156.asx iaw aug 16 2012 16.35 full year result and dividend announcement

8/9/2019 156.ASX IAW Aug 16 2012 16.35 Full Year Result and Dividend Announcement

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ACN 120 394 194

Level 22, 1 Market StreetSydney, New South Wales, 2000

Phone (02) 8263 6601

www.ilh.com.au ASX Code - IAW

Thursday, 16 August 2012

ASX RELEASE – 2.30pm WST/4.30pm EST

Integrated Legal Holdings Limited

2011/12 Full Year Performance and Dividend Announcement

Continued progress in delivery of growth plan

Solid result despite challenging business conditions

0.8 cent fully franked final dividend 2011/12

HIGHLIGHTS

Revenue increased by 14% to $32.4m

Solid NPAT of $1.12m, representing EPS of 1.10 cps

- Conditions in last quarter affected overall results

Acquisition of PLN Lawyers effective 1 August 2011 performing well

Expansion of network with new Melbourne based member firm

- Strategic investment in Rockwell Bates effective 2 July 2012

Both acquisitions expected to be materially EPS positive in 2012/13

Re-launch of the Law Central business

Second half net operating cash inflows of $0.46m

Re-financing of banking facilities on more favourable terms

- Increased funding limit to support future growth

Dividend- Increased final dividend of 0.8 cps fully franked payable November 2012

Strong pipeline of potential acquisition opportunities

http://www.ilh.com.au/





1. Overview

Overall, the Directors of Integrated Legal Holdings Limited (“the Company” or “ILH”) are pleased with

the development and growth of the Company during 2011/12, in what has continued to be very

challenging and difficult business conditions.

The Company achieved further progress with the delivery of its strategic growth plan during the year,most notably:

new member firm and tuck-in acquisitions;

the extension of the Company’s range of legal services;

the expansion of the Company’s network of member firms and affiliates;

enhancements to the Company’s acquisition model; and

product enhancements for the Company’s Law Central business.

These initiatives have all positioned ILH for continued growth.

The Company achieved revenue of $32.4m for the year ended 30 June 2012, a 14% increase on theprevious corresponding financial year. Net profit after tax was $1.12m, a 13% reduction on the

previous year. This result was impacted by challenging business conditions in the June 2012 quarter

which have since improved.

The Directors have declared a 0.8 cent per share fully franked final dividend for 2011/12.

2. Continued Progress in Delivery of Growth Plan

ILH has continued to execute its strategic plan and the following key developments are noted.

The addition of a Melbourne based member firm (ILH now has member firms in the key Australian

locations of Sydney, Melbourne and Perth).

The addition of new legal services to the Group, including Mergers and Acquisitions, Private

Equity Transactions, Structured Debt and Equity Finance, Distressed Assets and Insolvency.

Enhancement of the Group’s commercial and corporate legal services (Sydney, Perth and

Melbourne).

Continued expansion of the Group’s network of member firms and affiliates. The Company has

now developed a substantial legal services distribution network across Australia and the

Asia/Pacific region.

The introduction of an improved acquisition model, which the Directors consider provides further

opportunity to invest in high quality and fast growing legal services businesses (Rockwell Bates).

The Company has continued to achieve strong and consistent revenue growth, and has become a top

40 Australian law firm by fee income.

The Law Central business is being re-launched in September 2012 with a new website, enhanced legal

documents, new features and a fresh approach to marketing activities, including the engagement of

former Australian cricket captain Steve Waugh in a promotional capacity for the business.

The Directors consider that the Company is building an exciting and vibrant legal business with stronggrowth potential through positioning in niche service offerings in growth markets and segments in

Australia and the Asia/Pacific region.



About ILH

ILH is a legal services aggregation business with a growing network across Australia and the Asia/Pacific region.

The Legal Services division is a top 40 Australian law firm by fee income with over 160 employees including 26

Principals and 80 other fee earners.

ILH has member firms based in Sydney, Perth and Melbourne, offices in Brisbane, Fiji and Vanuatu, a representative

office in Singapore, and affiliate relationships in more than 15 countries across the Pacific, Asia and India.

The Group’s international capabilities are enhanced through strategic relationships with international legal

associations, as well as a strategic collaboration in the Pacific region between PLN and large US law firm Davis

Wright Tremaine LLP.

ILH is focused on client relationships with multi-nationals, publicly listed companies, businesses with assets in the

Asia/Pacific region, mid-market businesses, organisations in the government and insurance sectors, growth

businesses in the small and medium enterprises sector, as well as high net worth private clients.

The Law Central division (www.lawcentral.com.au) is an internet based legal document and information service

business targeting accountants, financial planners and DIY’s.

The ILH strategy is to identify quality legal services businesses to join the group through acquisition and support

these businesses towards growth, improved business performance and group synergies through collaboration.

ILH was ranked by Australasian Legal Business as a Top 10 Fastest Growing Law Firm in Australia in 2009, 2010 and

2011, and by BRW as a Top 8 ‘Fast Starters’ Australian businesses in 2010, 2011 and 2012.

http://www.lawcentral.com.au/






3. 2011/12 Full Year Financial Results

The Company achieved a full year net profit after tax of $1,116,006 for 2011/12. This compared with a

net profit after tax of $1,286,670 for the full year 2010/11, a decrease of 13%. The net profit after tax

result represented earnings per share of 1.10 cents per share, compared to 1.41 cents last year.

The profit result was achieved on a strong revenue increase of 14% to $32.41m, up from $28.48m in2010/11. Growth in revenue was a combination of some organic growth and growth through

acquisitions in particularly.

After a solid first half, the Company experienced exceptionally difficult trading conditions in May and

June 2012 which affected the performances of all member firms and substantially accounted for the

reduced profit result. However, the Directors are pleased to note that trading conditions improved

considerably in July 2012 and into August with revenues picking up strongly to expected levels.

The Directors note that the PLN Lawyers acquisition which was effective 1 August 2011, performed well

during the year.

4. Operating Cash Flow

The Company experienced net operating cash inflows of $0.46m for the second half, and net outflows

for the full year of $1.34m.

Under the ILH 100% acquisition model, the Company does not acquire debtors and work in progress as

part of an acquisition. Consequently, the Company will invest funds from operations in the build-up of

working capital (including debtors and work in progress) to normal levels post acquisition. As a result,

net operating cash flows of the Company are lower in the period following an acquisition.

The acquisition of Wojtowicz Kelly Legal (1 February 2011) and PLN Lawyers (1 August 2011) had thisexpected effect on operating cash flows during the period, particularly in the first half.

The Directors note that under the new acquisition arrangements with Rockwell Bates, there is no such

working capital funding requirement.

The Group’s underlying debtor days ratio extended during the year, with clients on average taking

longer to pay their bills. Whilst this appears to be a general trend across the Australian economy,

member firms have worked to tighten further client engagement and debtor management processes.

5. Declaration of Final Dividend

The Directors have declared a fully franked final dividend in respect of 2011/12 of 0.8 cents per share,

up from 0.6 cents fully franked in the previous corresponding period.

The dividend will have a record date of 12 October 2012 and a payment date of 2 November 2012.

2011/12

$m

2010/11

$m% Change

Revenue 32.41 28.48 14%

Net Profit after Tax 1.12 1.29 (13%)

Earnings per Share 1.10 cents 1.41 cents (22%)

2011/12

Dividends

Interim – 0.0 cents

Final – 0.8 cents

Total – 0.8 cents

Interim – 0.3 cents

Final – 0.6 cents

Total – 0.9 cents



6. Balance Sheet and Funding Facility

The Company is well positioned to continue organic and acquisition growth.

The Company’s cash position (including overdrafts) at 30 June 2012 was $1.28m.

The Company has refinanced its bank funding arrangements during the year on more favourable terms,with the new commercial bill facility increasing available financing from $3.5m to $10.0m.

The Company had bank loans of $4.55m at 30 June 2012.

7. Key Strategic Acquisitions

The Company has continued to grow by acquisition during the year.

PLN Lawyers

Effective 1 August 2011, the Company acquired the legal business of PLN Lawyers Pty Ltd (“PLN”) under

tuck-in arrangements with existing member firm Argyle Lawyers (“Argyle”).

PLN is an established and highly regarded Sydney based commercial law firm.

PLN’s mission is to be the leading provider of legal and business advisory services to corporations and

international institutions operating in the Pacific region. PLN’s clients include Australian, Asian,

American and European based companies and financial institutions with business interests in the Asia-

Pacific region.

The firm provides a range of legal services including Corporate and Financial Services, Travel and

Tourism, Aviation Industry services, Infrastructure and Development, Insurance, Insolvency, IPO's,

Mining and Petroleum, Telecommunications and Information Technology.

PLN is the centre of management for the Pacific Legal Network which was established in 2002 and has

developed key affiliate relationships in Vanuatu, Fiji, Papua New Guinea, Samoa, New Zealand,

American Samoa, Tonga, Cook Islands, New Caledonia, French Polynesia, Solomon Islands, Hawaii, the

Marshall Islands, Northern Mariana Islands, Palau, mainland USA and across Asia. Pacific Legal Network

remains the only co-ordinated legal and business advisory service in the region.

PLN consisted of founder and Principal John Ridgway, Senior Associate Nitij Pal, and 4 lawyers, with a

total of 8 staff, and annual fee income of approximately $2m.

PLN is an award winning law firm having won the 2009 New South Wales Exporter of the Year Award ina recognised services industry, and in August 2010 was named joint winner of the e.law Asia-Pacific Box

Breaker of the Year Award, which recognises those thinking outside the square to meet legal business

challenges.

PLN was “tucked-in” with existing member firm Argyle and relocated to its offices. The combined

practice has 6 Principals, approximately 40 staff and annual fee income of more than $10m.

John Ridgway joined Managing Principal Peter Bobbin, Principals Andrew Ireland, Mark Petrucco,

Glenda Laurence and Fiona Sonntag, and Practice Director Janice Duncan as the senior management of

the business, all of whom are committed to growing Argyle within the ILH Group. Nitij Pal has since

been appointed a Principal of the firm.

PLN has proven to be a high quality business with strong growth prospects. It will provide both Argyle

and ILH with a platform for further growth, in particular strengthening the organisation’s commercial

law services offering and providing new access to the Pacific and Asian markets.



Rockwell Bates (Melbourne)

Effective 2 July 2012, the Company completed the strategic investment in Melbourne firm Rockwell

Bates.

Rockwell Bates commenced operation in September 2008 and has quickly become a highly regarded

law firm with a pan Asia focus specialising in Mid Market Mergers and Acquisitions, Private EquityTransactions, Structured Debt and Equity Finance, Distressed Assets and Insolvency and Complex

Litigation.

The firm focuses on a number of key industries including:

Financial Services;

Automotive and Aviation;

Health and Life Sciences;

Mining , Minerals and Energy;

Technology Media and Advertising;

Electrical Manufacturing and Services; and Entrepreneurial Ventures and Investments.

Rockwell Bates’ clients are typically middle market financial sponsors, private equity investors, growth

companies and mid-cap listed companies based in Australia, India, Taiwan, Hong Kong and Malaysia.

The firm consists of founder and Managing Principal Adam Levine, Principals Brett Burns, George

Spiliotis and Julie Armstrong, with 7 other lawyers and a total staff of 16. Its annual fee income is

approximately $4m.

Rockwell Bates has become the Melbourne member firm of ILH and will continue to develop the

existing business strategy of:

A focus on domestic and Asian based inward bound Mid Market Mergers and Acquisitions, Private

Equity, Structured Debt and Equity Transactions, Distressed Assets and Insolvency and Complex

Litigation;

The development of relationships and offices in key Asian centres; and

Broadening the Rockwell Bates service offering over time and continuing to build trusted adviser

relationships with clients.

As a clear sign of its involvement in Asia, Rockwell Bates has an affiliate relationship with leading Indian

Mergers and Acquisitions law firm Rajani Associates based in Mumbai.

Rockwell Bates is an award winning law firm having been noted by the leading industry journal Asian

Legal Business as one of the Hot 100 Asian Region Law Firm (2011) and Managing Principal Adam

Levine has been recognised as one of the Top 20 Asia Region Deal Makers (2011).

ILH will support the business as appropriate with its growth and development endeavours, identifying

value adding opportunities for collaboration and revenue and cost synergies with ILH and ILH member

firms and associated parties.

ILH has initially acquired a 25% investment in Rockwell Bates, increasing to 49% over the next two years

through the acquisitions of additional 12% interests at fair value on each of 1 July 2013 and 1 July 2014.



The Directors believe that Rockwell Bates is a high quality business with very strong growth prospects

that will strengthen the Group’s corporate and commercial law services offering and provide new

access to industries and clients in the Australian and Asian markets.

The PLN and Rockwell Bates transactions are consistent with ILH’s strategy of supporting the growth

and expansion of a limited number of high quality member firms, with strong and focused market

positions and long term client relationships, into significant and highly profitable businesses withcompetitive advantages. This will be achieved by combining the scope and scale of complementary

practices as part of a network within a publicly listed group.

Both acquisitions are structured with significant employment restraints and conditions, consistent with

the Company’s disciplined acquisition model and strict criteria.

8. Business Strategy

Legal Services Division

The priorities for the legal services division have been broadened.

Continuing to work with existing member firms towards growth and development.

This includes organic and acquisition revenue growth and business operational improvement.

Continuing to develop the Group’s legal services network and range of services.

The Company is focused on developing its distribution network across Australia and the

Asia/Pacific region, as well as developing and enhancing capabilities in key legal services.

Additionally, over the period ahead, the Directors anticipate a move towards more consistent

branding across the member firms, and an increased focus on collaboration across the Group to

achieve revenue synergies.

Law Central Division

Law Central is an internet based customised legal document and information service business.

The business targets accountants, financial planners (and DIY’s) who can create legal documents on-

line using document templates that can be customised for their clients. It provides approximately 100

legal documents including Superannuation Fund Deeds, Trust Deeds, Employment Contracts and Shelf

Companies.

Law Central earns revenue based on the selling of these legal documents and from subscriptions to the

information service. The business operates with minimal variable costs per document sale, and as such

provides a relatively high margin.

The Law Central business is being re-launched in September 2012 with enhanced documents, new

features, a new website and with a fresh approach to marketing activities. This will include the

engagement of former Australian cricket captain Steve Waugh in a promotional capacity.

The Company has invested in the development of the Law Central IT platform during the year and it is

expected that this investment will continue into 2012/13. The IT initiatives will include further product

enhancements, as well as improving “time to market” for new documents, document changes and

product features generally.

In addition, the Company is reviewing the opportunity for new revenues streams for Law Central,

including third party product promotion and advertising on the Law Central website. New target

markets are also being considered for future development.



Outlook

Whilst the Directors remain cautious in the present business environment, the Board is confident that

the continued execution of the Company’s growth plans and initiatives will add long term shareholder

value.

Overall, the Directors remain confident in the outlook for the Company given the strength andunderlying quality of its member firms and distribution network, the opportunity for organic growth

and improved performance, and the significant potential to grow by selective acquisition.

The Company remains focused on incrementally and selectively acquiring good businesses with like-

minded people and working with them to achieve growth, business improvement and revenue

synergies through collaboration across the Group. In this regard, IHL presently has a strong pipeline of

potential acquisition opportunities.

The full year profit effect of the PLN and Rockwell Bates acquisitions is expected to be reflected from

the 2012/13 financial year. The Directors believe that both transactions will enhance the Company’s

growth prospects and be materially earnings per share positive in the 2012/13 financial year.

The Directors also expect growth in Law Central business revenues over the longer term as a result of

the business initiatives outlined previously.

The Company will provide updated commentary in respect of the 2012/13 financial year at its Annual

General Meeting in November 2012.

For further information contact:

Graeme Fowler –

Managing DirectorMobile: 0419 746 618

Office: (02) 8263 6601

Email: [email protected]

mailto:[email protected]



156.asx iaw aug 16 2012 16.35 full year result and dividend announcement

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