Progility Regulatory News (PGY)

ILX Group plc

Final Results for the 15 months to 30 June 2013

Chairman's statement

In my statement for the six months ended 31 March 2013 I said that there were steps in place to improve the efficiency of our product delivery. The launch of our own training rooms at our new offices in the Strand, London is a good example of providing closer direct contact with our customers and improved product margin.

I also said that I believed that there was an opportunity to increase the scope and scale of the Group through acquisition. Our recent acquisition of TFPL Limited, which brings recruitment sector skills and other expertise into the Group, is a good example of this.

The in-depth business review and restructure which we have carried out since I joined the board in August 2012 has delivered significant operating cost reductions during the period. The business processes and related staffing levels have been analysed and we have taken positive action to bring costs into line with the business's objectives. We have achieved material cost reductions in each functional business area.

In addition the board has been restructured with Ken Scott, CEO, Jon Pickles, CFO, Eddie Kilkelly, COO, and Paul Virik and Damien Lane, both non‐executive Directors, having all stepped down. In their place I am pleased to have welcomed Donald Stewart and John McIntosh onto the board. Donald joined the business originally as a non-executive Director on 18 April 2013 and, on 3 June, joined the executive team, as General Counsel while, on 6 June 2013, John McIntosh was appointed Finance Director, and it is the board's intention to seek to appoint a further suitable independent non-executive director in the near future. Paul Lever remains an independent non-executive Director.

Alongside these new Directors we have put an experienced team of highly capable change managers in place to identify and deliver further operational improvements and business development opportunities.

In order to make the most of the Group's extensive project management customer base we have expanded the Group's product offering by creating further complementary business divisions in consulting and recruitment. This will allow the Group to provide more comprehensive services for both corporate and individual project managers and provide a platform on which to connect with our customers at different stages in the project management life cycle. Not only are we able to train project managers, we can also provide consulting services across relevant sectors and now, additionally, a recruitment link to our growing list of trained project manager clients.

Restructuring costs during the period have been greater than was initially anticipated as a result of our thorough review of the business. The full benefit of the resulting reductions in operating costs are not expected to be reflected until the new financial year.

Continuing pressure remains on revenues from the training division due to external price competition and industry macro factors. The new consultancy division has made a positive contribution and kept overall Group revenues steady. We believe that the acquisition of TFPL gives sound foundations to the Group's new recruitment division and we will continue to aim to increase the scope and scale of the business through capitalising on the contacts and experience available to the Group.

Strategy and delivery

Our strategic focus during the period has remained exploring and developing of the group's capabilities in areas which the Board believes will afford good growth opportunities. Building on the Group's presence in the area of project management, we have added consulting and recruitment to our experience and skills in training. We will continue to evaluate further growth opportunities including acquisitions.

Our on-going marketing review is continuing to reveal valuable insights into our target markets and product offering, particularly in relation to our on-line positioning, which will enable us to prioritise and refocus our marketing activities and guide us in the future development of our on-line offering. We continue to work on operational improvements and the development of a broader digital and classroom product portfolio. This month saw the launch of our PMP product, which will serve as an alternative to PRINCE2 for our clients in the North American market.

Group re-organisation

The business processes and related staffing levels of the training division were analysed to align the strengths of the team with the ongoing challenges required to arrest the historic pattern of declining revenues. Significant actions were taken to bring costs into line with businesses objectives. The changes to the commercial culture of the training business were made rapidly to minimize disruption. However this resulted in a total charge to restructuring of £2.4 million including a non-cash charge against intangible assets of £1.1 million.

Restated Gross Profit

We have recalculated the gross profit as presented in the results for the 15 months to 30 June and the twelve months to 31 March 2012. The effect of this has been to move certain sales related costs, including administrative and technical staff costs and shipping costs, from administrative and distribution expenses to cost of sales. Refer to note 1 of the notes to the audited financial statements to 30 June 2013.

Business Review

Management

A new executive management team was introduced during the 15 month period made up of highly capable change managers within sales, finance, legal and operations. Their combined experience covers training, consulting, business development, sales, digital transformation, cost control and the public company environment. Each executive is experienced in mergers and acquisitions and business integration.

Review of Divisions

The group is now headquartered at Strand Bridge House, 138-142 The Strand, London. This central London location was chosen as it better suits the overall needs of the business and the new offices can accommodate training courses with marginal incremental costs to the business. The Group's former offices at Hammersmith were sublet for the remainder of the term at the prevailing market rate.

Performance Management

The Group measures the operating performance of the business through monthly financial reports on the Training and Consulting (and, going forward, Recruitment) divisions.

The Training division covers the following territories, UK (including other international), Australia, New Zealand and UAE. The Consulting division is represented by Obrar Limited ("Obrar") and ILX Consulting Pty Ltd ("ILXC") both of which are able to service international business.

Training Division

The Training division was the Group's primary business until December 2012.

During the 15 month period to 30 June 2013 the Group's business in the UK has suffered a contraction of revenue to the level last achieved in 2011. Since the period end further steps have been taken to address marketing performance which, it is hoped, will improve leads generation and, in turn, the sales performance.

During the period the opportunities to improve the financial performance of the Group's training business in the APAC region were reviewed and the office was restructured. The intention is that with a lower cost base that office will continue to develop its sales but at a better gross margin that was previously experienced.

The UAE training business based in Dubai completed its first full year of operation in June 2013. During this period the small team delivered strong revenues, despite the significant barriers to entry, through creating a start-up and accessing tenders within the territory.

Efforts to establish markets in Europe have been hampered by recruitment and language conversion costs. Consequently the Danish and Polish operations have been scaled back. Instead the Group is looking to the larger English speaking business markets as a source of future training business opportunities and has achieved some sales success there.

Consequently, future resources will be targeted towards territories where the training business can leverage most from its existing products and skills and, for example, where the language barriers are less of an issue, until such time as further market penetration can be achieved economically.

The Group will continue to review its product portfolio and development capability. During the period it was decided to review the accounting treatment of development costs. As a result there has been a non-cash charge against previously capitalised product development.

Consulting Division

This division comprises Obrar and ILXC which brought in a combined £1.6 million revenue (2012: £nil) between December 2012 and 30 June 2013. Obrar, which was acquired on 5 December 2012, is located in the UK, has managed and implemented several large contact centre technical and operational projects during the period. Since its formation in February 2013 ILXC has successfully progressed and the team, now three strong, has implemented several operational projects primarily for clients in the Australian public sector.

Corporate activity

We continue to review acquisition opportunities as they arise to capitalise on the Group's capabilities in areas which the Board believes will afford growth opportunities. Two consulting businesses were brought into the Group during the period and a recruitment business shortly after the period end. The Board will continue to consider and evaluate new opportunities to give the group increased scope and scale whilst continuing the theme of project management, training, consulting and recruitment services.

Wayne Bos

Executive Chairman

10 September 2013

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Financial Review

Operating performance

For the 15 months to 30 June 2013 the Group delivered revenues of £17.0 million (2012: £13.5 million). Operating loss after accounting for restructuring costs was £1.5 million (2012 £1.0 million profit). Operating profit before restructuring costs of £2.4 million (2012: £nil) was £0.9 million (2012: £1.0 million). All the restructuring costs related to the training business.

Training Division performance

For the 15 months to 30 June 2013 the training division delivered revenues of £15.3 million (2012: £13.5 million). Gross margins across the training business were 40% (restated 2012: 45%). Operating loss was £1.5 million (2012: £1.0 million) after restructuring costs of £2.4 million (2012: £nil) and central costs of £1.7 million (2012 £2.4 million).

Consulting Division performance

For the period from 5 December 2012, when the Group acquired Obrar Limited, to 30 June 2013 the division delivered revenues of £1.6 million (2012: nil). Gross margins across the business were 11% (2012: nil). Operating profit was £0.1 million (2012: nil) principally as a result of set up costs and transition within the Group.

Cost reductions

Steps have been taken to reduce operating costs across the core training business. In the 15 months to 30 June 2013, after removing restructuring charges of £2.4 million, following a root and branch review, operating costs were £0.7 million lower than in the previous twelve months reporting period. Understanding what drives the e-learning revenue of the business is a significant part of the ongoing review to strengthen the performance of the core business, and further effort will be directed towards this objective. 

To preserve cash the group will continue with its current dividend policy and, consequently, no dividend is anticipated for the foreseeable future.

During the period the Group traded principally through its subsidiaries in the UK, Australia, New Zealand and in United Arab Emirates. The physical office operations begun in Denmark and Poland have been scaled back to focus on the larger markets where greater return will be achieved. This includes directing marketing effort more towards the USA and the larger emerging markets of the Far East/Australasia, where English speaking project management clients have a presence.

Profit before tax

Loss before tax for the period was £1.7 million (2012: £0.6 million profit). The adjusted Profit before tax, before taking account of restructuring, share option and impairment charges was £1.1 million (2012: £0.9 million).

Finance costs

The Group incurred finance costs of £0.1 million (2012: £0.4 million) during the period. As described in the interim results for the period to 31 March 2013 much of the finance cost improvement resulted from the investment provided during the period by Praxis Trustees providing aggregate cash inflow of £1.6 million to the Group during the period.

Taxation

The tax benefit for the period was £0.3 million (2012: expense £0.1 million), representing 20% of loss before tax (2012: 16% annualised).

The Group has previously benefited from tax credits available in the UK arising from qualifying research and development.

Profit for the period and earnings per share

Loss for the period attributable to equity shareholders was £1.3 million (2012: £0.6 million profit). Loss per share was 3.79p basic (2012: 2.07p earnings).

Going Concern

The Group has prepared the accounts on a going concern basis based on current forecasts for the period through to December 2014. While the Group has negative net current assets, as at 30 June 2013, the Board believes that it can meet its day-to-day working capital requirements from operating cash flows and its existing banking facilities. The Group's banking facility is due for renewal at 30 November 2013, and the Group's banker, HSBC, has indicated its willingness to continue its support of the Group's ongoing development.

Cash flow, net debt and facilities

Cash flow

Cash generated from operating activities was £2.0 million (2012: £1.1 million). The Group continues to generate operating cash flow from its e-commerce and cash sales and from advance payments from customers. During the period to 30 June 2013 the required restructuring costs have represented a significant proportion of the Group operating cash outflow. It is believed that the restructuring investment will have a positive effect on future cash flow. The effectiveness of this investment will be reflected in its impact on the Group's Training business development and on the take up of a strengthened digital offering, once this is fully communicated to our customers.

The Group paid out £0.2 million in corporation tax during the period (2012: £0.3 million).

The Group continues to invest in its product range and also incurred capital expenditure in the period relating to updates of its client portal and its internal systems and equipment to improve operating efficiency and remove labour intensive data processing.

Net debt and facilities

The Group reduced its net debt by £1.7 million compared with the period to 31 March 2012, from both positive cash flow from operations and the proceeds of Praxis Trustees' investment. At the balance sheet date the Group's debt comprised £0.5 million in by way of a fixed term facility, £0.7m by way of a revolving debt facility and £0.4m due to Praxis Trustees.

Of the facilities drawn at the balance sheet date, the term loan is expected to be repaid in full by the quarterly term loan repayments during the first quarter of 2014. At the balance sheet date £0.35 million of the revolving facility remained undrawn. Post year end the Group's revolving credit facility was raised to £2.0m

Net debt at the period end, defined as all bank debt plus convertible debt, less cash at bank, was £0.5 million (2012: £2.2 million). This comprised: £1.2 million in bank facilities drawn and £0.4m of convertible loans less £1.1 million in cash balances. The Group remains within the terms of all its banking covenants.

Dividend

As noted above, in order to preserve the Group's cash resources the Board does not recommend a dividend for the period ended 30 June 2013, which will remain the position for the foreseeable future.

Post balance sheet events

New acquisition - TFPL Limited

TFPL Limited ("TFPL") is a recruitment, training and consulting business, which was purchased for a maximum potential consideration of £0.6 million.

The consideration for the Acquisition comprised an upfront payment of £0.3 million, deferred contingent consideration of £50,000 payable if TFPL's net fee income for the year to 31 October 2013 reaches £1.05 million, and a single earn-out payment of up to £0.25 million payable in full if TFPL's net fee income exceeds £1.3 million in the 12 months to 30 June 2014. All the consideration is payable in cash.

At the date these financial statements were completed the Directors had not finalised the valuation of the intangible assets acquired. A further valuation will take place. The Directors have identified three main types of intangible asset: Domain name and brand; IT systems; and, customer relationships. The Directors consider that any residual goodwill that may arise will do so due to synergies and economies of scale from integrating TFPL within the Group.

Consolidated Statement of Comprehensive IncomeFor the Period ended 30 June 2013

Consolidated statement of Financial PositionFor the Period ended 30 June 2013

The financial statements were approved by the Board of Directors and authorised for issue on 10 September 2013. They were signed on its behalf by Wayne Bos and John Mc Intosh.

Consolidated Cash Flow Statement

For the period ended 30 June 2013

Statement of Changes in Equity

For the period ended 30 June 2013

Notes to the Accounts

1) Results

The financial information set out in this (unaudited) preliminary announcement does not constitute the statutory financial statements for the fifteen months ended 30 June 2013 or the year ended 31 March 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditors have reported on the accounts for 2013 in the results issued today. Their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 of the Companies Act 2006.

2) Accounting policies

The principal accounting policies of the Group are set out in the Group's 2012 Annual Report and Financial Statements. The policies have remained unchanged for the fifteen months ended 30 June 2013.

3) Basis of preparation and significant accounting policies

Basis of preparation

The preparation of the Group accounts in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. The key estimates and assumptions are set out in the accounting policies below, together with the related notes to the accounts.

Such estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances and constitute management's best judgment of conditions at the date of the financial statements. Key estimates and judgments relate to impairment analysis assumptions, revenue recognition over exam vouchers (see accounting policy) and deferred tax assets. In the future, actual experience may deviate from these estimates and assumptions, which could affect the financial statements as the original estimates and assumptions are modified, as appropriate, in the year in which the circumstances change.

The financial statements have been prepared on the historical cost basis as modified by financial assets and financial liabilities (including derivative financial instruments) at fair value through the statement of comprehensive income.

Change in Statutory period end

On 21 March 2013 the statutory year end was changed to 30 June to better reflect the cycle of revenue and reporting within the core Training business. As such the information in the financial statements is not entirely comparable with the prior year.

Restatement of Gross profit

We have recalculated the gross profit to better effect the cost of goods sold. The effect of this has been to move certain sales related costs, including administrative and technical staff costs and shipping costs, from administrative and distribution expenses to cost of sales. The accounting policies set out below have, unless otherwise stated, been applied consistently by the Group to all years presented in these financial statements. Due to the immateriality of the resulting changes it has not been deemed necessary to provide a third set of comparatives from 2011.

Going concern

The Group meets its day-to-day working capital requirements from its operating cash flows and from its revolving bank facility, of which £0.35 million was undrawn at the balance sheet date. The Group has an outstanding term loan from HSBC bank (£0.5 million at the balance sheet date), which is due to be repaid during the next twelve months. The Group's banking facilities are due for renewal in November 2013.

Through the recent negotiations with its loan note holders and its principal bankers, the Directors, after making enquiries, have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

It is the board's view that based on cash flow projections the Group considers the existing financing facilities to be adequate to meet operating requirements through December 2014.

Basis of consolidation

The consolidated financial statements include the financial statements of ILX Group Plc and its subsidiaries. There are no associates or joint ventures to be considered.

Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group uses the acquisition method of accounting to account for the acquisition of subsidiaries.

Revenue

Revenue for licenses to generic software products is recognised at the start of the license term, provided that delivery has occurred. Revenue from multi-year licenses is recognised over the license term.

Revenue from software that is sold together with a workshop or exam voucher is split into separate components based on the fair value of the individual deliverables. The software will be recognised upon delivery. The workshop or course deliverable will be recognised upon delivery of the service. The allocation of the fair value of the exam voucher is determined after taking into account the expected redemptions that have been reliably estimated based on significant historical experience. This amount is deferred until the exam has been taken or the voucher has expired.

Revenue from fixed price consultancy, training, customisation, and software development projects or events is recognised in accordance with the delivery for each project or event. Revenue from such projects chargeable on a time and materials basis is recognised when the work is performed.

Revenue from rental and support services is recognised evenly over the period for which the service is to be provided.

Deferred revenue represents amounts invoiced for revenue which is expected to be recognised in a future period. Accrued revenue represents amounts recognised as revenue which are to be invoiced in a future period.

Foreign currency

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated at the rates of exchange ruling at the balance sheet date. Exchange differences are taken to the statement of comprehensive income.

In the consolidated accounts, the assets and liabilities of foreign subsidiaries are translated at the rates of exchange ruling at the balance sheet date. The trading results of foreign subsidiaries are translated using the exchange rate ruling at the date of the transactions. Exchange differences arising are classified as other comprehensive income and accumulated in foreign exchange reserve in equity.

Share based payments

The Company operates two share option schemes. The fair value of the options granted under these schemes is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the vesting period, based on the number of options expected to vest.

The fair value of the options granted is measured using the Black-Scholes model, adjusted to take into account sub-optimal exercise factor and other flaws in Black-Scholes, and taking into account the terms and conditions upon which the incentives were granted.

Business combinations

On acquisition the assets liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the fair value of the consideration transferred over the fair values of the identifiable net assets acquired is recognized as goodwill. Any deficiency of the fair value of the consideration transferred below fair values of the identified net asset acquired is credited to the income statements in the period of acquisition.

Changes in the Group's ownership interest that do not result in a loss of control are accounted for as equity transactions. Purchase of non-controlling interests are recognized directly within equity being the difference between the fair value of the consideration paid and the relevant share acquired of the carrying value of the net assets to the subsidiary.

Contingent and deferred consideration arising as a result of acquisitions is stated at fair value. Contingent and deferred consideration is based on management's best estimate of the likely outcome and best estimate of fair value, which is usually a contracted formula based on multiples of revenue and / or ebitda.

The Group has elected not to apply IFRS3 business combinations retrospectively to combinations prior to the date of transition of 1 January 2008.

Goodwill

Goodwill is determined by comparing the amount paid, including the fair value of any deferred and contingent consideration, on the acquisition of a subsidiary or associated undertaking and the Group's share of the aggregate fair value of its separable net assets. It is considered to have an indefinite useful economic life as there are no legal, regulatory, contractual, or other limitations on its life. Goodwill is therefore capitalised and is subject to annual impairment reviews in accordance with applicable accounting standards. Contingent consideration classified as a financial liability is subject to annual fair value re-measurement and any movement recorded through the profit and loss account.

Impairment

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment, first looking at the intangible product and then acquired goodwill, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Eg if the product become obsolete, or a technology change occurs in the case of capitalized intangible product. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows using a discount rate that approximates the Group's cash generating units cost of capital to calculate the net present discounted cash flow. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in the profit and loss account.

Acquired customer relationships

The value of acquired customer relationships is determined by estimating the net present value of the future profits expected from the customer relationships. Where customer relationships relate to contracts covering a pre-determined period, the value is amortised over that period.

Research and development

Research expenditure is written off to the statement of comprehensive income in the year in which it is incurred. Costs incurred on product development relating to the design and development of new or enhanced products are capitalised as intangible assets when it is probable that the development will provide economic benefits, considering its commercial and technological feasibility and the resources available for the completion and marketing of the development, and where the costs can be measured reliably. The expenditures capitalised are the direct labour costs, which are managed and controlled centrally. Other development costs are recognised as an expense as incurred. Product development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Change in accounting estimate

The Group has decided to adopt this new estimate of amortisation under IAS 38 to more accurately reflect the economic life of the product development investment. Capitalised product development expenditure is considered to have an economic life of ten years and is written off during the economic life on a straight line basis. Previously, relevant product development costs were recorded with an indefinite life, which was subject to regular impairment reviews.

As a result of the change in the estimate there was a charge to the amortisation account of £224,000 and is recognised within Depreciation and Amortisation in the Consolidated Statement of Comprehensive Income.

Depreciation

Property, plant, and machinery are stated at cost less accumulated depreciation. Depreciation on these assets is provided at rates estimated to write off the cost, less estimated residual value, of each asset over its expected useful life as follows:

Investments

The Company carries the value of investments in subsidiaries at cost, after adjusting for any impairment.

Deferred taxation

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided those rates are enacted or substantively enacted by the end of the reporting period.

Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will be able to be utilised against future taxable income. This is assessed based on the Group's forecast of future operating results, adjusted for significant nontaxable income and expenses and specific limits on the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in full.

Defined contribution pension scheme

The pension costs charged in the financial statements represent the contributions payable by the Company during the year.

Leases and hire purchase contracts

The Company has no assets financed through finance leases.

Other leases are treated as operating leases. Annual rentals are charged to the statement of comprehensive income on a straight line basis over the term of the lease.

Convertible debt

Convertible loan notes are regarded as compound instruments, consisting of a liability instrument and an equity instrument. At the date of issue the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the convertible loan note and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity. The portion relating to the equity component is charged directly against equity. The interest expense of the liability component is calculated by applying the effective interest rate to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible loan note.

Deferred and contingent consideration

Deferred and contingent consideration payable is shown as a creditor on the balance sheet to the extent that a contractual obligation exists, or may exist, to make payment in cash.

Company profit

The Company profit for the financial year includes a loss after tax of £1,525,000 relating to the Company after taking account of restructuring costs of £2,412,000. No separate Company statement of comprehensive income has been presented, in accordance with Section 408 of the Companies Act 2006.

Interest

Interest on loans is expensed as it is incurred. Transaction costs of borrowings are expensed as interest over the term of the loans.

Financial instruments

The Directors consider the Company to have financial instruments, as defined under IFRS 7, in the following categories:

Loans and receivables

The Group's loans and receivables comprise cash and cash equivalents and trade receivables.

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value.

Trade receivables are recognised and carried at original invoice amount less an adjustment for doubtful debts. Bad debts are written off to the statement of comprehensive income when identified. An estimate of the adjustment for doubtful debts is made when collection of the full amount is no longer probable.

Contingent consideration measured at fair value through profit or loss

The Group measures its contingent liabilities arising upon acquisition on an annual basis. Changes in the fair value of any such contingent liabilities, such as earn out or other contingent consideration are recognised immediately through the profit and loss account.

Other financial liabilities measured at amortised cost

These include accruals, trade payables, revolving credit facilities and term debt.

Trade payables are recognised and carried at original invoice amount. Accruals are recognised and carried at the amounts expected to be paid for the goods or services received but not invoiced at the balance sheet date.

Bank borrowings, overdrafts, and revolving credit facilities are classified as current liabilities to the extent that capital repayments are due within 12 months of the balance sheet date, and long term liabilities where they fall due more than 12 months after the balance sheet date.

Future changes to accounting policies

Certain new standards, amendments and interpretations to existing standards have been issued by the IASB or IFRIC with an effective date after the date of these financial statements:

The impact on the Group's financial statements of the future adoption of these standards is still under review. Other than IFRS 9, where the Group is continuing to assess the materiality of the impact of this new standard, the Group does not expect any of the changes to have a material effect on the result or net assets of the Group.

4) Earnings per share

Earnings per share is calculated by dividing profit attributable to shareholders by the weighted average number of shares in issue during the year.

Note: The £400,000 convertible loan note is convertible into Ordinary Shares at a price of 10 pence per Ordinary Share and has a one for one warrant attached, exercisable at 10 pence per Ordinary Share, giving Praxis the potential to subscribe for a total of up to 8 million new Ordinary Shares. In addition, there are 660,936 of nil value shares eligible for exercise as well as 130,000 other share options. The loss for the period attributable to equity shareholders results in the exercise of the nil value share options and the convertible debt dilution being anti-dilutive.

5) Restructuring

An internal review of the business has identified several opportunities to reduce costs that will translate into profitability. The management team has also tightened up a number of business processes and eliminated certain operating expenses and capital expenditure that have demonstrated either insufficient return or none at all. This has resulted in restructuring costs and intangibles impairment as follows:

6) Post Balance Sheet Review

Acquisition of TFPL Limited ("TFPL")

TFPL is a recruitment, training and consulting business. The entire share capital was acquired on the 1st July 2013 for a maximum consideration of £0.6 million. The recruitment business is complementary to the activities of the group in the project management area. The Group has clients whose projects are temporary in nature and therefore there is potential demand for a service which can also help recruit while training clients in their chosen project management field.

TFPL provides executive search, managed services and the placement of permanent, interim and contract personnel into the public and private sectors. Since its establishment in 1985, the company has developed a strong brand and reputation in its marketplace.

The consideration for the acquisition comprises an upfront payment of £0.3 million, deferred consideration of £50,000 payable if TFPL's net fee income for the year to 31 October 2013 reaches £1.05 million, and a single earn-out payment of up to £0.25 million payable in full if TFPL's net fee income exceeds £1.3 million in the 12 months to 30 June 2014. All consideration is payable in cash.

At the date these financial statements were finalised the Directors has not finalised the valuation of the intangible assets acquired. A further valuation will take place. The Directors have identified three main types of intangible asset: Domain name and brand; IT systems; and, customer relationships. The Directors consider that any residual goodwill that may arise will do so due to synergies and economies of scale from integrating TFPL within the Group.

7) Annual Report

Copies of the Annual Report are available from the Company's website www.ilxgroup.com from 10 September 2013. Copies will be sent to shareholders in due course and will be available from the Group's registered office Strand Bridge House, 138-142 The Strand, London, WC2R 1HH.