Final Results

17th February 2014

ELECTRIC WORD PLC

Preliminary Results to 30 November 2013

Electric Word, the specialist media company, announced today audited results for the year ended 30 November 2013.

FINANCIAL HIGHLIGHTS

Results in line with Board expectations

Revenue of £14.6m up 2%

· Live events revenue up 22% driven by growth in iGaming events and Education conferences

· Revenue mix change: Digital and Live revenue up from 50% to 59% of Group revenue

o Live up to 32% (2012: 27%) of Group revenues

o 46% of publishing revenues include a digital format (2012: 38%)

· Sport & Gaming revenue up 19%; Health down 12%; Education down 1%

Group adjusted EBITA* down from £1.2m to £0.6m

· Sport & Gaming EBITA* up 10% despite investment in sales, marketing and new products

· Education conferences EBITA* up 29% to £0.5m

· Other Education EBITA* loss of £0.6m driven by £0.3m investment in sales and marketing

· Health EBITA* down 89% due to lower sales and investments in digital products

Profit after Tax down from £0.2m profit to £0.6m loss after impairments and restructure provisions

· £0.3m restructure costs due to planned closure of Milton Keynes operations and Incentive Plus

· £0.7m impairments - £0.6m Radcliffe goodwill and intangible assets and £0.1m other

· £0.7m SportBusiness deferred tax asset recognition as future profitability becomes more visible

Gross debt paid down to £0.5m (2012: £0.9m): Cash/debt neutral: (2012: £0.1m net funds)

* EBITA denotes adjusted EBITA as defined in Note 5 and excludes amortisation and impairment of goodwill and intangible assets, restructuring and acquisition-related credits and costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges (which relate to movements on deferred tax such as the use of tax losses or tax credits from the recognition of tax losses).

This definition applies throughout the Annual Report

† Net funds / (debt) are cash held net of the gross debt which include bank overdrafts and loans (note 27), but exclude provisions for deferred and contingent consideration in relation to acquisitions (note 21).

OPERATIONAL HIGHLIGHTS

Sport & Gaming:

· New online subscription services launched in Sport & Gaming

· TVSM online subscription earnings increased 43% as site licence yields increased

· 32% growth in iGaming events revenues - London Affiliate Conference 2014 moved to larger Earls Court venue

· 50% stake acquired in iGaming North America conference

Education:

· Subscription customers fully converted from print to new digital services with majority of English secondary schools retained as customers

· £0.3m investment in sales and marketing in 2013

· Average sales value per school up 18%

· Conferences revenue up 17% and EBITA* up 29% - 36 conferences held (2012: 32)

· Decision taken to wind-down loss making Incentive Plus business in 2014

Health:

· Decision taken to close Milton Keynes location and centralise Health team in new London HQ during Q1 2014

· Radcliffe and Speechmark sales down 9% on 2012 but stabilised after weak Q1

· Research and development now underway for new digital products

Julian Turner, Chief Executive of Electric Word, commented:

"In 2013 we have put in place the plans we set out at the end of last year, investing in each of our three divisions to focus on the long-term value of the most important products. To do that effectively we have simplified the business and strengthened the senior team, including at Board level. I am particularly pleased with the progress we have made in the Sport & gaming division last year and 2014 has got off to a great start with record attendances and revenue from our London Affiliate Conference in Earl's Court earlier this month. At this early stage, overall trading for 2014 is in line with board expectations and ahead of 2013 and we expect to make further progress through the course of the year".

* Adjusted numbers, as explained in note 5, exclude amortisation and impairment of goodwill and intangible assets, acquisition-related and restructuring credits and costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges.

This definition applies throughout Annual Report.

† Net funds / (debt) are cash held net of bank overdrafts and loans (note 27), but exclude provisions for deferred and contingent consideration in relation to acquisitions (note 21).

The audited report and accounts of the Company for the year ended 30 November 2013 have been posted to the Company's website at www.electricwordplc.com. The printed version, together with details of the Annual General Meeting, will be posted to shareholders in due course.

ENDS

Enquiries:

Notes to Editors

Electric Word plc is a specialist media group supporting professional education, compliance and management through a wide range of digital, paper and live formats. Our approach is to identify niche communities within our market sectors and fulfil their key information, professional development, best practice and compliance needs.

Increasingly, our aim is to provide higher-value services and decision-critical data that help our customers to achieve their key personal and organisational objectives. We achieve this by developing a deep understanding of our sectors and our customers' challenges and critical information requirements.

The Group provides content in many different formats, including subscription websites, journals, magazines, events, face-to-face training, online training, books, special reports, bespoke research and consultancy. Competencies developed in one sector can then be transferred to another as opportunities arise.

The Group is composed of three market-facing divisions:

Sport & Gaming

This division is an international provider of business insight, data and analysis to professionals in both the business of sport (working in governing bodies, the media, sports marketing and management) and the online gaming industry and its marketing affiliates. It provides information across a range of formats from online subscriptions to live events and from daily news to bespoke research.

SportBusiness Group publishes for sports industry professionals who work in governing bodies, the media, sports marketing, sponsorship and club and event management.

iGaming Business publish to both the online gaming industry itself and its marketing affiliates, providing this global and fast-growing industry with business-critical information and marketing support.

Education

The Education division provides management and professional development information to school and general education managers, teachers and other professionals.

Operating through the Optimus Education brand, its main products comprise online subscription services, a market leading range of conferences, training resources, books, and magazines.

It is supplemented by the Incentive Plus catalogue of third-party products relating to children's behavioural and emotional development. A decision has been taken to wind-down the Incentive Plus business during 2014.

Health

The Health division provides professional education and training products for doctors, healthcare managers, speech therapists, elderly care and other health professionals through various brands.

Radcliffe Publishing produces a range of books, journals and training products focused on professional development for doctors, managers and professions allied to health.

Speechmark Publishing specialises in resources for speech therapists, special needs co-ordinators and teachers, care workers and mental health professionals.

The Radcliffe Solutions workforce management software enables online management and compliance reporting of appraisals, training and professional development.

Sports Performance is a niche online publisher to competitive sports athletes and coaches and related injury professionals.

CHAIRMAN'S STATEMENT

Dear Fellow Shareholders,

As this is my first set of results since taking the Chair at Electric Word last June, I thought it would be useful to reiterate what the Board see as the Group's key objectives.

Naturally we aim to create value for all the Group's stakeholders, including staff, suppliers, business partners and shareholders. Electric Word contains some high quality publishing assets and we see the best way of delivering value for stakeholders as working together to maximise the potential of those businesses. To achieve this we have been working to simplify the number and range of activities, increase our market focus and continue the transition to digital and live business models with greater earnings quality.

Simplifying the business has taken many forms. We have stopped doing some activities that are either sub-scale or don't take us in the right direction, so at the end of 2013 in two instances we supported employees to separate from the Group some advertising and contract publishing activities and we announced the winding down of the Incentive Plus catalogue business and the closure of our Milton Keynes office. In the Education and Sport markets we have also reduced our product ranges and simplified how they are presented to customers. The same process is being planned for the Health business in 2014.

Increasing market focus means reducing the number of customer groups that we aim to serve and delivering a deeper, more valuable service. In Education we have reduced products that are aimed at classroom teachers to focus on the needs of senior management teams. In Sport & Gaming we have grown by penetrating deeper into our core markets, created new higher-priced digital products and increased the scale of our Affiliate events. In Health we have identified the niches of medical education, professional development, management and speech and language therapy that will be the focus of future product development.

The Group raised funds in 2012 to support the transformation of the business. These funds have been invested in web development, in sales and marketing and in strengthening the central functions of the company. During 2013 we recruited a new Finance Director, the Head of the Health division and a Digital Development Director. We launched new responsive websites for SportBusiness and iGaming Business, incorporating new high-value digital subscription services. In Education, we completed a full cycle of converting print subscribers to new digital services and we have developed the prototypes of new digital Health products.

The pace of change has been striking but we are not satisfied. There is much to do, and none of it would be possible without the talent, energy and professionalism of our employees. I would like to thank them on behalf of the Board. 2014 holds the promise of much further progress and I look forward to reporting that next year.

I would like to thank all of our stakeholders for their part in the progress that the business has made this year.

Andrew Brode

Chairman

14 February 2014

CHIEF EXECUTIVE'S STATEMENT

BUSINESS MODEL AND STRATEGY

Business model

Electric Word plc is a specialist media group supporting professional education, compliance and management through a wide range of digital, paper and live formats. Our approach is to identify niche communities within our market sectors and fulfil their key information, professional development, best practice and compliance needs.

Our business model starts with the customer. By better understanding our customers' aspirations and challenges we can provide increasingly valuable information products that support their critical decisions and key objectives.

We serve our customers' needs through many different formats, including subscription websites, journals, magazines, events, face-to-face training, online training, books, special reports, bespoke research and consultancy. Competencies developed in one sector can then be transferred to another as opportunities arise. Within this mix we favour high-quality revenue streams from digital subscription services, tools that connect directly with customer work requirements and live events with the scale to build brand presence in their markets.

We aim to increase the value of the services that we deliver over the lifetime of each customer relationship. We deliver this by increasing the penetration of our information within each customer organisation and also by innovating and developing new product at a greater premium.

Group Strategy

Our business model requires focus and investment, so it is important that the activities we select for strategic development are scalable and will ultimately generate high margins.

The knowledge of customers and markets needed to deliver our business model also means that it makes sense to concentrate on a small number of market sectors and activities. We are therefore focusing the business on doing fewer things, each at a greater scale, to achieve higher margins. Our objective is a simpler business that is better able to capitalise on the opportunities in our markets and the changing technology underpinning our sector.

We raised funds in 2012 in order to make the investments needed to align the business with these objectives. We have been using those funds in four main ways: to increase our financial flexibility by paying down bank debt; to increase our web development capability and capacity to accelerate the transition from paper to digital formats; to increase the resource in sales and marketing; and to develop the Group's central team to improve the capacity to support and guide the changes being made in each market.

The strategy translates into different priorities within each division according to the needs of the market and the development of the business. These are described and evaluated in the Business Performance Review.

GROUP PERFORMANCE

The objective of maximising the value of each of our strategic publishing assets leads into goals for each division and for the group as a whole. At group level the main goals for 2013 were to:

· increase the proportion of revenue derived from digital and live activities

· make the investments needed to increase the quality as well as the scale of revenue over the medium term

· ensure that we had the structure and resources at the centre of the company to manage those investments effectively

· simplify the market focus and product mix with the medium-term aim of generating more revenue from fewer activities at higher profit margins

The revenue mix has continued to evolve in the right direction during the year. We analyse revenue by format (live, print and digital/mixed) and also by type (such as subscriptions or advertising/sponsorship/exhibition sales). In 2012 live and digital/mixed revenue reached 50% for the first time and in 2013 that increased to 59%. The strong growth in the iGaming Business Affiliate events pushed up advertising, sponsorship and exhibition revenue to 30% (from 24%) and digital/mixed subscriptions increased by 9%. This increase masks a somewhat deeper shift in the balance between digital and paper formats, with the content in all Education subscription services now being delivered online first and edited highlights being promoted subsequently in paper form.

Investments in accelerating change have been made across the group. The Sport & Gaming division is the most advanced in developing high-value products and events and has invested further in launching two new digital subscription services in 2013. The Education division also has an events business with growing profits and has completed its first full cycle of converting subscribers to its new digital service. It is now well placed to grow its revenue from an established base that includes the majority of English secondary schools. The second generation of Education digital products, at higher values, come on stream in the first half of 2014. The Health division is a stage behind and is developing prototypes for its main sectors.

In addition to investing in the divisions, we have invested in the strength and capacity of the central teams. These include the appointment of a new Finance Director, a Digital Development Director and the return from maternity leave of the Group Marketing Director. They have joined excellent existing function leaders in the IT Director and HR Director. The additional resource in the centre of the company has also enabled us to make progress on the simplification of the business, with activities closed or outsourced in every division.

Overall, increases in profit have outweighed investments in the Sport & Gaming division and the reverse has been true in Education and Health. As a result, the Group posts an adjusted EBITA result of £0.6m against £1.2m in 2012. This was in line with our investment plan and slightly exceeded market expectations.

Several items that appear below the adjusted profit line reflect our strategy and the changes that are being made in the business. Firstly, we have recognised a deferred tax asset in respect of an additional £4.0m of SportBusiness tax losses as the development of that business has increased the certainty of future profits. This has contributed £0.7m of tax credit to the 2013 profit and loss account. The reasons for this change in the outlook and underlying value of the division are, firstly, visible future growth in the iGB Affiliate events business; secondly, that the amortisation of the purchase of a key contract in that business from the previous joint venture partner comes to an end in February 2014; and thirdly, the increase in visible future profits from the TV Sports Markets subscriptions business.

At the same time as making this change we have recognised the uncertainties in the transition of the Radcliffe books business to one with greater focus in content themes and new formats. We have therefore impaired the carrying value of the goodwill and intangible assets in that business by £0.6m. Part of this transition has involved centralising the Health business in one multi-disciplinary team in our London office. This, along with the winding down of the Incentive Plus catalogue business to enable the Education business to focus on digital and live products for school managers, prompted the announcement in 2013 of the closure of the Milton Keynes office. The 2013 accounts therefore include exceptional costs of £0.3m and other impairments of £0.1m associated with this restructuring.

These adjustments lead to a statutory loss after tax of £0.6m, compared to a profit of £0.2m in 2012.

Divisional PERFORMANCE

SpORT & GAMING

The primary objective for SportBusiness and iGaming Business has been to continue to transform its revenue mix away from print advertising and towards digital subscriptions and live events. The strategy for achieving this has been:

· Increasing scale and profits in the highly successful Affiliate events business by investing in the infrastructure to support growth

· Investment in the content and delivery of new high-value subscription services to complement the successful TV Sports Markets deals analysis service

· Reduce contract publishing, print reports and print advertising to the core elements of those activities that deliver the highest margins

These goals have been met successfully, which has enabled investments to be made at the same time as increasing adjusted EBITA and improving the revenue mix. Subscriptions and events revenue increased to 60% of the total (from 54%). This was driven by the iGaming Business Affiliate events business growing revenue by 34% and adjusted EBITA by 41% and by a 35% increase in subscriptions revenue as a result of increasing the average value of customer sites on renewal, through increased usage and perceived value.

At the same time as growing revenue, the strength of the information market in this sector has meant that the division has been able to expand into new products and markets. In 2013 it has invested in establishing the North American edition of iGaming Business magazine; acquired a 50% stake in the annual iGaming North America conference; and created content for new digital subscription services such as the iGaming Intelligence Centre and SportBusiness Knowledge Centre (both launched in 2013) and Sports Sponsorship Insider (launched in 2012). On top of these investments, the business also reinforced the iGaming Business Affiliate team by enhancing both the sales leadership and the event delivery capacity. This enabled the event to be moved to a larger venue in February 2014 which has resulted in a further revenue increase of approximately 50% over 2013.

Subscription revenue is also expected to follow the growth achieved in 2013 with further increases in 2014 as average customer value is enhanced by the planned launch of new premium services in both the Sport and iGaming spaces.

EDUCATion

The above table excludes 'The School Run' which was disposed of for no consideration in April 2012 (note 26). In 2012, this contributed revenue of £108,000 and adjusted EBITA* of £133,000 loss before disposal. The Division now receives a licence income calculated as a percentage of revenue.

The table above also includes the results of Incentive Plus. The Group has announced its intention to wind down this business during 2014. In 2013, Incentive Plus contributed revenue of £670,000 and adjusted EBITA* of £19,000 loss (2012: Revenue of £990,000 and adjusted EBITA* of £28,000 profit).

Optimus Education provides expert advice and support for senior and middle managers in schools through digital and live formats. The market opportunity for this service has been enhanced by the reduced support available from surviving Local Education Authorities. The objective for this business is to grow revenues and exceed historic margins of 16-20%. The strategy for achieving this is to:

· Maintain a high level of market penetration in English secondary schools while converting from print to digital

· Add new premium products to increase the value of the subscription service

· Continue to rebuild the scale and quality of the Education conferences after a period of reduced profits in 2011

· Cut out activities that are not aimed at the target group of school managers

Optimus conferences had another successful year, building on the progress made in 2012, with revenue up by 17% on the back of four extra events (up from 32 to 36) and an 20% increase in delegate numbers also. Adjusted EBITA increased by 29% to £0.5m due to the high marginal profitability of additional delegates. The live events were complemented in the autumn of 2012 by the launch of a new range of training products designed to be able to be delivered in school by the relevant topic leader. In 2013, sales of these training packs and other books increased by 37% and in the first quarter of 2014 a group of these training sessions have been brought together as an additional premium product to offer to subscribers to the digital service.

One of the key goals for the digital subscription service was to maintain a high level of penetration in the core market of English secondary schools while converting schools that had been subscribing to 14 different paper newsletter to subscribe to the new digital service. The conversion process was completed in September 2013 still with a majority of all English secondary schools as subscription customers. This gives a strong platform from which to grow the business in the future, with the next goal to enhance the average value of each subscription.

Initial progress was made on this goal in 2013, with the average sale value per school up by 18%. However there is far more to achieve here as schools now have access to a much more extensive service which competes favourably with other methods of supporting middle and senior managers with both their immediate information needs and their professional development. The addition of the new training service is one part of a programme of product enhancements planned for 2014 with the aim of achieving a further significant uplift in average customer value. In 2014 we also plan to increase market penetration, especially in primary schools, as we become able to demonstrate the value for money delivered to subscribing schools.

The investment in additional resource in the sales and marketing and content teams has added £0.3m to the fixed costs of the business, only partly offset by reduced marginal costs. At this stage of the development of the subscription business, this increase in fixed costs means that the subscription business is loss making. Earned subscription revenue decreased as legacy paper subscribers fell away, however the addition of new digital subscribers meant that the value of subscription sales added in the year increased by 21%. The business is not expected to be profitable in 2014 but continued further sales growth will build profitability in the medium term as subscriber numbers and subscription values are increased at a high marginal profit.

HEALTH

The Health division is at an earlier point of transition than the Education and Sport & Gaming divisions, with several businesses in development. Radcliffe Solutions provides software to support training managers in the NHS to monitor and report on training and appraisal processes. Radcliffe and Speechmark are well-regarded books businesses at a largely pre-digital stage. The strategy in this division is to:

· Integrate and improve the efficiency of the existing book publishing operations

· Complement Speechmark's successful paper product range for speech and language therapists by evolving new digital formats

· Improve Radcliffe's profit margins by focusing on a smaller number of healthcare niches and reducing titles that are likely to be sub-scale

· Improve the user experience of Radcliffe Solutions' training management software to build the value generated by its large base of users in the NHS.

Book publishing had a difficult start to 2013 and combined sales for Speechmark and Radcliffe fell 9% in 2013. Speechmark is profitable and achieved an operating margin of 24% but Radcliffe is currently loss-making. The goal for the new head of Health Publishing is to complete the integration of the two businesses, rationalise the frontlist to remove subscale titles and make the most of strong sellers, convert appropriate titles to print-on-demand and e-books, identify opportunities to develop new, higher-value digital products and research the potential for adding subscription services like those in the Education and Sport & Gaming divisions. In the course of this process several activities were closed in 2013 or out-sourced, including live training courses and some experimental advertising-led products generating revenue from the pharmaceutical industry. Others remain under review and the modernisation of the publishing business will continue into 2014.

Radcliffe Solutions has an interesting market position and manages the training records of over 450,000 NHS staff. Led by the new Group Digital Development Director, the business aims to enhance the value it provides for its customers and increase the average revenue per subscribing Trust. If it is able to do so in 2014, the business has a substantial opportunity to grow.

Central costs

These costs represent central group costs which are not directly related to the Divisions' trading and are not therefore included in their results. They include Board fees and costs related to being both a PLC and a consolidated Group.

The Group has maintained its central costs at 5% of Group revenues. The majority of investments made by the Group to date have been directly related to the trade of Divisions and hence been recharged to them, but during 2013, the Group has added resources to central functions in the areas of Digital product development and HR.

Net interest payable is consistent year on year with the reduction in the Group's debt due to loan repayments made in 2013. In addition to interest payable and receivable, the net interest charge of £45,000 also includes notional interest of £5,000 (2012: £3,000) relating to the contingent consideration payable on the Ikonami acquisition in April 2011. See note 21.

Julian Turner

Chief Executive

14 February 2014

OPERATING AND FINANCIAL REVIEW

Summary adjusted results to reflect underlying trading performance

* A reconciliation of the adjusted numbers is set out in note 5. The adjusted numbers are presented to allow shareholders to gain a further understanding of the trading performance of the Group. Profits are adjusted for items not perceived by management to be part of the underlying trends in the business together with their related tax effect and the profit impact of movements in deferred tax balances.

Acquisition-related and restructuring credits and costs

In 2013, the decision was made to wind down the Incentive Plus business during 2014 due its lack of profitability and as the Board considered it non-core in the context of the Group's strategy. In addition, the Board decided to close down the Milton Keynes office during 2014 and centralise all its Health and back-office operations in the London office. As a result, the Group has recognised restructuring costs of £325,000 in 2013 relating to staff redundancy costs, impairments in stock and intangible assets and office closure costs.

In 2012, restructuring costs of £201,000 were booked relating to advisory fees and other minor costs on the disposal of the Education division's consumer arm, funding advice leading to the fundraising in the year and a provision against costs of Board level changes.

A credit of £687,000 was also recognised in 2012 to reflect reduction is the provisions for contingent consideration made at the time of the Radcliffe Publishing and Radcliffe Solutions (formerly Ikonami) acquisitions. Further credits of £144,000 were recognised in 2013 to reduce the provisions to £nil at 30 November 2013.

Impairment charges and reduction to goodwill

Impairment charges of £674,000 have been booked in 2013. Of these, £537,000 and £74,000 relate to impairments recognised on Radcliffe Publishing Ltd's goodwill and intangible assets respectively. These assets were deemed to be impaired as the outcomes expected from its evolution towards digital products are not yet sufficiently certain to generate positive returns in the short term to justify the previous carrying value. Additionally, £47,000 of the impairment results from a review of the carrying value of intangible assets in light of the planned closure of Incentive Plus and restructure of the Health business and £16,000 relates to impairments of leasehold improvements at the Milton Keynes office.

In 2012, a goodwill impairment charge of £300,000 was booked to reflect the challenging trading environment experienced by Radcliffe Solutions Ltd.

Capital expenditure

During the year, the Group has invested an additional £493,000 in web development and enhancing its digital products (2012: £429,000). The majority of web development spend this financial year has concentrated on launching new websites for SportBusiness and iGaming and further enhancements to the Education subscription offering including the building of a new training hub due to be launched in the first half of 2014. In Health, web development has been focused on improving the functionality of customer facing websites and developing new digital products. In 2013, we have also completed the implementation of a new email marketing channel which commenced in 2012.

Our London office moved location during 2013 and we have invested £94,000 on the fit out of the new premises.

Fundraising

In May 2013, the new Chairman subscribed for 7.2million new shares at a price of 2.1 pence per share, thereby injecting £151,000 of funds into the Group.

In September 2012 the Group raised £1,510,000 from a Firm Placing to its largest shareholders and executive directors and an Open Offer. Total costs of the share issue were £112,000 and the issue price was 1.5 pence per share. The combined placing added 100.7 million shares and diluted shares in issue by 34%.

Debt and cash flow

During 2012, the Group's lending Bank agreed to the fundraising and a change to the Loan Agreement. This change required that the Group's repayments of £125,000 due in November 2012 and 2013 both be made in November 2012. In return, much greater financial headroom in its loan covenants was granted thereby enabling the Group to pursue a heightened investment programme.

A further amendment was signed with the Bank in January 2013 which again changed the repayment profile but adds further relaxation in covenant headroom. This required a repayment of £400,000 in 2013 but eliminates the requirement for the Group to meet certain covenants regarding capital expenditure and EBITDA hurdles. This has enabled the Group to continue its investment programme as planned.

Net debt (note 27) at 30 November 2013 stood at £12,000 (2012: net funds of £108,000). The Group has gross Bank debt (note 18) of £475,000 at November 2013 (2012: £875,000) which is being repaid over the period to May 2016. Further to this the Group now has provisions of £nil (2012: £220,000) deferred and contingent consideration relating to two of its recent acquisitions (note 21).

Cash conversion rate

The relatively low cash conversion rate in 2012 is a consequence of three factors: investment in stock, notably development of new lines; slower cash collection relating to the outsourcing of the warehousing and fulfilment function to a third party in late 2011 and the pay-down of creditors compared to the prior year as a reflection of the funds position held.

The high cash conversion rate in 2013 is primarily a result of significant pre-billing and cash collection of 2014 events during 2013 and the return to a normalised creditor payment cycle compared to the creditor pay-downs during 2012.

Earnings per share

Statutory diluted earnings per share ("eps") is 0.18p loss (2012: 0.03p earnings). On an adjusted basis reflecting underlying trading (by using adjusted profits against diluted shares) earnings per share are 0.04p (2012: 0.24p) reflecting the net impact of trading performance and investments during the year as noted in the Business and Performance Review section of the Strategic Report.

Dividends

At this stage of the Group's evolution, the Directors do not propose a dividend this year (2012: £nil).

William Fawbert

Finance Director

14 February 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 November 2013

CONSOLIDATED GROUP AND COMPANY STATEMENTS OF CHANGES IN EQUITY

For the year ended 30 November 2013

CONSOLIDATED GROUP AND COMPANY STATEMENTS OF FINANCIAL POSITION

As at 30 November 2013

These financial statements were approved by the Board of Directors and authorised for issue on 14 February 2014 and are signed on its behalf by:

Julian Turner William Fawbert

Chief Executive Finance Director

CONSOLIDATED AND COMPANY CASH FLOW STATEMENT

For the year ended 30 November 2013

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 November 2013

1. ACCOUNTING POLICIES

BASIS OF PREPARATION

The financial statements have been prepared in accordance with International Financial Reporting Standards as endorsed by the European Union ("IFRS"), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements of the Group and the Parent Company have been prepared under the historical cost convention and in accordance with applicable accounting standards. As permitted by Section 408 of the Companies Act 2006, no separate income statement is presented for the Company. The Company's loss for the year was £686,000 (2012: £2,719,000 loss).

Operating profit is defined as profit before tax but excluding net finance and related costs and investment income.

GOING CONCERN

The Group has made a loss for the year of £614,000 (2012: £227,000 profit) and has net assets of £7,889,000 (2012: £8,479,000); notwithstanding this it has a net current liabilities position at 30 November 2013 of £800,000 (2012: £469,000). The level of bank debt has however reduced to £475,000 (2012:£875,000) as a result of £400,000 repayments made during 2013. The Directors have prepared group cash flow forecasts for the period ending 30 November 2015, which take into account the expected impact of closing down the Milton Keynes office and winding down the loss making Incentive Plus business during 2014. These forecasts indicate that the Group will continue to meet its liabilities and bank debt requirements as they fall due for the foreseeable future. The business is currently trading in line with these forecasts. In the event of forecast trading levels not being met due to a weaker economic climate than forecast, the Directors have the scope to take further actions to enable the group to meet its liabilities as they fall due for the foreseeable future and for it to remain within its financial covenants. There is long-term financing in place with the Group's bank debt renewed in January 2013 to a term loan with repayments over the period to May 2016 (note 18). The Group currently has an overdraft facility of up to £750,000 which is currently not utilised. On this basis the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

Changes in accounting policies

There have been no changes to accounting policies in the period.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Within the consolidated and company financial statements there are a number of areas where management has to include their best estimate of likely outcomes based on their first hand knowledge of the markets and situation. The preparation of consolidated and company financial statements will require management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these consolidated and company financial statements, the significant judgements made by management in applying the accounting policies and the key sources of estimation uncertainty were:

· Valuation and asset lives of intangible assets - which are based on management's considered opinion of what has been bought and what value it is to the Group in the future. Valuation methodologies include the use of discounted cash flows, revenue and profit multiples, whilst asset lives are estimated on the type of asset acquired and range between three and ten years;

· Impairment of assets - assets are subject to at least annual impairment reviews and testing, and the running of these tests and the numbers that form part of them will be based as far as possible on actual known results but will by nature include predictions of future outcomes. The asset carrying values are compared to estimates of the assets' value in use. This value in use is calculated by looking at the cash generating units underlying the assets and management estimating the future cash flows after applying a suitable discount factor. The estimates of future cash flows are based on detailed forecasts produced by management. Assumptions on the goodwill assets are given in note 11;

· Provisioning: both trade receivables for bad debt and inventories for returns and obsolescence are reviewed for potential write down. The provisions created to cover these areas are based on managements' experience and considered opinion of the assets' current value;

· Contingent consideration: provisions are made at the Directors' best estimate of what the consideration will be but as based on future results it can only be assessed on current knowledge and expectations with no certainty. The provisions made are considerably under the maximum amounts which could be payable (note 21);

· Valuation of share based payments - which are calculated from modelling including estimates of non-transferability, exercise restrictions, and behavioural considerations, including such factors as the volatility of the Company's share price. These inputs and the methods are set out in note 28;

· Deferred tax: both assets and liabilities require judgement in determining the amounts to be recognised, in particular the extent to which assets should be recognised in consideration of the timing and level of future taxable income.

An analysis of the Group's income is as follows:

Segmental information is presented in respect of the Group's business divisions. This format is based on the Group's management and internal reporting structure, as seen by the Board in its financial information used in allocating resources and making strategic decisions. These segments were identified by how the Group is focused on customer types and so does involve some aggregation of how those customers are served and of diversity within the customer bandings as niches are targeted within the broader markets.

· Education (E): provides school management and professional development information to professional communities in schools and other institutions;

· Health (H): provides professional education and training products for doctors, healthcare managers, speech therapists, elderly care professionals, and other health professionals as well as HR management and training compliance software;

· Sport & Gaming (S&G): provides insight, data and analysis to the business communities behind sport and online gaming;

· Central costs (PLC): the group function represents central PLC costs which are not directly related to the Divisions' trading and are not recharged. Finance costs and investment income are also included here as these are driven by central policy which manages the cash positions across the Group.

Operating profit is defined in note 1. The sector analysis includes the adjusted definition of operating profit (note 5) to allow shareholders to gain a further understanding of the trading performance of the Group and is considered by the Board alongside operating profit and profit before tax to assess performance and review strategy.

There are no inter-segmental sales.

The Group has announced plans to wind down the Incentive Plus business, part of the Education division. This will occur over the course of 2014. In 2013, Incentive Plus contributed revenue of £670,000 and adjusted EBITA before management charges, restructuring costs and impairments of £19,000 loss (2012: Revenue of £990,000 and adjusted EBITA of £28,000 profit before management charges, restructuring costs and impairments.)

The average monthly number of persons (including directors) employed by the Group during the year, analysed by category, was as follows:

Their aggregate remuneration comprised:

This remuneration is included in other operating expenses except for: £235,000 (2012: £181,000) included in cost of sales - direct costs; £165,000 (2012: £127,000) included in cost of sales - marketing expenses; £100,000 (2012: £26,000) included in restructuring costs; £179,000 (2012: £214,000) capitalised in the inventory for book development and £419,000 (2012: £404,000) capitalised in intangible fixed assets for web site development.

The Group considers that the Board of Directors are the key management personnel. Their remuneration is summarised below:

There were no retirement benefits accruing for the Directors.

No Directors (2012: none) exercised share options in the year and so no gains were made (2012: no gains). The amount for share based payment charges (note 28) which relates to Directors was £29,000 credit (2012: £138,000 charge).

At 30 November 2013, shares were receivable under long term incentive schemes in respect of one Director (2012: two Directors). J Turner has maximum numbers of options that could vest subject to performance conditions of 11,950,000 under the Share Price Growth Scheme (2012: 11,950,000 under the Share Price Growth Scheme). At 30 November 2012, Q Brocklebank had 7,170,000 under the Share Price Growth Scheme. The schemes are defined in note 28.

On 13 December 2013, the Company updated its share option plan and made new awards of share options (the "2013 Award"). The 2013 Award supersedes the share options granted in 2010 which were due to expire in April 2014 and have now been cancelled. Under the updated option plan, Julian Turner has a maximum total participation in the 2013 Award of 42,949,586 shares, William Fawbert has a maximum total participation in the 2013 Award of 17,179,834 shares and Andrew Brode has a maximum total participation in the 2013 Award of 10,151,720 shares.

The adjusted profits have been prepared to allow shareholders to gain a further understanding of the trading performance of the Group. Profits are adjusted for items not perceived by management to be part of the underlying trends in the business and the related tax effect of those items. The adjustments add back items which have no cash impact or are not trade related and of a non-recurring type.

Adjusted numbers exclude amortisation and impairment of goodwill and intangible assets, restructuring and acquisition-related costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax charges. Non-cash tax charges relate to movements on deferred tax such as the use of tax losses or tax credits from the recognition of tax losses.

As noted in the Strategic Report, the Board has made the decision to close the Milton Keynes office and wind down the Incentive Plus business during 2014. The Group has also withdrawn from the sponsorship based Cardiology business and streamlined the Sport & Gaming division during the year. The 2013 restructuring charge of £325,000 relates to closure costs of the Milton Keynes office, staff redundancy costs, stock provisions and a loss on disposal of intangible assets.

Restructuring costs of £201,000 in 2012 related to the disposal of the trade: 'The School Run', funding advice in advance of the fundraising in the year and changes at Board level.

The acquisition-related credits of £144,000 in 2013 and £687,000 in 2012 relate to reductions in provisions held for contingent consideration on both the Radcliffe Publishing Limited and the Ikonami Limited acquisitions (see note 21).

The 2013 and 2012 restructuring and impairment costs, but not the acquisition-related credits were considered to be taxable items for corporation tax and thus attributable tax has been included in the period at 23.3% (2012: 24.7%) of their value. All other adjusting items do not have a tax affect on the Group.

Other operating expenses as disclosed on the face of the income statement include staff costs (note 4) of £5,221,000 (2012: £4,825,000) and premises costs of £442,000 (2012: £426,000).

Impairment charges in 2013 consist of £537,000 goodwill and £74,000 intangible fixed assets relating to Radcliffe Publishing Ltd (notes 11 and 12 respectively); £16,000 leasehold improvement costs associated with the Milton Keynes office, now planned for closure and £47,000 relating to intangible assets following a review of carrying amounts. In 2012, goodwill from acquisitions was impaired by £300,000 as detailed in note 11.

Amounts payable to KPMG Audit Plc and their associates in respect of both audit and non-audit services are as follows:

Fees in respect of other services in 2013 and 2012, relate to the iXBRL filing of the Group's tax returns with the HMRC.