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IPH revenue up, but cyber breach proves costly

ASX-listed IP services group IPH Limited has recorded a 27 per cent increase in revenue in the latest financial year, despite a cyber breach costing the firm $2.8 million. Elsewhere, it is set to acquire a Canadian IP firm.

user iconLauren Croft 18 August 2023 Big Law
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IPH Limited (ASX: IPH) has recorded a 23 per cent increase in statutory net profit after tax (NPAT) of $64.5 million for the year ended 30 June 2023 and expanded its presence in Canada with the acquisition of a boutique firm with 30 staff.

Group underlying NPAT increased by 20 per cent to $99.0 million, and underlying EBITDA increased by 28 per cent to $170.0 million. The underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) margin increased by 0.3 per cent, including the contribution from Smart & Biggar, which delivered $31.4 million in underlying EBITDA since it was acquired by IPH in October 2022.

Chief executive officer Dr Andrew Blattman said that this further supported the firm’s growth strategy for FY23.


“IPH continued to execute its growth strategy successfully during FY23, demonstrated by the acquisition and subsequent integration of Smart & Biggar, which assisted in delivering a significant increase in underlying group profitability and enhanced returns to shareholders for the year,” he said.

“Smart & Biggar contributed $31.4 million in underlying EBITDA, which marginally exceeded our expectations at the time of acquisition. We are pleased with the progress of Smart & Biggar’s integration into the IPH network and the additional scale and opportunity this acquisition affords the group.”

According to a statement to the ASX from the firm, the difference between the group’s statutory and underlying EBITDA in FY23 of $11.0 million relates to changes in deferred consideration, costs associated with acquisitions, costs associated with managing a cyber security incident, restructuring expenses and IT SaaS implementation costs.

This comes after IPH detected unauthorised access to a portion of its IT environment in mid-March. It subsequently halted trading and launched an investigation into the breach.

The cyber attack was on two of the intellectual property law group’s member firms: Spruson & Ferguson (Australia) and Griffith Hack. That data breach was later revealed to have cost the firm upwards of $2 million, as reported by Lawyers Weekly at the time. You can read more about the impacts of such data breaches here.

IPH noted in its ASX announcement that it has since conducted a comprehensive post-incident review into the breach and has “identified further learnings and opportunities which will be incorporated into strengthening our cyber security measures and ensuring the strengthening of controls”.

While the group noted it had not experienced “any known loss of client relationships” following the cyber incident, there have been a variety of subsequent costs.

“For the month of March 2023, business disruption contributed to a service charge budget shortfall of approximately $4.4 million (in aggregate) for the impacted businesses of Spruson & Ferguson Australia and Griffith Hack. In the subsequent months, Griffith Hack and Spruson & Ferguson Australia collectively exceeded budget by approximately $1.5 million,” IPH stated.

“No further backlog of filings is expected for either firm. IPH incurred $2.8 million (pre-tax) in non-underlying costs in FY23, including costs for specialist third parties as part of management and remediation of IT systems, legal and other costs.”

The company’s improved underlying result and continuing strong financial position enabled a 9 per cent increase in the final dividend to 17.5¢ per share (35 per cent franked), bringing the full-year dividend to 33.0¢ per share, compared to 30.5¢ per share for the prior year.

“Like-for-like revenue in IPH’s Australian and New Zealand IP businesses declined by 1 per cent, with like-for-like EBITDA declining by 5 per cent,” Dr Blattman added.

“This represented an improvement from the first half (where revenue had declined 3 per cent and EBITDA down 6 per cent) notwithstanding some disruption from managing the response to the cyber incident during March/April.”

Additionally, IPH revealed that subsidiary Smart & Biggar had acquired Canadian IP firm Ridout & Maybee for $74 million.

As part of the acquisition, the two firms will act as one under the Smart & Biggar brand and bring 30 staff over from Ridout & Maybee.

“The acquisition of Ridout & Maybee is consistent with our growth strategy and supports our vision to be the leading IP services group in secondary IP markets,” Dr Blattman said.

“Following the successful acquisition of Smart & Biggar in October 2022, this transaction further consolidates our presence in the Canadian IP market, and we look forward to Ridout & Maybee becoming part of Smart & Biggar and contributing to the wider IPH network.”

Moving forward, Dr Blattman said IPH would continue to focus on complementary growth step-out opportunities in Canada and organic growth opportunities across its network.

“We continue to progress complementary acquisition opportunities in Canada. We believe there are a number of further consolidation opportunities to expand our patent market share in a material manner, each in the region of approximately 4 to 7 per cent of the Canadian patent market,” he said.

“We are also implementing specific business development initiatives targeting organic growth in Australia/New Zealand while focusing on restoring growth in Asia. Separately we are reviewing our operating model to ensure our future state capability, in terms of the management of the expanding IPH group.”