Law firm Slater & Gordon Limited (ASX: SGH) this morning reaffirmed its potential for long-term success with continued expansions of both its top and bottom line.
Total revenues for the half year to 31 December 2013 were up to $178.3 million. That's up 22.3% on the previous corresponding period (pcp). Net profit after tax (NPAT) was 21.1% higher to $23 million.
The strong results were bolstered by four of the company's five recent acquisitions in the United Kingdom with all, except the Pannone acquisition, being completed in the six months to December 31. It is expected the final acquisition will be completed within the month.
The board announced an interim dividend increase of 9.1% to three cents per share, in-line with expectations. Impressively it recorded an EBITDA margin of 23.1% (normalised for acquisition costs).
Source: Yahoo Finance
Slater & Gordon has not only been busy pursuing growth in the UK market. Its strategy to improve upon its market share in the Australian personal injury (PI) market resulted in 7% revenue growth and its venture into personal legal services (PLS) is just beginning. Management believe it is set to deliver more than 10% full-year revenue growth.
Despite the acquisitions, net debt ($93.6 million) is manageable – at a gearing ratio of 24.2%.
Group managing director Andrew Grech said: "The results for the half year are very pleasing. We have been able to maintain a strong overall financial and operational performance in our Australian practice whilst accelerating our expansion into the UK market… With the completion of the Pannone transaction later this month we will have secured approximately 5% market share in the UK claim PI market and have built a strong base for future growth and development."
He went on the reaffirm the company's FY14 guidance:
- Total group revenue of $395 million, including acquired businesses [FY13: $297.6 million]
- Group EBITDA margin of 24% – 25% [FY13: 20.5%]
- Group cash from operations (as a % of NPAT) of more than 70% [FY13: 78%]
Foolish takeaway
My most recent portfolio addition was Slater & Gordon. It, along with other listed legal services companies such as Shine Corporate Ltd (ASX: SHJ) and Bentham IMF Ltd (ASX: IMF) continue to provide impressive growth metrics and have a large runway for success.
Slater & Gordon will continue to grow both domestically and abroad. It recently fell 5% in value following the noise surrounding the S&P/ASX200 Index (ASX: XJO) (^AXJO), and I took the opportunity to add some shares to my personal collection. However, I still believe it holds exceptional long-term potential for investors at current prices. At midday, shares are trading 3.3% higher.
