161.asx iaw oct 16 2012 17.19 microcap conference presentation

8/9/2019 161.ASX IAW Oct 16 2012 17.19 Microcap Conference Presentation

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Australian Microcap Investment ConferenceMelbourne, 16 October 2012

Graeme FowlerManaging Director


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Legal services business

Industry dynamics creating a growth opportunity

Continued execution of Companys growth strategy Acquisition, organic growth, business improvement, synergies

Developing track record of financial performance

Pipeline of potential acquisitions

Relevant experience of board and management

Opportunity for early involvement in an aggregation growth story that willplay out over the next decade

Key Messages


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Agenda

Overview

The Industry Opportunity

Business Performance

Case Studies

Outlook


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About ILH

Strategyaggregation in the legal services industry

Acquire legal services businesses and support these businesses towards growth(organic and acquisition), improved business performance and group revenuesynergies through collaboration

Develop a network of member firms, affiliates, and strategic relationships Australia Asia, Pacific, India

Industry dynamics creating an opportunity

2 divisions

Legal Services

Law Central


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Corporate Snapshot

Market

Shares on Issue 105m

Market Capitalisation 11m

P/E 9x

Dividend Yield 8%

Shareholders839

Top 2055%

2 substantial shareholders >5%

Shareholder Profile

Internal 45.8%

External 54.2%


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ILH Board and Management

John DawkinsIndependent Non-Executive Chairman

Former Federal Treasurer Company Chairman & Director

Anne TregonningIndependent Non-Executive Director Experienced in accounting, risk management and as a company Director Held senior management roles at St George Bank and BankWest

Graeme FowlerManaging Director

Experienced in public listing and aggregation of professional services businesses Legal, accounting, financial services

Non Executive DirectorCountplus Ltd (AggregationAccounting & Financial Services) current Group CEOWHK Group Ltd (AggregationAccounting & Financial Services) 20032007 Bankers Trust Australia (BT Funds Management) 1987-2002

Jean-Marie RuddChief Financial Officer

+20 years in senior financial management roles Including more than 10 years in the legal industry


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About Legal Services

A growing network of member firms and affiliates across Australia andthe Asia/Pacific region

Top 40 Australian law firm by fee income

Ranked by ALB as a top 10 Fastest growing Law Firm in 2009, 2010, 2011

Over 160 employees including 26 Principals and 80 other fee earners

Member firms based in Sydney, Perth and Melbourne

Offices in Brisbane, Fiji and Vanuatu

Representative office in Singapore

Affiliate relationships in more than 15 countries across the Pacific, Asiaand India

Enhanced international capabilities

Strategic relationships with international legal associations Strategic collaboration in the Pacific region between PLN and large US law firm

Davis Wright Tremaine LLP


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5 owned legal firms in Australia

A top 40 Australian law firm by fee income with 26 Principals and 80 other feeearners

A growing network with offices in Sydney, Perth, Melbourne, Brisbane, Fiji andVanuatu, a representative office in Singapore, and affiliate relationships inmore than 15 countries across the Pacific, Asia and the sub-continent

Enhanced international capabilities through strategic relationships withinternational legal associations, as well as a strategic collaboration in thePacific region between PLN and Davis Wright Tremaine LLP

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 inthe small and medium enterprises sector, as well as high net worth privateclients

Ranked by Australasian Legal Business magazine as a Top 10 Fastest GrowingLaw Firm in Australia in 2009, 2010 and 2011

8

Mumbai

Singapore

NorthernMariana Islands

Federated

States ofMicronesia

SolomonIslands

Vanuatu

NewCaledonia Tonga

CookIslands

FrenchPolynesia

AmericanSamoa

Samoa

Marshall

Islands

Papua NewGuinea

East Timor

Perth

Melbourne

Sydney

Brisbane

New Zealand

Palau

Kiribati

DAVIS WRIGHT TREMAINEAnchorageBellevue

Los AngelesNew YorkPortlandSan FranciscoSeattleWashington D.C.

Member Firms

Offices

Affiliate relationships

Representative offices

Collaboration

PLN / Davis Wright Tremaine

Shanghai(DWT)

Fiji


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Limited number of member firms

Cultural fit like-minded people, driven and entrepreneurial Common aspirations of growth, improvement & working together

Good businesses with strong positions in their markets and strong growth prospects

Operational focus

Network development through member firm acquisition(& more recently by affiliation and strategic relationship)

Support growth and development of member firms Individual firm growth strategies (organic, acquisition, service line development)

Build scale businesses with competitive advantage in their markets

Improved business performanceof member firms Leadership & management

Business improvementbest practices, benchmarking,knowledge sharing

Cost advantage through national procurementarrangements

SCALEProvides competitive advantage

Allows us to invest

Dedicated management training,IT, facilities, new services


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Key Philosophies

Freedom within boundaries Firms continue ownership of the businesses

Firms continue to develop strategy & manage the business

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

Corporate provide Group strategy, boundaries, risk management and support

We expect every firm to take responsibility for growth and performancethe action is at the edge

Build client relationships (trusted adviser) not transactional

Performance based remuneration


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Commercial LitigationCompliance &RegulatoryCorporate & CommercialDispute Resolution &Mediation

Government ServicesInsolvency & Recovery

CriminalEmployment/Workplace

Estate Planning & Wills

Busin

essAdvisory

Private Client

Property &ConstructionStructure Debt & EquityFinanceTaxation LitigationTaxation Audits

Taxation AdviceWorkplace Relations

Family & SurrogacyImmigration Advice

Property/Settlements

Succession PlanningSuperannuation

Wealth Management

Taxation AdviceTaxation Audits

Taxation Litigation

Insurance ServicesLicensing, Gaming &HospitalityMedia & DefamationMergers & AcquisitionsMining, Energy &

ResourcesPrivate Equity Transactions

Busin

essAdvisory

Specialist Offerings PLNone stop in Pacific region Corporate adviceAustralia, Asia/Pacific

Taxation audits, disputes & litigation Superannuation, estate & wealth

Mergers & acquisitions, private equity & structured financeAustralia, Asia/Pacific

ILH Legal Services


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Internet based customised legal documents and information service

Targets accountants, financial planners and DIYs

Provides approximately 100 legal documents

Earns revenue based by selling legal documents and fromsubscriptions to the information service

Re-launch in September 2012 with enhanced documents, new features,a new website, fresh approach to marketing activities

Investment in the IT platform - will continue into 2012/13

IT initiatives will include further product enhancements, as well asimproving time to market for new documents

Reviewing the opportunity for new revenues streams, including thirdparty product promotion, advertising on the website, new jurisdictions

About Law Central


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Industry Opportunity


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The legal industry is in a state of turmoil

More overseas law firms scouting the local scene

BRW - 2012

The client driven consolidation and globalisation evident

in the legal services market will continue unabated

Australian Legal Business - August 2012

The urge to merge dr ives som e firms and baff les others

The Australian - January 2012

Australian Legal Services Environment


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DLA Piper Forms Worlds Largest Law Firm with Australian Merger

Allen & Overy poaches 14 Partners from Clayton Utz to open in Sydney/Perth

King & Wood, Mallesons join to form Asias Largest Law Firm

Freehills to merge with Herbert Smith

Allens and Linklaters form integrated Alliance

Blakes merge with Ashurst Asia

K & L Gates, Australias Middletons, in Advanced Merger Talks

Australian Legal Services Environment


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Change in the Australian Industry

Internationalisation Consolidation Fragmentation

+11,000 smaller law firms in Australia

Difficult to attract and retain good lawyers Hard to provide broad services to clients Hard to achieve growth (capital

constraints)

Young lawyers reluctant to buy intopartnership (succession)

Senior lawyers too involved in admin Undermanaged/underperforming Increased regulation and compliance

Opportunity to growour businesses &

build scale

Fallout frominternationalisation

& consolidation

Issues for fragmentedindustry

Tuck-in acquisitionsLateral hires

Develop servicecapabilities

Shaking the TreesChange is our Friend


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ILH

Goodwill value of the business Unlocked for the benefitof the Partners

Working capital (full acquisition)

Released to the Partners

Provided by ILH going forward

Professional liabilityPersonal financial obligations & risks

Professional liability assumed by ILHAbsorbed by ILH

Business ownership Continues under Freedomwithin boundaries

Partner earningsLess at riskEmployee salary & benefits

Growth and investment ILH supported/funded

NetworkLocal strategy & management with potential benefits ofnetwork

Legal Services - A Better Model


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Business Performance


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2011/12 Overview

Solid result despite continued challenging business conditions

Pleasing progress in delivery of strategic plan

New member firm and tuck-in acquisitions Extension of range of legal services Expansion of network of member firms and affiliates Enhancements to acquisition model Product improvement and re-launch of Law Central

Continued revenue growth

Revenue increased by 14% to $32.4m

A top 40 Australian law firm by fee income

Acquisitions of PLN and Rockwell Bates

Both expected to be materially EPS positive in 2012/13


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Addition of a Melbourne based member firmRockwell Bates Member firms in the key Australian locations of Sydney, Melbourne and Perth

Acquisition of PLN Lawyers effective 1 August 2011

The enhancement of legal services

Mergers and Acquisitions, Private Equity Transactions, Structured Debt and EquityFinance, Distressed Assets and Insolvency

Enhancement of the Groups commercial and corporate legal services

(Sydney and Melbourne)

Continued expansion of the Groups network of member firms and affiliates Significant legal services distribution network across Australia and the Asia/Pacific region

Product enhancements for the Law Central business

The introduction of an alternate acquisition model Provides further opportunity to invest in high quality and fast growing businesses

Re-financing of banking facilities on more favourable terms Increased funding limit to support future growth

2011/12 Key Strategic Developments

Al l of which posi t ion ILH for cont inued growth


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6.27.6

9.311.6 12.3 13.6

14.916.9

15.716.9

23.9

28.5

32.4

0

5

10

15

20

25

30

35

2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 FY09 FY10 FY11 FY12$m

14%Growth

Consistent Track Record of Revenue Growth2011/12

$m2010/11

$m2009/10

$m2008/09

$m

Operating Revenue 32.41 28.48 23.87 16.90

Profitable eachyear since

commencement


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Case Studies


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Talbot Olivier

Largest member firm based in Perth CBD

80 year historywell established brand and reputation

10 Principals (Partners), 25 other fee earning staff

Commercial and Private Client law firm specialising in

Corporate & Commercial Commercial Litigation (larger companies) Media & Defamation Insurance Government Licensing, Gaming & Hospitality Mining & Resources

Workplace relations Family Property & Settlements

Strong growth since joining August 2007fee income more than doubled $13m annual revenue Principals increased from 7 to 10 Predominantly organic growth


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Quality of Member Firms Good businesses with strong positions in local markets

Scale

3/5 member firms with +$8m fee income Broadly based services

Commercial and Private Client Client Profile

Publicly listed companies Multi-nationals Mid-market businesses Government

SMEs High net worth individuals Stickiness - repeat business

Long term commitment of vendor Principals

4 year fixed initial employment term, then 6 months notice period 12 month restraints on any terminationclients, staff, competition


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Acquisition of PLN Lawyers Completed 1 August 2011

Tuck-in with Argyle Sydney

Specialist Pacific & Asian region - commercial law services

Approx. $2m revenue

Sydney office; services in Fiji, Vanuatu, PNG & 15 other Pacific countries

Network of affiliate relationships with local capabilities

ClientsAustralian, Asian, European, US with Pacific assets

Integrated Legal Strategy

High quality business and clients

Builds Argyle & ILH commercial capability

Growth potential with extra support

Growth from additional services of Argyle & ILH

Cross referralsleakage

Premises synergies


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Acquisition of PLN Lawyers Strict investment criteria

Cultural and aspirational fit Business quality, growth potential, succession EPS & ROI targets

Multiple of maintainable earnings (EBIT)

Cash and shares Cash at completion Deferred cash component payable based on achieving EBIT targets

Funded with surplus cash reserves Increased debt during WIP/Debtor build up period

EPS accretive in 2011/12

Standard Vendor Principal Restraints & Conditions 4 year fixed initial employment term, then 6 month notice period 12 month restraints on any terminationclients, staff, competition Escrow of shares Liquidated damages


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Outlook


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Outlook - Priorities for Legal Services

Continuing to work with existing member firms towards growth anddevelopment

This includes organic and acquisition revenue growth and business operationalimprovement

Continuing to develop the Groups legal services network and range of

services

Developing the distribution network across Australia and the Asia/Pacific region, aswell as developing and enhancing capabilities in key legal services

Additionally, over the period ahead, we anticipate

A move towards more consistent branding across the member firms An increased focus on collaboration across the Group to achieve revenue synergies Fee sharing arrangements


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Outlook

Making good progresscontinuing tough markets

Cautious in the present business environment

But confident that continued execution of the Companys growth plans

and initiatives will add long term shareholder value

Building a strong and vibrant legal business

The full year profit effect of the PLN and Rockwell Bates acquisitions isexpected to be reflected from the 2012/13 financial year

Both transactions will enhance the Companys growth prospects and be materiallyearnings per share positive in the 2012/13

Expect growth in Law Central business revenues over the longer term asa result of the business initiatives outlined

Pipeline of potential acquisition opportunities


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ILH Annual General Meeting Proposed

Name change to ILH Group Limited

New Logo

ASX codeILH from IAW (from late 2012/early 2013)

Share consolidation10 for 1 Improve the share brand


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Legal services business

Industry dynamics creating a growth opportunity

Continued execution of Companys growth strategy

Acquisition, organic growth, business improvement, synergies

Developing track record of financial performance

Pipeline of potential acquisitions

Relevant experience of board and management

Opportunity for early involvement in an aggregation growth story that willplay out over the next decade

Key Messages


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

presentation is current as at September 2012.

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 investment adviser if necessary. Past performance is not a

reliable indication of future performance.

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.

Disclaimer

161.asx iaw oct 16 2012 17.19 microcap conference presentation

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