Law of returns as Slater & Gordon net profit hits $61m

LISTED law firm Slater & Gordon has capped a bumper year by unveiling a 47.2 per cent increase in profit.

Slater & Gordon MD Andrew Grech. ‘We are also now in a position to execute more acquisition ­opportunities’. Picture: David Geraghty

LISTED law firm Slater & Gordon has capped a bumper year, unveiling a 47.2 per cent increase in profit, 21.2 per cent growth in annual dividends and the acquisition of two more law firms.

Net profit hit $61.1 million after revenue jumped 40.4 per cent to $418.5m, which includes $182.5m from Slater’s recently purchased network of law firms in Britain.

The next practices to be acquired will be Victorian specialist personal injury firm Nowicki Carbone and Queensland consumer law practice Schultz Toomey O’Brien, which will cost Slater $45.2m in cash and $18.8m in shares. Both transactions are ­expected to be completed in ­November, and Slater told the Australian Securities Exchange they would contribute about $39m in annual fee revenue.

Managing director Andrew Grech said the operations in Britain were delivering underlying annual revenue growth of 8 per cent and formed a stable base to take advantage of continuing opportunities in that country.

“We are also now in a position to execute more acquisition ­opportunities in the Australian market across both personal ­injury law and general law,” Mr Grech said.

The outlook for this financial year is total revenue of $500m, made up of $270m from the Australian business and $230m from Britain.

The acquisition of Nowicki Carbone will give Slater an extra 100 staff and additional annualised revenue of $26m, while Schultz Toomey O’Brien will give the firm about 70 staff and revenue of $13m.

On completion of the deal in November, the vendors of Nowicki Carbone, an eight-­partner firm, will receive $10m in cash and $15m in Slater shares.

They will receive another $20m in cash over the next two years, subject to conditions.

Vendors of Schultz Toomey O’Brien, a six-partner firm, will receive $12.4m in cash and $3.8m in shares on completion.

Another $2.8m in cash will be paid over the next two years subject to conditions.

Slater said its core personal ­injury business in Australia performed strongly in NSW and Victoria, but underperformed in Queensland.

Mr Grech said the Queensland operations were a weak spot in the Australian personal injury practice and this was due to two factors. The first was the retention of dual management after the $57m purchase in 2010 of Queensland firm Trilby Misso, and the second was the impact of state changes last year to workers compensation laws.

The dual management had ­reduced “decision-making agil­ity” and the legislative changes had slowed the pace at which claims were being resolved, he said. “We have decided that the time has come to move to a single business in Queensland that will operate under a single brand and management. Trilby Misso will be mig­rated across to the Slater & Gordon platform over the next two months,” Mr Grech said.

In Britain, the regulatory environment was stabilising and providing opportunities for faster consolidation.

Acquisition opportunities were available and there were strong opportunities to increase the scale of smaller practices to ­increase their profit levels.

Directors declared a fully franked final dividend of 5c a share, up 29.9 per cent, payable on October 24.