IPH Limited (IPH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the IPH Limited H1 FY '24 Results Conference Call. [Operator Instructions]. I would now like to hand the conference over to Dr. Andrew Blattman, MD and CEO. Please go ahead.

Good morning, and welcome to the IPH results presentation for the half-year ended 31 December 2023. My name is Andrew Blattman. I'm the CEO and Managing Director of IPH. With me today is John Wadley, our Group CFO. As always, thank you for joining us today's presentation and for your continuing interest in IPH. Before I commence the formal presentation, I wanted to acknowledge and welcome our new team members who have joined our ever-expanding group at IPH through our most recent Canadian acquisitions of Ridout & Maybee and ROBIC. In the short period, we have built a market-leading IP business in Canada, and we welcome the contribution of our newly acquired businesses to the group. Let me also thank the IPH executive team and Board for their support, and of course, all our people across the group for their contribution to our results for this half. Moving to Slide 3. For today's presentation, I'll provide an overview of the operational highlights for the year. John will discuss the financial results in detail, including P&L, balance sheet, and cash flow and capital management before handing back to me to provide some commentary on our key markets in terms of filing activity and a review of our operations. I'll conclude with some comments about our ongoing strategic focus and how we are building a stronger platform for growth. As always, very happy to answer your questions at the end. So, moving to Slide 4. Just a reminder of the diversity and scale of IPH. Pleasingly, we continue to expand. In the last 6 months, we have further broadened our network with the successful completion of 2 acquisitions, consolidating our leading presence in the Canadian market, and I'll speak more on that later. We are truly one of the world's last services groups in secondary IP markets. We now have 7 brands and over 1,500 employees with offices in 10 companies servicing more than 25 IP jurisdictions. Slide 5 is our highlights slide, and our results for the half continued to reflect the resilience in our business and also the global scale I just highlighted, which comes from having exposure to an increasing number of IP jurisdictions across global regions. With that context, I'll step through the highlights for our financial results for the half. On Slide 6, we've delivered a solid underlying result for the half, with underlying EBITDA up 13%. Indeed, we would have seen a larger increase in underlying EBITDA by not to despite in the selling dollar in December, which resulted in an FX loss of $1.1 million on the revaluation of cash and receivables and John will speak to that later. One of the pleasing aspects of the result was the return to organic growth in our sterling New Zealand business and in particular, Spruson & Ferguson in Australia. I'm very pleased to report a strong turnaround in this Australian business with growth at both the top and bottom line. And while we continue to narrow the growth, we continue to narrow the gap between IPH patent filings and the market. This half represents some clear air, if I can call it that, following some disruption we experienced on the integration of sales in IP and Spruson a year or so ago and, of course, post the cyber incident last year. As you will see, there's been a bit of a dip in Asia because of market conditions, and I'll speak on that shortly. But the other highlight I wanted to point out there was a significant improvement in our cash generation. Our operating cash flow increased by over 50% for the half with cash flow generation of nearly 130% a fantastic effort. Our strong cash flow has always been a hallmark of IPH, and this continues to be the case. And as we have said consistently, this pace generation supports our ability to return to our target gearing range in this calendar year. Another high level on this slide is the scale we have created in Canada through our acquisitions of Ridout & Maybee and ROBIC during the period. Of course, these transactions build on our initial acquisition of Smart & Biggar in October 2022 with IPH now the market leader in Canada, a key secondary life market for us. That provides us with further earnings resilience and diversity together with the enhanced global scale as one of the world's leading IP services firms. In addition, we are delivering synergies on target from these acquisitions, and this has helped generate a 5% lift in like-for-like EBITDA in Canada despite a 1% decline in revenue associated with the variability of litigation revenue. All in all, a very strong results. I'll now hand over to John to step through the financial results in more detail.

Thank you, Andrew, and good morning, everyone. Our financial results for the half reflected a period where we have completed 2 acquisitions, Ridout & Maybee on the 29th of September 2023 and ROBIC on 15th of December 2023. Therefore, our underlying results include partial contributions from these businesses during the half, which were not included in the prior corresponding half. Additionally, the half-year results include 6 months EBITDA contribution of Smart & Biggar compared to almost 3 months in the half-year of 2023. The increase in underlying revenue and EBITDA represent the increased contribution from acquired businesses, but also the strong turnaround in the Australia/New Zealand business as this segment returned to growth. This delivered a solid underlying result with underlying EBITDA up 13%. The statutory result reflects the increased costs associated with acquisitions, including additional amortization and interest costs, which are included in the half, while the full-year benefit of earnings will be realized in FY '25 and beyond. I will address these costs in a subsequent slide. Our results should also be reviewed with an understanding of the foreign exchange impacts. Underlying earnings were partly supported by an average AUD-USD exchange rate over the period of $65.3 in half year '24 compared to 67.1% in half year '23. As we have previously advised, the $0.01 weakening in the Australian dollar equates to an annualized $2 million reduction in service charge revenue. However, you might recall that the Australian dollar strengthened quite significantly against the U.S. dollar towards the end of the reporting period to approximately $0.68. This strengthening caused an impact to the P&L from the revaluation of U.S. dollar-denominated cash and receivables. That resulted in a net foreign exchange loss of $1.1 million in half-year '24 compared to a gain of $0.3 million in the prior corresponding period. Our strong cash generation has enabled a further increase in the interim dividend, which is up 3% to $0.16 per share and 35% franked. The dividend will be paid on the 22nd of March, and the DRP will be in operation with a 1.5% discount. Looking at Slide 9, the like-for-like earnings. The like-for-like basis eliminates the impact of acquisitions and the foreign exchange impacts I have just discussed. Looking for this to Australia and New Zealand, this was a much improved result. Like-for-like revenue increased by 4%, assisted by increased pricing and improved filings. As Andrew will detail in a moment, IPH is continuing to close the gap in our filings relative to the market, which is very encouraging. That revenue growth came at an improved margin, which delivered a 6% increase in like-for-like EBITDA with like-for-like EBITDA margin improving by 1 percentage point. Results in Asia reflects a general decline in industry filings across the region. Filings in Singapore declined during the period with U.S. applicants accounting for the majority of this decline. Andrew will provide further context on these filings. Lower Singapore market filings, we would also indicate that market filings were lower across other Asian jurisdictions. There's also an impact to revenue and earnings from lower translation revenue associated with the reduction in filings from these jurisdictions. We've previously called out the impact of one large IPH client who exited operations in China in October 2022, reflecting industry supply chain de-risking of some corporate concatenative manufacturing locations to China. The half-year '24 results were impacted from cycling the prior corresponding period, which included a contribution from this client. All of that resulted in like-for-like revenue from Asia declining by 3% with like-for-like EBITDA down 9%. We've successfully addressed short-term periods of variability in the past, and our Asian business still represents a significant growth opportunity for the group. Our Canadian businesses performed well. Like-for-like revenue was down slightly, with growth in IP agency revenue, partially offset by a decline in legal revenue in Smart & Biggar. As we've outlined previously, legal revenue is typically related to case flow, which can fluctuate. [Indiscernible] will also detail shortly, our integration plans continue to progress well with synergies being delivered in line with our initial targets. As a result, despite a slight decline in revenue, we were able to deliver an uplift in EBITDA, up 5% with the EBITDA margin lifting by 7 percentage points. From an overall Group perspective, we have typically talked about our underlying margin based upon total revenue, which is circa 33%. And we based on service charges, it is even stronger and closer to 45%. Moving on to Slide 10 and the underlying results. Slide 10 shows the calculation of the underlying result, which is on a consistent basis with prior periods, and reconcile these to the reported statutory half-year '24 results. As I mentioned earlier, given the completion of 2 transactions during the half, we experienced a number of adjustments to the statutory results for the period. These included costs related to business acquisitions of $10.7 million. This primarily relates to the completion of Ridout & Maybee and ROBIC, together with costs associated with other opportunities. Restructuring expenses include $1.7 million for Smart & Biggar and Ridout & Maybee, including redundancy payments, $1.3 million for owner's provisions relating to the exit of Ridout & Maybee offices, and $0.7 million for the IPH project. Impairment of right-of-use assets relates to the write-down and planned exit of the existing RADAR and maybe premises. And finally, the amortization adjustment of $22.3 million relates to acquired intangibles associated with acquisitions. Share-based payments has been included in underlying EBITDA since FY '23 and is specifically relating to an acquisition. The half-year '24 results include $4.1 million of share-based payments expense compared to $2.1 million in the prior corresponding half and also includes $1.1 million of nonunderlying expense related to the acquisition of Smart & Biggar. The underlying effective tax rate was 26.4%, reflecting an increased proportion of the results recognized in lower tax jurisdictions. Now, turning to the cash flow on Slide 11. I'm pleased to report a solid increase in cash flow with very strong cash generation. You might recall that in FY '23, we amended the cash conversion calculation methodology to more accurately reflect the rate of cash conversion. This included the removal of the effects of nonoperating activities from the calculation. We have adopted the same at the dollar in half year '24, and the prior year comparatives have been restated. The group continues to generate strong cash flow with cash flow from operations up over 50%. Meaning our cash flow generation was 128%, a very strong result. Reduction in working capital reflects the reversal of the prior period working capital outflow as collections increased following the delay caused by the cyber instance as well as acquisition cost accruals, which were paid in January. While the quantum of receivables and related provisioning has increased as a result of the acquisitions, the aging of receivables has improved as a result of the improved collections. Looking at Slide 12 and the balance sheet. Main movements in the balance sheet have been caused by the acquisition accounting, Ridout & Maybee and ROBIC. These include customer relationships, which will be amortized over 10 years, ROBIC brand, and Goodwill. ROBIC brand and Goodwill will not be amortized, but subject to impairment testing. The increased borrowings related to both transactions which were majority debt funded. The Canadian acquisitions have resulted in an expected net finance cost of circa $27 million for FY '24. With outlined finance costs and other items below EBITDA in the appendix. Net debt at 31 December was $380 million, with leverage of 2.2x, which we outlined at the time of the ROBIC acquisition. We also announced at the time of that acquisition, we continue to expect to return to our gearing to below 2x during the calendar year of 2024. Slide 13, now exposure to foreign currency. The group's exposure to USD remains broadly the same post the acquisitions of Ridout & Maybee and ROBIC as the businesses invoiced the majority of their clients in Canadian dollars. 39% of the group's invoicing is denominated in USD. As most of you know, we currently do not undertake foreign currency hedging on our operational transaction exposure. We'll continue to monitor this position. I'll now hand back to Andrew.

Thanks, John. And over the next few slides, on Slide 14 onwards. I will set out an update on our filing activity for the year essentially in first one is Slide 15, the patent market in Australia and giving an update there. Certainly, we continue to narrow the gap in Australia. It's heading very much in the right direction. Overall, total Australian patent filings for the half decreased by 0.8%. That's total market compared to the prior half while IPH Group filings decreased by 2.8% for the same period. That relative gap to the market of minus 2 percentage points is a significant improvement from our position of 2 years ago, which was minus 8% and also from the full-year result as last year at minus 4.5%. So, we're certainly hitting in the right direction. As we've always said, a key objective for us as a market leader is for our patent filing performance to track the market and indeed beyond. While we're not quite there yet, I'm pleased with the direction of progress and where we continue to improve. That reflects some of the key initiatives we've been implementing to target organic growth, including specific business development plans for brands and a new client relationship management system to enhance client interaction. Slide 16 is the Singapore patent market. On our preliminary data, as you recall, we always have trouble getting real-time data in Singapore Base over several months in terms of what the data looks like. But on climate data, the Singapore patent market decreased by 5.5% for the calendar year to 31 October 2023. And U.S. applicants made up 2/3 of that total decline in the market, which was down 10.2% and our group is more exposed to the U.S. given appliances from this primary market are a large contributor to the generation of patents in the secondary markets where we operate. One significantly was client-decreased filings, notably in Singapore and indeed also Australia and impacted IPH. This client followed exclusively for IPH in these jurisdictions. This simply reflects the individual filing patterns of clients. We still retain this client. And they have seen similar movements from this particular client for over 30 years. IPH Group filings were down 6.6% for the same period. And as you would expect, this reflects that we were more similarly impacted decline in filings from this one corporate client in the rest of the market. If you exclude this client, IPH outperformed the market, the market was down 5.1%, and IPH down 4.7%. We have seen a further decline in Singapore patent market filings more recently for the period July to October 2023, the market was down 11.3%, while IPH was down 9.4%, again, continuing to perform ahead of the market. The current tip the Singapore patent market likely reflects the disruption in research caused by the COVID-19 pandemic and the inflation link cost-cutting by U.S. and European corporations, which typically leads to less investment in Singapore and across Asia. It also reflects the general variability in specifically Southeast Asian markets, the headwinds and tailwinds, we've seen probably get more up and down than what we see in Australia. Notwithstanding this market decline during the crude IP team is #1 position in Singapore. Looking across Asia on Slide 17. Given the market decline in Singapore, would expect that filings across most Asian jurisdictions would be similarly affected. And that reflects the fact that clients typically look to Singapore first and then progressively pill the remaining Southeast Asian jurisdictions through that lens. The decline in this period also results in lower translation revenue from filings, which impacted the finance results of the Asian segment. So, notwithstanding this market decline, IPH continues to be attractive to large clients, multiple large clients, increasing filings across a number of jurisdictions throughout the period. In terms of our focus on Asia, Slide 18, despite the short-term decline in Asia, we believe the fundamentals remain very strong in this region. Long-term investment in R&D by the Singapore and Hong Kong government continues to support activity. Additionally, as Asian economies become more affluent, we've always seen this generate the need for IP rights protection and encouragement of research. Asia remains a hotspot for many cutting technology sectors such as AI biotech, clean energy, and fintech, all of which require IP protection. And the movement of manufacturing ahead of China to a certain extent, there's an opportunity for us because it goes in other low-cost in countries such as Vietnam and Thailand, where we are also represented. Slide 20. The Canadian slide B where growth strategy has been clear and consistent ever since we listed in November 2014 and is one which supports our vision to be the leading IP services group in secondary market synergies of IP. Our successful acquisitions of Smart & Biggar on October '22, followed by Ridout & Maybee in September last year, and then ROBIC shortly thereafter in December last year are consistent with this strategy. These acquisitions provide diversity and resilience to our earnings base but also enabling us to enhance our international service offering to client lines. From a standing start in October 2022, we have built a market-leading IP business in Canada. In fact, Canada is now our second-largest operating segment. On a pro forma annualized basis, our Canadian operations generated pro forma EBITDA of approximately $65 million with nearly 11,000 Canadian patent filings representing patent market share of around 28%, a significant achievement, in my view, in a short period of time. Our focus now is to consolidate these acquisitions in the IPH Group. That means continuing to capture cost efficiencies, identifying and securing client referral and revenue opportunities, and enhancing our client service offering. We're making very good progress in these areas, and I'll provide some further details on the next slide, which is Slide 24. As I've just mentioned, we've made good progress here in integrating Canadian acquisitions into the group. Our key projects include the identification and delivery of Smart & Biggar cost synergies. And separately, the synergies related to the integration of Ridout & Maybee into Smart & Biggar. ROBIC remain as a stand-alone brand in the Canadian market. On this slide, we can provide an update on how we are tracking compared to the original synergies we announced at the time of acquisition. I'm pleased to say we remain very much on track to achieve those targeted synergies. As I said earlier, this is driving solid like-for-like EBITDA growth. We have identified $5.3 million in cost synergies within Smart & Biggar, which we will deliver over 3 years, primarily through rightsizing of back office functions. These will be delivered both above and below the EBITDA line. We are reconfiguring and reducing our office footprint with further rental cost reductions to come over the next 2 financial years. On the other side of leads, we are also delivering revenue synergies through client referrals between Smart & Biggar and IPH Asia and Australia New Zealand offices. The addition of Canadian representation broadens our international offering across our network and remains a key differentiator as we pitch our global work. For example, this network effect contributed to around 340 international client referrals between Smart & Biggar and IPH's offices in Asia Pacific since the acquisition. As you may recall, we completed the acquisition of Ridout & Maybee on 29 September last year. We've made good progress in 3 months as we integrated Ridout & Maybee into Smart & Biggar to operate as one firm under one brand. The first milestone was a successful systems cutover in December last year. In doing so, we have identified annualized cost synergies in excess of our initial target of CAD 3 million, and these have come through rail redundancies, office closures, and back-office consolidation. Indeed we have already closed 3 offices and right-off. So, Slide 23, summary and priorities for the financial year '24. In terms of the first half, we've had a very strong turnaround in our Australian financial performance, and we continue to close the GAAP relative patent files. It delivered a significant improvement in cash generation to 128%, with the reduction of working capital, and we've successfully built the IP market leader in Canada. That provides a solid platform for the remainder of the year where our priorities are continuing to close the filing gaps in Australia, restoring organic growth in Asia, proceeding with integrations of our Canadian businesses into the IPH Group, continued focus on capital management, where we expect to return to our target gearing range is calendar year and continuing to assess acquisition opportunities. Underpinning these activities, we have reviewed our overall operating model, and we're now implementing a refreshed design with a regional focus and a new operating rhythm that reflects our expanding global footprint and sure a future state capability. We are in the testing phase of our business process reengineering program, the IPH Way, implementation is scheduled to commence in the fourth quarter. This will standardize many of the IPH management processes, IP management process across the previous member firms and help us to continue to realize synergies. We have launched a new IP management platform to provide our clients a greater visibility of all their IP assets, a transparent task management tool, and access to IP intelligence. The initial rollout is focused on a small number of our member firm clients in Australia and New Zealand. A detailed road map has been developed to incorporate feedback from clients and introduce more functions and features. And on the AI front, we have a divergence of document summarization and drafting tools in the pilot phase and feedback gathered to understand efficiency gains. So, in closing, I would again like to acknowledge the hard work and contribution of all our people across the group. Many thanks to all of you for your continued interest and support. And back to our moderator. And as always, John and I are happy to take questions.

[Operator Instructions] Your first question today comes from Apoorv Sehgal with UBS.

My one question. Let's start on Asia then. So, it looks like the last 2 months of the half probably deteriorated a bit. Because if you go back to your AGM like-for-like revenues were up year-on-year, but you've ended up down 3% for Asia. Maybe just talk about the drivers there in November and December. And then I guess if we're heading into the second half, you will be cycling a pretty soft PCP for Asia. So, can we expect Asia to return to positive revenue growth in the second half?

Thanks, Sehgal. It's an interesting one. You are correct in that, a lot of the decline filling towards the second part of the first half, it's certainly in November and December because we have the AGM middle of November and up until then, we were really coming. I think I indicated there was a decline in Asia, but not to the extend we ended up landing at the end of December. And a lot of that sits around the filings we've seen. I mean, the thing about our Asian business, particularly in Singapore, is in translation-fed countries, Indonesia, Thailand, Vietnam, China, et cetera, if there's a decline in filing there, there's probably a greater impact that comes with the loss of high-margin translation revenue, and I think that came through a little bit in December. But generally, most of this is following a decline in filings that we're seeing in Singapore. It's hard to tell what those filings look like in the other countries because we can't see what the actual total markets are there. But as I said in my address, we see Singapore as a lead indicator because it does flow through the other jurisdictions so, more markedly.

[Operator Instructions] The next question is from Sam Haddad with Petra Capital.

Just to continue on that fee on Asia. Just to drill down on the filings trend, are you seeing just persisting to the second half? We've got through Singapore and IndoAsian business? And do you see this as a short-term anomaly? And what gives you comfort around that?

Well, thanks, Sam. Look, I think it is almost 30 years, we've been there. We've seen Asia go up and down a little bit, particularly as global trends. I think Asia is more exposed to global trends than what we are in Australia. Even in Australia, we ended the year at, as you know, 16% or 17% of U.S. PCTs land here, and there's less so in Australia. I think it's more discretionary in Southeast Asia than this year. And we've seen that over the last 30 years. But I still think the fundamentals of Asia are strong. And the fundamentals of U.S. innovation is strong. I mean I wouldn't bet against the U.S. in innovation based on what they've done in the last 200 years. And I don't think that's going to change and it will flow into these expanding markets which are becoming more and more refined and sophisticated and expanding in population and per capita income. So, I think that the long-term fundamentals remained strong, and we'll expect to see a return to the normality in the short to medium term.

Do you see that in the initial months in the second half?

January was fine, and we look like February shouldn't be a concern. So, I think that we're looking pretty good safe.

The next question is a follow-up from Apoorv Sehgal with UBS.

I just wanted to ask another one now that I've got the chance. Let's talk in that case about the Australia New Zealand business, 4% like-for-like revenue growth looks like a reasonable result. Can you talk about the benefits from price rises? Remind us the quantum you put through last year. And are you planning to further price rises this year too?

It's a good question. I'm glad you brought up Australia and Zealand because there's been a lot of focus on in the last couple of years. It's got to be a great pleasure to see what we've done there. And I did tell people that we would get this thing back on track, and we have. And we always forget that we do these integrations for a reason to increase the profitability of the underlying asset, and that's what we've seen. And so, I'm very pleased to see the return to growth in Australia. A lot of it's sitting in spreads and the Fergus in Australia. That's been a standout. But even in the business of a group of Han and Pizzeys also and the EBITDA line in a Parker is all in good shape. Look, we have put some true prices, one would expect in an inflationary environment that we've been in the last couple of years. But we continue to monitor the price always as any risk just does, and we'll look to review it when we can. Part of it is pull that kind of rolling effect, which we referred to that last couple of years where not all the price increases affect the book at the same time. So, as those previous customers have rolled off their fixed-term contracts over the period, they're probably now catching up with some of those price rises over the last 2 years.

And I mean beyond the price rises, just like the business development initiatives and the incentive plans you've put in place, are you seeing traction there in terms of actually winning new clients? And well, I guess, with the M&A disruptors behind you, is that kind of the focus now win new clients and getting that back to that 2% to 3% revenue growth firmly going through?

We love winning new clients, Apoorv. We do. And I probably should have mentioned in my speech, but we talked about it the last couple of halves how we won these transfers of portfolios, and people underestimate the importance of that and because it doesn't come out in direct filing numbers because the cases are already been filed, but Australia has been very successful in winning portfolios not only in domestic but also international clients. So, I think the Australian group has won over 1,200 transfers, patent farming transfer cases that have been filed, but are in prosecution, either in Australia or elsewhere in the world. So, when you get a transfer of that substance, there's a long tail of revenue that continues to come through. And that's been of the business. So, not only are we closing that market share gap, I think we went from minus 8 percentage points down to 2%, minus 2 percentage points in the last couple of years post the integrations. We're winning significant existing portfolios of new clients. And that gives a real punch to the outperformance of those domestic businesses in Australia. So, I think that will continue. We've got some very good people in prison Australia, Pizzieys, and Group Hakan AJ Park that are fully focused on this and seeing some good traction, which I couldn't be happier about. And they focus on BD incentives around BD, the CRM and the Chief Commercial Officer of her efforts are starting to come through, and it gives me great pleasure to reflect that in today's results.

The next question is from Tim Lysaght with Macquarie.

Mine is just around follow-up to the previous questions. In terms of the sort of number of clients or fortunate cost on old pricing, I mean, how much is theoretically to sort of annualize through from those to reset?

I think we've talked about in the past, approximately 60% of the book might be affected initially by the pricing increase or instantly and the tail then comes through either in the next year or the year after, depending on whether they're on 2 or 3-year deals. But potentially, those clients who are on the 2 or 3 deals do tend to be the larger clients. So, when those do roll off, you've got the potential then to negotiate, keeping in mind that also larger clients have had more of a bargaining power. I guess, it's part of that wave of pricing increases, it does build up nicely over time.

Is that 40% by client number or by client volume?

Volume.

And just a sort of follow-up in terms of the comments on the potential sort of Asia being more exposed sort of U.S. activity. Are you saying that the U.S. activity proceeding the sort of decline in Asia has been weak? Or are you just saying that those filings are not being made in Asia and ultimately will do if that's what's been so in history?

I think it's not quite sure I get the question. But in patents, you can't delay the file, they come through on a day we can't then revisit and see it come through again at a later date. So, I think we have seen a decline in U.S. applications coming into Asia and that's something which has probably underpinned the 5% to 6% calendar year decline in the Singapore market that we've seen. Now, as I said that the long-term drivers of innovation out of the U.S. I don't think remain unchanged.

So, you're not seeing a decline in primary U.S. filings? You're just saying that's not yet flowing through into Asia. Is that correct?

Yes. What we're seeing is that the number of cases coming into Singapore from U.S. Africans did decline, that is what we did see. Now, you won't know until you see the next period as to whether that's changed. What I can say is that the fundamentals of the region, if we think, remains unchanged.

The next question is from Conor O'Prey with Canaccord Genuity.

Just a question on IPH, which I think you announced a while ago and referenced in the priorities for '24. Are the benefits of that still $5 million? I think that was a number that was projected a while ago, if I got that right?

Yes. So, we still haven't given any update to that. So, we're expecting those to start coming through in FY '25.

And is it the full unit in '25 or some '25 and then the run rate in '26? How do you see that, John?

I think it's definitely the start. I wouldn't have estimated the full amount in FY '25, probably closer. We're kicking off in the last quarter of this financial year. So, we'll probably be able to give more precise guidance on that particular aspect at the year-end results.

Yes, that's probably, Canor, probably didn't get pushed based on the cyber incident last March have delayed us in really kicking off IPH way probably by 6 months, and we'll see that come into '25, but also come into '26.

The next question is a follow-up from Sam Haddad with Petra Capital.

Just on the Canadian legal business, what's the pipeline looking like into the second half in terms of case workload?

Of course, as we say, Sam, it's always pretty variable. But we had a good pipeline. We always got a good pipeline. It's just whether these cases settle. I mean, the nature of being part of a secondary market is that you are subject to the vagaries of what's happening in the bribery market. In most of these, not all, but a lot of these litigation matters are worldwide in nature, and a settlement and head office does flow through to where we operate. And we've seen some settlements in Canada in the last 6 months, unfortunately. Someone said don't settle the James estate, but that's what happens. But at the same time, we've seen a little pickup in litigation activity in Canada in the last couple of months, and we're hoping that continues through the end of the second half. So, I mean, given the nature of when we looked at the Smart& Biggar business when we first acquired it or even in DD, we looked at the litigation revenue over farms part. So, it was, of course, by definition, it will be more variable than the Pantone business, but it's still pretty strong. And as we add in right out and maybe to the group, I would describe it bigger, which didn't have a particularly large litigation practice, then there's even more opportunity for the litigation of Smart & Biggar pickup cases there as well. So, the fees increasing through the Ridout & Maybee integration. So, I'm relatively confident that we'll see a pickup in litigation into the second half.

And just one last follow-up, if I may. Just on the cost base in Asia, are you comfortable with that? Do you feel -- because there's obviously been an impact from the lower volumes and workflows. Are there any leads that you can pull to cushion that?

Yes. There are always levers, Sam. I mean, we have run a pretty high-margin business in Asia, as you know. And so, it's a pretty lean machine, but there are some opportunities, I think probably ex-Southeast Asia that we'll have a look at. And we are looking at it already and we'll react accordingly. We have seen some changes in Southeast at already in that space.

The next question is from Apoorv Sehgal with UBS.

Maybe just on the balance sheet. Is it good to see the receivables booked, the disclosure there, the 90 days past you ticking down? But I just wanted to ask about the 0 to 60 days past view. That did pick up any detail, John, you can share there and also expectations for the aged profile of that receivables book into the second half?

That's a very detailed question, but I'm glad you've picked up on the improvement in the receivables, which we're very pleased about. And, of course, that also improves the cash conversion, which was another feature of our results, which we're very pleased about. On the receivables, I think probably and we've talked about this before that our receivables book, our aging is longer than we would like for our business. But there are a couple of factors to that. Due to the high volume of international customers, particularly a predominance in North America, they do still pay a little bit by check or a lot more by check than you would expect. And so, to get that check to can be expensive at collection cycle. It's just the fact that a significant part of our business is done through other agents like ourselves overseas. So, other tiny firms in the U.S., they will only pay offs once their end client has paid them, again, extending out that collection cycle. So, we're happy that we've improved since the last reported numbers, and we'll be seeking to improve again. I'm not sure I can give a prediction on that particular metric, but we're always seeking to improve that.

And then there's one more. The target gearing range is that what we said you expect to return to target gearing during calendar year '24? Last time, I think it was quantified as 1.5 to 2x leverage by December '24. Is that still the same?

No, you've picked up that we have edited that slightly. So, it was previously by December '24, and now we're saying during calendar '24. So, I think that's indicative of potentially a little bit more confidence in that given our very strong cash flows in the period.

Sorry, one final one I've just thought of probably just worth asking quickly, just on Canada. Are you able to quantify the synergies you delivered in the half from Smart & Biggar?

No, not offhand. So, it would have come through mostly in November and December. That's when the main merger activities between Ridout & Maybee and Smart & Biggar occurs. So, outside of the additional or the original synergies from the Smart & Biggar business, which have been happening over the course of the year, perhaps a bigger bundle of them have happened in November, December, and we're seeing those come through in the second half. The other point to note in those synergy numbers or expectations that we've provided there is that the cost savings related to rental premises and the closure of offices. So, to the extent, they are coming through below the EBITDA line.

Look, there has been a lot of activity there. I mean, I think it's in the presentation, it's close to 80 FTEs. It's out of the business now across the Smart & Biggar and Ridout & Maybee combined business. That's a significant movement, and we'll continue to look at opportunities there.

Sorry, Andrew, what was that number?

I think it's 77%. I think it's in the presentation.

Thank you. There are no further questions at this time. I will now hand the call back to Dr. Blattman for closing remarks.

Thanks again, everyone. Look, we're pleased with the results. The Asian piece probably reflects the market dynamics. Really pleased to see Australia to what I think is where it should be. And I think that's just still warming up. There's more to do there. I'm very proud of the Canadian story. I mean, to make it the size of that platform in just over 12 months, 28% market share, 3 major acquisitions, 2 in a 6-month, we haven't done 2 in a 6-month period since probably 2016. And that does come with some cost line with the acquisition cost, but setting up that platform is fantastic, and seeing that improvement in margin EBITDA improvement in that broader Canadian business. It gives me great comfort that we're getting in the right direction there, plus the revenue synergies to get 340 referrals across that business in the 12 to 18 months is terrific and there this more to do. So, I think we're a good place and we're looking forward to meeting some of you in the next few days.

That does conclude our conference for today. Thank you for participating. You may now disconnect.