@PinchOfSalt I would just point you to my valuation piece where i break down the cost base. In short what we have is what i believe to be a rather significant gross profitability decline due a tight labour market and reduced billable hours due to leave and so on. This is strongly expected by myself to be temporary hence the allure. If you take a longer term view it is an extremely attractive price, as typical family law firms can run post tax margins into the high teens and low 20s pre-corporate costs.

IMO suspect this will look absolutely insane in years to come.

Today, a 10/12 Share buyback announced is great to see. I do note however, back in 2019/20 the business also announced a similar buyback and failed to enact it, so that remains to be seen. They have ~ 18% of the market cap in cash at this stage so well within their means, and the price is a c. 100% discount to where they raised in the entitlement offer last year, despite the business being more than double the size it was, with arguably a similar level of earnings power, subject to normalising levels of gross and operating margins.

RE: @Noddy74 results note, agreed on the commentary around the oxymoron on EBITDA, frankly wish they would focus on free cash flow per share, adjusted to treat SBC as a cash expense (frankly, can pay that in cash or shares). Where I differ in opinion however is that I still heavily believe it is a highly defensive industry however, what you have seen here is mainly disruption in the labour market, not the consumer market with a broadly consistent 45-55k divorces p.a. for decades now nationwide. Employee turnover however is an issue to tackle, which AFL has done reasonably well with.

Where I also disagree is that the sales multiple is a poor way to value a business like this, Professional services firms typically get valued on a turn of fees, and as eluded to managers can operate with vastly different margins, typically due to the type of services they offer, where they work and the overall productivity of the labour they employ (Fee earners) and the margin of said labour, the non-billable staff, the opex hygiene and so on.

At $0.25, $3.6m ($0.05 per share) in net cash and ~$20.4m in PF revenue ($0.26 per share) it's valued at just shy of 0.8x EV/Revenue here, whatever margins you think are achievable (to me >10% is perfectly achievable) you're buying back at single digit multiples which with the growth is highly accretive.

I intend to increase my position sizably, But each to their own...

The last few days we have seen a fairly significant contraction from 39c to 28c (-29%). I believe this is one of the major shareholders exiting non-discriminately with volume in the millions of shares. The shareholder that first comes to mind would be Cyril Jinks (Moat Investments) & his entourage of clients. He was opposed most strongly to the AGM notice on the remuneration rights last year wanting larger hurdles, so to see this result, it's likely this was a catalyst.

On another note, regarding my last straw i mentioned a few things which I now have answers for:

• During the year, the company lost 7 of it's lawyers and hired 6. The Group has 105 staff in total (including outsourced), 46 Lawyers & 18 Paralegals. There would probably be 15-20 in the headco, 1 admin for every 4 fee earners (~16) and the rest being outsourced. This is a relatively low turnover rate, but i do note a LOT of internal promotions (check their linkedin) post FY end.
• Regarding the large increase in Cost of Sales (Barrister fees), this is due to Withnalls Lawyers dealing with larger cases that require more forensic work, so I believe it wasn't organic growth in costs, but the addition of an existing cost that wasn't consolidated before (Business Mix).
• The same goes with the increase in WIP, Withnalls unlike the rest of the group, allows clients to carry their charge further along in the case (basically litigation funding) in exchange for the ability to charge a premium margin. Not something I love but if the interplay of margins and asset turns makes sense i'm fine with it.

And then some new details:

• Owner Operator deals are charged a 10% corporate recovery fee to service from the central office, this allows the model to scale. (refer to KPG, basically plagiarised from them)
• Investments in the corporate office that they mention, they believe each new dollar that comes in can come in at a 33% margin for the near and medium future (not sure exactly what metric - probably Underlying EBITDA ex. AASB16...)
• Aim for marketing spend if 6-8% of revenue.
• intention is not to dilute shareholders any further (save for the rights) and pay performance incentives in cash where they can. Assuming this means future deals will all be cash as well, which they are better placed to do with the bank facility.

Personally, remain bullish and think Whoever the selling shareholder is, has made a nice opportunity in the market for longer term shareholders.