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Another listed law firm going down the gurgler...
Listed law firm Shine Corporate loses CEO Courtney Petersen after only 5 months
Sarah Danckert
30 December 2016
Shine Corporate, the listed law firm tied to celebrity US legal eagle Erin Brockovich, has lost its chief executive officer Courtney Petersen after only five months at the helm.
Ms Petersen will be replaced by the person she replaced in August, company co-founder Simon Morrison. Shine's other co-founder Stephen Roche will also return as a consultant, the company said in a statement to the ASX on Friday.
The resignation of Ms Petersen comes less than two weeks after the law firm issued a profit warning for 2017 and flagged further impairments within its business.
Ms Petersen was appointed CEO in August as part of a management restructure that saw co-founder Simon Morrison step back from the role.
Her departure continues a management shakeup at the law firm, coming shortly after chief legal officer Jim Holding left the company after only three months in the role. Mr Holding joined the company in August from DLA Piper and has returned to the firm as co-managing partner.
Meanwhile in November, Shine's chief financial officer Daniel Wilkie took extended leave for health reasons. Ravin Raj is acting finance chief.
Chairman Tony Bellas thanked Ms Petersen for her contribution to Shine.
"Courtney joined Shine in April 2015 and the board recognises her valuable achievements during that time," Mr Bellas said.
"The board is pleased to see the return of the founders to the company to lead it through the next phase of its growth," Mr Bellas said.
Ms Petersen was appointed in tumultuous times for the company, which like its rival, listed law firm Slater & Gordon, has been forced to revise how it accounts for the revenue from partly completed law cases.
Profit warnings
Similarly to Slater & Gordon, Shine -- which also runs class actions -- is facing a potential class action following a swinging profit downgrade in January 2016, which has triggered a slump in its share price this year.
On December 19, Shine Corporate issued another profit warning citing "challenging conditions" in its energy and resources legal practice area.
"The company will be reviewing the asset carrying value of its energy and resources practices at the half year ending December 31, 2016," Ms Petersen said at the time.
"Whilst this review is yet to be finalised, the company expects an impairment of up to $5 million may be required," Ms Petersen added.
As a result of the poor performance in its energy and resources practice area, Shine said its pre-tax earnings would come in at between $36 million and $40 million for the year to June. No earlier guidance had been given.
In 2016, Shine slashed an initial profit forecast of $52 million to $56 million, saying earnings would come in at between $24 million and $28 million amid concerns about how the company was booking revenue for partly completed legal cases. It ended up reporting a $25 million operating profit, down 43 per cent from the year before.
Shine's shares were trading at 75¢ on Friday -- well below their March 2015 high of $3.36 and down 62 per cent for the year. Its shares were trading at $2 ahead of its suspension in January and plummeted to 53.5¢ when the suspension was lifted.
Shine Corporate slashes earnings guidance, shares plunge
Jonathan Shapiro
29 January 2016
Ms Brockovich, a lawyer who ran a successful class action over water contamination in the US and was made internationally famous in 2000 through the eponymous film Erin Brockovich starring Julia Roberts, formed a relationship with Shine in 2007 and remains an ambassador for the group, according to the law firm's website.
However, the market value has slid from $343 million to $102 million. The value of the stakes held by the founding shareholders Simon Morrison and Stephen Roche fell by $60 million each.
Mr Morrison, the firm's managing director, was not available for comment on Friday.
In a statement to the Australian Securities Exchange, the compensation claims law firm announced it had revised its earnings guidance to between $24 million and $28 million, from the original $54 million figure it issued in August of 2015.
The decline in earnings is a result of a one-off provision of $17.5 million after the company reviewed existing personal injury cases.
However, Shine also said income had declined as a result of "suboptimal fee-earner-to-file" ratios, greater than expected write-offs and competition in Queensland, leading to a further $10.5 million revision in guidance.
The company said it remained within its banking covenants after the forecast revision and expects to confirm a new banking facility. Shine's net debt to equity level is around 23 per cent, the company said. The increase in provisions would also not impact cash flows, the company said.
Shine also said it would not declare an interim dividend but expects to declare a full-year dividend.
Shine's write-downs come after rival listed law firm Slater & Gordon told investors on Thursday that it was unable to update them on their half year cash flow figures, despite telling them they would do so in January.
Slater, whose ASX listed model was a blueprint for Shine, has lost 90 per of its value in less than 12 months after regulators, short sellers and analysts questioning its accounting policies and ambitious $1.3 billion acquisition in the United Kingdom of Quindell.
Shine's latest revelations about its review of its "work in progress" are no doubt another blow to the listed law firm model. As recently as October, Shine chairman Tony Bellas assured shareholders it managed its work in progress and cash flows "very carefully."
"We closely monitor all active cases on a day-to-day basis and they are appropriately reflected in our accounts" he told the annual general meeting.