Progility Regulatory News (PGY)

ILX Group PLC

("ILX" or the "Group")

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2012

ILX Group plc (AiM: ILX), the AIM quoted provider of e-learning software and consulting services, announces its unaudited preliminary results for the year ended 31 March 2012.

Corporate Highlights

·; Continued strong growth in Australian revenues

·; Software sales growth in the UK despite difficult market conditions

·; Global consultancy business developed

·; Leading position in PRINCE2 and Best Practice digital learning maintained

·; Subsidiaries established in New Zealand, Dubai, and Poland

Financial Highlights

·; Revenues up 5% to £13.47 million (2011: £12.89 million)

·; Software revenues up 17% and comprise over 57% of Group revenues (2011: 51%)

·; Operating profit £1.01 million (2011: £1.73 million)

·; Adjusted PBT £0.96 million (2011: £1.54 million)

·; Adjusted earnings per share 2.49p (2011: 4.39p)

·; Bank debt refinanced with HSBC at reduced rates

·; £0.49 million investment in our digital learning products (2011: £0.48 million)

·; Net debt £2.25 million (2011: £1.89 million)

·; Dividend suspended to allow net debt to be reduced

Ken Scott, Chief Executive, ILX Group commented:

"The ongoing economic uncertainty made this a challenging year, particularly in the UK. However, we have increased Group revenues and continue to see growth of our digital learning revenues, even in the UK.

Our digital learning solutions and our technology platform provide a highly efficient and effective proposition. They deliver an enjoyable user learning experience and enable both organisational customers and consumers to obtain accreditation at excellent value for money. Demand for project and programme management skills and knowledge remains high, even in the current climate, and is expected to increase. ILX offer a cost effective, high quality interactive digital learning solution that meets this growing need. "

25 June 2012

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Editors' Note

ILX Group plc (www.ilxgroup.com) is a leading provider of Best Practice learning products and services to the private and public sectors. ILX offers a variety of accredited technology led courses through a blend of traditional classroom, workshops & live forums and digital learning. It has developed its own proprietary software and is the market leader in PRINCE2. It trades through two divisions:

1. UK Best Practice services primarily the UK marketplace, including a number of multinational companies headquartered in the UK

2. International was formed in late 2009 to service to overseas markets, including Australia, New Zealand, Middle East, US and across Europe.

ENDS

Chairman's Statement

For the year ended 31 March 2012

I am pleased to present the results for the year ended 31 March 2012.

In the current economic climate, the need for project and programme management skills is as strong as ever. With the increasing pace of technological change the demand for learning that can be delivered economically, efficiently, and using technology, remains strong and is increasing. Thus I am pleased to report that the Group continued to grow its overall sales during the period as well as increase the proportion in those sales of digital learning products.

Nevertheless, the growth was not as strong as we had hoped and this resulted in the issue of a profits downgrade towards the end of the financial year. Neither our International division, which grew revenues 61%, nor our UK division, where revenues fell 15%, made their annual targets. The UK was affected by highly competitive market conditions which affected in particular the classroom sales, and the International sales did not see the growth in Europe that was expected.

However, the Group still delivered top line growth and a significant operating profit. The decline in the UK revenues that was experienced during the year, most particularly in the third quarter, halted in Q4 which saw slight growth over the same period the previous year. The Australian and New Zealand operations again almost doubled their sales, and a strong foundation has been laid in the Middle East with a number of significant consultancy contracts in the pipeline for the current financial year.

We are confident that the strategy to focus on software led solutions and developing our business in overseas markets, whilst continuing to offer both software and classroom-based learning to customers, remains the right one.

Dividend

Given the fall in profits for the year, and the resultant effect on available cash, the Board has taken the decision not to recommend payment of a dividend for the year ended 31 March 2012.

The Group commenced a dividend payout in 2006 and since that time has paid dividends totaling £1.15 million, of which £0.97 million has been in cash and the remainder in scrip shares. However, it is important in the short term that the Group can reduce its level of debt and also that it can invest adequately in the opportunities for growth in its core markets. The position will be reviewed on a regular basis and the Board will endeavour to return to paying a dividend as soon as it is prudent to do so.

Financial results

Revenue for the year was £13.47 million (2011: £12.89 million), an increase of 5%. Operating profit was £1.01 million (2011: £1.73 million. Profit before taxation was £0.65 million (2011: £1.42 million). Diluted earnings per share were 1.94p (2011: 4.06p from continuing operations). Net debt increased during the year to £2.25 million (2011: £1.89 million).

These results are explained in detail in the Finance Review.

Board changes

Chris Allner of Octopus Ventures was appointed to the Board as a Non-Executive Director on 30 November 2010. Having left Octopus Ventures, Chris resigned from the Board and Damien Lane was appointed on 23 March 2012 in his stead.

I would like to thank Chris for the experience and input he made during his time on the Board and also warmly welcome Damien to the Board.

Outlook

We remain in challenging economic times in which companies will need to innovate to stay ahead. As I said at the beginning of this report, I believe that we are a company which is able to do so and that our strategy is the right one. In our ambitions to grow it is important we do not stretch ourselves too thin and we will therefore focus principally in the short term on our core geographical areas of the UK, Australasia, Oman and the UAE.

I would like to thank management and staff for their ongoing contributions, and our shareholders for their continued support, as we look forward to continued growth in the current financial year.

Paul Lever

Chairman25 June 2012

Business Review

For the year ended 31 March 2012

The year ended 31 March 2012 was very challenging in the face of the ongoing economic uncertainty. This was especially felt in the UK but I am pleased that, even domestically, the Group increased its digital learning revenue. Worldwide, digital learning revenue increased by 17% and now comprises 57% of total Group revenue. In addition, and even in this tough year, revenue as an absolute number grew across the Group.

The ongoing domestic austerity, and the deep shadow of uncertainty surrounding the Eurozone, has had a marked impact on UK organisational purchasing patterns. As a consequence, and in the UK specifically, the Group experienced longer sales lead times, a slowdown in customer spending and a price war amongst competitors in the classroom-training arena. At the same time however, and as mentioned earlier, our domestic sales of digital learning have grown year on year and the pipeline in the UK remains encouraging. However, those lengthening sales cycles and commodity pricing pressure in classroom training gave rise to a shortfall in domestic revenue and consequent shortfall in Group profitability.

Our ability to develop overseas markets on the back of digital learning and our market leading position in PRINCE2 (a leading and established best practice standard in project management) has also been instrumental in our continued substantial international growth. We are seeing the benefits of promoting our digital product suite and this combined with ongoing overseas expansion should allow the Group to recover its growth trajectory. The foundations that we have in place should ensure that ILX remains a market leader in digital learning, worldwide.

Our strategy and vision

The Group's vision is to 'Transform the Way People Learn'. We are committed to building brand leadership in digital learning to consumers and organisational customers across the world using innovative technology to deliver exceptional customer experiences around the core range of products and services.

Two years ago, we set out four key drivers for strategic growth:

Focus on innovative product development and customer retention to build on our position as a global market leader in the PRINCE2 project management qualification

We are at our core a digital learning provider, although we are also highly active in the provision of classroom training and in providing blended learning experiences; a mixture of digital and classroom events. Although we firmly believe that the migration to digital learning is inexorable and accelerating, we recognise that individual learners and organisations will migrate at a pace that suits their particular needs and circumstances. By being available to individual learners and organisations, regardless of where they are on the learning delivery spectrum will we believe, secure their business to ILX for years to come.

Sales of our digital learning products continued to grow as a proportion of total sales and now account for 57% of our PRINCE2 revenues (2011: 52%). Customer retention metrics, both in terms of repeat business and renewed software licences, have also shown improvement year on year.

ILX has over 10% of the PRINCE2 learning market measured by exam passes. We deliver learning products and services in over 100 countries across 5,000 organisations worldwide. The principal geographic areas of activity are the UK, Australia, New Zealand, Scandinavia, Western Europe, UAE, Oman, South Africa and the USA. During the year we established new subsidiaries in Poland and New Zealand.

Key enablers for this strategy to be successful are:

- Retaining product focus and innovation around the core product range. The aim is to achieve market dominance in PRINCE2 and market leadership in ITIL (a leading and established best practice standard in IT Service management).

- Ensuring we have a strong field sales capability across the business that is populated by well-trained and well-managed high performers who are able to sustain the growth required and thereby deliver the targeted results. We have recruited a sales coaching company to help ensure that our UK and international sales population as well as the supporting processes are fit for purpose.

- Strengthening the ILX brand and providing effective marketing support for our field sales activities.

Leverage our proprietary technology to drive significant international expansion; focusing on PRINCE2 and project management where we can disrupt established markets. 

The Group is building and developing its sales footprint across new and existing geographic territories. Currently, our field sales population is based in the UK, Denmark, the Netherlands, Dubai, Australia and New Zealand. This sales force drives around 70% of Group revenue. In all our new territories, we use our global pre-eminence as the leading learning provider in the PRINCE2 market as the entry point. Once established, we then broaden our offer over time.

Our total Group revenues by geographic area of delivery are shown below.

Over 40% of the Group's sales are now made to overseas customers, with sales outside the UK growing by 43% during the year. The major areas of growth were again Australia for the second year running and New Zealand. Our Australasian operation was started just two years ago and has gone from a standing start to now accounting for almost 20% of Group revenue. Substantial sales in mainland Europe and Scandinavia were also generated; some through our subsidiary in Copenhagen but the majority directly from the UK. The UAE and Oman also remain key target areas for growth and since the close of the year we have established a subsidiary company in Dubai to service this region.

On the back of our field sales capability, we have also developed a global consultancy business, to take advantage of the growing move in a number of countries towards governmental and organisational compliance with PRINCE2 process management. The consultancy opportunities typically develop from the sale of learning content but sometimes can be generated without our learning material initially having been used. The ILX brand and reputation are particularly helpful in new territories.

Our consumer offer currently accounts for around 30% of Group revenue. This revenue is all from web-generated leads, two thirds of which come through orders and enquiries; the remaining third being fully automated web purchases. We believe this area has significant opportunity for scalability.

In both our field sales and our consumer offer, the primary focus is on English language content as we have found the English language market for digital learning to be far more extensive than just English speaking territories. Sufficient numbers of workers seeking PRINCE2 accreditation in non-English speaking regions appear to value the English language versions and this is where we are particularly strong.

Develop our capability in other markets for Finance and Service Management to build market-leading positions.

Our revenues by subject for the year, with the comparative for last year, are shown below.

At first glance it would appear our revenues from pure PRINCE2 sales grew by just 1% in the year and now account for 56% of our business (2010: 58%), whereas pure ITIL and ISO20000 revenues remained flat at 9%. However, we have developed a multi-subject digital learning offer called Digital Learning Licence, which has proved very popular. Sales of the Digital Learning Licences increased by 72% during the year to £1.34 million (2011: £0.78 million) and the advent of this offer means that some of our PRINCE2 and ITIL data in particular is hidden in the sales of multi-subject Digital Learning Licences.

Other OGC (Office of Government Commerce, a division of the UK Treasury Department) accredited products comprise Programme and Project Sponsorship, Project Support (P3O), Risk Management (M_o_R), Value Management (MoV), Managing Successful Programmes (MSP) and the APM Introductory Certificate in Project Management. Revenues decreased by 7% and accounted for 17% of the business (2011: 19%).

Focus on increasing the number of learners using ILX technology worldwide. 

As was stated earlier, we recognise that individual learners and organisations will migrate to digital learning at a pace that suits their particular needs and circumstances. However, all our learners are exposed to our technology, whether through digital learning courses, access to revision games on hand-held devices, or a classroom-based simulation. During the year, we provided digital learning licenses to 56,000 users.

ILX is committed to taking advantage of the growing number of workers seeking to acquire new business skills. We plan to develop this into subscription-based revenue from users of our products and services.

Values and people

Our core values of Passion; Making a Difference; Teamwork and Ownership have been challenged in the past year in the face of the Euro monetary crisis, the UK recession and the overall global uncertainty, which have all impacted on business performance. In addition to these values we recognise the need for urgency in everything we do within the business in the knowledge that the speed of change is highly unpredictable and that the time available is highly subjective.

The year saw a number of people changes.

The executive management team within the Group has been strengthened over the past year; primarily to add additional skills that we need as the business expands. As I announced a year ago, Mel Scott-Taylor arrived from the Disney Channel in April 2011 to take up the newly created role of Chief Marketing Officer, responsible for driving marketing disciplines into a traditionally sales dominated culture. In April this year, Phil Barr also joined to take up another newly created role of Chief HR Officer. Phil came from Yell, where he was responsible for UK HR and key elements of Yell's global change programme.

At the end of March 2012 and as agreed at the time of his appointment, Martyn Kinch stepped down as Head of International and has now retired from the business. Martyn has been with ILX on and off since we purchased his company, Key Skills, in February 2004. He has had a major influence on the Group over the years and he will be missed. I would like to take this opportunity to thank him for his work and for his companionship over the past eight years.

Our new head of International is Eddie Kilkelly. Eddie was appointed to the main board in early 2011 and is highly experienced in all aspects of our operational and sales functions, having run the UK business for the past four years. He is well respected within ILX and is firmly grasping the International baton. I have taken over direct responsibility for running the UK sales operation. David Willis, our Chief Technology Officer, and Jon Pickles, our Chief Financial Officer, complete the team.

The executive management team continues to be committed to the core values and to ensure those values remain at the heart of our culture as the company changes shape.

Finally, I would like to thank all our staff for their ongoing hard work and resolve in what has been a testing year for everyone. We look to the future with confidence.

Ken Scott

Chief Executive Officer

25 June 2012

Finance Review

For the year ended 31 March 2012

Financial results

Operating performance

The Group delivered revenues of £13.47 million (2011: £12.89 million), growth of 5%. Gross margins increased fractionally to 55.5% (2011: 55.2%), with the positive effect of an increasing proportion of software sales offset somewhat by lower margins in the classroom space due to competitive pressure. Operating profit, however, fell to £1.01 million (2011: £1.73 million) principally as a result of higher overhead costs relating to marketing and international sales.

The breakdown of revenues and profits is disclosed in the notes to the accounts in the same format as that used internally, as required by IFRS 8. The note has also been expanded to include the two prior years to give a clearer view of the underlying trends.

These figures highlight that revenue growth for the year was driven by the International division, which grew its top line by 61% to £5.22 million, with the UK division revenues falling 15% to £7.95 million. Both divisions made a substantial contribution to profit. It should be noted that the UK division bears the entire costs of the Group's UK premises and operations team. The Finance e-learning revenues contributed £0.31 million (2011: £0.34 million), at a significantly increased profit.

Central costs rose to £2.39 million (2011: £1.89 million). These relate to technology, IT, finance, and central personnel costs, together with the costs of the Board, advisors, and other AIM related expenditure. Also included here are marketing costs, with the exception of those that relate directly to specific sales support for the International and UK divisions. The increase in central costs is principally due to increased marketing spend; in addition, the prior year comparative figure was distorted downwards by Directors waiving £115,000 of salary and pension in return for share options.

International subsidiaries

During the year, the Group traded principally through three companies; ILX Group plc, ILX Group Pty Ltd (Australia) and ILX Group Aps (Denmark). Subsidiaries have also been established in New Zealand, the USA, Poland, and post year end, the JLT free zone in Dubai. These have been required to support our increasing international business and will assist in ensuring and maintaining a local presence for customers.

Finance costs

The Group incurred finance costs of £0.37 million (2011: £0.31 million) during the year. This cost comprised £0.21 million in interest on bank loans and facilities (2011: £0.33 million); a credit of £0.04 million relating to the Group's interest rate swap arrangement (2011: £0.09 million); and loan arrangement costs of £0.19 million (2011: £0.07 million). As noted in last year's report, these costs included £0.18 million in previously paid fees relating to the Barclays debt which were being amortised over the term of the loan and were brought forward when the debt was refinanced during the year, as covered in more detail below.

Profit before tax

Profit before tax was £0.65 million (2011: £1.42 million).

In line with common practice, the Group has also presented an adjusted profit before tax figure which is calculated after adding back one-off non-cash refinancing charges, share option charges, and intangibles impairment. Adjusted profit before tax for the year was £0.96 million (2011: £1.54 million). Details are included in the notes to the accounts.

Taxation

The tax charge for the year was £0.10 million (2011: £0.40 million), representing 16% of profit before tax (2011: 28%). The Group continues to benefit where possible from tax credits available in the UK arising from qualifying research and development.

Profit for the year and Earnings per share

Profit for the year attributable to equity shareholders was £0.55 million (2011: loss of £9.45 million, after a loss from discontinued operations of £10.48 million).

Earnings per share were 2.00p (2011: loss of 38.2p, earnings of 4.14p from continuing operations). Diluted earnings per share were 1.94p (2011: loss of 37.4p, earnings of 4.06p from continuing operations).

An adjusted earnings per share figure is also presented based on adjusted profit before tax and after applying a standard tax rate. Adjusted earnings per share were 2.60p (2011: 4.48p) and adjusted diluted earnings per share 2.49p (2011: 4.39p).

Cash flow

Cash generated from continuing operating activities was £1.16 million (2011: £1.79 million). This represents 115% of operating profit (2011: 103% of operating profit). The Group continues to generate strong operating cash flow from its operating profit with strong e-commerce and cash sales and an increase in advance payments from customers, reflected by a 14% increase in deferred income.

The Group paid out £0.34 million in corporation tax (2011: £0.18 million). This significant increase was due to both the payment of the higher tax bill for the year ended 31 March 2011 and also the beginning of payment of UK corporation tax by installments, required as the Group is now considered large for UK corporation tax purposes.

The Group continued to invest in its product range and also incurred capital expenditure in the period relating to updates of systems and equipment.

Refinancing and net debt

The Group refinanced its bank facilities during the period, moving from Barclays to HSBC to secure additional facilities with substantially reduced costs.

At the 31 March 2011 the Group had term debt of £2.6 million with Barclays at an average interest rate of 6.9% over LIBOR. By 30 September 2011 this had been reduced to £2.1 million, and it was refinanced with a 3-year term loan of £2.0 million at 3.3% over base rate.

The Group also had at 31 March 2011 a revolving credit facility of £0.95 million, which was due for renewal in October 2011. This was refinanced by a £2.0 million 2-year revolving credit facility, expiring October 2013.

At the balance sheet date, the Company was in technical breach of two out of five banking covenants and accordingly, as required by IAS1, the Company's bank loans are presented as current liabilities. The Company's bankers have acknowledged the breach and confirmed that, at the present time, they are not taking any action following this breach. Of the total £2.89 million in facilities drawn, £0.65 million are expected to fall due for payment during the current year.

The effect of the refinancing was to reduce the overall cost of facilities by approximately 4 percentage points, almost halving the interest cost to the Group. In addition, total facilities increased from £3.15 million at 31 March 2011 (including £0.4 million undrawn) to £3.84 million at 31 March 2012 (including £0.95 million undrawn). Further draw down of these undrawn amounts is subject to EBITDA not exceeding gross debt by more than 2 times at the point of draw down and to the covenants being remedied.

As noted above, the refinancing accelerated the amortisation of £139,000 out of £180,000 in previously capitalised arrangement fees. Arrangement fees paid to HSBC were £52,000 and these will be spread over the period of the facilities.

Net debt at the year end, defined as all bank debt, less cash at bank, was £2.25 million (2011: £1.89 million). This comprised £2.89 million in bank facilities drawn and £0.64 million in cash balances.

Interest rate and currency risk

The Group entered into an interest rate swap agreement with Barclays Bank in February 2008, to hedge its exposure to interest rate movements in respect of its term loan. This agreement expired during the year. At the balance sheet date, there was no interest rate hedging in place.

34.3% of the Group's turnover for the year was invoiced in 7 separate foreign currencies (2011: 18.7% in 6 foreign currencies). These are: Australian Dollars (14.2%), Euros (5.9%), New Zealand Dollars (5.4%), US Dollars (4.9%), South African Rand (2.0%), Danish Kroner (1.9%), and Emirati Dirhams. At the year end, £1.15 million of assets (2011: £0.95 million) and £1.00 million of liabilities (2011: £0.42 million) were denominated in these currencies. No currency hedging arrangements were in place during the year. The Group maintains currency accounts in all these currencies, in order to match currency income and expenditure and to benefit from bulk rates on transfer to sterling.

Dividend

A dividend of 1.50 pence per share was declared for the previous financial year, which was paid during the year just ended. 43.4% of the shareholders elected to receive the scrip option, resulting in the issue of 620,796 new ordinary shares. The remaining £232,000 of the dividend was paid in cash during the year. As noted in the Chairman's statement, the board does not recommend a dividend for the year just ended.

Jon Pickles

Chief Financial Officer

25 June 2012

Consolidated Statement of Comprehensive Income

For the Year ended 31 March 2012

Consolidated Statement of Financial Position

As at 31 March 2012

Consolidated Cash Flow Statement

For the year ended 31 March 2012

Notes to the Preliminary Results

For the year ended 31 March 2012

1 Results

The financial information set out in this unaudited preliminary announcement does not constitute the statutory financial statements for the years ended 31 March 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditors have reported on the accounts for 2011; 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. The auditors have not yet reported on the accounts for 2012.

2 Accounting policies

The principal accounting policies of the Group are set out in the Group's 2011 Annual Report and Financial Statements. The policies have remained unchanged for the year ended 31 March 2012.

3 Segment reporting

In accordance with IFRS 8, the Group now presents its segmental analysis in terms of its three operating divisions, UK Best Practice, International Best Practice and Finance e-learning, as opposed to two segments of Best Practice and Finance. The analysis of revenue and profit by division is as follows, for the year and the prior two years, together with a reconciliation of the adjusted profit before tax figure.

The discontinued operation for the prior year is treated as a further segment under IFRS 8 and analysis of the results of this segment is provided in Note 4.

Revenues for the year and prior year split by geographical area were as follows:

4 Discontinued Operations

The results of the Corporate Training Group (CTG), which was closed during the prior year, have been included in the Consolidated Statement of Comprehensive Income as loss from discontinued items in accordance with IFRS 5. A breakdown of these results is as follows:

5 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.

Diluted earnings per share is adjusted for outstanding share options and the average option price, using an average interest saving of 5.0% (2011: 8.0%).

Adjusted earnings per share is calculated as follows:

6 Dividend

The directors do not recommend payment of a dividend for the year.

7 Annual report

The annual report will be sent to shareholders in due course 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.