Final Results
Wilmington Group Plc
18 September 2006
18 September 2006
WILMINGTON GROUP PLC
('Wilmington', 'the Group' or 'the Company')
Unaudited Preliminary Results for the Year Ended 30 June 2006
Wilmington Group plc, the information and training group, today announces its
unaudited preliminary results for the year ended 30 June 2006.
Highlights
• A year of excellent progress, with record revenues and profits
• Third successive year of strong growth
o Revenue from continuing operations up 11.5% to £89.8m (2005: £80.5m)
o Adjusted profit before tax up 13.3% to £13.8m (2005: £12.2m)
o Adjusted EPS up 23.3% to 11.63p (2005: 9.43p); over the last three years
EPS has grown at a compound rate in excess of 20%
o Total dividend for the year up 11% to 4.0p (2005: 3.6p)
o Good operating cash flow at 114% of operating profit (before
non-recurring costs, amortisation, interest and taxation)
• Particularly strong performance by Legal & Regulatory division
• Corporate activity over the last two years has significantly improved
the overall quality of the Group portfolio
• Wilmington is well placed to exploit the exciting organic growth and
acquisitive opportunities that the current market offers
Charles Brady, Chief Executive, commented:
'I am pleased to report that Wilmington has made excellent overall progress,
with strong growth in both revenue and profitability, together with a
significant increase in cash generation and encouraging results from the
integration of our latest acquisitions.
'We have an experienced and well-motivated management team, able to take
advantage of the Group's strong cashflow and robust balance sheet. We have a
strong reputation in areas that we want to develop and are well placed to
exploit the exciting possibilities both for organic growth and acquisitions that
we believe the current market offers.
'The Board is very encouraged by the continued progress of the Group, is
confident that our strategy will result in further progress and remains
confident of our prospects in the year ending 30 June 2007 and beyond.'
- ends -
For further information, please contact:
Wilmington Group Plc On the day: 020 7422 6804
Charles Brady, Chief Executive Thereafter: 0121 355 0900
Basil Brookes, Finance Director
Weber Shandwick Square Mile 020 7067 0700
Nick Oborne, Kirsty Raper or Helen Thomas
Notes to Editors
Wilmington Group plc is one of the UK's leading providers of information and
training for professional business markets. The Group provides training,
arranges industry events and publishes magazines, directories, databases, and
special reports focused primarily on its four principal sectors of Legal &
Regulatory, Healthcare, Media & Entertainment and Design & Construction.
Capitalised at approximately £151 million, Wilmington floated on the London
Stock Exchange in 1995.
Chairman's Statement
I am pleased to report that Wilmington has made excellent overall progress in
the year to 30 June 2006, with strong growth in both revenue and profitability,
together with a significant increase in cash generation and encouraging results
from the integration of our latest acquisitions.
Financial Performance
Revenue from continuing operations grew by 11.5% to £89.8m (2005: £80.5m) and
profit before tax increased by 28.4% to £10.1m (2005: £7.8m). Adjusted profit
before tax grew by 13.3% to £13.8m (2005: £12.2m). This is the third successive
year of impressive profit growth.
Earnings per share increased by 40.3% to 8.01p per share (2005: 5.71p). Adjusted
earnings per share from continuing operations grew by 23.3% to 11.63p per share
(2005: 9.43p), maintaining our recent trend of strong earnings per share growth.
Over the last three years, adjusted earnings per share has increased at a
compound rate in excess of 20% per annum.
Operating cash flow increased by 16.1% to £16.9m (2005: £14.6m), representing
114% of operating profit (before non-recurring items, amortisation, interest and
taxation), reflecting a further increase in underlying subscription revenues.
These are our first full year results reported under International Financial
Reporting Standards (IFRS). As a result there are changes in format and
additional disclosures, details of which are set out in the Business Review. All
of the 2005 comparative numbers, previously prepared under UK Generally Accepted
Accounting Practice ('UK GAAP'), have been adjusted to ensure comparability.
Merger
In June 2006 we announced our intention to merge with Metal Bulletin plc.
However, following receipt of an all cash offer from Euromoney Institutional
Investor plc, the Board of Metal Bulletin withdrew their recommendation to merge
with Wilmington. We were disappointed that the merger did not complete.
Moreover, I believe that the management team of Metal Bulletin plc would have
worked successfully with Wilmington's management to create significant
shareholder value. We wish them well for the future.
As required by IAS 37 we have provided £1.2m for the estimated costs of the
proposed merger incurred to 30 June 2006. These costs have been written off as
an exceptional expense and consequently have reduced the profit before tax and
earnings per share. The corresponding inducement fee income of £1.4m received in
August 2006, together with transaction costs incurred after 30 June 2006, will
be recognised in the accounts to 30 June 2007. The directors anticipate that the
total costs incurred in connection with the proposed merger will not be
materially different from the inducement fee received.
Dividend
The Board remains committed to a progressive dividend policy. As a result of the
proposed merger with Metal Bulletin, this year we paid a second interim dividend
in lieu of a final dividend. This second interim dividend of 2.7p per share was
paid on 12 September 2006 to shareholders on the register on 11 August 2006.
Together with the first interim dividend of 1.3p per share, this makes a total
dividend for the year of 4p per share, an increase of 11% over the 3.6p paid
last year. The dividend is covered 2.9 times by adjusted earnings per share
(2005: 2.6 times). As announced in the merger circular sent to shareholders on
10 June 2006, the directors do not propose a final dividend for the year.
Highlights of the Year
I am pleased to report that we have realised the benefits sought from last
year's management changes and extensive property reorganisation. This, together
with some excellent acquisitions and strategic disposals, has significantly
improved the overall quality of the Group's portfolio of businesses.
Overall, we have achieved our ambition of delivering substantial growth in
adjusted profit before tax and in adjusted earnings per share. The Business
Review describes the performance of the business in greater detail. There are
however some highlights which I would like to identify in this statement.
Legal and Regulatory
Revenue has grown 20.3% to £52.0m (2005: £43.2m), boosted by the acquisitions of
Ark Group (October 2005) and Smee & Ford (February 2006). Segmental profits
before non-recurring costs and amortisation have grown by 12.8% to a record
£12.3m (2005: £10.9m). Whilst we have had good performances in a number of areas
in this division, Waterlow's publishing and information activities in particular
have made outstanding progress with profits increased by 35.5%. This growth has
been largely generated by growing Internet and digital revenues and the success
of our sales and marketing teams. Electronic initiatives represented 92% of the
organic profit growth in Waterlow, which also benefited from the acquisition of
Ark Group and Smee & Ford.
We are excited by the many opportunities for future growth presented by the
Legal and Regulatory division's markets. The acquisition of Quorum Training in
May 2005 gave access to the accountancy training market, where we are investing
in new product, marketing and systems, but have still substantially increased
profits above the level achieved in the last full year prior to the acquisition.
The acquisition of Smee & Ford consolidates our leading position in the charity
sector and its profits are already ahead of our expectations. The acquisition of
Ark Group extended our business into niche areas of professional practice
management and knowledge management. Both acquisitions have been immediately
earnings enhancing, achieving a return on capital comfortably in excess of our
cost of capital.
Healthcare
Revenue increased by 4.6% to £11.2m (2005: £10.7m) and segmental profits before
non-recurring costs and amortisation were £2.1m (2005: £1.9m). While all the
major business units have made excellent progress, the headline profit was
impacted by £300k of net development costs relating to APM Health Europe.
Launched in January 2006, this English language electronic news service informs
senior executives in the pharmaceutical industry of developments and regulatory
issues across the key European markets.
Media and Entertainment
With revenues of £6.5m (2005: £6.8m) and a segmental profit before non-recurring
costs and amortisation of £0.9m (2005: £1.1m) the results are disappointing. We
have taken firm action to remedy this by the appointment of a new managing
director and a new sales director for Hollis Directories who we anticipate will
bring greater focus and energy to the business; furthermore we have increased
our investment in product and brand development. The acquisition of two
products, 'The Knowledge' and 'Benn's Media', in May 2006 will allow us to
leverage sales and operational synergies from our existing product range.
Design and Construction
The improvement in profitability within our Design and Construction division
continues with revenues of £10.9m (2005: £11.4m) and a segment profit before
non-recurring costs and amortisation of £0.4m (2005: £0.3m). We have made
extensive changes to the management and operating structure of this division.
These changes have resulted in further profit progression and, whilst the
margins are not at the level we wish, we anticipate further improvement during
the current year.
Outlook
Across the Group we continue to invest in people and products and we have shown
that we can transform the profits of businesses we acquire. We believe this
continued investment, combined with our ability to make value enhancing
acquisitions, will drive the business forward.
We have an experienced and well-motivated management team, able to take
advantage of the Group's strong cashflow and robust balance sheet. We have a
strong reputation in areas that we want to develop and are well placed to
exploit the exciting possibilities both for organic growth and acquisitions that
we believe the current market offers.
The Board is very encouraged by the continued progress of the Group, is
confident that our strategy will result in further progress and remains
confident of our prospects in the year ending 30 June 2007 and beyond.
Finally, and as always, I would like to thank my fellow directors, senior
managers and all of the Group's employees who have contributed to this year's
successful results for their innovation, hard work and commitment.
David Summers
Chairman
Business Review
IFRS
The Group's 2006 financial results are the first to have been prepared under the
new International Financial Reporting Standards (IFRS) and reporting guidelines.
As a result, there are changes in format and more technical disclosures than
previously. All the 2005 comparative numbers have been adjusted accordingly.
As a result of adopting IFRS, the revenue and profit numbers presented in the
Chairman's Statement and this Business Review all refer to the financial
performance from continuing operations. The after tax results from discontinued
operations are reported separately and are referred to in note 6.
Major changes in Wilmington's accounting policies were required in areas
relating to:-
• intangible assets;
• business combinations;
• deferred tax; and
• dividends.
Adjusted profit before tax and other adjusted performance measures specifically
exclude the amortisation and impairment of intangible assets, unusual or
significant non-recurring costs and the tax impact of these items where
appropriate.
Overview of the Group's Financial Performance
In the year to 30 June 2006 Wilmington generated record revenue and record
profit before tax. Revenue from continuing operations increased by 11.5% to
£89.8m (2005: £80.5m) to record a third successive year of impressive growth.
Adjusted profit before tax increased by 13.3% to £13.8m for the year compared to
£12.2m for the year ended 30 June 2005. The adjusted operating margin increased
to 15.4% (2005: 15.1%), the fourth year of margin improvement.
Operating profit (profit before interest, amortisation and impairment of
intangibles, non-recurring items and tax) increased by 13.5% to £14.9m (2005:
£13.1m). Reflecting the cash generative nature of the Wilmington Group business,
interest charges remained largely unchanged at £1.0m (2005: £0.9k), despite
extensive investment in the business and £16.2m spent on acquisitions.
Amortisation and impairment of intangible assets was £2.5m in the year ended 30
June 2006 compared to £3.4m in the year ended 30 June 2005.
Earnings per Share
Earnings per share increased by 40.3% to 8.01p for the year ended 30 June 2006
(2005: 5.71p). Adjusted earnings per share increased by 23.3% to 11.63p (2005
9.43p). Over the last three years adjusted earnings per share have grown at a
compound rate in excess of 20%. Earnings and adjusted earnings per share are
calculated on the weighted number of shares in issue of 83,600,179 for the year
ended 30 June 2006 (2005: 83,394,158).
Taxation
The Group tax charge of £2.7m (2005: £2.4m) represents 26.7% of the profits
before tax (2005: 30.1%). The reduction in tax charge arises primarily from the
recognition of capital allowances in one of the Group's subsidiaries, which has
resulted in both a reduction in current year corporation tax payable as well as
a prior year corporation tax and deferred tax credit. These capital allowances
and consequential deferred tax asset had not been previously recognised due to
uncertainty over the timing and use of this deferred tax asset.
Cashflow
Operating cashflow for the year ended 30 June 2006 of £16.9m was 114% of
operating profit before non-recurring items, amortisation, interest and taxation
(2005: £14.6m, 111%). The free cashflow, calculated after a deduction from
operating cashflow of replacement capital expenditure, payment of corporation
tax, payment of interest and equity dividends, was £7.2m (2005: £6.0m). During
the year £16.2m was spent on acquisitions, which was partially offset by those
businesses bringing with them net cash of £1.6m together with the Group's
proceeds of disposals providing £2.5m. At the balance sheet date the Group had
net debt of £13.1m (2005: £8.2m).
Treasury Policy
The Group does not have significant foreign exchange exposure but it does have
some net income in US dollars and Euros. These dollars and Euros are sold
periodically having regard to both prevailing exchange rates and transaction
charges. The Group has agreed to hedge its interest rate exposure on
approximately two thirds of any amount borrowed (subject to a £10m minimum)
under the revolving credit facility agreement.
Cash and debt is managed on a group wide basis and subsidiaries operate within
funding restrictions controlled by the executive directors of the Group.
Business Objectives and Strategy
Wilmington's strategy is to deliver sustainable and growing profits from
servicing the information requirements of selected professional business
markets. This is accompanied by a continued commitment to build strong
management teams, organisational effectiveness, investment in technology and
tight cost control.
We aim to deliver strong sustainable profit growth in our key market
sectors by:-
- focusing investment, both acquisitive and organic, on those markets;
- providing researched and accurate information in a variety of formats and by
developing innovative new products to extend and enhance our product range;
- investing in on-line and digital technology to create new products, access
new markets and to efficiently manage our business; and
- maintaining strong sales and marketing capabilities.
Wilmington is well positioned in markets with attractive growth prospects. Our
businesses are strongly cash generative and we have a clear investment strategy
to grow in those market sectors where we have critical mass and where we can see
the opportunity to produce sustainable growth.
Our long term growth prospects are expected to be sustained by the continuing
demand for professional information and high quality focused events. The
constant development of legislation and increasing levels of regulation, as well
as our commitment to developing new products and delivery channels, create
demand for the type of high quality information and training we provide.
By understanding and working closely with our client base the Group is able to
provide essential information and training whilst building long term sustainable
relationships with our clients.
Key Financial and Operational Targets
At a Group level we have five key financial and operational targets. In
addition, each of the operating divisions monitor a number of key performance
indicators.
1. Adjusted Earnings per Share
This is a key measure as it indicates the underlying profit attributable to
shareholders. It measures not only trading performance, but also the impact of
treasury management, bank and interest charges, as well as the efficient
structuring of the Group to minimise taxes. In the year to 30 June 2006,
adjusted earnings per share from continuing operations increased by 23.3% to
11.63p per share (2005: 9.43p). This is the third year of strong earnings per
share growth delivering a compound annual growth rate in excess of 20% over this
period.
2. Adjusted Profit Before Tax
This measure indicates the trading profits of the Group, after bank and interest
charges, but before amortisation and impairment of intangible assets and
non-recurring items. Amortisation and impairment is a non-cash technical
adjustment which does not necessarily reflect the inherent value of assets. This
is particularly the case where the value of assets has been enhanced as a
consequence of management action.
In the year to 30 June 2006 adjusted profit before tax increased by 13.3% to
£13.8m (2005: £12.2m). This is the third year in succession we have seen strong
growth in our key measure of adjusted profit before tax.
3. Cashflow
The Group's business is strongly cash generative; operating cashflow for the
year ended 30 June 2006 of £16.9m was 114% of operating profit before interest,
amortisation and impairment of intangible assets (2005: 111%). Free cashflow,
which is calculated after deduction from operating cashflow of replacement of
capital expenditure, payment of corporation tax, payment of interest and equity
dividends, was £7.2m (2005: £6.0m).
4. Balanced Revenue Streams
Wilmington seeks to achieve a robust portfolio of assets with diverse revenue
streams in key professional markets. When the Company was first floated in 1995,
over 70% of revenues came from magazine display advertising. We have now created
a more robust and balanced portfolio of assets producing sustainable revenue
streams, which include:-
• professional directories;
• professional magazines;
• information sales;
• training, events and conferences;
• professional accreditation and assessment.
These products and services are provided in a variety of formats, but are
increasingly supplied on-line, or digitally and are frequently supported by
management and delivery systems utilising the latest technology. At Group level
we intend to further develop this inter-dependent diverse business model in our
key markets.
The Group analyses its revenue streams on the following basis:-
• Subscription and copy sales 18% of revenue (2005: 18%)
• Professional education and events 37% of revenue (2005: 34%)
• Information sales and professional services 19% of revenue (2005: 21%)
• Magazine advertising 18% revenue (2005: 20%)
• Directory advertising 8% of revenue (2005: 7%)
The Group believes that all its revenue sources have merit and seeks to maintain
a balance that avoids over dependence on a particular revenue source.
5. Margin Improvement
The Group seeks to improve the quality of its revenue streams. This is in part
judged by the overall profit margin. We are therefore pleased that adjusted
profit margins have increased to 15.4% across the Group (2005: 15.1%). This is
the fourth year of margin improvement. Many of our businesses achieve far higher
profit margins and we intend to improve lower margin businesses or, at the
appropriate time, seek to dispose of those activities.
This performance indicator needs to be carefully analysed. It can be distorted
by investments where expenditure on new products and services is written off
when incurred. Moreover, Wilmington seeks to acquire businesses where there is
the potential for significant profit improvement and has a good track record of
acquiring businesses where we have been able to substantially enhance profit
margin and overall profit returns.
A further measure which we pay particular attention to is the investment in
digital and electronic systems. We have not presented any specific figures for
the Group as a whole as they may be misleading without detailed analysis.
However, we have invested substantially over the last few years in digital
content management, customer management and production systems, new web sites,
on-line information delivery and on-line and electronic support systems. This
investment has helped achieve our goals of improved profit margins and greater
efficiency.
Review of Operations
Three of our four key business divisions delivered increased profits against the
previous year, with a particularly strong performance by our Legal and
Regulatory division.
Legal and Regulatory
Year ended Year ended
30 June 2006 30 June 2005
£'000 £'000
Revenue 52,014 43,228
Trading profit* 12,291 10,901
Margin 23.6% 25.2%
*Trading profit is the segmental result before allocating non-recurring costs
and amortisation
This is our largest division, accounting for 58% of Group turnover and
contributing 74.9% of Group trading profit. Revenue grew by 20.3%, while trading
profit increased by 12.8% giving operating margins of 23.6% (2005: 25.2%). The
increase in turnover was partly due to acquisitions, and this adversely impacted
the division's profit margin. We are pleased by the organic profit growth at a
time when we were investing heavily in systems, new marketing and product
development. Our Legal and Regulatory division is a resilient and growing
business, combining high quality 'must have' information with a range of
focused, market leading products and events.
Waterlow provides information, magazines, events and services to the legal,
charity, accountancy, surveying, pensions and finance markets. Waterlow's
products, some of which date back to 1844, are clear market leaders with high
quality proprietary content and strong customer renewal rates.
In addition to products for professional markets, published under the Waterlow
brand, subsidiary brands include:
• Pendragon, which provides the leading electronic information service for
UK pensions professionals
• ICP, a leading provider of financial information on companies worldwide,
specialising in emerging markets
• Charity Choice, the market leading product through which UK charities
promote themselves to the legal profession and individual donors
• Smee & Ford, a provider of legacy information to charities in the UK for
over 100 years and the owner of the leading mortality data files for mailing
suppression and the prevention of identify fraud
• Caritas, the leading provider of financial analysis of charitable
organisations in the UK
• Solicitors Journal, a leading weekly magazine and portfolio of products
for the legal profession (and winner of the prestigious BIALL 'Legal Journal
of the Year' award for 2005)
• Ark, a leading publishing and events business focusing on knowledge
management and professional practice management
All Waterlow's markets have common characteristics including large professional
client bases with strong information needs, increasing regulatory requirements
and stable demand. These characteristics have provided a strong base upon which
Waterlow has been able to develop a cash generative and growing business with
excellent margins.
The business has seen constant growth in sales and profits in recent years as a
result of both strong organic growth and the successful integration and
development of acquisitions.
An important characteristic of Waterlow's print publishing is the resilience and
subscription-like characteristics of its classified directory advertising, which
achieved renewal rates in excess of 77% in the last year.
The development of electronic publishing has been a major factor in the success
of the business, with the proportion of revenues derived from higher margin
products and services delivered electronically increasing last year to 45%.
Furthermore, electronic developments represented over 92% of the organic profit
growth last year and fuelled the increased overall margins for Waterlow.
The development of our recent acquisitions has continued in an encouraging
manner. Ark and Smee & Ford, our two most recent acquisitions, exceeded our
expectations in their first year and contributed combined operating profit of
approximately £900k. We remain confident of continued development in these
businesses and are enthusiastically looking for other acquisitions where we can
generate further value for our shareholders.
Central Law Training ('CLT'), which serves the legal and financial markets, is
the market leader for the provision of mandatory post-qualification training
courses and accredited programmes for UK lawyers. It delivers more than 4,000
training courses per year.
On a like for like basis revenue and profits from continuing operations,
excluding the Immigration and Asylum Accreditation scheme and the acquisition of
Quorum Training, were ahead of the previous year.
Our public continuing Legal education events maintained their strong profit
contribution and profit margin. These training programmes are underpinned by our
growing subscription membership with 4,636 subscriptions (2005: 4,587),
including most major law firms, government departments, local authorities and
many in-house legal departments.
The investments made in course administration programmes, product development
and marketing capability have maintained CLT as market leader in public
continuing legal education.
CLT works closely with the Society of Trust and Estate Practitioners (STEP) in
the development of education and programmes which operate in the UK and
internationally. The offshore Diploma in Trust management has had a good year
with strong enrolments in many jurisdictions, including Switzerland and
Singapore. Overall revenues increased by 15.8%. Particularly pleasing was the
growth in UK enrolments, which have grown 31% in the year.
CLT has established a compliance training arm, ICT which operates both
internationally and in the UK and has seen strong growth with 18.6% increase in
revenues. Despite extensive investment in new products and programmes,
profitability increased by 59.7% to £176k (2005: £110k).
Central Law Training (Scotland) has had a record year with revenues increasing
20.2% and trading profits growing 38% to £487k (2005: £351k). Prior year
investment in personnel, office premises and products has created a strong team
in Scotland and, we anticipate continuing strong performance.
Central Law Training (Ireland) was launched during the year ended 30 June 2005.
It has had a very good year and is showing considerable potential with strongly
growing revenues and profits.
Bond Solon achieved a trading profit margin of 29% on revenues of £3.3m (2005:
£3.6m) although, as a result of the bedding in of a new management team, it did
not reach the highs of the 38% margin achieved during the financial year 2004/
05. It is, nevertheless, strongly placed to develop over the next 12 months.
Quorum Training, which was acquired in May 2005, produced an excellent
performance in its first full year, with profits 250% ahead of those in the last
full year prior to our acquisition. We have invested in product development,
marketing and course management systems. We anticipate further progress to be
made in the burgeoning market of post qualification training for accountants.
Overall we are very excited about the potential for the Legal and Regulatory
division. The three recent acquisitions are performing ahead of expectations,
and the investment in new product development is delivering the anticipated
profit growth.
Healthcare
Year ended Year ended
30 June 2006 30 June 2005
£'000 £'000
Revenue 11,228 10,738
Trading Profit* 2,073 1,944
Margin 18.5% 18.1%
*Trading profit is the segmental result before allocating non-recurring costs
and amortisation
Healthcare accounted for 12.5% of Group revenue and 12.6% of Group trading
profit. Healthcare is a high value market where a combination of accelerating
use of technology and rapid changes in information requirements are creating
many opportunities for us.
Binleys provides specialist contact information and sales management solutions
to healthcare and pharmaceutical industries. It continues to invest strongly in
organic growth, and it delivered revenue growth of 11.7% and profit growth of
17.5%. Its products are increasingly supplied as digital feeds, through online
subscription systems or on long term contracts as data is embedded into
pharmaceutical companies' sales system.
APM is our French Press Agency based in Paris. It is the leading provider of
online healthcare news to its home market and is building a European brand as it
develops a wider range of products. The underlying performance of this business
has remained buoyant, but its profit for the year to 30 June 2006 was impacted
by a net investment of £300k in the new pan-European newswire APM Health Europe.
Our healthcare magazines enjoyed a good year, with strong underlying profit
growth. We anticipate that the dynamics of the health services in the UK and
abroad will provide many opportunities for growth. We anticipate that those
opportunities will be largely organic, through our continued investment in
online and events based revenues.
Media and Entertainment
Year ended Year ended
30 June 2006 30 June 2005
£'000 £'000
Revenue 6,526 6,810
Trading profit* 893 1,142
Margin 13.7% 16.8%
*Trading profit is the segmental result before allocating non-recurring costs
and amortisation
Media and Entertainment, which accounts for 7.3% of Group revenue and 5.4% of
Group trading profit, had a difficult year with sales down 4.2% to £6.5m (2005
£6.8m) and trading profits down 21.8% to £0.9m (2005 £1.1m), reflecting the
challenges within the Hollis business.
The division provides information, data and services to the music, public
relations, sponsorship and marketing sectors. It operates through a number of
leading brands including Hollis, Muze Europe and PCR. It provides its
information as electronic products, newsletters, directories and events. This
sector is increasingly delivering its information through the Internet.
We are pleased with progress made by our joint venture Muze Europe, which
supplies information on recorded music and video to both retailers and
e-tailers. Revenues increased by 4.7% with trading profits up 28.6%. Margins
were much improved as a result of our investment in database platforms and a
move to almost wholly electronic delivery mechanism. Our partners in the US,
Muze Inc, supply equivalent data to the American and Asian markets and we expect
continued progress from this division as we develop further into the main
European markets.
Hollis, which provides reference information and data to the public relations,
sponsorship and performing arts market, had a difficult year with both reduced
revenues and profit. Changes in the market have required us to react rapidly and
we have injected the expertise necessary to provide the market with the
information products it now requires. The changes include a new senior
management team and investment in a media neutral platform to allow us to
deliver information over the Internet, as data, and in print to fully meet
customer requirements.
In May 2006 we acquired the Knowledge and Benn's Media. Whilst these products
did not contribute to revenues or profitability in the year under review, they
fit well with the products in our media and entertainment division and are
expected to contribute in the future. These acquisitions will enable us to
leverage sales of existing products and strengthen our sales and marketing
capability across the division.
Design and Construction
Year ended Year ended
30 June 2006 30 June 2005
£'000 £'000
Revenue 10,907 11,444
Trading profit* 424 254
Margin 3.9% 2.2%
*Trading profit is the segmental result before allocating non-recurring costs
and amortisation
Design and Construction, which accounts for 12.2% of Group revenue and 2.6% of
Group trading profit, made continued progress in the year under review with
trading profit up to £0.4m (2005: £0.3m) on lower sales of £10.9m (2005:
£11.4m).
Our products in this area cover niches in the design, commodities and equipment
within the construction sector. Specialist markets include the international
power generation markets. Profits have improved and we anticipate further
progress in the current year as we meet customer demand for information
delivered through electronic and event based channels.
Specialist
The remainder of our turnover is generated from a number of specialist sectors
including catering and automotive. These businesses have performed well, with
revenue increasing by 9.8% to £9.0m (2005: £8.3m) and trading profits more than
doubling to £718k (2005: £267k). Management teams have responded to changing and
sometimes difficult markets by evolving our products to deliver information in a
way that provides real business benefits to our customers.
Consolidated Income Statement
For the year ended 30 June 2006
Year ended Year ended
30 June 30 June
2006 2005
Notes £'000 £'000
----- ----- -----
Revenue 1 89,768 80,505
Cost of sales (29,433) (27,463)
-------- --------
Gross profit 60,335 53,042
Operating expenses excluding amortisation and
impairment 2 (45,484) (40,876)
Amortisation and impairment (2,539) (3,433)
-------- --------
Profit from continuing operations before
transaction costs 3 12,312 8,733
Transaction costs 3 (1,200) -
-------- --------
Profit from continuing operations after
transaction costs 11,112 8,733
Finance costs 4 (1,049) (896)
-------- --------
Profit on continuing activities before
taxation 10,063 7,837
Income tax expense 5 (2,682) (2,361)
-------- --------
Profit on continuing activities after
taxation 7,381 5,476
Profit/(loss) on discontinued operations
after taxation 6 131 (283)
-------- --------
Net profit for the year 7,512 5,193
-------- --------
Attributable to equity holders of the parent 6,825 4,480
-------- --------
Minority interest 687 713
-------- --------
Earnings per share attributable to equity holders
of the parent
Continuing operations: 8
Basic earnings per share 8.01p 5.71p
Diluted earnings per share 7.95p 5.69p
Continuing and discontinued operations: 8
Basic earnings per share 8.16p 5.37p
Diluted earnings per share 8.11p 5.35p
Statements of Recognised Income and Expense
For the year ended 30 June 2006
Group Company
Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June
2006 2005 2006 2005
£'000 £'000 £'000 £'000
----- ----- ----- -----
Exchange differences on
translation of foreign operations 5 (16) - -
Actuarial gain taken directly in
equity 96 120 - -
Tax on items taken directly in
equity (29) (35) - -
----- ----- ----- -----
Net income recognised directly
in equity 72 69 - -
Net profit for the year 7,512 5,193 11,207 2,838
----- ----- ----- -----
Total recognised income and
expense for the year 7,584 5,262 11,207 2,838
----- ----- ----- -----
Attributable to
Equity holders of the parent 6,897 4,549
Minority interests 687 713
----- -----
7,584 5,262
----- -----
Balance Sheets
As at 30 June 2006
Group Company
As at As at As at As at
30 June 30 June 30 June 30 June
2006 2005 2006 2005
£'000 £'000 £'000 £'000
----- ----- ----- -----
Non-current assets
Goodwill 52,595 41,734 - -
Intangible assets 25,896 26,926 36 40
Property, plant and equipment 11,201 11,830 1,838 1,765
Investments - - 44,959 42,626
Deferred tax asset 212 234 1 1
----- ----- ----- -----
89,904 80,724 46,834 44,432
----- ----- ----- -----
Current assets
Inventories 1,504 1,557 - -
Trade and other receivables 19,006 17,803 43,876 34,909
Cash 2,855 1,841 - -
----- ----- ----- -----
23,365 21,201 43,876 34,909
----- ----- ----- -----
Total assets 113,269 101,925 90,710 79,341
----- ----- ----- -----
Current liabilities
Trade and other payables (30,168) (27,474) (2,861) (4,996)
Tax liabilities (1,405) (1,501) - -
Bank overdrafts - (37) (2,129) (2,745)
----- ----- ----- -----
(31,573) (29,012) (4,990) (7,741)
----- ----- ----- -----
Non-current liabilities
Bank loans (16,000) (10,000) (16,000) (10,000)
Retirement benefit obligation (254) (378) - -
Deferred tax liability (2,604) (2,775) (92) (45)
----- ----- ----- -----
(18,858) (13,153) (16,092) (10,045)
----- ----- ----- -----
Total liabilities (50,431) (42,165) (21,082) (17,786)
----- ----- ----- -----
Net assets 62,838 59,760 69,628 61,555
----- ----- ----- -----
Equity
Share capital 4,180 4,180 4,180 4,180
Share premium account 42,658 42,658 42,658 42,658
Capital reserve 949 949 - -
Translation reserve (11) (16) - -
Share option reserve 91 57 3 2
Retained earnings 13,238 9,481 22,787 14,715
----- ----- ----- -----
Equity shareholders' funds 61,105 57,309 69,628 61,555
Minority interests 1,733 2,451 - -
----- ----- ----- -----
Total equity 62,838 59,760 69,628 61,555
----- ----- ----- -----
Cash Flow Statement
For the year ended 30 June 2006
Group
Year ended Year ended
30 June 30 June
2006 2005
Note £'000 £'000
---- ----- -----
Net cash flow from operating activities 9 12,416 10,768
Investing activities
Purchase of tangible fixed assets (909) (2,371)
Sale of tangible fixed assets 40 150
Purchase of subsidiary undertakings
and minority interests (14,524) (8,735)
Cash acquired on purchase of
subsidiary undertakings 1,567 214
Sale of subsidiary undertakings 2,466 450
Purchase of intangible assets (2,269) (623)
------ -----
Net cash used in investing activities (13,629) (10,915)
------ ------
Financing activities
Dividends paid to equity holders of the parent (3,135) (2,627)
Dividends paid to minority
shareholders in subsidiary undertakings (601) (192)
Issue of ordinary shares - 308
Repayment of loan notes - (1,000)
Increase in long term loans 6,000 3,000
------ ------
Net cash flows from/(used in) financing activities 2,264 (511)
------ ------
Net increase/(decrease) in cash and cash equivalents 1,051 (658)
Cash and cash equivalents at beginning of the year 1,804 2,462
------ ------
Cash and cash equivalents at end of the year 2,855 1,804
------ ------
Notes to the Accounts
1. Segmental information
(a) Primary reporting format - business segments
Year ended 30 June 2006
Legal and Healthcare Media and Design and Other Total
Regulatory Entertainment Construction
£'000 £'000 £'000 £'000 £'000 £'000
----- ----- ----- ----- ----- -----
Revenue 52,014 11,228 6,526 10,907 9,093 89,768
----- ----- ----- ----- ----- -----
Segmental profit
before allocating
non-recurring costs
and amortisation 12,291 2,073 893 424 718 16,399
Non-recurring costs - - - - - -
Amortisation (775) (617) (423) (524) (200) (2,539)
----- ----- ----- ----- ----- -----
Segmental profit
after allocating
non-recurring costs
and amortisation 11,516 1,456 470 (100) 518 13,860
----- ----- ----- ----- -----
Unallocated central overheads (1,548)
-----
Profit from continuing operations
before transaction costs 12,312
Transaction costs (1,200)
-----
Profit from continuing operations
after transaction costs 11,112
Finance cost (1,049)
-----
Profit on continuing activities
before taxation 10,063
Income tax expense (2,682)
-----
Profit on continuing activities
after taxation 7,381
Profit from discontinued operations 131
-----
Net profit for the year 7,512
-----
Assets 73,469 10,960 11,923 10,090 6,856 113,298
Liabilities (22,349) (2,818) (1,109) (3,529) (3,122) (32,927)
-------- ------- ------- ------- ------- ------
Net assets 51,120 8,142 10,814 6,561 3,734 80,371
-------- ------- ------- ------- -------
Less: unallocated net central
assets and liabilities (17,533)
------
62,838
------
(a) Primary reporting format - business segments
Year ended 30 June 2005
Legal and Healthcare Media and Design and Other Total
Regulatory Entertainment Construction
£'000 £'000 £'000 £'000 £'000 £'000
----- ----- ----- ----- ----- -----
Revenue 43,228 10,738 6,810 11,444 8,285 80,505
Segmental profit
before allocating
non-recurring costs and
amortisation 10,901 1,944 1,142 254 267 14,508
Non-recurring costs - (77) (32) (523) (225) (857)
Amortisation (462) (634) (411) (510) (1,416) (3,433)
----- ----- ----- ----- ----- -----
Segmental profit
after allocating
non-recurring costs and
amortisation 10,439 1,233 699 (779) (1,374) 10,218
----- ----- ----- ----- ----- -----
Unallocated central
overheads (1,485)
-----
Profit from continuing
operations 8,733
Finance costs (896)
-----
Profit on continuing
activities before taxation 7,837
Income tax
expense (2,361)
-----
Profit on continuing
activities after taxation 5,476
Loss from discontinued
operations (283)
Net profit for the year 5,193
-----
Assets 63,099 12,045 9,647 8,443 8,987 102,221
Liabilities (19,569) (2,971) (1,788) (2,776) (3,348) 30,452)
----- ----- ----- ----- ----- -----
Net assets 43,530 9,074 7,859 5,667 5,639 71,769
----- ----- ----- ----- -----
Less: unallocated net
central assets and liabilities (12,009)
------
59,760
------
(b) Secondary reporting format - geographical segments
The geographical analysis of turnover is as follows:
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
---------- ----------
United Kingdom 74,036 64,833
Overseas 15,732 15,672
---------- ----------
89,768 80,505
---------- ----------
(c) Adjusted profit
Adjusted profit is defined as profit before taxation, amortisation and
on-recurring items and reconciles to profit on continuing activities before
taxation as follows:
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
---------- ----------
Profit on continuing
activities before taxation 10,063 7,837
Amortisation and
impairment 2,539 3,433
Non-recurring items 1,200 917
---------- ----------
Adjusted profit 13,802 12,187
---------- ----------
2. Operating expenses
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
---------- ----------
Distribution and
selling costs 20,124 19,313
Administrative expenses 25,360 20,646
Exceptional item -
restructuring costs - 917
---------- ----------
45,484 40,876
Amortisation and
impairment of goodwill and intangible assets 2,539 3,433
---------- ----------
Total operating expenses 48,023 44,309
---------- ----------
3. Profit from operations
Profit from operations is stated after charging/(crediting)
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
---------- ----------
Depreciation of property, plant and equipment 1,574 1,621
(Profit)/loss on sale of fixed assets (6) 36
Rentals under operating leases:
Machinery 14 8
Other operating leases 700 316
Auditors' remuneration:
Audit fees 200 196
Other services 225 35
Share based payments 34 34
Non-recurring costs - restructuring costs - 917
Non-recurring costs - transaction costs 1,200 -
4. Finance Costs
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
----- -----
Bank interest receivable 22 16
Interest payable on loans and
overdrafts (944) (722)
Pension scheme finance income/(cost) 19 (4)
Facility fees (146) (186)
----- -----
(1,049) (896)
----- -----
5. Income tax expense
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
----- -----
The tax charge comprises:
UK corporation tax at current rates 3,153 3,066
Adjustment to previous year (177) (17)
----- -----
2,976 3,049
Foreign tax 300 366
----- -----
3,276 3,415
Deferred tax credit - current year (312) (1,054)
- prior year (282) -
----- -----
Income tax expense 2,682 2,361
----- -----
The prior year deferred tax credit arises as a result of the
recognition of capital allowances in one of the Group
subsidiaries which had previously not been recognised due to
uncertainty over the timing and use of these assets.
Factors affecting the tax charge for the year:
The tax charge for the year is less than the standard rate of
corporation tax in the UK of 30%. The differences are explained
below:
Reconciliation of tax charge:
Profit on ordinary activities before
tax 10,063 7,837
----- -----
Profit on ordinary activities
multiplied by the standard rate of
corporation tax in the year of 30%
(2005: 30%) 3,019 2,351
Effect of:
Goodwill and intangible asset
amortisation and impairment not
deductible for tax purposes 282 (61)
Other items not subject to tax (35) 9
Capital allowances for the year (in
excess of)/less than depreciation (65) 21
Net (profit)/loss on sale of assets not
taxable (62) 19
Foreign tax rate differences 2 39
Adjustment to tax charge in respect of
previous years (177) (17)
Prior year deferred tax credit (282) -
----- -----
Current tax charge for year 2,682 2,361
----- -----
6. Profit / (loss) for the period from discontinued operations
The results of the discontinued operations, which have been included in the
consolidated income statement, were as follows:
Notes Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
----- -----
Revenue 309 4,575
Expenses (519) (4,597)
----- -----
Loss before amortisation and taxation (210) (22)
Amortisation (86) (269)
----- -----
Loss before taxation (296) (291)
Attributable tax credit 63 8
----- -----
Net operating loss attributable
to discontinued operations (233) (283)
Profit on disposal of discontinued
operations 475 -
Attributable tax charge (111) -
364 -
----- -----
Profit / (loss) on discontinued
operations after taxation 131 (283)
----- -----
7. Dividends
Amounts recognised as distributions to equity holders in the period.
Year ended Year ended Year ended Year ended
30 June 2006 30 June 2005 30 June 30 June
Pence per Pence per 2006 2005
share share £'000 £'000
---- ---- ----- ---
Final dividends
recognised as
distributions
in the period 2.45 2.00 2,048 1,667
Interim dividends
recognised as
distributions
in the period 1.30 1.15 1,087 960
---- ---- ----- ---
Total dividends
paid 3.75 3.15 3,135 2,627
---- ---- ----- ---
Dividend proposed 2.70 2.45 2,174 2,048
---- ---- ----- ---
8. Earnings per share
To allow shareholders to gain a better understanding of the trading performance
of the Group, an adjusted earnings per ordinary share has been calculated using
an adjusted profit after taxation and minority interests but before amortisation
of intangible assets and post-taxation non-recurring costs.
(a) From continuing operations
The calculation of the basic and diluted earnings per share is based on the
following data:
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
----- -----
Earnings from continuing operations for the purpose of
basic earnings per share excluding discontinued operations 6,694 4,763
Add: Amortisation (net of minority interest effect and
deferred tax) 2,187 2,467
Non-recurring costs after taxation 840 638
----- -----
Earnings for the purposes of adjusted earnings per share 9,721 7,868
----- -----
Number Number
Weighted average number of ordinary shares for the
purposes of basic and adjusted earnings per share 83,600,179 83,394,158
Effect of dilutive potential ordinary shares:
Exercise of share options 555,262 387,373
----- -----
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 84,155,441 83,781,531
----- -----
Basic earnings per share 8.01p 5.71p
Diluted earnings per share 7.95p 5.69p
Adjusted basic earnings per share 11.63p 9.43p
Adjusted diluted earnings per share 11.55p 9.39p
----- -----
(b) From continuing and discontinued operations
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
----- -----
Earnings from continuing operations for the purpose of
basic earnings per share excluding discontinued operations 6,694 4,763
Adjustments to include the profit/ (loss) for the
period from discontinued operations 131 (283)
----- -----
Earnings from continuing and discontinued operations
for the purpose of basic earnings per share 6,825 4,480
Add: Amortisation (net of minority interest effect and
deferred tax) 2,273 2,638
Non-recurring costs after taxation 840 638
----- -----
Earnings for the purposes of adjusted earnings per share 9,938 7,756
----- -----
Basic earnings per share 8.16p 5.37p
Diluted earnings per share 8.11p 5.35p
Adjusted basic earnings per share 11.89p 9.30p
Adjusted diluted earnings per share 11.81p 9.26p
----- -----
(c) From discontinued operations
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
----- -----
Earnings from discontinued operations for the purpose
of basic earnings per share 131 (283)
Add: Amortisation (net of minority interest effect and
deferred tax) 86 269
----- -----
Earnings for the purposes of adjusted earnings per share 217 (14)
----- -----
Basic earnings per share 0.16p (0.34p)
Diluted earnings per share 0.16p (0.34p)
Adjusted basic earnings per share 0.26p (0.13p)
Adjusted diluted earnings per share 0.26p (0.13p)
----- -----
9. Net cash from operating activities
Group
Year ended Year ended
30 June 30 June
2006 2005
£'000 £'000
----- -----
Profit from operations 11,112 8,733
Transaction costs 1,200 -
Operating loss from discontinued operations (296) (291)
Depreciation of property, plant and
equipment 1,574 1,621
Amortisation of intangible assets 2,625 3,702
(Profit)/loss on disposal of property,
plant and equipment (6) 36
Exchange translation differences 5 (16)
Share option charge 34 34
----- -----
Operating cash flows before movements
in working capital 16,248 13,819
Decrease in inventories 4 251
Decrease/(increase) in receivables 507 (189)
Increase in payables 182 714
----- -----
Cash generated by operations 16,941 14,595
Tax paid (3,547) (2,930)
Interest paid (978) (897)
----- -----
Net cash flow from operating activities 12,416 10,768
----- -----
10. Nature of the financial information
The foregoing financial information does not amount to full accounts within the
meaning of Section 240 of Companies Act 1985. The financial information has been
extracted from the Group's Annual Report and Accounts for the year ended 30 June
2006 on which the auditors have not yet expressed an opinion, but for which an
unqualified report is expected. Statutory accounts for the year ended 30 June
2005 which were prepared under UK generally accepted accounting principles
(UKGAAP), 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 237(2) or (3) of the Companies Act 1985. As required by the European
Union's IAS Regulation and the Companies Act 1985 the Group has prepared its
consolidated financial statements for the year to 30 June 2006 in accordance
with International Financial Reporting Standards ('IFRS') as adopted by the
European Union. This is the first year in which the Group has prepared its
financial statements under IFRS and the comparatives have been restated from UK
GAAP to comply with IFRS. The effect of the transition to IFRS on the financial
information now being presented, including restatement of comparatives and the
accounting policies adopted, has not materially changed from the information
provided in the interim report for the six months ended 31 December 2005 issued
by the Company on 16 March 2006.
Copies of the Annual Report and Accounts will be posted to shareholders shortly
and will be available from the Company's registered office at Paulton House, 8
Shepherdess Walk, London, N1 7LB.
This information is provided by RNS
The company news service from the London Stock Exchange
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