SHINE JUSTICE LTD

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24 February 2021

Shine Justice Ltd (SHJ) Results for announcement to the market

In accordance with the Listing Rules, Shine Justice Ltd encloses for immediate release to the market:

Appendix 4D; and
Interim Financial Report for the 6 months ended 31 December 2020.

The Company will conduct an analyst and investor briefing at 10.30am AEST today. To register for the briefing, please click this link.

Authorised for release by the Board

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Annette O’Hara Company Secretary

Shine Justice Ltd Tel: 07 3837 9448 [email protected]

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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Appendix 4D

Preliminary financial statements for the six months ended 31 December 2020 as required by ASX listing rule 4.2A

Results for announcement to the market (All comparisons to the 6 months ended 31 December 2019) Revenue from ordinary activities Profit from ordinary activities after tax attributable to members Net comprehensive income for the period attributable to members Dividend information Final 2020 dividend per share (paid September 2020) Interim 2021 dividend determined Interim dividend dates Ex-dividend date Record date Payment date Dividend Reinvestment Plan The Company does not operate a dividend reinvestment plan.	31 Dec 20 $’000 Up/ down Movement from 31 Dec 19 %	31 Dec 20 $’000 Up/ down Movement from 31 Dec 19 %
	93,568 Up 4.6% 10,054 Up 13.9% 10,083 Up 14.7%
	Amount per share (cents) Franked amount per security (cents) Tax rate for franking credit (%)

	2.75	0.00 30%
	2.00	0.00 30%
		11 March 2021 12 March 2021 26 March 2021
		31 Dec 20 31 Dec 19 $ $ 1.17 1.04
		31 Dec 20 31 Dec 19
		$ $

Net tangible assetper security

This information should be read in conjunction with the 2020 Annual Report.

Additional information supporting the Appendix 4D disclosure requirements can be found in the Directors’ Report and the consolidated financial statements for the six months ended 31 December 2020.

This report is based on the consolidated financial statements for the six months ended 31 December 2020 which have been reviewed by PricewaterhouseCoopers.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 1

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;

Interim Financial Report

For the 6 months ended 31 December 2020

ABN: 93 162 817 905 ASX CODE: SHJ

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 2

Shine Justice Ltd ABN: 93 162 817 905

Interim report – 31 December 2020

Directors’ report


Directors’ report	4
Interim financial report
Consolidated statement of profit or loss	7
Consolidated statement of comprehensive income	8
Consolidated balance sheet	9
Consolidated statement of changes in equity	11
Consolidated statement of cash flows	12
Notes to the consolidated financial statements
1. Significant changes in the current reporting period	13
2. Segment and revenue information	14
3. Profit and loss information	18
4. Disbursement funding	19
5. Dividends	20
6. Borrowings	21
7. Equity securities issued	21
8. Contingencies	21
9. Events occurring after the reporting period	21
10. Related party transactions	22
11. Fair value measurements of financial instruments	23
12. Basis of preparation of half-year report	25
Signed reports
Directors’ declaration	26
Independent auditor’s review report to the members of Shine Justice Ltd	27
Corporate information	29

Corporate information

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report should be read in conjunction with the annual report for the year ended 30 June 2020 and any public announcements made by Shine Justice Ltd during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

The financial statements are presented in Australian currency.

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

Its shares are quoted on the Australian Securities Exchange. The financial statements were authorised for issue by the directors on 24 February 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.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 3

Directors’ report

Your Directors present their report on the consolidated entity consisting of Shine Justice Ltd and entities it controlled at the end of, or during, the six months ended 31 December 2020.

Directors

The focus remains to continue to extend our reach into other jurisdictions outside of Queensland to mitigate the impact of exposure to a single market. The Group has been successful in achieving this with just over two thirds of its revenue as at 31 December 2020 earned in markets outside of Queensland.

The following persons were directors of Shine Justice Ltd during the whole of the half-year and up to the date of this report:

Mr Graham Bradley AM (Chairman) Mr David Bayes Mrs Teresa Dyson Mr Simon Morrison

Mr Rodney Douglas was appointed a director on 11 December 2020 and continues in office at the date of this report.

Review of operations

Shine Justice Ltd and its controlled entities are a group (Group) which derives its revenues and profits primarily from one source being the provision of legal services throughout the eastern and western seaboard of Australia and the conduct of an insurance recovery business in New Zealand.

The Group is steadily expanding its footprint in Personal Injury (PI) in damages-based plaintiff litigation, but with a focus on growing New Practice Areas (NPA) at a faster rate than the PI practice area.

In November, we settled our first Super Online claim, after extending our online law firm model to include our Disability and Superannuation practice area last July. Super Online offers clients an easy-to-use 24/7 platform with a client portal so that they can check the progress of their claim at any time.

We continue to progress our digital innovation strategy. Our new Qld Core PI Mobile App will be launched to new clients in the second half and we will be one of the first law firms in Australia to offer a 24/7 mobile app for clients.

In November 2019, we were delighted to announce the successful outcome in court proceedings in one of Australia’s largest product liability class actions, commenced in 2012, relating to faulty prolapse mesh and tape implants. The applicants’ claims were successful and in November 2020, the Federal Court Registrar awarded Shine’s fixed costs in the sum of $39,786,867, which was received in December 2020.

There is an appeal to be heard during February 2021 but 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.

We are making strong progress on our strategic priorities, allowing us to access justice on behalf of more clients.

A summary of consolidated revenues and results for the half-year by significant segments is set out below:

	Segment revenues Segment results	Segment revenues Segment results	Segment revenues Segment results
	31 Dec 20 $'000	31 Dec 1931 Dec 20 $'000$'000	31 Dec 19 $'000
Personal Injury New Practice Areas Other		56,566 8,251 31,874 16,256 1,004 (217)	14,803 7,180 (317)
	49,071
	43,575
	922
Total segment revenue/result	93,568	89,444 24,290	21,666

Segment results are adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), which is the measure of segment result that is reported to the Managing Director to assess the performance of the operating segments. For a reconciliation to operating profit before tax refer to note 2(b).

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 4

Directors’ report

Significant factors that have affected the Group’s operations and results during the six months to 31 December 2020 are described below:

(a) Personal Injury

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

The segment EBITDA result of $8,251,000 was 44% lower than for the comparable period as a result of a combination of factors including the impact of restructuring and downsizing of non-performing practices in previous periods which has impacted in the first half. It is expected these initiatives will deliver long term improvements to profitability.

(b) New Practice Areas

The segment EBITDA of $16,256,000 was 126% higher than for the comparable period which was achieved through strong growth supported by class actions, abuse, medical law, and disability and superannuation.

The Class action business unit has continued to grow, strengthening our expertise through the employment of Class Action lawyers and the expected ongoing work administering the settlements for clients from the Mesh Class Action case.

On 1 July 2020, the Supreme Court of Victoria approved a contingency fee model for Class Actions which allows firms to compete with litigation funders. Additionally, in August 2020 case filings accelerated due to changes relating to litigation funders. Both developments have been positive and have helped drive an increase in new cases and revenues in the first half.

Outlook

We continue to explore organic and acquisition growth opportunities across several business units including building out the national footprint in Family Law and a solid pipeline of Class Actions and PI cases.

Shine is the third largest player, in Australia PI Litigation, with 7% market share. While competition is intense, the PI industry continues to grow with Shine continuing to seek further market share.

The strength of the industry's major players will likely support the industry's expansion, while also limiting the number of new players entering the industry. Encouraged by the success of advertising campaigns over the past several years, Shine will continue investing in marketing initiatives to increase market share of personal and workplace compensation claims. Despite these positive trends, we expect to face challenges, as the work accident rate and the number of motor vehicle accident deaths decline.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 6.

Rounding of amounts

The company is of a kind referred to ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the directors’ report and financial report. Amounts in the directors’ report and financial report have been rounded off to the nearest thousand dollars in accordance with the instrument.

This report is made in accordance with a resolution of Directors .

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Simon Morrison

Managing Director and CEO

Brisbane 24 February 2021

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 5

Auditor’s independence declaration

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SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 6

Consolidated statement of profit or loss

		31 Dec 20 31 Dec 19
Notes		$’000 $’000

Revenue from contracts with customers 2 Other income 2 Employee benefits expense Depreciation and amortisation expense Finance costs Other expenses 3(a) Profit before income tax Income tax expense Profit for the half-year Profit is attributable to: Owners of Shine Justice Ltd Non-controllinginterest		92,627 88,420 941 1,024 (49,964) (46,245) (6,363) (5,778) (3,481) (3,385) (19,177) (21,298)
		14,583 12,738 (4,529) (3,908)
		10,0548,830
		10,049 8,785 5 45
		10,054 8,830


		Cents Cents

Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share Diluted earningsper share		5.80 5.08 5.70 4.97

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 7

Consolidated statement of comprehensive income

		31 Dec 20 31 Dec 19
		$’000 $’000

Profit for the half-year Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Other comprehensive income for theperiod net of tax Total comprehensive income for theperiod Total comprehensive income for the period is attributable to: Owners of Shine Justice Ltd Non-controllinginterest		10,054 8,830 34 7
		34 7

		10,088 8,837
		10,083 8,792 5 45
		10,088 8,837

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 8

Consolidated balance sheet

	31 Dec 20	30 Jun 20
Note	$'000	$'000
ASSETS Current assets Cash and cash equivalents Trade and other receivables Contract assets – work in progress 2(e) Income tax receivable Unbilled disbursements at fair value 11 Other financial assets at amortised cost Other current assets Total current assets Non-current assets Trade and other receivables Contract assets – work in progress 2(e) Unbilled disbursements at fair value 11 Plant and equipment Other financial assets at amortised cost Right of use assets Intangible assets Total non-current assets Total assets 2(d) LIABILITIES Current liabilities Trade and other payables Disbursement creditors Borrowings 6 Lease liabilities Other current financial liabilities Current tax liabilities Employee benefit obligations Provisions Total current liabilities		32,812 10,876 181,565 322 67,240 313 2,983


	49,515
	17,489
	153,809
	-
	70,983
	313
	3,064
	295,173	296,111


	1,462	1,528
	133,988	123,537 22,028 3,234 4,385 40,647 48,949
	24,635
	3,157
	4,578
	37,400
	49,153
	254,373	244,308

	549,546	540,419
		13,485 83,644 4,075 7,549 154 215 7,619 214


	14,394
	86,968
	3,552
	7,775
	192
	289
	7,661
	179
	121,010	116,955

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 9

Consolidated balance sheet

Note Non-current liabilities Trade and other payables Borrowings 6 Lease liabilities Deferred tax liabilities Employee benefit obligations Provisions Total non-current liabilities Total liabilities 2(d) Net assets EQUITY Share capital 7 Other reserves Retained earnings Capital and reserves attributable to the owners of Shine Justice Ltd Non-controllinginterests Total equity	31 Dec 20	30 Jun 20 $'000
	$'000
		2,535 48,424 40,898 91,649 1,293 1,445

	1,697
	47,169
	37,809
	95,980
	1,377
	1,518
	185,550	186,244

	306,560	303,199

	242,986	237,220
		53,223 380 183,514

	53,223
	857
	188,798
	242,878	237,117 103
	108
	242,986	237,220

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 10

Consolidated statement of changes in equity

Attributable to owners of Shine Justice Ltd

			Foreign	Equity	Non-
	Share	Retained	exchange	share	controlling	Total
	capital	earnings	reserves	reserves	interest	equity
	$'000	$’000	$'000	$'000	$’000	$'000
Balance at 1 July 2019	53,150	168,966	(246)	433	105	222,408
Profit for the period	-	8,785	-	-	45	8,830
Other comprehensive income	-	-	7	-	-	7
Total comprehensive income for the half-year	-	8,785	7	-	45	8,837
Transactions with owners in their capacity of owners
Dividends paid	-	(4,329)	-	-	(79)	(4,408)
Issue of deferred ordinary shares	73	-	-	45	-	118
Employee share schemes – value of employee services	-	-	-	518	-	518
Total transactions with owners and other transfers	73	(4,329)	-	563	(79)	(3,772)

Balance at 31 December 2019	53,223	173,422	(239)	996	71	227,473
Balance at 1 July 2020	53,223	183,514	(516)	896	103	237,220
Profit for the period	-	10,049	-	-	5	10,054
Other comprehensive income	-	-	34	-	-	34
Total comprehensive income for the half-year	-	10,049	34	-	5	10,088
Transactions with owners in their capacity of owners
Dividends paid	-	(4,765)	-	-	-	(4,765)
Issue of shares to employees	-	-	-	(307)	-	(307)
Employee share schemes – value of employee services	-	-	-	750	-	750
Total transactions with owners and other transfers	-	(4,765)	-	443	-	(4,322)

Balance at 31 December 2020	53,223	188,798	(482)	1,339	108	242,986

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 11

Consolidated statement of cash flows

	Half-year	Half-year
Note	31 Dec 20 $’000	31 Dec 191 $’000

Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Disbursements recovered Disbursements paid Interest received Finance costs Income taxespaid Net cash inflow from operating activities 2(c) Cash flows from investing activities Payments for plant and equipment Payments of deferred consideration from acquisition of subsidiary Purchase of receivables Loans to related parties Payment for intangible assets Net cash outflow from investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Dividends paid to company’s shareholders Dividends paid to non-controlling interests in subsidiaries Asset finance facility repayments Principal elements of lease payments Proceeds from disbursement funding Repayments of disbursement funding Net cash outflow from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the half-year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the half-year		83,470 (78,220) 40,109 (37,373) 235 (2,684) (20)
	116,441
	(77,246)
	29,416
	(34,705)
	137
	(2,632)
	(116)
	31,295	5,517
		(789) 15 (678) (527) (1,373)

	(463)
	(858)
	-
	(193)
	(1,797)
	(3,311)	(3,352)
		73 - (682) (4,329) (79) (1,124) (3,697) 7,915 (2,803)

	-
	640
	(1,230)
	(4,765)
	-
	(1,187)
	(3,870)
	4,252
	(5,086)
	(11,246)	(4,726)
		(2,561) 26,697 35
	16,738
	32,812
	(35)
	49,515	24,171

The HY2019 cashflows relating to disbursement funding have been reclassified to be consistent with the current year presentation.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 12

Notes to the consolidated financial statements

1. Significant changes in the current reporting period

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

It 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 3,000 cases during the half-year and procured client damages in excess of $488 million.

New Practice Area segment

An increase in revenue was primarily as a result of significant growth in the Class Actions, Abuse, Medical Law and Disability and Super business.

In November 2019, in relation to the Mesh Class Action, the Federal Court Registrar awarded Shine’s fixed costs in the sum of $39,786,867, which was received in December 2020.

Personal Injury segment

Shine Lawyers continued to specialise in damagesbased plaintiff litigation legal services, primarily relating to personal injuries. We continued to optimise traditional and digital advertising, adapting content to respond to changing emphasis in client concerns as the COVID-19 pandemic evolved. We strengthened our brand presence and recognition across all regions, especially Queensland.

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

Stephen Browne Personal Injury Lawyers experienced growth in its personal injury business and has continued its work in superannuation and disability insurance.

Bradley Bayly Legal successfully settled many long-tail matters, generating high fees billed and substantial favourable outcomes for their clients.

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 31 December 2020 as follows:

COVID-19 Pandemic Impact

The Group closely monitored and responded to the potential impacts on its business of the COVID-19 pandemic during the first half of the financial 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 way services were provided during the first half of the year, with many staff continuing to work from home and providing services remotely. The transition to remote working has continued with minimal disruption to the delivery of services or impact on enquiries, case management or settlements in the first half
Financial results are tracking in line with guidance
The Group had $46.0 million net cash at bank (cash at bank less short-term borrowings), and sufficient liquidity in its banking facilities
Liquidity levels remain consistent, with the net current asset position at $174 million (30 June 2020: $179 million)
The pipeline of new work is tracking well, with new case numbers through Q1 and Q2 remaining consistent with prior year numbers, and
There was a favourable spike in new file openings during the first half compared to the prior comparative period.

There were no other significant business risks that impacted the financial performance or financial position of the Group as at 31 December 2020.

For a detailed discussion about the Group’s performance and financial position please refer to our operating and financial review on pages 4 to 5.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 13

Segment information

2. Segment and revenue information

(a) Description of segments

The Group is a diversified group which derives its revenue and profits from a variety of sources. The Group’s Managing Director considers the Group’s performance from a legal service perspective and has identified two reportable segments:

(i) Personal Injury

Personal injury remains the core business in damagesbased plaintiff litigation.

The business undertaken by Risk Worldwide New Zealand Limited and My Insurance Claim does not meet the specific criteria in AASB 8 Operating Segments which means it is not considered as its own reporting segment. Therefore, as both businesses currently account 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 Shine Lawyers Core PI business includes:

motor vehicle accidents
workers’ compensation
public liability, and
catastrophic injuries

In addition, brands included within this segment are:

SB Law Pty Ltd
Sciacca’s Lawyers Pty Ltd

The Managing Director primarily uses a measure of:

earnings before interest, taxes, 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.

Bradley Bayly Holdings Pty Ltd, and
files acquired within Claims Consolidated Pty Ltd

(ii) New Practice Areas

Shine Justice’s New Practices Areas comprises:

abuse law
disability insurance and superannuation claims
asbestos and dust disease
federal compensation law
medical law
class actions
commercial disputes
employment, and
private client services

In addition, brands included within this segment are:

Emanate Legal Services Pty Ltd
Best Wilson Buckley Family Law Pty Ltd
Shine NZ Services Pty Ltd
Risk Worldwide New Zealand Limited
My Insurance Claim Pty Ltd
Carr & Co Divorce and Family Lawyers Pty Ltd, and
files acquired within ACA Lawyers Pty Limited.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 14

Segment information

(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:

EBITDA reconciles to operating profit after income tax as follows:
	31 Dec 20	31 Dec 19
Note	$’000	$’000

Profit after income tax Finance costs – net Depreciation and amortisation Income tax expense Interest income EBITDA 2(d)	10,054	8,830 3,385 5,778 3,908 (235)
	3,481
	6,363
	4,529
	(137)
	24,290	21,666

(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:

	31 Dec 20	31 Dec 19
	$’000	$’000

Cash inflow from operating activities Finance costs paid Income taxes paid Interest received GOCF	31,295	5,517 2,684 20 (235)
	2,632
	116
	(137)
	33,906	7,986

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 15

Segment information

(d) Segment information provided to the Managing Director

The table below shows the segment information provided to the Managing Director for the reportable segments for the half-year ended 31 December 2020 and on the basis on which revenue is recognised:

Personal Injury 31 Dec 20 31 Dec 19 $'000 $'000 49,052 56,551 - - - - 49,052 56,551 - - - - 19 15 19 15 49,071 56,566 8,251 14,803 31 Dec 20 30 Jun 20 $'000 $'000 274,874 305,948 84,601 99,394	New Practice Areas 31 Dec 2031 Dec 19 $'000 $'000 32,265 19,032 3,773 3,236 7,537 9,601 43,575 31,869 - - - - - 5 - 5 43,575 31,874 16,256 7,180 31 Dec 2030 Jun 20 $'000$'000 274,047 233,449 80,644 55,816	Unallocated items 31 Dec 2031 Dec 19 $'000$'000 - - - - - - - - 137 235 785 769 - - 922 1,004 922 1,004 (217) (317) 31 Dec 2030 Jun 20 $'000$'000 625 1,022 141,315 147,989	Total	Total
31 Dec 20 $'000	31 Dec 20 $'000	31 Dec 20 $'000	31 Dec 20 $'000	31 Dec 19 $'000
49,052 - - 49,052 - - 19				75,583 3,236 9,601

	32,265	-	81,317
	3,773	-	3,773
	7,537	-	7,537
	43,575	-	92,627	88,420
				235 769 20
	-	137	137
	-	785	785
	-	-	19
19	-	922	941	1,024

49,071	43,575	922	93,568	89,444
8,251 31 Dec 20 $'000 274,874 84,601				21,666

	16,256	(217)	24,290
	31 Dec 20 $'000	31 Dec 20 $'000	31 Dec 20 $'000	30 Jun 20 $'000
	274,047	625	549,546	540,419 303,199
	80,644	141,315	306,560

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 16

Segment information

(e) Assets and liabilities related to contracts with customers

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

	31 Dec 20	30 Jun 20
	$’000	$’000

Current contact assets relating to work in progress Non-current contract assets relatingto work inprogress Total contract assets	153,809	181,565 123,537
	133,988
	287,797	305,102

There are no liabilities relating to contracts with customers.

Significant accounting judgement

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 $71,969,000 (30 June 2020: $66,575,000).

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

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 17

Profit and loss information

3. Profit and loss information

(a) Other expenses

(a) Other expenses
	31 Dec 20	31 Dec 19
	$’000	$’000

Premises Marketing HR IT and computer Printing, postage and stationery Professional fees Fair value losses on unbilled disbursements Motor vehicle and travel Bad and doubtful debts Sundry	1,991	2,005 7,603 1,577 2,719 840 2,228 2,870 825 380 251
	6,029
	1,331
	3,392
	616
	2,304
	2,933
	305
	142
	134
	19,177	21,298

(b) Income tax

Income tax expense is recognised based on management’s estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to 31 December 2020 is 31%, which is inline compared to 31% for the six months ended 31 December 2019. The tax rate is higher than the company tax rate of 30% due to the non-deductibility of entertainment and depreciation and amortisation expenses.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 18

Disbursement funding

4. Disbursement funding

4. Disbursement funding
	Facility	Total	Undrawn
	limit	facility	limit
	(Principal)	balance	available
	$’000	$’000	$’000
31 December 2020
Third Party Disbursement Funding Facility
Deferred payment agreement
Principal	57,500	(48,513)	8,987
Accrued interest	n/a	(18,923)	n/a
	n/a	(67,436)	n/a
Credit contracts and Exclusive Service Provider Deed
Principal	n/a	(7,018)	n/a
Accrued interest and fees	n/a	(1,247)	n/a
	n/a	(8,265)	n/a

Total	n/a	(75,701)	n/a
30 June 2020
Third Party Disbursement Funding Facility
Deferred payment agreement
Principal	57,500	(52,867)	4,633
Interest	n/a	(14,204)	n/a
Total facility balance	n/a	(67,071)	n/a
Credit contracts and Exclusive Service Provider Deed
Principal	n/a	(4,098)	n/a
Accrued interest and fees	n/a	(808)	n/a
	n/a	(4,906)	n/a

Total	n/a	(71,977)	n/a

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 19

Dividends

5. Dividends

(a) Ordinary shares

(a) Ordinary shares
	31 Dec 20	31 Dec 19
	$’000	$’000

Dividendsprovided for orpaid duringthe half-year (b) Dividends not recognised at the end of the half-year	4,765	4,329
		31 Dec 19
	31 Dec 20
	$’000	$’000

In addition to the above dividends, since the end of the half-year end the Directors have recommended the payment of an interim dividend of 2.00 cents unfranked per fully paid ordinary share (31 December 2019: 1.50 cents). The aggregate amount of the proposed dividend expected to be paid on 26 March 2021 out of retained earnings at 31 December 2020, but not recognised as a liability at the end of the half-year, is:	3,465	2,599

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 20

6. Borrowings

Loan covenants

Under the terms of the major borrowing facilities, the Group is required to comply with the following financial covenants:

Total bank debt not to exceed 50% of the Group’s total work in progress, and
Total bank debt must be no more than 2.25 times Group EBIDTA on a rolling 12 months basis.

The Group has complied with these covenants throughout the reporting period.

Financing arrangements

The Group’s borrowing facilities were as follows:

The Group’s borrowing facilities were as follows:
	31 Dec 20	30 Jun 20
	$’000	$’000

Floating rate – bank loans Expiring within one year Expiringbeyond oneyear Transformation project costs loan Expiring within one year Expiringbeyond oneyear Vendor finance Expiringwithin oneyear Current Non-current		1,341 45,000
	1,076
	45,000
		2,409 3,424

	2,476
	2,169
		325

	-

	50,721	52,499
		4,075 48,424
	3,552
	47,169

7. Equity securities issued

Issued capital at 31 December 2020 remained unchanged from the prior comparative period at $53,222,800 (173,261,812 ordinary shares).

8. Contingencies

(a) 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 31 December 2020 remains unchanged at $40,000 (30 June 2020: $40,000).

9. Events occurring after the reporting period

(a) Dividend recommendation

Refer to note 5 for the interim dividend recommended since the end of the reporting period.

(b) COVID-19 Impact

There continues to be limited impact from COVID-19 on the operations and financial results of the Group in the first half.

At the date of the signing of the accounts, the Group is comfortable that performance to date in FY21 does not suggest that there will be a material impact on the business in the near term.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 21

Related party transactions

10. Related party transactions

During the half-year, there has been no significant changes in the existing related party arrangements. There were no new arrangements entered into during the half-year.

arrangements entered into during the half-year.
	Sales to related parties Purchases from related parties	Amounts owed by related parties Amounts due to related parties


	$ $	$ $
Related parties of the Group: Entities controlled or significantly influenced 31 Dec 2020 31 Dec 2019	784,159 524,128
		4,598,046 6,219,828
	768,775 538,020	3,930,919 6,845,773

Purchases

During the half-year, premises rent totalling $524,128 (31 December 2019: $538,020) was paid to affiliated companies of which Simon Morrison and Stephen Roche are directors and controlling shareholders.

Sales

During the half-year, goods, rent and services fees totalling $784,159 (31 December 2019: $768,775) was sold to Shine Lawyers NZ Limited, an affiliated company of which Simon Morrison and Stephen Roche are directors and controlling shareholders.

Amounts owed by related parties

During the half-year, an additional loan of $399,640 was provided to Shine Lawyers NZ Limited, an affiliated company of which Simon Morrison and Stephen Roche are directors and controlling shareholders. An amount of $313,689 was repaid during the half-year. The balance outstanding is $4,598,046, which includes interest charged of $107,463.

Amounts due to related parties

During the half-year, liabilities associated with right to use assets provided by Simon Morrison, a director and a controlling shareholder and Stephen Roche, a controlling shareholder totalled $6,219,828 (31 December 2019: $6,845,773).

Other transactions

During the half-year, consultancy fees totalling $120,000 were paid to Stephen Roche, a controlling shareholder.

During the half-year, consultancy fees totalling $84,497 were paid to companies owned by Rod Douglas, a non-executive director.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 22

11. Fair value measurements of financial instruments

This note provides an update on the judgements and estimates made by the Group in determining the fair values of the financial instruments since the last annual financial report.

(a) Fair value hierarchy

To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the table.

The following table presents the Group’s financial assets measured and recognised at fair value at 31 December 2020 and 30 June 2020 on a recurring basis:

	Level 1	Level 2	Level 3	Total
At 31 December 2020	$’000	$’000	$’000	$’000
Financial assets
Unbilled disbursements	-	-	95,618	95,618
Total financial assets	-	-	95,618	95,618
	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

There were no transfers into or out of Level 3 fair value measurements during the six months ended 31 December 2020.

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-thecounter 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.

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

(b) 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.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 23

Fair value measurements of financial instruments

(c) Fair value measurements using significant unobservable inputs (level 3)

The following table presents the changes in level 3 items for the half-year ended 31 December 2020:

	Unbilled disbursements
	$’000
Opening balance 1 July 2020 Additions Settlements Losses recognised inprofit or loss Closing balance 31 December 2020	89,268
	41,059
	(31,776)
	(2,933)
	95,618

(i) Transfers between levels and changes in valuation techniques

There were no transfers between the levels of the fair value hierarchy in the six months to 31 December 2020. There were also no changes made to any of the valuation techniques applied as of 30 June 2020.

(ii) 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.

	Fair value
Description	at 31 December 2020	Unobservable inputs	Relationship of unobservable inputs to fair value
Unbilled	95,618	Internal historical recovery rates
disbursements
		Qualitative individual matters	If the recovery rate was 1% (higher) or
			lower, the fair value would
			(decrease)/increase by $1,003,158

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 24

Basis of preparation

12. Basis of preparation of half-year report

This condensed consolidated interim financial report for the half-year reporting period ended 31 December 2020 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001 .

The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2020 and any public announcements made by Shine Justice Ltd during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, and the adoption of new and amended standards as set out below.

(a) New and amended standards adopted by the group

A number of new or amended standards became applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 25

Signed reports

Directors’ declaration

In the Directors’ opinion:

(a) the financial statements and notes set out on pages 7 to 25 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 31 December 2020 and of its performance for the half-year ended on that date, and
(b) there are reasonable grounds to believe that Shine Justice Ltd will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Directors.

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Simon Morrison Managing Director & CEO

Brisbane 24 February 2021

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 26

Signed reports

Independent auditor’s review report to the members of Shine Justice Ltd

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SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 27

Signed reports

Independent auditor’s review report to the members of Shine Justice Ltd

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SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 28

Corporate information

ABN 93 162 817 905

Directors

Graham Bradley AM, Non-executive Chair David Bayes, Non-executive Director Rod Douglas, Non-executive Director Teresa Dyson, Non-executive Director Simon Morrison, Managing Director and CEO

Company secretaries

Annette O’Hara Ravin Raj

Registered office

Level 13 160 Ann Street Brisbane, Queensland Phone: 61 7 3006 6000

Share register

Link Market Services Limited Level 21, 10 Eagle Street Brisbane, Queensland

Shine Justice Ltd is listed on the Australian Securities Exchange (ASX)

Bankers

Commonwealth Bank of Australia Level 21 180 Ann Street Brisbane, Queensland

Auditors

PwC Australia 480 Queen Street Brisbane, Queensland

SHINE JUSTICE LTD INTERIM FINANCIAL REPORT HY21 29

AI assistant

SHINE JUSTICE LTD — Interim / Quarterly Report 2021

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