Wilmington Regulatory News (WIL)

28 February 2012

WILMINGTON GROUP PLC

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

Half Year Results for the six months ended 31 December 2011

Wilmington Group plc, the professional information and training group, today announces its half year results and its interim management report for the six months ended 31 December 2011.

Trading in-line with management expectations, outlook for full year remains unchanged

Highlights

·; Group revenues for the half year were up 5% at £41.6m (2010: £39.7m); Adjusted EBITA1 was in line with the prior year at £6.8m; Adjusted Profit before Tax2 was £5.5m (2010: £6.1m) reflecting higher finance costs following renewal of banking facilities; Adjusted Earnings per Share3 was 4.67p (2010: 4.86p)

·; Interim dividend maintained at 3.5p

·; Publishing & Information revenues up 11.9% to £19.9m (2010: £17.7m) and segmental profit4 up 8.6% to £5.2m (2010: £4.8m)

- benefiting from a strong subscription based business model, increasing digital delivery of high quality content and a strong AXCO performance

·; Training & Events revenues broadly unchanged at £21.8m (2010: £21.9m) and segmental profit4 6.2% lower at £2.9m (2010: £3.1m)

- good performance by Matchett (graduate entrant training for investment banks) and Mercia (accountancy training)

- appointment of a new management team, headcount reductions, modified course programmes and refocused marketing and sales to better address challenges and opportunities in Legal Training

·; Good progress towards achieving strategic objectives

- increasing digital content, now 79% of publishing revenues (2010: 75%)

- strong, recurring subscription based revenues; deferred revenue is at a seasonally adjusted high

- reduced dependency on advertising

- significant investment in new product development

·; Ambition to grow profits organically by 50% over the next 3 years and improve margins by 5 percentage points by 2015

1 Adjusted EBITA - see note 5 to the interim financial statements

2 Adjusted Profit before Tax - see note 5 to the interim financial statements

3 Adjusted Earnings per Share - see note 11 to the interim financial statements

4 Before non-recurring items, central overheads, share based payments, amortisation, net finance costs and tax

Mark Asplin, Chairman, commented:

"Our outlook for the full year remains unchanged. Whilst economic conditions remain tough generally, most areas of our business have been resilient. The cost savings and management initiatives which have already been implemented in anticipation of this should result in an outcome for the full year in line with our expectations.''

"The investments made during the last financial year and those being made this year are expected to continue to transition the business to a higher margin and higher quality business which can deliver our medium term growth ambitions."

For further information, please contact:

Notes to Editors

Wilmington Group plc is one of the UK's leading providers of information and training for professional business markets. The Group provides training, arranges industry events and publishes directories, databases, magazines and special reports for a variety of markets including the legal, health, accounting, pension, charities, financial and insurance sectors. Capitalised at approximately £72 million, Wilmington floated on the London Stock Exchange in 1995.

A copy of the investor presentation is available on the Group's website from 11.00 am today.

INTERIM MANAGEMENT REPORT

For the six months ended 31 December 2011

I am pleased to present my first report as Chairman of Wilmington, on the results for the six months ended 31 December 2011. During the period under review Wilmington has performed in line with management expectations and produced a solid performance, with revenues increasing by 5.0% to £41.6m. Adjusted EBITA1 was in line with the prior year at £6.8m. As expected, the cost of borrowing increased significantly following the renewal of the Group's banking facilities in June 2011; accordingly Adjusted Profit before Tax2 was £5.5m against £6.1m for the corresponding period in the prior year.

Business Strategy

Wilmington's key strategy is to increase shareholder value by delivering long term, sustainable and growing profits from servicing the information and training requirements of professional business markets.

In recent years the Group has sought to take advantage of the opportunities available to it and to address the challenges in the UK legal market and the ongoing structural change in the publishing business through:-

·; continued focus on operational efficiency,

·; the development of new training programmes, and

·; investment in subscription based information businesses with deep content delivered electronically.

A consequence of adopting this strategy has been an unprecedented level of development activity to generate new or additional revenue streams, many of which are deferred over the period of the underlying subscription. Deferred revenue is at a seasonally adjusted high of £17.4m (2010: £16.8m), an indication of the early success of our strategy.

Whilst these actions have impacted short term profits we believe that benefit will be seen in higher margins and higher profits over the next three years. Within this timescale our ambition is to grow profits organically by 50%. The incentivisation schemes for many senior managers reflect this ambition.

Axco, which was acquired in September 2010, continues to perform in line with our expectations, delivering 9% underlying sales growth in the period. We have enjoyed excellent renewal rates for our existing subscriptions, which have been in excess of 100% by value in the period. This, combined with the transition of many of our key international insurance company clients into long term contracts, provides us with a firm foundation upon which to grow the business. Work has continued on the development of unique statistical and analytical content, tools and services for our customers as well as the creation of a new content management system which will create exciting operational benefits for both us and clients. We have also invested in our sales and account management teams to allow us to sell these new products and services to both our existing client base and to new organisations globally.

We announced in November that a review had been completed of the legal training business and a plan initiated. As we indicated at the time, this and other cost saving initiatives are expected to deliver annualised cost savings of £1m per year. We are confident that the new management structure and refreshed course programmes will, over time, deliver improved business performance.

Financial Performance

Revenue in the six months to 31 December 2011 increased by 5.0% to £41.6m (2010: £39.7m). On a like-for-like basis (excluding the impact of acquisitions in the period and part way through the prior period) revenue was broadly unchanged from the previous period. Adjusted EBITA1 was unchanged at £6.8m (2010: £6.8m).

Adjusted Profit before Tax2 decreased by 9.3% to £5.5m (2010: £6.1m). This reflects the significantly higher finance costs incurred following the renewal in June 2011 of the Company's banking facilities. The impact of this on the first half finance costs was approximately £0.5m. From December 2011 the Group's effective cost of borrowing has reduced as a result of the maturity in November 2011 of a 5 year interest rate swap on £15m of debt at 5.23% against 3 month LIBOR. This was replaced by a 5 year swap at 2.68% and a further £10m 3 year interest swap became effective in November at 2.12% against 3 month LIBOR. Profit before Tax decreased to £0.9m (2010: £2.5m) reflecting increases in non-recurring items and amortisation.

Adjusted Earnings per Share3 decreased by 3.9% to 4.67p (2010: 4.86p). Basic earnings per share decreased to 0.61p (2010: 1.57p).

Operating cash flow remained healthy at £5.7m (2010: £6.4m) representing 93.9% of operating profit before amortisation, net finance costs and taxation (2010: 98.3%).

At 31 December 2011 the net assets of the Group were £50.1m (2010: £50.9m) with deferred revenue of £17.4m (2010: £16.8m). At 31 December 2011 the Group had net debt of £41.5m (2010: £40.9m) representing 63.8% utilisation of the Group's facilities which are committed to February 2016.

Publishing & Information

The Publishing & Information Division has delivered a solid performance in the six months to 31 December 2011, benefiting from a strong subscription based business model and the increasing digital delivery of high quality content. Information sales and subscriptions represented 87% of the Division's revenue (2010: 84%) and digital revenues as a percentage of sales improved to 79% (2010: 75%).

Segmental revenue increased by 11.9% to £19.9m (2010: £17.7m). This includes the impact of a full six months revenue from Axco, which was acquired half way through the corresponding period in the prior year. Excluding Axco, like-for-like revenues grew by 1% despite the closure of 16 print products in July 2011.

Segmental profits before non recurring items, central overheads, share based payments, amortisation, net finance costs and tax have grown by 8.6% to £5.2m (2010: £4.8m).

Wilmington Business Intelligence ('WBI') is continuing its transformation towards a fully digital business. During the period a number of print products were closed, with the result that revenues declined by 8% compared to the corresponding period in the prior year and we envisage further reductions in print products during the next twelve months. At the same time we saw increasing revenues from recently launched digital products albeit these revenues, as previously highlighted, will be received over the period of subscription.

Our Professional Services division has benefited from its new Dubai research centre becoming fully operational during the period. The Middle East is an important region for the credit insurance market and this centre will allow us to serve more effectively our global customers.

The Healthcare businesses in the UK and France achieved revenue growth of 13%.

Training & Events

The Training & Events Division has delivered a mixed performance during the first six months of the financial year. Overall segmental revenues were broadly unchanged at £21.8m (2010: £21.9m).

Increased market share saw Matchett Group, which provides graduate entrant training to international investment banks, achieve good revenue growth, with like-for-like revenues 12% ahead of the prior year. This was achieved however in an environment where there has been pressure on margins.

Mercia, our accountancy training business, achieved revenue growth of 9% ahead of the prior year, primarily reflecting the acquisition of a portfolio of CPD courses from CCH in August.

The International Compliance Training (ICT) business revenues were in line with the corresponding period for the prior year with a number of new revenue streams expected to commence in the second half of the financial year in Malaysia and Australia. ICT has also expensed the development cost of major bespoke programmes for International Financial Regulators and major Financial Institutions which will contribute to its performance in the second half of our financial year.

As we have previously reported, the legal training business has experienced continuing difficult trading conditions. Revenues in this part of the business fell by 14% in the first six months of the financial year compared to the corresponding period in the prior year. We have undertaken a detailed review of the business and implemented a plan, including a new management team, headcount reductions, modified course programmes and refocused marketing and sales, to better address the challenges and opportunities in this market.

Segmental profits in the six months to 31 December 2011, before non-recurring items, central overheads, share based payments, amortisation, net finance costs and tax were 6.2% lower at £2.9m (2010: £3.1m). This decline predominantly reflects the movement in revenues in the highly operationally geared legal training business and the continued investment in the compliance training business, where we expect to see revenue growth in the second half of the financial year.

Dividend

It is the Board's intention to maintain the dividend at the same level as the prior year. An interim dividend of 3.5p per share (2010: interim 3.5p, June 2011 final 3.5p) will be paid on 12 April 2012 to shareholders on the register as at 16 March 2012.

Board Changes

I was delighted that during the period we were able to welcome to the Board two new non-executive directors, Derek Carter and Nathalie Schwarz. Derek has a wealth of experience in B2B media whilst Nathalie, who is a qualified solicitor, has considerable experience in broadcast media. The Board is already benefiting from their contribution.

It would be remiss of me not to thank my predecessor as Chairman, David Summers, for his contribution to the Company over many years. David took the Chair at a time when the Company was predominantly known as a publisher of trade magazines and he oversaw a transformation of the business. David retired from the Board on 31 December 2011 and we wish him well in his retirement.

Outlook

Our outlook for the full year remains unchanged. Whilst economic conditions remain tough generally, most areas of our business have been resilient. The cost savings and management initiatives which have already been implemented in response to this should result in an outcome for the full year in line with our expectations.

The investments made during the last financial year and those being made this year are expected to continue to transition the business to a higher margin and higher quality business which can deliver our medium term growth ambitions.

Mark Asplin

Chairman

1 Adjusted EBITA - see note 5 to the interim financial statements

2 Adjusted Profit before Tax - see note 5 to the interim financial statements

3 Adjusted Earnings per Share - see note 11 to the interim financial statements

Consolidated Income Statement

The above Consolidated Income Statement should be read in conjunction with the accompanying notes.

All items in the current and comparative periods relate to continuing activities.

Consolidated Statement of Comprehensive Income

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Consolidated Statement of Changes in Equity

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Consolidated Balance Sheet

The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.

Consolidated Statement of Cash Flow

The above Consolidated Statement of Cash Flow should be read in conjunction with the accompanying notes.

Notes to the Financial Information

1. General information

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is 19-21 Christopher Street, London, EC2A 2BS.

The Company has its primary listing on the London Stock Exchange.

This condensed consolidated interim financial information was approved for issue on 28 February 2012.

This unaudited condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2011 were approved by the board of Directors on 20 September 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

2. Basis of preparation

This condensed consolidated interim financial information for the six months ended 31 December 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, ''Interim financial reporting'' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the Annual Financial Statements for the year ended 30 June 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

The Group's forecast and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate well within the level of its current banking facilities. The Directors have therefore adopted a going concern basis in preparing this interim financial information.

3. Accounting policies

The accounting policies applied are consistent with those of the Annual Financial Statements for the year ended 30 June 2011, as described in those Annual Financial Statements.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 July 2011, but are not currently relevant for the Group:

§ IFRS 7 ''Financial instruments: Disclosures on derecogonition'' effective for accounting periods beginning on or after 1 July 2011.

§ IAS 1 (amendment), ''Financial statement presentation regarding other comprehensive income'' effective for accounting periods beginning on or after 1 July 2011.

§ Annual improvements to International Financial Reporting Standards 2010 were issued in November 2010. The effective dates vary standard by standard but most are effective 1 January 2011.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2011 and have not been early adopted:

§ IFRS 10 ''Consolidated financial statements'' effective for accounting periods beginning on or after 1 January 2013.

§ IFRS 11, ''Joint arrangements'' effective for accounting periods beginning on or after 1 January 2013.

§ IFRS 12, ''Disclosure of interests in other entities'' effective for accounting periods beginning on or after 1 January 2013.

§ IAS 12 ''Income taxes on deferred tax'' effective for accounting periods beginning on or after 1 January 2012.

§ IFRS 13, ''Fair value measurement'' effective for accounting periods beginning on or after 1 January 2013.

§ IAS 27 (revised), ''Separate financial statements'' effective for accounting periods beginning on or after 1 January 2013.

§ IAS 28 (revised), ''Associates and joint ventures'' effective for accounting periods beginning on or after 1 January 2013.

Management will assess the impact on the Group of these standards and interpretations prior to their effective date of implementation.

4. Risks and uncertainties

The Group's principal risks and uncertainties remain as stated on page 23 of the Business Review in the Annual Report and Financial Statements for the year ended 30 June 2011.

The main risks arising from the Group's financial instruments are interest rate risk, liquidity risk and foreign currency risk. At 31 December 2011, the Group had undrawn committed borrowing facilities of £23m, comprising a bank facility provided by Barclays Capital, HSBC and Royal Bank of Scotland. Any non-compliance with covenants within the borrowing arrangements could, if not waived, constitute an event of default with respect to such arrangements. The Group was fully compliant with its financial covenants throughout each of the periods presented. Management reviews compliance with financial covenants for future periods as part of its forecasting procedures.

The Board reviews and agrees policies for managing each of these risks and they are summarised below. These policies are unchanged from the previous year.

a) Interest rate risk

The Group finances its operations through a mixture of retained profits, operational cash flow and bank borrowings. Historically, the Group has expanded its operations both organically and by acquisition, which has led on occasions to the need for external finance. The Board has chosen a credit facility with a floating rate of interest linked to LIBOR and has hedged its interest exposure on a proportion of this facility. In November 2006, the Group entered into a 5 year £15m interest rate swap whereby it received interest on £15m based on 3 month LIBOR and paid interest on £15m at a fixed rate of 5.23%. This facility expired in November 2011. In November 2010, the Group entered into a further three hedging instruments. Firstly, a 5 year £15m interest rate swap fixed against 3 month LIBOR with a forward start of 21 November 2011 paying interest on £15m at a fixed rate of 2.68% was entered into. Secondly, a cap of 2% was put on a further £10m until November 2011. Finally, in November 2010, a 3 year £10m interest rate swap fixed against 3 month LIBOR with a forward start of 21 November 2011 paying interest on £10m at a fixed rate of 2.12% was entered into. These derivatives have been designated as a cash flow hedge in order to manage interest rate risk associated with the first £25m of the credit facility. Payments received under the swaps have been matched against interest paid quarterly during the period and the entire mark to market loss on the derivatives have been recognised in equity, following the Directors' assessment of the hedge's effectiveness. There have been no significant changes in the business or economic circumstances that affect the fair value of the Group's financial assets and financial liabilities. The levels used for fair value measurement of financial instruments remain unchanged from those disclosed in note 23 of the audited Financial Statements for the year ended 30 June 2011. The new financial instrument referred to in (c) below is a level 2 financial instrument in the fair value measurement hierarchy.

b) Liquidity risk

The Group has an unsecured committed bank facility of £65m (2010: £70m) to February 2016. The facility currently comprises a revolving credit facility of £60m (2010: £60m) and an overdraft facility of £5m (2010: £5m together with a £5m money market line). At 31 December 2011, £42m of the revolving credit facility was drawn down (2010: £41m). Interest is charged on the amount drawn down at 2.00 to 2.75 percent above LIBOR depending upon leverage. Under the facility, drawdown is made for interest fixture periods of up to six months in duration.

The bank overdrafts are the subject of a Group set-off arrangement. Interest is charged on the overdraft at 2.25% over Barclays bank base rate.

c) Foreign currency risk

The Group has a substantial customer base overseas. The Group maintains bank accounts in foreign currency and converts this currency to Sterling at the appropriate times minimising the exposure to exchange fluctuations. On 30 September 2010, the Group sold forward €1.0m to 4 October 2011 at a rate of 1.170. This contract was entered into to provide certainty in Sterling terms of the bulk of the net Euro income of APM. On 26 January 2011, the Group sold forward US$0.5m to 2 December 2011 at a rate of 1.5881. On 22 June 2011, the Group sold forward US$0.5m to 2 December 2011 at a rate of 1.6188. These contracts were entered into in order to provide certainty in Sterling terms of the bulk of the net US$ income of the Matchett business. These contracts matured during the period ended 31 December 2011. On 8 July 2011, the Group sold forward a total of US$4.5m at rates between 1.5625 and 1.61 which are determined on 4 dates (''the expiry dates'') between 29 September 2011 and 30 May 2012. Under the terms of the contract the dollars are delivered during a 3 month window following the expiry date. The gains/(losses) on these contracts are recognised in the Income Statement.

5. Adjusted Profit

To allow shareholders to gain a better understanding of the trading performance of the Group, Adjusted Profit has been calculated as profit before income tax, amortisation of intangible assets, impairment of goodwill, unwinding of the discount on the provisions for future purchase of non-controlling interests, share based payments and non-recurring items and reconciles to profit on continuing activities before income tax as follows:

6. Segmental information

Operating segments are reported in a manner consistent with the internal reporting provided to the Company's Board of Directors, which is considered to be the Group's chief operating decision maker.

The Board considers the business from both a geographic and product perspective. Geographically, management considers the performance of the Group between the UK and overseas.

(a) Business segments

Six months ended 31 December 2011 (unaudited)

Six months ended 31 December 2010 (unaudited)

Twelve months ended 30 June 2011 (audited)

(b) Segmental information by geography

The geographical analysis of revenue by destination is as follows:

7. Non recurring items

The following items of an unusual nature, size or incidence have been charged to operating profit during the period and shown as non-recurring items:

Restructuring costs comprise primarily redundancy and termination costs together with associated reorganisation costs.

8. Income tax expense

9. Profit/(loss) for the period from discontinued operations after income tax

During the six months ended 31 December 2011 and in the comparative periods presented, no operations met the definition of discontinued operations.

10. Dividends

Amounts recognised as distributions to Equity Shareholders in the period.

11. Earnings per share

Adjusted Earnings per Share has been calculated using an adjusted profit after taxation and minority interests but before amortisation and impairment of intangible assets and goodwill, non-recurring items, share-based payments and the unwinding of the discount on the provisions for future purchase of non-controlling interests. There were no discontinued operations during the period or for the comparative periods.

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

12. Business combinations

In August 2011, Wilmington Group Plc's wholly owned subsidiary Mercia Group Limited acquired the trade, assets and liabilities of "CCH Professional Development". On completion, Mercia Group Limited received a cash payment of £190,000. Acquisition-related costs of £12,000 have been recognised as part of the non-recurring items in the Income Statement (see note 7).

During the period, the Group acquired the remaining 10% of the issued share capital of Wilmington Healthcare Limited (formerly Beechwood House Publishing Limited) thus making it a wholly owned subsidiary. Further details of this transaction were set out in note 29 of the audited Financial Statements for the year ended 30 June 2011.

13. Property, plant and equipment, intangible assets and goodwill

14. Trade and other payables

15. Provisions for future purchase of non-controlling interests

Provisions represent the estimated future cost (discounted to reflect the time value of money) required to settle put options held by non-controlling shareholders over non-controlling interest shares, should said put options be exercised.

The actual settlement timing and value is dependent upon when (and if) the non-controlling shareholders choose to exercise their options and the profitability of the underlying companies at the date of exercise. For the purposes of estimating the above provision it has been assumed that put options are exercised at the first available opportunity.

16. Bank loans

Details of the Group's bank facility are included in note 4 (b) under Risks and uncertainties.

17. Share capital