TIDMELE
RNS Number : 8430X
Electric Word PLC
14 February 2013
14(th) February 2013
ELECTRIC WORD PLC
Preliminary Results to 30 November 2012
Electric Word, the specialist media company, announced today
audited results for the year ended 30 November 2012.
FINANCIAL HIGHLIGHTS
* Results in line with September 2012 Placing Board
expectations
* Revenue of GBP14.3m down 5%
o Education down 16% through redevelopment and refocus
of products
o Continued growth in Gaming revenues (up 12%)
* Group adjusted profit before tax* down 22% to GBP1.1m
o Flat profits* in Education and Sport & Gaming despite
product investment
o Health profits reduce as costs increase ahead of
new product development
* Statutory profit before tax of GBP0.2m (2011: GBP4.7m
loss) following 2011 restructure
* September 2012 Placing raises GBP1.4m net of costs
* Gross debt paid down to GBP0.9m (2011: GBP1.1m); net
funds of GBP0.1m held (2011: GBP0.8m debt)
* Adjusted numbers, as explained in note 5, exclude
amortisation / impairment of goodwill and intangible
assets, restructuring and acquisition-related credits
and costs, and share based payment costs, as well
as the tax impact of those adjusting items and any
non-cash tax credits and charges (which relate to
movements on deferred tax such as the use of tax losses
or tax credits from the recognition of tax losses).
This definition applies throughout both the Chairman's
and Chief Executive's statements and the Operating
and Financial Review.
Net funds / (debt) are cash held net of the gross
debt which include bank overdrafts and loans (note
27), but exclude provisions for deferred and contingent
consideration in relation to acquisitions (note 21).
OPERATIONAL HIGHLIGHTS
* Education products successfully redeveloped to meet
new needs in new formats:
o New online service launched January 2012 to replace
print newsletters; migration of subscribers expected
to be completed in 2012/13 academic year
o Events exceed prior year results from fewer conferences
o 16 new training products launched successfully
* Health division digital development gets under way:
o New Radcliffe websites launched in December 2012
o New online communities in cardiology and dementia
identified for launch in 2013
* Sport & Gaming invests in product development and
market expansion:
o Gaming's 7(th) London Affiliate Congress in February
2013 achieved 7% growth in revenues to GBP0.75m
o iGaming Business magazine launched North American
edition in April 2012
o TV Sports Markets' online subscription earnings
increased by 51% on PY
o Investment started in additional Sport Business
premium online subscription services
* Continued investment in Group infrastructure and web
development
* Current trading is in line with the Board's
expectations for 2013
Julian Turner, Chief Executive of Electric Word, commented:
"It is an exciting time for our business, with great change in
the markets we serve, the nature of our products and the
information industry itself. The Group made significant progress in
2012, especially in our Education business. Our range of school
management products is now very largely digital or live and is set
up on scalable platforms for further innovation and future growth.
The Sport & Gaming division continues to perform well and,
along with the newer Health division, will see a significant
investment in new product development and sales in 2013. The Group
has an excellent opportunity to build value in the medium term and
we are focused on that goal".
Financial summary (GBP'000) 2012 2011 Change
-------------------------------- -------- -------- -------
Revenue 14,331 15,123 -5%
-------------------------------- -------- -------- -------
Gross Profit 7,129 7,400 -4%
-------------------------------- -------- -------- -------
Adjusted EBITA* 1,166 1,479 -21%
-------------------------------- -------- -------- -------
Adjusted profit before
tax* 1,086 1,388 -22%
-------------------------------- -------- -------- -------
Less amortisation and
impairment (1,255) (4,708)
-------------------------------- -------- -------- -------
Add/(Less) acquisition-related
and restructuring credits
and costs 486 (1,295)
-------------------------------- -------- -------- -------
Less share-based payment
charges and costs (144) (69)
-------------------------------- -------- -------- -------
Profit / (loss) before
tax (PBT) 173 (4,684)
-------------------------------- -------- -------- -------
Diluted earnings per share 0.03p (1.52)p
-------------------------------- -------- -------- -------
Adjusted diluted earnings
per share* 0.24p 0.24p -%
-------------------------------- -------- -------- -------
Cash and cash equivalents 983 305
-------------------------------- -------- -------- -------
Net funds / (debt) 108 (820)
-------------------------------- -------- -------- -------
* Adjusted numbers, as explained in note 5, exclude amortisation
and impairment of goodwill and intangible assets,
acquisition-related and restructuring credits and costs, and share
based payment costs, as well as the tax impact of those adjusting
items and any non-cash tax credits and charges (which relate to
movements on deferred tax such as the use of tax losses or tax
credits from the recognition of tax losses).
This definition applies throughout both the Chairman's and Chief
Executive's statements and the Operating and Financial Review.
Net funds / (debt) are cash held net of bank overdrafts and
loans (note 27), but exclude provisions for deferred and contingent
consideration in relation to acquisitions (note 21).
Revenue by activity 2012 2011
--------------------------- -------- ----- -------- -----
GBP'000 GBP'000
--------------------------- -------- ----- -------- -----
Subscriptions 3,485 24% 4,071 27%
--------------------------- -------- ----- -------- -----
Event delegates and
training 1,988 14% 2,048 14%
--------------------------- -------- ----- -------- -----
Books and reports 3,768 26% 3,974 26%
--------------------------- -------- ----- -------- -----
Sales of content 9,241 64% 10,093 67%
--------------------------- -------- ----- -------- -----
Advertising, sponsorship
and exhibitions 3,493 24% 3,262 21%
--------------------------- -------- ----- -------- -----
Bespoke publishing
and consultancy services 703 5% 550 4%
--------------------------- -------- ----- -------- -----
Commerce 894 6% 1,218 8%
--------------------------- -------- ----- -------- -----
Sales of access to
communities 5,090 36% 5,030 33%
--------------------------- -------- ----- -------- -----
Total 14,331 100% 15,123 100%
--------------------------- -------- ----- -------- -----
The audited report and accounts of the Company for the year
ended 30 November 2012 have been posted to the Company's website at
www.electricwordplc.com. The printed version, together with details
of the Annual General Meeting, will be posted to shareholders in
due course.
ENDS
Enquiries:
Electric Word
Julian Turner, Chief
Executive 020 7954 3470
Panmure Gordon
Andrew Potts 020 7886 2500
Notes to Editors
Electric Word plc is a specialist media group supporting
professional education, compliance and management through a wide
range of digital, paper and live formats. The Group is composed of
three market-facing divisions:
-- Education: provides school management and professional
development information through an online subscription service
supplemented by conferences and training products.
-- Health:provides professional education and training products
for doctors, healthcare managers, speech therapists, elderly care
and other health professionals.
-- Sport & Gaming: is an international provider of insight,
data and analysis to professionals in both the business of sport
(working in governing bodies, the media, sports marketing and
management) and the online gaming industry and its marketing
affiliates.
Our approach is to identify niche communities within our market
sectors and fulfil their key information, professional development,
best practice and compliance needs.
Increasingly, our aim is to provide higher-value services and
decision-critical data that help our customers to achieve their key
personal and organisational objectives. We expect to achieve this
by developing a deep understanding of our sectors and our
customers' challenges and critical information requirements.
The Group provides content in many different formats, including
subscription websites, journals, magazines, events, face-to-face
training, online training, books, special reports, bespoke research
and consultancy. Competencies developed in one sector can then be
transferred to another as opportunities arise.
CHAIRMAN'S STATEMENT
2012 has been an exciting and promising year for Electric Word.
The business set out an ambitious programme of development in the
nature and mix of our products designed to transform the value of
the business in the medium term. This was backed up in September
2012 by a successful fundraising to ensure that the Group had the
working capital appropriate for a period of rapid change in both
our products and our markets.
The aim is to enhance the value of each part of the business by
making the products worth more to our customers, by increasing the
proportion of digital and live revenue and by focusing on
activities with higher potential margins in the future.
The biggest changes have been achieved in the Education
division, where increased profits from the successful conferences
business have been reinvested in new products. The relaunch of the
newsletters in January 2012 as an integrated online subscription
service, the first on the Group's newly developed web publishing
platform, was an important moment. With new training products also
launched and further enhancements in the pipeline the division has
accomplished most of the planned reinvention of its product
formats. Increasingly through the year, and into 2013, the
investment emphasis has moved to sales and marketing.
The Sport & Gaming division has also seen considerable
development. New products were launched on sports sponsorship and
for the US iGaming market and significant further online
developments planned for 2013 which will add new premium
subscription services. As a result the revenue mix in this division
is expected to continue to move away from advertising and towards
subscriptions and events.
The Health division is the newest in the Group and is at an
earlier stage of its digital development but will therefore benefit
from the experiences and developments in other parts of the
business. Product development will increase in 2013 and reflect a
changing market as the health service continues to evolve through
Government reforms and initiatives. As previously in Education,
this creates some uncertainty in the short-term but opportunity in
the future.
The ground for these changes had been prepared in 2011 by
investing in the Group's infrastructure. This continued in 2012
with several new systems firmly established and further
developments in database and e-marketing systems planned for 2013
to support future growth.
The Group enters 2013 in its strongest financial shape for many
years and with a clear plan in place to deliver three divisions of
sufficient scale to be valuable assets in their own right as well
as part of the consolidated Group. At this stage we see the
departure of Quentin Brocklebank, our Finance Director, and thank
him for his enormous contribution to achieving this position, and
now welcome William Fawbert who will join the Board in his
place.
The Group's continued progress depends above all on the strength
and talents of the individuals it employs as well as the support of
our investors and other stakeholders. I would like to take this
opportunity to thank all of them for their energy and effort and
wish them further success in 2013 and beyond.
Peter Rigby
Chairman
13 February 2013
CHIEF EXECUTIVE'S STATEMENT
Strategic DIRECTION
Over the last two years the Group has been on a journey of
significant change. In part this has been in response to
developments in our markets, where change has created both
turbulence and opportunity. The business has also been moving
through the next phase of the digitisation of its publishing
businesses, in common with many others in our sector. Finally, we
have also been redeveloping our products to increase their value to
our customers and link them more closely with their key personal
and organisational objectives.
In making these changes we have also been reducing our areas of
activity in order to focus on those with the potential to deliver
the greatest long-term value. That means an emphasis on renewable
revenues, which are increasingly delivered online or live, and
products that link more directly with our customers' work. The goal
is to achieve more focus on fewer activities with greater scale and
higher margins. In this way we aim to maximise the potential of
each division and the Group as a whole.
The strategy has required significant investment in 2012 and
2013: in systems to support more efficient ways of working, a new
digital publishing platform, new products in every division and in
the nature and capacity of our sales and marketing as the channels
to market have evolved along with the products. It also depends on
investing in the talent and expertise of the people in the business
and a culture of continuous and shared learning, close
understanding of customer needs and product excellence.
The Group made significant progress towards these goals in 2012,
particularly in the Education division. The year also included a
fundraising and resetting of terms with our lending Bank which has
allowed us to intensify our investment, accelerate change and focus
on our goals of long-term value growth.
Divisional review
EDUCATion
Optimus Education provide management and professional
development information to school and general education managers,
teachers and other professionals using subscription online
services, conferences, training resources, books, and
magazines.
It is supplemented by the Incentive Plus catalogue of
third-party products relating to children's behavioural and
emotional development.
GBP'000 2012 2011 Change
----------------- ------ ------ -------
Revenue 4,601 5,454 -16%
----------------- ------ ------ -------
Adjusted EBITA* 263 248 +6%
----------------- ------ ------ -------
Profit margin 6% 5%
----------------- ------ ------ -------
The above table excludes 'The School Run' which was disposed of
for no consideration in April 2012 (note 26). This contributed
revenue of GBP108,000 (2011: GBP329,000) and adjusted EBITA* of
GBP133,000 loss (2011: GBP167,000 loss) before disposal; the
Division now receives a licence income calculated as a percentage
of revenue.
The new Optimus online information service for schools launched
in January 2012, replacing 14 individual print and online
newsletters. This will enable schools to receive a broader and more
valuable service over the coming years in an environment in which
local authority support continues to diminish. It includes
professional development advice, many practical case studies,
compliance information and the opportunity to ask for expert
advice.
The new support service is expected to be the most important
driver of margins and profit growth in the division over the medium
term. In 2012 the investment in the product was matched by a
significant increase in the sales and marketing resource. This
enabled the business to achieve its target number of subscriptions
migrated from the old newsletter to the new service. By the end of
December 2012 subscriptions to the new service outnumbered the
remaining newsletter subscriptions and migrations are expected to
be completed by the end of the 2012-13 academic year.
Also at the start of the year, the previously wide range of
books and e-books was slimmed down and largely reinvented in the
form of practical training products that schools could deliver
themselves. 16 products were successfully launched in 2012, all
achieving their initial sales targets. Further courses will be
added in 2013 along with an online learning management system.
Education events had started to recover in the last quarter of
2011 after a very difficult 2010-11 academic year in the wake of
the Comprehensive Spending Review and budget uncertainty in
schools. 2011-12 has seen a significant further step forward, with
the event team achieving year on year profit* growth, despite 16%
fewer events being run. Off the back of this year's results, the
team plan to achieve further growth by introducing new events to
replace some of those previously cut.
Revenue is down in the current year due to the lower
subscription base at the end of 2011 and the previous disinvestment
in low margin books and commerce sales. Overall, profit is flat
despite the investments as profit improvements in conferences and
books and training offset the losses on the subscription service
while it is in transition. A similar pattern is expected in 2013 as
the subscription business starts to grow again with a continuing
investment in sales and marketing.
HEALTH
Radcliffe Publishing produces a range of books, journals and
training products focused on professional development for doctors,
managers and professions allied to health. It is particularly
strong in primary care, medical education and exam support.
Speechmark Publishing specialises in resources for speech
therapists, special needs co-ordinators and teachers, care workers
and mental health professionals.
The Radcliffe Solutions workforce management software enables
online management and compliance reporting of appraisals, training
and professional development.
Sports Performance is a niche online publisher to competitive
sports athletes and coaches and related injury professionals.
GBP'000 2012 2011 Change
----------------- ------ ------ -------
Revenue 4,445 4,619 -4%
----------------- ------ ------ -------
Adjusted EBITA* 444 775 -43%
----------------- ------ ------ -------
Profit margin 10% 17%
----------------- ------ ------ -------
The 2012 results include 12 months of trade from Radcliffe
Solutions (formerly Ikonami Limited) while 2011 includes 7 months
only (as acquired in April 2011). The first 5 months of 2012
contributed revenue of GBP273,000 and adjusted EBITA* of
GBP(17,000).
Speechmark was acquired in October 2007 and has now seen five
years of profits greater than GBP0.5m under Group ownership and
completed payback of acquisition costs within 3.5 years. The
acquisition of Radcliffe Publishing in November 2010 enabled the
Group to form a Health division and develop synergies between the
businesses. Like Speechmark, Radcliffe Publishing came with a
strong backlist of books as well as academic journals and a strong
brand reputation. The editorial, production and marketing teams of
the two businesses have now been combined, along with back office
processes. In 2013 the first revenue synergies will be created with
the development of an online dementia community using content from
both businesses.
Progress has also been made in developing e-learning courses to
complement key book publishing areas and this will be extended in
2013 with digital versions of Radcliffe's successful MasterPass
exam support series. In time it is expected that more revenue from
interactive, subscription and sponsored products will complement
the base of book sales and support margin growth.
In 2012 Radcliffe Solutions experienced its first year without
the benefit of a central NHS contract for universal online
appraisal using the central knowledge and skills framework
('eKSF'). This has now been superseded by the 'AT-Performance'
product which has more comprehensive workforce management tools and
'AT-Learning' which allows a Trust's staff training to be monitored
and reported. Both products have case studies demonstrating
potential savings in employee time and reduced insurance costs,
although the market has been an extremely difficult one with many
Trusts in the process of merger and slow to take system decisions.
Nevertheless it was encouraging that NHS Scotland bought into a new
contract and provides an interesting opportunity for further
growth.
The Sports Performance business draws a significant proportion
of its revenue from consumers and in 2011 suffered from changes in
search engine algorithms which reduced traffic and led to lower
returns on marketing spend. As a result, investment in the business
was cut back.
Revenue in 2012 in the Health Division was down on the previous
as a result of reduced investment in Sports Performance, more focus
on core areas in Radcliffe Publishing and the expected
disappearance of Solutions' central NHS contract. Speechmark
revenues, however, grew in the year. The reduced profits in 2012
are as a result of lower profits in Radcliffe Solutions and the
Sports Performance business moving from a profit in 2011 to a loss
in 2012.
In January 2013 the Division was strengthened by a new
Commercial Development Director with the brief to develop new
sponsorship revenue streams and will soon be led by a new
Divisional Manager who will be taking on a significant programme of
product development and investment in building direct channels to
market.
SpORT & GAMING
The Division is an international provider of business insight
and analysis across a range of media from online subscriptions to
live events and from daily news to bespoke research.
SportBusiness Group publishes for sports industry professionals
who work in governing bodies, the media, sports marketing,
sponsorship and club and event management.
iGaming Business publish to both the online gaming industry
itself and its marketing affiliates, providing this global and
fast-growing industry with business-critical information and
marketing support.
GBP'000 2012 2011 Change
----------------- ------ ------ -------
Revenue 5,177 4,721 10%
----------------- ------ ------ -------
Adjusted EBITA* 1,307 1,338 -2%
----------------- ------ ------ -------
Profit margin 25% 28%
----------------- ------ ------ -------
The Sport & Gaming division is also in the process of
significant development. The influential TV Sports Markets
newsletter and online service has been steadily building the value
of its customers' site license subscriptions over the last two
years and this year that translated into a significant uplift in
subscription revenue. In 2012 a parallel product was launched to
record and analyse sports sponsorship deals. The fixed costs of
this new start-up bring down margins in SportBusiness compared to
2012.
Both these data-rich products will be developed further in 2013
as they migrate to the Group's new web platform along with new
premium subscription services for SportBusiness International
subscribers. As in Education, the sales and marketing team has been
expanded in 2012 and will grow again in 2013 to support the new
products,. The objective is to increase the proportion of
high-value subscription revenue to improve revenue quality and
ultimately margins in SportBusiness.
iGaming Business magazine enjoyed another successful year and in
April 2012 was launched into the US with a North American edition
to position the business in an important area of strategic
growth.
The iGaming Affiliate events business also grew in the year,
adding a social gaming event to its calendar. It has started 2013
strongly with its largest annual event, the London Affiliate
Conference, achieving record revenues in early February 2013,
attracting almost 3,000 delegates (2012: 2,802 delegates).
Revenues in Sport & Gaming were up on the previous year with
higher revenues in iGaming offsetting lower advertising revenue in
SportBusiness. Alongside the investment in the new sports
sponsorship products, this led to margins dropping to 25% and
slightly reduced profits.
Central costs
These costs represent central PLC costs which are not directly
related to the Divisions' trading and are not therefore included in
their results. They include Board fees and costs related to being
both a PLC and a consolidated Group.
GBP'000 2012 2011 Change
----------------- ------ ------ -------
Adjusted EBITA* (715) (715) -%
----------------- ------ ------ -------
As % of Group
revenue 5% 5%
----------------- ------ ------ -------
Net interest
charge (80) (91) +12%
----------------- ------ ------ -------
The Group has maintained its central costs at 5% of Group
revenues. Investments made by the Group to date have been directly
related to the trade of Divisions and so have been recharged to
them with no additions to the Central cost base.
Net interest payable is consistent year on year with the
reduction in the Group's debt as the Bank loan was paid down in
2011 and in 2012, offset by higher interest rates in 2012. The
reduction in the net interest charge comes from the inclusion of
notional interest (an accounting charge for the time value of money
where no interest is actually inherent) on the contingent
consideration related to the Ikonami acquisition in April 2011.
This notional (non-cash) interest came to GBP3,000 in the year
(2011: GBP17,000), a reduction on the prior year reflecting the
reduced provision in the current year (note 21).
CHANGE OF DIRECTOR
We announced on 3 January that Quentin Brocklebank leaves the
business and resigns from the Board in February 2013 on completion
of these 2012 results after more than five years as Finance
Director and Board member. Quentin leaves the Group with no net
debt and its balance sheet in a stronger position than at any other
time. The Board would like to thank Quentin for his invaluable
contribution to the development of the business and his outstanding
dedication throughout that period. William Fawbert will take over
as Finance Director and joins the Board in February 2013. The Board
welcomes William to Electric Word and looks forward to his
contribution to the next phase of the Group's development.
Julian Turner
Chief Executive
13 February 2013
OPERATING AND FINANCIAL REVIEW
Adjusted numbers to reflect underlying trading performance
GBP'000 2012 2011 Change
----------------- ------- ------- -------
Total Group
----------------- ------- ------- -------
Revenue 14,331 15,123 -5%
----------------- ------- ------- -------
Adjusted EBITA* 1,166 1,479 -21%
----------------- ------- ------- -------
Margin 8% 10%
----------------- ------- ------- -------
Net interest
charge (80) (91) 12%
----------------- ------- ------- -------
Adjusted PBT* 1,086 1,388 -22%
----------------- ------- ------- -------
The 2012 results include 12 months of trade from Radcliffe
Solutions (formerly Ikonami Limited) while 2011 includes 7 months
only (as acquired in April 2011). The first 5 months of 2012
contributed revenue of GBP273,000 and adjusted EBITA* of
GBP(17,000).
* A reconciliation of the adjusted numbers is set out in note 5.
The adjusted numbers are presented 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 together with removing the profit impact of
movements in deferred tax balances.
Operating segments
The Group evolved significantly in 2011 and reorganised its
management and reporting around three market-facing divisions:
Education, Health and Sport & Gaming. 2012 reporting is the
first year to reflect this new structure.
Acquisition-related and restructuring credits and costs
As part of the evolution in 2011 the Group remodelled its
Education portfolio, with a significant impairment to its books
list, a reduction in its exposure to commerce and consumer products
and consequently a number of redundancies being made. Costs were
also incurred or accrued for the decision to outsource the
warehousing and fulfilment functions for the book and commerce
businesses. This resulted in a total cost of GBP1.3m.
Restructuring costs in 2012 of GBP0.2m have been booked which
relate to advisory fees and other minor costs on the disposal of
the Education division's consumer arm, funding advice leading to
the fundraising in the year and a provision against costs of Board
level changes.
A credit of GBP0.7m has been recognised in 2012 as the
provisions for contingent consideration made at the time of the
Radcliffe Publishing and Solutions (formerly Ikonami) acquisitions
have been reduced.
Impairment charges and reduction to goodwill
As part of the restructure in 2011 two now peripheral assets in
the Education division were impaired at a total write down of
GBP3.6m to goodwill. One such impairment has been necessary in 2012
for GBP0.3m to reflect the tough current trading position that
Radcliffe Solutions (formerly Ikonami) is in, as described in the
Chief Executive's statement.
Further to the impairment charges, GBPnil (2011: GBP0.2m) has
been booked as a reduction in goodwill upon recognition of deferred
tax asset relating to pre-acquisition losses from the SportBusiness
Group which is an indication when booked of higher profits being
generated.
Capital expenditure
The Group has invested GBP0.5m across web development and
enhancing the back office systems added in the previous year (2011:
GBP0.5m acquiring systems and some web). Much of the spend on web
development this financial year has continued on improving the
functionality of the Group's sites and email marketing channel, and
particularly the online platforms which the Education division's
former print subscription offerings migrated onto early in the
year, the development of new Health sites launching late in 2012
and into 2013 and the start of the first Sport sites ahead of 2013
launch. The Health sites will include a 'My Account' area to track
professional development across the Radcliffe product range, a
feature which, in keeping with the Group's development sharing,
will then be rolled out to the Education sites.
The Group invested in 2011 by replacing two core databases: CRM
and SOP. The replacements are better suited to the fulfilment of
sophisticated sales packages such as product bundles and
combinations of print and online subscriptions. Investment has
continued into this year as most of the Group has now migrated onto
these new platforms. Further investment has been made on developing
detailed reporting suites that allow real time tracking of leads,
sales conversion and ROIs and monitor such as subscriber rates and
conversion prices and so enable effective forward sales and
marketing planning and spend.
Fundraising
In September 2012 the Group raised GBP1.3m from a Firm Placing
to its largest shareholders and executive directors and GBP0.2m
from an Open Offer, both gross of total costs of GBP0.1m and at a
price of 1.5 pence per share. The combined placing added 100.7
million shares and diluted the shares in issue by 34%.
Debt and cash flow
The Group's lending Bank agreed to the fundraising and a change
to the Loan Agreement. This change required the Group to make both
the GBP0.125m repayments due in November 2012 and 2013 in November
2012 but allowed much greater financial headroom in its loan
covenants so that the Group could pursue a heightened investment
programme.
A further amendment has now been signed with the Bank in January
2013 which again changes the repayment profile but with further
relaxation in covenant headroom. This requires a total repayment of
GBP0.4m in 2013 but that will be out of available cash and achieves
the fundraising goals of having sufficient capital and covenant
headroom so the Group can invest as directed by the long term asset
build rather than with mind to any restrictions or caps.
In 2011, when the impact of the acquisitions was added back, the
underlying cash generation from operations was sound given that the
business was already in a period of investment in future organic
growth. Both the Radcliffe Publishing and Solutions (formerly
Ikonami) acquisitions added considerable payables into the 2011
year which were subsequently cleared down to normal trading
levels.
The apparently low cash conversion rate in 2012 is a consequence
of three factors: investment in stock, notably development of new
lines; slower cash collection to date on debt where outsourced late
in 2011 with the warehousing and fulfilment; and as creditors have
been significantly paid down at this yearend as a reflection of the
funds position held.
GBP'000 2012 2011
------------------------------------------- ------ ------
Cash from operating activities
before interest and tax 155 693
------------------------------------------- ------ ------
Net cash outflow from acquisition-related
and restructuring costs 201 194
------------------------------------------- ------ ------
Working capital outflow
from acquisitions - 522
------------------------------------------- ------ ------
Adjusted cash from operating
activities before interest
and tax 356 1,409
------------------------------------------- ------ ------
Adjusted EBITA* 1,166 1,479
------------------------------------------- ------ ------
Adjusted cash conversion
of operating profits for
year 31% 95%
------------------------------------------- ------ ------
Net bank funds (note 27) at the yearend stood at GBP0.1m (2011:
net bank debt of GBP0.8m). The Group has gross Bank debt (note 18)
of GBP0.9m at November 2012 (2011: GBP1.1m) and is now being repaid
over the period to May 2016. Further to this the Group has deferred
and contingent consideration relating to two of its recent
acquisitions (note 21). The current significant provisions held are
for GBP75,000 payable January 2013, GBP50,000 payable February
2013, and GBP100,000 payable based on November 2013 results.
Earnings per share
Statutory diluted earnings per share ("eps") is 0.03p (2011:
(1.52)p loss). On an adjusted basis reflecting underlying trading
(by using adjusted profits* against diluted shares) earnings are
flat at 0.24p (2011: 0.24p) reflecting lower adjusted tax rate this
year offset by the new shares dilution which is included only for
part of the year on the weighted basis.
Dividends
At this stage of the Group's evolvement, the Directors do not
propose a dividend this year (2011: GBPnil). The Group has not paid
a dividend in previous years but will continue to evaluate its
position.
Key performance indicators (KPI)
The Board uses a range of KPIs to monitor progress across the
Group. These are compared against prior year and forecast
equivalents and are analysed in light of that. Actual performance
at Group level on these KPI is disclosed in this report against the
previous year.
Operating managers review monthly a number of financial KPI by
profit centre. Profit centres will be individual publishing titles
and sites or revenue types within a market sector, such as events
or books and reports. Fully loaded income statements and cash
receipts by revenue stream are prepared for each profit centre each
month, allowing analysis of revenue, gross margin, adjusted EBITA*
margin, headcount and cost, capital expenditure and cash receipts
as well as review of the detail contributing to those. On a weekly
basis the senior operating managers meet with the executive
directors to review and discuss sales bookings as well as employee
recruitment and retention issues, together with a review of a
business area or issue for wider consideration and to share ideas
and knowledge.
At a Group level each month consolidated balance sheet and cash
flow information is submitted to the Board and operating management
together with a look forward statement against the covenant tests
required by the Bank loan. Within the businesses more detailed KPI
are used such as marketing campaign return on investment (revenue
or gross profit per GBP of marketing spend on that campaign),
customer lifetime value and average life, delegate numbers and
profit per event or course, and web traffic (page views, unique
visitors, leads generated).
Quentin Brocklebank
Finance Director
13 February 2013
CONSOLIDATED INCOME STATEMENT
For the year ended 30 November 2012
2012 2011
Notes GBP'000 GBP'000
--------------------------------------- ------ -------- ---------
Revenue 2 14,331 15,123
Cost of Sales - Direct costs (5,464) (5,293)
Cost of Sales - Marketing expenses (1,738) (2,430)
--------------------------------------- ------ -------- ---------
GROSS PROFIT 2 7,129 7,400
Other operating expenses 8 (5,980) (5,875)
Restructuring costs 5 (201) (1,259)
Acquisition-related credits and costs 5 687 (36)
Depreciation expense 8 (127) (115)
Amortisation expense 12 (955) (957)
Impairment charges and reduction
to goodwill 8 (300) (3,751)
Total administrative expenses (6,876) (11,993)
OPERATING PROFIT / (LOSS) 253 (4,593)
Finance costs 6 (80) (92)
Finance income 7 - 1
PROFIT / (LOSS) BEFORE TAX 8 173 (4,684)
Taxation 9 54 245
PROFIT / (LOSS) FOR THE FINANCIAL
YEAR 227 (4,439)
======================================= ====== ======== =========
Attributable to:
- Equity holders of the parent 111 (4,551)
- Non-controlling interest 116 112
--------------------------------------- ------ -------- ---------
Total comprehensive income / (loss) 227 (4,439)
======================================= ====== ======== =========
EARNINGS / (LOSS) PER SHARE
Basic 10 0.03p (1.53)p
======================================= ====== ======== =========
Diluted 10 0.03p (1.52)p
======================================= ====== ======== =========
CONSOLIDATED GROUP AND COMPANY STATEMENTS OF CHANGES IN
EQUITY
For the year ended 30 November 2012
GROUP Reserve
Share for Non-
Share premium Merger own Retained controlling Total
capital account reserve shares earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- --------- --------- ---------- ---------- ------------- ---------
At 1 December
2010 2,987 7,061 105 (123) 1,088 11,118 114 11,232
Total comprehensive
income - - - - (4,551) (4,551) 112 (4,439)
Tax taken
directly to
equity (note
15) - - - - (31) (31) - (31)
--------------------- --------- --------- --------- --------- ---------- ---------- ------------- ---------
2,987 7,061 105 (123) (3,494) 6,536 226 6,762
Dividend paid
by subsidiary - - - - - - (93) (93)
Share issues 2 - - - - 2 - 2
Share based
payments - - - - 69 69 - 69
--------------------- --------- --------- --------- --------- ---------- ---------- ------------- ---------
At 30 November
2011 2,989 7,061 105 (123) (3,425) 6,607 133 6,740
Total comprehensive
income - - - - 111 111 116 227
Tax taken
directly to
equity (note
15) - - - - (30) (30) - (30)
--------------------- --------- --------- --------- --------- ---------- ---------- ------------- ---------
2,989 7,061 105 (123) (3,344) 6,688 249 6,937
Share issues 1,007 503 - - - 1,510 - 1,510
Share issue
costs - (112) - - - (112) - (112)
Share based
payments - - - - 144 144 - 144
At 30 November
2012 3,996 7,452 105 (123) (3,200) 8,230 249 8,479
===================== ========= ========= ========= ========= ========== ========== ============= =========
COMPANY Share
Share premium Retained Total
capital account earnings equity
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ --------- --------- ---------- ---------
At 1 December 2010 2,987 7,061 (134) 9,914
Total comprehensive income - - (2,770) (2,770)
Tax taken directly to equity
(note 15) - - (31) (31)
------------------------------ --------- --------- ---------- ---------
2,987 7,061 (2,935) 7,113
Share issues 2 - - 2
Share based payments - - 69 69
------------------------------ --------- --------- ---------- ---------
At 30 November 2011 2,989 7,061 (2,866) 7,184
Total comprehensive income - - (2,719) (2,719)
Tax taken directly to equity
(note 15) - - (30) (30)
2,989 7,061 (5,615) 4,435
Share issues 1,007 503 - 1,510
Share issue costs - (112) - (112)
Share based payments - - 144 144
At 30 November 2012 3,996 7,452 (5,471) 5,977
============================== ========= ========= ========== =========
CONSOLIDATED GROUP AND COMPANY STATEMENTS OF FINANCIAL
POSITION
As at 30 November 2012
Group Company
2012 2011 2012 2011
Notes GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------ -------- -------- -------- --------
ASSETS
Non-current assets
Goodwill 11 5,820 6,383 - -
Other intangible assets 12 2,972 3,558 119 154
Property, plant and equipment 13 124 200 81 166
Investments 14 - - 7,397 8,025
Deferred tax assets 15 1,021 910 131 110
------------------------------- ------ -------- -------- -------- --------
9,937 11,051 7,728 8,455
CURRENT ASSETS
Inventories 16 1,648 1,284 - -
Trade and other receivables 17 2,718 2,665 3,933 4,282
Cash and cash equivalents 27 983 305 750 10
------------------------------- ------ -------- -------- -------- --------
5,349 4,254 4,683 4,292
TOTAL ASSETS 15,286 15,305 12,411 12,747
=============================== ====== ======== ======== ======== ========
EQUITY AND LIABILITIES
Capital and Reserves
Called up ordinary share
capital 23 3,996 2,989 3,996 2,989
Share premium account 7,452 7,061 7,452 7,061
Merger reserve 105 105 - -
Reserve for own shares 24 (123) (123) - -
Retained earnings (3,200) (3,425) (5,471) (2,866)
Equity attributable to
equity holders of the
parent 8,230 6,607 5,977 7,184
Non-controlling interest 25 249 133 - -
------------------------------- ------ -------- -------- -------- --------
TOTAL EQUITY 8,479 6,740 5,977 7,184
Non-current liabilities
Borrowings 18 475 750 475 750
Provisions 21 95 932 95 932
Deferred tax liabilities 15 419 726 1 3
989 2,408 571 1,685
Current liabilities
Borrowings 18 400 375 400 375
Current tax liabilities 80 47 - -
Trade payables and other
payables 19 2,769 3,003 5,338 3,503
Provisions 21 125 - 125 -
Deferred income 20 2,444 2,732 - -
------------------------------- ------ -------- -------- -------- --------
5,818 6,157 5,863 3,878
TOTAL LIABILITIES 6,807 8,565 6,434 5,563
TOTAL EQUITY AND LIABILITIES 15,286 15,305 12,411 12,747
=============================== ====== ======== ======== ======== ========
These financial statements were approved by the Board of
Directors and authorised for issue on 13 February 2013 and are
signed on its behalf by:
Julian Turner Quentin Brocklebank
Chief Executive Finance Director
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
For the year ended 30 November 2012
Group Company
2012 2011 2012 2011
Notes GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------ -------- -------- -------- --------
Profit / (loss) for the
financial year 227 (4,439) (2,719) (2,770)
Taxation (54) (245) (54) (37)
Amortisation & impairment
expense, reduction in
goodwill 8 1,255 4,708 729 2,839
Depreciation 8 127 115 101 95
Finance costs 80 92 77 91
Finance income - (1) - -
Share based payment charges 8 144 69 144 69
Operating cash flows
before movement in working
capital 1,779 299 (1,722) 287
(Increase) / decrease
in inventories (364) 428 - -
(Increase) / decrease
in receivables (52) 612 (61) 285
(Decrease) / increase
in payables (1,208) (646) 1,663 (759)
Cash flow from operating
activities before interest
and tax 155 693 (120) (187)
Interest paid 6 (77) (75) (77) (74)
Taxation paid (99) (305) (100) (303)
Cash inflow / (outflow)
from operating activities (21) 313 (297) (564)
-------------------------------- ------ -------- -------- -------- --------
INVESTING ACTIVITIES
Acquisitions of subsidiaries,
net of cash acquired 26 - (55) - (65)
Deferred consideration 21,
paid 26 (29) (58) (29) (58)
Purchase of property
plant and equipment 13 (51) (57) (16) (29)
Purchase of intangible
assets 12 (429) (1,519) (66) (105)
Loss on disposal of intangible
assets 12 60 - - -
Interest received 7 - 1 - -
Net cash used in investing
activities (449) (1,688) (111) (257)
-------------------------------- ------ -------- -------- -------- --------
FINANCING
Proceeds from issuance
of ordinary shares 23 1,510 2 1,510 2
Costs of issuing shares (112) - (112) -
Proceeds of new long
term borrowings 18 875 1,125 875 1,125
Proceeds of new short
term borrowings 18 250 375 250 375
Repayments of borrowings 18 (1,375) (1,875) (1,375) (1,875)
Payment of dividend to - (93) - -
minority interest
Net cash from financing
activities 1,148 (466) 1,148 (373)
-------------------------------- ------ -------- -------- -------- --------
NET INCREASE / (DECREASE)
IN CASH AND CASH EQUIVALENTS 678 (1,841) 740 (1,194)
CASH AND CASH EQUIVALENTS
AT THE BEGINNING OF YEAR 305 2,146 10 1,204
CASH AND CASH EQUIVALENTS
AT END OF YEAR 27 983 305 750 10
================================ ====== ======== ======== ======== ========
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 November 2012
1. ACCOUNTING POLICIES
BASIS OF PREPARATION
The financial statements have been prepared in accordance with
International Financial Reporting Standards as endorsed by the
European Union ("IFRS"), IFRIC interpretations and the Companies
Act 2006 applicable to companies reporting under IFRS.
The financial statements of the Group and the Parent Company
have been prepared under the historical cost convention and in
accordance with applicable accounting standards. As permitted by
Section 408 of the Companies Act 2006, no separate profit and loss
account is presented for the Company. The Company's loss for the
year was GBP2,719,000 (2011: GBP2,770,000 loss).
Operating profit is defined as profit before tax but excluding
net finance and related costs and investment income.
GOING CONCERN
The Group has made a profit for the year of GBP227,000 (2011:
GBP4,439,000 loss) and has net assets of GBP8,479,000 (2011:
GBP6,740,000); notwithstanding this it has a net current
liabilities position at 30 November 2012 at GBP469,000 (2011:
GBP1,903,000). The Directors have prepared group cash flow
forecasts for the period ending 30 November 2014. 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 business is currently trading in line with these forecasts. In
the event of forecast trading levels not being met due to a weaker
economic climate than forecast, 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. There is long-term financing in
place with the Group's bank debt renewed in January 2013 to a term
loan with repayments over the period to May 2016 (note 18). The
Group continues to maintain positive cash flows excluding
acquisition spend. On this basis the Directors believe that it
remains appropriate to prepare the financial statements on a going
concern basis.
Changes in accounting policies
There have been no changes to accounting policies in the
period.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Within the consolidated and company financial statements there
are a number of areas where management has to include their best
estimate of likely outcomes based on their first hand knowledge of
the markets and situation. The preparation of consolidated and
company financial statements will require management to make
judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from
these estimates.
In preparing these consolidated and company financial
statements, the significant judgements made by management in
applying the accounting policies and the key sources of estimation
uncertainty were:
-- Valuation and asset lives of intangible assets - which are
based on management's considered opinion of what has been bought
and what value it is to the Group in the future. Valuation
methodologies include the use of discounted cash flows, revenue and
profit multiples, whilst asset lives are estimated on the type of
asset acquired and range between three and ten years;
-- Impairment of assets - assets are subject to at least annual
impairment reviews and testing, and the running of these tests and
the numbers that form part of them will be based as far as possible
on actual known results but will by nature include predictions of
future outcomes. The asset carrying values are compared to
estimates of the assets' value in use. This value in use is
calculated by looking at the cash generating units underlying the
assets and management estimating the future cash flows after
applying a suitable discount factor. The estimates of future cash
flows are based on detailed forecasts produced by management.
Assumptions on the goodwill assets are given in note 11;
-- Provisioning: both trade receivables for bad debt and
inventories for returns and obsolescence are reviewed for potential
write down. The provisions created to cover these areas are based
on managements' experience and considered opinion of the assets'
current value;
-- Contingent consideration: provisions are made at the
Directors' best estimate of what the consideration will be but as
based on future results it can only be assessed on current
knowledge and expectations with no certainty. The provisions made
are considerably under the maximum amounts which could be payable
(note 21);
-- Valuation of share based payments - which are calculated from
modelling including estimates of non-transferability, exercise
restrictions, and behavioural considerations, including such
factors as the volatility of the Company's share price. These
inputs and the methods are set out in note 28;
-- Deferred tax: both assets and liabilities require judgement
in determining the amounts to be recognised, in particular the
extent to which assets should be recognised in consideration of the
timing and level of future taxable income.
2 REVENUE AND COST OF SALES
An analysis of the Group's income is as follows:
2012 2011
GBP'000 GBP'000
------------------------------------ -------- --------
Revenue
Sale of goods 8,138 9,263
Rendering of services 6,193 5,860
------------------------------------ -------- --------
14,331 15,123
Cost of sales
Change in inventories of finished
goods 327 421
Raw materials and consumables used (5,791) (5,714)
Marketing costs (1,738) (2,430)
------------------------------------ -------- --------
(7,202) (7,723)
Gross profit 7,129 7,400
------------------------------------ -------- --------
3 SEGMENTAL ANALYSIS
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 seen by the Board in its
financial information used in allocating resources and making
strategic decisions. These segments were identified by how the
Group is focused on customer types and so does involve some
aggregation of how those customers are served and of diversity
within the customer bandings as niches are targeted within the
broader markets.
-- Education (E): provides school management and professional
development information to professional communities in schools and
other institutions;
-- Health (H): provides professional education and training
products for doctors, healthcare managers, speech therapists,
elderly care professionals, and other health professionals as well
as HR management and training compliance software;
-- Sport & Gaming (S&G): provides insight, data and
analysis to the business communities behind sport and online
gaming;
-- Central costs (PLC): the group function represents central
PLC 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 positions across the Group.
Operating profit is defined in note 1. The sector analysis
includes the adjusted definition of operating profit (note 5) 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.
Analysis Year ended 30 November Year ended 30 November
by market 2012 2011
sector
E H S&G PLC Total E H S&G PLC Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Revenue 4,709 4,445 5,177 - 14,331 5,783 4,619 4,721 - 15,123
Adjusted
operating
profit (note
5) 130 444 1,307 (715) 1,166 81 775 1,338 (715) 1,479
Share based
payment
charges (45) (40) (40) (19) (144) (29) (16) (17) (7) (69)
Restructuring
costs (41) - - (160) (201) (1,048) (112) (5) (94) (1,259)
Acquisition-related
credits
/ (costs) - 687 - - 687 - 11 (47) - (36)
Amortisation
of intangible
assets (151) (320) (383) (101) (955) (262) (292) (327) (76) (957)
Impairment
expense - (300) - - (300) (3,600) - - - (3,600)
Reduction
of goodwill - - - - - - - (151) - (151)
Operating
profit /
(loss) (107) 471 884 (995) 253 (4,858) 366 791 (892) (4,593)
Finance
costs - - - (80) (80) - - - (92) (92)
Investment
income - - - - - - - - 1 1
Profit /
(loss) before
tax (107) 471 884 (1,075) 173 (4,858) 366 791 (983) (4,684)
===================== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
3 SEGMENTAL ANALYSIS (continued)
Analysis Year ended 30 November Year ended 30 November
by market 2012 2011
sector
E H S&G PLC Total E H S&G PLC Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Depreciation
and amortisation 158 336 384 204 1,082 274 298 328 172 1,072
Impairment
expense - 300 - - 300 3,600 - 151 - 3,751
Expenditure
on intangible
assets 151 195 17 66 429 218 661 1,106 105 2,090
Expenditure
on property,
plant and
equipment 10 25 1 15 51 15 19 1 21 56
Analysis by market sector Assets Liabilities
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Education 292 1,615 1,798 3,394
Health 3,692 3,675 1,924 2,007
Sport & Gaming 3,223 3,038 1,051 1,241
--------------------------- -------- -------- -------- --------
7,207 8,328 4,773 6,642
Group function 7,058 6,067 660 25
Gross debt and taxation
(current and deferred) 1,021 910 1,374 1,898
15,286 15,305 6,807 8,565
=========================== ======== ======== ======== ========
There are no inter-segmental sales and no discontinued
operations except for the sale of The School Run trade which is not
material to Group numbers (note 26).
4 EMPLOYEES
The average monthly number of persons (including directors)
employed by the Group during the year, analysed by category, was as
follows:
2012 2011
Number Number
------------------------------- ------- -------
Sales and marketing 52 49
Content and production 57 62
Administration and management 31 44
140 155
=============================== ======= =======
Their aggregate remuneration comprised:
2012 2011
GBP'000 GBP'000
------------------------------------- -------- --------
Wages and salaries 5,068 5,119
Social security costs 538 508
Pension costs 27 26
Equity-settled share-based payments
and related costs 144 69
5,777 5,722
===================================== ======== ========
This remuneration is included in other operating expenses except
for GBP181,000 (2011: GBP207,000) included in cost of sales -
direct costs, GBP127,000 (2011: GBP106,000) included in cost of
sales - marketing expenses, GBP26,000 (2011: GBP171,000) included
in restructuring cost accruals, GBPnil (2011: GBP167,000) included
in goodwill as accrued in acquisition entities' balance sheets
prior to completion, GBP214,000 (2011: GBP63,000) capitalised in
the inventory for book development and GBP404,000 (2011:
GBP273,000) capitalised in the tangible fixed asset for web site
development.
4 EMPLOYEES (continued)
The Group considers that the Board of Directors are the key
management personnel. Their remuneration is summarised below:
Directors' Salaries
emoluments and Benefits 30 November 30 November
fees Bonus in kind Pension 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- -------- --------- -------- ------------ ------------
Executive Directors
J Turner 139 25 - 1 165 135
Q Brocklebank 120 18 - - 138 116
Non-executive
Directors
P Rigby 12 - - - 12 12
S Routledge 10 - - - 10 10
281 43 - 1 325 273
--------------------- --------- -------- --------- -------- ------------ ------------
There were no retirement benefits accruing for the
Directors.
No Directors (2011: none) exercised share options in the year
and so no gains were made (2011: no gains). The amount for share
based payment charges (note 28) which relates to Directors was
GBP138,000 (2011: GBP80,000).
Shares are receivable under long term incentive schemes in
respect of 2 Directors (2011: 2 Directors). J Turner has maximum
numbers of options that could vest subject to performance
conditions of 11,950,000 under the Share Price Growth Scheme (2011:
2,250,000 under the Profit Growth Plan and 11,950,000 under the
Share Price Growth Scheme) and Q Brocklebank has 7,170,000 under
the Share Price Growth Scheme (2011: 1,875,000 under the Profit
Growth Plan and 7,170,000 under the Share Price Growth Scheme). The
schemes are defined in note 28.
5 ADJUSTED PROFIT
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. The adjustments add back items which
have no cash impact or are not trade related and of a non-recurring
type.
Adjusted numbers exclude amortisation and impairment of goodwill
and intangible assets, restructuring and acquisition-related costs,
and share based payment costs, as well as the tax impact of those
adjusting items and any non-cash tax charges. Non-cash tax charges
relate to movements on deferred tax such as the use of tax losses
or tax credits from the recognition of tax losses
The Group incurred restructuring costs in 2012 of GBP201,000
which relate to the disposal of the trade: 'The School Run',
funding advice in advance of the fundraising in the year and
changes at Board level where processes were started in 2012.
The acquisition-related credits in 2012 totalling GBP687,000
result from reductions in provisions held for contingent
consideration on both the Radcliffe Publishing Limited and the
Ikonami Limited acquisitions (note 21).
In 2011 significant costs were incurred as it restructured its
business in response to the continued market difficulties in the
education sector, removing redundant staff positions and
significantly scaling back its education book list. Also, a lease
break clause was activated on its second property where the
inventory was stored and fulfilled and the decision taken to
outsource those functions. The restructuring costs of GBP1,259,000
included a provision against inventory of GBP899,000, which
followed the various policy changes and market shifts that made
some resources redundant and many non-core, and restructuring costs
of GBP360,000 which related to staff redundancies and the costs of
outsourcing the Group's inventory and relocating the remaining
staff to a smaller office only premises.
In 2011 the acquisition-related costs totalling GBP36,000
related to the acquisitions of the entire share capitals of Ikonami
Limited in April 2011 and of Radcliffe Publishing Limited in
November 2010 together with the buy-out of a contract partner in
the Group's gaming sector in January 2011. The costs included stamp
duty, Bank approval charges and professional advisory fees but net
of monies received back from the vendors of Radcliffe Publishing
Limited which were not provided on acquisition (note 26).
The 2012 and 2011 restructuring and 2011 acquisition-related
costs (gross of the monies received back from the vendors) but not
the 2012 acquisition-related credits were considered to be taxable
items for corporation tax and thus attributable tax has been
included in the period at 25% (2011: 27%) of their value. All other
adjusting items do not have a tax affect on the Group.
5 ADJUSTED PROFIT (continued)
2012 2011
Note GBP'000 GBP'000
------------------------------------------- ----- -------- --------
OPERATING PROFIT / (LOSS) FOR THE
YEAR 253 (4,593)
Amortisation of intangible assets 8 955 957
Impairment expense 8 300 3,751
Acquisition-related and restructuring
credits and costs (486) 1,295
Share based payment charges 144 69
Adjusting items to operating profit 913 6,072
Adjusted operating profit for the
year 1,166 1,479
Depreciation 8 127 115
Adjusted earnings before interest,
tax, depreciation and amortisation
for the year 1,293 1,594
=========================================== ===== ======== ========
PROFIT / (LOSS) BEFORE TAX FOR
THE YEAR 173 (4,684)
Adjusting items to operating profit 913 6,072
Adjusting items to profit before
tax 913 6,072
Adjusted profit before tax for
the year 1,086 1,388
=========================================== ===== ======== ========
PROFIT / (LOSS) FOR THE YEAR ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT 111 (4,551)
Adjusting items to profit before
tax 913 6,072
Attributable tax expense on adjusting
items (50) (378)
Exclude movements on deferred tax
assets and liabilities taken to
income statement 15 (185) (418)
Adjusting items to profit for the
year 678 5,276
Adjusted profit for the year 789 725
=========================================== ===== ======== ========
6 FINANCE COSTS
2012 2011
GBP'000 GBP'000
------------------------------------- -------- --------
Bank loans and overdrafts 77 75
Unwinding of discount on provisions 3 17
80 92
===================================== ======== ========
7 FINANCE INCOME
2012 2011
GBP'000 GBP'000
-------------------------- --------- --------
Bank interest receivable - 1
========================== ========= ========
8 PROFIT / (LOSS) BEFORE TAXATION
2012 2011
GBP'000 GBP'000
----------------------------------------- -------- --------
Profit / (loss) before taxation is
stated after charging:
Depreciation and amounts written off
property, plant and equipment - owned
assets 127 115
Amortisation of intangible fixed assets 955 957
Impairment charges and reduction to
goodwill 300 3,751
Operating lease rentals:
- Land and buildings 217 258
- Plant and equipment 19 21
Share based payment charges 144 69
Loss on foreign exchange 16 3
========================================= ======== ========
Other operating expenses as disclosed on the face of the income
statement include staff costs (note 4) of GBP4,825,000 (2011:
GBP4,735,000) and premises costs of GBP426,000 (2011:
GBP519,000).
The goodwill from acquisitions were impaired by GBP300,000
(2011: GBP3,600,000) as detailed in note 11 but intangible assets
from acquisitions were not impaired (2011: GBPnil) as detailed in
note 12. The goodwill has also been reduced by recognition of tax
losses pre-dating acquisition of the entity by the Group by amounts
of GBP263,000 (2011: GBPnil) against deferred tax (note 15) and
GBPnil (2011: GBP151,000) through the income statement.
Amounts payable to KPMG Audit Plc and their associates in
respect of both audit and non-audit services are as follows:
2012 2011
GBP'000 GBP'000
------------------------------------------- -------- --------
Fees payable to the company's auditor
for the audit of the company's annual
accounts 34 31
Fees payable to the company's auditor
and its associates for other services:
- the audit of the company's subsidiaries
pursuant to legislation 45 41
- other services relating to taxation 33 32
- services relating to corporate finance
transactions involving the company
or its subsidiaries 1 4
- other services 9 1
------------------------------------------- -------- --------
122 109
=========================================== ======== ========
Fees in respect of other services in 2012 related to the first
year of iXBRL filing of the Group's tax returns with the HMRC and
in 2011to the transfer of a subsidiary's trade within the
Group.
9 TAXATION
2012 2011
GBP'000 GBP'000
--------------------------------------------- -------- --------
Current tax:
UK corporation tax on profits of the
year 135 144
Adjustment to prior year (4) 28
Overseas tax suffered - 1
Total current tax 131 173
Deferred taxation:
Origination and reversal of timing
differences (250) (440)
Adjustment to prior year 65 22
Total deferred tax (note 15) (185) (418)
Tax on profit / loss on ordinary activities (54) (245)
============================================= ======== ========
UK corporation tax is calculated at 24.7% as 26% for the first
four months of the financial year and then 24% for the remainder
(2011: 26.7% as 28% for the first four months of the financial year
and then 26% for the remainder) of the estimated assessable profit
for the year. Taxation for other jurisdictions is calculated at the
rates prevailing in the relevant jurisdictions.
9 TAXATION (continued)
The Finance Act 2011 included legislation to reduce the main
rate of corporation tax from 26% to 24% from 1 April 2012. The
March 2012 UK Budget Statement announced a number of further
changes to the UK corporation tax system. Legislation is expected
to reduce the main rate of corporation tax to 23% in the Finance
Act 2012 and a further 1% reduction in the following year. Of these
further changes only the reduction to 23% had been substantially
enacted at the balance sheet date and is therefore included in
these financial statements and reflected in the above table as an
adjustment to prior year deferred tax. The further expected
reductions will reduce the company's future current tax charge if
enacted.
The total tax charge can be reconciled to the accounting profit
as follows:
Factors affecting tax charge 2012 2011
for the year
GBP'000 % GBP'000 %
----------------------------------------- -------- ----- -------- -----
Profit / (loss) on ordinary activities
before tax 280 (4,684)
Profit / (loss) on ordinary activities
multiplied at the standard rate
of corporation tax in the UK
of 24.7% (2011 - 26.7%) 69 25 (1,250) 27
Effect of:
(Credits) / expenses not deductible
for tax purposes (principally
acquisition-related credits and
costs and amortisation and impairment) (18) (7) 927 (20)
(Reduction to) / recognition
of tax losses for prior years (202) (72) 9 -
(Over) / under provision in prior
year 61 22 50 (1)
Share based payments 36 13 18 -
Overseas taxation - - 1 -
Tax (credit) / expense and effective
rate for the year (54) (19) (245) 5
========================================= ======== ===== ======== =====
10 EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on the
following:
2012 2011
Number Number
------------------------------------- ------------ ------------
Weighted average number of shares 321,469,843 298,870,057
Adjustment in respect of SIP shares (1,111,235) (1,400,064)
Weighted average number of shares
used in basic earnings per share
calculations 320,358,608 297,469,993
------------------------------------- ------------ ------------
Dilutive effect of share options 1,955,076 2,126,976
Weighted average number of shares
used in diluted earnings per share
calculations 322,313,684 299,596,969
------------------------------------- ------------ ------------
2012 2011
GBP'000 GBP'000
------------------------------------- -------- --------
Basic and diluted earnings 111 (4,551)
Adjustment to earnings (Note 5) 678 5,276
------------------------------------- -------- --------
Adjusted basic and diluted earnings
figure 789 725
------------------------------------- -------- --------
Earnings per share
Basic earnings per share 0.03p (1.53)p
===================================== ======== ========
Diluted earnings per share 0.03p (1.52)p
===================================== ======== ========
Adjusted earnings per share
Adjusted basic earnings per share 0.25p 0.24p
===================================== ======== ========
Adjusted diluted earnings per share 0.24p 0.24p
===================================== ======== ========
11 GOODWILL
Group
2012 2011
GBP'000 GBP'000
---------------------------------------------- -------- --------
Cost
1 December 11,211 10,059
Acquisition of subsidiaries - 977
Additional goodwill recognised during
the year relating to prior year acquisition - 175
30 November 11,211 11,211
---------------------------------------------- -------- --------
Accumulated impairment losses
1 December 4,828 1,077
Reduction to goodwill 263 151
Impairment losses for the year 300 3,600
30 November 5,391 4,828
---------------------------------------------- -------- --------
Carrying amount
30 November 5,820 6,383
============================================== ======== ========
Goodwill by segment
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units ('CGU') that are expected
to benefit from that business combination. CGU are identified as
individual operating units with specific market and product types,
usually derived from the original acquisition. The carrying amount
has been allocated to the operating segments as follows:
2011 Additions Impairment Reduction 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- ---------- ----------- ---------- --------
Education 1,874 - - - 1,874
Health 2,276 - (300) - 1,976
Sport & Gaming 2,233 - - (263) 1,970
Group overheads - - - - -
----------------- -------- ---------- ----------- ---------- --------
6,383 - (300) (263) 5,820
================= ======== ========== =========== ========== ========
A reduction to goodwill of GBP263,000 has been posted in the
period to derecognise deferred tax on amortisation as subsequently
determined as allowable. In 2011 GBP151,000 was booked in relation
to the acquisition of DMWSL 370 Limited. The entity contained
substantial unrecognised tax losses at the time of acquisition
which as they are subsequently recognised cause a reduction of the
goodwill calculated at the acquisition date. This is solely because
more value is recognised on the assets acquired and hence the
goodwill value becomes less rather than any deterioration in the
value of the business.
Impairment testing methodology
The Group tests each CGU' goodwill for impairment annually or
more frequently if there are indications that goodwill might be
impaired. The impairments in the periods reported are as disclosed
in note 8.
The recoverable amounts of the CGU are determined from value in
use calculations which are estimated using a discounted cash flow
model. The Group prepares cash flow forecasts derived from the most
recent financial budgets approved by management for the next 2
years and extrapolates further cash flows based on estimated
long-term growth in gross domestic product of 3%. The rates do not
exceed the average long-term growth rate for the relevant markets.
The pre-tax rate used to discount the cash flows for all CGU is
8.3% (2011: 8.3%) and is consistent with the Group's weighted
average cost of capital. All CGU are information provision
businesses consolidated within the same Group and so with the same
financing and structure risks.
The key assumptions across the CGU for the value in use
calculations are those regarding revenue growth, profit margin,
cash conversion, discount rate and terminal growth rate. The Group
has formally approved the budgets used for the initial two years.
The terminal growth rates are based on industry growth forecasts
and long-term growth in gross domestic product. Management estimate
discount rates using post-tax rates that reflect current market
assessments of the time value of money and the risks specific to
the CGU.
Impairment testing of goodwill
In 2012 one CGU has been deemed to be impaired reflecting the
tough current trading environment that Radcliffe Solutions
(formerly Ikonami) endures at present, as explained in the Chief
Executive's statement. On considering sensitivities if the discount
factor were increased by 0.5% then there would be no further
impairment. There are no other significant factors to be considered
that would cause impairment. Forecast results would need to fall by
over 5% before impairment would be required on the Radcliffe
Publishing GBP856,000 asset, but on the other assets not until the
results are sensitised by over 60%.
12 INTANGIBLE ASSETS
Group Company
Other
Publishing acquired Web Computer Web Computer
titles assets design software Total design software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ----------- ---------- -------- ---------- -------- -------- ---------- --------
Cost
1 December
2010 4,271 185 665 157 5,278 301 43 344
Acquisition
of subsidiaries 571 - - - 571 - - -
Additions - 1,050 324 145 1,519 10 95 105
Disposals - - (188) (27) (215) (188) (10) (198)
30 November
2011 4,842 1,235 801 275 7,153 123 128 251
Additions - - 408 21 429 53 13 66
Disposals - - (150) (96) (246) - - -
------------------ ----------- ---------- -------- ---------- -------- -------- ---------- --------
30 November
2012 4,842 1,235 1,059 200 7,336 176 141 317
------------------ ----------- ---------- -------- ---------- -------- -------- ---------- --------
Amortisation
1 December
2010 2,229 185 306 133 2,853 198 21 219
Charge for
the year 463 307 164 23 957 59 17 76
Disposals - - (188) (27) (215) (188) (10) (198)
30 November
2011 2,692 492 282 129 3,595 69 28 97
Charge for
the year 329 350 216 60 955 59 42 101
Disposals - - (90) (96) (186) - - -
30 November
2012 3,021 842 408 93 4,364 128 70 198
------------------ ----------- ---------- -------- ---------- -------- -------- ---------- --------
Carrying
amount
30 November
2012 1,821 393 651 107 2,972 48 71 119
================== =========== ========== ======== ========== ======== ======== ========== ========
30 November
2011 2,150 743 519 146 3,558 54 100 154
================== =========== ========== ======== ========== ======== ======== ========== ========
The Group tests the assets annually for impairment or more
frequently if there are indications that they might be impaired
following the impairment methodology set out in note 11. As
disclosed in note 8 no impairment of the assets in 2012 was deemed
necessary (2011: GBPnil). If the discount factor were increased by
0.5% there would be no impact on impairment at the 2012 balance
sheet date (2011: GBPnil).
Of the significant publishing title carrying values:
-- GBP571,000 relates to Radcliffe Publishing (acquired in
November 2010) and is attributable to book and journal titles
assessed by a net present value of their future expected cash flows
over ten years;
-- GBP771,000 relates to over three hundred product title rights
acquired as part of the Speechmark Publishing Limited acquisition
which have been reviewed individually for impairment and are seen
not to be impaired; and
-- GBP479,000 relates to the trade of Ikonami (Radcliffe Solutions) in the health sector.
The addition to other acquired assets in 2011 is the Group
buying a third party out of a profit share contract in its iGaming
affiliate marketer events for cash consideration of GBP1,050,000.
There were no assets taken on as part of this deal. The carrying
value is GBP393,000 (2011: GBP743,000).
In web design the major additions in 2011 and 2012 relate to the
development of improved e-marketing tools, the conversion of the
Group's various product sites to the latest Drupal version, both
allowing the cross fertilisation of features from site to site and
improved selling ability, and continuing digital migration of the
Group's products, notably the Education online subscription
service.
13 PROPERTY, PLANT AND EQUIPMENT
Group Leasehold Fixtures,
property Computer fittings
improvements equipment & equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------------- ----------- ------------- --------
Cost
1 December
2010 394 79 98 571
Acquisition
of subsidiaries - 3 - 3
Additions 17 24 15 56
Disposals (159) (24) (27) (210)
30 November
2011 252 82 86 420
Additions 34 13 4 51
Disposals (37) (42) (14) (93)
30 November
2012 249 53 76 378
------------------ -------------- ----------- ------------- --------
Depreciation
1 December
2010 207 66 31 304
Acquisition
of subsidiaries - 2 - 2
Charged in
the year 73 14 28 115
Disposals (158) (23) (20) (201)
30 November
2011 122 59 39 220
Charged in
the year 81 24 22 127
Disposals (37) (42) (14) (93)
30 November
2012 166 41 47 254
------------------ -------------- ----------- ------------- --------
Net book value
30 November
2012 83 12 29 124
================== ============== =========== ============= ========
30 November
2011 130 23 47 200
================== ============== =========== ============= ========
Company Leasehold Fixtures,
property Computer fittings
improvements equipment & equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------------- ----------- ------------- --------
Cost
1 December
2010 356 29 56 441
Additions 2 23 4 29
Write offs (157) (16) (10) (183)
30 November
2011 201 36 50 287
Additions 2 10 4 16
Write offs - (1) (1) (2)
30 November
2012 203 45 53 301
---------------- -------------- ----------- ------------- --------
Depreciation
1 December
2010 176 19 14 209
Charged in
the year 66 13 16 95
Write offs (157) (16) (10) (183)
30 November
2011 85 16 20 121
Charged in
the year 66 17 18 101
Write offs - (1) (1) (2)
30 November
2012 151 32 37 220
---------------- -------------- ----------- ------------- --------
Net book value
30 November
2012 52 13 16 81
================ ============== =========== ============= ========
30 November
2011 116 20 30 166
================ ============== =========== ============= ========
14 INVESTMENTS
The Company holds more than 20% of the share capital of the
following companies, all of which are incorporated in England:
Class % of Nature of
Subsidiary of shareholding shares business
undertakings: held
----------------------------- ----------------- -------- -----------
Optimus Professional Ordinary 100% Publisher
Publishing Limited
SBG Companies Ordinary 100% Publisher
Limited
I-Gaming Business Ordinary 70% Publisher
Limited *
Incentive Ordinary 100% Mail order
Plus Limited
P2P Publishing Limited Ordinary 100% Publisher
Speechmark Publishing Ordinary 100% Publisher
Limited
Radcliffe Publishing Limited Ordinary 100% Publisher
Radcliffe Solutions Limited Ordinary 100% Software
provider
* Indirectly held
Company 2012 2011
Shares Loans Shares Loans
in subsidiary to subsidiary in subsidiary to subsidiary
undertakings undertakings Total undertakings undertakings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------------- --------------- -------- --------------- --------------- --------
Cost:
At 1 December 10,999 2,595 13,594 10,219 2,595 12,814
Additions 2,792 - 2,792 780 - 780
At 30 November 13,791 2,595 16,386 10,999 2,595 13,594
----------------- --------------- --------------- -------- --------------- --------------- --------
Amounts written
off:
At 1 December 5,569 - 5,569 2,806 - 2,806
Impairment
in the year 3,420 - 3,420 2,763 - 2,763
----------------- --------------- --------------- -------- --------------- --------------- --------
At 30 November 8,989 - 8,989 5,569 - 5,569
----------------- --------------- --------------- -------- --------------- --------------- --------
Net book
value:
----------------- --------------- --------------- -------- --------------- --------------- --------
At 30 November 4,802 2,595 7,397 5,430 2,595 8,025
================= =============== =============== ======== =============== =============== ========
The Company acquired Radcliffe Solutions Limited in 2011 (note
26). This was for cash consideration of GBP65,000, with deferred
consideration of GBP236,000 and contingent consideration provided
at GBP550,000 net of GBP71,000 notional interest adjustment
provided at acquisition date.
The Group tests the investments annually for impairment or more
frequently if there are indications that they might be impaired
following the impairment methodology set out in note 11. In 2012
two investments were deemed to be impaired as explained below. The
other investments require substantial decreases in their 2013
forecast cash flows to be calculated as impaired. On investments a
0.5% increase in the discount factor would have no impact and
forecast results would need to reduce by over 5% before any further
impairment is due and then on Radcliffe Publishing investment
only.
In 2012 two (2011: two) trading investments were fully impaired
due to the inherent uncertainty in a turnaround happening in their
trading. In 2012 the carrying value for Radcliffe Solutions
(formerly Ikonami) has been deemed to be impaired by GBP300,000
reflecting the tough current trading environment that endures at
present, as explained in the Chief Executive's statement. Also the
Special Education Publishing asset has been fully impaired at a
charge of GBP328,000 as, while valuable to the Education division's
product range, the results are not sufficiently certain to improve
in the short-term so as to not write down its value.
The addition in 2012 reflects a capital contribution to a
subsidiary as its balances owed to group undertakings were written
down in the year. The entity's trade was then disposed of (note 26)
and so the same amount was then impaired.
15 DEFERRED TAX
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- -------- -------- --------
Deferred tax assets
Current 669 537 131 110
Non-current 352 373 - -
----------------------------- -------- -------- -------- --------
1,021 910 131 110
----------------------------- -------- -------- -------- --------
Deferred tax liabilities
Current (168) (180) (1) (3)
Non-current (251) (546) - -
----------------------------- -------- -------- -------- --------
(419) (726) (1) (3)
----------------------------- -------- -------- -------- --------
Net position at 30 November 602 184 130 107
============================= ======== ======== ======== ========
Group Goodwill
and
Capital Tax Intangible
allowances losses assets Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------ -------- ------------ -------- --------
1 December 2010 2 619 (571) 152 202
Credit / (charge)
to income for the
year - 188 254 (24) 418
Charge to equity
for the year - - - (31) (31)
Acquisition - - (405) - (405)
30 November 2011 2 807 (722) 97 184
------------------------ ------------ -------- ------------ -------- --------
Credit / (charge)
to income for the
year 163 (45) 42 25 185
Charge to equity
for the year - - - (30) (30)
Prior year acquisition
adjustment (note
11) - - 263 - 263
30 November 2012 165 762 (417) 92 602
------------------------ ------------ -------- ------------ -------- --------
There are accumulated losses of GBP13,009,000 (2011:
GBP12,752,000) which, subject to agreement with the HM Revenue
& Customs, are available to offset future profits of the same
trade. Of this the Group has not recognised tax losses of
GBP9,696,000 (2011: GBP9,523,000) as the probability that future
taxable profits beyond five years will be available cannot be
certain.
Company Capital Tax
allowances losses Other Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------ -------- -------- --------
1 December 2010 - - 134 134
Credit / (charge) to income
for the year - 25 (21) 4
Charge to equity for the
year - - (31) (31)
30 November 2011 - 25 82 107
----------------------------- ------------ -------- -------- --------
Credit / (charge) to income
for the year 54 (25) 24 53
Charge to equity for the
year - - (30) (30)
30 November 2012 54 - 76 130
----------------------------- ------------ -------- -------- --------
16 INVENTORIES
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- --------
Book inventories 1,648 1,284 - -
=================== ======== ======== ======== ========
Inventories were written down by GBP30,000 (2011: GBP950,000),
with GBP30,000 (2011: GBPnil) included within cost of sales and
GBPnil (2011: GBP950,000) included as a restructuring charge (note
5), from a carrying amount of GBP30,000 (2011: GBP1,161,000) down
to GBPnil (2011: GBP211,000).
17 TRADE AND OTHER RECEIVABLES
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------- -------- -------- --------
Due within one year:
Trade receivables 1,827 1,838 - -
Amounts owed by group undertakings - - 3,536 3,460
Other receivables 298 262 228 637
Prepayments and accrued
income 593 565 169 185
------------------------------------ -------- -------- -------- --------
2,718 2,665 3,933 4,282
Due in more than one year:
Other receivables - - - -
------------------------------------ -------- -------- -------- --------
2,718 2,665 3,933 4,282
==================================== ======== ======== ======== ========
The average credit period taken on sales of goods is 46 days
(2011: 40 days). Standard terms are thirty days but many of the
Group's goods and services, such as subscription renewals, will be
invoiced in advance of the term. An allowance is maintained for
estimated irrecoverable amounts from the sale of goods (note 22)
and has been made with reference to past default experience. The
Directors consider that the carrying amount of trade and other
receivables approximates to their fair values.
The Group's exposure to credit risk and impairment losses
related to trade and other receivables are disclosed in note
22.
The Group holds no collateral against these receivables at the
balance sheet date and charges no interest on its overdue
receivables.
18 BORROWINGS
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
------------- -------- -------- -------- --------
Non-current
Bank loans 475 750 475 750
------------- -------- -------- -------- --------
475 750 475 750
------------- -------- -------- -------- --------
Current
Bank loans 400 375 400 375
400 375 400 375
------------- -------- -------- -------- --------
875 1,125 875 1,125
============= ======== ======== ======== ========
The effective interest rates and applicable balances at the
balance sheet dates are as follows:
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------
Bank overdraft facility - - - -
(2.25% over the lending
Bank's base rate)
Bank loans (4.25% over
LIBOR) 875 1,125 875 1,125
875 1,125 875 1,125
========================== ======== ======== ======== ========
18 BORROWINGS (continued)
At 30 November there were the following committed undrawn
borrowing facilities expiring as follows:
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------
In one year or less - Bank
overdraft facility 750 750 750 750
============================ ======== ======== ======== ========
The weighted average interest rate implicit in the group's bank
loans at 30 November 2012 was 5.41% (2011: 4.88%) and the weighted
average period until maturity was 1.7 years (2011: 1.8 years). The
Directors estimate that the fair value of the Group's borrowings is
not significantly different to the carrying value.
The bank overdraft facility for GBP750,000 (2011: GBP750,000)
is, when utilised, repayable on demand.
The bank loan is guaranteed by material subsidiaries of the
Group.
It has been renegotiated in January 2013 and is repayable over
3.5 years ending in May 2016 (2011: repayable over 4 years ending
in November 2014 and in equal annual amounts of GBP375,000 payable
as one third in May and two thirds in November). The repayment
profile is given in note 22.
19 TRADE AND OTHER PAYABLES
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Trade payables 885 1,113 52 151
Amounts due to group undertakings - - 4,564 2,774
Other payables 419 250 328 179
Accruals 1,465 1,640 394 399
Total current 2,769 3,003 5,338 3,503
=================================== ======== ======== ======== ========
Trade, other payables, and accruals principally comprise amounts
outstanding for trade and ongoing costs. The average credit period
taken for trade purchases is 43 days (2011: 32 days).
20 DEFERRED INCOME
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Subscription and events
fees received in advance 2,444 2,732 - -
=========================== ======== ======== ======== ========
21 PROVISIONS
The provisions relate to contingent consideration for various
acquisitions of subsidiaries.
Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- --------
1 December 932 258 932 258
Increase in year 1 715 1 715
Release of provisions in
year (687) - (687) -
Utilised during the year (29) (58) (29) (58)
Unwinding of discount 3 17 3 17
--------------------------------- -------- -------- -------- --------
30 November 220 932 220 932
================================= ======== ======== ======== ========
Included in current liabilities 125 - 125 -
================================= ======== ======== ======== ========
Included in non-current
liabilities 95 932 95 932
================================= ======== ======== ======== ========
In 2010 a provision of GBP257,000 was made for the contingent
consideration relating to the acquisition of Radcliffe Publishing
Limited which could be payable in 2013 based on results in the 2012
financial year, with a maximum payable of GBP800,000. The provision
has been reduced in 2012 to an expected payment in 2013 of
GBP50,000.
In 2011 further provisions were made in relation to the
acquisition of Radcliffe Solutions, formerly Ikonami Limited, (note
26) representing GBP150,000 payable in January 2013 and an earn out
payable in 2014 based on results in the 2013 financial year where
maximum payable is GBP1,850,000 and GBP550,000 was provided net of
a notional interest discount of GBP71,000 which is unwinding
through to the payment date. The January 2013 provision has been
reduced by a working capital adjustment to GBP75,000 and the 2014
provision has been reduced to GBP100,000 net of the corresponding
reduction to notional interest.
The provision releases are reflected in acquisition-related
credits in the income statement.
22 FINANCIAL INSTRUMENTS
The Group's activities expose the Group to a number of risks
including capital risk management, market risk (foreign currency
risk and interest rate risk), liquidity risk and credit risk. The
policies for managing these risks are regularly reviewed and agreed
by the Board.
It is, and has been throughout the year under review, the
Group's policy that no trading in financial instruments shall be
undertaken.
Capital management
The Group's main objective when managing capital is to protect
returns to shareholders by ensuring the Group will continue to
trade in the foreseeable future. The Group also aims to maximise
its capital structure of debt and equity so as to minimise its cost
of capital. The Group in particular reviews its levels of borrowing
(note 18) and the repayment dates, setting these out against
forecast cash flows and reviewing the level of available funds.
The capital structure of the Group consists of debt, cash and
cash equivalents and equity attributable to holders of the parent,
comprising issued share capital, reserves and retained earnings.
Consistent with others in the industry, the Group reviews the
gearing ratio to monitor the capital. This ratio is calculated as
the net debt divided by total capital. Net debt is calculated as
total borrowings less cash and cash equivalents. Total capital is
calculated as equity (including capital, reserves and retained
earnings). This gearing ratio will be considered in the wider
macroeconomic environment. With the current restraints on the
availability of finance and economic pressures the Group has
lowered its gearing ratio expectations and has reduced debt
considerably in the last five years.
22 FINANCIAL INSTRUMENTS (continued)
Categories of financial instruments
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised in respect of each class of financial asset, financial
liability and equity instrument are disclosed in Note 1 to the
financial statements.
Group Company
2012 2011 2012 2011
Notes GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Loans and receivables
Trade receivables 17 1,827 1,838 - -
Other receivables 17 298 262 3,764 4,097
Accrued income 112 78 - -
Cash and cash equivalents 27 983 305 750 10
Total financial assets 3,220 2,483 4,514 4,107
--------------------------------- ------ -------- -------- -------- --------
Financial liabilities
Amortised cost
Bank loans 18 875 1,125 875 1,125
Current tax liabilities 80 47 - -
Trade payables 19 885 1,113 52 151
Other payables 19 419 250 4,892 2,953
Accruals 19 1,465 1,640 394 399
Contingent consideration 21 220 932 220 932
Deferred income 20 2,444 2,732 - -
Total financial liabilities 6,388 7,839 6,433 5,560
--------------------------------- ------ -------- -------- -------- --------
Liquidity risk
Cash balances are placed so as to maximise interest earned while
maintaining the liquidity requirements of the business. When
seeking borrowings, the Directors consider the commercial terms
available and, in consultation with their advisers, consider
whether such terms should be fixed or variable and are appropriate
to the business. The Directors review the placing of cash balances
on an ongoing basis. Any surplus cash balances during the year were
kept in standard accounts at standard bank interest rates. The
financial assets of the group at 30 November 2012 were mainly
designated in sterling and earned floating rate standard bank
interest. These are disclosed under cash at bank and in hand of
GBP983,000 (2011: GBP305,000).
The Group would normally expect that sufficient cash is
generated in the operating cycle to meet the contractual cash flows
through effective cash management. In addition, the Group maintains
a committed undrawn bank facility of GBP750,000 (2011: GBP750,000)
which can be accessed as considered necessary. This facility is
subject to annual renewal and any borrowings under it are repayable
on demand.
Interest rate risk
The Group and company's interest rate exposure arises mainly
from the interest bearing borrowings. Contractual agreements
entered into at floating rates expose the entity to cash flow risk
while any fixed rate borrowings would expose the entity to fair
value risk.
The tables below show the Group's financial assets and
liabilities split by those bearing fixed and floating rates and
those that are non-interest bearing.
22 FINANCIAL INSTRUMENTS (continued)
Floating Non-interest
Interest rate risk rate bearing Total
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- ------------- --------
At 30 November 2012
Cash and cash equivalents 983 - 983
Trade and other receivables - 2,237 2,237
--------------------------------------- --------- ------------- --------
983 2,237 3,220
======================================= ========= ============= ========
Current tax liabilities - 80 80
Trade and other payables - 2,769 2,769
Deferred income - 2,444 2,444
Borrowings 875 - 875
Provisions - contingent consideration - 220 220
875 5,513 6,388
======================================= ========= ============= ========
At 30 November 2011
Cash and cash equivalents 305 - 305
Trade and other receivables - 2,178 2,178
--------------------------------------- --------- ------------- --------
305 2,178 2,483
======================================= ========= ============= ========
Current tax liabilities - 47 47
Trade and other payables - 3,003 3,003
Deferred income - 2,732 2,732
Borrowings 1,125 - 1,125
Provisions - contingent consideration - 932 932
1,125 6,714 7,839
======================================= ========= ============= ========
The Group has derived a sensitivity analysis based on a 1%
change in the floating interest rate:
2012 2011
GBP'000 GBP'000
-------------------------------------- -------- --------
Impact on equity and profit after
tax
1% increase in base rate of interest (9) (11)
1% decrease in base rate of interest 9 11
-------------------------------------- -------- --------
The undiscounted contractual cash flows, including interest
payments, are set out in the tables below.
UNDISCOUNTED CONTRACTUAL
CASH FLOWS
Between Between
In less one two
than and and
one two five
Group year years years Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------
Bank loans 440 148 368 956
Contingent consideration 125 100 - 225
Other liabilities 5,293 - - 5,293
At 30 November 2012 5,858 248 368 6,474
========================== ======== ======== ======== ========
Bank loans 389 388 381 1,158
Contingent consideration 29 407 550 986
Other liabilities 5,782 - - 5,782
At 30 November 2011 6,200 795 931 7,926
========================== ======== ======== ======== ========
22 FINANCIAL INSTRUMENTS (continued)
UNDISCOUNTED CONTRACTUAL
CASH FLOWS
Between Between
In less one two
than and and
one two five
Company year years years Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------
Bank loans 440 148 368 956
Contingent consideration 125 100 - 225
Other liabilities 5,338 - - 5,338
At 30 November 2012 5,903 248 368 6,519
========================== ======== ======== ======== ========
Bank loans 389 388 381 1,158
Contingent consideration 29 407 550 986
Other liabilities 3,503 - - 3,503
At 30 November 2011 3,921 795 931 5,647
========================== ======== ======== ======== ========
The terms, security and repayment information on these
borrowings are given in note 18. Contingent consideration and other
liabilities are not interest bearing and unsecured.
Foreign exchange risk
The Group and Company operates principally in the United Kingdom
and as such the majority of the Group and Company's financial
assets and liabilities are denominated in sterling and there is no
material exposure to exchange risks.
The Group and Company does suffer some exposure to exchange risk
as a proportion of its business is overseas. Where the Group and
Company enters into significant contracts denominated in overseas
currencies it is not currently the Group and Company's policy to
mitigate exchange risk by entering into forward currency contracts.
The Group and Company attempt to mitigate its exposure by
offsetting liabilities against foreign currency receipts as far as
is possible.
Credit risk
The Group's principal financial assets are cash and cash
equivalents, trade and other receivables and accrued income which
represent the Group's maximum exposure to credit risk in relation
to financial assets.
The Group's credit risk primarily relates to trade and other
receivables and accrued income. The amounts presented in the
balance sheet are net of allowances for doubtful receivables, as
estimated by the Group's management.
The credit risk on liquid funds is limited because the
counterparties are banks with high credit ratings assigned by
international credit rating agencies.
The Group has no significant concentration of credit risk, with
exposure spread over a large number of counterparties and
customers.
The following table provides analysis of trade receivables that
were past due at 30 November, but not impaired. The Group believes
that the balances are ultimately recoverable based on a review of
past payment history and the current financial status of the
customers.
Ageing of receivables past due but
not impaired
2012 2011
GBP'000 GBP'000
------------------------------------ -------- --------
30-60 days 381 560
60-90 days 220 258
90-120 days 43 57
Greater than 120 days 23 -
------------------------------------ -------- --------
667 875
==================================== ======== ========
The Group's policy is that debt is payable within 30 days. The
older debt above will include items billed, such as conferences and
subscription renewals, ahead of the delivery so some payments may
be held back.
22 FINANCIAL INSTRUMENTS (continued)
Movement in the provision for impairment for trade
receivables:
2012 2011
GBP'000 GBP'000
---------------------------------------- -------- --------
Opening balance at 1 December (360) (580)
Net credit to Income Statement in year 81 220
Closing balance at 30 November (279) (360)
========================================= ======== ========
Fair value
The Directors consider that the fair values of the Group's
financial instruments do not significantly differ from their book
values.
23 SHARE CAPITAL
The Company does not have an authorised share capital in either
year.
Allotted, issued and fully paid: 2012 2011
Ordinary Ordinary
shares shares
GBP'000 GBP'000
---------------------------------- --------- ---------
As at 1 December 2,989 2,987
Issue of share capital 1,007 -
Options exercised - 2
As at 30 November 3,996 2,989
================================== ========= =========
A reconciliation of the movements in issued ordinary share
capital is as follows:
Number Total Share
of shares Share price
capital at issue
Number GBP'000 Pence
---------------- -------------------- ------------ --------- ----------
At 1 December
2010 298,717,462 2,987
24 February Exercise of share
2011 options 198,918 2 4.125p
At 30 November
2011 298,916,380 2,989
10 September Share issue at 1.5
2012 pence per share 100,665,458 1,007 1.800p
At 30 November
2012 399,581,838 3,996
====================================== ============ ========= ==========
There have been no shares issued since the year end.
24 RESERVES
The reserve for own shares relates to the employee Share
Incentive Plan (note 28 a) under which the Group owns 1,434,296
shares (2011: 1,652,094 shares).
25 NON-CONTROLLING INTEREST
The Group's non-controlling interest in both 2012 and 2011 was
composed entirely of equity interests and represents the
non-controlling interest of 30% in IGaming Business Limited.
26 BUSINESS COMBINATIONS AND DISPOSALS
Cash paid net of cash acquired:
Date of acquisition 2012 2011
GBP'000 GBP'000
----------------------------- --------------------- -------- --------
Prior year acquisitions:
Radcliffe Solutions Limited
(formerly Ikonami Limited)
(1) 14 April 2011 29 113
29 113
=================================================== ======== ========
(1) In 2011, GBP65,000 was paid on acquisition and 8 months of
12 monthly instalments of deferred consideration totalling
GBP86,000 but net of cash in the business of GBP10,000 as below. In
2012 the remaining 4 months of deferred consideration were
paid.
Ikonami Limited ("RS")
On 14 April 2011 the Group acquired 100% of the issued share
capital of RS for an initial consideration of GBP65,000 and renamed
it Radcliffe Solutions Limited. There are two tranches of deferred
consideration payable with GBP86,000 paid over 12 equal monthly
instalments from the month of acquisition and GBP75,000 being
payable in January 2013 (net of working capital adjustment).
Contingent consideration is payable in 2014 based on EBITA for the
year to 30 November 2013 and is reflected below net of notional
interest discount which will unwind through to payment date (note
21).
Fair
RS value Fair
Book value adjustments value
GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- ------------- --------
Intangible assets 95 476 571
Property, plant and equipment 1 - 1
Trade and other receivables 288 - 288
Cash and cash equivalents 10 - 10
Trade payables and other payables (460) - (460)
Deferred income (202) - (202)
Deferred tax - amortisation - (143) (143)
Net assets (268) 333 65
Goodwill 1,048 (333) 715
Total consideration 780 - 780
======================================== =========== ============= ========
Satisfied by:
Consideration - cash and cash
equivalents 65 - 65
Deferred consideration tranche
1 86 - 86
Deferred consideration tranche
2 150 - 150
Contingent consideration, net
of discounting (maximum GBP2,000,000) 479 - 479
780 - 780
======================================== =========== ============= ========
The deferred consideration tranche 2 was reduced to GBP75,000
and the contingent consideration to GBP87,000 (net of discounting)
through acquisition-related credits in the income statement in the
year (note 5).
The School Run ("TSR")
On 4 April 2012 the trade of TSR was disposed of for no
consideration. This contributed revenue of GBP107,000 (30 November
2011: GBP329,000) and adjusted EBITA* (before allocation of the
central division costs) of GBP103,000 loss (30 November 2011:
GBP167,000 loss) before disposal. Post disposal the Group now
receives a licence income calculated as a percentage of revenue and
has the option to buy the trade back at a set multiple which is not
valued in the Group's balance sheet as of immaterial value to the
Group at the present date based on current trading. Due to its
immaterial size this trade has not been separated out in the
Group's income statement as a discontinued operation.
27 ANALYSIS OF CHANGES IN NET FUNDS AND DEBT
Group At 30
At 1 December Non-cash November
2011 Cash flow changes 2012
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------------- ---------- --------- ----------
Cash at bank and in
hand 305 678 - 983
Overdraft - - - -
----------------------- -------------- ---------- --------- ----------
Net cash 305 678 - 983
Bank loans due within
one year (375) 250 (275) (400)
----------------------- -------------- ---------- --------- ----------
Debt due within one
year (375) 250 (275) (400)
Bank loans due after
one year (750) - 275 (475)
Debt due after one
year (750) - 275 (475)
Net fund / (debt) (820) 928 - 108
======================= ============== ========== ========= ==========
Non-cash changes are where applicable reclassifications from due
after one year to due within one year and recognition of overdraft
positions where the right of set-off does not apply. The terms on
the debt is set out in notes 18 and 22. Further to the above debt,
the Group also has deferred and contingent consideration in respect
of acquisitions (note 21).
28 SHARE BASED PAYMENT
The Company has the following option or share ownership schemes
and warrants in issue. All the schemes use the Monte Carlo
valuation method with the exception of the Long Term Incentive Plan
which uses the Black Scholes Method. The relevant inputs for each
scheme have been outlined below:
2012 2011
------------------ ------------------------- ----------------------------
Black Monte Carlo Black Scholes Monte Carlo
Scholes
------------------ ----------- ------------ -------------- ------------
Expected life 3.00 - 3.20 - 3.00 - 3.20 -
(years) 3.25 5.00 5.00 5.00
Risk free rate 4.8039 0.0126 2.6607 0.0126
(%) - 4.9315 - 5.1720 - 4.9315 - 5.1720
Volatility (%) 30.473 39.740- 30.473 39.740-
- 31.1165 57.562 - 40.075 57.562
Dividend yield
(%) 0 0 0 0
Weighted average
share price (p) 2.10 2.10 3.80 3.80
Weighted average 1.00 1.00 - 1.00 - 1.00 -
exercise price 5.40 3.25 5.40
(p)
The volatility of the Company's share price on each date of
grant was calculated as the average of the standard deviations of
daily continuously compounded returns on the stock of the Company,
calculated back over a period commensurate with the expected life
of the option. The risk-free rate used is the yield to maturity on
the date of grant of a UK Gilt Strip, with term to maturity equal
to the expected life of the option. It was assumed that options
would be exercised within two years of the date on which they vest.
The number of options exercisable for each scheme at the year end
is based on the year end share price.
There have been no transactions with non employees.
a Share Incentive Plan
In September 2005, the Group introduced a Share Incentive Plan
and has run it in three further years (2006, 2007 and 2010). Under
this plan the employees are eligible to acquire shares in the
following ways:
-- Free Shares
-- Partnership Shares
-- Matching Shares
The Free shares are available to all eligible employees and the
shares must be held in the trust for a minimum period of 3 years
unless the employee leaves the Company, in which case the Free
shares may either be forfeited or withdrawn from the Plan.
Partnership shares are available for purchase by employees at
current market value. Employees can invest any amount from between
GBP10 - GBP1,500 (or 10% of the employee's salary if lower). The
Partnership shares will be matched by the Matching shares on a 1
for 1 basis (2 for 1 basis in 2006 and 2005).
28 SHARE BASED PAYMENT (continued)
a Share Incentive Plan (continued)
The Partnership and Matching shares will also be held in the
Trust for a minimum of 3 years unless the employee leaves the
Company in which case the Free shares may either be forfeited or
withdrawn from the Plan. All of the shares are purchased at fair
value in the market. The cash cost of the Partnership shares was
expensed in the year, see staff costs analysis in note 4. The total
fair value of the options granted in the year (excluding the paid
for Partnership shares) was GBPnil (2011: GBPnil).
2012 2011
Weighted Weighted
average average
Number exercise Number exercise
of options price of options price
------------------------------ ------------ ---------- ------------ ----------
Outstanding at the beginning
of the period 1,400,064 6.79 1,656,150 6.91
Forfeited during the period (288,829) 7.21 (256,086) 7.53
Outstanding at the end
of the period 1,111,235 6.68 1,400,064 6.79
============================== ============ ========== ============ ==========
Exercisable at the end
of the period 480,551 9.22 645,327 9.18
============================== ============ ========== ============ ==========
The weighted average remaining contractual life of share options
outstanding at the end of the period was 6 years (2011: 7 years).
The exercise price of the outstanding options ranges from 4.75 -
10.37 pence, but will have been paid at the outset on these options
and nothing will be receivable by the Group.
b Long Term Incentive Plan
In November 2007, the Group introduced a Long Term Incentive
Plan ('LTIP'), under which at that time 14 members of senior
management were granted a maximum of 5,658,824 share options
dependent on performance criteria. The options, all with an
exercise price of 1 pence, vested in February 2010 as the
performance criteria of the Company achieving an average of at
least 15% annualised adjusted earnings per share growth over the
three years to November 2009 was met, although the maximum where
growth of 25% per year was required was not. 1,957,731 of the
vested options remain (2011: 2,092,723) and the weighted average
remaining contractual life of these options is 5 years (2011: 6
years).
In 2010 a new LTIP scheme was launched in two parts, a Profit
Growth Plan ('PGP') and a Share Price Growth Scheme ('SPGS').
Under the PGP 8 members of senior management were granted a
maximum of 9,650,000 options in April 2010 to acquire shares in the
Company at nominal value under a new 2010 Company Share Option Plan
("2010 Plan"). The scheme was subject to performance conditions
relating to the growth in adjusted operating profit (note 5) in the
business unit for which the participant was responsible over the
two years to 30th November 2011 or, in the case of Directors, the
Group as a whole. Vesting rights in these options start to accrue
if profit growth exceeds certain minimum growth thresholds that
have been set for each individual business unit and ranged from 3%
to 8% per annum. The number of shares that have vested under the
Profit Growth Plan is 1,500,000 and relate to one individual
only.
Options were granted in September 2010 under the SPGS to the two
executive Directors and will be exercisable at their nominal value
of 1p subject to performance conditions which reward share price
growth from November 30th 2009 to April 2014 above a threshold of
10% annual compound growth. The award was made wholly under the
unapproved part of the 2010 Plan. The maximum number of shares
allowed under the Share Price Growth Scheme is 19,120,000, which
would require annualised compound share price growth over the
period of 45% per annum.
2012 2011
Weighted Weighted
average average
Number exercise Number exercise
of options price of options price
------------------------------ ------------ ---------- ------------- ----------
Outstanding at the beginning
of the period 22,712,723 1.00 34,416,641 1.00
Forfeited during the period (134,992) 1.00 (1,500,000) 1.00
Exercised during the period - - (78,918) 1.00
Expired during the period - - (10,125,000) 1.00
Outstanding at the end
of the period 22,577,731 1.00 22,712,723 1.00
============================== ============ ========== ============= ==========
Exercisable at the end
of the period 3,457,731 1.00 2,092,723 1.00
============================== ============ ========== ============= ==========
28 SHARE BASED PAYMENT (continued)
b Long Term Incentive Plan (continued)
The weighted average remaining contractual life of share options
outstanding at the end of the period was 8 years (2011: 9 years).
For all share options outstanding at the year end the exercise
price was 1 pence.
c Unapproved Share Option Scheme
These options have been awarded to key members of management and
staff and are exercisable, subject to various trigger price
restrictions, at any time between the third and tenth anniversaries
of the date of grant and the weighted average remaining contractual
life of these options is 0 year (2011: 1 years). For share options
outstanding at the year end the exercise price was 4.62 pence.
2012 2011
Weighted Weighted
average average
Number exercise Number exercise
of options price of options price
------------------------------ ------------ ---------- ------------ ----------
Outstanding at the beginning
of the period 370,130 4.62 370,130 4.62
Forfeited during the period (370,130) 4.62 - -
Outstanding at the end
of the period - - 370,130 4.62
============================== ============ ========== ============ ==========
Exercisable at the end
of the period - - 370,130 4.62
============================== ============ ========== ============ ==========
No options were granted in the year and so the total fair value
was GBPnil (2011: GBPnil). For the Group's options to vest where a
trigger price is included, the Group's market share price must meet
that trigger. The relevant trigger prices for the options
outstanding at the end of the prior year were 5 pence for 70,130
and 7.5 pence for 300,000, both of which had been triggered.
d Enterprise Management Incentive Scheme
These options have been awarded to key members of management and
staff and are exercisable, subject to various trigger price
restriction, at any time between the third and tenth anniversaries
of the date of grant and the weighted average remaining contractual
life of these options is 2 years (2011: 5 years). For share options
outstanding at the year end the exercise price ranged from
1.00-5.38 pence.
2012 2011
Weighted Weighted
average average
Number exercise Number exercise
of options price of options price
------------------------------ ------------ ---------- ------------ ----------
Outstanding at the beginning
of the period 2,732,054 3.42 4,162,054 3.14
Forfeited during the period (1,512,054) 3.37 (160,000) 3.26
Exercised during the period - - (120,000) 1.00
Expired during the period - - (1,150,000) 2.70
Outstanding at the end
of the period 1,220,000 3.47 2,732,054 3.42
============================== ============ ========== ============ ==========
Exercisable at the end
of the period 830,000 3.58 2,342,054 3.44
============================== ============ ========== ============ ==========
No options were granted in the year (2011: none) with a total
fair value of GBPnil (2010: GBPnil). For the Group's options to
vest where a trigger price is included, the Group's market share
price must meet that trigger. Of the options outstanding at the end
of the period 200,000 (2011: 200,000) had a trigger price of 12
pence and 190,000 (2011: 190,000) of 15 pence and these have not
been triggered.
29 COMMITMENTS UNDER OPERATING LEASES
The minimum lease payments under non-cancellable operating lease
rentals are in aggregate as follows:
Land and buildings Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------
Within one year 252 232 210 210
Between two and five years 520 771 395 605
772 1,003 605 815
============================ ======== ======== ======== ========
Operating lease payments represent rentals payable by the Group
for its office properties. Leases are negotiated for an average
term, excluding break clauses, of 4 years (2011: 5 years) and
rentals are fixed for an average of 4 years (2011: 5 years).
Plant and machinery Group Company
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------
Within one year 10 19 - -
Between two and five years 12 22 - -
22 41 - -
============================ ======== ======== ======== ========
Operating lease payments represent rentals payable by the Group
for printers and a forklift truck (which finished in 2012). Leases
are negotiated for an average term, excluding break clauses, of 4
years (2011: 4 years) and rentals are fixed for an average of 4
years (2011: 4 years).
30 POST BALANCE SHEET EVENTS
Since the balance sheet there has been one significant event
which was the signing of a new loan agreement for the Group and
Company's Bank loan (note 18).
31 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
There are no capital commitments at the balance sheet date
(2011: GBP65,000 in relation to the fit out of the new Milton
Keynes premises). The Group does not have any contingent
liabilities except for contingent consideration on acquisitions
(note 21).
32 RELATED PARTY TRANSACTIONS
All related party balances held at November 2012 and 2011 are
unsecured.
Subsidiaries
Its 70% (2011: 70%) owned subsidiary, I-Gaming Limited, is owed
by other Group undertakings GBP3,020,000 (2011: GBP1,922,000) and
owes GBP1,820,000 at 30 November 2012 (2011: GBP1,082,000),
including debt due from the Company of GBP3,019,000 (2011: from the
Company GBP1,922,000), after being charged costs and allocated
staff time in the year of GBP828,000 (2011: GBP677,000).
Advisory Services
The Board receives financial advice from Trillium Partners
Limited ("Trillium Partners"). Trillium Partners is a specialist
media advisory firm, in which voting control of 45.0% (2011: 44.8%)
is held 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
in the year is under GBP0.1 million (2011: under GBP0.1 million).
The Group continues to receive advice at a similar level into
2013.
32 RELATED PARTY TRANSACTIONS (continued)
Company
The table below sets out the transactions and balances with
other group undertakings:
Balance Transactions
in year
Debtor / (creditor) Income / (expenditure)
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ------------ -----------
iGaming Business Limited (3,019) (1,922) (1,097) (1,080)
Incentive Plus Limited 239 (94) 333 (147)
Speechmark Publishing Limited (1,491) (683) (808) (213)
My Child Limited - - - (2,616)
Optimus Professional Publishing
Limited 803 60 743 1,355
Electric Word Publishing
Limited - - - 9
P2P Publishing Limited (54) 2,276 (2,330) 2,402
SBG Companies Limited 1,059 781 278 1,256
Lottery monitor Limited - - - 3
PFP Publishing Limited - - - 17
Special Education Publishing
Limited - - - (937)
Radcliffe Publishing Limited 793 (75) 868 285
Radcliffe Solutions Limited 471 172 299 172
Electric Word Employee
Benefit Trust 171 171 - -
---------- ----------
(1,028) 686
---------- ----------
The natures of the transactions with group undertakings comprise
salary recharges, recharges of various trading activities, and cash
draw downs.
Key management personnel
For details of related party transactions with key management
personnel see note 4.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BIGDDBXBBGXX
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