Interim Results

23 August 2016

ELECTRIC WORD PLC

Interim Results to 31 May 2016

Electric Word, the specialist information business with divisions operating in the Sport and Education sectors, today announced interim results for the six months ended 31 May 2016.

Julian Turner, Chief Executive of Electric Word, commented:

"Following the disposal of the Group's stake in iGaming Business Ltd, we now have a much stronger balance sheet. The performance of the trading divisions in the first half of the year has met expectations and been satisfactory, given market conditions. Our strategy of investing in higher value subscription products is now resulting in both higher revenues and margins in the Sport division whilst sales of our premium subscription products in Education are also encouraging. The Sports and Education businesses are not currently of sufficient size to support the existing level of Group overheads and central costs, however, and we are reviewing ways to address this."

Electric Word plc

INTERIM RESULTS TO 31 May 2016

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Comparative figures for the year to 30 November 2015 and six months to 31 May 2015 have been restated to reclassify the results of iGaming Business Ltd and the Optimus books business as discontinued (see note 8).

* Adjusted figures (Note 3) exclude amortisation, impairment of goodwill and intangible assets, non-recurring items and restructuring costs, 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 the Interim Results statement.

† Net funds (note 6) comprise cash held net of bank overdrafts and loans.

ENDS

Electric Word plc

INTERIM RESULTS TO 31 May 2016

Chairman's and Chief Executive's statement

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GROUP OVERVIEW

* Adjusted figures (note 3) exclude amortisation and impairment of goodwill and intangible assets, non-recurring items and restructuring costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges.

The Group's strategy has been to increase the value that it adds for its customers by creating products and services that support their critical decisions and the achievement of their key organisational objectives. This has required a deeper engagement with our customers as well as some significant investments. Inevitably, in following this path, we have had to make some choices and are now doing fewer things, of greater value and on a larger scale.

Our investment in the last three years has principally been in digital products and this has produced increased sales of higher-value, premium products which have once again seen higher average customer values in both SportBusiness and Optimus Education. We expect these higher-value premium products to add to the value of these businesses.

Following the disposal of iGaming Business in January 2016, we are mindful that the Group's cash balances could exceed the Group's expected financing requirements for the foreseeable future. We are also conscious that the Group's continuing businesses are in aggregate loss making. This is primarily because following the recent business disposals, the Sports and Education businesses are not currently of sufficient size to support the existing level of Group overheads and central costs.

In our 2015 Annual Report, we announced that we were reviewing our infrastructure, systems and processes and also assessing the options open to us, including a possible return of capital to Shareholders. We also stated that we were mindful of the continuing EBITA losses and that any capital return would be enhanced by improvements in profitability in the Optimus business. Our review is progressing but not yet concluded and as such we do not consider a return of capital would be appropriate at this stage. We will provide a further update in due course.

Directorate change

Stephen Routledge, who has been a non-executive director since September 2006, has indicated his intention to step down from the Board on 31 August 2016. We would like to thank Stephen for his contribution to the development of the Group during his tenure.

Electric Word plc

INTERIM RESULTS TO 31 May 2016

Chairman's and Chief Executive's Statement

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SPORT division

The table above excludes the results of iGaming Business Ltd which was sold on 4 January 2016 - see note 8.

The Sport division provides market information and knowledge to professionals in the global business of sport, particularly on media rights, sponsorship and event hosting.

Revenue in this division grew by 15% compared to H1 2015, with 65% of revenue from live or digital services in 2015 (62% in H1 2015). Subscriptions grew by 18% and now account for 69% of the revenue in this division (67% in H1 2015). Revenue from bespoke consulting increased by 26% compared to the first half of 2015 and accounted for 15% of revenues (14% in H1 2015), whereas advertising was 14% of 2016 divisional revenues (14% in H1 2015).

Revenues from TV Sports Markets continue to grow on the back of enhanced product offerings and represented 41% of revenues in H1 2016 - a 10% increase on H1 2015.

We are successfully continuing to develop our Sports Sponsorship Insider product and H1 2016 revenues have increased by 24% from H1 2015 to £113,000. This product is loss making due to continued investment and development, but at current growth rates we believe that it will become profitable in the short to medium term.

As noted above, revenues from bespoke consulting have increased compared to H1 2015, and are currently at 73% of total consulting revenues for the year to 30 November 2015.

Our flagship Sports Business International magazine generated 35% of revenues in the period to 31 May 2016 and H1 2015. Approximately 55% of revenues are subscriptions, and 42% are generated form advertising. This product earns a comparatively low margin but also provides an effective marketing channel for our other products and the business as a whole.

EDUCATION divisioN

The table above now includes the results of the Speechmark business which was previously reported in the Health segment. The results of the Incentive Plus business which was sold on 15 October 2014 have been excluded as have the results of the Optimus books business which have been discontinued - see note 8.

Electric Word plc

INTERIM RESULTS TO 31 May 2016

Chairman's and Chief Executive's Statement

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The Education division includes the Optimus and Speechmark businesses. Optimus supports teachers' professional development requirements through an online subscription-based information and training service and through live conferences.

The Optimus business is now focused on conferences for a narrower group of senior school leaders alongside the Premium CPD online training resources. These services have been brought together, along with the Knowledge centre database of articles and case studies, into an integrated membership offering under the Optimus Unlimited brand. This has resulted in a re-phased conference schedule and fewer events overall. We ran 14 events in the first half of 2016 (which is 5 fewer than 2015) and this contributed to 27% lower revenues compared to H1 2015, although profitability per event was higher.

In subscriptions, the total revenue earned was down 11% as a result of reduced subscriptions to the Knowledge Centre. Revenues from the Premium CPD and Unlimited products however have increased by 160% to £169,000 which represents good progress from the launch of Unlimited in September 2015. As a result of strong sales of Unlimited in the second quarter, deferred subscription revenue ended the period higher than the previous year.

The Optimus books business had been reduced greatly in recent years as part of the streamlining of activities around digital and live services and that business has now been discontinued as at 31 May 2016.

Speechmark, however, continues to publish books and other resources for speech and language therapists, mental health professionals and teachers in schools. Speechmark has had a good start to the year and revenues are 7% higher than in the period to 31 May 2015, mainly driven by UK book sales.

 Central costs

These costs represent those central group costs which have not been recharged to the divisions and are therefore not included in the divisional results. They include Board fees and costs related to being both a public company and a Group as well as some of the costs of central functions such as HR, IT and unallocated property costs.

Central costs are higher than 2015 levels due to the continuation of some costs which were previously allocated to the businesses which have been sold. We would expect central costs for the remainder of 2016 to be at an increased level as a result of higher property costs, although this will be mitigated in part by efficiencies realised following the disposals and other actions being taken to reduce costs.

Net interest receivable / (payable) is consistent with the reduction in the Group's debt and the increase in cash balances following the disposal of iGaming Business Ltd.

Electric Word plc

INTERIM RESULTS TO 31 May 2016

Chairman's and Chief Executive's Statement

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FINANCIAL REVIEW

In these results we refer to adjusted results. Adjusted results are prepared to provide a more comparable indication of the Group's underlying business performance. A reconciliation of statutory results to adjusted results is given in note 3, and further details of adjusting items are given below.

Non-recurring items

Non-recurring costs of £397,000 have been incurred in the 6 months ended 31 May 2016. These relate to costs associated with the strategic review of the Optimus Education business (£184,000), redundancy costs arising from staff restructuring (£54,000) and bonus payments made to the Executive Directors as a result of

meeting key objectives including the disposal of iGaming Business Ltd (£159,000). There were no non-recurring costs charged to continuing operations in the prior periods.

Amortisation

Amortisation of intangible fixed assets for continuing operations charged in the 6 months to 31 May 2016 amounted to £232,000 (6 months to 31 May 2015: £229,000; Year ended 30 November 2015, £470,000).

Impairment charges

An impairment expense of £1m was recognised in the second half of 2015 against the carrying value of goodwill in the Optimus business. There have been no impairments recognised in 2016.

Share-based payment charges

Share-based payment charges are recognised to spread the fair value of each award over the vesting period on a straight-line basis, after allowing for an estimate of the share awards that will actually vest. The expense recognised in the 6 months ended 31 May 2016 was £32,000 (6 months to 31 May 2015: £33,000; Year ended 30 November 2015, £66,000)

Debt and cash flow

Following the disposal of iGaming Business Ltd in January 2016, net cash at 31 May 2016 was £11,494,000 (31 May 2015: £11,000; 30 November 2015: £448,000). The Group has gross bank debt of £61,000 at 31 May 2016 (31 May 2015: £228,000; 30 November 2015: £94,000). This is being repaid over equal monthly instalments to May 2017.

Current Trading and Prospects

Current trading is in line with the Board's expectations. As we enter the fourth quarter, which is an important contributor to the Group's overall performance, we are expecting continued strong performance from our Sport division. In Education we are encouraged by sales of our premium subscription products although this will be offset by further reductions in Knowledge Centre. Advance bookings for fourth quarter education conferences are currently ahead of 2015 and Speechmark performance is anticipated to remain steady. Central costs in the second half of the year will be higher than the first due to higher property costs, but we continue to seek efficiencies where possible.

Andrew Brode Chairman

Julian Turner Chief Executive

Electric Word plc

Prior period results have been restated to show the effect of operations which have been discontinued in the current and prior periods - see note 8. Of the profit for the period from discontinued operations, £11,825,000 (6 months to 31 May 2015: £231,000, year ended 30 November 2015: £155,000 profit) is attributable to equity holders of the parent and £127,000 loss (6 months to 31 May 2015: £108,000 profit, year ended 30 November 2015: £231,000 profit) is attributable to the non-controlling interest.

Electric Word plc

Electric Word plc

Electric Word plc

Electric Word plc

1 PRESENTATION OF INTERIM RESULTS

GENERAL INFORMATION

Electric Word plc (the "Company") is a company incorporated in the United Kingdom. The unaudited condensed set of consolidated financial statements as at May 2016 and for the six months then ended comprise those of the Company and its subsidiaries (together referred to as the "Group").

The information for the six months ended 31 May 2016 and the comparative information for the six months ended 31 May 2015 are not audited by the Group's auditors. The comparative figures for the financial year ended 30 November 2015 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The consolidated financial statements of the Group as at and for the year ended 30 November 2015 are available upon request from the Company's registered office at 2nd Floor, 5 Thomas More Square, London E1W 1YW or at www.electricwordplc.com.

The comparative information for the year to 30 November 2015 and the six months ended 31 May 2015 included in the condensed consolidated statements has been restated to reclassify the results of businesses which have been discontinued in the current or prior periods. Further details are given in note 8.

ACCOUNTING POLICIES AND ESTIMATES

The financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union. The condensed set of consolidated financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.

The accounting policies, presentation and methods of computations applied by the Group in its consolidated financial statements are consistent with those applied by the Group in its consolidated financial statements for the year ended 30 November 2015.

The preparation of the condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and income and expense. Actual results may differ from these estimates.

In preparing this condensed set of consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the consolidated financial statements as at and for the year ended 30 November 2015.

GOING CONCERN

Following the disposal of the Group's 70% interest in iGaming Business Ltd, the Group has cash balances of £11,555,000 and a net current asset position of £9,835,000 as at 31 May 2016. Net funds amount to £11,494,000 at 31 May 2016. The Directors have prepared group cash flow forecasts for the period ending 30 November 2018. 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 Directors also prepare a rolling 12-month cash flow forecast each month to monitor the Group's expected cash balances.

Electric Word plc

1 PRESENTATION OF INTERIM RESULTS (continued)

In the event of forecast trading levels not being met, 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. The Group 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.

2 SEGMENTAL INFORMATION

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 reviewed by the Board when reviewing performance, allocating resources and making strategic decisions. Following the disposal of iGaming Business Ltd, the Directors have restructured the management of the Group's continuing operations and now organises its management and reporting around two market-facing divisions: Education and Sport.

· Sport (S): provides insight, data and analysis to the business communities behind sport.

· Education (E): provides professional education, development, training and resources to professional communities in schools and other institutions including school managers, teachers, speech and language therapists and special needs co-ordinators.

· Central costs (PLC): the group function represents central 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 position across the Group.

The sector analysis includes adjusted operating profit (note 3) 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. 

As described in note 8, the information in the table below excludes amounts relating to discontinued activities and 2015 comparatives have been restated accordingly

Electric Word plc

2 SEGMENTAL INFORMATION (continued)

3 ADJUSTED PROFITS

Adjusted profits are presented to allow shareholders to gain a further understanding of the trading performance of the Group. Profits are adjusted for items not considered by management to be part of the underlying trends in the business together with the related tax effect of those items. The adjustments add back items which are not trade related, are non-recurring in nature, or have no cash impact.

Adjusted figures exclude amortisation and impairment of goodwill and intangible assets, restructuring and acquisition-related costs, and share based payment costs, non-recurring items as well as the tax impact of those adjusting items and any non-cash tax charges.

Electric Word plc

3 ADJUSTED PROFITS (continued)

Electric Word plc

4 TAXATION

Income tax expense has been calculated based on management's best estimate of the weighted average annual income tax rate expected for the year ending 30 November 2016.

5 EARNINGS PER SHARE

The calculation of earnings per ordinary share is based on the following:

Electric Word plc

6 ANALYSIS OF NET FUNDS

Bank net funds

The Group also has an overdraft facility of £750,000 which, when utilised, is repayable on demand and charges an effective interest rate of 4.5% over the lending Bank's base rate.

7 PROVISIONS

The provision of £60,000 at 31 May 2016, 30 November 2015 and 31 May 2015 relates to an estimate of dilapidation costs due on termination of a lease.

8 DISCONTINUED OPERATIONS

On 4 January 2016, the Group's 70% interest in iGaming Business Ltd was disposed of for total cash consideration of £14,549,000. This business was reported in the Sport & Gaming reportable segment. Further details are given in note 9.

During the period to 31 May 2016, the Directors have also decided to discontinue the Optimus books business and focus investment on the conferences and high-value subscription products. Results from the Optimus books business were reported in the Education segment.

The combined results of all discontinued operations which have been discontinued in the current and prior periods included in the condensed consolidated statement of comprehensive income are set out below. The comparative profits from discontinued operations have been restated to include those operations classified as discontinued in the current year.

Electric Word plc

8 DISCONTINUED OPERATIONS (continued)

9 BUSINESS COMBINATIONS

As described in note 8, on 4 January 2016, the Group's 70% interest in iGaming Business Ltd was disposed of. Details of the assets and liabilities disposed of, and the calculation of the profit and loss on disposal are given in the table below.

Notes to Editors

Electric Word plc is a specialist media group supporting professional development, management effectiveness and market intelligence through a wide range of digital, print and live formats. Our approach is to identify niche communities within our market sectors and fulfil our customers' key information needs to enable them to make better-informed decisions and so improve their performance. We achieve this by developing a deep understanding of our sectors and our customers' challenges and information requirements.

The Group provides content in many different formats, including market data, subscription websites, magazines, conferences, face-to-face training, online training, books, special reports, bespoke research and consultancy.

Following the disposal of the Group's stake in iGaming Business, it is now composed of two market-facing divisions:

Education

Optimus Education supports the professional development of teachers and school leaders through an online subscription-based information and training service and through live conferences. Speechmark specialises in resources for speech therapists, mental health professionals and teachers.

Sport

SportBusiness Group provides business insight, data and analysis to executives in the global business of sport. It supports sports industry professionals who work in governing bodies, the media, sports marketing, sponsorship and club and event management through market data, subscription websites, magazines, special reports, bespoke research and consultancy.