RNS Number:8768H
Electric Word PLC
21 August 2006
21 August 2006
ELECTRIC WORD PLC
Interim results to 31 May 2006
171% PROFIT IMPROVEMENT REFLECTS STRONG ACQUISITIVE GROWTH & ORGANIC MARGIN
IMPROVEMENT
Electric Word plc is a specialist information business operating in two markets:
sport and the public sector. The company serves niche communities within each of
these sectors with a wide range of information products, including paper and
electronic newsletters, magazines, websites, books, loose-leaf files, research
reports, conferences, online training, management information software and
bespoke research and consultancy.
RESULTS HIGHLIGHTS
* Profit before tax (exc goodwill) up 171% to #313k (#116k)
* Organic profit growth of 66%
* Pre-tax margins (exc goodwill) up from 4% to 7%
* Turnover up 59% to #4.5m (#2.9m)
* Two major acquisitions, part-funded with debt
* Positive net cash
* EPS before tax and goodwill more increases by 130%
* Trading in line with Board expectations
Julian Turner, Chief Executive commented:
"The Group has made strong progress, reflected in both the rise in profits and
improvement in margins. Organic growth is being supported by cross-selling
products between businesses, the introduction of ancillary products and online
sales. Recent acquisitions are integrating well and are meeting our
expectations. Our progress this year has taken us another step forward and put
us in good stead for the next phase in the Group's development."
The Group is performing in line with our expectations and we anticipate
continued growth during the rest of the year, supported by external factors
benefiting our educational and sports markets."
ENDS
Enquiries:
Julian Turner, Chief Executive
Electric Word 0207 954 3470
Kim Muckle/Tim Spratt
Financial Dynamics 0207 831 3113
EXTRACTS FROM CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENTS
These strong interim results have been achieved at an exciting point in the
Group's six-year history. The first half of the year has seen two substantial
acquisitions that have had a significant impact on the scale and nature of the
Group's business. It is therefore especially encouraging to be able to report
that in this period of successful expansion the profit and margin performance of
the underlying business has also continued to advance.
Profit before tax and goodwill rose 171% to #313k, with pre-tax margins before
goodwill improving from 4% to 7%. Margin improvements in the continuing business
supported organic profit growth of 66% on last year, with the remainder from
acquisitions. Turnover grew by 59%, driven by the new acquisitions (47%) and
organic product development (12%).
The Board set out the Group's strategic objectives this year in our Annual
Report. They are to build margins in our existing business and to identify
value-enhancing acquisitions and we're pleased to report that the progress has
been good in both areas.
We aimed to build margins within our existing market sectors by developing more
products to sell-in to our existing customer databases and by extending our
e-marketing channels and other online revenue opportunities. This has been
achieved with the further development of non-subscription publishing activities
- which have shown revenue growth of 83% and improved margins as the publishing
list starts to gain scale. The increase in revenues sourced from online channels
has also improved margins. In some niches, online revenues are approaching 50%
and the average across the Group is now up to 10%. Online marketing and digital
products are set to be key drivers of future growth throughout the Group.
The second strand of growth has been through acquisitions, which have integrated
well. These results include five months of SportBusiness Group trading, one
month from Incentive Plus and five months of investment in the embryonic
Teaching Expertise magazine and website. Together, the acquisitions added profit
before goodwill of #122k at a margin of 9%. Incentive Plus profits are strongly
weighted towards the first quarter (which was prior to the acquisition) so its
positive impact on earnings will not be felt until 2007. Nevertheless, earnings
per share (fully diluted, before tax and goodwill) for the Group still improved
130% from 0.10p to 0.23p per share.
The EPS growth has also been aided by part-financing the two major acquisitions
with debt, thus reducing the dilution to shareholders. Combined with deferred
payment to vendors, this has introduced a long-term creditor and provision items
to the balance sheet. Mixed financing has been an objective of the Board for
several years and has only now become possible through the Group's established
profitability and strong balance sheet.
Overall the acquisitions have helped push the Group's net asset value up from
#1m to #4.4m. Operating cashflow was negative in the first half as the
opportunities presented by the new businesses created, as expected, an
additional working capital requirement. The impact of this is expected to be
temporary and the Group ends the period with over #1m in cash and in a strong
position to expand further.
Operational performance
Sport sector
6 months ended 6 months ended %increase
31 May 2006 31 May 2005
# #
Turnover 1,878,383 621,009 202%
Operating Profit 309,510 63,825 385%
Pre- tax margin before goodwill 16.5% 10.3%
The sport sector now embraces both Sports Performance (serving athletes and
coaches) and Sport Business (sports events, media and marketing). Turnover has
tripled and margins have improved from 10.3% to 16.5%, both driven largely by
the SBG acquisition. 2006 has been a particularly strong year for our new
SportBusiness Group, with strong growth in i-Gaming Business advertising
revenues, a contract publishing project for the Asian Games and the addition,
using the Group's existing events infrastructure, of a new, high-margin
professional development conference. The continuing Sports Performance business
has also performed strongly, with online advertising revenues achieving a
significant scale and margins building on a growing back-list of one-off
publications.
Public sector
6 months ended 6 months ended %increase
31 May 2006 31 May 2005
# #
Turnover 2,658,063 2,239,669 19%
Operating Profit 281,150 231,284 22%
Pre- tax margin before goodwill 10.6% 10.3%
The continuing growth in the public sector business has built on last year's
advances with a further improvement in profitability and first-half margins from
the existing business rising from 10.3% to 13.6%, with the overall margin edging
up to 10.6% after losses from Incentive Plus and investment in Teaching
Expertise. This organic margin improvement has been driven by sales growth in
education management book publishing (up 55%) and lower marketing costs as the
back-list builds scale. Another significant development this year has been the
emergence of an online marketing channel in education of the kind that has been
so important in driving the sports business over the last two years. Schools
have thus far been quicker to adopt new information technologies in the
classroom than in the school office but this is now changing, driven partly by
new Government requirements for the online presentation of management
information.
The emerging online sales channel is potentially valuable also for driving
growth in the new Incentive Plus acquisition. The integration of Incentive Plus
has begun well and some of the anticipated opportunities to add value to the
business are beginning to emerge - in particular the application of the Group's
direct marketing expertise and the ability to deepen the marketing investment,
which should influence results from 2007.
Shortly after the acquisition of Incentive Plus, the Group also completed the
acquisition of CKP, the thinking skills specialist publisher founded by Electric
Word Director Chris Kington. This will add further to the product development
pipeline as CKP brings a strong future publishing list as well as the full-time
commitment of its founder.
Current trading and prospects
With such a positive start to the year and emerging opportunities in each part
of the business the Directors are pleased to report that trading remains on
target to achieve the ambitious profit growth that the Board has set itself. The
Group's current trading, in both sectors is performing in line with our
expectations.
The outlook for the sport sector remains positive, with emerging product
development opportunities in SportBusiness Group and the continued migration of
the Sports Performance business online.
The outlook for the public sector business remains healthy. Investment in
high-value products, which will drive future growth, is made possible by margin
improvement on mature products. The Group has a strong position in areas of
emotional development and higher order learning skills both of which are central
to new government policies.
ENDS
ElectricWord plc
GROUP PROFIT AND LOSS ACCOUNT
for the period ended 31 May 2006
6 months Year
6 months ended 31 May 2006 ended ended
(unaudited) 31 May 30 November
Continuing 2005 2005
operations Acquisitions Total (unaudited) (audited)
# # # # #
TURNOVER 3,200,087 1,336,361 4,536,448 2,860,678 6,234,499
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COST OF SALES
Marketing/sales costs (878,044) (115,387) (993,431) (911,303) (1,727,251)
Other cost of sales (918,909) (500,506) (1,419,415) (867,361) (1,884,240)
-----------------------------------------------------------------------------------------------------
(1,796,953) (615,893) (2,412,846) (1,778,664) (3,611,491)
-----------------------------------------------------------------------------------------------------
GROSS PROFIT 1,403,134 720,468 2,123,602 1,082,014 2,623,008
Other operating expenses (1,226,586) (591,895) (1,818,481) (977,072) (2,190,768)
Amortisation of goodwill (153,418) (154,936) (308,354) (133,080) (286,498)
-----------------------------------------------------------------------------------------------------
TOTAL ADMINISTRATIVE
EXPENSES (1,380,004) (746,831) (2,126,835) (1,110,152) (2,477,266)
-----------------------------------------------------------------------------------------------------
OPERATING (LOSS)/PROFIT 23,130 (26,363) (3,233) (28,138) 145,742
-----------------------------------------------------------------------------------------------------
Interest receivable 13,858 10,562 21,020
Interest payable (5,909) - (1,914)
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PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 4,716 (17,576) 164,848
Taxation (Note 2) 72,005 (24,949) (50,756)
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PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION 76,721 (42,525) 114,092
Minority interests (24,122) - -
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PROFIT/(LOSS) ON ORDINARY ACTIVITIES FOR THE FINANCIAL
YEAR 52,599 (42,525) 114,092
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EARNINGS PER SHARE
Basic (Note 4) 0.05p (0.04p) 0.12p
------------------------------------------------------------------------------------------------------
Diluted (Note 4) 0.04p (0.04p) 0.10p
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ElectricWord plc
GROUP BALANCE SHEET
at 31 May 2006
31 May 31 May 30 November
2006 2005 2005
(unaudited) (unaudited) (audited)
# # #
FIXED ASSETS
Intangible assets 6,460,236 1,762,895 2,037,287
Tangible assets 210,308 25,609 181,466
Investments 90,000 - -
--------------------------------------------------------------------------------
6,760,544 1,788,504 2,218,753
--------------------------------------------------------------------------------
CURRENT ASSETS
Stocks 191,344 84,435 53,117
Debtors due within one year 2,312,282 1,561,698 1,530,399
Debtors due after more than one year 350,389 - 292,651
Cash at bank and in hand 1,033,899 918,364 880,677
--------------------------------------------------------------------------------
3,887,914 2,564,497 2,756,844
--------------------------------------------------------------------------------
CREDITORS: Amounts falling due within
one year
Deferred revenue (2,806,670) (2,675,043) (2,708,560)
Other creditors (1,316,272) (721,511) (912,780)
--------------------------------------------------------------------------------
(4,122,942) (3,396,554) (3,621,340)
--------------------------------------------------------------------------------
NET CURRENT LIABILITIES (235,028) (832,057) (864,496)
--------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 6,525,516 956,447 1,354,257
CREDITORS: amounts falling due after
more than one year (1,713,099) - (105,402)
(Note 5)
PROVISIONS FOR LIABILITIES AND CHARGES (368,736) - (158,000)
--------------------------------------------------------------------------------
NET ASSETS 4,443,681 956,447 1,090,855
--------------------------------------------------------------------------------
CAPITAL AND RESERVES
Called up share capital 1,368,942 950,639 951,139
Share premium account 2,877,933 2,120,305 3,000
Merger reserve 105,011 105,011 105,011
ESOP reserve (24,209) - (24,209)
Profit and loss account 108,513 (2,219,508) 55,914
--------------------------------------------------------------------------------
EQUITY SHAREHOLDERS' FUNDS 4,436,190 956,447 1,090,855
Minority interests 7,491 - -
--------------------------------------------------------------------------------
TOTAL CAPITAL EMPLOYED 4,443,681 956,447 1,090,855
--------------------------------------------------------------------------------
ElectricWord plc
GROUP CASH FLOW STATEMENT
for the period ended 31 May 2006
6 months 6 months Year
ended ended ended
31 May 31 May 30 November
2006 2005 2005
(unaudited) (unaudited) (audited)
# # #
CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES (Note 6a) (395,259) 17,504 289,517
Returns on investments and servicing of finance 7,949 10,562 19,106
Taxation (11,650) - (420)
Capital expenditure and financial investment (64,234) (11,127) (30,873)
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CASH (OUTFLOW)/INFLOW BEFORE ACQUISITIONS AND FINANCING (463,194) 16,939 277,330
Acquisitions (2,013,657) - (269,806)
------------------------------------------------------------------------------------------------------------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (2,476,851) 16,939 7,254
Financing 2,630,073 - (28,272)
------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD 153,222 16,939 (20,748)
(Note 6c)
------------------------------------------------------------------------------------------------------------
ElectricWord plc
GROUP CASH FLOW STATEMENT
for the period ended 31 May 2006
1 PRESENTATION OF INTERIM RESULTS
This interim report was approved by the Directors on xx August 2006. 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 2005 annual report and those that will be adopted for the 2006 annual
report. The audited results for the year ended 30 November 2005 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 33-41 Dallington
Street, London, EC1V OBB.
2 TAXATION
The entire tax provision relates to the recognition of deferred tax assets in
respect of losses as follows:
Deferred tax
#
1 December 2005 546,623
Transfer from profit and loss account 72,005
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30 May 2006 618,628
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3 DIVIDENDS
The directors do not recommend the payment of a dividend.
4 EARNINGS PER SHARE
Basic and diluted earnings per share is based on the profit for the financial
year and on the following weighted average number of shares in issue. Earnings
per share has been diluted to reflect the impact of share options and warrants
Period ended 31 May 2006 113,262,580 (Diluted : 137,369,163)
Period ended 31 May 2005 95,026,766 (Diluted ; 95,026,766)
Year ended 30 November 2005 95,055,772 (Diluted : 116,246,596)
ElectricWord plc
GROUP CASH FLOW STATEMENT
for the period ended 31 May 2006
5 CREDITORS: Amounts falling due 6 months 6 months Year
after more than one year ended ended ended 30
31 May 31 May November
2006 2005 2005
# # #
Bank loan 600,000 - -
Obligations under finance 85,474 - 105,402
leases
Other loans 127,000 - -
Preference shares 900,625 - -
-------------------------------------------------------------------------------------------
1,713,099 - 105,402
-------------------------------------------------------------------------------------------
6 CASH FLOWS 6 months 6 months Year
ended ended ended 30
31 May 31 May November
2006 2005 2005
# # #
a Reconciliation of operating loss to net cash
inflow from operating activities
Operating (loss)/profit (3,233) (28,138) 145,742
Amortisation 308,354 133,080 286,498
Depreciation 57,297 15,332 32,221
(Increase)/decrease in stocks (19,650) 20,521 51,839
Increase in debtors (46,714) (222,072) (508,614)
(Decrease)/increase in creditors (691,313) 98,781 122,713
Increase in provision - - 158,000
Adjustment re ESOP - - 1,118
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Net cash (outflow)/inflow from operating
activities (395,259) 17,504 289,517
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b Reconciliation of net cashflow to movement in 6 months 6 months Year
net funds ended ended ended 30
31 May 31 May November
2006 2005 2005
# # #
Increase/(decrease) in cash in the period 153,222 16,939 (20,748)
Cash (inflow)/outflow from (increase)/decrease (730,072) - 6,945
in debt and lease financing
------------------------------------------------------------------------------------------------------
Change in net debt resulting from cash flows (576,850) 16,939 (13,803)
New finance leases - - (153,000)
Loans acquired with subsidiary (127,000) - -
------------------------------------------------------------------------------------------------------
Movement in net funds in year (703,850) 16,939 (166,803)
Net funds at beginning of period 734,622 901,425 901,425
------------------------------------------------------------------------------------------------------
Net funds at end of period 30,772 918,364 734,622
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c Analysis of funds At Other At 30
1 December non cash May
2005 Cash flow changes 2006
# # # #
Cash at bank and in hand 880,677 153,222 - 1,033,899
Finance leases (146,055) 19,928 - (126,127)
Debt due within one year - (150,000) - (150,000)
Debt due after one year - (600,000) (127,000) (727,000)
------------------------------------------------------------------------------------------------------
734,622 (576,850) (127,000) 30,772
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ElectricWord plc
GROUP CASH FLOW STATEMENT
for the period ended 31 May 2006
7 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS
Share Profit
Share premium Merger ESOP and loss
capital account reserve reserve account Total
# # # # # #
At 1 December 2005 951,139 3,000 105,011 (24,209) 55,914 1,090,855
Profit attributable - - - - 52,599 52,599
to members of the
holding company
Issue of shares 417,803 - - - - 417,803
Premium on allotment
during period - 2,982,198 - - - 2,982,198
Share issue costs - (107,265) - - - (107,265)
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At 31 May 2006 1,368,942 2,877,933 105,011 (24,209) 108,513 4,436,190
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8 ACQUISITIONS
On 31 December 2005 the Group acquired 100% of the issued share capital of DMWSL
370 Limited for a consideration of up to #2.74 million including a contingent
performance related consideration of up to #250,000 payable in cash. The
balance of the consideration comprised 18,750,000 ordinary shares allotted on 31
December 2005 and 987,500 preference shares.
On 28 April 2006 the Group acquired 100% of the issued share capital of
Incentive Plus Limited and Incentive Publishing Limited for a consideration
of #2.05 million payable in cash.
On 28 April 2006 23,030,303 ordinary shares in the capital of the Company were
issued at a price of 8.25p per share.
As a result of the acquisitions in the period goodwill of #4,731,303 has been
recognised and is being amortised over 10 years.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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