The IPH Ltd (ASX: IPH) share price is this morning falling lower following the release of the company's full year reports. At the time of writing, the IPH share price has tumbled 5.46% to $7.97.
How did IPH perform in FY 2020?
The IPH share price has fallen lower despite the company releasing relatively strong financial results for the FY 2020. IPH delivered strong revenue of $370.1 million, up a huge 43% despite the challenging market conditions. Revenue was largely driven by Asian IP which grew 6%. In contrast Australia and New Zealand revenue declined 5% although this was largely due to the FY19 Xenith results being written off.
In further good news for the company, it reported statutory NPAT of $54.8 million representing in a 3% increase on the prior corresponding period.
The IPH results demonstrate the ongoing resilience of the business despite the challenging market conditions caused by COVID-19 in the second half of the year. The business remains well placed with continued strong cash generation, a robust balance sheet with enhanced financial flexibility and no refinancing commitments until 2022.
As a prudent measure, IPH drew $20 million from existing facilities in March 2020 and, as a result, had cash on hand of $82.9 million at year end of which $12.7 million was subsequently repaid in August 2020.
Foreign currency also plays a large part in the company's earnings thanks to its diversified earning portfolio. IPH seeks to reduce this risk through hedging against specific FX risks since a 1-cent movement in the AUD/USD exchange rate can have a $1.9 million effect on revenue. However this current policy is under review.
Dividend
For FY2020, IPH declared a final dividend of 15 cents per share, fully franked, bringing the full year dividend to 28.5 cents per share. This was up 14% on the prior year.
The full year dividend is in line with the board's dividend policy to pay 80-90% of cash NPAT as dividends.
What's next for the IPH share price?
For FY21, IPH aims to continue leveraging its expanded focus on Asia, especially in China, in order to develop a network effect for the company. It also aims to continue margin expansion and increase operational efficiencies across the group.
IPH does note, however, that there will be continued disruptions from COVID-19 and thus it will continue to adopt a prudent approach to managing the business in what is a challenging environment. In response, the company will focus on developing its digital platform for increased usability.
Unfortunately for IPH shareholders, the weakening of the US dollar is also likely to affect reported revenues moving forward.
The IPH share price has recovered 26.9% from its March low but is 3.2% down in year-to-date trading. The IPH share price has fallen 15.7% over the past 12 months.
