AF Legal Group Limited (AFL) Earnings Call Transcript & Summary

Welcome, everyone, to the H1 FY '26 Investor Presentation for AF Legal. I'll now hand over to CEO, Chris McFadden. Chris?

Thanks, Alexander. I appreciate that. Thanks to everyone for joining us today. As Alex said there, our H1 FY '26 investor presentation. So I will start working through it relatively quickly. It is basically the same structure as previously. So I think that most people should be relatively familiar with it. I don't particularly read all the slides I just talked to a few a few high-level points. It's very much the half 1 result is very much a continuation of the Q1 trend. I think the trends that we saw at Q1, where we had profit up 116% relative to revenue up 43%, and that trend's very much continued. So our half year numbers. Revenue is up 40%, with our underlying profit after normalization, up 125%. So again, very positive trends there. Average weekly revenue is a slight seasonal contraction. So we've gone from $692,000 in the previous quarter to $680,000 for the second quarter. And really, that is just December. Prior to December slowdown, I guess, we were tracking at around a level of nearly $750,000 a week, and it drops off dramatically in December from late November, it starts to decline. And then equally, the last 2 weeks of December is pretty much not much happening. So that's the impact on that. What I will say there as well is we've included an EBITDA number, which we haven't done for a little while. -- there have been some requests from a number of people to include that. So it shows the same sort of trends to be honest, as the profit numbers, but obviously, it's just a different metric and people have different views when it's worth, but it's included there for you to look at. The one down the bottom there and the little graphic at the side, the great plate work. I think we called it out at the Q1 because it would have been around them. pretty sure. But yes, we delivered our third survey and recalling that we started off at around the 53% level. at the start of the management change, 84% the year after, and we held that result at 85 in the most recent year, which is a very positive achievement to hang on to the significant growth that we have had achieved in our first year. And I think that, as you'll see from our results and as we discussed even in the first quarter, our ability to attract and retain high-quality legal talent is vastly helped by this result of the Great Place to Work Survey. Moving along. This one here is a traditional snapshot slide that we have. So again, it's just showing very positive trends. You look in you look at the revenue growth, and it's pretty classical growth. It's probably accelerating a little bit over the last 3 quarters, and we'll get into each of these in a little bit more detail, but definitely accelerating there. You see that slight dip in relation to Q2, and that's not unusual, probably last year, in the last couple of years. It may have been masked a little bit by acquisitions, which may be meant that it wasn't as apparent as it was, but definitely is the less decline in December. And then you've seen the -- you see the profit number there of $1.26 million for the half. And again, that's an acceleration to that we're seeing. Moving on. And I think that, again, it's a repetition of the same slide as previously or it's the same graph rather. But those numbers down the bottom are the important ones because they're showing the accelerating growth. And whilst we can look at H1 being up 40% on the prior corresponding period to H1 FY '25. If we look at the half-on-half growth, we can see 16%, 17%, 20% for the most recent half. And so we are we are accelerating that, and that's a real positive thing for us. I think that the other thing that we see there, and it's called out on that slide again is that it's pretty much happening whats happening across all divisions. So it's happening across congested bills in the states happening in Criminal Law. And most importantly, given that it's our biggest division. Family Law also up 31%. So very positive again. Revenue momentum, and I probably talked about this at the start forgetting that I had this slide to come. But obviously, that first quarter reduction the reduction of the first quarter due to December. And it calls out there the November, December level of $747,000 per week or it's us call it $750,000. And I'm pleased to say that February is back at that level. So February is back at the November December level. January is not dissimilar to December, to be honest. It's a slightly different pattern, but the overall numbers behave quite similarly. And I think that the things to call out here are our legal and our legal -- our lawyers and legal support teams have grown by 32% year-on-year. So relative to the first half of the prior year, also up 16% on the previous half. And I think just to call out some of the movements, we attracted a further 9 lawyers in H1, 7 of those were at senior associate or above. And in addition, there's a couple of other movements in our promotions and departures caught out there. I will also mention, and whilst it's not a particularly a H1 thing. But in the last 2 weeks, we have signed on 5 accredited specialists 4 of those in family law and lining incremental, which we'll talk about a little bit later. We now have in the order of or family law accredited specialists, and we have additional credit specialists across criminal law and contested bills and estates. So the quality of our people is getting stronger. And again, it goes back to that credibility that we've built with the Great Place to Work Survey in that we are viewed in the market as place to be. I think that for our -- for the most senior professionals, they are looking at us as an organization that is well worth joining for their career. Moving on. This one here is our standardized profit format half-on-half and also a little bit of history. It's basically trying to really focus on that normalized net profit before tax attributable to the owners on a consistently normalized basis. You go back to FY '23. And obviously, that was a big year of adjustments, which happened in the end of H1 FY '23, dropped off a little bit in the next couple of years. Most recently, we have had in the second half of last year, we saw the normalized adjustments around the legal defense fees and also the start of Project Titan. I think Project Titan in that H2 FY '25 was around about $270,000 or thereabout and then a further a further $494,000 in normalization adjustments in the current period. which are predominantly related almost solely related to Project Titan with, I think, $12,000 of ongoing legal defense fees, so minimal. The things to call out there is that, that $1.26 million represents 91% of our prior year profit or underlying profit, so very significant growth that we are achieving. And the rest of it there is probably just for your records to see, and I probably won't go through that in more detail. Again, looking at this slide here, something that we introduced, I think, in Q1, we started talking about our normalized net profit before tax attributable percentage. So that percentage is 7.1% for the current half, up from 5% in the previous. And if we actually do adjust that for the minority interest revenue, which given that we are not looking at the profit related to that minority interest. So if we adjust for the revenue accordingly, it would actually be around 7.8%. So in the context of our short to medium-term aspirational target of $50 million and $5 million bottom line or 10%. We are 7.8%, we're doing quite well. And I think that the other thing that this really evidences as well is and it comes from those numbers that I talked about before. So revenue up 40%, profit up 125%. That's a continuation of the trend that we are seeing. So we see that our profits or our underlying profit, if you like, are up substantially at a substantially greater rate than the revenue increases, so $40 million relative to $125 million. FY '25 was revenue growth of 27%, profit up by 77% and the year before revenue growth a bit more modest at 15%, but profit is probably kind of a pretty low base there. So hence, the big number there in terms of nearly 400%. Balance sheet movements. Again, I think these will come in questions if they are of interest, really, I think the ones to look at their trade and other receivables, the fact that they're up by 7% at a time when our half-on-half revenue growth was up by 20% is a pretty positive trend. Our debt is aging in terms of the older component is unchanged from the percentage that it was at year-end. And just pointing out there, again, that in terms of the age component, it primarily relates to the areas of contestable and estates, which is predominantly paid end of matter and also family law, some deferred settlement arrangements and all of which are not all of which, but the vast majority of which are securitized against assets that will flow out of the settlement of the family law matter in the wheels in the States manner. So the rest that we have there, the only thing I will point out one thing on that slide because it's -- there was a late adjustment which I missed on the on the presentation, to be honest. So the borrowings are all shown there as noncurrent, 900 should be up in current actually, so -- and it was in the 40, but I just missed out on this. So basically, the current component is the amortization or the repayment schedule for the next 12 months. So other than that, we will wait for any questions that flow from the balance sheet. Moving on to cash flow. Again, I won't dwell on it too much, but net operating cash of around about $2.4 million. relative to FY '25 in totality of $2.9 million compares relatively positively. And when you look at it in terms of the net profit before tax, 1.465. It's a pretty positive relationship. So we are reflecting a fairly healthy cash conversion here. The rest of the movements around investing activities and financing activities are all pretty standard. To be honest, there's nothing -- you see the repayments there of $50 million some dividend movements, lease liabilities, which is caused by the vagaries of AASB 16 in relation to leases, which is, again, has mixed views. Moving on to the last couple of slides here and just a moment here. So again, standard format that we sort of talk about here, and I won't repeat everything that tones. We tend to highlight things that have being active, if you like, in the most recent period by having them in blue. So again, Great Place to Work survey, 85%, which we've talked about. We've got to the end of our nearly the film releases or the last of those happened recently in Canberra, but we had a lot in the first half as well. And these are really good events for us. We really connected with a lot of people out there in different markets, which is a really positive thing for our around team members for our brand, for our -- yes, just for our profile in general. And I think that our association with Darren Mort has been great. great burn for us in many ways. Locked there on new client activity around SEO, new client inquiries, website evolution. And I would just refer you to -- on Page 8, I believe it is where we sort of get into a lot of this, and there's a lot of positive metrics that sort of support the positives coming out of this. And I think that I won't go through them here now, but I would encourage you to have a look at that as they're showing some really positive signs. And we are working with working with a third-party provider as well to ramp this up even more, to be honest, to divert some of our some of our marketing stage, which is currently dedicated to Google AdWords to really look at ways to generate pages and generate SCO that will be more effective for us. So I think watch more of that. Hopefully, we'll have more to say about that at the end of the year. Improving trends, we see that. Project Titan. So Project Titan continues to roll out. I think that everything is on track there, and we'll -- I think there are a couple of questions on it, so we'll probably come up to it then. -- equally recent changes as well and how they are impacted by it, which I'm pleasing to say that there is no significant impact that's going to prevent anything happening there. And then in relation to the proven growth model section there, just the one that sort of stays blue is growing existing practices through increased recruitment activity. And you can see that there is a lot of that being going on in the last 12 months, I would say, and it continues. We are currently looking for a new leader in our Brisbane team due to an internal promotion, which will improve our HR function throughout our organization, improve our I think, a HR partnering function with our practices, I think that promotion will do. So we are looking for a leader there. And we also have appointed a new lawyer up there as well, again, is another accreditor, 1 of those 5 accredited specialists. Moving on to our growth strategy. Again, similar principle here in that blue is all of the points that are ongoing, if you like, so the things that are -- that happened in the most recent 6 months. We have been growing our existing family law practices through team expansion, and I've talked about that. We've entered a couple of new markets. We've entered Geelong and Coburn, so Geelong in Victoria and Coburn in WA in late FY '25. And more recently, we entered Mornington Peninsula, which is largely focused around contestable and estates. But as with most of these locations, they are multi-branded, even though they may have started as a contestable and a state office, it will expand into being a family law office. And then I think the other thing that we look at, at the moment is future expansion, geographic expansion of contest wills and estates and Criminal Law. That has happened a lot in relation to criminal law. You will recall that when we acquired the Crimea division on our strong legal, it was just a city-based business. We have since put people on the ground in Brisbane, Melbourne and Canberra. And equally, we are looking at other opportunities around the nation for both of these businesses as well, and they are starting to grow well. The last one is around -- is a new introduction, if you like, so the consulting model, and that, again, will come up in a question. But I might just throw to Pete on this one. I know he has a particular passion for this, so I'll let him just have a few words around this.

Sorry, Chris, just take me through that last bit.

Just the consulting models we've just got on to the consulting model section of our growth strategy.

I was looking to get -- I'm able to cover this now. There's a question from Stella on this which will sort of come to as well. So I might just divide my answer up a little bit. But the consultant model in terms of what I was referring to in the presentation there. reflects the fact that at this point, we haven't looked at doing this. The consultant model has been very successful in parts in the U.K. It's been less successful, I would say, in its Australian guys. There's been 2 real attempts to roll it out in Australia, one through a group called Keystone, which is partly or largely owned by the biggest of the U.K. or one of the biggest of the U.K. consultant model is a key point more, which is a listed in I'm sorry it's Keypoint Australia, Keystone in the U.K. They have they've adopted an approach which is nicely focused on commercial areas of practice. They hire very like quality lawyers. What I would say is that I think that their growth has probably been slower than maybe they hoped for. It's at a point where they've got less than 100 lawyers after quite a long time of being established in Australia since 2014 and compared to, say, some of the big outfits in the U.K. like their parent company, Keystone and Taylor Rose, who have many hundreds or in telerads case, 1,000 consultants. There's another group GDC lawyers that also has attempted it in their case wanting to say too much, they expanded quite rapidly. But with respect probably didn't adopt some of the oversight that we would want to in how we would want to do this. So we are taking a very open mind to moving into this area. We have a firm view that it's best done as a hybrid model, and our focus remains on running a traditional law practice. But basically, we are open to one-off opportunistic offers of a consulting model to layers that fit the bill. And by that, I mean, we're only after the highest quality lawyers who predominantly, if not entirely bring their own work. And we've made an initial step in that regard, and I'll come back to that when we get to Stella's question as to how that's working in practice. So it's, I think, another growth area for us. It's really attractive as I think, to investors because it's theoretically a capital-light model that adjusts itself. -- more quickly to downturns in economic circumstances. Obviously, in the traditional consultant model, you're not paying a salary. People have to sort of kill what they eat as it were. And therefore, if there is a downturn in work, there is a buffer effort for investors. So look, we're quite excited that we've got a pro forma way of doing that. Now that we've made an initial step. And we just want to flag that. But Chris, I'll come back to it when we get to Stella's question.

Thanks, Pete. The last slide I just seem to running to a little problem here. But the last slide that is included in the pack which you refer to yourself as an appendix, which just basically builds a bridge between EBITDA to normalized net profit before tax attributable I will stop sharing now, and we'll go to the questions, I think, Pete?

Thanks. So look, thanks, Stella, for your questions. I see put up a couple on the Q&A, and I'd ask all the other investors to put their questions up and then the Q&A, if you have any, but Stella had sent some in before end. And Chris, the first of those is that in terms of the one-off adjustment was the one outstanding legal matter remaining as at June now resolved. And also related to this is on Project Titan, is there how many million dollars to spend in half 2. So perhaps just on the legal matter and then Project Titan.

Yes. I think in relation to the legal matter, that outstanding legal matter is ongoing. The majority of the costs relating to the defense, the evidence, et cetera, were incurred in FY '25, especially in the second half of FY '25. That was around $370,000. We are pushing for a final resolution and hope to achieve that in half 2 FY '26. And we would say that the costs in relation to that should not be anything like the initial phase. So it's definitely the $370,000 is the major chunk of the costs in relation to that. And we shouldn't see anything like that in H2. In relation to Project Titan Project Titan, so far has seen $750,000 expense and normalized across the second half of last year and the first half of this year. I think second half last year was around $270,000, and the first half year is around $480,000. It's anticipated that the second half could see up to $750,000 more. but we actually are working to a number which is currently lower than that. But obviously, there's a little bit of contingency in the $750,000, but we would hope that come in a little lower than that.

Thanks for that, Chris. And in terms of normalizations generally, we've flagged this before, as an investor is the largest investment in this company. I don't like seeing normalizations. You'd like to see some clean set of results. The project time and this one remaining legal matter, the trees will continue to call out. We're very hopeful that FY '26 sees that the end of this, and we start seeing some clean and continuing growing numbers in FY '27 the legal matter been out of our control. I'd say that we benefit from it relating to a matter where we were an entity, we are a part owner. So the effects are diluted to some degree there. And as Chris said, a lot of the actual work on has been done. Why that's out of our control is because it's up to the regulatory authorities as to how patent proceeds. But look, it's not something from a cost perspective that we would hope would be something that makes the accounts to messy going forward. Chris, on the Second question from Stella is the refinancing of the debt to start soon, noting it's maturing in 2027 and Stella makes the additional point today, can we expect better terms potentially with a stronger group profile.

Yes. I think we skipped over one question, but we can come back to that one, Pete. Let's see that one first. Yes, we are always in discussions with our bankers. So our bank are predominantly in relation to our facilities, NAB. We do have other arrangements with Westpac to a lesser extent, predominantly St. George or given that they're sort of my 1 and the same. We will kick off initial discussions with NAB shortly. And then determine whether we extend it beyond that. I think that, yes, if you look at our terms that we currently have that were put in place, couple of years ago. Results were obviously a lot better, and we've grown significantly through that period. So I would think that, that in a competitive process should lead to better terms for us. But that's something that we will look to finalize in the balance of calendar '26 and sooner rather than later.

Thanks, Chris. Stella's last question, which I'll have a guide answering first, if you want. She noted that on the 25th of February on LinkedIn AFL announced the signing of [ Andrew Tate ] to transit criminal practice that he currently manages a JSA New South Wales, that would transition across to our strong legal effective 1 April '26. She asks, is that effectively like a new hire or an acquisition? Or is that the new consultancy model? The answer is that it's a bit of everything of those to an extent, but it is the move that prompted us to refer to the consultancy model because the move has been done on a consulting model to the extent that there is a profit-sharing arrangement. So just to sum background Andrew, he is an incredibly good high-profile skilled criminal lawyer in Sydney. You can find him on LinkedIn, we see he's got something like 27,000, 28,000 followers because of politics in his case notes, which are basically daily. Some time back, used to work at Armstrong was a senior layer there. He went out with another Armstrong lawyer. This is 12 4-hour involvement and set up their own 2 partner practice. The other partner has retired and Andrew was left in a situation. And I think this also goes to the bigger question of what we offer lawyers. Andrew's position in that case, Andrew some that's lots practicing law he's not interested in the intricacies and the stresses of running a business. He doesn't want to do HR accounts, trust accounting, financial accounts, all of those matters. And so we were very attractive to Andrew, I believe, providing an auction where he did come on board. I think, unusually compared to most layers in this field here is someone that brings in all of his own work just through reputation, and it brings in more work than he can do personally. And so we've arranged a deal with Andrew, whereby there is essentially a profit sharing arrangement, which is akin to what you might see in the consultancy model. The details of the actual relationship in terms of consultancy versus employment, I won't go into. But they do get at the point that we are weigh or flexible. I think. We're not out here offering a cookie-cutter approach to this. Andrew benefit which perhaps wouldn't be the case in other consultancy models from being able to go on holiday and lead work to other people in the criminal section. He'll work closely with them. He will offer his skills to help train other junior lawyers in the criminal section. So there's a hybrid of integration with this profit sharing model. And we're open to all options along that spectrum, mostly though where the buyers are essentially bringing their own work. The want to alleviate all the stresses that come from having to run a small business. And that's what the other options are for most of the layers in our field. There's a couple of big family law firms like Land and Rogers, where you can join as and work your way up and become a partner perhaps, but it's very rare in most cases, the alternatives to someone like Andrew or other really good layers in our field that if you want to practice at scale, you have to become a small business person and either by itself or with all of the risks and stress that comes with having to deal with another 1 or 2 or 3 partners who may see the world very differently to you. So the other last really beneficial thing here is that we have spent some money on setting out the legal necessities of how this all works and the relevant contracts and that's something that we'll be able to do on in any future cases. So we're really excited by this also above anything, takes out already really formidable Sydney criminal law practice, which is already one of the best in the city to really a standout now having some very high profile and the highest quality criminal layers in Sydney. So Chris, unless you want to add anything there. I was just going to move on to some questions from [ Doug Wheeler ], who's another of our prominent investors and gives us a lot of feedback, which we very much are grateful for, Doug. He notes that there was a bad debt of $250,000 approximately. What was the circumstances and it was in which it was written off? Bad debts have been rare in 250,000 seems notable. And that crosses over with another question we got in relation to the bad debts. If you could comment on that, Chris?

Yes, for sure. So I'd say that our provision, you'll notice that our provision at the end of the half is $405,000, which is the same as it was at the end of financial year FY '25. So we've held that -- so effectively, we are expensing bad debts as they come through directly at the moment, but this may change in half 2. Half 2, we are completing a thorough review of our provisioning process. And we'll work through that in the coming months. I would say that in FY '24, our expense was $304,000 relative to revenue of $21.9 million, so a ratio of 1.4%. That was at a time when the provision was around $70,000. In FY '25, the provision dropped back to around the $400,000 level and the expense was $218,000 relative to 27.6%, so around about 0.8%. You could argue that if you actually allowed for the reduction in the provision as well at probably similar to that 1.4% level. And then in the first half of FY '22, 25 million relative to our revenue for the half of $17.8 million. So again, 1.4%. So I'm just -- I think the trend there is 1.4% is about what we sort of run out historically. So I think that there's nothing overly unusual about that other than, I guess, in FY '25, some of that was buffered off by a provision release. But I think that we will review our processes there, but I don't see that there's anything too alarming amongst all of that.

Thanks, Chris. Just on that, people might see that in, if you want to dig deeper into that in the annual report for FY '25, it's Note 11 and in the half year report is Note 8, you'll see that trade receivables have a provision for doubtful debts. And you'll see in previous years that some bad debts have been written off against that provision. So it hasn't shown up as an expense. We've taken all conservative approach in recent times. And you'll see in note of the accounts that there was nothing written off in that relation to that provision. So that provision wasn't reduced well taken advantage of. All bad debts were written off as an expense and I think it perhaps a little bit jarring in that the bad debt in the first half of last year were very low perhaps because some of the provision was taken advantage of there. So you'll see that $255,000 looks jarring, I guess only $30,000 last year. But if you look at the full year numbers, you'll see that $250,000 not particularly unusual in the grand scheme of things, especially given that more conservative approach, especially given the growth in revenue. And just on the question as well, I mean, it's not a single bad debt. It's doing business. It's something we strive to do our best on. And so it's across a number of matters. It's not a sign of one particular thing going wrong. But it's part of something we focus on every day in terms of to reduce as much as possible. Chris, Doug as average weekly revenue housing tracking in February?

Yes. And we sort of talked about this on the way through. We talked about the Q2 dropping back to 60from Q1 at 692 due to seasonal reasons. We talked about November and December tracking at the $750,000 level and the fact that February has returned back to that. So we expect, in the end, we expect quarter 3 to broadly align with quarter 2 in terms of revenue trends. And Q4, whilst we'll experience some Easter-related slowdowns. These should be more than offset by recent and ongoing hires and what is generally a seasonally stronger period in May and June for us. So I think that Q4 should see a lift on Q3 for sure.

Doug has asked about franking credits that are held by IFL.

Yes. I think this 1 will have to do a little bit of work and dig back into and get back to you because I know Doug has spoken previously around the possibility of dividends and whether that's something that we are looking at. And it's the structure of the companies and the way the profits flow through the companies and through to the top company that we just need to do a little bit of work in. There are obviously franking creds flowing through from the dividends that we all are paying and general profitability as well. But yes, I'll take that one on notice and get back to Doug on that one.

And just on goes to the issue of capital management. Obviously, that's a constant focus for the Board. We've considered stuff like small parcel share buybacks in the past the initial view is that the expense of that didn't make it worthwhile I still believe that we're in a phase where we want to get through FY '26. I'm speaking myself to me for the Board, of course. But FY '26 is the last of the big matters where we're normalizing things, where we are spending money on Project Titan. FY '27 will be -- if it happens as we hope it will, a period where the company starts to show what it can do in terms of continued growth without normalizations through that sort of 12 to 18 months, I think that strengthen the balance sheet remains a focus, showing that we can generate cash, getting to that refinancing, which there's no indication that will be any whatsoever, adjust that. Obviously, it's good to be in the best position you can be. And then absolutely considering whatever capital management options are available as the largest shareholder, my fund is intent on this being a very good investment for us. And the way to do that is this continual process of improvement being patient and letting Chris do what is what he's showing is a really good job of improving morale and getting that momentum in profit growth happening. Doug says that -- and not see counters for greater than 3 days have gone up. Is this a trend or one-off?

Yes, I've had a look at that one, nothing significant there to the in $4.55 million is up just $95,000 or 2%. So definitely nothing of any significance there.

And that compares to a significantly higher revenue?

Yes. Yes, exactly.

So any expectations on the long tail cases being resolved this financial year? And if so, what's the likely cash impact?

Yes. I think that this is a hard one to actually call to be honest. So in the case like the 2 areas here where the longer tail matters exist are in testees in the states and also some deferred settlement matters from a family law point of view. And in both cases, they are largely securitized against assets that flow out of the resolution of the issue that we're providing the advice around. In the case of contested will and estates, it often relates to relies on deceased to state assets being sold and also the process from a disease state point of view can be delayed by various administrative aspects in terms of Pro bad, all sorts of things. We have $800,000 across just 4 contest wills and estates matters. That could finalize -- they could finalize bill and be paid by the end of the year. But realistically, some will and some won't. It's very hard to gauge what that will actually look like. So they're big, lumpy amounts, and they can they can have an impact on our receivables and on our cash flow. That's for sure. And I think similarly, the deferred settlement matters in family laws, again, largely securitized against assets. But again, it's a lengthy process to work through before the assets may become available to facilitate that final payment in to say if it's going to fall this side of the line or the other side of the line, it's a little hard to say.

Thanks, Chris. And just a reminder, I suppose to some of the investors who might be new to these calls, but the nature of those matters means that say those formats as an example, where largely the legal work may have been finished, but we're waiting for the asset realization process to wind up. That's case were either IP or invoices that have been issued certainly appear on our receivables is over 90 days. But where we have extremely high confidence of that being collected because we have arrangements, which are set in stone and being tested that allow us to recover that as the first quarter call from those asset sales sort of a summary.

Yes.

So that's, I suppose, goes to the issue of why the receivables over 90 days or which would perhaps normally be alarming for other companies, investors market, there's more intricacies nuance with us. And the final question from Doug is asking, is there any more information you can provide in relation to Stace's resignation?

I think the best thing I can do is refer to the release is the fact that state is moving on to pursue new opportunities. And I think above all, we thank her for her contribution, which is considerable over the last 6 to 7 years in the time of AF Legal. We have, and it's something that's sort of popped out in LinkedIn lately. So we do have a senior finance team member has joined us with more than 20 years' experience, predominantly in the legal profession. I think in addition to that, he has extensive experience in relation to practice management implementations. He has recent and previous experience with the products that we are moving towards. So I think that in relation to the context of Project Titan, the new person that is coming on board will bid in relatively seamlessly in relation to that. And I do think that, combined with our existing team, my own CFO background, given that I was the CFO initially of AF Legal, has us well covered. And actually, there is a handover taking place between Stace and the rest of the teams during March. So I think that we should be fine with all that, but I do -- we do wish Stace we'lell for the future.

Chris, there are no set of questions about the moment unless we get any further ones. But this is from a set of questions from [ Fernando Abril Material ]. Fernando is a long-term investor with us based in Spain, been very loyal through tougher times and always has some really interesting questions. So thank you, Fernando. His first question is that based on your commentary of a flattish average weekly revenue in Q3, should we assume further contraction in attributable profit before tax, given ongoing personnel investments were recur expected in Q4?

Yes. I think I prefer Fernando also to the response in relation to the quarterly movements in revenue and that we touched on in the presentation and also in relation to Doug's question. And in relation to the profitability impact, I guess, as with most things, it depends. In this case, on how quickly the new team members ramp up. But I would say that is a general conclusion that there may be some contraction in Q3 profitability ahead of a strong I'd say that, that's pretty sound conclusion to draw.

I might just come back to his third question because it's a big one. his final question is, what are your expectations for working capital in H2 should receivables continue to grow below sales growth?

I think really, the answer on that one is similar to the answer around Doug's in relation to the movement of the big tail like the big tail items in relation to contested wills and estates and deferred settlement matters in family law. So I think that what side of the line they're going to fall in terms of year-end and things like that is a little hard to say. But I think that I don't think that -- I don't think we expect there's going to be blooming out in receivables in any respect. And I think that there's a natural movement on these things that we can experience and can expect to experience in the future. And they're lumpy ultimately.

Yes, from a Board perspective and an investor's perspective, it's incredibly important to us that this company is not one that just reports paper profits. It has to be followed by cash. We don't want the profit simply to be represented by growth in [ webinars ]. Obviously, that's going to happen to some degree as we're a growing company. But on at least a slightly delayed basis, the cash would follow the reported profit over time. and then that makes us different and why we hope eventually we'll be way more attractive to investors than say a personal injuries type legal company, where those things do tend to on in my experience as an investor list. So that's very much a focus for the Board. The final question from Fernando is a really good one and we can both a go answering it a broader view on implications for our business, how replicable or not a key practices? In the context of increasing LLM adoption, how do you see the trade-off between potential cost efficiencies and pressure on billing rates? And could you share some practical examples of the benefits project tightened in this regard. So if you want to have a go, Chris?

Yes, I'll start with that. Obviously, it's a big wide-ranging question. And I as in most areas of business, if you like, is it a pretty fluid stage and a stage of rapid development. I would characterize our areas of law as being personal laws, so primarily closely related to the individual. So in these cases, the client journey is a very personalized thing, and there's a significant relationship between the client and the layer, which AI can't easily replace. So in these areas of law, the human-centered aspects of practice more critical than in other areas of law. I think areas like empathy, advocacy, strategic thinking, ethical judgment and just general communication are key. I think that these are happening to people often at their most sensitive and vulnerable times in their lives. So the need for personal connection in our areas of law is even more important. I do think that in relation to the threat from AI, it is something that is probably more relevant to areas of law that are particularly technical. Ultimately, again, in relation to ourselves, I would say that AI will be a time-saving tool, not a replacement. It will streamline and improve some of our administrative tasks, but it won't replace the personalized legal service to clients. In terms of what that the increased efficiency is due to billing levels, the output to the client will be the same. So in many ways, that does challenge the time-based charging model. So I think that, that's something that we will keep an eye on. And I think that I know that the whole area of fixed price arrangements and versus time charging all things that we will look at as we work through this. in relation to Project Titan in terms of the time saving benefits, a lot of key straight reductions, which you sort of talked about before, e-mail saving efficiencies and interact in a Aderant with Copilot in terms of acting upon our internal data and our own precedents. But as with everything else, this is a developing area. And I think in relation to Aderant, they also recently purchased the legal tech division of Hercules AI and Hercules AI or the divisions that they bought cover a lot of different areas, which will, I'm sure, find their way into our practice management software in relation to automated time and activity capture email management tools and workflow tools and also what they characterize as a sophisticated pre-bill review engine driven around billing compliance, which serves to minimize deduction rates and boost realization levels. So more to come as we work our way through the final stages of project tighten. And I do think that the advantages coming through Aderant of their recent acquisition of Hercules AI, their legal tech division at least will be something that may flow on after the initial implementation as well.

Thanks, Chris. Just to make the added point that our areas of law are court facing areas of law. So all 3 involve filing things in court having to get predominantly adjudications from court, even in family law adders where things might be settled. There's still usually court filings. And in family law matters, say if you need to get a divorce or you even need to get a binding financial agreement or a prenup in colloquial terms, it's mandated that you have to have a lawyer. So they're not things that you can just scale in and do yourself number how good you are with AI, and I don't see that changing anytime soon. But the fact that things are court facing also differentiates us from other areas of law. So it's reasonably easy to see how AI can disrupt a situation where you have 2 lawyers who are negotiating with each other in relation to their clients' contract or a business agreement where at least in the initial stages, and ideally, there is no involvement in courts. Those are things that can be contracting reviewed drafted the back and forth can be managed by AI. Even there, I still skeptical about how much it takes over from a lawyer holding the client's hand and then giving them confidence. But in our areas, any matter which has fallen in court necessarily means that AI can't help. You can't have AI draft an affidavit. AI can't sit out in worse in New South Wales, it's impact absolutely banned, you have to attest to the fact that your affidavit has not been assisted by the use of AI at all. And in other states by using AI in anode you open yourself up to major legal problems if the matters ever in court and you cross on it. So the upshot of all that is that I think our areas of law will be the last to be affected within law. Maybe that's called comfort to some, but at least that is the starting point. And in terms of that area of also I think there's good reason to think that we will be the last firm to be effected by AI to the extent that we have scale compared to our competitors, we are able and we'll stay at the forefront of adopting the best daily tools. We can afford to do it. We're spending a lot of money with project time to do that. It's something that smaller firms may not be able to. There'll be obviously one-off AI gurus who are on their own practice. But at least among bigger firms will be at the forefront of it. So again, we'll be the last to be superseded. And if you take the view that AI is going to make all layers obsolete, then we're probably not for you as an investment anyway. But we'll be the last man standing in my view, both as an area of law and a firm. And just on that because Fernando also talked about how early it is to replace us or the example of Andrew Tater is perhaps one where you look at it through that framework. He is someone that no matter how much AI assistance there is, it's not going to make running your own business. It might make it easier and slightly more attractive but you're still going to have HR issues. AI is not going to solve your dealing with a problematic employee. It's not going to help you ultimately deal with the disputes that come from running your own business, whether they be suppliers or clients that can help to an extent, but ultimately, it doesn't all those things out. It doesn't mean that running your own business is a better option than getting the monetary upside from working in our model. and the ability to practice law. So I am certainly very get skeptical as an investor generally around some of the benefits promised by AI. I'm very content. We're not seeing any effects on pressure on fees, et cetera, at the moment. Obviously, it's a story that's going to evolve but there's really good reasons to think that any such pressure can be offset by benefits in efficiency. And that if you want to being an area that is -- well, it's really good reasons to think today AI can't get to the core. I think we're one of those investments, certainly, as a fund manager, which is my day job. This is one of the investments it's well down and one list of areas where I think is ripe for disruption. Chris, just on some of the questions have come through. [ Victor Elop ] asks, can you comment on new file openings metric?

Yes. I think, again, I'd refer Victor the 4D around Page 8 and 9, where it sort of talks about that. But for example, I know that we've done a lot of work in relation to the new client inquiries team. So in terms of the calls that we take and also the forms that people can to make appointments. And that has been an evolving process over the first half. I would say that probably in July, August, we had a little bit of a hiccup in some of our metrics on that. So I think to see that for the first half, that Armstrong Legal in terms of file biddings were up 4% is a very positive trend in relation to that, given that the first couple of months were a little bit sluggish. And similarly, our digital leads in relation to family law are up 23%. I would say also that I don't have the metric here, to be honest, but I know that this the shift to referral in family law has definitely been strong in H1. We also this file opening growth in that area as well. So again, I'd get Victor to have a look at those 2 sections. And if you have any other questions, Victor, flowing out of that, just let me know.

Chris, there's a question in the chat from Matthew. What market share do you currently have? And what is the total achievable going forward 3 years, what percentage market share and revenue you're aiming for? I might have a quick guide answering this. We used to under previous management, sort of quote a market statistics. My view was talking about tailorable market and the sort of big picture of things was not particularly helpful and talk a bit again and the actual results we're pointing to. So we sort of talk that out of our presentations. I mean they always talked about $1 billion family law market. Obviously, we're in other areas of an ourselves much bigger. The actual market size market share is not something we're focused on because it's not something that we're butting up against. We're still a very tiny share of a very big and divided market. It's not something where our size in the market is remotely problematic for us and we'd be for many, many years. So that's why perhaps we're taking our attention away from that. We have a significant ability to grow for many years organically within the current market without that ever becoming a problem in terms of I suppose, theoretically, if you're too big in the market, it might cause your ability to act on both sides or some issues there, but that's not going to be an issue for many, many years. In terms of what we're looking to achieve, the presentations the last couple of presentations have talked about our short- to medium-term aspiration, which is a $50 million revenue across the 3 areas of law and we haven't set a precise time in relation to that, but you can see what our trajectory currently is and draw your own conclusions. That $50 million be mighty problematic within the current market share. And I'd suggest that even double that triplet would not be a number that is making us to big further for market at all. Anything you want to add ad at all, Chris?

No, I think you've covered that well. I think that, that's it, really, in terms of questions. You don't see that there are any others. So I would think all of our everyone who's on the call today, thank them for their attendance and thank everyone who's watch it back later for their interest in our company and where appropriate, their investment in our company. And we look forward to continuation of the success that we've achieved over the last couple of years in the coming years ahead. So thanks to all.

Thank you.

Thank you, everyone. The webinar will now end.