Patent firm Murgitroyd upbeat despite slide in profits

Murgitroyd, the Glasgow-based firm of patent and trademark attorneys, today expressed confidence in its long-term growth prospects after revealing that its half-year profits have plunged by almost a third.
Murgitroyd's profits fell despite a record number of filings for the European Patent Office. Picture: ContributedMurgitroyd's profits fell despite a record number of filings for the European Patent Office. Picture: Contributed
Murgitroyd's profits fell despite a record number of filings for the European Patent Office. Picture: Contributed

The results came after the Aim-quoted firm warned last week that its annual results would fall short of City hopes amid “macro-economic uncertainty” in the wake of its acquisition in June of parts of Dallas-based MDB Capital Group and Nicaragua’s Patentvest for just over £1.8m.

For the six months to the end of November, Murgitroyd reported a pre-tax profit of £1.5 million, down by 30 per cent on the previous year’s figure of £2.1m, although revenues came in 5.3 per cent higher at £21.5m.

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Despite the slide in earnings, chairman Ian Murgitroyd said the board was proposing a 5.2 per cent increase in the firm’s interim dividend to 5p a share, to paid on 23 March.

Murgitroyd said: “While the impact on interim profit of the group’s most recent acquisition was anticipated, the combination of a significant increase in investments and lower-than-anticipated revenue growth has led to a decline in profits for the first half.”

He added: “Notwithstanding the current contraction in interim earnings and continuing external uncertainties, the board remains confident that it can deliver sustainable long-term growth and value to shareholders, reflected in the continuation of the progressive dividend policy.

“Profitable organic expansion of its client base and revenue, through targeted business development and the attraction and retention of high-quality staff, coupled with economies of scale and effective cost control, are central planks of the group’s growth strategy.”

Following the deal with MDB and Patentvest, Murgitroyd’s headcount has risen to 262, up from 236 a year ago, but the firm is set to save more than £100,000 a year in office rental costs after consolidating its central Scotland operations in Glasgow and bringing together its London operations in Croydon.

It said: “Additional efficiencies will also accrue from the continuing automation of processes, as well as the reduction in the scale of business development and marketing investment in the second half of the year.”

Figures from the EU Intellectual Property Office show the number of European trademark applications filed last year rose to more than 135,000, up from 130,400 in 2015, marking the seventh consecutive year of growth. The European Patent Office also saw patent filings grow 1.6 per cent to an all-time high of 278,000 in 2015, with filings from the US representing 24 per cent of the total.

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While Murgitroyd said that it was too early to evaluate the full impact of the Brexit vote, the firm’s management remains confident that the geographic spread of its activities and customer base “puts it in a strong comparative market position”.

He added: “After the UK’s exit from the EU is completed the group will also continue to have both operations and subsidiaries in the EU.”

Analysts at house broker N+1 Singer, which has reduced its full-year pre-tax profit forecast by 16 per cent to £3.8m, said: “The European patent market continues to grow steadily and should provide a supportive backdrop, although it is difficult to predict the full implications of the Brexit vote, the introduction of the [EU] unitary patent (perhaps in 2017) and future currency movements.”

They added that balance sheet strength “remains a feature” for Murgitroyd, with net cash at the end of the first half of £1.1m.