18th Sep 2006 07:02
Wilmington Group Plc18 September 2006 18 September 2006 WILMINGTON GROUP PLC ("Wilmington", "the Group" or "the Company") Unaudited Preliminary Results for the Year Ended 30 June 2006 Wilmington Group plc, the information and training group, today announces itsunaudited preliminary results for the year ended 30 June 2006. Highlights • A year of excellent progress, with record revenues and profits • Third successive year of strong growth o Revenue from continuing operations up 11.5% to £89.8m (2005: £80.5m) o Adjusted profit before tax up 13.3% to £13.8m (2005: £12.2m) o Adjusted EPS up 23.3% to 11.63p (2005: 9.43p); over the last three years EPS has grown at a compound rate in excess of 20% o Total dividend for the year up 11% to 4.0p (2005: 3.6p) o Good operating cash flow at 114% of operating profit (before non-recurring costs, amortisation, interest and taxation) • Particularly strong performance by Legal & Regulatory division • Corporate activity over the last two years has significantly improved the overall quality of the Group portfolio • Wilmington is well placed to exploit the exciting organic growth and acquisitive opportunities that the current market offers Charles Brady, Chief Executive, commented: "I am pleased to report that Wilmington has made excellent overall progress,with strong growth in both revenue and profitability, together with asignificant increase in cash generation and encouraging results from theintegration of our latest acquisitions. "We have an experienced and well-motivated management team, able to takeadvantage of the Group's strong cashflow and robust balance sheet. We have astrong reputation in areas that we want to develop and are well placed toexploit the exciting possibilities both for organic growth and acquisitions thatwe believe the current market offers. "The Board is very encouraged by the continued progress of the Group, isconfident that our strategy will result in further progress and remainsconfident of our prospects in the year ending 30 June 2007 and beyond." - ends - For further information, please contact: Wilmington Group Plc On the day: 020 7422 6804Charles Brady, Chief Executive Thereafter: 0121 355 0900Basil Brookes, Finance Director Weber Shandwick Square Mile 020 7067 0700Nick Oborne, Kirsty Raper or Helen Thomas Notes to Editors Wilmington Group plc is one of the UK's leading providers of information andtraining for professional business markets. The Group provides training,arranges industry events and publishes magazines, directories, databases, andspecial reports focused primarily on its four principal sectors of Legal &Regulatory, Healthcare, Media & Entertainment and Design & Construction.Capitalised at approximately £151 million, Wilmington floated on the LondonStock Exchange in 1995. Chairman's Statement I am pleased to report that Wilmington has made excellent overall progress inthe year to 30 June 2006, with strong growth in both revenue and profitability,together with a significant increase in cash generation and encouraging resultsfrom the integration of our latest acquisitions. Financial Performance Revenue from continuing operations grew by 11.5% to £89.8m (2005: £80.5m) andprofit before tax increased by 28.4% to £10.1m (2005: £7.8m). Adjusted profitbefore tax grew by 13.3% to £13.8m (2005: £12.2m). This is the third successiveyear of impressive profit growth. Earnings per share increased by 40.3% to 8.01p per share (2005: 5.71p). Adjustedearnings per share from continuing operations grew by 23.3% to 11.63p per share(2005: 9.43p), maintaining our recent trend of strong earnings per share growth.Over the last three years, adjusted earnings per share has increased at acompound rate in excess of 20% per annum. Operating cash flow increased by 16.1% to £16.9m (2005: £14.6m), representing114% of operating profit (before non-recurring items, amortisation, interest andtaxation), reflecting a further increase in underlying subscription revenues. These are our first full year results reported under International FinancialReporting Standards (IFRS). As a result there are changes in format andadditional disclosures, details of which are set out in the Business Review. Allof the 2005 comparative numbers, previously prepared under UK Generally AcceptedAccounting Practice ("UK GAAP"), have been adjusted to ensure comparability. Merger In June 2006 we announced our intention to merge with Metal Bulletin plc.However, following receipt of an all cash offer from Euromoney InstitutionalInvestor plc, the Board of Metal Bulletin withdrew their recommendation to mergewith Wilmington. We were disappointed that the merger did not complete.Moreover, I believe that the management team of Metal Bulletin plc would haveworked successfully with Wilmington's management to create significantshareholder value. We wish them well for the future. As required by IAS 37 we have provided £1.2m for the estimated costs of theproposed merger incurred to 30 June 2006. These costs have been written off asan exceptional expense and consequently have reduced the profit before tax andearnings per share. The corresponding inducement fee income of £1.4m received inAugust 2006, together with transaction costs incurred after 30 June 2006, willbe recognised in the accounts to 30 June 2007. The directors anticipate that thetotal costs incurred in connection with the proposed merger will not bematerially different from the inducement fee received. Dividend The Board remains committed to a progressive dividend policy. As a result of theproposed merger with Metal Bulletin, this year we paid a second interim dividendin lieu of a final dividend. This second interim dividend of 2.7p per share waspaid on 12 September 2006 to shareholders on the register on 11 August 2006.Together with the first interim dividend of 1.3p per share, this makes a totaldividend for the year of 4p per share, an increase of 11% over the 3.6p paidlast year. The dividend is covered 2.9 times by adjusted earnings per share(2005: 2.6 times). As announced in the merger circular sent to shareholders on10 June 2006, the directors do not propose a final dividend for the year. Highlights of the Year I am pleased to report that we have realised the benefits sought from lastyear's management changes and extensive property reorganisation. This, togetherwith some excellent acquisitions and strategic disposals, has significantlyimproved the overall quality of the Group's portfolio of businesses. Overall, we have achieved our ambition of delivering substantial growth inadjusted profit before tax and in adjusted earnings per share. The BusinessReview describes the performance of the business in greater detail. There arehowever some highlights which I would like to identify in this statement. Legal and Regulatory Revenue has grown 20.3% to £52.0m (2005: £43.2m), boosted by the acquisitions ofArk Group (October 2005) and Smee & Ford (February 2006). Segmental profitsbefore non-recurring costs and amortisation have grown by 12.8% to a record£12.3m (2005: £10.9m). Whilst we have had good performances in a number of areasin this division, Waterlow's publishing and information activities in particularhave made outstanding progress with profits increased by 35.5%. This growth hasbeen largely generated by growing Internet and digital revenues and the successof our sales and marketing teams. Electronic initiatives represented 92% of theorganic profit growth in Waterlow, which also benefited from the acquisition ofArk Group and Smee & Ford. We are excited by the many opportunities for future growth presented by theLegal and Regulatory division's markets. The acquisition of Quorum Training inMay 2005 gave access to the accountancy training market, where we are investingin new product, marketing and systems, but have still substantially increasedprofits above the level achieved in the last full year prior to the acquisition. The acquisition of Smee & Ford consolidates our leading position in the charitysector and its profits are already ahead of our expectations. The acquisition ofArk Group extended our business into niche areas of professional practicemanagement and knowledge management. Both acquisitions have been immediatelyearnings enhancing, achieving a return on capital comfortably in excess of ourcost of capital. Healthcare Revenue increased by 4.6% to £11.2m (2005: £10.7m) and segmental profits beforenon-recurring costs and amortisation were £2.1m (2005: £1.9m). While all themajor business units have made excellent progress, the headline profit wasimpacted by £300k of net development costs relating to APM Health Europe.Launched in January 2006, this English language electronic news service informssenior executives in the pharmaceutical industry of developments and regulatoryissues across the key European markets. Media and Entertainment With revenues of £6.5m (2005: £6.8m) and a segmental profit before non-recurringcosts and amortisation of £0.9m (2005: £1.1m) the results are disappointing. Wehave taken firm action to remedy this by the appointment of a new managingdirector and a new sales director for Hollis Directories who we anticipate willbring greater focus and energy to the business; furthermore we have increasedour investment in product and brand development. The acquisition of twoproducts, "The Knowledge" and "Benn's Media", in May 2006 will allow us toleverage sales and operational synergies from our existing product range. Design and Construction The improvement in profitability within our Design and Construction divisioncontinues with revenues of £10.9m (2005: £11.4m) and a segment profit beforenon-recurring costs and amortisation of £0.4m (2005: £0.3m). We have madeextensive changes to the management and operating structure of this division.These changes have resulted in further profit progression and, whilst themargins are not at the level we wish, we anticipate further improvement duringthe current year. Outlook Across the Group we continue to invest in people and products and we have shownthat we can transform the profits of businesses we acquire. We believe thiscontinued investment, combined with our ability to make value enhancingacquisitions, will drive the business forward. We have an experienced and well-motivated management team, able to takeadvantage of the Group's strong cashflow and robust balance sheet. We have astrong reputation in areas that we want to develop and are well placed toexploit the exciting possibilities both for organic growth and acquisitions thatwe believe the current market offers. The Board is very encouraged by the continued progress of the Group, isconfident that our strategy will result in further progress and remainsconfident of our prospects in the year ending 30 June 2007 and beyond. Finally, and as always, I would like to thank my fellow directors, seniormanagers and all of the Group's employees who have contributed to this year'ssuccessful results for their innovation, hard work and commitment. David SummersChairman Business Review IFRS The Group's 2006 financial results are the first to have been prepared under thenew International Financial Reporting Standards (IFRS) and reporting guidelines.As a result, there are changes in format and more technical disclosures thanpreviously. All the 2005 comparative numbers have been adjusted accordingly. As a result of adopting IFRS, the revenue and profit numbers presented in theChairman's Statement and this Business Review all refer to the financialperformance from continuing operations. The after tax results from discontinuedoperations are reported separately and are referred to in note 6. Major changes in Wilmington's accounting policies were required in areasrelating to:- • intangible assets; • business combinations; • deferred tax; and • dividends. Adjusted profit before tax and other adjusted performance measures specificallyexclude the amortisation and impairment of intangible assets, unusual orsignificant non-recurring costs and the tax impact of these items whereappropriate. Overview of the Group's Financial Performance In the year to 30 June 2006 Wilmington generated record revenue and recordprofit before tax. Revenue from continuing operations increased by 11.5% to£89.8m (2005: £80.5m) to record a third successive year of impressive growth.Adjusted profit before tax increased by 13.3% to £13.8m for the year compared to£12.2m for the year ended 30 June 2005. The adjusted operating margin increasedto 15.4% (2005: 15.1%), the fourth year of margin improvement. Operating profit (profit before interest, amortisation and impairment ofintangibles, non-recurring items and tax) increased by 13.5% to £14.9m (2005:£13.1m). Reflecting the cash generative nature of the Wilmington Group business,interest charges remained largely unchanged at £1.0m (2005: £0.9k), despiteextensive investment in the business and £16.2m spent on acquisitions. Amortisation and impairment of intangible assets was £2.5m in the year ended 30June 2006 compared to £3.4m in the year ended 30 June 2005. Earnings per Share Earnings per share increased by 40.3% to 8.01p for the year ended 30 June 2006(2005: 5.71p). Adjusted earnings per share increased by 23.3% to 11.63p (20059.43p). Over the last three years adjusted earnings per share have grown at acompound rate in excess of 20%. Earnings and adjusted earnings per share arecalculated on the weighted number of shares in issue of 83,600,179 for the yearended 30 June 2006 (2005: 83,394,158). Taxation The Group tax charge of £2.7m (2005: £2.4m) represents 26.7% of the profitsbefore tax (2005: 30.1%). The reduction in tax charge arises primarily from therecognition of capital allowances in one of the Group's subsidiaries, which hasresulted in both a reduction in current year corporation tax payable as well asa prior year corporation tax and deferred tax credit. These capital allowancesand consequential deferred tax asset had not been previously recognised due touncertainty over the timing and use of this deferred tax asset. Cashflow Operating cashflow for the year ended 30 June 2006 of £16.9m was 114% ofoperating profit before non-recurring items, amortisation, interest and taxation(2005: £14.6m, 111%). The free cashflow, calculated after a deduction fromoperating cashflow of replacement capital expenditure, payment of corporationtax, payment of interest and equity dividends, was £7.2m (2005: £6.0m). Duringthe year £16.2m was spent on acquisitions, which was partially offset by thosebusinesses bringing with them net cash of £1.6m together with the Group'sproceeds of disposals providing £2.5m. At the balance sheet date the Group hadnet debt of £13.1m (2005: £8.2m). Treasury Policy The Group does not have significant foreign exchange exposure but it does havesome net income in US dollars and Euros. These dollars and Euros are soldperiodically having regard to both prevailing exchange rates and transactioncharges. The Group has agreed to hedge its interest rate exposure onapproximately two thirds of any amount borrowed (subject to a £10m minimum)under the revolving credit facility agreement. Cash and debt is managed on a group wide basis and subsidiaries operate withinfunding restrictions controlled by the executive directors of the Group. Business Objectives and Strategy Wilmington's strategy is to deliver sustainable and growing profits fromservicing the information requirements of selected professional businessmarkets. This is accompanied by a continued commitment to build strongmanagement teams, organisational effectiveness, investment in technology andtight cost control. We aim to deliver strong sustainable profit growth in our key market sectors by:- - focusing investment, both acquisitive and organic, on those markets; - providing researched and accurate information in a variety of formats and by developing innovative new products to extend and enhance our product range; - investing in on-line and digital technology to create new products, access new markets and to efficiently manage our business; and - maintaining strong sales and marketing capabilities. Wilmington is well positioned in markets with attractive growth prospects. Ourbusinesses are strongly cash generative and we have a clear investment strategyto grow in those market sectors where we have critical mass and where we can seethe opportunity to produce sustainable growth. Our long term growth prospects are expected to be sustained by the continuingdemand for professional information and high quality focused events. Theconstant development of legislation and increasing levels of regulation, as wellas our commitment to developing new products and delivery channels, createdemand for the type of high quality information and training we provide. By understanding and working closely with our client base the Group is able toprovide essential information and training whilst building long term sustainablerelationships with our clients. Key Financial and Operational Targets At a Group level we have five key financial and operational targets. Inaddition, each of the operating divisions monitor a number of key performanceindicators. 1. Adjusted Earnings per Share This is a key measure as it indicates the underlying profit attributable to shareholders. It measures not only trading performance, but also the impact of treasury management, bank and interest charges, as well as the efficient structuring of the Group to minimise taxes. In the year to 30 June 2006, adjusted earnings per share from continuing operations increased by 23.3% to 11.63p per share (2005: 9.43p). This is the third year of strong earnings per share growth delivering a compound annual growth rate in excess of 20% over this period. 2. Adjusted Profit Before Tax This measure indicates the trading profits of the Group, after bank and interest charges, but before amortisation and impairment of intangible assets and non-recurring items. Amortisation and impairment is a non-cash technical adjustment which does not necessarily reflect the inherent value of assets. This is particularly the case where the value of assets has been enhanced as a consequence of management action. In the year to 30 June 2006 adjusted profit before tax increased by 13.3% to £13.8m (2005: £12.2m). This is the third year in succession we have seen strong growth in our key measure of adjusted profit before tax. 3. Cashflow The Group's business is strongly cash generative; operating cashflow for the year ended 30 June 2006 of £16.9m was 114% of operating profit before interest, amortisation and impairment of intangible assets (2005: 111%). Free cashflow, which is calculated after deduction from operating cashflow of replacement of capital expenditure, payment of corporation tax, payment of interest and equity dividends, was £7.2m (2005: £6.0m). 4. Balanced Revenue Streams Wilmington seeks to achieve a robust portfolio of assets with diverse revenue streams in key professional markets. When the Company was first floated in 1995, over 70% of revenues came from magazine display advertising. We have now created a more robust and balanced portfolio of assets producing sustainable revenue streams, which include:- • professional directories; • professional magazines; • information sales; • training, events and conferences; • professional accreditation and assessment. These products and services are provided in a variety of formats, but are increasingly supplied on-line, or digitally and are frequently supported by management and delivery systems utilising the latest technology. At Group level we intend to further develop this inter-dependent diverse business model in our key markets. The Group analyses its revenue streams on the following basis:- • Subscription and copy sales 18% of revenue (2005: 18%) • Professional education and events 37% of revenue (2005: 34%) • Information sales and professional services 19% of revenue (2005: 21%) • Magazine advertising 18% revenue (2005: 20%) • Directory advertising 8% of revenue (2005: 7%) The Group believes that all its revenue sources have merit and seeks to maintain a balance that avoids over dependence on a particular revenue source. 5. Margin Improvement The Group seeks to improve the quality of its revenue streams. This is in part judged by the overall profit margin. We are therefore pleased that adjusted profit margins have increased to 15.4% across the Group (2005: 15.1%). This is the fourth year of margin improvement. Many of our businesses achieve far higher profit margins and we intend to improve lower margin businesses or, at the appropriate time, seek to dispose of those activities. This performance indicator needs to be carefully analysed. It can be distorted by investments where expenditure on new products and services is written off when incurred. Moreover, Wilmington seeks to acquire businesses where there is the potential for significant profit improvement and has a good track record of acquiring businesses where we have been able to substantially enhance profit margin and overall profit returns. A further measure which we pay particular attention to is the investment indigital and electronic systems. We have not presented any specific figures forthe Group as a whole as they may be misleading without detailed analysis.However, we have invested substantially over the last few years in digitalcontent management, customer management and production systems, new web sites,on-line information delivery and on-line and electronic support systems. Thisinvestment has helped achieve our goals of improved profit margins and greaterefficiency. Review of Operations Three of our four key business divisions delivered increased profits against theprevious year, with a particularly strong performance by our Legal andRegulatory division. Legal and Regulatory Year ended Year ended 30 June 2006 30 June 2005 £'000 £'000Revenue 52,014 43,228Trading profit* 12,291 10,901Margin 23.6% 25.2% \* Trading profit is the segmental result before allocating non-recurring costs and amortisation This is our largest division, accounting for 58% of Group turnover andcontributing 74.9% of Group trading profit. Revenue grew by 20.3%, while tradingprofit increased by 12.8% giving operating margins of 23.6% (2005: 25.2%). Theincrease in turnover was partly due to acquisitions, and this adversely impactedthe division's profit margin. We are pleased by the organic profit growth at atime when we were investing heavily in systems, new marketing and productdevelopment. Our Legal and Regulatory division is a resilient and growingbusiness, combining high quality "must have" information with a range offocused, market leading products and events. Waterlow provides information, magazines, events and services to the legal,charity, accountancy, surveying, pensions and finance markets. Waterlow'sproducts, some of which date back to 1844, are clear market leaders with highquality proprietary content and strong customer renewal rates. In addition to products for professional markets, published under the Waterlowbrand, subsidiary brands include: • Pendragon, which provides the leading electronic information service for UK pensions professionals • ICP, a leading provider of financial information on companies worldwide, specialising in emerging markets • Charity Choice, the market leading product through which UK charities promote themselves to the legal profession and individual donors • Smee & Ford, a provider of legacy information to charities in the UK for over 100 years and the owner of the leading mortality data files for mailing suppression and the prevention of identify fraud • Caritas, the leading provider of financial analysis of charitable organisations in the UK • Solicitors Journal, a leading weekly magazine and portfolio of products for the legal profession (and winner of the prestigious BIALL 'Legal Journal of the Year' award for 2005) • Ark, a leading publishing and events business focusing on knowledge management and professional practice management All Waterlow's markets have common characteristics including large professionalclient bases with strong information needs, increasing regulatory requirementsand stable demand. These characteristics have provided a strong base upon whichWaterlow has been able to develop a cash generative and growing business withexcellent margins. The business has seen constant growth in sales and profits in recent years as aresult of both strong organic growth and the successful integration anddevelopment of acquisitions. An important characteristic of Waterlow's print publishing is the resilience andsubscription-like characteristics of its classified directory advertising, whichachieved renewal rates in excess of 77% in the last year. The development of electronic publishing has been a major factor in the successof the business, with the proportion of revenues derived from higher marginproducts and services delivered electronically increasing last year to 45%.Furthermore, electronic developments represented over 92% of the organic profitgrowth last year and fuelled the increased overall margins for Waterlow. The development of our recent acquisitions has continued in an encouragingmanner. Ark and Smee & Ford, our two most recent acquisitions, exceeded ourexpectations in their first year and contributed combined operating profit ofapproximately £900k. We remain confident of continued development in thesebusinesses and are enthusiastically looking for other acquisitions where we cangenerate further value for our shareholders. Central Law Training ("CLT"), which serves the legal and financial markets, isthe market leader for the provision of mandatory post-qualification trainingcourses and accredited programmes for UK lawyers. It delivers more than 4,000training courses per year. On a like for like basis revenue and profits from continuing operations,excluding the Immigration and Asylum Accreditation scheme and the acquisition ofQuorum Training, were ahead of the previous year.Our public continuing Legal education events maintained their strong profitcontribution and profit margin. These training programmes are underpinned by ourgrowing subscription membership with 4,636 subscriptions (2005: 4,587),including most major law firms, government departments, local authorities andmany in-house legal departments. The investments made in course administration programmes, product developmentand marketing capability have maintained CLT as market leader in publiccontinuing legal education. CLT works closely with the Society of Trust and Estate Practitioners (STEP) inthe development of education and programmes which operate in the UK andinternationally. The offshore Diploma in Trust management has had a good yearwith strong enrolments in many jurisdictions, including Switzerland andSingapore. Overall revenues increased by 15.8%. Particularly pleasing was thegrowth in UK enrolments, which have grown 31% in the year. CLT has established a compliance training arm, ICT which operates bothinternationally and in the UK and has seen strong growth with 18.6% increase inrevenues. Despite extensive investment in new products and programmes,profitability increased by 59.7% to £176k (2005: £110k). Central Law Training (Scotland) has had a record year with revenues increasing20.2% and trading profits growing 38% to £487k (2005: £351k). Prior yearinvestment in personnel, office premises and products has created a strong teamin Scotland and, we anticipate continuing strong performance. Central Law Training (Ireland) was launched during the year ended 30 June 2005.It has had a very good year and is showing considerable potential with stronglygrowing revenues and profits. Bond Solon achieved a trading profit margin of 29% on revenues of £3.3m (2005:£3.6m) although, as a result of the bedding in of a new management team, it didnot reach the highs of the 38% margin achieved during the financial year 2004/05. It is, nevertheless, strongly placed to develop over the next 12 months. Quorum Training, which was acquired in May 2005, produced an excellentperformance in its first full year, with profits 250% ahead of those in the lastfull year prior to our acquisition. We have invested in product development,marketing and course management systems. We anticipate further progress to bemade in the burgeoning market of post qualification training for accountants. Overall we are very excited about the potential for the Legal and Regulatorydivision. The three recent acquisitions are performing ahead of expectations,and the investment in new product development is delivering the anticipatedprofit growth. Healthcare Year ended Year ended 30 June 2006 30 June 2005 £'000 £'000Revenue 11,228 10,738Trading Profit* 2,073 1,944Margin 18.5% 18.1% \* Trading profit is the segmental result before allocating non-recurring costs and amortisation Healthcare accounted for 12.5% of Group revenue and 12.6% of Group tradingprofit. Healthcare is a high value market where a combination of acceleratinguse of technology and rapid changes in information requirements are creatingmany opportunities for us. Binleys provides specialist contact information and sales management solutionsto healthcare and pharmaceutical industries. It continues to invest strongly inorganic growth, and it delivered revenue growth of 11.7% and profit growth of17.5%. Its products are increasingly supplied as digital feeds, through onlinesubscription systems or on long term contracts as data is embedded intopharmaceutical companies' sales system. APM is our French Press Agency based in Paris. It is the leading provider ofonline healthcare news to its home market and is building a European brand as itdevelops a wider range of products. The underlying performance of this businesshas remained buoyant, but its profit for the year to 30 June 2006 was impactedby a net investment of £300k in the new pan-European newswire APM Health Europe. Our healthcare magazines enjoyed a good year, with strong underlying profitgrowth. We anticipate that the dynamics of the health services in the UK andabroad will provide many opportunities for growth. We anticipate that thoseopportunities will be largely organic, through our continued investment inonline and events based revenues. Media and Entertainment Year ended Year ended 30 June 2006 30 June 2005 £'000 £'000Revenue 6,526 6,810Trading profit* 893 1,142Margin 13.7% 16.8% \* Trading profit is the segmental result before allocating non-recurring costs and amortisation Media and Entertainment, which accounts for 7.3% of Group revenue and 5.4% ofGroup trading profit, had a difficult year with sales down 4.2% to £6.5m (2005£6.8m) and trading profits down 21.8% to £0.9m (2005 £1.1m), reflecting thechallenges within the Hollis business. The division provides information, data and services to the music, publicrelations, sponsorship and marketing sectors. It operates through a number ofleading brands including Hollis, Muze Europe and PCR. It provides itsinformation as electronic products, newsletters, directories and events. Thissector is increasingly delivering its information through the Internet. We are pleased with progress made by our joint venture Muze Europe, whichsupplies information on recorded music and video to both retailers ande-tailers. Revenues increased by 4.7% with trading profits up 28.6%. Marginswere much improved as a result of our investment in database platforms and amove to almost wholly electronic delivery mechanism. Our partners in the US,Muze Inc, supply equivalent data to the American and Asian markets and we expectcontinued progress from this division as we develop further into the mainEuropean markets. Hollis, which provides reference information and data to the public relations,sponsorship and performing arts market, had a difficult year with both reducedrevenues and profit. Changes in the market have required us to react rapidly andwe have injected the expertise necessary to provide the market with theinformation products it now requires. The changes include a new seniormanagement team and investment in a media neutral platform to allow us todeliver information over the Internet, as data, and in print to fully meetcustomer requirements. In May 2006 we acquired the Knowledge and Benn's Media. Whilst these productsdid not contribute to revenues or profitability in the year under review, theyfit well with the products in our media and entertainment division and areexpected to contribute in the future. These acquisitions will enable us toleverage sales of existing products and strengthen our sales and marketingcapability across the division. Design and Construction Year ended Year ended 30 June 2006 30 June 2005 £'000 £'000Revenue 10,907 11,444Trading profit* 424 254Margin 3.9% 2.2% \* Trading profit is the segmental result before allocating non-recurring costs and amortisation Design and Construction, which accounts for 12.2% of Group revenue and 2.6% ofGroup trading profit, made continued progress in the year under review withtrading profit up to £0.4m (2005: £0.3m) on lower sales of £10.9m (2005:£11.4m). Our products in this area cover niches in the design, commodities and equipmentwithin the construction sector. Specialist markets include the internationalpower generation markets. Profits have improved and we anticipate furtherprogress in the current year as we meet customer demand for informationdelivered through electronic and event based channels. Specialist The remainder of our turnover is generated from a number of specialist sectorsincluding catering and automotive. These businesses have performed well, withrevenue increasing by 9.8% to £9.0m (2005: £8.3m) and trading profits more thandoubling to £718k (2005: £267k). Management teams have responded to changing andsometimes difficult markets by evolving our products to deliver information in away that provides real business benefits to our customers. Consolidated Income StatementFor the year ended 30 June 2006 Year ended Year ended 30 June 30 June 2006 2005 Notes £'000 £'000 ----- ----- -----Revenue 1 89,768 80,505Cost of sales (29,433) (27,463) -------- --------Gross profit 60,335 53,042Operating expenses excluding amortisation and impairment 2 (45,484) (40,876)Amortisation and impairment (2,539) (3,433) -------- --------Profit from continuing operations before transaction costs 3 12,312 8,733Transaction costs 3 (1,200) - -------- --------Profit from continuing operations after transaction costs 11,112 8,733Finance costs 4 (1,049) (896) -------- --------Profit on continuing activities before taxation 10,063 7,837Income tax expense 5 (2,682) (2,361) -------- --------Profit on continuing activities after taxation 7,381 5,476Profit/(loss) on discontinued operations after taxation 6 131 (283) -------- --------Net profit for the year 7,512 5,193 -------- --------Attributable to equity holders of the parent 6,825 4,480 -------- --------Minority interest 687 713 -------- --------Earnings per share attributable to equity holders of the parent Continuing operations: 8 Basic earnings per share 8.01p 5.71pDiluted earnings per share 7.95p 5.69p Continuing and discontinued operations: 8 Basic earnings per share 8.16p 5.37pDiluted earnings per share 8.11p 5.35p Statements of Recognised Income and ExpenseFor the year ended 30 June 2006 Group Company Year ended Year ended Year ended Year ended 30 June 30 June 30 June 30 June 2006 2005 2006 2005 £'000 £'000 £'000 £'000 ----- ----- ----- ----- Exchange differences on translation of foreign operations 5 (16) - -Actuarial gain taken directly in equity 96 120 - -Tax on items taken directly in equity (29) (35) - - ----- ----- ----- ----- Net income recognised directly in equity 72 69 - -Net profit for the year 7,512 5,193 11,207 2,838 ----- ----- ----- -----Total recognised income and expense for the year 7,584 5,262 11,207 2,838 ----- ----- ----- -----Attributable to Equity holders of the parent 6,897 4,549 Minority interests 687 713 ----- ----- 7,584 5,262 ----- ----- Balance SheetsAs at 30 June 2006 Group Company As at As at As at As at 30 June 30 June 30 June 30 June 2006 2005 2006 2005 £'000 £'000 £'000 £'000 ----- ----- ----- -----Non-current assetsGoodwill 52,595 41,734 - -Intangible assets 25,896 26,926 36 40Property, plant and equipment 11,201 11,830 1,838 1,765Investments - - 44,959 42,626Deferred tax asset 212 234 1 1 ----- ----- ----- ----- 89,904 80,724 46,834 44,432 ----- ----- ----- -----Current assetsInventories 1,504 1,557 - -Trade and other receivables 19,006 17,803 43,876 34,909Cash 2,855 1,841 - - ----- ----- ----- ----- 23,365 21,201 43,876 34,909 ----- ----- ----- -----Total assets 113,269 101,925 90,710 79,341 ----- ----- ----- -----Current liabilitiesTrade and other payables (30,168) (27,474) (2,861) (4,996)Tax liabilities (1,405) (1,501) - -Bank overdrafts - (37) (2,129) (2,745) ----- ----- ----- ----- (31,573) (29,012) (4,990) (7,741) ----- ----- ----- -----Non-current liabilitiesBank loans (16,000) (10,000) (16,000) (10,000)Retirement benefit obligation (254) (378) - -Deferred tax liability (2,604) (2,775) (92) (45) ----- ----- ----- ----- (18,858) (13,153) (16,092) (10,045) ----- ----- ----- -----Total liabilities (50,431) (42,165) (21,082) (17,786) ----- ----- ----- -----Net assets 62,838 59,760 69,628 61,555 ----- ----- ----- -----EquityShare capital 4,180 4,180 4,180 4,180Share premium account 42,658 42,658 42,658 42,658Capital reserve 949 949 - -Translation reserve (11) (16) - -Share option reserve 91 57 3 2Retained earnings 13,238 9,481 22,787 14,715 ----- ----- ----- -----Equity shareholders' funds 61,105 57,309 69,628 61,555Minority interests 1,733 2,451 - - ----- ----- ----- -----Total equity 62,838 59,760 69,628 61,555 ----- ----- ----- ----- Cash Flow StatementFor the year ended 30 June 2006 Group Year ended Year ended 30 June 30 June 2006 2005 Note £'000 £'000 ---- ----- -----Net cash flow from operating activities 9 12,416 10,768 Investing activities Purchase of tangible fixed assets (909) (2,371) Sale of tangible fixed assets 40 150 Purchase of subsidiary undertakings and minority interests (14,524) (8,735) Cash acquired on purchase of subsidiary undertakings 1,567 214 Sale of subsidiary undertakings 2,466 450 Purchase of intangible assets (2,269) (623) ------ -----Net cash used in investing activities (13,629) (10,915) ------ ------ Financing activities Dividends paid to equity holders of the parent (3,135) (2,627) Dividends paid to minority shareholders in subsidiary undertakings (601) (192) Issue of ordinary shares - 308 Repayment of loan notes - (1,000) Increase in long term loans 6,000 3,000 ------ ------Net cash flows from/(used in) financing activities 2,264 (511) ------ ------Net increase/(decrease) in cash and cash equivalents 1,051 (658)Cash and cash equivalents at beginning of the year 1,804 2,462 ------ ------Cash and cash equivalents at end of the year 2,855 1,804 ------ ------Notes to the Accounts 1. Segmental information (a) Primary reporting format - business segments Year ended 30 June 2006 Legal and Healthcare Media and Design and Other Total Regulatory Entertainment Construction £'000 £'000 £'000 £'000 £'000 £'000 ----- ----- ----- ----- ----- ----- Revenue 52,014 11,228 6,526 10,907 9,093 89,768 ----- ----- ----- ----- ----- ----- Segmental profit before allocating non-recurring costs and amortisation 12,291 2,073 893 424 718 16,399Non-recurring costs - - - - - -Amortisation (775) (617) (423) (524) (200) (2,539) ----- ----- ----- ----- ----- ----- Segmental profit after allocating non-recurring costs and amortisation 11,516 1,456 470 (100) 518 13,860 ----- ----- ----- ----- -----Unallocated central overheads (1,548) -----Profit from continuing operations before transaction costs 12,312Transaction costs (1,200) -----Profit from continuing operations after transaction costs 11,112Finance cost (1,049) -----Profit on continuing activities before taxation 10,063Income tax expense (2,682) -----Profit on continuing activities after taxation 7,381Profit from discontinued operations 131 -----Net profit for the year 7,512 -----Assets 73,469 10,960 11,923 10,090 6,856 113,298Liabilities (22,349) (2,818) (1,109) (3,529) (3,122) (32,927) -------- ------- ------- ------- ------- ------Net assets 51,120 8,142 10,814 6,561 3,734 80,371 -------- ------- ------- ------- ------- Less: unallocated net central assets and liabilities (17,533) ------ 62,838 ------(a) Primary reporting format - business segments Year ended 30 June 2005 Legal and Healthcare Media and Design and Other Total Regulatory Entertainment Construction £'000 £'000 £'000 £'000 £'000 £'000 ----- ----- ----- ----- ----- -----Revenue 43,228 10,738 6,810 11,444 8,285 80,505Segmental profit before allocating non-recurring costs and amortisation 10,901 1,944 1,142 254 267 14,508Non-recurring costs - (77) (32) (523) (225) (857)Amortisation (462) (634) (411) (510) (1,416) (3,433) ----- ----- ----- ----- ----- -----Segmental profit after allocating non-recurring costs and amortisation 10,439 1,233 699 (779) (1,374) 10,218 ----- ----- ----- ----- ----- -----Unallocated central overheads (1,485) -----Profit from continuing operations 8,733Finance costs (896) -----Profit on continuing activities before taxation 7,837Income tax expense (2,361) -----Profit on continuing activities after taxation 5,476Loss from discontinued operations (283) Net profit for the year 5,193 -----Assets 63,099 12,045 9,647 8,443 8,987 102,221Liabilities (19,569) (2,971) (1,788) (2,776) (3,348) 30,452) ----- ----- ----- ----- ----- -----Net assets 43,530 9,074 7,859 5,667 5,639 71,769 ----- ----- ----- ----- ----- Less: unallocated net central assets and liabilities (12,009) ------ 59,760 ------(b) Secondary reporting format - geographical segments The geographical analysis of turnover is as follows: Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ---------- ----------United Kingdom 74,036 64,833Overseas 15,732 15,672 ---------- ---------- 89,768 80,505 ---------- ---------- (c) Adjusted profit Adjusted profit is defined as profit before taxation, amortisation and on-recurring items and reconciles to profit on continuing activities before taxation as follows: Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ---------- ----------Profit on continuing activities before taxation 10,063 7,837Amortisation and impairment 2,539 3,433Non-recurring items 1,200 917 ---------- ----------Adjusted profit 13,802 12,187 ---------- ---------- 2. Operating expenses Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ---------- ----------Distribution and selling costs 20,124 19,313Administrative expenses 25,360 20,646Exceptional item - restructuring costs - 917 ---------- ---------- 45,484 40,876Amortisation and impairment of goodwill and intangible assets 2,539 3,433 ---------- ----------Total operating expenses 48,023 44,309 ---------- ---------- 3. Profit from operations Profit from operations is stated after charging/(crediting) Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ---------- ----------Depreciation of property, plant and equipment 1,574 1,621(Profit)/loss on sale of fixed assets (6) 36Rentals under operating leases:Machinery 14 8Other operating leases 700 316Auditors' remuneration:Audit fees 200 196Other services 225 35Share based payments 34 34Non-recurring costs - restructuring costs - 917Non-recurring costs - transaction costs 1,200 - 4. Finance Costs Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ----- -----Bank interest receivable 22 16Interest payable on loans and overdrafts (944) (722)Pension scheme finance income/(cost) 19 (4)Facility fees (146) (186) ----- ----- (1,049) (896) ----- ----- 5. Income tax expense Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ----- -----The tax charge comprises:UK corporation tax at current rates 3,153 3,066Adjustment to previous year (177) (17) ----- ----- 2,976 3,049Foreign tax 300 366 ----- ----- 3,276 3,415Deferred tax credit - current year (312) (1,054) - prior year (282) - ----- -----Income tax expense 2,682 2,361 ----- ----- The prior year deferred tax credit arises as a result of therecognition of capital allowances in one of the Groupsubsidiaries which had previously not been recognised due touncertainty over the timing and use of these assets. Factors affecting the tax charge for the year: The tax charge for the year is less than the standard rate ofcorporation tax in the UK of 30%. The differences are explainedbelow: Reconciliation of tax charge: Profit on ordinary activities before tax 10,063 7,837 ----- -----Profit on ordinary activities multiplied by the standard rate of corporation tax in the year of 30%(2005: 30%) 3,019 2,351 Effect of: Goodwill and intangible asset amortisation and impairment not deductible for tax purposes 282 (61)Other items not subject to tax (35) 9Capital allowances for the year (in excess of)/less than depreciation (65) 21Net (profit)/loss on sale of assets not taxable (62) 19Foreign tax rate differences 2 39Adjustment to tax charge in respect of previous years (177) (17)Prior year deferred tax credit (282) - ----- -----Current tax charge for year 2,682 2,361 ----- ----- 6. Profit / (loss) for the period from discontinued operations The results of the discontinued operations, which have been included in theconsolidated income statement, were as follows: Notes Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ----- ----- Revenue 309 4,575Expenses (519) (4,597) ----- -----Loss before amortisation and taxation (210) (22) Amortisation (86) (269) ----- -----Loss before taxation (296) (291)Attributable tax credit 63 8 ----- -----Net operating loss attributable to discontinued operations (233) (283) Profit on disposal of discontinued operations 475 -Attributable tax charge (111) - 364 - ----- -----Profit / (loss) on discontinued operations after taxation 131 (283) ----- ----- 7. Dividends Amounts recognised as distributions to equity holders in the period. Year ended Year ended Year ended Year ended 30 June 2006 30 June 2005 30 June 30 June Pence per Pence per 2006 2005 share share £'000 £'000 ---- ---- ----- --- Final dividends recognised as distributions in the period 2.45 2.00 2,048 1,667Interim dividends recognised as distributions in the period 1.30 1.15 1,087 960 ---- ---- ----- ---Total dividends paid 3.75 3.15 3,135 2,627 ---- ---- ----- ---Dividend proposed 2.70 2.45 2,174 2,048 ---- ---- ----- --- 8. Earnings per share To allow shareholders to gain a better understanding of the trading performanceof the Group, an adjusted earnings per ordinary share has been calculated usingan adjusted profit after taxation and minority interests but before amortisationof intangible assets and post-taxation non-recurring costs. (a) From continuing operations The calculation of the basic and diluted earnings per share is based on thefollowing data: Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ----- -----Earnings from continuing operations for the purpose of basic earnings per share excluding discontinued operations 6,694 4,763Add: Amortisation (net of minority interest effect and deferred tax) 2,187 2,467 Non-recurring costs after taxation 840 638 ----- -----Earnings for the purposes of adjusted earnings per share 9,721 7,868 ----- ----- Number NumberWeighted average number of ordinary shares for the purposes of basic and adjusted earnings per share 83,600,179 83,394,158 Effect of dilutive potential ordinary shares:Exercise of share options 555,262 387,373 ----- -----Weighted average number of ordinary shares for the purposes of diluted earnings per share 84,155,441 83,781,531 ----- -----Basic earnings per share 8.01p 5.71pDiluted earnings per share 7.95p 5.69pAdjusted basic earnings per share 11.63p 9.43pAdjusted diluted earnings per share 11.55p 9.39p ----- -----(b) From continuing and discontinued operations Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ----- -----Earnings from continuing operations for the purpose of basic earnings per share excluding discontinued operations 6,694 4,763Adjustments to include the profit/ (loss) for the period from discontinued operations 131 (283) ----- -----Earnings from continuing and discontinued operations for the purpose of basic earnings per share 6,825 4,480Add: Amortisation (net of minority interest effect and deferred tax) 2,273 2,638 Non-recurring costs after taxation 840 638 ----- -----Earnings for the purposes of adjusted earnings per share 9,938 7,756 ----- -----Basic earnings per share 8.16p 5.37pDiluted earnings per share 8.11p 5.35pAdjusted basic earnings per share 11.89p 9.30pAdjusted diluted earnings per share 11.81p 9.26p ----- ----- (c) From discontinued operations Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ----- -----Earnings from discontinued operations for the purpose of basic earnings per share 131 (283)Add: Amortisation (net of minority interest effect and deferred tax) 86 269 ----- -----Earnings for the purposes of adjusted earnings per share 217 (14) ----- -----Basic earnings per share 0.16p (0.34p)Diluted earnings per share 0.16p (0.34p)Adjusted basic earnings per share 0.26p (0.13p)Adjusted diluted earnings per share 0.26p (0.13p) ----- -----9. Net cash from operating activities Group Year ended Year ended 30 June 30 June 2006 2005 £'000 £'000 ----- -----Profit from operations 11,112 8,733Transaction costs 1,200 -Operating loss from discontinued operations (296) (291)Depreciation of property, plant and equipment 1,574 1,621Amortisation of intangible assets 2,625 3,702(Profit)/loss on disposal of property, plant and equipment (6) 36Exchange translation differences 5 (16)Share option charge 34 34 ----- -----Operating cash flows before movements in working capital 16,248 13,819Decrease in inventories 4 251Decrease/(increase) in receivables 507 (189)Increase in payables 182 714 ----- -----Cash generated by operations 16,941 14,595Tax paid (3,547) (2,930)Interest paid (978) (897) ----- -----Net cash flow from operating activities 12,416 10,768 ----- ----- 10. Nature of the financial information The foregoing financial information does not amount to full accounts within themeaning of Section 240 of Companies Act 1985. The financial information has beenextracted from the Group's Annual Report and Accounts for the year ended 30 June2006 on which the auditors have not yet expressed an opinion, but for which anunqualified report is expected. Statutory accounts for the year ended 30 June2005 which were prepared under UK generally accepted accounting principles(UKGAAP), have been delivered to the Registrar of Companies; the report of theauditors on those accounts was unqualified and did not contain a statement underSection 237(2) or (3) of the Companies Act 1985. As required by the EuropeanUnion's IAS Regulation and the Companies Act 1985 the Group has prepared itsconsolidated financial statements for the year to 30 June 2006 in accordancewith International Financial Reporting Standards ("IFRS") as adopted by theEuropean Union. This is the first year in which the Group has prepared itsfinancial statements under IFRS and the comparatives have been restated from UKGAAP to comply with IFRS. The effect of the transition to IFRS on the financialinformation now being presented, including restatement of comparatives and theaccounting policies adopted, has not materially changed from the informationprovided in the interim report for the six months ended 31 December 2005 issuedby the Company on 16 March 2006. Copies of the Annual Report and Accounts will be posted to shareholders shortlyand will be available from the Company's registered office at Paulton House, 8Shepherdess Walk, London, N1 7LB. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Wilmington