A Blue Chip Result for ASX-Listed IPH Limited

Australia’s first publicly listed Intellectual Property practice has reported its 2016/17 full year financial results.

The financial results are blue chip not so much because of the increase in revenue, which was impressive, but because of the continued level of profitability.

Revenue increased substantially by 18% however a major acquisition did not play a role in the previous year’s revenue. In October 2016, IPH announced the acquisition of Ella Cheong (Hong Kong) Limited and its subsidiary Ella Cheong Intellectual Property Agency (Beijing) Company Limited for the equivalent of A$27 million.

For the financial year 2016/17, IPH achieved $186 million revenue and EBITDA of $68.7 million (statutory basis) or $71.6 million (underlying basis).

What this means is that (underlying) earnings (before interest, tax, depreciation and amortisation) was 38.5% of revenue. This is profit after paying all the people, including principals, in the firm. Employee Benefits Expense at $49 million was closely in line with the previous year as a proportion of revenue.

The other profitability achievement is having been able to integrate substantial acquisitions since its public listing in November 2014.

A blue chip result so why is IPH’s share price not flying?

IPH’s share price has dived from a peak reached around 18 months ago. Why? Could it be competition?

IPH Limited had first-mover advantage with its public listing, growth strategy. But it has now become a three horse race. Competitors have listed on the ASX and made their own major acquisitions. This might have taken the wind out of the sails of IPH’s share price. This is just a theory.

The three firms are IPH Limited, Xenith IP Group and Qantm Intellectual Property Limited. They appear to be competing on the same broad goals and strategy.

The goals, summarised from a Qantm report are:

• Common business processes (in consolidating firms) enabling reduced costs

• Asian expansion

• Acquisitions and

• Increased efficiency with technology