Progility Regulatory News (PGY)

21 Jun 2006 07:01

ILX Group PLC21 June 2006 For Release 21 June 2006 ILX GROUP PLC 2006 PRELIMINARY RESULTS Net profits up 117% to £1.7m; Maiden dividend ILX Group plc ('ILX'), the AIM quoted vocational education and training company,announces Preliminary Results for the year ended 31 March 2006, another year ofsignificant growth. These results have been restated under IFRS. Financial Highlights: • Turnover up 76% to £6.91m (2005: £3.92m) • Operating profit up 30% to £1.00m (2005: £0.77m) • Profit before tax up 20% £0.94m (2005: £0.78m) • Net profit up 117% to £1.70m (2005: £0.78m) • Strong organic growth of 29% from continuing operations • Strong cash generation during the year of £0.95m • Acquisitions contributed £0.53m turnover and £0.15m operating profit • Earnings per share up 64% to 16.39p (2005: 10.02p) • Maiden dividend of 0.75p - payable to shareholders on the register at 30 June 2006 Corporate Highlights: • £4.0m acquisition of Mount Lane Training and Implementation Solutions Ltd on 23 November 2005 • £1.0m acquisition of Customer Projects on 1 February 2006 • Group reorganised into one Best Practice operating unit • Rapid growth in both PRINCE2 (95% growth ) and ITIL (157% growth) • ILX is now the only Best Practice training company to offer computer based training, classroom based training and project management implementation consultancy services In summary, Ken Scott, Chief Executive of ILX Group plc, said: "Our strategy continues to be to build a market leading presence as a trainingand software business in the vocational training sector. We will look to createhigh value business models in each of the markets we serve. This will continueto be achieved through organic growth and by making earnings enhancingacquisitions. This year again has allowed us to demonstrate our ability todeliver profits, strong organic growth, and well judged acquisitionssuccessfully integrated within the framework of ILX Group plc." For further information, please contact: ILX Group plc Parkgreen Communications Ltd Charles Stanley SecuritiesKen Scott, Chief Executive Paul McManus Philip DaviesTel: 020 7371 4444 Tel: 020 7786 9600 Tel: 020 7149 6457 Mob: 07980 541 893http://www.ilxgroup.com Chairman's Statement For the year ended 31 March 2006 I am pleased to present the results for the year ended 31 March 2006. ILX Group plc has experienced another year of significant change as the Companycontinues to expand by way of organic growth and through acquisitions. The wideoffering of high quality classroom training, e-learning, and consultancy hasallowed the Group to make available a flexible delivery option to customers.This has helped provide competitive advantage and has led to market share gainsfor the Company in the past 12 months. Two further businesses have also beenacquired during the last six months of the year which have helped deliver theoverall surge in growth. International financial reporting standards (IFRS) These are the first results that we have reported under IFRS and all numberspresented for comparative periods have been restated under IFRS. The changesresulting from the adoption of IFRS do not affect revenue recognition or thecash flows of the business. The primary areas of change are the change intreatment of goodwill, which is now subject to annual impairment reviews ratherthan amortisation; the requirement to capitalise product development expenditurewhere certain criteria are met; and the requirement to show a charge to profitfor the share options granted to employees. Full explanation of the transitionto IFRS is presented in the notes to the financial statements. Financial results Turnover for the year was £6,913,255 (2005: £3,924,465) delivering an OperatingProfit of £1,000,725 (2005: £774,360. Net profit for the year was £1,699,430(2005: £782,180) representing basic earnings per share of 16.39p (2005: 10.02p).The results this year have benefited from the recognition of a deferred taxasset; stripping out this benefit the revised earnings per share figure is 9.08p(2005 after stripping out the exceptional gain of £100,000: 8.74p). I am delighted to announce that your Board has approved the issue of theCompany's first dividend which will be at 0.75p per share, and will be paidsubject to shareholder approval at the Company's forthcoming AGM. Acquisitions The Company is building a market leading presence in the vocational educationand training sectors within which it trades through a combination of organicgrowth and earnings enhancing acquisitions. To date, ILX Group has concentratedprincipally on the Best Practice market as its training needs are well definedand high end. This market provides the Company with growth opportunities for theforeseeable future. The acquisitions of Mount Lane and of Customer Projectshave added considerable strength to the company's Best Practice offering and areexpected also to provide new sources of revenue and profit in coming years. Mount Lane was purchased on 23 November 2005 for £4.0 million, in cash andshares, of which £1.8 million is contingent subject to meeting certainperformance criteria for the period ending March 2007. Assuming full earn-outthe payment represents a post-tax multiple of 6.0. Mount Lane providescustomised training and software based orientation principally for new andexisting desktop applications. Its clients tend to be large organisations with3,000 or more staff where there is typically either a wholesale migrationrequirement from one Microsoft Windows software system to another or where theorganisation is seeking to reduce significantly the cost of helpdesk support.The Mount Lane proposition is to simplify the user orientation headache andthereby to smooth the challenges faced by organisations when their desktopsoftware is upgraded. The Mount Lane software takes an organisation's users frompoint A to point B without the business experiencing a dip in productivity andwithout a short term increase in support calls. In addition, the Mount Lanesoftware is also used by some organisations to reduce the cost of helpdesksupport by empowering the user to resolve the more basic problems normallyrequiring hands-on support. These activities fall within the ITIL sphere asthey deal primarily with improving the user experience. The business is basedjust outside Reading. The Company's project management capability was significantly enhanced with theacquisition of Customer Projects in February this year. Customer Projects is animplementation consultancy business specialising in the Best Practice projectand programme management sector. Organisations such as Vodafone, United Nationsand Pension Protection Fund are using the Customer Projects consultancy serviceto ensure the transformational changes required to embed PRINCE2 and relatedproject management processes are truly taking place. This significantlycomplements the Company's project management proposition and makes ILX Groupunique amongst its competitive peer group in being able to deliver training andchange management in a flexible and effective way. Customer Projects waspurchased for a total of £1.0 million, of which £0.5 million is subject to anearn-out period ending March 2007. Again, assuming full earn-out the paymentrepresents a post-tax multiple of 5.5. Prospects In the opinion of the Directors, the Company has maintained the considerablemomentum it has gained in expanding its presence in the PRINCE2 and ITIL marketsand through the successful integration of previous acquisitions. At the end ofthe last financial year and after two further acquisitions completed, the BestPractice activities had grown into six separate operating divisions. On April 1these were reorganised into one single entity. The reorganisation is expected toprovide a sharper focus on the Best Practice market, to optimise theopportunities in project management and IT service management and to ensurefurther market share gains and future quality earnings. As the Company continues to build a leading presence in this Best Practicemarket, it is also constantly seeking opportunities to replicate this approachin other vocational training sectors with the aim of eventually having a basketof high value business models. The Directors expect that this will be achievedas suitable acquisitions are identified which provide appropriate entry points. This year more than any other, I believe the prospects for the Company are veryexciting. Finally, I formally welcome the staff and management of Mount Lane and CustomerProjects, and again to thank all ILX Group employees for their dedicated effortsover a year in which their hard work has borne fruit. We look forward to anothersuccessful year in 2006/7. Paul Lever Chairman Chief Executive's Review For the year ended 31 March 2006 Introduction Since I joined ILX Group in 2002, our strategy has been to build a significantvocational training business both through organic growth and by making earningsenhancing acquisitions. Within a few years, we aim to have a number of highvalue operating businesses, each of which will aim to dominate specific areas ofthe training markets which they serve. The year to 31 March 2006 has againdelivered strong organic growth with two further successfully integratedacquisitions. For the second successive year we have increased profit andgenerated a considerable amount of cash which together continue to underpin ouroverall strategic goals. Financial Results Profit for the year The Company delivered turnover of £6,913,255 for the year (2005: £3,924,465) andan Operating Profit of £1,000,725 (2005: £774,360 as restated under IFRS). Thisgrowth resulted primarily from a full year's trading of the Mindscope division(four months in 2005) and from the continued growth of both Mindscope and KeySkills revenues in the Best Practice market. The acquisitions of Mount Lane andCustomer Projects also contributed four and two months trading respectively tothe overall result. Particular trends in the Company's trading are identifiedlater in this review. Net Profit for the Year was £1,699,430 (2005: £782,180), giving basic earningsper share of 16.39p (2005: 10.02p). The Company expects to pay a dividend of0.75p per share. This dividend will be paid to shareholders on the register at30 June 2006, subject to shareholder approval at the Company's AGM. The 2006 earnings figure benefits from the one-off recognition of a tax assetrelating to tax losses that are available to offset against future profits.Additionally the 2005 earnings per share figure benefited from the £100,000one-off gain on the early repayment of part of its debt in that year. Strippingout both items from the earnings per share gives figures of 9.08p for 2006 and8.74p for 2005, and on that basis the 2006 performance represents a 4% increaseon an enlarged base of 10.36 million weighted average shares (2005: 7.80million). The company has utilised £1.04 million of tax losses to eliminate any tax chargefor the year. Unrelieved tax losses of £2.62 million remain available to beoffset against future profits. Acquisitions Two further acquisitions were completed, both in the second half of the year. Mount Lane Training and Implementation Solutions Ltd ("Mount Lane") waspurchased on 23 November 2005 for £4.0 million, in cash and shares, of which£1.8 million is deferred and contingent. The contingent consideration, of which15% is payable in cash and the remainder in cash or shares at the option of theCompany, is calculated as 4 times the amount by which Mount Lane's contributionto operating profit, for the year ended 31 March 2007, exceeds £500,000. Thefull earn-out will therefore be payable in the event that this contributionreaches £950,000 for that year which, assuming a tax rate of 30%, results in apost-tax multiple of 6.0 assuming the full earn-out is achieved. The initialconsideration represents a post-tax multiple of 5.9 on Mount Lane's last fullfinancial year prior to acquisition. Customer Projects was purchased on 1 February 2006 for a total of £1.0 millionin cash and shares, of which £0.5 million is deferred and contingent. Thecontingent consideration, which is payable in cash or shares at the option ofthe Company, is calculated as 3.5 times the amount by which Customer Projects'contribution to operating profit, for the year ended 31 March 2007, exceeds£120,000. The full earn-out will therefore be payable in the event that thiscontribution reaches £262,857 for that year which, assuming a tax rate of 30%,results in a post-tax multiple of 5.5 assuming the full earn-out is achieved.The initial consideration represents a post-tax multiple of 4.5 on CustomerProjects' last full financial year prior to acquisition. Both earn-out payments, which we expect to be fully met, are payable on 31 July2007. Cash generation and net debt Cash generated from operating activities during the year was £953,192 (2005:£645,967), a conversion rate of 95% (2005: 89%) of profit from operations. Net cash from operating activities, which under IFRS is stated after interestpaid and corporation tax, was £694,855 (2005: £477,833). The tax paymentstotalling £187,307 (2005: £125,396) relate entirely to pre-acquisition taxbalances on acquired companies. Corporation tax balances payable in the comingyear, relating to the pre-acquisition profits of Mount Lane and CustomerProjects, are £20,177. Net cash used in investing activities was £1,186,117 (2005: £170,481). TheCompany spent £839,914 (2005: an inflow of £46,495) on the cash elements ofacquisitions (net of cash balances received) in relation to Customer Projects,Mount Lane, and to deferred cash payable for the acquisition of Mindscope. TheCompany also spent £474,305 on product development (2005: £198,024) on newproducts launched during the year or expected to be launched in the first halfof the new financial year, and £90,402 (2005: £27,626) on capital expenditure,particularly in relation to investment in new computer hardware and systems. TheCompany also sold and leased back its freehold premises in Cheshire, principallyto provide greater flexibility as the team at that location expands. Thistransaction, along with the sale of a company car, raised £206,431 for theCompany. Net cash from financing activities was an inflow of £465,549 (2005: outflow of£179,269), and comprised an inflow of £720,796 representing net proceeds from anissue of new ordinary shares, at a price of 100p, to help finance the Mount Laneacquisition, less repayment of £255,247 of borrowings. At the end of the period the Company had cash balances of £646,126 (2005:£671,839) and total bank and hire purchase debt of £820,721 (2005: £1,076,009).The Company's net debt position at the end of the year was therefore £174,595(2005: £404,170). Markets, Operations, and Strategy Best Practice market The Project Management, IT Service Management and other related areas which arecollectively known as Best Practice continue to expand and increase their reach.The Company's Revenues from Best Practice activities represented 80% of totalCompany revenues in the period, up from 67% in 2005. In order to capitalise onthe opportunities in this market, the Company has reorganised its divisionalstructure, effective from 1 April 2006, into a more coherent operating unit,consisting of one Best Practice division which services the market of the samename. The Company's revenues, analysed by subject, were as follows: Turnover by subject Year ended 31.3.2006 Year ended 31.3.2005 Growth% £ % £ %PRINCE2 and project management 95% 3,973,555 57% 2,033,592 52%ITIL, IT & service management 157% 1,553,613 22% 604,583 15%Total Best Practice activities 110% 5,527,168 80% 2,638,175 67%Finance -7% 1,045,898 15% 1,120,980 29%Recharged expenses and other revenues 106% 340,189 5% 165,311 4%Total revenue 76% 6,913,255 100% 3,924,465 100% Projects in Controlled Environments (PRINCE2) is a process driven projectmanagement methodology that has become the standard in many parts of the world.PRINCE2 and related Best Practice activities expanded and consolidated furtherduring the period. Demand for PRINCE2 training products continues to expand at arate estimated at 20-30% per annum. Against this, the Company's sales of PRINCE2and other Project Management e-learning, classroom training, and consultancygrew by 95% in the past year. Full year contributions from Mindscope's classroomtraining and the acquisition in February of Customer Projects helped drive thesegains. Customer Projects is one of just six Accredited Consulting Organisations forBest Practice project management. It specialises in providing managementconsultancy to organisations that wish to embed the internal changes necessaryto enable Best Practice project management to flourish. Customers includeVodafone, Ericsson, Cable and Wireless, Pension Protection Fund and a majorglobal non-profit making organisation. It is led by Eddie Borup, ex-Head ofProjects at Cable & Wireless who has many years of experience in consulting. Iam very pleased that Eddie has remained with the Company as Managing Director ofthe Customer Projects business. This acquisition, combined with our multimediatraining software and our classroom training offering has put ILX in apre-eminent position. ILX Group is the only company in the Best Practice spaceto provide a full service offering of computer based training, classroom basedtraining, and project management implementation consultancy services. This isincreasingly helping to drive market share gains as we consolidate and refineour overall proposition. During the year, the Company also continued building its position in the ServiceManagement market with the launch of classroom training products for theInformation Technology Infrastructure Library (ITIL) qualification, following onfrom the successful launch of CBT products in this area in 2005. ITIL covers anintegrated, process based, best practice framework for managing IT services andis recognised worldwide. The Company's sales of ITIL, IT, and other ServiceManagement e-learning, classroom training, and consultancy grew by 157% in thepast year, helped by strong sales of ITIL training products and by theacquisition of Mount Lane. Mount Lane is a specialist provider of customised training and implementationsolutions/services. It provides an economic solution to organisationsundertaking major desktop migrations where the need to minimise productivityslippage is critical. Mount Lane has also been increasingly successful inhelping organisations to substantially reduce the cost of help desk supportthrough the use of its orientation software. The overall proposition is closelyallied to ITIL as the focus is primarily on the user experience and ensuringeither smooth transition in the case of migration and/or effective user support.Its target market is listed companies and large organisations, typically with anIT infrastructure in excess of 3,000 desktops. It has a blue chip customer basethat includes Norwich Union, most of the major UK banks, Network Rail and BskyB.Andrew White is Managing Director and has many years experience of the MountLane business and has remained with the enterprise he founded. Sales of Financial Training products and services were down slightly during theperiod as the offer was refined and the products refreshed. This is anincreasingly marginal portion of the overall business of ILX Group and wetherefore do not view this as significant. Delivery methods ILX Group is the only company in the Best Practice space to provide a fullservice offering of computer based training, classroom based training, andproject management implementation consultancy services. This is increasinglyhelping to drive market share gains as we consolidate and refine our overallproposition. In the full year, revenue was well spread between e-learning and classroom-basedtraining, contributing 47% and 34% respectively. Classroom-based training inparticular experienced significant growth, due partly to the full year'scontribution from Mindscope but also to significant organic growth in this area.The acquisition of Customer Projects helped drive the Consultancy revenues andthe bespoke software development revenues were boosted by the acquisition ofMount Lane. Turnover by product/service type Year ended 31.3.2006 Year ended 31.3.2005 Growth% £ % £ %e-Learning 26% 3,265,753 47% 2,585,597 66%Classroom-based training 165% 2,306,841 34% 871,702 22%Consultancy services 262% 284,586 4% 78,685 2%Bespoke software development 116% 567,913 8% 262,819 7%Other 288% 488,162 7% 125,662 3%Total revenue 76% 6,913,255 100% 3,924,465 100% The Company has unique expertise in software development and the use of softwarefor training purposes married with its classroom training capabilities anddevelopment experience. During the period the Company undertook a number ofbespoke or build-to-order contracts, which came from the following areas: • Development of bespoke e-learning solutions • Implementation products and services allowing companies to distribute training over a wide and dispersed audience whilst maintaining a full audit trail • Customisation of products to meet customer-specific requirements We envisage this area growing significantly as we leverage our competitiveadvantages of strong e-learning development capability as well as classroomdelivery and consultancy. Geographic split and sector analysis All the Company's operations are based within the UK but products and servicesare exported to a number of overseas locations. The majority of the businesscontinues to come from UK customers (88%) with small amounts from Europe (8%)and North America (2%). Turnover by geographical sector Year ended 31.3.2006 Year ended 31.3.2005 Growth% £ % £ %UK 105% 6,092,440 88% 2,965,920 75%Mainland Europe -4% 578,724 8% 601,701 15%North America -61% 116,179 2% 296,998 8%Other 110% 125,912 2% 59,846 2%Total Revenue 76% 6,913,255 100% 3,924,465 100% The Company continues to serve a wide range of customers across public andprivate sector as well as a significant proportion of business direct withindividuals, as illustrated by the table below. All areas showed strong growthin the year. Turnover by sector Year ended 31.3.2006 Year ended 31.3.2005 Growth% £ % £ %Private sector 61% 4,255,644 61% 2,638,672 67%Public sector / Not for profit 126% 2,041,667 30% 903,794 23%Individuals 61% 615,945 9% 381,999 10%Total revenue 76% 6,913,255 100% 3,924,465 100% Management changes As we grow as a Company, the importance of developing and maintaining a strongmanagement team grows ever more relevant. As mentioned earlier, I undertook awide ranging reorganisation at the end of the period. Its purpose was toimprove our focus and thereby our capabilities to win business in the BestPractice market. Martyn Kinch, Commercial Director (non-statutory) of theCompany since April, 2005 has been appointed Managing Director (non-statutory)of the Company's new Best Practice Group. Martyn ran Key Skills since itsinception and joined the Company in February 2004. His remit is to drive theBest Practice Group into a market dominant position over the next few years. Working with Martyn are Denise Maxfield - Sales Director (non-statutory), EddieKilkelly - Operations Director (non-statutory) and David Willis - TechnicalDirector (non-statutory). Denise Maxfield has run the sales team at Key Skillsfor a number of years. David Willis has managed the Intellexis division sinceApril 2004. Eddie Kilkelly joined the Company in March this year from Paritywhere he was responsible for all operational delivery over a number of years. Iam very pleased to welcome Denise, Eddie and David to the Best Practicemanagement team. I am also delighted to welcome Andrew White (Managing Director (non-statutory),Mount Lane) and Eddie Borup (Managing Director (non-statutory), CustomerProjects) to the team. Andrew White and Eddie Borup will continue to manageMount Lane and Customer Projects respectively as distinct units within the BestPractice Group. Future opportunities There are a great deal of opportunities open to us as a Company and manychallenges ahead. The focus for the first half of the next year continues to beto exploit the opportunities for organic growth. We have stated before the importance we place on establishing and maintaining afirm dialogue with all shareholders and ensuring that regular news of theCompany's progress is available. To this end we redesigned the Annual Reportlast year and launched the Shareholder Discount programme. In the summer of 2005we also launched the shareholder newsletter. Now called ILXtra, its purpose isto improve news flow and the communications between the Company and you itsshareholders. I would again encourage as many shareholders as possible to attendthe AGM. It is hoped that continued strong trading, organic growth, further choiceacquisitions and improved investor relations, will bring about higher profilefor the Company amongst the investment community. Our strategy continues to be to build a sizeable training and software businessin the vocational training market. We will look to create high value businessmodels in each of the markets we serve. This will continue to be achievedthrough organic growth and by earnings enhancing acquisitions. This year againhas allowed us to demonstrate our ability to deliver profits, strong growth, andwell judged acquisitions successfully integrated within the framework of ILXGroup plc. Lots still to achieve but we look forward to a bright future. Ken Scott Chief Executive Consolidated and Company Income Statement For the Year ended 31 March 2006 Year ended Year ended Year ended Year ended 31.3.2006 31.3.2006 31.3.2006 31.3.2005 Continuing Acquisitions Total As restated activities £ £ £ £ Revenue 6,380,582 532,673 6,913,255 3,924,465 Cost of sales (2,238,972) (96,602) (2,335,574) (957,557) Gross profit 4,141,610 436,071 4,577,681 2,966,908 Distribution costs (224,593) (2,955) (227,548) (144,907)Administrative expenses excludingdepreciation andamortisation (3,019,818) (282,274) (3,302,092) (1,977,810) Earnings before interest, tax anddepreciation andamortisation 897,199 150,842 1,048,041 844,191 Depreciation (46,010) (1,306) (47,316) (35,628)Amortisation - - - (34,203) Operating profit 851,189 149,536 1,000,725 774,360 Reorganisation costs - (49,116) Profit from operations 1,000,725 725,244 Interest receivable and similar income 12,073 42,674Gain on early repayment of debt - 100,000Interest payable and similar charges (71,123) (85,738) Profit before tax 941,675 782,180 Tax 757,755 - Profit for the period attributableto equity holders 1,699,430 782,180 Earnings per share -from continuingoperations andacquisitionsBasic 16.39p 10.02pDiluted 15.08p 9.83p Consolidated Balance Sheet as at 31 March 2006 31.3.2006 31.3.2005 As restatedAssets £ £Non-current assetsProperty, plant and equipment 132,872 262,354Intangible assets 12,386,146 6,816,684Total non-current assets 12,519,018 7,079,038 Current assetsDeferred tax asset 789,000 -Trade and other receivables 2,031,070 1,059,166Cash and cash equivalents 646,126 671,839Total current assets 3,466,196 1,731,005 Total assets 15,985,214 8,810,043 Current liabilitiesTrade and other payables (1,317,742) (674,214)Deferred consideration (236,869) (305,377)Tax liabilities (417,086) (293,712)Bank loans (146,429) (154,762) (2,118,126) (1,428,065) Net current assets 1,348,070 302,940 Non-current liabilitiesProvision for contingent consideration (270,000) -Hire purchase creditor (3,048) -Bank loans (674,332) (921,247)Total non-current liabilities (947,380) (921,247) Total liabilities (3,065,506) (2,349,312) Net assets 12,919,708 6,460,731 EquityIssued share capital 1,283,329 3,734,318Share premium 7,248,037 7,338,490Shares to be issued - contingent consideration 2,030,000 375,000Own shares in trust (1,082,192) (300,772)Share option reserve 199,616 90,866Buyback reserve 1,177,819 -Retained earnings 2,063,099 (4,777,171)Total equity 12,919,708 6,460,731 Consolidated Cash Flow Statement For the year ended 31 March 2006 Year ended Year ended 31.3.2006 31.3.2005 As restated £ £Profit from operations 1,000,725 725,244Adjustments for:Depreciation, amortisation and profit on disposal of non-current assets 37,455 69,831Share option charge 108,750 46,222Movement in trade and other receivables (821,795) (239,605)Movement in trade and other payables 628,057 44,275Cash generated from operating activities 953,192 645,967 Interest paid (71,030) (42,738)Tax paid (187,307) (125,396)Net cash from operating activities 694,855 477,833 Investing activitiesInterest received 12,073 8,674Proceeds on disposal of property, plant and equipment 206,431 -Purchases of property, plant and equipment (90,402) (27,626)Expenditure on product development (474,305) (198,024)Acquisition of subsidiary (net of cash acquired) (839,914) 46,495Net cash (used in) from investing activities (1,186,117) (170,481) Financing activitiesPost-completion dividends paid - (49,791)Repayment of borrowings (255,247) (588,575)Repayment of finance lease obligations - (6,100)Net proceeds of share issue 720,796 465,197Net cash from / (used in) financing activities 465,549 (179,269)Net change in cash and cash equivalents (25,713) 128,083 Cash and cash equivalents at 1 April 671,839 543,756Cash and cash equivalents at 31 March 646,126 671,839 Consolidated and Company Statement of Changes in Equity Year ended 31 March 2006 Called up Share Contingent Own shares Share Buyback Retained Total share premium consider- in trust option reserve earnings capital account ation reserve £ £ £ £ £ £ £ £Balance at 31 March 3,524,145 5,883,466 - (300,772) 44,644 - (5,559,351) 3,592,1322004 Profit for the year 782,180 782,180Issue of shares 210,173 210,173Premium on issue of shares 1,482,225 1,482,225Costs relating to share issue (27,201) (27,201)Options granted 46,222 46,222Contingent 375,000 375,000considerationBalance at 31 March 2005 3,734,318 7,338,490 375,000 (300,772) 90,866 - (4,777,171) 6,460,731 Profit for the year 1,699,430 1,699,430Capital reorganisation (2,836,926) (3,500,000) 1,177,819 5,140,840 (18,267)Issue of shares to trust (781,420) (781,420)Issue of shares 385,937 385,937Options granted 108,750 108,750Contingent consideration 1,655,000 1,655,000Premium on issue of shares 3,495,483 3,495,483Costs relating to share issue (85,936) (85,936)Balance at 31 March 2006 1,283,329 7,248,037 2,030,000 (1,082,192) 199,616 1,177,819 2,063,099 12,919,708 Notes to the Financial Statements For the Year ended 31 March 2006 1. Results The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The summarised balance sheet at 31 March 2006 and the summarised incomestatement, summarised cash flow statement and associated notes for the year thenended have been extracted from the Group's financial statements. The comparative financial information for the year ended 31 March 2005 is basedon an abridged version of the group's published financial statements for thatperiod, which contained an unqualified audit report and which have been filedwith the Registrar of Companies. The comparative financial information has beenrestated under IFRS. The statutory accounts for 2006 will be finalised on the basis of the financialinformation presented in this preliminary announcement and will be delivered tothe 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 2005Annual Report and Financial Statements. The policies have remained unchanged forthe year ended 31 March 2006, except as required by the adoption of IFRS. Thechanges resulting from the adoption of IFRS are set out in Note 5 below. 3. Segment reporting The Group operates in one business segment; that of supply of training andconsultancy solutions. For further details see the Chief Executive's Review. Theoperations are monitored by the geographic regions of UK, Mainland Europe, NorthAmerica, and Other (Asia, Middle and Far East, Africa, and South America). Taxassets and liabilities and the intangible asset for product developmentcapitalised are excluded from segment assets and liabilities. All other assetsand liabilities are maintained and managed centrally and are apportioned betweenthe regions on a pro-rata basis below. For the Year ended 31 March 2006 UK Mainland North Other Total Europe America £ £ £ £ £ Segment revenue 6,092,440 578,724 116,179 125,912 6,913,255Segment result 3,833,639 364,159 73,105 79,230 4,350,133Product development amortised -Central costs (3,349,408)Operating profit 1,000,725 Capital additions 79,668 7,568 1,519 1,647 90,402Depreciation and amortisation 41,698 3,961 795 862 47,316Segment assets 12,829,598 1,218,690 244,652 265,148 14,558,088Segment liabilities 2,333,972 221,705 44,507 48,236 2,648,420 For the Year ended 31 March 2005 UK Mainland North Other Total Europe America £ £ £ £ £ Segment revenue 2,965,920 601,701 296,998 59,846 3,924,465Segment result 2,486,944 236,236 47,424 51,397 2,822,001Product development amortised (34,203)Central costs (2,013,438)Operating profit 774,360 Capital additions 24,346 2,313 464 503 27,626Depreciation and amortisation 61,539 5,846 1,174 1,272 69,831Segment assets 7,619,650 723,795 145,302 157,475 8,646,222Segment liabilities 1,811,537 172,079 34,545 37,439 2,055,600 4. Earnings per share The calculation of earnings per share is calculated by dividing profitattributable to shareholders of £1,699,430 (2005: £782,180) by the weightedaverage number of shares in issue during the year of 10,363,803 (2005:7,803,413). Diluted earnings per share is adjusted for outstanding options and the averageoption price using an average interest saving of 5.6%. 5. Explanation of transition to IFRS These are the Group's and the Company's first annual financial statementsprepared in accordance with IFRS. The accounting policies referred to in Note 1have been applied in preparing the financial statements for the year ended 31March 2006, the comparative information for the year ended 31 March 2005, andthe preparation of an opening IFRS balance sheet at 1 April 2004, the Group'sand the Company's date of transition to IFRS. In preparing its opening IFRS balance sheet and comparative information for theyear ended 31 March 2005, the Group and the Company have adjusted amountsreported previously in financial statements prepared in accordance with UK GAAP. An explanation of how the transition from UK GAAP to IFRS has affected theGroup's and the Company's financial position and financial performance is setout in the following tables and notes accompanying them. There have been nochanges to the Group's or Company's cash flows as a result of the transition. Stockholders' equity UK GAAP Effects of transition IFRS Year ended Development Share options Goodwill Year ended 31.3.2005 expenditure expensed amortisation 31.3.2005 capitalised eliminatedCalled up share capital 3,734,318 3,734,318Share premium account 7,338,490 7,338,490Contingent consideration 375,000 375,000Own shares in trust (300,772) (300,772)Share option reserve - 90,866 90,866Retained earnings (5,140,840) 163,821 (90,866) 290,714 (4,777,171)Total stockholders' equity 6,006,196 163,821 - 290,714 6,460,731 Consolidated Income Statement UK GAAP Effect of IFRS transitionFor the year ended 31 March 2005 Year ended Year ended 31.3.2005 31.3.2005 £ £ £Revenue 3,924,465 - 3,924,465Cost of sales (957,557) - (957,557)Gross profit 2,966,908 - 2,966,908Distribution costs (144,907) - (144,907)Administrative expenses excluding depreciation and (2,129,613) 151,803 (1,977,810)amortisationEarnings before interest, tax, depreciation and amortisation 692,388 151,803 844,191Depreciation (35,628) - (35,628)Amortisation (290,714) 256,511 (34,203)Operating profit 366,046 408,314 774,360Reorganisation costs (49,116) - (49,116)Profit from operations 316,930 408,314 725,244Interest receivable and similar income 42,674 - 42,674Gain on early repayment of debt 100,000 - 100,000Interest payable and similar charges (85,738) - (85,738)Profit before tax 373,866 408,314 782,180Tax - - -Profit for the period attributable to equity holders 373,866 408,314 782,180 Consolidated Balance Sheet as at 31 March 2005 UK GAAP Effect of IFRS transition 31.3.2005 31.3.2005Assets £ £ £Non-current assetsProperty, plant and equipment 262,354 - 262,354Intangible assets 6,362,149 454,535 6,816,684Total non-current assets 6,624,503 454,535 7,079,038Current assetsTrade and other receivables 1,059,166 - 1,059,166Cash and cash equivalents 671,839 - 671,839Total current assets 1,731,005 - 1,731,005Total assets 8,355,508 454,535 8,810,043Current liabilitiesTrade and other payables (674,214) - (674,214)Deferred and contingent consideration (305,377) - (305,377)Tax liabilities (293,712) - (293,712)Bank loans (154,762) - (154,762) (1,428,065) - (1,428,065)Net current assets 302,940 - 302,940Non-current liabilitiesBank loans (921,247) - (921,247)Total non-current liabilities (921,247) - (921,247)Total liabilities (2,349,312) - (2,349,312)Net assets 6,006,196 454,535 6,460,731 EquityIssued capital 3,734,318 - 3,734,318Share premium 7,338,490 - 7,338,490Shares to be issued - contingent consideration 375,000 - 375,000Own shares in trust (300,772) - (300,772)Share option reserve - 90,866 90,866Retained earnings (5,140,840) 363,669 (4,777,171)Total equity 6,006,196 454,535 6,460,731 Company Balance Sheet as at 31 March 2005 UK GAAP Effect of IFRS transition 31.3.2005 31.3.2005Assets £ £ £Non-current assetsProperty, plant and equipment 262,354 - 262,354Intangible assets 6,362,149 (6,198,328) 163,821Investments - 6,652,863 6,652,863Total non-current assets 6,624,503 454,535 7,079,038Current assetsTrade and other receivables 1,059,166 - 1,059,166Cash and cash equivalents 671,839 - 671,839Total current assets 1,731,005 - 1,731,005Total assets 8,355,508 454,535 8,810,043Current liabilitiesTrade and other payables (674,214) - (674,214)Deferred and contingent consideration (305,377) - (305,377)Tax liabilities (293,712) - (293,712)Bank loans (154,762) - (154,762) (1,428,065) - (1,428,065)Net current assets 302,940 - 302,940Non-current liabilitiesBank loans (921,247) - (921,247)Total non-current liabilities (921,247) - (921,247)Total liabilities (2,349,312) - (2,349,312)Net assets 6,006,196 454,535 6,460,731 EquityIssued capital 3,734,318 - 3,734,318Share premium 7,338,490 - 7,338,490Shares to be issued - contingent consideration 375,000 - 375,000Own shares in trust (300,772) - (300,772)Share option reserve - 90,866 90,866Retained earnings (5,140,840) 363,669 (4,777,171)Total equity 6,006,196 454,535 6,460,731 Consolidated Cash Flow Statement for the year ended 31 March UK GAAP Effect of IFRS2005 transition Year ended Year ended 31.3.2005 31.3.2005 £ £ Profit from operations 316,931 408,313 725,244Adjustments for:Depreciation, amortisation and profit on disposal of 326,342 (256,511) 69,831non-current assetsShare option charge - 46,222 46,222Movement in trade and other receivables (239,605) - (239,605)Movement in trade and other payables 44,275 - 44,275Cash generated from operating activities 447,943 198,024 645,967 Interest paid (42,738) - (42,738)Tax paid (125,396) - (125,396)Net cash from operating activities 279,809 198,024 477,833 Investing activitiesInterest received 8,674 - 8,674Purchases of property, plant and equipment (27,626) - (27,626)Expenditure on product development - (198,024) (198,024)Acquisition of subsidiary (net of cash acquired) 46,495 - 46,495Net cash (used in) from investing activities 27,543 (198,024) (170,481) Financing activitiesPost-completion dividends paid (49,791) - (49,791)Repayment of borrowings (588,575) - (588,575)Repayment of finance lease obligations (6,100) - (6,100)Net proceeds of share issue 465,197 - 465,197Net cash from / (used in) financing activities (179,269) - (179,269)Net change in cash and cash equivalents 128,083 - 128,083 Cash and cash equivalents at 1 April 543,756 - 543,756Cash and cash equivalents at 31 March 671,839 - 671,839 Summary of changes resulting from the adoption of IFRS: a) Under UK GAAP all expenditure on research and development was expensedas incurred. Under IFRS, research expenditure is recognised as an expense asincurred but costs incurred on product development are capitalised as intangibleassets when it is probable that the development will provide economic benefit,considering its commercial and technical feasibility, where resources areavailable for the completion of the development, and costs can be measuredreliably. Other development expenditures are recognised as an expense asincurred. Capitalised product development expenditure is reviewed regularly forimpairment. b) IFRS requires that the fair value of share options provided toemployees be estimated and charged to the income statement over the vestingperiod of the options. c) Under UK GAAP goodwill was amortised over 20 years. Under IFRS goodwillis now subject to annual impairment reviews. Goodwill balances have been writtenback to their net book value, under UK GAAP, at 31 March 2004. d) Under IFRS dividends are charged to the income statement when paid orapproved and not in the period to which they relate as required previously by UKGAAP. e) In restating the accounts under IFRS, the company is now carrying thevalue of investments in subsidiaries made during the year at cost as shown underinvestments. These investments have not been impaired by virtue of the fairpresentation override of the EU regulations. In adopting the fair presentationoverride, the directors have concluded that the financial statements presentfairly the company's and the group's financial position, financial performance,and cash flows and they acknowledge that they have complied with applicablestandards and interpretations, except with regard to IAS 27. The company hasdeparted from this standard by showing the cost of investments in acquiredcompanies under investments on the balance sheet, rather than purchasedgoodwill, despite the fact that the trade in the acquired companies has beenhived up to the parent company. Showing these balances on the company balancesheet as purchased goodwill would be misleading as the goodwill arises onconsolidation due to the use of acquisition accounting and is not purchasedgoodwill. The financial impact of the departure is to show £11,748,020 underinvestments (2005: £6,652,863) rather than under goodwill on the face of thecompany balance sheet. The departure from the standard only impacts the companybalance sheet and has no impact on the consolidated balance sheet or any of theother financial statements. 6. Dividend The directors recommend payment of a dividend of 0.75 pence per share, subjectto shareholder approval at the Annual General Meeting on 11 August 2006. Thisdividend will be paid on 15 August 2006 to shareholders on the register at 30June 2006. The ordinary shares will become ex-dividend on 28 June 2006. Thesefinancial statements do not reflect this dividend payable, which will beaccounted for in the statement of changes in equity as an appropriation ofretained earnings, in the year ended 31 March 2007. 7. Annual Report The annual report will be sent to shareholders shortly and will also beavailable from the Company's registered office at 1 London Wall, London EC2Y5AB. This information is provided by RNS The company news service from the London Stock Exchange