SHINE JUSTICE LTD — Annual Report 2021

Aug 26, 2021

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27 August 2021

Shine Justice Ltd (SHJ) 2021 Annual Report

Attached for immediate release to the market is Shine Justice Ltd’s 2021 Annual Report.

Authorised for release by the Board

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Annette O’Hara Company Secretary Shine Justice Ltd

Tel: 07 3837 9448 aohara@shine.com.au

For more information

Simon Morrison, Managing Director & CEO - Shine Justice Ltd 07 3837 9435 Ravin Raj, Chief Financial Officer - Shine Justice Ltd 07 3006 6050

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2021 Annual Report Shine Justice Ltd | ABN 93 162 817 905

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Celebrating 45 Y E A R S

2021 Annual Report

2

ACKNOWLEDGEMENT OF COUNTRY

Shine Justice acknowledges the Traditional Custodians of country throughout Australia and their connections to land, sea and community.

We pay our respects to Aboriginal and Torres Strait Islander cultures and to Elders past, present and emerging.

Shine Justice Ltd 3

OUR PURPOSE

Shine a light on injustice and make the world a better place, one client at a time.

2021 Annual Report

4

VALUES

Always stand up for the little guy

We stand up for the underdog, giving a voice to those who would otherwise be unheard.

We are tenacious and never, ever give up.

We pride ourselves on not shying away from the tough cases.

Dare to be different

We are not your typical law firm, we follow our own path.

We believe the impossible can be achieved.

We challenge the status quo in our pursuit of justice for our clients.

Ahead of the pack

We look to the future for tomorrow’s opportunities.

We pioneer new ways.

We are leaders rather than followers.

Shine Justice Ltd 5

Celebrating 45 YEARS

OF STANDING UP FOR EVERYDAY PEOPLES’ RIGHTS

7,000+

CLIENT MAT TERS SET TLED IN F Y21

56

BR ANCHES ACROSS AUSTR ALIA AND NEW ZEAL AND

978

TEAM MEMBERS

$900m+

IN DAMAGES FOR OUR CLIENTS IN F Y21

6 2021 Annual Report

CONTENTS

FY21 in review	7
Letter from the Chairman	8
Directors’ Report	13
Remuneration Report	18
Auditor’s Independence Declaration	40
Environmental, Social and Governance (ESG) Performance	42
Corporate Governance Statement	44
Financial Report	56
Directors' Declaration	152
Independent Auditor’s Report	153
Shareholder Information	160
Glossary	163
Corporate Directory	165

Shine Justice Ltd 7

FY21 in review

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FY21 FY20 Variance %
Total Revenue $193.65m $183.03 5.80%
Net Profit After Tax (NPAT) $25.59m $21.55m 18.75%
Net Profit Before Tax (NPBT) $36.91m $32.19m 14.66%
Earnings Before Interest and Tax (EBIT) [1] $43.27m $39.10m 10.66%
Earnings Before Interest, Tax, Depreciation and Amortisation
$56.16m $51.15m 9.79%
(EBITDA) [2]
Underlying EBITDA [3] $47.44m $42.52m 11.57%
Net Operating Cash Flow (NOCF) $49.08m $24.75m 98.27%
Gross Operating Cash Flow (GOCF) [4] $54.65m [5] $34.56m 58.13%
Final Dividend (cents per Share) 3.25 2.75 18.18%
Interim Dividend (cents per Share) 2.00 1.50 33.33%
Total Dividend (cents per Share) 5.25 4.25 23.53%
Earnings Per Share (EPS - cents) 14.75 12.40 18.95%
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1 EBIT is not an IFRS calculation which appears in the Financial Report and accordingly, has not been audited.

2 EBITDA is not an IFRS calculation which appears in the Financial Report and accordingly, has not been audited. The adoption of AASB 16 Leases on 1 July 2018 had an impact on EBITDA, resulting in previously reported operating leases now disclosed below EBITDA as a combination of depreciation and interest.

3 Excluding impact of AASB 16 Leases .

4 GOCF is not an IFRS calculation which appears in the Financial Report and accordingly, has not been audited. GOCF is equal to NOCF with interest, finance costs and income tax cash flows removed.

5 Includes fees of $20.91m, excluding GST, received in respect of the Mesh Class Action in December 2020, in respect of which the decision of the High Court of Australia is awaited.

8 2021 Annual Report

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Letter from the Chairman

Graham Bradley AM

Dear Shareholders,

Milestone achievements

I am pleased to present the Annual Report of Shine Justice Ltd for the financial year to 30 June 2021, the year in which we celebrated our 45th anniversary.

This was a year of continued growth for the Group, in which we expanded our team and resolved more than 7,000 cases for our clients, securing damages in excess of $900 million.

COVID-19 continued to bring challenges for our business and for the entire community, including our people, who demonstrated unwavering commitment to our business and our values and continued to produce outstanding outcomes for our clients.

We expanded our team and resolved more than 7,000 cases for our clients, securing damages in excess of $900 million.

The Group achieved a number of significant milestones in FY21.

Our successful outcome in court proceedings relating to faulty prolapse mesh and tape implants, one of Australia’s largest product liability class actions, was upheld unanimously on appeal by the Full Court of the Federal Court of Australia. The appellants have applied for special leave to appeal the decision in the High Court of Australia, their final avenue of appeal. We will vigorously oppose any appeal. If ultimately successful, the litigation is expected to deliver justice for many thousands of Australian women left with life altering complications from the defective implants.

During the year we filed a second class action against the same defendants on behalf of women implanted after 4 July 2017 with defective mesh products, as well as a class action against pelvic mesh manufacturer, Boston Scientific.

Full Federal Court of Australia unanimously upholds successful outcome for victims of faulty prolapse implants. Class Actions Practice Leader, Rebecca Jancauskas.

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Letter from the Chairman

Shine Justice Ltd 9

We settled a class action against Westpac Banking Corporation and Westpac Life Insurance Services Limited in relation to financial advice about, and the sale of, allegedly overpriced life insurance products.

Class actions have also been filed on behalf of:

• the Wreck Bay Aboriginal community whose culturally significant land has been contaminated by toxic PFAS chemicals;

• passengers and families affected by the deadly outbreak of coronavirus on board the Ruby Princess cruise ship;

• Indigenous workers who were forced to work in slave-like conditions for minimal or no pay in Western Australia and the Northern Territory;

• Stolen Generation survivors in the Northern Territory;

• workers subject to sham contracting arrangements; and

We extended our abuse practice, which has experienced significant growth, into South Australia where we are fighting for justice for survivors abused in detention.

Our Dust Diseases team is continuing to lead the way in compensation claims for Australian workers suffering from silicosis, a serious and potentially deadly lung disease impacting miners, stonemasons and construction and tunnelling industry workers. Our team has been at the forefront of pioneering compensation outcomes for silica induced autoimmune diseases, including scleroderma, rheumatoid arthritis and lupus. We welcomed the release of the National Dust Disease Taskforce’s final report, containing recommendations including a licensing scheme to restrict access to engineered stone to businesses demonstrating ability to effectively manage silica exposure risk, one of a number of key measures initiated and actively lobbied for by our Dust Diseases team.

• insurance customers who received unethical financial advice.

We settled our first Super Online claim, after extending our online model to include our Disability and Superannuation practice, and are expanding our online booking tool.

Our team has been at the forefront of pioneering compensation outcomes for silica induced autoimmune diseases.

Our Head of People & Culture, Dustin Cherry, accepts our first Indigenous art purchase from artist Dhuril Blades at a ceremony celebrating National Reconciliation Week 2021 at Tiddalac.

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Letter from the Chairman

10 2021 Annual Report

The Shine A Light Foundation awarded a $15,000 grant to the Indigenous Literacy Foundation.

5.25 cents per Share, compared with 4.25 cents per Share in FY20, an increase of 23.5 percent. Dividend distribution was 35.6 percent of NPAT, in line with our stated distribution policy.

Other significant matters

Financial performance

The Group achieved earnings before interest, tax, depreciation and amortisation (EBITDA) of $56.16 million, compared with $51.15 million in the previous year, an increase of 9.8 percent. Underlying EBITDA (excluding the impact of AASB 16 Leases , adopted from 1 July 2018), was $47.44 million, compared with $42.52 million in the previous year, an increase of 11.6%.

Net profit after tax (NPAT) of $25.59 million compared with $21.55 million previously, up 18.8 percent. Gross operating cash flow (GOCF) of $54.65 million represents a solid outcome for the Group. It includes an amount of $20.91 million (excluding GST) received in respect of work in progress on the Mesh Class Action, in respect of which we await the High Court’s decision.

The Directors are pleased to declare a final dividend of 3.25 cents per Share (unfranked). When added to the 2 cents per Share unfranked interim dividend declared in February 2021, dividends for the year totalled

To coincide with Close the Gap Day in March this year, we were proud to launch our first Reconciliation Action Plan, setting out actions to be taken to create a more inclusive business and build strong, respectful and mutually beneficial relationships that create opportunities for Aboriginal and Torres Strait Islander peoples, whilst recognising the unique contribution they make to our shared culture and heritage.

Shine Lawyers has entered into a partnership with LifeFlight Australia, a strongly purpose driven organisation which saves lives by delivering emergency medical care to seriously ill and injured people throughout Queensland. We will be the Founding Partner of the ‘First Minutes Matter’ trauma training program which will equip people with practical skills for time-critical medical situations where professional help is still on the way.

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Shine ambassador Erin Brockovich.
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Jamie Shine, General Manager – Head Trauma participating in Dancing CEOs to raise funds for the Women’s Legal Service.

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Letter from the Chairman

Shine Justice Ltd 11

The Group’s philanthropic initiative, the Shine A Light Foundation, awarded a $15,000 grant to new charity partner, the Indigenous Literacy Foundation, a national book industry charity dedicated to lifting literacy levels in remote Indigenous communities, so all children across Australia have the same choices and opportunities.

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In July 2020, I was delighted to assume the role of Shine’s Chairman, following the appointments of Teresa Dyson and David Bayes to the Board in February 2020 and my appointment in May 2020. In December 2020, our Board renewal process was completed with the appointment of Rod Douglas, an experienced company director with a specialisation in culture, strategy and organisational value.

I would like to take this opportunity to thank my fellow Directors for their valuable contribution to the Group. We continue to benefit from the skills and experience consistently provided by our dedicated Board.

Conclusion

Over the past year, the Group’s leadership team has continued to strengthen, supporting our capability at all levels of the organisation to deliver consistent, highquality service across all work types and regions.

With a strong leadership team, ably led by Managing Director & CEO Simon Morrison, and the dedication of our highly engaged people, I am confident that Shine is well placed for future success.

Thank you for your ongoing support.

We are improving our systems and processes with the aim of improving efficiencies and consistency, as well as further integrating our brands under the Shine Justice banner.

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Graham Bradley AM Chairman 27 August 2021

Our leadership embeds a culture within the Group that respects our 45 year history, embraces our values and inspires high performance. We are grateful to our talented team members for their resilience and dedication.

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Our lawyers admitted to practice.
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12 2021 Annual Report

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Shine Justice Ltd 13

Directors’ Report

Your Directors present their report for the Financial Year ended 30 June 2021.

The Directors during the Financial Year were:

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Director Position Appointment
Graham Bradley AM Independent Chairman 1 July 2020 to present
Non-executive Director 28 May 2020 to present
Teresa Dyson Non-executive Director 28 February 2020 to present
David Bayes Non-executive Director 28 February 2020 to present
Rod Douglas Non-executive Director 11 December 2020 to present
Simon Morrison Managing Director & CEO 13 March 2013 to present
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Meetings of Board and Committees

The numbers of Board and Committee meetings held and the numbers attended by each Director during the Financial Year are listed below.

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Director Board Audit & Risk Nomination and
Management Remuneration
Committee Committee
Held Attended Held Attended Held Attended
Graham Bradley AM 9 9 6 6 4 4
Teresa Dyson 9 9 6 6 4 4
David Bayes 9 9 6 6 4 4
Rod Douglas [1] 6 6 3 3 (invitee) 2 2 (invitee)
Simon Morrison [2] 9 9 6 6 (invitee) 4 4 (invitee)
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• 1 The number of meetings indicated as held for Rod Douglas are those meetings held from the date of his appointment as Director (11 December 2020), including attendance as an invitee on the date of his appointment.

• 2 Simon Morrison attends Committee meetings as an invitee but does not attend during any discussions about his remuneration or other material personal interests.

14 2021 Annual Report

Directors’ Report

Board of Directors

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Graham Bradley AM BA, LLB (Hons 1), LL.M (Harvard), FAICD

Graham joined the Board in May 2020 as a Non-executive Director and was appointed Chairman of Directors on 1 July 2020.

Graham is an experienced company director and chairman. He is currently Chairman of United Malt Group Limited, EnergyAustralia Holdings Ltd and Volt Corporation Limited and its subsidiaries (including Volt Bank Limited). He is also a Director of The Hongkong & Shanghai Banking Corporation Limited, Chairman of Infrastructure NSW and a member of the Board of Tennis Australia.

Graham’s previous roles include Managing Director of Perpetual Limited, National Managing Partner and CEO of Blake Dawson (now Ashurst), a senior role at McKinsey & Company, Chairman of Stockland Corporation Limited, Chairman of HSBC Australia Limited, President of the Business Council of Australia and Deputy President of the Takeovers Panel.

In addition to his role as Chairman of the Board, Graham chairs the Nomination and Remuneration Committee and is a member of the Audit & Risk Management Committee.

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Teresa Dyson BA, LLB (Hons), MTax, MAppFin, GAICD

Teresa joined the Board as a Non-executive Director in February 2020.

Teresa is an experienced company director, whose career has spanned both the public and private sectors. Teresa is an admitted lawyer and has previously been a partner at a global law firm and professional services firm.

Teresa is currently a Director and Chair of the Audit and Risk Committee of Seven West Media Limited, Director and Chair of the Audit & Risk Management Committee of Genex Power Limited, Director of Northern Territory Power and Water Corporation, Energy Queensland, National Housing Finance and Investment Corporation, Gold Coast Hospital and Health Board, and the Foundation for Alcohol Research and Education and a member of the Foreign Investment Review Board and the Takeovers Panel. Teresa was a Director of Energy Super until its merger with LGIAsuper on 1 July 2021, following which she became a director of LGIAsuper. She is a former Director of UN Women National Committee Australia Ltd and Opera Queensland and a former Chair of each of the Board of Taxation and the Business Law Section of the Law Council of Australia.

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David Bayes FAICD

David joined the Board as a Non-executive Director in February 2020.

David is Chairman of Plarre Foods Pty Ltd (trading as Ferguson Plarre Bakehouses). He has previously held a variety of board and executive positions, including Non-executive Director of Sigma Healthcare Limited, Chief Executive Officer of Choice Hotels Australasia, Chief Operating Officer of Mortgage Choice Limited, Chief Executive Officer and Director of Bakers Delight, Non-executive Director of Chiquita Brands South Pacific Ltd and North Western Healthcare Network and Vice President and Director of McDonald’s Australia.

David is a former Director of the Australian Institute of Company Directors (AICD) and past President of the Victoria Council of the AICD.

David has over 40 years’ experience in multi-outlet retail business.

Special responsibilities include membership of the Audit & Risk Management and the Nomination and Remuneration Committees.

Special responsibilities include Chair of the Audit & Risk Management Committee and member of the Nomination and Remuneration Committee.

Other Australian listed company directorships held in the past three years:

GrainCorp Limited (March 2017 - March 2020) and United Malt Group Limited (March 2020 – present).

Other Australian listed company directorships held in the past three years:

Consolidated Tin Mines Ltd (January 2019 – January 2020), Seven West Media Limited (November 2017 – present) and Genex Power Limited (May 2018 – present).

Other Australian listed company directorships held in the past three years:

Sigma Healthcare Limited (June 2007 – May 2021).

Directors’ Report

Shine Justice Ltd 15

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Rod Douglas MBA, FAICD

Rod joined the Board as a Non-executive Director in December 2020.

Rod is an experienced company director with a specialisation in working with owner led businesses over the last 30 years. He focuses strongly on culture, strategy and organisational value through a governance lens. Rod’s broad experience covers property, financial services, professional services, agriculture, retail and marketing. He is a director of a number of private companies, and chairs the advisory board for two significant family businesses.

Rod holds a Master of Business Administration from Bond University, is a Foundation Fellow of the Australian Institute of Company Directors and is a Vincent Fairfax Fellow in Ethical Leadership.

Rod has a standing invitation to attend meetings of the Audit & Risk Management and Nomination and Remuneration Committees.

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Simon Morrison LLB

Simon became the Managing Director of Shine in 2012, after joining Shine Lawyers in 1988 and becoming a partner of the firm in 1995.

Simon is a former National President of the Australian Lawyers’ Alliance (ALA), chaired the ALA’s National Workers Compensation Special Interest Group and sits on the Board of Governors of the American Association of Justice. Simon has particular expertise in and is an acknowledged leader in workers’ compensation and is a Queensland Law Society Accredited Specialist in personal injury law. He has given evidence at numerous government inquiries, has assisted in drafting legislation and is a regular speaker at national and state conferences in this field.

Simon contributes skills and expertise to the Board including executive management of a listed company, strategy, industry experience, strategic marketing and policy, regulation and stakeholder management.

Simon is Shine’s Managing Director & CEO. He has a standing invitation to attend meetings of the Audit & Risk Management and Nomination and Remuneration Committees, but does not participate in any discussions in relation to his own remuneration.

Other Australian listed company directorships held in the past three years: None other than Shine.

Other Australian listed company directorships held in the past three years: None other than Shine.

16 2021 Annual Report

Directors’ Report

Management Team

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Chief Financial Officer

Company Secretary

Ravin Raj

BCom, ACA, FFin, GAICD

Ravin joined the Group as Chief Financial Officer, with responsibility for the financial direction of the Group, in November 2016.

Ravin has extensive experience in the finance, professional services and construction industries, having commenced his career at accounting firm Touche Ross & Co before joining Watpac Limited, where he held the position of CFO for nearly two decades. Ravin is also experienced in acquisition due diligence and valuation, taxation and debt financing.

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Chief Operating Officer

Jodie Willey LLB (Hons)

Jodie has worked at Shine for over 26 years, holding senior leadership and national level roles, including Chief Executive Officer at the time of Shine Justice’s listing on ASX.

Jodie is an Accredited Specialist in personal injury law and is highly experienced in all areas of personal injuries law. She was appointed Chief Operating Officer in December 2019, initially supporting the Managing Director & CEO by leading shared services teams, with her role and responsibility expanding during FY21.

Prior to Jodie’s appointment as Chief Operating Officer, she led the Innovation team which delivered our first innovation project in May 2019 – an online legal platform servicing small Queensland motor vehicle claims under separately branded law firm Claimify.

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National Practice Leader

Lisa Flynn LLB, B Com (Hons 1)

Lisa joined Shine Lawyers as an articled clerk almost 22 years ago and now holds the position of National Practice Leader for the Group, overseeing all legal teams across the business.

Lisa has a passion for and deep understanding of Shine’s business, its clients and its people. Having gained experience in a variety of roles and practice areas, Lisa is an influential leader who brings out the best in our people by living and breathing Shine’s values.

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General Counsel Company Secretary

Annette O’Hara BA, LLB (Hons 1), LLM, FGIA

Annette joined the Group in August 2016 as Senior Legal Counsel and was appointed General Counsel and Company Secretary in February 2017.

Previously, Annette had extensive experience as a senior corporate lawyer at national law firm Corrs Chambers Westgarth, advising a wide range of listed and unlisted companies in relation to regulatory, governance and general commercial matters.

Lisa is a highly regarded expert in abuse law and has been active in lobbying government for change in line with the recommendations of the Royal Commission into Institutional Responses to Child Sexual Abuse. She is often sought to provide expert commentary in national media and legal publications and has spoken internationally. Her commitment to legislative reform in this vital area is driven by her desire to better protect Australian children.

Shine Justice Ltd 17

18 2021 Annual Report

Remuneration Report

The Directors present the Shine Justice Ltd 2021 remuneration report, outlining key aspects of our remuneration policy and framework and remuneration awarded this year.

The report is structured as follows:

a)	Key management personnel (KMP) covered in this report	19
b)	Remuneration policy and link to performance	20
c)	Elements of remuneration	21
d)	Link between remuneration and performance	24
e)	Remuneration expenses for executive KMP	26
f)	Contractual arrangements with executive KMP	27
g)	Non-executive Director arrangements	28
h)	Additional statutory information	30

Shine Justice Ltd 19

Remuneration Report

a) Key management personnel (KMP) covered in this report

Non-executive and executive Directors (see pages 14 and 15 for details about each Director)

Graham Bradley AM (appointed Chairman from 1 July 2020)

David Bayes

Teresa Dyson

Rod Douglas (from 11 December 2020)

Simon Morrison (Executive Director)

Other key management personnel

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Name Position
Ravin Raj Chief Financial Officer (CFO) and Joint Company Secretary
Jodie Willey Chief Operating Officer (COO) (from 1 October 2020)
Lisa Flynn National Practice Leader (NPL) (from 1 October 2020)
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There have been no changes since the end of the reporting period.

20 2021 Annual Report

Remuneration Report

b) Remuneration policy and link to performance

The Nomination and Remuneration Committee is made up of independent Non-executive Directors. The Committee reviews and determines remuneration policy and structure annually to ensure it remains aligned to business needs and applies general remuneration principles. In particular, the Committee aims to ensure that remuneration practices are:

• competitive and reasonable, enabling the Company to attract and retain key talent

• aligned to the Company’s strategic and business objectives and the creation of shareholder value

• transparent and easily understood, and

• in the interests of shareholders.

Balancing short-term and long-term performance

Annual incentives are set to drive annual performance without encouraging undue risk-taking.

Long-term incentives are assessed over a three-year period and are designed to promote retention of key staff as well as alignment with shareholders.

The target remuneration mix for FY21 reflects the:

• Short-term incentives (STI) opportunity for the current year that is available if the performance conditions are satisfied, and

• the value of the Long-Term Incentive Plan (LTIP) Performance Rights granted during the year.

Figure 1

Remuneration framework FY21

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Element Purpose Performance Potential value Changes in FY21
metrics
Fixed remuneration Provide competitive Nil Positioned at median Reviewed in line with
(FR) market salary market rate market positioning
including
superannuation and
non-monetary
benefits
STI Reward for in-year CFO: CFO: $100,000 General company
performance General company performance
performance: 30% weighting reduced
from 40% to 30%
Operational
performance: 50% Operational
performance
People: 20%
weighting increased
from 40% to 50%
LTI Alignment to long- EPS growth: 50% Executive KMP: Replaced the relative
term shareholder Cumulative annual 30% of FR TSR (RTSR) hurdle
value TSR: 25% with cumulative
annual TSR
Strategic Objectives:
25% New Strategic
Objectives hurdle
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Shine Justice Ltd 21

Remuneration Report

Assessing performance and claw-back of remuneration

The Nomination and Remuneration Committee is responsible for assessing performance against KPIs and determining the STI and LTI to be paid to executive KMP. To assist in this assessment, the Committee receives detailed reports on performance from management which are based on independently verifiable data such as financial measures and data from independent surveys.

Unvested Performance Rights may be cancelled and STI payments withheld in the event of unacceptable conduct.

c) Elements of remuneration

(i) Fixed annual remuneration (FR)

Executives may receive their fixed remuneration as:

• cash, or

• cash with non-monetary benefits such as car allowances, motor vehicle and car parking benefits.

FR is reviewed annually, or on promotion. It is benchmarked against market data for comparable roles in companies in a similar industry and with similar market capitalisation. The Nomination and Remuneration Committee aims to position executives at or near the median, with flexibility to take into account capability, experience, value to the organisation and performance of the individual.

For the executive KMP, superannuation is included in FR.

22 2021 Annual Report

Remuneration Report

(ii) Short-term incentives

Figure 2

Structure of the FY21 STI plan

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Feature Description
Max opportunity CFO: $100,000
Performance metrics The STI metrics align with the Company’s strategic priorities of market competitiveness,
operational excellence, shareholder value and fostering talented and engaged people.
Metric Weighting Reason for selection
General company performance 30%
1. Performance against guidance 10% Reflects improvements in both
revenue cost control and cash
2. Rate of cash conversion 10% management
3. Exceed banking covenants 10%
Operational performance 50%
1. Disbursement funding processes 15%
2. File acquisition support 5% Reflects improvement in
processes which will support
3. Reduce write-offs 10% Shine’s growth strategy
4. Rental decrease on premises 5%
5. Financial improvements to Class Actions 15%
People 20% Supports corporate culture and
values.
1. Department turnover 10% Reducing staff turnover will
2. Culture and values 10% reduce costs and hence improve
EBITDA
Delivery of STI 100% of the STI which is determined to be payable will be paid in cash in September 2021.
Board discretion As part of the eligibility criteria for an STI payment, there are a number of behavioural
expectations. Failure to comply will result in a deduction from the STI payment, which is
subject to Board approval.
Max opportunity COO and NPL: No specific maximum STI was agreed for FY21. A specific maximum STI will
be agreed for FY22.
Performance metrics Contribution by the COO and the NPL to the success of the business in FY21 in their
respective roles, including the achievement of agreed strategic objectives.
Delivery of STI 100% of the STI which is determined to be payable will be paid in cash in September 2021.
Board discretion As part of the eligibility criteria for an STI payment, there are a number of behavioural
expectations. Failure to comply will result in a deduction from the STI payment, which is
subject to Board approval.
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Shine Justice Ltd 23

Remuneration Report

(iii) Long-term incentives

Executive KMP participate in the LTIP comprising annual grants of Performance Rights which are subject to a 3-year cumulative annual TSR performance, EPS growth condition and Strategic objectives. Further detail is shown in figure 3 below:

Figure 3

Structure of the FY21 LTIP

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Feature Description
Opportunity/Allocation Executive KMP (other than the Managing Director & CEO): 30% of fixed remuneration
Performance hurdle Cumulative annual TSR is assessed over 3 years to the end of FY23.
– TSR This is designed to focus executives on delivering sustainable long-term shareholder returns.
(25% weighting)
TSR Proportion to vest
Less than 7% 0%
Between 7% and 10% Pro rata vesting between 50% and 100% (on a
straight line basis)
At or above 10% 100%
Performance hurdle EPS growth is assessed over 3 years to the end of FY23. Vesting will occur based on the
– EPS Growth Company’s average annual growth. This is designed to focus executives on delivering
(50% weighting) sustainable long-term shareholder returns.
EPS Growth Proportion to vest
Less than 7% annual growth 0%
Between 7% and 10% annual growth Pro rata vesting between 50% and 100% (on a
straight line basis)
At or above 10% annual growth 100%
Performance hurdle Strategic objectives are achieved over 3 years to the end of FY23 relating to the following five
– Strategic Objectives categories:
(25% weighting, 1. Clients
5% in each category) 2. Team members
3. Growth
4. Financial strength
5. Innovation
Rights vest subject to achievement of the strategic hurdles set out above, with straight line
vesting of 50% - 100% in each category if the objectives are determined by the Board to be
substantially (at least 75%) achieved.
Vesting Performance Rights are granted under the LTIP for no consideration and carry no dividend or
voting rights. When vested, each right converts into one Share. The vesting price on which the
number of rights granted is based is the weighted average price at which the Company’s
shares are traded on the ASX on 15 days before plus 15 days after the release of the Shine
Justice Annual Report in the financial year to which they relate.
Forfeiture and The Performance Rights will lapse if performance conditions are not met. Rights will be
termination forfeited on cessation of employment unless the Board determines otherwise, eg in the case of
retirement due to injury, disability or death.
Board discretion The Board retains discretion to adjust the performance measures if warranted by relevant
circumstances at the time of vesting. The Board may also cancel some or all of individual
Performance Rights on the basis they constitute an inappropriate benefit to the KMP due to
any unacceptable conduct, including fraud or dishonesty or acting in a manner which brings
the Shine Group into disrepute.
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Due to his substantial shareholding in the Company, the Managing Director & CEO Simon Morrison does not participate in the LTIP.

24 2021 Annual Report

Remuneration Report

d) Link between remuneration and performance

The Group’s performance in FY21 continued to grow despite the relatively limited impact from COVID-19 on the operations of the Group.

The Board awarded the CFO 62.5% of the $100,000 maximum short-term incentive on the basis that KPIs were partly, but not fully, achieved.

As a reward for their significant contributions to the business in FY21, the Board awarded the COO and the NPL a bonus of $60,000 each.

Executive KMP (other than Simon Morrison) also received benefits in the form of Shares resulting from the vesting of the FY18 Performance Rights after satisfaction of the performance conditions. These equity instruments had been granted under the LTIP in a prior year.

Figure 4

Performance against key measures and impact on variable remuneration

==> picture [512 x 464] intentionally omitted <==

----- Start of picture text -----

Metric Impact on incentive award
STI 62.5% of maximum STI awarded to the CFO
General company performance
1. Performance against budget Not achieved
2. Rate of cash conversion Not achieved
3. Exceed banking covenants Achieved in full
Operational performance
1. Disbursement funding processes Achieved in full
2. File acquisition support Achieved in full
3. Reduce write-offs Not achieved
4. Rental decrease on premises Achieved in part
5. Financial improvements to Class Actions Achieved in part
People
1. Department turnover Achieved in full
2. Culture and values Achieved in full
LTI Vesting of FY18 LTIP in FY21
3-year RTSR 100% vesting
3-year EPS 0% vesting
Not achieved Achieved in part Achieved in full
----- End of picture text -----

Shine Justice Ltd 25

Remuneration Report

Statutory performance indicators

Figure 5 below shows measures of the Group’s financial performance over the last five years as required by the Corporations Act.

Figure 5

Statutory key performance indicators of the Group over the last five years

==> picture [512 x 208] intentionally omitted <==

----- Start of picture text -----

2021 2020 2019 2018 2017
Profit for the year attributable to owners of 25,556 21,476 13,953 19,113 20,155
Shine Justice Ltd ($’000)
Basic earnings per share (cents) 14.8 12.4 8.1 11.0 11.6
EBITDA ($’000) [1] 56,157 51,150 47,436 37,722 36,492
GOCF ($’000) [2] 54,650 34,561 31,252 21,872 19,184
Dividend payments ($’000) 8,230 6,928 6,061 5,195 5,638
Dividend payout ratio (%) [3] 32.2 32.3 43.4 27.2 28.0
Increase/(decrease) in share price (%) +41.6 +15.8 -31.4 +76.4 -48.6
----- End of picture text -----

1 Earnings before interest, tax, depreciation and amortisation (EBITDA) is not an IFRS calculation which appears in the Financial Report and accordingly, has not been audited.

2 Gross Operating Cash Flow (GOCF) is not an IFRS calculation which appears in the Financial Report and accordingly, has not been audited.

3 The dividend payout ratio is calculated based on dividends actually paid during the year and profit for the year.

26 2021 Annual Report

Remuneration Report

e) Remuneration expenses for executive KMP

The following table shows details of the remuneration expense recognised for the Group’s executive key management personnel for the current and previous financial year measured in accordance with the requirements of the accounting standards.

Figure 6

Executive remuneration

==> picture [512 x 407] intentionally omitted <==

----- Start of picture text -----

Fixed remuneration Variable remuneration
Name Year Salary [1] Non- Annual Post- Cash Rights Share Total Performance
monetary & long employment bonus granted [4] based related (%)
benefits service benefits [3] payments
leave [2]
Executive Director
Simon FY21 489,288 25,299 27,886 21,694 - - - 564,167 -
Morrison
FY20 489,288 25,324 34,291 21,003 - - - 569,906 -
Other Executive KMP
Ravin Raj FY21 413,427 10,857 20,642 21,694 62,500 95,877 - 624,997 25%
FY20 401,475 10,882 20,960 21,003 75,000 68,583 - 597,903 24%
Jodie Willey FY21 258,923 9,532 19,053 15,876 60,000 37,351 - 400,735 24%
(from 1 Oct
2020) FY20 - - - - - - - - -
Lisa Flynn FY21 258,923 - 26,371 15,876 60,000 50,813 - 411,983 27%
(from 1 Oct
2020) FY20 - - - - - - - - -
Cath Evans FY21 - - - - - - - - -
(resigned 27
Nov 2019) FY20 600,080 [5] 5,003 (20,211) 21,003 - (843,093) [6] 73,000 [7] (164,218) -
Total FY21 1,420,561 45,688 93,952 75,140 182,500 184,041 - 2,001,882
executive
KMP FY20 1,490,843 41,209 35,040 63,009 75,000 (774,510) 73,000 1,003,591
Total NED FY21 408,229 - - 51,655 - 175,392 - 635,276
remuneration
(see Figure 7) FY20 472,459 - - 44,883 - - - 517,342
Total KMP FY21 1,828,790 45,688 93,952 126,795 182,500 359,433 - 2,637,158
expense
FY20 1,963,302 41,209 35,040 107,892 75,000 (774,510) 73,000 1,520,933
----- End of picture text -----

1 Short-term benefits as per Corporations Regulation 2M3.03 (1) Item 6.

2 Other long-term benefits as per Corporations Regulation 2M.3.03(1) Item 16.8. The amounts disclosed in this column represent the increase in the associated provisions.

3 Post-employment benefits are provided through a defined contribution superannuation plan. The amounts disclosed as remuneration represent the superannuation guarantee contribution made by the Company.

4 Performance Rights granted under the current FY19-FY21 LTIP are expensed over the performance period, which includes the year to which the rights relate and NED Equity Plan rights for FY21 and FY22 granted in FY21.

5 $600,080 in total salary paid, $270,080 in her role as GCOO until resignation on 27 November 2019, and $330,000 relating to the contractual six-month notice period, which represents a termination benefit in accordance with AASB 119.

6 Cath Evans resigned on 27 November 2019. This amount represents the forfeiture of Performance Rights on termination.

• 7 100,000 Shares issued on 14 November 2019.

Shine Justice Ltd 27

Remuneration Report

f) Contractual arrangements with executive KMP

==> picture [512 x 168] intentionally omitted <==

----- Start of picture text -----

Component Managing Director & CEO Other executive KMP
Fixed remuneration $564,167 Range between $290,000 and $470,000
Contract duration Ongoing contract Ongoing contract
Notice of termination by the individual/ 6 months 3 months
Company (without cause)
Termination of employment (with cause) No notice No notice
Termination except in limited STI is not awarded and all unvested LTI will lapse
circumstances (eg death or disability)
----- End of picture text -----

28 2021 Annual Report

Remuneration Report

g) Non-executive Director arrangements

Non-executive Directors receive a board fee, see table below. They do not receive performance-based pay or retirement allowances. Superannuation is paid in addition to the fees.

There are no additional fees payable for chairing or being a member of a Board committee.

Fees are reviewed annually by the Board taking into account comparable roles. The current base fees were reviewed with effect from 1 July 2020.

The maximum annual aggregate Directors’ fee pool limit is $700,000 (including superannuation) and was approved by shareholders at the annual general meeting on 24 October 2019. The amount paid (including superannuation) in FY21 was $635,276 of which $558,652 falls under the Directors' fee pool limit, which excludes any value attributed to the NED Rights.

==> picture [511 x 74] intentionally omitted <==

----- Start of picture text -----

Base fees per annum (excluding superannuation) From 1 July 2020
Chairman $250,000
Other Non-executive Directors $120,000
----- End of picture text -----

All Non-executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including remuneration, relevant to the office of Director.

Figure 7

Non-executive Director remuneration

==> picture [512 x 369] intentionally omitted <==

----- Start of picture text -----

Name Year Fees Rights Super- Total
granted annuation
$ $ $ $
Graham Bradley AM FY21 181,790 85,221 22,941 289,952
(appointed Chairman on FY20 11,147 - 1,059 12,206
1 July 2020)
Teresa Dyson FY21 96,069 23,729 11,400 131,198
FY20 40,656 - 3,862 44,518
David Bayes FY21 98,625 18,983 11,351 128,959
FY20 40,656 - 3,862 44,518
Rod Douglas FY21 31,745 47,459 5,963 85,167
(appointed 11 December 2020) FY20 - - - -
Tony Bellas, Chairman FY21 - - - -
(retired 30 June 2020) FY20 180,000 - 17,100 197,100
Greg Moynihan FY21 - - - -
(retired 30 June 2020) FY20 120,000 - 11,400 131,400
Carolyn Barker FY21 - - -
(retired 28 February 2020) FY20 80,000 - 7,600 87,600
Total Non-executive Director FY21 408,229 175,392 51,655 635,276
remuneration
FY20 472,459 - 44,883 517,342
----- End of picture text -----

Shine Justice Ltd 29

Remuneration Report

Non-executive Director (NED) Equity Plan

In November 2020, the Board adopted the NED Equity Plan, under which the Non-executive Directors may increase their holdings of Shares in Shine Justice Ltd in order to share in the growth of the business and more closely align their interests with those of shareholders. The NED Equity Plan supports the Board’s policy that Directors should be encouraged to accumulate a shareholding equivalent in value to their annual Directors’ fees over a three-year period.

The NED Equity Plan provides for Non-executive Directors to sacrifice a percentage of their fees over an agreed period and to be granted rights to acquire a number of Shares reflecting the amount to be sacrificed over the period. The participating Directors fees are reduced in equal amounts each fortnight during the participation period. NED Rights are granted for no consideration at the beginning of the period during which salary sacrifices are made and vest into Shares at the end of that period.

The NED rights have been classified by the ASX as a separate class – Salary Sacrifice Rights. This class is now separate from the class of Performance Rights issued under the Company’s Performance Rights Plan (LTIP).

For the FY21 NED Rights granted on 18 December 2020, the price on which the number of granted NED Rights was calculated was the volume weighted average closing price of Shares on the ASX on the 15 trading days before, and the 15 trading days commencing on, the date of adoption of the NED Plan by the Board (9 November 2020), being $0.88. The fair value of $0.87 is lower due to no entitlement to dividends over the service period.

For the FY22 Rights granted on 30 June 2021, the price on which the number of granted NED Rights was calculated was the volume weighted average closing price Shares on the ASX on the 15 trading days before, and the 15 trading days commencing on, the date of the offer (1 June 2021), being $0.96. The fair value of $0.91 is lower due to no entitlement to dividends over the service period.

On vesting of NED Rights, the participating Director will be allocated a number of Shares purchased on market, equivalent to the number of vested NED Rights held by the Director. Shares allocated or transferred to Non-executive Directors following vesting will be subject to a Disposal Restriction until the earlier of the date of the Non-executive Director’s retirement from the Board and 15 years after allocation of transfer of the Shares. While the Disposal Restriction applies, the Non-executive Directors will not be permitted to dispose of their Shares.

If a participating Director retires from the Board prior to the vesting of NED Rights, pro-rata vesting or a repayment of sacrificed fees may occur and disposal restrictions will cease to apply. NED Rights do not carry any voting or dividend rights.

Figure 8

NED Salary Sacrifice rights

This table shows how many NED Rights were granted, vested and forfeited during the year:

==> picture [512 x 203] intentionally omitted <==

----- Start of picture text -----

Name Rights Balance at Granted Vested & Forfeited Balance at Maximum
granted start of during year exercised end of year value yet
in FY21 year (unvested) to vest [1]
Number Number Number % Number % Number $
Graham Bradley Jun 2021 - 142,009 - - - - 142,009 96,543
Dec 2020 - 62,018 - - - - 62,018 -
Teresa Dyson Jun 2021 - 34,260 - - - - 34,260 23,291
Dec 2020 - 18,605 - - - - 18,605 -
David Bayes Jun 2021 - 27,408 - - - - 27,408 18,633
Dec 2020 - 14,884 - - - - 14,884 -
Rod Douglas Jun 2021 - 68,521 - - - - 68,521 46,583
Dec 2020 - 37,210 - - - - 37,210 -
----- End of picture text -----

1 The maximum value of the RIghts yet to vest has been determined as the amount of the grant date fair value that is yet to be expensed.

Terms and conditions of the NED salary sacrifice rights arrangements

The terms and conditions of each grant of NED salary sacrifice rights affecting remuneration in the current or a future reporting period are as follows:

==> picture [512 x 89] intentionally omitted <==

----- Start of picture text -----

Approximate Value per right
Grant date Service criteria
vesting date at grant date
18 December 2020 (FY21 NED Rights) 30 August 2021 $0.88 Remains a Director during the
participation period
1 June 2021 (FY22 NED Rights) 30 August 2022 $0.96 Remains a Director during the
participation period
----- End of picture text -----

30 2021 Annual Report

Remuneration Report

h) Additional statutory information

(i) Performance based remuneration granted and forfeited during the year

Figure 9 shows for each executive KMP (other than the Managing Director & CEO) how much of their STI cash bonus was awarded and how much was forfeited. It also shows the value of Performance Rights that were granted, vested and forfeited during FY21. The number of rights and percentages vested/forfeited for each grant are disclosed in section (iii).

Figure 9

Performance based remuneration granted and forfeited during the year

==> picture [512 x 147] intentionally omitted <==

----- Start of picture text -----

Name Total STI bonus (cash) LTI Performance Rights
Total Awarded [1] Forfeited FY21 Granted FY18 Vested
opportunity
$ $ % $ $
Ravin Raj 100,000 62,500 37.5 113,126 37,760
Jodie Willey N/A [2] 60,000 [3] N/A 98,430 9,421
Lisa Flynn N/A [2] 60,000 [3] N/A 98,430 11,296
----- End of picture text -----

• 1 STI awarded in respect of FY21 and to be paid in FY22.

• 2 No specific maximum STI was agreed for FY21.

• 3 Contribution to the success of the business in FY21 in their respective roles, including the achievement of agreed strategic objectives.

(ii) Terms and conditions of the share-based payment arrangements

The terms and conditions of each grant of Performance Rights affecting remuneration in the current or a future reporting period are as follows:

==> picture [512 x 165] intentionally omitted <==

----- Start of picture text -----

Grant date Approximate Value per right at grant Performance achieved % vested
vesting date date
12 December 2018 31 August 2021 RTSR: $0.38 >50th & <75th % percentile [1] 62.6%
(FY19 LTIP) EPS: $0.63 >10% average annual growth 100%
29 November 2019 31 August 2022 RTSR: $0.68 RTSR [2 ] & EPS n/a
(FY20 LTIP) EPS: $0.84 to be determined
12 December 2020 31 August 2023 TSR: $0.49 TSR [3] & EPS n/a
(FY21 LTIP) EPS: $0.77 to be determined
Strategic objectives: $0.77
----- End of picture text -----

• 1 The Company ranked within this percentile of total shareholder returns achieved by companies in the S&P/ASX Small Ordinaries Index, excluding resource, mining and real estate companies in the three-year performance period.

• 2 This will vest if the Company ranks in the 75th percentile or above of total shareholder return achieved by companies in the S&P/ASX Small Ordinaries Index, excluding resource, mining and real estate companies in the three-year performance period, with partial vesting (straight line vesting between 50% and 100%) if the Company ranks in the 50th to 75th percentile.

• 3 Cumulative annual TSR is assessed over 3 years to the end of FY23. This is designed to focus executives on delivering sustainable long-term shareholder returns. The Directors consider that a pre-set TSR hurdle is a suitable hurdle for the FY21 Performance Rights and for future grants under the LTIP, given challenges associated with selecting an appropriate peer group against which to measure RTSR.

The number of Performance Rights over ordinary shares in the Company provided as remuneration to KMP is shown in Figure 10 below. See page 23 for the conditions that must be satisfied for the rights to vest. When vested, each right is replaced with one Share in Shine Justice Ltd. The vesting price on which the number of rights granted is based is the weighted average price at which the Company’s shares are traded on the ASX on 15 days before plus 15 days after the release of the Shine Justice Annual Report in the financial year to which they relate.

Shine Justice Ltd 31

Remuneration Report

(iii) Reconciliation of Performance Rights and ordinary Shares held by KMP

This table shows how many Performance Rights were granted, vested and forfeited during the year. No payment is required upon vesting.

Figure 10

Performance Rights

==> picture [512 x 351] intentionally omitted <==

----- Start of picture text -----

Name Year Balance Granted Vested and Balance at Maximum
granted at start during exercised [1] Forfeited end of year value yet
of year year (unvested) to vest [2]
Number Number Number % Number % Number $
Ravin Raj FY21 - 161,609 - - - 161,609 90,501
FY20 149,362 - - - - - 149,362 47,318
FY19 126,541 - - - - - 126,541 -
FY18 153,498 - (46,050) 30 (107,448) 70 - -
Jodie Willey FY21 - 140,614 - - - - 140,614 78,744
FY20 35,641 - - - - - 35,641 11,291
FY19 31,101 - - - - - 31,101 -
FY18 38,294 - (11,489) 30 (26,806) 70 - -
Lisa Flynn FY21 - 140,614 - - - - 140,614 78,744
FY20 74,365 - - - - - 74,365 11,291
FY19 36,929 - - - - - 36,929 -
FY18 45,916 - (13,775) 30 (32,141) 70 - -
----- End of picture text -----

• 1 The vesting date was 24 September 2020 with a vesting price of $0.81. No payment was required upon vesting.

• 2 The maximum value of the Performance Rights yet to vest has been determined as the amount of the grant date fair value of the rights that is yet to be expensed. The minimum value of Performance Rights yet to vest is nil, as the rights will be forfeited if the vesting conditions are not met.

32 2021 Annual Report

Remuneration Report

Figure 11

Shareholdings

==> picture [511 x 256] intentionally omitted <==

----- Start of picture text -----

Name Balance at the Received on vesting Other change Balance at the
start of the year of rights to shares during the year end of the year
Ordinary shares
Graham Bradley AM 104,123 - - 104,123
Teresa Dyson 19,000 - - 19,000
David Bayes 31,104 - - 31,104
Rod Douglas - - 103,768 103,768
Simon Morrison 43,313,704 - - 43,313,704
Ravin Raj 350,000 46,050 - 396,050
Jodie Willey 1,712,957 11,489 - 1,724,446
Lisa Flynn 386,893 13,775 - 400,668
----- End of picture text -----

(iv) Loans given to KMP

Details of loans made to Directors of Shine Justice Ltd and other KMP of the Group, including their close family members and entities related to them, are set out below.

Loans outstanding at the end of the current and prior year include loans to a New Zealand company affiliated with Shine, of which Simon Morrison is a director and controlling shareholder.

==> picture [511 x 78] intentionally omitted <==

----- Start of picture text -----

Name Balance at the start Interest paid and Balance at the end Highest indebtedness
of the year payable for the year of the year during the year
$ $ $ $
Simon Morrison 4,384,082 212,001 4,391,515 4,598,046
----- End of picture text -----

Interest is payable on this loan at Shine Justice’s Australian working capital facility loan rate plus 2%. The amounts shown for interest not charged in the tables above represent the difference between the amount paid and payable for the year and the amount of interest that would have been charged on an arm’s-length basis.

No write-downs or allowances for doubtful receivables have been recognised in relation to any loans made to key management personnel.

Shine Justice Ltd 33

Remuneration Report

(v) Other transactions with KMP

The following transactions occurred with a New Zealand company affiliated with Shine of which Simon Morrison is a director and controlling shareholder:

==> picture [512 x 135] intentionally omitted <==

----- Start of picture text -----

FY21 FY20
$ $
Sales and purchases of goods and services
Sale of goods, rent and services to entity controlled by KMP 1,450,642 1,544,393
Purchases of premises rent from entity controlled by KMP 1,085,501 1,071,476
Interest received from related parties 212,001 311,717
----- End of picture text -----

The Group acquired the following goods and services from entities that are controlled by Simon Morrison:

• Leases over and fit outs of commercial properties occupied by parts of the Group.

Consultancy fees

From 1 July 2020 to 30 June 2021 consultancy fees were paid to companies owned by Rod Douglas of $148,306 (including GST). These include consultancy fees paid to companies owned by him of $48,123 (including GST) since 11 December 2020 being the date of his appointment to the Shine Justice Board.

(vi) External remuneration consultants

There were no remuneration consultants engaged during the year.

(vii) Voting of shareholders at last year’s annual general meeting

Shine Justice received a 98.94% “yes” vote on its remuneration report for the FY20 financial year. The Company did not receive any specific feedback from shareholders at the AGM or throughout the year on its remuneration practices.

END OF REMUNERATION REPORT

34 2021 Annual Report

Directors' Report

Officers’ indemnities and insurance

The Constitution provides that the Company must indemnify any person who is, or has been, a Director or executive officer of the Group, and may indemnify other current or former officers and auditors, against liabilities incurred whilst acting as such officers or auditors, to the extent permitted by law.

The Company has entered into a Deed of Access, Indemnity and Insurance with each of the Directors and Company Secretaries. The Company has paid a premium for insurance for the Directors and officers of the Group against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of Directors and officers of the Group, other than conduct involving a wilful breach of duty in relation to the Group. The total amount of directors’ and officers’ insurance contract premiums paid during the Financial Year was $818,046 (2020: $693,841).

Indemnifying auditors

To the extent permitted by law, the Group has agreed to indemnify its auditors, PwC, and its former auditors, EY, against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify PwC or EY during, or since the end of, the Financial Year.

No leave to bring proceedings on behalf of the company

No person has applied to Court 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 any part of those proceedings. The Group was not a party to any such proceedings during the Financial Year.

The Company’s aim is to pay between 30% and 50% of NPAT as dividends each financial year. To the extent the Company has franking credits, it intends to distribute them to shareholders in the form of franked dividends. The declaration of dividends is at the sole discretion of the Board and no guarantee can be given about the amount of any dividends declared or the level of franking or imputation.

In respect of the Financial Year, an interim dividend of 2 cents per Share (unfranked) was declared on 24 February 2021 and paid on 26 March 2021. A final dividend of 3.25 cents per Share (unfranked) was declared on 27 August 2021 and is expected to be paid on 8 October 2021.

In respect of FY20, as detailed in the Directors’ Report for that financial year, a final dividend of 2.75 cents per Share (unfranked) was declared on 28 August 2020 and paid on 25 September 2020.

State of affairs

In the opinion of the Directors, there were no significant changes in the state of affairs of the Group that occurred during the Financial Year.

The COVID-19 pandemic resulted in many of the Group’s services being provided remotely, with many team members working from home for parts of the Financial Year. Remote working occurred with little disruption to the provision of services.

Events since the end of the Financial Year

The Directors are not aware of any events or developments which are not set out in this Annual Report that have, or would have, a significant effect on the Group’s state of affairs, or its expected results in future years.

The continuing COVID-19 pandemic may result in some continued remote working arrangements reflecting government and health authority recommendations.

Environmental regulation

The Group’s operations are not subject to any significant environmental regulation under the laws of the Commonwealth or States.

Dividends

The Board’s dividend policy has been structured in order to maintain investor, creditor and market confidence and to sustain future development of the Group’s business. The Group manages capital with a view to ensuring that the goals of continuing as a going concern and the provision of acceptable shareholder returns are met.

Rights and options

There are currently 1,060,521 FY19 Performance Rights, 1,703,049 FY20 Performance Rights and 2,399,317 FY21 Performance Rights on issue.

There are 132,717 FY21 NED Rights and 272,198 FY22 NED Rights on issue.

There are no options on issue.

The amount of dividends declared by the Board at any time will be influenced by underlying financial performance and cash flow, balance sheet, debt and treasury risk management, working capital needs and competing internal and external investment opportunities necessary for growth.

Directors' Report

Shine Justice Ltd 35

Non-Audit Services

During the Financial Year, the Company’s auditor, PwC, performed other services in addition to their audit responsibilities. The engagement to perform non-audit services was approved on the basis that it was more cost-effective than engaging a firm without knowledge of the Group.

Rounding of amounts

In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 , amounts in the Directors’ Report and the financial statements are rounded to the nearest thousand dollars, or in certain cases, the nearest dollar.

The Board, in accordance with advice from the Audit & Risk Management Committee, is satisfied that the provision of non-audit services by PwC (or by another person or firm on their behalf) during the Financial Year is compatible with the general standard of independence for auditors imposed by the Corporations Act because the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

Details of the amounts paid or payable to PwC for non-audit services provided during the Financial Year are set out below.

Non-audit services

==> picture [242 x 109] intentionally omitted <==

----- Start of picture text -----

Services FY21 FY20
Auditing or reviewing $419,409 $379,388
financial reports
Non-audit services $6,400 -
Total $425,809 $379,388
----- End of picture text -----

Auditor’s independence declaration

No officer of the Company is a former partner or director of PwC, and a copy of the Auditor’s Independence Declaration as required under the Corporations Act is set out in, and forms part of, this Report.

Declarations

Simon Morrison (as Managing Director & CEO) and Ravin Raj (as Chief Financial Officer) have each provided a declaration to the Board in accordance with section 295A of the Corporations Act that, in their opinion, the financial records of the Group have been properly maintained, the financial statements and notes in this Report comply with the accounting standards and give a true and fair view of the Group’s financial position and performance and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

36 2021 Annual Report

Directors' Report

Operating and Financial Review

Principal activities

The principal activities of the Group during the year were the provision of legal services in Australia and the conduct of an insurance recovery consulting business in New Zealand.

No significant changes in the nature of the Company’s principal activities occurred during the Financial Year.

The COVID-19 pandemic continued to impact the manner in which services were provided during the Financial Year, with many team members working from home and providing services remotely. Remote working resulted in minimal disruption to the delivery of services.

Overview and strategies

The objective of the Board is to create and deliver long-term shareholder value through the provision of a range of diversified legal services, both in terms of service offerings and geographical reach. Whilst each area of the Group’s business activities holds significant value and makes a substantial contribution towards achieving this objective, management of the synergies arising from the various business activities is critical to achieving the objective.

Whilst the Company was founded in Queensland 45 years ago, a core element of the Group strategy is to continue to extend its reach into other jurisdictions to mitigate the impact of exposure to a single market. The Group has been successful in achieving this with almost three quarters of its total revenue in FY21 earned in markets outside Queensland personal injuries. As the Group’s personal injury products operate under state government schemes, diversification into other markets is important in respect of managing exposure to tort reform.

The Board believes that the best way to operate in the personal injury markets in Australia is with the benefit of scale and as a listed entity.

Through its critical mass, the Group is able to leverage its investment in technology and provide better training and access to specialisation for staff.

The Board oversees the implementation of a range of strategies in five priority areas relating to clients, team members, growth, financial strength and innovation.

Review of operations

The Group specialises primarily in damages based plaintiff litigation legal services, primarily relating to personal injury.

The balance of the Financial Year’s revenue was derived from other practice areas, including class actions, abuse law, medical law, dust diseases law, and disability and superannuation claims.

Measures were taken to further the integration of all of our brands into the Group.

Personal injury

Shine Lawyers continued to specialise in damages based plaintiff litigation legal services, primarily relating to personal injuries.

We continued to optimise traditional and digital (including social media) advertising, adapting content to respond to changing emphasis in client concerns. We expanded our enquiry avenues and strengthened our brand presence and recognition across all regions, especially Queensland.

The Group’s Western Australian businesses continued to perform well. Stephen Browne Lawyers performed steadily in its personal injury and superannuation and disability insurance business.

Sciaccas Lawyers continued to grow during the Financial Year.

New Practice Areas

Our class actions division grew significantly in FY21.

Our successful outcome in court proceedings relating to faulty prolapse mesh and tape implants, one of Australia’s largest product liability class actions (Mesh Class Action), was upheld unanimously on appeal by the Full Court of the Federal Court of Australia. The appellants have applied for special leave to appeal the decision in the High Court of Australia, their final avenue of appeal. We will vigorously oppose any appeal. If ultimately successful, the Mesh Class Action is expected to deliver justice for many thousands of Australian women left with life altering complications from the defective implants. During the year we filed a second class action against the same defendants on behalf of women implanted after 4 July 2017 with defective mesh products, as well as a class action against pelvic mesh manufacturer Boston Scientific.

Class actions have also been filed on behalf of:

• the Wreck Bay Aboriginal Community whose culturally significant land has been contaminated by toxic PFAS chemicals;

• passengers and families affected by the deadly outbreak of coronavirus on board the Ruby Princess cruise ship;

• Indigenous workers who were forced to work in slave-like conditions for minimal or no pay in Western Australia and the Northern Territory;

• Stolen Generation survivors in the Northern Territory;

• workers subject to sham contracting arrangements; and

• insurance customers who received unethical financial advice.

Shine Lawyers continued to be a leading voice for the rights of Australians subjected to institutional abuse. Our abuse law practice grew significantly, representing more than 2,000 survivors in abuse compensation claims, compared with 1,200 in FY20. We extended the practice into South Australia where we are fighting for justice for survivors abused in detention.

Bradley Bayly experienced strong growth in abuse matters, following law reform removing the limitation period for childhood sexual abuse compensation claims.

Directors' Report

Shine Justice Ltd 37

Our medical law practice, specialising in actions such as brain, spinal and obstetric injuries, is expanding and demonstrating good growth. This Financial Year, the team provided submissions to the Inquiry into health outcomes and access to health and hospital services in rural, regional and remote New South Wales.

Our Dust Diseases practice is continuing to lead the way in compensation claims for Australian workers suffering from silicosis, a serious and potentially deadly lung disease impacting miners, stonemasons and construction and tunnelling industry workers. Our team has been at the forefront of pioneering compensation outcomes for silica induced autoimmune diseases, including scleroderma, rheumatoid arthritis and lupis. We welcomed the release of the National Dust Disease Taskforce’s final report, containing recommendations including a licensing scheme to restrict access to engineered stone to businesses demonstrating ability to effectively manage silica exposure risk, one of a number of key measures initiated and actively lobbied for by our Dust Diseases team.

In 2019, we launched an innovative new product – an online platform servicing small Queensland motor vehicle claims under a separate brand, Claimify. Building on this technology and the learnings provided, we launched Super Online, a streamlined and client-focused superannuation and disability platform which will allow us to expand our areas of practice to include total and permanent disability insurance claims, including assisting clients with small entitlements. We settled our first Super Online claim during the Financial Year and further growth is anticipated in this business unit.

Our Queensland family law practice, Best Wilson Buckley, performed consistently in FY21.

Carr & Co, our family law practice in Perth, was impacted in the early part of the Financial Year by the COVID-19 pandemic, but a return to strong file inflows in the later part of the year is expected to produce growth in FY22.

Risk Worldwide New Zealand Limited continued to operate in the loss adjusting and insurance policy recovery business in New Zealand, with a focus on residential claims under the brand ‘My Insurance Claim’.

Our Land, Energy and Resources business (Emanate) continued to operate in a challenging sector.

Future developments and prospects

The Group will seek to continue to grow its business by concentrating on the activities and strategies outlined below.

Damages based plaintiff litigation

The Group continues to execute its strategy to grow all areas of its damages based plaintiff litigation business, but with a focus on growing other specialties at a faster rate than the personal injury practice area. The Group intends to grow in the future organically and through acquisitions.

Whilst personal injury litigation remains a significant part of the strategy, the Group also considers other opportunities to broaden its service offerings, including in response to the business and community impacts of the COVID-19 pandemic.

Tort reform

The New South Wales Government passed regulatory reform in relation to the compulsory third party scheme in that State in FY18.

Although tort reform initiatives pose risks for the Group’s business, it has considerable experience adapting its business model to regulatory change. Tort reform presents opportunities, particularly in the acquisition of smaller practices which do not have the systems in place to deal with complex regulatory changes. During the Financial Year, Shine Lawyers, as a member of the Save Our CTP Coalition, was successful in achieving bipartisan State government support to protect the common law rights of Queenslanders under Queensland’s CTP insurance scheme.

International opportunities

Whilst the Directors believe there are ample opportunities for the Group to continue to grow domestically, they will continue to monitor opportunities internationally and maintain a ’watching brief‘ on the UK and US legal markets.

We expanded our Commercial Disputes practice into first party insurance claims, focusing on business interruption claims arising from COVID-19 lockdown measures.

38 2021 Annual Report

Directors' Report

Consolidated Financial Position

The Group seeks to maintain an optimal capital structure by ensuring that there is an appropriate balance of debt and equity. The current target is a maximum interest-bearing debt to equity ratio of 30%. At 30 June 2021, the ratio is 15%. The Group utilises a combination of short and long term debt to ensure that it has an appropriate level of liquidity available throughout the financial year.

The Group’s finance facilities with the Commonwealth Bank of Australia (CBA) were reviewed in May 2020 and continued substantially unchanged for the Financial Year. Details of these facilities are set out in note 6(g) in the Financial Report. The finance facilities are subject to financial covenants including a gearing ratio (borrowings cannot exceed 30% of net WIP) and debt to EBITDA ratio (not to exceed 2.25:1). The Group was in compliance with these financial covenants as at 30 June 2021 and has headroom available to increase funding levels if required.

In addition to the CBA facilities, the Group also has disbursement funding providers that support eligible clients with funds to cover disbursements in relation to their claims. The use of disbursement funding is expected to continue to improve the Group’s operating cash flows. Details of the disbursement funding facilities are set out in note 6(f) in the Financial Report.

The Group will generally only seek to raise new capital for material events. No material acquisitions are currently proposed.

Risk Management

The Group’s business is subject to risk factors, both specific to its business activities and risks of a general nature. The risks the Directors highlight below do not represent all risks associated with the Group, but represent, in the Directors’ opinion, the material business risks. The most significant factors relating to future financial performance are set out in the following commentary.

COVID-19 Pandemic

The Group closely monitored and responded to the potential impacts on its business of the COVID-19 pandemic during the Financial Year. The Group has at all times acted, and continues to act, in accordance with applicable government and health authority directions and advice in each of the Australian States in which it operates and in New Zealand in relation to the pandemic. Many team members continued effective working from home arrangements and remote work practices (including virtual client meetings and court appearances), with consistent support and guidance from a dedicated response team, with team members returning to the office as and when appropriate.

The Group will continue to monitor the impact of the pandemic.

The Group’s strategy of growing all areas of damages based plaintiff litigation helps to diversify the Group’s revenue stream and lessen the impact of the pandemic on any particular work type.

Regulatory Environment

The Group operates in a regulated environment. Its business operations could be adversely affected by actions of State, Territory and Commonwealth governments, including changes in legislation, guidelines and regulations that affect the areas of law in which the Group practises.

To mitigate this risk, the Group’s senior legal practitioners seek to meet with policymakers and participate in stakeholder working groups when reform is being considered in the areas of law in which the Group practises. This Financial Year, the Group’s Medical Law team provided submissions to the Inquiry into health outcomes and access to health and hospital services in rural, regional and remote New South Wales. In addition, the Group’s strategy of growing all areas of damages based plaintiff litigation helps to diversify the Group’s revenue stream and lessen the impact of individual legislative reform.

Conflict of Duties

WIP Recoverability

The Group, through those subsidiaries engaged in the provision of legal services, has a paramount duty to the court, first, and then to its clients. Those duties prevail over the Group’s duty to shareholders. There may be instances where the Group and its lawyers, in fulfilling their duties to the Court or to the client (or both), act other than in the best interests of shareholders.

To mitigate this risk, the Group has strong case management systems and processes to identify such conflicts so that they can be avoided or appropriately managed.

The Board respects the paramount duty owed by Shine and its lawyers to the courts and their duty to act in the best interests of clients, but believes that doing so will also be in the long term best interests of Shine and its shareholders.

Because the Group operates largely on a speculative fee basis and in areas of law where the ultimate recovery of fees is regulated, failure to recover WIP is a key risk. Given the inherent uncertainty associated with determining WIP recoverability, the Group has taken measures to ensure its case management systems and processes are designed to mitigate the risk of failing to realise booked revenue. This exposure is greater in relation to class actions as the WIP exposure on a single matter is higher. The Group seeks to mitigate this risk by adopting appropriate case selection methodologies and utilising litigation funding.

To mitigate risk in relation to the personal injuries practice area, case management systems and processes have been implemented to assist in improving WIP recoverability and predictability.

Directors' Report

Shine Justice Ltd 39

Growth and Integration Risk

There is a risk that the Group may be unable to manage its future growth successfully. Historically, the Group has grown through a combination of organic growth and acquisitions. That growth strategy will continue, and may include new practice areas and locations. A variety of factors, including unexpected integration issues, might cause future growth to be implemented less successfully than it has in the past.

To mitigate this risk, the Group continually refines its growth criteria to ensure that strategic and cultural alignment, adequate financial return and integration risks are considered before expansion opportunities are approved.

Our People

The Group depends on the talent and experience of its people. In particular, the Group’s growth is reliant on attracting and retaining professional fee-earning staff. Should any of its key people or a significant number of other people leave the Group, particularly to work for a competitor, this may have an adverse effect on the Group. It may be difficult to replace them, or to do so in a timely manner or at comparable expense.

The Group continues to focus on recruiting high calibre employees closely aligned to its values. The Group attracts, retains and incentivises talent by promoting its values based culture and by providing an environment where individuals and teams are recognised, rewarded and inspired to deliver outcomes for clients.

Professional Services Sector Risk

The Group operates in a sector of the market place with few other listed peer entities. As such, its Share price can be impacted by events affecting other participants in this sector.

Digital Disruption & Cybersecurity

The Group monitors threats from digital technology in order to ensure that, where possible, it is positioned to respond appropriately.

Shine monitors cybersecurity threats given the potential consequences of a cybersecurity breach, including but not limited to unauthorised access or disclosure (inadvertent or otherwise) of personal information held by the Group. From time to time, the Group engages cybersecurity experts to provide an independent assessment of the Group’s exposures and protective measures.

The Group has strengthened controls and training, including the implementation of multi-factor authentication across the business, and continues to work closely with its dedicated cybersecurity partner.

Economic, Environmental and Social Sustainability Risks

The material economic risks associated with the Group’s business are discussed above under ‘WIP Recoverability’ and ‘Growth and Integration Risk’.

The Directors do not believe the Group has any material exposure to environmental risk.

Brand and Reputational Risk

The success of the Group is reliant on its reputation and its brands. Anything that diminishes the Group’s reputation or its brands could have a significantly adverse financial effect. In particular, the actions of the Group’s employees, including breaches of relevant regulations or negligence in the provision of legal advice, could damage the Group’s brands and diminish future profitability and growth.

To mitigate this risk, the Group has strong case management systems and processes to identify cases where brand and reputation risk could emerge, particularly through the initial case selection process. The Group also has a disciplined public relations process to ensure that the views of the Group are not misrepresented.

As the Group has alliances with high profile individuals, including Erin Brockovich, any harm to the reputation of those individuals may also negatively impact the Group.

However, the Group recognises that environmental sustainability is a critical component in a responsible and ethical management strategy and has adopted an Environmental Sustainability Policy to reflect its commitment to conducting business in an environmentally responsible manner. For further information, please refer to page 43.

Other than the risks discussed under ‘Brand and Reputational Risk’ above, the Directors do not believe the Group has any material exposure to social sustainability risk.

This Directors’ Report is signed in accordance with a resolution of Directors made pursuant to section 298(2) of the Corporations Act.

On behalf of the Directors

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Graham Bradley AM Chairman Brisbane, 27 August 2021

40 2021 Annual Report

Auditor’s Independence Declaration

Auditor’s Independence Declaration

As lead auditor for the audit of Shine Justice Ltd for the year ended 30 June 2021, I declare that 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.

This declaration is in respect of Shine Justice Ltd and the entities it controlled during the period.

Simon Neill Brisbane Partner 27 August 2021 PricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757

480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001 T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Shine Justice Ltd 41

2021 Annual Report

42

Environmental, Social and Governance (ESG) Performance

Environmental, Social and Governance (ESG) Performance

Shine Justice Ltd 43

Environmental

Shine Justice adopted an Environmental Sustainability Policy in 2020.

Shine is committed to operating its business in a manner which reduces its impact on the environment, including through the following sustainability measures:

• use of carbon neutral copy paper

• recycling of paper waste and obsolete electrical or electronic devices and furniture

• reduced travel in favour of virtual communication

• technology-based solutions for reducing energy consumption (sensor lighting and automatic computer sleep modes)

• reduced paper use – double sided printing and electronic files

• high Energy Star rating appliances

• high (65%) shareholder uptake of electronic communications

Social

Refl ect Reconciliation Action Plan February 2021 – January 2022

Reconciliation Action Plan

Shine was proud to launch its first Reconciliation Action Plan (RAP), setting out actions to be taken to create a more inclusive business and build strong, respectful and mutually beneficial relationships that create opportunities for Aboriginal and Torres Strait Islander peoples, whilst recognising the unique contribution they make to our shared culture and heritage.

We have commenced class actions on behalf of Indigenous clients to recover stolen wages, redress injustice for Stolen Generations and recover compensation for the contamination of culturally significant land in Wreck Bay in the Jervis Bay Territory by PFAS chemicals.

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F O U N D I N G P A R T N E R
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LifeFlight

Shine Lawyers has entered into a partnership with LifeFlight Australia, a strongly purpose driven organisation which saves lives by delivering emergency medical care to seriously ill and injured people throughout Queensland. We will be the Founding Partner of the ‘First Minutes Matter’ trauma training program which will equip people with practical skills for time-critical medical situations where professional help is still on the way.

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Shine A Light Foundation

The Group’s philanthropic initiative, the Shine A Light Foundation, awarded a $15,000 grant to new charity partner, the Indigenous Literacy Foundation, a national book industry charity dedicated to lifting literacy levels in remote Indigenous communities, so all children across Australia have the same choices and opportunities.

Abuse and dust disease work

Shine undertakes significant and growing work representing survivors of abuse. We have expanded our growing abuse practice into South Australia, where we are fighting for justice for survivors abused in detention.

Our Dust Diseases team is continuing to lead the way in compensation claims for Australian workers suffering from silicosis, a serious and potentially deadly lung disease impacting miners, stonemasons and construction and tunnelling industry workers.

Our team has been at the forefront of pioneering compensation outcomes for silica induced autoimmune diseases, including scleroderma, rheumatoid arthritis and lupus. We welcomed the release of the National Dust Disease Taskforce’s final report, containing recommendations including a licensing scheme to restrict access to engineered stone to businesses demonstrating ability to effectively manage silica exposure risk, one of a number of key measures initiated and actively lobbied for by our Dust Diseases team.

Modern Slavery

The Board has adopted a Modern Slavery Policy and Supplier Code of Conduct to reflect its commitment to protecting human rights. Shine Justice lodged its first Modern Slavery Statement under the Modern Slavery Act 2018 with the Department of Home Affairs in March 2021.

Governance

The Board recognises the positive relationship between the creation and delivery of long-term shareholder value and corporate governance. Shine’s corporate governance framework fosters the values of integrity, respect, trust and openness among and between Board members, management, employees, clients, suppliers and shareholders. Shine's Corporate Governance Statement is set out on the following pages.

44 2021 Annual Report

Corporate Governance Statement

The Board recognises the positive relationship between the creation and delivery of long-term shareholder value and corporate governance. Shine’s corporate governance framework fosters the values of integrity, respect, trust and openness among and between Board members, management, employees, clients, suppliers and shareholders.

The ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (fourth edition) (Principles and Recommendations) set out recommended corporate governance practices for ASX listed entities. The Principles and Recommendations state that they are designed to ‘achieve good governance outcomes and meet the reasonable expectations of most investors in most situations’. The following assessment of the Group’s practice against the Principles and Recommendations as at 30 June 2021 has been approved by the Board.

Corporate Governance Statement

Shine Justice Ltd 45

Shine Justice Group’s Compliance

Principles and Recommendations

Principle 1

Lay solid foundations for management and oversight:

A listed entity should clearly delineate the respective roles and responsibilities of its board and management and regularly review their performance.

1.1 A listed entity should have and disclose a board charter setting out: a.the respective roles and responsibilities of its board and management; and b.those matters expressly reserved to the board and those delegated to management.	The Board is responsible for demonstrating leadership and for the overall strategic guidance and corporate governance of the Shine Justice Group. It has distinguished which functions and responsibilities are reserved for the Board and those which are delegated to management. These are set out in the Board Charter, which also sets out the role of the Chairman, Directors and management. The Board Charter is available on the Company’s website (www.shinejustice.com.au).
1.2 A listed entity should: a.undertake appropriate checks before appointing a director or senior executive or putting someone forward for election as a director; and b.provide security holders with all material information in its possession relevant to a decision on whether or not to elect or reelect a director.	Shine Justice conducts appropriate checks to verify the suitability of candidates considered for nomination to the Board, having regard to each candidate’s character, experience, education and skills, in addition to any interests and associations of the candidate. Comprehensive biographical information is provided to shareholders in notices of meeting to enable them to make an informed decision on whether to elect or re-elect a Director.
1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment.	All Directors and senior executives have a written agreement which formalises the terms of their appointment. Each Director commits to a letter of appointment which specifes the term of their appointment, the envisaged time commitment, expectations and duties relating to the position, remuneration, disclosure and confdentiality obligations, insurance and indemnity entitlements and details of the Group’s corporate governance policies. Each member of the Leadership Team enters into a contract which describes their role and duties, remuneration and termination rights and entitlements.
1.4 The company secretary of a listed entity should be accountable directly to the board on all matters to do with the proper functioning of the board.	The Company Secretary is accountable to the Board for facilitating the Company’s corporate governance processes and the functioning of the Board. The Board is responsible for the appointment and removal of the Company Secretary and all Directors are able to access the advice and services of the Company Secretary. Details of the Company Secretary’s qualifcations and experience are available on the Company’s website and are set out on page 16.

Corporate Governance Statement

46 2021 Annual Report

Principles and Recommendations

• 1.5 A listed entity should:

• a. have and disclose a diversity policy;

• b. through its board or a committee of the board set measurable objectives for achieving gender diversity in the composition of its board, senior executives and workforce generally; and

• c. disclose in relation to each reporting period:

  1. the measurable objectives set for that period to achieve gender diversity;

  2. the entity’s progress towards achieving those objectives; and

  3. relevantly, the respective proportions of men and women on the board, in senior executive positions and across the whole workforce.

Shine Justice Group’s Compliance

Shine Justice aims to actively promote a culture that supports diversity in the workplace, in the composition of its Board and senior management and throughout the Group. Shine Justice defines diversity as including, but not limited to, diversity of gender, age, ethnicity and cultural background.

Shine Justice’s Diversity Policy is disclosed on the Company’s website and sets out its objectives and reporting practices regarding diversity. The Nomination and Remuneration Committee reviews and reports to the Board on the Group’s diversity profile with a view to setting meaningful targets for the advancement of diversity within the Group. At present, the targets include to:

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Target Progress
Maintain female The Board currently includes
representation on the Board one female Director (25% of
of at least 25% of the Non- the Non-executive Directors).
executive Directors, with a While an increase in that
view to increasing that percentage is targeted over
percentage over time time, the size and constitution
of the Board is considered
appropriate for the size and
needs of the Group at this
time.
Analyse gender pay parity Work is continuing in this
across the Group with a view regard, with good progress
to resolving any made in reducing any
inconsistencies inconsistencies.
Implement the Group’s first The Group’s first Reconciliation
Reconciliation Action Plan Action Plan was adopted
during the Financial Year, with
substantial progress made
against the actions committed
to in the plan.
Introduce a formal Inclusion This remains a target, with the
and Diversity Program implementation of the
Reconciliation Action Plan
considered a key step in the
program.
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As at 30 June 2021:

• 20% of the Board members were women (25% of the Non-executive Directors);

• 52% of the Leadership Team were women; and

• 80% of the Group’s team members were women.

Corporate Governance Statement

Shine Justice Ltd 47

Principles and Recommendations

Shine Justice Group’s Compliance

• A listed entity should The Board regularly undertakes an evaluation process to assess its performance, including periodic assessments conducted by an

• a. have and disclose a process for independent third party consultant who seeks Board and management

• periodically evaluating the feedback on the performance of the Board and Board committees, as

• performance of the board, its well as feedback on individual Directors and the Group’s reporting and

• committees and individual governance practices.

• directors; and

• 1.6 A listed entity should

• The Board renewal process which was completed in 2020 included a

• b. disclose for each reporting detailed evaluation of the skills, knowledge, experience,

• period whether a performance independence and diversity required to ensure that the renewed

• evaluation has been undertaken Board and its Committees are ideally placed to perform their

• in accordance with that process governance and other functions. A further internal evaluation process

• during or in respect of that was conducted during 2021 to ensure that this remains the case.

• period.

• 1.7 A listed entity should:

• a. have and disclose a process for evaluating the performance of its senior executives at least once every reporting period; and

• b. disclose for each reporting period whether a performance evaluation has been undertaken in accordance with that process during or in respect of that reporting period.

The Nomination and Remuneration Committee is responsible for evaluating the performance of the Key Management Personnel. The Chairman is also responsible for reviewing the performance of the Managing Director & CEO.

A review of the performance of the Key Management Personnel in FY21 has been undertaken.

Corporate Governance Statement

48 2021 Annual Report

Shine Justice Group’s Compliance

Principles and Recommendations

Principle 2

Structure the Board to be effective and add value:

The board of a listed entity should be of an appropriate size and collectively have the skills, commitment and knowledge of the entity and the industry in which it operates, to enable it to discharge its duties effectively and to add value.

• 2.1 The board of a listed entity should:

• a. have a nomination committee which has at least three members, a majority of whom are independent directors and is chaired by an independent director; and

• b. disclose the charter, members and meeting attendance of the committee.

A Nomination and Remuneration Committee with its own charter and consisting of all three of the independent Directors was in place during the Financial Year. The Nomination and Remuneration Committee was chaired at all times by an independent Director (Graham Bradley) during the Financial Year. Details of the Nomination and Remuneration Committee’s functions are set out in the Nomination and Remuneration Committee Charter which is available on the Company’s website.

Details of the number of meetings and attendance by the Directors at those meetings are disclosed on page 13.

• 2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership.

The skills, knowledge and experience set out in the table below have been identified as those that are required for the effective management of the Group. The Board possesses broad coverage of these skills and attributes.

Further details regarding the skills and experience of each Director are included on pages 14 and 15.

Directors’ Skills Matrix

Directors’ Skill

Governance

Experience with listed company governance principles and practices.

Financial Literacy

Experience with public company financial reporting and accounting and internal financial controls.

Strategy Development

Experience in developing and implementing effective competitive strategies in service-based industries.

Public Policy and Regulation

Knowledge of the ethical principles and regulations applicable to professional legal services.

Risk and Compliance

Experience in oversight of business risks and regulatory compliance applicable to legal practices.

Industry Experience

Knowledge of the commercial and societal dynamics that determine supply and demand in the market for legal services.

People Management and Remuneration

Experience in managing a people-intensive business with a sound organisational culture and strong corporate values and in designing effective remuneration policies to support values and performance.

Innovation

Experience in overseeing technological change and innovation.

Mergers & Acquisitions

Experience in oversight of strategic acquisitions and integration of acquired businesses.

Corporate Governance Statement

Shine Justice Ltd 49

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Principles and Recommendations Shine Justice Group’s Compliance
2.3 A listed entity should disclose: The Group currently has a five member Board, of whom three (Graham
Bradley AM, Teresa Dyson and David Bayes) are considered to be
a. the names of the directors that
independent.
the board considers to be
independent directors; and Non-executive Director Rod Douglas provides limited consultancy
services to the Group, so is not currently classified by the Board as
b. if a director has an interest,
independent.
position or relationship of the
type described in Box 2.3 of the None of the Directors who are considered to be independent has an
Principles and interest, position or relationship described in Box 2.3 of the Principles
Recommendations, but the and Recommendations.
board is of the opinion that it The date of appointment of each Director and details of their skills and
does not compromise the experience are set out on pages 14 and 15 and on the Website.
director’s independence, the
nature of the interest, position
and relationship and an
explanation of why the board is
of that opinion; and
c. the length of service of each
director.
2.4 A majority of the board of a listed Three of the five Board members are considered to be independent
company should be independent – Graham Bradley AM, Teresa Dyson and David Bayes.
directors.
In accordance with the Board Charter which is available on the
Company’s website, a Director is considered independent if the
Director is independent of management and free of any business or
other relationship that could materially interfere, or be perceived as
interfering, with the exercise of an unfettered and independent
judgment in relation to matters concerning the Company.
Non-executive Director Rod Douglas provides limited consultancy
services to the Group, so is not currently classified by the Board as
independent.
2.5 The chair of the board of a listed The Chairman, Graham Bradley AM, is an independent Non-executive
entity should be an independent Director.
director and, in particular, should not
Simon Morrison is the Group’s Managing Director & CEO.
be the same person as the CEO of
the entity.
2.6 A listed entity should have a The Nomination and Remuneration Committee is responsible for
program for inducting new directors induction and continuous development programs for Directors.
and for periodically reviewing
An induction program has been conducted for each of Graham Bradley
whether there is a need for existing
AM, Teresa Dyson, David Bayes and Rod Douglas.
directors to undertake professional
Directors are encouraged to undertake continuing professional
development to maintain the skills
development activities each year and to join appropriate professional
and knowledge needed to perform
their role as directors effectively. associations in order to continually develop and enhance their
respective levels of industry knowledge, technical knowledge and
other skills required to discharge their role effectively.
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Corporate Governance Statement

50 2021 Annual Report

Shine Justice Group’s Compliance

Principles and Recommendations

Principle 3

Instil a culture of acting lawfully, ethically and responsibly:

A listed entity should instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly.

3.1 A listed entity should articulate and disclose its values.	The Shine Justice Group’s values are integral to its operations at all levels. They are included on its intranet and website and are embedded regularly throughout the business in a variety of formats. They appear on page 4 of this report.
3.2 A listed entity should: a.have and disclose a code of conduct for its directors, senior executives and employees; and b.ensure that the board or a committee of the board is informed of any material breaches of that code.	Shine Justice has a Code of Conduct for Directors, executives, employees, consultants and contractors which sets out the fundamental principles of business conduct expected by the Company. The Code of Conduct is available on the Company’s website. Any breaches of the Code of Conduct are reported to the Audit & Risk Management Committee. No breaches were reported during FY21.
3.3 A listed entity should: a.have and disclose a whistleblower policy; and b.ensure that the board or a committee of the board is informed of any material incidents reported under that policy.	The Shine Justice Group has a Whistleblower Policy under which any unlawful, unethical or improper conduct may be reported, including anonymously and to an independent external body. Any material incidents reported under the policy are reported to the Audit & Risk Management Committee. No incidents were reported during FY21.
3.4 A listed entity should: a.have and disclose an anti- bribery and corruption policy; and b.ensure that the board or a committee of the board is informed of any material breaches of that policy.	The Shine Justice Group’s anti-bribery and corruption policy is included in its Code of Conduct. Any material breaches of the policy are reported to the Audit & Risk Management Committee. No breaches were reported during FY21.

Corporate Governance Statement

Shine Justice Ltd 51

Principles and Recommendations Shine Justice Group’s Compliance

Principle 4

Safeguard the integrity of corporate reports:

A listed entity should have appropriate processes in place to verify the integrity of its corporate reports.

4.1 The board of a listed entity should: a.have an audit committee with at least three members, all of whom are non-executive directors and a majority of whom are independent directors, is chaired by an independent director who is not the chair of the board; and b.disclose the charter of the committee, the qualifcations and experience of its members and their attendance at committee meetings.	The Board has an Audit & Risk Management Committee, comprised of the three independent Non-executive Directors and chaired by an independent Non-executive Director (Teresa Dyson). Further details about the membership of the Audit & Risk Management Committee, including the names and qualifcations of its members, are set out on pages 14 and 15. The Charter of the Audit & Risk Management Committee is available on the Company’s website along with information about its members. The number of meetings held by the Committee and the Directors’ attendance at meetings is disclosed each year in the Group’s annual report and can be found on page 13 for FY21.
4.2 The board of a listed entity should, before it approves the entity’s fnancial statements for a fnancial period, receive from its CEO and CFO a declaration that, in their opinion, the fnancial records of the entity have been properly maintained and that the fnancial statements comply with the appropriate accounting standards and give a true and fair view of the fnancial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating efectively.	The Managing Director & CEO and the CFO each provide a statement to the Board and the Audit & Risk Management Committee in advance of seeking approval of any fnancial report to the efect that the Group’s risk management and internal compliance and control systems are operating efciently and efectively in all material respects. In accordance with the above, the Board has received written assurances that the declaration provided under section 295A of the Corporations Act is based on a sound system of internal control and risk management, which is operating efectively in all respects in relation to material business risks and fnancial reporting.
4.3 A listed entity should disclose its process to verify the integrity of any periodic corporate report it releases to the market that is not audited or reviewed by an external auditor.	The Group’s half year fnancial statements are reviewed by its external auditor and its full year fnancial statements are audited by its external auditors. A verifcation process is undertaken in relation to the Directors’ Report and any part of this document which is not audited, to ensure that it is materially accurate, balanced and provides investors with appropriate information to make informed investment decisions. The process includes compiling a record of verifcation material for any material statement of fact.

Corporate Governance Statement

52 2021 Annual Report

Principles and Recommendations Shine Justice Group’s Compliance

Principle 5

Make timely and balanced disclosure:

A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a material effect on the price or value of its securities.

5.1 A listed entity should have and disclose a written policy for complying with its continuous disclosure obligations under Listing Rule 3.1.	The Company has a Continuous Disclosure Policy which is designed to ensure that all material matters are appropriately disclosed in a balanced and timely manner and in accordance with the requirements of the Listing Rules. The policy sets out the processes and practices that ensure compliance with these requirements. The Continuous Disclosure Policy is published on the Website.
5.2 A listed entity should ensure that its board receives copies of all material market announcements promptly after they have been made.	In accordance with the Continuous Disclosure Policy, material market announcements are approved by the Directors in advance whenever practicable. If for any reason that is not possible, they receive a copy immediately following release.
5.3 A listed entity that gives a new and substantial investor or analyst presentation should release a copy of the presentation materials on the ASX Market Announcements Platform ahead of the presentation.	New and substantial investor or analyst presentations are released to the market ahead of presentation.

Corporate Governance Statement

Shine Justice Ltd 53

Principles and Recommendations Shine Justice Group’s Compliance

Principle 6

Respect the rights of security holders:

A listed entity should provide its security holders with appropriate information and facilities to allow them to exercise their rights as security holders effectively.

6.1 A listed entity should provide information about itself and its governance to investors via its website.	The Company’s website contains information about the Company, its values and business activities and other information relevant to investors. Investors may access copies of ASX announcements, notices of meeting and annual reports, as well asgeneral information about the Company,on the Website.
6.2 A listed entity should have an investor relations program that facilitates efective two-way communication with investors.	The Company conducts regular market briefngs, including interim and full year results presentations, investor roadshows and briefngs and also attends industry conferences in order to facilitate communication with investors and other stakeholders. Presentation material is provided to ASX and uploaded to the Website to ensure that all shareholders have timely access to information. The Company aims to ensure that all shareholders are well informed of all major developments afecting the Group.
6.3 A listed entity should disclose how it facilitates and encourage participation at meetings of security holders.	Shareholders are encouraged to attend the Company’s annual general meeting and to ask questions of Directors. The notice of meeting includes a process to enable shareholders to submit questions to the Board and the Company’s auditor prior to the meeting.
6.4 A listed entity should ensure that all substantive resolutions at a meeting of security holders are decided by a poll rather than by a show of hands.	All resolutions at the Company’s general meetings are decided by a poll.
6.5 A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically.	Shine provides its investors with the option to receive communications from, and send communications to, the Company and the share registry electronically.

Corporate Governance Statement

54 2021 Annual Report

Principles and Recommendations

Shine Justice Group’s Compliance

Principle 7

Recognise and manage risk:

A listed entity should establish a sound risk management framework and periodically review the effectiveness of that framework.

Principle 7 Recognise and manage risk: A listed entity should establish a sound risk management framework and periodically review the efectiveness of that framework.	Principle 7 Recognise and manage risk: A listed entity should establish a sound risk management framework and periodically review the efectiveness of that framework.	Principle 7 Recognise and manage risk: A listed entity should establish a sound risk management framework and periodically review the efectiveness of that framework.
7.1 The board should a.have a committee to oversee risk which has at least three members, a majority of whom are independent directors and is chaired by an independent director; and b.disclose the charter, members and meeting attendance of the committee.	The Board has an Audit & Risk Management Committee, comprised of the three independent Non-executive Directors and chaired by an independent Non-executive Director (Teresa Dyson). Further details about the membership of the Audit & Risk Management Committee, including the names and qualifcations of its members, are set out on pages 14 and 15. The Charter of the Audit & Risk Management Committee is available on the Company’s website along with information about its members. The number of meetings held by the Committee and the Directors’ attendance at meetings is disclosed each year in the Group’s annual report and can be found on page 13 for FY21.
7.2 The board or a committee of the board should: a.review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound and that the entity is operating with due regard to the risk appetite set by the board; and b.disclose, in relation to each reporting period, whether such a review has taken place.	The Board is responsible for the oversight and management of risk, including the identifcation of material business risks on an ongoing basis and is assisted by the Audit & Risk Management Committee where required. A review of material business risks has been conducted in the Financial Year, which concluded that controls over risk management processes were adequate and efective.
7.3 A listed entity should disclose if it has an internal audit function, how the function is structured and what role it performs.	The Company has an Internal Audit function which reports directly to the Chair of the Audit & Risk Management Committee in order to maintain independence. The Internal Audit & Risk Manager reviews the systems of internal control and risk management to ensure compliance with the Group’s published policies and procedures and its legal and regulatory obligations. Reviews of specifc areas of risk or control are undertaken by a combination of internal and external parties on an ad-hoc basis and by the Company’s internal and external auditors as required for the Group’s audit. Improvements are made where identifed to increase the efectiveness of the Group’s internal controls.
7.4 A listed entity should disclose whether it has any material exposure to environmental or social risks and, if it does, how it manages or intends to manage those risks.	The Group’s exposure to material business risks is disclosed in the Directors’ Report on pages 38 and 39. The Directors do not believe the Group has any material exposure to environmental or social risks. During FY20, the Group adopted an Environmental Sustainability Policy and a Modern Slavery Policy (and supporting Supplier Code of Conduct), each of which appear on the Group’s website. Shine Justice lodged its frst Modern Slavery Statement with the Department of Home Afairs in March 2021, in accordance with the_Modern Slavery_ Act 2018. Further information about the Group’s environmental, social and governance profle is set out on page 43.

Corporate Governance Statement

Shine Justice Ltd 55

Principles and Recommendations

Shine Justice Group’s Compliance

Principle 8

Remunerate fairly and responsibly:

A listed entity should pay director remuneration sufficient to attract and retain high quality directors and design its executive remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders and with the entity’s values and risk appetite.

Principle 8 Remunerate fairly and responsibly: A listed entity should pay director remuneration sufcient to attract and retain high quality directors and design its executive remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders and with the entity’s values and risk appetite.	Principle 8 Remunerate fairly and responsibly: A listed entity should pay director remuneration sufcient to attract and retain high quality directors and design its executive remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders and with the entity’s values and risk appetite.	Principle 8 Remunerate fairly and responsibly: A listed entity should pay director remuneration sufcient to attract and retain high quality directors and design its executive remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders and with the entity’s values and risk appetite.
8.1 The board should: a.have a remuneration committee which has at least three members, the majority of whom are independent directors and which is chaired by an independent director; and b.disclose the charter, members and meeting attendance of the committee.	A Nomination and Remuneration Committee, consisting of all three independent Directors and chaired by an independent Director, assisted the Board to discharge its responsibilities in relation to remuneration and issues relevant to remuneration policies and practices, including those for senior management and Non-executive Directors, during the Financial Year. The number of meetings held by the Committee and the Directors’ attendance at meetings is disclosed each year in the Group’s annual report and can be found on page 13 for FY21. The Charter of the Committee is available on the Website.
8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors, and the remuneration of executive directors and other senior executives.	The Company seeks to attract and retain high-performing Directors and executives with the experience, skills and qualifcations necessary to add value to the Company and fulfl the roles required. Accordingly, the Company seeks to recruit by ofering remuneration which is competitive for comparable executive roles. Further information about key factors afecting Director and executive remuneration are disclosed each year in the Remuneration Report which can be found commencing on page 18.
8.3 A listed entity which has an equity- based remuneration scheme should: a.have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and b.disclose that policy or a summary of it.	Details of the Group’s equity based remuneration scheme are set out in the Remuneration Report commencing on page 18. The equity based remuneration scheme prohibits transactions which confict with the Group’s Securities Trading Policy (which prohibits Directors and executives from entering into margin lending arrangements or short-term trading in relation to Company securities). A copy of the Securities Trading Policy is available on the Website.

56 Shine Justice Ltd FY21 Annual Report

Financial Report

Financial Report

Shine Justice Ltd FY21 Annual Report 57

Financial Report > Financial Statements

Financial statements

These financial statements are consolidated financial statements for the Group consisting of Shine Justice Ltd and its subsidiaries. A list of subsidiaries is included in note 13.

The financial statements are presented in Australian currency.

CONTENTS

	CONTENTS
	Consolidated statement ofproft or loss	58
	Consolidated statement of comprehensive income	59
	Consolidated balance sheet	60
	Consolidated statement of changes in equity	62
	Consolidated statement of cash fows	63
	Notes to the fnancial statements	64
	Directors’ Declaration	152

Shine Justice Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Shine Justice Ltd Level 13, 160 Ann St Brisbane QLD 4000

The financial statements were authorised for issue by the Directors on 27 August 2021. The Directors have the power to amend and reissue the financial statements.

All press releases, financial reports and other information are available at our Investors Centre on our website: www.shinejustice.com.au

58 Shine Justice Ltd FY21 Annual Report

Financial Report > Financial Statements

Consolidated statement of profit or loss

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2021 2020
Notes $’000 $’000
Revenue from contracts with customers 3(a) 191,880 180,799
Other income 3(a)&4(a) 1,774 2,233
Employee benefits expense (100,778) (92,110)
Depreciation and amortisation expense (12,891) (12,053)
Finance costs 4(d) (6,619) (7,313)
Other expenses 4(c) (36,456) (39,366)
Profit before income tax 36,910 32,190
Income tax expense 5 (11,316) (10,637)
Profit for the period 25,594 21,553
Profit is attributable to:
Owners of Shine Justice Ltd 8(d)&20(c) 25,556 21,476
Non-controlling interest 13(b) 38 77
25,594 21,553
Cents Cents
Earnings per share for profit attributable to the ordinary
equity holders of the Company:
Basic earnings per share 20(a) 14.75 12.40
Diluted earnings per share 20(b) 14.40 12.13
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Shine Justice Ltd FY21 Annual Report 59

Financial Report > Financial Statements

Consolidated statement of comprehensive income

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----- Start of picture text -----

2021 2020
Notes $’000 $’000
Profit for the period 25,594 21,553
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations 8(c) (23) (270)
Other comprehensive income for the period, net of tax (23) (270)
Total comprehensive income for the period 25,571 21,283
Total comprehensive income for the period is attributable to:
Owners of Shine Justice Ltd 25,533 21,206
Non-controlling interest 13(b) 38 77
25,571 21,283
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60 Shine Justice Ltd FY21 Annual Report

Financial Report > Financial Statements

Consolidated balance sheet

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2021 2020
Notes $’000 $’000
ASSETS
Current assets
Cash and cash equivalents 6(d) 55,992 32,812
Trade and other receivables 6(a) 14,035 10,876
Contract assets – work in progress 3(c) 161,205 181,565
Income tax receivable 7(e) 5 322
Unbilled disbursements 6(c) 81,832 67,240
Other financial assets at amortised cost 6(b) 313 313
Other current assets 7(f) 4,087 2,983
Total current assets 317,469 296,111
Non-current assets
Trade and other receivables 6(a) 1,237 1,528
Contract assets – work in progress 3(c) 138,107 123,537
Unbilled disbursements 6(c) 25,058 22,028
Investment in unlisted entity 100 -
Plant and equipment 7(a) 3,699 3,234
Other financial assets at amortised cost 6(b) 4,392 4,385
Right-of-use assets 7(b) 34,551 40,647
Intangible assets 7(c) 48,578 48,949
Total non-current assets 255,722 244,308
Total assets 2(d) 573,191 540,419
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Shine Justice Ltd FY21 Annual Report 61

Financial Report > Financial Statements

Consolidated balance sheet (continued)

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2021 2020
Notes $’000 $’000
LIABILITIES
Current liabilities
Trade and other payables 6(e) 16,872 13,485
Disbursement creditors 6(e) 91,081 83,644
Borrowings 6(g) 4,504 4,075
Lease liabilities 7(b) 8,129 7,549
Other current financial liabilities 6(e) 158 154
Current tax liabilities 7(e) 254 215
Employee benefit obligations 7(g) 8,722 7,619
Provisions 7(h) 211 214
Total current liabilities 129,931 116,955
Non-current liabilities
Trade and other payables 6(e) 1,696 2,535
Borrowings 6(g) 45,879 48,424
Lease liabilities 7(b) 34,814 40,898
Deferred tax liabilities 7(d) 102,785 91,649
Employee benefit obligations 7(g) 1,422 1,293
Provisions 7(h) 1,523 1,445
Total non-current liabilities 188,119 186,244
Total liabilities 2(e) 318,050 303,199
Net assets 255,141 237,220
EQUITY
Share capital 8(a) 53,223 53,223
-
Other equity 8(b) (62)
Reserves 8(c) 999 380
Retained earnings 8(d) 200,840 183,514
Capital and reserves attributable to the owners of Shine
255,000 237,117
Justice Ltd
Non-controlling interest 13(b) 141 103
Total equity 255,141 237,220
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62 Shine Justice Ltd FY21 Annual Report

Financial Report > Financial Statements

Consolidated statement of changes in equity

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Attributable to owners of Shine Justice Ltd
Foreign Equity Non-
Share Other Retained exchange share controlling Total
capital equity earnings reserves reserves interest equity
Notes $’000 $’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2019 53,150 - 168,966 (246) 433 105 222,408
Profit for the period - - 21,476 - - 77 21,553
Other comprehensive - - - - -
8(c) (270) (270)
income
Total comprehensive - - 21,476 (270) - 77 21,283
income for the period
Transactions with owners
in their capacity as
owners:
- - - -
Dividends paid 12(b) (6,928) (79) (7,007)
Deferred ordinary shares 73 - - - (45) - 28
Share schemes – value of
18(c) - - - - 508 - 508
services
73 - (6,928) - 463 (79) (6,471)
Balance at 30 June 2020
53,223 - 183,514 (516) 896 103 237,220
and 1 July 2020
Profit for the period - - 25,556 - - 38 25,594
Other comprehensive - - - - -
8(c) (23) (23)
income
Total comprehensive - - 25,556 (23) - 38 25,571
income for the period
Transactions with owners
in their capacity as
owners:
- - - - -
Dividends paid 12(b) (8,230) (8,230)
Acquisition of treasury - - - - -
8(b) (62) (62)
shares
Share schemes – value of
18(c) - - - - 642 - 642
services
- (62) (8,230) - 642 - (7,650)
Balance at 30 June 2021 53,223 (62) 200,840 (539) 1,538 141 255,141
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Shine Justice Ltd FY21 Annual Report 63

Financial Report > Financial Statements

Consolidated statement of cash flows

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2021 2020
Notes $’000 $’000
Cash flows from operating activities
Receipts from customers (inclusive of GST) 218,456 175,566
Payments to suppliers and employees (inclusive of GST) (154,351) (144,389)
Disbursements recovered 65,141 23,685
Disbursements paid (74,352) (24,570)
Interest received 263 406
Finance costs (5,851) (5,657)
Income taxes paid (229) (287)
Net cash inflow from operating activities 9(a) 49,077 24,754
Cash flows from investing activities
Payments for plant and equipment (1,406) (1,085)
Payment of deferred consideration relating to acquisition of business (838) (258)
Payments for acquisition of files (31) -
Payments for investments (100) -
Purchase of receivables - (678)
Loans to related parties (7) (980)
Payment for intangible assets (3,075) (3,441)
Net cash (outflow) from investing activities (5,457) (6,442)
Cash flows from financing activities
Payments for treasury shares 8(b) (62) -
Proceeds from borrowings 816 2,259
Repayment of borrowings (2,241) (1,891)
Dividends paid to company’s shareholders 12(b) (8,230) (6,928)
Dividends paid to non-controlling interests in subsidiaries - (79)
Asset finance facility repayments (2,409) (2,281)
Principal elements of lease payments (8,061) (7,528)
Proceeds from disbursement funding 9,610 24,103
Repayments of disbursement funding (9,854) (19,834)
Net cash (outflow) from financing activities (20,431) (12,179)
Net increase in cash and cash equivalents 23,189 6,133
Cash and cash equivalents at the beginning of the financial year 32,812 26,697
Effects of exchange rate changes on cash and cash equivalents (9) (18)
Cash and cash equivalents at end of year 6(d) 55,992 32,812
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64 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements

CONTENTS

Notes to the financial statements

	1.	Signifcant changes in the current reporting period	65
	How numbers are calculated		66
	2.	Segment information	67
	3.	Revenue	71
	4.	Other income and expense items	75
	5.	Income tax expense	77
	6.	Financial assets and fnancial liabilities	79
	7.	Non-fnancial assets and liabilities	92
	8.	Equity	110
	9.	Cash fow information	113
	Risk		115
	10.	Critical estimates, judgements and errors	116
	11.	Financial risk management	117
	12.	Capital management	124
	Group structure		126
	13.	Interests in other entities	127
	Unrecognised items		130
	14.	Contingent liabilities and contingent assets	131
	15.	Commitments	131
	16.	Events occurringafter the reporting period	132
	Further details		133
	17.	Relatedpartytransactions	134
	18.	Share-basedpayments	137
	19.	Remuneration of auditors	142
	20.	Earningsper share	143
	21.	Deed of crossguarantee	145
	22.	Parent entityfnancial information	148
	23.	Summaryof other signifcant accounting policies	150

Shine Justice Ltd FY21 Annual Report 65

Financial Report > Notes to the Financial Statements Note 1 Significant changes in the current reporting period

1. Significant changes in the current reporting period

The Group remains well placed to grow revenues organically through ongoing practice innovation.

The Group re-negotiated its CBA funding facilities in May 2021. There have been no adverse changes to the terms or covenants or the Group’s financing as a result of the new arrangements.

The Group has sufficient headroom to enable it to conform to covenants on its existing borrowings and sufficient working capital and undrawn financing facilities to service its operating activities.

The Group settled or resolved more than 7,000 cases during the year and procured client damages in excess of $900 million.

New Practice Area segment

Our Class Actions business grew significantly in FY21.

In respect of work in progress following the decision of the Federal Court of Australia in favour of Kathryn Gill, Diane Dawson and Ann Sanders (Applicants) in the class action against Ethicon Sàrl, Ethicon, Inc. and Johnson & Johnson Medical Pty Limited (Respondents) in November 2019 (the Mesh Class Action), the Federal Court Registrar awarded Shine fixed costs in the sum of $39,786,867, which was received in December 2020. The sum comprised Shine’s fees of $23,000,000 ($20,909,091 exclusive of GST) and disbursements due to external funders of $16,786,867.

The appeal in the matter was unanimously dismissed by the Full Court of the Federal Court of Australia in March this year. The Respondents have applied to the High Court of Australia for special leave to appeal the decision.

Our Medical Law business is expanding and demonstrated good growth.

Bradley Bayly Legal and the Shine Abuse business experienced strong growth in abuse matters, following law reform removing the limitation period for childhood sexual abuse compensation claims.

Emerging business risks

The Group has reviewed its exposure to emerging business risks, that could impact the financial performance or financial position of the Group as at 30 June 2021 as follows:

COVID-19 Pandemic Impact

The Group continued to closely monitor and respond to the potential impacts on its business of the COVID-19 pandemic during the year. There has been limited impact from COVID-19 on the operations and financial results of the Group highlighting the following:

• The COVID-19 pandemic impacted the business community in the way services were provided. However, combined with flexible remote working there has been minimal disruption to the delivery of services or impact on enquiries, case management or settlements

• Financial results (NPAT) for FY21 are 18.8% ahead of prior year

• The Group had $51.5 million net cash at bank (cash at bank less short-term borrowings), and sufficient liquidity in its banking facilities (refer to Note 11(d) for undrawn facility balances)

• Liquidity levels remain consistent, with the net current asset position increasing to $187.5 million (2020: $179.2 million)

• The pipeline of new work is tracking well, with new case numbers through Q3 and Q4 remaining consistent with prior year numbers, and

• There was a favourable increase in new enquiries particularly in the Abuse business.

There were no other significant business risks that impacted the financial performance or financial position of the Group as at 30 June 2021.

For a detailed discussion about the Group’s performance and financial position please refer to our operating and financial review on pages 36 to 39.

Personal Injury segment

Shine Lawyers continued to specialise in damages-based plaintiff litigation legal services, primarily relating to personal injuries. The business continued to optimise traditional and digital advertising, adapting content to respond to changing emphasis in client concerns as the COVID-19 pandemic evolved. Brand presence was strengthened across all regions, especially Queensland.

The Group’s Western Australian businesses continued to perform well.

66 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements

How numbers are calculated

This section provides additional information about those individual line items in the financial statements that the Directors consider most relevant in the context of the operations of the Group, including:

• (a) accounting policies that are relevant for an understanding of the items recognised in the financial statements. These cover situations where the accounting standards either allow a choice or do not deal with a particular type of transaction

CONTENTS

	2.	Segment information	67
	3.	Revenue	71
	4.	Other income and expense items	75
	5.	Income tax expense	77
	6.	Financial assets and fnancial liabilities	79
	7.	Non-fnancial assets and liabilities	92
	8.	Equity	110
	9.	Cash fow information	113

• (b) analysis and subtotals, including segment information, and

• (c) information about estimates and judgements made in relation to particular items.

Shine Justice Ltd FY21 Annual Report 67

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 2 Segment information

2. Segment information

a. Description of segments and principal activities

The Group’s Managing Director examines the Group’s performance from a legal service perspective and has identified two reportable segments of its business:

i. Personal Injury

Personal injury remains the core business in damagesbased plaintiff litigation.

The Shine Lawyers Core PI business includes:

• motor vehicle accidents

• workers’ compensation, and

• public liability

In addition, brands included within this segment are:

• SB Law Pty Ltd

• Sciacca’s Lawyers Pty Ltd

• Bradley Bayly Holdings Pty Ltd

• Claims Consolidated Pty Ltd, and

• Nerve Legal Pty Ltd (Clamify)

ii. New Practice Areas

Shine Justice’s New Practices Areas comprise:

The Shine Lawyers NPA business, which includes:

• abuse law

• disability insurance and superannuation claims

• asbestos and dust disease

• federal compensation law

• medical law

• class actions

• commercial disputes

• employment

• private client services, and

• catastrophic injuries (transferred from PI during the second half of the year)

In addition, brands included within this segment are:

• Emanate Legal Services Pty Ltd

• Best Wilson Buckley Family Law Pty Ltd

• Bradley Bayly Holdings Pty Ltd (Abuse portion)

• Shine NZ Services Pty Ltd

• Risk Worldwide New Zealand Limited

• My Insurance Claim Pty Ltd, and

• Carr & Co Divorce and Family Lawyers Pty Ltd

Therefore, as the business currently accounts for significantly less than 10% of the Group revenue, profit or assets, this business has been grouped under New Practice Areas, as permitted under AASB 8.

iii. Other

The column includes corporate head office and Group services.

The Managing Director primarily uses a measure of:

• earnings before interest, tax, depreciation and amortisation (EBITDA), and

• gross operating cash flow (GOCF)

to assess the financial performance of the operating segments.

The Managing Director also receives information about the segments’ revenue and assets on a monthly basis. Information about segment revenue is disclosed in note 3.

Classification of the Bradley Bayly Holdings Pty Ltd business

The Group has previously reported the Bradley Bayly business in the PI Segment.

However, management considers it to be more relevant to separate the Abuse business from the PI business and disclose the Abuse portion of its business in the NPA segment.

Subsequently, prior year segment revenue comparatives as at 30 June 2020 have been restated by reclassifying Abuse segment revenue of $5,421,827 from the PI segment to the NPA segment.

Prior year EBITDA comparatives have been restated by reclassifying Abuse segment revenue of $2,682,930 from the PI to the NPA segment.

Classification of the Shine Lawyers Catastrophic Injuries business

The Group has previously reported the Shine Lawyers Catastrophic Injuries business in the PI Segment. However, management considers it to be more relevant to report this business in the NPA segment.

Subsequently, prior year segment revenue comparatives have been restated by reclassifying segment revenue of $7,282,820 from the PI segment to the NPA segment.

Prior year EBITDA comparatives as at 30 June 2020 have been restated by reclassifying this business revenue of $3,478,934 from the PI to the NPA segment.

The business undertaken by Risk Worldwide New Zealand Limited and My Insurance Claim Pty Ltd does not meet the specific criteria in AASB 8 Operating Segments which means it is not considered as its own reporting segment.

68 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 2 Segment information

Accounting policy

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.

The Managing Director assesses the financial performance and position of the Group and makes strategic decisions.

b. EBITDA

Interest income and finance costs are not allocated to segments, as this type of activity is driven by the Group finance function, which manages the cash position of the Group.

EBITDA is not an IFRS measure and excludes those costs which are managed by the Group finance function. EBITDA reconciles to operating profit after income tax as follows:

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2021 2020
$’000 $’000
Profit after income tax 25,594 21,553
Finance costs – net 6,619 7,313
Depreciation and amortisation 12,891 12,053
Income tax expense 11,316 10,637
Interest revenue (263) (406)
EBITDA 56,157 51,150
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EBITDA based on the operations of the segments is shown below:

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2021 2020
$’000 $’000
Personal Injury 15,206 26,682
New Practice Areas 40,858 23,882
Other 93 586
EBITDA 56,157 51,150
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Shine Justice Ltd FY21 Annual Report 69

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 2 Segment information

c. GOCF

The Managing Director utilises GOCF as a key measure to monitor cashflow generated from operations. GOCF is not an IFRS measure and excludes those costs which are managed by the Group finance function. GOCF reconciles to Net cash inflows from operating activities as follows:

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2021 2020
$’000 $’000
Cash inflow from operating activities 49,077 24,754
Net cashflows from disbursement funding (244) 4,269
Finance costs paid 5,851 5,657
Income taxes paid 229 287
Interest received (263) (406)
GOCF 54,650 34,561
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d. Segment assets

Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the operations of the segment.

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2021 2020
$’000 $’000
Personal Injury 251,830 260,315
New Practice Areas 320,201 279,083
Other 1,160 1,021
Total segment assets 573,191 540,419
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The total of non-current assets other than financial instruments, broken down by location of the assets, is shown below.

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2021 2020
$’000 $’000
Australia 223,544 209,817
New Zealand 1,393 3,719
224,937 213,536
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70 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 2 Segment information

e. Segment liabilities

Segment liabilities are measured in the same way as in the financial statements. These liabilities are allocated based on the operations of the segment.

The Group’s borrowings are not considered to be segment liabilities but are managed by the Group finance function.

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2021 2020
$’000 $’000
Personal Injury 95,427 90,147
New Practice Areas 66,802 65,064
Other 3,634 4,486
Total segment liabilities 165,863 159,697
Unallocated:
Deferred tax liabilities 102,785 91,649
Borrowings 49,402 51,853
Total liabilities as per the balance sheet 318,050 303,199
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Shine Justice Ltd FY21 Annual Report 71

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 3 Revenue

3. Revenue

a. Revenue from contracts with customers

The Group derives revenue from the transfer of services over time under contracts that are either no-win-no-fee or time and materials based, with a fee that is either fixed or variable in the following major segment lines:

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Personal New
Other Total
Injury Practice Areas
2021 2020 2021 2020 2021 2020 2021 2020
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Legal services
No-win-no-fee variable 87,803 101,412 76,643 53,739 - - 164,446 155,151
No-win-no-fee fixed fee - - 7,648 6,123 - - 7,648 6,123
Time and materials - - 19,786 19,525 - - 19,786 19,525
Revenue from external
87,803 101,412 104,077 79,387 - - 191,880 180,799
customers
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b. Other income

Interest income Service management fee Other revenue Other income Total segment revenue	- - - - 27 192 27 192 87,830 101,604	- - - - 29 90 29 90 104,106 79,477	263 406 1,451 1,545 4 - 1,718 1,951 1,718 1,951	263 406 1,451 1,545 60 282
				1,774 2,233
				193,654 183,032

Revenue from external customers come from the provision of legal services. The revenue from both Personal Injury and New Practice Areas relates to the Shine Lawyers brand as well as other major brands.

The Group does not derive any revenue from any single external customer which is greater than 10% of total revenue.

The amount of its revenue from external customers broken down by location of the customers is shown below.

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2021 2020
$’000 $’000
Australia 193,304 178,820
New Zealand (424) 1,979
191,880 180,799
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72 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 3 Revenue

c. Assets and liabilities related to contracts with customers

The Group has recognised the following assets and liabilities related to contracts with customers:

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2021 2020
$’000 $’000
Current contract assets relating to work in progress 161,205 181,565
Non-current contract assets relating to work in progress 138,107 123,537
Total contract assets 299,312 305,102
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There are no liabilities relating to contracts with customers.

Accounting policy

Work in progress (WIP) represents revenue recognised (costs incurred and profit recognised) on client cases that are in progress and have not yet been invoiced at the end of the reporting date. WIP is recorded at its recoverable amount.

The Company recognises WIP where it is highly probable that the WIP will be recovered on completion of the matter. In assessing the probability of a significant reversal of revenue and hence WIP, Shine reviews the historical recovery rates of closed cases across similar matter types and stages of completion for the past 12 months. The calculated closed file recovery rate includes both matters that were billed and those that were closed with no fee.

Shine incorporates actuarial methodologies to assist in analysing its WIP recoverability rates. Cases that have

been identified as unlikely to be successful but not yet closed are not considered to be highly probable and no WIP or revenue is recognised for these matters.

Work in progress and revenue recognition on some larger cases, such as class actions and major claims, consider the specific aspects of each case or class action, including any third-party funding arrangements that may be applicable to the action.

Where there is a risk of a significant reversal of revenue in a future period the revenue and associated work in progress in relation to those matters are not recognised in the current reporting period.

Historical experience and knowledge of the client cases has been used to determine the net realisable value of work in progress at balance date and the classification between current and non-current.

Shine Justice Ltd FY21 Annual Report 73

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 3 Revenue

d. Revenue streams

i. Legal services: No-win-no-fee variable

This revenue stream operates based on contingent fee arrangements, whereby fees are earned only if there is a successful outcome of a matter. Revenue is recognised on a time recorded and materials basis net of any constraint of variable consideration.

Certain larger matters including some class actions are undertaken on a partially or fully funded basis. The Group has arrangements with third party funders to provide a portion of the fees receivable over time as services are performed. In such arrangements, the funded portion of fees is billed and recognised as revenue regularly over time and is not contingent on the successful outcome of the matter. 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.

ii. Legal services: No-win-no-fee fixed

This revenue stream operates based on contingent fee arrangements, whereby fees are earned only if there is a successful outcome of a matter.

Revenue is recognised on a time recorded and materials basis net of any constraint of variable consideration.

iii. Legal services: Time and materials

The Group earns revenue through a broad range of disciplines within its New Practice Areas segment. Fee arrangements include fixed fee arrangements and unconditional fee for service arrangements (time and materials). Revenue is recognised over time in the accounting period when services are rendered.

For unconditional time and materials contracts, revenue is recognised in line with the amount of fees that the Group is entitled to invoice for services performed to date based on contracted rates.

The Group has taken advantage of the practical expedient as set out in AASB 15 as the Group has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Group’s performance completed to date (as matters are billed for a fixed amount for each hour of service provided) and as such the Group has recognised revenue in the amount to which the Group has a right to invoice less any constraint on variable consideration.

Accounting policies and significant judgements

Estimating variable consideration

Under AASB 15, where consideration in respect of a contract is variable, revenue can only be recognised to the extent that it is highly probable that the cumulative amount of revenue recognised in respect of a contract will not be subject to a significant reversal when the uncertainty associated with the variable consideration is subsequently resolved (this is referred to as the ‘constraint’ requirement). WIP has been recognised net of a constraint of $71,764,112 (2020: $66,575,119).

The Group has determined statistically that its existing modelling for expected losses for contingent matters is materially compliant with the constraint requirements for variable consideration.

Performance obligations

Performance obligations within contracts outline the specific goods and services that are to be delivered to the customer over the life of the contract. For legal services, contracts with clients generally comprise a single distinct performance obligation, being the provision of services in pursuit of the successful settlement of a customer’s claim, and the transaction price is allocated to this single performance obligation. Some contracts contain multiple deliverables – for example in respect of a statutory claim and a common law claim, or initial pre-issue work and litigation work. In such circumstances, these multiple deliverables are considered to represent a single distinct performance obligation, given there is a significant level of integration performed by the Group in delivering these services.

Transaction price – variable

The Group provides various services based on contingent fee arrangements. The uncertainty around the fees ultimately receivable under these types of contracts is generally only fully resolved when a matter is concluded.

Where the Group has sufficient historical experience in similar contracts in order to be able to estimate the expected outcome of a group of existing contracts reliably, revenue is estimated using the “expected value” method. Revenue is recognised only to the extent that it is highly probable that the cumulative amount of revenue recognised in respect of a contract at the end of a reporting period will not be subject to significant reversal when a matter is concluded.

74 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 3 Revenue

To determine the probability of success of a case using the expected value method, a level of judgement is required to be applied based on past experience and historical performance of similar matters. The estimated amount of variable consideration is based on the expected fee for the nature of the legal service provided with reference to historical fee levels and relative rates of successful and unsuccessful outcomes.

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.

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.

Measuring progress of completion

Revenue is recognised when control of a service is transferred to the customer. The Group recognises revenue in matters ‘over time’ (as opposed to at a ‘point in time’) as the customer receives and consumes the benefits of the contract as the Group provides the promised goods and services. A stage of completion approach is used to measure progress towards completion of the performance obligation.

value through the profit or loss. Disbursements recovered are paid to third parties.

Conversion of work in progress to receivable

The conversion of work in progress to a receivable in relation to services is recognised when a bill has been raised, as this is the point in time that the consideration becomes unconditional because only the passage of time is required before the payment is due. For No-winno-fee matters, billing occurs when the matter is successfully resolved. For non-contingent revenue contracts, billing occurs over the life of the contract in line with contractual terms.

No significant financing component

Generally, the Group provides services to customers over multiple accounting periods. When a customer is paying for goods and services in arrears, the Group is effectively providing financing to the customer.

The Group has determined that no significant financing component exists in respect of its revenue streams. The reasoning for this decision is as follows:

• For contingent matters, a substantial amount of the consideration promised by the customer is variable subject to the occurrence or non-occurrence of a future event that is not substantially within the control of the customer or the Group, and

• With respect to fee for service and fixed fee arrangements, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

The stage of completion is determined using either:

• Time recorded productivity adjusted for potential billing write-offs and unsuccessful matters, or

• Judgement based estimates of percentage completion. The percentage of completion is determined by comparing the work performed to date against the expected fee to be billed at the conclusion of the matter, considering the approximate amount of time incurred and any potential uplifts/down sides that may be present upon completion.

Disbursements

Disbursements (costs from third parties in relation to matters) are arranged on behalf of the client. The Group cannot influence the services or goods provided by disbursement suppliers, therefore no profit margin is recognised on the activities when clients are on-charged the cost incurred by the Group. The Group acts as an agent for disbursements and no revenue is recognised. The disbursements recoverable at the end of the matter are treated as a separate financial asset measured at fair

Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 4 Other income and expense items

75

4. Other income and expense items

This note provides a breakdown of the items included in other income, other gains/(losses), costs and an analysis of expenses by nature. Information about specific profit and loss items (such as gains and losses in relation to financial instruments) is disclosed in the related balance sheet notes.

a. Other income

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2021 2020
$’000 $’000
Services management fee 1,451 1,545
Interest income 263 406
Other 60 282
1,774 2,233
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i. Interest income

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit impaired. For credit impaired financial assets, the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).

ii. Services management fee

Sales of goods, rent, and services to Shine Lawyers NZ Limited, an affiliated entity of the Group. Refer to note 17 for further detail.

b. Other gains/(losses)

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----- Start of picture text -----

2021 2020
$’000 $’000
Net (loss)/gain on disposal of plant and equipment (10) 207
Net foreign exchange gains 11 17
1 224
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76 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 4 Other income and expense items

c. Breakdown of expenses by nature

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2021 2020
Notes $’000 $’000
Premises 3,799 4,030
Marketing 12,199 12,733
HR 3,074 2,717
IT and computer 7,590 5,657
Printing, postage and stationery 1,195 1,513
Professional fees 4,114 3,846
Fair value losses on unbilled disbursements 6(h) 3,324 5,870
Motor vehicle and travel 822 1,205
Bad and doubtful debts 91 1,098
Sundry 248 697
36,456 39,366
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d. Finance costs

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2021 2020
Notes $’000 $’000
Interest and finance charges paid/payable for lease liabilities 7(b) 2,433 2,816
Disbursement funding related interest 2,461 1,493
Transformation project funding facility interest 259 387
Interest on other debt facilities 1,390 2,420
Other 76 197
6,619 7,313
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Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 5 Income tax expense

77

5. Income tax expense

This note provides an analysis of the Group’s income tax expense, shows what amounts are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Group’s tax position.

a. Income tax expense

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2021 2020
$’000 $’000
Current tax
Current tax on profits for the year 192 156
Total current tax expense 192 156
Deferred income tax
Decrease/(increase) in deferred tax assets 6,666 (2,362)
Increase in deferred tax liabilities 4,458 12,843
Total deferred tax expense 11,124 10,481
Income tax expense 11,316 10,637
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b. Numerical reconciliation of income tax expense to prima facie tax payable income tax expense

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2021 2020
$’000 $’000
Profit before income tax expense 36,910 32,190
Tax at the Australian tax rate of 30% (2020: 30%) 11,073 9,657
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income:
Movement in work in progress - 304
Amortisation of intangibles 139 139
Non-allowable items 71 57
Adjustments for current tax of prior periods 33 480
Income tax expense 11,316 10,637
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78 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 5 Income tax expense

c. Tax losses

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----- Start of picture text -----

2021 2020
$’000 $’000
Australia
Tax losses for which a deferred tax asset has been recognised 24,503 49,387
Potential tax benefit @ 30% 7,351 14,816
New Zealand
Tax losses for which a deferred tax asset has been recognised 275 2,101
82 630
Potential tax benefit @ 30%
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Accounting policy

Current income tax

The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to

interpretation. It establishes provisions where appropriate based on amounts expected to be paid to the tax authorities.

Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Leases

The Group’s lease payments are deductible upon payment for tax purposes. In accounting for the deferred tax relating to the lease, the Group considers both the lease asset and the lease liability separately. The Group separately accounts for the deferred taxation on the taxable temporary differences and the deductible temporary difference, which upon initial recognition are equal and offset to zero. Deferred tax is recognised on subsequent changes to the taxable and temporary differences as net on the balance sheet.

Shine Justice Ltd FY21 Annual Report

79

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

6. Financial assets and financial liabilities

This note provides information about the Group’s financial instruments, including:

• an overview of all financial instruments held by the Group

• specific information about each type of financial instrument

• accounting policies, and

• information about determining the fair value of the instruments, including judgements and estimation uncertainty involved.

The Group holds the following financial instruments:

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2021 2020
FINANCIAL ASSETS Notes $’000 $’000
Assets at amortised cost
Trade and other receivables 6(a) 15,272 12,404
Other financial assets 6(b) 4,705 4,698
Cash and cash equivalents 6(d) 55,992 32,812
75,969 49,914
Assets at fair value
Unbilled disbursements 6(c) 106,890 89,268
182,859 139,182
2021 2020
FINANCIAL LIABILITIES Notes $’000 $’000
Liabilities at amortised cost
Trade and other payables 6(e) 18,568 16,020
Disbursement creditors 6(e) 91,081 83,644
Other financial liabilities 6(e) 158 154
Borrowings 6(g) 50,383 52,499
Lease liabilities 7(b) 42,943 48,447
203,133 200,764
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The Group’s exposure to various risks associated with the financial instruments is discussed in note 11. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.

80 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

Accounting policy

Investments and other financial assets

Classification

The Group classifies its financial assets in the following measurement categories:

• those measured subsequently at fair value (either through Other comprehensive income (OCI) or through profit or loss), and

Measurement

At initial recognition, the Group measures a financial asset at its fair value (plus, in the case of a financial asset not at fair value through profit or loss (FVPL)), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Impairment

• those measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

The Group assesses on a forward-looking basis the expected credit loss associated with its trade receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

The Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see note 11(c) for further details.

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

Recognition and derecognition

Purchases and sales of financial assets are recognised on trade date, being the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Shine Justice Ltd FY21 Annual Report 81

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

a. Trade and other receivables

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2021 2020
Notes $’000 $’000
Current
Trade receivables from contracts with customers 13,305 12,078
Loss allowance 11(c) (997) (1,664)
12,308 10,414
Other receivables 1,727 462
14,035 10,876
Non-current
Trade receivables from contracts with customers 1,708 2,106
Loss allowance 11(c) (471) (578)
1,237 1,528
15,272 12,404
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i. Fair values of trade receivables

Due to the short-term nature of the current receivables, their carrying amount is the same as their fair value.

ii. Impairment and risk exposure

Information about the impairment of trade receivables and the Group’s exposure to credit risk and foreign currency risk can be found in note 11(c) and 11(b).

Accounting policy

Trade receivables are amounts due from customers for services performed in the ordinary course of business. Trade receivables expected to be collected within 12 months of the end of the reporting period are classified as current. All other trade receivables are classified as non-current.

Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method less loss allowance.

Details about the Group’s impairment policies and the calculation of the loss allowance are provided in note 11(c).

82 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

b. Other financial assets at amortised cost

Financial assets at amortised cost include the following debt investments:

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2021 2020
Notes $’000 $’000
Current
Loans to related parties (i) 313 313
313 313
Non-current
Loans to related parties (i) 4,413 4,406
Less: allowance for expected credit losses 11(c) (21) (21)
4,392 4,385
4,705 4,698
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i. Loans to related parties

Further information relating to loans to related parties is set out in note 17.

ii. Impairment and risk exposure

Information about the impairment of loans to related parties and the Group’s exposure to credit risk can be found in note 11(c).

Accounting policy

The Group classifies its financial assets as at amortised cost only if both of the following criteria are met:

• the asset is held within a business model whose objective is to collect the contractual cash flows, and

• the contractual terms give rise to cash flows that are solely payments of principal and interest.

Shine Justice Ltd FY21 Annual Report 83

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

c. Unbilled disbursements

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2021 2020
Notes $’000 $’000
Current 81,832 67,240
Non-current 25,058 22,028
7(h) 106,890 89,268
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i. Classification as unbilled disbursements

The Group determines the classification between current and non-current by evaluating the expected timing of settlements and billings of each case, considering historical trends and average length of time that cases are open.

Accounting policy

Disbursements represent costs incurred on behalf of clients during a matter that are recovered from clients on case resolution.

A general fair value adjustment is made to unbilled disbursements based on the Group’s history of amounts not recovered over previous years, and a specific assessment is made on the recoverability of disbursements on major No-win-no-fee cases such as class actions.

ii. Fair values of unbilled disbursements

The losses on these assets held at FVTPL are disclosed separately at Note 4(c). It has been assessed whether the unbilled disbursements are held at ‘at risk’ could impact the analysis that Shine is the agent rather than principal in respect of the disbursements under AASB 15.

In assessing the indicators whether the Group might be considered a principal under AASB 15, it is noted that the Group:

• is not responsible for fulfilling the promise of providing the good or service (e.g., Shine is not responsible for providing a medical report)

• does not have inventory risk in respect of the underlying good or service (e.g., in respect of a medical report), and

• does not have price discretion in respect of the disbursements (as this sits with the disbursement provider e.g., the doctor).

None of these indicators are impacted by the fact that the disbursements receivable is at risk, and therefore it has been assessed as appropriate that Group continues to be considered a principal in respect of disbursements.

See note 6(h) for more detail relating to the recognition of fair value measurements.

84 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

d. Cash and cash equivalents

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2021 2020
Notes $’000 $’000
Current assets
Cash at bank and in hand 55,992 31,994
Restricted cash - 818
Balance per statement of cash flows 9(b) 55,992 32,812
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i. Classification as cash equivalents

Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are receivable with 31 days’ notice with an interest adjustment based on the percentage of the original term elapsed as at the end of the 31-day notice period.

ii. Restricted cash

There is no restricted cash held by Shine Justice Ltd (2020: $818,000). In the prior year, this deposit was subject to restrictions and therefore was not available for general use by the other entities within the Group.

Accounting policy

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less and that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

During the previous financial year, $818,000 was receipted regarding a matter acquired as part of the ACA Lawyers acquisition. Under the acquisition, these funds were required to be held until another specific matter was secured and funding achieved. These conditions were met during the current year and therefore the $818,000 was subsequently paid to the ACA vendor.

Shine Justice Ltd FY21 Annual Report 85

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

e. Trade and other payables

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2021 2020
Notes $’000 $’000
Current
Trade and other payables
Trade payables 6,823 5,676
Sundry payables and accrued expenses 1,499 2,644
Staff related payables 8,550 5,165
16,872 13,485
Disbursement creditors
Disbursement funding creditors 6(f) 80,101 71,977
Other disbursement creditors 10,980 11,667
91,081 83,644
158 154
Other financial liabilities
108,111 97,283
Non-current
Deferred consideration – vendor liabilities on acquisition (i) 1,696 2,535
1,696 2,535
Total 109,807 99,818
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i. Deferred consideration - vendor liabilities on acquisition

At 30 June 2021, there was $1,697,088 (2020: $2,515,272) of contingent consideration with respect to the ACA Lawyers acquisition still outstanding. No interest has been accrued on the balance amounting.

ii. Disbursement funding creditors

See note 6(f) for further details.

iii. Other disbursement creditors

Disbursements payable by Shine which is not funded by an external disbursement funder These include speculative matters and barristers’ fees which are payable on the settlement of a case.

Accounting policy

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.

They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

86 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

f. Disbursement funding

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----- Start of picture text -----

Facility limit Total facility Undrawn limit
(Principal) balance available
Notes $’000 $’000 $’000
30 June 2021
Third Party Disbursement Funding Facility
Deferred payment agreement
Principal 57,500 (46,183) 11,317
Accrued interest (23,202)
(69,385)
Credit contracts and Exclusive Service Provider Deed
Principal (9,028)
Accrued interest and fees (1,688)
(10,716)
Total 6(e) (80,101)
30 June 2020
Third Party Disbursement Funding Facility
Deferred payment agreement
Principal 57,500 (52,867) 4,633
Interest (14,204)
(67,071)
Credit contracts and Exclusive Service Provider Deed
Principal (4,098)
Accrued interest and fees (808)
(4,906)
Total 6(e) (71,977)
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Shine Justice Ltd FY21 Annual Report

87

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

Deferred Payment Agreement

In June 2018, Shine Lawyers entered into a Deferred Payment Agreement with a third party to fund disbursements incurred on behalf of Shine’s clients. The disbursement funder reimburses Shine for disbursements incurred in respect of individual client matters and the disbursement funder is subsequently repaid out of settlement proceeds on completion of the matter. Should there be insufficient proceeds on settlement of a case or a case be unsuccessful Shine has the primary responsibility to repay the disbursement.

Accounting policy

The amount of disbursements funded under these facilities is recognised within disbursement funding creditors (see note 6(e)) and an offsetting amount is recognised in unbilled disbursements (debtors) .

A provision is recognised against unbilled disbursements to reflect the value of unrecoverable disbursements and funding fees which were not expected to be recovered from clients.

The principal drawdown on the Deferred Payment Agreement at 30 June 2021 is $46,183,273 (2020: $52,866,718) reflecting total disbursements that are funded. Total accrued interest is $23,201,743 (2020: $14,204,140). The principal and interest in aggregate represents the Group’s maximum potential exposure.

Credit contracts and Exclusive Service Provider Deed

In September 2018, Shine Justice Ltd and Shine Lawyers entered into an Exclusive Service Provider Deed to create a disbursement funding facility with a third party.

Disbursement loans are provided to clients of the Group by the funder for the sole purpose of funding disbursements. The funding agreement is between the client and the funder. Should there be insufficient proceeds on settlement of a case or case be unsuccessful Shine has guaranteed to repay the disbursement on behalf of the client.

There is no limit to the total value of client loans that can be approved by the third party. The total principal drawdown at 30 June 2021 was $9,027,965 (2020: $4,098,286).

88 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

g. Borrowings

Financing arrangements

The Group’s borrowing facilities were as follows:

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2021 2020
Notes $’000 $’000
Variable rate – bank loans
Expiring within one year 978 695
Expiring beyond one year 45,000 45,000
11(b) 45,978 45,695
Fixed rate – bank loans
982 646
Expiring within one year
Transformation project costs loan
Expiring within one year 2,544 2,409
Expiring beyond one year 879 3,424
3,423 5,833
Vendor finance
Expiring within one year - 325
50,383 52,499
Current 9(b) 4,504 4,075
Non-current 9(b) 45,879 48,424
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Shine Justice Ltd FY21 Annual Report 89

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

i. Compliance with financial covenants

Shine Justice Ltd has complied with the financial covenants of its borrowing facilities during the 2021 and 2020 reporting period, see note 12(a) for details.

ii. Fair value

For most of the borrowings, the fair values are not materially different from their carrying amounts, since the interest payable on those borrowings is either close to current market rates or the borrowings are of a short-term nature.

iii. Risk exposures

Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 11.

Accounting policy

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all the facility will be drawn down, the fee is capitalised as a prepayment and amortised over the period of the facility to which it relates.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

90 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

h. Recognised fair value measurements

i. Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Group has classified its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the table.

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Recurring fair value measurements Level 1 Level 2 Level 3 Total
at 30 June 2021 $’000 $’000 $’000 $’000
Financial assets
Unbilled disbursements - - 106,890 106,890
Total financial assets - - 106,890 106,890
Recurring fair value measurements Level 1 Level 2 Level 3 Total
at 30 June 2020 $’000 $’000 $’000 $’000
Financial assets
Unbilled disbursements - - 89,268 89,268
Total financial assets - - 89,268 89,268
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There were no transfers into or out of Level 3 fair value measurements during the twelve months ended 30 June 2021.

The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the reporting period.

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

ii. Valuation techniques used to determine fair values

Specific valuation techniques used to value financial instruments include:

• The use of quoted market prices or dealer quotes for similar instruments

• For foreign currency forwards – present value of future cash flows based on the forward exchange rates at the balance sheet date, and

• For other financial instruments – discounted cash flow analysis.

All the resulting fair value estimates are included in level 3.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Shine Justice Ltd FY21 Annual Report 91

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 6 Financial assets and financial liabilities

iii. Fair value measurements using significant unobservable inputs

The following table presents the changes in level 3 items for the periods ended 30 June 2021 and 30 June 2020:

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----- Start of picture text -----

Unbilled disbursements
Notes $’000
Balance at 1 July 2019 78,296
Additions and settlements 16,842
Losses recognised in profit or loss 4(c) (5,870)
Balance at 30 June 2020 & 1 July 2020 6(c) 89,268
Additions and settlements 20,946
Losses recognised in profit or loss 4(c) (3,324)
Balance at 30 June 2021 6(c) 106,890
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iv. Transfers between levels and changes in valuation techniques

There were no transfers between the levels of the fair value hierarchy in the twelve months to 30 June 2021. There were also no changes made to any of the valuation techniques applied as at 30 June 2020.

v. Valuation inputs and relationships to fair value

The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value measurements (see (ii) above for the valuation techniques adopted).

Description	Fair value at 30 June 2021 $’000	Unobservable inputs	Relationship of unobservable inputs to fair value
Unbilled disbursements	106,890	Internal historical recovery rates Qualitative individual matters	If the recovery rate was 1% (higher) or lower, the fair value would (decrease)/increase by $1,097,316

92 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

7. Non-financial assets and liabilities

This note provides information about the Group’s non-financial assets and liabilities, including:

• specific information about each type of non-financial asset and non-financial liability

• plant and equipment (note 7(a))

• leases (note 7(b))

• intangible assets (note 7(c))

• deferred tax balances (note 7(d))

• current tax balances (note 7(e))

• other assets (note 7(f))

• employee benefit obligations (note 7(g))

• provisions (note 7(h))

• accounting policies

• information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved.

Shine Justice Ltd FY21 Annual Report 93

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

a. Plant and equipment

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----- Start of picture text -----

Fixtures
Office
and furniture and Computer
fittings equipment equipment Total
Non-current $’000 $’000 $’000 $’000
Year ended 30 June 2020
Cost or fair value 6,853 2,306 1,014 10,173
Accumulated depreciation (4,668) (1,697) (574) (6,939)
Net book amount 2,185 609 440 3,234
Opening net book amount 2,166 720 400 3,286
Exchange differences (10) 3 - (7)
Additions 596 67 422 1,085
Reclassifications 25 (25) - -
-
Disposals (3) (176) (179)
Depreciation charge (592) (153) (206) (951)
Closing net book amount 2,185 609 440 3,234
Year ended 30 June 2021
Cost or fair value 7,397 2,126 1,751 11,274
Accumulated depreciation (5,241) (1,604) (730) (7,575)
Net book amount 2,156 522 1,021 3,699
Opening net book amount 2,185 609 440 3,234
Exchange differences (1) 1 - -
Additions 430 167 902 1,499
Reclassifications - - (94) (94)
Disposals (1) (30) (1) (32)
Depreciation charge (581) (119) (208) (908)
Closing net book amount 2,032 628 1,039 3,699
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94 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

Depreciation methods and useful lives

Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of the assets, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term.

The depreciation rates are as follows:

• Fixtures and fittings ...........................................................2.5-67% • Office furniture and equipment ..........................................2-67% • Computer equipment ....................................................... 2.5-50% • Vehicles......................................................................................... 20% • Leased plant and equipment ......................................... 2.5-50% • Makegood ............................................................................... 12-67%

Accounting policy

The Group’s accounting policy for plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

The depreciation methods and periods used by the Group are disclosed above.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 23(c)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings.

Shine Justice Ltd FY21 Annual Report 95

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

b. Leases

This note provides information on leases where the Group is a lessee.

i. Amounts recognised in the balance sheet

The balance sheet shows the following amounts relating to leases:

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2021 2020
$’000 $’000
Right-of-use-assets
Premises 31,654 38,021
Equipment 2,897 2,626
34,551 40,647
Lease liabilities
Current 8,129 7,549
Non-current 34,814 40,898
42,943 48,447
----- End of picture text -----

Additions to the right-of-use assets during the 2021 financial year were $2,446,121 (2020: $2,435,257).

ii. Amounts recognised in the statement of profit or loss

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----- Start of picture text -----

2021 2020
Notes $’000 $’000
Depreciation charge of right-of-use-assets
Premises (7,585) (7,505)
Equipment (1,079) (1,164)
(8,664) (8,669)
Interest expense (included in finance cost) 4(d) (2,433) (2,816)
Expense relating to short-term leases (included in other expenses) (274) (119)
Expense relating to leases of low-value assets that are not shown
(13) (18)
above as short-term leases (included in other expenses)
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The total cash outflow for leases in 2021 was $11,134,132 (2020: $10,343,855).

96 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

iii. The Groups leasing activities and how these are accounted for

The Group leases various office premises and equipment. Rental contracts are typically made for fixed periods of 12 months to 5 years, but may have extension options as described in (iv) below.

Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

• fixed payments, less any lease incentives receivable

• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date

• amounts expected to be payable by the Group under residual value guarantees

• the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and

• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date less any lease incentives received

• any initial direct costs, and

• restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.

iv. Extension and termination options

Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Group:

• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received

• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by Shine Justice Ltd, which does not have recent third party financing, and

• makes adjustments specific to the lease, eg term, country, currency and security.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability, until they take effect. When

Shine Justice Ltd FY21 Annual Report 97

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

v. Residual value guarantees

Critical judgements in determining the lease term

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

For leases of office premises and equipment, the following factors are normally the most relevant:

• If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or not terminate),

• If any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain to extend (or not terminate), and

To optimise lease costs during the contract period, the Group sometimes provides residual value guarantees in relation to equipment leases.

Estimating the amount payable under residual value guarantees

The Group initially estimates and recognises amounts expected to be payable under residual value guarantees as part of the lease liability. Typically the expected residual value at lease commencement is equal to or higher than the guaranteed amount, so the Group does not expect to pay anything under the guarantees.

At the end of each reporting period, the expected residual values are reviewed to reflect actual residual values achieved on comparable assets and expectations about future prices.

• Otherwise, the Group considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.

Most extension options in offices and equipment leases have not been included in the lease liability, because the Group could replace the assets without significant cost or business disruption.

The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.

During the current financial year, the financial effect of revising termination options was a decrease of $44,876 (2020: $487,384).

There was no exercising of extensions during the year that were not already taken up in the lease liability.

Shine Justice Ltd FY21 Annual Report

98

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

c. Intangible assets

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----- Start of picture text -----

Trademarks,
Non-contractual patents and
client IT development Transformation Erin Brockovich intellectual
Goodwill relationships & software Project costs Agreement property Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Year ended 30 June 2020
Cost 46,152 4,653 4,769 13,471 1,130 186 70,361
Accumulated amortisation and impairment (10,000) (4,074) (497) (5,536) (1,130) (175) (21,412)
Net book amount 36,152 579 4,272 7,935 - 11 48,949
Opening net book amount 36,158 1,043 44 10,584 104 11 47,944
Exchange differences (6) - - - - - (6)
Additions - - 3,445 - - - 3,445
Transfer - - 862 (862) - - -
Amortisation charge - (464) (79) (1,787) (104) - (2,434)
Closing net book amount 36,152 579 4,272 7,935 - 11 48,949
Year ended 30 June 2021
Cost 46,151 1,391 7,300 13,471 - 11 68,324
Accumulated amortisation and impairment (10,000) (1,275) (1,124) (7,347) - - (19,746)
Net book amount 36,151 116 6,176 6,124 - 11 48,578
Opening net book amount 36,152 579 4,272 7,935 - 11 48,949
Exchange differences (1) - - - - - (1)
Additions - - 3,826 - - - 3,826
Disposals - - (126) - - - (126)
Amortisation charge - (463) (1,045) (1,811) - - (3,319)
Reclass of SaaS configuration and - - (751) - - - (751)
customisation costs to the profit or loss
Closing net book amount 36,151 116 6,176 6,124 - 11 48,578
----- End of picture text -----

Shine Justice Ltd FY21 Annual Report 99

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

i. Amortisation methods and useful lives

The Group amortises intangible assets with a limited useful life using the straight-line method over the following periods:

• Transformation Project costs ............................................8 years • Non-contractual Client Relationship ...........................1.5 years • Patents and trademarks ...................................................10 years • IT development and software ...................................... 1-5 years

See note 23(c) for the Group’s policy regarding impairments.

Transformation Project Costs

This is amortised on a straight-line based to the extent that it will deliver future economic benefits and these benefits can be measured reliably.

Non-contractual Client Relationship

This relates to a file asset acquisition. The asset is representative of the premium paid to access profits expected to be obtained and is amortised over the life of the individual matters with an expected maximum amortisation period of between 1.5 to 3 years.

Accounting policy

Trademarks, licences and customer contracts

Separately acquired trademarks and licences are shown at historical cost. Trademarks, licences and customer contracts acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses.

Software

Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets where the following criteria are met:

• it is technically feasible to complete the software so that it will be available for use

• management intends to complete the software and use or sell it

• there is an ability to use or sell the software

• it can be demonstrated how the software will generate probable future economic benefits

• adequate technical, financial and other resources to complete the development and to use or sell the software is available, and

• the expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.

100 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

ii. Cloud based computing arrangements

Implementation of IFRS Interpretations Committee (IFRIC) agenda decision and new accounting policy

During the year, the Company revised its accounting policy in relation to upfront configuration and customisation costs incurred in implementing SaaS arrangements in response to the IFRIC agenda decision clarifying its interpretation of how current accounting standards apply to these types of arrangements. The new accounting policy is presented below.

Software-as-a-Service (SaaS) arrangements

SaaS arrangements are service contracts providing the Company with the right to access the cloud provider’s

Key judgements in applying the Company accounting policies

In applying the Company’s accounting policy, the Directors made the following key judgements that may have the most significant effect on the amounts recognised in the financial statements.

Capitalisation of configuration and customisation costs in SaaS arrangements

Part of the customisation and configuration activities undertaken in implementing SaaS arrangements may entail the development of software code that enhances or modifies, or creates additional capability to the existing on-premise software to enable it to connect with the cloud-based software applications (referred to as bridging modules or APIs). Judgement was applied in determining whether the additional code meets the definition of and recognition criteria for an intangible asset in AASB 138 Intangible Assets. During the year, the Company recognised $30,863 (2020: $nil) as intangible assets in respect of customisation and configuration costs incurred in implementing SaaS arrangements.

Determination whether configuration and customisation services are distinct from the SaaS access

Costs incurred to configure or customise the cloud provider's application software are recognised as operating expenses when the services are received. In

application software over the contract period. Costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider's application software, are recognised as operating expenses when the services are received.

Some of these costs incurred are for the development of software code that enhances or modifies, or creates additional capability to, existing on-premise systems and meets the definition of and recognition criteria for an intangible asset. These costs are recognised as intangible software assets and amortised over the useful life of the software on a straight-line basis. The useful lives of these assets are reviewed at least at the end of each financial year, and any change accounted for prospectively as a change in accounting estimate.

a contract where the cloud provider provides both the SaaS configuration and customisation, and the SaaS access over the contract term, the directors applied judgement to determine whether these services are distinct from each other or not, and therefore, whether the configuration and customisation costs incurred are expensed as the software is configured or customised (i.e. upfront), or over the SaaS contract term. Specifically, where the configuration and customisation activities significantly modify or customise the cloud software, these activities will not be distinct from the access to the cloud software over the contract term. Judgement has been applied in determining whether the degree of customisation and modification of the cloud-based software that would be deemed significant. During the year, the Company recognised $nil (2020: $nil) as prepayments in respect of customisation and configuration activities undertaken in implementing SaaS arrangements which are considered not to be distinct from the access to the SaaS access over the contract term.

As disclosed above, the Company revised its accounting policy in relation to SaaS arrangements during the year resulting from the implementation of agenda decisions issued by the IFRIC. Historical financial information has been assessed to have not had an material impact and has not been restated to account for the impact of the change in accounting policy. A total of $751,501 was expensed in the current year.

Shine Justice Ltd FY21 Annual Report 101

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

iii. Impairment tests for goodwill

Goodwill is monitored by management at the level of the two operating segments identified in note 2(a). A summary of the goodwill allocation by segment is presented below:

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2021 2020
$’000 $’000
Goodwill carrying amount
Personal Injury 14,188 16,646
New Practice Areas 21,963 19,506
36,151 36,152
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Significant estimate: key assumptions used for value-in-use calculations

The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of the cash-generating units (CGUs) was determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on board approved financial budgets for FY22. Cash flows beyond the four-year period are extrapolated using the estimated growth rates stated below. These growth rates are consistent with both historical trends and future forecasts projected.

The following table sets out the key assumptions for those CGUs that have significant goodwill allocated to them:

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Personal Injury New Practice Areas
2021
Revenue volume (% annual growth rate) 5.0 5.0
Operating costs (% annual growth rate) 3.0 to 3.7 3.0 to 3.7
Long-term growth rate (%) 3.0 3.0
Pre-tax discount rate (%) 13.2 13.6
2020
Revenue volume (% annual growth rate) 5.0 5.0
Operating costs (% annual growth rate) 3.0 to 3.7 3.0 to 3.7
Long-term growth rate (%) 3.0 3.0
Pre-tax discount rate (%) 13.9 15.1
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102 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

Management has determined the values assigned to each of the above key assumptions as follows:

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Assumption Approach used to determine values
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Assumption	Approach used to determine values
Revenue volume	Average annual growth rate over the fve-year forecast period is based on past performance, FY22 budget and management’s expectations of market development. Personal Injury CGU Group In relation to the PI CGU, historical performance from 2012-2019 has been in excess of an annual growth rate of 5%. Over recent years, the annual growth rate has been less than 5% due to strategies being undertaken to restructure and re-organise the NSW and Victorian PI business. However, based on recent work to resize the PI business it is expected that the PI business will return to historical growth rate in FY22 and beyond. As a result, it is considered appropriate that based on expectations of future performance that it is reasonable to maintain an annual growth rate of 5%. New Practice Areas CGU Group In relation to the NPA CGU, historical performance has been in excess of an annual growth rate of 5%. It is anticipated future growth will primarily be driven from the Class Action business and the continued growth in the Medical Law and Abuse Law businesses. As a result, it is considered appropriate that based on expectations of future performance that it is reasonable to continue to maintain an annual growth rate of 5%.
Other operating costs	Fixed costs of the CGUs, which do not vary signifcantly with revenue volumes or prices. Management forecasts these costs based on the current structure of the business, adjusting for infationary increases but not refecting any future restructurings or cost-saving measures. The amounts disclosed above are the average operating costs for the fve-year forecast period.
Long-term growth rate	This is the weighted average growth rate used to extrapolate cash fows beyond the budget period. The rates are consistent with forecasts included in industry reports.
Pre-tax discount rates	Refect specifc risks relating to the relevant segments and the jurisdictions in which they operate.

iv. Significant estimate: impairment charge

Based on the impairment testing performed, the results of the impairment testing of each CGU concluded that no impairment charge against goodwill is to be recognised at 30 June 2021.

v. Significant estimate: impairment if changes in key assumptions

The directors and management have considered and assessed reasonably possible changes for other key assumptions and have not identified any instances that could cause the carrying amount of the Personal Injury CGU and the New Practice Areas CGU to exceed its recoverable amount.

Shine Justice Ltd FY21 Annual Report

103

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

Personal Injury CGU

Although there are no reasonably possible changes in key assumptions that would indicate an impairment, the recoverable amount of this CGU would equal its carrying amount if the key assumptions were to change as follows, with all other assumptions remaining constant:

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2021 2020
From To From To
Revenue volume (% annual growth rate) 5.0 2.6 5.0 2.3
Long-term growth rate (%) 3.0 -4.4 3.0 -4.9
Pre-tax discount rate (%) 13.2 16.9 13.9 17.8
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New Practice Areas CGU

Although there are no reasonably possible changes in key assumptions that would indicate an impairment, the recoverable amount of this CGU would equal its carrying amount if the key assumptions were to change as follows with all other assumptions remaining constant:

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2021 2020
From To From To
Revenue volume (% annual growth rate) 5.0 3.5 5.0 2.9
Long-term growth rate (%) 3.0 -0.9 3.0 -3.7
Pre-tax discount rate (%) 13.6 15.4 15.1 18.2
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Accounting policy

Goodwill

Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised, but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments (note 2).

104 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

d. Deferred tax balances

i. Deferred tax balances

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2021 2020
$’000 $’000
Deferred tax assets 16,983 23,661
Deferred tax liabilities (119,768) (115,310)
(102,785) (91,649)
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ii. Deferred tax assets

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2021 2020
$’000 $’000
The balance comprises temporary differences attributable to:
Tax losses 7,433 15,446
Provisions 6,478 5,714
13,911 21,160
Other
Leases 2,646 2,341
Employee LTI 456 171
Sundry (30) (11)
3,072 2,501
Total deferred tax assets 16,983 23,661
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Significant estimates

The deferred tax assets include an amount of $7,350,611 (2020: $14,815,959) which relates to Australian carried-forward tax losses. New Zealand carry forward tax losses amount to $82,429 (2020: $630,320). The Group has concluded that the deferred assets will be recoverable using the estimated future taxable income based on the approved business plans and budgets for the Group. The losses can be carried forward indefinitely and have no expiry date. See note 5(c) for more details.

Shine Justice Ltd FY21 Annual Report 105

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

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Tax losses Provisions Leases Employee LTI Sundry Total
Movements $’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2019 14,155 5,356 1,693 110 7 21,321
(Charged)/credited
to statement of comprehensive income 1,291 358 648 61 4 2,362
- - - -
to statement of financial position (22) (22)
Balance at 30 June 2020 & 1 July 2020 15,446 5,714 2,341 171 (11) 23,661
(Charged)/credited
to statement of comprehensive income (8,013) 764 305 285 (7) (6,666)
- - - -
to statement of financial position (12) (12)
Balance at 30 June 2021 7,433 6,478 2,646 456 (30) 16,983
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iii. Deferred tax liabilities

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2021 2020
$’000 $’000
The balance comprises temporary differences attributable to:
Work in progress and disbursements 118,356 114,349
Intangible assets 1,172 844
Plant and equipment 240 117
Total deferred tax liabilities 119,768 115,310
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Shine Justice Ltd FY21 Annual Report

106

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

Offsetting within tax consolidated Group

Shine Justice Ltd and its wholly owned Australian subsidiaries have applied the tax consolidation legislation which means that these entities are taxed as a single entity. Consequently, the deferred tax assets and deferred tax liabilities of these entities have been offset in the consolidated financial statements.

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WIP and Intangible Plant and
Disburs. assets equipment Total
Movements $’000 $’000 $’000 $’000
Balance at 1 July 2019 101,774 515 178 102,467
(Charged)/credited
to statement of comprehensive income 12,575 329 (61) 12,843
Balance at 30 June 2020 & 1 July 2020 114,349 844 117 115,310
(Charged)/credited
to statement of comprehensive income 4,007 328 123 4,458
Balance at 30 June 2021 118,356 1,172 240 119,768
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e. Current tax balances

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2021 2020
$’000 $’000
Current tax receivable 5 322
Current tax liabilities (254) (215)
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These tax balances are in different tax jurisdictions and are not off settable.

Accounting policy

See note 5 for more detail on the Group’s income tax accounting policy.

Shine Justice Ltd FY21 Annual Report 107

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

f. Other assets

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2021 2020
$’000 $’000
Other current assets
Prepayments 4,087 2,983
4,087 2,983
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Shine Justice Ltd FY21 Annual Report

108

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

g. Employee benefit obligations

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2021 2020
Current Non-current Total Current Non-current Total
$’000 $’000 $’000 $’000 $’000 $’000
Leave obligations 8,722 1,422 10,144 7,619 1,293 8,912
Total employee benefit obligations 8,722 1,422 10,144 7,619 1,293 8,912
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Leave obligations

The leave obligations cover the Group’s liabilities for long service leave and annual leave which are classified as either other long-term benefits or short-term benefits.

The current portion of this liability includes all the accrued annual leave, the unconditional entitlements to long service leave where employees have completed the required period of service and for those employees who are entitled to pro-rata payments in certain circumstances. The entire amount of the provision of $8,722,287 (2020: $7,619,375) is presented as current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.

	2021	2020
	$’000	$’000
Current leave obligations expected to be settled after 12 months	5,768	5,525

Accounting policy

Short-term obligations

Liabilities for wages and salaries, including nonmonetary benefits and annual leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.

The liabilities are presented as current employee benefit obligations in the balance sheet.

Other long-term employee benefit obligations

The Group also has liabilities for long service leave and annual leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. These

obligations are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.

The obligations are presented as current liabilities in the balance sheet if the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.

Shine Justice Ltd FY21 Annual Report 109

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 7 Non-financial assets and liabilities

h. Provisions

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2021 2020
Current Non-current Total Current Non-current Total
$’000 $’000 $’000 $’000 $’000 $’000
Make good provision (i) 211 1,523 1,734 214 1,445 1,659
211 1,523 1,734 214 1,445 1,659
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i. Information about individual provisions and significant estimates

Make good provision

Shine Justice Ltd is required to restore the leased premises of its offices and branches to their original condition at the end of the respective lease terms. A provision has been recognised for the present value of the estimated expenditure required to remove any leasehold improvements. These costs have been capitalised as part of the cost of leasehold improvements and are amortised over the shorter of the term of the lease and the useful life of the assets.

ii. Movements in provisions

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Makegood provision
2021 $’000
Balance at 1 July 2020 1,659
Charged/(credited) to profit or loss
additions provisions recognised 75
Balance at 30 June 2021 1,734
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Accounting policy

Provisions for make good obligations are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Where there are several similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of

an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

110 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 8 Equity

8. Equity

a. Share capital

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2021 2020 2021 2020
Shares Shares $’000 $’000
Ordinary shares
Fully paid 173,261,812 173,261,812 53,223 53,223
Total share capital 173,261,812 173,261,812 53,223 53,223
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i. Movements in ordinary shares

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Number of shares (thousands) Total
# $’000
Details
Balance at 1 July 2019 173,162 53,150
Deferred ordinary shares issued 100 73
Balance at 30 June 2020 & 1 July 2020 173,262 53,223
Balance at 30 June 2021 173,262 53,223
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ii. Ordinary shares

Ordinary shares entitle the holder to participate in dividends, and to share in the proceeds of winding up the Company in proportion to the number of and amounts paid on the Shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and on a poll each Share is entitled to one vote.

The Company does not have a limited amount of authorised capital.

iii. Dividend reinvestment plan

The Company does not currently operate a dividend reinvestment plan.

iv. Employee share scheme issues

Information relating to the Shine Justice Performance Rights Plan, including details of performance rights issued, exercised and lapsed during the financial year and rights outstanding at the end of the reporting period, is set out in note 18.

Accounting policy

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the Company’s equity instruments, for example as the result of a share buy-back or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of Shine Justice Ltd as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of Shine Justice Ltd.

Shares held by the Shine Justice Employee Share Trust are disclosed as treasury shares and deducted from contributed equity.

v. Share buy-back

There is no current on-market buy-back.

Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 8 Equity

111

b. Other equity

i. Treasury shares

Treasury shares are shares in Shine Justice Ltd that are held by the Shine Justice Employee Share Trust for the purpose of issuing shares under the Shine Justice Performance Rights Plan and the Shine Justice NED Equity Plan (see note 18 for further information).

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2021 2020
Number of shares $’000 Number of shares $’000
Details
- - - -
Opening balance 1 July 2020
Acquisition of shares under the non-executive director fee sacrifice scheme 63,212 62 - -
Acquisition of shares under the employee share scheme 384,344 307 - -
Issue of shares to employees under the employees share - -
(384,344) (307)
scheme
Balance at 30 June 2021 63,212 62 - -
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c. Other reserves

The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements in these reserves during the year. A description of the nature and purpose of each reserve is provided below the table.

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Share-based Foreign currency Total other
payments translation reserves
Notes $’000 $’000 $’000
Balance at 1 July 2019 433 (246) 187
-
Currency translation difference (270) (270)
-
Other comprehensive income (270) (270)
Transactions with owners in their capacity as
owners:
-
Deferred ordinary shares (45) (45)
Share-based payment expense 18(c) 508 - 508
Balance at 30 June 2020 & 1 July 2020 896 (516) 380
-
Currency translation difference (23) (23)
-
Other comprehensive income (23) (23)
Transactions with owners in their capacity as
owners:
Share-based payment expense 18(c) 642 - 642
Balance at 30 June 2021 1,538 (539) 999
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112 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 8 Equity

Nature and purposes of reserves

Share-based payments

The share-based payments reserve is used to recognise:

• the grant date fair value of performance rights granted to employees but not yet vested,

• the issue of shares held by the Shine Justice Ltd Employee Share Trust to employees, and

• the issue of shares held by the Shine Justice Ltd Employee Share Trust to non-executive directors.

Transactions with non-controlling interests

This reserve is used to record the differences described in note 13(a)(ii) which may arise as a result of transactions with noncontrolling interests that do not result in a loss of control.

Foreign currency translation

Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 23(b) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

d. Retained earnings

Movement in retained earnings were as follows:

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2021 2020
Notes $’000 $’000
Balance at 1 July 183,514 168,966
Net profit for the period 25,556 21,476
Dividends 12(b) (8,230) (6,928)
Balance at 30 June 200,840 183,514
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Shine Justice Ltd FY21 Annual Report 113

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 9 Cash flow information

9. Cash flow information

a. Reconciliation of profit after income tax to net cash inflow from operating activities

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2021 2020
$’000 $’000
Profit for the period 25,594 21,553
Adjustments for:
Depreciation and amortisation 12,891 12,053
Net gain on sale of non-current assets 158 (17)
Interest on make good provision 75 -
Changes in operating assets and liabilities
(Increase)/decrease in trade receivables (2,499) 304
Decrease/(increase) in other assets 616 (108)
Decrease/(increase) in work in progress 5,854 (21,911)
(Decrease) in disbursements (17,623) (10,971)
Increase in trade creditors and accruals 11,692 12,212
(Decrease) in income taxes payable (49) (154)
Increase in deferred tax liabilities 11,136 10,504
Increase in provisions 1,232 1,289
Net cash inflow from operating activities 49,077 24,754
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114 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > How Numbers are Calculated > Note 9 Cash flow information

b. Net debt

This section sets out an analysis of debt for each of the periods presented:

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2021 2020
Notes $’000 $’000
Cash and cash equivalents 6(d) 55,992 32,812
Borrowings – repayable within one year (including overdraft) 6(g) (4,504) (4,075)
Lease liabilities – repayable within one year 7(b) (8,129) (7,549)
Borrowings – repayable after one year 6(g) (45,879) (48,424)
Lease liabilities – repayable after one year 7(b) (34,814) (40,898)
Net debt (37,334) (68,134)
Cash and cash equivalents 6(d) 55,992 32,812
Gross debt – fixed interest rates (47,348) (54,926)
Gross debt – variable interest rates 6(g) (45,978) (46,020)
Net debt (37,334) (68,134)
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c. Reconciliation of liabilities arising from financing activities to financing cash flows

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Liabilities from financing activities
Disbursement
funding Borrowings Leases Total
$’000 $’000 $’000 $’000
Balance at 1 July 2019 (48,598) (54,413) (54,538) (157,549)
Cash flows – repayments (4,269) 1,914 7,527 5,172
Acquisitions - leases - - (2,453) (2,453)
Terminations – leases - - 970 970
Foreign exchange adjustments - - 47 47
Balance at 30 June 2020 & 1 July 2020 (52,867) (52,499) (48,447) (153,813)
Cash flows flows – repayments 244 3,835 8,056 12,135
Payments from lenders direct to suppliers - (1,719) - (1,719)
Loans repaid from client settlements 6,440 - - 6,440
Acquisitions – leases - - (3,878) (3,878)
Terminations – leases - - 1,322 1,322
Foreign exchange adjustments - - 4 4
Balance at 30 June 2021 (46,183) (50,383) (42,943) (139,509)
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Shine Justice Ltd FY21 Annual Report 115

Financial Report > Notes to the Financial Statements > Risk

Risk

This section of the notes discusses the Group’s exposure to various risks and shows how these could affect the Group’s financial position and performance.

CONTENTS

	10.	Critical estimates, judgements and errors	116
	11.	Financial risk management	117
	12.	Capital management	124

116 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Risk Note 10 Critical estimates, judgements and errors

10. Critical estimates, judgements and errors

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies.

This note provides an overview of the areas that involve a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different. Detailed information about each of these estimates and judgements is included in other notes together with information about the basis of calculation for each affected line item in the financial statements. In addition, this note also explains where there have been actual adjustments this year as a result of an error and of changes to previous estimates.

a. Significant estimates and judgements

The areas involving significant estimates or judgements are:

• estimated fair value of certain financial assets – notes 6(h)

• estimation uncertainties and judgements made in relation to lease accounting – note 7(b)

• estimated goodwill impairment – note 7(c)

• configuration and customisation costs in SaaS arrangements – note 7(c)

• recognition of revenue and allocation of transaction price – note 3

• impairment of financial assets – note 11(c)

Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.

Shine Justice Ltd FY21 Annual Report 117

Financial Report > Notes to the Financial Statements > Risk Note 11 Financial risk management

11. Financial risk management

This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance. Current year profit and loss information has been included where relevant to add further context.

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Risk Exposure arising from Measurement Management
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Market risk –	Future commercial transactions	Cash fow forecasting	Not applicable
foreign exchange	Recognised fnancial assets and liabilities	Sensitivity analysis
	not denominated in Australian dollars
Market risk –	Long-term borrowings at variable rates	Sensitivity analysis	Not applicable
interest rate
Credit risk	Cash and cash equivalents, trade	Ageing analysis	Diversifcation of bank deposits
	receivables and contract assets	Credit ratings	and credit limits
Liquidity risk	Borrowings and other liabilities	Rolling cash fow	Availability of committed credit
		forecasts	lines and borrowing facilities

The Group’s financial risk management is predominantly controlled by the Group finance department under policies approved by the board of directors. Group finance identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units.

The board approves written principles for overall risk management, as well as policies covering specific areas, such as:

• foreign exchange risk

• interest rate risk

• credit risk

• use of derivative financial instruments and non-derivative financial instruments, and

• investment of excess liquidity.

a. Derivatives

The Group does not currently have any derivative financial instruments.

b. Market risk

i. Foreign exchange risk

Exposure

The Group’s exposure to foreign currency risk at the end of the reporting period was as follows:

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2021 2020
NZD NZD
$’000 $’000
Cash and cash equivalents 2,969 1,109
Trade receivables 822 332
Trade payables (106) (396)
Lease liabilities (1,139) (1,434)
Other 186 (58)
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118 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Risk Note 11 Financial risk management

The aggregate net foreign exchange gains/losses recognised in profit or loss were:

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2021 2020
NZD NZD
$’000 $’000
Net foreign exchange (losses)/gains (6) 46
Exchange (loss)/gain on foreign currency borrowing included in finance costs (2) 9
Total net foreign exchanges (loss)/gain recognised in profit before
(8) 55
income tax for the period
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Instruments used by the Group

The Group operates internationally and is exposed to foreign exchange risk, primarily the New Zealand dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the functional currency of the relevant Group entity.

There is currently no hedging of the foreign exchange risk.

Sensitivity

The Group is primarily exposed to changes in NZ/AUD exchange rates. The sensitivity of profit or loss to changes in the exchange rates arises mainly from NZ dollar-denominated financial instruments and the impact on other components of equity is currently considered immaterial.

ii. Cash flow and fair value interest rate risk

The Group’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Group to cash flow interest rate risk.

The Group’s borrowings and receivables are carried at amortised cost. The borrowings are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates.

The exposure of the Group’s borrowings to interest rate changes at the end of the reporting period are as follows:

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----- Start of picture text -----

2021 % of total 2020 % of total
Note $’000 borrowings $’000 borrowings
Variable rate borrowings 6(g) 45,978 91% 45,695 88%
45,978 91% 45,695 88%
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An analysis by maturities is provided in note 12(d)(ii). The percentage of total borrowings shows the proportion of borrowings that are currently at variable rates in relation to the total amount of borrowings.

Instruments used by the Group

Refer to note 16(c) for further detail.

Shine Justice Ltd FY21 Annual Report 119

Financial Report > Notes to the Financial Statements > Risk Note 11 Financial risk management

Sensitivity

Profit or loss and other components of equity is sensitive to higher/lower interest income from cash and cash equivalents as a result of changes in interest rates.

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----- Start of picture text -----

Impact on post-tax profit Impact on other component of equity
2021 2020 2021 2020
$’000 $’000 $’000 $’000
Interest rates – increase by 100 basis points
(460) (457) (460) (457)
(2020: 100bps)
Interest rates – decrease by 100 basis points
460 457 460 457
(2020: 100bps)
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• Holding of other variables constant

Collectability risk

One of the Group’s main risks arises from unbilled disbursements where there is a risk of non-recoverability on legal matters that are on a no-win no-fee basis. This risk is mitigated through a number of processes including the case selection process and regular review of likelihood of success during the life of the matter.

The exposure of the Group’s unbilled disbursements to provision rate changes at the end of the reporting period are as follows:

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----- Start of picture text -----

Impact on post-tax profit Impact on other component of equity
2021 2020 2021 2020
$’000 $’000 $’000 $’000
Provision rates – increase by 1%
(1,097) (923) (1,097) (923)
(2020: 1%)
Provision rates – decrease by 1%
1,097 923 1,097 923
(2020: 1%)
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• Holding of other variables constant

120 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Risk Note 11 Financial risk management

c. Credit risk

Credit risk arises from:

• cash and cash equivalents

• deposits with banks and financial institutions, and

• credit exposures to customers, including outstanding receivables.

i. Risk management

Credit risk is managed on a Group basis. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.

There are no significant concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/or regions.

ii. Security

For some trade receivables the Group may obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement.

iii. Impairment of financial assets

The Group has two types of financial assets that are subject to the expected credit loss model:

• trade receivables from the provision of legal services, and

• contract assets relating to the provision of legal services.

While cash and cash equivalents are also subject to the impairment requirements of AASB 9, the identified impairment loss was immaterial.

Trade receivables

The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.

To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.

The expected loss rates are based on the corresponding historical credit losses experienced. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified the following to be the most relevant factors in determining expected loss rates:

• unemployment rate

• inflation, and

• Reserve Bank of Australia cash rate

Shine Justice Ltd FY21 Annual Report 121

Financial Report > Notes to the Financial Statements > Risk Note 11 Financial risk management

On that basis, the loss allowance as at 30 June 2021 and 30 June 2020 was determined as follows for trade receivables:

	Current	More than 30 days past due	More than 60 days past due	More than 90 days past due	More than 120 days past due	Total
30 June 2021
Expected loss rate (%)	0%	0%	0%	4%	21%
Gross carrying amount ($’000)	4,812	1,517	941	858	6,885	15,013
Loss allowance ($’000)	-	-	-	34	1,434	1,468
30 June 2020
Expected loss rate (%)	0%	0%	4%	20%	29%
Gross carrying amount ($’000)	3,837	1,755	632	821	7,139	14,184
Loss allowance ($’000)	-	5	28	164	2,045	2,242

The loss allowance for trade receivables as at 30 June 2021 reconciles to the opening loss allowance as follows:

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----- Start of picture text -----

2021 2020
$’000 $’000
Balance at start of year 2,242 1,849
Increase in loss allowance recognised in profit or loss during the year 112 1,002
Receivables written off during the year as uncollectable (886) (609)
Balance at 30 June 1,468 2,242
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Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a period of greater than 90 days past due.

Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item.

Contract assets – work in progress

The loss allowance for work in progress as at 30 June 2021 reconciles to the opening loss allowance as follows:

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----- Start of picture text -----

$’000
Opening loss allowance as at 1 July 2019 (324)
Closing loss allowance as at 30 June 2020 (324)
Closing loss allowance as at 30 June 2021 (324)
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122 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Risk Note 11 Financial risk management

Other financial assets at amortised cost

Other financial assets at amortised cost include loans to related parties and other receivables.

The loss allowance for other financial assets at amortised cost as at 30 June 2021 reconciles to the opening loss allowance as follows:

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----- Start of picture text -----

Related parties Total
$’000 $’000
Opening loss allowance as at 1 July 2019 21 21
Closing loss allowance as at 30 June 2020 21 21
Closing loss allowance as at 30 June 2021 21 21
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Significant estimates and judgements

Impairment of financial assets

The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history and existing market conditions as well as forward-looking estimates at the end of each reporting period.

d. Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. At the end of the reporting period the Group held cash at hand of $55,991,512 (2020: $32,811,751) that are expected to readily generate cash inflows for managing liquidity risk. Due to the dynamic nature of the underlying businesses, Group finance maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Group’s liquidity reserve (comprising the undrawn borrowing facilities below) and cash and cash equivalents (note 6(d)) based on expected cash flows. This is generally carried out at local level in the operating companies of the Group in accordance with practice and limits set by the Group. These limits vary by location to take into account the liquidity of the market in which the entity operates. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

i. Financing arrangements

The Group had access to the following undrawn borrowing facilities at the end of the reporting period:

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----- Start of picture text -----

2021 2020
$’000 $’000
Variable rate
Expiring within one year (line of credit) 1,500 1,500
Expiring beyond one year (bank loans) 21,022 26,805
22,522 28,305
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The line of credit may be drawn at any time and may be terminated by the bank without notice. The CBA facility may be drawn at any time and is subject to annual review. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time.

Shine Justice Ltd FY21 Annual Report 123

Financial Report > Notes to the Financial Statements > Risk Note 11 Financial risk management

ii. Maturities of financial liabilities

The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Contractual maturities of fnancial liabilities	Within 1 year $’000	Between 1 and 5 years $’000	Over 5 years $’000	Total contractual cash fows $’000	Carrying amount $’000
At 30 June 2021
Non-derivatives
Trade and other payables1	107,922	-	-	107,922	107,922
Borrowings	4,504	49,107	-	53,611	50,383
Deferred consideration	-	1,697	-	1,697	1,697
Lease liabilities	8,161	25,160	9,622	42,943	42,943
Total non-derivatives	120,587	75,964	9,622	206,173	202,945
At 30 June 2020
Non-derivatives
Trade and other payables	97,283	-	-	97,283	97,283
Borrowings	1,341	49,131	-	50,472	52,499
Deferred consideration	-	2,535	-	2,535	2,535
Lease liabilities	7,982	27,655	12,810	48,447	48,447
Total non-derivatives	106,606	79,321	12,810	198,737	200,764

1 Includes disbursement creditors which is classed as all current as becomes due and payable as soon as the case ends with no certainty on the timing

124 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Risk Note 12 Capital management

12. Capital management

a. Risk management

The Group’s objectives when managing capital is to:

• safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and

• maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may:

• adjust the amount of dividends paid to shareholders

• return capital to shareholders

• issue new shares, or

• sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital based on the following gearing ratio:

Net debt as per note 9(b)

divided by

Total ‘equity’ (as shown in the balance sheet, including non-controlling interests).

The gearing ratios at 30 June 2021 and 30 June 2020 were as follows:

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2021 2020
Notes $’000 $’000
Net debt 9(b) 37,334 68,134
Total equity 255,141 237,220
Net debt to equity ratio 15% 29%
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Financial covenants

Under the terms of the major borrowing facilities, the Group is required to comply with the following financial covenants:

• The Gearing Ratio does not exceed 30% [1] , and

• The Debt to Group EBITDA Ratio does not exceed 2.25:1.00.

The Group has complied with these covenants throughout the reporting period.

• 1 As a result of the renegotiation of the Groups CBA borrowing facilities during the year, the Gearing Ratio has been revised from 50% to 30%.

Shine Justice Ltd FY21 Annual Report 125

Financial Report > Notes to the Financial Statements > Risk Note 12 Capital management

b. Dividends

i. Ordinary shares

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----- Start of picture text -----

2021 2020
$’000 $’000
Final dividend for the year ended 30 June 2020 of 2.75 cents
4,765 4,329
(2019: 2.25 cents) per fully paid share
Interim dividend for the year ended 30 June 2021 of 2.00 cents
3,465 2,599
(2020: 1.50 cents) per fully paid share
Total paid during the year 8,230 6,928
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ii. Dividends not recognised at the end of the reporting period

ii.Dividends not recognised at the end of the reporting period
	2021	2020
	$’000	$’000
In addition to the above dividends, since year end the Directors have declared a fnal dividend of 3.25 cents per fully paid ordinary share (2020: 2.75 cents). The aggregate amount of the proposed dividend expected to be paid on 8 October 2021 from retained earnings at 30 June 2021, but not recognised as a liability at year end, is:	5,631	4,765

iii. Franked dividends

The dividends declared after 30 June 2021 will be 100% unfranked. There are no existing franking credits within the Group nor any franking credits arising from the payment of income tax in the year ending 30 June 2021.

126 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Group Structure

Group structure

CONTENTS

1. Interests in other entities 127

This section provides information which will help users understand how the Group structure affects the financial position and performance of the Group. In particular, there is information about:

• changes to the structure that occurred during the year, and

• transactions with non-controlling interests.

A list of subsidiaries is provided in note 13.

Shine Justice Ltd FY21 Annual Report 127

Financial Report > Notes to the Financial Statements > Group Structure Note 13 Interests in other entities

13. Interests in other entities

a. Subsidiaries

The Group’s subsidiaries at 30 June 2021 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business.

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----- Start of picture text -----

Place of Ownership
business/ Ownership interest held by
country of interest held non-controlling Principal
Name of entity incorporation by the Group interests activities
2021 2020 2021 2020
% % % %
Shine Lawyers Pty Ltd Australia 100 100 - - Legal services
My Insurance Claim Pty Ltd Australia 100 100 - - Legal services
Shine DIR Pty Ltd Australia 100 100 - - Legal services
Shine (U.S.) Pty Ltd Australia 100 100 - - Legal services
Emanate Legal Services Pty Ltd Australia 100 100 - - Legal services
SB Law Pty Ltd Australia 100 100 - - Legal services
Sciacca’s Lawyers Pty Ltd Australia 100 100 - - Legal services
Sciacca’s Family Lawyers Pty Ltd Australia 100 100 - - Legal services
Shine NZ Services Pty Ltd Australia 100 100 - - Legal services
Bradley Bayly Holdings Pty Ltd Australia 100 100 - - Legal services
Best Wilson Buckley Family Law Pty Ltd Australia 100 100 - - Legal services
Claims Consolidated Pty Ltd Australia 100 100 - - Legal services
Risk Worldwide New Zealand Limited New Zealand 100 100 - - Loss adjusters
Nerve Solutions Group Pty Ltd Australia 100 100 - - Legal services
My Insurance Claim Limited New Zealand 100 100 - - Loss adjusters
ACA Lawyers Pty Ltd Australia 100 100 - - Legal services
Carr & Co Divorce & Family Lawyers Pty Ltd Australia 80 80 20 20 Legal services
Nerve Legal Pty Ltd Australia 100 100 - - Legal services
Shine Justice Employee Share Trust Australia 100 100 - - Share trust
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128 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Group Structure Note 13 Interests in other entities

Accounting policy

Principles of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity where the Group is exposed to, or has rights to, variable returns from its involvement with the entity and can affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and balance sheet respectively.

Changes in ownership interests

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and noncontrolling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Shine Justice Ltd.

Shine Justice Ltd FY21 Annual Report 129

Financial Report > Notes to the Financial Statements > Group Structure Note 13 Interests in other entities

b. Non-controlling interests (NCI)

Set out below is summarised financial information of Carr & Co Divorce and Family Lawyers Pty Ltd, the only subsidiary that has non-controlling interests. The amounts disclosed are before inter-company eliminations.

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2021 2020
SUMMARISED BALANCE SHEET $’000 $’000
Current assets 879 970
Current liabilities (740) (1,064)
Current net assets 139 (94)
Non-current assets 662 960
Non-current liabilities (96) (353)
Non-current net assets 566 607
Net assets 705 513
Accumulated NCI 141 103
2021 2020
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME $’000 $’000
Revenue 5,003 5,070
Profit for the period 192 383
Total comprehensive income 192 383
38 77
Profit allocated to NCI
Dividends paid to NCI - 79
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130 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Unrecognised items

Unrecognised items

This section of the notes provides information about items that are not recognised in the financial statements as they do not (yet) satisfy the recognition criteria.

CONTENTS

	14.	Contingent liabilities and contingent assets	131
	15.	Commitments	131
	16.	Events occurringafter the reporting period	132

Unrecognised items

There is no requirement to highlight separately any unrecognised items. However, we believe that this information is useful for users in assessing the financial performance and position of the Group.

Shine Justice Ltd FY21 Annual Report 131

Financial Report > Notes to the Financial Statements > Unrecognised items Note 14 Contingent liabilities and contingent assets Note 15 Commitments

14. Contingent liabilities and contingent assets

a. Bank guarantees

Bank guarantees are contracts that are measured in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets . The Group’s bank guarantees are as follows:

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----- Start of picture text -----

2021 2020
$’000 $’000
Bank Guarantee Facility
Limit 4,500 4,500
Unused 1,361 1,550
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b. Contingent liabilities

The Group has received a small number of individual notifications submitted by former clients against the Group. When each notification is received, the Group assesses the likelihood that the potential notice will proceed to a legal claim. The Group’s estimate of the notifications that may progress to a claim and the excess that may need to be paid to its insurers to cover such potential claims at 30 June 2021 is $100,533 (2020: $40,000).

c. Contingent assets

The Group had no contingent assets at 30 June 2021.

15. Commitments

a. Capital commitments

There was nil significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities (2020: $nil).

b. Commitments

The Group has payment commitments to suppliers under vendor financing arrangements as follows:

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----- Start of picture text -----

2021 2020
$’000 $’000
Non-cancellable payments
Not later than 12 months 3,903 2,022
Between 12 months and 5 years 2,610 2,328
6,513 4,350
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132 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Unrecognised items Note 16 Events occurring after the reporting period

16. Events occurring after the reporting period

a. Dividend recommendation

Refer to note 12(b) for the final dividend declared by the Directors, to be paid on 8 October 2021.

b. COVID-19 Impact

There has been limited impact from COVID-19 on the operations and financial results of the Group. This has continued to be the case through to 30 June 2021.

However, as a result of the renewed lockdowns and restrictions introduced across Australia recently, the Group is continuing to monitor lead indicators for potential impacts on performance in the short to medium term.

At the date of the signing of the accounts, the Group is comfortable that performance to date in FY22 does not suggest that there will be a material impact on the business in the near term.

c. Mesh Class Action Update

Our successful outcome in court proceedings relating to faulty prolapse mesh and tape implants, one of Australia’s largest product liability class actions, was upheld unanimously on appeal by the Full Court of the Federal Court of Australia in March this year. The appellants, Ethicon Sàrl, Ethicon Inc. and Johnson & Johnson Medical Pty Limited have applied for special leave to appeal the decision in the High Court of Australia, their final avenue of appeal. This is expected to be heard sometime in Q2 FY22.

d. Interest rate swap transaction

Shine Justice Ltd is exposed to variability in interest rate cashflows through its variable rate borrowings. As such Shine is exposed to interest rate risk over the term of the debt. Subsequent to 30 June 2021, the Company entered into an Interest Rate Swap (IRS) agreement with the Commonwealth Bank of Australia (CBA) on 2 July 2021 (with an effective date of 30 June 2021) on one of its CBA loan facilities to swap the floating rate interest payments into fixed rate interest payments. The notional amount of the swap was AUD 36,000,000.

In accordance with AASB 110 Events after the Reporting Period, although the transaction has an effective date of 30 June 2021, the trade date is post year end, and as a result the transaction has been determined as a non-adjusting subsequent event.

Shine Justice Ltd FY21 Annual Report 133

Financial Report > Notes to the Financial Statements > Further details

Further details

This section of the notes includes other information that must be disclosed to comply with the accounting standards and other pronouncements, but that is not immediately related to individual line items in the financial statements.

CONTENTS

	17.	Relatedpartytransactions	134
	18.	Share-basedpayments	137
	19.	Remuneration of auditors	142
	20.	Earningsper share	143
	21.	Deed of crossguarantee	145
	22.	Parent entityfnancial information	148
	23.	Summaryof other signifcant accounting policies	150

134 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Further details Note 17 Related party transactions

17. Related party transactions

a. Parent entities

The Group is controlled by the following entity:

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----- Start of picture text -----

Ownership interest
Name Type Place of incorporation 2021 2020
Immediate and ultimate
Shine Justice Ltd Australia 100% 100%
Australian parent entity
----- End of picture text -----

b. Subsidiaries

Interests in subsidiaries are set out in note 13(a).

c. Key management personnel compensation

==> picture [512 x 143] intentionally omitted <==

----- Start of picture text -----

2021 2020
$ $
Short-term employee benefits 2,056,978 2,079,511
Post-employment benefits 126,795 107,892
Long-term employment benefits 93,952 35,040
Share-based payments 359,433 (701,510)
2,637,158 1,520,933
----- End of picture text -----

Detailed remuneration disclosures are provided in the remuneration report on pages 18 to 33.

Shine Justice Ltd FY21 Annual Report 135

Financial Report > Notes to the Financial Statements > Further details Note 17 Related party transactions

d. Transactions with other related parties

The following transactions occurred with a related party, Shine Lawyers NZ Limited which is an affiliated company of which Simon Morrison and Stephen Roche, are directors and controlling shareholders:

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----- Start of picture text -----

2021 2020
$ $
Sales and purchases of goods and services
Sale of goods, rent and services to entity controlled by key management
1,450,642 1,544,393
personnel
Purchases of premises rent from entity controlled by key management
1,085,501 1,071,476
personnel
Interest received from related parties 212,001 311,717
----- End of picture text -----

i. Purchases from entities controlled by key management personnel

The Group acquired the following goods and services from entities that are controlled by a member of the Group’s key management personnel:

• Leases over and fit outs of commercial properties occupied by parts of the Group.

136 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Further details Note 17 Related party transactions

e. Loans to related parties

The following occurred with a related party, Shine Lawyers NZ Limited which is an affiliated company of which Simon Morrison and Stephen Roche are directors and controlling shareholders:

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----- Start of picture text -----

2021 2020
$ $
Balance at start of year 4,384,082 3,404,395
Loans advanced 985,557 1,438,524
Loan repayments (1,190,125) (770,554)
Interest charged 212,001 311,717
Balance at 30 June 4,391,515 4,384,082
----- End of picture text -----

No loss allowance was recognised in relation to loans to related parties during the year, see note 11(c) for further information.

f. Liabilities associated with right to use assets provided by related parties

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----- Start of picture text -----

2021 2020
$ $
Balance at start of year 6,444,984 6,482,443
Interest charged 345,435 370,471
Repayments made (822,100) (763,449)
Additional commitments 91,501 355,519
Balance at 30 June 6,059,820 6,444,984
----- End of picture text -----

g. Terms and conditions

Goods were sold to related parties during the year based on the price lists in force and terms that would be available to third parties.

All other transactions were made on normal commercial terms and conditions and at market rates.

The loans to other related parties are repayable two years from the reporting date. The loan attracts interest at the rate equivalent to Shine Justice’s Australian working capital facility loan rate plus 2%. The interest rate on loans during the year was 4.9% (2020: 8.5%).

Outstanding balances are unsecured and are repayable in cash.

h. Consultancy fees

During the year, consultancy fees were paid to Stephen Roche of $240,000 (2020: $240,000).

From 1 July 2020 to 30 June 2021 consultancy fees were paid to companies owned by Rod Douglas of $148,306 (including GST). These include consultancy fees paid to companies owned by him of $48,123 (including GST) since 11 December 2020 being the date of his appointment to the Shine Justice Board.

Shine Justice Ltd FY21 Annual Report 137

Financial Report > Notes to the Financial Statements > Further details Note 18 Share-based payments

18. Share-based payments

a. Employee Share long-term incentive scheme

The establishment of the Shine Justice Ltd Performance Rights (LTIP) Plan (the Plan) was approved by shareholders at the 2016 and 2019 annual general meetings. The Plan is designed to amalgamate retention strategies as well as providing long-term incentives for senior managers and create alignment with shareholders. Under the Plan, participants are granted Performance Rights which only vest if certain performance criteria are met. Participation in the Plan is at the Board’s discretion and no individual has a contractual right to participate in the scheme or to receive any guaranteed benefits. The Plan is administered by the Board. This trust is consolidated in accordance with note 13(a)(i). The amount of the current FY21 Performance Rights that will vest depends on Shine Justice Ltd:

• Earnings per share (EPS) growth – 50% weighting , achieving EPS growth of an average of 10% per annum during the three year Performance Period from 1 July 2020, with partial vesting (straight line vesting between 50% and 100% if 7-10% return is achieved

• Cumulative annual total shareholder return (TSR) – 25% weighting, achieving cumulative annual TSR of an average of 10% during the Performance Period, with partial vesting (straight line vesting between 50% and 100%) if 7-10% return is achieved, and

• Strategic Objectives – 25% weighting, if identified strategic objectives are achieved (as to 5% in each of the 5 categories set out below), with straight line vesting in each category between 50% and 100% if the objectives are determined by the Board to be achieved as to 75% to 100%. The 5 categories being:

• clients

• team members

• growth

• financial strength, and

• innovation.

The Board retain a discretion to adjust the performance measures if warranted by relevant circumstances at the time of vesting.

Performance Rights are granted under the LTIP for no consideration and carry no dividend or voting rights. When vested, each right converts into one Share. The vesting price on which the number of rights granted is based is the weighted average price at which the Company’s shares are traded on the ASX on 15 days before plus 15 days after the release of the Shine Justice Annual Report in the financial year to which they relate.

Shine Justice Ltd FY21 Annual Report

138

Financial Report > Notes to the Financial Statements > Further details Note 18 Share-based payments

Set out below are summaries of rights granted under the Plan:

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2021 2020
Number of rights Number of rights
Strategic
EPS TSR Objective EPS TSR
FY18 issuance
Balance at start of year 965,550 413,807 - 1,330,634 570,271
Forfeited during the year (965,550) (29,482) - (365,084) (156,464)
Vested during the year - (384,325) - - -
Balance at 30 June - - - 965,550 413,807
FY19 issuance
Balance at start of year 846,140 362,632 - 1,206,647 517,135
Forfeited during the year (103,775) (44,476) - (360,507) (154,503)
Balance at 30 June 742,365 318,156 - 846,140 362,632
FY20 issuance
Balance at start of year 1,471,870 630,802 - - -
Granted during the year - - - 1,824,042 781,732
Forfeited during the year (279,736) (119,887) - (352,172) (150,930)
Balance at 30 June 1,192,134 510,915 - 1,471,870 630,802
FY21 issuance
Balance at start of year - - - - -
Granted during the year 1,303,534 652,767 652,767 - -
Forfeited during the year (104,875) (52,438) (52,438) - -
Balance at 30 June 1,198,659 600,329 600,329 - -
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Share rights outstanding at the end of the year have the following expiry of performance period:

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Number of rights Number of rights
Grant date Expiry date of performance period
2021 2020
8 June 2018 (FY18 LTIP) 30 June 2020 - 1,379,357
14 December 2018 (FY19 LTIP) 30 June 2021 1,060,521 1,208,772
29 November 2019 (FY20 LTIP) 30 June 2022 1,703,049 2,102,672
18 December 2020 (FY21 LTIP) 30 June 2023 2,399,317 -
Total 5,162,887 4,690,801
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Shine Justice Ltd FY21 Annual Report 139

Financial Report > Notes to the Financial Statements > Further details Note 18 Share-based payments

i. Fair value of rights granted

The assessed fair value at grant date of Performance Rights granted during the year ended 30 June 2021 was:

• EPS: $0.77 per right (2020: $0.84)

• TSR: $0.49 per right (2020: $0.68)

• Strategic Objectives: $0.77 per right (2020: Nil)

EPS

The fair value at grant date is independently determined using a Black-Scholes Model (BSM). Under this approach the value is based on the share price at the valuation date with an adjustment for the dividends foregone during the vesting period.

TSR

The fair value at grant date is independently determined using an adjusted form of the BSM which includes a Monte Carlo simulation model that considers the:

• term of the rights

• impact of dilution (where material)

• share price at grant date

The model inputs for rights granted during the year ended 30 June 2021 included:

• rights are granted for no consideration and vest based on Shine Justice Ltd TSR over a three-year period.

• grant date: 18 December 2020 (2020: 29 November 2019)

• expiry date of performance period: 30 June 2023 (2020: 30 June 2022)

• share price at grant date: $0.87 (2020: $0.94)

• expected price volatility of the company’s shares: 45.37% (2020: 47.09%)

• expected dividend yield: 4.34% (2020: 4.01%)

• risk-free interest rate: 0.11% (2020: 0.66%)

The expected price volatility is based on the historic volatility (based on the remaining life of the rights), adjusted for any expected changes to future volatility due to publicly available information.

The fair value of the EPS and TSR rights at grant date $0.77 (2020: $0.84) and $0.49 (2020: $0.68) respectively was estimated by taking the market price of the Company’s shares on that date less the present value of expected dividends that will not be received by the executives on their rights during the three-year vesting period.

• expected price volatility of the underlying share

• expected dividend yields

• risk-free interest rate for the term of the right, and

• correlations and volatilities of the peer Group companies.

140 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Further details Note 18 Share-based payments

b. Deferred shares

The following table shows the deferred shares granted and outstanding at the beginning and end of the reporting period:

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2021 Number 2020 Number
of shares of shares
Balance at start of year - 100,000
Granted during the year - 100,000
Vesting during the year - (100,000)
Forfeited during the year - (100,000)
Balance at 30 June - -
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c. Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

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2021 2020
$ $
Rights issued under long-term incentive schemes 642,000 508,000
642,000 508,000
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Accounting policy

Share-based compensation benefits are provided to employees via the Shine Justice Performance Rights Plan.

Employee Performance Rights

The fair value of rights granted under the Shine Justice Performance Rights Plan is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be initially expensed is determined by reference to the fair value of the Rights granted:

• including any market performance conditions (e.g. Shine's share price)

• excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the Company over a specified time period), and

• including the impact of any non-vesting conditions (e.g. the requirement for employees to save or hold shares for a specific period of time).

The total expense is recognised over the vesting period, which is the period over which all the specified vesting conditions are to be satisfied. At the end of each period, the Company revises its estimates of the number of Rights that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

The Employee Share Scheme performance rights is administered by the Shine Employee Share Trust, which is consolidated in accordance with the principles in Note 13(b)(i). When the performance rights vest, the shares may be issued by the Company or transferred by the Trust. The Company can issue or fund to the Trust to pay for it to acquire shares. The Board also has the discretion to pay cash instead. The proceeds received net of any directly attributable transaction costs are credited directly to equity.

Shine Justice Ltd FY21 Annual Report 141

Financial Report > Notes to the Financial Statements > Further details Note 18 Share-based payments

Non-executive Director (NED) Equity Plan

In November 2020, the Board adopted the NED Equity Plan, under which the Non-executive Directors may increase their holdings of Shares in order to share in the growth of the business and more closely align their interests with those of shareholders. The NED Equity Plan supports the Board’s policy that Directors should be encouraged to accumulate a shareholding equivalent in value to their annual Directors’ fees over a three-year period.

The NED Equity Plan provides for Non-executive Directors to sacrifice a percentage of their fees over an agreed period and to be granted rights to acquire a number of Shares reflecting the amount to be sacrificed over the period. The participating Directors fees are reduced in equal amounts each fortnight during the participation period. NED Rights are granted for no consideration at the beginning of the period during which salary sacrifices are made and vest into Shares at the end of that period.

The NED rights have been classified by the ASX as a separate class – Salary Sacrifice Rights. This class is now separate from the class of Performance Rights issued under the Company’s Performance Rights Plan (LTIP).

For the FY21 NED Rights granted on 18 December 2020, the price on which the number of granted NED Rights was calculated was the volume weighted average closing price of Shares on ASX on the 15 trading days before, and the 15 trading days commencing on, the date of adoption of the NED Plan by the Board (9 November 2020) being $0.88.

For the FY22 Rights granted on 30 June 2021, the price on which the number of granted NED Rights was calculated was the volume weighted average closing price Shares on ASX on the 15 trading days before, and the 15 trading days commencing on, the date of the offer (1 June 2021) being $0.96.

On vesting of NED Rights, the participating Director will be allocated a number of Shares purchased on market, equivalent to the number of vested NED Rights held by the Director. Shares allocated or transferred to Non-executive Directors following vesting will be subject to a Disposal Restriction until the earlier of the date of the Non-executive Director’s retirement from the Board or 15 years after allocation of transfer of the Shares. While the Disposal Restriction applies, the Non-executive Directors will not be permitted to dispose of their Shares.

Set out below are summaries of Rights granted under the Plan:

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Salary sacrifice rights
Number of rights Number of rights
2021 2020
- -
Balance at start of year
Granted during the year
FY21 issuance 132,717 -
FY22 issuance 272,198 -
Balance at 30 June 404,915 -
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NED rights outstanding at the end of the year have the following expiry period:

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Number of rights Number of rights
Grant date Vesting date 2021 2020
-
18 December 2020 (FY21 NED Rights) 30 August 2021 132,717
-
30 June 2021 (FY22 NED Rights) 30 August 2022 272,198
Total 404,915 -
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142 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Further details Note 19 Remuneration of auditors

19. Remuneration of auditors

During the year, the following fees were paid or payable for services provided by PricewaterhouseCoopers Australia (PwC) as the auditor of the parent entity, Shine Justice Ltd, by PwC’s related network firms and by non-related audit firms:

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2021 2020
$ $
(a) Auditors of the Group – PwC and related network firms
Audit and review of financial reports
Group 419,409 379,338
Total audit and review of financial reports 419,409 379,338
Non-audit services 6,400 -
Total services provided by PwC 425,809 379,338
(b) Other auditors and their related network firms
Audit and review of financial reports - 64,871
Audit of trust accounts and work in progress 33,950 33,689
Other non-audit services
Tax compliance services - 60,000
Total services provided by other auditors 33,950 158,560
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Shine Justice Ltd FY21 Annual Report 143

Financial Report > Notes to the Financial Statements > Further details Note 20 Earnings per share

20. Earnings per share

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2021 2020
Cents Cents
a. Basic earnings per share
Attributable to the ordinary equity holders of the Company 14.75 12.40
b. Diluted earnings per share
Attributable to the ordinary equity holders of the Company 14.40 12.13
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c. Reconciliation of earnings used in calculated earnings per share

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2021 2020
$’000 $’000
Basic earnings per share
Profit attributable to the ordinary equity holders of the Company
25,556 21,476
used in calculating basic earnings per share
Diluted earnings per share
Profit attributable to the ordinary equity holders of the Company
25,556 21,476
used in calculating diluted earnings per share:
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d. Weighted average number of shares used as the denominator

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2021 2020
Number Number
Weighted average number of ordinary shares used as the
173,259,278 173,224,654
denominator in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Deferred shares 4,186,168 3,760,463
Weighted average number of ordinary shares and potential
ordinary shares used as the denominator in calculating diluted 177,445,446 176,985,117
earnings per share
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144 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Further details Note 20 Earnings per share

e. Information concerning the classification of securities

Deferred shares

Rights to deferred shares granted to executives and employees under the Group’s long-term incentive scheme are included in the calculation of diluted earnings per share assuming all outstanding rights will vest. The rights are not included in the determination of basic earnings per share. Further information about the rights is provided in note 18.

Accounting policy

Basic earnings per share

Basic earnings per share is calculated by dividing:

• the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares

• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares.

Diluted earnings per share

Adjusts the figures used in the determination of basic earnings per share to consider:

• the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and

• the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

Shine Justice Ltd FY21 Annual Report 145

Financial Report > Notes to the Financial Statements > Further details Note 21 Deed of cross guarantee

21. Deed of cross guarantee

Shine Justice Ltd and its subsidiaries listed below 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 ASIC Corporations (Wholly owned Companies) Instrument 2016/785.

The subsidiaries are listed below:

• Shine Lawyers Pty Ltd

• My Insurance Claim Pty Ltd

• Shine DIR Pty Ltd

• Shine (U.S.) Pty Ltd

• Emanate Legal Services Pty Ltd

• SB Law Pty Ltd

• Sciacca’s Family Lawyers Pty Ltd

• Shine NZ Services Pty Ltd

• Bradley Bayly Holdings Pty Ltd

• Best Wilson Buckley Family Law Pty Ltd

• Claims Consolidated Pty Ltd

• Nerve Solutions Group Pty Ltd

• ACA Lawyers Pty Ltd

• Nerve Legal Pty Ltd

a. Consolidated statement of profit or loss, statement of comprehensive income and summary of movements in consolidated retained earnings

The above companies represent a ‘closed group’ for the purposes of the instrument, and as there are no other parties to the deed of cross guarantee that are controlled by Shine Justice Ltd, they also represent the ‘extended closed group’.

Set out below is a consolidated statement of profit or loss, a consolidated statement of comprehensive income and a summary of movements in consolidated retained earnings for the year ended 30 June 2021 of the closed Group consisting of Shine Justice Ltd and its subsidiaries.

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2021 2020
$’000 $’000
Consolidated statement of comprehensive income
Profit before income tax 38,237 33,042
Income tax expense (11,170) (10,119)
Profit for the period 27,067 22,923
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the financial year 186,560 170,565
Profit for the period 27,067 22,923
Dividends paid (8,230) (6,928)
Retained earnings at the end of the financial year 205,397 186,560
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146 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Further details Note 21 Deed of cross guarantee

b. Consolidated balance sheet

Set out below is a consolidated balance sheet as at 30 June 2021 of the closed group consisting of Shine Justice Ltd and its subsidiaries listed above.

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2021 2020
$’000 $’000
ASSETS
Current assets
Cash and cash equivalents 53,635 31,690
Trade and receivables 22,087 20,409
Contract assets – work in progress 158,077 175,761
Income tax receivable - 322
Unbilled disbursements 83,778 70,716
Other current assets 4,029 2,921
Total current assets 321,606 301,819
Non-current assets
Trade and other receivables 6,189 5,932
Contract assets – work in progress 135,057 118,702
Unbilled disbursements 28,109 24,067
Plant and equipment 3,422 2,935
Right-of-use assets 34,065 39,804
Intangible assets 44,839 45,209
Investment in subsidiaries 3,700 3,600
Total non-current assets 255,381 240,249
Total assets 576,987 542,068
LIABILITIES
Current liabilities
Trade and other payables 8,129 9,644
Disbursement creditors 91,016 81,795
Borrowings 1,913 1,612
Lease liabilities 10,396 9,575
Other current financial liabilities 8,639 5,224
Provisions 8,666 7,520
Total current liabilities 128,759 115,370
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Shine Justice Ltd FY21 Annual Report 147

Financial Report > Notes to the Financial Statements > Further details Note 21 Deed of cross guarantee

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2021 2020
$’000 $’000
Non-current liabilities
Trade and other payables 1,697 2,535
Borrowings 45,000 45,000
Lease liabilities 35,467 43,847
Deferred tax liabilities 103,062 91,936
Provisions 2,818 2,670
Total non-current liabilities 188,044 185,988
Total liabilities 316,803 301,358
Net assets 260,184 240,710
EQUITY
Share capital 53,223 53,223
Reserves 1,564 927
Retained earnings 205,397 186,560
Total equity 260,184 240,710
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148 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Further details Note 22 Parent entity financial information

22. Parent entity financial information

a. Summary financial information

The individual financial statements for the parent entity, Shine Justice Ltd, show the following aggregate amounts:

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2021 2020
$’000 $’000
Balance sheet
Current assets 43,762 36,293
Total assets 191,884 186,999
Current liabilities 5,447 5,394
Total liabilities 41,664 46,064
Shareholders’ equity
Issued capital 132,627 132,627
Reserves 1,538 896
Retained earnings 16,055 7,412
150,220 140,935
Profit for the period 16,874 1,868
Total comprehensive income 16,874 1,868
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Shine Justice Ltd FY21 Annual Report 149

Financial Report > Notes to the Financial Statements > Further details Note 22 Parent entity financial information

b. Guarantees entered into by the parent entity

The parent entity has provided financial guarantees in respect of bank guarantees amounting to $3,139,495 (2020: $2,949,823).

The parent entity has also given secured guarantees in respect of:

• Bank loans which are secured by a fixed and floating charge over the assets of the Group, and

• Lease and hire purchase liabilities secured by the underlying assets.

In addition, there are cross guarantees given by Shine Justice Ltd and its subsidiaries as described in note 21. No deficiencies of assets exist in any of these companies.

No liability was recognised by the parent entity or the Group in relation to these last two guarantees, as the fair value of the guarantees is immaterial.

c. Contingent liabilities of the parent entity

The parent entity did not have any contingent liabilities as at 30 June 2021 or 30 June 2020. For information about guarantees given by the parent entity, please see above.

d. Contractual commitments for the acquisition of plant or equipment

The parent entity did not have any contractual commitments for the acquisition of plant or equipment as at 30 June 2021 or 30 June 2020.

e. Determining the parent entity financial

information

The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements, except as set out below.

ii. Tax consolidation

Shine Justice Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.

The head entity, Shine Justice Ltd, and the controlled entities in the tax consolidated Group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated Group continues to be a stand-alone taxpayer.

In addition to its own current and deferred tax amounts, Shine Justice Ltd also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated Group.

The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Shine Justice Ltd for any current tax payable assumed and are compensated by Shine Justice Ltd for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Shine Justice Ltd under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities’ financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the Group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities.

iii. Financial guarantees

i. Investments in subsidiaries

Investments in subsidiaries are accounted for at cost in the financial statements of Shine Justice Ltd.

Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment.

150 Shine Justice Ltd FY21 Annual Report

Financial Report > Notes to the Financial Statements > Further details Note 23 Summary of other significant accounting policies

23. Summary of other significant accounting policies

This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements to the extent they have not already been disclosed in the other notes above. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting of Shine Justice Ltd and its subsidiaries.

a. Basis of preparation

These general-purpose financial statements have been prepared in accordance with:

• Australian Accounting Standards

• Interpretations issued by the Australian Accounting Standards Board, and

• the Corporations Act 2001 .

Shine Justice Ltd is a for-profit entity for the purpose of preparing the financial statements.

i. Compliance with IFRS

The consolidated financial statements of the Shine Justice Ltd Group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

ii. Historical cost convention

The financial statements have been prepared on a historical cost basis, except for the following:

• certain financial assets – measured at fair value

iv. New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021 reporting periods and have not been early adopted by the Group. The Group has assessed that these new standards and interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

• AASB amends the definition of a business (AASB 2018-6)

• AASB amends the definition of material (AASB 2018-7)

• Interest rate benchmark reform on hedge accounting (AASB 2019-3)

• Revised Conceptual Framework for Financial Reporting (AASB 2019-1)

• Disclosure of the effect of new IFRS standards not yet issued in Australia (AASB 2019-5)

• AASB approves removal of special purpose financial reports and new simplified disclosures (AASB 2020-2 and AASB 1060)

• Classification of liabilities as current or non-current (AASB 2020-1)

• Narrow scope amendments issued for IAS 16, IAS 37, IFRS 3 and Annual Improvements to IFRS Standards 2018-2020 affecting IFRS 1, IFRS 9, IFRS 16 and IAS 41, and

• Clarification on IFRS 38 and Customisation and configuration cost in relation cloud computing arrangements

b. Foreign currency translation

iii. New and amended standards adopted by the Group

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July 2020:

AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015-2017 Cycle

This standard makes amendments to (with assessment made by the Group relating to the impact on the financial report in brackets):

• AASB 3 Business Combinations (no impact)

• AASB 11 Joint Arrangements (not applicable)

• AASB 112 Income Taxes (no impact), and

• AASB 123 Borrowing Costs (no impact).

i. Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’).

The consolidated financial statements are presented in Australian dollar ($), which is Shine Justice Ltd’s functional and presentation currency.

ii. Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.

Shine Justice Ltd FY21 Annual Report 151

Financial Report > Notes to the Financial Statements > Further details Note 23 Summary of other significant accounting policies

Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other gains/(losses).

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as at fair value through other comprehensive income are recognised in other comprehensive income.

iii. Group companies

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet

• income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

• all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

c. Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).

Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

d. Rounding of amounts

The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

e. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

152 Shine Justice Ltd FY21 Annual Report

Directors' Declaration

Signed reports

Directors’ Declaration

In the Directors’ opinion:

• a. the financial statements and notes set on pages 56 to 151 are in accordance with the Corporations Act 2001, including:

• i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• ii. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its

• b. performance for the financial year ended on that date, and

• c. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

• d. at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed

• e. Group identified in note 22 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 21.

Note 23(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of the Directors.

Simon Morrison

Managing Director & CEO

Brisbane

27 August 2021

Shine Justice Ltd 153

Independent Auditor’s Report

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Independent auditor’s report

To the members of Shine Justice Ltd

Report on the audit of the financial report

Our opinion

In our opinion:

The accompanying financial report of Shine Justice Ltd (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial performance for the year then ended

• (b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

What we have audited

The Group financial report comprises:

• the consolidated balance sheet as at 30 June 2021

• the consolidated statement of comprehensive income for the year then ended

• the consolidated statement of profit or loss for the year then ended

• the consolidated statement of changes in equity for the year then ended

• the consolidated statement of cash flows for the year then ended

• the notes to the financial statements, which include significant accounting policies and other explanatory information

• the directors’ declaration.

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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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.

PricewaterhouseCoopers, ABN 52 780 433 757 480 Queen Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001 T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

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Our audit approach

An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates.

The Group operates a variety of businesses in the legal industry across a number of regions throughout Australia and New Zealand.

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• Materiality Audit scope Key audit matters

• ● For the purpose of our audit ● Our audit focused on where the ● Amongst other relevant we used overall Group Group made subjective topics, we communicated the materiality of $1.8 million, judgements; for example, following key audit matters to which represents significant accounting the Audit and Risk approximately 5% of the estimates involving Committee: Group’s profit before tax. assumptions and inherently − uncertain future events. Revenue Recognition and

• ● We applied this threshold, Recoverability of Work In together with qualitative ● The Group is a legal practice Progress (WIP) and considerations, to determine that primarily undertakes the Unbilled Disbursements the scope of our audit and the provision of legal services − Carrying Value of

• nature, timing and extent of throughout Australia and the Goodwill

• our audit procedures and to conduct of an insurance evaluate the effect of recovery consulting business in ● These are further described in misstatements on the New Zealand. the Key audit matters section financial report as a whole. of our report. ● The accounting processes are

• ● We chose Group profit before structured around a Group tax because the Group is a finance function at its head profit-oriented business and office in Brisbane, where we we therefore believe this to be predominantly performed our the most appropriate audit procedures.

• We chose Group profit before tax because the Group is a profit-oriented business and we therefore believe this to be the most appropriate benchmark for measuring performance.

• We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds.

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Shine Justice Ltd 155

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Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context.

Key audit matter	How our audit addressed the key audit	How our audit addressed the key audit
	matter
Work In Progress (WIP) and Unbilled
Disbursements – Revenue recognition and
recoverability
(Refer to note 3(c) and 6(c) ) [$406.2m]
	To evaluate revenue recognition and the recoverability
At 30 June 2021, WIP of $299.3 million and unbilled	of WIP and unbilled disbursements, we performed the
disbursements of $106.9 million have been	following procedures, amongst others:
recognised.
	●	Obtained an understanding of the accounting
The Group recognises WIP and unbilled		policy, processes and controls in place over
disbursements where it is highly probable that the		the revenue recognition, WIP and
cumulative value of revenue and hence WIP		disbursement cycles.
recognised in relation to legal matters will not be
subject to significant reversal when the contract	●	Assessed the operating effectiveness of
outcome is finalised.		relevant key controls and examined
		supporting documentation including client
The Group applied judgement based on past		cost agreements, time worked reports,
experience and historical performance of similar		resolution calculations and case settlements
contracts to assess the probability of success. Where		to verify case existence, WIP recording and
historical averages are not predictive of the		case outcomes.
probability of outcomes or there is limited historical experiences with similar contracts, the Group assessed probability on a contract-by-contract basis.	●	Assessed the completeness of revenue recognition, WIP and disbursements with ’

• Assessed the completeness of revenue recognition, WIP and disbursements with reference to the prior year’s closing balances, cases closed as well as new cases originating in the current year.

Any revisions to estimated outcomes are recognised in the statement of profit or loss in the period which gives rise to the revision.

• Assessed the Group’s probability of success with reference to both historical case outcomes in the current and prior year. Where probability of success was not consistent with these outcomes, we assessed the evidence for such adjustments.

This was a key audit matter due to the judgement involved in determining the probability of contract outcomes.

• For a sample of matters where historical performance was not considered predictive of probable outcomes, we enquired of the Group’s legal practitioners, considered the status of such matters and external evidence where available to assess the Group’s position regarding likely case outcomes.

• On a sample basis, we tested unbilled disbursements to supporting documents and the respective case records.

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• Assessed the recoverability of unbilled disbursements with reference to specific case matters, the existence of disbursement funding arrangements and the extent of unbilled disbursements written off during the current and prior year.

• Evaluated whether the disclosures made in notes to the financial statements including those regarding the key assumptions were consistent with our understanding based on our audit procedures and the requirements of Australian Accounting Standards.

Carrying Value of Goodwill

(Refer to note 7(c)) [$36.2m]

At 30 June 2021, Goodwill of $36.2 million had been recognised, $14.2 million attributable to the Personal Injury (PI) cash generating unit (CGU) and $22.0m attributable to the New Practice Areas (NPA) GCU.

The Group has tested the recoverable amount of the PI and NPA CGUs including Goodwill based on a value in use (VIU) methodology, utilising a discounted cashflow model.

The Group made judgements over revenue and cost growth rates over the five-year forecast, the terminal year growth rate and discount rate used when estimating the future cashflows to calculate the recoverable amount.

The Group concluded that the recoverable amount of the PI and NPA CGUs supported the carrying amount at 30 June 2021.

Given the judgements incorporated by the Group in determining the recoverable amount of the PI & NPA CGUs was a key audit matter.

To evaluate the Group’s assessment of the recoverable amount of Goodwill, we performed a number of procedures including the following:

• Assessed the determination of CGUs through examination of system processes, reporting lines and personnel responsibility splits.

• Considered whether the valuation approach and methodology used by the Group was consistent with the basis required by Australian Accounting Standards and our understanding of the nature of the business.

• Assessed the allocation of the Group’s assets and liabilities into the PI and NPA CGUs.

• Considered the historical reliability of the Group’s cash flow forecasting process by comparing budgets with reported prior years’ actual results.

• Assessed the FY22 budget with reference to FY21 actual performance and agreed the FY22 cashflows per the financial model to the board approved budget.

• Assessed with the assistance of PwC valuation experts:

• Forecast revenue and cost growth rates over the five-year period with

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Shine Justice Ltd 157

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reference to industry benchmarks and prior period actual rates

• Forecast terminal year growth rate of 3.0% by comparison to economic forecasts

• The mathematical accuracy of the model.

• Calculate a point estimate of the recoverable amount using external industry revenue growth rates to assess the impact on headroom.

• Evaluated whether the disclosures made in the notes to the financial statements, including those regarding the key assumptions, were consistent with our understanding based on our audit procedures and the requirements of Australian Accounting Standards.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not and will not express an opinion or any form of assurance conclusion thereon.

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 that we 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.

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 ability of the Group to continue as a going concern, disclosing, as applicable, matters related 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.

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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 the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at:

https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf

This description forms part of our auditor's report.

Report on the remuneration report

Our opinion on the remuneration report

We have audited the remuneration report included in pages 18 to 33 of the directors’ report for the year ended 30 June 2021.

In our opinion, the remuneration report of Shine Justice Ltd for the year ended 30 June 2021 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.

PricewaterhouseCoopers

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Simon Neill Brisbane Partner 27 August 2021

Shine Justice Ltd 159

160 2021 Annual Report

Shareholder Information

The following information is current as at 25 August 2021.

Holding Distribution

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Category Shareholders FY19 FY20 FY21 FY21 FY22
(size of holding) Performance Performance Performance NED NED
Rights Rights Rights Rights Rights
1 – 1,000 307 0 0 0 0 0
1,001 – 5,000 403 0 0 0 0 0
5,001 – 10,000 178 7 0 0 0 0
10,001 – 100,000 303 36 53 73 4 3
100,001 and over 59 1 1 4 0 1
Total 1,250 44 54 77 4 4
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Unmarketable Parcels

The number of shareholders holding less than a marketable parcel of Shares is 166.

Substantial Holders

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Substantial Holder Relevant Interests of Substantial Holder and Associates
Stephen Roche and associates 84,979,804
Simon Morrison and associates 84,979,804
FIL Limited and associates 17,109,888
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*As disclosed in substantial shareholder notices received by the Company.

Shareholder Information

Shine Justice Ltd 161

Voting Rights

Each Share entitles its holder to one vote on a poll. Each member present at a meeting in person or by proxy has one vote on a show of hands.

Performance Rights and NED Rights do not confer voting rights.

Performance Rights and NED Rights

The following Performance Rights and NED Rights are held by the following numbers of holders:

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FY19 FY20 FY21 FY21 FY22
Performance Performance Performance NED NED
Rights Rights Rights Rights Rights
Number of Rights 1,060,521 1,703,049 2,399,317 132,717 272,198
Number of holders 44 54 77 4 4
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No Current On-Market Buy-Back

The Company is not currently conducting an on-market buy-back.

No Restricted Securities or Voluntary Escrow

No securities in the Company are restricted securities or are subject to voluntary escrow.

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Shareholder Information

Top 20 holders of Shares

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Name Number of Shares held % of issued capital
1 Simon Morrison 42,339,902 24.44
1 Stephen Roche 42,339,902 24.44
2 HSBC Custody Nominees (Australia) Limited 24,109,298 13.91
3 JP Morgan Nominees Australia Pty Limited 14,370,793 8.29
4 BNP Paribas Nominees Pty Ltd 7,303,581 4.22
5 BNP Paribas Noms Pty Ltd 6,053,224 3.49
6 Torrito Pty Ltd 2,348,771 1.36
7 NCH Pty Ltd 1,973,649 1.14
8 Citicorp Nominees Pty Limited 1,615,868 0.93
9 Jodie Willey [1] 1,512,957 0.87
10 HSBC Custody Nominees Australia Limited – A/C 2 1,232,949 0.71
11 Stephen Francis Roche 973,802 0.56
12 Ankla Pty Ltd 833,936 0.48
13 CHSL Thompson Pty Ltd 821,107 0.47
14 Binya Park Pty Ltd [2] 673,802 0.39
15 Timothy David Wilson 615,893 0.36
16 Neweconomy Com Au Nominees Pty Limited 567,488 0.33
17 First Samuel Ltd 563,850 0.33
18 Lara Schliebs 526,479 0.30
19 Grant David Zeller 509,259 0.29
20 Irwin Biotech Nominees Pty Ltd 500,000 0.29
TOTAL TOP 20 HOLDERS 151,786,530 87.61
BALANCE OF REGISTER 21,475,282 12.39
TOTAL 173,261,812 100.00
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1 Jodie Willey also holds separate parcels of 211,489 Shares

2 Binya Park Pty Ltd is a company controlled by Simon Morrison

Shine Justice Ltd 163

Glossary

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AGM Annual general meeting
ARMC or Audit & Risk The Audit & Risk Management Committee of the Board
Management Committee
ASIC Australian Securities & Investments Commission
ASX ASX Limited ACN 008 624 691 or the securities exchange operated by it
Best Wilson Buckley Best Wilson Buckley Family Law Pty Ltd ACN 139 493 039 or the business conducted by it
Board The board of Directors of the Company
Bradley Bayly Bradley Bayly Holdings Pty Ltd ACN 123 603 805 or the business conducted by it
Carr & Co Carr & Co Divorce & Family Lawyers Pty Ltd ACN 114 924 168 or the business conducted by it
CFO Chief Financial Officer
Chairman The chairman of Directors
Company/Shine/Shine Justice Shine Justice Ltd ACN 162 817 905
Constitution The constitution of the Company
COO Chief Operating Officer
Corporations Act Corporations Act 2001 (Cth)
Director A director of the Company
EBITDA Earnings before interest, tax, depreciation and amortisation
Emanate Emanate Legal Services Pty Ltd ACN 169 229 752 or the business conducted by it
EPS Earnings per Share
FY18 The financial year ended 30 June 2018
FY19 The financial year ended 30 June 2019
FY20 The financial year ended 30 June 2020
FY21/Financial Year The financial year ended 30 June 2021
FY22 The financial year ending 30 June 2022
FY23 The financial year ending 30 June 2023
FY18 Performance Right A Performance Right granted in respect of FY18, which vested during FY21
FY19 Performance Right A Performance Right granted in respect of FY19
FY20 Performance Right A Performance Right granted in respect of FY20
FY21 Performance Right A Performance Right granted in respect of FY22
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Glossary

164 2021 Annual Report

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FY21 NED Right An NED Right granted in respect of the six months to 30 June 2021
FY22 NED Right An NED Right granted in respect of FY22
Group/Shine Justice Group The Company and its Subsidiaries
Key Management Personnel, being those persons having authority and responsibility for
KMP planning, directing and controlling the activities of the Group, directly or indirectly, including any
Director (whether executive or otherwise)
A management team, including and supporting the Managing Director & CEO, the CFO, the COO
Leadership Team
and the NPL
Listing Rules The listing rules of ASX
LTI Long Term Incentive
LTIP Long Term Incentive Plan or Performance Rights Plan
The class action against Johnson & Johnson Medical Pty Limited, Ethicon Sàrl and Ethicon, Inc.
Mesh Class Action relating to faulty prolapse mesh and tape implants described in the Letter from the Chairman on
page 8
Non-executive Director Equity Plan adopted by the Board in November 2020, under which
NED Equity Plan Non-executive Directors may elect to sacrifice a portion of their fees in return for NED Rights,
each of which on vesting is replaced with one Share acquired on market
NED Right An unquoted right issued under the NED Plan
Nomination and Remuneration The Nomination and Remuneration Committee of the Board
Committee
Non-executive Director A Director other than the Managing Director & CEO
NPAT Net profit after tax
NPL National Practice Leader
Performance Right/Right An unquoted performance right issued under the LTIP
PwC PricewaterhouseCoopers
RTSR Relative Total Shareholder Return
Sciaccas Sciacca’s Lawyers Pty Ltd ACN 126 179 084 or the business conducted by it
Share A fully paid ordinary share in the Company
Shine Lawyers Shine Lawyers Pty Ltd ACN 134 702 757 or the business conducted by it
Stephen Browne Lawyers SB Law Pty Ltd ACN 169 699 183 or the business conducted by it
STI Short Term Incentive
STIP Short Term Incentive Plan
Subsidiaries The wholly owned subsidiaries of the Company as set out in note 13 to the Financial Statements
Website www.shinejustice.com.au
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Shine Justice Ltd 165

Corporate Directory

Directors

Graham Bradley AM, Independent Non-executive Chairman Teresa Dyson, Independent Non-executive Director David Bayes, Independent Non-executive Director Rodney Douglas, Non-executive Director Simon Morrison, Managing Director & CEO

Chief Financial Officer | Company Secretary

Website

shinejustice.com.au

Auditors

PricewaterhouseCoopers 480 Queen Street Brisbane QLD 4000 Phone: +61 7 3257 5000 Fax: +61 7 3257 5999

Ravin Raj

Bankers

General Counsel | Company Secretary

Annette O’Hara

Registered Office Principal Administrative Office

Level 13 160 Ann Street Brisbane QLD 4000 Phone: +61 7 3006 6000 Fax: +61 7 3229 1999

Commonwealth Bank of Australia Level 21 180 Ann Street Brisbane QLD 4350

Share Registry

Link Market Services Limited Level 21, 10 Eagle Street Brisbane QLD 4000 registrars@linkmarketservices.com.au Phone: +61 1300 554 474 (toll free)

ASX Listing

ASX Code - SHJ

Company Numbers

ABN: 93 162 817 905 ACN: 162 817 905

166 2021 Annual Report

Shine Justice Ltd 167

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45 Years
Reconciliation
Growth
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shinejustice.com.au