Slater & Gordon Ltd: FY14 Ahead Of Forecast
Edison | Aug 26, 2014 08:12AM ET
Slater & Gordon's (ASX:SGH) FY14 results were ahead of expectations driven by a beat in UK revenue. We believe this, and two new Australian acquisitions announced with the results, will see consensus upgrades. Management is guiding to further modest acquisitions in FY15. SGH’s own-brand development, tight management of workflow and economies of scale are delivering good growth. The dividend was increased from 6.6c (FY13) to 8c (FY14).
Revenue grew 40.4% on FY13 (38% excluding a £7.4m one-off credit, 32% on constant currency). Australian revenue was up 4% with a fall in Queensland revenue post regulatory changes partially offsetting 9% growth in the rest of the country. In the UK both established business and recently acquired businesses delivered c £49m each in revenue with management estimating underling growth of 8%. Personal Injury (PI) cases generated 80% of revenue. Underlying costs rose 37% (ie below revenue growth of 38%). Post-tax profits were up 47% with reported diluted EPS up to 29.8c (from 23.3c). Edison’s normalised EPS rose from 24.1c to 31.7c. Operating cash flow as a percentage of net post-tax profit was 89.7% (FY13 78%) aided by a one-off acceleration after an acquisition and tax management. The FY14 dividend was increased to 8c (from 6.6c in FY13).
h3 Outlook/h3SGH also announced two acquisitions in Australia. With these adding c A$25.6m to revenue, the management guidance of A$500m looks credible. We have slowed forecast growth in Australia to reflect a further modest impact from the Queensland reforms. Long-term growth of 5% in PI and 8% in General Law appear practical. Our UK revenue has been increased to reflect the FY14 outperformance. We see a range of opportunities for growth once the recent acquisitions have been fully bedded down (March 2015) and the market disruption from major regulatory change moderates. Management guidance remains for group operating cash flow as a percentage of net post-tax profit to be over 70%, which again appears credible.
h3 Valuation: Around fair value/h3The average of our valuation approaches is A$5.82 (c 15.3x FY15e EPS). This is on the basis of existing business, and further acquisitions may generate upside. Our forecasts are consistent with management guidance, and historically this has proved somewhat conservative.
Get The News You Want
To Read the Entire Report Please Click on the pdf File Below
/h3
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.