Annual Report • Sep 19, 2013
Annual Report
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Wilmington Group Plc
19 September 2013
Wilmington Year end 30 June 2013
19 September 2013
WILMINGTON GROUP PLC
("Wilmington", "the Group" or "the Company")
Financial Results for the twelve months ended 30 June 2013
Wilmington Group plc, the provider of Information, Compliance and Education to professional markets today announces its full year results for the twelve months ended 30 June 2013.
Financial highlights
- Adjusted EBITA1 increased 8% to £16.9m (2012: £15.7m)
- Adjusted EBITA margins3 improved to 19.8% (2012: 18.4%)
- Adjusted Profit before Tax2 was up 11% to £14.7m (2012: £13.2m)
- Adjusted Earnings per Share4 were up 12% at 13.06p (2012: 11.71p)
- Group revenues for the period stable at £85.0m (2012: £85.3m) as expected
- Profit before tax at £5.1m (2012: £6.3m)
- Subscriptions and deferred revenue increased by 7% to £18.6m
- Disposal of surplus freehold property for £4.4m in cash
- Net debt reduced by £2.8m to £33.4m (2012: £36.2m)
- Final dividend maintained at 3.5p making a total dividend of 7.0p for the year
Operational highlights
- Subscription and repeatable revenue now represent 79% of revenue (2012: 78%)
- Growing international revenues; now 32% of revenue (2012: 28%)
- Reduced exposure to advertising; now only 6% of revenue (2012: 9%)
- Print revenue reduced to £3.8m (2012 : £4.5m)
- Three focussed acquisitions to further strengthen Wilmington's presence in key markets
Current Trading
- Trading in line with management expectations, outlook for 2014 remains unchanged but with added contribution from our recent acquisition of Compliance Week
Notes
1 Adjusted EBITA - see note 3 to the financial statements
2 Adjusted Profit before Tax - see note 3 to the financial statements
3 Adjusted EBITA margin- Adjusted EBITA divided by Revenue
4 Adjusted Earnings per Share - see note 9 to the financial statements
5 Adjusted EBITDA - see note 3 to the financial statements
Chairman's Statement
I am pleased to present my report on Wilmington's results for the twelve months ended 30 June 2013. We have moved forward in line with our strategic aims of building a higher quality business comprising a larger proportion of subscription and repeatable revenues.
Focussing on the financial results I am delighted to report continued success making good progress towards our medium term financial targets. Wilmington has delivered an improved financial performance with Adjusted EBITA up 8% (£1.2m) to £16.9m from £15.7m in 2012. Revenues were stable at £85.0m (2012: £85.3m) reflecting the restructuring of the legal division, the disposal or closure of lower margin businesses and our exit from contract directory publishing. These were counterbalanced by a revenue contribution of £2.1m from our two acquisitions made in the year and a full year contribution from Millennium acquired in May 2012. The result of our actions is a very satisfactory growth in adjusted EBITA margin to 19.8% (2012:18.4%).
Adjusted Profit before Tax was up a pleasing 11% (£1.5m) to £14.7m (2012: £13.2m) driven by improving Adjusted EBITA and reduced interest on debt arising from our strong cash flow. At 30 June 2013 our net debt had reduced by £2.8m to £33.4m compared to £36.2m at 30 June 2012 despite investing £6.3m of net cash on acquisitions in the year. Our gearing as calculated by net debt to Adjusted EBITDA5 has fallen to 1.8 times (2012:2.1 times) and cash conversion remained strong at 115% (2012:111%).
In terms of business development it has been an exciting and busy year with particular emphasis on preparing the Group for future expansion and growth. This is consistent with our strategy of growth through selective value adding acquisitions and focussed organic investment. We have also taken action to improve margins through the consolidation of our legal and accountancy programmes, the disposal of our sub scale Australian investment, removal of loss making print directory products ,the termination of our NCLT venture and our exit from contract publishing.
Our strategy to move towards higher quality more sustainable income streams is bearing fruit. Revenue from subscriptions and repeatable revenues represented 79% of Group turnover (2012: 78%) and digital revenue as a percentage of our content revenue was also 79% (2012 76%). Advertising represented 6% of revenue (2012: 9%) despite the addition of Inese which generates around 14% of its revenue from advertising sources.
Business Strategy
Our strategy is to increase shareholder value by delivering sustainable and growing profits from servicing the information, compliance and education requirements of the global professional business markets.
We are focused on developing existing assets and acquiring new businesses in the UK and overseas that are earnings accretive with predictable recurring revenues and strong cash flows. During the year, we have continued our focus on higher margin business and implemented a number of internal initiatives to support our strategic objectives. These initiatives included increasing investment and co-ordination in the development of technology, introducing new strategic HR and finance systems as well as consolidating of our back office functions into a central shared service structure.
We are confident that this strategy will deliver a group of businesses with an increasing proportion of revenues derived from subscriptions to products which disseminate content-rich, high-value information digitally along with certificated education and compliance programs. Tighter regulatory control and more complex legislation in our key markets will continue to drive the demand for our products and services globally.
In addition, we have actively sought to increase our income streams from outside the UK where we see better prospects for long term sustainable growth. Revenue outside the UK has grown to 32% of total revenue compared to 28% last year. This growth, alongside cost savings and product development which have already been implemented, should result in further progress being made in 2013/14.
Acquisitions
Since my report in last year's annual statement we have made three acquisitions; NHiS, Inese and Compliance Week. Each acquisition has been consistent with our investment strategy and each acquisition was made with a clear objective and strengthened our position in one of our six core markets.
NHiS, a provider of business intelligence, data analysis, workflow tools and other services to pharmaceutical companies in the UK was acquired in February 2013. NHiS had built up a major business intelligence and technology capability in a complementary area to Binley's our healthcare information business. Our key objective was to combine resources and opportunities.
Inese, acquired in March 2013, is a provider of Spanish language subscription based publications and online services. It also provides training and a number of annual events including the leading industry congress; "Insurance Week". Inese also operates a digital news service in Latin America. This business neatly complements our existing insurance activities and will offer a route by which Axco will be able to exploit Inese's access to the South American market.
Post year end, in August 2013 we acquired Compliance Week. Compliance Week is the leading provider of governance, risk and compliance ("GRC") information and events for public companies and large enterprises primarily in the US. Compliance Week will work closely with other Wilmington Group companies including Axco (insurance market regulation and compliance information) and the ICT compliance training business, providing both with closer access to their North American customers and markets as well as opportunities for developing new revenue streams. The Group is also very well placed to support Compliance Week's ambitions to grow outside of the US and in October 2013 the Group will launch "Compliance Week Europe" in Brussels.
Dividend
I am proud of the Group's record of maintaining its dividend over the recent years reflecting our confidence in the strategy and resilience of our business models and I am pleased to confirm that the final dividend for this year will be 3.5p (2012: 3.5p) per share making a total dividend of 7.0p (2012: 7.0p) per share for the year.
We intend to build our annual dividend cover of Adjusted earnings per Share to two times the annual dividend at which time we will resume a progressive dividend policy.
Outlook and Current Trading
During the year, we have continued to focus on developing existing assets and acquiring new businesses in the UK and overseas to widen the Group's geographic reach and strengthen recurring revenues and cash flows. Transitioning the Group to a higher quality, higher margin business has been a key priority and as a result, the Group is well positioned to deliver on its medium growth targets.
We believe the macro economic climate is changing slowly for the better and the Group is in a good position to take advantage of this. As we anticipate tighter regulatory control and more complex legislation to be implemented in our key markets, these changes will continue to drive the demand for our products and services globally.
The new financial year has started well and we are seeing good growth in a number of areas in particular from our Pensions and Insurance and Banking & Compliance Divisions.
Finally we are in a fast moving service industry and we are fundamentally reliant on the quality and professionalism of our people. I would once again like to express my own and my fellow Board members' appreciation of the hard work and dedication of our people and to extend a warm welcome to the newer members of our group from NHiS, Inese and Compliance Week to the Wilmington team.
Business Review
Operational Review
As previously announced we now manage and report our business by reference to six market facing divisions; Pensions & Insurance, Banking & Compliance, Healthcare, Legal, Business Intelligence and Accountancy.
Pensions & Insurance (17% of Group revenue, 30% of Group contribution)
This division, which includes Axco, Pendragon, Inese and ICP provides in-depth regulatory and compliance information, market intelligence, events, training, analysis and workflow tools for the international insurance markets and the UK pensions industry.
| Pensions & Insurance | 2013 | 2012 | change |
| £'000 | £'000 | % | |
| Revenue | 14,629 | 12,481 | 17 |
| Contribution | 6,093 | 5,227 | 17 |
| Contribution % | 42 | 42 |
Divisional revenue grew 17% (£2.1m) helped by a maiden revenue contribution of £1.1m from Inese which was acquired in March 2013. Underlying revenue growth was 8%.
Axco, our insurance analytics, legislation and compliance information business reported a 12% sales growth helped by the launch of new products and analytics services. Sales were also boosted by increasing demand from emerging markets; an area where the recent acquisition of Inese should assist future development in Latin America.
Further investment and developments have been made in the content of Axco statistics based products and services as well as continued investment in technology for content management, CRM and product delivery. The Group has invested in and will continue to invest in Axco's product portfolio and in extending its global presence and offering. The acquisition of Inese was a good example of this commitment and strategy and the recent acquisition of Compliance Week will advance Axco's plans to develop an increased US operation and grow its substantial US customer base.
Pendragon, the leading electronic regulatory information service for the UK pension industry, maintained its market leading position in the UK pensions market and recorded steady revenue growth of 3%. The business is investing in new delivery technology for launch in 2014 and this will become the backbone of its information offerings for the future.
ICP, the leading provider of credit insurance reports for developing markets, has seen a continued increase in demand for credit insurance reports, particularly in the Middle East and recorded revenue growth of 5%. It is investing in XML delivery of its content to provide its customers with more integrated and flexible usage of its proprietary researched data.
Inese has been successfully integrated into the Group sharing central HR and central finance systems. Inese, with the benefit of a contribution from its leading annual industry congress "Insurance Week" in May 2013, contributed £0.35m to operating profits.
In addition to the continued investment in new products, people and associated infrastructure contribution grew by 17% to £6.1m (2012: £5.2m) reflecting the operational leverage within the businesses. Adjusting for acquisitions and currency effects underlying profits were up 9%.
Banking & Compliance (19% of Group revenue, 18% of Group contribution)
The Banking & Compliance division provides corporate finance and capital markets training and accredited programmes in compliance, anti-money laundering, wealth management, financial crime and trust management. This division serves primarily tier one banks, the international financial services industry and major multinational companies.
| Banking & Compliance | 2013 | 2012 | Change |
| £'000 | £'000 | % | |
| Revenue | 16,566 | 15,251 | 9 |
| Contribution | 3,513 | 3,049 | 15 |
| Contribution % | 21 | 20 |
The division continued to show strong revenue growth momentum with an increase of 9% compared to 2012. Growth drivers included the provision of compliance and Anti Money Laundering programmes to international banks and major multinational companies in the oil and gas industry and on line retailing with particularly strong growth from the Far East. We have also launched new initiatives in Australia, Hong Kong, Indonesia, Malaysia, the Middle East and Russia.
The division has launched new portfolios into the governance, risk and compliance ("GRC") market, cyber- crime, and corporate governance markets. The acquisition of Compliance Week will provide a natural introduction into many of these areas in the US market; an area where our compliance business has had little access in the past.
In the fast growing Far Eastern markets the reputation for excellence was recognised with ICTA being awarded the "2013 Winner of the FICS Inspiring Educator Award" by the authorities in Singapore and ICTA was also awarded the contract to develop and award qualifications in compliance for Malaysia by the national regulator.
AMT had a successful 2013 in which it reported a record sales performance since it joined the Group. 2013/14 has begun well with another strong start to its graduate entrant training for investment banks in its main centres of New York, Hong Kong and London. As AMT generates most of its revenue and contribution in the first quarter of the financial year this bodes well for the rest of the year.
Contribution for the division was 15% ahead of last year at £3.5m (2012: £3.0m) despite continued investment in new programs and support systems which will help drive future growth. Margins also showed pleasing progress up one percentage point to 21%.
Healthcare (15% of Group revenue, 14% of Group contribution)
This division includes Agence de Presse Médicale ("APM"), our French language medical news agency, Binley's, our UK healthcare information business and NHiS, a provider of business intelligence and data analysis to the pharmaceutical industry.
| Healthcare | 2013 | 2012 | Change |
| £'000 | £'000 | % | |
| Revenue | 13,058 | 12,666 | 3 |
| Contribution | 2,836 | 2,511 | 13 |
| Contribution % | 22 | 20 |
Revenue was up 3% (£0.4m) but adjusting for currency fluctuations and the contribution from NHiS (acquired February 2013) of £0.9m underlying revenue was down 3%.
APM has had an excellent year with underlying revenue up 2% despite closing its loss making APM Sante business. APM has one of the highest proportions of subscription income in the group at over 95%.
Binley's underlying revenue was down 5% (£0.4m) due mainly to the fall-off in lower margin mailing services reported in our half year results and the business is reducing its associated cost base to compensate. Over the last few years Binley's has developed a higher margin pharmaceutical business intelligence arm which has now been combined with our recent NHiS acquisition into a separate operation with staff as well as product and customers transferred to the enlarged operation. The integration has gone well and the enlarged business is performing to plan.
Overall contribution, helped by the addition of NHiS which added £0.3m to profits, has increased by 13%. Underlying contribution adjusting for exchange and acquisitions was up 2% reflecting good overhead control and the growth of higher margin business offsetting a reduction in lower margin mailing services.
Legal (23% of Group revenue, 14% of Group contribution)
The Legal division provides a range of training, professional support services and information including continuing legal education ("CLE"), expert witness training, databases and magazines.
| Legal | 2013 | 2012 | Change |
| £'000 | £'000 | % | |
| Revenue | 19,266 | 21,671 | -11 |
| Contribution | 2,884 | 2,784 | 4 |
| Contribution % | 15 | 13 |
The Legal division's revenue reduced by 11% (£2.4m) in the year but this reduction reflects the disposal of our company formations business in June 2012 (which contributed £1.1m to turnover in 2012), the disposal of Ark Australia and the rationalisation of our conference and course programme, a process started in late 2011. Underlying revenue decline was 3%.
We have seen good growth in Bond Solon our witness familiarisation business which enjoyed another record sales year with revenue up 13%. We have also seen growth in our public courses and Scottish legal training business.
The emphasis, however, has been on improving margins and taking difficult proactive decisions. We have reorganised the legal division in response to market changes and have exited unprofitable areas such as Ark Australia, and our Legal Practice Courses, NCLT. In other areas we have cut course outputs through combining regional courses and focussing on fewer, more central, locations.
The result is a more focussed business with a lower and more flexible cost base from which we expect to see profit growth.
Despite the decrease in revenue we saw contribution from the division increase by 4% to £2.9m and margins increase by two percentage points to 15%. The underlying growth in contribution was a pleasing 17%.
Business Intelligence (13% of Group revenue, 13% of Group contribution)
This division includes our Data Suppression and Fraud Prevention services as well as our Charities, Fund Management and Film & TV services.
| Business intelligence | 2013 | 2012 | Change |
| £'000 | £'000 | % | |
| Revenue | 10,948 | 12,388 | -12 |
| Contribution | 2,523 | 2,917 | -14 |
| Contribution % | 23 | 24 |
The division is experiencing the most significant challenges of all our businesses, as we continue the transition from a print and advertising based business to digital services, subscription information products and workflow tools.
Overall revenue was down 12% (£1.4m). As previously announced we exited contract directory publishing in June 2012 and this reduced revenue by £2.2m compared to the prior year. This contract directory revenue was offset to a large degree by a full year contribution from Millennium (acquired May 2012). The underlying revenue decline adjusting for acquisitions and disposals was 11% and the largest impacts were seen in the Film & TV and Charities areas where we still have the majority of our remaining print and advertising products and are seeing the expected decline in legacy revenues being only partially offset by growth of new digital businesses.
The remainder of the division; our data suppression, fraud prevention services and legacy notification businesses (Millennium and Smee & Ford) which do not have the pressure of migrating from print to a digital offering have seen underlying stable revenue and profit performance.
Overall contribution dropped by 14% (£0.4m) to £2.5m however the underlying reduction was 11% reflecting improved underlying margins in legacy businesses as we transition from print to digital.
Accountancy (12% of Group revenue, 11% of Group contribution)
The Accountancy division is the leading provider of training, technical support and marketing services to UK Accountancy firms and accountants in commerce and industry.
| Accountancy | 2013 | 2012 | Change |
| £'000 | £'000 | % | |
| Revenue | 10,581 | 10,869 | -3 |
| Contribution | 2,135 | 2,053 | 4 |
| Contribution % | 20 | 19 |
Overall revenues declined by 3% mostly due to the scaling back of our course output from Quorum resulting in an improvement in Quorum's margins and overall profits. We have seen good growth in revenue in both our Northern Ireland and Eire businesses reflecting to some extent positive changes in the local market conditions.
Roughly 60% of the Division's revenue is generated from training with a growing percentage from technical and marketing support for accountancy clients. Again, a number of initiatives have been implemented including the launch of our market leading accountancy firm website platform and technical micro websites optimised for specialist accountancy practices.
Regulation and deregulation provide opportunities in the Accountancy market. With audit exemption limits continuing to rise and the introduction of micro-entity accounting simplification this is likely to be a constraining factor on short term revenue growth. However, offsetting this are opportunities from the future implementation of IFRS to UK entities and the demand for more sophisticated technical and marketing support.
Operating profits grew 4% to £2.1m and margins were again improved, growing one percentage point to 20%.
Group Overheads
Group overheads, which include Board and head office salaries and associated costs as well as unallocated central overheads and exchange gains or losses on translating foreign currency assets and liabilities, increased by £0.2m to £3.1m.
Acquisitions
NHiS acquired for £5.6m in February 2013 - a leading provider of business intelligence, data analysis, workflow tools and other services to pharmaceutical companies in the UK.
This acquisition is complementary to our existing Healthcare business intelligence business, and has allowed us to combine our respective strengths and resources to develop our leading position in this niche area. During the year we integrated our Binley's business intelligence operation into NHiS. NHiS in the period generated 60% of its revenues from subscriptions and a further 35 % from repeatable information sales. All of its information products, which accounted for over 95% of its revenue were delivered digitally.
Inese acquired for €1.4m (£1.2m) in March 2013 - the leading provider of information and events to the insurance industry in Spain.
Inese provides Spanish language subscription based publications and online services along with training and a number of annual events including the leading industry congress; "Insurance Week". Inese also operates a digital news service in Latin America. As well as providing greater access to the Spanish insurance market for Axco it provides opportunities in the Spanish language insurance markets in South America, an area that Axco has been actively seeking to access. Inese recorded subscription sales of 38% and 34% of repeatable revenue including annual events during the period since its acquisition. Advertising revenue represented 14% of revenue.
Post year end, Compliance Week was acquired for $11.2m (£7.2m) in August 2013. Compliance Week is the leading provider of governance, risk and compliance ("GRC") information and events for public companies and large enterprises primarily in the US.
Compliance Week focuses on regulatory and compliance issues related to financial reporting, regulatory enforcement, corporate governance, enterprise risk management and related global issues, from consumer privacy to data management. Located in Boston, USA it provides a base for selective further US expansion and investment. This foothold in the US will also help the Group to expand Axco insurance information products and to take the Group's Compliance businesses into the US market. The Group also expects to provide opportunities to develop Compliance Week's presence outside of its traditional US heartland.
Financial Review
| Group | 2013 | 2012 | Change |
| £'m | £'m | % | |
| Revenue | 85.0 | 85.3 | 0 |
| Adjusted EBITA | 16.9 | 15.7 | 8 |
| Adjusted EBITA margin % | 19.8 | 18.4 |
Adjusted results
Reference is occasionally made in this financial review to adjusted results. Adjusted results in the opinion of the Directors provide a more comparable indication of the Group's underlying financial performance and exclude adjusting items set out in note 3. We have changed the definition of adjusted EBITA and adjusted profit before tax to include amortisation of computer software.
Revenue
Revenue for the twelve months to 30 June 2013 was £0.3m lower at £85.0m (2012: £85.3m). On a like-for-like basis (excluding the impact of acquisitions, foreign exchange and disposals) underlying revenue was largely unchanged.
Operating expenses
Operating expenses, excluding amortisation of intangible assets and non-recurring items, were £42.3m (2012: £43.5m), down 3%.
Amortisation of Intangible assets
Amortisation of intangible assets increased from £6.0m to £6.9m reflecting the acquisitions of the businesses made in the period offset by assets which had been fully amortised in previous years. Also included is £0.7m of accelerated amortisation in respect of intangibles within our Business Intelligence division.
Net gain on disposal of property
In December 2012 the Group disposed of one of its freehold properties for £4.4m in cash and recorded a gain, net of associated costs, of £3.3m.
Impairment of Goodwill
Within our Business Intelligence division; Wilmington Professional Publishing ("WPP") our legacy print directories, Charities and Film and TV cash generating unit (CGU); has experienced significant challenges including the transition from print and advertising based business to digital services. This has resulted in indicators of impairment for the CGU. Updated three year plans have been produced for the CGU which have resulted in a non-cash impairment in the carrying value of goodwill of £4.5m and further information is given in note 11.
Non Recurring costs
The Group incurred net non-recurring costs of £1.3m compared to a net cost of £0.9m in 2012. £0.5m of these costs were non cash movements; £0.3m relates to the write down of freehold property held for resale and £0.2m relates to termination of leases and empty property provisions including our former head office. £0.3m of non-recurring costs relate to costs of acquisitions made in the year. The remainder of the non-recurring costs was associated with the reorganisation and centralisation of back office functions in the UK, the exit costs of dissolving the NCLT joint venture and the completion of the Legal Division reorganisation.
Offsetting these was a reduction in the estimated deferred consideration payable within our Business Intelligence Division of £0.4m.
Finance Costs
Finance costs were down 17% from £2.7m to £2.3m driven by strong cash flow in the period. The Group had seen cash inflows associated with the sale of assets, businesses, treasury shares and operational cash flows, offset by the acquisition of businesses and the purchase of minority interests. This resulted in lower net debt of £33.4m by the year end (2012: £36.2m).
Income tax expense
Income tax expense increased by £0.2m (16%) from £1.3m to £1.5m. The increase in the tax expense is due to larger deferred tax credits in 2012 and higher taxable profits in overseas subsidiaries. The effective tax rate increased to 29% from 20% in 2012 reflecting the larger deferred tax credits in 2012 and the non-taxable impact of the impairment provision and the property disposal.
Operating Profits
Operating profits ("EBIT") were down from £9.0m to £7.4m largely due to the impairment charge of £4.5m. Adjusted EBITA was up 8% at £16.9m (2012: £15.7m) and Adjusted EBITA margins were up 1.4 percentage points to 19.8% (2012 18.4%). Acquisitions in the year contributed £0.7m to operating profits. Underlying adjusted EBITA grew by 7%.
Profit from continuing activities before income tax
Profit from continuing activities before income tax was down from £6.3m to £5.1m. This reflects a net profit of £3.3m from the disposal of our surplus London property, lower bank charges and interest and improved EBITA offset by a non- cash impairment charge of £4.5m and higher exceptional costs.
Adjusted Profit before Tax increased by 11% to £14.7m (2012: £13.2m).
Earnings per share
Adjusted Earnings per Share increased by 12% to 13.06p (2011: 11.71p). Basic earnings per share fell to 4.17p from 5.81p and diluted earnings per share fell to 4.07p from 5.63p.
Goodwill
Goodwill decreased by £1.3m to £73.3m due to additions from acquisitions in the year (£3.3m) offset by an impairment provision of £4.5m.
Intangible Fixed Assets
Intangible Fixed Assets remained unchanged reflecting normal and accelerated amortisation, offset by £5.8m from acquisitions made in the year.
Property, Plant and Equipment
Tangible Fixed Assets decreased by £0.9m to £5.9m reflecting the £0.3m provision (see note 4) representing a permanent reduction in value of a surplus freehold property which was put up for sale at the year end and transferred to "non-current assets held for sale". Additions to tangible fixed assets were £1.2m (2012: £1.0m).
Trade and other receivables
Trade Debtors within Trade and Other Receivables increased £1.2m compared to June 2012 reflecting acquisitions made during the year.
Current Liabilities
Trade and Other Creditors which includes deferred income were up £3.7m compared to 30 June 2012 reflecting the increase in deferred income and acquisitions made in the year.
Subscriptions and Deferred Income, which represents revenue received in advance increased by 7% from £17.3m in 2012 to £18.6m. The increase of £1.1m relates to Inese and NHiS acquired in the year. Axco recorded an increase in deferred income of 14% (£0.5m). 2012 included £0.3m relating to discontinued businesses.
Provisions for purchase of non- controlling interest
Provisions for purchase of non- controlling interest of £1.8m was settled during the year by a payment of £1.7m in respect of The Matchett Group. The difference of £0.1m was credited to goodwill.
Net Debt
Net debt which includes cash and cash equivalents, bank loans and bank overdrafts was £33.4m (2012: £36.2m) a decrease of £2.8m despite spending a net £6.3m in cash on acquisitions in the period. Operating cash flow and cash conversion was strong; with the latter increasing to 115% (2012 111%) which helped towards the debt reduction.
The net debt at 30 June 2013 represented just over half of our debt facility of £65m.
Dividend
It is the Board's intention to maintain the dividend at the same level as the prior year. A final dividend of 3.5p per share (June 2012 final 3.5p) will be paid on 7 November 2013 to shareholders on the register as at 11 October 2013.
Consolidated Income Statement
For the year ended 30 June 2013
| Notes | Year ended 30 June 2013 £'000 |
Year ended 30 June 2012 £'000 |
|
| Revenue | 4 | 85,048 | 85,326 |
| Cost of sales | (26,064) | (25,824) | |
| Gross profit | 58,984 | 59,502 | |
| Operating expenses excluding amortisation of intangible assets and non-recurring items | 5 | (42,252) | (43,494) |
| Amortisation of intangible assets | 12 | (6,860) | (6,046) |
| Operating expenses before non-recurring items | (49,112) | (49,540) | |
| Net gain on disposal of property | 5 | 3,325 | - |
| Impairment of goodwill | 11 | (4,500) | - |
| Other non-recurring items | 5 | (1,325) | (924) |
| Total net operating expenses | (51,612) | (50,464) | |
| Operating profit | 7,372 | 9,038 | |
| Finance income | 6 | 4 | 2 |
| Finance costs | 6 | (2,260) | (2,712) |
| Profit before tax | 5,116 | 6,328 | |
| Taxation | 7 | (1,484) | (1,274) |
| Profit for the financial year | 3,632 | 5,054 | |
| Attributable to: | |||
| Owners of the parent | 3,537 | 4,884 | |
| Non-controlling interests | 95 | 170 | |
| 3,632 | 5,054 | ||
| Earnings per share attributable to owners of the parent during the year: | |||
| Basic earnings per share | 9 | 4.17p | 5.81p |
| Diluted earnings per share | 9 | 4.07p | 5.63p |
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2013
| Year ended 30 June 2013 |
Year ended 30 June 2012 |
||
| £'000 | £'000 | ||
| Profit for the year | 3,632 | 5,054 | |
| Other comprehensive income/(expense) Items that may be reclassified subsequently to the Income Statement |
|||
| Exchange differences on translation of foreign operations | 51 | 13 | |
| Fair value movements on interest rate swaps | 286 | (926) | |
| Fair value movements on net investment hedge | 21 | - | |
| Tax on other comprehensive income / (expense) | (80) | 212 | |
| Other comprehensive income/(expense) for the year, net of tax | 278 | (701) | |
| Total comprehensive income for the year | 3,910 | 4,353 | |
| Total comprehensive income for the year attributable to: | |||
| -Owners of the parent | 3,815 | 4,172 | |
| -Non-controlling interests | 95 | 181 | |
| 3,910 | 4,353 |
Consolidated Balance Sheet
As at 30 June 2013
| As at 30 June 2013 |
As at 30 June 2012 |
||
| Notes | £'000 | £'000 | |
| Non-current assets | |||
| Goodwill | 11 | 73,282 | 74,593 |
| Intangible assets | 12 | 31,493 | 31,522 |
| Property, plant and equipment | 13 | 5,909 | 6,772 |
| Investments in subsidiaries | - | - | |
| Deferred tax asset | 887 | 639 | |
| 111,571 | 113,526 | ||
| Current assets | |||
| Inventories | 54 | 59 | |
| Trade and other receivables | 14 | 21,325 | 20,110 |
| Cash and cash equivalents | 7,803 | 3,954 | |
| 29,182 | 24,123 | ||
| Non-current assets held for sale | 657 | 888 | |
| Total assets | 141,410 | 138,537 | |
| Current liabilities | |||
| Trade and other payables | 16 | (39,254) | (35,552) |
| Current tax liabilities | (1,533) | (1,122) | |
| Deferred consideration | (224) | (160) | |
| Derivative financial liabilities | 15 | (63) | (26) |
| Bank overdrafts | 17 | (890) | (2,159) |
| Provisions for future purchase of non-controlling interests | 18 | - | (1,808) |
| (41,964) | (40,827) | ||
| Non-current liabilities | |||
| Bank loans | 17 | (39,751) | (37,218) |
| Deferred consideration - equity settled | (619) | - | |
| Deferred consideration - cash settled | (261) | (767) | |
| Derivative financial liabilities | 15 | (1,096) | (1,446) |
| Deferred tax liability | (5,822) | (6,518) | |
| Provisions for future purchase of non-controlling interests | 18 | (183) | (165) |
| (47,732) | (46,114) | ||
| Total liabilities | (89,696) | (86,941) | |
| Net assets | 51,714 | 51,596 | |
| Equity | |||
| Share capital | 4,305 | 4,305 | |
| Share premium | 45,231 | 45,231 | |
| Treasury shares | (2,356) | (4,008) | |
| Translation reserve | 59 | 93 | |
| Share-based payments reserve | 1,560 | 815 | |
| Retained earnings | 2,770 | 5,160 | |
| Equity attributable to the owners of the parent | 51,569 | 51,596 | |
| Non-controlling interests | 19 | 145 | - |
| Total equity | 51,714 | 51,596 |
Consolidated Statement of Changes in Equity
For the year ended 30 June 2013
| Share capital £'000 |
Share based payments reserve £'000 |
Translation reserve £'000 |
Retained earnings £'000 |
Total £'000 |
Non-controlling interests (note 18) £'000 |
Total equity £'000 |
|
| Group | |||||||
| At 1 July 2011 | 45,771 | 820 | 91 | 6,164 | 52,846 | 50 | 52,896 |
| Profit for the year | - | - | - | 4,884 | 4,884 | 170 | 5,054 |
| Exchange differences on translation of foreign operations | - | - | 2 | - | 2 | 11 | 13 |
| Fair value movements on interest rate swaps | - | - | - | (926) | (926) | - | (926) |
| Tax on other comprehensive income | - | - | - | 212 | 212 | - | 212 |
| 45,771 | 820 | 93 | 10,334 | 57,018 | 231 | 57,249 | |
| Dividends to shareholders | - | - | - | (5,891) | (5,891) | (10) | (5,901) |
| Share-based payments | - | (5) | - | 474 | 469 | - | 469 |
| Issue of share capital | 1,503 | - | - | - | 1,503 | - | 1,503 |
| Obligation to issue shares | (1,746) | 243 | (1,503) | (1,503) | |||
| Movements in non-controlling interests | - | - | - | - | - | (50) | (50) |
| Movements in offset of provisions for the future purchase of non-controlling interests | - | - | - | - | - | (171) | (171) |
| At 1 July 2012 | 45,528 | 815 | 93 | 5,160 | 51,596 | - | 51,596 |
| Profit for the year | - | - | - | 3,537 | 3,537 | 95 | 3,632 |
| Exchange differences on translation of foreign operations | - | - | 51 | - | 51 | - | 51 |
| Fair value movements on interest rate swaps | - | - | - | 286 | 286 | - | 286 |
| Fair value movements on net investment hedge | - | - | - | 21 | 21 | - | 21 |
| Tax on other comprehensive income | - | - | - | (80) | (80) | - | (80) |
| 45,528 | 815 | 144 | 8,924 | 55,411 | 95 | 55,506 | |
| Dividends to shareholders | - | - | - | (5,947) | (5,947) | (27) | (5,974) |
| Share-based payments | - | 745 | - | 322 | 1,067 | - | 1,067 |
| Translation reserve realised on disposal of overseas subsidiary | (85) | 85 | - | - | - | ||
| Reissue of treasury shares | 1,652 | - | - | (614) | 1,038 | - | 1,038 |
| Movements in non-controlling interests | - | - | - | - | - | 80 | 80 |
| Movement in offset of provisions for the future purchase of non-controlling interests | - | - | - | - | - | (3) | (3) |
| At 30 June 2013 | 47,180 | 1,560 | 59 | 2,770 | 51,569 | 145 | 51,714 |
Share capital comprises Share capital, Share premium and Treasury shares.
Consolidated Cash Flow Statement
For the year ended 30 June 2013
| Year ended 30 June 2013 |
Year ended 30 June 2012 |
||
| Notes | £'000 | £'000 | |
| Cash flows from operating activities | |||
| Cash generated from operations before non-recurring items | 20 | 19,385 | 17,414 |
| Net finance costs paid | (2,011) | (2,347) | |
| Tax paid | (2,926) | (3,080) | |
| Net cash inflow from operating activities | 14,448 | 11,987 | |
| Cash flows from investing activities | |||
| Purchase of businesses | 10 | (1,151) | (465) |
| Deferred consideration paid | (171) | - | |
| Purchase of subsidiaries | 10 | (5,523) | - |
| Cash acquired on purchase of businesses | - | 190 | |
| Cash acquired on purchase of subsidiaries | 10 | 547 | - |
| Purchase of non-controlling interests | 18 | (1,707) | - |
| Cash received from non-controlling interest | 80 | - | |
| Net proceeds from disposal of businesses and subsidiaries | - | 937 | |
| Non-recurring costs | (1,224) | (1,062) | |
| Purchase of property, plant and equipment | 13 | (1,217) | (952) |
| Proceeds from disposal of property, plant and equipment | 4,450 | 55 | |
| Purchase of intangible assets | 12 | (764) | (1,077) |
| Proceeds from disposal of intangible assets | - | 39 | |
| Net cash outflow from investing activities | (6,680) | (2,335) | |
| Cash flows from financing activities | |||
| Dividends paid to owners of the parent | 8 | (5,947) | (5,891) |
| Dividends paid to non-controlling interests | (27) | (10) | |
| Reissue of treasury shares | 1,038 | - | |
| Increase/(decrease) in long-term loans | 2,286 | (2,000) | |
| Net cash outflow from financing activities | (2,650) | (7,901) | |
| Net increase/(decrease) in cash and cash equivalents net of bank overdrafts | 5,118 | 1,751 | |
| Cash and cash equivalents net of bank overdrafts at beginning of the year | 1,795 | 44 | |
| Cash and cash equivalents net of bank overdrafts at end of the year | 6,913 | 1,795 | |
| Reconciliation of net debt | |||
| Cash and cash equivalents at beginning of the year | 3,954 | 2,321 | |
| Bank overdrafts at beginning of the year | (2,159) | (2,277) | |
| Bank loans at beginning of the year | (38,000) | (40,000) | |
| Net debt at beginning of the year | (36,205) | (39,956) | |
| Net increase/(decrease) in cash and cash equivalents net of bank overdrafts | 5,118 | 1,751 | |
| (Increase)/decrease in long-term loans | (2,286) | 2,000 | |
| Cash and cash equivalents at end of the year | 7,803 | 3,954 | |
| Bank overdrafts at end of the year | (890) | (2,159) | |
| Bank loans at end of the year | (40,286) | (38,000) | |
| Net debt at end of the year | (33,373) | (36,205) |
Notes to the Financial Information
1. Nature of the financial information
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 2013 on which an unqualified report has been made by the Company's auditors.
Financial Statements for the year ended 30 June 2012 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 2013 statutory accounts will be delivered in due course.
Copies of the Annual Report and Financial Statements will be posted to shareholders shortly and will be available from the Company's registered office at 6-14 Underwood Street, London, N1 7JQ.
2. Accounting Policies
The preliminary announcement for the year ended 30 June 2013 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 2012 along with new standards and interpretations which became mandatory for the financial year.
New standards and interpretations applied
The following new amendment to standards and interpretations, which does not have a material impact, is mandatory for the first time for the financial year beginning 1 July 2012:
• Amendment to IAS 1, "Presentation of Financial Statements" on Other Comprehensive Income effective for accounting periods beginning on or after 1 July 2012. These Financial Statements have been prepared in accordance with this amendment.
The following new amendment to standards is mandatory of the first time for the financial year beginning 1 July 2012, but is not currently relevant for the Group:
· Amendment to IAS 12 "Income taxes" on deferred tax, effective for accounting periods beginning on or after 1 January 2012.
3. Adjusted Profit
To provide shareholders with a better understanding of the trading performance of the Group, Adjusted Profit has been calculated as profit before tax after adding back:
· amortisation of publishing rights, titles and benefits,
· impairment of goodwill,
· unwinding of the discount on deferred consideration,
· unwinding of the discount on the provisions for the future purchase of non-controlling interests,
· share-based payments; and
· non-recurring items (including net gain on disposal of property).
This reflects an amendment to the definition of Adjusted Profit to exclude the add back of amortisation of computer software to be in line with current practice. It reconciles to profit on continuing activities before tax as follows:
| Year ended | Year ended | |
| 30 June | 30 June | |
| 2013 | 2012 | |
| £'000 | £'000 | |
| restated | ||
| Profit before tax | 5,116 | 6,328 |
| Amortisation of publishing rights, titles and benefits (see note 12) | 6,105 | 5,256 |
| Impairment of goodwill (see note 11) | 4,500 | - |
| Unwinding of the discount on the provisions for the future purchase of non-controlling interests (see note 6) | 16 | 188 |
| Unwinding of the discount on deferred consideration (see note 6) | 77 | 66 |
| Share-based payments | 888 | 464 |
| Net gain on disposal of property (see note 5) | (3,325) | - |
| Other non-recurring items (see note 5) | 1,325 | 924 |
| Adjusted profit before tax ("Adjusted Profit before Tax'') | 14,702 | 13,226 |
| Net finance costs (excluding the unwinding of the discounts above) | 2,163 | 2,456 |
| Adjusted Profit before Tax and net finance costs (''Adjusted EBITA'') | 16,865 | 15,682 |
| Depreciation of property, plant and equipment (see note 13) | 1,043 | 1,025 |
| Amortisation of computer software (see note 12) | 755 | 790 |
| Adjusted EBITA before depreciation (''Adjusted EBITDA'') | 18,663 | 17,497 |
4. Segmental information
The Group's operating segments are reported in a manner consistent with the internal financial information provided to the Board, which represents the chief operating decision maker.
The Group's organisational structure reflects the different professional markets to which it provides information, compliance and education. The six professional divisions (Pensions & Insurance, Banking & Compliance, Healthcare, Legal, Business Intelligence and Accountancy) are the Group's reportable segments and generate substantially all of the Group's revenue.
These are now six reportable segments (2012: two segments) as this more accurately reflects the way the Group is now being managed.
Other than the change to the definition of Adjusted Profit referred to in note 3, there is no change to any of the Group's accounting policies and there is no restatement of either revenues or profitability, other than this revised segmentation by the six operating division headings.
The Board considers the business from both a geographic and product perspective. Geographically, management considers the performance of the Group split between the UK and overseas.
(a) Business segments
| Revenue | Contribution | Revenue | Contribution | ||
| £'000 | £'000 | £'000 | £'000 | ||
| Year | Year | Year | Year | ||
| ended | ended | ended | ended | ||
| 30 June 2013 | 30 June 2013 |
30 June 2012 | 30 June 2012 |
||
| Pensions & Insurance | 14,629 | 6,093 | 12,481 | 5,227 | |
| Banking & Compliance | 16,566 | 3,513 | 15,251 | 3,049 | |
| Healthcare | 13,058 | 2,836 | 12,666 | 2,511 | |
| Legal | 19,266 | 2,884 | 21,671 | 2,784 | |
| Business Intelligence | 10,948 | 2,523 | 12,388 | 2,917 | |
| Accountancy | 10,581 | 2,135 | 10,869 | 2,053 | |
| Unallocated central overheads | - | (3,119) | - | (2,859) | |
| 85,048 | 16,865 | 85,326 | 15,682 | ||
| Amortisation of publishing rights, titles and benefits (see note 12) | (6,105) | (5,256) | |||
| Impairment of goodwill (see note 11) | (4,500) | - | |||
| Net gain on disposal of property (see note 5) | 3,325 | - | |||
| Other non-recurring items (see note 5) | (1,325) | (924) | |||
| Share-based payments | (888) | (464) | |||
| Net finance costs | (2,163) | (2,456) | |||
| Unwinding of discounts | (93) | (254) | |||
| Profit for the year before tax | 5,116 | 6,328 | |||
| Taxation (see note 7) | (1,484) | (1,274) | |||
| Profit for the year | 3,632 | 5,054 |
Unallocated central overheads represent head office costs that are not specifically allocated to segments.
Total assets and liabilities for each reportable segment are not presented, as such amounts are 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 | |
| 2013 | 2012 | |
| £'000 | £'000 | |
| UK | 58,159 | 61,115 |
| Europe, excluding the UK | 13,070 | 11,364 |
| North America | 7,422 | 6,979 |
| Rest of the World | 6,397 | 5,868 |
| Total revenue | 85,048 | 85,326 |
5. Operating expenses
| Year ended | Year ended | |
| 30 June | 30 June | |
| 2013 | 2012 | |
| £'000 | £'000 | |
| Distribution and selling costs | 15,814 | 17,408 |
| Administrative expenses (excluding impairment of goodwill and amortisation of intangible assets ) | 26,438 | 26,086 |
| 42,252 | 43,494 | |
| Amortisation of intangible assets (administrative expense) | 6,860 | 6,046 |
| Total operating expenses before non-recurring items | 49,112 | 49,540 |
Non-recurring items:
The following items have been charged/(credited) to profit or loss during the year but are of an unusual nature, size or incidence and so are shown as non-recurring items.
| Year ended | Year ended | |
| 30 June | 30 June | |
| 2013 | 2012 | |
| £'000 | £'000 | |
| Net gain on sale of property | (3,325) | - |
| Costs written off relating to both successful and abortive acquisitions | 270 | 65 |
| Restructuring and rationalisation costs | 593 | 1,014 |
| Impairment of freehold property and associated property, plant and equipment (see note 13) | 325 | - |
| Costs relating to rationalisation of publishing operations | 339 | - |
| Write down of print directories work in progress | - | 692 |
| Reduction in liability for deferred consideration | (440) | - |
| Termination costs of joint venture contract | 238 | - |
| Net profit from sale of businesses and subsidiaries | - | (847) |
| Total other non-recurring costs | 1,325 | 924 |
Restructuring and rationalisation costs comprise primarily redundancy and termination costs together with associated reorganisation costs.
6. Finance income and costs
| Year ended | Year ended | |
| 30 June | 30 June | |
| 2013 | 2012 | |
| £'000 | £'000 | |
| Finance income comprises: | ||
| Bank interest receivable | 4 | 2 |
| Finance costs comprise: | ||
| Interest payable on bank loans and overdrafts | (1,653) | (1,967) |
| Facility fees | (267) | (248) |
| Write off of loan arrangement fee | (247) | (243) |
| Unwinding of the discount on the provisions for the future purchase of non-controlling interests | (16) | (188) |
| Unwinding of the discount on deferred consideration | (77) | (66) |
| (2,260) | (2,712) |
7. Taxation
| Year ended | Year ended |
|||
| 30 June | 30 June | |||
| 2013 | 2012 | |||
| £'000 | £'000 | |||
| Current tax: | ||||
| UK corporation tax at current rates on profits for the year | 2,382 | 2,208 | ||
| Adjustment in respect of previous years | 30 | (74) | ||
| 2,412 | 2,134 | |||
| Foreign tax | 854 | 639 | ||
| Adjustment to foreign tax in respect of previous years | (4) | 52 | ||
| Total current tax | 3,262 | 2,825 | ||
| Deferred tax credit | (1,469) | (1,021) | ||
| Adjustment to deferred tax in respect of previous years | (41) | 15 | ||
| Effect on deferred tax of change in corporation tax rate | (268) | (545) | ||
| Total deferred tax | (1,778) | (1,551) | ||
| Taxation | 1,484 | 1,274 | ||
| Factors affecting the tax charge for the year: | ||||
| The tax assessed is higher (2012: lower) than the average rate of corporation tax in the UK of 23.75% (2012: 25.5%) for the year ended 30 June 2013. The differences are explained below: | ||||
| Year ended | Year ended | |||
| 30 June | 30 June | |||
| 2013 | 2012 | |||
| £'000 | £'000 | |||
| Profit before Tax | 5,116 | 6,328 | ||
| Profit multiplied by the average rate of corporation tax in the year of 23.75% (2012: 25.5%) | 1,215 | 1,614 | ||
| Tax effects of: | ||||
| Depreciation and amortisation in excess of capital allowances | 124 | 241 | ||
| Impairment not allowable for tax | 1,069 | - | ||
| Foreign tax rate differences | 179 | 72 | ||
| Adjustment in respect of previous years | 26 | (7) | ||
| Profit on sale of businesses and subsidiaries on which no tax is payable | - | (229) | ||
| Profit on sale of property on which no tax is payable | (790) | - | ||
| Put option and deferred consideration discounts not deductible for tax | 4 | 65 | ||
| Other items not subject to tax | (75) | 63 | ||
| Effect on deferred tax of change of corporation tax rate from 24% to 23% (2012: 26% to 24%) | (268) | (545) | ||
| Taxation | 1,484 | 1,274 | ||
During the year, on 1 April 2013, the UK corporation tax rate was reduced from 24% to 23%. This change has been substantively enacted at the balance sheet date and, therefore, is included in these financial statements. As deferred tax assets and liabilities are measured at the rates that are expected to apply in the periods of the reversal, deferred tax balances at 30 June 2013 have been calculated using a rate of 23% giving rise to a reduction in the net deferred tax liability of £268,000 (2012: £545,000). The Company's profits for this accounting year are taxed at an effective rate of 23.75%
On 2 July 2013, the government has enacted a further reduction in the main rate of UK corporation tax to 21% by 1 April 2014 and to 20% by 1 April 2015. This future annual corporation tax reduction is expected to affect the Consolidated Financial Statements. The actual impact will depend on the Group's deferred tax position at that time.
8. Dividends
Amounts recognised as distributions to owners of the parent in the year:
| Year ended | Year ended | Year ended | Year ended | |
| 30 June | 30 June | 30 June | 30 June | |
| 2013 | 2012 | 2013 | 2012 | |
| pence per share | pence per share | £'000 | £'000 | |
| Final dividends recognised as distributions in the year | 3.5 | 3.5 | 2,973 | 2,946 |
| Interim dividends recognised as distributions in the year | 3.5 | 3.5 | 2,974 | 2,945 |
| Total dividends paid | 5,947 | 5,891 | ||
| Final dividend proposed | 3.5 | 3.5 | 2,974 | 2,946 |
9. 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 publishing rights, titles and benefits,
• impairment of goodwill,
• unwinding of the discount on deferred consideration,
• unwinding of the discount on the provisions for the future purchase of non-controlling interests,
• share-based payments, and
• non-recurring items (including net gain on disposal of property).
This reflects an amendment to the definition of Adjusted Profit to exclude the add back of amortisation of computer software to be in line with current market practice. Prior year comparatives have been restated.
The calculation of the basic and diluted earnings per share is based on the following data:
| Year ended | Year ended | |
| 30 June | 30 June | |
| 2013 | 2012 | |
| £'000 | £'000 | |
| restated | ||
| Earnings from continuing operations for the purpose of basic earnings per share | 3,537 | 4,884 |
| Add/(remove): | ||
| Amortisation of publishing rights, titles and benefits (net of non-controlling interest effect) | 6,105 | 5,252 |
| Impairment of goodwill | 4,500 | - |
| Net gain on disposal of property | (3,325) | - |
| Other non-recurring items | 1,325 | 924 |
| Share-based payments | 888 | 464 |
| Unwinding of the discount on the provisions for the future purchase of non-controlling interests | 16 | 188 |
| Unwinding of the discount on deferred consideration | 77 | 66 |
| Tax effect | (2,057) | (1,927) |
| Adjusted earnings for the purposes of adjusted earnings per share | 11,066 | 9,851 |
| Number | Number | |
| Weighted average number of ordinary shares for the purposes of basic and adjusted earnings per share | 84,727,804 | 84,107,422 |
| Effect of dilutive potential ordinary shares: | ||
| Future exercise of share options | 1,992,729 | 2,611,551 |
| Deferred consideration to be settled by equity | 156,550 | - |
| Weighted average number of ordinary shares for the purposes of diluted and adjusted diluted earnings per share | 86,877,083 | 86,718,973 |
| Basic earnings per share | 4.17p | 5.81p |
| Diluted earnings per share | 4.07p | 5.63p |
| Adjusted basic earnings per share (''Adjusted Earnings Per Share'') | 13.06p | 11.71p |
| Adjusted diluted earnings per share | 12.74p | 11.36p |
10. Acquisitions and disposals
Business combinations
In February 2013, the Group acquired the entire issued share capital of NHiS Limited for an initial cash consideration of £5.5m and a further deferred consideration of up to £3.75m subject to the business achieving challenging targets for the growth in underlying profit. The deferred consideration will be satisfied by issuing up to 1.5m new Wilmington Group plc shares in October 2016 dependent inter alia upon NHiS's audited future earnings for the years ended 30 June 2015 and 30 June 2016. The number of new Wilmington Group plc shares to be issued in October 2016 will be determined by reference to the average of the closing mid-market price on the preceding five business days.
NHiS has been in operation since 2007 and is a leading provider of business intelligence, data analysis, workflow tools and other services to pharmaceutical companies in the UK. Around 40% of its revenue is derived from subscriptions and the business has enjoyed high overall renewal rates as defined by customer spend in excess of 90%. Over 75% of NHiS revenue is delivered digitally.
The acquisition of NHiS is consistent with Wilmington's strategy of acquiring businesses with high repeat revenues and strong, cash generative income streams in the Group's key markets. Details of the purchase consideration, the net assets acquired and goodwill for the acquisition are as follows:
| £'000 | ||
| Purchase consideration: | ||
| Cash paid | 5,523 | |
| Additional cash consideration to be paid | 81 | |
| Deferred consideration - equity settled | 595 | |
| Total purchase consideration | 6,199 | |
| The provisional fair values of assets and liabilities recognised as a result of this acquisition are as follows: | ||
| Provisional fair value | ||
| £'000 | ||
| Customer relationships | 2,700 | |
| Data | 1,010 | |
| Brand | 187 | |
| Other intangible assets | 407 | |
| Total Intangible assets (see note 12) | 4,304 | |
| Property, plant and equipment | 35 | |
| Trade and other receivables (net of allowances) | 770 | |
| Cash and cash equivalents | 547 | |
| Subscriptions and deferred revenue | (909) | |
| Trade and other payables | (792) | |
| Net deferred tax liabilities | (1,047) | |
| Net identifiable liabilities acquired | 2,908 | |
| Provisional goodwill (see note 11) | 3,291 | |
| Net assets acquired | 6,199 | |
In March 2013, the Group acquired the trading assets of Inese, the leading provider of information and events to the insurance industry in Spain, from Reed Business Information ("RBI") for a net consideration of €1.4m in cash.
Details of the purchase consideration, the net assets acquired and goodwill for the acquisition is as follows:
| £'000 | ||
| Purchase consideration: | ||
| Cash paid | 1,151 | |
| Total purchase consideration | 1,151 | |
| The provisional fair values of assets and liabilities recognised as a result of this acquisition are as follows: | ||
| Provisional fair value | ||
| £'000 | ||
| Customer relationships | 900 | |
| Brand | 178 | |
| Other intangible assets | 402 | |
| Total Intangible assets (see note 12) | 1,480 | |
| Trade and other receivables (net of allowances) | 749 | |
| Subscriptions and deferred revenue | (927) | |
| Trade and other payables | (151) | |
| Net identifiable liabilities acquired | 1,151 | |
| Provisional goodwill | - | |
| Net assets acquired | 1,151 | |
Acquisition-related costs of £215,000 have been recognised in the Income Statement as part of the non-recurring items for the two acquisitions.
The acquired businesses contributed revenues of £2,108,000 and profit before divisional overheads, tax and amortisation, of £681,000 to the Group for the period from their date of acquisition to 30 June 2013.
Non-controlling interests acquired
During the year, the Group acquired an additional 18.8% of the issued share capital of The Matchett Group Limited for £1,707,000, thus making it a wholly owned subsidiary.
Disposals
In January 2013, the Group sold its interest in its subsidiary Ark Group Australia Pty Limited for a nominal consideration.
11. Goodwill
| £'000 | |
| Cost | |
| At 1 July 2011 | 77,431 |
| Acquisitions | 250 |
| Change in provisions for the future purchase of non-controlling interests (see note 18) | (111) |
| Movement in offset of provisions for the future purchase of non-controlling interests (see note 18) | (171) |
| Revision to provisional fair value of prior year acquisition | (56) |
| At 1 July 2012 | 77,343 |
| Acquisitions (see note 10) | 3,291 |
| Exchange translation differences | - |
| Change in provisions for the future purchase of non-controlling interests (see note 18) | (99) |
| Movement in offset of provisions for the future purchase of non-controlling interests (see note 18) | (3) |
| At 30 June 2013 | 80,532 |
| Accumulated impairment | |
| At 1 July 2011 and 1 July 2012 | 2,750 |
| Charge for the year | 4,500 |
| At 30 June 2013 | 7,250 |
| Net book amount | |
| At 30 June 2013 | 73,282 |
| At 30 June 2012 | 74,593 |
| At 1 July 2011 | 74,681 |
The £4.5m (2012: £nil) impairment charge for the year relates to Wilmington Professional Publishing ("WPP"), a legacy print directories, charities, film and television business included within the Business Intelligence operating segment, which has experienced significant challenges including the transition from print and advertising based information to digital services.
The Group tests goodwill annually for impairment. The recoverable amount of the goodwill is determined from value in use calculations for each cash generating unit ("CGU"). These calculations use pre-tax cash flow projections based on financial budgets and forecasts approved by the Board covering a three year period. Cash flows beyond the three year period are extrapolated using estimated long-term growth rates.
Key assumptions for the value in use calculations are those regarding discount rates, cash flow forecasts and long-term growth rates. Management has used a pre-tax discount rate of 12.3% (2012: 11.1%) across all CGUs except for the WPP CGU which had a pre-tax discount rate of 13.3% (2012: 11.1%) to reflect the greater market challenges and risks. These pre-tax discount rates reflect current market assessments for the time value of money and the risks associated with the CGUs as the Group manages its treasury function on a Group-wide basis. The same discount rate has been used for all CGUs except WPP, as the Directors believe that the risks are the same for each CGU. The long-term growth rates used are based on management's expectations of future changes in the markets for each CGU and are 2.00% (2012: 1.25%).
Management has performed sensitivity analyses on all impairment calculations, for all CGU's except WPP, by reducing the growth rates by 1% and by increasing the pre-tax discount rate to 14.3%. These scenarios individually would not give rise to a further impairment charge.
For WPP, management performed individual sensitivity analyses by:
· increasing the discount rate by 1.0% to 14.3%;
· reducing the long-term growth rate by 1.0%;
· reducing the forecast cash flows by 5.0%.
The result of these revised tests individually, would be a further impairment of between £0.7m and £2.0m.
12. Intangible assets
| Publishing | ||||
| rights, titles | Computer | |||
| and benefits | software | Total | ||
| £'000 | £'000 | £'000 | ||
| Cost | ||||
| At 1 July 2011 | 59,914 | 3,288 | 63,202 | |
| Additions | 13 | 1,064 | 1,077 | |
| Acquisitions | 377 | - | 377 | |
| Sale of subsidiary undertakings | - | (184) | (184) | |
| Disposals | (909) | (3) | (912) | |
| At 1 July 2012 | 59,395 | 4,165 | 63,560 | |
| Additions | 262 | 764 | 1,026 | |
| Acquisitions (see note 10) | 5,784 | - | 5,784 | |
| Exchange translation differences | 21 | - | 21 | |
| At 30 June 2013 | 65,462 | 4,929 | 70,391 | |
| Accumulated amortisation | ||||
| At 1 July 2011 | 24,770 | 2,216 | 26,986 | |
| Charge for year | 5,256 | 790 | 6,046 | |
| Sale of subsidiary undertakings | - | (121) | (121) | |
| Disposals | (873) | - | (873) | |
| At 1 July 2012 | 29,153 | 2,885 | 32,038 | |
| Charge for year | 6,105 | 755 | 6,860 | |
| At 30 June 2013 | 35,258 | 3,640 | 38,898 | |
| Net book amount | ||||
| At 30 June 2013 | 30,204 | 1,289 | 31,493 | |
| At 30 June 2012 | 30,242 | 1,280 | 31,522 | |
| At 1 July 2011 | 35,144 | 1,072 | 36,216 |
The amortisation charge for the year includes an accelerated amortisation charge of £748,000 to reflect a reduction in the useful life if the Group's legacy print businesses.
13. Property, plant and equipment
| Group | Long | Short | Fixtures | ||||
| Freehold | leasehold | leasehold | and | Computer | Motor | ||
| property | property | property | fittings | equipment | vehicles | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Cost | |||||||
| At 1 July 2011 | 4,073 | 3,999 | 151 | 4,369 | 5,040 | 369 | 18,001 |
| Additions | - | - | 5 | 423 | 329 | 195 | 952 |
| Acquisitions | - | - | - | - | 13 | - | 13 |
| Sale of subsidiary undertakings | - | - | - | - | (34) | - | (34) |
| Disposals | - | - | - | (173) | (4) | (95) | (272) |
| Transfer to assets held for sale | (1,022) | - | - | (1,474) | - | - | (2,496) |
| Exchange translation differences | - | - | (8) | (5) | (24) | - | (37) |
| At 1 July 2012 | 3,051 | 3,999 | 148 | 3,140 | 5,320 | 469 | 16,127 |
| Additions | - | - | 22 | 550 | 528 | 117 | 1,217 |
| Acquisitions (see note 10) | - | - | - | 23 | 12 | - | 35 |
| Sale of subsidiary undertakings | - | - | - | (70) | - | - | (70) |
| Disposals | - | - | (31) | (843) | (2,000) | (112) | (2,986) |
| Transfer to assets held for sale | (1,049) | (44) | - | (45) | (34) | - | (1,172) |
| Exchange translation differences | - | - | 10 | 10 | 27 | - | 47 |
| At 30 June 2013 | 2,002 | 3,955 | 149 | 2,765 | 3,853 | 474 | 13,198 |
| Accumulated depreciation | |||||||
| At 1 July 2011 | 565 | 1,725 | 101 | 3,307 | 4,401 | 126 | 10,225 |
| Charge for the year | 49 | 175 | 2 | 447 | 251 | 101 | 1,025 |
| Sale of subsidiary undertakings | - | - | - | - | (34) | - | (34) |
| Disposals | - | - | - | (157) | (5) | (66) | (228) |
| Transfer to assets held for sale | (276) | - | - | (1,332) | - | - | (1,608) |
| Exchange translation differences | - | - | (2) | (1) | (22) | - | (25) |
| At 1 July 2012 | 338 | 1,900 | 101 | 2,264 | 4,591 | 161 | 9,355 |
| Charge for the year | 65 | 161 | 2 | 341 | 369 | 105 | 1,043 |
| Impairment | 258 | 37 | 24 | 6 | - | 325 | |
| Sale of subsidiary undertakings | - | - | - | (68) | - | - | (68) |
| Disposals | - | - | (29) | (789) | (2,000) | (76) | (2,894) |
| Transfer to assets held for sale | (391) | (44) | - | (45) | (34) | - | (514) |
| Exchange translation differences | - | - | 9 | 4 | 29 | - | 42 |
| At 30 June 2013 | 270 | 2,054 | 83 | 1,731 | 2,961 | 190 | 7,289 |
| Net book amount | |||||||
| At 30 June 2013 | 1,732 | 1,901 | 66 | 1,034 | 892 | 284 | 5,909 |
| At 30 June 2012 | 2,713 | 2,099 | 47 | 876 | 729 | 308 | 6,772 |
| At 1 July 2011 | 3,508 | 2,274 | 50 | 1,062 | 639 | 243 | 7,776 |
14. Trade and other receivables
| 30 June | 30 June | ||
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Current assets | |||
| Trade receivables | 17,211 | 15,772 | |
| Other receivables | 1,968 | 1,116 | |
| Prepayments and accrued income | 2,146 | 3,222 | |
| 21,325 | 20,110 |
15. Derivative financial liabilities
| 30 June | 30 June | ||
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Current liabilities | |||
| Forward currency contracts | (63) | (26) | |
| Non-current liabilities | |||
| Interest rate swaps | (1,096) | (1,446) |
16. Trade and other payables
| 30 June | 30 June | ||
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Trade payables | 3,995 | 3,409 | |
| Other payables | 2,623 | 2,377 | |
| Social security and other taxes | 3,591 | 3,240 | |
| Subscriptions and deferred revenue | 18,563 | 17,310 | |
| Accruals | 10,482 | 9,216 | |
| 39,254 | 35,552 |
17. Bank loans and overdrafts
| 30 June | 30 June | ||
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Current liability Bank overdrafts |
890 | 2,159 | |
| Non-current liability Bank loans |
40,286 | 38,000 | |
| Facility fees | (535) | (782) | |
| Bank loans net of facility fees | 39,751 | 37,218 |
The Group has an unsecured committed bank facility of £65m (2012: £65m) to February 2016. The facility currently comprises a revolving credit facility of £60m (2012: £60m) and an overdraft facility of £5m (2012: £5m). At 30 June 2013, £40m of the revolving credit facility was drawn down (2012: £38m). Interest is charged on the amount drawn down at between 2.00 and 2.75 per cent above LIBOR depending upon leverage, and drawdowns are made for periods of up to six months in duration. Interest is charged on the overdraft facility at 2.25% above the Barclays bank base rate. The Group has complied at all times with the covenant requirements of the bank facility arrangement.
18. Provisions for future purchase of non-controlling interests
| Current provisions | Non current provisions | |
| £'000 | £'000 | |
| At 1 July 2011 | - | 1,896 |
| Unwinding of discount (see note 6) | - | 188 |
| Change in value of existing provisions (see note 11) | - | (111) |
| Non-current provisions that became current | 1,808 | (1,808) |
| At 1 July 2012 | 1,808 | 165 |
| Amounts paid in respect of acquisitions of non-controlling interests | (1,707) | |
| Unwinding of discount (see note 6) | - | 16 |
| Change in value of existing provisions (see note 11) | (101) | 2 |
| At 30 June 2013 | - | 183 |
Provisions represent the estimated future cost (discounted to reflect the time value of money) required to settle put options held by non-controlling shareholders over non-controlling interest shares, should the put options be exercised.
The actual settlement timing and value is dependent upon when (and if) the non-controlling shareholders choose to exercise their options and the profitability of the underlying companies at the date of exercise. For the purposes of estimating the above provision, it has been assumed that put options are exercised at the first available opportunity.
19. Non-controlling interests
| Non-controlling interests - share of results and funds | Non-controlling interests - provisions for future acquisition | Net Non-controlling interests | ||
| £'000 | £'000 | £'000 | ||
| At 1 July 2011 | 1,356 | (1,306) | 50 | |
| Profit for the year | 170 | - | 170 | |
| Dividends paid | (10) | - | (10) | |
| Exchange translation difference | 11 | - | 11 | |
| Acquisition of non-controlling interests during the year | (364) | 364 | - | |
| Non-controlling interests in subsidiaries sold during the year | (56) | 6 | (50) | |
| Movement in offset of provisions for the future purchase of non-controlling interests (see note 11) | - | (171) | (171) | |
| At 1 July 2012 | 1,107 | (1,107) | - | |
| Profit for the year | 95 | - | 95 | |
| Dividends paid | (27) | - | (27) | |
| Exchange translation difference | - | - | - | |
| Acquisition of non-controlling interests during the year | (982) | 982 | - | |
| New contribution from non-controlling interest | 80 | - | 80 | |
| Movement in offset of provisions for the future purchase of non-controlling interests (see note 11) | - | (3) | (3) | |
| At 30 June 2013 | 273 | (128) | 145 |
20. Cash generated from operations
| Year ended | Year ended | ||
| 30 June | 30 June | ||
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Profit from continuing operations before tax | 5,116 | 6,328 | |
| Net gain on disposal of property (see note 5) | (3,325) | - | |
| Non-recurring items (see note 5) | 1,325 | 924 | |
| Depreciation of property, plant and equipment (see note 13) | 1,043 | 1,025 | |
| Impairment of goodwill (see note 11) | 4,500 | - | |
| Amortisation of intangible assets (see note 12) | 6,860 | 6,046 | |
| Loss/(profit) on disposal of property, plant and equipment | 94 | (11) | |
| Share-based payments (including social security costs) | 888 | 464 | |
| Net finance costs (see note 6) | 2,256 | 2,710 | |
| Operating cash flows before movements in working capital | 18,757 | 17,486 | |
| Decrease in inventories | 5 | 77 | |
| Decrease in receivables | 59 | 1,831 | |
| Increase/(decrease) in payables | 564 | (1,980) | |
| Cash generated from operations before non-recurring items | 19,385 | 17,414 |
There were no discontinued operations during the year (2012: nil).
Cash conversion is calculated as a percentage of cash generated by operations to Adjusted EBITA as follows:
| Year ended 30 June |
Year ended 30 June |
||
| 2013 | 2012 | ||
| £'000 | £'000 | ||
| Adjusted EBITA | 16,865 | 15,682 | |
| Amortisation of computer software | 755 | 790 | |
| Depreciation of property, plant and equipment | 1,043 | 1,025 | |
| Loss on disposal of property, plant and equipment | 94 | (11) | |
| Operating cash before movement in working capital | 18,757 | 17,486 | |
| Net working capital movement | 628 | (72) | |
| Funds from operations before non-recurring items | 19,385 | 17,414 | |
| Cash conversion | 115% | 111% |
21. Events after the reporting period
On 15 August 2013, the Group acquired Compliance Week for $11.2m. Compliance Week focuses on regulatory and compliance issues related to financial reporting, regulatory enforcement, corporate governance, enterprise risk management, and related global issues, from consumer privacy to data management. It is located in Boston, USA, and will provide a base for selective further US expansion and investment, in particular for our Axco insurance and risk products and for our Compliance businesses.
The acquisition of Compliance Week is consistent with Wilmington's strategy of acquiring businesses with high repeat revenues and strong, cash generative income streams in the Group's key markets. The business will form part of Wilmington's Banking & Compliance division.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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