ANNUAL REPORT 2015
contents
iph annual report 2015
Chairman’s letter
managing DireCtor’s report
business highlights anD market upDate
boarD oF DireCtors
iph groWth initiatiVes
FinanCial report
Corporate Directory
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Director’s Declaration
Independent Auditor’s Report to the Members of IPH Limited
Shareholder Information
2
4
6
10
12
14
16
17
34
36
97
98
100
chairman’s letter
In addition to strong earnings the Company has
converted a large proportion of those earnings into
cash. As a result the Board has been able to declare
dividends for FY15 which represent approximately
90% of the Company’s pro forma net profit after tax.
On 25 March 2015 the Company paid an interim
dividend of 3.5 cents per share (2.5 cents franked)
and the Directors have declared a final dividend of
10 cents per share (5 cents franked) payable on 7
October 2015.
The final dividend is eligible to participate in our
Dividend Re-Investment Plan (“DRP”). The Directors
have determined that the subscription price of shares
issued will be calculated with reference to the volume
weighted average market price of the Company’s
shares during the 10 trading days commencing on the
second day after the record date, less a discount of
2.5%.
The 2015 financial year has been a defining
year for IPH (the ‘Company’). Since its
successful listing on the ASX in 2014, the
Company has established a solid position from
which to grow and has embarked on strategies
to establish itself as the leading intellectual
property group in secondary markets.
On 19 November 2014, following the Company’s
The Board and management are committed to
reorganisation and incorporation, IPH became
maintaining high standards of corporate governance
the first intellectual property group to list on the
and maximising performance. We believe this to
Australian Stock Exchange. The market interest in
be compatible with achieving appropriate levels of
IPH’s quality businesses with origins dating back
shareholder returns, and sustaining the growth and
128 years produced strong demand and over
success of the Company into the future.
subscription for IPH shares from both institutional
and retail investors. The shares were issued at $2.10
and on completion of the listing IPH had a market
capitalisation of $330 million.
I would like to thank David Griffith and the rest of the
Company’s management and staff who have helped
make the year such a notable success. Finally, to all
our shareholders, I take this opportunity to thank you
By the end of 2015 financial year, IPH’s share price
for your support and demonstration of confidence in
had increased by 124% to $4.70 and the Company
our business.
had a market capitalisation of over $750 million.
On 20 March 2015, following an increase in the
Company’s share price, IPH was admitted to S&P/ASX
300 Index.
In its first year as a listed company, IPH has delivered
strong earnings with double-digit growth across all
its businesses. The Managing Director has provided
details of the Company’s financial performance in his
report which follows.
Richard Grellman
Chairman
2 / iPh limited annual rePort 2015
asian hub
australia /
south Pacific
hub
KeY financial highlights
nO. 1 ip gROUp in aSia-paCiFiCPRO FORMA REVENUE ($M)FY 15Actual94.6FY 15Forecast82.8FY 1479.219%14%PRO FORMA ebitdA ($M)FY 15Actual42.4FY 15Forecast33.0FY 1430.041%28%FY 14FY 14FY 15 ForecastFY 15 ForecastPRO FORMA NPAt ($M)FY 15Actual30.9FY 15Forecast23.8FY 1421.941%30%FY 14FY 15 Forecast managing director’s rePort
It is my pleasure to report on IPH’s first year
as a publicly listed company. The successful
listing of the Company in November 2014 was
a major milestone in a 128 year history dating
back to the first establishment of Spruson &
Ferguson, its main operating subsidiary. The
listing has provided the opportunity for IPH
companies (the ‘Group’) to embark on the next
phase of its development and growth.
The Group’s financial and operational performance
We are actively looking to acquire businesses which
for the year exceeded expectations, delivering
extend our capabilities beyond our traditional
significant growth compared to the prior year and
Intellectual Property (“IP”) business but which have
ahead of our prospectus forecasts.
strategic links to our core business. The first step in
The Group’s FY15 pro forma earnings before interest,
taxes, depreciation and amortisation (‘EBITDA’) was
$42.3 million, an increase of 41% on FY14 and 28%
above the IPO prospectus forecast. Pro forma net
profit after tax (‘NPAT’) for the year increased by 41%
on FY14 to $30.9 million and exceeded prospectus
forecast by 30%. Our net operating cash flow in
FY15 was $31.6 million or 103% of statutory NPAT.
The results were driven by a combination of strong
performance by IPH’s Asian operations, operational
that direction was the acquisition in April 2015 of
Practice Insight, a specialist IP software development
company. Practice Insight was founded by Thomas
Haines and his brilliant team of IT developers, who
have now joined the IPH group. The acquisition of
Practice Insight provides the Group with leading
IP data analysis tools and software applications,
which can be offered to clients and associates in the
primary IP markets, helping build deeper business
relationships with these firms.
leverage of the Group’s Australian business and
In May 2015 IPH acquired Fisher Adams Kelly, a long
foreign exchange gains.
At the end of FY15, IPH maintained a robust balance
sheet and had low net debt of $5.3 million. The Group
has minimal working capital requirements and strong
cash flow conversion across its businesses. In July
2015 IPH re-negotiated its bank facilities, increasing
our total facilities to $100 million. This strong financial
and capital position will allow us to continue to
established and highly regarded Brisbane based firm
of patent and trade mark attorneys. The acquisition
was earnings per share accretive, allowed us to
strengthen our position in both Australian and Asian
markets and has extended the Group’s wider IP
networks. Looking forward, we believe there are good
prospects of further acquisitions both in Australia and
abroad.
pursue our strategic objectives.
IPH companies maintained their number one market
Our focus throughout the year was on delivering
increased shareholder value through initiatives
position in patents in Australia and Singapore
throughout FY15.
directed at growing the Group organically and from
We continue to grow in Asia with patent filings in
delivering operational efficiencies, as was evidenced
the year up 8.6% on FY14. This good result gives us
by our financial results. Since the listing, the Group
visibility and confidence of future earnings growth
has been able to increase its earnings and value
in Asia. Spruson & Ferguson Asia has 24% patent
through acquisitions.
market share in Singapore and the overall Singapore
4 / iPh limited annual rePort 2015
patent market continues to grow with over 10,000
IPH is well positioned to respond to and benefit from
patent applications filed in CY14. The Group has
opportunities and changes affecting the IP profession
relatively low market share in Asian countries
in our markets. IPH’s strategy is to be a leading IP
outside Singapore and Malaysia, however we are well
services group in secondary and emerging markets.
positioned to increase our share in these markets,
Acquisitions in Australia, Asia and other secondary
through a combination of opening new offices in
markets will continue to be a focus for IPH over the
other regional capitals and acquisitions.
forthcoming year.
In Australia, IPH maintained the number one position
From 1 November 2015 Spruson & Ferguson will
in patents and number two position in trade marks.
re-commence its trade mark practice in Asia. We will
The acquisition of Fisher Adams Kelly strengthened
continue to leverage our Australian businesses to
the Group’s market position in Australia and
increase our filings into Asia.
synergies have started to flow from the redirection
of their Asian filings to Spruson & Ferguson Asia. We
saw positive trends in our patent and trade mark
filings in the second half of FY15 which continued
into the current financial year. The total patent filings
in Australia in FY15 were slightly lower than we
expected.
The positive global trend in Patent Cooperation Treaty
patent filings in the key primary markets provides
us with confidence of increasing volume of patent
Our IT efficiencies are gaining momentum allowing
for rationalisation of administration and increased
flexibility across the Group. We will continue exploring
opportunities to enter new markets and adjacent
businesses.
We believe there are opportunities in allied
professional areas in which IPH can capitalise by
leveraging our understanding of efficient, reliable, low
risk services.
applications being filed in the countries serviced by
Whilst we will remain focused on growth and
IPH companies in the foreseeable future.
delivering good financial results, we are committed
A significant outcome of the incorporation and
public listing of IPH has been organisational changes
throughout the Group. Notable amongst these
changes was the appointment of Dr Andrew Blattman
to investing in our people, opportunities and IT
infrastructure. We see these as key investment
priorities to help drive sustainable business
performance over the medium and longer term.
to succeed me as the CEO of Spruson & Ferguson in
I would like to thank our employees for their
June 2015. Andrew has been with the firm for over 20
professionalism and hard work in making these
years and has contributed strongly to the business
achievements possible, as well as our valued clients
and professional development of Spruson & Ferguson
for their support.
over the last 15 years. Andrew is perfectly equipped
to lead Spruson & Ferguson through its next phase of
growth. In July 2015, Spruson & Ferguson announced
the appointment of 10 new Principals across its
Australian and Asian offices. These appointments
reflect our commitment to build and maintain a
strong management and professional teams to guide
our future growth.
Having established a first mover advantage by listing,
David Griffith
Managing Director
iPh limited annual rePort 2015 / 5
business highlights and
marKet uPdate
IPH is the holding company for intellectual
property (“IP”) services firms and associated
companies offering a wide range of IP services
and products.
IPH companies employ a highly skilled
multidisciplinary team of approximately 330 people in
Australia, Singapore, Malaysia and China.
for Asia. The majority of professional work is
undertaken for clients in the hub office. The hub
office then deals directly with the IP office in its
home market (and certain other jurisdictions) and
through our selected agents in other countries. The
substantive professional work (value added) is all
performed in the “hub” office due to the high level of
professional expertise in the IP laws of each country
In 2014 IPH acquired Spruson & Ferguson (‘SF’), which
of responsibility.
was established in 1887 as one of the first Australian
patent and trade mark attorney firms. After its
global trends
successful IPO in November 2014, IPH became the
first IP services group to list on the Australian Stock
Exchange. In 2015 IPH acquired Fisher Adams Kelly
(‘FAK’), a long established Brisbane based firm of
patent and trade mark attorneys, and Practice Insight,
a specialist IP data analytics software development
company.
clients and service model
IPH’s core business is the provision of intellectual
property (‘IP’) services in the Asia-Pacific region with
over 85% of revenue derived from its patent/design
operations.
The Group’s professional service model is
underpinned by long-standing annuity style client
relationships and multiple “touch points” with its
clients. The Group has a diverse client base of Fortune
Global 500 companies, multinationals, public research
organisations, SMEs and professional services firms
worldwide. The largest client reflects no more than
2.5% of IPH’s total business.
The long cycle of IP matters means that IPH
companies are expected to generate revenue for
matters for a number of years into the future.
The key to the IPH model is its operation of IP service
hubs in Australia and Asia. The Group’s two IP service
hubs are located in Australia and Singapore.
The Australian operations act as a hub for Australia,
New Zealand, Papua New Guinea and the Pacific
Islands, while the Singapore office acts as a hub
6 / iPh limited annual rePort 2015
The number of international Patent Cooperation
Treaty (‘PCT’) applications filed provides a good
indication of potential future national patent
application levels. The PCT process requires
applicants to enter the national phase of a PCT
application in each jurisdiction for which they wish to
pursue patent protection via the PCT process.
The number of PCT applications in key jurisdictions
by resident applicants has increased steadily over the
past few years. This gives a strong indication of an
increasing number of PCT national applications to be
filed in the subsequent 12-19 months in the countries
serviced by IPH.
PCT international applications lodged in US, EP, JP
& China IP offices by applicants from the respective
countries
Pct international applications filed in us, eP, JP and
china iP offices by applicants from the respective
countries
source: WiPo
10,00020,00030,00040,00050,00060,00070,000ChinaEuropean Patent OfficeUnited States of AmericaCY14CY13CY12CY11CY10CY09Japan australia
Patent Market
The Australian patent market, as represented
by the number of patent applications filed, was
approximately 33,000 applications (including all types
of patent applications) in FY15.
The Raising the Bar legislation passed in April 2013
brought a number of filings forward and we saw
a spike in Australian filings in FY13 and naturally a
down turn in FY14.
The number of patent applications filed at IP Australia
in FY15 was slightly lower than expected.
Total Australian Patent Filings
total Patent filings in australia
FY09 - FY15
iPh Patent market share in australia (as at 30 June 2015)
IPH Patent Market Share in Australia
IPH Patent Market Share in Australia
13. 0%
13.0%
10. 5%
10.5%
9.8%
9.8%
8.6%
8.6%
6.7%
6.7%
source: iP australia
Trade Mark Business
In FY15 IPH’s trade marks operations contributed 12%
to the Group’s revenue.
The Australian trade mark market, as represented
by the number of trade mark applications filed, was
approximately 65,000 applications. IPH companies (SF
& FAK) holding approximately 9% of total applications
filed by the top 50 agents. Many applications are filed
by unsophisticated applicants without professional
Patent Market Share
source: iP australia
Combined, IPH companies (SF & FAK) have 13%
representatives.
patent market share and hold the number one
market position.
asia (excl. china)
Patent application volumes by Spruson & Ferguson
Patent Market
(Australia) are in line with the previous year but
The number of patent applications filed by non-
below target, in a flat market. Reduction in the filing
residents in the key Asian jurisdictions has been
propensity of a number of larger clients is evident, as
increasing over the past few years, with strong growth
happens from time to time.
in Indonesia and Thailand. Singapore remains the
largest patent market in Asia.
source: WiPo
iPh limited annual rePort 2015 / 7
46810121416%Competitor 3Competitor 2Competitor 1Spruson & FergusonIPH (SF + FAK)FY15FY14FY13FY12FY11FY1046810121416%Competitor 3Competitor 2Competitor 1Spruson & FergusonIPH (SF + FAK)FY15FY14FY13FY12FY11FY1015,00020,00025,00030,00035,00040,000FY15FY14FY13FY12FY11FY10FY09 SG, ID, TH, MY VN & PH Total Patent Filings
total Patent filings in selected asian countries*
is evident in the countries where IPH has physical
offices - Singapore and Malaysia.
iPh Patent market share in asia (cY13)*
25%
12%
8%
8%
6%
4%
1%
source: WiPo
source: WiPo, iPh
In Singapore, it is estimated that over 10,000 patent
In Singapore, IPH handles 24% of all patent
applications were filed at IPOS in CY14.
applications filed in Singapore and continues to hold
Total Singapore Patent Filings
total Patent filings in singapore*
the number one patent market position.
IPH Singapore Patent Market Share
iPh Patent market share in singapore*
24%
21%
9%
5%
source: iPos, iPh
* These percentages are our best estimates as official data
is delayed by approximately two or more years in many
instances.
source: iPos
The increase in patent applications is believed to be a
result of implementation efforts by the Government of
Singapore of its IP Hub Master Plan adopted in 2013,
which sets out the vision of Singapore as a global IP hub
in Asia.
Patent Market Share
IPH maintains a strong patent market position in key
jurisdictions in Asia. The largest patent market share
8 / iPh limited annual rePort 2015
51015202530%SingaporeMalaysiaPhilippinesIndonesiaVietnamThailandIndia(1) Outside Singapore and Malaysia, market share is represented by applications filed by agents instructed by Spruson & Ferguson.(2) Estimated market share based on non-resident patent applications filed in CY13. CY14 data is not available through WIPO .8,5009,0009,50010,00010,500CY14CY13CY12CY11CY10(i)(i) Singapore patent filings in CY14 – IPH estimate.SingaporeCY10CY11CY12CY13CY14 MalaysiaPhilippinesIndonesia VietnamThailand 2,0004,0006,0008,00010,00012,000(i)(ii)(i) CY14 patent filing numbers are not available through WIPO. Singapore patent filings in CY14 – IPH estimate.(ii) CY12 patent filing numbers for Indonesia are not available through WIPO. CY12 number is average of CY11 and CY13 filing numbers.5 10 15 20 25 30 35 Competitor 3Competitor 2Competitor 1IPH (SF Asia)CY14CY13CY12CY11CY10CY09% KeY oPerational highlights
2015
2014
1997
1978
1923
1887
source: iPos, iPh
Robert Ferguson joins Spruson and firm begins trading under Spruson & FergusonThe firm established as Hepburn & SprusonK.E. Niblett established as law firm specialising in IP law and the predecessor to Spruson & Ferguson LawyersSpruson & Ferguson’s Singapore office is establishedEstablishment of IPH and listing on ASXAcquisition of Practice Insight and Fisher Adams Kelly25+Countries serviced in Asia-Pacific IP Hub330+Employees11,448Patent applications filed by IPH companies in FY1513%Combined patent market share in Australia FY153000+Active clients24%Patent market share in Singapore FY15128-YEAR HISTORY board of directors
IPH’s Board of Directors
brings relevant experience
and skills including
professional services,
financial management,
legal services and corporate
governance.
richard grellman, am
david griffith
Independent Non-Executive
Managing Director
Chairman
FCa
BE (Hons), FIPTA, Registered Australian and
New Zealand Patent Attorney, Registered
Australian Trade Marks Attorney
Richard was appointed as an
David joined Spruson & Ferguson in
Independent Non-Executive
1974. He was a Principal of Spruson
Chairman in September 2014.
& Ferguson from 1981 and Managing
Richard is also Chairman of
Genworth Mortgage Insurance
Limited, AMP Foundation and the
Bible Society Australia. Richard is
a Director of Bisalloy Steel Group
Limited, Anglican Retirement
Villages and Chairman Emeritus
Principal of Spruson & Ferguson from
1999-2015. David was a founding
Director of Spruson & Ferguson Asia
and has been Chairman since 2011.
He is also the Chairman of Spruson
& Ferguson and Director of Fisher
Adams Kelly and Practice Insight.
of The Association of Surfing
David’s professional appointments
Professionals (International)
include past President of the Institute
Limited.
Richard worked for KPMG for 32
years, mostly within the Corporate
Recovery Division and was a
partner from 1982 to 2000.
of Patent and Trade Mark Attorneys
of Australia (IPTA), past President
of the Contact Commission of the
Federation Internationale des Conseils
en Propriete Industrielle (FICPI) (1997
– 2012) and an ex officio member of
the FICPI Advisory Council (1997-2012).
He was an Australian delegate to
the FICPI Executive Committee from
1983 to 1990 and he is a Member
of Honour of FICPI. David was a
representative partner to Computer
Patent Annuities Limited Partnership
(CPA) in Jersey, Channel Islands prior
to his appointment to CPA Board from
2005 until it was sold to private equity
in 2010.
10 / iPh limited annual rePort 2015
John atKin
robin loW
sallY PitKin
Independent Non-Executive
Independent Non-Executive
Independent Non-Executive
Director
LLB (1st Class Hons), BA (Pure
Mathematics) (1st Class Hons)
Director
BCom, FCa
Director
PhD (Governance), LLM, LLB, FAICD
John was appointed as an
Robin was appointed as an
Sally was appointed as as an
Independent Non-Executive
Independent Non-Executive
Independent Non-Executive
Director in September 2014.
Director in September 2014.
Director in September 2014.
John is a Non-Executive Director
Robin is a Director of Austbrokers
Sally is a Non-Executive Director of
of Aurizon Holdings Limited, GPT
Limited, CSG Limited, Appen
Echo Entertainment Group Limited,
Metro Office Fund, the Australian
Limited, Sydney Medical School
Super Retail Group Limited and
Outward Bound Foundation and a
Foundation, Primary Ethics and the
Billabong International Limited.
member of the Board of the State
Public Education Foundation. She is
Sally is the President Queensland
Library of NSW Foundation.
also a member of the Auditing and
Division of the Australian Institute
John is a former CEO & Managing
Assurance Standards Board.
of Company Directors.
Director of The Trust Company
Robin worked at
Sally is a former corporate partner
Limited (2009-2013). John was
PricewaterhouseCoopers for 28
of the law firm Clayton Utz.
also Managing Partner and Chief
years and was a partner from 1996
Executive of Blake Dawson (2002-
to 2013.
2008). John worked at Mallesons
Stephen Jaques as a Mergers &
Acquisitions Partner for 14 years
(1987-2001).
iPh limited annual rePort 2015 / 11
iPh groWth initiatives
The Group’s objective is to
be recognised as the leading
IP global service group for
secondary and emerging
markets. In FY16 IPH will focus
on the following key initiatives
to pursue that objective.
groWth in asia
groWth in australia
Maintain and grow patent
Maintain and grow patent
market share in Singapore
and trade mark market share
Increase patent market
in Australia through organic
share in other Asian
growth and acquisitions.
countries (excluding Japan
and Korea)
Grow Asian presence – new
offices and acquire well
established IP firms
Re-commence trade mark
practice business in Asia
Leverage new acquisitions to
increase filings in Asia
efficiencY gains
adJacent businesses
neW marKets
Development of IT systems
Develop Practice Insight’s IP
Explore acquisition
to drive efficiencies
data analytics and software
opportunities in other
development business
secondary markets outside of
the Asia-Pacific.
IPH cost synergies –
combining back office
Investigate options to enter
services
other adjacent businesses
12 / iPh limited annual rePort 2015
financial
rePort
FOR THE YEAR ENDED 30 JUNE 2015
14 / iPh limited annual rePort 2015
contents
FinanCial report
FOR THE YEAR ENDED 30 JUNE 2015
CORPORATE DIRECTORY
DireCtors’ report
auDitor’s inDepenDenCe DeClaration
FinanCial statements
DireCtor’s DeClaration
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IPH LIMITED
shareholDer inFormation
16
17
34
36
97
98
100
iPh limited annual rePort 2015 / 15
corPorate directorY
Directors
Mr Richard Grellman AM - Chairman
Mr David Griffith
Ms Robin Low
Dr Sally Pitkin
Mr John Atkin
Company secretary
Mr Malcolm Mitchell
Notice of annual
general meeting
Registered office
Principal place of
business
Share register
Auditor
Solicitors
The details of the annual general meeting of IPH Limited are:
Friday 20 November at 10:30am at the offices of Deloitte Touche Tohmatsu
Level 9, Grosvenor Place
225 George Street
Sydney NSW 2000
Level 35
31 Market Street
Sydney NSW 2000
Tel: 02 9393 0301
Fax: 02 9261 5486
Level 35
31 Market Street
Sydney NSW 2000
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Tel: 1300 554 474
Deloitte Touche Tohmatsu
Level 9, Grosvenor Place
225 George Street
Sydney NSW 2000
Watson Mangioni Lawyers Pty Limited
Speed and Stracey Lawyers Pty Limited
Level 13
50 Carrington Street
Sydney NSW 2000
Level 4
131 Macquarie Street
Sydney NSW 2000
Stock exchange listing
IPH Limited shares are listed on the Australian Securities Exchange (ASX code: IPH)
Website
www.iphltd.com.au
Corporate Governance
The Corporate Governance Statement was approved by the Board of Directors on 16
Statement
September 2015 and can be found at www.iphltd.com.au
16 / iPh limited annual rePort 2015
directors’ rePort
The Directors present their report, together with the financial statements, of the consolidated entity (referred to
hereafter as the ‘Group’) consisting of IPH Limited (referred to hereafter as the ‘Company’ or ‘Parent Entity’) and the
entities it controlled at the end of, or during, the year ended 30 June 2015.
IPH Limited was incorporated as a public company on 9 April 2014 and incorporated a subsidiary Spruson &
Ferguson Pty Limited on 18 August 2014. On 2 October 2014, Spruson & Ferguson Pty Limited, acquired the
business and controlled entities of the Spruson & Ferguson Unit Trust (the ‘Trust’) as part of a corporate/group
reorganisation. The accounting treatment adopted for recognising this new group structure is a form of corporate/
group reorganisation that does not involve any change of economic substance and, therefore, represents a
continuation of the existing group previously controlled by the Trust.
Following an initial public offer (‘IPO’), the Company was admitted to the official list of the Australian Stock
Exchange on 17 November 2014.
directors
The following persons were Directors of IPH Limited during the whole of the financial year and up to the date of
this report, unless otherwise stated:
NAME
OFFICE
Mr Richard Grellman, AM
Non-executive Chairman (appointed 23 September 2014)
Mr David Griffith
Managing Director and Chief Executive Officer
Ms Robin Low
Dr Sally Pitkin
Mr John Atkin
Non-executive Director (appointed 23 September 2014)
Non-executive Director (appointed 23 September 2014)
Non-executive Director (appointed 23 September 2014)
Mr Greg Turner
Former Director (resigned 23 September 2014)
Mr Robert Miller
Former Director (resigned 23 September 2014)
PrinciPal activities
During the financial year, the principal continuing activities of the Group consisted of:
Spruson & Ferguson patent and trade mark attorneys, Spruson & Ferguson Lawyers and IPH Services based in
Sydney, Australia;
Spruson & Ferguson Asia patent attorneys based in Singapore with a representative office in Shanghai;
Spruson & Ferguson Malaysia patent attorneys based in Kuala Lumpur;
Practice Insight, IP data analytics based in Perth (acquired 30 April 2015); and
Fisher Adams Kelly patent and trade mark attorneys based in Brisbane (acquired 28 May 2015).
The Group’s businesses provide services to support their clients in protecting their Intellectual Property (‘IP’) and
iPh limited annual rePort 2015 / 17
operates its IP hubs from its two major offices: the Sydney office provides services in Australia, New Zealand,
Papua New Guinea and the Pacific Islands; and the Singapore office operates a “one-stop” service for Asia,
providing services in 19 countries throughout the region including Singapore, Malaysia, China, Hong Kong, India,
Indonesia, the Philippines, Pakistan, Taiwan, Thailand and Vietnam. Specifically the Group provides patent and
design filing and prosecution services in all the above countries; trade mark filing and prosecution services in
Australia, New Zealand, Papua New Guinea and the Pacific Islands; services related to all other forms of IP; and IP
related legal services in Australia.
Fisher Adams Kelly was acquired on 28 May 2015, has offices in Brisbane, Sydney and Melbourne, and has a very
strong local client base as well as established relationships with foreign direct clients and attorney firms.
Practice Insight and Wise Time, acquired on 30 April 2015, are specialist providers of data analysis and software
applications for intellectual property and other professional services firms.
In Australia, Spruson & Ferguson is the leading patent attorney firm based on patent applications filed at IP
Australia and it is the second ranking trade mark attorney firm based on trade mark applications filed at IP
Australia. In Singapore, Spruson & Ferguson is the leading patent attorney firm based on patents filed at the
Intellectual Property Office of Singapore. In the other Asian markets in which Spruson & Ferguson competes, it has
a much lower market share, which represents a significant growth opportunity.
dividends
Dividends paid during the financial year were as follows:
Interim dividend of 3.5 cents per share for the year ended 30 June 2015, with
a record date of 5 March 2015 and paid on 25 March 2015. (franked to 2.5c)
Consolidated
30 June 2015
30 June 2014
$’000
5,514
$’000
-
On 28 August 2015, the Company declared an ordinary dividend of 10.0 cents per share (franked at 5.0 cents) and
to be paid on 7 October 2015 to shareholders registered on the record date of 7 September 2015.
revieW of oPerations
The profit for the Group after providing for income tax and non-controlling interest amounted to $30,315,000 (30
June 2014: $31,339,000). During the financial year the Group’s Asian businesses continued to grow strongly with
an increase in patent filings of 8%. This has seen the Asian business maintain its number one position in terms
of patent market share. The Australian patent business has broadly maintained its number one position in the
patent market and number two in trade mark business, having lost some market share when compared to the
previous financial year. Generally, Australian patent filings show relatively little or no growth compared to the
previous financial year, with a slight reduction in the filing propensity of a number of larger clients. The continuing
development of the Group’s IT systems has started to deliver efficiencies and greater flexibility across the group
operations.
18 / iPh limited annual rePort 2015
directors’ report / coNtiNUed30 June 2015 Statutory / Pro forma Results Reconciliation
The following table has been prepared so as to eliminate the effect of the restructuring of the Group, which took
place during the financial year ended 30 June 2015, and present the results on the basis of how the Group has
been constituted since the restructuring.
Statutory Net Profit After Tax ('NPAT')
Add: Income tax
Add: Interest expense
Add: Depreciation and amortisation
Statutory EBITDA
Add: IPO expenses
Add: LTIP establishment / leave balances recognition
Add: Spruson & Ferguson Lawyers earnings (net of distributions)
Less: Notional salaries adjustment
Less: Notional public company costs adjustment
Pro forma EBITDA
Less: Proforma depreciation and amortisation
Less: Proforma interest expense
Less: Proforma tax
Proforma Net Profit after Tax
Consolidated
30 June 2015
30 June 2014
$’000
30,589
6,297
623
1,062
$’000
32,155
2,589
301
826
38,571
35,871
3,499
970
131
(800)
(100)
42,271
(1,062)
(623)
(9,697)
30,889
400
-
-
(4,300)
(2,000)
29,971
(826)
(401)
(6,889)
21,855
significant changes in the state of affairs
Corporate/group reorganisation
On 2 October 2014, the Company via its subsidiary, Spruson & Ferguson Pty Limited, acquired the business, and
the controlled entities, of the Spruson & Ferguson Unit Trust (the ‘Trust’) pursuant to a scheme whereby 100%
of the Trust was acquired in exchange for 152 million shares in the Company. For accounting purposes, the
acquisition was treated as a corporate/group reorganisation.
Acquisition of Practice Insight Pty Ltd and WiseTime Pty Ltd
On 30 April 2015, the Group acquired data analysis and software companies Practice Insight Pty Ltd and WiseTime
Pty Ltd for a total consideration of $7,694,000. The consideration is settled by issuing 855,111 IPH Limited’s shares
at an issue price of $4.32 per share (acquisition date fair value) and cash of $4,000,000.
iPh limited annual rePort 2015 / 19
directors’ report / coNtiNUed30 June 2015 Acquisition of Fisher Adams Kelly Pty Ltd
On 28 May 2015, the Group acquired patent & trade mark attorneys firm Fisher Adams Kelly Pty Ltd for a total
consideration of $24,015,000. The consideration to be finally settled by the issue of a total of 4,992,665 shares in
IPH Limited (of which 3,963,655 were issued prior to year end) at an issue price of $4.81 per share (acquisition date
fair value).
There were no other significant changes in the state of affairs of the Group during the financial year.
matters subsequent to the end of the financial Year
Bank Facilities agreement
On 25 August 2014, the Group entered into a Facilities Agreement (‘Agreement’) with Australian and New Zealand
Banking Group Limited (‘ANZ’). The facilities under the Agreement comprised of a multi-option facility with a term
of three years for the general corporate purposes of the Group and a revolving annual credit facility allowing for
financial guarantees and standby letters of credit to be issued for the general corporate purposes of the Group.
On 7 July 2015, IPH Limited amended the Agreement to extend the facility to $100 million over a 3 year term.
Apart from the dividend declared, and the matter discussed above, no other matter or circumstance has arisen
since 30 June 2015 that has significantly affected, or may significantly affect the Group’s operations, the results of
those operations, or the Group’s state of affairs in future financial years.
environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
information on directors
The skills, experience, and expertise of each person who is a director of the Company at the end of the financial
year is provided below, together with details of the company secretary as at year end.
Name:
Title:
Richard Grellman, AM
Non-executive Chairman (appointed 23 September 2014)
Qualifications:
FCa
Experience and
expertise:
Richard worked for KPMG for 32 years, mostly within the Corporate Recovery Division
and was a Partner from 1982 to 2000.
Other current
directorships:
Former directorships
(last 3 years)
Richard is also Chairman of Genworth Mortgage Insurance Limited (2012), AMP
Foundation (2012) and Bible Society Australia. Richard is also a Director of Bisalloy Steel
Group Limited (2003), Anglican Retirement Villages (2014) and Chairman Emeritus of The
Association of Surfing Professionals (International) Limited.
Richard was Chairman of Crowe Horwath Australasia Limited (2011 - 2015)
Interests in shares:
48,791
Special responsibilities:
Chairman
20 / iPh limited annual rePort 2015
directors’ report / coNtiNUed30 June 2015 Name:
Title:
David Griffith
Managing Director and Chief Executive Officer
Qualifications:
BE (Hons), FIPTA ,Registered Australian and New Zealand Patent Attorney, Registered
Australian Trade Marks Attorney
Experience and
expertise:
David joined Spruson & Ferguson in 1974. He was a Principal from 1981 and Managing
Principal from 1999-2015. David was a Founding Director of Spruson & Ferguson Asia
and has been Chairman since 2011. He is also the Chairman of Spruson & Ferguson and
Director of Fisher Adams Kelly and Practice Insight. David’s professional appointments
include past President of the Institute of Patent and Trade Mark Attorneys of Australia
(‘IPTA’), past President of the Contact Commission of the Federation Internationale des
Conseils en Propriete Industrielle (‘FICPI’) (1997 2012) and an ex officio member of the
FICPI Advisory Council (1997 - 2012). He was an Australian delegate to the FICPI Executive
Committee (1983 – 1990) and is a Member of Honour of FICPI. David was a representa-
tive partner to Computer Patent Annuities Limited Partnership (‘CPA’) in Jersey, Channel
Islands prior to his appointment to the Board from 2005 until it was sold to private equity
in 2010.
Other current
directorships:
No other current directorships
Interests in shares:
6,098,765
Special responsibilities:
None
Name:
Title:
Robin Low, GAICD
Non-executive Director (appointed 23 September 2014)
Qualifications:
BCom, FCA
Experience and
Robin worked at PricewaterhouseCoopers for 28 years and was a Partner from 1996 to
expertise:
2013. She is also a member of the Auditing and Assurance Standards Board.
Other current
directorships:
Austbrokers Limited (2014), CSG Limited (2014), Appen Limited (2014), Sydney Medical
School Foundation (2012), Primary Ethics (2011) and the Public Education Foundation
(2010).
Interests in shares:
48,190
Special responsibilities:
Chairman - Audit and Risk Committee
iPh limited annual rePort 2015 / 21
directors’ report / coNtiNUed30 June 2015 Name:
Title:
Sally Pitkin , FAICD
Non-executive Director (appointed 23 September 2014)
Qualifications:
PhD (Governance), LLM, LLB, FAICD
Experience and
Sally is a former Corporate Partner of the law firm Clayton Utz. Sally is the President
expertise:
Queensland of the Australian Institute of Company Directors.
Other current
directorships:
Non-executive Director of Echo Entertainment Limited (2014), Super Retail Group Limited
(2010) and Billabong International Limited (2012)
Former directorships
(last 3 years)
No previous directorships
Interests in shares:
47,618
Special responsibilities:
None
Name:
Title:
John Atkin
Non-executive Director (appointed 23 September 2014)
Qualifications:
LLB (1st Class Hons), BA (Pure Mathematics) (1st Class Hons)
Experience and
expertise:
John is a former Chief Executive Officer and Managing Director of The Trust Company
Limited (2009 - 2013). John was also Managing Partner and Chief Executive of Blake
Dawson (2002 - 2008). He also worked at Mallesons Stephen Jaques as a Mergers &
Acquisitions Partner for 14 years (1987 - 2001).
Other current
directorships:
Aurizon Holdings Limited (2010), GPT Metro Office Fund (2014), The Australian Outward
Bound Foundation (2008) and the State Library of NSW Foundation (2013).
Former directorships
(last 3 years)
Managing Director of The Trust Company Limited (2009 - 2013)
Interests in shares:
95,238
Special responsibilities:
Chairman - Nomination and Remuneration Committee
22 / iPh limited annual rePort 2015
directors’ report / coNtiNUed30 June 2015 Name:
Title:
Qualifications:
Experience and
expertise:
Other current
directorships:
Greg Turner
Director (resigned 23 September 2014)
BE, FIPTA, Registered Australian and New Zealand Patent Attorney, Registered Australian
Trade Marks Attorney
Greg has worked at Spruson & Ferguson since 1974, and has been a Principal since 1985.
No other current directorships
Interests in shares:
5,395,062
Special responsibilities:
None
Name:
Title:
Robert Miller
Director (resigned 23 September 2014)
Qualifications:
BE, FIPTA, Registered Australian and New Zealand Patent Attorney, Registered Australian
Trade Marks Attorney
Experience and
expertise:
Robert had worked at Spruson & Ferguson since 1992, and was a Principal from 1985-
2014.
Other current
directorships:
No other current directorships
Interests in shares:
1,290,123
Special responsibilities:
None
The directors hold no interest in options, performance rights or contractual rights to the securities of IPH Limited
as at the date of this report.
Other current directorships’ quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only
and excludes directorships of all other types of entities, unless otherwise stated.
comPanY secretarY
Malcolm Mitchell, MA, CA. Mr Mitchell was appointed Group Chief Financial Officer and Company Secretary on
15 December 2014. He is a Chartered Accountant with over 30 years professional experience working in senior
financial roles with both listed and private companies. He is also a former Finance Director of Atlas Group Holdings
Limited and Parbury Limited.
The previous Company Secretary was Carole Campbell.
iPh limited annual rePort 2015 / 23
directors’ report / coNtiNUed30 June 2015 meetings of directors
The number of meetings of the Company’s Board of Directors (‘the Board’) held during the year ended 30 June
2015, and the number of meetings attended by each Director were:
Full Board
Nomination and
Audit and
Remuneration Committee
Risk Committee
Attended
Held
Attended
Held
Attended
Held
12
16
11
10
11
4
4
12
16
12
12
12
4
4
1
1
1
1
1
-
-
1
1
1
1
1
-
-
3
3
3
3
3
-
-
3
3
3
3
3
-
-
Richard Grellman AM
David Griffith
Robin Low
Sally Pitkin
John Atkin
Greg Turner
Robert Miller
Held: represents the number of meetings held during the time the Director held office.
remuneration rePort (audited)
Introduction from the Nomination and Remuneration Committee Chair
Dear Shareholder,
On behalf of the Board, I am pleased to present the Remuneration Report for FY15.
The Company’s current remuneration framework was developed in the context of the Company’s IPO. Many of the features of
the current remuneration framework for the Company reflect the particular circumstances of the Company’s transition from
a private firm which operated as a unit trust to a public listed company, particularly the very significant continuing equity
ownership held by the CEO and a number of the other Principals. At the time of the IPO, the company also introduced an
annual incentive program for its senior professional staff, other than KMP.
The Company is currently reviewing its remuneration framework for all its executives and professional staff, including KMP, to
ensure that on an ongoing basis the Company is able to attract, motivate and retain the talent necessary to run the business
and drive behaviour that aligns with the creation of sustainable shareholder value. Details of any revisions to the remuneration
framework will be disclosed in the remuneration report for FY16.
We look forward to your continued support and welcome your feedback on our remuneration report for FY15.
Yours sincerely,
John Atkin
Nomination and Remuneration Committee Chair
24 / iPh limited annual rePort 2015
directors’ report / coNtiNUed30 June 2015 The remuneration report details the key management personnel (‘KMP’) remuneration arrangements for the
Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of
the Group, directly or indirectly, including all Directors.
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional disclosures relating to key management personnel
PrinciPles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and conforms to the market best practice for the delivery of
reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for
good reward governance practices:
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation; and
transparency.
The Nomination and Remuneration Committee (‘NRC’) is responsible for reviewing and making recommendations
to the Board on remuneration packages and policies related to the Directors and other KMP and to ensure
that the remuneration policies and practices are consistent with the Group’s strategic goals and human
resources objectives. The performance of the Group depends on the quality of its Directors and other KMP. The
remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
The NRC has structured an executive remuneration framework that is market competitive and complementary to
the reward strategy of the Group.
Alignment to shareholders’ interests:
has economic profit as a core component of plan design;
focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and
attracts and retains high calibre executives.
iPh limited annual rePort 2015 / 25
directors’ report / coNtiNUed30 June 2015 Alignment to program participants’ interests:
rewards capability and experience;
reflects competitive reward for contribution to growth in shareholder wealth; and
provides a clear structure for earning rewards.
At the time of the IPO, the CEO and 18 of Spruson & Ferguson Principals continued to hold very significant equity
interests in the Company during the escrow period. Other than the CEO, Dr Andrew Blattman (CEO, Spruson &
Ferguson) and Kristian Robinson (Managing Director, Spruson & Ferguson Asia), these Principals are not deemed
key management personnel. Those Principals (including the CEO but excluding Robert Miller) entered into
individual executive services agreements which provide:
total compensation of $250,000 per annum (including superannuation entitlements);
a minimum three year term commencing on the Listing Date (for each of those Principals other than Scott
Berggren, Lee Pippard and Greg Turner). The minimum term binds the Principals (subject to all usual legal
requirements) however the Group may terminate the agreements earlier;
a notice period of six months (subject to the minimum term), or by the Group without notice in the event of
serious misconduct;
restraint of trade provisions throughout Australia, New Zealand and Asia for 12 months after termination of
employment. The enforceability of the restraint is subject to all usual legal requirements; and
five weeks annual leave and for Australian employees, all other leave entitlements as per the National
Employment Standard and applicable legislation.
Lee Pippard’s and Greg Turner’s agreements are for a minimum term of two years from the Listing Date and Scott
Berggren’s was for a minimum term of eighteen months from the Listing Date.
As foreshadowed at that time, the Board is currently reviewing these arrangements and may modify them for later
financial years.
Executive remuneration
The Group aims to reward executives with a level and mix of remuneration based on their position and
responsibility, which has both fixed and variable components.
The executive remuneration and reward framework has four components:
base pay and non-monetary benefits;
short-term performance incentives;
share-based payments; and
other remuneration such as superannuation and long service leave.
The combination of these comprises the executive’s total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually
by the NRC, based on individual and business unit performance, the overall performance of the Group and
comparable market remunerations.
26 / iPh limited annual rePort 2015
directors’ report / coNtiNUed30 June 2015 Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the Group and provides additional value to the executive.
No key management personnel have been granted options or performance rights over shares during the year
ended 30 June 2015.
Company performance
For the year to 30 June 2015 there was no link between company performance and KMP remuneration. In the year
ended 30 June 2015, the earnings per share were 19.51 cents. Shares in the company were issued at the IPO on 17
November 2014 at $2.10 and closed on 30 June 2015 at $4.70 per share.
Non-executive Directors remuneration
Fees and payments to Non-executive Directors reflect the demands and responsibilities of their role. Non-
executive Directors’ fees and payments are reviewed periodically by the NRC. The NRC may, from time to time,
receive advice from independent remuneration consultants to ensure Non-executive Directors’ fees and payments
are appropriate and in line with the market.
The Chairman’s fees are determined independently to the fees of other Non-executive Directors based on
comparative roles in the external market. The Chairman is not present at any discussions relating to the
determination of his own remuneration. Non-executive Directors do not receive share options or other incentives
and their remuneration must not include a commission on, or a percentage of, operating revenue.
ASX listing rules require the aggregate Non-executive Directors remuneration be determined periodically by
a general meeting. Under the Company’s Constitution and as set out in the IPO Prospectus, total aggregate
remuneration available to Non-executive Directors is set currently at $750,000 per annum.
Non-executive Director fees (Directors’ fees and committee fees) (inclusive of superannuation) proposed for the
year ending 30 June 2016 is summarised as follows:
Name - Position
Richard Grellman AM - Chairman
Robin Low - Director
Sally Pitkin - Director
John Atkin - Director
FY 2016 Fees
$190, 000
$90,000
$90,000
$90,000
The non-executive Directors are not entitled to participate in any employee incentive scheme (including the LTIP),
However, as disclosed at the time of the company’s IPO, Richard Grellman and Robin Low have elected to receive
4.2% of their fees in the form of shares, which are purchased on the market by the Company. The price of shares
purchased in the year was $4.6703 and $4.8094, which reflected the market price at the time they were acquired.
Directors may also be reimbursed for expenses reasonably incurred in attending to the Company’s affairs. Non-
executive Directors may be paid such additional or special remuneration as the Directors decide is appropriate
where a Director performs extra work or services which are not in the capacity as a Director of the Group. There is
no contractual redundancy benefit for Directors, other than statutory superannuation contributions.
iPh limited annual rePort 2015 / 27
directors’ report / coNtiNUed30 June 2015 details of remuneration
Amounts of remuneration
The remuneration disclosures for the KMP of the Group are as follows:
The 2015 disclosures represents nine months (the period from 2 October 2014 to 30 June 2015) of IPH Limited
and three months of the KMP of the Spruson & Ferguson Unit Trust.
The key management personnel of the Group consisted of the following Directors of IPH Limited:
Richard Grellman, AM - Non-executive Chairman (appointed 23 September 2014)
David Griffith - Managing Director and Chief Executive Officer
Robin Low - Non-executive Director (appointed 23 September 2014)
Sally Pitkin - Non-executive Director (appointed 23 September 2014)
John Atkin - Non-executive Director (appointed 23 September 2014)
Greg Turner - Former Director (resigned 23 September 2014)
Robert Miller - Former Director (resigned 23 September 2014)
And the following persons:
Malcolm Mitchell - Group Chief Financial Officer (from 24 February 2015); Company Secretary
Andrew Blattman - Chief Executive Officer, Spruson & Ferguson Pty Limited
Kristian Robinson - Managing Director, Spruson & Ferguson Asia Pte Limited
Carole Campbell - Former Group Chief Financial Officer and Company Secretary (resigned 15 December 2015)
Historically the group operated out of a unit trust structure as described in note 1. Compensation paid to key
management personnel consisted of both equity and non-equity components. As such, information for the prior year
is unable to be presented on a comparable basis and has therefore not been included for the period prior to listing.
Short-term benefits
Post em-
ployment
benefits
Long-term
benefits
Share-
based
payments
30 June 2015
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Employee
leave
$
Equity-
settled
$
Total
$
Non-Executive Directors:
Richard Grellman*
130,535
Robin Low*
Sally Pitkin*
John Atkin*
65,437
65,437
65,437
Executive Directors:
David Griffith
199,723
Greg Turner **
Robert Miller**
46,629
27,394
-
-
-
-
-
-
-
28 / iPh limited annual rePort 2015
-
-
-
-
-
-
-
12,401
6,217
6,217
6,217
21,599
3,253
2,602
-
-
-
-
49,999
192,935
49,999
121,653
49,999
121,653
49,999
121,653
13,149
78,844
-
-
-
-
234,470
127,289
29,996
directors’ report / coNtiNUed30 June 2015 Amounts of remuneration (continued)
Short-term benefits
Post em-
ployment
benefits
Long-term
benefits
Share-
based
payments
30 June 2015
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Employee
leave
$
Equity-
settled
$
Total
$
175,500
236,164
340,371
245,525
-
20,000
-
-
16,443
27,367
19,984
-
-
-
-
-
98,490
135,803
199,996
1,951,573
Other Key Management Personnel
Malcolm Mitchell*
175,500
Andrew Blattman
199,223
Kristian Robinson
316,426
Carole Campbell**
225,541
1,517,283
-
-
-
-
-
-
-
-
-
-
* Represents remuneration from date of appointment
** Represents remuneration to date of resignation
service agreements
Remuneration and other terms of employment for KMP are formalised in service agreements with the exception of
the Chief Financial Officer. Details of these agreements are as follows:
Name:
Title:
David Griffith
Managing Director and Chief Executive Officer
Agreement commenced:
17 November 2014
Term of agreement:
3 years
Name:
Title:
Andrew Blattman
Chief Executive Officer, Spruson & Ferguson Pty Limited
Agreement commenced:
17 November 2014
Term of agreement:
3 years
iPh limited annual rePort 2015 / 29
directors’ report / coNtiNUed30 June 2015 Name:
Title:
Kristian Robinson
Managing Director, Spruson & Ferguson Asia Pte Limited
Agreement commenced:
17 November 2014
Term of agreement:
3 years
KMP may terminate their employment contract by giving six months’ notice in writing. In the event of serious
misconduct or other specific circumstances warranting summary dismissal, the Company may terminate the
employment contract immediately by notice in writing and without payment in lieu of notice. Upon the termination
of the employment contract, the KMP will be subject to a restraint of trade period of 12 months throughout
Australia, New Zealand and Asia. The enforceability of the restraint is subject to all usual legal requirements.
KMP have no entitlement to termination payments in the event of removal for misconduct. KMP’s receive five
weeks annual leave, with the exception of non-executive directors.
share-based comPensation
Share based compensation paid in connection with listing
As disclosed in the Prospectus at the time of the Company’s IPO, upon the Company’s listing each non executive
director received a one-off listing fee in the form of shares. This payment was made in consideration of the
services they had provided in anticipation of the IPO and prior to their appointment as directors. The details are
set out below:
Name
Date
Richard Grellman
19/11/2014
Robin Low
Sally Pitkin
John Atkin
19/11/2014
19/11/2014
19/11/2014
Shares
23,809
23,809
23,809
23,809
Issue price
$2.10
$2.10
$2.10
$2.10
$
49,999
49,999
49,999
49,999
additional disclosures relating to KeY management Personnel
In accordance with Class Order 14/632, issued by the Australian Securities and Investments Commission, relating
to ‘Key management personnel equity instrument disclosures’, the following disclosures relate only to equity
instruments in the Company or its subsidiaries.
Shareholding
The number of shares in the Company held during the financial year by each Director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
30 / iPh limited annual rePort 2015
directors’ report / coNtiNUed30 June 2015 Balance at
the start
of the year
(units)
Unit subdi-
vision and
conversion
to shares
Received as
part of
remuneration
(listing fee)
Additions
Disposals
(incl notional
disposal)
Balance at
the end of
the year
-
-
-
-
-
-
-
-
30
15,000,000
8,350,000
16,425,000
-
9,775,000
1,225,000
-
16
33
-
19
1
-
99
23,809
23,809
23,809
23,809
-
-
-
-
-
-
24,982
24,381
23,809
71,429
-
-
-
-
-
-
-
-
15,000,000
8,350,000
48,791
48,190
47,618
95,238
-
-
10,326,235
6,098,765
-
-
469,136
4,333,025
5,911,111
6,542,468
3,891,296
3,876,172
23,810
23,810
-
50,775,000
95,236
7,180,015
41,924,366
16,125,885
Ordinary shares
Richard Grellman
Robin Low
Sally Pitkin
John Atkin
Greg Turner*
Robert Miller*
David Griffith
Malcolm Mitchell
Andrew Blattman
Kristian Robinson
Carole Campbell*
* Disposals/other may represent no longer being designated as a KMP, not necessarily a disposal of holding.
Option holding
No options over ordinary shares in the Company were held during the financial year by each Director and other
members of key management personnel of the Group, including their personally related parties.
Performance rights holding
There were no performance rights issued to each Director and other members of key management personnel of
the Group.
this concludes the remuneration rePort, Which has been audited.
Shares under performance and retention rights
Details of unissued shares or interests under performance and retention rights at the date of this report are:
Issuing entity
Type
Number of shares
Class
Exercise Price
Expiry Date
IPH Limited
Performance
275,076
Ordinary
IPH Limited
Retention
142,857
Ordinary
0.00
0.00
9/9/2017
9/9/2017
iPh limited annual rePort 2015 / 31
directors’ report / coNtiNUed30 June 2015 Shares under option
There were no unissued ordinary shares of IPH Limited under option at the date of this report.
indemnitY and insurance of officers
The Company has indemnified the Directors and executives of the Company for costs incurred, in their
capacity as a Director or executive, for which they may be held personally liable, except where there is a lack
of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the Directors and
executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability and the amount of the premium.
indemnitY and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor
of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
Proceedings on behalf of the comPanY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings
on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of
taking responsibility on behalf of the Company for all or part of those proceedings.
non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by
the auditor are outlined in note 32 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or
by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in note 32 to the financial statements do not
compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following
reasons:
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for
the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
32 / iPh limited annual rePort 2015
directors’ report / coNtiNUed30 June 2015 officers of the comPanY Who are former Partners of deloitte touche tohmatsu
There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu.
rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Class
Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
auditor’s indePendence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set
out on the following page.
auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations
Act 2001.
David Griffith
Managing Director
16 September 2015
Sydney
iPh limited annual rePort 2015 / 33
directors’ report / coNtiNUed30 June 2015
auditor’s indePendence declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
Tel: +61 2 9322 7000
Fax: +61 (0)2 9322 7001
www.deloitte.com.au
The Board of Directors
IPH Limited
Level 35, St Martins Tower
31 Market Street
Sydney NSW 2000
16 September 2015
Dear Board Members
IPH Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of IPH Limited.
As lead audit partner for the audit of the consolidated financial statements of IPH Limited and its controlled
entities for the financial year ended 30 June 2015, I declare that to the best of my knowledge and belief, there
have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Tara Hill
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
34 / iPh limited annual rePort 2015
iPh limited annual rePort 2015 / 35
financial statements
statement oF proFit or loss anD other ComprehensiVe inCome
statement oF FinanCial position
STATEMENT OF CHANGES IN EQUITY
statement oF Cash FloWs
notes to the FinanCial statements
37
38
39
40
41
statement of Profit or loss and other comPrehensive income
statement of Profit or loss and other comPrehensive income
FOR THE YEAR ENDED 30 JUNE 2015
Consolidated
Note
30 June 2015
30 June 2014
Revenue
Other income
Expenses
Employee benefits expense
Depreciation and amortisation expense
Rental expenses
Restructure and formation expenses
Business acquisition costs
Agent fee expenses
Insurance expenses
Travel expenses
Printing & stationery expenses
Other expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of IPH Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of IPH Limited
Earnings per share
From continuing operations
Basic earnings (cents per share)
Diluted earnings (cents per share)
5
6
7
7
7
8
41
41
$’000
88,716
5,202
$’000
72,212
4,855
(27,026)
(20,848)
(1,062)
(2,908)
(3,499)
(310)
(826)
(2,327)
(400)
-
(15,374)
(12,520)
(347)
(533)
(266)
(5,084)
(623)
36,886
(6,297)
30,589
43
43
30,632
274
30,315
30,589
274
30,358
30,632
19.51
19.48
(324)
(459)
(281)
(4,037)
(301)
34,744
(2,589)
32,155
(73)
(73)
32,082
816
31,339
32,155
811
31,271
32,082
20.62
20.62
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
iPh limited annual rePort 2015 / 37
statement of financial Position
AS AT 30 JUNE 2015
Consolidated
Note
30 June 2015
30 June 2014
$’000
$’000
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Total current assets
Non-current assets
Available-for-sale financial assets
Property, plant and equipment
Intangibles
Deferred tax
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Income tax
Provisions
Other financial liabilities
Other
Deferred revenue
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Equity attributable to the owners of IPH Limited
Non-controlling interests
Total equity
9
10
11
12
13
14
15
16
17
18
19
20
21
22
15
23
24
25
26
27
5,346
27,410
2,124
34,880
29
1,188
34,525
1,972
37,714
72,594
9,978
-
5,664
4,705
-
4,950
1,162
4,321
20,288
1,071
25,680
25
1,126
595
-
1,746
27,426
6,423
2,506
2,506
2,616
451
7,182
1,635
26,459
23,319
10,550
-
407
10,960
37,416
35,178
35,305
(14,588)
14,461
35,178
-
35,178
3,591
21
347
3,959
27,278
148
420
(4,748)
3,933
(395)
543
148
The above statement of financial position should be read in conjunction with the accompanying notes.
38 / iPh limited annual rePort 2015
Consolidated
Balance at 1 July 2013
Profit after income tax expense for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity
as owners:
Dividends paid to non-controlling interests
Distributions to trust unit holders
Issued
capital
$’000
420
-
-
-
-
-
statement of changes in equitY
FOR THE YEAR ENDED 30 JUNE 2015
Reserves
Retained
profits
Non-
controlling
interest
Total
equity
$’000
(4,680)
-
(68)
(68)
$’000
$’000
$’000
4,674
31,339
-
31,339
600
816
(5)
811
1,014
32,155
(73)
32,082
-
-
-
(868)
(868)
(32,080)
-
(32,080)
Balance at 30 June 2014
420
(4,748)
3,933
543
148
Reserves
Retained
profits
Consolidated
Balance at 1 July 2014
Profit after income tax expense for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity
as owners:
Net conversion of units
Issue of ordinary shares
Contributions of equity, net of transaction
costs (note 24)
Share-based payments
Issued
capital
$’000
420
-
-
-
451
321
22,759
$’000
(4,748)
-
43
43
-
-
-
Non-
controlling
interest
$’000
543
274
Total
equity
$’000
148
30,589
$’000
3,933
30,315
-
-
43
30,315
274
30,632
-
-
-
-
-
-
-
-
-
(159)
451
321
22,759
495
817
Acquisition of non-controlling interest
11,354
(10,378)
-
495
Distributions to trust unit holders
Dividends paid (note 28)
-
-
-
-
(14,273)
(5,514)
-
(14,273)
(658)
(6,172)
Balance at 30 June 2015
35,305
(14,588)
14,461
-
35,178
The above statement of changes in equity should be read in conjunction with the accompanying notes.
iPh limited annual rePort 2015 / 39
statement of cash floWs
FOR THE YEAR ENDED 30 JUNE 2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payments for purchase of subsidiaries, net of cash acquired
Payments for property, plant and equipment
Payments for intangibles
Dividends received
Note
6
7
40
37
13
14
Consolidated
30 June
2015
$’000
97,152
(60,284)
100
(623)
(4,780)
31,565
(3,211)
(595)
(652)
112
30 June
2014
$’000
87,861
(47,376)
18
(301)
(1,889)
38,313
-
(546)
(595)
-
Net cash used in investing activities
(4,346)
(1,141)
Cash flows from financing activities
Proceeds from issue of units
Distributions paid to previous owners
Dividends paid
Proceeds of borrowings
Repayment of borrowings
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
-
450
(21,296)
(36,354)
(5,514)
10,550
(9,579)
(868)
(701)
-
(25,839)
(37,473)
1,380
4,321
(355)
5,346
(301)
4,609
13
4,321
The above statement of cash flows should be read in conjunction with the accompanying notes.
40 / iPh limited annual rePort 2015
notes to the financial statements
30 JUNE 2015
note 1. general information
The financial statements cover IPH Limited as a Group consisting of IPH Limited and the entities it controlled at
the end of, or during, the year. The financial statements are presented in Australian dollars, which is IPH Limited’s
functional and presentation currency.
IPH Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 35
31 Market Street
Sydney NSW 2000
A description of the nature of the Group’s operations and its principal activities are included in the Directors’
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 16 September 2015.
Corporate / group reorganisation
IPH Limited was incorporated as a public company on 9 April 2014 and incorporated a subsidiary Spruson & Ferguson
Pty Limited on 18 August 2014. On 2 October 2014, Spruson & Ferguson Pty Limited, acquired the business and
controlled entities of the Spruson & Ferguson Unit Trust (the ‘Trust’) as part of a corporate/group reorganisation. The
accounting treatment adopted for recognising this new group structure is a form of corporate/group reorganisation
that does not involve any change of economic substance and, therefore, represents a continuation of the existing group
previously controlled by the Trust. Refer to the ‘business combinations’ accounting policy in note 2 for further details.
The Company was admitted to the official list of the Australian Stock Exchange on 17 November 2014.
note 2. significant accounting Policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
neW, revised or amending accounting standards and interPretations adoPted
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the
financial performance or position of the Group.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted.
statement of comPliance
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations
iPh limited annual rePort 2015 / 41
note 2. significant accounting Policies (continued)
statement of comPliance (continued)
Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’).
basis of PreParation
The financial statements have been prepared under the historical cost convention except for certain financial
instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below.
Historical cost is generally based on the fair values of the consideration given in exchange for assets.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements, are disclosed in note 3.
Parent entitY information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 36.
PrinciPles of consolidation
The consolidated financial statements are those of the consolidated entity (“the Group”), comprising the financial
statements of the parent entity and all of the entities the parent controls. The Company controls an entity when
it has power over the investee and the Group is exposed to or has rights to variable returns from its involvement
with the entity and has the ability to affect those returns through its power to direct the activities of the entity.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profit or loss and other comprehensive income from
the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or
loss and each component of other comprehensive income are attributed to the owners of the Company and to the
non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-
controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference
42 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
PrinciPles of consolidation (continued)
between the amount by which the non-controlling interests are adjusted and the fair value of the consideration
paid or received is recognised directly in equity and attributed to owners of the Company.
foreign currencY translation
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group entity are expressed in Australian dollars (‘$’), which is
the functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of each individual group entity, transactions in currencies other than the
entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of
the transactions.
At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the
rates prevailing at that date. Nonmonetary items carried at fair value that are denominated in foreign currencies
are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
exchange differences on foreign currency borrowings relating to assets under construction for future productive
use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on
those foreign currency borrowings;
exchange differences on transactions entered into in order to hedge certain foreign currency risks; and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement
is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation),
which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on
repayment of the monetary items.
For the purpose of presenting these consolidated financial statements, the assets and liabilities of the Group’s
foreign operations are translated into Australian dollars using exchange rates prevailing at the end of the reporting
period. Income and expense items are translated at the average exchange rates for the period, unless exchange
rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions
are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in
equity (and attributed to non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a
disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an
interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest
becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation
attributable to the owners of the Company are reclassified to profit or loss.
iPh limited annual rePort 2015 / 43
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
foreign currencY translation (continued)
In addition, in relation to a partial disposal of a subsidiary that includes a foreign operation that does not result in
the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are
re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e.
partial disposals of associates or joint arrangements that do not result in the Group losing significant influence or
joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.
revenue recognition
Revenue is measured at the fair value of the consideration received or receivable.
Revenue recognition relating to the provision of services is determined with reference to the stage of completion
of the transaction at the end of the reporting period and where outcome of the contract can be estimated reliably.
Stage of completion is determined with reference to the services performed to date as a percentage of total
anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only
to the extent that related expenditure is recoverable.
Dividend revenue is recognised when the right to receive a dividend has been established (provided that it is
probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group
and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.
Revenue from trust distributions is recognised when the right to receive a distribution has been established
(provided that it is probable that the economic benefits will flow to the Group and the amount of income can be
measured reliably). Other revenue, including commission revenue, is recognised when it is received or when the
right to receive payment is established.
All revenue is stated net of the amount of goods and services tax (GST).
WorK in Progress
Work in progress (WIP) represents costs incurred and profit recognised on client assignments and services that are
in progress at balance date. WIP is valued at net realisable value after providing for any foreseeable losses. WIP
older than 90 days is reviewed and any WIP not thought to be recoverable is written off.
disbursements recoverable
Recoverable client disbursements recorded in work in progress are recognised when services are provided. The
amount recognised is net of any GST payable. Internally generated disbursements are credited directly to the profit
& loss as they are charged to a client matter.
Disbursements older than 60 days are constantly being reviewed and any not thought to be recoverable are written off.
44 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
income tax
The current tax payable is based on taxable profit for the year. Taxable profit differs from profit before tax as
reported in the consolidated statement of profit or loss and other comprehensive income because of items of
income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of
the reporting period.
The Company and its wholly-owned Australian resident entities are part of a tax-consolidated group which was
formed on 3 September 2014. As a consequence, all members of the tax-consolidated group are taxed as a single
entity. The head entity within the tax consolidated group is IPH Limited.
Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the
members of the tax-consolidated group are recognised in the separate financial statements of the members of the
tax consolidated group using the “separate taxpayer within group” approach.
Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members
of the tax-consolidated group are recognised by the Company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts
are recognised as payable to or receivable by the Company and each member of the group in relation to the tax
contribution amounts paid or payable between the parent entity and the other members of the tax consolidated
group in accordance with the arrangement. Where the tax contribution amount recognised by each member of the
tax consolidated group for a particular period is different to the aggregate of the current tax liability or asset and
any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is
recognised as a contribution from (or distribution to) equity participants.
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or
substantively enacted by reporting date. Adjustments are made for transactions and events occurring within
the tax-consolidated group that do not give rise to a tax consequence for the group or that have a different tax
consequence at the head entity level of the group.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax base of those items. Adjustments are made for transactions and
events occurring within the tax-consolidated group that do not give rise to a tax consequence for the group or that
have a different tax consequence at the head entity level of the group.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets
are recognised to the extent that it is probable that sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses and tax offsets can be utilised.
However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them
iPh limited annual rePort 2015 / 45
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
income tax (continued)
arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which
affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in
relation to taxable temporary differences arising from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments except where the Group
is able to control the reversal of the temporary differences and it is probable that the temporary differences will not
reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these
investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits
against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when
the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority
and the Company intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the Statement of Comprehensive Income,
except when it relates to items credited or debited directly to equity, in which case the deferred tax is also
recognised directly in equity. As part of the restructure to facilitate listing, the Spruson& Ferguson Unit Trust
transferred its business to Spruson& Ferguson Pty Limited. This change in legal structure caused a change in the
tax status of the operations. This change in tax status has been included in profit and loss for the period.
cash and cash equivalents
Cash and cash equivalents include cash on hand and at banks, short term deposits with an original maturity of
three months or less held at call with financial institutions, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the consolidated statement of financial position.
trade and other receivables
Trade and other receivables include amounts due from customers for services performed in the ordinary course of
business. Receivables expected to be collected within 12 months of the end of the reporting period are classified
as current assets. All other receivables are classified as non current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any provision for impairment. Refer to Note 2 for further discussion on the
determination of impairment losses.
Unearned income is recognised as a liability when received and is recognised as revenue once a patent service has
been provided or completed.
46 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
trade and other PaYables
Trade and other payables represent the liabilities for goods and services received that remain unpaid at the end of
the reporting period. The balance is recognised as a current liability with the amounts normally paid within 90 days
of recognition of the liability.
financial instruments
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are carried at amortised cost using the effective interest rate method. Gains and losses
are recognised in profit or loss when the asset is derecognised or impaired.
Available-for-sale financial assets
Available for sale financial assets include any financial assets not included in the above categories and are
measured at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.
The cumulative gain or loss is held in equity until the financial asset is de recognised, at which time the cumulative
gain or loss held in equity is recognised in profit and loss.
Financial liabilities
Financial liabilities include trade payables, other creditors and loans from third parties including inter group balances.
Non derivative financial liabilities are recognised at amortised cost using the effective interest method.
Trade accounts payable comprise the original debt less principal payments plus where applicable any accrued interest.
The amortised cost of a financial asset or a financial liability is the amount initially recognised minus principal
repayments, plus or minus cumulative amortisation of any difference between the initial amount and the maturity
amount and minus any write-down for impairment.
Financial liabilities are classified as current liabilities unless the group has an unconditional right to defer
settlement of the liability for at least twelve months after the reporting period.
The carrying amount of financial assets is reviewed annually the directors’ to assess whether there is any objective
evidence that a financial asset is impaired.
Where such objective evidence exists, the company recognises impairment losses.
ProPertY, Plant and equiPment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their
useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method
are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a
prospective basis.
iPh limited annual rePort 2015 / 47
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
ProPertY, Plant and equiPment (continued)
Assets held under finance leases are amortised over their expected useful lives on the same basis as owned assets.
However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term,
assets are depreciated over the shorter of the lease term and their useful lives.
Leasehold improvements
Plant and equipment
Furniture, fixtures and fittings
Computer equipment
6-15 years
2-20 years
5-20 years
3-5 years
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement
of an item of property, plant and equipment is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or loss.
intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are measured at their fair value
at the date of the acquisition.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently of events or changes in circumstances indicate that it might be impaired and it is
carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit and loss and
not subsequently reversed.
Intangible assets acquired separately
Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation
and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful
lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with
the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite
useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-
generated intangible asset arising from development (or from the development phase of an internal project) is
recognised if, and only if, all of the following have been demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
48 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
intangible assets (continued)
Internally-generated intangible assets - research and development expenditure (continued)
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the recognition criteria listed above. Where no internally
generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period
in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
The useful lives of intangible assets are as follows:
Software
3-5 years
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net
disposal proceeds and the carrying amount of the asset are recognised in profit or loss when the asset is derecognised.
imPairment of assets
Goodwill and other assets that have an indefinite useful life are not amortised but are tested annually for
impairment in accordance with AASB 136 ‘Impairment of Assets’. Assets subject to annual depreciation or
amortisation are reviewed for impairment whenever events or circumstances arise that indicates that the carrying
amount of the asset may be impaired.
An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount. The
recoverable amount of an asset is defined as the higher of its fair value less costs to sell and value in use.
For the purposes of impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash generating units).
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation.
iPh limited annual rePort 2015 / 49
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
Provisions (continued)
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of
the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor
is included in the statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve
a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately
in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in
accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised as expenses in
the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased
asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period
in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed.
emPloYee benefits
Short and long-term employee benefit
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, and long
service leave when it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using
the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long term
employee benefits are measured at the present value of the estimated future cash outflows to be made by the
Group in respect of services provided by the employees up to reporting date.
50 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
emPloYee benefits (continued)
Retirement benefit costs
Payments to defined contribution plans are recognised as an expense when employees have rendered service
entitling them to the contributions.
borroWings costs
Borrowing costs can include interest, amortisation of discounts or premiums relating to borrowings, ancillary costs
incurred in connection with arrangement of borrowings, foreign exchange losses net of hedged amounts on borrowings.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to
the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are
recognised in profit or loss in the period in which they are incurred.
goods and services tax (gst)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of an item of the expense. Receivables and payables in the consolidated
statement of financial position are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as operating cash flows.
share based PaYments
Equity settled share based compensation benefits are provided to employees and directors. Equity settled
transactions are awards of shares, options or rights, that are provided in exchange for the rendering of services.
Equity settled share based payments are measured at the fair value of the equity instruments at the grant date.
The fair value at the grant date of the equity settled share based payments is expensed on a straight line basis
over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number
of equity instruments expected to vest. The impact of the revision of the original estimates, if any , is recognised in
profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to
the equity settled employee benefits reserve.
fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in
iPh limited annual rePort 2015 / 51
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
fair value measurement (continued)
an orderly transaction between market participants at the measurement date; and assumes that the transaction will
take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement
is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements (note 30). Classifications are reviewed at each
reporting date and transfers between levels are determined based on a reassessment of the lowest level of input
that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise
is either not available or when the valuation is deemed to be significant. External valuers are selected based on
market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one
period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest
valuation and a comparison, where applicable, with external sources of data.
issued caPital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
business combinations
Other than corporate/group restructures as mentioned below, the acquisition method of accounting is used to
account for business combinations regardless of whether equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of
any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the
acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All
acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the
Group’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date.
52 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
business combinations (continued)
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in
the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying
amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at
the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as
an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-
existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing
fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer,
the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after
a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in
the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period,
based on new information obtained about the facts and circumstances that existed at the acquisition-date. The
measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine fair value.
Corporate/group reorganisation - IPH Limited and Spruson & Ferguson Unit Trust
IPH Limited was incorporated as a public company on 9 April 2014 and incorporated a subsidiary Spruson &
Ferguson Pty Limited on 18 August 2014. On 2 October 2014, Spruson & Ferguson Pty Limited, acquired the
business and controlled entities of the Spruson & Ferguson Unit Trust (the ‘Trust’) as part of a corporate/group
reorganisation. Under the principals of corporate reorganisation, in accordance with the Australian Accounting
Standards, the financial statements of IPH Limited includes the historical financial information of the Trust for the
period before the acquisition.
Accordingly, the financial statements for the year ended 30 June 2015 includes the financial results for the Group
under IPH Limited from acquisition to 30 June 2015 and the consolidated group under the Trust for the period 1
July 2014 to the date of acquisition. The comparatives presented in the financial statements represents the financial
position of the Trust as at 30 June 2014, and the financial performance of the Trust for the year ended 30 June 2014.
This corporate reorganisation did not represent a business combination in accordance with AASB 3 ‘Business
Combination’. Instead the appropriate accounting treatment for recognising the new group structure is on the
basis that the transaction is a form of capital reconstruction and group reorganisation. Accordingly the financial
statements are a continuation of the Trust and as such:
The assets and liabilities recognised and measured in the consolidated financial statements are at the carrying
amounts of Trust rather than their fair value;
The retained earnings and other equity balances recognised in the consolidated financial statements are the
existing retained earnings and other equity balances of the Trust;
iPh limited annual rePort 2015 / 53
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
business combinations (continued)
The amount recognised as issued equity instruments are determined by adding the additional equity retained
by the Group to the issued equity recorded in the Trust’s financial statements immediately before the
acquisition;
No ‘new’ goodwill has been recognised as a result of the combination. The difference between the consideration
paid and the equity ‘acquired’ is reflected in equity as a ‘capital contribution’ or ‘distribution’; and
The comparatives presented are that of the Trust.
earnings Per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of IPH Limited, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation
to dilutive potential ordinary shares.
rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Class
Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
neW accounting standards and interPretations not Yet mandatorY or earlY adoPted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2015. The
Group’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most
relevant to the Group, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard
replaces all previous versions of AASB 9 and completes the project to replace IAS 39 ‘Financial Instruments:
Recognition and Measurement’. AASB 9 introduces new classification and measurement models for financial
assets. New simpler hedge accounting requirements are intended to more closely align the accounting
treatment with the risk management activities of the entity. New impairment requirements will use an ‘expected
credit loss’ model to recognise an allowance. The Group will adopt this standard from 1 July 2018 but the impact
of its adoption is yet to be assessed.
54 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 2. significant accounting Policies (continued)
neW accounting standards and interPretations not Yet mandatorY or earlY adoPted (continued)
AASB 15 Revenue from Contracts with Customers
This standard is currently applicable to annual reporting periods beginning on or after 1 January 2017.
Exposure Draft (ED 263) ‘Effective Date of AASB 15’ proposes to defer the application date by one year to
1 January 2018. The standard provides a single standard for revenue recognition. The core principle of the
standard is that an entity will recognise revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. The Group expects to adopt this standard from 1 July 2018 but the impact of its
adoption is yet to be assessed.
Other amending accounting standards issued are not considered to have a significant impact on the financial
statements of the consolidated entity as their amendments provide either clarification of existing accounting
treatment or editorial amendments. These standards (and their operative dates) include:
AASB 2014-1 Amendments to Australian Accounting Standards (Part D from 1 January 2016 and Part E from
1 January 2018)
AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint
Operations (from 1 January 2016)
AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of
Depreciation and Amortisation (from 1 January 2016)
AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15 (from 1 January 2017)
AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) (from
1 January 2018)
AASB 2014-8 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) –
Application of AASB 9 (December 2009) and AASB 9 (December 2010) (from 1 January 2015)
AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial
Statements (from 1 January 2016)
AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting
Standards 2012–2014 Cycle (from 1 January 2016)
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101
(from 1 January 2016)
AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031
Materiality (from 1 July 2015)
iPh limited annual rePort 2015 / 55
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015
note 3. critical accounting Judgements, estimates and assumPtions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates
its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on other various
factors, including expectations of future events, management believes to be reasonable under the circumstances.
The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Allowance for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level
of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical
collection rates and specific knowledge of the individual debtors financial position.
Estimation of useful lives of assets
Property, plant and equipment are depreciated over their useful lives taking into account residual values. Useful
lives are affected by technology innovations. Future market conditions determine residual values. Depreciation and
amortisation is calculated on a straight line basis which may not represent the actual usage of the asset.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events of changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the
accounting policy stated in note 2.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities
for anticipated tax audit issues based on the Group’s current understanding of the tax law. Where the final tax
outcome of these matters is different from the carrying amounts, such differences will impact the current and
deferred tax provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses. Such deferred tax
assets are not recognised if the temporary difference arises from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit. The carrying amount of the deferred tax assets is reviewed at the end of each period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Employee benefits provision
As discussed in note 2, the liability for employee benefits expected to be settled more than 12 months from the
reporting date are recognised and measured at the present value of the estimated future cash flows to be made
56 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 3. critical accounting Judgements, estimates and assumPtions (continued)
in respect of all employees at the reporting date. In determining the present value of the liability, estimates of
attrition rates and pay increases through promotion and inflation have been taken into account.
Share-based payment transactions
The Group measures the cost of equity settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined using an external valuation
consultant. The performance rights have market conditions therefore requiring a more sophisticated mode. The
accounting estimates and assumptions relating to equity settled share based payments have no impact on the
carrying amount of assets and liabilities within the next annual reporting period.
Business combinations
As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value
of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the Group taking into
consideration all available information at the reporting date. Fair value adjustments on the finalisation of the
business combination accounting is retrospective, where applicable, to the period the combination occurred and
may have an impact on the assets and liabilities, depreciation and amortisation reported.
Work in progress
The calculation of work in progress requires a degree of judgement to recognise profit in client assignments and
services in progress at balance date.
note 4. oPerating segments
Identification of reportable operating segments
The Group is organised into two geographic segments: Australia and Asia. These operating segments are based
on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief
Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources.
There is no aggregation of operating segments.
Australia
Asia
The Australian office operates as a hub for activities in Australia, New Zealand
and the Pacific providing patent, trade mark and design filings.
The Asia office operates as a hub for Asia providing patent, design filing and
prosecution services.
The CODM reviews Profit Before Tax (‘PBT’). The accounting policies adopted for internal reporting to the CODM
are consistent with those adopted in the financial statements.
The information reported to the CODM is on at least a monthly basis.
Intersegment transactions
There are varying levels of integration between the Australian and Asia segments. The integration includes
provision of professional services, shared technology and management services. Intersegment transactions were
made at market rates. Intersegment transactions are eliminated on consolidation.
iPh limited annual rePort 2015 / 57
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 4. oPerating segments (continued)
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans
payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates.
Intersegment loans are eliminated on consolidation.
Consolidated
Revenue
Australia
Asia
2015
$’000
2014
$’000
2015
$’000
2014
$’000
Sales to external customers
47,297
41,852
41,897
31,138
Intersegment sales
265
-
116
335
Total sales revenue
47,562
41,852
42,013
31,473
Interest revenue
Other revenue
99
17
22,056
17,327
1
906
1
45
Intersegment
eliminations /
unallocated
Total
2015
$’000
2014
$’000
88,716
72,212
-
-
2014
$’000
(778)
(335)
(1,113)
88,716
72,212
-
100
18
2015
$’000
(478)
(381)
(859)
-
(17,860)
(12,535)
5,102
4,837
Total revenue
69,717
59,196
42,920
31,519
(18,719)
(13,648)
93,918
77,067
Profit before income
tax expense
Income tax expense
Profit after income
tax expense
Assets
43,807
32,080
20,858
11,861
(27,779)
(9,197)
36,886
34,744
(6,297)
(2,589)
30,589
32,155
Segment assets
63,593
22,049
17,231
11,510
(8,230)
(6,133)
72,594
27,426
Total assets
Liabilities
72,594
27,426
Segment liabilities
30,141
21,964
8,758
5,557
(1,483)
(243)
37,416
27,278
Total liabilities
Depreciation and
amortisation
780
513
282
313
-
-
1,062
826
37,416
27,278
Interest expense: Australia $623,000, Asia $0.
58 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 5. revenue
Sales revenue
Revenue from the rendering of services
note 6. other income
Distributions from related party
Net foreign exchange gain
Other income
Commission
Consulting fees
Interest
note 7. exPenses
Profit before income tax includes the following specific expenses:
Depreciation and amortisation
Share based payments
Superannuation expense
Consolidated
30 June 2015
30 June 2014
$’000
$’000
88,716
88,716
72,212
72,212
Consolidated
30 June 2015
30 June 2014
$’000
112
3,120
350
1,491
29
100
5,202
$’000
1,366
40
697
1,594
1,140
18
4,855
Consolidated
30 June 2015
30 June 2014
$’000
1,062
495
2,069
$’000
826
-
1,617
iPh limited annual rePort 2015 / 59
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 7. exPenses (continued)
Profit before income tax includes the following specific expenses:
Finance costs
Interest on bank facilities
Other interest expense
Consolidated
30 June 2015
30 June 2014
$’000
$’000
285
338
623
301
-
301
Rental expense relating to operating leases
Minimum lease payments
2,908
2,327
note 8. income tax exPense
Income tax expense
Current tax
Deferred tax
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets (note 15)
First time recognition of deferred tax assets (note 15)
Decrease in deferred tax liabilities (note 15)
Consolidated
30 June 2015
30 June 2014
$’000
$’000
7,938
(1,641)
6,297
(1,007)
(613)
(21)
(1,641)
2,591
(2)
2,589
-
-
(2)
(2)
60 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015
note 8. income tax exPense (continued)
Consolidated
30 June 2015
30 June 2014
$’000
$’000
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
36,886
34,744
Tax at the statutory tax rate of 30%
11,066
10,423
Tax effect amounts which are not deductible/(taxable) in calculating
taxable income:
Permanent adjustments
First time recognition of deferred tax assets
Difference in overseas tax rates
Effect of income that is exempt from tax
Income tax expense
note 9. current assets - cash and cash equivalents
Cash on hand
Cash at bank
note 10. current assets - trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Other receivables
Due from related party
Loans to Trustees/Unit holders
226
(613)
(2,706)
(1,676)
6,297
-
-
(1,746)
(6,088)
2,589
Consolidated
30 Jun 2015
30 June 2014
$’000
40
5,306
5,346
$’000
41
4,280
4,321
Consolidated
30 June 2015
30 June 2014
$’000
28,142
(760)
27,382
28
-
-
$’000
19,740
(456)
19,284
480
342
182
27,410
20,288
iPh limited annual rePort 2015 / 61
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 10. current assets - trade and other receivables (continued)
Impairment of receivables
The Group has recognised a loss of $475,000 (2014: $162,000) in profit or loss in respect of impairment of
receivables for the year ended 30 June 2015.
The ageing of the impaired receivables provided for above are as follows:
Past due more than 91 days
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Consolidated
30 June 2015
30 June 2014
$’000
760
$’000
456
Consolidated
30 June 2015
30 June 2014
$’000
456
475
(171)
760
$’000
294
162
-
456
Past due but not impaired
Customers with receivable balances past due but without provision for impairment, amount to $14,907,000 as at
30 June 2015 ($10,945,000 as at 30 June 2014).
The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of customers
based on recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
Consolidated
30 June 2015
30 June 2014
$’000
6,484
4,019
4,404
$’000
5,242
2,514
3,189
14,907
10,945
31 to 60 days overdue
61 to 90 days overdue
Past due more than 91 days
62 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 11. current assets - other
Accrued revenue
Prepayments
Other current assets
Consolidated
30 June 2015
30 June 2014
$’000
45
818
1,261
2,124
$’000
183
195
693
1,071
note 12. non-current assets - available-for-sale financial assets
Unquoted ordinary shares - at fair value
Consolidated
30 June 2015
30 June 2014
$’000
29
29
$’000
25
25
note 13. non-current assets - ProPertY, Plant and equiPment
Leasehold improvements - at cost
Less: Accumulated amortisation
Plant and equipment - at cost
Less: Accumulated depreciation
Furniture, fixtures and fittings - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
Consolidated
30 June 2015
30 June 2014
$’000
1,068
(930)
138
465
(396)
69
809
(642)
167
5,237
(4,423)
814
1,188
$’000
917
(869)
48
438
(332)
106
798
(598)
200
4,618
(3,846)
772
1,126
iPh limited annual rePort 2015 / 63
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 13. non-current assets - ProPertY, Plant and equiPment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are
set out below:
Consolidated
Balance at 1 July 2013
Additions
Disposals
Exchange differences
Depreciation/amortisation expense
Balance at 30 June 2014
Additions
Additions through business combinations (note 37)
Disposals
Exchange differences
Depreciation/amortisation expense
Balance at 30 June 2015
Leasehold
improve-
ments
Plant and
equipment
Furniture,
fixtures and
fittings
Computer
equipment
$’000
107
-
-
-
(59)
48
149
-
-
2
(61)
138
$’000
124
12
-
-
(30)
106
-
-
(11)
2
(28)
69
$’000
188
54
-
-
(42)
200
6
5
(1)
(6)
(37)
167
$’000
987
480
(4)
4
(695)
772
440
207
(13)
27
(619)
814
Total
$’000
1,406
546
(4)
4
(826)
1,126
595
212
(25)
25
(745)
1,188
note 14. non-current assets - intangibles
Goodwill - at cost
Patents and trade marks - at cost
Capitalised software development - at cost
Less: Accumulated amortisation
Consolidated
30 June 2015
30 June 2014
$’000
33,581
14
1,247
(317)
930
34,525
$’000
-
-
595
-
595
595
64 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 14. non-current assets - intangibles (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are
set out below:
Consolidated
Balance at 1 July 2013
Additions
Balance at 30 June 2014
Additions through business combinations
(note 37)*
Additions
Disposals
Amortisation expense
Goodwill
Patents and
trade marks
Capitalised
software
development
$’000
$’000
-
-
-
33,581
-
-
-
-
-
-
14
-
-
-
14
Total
$’000
-
595
595
$’000
-
595
595
-
33,595
652
-
(317)
930
652
-
(317)
34,525
Balance at 30 June 2015
33,581
* Due to the proximity of the acquisitions of Practice Insight Pty Ltd and Fisher Adams Kelly Pty Limited to the
year end, the intangible assets arising on the acquisitions have provisionally been allocated entirely to goodwill.
The Directors acknowledge that a portion of the goodwill consequently may relate to the other identifiable
intangible assets and a portion of goodwill consequently may be reallocated accordingly when final assessments
have been determined.
Impairment testing
AASB136 states that an impairment test must be performed annually for goodwill and other indefinite life tangible
assets. Further, companies must also assess at each reporting date whether there is any indication that the asset
may be impaired and, if so perform an impairment test.
A value in use method has not been adopted as all three transactions were arm’s length in nature and within a few
months of year end and as such a fair value less cost to sell approach has been used. The impairment tests did not
indicate any impairment of the goodwill or indefinite life intangible assets.
iPh limited annual rePort 2015 / 65
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 15. deferred tax assets / liabilities
The net deferred tax asset comprises
of the following balances:
Impairment of receivables
Property, plant and equipment
Provisions
Accrued expenses
Unbilled revenue
Prepayments
Foreign exchange
Work in progress
Transaction costs
Sundry
Disclosed as
Deferred tax asset
Deferred tax liability
Consolidated
Opening
Balance
$’000
Recognised in
profit or loss
Acquisitions
Closing Balance
$’000
$’000
$’000
-
-
-
-
-
-
-
-
-
(21)
(21)
176
(375)
1,084
252
(132)
8
(171)
24
778
(3)
1,641
-
-
447
9
-
(20)
-
(89)
5
-
352
176
(375)
1,531
261
(132)
(12)
(171)
(65)
783
(24)
1,972
Consolidated
30 June 2015
30 June 2014
$’000
$’000
1,972
-
1,972
-
21
21
Deferred taxes have been recognised for the first time on the corporatisation of the Australian group arising from
the Group’s reorganisation. (see note 2).
66 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 16. current liabilities - trade and other PaYables
Trade payables
Sundry creditors and accruals
Refer to note 29 for further information on financial instruments.
note 17. current liabilities - borroWings
Second multi-option facility
First progress draw facility
Hire purchase
Consolidated
30 June 2015
30 June 2014
$’000
5,179
4,799
9,978
$’000
3,619
2,804
6,423
Consolidated
30 June 2015
30 June 2014
$’000
-
-
-
-
$’000
622
1,648
236
2,506
Refer to note 22 for further information on assets pledged as security and financing arrangements.
Refer to note 29 for further information on financial instruments.
note 18. current liabilities - Provisions
Employee benefits
Lease make good
Other provisions
Consolidated
30 June 2015
30 June 2014
$’000
4,419
198
88
4,705
$’000
2,616
-
-
2,616
iPh limited annual rePort 2015 / 67
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 19. current liabilities - other financial liabilities
320 fully paid A Units at $1 each and 450,320 fully paid C Units at $1 each
Consolidated
30 Jun 2015
30 June 2014
$’000
-
$’000
451
The A and C class Units of the Spruson & Ferguson Unit Trust were classified as financial liabilities as in the event
of termination of the Trust, the unit holders were entitled to receive the amount paid of $1 per unit over all other
units including Ordinary Units (classified as equity). Units were converted into ordinary shares on19 November
2014 (Refer to note 24). The Trust vested on 27 October 2014 and as such has wound up during the year.
The A Units were not entitled to receive any part of the net income of the Trust. The C units had special rights
attaching to them including the distribution of an agreed share of the net income from relevant country entity
dividend income.
note 20. current liabilities - other
Deferred consideration
Consolidated
30 June 2015
30 June 2014
$’000
4,950
$’000
7,182
The deferred consideration represents the estimated fair value of the deferred consideration relating to the
acquisition of Fisher Adams Kelly (note 37). There have been no significant changes to the fair value of the deferred
consideration since the acquisition date.
note 21. current liabilities - deferred revenue
Deferred revenue
Consolidated
30 June 2015
30 June 2014
$’000
1,162
$’000
1,635
68 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 22. non-current liabilities - borroWings
Multi-option facility
Second multi-option facility
Hire purchase
Refer to note 29 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Multi-option facility
Second multi-option facility
First progress draw facility
Hire purchase
Consolidated
30 June 2015
30 June 2014
$’000
10,550
-
-
10,550
$’000
-
3,462
129
3,591
Consolidated
30 June 2015
30 June 2014
$’000
10,550
-
-
-
10,550
$’000
-
4,084
1,648
365
6,097
Assets pledged as security
On 25 August 2014, the Group entered into a facilities agreement (‘Agreement’) with Australian and New Zealand
Banking Group Limited (‘ANZ’). The facilities under the Agreement comprised:
A multi-option facility with a term of three years for the general corporate purposes of the Group and
A revolving annual credit facility allowing for financial guarantees and standby letters of credit to be issued for
the general corporate purposes of the Group.
The Agreement is subject to specific financial covenants.
On 7 July 2015, IPH Limited amended the agreement to extend the facility to $100m over a three year term.
The bank facility made available by ANZ is secured by cross guarantee and all assets from IPH Limited and each of
its wholly owned subsidiaries, excluding IPH Services Pty Limited and Spruson & Ferguson (NSW) Pty Limited (refer
to note 38 for a list of wholly owned subsidiaries).
Upon executing the new Multi-Option Facility Agreement, previous borrowings under the Working Capital Facility
were extinguished.
iPh limited annual rePort 2015 / 69
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 22. non-current liabilities - borroWings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank overdraft
Multi-option facility
Hire purchase facility
First progress draw facility
Second multi option facility
Letter of credit issuance facility
Standby letter of credit facility
Bank guarantees
Used at the reporting date
Bank overdraft
Multi-option facility
Hire purchase facility
First progress draw facility
Second multi option facility
Letter of credit issuance facility
Standby letter of credit facility
Bank guarantees
Unused at the reporting date
Bank overdraft
Multi-option facility
Hire purchase facility
First progress draw facility
Second multi option facility
Letter of credit issuance facility
Standby letter of credit facility
Bank guarantees
70 / iPh limited annual rePort 2015
Consolidated
30 June 2015
30 June 2014
$’000
$’000
500
30,000
-
-
-
-
1,100
2,000
33,600
-
10,550
-
-
-
-
-
1,781
12,331
500
19,450
-
-
-
-
1,100
219
21,269
1,647
-
1,000
3,125
4,534
622
1,648
-
12,576
-
-
365
1,648
4,084
580
-
-
6,677
1,647
-
635
1,477
450
42
1,648
-
5,899
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 23. non-current liabilities - Provisions
Employee benefits
note 24. equitY - issued caPital
Consolidated
30 June 2015
30 June 2014
$’000
407
$’000
347
30 June 2015
30 June 2014
30 June 2015
30 June 2014
Consolidated
Ordinary Units - fully paid
Shares
-
Ordinary Class shares - fully paid
162,378,265
162,378,265
Units
320
-
320
Movements in ordinary units
Details
Balance
Balance
Date
1 July 2013
30 June 2014
$’000
-
35,305
35,305
Units
320
320
Subdivision of units
Units converted on IPO
19 November 2014
151,999,680
19 November 2014
(152,000,000)
Balance
30 June 2015
-
$’000
420
-
420
$’000
420
420
-
(420)
-
iPh limited annual rePort 2015 / 71
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 24. equitY - issued caPital (continued)
Movements in ordinary share capital
Details
Balance
Balance
Conversion of units **
19 November 2014
152,000,000
Acquisition of non-controlling interest
19 November 2014
5,406,666
Issue of shares to employees
Issue of shares for directors services
Acquisition of Practice Insight Pty Ltd (note 37)
Acquisition of Fisher Adams Kelley Pty Ltd (note 37)
19 November 2014
19 November 2014
30 April 2015
28 May 2015
57,596
95,237
855,111
3,963,655
Date
Shares
$’000
1 July 2013
30 June 2014
-
-
-
-
871
11,354
121
200
3,694
19,065
Balance
30 June 2015
162,378,265
35,305
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company
in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par
value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
** Share issues during the period
The previous unitholders of the Spruson & Ferguson Unit Trust received one IPH Limited share for each unit held
in the Trust. On IPO, the previous unit holders sold approximately 50% of their shares via IPH (SaleCo) Limited and
therefore no additional capital is reflected in the issued capital of IPH Limited. “A” and “C” class units in the Spruson
& Ferguson Unit Trust were classified as financial liabilities.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value
adding relative to the current Company’s share price at the time of the investment.
The Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
72 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 25. equitY - reserves
Foreign currency reserve
Share-based payments reserve
Minority interest acquisition reserve
Consolidated
30 June 2015
30 June 2014
$’000
(233)
495
(14,850)
(14,588)
$’000
(276)
-
(4,472)
(4,748)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements
of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net
investments in foreign operations.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their
remuneration, and other parties as part of their compensation for services. Specifically the reserve relates to
performance rights issued by the Company to its employees under its LTIP.
Minority interest acquisition reserve
This reserve represents the difference between the amount by which non-controlling interests are adjusted and
the fair value of the consideration paid or received, where there is no change in control.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Foreign
currency
Share-based
payments
Minority inter-
est acquisition
Balance at 1 July 2013
Foreign currency translation
Balance at 30 June 2014
Foreign currency translation
Share-based payments
Minority interest acquisition
Balance at 30 June 2015
$’000
(208)
(68)
(276)
43
-
-
(233)
$’000
-
-
-
-
495
-
495
$’000
(4,472)
-
(4,472)
-
-
Total
$’000
(4,680)
(68)
(4,748)
43
495
(10,378)
(10,378)
(14,850)
(14,588)
iPh limited annual rePort 2015 / 73
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 26. equitY - retained Profits
Retained profits at the beginning of the financial year
Profit after income tax expense for the year attributable to owners of IPH Limited
Profit attributable to previous unitholders
Dividends paid (note 28)
Distribution to trust unit holders
Retained profits at the end of the financial year
note 27. equitY - non-controlling interest
Retained profits at the beginning of the financial year
Share of total comprehensive income for the year
Acquisition of non controlling interest
Dividends paid to non controlling interest
Retained profits at the end of the financial year
Consolidated
30 June 2015
30 June 2014
$’000
3,933
16,042
14,273
(5,514)
(14,273)
14,461
$’000
4,674
-
31,339
-
(32,080)
3,933
Consolidated
30 June 2015
30 June 2014
$’000
543
274
(159)
(658)
-
$’000
600
811
-
(868)
543
On 3 October 2014, the remaining 7% interest in Spruson & Ferguson (Asia) Pte Limited was acquired, increasing in
ownership from 93% to 100%, in exchange for issue of shares in IPH Limited amounting to $11,354,000. The Group
recognised an increase in the minority interest acquisition reserve of $11,354,000, net of the balance owing in the
non-controlling interest account.
note 28 equitY - dividends
Interim dividend of 3.5 cents per share for the year ended 30 June 2015,
with a record date of 5 March 2015 and paid on 25 March 2015
Consolidated
30 June 2015
30 June 2014
$’000
5,514
$’000
-
74 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 28 equitY - dividends (continued)
On 28 August 2015, the Company declared an ordinary dividend of 10.0 cents per share (franked at 5.0 cents) to
be paid on 7 October 2015 to shareholders registered on the record date of 7 September 2015.
Franking credits
Franking credits available for subsequent financial years based
on a tax rate of 30%
Consolidated
30 June 2015
30 June 2014
$’000
3,602
$’000
-
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
note 29. financial instruments
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk,
price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
financial performance of the Group. The Group uses different methods to measure different types of risk
to which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign
exchange and ageing analysis for credit risk.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency
risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using
sensitivity analysis and cash flow forecasting.
The Group does not enter into any derivative financial instruments to manage its exposure to foreign currency risk.
The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at the
reporting date were as follows:
iPh limited annual rePort 2015 / 75
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 29. financial instruments (continued)
Market risk (continued)
Foreign currency risk (continued)
The Group had net assets denominated in foreign currencies of $16,920,000 (assets of $19,557,000 less liabilities
of $2,637,000) as at 30 June 2015 (2014: $16,540,000 (assets of $19,253,000 less liabilities of $2,713,000)). Based
on this exposure, had the Australian dollar weakened by 10%/strengthened by 10% (2014: weakened by 10%/
strengthened by 10%) against these foreign currencies with all other variables held constant, the Group’s profit
before tax for the year would have been $1,432,000 lower/$1,432,000 higher (2014: $1,364,000 higher/$1,364,000
lower) and equity would have been $1,432,000 lower/$1,432,000 higher (2014: $1,364,000 higher/$1,364,000
lower).
The percentage change is the expected overall volatility of the significant currencies, which is based on
management’s assessment of reasonable possible fluctuations taking into consideration movements over the last
12 months each year and the spot rate at each reporting date. The actual foreign exchange gain for the year ended
30 June 2015 was $3,120,000 (2014: loss of $40,000) (note 6).
United States dollars
+ / - 10% United States dollars
Decrease on profit before tax
Euro
+ / - 10% Euro
Decrease on profit before tax
Singapore dollars
+ / - 10% Singapore dollars
Increase on profit before tax
Other currencies
+ / - 10% Other currencies
Increase on profit before tax
Consolidated
30 June 2015
30 June 2014
$’000
$’000
(1,325)
(1,239)
(127)
(143)
-
20
18
20
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group’s main interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the
Group to interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The
Group does not enter into any derivative financial instruments to manage its exposure to interest rate risk.
76 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 29. financial instruments (continued)
Market risk (continued)
Interest rate risk (continued)
As at the reporting date, the Group had the following variable rate borrowings outstanding:
30 June 2015
30 June 2014
Consolidated
Weighted average
interest rate
%
3.74%
-%
-%
Multi-option facility
Second-multi option facility
First progress draw facility
Net exposure to cash flow
interest rate risk
Weighted average
interest rate
%
-%
5.0%
5.0%
Balance
$’000
10,550
-
-
10,550
Balance
$’000
-
4,084
1,648
5,732
An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below.
For the Group the bank loans outstanding, totalling $10,550,000 (2014: $5,732,000), are principal and interest
payment loans. Monthly cash outlays of approximately $23,000 (2014: $23,000) per month are required to
service the interest payments. An official increase/decrease in interest rates of 100 (2014: 100) basis points
would have an adverse/favourable effect on profit before tax of $115,000 (2014: $61,000) per annum. The
percentage change is based on the expected volatility of interest rates using market data and analysts
forecasts. In addition, minimum principal repayments of $0 (2014: $0) are due during the year ending 30 June
2016 (2014: 30 June 2015).
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Group. The Group may obtain payment in advance or restrict the services offered where appropriate to
mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the
carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial
position and notes to the financial statements. The Group does not have any material credit risk exposure to any
single debtor or group of debtors and does not hold any collateral.
Liquidity risk
Liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and
payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets
and liabilities.
iPh limited annual rePort 2015 / 77
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 29. financial instruments (continued)
Liquidity risk (continued)
Financing arrangements (unused)
Unused borrowing facilities at the reporting date:
Bank overdraft
Multi-option facility
Hire purchase facility
First progress draw facility
Second multi option facility
Letter of credit issuance facility
Standby letter of credit facility
Bank guarantees
Consolidated
30 June 2015
30 June 2014
$’000
500
19,450
-
-
-
-
1,100
219
21,269
$’000
1,647
-
635
1,477
450
42
1,648
-
5,899
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject
to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time and have an
average maturity of 3 years (2014: 2 years).
Remaining contractual maturities
The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows
disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in
the statement of financial position.
78 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 29. financial instruments (continued)
Liquidity risk (continued)
Remaining contractual maturities (continued)
The cash flows in the maturity analysis below are not expected to occur significantly earlier than contractually
disclosed below.
Consolidated - 30 June 2015
Weighted
average
interest rate
1 year
or less
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
Remaining
contractual
maturities
%
$’000
$’000
$’000
$’000
$’000
Non-derivatives
Non-interest bearing
Trade payables
Other payables and accruals
Interest-bearing - variable
-%
-%
5,719
4,799
Multi-option facility
3.74%
310
Total non-derivatives
10,828
-
-
310
310
-
-
10,602
10,602
-
-
-
-
5,719
4,799
11,222
21,740
Consolidated - 30 June 2014
Weighted
average
interest rate
1 year
or less
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
Remaining
contractual
maturities
%
$’000
$’000
$’000
$’000
$’000
Non-derivatives
Non-interest bearing
Trade payables
Other payables and accruals
Interest-bearing - variable
Bank loans
Lease liability
Total non-derivatives
-%
-%
3,619
2,804
-
-
5.00%
6.20%
2,500
248
9,171
3,529
131
3,660
-
-
-
-
-
-
-
-
-
-
3,619
2,804
6,029
379
12,831
iPh limited annual rePort 2015 / 79
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015
note 30. fair value measurement
Fair value hierarchy
The following tables detail the Group’s assets and liabilities, measured or disclosed at fair value, using
a three level hierarchy, based on the lowest level of input that is significant to the entire fair value
measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 30 Jun 2015
Assets
Available for sale unquoted ordinary shares
Total assets
Consolidated - 30 Jun 2014
Assets
Available for sale unquoted ordinary shares
Total assets
Level 1
$’000
Level 2
$’000
-
-
-
-
Level 1
$’000
Level 2
$’000
-
-
-
-
Level 3
$’000
29
29
Level 3
$’000
25
25
Total
$’000
29
29
Total
$’000
25
25
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate
their fair values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current
market interest rate that is available for similar financial liabilities.
Available for sale unquoted ordinary shares fair value approximates its cost.
In view of the immaterial balance of the available for sale financial assets, the Directors believe financial assets’ fair
value approximates their costs.
80 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 31. KeY management Personnel disclosures
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the Group is
set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
30 June 2015
30 June 2014
$
1,517,283
98,490
135,803
199,996
1,951,573
$
-
-
-
-
-
Historically the group operated out of a unit trust structure as described in note 1. Compensation paid to key
management personnel consisted of both equity and non-equity components. As such, information for the prior year
is unable to be presented on a comparable basis and has therefore not been included for the period prior to listing.
note 32. remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Deloitte Touche
Tohmatsu, the auditor of the Company, and unrelated firms:
Audit services - Deloitte Touche Tohmatsu
Audit or review of the financial statements
Other assurance services
Other services - Deloitte Touche Tohmatsu
Tax compliance services
Transaction due diligence
Tax advisory services
Investigating Accountants Report and associated services
Consolidated
30 June 2015
30 June 2014
$
$
158,000
3,500
60,660
40,000
71,300
275,000
608,460
75,000
-
-
-
195,000
270,000
iPh limited annual rePort 2015 / 81
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 32. remuneration of auditors (continued)
Deloitte Touche Tohmatsu (Singapore)
Audit or review of the financial statements
Tax compliance services
Audit services - unrelated firms
Audit or review of the financial statements
Other services - unrelated firms
Corporate and taxation services
Consolidated
30 June 2015
30 June 2014
$
43,689
15,825
59,514
-
-
-
$
-
-
-
24,361
3,288
27,649
note 33. contingent liabilities
The Group has given bank guarantees in respect of operating lease commitments for office premises as at 30 June
2015 of $1,781,000 (2014: $0).
note 34. commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Over five years
Consolidated
30 June 2015
30 June 2014
$’000
$’000
3,072
8,588
4,023
15,683
1,563
3,934
-
5,497
82 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 34. commitments (continued)
Lease commitments - hire purchase
Committed at the reporting date and recognised as liabilities, payable:
Within one year
One to five years
Total commitment
Less: Future finance charges
Net commitment recognised as liabilities
Representing:
Hire purchase - current
Hire purchase - non-current
Consolidated
30 June 2015
30 June 2014
$’000
$’000
-
-
-
-
-
-
-
-
260
140
400
(35)
365
236
129
365
Operating lease commitments include contracted amounts for offices and plant and equipment under non-
cancellable operating leases expiring within 1 to 10 years with, in some cases, options to extend. The leases have
various escalation clauses. On renewal, the terms of the leases are renegotiated.
note 35. related PartY transactions
Parent entity
IPH Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 38.
Key management personnel
Disclosures relating to key management personnel are set out in note 31 and the remuneration report in the
Directors’ report.
iPh limited annual rePort 2015 / 83
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 35. related PartY transactions (continued)
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
30 June 2015
30 June 2014
Other income:
Income from Spruson & Ferguson Lawyers Unit Trust - a related party *
$
-
Distributions from Spruson & Ferguson Lawyers Unit Trust - a related party *
112,398
$
1,366,154
1,366,154
* The Spruson & Ferguson Lawyers Unit Trust ‘SFLUT’ was a discretionary trust that was operated but not controlled by the Group.
The SFLUT vested on 27 October 2014.
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables:
Spruson & Ferguson Lawyers Unit Trust
Loans to / from related parties
Consolidated
30 June 2015
30 June 2014
$
-
$
342,412
The following balances are outstanding at the reporting date in relation to loans with related parties:
Current receivables:
Interest bearing secured loans to KMP included in “trade and other receivables”
Consolidated
30 June 2015
30 June 2014
$
-
$
181,773
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
note 36. Parent entitY information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
84 / iPh limited annual rePort 2015
Parent
30 June 2015
30 June 2014
$’000
3,952
3,952
$’000
-
-
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 36. Parent entitY information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Net current asset deficiency
Parent
30 June 2015
30 June 2014
$’000
15,607
59,649
16,117
26,668
34,434
110
(1,563)
21,627
$’000
-
-
-
-
-
-
-
-
As at 30 June 2015, the parent entity had a deficiency of net current assets of $510,000 which relates to interest
free payables in intercompany entities.
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Other than the security provided for the ANZ Facility Agreement as disclosed in note 22, the parent entity had no
guarantees in relation to the debts of its subsidiaries as at 30 June 2015 apart from being party to the deed of
cross guarantee as detailed in Note 43.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2015 and 30 June 2014.
Comparative accounting period
The parent entity was incorporated on 9 April 2014 and remained dormant for the period from incorporation to 30 June 2014.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2015 and 30 June 2014.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except
for the following:
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be
an indicator of an impairment of the investment.
iPh limited annual rePort 2015 / 85
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 37. business combinations
Practice Insight Pty Ltd and WiseTime Pty Ltd
On 30 April 2015, the Group acquired 100% of the ordinary shares of data analysis and software companies
Practice Insight Pty Ltd and WiseTime Pty Ltd under the terms of a Share Purchase Agreement (SPA). Under the
terms of the SPA, the consideration is settled by way of the issue of 855,111 IPH Limited’s shares at an issue price
of $4.6778 per share and cash of $4,000,000, subject to accounting adjustments.
In accordance with accounting standard AASB3, the shares issued have been recorded at their acquisition date fair
value ($4.3200 per share). Consequently, the value of the 855,111 shares issued, has been recorded in the financial
statements as $3,694,000 which has the effect of valuing the acquisition at a total of $7,694,000. The acquired
business contributed revenues of $104,000 and profit after tax of $3,490 to the Group for the period from 30
April 2015 to 30 June 2015. If the acquisition occurred on 1 July 2014, the full year contributions would have been
revenues of $285,000 and profit after tax of $76,000.
The initial accounting for the acquisition of Practice Insight Pty Ltd and WiseTime Pty Ltd has only been
provisionally determined at the end of the reporting period. For tax purposes, the tax values of Practice Insight’s
assets are required to be reset based on market values. At the date of these consolidated financial statements,
the necessary market valuations and other calculations had not been finalised and they have therefore only been
provisionally determined based on the directors’ best estimates of the likely tax values. The assets for which initial
accounting has not been completed include software, customer relationships and trade marks.
Details of the acquisition are as follows:
Cash and cash equivalents
Trade receivables
Plant and equipment
Other intangible assets
Trade payables
Deferred revenue
Net assets acquired
Goodwill and intangibles
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
IPH Limited shares issued to vendor
Acquisition costs expensed to profit or loss
86 / iPh limited annual rePort 2015
Fair value
$’000
77
145
5
14
(35)
(165)
41
7,653
7,694
4,000
3,694
7,694
117
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 37. business combinations (continued)
Practice Insight Pty Ltd and WiseTime Pty Ltd (continued)
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents acquired
Less: shares issued by Company as part of consideration (Note 24)
Net cash used
Fisher Adams Kelly Pty Ltd
Fair value
$’000
7,694
(77)
(3,694)
3,923
On 28 May 2015 the Group acquired 100% of the ordinary shares of patent & trade mark attorneys firm Fisher
Adams Kelly Pty Ltd “FAK” under the terms of a Share Purchase Agreement (SPA). The final agreed purchase price
was $22,912,339 which was based on seven and a half times FAK’s forecast profit before interest and tax for its
financial year ended 30 June 2015 subject to accounting adjustments.
Under the terms of the SPA, $18,190,005 of the purchase price was settled by way of the issue of ordinary shares in
IPH to the vendors of FAK at a price of $4.5892 per share, which equated to the issue of 3,963,655. The balance of
the purchase price of $4,950,000, recognised as deferred consideration.
In accordance with accounting standard AASB3, the shares issued have been recorded at their acquisition date fair
value ($4.810 per share). Consequently, the value of the 3,963,655 shares issued and the deferred consideration
has been recorded in the financial statements as $24,014,715.
The acquired business contributed revenues of $1,572,000 and profit after tax of $263,000 to the Group for the
period from 28 May 2015 to 30 June 2015. If the acquisition occurred on 1 July 2014, the full year contributions
would have been revenues of $16,433,000 and profit after tax of $2,035,000.
The initial accounting for the acquisition of FAK Pty Ltd has only been provisionally determined at the end of the
reporting period. For tax purposes, the tax values of FAK’s assets are required to be reset based on market values.
At the date of these consolidated financial statements, the necessary market valuations and other calculations
had not been finalised and they have therefore only been provisionally determined based on the directors’ best
estimates of the likely tax values. The assets for which initial accounting has not been completed include customer
relationships and trade marks.
iPh limited annual rePort 2015 / 87
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 37. business combinations (continued)
Fisher Adams Kelly Pty Ltd (continued)
Details of the acquisition are as follows:
Cash and cash equivalents
Trade and other receivables
Plant and equipment
Other assets
Trade payables
Deferred tax asset
Provisions
Borrowings
Net assets acquired
Goodwill and intangibles
Acquisition-date fair value of the total consideration transferred
Representing:
IPH Limited shares issued to vendor
Deferred consideration
Acquisition costs expensed to profit or loss
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: shares issued by Company as part of consideration
Less: cash and cash equivalents acquired (note 24)
Deferred consideration (note 20)
Net cash used
88 / iPh limited annual rePort 2015
Fair value
$’000
712
2,858
207
665
(1,747)
352
(1,478)
(3,482)
(1,913)
25,928
24,015
19,065
4,950
24,015
164
24,015
(19,065)
(712)
(4,950)
(712)
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 38. interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policies described in note 2:
Name
Principal place of
business / Country
of incorporation
Parent
Non-controlling
interest
Principal
activities
Ownership
interest
Ownership
interest
Ownership
interest
Ownership
interest
30 Jun
2015 %
30 Jun
2014 %
30 Jun
2015 %
30 Jun
2014 %
Spruson & Ferguson Pty
(NSW) Limited (iii) (iv)
Spruson & Ferguson Pty
Limited (iii) (iv)
Spruson & Ferguson
Lawyers Pty Limited (iii) (iv)
Spruson & Ferguson
(Asia) Pte Ltd (i)
Spruson & Ferguson
sDn bhD
IPH Services Limited
(iii) (iv)
Practice Insight Pty
Limited (iii) (iv)
Wise Time
Pty Limited (iii)
Fisher Adams Kelly
Pty Limited (iii) (iv)
Australia
Non trading
entity
100.00%
100.00%
Australia
Patent attorneys
100.00%
100.00%
Australia
Lawyers
100.00%
100.00%
Singapore
Patent attorneys
100.00%
93.00%
Malaysia
Patent attorneys
100.00%
100.00%
100.00%
100.00%
Australia
Software
Development
Australia
Data analysis and
software
Australia
Data analysis and
software
100.00%
100.00%
Australia
Patent attorneys
100.00%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
7.00%
-%
-%
-%
-%
-%
(i) During the financial year ended 30 June 2015, the remaining 7% of the issued share capital in Spruson &
Ferguson Asia Pte Limited was acquired. As at 30 June 2015, the Group owns 100% of the issued share capital in
Spruson & Ferguson Asia Pte Limited
(ii) IPH Limited is the head entity within the tax consolidated group.
(iii) These companies are member of the tax consolidated group
(iv) These wholly owned subsidiaries entered into a deed of cross guarantee with IPH limited on 26 June 2015
pursuant to class order 98/1418 and are relieved from the requirements to prepare and lodge an audited financial
report.
iPh limited annual rePort 2015 / 89
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 39. events after the rePorting Period
No matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect
the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
note 40. reconciliation of Profit after income tax to net cash from oPerating
activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Unrealised foreign exchange
Dividend income
Share-based payments
Issue of shares on listing to employees and directors
Other
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in deferred tax assets
Decrease/(increase) in other assets
Increase/(decrease) in trade and other payables
Increase in provision for income tax
Decrease in deferred revenue
Increase in provisions
Consolidated
30 June 2015
30 June 2014
$’000
30,589
$’000
32,155
1,062
398
(112)
495
321
(4)
(4,083)
(1,641)
(424)
1,773
3,158
(638)
671
826
985
-
-
-
-
2,130
(1)
63
551
702
(108)
1,010
Net cash from operating activities
31,565
38,313
90 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015
note 41. earnings Per share
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of IPH Limited
Weighted average number of ordinary shares used in calculating basic
earnings per share
Options over ordinary shares
Weighted average number of ordinary shares used in calculating diluted
earnings per share
Basic earnings per share
Diluted earnings per share
Consolidated
30 June 2015
30 June 2014
$’000
30,589
(274)
30,315
$’000
32,155
(816)
31,339
Number
Number
155,387,554
152,000,000
225,725
-
155,613,279
152,000,000
Cents
19.51
19.48
Cents
20.62
20.62
The weighted average number of ordinary shares for the year ended 30 June 2014 is calculated on the 152,000,000
ordinary shares that would have been in existence had the corporate/group reorganisation occurred as at 1 July 2013.
note 42. share-based PaYments
On 24 October 2014, the Long Term Incentive Plan (‘LTIP’) was adopted by the Board of Directors and was
established to attract, motivate and retain key staff. Participation in the LTIP is at the Board’s discretion and no
individual has a contracted right to participate in the LTIP or to receive any guaranteed benefits.
Retention rights
Each retention right issued under the LTIP converts into one ordinary share of IPH Limited on exercise. No
amounts are paid or payable by the recipient of the retention right, and the retention rights carry neither rights to
dividends nor voting rights. The retention rights are treated as in substance options and accounted for as share-
based payments.
A third of the aggregate retention rights granted will vest at each twelve month anniversary of the grant date;
vesting is conditional on continued employment.
iPh limited annual rePort 2015 / 91
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 42. share-based PaYments (continued)
Retention rights (continued)
Set out below are summaries of the rights granted under the plan:
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired /
forfeited /
other
Balance at
the end of
the year
19/11/2014
9/09/2017
$0.00
19/11/2014
9/09/2017
$0.00
19/11/2014
9/09/2017
$0.00
-
-
-
-
47,619
47,619
47,619
142,857
-
-
-
-
-
-
-
-
47,619
47,619
47,619
142,857
Performance rights
Each performance right issued under the LTIP converts into one ordinary share of IPH Limited on exercise. No
amounts are paid or payable by the recipient of the performance right, and the performance rights carry neither
rights to dividends nor voting rights. The performance rights are treated as in substance options and accounted
for as share-based payments.
Performance Rights will vest (and become exercisable) to the extent that the applicable performance, service or other
vesting conditions specified at the time of the grant are satisfied (collectively the ‘Performance Criteria’). Performance
Criteria may include conditions relating to continuous employment or service, the individual performance of the participant
and/or the Group’s performance. Typically, the Performance Criteria must be satisfied within a predetermined performance
period. Both the performance Criteria and the performance period are set by the Board at its absolute discretion.
The Board has set the following Performance Criteria for the performance period for the Performance Rights
granted to employees on 19 November 2014:
50% of the Performance Rights granted will vest subject to a relative total shareholder return (‘TSR’)
performance hurdle over the relevant vesting period; and
the remaining 50% of the Performance Rights granted will vest subject to an earnings per share (‘EPS’)
performance hurdle over the relevant vesting period.
TSR Rights
TSR rights will be assessed against the relative performance over the relevant performance period of a list of
companies included in the ASX300 Accumulation Index. The relative TSR performance targets and corresponding
percentages of the maximum number of TSR Rights that would vest are as follows:
Below the 50th percentile: 0%
At the 50th percentile: 25%
Better than the 50th percentile but below the 75th percentile: Pro-rata straight-line between 25% and 100%
Equal to or above the 75th percentile: 100%
92 / iPh limited annual rePort 2015
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 42. share-based PaYments (continued)
TSR Rights (continued)
For the Performance Rights granted to employees on 19 November 2014, the share price baseline for the TSR
calculation will be the offer price per the prospectus, and the performance period will be the period from the 19
November 2014 to 30 June 2017.
EPS Rights
The absolute EPS performance target (being the compound annual EPS growth over the relevant performance
period, adjusted to take into account one-off items associated with the Offer, if necessary) and corresponding
percentages of the maximum number of EPS Rights that would vest are as follows:
Compound EPS growth of less than 7% per annum: 0%
Compound EPS growth of 7% per annum : 20%
Compound EPS growth of more than 7% per annum but less than 15% per annum: Pro-rata straight line
between 20% and 100%
Compound EPS growth equal to or above 15% per annum : 100%
For the performance rights granted on 19 November 2014, the minimum EPS target (at which 20% of the EPS
Rights vest) will be EPS in the financial year ending 30 June 2017 of 17.3 cents, being the forecast pro forma
EPS of IPH for the financial year ending 30 June 2015 with a compound annual growth rate of 7% applied to
it for the following 2 financial years, and the maximum EPS target (at which 100% of the EPS Rights vest) will
be EPS in the financial year ending 30 June 2017 of 20.0 cents, being the forecast pro forma EPS of IPH for the
financial year ending 30 June 2015 with a compound annual growth rate of 15% applied to it for the following
2 financial years.
The performance rights are subject to a vesting period from grant date to 9 September 2017, and are detailed below:
Grant date
Type
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited /
other
Balance at
the end of
the year
19/11/2014
19/11/2014
tsr
eps
30/06/2017
$0.00
30/06/2017
$0.00
-
-
-
137,538
137,538
275,076
-
-
-
-
-
-
137,538
137,538
275,076
Fair value of retention and performance rights granted this year
The weighted average share price during the financial year was $2.70 (2014: N/A).
The weighted average remaining contractual life of rights outstanding at the end of the financial year was 2 years.
iPh limited annual rePort 2015 / 93
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 42. share-based PaYments (continued)
Fair value of retention and performance rights granted this year (continued)
For the performance rights granted during the current financial year, the valuation model inputs used to determine
the fair value at the grant date, are as follows:
Grant date
Expiry date
Share
price at
grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest
rate
Fair value
at grant
date
Performance rights
24/10/2014
24/10/2014
tsr
eps
Retention rights
09/09/2017
$2.10
09/09/2017
$2.10
24/10/2014
Tranche 1
09/09/2017
$2.10
24/10/2014
Tranche 2
09/09/2017
$2.10
24/10/2014
Tranche 3
09/09/2017
$2.10
$0.00
$0.00
$0.00
$0.00
$0.00
35.00%
35.00%
6.40%
6.40%
2.56%
$1.040
2.56%
$1.750
35.00%
35.00%
35.00%
6.40%
6.40%
6.40%
2.44%
$1.970
2.49%
$1.840
2.58%
$1.730
The weighted fair value of the rights granted during the year is $1.55.
note 43. deed of cross guarantee
The members of the Group party to the deed of cross guarantee are detailed in note 38. The consolidated
statement of profit or loss and other comprehensive income and consolidated statement of financial position of
the entities party to the deed of cross guarantee are:
Revenue
Other income
Expenses
Employee benefits expense
Depreciation and amortisation expense
Rental expenses
Restructure and formation expenses
Business acquisition costs
Agent fee expenses
Insurance expenses
Travel expenses
Printing & stationery expenses
Other expenses
Finance costs
Profit before income tax expense
94 / iPh limited annual rePort 2015
30 June 2015
$’000
47,562
35,524
(19,722)
(780)
(1,903)
(3,499)
(310)
(6,995)
(265)
(362)
(128)
(4,692)
(623)
43,807
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 43. deed of cross guarantee (continued)
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of IPH Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of IPH Limited
30 June 2015
$’000
43,807
(2,862)
40,945
-
40,945
-
40,945
40,945
-
40,945
40,945
iPh limited annual rePort 2015 / 95
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 note 43. deed of cross guarantee (continued)
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Investments in subsidiaries
Deferred tax
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Income tax
Provisions
Other liabilities
Deferred revenue
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
96 / iPh limited annual rePort 2015
30 June 2015
$’000
2,848
15,158
1,359
19,365
1,129
34,526
6,577
1,996
44,228
63,593
6,280
2,106
4,687
4,950
1,162
19,184
10,550
407
10,957
30,141
33,451
35,305
(10,954)
9,100
33,451
Notes to the fiNaNcial statemeNts / coNtiNUeD30 June 2015 director’s declaration
In the Directors’ opinion:
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards,
the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30
June 2015 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418.
The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to
each creditor payment in full of any debt in accordance with the deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which
the ASIC class order applies, as detailed in note 43 to the financial statements, will as a group, be able to meet any
obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
David Griffith
Managing Director
16 September 2015
Sydney
iPh limited annual rePort 2015 / 97
indePendent auditor’s rePort
to the members of iPh limited
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
Tel: +61 2 9322 7000
Fax: +61 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Members of IPH Limited
Report on the Financial Report
We have audited the accompanying financial report of IPH Limited, which comprises the statement of
financial position as at 30 June 2015, the statement of comprehensive income, the statement of cash
flows and the statement of changes in equity for the year ended on that date, notes comprising a
summary of significant accounting policies and other explanatory information, and the directors’
declaration of the consolidated entity, comprising the company and the entities it controlled at the
year’s end or from time to time during the financial year as set out on pages 37 to 97.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the consolidated financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the company’s
preparation of the financial report that gives a true and fair view, in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of IPH Limited, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Page 2
Opinion
In our opinion:
(a) the financial report of IPH Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting
Standards as disclosed in Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 24 to 31 of the directors’ report for the
year ended 30 June 2015. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of IPH Limited for the year ended 30 June 2015, complies
with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Tara Hill
Partner
Chartered Accountants
Sydney, 16 September 2015
iPh limited annual rePort 2015 / 99
shareholder information
The shareholder information set out below was applicable as at 20 August 2015.
distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Number of holders of
ordinary shares
Number of ordinary shares
539
2,405
1,074
697
78
4,793
-
364,047
7,590,098
8,459,852
15,504,815
130,459,453
162,378,265
-
equitY securitY holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Name
Ordinary shares
Number held
% of total shares issued
J P MORGAN NOMINEES AUSTRALIA LIMITED
11,215,486
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
national nominees limiteD
TALABAH PTY LIMITED
NABIDE PTY LIMITED
SETDOR PTY LIMITED
KIZILE PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES P/L
WOMBEE PTY LIMITED
BERGTRUS PTY LIMITED
BNP PARIBAS NOMS PTY LTD
MASSEYTRUS PTY LIMITED
KORTRUS PTY LIMITED
SHANTAY PTY LIMITED
HEUZTRUS PTY LIMITED
100 / iPh limited annual rePort 2015
6,187,228
6,138,582
5,715,728
5,441,975
5,358,024
4,925,925
4,654,321
4,130,746
3,987,654
3,987,654
3,785,112
3,753,086
3,753,086
3,753,086
3,518,518
6.91
3.81
3.78
3.52
3.35
3.30
3.03
2.87
2.54
2.46
2.46
2.33
2.31
2.31
2.31
2.17
shareholder information / continued
equitY securitY holders (continued)
Twenty largest quoted equity security holders (continued)
Name
GURLUCHI PTY LIMITED
CURNTRUS PTY LIMITED
AFTRUS PTY LIMITED
ROSSARD PTY LIMITED
EDNIC PTY LIMITED
O'BRIENTRUS PTY LIMITED
ASSONET PTY LIMITED
UBS NOMINEES PTY LTD
NADIRA HOLDINGS (S) PTE LTD
amp liFe limiteD
Ordinary shares
Number held
% of total shares issued
3,283,951
3,283,951
3,283,951
3,283,950
2,814,815
2,814,814
2,814,814
2,218,781
1,876,543
1,810,758
2.02
2.02
2.02
2.02
1.73
1.73
1.73
1.37
1.16
1.12
No person holds 20% or more of unquoted equity securities as at the date of this report.
Unquoted equity securities
Performance rights over ordinary shares
Retention rights
substantial holders
Number on issue
Number of holders
275,706
142,857
18
2
No substantial holder (least 5% of total issued shares) as at the date of this report.
voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
There are no other classes of equity securities.
restricted securities
There are no restricted securities.
iPh limited annual rePort 2015 / 101
shareholder information / continued
securities subJect to voluntarY escroW
Class
Ordinary
Ordinary
Ordinary
Expiry date
Number of shares
14/11/16
30/04/17
28/05/17
78,398,388
591,979
1,486,370
Annual General Meeting (AGM)
The 2015 annual general meeting (AGM) of IPH Limited will be held at 10:30am on 20 November 2015, at Deloitte,
Level 9, Grosvenor Place, 225 George Street, Sydney. The AGM will be webcast live on the internet at www.iphltd.
com.au and an archived version will be placed on the website to enable the AGM to be viewed at a later time.
IPH Limited is listed on the ASX and its ordinary shares are quoted under the ASX code ‘IPH’.
Annual Report
Amendments to the Corporations Act 2001 have changed the obligations of companies regarding the provision of
annual reports to shareholders. The default option for receiving annual reports has changed from a printed copy
to an electronic copy via IPH’s website at www.iphltd.com.au.
Online voting
Shareholders can lodge voting instructions electronically either as a direct vote or by appointing a proxy for the
2015 AGM at www.iphltd.com.au. The information required to log on and use online voting is shown on the voting
form distributed to shareholders with the Notice of Annual General meeting.
Voting Rights
At a general meeting, a shareholder present in person or by proxy, attorney or representative has one vote on a
show of hands and on a poll has one vote for each fully paid share held.
Voting at any meeting of shareholder is by a show of hands unless a poll is demanded in the manner described
in the Company’s Constitution. If there are two or more joint holders of a share and more than one of them is
present at a general meeting, in person or by proxy, attorney or representative, and tenders a vote in respect of
the share, the Company will count only the vote cast by, or on behalf of, the shareholder by the joint holder whose
name appears first in the Company’s register of shareholder.
The quorum required for a meeting of members is two shareholders. If the votes are equal on a proposed
resolution, the matter is decided in the negative.
Shareholder questions
Shareholders can submit a written question to the Company or the Company’s auditor in regard to the AGM or
any of the proposed resolutions to be considered at the AGM, using the form supplied with the Notice of AGM
distributed to shareholders.
Information about IPH
Information about IPH Limited including company announcements, presentations and reports can be accessed at
www.iphltd.com.au
102 / iPh limited annual rePort 2015
iPh limited annual rePort 2015 / 103
104 / iPh limited annual rePort 2015
iPh limited annual rePort 2015 / 105
106 / iPh limited annual rePort 2015