134.asx iaw oct 20 2011 14.00 annual report ye june 2011

8/9/2019 134.ASX IAW Oct 20 2011 14.00 Annual Report YE June 2011

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INTEGRATEDLEGALHOLDINGSLIMITED

ACN120394194

(ASX:IAW)

AnnualReport

Fortheyearended30June2011


2/122


ACN120394194

CorporateInformation

1

ABN20120394194

DirectorsTheHonJohnDawkins,NonexecutiveChairman

AnneTregonning,NonexecutiveDirector

GraemeFowler,ManagingDirectorandChiefExecutive

CompanySecretary

JeanMarieRudd

Registeredoffice

Level8,WesfarmersHouse

40TheEsplanade

Perth

WA

6000

Principalplaceofbusiness

HeadOffice

Level22

1MarketStreet

Sydney NSW 2000

Tel: (02)82636600

ShareRegister

ComputershareInvestorServicesPtyLimited

Level2

45StGeorgesTerrace

Perth WA 6000

Tel: (08)93232000

IntegratedLegalHoldingsLimitedsharesarelistedontheAustralianStockExchange.

Solicitors

TalbotOlivier ArgyleLawyers

Level8,WesfarmersHouse Level22

40TheEsplanade 1MarketStreet

Perth

WA

6000

Sydney

NSW

2000

Bankers

NationalAustraliaBankLimited

100StGeorgesTerrace

Perth WA 6000

Auditor

Ernst&Young

11MountsBayRoad

Perth WA 6000


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ACN120394194

ContentstoAnnualReport

2

ReportbyChairmanandManagingDirector...........................................................................................3

DirectorsReport....................................................................................................................................14

AuditorsIndependenceDeclaration.....................................................................................................39

CorporateGovernanceStatement.........................................................................................................40

ConsolidatedStatementofFinancialPosition.......................................................................................50

ConsolidatedStatementofComprehensiveIncome.............................................................................51

ConsolidatedStatementofCashFlows..................................................................................................52

ConsolidatedStatementofChangesinEquity.......................................................................................53

Notesto

the

Consolidated

Financial

Statements

...................................................................................54

DirectorsDeclaration.........................................................................................................................118

IndependentAuditReport..................................................................................................................119

ASXAdditionalInformation.................................................................................................................121


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ACN120394194

ReportbyChairmanandManagingDirector

3

2010/11FullYearResults

Continuingstrong

financial

performance

51%growthinnetprofitaftertax

19%earningspersharegrowth

20%growthinfullyfrankedfinaldividendforshareholders

Positionedforcontinuedorganicandacquisitiongrowth

Highlights

Netprofitaftertaxincreasedby51%to$1.29m.

Earningspershareincreasedby19%to1.41centspershare.

Operatingrevenueincreasedby19%to$28.5m.

Operatingcash

inflows

of

$1.23m.

Strongbalancesheet,cashreservesandconservativeborrowings.

20%growthinfinaldividendof0.60centspersharefullyfranked.

RecordDate14October2011;Payable4November2011.

Thedividendreinvestmentplanwilloperate.

Fullyear0.90centsfullyfranked20%growth

Continuedacquisitiongrowth.

WojtowiczKellyLegaleffective1February2011 $5.3mannualrevenue.

PLNLawyerseffective1August2011 $2mannualrevenue

Expectgrowthinearningspersharein2011/12.

1. ExecutiveSummary

IntegratedLegalHoldingsLimited(theCompanyorIntegrated)announcedon18August2011the

2010/11 Full Year Results, a net profit after tax of $1,286,670 for the 2010/11 financial year. This

comparedtoafullyear2009/10netprofitaftertaxof$853,494,anincreaseof51%.

Earningspersharefortheyearwere1.41centspershare,comparedtotheyearended30June2010

of1.18cents,anincreaseof19%.

TheDirectorsadvisethattheyarepleasedwiththefullyearresultsandconsiderthattheCompanyis

developingastrongandconsistenttrackrecordof growth inrevenue,earnings,earningspershare

anddividends.

FullYearResultsSummary

2010/11

$m

2009/10

$m

Growth

%

2008/09

$m

OperatingRevenue 28.48 23.87 19% 16.95

NetProfitafterTax 1.29 0.85 51% 0.59

EarningsperShare 1.41cents 1.18cents 19% 0.89cents

DividendperShare

Final 0.60cents

Interim 0.30cents

FullYear 0.90cents

Final 0.50cents

Interim 0.25cents

FullYear 0.75cents

20%


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ACN120394194

ReportbyChairmanandManagingDirector(continued)

4

HalfYearResultsAnalysis

TheCompany

achieved

a

net

profit

after

tax

for

the

2nd

half

of

2011

of

$0.53m,

compared

with

a

2nd

half2010profitof$0.47m,anda1sthalf2011profitof$0.76m.

2ndHalf

2010/11

$m

1stHalf

2010/11

$m

2ndHalf

2009/10

$m

1stHalf

2009/10

$m

OperatingRevenue 14.86 13.62 12.28 11.59

NetProfitafterTax 0.53 0.76 0.47 0.38

EarningsperShare 0.55cents 0.86cents 0.62cents 0.56cents

NewBusinessAcquisitions

TheCompanyhascontinuedtogrowbyacquisitionwiththefollowingannouncements.

AcquiredFirm AcquiredFirm Location

Annualised

Revenue

$m

EffectiveDate

WojtowiczKellyLegalMergerwithexistingMemberFirm

BrettDaviesLawyersPerth 5.3

1February

2011

PLNLawyersTuckinforexistingMemberFirm

ArgyleLawyersSydney 2.0 1August2011

Total 7.3

WojtowiczKellyLegal

In December 2010 the Company announced the acquisition of Wojtowicz Kelly Legal (WK) under

merger arrangements with the existing member firm Brett Davies Lawyers (incorporating Law

Central)(BDL).

WK isanestablishedandwellregardedPerthCBDbasedcommercial lawfirmdeliveringservicesto

commercial enterprises and private individuals predominantly in Western Australia, but also to

enterprisesbasedinSoutheastAsiawithAustralianinterests.

WK was established in 1994 and has developed a range of legal services including corporate and

commercial, property, litigation, family, migration advice, local government law and settlements

(conveyancing).

WKalsohasanofficeinRockinghamsouthofPerth,andarepresentativeofficeinSingapore.

ThefirmconsistedofthreePartners,GavanKelly,AnthonyQuaheandJohnWojtowicz,with40staff

andannualfeeincomeofapproximately$5.3m.

WK has merged with existing member firm BDL, with the merged firm having four Principals,

approximately54staffandannualfeeincomeofmorethan$7.5m.

BDLhasoperated inthePerthCBDforover15yearsand isaspecialist intax,successionplanning,

estate

planning

and

superannuation.

BDL

has

a

national

client

base

and

focuses

on

accountants,

financialplannersandlawyers.


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ACN120394194


6

PLNLawyers(continued)

PLNis

an

award

winning

law

firm

having

won

the

2009

New

South

Wales

Exporter

of

the

Year

Award

inarecognisedservicesindustry,andinAugust2010wasnamedjointwinnerofthee.lawAsia

PacificBoxBreakeroftheYearAward,whichrecognisesthosethinkingoutsidethesquaretomeet

legalbusinesschallenges.

PLN will tuckin with existing member firm Argyle, with the combined firm having 6 Principals,

approximately40staffandannualfeeincomeofmorethan$10m.

John Ridgway willjoin Managing Principal Peter Bobbin, Principals Andrew Ireland, Mark Petrucco,

GlendaLaurenceandFionaSonntag,andPracticeDirectorJaniceDuncanastheseniormanagement

ofthebusiness,allofwhomarecommittedtogrowingArgylewithintheILHGroup.

PLNwillretainitsbrand,butoperategoingforwardundertheArgylebusinessumbrella. Thetuckin

arrangements promise a sound base for the growth and expansion of the PLN brand across Asia

PacificandviatheILHmemberfirmsinAustralia.

Under the tuckin arrangements, PLN will be relocated and integrated into the nearby offices of

Argyle.

Thetransactionwasfundedthroughsurpluscashreserves.

The Directors believe that PLN is a high quality business with strong growth prospects and will

provide

both

Argyle

and

ILH

with

a

platform

for

further

growth,

in

particular

strengthening

theorganisations commercial law service offerings, and providing new access to the Pacific and Asian

markets.

The Company expects to generate earnings improvements through cross referrals of client matter

opportunitiesaswellascostsynergiessuchaspremises.

The WK and PLN transactions are consistent with ILHs strategy of supporting the growth and

expansion of a limited number of core member firms into major businesses with competitive

advantagethroughthescopeandscaleoftheiroperations,aspartofapubliclylistedgroup.

Both acquisitions are structured with significant employment constraints and conditions,consistentwiththeCompanysdisciplinedacquisitionmodelandstrictcriteria.

The full revenue and profit impact of the WK and PLN acquisitions will be achieved from the

2011/12financialyear. TheDirectorsbelievethattheeffectofbothacquisitiontransactionswill

bemateriallypositiveintermsofearningspershareinthe2011/12financialyearandwillenhance

theCompanysgrowthprospects.


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7

BalanceSheet

The

Company

has

maintained

a

strong

balance

sheet

and

is

well

placed

to

continue

organic

and

acquisitiongrowth. Thefollowingpointsarehighlighted:

Cashposition(includingoverdrafts)at30June2011of$2.44m.

Bankloansof$1.95mat30June2011(debttoequityratio15%).

TheCompanyhadabankfacilityasat30June2010of$3.05m(drawndownto$1.95m).

At31July2011theCompanysbankfacilityincreasedto$3.50m.

TheCompanyachievedoperatingcashinflowsfortheyearof$1.23m.

TheCompanys2010/11interimdividendwasfullyunderwrittenbyTaylorCollison(Sharebrokers

andInvestmentAdvisers)withthesupportofaninstitutionalinvestor.TheCompanyissued2.1m

new shares at 12.5 cents per share in lieu of a cash dividend payment of $267,833. The

Companys

dividend

reinvestment

plan

for

the

interim

dividend

attracted

22%

re

investment

fromshareholdersbeforetheunderwriting.

OperatingCashFlow

Cash flows from operations were $1.23m during the period, compared with$1.45m for the period

ended30June2010.

ItshouldbenotedthatundertheIntegratedmodeltheCompanydoesnotacquiredebtorsandwork

inprogressaspartofanacquisition.Consequently,theCompanywillinvestfundsfromoperationsin

the buildup of working capital (including debtors and work in progress) to normal levels post

acquisition.

As

a

result,

net

operating

cash

flows

of

the

Company

will

generally

be

lower

in

the

periodfollowinganacquisition.

During the period, the WK acquisition required the buildup of working capital to generally

acceptablelevelsinthenormalcourseoftrading. Similarly,theacquisitionofPLNwillhaveaneffect

inthefirsthalfof2011/12.

DividendAnnouncement

TheDirectorshavedeclaredafullyfrankedfinaldividendof0.60cents.

Thedividend

will

have

a

record

date

of

14

October

2011

and

a

payment

date

of

4

November

2011.

Thedividendreinvestmentplanwilloperate.

Intotal,the Companyhasdeclared fully frankeddividendsof0.90centsper shareforthe2010/11

financialyear,havingpaidaninterimdividendof0.30centsfullyfrankedinMay2011.

Outlook

Overall, the Directors remain confident in the outlook for the Company given the strength and

underlyingqualityofitsmemberfirms,thesignificantopportunityfororganicgrowthandimproved

performance inthesefirms,andthesignificantpotentialtogrowbyselectiveacquisitionaspartof

thestrategy

of

developing

a

national

network

of

legal

services

businesses.


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ACN120394194


8

Outlook(continued)

The

Directors

are

of

the

view

that

the

Company

is

well

placed

to

capitalise

on

the

significant

opportunity afforded by prevailing industry issues. Longterm competitive advantage can be

achievedbytheCompanyinsupportingmemberfirmsindevelopingscaletounderpinfuturegrowth

andprofitability.

Consistent with this position, the outlook for the Group is positive and the Directors expect the

Company to achieve earnings per share growth for 2011/12, providing reasonable business

conditionscontinuefortheyear.

2. BusinessPerformance

LegalServices

Division

The Legal Services division incorporates the businesses of Talbot Olivier (Perth), Argyle Lawyers

(Sydney/Melbourne)andCivicLegal(Perth,withnationalandinternationalcoverage).

Each of these businesses has highly competitive positions in their respective markets, and target

commercialclientsinthepubliclylisted,midmarket,governmentandSMEsegments,aswellashigh

networthindividualclients.

Talbot Olivier has a history of over 80 years and operates in commercial law, litigation, insurance,

property,estateplanningandfamilylawpredominantlyinthePertharea.

Argyle Lawyers commenced in 1982 and combines corporate, business, family, litigation, and

property law, with particular specialisation in key long term growth industries of financial services

andwealthmanagement,superannuationandtaxationandhighnetwealthestateplanning.

CivicLegalprovidesarangeoflegalservicesincludingcorporateandcommercial,property,litigation,

family,migrationadvice,localgovernmentlaw,settlementsandsuperannuation,taxationandestate

planningfirm.


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ACN120394194


9

LegalServicesDivision(continued)

TheLegal

Services

division

employs

over

90

lawyers

across

4

offices

in

Sydney,

Perth

and

Melbourne,

andhasdevelopedabroadanddiversifiedrangeoflegalservicesshowninthefollowingtable.

BusinessAdvisoryServices PrivateClientServices

Corporate&Commercial WealthManagement

Property&Construction WealthProtection

CommercialLitigation Superannuation

InsuranceServices TaxationLitigation

Media&Defamation TaxationAdvice

Licensing,GamingandHospitality TaxationAudits

GovernmentServices EstatePlanning&Wills

Insolvency&

Corporate

Recovery

Succession

Planning

WorkplaceRelations Family

TaxationLitigation&Advice Property/Settlements

Compliance&Regulatory Immigration

DisputeResolution&Mediation Employment/WorkplaceRelations

Mergers&Acquisitions Criminal

Mining,Energy&Resources OnlineLegalDocumentPublishing

The Directors consider that the broad diversification of services offered by the Company provides

strong support to the ongoing revenue profile of the Company and assists in insulating against

marketdownturns.

TheCompanysstrategyfortheLegalServicesdivisionistodevelopanationalnetworkofleadinglaw

firms in the capital cities and other key centres across Australia, with a view to the growth and

improvement of these businesses, as well as the development of cross referral processes, national

tenders,strategicrelationshipsandscaleadvantageopportunities.

InformationTechnologyServicesDivision

The Information Technology Services division (IT Services) incorporates the Law Central business,

which is an internet based customised legal document publishing and information service. The

service is targeted towards accountants and financial planners and earns revenue based on the

sellingof

documents

and

subscriptions

to

the

service.

The Company strategy for IT Services is to grow and develop the business organically through the

expansionofonlineservices,andthebuildingofdeeperrelationshipswiththeexistingLawCentral

clientbase.


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ACN120394194


10

3. IndustryOverview

TheDirectors

believe

that

the

legal

services

industry

is

currently

influenced

by

a

number

of

issues

whichprovideanopportunityfortheCompanytodevelopandgrowanetworkofleadinglawfirms.

There issignificantfragmentation intheindustrywithover11,000 legalfirms inAustraliaaccording

tothe2008IBISIndustryReport.

TheDirectorsconsiderthatthereareintherangeof150mediumsizedfirmsinAustralia,thesebeing

theCompanystargetgroupformemberfirms.

Formediumsizedlegalfirms,itisdifficulttoattractandretaingoodseniorlawyersanditishardto

providebroadservicestomeetclientneeds.

Growthisdifficultforthesebusinessesduetoavailabilityofcapital.

Further, succession planning is difficult with young lawyers increasingly reluctant to buy into

partnershipsgiventhecostoflivinginAustraliancities.

For small law firms, of which there are thousands, it isjust difficult to survive with challenges in

attractingandretainingstaff,providingtraining,providinganappropriateservicetoclients,finding

capitalandresourcesforgrowthandbusinesssuccessiongenerally.

Additionally, the Australian legal industry iscurrently undergoinganinternationalisation withthe

entryof

a

number

of

foreign

law

firms

into

key

Australian

markets.

Whilst the Directors are watchful of these developments, these changes are generally seen as

positive for the Company with the associated fragmentation, consolidation and evolution in

AustralianlawfirmsprovidingfurtheropportunitiesforIntegratedforexpansionthroughacquisition

andnewhiringoflawyers.

Againstthisbackground,theDirectorsconsiderthatILHprovidesanattractivevaluepropositionfor

firmstojointheCompany.

The Companys business model and strategy provides the basis for assisting member firms in

addressingthese

industry

issues.

Specifically, ILH looks to improve the financial and risk position of vendors, as well as unlock the

growthpotentialofalawfirm.

BusinessPhilosophiesandStrategy

ThekeybusinessphilosophiesoftheCompanyincludeaselectiveapproachtoacquisitions.

Thismeansselectivelyacquiringqualityfirmswithstronggrowthprospects,andwhoarecompatible

with existing member firm aspirations, culture and values, including a commitment to growth,

improvement

and

working

together.


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11

BusinessPhilosophiesandStrategy(continued)

Overthe

next

5

to

10

years,

we

intend

to

develop

a

national

network

of

legal

services

businesses

(memberfirms)byacquiring15 to20 highquality medium sized lawfirms inthe Australian capital

citiesandkeyregionalcentres.

Thebusinesseswetargetarebothmediumsizedcommerciallawfirmsandspecialistlawfirmsinkey

growthsegments.

Integratedsupportsthesememberfirmstowardsabovemarketrevenueandprofitgrowththrough

thedevelopmentofabroadrangeoflegalservices,organicgrowth,tuckinacquisitions,crossselling

andsuccessionplanning,

Integrated

also

supports

these

member

firms

towards

improved

and

sustainable

business

performance through improved business management, personnel management, best practice

businessprocesses,traininganddevelopment,shareplansandperformancebasedrewards.

Inthisregardthereareanumberofpotentialacquisitionswearecurrentlyspeakingwithwhichmay

ormaynotturnouttobetherightfitfortheGroup.

Growthwillbe incremental. TheCompanydoesnot intendtomakea largenumberofacquisitions

quickly,butratherensurethattheCompanysbusinessesaremanagedtothemaximumpotentialfor

shareholders.

The

model

is

one

of

freedom

within

boundaries,

where

member

firms

retain

their

branding

and

continue to develop the strategy and manage the business as they have previously done, but with

strategic,financialandriskmanagementboundaries.

Overtime,scaleadvantageisexpectedtosupportimprovedmarginsandweexpectbestpracticesto

helpdrivecostefficiencies.

Remuneration is performance based and aligned with shareholder interests, with profit share and

shareschemestoincentivisegrowthandimprovementinbusinessrevenueandearnings.

TheCorporateteamwillbekepttoaminimumandprovidesGroupmanagement,strategicdirection,

boundariesand

support,

as

well

as

providing

accountability

for

member

firms.

4. PositionedforGrowth

The Directors note their expectation of continued acquisition growth, organic growth and

operationalimprovementfrommemberfirmsintheperiodsahead,inparticularnoting:

TheCompanyhasgoodbusinesseswithstrongmarketpositionsandgrowthprospects.

The Company is successfully building a strong culture of likeminded people, with common

aspirationsforabovemarketgrowthandbusinessimprovement.

TheCompanysmemberfirmshavehighqualityandlongtermclientrelationshipswithpublicly

listed companies, midmarket businesses, government entities, SMEs and high net worth

individuals,whichprovidesasignificantelementofrecurringfeeincomefortheGroup.


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ACN120394194


12

4. PositionedforGrowth(continued)

The

Company

has

demonstrated

an

ability

to

achieve

strong,

consistent

and

above

marketrevenuegrowth.

Integratedisnowatop40Australianlawfirmbyfeeincome.

TheCompanywasnominatedthefastestgrowinglegalfirmbyfeeincomeinAustraliain2009

andsecondfastestgrowingin2010(Source:AustralasianLegalBusiness),andranked4thinthe

2011BRWMagazineFastStarters,and5thin2010.

Significant organic and acquisition growth opportunities exist for the Group and for member

firms.

The

Company

is

aiming

to

acquire

one

new

member

firm

and

a

number

of

smaller

tuckin

acquisitionsineach12monthperiod,whichwouldcontributeapproximately$10minannualised

revenue.

TheCompanyhasastrongbalancesheetandconservativeborrowing.

There is significant scope for business operational performance improvement in all member

firms,providinganopportunityforincreasedprofitabilityovertime.

Furthermore,anopportunityexistsforincreasedprofitabilitybyachievingincreasedscaleat

bothaGroupandmemberfirmlevel.

Ata

Group

level

this

means

securing

more

member

firms

to

share

the

fixed

overhead

burden

of

theCorporateoffice.

Andatamemberfirmlevel,thismeansachievingorganicandacquisitiongrowthtooptimisethe

useofexistingpremises,andtosharetheprofessionalmanagementandinfrastructurecosts

thatthesefirmsnowhaveinplace.

TheDirectorsbelievethatlongtermcompetitiveadvantagecanbeachievedbytheCompanyin

supportingmemberfirmsindevelopingscaletounderpinfuturegrowthandprofitability.

Significantly,thefutureprofitabilityoftheCompanyisunderpinnedbylongtermemployment

contracts, restraints and noncompetition arrangements with vendor Principals of member

firms.


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ACN120394194


13

5. Outlook

TheCompanys

priorities

for

the

period

ahead

remain

unchanged:

Workingwithexistingmemberfirmsforcontinuedgrowthanddevelopment.

Thisincludesorganicrevenuegrowthandcontinuedbusinessoperationalimprovement,witha

focusonbusinessleadershipandmanagement,workingcapitalmanagementandbestpractice

development.

ExtendingtheGroupsgeographiccoverageandservicestobuildscale.

TheDirectorsremainconfidentintheoutlookfortheCompanygiventhestrengthandunderlying

qualityof

its

member

firms,

the

significant

opportunity

for

organic

growth

and

improved

performanceinthesefirms,andthesignificantpotentialtogrowbyselectiveacquisitionaspartof

thestrategyofdevelopinganationalnetworkoflegalservicesbusinesses.

TheeffectivedeliveryoftheCompanysstatedstrategyofdevelopinganationalnetworkofleading

mediumsizedlawfirmswilltaketime. TheCompanyremainsfocusedonincrementallyand

selectivelyacquiringgoodbusinesseswithlikemindedpeopleandworkingwiththemtowards

qualityandsustainablegrowthandimprovement.

Consistentwiththisposition,theoutlookfortheGroupispositiveandtheDirectorsexpectthe

Companytoachieveearningspersharegrowthfor2011/12,providingthatreasonablebusiness

conditionscontinue

for

the

year.

TheHonJDawkins

Chairman

GFowler

ManagingDirector


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ACN120394194

DirectorsReport

14

Yourdirectorssubmittheirreportfortheyearended30June2011.

DIRECTORS

The names and details of the Companys directors in office during the financial year and until the

date of this report are as follows. Directors were in office for this entire period unless otherwise

stated.

Names,qualifications,experienceandspecialresponsibilities

TheHonJohnDawkins,AO,B.Ec(NonexecutiveChairman)

MrDawkinswasChairmanofLawCentralfromitsearlybeginningsinMarch2000untilMarch2006.

Hisother

board

appointments

include

Chairman

of

the

Archer

Exploration

Ltd,

TVET

Australia

Ltd

andSovereignGoldLtdandDirectorofM&CSaatchiDirectPtyLtd. Forover10years,until2005,he

served on the board of Sealcorp Holdings, now Asgard Wealth Solutions, and he is a former

chairmanofEldersRuralBankandRetailEnergyMarketCompanyLtd.

MrDawkinshasconsultedtoseverallargeAustralianandoverseascompanies,theWorldBankand

the OECD. Until his retirement from politics in 1994 he served as a Minister in the Federal

Governmentfor10yearsandintheHouseofRepresentativesfor18years.

He isagraduate inEconomicsfromtheUniversityofWesternAustralia,andhehasbeenawarded

honorary doctorates from The University of South Australia and the Queensland University of

Technology.

Duringthepastthreeyears,MrDawkinsservedasadirectorofthefollowinglistedcompanies:

MGMWirelessLtdappointed17August2010*

ArcherExplorationLtdappointed30April2010*

SovereignGoldCompanyLimitedappointed16September2010*

GeneticTechnologiesLtdappointed24November2004;resigned19November2010

*denotescurrentdirectorship

AnneTregonning,B.Com,FCA,

GAICD

(Non

executive

Director)

MsTregonninghasextensiveexperienceinfinanceandriskmanagementinbothpublicpracticeand

commerce. Senior positions previously held include General Manager Finance and Risk, Wealth

Management Division,St George Bank, Director Group Finance, Sealcorp Holdings (now ASGARD

WealthSolutions),andSeniorManagerCorporateBanking,BankWest.

Ms Tregonning is a nonexecutive director of Retail Energy Market Company Ltd and the Breast

Cancer Research Centre Western Australia. She is a past executive director of ASGARD Capital

ManagementLimited,apastStateChairmanoftheInstituteofCharteredAccountantsandmember

of itsNationalCouncil,andapastdirectorofotherpubliccompanyandnotforprofit/professional

organisations.


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ACN120394194

DirectorsReport(continued)

15

Ms Tregonning is a graduate of The University of Western Australia, a Fellow of The Institute of

CharteredAccountantsandgraduateoftheAustralianInstituteofCompanyDirectors.

MsTregonningdidnothaveanydirectorshipsinotherlistedcompaniesduringthepastthreeyears.

GraemeFowler,B.Bus,CPA,MAICD(ManagingDirectorandChiefExecutive)

Mr Fowler was previously Chief Executive Officer of listed accounting and financial services

consolidator WHK Group Limited. He brings specific experience in the successful consolidation of

professionalservicesfirms.Hespentover15yearsinseniormanagementroleswiththeBTFinancial

GroupincludingGroupChiefFinancialOfficer,ChiefExecutiveOfficerofBTFundsManagementNZ,

and Chief Executive Officer of BT Portfolio Services (including BT Wrap). Mr Fowler is also non

executivedirectorofCountplusLimited.

Mr Fowler is a business studies graduate of The University of Technology, Sydney and a Certified

PracticingAccountant.

Duringthepastthreeyears,MrFowlerservedasadirectorofthefollowinglistedcompany:

CountplusLimitedappointed19August2010*

*denotescurrentdirectorship

Beneficialinterestsinthesharesofthecompanyandrelatedbodiescorporate

Asatthedateofthisreport,thebeneficialinterestsofthedirectorsinthesharesofIntegratedLegal

HoldingsLimitedwere:

Numberof

OrdinaryShares

JDawkins 2,950,129

ATregonning 416,001

GFowler 4,860,613

COMPANYSECRETARY

JeanMarieRudd,B.Com,CA,GAICD

MrsRuddisalsotheChiefFinancialOfficer(CFO)oftheIntegratedLegalHoldingsLimitedgroupof

companies.

Mrs Rudd was previously the Western Australian Finance Director of national law firm, Minter

Ellison, bringing industryspecific experience to her roles with Integrated Legal Holdings Limited.

Mrs Rudd has over 20 years experience in CFO/Company Secretary roles including senior

managementroleswiththeHeytesburyGroupandThinkSmartLimited.

MrsRuddisagraduateofCurtinUniversity,Perth,aCharteredAccountantandagraduateofthe

AustralianInstituteofCompanyDirectors.


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ACN120394194


16

PRINCIPALACTIVITIES

Theprincipal

activity

of

the

entities

of

the

consolidated

Group

is

the

provision

of

legal

services

and

onlinelegaldocumentservicesinAustralia.

OPERATINGANDFINANCIALREVIEW

GroupOverview

AdetailedreviewoftheoperationsoftheGroupduringthefinancialyear,itsfinancialpositionand

businessstrategiesandprospectsforfuturefinancialyearsissetoutbelow.

OperatingResultsfortheYear

Consolidated operating revenues of $28,475,476 were 19% higher than the previous year which

reported $23,874,988 operating revenues. Revenue from ordinary activities increased due to a

combinationoforganicgrowthandtheacquisitionofWojtowiczKellyLegalinFebruary2011.

For the year ended 30 June 2011, the consolidated entity generated a net profit after tax of

$1,286,670comparedtotheyearended30June2010of$853,494,anincreaseof51%.

Earningspersharefortheyearwere1.41centspershare,comparedto1.18centspershareforthe

yearended30June2010,anincreaseof19%.

TheDirectorsconsiderthattheCompanyiswellplacedforthefuture,inparticularnoting:

TheCompanyhasgoodbusinesseswithstrongmarketpositionsandgrowthprospects.

The Company is successfully building a strong culture of likeminded people, with common

aspirationsforabovemarketgrowthandbusinessimprovement.

TheCompanyhasdemonstratedanabilitytoachievestrongandconsistentrevenuegrowth.

OrganicandacquisitiongrowthopportunitiesfortheGroupandformemberfirms.

TheCompanyhasastrongbalancesheetandavailablefundingforfurthergrowth.

Scopeforbusinessperformanceimprovementinallmemberfirms,providinganopportunityfor

increasedprofitabilityovertime.

In particular, an opportunity exists to increase profitability by achieving increased scale at both a

Groupandmemberfirmlevel.

AtaGrouplevelthismeanssecuringmorememberfirmstosharethefixedoverheadburdenofthe

Corporateoffice.

Andatamemberfirmlevel,thismeansachievingorganicandacquisitiongrowthtooptimisetheuse

ofexistingpremises,andtosharetheprofessionalmanagementandinfrastructurecoststhatthese

firmsnowhaveinplace.

The

Directors

believe

that

longterm

competitive

advantage

can

be

achieved

by

the

Company

supportingmemberfirmsindevelopingscaletounderpinfuturegrowthandprofitability.


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17

AfullercommentaryontheresultsforthereportingperiodiscontainedintheASXreleasedated18

August2011.

ShareholderReturns

TheCompanysreturntoshareholdersisasfollows:

Growth 2011 2010

Basicanddilutedprofitpershare(cents) 19% 1.41 1.18

PerformanceIndicators

Management

and

the

Board

monitor

the

Groups

overall

performance,

from

the

execution

of

its

strategic plan through to the performance of the Group against operating plans and financial

budgets.

The Board, together with management have identified key performance indicators (KPIs) that are

used to monitor performance. Directors receive the KPIs for review prior to each monthly Board

meetingallowingalldirectorstoactivelymonitortheGroupsperformance.

ReviewofFinancialCondition

LiquidityandCapitalResources

The statement of cash flows illustrates that there was a net cash inflow of $1,231,739 from

operatingactivitiesduringtheyear(2010:$1,448,161).

Cashflowsusedforinvestingactivitiesamountedto$1,188,744(2010:$802,129)ofwhich$209,596

related to the acquisition of plant and equipment (2010: $802,129) and $979,148 related to the

acquisitionofbusinessesduringtheyear(2010:nil).

Totalcashinflowsweresupplementedby$546,545(2010:$766,027)receivedtofinanceequipment

acquisitions and annual professional indemnity insurance premiums and $1,000,000 (2010:

$227,000)additionaldrawdownofbankfloatingbillfacilitiesearlyinthefinancialyear.

Finally, there was a cash outflow of $441,556 (2010: $131,122) for the payment of dividends and

paymentsforshareissueexpensesof$17,389(2010:$115,058).

ThenettangibleassetbackingoftheGroupwas5.23centspershare(2010:6.54cents)areduction

of20%overtheprioryear. ThisreductionisprimarilyduetotheacquisitionofWojtowiczKellyLegal

(refer note 29) in February 2011 which is not expected to add materially to profitability until the

2012financialyear.


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18

Assetandcapitalstructure

CONSOLIDATED2011 2010

$ $

Netassets 18,012,663 16,197,914

Less:Cashandcashequivalentsnetof

overdrafts (2,435,615) (1,948,949)

Totalcapitalemployed 15,577,048 14,248,965

The level of gearing in the Company is within acceptable limits set by the directors given the

implicationsofthebusinessacquisitionsandpaymentoftaxliabilitiesduringtheyear.

Shareissuesduringtheyear

TheCompanyhasissued10,679,662shares(2010:17,138,488shares)duringtheyear:

884,550sharestoemployeesundertheDeferredEmployeeSharePlan;

2,143,112 shares to shareholders under the dividend reinvestment plan for the 2011 interim

dividend(May2011);

1,800,000 shares to the vendors of The Argyle Partnership in final satisfaction of deferred

considerationpayable(September2010);

125,000sharesinpartsatisfactionof2010profitshareentitlements(December2010);and

5,727,000sharestovendorsofthelegalpracticeofWojtowiczKellyLegal(February2011).

RiskManagement

The Group takes a proactive approach to risk management. The Board is responsible forensuring

thatrisks,andalsoopportunities,areidentifiedonatimelybasisandthattheGroupsobjectivesand

activitiesarealignedwiththerisksandopportunitiesidentifiedbytheBoard.

The Board has established a separate Audit and Risk Management Committee. With respect to

recognisingandmanagingrisk,theCommitteeisresponsibleforensuringtheCompanyhasasound

system of risk oversight, management and internal control. This system is designed to identify,

analyse, action, monitor and report risks; including governance, strategic, operational and

compliancerisk;andinformtheBoardofmaterialchangestotheGroupsriskprofile.

The Board has a number of mechanisms in place to ensure that managements objectives and

activitiesarealignedwiththerisksidentifiedbytheBoard. Theseincludethefollowing:

Boardapprovalofastrategicplan,whichencompassestheGroupsvision,mission,strategies,

goalsandpriorities,designedtomeetstakeholdersneedsandmanagebusinessrisk;

Implementation of Board approved budget and Board monitoring of progress against budget,

includingtheestablishmentandmonitoringoffinancialKPIs;and

Theestablishmentofcommitteestoreportonspecificbusinessrisks.


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SIGNIFICANTCHANGESINTHESTATEOFAFFAIRS

The

acquisition

of

Wojtowicz

Kelly

Legal

on

1

February

2011

has

further

strengthened

the

legal

services division of the Group. Wojtowicz Kelly Legal (incorporating Civic Legal, the Simpson Kelly

Group,GibsonTovey&Associates,AllPropertyConveyancingandJanSimpsonSettlements)merged

with existing member firm Tax Lawyers Australia Pty Ltd trading as Brett Davies Lawyers and the

mergedbusinessnowtradesasCivicLegal.

Wojtowicz Kelly Legal is an established and well regarded Perth CBD based commercial law firm

delivering services to commercial enterprises and private individuals predominantly in Western

Australia,butalsotoenterprisesbasedinSoutheastAsiawithAustralianinterests. Thebusinesswas

establishedin1994andhasdevelopedarangeoflegalservicesincludingcorporateandcommercial,

property,litigation,family,migrationadvice,localgovernmentlawandsettlements(conveyancing).

TheCivicLegalbusinessalsohasanofficeinRockingham,southofPerth,andarepresentativeoffice

inSingapore.

Therehavebeennoothersignificantchanges inthestateofaffairsduringtheyearended30June

2011.

SIGNIFICANTEVENTSAFTERTHEREPORTINGDATE

AcquisitionoflegalpracticeofPLNLawyers

On 1 August 2011 the Company acquired the legal practice of PLN Lawyers (PLN) under tuckin

arrangementswiththeexistingmemberfirmArgyleLawyers.

PLNisanestablishedandhighlyregardedSydneybasedcommerciallawfirm.PLNsmissionistobe

the leading provider of legal and business advisory services to corporations and international

institutions operating in the Pacific region. PLNs clients include Australian, Asian, American and

European based companies and financial institutions with business interests in the AsiaPacific

region.

PLNprovidesarangeoflegalservicesincludingCorporateandFinancialServices,TravelandTourism,

Aviation

Industry

services,

Infrastructure

and

Development,

Insurance,

Insolvency,

Mergers,AcquisitionsandIPO's,MiningandPetroleum,TelecommunicationsandInformationTechnology.

PLN will tuckin with existing member firm Argyle, with the combined firm having 6 Principals,

approximately40staffandannualfeeincomeofmorethan$10m.

Furtherdetailsoftheacquisitionareprovidedinnote33andintheASXreleaseon1August2011.

DeclarationofFinalDividend

The Directors have declared a fully franked final dividend of 0.6 cents. The dividend will have a

recorddate

of

14

October

2011

and

a

payment

date

of

4

November

2011.

There

will

be

a

dividend

reinvestmentplanavailable.


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20

RenewalofBankFundingFacilities

Afterbalance

date

the

Company

renegotiated

bank

funding

facilities

which

were

due

to

expire

in

September2011.

As at 30 June 2011, the Company had $3.05m in bank funding facilities available of which $1.95m

was drawn down. After balance date, the facilities were renegotiated with an increased limit of

$3.50m,withrenewaldatesofSeptember2012andSeptember2013.

Furtherdetailsareprovidedinnote33.

LIKELYDEVELOPMENTSANDEXPECTEDRESULTS

Integrated Legal Holdings Limited will continue to seek growth in earnings per share through the

developmentandgrowthofexistingmemberfirmsandtheacquisitionofadditionalmemberfirms

throughoutAustralia.

ENVIRONMENTALREGULATION

The Groups operations are not subject to any significant environmental, Commonwealth or State,

regulationsorlaws.

INDEMNIFICATIONANDINSURANCEOFDIRECTORSANDOFFICERS

Each of the directors and secretary of the Company has entered into a deed with the Company

wherebytheCompanyhasprovidedcertaincontractualrightsofaccesstobooksandrecordsofthe

Company to those directors and secretary and to effect and maintain insurance in respect of the

directorsandofficersliabilityandprovidecertainindemnitiestoeachofthedirectors,totheextent

permittedbysection199BoftheCorporationsAct2001.

The Company has put in place Prospectus Insurance and Directors and Officers Liability Insurance.

The contract prohibits the disclosure of the nature of the liability and/or the amount of the

premium.

DIRECTORSMEETINGS

Thenumberofmeetingsofdirectors(includingmeetingsofcommitteesofdirectors)heldduringthe

yearandthenumberofmeetingsattendedbyeachdirectorwasasfollows:

Directors

Meetings

AuditandRiskManagement

CommitteeMeetings

Eligibleto

attend Attended

Eligibleto

attend Attended

JDawkins 11 10 8 7

ATregonning 11 11 8 8

GFowler 11 11 8 8


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21

Committeemembership

Asat

the

date

of

this

report,

the

Company

had

an

Audit

and

Risk

Management

Committee

of

the

BoardofDirectors.

TheAuditandRiskManagementCommitteecomprisesallmembersoftheBoardofdirectorsandis

chairedbyMsTregonning.

AUDITORINDEPENDENCEANDNONAUDITSERVICES

Acopyoftheauditors independencedeclarationreceivedbythedirectors inrelationtotheaudit

fortheyearisprovidedwiththisreportonpage39.

NONAUDITSERVICES

Nonauditserviceswereprovidedbytheentitysauditor,Ernst&Young. Thedirectorsaresatisfied

thattheprovisionofnonauditservicesiscompatiblewiththegeneralstandardofindependencefor

auditors imposed by theCorporationsAct2001. The nature and scope of each type of nonaudit

serviceprovidedmeansthatauditorindependencewasnotcompromised.

Ernst&Youngreceivedorareduetoreceivethefollowingamountsfortheprovisionofnonaudit

services:

CONSOLIDATED

2011 2010

$ $

Taxcompliance 17,500 31,453

Taxationservices 5,500

17,500 36,953


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22

REMUNERATIONREPORT(audited)

Thisremuneration

report

for

the

year

ended

30

June

2011

outlines

the

remuneration

arrangements

oftheCompanyandtheGroup inaccordancewiththerequirementsoftheCorporationsAct2001

anditsRegulations. Thisinformationhasbeenauditedasrequiredbysection308(3C)oftheAct.

The remuneration report details the remuneration arrangements for key management personnel

(KMP) of the Group who are defined as those persons having authority and responsibility for

planning, directing and controlling the major activities of the Company and the Group, directly or

indirectly, including any director (whether executive or otherwise) of the parent company, and

includesthefiveexecutivesintheParentandtheGroupreceivingthehighestremuneration.

For the purposes of this report, the term executive encompasses the Chief Executive and senior

executivesof

the

Parent

and

the

Group.

Theremunerationreportispresentedunderthefollowingsections:

1.

Individualkeymanagementpersonneldisclosures

2. Remunerationataglance

3. Boardoversightofremuneration

4.

Nonexecutivedirectorremunerationarrangements

5.

Executiveremunerationarrangements

6. Companyperformanceandthelinktoremuneration

7. Executivecontractualarrangements

8.

Equityinstruments

disclosures

1. Individualkeymanagementpersonneldisclosures

DetailsofKMP including the topfive remuneratedexecutivesof theParent and the Groupare set

outbelow:

i) Directors

JDawkins NonExecutiveChairman(nonexecutive)

ATregonning NonExecutiveDirector

GFowler ManagingDirectorandChiefExecutive

ii) Executives

BTaylor ManagingPrincipal,TalbotOlivier

PBobbin ManagingPrincipal,ArgyleLawyers

MDouglass(1)

Principal,ArgyleLawyers(to31August2011)

ManagingPrincipal,SignetLawyers(from1September2011)

AIreland Principal,ArgyleLawyers

BDavies ManagingPrincipal,BrettDaviesLawyers(to31January2011)

AQuahe ManagingPrincipal,CivicLegal(from1February2011)

JMRudd ChiefFinancialOfficerandCompanySecretary

(1) MarkDouglass,PrincipalofArgyleLawyersto31August2011,becametheManagingPrincipalof

specialist taxation litigation and advice legal firm known as Signet Lawyers which commenced

tradingon1September2011.


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REMUNERATIONREPORT(audited)(continued)

23

There

were

no

other

changes

to

KMP

after

the

reporting

date

and

before

the

date

the

financial

reportwasauthorisedforissue.

2.

Remunerationataglance

IntegratedLegalHoldingsLimitedsremunerationstrategyisdesignedtoattract,motivateandretain

employees and nonexecutive directors (NEDs) by identifying and rewarding high performers and

recognisingthecontributionofeachemployeetothecontinuedgrowthandsuccessoftheGroup.

The remuneration policy is to position total employment cost close to the median of its defined

talentmarket

to

ensure

a

competitive

offering.

Forthe2011performanceperiod,100%oftheshorttermincentivepaymentisbasedonattainment

of a financial measure (net profit before tax or earnings per share). In recognition of the

performanceoftheGroupandtheexecutivesduringtheyear,atotalof$704,234 incashbonuses

waspaidtoGroupKMPsduringthe2011financialyear.

Long term incentive awards consisting of shares that vest on attainment of a predetermined

performancegoalareawardedtoselectedexecutives. TheCompanyusesearningspershareasthe

performancemeasurefortheshareawards. Nosharesvestednorwereawardedor issuedduring

the2011financialyear.

The remuneration of NEDs of the Company consists only of directors fees and committee fees.

Directorandcommitteefeeswereindexedforinflationovertheprioryearfees.

3.

Boardoversightofremuneration

Remunerationassessmentandapprovalprocess

TheBoardofDirectorsoftheCompany isresponsiblefordeterminingandreviewingremuneration

arrangementsfortheBoardandexecutives.

TheBoardwillassesstheappropriatenessofthenatureandamountofremunerationofNEDsand

executives on a periodic basis by reference to relevant employment market conditions, with the

overallobjectiveofensuringmaximumstakeholderbenefitfromtheretentionofahighperforming

directorandexecutiveteam.


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24

Remunerationstrategy

IntegratedLegalHoldingsLimitedsremunerationstrategyisdesignedtoattract,motivateandretain

employeesandNEDsbyidentifyingandrewardinghighperformersandrecognisingthecontribution

ofeachemployeetothecontinuedgrowthandsuccessoftheGroup.

To this end, key objectives of the Companys reward framework are to ensure that remuneration

practices:

arealignedtothegroupsbusinessstrategy;

offercompetitiveremunerationbenchmarkedagainsttheexternalmarket;

providea

strong

linkage

between

individual

and

group

performance

and

rewards;

aligntheinterestsofexecutiveswithshareholdersthroughmeasurementofshareholderreturn;

haveaportionofexecutiveremunerationatrisk;and

establishappropriate,demandingperformancehurdlesforvariableexecutiveremuneration.

Remunerationstructure

In accordance with best practice corporate governance, the structure of NED and executive

remunerationisseparateanddistinct.

4.

Nonexecutivedirectorremunerationarrangements

Remunerationpolicy

TheBoardseekstosetaggregateremunerationatalevelthatprovidestheCompanywiththeability

to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to

shareholders.

The amount of aggregate remuneration sought to be approved by shareholders and the fee

structure is reviewed annually against inflation and fees paid to NEDs of comparable companies.

TheBoardmayalsoconsideradvicefromexternalconsultantswhenundertakingtheannualreview

process.

The Companys Constitution and the ASX Listing Rules specify that the aggregate remuneration of

NEDs shall be determined from time to time by a general meeting. The current aggregate

remuneration level for nonexecutive directors, as approved by shareholders, is $250,000 (2010:

$250,000)perannum.

TheBoardwillnotseekanyincreasefortheNEDspoolatthe2011AGM.


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25

Structure

The remuneration of NEDs consists of directors fees and committee fees. NEDs do not receive

retirementbenefits,nordotheyparticipateinanyincentiveprograms.

EachNEDreceivesabasefeeof$46,597(2010:$45,000)forbeingbothadirectoroftheCompany

and member of the Audit and Risk Management Committee. An additional fee of $46,597 (2010:

$45,000)isalsopaidiftheDirectoristheChairmanoftheBoardand$18,639(2010:$18,000)ifthe

directorisaChairmanoftheAuditandRiskManagementCommittee.

TheremunerationofNEDsforthefinancialyearisdetailedintable1onpage36ofthisreport.

5.

Executiveremunerationarrangements

Remunerationlevelsandmix

TheGroupaimstorewardexecutiveswithalevelandmixofremunerationcommensuratewiththeir

positionandresponsibilitieswithintheGroupsoasto:

Reward executives for Group, subsidiary and individual performance against targets set by

referencetoappropriatebenchmarks;

Alignthe

interests

of

executives

with

those

of

shareholders;

and

Ensuretotalremunerationiscompetitivebymarketstandards.

Structure

In the 2011 financial year, the executive remuneration framework consisted of the following

components:

Fixedremuneration

Variableremuneration:

o

Shorttermincentive(STI)

o

Longterm

incentive

(LTI)


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26

The

table

below

illustrates

the

structure

of

Integrated

Legal

Holdings

Limiteds

executive

remunerationarrangements:

Remuneration

ComponentVehicle Purpose

Linkto

Performance

Fixedremuneration Comprisesbasesalary,

superannuation

contributionsand

otherbenefits

Setwithreferencetorole,

marketandexperience.

Executivesaregiventhe

opportunitytoreceivetheir

fixedremunerationina

varietyofformsincluding

cashand

fringe

benefits

suchasparking.Itis

intendedthatthemanner

ofpaymentchosenwillbe

optimalfortherecipient

withoutcreatingunduecost

fortheGroup.

Remunerationlevelis

determinedannually

andisbasedona

financialscalelinked

toindividual

performanceinthe

previousfinancial

year.

STIcomponent Awardsaremadein

theformofcash

paymentsorshare

basedpayments

(equitysettled).

Rewardsexecutivesfor

theircontributionto

achievementofGroupand

businessunitoutcomes,as

wellas

individual

KPIs.

Linkedtofinancial

measuresincluding

earningspershareand

achievementof

profitabilitytargets.

LTIcomponent Awardsaremadein

theformofcash

paymentsorshare

basedpayments

(equitysettled).

Rewardsexecutivesfor

theircontributiontothe

creationofshareholder

valueoverthelongerterm.

Earningspershareis

thekeyfinancial

metric.

Fixedremuneration

FixedremunerationisreviewedannuallybytheBoard.TheprocessconsistsofareviewofCompany,

subsidiaryandindividualperformance,relevantcomparativeremunerationexternallyandinternally

and,where

appropriate,

external

advice

on

policies

and

practices.

The

Board

has

access

to

external

adviceindependentofmanagement,whereappropriate.

Thefixedremunerationcomponentofexecutivesisdetailedintable1onpage36.

Variableremuneration shorttermincentive(STI)

TheobjectiveoftheSTIprogramistolinktheachievementoftheGroupsoperationaltargetswith

the remuneration received by the executives charged with meeting those targets. The total

potentialSTIavailableissetatalevelsoastoprovidesufficientincentivetotheexecutivetoachieve

theoperationaltargetsandsuchthatthecosttotheGroupisreasonableinthecircumstances.


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27

STIawards

vest

at

the

end

of

the

period

over

which

the

performance

targets

are

measured,

and

are

forfeitedifemploymentisterminatedbeforethevestingdate. However,theBoardhasdiscretionto

approveproratapaymentsuptotheterminationdate,takingintoaccountthecircumstances.

ManagingDirectorandChiefExecutive

The Managing Director and Chief Executive is entitled to a maximum performance bonus of

$130,000 (2010:$160,000)payable in cashorshares at the discretionof theBoard, subject tothe

achievementofspecificearningspershare(EPS)performancetargets,calculatedbasedonearnings

beforeperformancebonusexpenserecognisedforthe2011financialyear. Thetargetsforthe2011

financialyearwere:

ThemaximumperformancebonusispayablewheretheGroupachieves25%EPSgrowth.

WheretheGroupachievesbetween15%and25%EPSgrowth,theamountpayableis40%ofthe

maximumbonus,plusanadditional6%(ofmaximumbonus)forevery1%inexcessof15%EPS

growth,toamaximumof100%bonusat25%EPSgrowth.

Wherethegroupachievesbetween10%and15%EPSgrowth,theamountpayableis20%ofthe



Where

the

Group

achieves

less

than

10%

EPS

growth

for

the

2011

financial

year,

any

bonus

payableisatthediscretionoftheBoard.

These targets are measured using financial reporting information and reviewed by the Board. If

performancetargetsarenotachieved,theperformancebonusmaystillbepaidatthediscretionof

theBoard,takingintoaccountthecircumstances.

MemberFirmPrincipals

Actual STI payments are granted to subsidiary member firms dependent on the extent to which

specific performance hurdles are met. The STI payments are calculated as a percentage of an

amount

by

which

profitability

of

a

subsidiary

exceeds

a

predetermined

profit

hurdle

for

that

subsidiary.

ProfithurdlesareapprovedbytheBoardatthetimeofacquisitionofamemberfirm.

The STI payment for a subsidiary is then allocated between Principals of that subsidiary based on

predeterminedKPIs,includingfeeincomeattributabletoeachPrincipal.

STI payments may be paid as a cash bonus, up to a maximum of 40% of the accrued bonus, at

quarterly intervals during the financial year subject to satisfaction of member firm KPI targets.

Accruedbonusesthatremainunpaidatyearendaredeliveredasacashbonusorshareswithin10

daysafter

the

release

of

the

audited

financial

statements

each

financial

year.


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28

ChiefFinancial

Officer

and

Company

Secretary

Forthesixmonthperiodended31August2010,theChiefFinancialOfficerandCompanySecretary

wasentitledtoamaximumperformancebonusof$7,000. Ifachievementofperformancetargetsis

not successful,a lesser amount may bepayable atthediscretion of the Managing Director, taking

intoaccounttheindividualcircumstancescontributingtononachievementofthosetargets.

Performance targets are achieved upon satisfaction of key deliverables involving the realisation of

budgetednetprofitbeforetaxandoperatingcashflows.

From1September2010,theChiefFinancialOfficerandCompanySecretaryisentitledtoamaximum

performancebonus

of

$17,600,

payable

in

cash

or

shares

at

the

discretion

of

the

Board,

subject

to

the achievement of specific earnings per share (EPS) performance targets, calculated based on

earningsbeforeperformancebonusexpenserecognisedforthe2011financialyear. Thetargetsfor

the2011financialyearwere:

ThemaximumperformancebonusispayablewheretheGroupachieves25%EPSgrowth.

WheretheGroupachievesbetween15%and25%EPSgrowth,theamountpayableis40%ofthe



Wherethe

group

achieves

between

10%

and

15%

EPS

growth,

the

amount

payable

is

20%

of

the



Where the Group achieves less than 10% EPS growth for the 2011 financial year, any bonus

payableisatthediscretionoftheBoard.

These targets are measured using financial reporting information and reviewed by the Board. If

performancetargetsarenotachieved,theperformancebonusmaystillbepaidatthediscretionof

theBoard,takingintoaccountthecircumstances.

STIawards

for

2011


AfterconsiderationofperformanceagainstKPIs,theBoarddeterminedthattheamounttobepaid

to the Managing Director and Chief Executive would be $130,000 (2010: $64,000). Payment was

accruedat 30June2011 and paid in cash inSeptember2011.ThemaximumSTI bonus achievable

was$130,000andtheminimumwasnil.

TherewerenoalterationstotheManagingDirectorsSTIbonusplanduringtheyear.


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29

MemberFirm

Principals

The Managing Director reviews the STI bonus payments for a subsidiary for subsequent allocation

between Principals of that subsidiary based on predetermined key performance indicators, which

may include fee income attributable to each Principal,which is measured using financial reporting

information.

ThemaximumSTIcashbonusiscalculatedasapercentageofanamountbywhichprofitabilityofa

subsidiaryexceedsapredeterminedprofithurdleforthatsubsidiary. TheminimumSTIcashbonus

payableisnil.

Duringthe

2011

financial

year,

the

bonus

achieved

and

vested

for

Mr

Taylor,

Managing

Principal

of

Talbot Olivier, was $74,846 (2010: $44,103), forMr Bobbin, Managing Principal of Argyle Lawyers,

was$238,394(2010:$300,000),forMrDouglass,PrincipalofArgyleLawyers,was$238,394(2010:

$400,000), for Mr Ireland, Principal of Argyle Lawyers, was nil (2010: $50,000), for Mr Davies,

Managing Principal of Brett Davies Lawyers (to 31 January 2011), was nil (2010: nil) and for Mr

Quahe,ManagingPrincipalofCivicLegal(from1February2011),wasnil(2010:n/a).

The bonuses achieved and vested during 2011 will be paid within 10 days after the release of the

2011AnnualReport,subjecttoachievementofKPItargetsinrelationtofirmdebtormanagement.

TherehavebeennoalterationstotheSTIbonusplanduringtheyear.

ChiefFinancialOfficerandCompanySecretary

TheManagingDirectorapprovedtheSTIbonuspaymentforthesixmonthsended31August2010.

Themaximumcashbonusis$7,000andtheminimumisnil.

$5,000(2010:$5,400)ofSTIawardsinrespectofthesixmonthperiodended31August2010vested

during the 2011 financial year with 29% (2010: 10%) forfeited. Board discretion was given to the

payment of a cash bonus given that performance conditions were not fully met. This was paid in

cashinOctober2010.

Under

the

new

STI

bonus

arrangements,

commencing

from

1

September

2010

and

afterconsiderationofperformanceagainstKPIs,theBoarddeterminedthattheamounttobepaidtothe

Chief Financial Officer and Company Secretary would be $17,600 (2010: $10,400). Payment was

accruedat30June2011andpaid incash inSeptember2011. ThemaximumSTIbonusachievable

was$17,600andtheminimumwasnil.

Other than the new arrangements from 1 September 2010 noted above, there were no other

alterationstotheChiefFinancialOfficerandCompanySecretarysSTIbonusplanduringtheyear.


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30

Variableremuneration

long

term

incentives

(LTI)


TheLTIbenefitsaredeliveredonadiscretionarybasisbytheBoardintheformofordinarysharesin

theCompanyundertheDeferred EmployeesSharePlan. Suchgrantsareonlymadeto executives

who are able to influence the generation of shareholder wealth and thus have an impact on the

Groupsperformanceagainsttherelevantlongtermperformancehurdle.

NosharesweregrantedtotheChiefFinancialOfficerandCompanySecretaryduringtheyear(2010:

40,000shares).

Sharesissuedinprioryearswillvestinstagesduringthethreeyearperiodfromissuedatefollowingthesuccessfulachievementoftheperformancecriteriaspecifiedbelow,andprovidedthattheChief

Financial Officer and Company Secretary remains in the employment of the Company for each

vestingperiod. ShouldtheChiefFinancialOfficerandCompanySecretaryceaseemploymentprior

tothisdate,unvestedshareswillbeforfeited.

Performancecriteriaattachedtothesharesareasfollows:

100% of shares will vest if cumulative growth in the Companys earnings per share over the

threeyeartermis45%ormore.

Shareswill

commence

vesting

after

achieving

30%

growth

in

the

Companys

earnings

per

share.

50% of shares will vest at 30% growth in earnings per share, with an additional 5% of shares

vestingforevery1.5%ofearningspersharegrowthabove30%.

Ifperformancetargetsarenotachieved,thesharesmaystillvestatthediscretionoftheBoard,

takingintoaccountthecircumstances.

Performance criteria will be measured using financial reporting information. At 30 June 2011, no

sharesundertheLTIplanhavevested(2010:nil)andnonewereforfeited(2010:nil).

Executivesharetradingpolicy

TheCompany

has

in

place

a

share

trading

policy

which

imposes

trading

restrictions

on

officers

and

employeesoftheCompanyanditsrelatedentitiesthatareconsideredtobeinpossessionofinside

information.

Executives and directors are prohibited from using derivatives or hedge instruments or otherwise

entering intotransactions(includingmargin loans)thatoperateorare intendedtooperateto limit

theeconomicriskofsecurityholdingsovervestedorunvestedshares intheCompanywithoutthe

writtenpermissionoftheBoard.

ThisismonitoredbytheCompanySecretaryonamonthlybasisthroughreviewofstatementsfrom

theshareregistryserviceprovider,ComputershareInvestorServicesPtyLimited.

Furthermore, executives and directors are required to declare their intention totrade in shares totheCompanySecretary,whichisthenpresentedtotheBoard.


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31

6.

Companyperformanceandthelinktoremuneration

IntegratedLegalHoldingsLimitedsremunerationpolicyaimstoconnecttheremunerationreceived

byexecutiveswithearningsandthecreationofshareholderwealth.

Group performance is reflected in the movement of the Groups EPS over time. The graph below

showsIntegratedLegalHoldingsLimitedsEPShistorysinceincorporationinJune2006:

*Fortheperiodfromincorporationon26June2006to30June2007

The2007EPSresultof65.50wasaffectedbythevaluationofsharesissuedtofoundationpartners

and supporters at a deemed value of 50 cents per share prior to listing of the Company and

acquisitionoflegalpractices.

In the 2008 financial year, the EPS was positively impacted through the acquisition of four legal

practicesandaninformationtechnologybusiness.

Inthe2009financialyearanumberoffactorsinfluencedthereductionofEPS. Corporateexpenses

increasedwith

the

full

year

effect

of

the

costs

of

a

Managing

Director

and

Chief

Executive

and

Chief

Financial Officer and Company Secretary, the foundation member firms required additional

investment to take advantage of the growth opportunities available to them, the prevailing

economicconditions negativelyaffectedrevenues, andthedecisiontowriteoff anumberofaged

debtorbalanceswhichhadbecomeunrecoverableasaresultoftheeconomicenvironment.

The increase in EPS during the 2010 financial year represented the full year effect of business

acquisitionsintheprioryearandnormalisedtradingactivitiesacrosstheGroupandintheCorporate

office.

Inthe2011financialyear,EPScontinuedtobestrongwitha19%increaseovertheprioryear. The

increasewas

driven

by

growth

in

business

performance

(51%

increase

in

net

profit

after

tax)

and

improvementinbestpracticestosupportimprovedmarginsandcostefficiencies.

(65.50)

2.66 0.89 1.18 1.41

70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00

10.00

2007* 2008 2009 2010 2011

EPS

(cents/share)

Year


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32

TheCompany

has

good

businesses

with

strong

market

positions

and

growth

prospects.

The directors believe that the business model remains strong and the company is on target to

achieveitsobjectives.

ThetablebelowsummarisestheconsequenceoftheGroupsperformanceonshareholdervaluefor

the financial year and the previous four financial years in the form of changes in share price and

returnonequity(inaccordancewiththerequirementsoftheCorporationsAct2001):

Financialyearended30June 2007 2008 2009 2010 2011

Closingshareprice

centspershareasat30June

50.0* 11.0 14.5 10.0 12.0

Dividendspershare(cents) 0.0 2.2 0.00 0.75 0.90

Returnonequity 0% 20% 0% 8% 8%

*The2007sharepricehadadeemedvalueof50centspersharepriortolistingoftheCompanyandacquisitionoflegal

practices.

7. Executivecontractualarrangements


ThereisanemploymentcontractinplacebetweenMrFowlerandIntegratedLegalHoldingsLimited

for Mr Fowlers appointment as Managing Director and Chief Executive of the Company. The

contractcommencedon28April2008andcontinuesindefinitelyunlessterminatedaccordingtothe

provisionsofthecontract.

Mr Fowler receives fixed remuneration of $325,000 (2010: $272,500) per annum (inclusive of

superannuation).

Underthetermsofthecontract,MrFowlersdutiesinclude,butarenotlimitedto:

ImplementingthebusinessplanasdeterminedbytheCompany;

Carrying

out

such

lawful

directions

as

given

by

the

Company;

and

Expandinganddevelopingthebusiness.

TheagreementmaybeterminatedwithoutnoticebyIntegratedLegalHoldingsLimitedif:

MrFowlercommitsaseriousbreachoftheagreement;

MrFowlercommitsanyactthatamountstoarepudiationoftheagreement;

MrFowlerengagesinseriousorwilfulmisconduct;or

Itispermittedforanyreasonunderrelevantlegislation.

The agreement may also be terminated by either party with six months notice in writing of

termination. Inlieuofnotice,MrFowlerwouldbeentitledtopaymentequivalenttosixmonthsof

hissalary

at

the

time

notice

is

given.


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34

MrTaylor

is

also

subject

to

strict

solicitation

and

competition

restraints

for

a

period

of

12

months

followingtermination.

Inlieuofnotice,MrTaylorwouldbeentitledtopaymentequivalenttosixmonthsofhissalaryatthe

timenoticeisgiven.

PBobbinManagingPrincipal,ArgyleLawyers

AIrelandandMDouglassPrincipals,ArgyleLawyers

Messrs Bobbin, Ireland and Douglass are employed under an initial four year term contract and

continue indefinitely unless terminated by either party with six months notice in writing of

termination.

Messrs Bobbin, Ireland and Douglass are paid a salary of $422,300 per annum (inclusive of

superannuation) (2010: $410,000) and potentially a bonus paid as an additional salary (the bonus

payment is calculated at a share of the Argyle Lawyers bonus pool, being a percentage of the

amount by which the audited net profit before tax of the Principals law firm exceeds a pre

determinedprofithurdle).

The employment contracts may be terminated without notice if the employees commit a serious

breachofanyprovisionoftheircontract,areunabletoorareprohibitedfromholdinga licenseto

practicelaw,commitsanyactthatamountstorepudiationofthecontractorengagesinseriousand

wilfulmisconduct.

MessrsBobbin,IrelandandDouglassarealsosubjecttostrictsolicitationandcompetitionrestraints

foraperiodof12monthsfollowingtermination.

Inlieuofnotice,MessrsBobbin,IrelandandDouglasswouldbeentitledtopaymentequivalenttosix

monthsoftheirsalaryatthetimenoticeisgiven.

AQuaheManagingPrincipal,CivicLegal

Mr Quahe is employed under an initial four year term contract and continues indefinitely unless

terminatedby

either

party

with

six

months

notice

in

writing

of

termination.

Mr Quahe is paid a salary of $225,000 per annum (inclusive of superannuation) (2010: nil) and

potentiallyabonuspaidasanadditionalsalary(thebonuspayment iscalculatedasashareofthe

CivicLegalbonuspool,beingapercentageoftheamountbywhichtheauditednetprofitbeforetax

ofthePrincipalslawfirmexceedsapredeterminedprofithurdle).

The employment contract may be terminated without notice if the employee commits a serious

breach of any provision of their contract, is unable to or is prohibited from holding a license to

practicelaw,commitsanyactthatamountstorepudiationofthecontractorengagesinseriousand

wilfulmisconduct.


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ACN120394194



35

MrQuahe

is

also

subject

to

strict

solicitation

and

competition

restraints

for

a

period

of

12

months

followingtermination.

In lieuofnotice,MrQuahewouldbeentitledtopaymentequivalenttosixmonthsofhissalaryat

thetimenoticeisgiven.


TheChiefFinancialOfficerandCompanySecretaryhasastandardcontract.MrsRuddreceivesfixed

remunerationof$176,000perannum(inclusiveofsuperannuation)(2010:$160,000).

TheCompany

may

terminate

the

employment

agreement

by

providing

one

month

written

notice

or

providingpaymentinlieuofthenoticeperiod(basedonthefixedcomponentofremuneration).The

Companymayterminatethecontractatanytimewithoutnoticeifseriousmisconducthasoccurred.

Whereterminationwithcauseoccurs,theexecutiveisonlyentitledtothatportionofremuneration

thatisfixed,andonlyuptothedateoftermination.

MrsRuddscontractcontainsstandardobligationstoperformthedutiesofanemployee.

In lieuofnotice,MrsRuddwouldbeentitledtopaymentequivalenttoonemonthofhersalaryat

thetimenoticeisgiven.

8.

Equityinstrumentsdisclosures

Unissuedshares

TheCompanyhasnotissuedanyoptionsduringtheyear.


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ACN120394194



Remunerationofkeymanagementpersonnel(KMP)andthefivehighestpaidexecutivesoftheCompanyandtheGroupTable1:Remunerationfortheyearended30June2011

Shortterm PostEmployment Longterm

Salary&

Fees

Cash

Bonus

Non

monetary

benefits Superannuation

LongService

benefits1

Other

Benefits

$ $ $ $ $ $

Nonexecutivedirectors

JDawkins 62,662 30,000

ATregonning 42,168 22,696

Subtotalnonexecutivedirectors 104,830 52,696

Executivedirectors

GFowler1 305,850 130,000 19,150 3,218 31,5

Subtotalexecutivedirectors 305,850 130,000 19,150 3,218 31,5

Otherkeymanagementpersonnel

BTaylor2 424,447 74,846 15,199 5,849

PBobbin2 372,299 238,394 50,000 2,493

MDouglass2 373,118 238,394 50,000 2,244

AIreland 372,299 50,000 2,493

AQuahe3 49,326 45,000

BDavies4 122,324 11,009 2,146

JMRudd2 159,021 22,600 14,312 1,990

SubtotalotherKMP 1,872,834 574,234 235,520 17,215

Total 2,283,514 704,234 307,366 20,433 31,5

1 RelatestotheinterestfreecomponentofloanstoKMP(note27c)).

2Cashbonusesof$699,234accruedasat30June2011werepaidinthe2012financialyear. Afurther$5,000incashbonusesrelatingtotheyearended30June2011wa

3 MrQuahebecameaGroupexecutivefrom1February2011.

4 MrDaviesceasedtobeaGroupexecutiveon31January2011.


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Remunerationofkeymanagementpersonnel(KMP)andthefivehighestpaidexecutivesoftheCompanyandtheGroupTable2:Remunerationfortheperiodended30June2010

Shortterm

Post

Employment Longterm

Salary&

Fees

Cash

Bonus

Nonmonetary

benefits Superannuation

LongService

benefits

O

Be

$ $ $ $ $

Nonexecutivedirectors

JDawkins 67,000 30,000

ATregonning 42,376 24,999

Subtotalnonexecutivedirectors 109,376 54,999

Executivedirectors

GFowler1 270,833 64,000 24,375 1,372 1

Subtotalexecutivedirectors 270,833 64,000 24,375 1,372 1

Otherkeymanagementpersonnel

BTaylor2 385,539 44,103 14,461 5,353

PBobbin2 360,000 300,000 49,999 665

MDouglass2,3

370,000 400,000 49,999 640

AIreland2,3

360,000 50,000 49,999 665

BDavies 129,969 11,697

JMRudd2 157,030 5,400 14,312 858

SubtotalotherKMP 1,767,026 799,503

190,467 8,181

Total 2,147,235 863,503 269,841 9,553 1

1 RelatestotheinterestfreecomponentofloanstoKMP(note27(c)).

2Cashbonusesof$841,440accruedasat30June2010werepaidinthe2011financialyear. Afurther$12,063incashbonusesrelatingtotheyearended30June2010waspaidinthe2010fina

3MrDouglassandMrIrelandbecameGroupexecutivesfrom1July2009.


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40/122

Liability limited by a scheme approved

under Professional Standards LegislationGHM:MJ:ILH:063

Auditors Independence Declaration to the Directors of Integrated Legal

Holdings Limited

In relation to our audit of the financial report of Integrated Legal Holdings Limited for the financial year

ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of the

auditor independence requirements of the Corporations Act 2001or any applicable code of professional

conduct.

Ernst & Young

G H Meyerowitz

Partner

28 September 2011


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ACN120394194

CorporateGovernanceStatement

40

The Board of directors of Integrated Legal Holdings Limited is responsible for the corporate

governance oftheGrouphaving regardtotheASX CorporateGovernance Council(CGC) published

guidelinesas

well

as

its

corporate

governance

principals

and

recommendations.

The

Board

guides

and monitors the business and affairs of Integrated Legal Holdings Limited on behalf of the

shareholdersbywhomtheyareelectedandtowhomtheyareaccountable.

TheCorporateGovernancepoliciesdisclosed inthisreportrepresentsthe latestguidancereleased

bytheAustralianStockExchange(ASX)forwhich,applicationisnotmandatoryforthe2011financial

yearbutisrequiredforthe2012financialyear.

ThetablebelowsummarisestheCompanyscompliancewiththeCGCsrecommendations:

RecommendationComplyYes/No

Reference/explanation

ASXListing

Rule/CGCrecommendations

Principal1Laysolidfoundationsformanagementandoversight

1.1 Companiesshouldestablishthefunctionsreservedtothe

Boardandthosedelegatedtoseniorexecutivesanddisclose

thosefunctions.

Yes ASXCGC1.1

1.2 Companiesshoulddisclosetheprocessforevaluatingthe

performanceofseniorexecutives.

Yes ASXCGC1.2

1.3 Companiesshouldprovidetheinformationindicatedinthe

guidetoreportingonPrincipal1.

Yes ASXCGC1.3

Principal2StructuretheBoardtoaddvalue

2.1

Amajority

of

the

Board

should

be

independent

directors.

Yes

(a)

ASX

CGC

2.1

2.2 Thechairshouldbeanindependentdirector. Yes (a) ASXCGC2.2

2.3 Therolesofchairandchiefexecutiveofficer(CEO)shouldnot

beexercisedbythesameindividual.

Yes ASXCGC2.3

2.4 TheBoardshouldestablishanominationcommittee. No (b) ASXCGC2.4

2.5 Companiesshoulddisclosetheprocessforevaluatingthe

performanceoftheBoard,itscommitteesandindividual

directors.

Yes ASXCGC2.5


guidetoreportingonPrincipal2.

Yes ASXCGC2.6

Principal3Promoteethicalandresponsibledecisionmaking

3.1 Companiesshouldestablishacodeofconductanddisclose

thecodeorasummaryofthecodeasto:

thepracticesnecessarytomaintainconfidenceinthe

Companysintegrity

thepracticesnecessarytotakeintoaccounttheirlegal

obligationsandthereasonableexpectationsoftheir

stakeholders

theresponsibilityandaccountabilityofindividualsfor

reportingandinvestigatingreportsofunethicalpractices.

Yes ASXCGC3.1

3.2 Companiesshouldestablishapolicyconcerningdiversityand

disclosethepolicyorasummaryofthatpolicy. Thepolicy

shouldincluderequirementsfortheBoardtoestablish

measurableobjectivesforachievinggenderdiversityfortheBoardtoassessannuallyboththeobjectivesandprogressin

achievingthem.

Yes ASXCGC3.2


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ACN120394194

CorporateGovernanceStatement(continued)

41

Recommendation

Comply

Yes/No

Reference/

explanation

ASXListing

Rule/CGC

recommendations

Principal3Promoteethicalandresponsibledecisionmaking

(continued)

3.3 Companiesshoulddiscloseineachannualreportthe

measurableobjectivesforachievinggenderdiversitysetby

theBoardinaccordancewiththediversitypolicyand

progresstowardsachievingthem.

Yes ASXCGC3.3

3.4 Companiesshoulddiscloseineachannualreportthe

proportionofwomenemployeesinthewholeorganisation,

womeninseniorexecutivepositionsandwomenonthe

Board.

Yes ASXCGC3.4


guideto

reporting

on

Principal

3.

Yes ASXCGC3.5

Principal4Safeguardintegrityinfinancialreporting

4.1 TheBoardshouldestablishanauditcommittee. Yes ASXCGC4.1

4.2 Theauditcommitteeshouldbestructuredsothatit:

consistsonlyofnonexecutivedirectors

consistsofamajorityofindependentdirectors

ischairedbyanindependentchair,whoisnotchairofthe

Board

hasatleastthreemembers.

No (c) ASXCGC4.2

ASXLR12.7

4.3 Theauditcommitteeshouldhaveaformalcharter. Yes ASXCGC4.3

4.4

Companiesshould

provide

the

information

indicated

in

the

guidet

134.asx iaw oct 20 2011 14.00 annual report ye june 2011

Documents