IPH Limited (ASX:IPH) Managing Director David Griffith discusses the company’s FY 2015 results.
Transcription of Finance News Network Interview with IPH Limited (ASX:IPH) Managing Director, David Griffith
Carolyn Herbert: IPH Limited (ASX:IPH) is the holding company for intellectual property and associated companies offering a wide range of IP services and products. IPH companies service a diverse client base of Fortune Global 500 companies, other multinationals, public sector research organisations, SMEs and professional services firms worldwide.
I’m Carolyn Herbert and joining me at the CEO Sessions in Melbourne is the company’s Managing Director, David Griffith. David, welcome to FNN.
David Griffith: Thank you Carolyn.
Carolyn Herbert: Now IPH has just released its full year results for FY2015. What were the highlights?
David Griffith: They were released on a pro forma basis, because this has been a year of transition. And as our CFO says, they’re more complex accounts than will ever have to be shown again, because of the way that the business has moved from being a unit trust, into a corporate structure. However, our pro forma earnings were $94.6 million, our EBIT $42.5 million and our NPAT of $30.9 million. So our NPAT exceeded the prospectus forecast by almost 30 per cent, and we were over 40 per cent above our financial year 2014 numbers.
Carolyn Herbert: Broadly speaking, what services do the companies under your banner provide?
David Griffith: The core business, which really relates to about 97 per cent of our business, is obtaining intellectual property rights before national patent offices and trademark offices. And this includes patents, trademarks and designs in Australia and throughout the Southeast Asian region.
Carolyn Herbert: What is the potential market size for these services and where are you focussed?
David Griffith: The potential market size is interesting. I think the market size is a multiple; you could probably add a zero onto where we are now. And our focus is on the growth areas of Southeast Asia, but also other secondary markets. Secondary markets being all of those markets outside North America, Japan and Europe.
Carolyn Herbert: Now to acquisitions, IPH has acquired two businesses since listing last year. How are they performing?
David Griffith: Well the first one is a little bit in the blue skies area. But whilst I talk about our primary business of registration of patents, trademarks and designs, there’re also adjacent areas of intellectual property, which have emerged in the last 20 or 30 years, to do with using patent data, trademark data and information. So the first acquisition is a software company in intellectual property, run by a brilliant young guy from Perth, Tom Haines, who’s also a patent attorney. And the revenue from that is just in its early stages and we see great futures, in the coming years.
The other acquisition is a very high quality patent attorney firm from Brisbane, Fisher Adams & Kelly. And the synergies with Fisher Adams & Kelly are the fact that they sent work out of Australia, and we can now have that work directed through our Singapore office. So we get a revenue synergy from them and also, we will get cost out synergies from the Backoffice rationalisation over time.
Carolyn Herbert: Are more acquisitions something you’re planning?
David Griffith: Yes we have a good pipeline we believe. I mean they won’t all come off, but we’re in discussions with a number of people, both in Australia and overseas. These are all we think a very exciting development for us in what’s, particularly in Australia, become a fragmented profession.
Carolyn Herbert: Taking a look at Asia, now you’re number one in terms of market presence in Singapore. How do you plan to expand your presence there and in the rest of Asia?
David Griffith: The fundamental thing that we have to do is do quality work in a timely manner at the right price, using high quality professionals. Patent attorneys are people with technical background and in advanced countries, they all have a technical degree. I’m a chemical engineer, we have 22 PhDs, a number of university medallists, we cover all areas of technology. So it’s a natural area for us.
In Southeast Asia where there is no tradition of patent attorneys, as there has been in America, Japan, Australia and Europe, so that’s a natural area for us. There’s a good local market there, but also to act for our northern hemisphere clients into the region. So we will continue to grow into all of the regions of Southeast Asia.
Carolyn Herbert: Given IPH receives its income in different currencies. How have you managed to use foreign exchange movements to the company’s advantage?
David Griffith: We’ve had tail wind of the declining Australian dollar against most other currencies. So we bill in US dollars, Euros, Singapore dollars and Australian dollars. And we’re basically; some people would consider us a US dollar denominated stock, because over 60 per cent of our billings are in US dollars.
Carolyn Herbert: Finally David. What’s your priority for the next 12 months and what should investors be looking out for?
David Griffith: Our acquisitions will give us a very nice EPS accretive growth. All of the acquisitions we do in the patent attorney space will be EPS accretive. So we offer a very good opportunity for people, who have no market available to them for transacting their business, to join us. And we’re only dealing with people we know and trust. I’ve been in this profession since 1974 and we’re dealing with people that I’ve personally known for decades.
So we have good opportunities in Asia. Not only just through acquisition, but also opening our own office in a couple of countries, where we have such a large amount of work, that we can justify having our own office. So it’ll be a combination of those activities plus the growth in the Australian, our share of the Australian market, through acquisition. They’re the immediate things for the next 12 months. There’s a lot more things on our horizon, but there’s only so much we can deal with.
Carolyn Herbert: David Griffith, thank you for the update.