AF Legal Settles $600k Claim, Eyes Stronger Second Half Earnings
AF Legal Group has resolved a significant legal claim related to a senior lawyer's 2022 hire, incurring up to $600,000 in costs, while navigating an ongoing regulatory probe. Despite these challenges, the firm remains optimistic about improved profitability in the second half of FY25.
- Settlement of legal claim involving senior lawyer joining in 2022
- Total legal expenses estimated between $550k and $600k for FY25 H2
- Ongoing regulatory investigation expected to add $100k in legal costs
- No other legal or regulatory issues currently affecting the group
- Confidence maintained in achieving higher normalised NPBT in H2 FY25
Legal Settlement Concludes a Lingering Matter
AF Legal Group has brought closure to a legal dispute stemming from the circumstances surrounding a senior lawyer's integration into the firm in 2022, a period under previous management. The settlement, reached without any admission of liability, involves a payment estimated between $550,000 and $600,000, inclusive of legal fees. This figure incorporates a $100,000 normalisation adjustment previously disclosed in the group's third quarter update.
Regulatory Investigation Remains Active
Separately, AF Legal is managing an ongoing regulatory investigation dating back to 2021, focused on one lawyer and one regulator. The lawyer in question has continued practicing without incident, supported by the firm in submitting detailed defenses. The investigation, which does not involve claims for damages, is expected to incur an additional $100,000 in legal expenses in the current half. The outcome remains pending as the regulator reviews the submissions.
Financial Impact and Forward Outlook
AF Legal has committed to transparency by segregating these "one-off legal expenses" in its normalised financial reporting to aid investor clarity. Despite these legal costs, the firm reports pleasing underlying performance in April and reiterates its guidance that normalised net profit before tax attributable to shareholders will exceed the $561,000 recorded in the first half of FY25. This suggests resilience and operational strength amid legal headwinds.
Risk Management and Governance
Importantly, AF Legal confirms no other lawyers within the group are subject to regulatory scrutiny or legal proceedings, underscoring a contained risk profile. The firm’s proactive approach to legal and regulatory challenges reflects a commitment to governance and risk mitigation, critical in the highly regulated legal services sector.
Bottom Line?
AF Legal’s legal hurdles are contained for now, but the regulatory probe’s resolution will be key to sustaining investor confidence.
Questions in the middle?
- What are the potential outcomes and timelines for the ongoing regulatory investigation?
- Could further legal or regulatory issues emerge from other parts of the firm?
- How will these legal expenses affect AF Legal’s longer-term profitability and growth plans?
