Progility Regulatory News (PGY)

22 Jun 2009 07:00



ILX Group plc

2008/9 Preliminary Results

ILX Group plc ('ILX' or the "Company"), the AIM quoted business education and training company, announces its unaudited preliminary results for the year ended 31 March 2009.

Highlights: 

Revenue up 17.1% to £15.6m (2008: £13.3m) 

Profit before tax and non-recurring costs* down 8.5% to £1.70m (2008: £1.86m) 

Adjusted fully diluted earnings per share before non-recurring costs* down 8.6% to 6.04p (2008: 6.61p) 

Strong cash generation during the year

Net debt reduced by £800,000

* Full details are included in the Chief Executive's Business Review. 

Ken Scott, Chief Executive of ILX Group plc, commented:

"The last financial year was difficult and our trading divisions showed mixed results with 40% revenue growth in Best Practice offset by Corporate Training Group which was badly hit by the economic downturn, in particular the collapse of Lehman Brothers and its aftermath.   In this context I believe that our results, which demonstrate considerable revenue growth, and a significant underlying profit, are highly creditable.

We have increased our market share and although the current year promises to be very challenging we have built a strong business and expect to further increase our market share, improve our positioning, and reduce our debt." 

Enquiries:

Editor's Notes

ILX Group plc (www.ilxgroup.com) is a leading provider of vocational training to the private and public sectors, delivered through e-learning, and instructor-led courses/workshops, and 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. 

2. Banking & Finance (through Corporate Training Group) provides instructor-led training, workshops and related services, principally to the investment banking community. 

Chairman's Statement

For the year ended 31 March 2009

I am pleased to present the results for the year ended 31 March 2009.

This year has been one of unprecedented financial and economic turmoil. The financial services sector, from which the Company gains approximately one-third of its revenues, has experienced tectonic shifts in the trading landscape. In addition, the global economy is in the midst of the worst recession in living memory.

In this context I believe that our results for the year ended 31 March 2009, which demonstrate considerable revenue growth, and a significant underlying profit, are highly creditable. Our strategy for some years has been to focus on the provision of hard skills training to our customers through a combination of innovative e-learning products and traditional classroom training. This has continued in the year just ended and the focus on hard skills training has contributed to the robustness of the business.

The Best Practice Group has enjoyed an exceptional year, building on the structural changes made last year and the launch of a major new product, taking significant market share from the competition and delivering increased revenue in excess of 40%.

The Corporate Training Group by contrast had a mixed, but overall difficult year. Revenues grew by 9% in the first half, but fell by 37% in the second half of the year, following the collapse of Lehman Brothers and the resulting global banking crisis. Despite maintaining excellent relationships with core clients and generating a number of new business streams, in particular from overseas collaborations, full year revenues were 11% down over the preceding year.

Financial Results

Total revenue for the year was £15.6 million (2008: £13.3 million), an increase of 17.1%. However, margin pressures meant that operating profit before non-recurring items was £2.09 million (2008: £2.29 million) and underlying profit before taxation and non-recurring items was £1.70 million (2008: £1.86 million), a fall of 8%. Accordingly, adjusted diluted earnings per share, before non-recurring items reduced to 6.04p (2008: 6.61p).

In the light of significant (mainly non-cash) non-recurring costs, it is appropriate to present an adjusted underlying profit and diluted earnings per share figure, stated before non-recurring costs which are explained in the Chief Executive's Business Review and detailed in the notes to the financial statements.

Net debt, defined as all bank debt less cash at bank, was £4.69 million at the end of the year (2008: £5.51 million which included deferred consideration).

Personnel Changes

Peter Evans, previously managing director and co-founder of the Corporate Training Group, joined the Board in January 2009. Peter has specific responsibility to identify and evaluate strategic opportunities for the Company.

Earn-outs

The second and final earn-out payment of £2.5 million for the Corporate Training Group was made in cash. Whilst the Company had the option to pay up to £1.5 million of the total in shares, this would have resulted in considerable dilution for shareholders given the current share price.

ILX has now paid all its liabilities under earn-out arrangements in full and is now concentrating primarily on repaying debt.

Dividend

The Board remains committed to the payment of an annual dividend, but it is also mindful of the requirement to conserve cash and repay debt, particularly in the current uncertain climate.

A dividend of 1.5 pence per share was paid in August 2008, in respect of the year ended 31 March 2008. Subject to shareholders' approval being obtained at the Company's forthcoming AGM, the Directors recommend the payment of a maintained annual dividend of 1.5 pence per share in respect of the year ended 31 March 2009. It is intended that this dividend will be paid on 30 October 2009 to shareholders on the register at 4 September 2009 and that the ordinary shares will become ex-dividend on 2 September 2009.

The Directors are considering the option of making available a scrip dividend alternative to shareholders, which if offered would be taken up by each of the Directors.

Share Buyback Authority

The Company will be seeking to renew its share buyback authority at the Company's forthcoming AGM. If approved, this will allow the Company, if it so chooses, to re-purchase up to 14.99% of its issued share capital, which it would hold in treasury. 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-backs until 27 July 2009.

The Board has no intention to carry out such a buyback exercise in the immediate future as any surplus cash generated is likely to be utilised to reduce debt. It would however like to retain this option.

Investor Relations

Our AGM has been moved back to September in order that it does not coincide with the holiday period and in the hope that more shareholders will be able to attend. I would strongly encourage shareholders to attend the AGM on 25 September, at One London Wall, 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.

Finally, I am pleased to remind shareholders that we continue to offer a 10% discount on all training courses, and a 20% discount on software products, to all shareholders holding at least 1,000 shares at the time of purchase. The discount is applicable to private individuals only for open course enrolments and single user licences.

Outlook

The forthcoming year promises to be a difficult one and we are under no illusions as to the tough trading conditions which persist in the market and are likely to for the foreseeable future. Nevertheless we have built a strong business and expect to increase our market share, improve our positioning, and reduce our debt. Trading into the new financial year remains challenging but robust.

Once again I would like to thank management and all staff for their hard work over the year and I look forward to the future with confidence.

Paul Lever

Chairman

22 June 2009

Business Review

For the year ended 31 March 2009

Introduction

Our strategy is to build a strong company providing technical 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.

In the year to 31 March 2009, we have experienced mixed trading conditions in what has been by far the toughest economic environment in living memory. Nevertheless, the strengths of the business have ensured that we once again delivered revenue growth and a significant, albeit slightly reduced, underlying profit.

Financial Results

Profit for the Year

Revenues for the year were £15.6 million (2008: £13.3 million), an increase of 17.1%. This is entirely due to organic growth (2008: organic growth of 14.0%). Best Practice Group revenues were up 40.4% to £10.5 million (2008: £7.50 million). Corporate Training Group revenues were £4.83 million (2008: £5.40 million), a fall of 10.6%.

Revenues from other services fell from £0.41 million to £0.22 million.

Whilst the Company saw strong growth in sales of e-learning products over the year, the fastest growth area was once again classroom training. Accordingly, gross margins have again decreased slightly to 49.0% (2008: 51.1%), due to the changed revenue mix.

Operating margins decreased to 13.4% (2008: 17.2%), principally due to reduced profits from the Corporate Training Group. Operating profit, before non-recurring items was £2.09 million (2008: £2.29 million), a fall of 8.5%. Consequently, profit before tax and non-recurring items also fell by 8.5% to £1.70 million (2008: £1.86 million).

Cash Flow and Net Debt

The Company delivered a further year of strong operating cash flow. Cash generated from operating activities for the year was £1.82 million (2008: £3.17 million), representing 87% of underlying operating profit (2008: 139%).

Free cash flow, being cash generated from operating activities less interest, tax, and all capital expenditure, was £1.49 million (2008: £2.57 million).

During the year, the Company made the second and final earn-out payment in respect of the acquisition of Corporate Training Group. This was made entirely in cash with £1.5 million generated from operating cash flow, and the remaining £1 million from bank facilities. This was done so as not to dilute existing shareholders. All earn-out payments were completed in February 2009.

Net debt, defined as all bank debt less cash at bank, was £4.69 million at 31 March 2009 (2008: £5.51 million). This is a multiple of just over three times free cash flow, and just over two times underlying operating profit.

This remaining net debt comprises £4.13 million in term debt, which is repayable over three years, and £0.56 million in working capital facilities, comprising an overdraft and confidential invoice finance facility. 

Non-Recurring Items

This year the Company has incurred substantial non-recurring charges, principally non-cash items that warrant particular explanation.

Cash items totalled £0.18 million in respect of bad debts, principally relating to Lehman Brothers and Kaupthing. The exceptional circumstances that surrounded the collapse of these two banks and the fact that historically the Company has experienced a negligible level of bad debt are the principal reasons behind highlighting these losses separately as non-recurring costs.

The remaining charges are non-cash entries.

The principal charge relates to the write-off of £2.36 million in goodwill relating to the Mount Lane acquisition. This charge is shown as an impairment on the Income Statement. Whilst this acquisition has not ultimately been successful, it is worth noting that five other acquisitions were made between 2004 and 2006, each of which have proven successful.

As last year, the Company used an interest rate swap arrangement, details of which are contained in the notes to the financial statements, to reduce exposure to future movements in interest rates. Nothing was paid for this arrangement, but accounting standards require us to value the instrument and to take any change in value to the Income Statement. This resulted in an additional notional charge of £170,000 which is included in interest payable for the year (2008: £39,000). Provided the Company does not look to exit this arrangement early, these charges will ultimately be reversed and returned to distributable reserves.

Taxation

The taxation charge for the year was £420,000 (2008: £460,000). The Company has now fully utilised all its tax losses and carries forward a tax liability of £329,000 payable in January 2010.

Net Profit and Dividend

After the non-recurring charges highlighted above, net loss attributable to equity holders after tax and non-recurring items for the year was £1.43 million (2008: profit £1.03 million).

A dividend of 1.5 pence per share was paid during the year in respect of the year ended 31 March 2008, and this is shown in the statement of changes in equity. As stated in the Chairman's Statement, a recommended final dividend of 1.5p in respect of the year ended 31 March 2009 will be payable in October 2009, subject to obtaining shareholders' approval at the forthcoming AGM, with the prospect of a scrip dividend alternative being offered.

Earnings Per Share

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 were 6.04p (2008: 6.61p), a fall of 8.6%.

Markets - Revenue Streams

Revenue Mix

The proportion of classroom training has increased again during the year, with instructor-led training, which grew by 21% in the year, now accounting for 61% of revenues (2008: 59%). E-Learning, which grew by 26%, now accounts for 32% (2008: 30%). The remaining 7% of revenues (2008: 11%) 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

The Company continues to train in a range of hard business skill subjects.

During 2008/9, PRINCE2™ and other project management training significantly outperformed all other subjects to grow by almost 60%. During this period, ILX Group has won significant market share and is now the global market leader for PRINCE2™ training.

The key markets at present are as follows.

PRINCE2™ and other Project Management

This area provided 53% of group revenues (2008: 40%) in the year.

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, sales of distance learning and open programme places direct to individuals have soared during the year and now account for around 30% of revenues.

Our ability to offer a full range of e-learning and distance learning products, as well as public and custom classroom training sessions, and consultancy, remains unique in the marketplace and has been key in cementing our position as the lead PRINCE2™ supplier. The company launched a fully interactive accredited PRINCE2™ Practitioner e-learning product in February, which contributed significantly to year end sales. PRINCE2™ revenues grew nearly 60% in a year in which saw many of our competitors struggle.

ITIL™ and Service Management

9% of group revenues (2008: 10%) 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.

The major change in the ITIL™ qualification from version 2 to version 3, which took place in 2007/8, provided us with a major opportunity to demonstrate market leadership. Our ITIL v3™ products, both classroom and e-Learning, were first to market, and additional courses have been developed to highlight the transition from version 2 to version 3.

ITIL™ remains a core part of our offering but with the market still adjusting to the new version, sales remained relatively flat during the year, growing by just 4%.

Finance for Professionals and Non-Financial Managers

This market, serviced primarily by the Corporate Training Group, accounted for 33% (2008: 44%) 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.

It has been a difficult year for this revenue stream, which has seen revenues fall by 11% overall. 

We continue with the provision of customised e-learning solutions for multi-national and global organisations, and have developed additional e-learning products to service this market. This is expected to ensure our offerings to key clients remain cost-effective in what is currently a difficult period for all of them.

We remain one of the leaders in this marketplace but it is a market which is likely to shrink further before it recovers.

Other Revenue Streams

Bespoke software development accounted for a small revenue stream and continues to be undertaken in certain circumstances for key customers.

IT and Migration training also contributed but suffered from the economic climate, with customers putting off software transition plans with a resulting knock-on effect on the training requirement. Accordingly, we ceased operations in this area on a stand alone basis.

There are still opportunities to generate revenues from existing clients utilising our bespoke development capability, as well as to repurpose the existing product suite to support business elsewhere in the group.

Markets - Prospects

Market Outlook

Even in times of recession demand for hard skills training tends to remain robust. Nevertheless the landscape for the next twelve months will be particularly challenging given the depth and global nature of this recession. 

All the major investment banks which have historically provided considerable training revenue, particularly in the summer graduate training months, have continued to book significant sums for 2009/10, but these numbers are in many cases materially reduced. The market is very fragmented and its size is difficult to determine, but we believe that we continue to gain market share.

In the short to medium term, we expect the financial services training market to contract significantly. This will clearly impact revenues from Corporate Training Group, which as previously noted fell 37% in the second half of 2008/9. Commensurate action will include driving revenue-generating initiatives both abroad and in the corporate sector.

The IT and project management training market is less dramatically affected, but our revenue growth of 40% in this area last year in difficult economic conditions is a clear indication of how we have grown in stature, and obtained significant market share, when many competitors are struggling. The annual IT Skills Research survey recently placed ILX as number 8 (up from number 14 last year) in the Top 50 providers of IT and related training, which is a very pleasing result.

The PRINCE2™ methodology is undergoing a significant update to PRINCE2 2009™, which will provide particular challenges to the whole industry. We expect to be in a strong position to deal with and benefit from this update.

We expect our market-leading e-learning products, and flexible classroom training business model, to hold us in good stead for the coming year. Trading conditions will however remain difficult.

Operations

During the year, the Company continued to operate as two divisions, Best Practice Group, run by Managing Director Eddie Kilkelly, and Corporate Training Group. As previously announced, Peter Evans, formerly the Managing Director of Corporate Training Group, joined the Board as Strategic Business Development Director in January 2009.

Given the change in landscape for 2009/10, we have made a number of changes to integrate the businesses further and to address our cost base. Since the year end, Eddie Kilkelly has been promoted to the post of Chief Operating Officer, a role which carries the responsibility for both divisions and a remit to integrate the sales and operations of the two businesses.

Summary and Prospects

As mentioned above, 2009/10 will be a very different year for the training industry. However, I believe the Company is well positioned to respond to, and operate in, the new environment, building on the work we have achieved to date even though there are still challenges to be overcome.

We believe our strategy of continuing to build a sizeable training and software company in the hard skills business training market is the right one. In 2009/10 we look forward to consolidating our position further.

Ken Scott

Chief Executive

22 June 2009

Consolidated Income Statement 

For the Year ended 31 March 2009

  Consolidated Balance Sheet

As at 31 March 2009

The financial statements were approved by the board of directors and authorised for issue on 22 June 2009.

Consolidated Cash Flow Statement

For the Year ended 31 March 2009

Consolidated Statement of Changes in Equity 

For the Year ended 31 March 2009

Notes to the Financial Statements

For the year ended 31 March 2009

1 Results

The financial information set out in this unaudited preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985.  The summarised balance sheet at 31 March 2009 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 2008 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 2009 will be finalised on the basis of the financial information presented in this unaudited 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 2008 Annual Report and Financial Statements. The policies have remained unchanged for the year ended 31 March 2009.

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).

All assets and liabilities are maintained and managed centrally.

4 Non-recurring costs

During the year, the Company incurred non-recurring costs as follows:

The exceptional bad debt provisions relate principally to full provisions which have been made in respect of amounts owed by Lehman Brothers and Kaupthing for services provided. The Company has seen negligible levels of bad debt in previous years.

The goodwill impairment relates to the write-off of the goodwill which arose on the acquisition of Mount Lane Implementation and Training Solutions Ltd in November 2005.

The financing costs relate to the revaluation of the Company's interest rate swap agreement (2008: £111,000 related to the early settlement of the Company's debt finance with HSBC).

5 (Loss) / Earnings per share

(Loss) / Earnings per share is calculated by dividing loss attributable to shareholders of £1,426,000 (2008: profit of £1,034,000) 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% (2008: 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.

6 Dividend

A final dividend of 1.5 pence per share in respect of the year ended 31 March 2008 was paid on 22 August 2008. This dividend is reflected in these financial statements.

The directors recommend the payment of a final dividend of 1.5 pence per share in respect of the year ended 31 March 2009, subject to shareholders' approval being obtained at the Company's Annual General Meeting on 25 September 2009. This dividend will be paid on 30 October 2009 to shareholders on the register at 4 September 2009. The ordinary shares will become ex-dividend on 2 September 2009. 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 2010.

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.