050.asx iaw april 28 2009 08.26 presentation by man. dir fowler

8/9/2019 050.ASX IAW April 28 2009 08.26 Presentation by Man. Dir Fowler

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Managing Director

April 2009The information contained in this document is not intended to be exhaustive and must be considered in conjunction with all other

publicly available information, as disclosed by the Company to the Australian Securities Exchange from time to time.


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Disclaimer

This presentation has been prepared by Integrated Legal Holdings Limited (IAW). The information in this presentation is

current as at 21 April 2009.

This presentation is not an offer or invitation for subscription or purchase of securities or a recommendation with respect to

any security. Information in this presentation should not be considered advice and does not take into account the investment

objectives, financial situation and particular needs of an investor. Before making an investment in IAW, any investor should

consider whether such an investment is appropriate to their needs, objectives and circumstances and consult with an

. .

IAW has prepared this presentation based on information available to it. No representation or warranty, express or implied, is

made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this

presentation. To the maximum extent permitted by law, none of IAW, its directors, employees or agents, nor any person

accepts any liability, including, without limitation, any liability arising from fault or negligence on the part of any of them or any

other person, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

This presentation may contain forward looking statements that are subject to a range of risk factors and uncertainties. Whilst

the statements are considered to be based on reasonable assumptions, the statements themselves and the assumptions upon

which they are based may be affected by a range of circumstances which could cause actual results to differ significantly from

the results expressed or implied in these forward looking statements.


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A enda

The Australian Legal Industry

us ness verv ew

Business Strategy

Financial Information

Management and Capital Structure

Outlook

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The Australian Legal Industry

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The Australian Le al Industr Big 6-10 firms dominate large company market

Some senior associates unhappy within

IMPLICATIONS

Medium sized law f irms (partnerships) total

headcount 30-60

Difficult to attract and retain ood law ers

Opportunity to develop

and grow a national

network of medium sized

(opportunities, career)

Hard to provide broad services to clients

Hard to achieve rowth available ca ital

rms

Opportunity for leadership

of mid, SME & HNW

Young lawyers reluctant to buy into

partnership

Some owners seeking a value for their

Pipeline of tuck-in

acquisitions

business (accelerating)

Small sized fi rms total headcount < 20

Hard to be small staff, training, resources,

Opportunity to improve

from cottage industry

5

growth


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Practices Qualified Practitioners Other Staff Total Income

Australian Legal Industry Landscape

No. % No. % No. % $m %

NSW 2,912 41 10,332 41 17,729 42 2,821 46

VIC 1,944 27 6,536 26 10,682 25 1,565 25

QLD 1,097 15 3,713 15 7,656 18 869 14

SA 483 7 1,510 6 1,989 5 298 5

WA 438 6 1,839 7 2,470 6 415 7

NT 52 1 182 1 282 1 42 1

ACT 111 2 497 2 710 2 108 2

Total 7 115 100 25 044 100 42 234 100 6 192 100

Industry annual revenue in excess of $6 billion in 2002, likely approaching $8 billion in 2009

Avera e firm rofit mar in before tax 29.7% this measure excludes allowance for an base salar for

Source: Australian Bureau of Statistics, 2002

, , , ,

Principals)

Significant fragmentation with over 7,000 practices and an average total headcount per firm (staff andlegal practitioners) of less than 10

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Broadly based firms (services) provide inherent resilience to present economic conditions


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Top 30 Australian Law Firms by Revenue

Rank Firm Revenue

$m

1 Mallesons 544

2 Freehills 493

a er c enz e

17 Slater & Gordon 80

24 Hunt & Hunt 50

27 Thomson Playford 43

30 HopgoodGanim 24

Source BRW 2007/08

IAW (present annual run rate) 21

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ur asp ra on s o e some ng very eren o ese rms cu ure, oppor un y, c en

service but we will compete with them for staff & clients


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Business Overview

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Business Overview

IAW listed on ASX in August 2007 with the goal of developing a national network of leadinglaw firms in the capital cities and other key centres across Australia

Throu h its network IAW lans to offer commercial law services as well as ca abilities inspecialist areas including superannuation, tax and estate planning, and employment law

Presently:

4 legal services businesses

55 lawyers 4 offices

Shares on issue 69.4m

Share price (24 April 2009) 16

Market capitalisation $11.1m

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.


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Range of services

Corporate & CommercialWealth Management/Protection

Insurance Services

Media & Defamation

Taxation Litigation

Taxation Adviceory

s

Banking & FinanceFranchising

Taxation AuditsEstate Planning & Wills

Advis

Clien

Insolvency

Workplace Relations

Family

Propertysines

Pr

ivat

Business Succession

Taxation Litigation

Employment/Workplace

Criminal

Bu

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-


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Ac uisition Re ister

Acquisition Business Effective Date

Foundation Businesses

Talbot Olivier Perth, WA Commercial Law August 2007

Brett Davies Lawyers Perth, WA Tax Law August 2007

Law Central Perth, WA On-line Documents August 2007

New Member Firms

Argyle Lawyers Sydney, NSW Commercial Law November 2008

Tuck-ins

Peter Marks Perth, WA (Talbot Olivier) Estate Planning September 2007

Shayne Leslie - Perth, WA (Talbot Olivier) Commercial Litigation September 2007

mda law ers S dne NSW Ar le Tax Advice Tax Liti ation March 2009

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Talbot Olivier Law ers Largest member firm Perth CBD based

80 year history well established brand and reputation

Commercial law firm specialising in:

Corporate & business

Litigation

Insurance

Government

Insolvency

Workplace relations

Criminal Law

37 fee earners

Approved quality practice Law Society WA

Strong growth since joining IAW:

Princi als increased from 7 to 9

13

Tuck-in acquisitions


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Perth CBD based year s ory

Specialist in tax, succession planning, estate planning and superannuation

4 lawyers

Focussed on relationships with accountants & financial planners National client base

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*Ar le Law ers*

Strategically important east coast acquisition

25 year history

Fee income approx. $6.5m

Head office Sydney, office in Melbourne

ange o ega serv ces corpora e, us ness, am y an proper y aw

Specialist in financial services, wealth management, super & tax

Strong brand, reputation and growth prospects

ISO: 9000 quality assurance certified

Tuck-in acquisition of Sydney-based mda lawyers (effective 13 March 2009):

,

$2.5m annual revenue

Full revenue and profit impact will be realised from 2009/10 year

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Law Central

Commenced in March 2000

. . .

Provides on-line purchase of legal documents

Preparation & publishing as well as a legal information service

Standard, base level documents for DIY users

60% of revenue from accountants & financial planners

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Information Technolo Services

Online legal documents pprox. m revenues; recurr ng

Good margins & cash flows

Key competitors:

Reckon (recent purchase of Corporate Services division of Espreon)

Cleardocs

Focus is organic growth

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Business Strategy

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Strate

Network of leadingega serv cesbusinesses

1. ACQUIRE 2. GROW 3. DEVELOP

Consolidate a national footprint through key geographic centres

Target the mid market, SME and high net worth client markets


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IAW Value Pro osition

Enables lawyers to achieve the equivalent of Equity Partnership without capital investment & financial

commitment

Provides a corporate structure to improve access to capital for business growth

Provides opportunity to generate fee income from network cross referrals and expanded client

relationships

Provides economies of scale and broader product capabilities

Provides incentives for growth and development of the business

Facilitates client & business development training

Provides career & personal growth opportunities for staff

20 building a better law firm


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Ac uisition Tem late

Cultural fit

Attitude & objectives of Principals (Partners)

Commitment to growth, improvement & working

together

and

incrementalapproach to

Quality & growth potential of firm

Multiple of maintainable earnings

Net of ongoing Principal (Partner) base salaryAcquisition

Cash (mostly) and shares

Employment conditions/restraints

transactionstructure

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Strict investment criteria


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Business Model

Freedom within boundaries

Firms continue to develop strategy & manage the business

Focus on revenue growth and margin improvement; not cost cutting or centralisation

Performance based remuneration

Profit share to incentivise growth in revenue & earnings

Corporate structure provides strategic direction, boundaries, risk management & support

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First Ste s

The first 18 months....excellent progress in a difficult market

Public listing Talbot Oliver, Bret Davies Lawyers, Law CentralAugust

Talbot Oliver tuck-in acquisition Peter Marks

Talbot Oliver tuck-in acquisition - Shayne Leslie

Appointment of CFO (Perth)

2007

September

September

October

Appointment of Managing Director (Sydney)

Year-end results release strong performance 2008

Apri l

August

November

Maiden dividend payment 2.2 per share

Half year results release strong performance

Argyle tuck-in acquisition

November

February

March

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mda lawyers2009


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First Ste s cont.

Investment in businesses & corporate structure ensures IAW is well placed to take advantage

of organic and acquisition growth opportunities

Strengthened executive management team

MD Graeme Fowler commenced role on 28 April 2008

CFO Jean-Marie Rudd commenced role in October 2007

Establishing a track record of success

Financial results for FY2008 (10.5 months) & 1H2009

Growth and improvement in existing businesses

East coast firm acquisition

24 good strategy, execute well ... share price appreciation will follow


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Immediate Priorities

The next 12 months

Review & refine strategy & business model - position for consistent growth

Continued success & improvement in existing member firms

Continued selective acquisition growth

New member firm (target 1 in next 12 months)

Quality tuck-ins for existing firms

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Financial Information

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Financial Hi hli hts

Excellent progress since listing

Strong profitability in line with expectation Current annualised mprove us ness per ormance y mem er rms

New acquisitions will accelerate growth

st

run rate - $21m

2008/09$m

.

2007/08$m

O eratin revenue $7.59m $10.69m

Net profit after tax $0.90m $1.54m

NPAT margin 12% 14%

arn ngs per s are . cen s . cen s

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Detailed O eratin Performance

1st Half 1st Half 2nd Half Full Year

(4.5 months) (10.5 months)2009 2008 2008 2007/08

Operating Revenue $m 7.59 4.51 6.18 10.69

Revenue from Firms $m 7.45 4.27 6.02 10.29

o a e on r u on rom rms m . . . .

Contribution Margin from Firms 25.6% 41.4% 33.0% 36.5%

Less: Profit Share for f irms $m (0.07) (0.00) (0.10) (0.10)

. . . .

Less: Finance Costs $m (0.07) (0.03) (0.03) (0.06)

Less: Impairments/Amortisations $m (0.02) (0.23) (0.02) (0.25)

Net Profit Before Tax m 1.30 1.38 1.10 2.48

Less: Taxation $m (0.40) (0.48) (0.46) (0.94)

Net Prof it After Tax $m 0.90 0.90 0.64 1.54

EPS c s 1.4 1.6 1.1 2.7

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DPS (ful ly f ranked) cps 0.0* 0.0 2.2 2.2

*Cash retained for investment opportunities and in v iew of the current environment. Future dividend policy wil l be determined in the context of theCompanys f inancial performance, future investment opportuni ties and cash flow requirements.


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Financial Performance Analysis Revenue from firms

$7.59m in 1HY2009, compared with $6.18m in 2HY2008

,

Present annualised revenues from firms of around $21m p.a.

Net contribution from firms

.

1HY2009 net contribution margin reflects 2008 impact of WA wages and salary pressure more favourable conditionsexpected for FY2010

Full year FY2009 & FY2010 margins will reflect restructuring of foundation partner employment contracts

Current salaries of $100k pa will be realigned so that remuneration structure is consistent with recent acquisitions

(higher base salary; profit share incentive; and more appropriate employment terms and conditions inc. restraints)

Increased rental expense of around $0.2m expected in FY2010 (Perth property market)

Corporate expenses

Movement attributed solely to recruitment of new CFO (October 2007) and MD (April 2008)

2HY2008 includes $0.4m for share issue to new MD

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1HY2009 includes salaries for new CFO and MD for full six months


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Acquisit ion Fee Incomem Effective Date

Foundation Businesses

Talbot Olivier Perth, WA 6.80 17 August 2007

re av es awyers er , . ugus

Law Central Perth, WA 0.95 17 August 2007

Acquisit ions YTD

New Member Firms

Argyle Lawyers Sydney, NSW 6.50 1 November 2008

Tuck-ins

. m

Peter Marks Perth, WA (Talbot Olivier) 0.30 19 September 2007

Shayne Leslie - Perth, WA (Talbot Olivier) 0.75 28 September 2007

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mda lawyers Sydney, NSW (Argyle) 2.50 13 March 2009


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Balance Sheet Analysis

IAW had a net cash balance of $2.2m

m s at s at

31-Dec-08 30-Jun-08

Cash and cash equivalents 2.2 5.6Trade and other receivables 3.5 2.4

Prepayments 0.3 0.3. .

Total current assets 7.6 9.4

Plant and equipment 0.7 0.2Goodwill 8.8 6.3

The reduct ion in cash and increasein working capital in 1H09 primarily

. .

Deferred tax assets 0.4 0.4

Prepayments 0.1 0.0Total non-current assets 10.2 7.1Total assets 17.7 16.4

re ec s e acqu s on o rgy eTrade and other payables 1.4 1.1Interest bearing loans and borrowings 0.1 0.2Income tax payable 1.3 1.0Provisions 0.5 0.2

Total current liabilities 3.3 2.4

NAB facilities: Floating rate bills - $2m (drawn to

$1m as at March 2009)

Interest bearing loans and borrowings 0.1 -Provisions 0.2 0.1

Other liabilities 0.2 0.0Total non-current liabilities 0.5 0.1

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- .Total liabilities 3.8 2.5Net assets 14.0 13.9


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s a s a

31-Dec-08 30-Jun-08

Current ratio (x) 2.3 3.9Debtor days (no.) 98.0 132.0

Net cash balance ($m) 2.0 5.5Shares outstanding (m) 68.1 63.5Net assets per share (cps) 20.5 21.9NTA per share (cps) 7.4 11.7

Franking credit balance (est. as at 30 June 2009) = $0.9m

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Cash Flow Analysis

FY2009 acquisitions have been very material (Argyle and mda)

New business acquisitions adversely impact short term operating cash flows because debtors & WIP are not

6 months ended 10.5 months ended

acqu re w a us ness

Cash flows are invested to rebuild working capital post acquisition

31/12/08

$m

30/06/08

$mCash Flow from Operations (reported) 0.36 1.21

. .

Underlying Cash Flow from Operations 0.86 1.21

FY2009 Operating Cash Flows will include the following:

Working capital build up of material acquisitions (Argyle and mda)

FY2008 tax payment (maiden) due May 2009 ($0.94m) which will be an operating cash

outflow

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Change to quarterly pre-payments of tax from April 2009 (approx. $0.3m) which will

result in an operating cash outflow


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Management and Capital Structure

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IAW Board and Mana ement

John Dawkins Independent Non-Executive Chairman

Former Federal Treasurer

Company Chairman & Director (formerly Asgard, Elders)

Graeme Fowler Managing Director

Previously over 20 years Financial Services Industry

WHK Group March 2003 (CFO/CEO Financial Services) July 2007 (Group CEO)

BT Financial roup

Anne Tregonning Independent Non-Execut ive Director

Experience in accounting, risk management and as a company Director Held senior management roles at St George Bank and BankWest

Jean-Marie Rudd Chief Financial Officer and Company Secretary

Ex erienced CFO oined IAW October 2007

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Previously 6 years with Minter Ellison Perth as Finance Director


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IAW ShareholdersGroup Holding

Board 7%Davies uperannuation Fund 12

Other employees (approx. 60) 41%

Retail shareholders (Perth centric) 40%

Institutions 0%

Shareholder distr ibution by s ize of holding asat 31.03.09

Shareholder distribution by location of holder asat 31.0309

ize oShareholding

No. oholders

o IssuedCapital Location

No. oholders

o IssuedCapital

1 - 1,000 4 - WA 360 38.0%

-, , . .

5,001 - 10,000 249 3.0% VIC 139 15.0%

10,001 - 100,000 471 24.0% Other Australia 154 16.0%

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, . .

947 100.0% 947 100.0%

OUTLOOK


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OUTLOOK

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Outlook Positioned for Growth

Organic Growth

IAW has a highly competitive position in its local markets

Generally good market conditions for growth

Broad service offering - cross selling (firms & group)

Network skills and knowledge

Significant opportunities available Prevailing industry issues create opportunities for IAW

Strong IAW value proposition

Target $10m acquired fee income p.a.

YTD2009 acquisitions (Argyle and mda) = operating revenue of $9m p.a.

FY2010 result should better reflect the underl in earnin s erformance of the ex anded rou takininto account the expected strong revenue growth and the factors referred to in the FinancialPerformance Analysis slide

IAWs annualised operating revenues are presently around $21m vs $10.7m in FY2008 (10.5months)

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Contact Details

Graeme FowlerManaging Director

Level 22

Sydney NSW 2000

Phone (02) 8263 6601

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