17 Jun 2008 07:00
FOR RELEASE
17 June 2008
ILX GROUP PLC
2007/8 PRELIMINARY RESULTS
"A Year of Consolidation and Growth"
ILX Group plc ('ILX'), the AIM quoted business education and training company, announces its unaudited preliminary results for the year ended 31 March 2008.
Financial Highlights:
Revenue up 28.7% to £13.3m (2007: £10.3m)
Operating profit before non-recurring costs* up 36.7% to £2.29m (2007: £1.67m)
Profit before tax and non-recurring costs* up 27.5% to £1.86m (2007: £1.46m)
Adjusted fully diluted earnings per share up 12.4% to 6.61p (2007: 5.88p)
Strong cash generation during the year - cash generated from operations up 59% to £3.17m (2007: £1.98m)
Recommended final dividend doubled to 1.5p (2007: 0.75p)
* Non-recurring costs of £253,000 relate to the restructuring of Best Practice and are included in administrative expenses; non-recurring costs of £111,000 relate to the refinancing with Barclays Bank and are included in interest payable.
Corporate Highlights:
Best Practice restructured at start of year into one consolidated division
13.1% revenue growth in Best Practice, with strong growth in Q4
12 months of Corporate Training Group included in 2008 (2007: 8 months)
15.3% underlying revenue growth in Corporate Training Group
Targets for second CTG earn-out achieved
Successful refinancing completed with Barclays Bank
Strong visibility for both divisions into 2008/9
In summary, Ken Scott, Chief Executive of ILX Group plc, said:
"We expect 2008/9 to be a challenging economic environment. However our business is well placed to be able to thrive in such an environment and both operating divisions have started the year with a great deal of momentum. The decision to declare a recommended final dividend at double last year's underlines our confidence in the business.
Our strategy continues to be to build a sizeable training and software company in the hard skills business training market. Our primary focus for 2008/9 is to maintain the growth of the existing businesses, and to ensure that we are best placed to take maximum advantage of further growth opportunities when economic conditions ease."
Enquiries:
| ILX Group plc Ken Scott / Jon Pickles | 020 7751 7100 |
| Adventis Financial PR Tarquin Edwards / Chris Steele | 020 7034 4758/4759 |
| Arbuthnot Securities (Nominated Adviser) Tom Griffiths | 020 7012 2000 |
Editor's Notes
ILX Group plc is a leading provider of vocational training to the private and public sectors, delivered through e-learning, instructor-led courses/workshops.
ILX Group now trades through two divisions:
1. Best Practice provides e-learning, instructor-led training and implementation consultancy principally to the programme and project management, IT service management and business finance markets. www.ilxgroup.com
2. Banking & Finance (through Corporate Training Group) provides instructor-led training, workshops and related services, principally to the investment banking community. www.ctguk.com
Chairman's Statement
For the year ended 31 March 2008
I am pleased to present the results for the year ended 31 March 2008, a year of consolidation and growth.
Our strategy is to focus on the provision of hard skills training to our customers through a combination of innovative e-learning products and traditional classroom training. We aim to deliver strong organic growth complemented, where opportunities arise, with suitable acquisitions.
I am pleased to report that both our operating divisions, the Best Practice Group and the Corporate Training Group, showed a strong performance achieving double-digit revenue growth and increased market share during the year.
The Best Practice Group was restructured at the start of the year and, after a slow start, experienced a renaissance in the latter half of the year. It is rapidly moving into a position of market dominance, both in terms of market share and thought leadership.
The Corporate Training Group had another strong year, growing its repeat business and securing some key new customers. This business has far outperformed our expectations when it was acquired in July 2006 and I would like to thank the management and staff for their exceptional efforts.
An exciting new range of e-learning products is under development in this division and we expect to see the first take-up in the 2008 graduate training programmes.
Financial Results
Revenue for the year was £13.3 million (2007: £10.3 million), growth of 28.7%. This delivered an operating profit before non-recurring items of £2.29 million (2007: £1.67 million), growth of 36.7%.
After non-recurring items, which related to restructuring costs and settlement of an employment dispute dating back to 2006, operating profit grew by 28.7% to £2.03 million (2007: £1.58 million).
Underlying profit before taxation and non-recurring items grew 27.5% to £1.86 million (2007: £1.46 million). After non-recurring items, including one off re-financing costs of £111,000, profit before tax grew 9.5% to £1.49 million (2007: £1.36 million).
The company incurred a higher tax charge than in 2006/7, as previous years have benefited from greater additional tax credits for qualifying research and development activities undertaken by the company.
Net profit after tax for the year was £1.03 million (2007: £1.11 million). Basic earnings per share was 5.33p (2007: 6.45p) and fully diluted earnings per share was 5.27p (2007: 6.33p). In the light of non-recurring costs and also variations in the tax charge, it is appropriate to present an adjusted diluted earnings per share figure which is stated before non-recurring costs and assumes a normalised tax rate. This figure was 6.61p (2007: 5.88p), and the calculations are detailed in the notes to this announcement.
Net debt, defined as cash at bank less all bank debt and all future deferred consideration whether payable in cash or in shares, was £5.51 million at the end of the year (2007: £7.38 million).
Personnel Changes
Peter Evans, previously managing director and co-founder of the Corporate Training Group, is to take on a new role responsible for strategic business development, with a view to joining the main Board once the final earn-out payment in relation to the division has been completed.
Peter will continue to oversee the organic growth of the Corporate Training Group, its global expansion and development of its e-learning initiative. In addition he will focus on the growth of the blended solutions offer into the blue chip corporate market, leveraging off the extensive curriculum currently residing within the Best Practice Group.
Peter Scollen is to take over as managing director of the Corporate Training Group and I am delighted to welcome him and Peter Evans to their new roles.
Earn-Out Payments
The first earn-out payment of £2.5 million, which became payable due to the performance last year of the Corporate Training Group, was made fully in cash. Whilst the company had the option to pay up to £1.5 million of this amount in shares, this would have resulted in considerable dilution for shareholders.
The targets for the second and final earn-out payment have also been met and accordingly a further £2.5 million becomes payable. As with the previous payment, up to £1.5 million can be made in shares, but it is the board's intention to make this payment in cash where possible. £1.0 million in undrawn bank facilities, in addition to current cash, remain available for this purpose.
New Broker
I am delighted to confirm the appointment of Arbuthnot Securities as Nominated Advisor and Broker to the Company. Arbuthnot Securities has an excellent reputation in supporting companies of our size which should over time help position the share price more realistically. The Board would like to thank Charles Stanley for their efforts over the last three years, in particular the placing that secured the Corporate Training Group acquisition.
Dividend
The Board remains committed to the payment of an annual dividend. A dividend of 0.75 pence per share was paid in August 2007, in respect of the year ended 31 March 2007. The directors recommend payment of a final dividend of 1.50 pence per share, in respect of the year ended 31 March 2008, subject to shareholder approval at the annual general meeting on 18 July 2008. This dividend will be paid on 22 August 2008 to shareholders on the register at 1 August 2008.
Share Buyback Authority
The company will be seeking to renew its share buyback authority at the forthcoming AGM. This, if approved, will allow the company to repurchase up to 14.99% of its issued share capital. The company has no intention to carry out such a buyback exercise in the immediate future, and indeed the terms of the tax relief granted to our Enterprise Investment Scheme and Venture Capital Trust investors effectively prevent the company from carrying out any buy-back until 27 July 2009.
Nevertheless the Board considers this ability a useful option as it reviews ways in which the company's strong performance can be translated into shareholder value.
Investor Relations
The company continues to provide regular updates to shareholders by way of its periodic ILXtra newsletters, which are mailed to shareholders and which are also available from the investor relations section of the company website. Their purpose is to give additional information on the group, its people and its challenges as it grows and matures. The company also attends a selection of suitable investor shows.
I would strongly encourage shareholders to attend the AGM on 18 July, if at all possible, where you will be able to hear from and question the directors and other key members of staff as well as see a demonstration of the company's products.
Outlook
The prospects for the forthcoming year and beyond for your company are excellent. Both divisions have established strong positions in their respective marketplaces, and both continue to see robust trading into the new financial year in spite of the current economic climate.
Once again I would like to thank all staff for an excellent year and I look forward with confidence to the future.
Paul Lever
Chairman
17 June 2008
Business Review
For the year ended 31 March 2008
Introduction
Our strategy remains one of delivering shareholder value through building a strong business providing hard skills business training, delivered through innovative and exciting e-learning software together with top quality traditional instructor-led training.
The company continues to trade through two divisions; the Best Practice Group, providing training in project and service management qualifications such as PRINCE2™ and ITIL®, and the Corporate Training Group, providing financial training programmes principally for finance professionals.
The year to 31 March 2008 has been the first year for some time without an acquisition. Instead, we have focused on consolidating the businesses we have acquired and on maintaining a high level of organic growth. We are very pleased with the progress made in 2007/8.
Financial Results
Profit for the Year
Once again the company has delivered record revenues and profits. Revenue for the year was £13.3 million (2007: £10.3 million), an increase of 28.7%. 14.0% of this increase represents organic growth from both divisions. Best Practice Group revenues were up 13.1% to £7.92 million (2007: £7.00 million) and Corporate Training Group revenues were £5.40 million (2007: £4.70 million including pre-acquisition revenues), growth of 15.3%. The remainder of the growth is due to these results including a full 12 months of the Corporate Training Group (2007: 8 months).
Gross margins have decreased slightly to 51.1% (2007: 56.6%), due to the increased proportion of classroom training arising principally from the acquisition of the Corporate Training Group.
Operating margins however increased to 17.2% (2007: 16.2%), with operating profit, before non-recurring items, being £2.29 million (2007: £1.67 million), growth of 36.7%.
Profit before tax and non-recurring items grew 27.5% to £1.86 million (2007: £1.46 million).
Cash Flow and Net Debt
The quality of our profits can be highlighted by the generation of strong operating cash flows. Cash generated from operating activities for the year was £3.17 million (2007: £1.98 million), representing 156% of operating profit (2007: 126%).
Free cash flow, being cash generated from operating activities less interest, tax, and all capital expenditure, was £2.57 million (2007: £1.52 million), growth of 69%.
The company announced in February that it had moved to Barclays Bank plc, and secured facilities totalling £6.0 million. These facilities comprised a 4-year term loan of £5.0 million and an invoice finance facility of £1.0 million. The facilities are on improved terms to the previous facilities and the increase in term debt has allowed us to utilise our preferred option to pay the first earn-out payment in respect of the Corporate Training Group fully in cash.
£4.0 million of the term debt was drawn down immediately to make the balance of this payment and to redeem the company's existing term debt. The remaining £1.0 million term debt, and the confidential invoice finance facility, were undrawn at the balance sheet date.
The company's net debt, defined as cash at bank less all bank debt and all future deferred consideration whether payable in cash or in shares, was £5.51 million at 31 March 2008 (2007: £7.38 million). At a multiple of just over two times free cash flow, and given the long visibility on a number of our earnings streams, this is a conservative level of debt.
The company uses an interest rate swap arrangement, details of which are contained in the notes to the accounts, to reduce exposure to future movements in interest rates. Nothing was paid for this arrangement but accounting standards require the company to value the instrument and to take any change in value to the income statement. This resulted in an additional notional charge of £39,000 included in interest payable for the year.
Deferred Consideration
The performance of the Corporate Training Group since its acquisition has been outstanding and all earn-out targets have been comfortably met.
During the year, £2.5 million was paid out in cash representing the first payment of the earn-out. Whilst a significant proportion of this payment could have been made in shares, this would have incurred substantial dilution for shareholders.
The payment of this amount in cash required additional finance as noted above, which took some while to secure. Under the terms of the agreement for the purchase of the Corporate Training Group interest of £117,000 accrued and was paid to the vendors along with the earn-out amount.
Non-Recurring Items
Non-recurring items covered three areas of expenditure for the year.
The Best Practice division underwent a restructuring at the start of the year at a cost of £179,000 in redundancy payments and relocation costs. This cut approximately £340,000 from overheads and laid a stronger foundation for continued growth.
During the second half of the year the company incurred a cost of £74,000 in settling an employment-related claim arising during the year ended 31 March 2007, together with related legal expenses.
Both these costs totalling £253,000 (non-recurring costs for 2007: £93,000) are included in the income statement as administrative expenses. After inclusion of these items, operating profit for the year was £2.03 million (2007: £1.58 million), growth of 28.7%. Operating margin after non-recurring costs was 15.3% (2007: 15.3%).
The company also incurred one-off costs of £111,000 in relation to the refinancing with Barclays Bank. These costs principally comprised the early write-down of fees incurred in securing the previous debt facilities. These costs were being spread across the term of the debt but had to be accelerated when the debt was repaid early.
After inclusion of this cost, profit before tax for the year was £1.49 million (2007: £1.36 million), growth of 9.5%.
Taxation
The taxation charge for the year was £460,000 (2007: £257,000). This represents 31% of pre-tax profits (2007: 19%). The company has previously claimed under the Research and Development tax credits scheme, where the company can claim 150% for both capital and revenue expenditure on projects that qualify under the scheme. This has reduced the tax charge in previous years but fewer projects in 2007/8 were eligible for such relief.
No corporation tax is payable as the company continues to utilise tax losses. At the year end the tax losses carried forward and available to offset against future profits were £294,000. The company shows a deferred tax asset in respect of these losses, and other adjustments, of £77,000.
Net Profit and Dividend
Net profit attributable to equity holders after tax and non-recurring items for the year was £1.03 million (2007: £1.11 million).
A dividend of 0.75 pence per share was paid during the year in respect of the year ended 31 March 2007, and this is shown in the statement of changes in equity. As stated in the Chairman's statement, a recommended final dividend of 1.50p in respect of the year ended 31 March 2008 will be payable in August subject to shareholder approval at the forthcoming AGM.
Earnings Per Share
Basic earnings per share was 5.33p (2007: 6.45p) and fully diluted earnings per share was 5.27p (2007: 6.33p).
The company uses an adjusted diluted earnings per share measure to evaluate performance. This measure takes fully diluted earnings per share and adjusts to remove the effect of non-recurring items, both costs and benefits. It also ensures a consistent normalised tax rate is used thus removing the beneficial effect of recognition of tax assets and accelerated research and development tax credits.
Adjusted diluted earnings per share for the year was 6.61p (2007: 5.88p), an increase of 12.1%.
Markets - Revenue Streams
As stated at the very start of this review, our strategy remains one of delivering shareholder value through building a strong business providing vocational hard skills training, delivered through innovative and exciting e-learning software together with top quality traditional instructor-led training.
Revenue Mix
Whilst all revenues have grown over the last two years, the proportion of classroom training has increased most significantly, in particular due to the acquisition of the Corporate Training Group. Instructor-led training accounted for 59% of revenues last year (2007: 53%), with e-Learning making up 30% (2007: 33%). The balance of revenues relates to consultancy, software development, and sales of books and manuals.
We remain committed to the appropriate use of e-learning and instructor-led training across all our subject areas.
Revenue by Subject
We have also continued to diversify the training we provide across a wider range of subjects both to reduce exposure to any one area and to increase the opportunities. This has been achieved both through acquisitions such as the Corporate Training Group and through the launch of products into new areas such as ITIL®.
During 2005/6, PRINCE2™ and other project management training accounted for nearly 55% of the company's revenues; in 2007/8 it accounted for just 40% of revenues, despite our sales in this area having shown year on year growth of 15-20%.
The key markets for the company at present are as follows.
Finance for Professionals
This market, serviced by the Corporate Training Group, accounts for 40% of revenues.
A wide range of subjects is covered including Accounting and Analysis, Corporate Finance, Company Valuation, Financial Modelling, Investment Management, Financial Products and Markets, and Regulation.
We train at various levels from major graduate training programmes right up to managing director level. Customers include a number of major investment banks as well as other financial institutions and some corporates and professional firms.
Revenues in this area are highly visible with extremely high levels of repeat business and bookings usually made many months in advance.
Training has historically been provided almost entirely through traditional instructor-led training, supported by consultancy and reference manuals. A key objective following the acquisition of the Corporate Training Group was to develop software products to complement the offering, and this has now been achieved through the development of our first e-learning products, which we expect to start rolling out in 2008.
Work has also been undertaken on both bespoke software development for key strategic customers in this area as well as electronic reference tools.
Revenues grew 15% year on year in this area and we remain one of the leaders in this marketplace.
PRINCE2™ and other Project Management
A further 40% of group revenues in the year came from PRINCE2™, the project management qualification, and related products and services.
We train to both PRINCE2™ Foundation and PRINCE2™ Practitioner level, as well as in qualifications such as the APM Introductory Certificate in Project Management, Managing Successful Programmes, and general project management.
Training is provided to a wide range of corporate customers spread across the public and private sector. In addition, an increasingly significant revenue stream is being generated from direct consumer and e-commerce sales.
Training is provided both by a range of e-learning and distance learning products, as well as public and custom classroom training sessions and a consultancy offering which enables customers both to assess better their training requirements and to ensure that the training delivered results in benefits for the organisation.
The ability to deliver to our level of expertise in each of these three areas is unique in this marketplace, and this has enabled the business to grow market share and move into a dominant position. Revenues in this area grew by 19% against estimated market growth of 5-10%.
ITIL® and Service Management
10% of group revenues in the year came from ITIL®, the IT service management qualification, and related service management training.
As with PRINCE2™ and project management, training is provided to a wide range of customers across public and private sectors, and is delivered through both classroom training and e-learning products.
During the year a major change in the ITIL® qualification from version 2 to version 3 affected all providers of training in this area. This provided us with a major opportunity to gain ground against competitors.
Our ITIL v3™ products, both classroom and e-Learning, were first to market.
In addition, a module highlighting the differences between the two versions was developed and provided free of charge from our website. It remains one of the most visited pages of our extensive range of product and information websites.
The disruption caused by the change to version 3 meant that in the first half of the year sales of ITIL® products and services were down by 10%; however, by the end of the year, the year-on-year sales had grown by 27%.
IT Training and Migration
4% of revenues fall into this area, providing principally web-based, self-service solutions.
These help enterprises maintain productivity through IT Desktop transformation projects, such as the rollout of new operating systems (Windows XP, Vista), or business critical applications (Office 2003, Office 2007, Lotus Notes).
Businesses often have had to contend with the loss of productivity associated with users coming to terms with a new desktop, operating system or new applications, as well as a rapid increase in the frequency of migration related calls to helpdesks.
Our solutions allow "business as usual" minimising the adverse effect of these migrations on business critical projects.
There remains an opportunity for significant growth going forward with the greatest potential in the Microsoft Office 2007 migration space.
Finance for Non-Financial Managers
Finance for non-financial managers accounts for 4% of revenues.
We continue with the provision of customised e-learning solutions for multi-national and global organisations. A number of new customers have been developed over the year, in addition to continuing service provided to the existing customer base.
The opportunity to combine the e-learning products with our own in-house financial training expertise to increase our overall share of the corporate financial training market remains a key area for potential growth in 2008/9 and beyond.
Bespoke Software Development
Bespoke software development accounted for 2% of revenues last year and is undertaken in certain circumstances for key customers or where the development may give rise to other generic product developments. We do not actively seek out such opportunities but nevertheless expect to deliver a small number of projects each year.
Markets - Prospects
Market Outlook
Despite current economic uncertainties, demand for hard skills training remains strong and, whilst it is difficult to precisely establish market size and growth, there are a number of positive indicators.
Recent figures from the Securities & Investment Institute showed that the top 20 investment banks were running their 2008 graduate recruitment programmes at 94% of the 2007 level, which itself was a significant increase on 2006. The figures also showed a modest rise in the graduate intake amongst City-based banks.
This bodes well for continued growth within the Corporate Training Group, which has shown annual growth over the last seven years of between 7% and 43%, and a compound annual growth over that time of 26%.
Figures released in May showed that the UK IT training market grew by 10% in 2007. We are currently listed by IT Skills Research as number 14 in the top 50 providers, up from number 26 last year. Our own research into growth in the PRINCE2™ and ITIL® market, based on the numbers of exams sat, estimates growth last year of 5-10% in PRINCE2™, which we expect to continue into 2008/9. The growth in the ITIL® market slowed during the year due to the changes from version 2 to version 3, and we expect the market size to remain the same into 2008/9 as the new version and its exams are bedded down.
Our underlying organic growth rate of 14% would indicate that in the year ended 31 March 2008 we increased our share of the key markets in which we operate.
Market Positioning
In addition to growth in revenues and market share we have looked to lead the market in terms of our expertise and innovation. This covers both the subject matter we deliver and the delivery itself.
In terms of subject matter:
A number of our investment banking clients now use financial models we have developed, covering comparable company analysis, precedent transactions, discounted cash flow, mergers, leveraged buy-outs, and rights issues;
We have used our in depth knowledge of our customer requirements and worked with the accrediting and examination bodies to bring to market new qualifications in which we, and others, can provide accredited training.
An example of this is the development last year of a new Programme and Project Sponsorship qualification. Having been invited two years ago by the Home Office to develop a programme of short briefings for the Senior Responsible Owners (SRO) of Public Sector Programmes and Projects, the company seized the opportunity to address one of the most significant learning gaps in the Best Practice training market. After developing both classroom and e-learning courses, we approached the body that accredits PRINCE2™ and ITIL® and facilitated the development of a new formal qualification.
Having led the design of the programme content, Best Practice Group Managing Director Eddie Kilkelly was appointed as an examiner to help define the syllabus and prepare the new suite of examinations. The resulting new qualification should add value internationally to every business that recognises the value of Best Practice programme and project. It will be formally launched at the Best Practice Showcase on 24 June 2008.
From a delivery perspective:
We perform training needs analysis across the planet for our customers to ensure that they can offer internally rigorous and consistent learning appropriately delivered;
As well as the development of interactive content for delivery via CD or the internet, we continue to lead the way in ensuring that the content is used effectively within our customer organisations.
We believe that the effective use of technology in training lies not only in developing exciting, interactive content, but also in ensuring content is accessible as required and on demand. Considerable research and development has gone into developing ways in which content, both training and information, can be accessible on handheld devices such as mobile phones.
Revenue Visibility
Prior to the acquisition of the Corporate Training Group, the short sales cycle and small transaction values meant that whilst the company experienced strong year on year revenue growth, the forward visibility of that revenue was limited.
The Corporate Training Group enjoys significant visibility of future revenues as a significant number of training programmes are booked some months in advance. At the start of the current financial year the division had in excess of £3.5 million in booked fee income for the year ending 31 March 2009, a slight increase on the figure the previous year.
I am pleased to note that revenue visibility in the Best Practice Group has increased significantly, with booked revenues at the start of the current financial year of approximately £1.0 million, compared to around £400,000 at the same time last year. A significant proportion of this has been paid for in advance and is shown as deferred revenue in the accounts.
This increase in visibility comes about as a result of our increasing success in selling blended solutions, where customers purchase e-learning products in conjunction with future workshop events, and also as a result of our rapidly growing ability to tender for, and win, larger contracts.
Overseas Markets
Although we have grown our overseas sales during the year we have remained primarily a UK-centric business with just 11% of revenues representing services delivered overseas (2007: 9%).
The vast majority of our overseas business is currently carried through direct sales from the UK. Opportunities for further overseas expansion through greater use of resellers, local offices, and franchises are being explored and remain an opportunity for the company.
Operations
Best Practice Restructure and Management
The Best Practice division was restructured into one division at the start of the financial year, consolidating the constituent businesses into one operation. The restructuring cut approximately £340,000 from overheads by reducing the number of premises utilised and putting responsibility for all service delivery with the company's office in Theale.
As part of the restructure the ISO9001 accreditation, which was previously restricted to the company's consultancy operations, was successfully implemented across the whole of the Best Practice Group.
Tony Glass, who was brought in at the start of the financial year as managing director of the Best Practice Group, left the business in April 2008. He contributed significantly to the restructuring in the early part of the year and I would like to thank him for his contribution. Eddie Kilkelly, who was previously the division's operations director and has been a key force behind the division's recent success and development, has taken over from Tony as the division's managing director.
Corporate Training Group Resources
The quality of our trainers is key to this area of our business and attracting the best trainers remains a top priority. Historically, the business has continued to hire trainers even in periods of slow growth as this allows us to build momentum for the future. Three additional training staff were taken on during the year and there are further staff scheduled to join in the current year.
Additionally, as mentioned in the Chairman's Statement, Peter Evans, previously managing director and co-founder of the Corporate Training Group, is to take on a new role responsible for strategic business development across both divisions. Peter Scollen is to take over as managing director of the Corporate Training Group.
Sales & Marketing
The Best Practice Group made progress during the year in further developing the sales resources with a number of new hires.
The sales staff are now organised into two teams based in London and Cheshire. In addition, a full overhaul of our e-commerce site was undertaken towards the end of the year. These two initiatives contributed significantly to an excellent final quarter for the division.
The Corporate Training Group relies more on account management than direct sales and we have boosted our resources in this area with an additional hire.
The company has also invested in trade public relations which has significantly raised its profile and presence, with regular articles in both trade journals and local press outlining the benefits we have been able to deliver to our customers.
Summary and Prospects
We expect 2008/9 to be a challenging economic environment. However our business is well placed to be able to thrive in such an environment and both operating divisions have started the year with a great deal of momentum.
As stated at the beginning of this review, our strategy continues to be to build a sizeable training and software company in the hard skills business training market. Our primary focus for 2008/9 is to maintain the growth of the existing businesses, and to ensure that we are best placed to take maximum advantage of further growth opportunities when economic conditions ease.
We look forward to a good year.
Ken Scott
Chief Executive
17 June 2008
Consolidated and Company Income Statement
For the Year ended 31 March 2008
|
|
| Year ended 31.3.2008 (Unaudited) | Year ended 31.3.2007 (Audited) |
|
| Notes | £'000 | £'000 |
|
|
|
|
|
| Revenue | 3 | 13,312 | 10,340 |
|
|
|
|
|
| Cost of sales |
| (6,513) | (4,489) |
|
|
|
|
|
| Gross profit | 3 | 6,799 | 5,851 |
|
|
|
|
|
| Administrative and distribution expenses excluding depreciation |
| (4,640) | (4,185) |
|
|
|
|
|
| Earnings before interest, tax and depreciation |
| 2,159 | 1,666 |
|
|
|
|
|
| Depreciation |
| (127) | (87) |
|
|
|
|
|
| Operating profit | 3 & 4 | 2,032 | 1,579 |
|
|
|
|
|
| Interest receivable and similar income | 16 | 26 | |
| Interest payable and similar charges | (554) | (241) | |
|
|
|
| |
| Profit before tax | 4 | 1,494 | 1,364 |
|
|
|
| |
| Tax | (460) | (257) | |
|
|
|
|
|
| Profit for the year attributable to equity shareholders |
| 1,034 | 1,107 |
|
|
|
|
|
| Earnings per share: |
|
|
|
| Basic | 5 | 5.33p | 6.45p |
| Diluted | 5 | 5.27p | 6.33p |
Consolidated Balance Sheet
As at 31 March 2008
|
| As at 31.3.2008 (Unaudited) | As at 31.3.2007 (Audited) | |
| Assets | £'000 | £'000 | |
| Non-current assets |
|
| |
| Property, plant and equipment | 206 | 232 | |
| Intangible assets | 23,129 | 22,779 | |
| Deferred tax asset | 77 | 534 | |
| Total non-current assets | 23,412 | 23,545 | |
|
|
|
| |
| Current assets |
|
| |
| Trade and other receivables | 3,464 | 2,661 | |
| Cash and cash equivalents | 994 | 843 | |
| Total current assets | 4,458 | 3,504 | |
|
|
|
| |
| Total assets | 27,870 | 27,049 | |
|
|
|
| |
| Current liabilities |
|
| |
| Trade and other payables | (3,249) | (1,743) | |
| Deferred consideration | (1,000) | (1,000) | |
| Tax liabilities | (694) | (645) | |
| Bank loans | (1,250) | (1,098) | |
| Total current liabilities | (6,193) | (4,486) | |
|
|
|
| |
| Non-current liabilities |
|
| |
| Derivative financial instruments | (39) | - | |
| Provision for contingent consideration | - | (1,000) | |
| Bank loans | (2,750) | (2,123) | |
| Total non-current liabilities | (2,789) | (3,123) | |
|
|
|
| |
| Total liabilities | (8,982) | (7,609) | |
|
|
|
| |
| Net assets | 18,888 | 19,440 | |
|
|
|
| |
| Equity |
|
| |
| Issued share capital | 1,939 | 1,938 | |
| Share premium | 11,804 | 11,813 | |
| Shares to be issued - deferred consideration | 1,500 | 3,000 | |
| Own shares in trust | (1,825) | (1,825) | |
| Share option reserve | 303 | 258 | |
| Buyback reserve | 1,178 | 1,178 | |
| Retained earnings | 3,989 | 3,078 | |
| Total equity | 18,888 | 19,440 | |
Consolidated and Company Cash Flow Statement
For the year ended 31 March 2008
|
| Year ended 31.3.2008 (Unaudited) | Year ended 31.3.2007 (Audited) |
|
| £'000 | £'000 |
|
|
|
|
| Profit from operations | 2,032 | 1,579 |
| Adjustments for: |
|
|
| Depreciation | 127 | 87 |
| Share option charge | 45 | 63 |
| Movement in trade and other receivables | (796) | 457 |
| Movement in trade and other payables | 1,759 | (204) |
| Cash generated from operating activities | 3,167 | 1,982 |
|
|
|
|
| Interest paid | (21) | (25) |
| Tax paid | (137) | (97) |
| Net cash generated from operating activities | 3,009 | 1,860 |
|
|
|
|
| Investing activities |
|
|
| Interest received | 16 | 26 |
| Proceeds on disposal of property and equipment | 7 | - |
| Purchases of property and equipment | (108) | (164) |
| Expenditure on product development | (350) | (199) |
| Acquisition of subsidiaries (net of cash acquired) | (2,532) | (5,780) |
| Net cash used by investing activities | (2,967) | (6,117) |
|
|
|
|
| Financing activities |
|
|
| Post-completion dividends paid | - | (82) |
| Increase in borrowings | 780 | 2,400 |
| Repayment of finance lease obligations | - | (10) |
| Net proceeds of share issue | (8) | 2,478 |
| Interest and refinancing costs paid | (540) | (236) |
| Dividend paid | (123) | (96) |
| Net cash from financing activities | 109 | 4,454 |
| Net change in cash and cash equivalents | 151 | 197 |
|
|
|
|
| Cash and cash equivalents at start of year | 843 | 646 |
| Cash and cash equivalents at end of year | 994 | 843 |
Notes to the Preliminary Financial Statements
For the year ended 31 March 2008
1. Results
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985.
The summarised balance sheet at 31 March 2008 and the summarised income statement, summarised cash flow statement and associated notes for the year then ended have been extracted from the Group's financial statements.
The comparative financial information for the year ended 31 March 2007 is based on an abridged version of the group's published financial statements for that period, which contained an unqualified audit report and which have been filed with the Registrar of Companies.
The statutory accounts for 2008 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the registrar of companies following the company's annual general meeting.
2. Accounting Policies
The prinicipal accounting policies of the Group are set out in the Group's 2007 Annual Report and Financial Statements. The policies have remained unchanged for the year ended 31 March 2008.
3. Segment reporting
The group operates in one business segment; that of supply of training and consultancy solutions. The operations are monitored by the geographic regions of UK, Mainland Europe, North America, and Other (Asia, Middle and Far East, Africa, and South America).
| For the year ended 31 March 2008 (Unaudited) | UK, Republic of Ireland and Channel Islands | Mainland Europe | North America and Canada | Other | Total |
|
| £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
| Segment revenue | 11,798 | 968 | 228 | 318 | 13,312 |
| Segment result | 6,027 | 494 | 116 | 162 | 6,799 |
| Central costs |
|
|
|
| (4,767) |
| Operating profit |
|
|
|
| 2,032 |
|
|
|
|
|
|
|
| For the year ended 31 March 2007 (Audited) | UK, Republic of Ireland and Channel Islands | Mainland Europe | North America and Canada | Other | Total |
|
| £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
| Segment revenue | 9,408 | 611 | 63 | 258 | 10,340 |
| Segment result | 5,323 | 346 | 36 | 146 | 5,851 |
| Central costs |
|
|
|
| (4,272) |
| Operating profit |
|
|
|
| 1,579 |
All assets and liabilities are maintained and managed centrally.
4. Non-recurring costs
During the year the company incurred non-recurring costs as follows:
|
| Year ended 31.3.2008 (Unaudited) | Year ended 31.3.2007 (Audited) |
|
| £'000 | £'000 |
|
|
|
|
| Included within administrative expenses |
|
|
| Restructuring costs | 179 | 93 |
| Other non-trading costs | 74 | - |
|
| 253 | 93 |
|
|
|
|
| Included within interest payable |
|
|
| Refinancing costs | 111 | - |
The restructuring costs relate to the fundamental reorganisation of the elements of the Best Practice division into one single operating division. The costs principally comprise redundancy payments and office relocation costs.
The other non-trading costs relate to the out of court settlement, and related legal expenses, of an employment dispute arising during the year ended 31 March 2007.
The refinancing costs relate to the early settlement of the company's debt finance with HSBC. The costs principally comprise arrangement fees which would have been spread over the remaining life of the loans had they not been settled early.
The restructuring and other non-trading costs are included within administrative expenses on the income statement. The refinancing costs are included within interest payable on the income statement.
5. Earnings per share
Earnings per share is calculated by dividing profit attributable to shareholders of £1,034,000 (2007: £1,107,000) by the weighted average number of shares in issue during the year.
Diluted earnings per share is adjusted for outstanding share options and the average option price, using an average interest saving of 8.0% (2007: 8.0%).
To allow shareholders to gain a better understanding of the underlying trading performance of the company, an adjusted earnings per share and adjusted diluted earnings per share has been calculated using an adjusted profit after taxation before post-taxation non-recurring costs, as follows:
|
| Year ended 31.3.2008 (Unaudited) | Year ended 31.3.2007 (Audited) |
|
| £'000 | £'000 |
|
|
|
|
| Post tax profit for the period | 1,034 | 1,107 |
| After tax interest on outstanding options multiplied by exercise price | 17 | 108 |
| Profit for diluted earnings per share | 1,051 | 1,215 |
|
|
|
|
|
| £'000 | £'000 |
|
|
|
|
| Post tax profit for the period | 1,034 | 1,107 |
| Add back actual tax charge | 460 | 257 |
| Strip out non-recurring items | 364 | 93 |
| Normalised tax charge | (557) | (437) |
| Profit for adjusted earnings per share | 1,301 | 1,020 |
|
|
|
|
|
| £'000 | £'000 |
|
|
|
|
| Profit for adjusted earnings per share | 1,301 | 1,020 |
| After tax interest on outstanding options multiplied by exercise price | 17 | 108 |
| Profit for adjusted diluted earnings per share | 1,318 | 1,128 |
|
|
|
|
|
| Number | Number |
|
|
|
|
| Weighted average shares | 19,390,598 | 17,179,200 |
| Outstanding share options | 557,125 | 2,008,615 |
| Weighted average shares for diluted earnings per share | 19,947,723 | 19,187,815 |
|
|
|
|
|
|
|
|
| Basic earnings per share | 5.33p | 6.45p |
| Diluted earnings per share | 5.27p | 6.33p |
| Adjusted earnings per share | 6.71p | 5.94p |
| Adjusted diluted earnings per share | 6.61p | 5.88p |
6. Dividend
The directors recommend payment of a final dividend of 1.50 pence per share in respect of the year ended 31 March 2008, subject to shareholder approval at the annual general meeting on 18 July 2008. The shares held in trust under the company's Medium Term Incentive Plan will waive their entitlement to this dividend. This dividend, amounting to £263,000, will be paid on 22 August 2008 to shareholders on the register at 1 August 2008. These financial statements do not reflect this dividend payable, which will be accounted for in the statement of changes in equity as an appropriation of retained earnings, in the year ending 31 March 2009.
7. Annual Report
The annual report will be sent to shareholders shortly and will also be available from the Company's website www.ilxgroup.com and from the Company's registered office at 1 London Wall, London EC2Y 5AB.