RNS Number:3466P
Electric Word PLC
27 July 2005
27 July 2005
ELECTRIC WORD PLC
Interim results to 31 May 2005
STRONG PROFIT IMPROVEMENT REFLECTS
GROWING PRODUCT PORTFOLIO
Electric Word plc is a specialist information business with two operating
divisions: Public Sector Management and Sport and Specialist Consumer, each of
which serve niche markets with a wide range of products in formats including
newsletters, conferences, books, special reports and distance learning training
courses.
RESULTS HIGHLIGHTS
* Profits before tax and goodwill improve by #247k (up to #116k from a loss
of #132k in 2004), reflecting strong demand and increasingly effective use
of product portfolio
* Gross profits up 55% to #1.1m
* Turnover up 22% to #2.9m
* Subscription growth enhanced by increases in book and special report
publishing (up 155%) and international sales (up 96%)
* Total revenue per subscriber up 12% as product portfolio broadens
* 76% of all revenues from renewable subscriptions, with no dependency on
advertising revenues
* Acquisition of online training business for cash in June 2005 will enhance
earnings in 2006
* Company performing in line with board's expectations
Julian Turner, Chief Executive, commented:
"We have had a good first half and followed our plan to make the most of our
large subscriber base by developing additional products, formats and sales. We
have also used our balance sheet and strong cash flow to make a complementary
acquisition and we expect more to follow.
The company is performing in line with our expectations and we anticipate
continued growth during the rest of the year, with government reform of the
public sector supporting that growth into the foreseeable future. In addition,
the 2012 London Olympics will ensure that sport, sports science and coaching
remain high on the agenda in government, schools and clubs for several years to
come."
ENDS
Enquiries:
Julian Turner, Chief Executive
Electric Word 020 7954 3470
Tim Spratt / Kim Muckle
Financial Dynamics 020 7831 3113
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
Electric Word's interim results for 2005 reflect another half year of growth,
development and steadily improving profitability. We expect to continue our
profitable growth, supported by complementary acquisitions such as that of
Fieldwork Online Training, completed in June, which develops our position still
further in the growing schools management area and takes us into the
strategically valuable e-learning market.
The Company's results for the six months to May 31st have built on last year's
move into profitability. Profit before tax and goodwill increased to #116k,
compared to a loss of #132k in the same period last year, on a 22% rise in
turnover to #2.9m. An encouraging 49% of that increase in turnover was converted
into pre-tax profit. As at the year end, the Group finished the period with a
strong balance sheet and cash balances up 50% against a year ago to #918k -
enabling the Group to make its first all-cash acquisition in June.
At the beginning of this year the Board set itself two strategic objectives: to
make the most of our established customer base by developing new revenue streams
and cross-selling new products; and to look for acquisitions in existing sectors
or competencies that leverage the Group's infrastructure, management, systems
and scale. We have made progress on both fronts.
The first of these objectives has driven performance at the divisional level,
where we have worked to expand the range of products we sell into our customer
database. The aim has been to develop ancillary revenue streams to supplement
the Company's solid foundation of subscription revenue. Results have been
encouraging. Subscriptions still accounted for 76% of turnover in the period
(with subscriber numbers up 9%) but sales of one-off publications that can be
targeted at those subscribers started to make a significant contribution,
pushing the average total revenue per subscriber up by 12%.
Following this strategy the Public Sector Management division has achieved
organic revenue growth of 20% and increased operating margins from 3% to 10%.
New launches include Enrichment Activities for Gifted and Talented Children,
which builds directly on the success of the Gifted & Talented Update newsletter
and conferences, and Christian Assemblies, which further leverages the
established primary school assembly business. Progress in publishing has
compensated for a disappointing first half for conferences, which suffered in
the run-up to the general election from the reduction in government initiatives.
This weakened the first-half programme more than had been anticipated but is not
expected to continue. With new government initiatives around professional
development, behaviour, child protection, health education, school sport and
many others we can expect a pick-up in our conference business in the second
half.
The Sport and Specialist Consumer division grew turnover by 29% and pushed up
margins from 0.6% to 10%, a major step forward in profitability. Investment over
the past two years in building an online marketing channel is now paying off
with a large email database of targeted sports participants buying a growing
range of products. This year we have published 11 new special reports on
subjects ranging from All-Weather Training to Master Athletes.
Despite the increase in turnover, central Group costs were maintained at #179k
for the period (down 4%). With both divisions operating at a 10% (and growing)
margin, the value of acquiring further businesses to leverage central Group
resources is clear.
The acquisition of Fieldwork Online Training, which supports the professional
development of school managers in the UK and abroad, adds an entirely new
product type to the Company's well-established market position in education
management. The business comprises an e-learning platform (in which the Company
has full IPR) that is particularly suitable for professional education and a
suite of over 50 education management courses. The courses closely match the
subject areas covered by our Optimus newsletters and represent a new and
high-value format in which to deliver professional education at a time when
continuing professional education is at the top of the government's agenda for
its term of office. The acquisition presents an exciting cross-selling
opportunity to move existing school customers into purchasing a significantly
higher-priced product (at an average value of over #1,000 for an annual
subscription compared to newsletter subscriptions closer to #100) and for the
Company to build further its direct sales competency.
Fieldwork has three other strategic benefits: it provides a flagship for the
Company's emerging range of digital products in the education market; it gives
the education management business an international opportunity for the first
time (most courses have an international version and around 40% of the acquired
customer base are English schools abroad); and it opens up online professional
education as a new product opportunity for other parts of the business.
Current trading and prospects
Current trading is in line with the Board's expectations and the outlook appears
positive in all sectors.
The Company is very well placed to benefit from the increased emphasis on
continuing professional development in schools, both through its existing
management information products and its new online professional education
courses.
Equally the 2012 London Olympics will ensure that sport, sports science and
coaching remain high on the agenda in both schools and clubs for several years
to come.
The development in the first half of new revenue streams looks set to continue
into the second half of the year. This year has seen the establishment of
one-off publications as a significant revenue line, the addition of online
training and, as a result of the success of the sports performance websites, the
emergence of a high-margin online advertising revenue opportunity.
The Board aims to build on these opportunities by making some additional
investments this year. Firstly, we plan to develop the content and sales
infrastructure of the acquired Fieldwork business to maximize its impact on
earnings in future years. Secondly, the benefit that the Board can see from
leveraging the Company's management and systems by adding new businesses, and
the existence of appropriate acquisition opportunities, leads us to plan for
future growth by a step expansion of the Company's premises in the second half
of the year.
Electric Word Staff
The Board would like to thank the staff for their efforts throughout the period,
but especially during the terrible events of the past month. Sadly, two members
of Electric Word's 50 staff were injured in the Tavistock Square bus attack. The
support that they have been shown by their colleagues, as well as many customers
and business partners, has been immense. With a colleague in hospital the
conferences team worked to ensure that an event due to take place in Tavistock
Square itself on the Tuesday after the attack was not cancelled but moved, with
the full support of delegates, speakers and suppliers, to a new venue within 24
hours. The strength, commitment and unity shown by the entire business during
this difficult time is inestimable and gives us great hope and confidence for
what can be achieved in the future.
Peter Rigby,Chairman
Julian Turner,Chief Executive
27 July 2005
ElectricWord plc
GROUP PROFIT AND LOSS ACCOUNT
for the period ended 31 May 2005
Year
6 months 6 months ended
ended ended 30 November
31 May 2005 31 May 2004 2004
(unaudited) (unaudited) (audited)
# # #
TURNOVER 2,860,678 2,351,087 5,516,307
COST OF SALES
Marketing costs (911,303) (816,451) (1,736,994)
Other cost of sales (867,361) (838,636) (1,866,148)
(1,778,664) (1,655,087) (3,603,142)
GROSS PROFIT 1,082,014 696,000 1,913,165
Other operating expenses (977,072) (830,377) (1,813,037)
Amortisation of goodwill (133,080) (133,082) (266,164)
TOTAL ADMINISTRATIVE EXPENSES (1,110,152) (963,459) (2,079,201)
OPERATING LOSS (28,138) (267,459) (166,036)
Interest receivable 10,562 2,479 6,763
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (17,576) (264,980) (159,273)
Taxation (24,949) - 399,580
(LOSS) /PROFIT ON ORDINARY ACTIVITIES AFTER
TAXATION (42,525) (264,980) 240,307
Basic (0.04p) (0.28p) 0.25p
Diluted (0.04p) (0.28p) 0.21p
ElectricWord plc
GROUP BALANCE SHEET
at 31 May 2005
31 May 31 May 30 November
2005 2004 2004
(unaudited) (unaudited) (audited)
# #
#
FIXED ASSETS
Intangible assets 1,762,895 2,036,917 1,895,975
Tangible assets 25,609 39,677 29,814
1,788,504 2,076,594 1,925,789
CURRENT ASSETS
Stocks 84,435 117,898 104,956
Debtors 1,561,698 927,243 1,362,575
Cash at bank and in hand 918,364 611,705 901,425
2,564,497 1,656,846 2,368,956
CREDITORS: Amounts falling due
within one year
Deferred revenue (2,675,043) (2,575,285) (2,494,992)
Other creditors (721,511) (666,470) (802,781)
(3,396,554) (3,241,755) (3,297,773)
NET CURRENT LIABILITIES (832,057) (1,584,909) (928,817)
TOTAL ASSETS LESS CURRENT 956,447 491,685 996,972
LIABILITIES
CAPITAL AND RESERVES
Called up share capital 950,639 950,139 950,139
Share premium account 2,120,305 2,118,805 2,118,805
Merger reserve 105,011 105,011 105,011
Profit and loss account (2,219,508) (2,682,270) (2,176,983)
SHAREHOLDERS' FUNDS 956,447 491,685 996,972
ElectricWord plc
GROUP CASH FLOW STATEMENT
for the period ended 31 May 2005
6 months 6 months Year ended
ended ended 30 November
31 May 2005 31 May 2004 2004
(unaudited) (unaudited) (audited)
# # #
CASH INFLOW FROM OPERATING ACTIVITIES 17,504 2,920 329,470
Returns on investments and servicing of finance 10,562 2,479 6,595
Capital expenditure and financial investment (11,127) (14,607) (15,553)
CASH INFLOW/(OUTFLOW) BEFORE FINANCING 16,939 (9,208) 320,512
Financing - 23,000 (17,000)
INCREASE IN CASH IN THE PERIOD 16,939 13,792 303,512
ElectricWord plc
NOTES TO THE INTERIM REPORT
1 PRESENTATION OF INTERIM RESULTS
This interim report was approved by the Directors on 27 July 2005. The
results for both the current and the comparative half year have not been
audited, but were the subject of an independent review carried out by the
company's auditors, Baker Tilly. Their review confirmed that the figures
were prepared using accounting policies and practices consistent with those
adopted in the 2004 annual report. The audited results for the year ended
30 November 2004 are an abridged version of the company's report and
financial statements which have been filed with the Registrar of Companies
and on which the auditors gave an unqualified report. The financial
information contained in this interim report does not constitute statutory
accounts as defined by Section 240 of the Companies Act 1985. All
shareholders will receive a copy of this interim report, which can also be
obtained from the company's registered office at 67-71 Goswell Road, London
EC1V 7EP.
2 COMPARATIVES
The comparative profit and loss account for the 6 months ended 31 May 2004
has been restated to reflect a more appropriate allocation of expenditure
between cost of sales and administrative expenditure and to ensure
comparability with the annual profit and loss account for the year ended
30 November 2004.
3 TAXATION
The interim tax charge is based on an estimate of the likely effective tax
rate for the year, expressed as a percentage of the expected results for
the year and then applied to the interim result.
4 DIVIDENDS
The directors do not recommend the payment of a dividend.
5 LOSS PER SHARE
Basic and diluted loss per share is based on the loss on ordinary
activities after taxation and on the following weighted average number of
shares in issue.
Period ended 31 May 2005 95,026,766
Period ended 31 May 2004 94,810,557
Year ended 30 November 2004 94,913,854 (Diluted: 114,520,015)
6 RECONCILIATION OF NET CASHFLOW 6 months 6 months Year
TO MOVEMENT IN NET FUNDS ended ended ended 30
31 May 31 May November
2005 2004 2004
# # #
Increase in cash in the period 16,939 13,792 303,512
Cash to repurchase loan stock - - 40,000
16,939 13,792 343,512
Net funds at beginning of period 901,425 557,913 557,913
Net funds at end of period 918,364 571,705 901,425
7 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS
Share Profit
Share premium Merger and loss
capital account reserve account Total
# # # # #
At 1 December 2004 950,139 2,118,805 105,011 (2,176,983) 996,972
Loss for the period - - - (42,525) (42,525)
Issue of shares 500 - - - 500
Premium on allotment
during period - 1,500 - - 1,500
At 31 May 2005 950,639 2,120,305 105,011 (2,219,508) 956,447
This information is provided by RNS
The company news service from the London Stock Exchange
END
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