Yesterday, IPH Ltd (ASX: IPH) reported its annual result for the 12 months to 30 June 2018, showing an increase in revenue.
IPH registered a 21% increase in revenue to $226 million in FY18, which includes the new acquisitions' income. If new businesses are excluded, then underlying revenue still grew by 2% compared to the prior corresponding period (pcp).
The Australian patent market recovered in the second half with filings increasing by 1.6% in the final six months of FY18 compared to the second half of FY17. The company said it maintained its market-leading position with 23.8% of filings.
Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 2%. The Asian segment produced a solid 5% growth in underlying EBITDA.
In October last year IPH announced it was acquiring AJ Park, the leading IP firm in New Zealand for approximately $60.9 million. Pleasingly, IPH said that the earnings contribution from AJ Park exceeded expectations.
IPH has finalised merging Fisher Adams Kelly Callinans, Cullens and Spruson & Ferguson under the Spruson & Ferguson brand. The IP company expects to create cost synergies of $1 million in the current financial year. However, one-off restructuring costs of $1 million and writing-off of brand names for $2.1 million impacted statutory profit.
Including the above-mentioned costs, statutory net profit after tax (NPAT) fell by 5%. The underlying NPAT increased by 1% excluding one-off costs.
On a per-share basis the statutory earnings per share (EPS) decreased by 7% whilst the underlying EPS fell by 1%.
The final dividend increased by 5% to 11 cents per share. The total dividends declared for FY18 showed an increase of 2.3% to 22.5 cents per share.
In the current financial year IPH will remain focused on retaining its market-leading position in Australia and Singapore. It will also consider expanding market share in other higher growth Asian regions.
The company said it will also benefit from lower net costs in the Data and Analytics Software business after selling the Filing Analytics and Citation Eagle products for $10 million. The net costs will be reduced by about $1 million, which is a decent saving.
Foolish takeaway
The market clearly liked what IPH reported yesterday with the share price rising by 5.4%. The share price has risen over 40% in the last six months.
IPH is trading at around 19x FY19's estimated earnings. I think IPH could be well-positioned for long-term growth considering how Asia is likely to become an increasingly strong economic region and require IP services. However, it's not on my own personal watchlist.
