A listed Australian firm has halved its profit forecast, causing its share price to plummet.
Shine Lawyers, which two years ago had designs on expanding into the UK, halted trading last week pending an announcement to the Australian stock market.
Earlier today, the company said some current cases used to form its estimated profit figures will not ultimately succeed. These mostly fall within the personal injury section of the business.
Shine made a A$17.5m (£8.7m) provision to cover its work on progress recovery rates, and announced a A$10.5 (£5.2m) hit to its business due to higher write-offs, competition and what it called ‘sub-optimal fee-earner-to-file ratios and under-performance by some fee-earners’.
The company has downgraded original profit projections made last August of A$52m-56m (£25.8m-£27.7m) to A$24m-A$28m (£11.9m-£13.9m).
The latest announcement says the company intends to take a ‘more conservative approach’ to work in progress and disbursement provisioning.
The board will not declare an interim dividend, but expects to be in a position to declare a full-year dividend.
‘[The] underlying business model remains strong and we continue to execute our programme of strategic initiatives to deliver greater efficiencies,’ said the announcement.
‘Although immediate focus is operational performance, we continue to have a strong pipeline of acquisition opportunities, which continue to form a key part of the company’s strategy moving forward.’
The statement preceded the company’s return to market trading, although by the close of play the share price had fallen by 73.25% within a day.
Meanwhile, Shine’s rival, and fellow listed firm Slater and Gordon, faces a class action in Australia related to its own falling share price.
Bruce Clarke, principal with Australian class action firm ACA Lawyers, said interest from institutional investors, particularly in the UK, has ‘been considerable’ since it started investigating Slater and Gordon’s recent announcements to the stock market.