The IPH Limited (ASX: IPH) share price has plummeted 4.6% lower on the ASX on Thursday, closing at $5.80, following its half-year results release this morning.
What happened to IPH's earnings?
The company recorded a solid statutory net profit after tax (NPAT) result of $24.2 million, up 23% on prior corresponding period. Revenue was similarly up 23% to $124.9 million and up 21% on an underlying basis.
Continued strong performance from Asia saw like-for-like revenue increase 14% and earnings before interest, tax, depreciation and amortisation (EBITDA) increase 17% in the core operating segment. Underlying revenue from the company's biggest segment, Australia & NZ IP, fell 1% on an underlying basis to $66.7 million once new businesses and FX moves were stripped out.
The IPH share price slumped today despite an increased in its interim dividend from 11.5 cents per share (cps) in 1H18 to 12 cps in 1H19, franked to 50%. This may have something to do with the equity stake that IPH acquired in Xenith IP Group Ltd (ASX: XIP), announced yesterday,
Xenith currently has a friendly merger in place with QANTM Intellectual Property Ltd (ASX: QIP) and IPH openly stated today that it does not support QANTM's current proposal to acquire Xenith. I'd expect to see IPH push hard to scupper the deal, with the stock rising 2.2% in yesterday's trade after the raid.
The Xenith share price closed 5.33% lower today, while the QANTM share price ended the day 3.23% higher.
The Verdict
Overall, I can't see too many negatives in today's result. Signs of slowing growth in Australia could be cause for concern but the company's Asian business is still trundling along nicely with sustained margins across the board.
The IPH share price is up nearly 7% year-to-date and remains the biggest listed law firm on the ASX. I think today's c has more to do with a correction from yesterday's surge and potentially some behind-the-scenes trading as people reposition for the Xenith trade. While I'm not looking to invest in the legal sector, I think IPH could see strong growth in 2H19 despite some headwinds.
