The IPH Ltd (ASX: IPH) share price is on fire today.
Shares in the intellectual property services group leapt 17% higher in early morning trade and are currently up 13.8% since yesterday's close.
The big gain in the IPH share price comes with two drivers: the release of its full year results for the 2022 financial year (FY22); and an acquisition announcement.
First, the acquisition…
IPH share price takes off on acquisition news
Investors are bidding up the IPH share price after the company announced it's reached an agreement to acquire the IP agency practice of Smart & Biggar, a leading Canadian intellectual property firm.
This marks the first expansion for IPH beyond the Asia Pacific region.
The consideration for the acquisition is CA$348 million (AU$387 million).
That's comprised of an upfront cash consideration of CA$241 million along with an initial issue of 5.3 million new IPH shares with a value of CA$41 million (escrowed for two years). There's also a deferred issue of new IPH shares (earn-out consideration) up to a value of CA$66 million (also escrowed for two years).
IPH forecast underlying earnings per share (EPS) accretion of around 10% in the first full year of ownership.
Commenting on the acquisition that looks to be driving the IPH share price higher today, CEO Andrew Blattman said:
The Australian and Canadian IP markets are very similar, and together the combined group will be well positioned to provide our clients with a comprehensive IP service offering with an international reach in key secondary markets, while offering strong career development opportunities for our people.
Moving on to the IPH FY22 results…
What happened in FY22?
- Revenue of $385.1 million, up 6% from the prior year
- Statutory net profit after tax (NPAT) of $52.6 million, down 2% year on year
- Statutory earnings before interest, taxes, depreciation and amortisation (EBITDA) of $115.9 million, up 2% from FY21
- Final dividend of 16.0 cents per share, 50% franked, an increase of 3% from FY22
What else impacted the IPH share price during the year?
The IPH results were significantly stronger on an underlying basis, likely providing some extra tailwinds for the share price today.
The company reported a 14% increase in underlying NPAT to $86.7 million while underlying EBITDA increased 11% from FY22 to $137.4 million.
It attributed the large difference between underlying and statutory results to the $4.6 million non-cash write-down of the intangible value of the Shelston IP brand, alongside the $2.2 million write-down of the Practice Insight business, which was divested during the year.
The company forecast that both these initiatives will deliver higher earnings in FY23 and beyond.
The full-year dividend comes out to 30.5 cents per share, up from 29.5 cents per share in FY21.
What did management say?
Commenting on the full-year results, Blattman said:
Since listing we have successfully demonstrated how our strategy to combine organic growth with the acquisition and integration of businesses delivers earnings accretion for the wider group. Our FY22 result reflects the continuation of that strategy with our Asian business once again delivering double-digit revenue and earnings growth on a like-for-like basis…
In Singapore, IPH Group maintained our number one patent market share of 21.9% for the period ending 31 March 2022… IPH remains the market leader in Australia with combined group patent market share (excluding innovation patents) of 34% for the year to 30 June 2022.
IPH share price snapshot
The IPH share price is up 21% over the past 12 months, handily outpacing the 5% full-year loss posted by the All Ordinaries Index (ASX: XAO).
Longer-term, IPH shares are up 123% over the past five years.
