IPH Limited (IPH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the IPH Limited HY '25 Results Presentation. [Operator Instructions] I would now like to hand the conference over to Dr. Andrew Blattman, Managing Director and CEO. Please go ahead.

Thank you, [ Jacob ]. Good morning, and welcome to the IPH results presentation for the half year ended 31 December 2024. My name is Andrew Blattman. I'm the CEO and Managing Director of IPH. With me today is John Wadley, our Group CFO. Thank you for joining us for today's presentation and for your continuing interest in IPH. Before commencing the formal presentation, I want to welcome our new Canadian team members from Bereskin & Parr, who joined IPH on 28th September last year. Let me also thank the broader IPH team across all of our regions for their efforts and contribution to delivering a solid result for the first half. Moving to Slide 3, the contents of today's presentation. I'll provide an overview of the operational highlights for the half; John will discuss the financial results in more detail before handing back to me. We have changed the format of the presentation slightly to reflect the increased global scale of our operations. As such, I will provide an update on the performance of our 3 segments, [ AU, NZ ], Asia and Canada, which will include information on financial performance and following commentary for each segment. You can find the typical patent filing performance charts in the appendix of this presentation. I will conclude with a summary of our priorities for the full year. And as always, we'll be happy to answer your questions at the end. So moving to Slide 4 about the IPH Group. First, a reminder of the continued growth in diversity and scale of IPH. As I just mentioned, we completed our fourth transaction in Canada with the acquisition of Bereskin & Parr in September, which enhances our market-leading presence in Canada and further strengthens our global network. We now have 7 brands and over 1,800 employees servicing some 26 IP jurisdictions. Slide 5. We continue to evolve our mission to reflect the global scale and expertise of our group. Our long-term strategy is anchored in a new vision for the group, which is to be the partner of choice, enabling global IP protection for the world's innovators. Our purpose is all about driving innovation through IP protection, underscored by our commitment to provide world-class IP services for our clients. Now turning to our results and the summary for the first half, we delivered a solid result in a challenging market. Despite the backdrop of lower market filings and a significant disruption to our Canadian business from the Canadian Intellectual Property Office, I call that CIPO going forth systems issues, we delivered solid growth. That includes 11% lift in underlying EBITDA and a corresponding 20% lift in underlying net profit. That increase in earnings, combined with our strong cash flow, delivered enhanced returns for shareholders with underlying diluted EPS up 7% and the interim dividend up 6%. The HY -- half year '25 result represents the third consecutive period of organic growth in our Australia and New Zealand businesses despite lower market filings. As I foreshadowed at the AGM in November, we are also starting to see positive signs of a recovery in our Asian business, which is very pleasing to me. We achieved solid growth in patent filings across the region, particularly towards the end of the period with IPH Asian filings up 10% for the half. This growth also includes translation revenue, which is creating positive momentum into the second half. While our Asian like-for-like earnings were down slightly for the first half, this compares to a 9% decline for the prior corresponding half and a 6% decline for the full year. Capital management remains a focus for the group. We continue to deliver strong cash with cash generation of 100%, which has helped to deliver the increase in the interim dividend. Meanwhile, we commenced the share buyback in December, which is targeting up to $75 million. Finally, the integration of Bereskin & Parr is proceeding on plan with cost synergies above our initial estimates. Moving to Slide 8. I'm very pleased with our progress during the half. As I mentioned earlier, we continue to generate organic growth in Australia and New Zealand despite a decline in overall filings. In Asia, as I say, we are seeing positive signs of recovery with promising filing activity. And as the market leader in this region, we remain well placed to return to sustainable growth, as markets recover further. In Canada, we are seeing an encouraging recovery in patent workflow following the CIPO systems -- the issues in the CIPO systems we experienced in the first half. And as I just mentioned, the integration of Bereskin & Parr is proceeding on plan with cost synergies above our initial estimates. We continue to implement our new corporate model, while that also includes some additional investment. As we've outlined previously, we're also removing some roles such as the Chief Operating Officer position. Following an internal review, we have decided not to proceed with the IPH Way in its current form instead our transformation function is expected to provide enhanced returns with a focus on earnings accretive projects across the entire group, including those which recently part of the IPH Way. And finally, the group maintains a strong financial position with an increase in the interim dividend and the buyback commenced. I remain very positive on our outlook. We've built a world-leading IP services company. And while we have experienced some challenges in the first half, we've demonstrated that we can still deliver good growth and returns to shareholders. As I say, I am particularly encouraged by our recovery in Asia. Across -- while at a macro level, we expect to benefit from an improving U.S. economy and the recent international trend towards deglobalization may well be a positive catalyst in terms of increased requirement for IP protection. I will now hand over to John, who will discuss the financial results in more detail.

Thank you, Andrew, and good morning, everyone. Looking first at an overview of the financial results. Results for the half include 3 months contribution from Bereskin & Parr acquired on the 28th of September 2024. They also include an incremental 5.5 months from ROBIC acquired in 15 December 2023 and 3 months from Ridout & Maybee acquired on 29th of September 2023 compared to the half year of 2024. The increase in underlying revenue and EBITDA reflect the contribution from these acquisitions, but also continued organic growth in the ANZ business. The significant increase in net profit after tax of 78% was driven by a substantial reduction in the quantum of non-underlying items, particularly acquisition costs, which were nondeductible for tax purposes in that half. The absence of those nondeductible items also lowered the effective tax rate from 32.3% to 21.3% in the first half. As always, IPH results should be reviewed with an understanding of the foreign exchange effects. Underlying earnings were partially impacted by the average Australian U.S. exchange rate of $0.661 in half year '25 compared to $0.653 in half year '24. As indicated previously, $0.01 weakening in the U.S. dollar equates to an approximate 2.8% reduction in service charge revenue. You might recall the Australian dollar weakened quite significantly versus the U.S. dollar towards the end of the reporting period. This impacts the P&L from the revaluation of U.S.-denominated cash and receivables at the lower Australian dollar rate. That resulted in a net foreign exchange gain of $1.3 million in half year '25 compared to net foreign exchange loss of $1 million for the prior corresponding half. Underlying NPAT was up 20% to $61 million, reflecting the Canadian acquisitions and the growth in ANZ, partially offset by a previously flagged increase in corporate costs. The company's strong cash generation of 100% enabled a further increase in the interim dividend, which was up 6% to $0.17 per share and 20% franked. The dividend will be paid on the 21st of March. Looking at Slide 11, the like-for-like earnings. Like-for-like basis eliminates the impact of acquisitions and foreign exchange. Looking first at Australia and New Zealand, we had continued organic growth in this segment despite the overall decline in market filings for the period. Like-for-like margin was down slightly, mainly due to an increase in disbursements revenue and increased cost allocation to this segment. Like-for-like revenue in Asia was steady, while like-for-like EBITDA decreased by 1%. However, this represents a significant trend improvement from half year '24, where revenue declined 3% and EBITDA was down 9%. Next, Canada. It's important to note here that the 8% increase in like-for-like revenue includes a 32% fee increase from the Canadian Patent Office for patent processing from the 1st of January. IPH firms directly recover this from clients, and therefore, while it inflates revenue, there's no contribution to earnings and thus impacts margin. Like-for-like service charge revenue, excluding these disbursement recoveries was flat. As Andrew will detail shortly, the like-for-like result in Canada was impacted by the delay in revenue associated with disruption from the CIPO systems upgrade and lower litigation revenue due to cases settling. This is partially offset by an increase in trademark revenue. The group like-for-like EBITDA decline reflects the increase in corporate costs that I mentioned earlier. As we previously advised, these include implementation of the new operating model, reflecting the increased geographic scale and scope of IPH following acquisitions and continued investment in corporate capability, filling the transformation function. While this initial investment has impacted the current EBITDA margin, benefits are anticipated in future reporting periods. Looking at Slide 12 and the underlying result. This slide shows the calculation of the underlying result, which is on a consistent basis with prior periods and reconciles these to the half year statutory 2025 results. The main adjustments, which I mentioned earlier, are significantly less than the prior corresponding period related to costs associated with the Bereskin & Parr acquisition. These acquisition costs were $3.2 million. Restructuring expenses of $1.4 million include costs related to the rollout of the regional model, including one-off redundancy costs. Amortization of acquired intangibles of $26.2 million or tax effected $18.9 million are excluded from underlying results. Slide 13 and the cash flow statement. The group continues to generate strong cash flow with a cash conversion ratio of 100%. Working capital for half year '25 reflects a more normalized pattern. You'll recall that the significant change in working capital in the prior corresponding half reflects the impact of the cyber incident in March 2023, which caused disruption in operations and delaying cash collections for the second half of the 2023 period. As a result, working capital in half year '24 included a reversal of the working capital outflow from the cyber incident in the preceding half. Net interest paid of $11.4 million reflects the reduction in net debt, as part of the refinancing in December 2024. Slide 14, the balance sheet. IPH maintains a strong balance sheet. The main movements in the balance sheet are due to the acquisition accounting of Bereskin & Parr. These include customer relationships, which were amortized over 10 years and goodwill, which will not be amortized, but subject to impairment testing. The reduced borrowings reflect debt repayments and completion of the refinancing of the Canadian dollar facility due to mature in August 2025. Net debt is down 16% to $300 million with the leverage ratio under our banking definition of 1.6x. We have outlined the breakdown of finance costs and other items below EBITDA in the appendix. The increase in share capital was largely driven by shares issued to Bereskin & Parr vendors and the capital raising, including the share purchase plan to fund the Bereskin & Parr acquisition. This was partially offset by the subsequent on-market buyback of 2.1 million shares. Slide 15, our progress on capital management. IPH has a disciplined capital allocation framework, which is based upon our predictable cash flows and a commitment to maintaining a strong balance sheet with flexibility to support our growth strategy. We have a clear strategic focus on maximizing shareholder returns through this framework. During the half, we made solid progress regarding capital management. These include a 16% reduction in net debt with a corresponding reduction in leverage ratio of 1.6x, which remains well within our target of ratio of up to 2x. As mentioned earlier, we continue to generate strong cash flows, which supported a 6% lift in the interim dividend. We commenced the on-market buyback of ordinary shares in December of up to $75 million. By year-end, we had bought back 2.1 million shares, representing $10.4 million. The Board of IPH believes the buyback is an efficient use of capital and is consistent with our focus on ensuring an effective mix of continued investment in the business to support earnings growth, while returning excess cash to shareholders. Slide 16 and our foreign currency sensitivity. The group's exposure to U.S. dollars has reduced slightly post the Bereskin & Parr acquisition. 36% of the group's invoicing is denominated in U.S. dollars. As most of you know, we currently do not undertake foreign currency hedging on our operating transaction exposure. We continue to monitor this position. The group's balance sheet is also exposed to FX on the level of foreign denominated cash receivables and debt, the largest of which is USD. 31 December 2024, net exposure to USD movements was $39.9 million. To mitigate the impact of the P&L of revaluation as a result of USD movements, we entered into approximately $32 million of FX forward contracts. I'll now hand back to Andrew.

Thanks, John. Over the next 3 slides, I'll provide an update on our 3 operating segments. As I indicated earlier, more detailed patent filing performance charts are contained within the appendix. So moving to Slide 18, our first segment, which is Australia and New Zealand. Our domestic business continued to deliver growth in revenue and earnings despite an overall decline in market patent filings for the period. Indeed, this is the third consecutive reporting period of growth for this segment. Underlying revenue and earnings were 7% and 9% ahead of the prior corresponding period. respectively. On a like-for-like basis, ex currency, revenue increased by 4% with an increase in like-for-like EBITDA of 2%. That was despite the lower market filings, which reflects the long-term annuity style nature of our business, where current period filings represent just one of several factors contributing to our ongoing financial performance. Like-for-like margin was down slightly, which was mainly due to an increase in disbursement revenue, which does not contribute to earnings and an increase in shared services costs, which were allocated to the ANZ segment. In terms of filings, Australian patent filings declined by 4.4% for half year '25. compared to the prior corresponding period of IPH Group filings declined by 7.6% for the same period. As we've said previously, IPH has a significant proportion of U.S. clients and continues to be impacted by a decrease in market filings from U.S. applicants, which were down 6.9% for the period. Notwithstanding this decline, IPH remains a market leader in Australia with a combined group market share of 30.4% for half year '25. Slide 19 is Asia. As I mentioned earlier, we are seeing some real signs of recovery in our Asian business, which is fantastic. Underlying revenue and EBITDA were steady with margin retained at 43%. On a like-for-like basis, revenue was steady, while EBITDA decreased by 1%. However, this represents a significant trend improvement from half year '24, where revenue declined by 3% and EBITDA was down 9%. Patent filings recovered strongly towards the end of the first half, with IPH patent filings increasing by 10% across Asia for half year '25 compared to the corresponding period. We have filing growth in key sectors, including 5G and 6G telecommunications, mining services, AI and machine learning software. We had double-digit filing growth across 5 countries in Asia. Importantly, many of these filings come with the associated translation revenue, which is creating positive momentum into the second half. Turning now to Canada, Slide 20. The underlying results include the incremental contribution from ROBIC and Ridout & Maybee compared to the prior corresponding period and the 3-month contribution from Bereskin & Parr. As John mentioned, revenue also includes the impact of the 32% fee increase that the Canadian IP Office implemented for patent processing from 1 January 2024. It's important to point out that IPH firms directly recover these fee increases from clients, and therefore, it has no contribution to earnings. While it inflates revenue, it does not contribute to EBITDA, and you can see this has negatively impacted the EBITDA margin on both an underlying and like-for-like basis. You will recall at the AGM in mid-November, we called out 2 factors impacting like-for-like performance. First, we experienced significant disruption from CIPO systems issues following the launch of its new patent filing system in July 2024. The backlog rather of workflow linked to these systems issues caused delays in revenues in the first half. We are now seeing a very encouraging recovery, as these systems issues are being addressed. Secondly, litigation revenue, which is always variable and dependent on case flow was lower in the first half due to cases being settled. Pleasingly, we recorded strong growth in trademarks with revenue increasing 27%, which helped mitigate the earnings decline in patents. Interestingly, our trademark business was also impacted by CIPO processing issues in the prior period. And accordingly, we expect a similar recovery in patents, as the CIPO issues are resolved. Slide 21 just some further commentary about our Canadian businesses. In September, we completed our fourth transaction in Canada with the acquisition of Bereskin & Parr. This acquisition has further consolidated our presence in the Canadian market. We are very pleased with how the business is performing and this integration into Smart & Biggar. As I mentioned earlier, cost synergies are above our initial target, and we expect annualized synergies of CAD 4.5 million compared to our initial estimate of CAD 3.7 million in acquisition. These include savings in premises, insurance, staff costs, et cetera. Of course, some of the rent savings fall below the EBITDA line due to accounting standards. We have recently restructured and streamlined back office and administrative functions with 30 full-time equivalent roles being taken out of the business in February. We have also consolidated office locations and halved our office footprint in Toronto. IPH has successfully integrated a number of acquisitions to generate efficiencies and create value, and Bereskin & Parr will be no different. In addition to cost synergies, we also create value through cross-selling opportunities and leveraging the IPH network effect, particularly in relation to supporting Bereskin & Parr's local clients, which are excellent [ in my head ] to file into other IPH jurisdictions. We continue to generate client referrals from our Canadian businesses into IPH Asia Pacific firms. And as of the end of December, we have delivered a cumulative total of nearly 650 referrals. Slide 22 is a summary of our priorities for FY '25. We continue to build towards our vision to be the leading IP services group in secondary IP markets. Our key priorities in FY '25 to support that vision include delivering organic growth in our domestic market and restoring organic growth in Asia; building on the momentum in Asian filings and translating this into revenue and EBITDA growth; the CIPO backlog processing represents a tailwind for our Canadian segment; completing the full integration of Bereskin & Parr into Smart & Biggar; continued focus on strong cash generation and returns to shareholders; and continuing to implement our transformation plan to improve efficiency and effectiveness through streamlining, automating and leveraging AI tools. In closing, I would like again to acknowledge the hard work and contribution of all our people across IPH. As a group, we've navigated some market challenges, and we still delivered a 20% improvement in underlying net profit for the half. That reflects the increased diversity and scale of our business. I remain very confident that we're exceptionally well placed to build on this scale and deliver further returns to shareholders. Many thanks to all of you for your continued interest and support. Over to our moderator, [ Jacob ]. And as always, John and I are happy to take questions.

[Operator Instructions] Your first question comes from Tim Lawson from Macquarie.

Just a few on Canada to start. Can you just quantify the timing of the system issue at CIPO and what that might mean in sort of dollar revenue terms and margin impact?

Thanks, Tim. Yes, look, it's been a challenge because it really started to impact us midway through the first half. And we had a number of discussions with CIPO, including myself having a number of discussions with CIPO directly. And I guess what we've seen particularly this month and even the beginning of this month was a release. I wouldn't -- won't say floodgate release, but certainly a very improved release on their processing. So we're always able to file the patent applications throughout the period, but we weren't getting the subsequent notifications or other patent office actions that come typically through the examination cycle. So whilst we were filing, we weren't getting that flow-on work, and it was impacting both Smart & Biggar, and particularly probably given its size and also ROBIC. So I think it will be -- they're not fully back, but goodness, it's a hell of an improvement on what it was. And I'm hoping that by the next -- by March, we're going to be pretty much back to normal operating systems there. We're having -- I was hoping to give you an update from CIPO for this presentation. But in the end, I think they are having a general webinar [indiscernible] might be tomorrow, [ Canadian times Friday or might even be ] Monday, we'll get some further details from CIPO on what that looks like. But it will be a tailwind into the Canadian.

And are you able to quantify it at all? And with the sort of impact it has on the mix of work that you're doing from it sounds like what you're saying is that certain work is impacted, others not. Is that -- how does that affect the margin as well? Because there's some costs that are you effectively can't get rid of until that activity comes back, and therefore, it should be high margin in the second half?

It's difficult to quantify. If I was to put a number to it, it may be up to [ $0.5 million ] per month in terms of the revenue loss. So in doing that, we've -- you can't really get rid of the cost base. The cost base remains the same. So to the extent that this revenue does come back in the second half, we should have increased margin in the second half on that. In terms of your question on the different types of work, so we've definitely said that Andrew reflected that the trademarks has been very promising in the 6 months. And to some extent, that has offset the revenue lost in the patent side of business.

It's a funny one, Tim, because the trademarks, I think I said it was up 27% and a lot of that was dealing with the backlog caused by another CIPO upgrade some year or so earlier. So it does augur well in the context of what will come through. And the $0.5 million is probably just in Smart & Biggar alone, and there will be a little bit more with ROBIC added to it. So it is reasonably significant, and that release will, as I say, be a good story for us.

Yes. And then just staying on Canada, you've called out the synergies, I think it's $4.5 million. You've obviously called out the headcount change in February. Can you sort of -- I assume that's not included in the $4.5 million? And then how much was actually delivered in the first half of '25? Because it sounds like that $4.5 million is sort of like an annualized run rate number.

Correct. The $4.5 million is an annualized number. Probably not much was delivered on the 1st of October. So much in the first half, those 30 people departed the business just in the last couple of weeks, and we have the full integration of the businesses, as of 1st of March. So we would expect it to start contributing. Obviously, with those 30 people leaving, we'll have some employee benefits savings, but the majority will come through next full financial year.

And just to clarify, the 30 people is not included in the $4.5 million or is included in the $4.5 million?

It is included.

It is included. Okay. Maybe just a quick question on Asia. Obviously, a good sort of 10% fund growth. Can you give us a feel what you think is happening in the market?

It's an interesting one, Tim, I love it. I mean I did say Asia would turn, whether anyone believe me or not, I'm not sure, but my waters are telling me even in the AGM that we're on the brink of something, and it was -- it came through towards late November and certainly steadily through December and again, has continued on nicely. Look, I think it's a technology piece that we're seeing some -- particularly in the ICT space and particularly in countries, I mean that's engineering and information and communication stuff, that the not so -- not seeing the same growth -- good growth, but still not the same growth in chemical, life sciences. It's very much in the ICT and very much in countries like Indonesia and Thailand, Philippines. I think I've even got a slide in there, China with some -- with the double-digit growth we're seeing. And the beauty about that, that of course, as you well know, is this translation kicker that will follow with that. And because it only came through in December and continues now, I expect to see a bit of that kicker come through into the second half nicely. So I'm very pleased with Asia. The team up there has done a great job servicing some very good clients because some new clients have entered the space, a combination of traditional clients we've had for generations and some new ones from other emerging markets and Europe and other places like that. So interesting times in Asia.

Yes. Just a quick question on Australia and I'll finish on -- one on adjustments. Just the shared services allocation, can you just talk us through what that relates to given a bigger group with the Canadian acquisition and that's sort of following through. Just interested why that allocation has increased to ANZ?

So I think that we flagged last year, certainly at the AGM, our increase in corporate costs across the whole group. Some of those corporate costs would be retained in corporate, but things like IT licenses or other IT investments correspondingly, they get charged out to the business. So we would see across all of our regions, all of them would have an increased corporate cost share allocated to that.

Okay. That's clear. And then just the sort of outlook for adjustments, they'll be reconciling between the sort of stat and underlying EBITDA, you've got sort of 4 items there. Just sort of thinking on those. Obviously, there might be some more restructuring expenses with those headcount going, but just want to understand just the outlook for cyber upgrade, et cetera.

Yes. I think acquisition costs for the near term, those should be relatively minimal in the second half. You're right in terms of the restructuring costs, I'd expect them to be some of those in the second half, particularly with those 30 people departing the business and other costs related to the integration of Bereskin & Parr and Smart & Biggar. I think elsewhere in the presentation, we referred to the cyber project costing about $1.5 million over a 3-year period.

So a little bit in the second half and there's some continuation into FY '26?

Certainly, yes. But you would see that they're substantially reduced from the prior period, which has helped our overall statutory NPAT.

Your next question comes from Russell Gill from JPMorgan.

Just to clarify in Canada, the 32% price rise that went through on 1 January, is there a timing of when that flows through your accounts? Because the margin held up relatively okay, I guess, in the second half of the year, the 6 months to 30 June, but then has fallen quite substantially just in the next 6 months. So is there a timing difference around that? Or is litigation also causing some of that margin decline, I guess, sequentially?

Well, certainly, the litigation and the CIPO issues are causing some of the margin decline in the first half. I think that factor would have been there last year, but perhaps because it only happened in 1st January and only effect in the second half, and we only report at the full year results, maybe that impact was perhaps lost or spread over a much higher base last year. So certainly, a big impact in this particular half. But yes, the other factors in Canada being the CIPO and litigation would also contribute to a margin decline there for the moment.

If you're just looking half-on-half sequentially, the margins only went backwards 140 bps, I guess, first half and second half last year, but then they've fallen almost 600 sequential or 500 sequentially. So it looks like litigation is a significant margin driver rather than just this 32% price increase. Is that fair?

Yes. So certainly, they all contribute to the margin. Litigation, we've said, is a little bit difficult to provide any guidance on in terms of what it should be. When cases are on and the attorneys are working multiple hours a day, that the margin can be quite high, whereas when they don't have cases, which has been the issue in this particular half, we have a higher cost base because those attorneys tend to be paid a little bit more, a higher cost base, but there's no revenue coming through. So I think your point is valid.

As we're thinking through the second half in Canada, you're talking about CIPO hopefully being fully recovered by March. You've got Bereskin & Parr essentially for -- you only [ have to kind of 2 months ] in the first half. If we're using this first half, I guess, as a base, I mean, how much margin uplift or revenue uplift are you expecting to come through in the second half through those both those dynamics? There's a lot of moving parts because Bereskin coming in for only 2 months and then the revenue coming through from the 32% price increase. So is the ability to get a better guide on what the second half actually looks like in Canada?

The first element of the impact of the CIPO coming back is more difficult. The introduction of Bereskin & Parr, I think looking at how we're positioned and how we -- the acquisition business case is probably an incremental $6 million in EBITDA coming through in the second half from its initial business case and run rate, as well as some of those initial synergies coming through. So happy to provide a number there. Difficult to provide until we get some level of clarity on the CIPO issue to give a number to that. Now I quoted earlier kind of a 500 per month maybe over the 3 months that we've lost in the first half. So that could be a number if it all came back immediately in the second half.

Great. Just switching to Asia, just to understand the filing dynamics being up 10%, but like-for-like revenue flat. Is there -- I guess, is the timing of the filings towards back ended and when you guys actually realize revenue on here? Just to understand that mismatch between, I guess, activity in the market and your own revenue.

Yes. Good point, Russell. And you're right. I mean, we hadn't -- at the AGM, I had a snip of it, but it really didn't come through until December markedly through December, which was great, but still it was December and came in a good run. And in terms of the translation piece, there is a delay between accepting instructions to open a file and actually translating a large patent specification in [ perhaps ] Indonesian or Mandarin or whatever it might be. So that will account for some of the differential in timing. But we are seeing some good revenue coming through in the second half. And that should only continue given that we haven't seen any real slowdown yet on the filings. The filings are good.

Great. And just you made comments about, I guess, the IPH Way strategy being [ parked ] and then, I guess, a refocus. Can you just maybe give a few comments about what changes there are in the strategy in the business and why the IPH Way was parked aside and what the new strategy is and what the decision behind that actually drove it?

Yes. I guess we approached IPH Way in a way, where we had our own people doing a combination of IPH Way matters and a day job and seem to me that we couldn't get the best out of either of those scenarios. So -- and we indicated last year that we're putting into the transformation function. We've got a full transformation team now. And I'd rather let the transformation teams do their role rather than the rest of us from an enthusiastic amateur approach is better served. I think, with letting the transformation function with the full team do what they do best, and we've got a CTO in place. His team is in place really this second half, and they're away. So I think that's why we did what I'll call a bit of a reset on the IPH Way away from the existing business into a specialized function.

And then just a final question on capital management. Just to understand how you guys are thinking about, I guess, capital allocation going forward. Franking is relatively low in the business. So you're only franking your dividends at 20%, but your payout ratio is still quite high. You've also got this buyback and obviously, your share price is where it is. Is the need to keep that payout ratio quite high because there's a lot of, I guess, employees that maintain stock that see it as essentially a form of remuneration? Or the -- would shareholders be better served by, I guess, lowering the payout ratio, increasing the franking essentially percentage and then deploying more back into buying stock on market?

So I think you'll notice that this particular dividend is now at the lower end of that particular payout ratio. So I think it's about 81%, so at the lower end. Certainly, your ideas are [ all balanced ] and they're all under consideration. Certainly, we've taken that feedback from the market into account by the announcement of the buyback program, which we started before Christmas and have already acquired some shares. Yes, so we need to get that balance right between our dividend and return to shareholders through the buyback.

[Operator Instructions] The next question is from Elizabeth Miliatis from Jarden.

Just regarding the Australian business, are you sort of just able to touch on just the price increases that you saw in the period? Apologies if you mentioned it previously, we're just straddling a few calls. But it seems like there was some pretty robust price being pushed through. And if I can ask a very sneaky extra one just around the outlook to the market share. I mean, we've continued to see decreases for quite some time. It did look like there was a bit of stability from first half and second half last year, but it's obviously deteriorated again. So what's being done there? And can we see some stability in that in the medium term?

In terms of the pricing, I think we're probably more back to a more normalized level of increase. For a couple of the years there, perhaps our increases were 5% to 10% across the whole range of activities and rates. So it wasn't a standard 7.5% applied to everything. There was different pricing increases applied to different services and different tasks. And that really during that high inflationary environment was necessary. So it's come off a little bit. So probably it's a more normalized 3% to 4% increase. Again, not one particular rate across our whole book of work. It's across different services and different tasks within that. Also remembering when we always talk about price that a price increase doesn't affect our whole book at once due to some of our customers and particularly some of our larger customers perhaps on 2- and 3-year fixed price agreements, it takes a while for those price increases to work through the books. Obviously, this year, some of those larger clients would have been having those larger price increases from the prior years, finally catch up with them. So that certainly would have assisted. In terms of the overall market share, I guess, we pointed to that really, the IPH Group is more susceptible to U.S. inbound filings and U.S. inbound filings have probably been those, which have been most down recently. I think the IPH Group, approximately 48% of our -- in the Australian and New Zealand context is inbound from the U.S., whereas probably the market as a whole is probably around 39%, 40% mark. So when the U.S. is down, IPH suffers more comparatively than our competitors. I think we've briefly talked about potential tailwinds in the U.S. or through other macro factors. It's then really that we need to see the U.S. turn around, and therefore, that will address our market share issue.

I think just to add to that, Liz, is the whole market was down 4.4% and the filings from U.S. applicants were down almost 7%. So if we are the greatest exposed from the U.S., then that's the kind of outcome you would expect. But I think there's a graph in the pack that should imply that U.S. position in terms of incoming starts to improve in the latter half of the second half.

Your next question comes from Apoorv Sehgal from UBS.

I'm sorry, I jumped on the call quite late, so apologies if this has been asked. I guess my one question just on your expectations for Asia's second half like-for-like revenue growth, just how we should think about that? And if we sort of look beyond also sort of into FY '26, I mean, is it too ambitious for Asia to kind of return to its historical revenue growth rates in that high single-digit range in maybe in 12 months' time?

Well, I'd love to [ return to that ]. But I can certainly say that it's in much better shape than this time last year. And the filings we're seeing through December, January and even last time, there was an excellent number of filings coming through. So that's a big driver of that business, particularly ex-Singapore and countries -- and that's where we're seeing most of the growth basically in countries ex-Singapore. And some of those ex-Singapore countries do have that nice high-margin translation revenue attached to it. So without getting too bullish, it's in good shape. I know John wants to add something as well.

I think we can expect to see some growth in the second half. So we reported flat to minus 1% in this particular half. I think given these tailwinds, a few percentage points of growth in the second half is not unreasonable. I think then to return to perhaps where we were by FY '26 might be a little bit ambitious. I think it's linked back to the question on these U.S. filers. So they are even more susceptible in Asia than in the ANZ region to the inbound U.S. filing. So to the extent that they return, I think that will really govern when we can come back to those previous levels of growth in Asia.

[Operator Instructions]

Yes. Well, that's it, [ Jacob ], but...

Yes. There are no further questions at this time. I now hand back to Dr. Blattman for closing remarks. Please go ahead, sir.

Thanks again, [ Jacob ]. Thanks, everyone. We know we'll see some of you in the next few days, and I appreciate your support. I'm pleased with these results. It's good to see the third half -- consecutive half of growth in Australia and New Zealand. As I say, my water is telling me good things about Asia, and I recognize there is a tailwind coming out of Canada with CIPO back on board. And I think that litigation may also have a few more moves in it yet. So thanks for that, and we'll catch up with you.

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