in 2009. She was the only director to then move into the listed environment for Shine. She got off our board about five years ago and has done various project work since then for Shine. She moved into a Chief of Staff role and then, about six months ago, took the CEO role and has been very busy. We'll talk about that in a moment. Very experienced CEO. She's been a CEO in listed environments. She's a former CEO of the Australian Institute of Management, so comes very well credentialed.
Marc Devine, our CFO, has just celebrated one-year anniversary at Shine. Marc has had very senior roles in healthcare services and, more recently, CFO for more than eight years at Alliance Airlines. Again, very well credentialed. John George, our Head of Investor Relations, is a former director of Shine, Company Secretary of Shine. He's a consultant to private businesses these days, a former ASIC senior personnel. Good to have John with us. I'm the MD of the company. I've been with Shine 37 years. Since Carolyn's appointment, it's freed me up to spend a fair bit of time on our international mass torts strategies, which we will cover in some detail as well in the presentation today. If we can move to slide four, firstly, there are three themes I just want to lay out for what we've been up to in the last 12 months.
The first theme is there's been a lot of work done to tighten, strengthen, and clean up our personal injury practice and our class actions practice in Australia. Carolyn has led much of that work, and she will go into some detail about that. Secondly, we have been very busy accelerating our international mass torts strategy. We've touched on it in prior presentations, but we've had a very active year, and we'll let you know what we've been doing there. Thirdly, we have made a commitment to a significant investment in emerging technologies in FY 2026. Carolyn has led a team that has prepared us for the role of emerging tech in a litigation law firm, and I think there are some exciting opportunities ahead. I'll start with some headline numbers. It was a year of strategic organizational restructure for the company, and I'm very pleased.
It's significant work that both Carolyn and Marc have led through that process. Notwithstanding all of that, our revenues were up in FY 2025, $204.4 million on a PCP of $195.7 million. Our adjusted EBITDA was down on PCP at $38.4 million versus $45 million, but a significant portion of that delta was the strengthening of our balance sheet with some increased provisions, which Marc can talk to in a moment. Our adjusted NPAT followed those numbers, and we were pleased to declare a final dividend of $0.035, fully franked, indicating our great confidence in our cash position moving forward as a company. Operating cash flows were $30.6 million down on PCP, largely because of some one-off injections of cash in the prior year of some class actions. In summary, some initiatives that went on during the year. We restructured the team.
I've introduced our new CEO and CFO, who are doing tremendous work. Carolyn has been very busy on the process side inside both the legal and business support arms at Shine, which she will talk to us about. We've talked previously about exiting non-core practice areas at Shine so that we can focus on the two areas of work that we know well and can scale up. We've been very busy on the international mass torts front with our hub in the United States, which we'll talk to a bit later. Carolyn will speak to us about some groundwork that has been done to grow organically a number of our branches across the Australian network. She'll also speak to some of the emerging tech work that we've done.
Let's move to slide five, and I'll just touch on some highlights that we've been focusing on around how we positioned Shine competitively and to get strategic advantage. We remain the largest personal injury firm in the country, which is a good opportunity for us to platform from. We still have the largest footprint across the country with 46 offices and just under 1,000 staff. We have zeroed in on the two core parts of the business being personal injury and class actions, and we have accelerated our work in international mass torts. The industry is still ripe for consolidation, notwithstanding that we are the largest player in Australia. Some 75% of the market is still occupied by boutiques. Carolyn and her team have been doing some very good work in 2025 to position us to infiltrate that part of the market.
Finally, a lot of work has been done behind the scenes, particularly with international funders, to develop a superior funding opportunity for Shine to fuel our class actions and international mass tort cases. Three pillars that we've sort of anchored our work on. One is our efficiency and technology work. The second is our people. It remains very competitive in the legal industry. Salaries remain high, and there is a war for talent. One program I do want to call out that is working very well for Shine is what we call our Alumni Program, where people who have left Shine over the years are coming back to the organization. We track those numbers, and the growth of people coming back who previously worked at Shine is really encouraging. There have been strategies to develop our market share growth.
Let's move to slide six and a little bit about our vision beyond 2026 and beyond. The first is fortifying our foundations, or I use the frame, get the base right. The base of our business is the Australian PI and class action practices and putting them in the type of shape we need to consistently deliver good earnings in cash for the company, and Carolyn will walk us through that. The second is realignment to market needs. Our customer needs are changing. How we engage with our customers, how we source our customers, it is a moving target, and a fair bit of work has been done to understand that changing market so that we can capitalize on it. The final, of course, is to accelerate our growth strategies. Shine was listed as a growth company.
We have significant growth opportunities ahead of us that we have been quietly planning for. On that note, I'll hand Carolyn to walk us through personal injury and class action businesses.
Thanks very much, Simon. Our mantra is that we are a personal injury and class actions business. After exiting, divesting a number of business units in family, estate law, landholder, commercial litigation over the last two years, we've now settled into the rhythm of personal injury class actions. The extension of that is international mass torts, which Simon talked about further into the presentation. On the PI side, this is a deep Shine DNA. We've all started here in Queensland. We now have a national footprint through acquisition in Western Australia, now fully back into integrated through New South Wales and Victoria, and a new office in Adelaide. We moved from primarily detainee matters into a PI office in downtown Adelaide. We have 46 offices around the country, and these are the backbone and the heartbeat of what we do day to day.
We follow a very informed process, have embedded case management processes. We want to ensure the best outcome for our clients and consistency doing so. As Simon said, we're the number one personal injury firm in Australia. We know that the growth can come from two areas, as the segment of the business stands. One is that our footprint grows organically. That is via our community interface, via our advertising and promotions, via our call center taking inquiries, sending them to the branches. A lot of work is being done on allowing us to do that through our customer intake systems. We'll talk about that a little bit later. However, another area of growth is to look at the roughly 70% of the market that is populated by smaller players, boutique firms, often in the backyard of our regional and rural and suburban environments.
We are looking at strategic acquisitions in terms of file acquisitions, and where very attractive business acquisition opportunities come our way, that, of course, is always on the table. On the slide here, you can see that we're looking at organic growth being achieved, which I just mentioned earlier, by looking at the recoverability for our legal work, making sure that we hit budget and better. Obviously, that is a very key metric for us. Our fee earner utilization, we've been doing a lot of work on ensuring that fee earners are utilized in the best way and deliver best for the client, for the business, and for themselves throughout all of our programs that underpin that. New file intake is incredibly important for us, as is the quality of those files.
After a very significant restructure that we did mention at the half in our customer services team, fueled by Salesforce and some now front-end AI capabilities about to be launched very soon into our offerings, we are concentrating on that particularly. Obviously, we're looking at, as a result of that, our revenue and our market share growth. The outcome, as we've said here, is that we want to run a sustainable, low-cost network in PI driven by operational efficiency. This is something that's very important to us. I just want to mention here our Victorian operations. We've been in Victoria 20 years. We started in Victoria via acquisition, and we have an extensive network there of regional offices. Very important that we have that reach in that particular state.
Victoria now is being looked after by COO Jodi Willie, who is a very, very well-experienced, well-known player in the personal injury market. She is working with our people there to ensure that we continue to turn around the Victorian operation and to embed ourselves there in a more productive way. Our broad case portfolio through all of that covers, just for the sake of saying the obvious, motor vehicle accidents, workplace injuries, public liability, medical negligence, disability claims, abuse, and dust and diseases. I've already talked about, on the right-hand side of the slide, strategic acquisitions and talked about why that is important to us as well, because we want to manage the velocity, which is basically the payback period. We will do that by really looking at those file acquisitions and getting good quality files in.
Digital innovation, we've touched on, and we will talk later on this slide about that, and our emerging technology center. Talent development is the bane if that's one side of the coin and the joy, the other side of the coin of running an organization such as this. We have spent a lot of time and effort and understanding to see how we can be not just the old phrase of attractive to the market, the best talent, getting the best talent out there, but how we can absolutely keep our people, pay them appropriately, and make them stick. Simon did mention of our Alumni Program in the last five years, because we measure this, we measure everything at Shine, which is a good thing, that we have had nearly 8%, 8.5% people returning to us. That is a very significant statistic in relation to the general environment.
Moving on to class actions, primarily before we get to IMT, International Mass Torts, we're going to talk to this slide from a primarily domestic class actions perspective. Now, we've briefed the market before on our class actions business. Just to update you, we had 29 filed actions and 29 cases in the investigation phase. We look at what class actions will have links for us and, of course, our clients. We investigate how this might be undertaken. We then fund, and then after that successfully has occurred, we move it to an action on behalf of the class members. You can see here it's an interesting sort of wheel there, colorful wheel, about the type of showing the type of class actions that we play in, the type of fields that we play in: consumer, financial services, medical product liability, which is an important one for us.
First Nations and social justice, there's been a lot of successful outcomes there, and also a lot of dialogue about those outcomes. We talk about those landmark wins over on the right-hand side of the page. Shareholder and environmental. We have a deep, deep DNA about social justice, who we are, and why we do the things we do at Shine. Pre-listing, through listing, after listing, right now. It is very important to us that we can use our methodologies, I call it that, in order that we focus on some social justice cases and classes. Certainly, those landmark wins, so the Northern Territory Stolen Wages win, a historic $202 million settlement for Indigenous workers, and also the Western Australia Stolen Wages win, $180 million for Indigenous workers. I'm going to stop there, Simon, and turn over to you.
Thanks, Carolyn. Let's move to slide 11. Talk a little bit about the international mass torts practice. It's in more detail than we've previously recorded. The appointment of Carolyn to the CEO role has freed me up to spend much more time in the last year accelerating the strategy forward. I just want to share with you what we've been up to and why. Firstly, international mass torts are typically very large class actions that run in multiple countries against the same company for the same role. Most of those companies are large multinational U.S. corporations. We have run mass tort litigation in Australia as class actions for over a decade. We have now commenced in New Zealand running class actions. We are looking to other territories where we can effectively run the one case in multiple countries. Shine is an early adopter to this strategy.
There are a couple of U.S. and U.K. law firms that are in the same phase, I guess, of development, but we've taken that decision to be an early adopter. The second part of it is that the scalability opportunities of these cases provide significant forward growth revenue opportunities for the company, which is a key cornerstone strategy. Implicit in that is litigation funding at significant scale so that we can remove risk and improve cash flows, and I'll come to the funding side of it shortly. The third piece to the strategy is to work with the best lawyers around the world. We've spent a lot of time in the United States developing working relationships with the best of the best in that country, and I'm pleased that we've got some of the best on board working with Shine.
Let's move to slide 12, and I just want to unpack our litigation funding strategies at Shine. In addition to our current litigation funding, we have our domestic class actions, which are typically structured in what we call a siloed environment, which means we have a bespoke piece of funding for a bespoke piece of litigation. We have been in very mature dialogue with very large international funders, predominantly United States-based, who have the balance sheets and the investment capability to provide us what we call portfolio funding, wherein in one transaction we can be funded for multiple cases at once. The reasons we're moving into the strategy, firstly, the cash flow predictability for those who followed Shine, will come as no surprise that this will be a big change to our cash flows moving forward.
Secondly, the earnings volatility that we've seen over the years with some funding of cases and the timing of cases will change. We will smooth out the volatility we've seen in the past. The third, and I think one of the most important elements to the funding strategy, is capacity. When we were a sole funder of class actions, our constraint was financial capacity. Our balance sheet just wasn't geared to support the high volume of cases that we're currently in a good position to be able to run. Having a portfolio funding structure behind us changes that capacity very quickly for the company. We move to slide 13. I'll just unpack a little bit about what we've been doing.
Firstly, we currently operate in Australia and New Zealand on the class action front, and the IMT cases that we are developing out of the United States are fed to those two countries to litigate the cases. As I touched on earlier, we are looking at other opportunities very carefully at the moment about what other jurisdictions we could feed class actions into. The cornerstone of the strategy is to develop a base in the United States, which we have done. We have secured an operating license in the State of Arizona, which permits us to practice law in the United States and move the strategy forward. Thirdly, as I said, we have developed partnerships with the U.S. leading plaintiff law firms who are working in collaboration with us. Now I'll move to Carolyn just to talk a little bit about emerging tech.
We've covered it large. Everybody is talking about AI and how it's going to affect business. At Shine, we've elected to start what we've called an emerging technology center. That is where we can look and test out the AI and other systems that take a different approach, a technological approach to the way we do business. We're using proof of concept methodology to do that. The reason, we are beneath the simplicity of PI class actions. It's a business that is driven by systems that are rather complex, are vast, and we want to ensure that we understand the impact of this technology as it is emerging and over time. The emerging technology center is run out of our, under my informato, as Simon has said, and we have a lot of really smart people that we've either had at Shine and refocused them and/or brought into Shine.
That is going to roll through 2026, and we will see, I imagine, when we get to 2027, we will see benefits in 2026, but we will see how we've harnessed this in the next two years. I want to talk about Salesforce. We mentioned it before. It's our new marketing system, and it is fully embedded now. Salesforce does have some, and we have created a number of AI agents that will be utilized through the Salesforce mechanism, and those are in the process of testing and will go live soon. That will further enhance the quality flow and activity around our inquiry flow. That's incredibly important, especially in PI, but also for class actions in the ability to so that we can handle the incoming, which can be tens of thousands and hundreds of thousands, depending on the class action. That has been a key thing.
We promised the market a key activity, and that has occurred. It's now going to flow through in 2026 and, of course, 2027. We also have done a lot of work on our advanced analytics so that we are data-rich here, but we want to be able to manage the company in terms of the outcomes and the needs and the implications of how that data can be applied. We now have meaningful, we've always had them, but these are even more meaningful dashboards providing us the insights and analysis for our legal leaders, particularly on a daily basis and an hourly basis if they want to get specific reports. Basically, what we're talking about in terms of that technology is not a big bang, large installation revolution.
We are talking about a proof of concept methodology, clearly project managed, clearly targeted at the elements of our business that can make the most impact. That's about all to say there, Simon.
Thanks, Carolyn. We'll now pass to Marc for capital management and financials.
Morning, everyone. I just said Chris signed the body on nearly 12 months ago. I think I'll do it another month to go, and we can have a celebratory birthday card. Driven capital management, obviously a big focus in the past 12 months, both on the pure capital side, but also on our debt structures and borrowings and how best to sort of structure those, both in the short term and the longer term. I'll touch on the one that is pleasing, I think, for all of us, is the dividends for the year. At the half, we declared and paid a $0.015 dividend, and then for the full year dividend, we will pay another $0.035, so $0.05. Fully franked dividend, which represents the stability of the cash flow.
There still were some lumpiness in cash during the year, mainly just a lot of those class action settlements that we get the timing of those, but it's good to say the cash flow supported the payment of that $0.05 dividend. At the same time, we did have a share buyback program running, and it will continue to run until mid-September when the board will then review further the future programs. I think we bought up to 2% of the shareholder shares back. Managed as best we could, I guess, with some of that lumpiness of the cash flows over the past 12 months as well. Obviously, probably the piece on players with this is the debt structure. We refinanced the majority of the debt with the Commonwealth Bank, extended the tenure out three years so we could sort of lock and load it for three years.
We also moved some disbursement debt that we had with one of our funders into the CDA, which gave us a quite significant interest rate savings. Someone that comes in FY 2025 will get the full year impact of that on FY 2026. I guess just overall, we've just tried to make sure that the capital structure we have, the debt structure we have, supports the business as it is now, but also as it is, how we see it in the future. We've tried to get an efficient, so tried to lock and load it for three years, and the idea now is we continue to focus on that capital management side and shareholder value. Move to the next slide. This is just a summary of that position.
Some of the first ones right at the top, may on the face of it, shock some people with the $53.6 million net debt number. I think last year was a $21 million. That's been impacted by us moving the $18.8 million across from disbursement funding into borrowings. It has increased. The net debt hasn't moved the liabilities on the balance sheet. We've just shifted it from one bucket to another. Quite a significant interest rate saving, which will flow through below the dollar. Gross borrowing is $71.6 million, so we've still got a fair amount of headroom there, and we're comfortable with that level for now. The reduction of interest expense will come with that $18.8 million now being under borrowings. Average cost of debt around that 7%. Obviously, we've had a couple of rate reductions through the year. Historically, Shine's had hedging in place.
I think the last one came off towards the end of last financial year or early this financial year. We'll look at what we do with a hedging perspective moving forward, but at the moment, there is no hedge in place. Something we'll look at in the future. I also made a note that CapEx is $2.3 million, lower than previous years. A lot of the projects that have been underway over the last couple of years have also finalized now, so we don't expect any major or any material increase for the CapEx number. It'll probably be around that mark again for the current year. We move just to the summary of the financials. As Simon said earlier, the revenue was up to $204 million. Included in that revenue growth number was an increase in the constraint that we carry on our WIP.
The constraint over the period increased by 3.1%, which equates to around $14 million. That was included in the current year just to give us a bit more balance sheet strength and, in some ways, conservatism around that constraint number, but we think it's at the right level now. As recovery improves over time, hopefully, we get that constraint percentage down, which will obviously have a massive impact on the P&L. Everything we talk about, efficiency and focus, is all aimed at trying to get the recovery rate high and the constraint lower. We adjusted even down a number. The other thing we adjusted out this year was the fair value loss on consideration, which you'll see at the bottom of that table, $9.6 million. When you look at the 28.4 to the 45, the majority of that delta is that increase in constraint.
You can also see that the employee expenses are up by $3.7 million, which is basically the CPI moment, an increase in salaries. We do have less staff than what we had the previous year. That's on the starting space. Overheads, in the same vein, I'll be out by $1.2 million, which again, you know, it's a focus of ours that we don't increase that overhead cost base. You know, we want to sort of stay pretty stable whilst increasing the revenue line. I guess just a general note, we remain well positioned a couple of ways on both the class action sort of side of the business in the future, as well as increase that recovery rate per laundry. Cash flow, just a couple of calls on cash flow receipts.
Customers lower in the current year, and as Simon mentioned earlier, that's related to some major class action lump sum receipts that we received in 2024 that weren't repeated in 2025. Obviously, in the future, with portfolio funding and getting our class action cases funded, we don't have to smooth out the cash flow so there's less amounts of these lumpy receipts coming in and more of us move the cash flow as we move through the year. Homes and suppliers, pretty well stable. Same with the disbursements. Probably the only other caller in the operating cash flow there is the tax. We did pay $3.9 million in FY 2025, which related to FY 2024 tax obligation. That's due to us being in that tax payable position. To save for the foreseeable future, we've also paid $2.3 million in installments for FY 2025.
There's a big delta there on the last year and current year. Financing and cash outflows, there's an internal movement there from borrowings, the disbursements, as I told you earlier. Probably the only other call out, the net cash outflows from investing activities does look a bit odd because it's new. The reasoning behind that is we did spend some money on CapEx, but we also, from a previous, had a previous file transfer out, which we received funds for. The money received into those file acquisitions actually offset the CapEx that we spent. I think that's nearly coming to an end, so that will be the last time you see that as a low or a zero number. Just turning to the balance sheet. Again, a couple of major call outs there. Cash has obviously reduced in the period.
In the main, again, you know we've invested a lot of money in class action investigations, which haven't yet filed or been funded. We're sort of carrying that cash on our balance sheet. Hope to get those funded, and we'll get cash back in for those. The financial, sorry, financial assets for fair values, that just takes into account the write down of that. We had from a previous siloed business. We still are looking to recover those funds. We thought we'd just write it down, and anything that we may recover, we can write back as we need to. On the liability side, probably the main thing to call out, which you can see, is between the years, the disbursement creditors and the borrowings, it just flipped for that $18.8 million has come out of disbursement creditors into borrowings. Otherwise, a fairly sort of stable balance sheet.
I think we've got it structured now, in addition to where, as Simon said, you have that platform for growth, and that's what we want to achieve in the future.
Thanks, Carm. Move to slide 23, the article FY 2026. I'm going to finish where we started the presentation, which is, you will have heard that the lion's share of FY 2025 activity was to lay those foundations in the core part of the business and accelerate the strategies for the next arm of growth in the business. A significant part of that were the leadership changes that have gone on in the business in the last year. The Carolyn and Marc that I spoke to, me moving more of my time into the IMT work. Our COO, Jodi Willie, was seconded to run the Victorian business to improve that efficiency faster. Our Chief Legal Officer, Lisa Flynn, was responsible for much of the structural work that went on in the PI business and class action business in 2025.
The key strategies for the next year, we want to move to the next phase of that structural alignment that Lisa was working on. The emerging tech opportunities that Carolyn spoke to, we will see that investment occur in FY 2026, and we expect good returns from that. We have been able to reallocate a lot of our resourcing to focus more on just the PI and class action businesses, and we expect to see gains from that. We saw some great weight signs in FY 2025 on the fee recovery front, which we expect will flow through to 2026. We will move to the next phase of the international mass torts strategy, and you will see some significantly larger cases out of the U.S. file into Australia in FY 2026.
Finally, we are quite a mature stage in our negotiations with international funders, so we're expecting to see that come online for the 2026 year. To round that out, the year for us is to execute on the 2026 growth plan, expanding opportunities in those two significant parts of our business, the personal injury and class action. That concludes the formal presentation. Carolyn, Marc, and I happy to take questions.
Fantastic. Thank you, Simon, Carolyn, and Marc. First question. How are the new marketing and conversion systems performing in the PI business? Has this had much of an impact in the second half?
Thank you, Alan. Thank you, Daniel, for asking the question. I think I did cover it by talking about those new marketing and conversion systems. Simon mentioned this in closing too, that that is our second half, I call it uplift in 2025. Is this a result of those systems gaining purchase? They are fully embedded. We have explored in our proof of concept methodology through our emerging technologies center how the AI agents can be most productively and authentically used at the front end of the incoming on those systems. As I said previously, they will be released during this period, FY 2026. We've talked before about Salesforce. We've talked about embedding it. It is done, and we are now fine-tuning it and developing better quality inflow and a better front-end relationship with clients to be.
Thanks, Carolyn. This one's for you again, Marc. The PI segment has reportedly steady revenue of $80 million- $85 million over the past four halves. With a combination of office footprint additions, targeted fee earner utilization improvements, improved new filing tech and conversion rates with new Salesforce platforms, and potential strategic acquisitions against files and businesses, what sort of revenue growth are you targeting in PI in FY 2026?
I'll take that one. Obviously, we are targeting growth. I think some of those things that we have spoken about, as example, file acquisitions, some of the office and footprint changes we're doing, that is probably weighted more towards the second half of the year. It takes time to get the files in and get them going. There will be growth. Probably in addition to that, the recovery aspect of choice touched on earlier, I think that's one of the more, I'll call it low-hanging fruit, even though it's a hard fruit to reach. It is probably more of an impact in some cases to get the recovery rate up. In addition to those things, you know we do expect the revenue growth. I'm not going to go into exact numbers for you at this stage. You know we've laid the foundation. They're all the things we're targeting.
Along with that recovery rate, we should see quite a lot of growth in 2026 and beyond.
Thanks, Marc. Another question. EBITDA margins in PI rebounded to over 20% in the second half. You had previously stated that the target EBITDA margin range for PI is 20% and 25%. Is this still the case? Can we expect further improvement in FY 2026 given the work completed during FY 2025?
Yeah, probably a mirror answer of my last comment. You know we've taken the additional provisioning in FY 2025. We've laid the foundations for all those improvements with offices and fee earner utilization and new file intakes, the file acquisition strategy, and the recovery rate. I think 20% s, I'd call it the baseline. We can only grow from there, ideally to 25%. Hopefully, we can get up to 30% at one time in the future, but all those strategies have to come off for that to occur.
Thanks, Marc. On class actions, the segment reports very strong revenue growth, over 20% in FY 2025, with a strong pipeline of cases in the investigation phase in FY 2025. How should we expect revenue growth to evolve in FY 2026 in this segment?
Yeah, so with class actions, I think we've been pretty open at the half and I believe it before that. A lot of the key to the class action revenue recognition is around having cases funded, filed, lead applicants signed up, and a whole range of boxes we've got to tick before we can actually recognize the revenue. The key to all of that is the funding. In the main, I think once you've secured the funding, everything else just falls into place. Obviously, you know we've still got investigations that we're working out now where they've got matters out to funders. That takes time. Sometimes the sense of urgency we've got is it matters what someone else has on the funding side. The key to it is getting the funding in place.
If some of the things that Simon's working on from a portfolio funding perspective come into play, that will be a real game changer for the class actions segment. It'll allow us to run investigations, have the funding there to basically file and push into the action immediately. There will be revenue growth when the funding is locked in. That will increase again. We're obviously working on that now, probably again weighted more towards the second half than the first, but we do see that growth in class actions as and when that funding can come up.
Next question. There is a $4 million of revenue related to insurance services in the class actions segment note. What does this relate to, and is it recurring?
Very good question. I'll start the answer with, if you'd like to read AASB 730 insurance contracts, that will put you to sleep even early in the morning. The reason there's an insurance revenue amount noted is that where we are indemnified, but we are carrying the indemnity for costs. Under the standards, it's classified as an insurance contract, and we then need to recognize both insurance revenue and insurance expense. The outcome for the P&L on the balance sheet is a zero-sum game. However, we do have to recognize a portion of those class action matters where we've got the cost issue. We're cost indemnity. We've got to recognize those insurance contracts. We're actually trying to talk to the auditors to see if there's a way that it's basically from an insurance company, which we're not.
We're going to try and talk to the auditors to see if there's a way that we can actually tackle it so we don't have to record it as such. Purely, it's just a movement from legal work revenue to insurance. It's nothing else but that.
Just a question on headcount. We talked to 958 staff at the end of the year. Do you expect the total number of staff members to go up or down in FY 2026?
To go down as we get more fee utilization from our margin to go down from our fee earners, and as, of course, AI just starts kicking in to our emerging technology centers and also some of the other work that we're doing on the applications that will help that. We don't expect it to go up.
Thanks, Carolyn. Can I make a question for Ashley? Can you please go with detail around the recovery rate and the constraint rate, which greatly impacted P&L, and how we are currently tracking on these metrics versus your objective? What is your path to green on these? Do you have a lot of levers you can pull on and who is pulling them?
Yeah. When you talk about recovery rate, I guess the starting point and endpoint being the recovery rate is looked on, as Carolyn mentioned earlier, the file intake. There's been a really big focus on what files we're bringing in, what files you know we know the quality of the file, I guess, and the quality of the work needs to go on it. It starts at the file intake, making sure we're bringing the right files where we know what outcomes for ourselves and obviously, more importantly, the client. How those files are run. There's a lot of work being done in the processes of a legal mind to actually run those files efficiently and effectively. How those files are settled, how the negotiations with the defendant sort of come into play as well.
It's a lot of different things that go into trying to uplift that recovery rate, but it all starts at the beginning, bringing the file intake.
Thanks, Marc. Another one, Ashley, obviously in regards to the Eficon legal fees. Are you able to update on that? Basically, has Shine abandoned that situation?
The update is the application work is still pending. It has been slower than we expected in 2025, but we will certainly report back to the market on developments. No, Shine has not abandoned it.
Excellent. Question from Daniel. Is there any potential regulatory changes on the horizon that could have an impact positively or negatively on the business, particularly in your core market in Queensland?
There are no positive regulatory changes that I'm aware of. We don't see them very often, but they come along every now and again. There are no negative ones that I'm aware of. Actually, there is one reform that is being sought in Queensland at the moment, which is largely neutral to Shine, and that is in the CTP space. One of the larger insurers in the CTP market in Queensland is seeking a form of equalization on premium from the government in respect to the insurance of older vehicles. As I said, that's neutral to Shine.
Thank you, Simon. I think we've covered most of the questions here, team. If there's any final questions, please enter them in now, and I'll address them. Otherwise, we can move up to Simon for closing remarks.
Thanks, Alan. Thank you all, and we look forward to talking to people on the roadshow. Thanks very much.
Fantastic. Thank you again, team. Yeah, speak soon.