Wilmington Regulatory News (WIL)

13 September 2017 WILMINGTON PLC

('Wilmington', 'the Group' or 'the Company')

Financial results for the twelve months ended 30 June 2017

Wilmington plc, the provider of information, education and networking services in Risk & Compliance, Professional and Healthcare knowledge areas, today announces its full year results for the twelve months ended 30 June 2017.

Financial Highlights

- Revenues for the year up 14% (£14.6m) to £120.3m (2016: £105.7m); up 9% on a constant currency1 basis

- Organic revenue2 down 0.8% overall with growth offset by one off issues at AMT and declines in legal product lines 

- Adjusted measures345 now stated inclusive of share based payment costs of £0.6m (2016: £0.6m)

- Adjusted EBITA3 increased by 6% (£1.4m) to £23.4m (2016: £22.0m) with EBITA margins at 19.4% (2016: 20.8%). Margins impacted by significant investment particularly in Compliance

- Adjusted Profit before Tax4 up 5% to £21.4m (2016: £20.3m)

- Profit before tax at £15.9m (2016: loss £3.4m)

- Adjusted Earnings per Share5 up 5% to 19.05p (2016: 18.17p)

- Basic earnings per Share 14.72p (2016: loss per Share 7.39p)

- Final dividend increased 7% to 4.6p (2016: 4.3p); total dividends up 5% to 8.5p (2016: 8.1p)

- Cash flow conversion6 at 114% (2016: 108%)

1Constant currency - eliminating the effects of exchange rate fluctuation

2Organic Revenue - eliminating the effects of exchange rate fluctuation and the impact of acquisitions

3Adjusted EBITA - see note 3

4Adjusted Profit before Tax - see note 3

5Adjusted Earnings per Share - see note 10

6Cash conversion represents the Operating Cash Flow for the year as a percentage of adjusted operating profit before interest and amortisation.

Operational Highlights

- Good growth from Risk & Compliance with revenue up 9%, driven by demand for compliance offerings

- Strong growth from Healthcare division overall revenue up 28%, supported by acquisitions and UK healthcare business delivering organic revenue growth of 9%

- Acquisition of Health Service Journal ("HSJ") on 31 January 2017 creates unparalleled insight into UK healthcare market, and adds scale to Healthcare division 

- Professional division revenue up 7% driven by the maiden contribution from SWAT Group Limited ("SWAT") which adds scale to the Professional division

- Exiting legal practice support market with planned closure of Ark businesses

- Project Sixth gear progressing well on the consolidation of the London offices, marketing best practice, procurement and key account management

- London leasehold premises sold for £7.3m and new central London leasehold headquarters acquired 

- Subscription and repeatable revenue at 77% of total revenue (2016: 75%)

- International revenues increased to 43% of total revenue (2016: 42%)

Outlook and Current Trading

- Satisfactory albeit slow start for first two months of the year but revenue up 7% over the same period in 2016 driven by HSJ contribution

- Exit from legal practice support market will reduce unprofitable revenue and help restore stability to Professional division

- Increased operating costs of £0.75m across the Group to capitalise on opportunities from changing customer demands

- Increased annual operating costs from London property move of £0.9m p.a.

- Expecting continued momentum from Risk & Compliance and Healthcare businesses

Mark Asplin, Chairman, commented:

"This year has been a positive one for Wilmington, with overall solid financial performance delivered in the context of accelerating change in our end-markets. Wilmington is well positioned to benefit from this change, and we continue to see significant demand for our products and services from our customers.

We enter the new financial year anticipating continued momentum, particularly in our Risk & Compliance and Healthcare divisions. We are also excited about the prospects for our newly created Professional division, which promises to benefit in the medium term from the convergence in education requirements across the professional services."

Pedro Ros, Chief Executive Officer, commented:

"Wilmington continues to make good strategic progress as we focus the business on key areas of growth. With three logical divisions in place and an ongoing commitment to investing in the digitisation of our business, we are confident in our prospects for the future.

This year we will sharpen our focus further still. We will continue the integration of our Professional division and accelerate the digital transition of our products. Later in the year we will also be bringing 300, nearly one third of our global workforce, of Wilmington's people under one roof, reinforcing our culture as 'One Wilmington', ensuring we can collaborate effectively and helping us to attract and retain the best talent in our industry."

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement this inside information is now considered to be in the public domain.

For further information, please contact:

Notes to Editors

Wilmington plc is the provider of information, education and networking services in Risk & Compliance, Professional and Healthcare knowledge areas. Capitalised at approximately £207 million, Wilmington floated on the London Stock Exchange in 1995.

Chairman's Statement

I am pleased to present my report on Wilmington's results for the twelve months ended 30 June 2017. Overall It has been a positive financial performance as we move towards our objective of becoming a single integrated international business. Wilmington has continued to meet the challenges that necessary change inevitably brings; a balance of growing revenue and profits whilst making material investments in new products, systems, offices, personnel and in new businesses.

Wilmington delivered revenue growth of 14% (up 9% on a constant currency) led by excellent contributions from the acquisitions made during the year and supported by organic growth from our core offerings. We have seen strong growth from Healthcare up 28% and good growth from Risk & Compliance up 9% as well as growth from Professional which increased its revenue by 7% albeit benefiting from the acquisition of SWAT.

Adjusted profit before tax (which now for the first time includes share based payment costs of £0.6m (2016: £0.6m)) increased 5% to £21.4m (2016: £20.3m).

Business strategy

Wilmington's strategy is to further develop its business into a knowledge based model and structure focussing on serving the needs of chosen communities with an overall objective of becoming a single integrated international business. This business structure will maximise Wilmington's opportunities to help its clients and communities meet their information, education and networking requirements as well as drive operational efficiencies. As part of its evolution, Wilmington has and is continuing to be more focussed on its core communities that provide a higher quality of earnings.

Vision

The vision which acts as our guide and underpins our strategy is:

"To be the recognised knowledge leader and partner of choice for information, education and networking in Risk & Compliance, Professional and Healthcare."

By achieving our vision we aim to turn knowledge into competitive advantage for our clients.

Project Sixth Gear

On 23 February 2017, we announced project Sixth Gear which is the next stage in our strategic development. This project builds upon the first stage which focussed on the simplification of group structure and the selective acquisition of businesses to fill gaps in our product offerings. The prime objective of Sixth Gear is to accelerate the move to a single "One Wilmington" simplifying and integrating the business further, maximising client relationships and providing the basis for organic and acquisition-led growth and scale. The accelerated integration and pooling of resources will help to capitalise on growing economies of scale.

New Reporting Structure

As previously announced, to help simplify Wilmington still further we reorganised our business into three divisions; Risk & Compliance, Professional and Healthcare. The combination of the former divisions of Legal and Finance into one new division; Professional is a natural outcome from the restructuring, downsizing and refocusing of our Law for Lawyers business over the last few years. This combination which is facilitated by the decision to exit from the legal practice support market also brings greater clarity to this division.

 Risk & Compliance division concentrates on servicing the strong organic global demand for our offerings supported by selective earnings enhancing acquisitions in the areas of risk & compliance as well as investments in new products, data services, offices and in new territories. The emphasis continues to be servicing the needs of risk managers and compliance officers globally.

Professional division provides information, education and networking support to professionals in the accountancy, financial services, and legal markets. This division focuses on supporting the post-qualification needs of individual professionals and SMEs with an increasing emphasis on exploiting international opportunities, and an accelerated move to expand our digital -learning solutions; areas where we feel the revenue growth opportunities are greatest. The emphasis in the short term will be on organic rather than acquisition led growth with capital allocated accordingly.

Healthcare division is the renamed Insight division recognising that well over 80% of its revenue following the HSJ acquisition comes from healthcare markets globally. We are replicating the successful model of providing information (particularly insight data and analytics), education and networking capabilities on a country by country basis. The emphasis will be to build on our existing market presence in the EU and in the US either organically or by acquisition. 

In line with our strategy all three divisions offer information, networking and education capabilities servicing key defined communities, supported by best-in-class technology. The divisions will look to exploit international and, increasingly digital opportunities using and replicating expertise from their existing market positions. Each division will also act as our specialist knowledge expert and centre of excellence providing expertise and R&D to support the two other divisions.

Our people

As a digital information, education and networking business operating in dynamic and competitive markets, we are fundamentally reliant upon the quality and professionalism of our people. I would once again like to express my own and my fellow Board members' appreciation of the hard work and dedication of our Wilmington colleagues across the globe.

Financial and operational targets

I am pleased to report progress in all but one of our key financial and operational targets. We have seen growth in Adjusted Profit before Tax, Adjusted Earnings per Share, and Return on Equity although we saw a drop in the level of Adjusted EBITA margins from 20.8% to 19.4% reflecting inter alia significant investment expenditure during the year. As you will read in the Chief Executive Officer's review in our compliance business alone we have invested an additional £1.0m in new initiatives which represents one percentage point off our overall margin. We see further necessary operational investment during 2017/18 offsetting the underlying improvement to margins that integration, previous investment projects and the impact of higher margin acquired businesses bring on our Adjusted EBITA margins. The four financial measures above form the basis of the Executive Directors incentive plans. 

We closely monitor cash conversion which we expect to exceed 100% on an annual basis, and in 2017 that conversion rate was 114% (2016: 108%). This excellent cash conversion illustrates the strength of the business as well as the efficiency in our stewardship of working capital. The positive cashflow characteristics of Wilmington matched with clear fiscal discipline in turn help us attract and maintain significant finance from third party providers. 

We continue to generate a high proportion of our revenue derived from quality and sustainable income streams and in 2017 revenue from subscriptions and repeatable revenue was 77% of group revenue (2016: 75%). A high proportion of repeatable revenue provides a good degree of earnings visibility as well as security.

We continue to seek to increase each year our proportion of revenue generated outside the UK where we see good prospects for long term sustainable growth. Revenue outside the UK has grown again and was 43% of total revenue compared to 42% last year with the underlying relative growth in non-UK revenue from our portfolio mitigated by our acquisitions this year which were both focussed on the UK market. 

These financial and operational performances are reflective of the quality of our portfolio of offerings which benefit from a significant proportion of revenues derived from subscriptions and from products which disseminate increasingly international content-rich, high-value information and, increasingly digitally along with certificated education and compliance programmes.

Acquisitions 

In support of our growth strategy, we continue to seek selective earnings enhancing acquisition opportunities to add additional growth, scale and expertise in our chosen markets. In this context, we were delighted to announce two acquisitions during the year both of which were consistent with our strategy of acquiring complementary businesses with high repeat revenues in our chosen knowledge areas and communities. The acquisitions of SWAT in July 2016 and HSJ in January 2017 enhanced and added further scale to our offerings by providing information, education and, for HSJ networking capability in our Professional and Healthcare divisions respectively. 

Cash and borrowings

Net debt, which includes cash and cash equivalents, bank loans (excluding capitalised facility fees) and bank overdrafts, was £40.0m (2016: £34.7m) an increase of £5.3m on last year during another period of considerable growth and change in which we spent £20.3m (including deferred consideration) on acquisitions offset by the proceeds of £7.3m from the disposal of the Underwood Street offices.

The Group continues to demonstrate excellent cash generative characteristics as mentioned above with consistently high levels of cash conversion. These characteristics were recognised by the continued support from our principal bank debt providers who extended the multicurrency £65m debt facility on 1 July 2015 until 1 July 2020. This facility was increased to £85m in support of the acquisition of HSJ in January 2017. The facility can be extended by a further £15m to £100m if required with majority lending bank consent.

Our ability to use third party debt finance remains a key component of our business development strategy and our debt capacity remains strong. As we increase our profits given the cash generative ability of our business this combines to provide increased capacity for selective earnings enhancing acquisitions and other capital investments.

Board changes

Anthony Foye has informed the Board of his intention to step down from his position as Chief Financial Officer in due course. Anthony will remain in his position until June 2018 while a successor is found and to ensure a smooth and orderly handover. The Board will initiate a search for his successor and an update in relation to a new Chief Financial Officer will be made in due course.

Dividend

I am proud of the Group's record of maintaining its dividend over recent years and the resumption in 2013/14 of a progressive dividend policy reflecting our improving financial performance. Our dividend payment policy remains the same and underpins our confidence in the strategy and vision and the resilience of our business models. I am pleased to confirm that the final dividend for this year will be increased again to 4.6p (2016: 4.3p) per share, an increase of 7% on last year. This together with an increased interim dividend makes a total dividend of 8.5p up 5% from 2016 (8.1p) reflective of confidence in our future. It is the Board's intention to maintain its progressive dividend policy whilst ensuring that suitable dividend cover of at least two times adjusted earnings per share is maintained. 

The final dividend of 4.6p per share will be paid on 17 November 2017 to shareholders on the share register as at 20 October 2017, with an associated ex-dividend date of 19 October 2017.

Current trading and outlook

The first two months of the year have started satisfactorily albeit slowly across the Group with revenue up 7% against the same period last year supported by the acquisition of HSJ. In Risk & Compliance our compliance training businesses which make up the bulk of the compliance business have started in line with plan although down against a strong comparator period in 2016. The sales pipeline for compliance training remains strong, continuing the momentum we have seen over the last few years and in Risk we have also seen a good start from Axco which was up 6% on the same period in 2016.

The Professional division has started in line with the same period in 2016 with good early performance from Accountancy product lines offsetting slightly weaker performances mainly from the re positioned Legal product which currently includes Ark. Healthcare which has the benefit of HSJ has seen good growth overall as a consequence of the acquisition and that has more than offset a slower start across the division.

Relationships with our chosen communities and clients continue to evolve at an increasing pace with commensurate demand for more sophisticated interaction and bespoke products and services delivered instantly and efficiently. We see this evolution as an opportunity to increase our engagement with our markets, making us an even more essential business partner as well as creating barriers to our competitors. We need therefore to ensure our businesses are equipped with the appropriate extra resources, systems and support to capitalise on this opportunity. The opportunity also comes at a cost and we expect to step up our operating expenditure in 2017/18 in addition to our increased annual London property costs of £0.9m by a further £0.75m across the business. The additional costs which are discussed in the Chief Executives report are in people, IT infrastructure, automated marketing and in the digitisation of up to 250 of our training programmes over the next 18 months predominantly in the Risk & Compliance and Professional divisions as part of our digital learning investment.

We continue to see tighter regulatory control and more complex legislation implemented in most of our key markets and we remain confident that these changes will continue to drive the demand for our products and services globally.

Wilmington has been acquisitive in the past and we will continue to review opportunities to enhance growth and to add expertise through selective earnings enhancing acquisitions consistent with our strategy. Our priority areas for capital allocation remain compliance, risk (insurance) and healthcare as we focus on adding further scale to our existing market positions.

The Board, our management team and our staff are excited and energised about the opportunities driving Wilmington in the next stage in its development. Wilmington will also benefit in 2017/18 from a full year of contribution from HSJ as well as the impact of the investments made during 2016/17.

Mark Asplin

Chairman

Chief Executive Officer's review

I am pleased to present my report on Wilmington's performance for the 12 months to 30 June 2017. During the year revenue increased by 14% (£14.6m) and was up 9% in constant currency terms. Adjusted EBITA was also up increasing by 6% to £23.4m. We achieved good revenue growth from our Risk & Compliance division up 9% overall (£3.5m) and from our Healthcare division which was up 28% (£8.4m). The Professional division also recorded growth, up 7% (£2.8m) albeit supported by acquisition-led growth from SWAT (£4.7m). HSJ acquired on 31 January 2017 added £3.7m to Healthcare revenue.

Organic revenue growth (excluding currency and acquisitions) remains a priority but this year's overall organic growth was down 0.8%. Organic performance was impacted by the well-publicised issues around AMT and the law for lawyers' products. Adjusting for these two businesses, over 85% by value of the remainder of our businesses delivered on average organic growth in excess of 2%. This represents an improvement over the performance for the first half year which showed an organic revenue decline of 2%.

The growth within Healthcare of 28% reflects excellent returns from acquisitions we have made since the beginning of 2016 and supported by 9% organic growth from our UK healthcare business. Overall the Healthcare division's organic growth was 3% in constant currency terms with overall growth in healthcare offset by the expected decline in our legacy non-healthcare assets. The Risk & Compliance increase of 9% (4% organic constant currency) continued its trend of strong organic growth led by the compliance training business which was up 7% despite some slippage into 2017/18. Whilst the Professional division recorded revenue growth up 7% this was due to the acquisition of SWAT and support from underlying growth from Accountancy which more than offset the issues with our law for lawyers' product lines and AMT our Investment bank training business.

Profit growth generally was constrained by the previously announced planned investments particularly in our compliance businesses, from the weaker performance from AMT and from our US operations; and some slippage of compliance training assignments. Recent acquisitions have however performed strongly in both revenue and profit contribution terms and these results have also benefited from favourable currency exchange effects on both revenue and on profits adding around £5.0m and £1.0m respectively.

Finance costs before adjusting items were up 16% (£0.3m) compared to 2015/16 reflecting inter alia £20.3m spent on acquisitions (net of cash acquired) and deferred consideration during the year which contributed to an increase in net debt of £5.3m to finish at £40.0m.

The growth in Adjusted EBITA offset by the increase in adjusted finance costs resulted in Adjusted Profit before Tax up £1.1m (5%) to £21.4m (2016: £20.3m).

Risk & Compliance (35% of Group revenue, 44% of Group contribution)7

This division provides in depth accredited regulatory and compliance training and information, market intelligence, and analysis. It focuses on the international financial services and international insurance markets as well as the UK pensions industry. The main communities that use our offerings are risk and compliance officers globally.

Divisional revenue increased by 9% (£3.5m) and contribution was down slightly by 3% (£0.4m) reflecting investment within our compliance business in new products, the new North American compliance operation, and in additional support staff to expand our infrastructure and to help in the drive to boost ICA membership. We had also increased resources during the final quarter of 2017 on the back of our recent success in winning two large international training programmes which are now expected to be delivered during 2017/18. These additional resources and investments have impacted margins in the short term but are expected to benefit contribution in 2017/18 and indeed future years.

During the year, the net investment in our North American office amounted to £0.5m, and additional resources in terms of senior appointments, trainers, sales and administrative support staff together with digital learning capability and bespoke compliance programmes to expand our infrastructure were £0.5m.

Compliance

Our compliance business which accounts for just over 50% of the division's revenue grew by 10% compared to 2015/16 (4% constant currency). However, within this, our compliance training businesses which are the division's main engine of growth, grew by 12% (7% constant currency) slightly down on our expectations due to some slippage of assignments into 2017/18.

Compliance Week, our US Governance Risk and Compliance (GRC) events and information business reported revenue up 16% and on a constant currency basis revenue was flat. There is an ongoing programme of investment in new content and technology to reposition the business as a GRC resource centre and events business collaborating with other parts of Wilmington, in particular ICT and ICA but also FRA on joint events. The flagship event in Washington held in May 2017 enjoyed continued success and again attracted record delegates and sponsorship offsetting some decline in subscribers and sponsored events in the rest of the business. For 2017/18 continued investment is being made to strengthen the content offering and more topic areas will be added together with supporting databases.

Risk

Axco, the industry leading provider of insurance market intelligence, regulation and compliance information reported 8% revenue growth (3% constant currency) helped by the continued success of its digital subscription products and the insight products which enhance our analytical insurance offerings.

The remainder of the risk part of the division performed well recording 9% growth overall (3% constant currency). In August 2016, we successfully opened a new insurance events and training office in Barcelona in response to increasing localised demand for our insurance offerings.

Overall divisional contribution decreased by £0.4m (3%) to £12.3m (2016: £12.7m). Margins were down to 29% (2016: 33%) reflecting the investments outlined above which were predominantly in the compliance training businesses.

7Group contribution of £27,834,000 see note 4

Professional (33% of Group revenue, 21% of Group contribution)

This division includes Wilmington's financial training businesses, financial networking events and our repositioned legal product lines. The Professional division provides expert and technical training as well as support services to professionals in corporate finance and capital markets and to qualified lawyers and accountants in the UK in both the profession and in industry. This division serves primarily tier 1 banks, the international financial services industry, US Capital Markets and small to medium sized professional accountancy and law firms.

The division recorded overall revenue growth of 7% (£2.8m) attributed to the acquisition of SWAT which contributed £4.7m of revenue and to foreign currency benefits of £1.2m. The integration process for SWAT is progressing well and the business is performing in line with plan. Organic (constant currency) revenue which was down overall by 8% was reflective of the issues at AMT and our Law for Lawyers business.

Investment bank training as previously reported had a weak first half year which was mainly due to the competition issues previously highlighted but also due to some softening of training assignments in the Asia Pacific region. The second half year saw stabilisation of the business and we are now entering the busy summer training period with early indications of slow but more stable trading.

The division saw good underlying growth from accountancy training (adjusting for the benefit from the one off double UK Government fiscal budget in 2015/16) offset by previously reported challenging market conditions in the Law for Lawyers businesses following changes to the Legal CLE rules.

Divisional contribution was down 5% (£0.3m) on last year at £5.9m and margins, as we saw at the half year were particularly impacted by the issues at AMT.

The Professional division is being refocussed and integrated as an integral part of project Sixth Gear under the leadership of its new Divisional Director appointed on 1 July 2017.

Healthcare (32% of Group revenue, 35% of Group contribution)

The Healthcare division provides analysis and clarity to customer-focused organisations predominantly in the Healthcare and Life Science markets, enabling them to better understand and connect with their markets. This division includes our UK healthcare information businesses, our Paris based European healthcare news agency, healthcare networking events and our legacy non- healthcare data suppression and charity information businesses. The main communities that use our offerings are healthcare professionals on an increasingly global basis.

Revenue was up 28% (£8.4m) and, adjusting for the impact of favourable currency movements, and the contribution from the acquisitions made over the prior 18 months underlying revenue was up 3% in organic terms compared to 2015/16.

Wilmington Healthcare business, which following the HSJ acquisition will represent over 80% of the division by revenue on a pro-forma basis, had a good year with organic revenue from the UK businesses up 9%. The legacy UK businesses and brands have been successfully supplemented by strategically relevant acquisitions and unified under the Wilmington Healthcare brand and a single management team. This performance was supported by good performances from APM and from our US healthcare networking events.

HSJ which was acquired on 31 January 2017 has had an excellent start and has been fully integrated with the employees transferred to our Underwood Street offices in March and all transactional processes and functions transferred onto Wilmington systems by 30 June 2017.

The legacy data suppression and charities businesses were marginally down (4%) as expected in revenue terms compared to last year and the focus continues to be on delivering higher margins through ongoing reorganisation and the review of marginal business operations.

Benefiting from profit contributions from acquisitions, overall contribution increased by 33% (£2.4m) to £9.7m. Contribution growth was 27% in constant currency terms.

Group overheads

Group overheads, which include board costs, head office salaries as well as unallocated central overheads, increased by £0.4m (11%) to £3.9m (2016: £3.5m).

Project Sixth Gear update

As outlined in the Chairman's section we are progressing well with project Sixth Gear which is a project to speed up the integration of Wilmington. Sixth gear is already well advanced in the achievement of many of its objectives including the consolidation of the London offices, the consolidation of all UK travel and subsistence, marketing best practice, procurement, key account management and centralised functions.

New London Head Office

A key objective of project Sixth Gear was the consolidation of the remaining London office locations into an appropriate single location bringing Wilmington businesses closer together. On 20 June 2017, we completed the sale of our Underwood Street lease and signed a 10-year lease for new premises in the Aldgate area of London. The Underwood Street premises has served Wilmington well for many years but given its modular structure arranged over 4 floors it was not consistent with our vision and strategic objective of encouraging greater collaboration, flexible working and the building of a "one Wilmington" team.

The investment and step change in our working conditions will undoubtedly lead to many benefits both financial and operational over time. Initially there will be an annual step up in operating costs of around £0.9m pa starting from occupation in January 2018. However, given the disposal proceeds from Underwood Street the cash outflow including fit out costs and associated tax will be neutral for the first 5 years. The Underwood Street sale produced a net profit of £6.3m which is shown on the face of the income statement.

We expect an adjusting operating expense in 2017/18 of £1.4m in respect of property costs. Included in this item is £0.4m in respect of the non-cash write off of the remaining property plant and equipment in use in existing properties and £1.0m of the double running costs covering part of the rent free period of the new Aldgate premises.

Exit from Legal practice support market

As previously announced and resulting from our decision to focus Wilmington around three divisional knowledge areas we decided to exit the legal practice support markets. We therefore looked to dispose of our Ark business which contributed £2.8m (£2.6m constant currency; 2016: £3.0m) to revenue and £0.1m to profit before central overhead allocations in 2016/17. The five-month sale process to find a new home for the Ark business ultimately proved unsuccessful so we are closing all operations except the US events business and some parts of the UK events businesses which remain profitable and are consistent with our strategy. We have entered into consultation with the staff affected and redundancy and other related costs are expected to come to £0.2m. We have also decided to impair the remaining associated goodwill and intangible fixed assets relating to this investment. This impairment is shown as a £2.4m impairment charge.

New learning management system (LMS)

Wilmington has already invested significant resource in setting up and developing an embryonic programme of next generation digital training products and learning support systems. During 2016/17 we set up a dedicated e-learning team and we selected Totara© as our new learning management system. Totara© integrates with other key systems such as SalesForce© and our new automated marketing system Marketo© and provides the end to end platform for our all products facilitating an ambitious roll out of new digital training courses. The market for bespoke digital training programmes and other allied products is evolving rapidly and we believe it is set to grow strongly over the next few years. Wilmington, like its larger competitors is positioning itself to take advantage and is investing in blended digital learning solutions taking an increasingly "digital first" approach to new training product launches. We have identified up to 250 existing training courses across the Group which can be repurposed and restructured as blended digital training products; learning and building from the established pioneering digital training programmes of SWAT and AMT and coordinated by the newly formed digital learning team. The cost of conversion of existing and the launch of new courses is likely to see an increase in operational costs and working capital as investment feeds through. We however expect to see many commercial advantages including higher adjusted EBITA margins in the medium term, greater ability to repurpose and repackage products across Wilmington communities and the exploitation of overseas market opportunities. As explained in the Chairman's statement the costs of this are included in the expected £0.75m of additional costs for 2017/18.

Acquisitions

In July 2016 Wilmington acquired SWAT Group Limited ('SWAT'), a leading provider of training, and technical compliance support to accountancy firms in London and the South West of England. SWAT sits inside the professional division offering training, and technical accounting services. The consideration paid was an initial cash payment of £2.5m and a deferred consideration payment of up to £3.0m payable in September 2018 in cash subject to SWAT achieving challenging profit targets over the two financial years ending 30 June 2018.

On 31 January 2017 Wilmington acquired HSJ for £16.9m after an adjustment for working capital. HSJ is one of the UK's leading health information, insight and networking business with a highly-trusted brand providing unparalleled penetration into the NHS and private vendor space through subscription information and data products, events and awards and marketing solutions. HSJ has a growing recurring revenue stream from subscriptions and annual events 

The HSJ business is integral to Wilmington's market leading healthcare business significantly enhancing the Group's presence across the UK healthcare market. Uniquely, Wilmington Healthcare now has a complete UK industry presence across both provider/payer and the private sector in Pharma and MedTech and other healthcare providers.

Executive team

To support our exciting growth strategy, we have continued to strengthen our executive team with the appointment of a senior executive with particular experience and a successful track record in designing and implementing large scale digital learning initiatives to head up our Professional division. The integration of the Professional division is a priority objective and consequence of project Sixth Gear which will particularly benefit from the key account management, common platforms and work flow processes which should in turn reflect in improving margins over the next few years.

Pedro Ros

Chief Executive Officer

Financial review

Adjusting items, measures and adjusted results

Reference is made in this financial review to adjusted results as well as the equivalent statutory measures. Adjusted results in the opinion of the Directors can provide additional relevant information on our future or past performance where equivalent information cannot be presented using financial measures under IFRS. Adjusted results exclude adjusting items, profit on disposal of property plant and equipment (to the extent it is material or significant in nature), goodwill and intangible impairment and intangible amortisation excluding computer software. Effective from 30 June 2017 Wilmington also includes share based payments costs within its definition of adjusted results. Share based payment costs amounted to £0.6m in 2016/17 and £0.6m in 2015/16.

Revenue

For the twelve months ended 30 June 2017 revenue increased by 14% (£14.6m) to £120.3m (2016: £105.7m). On a constant currency basis revenue was up 9%. Acquisitions and favourable exchange rates accounted for the reported revenue growth with organic revenue down 0.8% overall.

Operating expenses before adjusting items amortisation and impairment

Operating expenses before amortisation and impairment, excluding adjusting items, were £97.0m (2016: £83.7m) up 16% reflecting inter alia significant investment in staff and new premises in the period as well as costs associated with operating acquired businesses. For the first time share based payments of £0.6m (2016: £0.6m) are included within operating expenses before adjusting items, amortisation and impairment.

Amortisation excluding computer software

Amortisation of intangible assets (excluding computer software) was £6.0m, compared to £5.5m in the previous year. The increase reflects acquisitions made in the period.

Impairment of goodwill and intangible assets

A non-cash impairment of £2.4m has been made against the carrying values for goodwill and intangible assets in the Ark cash generating unit (CGU) following the failure to sell the business and the resultant decision to close operations. Ark was acquired by Wilmington plc in October 2005 and the original investment was impaired in 2015/16 by £1.0m. Further information is given in note 12.

The 2016 comparator figure of £15.7m relates to the impairment of CLT and the Ark CGU.

Adjusting items within operating expenses

Adjusting items within operating expenses were £3.5m (2016: £2.4m). These items include £1.6m relating to acquisition costs (2016: £1.7m), £0.5m in respect of project Sixth Gear, £0.3m in respect of the relocation of back office functions from London and £1.0m in respect of costs associated with the London move including the termination or disposal of property leases.

Other Income - gain on disposal of leasehold property

The gain of £6.3m is in respect of the disposal of the Underwood Street lease for £7.3m in cash less associated costs of the sale and the net book values of assets associated with the leasehold property.

Operating profit/(loss) ("EBITA")

Operating profit was £17.8m compared to an operating loss of £1.5m in 2016. The 2016 comparator loss was due inter alia to a non-cash impairment of £15.7m.

Adjusted EBITA

Adjusted EBITA was up £1.4m (6%) to £23.4m (2016: £22.0m). Adjusted EBITA margins (Adjusted EBITA expressed as a percentage of revenue were 19.4% (2016: 20.8%).

Finance costs

Finance costs before adjusting items which consist of interest payable and bank charges were up 16% to £2.0m from £1.7m reflecting an increase in net debt in the period. Net debt, which includes cash and cash equivalents, bank loans (excluding loan arrangement fees) and bank overdrafts, was £40.0m (30 June 2016: £34.7m) at the year-end an increase of £5.3m on last year. The increase in debt reflects £20.3m (including deferred consideration) spent on acquisitions offset by the proceeds of £7.3m from the disposal of the Underwood Street offices.

Finance costs including adjusting items were up 2% (£0.1m) on 2016. Adjusting items in 2016 relate to the previous loan facility written off.

Profit/ (loss) before taxation

Profit before tax of £15.9m was up compared to a loss of £3.4m in 2016 principally due to the non-cash impairment of £15.7m in 2016 compared to increased trading profits in 2017 and the gain on the disposal of the leasehold property. Adjusted Profit before Tax increased by 5% (£1.1m) to £21.4m from £20.3m (note 3).

Taxation

Taxation increased by £0.2m (5%) to £3.0m from £2.8m. The increase in the taxation charge is due to an increase in profits before tax, adding back the impairment provisions of £2.4m (2017) and £15.7m (2016) offset by a reduction to UK corporation tax rates.

The effective tax rate is 16.4% (2016: 23.2%) which is calculated after adding back the impairment charge of £2.4m ( 2016: £15.7m) . This charge is reduced compared to 2015/16 due to the relatively low effective tax rate associated with the leasehold property disposal.

The underlying tax rate which ignores the tax effects of adjusting items remained the same as 2016 at 22.4%. The underlying tax rate is calculated as the product of one minus the adjusted profit after tax per note 10 of £16.6m (2016: £15.8m) divided by the adjusted profit before tax of £21.4m (2016: £20.3m).

Earnings/ (loss) per share

Adjusted Basic Earnings per Share increased by 5% to 19.05p (2016: 18.17p). Basic earnings per share was 14.72p compared to a basic loss per share of 7.39p in 2016.

Goodwill

Goodwill increased by £15.2m from £70.8m to £86.0m due to additions of £14.9m arising from businesses acquired in the period, the reallocation of £1.3m of assets between goodwill and intangibles (note 12) and exchange rate movements of £0.5m. These were offset by an impairment of £1.5m.

Intangible assets

Intangible assets increased by £2.9m from £29.0m to £31.9m due to acquisitions of £10.1m arising from businesses acquired in the period and exchange rate movements of £0.5m in the period, and other additions of computer software, of £1.6m. These were offset by amortisation of £7.2m, the reallocation of £1.3m of assets between goodwill and intangibles (note 13) and an impairment charge of £0.8m.

Property, plant and equipment

Property, plant and equipment decreased by £0.2m to £4.4m reflecting additions to tangible fixed assets of £1.3m (2016: £0.6m), additions from acquired businesses of £0.2m offset by depreciation of £1.1m and assets written off on disposal of the Underwood Street lease of £0.6m at net book value.

Trade and other receivables

Trade and other receivables increased by £2.3m reflecting acquisitions which added £2.8m, offset by more efficient cash collection from our new credit control processing following its relocation.

Trade and other payables

Total balances increased from £43.9m to £52.3m.

Trade and other payables increased by £3.8m to £25.4m (2016: £21.6m) reflecting, inter alia, acquisitions in the period which accounted for £1.1m. Trade and other payables also include £1.8m in respect of various lease surrender costs following the London property consolidation, reorganisation costs under project Sixth Gear and other London property professional costs and equipment.

Subscriptions and deferred revenue increased by £4.7m or 21% to £27.0m (2016: £22.3m). Acquisitions accounted for £3.9m of the increase, foreign exchange was £0.2m. Risk & Compliance division grew by £0.8m (8%), Professional division grew by 13% (£0.6m) of which acquisitions accounted for all the increase. Healthcare was up 43% (£3.3m) with acquisitions accounting for £3.2m of the overall increase. Within Risk & Compliance ICA membership deferred revenue is up 118% and Axco was up 12%.

Current tax liabilities

Current tax liabilities increased from £1.6m to £1.9m reflecting acquisitions in the period and higher tax associated with higher overall group profits.

Net debt

Net debt, which includes cash and cash equivalents, bank loans (excluding capitalised loan arrangement fees) and bank overdrafts, was £40.0m (30 June 2016: £34.7m.) an increase of £5.3m. Acquisition costs (including deferred consideration) of £20.3m were offset by cash conversion of 114% (2016: 108%). Net debt at 30 June 2017 represented 47% of our debt and overdraft facility of £85m. This facility was extended in January 2017 by a further £20m in support of the acquisition of HSJ from £65.0m and is repayable on 1 July 2020.

Deferred consideration (cash settled)

Deferred consideration in total was £2.5m down on 2016 total liability of £2.6m. Movements during the year included an increase of £1.1m from the acquisition of SWAT offset by payments of £1.3m in the year in respect of Evantage (£0.3m) and FRA (£1.0m). 

Derivative financial instruments

The Group is exposed to foreign exchange risks, liquidity and capital risks and credit risks. The Group has policies that mitigate these risks. Total estimated liabilities were £0.7m down £1.3m compared to £2.0m at 30 June 2016. The main reason for the decrease was there were no forward foreign currency contracts obligations at the balance sheet date (2016 loss provision £0.9m).

On 3 July 2017 the Group entered into a number of foreign currency transactions to mitigate possible exchange rate fluctuations on its financial results. $10.0m US dollars were sold forward during 2017/18 at an average rate of $1.31 and €5.0m were sold at an average rate of €1.14m. 

Share capital

During the year 0.3m new ordinary shares of £0.05 were issued in settlement of shares vesting under the Group's Performance Share Plan. This resulted in an increase to share capital of £13,112.

Dividend

It is the Board's intention to pay a progressive dividend whilst ensuring a cover of at least two times the Group's adjusted earnings per share over the dividend per share in respect of the year. A final dividend of 4.6p per share (2016: 4.3p) will be paid on 17 November 2017 to shareholders on the register as at 20 October 2017, with an associated ex-dividend date of 19 October 2017.

Anthony Foye

Chief Financial Officer

Statement of directors' responsibilities

The statement of Directors' responsibilities below has been prepared in connection with the Group's full annual report for the year ended 30 June 2017. Certain parts of the annual report have not been included in this announcement as set out in note 1 of the financial information.

We confirm to the best of our knowledge that:

· the consolidated financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group;

· the management report represented by the report of the Directors, and material incorporated by reference, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face; and

· the annual report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to access the company's performance, business model and strategy.

This responsibility statement was approved by the board of Directors on 12 September 2017 and is signed on its behalf by:

Anthony Foye

Chief Financial Officer

Consolidated Income Statement for the year ended 30 June 2017

Items in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 8. 

Balance Sheets as at 30 June 2017

Statements of Changes in Equity for the year ended 30 June 2017

Cash Flow Statements for the year ended 30 June 2017

Reconciliation of net debt

Notes to the Financial Statements

1. Nature of the financial statements

The following financial information does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and Financial Statements for the year ended 30 June 2017 on which an unqualified report has been made by the Company's auditors.

Financial statements for the year ended 30 June 2016 have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The 2017 statutory accounts will be delivered in due course.

Copies of the Annual Report and Financial Statements will be posted to shareholders shortly and will be available from the Company's registered office at 6-14 Underwood St, London, N1 7JQ.

2. Statement of Accounting Policies

The preliminary announcement for the year ended 30 June 2017 has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The accounting policies applied in this preliminary announcement are consistent with those reported in the Group's annual financial statements for the year ended 30 June 2016 along with new standards and interpretations which became mandatory for the financial year.

 3. Measures of profit

(a) Reconciliation to profit on continuing activities before tax

To provide shareholders with additional understanding of the trading performance of the Group, Adjusted EBITA has been calculated as Profit before Tax after adding back:

· amortisation of intangible assets excluding computer software;

· impairment of goodwill and intangible assets;

· adjusting items (included in operating expenses);

· other income - gain on sale of leasehold property; and

· finance costs.

Adjusted EBITA and Adjusted EBITDA reconcile to profit on continuing activities before tax as follows:

Adjusted profit before tax reconciles to profit on continuing activities before tax as follows:

(b) Reconciliation to adjusted profit before tax

4. Segmental information

In accordance with IFRS 8 the Group's operating segments are based on the operating results reviewed by the Board, which represents the chief operating decision maker. Following a strategic review in the year, the Group now reports its results in three (previously 4) segments as this more accurately reflects the way the Group is managed. The comparatives have been restated to provide information on a consistent basis.

The Group's organisational structure reflects the main communities to which it provides information, education and networking. The three divisions (Risk & Compliance, Professional and Healthcare) are the Group's segments and generate all of the Group's revenue.

The Board considers the business from both a geographic and product perspective. Geographically, management considers the performance of the Group between the UK, North America, Europe (excluding the UK) and the Rest of the World.

 (a) Business segments

There are no intra-segmental revenues which are material for disclosure.

Unallocated central overheads represent head office costs that are not specifically allocated to segments.

Total assets and liabilities for each reportable segment are not presented, as such information is not provided to the Board.

 (b) Segmental information by geography

The UK is the Group's country of domicile and the Group generates the majority of its revenue from external customers in the UK. The geographical analysis of revenue is on the basis of the country of origin in which the customer is invoiced:

5. Profit from continuing operations

a) Profit for the year from continuing operations is stated after charging/(crediting):

b) Adjusting items:

The following items have been charged/(credited) to the Income Statement during the year but are considered to be adjusting so are shown separately:

Successful and aborted acquisitions relate to the acquisition of SWAT Group Limited ('SWAT'), Health Service Journal ('HSJ') and other aborted acquisitions. The increase in the liability for deferred consideration relates to the purchase of SWAT Group Limited ('SWAT').

Restructuring and rationalisation costs comprise primarily of £500,000 of costs relating to the implementation of project Sixth Gear, and £300,000 of redundancy and property costs following the Group's decision to relocate part of the finance function from its head offices in central London to our existing freehold premises in Basildon, Essex.

Included within operating expenses before depreciation, amortisation and impairment are £224,000 (2016: £122,000) of minor restructuring costs not considered to be adjusting items.

Costs associated with property portfolio review relate to a review of the London property portfolio, see note 4c for further details.

c) Property portfolio review

In the year Wilmington plc performed a review of its London property portfolio, on the back of this it sold the leasehold interest in its current Underwood Street London head office premises for a £7.3m cash consideration. At the same time as disposing of its leasehold interest, Wilmington entered into a new ten-year market rate lease for a London head office premises near Aldgate. The new head office space will accommodate Wilmington's London based businesses whilst retaining the training facility recently acquired with the acquisition of SWAT Group Limited. The new London premises will consolidate staff from a number of our current properties therefore in the year we have also accounted for the surrender of the leasehold of our London Old Broad Street property and the onerous lease of a leasehold property in Kent.

The items which have been credited/(charged) to profit or loss during the year in relation to this review are as follows:

Gain on sale of Underwood Street Leasehold property:

Operating expenses - Adjusting items relating to the property portfolio review:

Note 25 Commitments includes the minimum lease commitments associated with the London property portfolio review.

The net tax charge on the property transaction included in corporation tax expense is £230,488.

6. Operating expenses

7. Finance costs

The extension of loan facility costs of £225,000 in the year ended 30 June 2016 comprises £147,000 of old capitalised loan arrangement fees written off and £78,000 of legal and professional costs connected to the extension.

8. Taxation

Factors affecting the tax charge for the year:

The effective tax rate is lower (2016: higher) than the average rate of corporation tax in the UK of 19.75% (2016: 20.00%). The differences are explained below:

On 26 October 2015, the UK corporation tax rate was reduced from 20% to 19% from 1 April 2017 and a further change was announced on 23 November 2016 to reduce the rate from 19% to 17% from 1 April 2020. These changes have been substantively enacted at the balance sheet date and therefore are included in these financial statements. Deferred tax assets and liabilities are measured at the rates that are expected to apply in the periods of the reversal, deferred tax balances at 30 June 2017 have been calculated using the above rates giving rise to a reduction in the net deferred tax liability of £117,000 (2016: £178,000).

The Company's profits for this accounting year are taxed at an effective rate of 19.75%.

Included in other comprehensive income are a tax charge of £106,000 and a tax credit of £97,000 relating to the interest rate swaps and net investment hedges respectively.

The tax effect of adjusting items as disclosed in note 9 is a credit of £1,757,000 (2016: £1,579,000).

9. Dividends

Amounts recognised as distributions to owners of the parent in the year:

10. Earnings per share

Adjusted earnings per share has been calculated using adjusted earnings calculated as profit/(loss) after taxation and non-controlling interests but before:

· amortisation of intangible assets excluding computer software

· impairment of goodwill and intangible assets;

· adjusting items (included in operating expenses);

· other income - gain on sale of leasehold property; and

· adjusting items (included in finance costs).

The calculation of the basic and diluted earnings per share is based on the following data:

11. Acquisitions and disposals

All below acquisitions have been financed out of the extended £85.0m multi-currency revolving credit facility.

a. Acquisition - SWAT Group Limited - July 2016

On 19 July 2016 Mercia Group Limited, a subsidiary, acquired the entire issued share capital of SWAT Group Limited ('SWAT'), a provider of training and technical compliance support to accountancy firms in London and the South West of England.

SWAT was acquired for initial consideration of £2,870,000, of which £500,000 was withheld in relation to the Net Asset adjustment. Subsequently, this initial consideration was reduced by £387,538 in relation to the final Net Asset adjustment.

Deferred consideration of up to £3,000,000 is payable contingent on SWAT's future performance for the years ended 30 June 2017 and 2018 and will be paid in cash in one instalment. Management has estimated the expected value of these future payments to be £1,082,000 which has been recognised in the total consideration. Any future movements of this contingent consideration will be charged to the income statement as an adjusting item.

Acquisition related costs of £278,000 have been expensed as an adjusting item in the income statement (see note 4b).

Details of the fair value of the purchase consideration, the net assets acquired and goodwill for the acquisition are as follows:

The provisional fair values of assets and liabilities recognised as a result of this acquisition are as follows:

The estimated useful economic life of the intangibles is as follows:

The acquired business contributed revenues of £4,659,359 and contribution of £658,559 to the Group for the period from the date of acquisition to 30 June 2017. Had SWAT been consolidated from 1 July 2016 the Group consolidated Income Statement would include pro forma revenue of £5,016,454 and contribution of £677,811.

At the year the deferred consideration due in respect of the SWAT acquisition was £1,136,000.

b) Acquisitions - Health Service Journal - January 2017

On 31 January 2017 Wilmington Healthcare Limited, a subsidiary, acquired the trading assets and liabilities of Health Service Journal ('HSJ'), the UK's leading health information, insight and networking business from EMAP Publishing Limited (the 'Seller'). HSJ was acquired for initial consideration of £17,000,000 in cash with a subsequent adjustment in respect of final working capital of £250,000 which was due to Wilmington Healthcare Limited. There is no deferred or contingent consideration in relation to the HSJ acquisition.

Acquisition related costs of £1,106,000 have been expensed as an adjusting item in the income statement (see note 4b).

The acquisition adds further strength to the existing Wilmington Healthcare businesses, and will enable the combined group to provide unparalleled services into the NHS and private vendor space through subscription information and analytics products, events, awards, education, and marketing solutions.

Details of the fair value of the purchase consideration, the net assets acquired and goodwill for the acquisition are as follows:

The provisional fair values of assets and liabilities recognised as a result of this acquisition are as follows:

The goodwill is attributable to the unique HSJ content, established customer base, and the solid customer relationships held by the experienced and stable workforce. As well as, the synergies that will arise with the existing Wilmington Healthcare businesses and the ability to be able to provide a wider breadth of services and products, across both provider/payer and the private sector in Pharma and MedTech industries.

The estimated useful economic life of the intangibles is as follows:

The acquired business contributed revenues of 3,695,000 and contribution of £794,000 to the Group for the period from the date of acquisition to 30 June 2017, which equates to a five months' revenue and contribution. Had HSJ been consolidated from 1 July 2016 the group consolidated Income Statement would include pro forma revenue of £9,769,000 and contribution of £2,734,000.

12. Goodwill

A review by management in the year concluded that the tax amortisation benefit acquired with FRA in 2016 should be reallocated across Goodwill and Intangibles. This resulted in a reallocation of £1,281,000 from Intangible Assets to Goodwill, with a nil net impact on non-current assets.

The Group tests goodwill annually for impairment. The recoverable amount of the goodwill is determined as the higher of the value in use calculation or fair value less cost of disposal for each cash generating unit ('CGU'). The value in use calculations use pre-tax cash flow projections based on financial budgets and forecasts approved by the Board covering a three year period. These pre-tax cash flows beyond the three year period are extrapolated using estimated long-term growth rates.

Key assumptions for the value in use calculations are those regarding discount rates, cash flow forecasts and long-term growth rates. Management has used a pre-tax discount rate of 12.3% (2016: 12.3%) across all CGUs in the UK except for the CLT CGU which had a pre-tax discount rate of 13.3% (2016: 13.3%) to reflect the greater market challenges and risks. A pre-tax discount rate of 13.5% (2016: 13.5%) has been used for Compliance Week and FRA that both operate in North America. These pre-tax discount rates reflect current market assessments for the time value of money and the risks associated with the CGUs as the Group manages its treasury function on a Group-wide basis.

The same discount rate has been used for all CGUs except CLT, Compliance Week and FRA as the Directors believe that the risks are the same for each other CGU. The long-term growth rates used are based on management's expectations of future changes in the markets for each CGU and are 2.0% (2016: 2.0%).

Management's impairment calculations based upon the above assumptions show ample headroom with the exception of CLT and Compliance Week.

Goodwill is allocated to significant CGUs as follows. A CGU is considered to be significant if the goodwill allocated to it is greater than 10% of the total goodwill net book value.

CLT

For CLT, the value in use exceeds the carrying value by 63% (2016: 0%). The impairment review of CLT is sensitive to a reasonably possible change in the key assumptions used; most notably the projected cash flows and the pre-tax discount rate. The value in use exceeds the carrying value unless any of the assumptions are changed as follows:

- A decrease in the projected operating cash flows of 38.6% in each of the next three years; or

- An increase in the pre-tax discount from 12.4% to 18.8%.

Compliance week

For Compliance Week, the value in use exceeds the carrying value by 27% (2016: 15%). The impairment review of Compliance Week is sensitive to a reasonably possible change in the key assumptions used; most notably the projected cash flows and the pre-tax discount rate. The value in use exceeds the carrying value unless any of the assumptions are changed as follows:

- A decrease in the projected operating cash flows of 27.4% in each of the next three years; or

- An increase in the pre-tax discount from 13.5% to 19.0%.

Impairment of Ark

A non-cash impairment of £1.54m has been made against the carrying value for goodwill in Ark following the failure to sell the business and the Board's decision to close all but the events and reports businesses. This impairment further reflects the impact of structural changes in the legal information and training market. Ark was acquired by Wilmington plc in October 2005 and the original investment was impaired last year by £1.03m. It was also decided that the remaining assets held in the business should be written down to their recoverable value, resulting in an impairment of £0.83m against the intangible assets held in the business (see note 13). All remaining items on the balance sheet are held at their realisable value and are considered recoverable.

13. Intangible assets

Included within computer software are assets under construction that have not yet been amortised with a net book amount of £142,000 (2016: £44,000).

A review by management in the year concluded that the tax amortisation benefit acquired with FRA in 2016 should be reallocated across Goodwill and Intangibles. This resulted in a reallocation of £1,281,000 from Intangible Assets to Goodwill, with a nil net impact on non-current assets.

14. Property, plant and equipment

Included in land, freehold and leasehold buildings is £970,000 (2016: £970,000) of non-depreciated land.

Depreciation of property, plant and equipment is charged to operating expenses within the Income Statement.

The disposal of land, freehold and leasehold buildings is the sale of a leasehold property from which a gain on sale of £6,333,000 arose (note 4c).

15. Trade and other receivables

16. Derivative financial investments

17. Trade and other payables

18. Borrowings

Bank overdrafts comprise of the net of gross overdraft balances of £13.2m (2016: £10.3m) and cash positions of £12.3m (2016: £8.1m) held at Barclays Bank PLC in certain UK companies included in the offsetting agreement.

The £1,000 decrease in capitalised loan arrangement fees reflects the net impact of a £146,000 payment of fees relating to the extension of the Group's £85m revolving multi-currency credit facility, and an amortisation charge of (£147,000).

19. Non-controlling interests

20. Cash generated from operations

Cash conversion is calculated as a percentage of cash generated by operations to Adjusted EBITA as follows:

21. Events after the reporting period

Purchase of minority interest

In July 2017 the Group purchased the remaining 20% shareholding in Central Law Training (Scotland) Limited for £335,000 making it a wholly owned subsidiary.

Forward contracts

On 3 July 2017 the following forward contracts were entered into in order to provide certainty in Sterling terms of 80% of the Group's expected net US dollar and Euro income:

· The Group sold €5.0m at an average rate of 1.1358

· The Group sold $10.0m at an average rate of 1.3071

Appendix 1 - New operating segments (unaudited)