Half Yearly Report

RNS Number : 2271Y
Wilmington Group Plc
28 February 2012
 



 

 

28 February 2012

WILMINGTON GROUP PLC

("Wilmington", "the Group" or "the Company")

 

Half Year Results for the six months ended 31 December 2011

 

Wilmington Group plc, the professional information and training group, today announces its half year results and its interim management report for the six months ended 31 December 2011.

 

Trading in-line with management expectations, outlook for full year remains unchanged

 

Highlights

 

· Group revenues for the half year were up 5% at £41.6m (2010: £39.7m); Adjusted EBITA1 was in line with the prior year at £6.8m; Adjusted Profit before Tax2 was £5.5m (2010: £6.1m) reflecting higher finance costs following renewal of banking facilities; Adjusted Earnings per Share3 was 4.67p (2010: 4.86p)

 

· Interim dividend maintained at 3.5p

 

· Publishing & Information revenues up 11.9% to £19.9m (2010: £17.7m) and segmental profit4 up 8.6% to £5.2m (2010: £4.8m)

- benefiting from a strong subscription based business model, increasing digital delivery of high quality content and a strong AXCO performance

 

· Training & Events revenues broadly unchanged at £21.8m (2010: £21.9m) and segmental profit4 6.2% lower at £2.9m (2010: £3.1m)

-  good performance by Matchett (graduate entrant training for investment banks) and Mercia (accountancy training)

-  appointment of a new management team, headcount reductions, modified course programmes and refocused marketing and sales to better address challenges and opportunities in Legal Training

 

· Good progress towards achieving strategic objectives

-     increasing digital content, now 79% of publishing revenues (2010: 75%)

-     strong, recurring subscription based revenues; deferred revenue is at a seasonally adjusted high

-     reduced dependency on advertising

-     significant investment in new product development

 

· Ambition to grow profits organically by 50% over the next 3 years and improve margins by 5 percentage points by 2015

 

1               Adjusted EBITA - see note 5 to the interim financial statements

2               Adjusted Profit before Tax - see note 5 to the interim financial statements

3               Adjusted Earnings per Share - see note 11 to the interim financial statements

4               Before non-recurring items, central overheads, share based payments, amortisation, net finance costs and tax

 

Mark Asplin, Chairman, commented:

 

"Our outlook for the full year remains unchanged.  Whilst economic conditions remain tough generally, most areas of our business have been resilient.  The cost savings and management initiatives which have already been implemented in anticipation of this should result in an outcome for the full year in line with our expectations.''

 

"The investments made during the last financial year and those being made this year are expected to continue to transition the business to a higher margin and higher quality business which can deliver our medium term growth ambitions."

 

 

For further information, please contact:

 

Wilmington Group Plc  

Charles Brady, Chief Executive

Basil Brookes, Finance Director

020 7422 6800

Weber Shandwick Financial 

020 7067 0700

Nick Oborne / Stephanie Badjonat


 

Notes to Editors

 

Wilmington Group plc is one of the UK's leading providers of information and training for professional business markets. The Group provides training, arranges industry events and publishes directories, databases, magazines and special reports for a variety of markets including the legal, health, accounting, pension, charities, financial and insurance sectors. Capitalised at approximately £72 million, Wilmington floated on the London Stock Exchange in 1995.

 

A copy of the investor presentation is available on the Group's website from 11.00 am today.

 

 

 

 

 

INTERIM MANAGEMENT REPORT

 

For the six months ended 31 December 2011

 

I am pleased to present my first report as Chairman of Wilmington, on the results for the six months ended 31 December 2011.  During the period under review Wilmington has performed in line with management expectations and produced a solid performance, with revenues increasing by 5.0% to £41.6m.  Adjusted EBITA1 was in line with the prior year at £6.8m.  As expected, the cost of borrowing increased significantly following the renewal of the Group's banking facilities in June 2011; accordingly Adjusted Profit before Tax2 was £5.5m against £6.1m for the corresponding period in the prior year.

 

Business Strategy

 

Wilmington's key strategy is to increase shareholder value by delivering long term, sustainable and growing profits from servicing the information and training requirements of professional business markets.

 

In recent years the Group has sought to take advantage of the opportunities available to it and to address the challenges in the UK legal market and the ongoing structural change in the publishing business through:-

 

·                    continued focus on operational efficiency,

·                    the development of new training programmes, and

·                    investment in subscription based information businesses with deep content delivered electronically.

 

A consequence of adopting this strategy has been an unprecedented level of development activity to generate new or additional revenue streams, many of which are deferred over the period of the underlying subscription.  Deferred revenue is at a seasonally adjusted high of £17.4m (2010: £16.8m), an indication of the early success of our strategy.

 

Whilst these actions have impacted short term profits we believe that benefit will be seen in higher margins and higher profits over the next three years.  Within this timescale our ambition is to grow profits organically by 50%.  The incentivisation schemes for many senior managers reflect this ambition.

 

Axco, which was acquired in September 2010, continues to perform in line with our expectations, delivering 9% underlying sales growth in the period.  We have enjoyed excellent renewal rates for our existing subscriptions, which have been in excess of 100% by value in the period.  This, combined with the transition of many of our key international insurance company clients into long term contracts, provides us with a firm foundation upon which to grow the business.  Work has continued on the development of unique statistical and analytical content, tools and services for our customers as well as the creation of a new content management system which will create exciting operational benefits for both us and clients.  We have also invested in our sales and account management teams to allow us to sell these new products and services to both our existing client base and to new organisations globally.

 

We announced in November that a review had been completed of the legal training business and a plan initiated.  As we indicated at the time, this and other cost saving initiatives are expected to deliver annualised cost savings of £1m per year.  We are confident that the new management structure and refreshed course programmes will, over time, deliver improved business performance.

 

Financial Performance

 

Revenue in the six months to 31 December 2011 increased by 5.0% to £41.6m (2010: £39.7m).  On a like-for-like basis (excluding the impact of acquisitions in the period and part way through the prior period) revenue was broadly unchanged from the previous period.  Adjusted EBITA1 was unchanged at £6.8m (2010: £6.8m).

 

Adjusted Profit before Tax2 decreased by 9.3% to £5.5m (2010: £6.1m).  This reflects the significantly higher finance costs incurred following the renewal in June 2011 of the Company's banking facilities.  The impact of this on the first half finance costs was approximately £0.5m.  From December 2011 the Group's effective cost of borrowing has reduced as a result of the maturity in November 2011 of a 5 year interest rate swap on £15m of debt at 5.23% against 3 month LIBOR.  This was replaced by a 5 year swap at 2.68% and a further £10m 3 year interest swap became effective in November at 2.12% against 3 month LIBOR. Profit before Tax decreased to £0.9m (2010: £2.5m) reflecting increases in non-recurring items and amortisation.

 

Adjusted Earnings per Share3 decreased by 3.9% to 4.67p (2010: 4.86p).  Basic earnings per share decreased to  0.61p (2010: 1.57p).

 

Operating cash flow remained healthy at £5.7m (2010: £6.4m) representing 93.9% of operating profit before amortisation, net finance costs and taxation (2010: 98.3%).

 

At 31 December 2011 the net assets of the Group were £50.1m (2010: £50.9m) with deferred revenue of £17.4m (2010: £16.8m).  At 31 December 2011 the Group had net debt of £41.5m (2010: £40.9m) representing 63.8% utilisation of the Group's facilities which are committed to February 2016.

 

Publishing & Information

 

The Publishing & Information Division has delivered a solid performance in the six months to 31 December 2011, benefiting from a strong subscription based business model and the increasing digital delivery of high quality content.  Information sales and subscriptions represented 87% of the Division's revenue (2010: 84%) and digital revenues as a percentage of sales improved to 79% (2010: 75%).

 

Segmental revenue increased by 11.9% to £19.9m (2010: £17.7m).  This includes the impact of a full six months revenue from Axco, which was acquired half way through the corresponding period in the prior year.  Excluding Axco, like-for-like revenues grew by 1% despite the closure of 16 print products in July 2011. 

 

Segmental profits before non recurring items, central overheads, share based payments, amortisation, net finance costs and tax have grown by 8.6% to £5.2m (2010: £4.8m).

 

Wilmington Business Intelligence ('WBI') is continuing its transformation towards a fully digital business.  During the period a number of print products were closed, with the result that revenues declined by 8% compared to the corresponding period in the prior year and we envisage further reductions in print products during the next twelve months.  At the same time we saw increasing revenues from recently launched digital products albeit these revenues, as previously highlighted, will be received over the period of subscription.

 

Our Professional Services division has benefited from its new Dubai research centre becoming fully operational during the period. The Middle East is an important region for the credit insurance market and this centre will allow us to serve more effectively our global customers.

 

The Healthcare businesses in the UK and France achieved revenue growth of 13%. 

 

Training & Events

 

The Training & Events Division has delivered a mixed performance during the first six months of the financial year.  Overall segmental revenues were broadly unchanged at £21.8m (2010: £21.9m).

 

Increased market share saw Matchett Group, which provides graduate entrant training to international investment banks, achieve good revenue growth, with like-for-like revenues 12% ahead of the prior year.  This was achieved however in an environment where there has been pressure on margins. 

 

Mercia, our accountancy training business, achieved revenue growth of 9% ahead of the prior year, primarily reflecting the acquisition of a portfolio of CPD courses from CCH in August.

 

The International Compliance Training (ICT) business revenues were in line with the corresponding period for the prior year with a number of new revenue streams expected to commence in the second half of the financial year in Malaysia and Australia.  ICT has also expensed the development cost of major bespoke programmes for International Financial Regulators and major Financial Institutions which will contribute to its performance in the second half of our financial year.

 

As we have previously reported, the legal training business has experienced continuing difficult trading conditions.  Revenues in this part of the business fell by 14% in the first six months of the financial year compared to the corresponding period in the prior year. We have undertaken a detailed review of the business and implemented a plan, including a new management team, headcount reductions, modified course programmes and refocused marketing and sales, to better address the challenges and opportunities in this market. 

 

Segmental profits in the six months to 31 December 2011, before non-recurring items, central overheads, share based payments, amortisation, net finance costs and tax were 6.2% lower at £2.9m (2010: £3.1m).  This decline predominantly reflects the movement in revenues in the highly operationally geared legal training business and the continued investment in the compliance training business, where we expect to see revenue growth in the second half of the financial year.

 

Dividend

 

It is the Board's intention to maintain the dividend at the same level as the prior year.  An interim dividend of 3.5p per share (2010: interim 3.5p, June 2011 final 3.5p) will be paid on 12 April 2012 to shareholders on the register as at 16 March 2012.

 

Board Changes

 

I was delighted that during the period we were able to welcome to the Board two new non-executive directors, Derek Carter and Nathalie Schwarz.  Derek has a wealth of experience in B2B media whilst Nathalie, who is a qualified solicitor, has considerable experience in broadcast media.  The Board is already benefiting from their contribution.

 

It would be remiss of me not to thank my predecessor as Chairman, David Summers, for his contribution to the Company over many years.  David took the Chair at a time when the Company was predominantly known as a publisher of trade magazines and he oversaw a transformation of the business.  David retired from the Board on 31 December 2011 and we wish him well in his retirement.

 

Outlook

 

Our outlook for the full year remains unchanged.  Whilst economic conditions remain tough generally, most areas of our business have been resilient.  The cost savings and management initiatives which have already been implemented in response to this should result in an outcome for the full year in line with our expectations.

 

The investments made during the last financial year and those being made this year are expected to continue to transition the business to a higher margin and higher quality business which can deliver our medium term growth ambitions.

 

 

 

 

Mark Asplin

Chairman

 

 

 

1                      Adjusted EBITA - see note 5 to the interim financial statements

2                      Adjusted Profit before Tax - see note 5 to the interim financial statements

3                      Adjusted Earnings per Share - see note 11 to the interim financial statements

 

 

 

 

 

Consolidated Income Statement

 



Six months
   ended 31
December
2011

 

Six months
ended 31
December
2010

 

Twelve months

 ended 30

 June

 2011

 



(unaudited)

(unaudited)

(audited)


Notes

£'000

£'000

£'000






Revenue

6

41,635

39,671

83,779

Cost of sales


(13,401)

(12,361)

(25,463)






Gross profit


28,234

27,310

58,316

Operating expenses excluding amortisation and non-recurring items


(21,820)

(20,798)

(44,008)

Amortisation


(3,082)

(2,705)

(5,711)






Operating expenses before non-recurring items


(24,902)

(23,503)

(49,719)

Non-recurring items

7

(1,003)

(475)

(715)






Total operating expenses


(25,905)

(23,978)

(50,434)

Operating profit 


2,329

3,332

7,882

Finance income


24

20

20

Finance costs


(1,414)

(883)

(1,825)






Profit on continuing activities before income tax


939

2,469

6,077

Income tax expense

8

(229)

(914)

(1,448)






Profit for the period


710

1,555

4,629






Attributable to :










Equity Shareholders of the Company


512

1,299

4,306

Non-controlling interests


198

256

323



710

1,555

4,629






Earnings per share attributable to Equity Shareholders of the Company

11




Basic earnings per share


0.61p

1.57p

5.20p

Diluted earnings per share


0.59p

1.53p

5.07p






 

 

 

 

The above Consolidated Income Statement should be read in conjunction with the accompanying notes.

 

All items in the current and comparative periods relate to continuing activities.

 

 

 

Consolidated Statement of Comprehensive Income

 



Six months ended 31 December 2011

 

Six months ended 31 December 2010

 

Twelve months ended 30
June
 2011

 



(unaudited)

(unaudited)

(audited)



£'000

£'000

£'000






Profit for the period


710

1,555

4,629






Other comprehensive income





Interest rate swap fair value (loss)/gain taken directly to equity


(786)

617

437

Tax on interest rate swap fair value (loss)/gain taken directly to equity


204

(171)

(133)

Exchange translation difference


(49)

3

43

Other comprehensive income for the period, net of tax


(631)

449

347






Total comprehensive income for the period


79

2,004

4,976











Total comprehensive income for the period  attributable to :





Equity Shareholders of the Company


(124)

1,748

4,666

Non-controlling interests


203

256

310



79

2,004

4,976

 

 

 

 

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

 

 

 

 

Consolidated Statement of Changes in Equity

 



Attributable to Equity

Shareholders of the Company




Share capital

(note 17)

£'000

 

Share

option

reserve

£'000

Translation reserve

£'000

Retained earnings

£'000

Total

£'000

Non- controlling interests

 

£'000

Total equity

£'000










 

 

At 1 July 2010 (audited)


43,714

575

35

7,202

51,526

53

51,579

Profit for the period


-

-

-

1,299

1,299

256

1,555

Exchange translation difference


-

 

-

3

-

3

-

3

Interest rate swap fair value profit taken directly to equity


-

 

 

-

-

617

617

-

617

Tax on interest rate swap fair value profit taken directly to equity


-

 

 

-

-

(171)

(171)

-

(171)












43,714

575

38

8,947

53,274

309

53,583










Dividends paid


-

-

-

(2,894)

(2,894)

(258)

(3,152)

Net movement on share based payment reserve


-

237

-

-

237

-

237

Issue of share capital during the period


311

(121)

-

-

190

-

190

Movement in offset of provisions for future purchase of non-controlling interests


-

-

-

-

-

(2)

(2)










At 31 December 2010 (unaudited)


44,025

691

38

6,053

50,807

49

50,856










Profit for the period


-

-

-

3,007

3,007

67

3,074

Exchange translation difference


-

-

53

-

53

(13)

40

Interest rate swap fair value loss taken directly to equity


-

-

-

(180)

(180)

-

(180)

Tax on interest rate swap fair value loss taken directly to equity


-

-

-

38

38

-

38












44,025

691

91

8,918

53,725

103

53,828










Dividends paid


-

-

-

(2,901)

(2,901)

(78)

(2,979)

Net movement on share based payment reserve


-

129

-

147

276

-

276

Issue of share capital during the period


-

-

-

-

-

-

-

Obligation to issue shares


1,746

-

-

-

1,746

-

1,746

Movement in offset of provisions for future purchase of non-controlling interests


-

-

-

-

-

25

25










At 30 June 2011 (audited)

 


45,771

820

91

6,164

52,846

50

52,896

Profit for the period


-

-

-

512

512

198

710

Exchange translation difference


-

-

(54)

-

(54)

5

(49)

Interest rate swap fair value loss taken directly to equity


-

-

-

(786)

(786)

-

(786)

Tax on interest rate swap fair value loss taken directly to equity


-

-

-

204

204

-

204



45,771

820

37

6,094

52,722

253

52,975










Dividends paid


-

-

-

(2,946)

(2,946)

(10)

(2,956)

Net movement on share based payment reserve


-

18

-

295

313

-

313

Issue of share capital during the period


1,503

-

-

-

1,503

-

1,503

Obligation to issue shares


(1,746)

-

-

243

(1,503)

-

(1,503)

Movement in offset of provisions for future purchase of non-controlling interests


-


-

-

-

(194)

(194)










At 31 December 2011 (unaudited)


45,528

838

37

3,686

50,089

49

50,138

 

 

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

 

 

 

Consolidated Balance Sheet

 



 

31 December 2011

 

 

31 December 2010

 

 

30 June 2011

 



(unaudited)

(unaudited)

(audited)


Notes

£'000

£'000

£'000

Non-current assets





Goodwill

13

74,737

73,827

74,681

Intangible assets

13

33,737

37,839

36,216

Property, plant and equipment

13

7,525

7,245

7,776

Deferred income tax asset


536

303

335



116,535

119,214

119,008

Current assets





Inventories


997

1,565

828

Trade and other receivables


20,098

20,250

21,658

Derivative financial assets


-

-

16

Cash and cash equivalents


3,208

3,407

2,321



24,303

25,222

24,823

Total assets


140,838

144,436

143,831

Current liabilities





Trade and other payables

14

(34,463)

(34,814)

(37,025)

Current income tax liabilities


(988)

(2,001)

(1,377)

Derivative financial liabilities


-

-

(379)

Bank overdrafts


(2,678)

(3,333)

(2,277)

Provisions for future purchase of non-controlling interests

15

(1,822)

(1,784)

-



(39,951)

(41,932)

(41,058)

Non-current liabilities





Bank loans net of facility fees

16

(41,094)

(40,926)

(38,990)

Deferred consideration


(909)

-

(866)

Derivative financial liabilities


(1,371)

(339)

(187)

Deferred tax liabilities


(7,207)

(9,026)

(7,938)

Provisions for future purchase of non-controlling interests

15

(168)

(1,357)

(1,896)



(50,749)

(51,648)

(49,877)

Total liabilities


(90,700)

(93,580)

(90,935)

Net assets


50,138

50,856

52,896

Equity





Share capital

17

4,305

4,241

4,241

Share premium

17

45,231

43,792

43,792

Treasury shares

17

(4,008)

(4,008)

(4,008)

Obligation to issue shares


-

-

1,746

Translation reserve


37

38

91

Share based payments reserve


838

691

820

Retained earnings


3,686

6,053

6,164

Shareholders' funds


50,089

50,807

52,846

Non-controlling interests


49

49

50

Total equity and reserves attributable to Equity Shareholders of the Company


50,138

50,856

52,896

 

The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.

 

 

 

Consolidated Statement of Cash Flow

 



Six months ended 31 December 2011

Six months ended 31 December 2010

Twelve months

ended 30

June

 2011



(unaudited)

(unaudited)

(audited)


Notes

£'000

£'000

£'000






Cash inflows from operating activities





Cash generated from operations before non-recurring items

18

5,692

6,412

 

15,811

Net interest paid


(1,323)

(680)

(2,388)

Net tax paid


(1,383)

(1,783)

(4,110)






Net cash inflow from operating activities


2,986

3,949

9,313






Investing activities





Purchase of subsidiary undertakings


-

(21,325)

(21,294)

Cash acquired on purchase of subsidiary undertakings


-

1,406

1,406

Purchase of non-controlling interests

15

-

(3,852)

(3,849)

Consideration from sale of business


31

-

-

Deferred consideration from sale of business


-

-

250

Cash acquired on purchase of business


190

-

-

Non-recurring  costs

7

(634)

(475)

(715)

Purchase of property, plant and equipment

13

(651)

(524)

(1,463)

Proceeds from sale of property, plant and equipment


155

-

40

Purchase of intangible assets

13

(634)

(334)

(882)

Proceeds from sale of intangible assets


-

12

-

Net cash used in investing activities


(1,543)

(25,092)

(26,507)











Financing activities





Dividends paid to Equity Shareholders of the Company


(2,946)

(2,894)

(5,795)

Dividends paid to non-controlling interests in subsidiary undertakings


(11)

(258)

(336)

Issue of ordinary shares


-

190

190

Increase in long term loans


2,000

23,000

22,000

Net cash flows (used in)/from financing activities


(957)

20,038

16,059











Net increase/(decrease) in cash and cash equivalents, net of bank overdrafts


486

(1,105)

(1,135)

Cash and cash equivalents, net of bank overdrafts, at beginning of the period


44

1,179

1,179






Cash and cash equivalents, net of bank overdrafts, at end of the period


530

74

44






Reconciliation of net debt





Cash and cash equivalents at beginning of the period


2,321

1,779

1,779

Bank overdrafts at beginning of the period


(2,277)

(600)

(600)

Bank loans at beginning of the period

16

(40,000)

(18,000)

(18,000)

Net debt at beginning of the period


(39,956)

(16,821)

(16,821)

Net Increase/(decrease) in cash and cash equivalents, net of bank overdrafts


486

(1,105)

(1,135)

Increase in long term loans


(2,000)

(23,000)

(22,000)

Cash and cash equivalents at end of the period


3,208

3,407

2,321

Bank overdrafts at end of the period


(2,678)

(3,333)

(2,277)

Bank loans at end of the period

16

(42,000)

(41,000)

(40,000)

Net debt at end of the period


(41,470)

(40,926)

(39,956)

 

The above Consolidated Statement of Cash Flow should be read in conjunction with the accompanying notes.

 

 

 

 

Notes to the Financial Information

 

1.   General information

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is 19-21 Christopher Street, London, EC2A 2BS.

 

The Company has its primary listing on the London Stock Exchange.

 

This condensed consolidated interim financial information was approved for issue on 28 February 2012.

 

This unaudited condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  Statutory accounts for the year ended 30 June 2011 were approved by the board of Directors on 20 September 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

2.   Basis of preparation

This condensed consolidated interim financial information for the six months ended 31 December 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, ''Interim financial reporting'' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the Annual Financial Statements for the year ended 30 June 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The Group's forecast and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate well within the level of its current banking facilities. The Directors have therefore adopted a going concern basis in preparing this interim financial information.

 

3.   Accounting policies

The accounting policies applied are consistent with those of the Annual Financial Statements for the year ended 30 June 2011, as described in those Annual Financial Statements. 

 

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 July 2011, but are not currently relevant for the Group:

 

§ IFRS 7 ''Financial instruments: Disclosures on derecogonition'' effective for accounting periods beginning on or after 1 July 2011.

§ IAS 1 (amendment), ''Financial statement presentation regarding other comprehensive income'' effective for accounting periods beginning on or after 1 July 2011.

§ Annual improvements to International Financial Reporting Standards 2010 were issued in November 2010. The effective dates vary standard by standard but most are effective 1 January 2011.

 

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2011 and have not been early adopted:

 

§ IFRS 10 ''Consolidated financial statements'' effective for accounting periods beginning on or after 1 January 2013.

§ IFRS 11, ''Joint arrangements'' effective for accounting periods beginning on or after 1 January 2013.

§ IFRS 12, ''Disclosure of interests in other entities'' effective for accounting periods beginning on or after 1 January 2013.

§ IAS 12 ''Income taxes on deferred tax'' effective for accounting periods beginning on or after 1 January 2012.

§ IFRS 13, ''Fair value measurement'' effective for accounting periods beginning on or after 1 January 2013.

§ IAS 27 (revised), ''Separate financial statements'' effective for accounting periods beginning on or after 1 January 2013.

§ IAS 28 (revised), ''Associates and joint ventures'' effective for accounting periods beginning on or after 1 January 2013.

Management will assess the impact on the Group of these standards and interpretations prior to their effective date of implementation.

 

4. Risks and uncertainties

The Group's principal risks and uncertainties remain as stated on page 23 of the Business Review in the Annual Report and Financial Statements for the year ended 30 June 2011.

 

The main risks arising from the Group's financial instruments are interest rate risk, liquidity risk and foreign currency risk. At 31 December 2011, the Group had undrawn committed borrowing facilities of £23m, comprising a bank facility provided by Barclays Capital, HSBC and Royal Bank of Scotland. Any non-compliance with covenants within the borrowing arrangements could, if not waived, constitute an event of default with respect to such arrangements.  The Group was fully compliant with its financial covenants throughout each of the periods presented. Management reviews compliance with financial covenants for future periods as part of its forecasting procedures.

 

The Board reviews and agrees policies for managing each of these risks and they are summarised below.  These policies are unchanged from the previous year.

 

a)  Interest rate risk

The Group finances its operations through a mixture of retained profits, operational cash flow and bank borrowings. Historically, the Group has expanded its operations both organically and by acquisition, which has led on occasions to the need for external finance. The Board has chosen a credit facility with a floating rate of interest linked to LIBOR and has hedged its interest exposure on a proportion of this facility.  In November 2006, the Group entered into a 5 year £15m interest rate swap whereby it received interest on £15m based on 3 month LIBOR and paid interest on £15m at a fixed rate of 5.23%. This facility expired in November 2011. In November 2010, the Group entered into a further three hedging instruments. Firstly, a 5 year £15m interest rate swap fixed against 3 month LIBOR with a forward start of 21 November 2011 paying interest on £15m at a fixed rate of 2.68% was entered into. Secondly, a cap of 2% was put on a further £10m until November 2011. Finally, in November 2010, a 3 year £10m interest rate swap fixed against 3 month LIBOR with a forward start of 21 November 2011 paying interest on £10m at a fixed rate of 2.12% was entered into. These derivatives have been designated as a cash flow hedge in order to manage interest rate risk associated with the first £25m of the credit facility.  Payments received under the swaps have been matched against interest paid quarterly during the period and the entire mark to market loss on the derivatives have been recognised in equity, following the Directors' assessment of the hedge's effectiveness. There have been no significant changes in the business or economic circumstances that affect the fair value of the Group's financial assets and financial liabilities. The levels used for fair value measurement of financial instruments remain unchanged from those disclosed in note 23 of the audited Financial Statements for the year ended 30 June 2011. The new financial instrument referred to in (c) below is a level 2 financial instrument in the fair value measurement hierarchy.

 

b) Liquidity risk

The Group has an unsecured committed bank facility of £65m (2010: £70m) to February 2016. The facility currently comprises a revolving credit facility of £60m (2010: £60m) and an overdraft facility of £5m (2010: £5m together with a £5m money market line). At 31 December 2011, £42m of the revolving credit facility was drawn down (2010: £41m). Interest is charged on the amount drawn down at 2.00 to 2.75 percent above LIBOR depending upon leverage. Under the facility, drawdown is made for interest fixture periods of up to six months in duration.

 

The bank overdrafts are the subject of a Group set-off arrangement. Interest is charged on the overdraft at 2.25% over Barclays bank base rate.

 

c) Foreign currency risk

The Group has a substantial customer base overseas.  The Group maintains bank accounts in foreign currency and converts this currency to Sterling at the appropriate times minimising the exposure to exchange fluctuations. On 30 September 2010, the Group sold forward €1.0m to 4 October 2011 at a rate of 1.170. This contract was entered into to provide certainty in Sterling terms of the bulk of the net Euro income of APM. On 26 January 2011, the Group sold forward US$0.5m to 2 December 2011 at a rate of 1.5881. On 22 June 2011, the Group sold forward US$0.5m to 2 December 2011 at a rate of 1.6188. These contracts were entered into in order to provide certainty in Sterling terms of the bulk of the net US$ income of the Matchett business. These contracts matured during the period ended 31 December 2011. On 8 July 2011, the Group sold forward a total of US$4.5m at rates between 1.5625 and 1.61 which are determined on 4 dates (''the expiry dates'') between 29 September 2011 and 30 May 2012. Under the terms of the contract the dollars are delivered during a 3 month window following the expiry date. The gains/(losses) on these contracts are recognised in the Income Statement.

 

5. Adjusted Profit

To allow shareholders to gain a better understanding of the trading performance of the Group, Adjusted Profit has been calculated as profit before income tax, amortisation of intangible assets, impairment of goodwill, unwinding of the discount on the provisions for future purchase of non-controlling interests, share based payments and non-recurring items and reconciles to profit on continuing activities before income tax as follows:

 


Six months

ended 31

December

2011

 

Six months

ended 31

December

2010

 

Twelve months

ended 30

June

2011

 


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000





Profit from continuing activities before taxation ("Profit before Tax")

939

2,469

 

6,077

Amortisation of intangible assets

3,082

2,705

5,711

Unwinding of the discount on the provisions for future purchase of non-controlling interests

94

157

265

Unwinding of the discount on deferred consideration

43

-

-

Share based payments

346

267

634

Non-recurring items (see note 7)

1,003

475

715









Adjusted profit before income tax (''Adjusted Profit before Tax'')

5,507

6,073

13,402

Net finance costs (excluding the unwinding of the discounts above)

1,253

706

1,540





Adjusted Profit before Tax and net finance costs (''Adjusted EBITA'')

6,760

6,779

14,942

Depreciation

781

540

900





Adjusted EBITA before depreciation (''Adjusted EBITDA'')

7,541

7,319

15,842

 

6. Segmental information

Operating segments are reported in a manner consistent with the internal reporting provided to the Company's Board of Directors, which is considered to be the Group's chief operating decision maker.

 

The Board considers the business from both a geographic and product perspective. Geographically, management considers the performance of the Group between the UK and overseas.

 

(a) Business segments

 

Six months ended 31 December 2011 (unaudited)


Training & Events

Publishing & Information

Total


£'000

£'000

£'000

Revenue

21,777

19,858

41,635





Segmental profit before amortisation and share based payments

2,933

5,209

8,142

Amortisation

(489)

(2,529)

(3,018)

Share based payments

(117)

(119)

(236)





Segmental profit after amortisation and share based payments

2,327

2,561

4,888





Unallocated central overheads (includes amortisation of £64,000 and share based payments of £110,000)



(1,556)





Profit from continuing operations before non-recurring items



3,332

Non-recurring items (see note 7)



(1,003)





Profit from continuing operations after non-recurring items



2,329

Net finance costs



(1,390)





Profit from continuing activities before tax



939

Income tax expense (see note 8)



(229)





Profit for the period



710





 

Six months ended 31 December 2010 (unaudited)


Training & Events

Publishing & Information

Total


£'000

£'000

£'000





Revenue

21,924

17,747

39,671





Segmental profit before amortisation and share based payments

3,126

4,798

7,924

Amortisation

(946)

(1,695)

(2,641)

Share based payments

(70)

(69)

(139)





Segmental profit after amortisation and share based payments

2,110

3,034

5,144





Unallocated central overheads (including amortisation of £64,000 and share based payments of £128,000)



(1,337)





Profit from continuing operations before non-recurring items



3,807

Non-recurring items (see note 7)



(475)





Profit from continuing operations after non-recurring items



3,332

Net finance costs



(863)





Profit from continuing activities before tax



2,469

Income tax expense (see note 8)



(914)





Profit for the period



1,555

 

Twelve months ended 30 June 2011 (audited)


Training & Events

Publishing & Information

Total


£'000

£'000

£'000





Revenue

43,594

40,185

83,779





Segmental profit before amortisation and share based payments

6,475

10,590

17,065

Amortisation

(1,666)

(3,925)

(5,591)

Share based payments

(179)

(353)

(532)





Segmental profit after amortisation and share based payments

4,630

6,312

10,942





Unallocated central overheads (including amortisation of £120,000 and share based payments of £102,000)



(2,345)





Profit from continuing operations before non-recurring items



8,597

Non-recurring items (see note 7)



(715)





Profit from continuing operations after non-recurring items



7,882

Net finance costs



(1,805)





Profit from continuing activities before tax



6,077

Income tax expense (see note 8)



(1,448)





Profit for the year



4,629

 

 

(b)  Segmental information by geography

The geographical analysis of revenue by destination is as follows:

 


Six months ended 31 December 2011

 

Six months ended 31 December 2010

 

Twelve months

ended 30

June

2011

 


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000





United Kingdom

29,726

28,998

61,680

Overseas

11,909

10,673

22,099






41,635

39,671

83,779





 

7. Non recurring items

The following items of an unusual nature, size or incidence have been charged to operating profit during the period and shown as non-recurring items:

 


Six months ended 31 December 2011

(unaudited)

£'000

Six months ended 31 December 2010

(unaudited)

£'000

Twelve months ended 30
June
2011

(audited)

£'000





Costs written off relating to both successful and abortive acquisitions

12

 

325

565

Costs relating to the termination of the mergers and acquisition department

-

 

150

150

Restructuring costs

991

-

-

Total non-recurring costs

1,003

475

715

 

Restructuring costs comprise primarily redundancy and termination costs together with associated reorganisation costs.

 

8. Income tax expense


Six months

ended 31

December

2011

 

Six months

ended 31

December

2010

 

Twelve months

ended 30

June

2011

 


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000





The tax charge comprises:




UK corporation tax at current rates

776

1,048

2,509

Adjustment to tax charge in respect of previous years

(14)

(29)

(88)






762

1,019

2,421

Foreign tax

370

590

909

Adjustment to foreign tax charge in respect of previous years

(44)

-

(18)





Total current tax

1,088

1,609

3,312

Deferred income tax credit

(761)

(547)

(1,270)

Deferred income tax credit in respect of previous years including the effect of change of corporation tax rate

(98)

(148)

(594)





Income tax expense

229

914

1,448

 

9. Profit/(loss) for the period from discontinued operations after income tax

During the six months ended 31 December 2011 and in the comparative periods presented, no operations met the definition of discontinued operations.

 

10. Dividends

Amounts recognised as distributions to Equity Shareholders in the period.

 


Six

 months ended 31 December 2011

pence per share

Six

months ended 31 December 2010

pence per share

Twelve months ended 30 June

2011

pence per share

Six

 months ended 31 December 2011

£'000

Six

 months ended 31 December 2010

£'000

Twelve months ended 30 June

2011

£'000


(unaudited)

(unaudited)

(audited)

(unaudited)

(unaudited)

(audited)

Final dividends recognised as distributions in the period

3.50

3.50

3.50

2,946

2,894

2,894

Interim dividends recognised as distributions in the period

-

-

3.50

-

-

2,901








Total dividends paid




2,946

2,894

5,795








Interim dividend proposed

3.50

3.50

3.50

2,946

2,894

3,014

 

11.  Earnings per share

 

Adjusted Earnings per Share has been calculated using an adjusted profit after taxation and minority interests but before amortisation and impairment of intangible assets and goodwill, non-recurring items, share-based payments and the unwinding of the discount on the provisions for future purchase of non-controlling interests. There were no discontinued operations during the period or for the comparative periods.

 

The calculation of the basic and diluted earnings per share is based on the following data:

 


Six months ended 31 December 2011

 

Six months ended 31 December 2010

 

Twelve months ended 30
June
2011

 


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000





Earnings from continuing operations for the purpose of basic earnings per share

512

1,299

4,306





Add:  Amortisation (net of non-controlling interest effect)

3,080

2,699

5,697

Non-recurring items

1,003

475

715

Share based payments

346

267

634

Unwinding of the discount on the provisions for future purchase of non-controlling interests

94

157

265

Unwinding of the discount on deferred consideration

43

-

-

Tax effect of above adjustments

(1,152)

(880)

(1,860)





Adjusted earnings for the purposes of adjusted earnings per share

3,926

4,017

9,757






Number

Number

Number

Weighted average number of ordinary shares for the purposes of basic and adjusted earnings per share

84,053,707

82,670,525

82,788,676





Effect of dilutive potential ordinary shares:








Exercise of share options

2,464,470

2,092,289

2,142,271





Weighted average number of ordinary shares for the purposes of diluted earnings per share

86,518,177

84,762,814

84,930,947





Basic earnings per share

0.61p

1.57p

5.20p

Diluted earnings per share

0.59p

1.53p

5.07p

Adjusted basic earnings per share (''Adjusted Earnings Per Share'')

4.67p

4.86p

11.79p

Adjusted diluted earnings per share

4.54p

4.74p

11.49p

 

12. Business combinations

In August 2011, Wilmington Group Plc's wholly owned subsidiary Mercia Group Limited acquired the trade, assets and liabilities of "CCH Professional Development". On completion, Mercia Group Limited received a cash payment of £190,000. Acquisition-related costs of £12,000 have been recognised as part of the non-recurring items in the Income Statement (see note 7).

 

During the period, the Group acquired the remaining 10% of the issued share capital of Wilmington Healthcare Limited (formerly Beechwood House Publishing Limited) thus making it a wholly owned subsidiary. Further details of this transaction were set out in note 29 of the audited Financial Statements for the year ended 30 June 2011.

 

13. Property, plant and equipment, intangible assets and goodwill

 


Property, plant and equipment

£'000

Intangible assets

£'000

Goodwill

£'000

















At 1 July 2010 (audited)

7,192

24,303

63,277

Additions

524

334

-

Acquisitions

73

15,923

10,392

Disposals

(11)

(16)

-

Exchange translation differences

7

-

-

Depreciation and amortisation

(540)

(2,705)

-

Change in provisions for the future purchase of non-controlling interests

-

-

155

Movement in offset of provisions for future purchase of non-controlling interests

-

-

3





Closing net book amount as at 31 December 2010 (unaudited)

7,245

37,839

73,827

Additions

939

548

-

Acquisitions

-

838

440

Disposals

(44)

(3)

-

Exchange translation differences

(4)

-

-

Depreciation and amortisation

(360)

(3,006)

-

Change in provisions for the future purchase of non-controlling interests

-

-

394

Movement in offset of provisions for future purchase of non-controlling interests

-

-

20





Closing net book amount as at 30 June 2011 (audited)

7,776

36,216

74,681

Additions

651

634

-

Acquisitions

-

-

250

Disposals

(155)

(31)

-

Exchange translation differences

34

-

-

Depreciation and amortisation

(781)

(3,082)

-

Change in provisions for the future purchase of non-controlling interests

-

-

-

Movement in offset of provisions for future purchase of non-controlling interests

-

-

(194)

Closing net book amount as at 31 December 2011 (unaudited)

7,525

33,737

74,737

 

14. Trade and other payables

 


31 December 2011

£'000

(unaudited)

31 December 2010

£'000

(unaudited)

30 June

2011

£'000

(audited)





Trade payables

2,044

1,933

2,986

Other payables

3,621

4,455

2,847

Other taxes and social security

2,468

2,706

3,465

Subscriptions and deferred revenue

17,437

16,772

17,889

Accruals

8,893

8,948

9,838


34,463

34,814

37,025





 

15. Provisions for future purchase of non-controlling interests




Current provisions

£'000

Non-current provisions

£'000




At 1 July 2010 (audited)

3,530

3,147

Amounts paid in respect of acquisitions of non-controlling interests

(3,849)

-

Unwinding of discount

-

157

Change in value of existing provisions

319

(163)

Non-current provisions becoming current

1,784

(1,784)

 

At 31 December 2010 (unaudited)

1,784

1,357

Amounts paid in respect of acquisitions of non-controlling interests

-

-

Unwinding of discount

-

108

Change in value of existing provisions

(189)

582

Option to be settled by issue of equity

(1,746)

-

Non-current provisions becoming current

151

(151)

 

At 30 June 2011 (audited)

-

1,896

Amounts paid in respect of acquisitions of non-controlling interests

-

-

Unwinding of discount

-

94

Change in value of existing provisions

-

-

Non-current provisions becoming current

1,822

(1,822)




At 31 December 2011 (unaudited)

1,822

168

 

Provisions represent the estimated future cost (discounted to reflect the time value of money) required to settle put options held by non-controlling shareholders over non-controlling interest shares, should said put options be exercised.

 

The actual settlement timing and value is dependent upon when (and if) the non-controlling shareholders choose to exercise their options and the profitability of the underlying companies at the date of exercise. For the purposes of estimating the above provision it has been assumed that put options are exercised at the first available opportunity.

 

16. Bank loans


31 December

2011

£'000

(unaudited)

31 December

2010

£'000

(unaudited)

30 June

2011

£'000

(audited)

Non-current liability - Bank loans

42,000

42,000

40,000

Facility fees

(906)

(1,074)

(1,010)

Bank loans net of facility fees

41,094

40,926

38,990

 

Details of the Group's bank facility are included in note 4 (b) under Risks and uncertainties.

 

17. Share capital

 


Number of shares

of 5p each

Ordinary shares

£'000

Share premium

£'000

Obligation to issue shares

£'000

Treasury shares

£'000

Total

£'000

Opening balance as at 1 July 2010 (audited)

84,577,679

4,229

43,493

-

(4,008)

43,714

Proceeds from shares issued under Employee share option schemes

236,302

12

299

-

-

311

At 31 December 2010 (unaudited)

84,813,981

4,241

43,792

-

(4,008)

44,025

Obligation to issue shares

-

-

-

1,746

-

1,746








As at 30 June 2011 (audited)

84,813,981

4,241

43,792

1,746

(4,008)

45,771

Shares issued during the period

1,289,156

64

1,439

(1,746)

-

(243)

At 31 December 2011 (unaudited)

86,103,137

4,305

45,231

-

(4,008)

45,528

 

During the period ended 31 December 2011, no ordinary shares were issued in respect of share options exercised by members of staff (2010: 236,302).

 

The Group issued 1,289,156 new ordinary shares in July 2011 to satisfy the consideration for the remaining Option shares as explained in note 29 of the audited Financial Statements for the year ended 30 June 2011.

 

The Company did not buy back any shares during the period (2010: nil). At 31 December 2011, 1,942,000 shares were held in Treasury (2010: 1,942,000).

 

18. Net cash flow from operating activities

 



Six months ended 31 December 2011

 

Six months ended 31 December 2010

 

Twelve months ended 30
 June
 2011

 



(unaudited)

(unaudited)

(audited)


Note

£'000

£'000

£'000






Profit from continuing operations before income tax


939

2,469

6,077

Non-recurring items

7

1,003

475

715

Depreciation of property, plant and equipment

13

781

540

900

Amortisation of intangible assets

13

3,082

2,705

5,711

(Profit)/loss on disposal of property, plant and equipment


-

(2)

15

Loss on disposal of intangible assets


-

15

19

Share based payments


346

267

634

Finance costs


1,390

863

1,805

Operating cash flows before movements in working capital


7,541

7,332

15,876

(Increase)/decrease in inventories


(169)

(485)

252

Decrease/(increase) in receivables


1,622

(751)

(2,539)

(Decrease)/increase in payables


(3,302)

316

2,222

Cash generated by operations before non-recurring items


5,692

6,412

15,811

 

 

19. Related party transactions

 

The only related party transactions to have taken place during the period were normal business transactions between the Company and its subsidiary undertakings.

 

Certain administrative expenses totalling £381,000 (2010: £170,000) have been recharged by the Company at cost to its subsidiaries.

 

20. Seasonality

 

The Group has traditionally generated the majority of its revenues and profits during the second half of the financial year. This has historically resulted from two factors. Firstly, most of the Group's businesses (the notable exception being The Matchett Group) produce seasonally low sales in July, August and December which include holiday periods for many of the Group's clients. Secondly, the Publishing business produces a number of annual directory and database products, most of which are published in the second half of the financial year. To the extent that revenue is generated in the hard copy products this is recognised on publication. To the extent revenue relates to online content revenue is recognised over the period the content remains online. The migration over recent years of much of this revenue to the online products has resulted in a corresponding reduction in the seasonality of this revenue.

 


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