066.ASX IAW Nov 27 2009 14.40 MDs Address

8/9/2019 066.ASX IAW Nov 27 2009 14.40 MDs Address

1/45

ACN120394194

Level22

1MarketStreet

SydneyNSW2000

Phone(02)82636600

www.ilh.com.au

ASX Announcement

Managing Directors Address

2009 Annual General MeetingPerth, Thursday 26 November 2009

Iwouldliketotakethisopportunitytowelcomeshareholderstothe2009AnnualGeneralMeeting,

my

second

as

Managing

Director.

Iwilltodaydiscuss:

thecompanysprogressoverthelast12months,includingthe2009financialperformance;

provideanoverviewofthebusinessasitcurrentlystands;

thecompanysstrategyandpriorities;and

finally,abriefoutlookfortheperiodahead.

Additionally,Inote

that

Ihave

received

various

calls,

emails

and

even

visits

from

shareholders

over

the last23monthsand Ihaveensured thatquestionsandpoints raisedby themare included in

todayspresentation.

Iwouldparticularly liketothanktheseshareholdersfortheirfeedbackand interest,andalsoallof

youforyourattendancetoday.

When I presented to you at last years Annual GeneralMeeting I had only been in the role of

ManagingDirector

for

6months

and

the

messages

were

generally

very

positive.

TheCompanysprofitsfor2008hadbeenstrong,asoliddividendhadbeendeclaredandwehadjust

announcedthestrategicallyimportantacquisitionsontheeastcoast.

Whilst I alluded at that time to changes that we would need to make to the business strategy the


2/45

So12monthslaterwehavelearntmuchaboutthebusiness,muchabouthowthebusinessresponds

todifferenteconomiccircumstances,muchmoreabouttheprospectsfortheCompany,andhaving

hadto

make

more

substantial

changes

than

we

anticipated.

ButIdothinkwehavecomealongwaystrategicallyinthelast12monthswithsomekeymilestones

achieved,andthatwearenowinamuchstrongerpositionfortheopportunitiesahead.

TheLast12Months

Itprobablygoeswithout saying that2009wasaparticularlydifficultandchallengingyear for the

Company,butIthinkitisusefultostartbyreflectingontheenvironmenttheCompanyoperatedin,

andchallenges

that

were

faced.

GFC

The2009financialyearwasanunprecedentedperiodinAustralianandworldfinancialmarkets.

The global financial crisis, or GFC, impacted all aspects of business and society, with reduced

demand for products and services, significantjob losses across Australia, andwith a number of

previously high profile public listed companies either no longer in existence orwho delivered a

significantlossofprofitabilityandshareholdervalue.

TheCompanywasnotimmunetotheeffectsoftheGFC,withtheeconomicenvironmentnegatively

impactingrevenues,andforcingsomeclientsintobankruptcy,leadingtobaddebtsforIntegrated.

Small

Company

with

New

business/strategy

It was also a difficult operating environment for relatively new and small companies such as

Integrated.

Potentialnew investorsweredistractedbyevents inthemarketandgenerallyhad little interest in

newstories fromasmallcompanywhichcontinuedtobe intheprocessofdeveloping itsstrategy

andbusinessmodel.

Startingasmallpubliclylistedcompanyisdifficultatthebestoftimes,itisbeenevenmoresointhe

environmentoverthelast2years.

Additionally,Integrated

is

trailblazing

with

anew

business

model

and

concept.

Integratedremains1ofonly2listedlegalfirmsintheworld.

Itisaverynewconceptandassuchwilltaketimetopositionthebusinessandtogaintractioninthe

market,andthisprocesshaswithoutdoubtbeenslowedbytheeffectsoftheGFC.


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A priority therefore in 2009was to establish a presence on the east coast, and to that endwe

announced the acquisition ofArgyle Lawyers lastNovember and the subsequent tuckin ofmda

lawyersin

March

this

year.

Integratednowhasasignificantpresence inSydneyandtoa lesserextentMelbourne,thisbeinga

veryimportantstrategicaccomplishmentforthefuturepositioningoftheCompany.

Theseacquisitionswerevery large relative toourexistingsize,andeffectivelydoubledthesizeof

theCompanyinashorttime.

Asexpected,

this

did

place

pressure

on

the

business,

particularly

in

the

areas

of

operating

cash

flows

andprofitability.

Consolidation

Andfinally,thefocusformuchofthesecondhalfoftheyearinparticularwasconsolidation.

Thisconsolidationincludedthefollowing:

Bedding down the new acquisitions,which in the case of Argyle in Sydney included the

expected implementation of new technology to support the business and growth in the

business going forward. This is nearing successful completion andhas involvedmaterial

investment;

Ensuring we had appropriate management and reporting processes in place across the

Group;

Starting to improve thequalityofourcash flowmanagementprocesses inthebusinesses,

andIwilltalkfurtheraboutthislater;

Establishingsome

fundamental

best

practices

that

can

be

applied

to

the

next

round

of

acquisitions;and

Resolving a number of outstanding legacy issues in the foundation businesses such as

PrincipalremunerationwhichIwilltalkaboutindetailshortly. Theselegacyissuesrelated

to various aspects of the initial businessmodel and needed to be addressed before the

companycouldsuccessfullymoveforward.

Essentially this consolidation has been all aboutmaking changes to the business to ensure our

businessmodel

is

right,

our

cost

base

reflects

reality,

our

businesses

are

well

positioned

for

the

future,andthattheCompanyiswellpositionedforthenextstageofacquisitions.

Financials

Sowith that difficult and challenging background inmind, lets turn to the Companys financial

performance for 2009.


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But the GFC did impact revenues for the year,with fee income for the Company less than the

Directorsexpected.

ThiswasparticularlythecaseintheJunequarter2009,andinparticularthemonthofJune,against

theseasonallyhighrevenueshistoricallyachievedduringthisperiod.

Additionally,ournewacquisitionsachievedfeeincomebelowexpectations,asadirectresultofthe

effectoftheGFConthefinancialservicesandcommercialareasofthosebusinesses.

Sooverall,astrongrevenuegrowthresult,althoughlowerthanexpectedasaresultoftheeconomic

conditions.

Importantlyhowever,wearecontinuingtobuildasolidtrackrecordofstrongandconsistentgrowth

bothannuallyandhalfyearly.

ContinuedProfitability

Turningto2009profitabilityoftheCompany,andthistableshowsNetProfitandEarningsperShare,

orEPS,for2009against2008.

Ataheadlinelevel,theCompanyachieveda2009netprofitof$594,000andEPSof0.89centsper

share,whichweredown62%and66%respectivelyfrom2008.

Whilst theDirectorsaredisappointedwithaspectsof the2009netprofitandEPS,overallweare

pleasedwith thecontinuedprofitabilityof theCompanyduringdifficultandchallengingeconomic

conditions,andduringaperiodofconsiderablechangeanddevelopmentofthebusiness.

ThisslideprovidesfurtherdetailofhalfyearprofitabilityandEPS.

Afterachievingasolidperformance for the1sthalfof2009of$897,000netprofitand1.38cents

earningspershare,theCompanyrecordeda2ndhalflossof$303,000andanegativeEPSofminus45

centspershare.

Anumberofmattersshouldbeconsideredinrelationtothe2009results.

Firstly, inrespectofcomparatives,theDirectorshavepreviouslyreportedtoshareholdersthatthe

2008correspondingperiodrelates tothe initial10.5monthstradingoftheCompanyunderpublic

listing.

TheCompanyacquiredthefoundationbusinessesatthetimeofpubliclistinginAugust2007.


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TalbotPrincipalRemunerationChanges

Inthisregard,letmetalkaboutthechangestomemberfirmTalbotOlivierPrincipalremunerationin

particular,and

there

does

seem

to

be

some

misunderstanding

of

this

matter.

Asbackground,underthetermsoftheInitialPublicOfferingoftheCompanyinAugust2007,andas

disclosedintheProspectusatthattime,thePrincipalsoftheFoundationfirmsofTalbotOlivierand

BrettDavies Lawyers signed an initial 2 yearemployment agreement endingAugust2009,which

providedawellbelowmarketremunerationforthat2yearperiodforthesePrincipalsof$100,000

perannumsalary,andarequirementforarenegotiationoftheemploymentcontractsattheendof

thatfirsttwoyearssotheinitialcontractsexpiredinAugust2009justgone.

ThePrincipalswereabletoleavethefirmattheendofthat2yearperiodifsuitablearrangements

werenotagreedwithin28daysofAugust2009.

TalbotOlivier inparticular isthe largestmemberfirmoftheCompanyandhasgrownstronglyand

consistentlysincejoiningtheGroup. ItmaintainsastrongbrandandmarketpositioninginthePerth

market.

The Directors considered the appropriate renegotiation of arrangements for these Principals,togetherwiththesecuringoflongtermemploymentcommitments,asacriticallyimportantpriority

fortheCompanyinprovidingsecurityoffutureearningsforshareholders.

TheDirectorsconsiderthatifthesePrincipalshadleftthefirm,shareholderswouldhavesuffereda

substantiallossofvalueandfutureearnings,thePrincipalsbeingthekeyfeeearnersofthebusiness.

The

reality

is

that

this

initial

remuneration

of

these

Principals

was

very

low

artificially

low

and

as

such represented an unsustainable and non competitive position for Talbot Olivier and for the

Group.

An importantpoint tonote therefore is that thesenew remunerationarrangementswerenotan

increaseinsalary,butratheranadjustmentfromtheartificiallylowlevelsinitiallyestablished.

TheNewArrangementsareeffective1July2009,andthePrincipalshaveagreedtonew longterm

employmentconditions

in

return

for

these

remuneration

changes.

These arrangements include an initial 4 year employment term from 1 July 2009 continuing

thereafter, a6monthnoticeperiod, andon any termination, comprehensive restraints including

noncompetitionaswellasnonsolicitationofemployeesandclients.


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Thenew remuneration frameworkwill support the realisationofTalbotOliviersgrowthpotential

andprovideanimportantcompetitiveedgeinattractingandretainingqualityemployeesandtuckin

acquisitions.

ThesuccessfulrestructureofthesearrangementsrepresentsamajorendorsementbythePrincipals

oftheCompanysstrategyandbusinessmodelandunderpinsitsfutureprospects.

Again,thearrangementsputinplaceatthetimeoftheIPOwereartificiallylowandunsustainable.

The new arrangements are sustainable, competitive, incentivise for behaviours aligned to

shareholdersinterests,

and

provide

for

long

term

commitment

of

these

senior

employees.

Thefinalisationofthenewemploymentarrangementsprovidesanumberofimportantadvantages,

includingstabilityfortheongoingoperationofthebusinessandincreasedsecurityoffuturerevenue

andearningsforthebenefitofshareholders.

TalbotOlivierwouldbetheonly legalfirminPerthtohavelongtermemploymentcontractsforits

senior team, this providing security for the business and shareholders and we believe deliver

competitiveadvantage.

Moregenerally,ourbusinessmodelprovidesalignmentbetweenshareholderinterestsandPrincipal

incentives.

Principals receive a base salary that is negotiated at the time of acquisition, and are then

incentivisedforgrowthinearningsthroughaprofitsharingarrangement. Thisbasesalaryisaligned

to

fees

generated

for

that

Principal.

Further,acquisitionarrangements includethe issuingofCompanysharessoourPrincipalsareall

shareholdersofbetween2and3percentoftheCompanyandassucharealsomotivatedtodrive

Companyearningsandcashflowsfordividends.

Insummarythen,undertheCompanysmodel,ourPrincipalsbeingthekeyrevenuegeneratorsof

thebusiness aredrivenbyrevenuegrowth,profitgrowth,sharepricegrowthanddividendsallof

whichare

aligned

to

shareholder

best

interests.

Again, the appointment of a corporate team and the renegotiated Principal remunerationwere

significantchanges inthecostbaseof theCompany,but theyreflecttherealityofanormalcost

baseforthebusiness.


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Thisdecline indemandnegativelyaffectedtheprofitabilityofLawCentral in2009,exacerbatedby

theCompanysplannedinvestmentduringtheperiodinrequiredtechnologyenhancements.

Impairment

AsaconsequenceoftheGFCandtheresultingreductioninrevenueandprofitsofLawCentral,the

Directorsrecognisedanimpairmentchargeof$450,000forthe2009financialyear.

Again,this impairmentchargecontributedsignificantlytothe lowersecondhalfprofitabilityofthe

Company.

Underaccounting

standards,

we

are

required

to

assess

on

asix

monthly

basis,

the

current

balance

sheetvalueofallourbusinessassets.

The impairmentchargereflectsthesignificantchange ineconomicconditionssincetheCompanys

acquisitionofLawCentralinAugust2007,whichhasresultedinadeclineintherelativevalueofthe

business.

Thisimpairmentchargeisaoneoffaccountingitem,whichreducesNetReportedProfitbutisnota

normaloperating

cost

of

the

Company.

WhilsttheDirectorsaredisappointedthatithasbeennecessarytowritedownthecarryingvalueof

theLawCentralbusiness,marketconditionsareinmanywaysunprecedented,withbusinessassets

generallyworthlesstodaythantheywere2yearsago,andrequiringmanycompaniestoimpairthe

valueofassetsduringthe2009reportingseason.

We

are

confident

that

the

Law

Central

business

will

return

to

historical

revenue

levels

and

as

such

regainbusinessvalueastheeconomicconditionsimprove.

But Inotethatthebusinessatthistimecontinuestooperatebelowhistoricaldemand levelswith

reducedactivityinareassuchasfamilytrusts,superfundsandcompanies.

Immaterial2nd

halfcontributionfromAcquisitions

The 2009 results also included an initial tradingperiod forArgyle Lawyers andmda lawyers, the

Companyhaving

acquired

these

businesses

in

November

2008

and

March

2009,

respectively.

Asexpected,thesenewlyacquiredbusinessesdidnotcontributemateriallytoprofitabilityin2009.

TheDirectors advise that generally the initial trading period of an acquisitionwill not provide a

material profit contribution. Specifically, this initial trading period will involve an element of

acquisitioncost,integrationexpenseandincludeaccountingadjustmentsonacquisition.


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The Talbot Olivier business also required fitout work to these premises to provide appropriate

accommodation for the growth that had occurred in the business, again involving a material

investment.

Thefullyeareffectofthiswillbeincludedin2010profitability.

Operatingcashflows

Movingtooperatingcashflowsandthistableshowscashflowsfromoperationsfor2009asnegative

$1.65mfortheperiod.

Italso

shows

key

items

included

in

these

cash

flows.

During the2009year,thedollarvalueofworkingcapitalofthebusiness, representedbyWork in

progressanddebtors,increasedsignificantlyasaresultof:

Acquisitions;

Organicrevenuegrowthinthebusinesses;and

TheGFCwhichslowedclientpayments.

Operatingcashflowsareadverselyaffectedbynewfirmacquisitions,asfundsfromoperationsare

invested in thebuildupofdebtors andwork inprogresspost acquisition tonormal levels. The

Companydoesnotacquiredebtorsandworkinprogressaspartoftheacquisition.

During theperiod,acquisitionswereverymaterial relative to theexistingbusiness,andoperating

cashflowswereinvested inthebuildupofworkinprogressanddebtorsforthesebusinessespost

tonormallevels.

Thecashflowimpactofworkingcapitalfornewacquisitionswas$1.53moutflowsfortheperiod.

As a general note, we believe that there is significant room for improvement in cash flow

management in our businesses, with the effect of lowering the value of work in progress and

debtors,andincreasingcashresources.

We are working hard in this regard and the businesses have made commitments to this

improvement.

Basically,ourfirmsarenotasgoodatcollectingmoniesfromclientsastheyneedtobeandithas

toimprove.

We have found some poor processes and bad habits in our businesses that are taking time to


9/45

ItisnotedthattheCompanysquarterlycashflowreportforSeptember2009,indicatedanetcash

outflowof$48,000fortheperiod,butimportantlyshowedapositivetrendincashflowoverthe3

months.

Dividend

InlightoftheCompanysstatedstrategyofacquiringlegalfirms,andasaresultofopportunitiesto

growtheCompanybyacquisition,theDirectorsmadethedifficultandveryunpopulardecisionnot

topayadividendfor2009.

Further, in the challenging market conditions, maintaining our balance sheet strength was and

continuesto

be

akey

priority.

Theretentionofavailablecashsupportsthispriority.

WhilsttheBoardviewsthepaymentofdividendsfromtheCompanyasdesirable,andunderstands

theimportanceofdividendstosomeshareholders,theyseetheimmediateprioritiesasinvestingin

thebusinessandmaintainingbalancesheetstrength,andassuchconsiderthisdividenddecisionto

beinthebestlongterminterestsofshareholders.

Ialsonotethatimproveddebtorscollectioninourfirmswillhaveadirectconnectiontothestrength

andregularityofdividends. Again,thisisanareawearefocused.

TheBoardsdividendpolicycontinuestobethatdividendswillbedeclaredafterconsiderationofthe

performanceofthecompany,includingcashflows,andfutureinvestmentopportunities.

We

note

that

the

Company

continues

to

have

a

strong

balance

sheet,

with

conservative

gearing

levels.

BusinessOverviewandStrategy

Thisnextsectionprovidesanoverviewofthebusinessandstrategy.

Asastartingpoint, it isworthwhiletoconsidersomebackground informationonthe legalservices

industryandspecificallythekeytrendsthatwebelievecreateanopportunityfortheCompany.

Thedirectorsareoftheviewthatthelegalservicesindustryiscurrentlyinfluencedbyanumberof

issueswhichprovideanopportunitytodevelopandgrowanetworkofleadingmediumsizedfirms

inthemidmarket,SMEandhighnetworthclientsegments,andthatthecompanysbusinessmodel

andstrategyprovidesthebasisforassistingmemberfirmsinaddressingtheseindustryissues.


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Itisproblematictoachievegrowthinthepartnershipmodelduetolimitationsonavailablecapital.

Further,succession

planning

is

difficult

with

young

lawyers

increasingly

reluctant

to

buy

into

partnershipsgiventhecostoflivinginAustraliancities.

For small law firms, it isjust difficult to survive with challenges in getting and retaining staff,

providingtraining,providinganappropriateservicetoclientsand findingcapitalandresourcesfor

growth.

Webelieve these industry issuesprovide theCompanywithauniqueopportunity toacquireand

growanational

network

of

quality

member

firms

and

aspire

to

amarket

leadership

position

in

the

midmarket,SMEandhighnetworthclientsegments.

Webelievetherewillbeastrongpipelineofsmallertuck inacquisitionsthatcansupportmember

firms in developing scale to underpin future growth and profitability and achieve longterm

competitiveadvantage.

ThischartshowstheCompanysprogresswithinthelegalindustrysofar.

ThefiguresarefromBRWMagazineOctober2009edition,andshowIntegratedjustoutsidethetop

30lawfirmsinAustralia.

Strategy

Broadly,theCompanysstrategyisbasedonthefollowingprinciples:

Owninga limitednumberofmember firms in capital cities andkey regional areas across

Australia;

Target firms arebothmedium sized commercial law firms and specialist law firms in key

growthsegments;

TheCompanyistargeting1520memberfirmsoverthenext510years;

Supporting the stronggrowthanddevelopmentofmember firmsbothorganicallyandby

tuckinacquisition,toachievescalebusinesseswithcompetitiveadvantageintheirmarkets.

Wewilllooktogrowthesememberfirmsorganicallywithaseriesofstrategiesincludingthe

implementation of best practices for revenue growth, enhancing the environment for

attractingand

retaining

great

lawyers,

introducing

new

products

and

services,

and

developing internalcrossreferralprocessesandexternalstrategicrelationshipsto leverage

clientopportunitiesaspartofanetworkofmemberfirms;and

Improvement of the overallmanagement of these businesses. Wewill look to improve

margins of member firms with enhanced management practices and develop cost

advantages for member firms through national procurement arrangements.


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Weare selectiveandwehavealready rejectedanumberof acquisitionopportunities. Wewant

goodbusinessesthatfitourcultureandaspirationsandthatmaytaketime.

Wewillalsobeincrementalwearestillasmallbusinessandwehavetomanagehowfastwegrow.

Thereareanumberofpotentialacquisitionswearecurrentlyspeakingwithwhichmayormaynot

turnouttobetherightfitfortheGroup.

Themodel is oneof freedomwithin boundaries,wheremember firms retain theirbranding and

continuetodevelopthestrategyandmanagethebusinessastheyhavepreviouslydone,butwith

strategic,financialandriskmanagementboundaries.

Themodelisnotaboutcostcuttingandnotaboutcentralisationitisaboutrevenueandearnings

growth.

Although, scale advantage overtime is expected to help improve margins and we expect best

practicestohelpdrivecostefficienciesagainovertime.

Remuneration is performance based and as such alignedwith shareholder interests,with profit

shareand

share

schemes

to

incentivise

growth

and

improvement

in

revenue

and

business

earnings.

TheCorporateteamwillbekepttoaminimumandprovideGroupmanagement,strategicdirection,

boundariesandsupport,aswellasprovidingaccountabilityformemberfirms.

TheBusiness

Wenowhave4legalservicesbusinesseswithmorethan60legalprofessionals,across4offices.

TalbotOlivierisbasedinPerthCBDandisourlargestmemberfirm.

TalbotOlivierhas an80 yearhistory so it isawellestablishedbusinesswitha strongbrandand

reputationinthePerthandWAmarkets.

ArgyleLawyershasa25yearhistoryandhasbecomeacategoryleadingmediumsizedcommercial

lawfirm. ArgylehasaheadofficeisinSydneywithanofficeinMelbourne.

BrettDavies

Lawyers

is

based

in

Perth

CBD,

has

been

operating

for

over

15

years,

and

is

aspecialist

in tax, succession planning, estate planning and superannuation. And I note that Brett Davies

Lawyerswasrecentlyawardedthe2009NationalWinnerforexcellence incustomerservicebythe

CustomerServiceInstituteofAustralia.

LawCentralcommencedasabusiness in2000,and isan internetbasedbusinessprovidingon line


12/45

Inthisregardourmemberfirmssharecompatibleaspirationsof:

Abovemarketgrowth;

Marketleading

quality

from

business

improvement;

Winningthewarfortalentthroughattractingandretaininggreatpeople;and

Winning thewar for theclientwhichwillrequireabroadeningofserviceofferinganda

new approach for deeper client relationships rather than transactional, which has

historicallybeentheapproachofmanylawyers.

Wewillcontinuetobeveryselectiveinacquiringbusinesseswhosharetheseaspirations.

Priorities

and

Outlook

AndfinallyafewwordsonourprioritiesandtheoutlookfortheCompany.

I think itsausefulexercise toconsiderand reflectonwhatwehave learntover the first2years

operationoftheCompany:

Firstly,wehavegoodbusinesseswithstrongpositions in theirmarketsandstronggrowth

prospects.

We are successfully building a strong culture of likeminded people, with common

aspirationsforabovemarketgrowth,businessimprovementandworkingtogether.

And themodel is starting towork we have already shown thatwe can achieve strong

revenuegrowthinmemberfirms.

Wecanseesignificantscope forbusinessperformance improvement inallofourmember

firms,whichprovidesanopportunityforincreasedprofitabilityovertime.

WecanalsoseestrongorganicandacquisitiongrowthopportunitiesfortheGroupandfor

themember

firms,

although

we

may

need

to

kiss

alot

of

frogs

before

we

find

our

princesses.

Wehaveasignificantopportunitytoincreaseprofitabilitybyachievingincreasedscale:

o Atagrouplevelthismeanssecuringmorememberfirmstosharethefixedoverhead

burdenofCorporate.

o Andatamemberfirmlevel,thismeansachievingorganicandacquisitiongrowthto

utilise available excesspremises, and to share the infrastructure costs that these

firmsnowhaveinplace.

o Wehavethebasicsinplacethestrategy,businessmodel,goodbusinesses,butwe

needscale

now

to

really

drive

profitability.

o Additionally, law firm revenue isgenerallynot recurring innatureanddemand in

certainservicesandcertainbusinessandcertainstateswillfluctuateovertime. We

needtodevelopamorediversifiedportfolioofbusinesseswhichwillultimatelyhave

theeffectofsmoothingearnings. TheGroupiscurrentlyreliantonasmallnumber

of businesses and as such a bit exposed to the underperformance of any one of


13/45

Ourprioritiesforthenext12monthswillbe:

Workingwithourexistingmemberfirmsforcontinuedgrowthandimprovement;

Thereis

plenty

more

to

do

to

help

these

firms

achieve

scale

and

improve

profitability;

Aspreviouslymentionedwearealsoworkingtoimprovingtheircashflowmanagement;

Aspartofouroverallstrategy,expandingtheservicesprovidedtoclients;and

ExtendingourgeographiccoveragetobuildscalefortheGroup

Outlook

Lookingforward,myviewisthateffectsoftheGFCarefarfromover:

Conditions remain challenging in parts of our business and some services are behind

expectationsfor

the

first

half

of

2010;

Wearestillseeingsomebaddebts,andsuspectthiswillcontinueforawhilelonger;

OurPerthbusinessesinparticularhavestruggledinsomeservicelinesinfirst45monthsof

theyear;and

ThiswilllikelytempertheCompanysperformanceinthefirsthalf.

2010will also see the full yeareffectof thenecessary costbase changes as Ihave talked about

today.

Somegreatnewsisthatlastyearsacquisitionsareperformingwell:

ThatsArgyleinSydneyandMelbourne.

Theyarenowsettledinandprovingtobethegoodbusinesseswethoughttheywere.

Growthinthefirmisalsogoodwithsomeexcellentnewstaffappointmentsinthelastfew

months.

Aspreviously

advised,

we

expect

revenues

to

be

at

least

$21m

for

2010,

representing

24%

growth,

andassumingnofurtheracquisitions.

AndtherearestrongprospectsforbothorganicandacquisitiongrowthfortheGroup,butwewill

continuetomanageacquisitionincrementallybutonlyifwecanfindtherightfirms.

Ibelievewearemakingprogress.

SinceIjoined

the

Company

in

May

2008

we

have

had

to

make

anumber

of

changes

from

the

initial

businessmodeltoensurethattheCompanyisinapositiontogeneratestrongandconsistentlonger

termreturns.

This,combinedwiththeworstofeconomicconditions,hasmeantareductioninearningsin2009.


14/45

Butagaintherealityisitwilltaketimetherearenosilverbulletsitwilltaketimeandmorehard

work.

IshouldnotethatIalsogetalotofquestionsaboutthesharepricewhyisitnothigherwhenwill

itgoupandevenwhenwillthesharepricegetbacktotheissuepriceof50cents.

WelltherealityonthesharepriceisthatitisatabouttherightlevelfortheCompanysprofitability.

SharepricesaremostlyaboutmultiplesofearningspershareandbasedontheCompanysearnings

persharethesharepriceisaboutright.

Ourtask istofocusonthebusiness,growprofitabilitypershareatanattractiverate,andachieve

consistency inthatprofitability that iswhatwilldriveoursharepricegrowth,andourfocusover

thelast18monthshasbeentowardsgettingtheCompanyinapositiontostarttoachievethis.

Finally,IwouldliketothankthePrincipalsandstaffoftheCompanyfortheircontinuedeffortsand

support.

Weare

very

fortunate

to

have

ahighly

skilled

and

very

committed

team

and

we

are

appreciative

of

theirefforts.

Withthat,Iwouldliketothankshareholdersfortheirattendancetodayandwillnowhandbackto

theChairmanofthisAnnualGeneralMeeting,TheHonJohnDawkins,toconductthebusinessofthe

meeting.

Thankyouforyourattention.

GraemeFowler

ManagingDirector

26November2009


15/45

Annual General MeetingNovember 2009

Chairman Hon. John Dawkins

information, as disclosed by the Company to the Australian Stock Exchange from time to time.


16/45


Managing Director Graeme Fowler

The information contained in this document is not intended to be exhaustive and must be considered in conjunction with all other public availableinformation, as disclosed by the Company to the Australian Stock Exchange from time to time.


17/45

A enda

The Last 12 Months

2009 Financial Performance

2010 Priorities & Outlook


18/45

The Last 12 Months


19/45

The Last 12 Months

Global Financial Crisis (GFC)

Small Company with New Business Model/Strategy

Large Acquisitions Relative to Size

Consolidation


20/45

2009 Financial Performance


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Revenue Stron l Hi her

2009 2008 %2nd Half

20091st Half

20092nd Half

2008

$m $m $m $m $m

Operating Revenue 16.95 10.69 59% 9.36 7.59 6.18

Revenue increased by 59% to $16.95m51%Growth

Organic & Acquisition Growth


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Continued Profitabilit

10.5 months2009

$000s

2008

$000s

Growth

Reported Net Profit 594 1,544 (62%)

Reported EPS 0.89 cents 2.66 cents (66%)


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2009$000s

10.5 months

2008$000s

%

Growth

2nd Half

2009$000s

1st Half

2009$000s

2nd Half

2008$000s

Reported Net Profit 594 1,544 (62%) (303) 897 649

Reported EPS 0.89 cents 2.66 cents (66%) (0.45) cents 1.38 cents 1.12 cents

2008 comparatives reflect abnormal trading

Corporate Management

Part year effect of renegotiated Principal Remuneration


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Princi al Remuneration

Talbot Olivier Principal remuneration changes Background

Existing remuneration was low, non-commercial & unsustainable

Not an increase an adjustment from artificially low levels

New Arrangements Sustainable

Aligned to shareholder interests

Longer term commitment

r ca s ra eg c n a ve


25/45


2009$000s

10.5 months

2008$000s

%

Growth

2nd Half

2009$000s

1st Half

2009$000s

2nd Half

2008$000s




Corporate Management

Part year effect of renegotiated Principal Remuneration


26/45

Continued Profitabilit cont.

2009$000s

10.5 months

2008$000s

%

Growth

2nd Half

2009$000s

1st Half

2009$000s

2nd Half

2008$000s




Part ear effect of rene otiated Princi al Remuneration

Impact of GFC

June Quarter Revenues below expectations

en an rup c es

Lower Law Central Profit Contribution

Law Central Accounting Impairment Charge 2nd Half $450,000


27/45

Accountin Im airment Law Central

Accounting write down

GFC business worth less than 2 years ago

Family Trusts

Super Funds

Companies

Business continues to perform below historical levels


28/45

Continued Profitability (cont.)

2009

10.5 months

2008

%

Growth

2nd Half

2009

1st Half

2009

2nd Half

2008




Impact of GFC

Immaterial 2nd

half contribution from new acquisitions Premises rental increases


29/45

O eratin Cash Outflows

2008/09

$mepor e pera ng as u ows .

Includes: Working capital impact of new Acquisitions

1.53

Dollar value of work in progress and debtors grew during the period

.

Organic growth GFC

New business acquisitions adversely impact short term operating cash flows

Room for significant improvement with cash flow management

Maiden tax payment


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Dividends

Retention of cashcqu s on s ra egy

Opportunities Priority of Balance Sheet strength

v en o cy - ec are a er cons era on o ompany per ormance

investment opportunities

Stron balance sheet with conservative earin levels


31/45


32/45

The Australian Le al Industr

Medium sized law firmsIMPLICATIONS

lawyers

Hard to provide broad services toclients

Opportunity to develop

and grow a national

network of medium sized

Hard to achieve growth

Young lawyers reluctant to buy intopartnership

Over 11,000 law firmsIn Australia.

rms

Opportunity for leadership

of mid, SME & HNW

Some owners seeking a value fortheir business

Small s ized firms

.sized firms

Pipeline of tuck-in

acquisitions

Hard to be small staff, training,resources, growth

There is no market leader in mid market,

Opportunity to improve

from cottage industry

SME & HNW client segments


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Top 30 Australian Law Firms by Revenue 2009

Rank Firm Revenue

$m1 Mallesons 553

2 Freehills 493

a er c enz e

15 Slater & Gordon 103

20 Mora & A new 64

25 Thomson Playford 48

30 HopgoodGanim 29

Source BRW October 2009

Integrated (annual run rate) 21

ur asp ra on s o e some ng very eren o ese rms cu ure, oppor un y, c en

service but we will compete with them for staff & clients


34/45

Business Strate

Network of leadinglegal services

businesses

. . .

15-20 member firms Above market rates Improvement


35/45

Philoso hies

Selective & Incremental approach to acquisitionsu ura Attitude & objectives of Partners

Commitment to growth, improvement & working together

Freedom within boundaries Firms retain brand

rms con nue o eve op s ra egy manage e us ness Focus on revenue growth and margin improvement

Performance based remunerationProfit share & share schemes to incentivise growth in revenue & earnings Aligned with shareholder interests

Corporate provide boundaries strategic, financial, risk


36/45

Developing a National Network

Law Central(Internet Based)

Talbot Olivier(Perth WA)

e rgy e ar ners p(Sydney NSW &Melbourne - VIC)

Brett Davies Lawyers(Perth WA)


37/45


38/45

Member Firm As irations

AboveMarket

ar eGrowth

Quality

ILHMember

rms

War forthe

War forTalent

2010 PRIORITIES & OUTLOOK


39/45

2010 PRIORITIES & OUTLOOK


40/45

2 Years on What have we learnt?

Good businesses with strong positions in local markets

Building a strong culture like-minded people; common aspirations

Model is starting to work

Fee income growth in member firms

Scope for business improvement

Growth opportunities

Achieving scale to drive profit growth This will take time slowed by GFC

Good medium to long term prospects


41/45

2010 Priorities

Continued growth & improvement of existing member firms

Build scale in member firms

Expansion of services

Extend geographic coverage

Build scale for the Group


42/45

Outlook

Continuing effects of GFC will temper 1st half profit

Full year effect of cost base changes

2010 revenues at least $21m

Assumes no acquisitions

ppor un es or organ c acqu s on grow


43/45


Managing Director Graeme Fowler

The information contained in this document is not intended to be exhaustive and must be considered in conjunction with all other public availableinformation, as disclosed by the Company to the Australian Stock Exchange from time to time.


44/45

Item 2 Adopt the Remuneration Report

The Report is incorporated in the Directors Report.

The vote on this resolution is advisory only and does not bind theDirectors of the Company.

In favour 2,971,882

Against 486,000

Proxys Discretion 295,439

,


45/45

Item 3 Re-election of Director Anne Tregonning

In favour 3,333,882

Against 138,000

,

Abstain 4,000

066.ASX IAW Nov 27 2009 14.40 MDs Address

Documents

Transcript of 066.ASX IAW Nov 27 2009 14.40 MDs Address