RNS Number:3818N
Electric Word PLC
10 July 2003
ELECTRIC WORD PLC
Interim Report for the Six Months ended 31 May 2003
Chairman's and Chief Executive's Report
Electric Word plc is a specialist publisher of professional development
information, particularly for managers in the public sector. Its markets are
education management, public sector funding, health management and sports
science. The great majority of revenue is from renewable subscriptions to 18
newsletters, but Electric Word also produces books, reports, reference files and
conferences. The first half of 2003 has been characterised by continued growth,
substantial increases in gross profits and a significant investment in new
product development.
*Turnover up 18% to #1.25m (#1.06m at half year in 2002)
*Subscriptions revenue up 33% to #1.07m (#808k)
*Gross profit up 73% to #575k (#332k)
*First profit before goodwill amortisation and new product development
*Average number of subscriptions up 14% to 25,371
*Net investment in product development up 276% to #281k (#75k)
*3 new newsletters launched in first half of year
*85% of revenue from renewable subscriptions (76%)
*Cash balance #561k (#499k in May 2002)
Chairman's and Chief Executive's Report
As promised in our 2002 year-end report, this year has been one of intense
product development activity. The result has been the launch of three new
newsletters with a further five ready for testing in the second half of the year
and a 14% increase in the total number of paid subscriptions. Stripping out
goodwill amortisation and the net investment in new product development,
Electric Word recorded its first profit (#31k against a loss of #76k this time
last year).
Turnover increased by 18% to #1.25m, and the effort in developing the core
subscriptions business has been rewarded by a 33% increase in subscriptions
revenue which accounted for 85% of the total. Gross profit increased by 73% to
#575k. With the net investment in new product development increasing to #281k,
the pre-tax loss increased by just under #100k to #318k.
The increased investment in product development reflects the fundamental
strength of the market for professional development information. The public
sector is witnessing a dramatic change through the professionalisation of its
management. Much of Electric Word's business addresses managers in education and
local authorities, but the first half of this year has also seen the company
move into primary healthcare management for the first time.
In addition to management information, the company provides continuing education
information for sports science and sports health professionals. This, the most
established part of the company, has also enjoyed a period of exciting expansion
as the company has developed new markets outside the UK. One of the most
significant areas of investment in new product development this year has been in
the electronic side of the sports science business which shows great promise for
future growth.
The investment was achieved in the first half of the year without reducing the
company's cash balance. This provides a strong platform for further investment
in the second half, both in more new launches and in supporting the high
proportion (35%) of the company's titles that are still in their first year.
The strong cash position is typical of a subscription-based business in which
payment is received in advance but much of the revenue is deferred to future
periods. As the costs of acquiring new subscriptions are wholly expensed at the
start of a subscriber's life, profits lag behind cash - particularly when
products are first launched and growing fast. In this half-year, operating cash
exceeded the net trading result by over #300,000. As a result, the company does
not anticipate needing to raise additional funds for working capital.
Trading Update
Despite recent concerns about the level of government funding for schools, sales
to the education market have grown by 30% year-on-year and, with the enthusiasm
for new launches continuing to match the pace of organisational change, the
medium and long-term outlook remains very encouraging. Nevertheless, we have
acted to reduce the impact of any short-term volatility in the education market
by converting more subscribers to two-year terms whilst also looking to
complement our education portfolio by developing new markets in health
management.
The sports science market has also continued to show real vigour and
opportunity. For the first time, this half year saw a majority of new
subscriptions for electronic rather than print versions of the products, with
the majority of those coming from customers outside the UK. Successful Coaching
has also become the company's first newsletter to be launched in a purely
electronic format.
The conference business continues to grow, with three more events held in the
first half and a strong autumn programme, particularly in education.
Finally, the two public sector funding products have delivered subscriptions
growth of more than 50%, thanks to the successful establishment of External
Funding Bulletin, launched towards the end of last year.
Future Prospects
This time last year we promised to re-invest the cash generated by the group's
established products into a programme of organic growth through new launches.
The success of this programme continues to justify the priority it has been
accorded, with six new titles launched in the last 12 months. We expect to
continue organic growth in the second half of this year, but if we find
opportunities to apply the skills and abilities of our exceptional management
and operational team, we may look to create value through acquisition.
We would like to thank all of Electric Word's staff, editors and writers for the
energy and skill that makes the company such an exhilarating place to work.
Thanks to the efforts of the whole team, the business has been able to make
excellent progress each year and we have every reason to expect this to continue
into the future.
Nigel Wray, Chairman
Julian Turner, Chief Executive
GROUP PROFIT AND LOSS ACCOUNT
for the period ended 31 May 2003
Year
6 months 6 months ending
ending ending 30 November
31 May 2003 31 May 2002 2002
(unaudited) (unaudited) (audited)
# # #
TURNOVER 1,254,833 1,060,022 2,494,307
---------------- ---------------- ----------------
COST OF SALES
Marketing costs (365,725) (398,451) (830,730)
Other cost of (314,329) (329,088) (776,480)
sales
---------------- ---------------- ----------------
(680,054) (727,539) (1,607,210)
---------------- ---------------- ----------------
GROSS PROFIT 574,779 332,483 887,097
Other operating (432,760) (408,321) (921,730)
expenses (net)
New product (392,185) (74,819) (310,333)
development
--------------- --------------- ---------------
(250,166) (150,657) (344,966)
Amortisation of (69,813) (69,813) (139,625)
goodwill
--------------- --------------- ----------------
TOTAL (894,758) (552,953) (1,371,688)
ADMINISTRATIVE
EXPENSES
---------------- ---------------- ----------------
OPERATING LOSS (319,979) (220,470) (484,591)
Interest 2,313 1,880 4,323
receivable
--------------- --------------- ---------------
LOSS ON ORDINARY (317,666) (218,590) (480,268)
ACTIVITIES BEFORE
TAXATION
=============== =============== ===============
Taxation - - -
--------------- --------------- ---------------
LOSS ON ORDINARY
ACTIVITIES AFTER
TAXATION (317,666) (218,590) (480,268)
================ ================ ================
Basic and diluted (0.41p) (0.28p) (0.62)p
loss per share
================ ================ ================
RECONCILIATION OF OPERATING LOSS TO LOSS BEFORE GOODWILL AND INVESTMENT IN NEW
PRODUCT DEVELOPMENT
Year
6 months 6 months ending
ending ending 30 November
31 May 2003 31 May 2002 2002
(unaudited) (unaudited) (audited)
# # #
Operating loss (319,979) (220,470) (484,591)
Amortisation of 69,813 69,813 139,625
goodwill
New product (111,233) - (31,843)
development
revenue
New product 392,185 74,819 310,333
development
costs
--------------- --------------- ---------------
Operating profit/ 30,786 (75,838) (66,476)
(loss) before
goodwill and
investment in new
product
development
================ ================ ================
GROUP BALANCE SHEET
at 31 May 2003
30 November
31 May 2003 31 May 2002
(unaudited) 2002 (audited)
# (unaudited) #
#
FIXED ASSETS
Intangible assets 974,421 1,114,046 1,044,234
Tangible assets 83,701 27,427 29,833
--------------- -------------- --------------
1,058,122 1,141,473 1,074,067
--------------- -------------- --------------
CURRENT ASSETS
Stocks 23,929 7,695 24,797
Debtors 264,743 244,447 283,569
Cash at bank and in 560,826 498,511 559,396
hand
--------------- -------------- --------------
849,498 750,653 867,762
--------------- -------------- --------------
CREDITORS: Amounts
falling due within one
year
Deferred revenue (1,753,010) (1,213,332) (1,382,884)
Other creditors (335,816) (289,227) (422,485)
--------------- -------------- --------------
(2,088,826) (1,502,559) (1,805,369)
--------------- -------------- --------------
NET CURRENT (1,239,328) (751,906) (937,607)
LIABILITIES
--------------- -------------- --------------
--------------- -------------- --------------
TOTAL ASSETS LESS (181,206) 389,567 136,460
CURRENT LIABILITIES
=============== ============== ==============
CAPITAL AND RESERVES
Called up share 778,739 770,168 778,739
capital
Share premium account 1,262,705 1,262,705 1,262,705
Merger reserve 105,011 105,011 105,011
Profit and loss (2,327,661) (1,748,317) (2,009,995)
account
--------------- -------------- --------------
SHAREHOLDERS' FUNDS (181,206) 389,567 136,460
=============== ============== ==============
GROUP CASH FLOW STATEMENT
for the period ended 31 May 2003
6 months 6 months Year
ending ending ending 30
November
31 May 2003 31 May 2002 2002
(unaudited) (unaudited) (audited)
# # #
CASH INFLOW FROM 61,343 143,699 206,473
OPERATING ACTIVITIES
Returns on investments 2,313 1,880 4,323
and servicing of
finance
Capital expenditure and (62,226) (15,717) (28,620)
financial investment
--------------- -------------- --------------
CASH INFLOW BEFORE 1,430 129,862 182,176
FINANCING
Financing - - 8,571
--------------- -------------- --------------
INCREASE IN CASH IN THE 1,430 129,862 190,747
PERIOD
=============== ============== ==============
NOTES TO THE INTERIM REPORT
1. PRESENTATION OF INTERIM RESULTS
This interim report was approved by the Directors on 9 July 2003. The
results for both the current and the comparative half year have not been
audited, but were the subject of an independent review carried out by the
company's auditors, Baker Tilly. Their review confirmed that the figures
were prepared using accounting policies and practices consistent with those
adopted in the 2002 annual report. The audited results for the year ended 30
November 2002 are an abridged version of the company's report and financial
statements which have been filed with the Registrar of Companies and on
which the auditors gave an unqualified report. The financial information
contained in this interim report does not constitute statutory accounts as
defined by Section 240 of the Companies Act 1985. All shareholders will
receive a copy of this interim report, which can also be obtained from the
company's registered office at 67-71 Goswell Road, London EC1V 7EP.
2. TAXATION
No taxation has been provided due to losses in the period.
3. DIVIDENDS
The directors do not recommend the payment of a dividend.
4. LOSS PER SHARE
Basic and diluted loss per share is based on the loss on ordinary activities
after taxation and on the following weighted average number of shares in
issue.
31 May 2003 77,873,854
31 May 2002 77,016,710
30 November 2002 77,088,139
RECONCILIATION OF 6 months 6 months Year
NET CASHFLOW
TO MOVEMENT IN NET ending ending ending 30
FUNDS
31 May 31 May November
2003 2002 2002
# # #
Increase in cash 1,430 129,862 190,747
in the period
--------------- -------------- --------------
Net funds at 559,396 368,649 368,649
beginning of
period
---------------- -------------- --------------
Net funds at end 560,826 498,511 559,396
of period
================ ============== ==============
RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS
Share Profit
Share premium Merger and loss
capital account reserve account Total
# # # # #
At 1 778,739 1,262,705 105,011 (2,009,995) 136,460
December
2002
Loss for - - - (317,666) (317,666)
the
period
-------------- --------------- -------------- ---------------- ---------------
At 31 778,739 1,262,705 105,011 (2,327,661) (181,206)
May
2003
============== =============== ============== ================ ===============
INDEPENDENT REVIEW REPORT TO ELECTRIC WORD PLC
Introduction
We have been instructed by the company to review the financial information
set out on pages 4 to 9 and we have read the other information contained in
the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' Responsibilities
The interim report, including the financial information contained therein,
is the responsibility of, and has been approved by the directors. It is best
practice that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board as if that Bulletin applied. A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed.
A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially
less in scope than an audit performed in accordance with Auditing Standards
and therefore provides a lower level of assurance than an audit. Accordingly
we do not express an audit opinion on the financial information.
Review Conclusion
On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the 6
months ended 31 May 2003.
BAKER TILLY
Chartered Accountants
2 Bloomsbury Street
London WC1B 3ST
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