Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IPH Ltd (ASX:IPH, Financial) reported a 15% lift in underlying EBITDA and a 40% increase in underlying net profit for FY24.
- The company announced a 9% increase in the final dividend, reflecting strong shareholder returns.
- Successful acquisitions in Canada have led to double-digit revenue growth and an 8% lift in earnings on a like-for-like basis.
- IPH Ltd (ASX:IPH) has returned to its target gearing range ahead of schedule, demonstrating strong cash flow and debt repayment capabilities.
- The company is implementing a regional operating model and a global client program to enhance service capabilities and drive growth.
Negative Points
- The Asian business continues to be impacted by lower market filings, with like-for-like earnings down 6% for the full year.
- The integration of new acquisitions has led to increased corporate costs, including investments in cybersecurity and business development.
- The company faces challenges in maintaining market share in Australia, with a gap of 2.3 percentage points relative to the market.
- The financial results were partially supported by favorable foreign exchange rates, which may not be sustainable.
- The capital raising to fund acquisitions and reduce debt may dilute existing shareholders, as it includes a fully underwritten institutional placement and a non-underwritten share purchase plan.
Q & A Highlights
Q: Good morning, Andrew and John. First question, just on the acquisition of (inaudible). Would you be able to share a few other details on (inaudible), maybe unlike EBITDA margin and anything you can share and like historical top line growth is similar to the overall Canadian market or perhaps any different? And maybe just any key differences of (inaudible) and versus the other three brands that you own that are just worth highlighting, whether it be culturally customer mix? Is anything important that you think stands out?
A: Just on first element of the question, Apurv, in our announcements that had the revenue for the 12 months was about a $60 million in cash. And if adjusted EBITDA of around $11 million. So that's a lower margin than some of our existing businesses, but around the world and in Canada. So it's certainly something we'll be looking to improve and having identified some synergies as part of that transaction that we'll be aiming to address some of those in the near term, mainly in the first full year of acquisition. I think it has been a steady business reflecting the Canada disposition as a secondary market like ours. And I think it's showed relatively steady growth of recent times. It has slowed a little bit more accelerated growth. So we're very much looking forward to having part of that, probably IPH stable.
Q: Okay. Then maybe a couple of questions on the result and more specifically, just on Asia. So good to see a slight improvement there and like for like revenues are down 1% in the second half. First half was down 3%. How should we think about FY25 then, historically Asia's delivered about a high single digit revenue growth through the cycle. I mean you will be cycling some soft comps in FY25. Do you think we can get back to that normal cadence of growth? And any observations over July, August would be helpful, please.
A: So I think in reference to the previous levels of growth. I think it was more than likely to carry on at least at a more moderate level for the certainly the first half of FY25. That's reflective of what Andrew is referring to those USBCT. It's really we are suffering from a market dynamic in Asia. Having said that, we did improve in the second half of the financial year just gone. So we'd hope that trend would continue. We've announced and we'll be appointing a new CEO in that particular market. So I'd be hoping that will bring with it some impetus to Asian business. But overall, probably it's more in the 3% to 4% growth in Asia position than our historical, maybe 6%or 7% for the next financial year. But in the presentation, we also point to that the fundamentals of the Asian region for IP do remain very strong. We think that if there are some short-term things. They will indeed be short term affecting the markets, the market filings.
Q: Okay, So, that's 3% to 4% sales growth in FY25 for Asia or the --
A: (inaudible) your EBITDA growth.
Q: EBITDA growth. I guess. So maybe couple of percent at the sales level?
A: Yes.
Q: Yes, okay. (multiple speakers)
A: (multiple speakers)just (inaudible) is exposed to the incoming market. So particularly US, I think the first half probably run on a similar environment to what we saw in the second half of '24, and then hopefully we'll get some flow through what started to come through on the USBCT has been rationalized in the second half, and at the same time as part of the growth in the second half against first half. We've had a couple of client wins in terms of taking market share, and we continue on that journey. We've got a new (inaudible), as John mentioned, he'll come in with some momentum behind him and then we're trying to we do well and that is win work. So that's what we're going to aim to do.
Q: Got you. I know that's clear. And then just one final question, if I may, please. Just on for John. Just on slide 34, finance cost guidance for FY25. If I read that correctly, it's about $26 million, including lease cost. I think previously guidance was [$432 million] of net finance cost. So have I read that correctly? And presumably that reduction in guidance, is this down to you're raising capital, so you're paying down some debt, so hence, the lower interest?
A: So the last part is certainly correct. So, but it was more to do with the repayments that we made in the second half of the year. So we've made repayments of $70.4 million worth of debt in the second half of FY24. So that will be reflected in that particular guidance that you're referring to, there are full that doesn't reflect any further paying down of debt with the proceeds of the capital raise.
Q: Hi, Andrew. Hi, John. Just a few operationally, just going back to Asia. It's a good financial outcome in the second half. Can you talk a bit more? Was that more also to do with cost management and what was done there to improve there in terms of margins? And was also a sales mix benefit as well given finances being weak?
A: Yes, it's an interesting one. Sam, in this business, is it pretty (Laughter) business 46% or 45% were in February was due to again the (inaudible)So there's not a lot of costs that would come out of it. It have some client wins, as I say, the better outcome in [BD] and I think that they are hungry, they used to being front rationalisation there that I'd like to be here in the negative side. I see a lot of activity in that business in BD and BD outcomes. I expect that trend to continue. And what I love about the Verisk Empower acquisition is as of all Canadian businesses, it adds the opportunity and the client movement term from that client base into Asia and Australia, particularly in the ways that we would go certainly more jurisdictions now. So now I think it's a good second half, right? And we're still on postpaid, but we'll get there. And the addition of Verisk and (inaudible) and I hope that story.
Q: Just start with (inaudible) just maybe talking about your China footprint, given geopolitical uncertainties around potential additional tariffs from the US in that? Are you comfortable maintaining those two office footprints? And how that help trying to do it as a separate business is a still profitable?
A: Yes, it is profitable, business is profitable. Well, I mean, our exposure to China, particularly with declines coming into the region we
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
