Trading Update (3292Q)

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RNS Number : 3292Q

Electric Word PLC

18 October 2011

Electric Word plc

Trading Update

Electric Word, the specialist information publisher, wishes to provide an update on trading since the announcement of its interim results on 14 July 2011.

Trading since that date has consolidated the strong first half performance in the Business Information division, driven mainly by the additional profits generated from buying out our joint venture partner's share of the Affiliate events business. Forward bookings for the January 2012 London Affiliate event are again ahead of this time last year and the TV Sports Markets online subscription business is also showing strong growth going into 2012. However the almost 40% growth in adjusted profits expected to be shown by the Business Information division in 2011 over 2010 will not be enough to make up for the anticipated further drop in profits in 2011 in the Professional publishing business, particularly in the Education sector.

Sales in the Education sector in the third quarter were weaker than expected and this has continued into the important fourth quarter, which accounts for a large proportion of full year profits in Education. The drop in sales has a significant effect on incremental profits and this, combined with increased investment in the Education subscriptions business and product development in the recently acquired Health businesses, means that adjusted profits in the Professional division will be below expectations at around one third of that division's 2010 levels. This will mean that 2011 adjusted profits for the Group as a whole will also be materially below market expectations.

The Board remains confident in the outlook for the core Education businesses and has taken steps to deal with those elements that are less likely to recover. The Optimus school management subscriptions business provides best practice and compliance information for senior and middle managers in schools across school leadership, special needs, child protection, finance and many other disciplines. These products have received significant investment this year as they move into their second digital generation in January 2012 in a much-enhanced format that will provide a cost-effective source of advice at a time when free local authority support is rapidly disappearing. Marketing spend was increased in the final quarter on the back of some year-on-year improvement in new subscription orders, and that increased investment will be continued into next year.

The Education conferences business, which serves similar areas of professional development for school managers, is also expected to recover from a year in which budget uncertainty in schools has led to a significant cut in delegate numbers with a resulting loss of marginal profits. However even in this difficult year the business has not been loss-making and the need to share best practice and cost-effective solutions is strong at a time of great change. Delegate satisfaction ratings have remained high and some events in the fourth quarter have shown signs of recovery, with September's child protection conference achieving an attendance not equalled by any event since April 2010.

The Speechmark imprint of speech therapy, special needs and mental health books has performed relatively well through the year, experiencing a small drop in sales, and margins have remained strong. This business will benefit further in 2012 from synergies with the Radcliffe health publishing business acquired in 2010 and which has now been integrated with Speechmark. The Optimus management and teacher education books have fared less well and we have taken steps to restructure this business and remodel the forward schedule to reflect schools' different needs and deliver cost-effective alternatives to expensive training and consultancy. Finally the Incentive Plus catalogue of behaviour and life skills resources, which was the first business to lose sales as budgets tightened, has also been restructured and can expect significantly improved margins in 2012. The restructures will incur some significant one-off costs in 2011.

In 2010 and early 2011 the Group invested in building a position in professional education publishing in the health sector. The acquisitions of the Radcliffe Publishing books and journals business and the Radcliffe Solutions workforce and training management software business has formed a platform, for product development investment in 2011 and 2012. These businesses are well-placed to take advantage of opportunities created by the health service reforms and the forthcoming Revalidation programme.

While recovery may be slow, the Board expects trading in the Professional division to improve in 2012 and beyond as schools start to buy in more professional education services, NHS reforms gather pace and the Group's new products come to market.

- ENDS -

Enquiries:

 
Julian Turner, Chief Executive, Electric Word   020 7954 3470 
Andrew Potts, Panmure Gordon                    020 7459 3600 
Tim Spratt / Clare Thomas, FTI Consulting       020 7831 3113

This information is provided by RNS

The company news service from the London Stock Exchange

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