Interim Results

13th Aug 2009 07:01



13 August 2009

ELECTRIC WORD PLC

Interim Results to 31 May2009

Electric Word, the specialist information publisher, announced today interim results for the six months ended 31 May 2009, and additionally a successful placing to raise £2.45m (net of costs). 

Revenue down 3% to £8.7m following restructure of My Child business which has resulted in higher profits but off a lower revenue base 

Excluding My Child, revenue up 4% to £8.4m driven by increased event activity

Group operating margin* rises to 10.4% (2008: 9.0%) reflecting profit improvements in Specialist Consumer division

Adjusted profit before tax* improved 19% to £0.8m

Steady performance in Professional Education division with 1% revenue increase; impacted by reduced sales of third-party products, but margin kept above 14% despite investment in new book titles

Sports Business achieved strong growth in revenues as a result of iGaming Business event revenues increasing 77% with two additional events run and advertising in Sport Business International up by 12%

Reversal of losses in My Child de-risks Specialist Consumer division and leads to strong profit improvement

Strong cash generation: cash from operating businesses improved 45% to £0.3m

Adjusted EPS* up 16% (basic EPS up 73%)

Current trading in line with the Board's expectations for 2009

Emerging opportunities for organic and acquired growth

Placing to raise £2.45m (net of costs) to reduce debt and allow the Group to take advantage of growth opportunities

*Adjusted numbers exclude amortisation and impairment of goodwill and intangible assets, exceptional gains and costs (non-trading and of a non-recurring nature), the tax impact of the adjusting items, the use of tax losses and tax credits from recognition of tax losses, and notional accounting charges. The amount for notional accounting charges is not a cash item and encompasses the unwinding of discounts on preference shares and provisions and share based payment costs. The adjusted earnings per share number is fully diluted.

Julian Turner, Chief Executive of Electric Word, commented:

"We have been encouraged by the performance during the first half which has seen profits increase against the prior year despite a challenging business environment. The Group's mix of market sectors and revenue streams has shown both defensive quality and areas of potential growth. 

Current trading is in line with the Board's expectations. Our focus for the first half of the year on profitability over revenue has continued into the second half, set against a backdrop of the challenging market and ongoing investment in product development.

The successful Placing to raise £2.45m will allow us to reduce our net debt to less than one times our 2008 adjusted EBITA. This will put us in a strong position to fund organic growth and consider selective acquisition opportunities."

ENDS

Julian Turner, Chief Executive
Electric Word	020 7954 3470
Andrew Potts / Ashton Clanfield / Callum Stewart
Panmure Gordon	020 7459 3600
Nicola Biles / Tim Spratt
Financial Dynamics	020 7831 3113

Notes to Editors

Electric Word plc delivers specialist information in a wide range of formats through three divisions:

Professional education: serves professional communities in schools and other institutions, including school leaders and managers, special needs and speech therapy professionals and teachers - primarily in the UK.

Sport business: provides insight and analysis into the business of sport for international sports federations, brands and sponsors, broadcasters and media, major event organisers and the online gaming industry across the world.

Specialist consumer: covers both sport, aimed at competitive athletes and coaches, and education, providing information for parents to support their children's educational development.

The range of products and services offered to these communities include subscription newsletters, magazines, websites, events, books, special reports and bespoke research and publishing. In the Half Year 2009 62% (2008: 66%) of revenue came from selling content, including 25% (2008: 32%) from subscription revenue, and 38% (2008: 34%) came from selling access to these communities.

  

Financial summary (£000)	2009 6 months	2008 6 months	Percentage change	2008 12 months
Revenue	8,724	8,953	-3%	17,335
Gross Profit	3,808	3,673	+4%	7,890
Adjusted EBITA*	909	801	+13%	1,993
Adjusted profit before tax*	832	697	+19%	1,790
Less: amortisation and impairment	(239)	(250)		(1,367)
Less: restructuring costs / non-recurring gains	-	21		(319)
Less: notional accounting charges	(63)	(177)		(313)
Profit / (loss) before tax (PBT)	530	291	+82%	(209)
Basic earnings per share	0.19p	0.11p	+73%	(0.26)p
Adjusted earnings per share*	0.37p	0.32p	+16%	1.05p
Cash generated by operations	269	186	+45%	167
Cash balance	198	1,370		340

*Adjusted numbers, as set out in note 3, exclude amortisation and impairment of goodwill and intangible assets, exceptional gains and costs (non-trading and of a non-recurring nature), the tax impact of the adjusting items, the use of tax losses and tax credits from recognition of tax losses, and notional accounting charges. The amount for notional accounting charges is not a cash item and encompasses the unwinding of discounts on preference shares and provisions and share based payment costs. The adjusted earnings per share number is fully diluted.

Electric Word plc

INTERIM RESULTS TO 31 May 2009

Chairman's and Chief Executive's Statement

Dear fellow shareholders,

We are pleased that the half year profitability for Electric Word has improved against the prior year despite a challenging business environment. No business can expect to be unaffected, but we remain reassured that the Group's mix of market sectors and revenue streams has shown both defensive quality and areas of potential growth.

We are encouraged by the performance through this half year, where our priority was increased profitability. The result has been an improvement in the operating margin across the Group, partially from the restructuring of the My Child subsidiary but also from actions to protect profits across all of the businesses. The Group has also improved cash generation through the period and successfully extended its primary bank loan of £1.5m to May 2011 from October 2010.

The Group has announced a share placing of 74.5 million shares at 3.625 pence. Completion of the placing is dependent on shareholder approval at a general meeting for the 47.3 million shares to be issued above that for which shareholder approval has already been granted. This placing, coupled with the conversion of the £875,000 class A preference shares, will allow the Group to reduce its net debt1 of £4.5 million by £3.4 million. This level of de-gearing enables the Group to clear its current debt repayments and refocus on taking advantage of available growth opportunities. Organic opportunities exist, including but not limited to education books, specialist consumer websites and iGaming events, and, additionally, the Board expects the potential for earnings-enhancing in-fill acquisitions at sensible valuations to remain.

1 This includes net debt (bank overdrafts and loans, other loans, and finance leases net of cash held) of £2.7m and both classes of preference shares totalling £1.8m. This is set out in note 7.

Electric Word plc

INTERIM RESULTS TO 31 May 2009

Chairman's and Chief Executive's Statement - continued

	Continuing businesses			Acquired2	Total
(£'000)	2009	2008	%	2009	2009	2008	%
Professional education
Revenue	5,494	5,625	-2%	170	5,664	5,625	+1%
Adjusted EBITA	785	825	-5%	16	801	825	-3%
Margin	14.3%	14.7%		9.4%	14.1%	14.7%
Sport business
Revenue	2,162	1,859	+16%	0	2,162	1,859	+16%
Adjusted EBITA	295	282	+5%	0	295	282	+5%
Margin	13.6%	15.2%			13.6%	15.2%
Specialist consumer
Revenue	898	1,469	-39%	0	898	1,469	-39%
Adjusted EBITA	133	30	+343%	0	133	30	+343%
Margin	14.8%	2.0%			14.8%	2.0%
Central Group costs
Adjusted EBITA	(320)	(336)	+5%	0	(320)	(336)	+5%
As % of Group revenue					-3.7%	-3.8%
Total Group
Revenue	8,554	8,953	-4%	170	8,724	8,953	-3%
Adjusted EBITA	893	801	+12%	16	909	801	+13%
Margin	10.4%	9.0%		9.4%	10.4%	9.0%

2 Whilst no acquisitions have been made in the period (note 9), Special Education Publishing Limited was acquired in February 2008 so has 3 months in the 2009 results which are not in the 2008 comparatives.

Revenue has decreased by 3% to £8.7m. The Group has prioritised profit over revenue with all businesses aiming to protect margins. Compared to the same period last year margins have increased from 9% to 10.4% as a result of reducing unprofitable activities, as well as changes in the business mix and a continued movement on-line.

A significant part of this is the restructuring of the My Child business in the Specialist Consumer division. Following this restructuring in the second half of 2008 the loss-making activities have been ceased with a consequential significant reduction in revenue. Excluding My Child from the Group's revenue leaves net revenue of £8.4m, a 4% increase on the prior year equivalent.

  Professional Education division

 

	Continuing businesses			Acquired	Total
(£'000)	2009	2008	%	2009	2009	2008	%
Revenue	5,494	5,625	-2%	170	5,664	5,625	+1%
Adjusted EBITA	785	825	-5%	16	801	825	-3%
Margin	14.3%	14.7%		9.4%	14.1%	14.7%

Revenue has increased by 1% across this division. Growth in the book list and on event sizes has added £0.3m. This has been offset by some decrease in subscriptions, with the impact of the 2008 closures and some shrinkage of mature titles, and commerce revenues (sales of third-party products) are down year-on-year as the market there tightens.

Margins in this division reached a high in the 2008 full year and this momentum has been maintained into the first half. Margin improvement in 2008 was driven by the addition of a mature business in Speechmark books at the end of 2007 and by the continued removal of low margin products and the transition on-line of marketing, reducing costs and improving the ROI. In 2009 some of these gains have been reinvested through an increase in investment in new book titles in Optimus and Speechmark with first print runs on new titles inevitably being at a lower margin.

It is acknowledged that changes in public spending following the general election due in 2010 may impact this division. However it is also felt that policy changes in education may create opportunities across the product range and that many political priorities are likely to remain consistent in our key markets - teacher professional development, behaviour, gifted children, special educational needs and child welfare. 

The Group has aligned its strengths with identified growth opportunities. In Speechmark we are reinvesting in a future publishing programme in specialist core areas, extending speech therapy and mental health publishing. In Optimus books we have the opportunity to continue to improve margins as the publishing backlist builds and as a result of the increasing proportion of new sales generated by the Group's strength in e-marketing.

Sport Business division

(£'000) 3	2009	2008	%
Revenue	2,162	1,859	+16%
Adjusted EBITA	295	282	+5%
Margin	13.6%	15.2%

3 Of the above numbers, the iGaming Business represents revenue of £1,168,000 (2008: £886,000) and adjusted EBITA of £238,000 (2008: £234,000). The remainder all relates to the business of sport.

The division has seen a 16% increase in revenue as a result of iGaming Business event revenues increasing 77% with two additional events being run in the Affiliate marketing space. Outside of iGaming, advertising revenues were up 12%, driven in particular by bidding for the 2016 Olympics. Profits have increased 5% compared to the same period last year and margins have remained stable at 14% (15% in 2008), despite a timing difference in the publication of the iGaming directory which was distributed in June this year against May in 2008. 

The business of sport sector continues to deliver profits from a valuable global niche in which sports federations, media, sponsoring brands and venues negotiate high-profile commercial rights. Opportunities continue to arise from the bidding cycles of major events, notably in the near term with the 2016 Olympics driving revenue in 2008/9 and the new bidding cycles for 2018 and 2022 Football World Cups and 2018 Winter Olympics driving revenue in 2010/11. TV Sports Markets, which provides information for professionals negotiating media sports rights, has resilient subscription revenues. The business has also continued a bespoke publishing contract in 2009 for the Qatar Olympic Committee.

The market for iGaming Business continues to grow, especially in the affiliate marketing space. Two new events have been added and opportunities for further event, magazine and report offerings appear likely. The business has shown strong growth over the last few years since inception in 2005 and the sector looks well placed to support continued growth.

Specialist Consumer division

(£'000)	2009	2008	%
Revenue	898	1,469	-39%
Adjusted EBITA	133	30	+343%
Margin	14.8%	2.0%

Following the restructuring of the My Child part of this division, which provides parents with information about their children's educational development, revenue has as expected been at a much lower level this year. The prior year revenue includes in the region of £0.8m of subscription revenue sold through telesales. The investment in scaling up this channel did not prove cost effective so it has been almost completely removed, with new subscription sales now sourced online, at lower volume but more profitably. This has successfully reduced costs and therefore risks following the cash losses in 2008. Web site traffic continues to grow, with My Child reaching 50,000 unique visitors per month this year and has now built an email database of over 150,000 from a low starting point. Also in the period the Group exercised its option to take 100% ownership of My Child.

In the sports performance part of the business, which publishes sports science information for both competitors and coaches, revenue is in line with the prior year but at an improved margin as more of this is earned online. In 2008 the Group granted an option to Sussex Research Limited, a related party, to acquire this business. Confirmation has now been received that this option will not be exercised and has therefore been cancelled.

The integration and merger of these two consumer-facing businesses has reduced costs and accelerated learning, notably in the growth of e-marketing on My Child. The development of a single team working across content areas also supports the potential for further organic development in this division as new consumer publishing opportunities are explored.

Central costs

(£'000)	2009	2008	%
Adjusted EBITA	(320)	(336)	+5%
As % of Group revenue	-3.7%	-3.8%

The Group has again managed to reduce its central costs, by 5% this half year, and they represent less than 4% of the Group's revenue reflecting a continued review of resource levels, infrastructure efficiencies and changes at Board level.

Board changes

This half year has seen the departure from the Group of Dominic Jacquesson after many years of strong service as Chief Operating Officer and the retirement from the Board of Chris Kington whose knowledge and contacts have been pivotal to the growth of the professional education division. Both will be greatly missed by their peers. They are replaced on the Board by Emma Rogers who had taken over the management of the professional education division from Chris in 2007 after previously running the Group's marketing function for a number of years.

Current Trading and Prospects

Electric Word continues to evolve and develop new areas. Books in the education sector remains a source of potential and many new titles are being added again this year. The specialist consumer division has already seen much change and will continue to expand its website activity. iGaming Business continues to have the potential to add further events and expand on its current size to take advantage of its strong position and resources in that market.

The Group will continue to make the most of organic growth opportunities, focus on higher margin activities and consider opportunities to take advantage of earnings-enhancing in-fill acquisitions.

Current trading is in line with the Board's expectations. Our focus for the first half of the year on profitability over revenue has continued into the second half, set against a backdrop of the challenging market and ongoing investment in product development.

Peter Rigby Chairman

Julian Turner Chief Executive

  

Electric Word plc

CONSOLIDATED INCOME STATEMENT For the six months ended 31 May 2009 - unaudited 

		Note	Six months ended  31 May  2009 £'000	Six months ended  31 May  2008 £'000	Year ended 30 November 2008 £'000
REVENUE		2	8,724	8,953	17,335
Cost of sales - direct costs			(3,496)	(3,759)	(5,892)
Cost of sales - marketing expense			(1,420)	(1,521)	(3,553)
Gross profit			3,808	3,673	7,890
Other operating expenses			(2,857)	(2,915)	(5,977)
Depreciation expense			(78)	(64)	(128)
Amortisation expense			(238)	(250)	(497)
Total administrative expenses			(3,173)	(3,229)	(6,602)
OPERATING PROFIT		2, 3	635	444	1,288
Impairment expense			(1)	-	(870)
Restructuring expense			-	-	(340)
Non-operating income and expense			-	21	21
Finance costs			(105)	(184)	(350)
Investment income			1	10	42
PROFIT / (LOSS) BEFORE TAX		3	530	291	(209)
Taxation		4	(183)	(79)	(117)
PROFIT / (LOSS) FOR THE PERIOD			347	212	(326)
Attributable to:
·; Equity holders of the parent		3, 8	276	153	(367)
·; Minority interests			71	59	41
EARNINGS / (LOSS) PER SHARE		6
Basic			0.19p	0.11p	(0.26)p
Diluted			0.18p	0.10p	(0.26)p

The result for the period arises from the Group's continuing operations.

  

Electric Word plc

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the period ended 31 May 2009 - unaudited

		Note	Six months ended  31 May  2009 £'000	Six months ended  31 May  2008 £'000	Year ended 30 November 2008 £'000
Profit / (loss) for the period			347	212	(326)
Tax taken direct to reserves		8	29	(202)	(365)
TOTAL RECOGNISED INCOME AND EXPENSE FOR THE PERIOD			376	10	(691)
Attributable to:
- Equity holders of the parent		8	305	(49)	(732)
- Minority interests			71	59	41
			376	10	(691)

  

Electric Word plc

CONSOLIDATED BALANCE SHEET

At 31 May 2009 - Unaudited

	Note	31 May 2009 £'000	31 May 2008 (restated - note 8) £'000	30 November  2008 £'000
ASSETS
Non-current assets
Goodwill	9	8,810	8,798	8,811
Other intangible assets	9	2,228	3,394	2,465
Property, plant and equipment		286	275	364
Deferred tax assets		700	981	746
		12,024	13,448	12,386
Current Assets
Inventories		1,390	766	1,223
Trade and other receivables		2,553	3,530	3,253
Cash and cash equivalents	7	306	1,370	395
		4,249	5,666	4,871
TOTAL ASSETS		16,273	19,114	17,257
EQUITY AND LIABILITIES
Capital and reserves
Called up ordinary share capital		1,477	1,444	1,450
Preference share capital		875	875	875
Other reserve		(454)	(454)	(454)
Share premium account		3,133	3,100	3,106
Merger reserve		105	105	105
Reserve for own shares		(103)	(103)	(103)
Reserve for share based payments		429	421	364
Retained earnings		259	508	(17)
Equity attributable to equity holders of the parent	8	5,721	5,896	5,326
Minority interest in equity		144	55	72
TOTAL EQUITY		5,865	5,951	5,398
Non-current liabilities
Borrowings	7	1,500	2,271	2,201
Deferred tax liabilities		613	913	676
Obligations under finance leases		2	28	7
Preference shares		-	903	929
		2,115	4,115	3,813
Current liabilities
Borrowings	7	1,501	1,069	863
Current tax liabilities		397	99	235
Trade payables and other liabilities		2,130	2,759	2,794
Provisions		5	503	255
Obligations under finance leases		13	19	19
Deferred income		3,291	4,599	3,880
Preference shares		956	-	-
		8,293	9,048	8,046
TOTAL LIABILITIES		10,408	13,163	11,859
TOTAL EQUITY AND LIABILITIES		16,273	19,114	17,257
These financial statements were approved by the Board of Directors and are authorised for issue on 12 August 2009.

  

Electric Word plc

CONSOLIDATED CASH FLOW STATEMENT

For the period ended 31 May 2009 - unaudited

	Note	6 months ended 31 May  2009 £'000	6 months ended 31 May  2008 £'000	Year ended  30 November 2008 £'000
Cash flows from operating activities
Operating profit for the period		635	444	1,288
Amortisation		238	250	497
Depreciation		78	64	128
Share based payment charges		36	107	208
Restructuring costs		-	-	(340)
Operating cash flows before movements in working capital		987	865	1,781
Change in inventories		(168)	94	(419)
Change in receivables		702	(113)	10
Change in payables		(1,252)	(660)	(1,205)
Cash flow from operating activities before interest and tax		269	186	167
Interest paid		(78)	(114)	(245)
Taxation paid		(10)	(153)	(206)
Net cash from operating activities		181	(81)	(284)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired		-	(40)	(140)
Sale of disposal option on subsidiary		-	21	21
Deferred consideration paid	9	(250)	(466)	(725)
Purchase of property, plant and equipment		-	(14)	(181)
Purchase of intangible assets		(1)	(16)	(11)
Interest received		1	10	42
Net cash used in investing activities		(250)	(505)	(994)
Cash flows from financing activities
Proceeds from issuance of ordinary shares	8	54	-	12
Proceeds of new long term borrowings		-	600	600
Proceeds of new short term borrowings		-	950	100
Repayments of borrowings	7	(116)	(690)	(170)
Repayments of obligations under finance leases	7	(11)	(20)	(40)
Net cash used in financing activities		(73)	840	502
Net (decrease) / increase in cash and cash equivalents		(142)	254	(776)
Cash and cash equivalents at the beginning of the period		340	1,116	1,116
Cash and cash equivalents at the end of the period	7	198	1,370	340

 

 

Electric Word plc

NOTES TO THE INTERIM REPORT

For the period ended 31 May 2009 - unaudited

 

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 2009 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 2009 and the comparative information for the six months ended 31 May 2008 are not audited by the Group's auditors. The comparative information for the twelve months ended 30 November 2008 does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. A copy of the statutory accounts for the twelve months ended 30 November 2008 has been delivered to the Registrar of Companies. The Auditor's Report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain any statements under Sections 237(2) or 237(3) of the Companies Act 1985. The consolidated financial statements of the Group as at and for the year ended 30 November 2008 are available upon request from the Company's registered office at 33-41 Dallington Street, London, EC1V 0BB or at www.electricwordplc.com.

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 Standards 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 the same as those applied by the Group in its consolidated financial statements for the year ended 30 November 2008.

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 these 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 2008.

GOING CONCERN

The Group has a net current liability position as at 31 May 2009. However the Group has net assets overall and the directors believe from reviewing the Group's cash flow forecasts that it is appropriate to prepare the financial statements on a going concern basis. There is long term financing in place and the Group continues to maintain positive cash flows excluding acquisition spend. A significant element of the Group's net liabilities position is deferred revenue accumulated from payments received in advance, notably on subscription publishing, and on which the cost of fulfilment is significantly less than the refund exposure shown on the balance sheet as a liability.

 

2 SEGMENTAL INFORMATION

Segmental information is presented in respect of the Group's business divisions. This primary format is based on the Group's management and internal reporting structure.

The primary format consists of three market sectors: professional education (serving professional communities in schools and other institutions), sport business (for the professional communities supporting the sport and on-line gaming industries), and specialist consumer (for individual needs in both sport -competitive athletes and coaches - and education - parents looking to support their children's educational development). The group function represents central PLC costs which are not directly related to the sector trading and are not recharged.

Analysis by market sector	Revenue			Segment result: profit / (loss) from operations
	Six months ended 31 May 2009	Six months ended 31 May 2008	Year ended 30 November 2008	Six months ended 31 May 2009	Six months ended 31 May 2008	Year ended 30 November 2008
	£'000	£'000	£'000	£'000	£'000	£'000
Professional education	5,664	5,625	10,668	612	635	1,555
Sport business	2,162	1,859	3,832	273	203	625
Specialist consumer	898	1,469	2,835	74	(51)	(57)
Group function	-	-	-	(324)	(343)	(835)
	8,724	8,953	17,335	635	444	1,288

The following primary sector analysis under the adjusted definition of operating profit (note 3) has been made to allow shareholders to gain a further understanding of the trading performance of the Group:

Analysis by market sector	Adjusted operating profit
	Six months ended 31 May 2009	Six months ended 31 May 2008	Year ended 30 November 2008
	£'000	£'000	£'000
Professional education	801	825	1,966
Sport business	295	282	748
Specialist consumer	133	30	105
Group function	(320)	(336)	(826)
	909	801	1,993

  3 ADJUSTED PROFITS

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.

Adjusted numbers exclude amortisation of intangible assets, exceptional gains and costs (non-trading and of a non-recurring nature), the tax impact of the adjusting items, tax credits from recognition and the use of tax losses, and notional accounting charges. The amount for notional accounting charges encompasses both the unwinding of discounts on preference shares and provisions and the share based payment costs.

The adjustments add back items which have no cash impact or are not trade related and of a non-recurring type. All of the items have no cash impact, except for the non-recurring gain and restructuring costs which are excluded as they are not in the normal course of trading and are not recurring.

	Note	6 months ended 31 May 2009 £'000	6 months ended 31 May 2008 £'000	Year ended  30 November  2008 £'000
Operating profit for the period		635	444	1,288
Amortisation of intangible assets		238	250	497
Notional accounting charges - share based payment charges		36	107	208
Adjusting items to operating profit		274	357	705
Adjusted operating profit for the period		909	801	1,993
Profit / (loss) before tax for the period		530	291	(209)
Adjusting items to operating profit		274	357	705
Impairment expense	i	1	-	870
Restructuring costs	ii	-	-	340
Non-recurring gains	iii	-	(21)	(21)
Notional accounting charges - unwinding of discounts		27	70	105
Adjusting items to profit before tax		302	406	1,999
Adjusted profit before tax for the period		832	697	1,790
Profit for the period attributable to equity holders of the parent		276	153	(367)
Adjusting items to profit before tax		302	406	1,999
Attributable tax expense on adjusting items	iv	-	6	(89)
Exclude use of tax losses		-	-	276
Add back recognition of tax losses		-	(67)	(205)
Adjusting items to profit for the year		302	345	1,981
Adjusted profit for the period		578	498	1,614

  3 ADJUSTED PROFITS (continued)

Notes to the tables:

An impairment charge to goodwill of £1,000 (2008: £170,000) was booked under IFRS in relation to the acquisition of DMWSL 370 Limited. The acquired entity contained substantial unrecognised tax losses which on subsequent recognition cause an impairment of the goodwill recognised at the acquisition date. My Child Limited was impaired in 2008 by £700,000 reflecting the restructure of the business in the period.

The restructuring costs in 2008 of £340,000 are all in My Child Limited and relate to the decision in August 2008 to close the My Child call centre and cease publication of its print magazine, moving the business on-line, as well as some transitional expenditure in replacing existing management and operational systems.

The non-recurring gain made in 2008 relates to the sale of an option for a third party to potentially acquire part of the business (the sports part of the specialist consumer division trading through P2P Publishing Limited).

The above items except for impairment were all considered to be taxable items for corporation tax and thus attributable tax has been included in the relevant periods at 28% of their value. All other adjusting items do not have a tax affect on the Group.

4 TAXATION

The tax charge is estimated based on the expected full year rate of taxation. This has been estimated as follows:

	6 months ended 31 May 2009		6 months ended 31 May 2008		Year ended 30 November 2008
	£'000	%	£'000	%	£'000	%
Profit / (loss) before tax	530		291		(209)
Profit multiplied by the standard rate of corporation tax in the UK of 28.0% (2008 6 months: 29.3%; 12 months: 28.7%)	148	28	84	29	(60)	29
Effect of:
Expenses not deductible for tax purposes (principally amortisation)	20	4	43	15	62	(30)
Recognition of tax losses for prior years	-	-	(67)	(23)	(209)	100
Tax losses not recognised	-	-	-	-	261	(125)
Under / (over) provision in prior year	-	-	-	-	(1)	-
Share based payments	10	2	19	6	54	(26)
Overseas taxation	5	1	-	-	10	(4)
Tax expense / effective tax rate for the period	183	35	79	27	117	(56)

The rate of tax was 28% (2008: 30% for the first four months and then 28%).

 

5 DIVIDENDS

 

The directors do not recommend the payment of a dividend.

 

6 EARNINGS PER SHARE

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

		6 months ended 31 May  2009	6 months ended 31 May  2008	Year ended  30 November  2008
		Number	Number	Number
Weighted average number of shares		146,899,051	143,162,255	144,434,481
Adjustment in respect of SIP shares		(1,096,794)	(1,189,730)	(1,096,794)
Weighted average number of shares used in basic earnings per share calculations		145,802,257	141,972,525	143,337,687
Dilutive effect of share options		3,216,705	4,810,872	3,320,637
Dilutive effect of warrants		6,149,167	7,329,463	7,045,530
Weighted average number of shares used in diluted earnings per share calculations		155,168,129	154,112,860	153,703,854

	Note	6 months ended 31 May  2009 £'000	6 months ended 31 May  2008 £'000	Year ended  30 November  2008 £'000
Basic and diluted earnings		276	153	(367)
Adjustment to earnings	3	302	345	1,981
Adjusted basic and diluted earnings figure		578	498	1,614
Earnings per share
Basic earnings / (loss) per share		0.19p	0.11p	(0.26)p
Diluted earnings / (loss) per share		0.18p	0.10p	(0.26)p
Adjusted earnings per share
Adjusted basic earnings per share		0.40p	0.35p	1.13p
Adjusted diluted earnings per share		0.37p	0.32p	1.05p

  7 ANALYSIS OF NET DEBT

Analysis of changes in net debt	At 1 December 2008 £'000	Cash flow £'000	Other non  cash changes £'000	At 31 May  2009 £'000
Cash at bank and in hand	395	(89)	-	306
Overdraft	(55)	(53)	-	(108)
	340	(142)	-	198
Bank loans due within one year	(208)	116	(101)	(193)
Other loans due within one year	(600)	-	(600)	(1,200)
Finance leases due within one year	(19)	11	(5)	(13)
Debt due within one year	(827)	127	(706)	(1,406)
Bank loans due after one year	(1,601)	-	101	(1,500)
Other loans due after one year	(600)	-	600	-
Finance leases due after one year	(7)	-	5	(2)
Debt due after one year	(2,208)	-	706	(1,502)
Gross debt	(3,035)	127	-	(2,908)
Net debt	(2,695)	(15)	-	(2,710)

The Group has three types of lending facility from its bankers. An overdraft facility of £750,000 is available, paying interest of 2.25% above base rate, utilised as above and subject to annual renewal. There is a term loan of £193,000, paying interest of 2.75% above LIBOR, which is scheduled to be repaid within one year. The Group also has a revolving credit facility of £1,500,000 which is fully drawn down, paying interest of 2.25% above base rate, and which was due to be repaid on the 7 October 2010, but agreement has been signed in May 2009 to extend that facility to May 2011 on the same interest terms.

Other debt relates to borrowings from Sussex Research Limited, a related party courtesy of it being beneficially owned by the same party as Sussex Trading Company Limited, a company which has a substantial share holding in the Group. The loan facility outstanding of £1,200,000 carries an interest rate of 2.5% over LIBOR and is due to be repaid as £600,000 by both 31 August 2009 and 30 April 2010.

In addition to the above debt the Group had deferred consideration at 30 November 2008 of £255,000, of which £250,000 has been repaid in the period, and two tranches of preference shares. One tranche is disclosed in equity, as it is expected to be converted since that is at the Group's call, at a carrying value of £421,000 (£875,000 preference share capital net of the fair value adjustment from 13.25p conversion price to actual share price at the grant date). The second tranche is disclosed in liabilities, as it is expected to be redeemed in December 2009 at a cost of £987,000 since conversion is at the lender's call and at a price of 10p. It is carried in the books net of future interest costs which unwind evenly through to redemption date with the charge being included in the notional accounting charges - unwinding of discounts (note 3) - as this is not a cash cost (coupon rate is nil%).

  8 RECONCILIATION OF MOVEMENTS ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

	Share capital £'000	Preference share capital £'000	Share premium account £'000	Other reserves £'000	Reserve for own shares £'000	Reserve for share based payment £'000	Retained earnings £'000	TOTAL £'000
At 30 November 2007 - restated	1,424	-	3,039	105	(103)	522	349	5,336
Share issues	20	875	61	(454)	-	-	-	502
Share based payment costs	-	-	-	-	-	107	-	107
Tax taken directly to equity	-	-	-	-	-	(208)	6	(202)
Profit attributable to members of the holding company	-	-	-	-	-	-	153	153
At 31 May 2008	1,444	875	3,100	(349)	(103)	421	508	5,896
Share issues	6	-	6	-	-	-	-	12
Share based payment costs	-	-	-	-	-	101	-	101
Tax taken directly to equity	-	-	-	-	-	(158)	(5)	(163)
Profit attributable to members of the holding company	-	-	-	-	-	-	(520)	(520)
At 30 November 2008	1,450	875	3,106	(349)	(103)	364	(17)	5,326
Issue of shares	27	-	27	-	-	-	-	54
Share based payments	-	-	-	-	-	36	-	36
Tax taken directly to equity	-	-	-	-	-	29	-	29
Profit attributable to members of the holding company	-	-	-	-	-	-	276	276
At 31 May 2009	1,477	875	3,133	(349)	(103)	429	259	5,721

The retained earnings as at 30 November 2007 have been reduced by £391,000 since the 2008 interim report but as disclosed in the 2008 annual report. This is in relation to an impairment charge to goodwill in relation to the acquisition of DMWSL 370 Limited. The acquired entity contained substantial unrecognised tax losses which on subsequent recognition cause an impairment of the goodwill recognised at the acquisition date. This was not processed in the initial transition to IFRS numbers in the interim reporting 2008 but was processed in the 2008 annual report.

Other reserves include a merger reserve of £105,000 and a reserve relating to the adjustment of the preference share capital issued (note 7).

  

9 ACQUISITIONS

There have been no acquisitions in the period. The cash flow payment relates to deferred consideration now fully settled on the Speechmark Publishing Limited acquisition (October 2007).

10 RELATED PARTIES

The Board received financial advice from Trillium Partners Limited ("Trillium Partners") in the period. Trillium Partners is a specialist media advisory firm, which is 35% owned by Stephen Routledge, a non-executive director of Electric Word, and as such is a related party for the purposes of the AIM Rules. Accordingly, the Directors (other than Stephen Routledge) consider, having consulted with Panmure Gordon (UK) Limited, its nominated adviser, that the terms of the fees payable to Trillium Partners are fair and reasonable insofar as the Company's shareholders are concerned. The total fee for the advice and work will be under £0.1 million.

11 POST BALANCE SHEET EVENT

The Group announced on 13 August 2009 that it has raised £2.45 million after expenses, through a placing of 74.5 million new Ordinary Shares at 3.625 pence each (the "Placing"). The Placing price is at a discount of 9.4 per cent. to the Closing Price of 4 pence per Ordinary Share on 12 August 2009 (being the day before the announcement of the Placing).

It is proposed to effect the Placing in two stages. Under the First Placing, 27.2m of the Placing Shares will be allotted on 13 August 2009, conditional on Admission, using the Directors' existing authority to allot Ordinary Shares for cash otherwise than on a pre-emptive basis. Admission of the First Placing Shares is expected to take place on 20 August 2009. Under the Second Placing, Shareholder approval is required to allot the balance of the Placing Shares (47.3m Placing Shares) and it is proposed to convene a general meeting to seek the requisite authorities. 47.3m Ordinary Shares, representing the balance of the Placing Shares, will be allotted immediately after the General Meeting, conditional on the Resolutions being passed. Admission of the Second Placing Shares is expected to take place on 3 September 2009. The First Placing is not conditional upon completion of the Second Placing.

ENDIR CKBKKDBKBKFD

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Related Shares:

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