It hasn't been a great 12 months for legal firm, Shine Corporate Ltd (ASX: SHJ), but its FY16 result may finally provide some relief to shareholders.
Its first half result was clearly a huge disaster thanks to accounting irregularities and a weak operating performance, but the company has delivered a vastly improved second half.
This is summarised in the table below:
Pleasingly, Shine managed to meets it mid-year revised guidance and also managed to generate a strong level of operating cashflow.
The improved cashflow generated stemmed from a record year of fees billed and this allowed the company to reduce its short term liabilities over the second half. Although the company increased its long term borrowings over the year, Shine's gearing remains quite conservative with a net debt ratio of 10.9%.
The board also decided to pay a final dividend of 2.5 cents per share on the back of the improved operating performance over the second half.
In a separate statement, the company also announced that Courtney Petersen will transition to Managing Director (MD), with the current MD, Simon Morrison, to move into the role of Executive Director, effective immediately.
Outlook
Shine declined to provide any financial forecasts for FY17 but the commentary provided made it clear that the company is still facing headwinds in the personal injury market. On the positive side, the law firm noted that the underlying business recovery was continuing and that the company remains focused on growing the business organically and through acquisition.
Should you buy?
Based on Shine's second half performance, there is little doubt that the shares appear cheap, but that doesn't mean they are a low risk proposition. Shine still faces intense competition from the likes of Slater & Gordon Limited (ASX: SGH) in the personal injury market and this could create a headwind for the company because its generates around 78% of its revenues from this division.
As a result, I would feel more comfortable waiting for another half of results before buying shares of this law firm.
