19 August 2021
Appendix 4E and 2021 Annual Report
Attached is a copy of the IPH Limited Appendix 4E and 2021 Annual Report. A printed version of the report
will be sent to shareholders who have requested a copy. The report is also available on the Company’s
website at www.iphltd.com.au.
For more information, please contact:
Martin Cole
Capital Markets Communications
T. +61 403 332 977
Authorised for release to ASX by:
The Board of Directors
IPH Limited
About IPH Limited
IPH is the Asia Pacific’s leading intellectual property services group, comprising a network of member firms working in eight IP
jurisdictions and servicing more than 25 countries. The group includes leading IP firms AJ Park, Griffith Hack, Pizzeys, Shelston IP and
Spruson & Ferguson, online IP services provider Applied Marks, and the autonomous timekeeping business, WiseTime. IPH employs
more than 900 people working in Australia, China, Hong Kong SAR, Indonesia, Malaysia, New Zealand, Singapore and Thailand.
IPH Limited | Level 24, Tower 2, Darling Park, 201 Sussex St, Sydney NSW 2000 | ABN 49 169 015 838 | iphltd.com.au
1
iphltd.com.au
2021
Annual Report
Year ended
30 June 2021
Contents
About IPH
FY21 Year in Review
Corporate Directory
Directors’ Report
Financial Statements
Independent Auditor’s Report
Shareholder Information
4
8
15
17
47
85
90
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2021 Annual Report
3
About IPH
No 1
Patent group
in Australia,
New Zealand
and Singapore2
No 1
Trade mark group
in Australia and
New Zealand3
8IP jurisdictions
900+
Employees1
25+Countries serviced
1) Approximate employee numbers as at 30 June 2021
2) IPH Management estimate based on patent filing data: Australia (IP Australia)
– FY21 as at 13/07/21; Singapore (IPOS) – CY21 YTD Jun (preliminary) as at 5/08/21;
New Zealand (IPONZ) – FY21 as at 14/07/21.
3) IPH Management estimate based on trade mark filing data: Australia (IP Australia)
– FY21 as at 15/07/21 based on market share of top 50 agents; New Zealand (IPONZ)
– FY21 as at 10/08/21.
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4
7 brands
About our business
IPH is Asia Pacific’s leading intellectual
property services group, comprising a
network of member firms operating in
eight intellectual property jurisdictions and
servicing more than 25 countries.
The group includes leading IP firms AJ
Park, Griffith Hack, Pizzeys, Shelston IP
and Spruson & Ferguson, online IP services
provider Applied Marks and the automated
timekeeping business, WiseTime. Member
firms provide services for the protection,
commercialisation, enforcement and
management of all forms of intellectual
property including patents, trade marks
and designs. Clients include some of the
world’s leading companies, multi-nationals,
universities, public sector research
organisations, foreign associates and other
corporate and individual clients.
The group employs more than 900 people
working in Australia, China, Hong Kong SAR,
Indonesia, Malaysia, New Zealand, Singapore
and Thailand.
IPH’s vision is to be the leading IP services group
in secondary markets.
IPH listed in 2014.
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2021 Annual Report
5
New visual identity for IPH
In February, IPH launched a new visual brand
identity to reflect the growing network. The
decision to rebrand was part of a focus on
evolving into a more active network in the Asia
Pacific region.
IPH’s new mark is designed to visually represent
the power generated by individual firms working
as a network, enabling them to deliver more
opportunities for more clients in more markets
and to access scale that helps us work smarter.
With the ‘network effect’ at the core of our
visual brand identity, the new IPH brand
supports the broader IPH strategic direction
which is to grow the network, amplifying the
network effect.
Our story
IPH was formed in 2014 with the vision to
grow to be the leading IP services group in
secondary markets.
Key to this strategy has been growth by
acquiring and integrating firms and businesses
that share our values, employ highly skilled
professionals and have leading positions in the
market they serve. Together with our member
firms we bring to life ‘the network effect’. The
network effect gives clients a seamless way
to enter more international markets, helps us
make group-scale investments in technology
and processes so we can work smarter and
creates a multi-national pool of talent.
Since 2014 we have acquired a number of firms
across Australia, New Zealand and Asia. We
have consolidated a number of businesses so
that our network consists of strong brands
that lead the markets they serve. The IPH
Group is currently made up of five IP attorney
firms plus two firms delivering services to the
IP market and adjacent markets.
Our strategy is focused on organic growth,
consolidating acquisitions and investing in
new international and domestic businesses.
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6
Network acquisition history
Nov 2014
IPH lists on the ASX with Spruson &
Ferguson as the founding business
Apr 2015
IPH acquires IP data analysis & software applications
businesses Practice Insight and WiseTime
May 2015
IPH acquires Australian IP firm Fisher Adams Kelly
Sep 2015
IPH acquires Australian IP firm Pizzeys
Nov 2015
IPH firm Fisher Adams Kelly acquires the business
of Australian IP firm Callinans
Mar 2016
Opening of Spruson & Ferguson Indonesia
May 2016
Opening of Spruson & Ferguson Thailand
Jun 2016
IPH acquires Australian IP firm Cullens
Nov 2016
IPH acquires Ella Cheong Hong Kong and Beijing
Jun 2017
Opening of Spruson & Ferguson Melbourne
Oct 2017
IPH acquires AJ Park in New Zealand
Jul 2018
Merger of Fisher Adams Kelly Callinans and
Cullens with Spruson & Ferguson
Aug 2019
IPH acquires Xenith IP Group Limited including Australian
firms Shelston IP, Griffith Hack and Watermark
May 2020
Divestment of Glasshouse Advisory R&D tax
and EMDG practices to Grant Thornton
Jul 2020
Integration of IPH Group businesses
Watermark and Griffith Hack completed
Oct 2020
IPH firm AJ Park acquires New Zealand IP firm Baldwins IP
Jul 2021
IPH acquires Australian online IP services
business Applied Marks
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2021 Annual Report
7
FY21 Year in Review
Chairman’s Letter
Dear Shareholder,
IPH delivered a strong underlying result in FY21 which once
again demonstrates the resilience of our business in the
current environment.
FY21 results
IPH reported a Statutory Net Profit After Tax (NPAT) of
$53.6 million for FY21 compared to $54.8 million for the
prior year. Diluted Earnings Per Share were 24.7 cents,
down 4 per cent on the prior year.
Statutory earnings included the negative impact of the
higher Australian dollar compared to the prior year. On a
like for like basis, (which removes the impact of currency
impacts and new business acquisitions) Group Underlying
EBITDA increased by 10 per cent.
The Directors declared a final dividend of 15.5 cents per
share, 40 per cent franked, bringing the full year dividend
to 29.5 cents per share, compared to 28.5 cents per share
for the prior year. The full year dividend is in line with the
Board’s dividend policy to pay 80-90 per cent of cash NPAT
as dividends.
More detail on our financial results is contained within the
CEO Report and Operating and Financial Review.
Strong financial position
maintained
IPH retains a strong balance sheet to manage through the
current environment while maintaining investments which
support our strategy for medium term growth.
Net debt at 30 June 2021 was $45 million, down 34 per cent
on the prior year, with a conservative leverage ratio (Net
Debt / EBITDA) of 0.4 times.
Strategic progress
IPH continues to make significant progress in our strategy
to be the leading IP services group in secondary IP markets
and adjacent areas of IP.
We further strengthened our presence and client service
offering in New Zealand through AJ Park’s acquisition of
intellectual property firm, Baldwins Intellectual Property
(Baldwins) in October 2020.
The successful integration of Baldwins into AJ Park provides
our merged businesses greater depth of expertise,
enhanced career opportunities for our people and
provides clients with access to a complementary team of
experienced IP professionals in other global jurisdictions.
On 1 July 2021, IPH announced the acquisition of Applied
Marks Pty Ltd. Applied Marks is a leading Australian online
automated trade mark application platform, also providing
automated registration and intelligence services relating to
companies and domain names, both directly to customers
and through channel partners.
This acquisition strengthens our position in automated
IP services and accelerates our digital strategy with the
resources and technology contributing to a new digital
services function within the group
Sustainability
IPH remains committed to sustainable practices throughout
our business.
We recognise that a sustainable business is one that
provides a safe, rewarding and diverse environment for our
people, while operating in an environmentally and socially
responsible manner.
This year, we are pleased to confirm that IPH’s approach to
sustainability contributes to progressing a number of the
United Nations Sustainable Development Goals (UNSDGs).
The UNSDGs are a set of 17 goals that are based on human
rights and define global sustainable development priorities
and aspirations for 2030. By contributing to the UNSDGs,
IPH is contributing to sustainability in a global context.
More information about our continued progress on
sustainability can be found in our Sustainability Report
which is available on the IPH website.
Conclusion
I would like to acknowledge IPH’s Managing Director and
CEO, Dr Andrew Blattman, his leadership team, and all our
people across the IPH Group for their dedication and efforts
in FY21.
The Company has once again delivered a strong result,
while continuing to make significant progress in our
strategy. IPH continues to develop its network and
strong platform for further growth to generate enhanced
shareholder value.
I would like to thank our shareholders for your ongoing
support of IPH Limited.
Kind regards,
Richard
Richard Grellman AM
Non-executive Chairman
IPH Limited
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2021 Annual Report
9
Financial Highlights
Revenue
A$363.5m
Operating Cashflow
A$92.6m
EBITDA 1
A$113.3m
Earnings Per Share 2
24.7c
NPAT
A$53.6m
Full Year Dividend
29.5c
1) Earnings before Interest, Tax, Depreciation and Amortisation
2) Diluted Earnings Per Share
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2021 Annual Report
10
CEO’s Report
In a market which continued to be disrupted by
the ongoing impact of COVID-19 and a higher
Australian dollar compared to the prior year, IPH
delivered a strong underlying result in FY21 and
provided increased returns to shareholders.
FY21 Results
Underlying Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA) was
$124.3 million, down slightly from $126.0 million
in the prior year. Underlying revenue for the
year decreased by 2 per cent to $363.5 million
while Underlying Net Profit After Tax (NPAT)
was $76.2 million compared to $77.7 million for
the prior year.
However, on a like-for-like basis (which
removes the impact of acquisitions and the
effect of the higher Australian dollar in FY21)
IPH reported a strong result.
The continued market disruption of COVID-19
impacted the top line with like-for-like revenue
declining by 2 per cent. However, underlying
like-for-like EBITDA increased by 10 per cent as
a result of IPH’s ongoing successful strategy to
integrate acquisitions and capture synergies
to deliver margin accretion, together with the
continued leverage of our leading network of
IP operations across the region.
Group Underlying like-for-like EBITDA margin
increased by 12 per cent.
In our Asian IP business, like-for-like revenue
increased by 3 per cent and like-for-like
EBITDA improved by 8 per cent. EBITDA margin
increased by 5 per cent.
Like-for-like revenue in IPH’s Australian and New
Zealand IP businesses declined by 3 per cent.
However, the delivery of cost synergies from
the successful Xenith IP integration and other
measures resulted in a 7 per cent lift in like-for-
like EBITDA and an 11 per cent improvement in
Underlying EBITDA margin.
The main contribution to this increase was the
39 per cent improvement in Underlying EBITDA
margin of the former Xenith IP business to 28
per cent compared to 20 per cent when we
acquired the business in 2019.
Market conditions
IPH maintains its leading patent market
share positions in Australia, New Zealand and
Singapore.
In Australia, total patent filings (excluding
innovation patents which cease to be available
from August 2021) increased by 2.6 per cent
for the period. IPH Group’s filings (including
Baldwins IP on a pro-forma basis and excluding
innovation patents) declined by 4.8 per cent.
This was an improvement from our update
at the AGM where filings had declined by ~8
per cent and the half year result (5.7 per cent
decline). While we experienced some expected
disruption from the integration of Griffith Hack
and Watermark, IPH Group filings continued to
improve in the second half of the year.
IPH remains the market leader in Australia
with combined group patent market share
(including Baldwins IP on a proforma basis and
excluding innovation patents) of 36.2 per cent
for the year to 30 June 2021.
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2021 Annual Report
11
Removing the effect of a significant increase
of one client filing in the prior year, IPH
experienced patent filing growth of 8.4 per
cent across its key Asian jurisdictions (excluding
Singapore) in FY21, with growth across all key
jurisdictions (except Vietnam). Filings declined
by 5 per cent when this client’s filings are
included in the prior year comparison.
China and Hong Kong SAR continued to
perform well with patent filing growth of 12 per
cent and 10 per cent respectively. In Singapore,
IPH Group strengthened its number one patent
market share of 25.9 per cent for the period
ending 30 June 2021 with a 1 per cent increase
in patent filings, despite a strong comparative
prior period which included the closure of the
foreign route system.
The overall trade mark market in Australia
increased by 18 per cent. Excluding self-filers,
the market increased by 24 per cent. IPH trade
mark filings increased by 8 per cent and the
Group maintains its number one trade mark
market position in Australia with 20 per cent
share of filings from the top 50 agents.
Strategic progress
IPH’s strategy is focused on organic growth,
consolidating acquisitions and pursuing
growth step-out opportunities. During FY21
the Company made continued progress in
each of these areas.
We continued to leverage our leading network
in IP jurisdictions across the Asia Pacific region
with an increase in client referrals leading to
organic growth.
The consolidation of the Xenith IP and
Baldwins IP acquisitions is generating
synergies which is driving earnings growth
and margin accretion whilst enhancing our full
service offering to clients.
More recently, the acquisition of Applied Marks
Pty Ltd accelerates our digital capability while
allowing us to address the retail online trade
mark market. It also bolsters IPH’s ability to
participate in the online automated IP services
space and will support IPH in evolving its
traditional trade mark offering in line with the
changing market. Over time we expect to
harness this digital expertise in related areas of
IP across the regions where we operate.
Our autonomous time-keeping software
application, WiseTime, was enhanced through
the development and addition of a billing
module called Legebill. Both the original
application and this new functionality have
seen an increase in interest from existing and
prospective customers.
Focus on our people
We continue to focus on attracting, motivating,
developing, and retaining our people across
the group.
At the senior level, we were pleased to appoint
a new Chief Commercial Officer for IPH in
July 2021, while new Managing Directors were
appointed in Spruson & Ferguson, Griffith Hack
and AJ Park and a General Manager in Pizzeys
during the year.
FY21 was a record year for promotions for the
IPH group with 35 promotions across member
firms, including 11 Principal appointments.
The breadth and depth of promotions across
the member firms highlights the collective
strength of talent across the group.
IPH continues to invest in the future of the IP
profession with 32 trainee attorneys across the
group as at 30 June 2021.
Summary
During FY21 IPH demonstrated our ability
to continue to create enhanced value from
acquisitions and the right-sizing of our
acquired businesses to achieve a more
efficient operating model.
I want to acknowledge and thank all our people
across IPH for their hard work and dedication
during the year.
We are building a stronger platform with
increased operational leverage for further growth.
At the same time IPH maintains a solid financial
position with low gearing and consistent
cash generation which enables us to assess
further growth options, including potential
international acquisition opportunities in core
secondary IP markets.
Kind regards,
Andrew
Dr Andrew Blattman
CEO and Managing Director
IPH Limited
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2021 Annual Report
12
IPH Board of Directors
The Board of Directors bring relevant experience and skills to
the governance of IPH, including professional services, financial
management, legal services and corporate governance.
Richard Grellman AM
Dr Andrew Blattman
Independent Non-executive Chairman
CEO and Managing Director
FCA
BScAgr (Hons 1), PhD, GraDipIP
Richard was appointed independent
Non-executive Chairman in September 2014.
Richard worked for KPMG for 32 years, mostly
within the Corporate Recovery Division and
was a Partner from 1982 to 2000. Richard is
currently the Tribunal of the Statutory and
Other Officers Remuneration Tribunal (SOORT),
appointed by the Governor of NSW. Richard is
also Chairman of FBR Ltd, Lead Independent
Director of F45 Training Holdings Inc (NYSE)
and Lead Independent Director of the
Salvation Army in Australia.
Andrew has more than 20 years’ experience in
the intellectual property profession. Previously
he was CEO of Spruson & Ferguson, the largest
entity in the IPH Limited group. Andrew joined
Spruson & Ferguson in 1995 and in 1999 he was
appointed as a Principal of the firm.
In 2015 Andrew was appointed CEO of Spruson
& Ferguson. Under his leadership Spruson &
Ferguson significantly expanded its footprint in
the Australian and Asian IP markets – opening
new offices in Melbourne, Beijing, Hong Kong
SAR, Jakarta and Bangkok.
Richard was also formerly Chairman of
Genworth Mortgage Insurance Limited,
Chairman of Bisalloy Steel Group Ltd (2014-
2020), Chairman of the AMP Foundation,
Chairman of SuperConcepts Pty Ltd (AMP)
and Director of the National Health and
Medical Research Council Institute for
Dementia Research.
Since Spruson & Ferguson’s incorporation and
the listing of IPH on the Australian Securities
Exchange in 2014, Andrew has played a key
role in the development and growth of the
IPH group. He has a deep knowledge and
understanding of the IPH business and the
environment in which the company operates.
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2021 Annual Report
13
John Atkin
Robin Low
Jingmin Qian
Independent Non-executive
Director
Independent Non-
executive Director
Independent Non-executive
Director
BCom, FCA, GAICD
BEc, MBA, CFA, FAICD
Robin was appointed as a
Non-executive Director in
September 2014.
Jingmin was appointed as a
Non-executive Director in
April 2019.
Robin is a Director of AUB
Group Limited, Appen
Limited, Marley Spoon AG,
Australian Reinsurance Pool
Corporation, Gordian Runoff
Limited/Enstar Australia
Holdings Pty Ltd (part of the
NASDAQ listed Enstar Group),
Guide Dogs NSW/ACT and
the Sax Institute. Robin is
also on the University of New
South Wales audit committee
and was formerly Deputy
Chairman of the Auditing and
Assurance Standards Board.
Robin was with
Pricewaterhouse Coopers
for 28 years and was a
partner from 1996 to 2013,
specialising in audit and risk.
Jingmin is a Director of Abacus
Property Group, Trustee of
Club Plus Super, a member of
Macquarie University Council, a
Director of the Australia China
Business Council, Director of
the Foundation for Australian
Studies in China and a Director
of the CFA Society of Beijing.
She is also a senior advisor to
leading global and Australian
organisations and Director of
Jing Meridian Advisory Pty Ltd.
Jingmin previously held senior
roles with L.E.K. Consulting,
Boral Limited and Leighton
Holdings, and brings a
broad range of commercial
experience covering strategy,
mergers and acquisitions,
capital planning, investment
review and Asian expansion.
LLB (1st Class Hons),
BA (Pure Mathematics)
(1st Class Hons), FAICD
John was appointed as a
Non-executive Director in
September 2014.
John is Chairman of the Australian
Institute of Company Directors,
and Qantas Superannuation
Limited. He is a Director of
Integral Diagnostics Limited,
Commonwealth Bank Officers
Superannuation Corporation Pty
Limited and is Vice Chairman of
Outward Bound International Inc.
John is a former Chief Executive
Officer and Managing Director
of The Trust Company
Limited (2009-2013) prior to
its successful merger with
Perpetual Limited, a former
non-executive director of
Aurizon Holdings Limited (2010-
2016), and former Chairman of
GPT Metro Office Fund (2014-
2016). 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 15
years (1987-2002).
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2021 Annual Report
14
Note: Directors’ profiles as at August 2021
Corporate Directory
Corporate Directory
Directors
Mr Richard Grellman AM - Chairman
Dr Andrew Blattman
Mr John Atkin
Ms Robin Low
Ms Jingmin Qian
Company Secretary
Mr Philip Heuzenroeder
Notice of Annual
General Meeting
Registered office
IPH will hold its 2021 Annual General Meeting on
Thursday 18 November 2021, commencing at 10.30am (AEDT).
Level 24, Tower 2, Darling Park
201 Sussex Street, Sydney NSW 2000
Tel: 02 9393 0301
Fax: 02 9261 5486
Principal place of business
Level 24, Tower 2, Darling Park
201 Sussex Street, Sydney NSW 2000
Share register
Auditor
Solicitors
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 23, 85 Castlereagh 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 has been
approved by the Board of Directors and can be
found at www.iphltd.com.au
iphltd.com.au
2021 Annual Report
16
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 2021.
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 including some of the world’s leading companies, multi-nationals,
universities, public sector research organisations, foreign associates and other corporate and individual clients.
IPH was 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
Dr Andrew Blattman
Managing Director and Chief Executive Officer
Mr John Atkin
Ms Robin Low
Non-executive Director
Non-executive Director
Ms Jingmin Qian
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:
Richard worked for KPMG for 32 years and was a Partner from 1982 to 2000. Richard is currently
the Tribunal of The Statutory and other Officers Remuneration Tribunal (SOORT), appointed by the
Governor of NSW in 2014.
Other current
directorships:
Richard is Chairman of FBR Ltd and Lead Independent Director of F45 Training Holdings Inc
(NYSE). Richard is also Lead Independent Director of Salvation Army in Australia.
Former directorships
(last 3 years)
Chairman of the AMP Foundation (2012 – 2018), Bisalloy Steel Group Ltd (2014 - 2020)
and SuperConcepts Pty Ltd (AMP) (2012 – 2019).
Interests in shares:
54,108
Special responsibilities:
Chairman. Member – Nominations and Remuneration Committee
Annual Financial Report
iphltd.com.au
2021 Annual Report
18
Page 3
Name:
Title:
Dr Andrew Blattman
Managing Director and Chief Executive Officer (appointed 20 November 2017)
Qualifications:
BScAgr (Hons 1), PhD, GraDipIP
Experience and
expertise:
Andrew has more than 20 years’ experience in the intellectual property profession. Previously he
was CEO of Spruson & Ferguson, the largest entity in the IPH Limited group. Andrew joined
Spruson & Ferguson in 1995 and in 1999 he was appointed as a Principal of the firm.
In 2015 Andrew was appointed CEO of Spruson & Ferguson. Under his leadership Spruson &
Ferguson significantly expanded its footprint in the Australian and Asian IP markets – opening new
offices in Melbourne, Beijing, Hong Kong SAR, Jakarta and Bangkok.
Since Spruson & Ferguson’s incorporation and the listing of IPH on the Australian Securities
Exchange in 2014, Andrew has played a key role in the development and growth of the IPH group.
He has a deep knowledge and understanding of the IPH business and the environment in which the
company operates.
Memberships of
Professional Associations:
FIPTA, APAA, AIPPI, FICPI and IPSANZ
Other current
directorships:
St Paul’s College Foundation
Interests in shares:
2,323,751
Special responsibilities:
CEO
Name:
Title:
John Atkin
Non-executive Director (appointed 23 September 2014)
Qualifications:
LLB (1st Class Hons), BA (Pure Mathematics) (1st Class Hons), FAICD
Experience and
expertise:
Other current
directorships:
Former directorships
(last 3 years)
John is a former Chief Executive Officer and Managing Director of The Trust Company Limited
(2009 - 2013) prior to its successful merger with Perpetual Limited, a former non-executive director
of Aurizon Holdings Limited (2010-2016), and former Chairman of GPT Metro Office Fund (2014-
2016). 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 15 years (1987 -
2002).
John is Chairman of the Australian Institute of Company Directors, and Qantas Superannuation
Limited, and Vice Chairman of Outward Bound International Inc. He is a director of Integral
Diagnostics Limited.
Commonwealth Bank Officers Superannuation Corporation Pty Limited
Interests in shares:
121,053
Special responsibilities:
Chairman - Nominations and Remuneration Committee. Member - Audit Committee, Risk
Committee
Annual Financial Report
iphltd.com.au
2021 Annual Report
19
Page 4
Name:
Title:
Robin Low
Non-executive Director (appointed 23 September 2014)
Qualifications:
BCom, FCA, GAICD
Experience and
expertise:
Other current
directorships:
Robin was with PricewaterhouseCoopers for 28 years and was a Partner from 1996 to 2013,
specialising in audit and risk.
Robin is a Director of AUB Group Limited, Appen Limited, Marley Spoon AG, Australian
Reinsurance Pool Corporation, Gordian Runoff Limited/Enstar Australia Holdings Pty Ltd (part of the
NASDAQ listed Enstar Group), Guide Dogs NSW/ACT and the SAX Institute. Robin is also a
member of the University of New South Wales audit committee and is a former Deputy Chairman of
the Auditing and Assurance Standards Board.
Former directorships:
CSG Limited
Interests in shares:
74,214
Special responsibilities:
Chairman - Audit Committee. Member - Nominations and Remuneration Committee, Risk
Committee
Name:
Title:
Jingmin Qian
Non-executive Director (appointed 1 April 2019)
Qualifications:
BEc, MBA, CFA, FAICD
Experience and
expertise:
Other current
directorships:
Jingmin previously held senior roles with L.E.K. Consulting, Boral Limited and Leighton Holdings,
and brings a broad range of commercial experience covering strategy, mergers and acquisitions,
capital planning, investment review and Asian expansion.
Jingmin is a Director of Abacus Property Group, Trustee of Club Plus Super, a member of
Macquarie University Council, a Director of the Australia China Business Council and a Director of
the Foundation for Australian Studies in China. She is also a senior advisor to leading global and
Australian organisations and Director of Jing Meridian Advisory Pty Ltd.
Interests in shares:
Nil
Special responsibilities:
Chairman - Risk Committee. Member – Audit Committee, Nominations and Remuneration
Committee
The non-executive directors hold no interest in options, performance rights or contractual rights to the securities of IPH
Limited as at the date of this report.
Annual Financial Report
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2021 Annual Report
20
Page 5
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 2021,
and the number of meetings attended by each Director were:
Name
Board of
Directors
Nominations and
Remuneration Committee
Audit
Committee
Risk
Committee
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Richard Grellman AM
Andrew Blattman
John Atkin
Robin Low
Jingmin Qian
9
9
9
9
9
9
9
9
9
9
3
-
3
3
3
3
-
3
3
3
-
-
4
4
4
-
-
4
4
4
-
-
3
3
3
-
-
3
3
3
Held: represents the number of meetings held during the time the Director held office. Whilst not a member
of the committees Andrew Blattman was in attendance except in circumstances of a conflict of interest.
2. Company secretary
Philip Heuzenroeder, BEc, LLB, LLM, GAICD (Order of Merit). Mr Heuzenroeder was appointed Group General Counsel
and Company Secretary on 29 April 2016. He is a solicitor with over 25 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,
intellectual property and litigation. Philip was formerly a Principal of Spruson & Ferguson Lawyers and was a director of
the Cure Brain Cancer Foundation from 2013 to 2017.
3. Principal activities
During the year the principal activities of the Group consisted of:
• IP services related to provision of filing, prosecution, enforcement and management of patents, designs, trademarks
and other IP in Australia, New Zealand, Asia and other countries;
• the development of autonomous timekeeping software under a subscription licence model whereby the software is
licensed and paid for on a recurring basis.
There were otherwise 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 Directors believe it is important to include the financial information on an underlying basis as this reflects the
ongoing or underlying activities of the Group and excludes items that are not expected to occur frequently and do not
form part of the core activities of the Group.
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The FY21 underlying earnings of the Group have been determined by adjusting statutory earnings amounts to eliminate
the effect of amortisation of intangible assets, business acquisition costs, restructuring expenses, non-cash share based
payments expenses, impairments and IT SaaS implementations costs. A summary of adjustments is outlined in section
4.1.1.
Revenue declined by 2% to $363.5m, driven by organic growth in Asia, offset by the negative impact of a higher
Australian dollar in FY21 compared to the prior year.
Statutory EBITDA was flat at $113.3m, compared to $113.2m in FY20. Underlying EBITDA declined by 1% to $124.3m
from $126.0m for the prior year.
The Group reported a statutory net profit after tax of $53.6m; a decline of 2% on the prior year’s result of $54.8m.
Underlying net profit after tax decreased by 2% to $76.2m compared to the prior year.
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Australia and New Zealand IP
Underlying revenue in the Australia and New Zealand IP segment declined by 1% to $275.7m.
In Australia, total patent filings (excluding innovation patents which cease to be available from August 2021) increased
by 2.6% for the period. IPH Group’s filings (including Baldwins IP on a pro-forma basis and excluding innovation
patents) declined by 4.8%, however, excluding the impact of the reset of the merged Griffith Hack into a higher margin
and more profitable business, IPH’s filings increased by 0.7%.
IPH remains the market leader in Australia with combined group patent market share (including Baldwins IP on a
proforma basis and excluding innovation patents) of 36.2% for the year to 30 June 2021.
Underlying EBITDA decreased by 2% to $93.3m which includes the impact of unfavourable foreign exchange
movements.
On a like for like basis revenue declined by 3%. However, the delivery of cost synergies from the successful Xenith
integration resulted in a 7% uplift in like-for-like EBITDA. The main contribution to this increase was the improvement
in Underlying EBITDA margin of the former Xenith IP business to 28%.
Asian IP
Revenue in the Asian IP segment declined by 6% to $96.1m. On a like for like basis revenue increased by 3%. Like for
like Underlying EBITDA improved by 8%.
Total filings across IPH’s key Asian jurisdictions (excl Singapore) declined by 5% in FY21. However, the prior year
included a significant increase in filings from one client filing across multiple jurisdictions. Removing the effect of this
one client, IPH experienced patent filing growth of 8% with growth across all key jurisdictions (except Vietnam).
China and Hong Kong, SAR continued their improved performance from the first half with year on year patent filing
growth of 12% and 10% respectively
For the first half of CY21, the Group has strengthened its number one patent market share position in Singapore (all
patent applications filed in Singapore).
Adjacent Businesses
The Group continues to invest in WiseTime, an autonomous time-keeping software application. In FY21 the product
offering was enhanced through the development and addition of a billing module called Legebill. Both the original
application and this new functionality have seen an increase in interest from existing and prospective customers.
Movements in FX Rates
Foreign exchange rates used to translate earnings throughout the period were:
AUD/USD
AUD/EUR
AUD/SGD
Year End
Average
Year End
Average
Year End
Average
FY19
FY20
0.7022
0.7153
0.6176
0.6270
0.9500
0.9765
0.6877
0.6712
0.6124
0.6069
0.9591
0.9283
Movement
6.2%
3.2%
4.9%
FY21
0.7507
0.7472
0.6320
0.6262
1.0095
1.0055
Movement
(11.3%)
(3.2%)
(8.3%)
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The average exchange rates incurred in FY21 had an adverse effect on the reported results compared to those incurred
during FY20. A one cent movement in the AUD/USD equates to a c$1.9m movement in service charges (revenue), the
majority of which falls to the EBITDA line.
4.1.1 Adjustments to Statutory Results
The internal reporting that is regularly provided to the chief operating decision makers includes financial information
prepared on both a statutory and underlying basis. It is considered important to include the financial information on an
underlying basis as this reflects the ongoing or underlying activities of the Group and excludes items that are not
expected to occur frequently and do not form part of the core activities of the Group.
Adjustments to the statutory EBITDA for FY21 have been made for:
• Business acquisition costs – costs incurred in the pursuit of acquisitions which have been completed, not
ultimately pursued or are currently in progress.
• New business establishment costs – costs of establishing new offices.
• Restructuring expenses – costs of restructuring across the Group. In the current year these predominately related
to the integration of Xenith IP and Baldwins businesses.
• Share based payments – accounting charges for the share-based incentive plans.
• IT systems implementation costs - one off costs associated with the implementation of new SaaS based general
ledger and HRIS. This is new for FY21 following clarification of the treatment of upfront configuration and
customisation costs incurred in implementing SaaS arrangements by the IFRS Interpretations Committee (IFRIC) .
Previous treatment would be to capitalise these costs which would subsequently flow through the statement of profit
& loss as amortisation.
4.2 Business model, strategy and outlook
4.2.1 Business model
IPH Limited is an intellectual property group operating a number of professional services businesses providing
intellectual property services (“IP Services”). In FY21 it also operated the WiseTime business, an autonomous time-
keeping software application.
In IPH’s IP Services businesses in Australia, New Zealand and Asia, 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 (directly or through an agent) 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.
Factors that affect the performance of the business 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.
4.2.2 Strategy
IPH vision, mission and values
From the Company’s foundation and listing on the ASX in November 2014, IPH has been pursuing its vision of
becoming the leading IP group in IP secondary markets and adjacent areas of IP.
From its origins in 1887 as Spruson & Ferguson, IPH’s success continues to be underpinned by the key drivers and
values at the core of our businesses, which remain unchanged:
• Excellence in service delivery to our clients
• Innovation in value creation
• Integrity in business practices
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• Efficiency and effectiveness in operations
• Empowerment and engagement of our people
Value creating growth strategies
IPH’s seeks to achieve its goals through implementation of strategic initiatives in five key areas:
• Australian and New Zealand IP businesses
• Asia IP businesses
• Other secondary IP markets
• Adjacent to IP markets
• Business improvements and operations
Australian and New Zealand IP businesses
A key objective of all IPH’s Australia and New Zealand businesses is to continue to organically grow the volume of
filings, market share and revenue across all disciplines, and to invest in providing superior service to global customers
consistent with the longstanding strength and reputation of its brands, AJ Park, Griffith Hack, Pizzeys, Shelston IP and
Spruson & Ferguson.
IPH’s Australia and New Zealand businesses are also an important part of the Asian growth strategy in that they are a
valuable source of filings and revenue into IPH’s Asian business. The successful acquisition of the Xenith IP businesses
in August 2019 and subsequent integration provides an additional opportunity for professionals in these businesses to
offer a pan-Asian filing solution to their clients.
Asian IP businesses
Asia has been a key part of the Group’s strategy since the opening of the Singapore office in 1997. In recent years IPH
has supported its Asian growth strategy with the opening of offices in Thailand and Indonesia and expanding into China
and Hong Kong through the acquisition of Ella Cheong Hong Kong and Beijing (re-branded Spruson & Ferguson). The
expansion provides a strong platform to extend the provision of IP services to new geographical areas for existing
clients and an improved multi-country service offering for potential new clients. The key focus for IPH’s Asian business
is to leverage existing infrastructure for further organic growth. IPH will continue to assess potential organic and M&A
opportunities in Asia as they arise.
Other secondary IP markets
IPH has adopted a strategic and disciplined approach to the assessment of any potential M&A opportunities in Asia-
Pacific and other secondary IP markets. First and foremost, the growth opportunities are evaluated on the extent to
which they help to achieve IPH’s strategic objectives. IPH continues to evaluate potential acquisition opportunities in
international secondary markets.
Business improvements and operations
The Group will continue to focus on the optimisation of all IPH’s businesses with a view to extract operational
efficiencies and improve the quality of service for our clients.
4.2.3 FY22 priorities
IPH’s strategic priorities include maintaining its leading positions in Australia, New Zealand and Singapore, and seeking
to expand in other secondary market jurisdictions.
The completion of integration of Baldwins IP into AJ Park provides IPH with a strong opportunity to leverage its position
in that market.
The Company will continue to build on its positive momentum in leveraging its Asian network to expand organic revenue
opportunities and grow market share in high growth markets across the region.
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As announced on 1 July 2021 the Company acquired Applied Marks Pty Ltd, a leading online automated trade mark
application platform. This acquisition strengthens IPH’s position in automated IP services and enhances its digital
strategy.
IPH maintains a solid financial position with low gearing and consistent cash generation which enables the Company to
continue to assess further growth options, including potential international acquisition opportunities in core secondary IP
markets.
4.3 Risks
During FY21 the Company took steps to identify, assess and manage risks in accordance with its risk management
framework. This section provides a summary of the material risks identified by the Company which may have an impact
on the Company’s ability to achieve its operational, financial and strategic targets and the Company’s approach to the
management of such risks.
Risk
Description
Management of risk
Strategic planning
and implementation
The Company conducts its operations in a market that has
undergone significant changes with the development of
corporatised service providers, which the market continues
to adjust to. This provides the Group with both opportunities
and risks requiring development and communication of a
clear strategic vision and objectives.
The Board is closely involved in identifying, reviewing and confirming strategic
objectives and reviewing implementation, including assessing opportunities and
risks, and in providing direction to management.
Competition and
changing market
conditions
The sectors in which the Company operates are subject to
vigorous competition, based on factors including price,
service, innovation and the ability to provide the customer
with an appropriate range of IP services in a timely manner.
Scope exists for market conditions to change over time
reflecting economic, political or other circumstances.
Regulatory
environment
The Company is subject to significant regulatory and legal
oversight.
Effective client service, comprising a high level of expertise at competitive prices
delivered in a timely manner.
The IPH Group continues to implement leading IT systems to support client
services.
Regular marketing visits or, where travel is not possible, virtual meetings or other
forms of communication, to maintain and develop client relationships and
understand potential changes in client needs, and internal and external pressures.
IPH also provides a broad range of IP services and its operations are
geographically widespread, reducing exposure to any one form of IP country or
jurisdiction in which it operates.
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.
Compliance with a professional work approval process for outgoing work. The
approval process is correlated to the complexity and level of potential risk
associated with the work.
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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, proposals to streamline multi-
jurisdictional patent filing and examination processes.
The Company is proactive in any review or evaluation of regulations likely to
affect its operations materially, and works with regulators or review authorities
to ensure a clear understanding of facts and circumstances, and consideration
of all stakeholder perspectives.
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 including loss of knowledge and
relationships. Employee costs represent a significant
component of the Group’s total cost base.
Disintermediation,
adjacent service
providers and third party
aggregation
The Group acts as an intermediary agent between its clients
and IP offices. The removal of intermediaries in the IP
application and registration process would have an adverse
impact on the Group.
It is possible that third party service providers that currently
only provide services with respect to limited aspects of IP
protection may seek to extend their relationships with clients
into other aspects of the provision of IP services that the
Group currently services causing a diminution of
relationships with clients.
Third party aggregators, such as third parties offering IP
provider “brokerage”-like services may have an adverse
impact on the Group’s relationships with clients
Case management
and technology
systems
The Group’s internally customised systems represent an
important part of its operations upon which the Group is
reliant.
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 consider the development of revenue streams
from adjacent markets.
Retention practices including conducting regular employee surveys and
implementing initiatives to improve the employee experience, appropriate
remuneration, incentive programmes (both short and long term having regard
to appropriate key performance indicators), retention awards, working
environment and rewarding work. Learning and development programs are in
place to attract, develop and build the capability of our workforce to meet our
current and future needs of clients.
Remove single point of failure by where practicable maintaining relationships
with clients through multiple contact points. Dilute the dependency on
personnel by providing value-add services through technology.
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 factors which help safeguard the Company’s intermediary role are
effective technology, excellent client service and efficient operations. The
Company also 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 disintermediation or expansion by other providers.
The “network effect” provided by the Group in bringing together a portfolio of
member firms supported by leading infrastructure and providing services
across multiple jurisdictions may reduce the risk of disintermediation and third
party aggregation and may provide an opportunity for the Group to secure its
own additional clients.
The Company has established business continuity plans and procedures and
maintains system back up and maintenance processes. The Company
conducts appropriate reviews of its information technology systems,
operations and human resourcing, and its management of cyber risk. The
Company continually invests in system enhancements and engages quality
third party suppliers to assist with its systems development and maintenance.
The Company’s transition of its IT systems to offsite ‘cloud-based’ systems
enables centralised oversight and standardisation of processes.
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Risk
Description
Management of risk
Technology
disruption
The increasing use of electronic systems and processes
and technology by regulatory authorities in some markets
may provide opportunities for technology disruption in the
industry.
Foreign
exchange risk
The Group’s financial reports are prepared in Australian
dollars. However, a substantial proportion of the Group’s
sales revenue, expenditure and cash flows are generated
in, and assets and liabilities are denominated in US dollars,
Euros and Singapore dollars.
Conflict of duties
Australian and New Zealand patent and trademark
attorneys are required to abide by the Code of Conduct for
Trans-Tasman Patent and Trade Marks Attorneys 2018
(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 with
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.
An amendment to the Code of Conduct may affect the
manner in which the Group conducts its activities,
particularly with the expansion of the Group to include
additional member firms.
Standardisation, removal of technical debts and the introduction of IT change
control stabilises the systems and improves reliability.
The need for the Company’s services is safeguarded by the reliance of target
clients 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.
Targeted acquisitions of new technologies also increase the services offered
by the Group.
Other factors which help safeguard the Company against technology
disruption include its own investment in and awareness of effective technology
development, and in efficiency in operations. The Company also seeks to offer
its services in a range of secondary markets. Many of these markets have less
developed IP regulations and electronic systems, are less advanced
technologically and require technical translations into languages other than
English.
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 and
has engaged in appropriate use of foreign currency denominated finance
facilities to reduce exposure. The Chief Financial Officer regularly reports to
the Board in respect of the Company’s foreign currency exposures. The Board
reviews its hedging policy in respect of the foreign currency exposures from
time to time. Currently the Group does not directly hedge against its foreign
currency exchange risk.
The Company has been proactive in any review or evaluation of regulations
likely to affect its operations materially and works with regulators or review
authorities to ensure a clear understanding of facts and circumstances, and
consideration of all stakeholder perspectives.
The Company has sought detailed advice on issues of conflict of interest and
compliance with related professional obligations. The Company actively
assists its member firms to implement appropriate processes and procedures
for compliance, including relevant professional standards bodies’ Codes of
Conduct and Professional Rules.
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.
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 in place a comprehensive 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.
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Risk
Description
Management of risk
Acquisitions
The Company’s growth strategy may include the acquisition
of other IP businesses. Risks arise in ensuring that potential
acquisitions are appropriately selected and issues affecting
the value of individual acquisitions are identified and
reflected in the purchase considerations.
The Company assesses potential acquisition opportunities against the
Company’s strategic objectives, values and culture. Where an appropriate
potential acquisition is identified the Company undertakes an extensive due
diligence process and, where appropriate, engages competent professional
experts to assist with the due diligence process and appropriate
documentation of the transaction. The Company’s Board is involved in the
review of, and approves, all corporate acquisitions.
Integration of
acquired businesses
Following the acquisition of new businesses, risks arise in
ensuring the acquired business is properly integrated into
the IPH Group, that people and culture issues that may
arise are addressed, key staff retained and value
maintained.
The Company seeks to identify potential post-acquisition risks when assessing
potential acquisitions including for cultural fit and matching of expectations,
and to mitigate such risks by appropriate transaction and post-acquisition
management structures. Steps are taken following acquisition to review and
ensure appropriate on-boarding of new acquisitions with IPH governance,
policies, processes and practices and levels of financial control and reporting,
and to integrate Company and Group approaches to retention of key staff and
utilisation of appropriate information technology platforms. The integration of
new acquisitions is regularly reviewed by the Company’s Board and relevant
Board Committees.
Management of an
expanded group
With the expansion of the Group to include new businesses
with multiple offices and across multiple jurisdictions risk
may arise with respect to ensuring the appropriate
structuring and resourcing of key management and shared
services functions and appropriate reporting and oversight
of Group operations.
As the Group expands, with the oversight of the Board, the Company reviews
and adapts existing management structures to ensure appropriate oversight,
reporting requirements, support and resourcing is in place, and that the
Company is attracting, retaining and motivating appropriate skilled personnel.
Global or regional
economic, health or
physical events
Risk may arise as a result of global or regional events in
the nature of natural disasters or other physical events,
global or regional health events, including the global Covid-
19 Pandemic, or global or regional economic shocks which
may impact on the level of demand for IP services by
clients and their ability to provide or confirm instructions,
the capability and timing for IP regulatory authorities to
accept, review and progress the prosecution of IP rights,
and the ability of the Group to provide its services.
The nature of the Group’s customer base means that it receives revenue from
a large number of customers located in a range of jurisdictions such that no
one customer accounts for more than a small percentage of the overall
revenue of the Group.
Further much of the demand for patent related services arises from research
and development programmes conducted over longer periods that are likely to
be less susceptible to economic impacts in the short term. The IP prosecution
process also generally extends over longer timeframes and is usually subject
to certain fixed milestone steps which are known in advance and required to
be met to preserve rights, providing a degree of protection against short term
decisions to cease or delay prosecution.
The Company has established business continuity plans and procedures. The
Company’s transition of its IT systems to offsite ‘cloud-based’ systems
enables remote conduct of its business by employees, where required.
Similarly, the ability of many customers and IP offices to continue their core
operations in a remote environment facilitates ongoing provision of instructions
and responses.
As part of its COVID-19 pandemic, response the Company has implemented
comprehensive COVID-19 response and safety plans across all offices to
ensure the ongoing safety and wellbeing of our people, our clients and our
communities. Member firms have implemented a range of initiatives to ensure
continued connectivity and interaction with their clients, and the Company and
member firms monitor the impact of the pandemic on business activity so that
appropriate responses can be implemented.
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5. Remuneration report (audited)
5. Remuneration report (audited)
Introduction from the Nominations and Remuneration Committee Chair
Introduction from the Nominations and Remuneration Committee Chair
Dear Shareholders,
Dear Shareholders,
On behalf of the Board, I am pleased to present the Remuneration Report for the 2021 financial year.
On behalf of the Board, I am pleased to present the Remuneration Report for the 2021 financial year.
Last year’s Remuneration Report supplied significant detail as to the evolution of the group’s remuneration strategy
Last year’s Remuneration Report supplied significant detail as to the evolution of the group’s remuneration strategy
since listing which resulted in the alignment of the CEO’s remuneration in line with market as well as that of the
since listing which resulted in the alignment of the CEO’s remuneration in line with market as well as that of the
Chairman and Non-executive directors. This historical context has not been repeated this year.
Chairman and Non-executive directors. This historical context has not been repeated this year.
As foreshadowed in our last Annual Report, in light of the uncertain global outlook, annual pay reviews were delayed for
As foreshadowed in our last Annual Report, in light of the uncertain global outlook, annual pay reviews were delayed for
key management personnel (KMP) including the IPH Executive in FY21 (with the exception of promotions and
key management personnel (KMP) including the IPH Executive in FY21 (with the exception of promotions and
addressing anomalies). In January 2021 it was decided that FY21 KMP remuneration would remain at FY20 levels. For
addressing anomalies). In January 2021 it was decided that FY21 KMP remuneration would remain at FY20 levels. For
FY22, executive KMP fixed remuneration has increased by 2.0%, in addition to the increase in the Superannuation
FY22, executive KMP fixed remuneration has increased by 2.0%, in addition to the increase in the Superannuation
Guarantee cap. Pay review decisions for the KMP were informed by external benchmarking conducted by third party
Guarantee cap. Pay review decisions for the KMP were informed by external benchmarking conducted by third party
remuneration consultants which will be detailed later in the report.
remuneration consultants which will be detailed later in the report.
Despite the impact of FX headwinds on reported results, and the lingering impact of Covid-19 the Group exceeded its
Despite the impact of FX headwinds on reported results, and the lingering impact of Covid-19 the Group exceeded its
budgeted EBITDA target for STIP purposes on a constant currency basis. Pleasingly, the Group’s three year EPS
budgeted EBITDA target for STIP purposes on a constant currency basis. Pleasingly, the Group’s three year EPS
CAGR exceeded 9% resulting in an LTIP payout of the FY19 grant of approximately 63%.
CAGR exceeded 9% resulting in an LTIP payout of the FY19 grant of approximately 63%.
Additions to the FY21 Remuneration Report
Additions to the FY21 Remuneration Report
During the year I have had the opportunity to meet with shareholders and proxy advisors to receive their feedback on
During the year I have had the opportunity to meet with shareholders and proxy advisors to receive their feedback on
remuneration matters and seek to address any issues arising from the FY20 report, where appropriate. The following
remuneration matters and seek to address any issues arising from the FY20 report, where appropriate. The following
matters raised have been addressed in the body of the report:
matters raised have been addressed in the body of the report:
• Inclusion of EBITDA targets on a retrospective basis for KMP STI metrics and outcomes; and
• Inclusion of EBITDA targets on a retrospective basis for KMP STI metrics and outcomes; and
• further information on the award of STIP based upon non-financial KPIs for the KMP.
• further information on the award of STIP based upon non-financial KPIs for the KMP.
As the Company continues to grow and mature, we will continue to review the remuneration framework and settings for
As the Company continues to grow and mature, we will continue to review the remuneration framework and settings for
all executives and professional staff, including KMP, to ensure its ability to attract, motivate and retain the talent
all executives and professional staff, including KMP, to ensure its ability to attract, motivate and retain the talent
necessary to run the business, and simultaneously drive behaviour that aligns with the creation of sustainable
necessary to run the business, and simultaneously drive behaviour that aligns with the creation of sustainable
shareholder value.
shareholder value.
We look forward to your support and welcome your feedback on our Remuneration Report.
We look forward to your support and welcome your feedback on our Remuneration Report.
Yours sincerely,
Yours sincerely,
John Atkin
John Atkin
Nominations and Remuneration Committee Chair
Nominations and Remuneration Committee Chair
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Page 2
Page 2
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 topics:
• Overview of Executive Remuneration Framework and Guiding Principles
• Overview of Executive Remuneration
• 2021 Remuneration Outcomes
• Overview of Non-Executive Director Remuneration
• Details of Remuneration of Key Management Personnel
• Service Agreements
• Additional Disclosures Relating to Key Management Personnel
5.1 Overview of Executive Remuneration Framework
and Guiding Principles
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. The Board of Directors (the Board) ensures that executive reward
satisfies the following key criteria for good reward governance practices:
• competitiveness, fairness and reasonableness;
• acceptability to shareholders and other stakeholders;
• performance linkage and alignment of executive compensation with remuneration provided across the Group; and
• transparency.
The Nominations 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 people objectives. The
performance of the Group depends on the quality of its directors and other KMP. The remuneration philosophy is to
attract and retain high quality people and motivate high performance.
The NRC has structured an executive remuneration framework that is market competitive and complementary to the
strategy of the Group.
a) Alignment to shareholders’ interests:
• focuses on sustained growth in earnings per share as well as focusing the executive on key non-financial drivers of
value; and
• attracts and retains high calibre executives.
b) Alignment to participants’ interests:
• rewards capability and experience;
• reflects competitive reward for contribution to growth in shareholder wealth; and
• provides a clear structure for earning rewards.
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Aon Hewitt was engaged by the NRC to provide remuneration advice and other valuation services in relation to the
KMP, but did not provide the NRC with remuneration recommendations as defined under Division 1, Part 1.2, 9B(1) of
the Corporations Act 2001 (Cth). The Board was satisfied that advice received was free from any undue influence by
KMP to whom the advice may relate because strict protocols were observed and complied with regarding any
interaction between Aon Hewitt and management, and because all remuneration advice was provided to the NRC Chair.
5.2 Overview of 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 executive KMP for FY21 had the following components:
• base salary, short and long-term incentives and non-monetary benefits; and
• other remuneration such as superannuation and long service leave.
The combination of these comprises the executive KMP’s total remuneration.
In broad terms, fixed remuneration is set at or above median market levels compared to peers with similar revenues and
market capitalisation, while the short-term at-risk component is set at below median levels. The Board believes that the
“at-risk” component should be weighted towards long-term incentives, to align with long-term value creation for
shareholders.
Fixed Remuneration
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
NRC, based on individual performance, the overall performance of the Group and comparable market remuneration.
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.
In light of the uncertain global outlook and with reference to external benchmarking, KMP remuneration remained at
FY20 levels in FY21. For FY22, the Board reviewed the CEO’s remuneration against available remuneration
benchmarks for like businesses and roles provided by Aon Hewitt. The Board has also considered the composition of
remuneration in terms of the mix of fixed, and short and long-term at-risk incentives. Following such review, the
Directors increased the KMP’s fixed remuneration by 2.0%, in addition to the Superannuation Guarantee cap.
Variable Remuneration
Short and long-term incentives remained at 33% for the CEO and 25% for the CFO, with a stronger focus on alignment
through the long-term incentives at 100% for the CEO and 75% for the CFO. Incentives continue to be reviewed
annually by the NRC. The mix of remuneration is illustrated below:
Remuneration Mix
Andrew Blattman
43%
14%
43%
John Wadley
50%
12%
38%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed
STI
LTI
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Long term incentive
Under the long-term incentive plan, the CEO and CFO are issued Performance Rights which entitle the holder at the
Vesting Date to an equivalent number of Shares subject to satisfying defined vesting conditions.
Performance Rights will vest on the Vesting Date subject to the Company’s achievement of a minimum compound
annual growth rate (CAGR) in Earnings Per Share over the Performance Period. EPS performance will be assessed on
the basis of the Company’s EPS performance during the relevant Performance Period compared to the EPS targets for
that period as determined by the Board.
The Board will determine a target for EPS for the Performance Period (EPS Target) and a minimum target for EPS for
the Performance Period (Minimum EPS Target) prior to any issue from year to year. For vesting to occur, EPS for the
Performance Period must be at least equal to the Minimum EPS Target.
In the prior year, the Board had reviewed the Long-Term Incentive (LTI) Earnings Per Share (EPS) targets, taking into
account shareholder feedback and appropriate levels of growth for IPH to pursue in the markets in which the Group
operates. As a result, the LTI targets for the KMP as outlined below were re-calibrated to align with internal objectives
and external expectations whilst maintaining an appropriate level of stretch.
The Board also considered in the past the possible inclusion of an additional performance conditions based on
alternative measures including those based upon capital returns however assessed they were not appropriate for
inclusion. The Board will ensure that management continues to apply a disciplined approach to investing the Group’s
capital when evaluating acquisitions and other investment opportunities.
The table below outlines how Performance Rights issued in calendar 2021 (the FY22 Plan) will vest based on the
Company’s EPS performance over the Performance Period (measured by calculating the CAGR between EPS for FY21
and EPS for FY24.
EPS in FY24
Percentage of Performance Rights that Vest
Less than 5% CAGR in EPS over the Performance Period
Equal to 5% CAGR in EPS over the Performance Period
Nil vesting
25% vesting
CAGR in EPS greater than 5%, up to and including 12.5%
Pro-rated vesting on a straight-line basis
CAGR in EPS over the Performance Period
At or above 12.5% CAGR in EPS over the Performance Period
100% vesting
Dividends will not be paid on Performance Rights.
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5.3 2021 Remuneration Outcomes
The Group aims to align its Executive remuneration to its strategic objectives and the consequences on shareholder’s
financial wealth. The evolution of the Group’s remuneration policy aligns with the growth in the business in the last five
financial years as summarised below:
2017
2018
2019
2020
2021
NPAT (‘000)
42,893
40,673
53,112
54,752
53,600
EPS (cents per share)
Underlying EPS (cents per
share)
22.5
26.7
20.8
26.4
26.9
31.7
25.9
24.8
36.6
35.0
Dividends Paid (‘000)
40,924
42,823
51,360
61,015
62,432
Total Dividends (cents per
share)
Share Price (30 June closing
price)
22.0
22.5
25.0
28.5
29.5
$4.80
$4.45
$7.46
$7.46
$7.80
Return of Capital (‘000)
-
2,727
-
-
-
2021 STIP Outcomes – Summary of plan design
Financial KPI – The KMP (maximum 50% of STIP Opportunity) have the attainment of the Group Underlying EBITDA
budget (on an FX adjusted or constant currency basis) as their financial target. Group Underlying EBITDA was selected
as it is the most common measure used to assess the group’s financial performance.
Strategic KPI’s – The KMP (maximum 50% of STIP Opportunity) have the attainment of a number individual objectives
in line with the Board approved strategy of:
• Consolidation of acquisitions; organic growth; and growth step-outs. (30%)
• People and culture (20%)
2021 STIP Outcomes – Performance commentary
The Group achieved an Underlying EBITDA of $124.3M despite FX headwinds. The average AUD/USD rate in FY21
was 0.747c versus a rate of 0.671c in the prior year. A 1c movement in this rate impacts service charges by
approximately $1.9M on an annualised basis.
This outcome included the acquisitive impact of the Baldwins IP business in NZ and continued strong organic EBITDA
growth from the Asian and ANZ businesses. Dividends to shareholders increased by 3.5%.
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Financial KPI
The financial KPI is calculated on a constant currency basis and has a base, target and a stretch, as outlined in the
table below.
Achievement
97.5%
100%
102.5%
Payout Ratio
50%
75%
100%
The purpose of a constant currency calculation is to remove the impact of the difference between actual exchange rates
incurred and the budgeted rate. The key exposure of the Group is to the USD. The budgeted AUD:USD for FY21 was
0.70c. The actual average rate incurred was 74.7c.
The table below outlines the calculation of the constant currency EBITDA for comparison to budget EBITDA:
• the base is the “underlying” EBITDA;
• the first adjustment removes FX gains and losses recorded in the financial accounts while the second reflects the
difference in exchange rates at which revenue and expense items were recorded versus the budgeted rate; and
• this is then compared to the Group budget which was adjusted to allow for the acquisitive impact of Baldwins in the
current financial year.
Reported Group Underlying EBITDA
Accounting FX adjustment
Budgetary FX adjustment
Constant Currency Underlying EBITDA
IPH Group EBITDA Budget
Financial KPI Budget Achievement
Strategic KPI
124.3
0.2
10.7
135.2
130.9
103.3%
An award was made to each executive KMP member on the basis of their achievement of individual objectives inline
with the Board approved strategic objectives of: consolidating acquisitions; organic growth; and growth step outs
(acquisitive growth), as well as People and Culture. The CEO and CFO were awarded 90% and 80% respectively of
their STIP potential amount related to the Strategic KPI. Notable progress included:
Consolidating acquisitions – The acquisition of Baldwins IP and integration into a single AJ Park brand has given the
Group greater scale in the New Zealand market and a stronger platform for referrals into Asia. Cost synergies were
achieved as a result of the consolidation of this business.
Organic growth – The Group maintained organic growth in Asia, even with long periods of lockdown and closure of
patent agents. This was due to the growth in filings in China, as well as further case inflow through the network effect of
files directed by IPH entities.
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Growth step-outs – On 1 July 2021 the group announced the acquisition of Applied Marks Pty Limited. This acquisition
will accelerate its digital enablement strategy and strengthen its position in the local Australian trademarks services
market. The Company continues to evaluate potential acquisition opportunities in international secondary markets.
People and Culture - In 2021, the KMP were assessed as having met the majority of the people and culture key
performance indicators. This included the emphasis on building capability with the roll out of the leadership excellence
programs, more robust approach to driving employee engagement and movement towards driving greater
organisational performance through the improvements in key performance indicator setting and monitoring. The
restructuring of the shared services teams has also enabled an enterprise wide approach to drive efficiency and
accountability across the IPH network.
2021 STIP Outcomes – Individual KMP outcome
2021
2020
Executive
STI
Forgone %
STI
Paid (%)
STI
Payment ($)
STI
Forgone %
STI
Paid (%)
STI
Payment ($)
Andrew Blattman
John Wadley
5
10
95
90
391,875
135,000
30
22
70
78
288,750
117,000
2019 LTIP Grant Outcomes – tested at the conclusion of the 2021 financial year
The performance period for the 2019 LTIP commenced on 1 July 2018 and concluded on 30 June 2021. Performance
was assessed at the end of the 2021 financial year and as a result of performance over the period, there was a partial
vesting.
In 2019, the NRC reviewed the definition of earnings which is used in the calculation of earnings per share. The LTIP
issues made in 2018 and 2019 used a “cash-adjusted” earnings measure. The Committee felt the use of this third
measure (in addition to the established statutory and underlying measures) had the potential to create confusion.
Therefore, it was decided to re-calculate the targets based upon an underlying earnings measure consistent with that
adopted for market reporting.
This had the effect of increasing the maximum EPS target for the 2019 issue from 37.9 cents per share to 40.2 cents
per share. This new methodology was approved before the 2020 issue and thus no change was required to that issue.
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In determining the calculation of the Underlying EPS, adjustments are made to statutory profit after tax. The outcome for
FY21 is as follows:
Statutory Net Profit after tax ($M)
Net amount of non-cash amortisation expenses of acquired intangibles
Net amount of non-cash share based payments as part of the share incentive
plan
Net amount of adjustment to statutory results as disclosed in the Operational
and Financial Review
Underlying Net Profit after tax
Underlying EPS (cents per share)
53.6
15.3
2.1
5.2
76.2
35.0
Grant
Performance Period
Measure
Minimum
Maximum
Performance Achieved
2019
1 July 18 – 30 June 21
Underlying EPS CAGR
7%
15%
9.9% per annum
On the basis of the underlying EPS achieved, the CAGR equated to 9.9%, which led to a pay-out of 63% of the
maximum award. The basis for calculation of the proportion of the award is detailed in note 33 of the financial
statements
Executive
Maximum Award1 ($)
Rights
% Vested
% Forfeited
Vested ($)2
Expensed ($)3
Andrew Blattman
$900,000
198,676
John Wadley
$270,000
59,603
63
63
37
37
$979,391
$555,694
$293,818
$166,709
1. Maximum remuneration attributable to rights
2. Value of shares vesting at 30 June 2021 share price
3. Expensed in the IPH Group P&L account over the life of the award
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5.4 Overview of Non-Executive Director 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.
Non-executive Director fees paid (Directors’ fees and committee fees) (inclusive of superannuation) for the year ended
30 June 2021 are summarised as follows:
Name - Position
FY2021 Fees
Richard Grellman AM - Chairman
John Atkin - Director
Robin Low - Director
Jingmin Qian - Director
330,000
165,000
165,000
165,000
825,000
The non-executive Directors are not entitled to participate in any employee incentive scheme (including the LTIP).
Directors may also be reimbursed for expenses reasonably incurred in attending to the Company’s affairs.
5.5 Details of Remuneration of Key Management Personnel
Amounts of remuneration
The key management personnel of the Group consisted of the following directors of IPH Limited:
• Richard Grellman, AM – Non-executive Chairman
• Andrew Blattman – Managing Director and Chief Executive Officer
• John Atkin – Non-executive Director
• Robin Low – Non-executive Director
• Jingmin Qian – Non-executive Director
and the following persons:
• John Wadley – Chief Financial Officer
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Non-executive Directors
Richard Grellman
John Atkin
Robin Low
Jingmin Qian
Executive Directors:
Andrew Blattman
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Short-term benefits
Cash salary
and fees
$
Cash
bonus
$
301,644
304,660
150,685
150,685
150,685
150,685
150,685
150,685
-
-
-
-
-
-
-
-
Non-
Monetary1
$
-
-
-
-
-
-
-
-
1,228,945
391,875
66,171
1,228,997
288,750
9,272
Other Key Management Personnel:
John Wadley
2021
2020
578,945
135,000
35,711
589,325
117,000
(10,204)
Post-
employment
benefits
Long-
term
benefits
Share-
based
payments
Super
Employee Leave2
annuation
$
28,356
25,340
14,315
14,315
14,315
14,315
14,315
14,315
28,755
27,889
22,446
21,725
Equity-
Settled3
Total
$
$
-
-
-
-
-
-
-
-
330,000
330,000
165,000
165,000
165,000
165,000
165,000
165,000
$
-
-
-
-
-
-
-
-
23,861
709,307
2,448,914
129,347
763,344
2,447,599
35,684
255,315
1,063,101
-
253,522
971,368
1. Non-monetary benefits represent the movement in the accrued annual leave balance during the year
2. Employee Leave balances represent the movement in accrued long service leave balances during the year.
3. Accounting charge based on the fair value of the award at date of grant. Total number of rights are included
in the performance rights holding table at the end of this report.
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5.6 Service Agreements
Remuneration and other terms of employment for KMP are formalised in service or employment agreements. Details of
these agreements are as follows:
Dr Andrew Blattman, Managing Director and Chief Executive Officer.
• Remuneration package (inclusive of superannuation) for the year ended 30 June 2021 of $1,250,000. Annual
superior performance bonus of up to 33% of remuneration and a long-term incentive opportunity of 100% of
remuneration.
• Remuneration package (inclusive of superannuation) for the year ended 30 June 2022 of $1,277,000. Annual
superior performance bonus of up to 33% of remuneration and a long-term incentive opportunity of 100% of
remuneration.
John Wadley, Chief Financial Officer.
• Remuneration package (inclusive of superannuation) for the year ended 30 June 2021 of $600,000. Annual superior
performance bonus of up to 25% of remuneration and a long-term incentive opportunity of 75% of remuneration.
• Remuneration package (inclusive of superannuation) for the year ended 30 June 2022 of $614,000. Annual superior
performance bonus of up to 25% of remuneration and a long-term incentive opportunity of 75% of remuneration.
Executive KMP may terminate their employment contract by giving six months’ notice in writing. Contracts 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 and without notice or
payment in lieu of notice. Upon termination of the employment contract, the KMP will be subject to a restraint of trade
period of 12 months throughout Australia, New Zealand and Singapore. 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.
Andrew Blattman receives five weeks annual leave.
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5.7 Additional Disclosures Relating to Key Management Personnel
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:
Balance at the
start of the year
Additions
Disposals
Balance at the
end of the year
30 June 2021
Ordinary shares
Richard Grellman
51,773
Andrew Blattman
2,206,166
2,335
117,585
5,224
-
-
35,752
160,896
-
-
-
-
-
-
-
54,108
2,323,751
121,053
74,214
-
36,165
2,609,291
115,829
74,214
-
413
2,448,395
Balance at the
start of the year
Additions
Disposals
Balance at the
end of the year
John Atkin
Robin Low
Jingmin Qian
John Wadley
30 June 2020
Ordinary shares
Richard Grellman
71,449
1,773
(21,449)
51,773
Andrew Blattman
2,506,166
John Atkin
Robin Low
Jingmin Qian
John Wadley
115,829
74,214
-
401
2,768,059
-
-
-
-
12
1,785
(300,000)
2,206,166
-
-
-
-
115,829
74,214
-
413
(321,449)
2,448,395
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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
The number of performance rights issued to KMPs is set out below:
Executive
Plan1
Balance
Granted
Vested
Forfeited
at Start
of Year
During
Year
FY21
Expense3
Unvested
Future
at end
of year
P&L
Expense
Andrew
Blattman
John
Wadley
2018
117,585
2019
198,676
2020
175,809
-
-
-
2021
-
163,613
2018
35,276
2019
59,603
2020
63,292
-
-
-
2021
-
58,901
No
%2
No
%
(117,585)
75
-
-
31,383
-
-
-
-
-
-
-
-
(35,276)
75
(73,113)
37
(30,749)
125,563
31,942
-
-
-
-
-
-
407,501
175,809
477,836
301,172
163,613
654,328
9,415
-
-
-
-
-
-
-
-
-
(21,934)
37
(9,225)
37,669
9,583
-
-
(95,047)
-
-
-
146,702
63,292
172,023
108,423
58,901
235,559
964,622
624,847
1,581,271
650,241
222,514
(152,861)
1. Financial year in which the award is granted.
2. % of maximum award
3. Expense for the 2019 award includes an adjustment for the forfeited award expensed in prior years.
This concludes the remuneration report, which has been audited.
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6. Shares under performance rights
Details of unissued shares or interests under performance rights across all incentive plans of the Group at the date of
this report are:
Issuing
Entity
Type
Number
of Shares
Class
Exercise
Price
Expiry
Date
IPH Limited
Performance
1,487,461
Ordinary
0.00
Up to Sept 2023
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 15.0 cents per share for the year ended 30 June 2020, paid on 18 September
2020 (100% Franked) (A$’000s)
Interim dividend of 14.0 cents per share for the year ended 30 June 2021, paid on 19 March
2021 (50% Franked) (A$’000s)
32,159
30,273
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
On 1 July 2021 IPH Ltd completed the acquisition of Applied Marks Pty Ltd for upfront consideration of $5m with a
potential further $2.1m in the form of ordinary shares escrowed for 2 years, subject to performance requirements.
11. Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
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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.
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 24 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 24 to the financial statements do not compromise
the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the
Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
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Page 16
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 ASIC Corporations (Rounding in Financial/Directors Reports) Instrument dated
24 March 2016 and in accordance with that Instrument amounts in the annual financial report are rounded off to the
nearest thousand dollars, unless otherwise indicated.
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.
Dr Andrew Blattman
CEO and Managing Director
19 August 2021
Sydney
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Auditor’s Independence Declaration
19 August 2021
The Board of Directors
IPH Limited
Level 24, Tower 2, Darling Park
201 Sussex, Sydney
19 August 2021
Dear Board Members
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
Tel: +61 2 9322 7000
www.deloitte.com.au
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
Tel: +61 2 9322 7000
www.deloitte.com.au
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo IIPPHH LLiimmiitteedd
The Board of Directors
IPH Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration
Level 24, Tower 2, Darling Park
of independence to the directors of IPH Limited.
201 Sussex, Sydney
As lead audit partner for the audit of the financial report of IPH Limited for the year ended 30 June 2021, I declare
that to the best of my knowledge and belief, there have been no contraventions of:
The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
Dear Board Members
Any applicable code of professional conduct in relation to the audit.
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo IIPPHH LLiimmiitteedd
Yours faithfully
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 financial report of IPH Limited for the year ended 30 June 2021, I declare
that to the best of my knowledge and belief, there have been no contraventions of:
DELOITTE TOUCHE TOHMATSU
The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
Any applicable code of professional conduct in relation to the audit.
Yours faithfully
H Fortescue
Partner
Chartered Accountants
DELOITTE TOUCHE TOHMATSU
H Fortescue
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
iphltd.com.au
2021 Annual Report
46
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
Financial Statements
Statement of Profit or Loss and Other Comprehensive Income
Consolidated
Note
30 June 2021
30 June 2020
$’000
$’000
Revenue
Other income
Expenses
Employee benefits expense
Agent fee expenses
Amortisation of acquired intangibles
Depreciation of right-of-use assets
Depreciation and amortisation of fixed assets and intangibles
Insurance expenses
Travel expenses
Occupancy 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
Fair value loss on hedging instruments
Items that will not be reclassified subsequently to profit or loss
Fair value gain on investment in equity instruments
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Owners of IPH Limited
Total comprehensive income for the year is attributable to:
Owners of IPH Limited
Earnings per share
From continuing operations
Basic earnings (cents per share)
Diluted earnings (cents per share)
These statements should be read in conjunction with the following notes.
5
6
7
7
7
7
7
8
359,684
3,830
365,674
4,485
(115,124)
(104,493)
(21,607)
(8,588)
(7,275)
(2,265)
(358)
(1,981)
(25,967)
(5,977)
69,879
(16,279)
53,600
(5,301)
282
-
(5,019)
48,581
53,600
53,600
48,581
48,581
(115,462)
(105,590)
(19,616)
(9,624)
(5,241)
(2,500)
(1,910)
(1,713)
(29,686)
(7,125)
71,692
(16,940)
54,752
(516)
(542)
855
(203)
54,549
54,752
54,752
54,549
54,549
32
32
24.80
24.74
25.85
25.76
iphltd.com.au
2021 Annual Report
48
Statement of Financial Position
Consolidated
Note
30 June 2021
30 June 2020
$’000
$’000
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Income tax payable
Provisions
Interest bearing lease liabilities
Other financial liabilities
Contract liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax
Interest bearing lease liabilities
Other financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity attributable to owners of IPH Limited
These statements should be read in conjunction with the following notes.
9
10
11
12(a)
12(b)
12(c)
13
14
15
12(b)
16
13
12(b)
22
17
18
19
20
71,152
83,366
6,329
4,045
82,910
89,132
4,763
4,254
164,892
181,059
10,178
30,639
468,088
34
856
509,795
674,687
24,021
2,631
21,821
10,012
200
1,972
60,657
13,273
38,808
483,259
103
-
535,443
716,502
24,733
3,270
19,160
11,076
200
1,803
60,242
116,159
151,238
36,300
33,223
503
1,053
187,238
247,895
426,792
417,079
(1,500)
11,213
426,792
37,791
42,587
774
1,208
233,598
293,840
422,662
402,149
468
20,045
422,662
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2021 Annual Report
49
Statement of Changes in Equity
Foreign
Currency
Translation
Reserve
Minority
Interest
Acquisition
Reserve
Equity Settled
Employee
Benefits
Reserve
Other Reserve
$’000
$’000
$’000
(14,814)
-
(14,814)
4,453
-
4,453
Issued Capital
$’000
262,763
-
262,763
-
-
-
-
-
130,730
8,656
-
-
$’000
3,858
-
3,858
-
(516)
-
-
(516)
-
-
-
-
4,478
-
4,478
-
-
855
(542)
313
-
-
-
-
4,791
-
-
-
-
-
-
-
2,696
-
7,149
402,149
3,342
(14,814)
(14,814)
7,149
4,791
402,149
-
-
-
-
2,447
12,483
-
-
3,342
-
(5,301)
-
(5,301)
-
-
-
-
417,079
(1,959)
(14,814)
-
-
-
-
-
-
3,051
-
10,200
-
-
282
282
-
-
-
-
5,073
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Retained
Profits
$’000
Total equity
$’000
24,012
(2,183)
21,829
54,752
-
-
-
54,752
-
-
-
(56,536)
20,045
20,045
53,600
-
-
53,600
-
-
-
(62,432)
11,213
284,750
(2,183)
282,567
54,752
(516)
855
(542)
54,549
130,730
8,656
2,696
(56,536)
422,662
422,662
53,600
(5,301)
282
48,581
2,447
12,483
3,051
(62,432)
426,792
Balance at 1 July 2019
AASB 16 transitional impact on retained earnings
Adjusted opening balance at 1 July 2019
Profit after income tax expense for the year
Effect of foreign exchange differences
Fair value gain on investment in equity instruments designated at
FVTOCI
Hedge revaluation (note 22)
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Issue of ordinary shares as consideration for a business
combination, net of transaction costs
Dividend Reinvestment Plan (note 21)
Share-based payments charge
Dividends paid (note 21)
Balance at 30 June 2020
Balance at 1 July 2020
Profit after income tax expense for the year
Effect of foreign exchange differences
Hedge revaluation (note 22)
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Issue of ordinary shares as consideration for a business
combination, net of transaction costs (note 28)
Dividend Reinvestment Plan (note 21)
Share-based payments charge
Dividends paid (note 21)
Balance at 30 June 2021
These statements should be read in conjunction with the following notes.
iphltd.com.au
2021 Annual Report
50
Statement of Cashflows
Consolidated
Note
30 June 2021
30 June 2020
$’000
$’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
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Proceeds of borrowings
Repayment of borrowings
Payment of lease liabilities
Net cash (used in)/from financing activities
6
7
31
28
12(a)
12(c)
21
Net (decrease)/increase 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
These statements should be read in conjunction with the following notes.
404,664
(285,672)
60
(5,977)
(20,426)
92,649
(4,659)
(1,814)
(4,364)
(10,837)
(49,949)
116,159
(148,601)
(11,162)
(93,553)
(11,741)
82,910
(17)
71,152
413,835
(288,793)
75
(7,125)
(30,442)
87,550
(40,324)
(2,117)
(3,046)
(45,487)
(47,880)
90,183
(26,107)
(9,630)
6,566
48,629
35,263
(982)
82,910
iphltd.com.au
2021 Annual Report
51
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 24, Darling Park Tower 2, 201 Sussex 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 19 August 2021.
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 27.
Notes to the Financial Statements
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2021 Annual Report
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Page 2
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.
Notes to the Financial Statements
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2021 Annual Report
53
Page 3
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 which are
recognised in reserves; 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
• All resulting exchange differences are recognised in other comprehensive income, in the foreign currency
translation reserve.
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.
The Group provides professional services in relation to the protection, commercialisation, enforcement and
management of all forms of intellectual property. Delivery of these services represent performance obligations. Upon
completion of each performance obligation, which is satisfied at a point in time, the Group is entitled to payment for the
services performed. Fees for completion of each performance obligation are determined by reference to a scale of
charges and revenue is recognised.
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).
Other Income
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.
Government Grants
Grants from governments are recognised at their fair value where there is reasonable assurance that the grant will be
received and the Group will comply with any specified requirements. All government grants are recognised in the
Statement of Profit or Loss and Other Comprehensive Income on a systematic basis over the periods in which the
Group recognises the related costs.
Notes to the Financial Statements
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2021 Annual Report
54
Page 4
Contract assets
Contract assets represent costs incurred and profit recognised on client assignments and services that are in progress
at balance date. Contract assets are valued at net realisable value after providing for any foreseeable losses. Contract
assets are subsequently assessed for impairment using the expected credit loss under AASB9.
Disbursements recoverable
Recoverable client disbursements recorded in contract assets 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 recoverable are subsequently assessed for impairment using the expected credit loss under AASB9..
Income Tax
The income tax expense or benefit is the tax payable on the current period’s 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.
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.
Notes to the Financial Statements
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2021 Annual Report
55
Page 5
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the Statement of Profit or Loss and Other
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.
Financial instruments
Financial assets
Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive
income (FVTOCI) or at fair value through profit or loss (FVTPL). Financial assets are initially recognised at fair value on
the trade date, including, in the case of instruments not recorded at fair value through profit or loss, directly attributable
transaction costs. Subsequently, financial assets are carried at fair value (equity investments and derivatives) or
amortised cost adjusted for any loss allowance (loans, trade receivables and other receivables).
Derivative financial instruments
A derivative is a type of financial instrument typically used to manage risk. A derivative’s value changes over time in
response to underlying variables including interest rates or exchange rates and is entered into for a fixed period. A
hedge is where a derivative is used to manage an underlying exposure and the Group uses derivatives to manage its
exposure to interest rates and foreign exchange risk accordingly.
All derivatives are measured through the Statement of Profit and Loss and Other Comprehensive Income unless
designated and effective as a hedge where the hedge accounting provisions apply.
Impairment of financial assets
The impairment approach is based on lifetime expected credit losses (ECL model) for financial assets held at amortised
cost. Therefore, it is not necessary for a loss event to have occurred before credit losses are recognised. Instead, a loss
allowance is always recognised for ECL and is re-measured at each reporting date for changes in those expected credit
losses. The expected credit losses are estimated via a provision matrix based on the Group’s historical credit loss
experience. This is then adjusted for factors that are specific to the debtors, general economic conditions and an
assessment of both the current and forecasted direction of conditions at the reporting date, including time value of
money where appropriate.
For financial assets, a credit loss is the present value of the difference between: (i) the contractual cash flows that are
due under the contract; and (ii) the cash flows expected to be received.
Notes to the Financial Statements
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2021 Annual Report
56
Page 6
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a
trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and at banks, short term deposits with an original maturity of three
months or less held at call with financial institutions, and bank overdrafts. Bank overdrafts are shown within borrowings
in current liabilities in the consolidated Statement of Financial Position.
Trade and other receivables
Trade and other receivables include amounts due from customers for services performed in the ordinary course of
business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as
current assets. All other receivables are classified as non-current assets.
Trade and other receivables are measured at amortised cost using the effective interest method.
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.
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 Group recognises impairment losses.
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.
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.
Contract Liabilities are recognised as a liability when received and is recognised as revenue once a patent service has
been provided or completed.
Notes to the Financial Statements
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2021 Annual Report
57
Page 7
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.
Item
Leasehold improvements
Plant and equipment
Furniture, fixtures and fittings
Computer equipment
Years
6-15 years
2-20 years
5-20 years
2-5 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 of events or changes in circumstances indicate that it
might be impaired and it is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken
to profit and loss and not subsequently reversed.
Intangible assets acquired separately
Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation and
accumulated impairment losses.
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.
Notes to the Financial Statements
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Trademarks
Trademarks are intangible assets with indefinite useful lives that are acquired separately and are carried at cost less
accumulated impairment losses.
Software acquired
Software acquired through a business combination is assessed as the identifiable value of that software at the date of
acquisition. Acquired software is amortised over a period of 4 years.
Internally generated intangible assets
Internally generated intangible assets, including software, 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;
• 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 internally generated intangible assets are as follows:
Software
3 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.
Sofware-as-a-Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right to access the cloud providers application
software over the contract period. Costs incurred to configure or customise, and the ongoing fees to obtain access to the
cloud providers application software, are recognised as operating expenses when the services are received.
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 fair value less costs of disposal.
The recoverable amount of an asset is defined as the higher of its fair value less costs of disposal and value in use.
Notes to the Financial Statements
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For the purposes of impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash generating units).
For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be
allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that is expected to benefit
from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to
those units or groups of 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.
Leases
The Group recognises a right-of use-asset and a lease liability at the lease commencement date. The right-of-use
assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at
cost less accumulated depreciation and impairment. Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of
the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts for any identified
impairment loss as described in the ‘Impairment of assets’ policy.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it
is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision
is recognised and measured under AASB137. To the extent that the costs relate to a right-of-use asset, the costs are
included in the related right-of-use asset.
As a practical expedient, AASB 16 permits a lessee not to separate non-lease components, and instead account for any
lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the Group's incremental borrowing rate. The lease liability is subsequently
measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method)
and by reducing the carrying amount to reflect the lease payments made.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable; and
• Lease payments that depend on an index rate, initially measured using the index or rate at the commencement
date.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
Notes to the Financial Statements
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• The lease term has changed or there is a significant event or change in circumstances, in which case the lease
liability is remeasured by discounting the revised lease payments using a revised discount rate; or
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the
lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease
payments using a revised discount rate at the effective date of the modification.
To determine the incremental borrowing rate, the Group makes adjustments specific to the lease including factors such
as lease term, country, currency and security. The weighted average incremental borrowing rate applied to lease
liabilities was 4.49% (2020: 4.23%).
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that
triggers those payments occurs and is disclosed in note 13(b).
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.
Borrowing 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.
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.
Notes to the Financial Statements
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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 22). 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 are 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 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.
Notes to the Financial Statements
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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 Group 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 Group
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 ASIC Corporations (Rounding in Financial/Directors Reports) Instrument dated
24 March 2016 and in accordance with that Instrument amounts in the annual financial report are rounded off to the
nearest thousand dollars, unless otherwise indicated.
Adoption of new accounting standards
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (the AASB) that are relevant to its operations and effective for an accounting period that begins on or
after 1 July 2020.
Notes to the Financial Statements
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Implementation of IFRIC agenda decision
During the year an IFRIC agenda decision clarified the interpretation of how accounting standards apply to upfront
configuration and customisation costs incurred in implementing SaaS arrangements. In the current period, costs of $1.1m
have been recognised as an expense. There has been no restatement of prior reported financial information as the
amounts involved were not material.
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.
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.
COVID-19
Management have considered the impact of Covid-19 and the current economic environment on the judgements,
estimates and assumptions that affect the reported amounts in the financial statements and adjusted these where
appropriate. Government Covid-19 stimulus grants were provided to Asian entities from their local governments, refer to
note 7.
Notes to the Financial Statements
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Page 14
Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into three segments: Intellectual Property Services Australia & New Zealand; Intellectual
Property Services Asia; and Adjacent Businesses. Adjacent Businesses includes the operations of Wisetime. 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.
Segment
Activity
Intellectual Property Services
Related to the provision of filing, prosecution, enforcement and management of patents,
Australia & New Zealand
designs, trademarks and other IP in Australia and New Zealand.
Intellectual Property Services Asia
Related to the provision of filing, prosecution, enforcement and management of patents,
designs, trademarks and other IP in Asia.
Adjacent Businesses
Adjacent businesses include Wisetime the autonomous time-keeping tool and in the
prior year, Glasshouse Advisory.
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.
Reliance on major customers
Maximum revenue from any customer is less than 3% of overall revenue of the Group.
Notes to the Financial Statements
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Page 15
Note 4. Operating Segments
Consolidated
Australia & NZ
Asia
Adjacent Businesses
Corporate
Intellectual Property Services
2021
$’000
2020
$’000
267,739
266,059
948
2,528
268,687
268,587
6,979
9,062
2021
$’000
91,945
5,280
97,225
(1,112)
2020
$’000
97,345
5,292
102,637
72
275,666
277,649
96,113
102,709
2021
$’000
-
-
-
409
409
2020
$’000
2,270
-
2,270
473
2,743
2021
$’000
2020
$’000
-
-
-
-
-
-
5,601
5,601
2,040
2,040
Intersegment
eliminations /
unallocated
Total
2021
$’000
-
(6,228)
(6,228)
(8,107)
2020
$’000
2021
$’000
2020
$’000
-
359,684
365,674
(7,820)
(7,820)
(7,689)
-
-
359,684
365,674
3,770
3,958
(14,335)
(15,509)
363,454
369,632
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Other revenue
Total revenue
Less: Overheads
(182,411)
(182,066)
(52,703)
(56,622)
(778)
(4,612)
(17,436)
(15,218)
14,152
14,922
(239,176)
(243,596)
Earnings before interest, tax, depreciation and
amortisation (EBITDA), before adjustments
Less: Depreciation
Less: Amortisation
93,255
95,583
(9,680)
(10,002)
(21,055)
(19,147)
43,410
(2,469)
(1,290)
Less: Management Charges
4,853
3,159
(10,523)
46,087
(2,482)
(1,225)
(7,199)
(369)
(56)
(1,698)
-
(1,869)
(11,835)
(13,178)
(183)
(587)
124,278
126,036
(400)
(110)
-
(256)
(988)
5,564
(273)
(866)
4,037
-
22
106
-
24
3
(12,461)
(13,157)
(25,009)
(21,324)
-
-
Segment result: (Profit before interest, tax and
adjustments)
Reconciliation of segment result
Segment result
Adjustments to statutory result:
Business acquisition costs
Restructuring expenses
Impairment of intangible assets
Impairment of right-of-use assets and fixed assets
Share based payments
IT SaaS Implementation Costs
Total adjustments
Interest income
Finance Costs
Profit for the period before income tax expense
Reconciliation of segment revenue
Segment revenue
Restructuring
Interest income
Total revenue
67,373
69,593
29,128
35,181
(2,123)
(2,379)
(7,515)
(10,280)
(55)
(560)
86,808
91,554
86,808
91,554
(3,616)
(2,190)
-
(464)
(3,578)
(1,164)
(1,202)
(4,127)
(1,600)
(3,704)
(2,180)
-
(11,012)
(12,813)
60
(5,977)
69,879
75
(7,125)
71,691
363,454
369,632
-
60
452
75
363,514
370,159
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2021 Annual Report
66
Note 5. Sales revenue
Revenue from the rendering of services
Note 6. Other income
Net realised foreign exchange (loss)/gain
Net unrealised foreign exchange gain/(loss)
Other income
Commission
Interest
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Depreciation and amortisation:
Depreciation - Property, plant and equipment
Amortisation - Software development
Depreciation - Right-of-use asset
Amortisation - Acquired Intangibles
Total depreciation and amortisation
Employee benefits expense:
Share based payments (note 33)
Superannuation expense
Government Covid-19 stimulus grants1
Other expenses:
Advertising and marketing
Impairment of right-of-use assets and revaluation of lease liabilities arising from onerous leases
Impairment of leasehold improvements
Impairment of Watermark trademark
Impairment and loss on disposal of fixed assets
IT and communication
Office expenses
Professional fees
Staff welfare and training
Business acquisition costs
Other
Finance costs
Interest on bank facilities - Overdraft
Interest on bank facilities - Loan
Other finance costs - Facility fees
Interest on lease contracts (note 12(b))
Total finance costs
1. Grants received from Asian governments in response to the impact of Covid-19.
Consolidated
30 June 2021
30 June 2020
$’000
359,684
359,684
$’000
365,674
365,674
Consolidated
30 June 2021
30 June 2020
$’000
(6,338)
6,151
1,430
2,527
60
3,830
$’000
1,732
(1,556)
1,736
2,498
75
4,485
Consolidated
30 June 2021
30 June 2020
$’000
3,873
3,402
7,275
8,588
21,607
37,470
3,578
6,351
(1,273)
1,182
(13)
-
-
876
6,876
1,780
2,746
1,009
3,616
7,895
25,967
-
2,592
1,444
4,036
1,941
5,977
$’000
3,533
1,708
5,241
9,624
19,616
34,481
2,180
7,151
(1,071)
825
2,385
1,319
1,600
-
5,052
2,152
3,006
1,128
1,202
11,017
29,686
36
3,779
1,042
4,857
2,268
7,125
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2021 Annual Report
67
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 13)
Decrease in deferred tax liabilities (note 13)
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 differences
Equity settled share based payments
Acquisition costs
Difference in overseas tax rates
Over provision with respect to current tax in prior years
Over provision with respect to deferred tax in prior years
Other
Effect of income that is exempt from tax
Income tax expense
Note 9. Current assets - cash and cash equivalents
Cash on hand
Cash at bank
1
Term deposit
1. Restricted cash cover for bank facilities.
Note 10. Current assets - trade and other receivables
Trade receivables from contracts with customers
Less: Loss allowance and ECL
Consolidated
30 June 2021
30 June 2020
$’000
$’000
20,683
(3,395)
(1,009)
16,279
854
(4,249)
(3,395)
69,879
20,964
48
(1,098)
1,424
(3,831)
(1,009)
(219)
-
-
23,935
(6,859)
(136)
16,940
(1,520)
(5,339)
(6,859)
71,692
21,508
108
(169)
249
(4,683)
(136)
-
63
-
16,279
16,940
Consolidated
30 June 2021
30 June 2020
$’000
62
71,070
20
71,152
$’000
162
81,898
850
82,910
Consolidated
30 June 2021
30 June 2020
$’000
86,236
(2,870)
83,366
$’000
91,886
(2,754)
89,132
Impairment of receivables
The Group has recognised a loss of $1,447,000 (2020: $1,855,000) in profit or loss in respect of the loss allowance for the year ended 30 June 2021.
The Group measures the loss allowance for trade receivables and an amount equal to the lifetime ECL. The expected credit losses are estimated via a provision matrix based on the Group’s historical credit loss
experience. This is then adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current and forecasted direction of conditions at the reporting date, including time
value of money where appropriate.
Expected credit losses for ageing categories1
Past due more than 91 days
1. Ageing brackets not covered are deemed immaterial.
Movements in the loss allowance for impairment of receivables are as follows:
Opening balance
Additional provisions recognised through business combinations (note 28)
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Consolidated
30 June 2021
30 June 2020
$’000
2,549
$’000
2,396
Consolidated
30 June 2021
30 June 2020
$’000
2,754
-
1,447
(1,331)
2,870
$’000
1,249
470
1,855
(820)
2,754
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68
Note 10. Current assets - trade and other receivables (Cont)
Trade receivable ageing
The ageing of trade receivables are as follows:
Current
0 to 60 days overdue
61 to 90 days overdue
Past due more than 91 days
Ageing has been calculated with reference to the trading terms of local clients (30 days) and international clients (90 days). No interest is charged on outstanding trade receivables.
Note 11. Current assets - other
Prepayments
Foreign exchange contracts (note 22)
Net investment in sub-lease
Other current assets
Note 12. Non-current assets
(a) 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 - at cost
Less: Accumulated depreciation
Consolidated
30 June 2021
30 June 2020
$’000
58,388
9,657
4,646
10,675
83,366
$’000
52,282
26,895
2,882
7,073
89,132
Consolidated
30 June 2021
30 June 2020
$’000
2,888
-
307
850
4,045
$’000
3,697
384
-
173
4,254
Consolidated
30 June 2021
30 June 2020
$’000
15,180
(9,401)
5,779
1,659
(1,413)
246
5,000
(3,910)
1,090
27,255
(24,192)
3,063
10,178
$’000
14,846
(8,038)
6,808
1,589
(1,359)
230
6,281
(4,228)
2,053
29,093
(24,911)
4,182
13,273
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2019
Additions
Additions through business combinations (note 28)
Disposals
Impairment
Exchange differences
Depreciation expense
Balance at 30 June 2020
Additions
Additions through business combinations (note 28)
Disposals / Transfers
Impairment
Exchange differences
Depreciation expense
Balance at 30 June 2021
Leasehold
improvements
Plant and
equipment
Furniture, fixtures
and fittings
Computer
equipment
$’000
$’000
$’000
$’000
Total
$’000
3,911
424
5,366
(240)
(1,319)
(33)
(1,301)
6,808
269
139
(180)
-
145
(1,402)
5,779
171
80
41
-
-
(3)
(59)
230
36
-
83
-
252
(355)
246
1,044
383
913
-
-
(10)
(277)
2,053
86
13
(810)
-
(175)
(77)
1,090
1,566
1,230
3,314
(2)
-
(30)
(1,896)
4,182
1,423
39
357
(479)
(420)
(2,039)
3,063
6,692
2,117
9,634
(242)
(1,319)
(76)
(3,533)
13,273
1,814
191
(550)
(479)
(198)
(3,873)
10,178
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69
Note 12. Non-current assets (Cont)
(b) Leases
The Group enters leases in relation to office space and office equipment.
The Statement of Financial Position shows the following amounts relating to leases:
Right-of-use assets
Balance at 1 July 2019
Adoption of AASB 16
Remeasurements
Additions through business combinations (note 28)
Depreciation expense
Impairment arising from onerous leases
Exchange gains / (losses)
Balance at 30 June 2020
Additions
Additions through business combinations (note 28)
Remeasurements
Depreciation expense
Disposals / Reclasses
Exchange gains / (losses)
Balance at 30 June 2021
Lease Liabilities
Current
Non-current
The Statement of Profit or Loss and Other Comprehensive Income shows the following amounts relating to leases:
Depreciation charge - Right-of-use assets
Interest expense (included in finance costs)
Expense relating to variable lease payments not included in lease liabilities (included in occupancy expenses)
Income from subleasing of right-of-use assets (included in other income)
Impairment of right-of-use assets and remeasurement of lease liability
Total cash outflow for leases in 2021 was $11,162,000 (2020: $9,630,000).
(c) Intangibles
Goodwill - at cost
Patents and trade marks - at cost
Less: Accumulated amortisation
Capitalised software development - at cost
Less: Accumulated amortisation
Customer Relationships
Less: Accumulated amortisation
Less: Impairment
Premises
Equipment
$’000
$’000
Total
$’000
-
29,730
2,562
20,222
(9,475)
(4,661)
162
38,540
526
1,186
-
(8,446)
(927)
(439)
30,440
-
357
66
-
(149)
-
(6)
268
71
-
9
(142)
-
(7)
199
-
30,087
2,628
20,222
(9,624)
(4,661)
156
38,808
597
1,186
9
(8,588)
(927)
(446)
30,639
Consolidated
30 June 2021
30 June 2020
$’000
10,012
33,223
43,235
$’000
11,076
42,587
53,663
Consolidated
30 June 2021
30 June 2020
$’000
8,588
1,941
1,856
(386)
(13)
$’000
9,624
2,268
2,818
(260)
2,385
Consolidated
30 June 2021
30 June 2020
$’000
296,434
17,293
(5)
313,722
15,067
(9,370)
5,697
218,284
(68,654)
(961)
148,669
468,088
$’000
298,038
17,232
-
315,270
10,792
(6,022)
4,770
212,011
(47,831)
(961)
163,219
483,259
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70
Note 12. Non-current assets (Cont)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2019
Exchange differences
Additions
Additions through business combinations (note 28)
Impairment1
Amortisation expense
Balance at 30 June 2020
Exchange differences
Additions
Additions through business combinations (note 28)
Amortisation expense
Balance at 30 June 2021
Goodwill
Patents and trade
marks
Customer
relationships
Capitalised
software
development
$’000
$’000
$’000
$’000
Total
$’000
184,648
(530)
-
113,920
-
-
298,038
(3,590)
-
1,986
-
296,434
4,189
-
43
14,600
(1,600)
-
17,232
61
-
-
(5)
17,288
62,735
-
-
120,100
-
(19,616)
163,219
296
-
6,756
(21,602)
148,669
3,481
(6)
3,003
-
-
(1,708)
4,770
(35)
4,364
-
(3,402)
5,697
255,053
(536)
3,046
248,620
(1,600)
(21,324)
483,259
(3,268)
4,364
8,742
(25,009)
468,088
1. On 1 July 2020 Watermark was merged with Griffith Hack and will operate under the Griffith Hack name. As a result, the intangible asset relating to the former Watermark trademark has been assessed as having no ongoing economic benefit and hence has been written off.
Impairment testing
For the purposes of impairment testing, goodwill is allocated to cash generating units (CGUs) that are an identifiable group of assets that generate cash associated with the goodwill.
A summary of the goodwill by CGU is set out below:
CGU
Spruson & Ferguson Australia
Pizzeys
AJ Park
Segment
Australia & NZ
Australia & NZ
Australia & NZ
Spruson & Ferguson (Hong Kong)
Asia
Griffith Hack
Shelston
Spruson & Ferguson Asia
Other
Total
Australia & NZ
Australia & NZ
Asia
Asia
Consolidated
30 June 2021
30 June 2020
$’000
52,958
68,158
43,278
31,828
54,006
36,992
8,888
326
$’000
52,958
68,158
41,424
34,839
54,006
36,992
9,355
306
296,434
298,038
The recoverable amount of a CGU is determined primarily utilising 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
CGU
Spruson & Ferguson Australia
Spruson & Ferguson Asia
Pizzeys
AJ Park
S&F Hong Kong
Griffith Hack
Shelston
5 yr EBITDA CAGR
Terminal growth rates
Pre-Tax
Pre-Tax
Post-Tax
Post-Tax
Discount rates1
2021
%
4.2
8.0
5.1
3.4
13.2
5.5
5.7
2020
%
4.1
8.2
4.9
4.0
13.6
6.6
5.9
2021
2020
%
2.0
2.0
2.0
2.0
2.0
2.0
2.0
%
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2021
%
13.6
12.6
13.6
13.2
13.8
13.6
13.6
2020
%
15.0
12.6
15.0
14.6
13.8
15.0
15.0
2021
%
9.5
10.5
9.5
9.5
11.5
9.5
9.5
2020
%
10.5
10.5
10.5
10.5
11.5
10.5
10.5
1. The post-tax discount rate has been applied to discount the future attributable post-tax cash flows.
At 30 June 2021, the assessed value-in-use for each CGU exceeded the carrying amounts of the CGU and no impairment loss was recognised. It has been determined that a reasonable change in key assumptions would
not result in an impairment loss.
Note 13. Deferred tax assets/liabilites
The net deferred tax asset comprises the following balances:
Loss allowance
Property, plant and equipment
Provisions
Accrued expenses
Unbilled revenue
Prepayments
Foreign exchange
Transaction costs
Leased assets
Software
Intangible assets - Customer Relationships
Intangible assets - Trademarks
Sundry
Financial Instruments
Fair value movement on Investments
Opening balance
Recognised in profit
or loss
Acquisitions
Recognised in
equity
Closing
balance
$’000
$’000
$’000
$’000
$’000
545
399
5,309
1,543
(1,141)
(131)
978
3,366
3,612
(56)
(48,780)
(4,305)
762
211
-
(37,688)
(70)
(1,007)
(22)
(927)
(35)
89
(1,577)
(961)
(194)
751
6,065
-
706
20
557
3,395
-
-
-
-
-
-
-
-
-
-
(1,892)
-
-
-
-
(1,892)
-
-
-
-
-
-
-
-
-
-
-
-
-
(81)
-
(81)
475
(608)
5,287
616
(1,176)
(42)
(599)
2,405
3,418
695
(44,607)
(4,305)
1,468
150
557
(36,266)
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2021 Annual Report
71
Note 13. Deferred tax assets/liabilites (Cont)
Disclosed as:
Deferred tax asset
Deferred tax liability
Note 14. Current liabilities - trade and other payables
Trade payables
Sundry creditors and accruals
Note 15. Current liabilities - provisions
Employee benefits
Provision for onerous contracts
Other provisions
Movement in provision for onerous contracts
Opening balance at beginning of financial year
Additions
Current / non-current reclasses
Payment of onerous contracts
Closing balance at the end of financial year
Note 16. Non-current liabilities - borrowings
Non Current
Multicurrency loan facility
Consolidated
30 June 2021
30 June 2020
$’000
$’000
34
(36,300)
(36,266)
103
(37,791)
(37,688)
Consolidated
30 June 2021
30 June 2020
$’000
15,227
8,794
24,021
$’000
15,064
9,669
24,733
Consolidated
30 June 2021
30 June 2020
$’000
21,451
370
-
21,821
$’000
18,577
523
60
19,160
Consolidated
30 June 2021
30 June 2020
$’000
523
169
348
(670)
370
$’000
-
523
-
-
523
Consolidated
30 June 2021
30 June 2020
$’000
$’000
116,159
116,159
151,238
151,238
On 28 June 2021, the Group entered into a facilities agreement (‘Agreement’) with HSBC, Westpac, ANZ and CBA which refinanced the facilities previously outstanding with HSBC and Westpac. The facilities under the
Agreement comprise:
- A $115m multicurrency revolving loan facility;
- A $70m acquisition term loan facility; and
- A $25m revolving credit facility for the general corporate purposes of the Group.
The Agreement has a term of three years maturing on 4 July 2024.
Assets pledged as security
The bank facility made available by HSBC, ANZ, CBA and Westpac is secured by cross guarantee and all assets from IPH Limited and a number of its wholly owned subsidiaries. The value of current and non-current
assets pledged as security are as noted on the consolidated Statement of Financial Position.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Loan facilities
Working capital facility
Used at the reporting date
Loan facilities
Bank guarantees drawn under working capital facility
Unused at the reporting date
Loan facilities
Working capital facility
Consolidated
30 June 2021
30 June 2020
$’000
$’000
185,000
25,000
210,000
116,159
116,159
190,000
20,000
210,000
151,238
151,238
8,760
12,813
68,841
16,240
85,081
38,762
7,187
45,949
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72
Note 17. Non-current liabilities - provisions
Employee benefits
Provision for onerous contracts
Other provisions
Movement in provision for onerous contracts
Opening balance at beginning of financial year
Additions
Current / non-current reclasses
Cancellation of onerous contract
Closing balance at the end of financial year
Note 18. Equity - issued capital
Ordinary Class shares - fully paid
Movements in ordinary share capital
Opening balance
Acquisition of Xenith IP Group Ltd (note 28)
Performance and retention rights exercised
Dividend reinvestment - final dividend (note 21)
Dividend reinvestment - interim dividend (note 21)
Balance at 30 June 2020
Performance and retention rights exercised
Dividend reinvestment - final dividend (note 21)
Acquisition of Baldwins Intellectual Property (note 28)
Dividend reinvestment - interim dividend (note 21)
Balance at 30 June 2021
Ordinary shares
Consolidated
30 June 2021
30 June 2020
$’000
730
135
188
1,053
$’000
565
643
-
1,208
Consolidated
30 June 2021
30 June 2020
$’000
643
-
(348)
(160)
135
$’000
-
643
-
-
643
Consolidated
Consolidated
30 June 2021
30 June 2020
30 June 2021
30 June 2020
Shares
217,203,866
217,203,866
Shares
214,396,164
214,396,164
Date
1 July 2019
15 August 2019
28 August 2019
18 September 2019
13 March 2020
11 September 2020
18 September 2020
16 October 2020
19 March 2021
$’000
417,079
417,079
Shares
197,341,566
15,581,683
510,320
307,613
654,982
$’000
402,149
402,149
$’000
262,763
130,730
-
2,879
5,777
214,396,164
402,149
553,071
950,862
335,016
968,753
-
6,462
2,447
6,021
217,203,866
417,079
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.
Employee Share Trust
On 1 July 2017, IPH established the Employee Share Trust for the purpose of acquiring and allocating shares granted through the IPH Employee Incentive Plan. As at 30 June 2021, the number of shares held by the trust
was 866,186 (2020: 579,154). 553,071 shares were issued to the trust during the year.
Share buy-back
There were no shares bought back during the year ended 30 June 2021.
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 days trading days commencing on the
second trading day following the dividend record date.
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73
Note 19. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Minority interest acquisition reserve
Other reserve
Foreign currency reserve
Consolidated
30 June 2021
30 June 2020
$’000
(1,959)
10,200
(14,814)
5,073
(1,500)
$’000
3,342
7,149
(14,814)
4,791
468
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 and arose on the
initial listing of IPH.
Other reserve
This reserve includes the following items:
- fair value gains or losses on investments in equity instruments designated as FVTOCI; and
- revaluation of hedging instruments ($503k at 30 June 2021).
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.
Note 20. 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
Transitional impact on adoption of AASB16
Dividends paid (note 21)
Retained profits at the end of the financial year
Note 21. Equity - dividends
Interim dividend
December 2019 - paid 13 March 2020
December 2020 - paid 19 March 2021
Final dividend
June 2019 - paid 18 September 2019
June 2020 - paid 18 September 2020
Consolidated
30 June 2021
30 June 2020
$’000
20,045
53,600
-
(62,432)
11,213
$’000
24,012
54,752
(2,183)
(56,536)
20,045
Cents per share
13.5
14.0
13.0
15.0
Consolidated
30 June 2021
30 June 2020
$’000
-
30,273
-
32,159
$’000
28,856
-
27,680
-
On 19 August 2021, the Company declared an ordinary dividend of 15.5 cents per share (franked at 40%) to be paid on 17 September 2021. The dividend value is $33,666,600. No provision for this dividend has been
recognised in the Statement of Financial Position as at 30 June 2021, as it was declared after the end of the financial year.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan was active during the financial year. 1,919,615 (2020: 962,595) shares were issued to participants totalling $12,483,000 (2020: $8,656,199).
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
Consolidated
30 June 2021
30 June 2020
$’000
2,050
$’000
9,100
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.
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74
Note 22. Financial instruments
Financial risk management objectives
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’s principal
financial instruments, other than derivatives, comprise of cash and bank loan facilities. The main purpose of financial instruments is to manage liquidity and hedge the Group’s exposure to financial risks, namely:
- foreign currency risk;
- interest rate risk;
- liquidity risk; and
- credit risk.
The Group uses derivatives to reduce the Group’s exposure to fluctuations in interest rates and foreign exchange rates. These derivatives create an obligation or a right that effectively transfers one or more of the risks
associated with an underlying financial instrument, asset or obligation. Derivative financial instruments that the Group uses to hedge its risks include:
- foreign exchange contracts; and
- interest rate swaps.
The Group does not trade in derivative instruments for speculative purposes. The Group uses different methods to measure the different types of risks to which it is exposed, including sensitivity analysis in the case of
interest rate and foreign exchange and ageing analysis for credit risk.
i) 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 focus is on minimising exposure to fluctuations in the rate of the United States Dollar (“USD”) and the European Union’s Euro (“EUR”) which represent most of the
Group’s foreign currency exposure.
The Group’s net asset exposure at the reporting date was as follows:
30 June 2021
Net asset exposure (Local Currency)
30 June 2020
Net asset exposure (Local Currency)
1. Australian dollar equivalent.
A$'000
US$'000
362,272
37,093
€'000
3,126
S$000
NZD$000
7,959
7,850
Other1
1,271
348,005
41,491
5,736
9,628
7,137
3,369
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 (2020: 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
NZD
Other currencies
Net exposure to foreign currency risk
Interest rate risk
10% Weakening
10% Strengthening
2021
$’000
4,492
450
717
664
116
6,439
2020
$’000
5,046
744
729
667
337
7,523
2021
$’000
(4,941)
(495)
(788)
(731)
(127)
2020
$’000
(4,587)
(677)
(662)
(606)
(306)
(7,082)
(6,838)
The Group’s main interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the Group to interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
The Group’s policy is to seek to reduce its interest rate exposure using interest rate swaps. Instruments in place at year end are summarised in the table below:
As at 30 June 2021
Interest rate swaps
As at 30 June 2020
Interest rate swaps
As at the reporting date, the Group had the following variable rate borrowings outstanding:
Consolidated
Multicurrency loan facility
Net exposure to cash flow interest rate risk
ii) Liquidity risk
Carrying amount
($'000)
Notional amount
($'000)
Hedge ranges %
p.a.
Average maturity
profile years
(503)
50,000
0.79-0.92
(774)
50,000
0.79-0.92
<5
<5
30 June 2021
30 June 2020
Weighted average
interest rate
%
1.49
Balance
$’000
116,159
116,159
Weighted average
interest rate
%
1.87
Balance
$’000
151,238
151,238
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.
Refer to the Remaining Contractual Maturities section in this note for a breakdown of future cash commitments of the Group.
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75
Note 22. Financial instruments (Cont)
iii) 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.
iv) Price risk
The Group is not exposed to any significant price risk.
Offsetting financial assets and financial liabilities
The Group presents its derivative assets and liabilities on a gross basis.
Derivative financial instruments
Fair value hedge
A fair value hedge is a hedge of the exposure to changes in fair value of an asset or liability that is attributable to a particular risk and could affect the Statement of Comprehensive Income. Changes in the fair value of
derivatives (hedging instruments) that are designated as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk
(hedged item).
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit or loss over the period to
maturity using a recalculated effective interest rate.
Cashflow hedge
A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk of a highly probable forecast transaction or a recognised asset or liability. The effective portion of changes in the fair
value of derivatives that are designated as cash flow hedges is recognised in other comprehensive income in equity via the cash flow hedge reserve. Amounts accumulated in equity are reclassified to profit or loss in the
periods when the hedged item affects profit or loss. Any gain or loss related to ineffectiveness is recognised in profit or loss immediately.
At inception of a hedge relationship the Group formally designates and documents the relationship between the hedging instrument and the hedged item, along with the risk management objectives and strategy for
undertaking the hedge transaction. Both at inception and an ongoing basis that the hedging instrument is effective in offsetting changes in cash flows and fair values of the hedged item attributable to the hedged risk,
which is when the hedging relationship meets all of the following hedge effectiveness requirements:
— an economic relationship between the hedged item and the hedging instrument;
— effect of credit risk does not dominate the value changes that result from that economic relationship; and
— hedge ratio of the designated hedge is the same; that is the Group hedges the same quantity of the hedging instrument and the hedged item.
Hedge accounting is discontinued when the hedging instrument expires, is terminated, is no longer in an effective hedge relationship, or the forecast transaction is no longer expected to occur. The fair value gain or loss
of derivatives recorded in equity is recognised in profit or loss over the period that the forecast transaction is recorded in profit or loss. If the forecast transaction is no longer expected to occur, the cumulative gain or loss
in equity is recognised in profit or loss immediately.
Effects of hedge accounting on the financial position and performance
The effects of the interest rate swaps on the group's financial position and performance are as follows:
Carrying amount (non-current liability)
Notional amount
Maturity date
Hedge ratio
Change in fair value of outstanding hedging instruments since inception of hedge
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate for the year
The group has the following derivative financial instruments in the following line items in the Statement of Financial Position:
Current assets
Foreign exchange contracts - fair value hedges
Non-current liabilities
Interest rate swaps - cash flow hedges
Consolidated
$’000
$’000
30 June 2021
(503)
50,000
2023
1:1
(503)
503
1.01%
30 June 2020
(774)
50,000
2023
1:1
(774)
774
1.5%
Consolidated
$’000
$’000
30 June 2021
30 June 2020
-
-
503
503
384
384
774
774
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76
Note 22. Financial instruments (Cont)
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 2021
Non-derivatives
Non-interest bearing
Trade payables
Sundry creditors and accruals
Interest-bearing - variable
Lease liabilities
Multi-option facility
Total non-derivatives
Consolidated - 30 June 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables and accruals
Interest-bearing - variable
Lease liabilities
Multicurrency loan 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
-
-
4.49%
1.49%
Weighted
average
interest rate
15,227
8,794
11,546
1,731
37,298
-
-
8,863
1,731
10,594
-
-
17,541
117,890
135,431
-
-
10,366
-
10,366
1 year or less
Between 1 and 2
years
Between 2 and 5
years
Over 5 years
15,227
8,794
48,316
121,352
193,689
Remaining
contractual
maturities
%
$’000
$’000
$’000
$’000
$’000
-
-
4.23%
1.87%
15,064
9,669
14,901
2,828
42,462
-
-
14,087
152,888
166,975
-
-
20,170
-
20,170
-
-
13,546
-
13,546
15,064
9,669
62,704
155,716
243,153
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 Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 Unobservable inputs for the asset or liability.
The Board considers that the carrying amount of financial assets and financial liabilities recognised in the financial statements approximate their fair value.
The table below shows the assigned level for each asset and liability held at fair value by the Group:
Consolidated - 30 June 2021
Financial assets measured at fair value
Forward foreign exchange contracts
Total current assets
Financial liabilities measured at fair value
Interest rate swaps1
Total non-current liabilities
1. The Level 2 input for foreign exchange contracts is based on fair value calculations as at 30 June 2021.
Consolidated - 30 June 2020
Financial assets measured at fair value
Forward foreign exchange contracts
Total current assets
Financial liabilities measured at fair value
Interest rate swaps
Total non-current liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
-
503
503
-
-
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
384
384
774
774
-
-
-
-
Total
$’000
-
-
503
503
Total
$’000
384
384
774
774
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77
Note 23. 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
Note 24. 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 (Australia)
Audit or review of the financial statements
Other assurance services
Deloitte Touche Tohmatsu (Singapore)
Audit or review of the financial statements
Audit services - unrelated firms
Audit or review of the financial statements
Other services - unrelated firms
Corporate and taxation services
Note 25. Contingent liabilities
The Group has given bank guarantees in respect of leased office premises as at 30 June 2021 of $8,760,000 (2020: $12,813,000).
Note 26. Related party transactions
Parent entity
IPH Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 30.
Key management personnel
Disclosures relating to key management personnel are set out in note 23 and the remuneration report in the Directors’ report.
Transactions with related parties
There were no additional transactions with related parties.
Note 27. 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
Other comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Other Reserves
Retained earnings
Consolidated
30 June 2021
30 June 2020
$
3,190,346
122,502
59,545
964,622
4,337,015
$
2,979,854
117,899
129,347
1,016,866
4,243,966
Consolidated
30 June 2021
30 June 2020
$
$
491,400
17,850
509,250
66,800
66,800
522,000
17,500
539,500
65,232
65,232
42,452
45,984
79,126
121,578
147,500
193,484
Parent
30 June 2021
30 June 2020
$’000
79,828
-
79,828
123,948
571,827
5,037
121,850
417,079
11,406
5,059
16,433
449,977
$’000
45,743
313
46,056
116,543
503,290
3,874
87,859
402,149
9,450
4,792
(960)
415,431
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78
Note 27. Parent entity information (Cont)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Other than the security provided for the debt facility agreement as disclosed in note 16, the parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2021 apart from being party to the deed
of cross guarantee as detailed in Note 34.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2021.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2.
Note 28. Business combinations
Acquisitions undertaken in the year ended 30 June 2021
Balwdins Intellectual Property
On 16 October 2020 the Group completed the acquisition of New Zealand intellectual property firm Baldwins Intellectual Property (Baldwins). The transaction was effected by the Group's subsidiary, AJ Park IP, acquiring
the patent attorney business of Baldwins and the benefits of Baldwins' legal business through the acquisition of that legal business by AJ Park IP's allied law firm, AJ Park Law. The final agreed purchase price was
NZ$7,500,000.
Established in 1896, Baldwins is a well-known New Zealand IP firm, with four partners and other high quality IP professional staff working from Auckland and Wellington offices. Clients include large multi-national
corporations, universities, government agencies, start-ups and individual inventors.
The initial accounting for the acquisition has only been provisionally determined at the end of the reporting period with the 12 month period from acquisition date to end October 2021.
Equity instruments issued
A$2,447,288 of the purchase price was settled by way of the issue of 335,016 ordinary shares in IPH to the vendors of Baldwins (with those shares being escrowed for two years). The shares issued have been recorded in
the financial statements at the acquisition date fair value of $7.31 per share.
Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
Cash
Equity instruments (335,016 ordinary shares)
Total acquisition value
The Group incurred acquisition costs of $972,932. These costs have been included in business acquisition expenses in the Statement of Profit or Loss.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
Contract assets
Other assets
Property, plant and equipment
Right-of-use assets
Intangible assets - customer relationships
Trade and other payables
Provisions
Deferred tax liability
Interest bearing lease liabilities
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
Net cash used
Acquisitions undertaken in the year ended 30 June 2020
Xenith IP Group Ltd
$’000
4,659
2,447
7,106
Fair value
$’000
208
126
191
1,186
6,756
(87)
(182)
(1,892)
(1,186)
5,120
1,986
7,106
7,106
(2,447)
4,659
On 15 August 2019, the Group acquired the remaining 80.1% of ordinary shares of Xenith IP Group Limited which it did not already own under the terms of a Scheme of Arrangement. As a result the Group's consolidated
FY21 statement of profit and loss contains approximately 6 weeks more of Xenith IP Group Limited's statement of profit and loss in comparison to the Group's FY20 statement of profit and loss.
The final accounting for the acquisition was finalised during the previous financial year.
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79
Note 29. Events after the reporting period
On 1 July 2021 IPH Ltd completed the acquisition of Applied Marks Pty Ltd for upfront consideration of $5m with potential further $2.1m subject to performance requirements. The fair value of the assets and liabilities
acquired is yet to be assessed due to the proximity of the date of acquisition to the date of this financial report.
Note 30. 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
AJ Park IP Ltd
AJ Park IP Pty Ltd
AJ Park Law Ltd5
IPH Holdings (Asia) Pte Ltd
IPH (Thailand) Ltd4
Spruson & Ferguson Ltd
Pizzeys Pte Ltd
PT Spruson Ferguson Indonesia
IPH Services Pty Ltd2,3
Pizzeys Patent & Trade Mark Attorneys Pty Ltd2,3
Practice Insight Pty Limited2,3
WiseTime LLC
Spruson & Ferguson (Hong Kong) Ltd
Spruson & Ferguson Intellectual Property Agency (Beijing)
Company Ltd
Spruson & Ferguson Limited
Spruson & Ferguson (Shanghai) Ltd
Spruson & Ferguson Pty Limited2,3
Spruson & Ferguson (Asia) Pte Limited
Spruson & Ferguson Lawyers Pty Limited2,3
Spruson & Ferguson (M) SDN BHD
Spruson & Ferguson (NSW) Pty Limited2,3
WiseTime GmbH
Xenith IP Group Pty Ltd2,3,6
Griffith Hack Holdings Pty Ltd2,3,6
GH PTM Pty Ltd2,3,6
GH Law Pty Ltd2,3,6
Intellectual Property Management Pty Ltd2,3,6
Glasshouse Advisory Pty Ltd2,3,6
Shelston IP Lawyers Pty Ltd2,3,6
Shelston IP Pty Ltd2,3,6
Watermark Holdings Pty Ltd2,3,6
Watermark Advisory Services Pty Ltd2,3,6
Watermark Australasia Pty Ltd2,3,6
Watermark Intellectual Property Lawyers Pty Ltd2,3,6
Watermark Intellectual Property Pty Ltd2,3,6
Xenith IP Services Pty Ltd2,3,6
1. IPH Limited is the head entity within the tax consolidated group.
2. These companies are members of the tax consolidated group.
Principal place of busines/Country
of incorporation
Principal activities
Ownership interest
Ownership
interest
New Zealand
Australia
New Zealand
Singapore
Thailand
Thailand
Singapore
Indonesia
Australia
Australia
Australia
United States of America
Hong Kong
China
Hong Kong
China
Australia
Singapore
Australia
Malaysia
Australia
Germany
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Patent attorneys
Patent attorneys
Lawyers
Non trading entity
Non trading entity
Patent attorneys
Patent attorneys
Patent attorneys
Support services
Patent attorneys
Data analysis and
software
Data analysis and
software
Patent attorneys
Patent attorneys
Non trading entity
Patent attorneys
Patent attorneys
Patent attorneys
Lawyers
Patent attorneys
Non trading entity
Data analysis and
software
Non trading entity
Non trading entity
Patent attorneys
Lawyers
Non trading entity
Non trading entity
Lawyers
Patent attorneys
Non trading entity
Non trading entity
Non trading entity
Lawyers
Patent attorneys
Support services
30 June 2021
100%
30 June 2020
100%
100%
0%
100%
49%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
49%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
3. These wholly owned subsidiaries entered into a deed of cross guarantee with IPH limited pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 and are relieved from the requirements to prepare and lodge an audited financial report (note 34).
4. The Group holds 90.6% of the voting rights and thus has control of this entity.
5. These entities have Alliance Agreements with Group entities which results in consolidation in the IPH Group for Accounting purposes.
6. These entites were acquired by IPH Group in the financial year ended 30 June 2020.
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80
Note 31. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Impairment of Intangible assets
Lease liability revaluations and loss on disposal of fixed assets
Unrealised foreign exchange
Share-based payments
Change in operating assets and liabilities:
Decrease/(Increase) in trade and other receivables
(Increase) in deferred tax assets
Decrease/(Increase) in other assets
(Decrease) in trade and other payables
(Decrease) in provision for income tax
Increase/(Decrease) in deferred revenue
Increase in provisions
Net cash from operating activities
Note 32. Earnings per share
Profit after income tax
Profit after income tax attributable to the owners of IPH Limited
Weighted average number of ordinary shares used in calculating basic earnings per share
Options over ordinary shares
Weighted average number of ordinary shares used in calculating diluted earnings per share
Basic earnings per share
Diluted earnings per share
Note 33. Share-based payments
Consolidated
30 June 2021
30 June 2020
$’000
$’000
53,600
54,752
37,470
-
308
(4,070)
3,578
7,121
(3,314)
(1,101)
(2,703)
(1,153)
169
2,744
92,649
34,481
1,600
3,704
1,556
2,180
(682)
(9,100)
6,291
(3,658)
(4,402)
(53)
881
87,550
Consolidated
30 June 2021
30 June 2020
$’000
53,600
53,600
$’000
54,752
54,752
Number
Number
216,090,337
211,828,389
555,135
755,802
216,645,472
212,584,191
Cents
24.80
24.74
Cents
25.85
25.76
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.
Revised IPH Limited Employee Incentive Plan - November 2016
A new incentive plan, the IPH Limited Employee Incentive Plan (the "Incentive Plan"), was approved at the AGM on 16 November 2016. This plan replaced the existing Long Term Incentive Plan and Retention Rights
Plan. Each performance right issued under the Incentive Plan 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.
The conditions attached to rights issued under the Incentive Plan can be in the form of a retention requirement or other Key Performance Indicator (KPI) metric for the Group, business unit and individual.
Movement in Performance Rights issued under the new Incentive Plan during the financial year were:
Grant Date
Retention - 7 May 18
KPI - FY202
KPI - FY21 - 16 Sept 20
Total Performance Rights
1. Annual vesting of 25% of the award
2. Rights were issued in 3 tranches with grant dates of 11 Oct 19, 1 Nov 19 and 4 Dec 19
3. Vesting at Boards discretion prior this date
Final vesting date
Exercise
price
Balance at the start
of year
Granted
Exercised
Expired/ forfeited/
other
Balance at the
end of the year
9 Apr 20221
31 Aug 2020
31 Aug 20213
$0.00
$0.00
$0.00
14,494
335,886
-
350,380
-
-
1,035,962
1,035,962
(7,247)
(335,886)
-
(343,133)
(7,247)
-
(508,102)
(515,349)
-
-
527,860
527,860
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81
Note 33. Share-based payments (Cont)
IPH Executives - Long Term Incentive
An executive long term incentive was introduced during FY18. Performance rights vest subject to achievement of a minimum compound annual growth rate in EPS over the performance period. The Board will determine
a target for EPS for the performance period. For vesting to occur, EPS for the performance period must be at least equal to the Minimum EPS Target.
EPS Targets for the FY18 and FY19 plans are:
- Minimum EPS Target: 7% CAGR in EPS over the three year performance period ending on 30 June; and
- EPS Target: 15% CAGR in EPS over the three year performance period ending on 30 June.
Vesting of Rights is as follows:
Less than 7% CAGR in EPS over the Performance Period - Nil vesting
Equal to 7% CAGR in EPS over the performance Period - 20% vesting
Greater than 7% CAGR in EPS up to and including 10% CAGR - straight line vesting between 20% and 65%
Greater than 10% CAGR in EPS up to and including 15% CAGR - straight line vesting between 65% and 100%
At or above 15% CAGR in EPS over the Performance Period - 100% vesting
EPS Targets for the FY20 and FY21 plans:
- Minimum EPS Target: 5% CAGR in EPS over the three year performance period ending on 30 June;
- EPS Target: 12.5% CAGR in EPS over the three year performance period ending on 30 June.
Vesting of Rights is as follows:
Less than 5% CAGR in EPS over the Performance Period - Nil vesting
Equal to 5% CAGR in EPS over the performance Period - 25% vesting
Greater than 5% CAGR in EPS up to and including 12.5% CAGR - pro-rated vesting on a straight line basis
At or above 12.5% CAGR in EPS over the Performance Period - 100% vesting
Grant Date
LTI - 20 Nov 17
LTI - 26 Nov 18
LTI - 22 Nov 19
LTI - 7 Dec 20
Total LTI Performance Rights
1. Vesting at Boards discretion prior this date
Final vesting date1
Exercise
price
Balance at the start
of year
Granted
Exercised
Expired/ forfeited/
other
Balance at the
end of the year
1 Sept 2020
1 Sept 2021
1 Sept 2022
1 Sept 2023
$0.00
$0.00
$0.00
$0.00
216,608
366,493
377,044
-
960,145
-
-
-
369,768
369,768
(216,608)
-
-
-
-
(153,704)
-
-
(216,608)
(153,704)
-
212,789
377,044
369,768
959,601
Fair value of retention and performance rights granted
The weighted average share price during the financial year was $6.94 (2020: $8.19).
The weighted average remaining contractual life of rights outstanding at the end of the financial year was 0.9 years (2020: 1.04 years)
The weighted fair value of the rights granted during the year is $6.58 (2020: $7.71)
Valuation model inputs used to determine the fair value of rights at the grant date, are as follows:
Revised IPH Limited Incentive Plan - November 2016
Professional Staff and Senior Management
Grant Date
IPH Limited Employee Incentive Plan
Retention - 7 May 181,2
KPI FY20 - 11 Oct
KPI FY20 - 1 Nov
KPI FY20 - 4 Dec
KPI FY21 - 16 Sept
1. Risk free interest rate and fair value at grant dat are at the weighted average of the rights issued
2. Annual vesting of 25% of the award.
IPH Executives - Long Term Incentive
Grant Date
LTI - 20 Nov 2017
LTI - 26 Nov 20181
LTI - 22 Nov 20191
LTI - 7 Dec 20201
1. Expected volatility not included in this valuation.
Amounts recognised in the Financial Statements
Vesting Date
Share price at
grant date
Exercise price
Dividend yield
Risk-free interest
rate
Fair value at
grant date
9 April 2022
31 Aug 2020
31 Aug 2020
31 Aug 2020
31 Aug 2021
$3.86
$8.16
$8.05
$8.07
$7.12
$0.00
$0.00
$0.00
$0.00
$0.00
6.30%
3.90%
3.90%
3.90%
4.20%
2.08%
0.70%
0.83%
0.77%
0.16%
$3.32
$7.88
$7.79
$7.84
$6.84
Vesting Date
Share price at
grant date
Exercise price
Expected Volatility
Dividend yield
Risk-free interest
rate
Fair value at
grant date
1 Sept 2020
1 Sept 2021
1 Sept 2022
1 Sept 2023
$5.64
$5.40
$8.20
$6.62
$0.00
$0.00
$0.00
$0.00
32.00%
5.00%
5.20%
3.90%
4.60%
1.89%
2.07%
0.74%
0.12%
$4.91
$4.68
$7.36
$5.84
During the financial year ended 30 June 2021, an expense of $3,578,000 was recognised in the Statement of Profit or Loss in relation to equity settled share based payment awards. (June 2020: $2,180,000)
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82
Note 34. Deed of cross guarantee
The members of the Group party to the deed of cross guarantee are detailed in note 30. The consolidated Statement of Profit or Loss and Other Comprehensive Income and consolidated Statement of Financial Position
of the entities party to the deed of cross guarantee are:
Revenue
Other income
Expenses
Employee benefits expense
Depreciation of right-of-use assets
Depreciation and amortisation of fixed assets and intangibles
Occupancy expenses
Business acquisition costs
Agent fee expenses
Insurance expenses
Travel 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 attibutable to:
Owners of IPH Limited
Profit after income tax expense for the year
Total comprehensive income for the year is attibutable to:
Owners of IPH Limited
Profit after income tax expense for the year
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangibles
Investments in subsidiaries
Deferred tax
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Income tax
Provisions
Interest bearing lease liabilities
Deferred revenue
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liability
Interest bearing lease liabilities
Other financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
30 June 2021
30 June 2020
$’000
209,640
54,500
(74,971)
(5,284)
(24,318)
(1,412)
(3,467)
(63,306)
(1,902)
(207)
(16,173)
(4,967)
68,133
(9,405)
58,728
282
59,010
58,728
58,728
59,010
59,010
$’000
220,755
44,146
(79,969)
(6,119)
(24,472)
(711)
(1,120)
(66,632)
(1,334)
(1,369)
(17,724)
(6,473)
58,978
(12,098)
46,880
313
47,193
46,880
46,880
47,193
47,193
30 June 2021
30 June 2020
$’000
$’000
49,964
52,813
6,919
109,696
7,018
22,781
278,846
118,627
14,246
441,518
63,970
58,273
7,536
129,779
9,793
27,509
284,201
98,878
21,755
442,136
551,214
571,915
12,822
(3,045)
16,880
6,521
8,306
41,484
116,159
33,880
26,915
503
1,022
178,479
16,990
(4,361)
15,898
6,567
1,832
36,926
151,238
40,735
32,748
774
2,791
228,286
219,963
265,212
331,251
306,703
304,503
9,630
17,118
331,251
289,574
9,261
7,868
306,703
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83
IPH LIMITED
ABN 49 169 015 838
Directors Declaration
IPH LIMITED
ABN 49 169 015 838
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;
In the Directors’ opinion:
- the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as
- the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other
described in note 2 to the financial statements;
mandatory professional reporting requirements;
- the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the financial year
- the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as
ended on that date; and
described in note 2 to the financial statements;
- there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
- the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the financial year
ended on that date; and
At the date of this declaration, the company is within the class of companies affected by ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. 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
- there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
the deed of cross guarantee.
At the date of this declaration, the company is within the class of companies affected by ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. 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
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC Corporations Instrument applies, as detailed
the deed of cross guarantee.
in note 35 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.
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC Corporations Instrument applies, as detailed
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
in note 35 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.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
On behalf of the Directors
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
Dr Andrew Blattman
Managing Director
19 August 2021
Sydney
Dr Andrew Blattman
Managing Director
19 August 2021
Sydney
iphltd.com.au
2021 Annual Report
84
Heading here
Independent Auditor’s Report
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
Tel: +61 2 9322 7000
www.deloitte.com.au
IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee MMeemmbbeerrss ooff IIPPHH LLiimmiitteedd
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt
Opinion
We have audited the financial report of IPH Limited (the “Company”) and its subsidiaries (the “Group”) which
comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of
profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance
for the year then ended; and
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report for the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
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2021 Annual Report
86
KKeeyy AAuuddiitt MMaatttteerr
RReeccoovveerraabbiilliittyy ooff ggooooddwwiillll aanndd iinnttaannggiibbllee aasssseettss
As at 30 June 2021, goodwill and intangible assets
totalled $296.4 million and $171.7 million
respectively, as disclosed in note 12(c).
The determination of the recoverable amount of
goodwill and intangible assets is complex and
requires management to exercise significant
judgement in particular in determining the key
assumptions used in cash flow projections, such
as:
short term forecast revenue and costs,
particularly in light of the current
economic uncertainty caused by COVID-
19;
long term growth rates;
terminal values; and
discount rates.
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt
MMaatttteerr
Our procedures performed included, but were not
limited to:
o obtaining an understanding of management’s
process to assess the recoverable amount of
goodwill and intangible assets including the
preparation of discounted cash flow models,
and budgeting and forecast processes;
o agreeing the cash flow projections used in the
DCF model to Board approved forecasts;
o
consideration of the impact of COVID-19 on
future forecast cash flows, with specific focus
on revenue and cost forecasts;
o assessing the historical accuracy of
management’s forecasting by comparing actual
results to budgeted results for preceding years;
o
in conjunction with our valuation specialists,
assessing the appropriateness of
management’s discounted cash flow
(“DCF”) models; and
challenging the key assumptions and
estimates used by management in their
DCF models, including:
analysis of long term growth rates
and terminal values by reference to
industry data and external economic
outlook;
determining our independent
expectation of an appropriate
discount rate range;
o
challenging and evaluating the appropriateness
of management’s sensitivity analysis; and
o evaluating the appropriateness of disclosures
made in the financial report against the relevant
accounting standards.
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87
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group’s annual report for the year ended 30 June 2021 but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not and will not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial report
or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we
have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of the Directors 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 preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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
Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
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88
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards
applied.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt
Opinion on the Remuneration Report
We have audited the Remuneration Report included in Section 5 of the Directors’ Report for the year ended 30
June 2021.
In our opinion, the Remuneration Report of IPH Limited for the year ended 30 June 2021, complies with section
300A of the Corporations Act 2001.
Responsibilities
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.
DELOITTE TOUCHE TOHMATSU
H Fortescue
Partner
Chartered Accountants
Sydney, 19 August 2021
iphltd.com.au
2021 Annual Report
89
Heading here
Shareholder Information
Shareholder
Information
The shareholder information set out below was applicable as at 31 July 2021.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Securities
%
No. of holders
191,164,636
88.01
10,316,518
5,534,634
8,585,890
1,602,188
4.75
2.55
3.95
0.74
Total
217,203,866
100.00
63
448
759
3,376
3,517
8,163
Geographic distribution
Range
AUSTRALIA
BAHRAIN
HONG KONG
INDONESIA
JAPAN
LAO PEOPLE'S
DEMOCRATIC REPUBLIC
MALAYSIA
NEW ZEALAND
PHILIPPINES
SINGAPORE
SWEDEN
THAILAND
UNITED KINGDOM
UNITED STATES OF AMERICA
VANUATU
Securities
%
No. of holders
%
216,252,290
99.56
8,053
98.65
700
8,832
2,982
974
701
3,900
816,385
1,320
45,440
1,657
8,000
45,268
13,517
1,900
0.00
0.00
0.00
0.00
0.00
0.00
0.38
0.00
0.02
0.00
0.00
0.02
0.01
0.00
1
3
1
1
1
3
77
1
9
1
1
6
4
1
0.01
0.04
0.01
0.01
0.01
0.04
0.94
0.01
0.11
0.01
0.01
0.07
0.05
0.01
Total
217,203,866
100.00
8,163
100.00
iphltd.com.au
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91
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest registered holders of quoted equity securities as at 31 July 2021
are listed below:
Rank
Name
A/C designation
30 Jul 2021
%IC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED
J P MORGAN NOMINEES
AUSTRALIA PTY LIMITED
CITICORP NOMINEES
PTY LIMITED
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED
NATIONAL NOMINEES
LIMITED
74,754,654
34.42
33,994,561
15.65
18,555,719
8.54
13,032,908
6.00
11,962,301
5.51
4,949,531
2.28
BNP PARIBAS NOMINEES
PTY LTD
BNP PARIBAS NOMS
PTY LTD
3,200,040
1.47
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED
2,968,221
1.37
SETDOR PTY LIMITED
UBS NOMINEES PTY LTD
TALABAH PTY LIMITED
MILTON CORPORATION
LIMITED
ANACACIA PTY LIMITED
CITICORP NOMINEES
PTY LIMITED
WARBONT NOMINEES
PTY LTD
WOMBEE PTY LTD
NATIONAL NOMINEES LIMITED
PACIFIC CUSTODIANS
PTY LIMITED
IPH EMP SHARE TST
BRISPOT NOMINEES
PTY LTD
HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED - A/C 2
2,100,000
1,939,298
1,767,175
1,535,922
1,418,682
1,270,842
0.97
0.89
0.81
0.71
0.65
0.59
1,118,650
0.52
1,000,654
880,456
866,186
0.46
0.41
0.40
853,495
0.39
840,657
0.39
Total
179,009,952
Balance of register
38,193,914
0.82
0.18
Grand total
217,203,866
100.00
iphltd.com.au
2021 Annual Report
92
6.07%
5.10%
6.12%
6.40%
Unquoted equity securities
Performance Rights
Substantial holders
No. on Issue
No. of holders
1,487,461
178
The names of substantial shareholders of the Company’s ordinary shares as at 31 July 2021
(holding no less than 5%) who have notified the Company in accordance with section 671B
of the Corporations Act 2001 are:
Holder
Paradice Investment
Management Pty Ltd
Date of last
notice received
No. of
securities
Percentage of
issued capital1
19 Aug 2019
13,185,819
The Vanguard Group
27 May 2019
11,076,840
Invesco Australia Ltd
11 Dec 2020
13,288,298
12 Mar 2021
13,903,589
Kabouter Management LLC
& Related Entities
1) Percentage of issued securities at 31 July 2021
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and
upon a poll each share shall have one vote.
There are no other classes of equity securities.
Restricted securities
There are no restricted securities.
Securities subject to voluntary escrow
Class
Ordinary
Expiry date
No. of
securities
16 Oct 2022
335,016
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2021 Annual Report
93
Annual General Meeting (AGM)
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.
Consistent with the ASX Corporate Governance
Principles and Recommendations, the Chairman
will demand a poll in relation to all substantive
resolutions at a meeting of shareholders. 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 the lesser (by number) of:
five shareholders present in person; or
shareholders present in person representing at
least 10 per cent of the voting shares.
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 which will accompany
the Notice of Annual General Meeting to be
distributed to shareholders.
Information about IPH
Information about IPH Group Limited including
company announcements, presentations and
reports can be accessed at www.iphltd.com.au.
IPH will hold its 2021 Annual General Meeting
on Thursday, 18 November 2021, commencing
at 10.30am (AEDT). Details of the meeting
will be included with the Notice of Annual
General meeting which will be distributed to
shareholders.
IPH Limited is listed on the Australian Securities
Exchange (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.
Verification process
IPH has in place processes to verify the
periodic corporate reports it has prepared and
released during FY21, where those reports were
not subject to audit or review by an external
auditor, to satisfy itself that each report was
materially accurate and balanced and provided
investors with appropriate information to
make investment decisions. This verification
process was applied to the sections of this
Annual Report not audited or reviewed by an
external auditor. The verification processes
used included documenting the sources of
information and undertaking consultation within
IPH or with external parties. The Board or, where
appropriate, Board Committees, have reviewed
and approved each periodic corporate report
prepared and released by IPH during FY21.
Online voting
Shareholders can lodge voting instructions
electronically either as a direct vote or by
appointing a proxy for the 2021 Annual General
Meeting. The information required to log on and
use online voting will be shown on the voting
form which will be distributed to shareholders
with the Notice of Annual General meeting.
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iphltd.com.au