REG - Wilmington PLC - Half-year Report
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RNS Number : 5355D Wilmington PLC 20 February 2020
Wilmington plc
('Wilmington', 'the Group' or 'the Company')
Financial results for the six months ended 31 December 2019
Wilmington plc, the provider of information, education and networking services
in Risk & Compliance, Healthcare and Professional knowledge areas, today
announces its half year results for the six months ended 31 December 2019.
Financial Highlights
- Revenue for the period £59.5m (2018: £58.3m) up £1.2m or 2%
on an organic1 basis
o Building momentum from the achievements of the prior year
- Adjusted EBITA2 £7.9m (2018: £7.8m) up 1%
o Underlying revenue growth offset by increased staff costs to support growth
initiatives
- Adjusted profit before tax3 £6.9m (2018: £6.7m) up 4%
- Statutory profit before tax £4.1m (2018: £5.8m)
o One-off £1.9m gain on sale of ICP business in prior year not repeated
- Adjusted basic earnings per share(4) 6.36p (2018: 6.16p) up 3%
- Statutory basic earnings per share of 3.59p (2018: 5.70p)
- Interim dividend increased 2% to 4.2p (2018: 4.1p)
- Cash conversion(5) of 70% (2018: 91%) on a comparable basis to last
year. Reduction reflects reversal of abnormal working capital position at 30
June 2019
- Group net debt at 31 December 2019 was £41.3m (31 December
2018: £43.8m; 30 June 2019 £33.9m)
Operational Highlights
- Organic revenue growth in all three divisions
- Risk & Compliance division organic revenue growth of 2%
against a strong prior period comparator
o Year on year comparison impacted by the prior year's abnormal course timing
in ICA which shifted revenue into H1 last year
o ICA saw strong growth in online learning revenues
- Healthcare division delivered 3% organic revenue growth;
building momentum following challenging recent years
o UK Healthcare achieved sales growth but is taking longer to convert those
sales to revenue due to change in product mix
o US Healthcare business delivered strong organic growth of 20%
- Professional division stabilised to deliver modest organic
revenue growth of 1% following 2% decline in prior financial year
o Good performance in Investment Banking training business
- Continued focus on three previously identified key areas to deliver
operational excellence: sales and marketing, product management and
technology
- Portfolio management: review of business portfolio conducted by new
Chief Executive Officer. Two businesses, CLT and Inese, undergoing strategic
reviews
Outlook and Current Trading
- Normal second half weighting of revenue expected. Good
progress on the specific events that impact H2
- On track to achieve full year revenue targets
- Action being taken with technology and digital content creation
to accelerate digital transformation
- Additional cost of investment means adjusted PBT this year will
be in line with that achieved last year; will also impact following year
Mark Milner, Chief Executive Officer, commented:
"The first half of the year has seen positive trading performance and we enter
the second half with momentum continuing to build."
"Looking beyond this financial year, it is becoming clear that in order to
drive the growth aspirations for the medium term, the business needs to invest
further in its technology and digital content to ensure that its product
portfolio is positioned in growth areas. These investments support our
aspirations to build a focussed, modern, digital business portfolio capable of
serving the changing requirements of our growing customer communities and
through that deliver sustainable growth in shareholder value."
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.
1 Organic - eliminating the effects of exchange rate fluctuations
2 Adjusted EBITA - see note 5
3 Adjusted profit before tax - see note 5
4 Adjusted earnings per share - see note 11
5 Cash conversion - see note 17
For further information, please contact:
Wilmington plc 020 7490 0049
Mark Milner, Chief Executive Officer
Richard Amos, Chief Financial Officer
FTI Consulting 020 3727 1000
Charles Palmer / Dwight Burden / Emma Hall / Leah Dudley
Notes to Editors
Wilmington plc is the recognised knowledge leader and partner of choice for
information, education and networking in Risk & Compliance, Healthcare and
Professional areas. Wilmington employs close to 1,000 people and sells to
around 120 countries. Wilmington is listed on the main market of the London
Stock Exchange.
Operational and Strategic Review
Introduction
We are pleased to report on an encouraging period for Wilmington in which we
have built on the momentum that we started to see in the prior year. All
three divisions achieved organic revenue growth in the first six months of the
current financial year which is an encouraging indication that the decision 18
months ago to focus on organic growth is starting to yield results. Overall
the Group recorded underlying revenue growth of 2% which is an improvement on
both the comparative interim period where revenue was flat and the prior full
financial year growth of 1.5%.
All businesses within the Risk & Compliance division contributed to 2%
organic revenue growth with the exception of the core Compliance business,
ICA, which reported a slight decline. This was in line with expectations as
it was mainly caused by timing differences which are expected to reverse in
the second half of the year.
The Healthcare division is building momentum, delivering 3% organic revenue
growth. This was driven by the overseas businesses with particularly
impressive growth in US Healthcare. UK Healthcare continued to make progress
with growth in new business sales. This did not translate into revenue
growth due to a change in product mix, with the products driving the sales
growth taking longer to convert into delivered revenue than those which they
replaced.
Organic revenue growth within the Professional division, although modest, was
a welcome reversal of the decline in the previous full year. Accountancy was
flat once the impact of the Government's budget being delayed into the second
half of the year is taken into account. Legal, in particular, faced
challenging conditions in a market adversely impacted by Brexit uncertainty.
Against this, the Investment Banking business delivered a strong performance
in its key summer trading period.
Results and dividend
Revenue of £59.5m was up £1.2m or 2%. There were no acquisitions or
disposals impacting the current or prior period and only minor impacts from
changes in currency movements. As a result the organic growth rate was also
2%.
Adjusted profit before tax of £6.9m (2018: £6.7m) represented an increase of
£0.2m or 4% with the additional revenue offset by increased staff costs
partly to support the growth initiatives. This underlying cost increase was
partially mitigated by a small foreign exchange gain in the period and lower
underlying interest costs driven by a reduction in net debt.
Cash generation in the first half was as expected, with the traditional
seasonal first half cash outflow compounded by additional tax payments due new
UK tax payment on account regulations and higher capital expenditure related
to computer software. Net debt at 31 December 2019 of £41.3m was up from
£33.9m at 30 June 2019 but lower than the £43.8m at 31 December 2018.
In recognition of the growth in revenue and adjusted profit before tax as well
as our confidence in the future prospects of the Group the Board is
maintaining the progressive dividend policy which has been in place since
2013/14. The interim dividend will be increased 2% to 4.2p (2018: 4.1p) and
will be paid on 9 April 2020 to shareholders on the share register as at 6
March 2020, with an associated ex-dividend date of 5 March 2020.
Operational excellence
As discussed in the latest Annual Report and to enable us to achieve our goal
of generating sustained organic growth, under the leadership of our new Chief
Executive Officer, Mark Milner, the Board have identified three components of
operational excellence to focus on, namely sales and marketing, product
management and technology.
Sales and marketing execution is, of course, a key factor in driving organic
growth. Early in the year we identified that many areas of Wilmington have
traditionally concentrated on maintaining existing customer relationships and
have not focussed enough on seeking out new opportunities and clients. We have
implemented a number of changes to develop a more proactive sales culture.
The implementation of a CRM system, Salesforce(©) which has now been rolled
out to over two thirds of the Group, replacing many disjointed, legacy systems
is beginning to yield results. Implementing a centralised system has allowed
us to start adopting consistent, groupwide sales KPIs to enable more dynamic
tracking of sales data and management of sales opportunities and targets.
We have begun to take a more unified approach to sales processes, sharing best
practice across the Group's businesses. This has included the physical
relocation of sales teams to a new centralised location or 'sales hub' in the
London Head Office building. A review of sales teams in the Group identified
certain businesses which would benefit from additional sales resource. This
has resulted in the Group-wide sales resources increasing by 10 from the start
of the year.
Sales teams will now be progressively going through our newly launched Sales
Academy aimed at improving sales skills across the Group. We have engaged
external contractors with extensive experience in our industries to develop a
sales training programme. This will be a three level programme targeted at
managing directors, sales leaders and sales staff and will be tailored to the
specific types of sales skills needed in different areas of the Group.
We are already seeing the benefits of this increased sales focus, with all
three divisions showing encouraging year on year growth in sales bookings for
the six month period. We expect that, as the further changes are made, they
will continue to improve sales execution performance across the Group.
Product management and new product development is another key to driving
organic growth which we feel has received insufficient investment in recent
years due to the previous focus on acquisitions rather than organic growth.
The new product development process launched last year has provided structure
around assessing the opportunities for development, prioritising those with
the most potential as well as tracking the progress of these investments
throughout their development, and once they go to market. Our product
development philosophy involves us creating 'minimum viable products' which
serve the basic needs of our customers and then utilising our relationships
with those customers to learn what additional features would be of value to
them once the initial version has been launched.
A number of new products have been brought to market as part of this process
including the online student dashboard in AMT, our investment banking training
business, which allows both students and tutors to track progress on their
training programme in real time. Where appropriate we now intend to roll this
product out to our other training businesses. In total five products were
signed off by our Investment Committee in the first half of the current
financial year compared to only two in the same period last year.
Technology excellence was identified a number of years ago as a key component
of the Group's strategy given the market trends towards digitisation and
personalisation. There has been considerable investment made in this area
since that time including rolling out group-wide CRM software, a marketing
automation solution and an online learning platform. While we have gained
many benefits from these investments already, we have identified a number of
opportunities to strengthen the interfaces between these systems to allow us
to gain enhanced value from them. To facilitate this, we have recently
centralised technology teams that previously existed within specific
businesses and brought them under the direction of Thomas Mount, our Chief
Technology Officer who joined the business a year ago. Working with this
combined team he will focus on improving these integrations which will both
enhance the user experience and drive additional operational efficiencies.
Portfolio Management
Following Mark Milner's appointment in July 2019, he has completed a thorough
review of our business portfolio, building on the work that was carried out as
part of the consultant led business review conducted last year. This review
has looked at each part of the portfolio and assessed its market position and
the extent to which Wilmington is best placed to maximise its value. Through
this review we have identified two businesses, CLT and Inese, where our
ability to add value appears limited. Accordingly we have instigated strategic
reviews of both businesses which, in combination, currently deliver annually
around £7m of revenue and £0.5m of profit.
CLT, within the Professional division, is our only remaining law for lawyers
business following the closure of Ark in 2017. The business has suffered over
a number of years from changing requirements for continuing professional
development for lawyers in England. Plans to offset the corresponding
revenue and profit decline with growth in online training are not delivering
the required returns. A strategic review is being carried out to assess
alternatives for this business.
Inese, our Spanish business within the Risk & Compliance division, whilst
performing well in its market, struggles to generate synergies with our other
insurance business due to its geographical location and focus on the Spanish
speaking insurance industry. We have therefore engaged external advisors to
identify potential purchasers of the business.
Driving organic growth in revenue and profit remains the main focus of
management and the Board in line with our stated priorities. Complementing
this, active portfolio management will remain an important part of the Group's
strategy. And, in time, we will consider investing the capital generated
from our existing portfolio and that from any future disposals into
acquisitions where we see clear opportunities which support those of our
businesses with the most potential and which deliver shareholder value.
Current trading and outlook
The first half of the year has seen positive trading performance and we enter
the second half with momentum continuing to build. Good progress is being
made on the specific key events and opportunities that traditionally drive
stronger second half revenue and profit. Overall therefore the Group remains
on track to achieve its full year revenue growth expectations.
Looking beyond this financial year, it is becoming clear that in order to
drive the growth aspirations for the medium term, the business needs to invest
further in its technology and digital content to ensure that its product
portfolio is positioned in growth areas. Those investments will include the
integration of existing technologies to improve user experience, development
of more structured data platforms to enhance the monetisation of existing data
assets and acceleration of the on-going transition from face to face to online
and blended learning. Associated investment will be needed in additional
staff with new skills to drive these changes and in providing them with the
required skills, tools and infrastructure.
These investments will build on and utilise what has already been invested
over the last few years and much of what is now needed was already included in
previous plans. However, the work conducted over the last six months has
concluded that some of this investment needs to be enhanced and some of it
accelerated to ensure that we can meet changing market demands. We expect
those investments to commence in the second half of this year with, for
example, initial work on building the platform and undertaking the
digitisation of current face to face courses in the Compliance business. The
cost implications of this investment, combined with that incurred in the first
half of the year will mean that adjusted profit before tax for the current
year is expected to be in line with that achieved in the last full year, with
a further consequential impact in the following year.
These investments will allow the Group to accelerate its digital
transformation. They support the longer term growth aspirations as we build
a focussed, modern, digital business portfolio capable of serving the changing
requirements of our growing customer communities and, through that, delivering
sustainable growth in shareholder value.
Segmental Review
Note that as there have been no acquisitions or disposals impacting the
current or prior period, variances described below as 'organic' reflect
changes calculated at constant currency.
Risk & Compliance
H1 2019 H1 2018 Absolute Organic
Variance Variance
Revenue £'m £'m
Compliance 14.1 13.8 +2% +2%
Risk 6.5 6.3 +3% +1%
Total 20.6 20.1 +3% +2%
Operating profit 6.1 5.9 +3% +2%
Margin 30% 29%
Overall revenue for the Risk & Compliance division was up 3% on an
absolute basis and 2% on an organic basis at £20.6m (2018: £20.1m). This
growth is in line with our expectations and demonstrates a robust performance
against the strong first half comparatives in the prior year.
Within this, revenue in the Compliance businesses combined grew 2% on an
absolute and organic basis. This reflected a good performance in Compliance
Week and CLTi offset by an anticipated timing related reduction in the main
Compliance business, ICA, which recorded a 2% organic reduction in revenue.
This reflects an unusually strong comparative prior period due to the timing
of certain courses shifting what is normally second half revenue into H1 in
the prior year. This year reverts to a more normal pattern and strong
registrations and sales activity in the first half means that ICA enters the
second half with c.£1m more deferred revenue than twelve months ago which
supports ICA's full year growth expectations.
Within ICA online learning is becoming an increasingly important revenue
stream, growing 54% in the period. Further work is being undertaken to support
the move to digitisation in ICA with a new digital platform being built for
launch in summer 2020. Within ICA the Asia Pacific region experienced lower
enrolments on public courses towards the end of the prior year due to
forthcoming changes in the regulatory environment in Singapore which
compounded the timing issues mentioned above. Excluding Asia Pacific, ICA's
revenue grew by 5% on an organic basis. Accredited paid memberships of ICA
continued to increase to over 15,000 from around 14,000 at the start of the
financial year.
The remaining Compliance businesses performed well, delivering combined 8%
organic revenue growth with each business contributing positively to the
total. The wealth management business benefited from a more favourable course
schedule timing which accelerated revenue into the first half. This will
reverse in the second half of the year but the business also continues to
benefit from the development of online learning materials opening up a more
international market. Compared to a weak prior year Compliance Week had an
encouraging period following its launch of a new online platform and a revised
pricing strategy. Pendragon, our pensions regulation business also performed
well due mainly to pricing changes and better client retention rates.
The Risk businesses reported modest organic growth of 1% with both businesses
contributing positively. Axco, our insurance information business, delivered
4% absolute growth (up 1% on an organic basis). A new data platform with an
enhanced regulatory alert system was launched in January 2020. The data
platform allows the business to offer its data on a more targeted basis than
was previously possible and the new alerts platform offers clients more timely
regulatory updates on a large number of markets.
Inese, our Spanish insurance industry expert has delivered 2% organic revenue
growth despite the loss of the revenue generated by the Barcelona office which
was closed in July 2019. This growth is based on improved subscriptions for
its digital publications.
Divisional operating profit was up 3% in absolute terms to £6.1m (2018:
£5.9m). On an organic basis the increase was 2% reflecting the increase in
revenue. Operating margin increased slightly to 30% (2018: 29%).
Healthcare
H1 2019 H1 2018 Absolute Organic
Variance Variance
Revenue £'m £'m
European Healthcare 14.5 14.6 -1% 0%
US Healthcare 3.1 2.5 23% 20%
Other Information Businesses 3.5 3.4 2% 2%
Total 21.1 20.5 3% 3%
Operating profit 1.3 1.3 -1% 0%
Margin 6% 6%
Overall revenue for the Healthcare division grew 3% on both an organic and
absolute basis to £21.1m (2018: £20.5m) demonstrating the momentum
rebuilding in this division following challenges in recent years.
Within the division, the European Healthcare businesses overall were flat on
an organic basis with growth in APM in France offset by a reduction in UK
Healthcare.
APM continues to deliver good growth with revenue increasing by 8% on an
organic basis. The growth was driven both by ongoing new sales of the new
APMi product that was launched in July 2018 as well as growth from the
business's traditional products.
In UK Healthcare revenue declined 3% on an organic basis despite sales
bookings growing by mid-single digits compared to the prior period. This
primarily reflected a shift in the mix of sales away from products which are
converted rapidly into revenue towards products which take longer to deliver.
One-off sales of contact data have fallen, due in part to the market's
hesitancy around purchasing such data following the introduction of GDPR
regulation. Conversely sales of Specialist Share Data which provides
pharmaceutical companies with insight into the usage of products have risen.
This data is captured over time, often up to twelve months, with the revenue
recognised over the same period.
Good progress was achieved by the Interactive Medica products which are now
fully integrated within the UK Healthcare business. The Interactive Medica
platform now forms the core of the Wilmington Healthcare cloud which is being
progressively rolled out as the delivery mechanism for various data
products. This is being supported by enhanced versions of a number of other
products which improves their value to clients and ultimately their
competitive position.
Our US healthcare business, FRA, made a good recovery from what was a
difficult prior year, delivering an organic revenue increase of 20%. There has
been a shift in focus to quality key events delivering 19 in H1 this year
compared to 24 in the prior year. A number of events outperformed the
previous year including RISE West, held in San Diego, where delegate numbers
increased by 50%. In the second half of the year we will host FRA's flagship
event - RISE Nashville, which moves to a new larger venue following recent
growth. It will be complemented by a co-located sister event on Social
Determinants of Health which will run at the same time.
The other Information Businesses reported in this division achieved 2% revenue
growth for the period due to a one-off sale of genealogy data. Also in the
period we concluded a new agreement with HM Court Services which secures
access to wills and probate orders that form the core of our mortality data
products.
Operating profit in the Healthcare division was unchanged at £1.3m (2018:
£1.3m) with operating margin also remaining unchanged at 6%. In addition to
normal inflation, the increase in costs reflected investment in sales resource
in FRA in the second half of the prior year to drive the revenue growth plus
the filling of previous staff vacancies in the UK Healthcare business. Given
the fixed nature of many of the costs and the weighting of revenue towards H2,
the operating margin in Healthcare is expected to improve significantly in the
second half of the year as it did last year.
Professional
H1 2019 H1 2018 Absolute Organic
Variance Variance
£'m £'m
Revenue 17.8 17.7 1% 1%
Operating profit 2.7 2.9 -7% -6%
Margin 15% 17%
The Professional division overall delivered revenue of £17.8m (2018: £17.7m)
growing 1% on both an absolute and organic basis. Although modest, this growth
is supressed by adverse timing issues and marks a turnaround from the 2%
decline in the prior year. It comes despite the division facing challenging
market conditions with demand for many of its products impacted by Brexit
related uncertainty that affected the UK economy in the second half of 2019.
Following a tough prior year in which three separate businesses were
integrated into a single nationwide programme of products, performance in
Accountancy has improved, delivering flat revenues compared to the prior year
once the impact of the anticipated Government Budget being delayed until H2 is
taken into account. Progress is being made in the area of technical support,
driven by the current challenges in the UK accountancy / audit market and the
increasing regulatory pressure on small and mid-tier accountancy firms which
make up our core clients. We will be looking to increase staffing in this
area in the second half to support this demand.
The Legal businesses experienced a 2% organic revenue decline as growth in
regulatory training offset a market-related reduction in CPD training for
lawyers. Progress was particularly made in the Law for Non-Lawyers business,
Bond Solon, where framework contracts to provide Government agencies with
regulatory training is helping to provide a more predictable revenue stream.
The business has also continued to see good demand for witness familiarisation
training and for training of expert witnesses following a number of high
profile cases of court processes adversely impacted by under-qualified expert
witnesses.
AMT, our Investment Banking training business, whose peak summer months fall
into H1, performed well, recording double digit revenue growth. This is a
positive sign that the investment made in an online learning dashboard and the
move onto Totara(©) has been well received in what is a very competitive
market. A shortfall in internal trainer capacity meant the business relied
more on higher cost consultant trainers in the peak season which slightly
impacted on operating margins in the period.
Operating profit in the Professional division fell by £0.2m to £2.7m (2018:
£2.9m). The relatively small cost increase that caused this was due partly to
the trainer cost issues discussed above in AMT. Operating margins as a
result declined to 15% (2018: 17%).
Unallocated central overheads
Unallocated central overheads represent board costs, head office salaries as
well as other centrally incurred costs not recharged to the businesses. These
decreased by £0.5m to £1.8m from £2.3m for the same six-month period in the
prior year. This decrease was attributable to the one-off business review
conducted in the prior year plus a reduction in tax and audit fees.
Financial review
Change in accounting policies
From 1 July 2019 the Group has adopted the new lease accounting standard IFRS
16. Wilmington has opted to apply the modified retrospective approach to
adoption meaning the prior year comparators have not been adjusted. In the
current year adoption of this standard has had immaterial impacts on profit
before tax, adjusted EBITA and adjusted PBT but resulted in the recognition of
material 'right of use assets' and 'lease liabilities' on the Balance Sheet
and a material reclassification of certain accruals to right of use assets.
The commentary below identifies the impact of the changes. See note 19 for a
full reconciliation.
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 future or past
performance where equivalent information cannot be presented using financial
measures under IFRS. Adjusted results exclude adjusting items, gain on sale of
subsidiary and amortisation of intangible assets (excluding computer
software).
H1 2019 H1 2018 Absolute Organic
variance variance
£'m £'m £'m
Revenue 59.5 58.3 1.2 2% 2%
Adjusted EBITA 7.9 7.8 0.1 1% 1%
Margin % 13.3% 13.4%
Revenue
For the six months ended 31 December 2019 revenue increased by £1.2m or 2% to
£59.5m (2018: £58.3m). The Group's major non-Sterling revenues are in US
Dollars and Euros. On average over the period the US Dollar strengthened
against Sterling whereas the Euro weakened in the same period. These currency
impacts essentially netted off and, with no impact of acquisitions or
disposals in the period, accordingly organic revenue growth was also 2%.
Revenue generated from customers outside the UK increased as a percentage of
overall revenue to 45% (2018: 42%) due to good organic growth in our US
businesses, particularly in the Healthcare division.
Recurring revenue (i.e. subscription income and repeatable revenues) as a
percentage of total revenue dropped 2 percentage points to 71% from 73% last
year due to much of the revenue growth in the period being generated by
non-repeatable revenues such as events.
Across the entire business, digital learning revenues as a proportion of total
training revenues continued to increase from 30% last
year to 33%.
Operating expenses before adjusting items, amortisation and impairment
Adjusted operating expenses i.e. before adjusting items and amortisation of
intangible assets (excluding computer software)
were £51.6m up £1.1m or 2% from £50.5m in the comparative six months ended
31 December 2018.
Within adjusted operating expenses non-employment related costs fell £0.5m
from £24.9m to £24.4m. This reduction includes £0.6m of costs in the
first half of the prior year which were one-off in nature and have not
repeated; namely £0.4m of business review costs and a £0.2m foreign exchange
cost. In the current year £0.4m of costs recognised last year in H1 will move
into H2 mirroring the timing shift in Compliance revenue. On an on-going
basis therefore, non-employment costs increased by £0.5m of which £0.4m were
the direct costs associated with delivering the additional £1.2m of revenue.
The remaining £0.1m increase reflected general inflation of £0.3m offset by
the on-going reclassification of £0.2m of previous operating expense to
finance costs in line with the new lease accounting standard IFRS 16.
Employment costs at £27.2m (2018: £25.6m) increased £1.6m. This reflects
share-based payment costs of £0.4m compared to nil in the prior period as a
result of a change in vesting expectations that period. Salary inflation
accounted for £0.5m of the increase with employment costs rising by a further
£0.7m primarily due to additional headcount, with the Group's full time
equivalent ('FTE') headcount at 31 December 2019 being 886 compared to 860 at
30 June 2019.
The Group's business model involves the engagement across a typical year of
around 1,000 part-time consultants or associates in activities such as
training, setting and marking exams, and short-term development projects.
Changes to the HMRC IR35 legislation which regulates the tax treatment of such
individuals is anticipated to come into effect on 5 April 2020. It is
expected to increase operating expenses on a full year basis by around £0.5m
with an impact in the final three months of this year of £0.1m.
Adjusted operating profit ('Adjusted EBITA')
As a result of the increase in revenue and changes in adjusted operating
expenses, adjusted EBITA was up £0.1m or 1% to £7.9m (2018: £7.8m).
Adjusted operating margin (adjusted EBITA expressed as a percentage of
revenue) remained flat at 13%.
Adjusting items within operating expenses
Adjusting items within operating expenses were £0.5m (2018: £0.1m). They
represent those items that in the opinion of the Directors are one-off in
nature and which do not represent the ongoing trading performance of the
business. The amount recognised in the period reflects deferred consideration
for the acquisitions of both Evantage, for which the final payment was made in
the period, and Interactive Medica, which will be settled in the second half
of the year.
Amortisation excluding computer software
Amortisation of intangible assets (excluding computer software) was £2.4m
(2018: £2.6m). The small decrease reflects certain historic assets being
fully amortised in the second half of the prior year.
Finance costs
Underlying finance costs fell £0.2m to £0.8m (2018: £1.0m) driven by a fall
in net debt levels compared to the same period twelve months ago. Offsetting
this, the new lease accounting standard IFRS 16 increased finance costs by
£0.2m meaning overall finance costs remained constant at £1.0m.
Profit before taxation
Profit before tax was £4.1m (2018: £5.8m), however the year on year
comparison was significantly affected by one-off items, principally the gain
on sale of ICP in the prior year. Adjusting for these one-off items, adjusted
profit before tax was up £0.3m or 4% at £6.9m (2018: £6.7m).
Taxation
The tax charge was £0.9m compared to £0.8m in the prior period. The overall
effective tax rate(6) was 23% (2018: 14%) with the increase reflecting the
treatment of the gain on sale of ICP in the prior period comparator.
The underlying tax rate7 which ignores the tax effects of adjusting items
remained essentially flat at 20% (2018: 20%), which is a good guide to the
expected full year underlying tax rate.
Earnings per share
Adjusted basic earnings per share increased by 3% to 6.36p (2018: 6.16p),
owing to the increase in adjusted profit before tax. Statutory basic earnings
per share were 3.59p compared to 5.70p in 2018 with the decrease driven by the
one-off gain on sale of ICP in the prior year.
Balance Sheet
Non-current assets
Goodwill fell slightly to £77.1m at 31 December 2019 from £77.5m at 31
December 2018 due to exchange translation differences.
Intangible assets decreased by £3.3m to £21.7m at 31 December 2019 (31
December 2018: £25.1m) primarily due to amortisation, offset by additions to
capitalised and purchased computer software of £3.2m over the last twelve
months. Additions in the first six months of the current year were £1.6m and
included significant investments in our ecommerce platforms, online learning
development and the ongoing integration of the technology platforms in the
Accountancy businesses.
Property, plant and equipment fell £1.1m to £5.3m at 31 December 2019 from
£6.4m twelve months previous. Adoption of IFRS 16 caused £0.3m of this
decrease, with the amount being reclassified to right of use assets. The
remaining £0.8m fall was due to depreciation of £1.5m being only partially
offset by additions of which £0.3m were in H1 of the current financial year.
Deferred consideration receivable
Upon the disposal of ICP in July 2018 £2.2m of deferred consideration
receivable, discounted to present value, was recognised on the balance sheet.
The value at 31 December 2019 is £2.3m compared to £2.2m at 31 December 2018
due to an unwind of the discounting which has been credited to finance costs
in the Income Statement. Of the £2.3m total, £0.2m sits within current
assets as it will be received within twelve months of the Balance Sheet date.
Trade and other receivables
Trade and other receivables increased £1.8m to £28.2m (2018: £26.4m). This
increase was largely due to increased billings in December 2019, which were
£1.6m higher than the previous year. The aging of the trade receivables
improved with overdue debtors falling by 10% compared to 31 December 2018.
Trade and other payables
Total balances remained relatively unchanged at £50.1m from £50.4m at 31
December 2018. Within this subscriptions and deferred revenue increased by
£3.5m or 13% to £30.1m (2018: £26.6m). Of this increase £1.3m is the
impact of a change in the method of billing certain Accountancy subscriptions,
with these now being invoiced once at the start of the twelve-month
subscription instead of monthly as in prior years. The remaining increase is
due to improved sales, with £0.9m relating to deferred revenue for the core
Compliance business ICA.
Excluding subscriptions and deferred revenue, trade and other payables
decreased by £3.7m of which £1.6m was due to a reclassification under IFRS
16 of accruals relating to rent free periods from trade payables to right of
use assets. The remaining fall is due to a decrease in non-employment
professional fees plus a change in timings of invoices from suppliers.
Current tax assets/(liabilities)
At 31 December 2019 there was a current tax asset of £1.7m up from an asset
of £0.5m at 31 December 2018. This increase was due to HMRC accelerating the
payment of quarterly tax instalments for large companies, resulting in an
additional £1.2m of tax payments on account in the period compared to the
prior year.
Right of use assets and lease liabilities and the implementation of IFRS 16 -
Leases.
IFRS 16 has resulted in almost all leases being recognised on the balance
sheet. The amounts recognised for right of use assets £10.9m and lease
liabilities £12.5m reflect the adoption of IFRS 16. As permitted by the
standard, comparatives for 2018 have not been restated and the cumulative
brought forward impact of rental expenses being replaced by depreciation and
interest has been recognised as an opening adjustment to retained earnings.
Deferred consideration payable
The liability for deferred consideration payable decreased by £1.0m from
£1.6m at 30 June 2019 to £0.6m at 31 December 2019 (31 December 2018:
£1.3m). The movement in the period reflects the £1.3m payment in relation to
the settlement of the final amount owing for Evantage partially offset by the
build-up of the deferred consideration relating to Interactive Medica. The
remaining balance is all due for payment within twelve months.
6 The effective tax rate is calculated as the total tax charge divided by
profit before tax
7 The underlying tax rate is calculated as one minus the adjusted profit after
tax divided by the adjusted profit before tax
Net debt and cashflow
Net debt, which includes cash and cash equivalents, bank loans (excluding
capitalised loan arrangement fees) and bank
overdrafts, was £41.3m (30 June 2019: £33.9m; 31 December 2018: £43.8m).
Cash conversion was 83% (2018: 91%), although year on year comparison of the
percentages is impacted by adoption of IFRS 16. With this adjusted for, the
comparable cash conversion this year would be 70%. The fall in cash conversion
is mainly due to the unwind of the favourable working capital position at 30
June 2019.
This cash conversion was offset by the payment of the deferred consideration,
capital expenditure of £1.9m and corporation tax payments of £3.4m.
Net debt at 31 December 2019 represented 64% of our £65m debt and overdraft
facility (31 December 2018: 58%).
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 which include the use of derivative products such as forward
contracts and swaps subject to Board approval. The
Group uses interest rate swap contracts to mitigate part of the interest rate
volatility risk. These forward contracts and swaps
have resulted in an asset of £0.4m and a liability of £0.1m at 31 December
2019 (30 June 2019: liability of £0.2m; 31 December 2018: liability of
£0.5m). This asset and liability will unwind in the next twelve months.
Share capital
During the period 64,350 new ordinary shares of £0.05 were issued in
settlement of awards vesting under the Group's
Performance Share Plan. This resulted in an increase to the number of ordinary
shares outstanding at 31 December 2019 to
87,603,917 (30 June 2019 and 31 December 2018: 87,539,567).
Treasury and ESOT reserve
During the period, the Employee Share Option Trust purchased 80,000 shares in
Wilmington plc at a total cost of £0.2m to satisfy future obligations under
the Group's various share plans.
Dividend
An interim dividend of 4.2p per share (2018: 4.1p) will be paid on 9 April
2020 to shareholders on the share register as at 6
March 2020, with an associated ex-dividend date of 5 March 2020. This
represents an increase of 2% reflective of the Directors'
intention to maintain the progressive dividend policy that has been in place
since 2013/14.
Statement of directors' responsibilities
The Directors confirm to the best of their knowledge the interim information
has been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting as adopted by the European
Union. The Interim Management Report
includes a fair review of the Interim Information and, as required by DTR 4.2
TR and DTR 4.2 8R, the following information:
• an indication of important events that have occurred during the first six
months of the financial year, and their impact on
the condensed set of financial statements, and a description of the principal
risks and uncertainties for the remaining
six months of the financial year; and
• disclosure of material related party transactions that have taken place in
the first six months of the current financial
year and of any material changes in the related party transactions described
in the last Annual Report and Financial
Statements.
A list of current Directors is maintained on the Wilmington plc website at:
www.wilmingtonplc.com (http://www.wilmingtonplc.com) .
This responsibility statement was approved by the board of Directors on 19
February 2020 and is signed on its behalf by
Richard Amos
Chief Financial Officer
Officers
Directors:
Martin Morgan
Chairman
Mark Milner
Chief Executive Officer
Richard Amos
Chief Financial Officer & Company Secretary
Derek Carter
Senior Independent
Non-Executive Director
Nathalie Schwarz
Non-Executive Director
Paul Dollman
Non-Executive Director
Registered Office:
10 Whitechapel High Street
London
E1 8QS
Tel: +44 (0)20 7490 0049
Company Registration Number: 03015847
Consolidated Income Statement
Notes Six months ended 31 December 2019 Six months ended 31 December 2018 Year
(unaudited) (unaudited) ended
£'000 £'000 30 June 2019
(audited)
£'000
Continuing operations
Revenue 6 59,475 58,300 122,525
Operating expenses before amortisation of intangibles excluding computer (51,563) (50,501) (101,074)
software and adjusting items
Adjusting items 7 (486) (132) (1,443)
Amortisation of intangibles excluding computer software 7 (2,381) (2,607) (5,049)
Operating expenses (54,430) (53,240) (107,566)
Other income - gain on sale of subsidiary - 1,906 1,906
Operating profit 5,045 6,966 16,865
Net finance costs 8 (979) (1,008) (2,103)
Share of loss of equity accounted investment - (115) (50)
Profit before tax 5 4,066 5,843 14,712
Taxation 9 (924) (843) (3,519)
Profit for the period 3,142 5,000 11,193
Attributable to:
Owners of the parent 3,142 4,983 11,149
Non-controlling interests - 17 44
3,142 5,000 11,193
Earnings per share attributable to the owners of the parent:
Basic (p) 11 3.59 5.70 12.74
Diluted (p) 11 3.54 5.65 12.64
Adjusted earnings per share attributable to the owners of the parent:
Basic (p) 11 6.36 6.16 17.44
Diluted (p) 11 6.29 6.10 17.30
The notes on pages 16 to 26 are an integral part of these consolidated
financial statements.
Consolidated Statement of Comprehensive Income
Six months ended Six months ended Year
31 December 2019 31 December 2018 ended
30 June
2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit for the period 3,142 5,000 11,193
Other comprehensive income/(expense):
Items that may be reclassified subsequently to the Income Statement
Fair value movements on interest rate swap (net of tax) 56 54 32
Currency translation differences (88) 505 643
Net investment hedges (net of tax) 345 (409) (424)
Other comprehensive income for the period, net of tax 313 150 251
Total comprehensive income for the period 3,455 5,150 11,444
Attributable to:
Owners of the parent 3,455 5,133 11,400
Non-controlling interests - 17 44
3,455 5,150 11,444
Items in the statement above are disclosed net of tax. The notes on pages 16
to 26 are an integral part of these financial statements.
Consolidated Balance Sheet
31 December 2019 31 December 2018 30 June
2019
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Non-current assets
Goodwill 12 77,078 77,497 77,535
Intangible assets 12 21,736 25,083 23,213
Property, plant and equipment 12 5,292 6,411 5,967
Right of use assets 12 10,942 - -
Deferred consideration receivable 2,098 2,154 2,221
Deferred tax assets 741 849 555
Derivative financial instruments 4 - - 23
117,887 111,994 109,514
Current assets
Trade and other receivables 13 28,178 26,350 29,112
Current tax asset 1,721 533 -
Derivative financial instruments 4 367 - -
Deferred consideration receivable 193 - -
Cash and cash equivalents 6,031 12,428 7,921
36,490 39,311 37,033
Total assets 154,377 151,305 146,547
Current liabilities
Trade and other payables 14 (50,124) (50,370) (57,168)
Current tax liabilities - - (312)
Lease liabilities (2,424) - -
Deferred consideration payable - cash settled (572) (1,256) (1,550)
Derivative financial instruments 4 (133) (278) -
(53,253) (51,904) (59,030)
Non-current liabilities
Borrowings 15 (46,711) (55,975) (41,790)
Lease liabilities (10,087) - -
Derivative financial instruments 4 - (177) (226)
Deferred tax liabilities (2,383) (2,847) (2,633)
(59,181) (58,999) (44,649)
Total liabilities (112,434) (110,903) (103,679)
Net assets 41,943 40,402 42,868
Equity
Share capital 16 4,380 4,377 4,377
Share premium 16 45,225 45,225 45,225
Treasury and ESOT reserves 16 (300) (96) (96)
Share based payments reserve 915 585 839
Translation reserve 3,200 3,150 3,288
Accumulated losses (11,477) (12,904) (10,765)
Equity attributable to owners of the parent 41,943 40,337 42,868
Non-controlling interests - 65 -
Total equity 41,943 40,402 42,868
The notes on pages 16 to 26 are an integral part of these consolidated
financial statements.
Consolidated Statement of Changes in Equity
Share capital, share premium, treasury shares and ESOT shares (note 16) Share based payments reserve Total Non- controlling interests Total equity
£'000 £'000 £'000 £'000 £'000
Translation reserve Accumulated losses
£'000 £'000
At 30 June 2018 (audited) 49,500 1,108 2,645 (13,939) 39,314 82 39,396
IFRS 15 restatement - - - 234 234 - 234
Profit for the period - - - 4,983 4,983 17 5,000
Other comprehensive income/(expense) for the period - - 505 (355) 150 - 150
49,500 1,108 3,150 (9,077) 44,681 99 44,780
Dividends - - - (4,200) (4,200) (34) (4,234)
Issue of share capital 6 (472) - 466 - - -
Share based payments - (51) - - (51) - (51)
Tax on share based payments - - - (93) (93) - (93)
At 31 December 2018 (unaudited) 49,506 585 3,150 (12,904) 40,337 65 40,402
Profit for the period - - - 5,932 5,932 27 5,959
Other comprehensive income/(expense) for the period - - 138 (37) 101 - 101
49,506 585 3,288 (7,009) 46,370 92 46,462
Dividends - - - (3,587) (3,587) - (3,587)
Share based payments - 254 - - 254 - 254
Tax on share based payments - - - 45 45 - 45
Movements in non-controlling interest - - - (214) (214) (92) (306)
At 30 June 2019 (audited) 49,506 839 3,288 (10,765) 42,868 - 42,868
Effect of initial application - - - (182) (182) - (182)
of IFRS 16 (note 19)
Tax relating to initial - - - 35 35 - 35
application of IFRS 16
At 1 July 2019 (unaudited) 49,506 839 3,288 (10,912) 42,721 - 42,721
Profit for the period - - - 3,142 3,142 - 3,142
Other comprehensive (expense)/income for the period - - (88) 401 313 - 313
49,506 839 3,200 (7,369) 46,176 - 46,176
Dividends - - - (4,378) (4,378) - (4,378)
Issue of share capital 3 (242) - 239 - - -
ESOT share purchases (204) - - - (204) - (204)
Share based payments - 318 - - 318 - 318
Tax on share based payments - - - 31 31 - 31
At 31 December 2019 (unaudited) 49,305 915 3,200 41,943 41,943
(11,477) -
The notes on pages 16 to 26 are an integral part of these consolidated
financial statements.
Consolidated Cash Flow Statement
Six months ended 31 December 2019 Six months ended 31 December 2018 Year ended 30
June 2019
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations before adjusting items 17 6,585 7,083 26,439
Cash flows for adjusting items - operating activities (271) (412) (810)
Cash flows from tax on share based payments (17) (33) (33)
Cash generated from operations 6,297 6,638 25,596
Interest paid (814) (1,004) (1,943)
Tax paid (3,420) (2,254) (3,943)
Net cash generated from operating activities 2,063 3,380 19,710
Cash flows from investing activities
Purchase of businesses net of cash acquired - (100) (79)
Sale of subsidiary net of cash - 60 60
Deferred consideration paid (1,385) (1,522) (1,522)
Purchase of non-controlling interests - - (224)
Cash flows for adjusting items - investing activities - (74) (405)
Purchase of property, plant and equipment (304) (554) (1,332)
Proceeds from disposal of property, plant and equipment 18 28 112
Purchase of intangible assets (1,637) (761) (2,324)
Net cash used in investing activities (3,308) (2,923) (5,714)
Cash flows from financing activities
Dividends paid to owners of the parent (4,378) (4,200) (7,787)
Dividends paid to non-controlling interests - (34) (34)
Share issuance costs (3) (6) (6)
Payment of lease liabilities (1,129) - -
Purchase of shares by ESOT (204) - -
Cash flows for loan arrangement fees (708) (12) (24)
Increase in bank loans 7,000 6,000 6,000
Decrease in bank loans (1,000) (1,000) (15,399)
Net cash (used in)/generated from financing activities
(422) 748 (17,250)
Net (decrease)/increase in cash and cash equivalents, net of bank overdrafts (1,667) 1,205 (3,254)
Cash and cash equivalents, net of bank overdrafts, at beginning of the period 7,921 11,033 11,033
Exchange (losses)/gains on cash and cash equivalents (223) 190 142
Cash and cash equivalents, net of bank overdrafts at end of the period 6,031 12,428 7,921
Reconciliation of net debt
Cash and cash equivalents at beginning of the period 7,921 10,789 10,789
Cash classified as held for sale - 244 244
Bank loans at beginning of the period 15 (41,790) (50,665) (50,665)
Net debt at beginning of the period (33,869) (39,632) (39,632)
Net (decrease)/increase in cash and cash equivalents (net of bank overdrafts) (1,890) 1,395 (3,112)
Net (drawdown)/repayment in bank loans (6,000) (5,000) 9,399
Exchange gain/(loss) on bank loans 423 (524) (524)
Cash and cash equivalents at end of the period 6,031 12,428 7,921
Bank loans at end of the period 15 (47,367) (56,189) (41,790)
Net debt at end of the period (41,336) (43,761) (33,869)
The notes on pages 16 to 26 are an integral part of these consolidated
financial statements.
Notes to the Financial Results
General information
The Company is a public limited company incorporated and domiciled in the UK.
The address of the Company's registered office is 10 Whitechapel High Street,
London, E1 8QS.
The Company is listed on the Main Market on the London Stock Exchange. The
Company is a provider of information, education and networking to the
professional markets.
This condensed consolidated interim financial information ('Interim
Information') was approved for issue by the Board of Directors on 19 February
2020.
The Interim Information is neither reviewed nor audited and does not comprise
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 30 June 2019 were approved by the
Board of Directors on 18 September 2019 and subsequently filed with the
Registrar. 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.
1. Basis of preparation
This Interim Information for the six months ended 31 December 2019 has been
prepared in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union. The Interim Information should be
read in conjunction with the Annual Financial Statements for the year ended 30
June 2019 which have been prepared in accordance with IFRSs as adopted by the
European Union, and are available on the Group's website: wilmingtonplc.com.
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 the Interim Information.
2. Accounting policies
The accounting policies, significant judgements and key sources of estimation
adopted in the preparation of this Interim Report are consistent with those
applied by the Group in its consolidated financial statements for the year
ended 30 June 2019 except for the adoption of the new standard and
interpretation effective as of 1 July 2019 listed below:
· IFRS 16 Leases
IFRS 16 is effective for accounting periods beginning on or after 1 January
2019. The date of initial application of IFRS 16 for the Group was 1 July
2019.
IFRS 16 prescribes a single lessee accounting model that requires the
recognition of a right of use asset and corresponding liability for all leases
with terms over twelve months, unless the underlying asset is of low value.
The liability is initially measured at the present value of future lease
payments for the lease term. The right of use asset is depreciated, with the
depreciation charge and the interest on the corresponding lease liability
being recognised in the income statement over the lease term. In the cash flow
statement the total amount of cash paid in respect of lease payments is
reflected in cash flows from financing activities. Details of the transition
and the impact on the financial statements are specified in note 19.
The Group has adopted the modified retrospective approach to application,
using transitional reliefs available. It has not restated comparatives and on
transition the Group recognised a cumulative adjustment to the opening balance
of retained earnings at 1 July 2019.
3. Principal risks and uncertainties
The principal risks and uncertainties that affect the Group are as stated on
pages 32 to 39 of the Strategic Report in the Annual Report and Financial
Statements for the year ended 30 June 2019. The main financial risks that
affect the Group are:
(a) Interest rate risk
Risk
The Group financing arrangements include external debt that is subject to a
variable interest rate. The Group is consequently exposed to cash flow
volatility arising from fluctuations in market interest rates applicable to
that external finance. In particular, interest is charged on the £47m (2018:
£56m) amount drawn down on the revolving credit facility at a rate of between
1.50 and 2.25 percent above LIBOR depending upon leverage. Cash flow
volatility therefore arises from movements in the LIBOR interest rates.
Group policy
The Group policy is to enter into interest rate swap contracts to maintain the
ratio of fixed to variable rate debt at a level that achieves a reasonable
cost of debt whilst reducing the exposure to cash flow volatility arising from
fluctuations in market interest rates.
Notes to the Financial Results
3. Principal risks and uncertainties (continued)
(a) Interest rate risk (continued)
Risk management arrangements
The Group's interest rate swap contracts offset part of its variable interest
payments and replace them with fixed payments. In particular, the Group has
hedged its exposure to the LIBOR part of the interest rate via interest rate
swaps, as follows:
· A $7.5m interest rate swap commencing on 13 July 2015 and ending
on 1 July 2020, whereby the Group receives interest on $7.5m based on the USD
LIBOR rate and pays interest on $7.5m at a fixed rate of 1.79 percent.
· A £15.0m interest rate swap commencing on 22 November 2016 and
ending on 1 July 2020, whereby the Group receives interest on £15m based on
LIBOR rate and pays interest on £15m at a fixed rate of 2.00 percent.
These derivatives have been designated as a cash flow hedge for accounting
purposes. The net settlement of interest on the interest rate swap, which
comprises a variable rate interest receipt and a fixed rate interest payment,
is recorded in net finance costs in the income statement and so is matched
against the corresponding variable rate interest payment on the revolving
credit facility. The derivatives are remeasured at fair value at each
reporting date. This gives rise to a gain or loss, the entire amount of which
is recognised in Other Comprehensive Income ('OCI') following the Directors'
assessment of hedge effectiveness.
(b) Foreign currency risk
Risk
The currency of the primary economic environment in which the Group operates
is Sterling, and this is also the currency in which the Group presents its
financial statements. However, the Group has significant Euro and US dollar
cash flows arising from international trading and overseas operations. The
Group is consequently exposed to cash flow volatility arising from
fluctuations in the applicable exchange rates for converting Euros and US
dollars to Sterling.
Group policy
The Group policy is to fix the exchange rate in relation to a periodically
reassessed set percentage of expected Euro and US Dollar net cash inflows
arising from international trading, by entering into foreign currency
contracts to sell a specified amount of Euros or US Dollars on a specified
future date at a specified exchange rate. This set percentage is approved by
the Board as part of the budgeting process and upon the acquisition of foreign
operations.
The Group policy is to finance investment in overseas operations from
borrowings in the local currency of the relevant operation, so as to achieve a
natural hedge of the foreign currency translation risk. This natural hedge is
designated as a net investment hedge for accounting purposes. Debt of $11.0m
(2018: $19.2m) and €2.4m (2018: €2.4m) has been designated as a net
investment hedge relating to the Group's interest in Compliance Week, FRA and
Interactive Medica.
Risk management arrangements
The following forward contracts were entered into in order to provide
certainty in Sterling terms of circa 80% of the Group's expected net US dollar
and Euro income:
Currency Amount (millions) Maturity date Foreign exchange rate
US dollar 1.0 12 July 2019 1.2579
US dollar 1.0 27 September 2019 1.2622
US dollar 1.0 25 October 2019 1.2637
Euro 1.0 27 November 2019 1.1095
US dollar 1.0 20 December 2019 1.2663
US dollar 1.0 31 January 2020 1.2686
Euro 1.0 31 January 2020 1.1067
US dollar 2.0 28 February 2020 1.2698
US dollar 2.0 27 March 2020 1.2708
US dollar 2.0 24 April 2020 1.2721
Euro 1.0 24 April 2020 1.1033
US dollar 1.5 29 May 2020 1.2734
The above derivatives are remeasured at fair value at each reporting date.
This gives rise to a gain or loss, the entire amount of which is recognised in
the Income Statement.
(c) Liquidity and capital risk
Risk
The Group has historically expanded its operations both organically and via
acquisition, financed partly by retained profits but also via external
finance. As well as financing cash outflows, the Group's activities give rise
to working capital obligations and other operational cash outflows. The Group
is consequently exposed to the risk that it cannot meet its obligations as
they fall due, or can only meet them at an uneconomic price.
Notes to the Financial Results
3. Principal risks and uncertainties (continued)
(c) Liquidity and capital risk (continued)
Group policy
The Group policy is to preserve a strong capital base in order to maintain
investor, creditor and market confidence and to safeguard the future
development of the business, but also to balance these objectives with the
efficient use of capital. The Group has, in previous years, made purchases of
its own shares whilst taking into account the availability of credit.
Risk management arrangements
The Group ensures its liquidity is maintained by entering into short, medium
and long-term financial instruments to support operational and other funding
requirements. The Group determines its liquidity requirements by the use of
short and long-term cash forecasts.
On 3 July 2019 Wilmington plc extended its revolving credit facility through
to 3 July 2023 (with the option to extend it to 3 October 2024). The terms of
the old and extended facility are included below:
Old facility that expired on 3 July 2019
The Group had a £65m revolving credit facility with Barclays Bank PLC, HSBC
Bank plc and The Royal Bank of Scotland plc from 1 July 2015. The facility
comprised of a revolving credit facility of £60m and an overdraft facility
across the Group of £5m. In addition, the facility also provided an accordion
option whereby the unsecured committed bank facility may be increased by up to
£35m to a total commitment of £100m if required subject to majority lending
bank consent. On 17 January 2017 £20m of the accordion facility was
triggered, increasing the total unsecured bank facility to £85m. This
extension was made to fund the acquisition of HSJ. The extended facility
comprised of a revolving credit facility of £80.0m and an overdraft facility
across the Group of £5.0m. On 24 November 2017 the revolving credit facility
was reduced by £10.0m to £75.0m, to decrease the non-utilised portion and
the associated non-utilisation fee.
Extended facility that is effective from 3 July 2019 and expires on 3 July
2023 (with an option to extend it to 3 October 2024)
The Group has a £65m revolving credit facility with Barclays Bank PLC, The
Governor and Company of the Bank of Ireland and The Royal Bank of Scotland plc
from 3 July 2019. The facility comprised of a revolving credit facility of
£60m and an overdraft facility across the Group of £5m. In addition, the
extended facility also provides for an accordion option whereby the unsecured
committed bank facility may be increased if required subject to majority
lending bank consent. Interest is charged on the amount drawn down at between
1.50 and 2.25 (the 'Margin') per cent above LIBOR depending upon leverage, and
drawdowns are made for periods of up to six months in duration. Interest is
charged on the drawn element of the overdraft facility at 1.50% and 2.25% per
cent above the Barclays bank base rate depending upon leverage. The Group also
pays a fee of 40% of the applicable Margin on the undrawn element of the
credit facility and the undrawn overdraft.
(d) Credit risk
Risk
The Group's principal financial assets are receivables and bank balances. The
Group is consequently exposed to the risk that its customers or the credit
facility providers cannot meet their obligations as they fall due.
Group policy
The Group policy is that the lines of business assess the creditworthiness and
financial strength of customers at inception and on an ongoing basis. The
Group also reviews the credit rating of the bank. Cash is held in banks with a
credit rating between AA and BBB+ per Fitch at 19 February 2020.
Risk management arrangements
The Group's credit risk is primarily attributable to its trade receivables.
However, the Group has no significant exposure to credit risk because its
trading is spread over a large number of customers. The payment terms offered
to customers take into account the assessment of their creditworthiness and
financial strength, and they are set in accordance with industry standards.
The creditworthiness of customers is considered before trading commences. Most
of the Group's customers are large and well established institutions that pay
on time and in accordance with the Group's standard terms of business.
The amounts presented in the Balance Sheet are net of the expected credit loss
allowance. The Group applies a simplified approach to measure the expected
credit loss allowance for trade receivables classified at amortised cost,
using the twelve month expected loss provision.
The expected credit loss on trade receivables is estimated using a provision
matrix by reference to past default experience and credit rating, adjusted as
appropriate for current observable data.
Notes to the Financial Results
4. Financial instruments and risk management
The methods and assumptions used to estimate the fair values of financial
assets and liabilities are as follows:
· The carrying amount of trade receivables and payables approximates to fair
value due to the short maturity of the amounts receivable and payable.
· The fair value of the Group's borrowings is estimated on the basis of the
discounted value of future cash flows using approximate discount rates in
effect at the balance sheet date.
· The fair value of the Group's outstanding interest rate swaps, foreign
exchange contracts are estimated using discounted cash flow models and market
rates of interest and foreign exchange at the balance sheet date.
Financial instruments are measured at fair value via a valuation method. The
different levels have been defined as:
· level 1: Quoted prices (unadjusted) in active markets for identical assets
or liabilities;
· level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices); and
· level 3: Inputs for the assets or liabilities that are not based on
observable market data (that is, unobservable inputs).
The Group has recognised a level 2 financial asset of £367,113 (2018:
£278,131 liability) for foreign exchange trading derivatives at fair value
through income or expense. In addition, the Group has recognised a level 2
financial liability of £133,445 (2018: £176,605) for two (2018: two)
interest rate swap contracts at fair value through other comprehensive income
or expense. The Group has no recognised level 1 or level 3 assets or
liabilities.
5. Measures of profit
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;
· adjusting items (included in operating expenses);
· other income - gain on sale of subsidiary
· share of loss of equity accounted investment; and
· net finance costs.
Adjusted profit before tax, adjusted EBITA and adjusted EBITDA reconcile to
profit on continuing activities before tax as follows:
Six months Six months Year ended
ended ended 30 June 2019
31 December 31 December (audited)
2019 2018 £'000
(unaudited) (unaudited)
£'000 £'000
Profit before tax 4,066 5,843 14,712
Amortisation of intangible assets excluding computer software 2,381 2,607 5,049
Adjusting items (included in operating expenses) 486 132 1,443
Other income - gain on sale of subsidiary - (1,906) (1,906)
Adjusted profit before tax 6,933 6,676 19,298
Share of loss of equity accounted investment - 115 50
Net finance costs 979 1,008 2,103
Adjusted operating profit ('adjusted EBITA') 7,912 7,799 21,451
Depreciation of property, plant and equipment included in operating expenses 684 572 1,359
Depreciation of right of use assets 1,006 - -
Amortisation of intangible assets - computer software 752 652 1,477
Adjusted EBITA before depreciation ('adjusted EBITDA') 10,354 9,023 24,287
Notes to the Financial Results
6. 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.
The Group's organisational structure reflects the main communities to which it
provides information, education and networking. The three divisions (Risk
& Compliance, Healthcare and Professional) 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, the rest of Europe and the rest of the world.
(a) Business segments
Six months ended 31 December 2019 (unaudited) Six months ended 31 December 2018 Year ended 30
(unaudited) June 2019
(audited)
Revenue Contribution Revenue Contribution Revenue Contribution
£'000 £'000 £'000 £'000 £'000 £'000
Risk & Compliance 20,560 6,091 20,058 5,906 42,453 12,670
Healthcare 21,096 1,255 20,560 1,271 46,310 7,337
Professional 17,819 2,731 17,682 2,923 33,762 5,808
Group contribution 59,475 10,077 58,300 10,100 122,525 25,815
Unallocated central overheads - (1,802) - (2,308) - (4,152)
Share based payments - (363) - 7 - (212)
59,475 7,912 58,300 7,799 122,525 21,451
Amortisation of intangible assets excluding computer software (2,381) (2,607) (5,049)
Adjusting items (included in operating expenses) (486) (132)
(1,443)
Other income - gain on sale of subsidiary - 1,906 1,906
Net finance costs (979) (1,008) (2,103)
Share of loss of equity accounted investment - (115)
(50)
Profit before tax 4,066 5,843 14,712
Taxation (924) (843) (3,519)
Profit for the financial period 3,142 5,000 11,193
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:
Six months Six months ended 31 December Year
ended 31 2018 ended 30 June
December 2019
2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
UK 32,579 33,814 69,839
North America 10,920 8,745 20,829
Europe (excluding the UK) 10,778 11,077 22,055
Rest of the world 5,198 4,664 9,802
Total revenue 59,475 58,300 122,525
Notes to the Financial Results
7. Adjusting items
The following items have been charged to the Income Statement during the
period but are considered to be adjusting so are shown separately:
Six months ended Six months ended Year ended
31 December 31 December 30 June
2019 2018 2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Costs relating to successful and aborted acquisitions, disposals and - 84 74
integration
Impairment of loan receivable - - 331
Costs associated with the change in CEO - - 549
Net increase in the liability for deferred consideration 486 48 489
Other adjusting items (included in operating expenses) 486 132 1,443
Amortisation of intangible assets excluding computer software 2,381 2,607 5,049
Total adjusting items (classified in profit before tax) 2,867 2,739 6,492
The increase in the liability for deferred consideration relates to
adjustments to deferred consideration in respect of Interactive Medica Limited
and Evantage Consulting Limited.
8. Net finance costs
Year
Six months ended Six months ended 31 December ended 30
June
31 December 2019 2018
2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net finance costs comprise:
Interest payable & receivable on bank loans and overdrafts 800 985 1,921
Unwinding of the discount on royalty payments receivable (70) (60) (127)
Notional interest on lease liabilities 166 - -
Amortisation of capitalised loan arrangement fees 83 83 309
979 1,008 2,103
9. Taxation
Six months ended Year
31 December 2019 Six months ended ended
31 December 2018 30 June
2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Current tax:
Current tax on profits for the period 1,308 1,151 3,316
Adjustments in respect of previous years - - 244
Total current tax 1,308 1,151 3,560
Deferred tax: (384) (308) (41)
Deferred tax credit
Total deferred tax (384) (308) (41)
Taxation 924 843 3,519
Notes to the Financial Results
10. Dividends
Distributions to owners of the parent in the period:
Six Six Year ended 30 June Six Six Year ended 30 June
months ended 31 December 2019 months ended 31 December 2018 2019 months ended 31 December 2019 months ended 31 December 2018 2019
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
pence per share pence per share pence per share £'000 £'000 £'000
Final dividends recognised as distributions in the year 5.0 4.8 4.8 4,378 4,200 4,200
Interim dividends recognised as distributions in the year - - 4.1 - - 3,587
Total dividends paid in the period 4,378 4,200 7,787
Interim/final dividend proposed 4.2 4.1 5.0 3,671 3,587 4,375
The Trustee of the ESOT waived dividends on shares held by the ESOT. At 19
February 2020, the ESOT held 160,000 shares in the company.
11. Earnings per share
Adjusted earnings per share has been calculated using adjusted earnings
calculated as profit after taxation and non-controlling interests but before:
· amortisation of intangible assets excluding computer
software;
· adjusting items (included in operating expenses);
· other income - gain on sale of subsidiary; and
· adjusting items (included in finance costs).
The calculation of the basic and diluted earnings per share is based on the
following data:
Six months ended 31 December 2019 Six months ended 31 December 2018 Year ended
30 June
2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Earnings from continuing operations for the purpose of basic earnings per 3,142 4,983 11,149
share
Add/(remove):
Amortisation of intangible assets excluding computer software (net of 2,381 2,607 5,049
non-controlling interests)
Adjusting items (included in operating expenses) 486 132 1,443
Other income - gain on sale of subsidiary - (1,906) (1,906)
Tax effect of adjustments above (436) (432) (475)
Adjusted earnings for the purposes of adjusted earnings per share 5,573 5,384 15,260
Number Number Number
Weighted average number of ordinary shares for the purpose of basic and 87,577,105 87,466,362 87,513,422
adjusted earnings per share
Effect of dilutive potential ordinary shares:
Future exercise of share awards and options 1,067,312 753,794 719,509
Weighted average number of ordinary shares for the purposes of diluted 88,644,417 88,220,156 88,232,931
earnings per share
Basic earnings per share 3.59p 5.70p 12.74p
Diluted earnings per share 3.54p 5.65p 12.64p
Adjusted basic earnings per share ('adjusted earnings per share') 6.36p 6.16p 17.44p
Adjusted diluted earnings per share 6.29p 6.10p 17.30p
Notes to the Financial Results
12. Goodwill, Intangible assets, Property, plant and equipment and right of
use assets
Goodwill Intangible assets Property, plant and equipment
£'000 £'000 £'000
Right of use assets
£'000
Closing net book amount as at 30 June 2018 (audited) 77,103 27,305 6,463 -
Additions - 761 554 -
Acquisitions - 240 1 -
Disposals - - (26) -
Exchange translation differences 394 36 (9) -
Depreciation of property, plant and equipment - - (572) -
Amortisation of intangible assets excluding computer software - (2,607) - -
Amortisation of computer software - (652) - -
Closing net book amount as at 31 December 2018 (unaudited) 77,497 25,083 6,411
-
Additions - 1,563 455 -
Disposals - (211) (123) -
Exchange translation differences 38 45 11 -
Depreciation of property, plant and equipment - - (787) -
Amortisation of intangible assets excluding computer software - (2,442) - -
Amortisation of computer software - (825) - -
Closing net book amount as at 30 June 2019 (audited) 77,535 23,213 5,967 -
Transition to IFRS 16 (note 19) - - (273) 11,105
Opening net book amount as at 1 July 2019 (unaudited) 77,535 23,213 5,694 11,105
Additions - 1,637 304 843
Disposals - - (15) -
Exchange translation differences (457) 19 (7) -
Depreciation of property, plant and equipment - - (684) -
Depreciation of right of use assets - - - (1,006)
Amortisation of intangible assets excluding computer software - (2,381) - -
Amortisation of computer software - (752) - -
Closing net book amount as at 31 December 2019 (unaudited) 77,078 21,736 5,292
10,942
13. Trade and other receivables
31 December 31 December 2018 30 June
2019 (unaudited) 2019
(unaudited) £'000 £'000 (audited)
£'000
Trade receivables 22,101 20,321 23,058
Prepayments and other receivables 6,077 6,029 6,054
28,178 26,350 29,112
14. Trade and other payables
31 December 2019 31 December 2018 30 June
(unaudited) £'000 (unaudited) 2019
£'000 (audited)
£'000
Trade and other payables 20,031 23,770 26,374
Subscriptions and deferred revenue 30,093 26,600 30,794
50,124 50,370 57,168
Notes to the Financial Results
15. Borrowings
31 December 2019 31 December 2018 30 June
(unaudited) (unaudited) 2019
(audited)
£'000 £'000 £'000
Non-current liability 47,367 56,189 41,790
Bank loans
Capitalised loan arrangement fees (656) (214) -
Bank loans net of facility fees 46,711 55,975 41,790
16. Share capital
Number of ordinary shares Ordinary shares Share premium account Treasury and ESOT reserves £'000 Total
of 5p each £'000 £'000 £'000
At 1 July 2018 (audited) 87,414,073 4,371 45,225 (96) 49,500
Shares issued 125,494 6 - - 6
At 31 December 2018 (unaudited) and 30 June 2019 (audited) 87,539,567 4,377 45,225 (96) 49,506
Shares issued 64,350 3 - - 3
ESOT share purchases - - - (204) (204)
At 31 December 2019 (unaudited) 87,603,917 4,380 45,225 (300) 49,305
On 19 September 2019, 64,350 ordinary shares were issued in respect of the
vesting of the 2016 PSP Share Awards to employees (including Directors).
At 31 December 2019, 46,584 shares (2018: 46,584) were held in Treasury, which
represents 0.1% (2018: 0.1%) of the called up share capital of the Company.
At 31 December 2019, the ESOT held 80,000 shares (2018: nil) in the company,
which represents 0.1% (2018: nil%) of the called up share capital. At 19
February 2020, the ESOT held 160,000 shares in the company.
17. Cash generated from operations
Six months ended 31 December 2019 Six months ended 31 December 2018 Year ended
30 June
2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit from continuing operations before income tax 4,066 5,843 14,712
Adjusting items 486 132 1,443
Depreciation of property, plant and equipment 684 572 1,359
Depreciation of right of use assets 1,006 - -
Gain on sale of subsidiary - (1,906) (1,906)
Amortisation of intangible assets 3,133 3,259 6,526
Profit on disposal of property, plant and equipment (3) (2) 36
Share based payments (including social security costs) 363 (7) 212
Share of loss of equity accounted investment - 115 50
Net finance costs 979 1,008 2,103
Operating cash flows before movements in working capital 10,714 9,014 24,535
Decrease/(increase) in trade and other receivables 664 3,027 (258)
(Decrease)/increase in trade and other payables (4,793) (4,958) 2,162
Cash generated from operations before adjusting items 6,585 7,083 26,439
Notes to the Financial Results
17. Cash generated from operations (continued)
Cash conversion is calculated as a percentage of cash generated by operations
to Adjusted EBITA as follows:
Six months ended 31 December 2019 Six months ended 31 December 2018 Year ended
(unaudited) (unaudited) 30 June
£'000 £'000 2019
(audited)
£'000
Funds from operations before adjusting items:
Adjusted EBITA 7,912 7,799 21,451
Share based payments (including social security costs) 363 (7) 212
Amortisation of intangible assets - computer software 752 652 1,477
Depreciation of property, plant and equipment included in operating expenses 684 572 1,359
Depreciation of right of use assets 1,006 - -
(Profit)/loss on disposal of property, plant and equipment (3) (2) 36
Operating cash flows before movements in working capital 10,714 9,014 24,535
Net working capital movement (4,129) (1,931) 1,904
Funds from operations before adjusting items 6,585 7,083 26,439
Cash conversion 83% 91% 123%
The 83% conversion percentage this year is not comparable to the 91% last year
due to the different treatment of lease rental costs in the current year
following adoption of IFRS 16. On a comparable basis to last year the cash
conversion would be 70%.
Free cash flows:
Operating cash flows before movement in working capital 10,714 9,014 24,535
Proceeds on disposal of property, plant and equipment 18 28 112
Net working capital movement (4,129) (1,931) 1,904
Interest paid (814) (1,004) (1,943)
Payment of lease liabilities (1,129) - -
Tax paid (3,420) (2,254) (3,943)
Purchase of property, plant and equipment (304) (554) (1,332)
Purchase of intangible assets (1,637) (761) (2,324)
Free cash flows (701) 2,538 17,009
18. Related party transactions
The Company and its wholly owned subsidiary undertakings offer certain
Group-wide purchasing facilities to the Company's other subsidiary
undertakings whereby the actual costs are recharged.
Close family members of key management personnel provided services to the
Group during the period for lecturing. The total invoiced for these services
was £49,883 (2018: £55,006).
19. Transition to IFRS 16
On 1 July 2019 the Group adopted the new accounting standard IFRS 16 Leases.
The Group has adopted the modified retrospective approach to application,
using transitional reliefs available. It has not restated comparatives and on
transition the Group recognised a cumulative adjustment to the opening balance
of retained earnings at 1 July 2019. The Group has also made use of the
following transitional reliefs:
· Exclusion of initial direct costs from the measurement of the right-of-use
assets at the date of application
· Exemption from transition of leases with a remaining term less than twelve
months
· Application of the discount rate at the date of transition, rather that the
date of lease commencement, to calculate the value of the lease liabilities
· Leases for low value assets have been excluded from transition
· The group will not reassess whether a contract is or contains a lease, and
the definition of a lease under IAS 17 will continue to apply to leases
entered into before 1 July 2019.
Notes to the Financial Results
19. Transition to IFRS 16 (continued)
At the 1 July 2019 transition date, adoption of IFRS 16 resulted in the Group
recognising right-of-use assets of £11.1m and lease liabilities of £12.5m.
There is a reduction of £1.6m to other payables in respect of accrued rent
free amounts netted against the right of use assets. There is a £0.1m opening
adjustment to retained earnings to reflect the difference between carrying
values of right of use assets and lease liabilities at the transition date,
and an associated deferred tax asset has also been recognised. There is also a
£0.3m reclassification between property plant and equipment and right of use
assets, relating to an asset retirement obligation.
Impact on the consolidated balance sheet
The effect on the consolidated balance sheet of the implementation of IFRS16
Leases on 1 July 2019 is summarised below:
Group
Reported IFRS 16 adjustments Adjusted
30 June 2019 1 July 2019 1 July 2019
(audited) (unaudited)
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 5,967 (273) 5,694
Right of use assets - 11,105 11,105
Deferred tax assets 555 35 590
Other non current assets 102,992 - 102,992
109,514 10,867 120,381
Current assets 37,033 - 37,033
Total assets 146,547 10,867 157,414
Current liabilities
Trade and other payables (57,168) 1,616 (55,552)
Lease liabilities - (2,475) (2,475)
Other current liabilities (1,862) - (1,862)
(59,030) (859) (59,889)
Non-current liabilities
Lease liabilities - (10,155) (10,155)
Other non-current liabilities (44,649) - (44,649)
Total liabilities (103,679) (11,014) (114,693)
Net assets 42,868 (147) 42,721
Equity
Share capital, share premium and treasury shares 49,506 - 49,506
Other reserves 4,127 - 4,127
Accumulated losses (10,765) (147) (10,912)
Total equity 42,868 (147) 42,721
Impact on the consolidated income statement
For the 6 months ended 31 December 2019 there was an income statement
depreciation charge of £1.0m relating to right of use assets associated with
IFRS 16 leases and an interest cost relating to the IFRS 16 lease liabilities
of £0.2m.
Impact on the consolidated cash flow statement
Payments in respect of leases which were previously recognised within cash
flows from operating activities are now recorded within cash flow from
financing activities.
20. Seasonality
The Group has traditionally generated the majority of its revenues and profits
during the second half of the financial year. This has historically resulted
from two factors. Firstly, most of the Group's businesses (the notable
exception being AMT) deliver seasonally low revenue in July, August and
December which include holiday periods for many of the Group's clients.
Secondly, Inese, Compliance Week and FRA have major annual events in the
second half of the year.
21. Events after the reporting period
Inese, our Spanish business within the Risk & Compliance division, whilst
performing well in its market, struggles to generate synergies with our other
insurance business due to its geographical location and focus on the Spanish
speaking insurance industry. We have therefore engaged external advisors to
identify potential purchasers of the business and since the balance sheet date
have commenced active marking at a reasonable sale price. As a result, after
the balance sheet date the assets and liabilities related to Inese meet the
criteria of an asset held for sale under IFRS 5.
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