TIDMWIL
RNS Number : 2357Z
Wilmington PLC
17 September 2020
17 September 2020
Wilmington plc
('Wilmington', 'the Group' or 'the Company')
Financial results for the twelve months ended 30 June 2020
Wilmington plc, the provider of data, information, education and
networking services in Risk & Compliance, Healthcare and
Professional knowledge areas, today announces its full year results
for the twelve months ended 30 June 2020.
Financial Headlines
- Results at the top end of range previously provided for both revenue and profit
- Revenues for the year down 8% to GBP113.1m (2019: GBP122.5m),
impacted by no face-to-face events or training in final quarter
o Successfully minimised the revenue decline through rapid
conversion to virtual formats
o Achieved stated aim of organic1 revenue growth in first three
quarters, final quarter impacted by Covid-19
o Benefited from diversified portfolio with data and information
revenue streams up 2%
- Adjusted EBITA2 decreased by 35% to GBP14.0m (2019: GBP21.5m)
o Resilient model, remained profitable in all four quarters,
despite the impact of Covid-19
- Adjusted profit before tax3 down 39% to GBP11.9m (2019: GBP19.3m)
- Profit before tax at GBP6.4m (2019: GBP14.7m)
o Reflects trading impact of Covid-19 and non-repeat of prior
year benefit from the sale of ICP
- Adjusted earnings per share4 down to 10.71p (2019: 17.44p) and
basic earnings per share of 5.33p (2019: 12.74p)
- Continued strong cash conversion5 at 189% (2019: 123%)
o 133% when adjusted for IFRS 16 and one-off working capital
fluctuations, demonstrating year-on-year improvement.
- Improved Group net debt6 GBP27.7m at 30 June 2020 (2019:
GBP33.9m). Represents 1.4 times adjusted EBITDA (2019: 1.4
times)
o Decisive action taken throughout pandemic to reduce costs,
protect cash and liquidity
o Debt facilities in place to July 2023, with strong headroom
projected throughout
- Dividend suspended but the Board remains committed to a
resumption of dividends as soon as the trading environment
normalises
Covid-19 has accelerated strategic progress
- Covid-19 has accelerated our strategy, with three years of
digitisation achieved in just three months
o Resilient model tested with swift action taken to successfully
convert events and training across the portfolio to virtual
formats, which have been well received
o Remained focussed on three strategic objectives to generate
organic growth, manage our portfolio and invest in our business
o Progressed four key areas of operational excellence: product
management, technology and data, sales and marketing, and
people
o Identified 'digital capabilities' and 'data enabled' as two
new Wilmington business characteristics
Operational Headlines
- Risk & Compliance - revenue down 2% on an organic basis
against a strong prior period comparator
o Rapid transition to online training with Covid-19 disruption
accelerating the planned digitisation
o ICA's first fully digital post graduate diploma was launched
in June and has seen a solid uptake
o Compliance Week benefitted from the launch of its new online
platform and a revised pricing strategy
o Axco's new data platform launched in January 2020, enhancing
product offering
- Healthcare - revenue declined 11%, largely due to RISE
National event not physically taking place
o RISE National converted to a successful virtual event to
partly mitigate the impact of Covid-19 restrictions
o HSJ and APM News products proved invaluable to healthcare
leaders and key workers, providing latest developments and
insights
o Strong demand for APMi product drove 6% organic growth in APM
revenue
o Product innovation with Quantis Covid-19 tracker launched to
provide analysis of patient waiting times, admissions and treatment
pathways
- Professional - revenue down 10%
o Loss of face-to-face training partially mitigated by
successful conversion of training to virtual formats
o Launch of Mercia LIVE in Accountancy business
o Good performance in investment banking business, and agility
demonstrated by delivering summer training programmes digitally
1 Organic - eliminating the effects of exchange rate
fluctuations and the impact of acquisitions and disposals
2 Adjusted operating profit ('adjusted EBITA') - see note 3
3 Adjusted profit before tax - see note 3
4 Adjusted earnings per share - see note 10
5 Cash conversion - see note 17
6 Net debt - see Cash flow statement
Current Trading and Outlook
- Sustained resilience in the face of Covid-19 disruption
o Remained profitable in the first two months of the new
financial year
o Expect this to continue despite no anticipated face-to-face
delivery in H1
- Phased return to face-to-face events planned for second half
Mark Milner, Chief Executive Officer, commented:
"In the first nine months of the year we made significant
progress on our strategic objectives of generating organic growth
through operational excellence, managing our portfolio, and
investing in our business. Whilst results were impacted in the last
quarter by the unprecedented challenges and restrictions on
running-face-to-face events, Covid-19 has accelerated our strategy
of digital transformation, demonstrating Wilmington is fully
capable of operating digitally.
Our talented and dedicated employees innovated quickly,
successfully converting our events and training to virtual formats
which was a huge undertaking. I would like to thank them for
adapting brilliantly to this new digital format and for their
ongoing efforts to serve our customers seamlessly, all while
working from home. The resilience of our business model has been
tested and has highlighted the strength of our diversified
portfolio, in particular our core, subscription-led data businesses
which are holding up well.
In the first two months of the new financial year, we have
remained profitable, in what is traditionally a quiet period for
trading during the UK and European holiday season. The work that we
have done in the last couple of years meant we entered this crisis
as an agile and resilient business and I believe these actions will
help us to navigate the current challenges and enable us to emerge
in a much stronger position."
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
Mark Milner, Chief Executive Officer
Richard Amos, Chief Financial Officer 020 7422 6800
FTI Consulting
Charles Palmer / Dwight Burden / Emma Hall
/ Debbie Oluwaseyi Sonaike 020 3727 1000
Notes to Editors
Wilmington plc is the recognised knowledge leader and partner of
choice for data, information, education and networking in Risk
& Compliance, Healthcare and Professional areas. Wilmington
employs close to 1,000 people and sells to around 120 countries.
Wilmington is a premium listed company on the main market of the
London Stock Exchange.
Chairman's statement
I am pleased to present the report for the year ended 30 June
2020, a year which has been very much one of two parts. In the
first nine months of the year we made good progress in each of our
three core strategic areas: generating sustained organic revenue
growth, managing our portfolio and investing in our business. We
were then faced with the global outbreak of Covid-19 which has seen
us face unprecedented challenges. Our results have been impacted by
the restrictions on running face-to-face training and events.
However, the business has demonstrated the benefit of being
diversified with the consequential resilience this brought to a
challenging situation. Our colleagues' efforts in the way they
responded to these challenges have been inspirational and I cannot
commend them highly enough. Actions taken throughout the pandemic
will enable us to emerge in a stronger position. Covid-19 has
accelerated our strategy of digital transformation, with at least
three years of digitisation being achieved in just three months,
resulting in a business that is fully capable of operating
digitally. It has highlighted the strength of our diversified
portfolio, with our core subscription-led data businesses holding
up particularly well.
Results, net debt and dividend
Overall financial performance in the year reflects a strong
result for the first three quarters with us focussing on, and
achieving, our stated aim of organic revenue growth. The final
quarter was impacted by the Covid-19 pandemic which prevented us
from holding any face-to-face events (which typically account for
approximately 14% of annual revenue) or face-to-face training. We
were able to accelerate the transformation to a digital business
which was already underway and moved swiftly to convert as much as
possible of these training and events to virtual equivalents. This
allowed us to minimise, but not wholly offset, the revenue impact.
Ultimately the Covid-19 related impact resulted in an 8% full year
organic revenue decline to GBP113.1m (2019: GBP122.5m).
Adjusted profit before tax is down at GBP11.9m (2019: GBP19.3m)
with the fall in revenue partially offset by direct cost savings
plus the benefits obtained globally from Covid-19 government
assistance schemes. Statutory profit before tax fell by 56% to
GBP6.4m (2019: GBP14.7m) in part due to a one-off gain on disposal
from the sale of ICP in the prior year not being repeated.
We entered the Covid-19 crisis with a strong balance sheet and
significant headroom in our banking facilities and moved quickly to
protect cash. This was successful with net debt at the year end of
GBP27.7m being GBP6.2m lower than the prior year (2019: GBP33.9m).
In July 2019, the Group had renewed its GBP65.0m banking facilities
for a further four years with an option to extend until October
2024. On 25 June 2020, in response to the Covid-19 impact, we
announced a partial relaxation of the covenants attached to these
facilities and the agreement to access an additional GBP15.0m of
facilities through the Government's Coronavirus Large Business
Interruption Scheme ('CLBILS') for twelve months from August
2020.
In light of the exceptional circumstances currently prevailing
and to ensure that sufficient cash reserves remain within the
business to tackle the ongoing impacts of Covid-19, the Board
decided to cancel the interim dividend due to be paid 9 April 2020.
It is also not proposing a final dividend for the financial year
just ended. The Board recognises the importance of regular dividend
income to its shareholders and remains committed to a resumption of
dividends as soon as the trading environment normalises.
Covid-19 and people
The work put in, and the investments made, over the last two
years gave us a strong foundation when entering the pandemic
crisis. In his review later in this report, our Chief Executive
Mark Milner, who joined us in July 2019, highlights the actions we
took to manage the situation, and our plans and expectations to
deal with the challenges it will continue to present in the new
financial year. Throughout the crisis we have been, and will
continue to be, guided first and foremost by the need to protect
the health and wellbeing of our employees and to serving our
customers.
I have been incredibly impressed by the response of our people
who have not only adapted to new ways of working but also moved
swiftly to find new and innovative ways to serve our customers. I
would like to take this opportunity to thank them personally for
their ongoing commitment and resilience.
Strategy
Following Mark Milner's appointment we undertook a review of our
strategy. Mark identified three core strategic areas, namely
generating organic revenue growth, actively managing our portfolio,
and investing in our business. These are the key pillars driving
the next stage in the Group's evolution, and our future success.
Mark's Chief Executive Review explains in more detail how these
elements interact and the work we are undertaking in each area. In
particular, it explains the logic behind our decision in February
2020 to commence strategic reviews of two of our businesses,
Central Law Training and Inese, and the progress we have made.
Active portfolio management will be an important part of our
ongoing strategy although we are not currently working on plans
beyond the two businesses mentioned above.
Board changes
On 29 April 2020 I was delighted to welcome Helen Sachdev as she
joined the Board as Non-Executive Director and Chair Designate of
the Remuneration Committee. Helen has a strong commercial
background in a number of businesses and will provide valuable
counsel to the Group.
Derek Carter, our current Senior Independent Director, and
Nathalie Schwarz, Chair of the Remuneration Committee, will both
step down from the Board at the conclusion of the AGM on 4 November
2020 after completing their full nine year terms as Independent
Non-Executive Directors. I would like to thank both Derek and
Nathalie for their outstanding contribution to Wilmington over the
last nine years. Nathalie will be replaced as Chair of the
Remuneration Committee by Helen Sachdev. Paul Dollman, the current
Chair of the Audit Committee, will assume the role of Senior
Independent Director. We are currently undertaking a recruitment
process to replace Derek's other roles on the Board.
Martin Morgan
Chairman
Chief Executive's review
I am pleased to present my report on the year ended 30 June
2020, my first as Chief Executive Officer. In the first nine months
of the year we made significant progress on our strategic
objectives of generating organic growth through operational
excellence, managing our portfolio, and investing in our business.
The benefits of these efforts were beginning to be realised as
demonstrated by the interim results, with organic revenue growth in
all three divisions as well as increased year-on-year sales and
consequently an increased deferred revenue balance heading into the
second half of the year.
Covid-19 response
Much of that progress was then interrupted in the last quarter
of the year as we faced the unprecedented challenges presented by
the Covid-19 pandemic. Lockdown restrictions resulted in us having
to close every office in our portfolio. The whole business quickly
and successfully converted to virtual working and the changes in
working practices have accelerated Wilmington's digital strategy.
This was possible in part because of the investments made in our IT
infrastructure in the last few years.
At its heart Wilmington is a data led business. Our subscription
based data and information revenue streams, which make up over half
of our revenue, have not been significantly affected by Covid-19,
and we do not anticipate that changing materially in the
foreseeable future. Within training and networking events however,
despite a rapid acceleration of our existing plans to transition
many of our products to a virtual equivalent, the restrictions to
face-to-face delivery resulted in significant disruption
particularly in the Professional division and in US Healthcare. The
initiative and ingenuity of our teams have enabled us to rapidly
deploy virtual alternatives to previously face-to-face activities.
Customer response to these changes has been very positive and in
many instances the move to virtual equivalents is likely to be a
permanent one.
During the rest of calendar year 2020 we do not anticipate
running many, if any, face-to-face networking events. We have been
staying close to our customers through the pandemic and are
planning for alternative virtual events whilst retaining the
flexibility to convert back if regulations permit and customers
demand it. Our proven ability to deliver professional development
from our events means we expect demand for them to remain, even in
a virtual format. Similarly, we are organised to run 100% of
training courses virtually for the rest of the calendar year but
can rapidly convert back to face to face if required. The full
impacts of Covid-19, particularly on the wider economy, are yet to
be seen but I am confident in our business' resilience and ability
to innovate in response to further challenge.
The work we have done in the last couple of years meant we
entered this crisis as an agile and resilient business. I believe
these actions will enable us to emerge in a much stronger position,
capable of operating as a fully digital business but with the
flexibility to deliver face-to-face or hybrid solutions as the
market demands.
Results summary
Despite the significant disruption caused by Covid-19, our swift
actions mitigated the financial impact and we were able to not only
deliver a profit in the final quarter of the year but also achieve
results which were at the top end of the scenarios we predicted
when the crisis broke, highlighting the agility of the business.
Having been up 2% at the half year, full year Group revenue
ultimately declined 8% to GBP113.1m (2019: GBP122.5m) and adjusted
operating profit decreased 35% to GBP14.0m (2019: GBP21.5m)
resulting in an adjusted operating margin of 12.4% (2019:
17.6%).
As the Covid-19 pandemic was unforeseen we were unable to make
significant savings in our overhead cost base within the financial
year which resulted in adjusted operating margin falling as
explained above. Subsequently we performed a thorough review of our
Group-wide overheads to ensure these are appropriate for supporting
the future of our business. This business-by-business review
identified GBP3.0m of overhead cost savings for the next financial
year and also identified some areas of investment which, in
combination, will result in the most appropriate future cost base
for our business.
Strategy
As we strive to create sustainable value for our stakeholders,
we have identified three integrated strategic imperatives which
drive our decision making, namely generating organic growth,
managing our portfolio, and investing in our business. Each of
these strategic areas facilitates the other and we have made good
progress in each area over the course of the year.
Generating organic growth
The switch in focus from acquisitive growth to organic growth
was a change implemented by the Board in autumn 2018 following the
arrival of Martin and Richard as Chairman and Chief Financial
Officer respectively. Building a group that is capable of
delivering organic growth in revenue and profit is fundamental to
driving sustainable growth in shareholder value. To enable us to
achieve that goal the Board and I have identified four components
of operational excellence key to driving this growth, namely;
product management, technology and data, people, and sales and
marketing.
Product management, including new product development is an area
which we believe has received insufficient investment in recent
years due to the previous focus on acquisitive rather than organic
growth. Last year we launched a new product development process,
managed by a newly formed Investment Committee. This has provided
structure around assessing and prioritising opportunities for
development to ensure those which have the most potential receive
the investment and focus they deserve. A number of new products
have already been brought to market as part of this process
including our wealth management business's new website and
ecommerce solution launched in May. There are currently five more
new products under development through this process including the
Digital Learning Platform discussed later in my review. The
Investment Committee is focussed on looking for more cross-group
collaboration opportunities to allow us to gain additional value
from sharing new product solutions across different parts of the
Group.
Within the product development framework, we have implemented a
methodology which involves stripping back requirements to the
'minimum viable product' which serves the fundamental needs of our
customers, tested against 'customer advisory groups' to ensure
features are of high value to our customers. This process allows us
to move away from 'big-bang' product launches with long gaps
between each release towards a series of iterative roll-outs. We
have made good progress in embedding this philosophy across our
business although there is more work to do here.
Technology was identified several years ago as a key component
of the Group's strategy and significant investment has already been
made, particularly in the areas of infrastructure, CRM systems and
learning management systems. The benefit of this has never been
clearer than in the last few months when the investment in our
internal infrastructure allowed us to move seamlessly to working
remotely and the ongoing work on digitising products could be
rapidly accelerated to allow us to deliver in virtual formats the
majority of our previously face-to-face training and events.
Since joining the Group, I have been encouraging the business to
recognise the very considerable data assets that it possesses and
to identify how it can monetise those assets more effectively
through the better use of technology. Initiatives are underway to
develop this further and we have seen manifestations of this
already in some of the development work that has been undertaken,
for example to allow better analysis of the data captured by the
Axco insurance data business and to present that data using a more
advanced front end user interface.
People are critical to achieving success within a corporation
and we are very fortunate at Wilmington to have a strong and loyal
group of employees. They have demonstrated that very clearly over
the last few months as they have been the driving force behind the
successful way we have adapted and responded to the Covid-19
crisis. I want to place on record my personal thanks to each of
them for the exceptional efforts they have made throughout the
pandemic and for their continued work to innovate and serve our
customers seamlessly all while working from home.
As part of our continuing work with the employees we initiated a
new staff engagement survey shortly after I joined. Whilst the
results, based on an impressive 91% participation rate, were
largely positive, the survey identified a number of areas that we
needed to improve. These included the engagement of our employees
with the Group strategy and the opportunities for career
development. We have taken action on both these and the other
points raised by the survey over the last year. Six months after
the first survey we conducted another, targeted on specific areas.
This showed the engagement score increasing significantly. We
intend to continue the work in this area over the next twelve
months.
Part of this has been the creation of a Diversity and Inclusion
working party, with participants from all parts of Wilmington,
aimed at ensuring our workplace is free from discrimination and
prejudice in all its forms. This initiative came about through our
considered response to the Black Lives Matter movement. Whilst we
start from a strong place in regards to diversity and inclusion we
recognise that more must be done and are committed to delivering
that.
Lastly, sales and marketing is of course a key component of
driving organic revenue growth. When I joined Wilmington I
identified that many areas of the Group traditionally concentrated
on maintaining existing customer relationships and not enough on
seeking out new opportunities and clients. Over the last twelve
months we have implemented a number of changes to develop a more
proactive sales culture.
Over the last few years, the Group has been focussed on rolling
out a Group-wide CRM solution. This has now been adopted by more
than two thirds of the Group companies. Over the last twelve months
we have used this to start adopting consistent, Group-wide sales
KPIs to enable more dynamic tracking of sales data and management
of sales opportunities and targets.
We have augmented this through adopting a more unified approach
to sales processes, sharing best practice across the Group's
businesses. To facilitate this we physically relocated the London
based sales teams to a new centralised location or 'sales hub' in
the London Head Office building.
Pre Covid-19, we were starting to see real benefits from the
work here with growth in year-on-year sales in each division giving
total Group sales growth in the mid-single digit percentage range.
This has dropped back due to the impact of the pandemic. However we
are confident that the groundwork put in place in all of our areas
of operational excellence will give us the resilience to face the
immediate challenges and the platform to emerge from this crisis
strongly.
Managing our portfolio
Wilmington is a portfolio of businesses, united by a common set
of characteristics. To support the Group's goal to deliver organic
growth we need to continuously assess the portfolio to identify
areas where either organic growth could be augmented by bolting on
complementary acquisitions, or where organic growth is being
challenged because elements of the existing portfolio are
underperforming or lack a strategic fit with the rest of the Group
so risk diverting focus from the common purpose. Currently this
element of the strategy is targeted at the latter, and at focussing
the portfolio on doing fewer things but doing them better.
Following my arrival last July we completed a thorough review of
our business portfolio, building on the work carried out as part of
the consultant-led business review conducted last year. My review
identified the key characteristics of a Wilmington business as
follows.
A Wilmington business will have a differentiated offering and be
in or be capable of being in a market-leading position, with a
developed and defendable moat, owned IP, a strong brand position,
and be valued by its customers. It will be operating in attractive,
growing and sizeable markets, the macro fit being that it will
operate in markets we understand, the micro fit being that our
solutions, services and data are integrated into our customers'
systems, workflow, businesses and decision-making processes. A
Wilmington business will have attractive economics and have sales
channels which veer away from single sales and towards repeatable
revenues.
A Wilmington business will also receive a benefit from being in
the Wilmington Group, and the Group will benefit from that
company's participation, sharing synergies, for example, around
commercial or product initiatives or sharing technology or product
innovations and the business will have strong leadership, with a
bias towards innovation, and outstanding sector knowledge.
Following the accelerated shift towards virtual products in
response to the Covid-19 pandemic Wilmington will now also
demonstrate best in class digital capabilities, with products
available for face-to-face, virtual or blended delivery.
Furthermore, a Wilmington business will be data enabled, providing
unique data insights and innovative solutions to their
customers.
In the Interim Report we announced that we had identified two
businesses, CLT and Inese, where our ability to add value appeared
limited and they would therefore be subject to a strategic
review.
Since our closure of Ark in 2017, CLT, within the Professional
division, has been our only remaining business in the Law for
Lawyers market. It is made up of two separate operations, CLT
England and CLT Scotland. CLT England has suffered over a number of
years from changing requirements for continuing professional
development for lawyers in England. Plans to offset the
corresponding revenue and profit decline with growth in online
training have not delivered the required returns. We have now
completed the strategic review and made the difficult decision to
close the vast majority of the CLT England business from 31 August
2020. Closure costs for the business will total GBP0.6m and will be
accounted for as an adjusting item in the year to 30 June 2021. The
review of CLT Scotland has concluded that this remains a profitable
and viable operation, and as a result, we are assessing the options
for this business going forward.
Inese, our Spanish business within the Risk & Compliance
division, whilst performing well in its market, struggles to
generate
synergies with our other insurance business due to its
geographical location and focus on the Spanish speaking insurance
industry.
We therefore engaged external advisors to identify potential
purchasers. This process is progressing but has been delayed by the
impacts of Covid-19 so is still ongoing.
Investing in our business
Achieving progress in relation to generating organic growth and
portfolio management will result in the Group generating
significant surplus cash. Whilst the Board's intention is to
recommence, as soon as possible, the return of a considerable
portion of this cash to shareholders through its progressive
dividend policy, it also intends to retain a portion to reinvest
back in the business. This reinvestment is of course necessary to
support the organic growth strategy. It has become clear that in
order to drive the growth aspirations of the business in the medium
term there are areas in which our Group needs further investment.
Two of these are outlined below.
Digital Learning Platform
We have worked hard in the last couple of years to convert more
of our products to virtual equivalents, including the roll-out of a
Group-wide online learning platform. This has of course been
accelerated by our response to Covid-19. So far however, this has
existed as a standalone technology and has not been integrated into
other business systems. This has meant that the user experience
associated with buying the product, registering for access and then
using the service has been somewhat disjointed. We are now
addressing this by developing an integrated online education,
membership, and information platform. This will allow customers to
browse, purchase, and receive our training products in one place,
as well as receiving personalised content, access to a community
platform, and insights into the knowledge areas relevant to them.
Initially this digital platform is being developed for two of our
training businesses, ICA and Bond Solon, and it is expected to be
operational from early 2021. In the fullness of time we expect this
solution to be rolled out and adopted much more widely across the
Group.
People
As previously explained, the business-by-business overheads
review performed in the year identified around GBP3m of cost saving
initiatives across the Group in both staff and supplier costs. Also
identified were a number of areas where additional expertise and
talent, particularly in technology, data and virtual learning, are
required to drive our business forward. We expect to invest around
GBP2m in new talent next year to facilitate growth in these
areas.
Current trading and outlook
The performance achieved in the final quarter of the last
financial year demonstrated the resilience of the Group's
businesses and business models. Despite being significantly
impacted by lockdown restrictions imposed the Group remained
profitable in that quarter and generated significant amounts of
cash.
In the first two months of the new financial year, this
performance has continued. We remain profitable in what is
traditionally a quiet period for trading during the UK and European
holiday season. We expect this pattern to carry on for the rest of
the first half, despite no current expectation of being able to run
face-to-face events and training for the rest of the calendar year.
This is expected to yield results for the first half of the year
that will be similar overall to those achieved in the second half
of the year just reported.
Predictions for the second half of the year are of course harder
to make at this stage. Overall performance will ultimately be
determined by the extent to which we are able to run the major
face-to-face events that are traditionally a feature of the second
half of our year. If we are able to run those, as we currently
plan, then we would expect to deliver revenue in the second half
approaching that achieved in the same period of FY19. This would
result in full year revenue growth in the low single digit range.
However, if restrictions remain through the second half and we can
offer virtual events only throughout the financial year, then the
second half revenue is likely to show a low single digit growth on
that achieved this year albeit profitability will improve due to
the cost reduction measures we have already taken.
In either scenario we expect to remain profitable throughout the
period. The actions recently taken to reset the covenants for the
next twelve months and to access additional facility headroom
provide us with emergency cover should the economic situation
deteriorate markedly from where we see it currently. Under either
scenario, our current expectations are that we will not need to
call on the additional comfort that each of them provides.
Looking out longer-term we believe Wilmington is well positioned
to both weather the storm and emerge strongly. The markets we serve
are generally expected to be resilient to the economic challenges
we will all face. Similarly, our customers are, for the most part,
likely to be less affected than those in certain other sectors. And
crucially, the products and services we provide will remain
relevant to and be required by those customers and we are investing
the resources at our disposal to enhance the value that they
deliver to them.
Mark Milner
Chief Executive Officer
Review of operations
Note that variances described below as 'organic' are at constant
currency exchange rates. There is no impact on either the current
or comparative year from mergers, acquisitions or disposals.
Risk & Compliance
Revenue 2020 2019 Absolute Organic
variance variance
% %
Compliance 28.2 29.0 (3%) (3%)
----- ----- ---------- ----------
Risk 13.5 13.4 1% -
----- ----- ---------- ----------
Total 41.7 42.4 (2%) (2%)
----- ----- ---------- ----------
Operating profit 12.8 12.7 1% -
----- ----- ---------- ----------
Margin % 31% 30%
----- ----- ---------- ----------
Business model and market
The Risk & Compliance division comprises four businesses
that operate in Compliance markets and two that operate in the
Insurance market. The division provides a mixture of services to
its clients with a focus on training and education which
represented 48% of the division's revenue in the last financial
year. Provision of data and information accounted for 48% of FY20
revenue with networking services - predominantly roundtables and
conferences - making up the rest.
The main Compliance business, which was developed organically
within Wilmington is the International Compliance Association
('ICA'). It is an industry body and training business that we
created in 2002 which offers professional development and support
to compliance officers predominantly in the financial services
sector. It has offices in the UK, Singapore, Malaysia and Dubai. In
total, revenue from ICA accounts for around 40% of total Risk &
Compliance revenue.
Revenue earned by ICA is primarily training income although this
is complemented through subscriptions paid by the professional
members for their ICA accreditations. The training income is
generated both through running professional development courses and
associated examinations, which are open to public enrolment, that
allow students to achieve their professional accreditation, and
through developing bespoke in-house programmes for institutions to
train staff across their businesses in compliance regulation and
procedures. These accreditations are awarded in association with
the University of Manchester's Alliance Manchester Business School.
The courses ICA run usually extend over several weeks or even
months. They traditionally mix distance learning with face-to-face
sessions. Increasingly the distance learning element has been
transitioning to online and digital variants, and more recently
virtual programmes have been offered in place of face-to-face
sessions. To support the move to virtual training in ICA a new
digital learning platform ('hub') is being built for launch at the
start of 2021.
ICA primarily serves the financial services industry. The
material for ICA courses is developed by our own internal R&D
team and external specialists, and we own the associated
intellectual property.
Outside of ICA, the other Compliance businesses earn revenue
from running professional development programmes for wealth
managers; from offering subscription services for the provision of
detailed information on regulations in the UK pensions industry;
and from subscriptions to Compliance Week, the premium industry
journal for US and European compliance professionals. The
Compliance Week brand also generates revenue from lead generation
to the compliance community and from running industry networking
events.
The Risk businesses serve the global insurance industry,
primarily with in-depth regulatory information, market intelligence
and analysis. In addition, we provide networking events and
training specifically focussed on the Spanish insurance market.
Revenue in Risk is mainly earned through subscriptions to the
information and analysis services and publications, and from
attendance fees and sponsorship at the training and networking
events.
Covid-19 response
The resilient nature of the Risk & Compliance business
models has meant that the division has generally weathered the
storm from Covid-19 reasonably well. Although the majority of
training and education in Risk & Compliance has a face-to-face
element, the business was able to transition quickly to virtual
alternatives. The progress already made in the last few years to
offer increased online training in Compliance was accelerated and
it was possible to deliver the majority of the planned training
courses for the remainder of the financial year in this virtual
format. Registrations for forthcoming public courses have been at
historical levels through the Covid-19 impacted period, which
demonstrates the critical nature of the training provided. There
have been some delays and deferrals in bookings for in-house
courses as clients decide how they run such programmes. This was
particularly noticeable in the early period of lockdown but booking
volumes are starting to recover as restrictions ease.
There were a number of networking events due to be held in Q4,
notably Compliance Week's flagship conference which was planned for
May. In line with local Government advice, all face-to-face events
were postponed or cancelled with a consequential revenue impact.
However it was possible to convert a number of these events to
virtual formats. This included the Compliance Week event which ran
successfully over two days with around 1,000 delegates and 50
speakers.
The critical nature of much of the data and information services
provided by the Risk & Compliance businesses meant that this
element of the revenue was largely unaffected by Covid-19. Business
development activities have been impacted by restrictions on
face-to-face meetings and this could impact new business in the
short term. Renewal rates and pricing have not been materially
affected and this should provide resilience in the short and medium
term.
Looking out further, we are confident in Risk & Compliance's
ability to recover from Covid-19 impacts. The clients that the
division serves are based primarily in the financial services and
insurance industries. Whilst these will be impacted by general
recessionary pressures, they are unlikely to be drastically
affected in the way that other industries are. We believe that the
services the division provides will remain at least as relevant for
their clients in the future. There may be some reduction in demand
for face-to-face training and events, but the division is very well
placed to benefit from these changes and investments such as the
digital hub should improve the competitive positioning in this
regard.
Trading performance
With Covid-19 impacting the last quarter of the year the Risk
& Compliance division performed well with revenue only 2% down
on both an absolute and organic basis against what was a strong
prior year performance.
Within this total the Compliance businesses' revenue declined by
3% on an absolute and organic basis. In the main Compliance
business ICA, revenue fell by 4% on an organic basis. Before the
impacts of Covid-19 ICA was on track to deliver low single figure
growth on what was a very strong prior year performance, with good
growth in the UK business offset by declines in Asia Pacific and
the Middle East due to a delay in changes to regulations and the
difficult political and economic conditions respectively. This
growth was overshadowed by the loss of in-house programmes in the
last quarter due to Covid-19. However the move to online training
resulted in cost savings from reduced travel, venue and trainer
costs meaning there was no impact on profit.
The Asia ICA business was placed under new leadership in the
year and there has been a new funding structure introduced in
Singapore which means that compliance accreditations are now 95%
funded directly by the Government, so we are expecting this region
to perform well next year. This view is supported by the level of
registrations already seen which means that we enter FY21 with a
higher level of booked revenue than twelve months ago.
Following the cessation of face-to-face training due to Covid-19
the business moved swiftly to convert all training programmes to
virtual equivalents, an acceleration of the shift towards online
training which had already started in the last few years. ICA's
first fully virtual postgraduate diploma was launched in June and
has seen a solid uptake with a more international reach and
accessible timetable. ICA's face-to-face conference which was due
to be held in Q4 has been converted into the 'Big Compliance
Festival', a rolling programme of virtual events to take place over
the next twelve months.
The Other Compliance businesses performed reasonably with
revenue down by 1%. The decline came due to the required conversion
to virtual of Compliance Week's mid-May flagship annual conference.
Aside from this Covid-19 impact, Compliance Week performed well
following the launch of its new online platform and a revised
pricing strategy. The wealth management business delivered good
mid-single digit growth. It launched a new website and ecommerce
solution in May this year and has moved to online delivery of all
UK and international programmes in response to Covid-19. Pendragon,
our pensions regulation business was not immediately impacted by
Covid-19 and delivered solid single digit growth.
The Risk businesses overall reported a 1% increase in revenue.
On a constant currency basis revenue was flat. Axco, our insurance
information business delivered low single digit growth offset by a
decline in revenue in Inese, our Spanish insurance industry
company.
In Axco the impacts of consolidation within the insurance sector
were offset by pricing improvements. Axco's existing revenue was
not immediately impacted by Covid-19 and where possible research
trips have been converted to virtual meetings, generating travel
cost savings. A new data platform in Axco, was launched in January
2020. During the year Axco also launched an enhanced regulatory
alert system.
Inese's revenue was impacted by Covid-19 with some face-to-face
events not being appropriate for digital conversion. However the
closure of the Barcelona office at the start of the year and the
cost savings driven by the move to online training resulted in
operating profit which was up slightly year-on-year. We announced
at the half year that we had engaged advisors to identify potential
purchasers for the business. That process has been delayed by
Covid-19 but is still ongoing.
Overall in Risk & Compliance, divisional operating profit
was up 1% in absolute terms to GBP12.8m (2019: GBP12.7m). On an
organic basis the operating profit was flat as the reduction of
revenue was offset by cost savings driven by the switch to online
training and events and reduced travel in the Risk businesses.
Operating margin was slightly higher at 31% (2019: 30%).
Healthcare
Revenue 2020 2019 Absolute Organic
variance variance
% %
European Healthcare 27.9 29.0 (4%) (4%)
----- ----- ---------- ----------
US Healthcare 6.1 9.7 (38%) (39%)
----- ----- ---------- ----------
Other Information
businesses 7.0 7.6 (7%) (7%)
----- ----- ---------- ----------
Total 41.0 46.3 (11%) (12%)
----- ----- ---------- ----------
Operating profit 3.3 7.3 (56%) (56%)
----- ----- ---------- ----------
Margin % 8% 16%
----- ----- ---------- ----------
Business model and markets
Wilmington offers a wide range of products and services through
its Healthcare businesses predominantly around the provision of
market and customer intelligence. Wilmington's Healthcare division
combines these information assets with complementary products that
provide similar services to a number of other communities including
charities and not for profit organisations. In addition the
division runs networking events, primarily in the US market and
offers a small amount of online training.
The core of the data supplied by the Healthcare division comes
primarily from publicly available sources. The value generated by
our services is based around its collation, verification,
combination with other complementary data sources and then its ease
of presentation and usage. In some areas we provide proprietary
analysis of the data and editorial comment which constitutes our
own intellectual property.
Wilmington's European Healthcare businesses operate mainly in
the UK and France. One of their core products is the provision of
deep insight information on practitioners, facilities and
treatments in the UK and French health sector markets that enable
suppliers into those markets, including pharmaceutical companies,
to understand and connect better with their customers. The majority
of this revenue is earned through sales of discrete packages of
data or through subscription services for the ongoing provision of
information. Additionally, in the UK we publish the Health Service
Journal ('HSJ'), the leading online publication in the UK for
healthcare leaders, with revenue generated through providing
subscriptions to NHS foundation trusts, Clinical Commissioning
Groups and suppliers to the NHS. Associated with that we organise
networking and training events including the flagship HSJ Awards.
These events are typically funded by supplier sponsorship although
this is sometimes augmented by delegate charges. We also provide a
suite of online learning courses that familiarise UK industry
participants with the complexities of the National Health
Service.
The US Healthcare businesses are distinct from our other
Healthcare assets in that they are predominantly events based with
only a small proportion of revenue earned from data. They serve the
US healthcare/health insurance markets and to a lesser extent the
US financial and legal service communities. The prime brand is the
RISE series of events that address the Medicare and Medicaid
markets and is attended by health plans, physician groups and
solution partners, for which the flagship event is RISE National
which normally takes place in Nashville in March each year. Revenue
from the US events is generated from both sponsorship and delegate
sales.
The Other Information businesses consist of a portfolio of data
products including charity fund-raising information, and marketing
data suppression tools. They include services that are used by
organisations to help prevent identify fraud. Revenue is
traditionally earned through subscription to the relevant data
feed.
Covid-19 response
The healthcare industry has, of course, been profoundly impacted
by Covid-19, with the immediate industry response being to focus
resources on addressing the pandemic challenges and to pause all
other non-emergency treatment. Interest in our healthcare news
services in the UK and France increased significantly during the
period and we moved all Covid-19 related content in front of
paywalls during the early part of the crisis to ensure maximum
availability of information. Throughout the pandemic, we have kept
healthcare leaders and key workers on the front line up to date
with the latest developments and insight, significantly increasing
brand awareness for our flagship HSJ and APM News products. The
healthcare industry is starting to return to some semblance of
normality following the initial response. This is resulting in a
return to marketing activities by our pharmaceutical clients.
The main immediate impact of Covid-19 on the Healthcare division
has been on networking events revenue. This has particularly
impacted our US Healthcare business which generates the majority of
its income from events and was not able to hold RISE National in
late March, eventually running it as a very successful but smaller
virtual event at the end of June. In total twelve US events were
successfully moved online in the last quarter whilst in the UK the
decision was taken to postpone the 3 events due to run until later
in the calendar year.
Encouragingly there has been only a limited impact on data and
information services in Healthcare due to Covid-19. The APM brand
in France has fared well during the pandemic due to its impressive
coverage of health stories and data, and its position as a point of
reference for the French healthcare market has been strengthened.
In the UK, sales of subscriptions and ongoing data analysis has
continued reasonably unaffected. There was a brief hiatus in sales
of one-off cuts of data in the early stages of lockdown as
pharmaceutical companies deferred marketing plans and launches.
These are starting to return as the NHS returns to more normal
operations.
Going forward we see that the market for our products and
services will recover as the pandemic recedes. Our clients, whilst
impacted by the situation, will generally be expected to come
through it reasonably strongly and they will continue to require
the services that we provide in the future. Indeed, arguably data
and information become more important and valuable in challenging
times and we are well placed to support that requirement. Clearly
we need to be mindful of both sponsor and delegate demand for
face-to-face events over the medium term. However the fundamental
needs that drove that business in the past remain, namely the need
for sponsors to interact with prospective clients to drive business
development activities; and for practitioners to meet each other to
debate and learn about industry developments and best practice.
With our unique blend of face-to-face and digital capabilities we
are very well placed to develop solutions that meet those
requirements whilst being sensitive to any concerns over
face-to-face interaction.
Trading performance
Overall revenue for the Healthcare division declined 11% to
GBP41.0m (2019: GBP46.3m) or 12% on a constant currency basis.
Around half of the decline was due to being unable to hold the RISE
National event in March 2020.
Within the division, European Healthcare saw a 4% decline which
was fully attributable to Covid-19 causing a reduction in events
revenue in the year. Revenue from other products and services was
flat year-on-year.
APM, our French healthcare business, delivered 6% organic growth
which was driven by both its core products and the recently
launched APMi product.
After a difficult couple of years, the UK Healthcare business
was on track before the onset of Covid-19 to deliver low single
digit organic revenue growth for the year. The growth was
predominantly driven from the sales of Specialist Share Data (SSD)
and by strong mailing fulfilment, postage sales and increased
digital sales. Following the impact of lockdown on the Q4 events
revenue and the reduction in demand for one-off data cuts, the
business ultimately reported a 6% decline in full year revenue. In
May we launched the Quantis Covid tracker product which enables
clients to understand the impact of Covid-19 on patient waiting
times, admissions and treatment pathways. This helps them engage
with relevant stakeholders in the NHS and has been well received by
the market.
The US Healthcare events business, FRA, was also on track to
deliver a very strong year as demonstrated by the 20% organic
growth announced at the half year. In the US there have been major
changes in the Medicare industry, the particular focus of the
business, and this is driving positive underlying opportunities.
However, 18 planned face-to-face events were impacted by Covid-19
in the latter part of the year. Of these, twelve, including RISE
National, were converted into virtual events albeit with a
significant revenue reduction. The impact from this resulted in
full year revenue declining 39% at constant currency, with the
second half down 59% year-on-year.
The Other Information businesses saw a continued slow decline in
their legacy portfolio, particularly in revenue associated with
physical mailings, but increases in revenues from new services in
genealogy and preventing identity fraud continue to grow to
partially offset this long term decline. This reduction was
compounded by the impact of Covid-19 on events and physical mailing
products which were suspended in April and May but have since been
resumed. The business benefited in the year from the renewal of
access to the wills and probate data that underpin many of its data
services.
Operating profit in the Healthcare division decreased 56% in
absolute and organic terms to GBP3.3m (2019: GBP7.3m). The
operating margin declined to 8% (2019: 16%). This decline reflected
the lost revenue which was associated with only minor venue related
cost savings as most other costs in this division are essentially
fixed.
Professional
2020 2019 Absolute Organic
variance variance
% %
Revenue 30.3 33.8 (10%) (10%)
----- ----- ---------- ----------
Operating profit 2.9 5.8 (50%) (50%)
----- ----- ---------- ----------
Margin % 10% 17%
----- ----- ---------- ----------
Business model and market
The Professional division predominantly provides training for
professionals employed in three target communities: accountants in
practice and in business; individuals involved in the legal system,
including lawyers; and investment bankers. It runs a mix of
face-to-face, online and blended learning for these communities. It
provides training at various levels including inducting new joiners
to the investment banking industry, providing continuing
professional development for existing qualified lawyers and
accountants and, in the case of the legal profession, helping them
train their clients for interaction with the legal system.
Additionally it provides technical support to accountancy firms
which enables them to keep abreast of technical developments and
changes in tax law, as well as supporting them to promote the
services they then offer to their clients.
The Accountancy and Legal businesses are predominantly UK and
Ireland based, reflecting the country specific laws and accounting
standards that govern their profession. Investment banking is of
course a global industry, and as such Wilmington's business in that
area has an international presence, with centres in Europe, North
America and Asia Pacific.
Around half the revenue in the Professional division is earned
through clients subscribing for ongoing training support and other
related activities over a period of time (usually twelve months),
with the rest through one-off course attendance fees. Courses are
typically single or half day events, and content is a mix of owned
and third-party intellectual property. Courses are delivered either
by in-house experts or by a network of independent tutors who are
paid per course that they deliver.
Before the impact of Covid-19 the Accountancy market was
growing, however this was somewhat offset by the continued
consolidation of smaller firms, some Brexit uncertainty and
relatively a stable backdrop in terms of tax legislation and
accounting standards. The investment banking market remains
competitive, however recent investment in technology had improved
our offering in this area. The legal market remains mixed with the
demand for Law for Lawyers products continuing to suffer from
changing CPD requirements. In contrast the Law for Non-Lawyers
market was strong with good demand for existing products as well as
successful launches of new training courses.
Covid-19 response
The Professional division typically derives the majority of its
revenue from delivering face-to-face training sessions for its
three target communities. The inability to provide these due to
Covid-19 has had a detrimental impact on revenue in Q4. Impressive
efforts have been made, and continue to be made, by each of the
businesses to convert this training to a virtual format, and some
industry areas which have historically been resistant to virtual
delivery have adapted well to this. However it has not been
possible to translate all areas of training into an online
equivalent either due to the nature of the topics, or to demand
pausing, for example with witness familiarisation training which
has largely been put on hold due to courts remaining closed.
Longer term it is difficult to assess the potential impact of
Covid-19 on the markets which the Professional division serves.
Whilst there will continue to be an underlying demand for the
professions served (accountancy, legal and investment banking),
they are likely to suffer recessionary pressures which potentially
temporarily reduce the numbers of professionals employed, and hence
require training. Equally there is potential for consolidation
amongst small accountancy and legal practices which could reduce
the number of available firms subscribing for membership type
models, albeit those remaining will be larger. However, ultimately
the professionals employed will still require continuing
professional development, and the volume of regulations is only
likely to increase which will drive an increased demand which we
are well placed to serve. With likely future demand for different
models in terms of face-to-face and online we are well positioned
to capture further share from the market that does develop.
Trading performance
Overall revenue for the Professional division was down 10% at
GBP30.3m (2019: GBP33.8m) on both an absolute and organic basis.
Professional has the highest proportion of its revenue generated by
training of any of the divisions and the nature of this training
has in some areas made it more difficult to convert to an online
format in response to Covid-19.
Before Covid-19, following a tough prior year in which three
separate businesses were integrated into a single nationwide
programme of products, the Accountancy business had stabilised and
was showing positive signs. In Accountancy Covid-19 has impacted
both face-to-face training and the file reviews provided for
accountancy practices which are traditionally performed on site at
the client's offices. In response, the Accountancy business worked
quickly to launch Mercia LIVE, a virtual classroom to deliver
training. This successfully mitigated some of the revenue
reduction, although full year Accountancy revenue still declined by
7% year-on-year. Savings on venues, travel and trainer costs,
through the conversion to online and the consolidation of regional
face-to-face sessions into a single online event significantly
mitigated the profit impact. Towards the end of the year the
Accountancy business was registered as a supporting provider under
the Government's apprenticeship scheme and the business is
progressing a number of opportunities in relation to this.
Within Legal, Bond Solon, the Law for Non-Lawyers business,
experienced significant Covid-19 impacts in what would otherwise
have been a strong year. Prior to Covid-19, Bond Solon delivered
100% face-to-face training. Where possible training in Q4 was
converted to online and in some areas was very successful, with
expert witnesses for example taking the opportunity to complete
regulatory training during lockdown. However, the sensitive nature
of some training meant that conversion online was not possible for
all courses. In addition, the closure of courts due to Covid-19
meant that the majority of witness familiarisation training was put
on hold in Q4. Bond Solon launched two new Covid-19 related
training courses in May which were well received.
The well documented decline in CPD training for lawyers
continued and was exacerbated by Covid-19. This resulted in a 25%
year-on-year revenue decline. Following our announcement in
February 2020 that the Law for Lawyers business would be subject to
a strategic review the decision has been made to close the vast
majority of CLT England by 31 August 2020, options are being
considered for CLT Scotland which remains profitable.
AMT, the investment banking business, relies on traditional
face-to-face training for its revenue, albeit often augmented by
online learning delivered through our Group-wide Totara eLearning
platform. A significant proportion of its revenue is derived from
the summer graduate and intern induction programmes delivered in Q1
each financial year. These had already happened by the time of
Covid-19 and hence there was only a small revenue reduction in the
year. AMT is working with its customers to determine how these
training programmes will be delivered this summer with many of them
opting for a virtual format over a longer time period.
Overall divisional operating profit decreased 50% on an absolute
and organic basis to GBP2.9m (2019: GBP5.8m) driven by the fall in
revenue. There were direct cost savings as a result of the decrease
in revenue but these were partially offset by a one-off GBP0.8m
cost in Accountancy to upgrade business and CRM systems to effect
the integration of the business. The operating margin fell to 10%
(2019: 17%).
Unallocated central overheads
Unallocated central overheads represent Board costs and head
office salaries as well as other centrally incurred costs not
recharged to the businesses. These were essentially flat at GBP4.3m
(2019: GBP4.1m).
Finance review
Change in accounting policies - IFRS 16 Leases
From 1 July 2019 the Group has adopted the new lease accounting
standard IFRS 16 which has resulted in leases being recognised on
the balance sheet. Wilmington has opted to apply the modified
retrospective approach to adoption meaning the prior year
comparators have not been adjusted. On transition right of use
assets of GBP11.0m were recognised, along with a corresponding
GBP12.6m lease liability. In the current year adoption of this
standard has had immaterial impacts on profit before tax, adjusted
EBITA and adjusted PBT. The commentary below identifies the impact
of the changes. See note 18 for a full reconciliation.
Adjusting items, measures and adjusted results
In this financial review reference is made 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, gain on sale of
subsidiaries and amortisation of intangible assets (excluding
computer software).
2020 2019 Absolute Organic
variance variance
GBP'm GBP'm GBP'm % %
------ ------ ------ ------ ----------
Revenue 113.1 122.5 (9.5) (8%) (8%)
------ ------ ------ ------ ----------
Adjusted EBITA 14.0 21.5 (7.4) (35%) (35%)
------ ------ ------ ------ ----------
Margin % 12.4 17.6
------ ------ ------ ------ ----------
Variances described as 'organic' are calculated using constant
currencies. There were no acquisitions or disposals affecting
either the financial year or the comparative period.
Revenue
In the year ended 30 June 2020 revenue decreased by 8% or
GBP9.5m on both an absolute and organic basis to GBP113.1m (2019:
GBP122.5m) which represented a positive first nine months of the
financial year masked by the impacts of Covid-19 on the final
quarter. The Group's major non-Sterling revenues are in US Dollars
and Euros. During the year there were only small movements in these
rates therefore there were not large differences between our
absolute and constant currency positions.
Within revenue, the Data and Information revenue streams, which
represented 51% of the Group's revenue in FY20 (2019: 47%), were
not materially impacted by Covid-19 and grew 2% in the year. This
revenue stream is the one that has the highest proportion of
subscription type revenues and renewal rates remained reasonable in
the last quarter of the year.
The next largest revenue stream, Training, which represented 39%
of the Group's revenue (2019: 39%) was impacted by the inability to
hold face-to-face training for the last quarter of the year and as
a result fell by 8% compared to the prior year as demand for
certain types of training, particularly single and half day events,
decreased due to lockdown. This decrease was mitigated by the
Group's ability to successfully transition almost all face-to-face
training to virtual equivalents.
Networking, which is typically our smallest revenue stream and,
in the year, represented 10% of total revenue (2019: 14%), was the
most impacted by Covid-19 and revenue in this area fell
year-on-year by 36%. Frustratingly, the Covid-19 lockdown coincided
with the peak season for Networking events. These had to be
cancelled, including RISE National, traditionally the Group's
largest event, which was due to be held at the end of March 2020.
This was converted to a successful virtual event held in June which
helped mitigate some of the lost revenue.
The Covid-19 pandemic accelerated our existing plans to digitise
our products, meaning that in the final quarter of the year we
operated as a fully digital business. Overall across the year 43%
(2019: 30%) of our training revenues were derived from digital
learning.
The portion of our revenue which is generated in the UK
increased slightly to 58% (2019: 57%) the small increase was due to
our large US networking event RISE National not taking place and a
shift in the mix of ICA's revenue with the UK growing and Asia
Pacific declining in the year.
Operating expenses before adjusting items, amortisation and
impairment
Operating expenses before adjusting items, amortisation of
intangible assets (excluding computer software) and impairment,
were GBP99.0m (2019: GBP101.1m) down 2.0% or GBP2.0m.
Within operating expenses, non-staff costs fell GBP3.6m to
GBP45.7m (2019: GBP49.3m). Direct costs made up GBP3.5m of this
decrease, being both the direct cost savings associated with the
lost revenue in the final quarter of the year, and savings in
direct costs driven by the virtual delivery of previously
face-to-face training and events, including venue, travel and
trainer costs. The remaining GBP0.1m reduction reflects the benefit
of GBP1.4m received from various Covid-19 related government
schemes implemented to protect jobs, mainly in the US and the UK,
offset by a GBP0.6m increase to bad debt provision and a GBP0.8m
write off of system integration costs in the Accountancy
business.
Staff costs increased by GBP1.6m to GBP53.3m (2019: GBP51.8m).
Salary inflation accounted for GBP1.0m of this increase,
additionally share based payment costs increased GBP0.5m in the
year due to revised vesting assumptions in the prior year which
resulted in that year's charge being abnormally low. Investments in
new staff in the year, primarily in the Compliance businesses,
totalled GBP1.1m and this was offset by a year-on-year saving of
GBP1.0m in relation to discretionary staff bonuses and sales
commission payments. The Group's full time equivalent ('FTE')
headcount at 30 June 2020 was 892 compared to 860 at 30 June 2019.
The addition of 32 FTEs reflects the investment in new staff
discussed above. Since the period end, recognising that the effects
of Covid-19 are likely to extend well into the first half of the
new financial year we have undertaken restructuring activities at a
number of businesses across the Group. These have regrettably
resulted in around 40 staff members being made redundant which is
expected to deliver a net GBP1.3m saving in the new financial
year.
Adjusted operating profit ('adjusted EBITA')
As a result of these changes in revenue and operating expenses,
adjusted EBITA was down GBP7.4m (34.6%) to GBP14.0m (2019:
GBP21.5m). Adjusted operating margin (adjusted EBITA expressed as a
percentage of revenue) also decreased to 12.4% (2019: 17.6%).
Amortisation excluding computer software
Amortisation of intangible assets (excluding computer software)
was GBP4.8m, compared to GBP5.0m in the previous year. The small
decrease reflects certain historic assets being fully amortised
part way through the prior year.
Adjusting items within operating expenses
Adjusting items in operating expenses are those items that in
the opinion of the Directors are one-off in nature and which do not
represent the ongoing trading performance of the business. In the
year adjusting items within operating expenses were GBP0.6m (2019:
GBP1.4m) and related to acquisition and disposal activity. Deferred
consideration relating to Evantage and Interactive Medica which
were both settled in the financial year accounted for GBP0.4m with
the remaining GBP0.2m of cost relating to the strategic reviews of
Inese and CLT.
Operating profit ('EBITA')
After the various adjusting items detailed above, plus a GBP1.9m
prior year benefit relating to the sale of ICP which was not
repeated in the current year, operating profit was down GBP8.3m at
GBP8.6m (2019: GBP16.9m).
Net finance costs
Net finance costs increased by GBP0.1m to GBP2.2m (2019:
GBP2.1m), within this interest payable on bank loans and overdrafts
fell GBP0.3m due to lower average debt balances across the year.
This was offset by the new lease accounting standard, IFRS 16,
increasing finance costs by GBP0.3m, and by a GBP0.1m increase in
loan arrangement fees due to the GBP15.0m additional CLBILS
facility we have entered into.
Profit before taxation
After finance costs, profit before tax was GBP6.4m (2019:
GBP14.7m). Adjusted profit before tax was down 38.6% to GBP11.9m
(2019: GBP19.3m).
Taxation
The tax charge in the year was GBP1.8m compared to GBP3.5m in
the prior year. The fall was driven by the decrease in profit
before tax. The overall effective tax rate1 increased to 27.4% from
23.9% due to the relatively higher adjusting items relating to
acquisitions and disposals which are not deductible for tax
purposes.
The underlying tax rate2 which ignores the tax effects of
adjusting items remained flat at 20.9% (2019: 20.9%).
Earnings per share
Adjusted basic earnings per share decreased by 38.6% to 10.71p
(2019: 17.44p), owing to the decrease in adjusted profit before tax
and a flat underlying tax rate on an essentially unchanged number
of issued ordinary shares. Basic earnings per share was 5.33p
compared to 12.74p in 2019 due to the decrease in profit after
tax.
1 The effective tax rate is calculated as the total tax charge
divided by profit before tax
2 The underlying tax rate is calculated as one minus the
adjusted profit after tax divided by the adjusted profit before
tax
Balance Sheet
Non-current assets
Goodwill increased by GBP0.3m from GBP77.5m to GBP77.9m due to
fluctuations in foreign exchange rates.
Intangible assets decreased by GBP3.5m from GBP23.2m to GBP19.7m
due to amortisation of GBP6.9m, which was partly offset by
additions of GBP3.3m within computer software reflecting the
strategy to invest in the existing businesses to drive organic
growth. Additions included significant investments in an upgrade to
the Axco data platform and the new ecommerce website in the wealth
management business. Internally generated assets accounted for
GBP0.8m of additions (2019: GBP0.6m).
Property, plant and equipment fell GBP0.9m to GBP5.1m from
GBP6.0m twelve months previous. Adoption of IFRS 16 caused GBP0.3m
of this decrease, with the amount being reclassified to right of
use assets. The remaining GBP0.6m fall was due to depreciation of
GBP1.1m being only partially offset by additions of GBP0.5m.
Right of use assets of GBP11.8m relate to the Group's property
leases following the adoption of IFRS 16. As permitted by the
standard the prior year figures have not been updated.
Deferred consideration receivable
Following the disposal of ICP in July 2018, the Group recognised
GBP2.2m of deferred consideration receivable, which represents the
net present value of the gross amount of GBP2.7m which will be paid
over five years. The receipt of the first GBP0.2m of consideration
was offset by a GBP0.2m unwind of the discount to give a closing
balance of GBP2.2m. The unwind of the remaining GBP0.3m discount
will continue to be recognised as a credit to net finance costs
over the next three years.
Trade and other receivables
Trade and other receivables were down GBP3.6m at GBP25.5m (2019:
GBP29.1m). Within this, trade receivables decreased GBP2.3m due to
decreased billings in the final quarter of the year. Additionally
we increased the bad debt provision in the period by GBP0.6m to
reflect the current economic uncertainties and the resulting extra
credit risk. Prepayments and other receivables fell GBP1.3m due to
a change in the billing schedule of large supplier contracts from
annual to quarterly and the shift of Q1 FY21 events to later in the
year.
Current tax asset / liabilities
At 30 June 2020 the Group recognised an asset relating to
current tax of GBP1.3m (2019: GBP0.3m liability). A change in the
year to how large companies pay corporation tax in the UK
accelerates payment of around half the tax liability from after the
financial year end to in-year. This combined with a number of
territories delivering lower profit in the last quarter of the year
than expected due to Covid-19 has resulted in a net overpayment
position.
Trade and other payables
Trade and other payables increased by GBP1.3m from GBP57.2m to
GBP58.5m. Within this subscriptions and deferred revenue increased
by GBP0.7m or 2.2% to GBP31.5m (2019: GBP30.8m), with trade and
other payables increasing GBP0.7m to GBP27.0m (2019: GBP26.4m).
This increase in subscriptions and deferred revenue was driven
by the delay to planned events from Q4, which has meant that we are
holding more prepayments from event sponsors or delegates than we
normally have at this time. We expect these credits to be used
progressively over the next year. Adjusting for this, underlying
deferred revenue decreased by 6% due to the absence of sales for
events normally expected to be held over the summer or into the
autumn for which we would usually have started billing sponsors and
delegates.
The increase in trade and other payables was caused by GBP5.7m
of UK VAT and payroll tax payments in Q4 being delayed with
agreement from HMRC as a prudent response to the Covid-19 pandemic.
These payments will be regularised by the end of Q3 of the current
financial year. This increase was offset by a fall in normal trade
payables and accruals driven by cost savings implemented in the
last quarter of the year to reflect the lower levels of business
activity in the face of the pandemic and a GBP1.6m reclassification
of rent free period accruals from trade payables to right of use
asset under the IFRS 16 transition.
Lease liabilities
Lease liabilities of GBP13.1m relate to the Group's property
leases following the adoption of IFRS 16. As permitted by the
standard the prior year figures have not been restated.
Net debt and cash flow
Net debt, which includes cash and cash equivalents, bank loans
(excluding capitalised loan arrangement fees) and bank overdrafts,
was GBP27.7m (2019: GBP33.9m). Cash generation of GBP6.2m compared
to GBP5.7m in the prior year was a result of lower operating profit
offset by a favourable working capital movement and the interim
dividend not being paid. The favourable working capital movement
was driven primarily by the previously discussed delay in settling
VAT and payroll taxes.
As a result of the above, cash conversion for the year ended 30
June 2020 was an exceptional 189% (2019: 123%). As well as the
impact of the abnormal working capital position, year-on-year
comparison of the percentages is impacted by adoption of IFRS 16.
With both these items adjusted for, the comparable cash conversion
this year would be 133%.
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 which include the use of derivative products
such as forwards and swaps subject to Board approval. The Group
uses interest rate swap contracts to mitigate part of the interest
rate volatility risk. These swaps have resulted in a liability of
GBP0.1m (2019: GBP0.2m) at 30 June 2020. The Group's existing
interest rate swaps expired in July 2020 and new swaps were entered
into in the same month to reflect the timelines associated with the
new banking facilities entered into in July 2019.
On 1 July 2020 the Group entered into a number of foreign
currency transactions to mitigate possible exchange rate
fluctuations on its 2020/21 financial results. $9.0m USD were sold
forward to mature during the 2020/2021 financial year at an average
rate of $1.24.
Share capital
During the year 64,350 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 the number
of ordinary shares outstanding at 30 June 2020 to 87,603,917 (2019:
87,539,567).
In the year the Wilmington Group plc Employee Share Ownership
Trust purchased 200,000 ordinary shares for the purpose of settling
employee share schemes. At 30 June 2020 it held 200,000 shares
(2019: nil).
Richard Amos
Chief Financial Officer
Statement of Directors' responsibilities in respect of the
financial statements
The statement of directors' responsibilities below has been
prepared in connection with the Group's full Annual Report for the
year ended 30 June 2020. 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 16 September 2020 and is signed on its behalf by
Richard Amos
Chief Financial Officer
Consolidated income statement
for the year ended 30 June 2020
Year ended Year ended
30 June 30 June
2020 2019
Notes GBP'000 GBP'000
---------------------------------------------- ----- ---------- ----------
Continuing operations
Revenue 4 113,075 122,525
---------------------------------------------- ----- ---------- ----------
Operating expenses before amortisation of
intangibles excluding computer software and
adjusting items (99,044) (101,074)
Amortisation of intangible assets excluding
computer software 5b (4,797) (5,049)
Adjusting items 5b (625) (1,443)
---------------------------------------------- ----- ---------- ----------
Operating expenses 6 (104,466) (107,566)
Other income - gain on sale of subsidiary - 1,906
---------------------------------------------- ----- ---------- ----------
Operating profit 8,609 16,865
---------------------------------------------- ----- ---------- ----------
Net finance costs 7 (2,175) (2,103)
Share of loss of equity accounted investment - (50)
---------------------------------------------- ----- ---------- ----------
Profit before tax 6,434 14,712
Taxation 8 (1,760) (3,519)
---------------------------------------------- ----- ---------- ----------
Profit for the year 4,674 11,193
---------------------------------------------- ----- ---------- ----------
Attributable to:
Owners of the parent 4,674 11,149
Non-controlling interests - 44
---------------------------------------------- ----- ---------- ----------
4,674 11,193
---------------------------------------------- ----- ---------- ----------
Earnings per share attributable to the owners
of the parent:
Basic (p) 10 5.33 12.74
Diluted (p) 10 5.26 12.64
---------------------------------------------- ----- ---------- ----------
Adjusted earnings per share attributable
to the owners of the parent:
Basic (p) 10 10.71 17.44
Diluted (p) 10 10.56 17.30
---------------------------------------------- ----- ---------- ----------
Consolidated statement of comprehensive income
for the year ended 30 June 2020
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Profit for the year 4,674 11,193
Other comprehensive income/(expense):
Items that may be reclassified subsequently to the
income statement
---------------------------------------------------- ---------- ----------
Fair value movements on interest rate swaps, net
of tax 116 32
Currency translation differences 513 643
Net investment hedges, net of tax (237) (424)
---------------------------------------------------- ---------- ----------
Other comprehensive income for the year, net of tax 392 251
---------------------------------------------------- ---------- ----------
Total comprehensive income for the year 5,066 11,444
---------------------------------------------------- ---------- ----------
Attributable to:
Owners of the parent 5,066 11,400
Non-controlling interests - 44
---------------------------------------------------- ---------- ----------
5,066 11,444
---------------------------------------------------- ---------- ----------
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 sheet
as at 30 June 2020
2020 2019
Notes GBP'000 GBP'000
--------------------------------------- ----- --------- ---------
Non-current assets
Goodwill 11 77,876 77,535
Intangible assets 12 19,712 23,213
Property, plant and equipment 13 5,134 5,967
Right of use assets 13 11,760 -
Deferred consideration receivable 2,163 2,221
Deferred tax assets 1,189 555
Derivative financial instruments - 23
--------------------------------------- ----- --------- ---------
117,834 109,514
--------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 14 25,526 29,112
Current tax assets 1,314 -
Cash and cash equivalents 21,426 7,921
--------------------------------------- ----- --------- ---------
48,266 37,033
--------------------------------------- ----- --------- ---------
Total assets 166,100 146,547
--------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 15 (58,495) (57,168)
Current tax liabilities - (312)
Lease liabilities 16 (2,660) -
Derivative financial instruments (59) -
Deferred consideration - cash settled - (1,550)
--------------------------------------- ----- --------- ---------
(61,214) (59,030)
--------------------------------------- ----- --------- ---------
Non-current liabilities
Borrowings (48,495) (41,790)
Lease liabilities 16 (10,461) -
Derivative financial instruments - (226)
Deferred tax liabilities (2,524) (2,633)
(61,480) (44,649)
--------------------------------------- ----- --------- ---------
Total liabilities (122,694) (103,679)
--------------------------------------- ----- --------- ---------
Net assets 43,406 42,868
--------------------------------------- ----- --------- ---------
Equity
Share capital 4,380 4,377
Share premium 45,225 45,225
Treasury and ESOT reserves (590) (96)
Share based payments reserve 1,195 839
Translation reserve 3,801 3,288
(Accumulated losses)/retained earnings (10,605) (10,765)
--------------------------------------- ----- --------- ---------
Total equity 43,406 42,868
--------------------------------------- ----- --------- ---------
Statements of changes in equity
for the year ended 30 June 2020
Share capital,
share premium, Share
ESOT shares based
and treasury payments Translation Accumulated Non-controlling Total
shares reserve reserve losses Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------------- --------- ----------- ----------- -------- --------------- --------
Group
At 30 June 2018 49,500 1,108 2,645 (13,939) 39,314 82 39,396
Profit for the year - - - 11,149 11,149 44 11,193
Other comprehensive
income/(expense) for
the year - - 643 (392) 251 - 251
--------------------------- --------------- --------- ----------- ----------- -------- --------------- --------
49,500 1,108 3,288 (3,182) 50,714 126 50,840
Transactions with owners:
Dividends - - - (7,787) (7,787) (34) (7,821)
Issue of share capital 6 (472) - 466 - - -
Share based payments - 203 - - 203 - 203
Tax on share based payments - - - (48) (48) - (48)
Movements in
non-controlling
interest - - - (214) (214) (92) (306)
--------------------------- --------------- --------- ----------- ----------- -------- --------------- --------
At 30 June 2019 49,506 839 3,288 (10,765) 42,868 - 42,868
Effect of initial
application
of IFRS 16 - - - (180) (180) - (180)
Tax relating to initial
application of IFRS 16 - - - 34 34 - 34
--------------------------- --------------- --------- ----------- ----------- -------- --------------- --------
At 1 July 2019 49,506 839 3,288 (10,911) 42,722 - 42,722
Profit for the year - - - 4,674 4,674 - 4,674
Other comprehensive
income/(expense) for
the year - - 513 (121) 392 - 392
--------------------------- --------------- --------- ----------- ----------- -------- --------------- --------
49,506 839 3,801 (6,358) 47,788 - 47,788
Transactions with owners: -
Dividends - - - (4,378) (4,378) - (4,378)
Issue of share capital 3 (242) - 239 - - -
ESOT share purchases (497) - - - (497) - (497)
Sale of treasury shares 3 - - - 3 - 3
Share based payments - 598 - - 598 - 598
Tax on share based payments - - - (108) (108) - (108)
--------------------------- --------------- --------- ----------- ----------- -------- --------------- --------
At 30 June 2020 49,015 1,195 3,801 (10,605) 43,406 - 43,406
--------------------------- --------------- --------- ----------- ----------- -------- --------------- --------
Cash flow statements
for the year ended 30 June 2020
Year ended Year ended
30 June 30 June
2020 2019
Notes GBP'000 GBP'000
-------------------------------------------------- ----- ---------- ----------
Cash flows from operating activities
Cash generated from operations before adjusting
items 17 26,512 26,439
Cash flows for adjusting items - operating
activities (293) (810)
Cash flows from share based payments (16) (33)
-------------------------------------------------- ----- ---------- ----------
Cash generated from operations 26,203 25,596
Interest paid (1,632) (1,943)
Tax paid (4,377) (3,943)
-------------------------------------------------- ----- ---------- ----------
Net cash generated from operating activities 20,194 19,710
-------------------------------------------------- ----- ---------- ----------
Cash flows from investing activities
Purchase of businesses net of cash acquired - (79)
Sale of subsidiary net of cash disposed - 60
Deferred consideration paid (1,957) (1,522)
Deferred consideration received 200 -
Purchase of non-controlling interests - (224)
Cash flows for adjusting items - investing
activities (217) (405)
Purchase of property, plant and equipment (538) (1,332)
Proceeds from disposal of property, plant
and equipment 27 112
Purchase of intangible assets (3,315) (2,324)
-------------------------------------------------- ----- ---------- ----------
Net cash used in investing activities (5,800) (5,714)
-------------------------------------------------- ----- ---------- ----------
Cash flows from financing activities
Dividends paid to owners of the parent (4,378) (7,787)
Dividends paid to non-controlling interests - (34)
Share issuance costs (3) (6)
Payment of lease liabilities (2,392) -
Purchase of shares by ESOT (497) -
Fees relating to new and extended loan facility (741) (24)
Increase in bank loans 14,000 6,000
Decrease in bank loans (7,000) (15,399)
-------------------------------------------------- ----- ---------- ----------
Net cash used in financing activities (1,011) (17,250)
-------------------------------------------------- ----- ---------- ----------
Net increase/(decrease) in cash and cash
equivalents, net of bank overdrafts 13,383 (3,254)
-------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents, net of bank overdrafts
at beginning of the year 7,921 11,033
Exchange gain on cash and cash equivalents 122 142
-------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents, net of bank overdrafts
at end of the year 21,426 7,921
-------------------------------------------------- ----- ---------- ----------
Reconciliation of net debt
-------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at beginning of
the year 7,921 10,789
Cash classified as held for sale - 244
Bank overdrafts at beginning of the year - -
Bank loans at beginning of the year (41,790) (50,665)
-------------------------------------------------- ----- ---------- ----------
Net debt at beginning of the year (33,869) (39,632)
-------------------------------------------------- ----- ---------- ----------
Net increase/(decrease) in cash and cash
equivalents,
net of bank overdrafts 13,505 (3,112)
Net (drawdown)/repayment in bank loans (7,000) 9,399
Exchange loss on bank loans (292) (524)
-------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at end of the
year 21,426 7,921
Bank overdrafts at the end of the period - -
Bank loans at end of the year (49,082) (41,790)
-------------------------------------------------- ----- ---------- ----------
Net debt at end of the year (27,656) (33,869)
-------------------------------------------------- ----- ---------- ----------
Net debt at end of the year does not include lease liabilities
of GBP13,121,000 (2019: nil).
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 2020 on which an unqualified report has been made by the
Company's auditors.
Financial statements for the year ended 30 June 2019 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 2020 statutory
accounts will be delivered in due course.
Copies of the Annual Report and Financial Statements will be
made available to shareholders shortly and printed copies will be
available from the Company's registered office at 10 Whitechapel
High Street, London, E1 8QS.
2. Statement of accounting policies
The preliminary announcement for the year ended 30 June 2020 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 2019 along with new standards and interpretations
which became mandatory for the financial year. Of these new
standards and interpretations, the adoption of IFRS 16 led to a
change in the Group's accounting policies.
3. Measures of profit
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;
-- adjusting items (included in operating expenses);
-- other income - gain on sale of subsidiary;
-- share of loss of equity accounted investment; and
-- net finance costs.
Adjusted profit before tax, adjusted EBITA and adjusted EBITDA
reconcile to profit on continuing activities before tax as
follows:
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
------------------------------------------------------- ---------- ----------
Profit before tax 6,434 14,712
Amortisation of intangible assets excluding computer
software 4,797 5,049
Adjusting items (included in operating expenses) 625 1,443
Other income - gain on sale of subsidiary - (1,906)
------------------------------------------------------- ---------- ----------
Adjusted profit before tax 11,856 19,298
Share of loss of equity accounted investment - 50
Net finance costs 2,175 2,103
------------------------------------------------------- ---------- ----------
Adjusted operating profit ('adjusted EBITA') 14,031 21,451
Depreciation of property, plant and equipment included
in operating expenses 1,105 1,359
Depreciation of right of use assets 2,094 -
Amortisation of intangible assets - computer software 2,080 1,477
------------------------------------------------------- ---------- ----------
Adjusted EBITA before depreciation ('adjusted EBITDA') 19,310 24,287
------------------------------------------------------- ---------- ----------
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.
The Group's organisational structure reflects the main
communities to which it provides data, 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 Profit Revenue Profit
Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June
2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- ----------- -----------
Risk & Compliance 41,739 12,849 42,453 12,670
Healthcare 40,993 3,260 46,310 7,337
Professional 30,343 2,901 33,762 5,808
------------------------------------------ ----------- ----------- ----------- -----------
Group total 113,075 19,010 122,525 25,815
Unallocated central overheads - (4,255) - (4,152)
Share based payments - (724) - (212)
------------------------------------------ ----------- ----------- ----------- -----------
113,075 14,031 122,525 21,451
Amortisation of intangible assets
excluding computer software (4,797) (5,049)
Adjusting items (included in operating
expenses) (625) (1,443)
Other income - gain on sale of subsidiary - 1,906
Finance costs (2,175) (2,103)
Share of loss of equity accounted
investment - (50)
------------------------------------------ ----------- ----------- ----------- -----------
Profit before tax 6,434 14,712
Taxation (1,760) (3,519)
------------------------------------------ ----------- ----------- ----------- -----------
Profit for the financial year 4,674 11,193
------------------------------------------ ----------- ----------- ----------- -----------
There are no intra-segmental revenues which are material for
disclosure. Unallocated central overheads represent central 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
2020 2019
GBP'000 GBP'000
-------------------------- ---------- ----------
UK 65,793 69,839
Europe (excluding the UK) 21,037 22,055
North America 18,042 20,829
Rest of the World 8,203 9,802
-------------------------- ---------- ----------
Total revenue 113,075 122,525
-------------------------- ---------- ----------
c) Timing of revenue recognition
The timing of the Group's revenue recognition is as follows:
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Revenue from products and services transferred at
a point in time 59,524 51,054
Revenue from products and services transferred over
time 53,551 71,471
---------------------------------------------------- ---------- ----------
Total revenue 113,075 122,525
---------------------------------------------------- ---------- ----------
The value of revenue recognised in the year which was included
in subscriptions and deferred revenue at the start of the year was
GBP30,794,000 (2019: GBP28,384,000).
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
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- ---------- ----------
Depreciation of property, plant and equipment - included
in operating expenses 1,105 1,359
Depreciation of right of use assets 2,094 -
Rent and rates relating to leases 394 2,661
Amortisation of intangible assets - computer software 2,080 1,477
Profit on disposal of property, plant and equipment (7) 36
Share based payments (including social security costs) 724 212
Amortisation of intangible assets excluding computer
software 4,797 5,049
Adjusting items (included in operating expenses) 625 1,443
Gain on sale of subsidiary - (1,906)
Foreign exchange loss/(gain) (including forward currency
contracts) 14 (55)
Fees payable to the auditors for the audit of the
Company and consolidated financial statements 87 87
Fees payable to the auditors and their associates
for other services:
- The audit of the Company's subsidiaries pursuant
to legislation 152 154
- Audit related other services 15 15
--------------------------------------------------------- ---------- ----------
Rent and rates relating to leases reflect expenses incurred in
relation to leasehold properties accounted for under IAS 17 (for
the year ended 30 June 2019) and expenses incurred in relation to
right of use assets that do not fall into scope for IFRS 16 (for
the year ended 30 June 2020).
b) Adjusting items
The following items have been charged 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
2020 2019
GBP'000 GBP'000
------------------------------------------------------- ---------- ----------
Costs relating to strategic activities 218 74
Increase in liability for deferred consideration 407 489
------------------------------------------------------- ---------- ----------
625 563
Impairment of loan receivable - 331
Costs associated with the change in CEO - 549
------------------------------------------------------- ---------- ----------
Other adjusting items (included in operating expenses) 625 1,443
Amortisation of intangible assets excluding computer
software 4,797 5,049
------------------------------------------------------- ---------- ----------
Total adjusting items (classified in profit before
tax) 5,422 6,492
------------------------------------------------------- ---------- ----------
The increase in the liability for deferred consideration relates
to adjustments to deferred consideration in respect of Interactive
Medica Limited, and Evantage Consulting Limited that were settled
in the year. The costs relating to strategic activities in the year
to 30 June 2020 are in respect of strategic reviews of two of the
Group's businesses, Central Law Training Limited and Wilmington
Inese SL.
6. Operating expenses
Year ended 30 June 2020 Year ended 30 June 2019
---------------------------------- ----------------------------------
Cost of Cost of
sales Administration Total sales Administration Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------------- -------- -------- -------------- --------
Operating expenses before
depreciation and amortisation 89,363 4,402 93,765 93,626 4,612 98,238
Depreciation of property,
plant and equipment and right
of use assets 3,199 - 3,199 1,359 - 1,359
Amortisation of intangible
assets - computer software 2,080 - 2,080 1,477 - 1,477
--------------------------------- -------- -------------- -------- -------- -------------- --------
Operating expenses before
amortisation
of intangible assets excluding
computer software 94,642 4,402 99,044 96,462 4,612 101,074
Amortisation of intangible
assets - databases 1,673 - 1,673 1,745 - 1,745
Amortisation of intangible
assets - customer relationships 1,309 - 1,309 1,501 - 1,501
Amortisation of intangible
assets - brands 1,241 - 1,241 1,185 - 1,185
Amortisation of intangible
assets - publishing rights
and titles 574 - 574 618 - 618
Other adjusting items (note
5) - 625 625 - 1,443 1,443
--------------------------------- -------- -------------- -------- -------- -------------- --------
Operating expenses 99,439 5,027 104,466 101,511 6,055 107,566
--------------------------------- -------- -------------- -------- -------- -------------- --------
7. Net finance costs
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- ---------- ----------
Net finance costs comprise:
Interest payable on bank loans and overdrafts 1,587 1,921
Unwinding of the discount on royalty payments receivable (142) (127)
Bank arrangement fees 388 309
Notional interest on lease liabilities 342 -
--------------------------------------------------------- ---------- ----------
2,175 2,103
--------------------------------------------------------- ---------- ----------
Included within bank arrangement fees are costs relating to the
negotiations securing access to GBP15m of additional facility
headroom through the Government's Coronavirus Large Business
Interruption Scheme ('CLBILS').
8. Taxation
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
------------------------------------------------------ ---------- ----------
Current tax
UK corporation tax at current rates on UK profits for
the year 1,859 2,163
Adjustments in respect of previous years 30 (106)
------------------------------------------------------ ---------- ----------
1,889 2,057
Foreign tax 769 1,153
Adjustments in respect of previous years (75) 350
------------------------------------------------------ ---------- ----------
Total current tax 2,583 3,560
------------------------------------------------------ ---------- ----------
Total deferred tax (823) (41)
------------------------------------------------------ ---------- ----------
Taxation 1,760 3,519
------------------------------------------------------ ---------- ----------
Factors affecting the tax charge for the year:
The effective tax rate is higher (2019: higher) than the average
rate of corporation tax in the UK of 19.00% (2019: 19.00%). The
differences are explained below:
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Profit before tax 6,434 14,712
---------------------------------------------------- ---------- ----------
Profit before tax multiplied by the average rate of
corporation tax in the year of 19.00%
(2019: 19.00%) 1,222 2,795
Tax effects of:
Foreign tax rate differences 48 384
Adjustment in respect of previous years (45) 244
Other items not subject to tax 328 96
Effect on deferred tax of change of corporation tax
rate 207 -
---------------------------------------------------- ---------- ----------
Taxation 1,760 3,519
---------------------------------------------------- ---------- ----------
Deferred tax assets and liabilities are measured at the rates
that are expected to apply in the periods of the reversal.
The Company's profits for this accounting year are taxed at an
effective rate of 27.4% (2019: 23.9%).
Included in other comprehensive income are a tax charge of
GBP27,000 (2019: GBP8,000) and a tax credit of GBP55,000 (2019:
GBP99,000 credit) relating to the interest rate swaps and net
investment hedges respectively.
The tax effect of adjusting items as disclosed in note 10 is a
credit of GBP712,000 (2019: GBP475,000).
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
2020 2019 30 June 30 June
Pence per Pence per 2020 2019
share share GBP'000 GBP'000
---------------------------------------------- ---------- ---------- ---------- ----------
Final dividends recognised as distributions
in the year 5.0 4.8 4,378 4,200
Interim dividends recognised as distributions
in the year - 4.1 - 3,587
---------------------------------------------- ---------- ---------- ---------- ----------
Total dividends paid 4,378 7,787
---------------------------------------------- ---------- ---------- ---------- ----------
Final dividend proposed - 5.0 - 4,375
---------------------------------------------- ---------- ---------- ---------- ----------
In light of the exceptional circumstances currently prevailing
and to ensure that sufficient cash reserves remain within the
business to tackle the impacts of Covid-19 the Board cancelled the
interim dividend due to be paid 9 April 2020 and is not proposing a
final dividend for the year ended 30 June 2020.
10. Earnings per share
Adjusted earnings per share has been calculated using adjusted
earnings calculated as profit after taxation and non-controlling
interests but before:
* amortisation of intangible assets excluding computer
software;
* adjusting items (included in operating expenses); and
* other income - gain on sale of subsidiary.
The calculation of the basic and diluted earnings per share is
based on the following data:
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Earnings from continuing operations for the purpose
of basic earnings per share 4,674 11,149
Add/(remove):
Amortisation of intangible assets excluding computer
software 4,797 5,049
Adjusting items (included in operating expenses) 625 1,443
Other income - gain on sale of subsidiary - (1,906)
Tax effect of adjustments above (712) (475)
-------------------------------------------------------- ---------- ----------
Adjusted earnings for the purposes of adjusted earnings
per share 9,384 15,260
-------------------------------------------------------- ---------- ----------
Number Number
------------------------------------------------------ ---------- ----------
Weighted average number of ordinary shares for the
purposes of basic and adjusted earnings per share 87,590,511 87,513,422
Effect of dilutive potential ordinary shares:
Future exercise of share awards and options 1,254,878 719,509
------------------------------------------------------ ---------- ----------
Weighted average number of ordinary shares for the
purposes of diluted and adjusted diluted earnings
per share 88,845,389 88,232,931
------------------------------------------------------ ---------- ----------
Basic earnings per share 5.33p 12.74p
Diluted earnings per share 5.26p 12.64p
Adjusted basic earnings per share ('adjusted earnings
per share') 10.71p 17.44p
Adjusted diluted earnings per share 10.56p 17.30p
------------------------------------------------------ ---------- ----------
11. Goodwill
GBP'000
---------------------------------------------- -------
Cost
At 1 July 2018 109,824
Exchange translation differences 432
---------------------------------------------- -------
At 30 June 2019 110,256
Exchange translation differences 341
---------------------------------------------- -------
At 30 June 2020 110,597
---------------------------------------------- -------
Accumulated impairment
At 1 July 2018, 30 June 2019 and 30 June 2020 32,721
---------------------------------------------- -------
Net book amount
At 30 June 2020 77,876
---------------------------------------------- -------
At 30 June 2019 77,535
---------------------------------------------- -------
At 30 June 2018 77,103
---------------------------------------------- -------
As at 30 June 2020 the Group had recognised goodwill of GBP77.9m
(2019: GBP77.5m) with the movement fully attributable to foreign
exchange. Goodwill arising on business combinations is not
amortised but reviewed for impairment on an annual basis, or more
frequently if there are indications that goodwill may be impaired.
Determining whether the carrying value of acquired goodwill is
recoverable is a significant judgement given the material nature of
the goodwill balance and the significant assumptions underpinning
management's impairment assessment of the Group's cash generating
units ('CGUs').
The recoverable amount for each CGU has been determined using
value in use calculations. These calculations use the pre-tax
future cash flow forecasts covering a three year period based on
Board approved budgets. Pre-tax cash flows beyond the three year
period are then extrapolated using estimated long term growth
rates. Key assumptions for the value in use calculations are those
regarding discount rates, three year cash flow forecasts and long
term growth rates.
Discount rates
Management has applied pre-tax discount rates as follows:
Territory Year ended 30 June Year ended 30 June
2020 (%) 2019 (%)
United Kingdom 11.2 10.5
------------------- -------------------
United States 12.1 11.3
------------------- -------------------
Spain 11.8 11.6
------------------- -------------------
France 12.4 11.0
------------------- -------------------
Pre-tax discounts rates are calculated on a company specific
participant basis, movements in the pre-tax discount rates for CGUs
since the prior year are driven by changes in company specific
market-based inputs. Management considers the pre-tax discount
rates to be calculated using appropriate methodology. The rates are
in in line with its peers, and the Board views the rates as
accurately reflecting the return expected by a market
participant.
Three year cash flow forecasts and Covid-19
The three year cash flow forecasts which drive the value in use
calculations take into account the impact of Covid-19, they assume
no face-to-face training or events for the remainder of the 2020
calendar year with a gradual return thereafter. They also assume a
general recessionary impact on products which are not reliant on
face-to-face delivery. Given these unprecedented times, the outlook
remains uncertain however management believes these cash flows
reflect a reasonable scenario.
Compliance Week
For Compliance Week, the value in use exceeds the carrying value
by 36% (2019: 6%). The increase in headroom is due to a fall in the
asset value of the business in the year due to amortisation and
increased three year cash flow forecasts which are based on better
performance in the business's core subscription product and the
assumed gradual return to face-to-face events. 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
35% in each of the next three years; or
* an increase in the pre-tax discount from 12.1% to
17.0%.
UK Healthcare
The UK Healthcare CGU has a relatively high goodwill carrying
value due to a number of fairly recent acquisitions. The healthcare
industry, and consequently our Healthcare business, has been
disrupted by the Covid-19 pandemic and the planned growth in the
CGU in the year has not been delivered. The value in use
calculation exceeds the goodwill carrying value by 30% (2019:
123%). The value in use calculation assumes growth in years two and
three of the three year cash flow forecast driven by both a return
to normality for revenue streams disrupted by Covid-19 and the
success of new products being developed and launched through our
NPD process. Management has performed sensitivities on this CGU and
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
24% in each of the next three years;
* a decrease in the forecasted cash flows associated
with new products being developed through our NPD
process of 69% in each of the next three years; or
* an increase in the pre-tax discount rate from 11.2%
to 14.7%
Management will continue to monitor performance against the
assumptions made as the Covid-19 pandemic progresses.
As a result of the increased integration of the UK Healthcare
businesses into one single UK Healthcare business, it is no longer
possible to identify cash flows generated by Interactive Medica
independently from the other UK Healthcare businesses. Therefore,
going forward Interactive Medica will be included in the UK
Healthcare CGU from the year ending 30 June 2021. As such the year
ended 30 June 2020 will be the final year in which Interactive
Medica is disclosed as a separate CGU.
The following table details the net book amount of each CGU:
30 June 30 June
2020 2019
CGU GBP'000 GBP'000
---------------------- -------- --------
UK Healthcare 21,182 21,182
Axco and Pendragon 11,150 11,150
Accountancy 8,307 8,307
Legal 6,830 6,830
AMT 6,203 6,203
Compliance 7,972 7,972
Compliance Week 4,854 4,732
FRA 7,550 7,331
Business Intelligence 3,240 3,240
Interactive Medica 588 588
---------------------- -------- --------
77,876 77,535
---------------------- -------- --------
12. Intangible assets
Publishing
Computer Customer rights and
software Databases relationships Brands titles Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- -------------- -------- ----------- --------
Cost
At 1 July 2018 10,193 16,741 24,802 13,633 30,289 95,658
Additions 2,324 - - - - 2,324
Acquisitions - - - - 104 104
Disposal (326) - - - - (326)
Exchange translation
differences (17) 30 167 124 - 304
------------------------- --------- --------- -------------- -------- ----------- --------
At 30 June 2019 12,174 16,771 24,969 13,757 30,393 98,064
Additions 3,215 - - - 100 3,315
Disposal (62) - - - - (62)
Exchange translation
differences 111 24 135 100 - 370
------------------------- --------- --------- -------------- -------- ----------- --------
At 30 June 2020 15,438 16,795 25,104 13,857 30,493 101,687
------------------------- --------- --------- -------------- -------- ----------- --------
Accumulated amortisation
At 1 July 2018 6,642 12,048 17,096 5,496 27,071 68,353
Charge for the year 1,477 1,745 1,501 1,185 618 6,526
Disposals (251) - - - - (251)
Exchange translation
differences (18) 17 123 101 - 223
------------------------- --------- --------- -------------- -------- ----------- --------
At 30 June 2019 7,850 13,810 18,720 6,782 27,689 74,851
Charge for the year 2,080 1,673 1,309 1,241 574 6,877
Disposals (62) - - - - (62)
Exchange translation
differences 135 13 73 88 - 309
------------------------- --------- --------- -------------- -------- ----------- --------
At 30 June 2020 10,003 15,496 20,102 8,111 28,263 81,975
------------------------- --------- --------- -------------- -------- ----------- --------
Net book amount
At 30 June 2020 5,435 1,299 5,002 5,746 2,230 19,712
------------------------- --------- --------- -------------- -------- ----------- --------
At 30 June 2019 4,324 2,961 6,249 6,975 2,704 23,213
------------------------- --------- --------- -------------- -------- ----------- --------
At 30 June 2018 3,551 4,693 7,706 8,137 3,218 27,305
------------------------- --------- --------- -------------- -------- ----------- --------
13. Property, plant and equipment
Land, freehold Fixtures
and leasehold and Computer Motor Right of use
buildings fittings equipment vehicles Total assets
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------------- --------- ---------- --------- -------- ------------
Cost
At 1 July 2018 5,283 4,033 3,900 460 13,676 -
Additions 248 324 302 135 1,009 -
Acquisitions - - 13 - 13 -
Disposals - (786) (477) (198) (1,461) -
Exchange translation
differences - 14 7 - 21 -
------------------------- -------------- --------- ---------- --------- -------- ------------
At 30 June 2019 5,531 3,585 3,745 397 13,258 -
Transition to IFRS
16 (note 18) (273) - - - (273) 11,043
------------------------- -------------- --------- ---------- --------- -------- ------------
At 1 July 2019 5,258 3,585 3,745 397 12,985 11,043
Additions - 126 369 43 538 2,854
Disposals - (23) (114) (63) (200) -
Exchange translation
differences 2 17 17 - 36 (43)
------------------------- -------------- --------- ---------- --------- -------- ------------
At 30 June 2020 5,260 3,705 4,017 377 13,359 13,854
------------------------- -------------- --------- ---------- --------- -------- ------------
Accumulated depreciation
At 1 July 2018 959 2,961 3,059 234 7,213 -
Charge for the year 325 491 452 91 1,359 -
Disposals - (693) (467) (153) (1,313) -
Acquisitions - - 13 - 13 -
Exchange translation
differences - 11 8 - 19 -
------------------------- -------------- --------- ---------- --------- -------- ------------
At 30 June 2019 1,284 2,770 3,065 172 7,291 -
Charge for the year 287 263 483 72 1,105 2,094
Disposals - (14) (114) (52) (180) -
Exchange translation
differences (5) 35 (20) (1) 9 -
------------------------- -------------- --------- ---------- --------- -------- ------------
At 30 June 2020 1,566 3,054 3,414 191 8,225 2,094
------------------------- -------------- --------- ---------- --------- -------- ------------
Net book amount
At 30 June 2020 3,694 651 603 186 5,134 11,760
------------------------- -------------- --------- ---------- --------- -------- ------------
At 30 June 2019 4,247 815 680 225 5,967 -
------------------------- -------------- --------- ---------- --------- -------- ------------
At 30 June 2018 4,324 1,072 841 226 6,463 -
------------------------- -------------- --------- ---------- --------- -------- ------------
Included in land, freehold and leasehold buildings is GBP970,000
(2019: GBP970,000) of non-depreciated land.
Depreciation of property, plant and equipment is charged to
operating expenses within the income statement.
14. Trade and other receivables
30 June 30 June
2020 2019
GBP'000 GBP'000
---------------------------------- -------- --------
Current
Trade receivables 20,752 23,058
Prepayments and other receivables 4,774 6,054
---------------------------------- -------- --------
25,526 29,112
---------------------------------- -------- --------
15. Trade and other payables
30 June 30 June
2020 2019
GBP'000 GBP'000
----------------------------------- -------- --------
Trade and other payables 27,030 26,374
Subscriptions and deferred revenue 31,465 30,794
----------------------------------- -------- --------
58,495 57,168
----------------------------------- -------- --------
16. Lease liabilities
The following table shows the discounted lease liabilities
included in the Group balance sheet:
30 June 30 June
2020 2019
GBP'000 GBP'000
------------ -------- --------
Current 2,660 -
Non-current 10,461 -
------------ -------- --------
13,121 -
------------ -------- --------
17. Cash generated from operations
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
--------------------------------------------------- ---------- ----------
Profit from continuing operations before income
tax 6,434 14,712
Gain on sale of subsidiary - (1,906)
Adjusting items 625 1,443
Depreciation of property, plant and equipment
included in operating expenses 1,105 1,359
Depreciation of right of use assets 2,094 -
Amortisation of intangible assets 6,877 6,526
(Profit)/loss on disposal of property, plant
and equipment (7) 36
Share based payments (including social security
costs) 724 212
Share of loss of equity accounted investment - 50
Finance costs 2,175 2,103
--------------------------------------------------- ---------- ----------
Operating cash flows before movements in working
capital 20,027 24,535
Decrease/(increase) in trade and other receivables 3,279 (258)
Increase/(decrease) in trade and other payables 3,206 2,162
--------------------------------------------------- ---------- ----------
Cash generated from operations before adjusting
items 26,512 26,439
--------------------------------------------------- ---------- ----------
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
2020 2019
GBP'000 GBP'000
----------------------------------------------------------- ---------- ----------
Funds from operations before adjusting items:
Adjusted EBITA (note 3) 14,031 21,451
Share based payments (including social security costs) 724 212
Amortisation of intangible assets - computer software 2,080 1,477
Depreciation of right of use assets 2,094 -
Depreciation of property, plant and equipment included
in operating expenses 1,105 1,359
(Profit)/loss on disposal of property, plant and equipment (7) 36
----------------------------------------------------------- ---------- ----------
Operating cash flows before movement in working capital 20,027 24,535
Net working capital movement 6,485 1,904
----------------------------------------------------------- ---------- ----------
Funds from operations before adjusting items 26,512 26,439
----------------------------------------------------------- ---------- ----------
Cash conversion 189% 123%
----------------------------------------------------------- ---------- ----------
Year ended Year ended
30 June 30 June
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Free cash flow:
Operating cash flows before movement in working capital 20,027 24,535
Proceeds on disposal of property, plant and equipment 27 112
Net working capital movement 6,485 1,904
Interest paid (1,632) (1,943)
Payment of lease liabilities (2,392) -
Tax paid (4,377) (3,943)
Purchase of property, plant and equipment (538) (1,332)
Purchase of intangible assets (3,315) (2,324)
-------------------------------------------------------- ---------- ----------
Free cash flow 14,285 17,009
-------------------------------------------------------- ---------- ----------
18. Transition to IFRS 16
On 1 July 2019 the Group adopted the new accounting standard
IFRS 16 Leases.
The Group has adopted the modified retrospective approach to
application, using transitional reliefs available. It has not
restated comparatives and on transition the Group recognised a
cumulative adjustment to the opening balance of retained earnings
at 1 July 2019. The Group has also made use of the following
transitional reliefs:
* exclusion of initial direct costs from the
measurement of the right of use asset at the date of
application;
* exemption from transition of leases with a remaining
term less than twelve months;
* application of the discount rate at the date of
transition, rather that the date of lease
commencement, to calculate the value of the lease
liability;
* leases for low value assets have been excluded from
transition; and
* the Group will not reassess whether a contract is or
contains a lease, and the definition of a lease under
IAS 17 will continue to apply to leases entered into
before 1 July 2019.
At the 1 July 2019 transition date, adoption of IFRS 16 resulted
in the Group recognising right of use assets of GBP11.0m and lease
liabilities of GBP12.6m. There is a reduction of GBP1.6m to other
payables in respect of accrued rent free amounts netted against the
right of use asset. There is a GBP0.1m opening adjustment to
retained earnings to reflect the difference between carrying values
of right of use assets and lease liabilities at the transition
date, and an associated deferred tax asset has also been
recognised. There is also a GBP0.3m reclassification between
property, plant and equipment and right of use assets, relating to
an asset retirement obligation.
The weighted average incremental borrowing rate applied to the
Group's lease liabilities on transition at 1 July 2019 was
2.7%.
Impact on the Consolidated Balance Sheet
The effect on the Consolidated Balance Sheet of the
implementation of IFRS 16 Leases on 1 July 2019 is summarised
below:
Group
------------------------------------------------
Reported Adjusted
30 June 2019 IFRS 16 adjustments 1 July 2019
(audited) 1 July 2019 (unaudited)
GBP'000 GBP'000 GBP'000
------------- ------------------- ------------
Non-current assets
Property, plant and equipment 5,967 (273) 5,694
Right of use assets - 11,043 11,043
Deferred tax assets 555 34 589
Other non-current assets 102,992 - 102,992
109,514 10,804 120,318
------------- ------------------- ------------
Current assets 37,033 - 37,033
------------- ------------------- ------------
Total assets 146,547 10,804 157,351
------------- ------------------- ------------
Current liabilities
Trade and other payables (57,168) 1,616 (55,552)
Lease liabilities - (2,181) (2,181)
Other current liabilities (1,862) - (1,862)
(59,030) (565) (59,595)
------------- ------------------- ------------
Non-current liabilities
Lease liabilities - (10,385) (10,385)
Other non-current liabilities (44,649) - (44,649)
------------- ------------------- ------------
Total liabilities (103,679) (10,950) (114,629)
------------- ------------------- ------------
Net assets 42,868 (146) 42,722
------------- ------------------- ------------
Equity
Share capital, share premium and treasury
shares 49,506 - 49,506
Other reserves 4,127 - 4,127
Accumulated losses (10,765) (146) (10,911)
------------- ------------------- ------------
Total equity 42,868 (146) 42,722
------------- ------------------- ------------
A reconciliation of the movement in the right of use asset in
the year ended 30 June 2020 is included in note 13. Movements in
the lease liability relating to the unwind of the discounted future
lease payments is included in note 7. Amounts recognised through
the consolidated income statement in respect of short term leases
and low value leases are included in note 5. Payments of lease
liabilities are disclosed in the cashflow.
Impact on the Consolidated Income Statement
For the year ended 30 June 2020 there was an income statement
depreciation charge of GBP2.1m relating to right of use assets
associated with IFRS 16 leases and an interest cost relating to the
IFRS 16 lease liabilities of GBP0.3m.
Impact on the Consolidated Cash Flow Statement
Payments in respect of leases which were previously recognised
within cash flows from operating activities are now recorded within
cash flow from financing activities.
Reconciliation of operating lease commitments on transition
The following is a reconciliation of total operating lease
commitments at 30 June 2019, as disclosed in the financial
statements to 30 June 2019, to the lease liabilities recognised at
1 July 2019.
GBP'000
-------
Total operating lease commitments at
30 June 2019 17,379
Non lease components included in commitments (2,907)
Leases with remaining lease term less
than twelve months (702)
--------------------------------------------- -------
Total undiscounted lease liabilities 13,770
--------------------------------------------- -------
Discounted using incremental borrowing
rate (1,204)
--------------------------------------------- -------
Total lease liabilities recognised
under IFRS 16 at 1 July 2019 12,566
--------------------------------------------- -------
19. Events after the reporting period
Forward contracts
On 1 July 2020 the following forward contracts were entered in
order to provide certainty in sterling terms of 80% of the Group's
expected net US dollar income:
Currency Amount (millions) Maturity date Foreign exchange
rate
----------- ------------------ ----------------- -----------------
US dollar 1.5 31 July 2020 1.2398
US dollar 1.0 30 October 2020 1.2414
US dollar 1.0 18 December 2020 1.2417
US dollar 1.0 29 January 2021 1.2424
US dollar 1.0 26 February 2021 1.2426
US dollar 2.0 30 April 2021 1.2431
US dollar 1.5 28 May 2021 1.2433
Interest rate swap contracts
On 1 July 2020 the following interest rate swap contracts were
entered into in order to offset part of the Group's variable
interest payments and replace them with fixed payments:
* A $7.5m interest rate swap commencing on 1 July 2020
and ending on 1 October 2024, whereby the Group
receives interest on $7.5m based on the USD LIBOR
rate and pays interest on $7.5m at a fixed rate of
0.495%.
* A GBP20.0m interest rate swap commencing on 1 July
2020 and ending on 1 October 2024, whereby the Group
receives interest on GBP20m based on LIBOR rate and
pays interest on GBP20m at a fixed rate of 0.395%.
Included within both swaps is an embedded 0% LIBOR floor to
align with the equivalent floor in the Group's revolving credit
facility, ensuring the hedge remains effective if a negative LIBOR
event were to arise.
Bank facility extension
To ensure the Group has sufficient facility headroom to deal
with the most pessimistic trading scenarios the Board has agreed in
principle with its lenders to access GBP15m of additional facility
headroom through the Government's Coronavirus Large Business
Interruption Scheme ('CLBILS') for twelve months from July 2020.
Within finance costs the banking facility extension fees relate to
the negotiations securing the loan.
END
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