ACN 120 394 194

Level 22
1 Market Street
Sydney NSW 2000
Phone (02) 8263 6600
www.ilh.com.au

Monday 31st August 2009

The Manager
Company Announcements Office
Australian Stock Exchange Limited

Integrated Legal Holdings Positioned for Growth

2008/09 Full Year Results Announcement

Integrated Legal Holdings Limited (the Company and Integrated) has today released its full year
results for the 2008/09 financial year.
Summary

Operating revenue increased by 59% to $16.95m.

Net Profit after Tax and before Impairment of $1.04m.

Strong Balance Sheet and conservative gearing levels net debt to shareholders funds 12%.

The Directors expect Company revenue for 2009/10 of at least $21m (assumes no further acquisitions),
and growth in Net Profit after Tax and before Impairment and Net Profit after Tax and before
Impairment per share.

The Company is well positioned for future growth.

1.

Executive Summary

Operating Revenues
The Directors are pleased to report that operating revenues of the Company continued to grow strongly
during the period to $16.95m, an increase of 59% from 2007/08.
As expected, Integrateds revenues have continued to grow strongly as a result of organic growth and the
selective acquisition of new member and tuck-in firms.
2007/08 Comparatives
In respect of comparatives, the Directors have previously advised that the 2007/08 corresponding period
relates to the initial 10.5 months trading of the Company under public listing. The Company acquired the
foundation businesses at the time of public listing in August 2007. The Directors consider this initial trading
period to be an abnormal period of trading reflecting the integration of acquired businesses and
establishment as a listed company, and excluding the full year effect of normal operating costs including
Corporate management.

Net Profit after Tax before Impairment

The Directors advise that the Company has reported a Net Profit after Tax before Impairment of $1.04m.

Operating Revenue
Net Profit after Tax before Impairment

Full Year
2008/09
$m

10.5 mths
2007/08
$m

16.95
1.04

10.69
1.76

%
Change
59%
(41%)

The 2008/09 financial year was as expected a year of consolidation, with the Directors having advised in
August 2008 that following the appointment of a full time Managing Director in April 2008 the Company
would be refining its strategy and business model in order to appropriately position the Company for strong
and consistent future growth in earnings and dividends.
The Directors advised that Corporate expenses would increase with the full year effect of the costs of a
Managing Director and Chief Financial Officer/Company Secretary, and that the foundation member firms
would require investment during the period to ensure the firms were best placed to take advantage of the
growth opportunities available to them.
These changes in the cost base of the Company would have the effect of normalising profit margins, down
from the abnormally high levels experienced in the initial trading period of 2007/08.
Further, several factors combined in the June quarter to decrease Net Profit after Tax before Impairment to
below the level anticipated by the Directors.
Firstly, the prevailing economic conditions negatively affected revenues during the June quarter, and in
particular the month of June, against expectations and against the seasonally high revenues historically
achieved during this period.
Secondly, as announced in June, the restructuring of remuneration and employment conditions in respect of
the Principals of member firm Talbot Olivier, included a backdated payment of $375,000 in respect of the
period 1 January 2009 to 30 June 2009, which was paid on 30 June 2009.
And thirdly, as part of the year end review of the Companys financial position, the Directors resolved to
write-off a number of aged debtor balances which in their view had become unrecoverable as a result of the
economic environment.
Significant strategic and operational progress
Whilst the Directors are disappointed with the decline in Net Profit after Tax before Impairment for 2008/09,
overall they are pleased with the continued profitability of the Company during difficult and challenging
economic conditions, and with the significant strategic and operational progress that has been made during
the period towards developing a robust business model and in positioning the Group for future growth.
The Directors consider the acquisition of Sydney based Argyle Lawyers and the re-negotiation of the Talbot
Olivier Principal remuneration and employment conditions to be of critical importance.
Argyle Lawyers is a highly regarded commercial law firm with offices in Sydney and Melbourne, and was
the first east coast acquisition for the Company having listed with Perth based businesses.
The Directors consider that the acquisition of Argyle Lawyers provides important credibility to the
Companys strategy and business model and will assist in providing a platform for continued growth.
The Company announced in June the successful negotiation of new remuneration and employment
arrangements with the Principals of the Companys largest member firm, Talbot Olivier.
Whilst these new arrangements provide a significant increase in annual operating costs of the Company, the
Directors consider the finalisation of this matter to be a critical initiative and an extremely positive
development for the Company which provides increased security of future earnings for shareholders, and is a
major endorsement by the Principals of Talbot Olivier of the Companys strategy and future prospects.

Page | 2

Dividend
In light of the Companys stated strategy of selectively and incrementally acquiring legal firms, and as a
result of currently available opportunities to grow the Company by acquisition, the Directors have decided
against the payment of a final dividend.
Further, in the current challenging market conditions, maintaining our balance sheet strength is a key
priority. The retention of available cash at this time supports this priority.
Whilst the Directors view the payment of dividends from the Company as desirable, they see the immediate
priorities as investing in the business and maintaining balance sheet strength, and as such consider this
dividend decision to be in the best long-term interests of shareholders.
Outlook
The Directors can advise that having largely completed the process of strategy and business model
refinement, the Company can now move strongly forward in executing its business plans.
The Directors are of the view that the Company is well placed to continue growth both organically and by
acquisition by capitalising on the significant opportunity afforded by prevailing industry issues. Long-term
competitive advantage can be achieved by the Company in supporting member firms in developing scale to
underpin future growth and profitability.
The Directors are confident in the longer term outlook of the Company given the strength and underlying
quality of the existing member firms, the significant potential to grow organically, and the opportunities for
selective acquisition growth as part of the strategy of developing a national network of legal services
businesses.
The Directors advise that they expect Company revenue for 2009/10 of at least $21m (assumes no further
acquisitions), and growth in Net Profit after Tax before Impairment and Net Profit after Tax before
Impairment per share.
2.

2008/09 Detailed Performance Review

2.1 Operating Revenue

Operating revenue for the period was $16.95m, a 59% increase on the 10.5 months initial trading period of
the Company in 2007/08.
As expected, Integrateds revenues have continued to grow strongly as a result of organic growth and the
selective acquisition of new member and tuck-in firms.
Revenue from the Companys member firms increased during the period by 63% to $16.79m.
The Company continues to achieve strong and consistent growth in half yearly revenue, with operating
revenue for the 2nd half 2008/09 of $9.36m, representing 23% growth against 1st half 2008/09 of $7.59m,
and a 51% increase on 2nd half 2007/08 of $6.18m.
Full Year
2008/09
$m

Revenue from Firms

16.79
Other Income*
0.16
Total Operating Revenue
16.95
*Other income includes interest income.

10.5 mths
2007/08
$m

10.30
0.39
10.69

%
Growth
63%
(59%)
59%

2nd Half
2008/09
$m

1st Half
2008/09
$m

2nd Half
2007/08
$m

9.33
0.03
9.36

7.46
0.13
7.59

6.02
0.16
6.18

Page | 3

2.2 Business Performance

Legal Services Division
The Legal Services division incorporates the businesses of Talbot Olivier, Argyle Lawyers effective 1
November 2008 and Brett Davies Lawyers.
Each of these businesses has highly competitive positions in their local markets.
Talbot Olivier has a history of over 80 years and operates in commercial law, litigation, and insurance,
predominantly in the Perth area, and targets commercial clients in the mid-market, SME and high net worth
private client segments.
Argyle Lawyers combines, corporate, business, family, litigation and property law, with particular
specialisation in key long term growth industries of financial services and wealth management,
superannuation and taxation and high net wealth estate planning. Argyle Lawyers has been working with
the financial planning profession for more than 20 years and is an innovation leader in training and
supporting dealer groups and financial planners, including major banks and insurance companies.
The legal services of Argyle Lawyers expanded in March 2009 following the tuck-in acquisition of mda
lawyers, a specialist taxation advice and taxation litigation firm.
Brett Davies Lawyers is a specialist superannuation, taxation and estate planning firm, with predominantly
accountant and financial planning clients across Australia.
All the businesses are Law Society approved quality practices.
The Legal Services division employs over 60 lawyers across 4 offices (Sydney, Perth, Melbourne), and has
developed a broad and diversified range of legal services shown in the following table.
Business Advisory Services
Corporate & Commercial
Commercial Litigation
Insurance Services
Media & Defamation
Banking & Finance
Franchising
Government Services
Insolvency
Workplace Relations
Business Succession
Taxation Litigation
Taxation Advice

Private Client Services

Wealth Management/Protection
Superannuation
Taxation Litigation
Taxation Advice
Taxation Audits
Estate Planning & Wills
Succession Planning
Family
Property
Employment/Workplace
Criminal
On-line Document Publishing

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 market downturns.
The Companys strategy for the Legal Services division is to develop a national network of leading law
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 and strategic
relationships and scale advantage opportunities.

Page | 4

Information Technology Services Division

The Information Technology Services division (IT Services) is a complementary but not core business for
the Company.
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 selling of documents and subscriptions to the service.
The Company strategy for IT Services is to grow and develop the business organically through the
expansion of on-line services, and the building of deeper relationships with the existing Law Central client
base.
Business Performance Review
Full Year
2008/09
$m

10.5 mths
2007/08
$m

Revenue from Firms

Legal Services Division
IT Services Division
Total Revenue from Firms

16.00
0.79
16.79

9.48
0.82
10.30

Contribution from Firms

Legal Services
IT Services
Total Contribution from firms

2.64
0.22
2.86

3.47
0.38
3.85

As a % of revenue from firms

17%

37%

%
Growth

69%
(4%)
63%

(24%)
(42%)
(26%)

2nd Half
2008/09
$m

1st Half
2008/09
$m

2nd Half
2007/08
$m

8.92
0.41
9.33

7.08
0.38
7.46

5.51
0.51
6.02

0.84
0.13
0.97

1.80
0.09
1.89

1.75
0.24
1.99

10%

25%

33%

Operating revenue for the Legal Services Division increased by 69% for the period to $16.00m.
The Company continued to make selective acquisitions of members firms and tuck-in firms in the legal
services division during the period, with $9m of annualised revenue announced.
However, Legal Services operating revenue was below expectations for the June quarter, affected by the
economic environment.
In particular, the financial services division experienced reduced demand in the June quarter, and the month
of June in particular. This period is historically a seasonally high quarter and month, as a result of year end
tax and business planning.
This was to an extent offset by stronger demand in other legal services and in particular commercial
litigation, the Companys diversification of legal services providing some recession proofing.
Whilst the Directors anticipate that reduced demand for the Companys financial services division will
continue into 2009/10, they are confident that demand will return towards historical levels as the broader
economic conditions improve, and at that time the division can achieve strong earnings growth.
As announced in June, the results include a back payment of $375,000 to the Principals of member firm
Talbot Olivier, in respect of restructuring of remuneration and employment conditions. This amount was in
respect of the period 1 January 2009 to 30 June 2009, and was paid on 30 June 2009.
Further, as part of the year end review of the Companys financial position, the Directors resolved to writeoff a number of aged debtor balances which in their view had become unrecoverable as a result of the
economic environment.
Additionally, the result reflects the significant impact of 2008 salary and wage pressures for WA legal
employees, with more favourable conditions being experienced for 2009/10, as well as significant increases
in WA premises rental from April 2009.

Page | 5

The results include an initial trading period for Argyle Lawyers and mda lawyers, the Company having
acquired these businesses in November 2008 and March 2009, respectively.
As expected, these newly acquired businesses did not contribute materially to profitability in 2008/09, and as
previously advised, will provide full revenue and profit impact for the Company from the 2009/10 year.
The Directors advise that generally the initial trading period of an acquisition will not provide a material
profit contribution. Specifically, this initial trading period will involve an element of acquisition cost,
integration expense and include accounting adjustments on acquisition.
The profit contribution for the initial period will also depend on timing of the acquisition, and in respect of
Argyle Lawyers which joined the Group in November 2008, the initial trading period includes a number of
seasonally less profitable months (December and January), and excludes several seasonally strong months
(July October).
Further, the Directors note that additional changes to accounting standards from 1 July 2009 will require the
immediate expensing of certain costs associated with acquisitions, including applicable stamp duty and legal
expenses, these being previously capitalised.
In line with the broader economic environment, revenue for the Companys IT Services division was lower
than expected and well below historical levels for the June quarter and in particular the month of June,
which is historically the highest annual revenue month for this business, and usually significantly higher
than any other month as a result of year end tax and business planning of Law Central clients.
This decline in demand negatively affected the profitability of Law Central in 2008/09, exacerbated by the
Companys planned investment during the period in new technology, new service initiatives, and additional
business development activities, all of which are expected to support earnings growth in the business over
time.
Whilst the Directors anticipate that reduced demand for Law Central services will continue into 2009/10,
they are confident that demand will return towards historical levels as the broader economic conditions
improve, and at that time the Law Central business can achieve strong earnings growth.
2.3 Operating Performance
Net Profit after Tax before Impairment for the period was $1.04m.
Full Year
2008/09
$m

10.5 mths
2007/08
$m

%
Growth

2nd Half
2008/09
$m

1st Half
2008/09
$m

2nd Half
2007/08
$m

Total Contribution from Firms

2.86

3.85

(26%)

0.97

1.89

1.99

Less: Corporate Expenses

1.25

1.12

12%

0.67

0.58

0.87

EBIT

1.61

2.73

(41%)

0.30

1.31

1.12

Less: Interest Costs

Less: Tax

0.06
0.51

0.03
0.94

0.05
0.11

0.01
0.40

0.01
0.46

Net Profit after Tax before

Impairment

1.04

1.76

0.14

0.90

0.65

(41%)

As previously advised, the Companys corporate expenses have grown into 2008/09, following the
appointment of a full time Managing Director from April 2008, and a full time Chief Financial
Officer/Company Secretary in September 2007. The Company has made an important investment in senior
management of the Company, whom the Directors believe will be able to manage the Company to achieve
strong growth into the future.
Additionally, the 2008/09 results reflect the full year effect of the costs of being a publicly listed company
including annual listing fees, share registry, audit and taxation and accounting fees.

Page | 6

During the period and as a result of continued acquisition growth, the Company secured a bank debt facility,
incurring increased interest charges.
2.4 Reported Profit Impairment Charge
As previously reported, as part of the Companys year end accounting procedures, the Directors have
reviewed the carrying value of the Law Central business and have recognised an impairment charge of
$450,000 for the 2008/09 financial year.
Law Central 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 selling of documents
and subscriptions to the service. Law Central is a complementary but not core business for the Company.
The impairment charge reflects the significant change in economic conditions since the Companys
acquisition of Law Central in August 2007, which has resulted in a decline in the relative value of the
business.

Net Profit after Tax before Impairment

Less: Impairment Charge
Net Reported Profit

Full Year
2008/09
$m

10.5 mths
2007/08
$m

1.04
0.45
0.59

1.76
0.22
1.54

%
Growth
(41%)
104%
(62%)

Operating revenue of Law Central fell below historical levels during the 2008/09 financial year impacted by
reduced demand in line with the broader economic environment.
With the resulting lower profitability of Law Central for the period, and an expected continuation of reduced
demand into 2009/10, the Directors have downwardly revised expected growth rates for revenue and
earnings of the business. This impairment charge is a one-off accounting item, which reduces Net Reported
Profit but is not a normal operating cost of the Company. This impairment charge is a non cash provision
against the value of goodwill and represents a write down of approximately 18% of the carrying value of
Law Central.
Whilst the Directors are disappointed that it has been necessary to write-down the carrying value of the Law
Central business, market conditions are in many ways unprecedented, with business assets generally worth
less today than they were 2 years ago, and requiring many companies to impair the book value of acquired
assets during the current reporting season.
The Directors are confident that demand for the services of Law Central will return towards historical levels
as the broader economic conditions improve.
2.5 Earnings per Share
Underlying profitability, represented by Net Profit after Tax before Impairment per share, was 1.56 cents per
share (weighted average) for the period.
Full Year
2008/09
$m

10.5 mths
2007/08
$m

%
Growth

(48%)
Net Profit after Tax before Impairment per Share
1.56
3.03
(66%)
Earnings per Share (after impairment charge)
0.89
2.66
*Calculations are based on the weighted average number of shares on issue over the 2008/09 financial
year of 66,860,219 (2007/08 58,012,296).

Page | 7

3.

Revised Talbot Olivier Principal Remuneration and Employment Arrangements

In June 2009, the Directors advised that the Company had successfully negotiated new remuneration and
employment arrangements for the Principals of member firm Talbot Olivier to apply from 1 July 2009.
The successful restructure of these arrangements demonstrates a resounding vote of confidence by the
Principals of Talbot Olivier in the strategy, business model and future of the Company.
Background
At the time of the Companys initial public offering in August 2007, six Principals signed employment
agreements for a period of two years ending 12 August 2009, with the following conditions:

Base salary for each Principal would be limited to $100,000 per annum ($600,000 per annum in
aggregate) for the two years with a profit sharing arrangement;

At the conclusion of the 2 year period, either party could terminate the employment contract by giving
28 days notice; and

Restraints would apply to Principals in relation to non-solicitation of employees or clients following any
termination of employment.

The finalisation of the new employment arrangements prior to August 2009 provides a number of important
advantages, including certainty for the Principals, stability for the ongoing operation of the business and
increased security of future revenue and earnings for the benefit of shareholders.
New Arrangements
The new arrangements will apply to eight Principals of Talbot Olivier, seven of whom joined the Company
at the time of the IPO and one of whom has been newly appointed with the continued growth of that member
firm.
The new arrangements provide an aggregated increase of Principal remuneration (performance based salary
and profit share) of approximately $1.27m per annum, to apply from the 2009/10 financial year.
The Principals have agreed to new employment conditions as follows (with minimal individual variances):

An initial 4 year employment term from 1 July 2009, continuing thereafter;

A 6 month notice period ;

On any termination, more comprehensive restraints including non-competition as well as nonsolicitation of employees and clients.

The new arrangements are effective 1 July 2009, but include an adjustment to the base salaries from 1
January 2009 for six of the original Principals, payable in the 2008/09 financial year ($375,000 in
aggregate).
The Directors consider the finalisation of this matter to be a critical initiative and an extremely positive
development for the Company. The new remuneration framework will support the realisation of Talbot
Oliviers growth potential and provide an important competitive edge in attracting and retaining quality
employees and tuck-in acquisitions.
Talbot Olivier is the largest member firm of the Company and has grown strongly and consistently since
joining the Company. It maintains a strong brand and market positioning in the Perth market.
The successful restructure of these arrangements represents a major endorsement by the Principals of Talbot
Olivier of the Companys strategy and business model and underpins its future prospects.

Page | 8

4.

New Business Acquisitions

The Company has grown strongly, and selectively and incrementally expanded by acquisition during the
period, with the announcement and subsequent completion of the following acquisitions.

Acquired Firm
Argyle Lawyers
mda lawyers
Total

Acquired Firm

Location

New Stand alone Member Firm

Tuck-in for Argyle Lawyers

Sydney
Sydney

Annualised
Revenue
$m
6.5
2.5
9.0

Effective Date
1 November 2008
13 March 2009

Argyle Lawyers
In November 2008, the Company announced the acquisition of Argyle Lawyers (Argyle) effective 1
November 2008, with annualised revenue of approximately $6.5m.
Argyle is a highly regarded commercial law firm with offices in Sydney and Melbourne. This strategically
important acquisition for Integrated is the first of its east coast expansion, having listed in August 2007 with
Perth based foundation businesses.
The Directors believe that Argyle brings a strong brand, reputation and growth prospects, and with existing
Integrated businesses will assist in providing the Company an Australia-wide robust platform for further
growth, particularly on the east coast of Australia.
The Directors believe that the effect of this transaction will be materially positive in terms of earnings per
share, and will enhance the Companys growth prospects. The full revenue and profit impact of the
acquisitions will be achieved from the 2009/10 financial year.
In March 2009, the Company announced the acquisition of mda lawyers (mda) effective 13 March 2009,
under tuck-in arrangements with the existing member firm Argyle Lawyers.
Mda is a prominent and highly regarded taxation law firm, specialising in taxation advice, taxation litigation,
investigation and audit matters, and based in the Sydney CBD. The firm consists of Principal Mark
Douglass and 5 lawyers, and has annual fee income of approximately $2.5m.
Mda merged with existing member firm Argyle, with the merged firm having 7 Principals, approximately 40
staff and annual fee income of around $9m.
Under the merger plans, the mda business was relocated and integrated into the nearby offices of Argyle.
The Directors believe that mda brings a strong reputation and growth prospects, and as part of the Argyle
business will assist in providing the Company a robust platform for further growth.
The transaction is consistent with the Companys strategy of supporting the growth and expansion of a
limited number of core member firms into major businesses with a competitive advantage through scope and
scale of operation, as part of a listed group.
The Directors believe that the effect of both acquisition transactions will be materially positive in terms of
earnings per share, and will enhance the Companys growth prospects.
The full revenue and profit impact of the acquisitions will be achieved from the 2009/10 financial year.
Broadly, the Companys acquisition strategy is based on the following principles:

Owning a limited number of member firms in capital cities and key regional areas across Australia.
Target firms are both medium sized commercial law firms and specialist law firms in key growth
segments.
Target the mid market, SME and high net worth client segments.
Acquiring selectively and incrementally only quality firms compatible with existing firms and Company
culture, aspirations and values.

Page | 9

Supporting the strong growth and development of member firms both organically and by acquisition, to
achieve scale businesses with competitive advantage in their markets.
Improvement of the overall management of these businesses.
Developing internal cross referral processes and external strategic relationships to leverage client
opportunities as part of a network of member firms.
Developing cost advantages for member firms through national procurement arrangements.

The Company applies a performance based remuneration structure to incentivise growth and improvement in
the businesses.
More generally, the opportunity for continued growth by acquisition is considered to be significant having
regard to the prevailing industry issues, and the appropriateness of the Companys strategy and business
model in supporting growth and development of member firms.
The Company will look to the acquisition of a series of medium sized commercial law firms, supplemented
by the tuck-in acquisition of smaller firms into these businesses.
The Company is targeting 10-15 member firms over the next 5-10 years.
The Directors are of the view that the legal services industry is currently influenced by a number of issues
which provide an opportunity to develop and grow a network of leading medium sized firms in the midmarket, SME and high net worth client segments, and that the Companys business model and strategy
provides the basis for assisting member firms in addressing these industry issues.
There is significant fragmentation in the industry with currently over 11,000 legal firms in Australia (2008
IBIS Industry Report).
The Directors consider that there are in the range 150-200 medium sized firms in Australia.
Issues affecting small and medium sized firms in the legal industry include the following:
-

It is difficult for these firms to attract and retain good lawyers.

It is hard for these firms to provide broad services to clients.
It is problematic for these firms to achieve growth, due to limitations on available capital for working
capital and general business investment, and the significant personal financial obligations and risks
involved.
Many young lawyers are reluctant to buy into partnership
Some owners are seeking a value for their business.

Consistent with its selective and incremental acquisition strategy, the Company is aiming to acquire one new
member firm and a number of smaller tuck-in acquisitions in each 12 month period, which would contribute
approximately $10m in annualised revenue.

Page | 10

5.

Analysis of Balance Sheet and Operating Cash Flow

5.1 Balance Sheet Analysis

The Directors advise that the Company has been able to grow and acquire new businesses during the period,
whilst maintaining a strong Balance Sheet position. The following is an extract from the Companys
balance sheet.
As at
30 June 2009
$m
0.60

As at
30 June 2008
$m
5.63

0.72
1.00
0.59
2.31
(1.71)
13.86

0.00
0.00
0.19
0.19
5.44
13.90

12%

NA

(1.65)

1.12

Trade Debtors (net of provisions)

WIP (net of provisions)

4.77
1.37

2.28
1.08

Net Debt as a % of net Debtors and WIP

28%

Cash
Borrowings
- Current
- Non-current
- Leasing, HP & Other
Total Debt
Net Cash/(Debt)
Shareholders Funds
Net Debt to Shareholders Funds

Cash Flows from Operations (see below)

Cash holdings at 30th June 2009 were $0.60m ($5.63m 30 June 2008), with bank debt of $2.31m (30 June
2008 $0.19m).
The movement from a net cash position of $5.44m at 30 June 2008, to a net debt position of $1.71m at 30
June 2009, is representing by the following:

the acquisition of new businesses (with a higher portion of cash consideration over shares)
the payment of the Companys maiden dividend in November 2008 of 2.2 cents per share
the maiden payment of tax for the Company in April 2009
the funding of working capital for the newly acquired businesses (see below).

The Directors consider this net debt position at 30 June 2009 to represent a conservative level of gearing
(Net Debt to Shareholders Funds) of 12%.
5.2 Analysis of Operating Cash Flow
The dollar value of work in progress and debtors grew during the period to $6.14m (30 June 2008 $3.36m)
as a result of strong organic and acquisition growth.
Cash flows from operations were negative $1.65m during the period, compared with $1.12m for the 10.5
months to 2007/08.
Operating cash flows are adversely affected by new firm acquisitions, as funds from operations are invested
in the build up of working capital (including debtors and work in progress) post acquisition to normal levels.
The Company does not acquire debtors and work in progress as part of the acquisition.
During the period, acquisitions (Argyle Lawyers and mda lawyers) have been very material relative to the
existing business and operating cash flows were invested in the build-up of working capital of these
businesses post acquisition to generally acceptable levels in the normal course of trading.
Further, the Company made its maiden tax payment during the period.

Page | 11

The following table shows the working capital impact of new acquisitions during the period, as well as tax
payments made.
Analysis of Cash Flows from Operations
Reported operating cash flows
Includes:
working capital impact of new acquisitions during the period
2008 maiden tax payment
2009 quarterly tax instalment
6.

2008/09
$m
(1.65)
1.53
0.96
0.35

Outlook Positioned for Growth

The 2008/09 financial year was an unprecedented period in Australian and world financial markets.
The global financial crisis impacted all aspects of business and society, with reduced demand for products
and services, significant job losses across Australia, and with a number of previously high profile public
listed companies either no longer in existence or facing the prospect of significant loss of profitability and
shareholder value.
It was also a difficult operating environment for newly listed micro capital companies such as Integrated,
with the economic environment negatively impacting revenues, and with potential new investors distracted
by events in the market and generally having little interest in new stories from small start up companies.
Overall, the Directors are pleased with the Companys progress, in what has been challenging and difficult
business conditions.
Further, the Directors advise that having largely completed the necessary refinements and investment, the
Company can now move strongly forward in executing its strategy and business plans.
The Directors are of the view that the Company is well placed to continue growth both organically and by
acquisition by capitalising on the significant opportunity afforded by prevailing industry issues. Long-term
competitive advantage can be achieved by the Company in supporting member firms in developing scale to
underpin future growth and profitability.
The Directors are confident in the longer term outlook of the Company given the strength and underlying
quality of the existing member firms, the significant potential to grow organically, and the opportunities for
selective acquisition growth as part of the strategy of developing a national network of legal services
businesses.
The Directors advise that they expect Company revenue for 2009/10 of at least $21m (assumes no further
acquisitions), and growth in Net Profit after Tax before Impairment and Net Profit after Tax before
Impairment per share.

Graeme Fowler
Managing Director
Monday, 31st August 2009

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