QANTM Intellectual Property Group Limited (ASX: QIP) has announced its half-yearly results for the financial year 2019. In the half year period, the company’s service charges revenue increased by 13.2% to $43.0 Mn, reflecting an increase in revenues across patents, trademarks and legal/litigation services. Further, the total revenue of the company increased by 12.4% to $55.3 Mn for the half-year FY19, which included an initial revenue contribution from Advanz Fidelis of $1.1 Mn.
As per the half yearly result report, the patents revenue increased by 7.6% to $28.3 Mn (H1 FY2018: $26.3 Mn); trademarks revenue increased by 14.7% to $7.8 Mn (H1 FY2018: $6.8 Mn) and legal/litigation revenues increased by 41% to $6.9 Mn (H1 FY2018: $4.9 Mn).
Total operating expenses increased by 10.2% to $33.4 Mn, reflecting the inclusion of Advanz Fidelis; higher business development costs; the full impact of recruitment of three lateral teams; and the establishment of the employee share trust.
EBITDA was reported at $12.2 Mn, a 29.8% increase (H1 FY2018: $9.4 Mn). Underlying net profit after tax was $7.5 Mn, a 36.4% increase (H1 FY2018: $5.5 Mn). Statutory NPAT was $4.6 Mn (H1 FY2018: $3.6 Mn). Operating cash flow of $3.4 Mn, $4.9 Mn lower, primarily due to $5.1 Mn income tax (H1 FY2018: Nil). Net debt as on 31 June 2018 was $16.2 Mn; gearing (net debt/net debt + equity) of 19.1%.
An interim dividend of 3.5 cents has been declared by the company, fully franked (H1 FY2018: 2.8 cents) with a payment date of 28 March 2019 for shareholders registered as at 28 February 2019.
The company has also expanded its Asian business which include Advanz Fidelis (Malaysia) acquisition. It helped QANTM in the establishment of FPA Singapore office, complementing DCC presence which led to a 25% increase in all-Asia patent applications (exclusive of AFIP) vs. H1 FY2018; 42% increase vs. H2 FY2018 (inclusive of AFIP).
Operating expenses increased period-on-period, reflecting investment in QANTM’s business, designed to generate new revenue streams through business development activities, including various M&A evaluation opportunities and marketing. An investment in professional capabilities through promotions, professional development, and an employee share trust for new principals. Higher staff costs included an increase in professional staff numbers, annual salary adjustments, and incentive payments.
On 27 November 2018, QANTM and Xenith IP Group Ltd announced their intention, subject to shareholder and regulatory approvals, to merge by way of a scheme of arrangement under section 411 of the Corporations Act.
The company is confident of a continuation of favorable financial trends based on the great franchises DCC, FPA, and Advanz Fidelis, backed by a depth of internal expertise and capabilities. The benefits of the combined business, particularly the expanding Asian presence, are starting to generate common business benefits. Subject to the merger with Xenith being approved, QANTM and Xenith will enter a new stage in their evolution in the IP sector. The merged group will be an Australian leader in IP originating services, will facilitate geographical expansion, introduce greater flexibility and robustness in the business model and generate improved efficiencies and service delivery to a diverse client base.
On stock information, QANTM intellectual last traded at $1.667 up 2.27% as on 22 February 22 2019 (AEST 3:16 PM) with the market capitalization of ~$216.87 Mn. Its current PE multiple is at 22.77x. Its 52 weeks high has been noted at $1.69 and low at $1.035. Its absolute return for the last 3 months and 1 year is 12.41% and 44.89% respectively.
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