Listed law company has enjoyed outstanding organic growth
The Age
Wednesday February 17, 2010
SLATER & Gordon has just about completed three years as a listed company and managing director Andrew Grech says he's enjoying the journey."It's been a pretty stable three years, lots of growth and, I'm glad to say, delivery of the things that we talked about doing in the prospectus and a fair bit more."Anyone who took up the $1 shares in the float would not be complaining, although initial exuberance pushed the shares to $1.98, which remains the stock's high.Yesterday, the scrip firmed 8 to $1.645, following a December-half report that showed earnings were up 12 per cent to $9.5 million on revenue that increased 16 per cent to $59 million."One of the terrific things over the last few years is we've enjoyed very strong organic growth, about 10 per cent compounding, year-on-year, and that's been a feature of the last six months and we expect a strong part of the future," Grech says.Since floating, Slater's number of offices has grown from about 15 to 33, and management is trying to broaden and deepen the areas of the law in which it practices. Personal injury litigation still accounts for about 75 per cent of the business.The company has made about 30 acquisitions in less than a decade and during the past 2 years has spent about $31 million buying other businesses.Grech reports that he's happy with what he's bought. "You sometimes get problems with one or two or three of those at the outside, but overall our run rate has been very strong and overall they've actually outperformed our expectations."We now feel that acquisitions in the $1 million to $5 million revenue range is a core competency of the team; so we feel very comfortable and confident doing that going forward."Earnings growth slowed down from 42 per cent not long after listing to more recent levels of about 12 per cent; which might explain why the shares have weakened since the middle of last year. But that doesn't perturb Grech."I think the growth is sustainable growth. What always worries one a bit is the capacity of a business to sustain flashy, big jumps year on year."And will Grech be there in five or 10 years? "If I'm still wanted, yeah. I love the place. I love the work that we do."At $1.645, Slater is valued at $198 million, or about 10 times earnings, assuming profit improves by 15 per cent in the current half.
© 2010 The Age
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