ELE.L Regulatory News (ELE)

27 Jul 2005 07:00

Electric Word PLC27 July 2005 27 July 2005 ELECTRIC WORD PLCInterim results to 31 May 2005 STRONG PROFIT IMPROVEMENT REFLECTS GROWING PRODUCT PORTFOLIO Electric Word plc is a specialist information business with two operatingdivisions: Public Sector Management and Sport and Specialist Consumer, each ofwhich serve niche markets with a wide range of products in formats includingnewsletters, conferences, books, special reports and distance learning trainingcourses. RESULTS HIGHLIGHTS • Profits before tax and goodwill improve by £247k (up to £116k from a loss of £132k in 2004), reflecting strong demand and increasingly effective use of product portfolio • Gross profits up 55% to £1.1m • Turnover up 22% to £2.9m • Subscription growth enhanced by increases in book and special report publishing (up 155%) and international sales (up 96%) • Total revenue per subscriber up 12% as product portfolio broadens • 76% of all revenues from renewable subscriptions, with no dependency on advertising revenues • Acquisition of online training business for cash in June 2005 will enhance earnings in 2006 • Company performing in line with board's expectations Julian Turner, Chief Executive, commented: "We have had a good first half and followed our plan to make the most of ourlarge subscriber base by developing additional products, formats and sales. Wehave also used our balance sheet and strong cash flow to make a complementaryacquisition and we expect more to follow. The company is performing in line with our expectations and we anticipatecontinued growth during the rest of the year, with government reform of thepublic sector supporting that growth into the foreseeable future. In addition,the 2012 London Olympics will ensure that sport, sports science and coachingremain high on the agenda in government, schools and clubs for several years tocome." ENDS Enquiries:Julian Turner, Chief ExecutiveElectric Word 020 7954 3470 Tim Spratt / Kim MuckleFinancial Dynamics 020 7831 3113 CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT Electric Word's interim results for 2005 reflect another half year of growth,development and steadily improving profitability. We expect to continue ourprofitable growth, supported by complementary acquisitions such as that ofFieldwork Online Training, completed in June, which develops our position stillfurther in the growing schools management area and takes us into thestrategically valuable e-learning market. The Company's results for the six months to May 31st have built on last year'smove into profitability. Profit before tax and goodwill increased to £116k,compared to a loss of £132k in the same period last year, on a 22% rise inturnover to £2.9m. An encouraging 49% of that increase in turnover was convertedinto pre-tax profit. As at the year end, the Group finished the period with astrong balance sheet and cash balances up 50% against a year ago to £918k -enabling the Group to make its first all-cash acquisition in June. At the beginning of this year the Board set itself two strategic objectives: tomake the most of our established customer base by developing new revenue streamsand cross-selling new products; and to look for acquisitions in existing sectorsor competencies that leverage the Group's infrastructure, management, systemsand scale. We have made progress on both fronts. The first of these objectives has driven performance at the divisional level,where we have worked to expand the range of products we sell into our customerdatabase. The aim has been to develop ancillary revenue streams to supplementthe Company's solid foundation of subscription revenue. Results have beenencouraging. Subscriptions still accounted for 76% of turnover in the period(with subscriber numbers up 9%) but sales of one-off publications that can betargeted at those subscribers started to make a significant contribution,pushing the average total revenue per subscriber up by 12%. Following this strategy the Public Sector Management division has achievedorganic revenue growth of 20% and increased operating margins from 3% to 10%.New launches include Enrichment Activities for Gifted and Talented Children,which builds directly on the success of the Gifted & Talented Update newsletterand conferences, and Christian Assemblies, which further leverages theestablished primary school assembly business. Progress in publishing hascompensated for a disappointing first half for conferences, which suffered inthe run-up to the general election from the reduction in government initiatives.This weakened the first-half programme more than had been anticipated but is notexpected to continue. With new government initiatives around professionaldevelopment, behaviour, child protection, health education, school sport andmany others we can expect a pick-up in our conference business in the secondhalf. The Sport and Specialist Consumer division grew turnover by 29% and pushed upmargins from 0.6% to 10%, a major step forward in profitability. Investment overthe past two years in building an online marketing channel is now paying offwith a large email database of targeted sports participants buying a growingrange of products. This year we have published 11 new special reports onsubjects ranging from All-Weather Training to Master Athletes. Despite the increase in turnover, central Group costs were maintained at £179kfor the period (down 4%). With both divisions operating at a 10% (and growing)margin, the value of acquiring further businesses to leverage central Groupresources is clear. The acquisition of Fieldwork Online Training, which supports the professionaldevelopment of school managers in the UK and abroad, adds an entirely newproduct type to the Company's well-established market position in educationmanagement. The business comprises an e-learning platform (in which the Companyhas full IPR) that is particularly suitable for professional education and asuite of over 50 education management courses. The courses closely match thesubject areas covered by our Optimus newsletters and represent a new andhigh-value format in which to deliver professional education at a time whencontinuing professional education is at the top of the government's agenda forits term of office. The acquisition presents an exciting cross-sellingopportunity to move existing school customers into purchasing a significantlyhigher-priced product (at an average value of over £1,000 for an annualsubscription compared to newsletter subscriptions closer to £100) and for theCompany to build further its direct sales competency. Fieldwork has three other strategic benefits: it provides a flagship for theCompany's emerging range of digital products in the education market; it givesthe education management business an international opportunity for the firsttime (most courses have an international version and around 40% of the acquiredcustomer base are English schools abroad); and it opens up online professionaleducation as a new product opportunity for other parts of the business. Current trading and prospects Current trading is in line with the Board's expectations and the outlook appearspositive in all sectors. The Company is very well placed to benefit from the increased emphasis oncontinuing professional development in schools, both through its existingmanagement information products and its new online professional educationcourses. Equally the 2012 London Olympics will ensure that sport, sports science andcoaching remain high on the agenda in both schools and clubs for several yearsto come. The development in the first half of new revenue streams looks set to continueinto the second half of the year. This year has seen the establishment ofone-off publications as a significant revenue line, the addition of onlinetraining and, as a result of the success of the sports performance websites, theemergence of a high-margin online advertising revenue opportunity. The Board aims to build on these opportunities by making some additionalinvestments this year. Firstly, we plan to develop the content and salesinfrastructure of the acquired Fieldwork business to maximize its impact onearnings in future years. Secondly, the benefit that the Board can see fromleveraging the Company's management and systems by adding new businesses, andthe existence of appropriate acquisition opportunities, leads us to plan forfuture growth by a step expansion of the Company's premises in the second halfof the year. Electric Word Staff The Board would like to thank the staff for their efforts throughout the period,but especially during the terrible events of the past month. Sadly, two membersof Electric Word's 50 staff were injured in the Tavistock Square bus attack. Thesupport that they have been shown by their colleagues, as well as many customersand business partners, has been immense. With a colleague in hospital theconferences team worked to ensure that an event due to take place in TavistockSquare itself on the Tuesday after the attack was not cancelled but moved, withthe full support of delegates, speakers and suppliers, to a new venue within 24hours. The strength, commitment and unity shown by the entire business duringthis difficult time is inestimable and gives us great hope and confidence forwhat can be achieved in the future. Peter Rigby,ChairmanJulian Turner,Chief Executive 27 July 2005 ElectricWord plcGROUP PROFIT AND LOSS ACCOUNTfor the period ended 31 May 2005 Year 6 months 6 months ended ended ended 30 November 31 May 2005 31 May 2004 2004 (unaudited) (unaudited) (audited) £ £ £ TURNOVER 2,860,678 2,351,087 5,516,307 COST OF SALESMarketing costs (911,303) (816,451) (1,736,994)Other cost of sales (867,361) (838,636) (1,866,148) (1,778,664) (1,655,087) (3,603,142) GROSS PROFIT 1,082,014 696,000 1,913,165 Other operating expenses (977,072) (830,377) (1,813,037)Amortisation of goodwill (133,080) (133,082) (266,164) TOTAL ADMINISTRATIVE EXPENSES (1,110,152) (963,459) (2,079,201) OPERATING LOSS (28,138) (267,459) (166,036) Interest receivable 10,562 2,479 6,763 LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (17,576) (264,980) (159,273) Taxation (24,949) - 399,580 (LOSS) /PROFIT ON ORDINARY ACTIVITIES AFTERTAXATION (42,525) (264,980) 240,307 Basic (0.04p) (0.28p) 0.25p Diluted (0.04p) (0.28p) 0.21p ElectricWord plcGROUP BALANCE SHEETat 31 May 2005 31 May 31 May 30 November 2005 2004 2004 (unaudited) (unaudited) (audited) £ £ £ FIXED ASSETSIntangible assets 1,762,895 2,036,917 1,895,975Tangible assets 25,609 39,677 29,814 1,788,504 2,076,594 1,925,789 CURRENT ASSETSStocks 84,435 117,898 104,956Debtors 1,561,698 927,243 1,362,575Cash at bank and in hand 918,364 611,705 901,425 2,564,497 1,656,846 2,368,956CREDITORS: Amounts falling duewithin one yearDeferred revenue (2,675,043) (2,575,285) (2,494,992)Other creditors (721,511) (666,470) (802,781) (3,396,554) (3,241,755) (3,297,773) NET CURRENT LIABILITIES (832,057) (1,584,909) (928,817) TOTAL ASSETS LESS CURRENT 956,447 491,685 996,972LIABILITIES CAPITAL AND RESERVESCalled up share capital 950,639 950,139 950,139Share premium account 2,120,305 2,118,805 2,118,805Merger reserve 105,011 105,011 105,011Profit and loss account (2,219,508) (2,682,270) (2,176,983) SHAREHOLDERS' FUNDS 956,447 491,685 996,972 ElectricWord plcGROUP CASH FLOW STATEMENTfor the period ended 31 May 2005 6 months 6 months Year ended ended ended 30 November 31 May 2005 31 May 2004 2004 (unaudited) (unaudited) (audited) £ £ £ CASH INFLOW FROM OPERATING ACTIVITIES 17,504 2,920 329,470 Returns on investments and servicing of finance 10,562 2,479 6,595 Capital expenditure and financial investment (11,127) (14,607) (15,553) CASH INFLOW/(OUTFLOW) BEFORE FINANCING 16,939 (9,208) 320,512 Financing - 23,000 (17,000) INCREASE IN CASH IN THE PERIOD 16,939 13,792 303,512 ElectricWord plcNOTES TO THE INTERIM REPORT 1 PRESENTATION OF INTERIM RESULTS This interim report was approved by the Directors on 27 July 2005. The results for both the current and the comparative half year have not been audited, but were the subject of an independent review carried out by the company's auditors, Baker Tilly. Their review confirmed that the figures were prepared using accounting policies and practices consistent with those adopted in the 2004 annual report. The audited results for the year ended 30 November 2004 are an abridged version of the company's report and financial statements which have been filed with the Registrar of Companies and on which the auditors gave an unqualified report. The financial information contained in this interim report does not constitute statutory accounts as defined by Section 240 of the Companies Act 1985. All shareholders will receive a copy of this interim report, which can also be obtained from the company's registered office at 67-71 Goswell Road, London EC1V 7EP. 2 COMPARATIVES The comparative profit and loss account for the 6 months ended 31 May 2004 has been restated to reflect a more appropriate allocation of expenditure between cost of sales and administrative expenditure and to ensure comparability with the annual profit and loss account for the year ended 30 November 2004. 3 TAXATION The interim tax charge is based on an estimate of the likely effective tax rate for the year, expressed as a percentage of the expected results for the year and then applied to the interim result. 4 DIVIDENDS The directors do not recommend the payment of a dividend. 5 LOSS PER SHARE Basic and diluted loss per share is based on the loss on ordinary activities after taxation and on the following weighted average number of shares in issue. Period ended 31 May 2005 95,026,766 Period ended 31 May 2004 94,810,557 Year ended 30 November 2004 94,913,854 (Diluted: 114,520,015) 6 RECONCILIATION OF NET CASHFLOW 6 months 6 months Year TO MOVEMENT IN NET FUNDS ended ended ended 30 31 May 31 May November 2005 2004 2004 £ £ £ Increase in cash in the period 16,939 13,792 303,512 Cash to repurchase loan stock - - 40,000 16,939 13,792 343,512 Net funds at beginning of period 901,425 557,913 557,913 Net funds at end of period 918,364 571,705 901,425 7 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS Share Profit Share premium Merger and loss capital account reserve account Total £ £ £ £ £ At 1 December 2004 950,139 2,118,805 105,011 (2,176,983) 996,972 Loss for the period - - - (42,525) (42,525) Issue of shares 500 - - - 500 Premium on allotment during period - 1,500 - - 1,500 At 31 May 2005 950,639 2,120,305 105,011 (2,219,508) 956,447 This information is provided by RNS The company news service from the London Stock Exchange