TIDMWIL
RNS Number : 5665Q
Wilmington PLC
13 September 2017
13 September 2017 WILMINGTON PLC
('Wilmington', 'the Group' or 'the Company')
Financial results for the twelve months ended 30 June 2017
Wilmington plc, the provider of information, education and
networking services in Risk & Compliance, Professional and
Healthcare knowledge areas, today announces its full year results
for the twelve months ended 30 June 2017.
Financial Highlights
- Revenues for the year up 14% (GBP14.6m) to GBP120.3m (2016:
GBP105.7m); up 9% on a constant currency(1) basis
- Organic revenue(2) down 0.8% overall with growth offset by one
off issues at AMT and declines in legal product lines
- Adjusted measures(345) now stated inclusive of share based
payment costs of GBP0.6m (2016: GBP0.6m)
- Adjusted EBITA(3) increased by 6% (GBP1.4m) to GBP23.4m (2016:
GBP22.0m) with EBITA margins at 19.4% (2016: 20.8%). Margins
impacted by significant investment particularly in Compliance
- Adjusted Profit before Tax(4) up 5% to GBP21.4m (2016: GBP20.3m)
- Profit before tax at GBP15.9m (2016: loss GBP3.4m)
- Adjusted Earnings per Share(5) up 5% to 19.05p (2016: 18.17p)
- Basic earnings per Share 14.72p (2016: loss per Share 7.39p)
- Final dividend increased 7% to 4.6p (2016: 4.3p); total dividends up 5% to 8.5p (2016: 8.1p)
- Cash flow conversion(6) at 114% (2016: 108%)
(1) Constant currency - eliminating the effects of exchange rate
fluctuation
(2) Organic Revenue - eliminating the effects of exchange rate
fluctuation and the impact of acquisitions
(3) Adjusted EBITA - see note 3
(4) Adjusted Profit before Tax - see note 3
(5) Adjusted Earnings per Share - see note 10
(6) Cash conversion represents the Operating Cash Flow for the
year as a percentage of adjusted operating profit before interest
and amortisation.
Operational Highlights
- Good growth from Risk & Compliance with revenue up 9%,
driven by demand for compliance offerings
- Strong growth from Healthcare division overall revenue up 28%,
supported by acquisitions and UK healthcare business delivering
organic revenue growth of 9%
- Acquisition of Health Service Journal ("HSJ") on 31 January
2017 creates unparalleled insight into UK healthcare market, and
adds scale to Healthcare division
- Professional division revenue up 7% driven by the maiden
contribution from SWAT Group Limited ("SWAT") which adds scale to
the Professional division
- Exiting legal practice support market with planned closure of Ark businesses
- Project Sixth gear progressing well on the consolidation of
the London offices, marketing best practice, procurement and key
account management
- London leasehold premises sold for GBP7.3m and new central
London leasehold headquarters acquired
- Subscription and repeatable revenue at 77% of total revenue (2016: 75%)
- International revenues increased to 43% of total revenue (2016: 42%)
Outlook and Current Trading
- Satisfactory albeit slow start for first two months of the
year but revenue up 7% over the same period in 2016 driven by HSJ
contribution
- Exit from legal practice support market will reduce
unprofitable revenue and help restore stability to Professional
division
- Increased operating costs of GBP0.75m across the Group to
capitalise on opportunities from changing customer demands
- Increased annual operating costs from London property move of GBP0.9m p.a.
- Expecting continued momentum from Risk & Compliance and Healthcare businesses
Mark Asplin, Chairman, commented:
"This year has been a positive one for Wilmington, with overall
solid financial performance delivered in the context of
accelerating change in our end-markets. Wilmington is well
positioned to benefit from this change, and we continue to see
significant demand for our products and services from our
customers.
We enter the new financial year anticipating continued momentum,
particularly in our Risk & Compliance and Healthcare divisions.
We are also excited about the prospects for our newly created
Professional division, which promises to benefit in the medium term
from the convergence in education requirements across the
professional services."
Pedro Ros, Chief Executive Officer, commented:
"Wilmington continues to make good strategic progress as we
focus the business on key areas of growth. With three logical
divisions in place and an ongoing commitment to investing in the
digitisation of our business, we are confident in our prospects for
the future.
This year we will sharpen our focus further still. We will
continue the integration of our Professional division and
accelerate the digital transition of our products. Later in the
year we will also be bringing 300, nearly one third of our global
workforce, of Wilmington's people under one roof, reinforcing our
culture as 'One Wilmington', ensuring we can collaborate
effectively and helping us to attract and retain the best talent in
our industry."
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement this inside information is now considered to be in the
public domain.
For further information, please contact:
Wilmington plc
Pedro Ros, Chief Executive Officer
Anthony Foye, Chief Financial Officer 020 7422 6800
FTI Consulting
Charles Palmer / Emma Appleton /
Adam Davidson 020 3727 1000
Notes to Editors
Wilmington plc is the provider of information, education and
networking services in Risk & Compliance, Professional and
Healthcare knowledge areas. Capitalised at approximately GBP207
million, Wilmington floated on the London Stock Exchange in
1995.
Chairman's Statement
I am pleased to present my report on Wilmington's results for
the twelve months ended 30 June 2017. Overall It has been a
positive financial performance as we move towards our objective of
becoming a single integrated international business. Wilmington has
continued to meet the challenges that necessary change inevitably
brings; a balance of growing revenue and profits whilst making
material investments in new products, systems, offices, personnel
and in new businesses.
Wilmington delivered revenue growth of 14% (up 9% on a constant
currency) led by excellent contributions from the acquisitions made
during the year and supported by organic growth from our core
offerings. We have seen strong growth from Healthcare up 28% and
good growth from Risk & Compliance up 9% as well as growth from
Professional which increased its revenue by 7% albeit benefiting
from the acquisition of SWAT.
Adjusted profit before tax (which now for the first time
includes share based payment costs of GBP0.6m (2016: GBP0.6m))
increased 5% to GBP21.4m (2016: GBP20.3m).
Business strategy
Wilmington's strategy is to further develop its business into a
knowledge based model and structure focussing on serving the needs
of chosen communities with an overall objective of becoming a
single integrated international business. This business structure
will maximise Wilmington's opportunities to help its clients and
communities meet their information, education and networking
requirements as well as drive operational efficiencies. As part of
its evolution, Wilmington has and is continuing to be more focussed
on its core communities that provide a higher quality of
earnings.
Vision
The vision which acts as our guide and underpins our strategy
is:
"To be the recognised knowledge leader and partner of choice for
information, education and networking in Risk & Compliance,
Professional and Healthcare."
By achieving our vision we aim to turn knowledge into
competitive advantage for our clients.
Project Sixth Gear
On 23 February 2017, we announced project Sixth Gear which is
the next stage in our strategic development. This project builds
upon the first stage which focussed on the simplification of group
structure and the selective acquisition of businesses to fill gaps
in our product offerings. The prime objective of Sixth Gear is to
accelerate the move to a single "One Wilmington" simplifying and
integrating the business further, maximising client relationships
and providing the basis for organic and acquisition-led growth and
scale. The accelerated integration and pooling of resources will
help to capitalise on growing economies of scale.
New Reporting Structure
As previously announced, to help simplify Wilmington still
further we reorganised our business into three divisions; Risk
& Compliance, Professional and Healthcare. The combination of
the former divisions of Legal and Finance into one new division;
Professional is a natural outcome from the restructuring,
downsizing and refocusing of our Law for Lawyers business over the
last few years. This combination which is facilitated by the
decision to exit from the legal practice support market also brings
greater clarity to this division.
Risk & Compliance division concentrates on servicing the
strong organic global demand for our offerings supported by
selective earnings enhancing acquisitions in the areas of risk
& compliance as well as investments in new products, data
services, offices and in new territories. The emphasis continues to
be servicing the needs of risk managers and compliance officers
globally.
Professional division provides information, education and
networking support to professionals in the accountancy, financial
services, and legal markets. This division focuses on supporting
the post-qualification needs of individual professionals and SMEs
with an increasing emphasis on exploiting international
opportunities, and an accelerated move to expand our digital
-learning solutions; areas where we feel the revenue growth
opportunities are greatest. The emphasis in the short term will be
on organic rather than acquisition led growth with capital
allocated accordingly.
Healthcare division is the renamed Insight division recognising
that well over 80% of its revenue following the HSJ acquisition
comes from healthcare markets globally. We are replicating the
successful model of providing information (particularly insight
data and analytics), education and networking capabilities on a
country by country basis. The emphasis will be to build on our
existing market presence in the EU and in the US either organically
or by acquisition.
In line with our strategy all three divisions offer information,
networking and education capabilities servicing key defined
communities, supported by best-in-class technology. The divisions
will look to exploit international and, increasingly digital
opportunities using and replicating expertise from their existing
market positions. Each division will also act as our specialist
knowledge expert and centre of excellence providing expertise and
R&D to support the two other divisions.
Our people
As a digital information, education and networking business
operating in dynamic and competitive markets, we are fundamentally
reliant upon the quality and professionalism of our people. I would
once again like to express my own and my fellow Board members'
appreciation of the hard work and dedication of our Wilmington
colleagues across the globe.
Financial and operational targets
I am pleased to report progress in all but one of our key
financial and operational targets. We have seen growth in Adjusted
Profit before Tax, Adjusted Earnings per Share, and Return on
Equity although we saw a drop in the level of Adjusted EBITA
margins from 20.8% to 19.4% reflecting inter alia significant
investment expenditure during the year. As you will read in the
Chief Executive Officer's review in our compliance business alone
we have invested an additional GBP1.0m in new initiatives which
represents one percentage point off our overall margin. We see
further necessary operational investment during 2017/18 offsetting
the underlying improvement to margins that integration, previous
investment projects and the impact of higher margin acquired
businesses bring on our Adjusted EBITA margins. The four financial
measures above form the basis of the Executive Directors incentive
plans.
We closely monitor cash conversion which we expect to exceed
100% on an annual basis, and in 2017 that conversion rate was 114%
(2016: 108%). This excellent cash conversion illustrates the
strength of the business as well as the efficiency in our
stewardship of working capital. The positive cashflow
characteristics of Wilmington matched with clear fiscal discipline
in turn help us attract and maintain significant finance from third
party providers.
We continue to generate a high proportion of our revenue derived
from quality and sustainable income streams and in 2017 revenue
from subscriptions and repeatable revenue was 77% of group revenue
(2016: 75%). A high proportion of repeatable revenue provides a
good degree of earnings visibility as well as security.
We continue to seek to increase each year our proportion of
revenue generated outside the UK where we see good prospects for
long term sustainable growth. Revenue outside the UK has grown
again and was 43% of total revenue compared to 42% last year with
the underlying relative growth in non-UK revenue from our portfolio
mitigated by our acquisitions this year which were both focussed on
the UK market.
These financial and operational performances are reflective of
the quality of our portfolio of offerings which benefit from a
significant proportion of revenues derived from subscriptions and
from products which disseminate increasingly international
content-rich, high-value information and, increasingly digitally
along with certificated education and compliance programmes.
Acquisitions
In support of our growth strategy, we continue to seek selective
earnings enhancing acquisition opportunities to add additional
growth, scale and expertise in our chosen markets. In this context,
we were delighted to announce two acquisitions during the year both
of which were consistent with our strategy of acquiring
complementary businesses with high repeat revenues in our chosen
knowledge areas and communities. The acquisitions of SWAT in July
2016 and HSJ in January 2017 enhanced and added further scale to
our offerings by providing information, education and, for HSJ
networking capability in our Professional and Healthcare divisions
respectively.
Cash and borrowings
Net debt, which includes cash and cash equivalents, bank loans
(excluding capitalised facility fees) and bank overdrafts, was
GBP40.0m (2016: GBP34.7m) an increase of GBP5.3m on last year
during another period of considerable growth and change in which we
spent GBP20.3m (including deferred consideration) on acquisitions
offset by the proceeds of GBP7.3m from the disposal of the
Underwood Street offices.
The Group continues to demonstrate excellent cash generative
characteristics as mentioned above with consistently high levels of
cash conversion. These characteristics were recognised by the
continued support from our principal bank debt providers who
extended the multicurrency GBP65m debt facility on 1 July 2015
until 1 July 2020. This facility was increased to GBP85m in support
of the acquisition of HSJ in January 2017. The facility can be
extended by a further GBP15m to GBP100m if required with majority
lending bank consent.
Our ability to use third party debt finance remains a key
component of our business development strategy and our debt
capacity remains strong. As we increase our profits given the cash
generative ability of our business this combines to provide
increased capacity for selective earnings enhancing acquisitions
and other capital investments.
Board changes
Anthony Foye has informed the Board of his intention to step
down from his position as Chief Financial Officer in due course.
Anthony will remain in his position until June 2018 while a
successor is found and to ensure a smooth and orderly handover. The
Board will initiate a search for his successor and an update in
relation to a new Chief Financial Officer will be made in due
course.
Dividend
I am proud of the Group's record of maintaining its dividend
over recent years and the resumption in 2013/14 of a progressive
dividend policy reflecting our improving financial performance. Our
dividend payment policy remains the same and underpins our
confidence in the strategy and vision and the resilience of our
business models. I am pleased to confirm that the final dividend
for this year will be increased again to 4.6p (2016: 4.3p) per
share, an increase of 7% on last year. This together with an
increased interim dividend makes a total dividend of 8.5p up 5%
from 2016 (8.1p) reflective of confidence in our future. It is the
Board's intention to maintain its progressive dividend policy
whilst ensuring that suitable dividend cover of at least two times
adjusted earnings per share is maintained.
The final dividend of 4.6p per share will be paid on 17 November
2017 to shareholders on the share register as at 20 October 2017,
with an associated ex-dividend date of 19 October 2017.
Current trading and outlook
The first two months of the year have started satisfactorily
albeit slowly across the Group with revenue up 7% against the same
period last year supported by the acquisition of HSJ. In Risk &
Compliance our compliance training businesses which make up the
bulk of the compliance business have started in line with plan
although down against a strong comparator period in 2016. The sales
pipeline for compliance training remains strong, continuing the
momentum we have seen over the last few years and in Risk we have
also seen a good start from Axco which was up 6% on the same period
in 2016.
The Professional division has started in line with the same
period in 2016 with good early performance from Accountancy product
lines offsetting slightly weaker performances mainly from the re
positioned Legal product which currently includes Ark. Healthcare
which has the benefit of HSJ has seen good growth overall as a
consequence of the acquisition and that has more than offset a
slower start across the division.
Relationships with our chosen communities and clients continue
to evolve at an increasing pace with commensurate demand for more
sophisticated interaction and bespoke products and services
delivered instantly and efficiently. We see this evolution as an
opportunity to increase our engagement with our markets, making us
an even more essential business partner as well as creating
barriers to our competitors. We need therefore to ensure our
businesses are equipped with the appropriate extra resources,
systems and support to capitalise on this opportunity. The
opportunity also comes at a cost and we expect to step up our
operating expenditure in 2017/18 in addition to our increased
annual London property costs of GBP0.9m by a further GBP0.75m
across the business. The additional costs which are discussed in
the Chief Executives report are in people, IT infrastructure,
automated marketing and in the digitisation of up to 250 of our
training programmes over the next 18 months predominantly in the
Risk & Compliance and Professional divisions as part of our
digital learning investment.
We continue to see tighter regulatory control and more complex
legislation implemented in most of our key markets and we remain
confident that these changes will continue to drive the demand for
our products and services globally.
Wilmington has been acquisitive in the past and we will continue
to review opportunities to enhance growth and to add expertise
through selective earnings enhancing acquisitions consistent with
our strategy. Our priority areas for capital allocation remain
compliance, risk (insurance) and healthcare as we focus on adding
further scale to our existing market positions.
The Board, our management team and our staff are excited and
energised about the opportunities driving Wilmington in the next
stage in its development. Wilmington will also benefit in 2017/18
from a full year of contribution from HSJ as well as the impact of
the investments made during 2016/17.
Mark Asplin
Chairman
Chief Executive Officer's review
I am pleased to present my report on Wilmington's performance
for the 12 months to 30 June 2017. During the year revenue
increased by 14% (GBP14.6m) and was up 9% in constant currency
terms. Adjusted EBITA was also up increasing by 6% to GBP23.4m. We
achieved good revenue growth from our Risk & Compliance
division up 9% overall (GBP3.5m) and from our Healthcare division
which was up 28% (GBP8.4m). The Professional division also recorded
growth, up 7% (GBP2.8m) albeit supported by acquisition-led growth
from SWAT (GBP4.7m). HSJ acquired on 31 January 2017 added GBP3.7m
to Healthcare revenue.
Organic revenue growth (excluding currency and acquisitions)
remains a priority but this year's overall organic growth was down
0.8%. Organic performance was impacted by the well-publicised
issues around AMT and the law for lawyers' products. Adjusting for
these two businesses, over 85% by value of the remainder of our
businesses delivered on average organic growth in excess of 2%.
This represents an improvement over the performance for the first
half year which showed an organic revenue decline of 2%.
The growth within Healthcare of 28% reflects excellent returns
from acquisitions we have made since the beginning of 2016 and
supported by 9% organic growth from our UK healthcare business.
Overall the Healthcare division's organic growth was 3% in constant
currency terms with overall growth in healthcare offset by the
expected decline in our legacy non-healthcare assets. The Risk
& Compliance increase of 9% (4% organic constant currency)
continued its trend of strong organic growth led by the compliance
training business which was up 7% despite some slippage into
2017/18. Whilst the Professional division recorded revenue growth
up 7% this was due to the acquisition of SWAT and support from
underlying growth from Accountancy which more than offset the
issues with our law for lawyers' product lines and AMT our
Investment bank training business.
Profit growth generally was constrained by the previously
announced planned investments particularly in our compliance
businesses, from the weaker performance from AMT and from our US
operations; and some slippage of compliance training assignments.
Recent acquisitions have however performed strongly in both revenue
and profit contribution terms and these results have also benefited
from favourable currency exchange effects on both revenue and on
profits adding around GBP5.0m and GBP1.0m respectively.
Finance costs before adjusting items were up 16% (GBP0.3m)
compared to 2015/16 reflecting inter alia GBP20.3m spent on
acquisitions (net of cash acquired) and deferred consideration
during the year which contributed to an increase in net debt of
GBP5.3m to finish at GBP40.0m.
The growth in Adjusted EBITA offset by the increase in adjusted
finance costs resulted in Adjusted Profit before Tax up GBP1.1m
(5%) to GBP21.4m (2016: GBP20.3m).
Risk & Compliance (35% of Group revenue, 44% of Group
contribution)(7)
This division provides in depth accredited regulatory and
compliance training and information, market intelligence, and
analysis. It focuses on the international financial services and
international insurance markets as well as the UK pensions
industry. The main communities that use our offerings are risk and
compliance officers globally.
2017 2016 Movement
GBP'm GBP'm GBP'm %
Revenue 42.3 38.8 3.5 9
Contribution 12.3 12.7 (0.4) (3)
Margin % 29 33
Divisional revenue increased by 9% (GBP3.5m) and contribution
was down slightly by 3% (GBP0.4m) reflecting investment within our
compliance business in new products, the new North American
compliance operation, and in additional support staff to expand our
infrastructure and to help in the drive to boost ICA membership. We
had also increased resources during the final quarter of 2017 on
the back of our recent success in winning two large international
training programmes which are now expected to be delivered during
2017/18. These additional resources and investments have impacted
margins in the short term but are expected to benefit contribution
in 2017/18 and indeed future years.
During the year, the net investment in our North American office
amounted to GBP0.5m, and additional resources in terms of senior
appointments, trainers, sales and administrative support staff
together with digital learning capability and bespoke compliance
programmes to expand our infrastructure were GBP0.5m.
Compliance
Our compliance business which accounts for just over 50% of the
division's revenue grew by 10% compared to 2015/16 (4% constant
currency). However, within this, our compliance training businesses
which are the division's main engine of growth, grew by 12% (7%
constant currency) slightly down on our expectations due to some
slippage of assignments into 2017/18.
Compliance Week, our US Governance Risk and Compliance (GRC)
events and information business reported revenue up 16% and on a
constant currency basis revenue was flat. There is an ongoing
programme of investment in new content and technology to reposition
the business as a GRC resource centre and events business
collaborating with other parts of Wilmington, in particular ICT and
ICA but also FRA on joint events. The flagship event in Washington
held in May 2017 enjoyed continued success and again attracted
record delegates and sponsorship offsetting some decline in
subscribers and sponsored events in the rest of the business. For
2017/18 continued investment is being made to strengthen the
content offering and more topic areas will be added together with
supporting databases.
Risk
Axco, the industry leading provider of insurance market
intelligence, regulation and compliance information reported 8%
revenue growth (3% constant currency) helped by the continued
success of its digital subscription products and the insight
products which enhance our analytical insurance offerings.
The remainder of the risk part of the division performed well
recording 9% growth overall (3% constant currency). In August 2016,
we successfully opened a new insurance events and training office
in Barcelona in response to increasing localised demand for our
insurance offerings.
Overall divisional contribution decreased by GBP0.4m (3%) to
GBP12.3m (2016: GBP12.7m). Margins were down to 29% (2016: 33%)
reflecting the investments outlined above which were predominantly
in the compliance training businesses.
(7) Group contribution of GBP27,834,000 see note 4
Professional (33% of Group revenue, 21% of Group
contribution)
This division includes Wilmington's financial training
businesses, financial networking events and our repositioned legal
product lines. The Professional division provides expert and
technical training as well as support services to professionals in
corporate finance and capital markets and to qualified lawyers and
accountants in the UK in both the profession and in industry. This
division serves primarily tier 1 banks, the international financial
services industry, US Capital Markets and small to medium sized
professional accountancy and law firms.
2017 2016 Movement
GBP'm GBP'm GBP'm %
Revenue 39.5 36.7 2.8 7
Contribution 5.9 6.2 (0.3) (5)
Margin % 15 17
The division recorded overall revenue growth of 7% (GBP2.8m)
attributed to the acquisition of SWAT which contributed GBP4.7m of
revenue and to foreign currency benefits of GBP1.2m. The
integration process for SWAT is progressing well and the business
is performing in line with plan. Organic (constant currency)
revenue which was down overall by 8% was reflective of the issues
at AMT and our Law for Lawyers business.
Investment bank training as previously reported had a weak first
half year which was mainly due to the competition issues previously
highlighted but also due to some softening of training assignments
in the Asia Pacific region. The second half year saw stabilisation
of the business and we are now entering the busy summer training
period with early indications of slow but more stable trading.
The division saw good underlying growth from accountancy
training (adjusting for the benefit from the one off double UK
Government fiscal budget in 2015/16) offset by previously reported
challenging market conditions in the Law for Lawyers businesses
following changes to the Legal CLE rules.
Divisional contribution was down 5% (GBP0.3m) on last year at
GBP5.9m and margins, as we saw at the half year were particularly
impacted by the issues at AMT.
The Professional division is being refocussed and integrated as
an integral part of project Sixth Gear under the leadership of its
new Divisional Director appointed on 1 July 2017.
Healthcare (32% of Group revenue, 35% of Group contribution)
The Healthcare division provides analysis and clarity to
customer-focused organisations predominantly in the Healthcare and
Life Science markets, enabling them to better understand and
connect with their markets. This division includes our UK
healthcare information businesses, our Paris based European
healthcare news agency, healthcare networking events and our legacy
non- healthcare data suppression and charity information
businesses. The main communities that use our offerings are
healthcare professionals on an increasingly global basis.
2017 2016 Movement
GBP'm GBP'm GBP'm %
Revenue 38.6 30.2 8.4 28
Contribution 9.7 7.3 2.4 33
Margin % 25 24
Revenue was up 28% (GBP8.4m) and, adjusting for the impact of
favourable currency movements, and the contribution from the
acquisitions made over the prior 18 months underlying revenue was
up 3% in organic terms compared to 2015/16.
Wilmington Healthcare business, which following the HSJ
acquisition will represent over 80% of the division by revenue on a
pro-forma basis, had a good year with organic revenue from the UK
businesses up 9%. The legacy UK businesses and brands have been
successfully supplemented by strategically relevant acquisitions
and unified under the Wilmington Healthcare brand and a single
management team. This performance was supported by good
performances from APM and from our US healthcare networking
events.
HSJ which was acquired on 31 January 2017 has had an excellent
start and has been fully integrated with the employees transferred
to our Underwood Street offices in March and all transactional
processes and functions transferred onto Wilmington systems by 30
June 2017.
The legacy data suppression and charities businesses were
marginally down (4%) as expected in revenue terms compared to last
year and the focus continues to be on delivering higher margins
through ongoing reorganisation and the review of marginal business
operations.
Benefiting from profit contributions from acquisitions, overall
contribution increased by 33% (GBP2.4m) to GBP9.7m. Contribution
growth was 27% in constant currency terms.
Group overheads
Group overheads, which include board costs, head office salaries
as well as unallocated central overheads, increased by GBP0.4m
(11%) to GBP3.9m (2016: GBP3.5m).
Project Sixth Gear update
As outlined in the Chairman's section we are progressing well
with project Sixth Gear which is a project to speed up the
integration of Wilmington. Sixth gear is already well advanced in
the achievement of many of its objectives including the
consolidation of the London offices, the consolidation of all UK
travel and subsistence, marketing best practice, procurement, key
account management and centralised functions.
New London Head Office
A key objective of project Sixth Gear was the consolidation of
the remaining London office locations into an appropriate single
location bringing Wilmington businesses closer together. On 20 June
2017, we completed the sale of our Underwood Street lease and
signed a 10-year lease for new premises in the Aldgate area of
London. The Underwood Street premises has served Wilmington well
for many years but given its modular structure arranged over 4
floors it was not consistent with our vision and strategic
objective of encouraging greater collaboration, flexible working
and the building of a "one Wilmington" team.
The investment and step change in our working conditions will
undoubtedly lead to many benefits both financial and operational
over time. Initially there will be an annual step up in operating
costs of around GBP0.9m pa starting from occupation in January
2018. However, given the disposal proceeds from Underwood Street
the cash outflow including fit out costs and associated tax will be
neutral for the first 5 years. The Underwood Street sale produced a
net profit of GBP6.3m which is shown on the face of the income
statement.
We expect an adjusting operating expense in 2017/18 of GBP1.4m
in respect of property costs. Included in this item is GBP0.4m in
respect of the non-cash write off of the remaining property plant
and equipment in use in existing properties and GBP1.0m of the
double running costs covering part of the rent free period of the
new Aldgate premises.
Exit from Legal practice support market
As previously announced and resulting from our decision to focus
Wilmington around three divisional knowledge areas we decided to
exit the legal practice support markets. We therefore looked to
dispose of our Ark business which contributed GBP2.8m (GBP2.6m
constant currency; 2016: GBP3.0m) to revenue and GBP0.1m to profit
before central overhead allocations in 2016/17. The five-month sale
process to find a new home for the Ark business ultimately proved
unsuccessful so we are closing all operations except the US events
business and some parts of the UK events businesses which remain
profitable and are consistent with our strategy. We have entered
into consultation with the staff affected and redundancy and other
related costs are expected to come to GBP0.2m. We have also decided
to impair the remaining associated goodwill and intangible fixed
assets relating to this investment. This impairment is shown as a
GBP2.4m impairment charge.
New learning management system (LMS)
Wilmington has already invested significant resource in setting
up and developing an embryonic programme of next generation digital
training products and learning support systems. During 2016/17 we
set up a dedicated e-learning team and we selected Totara(c) as our
new learning management system. Totara(c) integrates with other key
systems such as SalesForce(c) and our new automated marketing
system Marketo(c) and provides the end to end platform for our all
products facilitating an ambitious roll out of new digital training
courses. The market for bespoke digital training programmes and
other allied products is evolving rapidly and we believe it is set
to grow strongly over the next few years. Wilmington, like its
larger competitors is positioning itself to take advantage and is
investing in blended digital learning solutions taking an
increasingly "digital first" approach to new training product
launches. We have identified up to 250 existing training courses
across the Group which can be repurposed and restructured as
blended digital training products; learning and building from the
established pioneering digital training programmes of SWAT and AMT
and coordinated by the newly formed digital learning team. The cost
of conversion of existing and the launch of new courses is likely
to see an increase in operational costs and working capital as
investment feeds through. We however expect to see many commercial
advantages including higher adjusted EBITA margins in the medium
term, greater ability to repurpose and repackage products across
Wilmington communities and the exploitation of overseas market
opportunities. As explained in the Chairman's statement the costs
of this are included in the expected GBP0.75m of additional costs
for 2017/18.
Acquisitions
In July 2016 Wilmington acquired SWAT Group Limited ('SWAT'), a
leading provider of training, and technical compliance support to
accountancy firms in London and the South West of England. SWAT
sits inside the professional division offering training, and
technical accounting services. The consideration paid was an
initial cash payment of GBP2.5m and a deferred consideration
payment of up to GBP3.0m payable in September 2018 in cash subject
to SWAT achieving challenging profit targets over the two financial
years ending 30 June 2018.
On 31 January 2017 Wilmington acquired HSJ for GBP16.9m after an
adjustment for working capital. HSJ is one of the UK's leading
health information, insight and networking business with a
highly-trusted brand providing unparalleled penetration into the
NHS and private vendor space through subscription information and
data products, events and awards and marketing solutions. HSJ has a
growing recurring revenue stream from subscriptions and annual
events
The HSJ business is integral to Wilmington's market leading
healthcare business significantly enhancing the Group's presence
across the UK healthcare market. Uniquely, Wilmington Healthcare
now has a complete UK industry presence across both provider/payer
and the private sector in Pharma and MedTech and other healthcare
providers.
Executive team
To support our exciting growth strategy, we have continued to
strengthen our executive team with the appointment of a senior
executive with particular experience and a successful track record
in designing and implementing large scale digital learning
initiatives to head up our Professional division. The integration
of the Professional division is a priority objective and
consequence of project Sixth Gear which will particularly benefit
from the key account management, common platforms and work flow
processes which should in turn reflect in improving margins over
the next few years.
Pedro Ros
Chief Executive Officer
Financial review
Adjusting items, measures and adjusted results
Reference is made in this financial review to adjusted results
as well as the equivalent statutory measures. Adjusted results in
the opinion of the Directors can provide additional relevant
information on our future or past performance where equivalent
information cannot be presented using financial measures under
IFRS. Adjusted results exclude adjusting items, profit on disposal
of property plant and equipment (to the extent it is material or
significant in nature), goodwill and intangible impairment and
intangible amortisation excluding computer software. Effective from
30 June 2017 Wilmington also includes share based payments costs
within its definition of adjusted results. Share based payment
costs amounted to GBP0.6m in 2016/17 and GBP0.6m in 2015/16.
2017 2016 Movement
GBP'm GBP'm GBP'm %
Revenue 120.3 105.7 14.6 14
Adjusted EBITA 23.4 22.0 1.4 6
Margin % 19.4 20.8
Revenue
For the twelve months ended 30 June 2017 revenue increased by
14% (GBP14.6m) to GBP120.3m (2016: GBP105.7m). On a constant
currency basis revenue was up 9%. Acquisitions and favourable
exchange rates accounted for the reported revenue growth with
organic revenue down 0.8% overall.
Operating expenses before adjusting items amortisation and
impairment
Operating expenses before amortisation and impairment, excluding
adjusting items, were GBP97.0m (2016: GBP83.7m) up 16% reflecting
inter alia significant investment in staff and new premises in the
period as well as costs associated with operating acquired
businesses. For the first time share based payments of GBP0.6m
(2016: GBP0.6m) are included within operating expenses before
adjusting items, amortisation and impairment.
Amortisation excluding computer software
Amortisation of intangible assets (excluding computer software)
was GBP6.0m, compared to GBP5.5m in the previous year. The increase
reflects acquisitions made in the period.
Impairment of goodwill and intangible assets
A non-cash impairment of GBP2.4m has been made against the
carrying values for goodwill and intangible assets in the Ark cash
generating unit (CGU) following the failure to sell the business
and the resultant decision to close operations. Ark was acquired by
Wilmington plc in October 2005 and the original investment was
impaired in 2015/16 by GBP1.0m. Further information is given in
note 12.
The 2016 comparator figure of GBP15.7m relates to the impairment
of CLT and the Ark CGU.
Adjusting items within operating expenses
Adjusting items within operating expenses were GBP3.5m (2016:
GBP2.4m). These items include GBP1.6m relating to acquisition costs
(2016: GBP1.7m), GBP0.5m in respect of project Sixth Gear, GBP0.3m
in respect of the relocation of back office functions from London
and GBP1.0m in respect of costs associated with the London move
including the termination or disposal of property leases.
Other Income - gain on disposal of leasehold property
The gain of GBP6.3m is in respect of the disposal of the
Underwood Street lease for GBP7.3m in cash less associated costs of
the sale and the net book values of assets associated with the
leasehold property.
Operating profit/(loss) ("EBITA")
Operating profit was GBP17.8m compared to an operating loss of
GBP1.5m in 2016. The 2016 comparator loss was due inter alia to a
non-cash impairment of GBP15.7m.
Adjusted EBITA
Adjusted EBITA was up GBP1.4m (6%) to GBP23.4m (2016: GBP22.0m).
Adjusted EBITA margins (Adjusted EBITA expressed as a percentage of
revenue were 19.4% (2016: 20.8%).
Finance costs
Finance costs before adjusting items which consist of interest
payable and bank charges were up 16% to GBP2.0m from GBP1.7m
reflecting an increase in net debt in the period. Net debt, which
includes cash and cash equivalents, bank loans (excluding loan
arrangement fees) and bank overdrafts, was GBP40.0m (30 June 2016:
GBP34.7m) at the year-end an increase of GBP5.3m on last year. The
increase in debt reflects GBP20.3m (including deferred
consideration) spent on acquisitions offset by the proceeds of
GBP7.3m from the disposal of the Underwood Street offices.
Finance costs including adjusting items were up 2% (GBP0.1m) on
2016. Adjusting items in 2016 relate to the previous loan facility
written off.
Profit/ (loss) before taxation
Profit before tax of GBP15.9m was up compared to a loss of
GBP3.4m in 2016 principally due to the non-cash impairment of
GBP15.7m in 2016 compared to increased trading profits in 2017 and
the gain on the disposal of the leasehold property. Adjusted Profit
before Tax increased by 5% (GBP1.1m) to GBP21.4m from GBP20.3m
(note 3).
Taxation
Taxation increased by GBP0.2m (5%) to GBP3.0m from GBP2.8m. The
increase in the taxation charge is due to an increase in profits
before tax, adding back the impairment provisions of GBP2.4m (2017)
and GBP15.7m (2016) offset by a reduction to UK corporation tax
rates.
The effective tax rate is 16.4% (2016: 23.2%) which is
calculated after adding back the impairment charge of GBP2.4m (
2016: GBP15.7m) . This charge is reduced compared to 2015/16 due to
the relatively low effective tax rate associated with the leasehold
property disposal.
The underlying tax rate which ignores the tax effects of
adjusting items remained the same as 2016 at 22.4%. The underlying
tax rate is calculated as the product of one minus the adjusted
profit after tax per note 10 of GBP16.6m (2016: GBP15.8m) divided
by the adjusted profit before tax of GBP21.4m (2016: GBP20.3m).
Earnings/ (loss) per share
Adjusted Basic Earnings per Share increased by 5% to 19.05p
(2016: 18.17p). Basic earnings per share was 14.72p compared to a
basic loss per share of 7.39p in 2016.
Goodwill
Goodwill increased by GBP15.2m from GBP70.8m to GBP86.0m due to
additions of GBP14.9m arising from businesses acquired in the
period, the reallocation of GBP1.3m of assets between goodwill and
intangibles (note 12) and exchange rate movements of GBP0.5m. These
were offset by an impairment of GBP1.5m.
Intangible assets
Intangible assets increased by GBP2.9m from GBP29.0m to GBP31.9m
due to acquisitions of GBP10.1m arising from businesses acquired in
the period and exchange rate movements of GBP0.5m in the period,
and other additions of computer software, of GBP1.6m. These were
offset by amortisation of GBP7.2m, the reallocation of GBP1.3m of
assets between goodwill and intangibles (note 13) and an impairment
charge of GBP0.8m.
Property, plant and equipment
Property, plant and equipment decreased by GBP0.2m to GBP4.4m
reflecting additions to tangible fixed assets of GBP1.3m (2016:
GBP0.6m), additions from acquired businesses of GBP0.2m offset by
depreciation of GBP1.1m and assets written off on disposal of the
Underwood Street lease of GBP0.6m at net book value.
Trade and other receivables
Trade and other receivables increased by GBP2.3m reflecting
acquisitions which added GBP2.8m, offset by more efficient cash
collection from our new credit control processing following its
relocation.
Trade and other payables
Total balances increased from GBP43.9m to GBP52.3m.
Trade and other payables increased by GBP3.8m to GBP25.4m (2016:
GBP21.6m) reflecting, inter alia, acquisitions in the period which
accounted for GBP1.1m. Trade and other payables also include
GBP1.8m in respect of various lease surrender costs following the
London property consolidation, reorganisation costs under project
Sixth Gear and other London property professional costs and
equipment.
Subscriptions and deferred revenue increased by GBP4.7m or 21%
to GBP27.0m (2016: GBP22.3m). Acquisitions accounted for GBP3.9m of
the increase, foreign exchange was GBP0.2m. Risk & Compliance
division grew by GBP0.8m (8%), Professional division grew by 13%
(GBP0.6m) of which acquisitions accounted for all the increase.
Healthcare was up 43% (GBP3.3m) with acquisitions accounting for
GBP3.2m of the overall increase. Within Risk & Compliance ICA
membership deferred revenue is up 118% and Axco was up 12%.
Current tax liabilities
Current tax liabilities increased from GBP1.6m to GBP1.9m
reflecting acquisitions in the period and higher tax associated
with higher overall group profits.
Net debt
Net debt, which includes cash and cash equivalents, bank loans
(excluding capitalised loan arrangement fees) and bank overdrafts,
was GBP40.0m (30 June 2016: GBP34.7m.) an increase of GBP5.3m.
Acquisition costs (including deferred consideration) of GBP20.3m
were offset by cash conversion of 114% (2016: 108%). Net debt at 30
June 2017 represented 47% of our debt and overdraft facility of
GBP85m. This facility was extended in January 2017 by a further
GBP20m in support of the acquisition of HSJ from GBP65.0m and is
repayable on 1 July 2020.
Deferred consideration (cash settled)
Deferred consideration in total was GBP2.5m down on 2016 total
liability of GBP2.6m. Movements during the year included an
increase of GBP1.1m from the acquisition of SWAT offset by payments
of GBP1.3m in the year in respect of Evantage (GBP0.3m) and FRA
(GBP1.0m).
Derivative financial instruments
The Group is exposed to foreign exchange risks, liquidity and
capital risks and credit risks. The Group has policies that
mitigate these risks. Total estimated liabilities were GBP0.7m down
GBP1.3m compared to GBP2.0m at 30 June 2016. The main reason for
the decrease was there were no forward foreign currency contracts
obligations at the balance sheet date (2016 loss provision
GBP0.9m).
On 3 July 2017 the Group entered into a number of foreign
currency transactions to mitigate possible exchange rate
fluctuations on its financial results. $10.0m US dollars were sold
forward during 2017/18 at an average rate of $1.31 and EUR5.0m were
sold at an average rate of EUR1.14m.
Share capital
During the year 0.3m new ordinary shares of GBP0.05 were issued
in settlement of shares vesting under the Group's Performance Share
Plan. This resulted in an increase to share capital of
GBP13,112.
Dividend
It is the Board's intention to pay a progressive dividend whilst
ensuring a cover of at least two times the Group's adjusted
earnings per share over the dividend per share in respect of the
year. A final dividend of 4.6p per share (2016: 4.3p) will be paid
on 17 November 2017 to shareholders on the register as at 20
October 2017, with an associated ex-dividend date of 19 October
2017.
Anthony Foye
Chief Financial Officer
Statement of directors' responsibilities
The statement of Directors' responsibilities below has been
prepared in connection with the Group's full annual report for the
year ended 30 June 2017. Certain parts of the annual report have
not been included in this announcement as set out in note 1 of the
financial information.
We confirm to the best of our knowledge that:
-- the consolidated financial statements, which have been
prepared in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the Group;
-- the management report represented by the report of the
Directors, and material incorporated by reference, includes a fair
review of the development and performance of the business and the
position of the Group, together with a description of the principal
risks and uncertainties that they face; and
-- the annual report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to access the company's performance, business model
and strategy.
This responsibility statement was approved by the board of
Directors on 12 September 2017 and is signed on its behalf by:
Anthony Foye
Chief Financial Officer
Consolidated Income Statement for the year ended 30 June
2017
June 2017 June 2016
Notes GBP'000 GBP'000
--------- ---------
Continuing operations
Revenue 4 120,329 105,724
Operating expenses before amortisation of intangibles
excluding computer software, impairment and adjusting
items (96,977) (83,682)
Amortisation of intangibles excluding computer software 5b (6,028) (5,545)
Impairment of goodwill and intangible assets 5b (2,366) (15,659)
Adjusting items 5b (3,468) (2,352)
-------------------------------------------------------- ----- --------- ---------
Operating expenses 5 (108,839) (107,238)
--------- ---------
Other income - gain on sale of leasehold property 5c 6,333 -
--------- ---------
Operating profit/(loss) 17,823 (1,514)
--------- ---------
Finance costs before adjusting items (1,961) (1,695)
Adjusting items - (225)
-------------------------------------------------------- ----- --------- ---------
Finance costs 7 (1,961) (1,920)
Profit/(loss) before tax 15,862 (3,434)
--------- ---------
Taxation 8 (2,988) (2,841)
Profit/(loss) for the year 12,874 (6,275)
Attributable to:
Owners of the parent 12,836 (6,418)
Non-controlling interests 19 38 143
--------- ---------
12,874 (6,275)
--------- ---------
Earnings/(loss) per share attributable to the owners
of the parent:
--------- ---------
Basic (p) 10 14.72p (7.39p)
Diluted (p) 10 14.62p (7.39p)
--------- ---------
Adjusted earnings per share attributable to the owners
of the parent:
--------- ---------
Basic (p) 10 19.05p 18.17p
Diluted (p) 10 18.91p 18.01p
--------- ---------
Consolidated Statement of Comprehensive Income for the year
ended 30 June 2017
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Profit/(loss) for the year 12,874 (6,275)
Other comprehensive income/(expense):
Items that may be reclassified subsequently to the income
statement
---------- ----------
Fair value movements on interest rate swaps (net of tax) 431 (622)
Currency translation differences 939 2,966
Net investment hedges (net of tax) (395) (1,474)
---------- ----------
Other comprehensive income for the year, net of tax 975 870
---------- ----------
Total comprehensive income/(expense) for the year 13,849 (5,405)
---------- ----------
Attributable to:
- Owners of the parent 13,811 (5,548)
- Non-controlling interests 38 143
---------- ----------
13,849 (5,405)
---------- ----------
Items in the statement above are disclosed net of tax. The
income tax relating to each component of other comprehensive income
is disclosed in note 8.
Balance Sheets as at 30 June 2017
Group
---------------------------
2017 2016
Notes GBP'000 GBP'000
---------------- ---------
Non-current assets
Goodwill 12 86,028 70,763
Intangible assets 13 31,911 29,038
Property, plant and equipment 14 4,444 4,628
Investments in subsidiaries - -
Deferred tax assets 820 942
123,203 105,371
---------------- ---------
Current assets
Trade and other receivables 15 28,444 26,121
Cash and cash equivalents 10,687 14,642
39,131 40,763
---------------- ---------
Total assets 162,334 146,134
---------------- ---------
Current liabilities
Trade and other payables 17 (52,330) (43,896)
Current tax liabilities (1,932) (1,553)
Deferred consideration - cash settled (177) (1,272)
Derivative financial instruments 16 - (1,013)
Borrowings 18 (925) (2,204)
---------------- ---------
(55,364) (49,938)
---------------- ---------
Non-current liabilities
Borrowings 18 (49,353) (46,697)
Deferred consideration - cash settled (2,305) (1,370)
Derivative financial instruments 16 (662) (1,037)
Deferred tax liabilities (4,585) (3,989)
Provisions for future purchase of non-controlling
interests (100) (100)
---------------- ---------
(57,005) (53,193)
---------------- ---------
Total liabilities (112,369) (103,131)
---------------- ---------
Net assets 49,965 43,003
---------------- ---------
Equity
Share capital 4,362 4,349
Share premium 45,225 45,225
Treasury shares (96) (96)
Share based payments reserve 898 886
Translation reserve 3,541 2,602
Retained (losses)/earnings (4,051) (10,116)
---------------- ---------
Equity attributable to owners of the parent 49,879 42,850
Non-controlling interests 19 86 153
---------------- ---------
Total equity 49,965 43,003
---------------- ---------
Statements of Changes in Equity for the year ended 30 June
2017
Share capital,
share premium Accumulated
and treasury Share based (losses)/ Non-controlling
shares payments Translation retained interests
(note 22) reserve reserve earnings Total (note 24) Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ----------- ----------- ----------- -------- --------------- ------------
Group
At 30 June 2015 49,454 1,052 (364) 4,780 54,922 277 55,199
(Loss)/profit for
the year - - - (6,418) (6,418) 143 (6,275)
Other comprehensive
income for the year - - 2,966 (2,096) 870 - 870
-------------- ----------- ----------- ----------- -------- --------------- ------------
49,454 1,052 2,602 (3,734) 49,374 420 49,794
Dividends - - - (6,782) (6,782) (141) (6,923)
Issue of share capital 24 (636) - 612 - - -
Share based payments - 470 - - 470 - 470
Tax on share based
payments - - - (4) (4) - (4)
Movements in
non-controlling
interests - - - (208) (208) (126) (334)
At 30 June 2016 49,478 886 2,602 (10,116) 42,850 153 43,003
Profit for the year - - - 12,836 12,836 38 12,874
Other comprehensive
income for the year - - 939 36 975 - 975
-------------- ----------- ----------- ----------- -------- --------------- ------------
49,478 886 3,541 2,756 56,661 191 56,852
Dividends - - - (7,150) (7,150) (105) (7,255)
Issue of share capital 13 (466) - 453 - - -
Share based payments - 478 - - 478 - 478
Tax on share based
payments - - - (110) (110) - (110)
-------------- ----------- ----------- ----------- -------- --------------- ------------
At 30 June 2017 49,491 898 3,541 (4,051) 49,879 86 49,965
-------------- ----------- ----------- ----------- -------- --------------- ------------
Cash Flow Statements for the year ended 30 June 2017
Group
----------------------
Year ended Year ended
30 June 30 June
2017 2016
Notes GBP'000 GBP'000
---------- ----------
Cash flows from operating activities
Cash generated from operations before adjusting
items 20 26,653 23,872
Cash flows for adjusting items - operating
activities (1,510) (186)
Cash flows from share based payments (87) (180)
---------- ----------
Cash generated from operations 25,056 23,506
Interest paid (1,656) (1,502)
Tax paid (3,905) (3,197)
---------- ----------
Net cash generated from operating activities 19,495 18,807
---------- ----------
Cash flows from investing activities
Purchase of businesses net of cash acquired (19,005) (13,912)
Proceeds from disposal group held for sale - 343
Deferred consideration paid (1,295) (330)
Purchase of non-controlling interests - (334)
Cash flows for adjusting items - investing
activities (1,327) (540)
Purchase of property, plant and equipment (1,300) (641)
Cash flows from sale of leasehold property 7,300 -
Proceeds from disposal of property, plant and
equipment 43 11
Purchase of intangible assets (1,599) (870)
---------- ----------
Net cash used in investing activities (17,183) (16,273)
---------- ----------
Cash flows from financing activities
Dividends paid to owners of the parent (7,150) (6,782)
Dividends paid to non-controlling interests (105) (141)
Share issuance costs (5) (5)
Fees relating to new and extended loan facility (146) (631)
Increase in bank loans 27,702 18,002
Decrease in bank loans (25,593) (10,306)
---------- ----------
Net cash (used in)/generated from financing
activities (5,297) 137
---------- ----------
Net (decrease)/increase in cash and cash equivalents,
net of bank overdrafts (2,985) 2,671
---------- ----------
Cash and cash equivalents, net of bank overdrafts
at beginning of the year 12,438 8,698
Exchange gains on cash and cash equivalents 309 1,069
---------- ----------
Cash and cash equivalents, net of bank overdrafts
at end of the year 9,762 12,438
---------- ----------
Reconciliation of net debt
Cash and cash equivalents at beginning of the year 14,642 9,194
Bank overdrafts at beginning of the year (2,204) (496)
Bank loans at beginning of the year 18 (47,126) (37,306)
-------- --------
Net debt at beginning of the year (34,688) (28,608)
-------- --------
Net (decrease)/increase in cash and cash equivalents
(net of bank overdrafts) (2,676) 3,740
Net (drawdown)/repayment in bank loans (2,109) (7,696)
Exchange loss on bank loans (546) (2,124)
-------- --------
Cash and cash equivalents at end of the year 10,687 14,642
Bank overdrafts at end of the year (925) (2,204)
Bank loans at end of the year 18 (49,781) (47,126)
-------- --------
Net debt at end of the year (40,019) (34,688)
-------- --------
Notes to the Financial Statements
1. Nature of the financial statements
The following financial information does not amount to full
financial statements within the meaning of Section 434 of Companies
Act 2006. The financial information has been extracted from the
Group's Annual Report and Financial Statements for the year ended
30 June 2017 on which an unqualified report has been made by the
Company's auditors.
Financial statements for the year ended 30 June 2016 have been
delivered to the Registrar of Companies; the report of the auditors
on those accounts was unqualified and did not contain a statement
under Section 498 of the Companies Act 2006. The 2017 statutory
accounts will be delivered in due course.
Copies of the Annual Report and Financial Statements will be
posted to shareholders shortly and will be available from the
Company's registered office at 6-14 Underwood St, London, N1
7JQ.
2. Statement of Accounting Policies
The preliminary announcement for the year ended 30 June 2017 has
been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union. The accounting policies
applied in this preliminary announcement are consistent with those
reported in the Group's annual financial statements for the year
ended 30 June 2016 along with new standards and interpretations
which became mandatory for the financial year.
3. Measures of profit
(a) Reconciliation to profit on continuing activities before tax
To provide shareholders with additional understanding of the
trading performance of the Group, Adjusted EBITA has been
calculated as Profit before Tax after adding back:
-- amortisation of intangible assets excluding computer software;
-- impairment of goodwill and intangible assets;
-- adjusting items (included in operating expenses);
-- other income - gain on sale of leasehold property; and
-- finance costs.
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Profit/(loss) before tax 15,862 (3,434)
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangibles 2,366 15,659
Adjusting items (included in operating expenses) 3,468 2,352
Other income - gain on sale of leasehold property (6,333) -
Finance costs 1,961 1,920
---------- ----------
Adjusted operating profit ('Adjusted EBITA') 23,352 22,042
Depreciation of property, plant and equipment 1,071 911
Amortisation of intangible assets - computer software 1,165 1,050
---------- ----------
Adjusted EBITA before depreciation ('Adjusted EBITDA') 25,588 24,003
---------- ----------
Adjusted EBITA and Adjusted EBITDA reconcile to profit on
continuing activities before tax as follows:
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Profit/(loss) before tax 15,862 (3,434)
Amortisation of intangible assets excluding computer
software 6,028 5,545
Impairment of goodwill and intangibles 2,366 15,659
Adjusting items (included in operating expenses) 3,468 2,352
Other income - gain on sale of leasehold property (6,333) -
Adjusting items (included in finance costs) - 225
---------- ----------
Adjusted profit before tax 21,391 20,347
---------- ----------
Adjusted profit before tax reconciles to profit on continuing
activities before tax as follows:
Adjusted Adjusting Statutory Adjusted Adjusting Statutory
results items results results items results
June 2017 June 2017 June 2017 June 2016 June 2016 June
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 2016
GBP'000
----------- ----------- ----------- ----------- ----------- ----------
Revenue 120,329 - 120,329 105,724 - 105,724
Operating expenses before
share based payments, amortisation
of intangible assets excluding
computer software and impairment (96,425) (3,468) (99,893) (83,119) (2,352) (85,471)
Share based payments (552) - (552) (563) - (563)
----------- ----------- ----------- ----------- ----------- ----------
Operating expenses before
amortisation of intangible
assets excluding computer
software and impairment (96,977) (3,468) (100,445) (83,682) (2,352) (86,034)
Amortisation of intangible
assets excluding computer
software - (6,028) (6,028) - (5,545) (5,545)
Impairment of goodwill and
intangible assets - (2,366) (2,366) - (15,659) (15,659)
Gain on sale of leasehold
property - 6,333 6,333 - - -
----------- ----------- ----------- ----------- ----------- ----------
Operating profit/(loss) 23,352 (5,529) 17,823 22,042 (23,556) (1,514)
----------- ----------- ----------- ----------- ----------- ----------
Finance costs (1,961) - (1,961) (1,695) (225) (1,920)
----------- ----------- ----------- ----------- ----------- ----------
Profit/(loss) before tax 21,391 (5,529) 15,862 20,347 (23,781) (3,434)
----------- ----------- ----------- ----------- ----------- ----------
(b) Reconciliation to adjusted profit before tax
4. Segmental information
In accordance with IFRS 8 the Group's operating segments are
based on the operating results reviewed by the Board, which
represents the chief operating decision maker. Following a
strategic review in the year, the Group now reports its results in
three (previously 4) segments as this more accurately reflects the
way the Group is managed. The comparatives have been restated to
provide information on a consistent basis.
The Group's organisational structure reflects the main
communities to which it provides information, education and
networking. The three divisions (Risk & Compliance,
Professional and Healthcare) are the Group's segments and generate
all of the Group's revenue.
The Board considers the business from both a geographic and
product perspective. Geographically, management considers the
performance of the Group between the UK, North America, Europe
(excluding the UK) and the Rest of the World.
(a) Business segments
Revenue Contribution Revenue Contribution
Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------- ------------ ----------- ------------
Risk & Compliance 42,272 12,265 38,802 12,678
Professional 39,472 5,864 36,743 6,159
Healthcare 38,585 9,705 30,179 7,316
Group contribution 120,329 27,834 105,724 26,153
Unallocated central overheads - (3,930) - (3,548)
Share based payments - (552) - (563)
120,329 23,352 105,724 22,042
Amortisation of intangible assets excluding
computer software (6,028) (5,545)
Impairment of goodwill and intangibles (2,366) (15,659)
Adjusting items (included in operating
expenses) (3,468) (2,352)
Other income - gain on sale of leasehold
property 6,333 -
Finance costs (1,961) (1,920)
----------- ------------ ----------- ------------
Profit/(loss) before tax 15,862 (3,434)
Taxation (2,988) (2,841)
----------- ------------ ----------- ------------
Profit/(loss) for the financial year 12,874 (6,275)
----------- ------------ ----------- ------------
There are no intra-segmental revenues which are material for
disclosure.
Unallocated central overheads represent head office costs that
are not specifically allocated to segments.
Total assets and liabilities for each reportable segment are not
presented, as such information is not provided to the Board.
(b) Segmental information by geography
The UK is the Group's country of domicile and the Group
generates the majority of its revenue from external customers in
the UK. The geographical analysis of revenue is on the basis of the
country of origin in which the customer is invoiced:
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
UK 68,588 61,321
Europe (excluding the UK) 18,049 15,859
North America 22,863 19,030
Rest of the World 10,829 9,514
---------- ----------
Total revenue 120,329 105,724
---------- ----------
5. Profit from continuing operations
a) Profit for the year from continuing operations is stated
after charging/(crediting):
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Depreciation of property, plant and equipment 1,071 911
Amortisation of intangible assets - computer software 1,165 1,050
Profit on disposal of property, plant and equipment (20) (4)
Rentals under operating leases 1,568 1,110
Share based payments (including social security costs) 552 563
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangibles 2,366 15,659
Adjusting items (included in operating expenses) 3,468 2,352
Gain on sale of leasehold property (6,333) -
Foreign exchange loss (including forward currency contracts) 50 202
Fees payable to the Auditors for the audit of the Company
and consolidated financial statements 110 110
Fees payable to the Auditors and its associates for other
services:
- The audit of the Company's subsidiaries pursuant to
legislation 173 280
- Audit-related and other assurance services 142 41
- Tax compliance services 8 54
- Other services 47 100
---------- ----------
b) Adjusting items:
The following items have been charged/(credited) to the Income
Statement during the year but are considered to be adjusting so are
shown separately:
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Costs written off relating to both successful and aborted
acquisitions 1,569 585
Increase in liability for deferred consideration 54 1,082
1,623 1,667
Adjusting items relating to property portfolio review 1,027 -
Restructuring and rationalisation costs 818 612
Legal claim costs (net of settlement received) - 73
Other adjusting items (included in operating expenses) 3,468 2,352
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangible assets 2,366 15,659
Costs relating to the extension of the loan facility - 225
Total adjusting items (classified in profit before tax) 11,862 23,781
---------- ----------
Successful and aborted acquisitions relate to the acquisition of
SWAT Group Limited ('SWAT'), Health Service Journal ('HSJ') and
other aborted acquisitions. The increase in the liability for
deferred consideration relates to the purchase of SWAT Group
Limited ('SWAT').
Restructuring and rationalisation costs comprise primarily of
GBP500,000 of costs relating to the implementation of project Sixth
Gear, and GBP300,000 of redundancy and property costs following the
Group's decision to relocate part of the finance function from its
head offices in central London to our existing freehold premises in
Basildon, Essex.
Included within operating expenses before depreciation,
amortisation and impairment are GBP224,000 (2016: GBP122,000) of
minor restructuring costs not considered to be adjusting items.
Costs associated with property portfolio review relate to a
review of the London property portfolio, see note 4c for further
details.
c) Property portfolio review
In the year Wilmington plc performed a review of its London
property portfolio, on the back of this it sold the leasehold
interest in its current Underwood Street London head office
premises for a GBP7.3m cash consideration. At the same time as
disposing of its leasehold interest, Wilmington entered into a new
ten-year market rate lease for a London head office premises near
Aldgate. The new head office space will accommodate Wilmington's
London based businesses whilst retaining the training facility
recently acquired with the acquisition of SWAT Group Limited. The
new London premises will consolidate staff from a number of our
current properties therefore in the year we have also accounted for
the surrender of the leasehold of our London Old Broad Street
property and the onerous lease of a leasehold property in Kent.
The items which have been credited/(charged) to profit or loss
during the year in relation to this review are as follows:
Gain on sale of Underwood Street Leasehold property:
Year ended
30 June
2017
GBP'000
----------
Proceeds of sale of Underwood Street Leasehold property 7,300
Disposal of leasehold improvements (579)
Legal and professional fees relating to the sale of Underwood
Street Leasehold property (293)
Agent fees relating to the sale of Underwood Street Leasehold
property (95)
Gain on sale of leasehold property 6,333
----------
Operating expenses - Adjusting items relating to the property
portfolio review:
Year ended
30 June
2017
GBP'000
----------
Rent, rates, and legal and professional fees relating to new Aldgate
lease (514)
Cost to surrender Old Broad Street lease (231)
Onerous lease on property in Kent (197)
Accelerated depreciation of computer hardware on sale of Underwood
Street Leasehold property (85)
Total adjusting items relating to property portfolio review (1,027)
----------
Note 25 Commitments includes the minimum lease commitments
associated with the London property portfolio review.
The net tax charge on the property transaction included in
corporation tax expense is GBP230,488.
6. Operating expenses
Year ended 30 June 2017 Year ended 30 June 2016
Cost of sales Administration Total Cost of sales Administration Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- -------------- -------- ------------- -------------- --------
Operating expenses before
depreciation,
amortisation and impairment 90,906 3,835 94,741 78,275 3,446 81,721
Depreciation of property plant
and equipment 976 95 1,071 809 102 911
Amortisation of intangible assets
- computer software 1,165 - 1,165 1,050 - 1,050
------------------------------------ ------------- -------------- -------- ------------- -------------- --------
Operating expenses before
amortisation
of intangible assets excluding
computer software and impairment 93,047 3,930 96,977 80,134 3,548 83,682
Amortisation of intangible assets
- databases 1,897 - 1,897 1,643 - 1,643
Amortisation of intangible assets
- customer relationships 1,947 - 1,947 1,647 - 1,647
Amortisation of intangible assets
- brands 893 - 893 755 - 755
Amortisation of intangible assets
- publishing rights and titles 1,291 - 1,291 1,500 - 1,500
Goodwill and intangibles impairment
charge 830 1,536 2,366 - 15,659 15,659
Other adjusting items (note
4) - 3,468 3,468 - 2,352 2,352
------------- -------------- -------- ------------- -------------- --------
Operating expenses 99,905 8,934 108,839 85,679 21,559 107,238
------------- -------------- -------- ------------- -------------- --------
7. Finance costs
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
Finance costs comprise:
Interest payable on bank loans and overdrafts 1,814 1,564
Amortisation of capitalised loan arrangement fees 147 131
---------- ----------
1,961 1,695
Adjusting items - extension of loan facility costs - 225
---------- ----------
1,961 1,920
---------- ----------
The extension of loan facility costs of GBP225,000 in the year
ended 30 June 2016 comprises GBP147,000 of old capitalised loan
arrangement fees written off and GBP78,000 of legal and
professional costs connected to the extension.
8. Taxation
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------------- ----------
Current tax:
UK corporation tax at current rates on UK profits for
the year 3,225 2,520
Adjustments in respect of previous years 103 125
---------------- ----------
3,328 2,645
Foreign tax 1,067 1,272
Adjustment in respect of previous years (43) 73
---------------- ----------
Total current tax 4,352 3,990
Deferred tax credit (1,247) (971)
Effect on deferred tax of change in corporation tax rate (117) (178)
---------------- ----------
Total deferred tax (1,364) (1,149)
---------------- ----------
Taxation 2,988 2,841
---------------- ----------
Factors affecting the tax charge for the year:
The effective tax rate is lower (2016: higher) than the average
rate of corporation tax in the UK of 19.75% (2016: 20.00%). The
differences are explained below:
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Profit/(loss) before tax 15,862 (3,434)
---------- ----------
Profit/(loss) multiplied by the average rate of corporation
tax in the year of 19.75% (2016: 20.00%) 3,133 (687)
Tax effects of:
Impairment of goodwill not deductible for tax purposes 303 3,132
Foreign tax rate differences 312 233
Adjustment in respect of previous years 59 198
Reduced effective rate on gain on sale of leasehold property (817) -
Other items not subject to tax 115 143
Effect on deferred tax of change of corporation tax rate (117) (178)
---------- ----------
Taxation 2,988 2,841
---------- ----------
On 26 October 2015, the UK corporation tax rate was reduced from
20% to 19% from 1 April 2017 and a further change was announced on
23 November 2016 to reduce the rate from 19% to 17% from 1 April
2020. These changes have been substantively enacted at the balance
sheet date and therefore are included in these financial
statements. Deferred tax assets and liabilities are measured at the
rates that are expected to apply in the periods of the reversal,
deferred tax balances at 30 June 2017 have been calculated using
the above rates giving rise to a reduction in the net deferred tax
liability of GBP117,000 (2016: GBP178,000).
The Company's profits for this accounting year are taxed at an
effective rate of 19.75%.
Included in other comprehensive income are a tax charge of
GBP106,000 and a tax credit of GBP97,000 relating to the interest
rate swaps and net investment hedges respectively.
The tax effect of adjusting items as disclosed in note 9 is a
credit of GBP1,757,000 (2016: GBP1,579,000).
9. Dividends
Amounts recognised as distributions to owners of the parent in
the year:
Year ended Year ended
30 June 30 June Year ended Year ended
2017 2016 30 June 30 June
pence per pence per 2017 2016
share share GBP'000 GBP'000
---------- ---------- ---------- ----------
Final dividends recognised as distributions
in the year 4.3 4.0 3,749 3,478
Interim dividends recognised as distributions
in the year 3.9 3.8 3,401 3,304
---------- ---------- ---------- ----------
Total dividends paid 7,150 6,782
---------- ---------- ---------- ----------
Final dividend proposed 4.6 4.3 4,011 3,738
---------- ---------- ---------- ----------
10. Earnings per share
Adjusted earnings per share has been calculated using adjusted
earnings calculated as profit/(loss) after taxation and
non-controlling interests but before:
-- amortisation of intangible assets excluding computer software
-- impairment of goodwill and intangible assets;
-- adjusting items (included in operating expenses);
-- other income - gain on sale of leasehold property; and
-- adjusting items (included in finance costs).
The calculation of the basic and diluted earnings per share is
based on the following data:
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Earnings/loss from continuing operations for the purpose
of basic earnings per share 12,836 (6,418)
Add/(remove):
Amortisation of intangible assets excluding computer software 6,028 5,545
Impairment of goodwill and intangibles 2,366 15,659
Adjusting items (included in operating expenses) 3,468 2,352
Other income - gain on sale of leasehold property (6,333) -
Adjusting items (included in finance costs) - 225
Tax effect of adjustments above (1,757) (1,579)
---------- ----------
Adjusted earnings for the purposes of adjusted earnings
per share 16,608 15,784
---------- ----------
Number Number
---------- ----------
Weighted average number of ordinary shares for the purposes
of basic and adjusted earnings per share 87,193,340 86,846,236
Effect of dilutive potential ordinary shares:
Future exercise of share awards and options 611,052 772,980
Weighted average number of ordinary shares for the purposes
of diluted and adjusted diluted earnings per share 87,804,393 87,619,216
---------- ----------
Basic earnings/(loss) per share 14.72p (7.39p)
Diluted earnings/(loss) per share 14.62p (7.39p)
Adjusted basic earnings per share ('Adjusted Earnings
Per Share') 19.05p 18.17p
Adjusted diluted earnings per share 18.91p 18.01p
---------- ----------
11. Acquisitions and disposals
All below acquisitions have been financed out of the extended
GBP85.0m multi-currency revolving credit facility.
a. Acquisition - SWAT Group Limited - July 2016
On 19 July 2016 Mercia Group Limited, a subsidiary, acquired the
entire issued share capital of SWAT Group Limited ('SWAT'), a
provider of training and technical compliance support to
accountancy firms in London and the South West of England.
SWAT was acquired for initial consideration of GBP2,870,000, of
which GBP500,000 was withheld in relation to the Net Asset
adjustment. Subsequently, this initial consideration was reduced by
GBP387,538 in relation to the final Net Asset adjustment.
Deferred consideration of up to GBP3,000,000 is payable
contingent on SWAT's future performance for the years ended 30 June
2017 and 2018 and will be paid in cash in one instalment.
Management has estimated the expected value of these future
payments to be GBP1,082,000 which has been recognised in the total
consideration. Any future movements of this contingent
consideration will be charged to the income statement as an
adjusting item.
Acquisition related costs of GBP278,000 have been expensed as an
adjusting item in the income statement (see note 4b).
Details of the fair value of the purchase consideration, the net
assets acquired and goodwill for the acquisition are as
follows:
GBP'000
Purchase consideration:
Initial consideration 2,870
Net asset adjustment (388)
Deferred consideration - to be cash settled 1,082
--------
Total consideration 3,564
--------
The provisional fair values of assets and liabilities recognised
as a result of this acquisition are as follows:
GBP'000
Intangible assets - Customer relationships 2,337
Total intangible assets 2,337
Property, plant & equipment 183
Computer software 13
Trade and other receivables (net of allowances) 365
Cash and cash equivalents 360
Trade and other payables (598)
Subscriptions and deferred revenue (579)
Current tax liabilities (137)
Deferred tax liabilities (444)
--------
Net identifiable assets acquired 1,500
Goodwill 2,064
--------
Net assets acquired 3,564
--------
The estimated useful economic life of the intangibles is as
follows:
Intangible assets - Customer Relationships - Subscribers 10 years
The acquired business contributed revenues of GBP4,659,359 and
contribution of GBP658,559 to the Group for the period from the
date of acquisition to 30 June 2017. Had SWAT been consolidated
from 1 July 2016 the Group consolidated Income Statement would
include pro forma revenue of GBP5,016,454 and contribution of
GBP677,811.
At the year the deferred consideration due in respect of the
SWAT acquisition was GBP1,136,000.
b) Acquisitions - Health Service Journal - January 2017
On 31 January 2017 Wilmington Healthcare Limited, a subsidiary,
acquired the trading assets and liabilities of Health Service
Journal ('HSJ'), the UK's leading health information, insight and
networking business from EMAP Publishing Limited (the 'Seller').
HSJ was acquired for initial consideration of GBP17,000,000 in cash
with a subsequent adjustment in respect of final working capital of
GBP250,000 which was due to Wilmington Healthcare Limited. There is
no deferred or contingent consideration in relation to the HSJ
acquisition.
Acquisition related costs of GBP1,106,000 have been expensed as
an adjusting item in the income statement (see note 4b).
The acquisition adds further strength to the existing Wilmington
Healthcare businesses, and will enable the combined group to
provide unparalleled services into the NHS and private vendor space
through subscription information and analytics products, events,
awards, education, and marketing solutions.
Details of the fair value of the purchase consideration, the net
assets acquired and goodwill for the acquisition are as
follows:
GBP'000
Purchase consideration:
Initial cash paid 17,000
Final working capital adjustment (250)
Settlement of liability on behalf of acquiree 133
----------
Total consideration 16,883
The provisional fair values of assets and liabilities recognised
as a result of this acquisition are as follows:
GBP'000
Intangible assets - Customer relationships - Subscribers 2,894
Intangible assets - Customer relationships - Sponsors 164
Intangible assets - Customer relationships - Delegates 78
Intangible assets - Customer relationships - Other 366
Intangible assets - Brand 4,240
---------
Total intangible assets 7,742
Trade and other receivables (net of allowances) 814
Trade and other payables (428)
Subscriptions and deferred revenue (2,723)
Deferred tax liabilities (1,389)
---------
Net identifiable assets acquired 4,016
Goodwill 12,867
---------
Net assets acquired 16,883
The goodwill is attributable to the unique HSJ content,
established customer base, and the solid customer relationships
held by the experienced and stable workforce. As well as, the
synergies that will arise with the existing Wilmington Healthcare
businesses and the ability to be able to provide a wider breadth of
services and products, across both provider/payer and the private
sector in Pharma and MedTech industries.
The estimated useful economic life of the intangibles is as
follows:
Intangible assets - Customer relationships - Subscribers 8 years
Intangible assets - Customer relationships - Sponsors 3 years
Intangible assets - Customer relationships - Delegates 3 years
Intangible assets - Customer relationships - Other 3 years
Intangible assets - Brand 10 years
The acquired business contributed revenues of 3,695,000 and
contribution of GBP794,000 to the Group for the period from the
date of acquisition to 30 June 2017, which equates to a five
months' revenue and contribution. Had HSJ been consolidated from 1
July 2016 the group consolidated Income Statement would include pro
forma revenue of GBP9,769,000 and contribution of GBP2,734,000.
12. Goodwill
Cost GBP'000
At 1 July 2015 84,028
Additions 7,958
Exchange translation differences 1,401
At 30 June 2016 93,387
-------
Additions 14,931
Reallocation 1,281
Exchange translation differences 589
At 30 June 2017 110,188
Accumulated impairment
At 1 July 2015 6,965
Impairment 15,659
-------
At 30 June 2016 22,624
-------
Impairment 1,536
At 30 June 2017 24,160
Net book amount
At 30 June 2017 86,028
-------
At 30 June 2016 70,763
-------
At 30 June 2015 77,063
-------
A review by management in the year concluded that the tax
amortisation benefit acquired with FRA in 2016 should be
reallocated across Goodwill and Intangibles. This resulted in a
reallocation of GBP1,281,000 from Intangible Assets to Goodwill,
with a nil net impact on non-current assets.
The Group tests goodwill annually for impairment. The
recoverable amount of the goodwill is determined as the higher of
the value in use calculation or fair value less cost of disposal
for each cash generating unit ('CGU'). The value in use
calculations use pre-tax cash flow projections based on financial
budgets and forecasts approved by the Board covering a three year
period. These pre-tax cash flows beyond the three year period are
extrapolated using estimated long-term growth rates.
Key assumptions for the value in use calculations are those
regarding discount rates, cash flow forecasts and long-term growth
rates. Management has used a pre-tax discount rate of 12.3% (2016:
12.3%) across all CGUs in the UK except for the CLT CGU which had a
pre-tax discount rate of 13.3% (2016: 13.3%) to reflect the greater
market challenges and risks. A pre-tax discount rate of 13.5%
(2016: 13.5%) has been used for Compliance Week and FRA that both
operate in North America. These pre-tax discount rates reflect
current market assessments for the time value of money and the
risks associated with the CGUs as the Group manages its treasury
function on a Group-wide basis.
The same discount rate has been used for all CGUs except CLT,
Compliance Week and FRA as the Directors believe that the risks are
the same for each other CGU. The long-term growth rates used are
based on management's expectations of future changes in the markets
for each CGU and are 2.0% (2016: 2.0%).
Management's impairment calculations based upon the above
assumptions show ample headroom with the exception of CLT and
Compliance Week.
Goodwill is allocated to significant CGUs as follows. A CGU is
considered to be significant if the goodwill allocated to it is
greater than 10% of the total goodwill net book value.
CGU 30 June 30 June
2017 2016
GBP'000 GBP'000
-------------------- --------- ---------------------
HSJ 12,867 -
Axco and Pendragon 11,150 11,150
CLT 8,563 8,563
ICT 7,972 7,972
Others 45,476 43,078
-------------------- --------- ---------------------
86,028 70,763
-------------------- --------- ---------------------
CLT
For CLT, the value in use exceeds the carrying value by 63%
(2016: 0%). The impairment review of CLT is sensitive to a
reasonably possible change in the key assumptions used; most
notably the projected cash flows and the pre-tax discount rate. The
value in use exceeds the carrying value unless any of the
assumptions are changed as follows:
- A decrease in the projected operating cash flows of 38.6% in
each of the next three years; or
- An increase in the pre-tax discount from 12.4% to 18.8%.
Compliance week
For Compliance Week, the value in use exceeds the carrying value
by 27% (2016: 15%). The impairment review of Compliance Week is
sensitive to a reasonably possible change in the key assumptions
used; most notably the projected cash flows and the pre-tax
discount rate. The value in use exceeds the carrying value unless
any of the assumptions are changed as follows:
- A decrease in the projected operating cash flows of 27.4% in
each of the next three years; or
- An increase in the pre-tax discount from 13.5% to 19.0%.
Impairment of Ark
A non-cash impairment of GBP1.54m has been made against the
carrying value for goodwill in Ark following the failure to sell
the business and the Board's decision to close all but the events
and reports businesses. This impairment further reflects the impact
of structural changes in the legal information and training market.
Ark was acquired by Wilmington plc in October 2005 and the original
investment was impaired last year by GBP1.03m. It was also decided
that the remaining assets held in the business should be written
down to their recoverable value, resulting in an impairment of
GBP0.83m against the intangible assets held in the business (see
note 13). All remaining items on the balance sheet are held at
their realisable value and are considered recoverable.
13. Intangible assets
Group
-------------------------------
Customer Publishing
Computer relationships rights and
software Databases GBP'000 Brands titles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- -------------- -------- ----------- --------
Cost
At 1 July 2015 7,063 14,261 15,224 4,000 30,223 70,771
Additions 870 - - - - 870
Acquisitions 191 1,695 2,001 6,086 - 9,973
Disposals - - - - (304) (304)
Exchange translation differences 78 160 798 629 - 1,665
--------- --------- -------------- -------- ----------- --------
At 30 June 2016 8,202 16,116 18,023 10,715 29,919 82,975
Additions 1,599 - - - - 1,599
Acquisitions 128 - 5,839 4,240 - 10,207
Reallocation - - 391 (1,672) - (1,281)
Disposals (15) - - - - (15)
Exchange translation differences 32 27 102 58 370 589
At 30 June 2017 9,946 16,143 24,355 13,341 30,289 94,074
Accumulated amortisation
At 1 July 2015 4,381 6,512 11,220 2,315 22,707 47,135
Charge for year 1,050 1,643 1,647 755 1,500 6,595
Acquisitions 167 - - - - 167
Disposals - - - - (304) (304)
Exchange translation differences 38 42 68 72 124 344
--------- --------- -------------- -------- ----------- --------
At 30 June 2016 5,636 8,197 12,935 3,142 24,027 53,937
Charge for year 1,165 1,897 1,947 893 1,291 7,193
Acquisitions 115 - - - - 115
Impairment 86 - - - 744 830
Disposals (14) - - - - (14)
Exchange translation differences 16 16 105 153 (188) 102
At 30 June 2017 7,004 10,110 14,987 4,188 25,874 62,163
Net book amount
At 30 June 2017 2,942 6,033 9,368 9,153 4,415 31,911
--------- --------- -------------- -------- ----------- --------
At 30 June 2016 2,566 7,919 5,088 7,573 5,892 29,038
--------- --------- -------------- -------- ----------- --------
At 1 July 2015 2,682 7,749 4,004 1,685 7,516 23,636
--------- --------- -------------- -------- ----------- --------
Included within computer software are assets under construction
that have not yet been amortised with a net book amount of
GBP142,000 (2016: GBP44,000).
A review by management in the year concluded that the tax
amortisation benefit acquired with FRA in 2016 should be
reallocated across Goodwill and Intangibles. This resulted in a
reallocation of GBP1,281,000 from Intangible Assets to Goodwill,
with a nil net impact on non-current assets.
14. Property, plant and equipment
Land, freehold and Motor
leasehold buildings Fixtures and fittings Computer equipment Vehicles Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------------------- ----------------------- --------- --------
Cost
At 1 July 2015 5,950 3,909 3,743 495 14,097
Additions - 312 230 99 641
Acquisitions - 40 28 - 68
Disposals - (189) (42) (107) (338)
Exchange translation
differences - 45 73 - 118
----------------------- --------------------- ----------------------- --------- --------
At 30 June 2016 5,950 4,117 4,032 487 14,586
Additions - 775 416 109 1,300
Acquisitions - 341 340 87 768
Disposals (2,789) (10) (520) (149) (3,468)
Exchange translation
differences - 16 24 - 40
At 30 June 2017 3,161 5,239 4,292 534 13,226
Accumulated
depreciation
At 1 July 2015 2,721 2,922 3,394 219 9,256
Charge for the year 158 394 270 89 911
Disposals - (189) (42) (91) (322)
Acquisitions - 26 - - 26
Exchange translation
differences - 34 53 - 87
----------------------- --------------------- ----------------------- --------- --------
At 30 June 2016 2,879 3,187 3,675 217 9,958
Charge for the year 151 540 275 105 1,071
Disposals (2,210) (10) (520) (126) (2,866)
Acquisitions - 227 315 43 585
Exchange translation
differences - 12 22 - 34
At 30 June 2017 820 3,956 3,767 239 8,782
Net book amount
At 30 June 2017 2,341 1,283 525 295 4,444
----------------------- --------------------- ----------------------- --------- --------
At 30 June 2016 3,071 930 357 270 4,628
----------------------- --------------------- ----------------------- --------- --------
At 30 June 2015 3,229 987 349 276 4,841
----------------------- --------------------- ----------------------- --------- --------
Included in land, freehold and leasehold buildings is GBP970,000
(2016: GBP970,000) of non-depreciated land.
Depreciation of property, plant and equipment is charged to
operating expenses within the Income Statement.
The disposal of land, freehold and leasehold buildings is the
sale of a leasehold property from which a gain on sale of
GBP6,333,000 arose (note 4c).
15. Trade and other receivables
Group
------------------
30 June 30 June
2017 2016
GBP'000 GBP'000
-------- --------
Current
Trade receivables 23,207 21,993
Prepayments and other receivables 5,237 4,128
28,444 26,121
-------- --------
16. Derivative financial investments
Group
------------------
30 June 30 June
2017 2016
GBP'000 GBP'000
-------- --------
Current liabilities
Interest rate swap - maturing in November 2016 - (162)
Forward currency contracts - (851)
- (1,013)
Non-current liabilities
-------- --------
Interest rate swaps - maturing in November 2020 (662) (1,037)
-------- --------
17. Trade and other payables
Group
------------------
30 June 30 June
2017 2016
GBP'000 GBP'000
-------- --------
Trade and other payables 25,357 21,591
Subscriptions and deferred revenue 26,973 22,305
52,330 43,896
-------- --------
18. Borrowings
Group
------------------
30 June 30 June
2017 2016
Current liability GBP'000 GBP'000
-------- --------
Bank overdrafts 925 2,204
925 2,204
-------- --------
Non-current liability
Bank loans 49,781 47,126
Capitalised loan arrangement fees (428) (429)
-------- --------
Bank loans net of loan arrangement fees 49,353 46,697
-------- --------
Bank overdrafts comprise of the net of gross overdraft balances
of GBP13.2m (2016: GBP10.3m) and cash positions of GBP12.3m (2016:
GBP8.1m) held at Barclays Bank PLC in certain UK companies included
in the offsetting agreement.
The GBP1,000 decrease in capitalised loan arrangement fees
reflects the net impact of a GBP146,000 payment of fees relating to
the extension of the Group's GBP85m revolving multi-currency credit
facility, and an amortisation charge of (GBP147,000).
19. Non-controlling interests
Net Non-
controlling interests
GBP'000
----------------------
At 30 June 2015 277
Profit for the year 143
Dividends paid (141)
Movements in non-controlling interests (126)
At 30 June 2016 153
Profit for the year 38
Dividends paid (105)
At 30 June 2017 86
----------------------
20. Cash generated from operations
Group
----------------------
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Profit/(loss) from continuing operations before income
tax 15,862 (3,434)
Other adjusting items (included in operating expenses) 3,468 2,352
Gain on sale of leasehold property (6,333) -
Depreciation of property, plant and equipment 1,071 911
Amortisation of intangible assets 7,193 6,595
Impairment of goodwill and intangible assets 2,366 15,659
Profit on disposal of property, plant and equipment (20) (4)
Share based payments (including social security costs) 552 563
Finance costs 1,961 1,920
---------- ----------
Operating cash flows before movements in working capital 26,120 24,562
(Increase)/decrease in trade and other receivables (1,997) (2,434)
Increase in trade and other payables 2,530 1,744
---------- ----------
Cash generated from operations before adjusting items 26,653 23,872
---------- ----------
Cash conversion is calculated as a percentage of cash generated
by operations to Adjusted EBITA as follows:
Year ended Year ended
30 June 30 June
2017 2016
GBP'000 GBP'000
---------- ----------
Funds from operations before adjusting items:
Adjusted EBITA 23,352 22,042
Share based payments (including social security costs) 552 563
Amortisation of intangible assets - computer software 1,165 1,050
Depreciation of property, plant and equipment 1,071 911
Profit on disposal of property, plant and equipment (20) (4)
---------- ----------
Operating cash flows before movement in working capital 26,120 24,562
Net working capital movement 533 (690)
---------- ----------
Funds from operations before adjusting items 26,653 23,872
---------- ----------
Cash conversion 114% 108%
---------- ----------
Free cash flows:
Operating cash flows before movement in working capital 26,120 24,562
Profit on disposal of property, plant and equipment 43 (4)
Net working capital movement 533 (690)
Interest paid (1,656) (1,502)
Tax paid (3,905) (3,197)
Purchase of property, plant and equipment (1,300) (641)
Purchase of intangible assets (1,599) (870)
---------- ----------
Free cash flows 18,236 17,658
---------- ----------
21. Events after the reporting period
Purchase of minority interest
In July 2017 the Group purchased the remaining 20% shareholding
in Central Law Training (Scotland) Limited for GBP335,000 making it
a wholly owned subsidiary.
Forward contracts
On 3 July 2017 the following forward contracts were entered into
in order to provide certainty in Sterling terms of 80% of the
Group's expected net US dollar and Euro income:
-- The Group sold EUR5.0m at an average rate of 1.1358
-- The Group sold $10.0m at an average rate of 1.3071
Appendix 1 - New operating segments (unaudited)
Reconciliation June 2017 Revenue Risk & Compliance Professional Healthcare
GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------------ ------------- -----------
Risk & Compliance 42,272 42,272
Finance 24,859 24,859
Legal 14,613 14,613
Insight 38,585 38,585
-------- ------------------ ------------- -----------
Revenue 120,329 42,272 39,472 38,585
As % of revenue 35% 33% 32%
Adjusted
EBITA Risk & Compliance Professional Healthcare
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------------ ------------- -----------
Risk & Compliance 12,265 12,265
Finance 4,071 4,071
Legal 1,793 1,793
Insight 9,705 9,705
--------- ------------------ ------------- -----------
Contribution 27,834 12,265 5,864 9,705
As % of Contribution 44% 21% 35%
Unallocated central overheads (3,930)
Share based payments (552)
---------
Adjusted EBITA 23,352
Reconciliation June 2016
Revenue Risk & Compliance Professional Healthcare
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------------ ------------- -----------
Risk & Compliance 38,802 38,802
Finance 21,219 21,219
Legal 15,524 15,524
Insight 30,179 30,179
--------- ------------------ ------------- -----------
Revenue 105,724 38,802 36,743 30,179
As % of revenue 37% 35% 29%
Adjusted
EBITA Risk & Compliance Professional Healthcare
GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------------ ------------- -----------
Risk & Compliance 12,678 12,678
Finance 4,473 4,473
Legal 1,686 1,686
Insight 7,316 7,316
--------- ------------------ ------------- -----------
Contribution 26,153 12,678 6,159 7,316
As % of Contribution 48% 24% 28%
Unallocated central overheads (3,548)
Share based payments (563)
---------
Adjusted EBITA 22,042
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DMGMLRZLGNZM
(END) Dow Jones Newswires
September 13, 2017 02:01 ET (06:01 GMT)
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