The IPH Ltd (ASX: IPH) share price is falling this morning after the intellectual property law firm reported its profit results for the six-month period ending December 31 2016. Below is a summary of the results.
- Revenue up 22% to $93.1 million
- Profit up 19% to $22.1 million
- Dividend flat at 11.5 cents per share
- Diluted earnings per share of 11.5 cents, up 6%
- Guidance for full year EBITDA between $72 million to $74 million reaffirmed
- No debt and $32.2 million in cash on the balance sheet
IPH is a conglomerate of patent law firms that includes its flagship Australian business Spruson and Ferguson, while others include the newly-merged Fisher Adams Kelly Callinans patent law business.
For the Australian business total patent filings were 3% lower than the prior corresponding half, although the group retained its market share at 22% in Australia.
For growth the group is looking to expand organically and via acquisition into Asian markets where its core market is the financial services hub of Singapore, with plans to also grow into Malaysia, Thailand and Indonesia among other regions.
The group's market share in its key Singapore market declined however in a result it blamed on a slowdown after a rush of listings that was created in prior periods by legislative changes in North America.
The group is also continuing to employ an aggressive roll-up or acquisition strategy in order to maintain growth and in part justify the relatively high multiple of earnings on which it trades.
The business only recently came to IPO and there was a significant sell-down of escrowed stock in the business by staff members over the period, which is not the kind of sign I like to see in an investment opportunity.
Outlook
Management also flagged that meeting the full year guidance provided will depend on a stronger second half with the weighting currently skewed 47% to 53% first half to second half.
If achieved this would be a strong result and the dividend yield around 4.9% on an annualised basis is also attractive. Overall, this was an impressive half of growth, although of course markets are forward looking and the group's performance into the future is what will really count with regard to the share price's direction.
There are also risks around its limited track record as a public business and investors may find better opportunities elsewhere in the market.
