Annual Report
2016
Year Ended 30 June 2016
IPH LIMITED / ABN 49 169 015 838
2 / IPH ANNUAL REPORT 2016
CONTENTS
IPH ANNUAL REPORT 2016
CHAIRMAN’S LETTER
CHIEF EXECUTIVE OFFICER’S REPORT
BOARD OF DIRECTORS
FINANCIAL REPORT
» Corporate Directory
» Directors' Report
» Auditor’s Independence Declaration
» Financial Statements
» Directors' Declaration
» Independent Auditor’s Report to Members of IPH Limited
» Shareholders Information
4
7
9
13
14
15
37
38
94
95
97
IPH ANNUAL REPORT 2016 / 3
CHAIRMAN'S
LETTER
“During the year we
strengthened IPH’s
leadership position in
the IP markets across
Asia-Pacific.”
4 / IPH ANNUAL REPORT 2016
to finance strategic growth focusing
on secondary markets outside of
Australia.
We continue
to build a strong
leadership team for the future with a
number of key appointments in the
senior management and professional
teams across the IPH group.
for
On 19 November 2016 escrow
restrictions
former trustees of
Spruson & Ferguson will cease to
apply. IPH intends to facilitate a share
sale facility to conduct any sale of
shares in a structured and orderly
fashion.
In FY17, the Group’s Australian and
Asian
IP services businesses are
expected to grow in line with underlying
market trends. We envisage that an
incremental earnings contribution will
be received from new businesses
acquired in the last year and we also
incremental Asian growth
expect
as new offices ramp up through the
year. The Data and Analytics Software
segment will see an increased level of
investment.
Finally, on behalf of the Board, I would
like to thank our shareholders for
their ongoing support and our staff
and management for their efforts in
delivering consistently outstanding
results while continuing to focus on
the business growth and long-term
value creation.
Richard Grellman
Chairman
The 2016 financial year has been
another successful year for IPH – a
year of acquisitions, expansion and
growth.
We enjoyed double-digit growth in
revenue, EBITDA and NPAT, with
increasing by
earnings per share
11% on FY15. This welcome result
was due to the incremental earnings
from acquisitions, foreign exchange
tailwinds and organic growth from our
IP services businesses.
IPH’s solid financial position and
strong cash flows continue to support
the Company’s high dividend pay-out
ratio to our shareholders. The Directors
have declared a final dividend of 10.0
cents per share (5c franked) payable
on 14 September, bringing dividends
paid during the year to 21 cents.
From IPH’s listing on the ASX in
November 2014, our vision has been
to be the leading IP group in secondary
IP markets and adjacent areas of IP.
To achieve this we are focusing on
four key strategic priorities: organic
growth within existing businesses
and markets, expansion to other
secondary markets where IPH has
little or no exposure, entering new
adjacent areas of IP and enhancing
operational
quality
control and governance. We believe
these strategies, underpinned by the
Company’s core values, will deliver
sustainable growth and value to our
shareholders.
efficiencies,
including:
During the year we strengthened IPH’s
leadership position in the IP markets
across Asia-Pacific
the
acquisition of three well-established
Australian IP firms: Callinans, Pizzeys
and Cullens; and opening offices of
Spruson & Ferguson in Indonesia and
Thailand and Pizzeys in Singapore.
through
the
raised
The capital
institutional share placement and
share purchase plan in the first half
of FY16, as well as the Company’s
undrawn bank facilities, will enable IPH
FINANCIAL
HIGHLIGHTS
REVENUE ($M)
EBITDA ($M)
2)
$A
143.1M
53%
$A
59.5M
55%
NPAT ($M)
OPERATING CASHFLOW ($M)
$A
38.8M
27%
$A
42.1M
33%
30.6
38.8
EARNINGS
PER SHARE (cents)
3)
21.7c 11%
19.5
21.7
FULL YEAR
DIVIDEND (cents)
21.0c 55%
13.5
21.0
1) The Company listed on 17 November 2014.
2) Earnings before interest, tax, depreciation and amortisation.
3) Diluted earnings per share.
FY15FY16FY15FY16FY15FY16 93.8143.1FY15FY1638.559.5FY15FY1631.542.1FY15FY16 BUSINESS
SNAPSHOT
EMPLOYEES
420+
FILINGS BY IPH COMPANIES
1)
16,000
+
4,000
+
PATENT APPLICATIONS
TRADEMARK APPLICATIONS
BRANDS
MARKET SHARE - PATENTS
22% 25%
2)
PIZZEYS
Patent and Trade Mark Attorneys
AU S T R A L I A | N E W Z E A L A N D
A S I A PAC I F I C
LOCATIONS
GERMANY
3)
No.1 in AUSTRALIA
No.1 in SINGAPORE
CLIENTS
6,000
+
CHINA
MALAYSIA
SINGAPORE
AUSTRALIA
THAILAND
INDONESIA
1) All patent applications filed either directly or indirectly through an agent, including through IPH entities. Filing numbers are based on number of
applications filed by SF(AU) and SF(Asia) in FY16 and annualised number of applications filed by FAKC, Pizzeys & Cullens.
2) CY15.
3) Practice Insight's sales and support office.
CHIEF EXECUTIVE OFFICER'S
REPORT
In FY16 the Group underwent many
exciting changes and achieved
significant
IPH
companies employ over 420 staff,
operating under five different brands
in seven countries.
growth.
Today,
“The strong results
were driven by a
combination of strong
performance by IPH’s
IP services businesses,
an incremental $12.4m
EBITDA from recent
acquisitions and
foreign exchange
tailwinds.”
In March 2016, IPH was admitted into
the S&P/ASX 200 index and at 30
June 2016 had market capitalisation
of $1.2b.
Strong financial performance
and solid capital structure
I’m delighted to report that the Group’s
growth trend continued with the FY16
underlying net profit after tax (NPAT) of
$46.9M, an increase of 50% on FY15.
The Group’s underlying earnings
before interest, taxes, depreciation,
and amortization (EBITDA) for the
year increased by 52% on FY15 to
$65.0m. Our net operating cash
flow was $42.1m. The results were
driven by a combination of strong
performance by IPH’s IP services
incremental $12.4m
business, an
recent acquisitions
from
EBITDA
and foreign exchange tailwinds. The
America Invents Act caused a pull
forward of patent filings, resulting in
stronger earnings in the first half of the
year.
At the end of FY16, IPH maintained
a robust balance sheet with $58.8m
in
in cash, no debt and $95m
undrawn bank facilities. The Group
continues to have minimal working
capital requirements and strong cash
IP services
conversion across
businesses.
its
Market Overview
The America Invents Act (AIA) caused
an increase in the number of patent
applications filed in Australia and Asia
in the first half of the year. Post AIA,
the outlook remains strong with the
normalisation of US originating PCT
applications to be filed in the countries
serviced by IPH group companies in
the next 18 months.
Asian markets remain attractive for
IPH with strong, consistent growth
across the region.
The patent filings in Australia continue
to grow in single-digit percentage
terms in a mature market.
is a moderate growth
Singapore
market with over 10,000 patent
applications filed
last two
consecutive years.
in the
IP services businesses
Over the last 12 months, we have
delivered on our strategic objective
to consolidate the Australian market
- IPH extended its leading market
position in the Australian IP market
by acquiring highly regarded IP firms
Callinans, Pizzeys and, most recently,
Cullens Patent and Trade Mark
Attorneys. We are proud to have such
quality firms as part of the IPH family.
Together, IPH Australian IP firms hold
the number one patent market position
in Australia with approximately 22%
market share - more than twice the
market share of the next competitor.
Spruson & Ferguson, as an individual
firm maintained the leading market
position in terms of number of patent
applications filed in Australia.
Post-acquisitions, we have been
working on increasing the Group’s
capabilities,
and
geographical coverage. The key
developments which took place:
efficiencies
» merging the operations of Fisher
Adams Kelly and Callinans (FAKC);
» expanding FAKC’s geographical
reach of services to Asia;
» opening of the Pizzeys office in
Singapore; and
»
improving efficiencies by enhanc-
ing operational management
capabilities and the utilisation of
IT systems in the newly acquired
businesses.
IPH ANNUAL REPORT 2016 / 7
CHIEF EXECUTIVE OFFICER'S
REPORT (continued)
We have also strengthened our executive management
team with the appointment of a Chief Operating Officer
and General Counsel, which will enhance our ability
to execute on the Company’s growth strategies and
develop best practice corporate governance standards.
Operational efficiencies
The IPH’s IT group continues to develop strategic
IT facilities to streamline services of the traditional
operations of IPH businesses. Some of the key
developments include:
» moving to a largely paperless environment;
»
»
leveraging the established B2G interface with IP
Australia and IPONZ; and
relocating IT operations to the offsite file servers in
Sydney and Singapore.
remain
We
focused on maximising profitability
through operational integration and business process
improvements across the Group.
I am very proud of what we achieved to date and excited
about the opportunities ahead of us and the direction IPH
is heading. I would like to thank all employees for their
contribution and dedication, our clients for entrusting us
with their business and shareholders for their support
in helping us to build a thriving business for the future.
David Griffith
Chief Executive Officer
IPH continues to deliver strong results in Asia, primarily due
to the outstanding performance of Spruson & Ferguson’s
Asian operations. IPH holds the number one position in the
Singapore patent market with approximately 25% market
share (CY15); and with the establishment of Pizzeys’
Singapore office and Spruson & Ferguson’s new offices
in Indonesia and Thailand, we hope to further grow IPH’s
footprint in Asia.
In FY16 IPH companies filed over 16,000 patent and 4,000
trademark applications. This includes over 300 originating
PCT applications filed by IPH companies for their clients in
Australia and Singapore, reflecting further diversification of
the business and revenue streams.
Practice Insight
In pursuing our strategy to enter adjacent IP markets,
in April 2015, IPH acquired Practice Insight, an IP data
and analytics software business. With the acquisition of
Practice Insight, one of the few companies in the world
with access to the "big" IP data, IPH is well positioned
to enter adjacent markets and capitalise on disruptive
innovation. Products developed by Practice Insight are
highly desirable for private practice firms worldwide as
well as patent licensing departments of corporations and
research institutions.
We conducted an analysis of Practice Insight’s business,
the company’s
products and market; strengthened
management and sales capabilities; and established
Practice Insight’s new sales and support office in Munich
to provide better reach in key markets.
In the next 12 months, in an effort to accelerate the
company’s growth and capitalise on significant market
opportunities, we will continue to heavily invest in Practice
Insight’s product development and go-to-market strategic
initiatives.
Management and professional appointment
Our people are a key asset and fundamental to the
success of our business. We are committed to attracting,
retaining and advancing the best talent to lead, grow and
manage our diverse business.
In alignment with this commitment, in the past 12 months,
15 IP professionals across the Group were promoted to
the position of Principal. The promotions allowed IPH
companies to renew, rejuvenate and ensure continuity
of service of the Group’s senior IP leadership team. We
are extremely pleased to be able to promote our highly
qualified and experienced professional staff to key
leadership positions within the company under its new
corporate structure.
8 / IPH ANNUAL REPORT 2016
BOARD OF
DIRECTORS
RICHARD GRELLMAN, AM
DAVID GRIFFITH
Independent Non-Executive
Chairman
FCA
Managing Director and CEO
BE (Hons), Emeritus Member - IPTA
Richard was appointed independent
Non-Executive Chairman in September
2014.
Richard is also Chairman of Genworth
Mortgage
Insurance Limited, AMP
Foundation and Bible Society Australia.
Richard is a director of Bisalloy Steel
Group Limited.
Richard worked for KPMG for 32
years, mostly within the Corporate
Recovery Division and was a partner
from 1982 to 2000
David Griffith was appointed CEO of IPH
in November 2014, after successfully
managing intellectual property (IP) firm
Spruson & Ferguson, now subsidiary
of IPH, for over 20 years. Under David’s
leadership Spruson & Ferguson became
the first Australian IP firm to the enter
Asian IP market with the opening of the
firm’s Singapore office in 1999 and joining
what was the partnership of CPA Global.
to
in 2013 allowing
the Australian
After amendments
Patents Act
for
incorporation of patent attorney practices,
in 2014 David led a successful $AU330m
IPO of IPH Limited (ASX: IPH), the first IP
professional services group to list on the
ASX. Since David’s appointment IPH has
completed five acquisitions and today is
an S&P/ASX 200 company with market
capitalisation in excess of $AU1b.
From 2005 David served on the Board
of Computer Patent Annuities Limited
Partnership (CPA) in Jersey, Channel
Islands until the company was sold to
Private Equity in 2010.
David began his career as a patent and
trade mark attorney when he joined
Spruson & Ferguson in 1974. He was
a Principal of the firm 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
Pizzeys, Fisher Adams Kelly Callinans,
Cullens and Practice Insight.
IPH ANNUAL REPORT 2016 / 9
BOARD OF
DIRECTORS (continued)
JOHN ATKIN
ROBIN LOW
SALLY PITKIN
Independent Non-Executive
Director
LLB (1st Class Hons), BA (Pure
Mathematics) (1st Class Hons)
Independent Non-Executive
Director
BCom, FCA
Independent Non-Executive
Director
PhD (Governance), LLM, LLB,
FAICD
John was appointed as a Non-
Executive Director in September 2014.
Robin was appointed as a Non-
Executive Director in September 2014.
Sally was appointed as a Non-
Executive Director in September 2014.
Robin is a director of AUB Group
Limited, CSG Limited, Appen Limited,
Sydney Medical School Foundation,
Primary Ethics and
the Public
Education Foundation. She is also a
member of the Auditing and Assurance
Standards Board.
Sally is a non-executive director of
Star Entertainment Group Limited,
Link Group, and Super Retail Group
Limited. Sally
the President
is
Queensland Division of the Australian
Institute of Company Directors, and
member of the National Board.
Robin worked at
PricewaterhouseCoopers for 28 years
and was a partner from 1996 to 2013.
Sally is a former corporate partner of
the law firm Clayton Utz.
John is Chairman of GPT Metro Office
Fund and the Australian Outward
Bound Foundation, a Non-Executive
Director of Integral Diagnostics Limited
and a member of the Board of the
State Library of NSW Foundation.
John is a former CEO & Managing
Director of The Trust Company Limited
(2009-2013) prior to its successful
merger with Perpetual Limited. John
was also Managing Partner and Chief
Executive of Blake Dawson (2002-
2008). John also worked at Mallesons
Stephen Jaques as a Mergers &
Acquisitions Partner
for 14 years
(1987-2001).
10 / IPH ANNUAL REPORT 2016
FINANCIAL
REPORT
IPH ANNUAL REPORT 2016
CORPORATE DIRECTORY
DIRECTORS' REPORT
AUDITOR’S INDEPENDENCE DECLARATION
FINANCIAL STATEMENTS
DIRECTORS' DECLARATION
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IPH LTD
SHAREHOLDERS INFORMATION
14
15
37
38
94
95
97
IPH ANNUAL REPORT 2016 / 13
CORPORATE
DIRECTORY
Directors
Mr Richard Grellman AM - Chairman
Mr David Griffith
Ms Robin Low
Dr Sally Pitkin
Mr John Atkin
Company secretary
Mr Philip Heuzenroeder
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:
Wednesday 16 November at 10:30am at the offices of Ernst & Young
200 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
Level 13
50 Carrington 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
Statement
The Corporate Governance Statement was approved by the Board of Directors on
30 September 2016 and can be found at www.iphltd.com.au
14 / IPH ANNUAL REPORT 2016
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 2016.
IPH Limited (“IPH”, ASX:IPH), the holding company of intellectual property services firms Spruson & Ferguson, Fisher Adams
Kelly Callinans, Pizzeys and Cullens (from 30 June 2016) and data analytics software development company, Practice
Insight. The group employs a multidisciplinary team of approximately 420 people in Australia, Singapore, Malaysia, Thailand,
Indonesia, China and Germany.
IPH is the leading intellectual property (“IP”) services group in the Asia-Pacific region offering a wide range of IP services and
products to a diverse client base of Fortune Global 500 companies, multinationals, public sector research organisations,
SMEs and professional services firms worldwide.
IPH is the first IP services group to list on the Australian Securities Exchange.
1. 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
Mr David Griffith
Managing Director and Chief Executive Officer
Ms Robin Low
Dr Sally Pitkin
Mr John Atkin
Non-executive Director
Non-executive Director
Non-executive Director
1.1 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:
Other current
directorships:
Former directorships
(last 3 years)
Richard worked for KPMG for 32 years, mostly within the Corporate Recovery Division and
was a Partner from 1982 to 2000.
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).
Chairman of Crowe Horwath Australasia Limited (2011 - 2015)
Interests in shares:
54,711
Special responsibilities:
Chairman
IPH ANNUAL REPORT 2016 / 15
DIRECTORS' REPORT / Continued
JUNE 2016
Name:
Title:
David Griffith
Managing Director and Chief Executive Officer
Qualifications:
BE (Hons), Emeritus Member - IPTA
Experience and
expertise:
David Griffith was appointed CEO of IPH in November 2014, after successfully managing
intellectual property (IP) firm Spruson & Ferguson, now subsidiary of IPH, for over 20 years.
Under David’s leadership Spruson & Ferguson became the first Australian IP firm to enter
the Asian IP market with the opening of the firm’s Singapore office in 1999 and joining what
was the partnership of CPA Global.
After amendments to the Australian Patents Act in 2013 allowing for incorporation of patent
attorney practices, in 2014 David led a successful $AU330m IPO of IPH Limited (ASX:
IPH), the first IP professional services group to list on the ASX. Since David’s appointment
IPH has completed five acquisitions and today is an S&P/ASX 200 company with market
capitalisation in excess of $AU1b.
From 2005 David served on the Board of Computer Patent Annuities Limited Partnership
(CPA) in Jersey, Channel Islands until the company was sold to Private Equity in 2010.
David began his career as a patent and trade mark attorney when he joined Spruson &
Ferguson in 1974. He was a Principal of the firm 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
Pizzeys, Fisher Adams Kelly Callinans, Cullens and Practice Insight.
Other current
directorships:
No other current directorships
Interests in shares:
6,098,765
Special responsibilities:
None
Name:
Title:
Robin Low
Non-executive Director (appointed 23 September 2014)
Qualifications:
BCom, FCA, GAICD
Experience and
expertise:
Robin worked at PricewaterhouseCoopers for 28 years and was a Partner from 1996 to
2013. She is also a member of the Auditing and Assurance Standards Board.
Other current
directorships:
AUB Group 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:
60,039
Special responsibilities:
Chairman - Audit Committee
16 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
Name:
Title:
Sally Pitkin , FAICD
Non-executive Director (appointed 23 September 2014)
Qualifications:
PhD (Governance), LLM, LLB, FAICD
Experience and
expertise:
Sally is a former Corporate Partner of the law firm Clayton Utz. Sally is the President
Queensland of the Australian Institute of Company Directors.
Other current
directorships:
Non-executive Director of Star Entertainment Group Limited, Link Group and Super Retail
Group Limited
Former directorships
(last 3 years)
Non-executive director of Billabong International Limited (2012 – 2016)
Interests in shares:
52,518
Special responsibilities:
Chairman – Risk Committee
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:
GPT Metro Office Fund (2014), Integral Diagnostics Limited (2015), The Australian Outward
Bound Foundation (2007) and the State Library of NSW Foundation (2013).
Former directorships
(last 3 years)
Managing Director of The Trust Company Limited (2009 - 2013), Non-executive director
Aurizon Holdings Limited (2010 - 2016)
Interests in shares:
97,292
Special responsibilities:
Chairman - Nomination and Remuneration Committee
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.
IPH ANNUAL REPORT 2016 / 17
DIRECTORS' REPORT / Continued
JUNE 2016
1.2 Meetings of Directors
The number of meetings of the Company’s Board of Directors (‘the Board’) held during the year ended 30 June 2016, and
the number of meetings attended by each Director were:
Full Board
Nomination and
Remuneration Committee
Audit and
Risk Committee
Attended
Held
Attended
Held
Attended
Held
Richard Grellman AM
David Griffith
Robin Low
Sally Pitkin
John Atkin
13
13
12
13
12
13
13
13
13
13
-
-
2
2
2
Held: represents the number of meetings held during the time the Director held office.
-
-
2
2
2
-
-
4
4
4
-
-
4
4
4
With effect from 29 April 2016 the Company’s Audit and Risk Committee was renamed as the Audit Committee and a
separate Risk Committee established. The Risk Committee did not meet in the year ended 30 June 2016.
2. Company secretary
Philip Heuzenroeder, BEc, LLB, LLM. Mr Heuzenroeder was appointed Group General Counsel and Company Secretary
on 29 April 2016. He is a solicitor with over 20 years professional experience working in private practice and in-house, with
experience in a broad range of areas of law including commercial law, competition law, ICT and intellectual property, and
litigation. Philip was formerly a Principal of Spruson & Ferguson Lawyers and has been a director of the Cure Brain Cancer
Foundation since 2013.
The previous Company Secretary was Malcolm Mitchell.
3. Principal activities
During the year principal activities of the Group consisted of:
»
»
IP services related to provision of filing, prosecution, enforcement and management of patents, designs, trade marks and
other IP in Australia, Asia and other countries; and
the development and provision of IP data and analytics software under the subscription licence model whereby the soft-
ware is licensed and paid for on a recurring basis.
There were no significant changes in the nature of activities of the Group during that period.
4. Operational and Financial Review
4.1 Operations and Financial Performance
The summary financial analysis below shows the results on a statutory and underlying basis.
The FY16 underlying earnings of the Group have been determined by adding back to statutory earnings amounts
eliminating the effect of business acquisition adjustments, business acquisition costs, new business establishment costs,
restructuring expenses and non-cash share based payments expenses and in the previous corresponding period to
also eliminate the effects of the IPO and restructuring of the Group. The Directors believe these adjustments show the
operational results of the Group on the basis of how it has been constituted since the restructuring in late 2014.
18 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
Australian IP
Asian IP
Data Services
Corporate Office
Eliminations
Underlying Revenue / EBITDA
Business acquisition costs
Business combination adjustments (net)
New business establishment costs
Restructuring expenses
Share based payments
IPO Costs
IPO Proforma
Revenue
FY16
Revenue
FY15
Chg%
EBITDA
FY16
EBITDA
FY15
93,258
53,592
54,322
42,919
74%
27%
42,286
23,583
26,940
21,139
Chg%
79%
27%
147,580
96,511
53%
69,226
44,722
55%
397
63
(4,911)
143,129
104
427
(2,532)
94,510
(762)
4
(3,425)
(2,246)
52%
65,039
42,480
52%
(2,092)
(338)
(1,064)
(1,231)
(844)
-
-
(310)
-
-
(505)
(495)
(3,499)
800
-
(700)
Statutory Revenue / EBITDA
143,129
93,810
53%
59,476
38,471
55%
Interest Income
Interest Expense
Depreciation and amortisation
534
(1,530)
(7,164)
100
(623)
(1,062)
Net Profit Before Tax
51,310
36,886
39%
Overall underlying revenue has grown by $50m to $143.1m, an increase of 52%. The key drivers are:
» Australian IP growth of $39.7m (74%) reflects the impact of a full year of operation of the Fisher Adams Kelly business ac-
quired in the prior financial year ($21.8m in revenues); the acquisition of Pizzeys on 30 September 2015 (which contributed
revenue of $15.0m); the acquisition of the assets of Callinans Patent & Trade Mark Attorneys which was quickly integrated
into the FAK business; and general underlying organic growth. The America Invents Act also resulted in an increase in
patent filings during the year.
» Asian IP revenues increased by $11.4m (27%) which reflects organic growth in the Asia market as well as beneficial foreign
exchange rates (refer table below). Revenue growth also arose due to the Group opening offices in Indonesia and Thailand
during the year as part of a continued expansion in the key Asian markets.
» The data services business recorded sales of $0.4m as it commenced the rollout of its products.
IPH ANNUAL REPORT 2016 / 19
DIRECTORS' REPORT / Continued
JUNE 2016
Movements in FX Rates
Average foreign rates used to translate earnings balances were:
FY15
FY16
Movement
AUD/USD
AUD/EUR
SGD/AUD
0.8391
0.7286
13.2%
0.6968
0.6564
5.7%
1.0987
1.0122
7.9%
4.1.1 Adjustments to Statutory Results
Adjustments to the statutory EBITDA have been made for:
» Business acquisition costs – costs incurred in the pursuit of acquisitions which have been completed or are currently in
progress
» Business combination adjustments – P&L impact of the revaluation of earn-out agreements for the Pizzeys and Callinans
acquisitions
» New business establishment costs – cost of establishing offices in China, Indonesia and Thailand
» Restructuring expenses – costs associated with the restructuring of Callinans including closure of the office in Melbourne,
as well as the one-time impact on executive leave balances as a result of the corporatisation of the businesses
» Share based payments – accounting charges for the share based incentive plans.
Underlying EBITDA, which excludes the adjustments above, increased by $22.6m (53%). Statutory EBITDA increased by
$21m (55%). The negative EBITDA of the Data Services business reflects the rollout phase of the product.
The significant increase in Depreciation and Amortisation is due to the amortisation of intangible assets arising from
acquisitions ($5.0m).
Net profit before tax increased by $14.4m, an improvement of 39% over the prior corresponding period.
20 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
Reported
Balance Sheet as
at 30 June 2016
Reported
Balance Sheet as
at 30 June 2015
58.5
38.0
3.9
100.4
4.3
190.2
3.1
0.0
298.0
13.9
0.0
6.9
28.3
27.1
76.2
221.8
218.6
(13.2)
16.4
221.8
5.4
27.4
2.1
34.9
2.1
33.6
2.0
0.0
72.6
10.0
10.5
5.7
5.0
6.2
37.4
35.2
35.3
(14.6)
14.5
35.2
4.2 Statement of Financial Position
Consolidated Balance Sheets
$'m
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
PP&E
Acquisition intangibles & goodwill
Deferred tax asset
Other non-current assets
Total assets
Trade and other payables
Loans and borrowings
Tax provisions
Deferred acquisition liability
Other liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
The quantum of most balance sheet captions have increased as a result of the acquisitions and capital raising that took
place during the year. A summary of specific key movements are as follows:
» The increase in cash is primarily due to the capital raising undertaken in November 2015. $50m of cash has been utilised
for current year acquisitions, as well as the repayment of $10.5m in borrowings. The Group has undrawn bank facilities of
$95m at its disposal.
» The Group generated positive cash flows from operating activities of $42.1m.
» As at 30 June 2016 the cash balance was denominated in AUD (49%), USD (43%), other (8%).
» The significant increase in intangible assets arises from the acquisition of Pizzeys Patent & Trade Mark Attorneys Pty Ltd
(“Pizzeys”), Callinans Patent and Trade Mark Attorneys (“Callinans”), Cullens Pty Ltd and Cullens Services No.1 Pty Ltd
(“Cullens”).
»
Identifiable intangible assets consist of customer relationships $63.5m, trademarks $3.5m and software of $3.8m.
IPH ANNUAL REPORT 2016 / 21
DIRECTORS' REPORT / Continued
JUNE 2016
» Goodwill resulting from the acquisitions is $124.1m.
» The deferred acquisition liability includes $4.5m of cash consideration for the purchase of Cullens and deferred acquisition
costs of $23.7m arising from earn out payments on completion of acquisition of the acquired entities. This represents the
fair value of the expected earn outs at 30 June and are payable within the next 12 months.
» Other liabilities include deferred tax liabilities of $17.4m arising on the identifiable intangible assets on acquisitions.
»
Issued capital reflects $108m issued through a capital raising and $71m issued in consideration for acquisitions.
4.3 Business Model, Strategy and Outlook
4.3.1 Business Model
IPH Limited is an intellectual property group operating a number of independent professional businesses in intellectual
property services (“IPS”) and IP data analytics software (“AS”) sectors.
In IPH’s IPS businesses, revenue is derived from fees charged for the provision of professional IP services by each firm
as related to securing, enforcing and managing IP rights in the country in which registration is sought by the client. The
business model allows IPH to generate recurring revenue streams throughout all stages of the IP lifecycle from its long-
standing and diverse client base.
Practice Insight (“AS” sector) generates revenue from the sale of its products directly or through a third party under an annual
subscription licence model.
Factors that affect the performance of both business segments include, amongst others, the performance of the global and
Australian economies, client activity levels, competitor activity, and the regulatory environment in which the services are
provided.
4.3.2 Strategy
IPH Vision and Performance
From the Company’s foundation and listing on the ASX in November 2014, IPH has pursued the vision of becoming the
leading IP group in worldwide secondary1) markets and adjacent areas of IP.
Since its initial public offering, IPH has grown into the industry leader through a combination of organic growth initiatives,
strategic acquisitions and operational improvements including:
» Consolidating the Australian IP market by acquiring four IP services firms in Australia.
» Acquiring an IP data and analytics software development company.
» Expanding its presence in existing and new markets in Asia:
-
-
-
-
opening a Pizzeys office in Singapore;
additional Spruson & Ferguson offices in Shanghai (China), Indonesia and Thailand;
receiving approval for Wholly Owned Foreign Entities in Shanghai and Beijing; and
strengthening capabilities of Fisher Adams Kelly Callinans and Pizzeys in Asia.
» Strengthening the company’s management team with key appointments.
» Maximising future operational efficiencies by integrating (merging) practices of Fisher Adams Kelly (FAK) and Callinans.
Value creating growth strategies
IPH’s primary and ongoing objective is to deliver sustainable growth and value to shareholders through the following
strategies:
» growth within the existing businesses and markets;
1) The primary IP markets of USA, Japan and Western Europe generate the majority of IP rights and clients by value. The secondary markets are all countries
outside of USA, Japan and Western Europe.
22 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
» expansion to other secondary IP markets where IPH currently has little or no exposure by accretive acquisitions or estab-
lishment of new offices;
» entering new adjacent areas of IP by acquisition and/or organic growth; and
» continue to improve operational efficiencies, quality control and governance through technological innovation, sound man-
agement and the leadership team.
Organic growth within existing businesses and markets
A key objective of all IPH businesses is to grow market share and revenue in the existing markets by leveraging existing and
developing new business’ core strengths and capabilities.
Expansion to other secondary IP markets where IPH currently has little or no exposure
IPH already has an extensive footprint in Asia-Pacific with offices in six countries across the region. Given the size and
growth of the Asian IP market, IPH will continue to pursue expansion opportunities in the region. IPH is also exploring
opportunities in other IP secondary markets.
Entering new adjacent areas of IP
Over the past 40 years the IP industry observed the rise of non-traditional IP service providers offering alternative ways
of servicing and delivering value to clients through technology and data-driven business models. With the acquisition of
Practice Insight, one of the few companies in the world with access to “big IP data”, IPH is well positioned to enter adjacent
markets and capitalise on disruptive innovation. IPH continuously explores opportunities in the adjacent IP markets.
Continue to improve efficiencies, quality control and governance
IPH will continue to focus on operational efficiencies, financial discipline, quality assurance and responsible governance at
the group and subsidiary level, maximizing returns for shareholders.
Key drivers and core values
IPH is committed to building and growing a thriving business for the future.
From our origins in 1887 as Spruson & Ferguson, IPH’s success is underpinned by key drivers and values at the core of our
business, which remain unchanged:
» excellence in service delivery to our clients
»
»
innovation in value creation
integrity in business practices
» efficiency and effectiveness in operations
» empowerment and engagement of our people
Excellence in service delivery
Delivering the highest quality of services in a professional, timely and cost-effective manner to our clients, meeting their
needs and exceeding their expectations, is embedded in our day-to-day practice and culture.
Innovation in value creation
Strategic innovation is the cornerstone of our past success and future growth. We will continue to seek innovative ways to
deliver value to our clients, shareholders and stakeholders.
Integrity in business practices
We are committed to the highest level of integrity in business practices. All IPH businesses and their employees are expected
to act honestly and ethically in compliance with all applicable laws, regulations and codes of conduct.
Efficiency and effectiveness in operations
We are focused on maximizing profitability through operational integration and business process improvements at group and
subsidiary level.
IPH ANNUAL REPORT 2016 / 23
DIRECTORS' REPORT / Continued
JUNE 2016
Empowerment and engagement of our people
Our people are our most valuable asset and the key to the success of our business. We are committed to ensuring that our
people strategies and culture are aligned with our goals and values and continue to drive our long-term success.
4.3.3 Outlook
The Group’s Australian & Asian businesses are expected to continue growing in line with underlying market trends. In FY17
an incremental earnings contribution will be received from new businesses acquired in the last year and there will also be
incremental Asian growth as new offices ramp up through the year. The Data and Analytics Software segment will see an
increased level of investment.
We expect there will be expansion into new secondary IP markets where IPH currently has little or no exposure through
accretive acquisitions and/or establishment of new offices, and entering adjacent areas of IP by acquisition and/or organic
growth.
4.4 Risks
Risk
Description
Management of Risk
Effective client service, comprising a high level of expertise at
competitive prices delivered in a timely manner.
All operations of the IPH Group are now or will be supported
by industry leading IT systems.
Regular marketing visits to maintain and develop client
relationships.
IPH provides a broader range of intellectual property services
than its competitors.
Senior executives ensure that all regulatory and legal issues
affecting IPH’s business are monitored and that any changes to
the business operations necessary to comply with regulatory
and legal changes are undertaken in a timely manner.
Careful management and oversight of the Group’s internal
case management system.
Principal review of all professional work and compliance with
a professional work approval matrix for outgoing work. The
approval matrix is correlated to the complexity and level of
potential risk associated with the work.
Competition
The sectors in which the Company
operates are subject to vigorous
competition, based on
factors
including price, service, innovation
the
and
customer with an appropriate range
of IP services in a timely manner.
to provide
the ability
Regulatory
environment
The Company is subject to significant
regulatory and legal oversight.
24 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
Risk
Description
Management of Risk
Regulatory
reforms
The Group’s service offerings are
subject to changes to government
legislation, regulation and practices
including particularly, if implemented,
streamline multi-
proposals
and
filing
jurisdictional
examination processes.
patent
to
Personnel
The Company depends on the talent
and experience of
its personnel.
The loss of any key personnel, or
a significant number of personnel
generally may have an adverse effect
on the Company. Employee costs
represent a significant component of
the Group’s total cost base.
role
Disintermediation The Group acts as an intermediary
agent between its clients and IP
offices. This
is safeguarded
by clients’ reliance on the Group’s
expertise (both general IP expertise
and local expertise) and regulatory
barriers such as exclusive rights of
patent attorneys to provide various
IP related services and requirements
for IP applicants to record a local
address for service of documents
with the local IP office.
Case
management
and technology
systems
The Group’s internally customised
systems represent an important part
of its operations
The Company seeks to offer its services in a range of secondary
markets. Many of these markets have less developed IP
regulations and systems, and require translations
into
languages other than English, and are therefore less likely to
be affected by such proposals if they were to be implemented
than developed or primary markets.
Other factors which help safeguard the company’s role are
effective technology, excellent client service and efficient
operations and the likely need for IP applicants to continue to
be required to record a local address for service of documents
with the local IP office for examination and prosecution
purposes.
The Company also continues to seek to develop revenue
streams from adjacent markets.
Retention practices
including appropriate remuneration,
incentive programmes (both short and long term), retention
awards, working environment and rewarding work.
Careful management of staff numbers and salary levels and
consideration of resourcing requirements as the Company
grows.
IPH’s intermediary role is safeguarded by clients’ reliance on
the Group’s expertise (both general IP expertise and local
expertise) and regulatory barriers such as exclusive rights of
patent attorneys to provide various IP related services and
requirements for IP applicants to record a local address for
service of documents with the local IP office.
Other
the company’s
intermediary role are effective technology, excellent client
service and efficient operations.
factors which help safeguard
The Company has established business continuity plans and
procedures and maintains system back up and maintenance
processes. The Company continually invests in system
enhancements and engages quality 3rd party suppliers to
assist with its systems developments.
The Company’s transition of its IT systems to offsite ‘cloud-
based’ systems has enabled centralised oversight and
standardisation of processes.
IPH ANNUAL REPORT 2016 / 25
DIRECTORS' REPORT / Continued
JUNE 2016
Risk
Description
Management of Risk
Concentration of
shareholding
Following completion of the listing,
former owners held approximately
49.8% of the shares, which are
covered under the current escrow
arrangements for 2 years from listing.
Foreign exchange
risk
the Group’s sales
The Group’s financial reports are
prepared
in Australian dollars.
However, a substantial proportion
of
revenue,
expenditure and cash flows are
generated in, and assets and liabilities
are denominated in US dollars, Euros
and Singapore dollars.
Conflict of duties Patent and
trademark attorney's
are required to abide by a code of
conduct that requires them to act in
accordance with the law, in the best
interests of their client, in the public
interest, and in the interests of the
registered attorney’s profession as a
whole. There may be circumstances
in which the Company is required
to act in accordance with these
duties contrary to other corporate
responsibilities and against
the
interests of shareholders and the
short term profitability of IPH.
Professional
liability and
uninsured risks
The provision of patent
and
trademark services and legal services
by the Company gives rise to the risk
of potential liability for negligence
or other similar client or third party
claims
At the end of the escrow period there may be a significant
number of former owners who wish to sell down some of
their IPH shareholding. The Company plans to manage
the risk posed to IPH’s share price by seeking to facilitate
any significant sell down that may be determined by former
owners by means of a share placement. To ensure widespread
investor support the Company undertakes an extensive
programme of investor presentations.
The Company monitors the foreign currency exposures that
arise from its foreign currency revenue, expenditure and cash
flows and from the foreign currency assets and liabilities
held on its balance sheet. The Company undertakes regular
sensitivity analyses of these exposures. The Company has
foreign currency hedging facilities available as part of its bank
facilities. The Chief Financial Officer regularly reports to the
Board in respect of the Company’s foreign exposures. The
Board reviews its hedging policy in respect of the foreign
currency exposures from time to time. Currently the Group
does not hedge against its foreign currency exchange risk.
Conflict of interest advice obtained from outside Counsel from
which the Group has developed a comprehensive conflict of
interest policy.
The Company maintains file management processes which
are highly automated, safeguarded, controlled and regularly
reviewed.
The Company has comprehensive quality assurance
processes to ensure appropriate standards of professional
work are maintained.
The Group has
insurance
programme which includes professional indemnity insurance.
To support its professional indemnity insurance arrangements
the Group has internal processes to ensure timely notification
to the underwriters of any potential claim arising from its
business activities.
in place a comprehensive
26 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
Risk
Description
Management of Risk
Acquisitions
affecting
property
in ensuring
The Company’s growth strategy
the acquisition of other
involves
businesses.
intellectual
Risks arise
that all
issues
value of
individual acquisitions are identified
and
the purchase
in
considerations. After acquiring a new
business, risks arise in ensuring the
business is properly integrated into
the IPH Group
reflected
the
The Company undertakes an extensive due diligence process
covering all relevant matters relating to each acquisition
target. Where appropriate, the Company engages competent
professional experts to assist with the due diligence process.
For each acquisition the Company requires comprehensive
legal contracts to be completed with the vendors. The
contracts include appropriate indemnities and warranties and
employment arrangements with key individuals. For most
acquisitions part of the consideration is paid in the form of IPH
shares which are required to be escrowed for up to two years.
Management keeps the Board closely informed throughout
each acquisition process and seeks the Non-executive
Directors’ counsel where appropriate. The Board conducts
a formal detailed review of each acquisition prior to giving its
final approval. After completing an acquisition, processes are
undertaken to review standards of governance, compliance
with IPH policies and procedures, and levels of financial
control and reporting, and where necessary brought into line
with Group standards.
5. 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 FY16.
The Company’s current remuneration framework was developed in the context of the Company’s IPO in November 2014.
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.
The most significant change to this framework in the current year has been to move the remuneration of Key Management
Personnel (KMP) from the amount in their individual executive service agreements entered into on listing, towards appropriate
industry benchmarks for the roles which they have taken on. These changes took effect from 1 January 2016. The
Company continues to review 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 FY17.
We look forward to your continued support and welcome your feedback on our remuneration report for FY16.
Yours sincerely,
John Atkin
Nomination and Remuneration Committee Chair
IPH ANNUAL REPORT 2016 / 27
DIRECTORS' REPORT / Continued
JUNE 2016
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
5.1 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 con-
stant 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.
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 David Griffith the CEO, Dr Andrew Blattman (CEO, Spruson & Ferguson)
and Kristian Robinson (Managing Director, Spruson & Ferguson Asia), these Principals are not deemed key management
personnel.
As of 1 January 2016, the CEO, Dr Andrew Blattman (CEO, Spruson & Ferguson) and Kristian Robinson (Managing Director,
Spruson & Ferguson Asia), entered into new executive service agreements to accurately reflect their roles in the company.
28 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
The change in remuneration was determined with reference to independent benchmarking data.
As foreshadowed at the time of listing, the Board will continue to review these arrangements and may modify them for later
financial years.
5.2 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 for KMP has two components:
» base pay and non-monetary benefits; and
» other remuneration such as superannuation and long service leave.
The combination of these comprises the KMP’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.
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 KMP have been granted options or performance rights over shares during the year ended 30 June 2016.
5.3 Company performance
For the year to 30 June 2016 there was no link between Company performance and KMP remuneration. However, each of
the three executive members of the KMP who were ex-trustees (i.e. David Griffith the CEO, Dr Andrew Blattman and Kristian
Robinson) continue to hold a substantial shareholding thereby providing a significant alignment of interests with company
performance. Each of these executive KMP have had their executive service agreements, particularly their base pay,
amended to reflect their roles in the Group.
For the year ended 30 June 2016, the earnings per share were 21.92 cents (2015:19.51 cents). Shares in the company
closed on 30 June 2016 at $6.42 (2015: $4.70 per share).
5.4 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 from the fees of other Non-executive Directors based on comparative
roles in the external market. 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.
IPH ANNUAL REPORT 2016 / 29
DIRECTOR'S REPORT / Continued
JUNE 2016
Non-executive Director Fees (Directors’ fees and committee fees) (inclusive of superannuation) proposed for the year ending
30 June 2017 is summarised as follows:
Name - Position
Richard Grellman AM - Chairman
Robin Low - Director
Sally Pitkin - Director
John Atkin - Director
FY 2017 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 20% 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
$5.01 and $6.73, 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.
5.5 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
» David Griffith - Managing Director and Chief Executive Officer
» Robin Low - Non-executive Director
» Sally Pitkin - Non-executive Director
» John Atkin - Non-executive Director
And the following persons:
» Malcolm Mitchell - Group Chief Financial Officer;
» Andrew Blattman - Chief Executive Officer, Spruson & Ferguson Pty Limited
» Kristian Robinson - Managing Director, Spruson & Ferguson Asia Pte Limited
30 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
Short-term benefits
Post
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Employee
leave
$
Equity-
settled
$
Total
$
Non-Executive
Directors:
Richard Grellman
Robin Low
Sally Pitkin
John Atkin
Executive Directors:
David Griffith
Former Executive
Directors:
Greg Turner *
Robert Miller*
Other Key Management
Personnel:
Malcolm Mitchell
Andrew Blattman
Kristian Robinson
Former Key
Management
Personnel:
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2015
2015
2016
2015
2016
2015
2016
2015
177,854
130,535
82,192
65,437
82,192
65,437
82,192
65,437
480,954
199,723
46,629
27,394
328,500
175,500
356,554
199,223
347,266
316,426
Carole Campbell*
2015
225,541
* Represents remuneration to date of resignation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,146
12,401
7,808
6,217
7,808
6,217
7,808
6,217
-
-
-
-
-
-
-
-
-
190,000
49,999
192,935
-
90,000
49,999
121,653
-
90,000
49,999
121,653
-
90,000
49,999
121,653
-
-
-
-
-
-
-
-
-
-
-
19,308
251,071
21,599
13,149
3,253
78,844
2,602
-
-
23,455
20,000
-
-
-
-
-
65,859
16,443
35,664
27,367
19,984
-
-
-
-
-
-
-
-
-
-
-
-
751,333
234,471
128,726
29,996
328,500
175,500
445,868
235,666
382,930
343,793
245,525
IPH ANNUAL REPORT 2016 / 31
DIRECTORS' REPORT / Continued
JUNE 2016
5.6 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
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 and the contract may be terminated
by the Company with six months notice. 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.
5.7 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:
32 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
Balance at the start of
the year
Additions
Disposals
Balance at the end
of the year
48,791
48,190
47,618
95,238
6,098,765
-
5,911,111
3,876,172
5,920
11,849
4,900
2,054
-
10,000
95,055
62,819
16,125,885
192,597
-
-
-
-
-
-
-
-
-
54,711
60,039
52,518
97,292
6,098,765
10,000
6,006,166
3,938,991
16,318,482
Balance at the
start of the
year (units)
Unit subdivision
and conversion
to shares
Received as part
of remuneration
(listing fee) Additions
Disposals
(incl notional
disposal)
Balance at
the end of the
year
-
-
-
-
23,809
24,982
23,809
24,381
23,809
23,809
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
-
15,000,000
8,350,000
16,425,000
-
9,775,000
1,225,000
-
-
-
-
-
-
-
-
-
-
-
-
30
16
33
-
19
1
-
99
30 June 2016
Ordinary shares
Richard Grellman
Robin Low
Sally Pitkin
John Atkin
David Griffith
Malcolm Mitchell
Andrew Blattman
Kristian Robinson
30 June 2015
Ordinary shares
Richard Grellman
Robin Low
Sally Pitkin
John Atkin
Greg Turner*
Robert Miller*
David Griffith
Malcolm Mitchell
Andrew Blattman
Kristian Robinson
Carole Campbell*
50,775,000
95,236
7,180,015
41,924,366
16,125,885
* 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.
IPH ANNUAL REPORT 2016 / 33
DIRECTORS' REPORT / Continued
JUNE 2016
6. 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
510,047
Ordinary
IPH Limited
Retention
306,154
Ordinary
0.00
0.00
Sept 2017 and
Sept 2018
Up to July 2018
7. Shares under option
There were no unissued ordinary shares of IPH Limited under option at the date of this report.
8. Dividends
Dividends paid during the financial year were as follows:
Final dividend of 10.0 cents per share for the year ended 30 June 2015,
paid on 7 October 2015 (franked to 5.0c).
Interim dividend of 11.0 cents per share for the year ended 30 June 2016,
paid on 23 March 2016 (franked to 8.8c).
16,341
20,496
9. Significant changes in the state of affairs
There were no other significant changes in the state of affairs of the Group during the financial year.
10. Matters subsequent to the end of the financial year
Apart from the dividend declared, no other matter or circumstance has arisen since 30 June 2016 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.
11. Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
12. 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.
34 / IPH ANNUAL REPORT 2016
DIRECTORS' REPORT / Continued
JUNE 2016
13. 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.
14. 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.
15. 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 30 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 30 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 review-
ing 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.
16. 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.
17. 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.
IPH ANNUAL REPORT 2016 / 35
DIRECTORS' REPORT / Continued
JUNE 2016
18. 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.
19. 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
18 August 2016
Sydney
36 / IPH ANNUAL REPORT 2016
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 (0) 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
18 August 2016
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 2016, 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
IPH ANNUAL REPORT 2016 / 37
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30TH JUNE 2016
Note
Consolidated
30 June 2016
$’000
30 June 2015
$’000
5
6
7
7
7
8
Revenue
Other income
Expenses
Employee benefits expense
Depreciation and amortisation expenses
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
140,040
3,623
(39,657)
(7,164)
(4,729)
-
(3,133)
(27,356)
(533)
(1,410)
(446)
(6,395)
(1,530)
51,310
(12,467)
38,843
505
505
39,348
-
38,843
38,843
-
39,348
39,348
88,716
5,202
(27,026)
(1,062)
(2,908)
(3,499)
(310)
(15,374)
(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
Earnings per share
From continuing operations
Basic earnings (cents per share)
Diluted earnings (cents per share)
39
39
21.92
21.70
19.51
19.48
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
38 / IPH ANNUAL REPORT 2016
STATEMENT OF FINANCIAL POSITION
AS AT 30TH JUNE 2016
Note
Consolidated
30 June 2016
$’000
30 June 2015
$’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
Income tax
Provisions
Other
Other financial liabilities
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
15
21
22
23
24
25
58,761
37,919
3,678
100,358
29
4,350
190,156
3,087
197,622
297,980
13,924
6,933
6,328
4,554
25,462
1,195
58,396
-
17,399
373
17,772
76,168
221,812
218,583
(13,238)
16,467
221,812
-
221,812
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
26,459
10,550
-
407
10,957
37,416
35,178
35,305
(14,588)
14,461
35,178
-
35,178
The above statement of financial position should be read in conjunction with the accompanying notes.
IPH ANNUAL REPORT 2016 / 39
F
O
R
T
H
E
Y
E
A
R
E
N
D
E
D
3
0
T
H
J
U
N
E
2
0
1
6
S
T
A
T
E
M
E
N
T
O
F
C
H
A
N
G
E
S
I
N
E
Q
U
T
Y
I
4
0
/
I
P
H
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
6
Foreign
Currency
Translation
Reserve
Minority
Interest
Acquisition
Reserve
Equity
Settled
Employee
Benefits
Reserve
Retained
Profits
Parent
Non-
controlling
interest
Total
equity
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Issued
Capital
$’000
Balance at 1 July 2014
420
(276)
(4,472)
Profit after income tax expense for the year
Effect of foreign exchange differences
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Net conversion of units
Issue of ordinary shares
Issue of ordinary shares as consideration for a business
combination, net of transaction costs
Share-based payments
Acquisition of non-controlling interest
Distributions to trust unit holders
Dividends paid (note 26)
Balance at 30 June 2015
-
-
-
451
321
22,759
-
11,354
-
-
-
43
43
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,378)
-
-
-
-
-
-
-
-
-
495
-
-
-
3,933
(395)
30,315
30,315
-
43
543
274
-
148
30,589
43
30,315
30,358
274
30,632
-
-
-
-
-
451
321
22,759
495
976
-
-
-
-
(159)
451
321
22,759
495
817
(14,273)
(14,273)
-
(14,273)
(5,514)
(5,514)
(658)
(6,172)
35,305
(233)
(14,850)
495
14,461
35,178
Balance at 1 July 2015
35,305
(233)
(14,850)
495
14,461
35,178
Profit after income tax expense for the year
Effect of foreign exchange differences
Total comprehensive income for the year
-
-
-
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 22)
109,150
Issue of ordinary shares as consideration for a business
combination, net of transaction costs (note 35)
Dividend Reinvestment plan
Share-based payments
Dividends paid (note 26)
Balance at 30 June 2016
71,078
3,050
-
-
-
505
505
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
845
38,843
38,843
-
505
38,843
39,348
-
-
-
-
109,150
71,078
3,050
845
-
(36,837)
(36,837)
218,583
272
(14,850)
1,340
16,467
221,812
The above statement of changes in equity should be read in conjunction with the accompanying notes.
-
-
-
-
-
-
-
-
-
-
-
35,178
35,178
38,843
505
39,348
109,150
71,078
3,050
845
(36,837)
221,812
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30TH JUNE 2016
Consolidated
Note
30 June 2016
$’000
30 June 2015
$’000
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 internally developed software
Dividends received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Distributions paid to previous owners
Dividends paid
Proceeds of borrowings
Repayment of borrowings
Net cash used in financing activities
6
7
38
35
13
14
26
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
9
The above statement of cash flows should be read in conjunction with the accompanying notes.
151,164
(94,976)
534
(1,530)
(13,137)
42,055
(49,571)
(2,564)
(731)
-
97,152
(60,284)
100
(623)
(4,780)
31,565
(3,211)
(595)
(652)
112
(52,866)
(4,346)
108,454
-
-
(21,296)
(33,786)
-
(10,550)
64,118
53,307
5,346
108
58,761
(5,514)
10,550
(9,579)
(25,839)
1,380
4,321
(355)
5,346
IPH ANNUAL REPORT 2016 / 41
NOTES TO THE FINANCIAL STATEMENTS
30TH JUNE 2016
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 18 August 2016.
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 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 34.
42 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
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.
External non controlling interests are allocated their share of total comprehensive income and are presented within equity in
the consolidated Statement of Financial Position, separately from the equity of shareholders.
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 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. Non-monetary 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 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.
For the purpose of presenting these consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated into Australian dollars as follows:
»
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.
» Assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the balance
date; and
IPH ANNUAL REPORT 2016 / 43
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
Foreign currency translation (continued)
» All resulting exchange differences are recognised in other comprehensive income, in the foreign currency translation re-
serve.
Goodwill and fair value accounting adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate.
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 recognised on an accruals basis. 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.
Income Tax
The income tax expense or benefit is the tax payable on the current periods taxable income based on the national income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
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.
44 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
Income Tax (continued)
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.
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 to utilise those temporary differences and losses.
Deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them 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.
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.
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.
IPH ANNUAL REPORT 2016 / 45
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
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.
Unearned income is recognised as a liability when received and is recognised as revenue once a patent service has been
provided or completed.
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.
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 by 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.
Assets held under finance leases are amortised over their expected useful lives on the same basis as owned assets.
46 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
Property, plant and equipment (continued)
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 represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary/associate at the date of acquisition. Goodwill is not amortised. Instead, goodwill is tested
annually for impairment, or more frequently if 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.
Customer Relationships
Customer relationships are the assessed value of the supply of goods and services that exist at the date of acquisition. In
valuing customer relationships, consideration is given to historic customer retention and decay statistics, projected future
cash flows and appropriate capital charges.
Customer relationships are amortised over a period of 10 years. The estimated useful lives, residual values and amortisation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a
prospective basis.
Trademarks
Trademarks are intangible assets with indefinite useful lives that are acquired separately and 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;
IPH ANNUAL REPORT 2016 / 47
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
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.
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.
48 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
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.
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. Borrowings
are initially recognised at fair value, net of transaction costs and subsequently measured at amortised cost. Any difference
between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of
the borrowings using the effective interest method.
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.
IPH ANNUAL REPORT 2016 / 49
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
Share based payments
Equity settled share based compensation benefits are provided to employees. Equity settled transactions are awards of
shares, options or rights, which 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 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 28). 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
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. The consideration transferred also includes the fair value of any contingent consideration
arrangement and the fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities
50 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
Business combinations (continued)
and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date. 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.
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, the difference is recognised as a gain directly in profit or loss
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 any previously held equity interest.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. Contingent consideration is classified either as equity or a financial liability.
Amounts classified as financial liability are subsequently remeasured to fair value with changes to fair value recognised in
profit or loss.
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.
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.
IPH ANNUAL REPORT 2016 / 51
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 2. Significant accounting policies (continued)
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 2016. 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.
AASB 15 Revenue from Contracts with Customers
This standard is currently applicable to annual reporting periods beginning on or after 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.
AASB 16 Leases
This standard is currently applicable to annual reporting periods beginning on or after 1 January 2019. The Group expects to
adopt this standard from 1 July 2019 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 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and
Amortisation (from 1 January 2016)
» AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Stand-
ards 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 2016-2 Amendments to Australian Accounting Standards – Disclosure initiative: Amendments to AASB 107 (from 1
January 2018)
»
IFRS 2 Share-based payment – amendments clarifying how to account for certain types of share-based payment transac-
tions (from 1 January 2018)
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.
52 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 3. Critical accounting judgements, estimates and assumptions
(continued)
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.
Customer relationships are finite intangible assets and are amortised over their expected life. Assets subject to amortisation
are reviewed for impairment whenever events or circumstances arise that indicates that the carrying amount of the asset
may be impaired.
Business combinations
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.
Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into three segments: Intellectual Property Services Australia; Intellectual Property Services Asia; and
Data and Analytics Software. These operating segments are based on the internal reports that are reviewed and used by
the senior executive team and 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.
Intellectual Property
Services Australia
Related to the provision of filing, prosecution, enforcement and management of patents, designs,
trade marks and other IP in Australia.
Intellectual Property
Services Asia
Related to the provision of filing, prosecution, enforcement and management of patents, designs,
trade marks and other IP in Asia.
Data and Analytics
Software
Develops and provides IP data and analytics software under a subscription license model.
The CODM reviews profit before interest, income tax and adjustments to the statutory reported results. 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 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.
Comparative Information
The 30 June 2015 comparatives have been represented to reflect the updated operating segments.
IPH ANNUAL REPORT 2016 / 53
5
4
/
I
P
H
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
6
Consolidated
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Other revenue
Total revenue
Less: Overheads
Intellectual Property
Services
Australia
2016
$’000
2015
$’000
Asia
2016
$’000
2015
$’000
1,729
85,238 47,297
265
86,967 47,562
6,996
6,291
6
54,799 41,897
116
54,805 42,013
906
(483)
93,258 54,558
54,322 42,919
Data and
Analytics
Software
Corporate
Intersegment
eliminations /
unallocated
Total
2016
$’000
2015
$’000
2016 2015
$’000 $’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
-
-
-
397
397
-
-
-
104
104
-
-
-
63
63
-
-
-
427
427
-
(1,735)
(1,735)
(3,176)
(478)
(381)
(859)
(3,331)
140,037 88,716
-
-
140,037 88,716
5,102
3,092
(4,911)
(4,190)
143,129 93,818
(50,972) (31,755)
(27,382)
(21,780)
(1,159)
(100)
(3,997) (1,212)
5,420
4,309
(78,090) (50,538)
Earnings before interest, tax,
depreciation and amortisation (EBITDA),
before adjustments
42,286 22,803
26,940 21,139
(762)
Less: Depreciation
Less: Amortisation
(692)
(457)
(590)
(282)
(3,924)
-
-
-
(244)
(1,108)
Segment result: (Profit before interest,
tax and adjustments)
37,670 22,346
26,350 20,857
(2,114)
4
-
-
4
(3,934)
(785)
509
119
65,039 43,280
(606)
(323)
-
-
-
-
-
-
(2,132)
(1,062)
(5,032)
-
(4,540) (1,108)
509
119
57,875 42,218
3
0
T
H
J
U
N
E
2
0
1
6
N
o
t
e
4
.
O
p
e
r
a
t
i
n
g
s
e
g
m
e
n
t
s
(
c
o
n
t
i
n
u
e
d
)
I
N
O
T
E
S
T
O
T
H
E
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
Reconciliation of segment result
Segment result
Adjustments to statutory result:
Business acquisition costs
Business acquisition adjustments
New business establishment costs
Restructuring expenses
Share based payments
IPO Costs
Total adjustments
Interest income
Finance Costs
Profit for the period before income tax
expense
Reconciliation of segment revenue
Segment revenue
Interest income
Total revenue
/
C
o
n
t
i
n
u
e
d
57,875 42,218
(2,092)
(338)
(1,064)
(1,231)
(844)
-
(310)
-
-
(505)
(495)
(3,499)
(5,569)
(4,809)
534
(1,530)
100
(623)
51,310 36,886
143,129 93,818
534
100
143,663 93,918
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 5. Revenue
Sales revenue
Revenue from the rendering of services
Note 6. Other Income
Distributions from related party
Net Realised foreign exchange gain
Net unrealised foreign exchange (loss)/gain
Other income
Commission
Consulting fees
Interest
Consolidated
30 June 2016
30 June 2015
$’000
$’000
140,040
140,040
88,716
88,716
Consolidated
30 June 2016
$’000
30 June 2015
$’000
-
1,363
(409)
679
1,456
-
534
3,623
112
1,821
1,299
350
1,491
29
100
5,202
IPH ANNUAL REPORT 2016 / 55
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Amortisation
Share based payments
Superannuation expense
Deferred acquisition costs remeasurement
Business acquisition impairment - customer relationships
Profit before income tax includes the following specific expenses:
Finance costs
Interest on bank facilities
Other interest expense
Rental expense relating to operating leases
Minimum lease payments
Consolidated
30 June 2016
30 June 2015
$’000
$’000
1,336
5,828
7,164
845
2,931
(632)
961
1,062
-
1,062
495
2,069
-
-
Consolidated
30 June 2016
30 June 2015
$’000
$’000
3
1,527
1,530
285
338
623
4,729
2,908
56 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 8. Income Tax Expense
Income tax expense
Current tax
Deferred tax
(Over) provided in prior years
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)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Permanent adjustments
Equity settled share based payments
Earn-out revaluations
Acquisition costs
First time recognition of deferred tax assets
Difference in overseas tax rates
Losses not brought to account
(Over) provided in prior years
Effect of income that is exempt from tax
Income tax expense
Consolidated
30 June 2016
30 June 2015
$’000
$’000
14,046
(1,574)
(5)
12,467
(1,574)
-
-
(1,574)
7,938
(1,641)
-
6,297
(1,007)
(613)
(21)
(1,641)
51,310
36,886
15,393
11,066
(1)
390
(187)
334
-
(3,394)
79
(5)
(142)
12,467
226
-
-
-
(613)
(2,706)
-
-
(1,676)
6,297
IPH ANNUAL REPORT 2016 / 57
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
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
Consolidated
30 June 2016
30 June 2015
$’000
12
58,749
58,761
$’000
40
5,306
5,346
Consolidated
30 June 2016
30 June 2015
$’000
$’000
38,493
(574)
37,919
-
37,919
28,142
(760)
27,382
28
27,410
Impairment of receivables
The Group has recognised a loss of $136,000 (2015: $475,000) in profit or loss in respect of impairment of receivables for
the year ended 30 June 2016.
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
58 / IPH ANNUAL REPORT 2016
Consolidated
30 June 2016
30 June 2015
$’000
574
$’000
760
Consolidated
30 June 2016
30 June 2015
$’000
760
136
(322)
574
$’000
456
475
(171)
760
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 10. Current assets - trade and other receivables (continued)
Past due but not impaired
Customers with receivable balances past due but without provision for impairment, amount to $21,542,000 as at 30 June
2016 (2015: $14,907,000). 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:
31 to 60 days overdue
61 to 90 days overdue
Past due more than 91 days
Note 11. Current assets - other
Accrued revenue
Prepayments
Other current assets
Consolidated
30 June 2016
30 June 2015
$’000
9,938
5,343
6,261
$’000
6,484
4,019
4,404
21,542
14,907
Consolidated
30 June 2016
30 June 2015
$’000
-
1,448
2,230
3,678
$’000
45
818
1,261
2,124
Note 12. Non-current assets - Available-For-Sale Financial Assets
Unquoted ordinary shares - at fair value
Consolidated
30 June 2016
30 June 2015
$’000
$’000
29
29
29
29
IPH ANNUAL REPORT 2016 / 59
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 13. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Furniture, fixtures and fittings - at cost
Less: Accumulated depreciation
Computer equipment and software - at cost
Less: Accumulated depreciation
Consolidated
30 June 2016
30 June 2015
$’000
2,811
(1,131)
1,680
992
(533)
459
1,592
(1,025)
567
7,277
(5,633)
1,644
4,350
$’000
1,068
(930)
138
465
(396)
69
809
(642)
167
5,237
(4,423)
814
1,188
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Leasehold
improvements
Plant and
equipment
Furniture,
fixtures and
fittings
Balance at 1 July 2014
Additions
Additions through business combinations (note 35)
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2015
Additions
Additions through business combinations (note 35)
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2016
$’000
48
149
-
-
2
(61)
138
1,721
23
(17)
1
(186)
1,680
$’000
106
$’000
200
-
-
(11)
2
(28)
69
539
-
(23)
-
(126)
459
6
5
(1)
(6)
(37)
167
229
242
-
-
(71)
567
Computer
equipment
$’000
772
440
207
(13)
27
(619)
814
1,796
-
(23)
10
(953)
1,644
Total
$’000
1,126
595
212
(25)
25
(745)
1,188
4,285
265
(63)
11
(1,336)
4,350
60 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 14. Non-current assets - intangibles
Goodwill - at cost
Patents and trade marks - at cost
Capitalised software development - at cost
Less: Accumulated amortisation
Customer Relationships
Less: Accumulated amortisation
Less : Impairment
Consolidated
30 June 2016
30 June 2015
$’000
$’000
124,156
3,511
127,667
5,783
(1,979)
3,804
63,570
(3,924)
(961)
58,685
33,581
14
33,595
1,247
(317)
930
-
-
-
-
190,156
34,525
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Goodwill
Patents and
trade marks
Customer
relationships
$’000
$’000
$’000
Balance at 1 July 2014
Additions
-
-
Additions through business combinations (note 35)
33,581
Disposals
Amortisation expense
Balance at 30 June 2015
Provisional accounting adjustments*
Additions
-
-
33,581
(10,861)
-
-
-
14
-
-
14
-
-
-
-
-
-
1,014
-
8,631
-
Additions through business combinations (note 35)
101,436
2,483
54,939
Disposals
Impairment loss
Amortisation expense
Balance at 30 June 2016
-
-
-
-
-
-
124,156
3,511
-
(961)
(3,924)
58,685
Capitalised
software
development
$’000
595
652
-
-
(317)
930
3,805
731
Total
$’000
595
652
33,595
-
(317)
34,525
2,589
731
-
-
-
158,858
-
(961)
(1,662)
(5,586)
3,804
190,156
* 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 were provisionally allocated entirely to goodwill. A portion of the goodwill was subsequently reallocated to other identifiable intangible assets once final
assessments had been determined.
IPH ANNUAL REPORT 2016 / 61
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 14. Non-current assets - intangibles (continued)
Impairment testing
For the purposes of impairment testing, goodwill is allocated to Cash Generating Units (CGU's) that are an identifiable group
of assets that generate cash associated with the goodwill.
The acquired legal entities are managed as standalone CGU's. A summary of the goodwill by cash generating unit is set out
below:
Cash Generating Unit
Fisher Adams Kelly Callinans
Practice Insight
Pizzeys
Cullens1
Total
Consolidated
30 June 2016
30 June 2015
$’000
23,674
3,834
67,753
28,589
$’000
25,928
7,653
-
-
123,850
33,581
1. Cullens not tested for impairment as acquired on 30 June 2016
The recoverable amount of a CGU is determined primarily on a value-in-use calculation and secondly based on estimated
net selling prices. Value-in-use calculations use cash flow projections based on financial budgets prepared by management
and approved by the Board. Cashflows for future years are extrapolated using the estimated growth rates stated below.
After five years a terminal growth rate is assumed and terminal value-in-use calculated. The terminal growth rates do not
exceed the average growth rates that the business has experienced and are generally lower than the short term growth rates
assumed.
Key assumptions used for value-in-use calculations
Cash Generating Unit
Fisher Adams Kelly Callinans
Practice Insight
Pizzeys
5 yr EBITDA
CAGR
Terminal growth
rates
Discount rates
Pre-Tax
Post-Tax
%
5.2
32.2
7.9
%
2.5
2.5
2.5
%
15
25
15
%
10.5
17.5
10.5
The post-tax discount rate has been applied to discount the future attributable post-tax cash flows.
At 30 June 2016, the assessed value-in-use for each CGU exceeded the carrying amounts of the CGU and no impairment
loss was recognised.
Impact of possible change in key assumptions
No impairment charge would arise as a result of the following changes in assumptions:
» Holding all assumptions constant, if the forecast cashflows in years 1 to 5 declined by 5%
» Holding all assumptions constant, if the discount rate increased by 0.5%
» Holding all assumptions constant, if the terminal rate declined by 0.5%
62 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 15. Deferred tax assets/liabilities
The net deferred tax asset comprises the following balances:
Opening
balance
Recognised in
profit or loss
Acquisitions Recognised
in equity
Closing
balance
$’000
$’000
$’000
$’000
$’000
Impairment of receivables
Property, plant and equipment
Provisions
Accrued expenses
Unbilled revenue
Prepayments
Foreign exchange
Work in progress
Transaction costs
Leased assets
Software
Intangible assets
Sundry
Disclosed as:
Deferred tax asset
Deferred tax liability
176
(375)
1,531
261
(132)
(12)
(171)
(65)
783
-
-
-
(24)
1,972
(45)
133
38
(274)
(81)
(1)
174
65
(224)
305
308
1,176
-
-
-
138
13
-
(5)
-
-
-
-
-
(18,781)
-
-
-
-
-
-
-
-
-
777
-
-
-
-
131
(242)
1,707
-
(213)
(18)
3
-
1,336
305
308
(17,605)
(24)
1,574
(18,635)
777
(14,312)
Consolidated
30 June
2016
$’000
30 June
2015
$’000
3,087
(17,399)
(14,312)
1,972
-
1,972
Deferred taxes were recognised for the first time during the 2015 financial year on the corporatisation of the Australian group
arising from the Group’s reorganisation.
IPH ANNUAL REPORT 2016 / 63
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 16. Current liabilities - trade and other payables
Trade payables
Sundry creditors and accruals
Refer to note 27 for further information on financial instruments
Note 17. Current liabilities - provisions
Employee benefits
Lease make good
Other provisions
Note 18. Current liabilities - other
Deferred consideration
Consolidated
30 June 2016
30 June 2015
$’000
5,721
8,203
13,924
$’000
5,179
4,799
9,978
Consolidated
30 June 2016
30 June 2015
$’000
5,057
484
787
6,328
$’000
4,419
198
88
4,705
Consolidated
30 June 2016
30 June 2015
$’000
4,554
$’000
4,950
Represents the estimated fair value of the deferred consideration relating to the acquisition of Cullens on 30 June 2016 (note
35). Prior period consideration was in relation to the acquisition of Fisher Adams Kelly and was settled during the year.
64 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 19. Current liabilities - other financial liabilities
Deferred Acquisition costs
Lease Incentive liability
Preference shares
Other
Consolidated
30 June 2016
30 June 2015
$’000
$’000
23,674
1,581
200
7
25,462
-
-
-
-
-
Deferred acquisition costs relate to additional consideration arising on settlement that is dependent on certain performance
conditions being met. The balance represents the fair value of the expected consideration due to be paid at the designated
date. Refer note 35.
Preference shares in IPH (Thailand) Limited were issued to Siam Premier as part of the acquisition of the intellectual property
business of Siam Premier International Law Office Limited (note 35). The preference shares entitle the holder to a cumulative
right to fixed dividends of 10% of the paid up share capital of the preference shares.
Reconciliations
Reconciliation of the movement in deferred acquisition costs for the financial year is set out below:
Opening balance
Recognised on acquisition (note 35)
Revaluation of liability
Consolidated
30 June 2016
30 June 2015
$’000
$’000
-
24,306
(632)
23,674
-
-
-
-
IPH ANNUAL REPORT 2016 / 65
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 20. Borrowings
Current
Bank overdraft
Multi-option facility
Non Current
Bank overdraft
Multi-option facility
Consolidated
30 June 2016
30 June 2015
$’000
$’000
-
-
-
-
-
-
Consolidated
30 June 2016
30 June 2015
$’000
$’000
-
-
-
-
10,550
10,550
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.
On 7 July 2015, IPH Limited amended the agreement to extend the facility to $97m over a three year term maturing on 31
July 2018 comprising:
» A multi-option acquisition loan facility; and
» A multi-option revolving loan facility including a bank guarantee facility and overdraft facility for the general corporate pur-
poses of the Group.
Upon executing the new Multi-Option Facility Agreement, borrowings under the previous facility were extinguished.
Assets pledged as security
The bank facility made available by ANZ is secured by cross guarantee and all assets from IPH Limited and a number of its
wholly owned subsidiaries.
66 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 20. Borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank overdraft1
Multi-option facility1
Standby letter of credit facility
Bank guarantees1
Used at the reporting date
Bank overdraft
Multi-option facility
Standby letter of credit facility
Bank guarantees
Unused at the reporting date
Bank overdraft
Multi-option facility
Standby letter of credit facility
Bank guarantees
Consolidated
30 June 2016
30 June 2015
$’000
$’000
-
97,000
-
-
97,000
-
-
-
2,494
2,494
-
94,506
-
-
94,506
500
30,000
1,100
2,000
33,600
-
10,550
-
1,781
12,331
500
19,450
1,100
219
21,269
1. The Multi-option facility includes facility sublimits of $10m and $7m which may be used for the issuance of bank guarantees and available overdraft respectively.
Note 21. Non-current liabilities - provisions
Employee benefits
Consolidated
30 June 2016 30 June 2015
$’000
$’000
373
373
407
407
IPH ANNUAL REPORT 2016 / 67
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 22. Equity - issued capital
Ordinary Class shares - fully paid
Movements in ordinary share capital
Consolidated
Consolidated
30 June 2016
30 June 2015
30 June 2016 30 June 2015
Shares
Shares
$’000
$’000
188,883,320
162,378,265
188,883,320
162,378,265
218,583
218,583
35,305
35,305
Balance
Conversion of units **
Date
Shares
$’000
1 July 2014
-
19 November 2014
152,000,000
-
871
Acquisition of non-controlling interest
19 November 2014
5,406,666
11,354
Issue of shares to employees
Issue of shares for directors services
Acquisition of Practice Insight Pty Ltd
Acquisition of Fisher Adams Kelly Pty Ltd
Balance at 30 June 2015
19 November 2014
19 November 2014
30 April 2015
28 May 2015
Acquisition of Fisher Adams Kelly Pty Ltd
27 August 2015
Acquisition of Pizzeys Patent & Trademark Attorneys
30 September 2015
Dividend reinvestment plan issues
7 October 2015
Acquisition of Callinans Patent & Trademark Attorneys
2 November 2015
57,596
95,237
855,111
3,963,655
162,378,265
1,029,010
6,776,263
507,271
393,932
Shares issued
Capital raising costs
Retention rights exercised
1 December 2015
15,197,330
2 December 2015
-
47,619
Acquisition of Cullens & Cullens Services No 1 Pty Ltd
30 June 2016
2,553,630
Balance at 30 June 2016
Ordinary shares
188,883,320
121
200
3,694
19,065
35,305
4,950
46,756
3,050
2,978
110,940
(1,790)
-
16,394
218,583
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 FY15
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.
68 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 22. Equity - issued capital (continued)
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.
Dividend reinvestment plan
The group operates a dividend reinvestment plan. The issue price is the average of the daily volume weighted average
market price of all shares sold by normal trade during the 10 trading days commencing on the second trading day following
the dividend record date.
Note 23. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Minority interest acquisition reserve
Foreign currency reserve
Consolidated
30 June 2016
30 June 2015
$’000
272
1,340
(14,850)
(13,238)
$’000
(233)
495
(14,850)
(14,588)
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 presented in the Statement of
Changes in Equity.
IPH ANNUAL REPORT 2016 / 69
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 24. 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 26)
Distribution to trust unit holders
Retained profits at the end of the financial year
Note 25. 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 2016
30 June 2015
$’000
$’000
14,461
38,843
-
(36,837)
-
16,467
3,933
16,042
14,273
(5,514)
(14,273)
14,461
Consolidated
30 June 2016
30 June 2015
$’000
$’000
-
-
-
-
-
543
274
(159)
(658)
-
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 26. Equity - dividends
Interim dividend
December 2014 - paid 25 March 2015
December 2015 - paid 23 March 2016
Final dividend
Consolidated
Cents per share
30 June 2016
30 June 2015
$’000
$’000
3.5
11.0
-
20,496
5,514
-
-
June 2015 - paid 7 October 2015
10.0
16,341
70 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 26. Equity - dividends (continued)
On 18 August 2016, the Company declared an ordinary dividend of 10.0 cents per share (franked at 5.0 cents) to be
paid on 5 October 2016. The dividend value is $18,888,332. No provision for this dividend has been recognised in the
Statement of Financial Position as at 30 June 2016, as it was declared after the end of the financial year.
Franking credits
Franking credits available for subsequent financial years
based on a tax rate of 30%
Consolidated
30 June 2016
30 June 2015
$’000
$’000
5,604
3,602
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 27. 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.
IPH ANNUAL REPORT 2016 / 71
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 27. Financial instruments (continued)
Market risk (continued)
Foreign currency risk (continued)
The Group’s net asset exposure at the reporting date was as follows:
30 June 2016
Net asset exposure (Local Currency)
173,890
30,615
2,304
4,141
(107)
A$’000
US$’000
€’000
S$000
Other1
30 June 2015
Net asset exposure (Local Currency)
20,458
13,250
1,270
-
200
1. Australian dollar equivalent
Sensitivity analysis
The sensitivity of the Group's Australian dollar denominated Profit or Loss account and Statement of Financial Position to
foreign currency movements is based on a 10% fluctuation (2015: 10% fluctuation) on the average rates during the financial
year. This analysis assumes that all other variables including interest rates remain constant. A 10% movement in the average
foreign exchange rates would have impacted the Group's profit after tax and equity as follows:
USD
Euro
SGD
Other currencies
10% Weakening 10% Strengthening
2016
$’000
2015
$’000
3,822
1,325
319
372
11
127
-
(20)
2016
$’000
(4,204)
(351)
(409)
(10)
2015
$’000
(1,205)
(115)
-
18
Net exposure to foreign currency risk
4,524
1,432
(4,974)
(1,302)
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.
72 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 27. Financial instruments (continued)
Market risk (continued)
Interest rate risk (continued)
As at the reporting date, the Group had the following variable rate borrowings outstanding:
Consolidated
Multi-option facility
Net exposure to cash flow interest rate risk
30 June 2016
30 June 2015
Weighted average
interest rate
Balance
Weighted
average interest
rate
%
-
$’000
-
-
%
3.74
Balance
$’000
10,550
10,550
The Group had no bank loans outstanding at 30 June 2016 (2015: $10,550,000) and is therefore not exposed to
movements in interest rates.
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.
Financing arrangements (unused)
Unused borrowing facilities at the reporting date:
Bank overdraft
Multi-option facility
Standby letter of credit facility
Bank guarantees
Consolidated
30 June 2016
30 June 2015
$’000
-
94,506
-
-
94,506
$’000
500
19,450
1,100
219
21,269
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.
IPH ANNUAL REPORT 2016 / 73
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 27. Financial instruments (continued)
Liquidity risk (continued)
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.
The cash flows in the maturity analysis below are not expected to occur significantly earlier than contractually disclosed
below.
Consolidated - 30 June 2016
Non-derivatives
Non-interest bearing
Trade payables
Other payables and accruals
Deferred acquisition costs
Interest-bearing - variable
Multi-option facility
Total non-derivatives
Consolidated - 30 June 2015
Non-derivatives
Non-interest bearing
Trade payables
Other payables and accruals
Interest-bearing - variable
Multi-option facility
Total non-derivatives
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
-
-
-
-
5,721
8,203
23,674
-
37,598
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,721
8,203
23,674
-
37,598
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
-
-
5,719
4,799
3.74%
310
10,828
-
-
310
310
-
-
10,602
10,602
-
-
-
-
5,719
4,799
11,222
21,740
Note 28. 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
74 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 28. Fair value measurement (continued)
Fair value hierarchy (continued)
» 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 June 2016
Assets
Available for sale unquoted ordinary shares
Total assets
Consolidated - 30 June 2015
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
29
29
Total
$’000
29
29
Total
$’000
29
29
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.
Note 29. 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 2016
$
1,937,704
30 June 2015
$
1,517,283
78,333
352,594
-
98,490
135,803
199,996
2,368,631
1,951,572
IPH ANNUAL REPORT 2016 / 75
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 30. 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
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 2016
30 June 2015
$
$
297,000
4,000
147,658
-
-
-
448,658
66,780
44,193
110,973
5,142
836
5,978
158,000
3,500
60,660
40,000
71,300
275,000
608,460
43,689
15,825
59,514
-
-
-
Note 31. Contingent liabilities
The Group has given bank guarantees in respect of operating lease commitments for office premises as at 30 June 2016 of
$1,853,000 (2015: $1,781,000).
76 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 32. 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 2016
30 June 2015
$’000
$’000
4,539
8,479
2,392
15,410
3,072
8,588
4,023
15,683
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 33. Related party transactions
Parent entity
IPH Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 36.
Key management personnel
Disclosures relating to key management personnel are set out in note 29 and the remuneration report in the Directors’ report.
Transactions with related parties
The following transactions occurred with related parties:
Other Income
Distributions from Spruson & Ferguson Lawyers Unit Trust - a related party
Consolidated
30 June 2016
30 June 2015
$
-
-
$
112,398
112,398
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.
IPH ANNUAL REPORT 2016 / 77
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 34. 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
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Retained earnings/(accumulated losses)
Parent
30 June 2016
30 June 2015
$’000
43,611
43,611
148,198
319,663
96,340
96,386
217,112
954
5,211
223,277
$’000
3,952
3,952
15,607
59,649
16,117
26,668
34,434
110
(1,563)
32,981
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 20, the parent entity had no guarantees
in relation to the debts of its subsidiaries as at 30 June 2016 apart from being party to the deed of cross guarantee as
detailed in Note 41.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2016.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2016.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2.
78 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 35. Business combinations
Pizzeys Patent & Trade Mark Attorneys Pty Ltd
On 30 September 2015, the Group acquired 100% of the ordinary shares of Pizzeys Patent & Trade Mark Attorneys Pty Ltd
“Pizzeys” under the terms of a Share Purchase Agreement (SPA). The final agreed purchase price was $72,142,041.
The acquired business contributed revenues of $15,028,000 and profit after tax of $5,092,000 to the Group for the period
from 1 October 2015 to 30 June 2016. If the acquisition occurred on 1 July 2015, the full year contributions would have
been revenues of $18,949,000 and profit after tax of $6,786,000.
Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
Cash
Equity instruments (6,776,263 ordinary shares)
Contingent consideration
Total consideration transferred
$’000
35,483
46,756
14,006
96,245
The Group incurred acquisition related costs of $211,000. These costs have been included in business acquisition expenses.
Equity instruments issued
$36,659,583 of the purchase price was settled by way of the issue of 6,776,263 ordinary shares in IPH to the vendors of
Pizzeys. The shares issued have been recorded at their acquisition date fair value of $6.90 per share.
The value of the 6,776,263 shares issued has been recorded in the financial statements as $46,756,215.
Contingent consideration
The Group has agreed to pay the selling shareholders additional consideration of 7.9 times the amount by which the
acquirees FY16 normalised EBITA, up to a maximum of $11 million, exceeds FY15 normalised EBITA. The Group has
included $14,006,665 as contingent consideration related to the additional consideration, which represents its fair value at
the date of acquisition. At 30 June 2016, the contingent consideration had increased to $14,052,093.
IPH ANNUAL REPORT 2016 / 79
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 35. Business combinations (continued)
Pizzeys Patent & Trade Mark Attorneys Pty Ltd (continued)
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
Cash and cash equivalents
Trade and other receivables
Other assets
Property, plant and equipment
Intangible assets - customer relationships
Intangible assets - trade marks
Deferred Tax Liability
Deferred tax assets
Trade and other payables
Current tax liability
Provisions
Net assets acquired
Goodwill
Acquisition-date fair value of total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of total consideration transferred
Less: shares issued by company as part of consideration
Less: cash and cash equivalents acquired
Deferred consideration
Net cash used
Fair value
$’000
1,012
3,244
722
63
34,610
1,349
(10,383)
77
(1,226)
(655)
(321)
28,492
67,753
96,245
96,245
(46,756)
(1,012)
(14,006)
34,471
Callinans Patent & Trade Mark Attorneys Pty Ltd
On 2 November 2015, Fisher Adams Kelly Pty Limited (“FAK”) acquired the assets of Callinans Patent and Trade Mark
Attorneys (“Callinans”). Under the terms of a Business Purchase Agreement (BPA). The agreed initial purchase price was
$5,479,400.
Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
Cash
Equity instruments (393,932 ordinary shares)
Contingent consideration
Total consideration transferred
$’000
2,729
2,978
3,789
9,496
The Group incurred acquisition related costs of $238,000. These costs have been included in business acquisition expenses.
80 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 35. Business combinations (continued)
Callinans Patent & Trade Mark Attorneys Pty Ltd (continued)
Equity instruments issued
Under the terms of the BPA, $2,750,000 of the purchase price was settled by way of the issue of ordinary shares in IPH
Limited to the vendors of Callinan’s. The shares issued have been recorded at their acquisition date fair value of $7.56 per
share.
The value of the 393,932 shares issued, has been recorded in the financial statements as $2,978,126.
Contingent consideration
The Group has agreed to pay the selling shareholders additional consideration, of up to $6 million should certain billing
targets be met in relation to key customers. The Group has included $3,788,823 as contingent consideration, which
represents its fair value at the date of acquisition. At 30 June 2016, the contingent consideration had decreased to
$2,661,674 as a result of certain conditions not being met. Contingent consideration is potentially due in two instalments in
December 2016 and April 2017.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
Other assets
Intangible assets - customer relationships
Deferred Tax Liability
Provisions
Deferred revenue
Net assets acquired
Goodwill
Acquisition-date fair value of total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of total consideration transferred
Less: shares issued by company as part of consideration
Deferred consideration
Net cash used
Fair value
$’000
22
6,668
(2,000)
(243)
(25)
4,422
5,074
9,496
9,496
(2,978)
(3,789)
2,729
IPH ANNUAL REPORT 2016 / 81
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 35. Business combinations (continued)
Cullens Pty Limited and Cullens Services No1 Pty Limited ("Cullens")
On 30 June 2016, the Group acquired 100% of the ordinary shares of Cullens Pty Limited and Cullens Services No1 Pty
Limited “Cullens” under the terms of a Share Purchase Agreement (SPA). The preliminary agreed purchase price was
$35,597,602. The consideration is settled by way of issue of 2,553,630 IPH shares at an issue price of $6.97 and cash of
$14,239,000.
Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
Cash
Equity instruments (2,553,630 ordinary shares)
Contingent consideration
Total consideration transferred
$’000
14,239
16,394
11,065
41,698
The Group incurred acquisition related costs of $218,000. These costs have been included in business acquisition expenses.
Equity instruments issued
$17,798,801 of the purchase price was settled by way of the issue of 2,553,630 ordinary shares in IPH to the vendors of
Cullens. The shares issued have been recorded at their acquisition date fair value of $6.42 per share. The value of the shares
issued has been recorded in the financial statements as $16,394,304.
Contingent consideration
The Group has agreed to pay the selling shareholders additional consideration of 7.9 times the amount by which the
acquirees FY16 normalised EBITA, up to a maximum of $7.1 million, exceeds FY15 normalised EBITA. The Group has
included $6,510,678 as contingent consideration related to the additional consideration, which represents its fair value at the
date of acquisition.
The balance of the purchase price of $4,554,345 is payable in cash, and recognised as deferred consideration.
82 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 35. Business combinations (continued)
Cullens Pty Limited and Cullens Services No1 Pty Limited ("Cullens") (continued)
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
Cash and cash equivalents
Trade and other receivables
Other assets
Property, plant and equipment
Intangible assets - customer relationships
Intangible assets - trade marks
Deferred tax assets
Deferred tax liabilities
Trade and other payables
Current tax liability
Provisions
Net assets acquired
Goodwill
Acquisition-date fair value of total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of total consideration transferred
Less: shares issued by company as part of consideration
Less: cash and cash equivalents acquired
Deferred consideration
Net cash used
Fair value
$’000
1,868
2,820
6
202
13,661
1,134
122
(4,098)
(1,130)
(1,067)
(410)
13,108
28,590
41,698
41,698
(16,394)
(1,868)
(11,065)
12,371
Intellectual Property business of Siam Premier International Law Office Limited (“Siam
Premier”)
On 30 May 2016 Spruson & Ferguson Ltd (Thailand), a subsidiary of IPH Limited, acquired the Intellectual Property (IP)
business of Siam Premier International Law Office Limited. The final agreed purchase price was THB 8,268,750 (A$323,000).
Simultaneously, Siam Premier invested in IPH (Thailand) Limited (the immediate parent of S&F Thailand) through the
acquisition of preference shares, with a cumulative right to fixed dividends of 10% of the paid up share capital of the
preference shares, to the value of THB 5.1m. IPH (Thailand) Limited also issued THB 3.9m of ordinary shares to IPH
Holdings (Asia) Pte Ltd.
Subsequent to the transaction, the shares of IPH (Thailand) are owned 51% by Siam Premier and 49% by IPH (Holdings)
Asia. The preference shares however have 1 vote for every 10 that have been issued resulting in IPH Limited controlling IPH
(Thailand) Limited.
The preference shares issued to Siam Premier have been classified as debt in Note 19.
IPH ANNUAL REPORT 2016 / 83
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 35. Business combinations (continued)
Intellectual Property business of Siam Premier International Law Office Limited
(“Siam Premier”) (continued)
Details of the acquisition are as follows:
Net assets acquired
Goodwill
Acquisition-date fair value of total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of total consideration transferred
Net cash used
Fair value
$’000
-
323
323
323
323
Acquisitions undertaken in the year ended 30 June 2015
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.
The final accounting for the acquisition of Practice Insight Pty Ltd and WiseTime Pty Ltd was finalised during the current
financial year.
As a result intangible assets relating to Trade Marks and Software have been identified with a corresponding reduction in the
value of the goodwill recognised. The final acquisition details are as follows:
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Intangible assets - trade marks
Trade and other payables
Deferred revenue
Net assets acquired
Intangible Assets - Software
Goodwill
Acquisition-date fair value of total consideration transferred
84 / IPH ANNUAL REPORT 2016
Fair value
$’000
77
145
5
14
(35)
(165)
41
3,805
3,834
7,680
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 35. Business combinations (continued)
Fisher Adams Kelly Pty Ltd
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.
The final accounting for the acquisition of FAK was finalised during the current financial year.
As a result intangible assets relating to Trade Marks and Customer Relationships have been identified with a corresponding
reduction in the value of the goodwill recognised. The final acquisition details are as follows:
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Other assets
Trade and other payables
Deferred tax asset
Provisions
Borrowings
Net assets acquired
Intangible Assets - Trade Marks
Intangible Assets - Customer Relationships
Deferred tax liability
Goodwill
Acquisition-date fair value of total consideration transferred
Fair value
$’000
712
2,858
207
665
(1,747)
352
(1,478)
(3,482)
(1,913)
1,014
8,631
(2,589)
18,872
24,015
IPH ANNUAL REPORT 2016 / 85
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 36. 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
Principal
activities
Ownership
interest
Ownership
interest
30 June 2016 30 June 2015
Spruson & Ferguson Pty (NSW) Limited2,3
Australia
Non Trading entity
100%
Spruson & Ferguson Pty Limited2,3
Australia
Patent attorneys
100%
Spruson & Ferguson Lawyers Pty Limited2,3
Australia
Lawyers
100%
Spruson & Ferguson (Asia) Pte Limited
Singapore
Patent attorneys
100%
Spruson & Ferguson SDN BHD
Malaysia
Patent attorneys
100%
IPH Holdings (Asia) Pte Ltd
Singapore
Non Trading entity
100%
PT Spruson Ferguson Indonesia
Indonesia
Patent attorneys
100%
IPH (Thailand) Ltd4
Thailand
Non Trading entity
49%
Spruson & Ferguson Ltd
Thailand
Patent attorneys
100%
IPH Services Limited2,3
Practice Insight Pty Limited2,3
Wise Time Pty Limited2
Fisher Adams Kelly Pty Limited2,3
Australia
Australia
Australia
Australia
Software
development
Data analysis and
software
Data analysis and
software
Patent attorneys
100%
100%
100%
100%
Pizzeys Patent & Trademark Attorneys Pty Ltd3
Australia
Patent attorneys
100%
Cullens Pty Limited
Australia
Patent attorneys
100%
Cullens Services No 1 Pty Limited
Australia
Patent attorneys
100%
Pizzeys Pte Ltd
Singapore
Patent attorneys
100%
Spruson & Ferguson (Shanghai) Ltd
China
Patent attorneys
100%
Spruson & Ferguson Limited
Hong Kong
Non Trading entity
100%
Spruson & Ferguson (Beijing) Ltd
China
Patent attorneys
100%
100%
100%
100%
100%
100%
-
-
-
-
100%
100%
100%
100%
-
-
-
-
-
-
-
1. IPH Limited is the head entity within the tax consolidated group.
2. These companies are members of the tax consolidated group.
3. 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 (note 41).
4. The Group holds 90.6% of the voting rights and thus has control of this entity.
86 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 37. Events after the reporting period
No matter or circumstance has arisen since 30 June 2016 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 38. Reconciliation of profit after income tax to net cash from
operating activities
Profit after income tax expense for the year
38,843
30,589
Consolidated
30 June 2016
30 June 2015
$’000
$’000
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
Increase in other liabilities
Decrease in deferred revenue
Increase in provisions
Net cash from operating activities
7,164
108
-
845
-
338
(6,350)
(420)
(558)
1,667
(453)
248
8
615
1,062
398
(112)
495
321
(4)
(4,083)
(1,641)
(424)
1,773
3,158
-
(638)
671
42,055
31,565
IPH ANNUAL REPORT 2016 / 87
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 39. Earnings per share
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of IPH Limited
Consolidated
30 June 2016 30 June 2015
$’000
38,843
-
38,843
$’000
30,589
(274)
30,315
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
177,222,041
155,387,554
Options over ordinary shares
1,769,596
225,725
Weighted average number of ordinary shares used in calculating diluted earnings per share 178,991,637
155,613,279
Basic earnings per share
Diluted earnings per share
Note 40. Share-based payments
Cents
21.92
21.70
Cents
19.51
19.48
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 portion of the aggregate retention rights granted will vest at each twelve month anniversary of the grant date; vesting is
conditional on continued employment.
Set out below are summaries of the rights granted under the plan:
Grant Date
19 Nov 2014
19 Nov 2014
19 Nov 2014
16 Sept 2015
16 Sept 2015
16 Sept 2015
Vesting
Date
Exercise
price
Granted
Balance at
the start of
year
Exercised Expired/
forfeited/
other
Balance at the
end of the year
19 Nov 2015
19 Nov 2016
19 Nov 2017
1 July 2016
1 July 2017
1 July 2018
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
47,619
47,619
47,619
-
-
-
-
-
-
42,183
63,275
105,458
(47,619)
-
-
-
-
-
-
-
-
-
-
-
-
-
47,619
47,619
42,183
63,275
105,458
306,154
Total Retention Rights
142,857
210,916
(47,619)
88 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 40. Share-based payments (continued)
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:
» 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%
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, 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%
IPH ANNUAL REPORT 2016 / 89
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 40. Share-based payments (continued)
EPS Rights (continued)
FY15 Award (Nov 2014)
FY16 Award (Sept/Dec 15)
Minimum EPS Target
EPS in the financial year ending 30 June 2017 of 17.3 cents,
Compound annual growth
being the forecast pro forma EPS of IPH for the financial year
rate (CAGR) of 7%
ending 30 June 2015 with a compound annual growth rate of
7% applied to it for the following 2 financial years
EPS Target
EPS in the financial year ending 30 June 2017 of 20.0 cents,
Compound annual growth
being the forecast pro forma EPS of IPH for the financial year
rate (CAGR) of 15%
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 and are detailed below:
Grant Date
TSR - 19 Nov 14
EPS - 19 Nov 14
TSR - 16 Sept 15
EPS - 16 Sept 15
TSR - 2 Dec 15
EPS - 2 Dec 15
Vesting
Date
Exercise
price
Balance at
the start of
year
Granted Exercised
Expired/
forfeited/
other
Balance at the
end of the year
9 Sept 2017
$0.00
137,853
9 Sept 2017
$0.00
137,853
-
-
8 Sept 2018
$0.00
8 Sept 2018
$0.00
8 Sept 2018
$0.00
8 Sept 2018
$0.00
-
-
-
-
138,131
138,131
4,862
4,862
-
-
-
-
-
-
-
(19,404)
(19,404)
(5,084)
(5,084)
(1,334)
(1,334)
118,449
118,449
133,047
133,047
3,528
3,528
(51,644)
510,048
Total Performance Rights
275,706
285,986
Fair value of retention and performance rights granted
The weighted average share price during the financial year was $7.18 (2015: $2.70).
The weighted average remaining contractual life of rights outstanding at the end of the financial year was 2.1 years (2015: 2
years)
90 / IPH ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 40. Share-based payments (continued)
EPS Rights (continued)
Fair value of retention and performance rights granted (continued)
Valuation model inputs used to determine the fair value of rights at the grant date, are as follows:
Grant Date
Performance rights
Vesting
Date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value at
grant date
TSR - 19 Nov 14
9 Sept 2017
EPS - 19 Nov 14
9 Sept 2017
TSR - 17 Sept 15
8 Sept 2018
EPS - 17 Sept 15
8 Sept 2018
TSR - 2 Dec 15
EPS - 2 Dec 15
8 Sept 2018
8 Sept 2018
Retention rights
19 Nov 2014
19 Nov 2014
19 Nov 2014
17 Sept 2015
17 Sept 2015
17 Sept 2015
19 Nov 2015
19 Nov 2016
19 Nov 2017
1 July 2016
1 July 2017
1 July 2018
$2.10
$2.10
$6.12
$6.12
$8.20
$8.20
$2.10
$2.10
$2.10
$6.12
$6.12
$6.12
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
35.00%
6.40%
6.40%
3.50%
3.50%
3.50%
3.50%
6.40%
6.40%
6.40%
3.50%
3.50%
3.50%
2.56%
2.56%
2.00%
2.00%
2.00%
2.00%
2.44%
2.49%
2.58%
1.96%
1.93%
1.99%
$1.04
$1.75
$4.45
$5.51
$6.66
$7.40
$1.97
$1.84
$1.73
$5.95
$5.75
$5.55
The weighted fair value of the rights granted during the year is $5.39
Amounts recognised in the Financial Statements
During the financial year ended 30 June 2016, an $845,000 expense was recognised in the Statement of Profit or Loss in
relation to equity settled share based payment awards (June 2015: $495,000).
IPH ANNUAL REPORT 2016 / 91
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 41. Deed of cross guarantee
The members of the Group party to the deed of cross guarantee are detailed in note 36. 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:
30 June 2016
30 June 2015
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
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
Profit after income tax expense for the year
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of IPH Limited
Profit after income tax expense for the year
92 / IPH ANNUAL REPORT 2016
$’000
86,969
29,325
(28,812)
(6,569)
(3,607)
-
(2,430)
(18,256)
(353)
(1,043)
(436)
(6,405)
(1,525)
46,858
(8,352)
38,506
-
38,506
-
38,506
38,506
-
38,506
38,506
$’000
47,562
35,524
(19,722)
(780)
(1,903)
(3,499)
(310)
(6,995)
(265)
(362)
(128)
(4,692)
(623)
43,807
(2,862)
40,945
-
40,945
-
40,945
40,945
-
40,945
40,945
NOTES TO THE FINANCIAL STATEMENTS / Continued
30TH JUNE 2016
Note 41. 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
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
30 June 2016
30 June 2015
$’000
$’000
51,372
22,145
2,455
75,972
2,677
147,502
48,275
2,992
201,446
2,848
15,158
1,359
19,365
1,129
34,526
6,577
1,996
44,228
277,418
63,593
5,945
1,794
5,292
29,774
1,195
44,000
-
898
13,301
14,199
6,280
2,106
4,687
4,950
1,162
19,185
10,550
407
-
10,957
58,199
30,142
219,219
33,451
218,582
(10,164)
10,801
219,219
35,305
(10,954)
9,100
33,451
IPH ANNUAL REPORT 2016 / 93
DIRECTORS'
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 2016
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 41 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
18 August 2016
Sydney
94 / IPH ANNUAL REPORT 2016
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 (0) 2 9322 7000
Fax: +61 (0) 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 2016, the statement of profit and loss and other 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 38 to 94.
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
IPH ANNUAL REPORT 2016 / 95
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF IPH 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.
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 2016
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 27 to 33 of the directors’ report for
the year ended 30 June 2016. 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 2016, complies
with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Tara Hill
Partner
Chartered Accountants
Sydney, 18 August 2016
96 / IPH ANNUAL REPORT 2016
SHAREHOLDERS
INFORMATION
The shareholder information set out below was applicable as at 31 August 2016.
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
Equity security holders
Number of holders of
ordinary shares
Number of ordinary shares
3,037
4,423
1,392
813
92
9,757
-
1,676,240
11,699,866
10,026,706
17,351,753
146,225,612
186,980,177
-
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
UBS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
TALABAH PTY LIMITED
NABIDE PTY LIMITED
SETDOR PTY LIMITED
1
2
3
4
5
6
7
8
9
10 KIZILE PTY LIMITED
11 BERGTRUS PTY LIMITED
12 WOMBEE PTY LTD
13 MASSEYTRUS PTY LIMITED
13 KORTRUS PTY LIMITED
13 SHANTAY PTY LIMITED
14 HEUZTRUS PTY LIMITED
15 AFTRUS PTY LIMITED
16 ROSSARD PTY LIMITED
17 GURLUCHI PTY LIMITED
17 CURNTRUS PTY LIMITED
18 EDNIC PTY LIMITED
19 ASSONET PTY LIMITED
19 O'BRIENTRUS PTY LIMITED
20 RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
No person holds 20% or more of unquoted equity securities as at the date of this report.
The above table includes shareholders that may hold shares for the benefit of third parties.
Ordinary Shares
Number held
9,683,883
8,414,193
8,131,335
7,955,584
5,560,754
5,549,657
5,527,175
5,358,024
4,925,925
4,654,321
3,989,708
3,987,654
3,753,086
3,753,086
3,753,086
3,518,518
3,286,005
3,286,004
3,283,951
3,283,951
2,814,815
2,814,814
2,814,814
2,022,430
112,122,773
% of total
shares issued
5.18
4.50
4.35
4.25
2.97
2.97
2.96
2.87
2.63
2.49
2.13
2.13
2.01
2.01
2.01
1.88
1.76
1.76
1.76
1.76
1.51
1.51
1.51
1.08
59.97
IPH ANNUAL REPORT 2016 / 97
SHAREHOLDERS
INFORMATION
Equity security holders (continued)
Geography distribution
AUSTRALIA
BAHRAIN
BERMUDA
BRUNEI DARUSSALAM
CHINA
FRANCE
HONG KONG
KUWAIT
MALAYSIA
NEW ZEALAND
PAPUA NEW GUINEA
SINGAPORE
THAILAND
UNITED ARAB EMIRATES
UNITED KINGDOM
UNITED STATES OF AMERICA
VANUATU
Unquoted equity securities
Ordinary Shares
Number of holder
Number of shares
9,646
1
1
1
3
1
3
1
1
66
1
15
2
1
9
4
1
9,757
183,223,412
210
5,000
701
18,961
500
8,684
460
1,000
161,884
2,380
3,503,756
1,049
500
46,194
2,590
2,896
186,980,177
Performance Rights over ordinary shares granted under
the Long Term Incentive Plan
Retention Rights granted under the Long Term Incentive Plan
510,047
398,120
33
23
Number on Issue
Number of holders
Substantial holders
The names of substantial shareholders of the Company's ordinary shares as at 31 August 2016 (holding no less than 5%)
who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:
Holder
IPH Limited and its related bodies corporate
Bennelong Funds Management Group Pty Limited
Voting rights
The voting rights attached to ordinary shares are set out below:
Number of securities
88,725,446
12,028,647
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.
98 / IPH ANNUAL REPORT 2016
SHAREHOLDERS
INFORMATION
Expiry Date
Number of Shares
21/11/2016
30/04/2017
28/05/2017
30/09/2017
02/11/2017
30/06/2018
31/08/2018
78,398,388
591,979
2,515,380
6,776,263
393,932
2,042,905
1,619,860
Securities Subject to Voluntary Escrow
Class
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Annual General Meeting (AGM)
The 2016 annual general meeting (AGM) of IPH Limited will be held on Wednesday 16 November at 10:30am at the offices
of Ernst & Young, 200 George Street, Sydney NSW 2000.
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 2016 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
IPH ANNUAL REPORT 2016 / 99
100 / IPH ANNUAL REPORT 2016