Slater & Gordon Ltd
Annual Report 2022
Contents
01
Business Highlights
02
Our Business
05
Chair’s Report
06
Chief Executive Officer’s Report
08
People and Culture
10
Social Responsibility
12
Financial Statements
13
Directors’ Report
32
Auditor’s Independence Declaration
33
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
34
Consolidated Statement of Financial Position
35
Consolidated Statement of Changes in Equity
36
Consolidated Statement of Cash Flows
37
Notes to the Financial Statements
71
Slater & Gordon Ltd Directors’ Declaration
72
Independent Auditor’s Report
77
Additional ASX Information
79
Corporate Directory
Slater & Gordon Ltd
ANNUAL REPORT 2022
Business Highlights
Slater & Gordon is a leading Australian consumer law firm.
Our mission is to give people easier access to world class
legal services. The firm provides specialist legal and
complementary services in a broad range of areas.
Employee Engagement4
-1
63
Net Promoter Score3
+6
29
EBITDA Margin2
16.6%
Gross Operating
Cash Flow
-139%
$(6.0)m
Net Tangible Assets
+2%
$182.4m
Net Profit After Tax
-85%
$2.2m
Net Revenue 1
-10%
$182.0m
EBITDA 2
-40%
$29.3m
1. Statutory revenue.
2. EBITDA excluding specified items where specified items are certain cash and non-cash items relating to transformation and normalisation of the Company.
3. Source – Kantar April 2022.
4. Source – Kincentric March 2022.
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ANNUAL REPORT 2022
We access justice for all people.
We champion voices struggling
to be heard.
What we do
We unite to treat every client
with care and commitment.
How we work
We make tomorrow start today
for our clients.
Why we do it
Our Business
1. Includes permanent, visiting, and virtual offices.
2. Source – Nature: November 2021 – No 1 in all Vic, NSW, WA & No 2 in Qld.
3. Source – Kantar April 2022.
4. Personal Injury includes Motor Vehicle Accidents, Workers Compensation, Medical Negligence, Public Liability, Asbestos, Abuse,
Military Compensation and Superannuation/TPD matters).
5. Includes shareholder, superannuation, consumer protection, tort/product liability.
6. Includes Compulsory Acquisition, Industrial and Employment.
Iconic and trusted brand
• ＋87+ years of caring for Australians’ rights
• Maintained #1 prompted and unprompted recall2
• Net Promoter Score of 293
Deep physical networks staffed by skilled,
diverse teams
• ＋~601 sites in VIC, NSW, ACT, QLD, NT and WA
• ＋Well represented in chosen markets
• ＋Unions and other referral relationships
Market-leading digital assets
• ＋Online claim assessment tool
• ＋Outbound digital capability
• ＋Advanced analytics supporting business decisions
Highly focused business model
• ＋Personal Injury4 – 87% of revenue
• ＋Class Actions5 – 11% of revenue
• ＋Emerging Services6 – 2% of revenue
Perth
Adelaide
Melbourne
Hobart
Brisbane
Sydney
Darwin
WESTERN
AUSTRALIA
NORTHERN
TERRITORY
SOUTH
AUSTRALIA
QUEENSLAND
NEW SOUTH
WALES
VICTORIA
TASMANIA
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ANNUAL REPORT 2022
7. IBISWorld Industry Report OD5519 April 2022.
Our ongoing commitment to our clients and our demand
for the highest professional standards have helped make
us Australia’s largest personal injury law firm.7
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ANNUAL REPORT 2022
It is this commitment to our clients and to social justice
that has made a difference to millions of Australians
over our 87 year history.
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ANNUAL REPORT 2022
I want to begin by thanking our people for their
commitment to our clients and the care and compassion
they have shown over the past 12 months. COVID remained
an ominous threat throughout the financial year ended
30 June 2022 (FY22). The prolonged lockdowns in the
first half of the financial year across Melbourne, Sydney
and Canberra, as well as border closures in Western
Australia and Queensland were challenging for our people
and our clients. The resilience of our people shone through
in the compassion and commitment they have provided
to our clients and to each other.
In responding to COVID, our focus continued to be on
protecting the health and wellbeing of our people and
our clients and business resilience. The lockdowns in
the first half of the financial year have impacted business
performance and our FY22 result. Lockdowns and ongoing
restrictions meant limited mobility amongst large parts
of the population resulting in fewer work and road injuries
and consequently in lower file openings and slower
progression of files in the first half.
However, with the lockdowns and other restrictions
being relaxed toward the end of the first half and into the
second half and with people returning to the road and
workplace, enquiry levels returned to pre-pandemic
levels. The barriers to claims progression were reduced.
As a result, we were able to report a net profit after tax for
FY22 of $2.2m, which was a good turn-around from the
$7.5m loss reported at the half year. However, compared
to the net profit after tax in FY21 of $14.5m, the adverse
impacts of the COVID lockdowns are apparent.
After two years of delays, we were pleased to finally
come together in person to celebrate Slater & Gordon’s
85 year anniversary. It was a wonderful opportunity to
meet and celebrate the past as we work to shape our
future. I want to thank our people, our special guests
and our alumni for joining us in making it a very special
celebration. I am very proud to be a part of such a
wonderful community.
It is our people and our clients who make Slater & Gordon.
From Bill Slater and Hugh Gordon and the workers of the
RTBU in the beginning, to the many people and clients
who have walked our hallways and through our doors over
the past 87 years, to our people who work here today and
our current clients.
I acknowledge and am grateful for the terrific support and
hard work of my colleagues on the Board, the Company’s
leadership team and importantly, all our people. It is the
commitment and care they show today that continues
the legacy started by Bill Slater more than 87 years ago.
Chair’s Report
Our history is not walls and buildings, bricks and mortar;
our history lives within all of us. Our history is our people
and it is the clients that we’ve helped and the legacy
we leave. That is a legacy of bravery and innovation,
of protecting the right to justice for every Australian,
and of standing up to big businesses, to insurers and
to governments when they seek to exploit the power
imbalance and deny Australians their rights. And our
record on that is strong.
Whether it is the big class action cases we have taken
on, the legislative reforms we have either championed
or fought against when they seek to erode the rights
of Australians to access justice, or the work we do for
thousands of individuals every single day – it is this
commitment to our clients and to social justice that has
made a difference to millions of Australians over our
87 year history. The fabric of Australian society would
be very different without Slater & Gordon and we
were proud to have the opportunity to recognise and
celebrate that.
Our friends within the union movement and within the
legal profession, our regulators, industry bodies, our
business partners and stakeholders are a core part of
our success and I want to thank them all for their
ongoing support.
There is no doubt that the past two years have been
challenging for all, but these results demonstrate
that the Company’s strategy is continuing to deliver
transformation and growth. Most importantly our
commitment to our clients is unwavering. We have
supported thousands of Australians to access justice and
champion the voices of those who are struggling to be
heard so that we can ensure their tomorrow starts today.
James MacKenzie
Chair
I acknowledge and am grateful for
the terrific support and hard work
of my colleagues on the Board,
the Company’s leadership team
and importantly, all our people.
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FY22 was a tale of two halves for our Company.
The first half was characterised by continuing lockdowns
and other restrictions on movement and work, imposed by
governments to manage the ongoing COVID-19 pandemic.
Those restrictions were felt particularly in Victoria and
NSW, the two states where our business has its biggest
presence. Although our people persevered to continue to
care for and deliver terrific outcomes for our clients, there
was an adverse impact on the performance of our business,
with the Company reporting a net loss after tax of $7.5m
for the first half.
We were pleased the Company was able to manage
through these challenges to support our people and
embed flexible and hybrid working. During the continued
lockdowns and restrictions in FY22, the Company
continued its actions to protect the health and wellbeing
of its clients and people and to protect its business,
including the following:
• Offices being closed and our people working from home.
• A small skeleton staff continuing to work in offices
during periods of restriction to deal with mail, banking
and document retrieval.
• Further laptops and software licences were acquired
to allow our people to continue to support clients and
operate the Company’s business with minimal disruption.
• As restrictions eased in various states and regions,
offices were re-opened in a staged manner and subject to
vaccination requirements, in line with recommendations
from state governments and health officers.
Although, the impact of the COVID restrictions and the
Omicron wave that occurred over summer continued to
impact the business at the beginning of the second half of
FY22, as our offices re-opened, as people began to return
to the workplace, as mobility returned to the community
and as courts and tribunals and other litigation-associated
processes returned to almost pre-pandemic normality,
we saw enquiry levels start to bounce back and matter
progression return to more normal timing.
Pleasingly, we were able to turn the first half loss into a
full year profit of $2.2m. This is still significantly behind
the FY21 net profit after tax of $14.5m.
However, some of the results show the strength of the
underlying business. Our fee revenue in FY22 of $155.4m
was better than in the prior corresponding period (PCP)
of $154.2m.
In FY22, WIP growth of $26.6m declined against the PCP
(FY21: $48.1m), reflecting the slow-down in new file
openings and the progression of matters.
Chief Executive Officer’s Report
None of our 20 class actions settled in FY22, in part due
to COVID slow-downs, in part due to defendants taking
a more adversarial approach to class action litigation,
but also in part due to the stage of development of our
class action portfolio. To this end, the lack of settlements
was as mostly expected.
We were able to contain expenses reasonably well with
expenses from continuing operations at $179.2m in FY22
compared to $182.5m in the PCP.
The business consumed cash in FY22 with a gross operating
cash flow of $(6.0)m reflecting our investment in growth,
but also reflecting the slow-downs in both Personal Injury
Law (PIL) matters and class actions referred to above.
We continued our work on the balance sheet, increasing
our access to working capital with an increase to our
term loan facility and post balance date we secured an
extension to the maturity date of our Super Senior Facility
to 31 October 2024.
Our net asset position improved in FY22 to $184.0m
(FY21: $180.5m).
The Board and I are continuing our focus on this work.
Despite the challenges brought about by the ongoing
disruption of the pandemic we made further progress to
deliver on our Looking Forward Strategy, embedding our
national personal injury structure and clear career paths
for our people.
Pleasingly we continued to strengthen our legacy of
providing access to justice for Australians and advocating
for voices struggling to be heard. Following the Taliban’s
return to power in August 2021, 73 Slater & Gordon
staff volunteered to work with the Refugee Advice and
Casework Service (RACS) to assist with a large number
of urgent visa applications for Afghan refugees.
Our Abuse Law team achieved a settlement and formal
apology on behalf of 42 First Nations survivors of abuse at
Garden Point Catholic Church Mission on Melville Island.
The ceremony, which took place in Darwin in November,
saw survivors receive a formal apology from the
Commonwealth Government, Catholic Diocese of Darwin
Despite the challenges brought
about by the ongoing disruption
of the pandemic we made further
progress to deliver on our Looking
Forward Strategy.
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ANNUAL REPORT 2022
and The Corporation of the Society of the Missionaries of
the Sacred Heart. While nothing will ever take away the
trauma they have experienced, we hope that the outcome
we achieved on their behalf may go some way towards the
healing process.
And in a ground-breaking case, Slater & Gordon
successfully pursued a worker’s death benefit claim on
behalf of the family of a delivery driver who was killed on
the job. To our knowledge this is the first case where there
has been an admission that a gig economy driver has been
considered a worker. In FY21 we launched a campaign
advocating for the rights of gig economy workers and we
continue to work with unions, governments and our clients
to pursue better protections for gig economy workers.
I was also pleased to join with President of the Victorian
Court of Appeal, Justice Chris Maxwell, CEO of the Law
Institute of Victoria, Adam Awty, and CEO of Lander
& Rogers, Genevieve Collins, to co-convene Advocates
for Change – a group of Victorian legal professionals
committed to taking action in their individual organisations
to eliminate sexual harassment in the profession.
In February, the group launched the document Sexual
Harassment in the Legal Profession: What can we do
about it?, which records the commitment of the group
to collaborative engagement and working as advocates
for change in the legal profession.
In May we were at last finally able to celebrate our 85 year
anniversary, which occurred in 2020, but had been
postponed a number of times due to the pandemic. It was
wonderful to come together, in person, with our friends,
alumni and special guests to celebrate our legacy as we
shape our future. I want to thank everyone who attended
and also our people who worked behind the scenes to
make it such a special event.
Over the past 12 months we have continued to make good
progress as we build on our legacy of providing access to
justice for Australians and as we continue to shape our
future. Despite the challenges we have all faced, I am
so very proud to be a part of a firm whose people are so
determined and passionate about helping their clients’
tomorrow start today. After all, it is our people and our
clients that make Slater & Gordon such a strong and
important part of the Australian legal landscape.
John Somerville
Managing Director and Chief Executive Officer
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People and Culture
Our skilled and purpose driven Slater & Gordon team
across Australia continued to champion our clients’ voices
to unlock access to justice and advocate for those less
powerful in our communities.
Anchored by our Company values and Looking Forward
Strategy, we proudly delivered legal services to our clients
throughout Victoria, New South Wales, Queensland,
Western Australia, ACT and Northern Territory.
COVID-19
During the ongoing lockdowns and restrictions in FY22,
the Company continued its actions to protect the health
and wellbeing of its employees and clients and maintain
business resilience – again doing so with no job losses
or reduction in people’s pay or benefits.
Previous investment in technology and training allowed
our people, including newly inducted employees, to
effectively work from home and continue to service
our clients during periods of lockdowns. As restrictions
eased in various states and regions, our offices were
re-opened in a staged and COVID-safe manner. To best
protect our people, a national COVID-19 vaccination
policy was implemented, which was strongly supported
and well received by our people and clients. Our annual
engagement scores reinforced the strong sentiment
that our people feel the Company takes protecting
their health and safety seriously.
A focus throughout the year has remained on supporting
and embedding a hybrid and flexible way of working
to ensure our people have the right level of autonomy
and work/life balance, whilst providing our clients with
the highest level of care, service and outcomes. A large
majority of our people feel supported in making use of
flexible work arrangements.
Support was also provided to our people and clients
impacted by flooding in Queensland and New South Wales
throughout the year, which fortunately were limited in
number – demonstrating our ability to pivot to remote
work at short notice in response to these natural disasters
to ensure business continuity.
Engagement and Delivering on our Strategy
Despite the ongoing uncertainties and challenges faced by
Australian businesses as a result of the pandemic in FY22,
we were pleased to effectively preserve our Company’s
annual employee engagement score.
Our people’s feedback on their experience at work
throughout the year showed significant increases in
the areas of diversity and inclusion, enterprise-wide
collaboration, safety, client focus, learning and
development and career opportunities. These were
areas of considerable focus during the year, including
strengthening and increasing learning and development
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We continue to have strong
female participation at all
levels throughout the Company
with 78% of our workforce
being female and 83% of our
promotions awarded to females.
opportunities (including in a remote environment) and
announcing clearer career pathways and national practice
lines in our personal injury teams, aimed at leveraging our
size and scale and unlocking greater opportunity for our
people and clients.
Our firmwide engagement action plan is focused on activity
closely aligned to our Company strategy and aimed at
continuing to support our people to unlock their full
potential, including:
• Improved and efficient operational processes across
Slater & Gordon to support our people to continue
to deliver exceptional legal services and results to
our clients;
• More career pathways and learning opportunities
for our people, with a focus on building legal and
leadership capability; and
• People and client initiatives to drive Slater & Gordon’s
success and position Slater & Gordon as an employer
of choice.
Diversity and Inclusion
Fostering a culture of Diversity and Inclusion remains
fundamental to our Company Values. A high proportion
of our people feel that our work environment is open,
accepts individual differences and allows them to be
themselves at work.
We continue to have strong female participation at all levels
throughout the Company with 78% of our workforce being
female and 83% of our promotions awarded to females.
Promoting gender pay parity is a priority and reviewed
regularly to ensure our results remain strong against
industry standards.
Our advocacy extends beyond individual cases and our
people stay at the forefront of broader legislative and
policy debates, always seeking to protect and enhance the
legal rights of all people in the community. For example,
this year, the Company proudly partnered with the Law
Institute of Victoria to implement the Advocates for
Change initiative, aimed at raising awareness and
eliminating sexual harassment within the workplace.
The Company’s Inclusion Committee met regularly
throughout the year to promote and progress several
inclusion activities, including supporting the people of
Afghanistan and honouring important annual events
such as Refugee Week, National Reconciliation Week,
NAIDOC Week, PRIDE and Wear it Purple Day.
Gender Participation Levels
30 June 2022
30 June 2021
Employment Level
Male
Female
Male
Female
Board
71%
29%
71%
29%
Senior Executive Team
40%
60%
45%
55%
Senior Management
48%
52%
46%
54%
Non-Management
20%
80%
20%
80%
Overall Organisation
22%
78%
23%
77%
Our people are diverse, authentic, connected and
collaborative and pride themselves on actions, not just
words, that make Tomorrow Start Today for our clients.
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Social Responsibility
Slater & Gordon is built on social justice values and we
are committed to giving back. Our social responsibility
program has three key areas of focus: assisting people
with disease and disability, addressing inequality and
disadvantage and encouraging people to engage in healthy
activity and lifestyles.
One of the defining features of our firm is our relationship
with the local communities in which we operate. We
encourage and support that relationship through pro bono
legal support and other activities, as well as giving staff
the opportunity to donate a portion of their wage to our
Staff Giving Program, which goes towards funding local
projects throughout Australia via the Slater & Gordon
Community Fund.
Slater & Gordon also gives back through its commitment
to philanthropic activity, having established a Community
Fund in 2001 and an Asbestos Research Fund in 2004.
In 2014 the Company broadened its commitment to
achieving outcomes for people suffering disease and
disability by establishing the Health Projects and Research
Fund, into which the Asbestos Research Fund was absorbed.
The Slater & Gordon Community Fund
Our Community Fund is a philanthropic fund which offers
grants to community groups in three key areas of focus:
• Assisting people with disease and disability and
promoting their participation and inclusion;
• Addressing inequality and disadvantage; and
• Encouraging young people to engage in healthy
activity and lifestyles.
Financial support is given to projects and initiatives which
further these objectives. The fund is supported by donations
from Slater & Gordon staff via our Staff Giving Program.
Health Projects and Research Fund
The Slater & Gordon Health Projects and Research Fund
is a philanthropic grants initiative focused on improving
care and treatment for people with asbestos-related
illnesses, occupation-caused cancers or with significant
disability caused by a catastrophic injury. The fund also
provides small ongoing education grants to medical and
health professionals who are dedicated to the prevention,
treatment, care and support of people who have an
asbestos-related disease, work-related cancer or a
catastrophic spinal or brain injury. The fund did not make
any grants in FY22 due to a shortage of funds. In FY23,
it is intended that the fund will undergo a governance
refresh and different funding options will be explored.
Pro Bono Work
Slater & Gordon has a proud history of providing
pro bono and public interest legal work in Australia.
Our lawyers undertake pro bono work in many areas
of law and through that have assisted members of the
community, including people with severe disabilities,
charities, community and indigenous groups, as well as
volunteering at community legal centres. In FY22 Slater
& Gordon staff worked with the Refugee Advice and
Casework Service (RACS) to complete a large number
of urgent visa applications for Afghan refugees following
the Taliban’s return to power. In all, 73 Slater & Gordon
employees were trained in Refugee Law to assist 70
clients, on a pro bono basis, with various stages of their
visa applications.
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Slater & Gordon Inclusion Committee
In 2019 Slater & Gordon established the Inclusion
Committee to advise on mechanisms that address
inequities on the basis of gender, gender identity,
sexuality, ethnicity, race, age and disability, and includes
preventing violence against women and their children
by addressing the drivers of violence in a holistic way,
with consideration to the complex nuances associated
with diversity and workplace inclusion. The Committee’s
membership is representative of the organisation as a
whole and brings valuable insights of their lived experience
to inform the Committee. Through the Committee the
Company has partnered with the Victorian Women’s
Legal Service in their Starts With Us project to tackle the
issues of sexism and gender inequality in the Legal and
Justice Sector, and in particular the drivers of violence
Slater & Gordon has a proud history of
providing pro bono and public interest legal
work in Australia.
In FY22 Slater & Gordon staff worked with
the Refugee Advice and Casework Service
(RACS) to complete a large number of urgent
visa applications for Afghan refugees.
The Company has partnered with the Victorian
Women’s Legal Service in their Starts With Us
project to tackle the issues of sexism and gender
inequality in the Legal and Justice Sector.
against women. Along with The Law Institute of Victoria
and a group of committed legal professionals Slater &
Gordon was proud to lead and implement the Advocates
for Change initiative, committing to take action to
eliminate sexual harassment in the profession.
Other Initiatives and Memberships
Slater & Gordon is a member of the Diversity Council
of Australia and a signatory to the United Nations Global
LGBTI Standards for Business. Slater & Gordon also
supports and sponsors the Next Generation Internship
Program, which is run by EMILY’s List Australia, and
in 2016 the class actions team became a signatory to
the Law Council of Australia’s Equitable Briefing Policy
and the Company continues the process of rolling this out
more broadly across the business.
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Financial Statements
13
Directors’ Report
32
Auditor’s Independence Declaration
33
Consolidated Statement of Profit or Loss and Other Comprehensive Income
34
Consolidated Statement of Financial Position
35
Consolidated Statement of Changes in Equity
36
Consolidated Statement of Cash Flows
37
Notes to the Financial Statements
71
Directors’ Declaration
72
Independent Auditor’s Report
77
Additional ASX Information
79
Corporate Directory
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ANNUAL REPORT 2022
DIRECTORS REPORT
The Directors present their report, together with the financial report of the consolidated entity consisting of Slater & Gordon Ltd (“the
Company”) and its controlled entities (jointly referred to as “the Group”), for the financial year ended 30 June 2022 (“FY22”) and the
auditor’s report thereon. This financial report has been prepared in accordance with Australian Accounting Standards. Compliance with
Australian Accounting Standards ensures compliance with International Financial Reporting Standards (“IFRS”).
Directors
The Directors in office at any time during the financial year and up to the date of this report are:
•
James MacKenzie – Chair
•
Mark Dewar
•
Merrick Howes
•
Michael Neilson
•
Elana Rubin
•
John Somerville
•
Jacqui Walters
Details of the skills, experience, expertise and special responsibilities of each Director are set out in the “Information on Directors and
Company Secretary” section of this report.
Principal Activities
The principal activity of the Group during the financial year was the operation of legal practices in Australia.
Review of Operations
The Slater & Gordon vision
The Company’s vision is to help everyday Australians secure a better future by accessing justice and championing those who struggle
to have their voices heard. The Company is united in its purpose to make tomorrow better than today for its clients and treats every
client with care and commitment.
The Company helps unlock justice for everyday Australians who it believes have a right of redress or compensation, where there is a
considerable power imbalance. The Company’s clients come to the Company at what is often the most vulnerable time of their lives.
Without the Company’s services, many of the Company’s clients would not be able to access justice.
The Company treats clients with compassion and respect and prides itself on being trusted legal advocates for, and delivering the highest
quality legal services to, clients. This absolute focus on client care and results makes the Company fierce in its representation and
permeates the firm.
The Company has a history of innovating and is active in protecting and enhancing the legal rights of clients. The Company’s advocacy
extends beyond individual cases to include the issues of social justice and individual rights more broadly.
The Company has three core values:
+
Do it right – we are passionate about the quality of our work and always achieve the highest professional standards in order to
deliver the best outcome for our clients.
+
Work well with others – we share knowledge, experience and ideas. We encourage respect and collaboration within the firm and
the community.
+
Take the lead – we challenge ourselves to be the best, we strive for innovation and we are committed to doing everything that can
be done to help our clients.
Managing risks
The following details some of the material business risks that could affect the growth of the Company’s core services. These are not
listed in order of significance and do not comprise every risk that the Company may be exposed to.
Description of key risk
Key risk mitigation
Regulatory & Industry Reform
The Company’s operations are subject to extensive regulation.
Adverse regulatory or legislative changes may adversely impact the
Company’s operations, financial performance and position. The
Company’s operations are subject to extensive regulation, a
changing competitive landscape and the use of new technologies.
Adverse changes in regulations and/or to the Australian legal industry
can impact the Company’s operations, our clients and the
environment in which we operate, which may adversely impact the
Company’s financial performance and position.
• Proactive and comprehensive stakeholder and community
engagement and informed discussion
• Maintain an active dialogue with key regulators and government
consultation to advocate our position and remain aware of
impending regulatory and legal developments.
• Modelling of the potential impact of regulatory and industry
changes to our business model and reviewing the impact to our
strategic plan; and
• Optimisation and diversification of our practice management
service offerings.
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DIRECTORS REPORT
Description of key risk
Key risk mitigation
Operations and Systems
There are a number of key operational risks which arise directly from
the operations of the Company as a major participant in the Australian
legal services industry, impacted by disruptions caused by the
ongoing COVID-19 pandemic and geopolitical environment. These
include strategic and business decisions, technology and cyber risk,
reputation risk, fraud, supplier disruption, increased digitisation and
changed employee working conditions, health and safety risk,
professional conduct, uninsured risks, compliance with legal and
regulatory obligations, counterparty performance under outsourcing
and referral arrangements, business continuity planning, legal risk,
data privacy and integrity risk, client default risk, key personnel risk
and external events.
• Initiatives are being undertaken to strengthen our information
security framework to enhance our resilience to cyber-attacks and
for the protection and privacy of the Company’s data. Further
development, periodic re-assessment and scenario analysis of
risk impacts to our professional operating model and business
performance improvement programs designed to standardise,
centralise, optimise and promote efficient and innovative
operating platforms, IT systems and people strategies.
• Business continuity and crisis management oversight and
response activities are in place for the health and safety of the
Company’s people and protection of critical business functions.
• A workplace health and safety framework and initiatives which
supports the mental health and wellbeing of the Company’s
people.
• Information security framework initiatives to strengthen resilience
to cyber-attacks and protect and manage the privacy of the
Company’s data.
• Enhancement of our procurement function to address changing
supply chain vulnerabilities and risks.
Growth Strategy, Competition and Market Share
The Company operates in a competitive market, competing for its
offering of personal injury, class actions and/or other legal services.
Competition is on the basis of a number of factors, including the
quality of advice and service, innovation, reputation and price which
has been heightened by a reduction in the level of market activity as
a result of the COVID impacted environment. In addition, the
Company’s marketing and service offerings may not generate
sufficient enquiries and opportunities to attract and retain clients and
commence class actions to support our growth strategy.
Financial performance may be adversely impacted as a result of these
risks.
• Strategic initiatives are designed and implemented to support the
Company’s growth strategy, including diversification of service
offerings and digitisation.
• Close monitoring of the markets in which the Company operates
to understand competitive activities and the ongoing demand for
the Company’s services whilst operating disciplined pipeline
processes for class actions.
• Brand protection and strengthening initiatives.
• Maintaining long-standing relationships with trade unions and
professional groups which provide a consistent source of new
client referrals.
People
The Company may be unable to attract, engage, retain and develop
talented and motivated people and maintain the Company’s desired
culture and diversity which may limit its ability to deliver its growth
initiatives. In addition, changes in our people and management
structure required to grow the business could impact the Company’s
ability to deliver professional services and financial performance.
• People, culture and remuneration initiatives are undertaken to
support, engage, train and develop the Company’s people and
maintain its desired culture, diversity and professional standard,
deliver and manage our enterprise agreements and address
evolving working condition needs as a result of the pandemic.
• Recruitment initiatives to attract and retain skilled and talented
people in a competitive environment.
Capital Management
The Company’s current financing and capital commitments, balance
sheet strength, ability to successfully refinance, volatility in interest
rates and funding growth in service offerings, particularly in class
actions exposes the Company to cashflow and liquidity risks.
Additional funds may need to be obtained through capital raisings or
cash flow may need to be managed through seeking to negotiate
current debt and equity arrangements.
• Periodic re-assessment, stress testing of debt exposure based on
market benchmarks and enhancement of our working capital
management program with due diligence of the Company’s
service offering funding requirements.
• Close involvement of the Company’s lenders to ensure liquidity
needs are monitored closely and arrangements are put in place
where necessary to bridge short term liquidity needs
• Periodic re-assessment and management of the Company’s
capital and ownership structure to align with delivery of strategic
plan and objectives and manage longer term financing needs.
Refer to the Company’s Corporate Governance Statement for details of the Company’s risk management framework.
14
Slater & Gordon Ltd
ANNUAL REPORT 2022
DIRECTORS REPORT
Financial review
The Group reported a net profit before tax from continuing operations of $3.5m for the year ended 30 June 2022, a decrease from $21.3m
in the prior year. The full year result was impacted in the first half by the economic impacts resulting from extended lockdowns because
of Covid-19 health directives. This impacted the rate of growth of work in progress while Fees billed were slightly improved year on year.
The Group secured a new facility to fund working capital in December 2021. As at 30 June 2022, the Group’s total borrowings were
$108.7m (excluding lease liabilities), an increase of $19.5m from prior year. The Group has a positive net current asset balance of
$110.6m and positive overall net asset balance of $184.0m.
Significant Changes in the State of Affairs
COVID-19
The COVID related lockdowns across metropolitan Melbourne, Sydney and Canberra during the first half of FY22 and the ongoing
COVID-related work restrictions, which continued into the early part of the second half have impacted the Company’s performance and
its FY22 result. Those lockdowns and other restrictions, resulted in fewer road and workplace accidents, with those people with latent
claims from the period prior to the lockdowns having already been identified and assisted during the FY20 and FY21 lockdown periods.
These circumstances resulted in lower file openings and in delays in progressing existing claims during the first half of FY22.
However, with the lockdowns and other restrictions being relaxed toward the end of the first half and into the second half and with people
returning to the road and workplace, enquiry levels returned to pre-pandemic levels. The barriers to claims progression were also largely
removed.
Second half performance improved and the Company moved from a $7.5m loss in the first half to a $2.2m profit for the full year.
During the continued lockdowns and restrictions in FY22, the Company continued its actions to protect the health and wellbeing of its
clients and employees and to protect its business, including the following:
•
Offices being closed and employees working from home.
•
A small skeleton staff continuing to work in offices during periods of restriction to deal with mail, banking and document retrieval.
•
Further laptops and software licenses were acquired to allow employees to continue to support clients and operate the Company’s
business with minimal disruption.
•
As restrictions eased in various states and regions, offices were re-opened in a staged manner and subject to vaccination
requirements, in line with recommendations from state governments and health officers.
The Company did not qualify for, apply for or receive any support under the Federal Government’s JobKeeper support scheme.
Events Subsequent to Reporting Date
On 16 August 2022, the Company executed an amendment to the Super Senior Facility loan agreement. The termination date of the
facility has been extended to 31 October 2024. The interest rate has been revised and will increase by 0.5% on 1 July 2023, a further
0.5% on 1 January 2024 and a further 1% on 1 July 2024, with the additional interest being capitalised to the loan balance. Part
repayments of the facility may be required based on available cash at 31 December 2022 and 30 June 2023. An Independent Debt
Advisor must be appointed by 28 February 2023.
Likely Developments
The Group is focused on organically growing its core service areas of Personal Injury Law and Class Actions in Australia.
The continued impact of the COVID-19 pandemic, including in particular the continued imposition of government restrictions and the
broader impacts on the Australian economy, may impact the Company’s performance in FY22. That impact (if any) cannot currently be
determined with certainty.
The Board and Executive Leadership Team continues to monitor the situation closely and to take actions in response as appropriate and
as recommended by governments and health authorities.
Environmental Regulation
The Group’s operations are not subject to any significant environmental regulations or laws in Australia.
Environmental, Social and Corporate Governance
Pursuant to ASX Corporate Governance Principle and Recommendation 7.4, which provides that companies disclose any material
exposure to environmental or social risks, the Company does not consider that the operations are materially exposed to such risk.
15
Slater & Gordon Ltd
ANNUAL REPORT 2022
DIRECTORS REPORT
Dividends Paid, Recommended and Declared
The Group has not declared or paid any dividends in respect of the 30 June 2022 financial year.
The dividends paid and declared since the start of the financial year are as follows:
2022
$’000
2021
$’000
Dividends on ordinary shares
No interim dividend paid in 2022 (2021: No interim dividend paid)
-
-
No final dividend for 2021 (2020: No final dividend paid)
-
-
-
-
Share Options
As reported in the Remuneration Report, as part of the Long Term Incentive Plan (“LTIP”) and as approved by shareholders at the 2019
Annual General Meeting, in FY20 the Company agreed to award 15,573,000 performance rights (“Rights”) to certain Directors and
members of the Executive Leadership Team subject to the satisfaction of specified vesting and other conditions.
Once vesting conditions of awarded Rights were met and the required Exit Event occurred those Rights became effectively zero priced
options. During FY21, the Exit Event occurred, and so all vested Rights are now exercisable.
During FY22, the Company issued a further 320,000 Rights to its new Chief Financial Officer, Kate Malone. Ms Malone is a member of
the Key Management Personnel of the Company. None of those Rights have yet vested or been exercised.
Also, during FY22, 1,103,310 Rights were exercised and 1,523,912 Rights lapsed. 14,409,323 Rights remained outstanding at the end
of the financial year.
A full description of the LTIP, including the numbers of Rights agreed to be awarded to Directors and other KMP, is contained in the
Remuneration Report.
Indemnification and Insurance of Directors and Officers and Auditors
During the financial year, the Group has provided an indemnity or entered an agreement to indemnify, and paid insurance premiums for
a twelve-month period in respect of Directors, Officers and the Company Secretary of the Company against a liability brought against
such an Officer.
Further disclosure required under section 300(9) of the Corporations Act 2001 is prohibited under the terms of the contract.
The Group has agreed (in certain circumstances) to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement
agreement. No payment has been pursuant to any indemnity in favour of Ernst & Young during or since the financial year.
Information on Directors and Company Secretary
The skills, experience, expertise and special responsibilities of each person who has been a Director of the Company at any time during
or since the end of the financial year is provided below, together with details of the Company Secretary as at the year end.
James MacKenzie
B.Bus, FCA, FAICD
Chair
Independent Non-
Executive Director
Experience
James is an experienced Australian company director. He currently serves as Chair of Victorian Funds
Management Corporation (“VFMC”), the Suburban Rail Loop Authority, the Melbourne Arts Precinct
Corporation Board, Fed Square Pty Ltd and Monivae College. He is also a Trustee of the MCG Trust.
James was previously President of the Victorian Arts Centre Trust and Chair of property developer Mirvac
Group, Pacific Brands, the Transport Accident Commission (“TAC”), Worksafe Victoria, Development
Victoria and was co-Vice Chair of Yancoal Australia. He was also Managing Director of Funds
Management and Insurance at the ANZ Banking Group, Chief Executive Officer of Norwich Union
Australia, and TAC Chief Executive Officer. He has been a member of the COAG Business Advisory
Forum and a previous director of VFMC.
James has a Bachelor of Business from Swinburne University and is a Fellow of the Australian Institute
of Company Directors and the Institute of Chartered Accountants Australia and New Zealand.
In 2001 he was awarded the Centenary Medal for services to Public Administration.
James is Chair of the Board and is also a member of the Audit and Risk Committee and the People and
Culture Committee.
Other directorships of listed companies held in the last three years
None
16
Slater & Gordon Ltd
ANNUAL REPORT 2022
DIRECTORS REPORT
Mark Dewar
B.Bus. Accounting
Chartered Accountant
Non-Independent Non-
Executive Director
Experience
Mark joined the Board of Slater & Gordon in May 2019 and comes from a Consulting background as well
as being a Non-Executive Director for other PE backed companies.
Mark is the Australian Practice Leader and is a Senior Managing Director in the Corporate Finance
segment at FTI Consulting. His experience is typically focussed in helping clients who are undergoing
significant change or embarking on a transformation and specialises in advising companies, private equity
investors or lenders across a range of industries including financial services, mining, telecommunications,
software, retail, engineering, building and construction, and automotive.
Prior to joining FTI Consulting, Mark spent almost ten years with Ernst & Young, where he commenced
his career in Australia in the Audit practice before moving to London where he was a director in the
Corporate Finance practice.
Mark is a Chartered Accountant and a member of the Institute of Chartered Accountants of Australia.
Other directorships of listed companies held in the last three years
None
Merrick Howes
BA LLB
Non-Independent Non-
Executive Director
Experience
Merrick founded Aviron Investment Management, an Australian private investment fund, in May 2021
after nearly ten years as the head of Anchorage Capital Group LLC’s operations in Australia. Previously,
he was the Co-founder and Managing Director at Shearwater Capital, where he focused on special
situations and distressed debt investments. Prior to Shearwater, he was a Partner and Managing Director
in the Principal Investment Area at Goldman Sachs in Australia. Merrick was also a Managing Director
and European Head of Global Structured Products at Merrill Lynch in Hong Kong and London. He also
worked at Macquarie Bank Group from 1989 to 1998.
Merrick received a BA in Accounting and a Bachelor of Laws from the Australian National University.
Merrick is Chair of Slater & Gordon’s People and Culture Committee.
Other directorships of listed companies held in the last three years
None
Michael Neilson
BA LLB GAICD FGIA
Executive Director and
Company Secretary
Experience
Michael is the Executive Director, Legal and Governance, having commenced at Slater & Gordon in April
2018.
Prior to joining Slater & Gordon, Michael was at Crown Resorts Limited, where he was Group General
Counsel and Company Secretary for almost ten years and, prior to that, he was General Counsel for
Crown Melbourne.
From 1997 to 2004, Michael was at the Lend Lease Group where he was General Counsel and Company
Secretary of General Property Trust (which was then managed by Lend Lease) and prior to that General
Counsel of Lend Lease Property Management.
Michael started his career in the commercial practice at Herbert Geer & Rundle where he spent ten years
before moving in house.
Michael has a strong track record in implementing governance, legal and regulatory frameworks in
complex, multinational businesses as well as deep experience managing risk and compliance in
challenging environments.
Other directorships of listed companies held in the last three years
None
17
Slater & Gordon Ltd
ANNUAL REPORT 2022
DIRECTORS REPORT
Elana Rubin AM
BA(Hons) MA SFFin
FAICDLife
Independent Non-
Executive Director
Experience
Elana is a non-executive director at Slater & Gordon and was appointed to the Board in March 2018.
Elana has over 20 years’ experience as a non-executive Company director, across diverse sectors. She
is currently a director of Telstra, as well as a number of unlisted companies and/or government boards.
Elana was previously the chair of Afterpay, Australiansuper and WorkSafe Victoria, and a director of the
TAC in Victoria. Other previous board roles covered the financial services, insurance, infrastructure,
professional services, and not-for-profit sectors.
Before becoming a full time non-executive director, Elana worked for one of the (then) largest industry
funds and the Australian Council of Trade Unions (“ACTU”). She is a member of Chief Executive Women
and Women Corporate Directors International. Her career reflects an understanding of corporate social
licence to operate and a deep commitment to culture, diversity, social equity and participation.
Elana is a member of the Audit and Risk Committee and the People and Culture Committee.
Other directorships of listed companies held in the last three years
Telstra Limited (ASX: TLS) (Feb 2020 to current)
Afterpay Limited (ASX:APT) (2017 to 2022)
Mirvac Limited (ASX:MGR) (2010 to Nov 2019)
John Somerville
BSC GDip Applied
Information Systems MBA
Managing Director and
Chief Executive Officer
Experience
John is the Managing Director and Chief Executive Officer of Slater & Gordon, having joined the
organisation in February 2018.
John is a passionate leader with a history of building and leading successful teams that deliver strong
business outcomes and people engagement. Prior to joining Slater & Gordon, he was the National
Managing Partner of KPMG (Advisory) Australia.
Prior to joining Slater & Gordon he spent 25 years advising some of Australia’s largest corporations and
governments combined with growing and leading businesses within KPMG.
He believes business thrives when people help others be successful. This orientation translates into
delivering better outcomes for clients. He is passionate about getting the most from diversity by creating
an inclusive workforce.
John’s career has involved regional and global activity, including work in Europe, the US, Asia as well as
Australia.
Other directorships of listed companies held in the last three years
None
Jacqui Walters
BCom (Accounting and
Finance) GAICD
Independent Non-
Executive Director
Experience
Jacqui joined the Slater & Gordon Board in March 2018 and chairs the Audit and Risk Committee. She
has international experience as a growth and strategy advisor across many industry sectors. Her work
has ranged from whole of organisation transformation and restructuring to highly specific areas such as
major capital project procurement and delivery, new product introduction, professional services strategy
and performance, technology implementation and post-merger culture alignment.
Jacqui is Chair of CleanCo Queensland Ltd, a non-executive Director and Chair of the Audit and Risk
Committee of Development Victoria, a non-Executive Director of the not-for-profit organisation, Second
Bite, and a Director of Pathways to Resilience, a youth well-being and resilience not-for-profit
organisation.
Other directorships of listed companies held in the last three years
None
Company Secretary
Michael Neilson
See above
18
Slater & Gordon Ltd
ANNUAL REPORT 2022
DIRECTORS REPORT
Directors’ Meetings
The number of meetings of the Board of Directors and of each Board committee held during the financial year and the number of meetings
attended by each Director were:
Board of Directors
Audit and Risk Committee1
People and Culture Committee2
Eligible to attend
Attended
Eligible to attend
Attended
Eligible to attend
Attended
J MacKenzie3
13
10
4
2
4
2
M Dewar
14
13
-
-
-
-
M Howes
14
13
-
-
4
4
M Neilson
14
14
-
-
-
-
E Rubin
12
12
4
4
4
4
J Somerville
14
14
-
-
-
-
J Walters
14
14
4
4
-
-
1 All Directors who are not members of the Audit and Risk Committee also attended all meetings of the Committee as invitees.
2 All Directors who are not members of the People and Culture Committee also attended all meetings of the Committee as invitees.
3 During the period 1 August 2021 to 1 December 2021, James MacKenzie temporarily stepped down as Chair to have treatment for a medical condition.
Directors’ Interests in Shares
Directors’ relevant interests in shares of the Company as at the date of this report are detailed below.
Ordinary Shares of the Company
Performance Rights
J MacKenzie1
-
1,245,840
M Dewar
-
-
M Howes
-
-
M Neilson
-
1,245,840
E Rubin
-
415,280
J Somerville
-
3,322,240
J Walters
-
415,280
1 James MacKenzie’s Rights have been agreed to be awarded to a Company controlled by him, JACM Pty Ltd.
Directors’ Interest in Contracts
Directors’ interests in contracts are disclosed in Note 21 to the financial statements.
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the audit for
the financial year is provided with this report.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
Non-Audit Services
Written approval for non-audit services is provided either by the Board of Directors or by the Audit and Risk Committee and approval is
notified to the Board of Directors. The Directors are satisfied that the provision of non-audit services during the year by the auditor is
compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each
type of non-audit service provided means the auditor independence was not compromised.
Rounding of Amounts
The amounts contained in the Directors’ Report and Financial Report have been rounded to the nearest thousand dollars (where rounding
is applicable) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191.The Company is an entity to which the Class Order applies.
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Slater & Gordon Ltd
ANNUAL REPORT 2022
DIRECTORS REPORT
The Directors’ Report and accompanying Audited Remuneration Report is signed in accordance with a resolution of the Directors.
James MacKenzie
John Somerville
Chair
Managing Director and Chief Executive Officer
Melbourne
26 August 2022
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Slater & Gordon Ltd
ANNUAL REPORT 2022
Directors’ Report
Audited Remuneration Report
1.0 Introduction
The Company made no changes to its overall remuneration framework in FY22.
The COVID-19 pandemic has presented a delayed impact to the Company’s financial performance during FY22. With extended
government-imposed restrictions and lockdowns in FY21 and into the first half of FY22, in particular in Victoria, enquiry numbers slowed
as a result of reduced presence in workplaces, traffic on roads and elective surgeries, and delays in courts slowing case progression with
medical panels and courts and tribunals being hampered and delayed in their activities. This had some negative impact on the Company’s
fees billed, work in progress and cash flows.
Although, the Company’s financial performance improved during the second half of FY22, the Company has not met its financial
performance prerequisites under the Short-Term Incentive Plan (“STIP”) and so there will be no STIP payments for FY22. To reward
pockets of exceptional performance and assist in the retention of key high performing individuals, the Board has approved a small bonus
pool to be used for discretionary extraordinary performance bonuses. No KMP will participate in this bonus pool.
2.0 Remuneration Report Overview
The Directors present the Remuneration Report (“the Report”) for the Company and its controlled entities for FY22. This Report forms
part of the Director’s Report and has been audited in accordance with section 300A of the Corporations Act 2001. The Report details the
remuneration arrangements for the Company’s Key Management Personnel (“KMP”) which is comprised of:
•
Non-Executive Directors (“NEDs”)
•
Executive Directors
•
Other Executive KMP
KMP are those persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling the major
activities of the Company.
The table below outlines the KMP for FY22:
Name
Position
Term as KMP
Non-Executive Directors
James MacKenzie
•
Chair of the Board
•
Non-Executive Director (Independent)
•
Full financial year
Mark Dewar
•
Non-Executive Director
•
Full financial year
Merrick Howes
•
Non-Executive Director
•
Full financial year
Elana Rubin
•
Non-Executive Director (Independent)
•
Full financial year
Jacqui Walters
•
Non-Executive Director (Independent)
•
Full financial year
Executive Directors
John Somerville
•
Managing Director and Chief Executive Officer
•
Full financial year
Michael Neilson
•
Executive Director, Legal and Governance
•
Full financial year
Other Executive KMP
Scott Butterworth
•
Chief Financial Officer
•
Resigned 29 October 2021
Kate Malone
•
Chief Financial Officer
•
Commenced 1 November 2021
3.0 How remuneration is governed
The People and Culture Committee assists the Board to oversee the establishment and operation of appropriate policies and strategies
that provide the Company with the capability to achieve its short and long-term business objectives, including recommending
remuneration changes to the Board for NEDs, Executive Directors and Other Executive KMP.
3.1
Use of remuneration advisors
During FY22, the Company did not use remuneration advisors as defined under the Corporations Act 2001.
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Slater & Gordon Ltd
ANNUAL REPORT 2022
Directors’ Report
Audited Remuneration Report
3.2
Claw back of remuneration
The claw back policy was introduced in June 2016. This policy enables the Company to claw back certain elements of an Executive
Director’s or Other Executive KMP’s (collectively “Executive KMP”) remuneration if there has been a misstatement of the financial
statements which resulted in the Executive KMP receiving a reward which exceeds the outcome that would have been achieved had the
misstatement not been made.
3.3
Share Trading Policy
The Company’s Share Trading Policy (“Policy”) applies to all Directors, officers, employees, contractors and consultants. The Share
Trading Policy outlines how and when Directors, officers, employees, contractors and consultants may deal in Company securities.
Restricted Persons (as defined in the Policy) may only deal in securities in the Company during defined trading windows and provided
they do not possess inside information. There are some limited exceptions set out in the Policy.
If a Relevant Person (as defined in the Policy) acquires securities in the Company (other than via an employee share plan), they should
not sell or agree to sell any Company securities of that class for at least 30 days.
Directors are prohibited from entering margin loans under the Policy. Relevant Persons require prior approval to enter into a margin loan
arrangement where the number of shares mortgaged, provided as security, lent or charged to a financier, amounts to 1% or more of the
issued capital in the Company at the relevant time. A Restricted Person must notify the Company Secretary immediately if they are given
notice by their financier of an intention to make a margin call and sell the Company’s securities during a prohibited trading period.
Relevant Persons must not enter into hedging arrangements in relation to securities in the Company that are unvested or subject to
disposal restrictions or minimum shareholding requirements.
The Policy is available on the Company’s website www.slatergordon.com.au.
3.4
Executive KMP employment agreements
Executive KMP are employed on individual employment agreements that outline the terms of their employment, which include:
Length of
Contract
Notice
Period
Employee
Notice Period
Slater &
Gordon1
Termination
Payment
Statutory Entitlements
Post-Employment Restraints
No fixed
term
Six (6)
months
Six (6)
months
Six (6)
months
Payment of statutory
entitlements of long service
leave and annual leave applies
in all events of separation
The employment agreement
contains a restraint of trade
provision which applies for a
period of 6 months and 12 months
1 The Company may also terminate at any time without notice for serious misconduct and/or breach of contract.
3.5
Cessation and movement of Executive KMP
During FY22, and as disclosed to the ASX on 10 August 2021, Chief Financial Officer, Scott Butterworth resigned and departed the
Company on 29 October 2021. Kate Malone was appointed as Chief Financial Officer from 1 November 2021.
3.6
Other transactions and balances with KMP and their related parties
During FY22, an additional tranche of Performance Rights was awarded to Kate Malone upon her appointment as Chief Financial
Officer. This is described in section 4.3 below. Otherwise, there were no additional transactions for Executive KMP and their related
parties.
4.0 Overview of Executive KMP Remuneration
This section of the Remuneration Report outlines the principles applied to Executive KMP remuneration decisions and the framework
used to deliver the various components of remuneration, including an explanation of the performance and remuneration linkages.
4.1
How Executive KMP remuneration policies and structures are determined
The Company’s remuneration strategy is designed to motivate and focus our people on delivering the best possible outcomes for our
clients and shareholders in a manner that supports the growth and sustainability of the Company in the short and long-term. To do this,
the following principles are applied to fixed and variable pay:
•
Aligns employee, client and shareholder interests;
•
Attracts, retains and engages employees with the requisite skills, expertise and capabilities;
•
Fosters a high-performance culture which focuses and aligns short and long-term objectives;
•
Reinforces a pay for performance culture based on both role requirements and performance against company values;
•
Is compliant with current governance and legislative requirements related to remuneration practices; and
•
Promotes pay parity and equity.
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Slater & Gordon Ltd
ANNUAL REPORT 2022
Directors’ Report
Audited Remuneration Report
4.2
Executive KMP Remuneration Structures
The Company rewards Executive KMP in a way that secures quality executives for the long-term success of the Company, while fostering
a performance-oriented and risk management culture. The Company ensures remuneration packages are equitable, motivating,
competitive and affordable.
Executive KMP receive fixed remuneration and variable remuneration consisting of short-term and long-term incentive opportunities.
Executive KMP remuneration levels are reviewed annually by the People and Culture Committee with reference to the Company’s
remuneration principles, market movements and affordability.
4.3
Elements of remuneration
Fixed remuneration
Fixed remuneration is determined with reference to the size, scope and complexity of the role and relevant individual experience, whilst
also considering market positioning, internal equity, affordability and the Company’s ability to attract and retain employees with required
capabilities to achieve the Company’s objectives.
Fixed remuneration consists of base remuneration, superannuation (based on and up to the maximum of the statutory guarantee level)
and other non-monetary benefits. Fixed remuneration is reviewed annually with approved changes effective 1 July or such other date as
the Board may nominate. The following factors are taken into consideration when reviewing executive remuneration:
•
Annual company performance and affordability;
•
Individual performance and demonstration of company values tied to an annual Performance and Development Review;
•
The Total Target Reward (fixed remuneration and incentive opportunity) of an individual, including the pay mix of fixed and variable
reward;
•
Economic climate and external market movement;
•
Company and social responsibility; and
•
Pay parity and equity.
Adjustments to Executive KMP remuneration are reviewed by the People and Culture Committee and approved by the Board.
STIP
Under the STIP, all Executive KMP have the opportunity to earn an annual incentive award. The plan includes two measures, company
performance and individual performance. Company performance focuses executives on achieving sustainable success for the enterprise.
Individual performance rewards the employee’s own contribution towards Key Performance Indicators (“KPIs”) and company success.
How are bonuses paid?
STIP bonuses are paid in cash.
How much can executives earn?
Executive KMP have a defined on-target STIP opportunity between 23% - 50% of their Full Time Equivalent base remuneration and a
maximum STIP opportunity of 200% of their on-target opportunity.
Executive KMP1
STIP On -Target2
% of Base
Remuneration
John Somerville3
$276,799
50%
Michael Neilson
$94,190
23%
Kate Malone
$91,179
23%
1 Scott Butterworth resigned effective 29 October 2021, so he was not entitled to be considered for an STIP bonus.
2 Represents on-target for full plan year.
3 John Somerville On-Target STIP is 50% of base remuneration plus superannuation.
Each Executive KMP’s Total Remuneration Pay Mix% (annualised at target) for FY22 is set out below.
Executive KMP
Total Fixed
Remuneration1
Short Term
Incentive
John Somerville
66.7%
33.3%
Michael Neilson
82.1%
17.9%
Kate Malone
82.2%
17.8%
1 Includes superannuation
How is performance measured?
The STIP performance measures were chosen based on their ability to deliver sustainable company performance and results for clients
and shareholders. Company performance against financial targets (earnings before interest, tax, depreciation and amortisation
(“EBITDA”) and cashflow) act as a gateway for rewarding individual performance against individually set KPI’s. For each individual KPI,
a target is set.
Performance measures are validated and approved by the Board annually.
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Directors’ Report
Audited Remuneration Report
FY22 performance measures are set out below:
Executive KMP
Company Financial
Performance
Client Measure
People Measure
Managing Director and Chief Executive Officer
60%
20%
20%
Executive Director, Legal and Governance
60%
20%
20%
Chief Financial Officer
60%
20%
20%
EBITDA and cashflow targets are the measures against which the Board and management assess the Company’s short term financial
performance.
Who sets STIP performance measures?
Financial performance measures are set by the Board, based on the recommendation of the People and Culture Committee.
KPIs are set for the Chief Financial Officer and Executive Director, Legal and Governance by the Managing Director and Chief Executive
Officer, then reviewed and endorsed by the People and Culture Committee and Board.
The Managing Director and Chief Executive Officer’s KPIs are set and approved by the Board.
When are STIP bonuses paid?
The STIP outcome is determined after the end of the financial year and at the same time as the Financial Report is approved. The Board
approves the final STIP award for the Executive KMP, which is generally paid approximately three months after the end of the financial
year. However, the Board has some discretion as to when payment is made. There are no deferred components.
What happens if an Executive KMP leaves?
The following details the treatment of STIP on termination:
Resignation and Dismissal: Any potential STIP payment is forfeited.
Retirement and Total and Permanent Incapacity: Any potential STIP will be calculated on a pro-rated basis for portion of year worked
within the plan year. Payment will be calculated in accordance with the normal timetable and based on the end of year results.
Death: Payments will be made to the estate of a deceased employee pro-rated for the eligible period. Payment will be calculated in
accordance with the normal timetable and based on the end of year results.
Redundancy: If redundancy occurs during the first half of the financial year, any potential STIP will be forfeited. If redundancy occurs
during the second half of the financial year, any potential STIP will be calculated on a pro-rated basis for portion of financial year worked.
Payment will be calculated in accordance with the normal timetable and based on the end of year results.
Long Term Incentive Plan (“LTIP“)
The LTIP and the award of performance rights (“Rights”) to the independent NEDs and the Executive Directors was approved by
shareholders at the 2019 Annual General Meeting.
Subsequently, four tranches of Rights have been awarded.
How is LTIP paid?
Under the terms of the LTIP, eligible participants are offered Rights to acquire ordinary shares in the Company at no cost to them.
Participants can acquire shares if they remain employed by the Company and satisfy the vesting conditions and exercise conditions.
While the Rights remain unexercised the participants do not have the same benefits as other holders of shares in the Company, such as
dividend and voting rights. However, once vesting conditions and the exercise condition has been met and a participant exercises their
Rights, then, as holders of shares, participants have the same benefits as other holders of shares in the Company, such as dividend and
voting rights.
How much can executives earn?
The number of Rights granted to participants in the LTIP is determined by the Board.
In FY20 five Directors (including two Executive Directors) and nine members of the Executive Leadership Team were granted a specified
number of Rights from a pool of 15,573,000 Rights, or 75% of the pool of Rights available to be awarded under the LTIP (Tranche 1).
One of those employees was Kate Malone, who was not an Executive KMP at that time, but who became an Executive KMP when she
was appointed Chief Financial Officer on 1 November 2021.
Although no further Rights were offered to Executive KMP in FY21, Rights were offered to 33 senior employees in two separate awards
(Tranches 2 and 3).
In FY22, Kate Malone was awarded an additional 320,000 Rights with a nil exercise price (valued at $180,0001) upon her appointment
as Chief Financial Officer and upon becoming an Executive KMP (Tranche 4). Vesting of each tranche within Tranche 4 is also conditional
on Kate Malone achieving a satisfactory performance rating for each relevant financial year.
1 Valued using the Black Scholes valuation method.
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LTIP opportunities for Executive KMP were determined using a combination of factors, including scope, complexity and responsibility of
role, relative seniority, relative base remuneration and length of service with the Company post the recapitalisation in December 2017.
Set out below are the Rights awarded to Executive KMP:
Executive KMP
Number of Rights
Awarded
Tranche
John Somerville
3,322,240
1 (FY20)
Michael Neilson
1,245,840
1 (FY20)
Kate Malone
622,920
320,000
1 (FY20)
4 (FY22)
How is performance measured?
Under the LTIP rules, the nature and content of any vesting conditions (including the vesting period) are determined by the Board and
may include conditions relating to any or all of:
•
continuing employment;
•
performance of the Participant;
•
performance of the Company;
•
the Company's share price;
•
the achievement of specific targets; or
•
the occurrence of specific events
The Rights granted to independent NEDs, Executive Directors, Other Executive KMP and certain senior executives have vested or will
vest in accordance with the following schedules, subject to continuing employment/engagement of services.
Tranche 1:
Vesting Date
Vesting Percentage
Tranche A: 30 June 2020
22%
Tranche B: 30 June 2021
22%
Tranche C: 30 June 2022
22%
Tranche D: Date of ‘Exit Event’
34%
Vested Rights may only be exercised, i.e. converted to shares in the Company, after an Exit Event occurs. The terms of the award provide
that an Exit Event will occur if (a) the Company’s underlying EBITDA reaches the target specified by the Board of $28.0m and as
evidenced by the audited Financial Statements for that financial year and (b) the Board being satisfied that the Company’s approved
Budget for the following Financial Year shows underlying EBITDA forecast at or better than the target set by the Board, subject always
to the Board’s discretion to ignore or waive any one off transactions or circumstances in calculating underlying EBITDA for this purpose.
If an Exit Event had not occurred before the seventh anniversary of the grant of the Rights, then the Rights would have expired.
On 18 November 2020, the Board determined that the Exit Event had occurred as disclosed in section 5.3.
Tranche 2:
Vesting Date
Vesting Percentage
1 January 2022
100%
Tranche 3:
Vesting Date
Vesting Percentage
Tranche A: 1 July 2022
33.3%
Tranche B: 1 July 2023
33.3%
Tranche C: 1 July 2024
33.4%
Vesting of each tranche is also conditional on the participant achieving a satisfactory performance rating for each relevant financial year.
Rights can be exercised once the vesting conditions are satisfied.
Tranche 4:
Vesting Date
Vesting Percentage
Tranche A: 1 July 2023
50.0%
Tranche B: 1 July 2024
50.0%
Vesting of each tranche is also conditional on the participant achieving a satisfactory performance rating for each relevant financial year.
Rights can be exercised once the vesting conditions are satisfied.
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When is performance measured?
Vesting conditions and (in the case of Tranche 1) the Exit Event are measured at the end of each financial year during the term of the
LTIP.
What happens if a participant leaves?
If a participant resigns or is terminated for cause, any unvested and vested but unexercised (as at the date their employment ends) Rights
are forfeited, unless otherwise determined by the Board.
If a participant ceases employment by reason of redundancy, ill health, death, or other circumstances approved by the Board, unvested
Rights will vest pro-rata based on the portion of the Vesting Period that has elapsed as at the cessation date. The vested portion may be
retained provided the participant exercises their vested Rights by delivering a signed Exercise Notice to the Company by the earlier of:
(i) the expiry date of the Rights; and (ii) the date which is three months after the participant receives notification from the Company that
the Exit Event has been achieved.
What happens if there is a change of control?
If there is a ‘Change of Control’ (as defined in the LTIP rules), all unvested Rights will automatically vest and the Exit Event will be deemed
to be satisfied so that participants can elect to either request the Company to buy-back their Rights or exercise the vested Rights and
dispose of the shares delivered to the participant.
Are Executives eligible for dividends?
Participants are not eligible to receive dividends on Rights, vested or unvested.
Can further awards be made under the LTIP?
There remains a pool of further Rights available for award under the LTIP at the Company’s discretion.
Changes for FY22
There were no material changes to the Executive Remuneration framework during FY22.
5.0 FY22 Executive KMP Performance and Remuneration Outcomes
5.1
Actual Remuneration earned by Executive KMP in FY22:
The actual remuneration earned by Executive KMP in FY22 is set out in section 7 below.
The FY22 and FY21 cash bonus STIP and LTIP Rights awarded to Executive KMP is set out in section 7 below. The table in section 7
represents what has been awarded to Executive KMP under the STIP and LTIP. No STIP was awarded to any Executive KMP in FY22.
5.2
STIP Performance Measures for FY22
A combination of financial and non-financial measures is used to measure Executive KMP performance for STIP awards which are
underpinned by the Company’s values and behaviours. A summary and performance against each measure is as follows:
Key: Below target At target Exceed target
Company Financial
Performance
Client Measure
People Measure
Managing Director and Chief Executive
Officer
Cash Generation
EBITDA
Client satisfaction
Engagement & compliance to people activities
Executive Director, Legal and Governance
Cash Generation
EBITDA
Client satisfaction
Engagement & compliance to people activities
Chief Financial Officer
Cash Generation
EBITDA
Client satisfaction
Engagement & compliance to people activities
The COVID-19 pandemic has presented a delayed impact to the Company’s financial performance during FY22. With extended
government-imposed restrictions and lockdowns in FY21 and into the first half of FY22, in particular in Victoria, enquiry numbers slowed
as a result of reduced presence in workplaces, traffic on roads and elective surgeries, and delays in courts slowing case progression with
medical panels and courts and tribunals being hampered and delayed in their activities. This had some negative impact on the Company’s
fees billed, work in progress and cash flows. Although, the Company’s financial performance improved during the second half of FY22,
the Company has not met its financial performance prerequisites under the STIP and so there will be no STIP payments for FY22.
To reward pockets of exceptional performance and assist in the retention of key high performing individuals, the Board has approved a
small bonus pool to be used for discretionary extraordinary performance bonuses. No KMP will participate in this bonus pool.
The table in section 7.1 discloses actual FY22 and FY21 STIP awarded to Executive KMP.
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5.3
LTIP Performance Measures and Vesting outcomes for FY22
On 30 June 2020, Tranche A of Tranche 1 of the LTIP vested in accordance with the terms of the award to independent NEDs and
Executive KMP.
On 18 November 2020, the Board determined that the Exit Event had occurred. As a result, Tranche D of Tranche 1 vested. and both
Tranche A and Tranche D, became exercisable by the participants.
On 30 June 2021 and 30 June 2022, Tranche B and Tranche C (respectively) of Tranche 1 of the LTIP vested in accordance with the
terms of the award to independent NEDs and Executive KMP.
All of Tranche 1 is now vested and exercisable.
On 1 January 2022, all of Tranche 2 vested and became exercisable.
On 1 July 2022, Tranche A of Tranche 3 vested and became exercisable.
The Company has valued the benefit to independent NEDs and Executive KMP of their participation in the LTIP in FY22 using the Black
Scholes valuation method and that value has been added to each NED and Executive KMP’s remuneration in the tables in sections 6
and 7. The value of these benefits does not represent cash received by the relevant participant and these values may need to be adjusted
over time, based on performance, changes in model parameters and LTIP outcomes.
5.4
Overview of company performance (FY18 to FY22)
The table below sets out information about the Company’s earnings and movements in shareholder wealth for the past five years up to
and including the current financial year.
Company Performance
20181
2019
2020
2021
2022
Total revenue and other income from
continuing operations ($'000)
162,501
160,372
178,339
203,801
182,617
Profit before tax from continuing
operations ($'000)
(29,044)
(141)
(199)
21,263
3,459
Profit after tax from continuing
operations ($'000)
(31,722)
33,010
(1,660)
14,186
1,936
Basic earnings per share (dollars)
(0.84)
0.425
(0.013)
0.098
0.013
Diluted earnings per share (dollars)2
(0.84)
0.450
(0.013)
0.094
0.013
Gross Operating Cash Flow less
CAPEX($'000)
(682)
5,230
24,921
14,516
(7,254)
Dividends per share - paid during
financial year (cents)
-
-
-
-
-
Total dividends paid during financial
year (cents)
-
-
-
-
-
1. Financial performances were not restated for the discontinued operations that occurred in FY18. However, the basic earnings per share, diluted earnings per share and
share price at 30 June have been restated for the 100 to 1 share consolidation that took place on 8 December 2017.
2. Basic earnings per share and diluted earnings per share were restated for the impact of the 100 to 1 share consolidation that took place on 8 December 2017. 2018
earnings per share is shown excluding discontinued operations. Prior years are shown for the overall business and have not been restated for discontinued operations.
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6.0 Overview of Non-Executive Director remuneration
6.1
Overview of Non-Executive Director remuneration
The fees paid to the Company’s NEDs are designed to attract and retain high calibre directors who can discharge their roles and
responsibilities required in terms of good governance, strong oversight, independence and objectivity.
NED remuneration is based on fixed director fees and superannuation contributions and is reviewed annually by the People and Culture
Committee. The chairs of the Board and each Committee do not receive any additional committee fees in addition to base fees.
6.2
Maximum aggregate NED fee pool
The maximum aggregate fee amount that may be paid to NEDs for their services is $1,350,000 during any financial year, as approved
by shareholders at the 2021 AGM held in November 2021. The table below summarises Board and Committee fees paid to NEDs for
FY22 (inclusive of superannuation).
1 July 2021 - 30 June 2022
Board Chair Fee
$250,0001
Board Director Fee
$175,0002
Committee Fees
Audit and Risk Committee
Chair
Nil
Member
Nil
People and Culture Committee
Chair
Nil
Member
Nil
Annual Fee Pool
$1,350,000
1 During the period 1 August 2021 to 30 November 2021, James MacKenzie temporarily stepped down as Chair to have treatment for a medical condition. Elana Rubin acted
as Chair during this period and the Board agreed to temporarily increase her remuneration to the same rate as the Chair’s remuneration during this period.
2 Executive Directors John Somerville and Michael Neilson do not receive payment of Board director fees from the Company.
6.3
FY22 NED Remuneration
The table below sets out the FY22 NED remuneration. The table includes an entry for short term benefits to Merrick Howes, an executive
who was employed by Anchorage Capital Group LLC (“Anchorage”) until May 2021. Anchorage is the parent entity of the Group. Merrick
Howes ceased his employment with Anchorage in May 2021. Prior to 1 July 2021, the Company did not pay any remuneration to Merrick
Howes. Australian Accounting Standards required disclosure of fees for his role as a Director of the Company, where he was paid by his
employer. The fees paid by the Company to other NEDs were considered representative of this. From 1 July 2021, Merrick Howes was
paid a fee of $175,000 pa.
The Executive Directors do not receive Board director’s fees. Their remuneration does not count towards the total NED Annual Fee Pool.
Please refer to table 7.1 KMP Remuneration: Statutory Remuneration Outcomes for Executive Director remuneration.
1 Merrick Howes was employed by Anchorage until May 2021. Prior to 1 July 2021, he was not remunerated by the Company for his service as a Non-Executive Director and
the Company was not charged for his service. Amounts shown in this table for Merrick Howes prior to 1 July 2021 are not included in the total NED Annual Fee Pool.
2 Elana Rubin received an exemption certificate from receiving Superannuation Guarantee contributions paid by the Company during FY21. During FY22, Elana Rubin acted
as Chair from 1 August 2021 to 30 November 2021 and was paid at the same rate as James MacKenzie during that period.
3 The fee shown attributable to Merrick Howes in FY21 was not counted towards the maximum aggregate NED Annual Fee Pool in FY21.
4 The Company has valued the benefit to independent NEDs of their participation in the LTIP in FY22 and FY21 using the Black Scholes valuation method. The value of these
benefits does not represent cash received by the relevant participant. The value of the benefit under the LTIP does not count towards the total NED Annual Fee Pool.
Short-term
benefits
Post-employment
benefits
LTIP Value4
Amounts $
Year
Fees3,5
Superannuation
benefits
Rights
Total
Current NEDs
James MacKenzie (Chair)
FY22
227,273
22,274
59,783
309,330
FY21
236,962
21,276
260,999
519,237
Mark Dewar
FY22
159,091
15,909
-
175,000
FY21
165,872
15,758
-
181,630
Merrick Howes 1
FY22
159,091
15,909
-
175,000
Disclosure required by Australian Accounting Standards – no remuneration
was actually paid by the Company in FY21
FY21
159,817
-
-
159,817
Elana Rubin 2
FY22
195,245
4,851
19,928
220,024
FY21
181,630
-
87,000
268,630
Jacqui Walters
FY22
159,091
15,909
19,928
194,928
FY21
165,872
15,758
87,000
268,630
Total 3
FY22
899,791
74,852
99,639
1,074,282
FY21
750,336
52,792
434,999
1,238,127
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In FY20 three of the NEDs were awarded Rights under the Company’s LTIP, as follows:
1 James MacKenzie’s Rights were awarded to a company controlled by him, JACM Pty Ltd.
These awards were approved by shareholders at the Company’s 2019 Annual General Meeting. Section 4.3 and 5.3 contains a
description of the LTIP.
No further Rights have been awarded to NEDs since the award in FY20 and no NEDs have exercised any vested Rights.
NED
Number of Rights
Awarded
James MacKenzie1
1,245,840
Elana Rubin
415,280
Jacqui Walters
415,280
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7.0 Actual Executive Director and KMP Remuneration
7.1 Executive Director and KMP Remuneration Table – Statutory Disclosure
Name
Year
Fixed Remuneration
Variable Pay
End of Service
Total
Remun-
eration
Proportion of Total
Remuneration
Short-term
Post-
employment
Long-
term
Total
Short-
term
Long-term
Total
Contractual
Notice
Period
Total
Performance
related
Delivered
as Equity
Salary4
Non-
monetary
benefits
Other
benefit
Super-
annuation
benefits
Long
service
leave
Cash
Bonus1
Performance
Rights /
Options2
%
%
Executive Director
John
Somerville
FY22
516,589
-
-
23,568
11,746
551,903
-
159,422
159,422
-
-
711,325
22.4%
22.4%
FY21
527,723
-
-
21,694
8,670
558,087
275,000
695,998
970,998
-
-
1,529,085
63.5%
45.5%
Michael
Neilson
FY22
413,756
-
-
23,568
8,927
446,251
-
59,783
59,783
-
-
506,034
11.8%
11.8%
FY21
420,140
-
-
21,694
6,457
448,291
82,174
260,999
343,173
-
-
791,464
43.4%
33.0%
Other Executive KMP
Scott
Butterworth3
FY22
149,501
-
-
9,383
(10,354)
148,530
-
-
-
-
-
148,530
-
-
FY21
463,459
-
-
21,694
6,073
491,226
-
304,499
304,499
-
-
795,725
38.3%
38.3%
Kate
Malone
FY22
269,168
-
-
14,837
5,578
289,583
-
75,781
75,781
-
-
365,364
20.7%
20.7%
FY21
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
FY22
1,349,014
-
-
71,356
15,897
1,436,267
-
294,986
294,986
-
-
1,731,253
17.0%
17.0%
FY21
1,411,322
-
-
65,082
21,200
1,497,604
357,174
1,261,496
1,618,670
-
-
3,116,274
51.9%
40.5%
1 The FY21 cash bonus represents FY21 STIP awarded to Executive KMP which has been restated to reflect the reduction to 80% due to the underachievement of the cash target.
2 The Company has valued the benefit to Executive KMP of their participation in the LTIP using the Black Scholes valuation method. The value of these benefits does not represent cash received by the relevant participant.
3 Scott Butterworth resigned from his position of Chief Financial officer in August 2021 and as a result forfeited FY21 cash bonus/STIP. His vested and unexercised Rights lapsed.
4 The FY21 salary comparative disclosure had been adjusted to reflect the salary prepayment in FY21.
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ANNUAL REPORT 2022
DIRECTORS REPORT
Audited Remuneration Report
7.2
Executive KMP Equity Plans
As described in section 4.3, the LTIP is the only equity plan in which Executive KMP participated during FY22.
7.3
Vesting and Exercise of Performance Rights granted as Remuneration
As described in section 5.3, on 30 June 2021 and 30 June 2022, Tranche B and Tranche C (respectively) of Tranche 1 of the LTIP vested
in accordance with the terms of the award to independent NEDs and Executive KMP.
All of Tranche 1 is now exercisable.
On 1 January 2022, all of Tranche 2 vested and has now become exercisable.
On 30 June 2022, one third of Tranche 3 vested and became exercisable.
No KMP exercised any vested Rights in FY22.
7.4 Shareholding of Executive KMP and NEDs
In accordance with the Corporations Act (section 205G (1)), the Company is required to notify the interests (shares and rights to shares)
of directors to the ASX. In the interests of transparency and completeness of disclosure, this information is provided for each NED (as
required under the Corporations Act) and all Executive KMP. Please refer section 3.3 for more information on prohibition on hedging and
margin lending.
The table below indicates shareholdings of the Executive KMP and NEDs:
KMP
Number held at
1 July 2021
Acquisitions
Disposals
Number held at
30 June 2022
James MacKenzie
-
-
-
-
Mark Dewar
-
-
-
-
Merrick Howes
-
-
-
-
Elana Rubin
-
-
-
-
Jacqui Walters
-
-
-
-
John Somerville
-
-
-
-
Michael Neilson
-
-
-
-
Scott Butterworth1
-
-
-
-
Kate Malone
-
-
-
-
Total
-
-
-
-
1 Scott Butterworth resigned effective 29 October 2021
7.5
Movement in Executive KMP Holdings: Performance rights over ordinary shares
During the financial year, the movement in the number of performance rights over ordinary shares of the Company acquired under the
LTIP, held by Executive KMP and NEDs is detailed below:
KMP
Number of
Rights at 1
July 2021
Acquisitions
Rights
Vested2
Rights
Exercisable
Rights
Exercised
Rights
Lapsed
Number of
Rights at 30
June 2022
James MacKenzie1
1,245,840
-
1,245,840
1,245,840
-
-
1,245,840
Mark Dewar
-
-
-
-
-
-
-
Merrick Howes
-
-
-
-
-
-
-
Elana Rubin
415,280
-
415,280
415,280
-
-
415,280
Jacqui Walters
415,280
-
415,280
415,280
-
-
415,280
John Somerville
3,322,240
-
3,322,240
3,322,240
-
-
3,322,240
Michael Neilson
1,245,840
-
1,245,840
1,245,840
-
-
1,245,840
Scott Butterworth3
1,453,480
-
-
-
-
1,453,480
-
Kate Malone
622,920
320,000
622,920
622,920
-
-
942,920
Total
8,720,880
320,000
7,267,400
7,267,400
-
1,453,480
7,587,400
1 James MacKenzie’s Rights were awarded to a company controlled by him, JACM Pty Ltd.
2 Rights vested comprise Tranche 1A to 1D as at 30 June 2022.
3 Scott Butterworth resigned effective 29 October 2021.
End of Remuneration Report
31
Slater & Gordon Ltd
ANNUAL REPORT 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s independence declaration to the directors of
Slater & Gordon Ltd
As lead auditor for the audit of the financial report of Slater & Gordon Ltd for the financial year ended
30 June 2022, I declare to the best of my knowledge and belief, there have been:
a.
No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b.
No contraventions of any applicable code of professional conduct in relation to the audit; and
c.
No non-audit services provided that contravene any applicable code of professional conduct in
relation to the audit.
This declaration is in respect of Slater & Gordon Ltd and the entities it controlled during the financial
year.
Ernst & Young
David Shewring
Partner
Melbourne
26 August 2022
32
Slater & Gordon Ltd
ANNUAL REPORT 2022
Consolidated statement of profit or loss and other
comprehensive income
For the year ended 30 June 2022
Note
30 June 2022
30 June 2021
$'000
$'000
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying
notes
Revenue
Fee revenue
155,421
154,245
Net movement in work in progress
26,620
48,096
Revenue from contracts with customers
3
182,041
202,341
Other income
576
1,460
Total revenue and other income
182,617
203,801
Less expenses
Salaries and employee benefit expense
4
(112,003)
(114,686)
Administration and office expense
4
(20,286)
(20,377)
Finance costs
4
(13,322)
(12,149)
Advertising, marketing and new business development expense
(11,779)
(12,319)
Depreciation and amortisation expense
4
(7,592)
(7,978)
Bad and doubtful debts
4
(5,075)
(4,983)
Consultant fees
(3,830)
(5,540)
Rental expense
(2,377)
(2,689)
Other expenses
(2,894)
(1,817)
Total expenses
(179,158)
(182,538)
Profit before income tax expense from continuing operations
3,459
21,263
Income tax expense
6
(1,523)
(7,077)
Profit after income tax expense from continuing operations
1,936
14,186
Profit after income tax expense from discontinued operations
220
284
Profit after income tax expense for the year
2,156
14,470
Other comprehensive income for the year, net of tax
-
-
Total comprehensive income for the year
2,156
14,470
Total comprehensive income for the year is attributable to:
Continuing operations
1,936
14,186
Discontinued operations
220
284
Total comprehensive income for the year
2,156
14,470
Cents
Cents
Earnings per share from continuing operations
Basic earnings per share
8
1.3
9.8
Diluted earnings per share
8
1.3
9.4
Earnings per share from discontinued operations
Basic earnings per share
8
0.1
0.2
Diluted earnings per share
8
0.1
0.2
Earnings per share
Basic earnings per share
8
1.4
10.0
Diluted earnings per share
8
1.4
9.6
33
Slater & Gordon Ltd
ANNUAL REPORT 2022
Consolidated statement of financial position
As at 30 June 2022
Note
30 June 2022
30 June 2021
$'000
$'000
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
Assets
Current assets
Cash and cash equivalents
15
15,633
20,697
Receivables
10
55,021
57,098
Work in progress
11
119,204
122,577
Other assets
14,25
5,150
10,981
Total current assets
195,008
211,353
Non-current assets
Property, plant and equipment
12
2,138
2,690
Receivables
10
33,652
23,096
Work in progress
11
194,523
163,554
Right-of-use assets
17
13,673
15,572
Intangible Assets
9
1,533
907
Other assets
14,25
3,279
1,428
Total non-current assets
248,798
207,247
Total assets
443,806
418,600
Liabilities
Current liabilities
Payables
13
54,557
60,758
Leases
17
6,887
6,628
Provisions
14
22,979
23,154
Total current liabilities
84,423
90,540
Non-current liabilities
Payables
13
21,845
13,317
Financing arrangements
16
108,706
89,214
Leases
17
14,257
16,542
Deferred tax
6
24,036
22,418
Provisions
14
6,575
6,114
Total non-current liabilities
175,419
147,605
Total liabilities
259,842
238,145
Net assets
183,964
180,455
Equity
Contributed equity
19
1,435,826
1,435,177
Reserves
9,997
9,293
Accumulated losses
(1,261,859)
(1,264,015)
Total equity
183,964
180,455
34
Slater & Gordon Ltd
ANNUAL REPORT 2022
Consolidated statement of changes in equity
For the year ended 30 June 2022
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
Contributed
Share-based
payment
Accumulated
Total equity
equity
reserve
losses
$'000
$'000
$'000
$'000
Balance at 1 July 2020
1,434,793
6,025
(1,278,485)
162,333
Profit after income tax expense for the year
-
-
14,470
14,470
Other comprehensive income for the year, net of tax
-
-
-
-
Total comprehensive income for the year
-
-
14,470
14,470
Issuance of shares under rights offer
384
(384)
-
-
Performance rights granted under LTIP
-
3,652
-
3,652
Balance at 30 June 2021
1,435,177
9,293
(1,264,015)
180,455
Contributed
Share-based
payment
Accumulated
Total equity
equity
reserve
losses
$'000
$'000
$'000
$'000
Balance at 1 July 2021
1,435,177
9,293
(1,264,015)
180,455
Profit after income tax expense for the year
-
-
2,156
2,156
Other comprehensive income for the year, net of tax
-
-
-
-
Total comprehensive income for the year
-
-
2,156
2,156
Issuance of shares under rights offer
649
(649)
-
-
Performance rights granted under LTIP
-
1,353
-
1,353
Balance at 30 June 2022
1,435,826
9,997
(1,261,859)
183,964
35
Slater & Gordon Ltd
ANNUAL REPORT 2022
Consolidated statement of cash flows
For the year ended 30 June 2022
Note
30 June 2022
30 June 2021
$'000
$'000
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
Cash flows from operating activities
Receipts from customers
211,381
224,211
Payments to suppliers and employees
(217,363)
(208,853)
Interest received
4
1,050
Borrowing costs paid
(8,397)
(4,429)
Net cash (used in) / provided by operating activities of continuing operations
(14,375)
11,979
Net cash from operating activities of discontinued operations
6
315
406
Net cash (used in) / provided by operating activities
5
(14,060)
12,385
Cash flows from investing activities
Payment for software development
(642)
-
Payment for plant and equipment
12
(630)
(842)
Return of bank guarantees
2,095
-
Net cash from / (used in) investing activities
823
(842)
Cash flows from financing activities
Proceeds from borrowings
31,415
5,676
Repayment of borrowings
(16,415)
(14,627)
Payment of principal portion of lease liabilities
(6,827)
(8,356)
Net cash from / (used in) financing activities
8,173
(17,307)
Net decrease in cash and cash equivalents
(5,064)
(5,764)
Cash and cash equivalents at the beginning of the financial year
20,697
26,461
Cash and cash equivalents at the end of the financial year
15
15,633
20,697
36
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 1. Basis of Preparation
This note sets out the accounting policies adopted by Slater & Gordon Ltd (the “Company”) and its consolidated entities (the “Consolidated
Entity” or the “Group”) in the preparation and presentation of the financial report. Where an accounting policy is specific to one note, the
policy is described within the note to which it relates.
The financial report was authorised for issue by the Directors as at the date of the Directors’ Report on 26 August 2022.
The Company is limited by shares and is incorporated and domiciled in Australia. Its shares are publicly traded on the Australian Securities
Exchange.
1.1 Basis of Accounting
This financial report is a general purpose financial report, for a ‘for-profit’ entity, which has been prepared in accordance with Australian
Accounting Standards, Interpretations and other applicable authoritative pronouncements of the Australian Accounting Standards Board
and the Corporations Act 2001. The consolidated financial statements of Slater & Gordon Ltd also comply with the International Financial
Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).
The financial report has been prepared under the historical cost convention, except where noted.
The consolidated financial statements provide comparative information in respect of the previous period.
Where necessary, comparative figures have been reclassified and repositioned for consistency with current year disclosures.
The parent entity and the consolidated entity have applied the relief available under ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191 and accordingly, amounts in the consolidated financial statements and Directors’ Report have been rounded
off to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Going Concern
The financial statements have been prepared using the going concern assumption which contemplates the realisation of assets and the
settlement of liabilities in the ordinary course of business.
The Group incurred a net operating cash outflow of $14.1m and profit before tax of $3.8m in the current period. Notwithstanding, the Group
has considered the following factors in determining that the financial statements should be prepared on a going concern basis:
●
As at 30 June 2022, the Group has a positive net current asset balance of $110.6m (30 June 2021: $120.8m) and a positive overall
net asset balance of $184.0m (30 June 2021: $180.5m).
●
As at 30 June 2022, the Group’s total borrowings (excluding lease liabilities), were $108.7m (30 Jun 2021: $89.2m). The total debt,
including the Super Senior Facility expiring in July 2023, are classified as non-current liabilities. The Group’s borrowings are subject
to covenants which have been complied with as at 30 June 2022. These covenants are expected to be complied with in the next 12
months based on the most recent forecasts. On 16 August 2022, the Super Senior Facility has been amended and the termination
date of the facility has been extended to 31 October 2024.
●
The Directors have assessed the appropriateness of applying the going concern assumption by considering the Group’s balance
sheet position including debt maturity profile, covenant requirements and available facilities, forecasts of the Group’s trading and
cash flows in line with current experience and forecast outcomes including sensitivities and the post year end execution of an
amendment to the Super Senior Facility. Various mitigation strategies are able to be deployed to manage cash to appropriate levels
in the event an unfavourable outcome occurs.
On this basis, the Directors have concluded that there are reasonable grounds to believe that the Group will continue to be able to pay its
debts as and when they become due and payable, and the preparation of the 30 June 2022 financial report on a going concern basis is
appropriate.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of the parent entity and of all entities which the parent entity
controls. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity. Adjustments are made to bring
into line any dissimilar accounting policies which may exist.
37
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 1. Basis of Preparation (continued)
All inter-company balances and transactions, including any unrealised profits or losses, have been eliminated on consolidation.
Subsidiaries are consolidated from the date on which control is established and are de-recognised from the date that control ceases.
Non-controlling interests in the results of subsidiaries are shown separately in the consolidated statement of profit or loss and other
comprehensive income and consolidated statement of financial position.
Any changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are
accounted for as equity transactions.
1.2 Foreign Currency Translations and Balances
Functional and Presentation Currency
The consolidated financial statements are presented in Australian dollars which is also the functional currency of the parent entity and all
subsidiaries.
1.3 Adoption of New and Amended standards
The Group did not apply any new and/or amended standards as of 1 July 2021 that have a material impact on the financial statements of
the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
1.4 Significant Accounting Judgements, Estimates and Assumptions
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the
application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may
differ from these estimates. Estimates and underlying assumptions are regularly reviewed. Revisions to estimates are recognised
prospectively.
The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty
are outlined in detail within the specific note to which they relate.
Note 2. Segment Reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenue and expenses that relate to transactions with any of the Group's other components.
The Group has one reportable segment relating to provision of legal services in Australia. Information provided to the Chief Operating
Decision Maker ("CODM") for the purposes of making decisions about allocating resources to the segment and assessing its performance
is consistent with amounts presented in the consolidated financial statements.
The Group’s revenues and assets are wholly based in Australia. The Group is not reliant on any single customer.
Note 3. Revenue from Contracts with Customers
3.1 Accounting Policies
Provision of Legal Services – Personal Injury Law Claims
The Group's personal injury law practice operates on the basis of No Win – No Fee (“NWNF”) conditional fee arrangements, whereby fees
are earned only in the event of a successful outcome of a client’s claim. Fees may be fixed depending on the stage at which a matter
concludes or determined based on an agreed scale detailed within the legal cost agreement, which is often a mix between time-based
charging and set rates for certain activities.
Contracts with clients may comprise a single performance obligation, being the provision of services in pursuit of the successful settlement
of a customer’s claim, or may contain multiple performance obligations, such as legal services in respect of a statutory claim and a common
law claim, or initial pre-issue work and litigation work. In both circumstances, the transaction price is allocated to a single distinct
performance obligation given the services being performed are highly integrated.
38
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 3. Revenue from Contracts with Customers (continued)
The NWNF arrangement introduces transaction price variability as the final fees receivable under a contract are generally only known upon
the matter’s conclusion. Expected fees are only recognised as revenue to the extent that it is highly probable that the cumulative amount
of revenue recognised will not be subject to significant reversal when a matter is concluded.
The transaction price for revenue recognition is estimated using the expected value method basis using the Group’s historical experience
in similar contracts and is influenced by the following factors:
Factor
Basis
Sensitivity
expected fee
historical fee data
The higher the expected fee, the higher the estimated
revenue.
success rate
historical rates of successful and unsuccessful
outcomes of similar matters
The higher the success rate, the higher the estimated
revenue.
risk adjustment
simulated at each reporting period using a Monte
Carlo method
The higher the risk adjustment, the lower the
estimated revenue.
The additional risk adjustment is applied to consider the variability of the final outcomes of contracts in a particular group of matters and
determines a percentage adjustment that should be applied to the expected outcome in order to satisfy that it is ‘highly probable that a
significant reversal of revenue recognised will not occur’ when the uncertainty associated with the amount of variable consideration is
resolved.
Where historical averages are not predictive of the probability of outcomes for a given contract, or where the Group has limited historical
experience with similar contracts, the expected amount of variable consideration is estimated using a 'most likely amount' approach on a
contract by contract basis. In such circumstances, a level of judgement is required to determine the likelihood of success of a given matter,
as well as the estimated amount of fees that will be recovered in respect of the matter.
Revenue is recognised when control of a service is transferred to the client. The Group recognises revenue in respect of personal injury
matters 'over time' (as opposed to at a 'point in time') using a milestone-based approach. The percentage completion is determined:
●
by calculating the average fee received for matters that resolve at a particular status code as a percentage of the average fee received
for matters that resolve at that status and any later status; or
●
by use of defined completion allocations based on historical performance.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or
decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision
become known by management.
The Group also arranges for the disbursement activities provided by third parties on behalf of the client where the Groups acts as an agent
because the Group does not control the output from those activities and cannot influence the content of the medical reports or certain court
filings. No profit margin is recognised on the activities when clients are charged the direct cost incurred by the Group. The amount
recognised for the expected reimbursement does not exceed the relevant costs incurred. Disbursements are treated as a separate asset
reduced by an allowance for non-recovery based on past experience. Refer to Note 10.
Provision of Legal Services – Litigation and Emerging Services
The Group earns revenue from the provision of general legal services, including project litigation. Revenue for general legal services is
recognised over time in the accounting period when services are rendered. Revenue recognised is carried as ‘Work in progress’ until the
matter is finalised and a client invoice is raised.
Fee arrangements from general legal services include NWNF arrangements, contingency fee arrangements, fixed fee arrangements, and
partially or fully funded litigation.
NWNF arrangements: Revenue is estimated using a most likely amount approach on a contract by contract basis. Management makes
a detailed assessment of the amount of revenue expected to be received and the probability of success of each case. Variable
consideration is included in revenue only to the extent that it is highly probable that a significant reversal will not occur.
Contingency fee arrangements: During the period, one of the Group’s Project Litigation cases converted from a NWNF arrangement to
a Group Cost Order ("GCO") which operates on the basis of contingency fee arrangements. The Justice Legislation Miscellaneous
Amendments Act 2000, effective on 1 July 2020, amended the Victorian Supreme Court Act 1956 to enable contingency fee arrangements.
A contingency fee arrangement entitles the Group to receive a percentage share of the damages awarded to the plaintiffs. As with existing
NWNF arrangements, the revenue will only be recognised if it is it is highly probable that a significant reversal will not occur.
39
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 3. Revenue from Contracts with Customers (continued)
Partially or fully funded litigation: The Group enters into arrangements with third party funders to provide a portion of the fees on a
matter over time as services are performed. In such arrangements, the funded portion of fees, referred to as time and materials, is billed
regularly over time and is not contingent on the successful outcome of the litigation. The remaining portion of fees is variable consideration
which is conditional on the successful resolution of the litigation. The variable consideration is included in revenue as services are
performed only to the extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is
resolved.
Fixed fee arrangements: Revenue is recognised based on the stage of completion tracked on a contract by contract basis using a
milestone-based approach, similar to Personal Injury Law Claims as explained above.
As in the case of personal injury claims, estimates of revenues, costs or extent of progress toward completion are revised if circumstances
change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the
circumstances that give rise to the revision become known by management.
The Group has determined that no significant financing component exists in respect of all its revenue streams. This is because:
●
a substantial amount of the consideration promised by the client is variable subject to the occurrence or non-occurrence of a future
event that is not substantially within the control of the client or the Group; and
●
for fixed and funded fee arrangements, the period between when the entity transfers a promised good or service to a client and when
the client pays for that good or service is expected to be one year or less.
A receivable in relation to the Group’s services is recognised when a bill has been invoiced, as this is the point in time that the consideration
is unconditional because only the passage of time is required before the payment is due. When an invoice is raised, the amount receivable
is transferred from ‘Work in progress’ to ‘Accounts receivable’.
Contract Costs
Applying the practical expedient in paragraph 94 of AASB 15 Revenue from Contracts with Customers, the Group recognises the
incremental costs of obtaining contracts as an expense when incurred.
Critical Accounting Estimates and Judgements
Area
Detail
Identifying the performance
obligation
As referred to above, some revenue contracts contain multiple deliverables. The Group has assessed
that these multiple deliverables represent a single distinct performance obligation, given there is a
significant integration between the various deliverables provided to clients.
Estimating the variable
consideration on NWNF
arrangements
As referred to above, the uncertainty around the fees ultimately receivable under these types of
contracts is generally only fully resolved when a matter is concluded. To estimate the revenue
recognised over the period of the contract, significant estimation is employed by the Group as
described above.
Measuring the stage of
completion
As referred to above, the Group recognises revenue 'over time' (as opposed to at a 'point in
time'). The determination on the stage of completion involves significant estimation as described
above.
40
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 3. Revenue from Contracts with Customers (continued)
Partially or fully funded litigation: The Group enters into arrangements with third party funders to provide a portion of the fees on a
matter over time as services are performed. In such arrangements, the funded portion of fees, referred to as time and materials, is billed
regularly over time and is not contingent on the successful outcome of the litigation. The remaining portion of fees is variable consideration
which is conditional on the successful resolution of the litigation. The variable consideration is included in revenue as services are
performed only to the extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is
resolved.
Fixed fee arrangements: Revenue is recognised based on the stage of completion tracked on a contract by contract basis using a
milestone-based approach, similar to Personal Injury Law Claims as explained above.
As in the case of personal injury claims, estimates of revenues, costs or extent of progress toward completion are revised if circumstances
change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the
circumstances that give rise to the revision become known by management.
The Group has determined that no significant financing component exists in respect of all its revenue streams. This is because:
●
a substantial amount of the consideration promised by the client is variable subject to the occurrence or non-occurrence of a future
event that is not substantially within the control of the client or the Group; and
●
for fixed and funded fee arrangements, the period between when the entity transfers a promised good or service to a client and when
the client pays for that good or service is expected to be one year or less.
A receivable in relation to the Group’s services is recognised when a bill has been invoiced, as this is the point in time that the consideration
is unconditional because only the passage of time is required before the payment is due. When an invoice is raised, the amount receivable
is transferred from ‘Work in progress’ to ‘Accounts receivable’.
Contract Costs
Applying the practical expedient in paragraph 94 of AASB 15 Revenue from Contracts with Customers, the Group recognises the
incremental costs of obtaining contracts as an expense when incurred.
Critical Accounting Estimates and Judgements
Area
Detail
Identifying the performance
obligation
As referred to above, some revenue contracts contain multiple deliverables. The Group has assessed
that these multiple deliverables represent a single distinct performance obligation, given there is a
significant integration between the various deliverables provided to clients.
Estimating the variable
consideration on NWNF
arrangements
As referred to above, the uncertainty around the fees ultimately receivable under these types of
contracts is generally only fully resolved when a matter is concluded. To estimate the revenue
recognised over the period of the contract, significant estimation is employed by the Group as
described above.
Measuring the stage of
completion
As referred to above, the Group recognises revenue 'over time' (as opposed to at a 'point in
time'). The determination on the stage of completion involves significant estimation as described
above.
41
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 3. Revenue from Contracts with Customers (continued)
3.2 Revenue from Contracts with Customers
The Group derives revenue from the transfer of goods and services over time and at a point in time, in the major product lines of Personal
Injury Law and Litigation and Emerging Services and the geographical regions of Australia:
Personal
Injury Law
Litigation and
Emerging
Services
Total
30 June 2022
$'000
$'000
$'000
Type of contract
No Win - No Fee
157,231
10,934
168,165
Time and Materials
-
12,150
12,150
Contingency fees (Group Cost Order)
-
1,692
1,692
Fixed Fee
-
34
34
Revenue from contracts with customers
157,231
24,810
182,041
Personal
Injury Law
Litigation and
Emerging
Services
Total
30 June 2021
$'000
$'000
$'000
Type of contract
No Win - No Fee
175,726
13,046
188,772
Time and Materials
-
13,537
13,537
Fixed Fee
-
32
32
Revenue from contracts with customers
175,726
26,615
202,341
Note 4. Expenses
4.1 Accounting Policies
Expenses are recorded in the period in which the goods or services are received or used.
Interest
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Depreciation
The depreciable amounts of all property, plant and equipment, excluding land, are depreciated over their estimated useful lives,
commencing from the time the asset is held ready for use. Leased right of use assets are depreciated over the shorter of the lease term
and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.
The depreciation rates used for each class of assets are:
Class of Fixed Asset
Depreciation Rates
Depreciation Method
Plant and equipment
5.00% - 33.33%
Straight Line and Diminishing Value
Right of use asset
11.00% - 50.00%
Straight Line
Low value asset pool
18.75% - 37.50%
Diminishing Value
42
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 4. Expenses (continued)
Amortisation
Amortisation is calculated using a straight-line method to allocate the cost of intangible assets over their estimated useful lives. Amortisation
commences when the intangible asset is available for use.
The amortisation rates used for each class of assets are:
Class of Intangible Asset
Amortisation Rates
Amortisation Method
Software and development
33.33%
Straight Line
Client lists
33.33%
Straight Line
Share Based Payments
The accounting policy for share based payments is included in Note 20.
4.2 Expense Analysis
30 June 2022
30 June 2021
$'000
$'000
Profit before income tax from continuing operations includes the following specific expenses:
Salaries and employee benefit expense
Wages and salaries
101,598
102,740
Post-employment benefits
8,532
7,525
Share-based payments expense (includes payroll tax)
1,387
3,652
Redundancy costs
486
769
112,003
114,686
Administration and office expense
IT and computer
6,636
5,546
Utilities and insurance
3,746
3,611
Professional fees
3,331
4,068
Printing, postage and stationery
2,182
2,222
Sundry
4,391
4,930
20,286
20,377
Finance costs
Interest and fees on loans (includes costs of borrowing)
11,159
10,195
Interest on lease obligations, make good and hire purchases
2,163
1,954
13,322
12,149
Depreciation and amortisation
Right of use assets
6,478
5,485
Property, plant and equipment
1,067
1,782
Software
47
711
7,592
7,978
Bad and doubtful debts
Disbursements receivables
6,176
5,064
Work in progress
(997)
(321)
Trade receivables
(104)
240
5,075
4,983
43
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 5. Cash Flow Information
Reconciliation of profit for the period to cash flows from operating cash flows
30 June 2022
30 June 2021
$'000
$'000
Profit after income tax expense for the year
2,156
14,470
Adjustments for:
Interest expense capitalised in financing arrangements
4,044
6,537
Depreciation, amortisation and disposal
7,706
7,978
Bad and doubtful debts
5,075
4,983
Share-based payment expenses (includes payroll tax)
1,387
3,652
Impairment expense
304
-
Change in operating assets and liabilities:
(Increase) / Decrease in receivables
(7,168)
6,603
(Increase) in work in progress
(26,597)
(45,803)
Decrease / (Increase) in other assets
1,881
(1,759)
(Decrease) / Increase in payables
(5,116)
5,247
Increase in provisions and other liabilities
650
3,278
Increase in net deferred tax
1,618
7,199
Net cash (used in) / provided by operating activities
(14,060)
12,385
44
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 6. Income tax expense
6.1 Accounting Policies
Income and other taxes consist of income tax and goods and services tax.
Income Tax
Current income tax expense or benefit for the current and prior periods is measured at the amount expected to be recovered from or paid
to the tax authorities. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end
of the reporting period in the countries where the Group operates.
Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets are expected to be
recovered or liabilities are settled. Deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Except for
those arising from right-of-use assets and lease liabilities, deferred tax is also not recognised if it arises from initial recognition of an asset
or liability in a transaction that is not a business combination and does not affect accounting profit or taxable profit.
Deferred tax assets are recognised for unused tax losses to the extent that management considers the similar business test to have been
satisfied and only if management considers it is probable that future taxable amounts will be available to utilise those temporary differences
and losses.
Deferred tax assets are reviewed at each reporting date. Unrecognised deferred tax assets are reassessed at each reporting date.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Current and deferred tax for the year are recognised in profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income
or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax
effect is included in the accounting for the business combination.
Goods and Services Tax (“GST”)
Revenue and expenses are recognised net of the amount of GST, except where the GST incurred is not recoverable from the Australian
Taxation Office (“ATO”), and is therefore recognised as part of the asset’s cost or as part of the expense item. Receivables and payables
are stated inclusive of GST.
The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the consolidated
statement of financial position.
Critical Accounting Estimates and Judgements
Area
Detail
No adverse change will occur in
the income tax legislation
Deferred tax assets and liabilities are based on the assumption that no adverse change will occur in
the income tax legislation in Australia and the anticipation that the Group will derive sufficient future
assessable income to enable the benefit to be realised and comply with the conditions of deductibility
imposed by the law.
Recognition of deferred tax
assets
Deferred tax assets are recognised only if management considers it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
45
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 6. Income tax expense (continued)
6.2 Income Tax Expense
The major components of income tax expense are:
30 June 2022
30 June 2021
$'000
$'000
Income tax expense
Adjustment for tax expense relating to prior periods
-
(401)
Deferred income tax expense
1,618
7,600
Aggregate income tax expense
1,618
7,199
Income tax expense is attributable to:
Profit from continuing operations
1,523
7,077
Profit from discontinued operations
95
122
Aggregate income tax expense
1,618
7,199
The prima facie tax payable on profit before tax differs from the income tax expense as follows:
Profit before income tax expense from continuing operations
3,459
21,263
Profit before income tax expense from discontinued operations
315
406
3,774
21,669
Tax at the statutory tax rate of 30%
1,132
6,501
Tax effect amounts which are not deductible in calculating taxable income:
Non-deductible expenses
486
1,099
1,618
7,600
Adjustment for tax expense relating to prior periods
-
(401)
Income tax expense
1,618
7,199
30 June 2022
30 June 2021
$'000
$'000
Deferred income tax expense included in income tax expense:
Increase in deferred tax assets
(6,637)
(4,052)
Increase in deferred tax liabilities
8,255
11,251
1,618
7,199
46
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 6. Income tax expense (continued)
6.3 Recognised Tax Assets and Liabilities
30 June 2022
30 June 2021
$'000
$'000
Deferred tax assets
Employee benefits
6,458
5,972
Lease liabilities
6,291
6,901
Provision for impairment
5,221
4,940
Property, plant and equipment
2,688
2,604
Accruals
2,299
3,264
Solicitor liability provision
1,538
1,737
Provision for make good
971
953
Blackhole tax asset(1)
169
923
Other
-
110
Revenue losses carried forward(2)
61,311
52,905
Total
86,946
80,309
Offset of deferred tax assets and deferred tax liabilities
(86,946)
(80,309)
Balance at the end of the year
-
-
(1) Blackhole tax asset relates to capital expenditures which are not deductible immediately during the period it was incurred, but instead,
deducible over 5 years using the straight-line method under the income tax regime.
(2) The Group’s revenue losses carried forward arose in prior periods and are available indefinitely for offsetting against future taxable
profits, subject to compliance with the Similar Business Test.
30 June 2022
30 June 2021
$'000
$'000
Deferred tax liabilities
Work in progress
(95,902)
(87,077)
Unrendered disbursements
(9,029)
(8,836)
Right of use asset
(4,102)
(4,671)
Sub-lease receivable
(895)
(1,080)
Professional indemnity insurance asset
(268)
(744)
Other
(786)
(319)
Total
(110,982)
(102,727)
Offset of deferred tax assets balance
86,946
80,309
Net deferred tax liability balance at the end of the year
(24,036)
(22,418)
Note 7. Dividends
No interim or final dividend was paid, declared or proposed for the years ended 30 June 2022 or 30 June 2021.
Note 8. Earnings per Share
The following reflects the profit and share data used in the calculations of basic and diluted profit per share:
30 June 2022
30 June 2021
$'000
$'000
Earnings per share from continuing operations
Profit after income tax
1,936
14,186
47
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 8. Earnings per Share (continued)
30 June 2022
30 June 2021
$'000
$'000
Earnings per share from discontinued operations
Profit after income tax
220
284
30 June 2022
30 June 2021
$'000
$'000
Earnings per share
Profit after income tax
2,156
14,470
2022
2021
'000
'000
Weighted average number of ordinary shares used in calculating basic earnings per share
153,025
145,219
Adjusted for potential ordinary shares in relation to the Company’s equity-settled share-based payment
145
5,942
Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share
153,170
151,161
Note 9. Intangible Assets
9.1 Accounting Policies
Goodwill
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for
non-controlling interests) and any previous interest held over the net identifiable assets acquired and liabilities assumed.
Goodwill is not amortised, but it is tested annually for impairment or more frequently if events or changes in circumstances indicate that it
might be impaired.
Software Development Costs
Development costs are capitalised when it is probable that the project will be a success considering its commercial and technical feasibility;
the entity is able to use or sell the asset; the entity has sufficient resources and intent to complete the development and its costs can be
measured reliably. Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment
losses. See Note 4 for the amortisation policy.
30 June 2022
30 June 2021
$'000
$'000
Non-current assets
Goodwill - at cost
879
879
Software - at cost
16,570
15,898
Less: Accumulated amortisation
(15,916)
(15,898)
654
-
Client lists - at cost
102
102
Less: Accumulated amortisation
(102)
(74)
-
28
Total intangible assets
1,533
907
48
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 9. Intangible Assets (continued)
Movement in carrying amounts:
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below
Goodwill
Software
Client lists
Total
$'000
$'000
$'000
$'000
Balance at 1 July 2020
879
677
62
1,618
Amortisation expense
-
(677)
(34)
(711)
Balance at 30 June 2021
879
-
28
907
Additions
-
673
-
673
Amortisation expense
-
(19)
(28)
(47)
Balance at 30 June 2022
879
654
-
1,533
9.2 Impairment Testing of Goodwill
For the purposes of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable, largely
independent, cash inflows (cash generating units “CGU’s”).
Impairment testing is completed at least annually for goodwill, or more frequently if events or changes in circumstances indicate that the
asset may be impaired.
An impairment loss is recognised where the carrying amount of the asset or CGU exceeds its recoverable amount. The recoverable amount
of an asset or CGU is defined as the higher of its fair value less costs of disposal and value-in-use.
Critical Accounting Estimates and Judgements
Area
Detail
Impairment of Goodwill
Determining whether goodwill is impaired requires an estimation of the value-in-use or fair-value less
cost of disposal of the CGU’s to which goodwill has been allocated. The value-in-use calculation
requires management to estimate the future cash flows expected to arise from the CGU and a post-
tax discount rate that reflects the current market assessments of the time value of money and the risks
specific to the asset in order to calculate present value. A material impairment loss may arise where
the present value of future cash flows as currently assessed are less than expected.
Key assumptions and inputs into the determination of the recoverable value of the Group’s CGUs
such as forecast cash flows and discount rates, are subject to significant estimation.
Sensitivity considerations
Sensitivities to the key assumptions were also tested and the Group has determined that no reasonably possible changes would give rise
to impairment at 30 June 2022.
9.3 Impairment Losses Recognised
As at 30 June 2022, the Group did not recognise an impairment expense (30 June 2021: nil).
Note 10. Receivables
10.1 Accounting Policies
Trade receivables are amounts due from customers for services performed in the ordinary course of business. Other receivables are non-
derivative financial assets with fixed or determinable payments that are not quoted in an active market. Other receivables are mainly related
to deferred consideration for sale of client files. If collection of the amounts is expected in one year from the reporting date or less, they
are classified as current assets. If not, they are presented as non-current assets.
49
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 10. Receivables (continued)
Disbursements receivables are only recognised when it is assessed that a reimbursement will be received from the client or on his or her
behalf. The disbursements receivables are initially recognised at the amount disbursed. The disbursements receivables are treated as a
separate asset.
30 June 2022
30 June 2021
$'000
$'000
Current assets
Trade receivables
32,751
31,474
Provision for impairment
(4,384)
(5,403)
Trade receivables, net
28,367
26,071
Disbursements receivables
28,527
31,912
Provision for impairment
(3,995)
(3,376)
Disbursements receivables, net
24,532
28,536
Other receivables
2,122
2,491
Total current assets
55,021
57,098
Non-current assets
Disbursements receivables
47,618
33,778
Provision for impairment
(15,980)
(13,503)
Disbursements receivables, net
31,638
20,275
Other receivables
2,014
2,821
Total non-current assets
33,652
23,096
Collectability of trade receivables is reviewed at each reporting period. The Group applies the AASB 9 Financial Instruments simplified
approach to measuring the expected credit loss (“ECL”) for all receivables, which uses a lifetime expected loss allowance. Where there is
no reasonable expectation of recovery, receivables are written off.
The ECL is based on three main parameters: probability of default, loss given default and exposure at default. These parameters are
generally derived from internally developed statistical models combined with historical, current and forward-looking information, including
macro-economic data such as the uncertain economic outlook and changes in inflation and interest rates:
Parameter
Detail
Probability of default (“PD”)
Lifetime PD represents the expected point-in-time probability of a default, based on conditions existing
at the balance sheet date and future economic conditions that affect credit risk. Debtors that roll into
an above 90 days overdue category are assumed to have a PD of 100%.
Loss given default (“LGD”)
Represents expected loss conditional on default.
Exposure at default (“EAD”)
Represents the expected exposure at default, taking into account the repayment of outstanding
amounts from the balance sheet date to the default event.
The provision matrix is initially based on the Group’s historical observed default rates. The Group calibrates the matrix to adjust the
historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated
and changes in the forward-looking estimates are analysed. The use of forward-looking information such as macro-economic forecasts
increases the degree of judgement required to assess how changes in these data points will affect ECLs. The assumptions, including any
forecasts of future economic conditions, are reviewed regularly.
Disbursements receivables and work in progress (Note 11) relate to unbilled work in progress and have substantially the same risk
characteristics as zero days past due trade receivables for the same types of contracts. ECLs related to disbursements receivables and
work in progress are discounted at the risk free rate.
50
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 10. Receivables (continued)
The ECL as at 30 June 2022 and 30 June 2021 was determined as follows:
Trade receivables
Total
<30 days
30-60 days
61-90 days
91-180 days
>180 days
$'000
$'000
$'000
$'000
$'000
$'000
30 June 2022
Gross carrying amount
32,751
20,745
3,758
2,121
1,552
4,575
Provision for impairment
4,384
299
92
99
315
3,579
30 June 2021
Gross carrying amount
31,474
20,051
2,980
1,492
1,517
5,434
Provision for impairment
5,403
402
171
320
410
4,100
2022
2021
Trade receivables
Disbursements
receivables Trade receivables
Disbursements
receivables
Provision for impairment
$'000
$'000
$'000
$'000
Opening balance as at 30 June
(5,403)
(16,879)
(5,958)
(15,924)
Receivables written off as uncollectible
996
1,811
775
2,175
Release / (increase) of provisions
23
(4,907)
(220)
(3,130)
Closing Balance as at 30 June
(4,384)
(19,975)
(5,403)
(16,879)
Critical Accounting Estimates and Judgements
Area
Detail
Provision for ECL of trade
receivables and disbursements
receivables
As referred to above, the Group uses a provision matrix to calculate ECLs for trade receivables and
disbursements receivables. The ECL is calculated based on the PD, LGD and EAD, generally derived
from internally developed statistical models combined with historical, current and forward-looking
information, including macro-economic data.
The assessment of the correlation between historical observed default rates, forecast economic
conditions and ECL involves significant estimation.
Note 11. Work in progress
11.1 Accounting Policies
Work in progress represents client cases which have not yet reached a conclusion and comprises personal injury cases, services
performed ancillary to personal injury cases, non-personal injury cases and project litigation cases. Refer to Note 3 for further details.
Contracts for legal services are billed based on time incurred or regulated prices. As permitted under AASB 15, the transaction price
allocated to the unsatisfied or partially unsatisfied performance obligations under these contracts has not been disclosed.
The Group allocates work in progress between current and non-current classifications based on a historical analysis of the Group’s work
in progress balances and case velocity rates to determine expected timing of settlements.
The Group maintains a provision to take account of potential errors in the data input of the work in progress of the personal injury law
practice.
51
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 11. Work in progress (continued)
30 June 2022
30 June 2021
$'000
$'000
Current assets
Personal injury
109,990
112,853
Litigation and emerging services
9,844
10,549
Provision for impairment
(630)
(825)
Total current assets
119,204
122,577
Non-current assets
Personal injury
175,476
160,186
Litigation and emerging services
21,567
6,668
Provision for impairment
(2,520)
(3,300)
Total non-current assets
194,523
163,554
The ECL for work in progress is calculated using the same methodology as described in Note 10. The closing provision for impairment for
work in progress as at 30 June 2022 reconciles to the opening provision for impairment as follows:
30 June 2022
30 June 2021
$'000
$'000
Opening balance as at 30 June
4,125
4,953
Change in provisions
(975)
(828)
Closing balance
3,150
4,125
Critical Accounting Estimates and Judgements
Area
Detail
Valuation of work in progress
Refer to the disclosures made in Note 3.
Provision for ECL of work in
progress
Refer to the disclosures made in Note 10.
Note 12. Property, plant and equipment
12.1 Accounting Policies
Property, plant and equipment is measured at cost less accumulated depreciation and any accumulated impairment losses.
An asset’s residual value and useful life is reviewed, and adjusted if appropriate, at the end of each reporting period. Any depreciation and
impairment losses of an asset are recognised in profit or loss – see Note 4.1 for the depreciation policy.
Gains and losses on disposal are determined by comparing the proceeds obtained for the disposal with the carrying value of the relevant
asset. These gains and losses are included in profit or loss when the asset is derecognised.
52
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 12. Property, plant and equipment (continued)
30 June 2022
30 June 2021
$'000
$'000
Non-current assets
Plant and equipment - at cost
27,973
27,520
Less: Accumulated depreciation
(25,936)
(25,130)
Carrying value
2,037
2,390
Low Value Asset Pool - at cost
810
3,102
Less: Accumulated depreciation
(709)
(2,802)
Carrying value
101
300
Total
2,138
2,690
Reconciliations
Movements in the written down values at the beginning and end of the current and previous financial year are set out below:
Plant &
Low Value
Equipment
Asset Pool
Total
$'000
$'000
$'000
Balance at 1 July 2020
3,162
481
3,643
Additions
842
-
842
Disposals
(12)
(1)
(13)
Depreciation expense
(1,602)
(180)
(1,782)
Balance at 30 June 2021
2,390
300
2,690
Additions
630
-
630
Disposals
(29)
(86)
(115)
Depreciation expense
(954)
(113)
(1,067)
Balance at 30 June 2022
2,037
101
2,138
Note 13. Payables
13.1 Accounting Policies
Trade creditors and accruals are carried at amortised cost and represent future amounts payable for goods and services provided to the
Group prior to the end of the financial year. They arise when the Group becomes obliged to make future payments in respect of the
purchase of these goods and services.
Legal creditors are carried at amortised cost and represent counsel fees and other disbursements payable by the Group. Counsel fees will
not be paid until the Group receives payment from settlement proceeds on the matter.
53
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 13. Payables (continued)
30 June 2022
30 June 2021
$'000
$'000
Current liabilities
Legal creditors
24,472
26,727
Trade creditors and accruals
16,392
21,449
Third party disbursements
13,693
12,582
Balance
54,557
60,758
Non-current liabilities
Third party disbursements
21,845
13,317
Balance
21,845
13,317
The Group has an agreement with a third-party disbursement funder, Equal Access Funding Proprietary Limited (“EAF”), who funds
disbursements in respect of certain individual matters. They are reimbursed out of any settlement proceeds on the matter. The Group has
provided a financial guarantee to EAF for the repayment of clients’ obligations in certain circumstances.
In July 2018, the Group entered into an Exclusive Service Provider Deed with MAF Credit Pty Ltd ("MAF") to provide disbursement funding
to clients. The funding facility was initially available for 36 months. On 8 January 2021, the Group extended the terms of the funding for an
additional 18 months expiring on 2 January 2023. The Group has provided a financial guarantee to MAF for the repayment of clients’
obligations in certain circumstances.
Both disbursement funding facilities are presented in the statement of financial position within payables with a corresponding financial
asset in receivables. An assessment of the financial asset has been performed in line with AASB 9 and a provision has been recognised
against the asset in accordance with the impairment policy described.
Critical Accounting Estimates and Judgements
Area
Detail
Recognition of third-party funding
arrangements
The Group has assessed the arrangements create a financial liability, given that the effect of the
arrangements is to create an unconditional contractual obligation to deliver cash to the funders (even
if the amount and timing is unknown) upon certain events. A corresponding financial asset is
recognised as the Group effectively acts as an agent of the client in paying disbursements associated
with a client’s matter.
The recognition of a separate financial liability on the balance sheet and a corresponding financial
asset is considered a critical accounting judgement.
Provision for ECL of
third-party disbursements assets
Refer to the disclosures made in Note 10.
Note 14. Provisions
14.1 Accounting Policies
Non-employee related provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events,
for which it is probable that an outflow of economic benefits will result in an amount that can be reliably measured. Employee related
provisions are recognised by the Group in line with the requirements of AASB 119 Employee Benefits.
Solicitor Liability Claims
A provision for solicitor liability claims is made for the potential future cost of claims brought against the Group by former clients. The
provision relates to open claims and potential future claims as identified at the end of the reporting period. The provision is determined
based on historical data, taking into account the nature of existing claims. The estimate includes the estimated maximum amount payable
by the Group under its Professional Indemnity Insurance Policy on all claims notified to its insurer.
54
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 14. Provisions (continued)
Employee Benefits
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve
months of the reporting date are measured at the amounts based on remuneration rates which are expected to be paid when the liability
is settled. Liabilities arising later than one year have been measured at the present value of the estimated future cash outflows to be made
for those benefits. These estimated future cash flows have been discounted using market yields, at the reporting date, on high quality
corporate bonds with matching terms to maturity.
A bonus provision is recognised when it is payable in accordance with the employee’s contract of employment and the amount can be
reliably measured.
A provision for termination benefits is recognised when the entity can no longer withdraw the offer of those benefits, or if earlier, when the
termination benefits are included in a formal restructuring plan that has been announced to those affected by it.
Employee benefit obligations are presented as current liabilities if the entity does not have an unconditional right to defer settlement for at
least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.
Other: Make Good
For the Group’s obligation to dismantle and remove a leased asset or restore the underlying asset to the condition required by the terms
and conditions of the lease, a provision is recognised and measured under AASB 137 Provisions, Contingent Liabilities and Contingent
Assets. This includes costs of removing furniture and fixtures, equipment, partitions and signage within the Group’s leased offices.
Adjustments to the make good provision are generally included in the Group’s right-of-use asset under AASB 16 Leases. However, if the
make good obligation specifically relates to leasehold improvements undertaken by the Group, the make good provision is capitalised as
part of the relevant leasehold improvement asset rather than to the right-of-use asset.
14.2 Provisions
30 June 2022
30 June 2021
$'000
$'000
Current
Employee benefits
20,626
19,056
Solicitor liability claims
1,413
3,024
Other provisions
940
1,074
Balance
22,979
23,154
Non-current
Employee benefits
1,304
1,246
Solicitor liability claims
2,972
2,136
Other provisions
2,299
2,732
Balance
6,575
6,114
There have been no significant COVID-19 related provisions identified as a result of the assessment performed by management for the
balances as at 30 June 2022.
55
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 15. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and short-term deposits with an original maturity of
three months or less. For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding banking overdrafts.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
30 June 2022
30 June 2021
$'000
$'000
Cash and cash equivalents
Cash in hand
25
26
Cash in bank
15,608
20,671
Balance
15,633
20,697
Note 16. Financing arrangements
16.1 Accounting Policies
Borrowing Costs
Borrowing costs can include interest expense, finance charges in respect of finance leases, amortisation of loan discounts or premiums,
ancillary costs relating to borrowings, and exchange differences arising from foreign currency borrowings to the extent that they are
regarded as an adjustment to interest costs.
16.2 Financing arrangements
Debt facilities
At the reporting date, the Group had the following debt facilities:
(a) Super Senior Facility ($65.0m) with a termination date of 31 July 2023. The facility incurs fixed fees and a fixed interest rate. From 1
January 2021, 25% of the interest became payable in cash and this increased to 50% at 1 July 2021. The remaining interest continues
to be capitalised to the loan balance until the end of December 2022, when all interest becomes payable in cash. The balance is
$84.0m at 30 June 2022 (30 June 2021: $79.9m). The total undrawn amount of the facility is nil at 30 June 2022 (30 June 2021: nil).
On 16 August 2022, the Super Senior Facility has been amended and the termination date of the facility has been extended to 31
October 2024. Refer to Note 26 for further details.
(b) April 2020 Term Loan (nil) – the $15.0m facility held at 30 June 2021 with a maturity date of 6 February 2023 was fully repaid and
terminated in December 2021. The balance is not available as at 30 June 2022 (30 June 2021: $10.0m). This facility was replaced
by the December 2021 Term Loan below.
(c) December 2021 Term Loan ($30.0m) – a new $30.0m facility was executed in December 2021 with a termination date of 10
December 2024. The facility is secured against a borrowing base of eligible receivables, eligible WIP and a specific bank account.
The $25.0m outstanding facility commitment is a term loan facility which incurs fixed fees and a fixed interest rate, with interest
payable monthly in arrears. The balance is $25.0m as at 30 June 2022 (30 June 2021: $nil). The total available undrawn amount of
the facility is $5.0m as at 30 June 2022 and is available until 10 December 2022, subject to availability of the borrowing base.
Net Debt
As at 30 June 2022, the Group has fully drawn its Super Senior Facility.
The Group had cash on hand of $15,633,000 (30 June 2021: $20,697,000), offset by debt of $129,850,000 (including lease liabilities of
$21,144,000), resulting in net debt of $114,217,000 (30 June 2021: $91,687,000).
Covenants position
The Group was in compliance with all financial covenants as at 30 June 2022.
56
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 16. Financing arrangements (continued)
Debt reconciliation
Super senior
facility
April 2020
term loan
December
2021 term loan
Lease
liabilities
Insurance
Premium
financing
Total
$'000
$'000
$'000
$'000
$'000
$'000
Balance at 30 June 2021
79,928
9,286
-
23,170
-
112,384
Drawdowns
-
5,000
25,000
-
1,415
31,415
Repayments
-
(15,000)
-
(8,956)(1)
(1,450)
(25,406)
Borrowing costs
-
-
(330)
-
-
(330)
Lease non-cash movements
-
-
-
4,801
-
4,801
Borrowing costs unwind
-
714
64
-
-
778
Accrued interest / interest charges
4,044
-
-
2,129
35
6,208
Balance at 30 June 2022
83,972
-
24,734
21,144
-
129,850
(1) Includes both principal and interest repayment.
16.3 Summary of Borrowing Arrangements
At reporting date, the following banking facilities had been executed and were available:
2022
2021
Total banking facilities
Maturity
$'000
$'000
Super senior facility
65,000
65,000
December 2021 term loan
30,000
-
Total credit facilities
95,000
65,000
Super senior facility
31 Jul 2023
-
-
December 2021 term loan
10 Dec 2024
-
-
Total credit facilities - current
-
-
Super senior facility(1)
31 Jul 2023
83,972
79,928
December 2021 term loan(2)
10 Dec 2024
24,734
-
Total credit facilities - non-current
108,706
79,928
(1) Includes interest capitalised to the loan balance.
(2) Net of capitalised establishment costs.
57
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 17. Leases
17.1 Accounting Policies
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease arrangements in which it is the lessee. This approach excludes short-term leases
(defined as leases with a lease term of 12 months or less, and leases of low value assets such as laptop computers, small items of office
furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate (“IBR”).
Lease payments included in the measurement of the lease liability comprise:
●
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
●
Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
●
The amount expected to be payable by the lessee under residual value guarantees;
●
The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
●
Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the
carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
●
The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of an option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised
discount rate.
●
The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which case the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate
●
A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate
at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses; and adjusted for remeasurement of the lease liability.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset or restore the underlying asset to the condition
required by the terms and conditions of the lease, a provision is recognised and measured under AASB 137. To the extent that the costs
relate to a right-of-use asset, the costs are included in the related right-of-use asset.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If the lease transfers
ownership of the underlying asset to the Group by the end of the lease term or if the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The
depreciation starts at the commencement date of the lease.
The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as
described in Note 12.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset.
The related payments are recognised as an expense in the period in which the event occurs and are included in the line Other expenses
in profit or loss.
As a practical expedient, AASB 16 permits a lessee not to separate non-lease components, and instead account for any lease and
associated non-lease components as a single arrangement. The Group has not used this practical expedient.
58
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 17. Leases (continued)
17.2 Right of use assets
Buildings
Plant &
Equipment
Total
$'000
$'000
$'000
At 1 July 2020
19,705
-
19,705
Additions
1,125
272
1,397
Lease adjustments
(2,341)
-
(2,341)
Depreciation charge
(5,447)
(38)
(5,485)
Makegood recognised
2,296
-
2,296
At 30 June 2021
15,338
234
15,572
Additions
4,716
-
4,716
Lease adjustments
220
-
220
Depreciation charge
(6,388)
(90)
(6,478)
Makegood adjustments
(53)
-
(53)
Impairment
(304)
-
(304)
As at 30 June 2022
13,529
144
13,673
17.3 Lease Liabilities
The closing lease liability balances are shown below. Movements in the overall lease liabilities are outlined in Note 16.
30 June 2022
30 June 2021
$'000
$'000
Current liabilities
Lease liability
6,887
6,628
Total current
6,887
6,628
Non-current liabilities
Lease liability
14,257
16,542
Total non-current
14,257
16,542
Refer to Note 18 for further information on financial risk management.
17.4 Amounts recognised in profit and loss
The amounts shown below are recognised in the consolidated statement of profit or loss.
30 June 2020
30 June 2021
$000
$000
Depreciation and amortisation
Depreciation expense of right-of-use assets
6,478
5,485
Finance costs and income
Interest expense on lease liabilities
2,129
1,902
Income from sub-leasing of right-of-use assets
(273)
(357)
59
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 17. Leases (continued)
30 June 2022
30 June 2021
$’000
$’000
Rental expense
Expenses relating to short term leases
831
815
Expenses relating to variable payments not included in lease liability
1,534
1,515
Impairment expense
Impairment expense of right-of-use assets
304
-
Critical Accounting Estimates and Judgements
Area
Detail
Estimating the IBR
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its IBR to
measure lease liabilities. The Group estimates the IBR using observable inputs (e.g. market interest
rates) when available and is required to make certain entity-specific estimates (e.g. Group’s credit
rating).
Determining the lease term of
contracts with renewal
termination options
The Group has several property lease contracts that include extension options. These options are
negotiated by management to provide flexibility in managing the leased-asset portfolio and align with
the Group’s business needs. Management exercises significant judgement in determining whether
these extension options are reasonably certain to be exercised.
As at 30 June 2022, the undiscounted potential future rental payments relating to periods following the
exercise date of extension options that are not included in the lease term amounted to $40.5m (30
June 2021: $33.7m).
Note 18. Financial Risk Management
18.1 Accounting Policies
The Group’s principal financial instruments comprise cash and cash equivalents, receivables, work in progress, trade payables and loans.
The classification of financial instruments depends on the purpose for which the instruments were acquired. Management determines the
classification of its financial instruments at initial recognition.
Financial assets
Under AASB 9, the Group assesses which of its financial assets are measured at fair value through other comprehensive income, fair
value through profit or loss, or amortised cost. The classification is generally based on the business model in which a financial asset is
managed and its contractual cash flow characteristics. The determination of the business model within which a financial asset is held has
been made on the basis of the facts and circumstances that existed at the date of initial application.
Based on the necessary assessments, the Group has designated all its financial assets to be measured at amortised cost. The carrying
value of these financial assets approximate their fair value.
Receivables are non-interest bearing, non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. These are initially recognised based on fair value plus directly attributable transaction costs that are subsequently measured using
the effective interest method at amortised cost and are subject to impairment.
Financial assets are tested for impairment on a forward-looking basis to calculate the associated ECL and to establish whether there is
any objective evidence of resulting impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified
or impaired. The impairment loss is reversed through profit or loss if the amount of the impairment loss decreases in a subsequent period
and the decrease can be related objectively to an event occurring after the impairment was recognised.
60
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 18. Financial Risk Management (continued)
Financial liabilities
Under AASB 9, the Group assesses which of its financial liabilities are measured at either fair value through profit or loss or at amortised
cost. Financial liabilities include trade payables, other creditors and loans from third parties including loans from or other amounts due to
director-related entities.
Based on the necessary assessments, the Group has designated all its financial liabilities to be measured at amortised cost. The carrying
value of these financial liabilities approximate their fair value.
Financial liabilities are recognised at amortised cost, comprising original debt, net of directly attributable transaction costs less principal
payments and amortisation using the effective interest rate method. The implied interest expense is recognised in profit or loss.
18.2 Interest Rate Risk
The Group's exposure to interest rate risk and the effective interest rates of non-derivative financial assets and financial liabilities both
recognised and unrecognised at the end of the reporting period are as follows:
Variable
interest rate
Variable
interest rate
Fixed interest
rate
Fixed interest
rate
Total
Total
2022
2021
2022
2021
2022
2021
$'000
$'000
$'000
$'000
$'000
$'000
Financial assets
Financial assets held at amortised
cost
Cash and bank guarantees on
deposit
18,422
25,581
-
-
18,422
25,581
Total financial assets
18,422
25,581
-
-
18,422
25,581
Financial liabilities
Financial liabilities held at
amortised cost
Lease liabilities
-
-
21,144
23,170
21,144
23,170
Super senior facility
-
-
83,972
79,928
83,972
79,928
April 2020 term loan
-
-
-
9,286
-
9,286
December 2021 term loan
-
-
24,734
-
24,734
-
Total financial liabilities
-
-
129,850
112,384
129,850
112,384
The Group manages the exposure through the ongoing monitoring of interest rates.
18.3 Foreign Exchange Risk
The Group has no significant exposures to foreign exchange risk.
18.4 Credit risk
The main exposure to credit risk in the Group is represented by receivables (debtors and disbursements) owing to the Group. The Group’s
exposure to credit risk arises from the potential default of the counterparty, with a maximum exposure equal to the carrying amount of
those assets as disclosed in the statement of financial position and notes to the financial statements.
The Group held cash and cash equivalents and restricted bank guarantees on deposit of $18,422,000 at 30 June 2022 (30 June 2021:
$25,581,000). The credit risk associated with cash and cash equivalents is considered minimal as the cash and cash equivalents are held
with Authorised Deposit Institutions in Australia which are regulated by the Australian Prudential Regulatory Authority.
Receivables
Once client matters are billed, a significant portion of receivables are considered low risk. This is because these receivables are collected
directly from settlements that are mainly paid by insurers or government bodies or litigation funders into trust accounts held on behalf of
the Group’s clients. The Group applies the AASB 9 simplified approach to measuring the ECL for receivables, which uses a lifetime
expected loss allowance for ECL for all receivables, see Note 10 for further details.
61
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 18. Financial Risk Management (continued)
Management of Credit Risk
The Group actively manages its credit risk by:
●
where applicable, assessing the capability of a client to meet its obligations under the fee and retainer agreement;
●
periodically reviewing the reasons for bad debt write-offs in order to improve the future decision-making process;
●
maintaining an adequate provision against the future recovery of debtors and disbursements;
●
including in management key performance indicators ("KPIs") measures in respect of debtors, disbursements and collections;
●
holding regular meetings with relevant teams on debtor profiling, including ageing of the portfolios; and
●
where necessary, pursuing the recovery of debts owed to the Group through external mercantile agents and the courts.
Due to the nature of the NWNF arrangements applicable to the majority of the legal matters managed by the Group there can be
considerable time between initiation and settlement of a matter. While time increases the ageing profile of receivables, particularly
disbursements, it does not always increase the associated credit risk.
18.5 Liquidity risk
The Group’s objective is to maintain a balance between the continuity of funding and flexibility through the use of operating cash flows and
committed available credit facilities. The Group actively reviews its funding position to ensure the available facilities are adequate to meet
its current and anticipated needs.
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate borrowing facilities are maintained. Refer
to the statement of cash flows and Note 5, for further information on the historical cash flows. Further information in relation to debt facilities
available and utilised are outlined in Note 16.
Maturity Analysis
The table below represents the estimated and undiscounted contractual settlement terms for financial instruments and management’s
expectation for settlement of undiscounted maturities. Cash flows for floating rate financial instruments have been presented based on the
rate prevailing at the balance date.
Total
contractual
Carrying
< 12 Months
1 - 5 years
> 5 years
cash flows
amount
$'000
$'000
$'000
$'000
$'000
2022
Non-derivative financial liabilities
Payables
54,557
21,845
-
76,402
76,402
Borrowings
9,606
118,482
-
128,088
108,706
Lease liabilities
8,116
15,203
342
23,661
21,144
Financial liability maturities
72,279
155,530
342
228,151
206,252
2021
Non-derivative financial liabilities
Payables
60,758
13,317
-
74,075
74,075
Borrowings
6,225
107,014
-
113,239
89,214
Lease liabilities
8,207
18,135
530
26,872
23,170
Financial liability maturities
75,190
138,466
530
214,186
186,459
Note 19. Contributed equity
30 June 2022
30 June 2021
30 June 2022
30 June 2021
Shares
Shares
$'000
$'000
Ordinary shares - fully paid
140,196,875
139,093,565
1,435,826
1,435,177
62
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 19. Contributed equity (continued)
Movements in ordinary share capital
Details
Shares
$'000
Balance at 1 July 2020
138,428,817
1,434,793
Issue of shares under LTIP
664,748
384
Balance at 30 June 2021
139,093,565
1,435,177
Issue of shares under LTIP
1,103,310
649
Balance at 30 June 2022
140,196,875
1,435,826
Ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At
shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a
show of hands.
During the period, the Company issued 1,103,310 shares for nil consideration as part of the Long Term Incentive Plan ("LTIP").
The Company did not pay any dividends during the financial year ended 30 June 2022 (30 June 2021: nil).
For the purpose of the Group’s capital management, capital includes issued capital. The primary objective of the Group’s capital
management is to maximise the shareholder value.
Note 20. Share-based payments
20.1 Accounting policies
The consolidated entity operates a share-based payment employee share and option scheme.
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date.
The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting
period, with a corresponding increase to an equity account. In respect of share-based payments that are dependent on the satisfaction of
performance conditions, the number of shares and options expected to vest is reviewed and adjusted at each reporting date. The amount
recognised for services received as consideration for these equity instruments granted is adjusted to reflect the best estimate of the number
of equity instruments that eventually vest.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services
received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity
instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
20.2 Employee Equity Incentive Plan
The Company has one employee Equity Incentive Plan (the "Plan"), which was approved by the shareholders of the Company at the
Annual General Meeting held on 14 November 2019.
63
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 20. Share-based payments (continued)
The Plan provides participants with a nil-exercise price right to acquire shares in the Group which are subject to restrictions to be
determined by the Board. There have been four issuances (Tranches 1 to 4) to date related to the Plan as follows:
Tranche 1: The Rights under Tranche 1 are provided to participants in four tranches, A through D. The number of Rights that will vest in
Tranches A to C is based on the fulfillment of service conditions, while Rights vesting for Tranche D depend on the occurrence of a
performance-based exit event condition. That same exit event condition must be met for all tranches to become exercisable.
Tranche 2: The Rights under Tranche 2 will vest based on the fulfillment of a service condition of remaining in the Group’s employ to 1
January 2022.
Tranche 3: The Rights under the Plan are provided to participants in three tranches, A through C. The number of Rights that will vest in
Tranches A to C is based on the fulfillment of service conditions as well as the achievement of a performance-based condition.
Tranche 4: The Rights under the Plan are provided to participants in two tranches, A and B. The number of Rights that will vest in Tranches
A and B is based on the fulfillment of service conditions as well as the achievement of a performance-based condition.
(i) Recognition
The Group’s Plan is an equity-settled share-based payment, in accordance with the definition under AASB 2 Share-based Payment ("AASB
2"). Equity-settled share-based payments are measured at the grant date fair value for employee services. Equity-settled share-based
payment transactions are not subsequently re-measured once the grant date fair value has been determined. Where unallocated Rights
exist at year end, these will not be recognised until the allocation occurs, as no obligation is attached to these rights as at 30 June 2022.
AASB 2 requires the fair value of equity instruments granted to be based on market price, if available, and to consider the terms and
conditions for those instruments granted. The cost of the Rights issued is recognised as an expense from the Grant date over the defined
vesting period. Management assumptions of service conditions (i.e. employment retention) are based on best estimate and reflected in
the employee expenses recognised for the respective financial year.
(ii) Valuation
A Black Scholes option pricing model has been used to value Rights given the performance hurdle is a non-market hurdle, being the
underlying Earnings Before Interest, Taxes, Depreciation and Amortisation ("EBITDA"). The grant date fair values of the Rights have been
determined to be $9,000,000, $812,463, $348,750 and $180,000 for Tranches 1, 2, 3 and 4, respectively, using the following inputs:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Exercise Price (AUD$)
0.00
0.00
0.00
0.00
Spot price (AUD$)
0.89
0.80
0.75
0.75
Time to maturity (years)
7.00
0.91
1.22 to 3.22
1.62 to 2.62
Dividend yield
0.00%
0.00%
0.00%
0.00%
Discounted for lack of control
28%
25%
25%
25%
Valuation date (i.e. grant date)
13 December 2019
5 February 2021
12 April 2021
18 November 2021
The employment termination of the participant will forfeit his/her rights to the share options, unless the participant is assessed to be a 'good
leaver'. The Group estimates the following departures for each of the tranches:
Tranche 1: one participant each departed in financial year 2021 and 2022.
Tranche 2: no departure throughout the vesting period.
Tranche 3 and 4: the participants are not expected to leave the Group throughout the vesting period.
The estimated percentage of employee departure will be reassessed at the end of each respective financial year.
64
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 20. Share-based payments (continued)
(iii) Measurement
The Plan is a staged vesting plan, with the following tranches:
Vesting date / event
Vesting percentage
Cumulative value of vested
award ($)
Tranche 1
Tranche A
30 June 2020
22%
1,980,000
Tranche B
30 June 2021
22%
3,960,000
Tranche C
30 June 2022
22%
5,940,000
Tranche D
Date of 'Exit Event'
34%
9,000,000
Tranche 2
1 January 2022
100%
812,463
Tranche 3
Tranche A
1 July 2022
33%
116,250
Tranche B
1 July 2023
33%
232,499
Tranche C
1 July 2024
34%
348,750
Tranche 4
Tranche A
1 July 2023
50%
90,000
Tranche B
1 July 2024
50%
180,000
The following table illustrates the expected vesting of the LTIP, considering that estimates described under (ii) above:
Vesting Date ($)
30 June 2020
30 June 2021
30 June 2022
30 June 2023
30 June 2024
Total
cumulative
expense
Tranche 1A
1,980,000
-
-
-
-
1,980,000
Tranche 1B
717,010
1,229,161
-
-
-
1,946,171
Tranche 1C
387,599
664,456
664,456
-
-
1,716,511
Tranche 1D
1,785,000
1,275,000
-
-
-
3,060,000
Tranche 2
-
375,561
450,673
-
-
826,234
Tranche 3A
-
20,043
96,207
-
-
116,250
Tranche 3B
-
10,968
52,641
52,641
-
116,250
Tranche 3C
-
7,548
36,234
36,234
36,234
116,250
Tranche 4A
-
-
34,615
55,385
-
90,000
Tranche 4B
-
-
21,429
34,286
34,285
90,000
Total
4,869,609
3,582,737
1,356,255
178,546
70,519
10,057,666
$1.4m share based payment expense was recognised for the year ended.
(iv) Movements during the year
The following table illustrates the number and movements in Rights during the year:
30 June 2022
30 June 2021
(Number)
(Number)
Balance at 1 July
16,716,545
15,573,000
Granted during the year
320,000
1,974,105
Forfeited/Lapsed during the year
(1,523,912)
(165,812)
Exercised during the year
(1,103,310)
(664,748)
Outstanding at 30 June
14,409,323
16,716,545
Exercisable at 30 June
13,469,323
11,499,103
65
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 20. Share-based payments (continued)
All of the Rights under the LTIP have a nil exercise price. For the Rights exercised during the year, the weighted average share price is
$0.68 (30 June 2021: $0.85).
Note 21. Related Party Disclosures
21.1 Equity Interests in Related Parties
The table below lists the primary operating controlled entities of the Group. Individual controlled entities that are dormant have not been
listed. All are owned 100% unless noted.
% Equity
% Equity
interest
interest
Country of Incorporation
2022
2021
Australia:
Slater and Gordon (TML) Queensland Pty Ltd
100%
100%
Slater & Gordon Lawyers NSW Pty Limited
100%
100%
Conveyancing Works (Qld) Pty Limited
100%
100%
Schultz Toomey O'Brien Pty Ltd
100%
100%
All States Legal Co Pty Ltd
100%
100%
SG NSW Pty Ltd
100%
100%
The Immediate Parent Entity of the Group is AIO V Finance (Ireland) DAC, incorporated in Ireland. The Ultimate Parent Entity is Anchorage
Capital Group LLC incorporated in the United States of America.
66
Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 21. Related Party Disclosures (continued)
21.2 Guarantees for S&G UK lease obligations
The Company and Slater and Gordon (UK) 1 Limited (“S&G UK”) entered into certain transitional arrangements that are governed by a
business separation agreement (“BSA”) to effect the separation of the Group’s previous UK operations and subsidiaries from its Australian
operations under the Senior Lender Scheme entered into in December 2017.
The transitional arrangements required the parties to the BSA to seek to procure that the Company be released from parent guarantees
and other forms of security and financial support that it has provided to the UK operations. Any potential material contingent liability relates
to parent guarantees for UK leases for the major office premises used by the UK operations.
The BSA provides that S&G UK must use reasonable endeavours to have the parent guarantees released and that this must be completed
within 18 months of the date of implementation of the Recapitalisation on 15 December 2017 (or such longer period as agreed between
the Company and S&G UK). This due date was first extended by agreement until 22 June 2020. Subsequently in June 2020, the Company
and S&G UK agreed to extend this period by six further terms of one month each in return for the payment of a guarantee fee equal to 5%
of the monthly guaranteed amount, payable in advance of each one month extension. The final extension expired on 22 December 2020
and no further extension has been agreed to. Despite the failure of S&G UK to meet its obligations under the BSA to have the parent
guarantees released by the extended due date, S&G UK remains under a continuing obligation to use its reasonable endeavours to have
the parent guarantees released.
During the year ended 30 June 2021, S&G UK surrendered its lease of its Watford office and agreed to sub lease three of the eight floors
at its Manchester office to a government sub tenant. While the sub lease does not terminate the parent company guarantee in respect of
those premises, it does reduce the risk of default.
In December 2021, as part of an agreement in principle to resolve a dispute in relation to the Manchester building, the landlord agreed to
a surrender of lease and release of the parent guarantee in respect of the three sublet floors. Formal documents to give effect to the
agreement in principle were signed on 25 February 2022.
The Manchester office leases are the only remaining leases for which parent company guarantees have been given by the Company.
If S&G UK defaults on the UK leases subject to the parent guarantees, and those parent guarantees have not yet been released, the
Company may be liable for any unpaid amounts under those leases at the time of default. Any contingent liability has the potential to be
material in the event that the UK operations were in default and the parent guarantees were called upon and the Company was unable to
take steps that are typically commercially available to mitigate its loss, such as sub-leasing. At 30 June 2022, the aggregate unpaid
amounts under these lease agreements for the remainder of the lease term expiring on 1 January 2030 are $43,576,609 (GBP 24,689,157),
(30 June 2021: $67,578,492; GBP 36,993,837).
It is not currently possible for the Company to estimate any liability or contingent liability under these guarantees as there would need to
be an event of default by the UK operations to cause any liability. In addition, numerous factors would impact the extent of any potential
liability in that event, such as when the guarantee would be called and the amounts outstanding at that time, the Company’s ability to take
steps to mitigate loss, including subleasing the premises, and its capacity to negotiate with the third parties who have the right to call on
those guarantees. Liability in respect of these guarantees will only arise if the UK operations default on their obligations under the leases
and other material contracts subject to a parent guarantee, prior to an agreement being made to release that guarantee.
21.3 Deed of Cross Guarantee
All Australian entities are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering
into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under
Corporations Instrument 2016/785 dated 17 December 2016 issued by the Australian Securities and Investments Commission.
21.4 Key Management Personnel Compensation
30 June 2022
30 June 2021
$
$
Compensation by category
Short-term employee benefits
2,248,805
2,518,832
Post-employment benefits
146,208
117,874
Other long term employment benefits
15,897
21,200
Share based payments
394,625
1,696,495
Total
2,805,535
4,354,401
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Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 21. Related Party Disclosures (continued)
21.5 Transactions with AIO V Finance (Ireland) DAC (Immediate Parent Entity)
30 June 2022
30 June 2021
$'000
$'000
Loans from Immediate Parent Entity
Opening balance
44,895
45,220
Repayments
-
(4,120)
Interest capitalised
2,271
3,795
Closing balance outstanding
47,166
44,895
The loan facilities are advanced by the Immediate Parent Entity as one of the lenders under the super senior facility, on the same terms
as those agreed with the other lenders. The facilities are unsecured, and repayable in cash on maturity. Further details of the terms of the
facilities are provided in Note 16.2.
21.6 Transactions with Other Related Parties
The shareholdings of related parties and remuneration of KMP are disclosed in the Directors’ Report.
Note 22. Parent Entity Disclosures
As at, and throughout, the financial year ended 30 June 2022 the parent entity of the Group was Slater & Gordon Ltd. Investments in
subsidiaries are accounted for at cost, less any impairment recognised since acquisition.
Statement of profit or loss and other comprehensive income
Parent
30 June 2022
30 June 2021
$'000
$'000
Profit after income tax
1,047
13,754
Total comprehensive income
1,047
13,754
Statement of financial position
Parent
30 June 2022
30 June 2021
$'000
$'000
Total current assets
127,831
140,815
Total assets
373,709
343,934
Total current liabilities
109,639
109,603
Total liabilities
275,156
247,782
Net assets
98,553
96,152
Equity
Contributed equity
1,435,773
1,435,124
Share-based payments reserve
10,013
9,309
Accumulated losses
(1,347,233)
(1,348,281)
Total equity
98,553
96,152
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Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 23. Auditor's Remuneration
The auditor of the Group for the year ended 30 June 2022 is Ernst & Young (30 June 2021: Ernst & Young).
2022
2021
$
$
Fees to Ernst & Young
Fees for auditing the statutory financial report of the parent covering the group and auditing the
statutory financial reports of any controlled entities
579,000
555,000
Fees for other assurance and agreed-upon-procedures services under other legislation or contractual
arrangements where there is discretion as to whether the service is provided by the auditor or another
firm
· Trust account audits
82,810
112,000
Fees for other services
· Other non-audit services
-
50,000
Total
661,810
717,000
Note 24. Accounting Standards issued but not yet effective at 30 June 2022
At the date of authorisation of the financial statements, there are a number of amendments to accounting standards that become applicable
for annual reporting periods commencing on or after 1 July 2022, but they do not have a material effect on the Group's financial statements.
Note 25. Unrecognised Items
25.1 Guarantees
The Group has provided certain lease rental guarantees with a face value of $2,789,374 (30 June 2021: $4,884,105). The Company has
also provided lease guarantees for certain offices located in the United Kingdom. Refer to Note 21.2.
25.2 Contingent Liabilities – Class Action Proceedings
On 12 October 2016 legal proceedings were filed against the Company in the Federal Court of Australia (“Federal Court”) by Matthew Hall
on behalf of an open class of the Company’s shareholders (the “Hall proceeding”). The class action proceeding asserted that the Company
engaged in misleading or deceptive conduct and breached its continuous disclosure obligations during the period from 30 March 2015 to
24 February 2016 and sought compensation or refund of investments, plus interest and costs. This class action proceeding was settled by
agreement in July 2017 through a Federal Court mediation, subject to creditor, shareholder and Court approval of a shareholder claimant
and senior lender scheme of arrangement.
On 20 June 2017, the Company announced that legal proceedings were filed against it by Babscay Pty Ltd (the “Babscay proceeding”) on
behalf of persons who acquired an interest in shares of the Company between 24 August 2012 and 19 November 2015. The statement of
claim asserted that the Company’s financial statements for the financial years ended 30 June 2013, 2014 and 2015 contained false or
misleading statements. This claim was later amended to also include the Company’s financial statements for the financial year ended 30
June 2012. The allegations focus on the way in which the Company recognised revenue and, in financial year 2015, accounted for
acquisitions in accordance with Australian Accounting Standards.
On 14 December 2017 the Federal Court approved a scheme of arrangement between the Company and all shareholder claimants
(“Shareholder Claimant Scheme”), including claimants in the Hall and Babscay proceedings. The Shareholder Claimant Scheme resolves
and compromises all potential shareholder claims against the Company and its officers. The Shareholder Claimant Scheme became legally
effective on 15 December 2017. Under the Scheme, shareholder claimants have released the Company and officers from any shareholder
claims and the Scheme can be pleaded as a bar to any shareholder claim.
On 14 December 2017 the Federal Court also approved the settlement of the Hall proceeding and dismissed that proceeding. The
Company’s contribution to this settlement of $5.0m was recognised as a provision at 30 June 2017. The Hall proceeding settlement is
implemented by the Shareholder Claimant Scheme. The Babscay proceeding has not yet been formally dismissed or discontinued,
however the Shareholder Claimant Scheme releases the Company and its officers and bars the prosecution of that claim.
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Slater & Gordon Ltd
ANNUAL REPORT 2022
Notes to the consolidated financial statements
For the Year Ended 30 June 2022
Note 25. Unrecognised Items (continued)
The Shareholder Claimant Scheme limits the ability of a shareholder claimant to bring proceedings against third parties and also provides
for an indemnity from the shareholder claimants in favour of the Company and its directors and officers in the event that a shareholder
claimant brings a permitted claim against a third party and that third party then brings a claim against the Company.
On 1 November 2017, class action legal proceedings were filed against the Company’s former auditors, Pitcher Partners, by Babscay Pty
Ltd (the “Babscay Pitcher proceeding”). On 23 February 2018, Pitcher Partners served a cross claim on the Company and certain former
directors and officers.
On 31 July 2018, further class action legal proceedings were filed against the Company’s former auditors, Pitcher Partners, by Matthew
Hall (the “Hall Pitcher proceedings”). On 26 October 2018 Pitcher Partners served a cross claim in the Hall Pitcher proceedings on the
Company and certain former directors and officers.
The Company has filed defences against both cross claims and has, in turn, filed cross claims against the plaintiffs, claiming the benefit of
the indemnity in the Shareholder Claimant Scheme.
In May 2019, Pitcher Partners brought a further cross claim against another party.
In November 2020, the Babscay Pitcher proceeding was discontinued by the plaintiff and the plaintiff has paid amounts to each of Pitchers
and the Company toward their legal costs.
In September 2019, class action proceedings were commenced against the Company’s former solicitors, Arnold Bloch Leibler, by Matthew
Hall on behalf of an open class of the Company’s shareholders (the “Hall ABL proceedings”). In December 2020, Arnold Bloch Leibler
brought a cross claim against the Company and a former director and a former officer of the Company. The Company filed its Defence to
the Cross Claim and has, in turn, filed a cross claim against the plaintiff, claiming the benefit of the indemnity in the Shareholder Claimant
Scheme.
On 20 October 2021, an agreement was reached by the parties to settle the Hall ABL proceedings. The agreement is subject to a long
form Settlement Deed being signed by all parties and approval by the Court. A long form Settlement Deed was signed on 16 November
2021 and the Court approved the settlement on 4 March 2022. Under the terms of the settlement, the Company was not required to
contribute to the settlement.
The trial of the Hall Pitcher Proceedings commenced on 9 November 2021 and concluded on 23 December 2021. Judgement has been
reserved and is expected to be delivered in the first half of FY23.
25.3 Contingent Liabilities – Solicitor liability
Entities within the Group are defendants from time to time in legal proceedings arising from the conduct of their business. There are
contingent liabilities in respect of claims, potential claims and court proceedings against entities of the Group. Appropriate, provisions have
been made for identified claims based on historical data, taking into account the nature of the claims. The aggregate of any potential
liability in respect of future claims cannot be accurately assessed.
25.4 Contingent Liabilities – Group Cost Orders
The Justice Legislation Miscellaneous Amendments Act 2000 amended the Victorian Supreme Court Act 1956 to introduce the Group Cost
Order (GCO) regime which enables contingency fee arrangements. A contingency fee arrangement allows the Group to receive a
percentage share of the damages awarded to the plaintiffs. In the event of losing a GCO case, the Group is liable to pay a defendant’s
costs where they are successful in obtaining an Adverse Cost Order.
At 30 June 2022 the Group has one GCO case. The Group considers it not probable that the Group will be liable for any adverse costs
relating to this matter, therefore no provision has been recognised at 30 June 2022.
Note 26. Events after the reporting period
Subsequent events
On 16 August 2022, the Company executed an amendment to the Super Senior Facility loan agreement. The termination date of the facility
has been extended to 31 October 2024. The interest rate has been revised and will increase by 0.5% on 1 July 2023, a further 0.5% on 1
January 2024 and a further 1% on 1 July 2024, with the additional interest being capitalised to the loan balance. Part repayments of the
facility may be required based on available cash at 31 December 2022 and 30 June 2023. An Independent Debt Advisor must be appointed
by 28 February 2023.
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ANNUAL REPORT 2022
Directors' declaration
For the Year Ended 30 June 2022
In the Directors' opinion:
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting requirements;
●
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board as described in Note 1 to the financial statements;
●
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2022 and of its
performance for the financial year ended on that date; and
●
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
___________________________
___________________________
James MacKenzie
John Somerville
Chair
Managing Director and Chief Executive Officer
26 August 2022
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ANNUAL REPORT 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor's Report to the Members of Slater & Gordon Ltd
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Slater & Gordon Ltd (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
June 2022, the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, notes to the financial statements, including a summary of significant accounting policies,
and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2022 and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context. We have determined the matters described below to
be the key audit matters to be communicated in our report.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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ANNUAL REPORT 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Work in Progress and Associated Revenue Recognition
Why significant
How our audit addressed the key audit matter
Work in progress (WIP) is significant to the Group,
comprising 71% of total assets. Movements in WIP are
included in revenue recognised for the year.
The Group’s disclosures regarding WIP and the
associated revenue recognised are included in Notes 3
and Note 11 of the financial report.
The directors’ determination of the carrying value of
WIP and its associated revenue streams involves
significant judgement, data analysis and complexity.
The Group considers each revenue stream in isolation
and makes judgements in relation to:
The identification of a contract
The identification of the performance obligations as
part or within a contract
Determination of the transaction price, particularly
for revenue streams accounted under a “no win no
fee” basis
Allocation of the transaction price
Recognition of revenue when a performance
obligation is satisfied
To validate the judgements made in relation to WIP, the
Group develops a series of data models based on
historical information over a two-year period. Data
included in these models is applied to a methodology to
determine the valuation of cases at their respective
status.
Accordingly, this was considered a Key Audit Matter.
Our audit procedures included the following:
Considered whether the Groups’ accounting policy
for WIP complied with Australian Accounting
Standards, in particular AASB 15 Revenue from
Contracts with Customers.
Obtained details of WIP recognised for each revenue
stream at balance date and applied sampling
techniques to select individual legal matters
(“cases”) for testing.
Obtained evidence to support the case status that
had been allocated to each of these case files by the
responsible legal professional. Evidence obtained
was assessed against the case coding guidelines of
the Group.
Considered the assumptions supporting the key
judgements that were made in the data models.
Assessed the movements in the legal case profile
including changes in status and ageing.
Involved our data specialists to assess the
mathematical accuracy of the models. This involved
data analytic procedures to reperform, re-calculate
and test key calculations.
Performed a combination of testing case samples to
customer and/or court approved case settlement
contracts, and revenue to cash data correlation
testing, assessed the accuracy of fee amounts
recorded in revenue; and
Considered the adequacy of the disclosures
contained in Notes 3 and Note 11, of the financial
report, in particular those regarding assumptions to
which the outcome of the data models is most
sensitive.
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Slater & Gordon Ltd
ANNUAL REPORT 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Going concern
Why significant
How our audit addressed the key audit matter
As disclosed in Note 1.1 of the financial report the
directors concluded that in their opinion, there are
reasonable grounds to believe that the Group has the
ability to pay its debts as and when they fall due. The
financial report has been prepared on a going concern
basis.
In making this assessment, consideration has been given
to the Group’s operations and forecast cash flows based
on best estimates within a range of future market
scenarios, noting that the uncertain nature of timing of
settlements makes it inherently difficult to forecast
outcomes with certainty.
For the year ended 30 June 2022, the Group generated
a net profit after tax of $2.2 million, used net cash in
operating activities of $14.1million, had $15.6 million
of cash on hand and had $5.0 million of undrawn debt
facilities.
As disclosed in Notes 1.1 and Note 26 of the financial
report, the Group has agreed with its senior lenders to
extend the maturity date of the Super Senior Facility
from 31 July 2023 to 31 October 2024.
The going concern assumption is fundamental to the
basis of preparation of the financial report. Given the
judgment involved in the preparation of cash flow
forecasts to support the going concern conclusion, this
was considered a Key Audit Matter.
Our audit procedures included the following:
Evaluated the assumptions made in the budget and
the cash flow forecasts approved by the Board.
Assessed the reasonableness of the assumptions
included in the cash flow model with statements
related to future plans and commitments contained
in the approved FY23 budget.
Considered the historical accuracy of the Group’s
cash flow forecasting by reference to actual results
in prior periods.
Considered the impact of a range of sensitivities to
the cash flow model and cashflow mitigation
assumptions made by the Group, to assess the
breakeven position, including with reference to
financial covenants related to the Group’s borrowing
facilities.
Obtained evidence to support the extension of the
Super Senior Facility.
Assessed the adequacy of the going concern
disclosures contained in Note 1.1.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2022 Annual Report other than the financial report and our
auditor’s report thereon. The Group’s 2022 Annual Report is expected to be made available to us after
the date of this auditor’s report. We obtained the Directors’ Report that is to be included in the Annual
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
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ANNUAL REPORT 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
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A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2022.
In our opinion, the Remuneration Report of Slater & Gordon Ltd for the year ended 30 June 2022,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
David Shewring
Partner
Melbourne
26 August 2022
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ANNUAL REPORT 2022
Additional ASX Information
In accordance with the Australian Stock Exchange Limited Listing Rules, the Directors provide the following information
as at 26 August 2022.
(a) Distribution of shareholders and option holders
Holding
Number of Ordinary Shareholders
1 – 1,000
1,030
1,001 – 5,000
454
5,001 – 10,000
119
10,001 – 100,000
139
100,001 – Over
22
There are 874 shareholders holding less than a marketable parcel of 807 shares each (i.e. less than $500 per parcel of shares).
(b) Twenty largest shareholders
Shareholder
Number of Shares Held
% Held
1
AIO V FINANCE (IRELAND) DAC
74,371,573
53.04
2
CITICORP NOMINEES PTY LIMITED
17,544,806
12.51
3
TCA OPPORTUNITY INVESTMENTS SARL
12,988,257
9.26
4
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
9,020,425
6.43
5
PERPETUAL CORPORATE TRUST LIMITED
7,408,982
5.28
6
RIVER BIRCH MASTER FUND LP
6,023,362
4.30
7
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
2,426,073
1.73
8
PA VIEW OPPORTUNITY IV LIMITED
889,563
0.63
9
NATIONAL NOMINEES LIMITED
768,339
0.55
10
RIZZO SUPER PTY LTD
500,000
0.36
11
MS KAREN MURPHY
443,215
0.32
12
IRWIN BIOTECH NOMINEES PTY LTD
250,000
0.18
12
MR PENG REN
250,000
0.18
14
MR STEPHEN MARSHALL AARONS
222,988
0.16
15
MR PETER JOHN KLASEN
202,306
0.14
16
MS IDA TEH
160,719
0.11
17
RIZZO PTY LTD
150,000
0.11
18
MS SARAH GAIK HIANG LIM + DR JONATHAN CHAN
137,551
0.10
19
DAVID RICARDO ASSET MANAGEMENT PTY LTD
128,888
0.09
20 MR ANDREW SEYMOUR
119,000
0.08
TOTAL: Top 20 holders of Fully Paid Ordinary Shares
134,006,047
95.57
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Slater & Gordon Ltd
ANNUAL REPORT 2022
Additional ASX Information continued
(c) Substantial Shareholders
A substantial shareholder is one who has a relevant interest in 5 per cent or more of the total issued shares in the Company.
Following are the substantial shareholders in the Company based on notifications provided to the Company under the
Corporations Act 2001:
Shareholder
Number
Ordinary Shares %1
1
AIO V FINANCE (IRELAND) DAC
37,100,2442
53
2
TCA OPPORTUNITY INVESTMENTS SARL
6,190,7362
9
3
YORK GLOBAL FINANCE BDH LLC
5,802,8772
8
4
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
9,020,6083
7
5
PERPETUAL CORPORATE TRUST LIMITED
3,591,5002
5
1. Percentage of shares in which a relevant interest is held based on total issued capital of the Company at the time a substantial shareholder notice was
provided to the Company.
2. Substantial shareholder notice received pre entitlement offer completed on 20 September 2019 and based on issued shares of 69,527,235.
3. Substantial shareholder notice received post entitlement offer completed on 20 September 2019 and based on issued shares of 138,428,817.
(d) Voting Rights
All issued ordinary shares carry one vote per share.
(e) Corporate Governance Statement
The Company’s Corporate Governance Statement can be found on the Company’s website at:
https://www.slatergordon.com.au/the-firm/governance
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Slater & Gordon Ltd
ANNUAL REPORT 2022
Corporate Directory
Directors
James MacKenzie, Chair
Mark Dewar
Merrick Howes
Michael Neilson
Elana Rubin
John Somerville
Jacqui Walters
Company Secretary
Michael Neilson
Registered Office and
Corporate Office
Level 12
485 La Trobe Street
Melbourne Victoria 3000
Telephone: (03) 9602 6888
Facsimile: (03) 9600 0290
Company Website
www.slatergordon.com.au
Company Numbers
ACN 097 297 400
ABN 93 097 297 400
Auditors
Ernst & Young
8 Exhibition Street
Melbourne Victoria 3000
Bankers
Macquarie Bank
Level 23
101 Collins Street
Melbourne Victoria 3000
Solicitors
MinterEllison
Level 20
447 Collins Street
Melbourne Victoria 3000
Securities Exchange Listing
Slater & Gordon Ltd
shares are listed on the
Australian Securities
Exchange. The Home
Exchange is Melbourne.
ASX Code: SGH
Share/Security Registers
The Registrar
Computershare Investor
Services Pty Ltd
Yarra Falls
452 Johnston Street
Abbotsford Victoria 3067
GPO Box 2975
Melbourne Victoria 3001
Telephone
Toll Free 1300 850 505
(Australia)
+61 3 9415 4000
(Overseas)
Investor Centre Website
www.computershare.com.au
Email
web.queries@computershare.com.au
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Slater & Gordon Ltd
ANNUAL REPORT 2022