REG - Wilmington PLC - Financial results for year ended 30 June 2021
20 September 2021
Wilmington plc
Digitisation drives profits up 27%
Wilmington plc, (LSE: WIL 'Wilmington', 'the Group') the provider of data, information, education and training in the global Governance, Risk and Compliance markets, today announces its full year results for the year ended 30 June 2021.
Financial highlights
- Revenues flat at £113.0m (2020: £113.1m) despite full 12 months of Covid-19 restrictions
- Organic1 revenue growth 3% (2020: down 8%) demonstrating continued strong demand
- Adjusted profit before tax2 up 27% to £15.0m (2020: £11.9m) reflecting focus on costs and efficiencies realised through conversion to digital
- Adjusted basic earnings per share3 up 27% to 13.62p (2020: 10.71p)
- Statutory loss before tax £2.0m (2020: profit £6.4m), basic loss per share of 5.18p (2020: earnings 5.33p) impacted by £14.8m non-cash impairment charges
- Dividend reinstated in the year, final dividend at 3.9p (2020: nil); total dividend 6.0p (2020: nil)
- Strong cash conversion4 of 104% (2020: 189%)
- Significantly reduced Group net debt (excluding lease liabilities) at £17.2m (2020: £27.7m) reflecting strong trading, effective working capital management and small product disposal.
Operational highlights
- Continued strong demand demonstrates success of digitisation strategy
- Renewed strategic focus on large and growing Governance, Risk and Compliance (GRC) and Regulatory Compliance markets
- Portfolio of Group businesses reorganised into two divisions: Information & Data and Training & Education, reflecting broad range of complementary GRC solutions
- Operational focus on clearly defined pillars of growth: simplified structure, leadership and people, data and technology, product, and sales and marketing
- Performed ESG materiality assessment in H2, developed roadmap for FY22 progress, and early adopted TCFD.
Mark Milner, Chief Executive Officer, commented:
"We have continued to refine and embed our digital capabilities across the business. This reflects our ambition to create a fully digital enterprise whilst retaining the flexibility to offer our customers face-to-face and hybrid solutions.
"These strong results with profitability up 27% demonstrate the continued and growing demand for our information and data products, despite the disruption caused by the pandemic.
"We are now at an inflexion point with a simplified portfolio and are well positioned to address large and growing markets which are increasingly online.
"The current financial year has started well, in line with our expectations."
1 Organic - eliminating the effects of exchange rate fluctuations and the impact of acquisitions and disposals
2 Adjusted profit before tax - see note 3
3 Adjusted earnings per share - see note 10
4 Cash conversion - see note 19
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement this inside information is now considered to be in the public domain.
For further information, please contact:
Wilmington plc
Mark Milner, Chief Executive Officer
Guy Millward, Chief Financial Officer
Meare Consulting
Adrian Duffield
020 7422 6800
07990 858548
Notes to Editors
Wilmington plc is the recognised knowledge leader and partner of choice for data, information, education and training in the global Governance, Risk and Compliance (GRC) markets. 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.
Chairman's statement
I am pleased to present the results for the year ended 30 June 2021. We made good progress in the year, demonstrating the value of our diversified portfolio and digital-first strategy while we continue to adapt to the impact of Covid-19.
Despite a full 12 months of Covid-19 restrictions we traded strongly in FY21 and delivered revenues unchanged on FY20, despite four months of disruption at the beginning of the pandemic causing an 8% decline in revenues year-on-year. In FY21 organic revenue growth was achieved by our information and data products, and within our training products revenues only decreased in our face-to-face businesses.
Adjusted profits at all levels were up, reflecting a continuous focus on costs and improved margins achieved through the move to virtual solutions. Strong trading combined with a focus on working capital management, and a small product disposal, enabled us to greatly reduce our net debt position (excluding lease liabilities) to £17.2m as at 30 June 2021, £10.5m better than 30 June 2020. As a result, we honoured our commitment to reinstate the dividend and repaid all amounts received from the UK government's furlough scheme relating to this financial year.
In June 2021 we announced a new group structure and operating model to increasingly focus the business on the resilient and growing GRC and Regulatory Compliance markets. We report here for the first time our new divisions: Information & Data and Training & Education, which reflect the broad range of complementary products and solutions we offer to our customers. In last year's report, I outlined our key areas of strategic focus: organic revenue growth, investing in our business and managing our portfolio. Despite the pandemic, we made good progress in all these areas so that we continue to realise the benefit of recent investments.
Derek Carter and Nathalie Schwarz stood down from the Board at the conclusion of the AGM on 4 November 2020 after completing their full nine-year terms as Independent Non‑Executive Directors. I would like to thank them for their outstanding contributions to Wilmington. Nathalie was replaced as Chair of the Remuneration Committee by Helen Sachdev. Paul Dollman, the current Chair of the Audit Committee, has assumed the role of Senior Independent Director. In February 2021 I was delighted to welcome William Macpherson to the Board as Non-Executive Director, the director responsible for worker representation and Chair of the Nominations Committee. William has a strong commercial background in the professional education sector and is providing valuable counsel to the Group.
Most importantly, I would like to thank all our employees for their continued commitment and resilience in these testing and difficult times. Throughout the crisis we have been, and will continue to be, guided first and foremost by the need to protect the health and wellbeing of our employees while remaining focussed on serving our customers to the highest standards.
Martin Morgan
Chairman
Chief Executive's review
Overview
Our diversified portfolio has continued to demonstrate agility and resilience in the face of ongoing disruption caused by the pandemic. The work done over the last 12 months, to refine our digital-first model and to focus the business on the GRC and Regulatory Compliance markets, reflects a period of positive change.
Following the rapid acceleration of our digitisation strategy in the year to June 2020, throughout FY21 we have concentrated on further refining and embedding our strong digital capabilities across the business. This work reflects our ambition to create a fully digital enterprise whilst retaining the flexibility to offer our customers face-to-face and hybrid solutions according to their needs.
Our financial performance demonstrates that demand for our products remains strong, and that our ability to respond to our customers' needs continues to cement our position as their trusted partner when navigating the complexity of the Regulatory Compliance landscape.
Reported Group revenue was flat, but up 3% on an organic basis. This result reflects solid uptake of our core information and data products, strong conversion of new sales opportunities in ICA Singapore, and high demand driving double-digit revenue growth in the legal sector businesses. Growth in these areas was partly offset by the anticipated reduction in face-to-face training and event revenues caused by Covid-19 related restrictions.
A continued focus on cost management and further efficiencies realised through the conversion to digital resulted in adjusted profit before tax (PBT) growth of 27% to £15.0m (2020: £11.9m) and a corresponding improvement in adjusted PBT margin to 13.3% (2020: 10.5%).
This resulted in adjusted basic earnings per share being up 27%. We also are proposing a final dividend of 3.9p (total of 6.0p). The Group's net debt (excluding lease liabilities) was sharply down at £17.2m (2020: £27.7m).
Strategy
We announced in June 2021 that our strategic focus will be centred on building upon our already strong presence in the large, growing and rapidly evolving GRC and Regulatory Compliance markets. These markets are the intent of and actions undertaken by organisations, entities and individuals to both understand and align their activities and ethics with the relevant legal, policy and regulatory frameworks within which they operate.
These markets are underpinned by strong macro drivers, particularly the increasing volume and enforcement of regulation, complex geopolitical landscape, increased importance of ESG and widespread adoption of technological and data-driven compliance solutions, all of which align strongly to Wilmington's core offering.
At the heart of this focus on GRC and Regulatory Compliance markets is our ambition to help our customers to do the right business in the right way, by providing a complementary range of information & data and training & education solutions.
We continue to develop new products, identify clear organic growth opportunities and consider acquisition targets which complement and/or extend our capabilities.
Current trading and outlook
We have strong foundations with our leading brands which have shown notable resilience during the pandemic whilst our large markets are seeing strong growth.
We have made the switch to a digital first business with the capability to offer face-to-face and hybrid solutions and have invested in our data capabilities and new product development. We also have a simplified structure and an operational focus on execution excellence.
Trading in the first two months of the year has been encouraging, with both revenue and profits in line with expectation.
Operational review
In order to execute our strategy, we reorganised our portfolio into two divisions: Information & Data and Training & Education. This simplified structure clusters our businesses to drive synergies and provides a scalable platform for acquisitions and strong integration capabilities.
As previously announced, we are actively managing the portfolio by assessing the potential of each business to contribute to the delivery of our strategic objectives over the long term. Consequently, CLT England was closed down in August 2020 and the CLT Scotland business sold. Two product lines, one in the UK Healthcare business, and the other a pension fund product were withdrawn.
Our Information & Data division is addressing the $1bn regulatory intelligence market. The key drivers are the increased importance of independent, authoritative and actionable intelligence; increased investment in technology to solve regulatory compliance challenges; and disruptive technologies that create opportunities and threats.
Our Training & Education division is addressing the $4bn compliance training market. The key drivers are the shift from insourced to outsourced training; the shift from face-to-face to digital and blended training; increased demand for continuous learning and micro-learning; and increased focus on ROI through personalised learning experiences and outcomes-based programmes.
Our strategy is executed via our clearly defined pillars of growth: our simplified structure and key drivers of operational excellence: Leadership and people, data and technology, product, and sales and marketing. We have made progress in all areas in the year.
Our work to embed a positive culture and high employee engagement reflected a focus on Learning and Development and Diversity and Inclusion, whilst we remained committed to enhancing employee experience by delivering a responsive portfolio of wellbeing resources and a broad range of personal development opportunities.
We delivered against our objective to roll out the first phase of the Wilmington Sales Academy and made significant progress enhancing the sales KPI analysis capabilities which are informing our future development in this area. We also started work to embed an improved approach to sales packaging and pricing, which is strongly aligned to our focus on developing consistent and sustainable revenue streams to support long term growth.
Our sales and marketing function has become de-centralised and so much closer to our end-user markets. We have instilled a KPI driven sales culture and as highlighted above have a focus on learning and development. We are also using technology more effectively and are optimising our product pricing and packaging.
The progress we made to drive excellence in product management reflects our commitment to embed a customer-led approach, and throughout the year we engaged closely with our customers as they adapted to changes brought about by the pandemic. This was complemented by our continued investment in strong digital and data capabilities to deliver a dynamic and innovative portfolio of solutions.
We launched the Wilmington Product Academy, specifically designed to build a strong and consistent skills base that will propel our success in this area. We retain a strong focus on development methodologies using minimum viable products (MVPs), iterative roll outs, and insights gained from data generated from our existing processes. The Product Academy also supports our plans to further leverage the success of recently launched products such as the digital learning hub, by informing the development of similar solutions in other parts of the businesses to generate synergistic value across the portfolio.
Responsible business
As we continue to help our customers to do the right business in the right way, we are also committed to holding ourselves accountable and demonstrating the highest standards of responsible business practice.
We have now implemented the actions outlined in the ESG roadmap set in February 2021, which included performing a materiality assessment and defining the agenda for the future. By assessing the key issues that impact our stakeholders, the materiality assessment process led to the refinement of our ESG strategy and concluded that four strategic pillars will drive our progress for the next phase of work. These four pillars, their core objectives and the way that they support our commitment to operational excellence, are outlined below.
Strategic pillar
Cultural
positivity
Customer
empowerment
Proactive
assurance
Environmental responsibility
Core objective
Create equal opportunities and nurture talent in a safe and mindful environment.
Deliver products that are accessible, high value, up to date and move with industry trends.
Uphold high standards related to digital protection, regulatory requirements, ethics & production.
Reduce environmental impact by minimising carbon footprint and committing to responsible procurement.
Supporting operational excellence
Fostering a positive culture will enhance employee experience and allow our people to perform highly as they continue to drive progress against our strategic objectives.
Empowering our customers ensures our products are aligned to their needs, and that our sales and marketing strategies effectively convey high product value.
Responsible digitisation and ethical conduct are fundamental to our data and technology strategies as we innovate to deliver the best-in-class digital products.
Committing to environmental responsibility protects the future of our people and demonstrates to customers that we strive to deliver products with minimal environmental impact.
We have established a governance framework around our ESG initiatives, providing sponsorship for each pillar of the strategy from a member of the Executive Committee and oversight from the Board. The executive sponsors will support internal working groups as they implement improvement initiatives to ensure that continued and consistent progress is made to meet the core objectives. The work planned for FY22 includes a focus on refining our approach to data collection, to facilitate effective measurement of outputs and to ensure that we set sufficiently challenging targets to drive long term improvements.
In recognition of the rapidly evolving climate crisis, we have early adopted TCFD and have accelerated our own work to address climate change by committing to carbon neutrality in FY22, with a further commitment to establish a roadmap for action to subsequently become a net zero carbon business.
Review of divisional performance
Information & Data
2021
2020
Absolute
variance
Organic variance
£'m
£'m
%
%
Revenue
Healthcare
28.9
27.9
4%
3%
Financial Services & Other
21.3
21.7
-2%
0%
Identity & Charities
6.6
7.0
-6%
-5%
Total Revenue
56.8
56.6
1%
1%
Operating Profit
9.3
11.1
-16%
-13%
Margin %
16%
20%
Business model and market
Wilmington offers a wide range of products and services through its Healthcare businesses predominantly around the provision of market and customer intelligence. The core of the data supplied comes primarily from publicly available sources. The value generated by our services is based around its collation, verification, combination with other complementary data sources and then its ease of presentation and usage. In some areas we provide proprietary analysis of the data and editorial comment which constitutes our own intellectual property.
Wilmington's Healthcare businesses operate mainly in the UK and France and provide deep insight information on practitioners, facilities and treatments in the UK and French health sector markets that enable suppliers into those markets, including pharmaceutical companies, to understand and connect better with their customers. Revenue is mainly earned through sales of discrete packages of data or through subscription services for the ongoing provision of information. Additionally, in the UK we publish the Health Service Journal ('HSJ'), the leading online publication in the UK for healthcare leaders, with revenue generated through providing subscriptions to NHS foundation trusts, Clinical Commissioning Groups and suppliers to the NHS.
The Financial Services/Other businesses operate in the Insurance, Pensions and Compliance markets. These businesses provide a broad range of information products and services with revenues generated primarily through subscription but also sponsorship, lead generation and event attendance.
The Identity & Charities business consists of a portfolio of data products including charity fund-raising information, and marketing data suppression tools. They include services that are used by organisations to help prevent identify fraud. Revenue is predominantly subscription based. We sold a pension fund product line in this part of the business during the year.
Trading performance
Overall Information & Data revenues grew 1% in the year, although this overall rate masks some more significant movements in the underlying businesses.
Healthcare revenues grew 3% organically in the year despite a significant drop in UK events revenues because no face-to-face events took place. Non-events revenues grew 7% in the period with UK revenues up 10% and French revenues up 7%. We closed a product line during the year (that sold a suite of online learning courses that familiarise UK industry participants with the complexities of the National Health Service) as it was loss-making and we outsourced part of the UK operations to improve future profits.
Financial Services revenues were flat organically (removing the effect of currency) with growth in Axco, Pendragon and Compliance Week offset by a decline in Inese revenues due to the lack of face-to-face events in Spain. We announced last year that we were seeking buyers for the Inese business but this process was delayed due to Covid-19 restrictions and we will resume the process in coming months.
Identity & Charities revenues were down 6%. We have restructured this set of products just before the year end, selling one product line and closing two others to focus the business on areas we believe can grow in the future and to reduce its cost base. The slimmed-down business will now focus on identity revenues and a small line of revenue in the charity sector.
Information & Data divisional operating profit was down on the previous year despite the flat revenue performance as we took restructuring measures (closing product lines and outsourcing some costs) to improve revenues and profits going forward. The cost of these changes has been taken as part of normal operations.
Training & Education
2021
2020
Absolute
variance
Organic variance
£'m
£'m
%
%
Revenue
Global
29.2
25.8
13%
16%
UK & Ireland
22.1
24.6
-10%
0%
North America
4.9
6.1
-20%
-15%
Total Revenue
56.2
56.5
-1%
6%
Operating Profit
12.2
7.9
54%
65%
Margin %
22%
14%
Business model and market
The Global division comprises three businesses that operate in compliance markets. The largest business, which was developed organically within Wilmington, is the International Compliance Association ('ICA'). It is an industry body and training business that we created in 2002 which offers professional development and support to compliance officers predominantly in the financial services sector. It has offices in the UK, Singapore, Malaysia and Dubai.
Revenue earned by ICA is primarily training income complemented by subscriptions paid by the professional members for their ICA accreditations. The courses ICA run usually extend over several weeks or even months. They traditionally mix distance learning with face-to-face sessions. The distance learning element has transitioned to online and digital variants, and virtual programmes have been offered in place of face-to-face sessions. To support the move to virtual training in ICA a new digital learning platform ('hub') is being built - it was launched at the start of 2021 and further developments are due for release in the coming months.
ICA primarily serves the financial services industry. The material for ICA courses is developed by our own internal R&D team, and external specialists, and we own the associated intellectual property.
The other Global businesses earn revenue from running professional development programmes for wealth managers and training for professionals joining the investment banking industry. Wilmington has an international presence, with centres in UK, Europe, North America and Asia Pacific and consistent investment in technology maintains the Group's competitive positioning.
The North America business is predominantly events based. They serve the US healthcare/ health insurance markets and, to a lesser extent, the US financial and legal service communities. The prime brand is the RISE series of events that address the Medicare and Medicaid markets and is attended by health plans, physician groups and solution partners. The flagship event is RISE National which normally takes place in Nashville in March each year, although it ran online in FY21. Revenue from the US events is generated from both sponsorship and delegate sales.
The UK and Ireland division predominantly provides training for accountants in practice and in business and individuals involved in the legal system, including lawyers. It runs a mix of face to face, online and blended learning for these communities. It provides training at various levels including providing continuing professional development for existing qualified accountants and, in the case of the legal profession, helping them train their clients for interaction with the legal system. Additionally, it provides technical support to accountancy firms which enables them to keep abreast of technical developments and changes to regulation, as well as supporting them to promote the services they then offer to their clients.
The Accountancy and Legal businesses are predominantly UK and Ireland based, reflecting the country specific laws and accounting standards that govern their profession. Revenue in the unit is earned through clients subscribing for ongoing training support and other related activities over a period of time (usually twelve months), with the rest through one-off course attendance fees. Courses are typically single or half day events, and content is a mix of owned and third-party intellectual property. Courses are delivered either by in-house experts or by a network of independent tutors who are paid per course that they deliver.
Before the impact of Covid-19, the Accountancy market was growing, although this was somewhat offset by the continued consolidation of smaller firms, some Brexit uncertainty and a relatively stable backdrop in terms of tax legislation and accounting standards. In contrast the Law for Non-Lawyers market was strong with good demand for existing products as well as successful launches of new training courses. Wilmington exited the CPD training market for lawyers in FY21 when it sold its Central Law Training (CLT) business in Scotland and closed the CLT business in England.
Trading performance
Training & Education revenues grew organically by 6% in the year, representing a significant improvement in the second half as revenues were down 12% in the first half of the year.
ICA revenues were 21% up on FY20 due mainly to very strong growth in Singapore where government funding for compliance training, the rapid adaptation of our services to ensure compliance with government requirements, and a restructuring of our operations, led to a doubling of revenues. AMT saw strong growth in FY21 of 19%, with all its courses being delivered virtually and benefitting from strong demand from its blue-chip customer base. CLTi had a slower year as demand for its international courses dropped during the pandemic.
The legal sector businesses in the UK and Ireland (Bond Solon and LaTouche) saw double-digit growth in FY21, driven by a strong return of demand particularly in the last quarter of the year. Accountancy revenues also had a strong second half and reduced the deficit on FY20 seen in H1 to end the year 9% down on FY20. CLT revenues were £0.6m in the year (2020: £2.9m) up to the closure of CLT England in August 2020 and the sale of CLT Scotland in December 2020.
In the US, FRA revenues ended the year 15% down on FY20. They were more than 50% down at the half year but a strong digital performance in H2 as well as a return to face-to-face and hybrid events in June 2021 gives the business a strong platform to return to growth provided that face-to-face events continue in the US in FY22.
Overall divisional operating profit increased strongly by 54% on FY20, mainly due to cost efficiencies realised through the lack of face-to-face training (lower venue hire, external tutor and travel costs). The increase also reflects the impact of the closure of CLT, which was loss making in the prior year. As a result, the operating profit margin rose to 22% from 14% in FY20.
Financial review
Overview
The Group performed well during the year, achieving organic revenue growth of 3% (2020: down 8%). Revenue growth was supported by strong cost control and efficiencies realised through conversion to digital, driving increased profitability and a corresponding improvement in adjusted operating margin at 14.7% (2020: 12.4%). This resulted in strong cash generation, reflected in a significantly reduced net debt position (including lease liabilities) at 30 June 2021 of £28.0m (2020: £40.8m).
Adjusting items, measures and adjusted results
In this financial review reference is made to adjusted results as well as the equivalent statutory measures. Adjusted results, in the opinion of the Directors, provide additional relevant information on our future or past performance where equivalent information cannot be presented using financial measures under IFRS. Adjusted results exclude adjusting items, gain on disposal of subsidiaries and business operations, impairment and amortisation of intangible assets (excluding computer software).
2021
2020
Absolute variance
Organic
variance
£'m
£'m
£'m
%
%
Revenue
113.0
113.1
(0.1)
(0.0%)
3.3%
Adjusted profit before tax
15.0
11.9
3.1
26.6%
27.9%
Margin %
13.3
10.5
Variances described as 'organic' are calculated using constant currencies and exclude the impact of the closure and disposal of CLT England and CLT Scotland respectively, as well as the disposal of a pension fund product line within the Information & Data division.
Revenue
Group revenue was flat overall and increased 3% on an organic basis.
Operating expenses before adjusting items, amortisation and impairment
Operating expenses before adjusting items, amortisation of intangible assets (excluding computer software) and impairment, were £96.4m (2020: £99.0m) down £2.6m or 2.6%.
Within operating expenses, staff costs increased £1.4m to £54.7m (2020: £53.3m). This net increase was driven by the full year effect of investments in new roles that have been key to our strategic progress. Discretionary staff bonuses and sales commission payments were also £1.7m higher than the prior year supported by a stronger trading performance in FY21. The increases described above were offset by salary cost savings generated from a reduction in the average monthly headcount during the year to 952 from 982 in the prior year. This decrease in headcount was primarily driven by the closure of CLT England as well as the sale of CLS Scotland and AP Pensions. There was also a small saving in share based payment costs of £0.2m due to revised vesting assumptions during the year.
Non-staff costs decreased by £4.0m to £41.7m from £45.7m in the prior year. Direct costs made up £3.7m of this decrease, demonstrating cost savings from a full 12-month period of running virtual events and training as opposed to traditional, more costly face-to-face variants. A further £1.6m cost saving was driven by the closure and sale of CLT England and CLT Scotland, respectively. These, and other cost decreases, were partly offset by an increase in direct costs of £2.3m to support organic revenue growth primarily in the Group's Compliance and Global Training businesses.
Unallocated central overheads
Unallocated central overheads, representing Board costs and head office salaries as well as other centrally incurred costs not recharged to the businesses, were flat year-on-year at £4.3m (2020: £4.3m).
Adjusted profit before tax ('adjusted PBT')
As a result of these changes in revenue, operating expenses and finance costs, adjusted profit before tax, which eliminates the impact of adjusting items, amortisation of intangible assets excluding computer software, other income (when it is material or of a significant nature), and impairment of goodwill, intangible assets and property, plant and equipment, was up 26.6% to £15.0m (2020: £11.9m).
Adjusted profit margin (adjusted PBT expressed as a percentage of revenue) also increased to 13.3% (2020: 10.5%).
Amortisation excluding computer software
Amortisation of intangible assets (excluding computer software) was £3.4m, compared to £4.8m in the previous year. The decrease reflects certain historic assets being fully amortised part way through the prior year.
Impairment of goodwill, intangible assets and property, plant and equipment
An impairment charge of £3.0m was recognised in relation to the goodwill and intangible assets attributable to a loss-making product line in the Healthcare sub-division that was discontinued during the year. £1.5m of this impairment charge was allocated against goodwill, with the remaining £1.5m allocated to intangible assets.
The Group's annual impairment review concluded that the carrying value of the UK Healthcare CGU exceeded its recoverable amount. This reflects the ongoing uncertainty around the anticipated timeline for a return to pre-pandemic growth within the UK Healthcare business following Covid-19 related disruption to the healthcare industry. Consequently, an impairment charge of £8.4m has been recognised to reduce the carrying value of the CGU, and has been allocated entirely to the associated goodwill.
The right-of-use asset and associated property, plant and equipment relating to the Group's head office premises were impaired during the year following a decision to consolidate office space to reflect a future of flexible working arrangements. Management took the decision to permanently close a portion of the head office and seek a tenant to sublease the closed portion. This resulted in a £3.4m impairment charge, £2.8m of which was allocated to the head office, with the remaining £0.6m allocated to the associated property, plant and equipment.
This resulted in a total impairment charge of £14.8m which was recognised within adjusting items for the year ended 30 June 2021.
Adjusting items within operating expenses
Adjusting items in operating expenses are 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. In the year adjusting items within operating expenses were £3.0m (2020: £0.6m). These items are mainly £1.9m (2020: £nil) representing an onerous provision for costs associated with the closed portion of the head office and £1.1m (2020: £0.6m) relating to strategic activities. Costs associated with strategic activities relate to strategic reviews of two of the Group's businesses, Central Law Training Limited and Wilmington Inese SL in addition to costs associated with the disposal of business operations.
Operating loss ('EBITA')
Operating profit decreased from £8.6m in the prior year to an operating loss of £0.4m for the year ended 30 June 2021. The decrease is driven primarily by the impact of the adjusting items and the £14.8m impairment charge detailed above, offset in part by the profit on disposal of CLT Scotland and a pension fund product line within the Information & Data division.
Net finance costs
Net finance costs decreased by £0.6m to £1.6m (2020: £2.2m), within which interest payable on bank loans and overdrafts fell £0.2m due to lower average debt balances across the year. In addition to this, the prior year expense includes fees in respect of the renegotiation of the Group's financing arrangements during the year ended 30 June 2020.
Result before taxation
Loss before taxation was £2.0m compared to a profit before tax in the prior year of £6.4m, a reconciliation of this to adjusted profit before tax can be found in note 3.
Taxation
The tax charge for the year was £2.5m compared to £1.8m in the prior year. Despite a significant reduction in profit before taxation from £6.4m in the prior year to a loss before taxation of £2.0m during the year, the main driver of this profit reduction was the impairment charge detailed above which was not deductible for tax purposes.
The underlying tax rate which ignores the tax effects of adjusting items remained essentially unchanged at 20.5% (2020: 20.9%).
Earnings per share
Adjusted basic earnings per share increased by 27.2% to 13.62p (2020: 10.71p), owing to the increase in adjusted profit before tax, a broadly flat underlying tax rate and an essentially unchanged number of issued ordinary shares. Basic loss per share was 5.18p compared to a basic earnings per share of 5.33p in the prior year, wholly reflecting the decrease in profit after tax.
Dividend
A final dividend of 3.9p per share (2020: nil) will be proposed at the AGM. If approved it will be paid on 12 November 2021 to shareholders on the register as at 15 October 2021 with an associated ex-dividend date of 14 October 2021. This will give a full year dividend of 6.0p (2020: nil) and dividend cover of 2.3 times (2020: nil).
Balance sheet
Non-current assets
Goodwill decreased by £12.1m from £77.9m to £65.8m which was primarily due to the £8.4m impairment of goodwill relating to the UK Healthcare CGU, as well as the £1.5m impairment relating to a discontinued loss-making product line as described above. Additionally, a weakening US Dollar led to a decrease in the Sterling value of the US Dollar portion of the Group's goodwill.
Intangible assets decreased by £5.7m from £19.7m to £14.0m due to amortisation of £5.8m and an impairment of £1.5m as described above. These decreases were partly offset by additions of £2.0m within computer software reflecting the Group's continued strategy to invest in the existing businesses to fuel organic growth. Additions during the year reflect the installation of the new virtual classroom facility in the Birmingham UK office, as well as continued investment in Wilmington's Digital Hub. Internally generated assets accounted for £0.5m of additions (2020: £0.8m).
Property, plant and equipment decreased by £7.6m from £16.9m in the prior year to £9.3m in the year ended 30 June 2021. Of this decrease, £5.2m was attributable to right-of-use assets.
The £2.4m decrease in purchased property, plant and equipment was attributable to depreciation of £1.2m and impairment of £0.6m, partly offset by £1.0m of additions during the year. Furthermore, the carrying value of £1.6m relating to a building marketed for sale at 30 June 2021, as part of the exercise to consolidate our office space, was transferred from property, plant and equipment to assets held for sale.
As detailed above, right-of-use assets decreased by £5.2m to £6.6m (2020: £11.8m) during the year. This decrease is primarily due to the £2.8m impairment of the Group's head office detailed above as well as depreciation of £2.2m during the year.
Deferred consideration receivable
The deferred consideration receivable balance relates to the disposal of ICP in July 2018. At 30 June 2021 the Group recognised a total of £1.8m (2020: £2.2m) of deferred consideration receivable, with £1.6m recognised within non-current assets and the remaining £0.2m recognised within current assets. During the year, a £0.1m unwind of the discount was offset by an increase of £0.5m reflecting an agreed adjustment to the phasing of the settlement plan.
Trade and other receivables
Trade and other receivables were up £3.2m at £28.7m (2020: £25.5m). This increase was due in large to increased billings compared to the prior year. The increase was partly offset by the closure and disposal of CLT England and CLT Scotland respectively, which collectively comprised £0.3m within trade receivables in the prior year.
Current tax asset
At 30 June 2021 the Group recognised an asset relating to current tax of £0.3m (2020: £1.3m). The net asset position reflects a claim to carry back US losses against prior year returns resulting in a net repayment position.
Trade and other payables
Trade and other payables decreased by £3.5m from £58.5m to £55.0m. Within this, subscriptions and deferred revenue decreased £1.4m or 4.3% to £30.1m (2020: £31.5m) and trade and other payables decreased £2.2m to £24.8m (2020: £27.0m).
This decrease in subscriptions and deferred revenue was driven in large by the delayed RISE Nashville event which has resulted in fewer prepayments from event sponsors or delegates being held than in the prior year. In addition to this, subscriptions and deferred revenue in the prior year included £0.6m of deferred revenue in respect of CLT England which was £nil for the year ended 30 June 2021 following its closure.
The decrease in trade and other payables was primarily driven by the unwind of deferred VAT and payroll tax payments which were on the balance sheet in the prior year in response to the Covid-19 pandemic. A further driver of the decrease was less spend on venues and related costs during the year following the transition to virtual of many of the Group's training and events.
Provisions
At 30 June 2021 a provision of £1.8m has been recognised in respect of future committed cost associated with the closed portion of the head office space.
Net debt, lease liabilities and cash flow
Net debt, which includes cash and cash equivalents, bank loans (excluding capitalised loan arrangement fees) and bank overdrafts, and lease liabilities was £28.0m (2020: £40.8m). This significant decrease in net debt is driven by a strong trading performance delivering improved profits, deployment of effective cash management strategies as well as a small product disposal during the year which has enabled the business to reduce the level of drawdown debt.
Lease liabilities decreased during the year by £2.4m to £10.7m (2020: £13.1m) which represents cash payments in relation to contractual lease obligations, offset in part by £0.3m of notional interest on lease liabilities reported within net finance costs.
Cash conversion for the year ended 30 June 2021 was 104% (2020: 189%), although year-on-year comparison of the percentages has been impacted by the unusual movement in working capital, driven by delayed 2020 payments of UK VAT and payroll tax of £5.7m in the prior year.
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 forwards and swaps subject to Board approval. The Group uses interest rate swap contracts to mitigate part of the interest rate volatility risk. These swaps have resulted in an asset of £0.1m (2020: £0.1m liability) at 30 June 2021.
On 1 July 2021 the Group entered into a number of foreign currency transactions to mitigate possible exchange rate fluctuations on its FY22 financial results. $8.5m USD were sold forward to mature during the 2021/2022 financial year at an average rate of $1.38.
Share capital
During the year nil (2020: 64,350) new ordinary shares of £0.05 were issued. Shares which vested during the year under the Group's Performance Share Plan were settled via the Wilmington Group plc Employee Share Ownership Trust.
In the year the Wilmington Group plc Employee Share Ownership Trust purchased 129,903 ordinary shares for the purpose of future settlement of employee share schemes. At 30 June 2021 it held 329,903 shares (2020: 200,000).
Statement of Directors' responsibilities in respect of the financial statements
The statement of directors' responsibilities below has been prepared in connection with the Group's full Annual Report for the year ended 30 June 2021. Certain parts of the Annual Report have not been included in this announcement as set out in note 1 of the financial information.
We confirm to the best of our knowledge that:
· the consolidated financial statements, which have been prepared in accordance with IFRSs as adopted by the United Kingdom, give a true and fair view of the assets, liabilities, financial position and profit of the Group;
· the management report represented by the report of the Directors, and material incorporated by reference, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face; and
· the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to access the company's performance, business model and strategy.
This responsibility statement was approved by the board of Directors on 17 September 2021 and is signed on its behalf by
Guy Millward
Chief Financial Officer
Consolidated income statement
for the year ended 30 June 2021
Notes
Year ended
30 June 2021
£'000
Year ended
30 June 2020
£'000
Continuing operations
Revenue
4
113,027
113,075
Operating expenses before amortisation of intangibles excluding computer software, impairment and adjusting items
(96,378)
(99,044)
Impairment of goodwill, intangible assets and property, plant and equipment
5a
(14,834)
-
Amortisation of intangible assets excluding computer software
5b
(3,400)
(4,797)
Adjusting items
5b
(2,970)
(625)
Operating expenses
6
(117,582)
(104,466)
Other income - gain on disposal of business operations
11
3,394
-
Other income - gain on disposal of subsidiary
11
770
-
Operating (loss)/profit
(391)
8,609
Net finance costs
7
(1,634)
(2,175)
(Loss)/profit before tax
(2,025)
6,434
Taxation
8
(2,522)
(1,760)
(Loss)/profit for the year attributable to owners of the parent
(4,547)
4,674
(Loss)/earnings per share:
Basic (p)
10
(5.18)
5.33
Diluted (p)
10
(5.18)
5.26
Consolidated statement of comprehensive income
for the year ended 30 June 2021
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
(Loss)/profit for the year
(4,547)
4,674
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to the income statement
Fair value movements on interest rate swaps, net of tax
93
116
Currency translation differences
(1,732)
513
Fair value movements of net investment hedges, net of tax
762
(237)
Other comprehensive (expense)/income for the year, net of tax
(877)
392
Total comprehensive (expense)/income for the year attributable to owners of the parent
(5,424)
5,066
Items in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 8.
Consolidated balance sheet
as at 30 June 2021
Notes
2021
£'000
2020
£'000
Non-current assets
Goodwill
12
65,833
77,876
Intangible assets
13
14,000
19,712
Property, plant and equipment
14
9,277
16,894
Deferred consideration receivable
1,585
2,163
Derivative financial instruments
57
-
Deferred tax assets
1,364
1,189
92,116
117,834
Current assets
Trade and other receivables
15
28,698
25,526
Deferred consideration receivable
250
-
Current tax assets
312
1,314
Cash and cash equivalents
7,374
21,426
Assets held for sale
14
1,588
-
38,222
48,266
Total assets
130,338
166,100
Current liabilities
Trade and other payables
16
(54,959)
(58,495)
Lease liabilities
17
(2,356)
(2,660)
Derivative financial instruments
-
(59)
Borrowings
(3,644)
-
Provisions
18
(461)
-
(61,420)
(61,214)
Non-current liabilities
Borrowings
(20,430)
(48,495)
Lease liabilities
17
(8,386)
(10,461)
Deferred tax liabilities
(2,054)
(2,524)
Provisions
18
(1,381)
-
(32,251)
(61,480)
Total liabilities
(93,671)
(122,694)
Net assets
36,667
43,406
Equity
Share capital
4,380
4,380
Share premium
45,225
45,225
Treasury and ESOT reserves
(701)
(590)
Share based payments reserve
1,390
1,195
Translation reserve
2,069
3,801
Accumulated losses
(15,696)
(10,605)
Total equity
36,667
43,406
Consolidated statement of changes in equity
for the year ended 30 June 2021
Share capital,
share premium,
ESOT shares
and treasury
shares
£'000
Share based
payments
reserve
£'000
Translation
reserve
£'000
Accumulated
losses
£'000
Total equity
£'000
At 30 June 2019
49,506
839
3,288
(10,765)
42,868
Effect of initial application of IFRS 16
-
-
-
(180)
(180)
Tax relating to initial application of IFRS 16
-
-
-
34
34
At 1 July 2019
49,506
839
3,288
(10,911)
42,722
Profit for the year
-
-
-
4,674
4,674
Other comprehensive income/(expense) for the year
-
-
513
(121)
392
49,506
839
3,801
(6,358)
47,788
Transactions with owners:
Dividends paid
-
-
-
(4,378)
(4,378)
Issue of share capital
3
(242)
-
239
-
ESOT share purchases
(497)
-
-
-
(497)
Sale of treasury shares
3
-
-
-
3
Share based payments
-
598
-
-
598
Tax on share based payments
-
-
-
(108)
(108)
At 30 June 2020
49,015
1,195
3,801
(10,605)
43,406
Loss for the year
-
-
-
(4,547)
(4,547)
Other comprehensive (expense)/income for the year
-
-
(1,732)
855
(877)
49,015
1,195
2,069
(14,297)
37,982
Transactions with owners:
Dividends paid
-
-
-
(1,829)
(1,829)
Performance share plan awards vesting settled via ESOT
137
(241)
-
104
-
ESOT share purchases
(263)
-
-
-
(263)
Sale of treasury shares
15
-
-
-
15
Share based payments
-
436
-
-
436
Tax on share based payments
-
-
-
326
326
At 30 June 2021
48,904
1,390
2,069
(15,696)
36,667
Consolidated cash flow statement
for the year ended 30 June 2021
Notes
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Cash flows from operating activities
Cash generated from operations before adjusting items
19
17,290
26,512
Cash flows for adjusting items - operating activities
(339)
(293)
Cash flows from share based payments
9
(16)
Cash generated from operations
16,960
26,203
Interest paid
(1,196)
(1,632)
Tax paid
(2,697)
(4,377)
Net cash generated from operating activities
13,067
20,194
Cash flows from investing activities
Disposal of subsidiary
11
400
-
Disposal of business operations
11
4,144
-
Deferred consideration paid
-
(1,957)
Deferred consideration received
250
200
Cash flows for adjusting items - investing activities
(151)
(217)
Purchase of property, plant and equipment
(1,047)
(538)
Proceeds from disposal of property, plant and equipment
103
27
Purchase of intangible assets
(1,969)
(3,315)
Net cash generated from/(used in) investing activities
1,730
(5,800)
Cash flows from financing activities
Dividends paid to owners of the parent
(1,829)
(4,378)
Share issuance costs
-
(3)
Payment of lease liabilities
(2,530)
(2,392)
Purchase of shares by ESOT
(263)
(497)
Fees relating to new and extended loan facility
(191)
(741)
Increase in bank loans
2,000
14,000
Decrease in bank loans
(29,181)
(7,000)
Net cash used in financing activities
(31,994)
(1,011)
Net (decrease)/increase in cash and cash equivalents, net of bank overdrafts
(17,197)
13,383
Cash and cash equivalents, net of bank overdrafts at beginning of the year
21,426
7,921
Exchange (loss)/gain on cash and cash equivalents
(499)
122
Cash and cash equivalents, net of bank overdrafts at end of the year
3,730
21,426
Reconciliation of net debt
Cash and cash equivalents at beginning of the year
21,426
7,921
Bank overdrafts at beginning of the year
-
-
Bank loans at beginning of the year
(49,082)
(41,790)
Lease liabilities at beginning of the year
(13,121)
-
Net debt at beginning of the year
(40,777)
(33,869)
Net (decrease)/increase in cash and cash equivalents, net of bank overdrafts
(17,696)
13,505
Net repayment/(drawdown) in bank loans
27,181
(7,000)
Exchange gain/(loss) on bank loans
941
(292)
Movement in lease liabilities/(transition to IFRS 16)
2,379
(13,121)
Cash and cash equivalents at end of the year
7,374
21,426
Bank overdrafts at end of the year
(3,644)
-
Bank loans at end of the year
(20,960)
(49,082)
Lease liabilities at end of the year
(10,742)
(13,121)
Net debt at end of the year
(27,972)
(40,777)
Notes to the financial statements
1. Nature of the Financial Statements
The following financial information does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and Financial Statements for the year ended 30 June 2021 on which an unqualified report has been made by the Company's auditors.
Financial statements for the year ended 30 June 2020 have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The 2021 statutory accounts will be delivered in due course.
Copies of the Annual Report and Financial Statements will be made available to shareholders shortly and printed copies will be available from the Company's registered office at 10 Whitechapel High Street, London, E1 8QS.
2. Statement of accounting policies
The preliminary announcement for the year ended 30 June 2021 has been prepared in accordance with International Financial Reporting Standards as adopted by the United Kingdom. The accounting policies applied in this preliminary announcement are consistent with those reported in the Group's Annual Financial Statements for the year ended 30 June 2020. There was no material effect from the adoption of new standards or interpretations in the year ended 30 June 2021.
3. 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:
• impairment of goodwill, intangible assets and property, plant and equipment;
• amortisation of intangible assets excluding computer software;
• adjusting items (included in operating expenses);
• other income - gain on disposal of subsidiary;
• other income - gain on disposal of business operations; and
• net finance costs.
Adjusted profit before tax, adjusted EBITA and adjusted EBITDA reconcile to profit on continuing activities before tax as follows:
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
(Loss)/profit before tax
(2,025)
6,434
Impairment of goodwill, intangible assets and property, plant and equipment
14,834
-
Amortisation of intangible assets excluding computer software
3,400
4,797
Adjusting items (included in operating expenses)
2,970
625
Other income - gain on disposal of business operations
(3,394)
-
Other income - gain on disposal of subsidiary
(770)
-
Adjusted profit before tax
15,015
11,856
Net finance costs
1,634
2,175
Adjusted operating profit ('adjusted EBITA')
16,649
14,031
Depreciation of property, plant and equipment included in operating expenses
3,399
3,199
Amortisation of intangible assets - computer software
2,416
2,080
Adjusted EBITA before depreciation ('adjusted EBITDA')
22,464
19,310
4. Segmental information
In accordance with IFRS 8 the Group's operating segments are based on the operating results reviewed by the Board, which represents the chief operating decision maker.
During the year, the Group reorganised its business into two Divisions (Training & Education and Information & Data).
The Group's dynamic portfolio provides customers with a range of information, data, training and education solutions. The two divisions (Training & Education and Information & Data) 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, Europe (excluding the UK), North America and the Rest of the World.
a) Business segments
Revenue
Year ended
30 June 2021
Profit
Year ended
30 June 2021
Revenue
Year ended
30 June 2020
Profit
Year ended
30 June 2020
£'000
£'000
£'000
£'000
Training & Education
56,211
12,197
56,474
7,933
Information & Data
56,816
9,320
56,601
11,077
Group total
113,027
21,517
113,075
19,010
Unallocated central overheads
-
(4,302)
-
(4,255)
Share based payments
-
(566)
-
(724)
113,027
16,649
113,075
14,031
Impairment of goodwill, intangible assets and property, plant and equipment
(14,834)
-
Amortisation of intangible assets excluding computer software
(3,400)
(4,797)
Adjusting items (included in operating expenses)
(2,970)
(625)
Other income - gain on disposal of business operations
3,394
-
Other income - gain on disposal of subsidiary
770
-
Net finance costs
(1,634)
(2,175)
(Loss)/profit before tax
(2,025)
6,434
Taxation
(2,522)
(1,760)
(Loss)/profit for the financial year
(4,547)
4,674
There are no intra-segmental revenues which are material for disclosure. Unallocated central overheads represent central 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:
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
UK
61,999
65,793
Europe (excluding the UK)
23,304
21,037
North America
15,042
18,042
Rest of the World
12,682
8,203
Total revenue
113,027
113,075
c) Timing of revenue recognition
The timing of the Group's revenue recognition is as follows:
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Revenue from products and services transferred at a point in time
41,583
59,524
Revenue from products and services transferred over time
71,444
53,551
Total revenue
113,027
113,075
The value of revenue recognised in the year which was included in subscriptions and deferred revenue at the start of the year was £31,465,000 (2020: £30,794,000).
5. (Loss)/profit from continuing operations
a) (Loss)/profit for the year from continuing operations is stated after charging/(crediting):
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Depreciation of property, plant and equipment - included in operating expenses
3,399
3,199
Short term and low-value leases
486
308
Amortisation of intangible assets - computer software
2,416
2,080
Loss/(profit) on disposal of property, plant and equipment
2
(7)
Share based payments (including social security costs)
566
724
Amortisation of intangible assets excluding computer software
3,400
4,797
Adjusting items (included in operating expenses)
2,970
625
Gain on disposal of business operations
(3,394)
-
Gain on disposal of subsidiary
(770)
-
Research and development expenditure credit
(290)
-
Impairment of goodwill, intangible assets and property, plant and equipment
14,834
-
Foreign exchange (gain)/loss
(24)
14
Fees payable to the auditors for the audit of the Company and consolidated financial statements
95
87
Fees payable to the auditors and their associates for other services:
- The audit of the Company's subsidiaries pursuant to legislation
182
152
- Audit related other services
15
15
The impairment of goodwill, intangible assets and property, plant and equipment relates to:
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Goodwill
9,873
-
Intangible assets
1,516
-
Property, plant and equipment
3,445
-
14,834
-
b) Adjusting items
The following items have been charged to the income statement during the year but are considered to be adjusting so are shown separately:
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Costs relating to strategic activities
1,128
218
Increase in liability for deferred consideration
-
407
Costs relating to the consolidation of office space
1,842
-
Other adjusting items (included in operating expenses)
2,970
625
Impairment of goodwill, intangible assets and property, plant and equipment
14,834
-
Amortisation of intangible assets excluding computer software
3,400
4,797
Total adjusting items (classified in profit before tax)
21,204
5,422
The costs relating to strategic activities in the year to 30 June 2021 are in respect of strategic reviews of two of the Group's businesses, Central Law Training Limited and Wilmington Inese SL, in addition to strategic costs associated with the disposal of business operations. The costs relating to the consolidation of office space relate to the recognition of an onerous provision in respect of future costs associated with the portion of the head office no longer in use.
6. Operating expenses
Year ended 30 June 2021
Year ended 30 June 2020
Cost of sales
£'000
Administration
£'000
Total
£'000
Cost of sales
£'000
Administration
£'000
Total
£'000
Operating expenses before depreciation and amortisation
86,167
4,396
90,563
89,363
4,402
93,765
Depreciation of property, plant and equipment
3,399
-
3,399
3,199
-
3,199
Amortisation of intangible assets - computer software
2,416
-
2,416
2,080
-
2,080
Operating expenses before amortisation of intangibles excluding computer software, impairment and adjusting items
91,982
4,396
96,378
94,642
4,402
99,044
Amortisation of intangible assets - databases
826
-
826
1,673
-
1,673
Amortisation of intangible assets - customer relationships
1,052
-
1,052
1,309
-
1,309
Amortisation of intangible assets - brands
1,016
-
1,016
1,241
-
1,241
Amortisation of intangible assets - publishing rights and titles
506
-
506
574
-
574
Impairment of goodwill, intangible assets and property, plant and equipment
-
14,834
14,834
-
-
-
Other adjusting items (note 5b)
-
2,970
2,970
-
625
625
Operating expenses
95,382
22,200
117,582
99,439
5,027
104,466
7. Net finance costs
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Net finance costs comprise:
Interest payable on bank loans and overdrafts
1,437
1,587
Unwinding of the discount on royalty payments receivable
(139)
(142)
Bank arrangement fees
-
388
Notional interest on lease liabilities
336
342
1,634
2,175
8. Taxation
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Current tax
UK corporation tax at current rates on UK profits for the year
2,327
1,859
Adjustments in respect of previous years
30
30
2,357
1,889
Foreign tax
993
769
Adjustments in respect of previous years
(21)
(75)
Total current tax
3,329
2,583
Total deferred tax
(807)
(823)
Taxation
2,522
1,760
Factors affecting the tax charge for the year:
The effective tax rate is higher (2020: higher) than the average rate of corporation tax in the UK of 19.00% (2020: 19.00%). The differences are explained below:
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
(Loss)/profit before tax
(2,025)
6,434
(Loss)/profit before tax multiplied by the average rate of corporation tax in the year of 19.00% (2020: 19.00%)
(385)
1,222
Tax effects of:
Impairment of goodwill, intangible assets and property, plant and equipment
2,818
-
Foreign tax rate differences
177
48
Adjustment in respect of previous years
9
(45)
Other items not subject to tax
(230)
328
Effect on deferred tax of change of corporation tax rate
133
207
Taxation
2,522
1,760
Deferred tax assets and liabilities are measured at the rates that are expected to apply in the periods of the reversal.
The Company's profits for this accounting year are taxed at an effective rate of -125.0% (2020: 27.4%).
Included in other comprehensive income are a tax charge of £22,000 (2020: £27,000) and a tax debit of £179,000 (2020: credit of £55,000) relating to the interest rate swaps and net investment hedges respectively.
The tax effect of adjusting items as disclosed in note 10 is a credit of £558,000 (2020: £712,000).
9. Dividends
Amounts recognised as distributions to owners of the parent in the year:
Year ended
30 June
2021
Pence per share
Year ended
30 June
2020
Pence per share
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Final dividends recognised as distributions in the year
-
5.0
-
4,378
Interim dividends recognised as distributions in the year
2.1
-
1,829
-
Total dividends paid
1,829
4,378
Final dividend proposed
3.9
-
3,415
-
10. (Loss)/earnings per share
Adjusted earnings per share has been calculated using adjusted earnings calculated as profit after taxation attributable to owners of the parent but before:
• impairment of goodwill, intangible assets and property, plant and equipment;
• amortisation of intangible assets excluding computer software;
• adjusting items (included in operating expenses);
• other income - gain on disposal of subsidiary; and
• other income - gain on disposal of business operations.
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
(Loss)/earnings from continuing operations for the purpose of basic earnings per share
(4,547)
4,674
Add/(remove):
Impairment of goodwill, intangible assets and property, plant and equipment
14,834
-
Amortisation of intangible assets excluding computer software
3,400
4,797
Adjusting items (included in operating expenses)
2,970
625
Other income - gain on disposal of business operations
(3,394)
-
Other income - gain on disposal of subsidiary
(770)
-
Tax effect of adjustments above
(558)
(712)
Adjusted earnings for the purposes of adjusted earnings per share
11,935
9,384
Number
Number
Weighted average number of ordinary shares for the purposes of basic and adjusted earnings per share
87,603,917
87,590,511
Effect of dilutive potential ordinary shares:
Future exercise of share awards and options
410,301
1,254,878
Weighted average number of ordinary shares for the purposes of diluted and adjusted diluted earnings per share
88,014,218
88,845,389
Basic (loss)/earnings per share
(5.18p)
5.33p
Diluted (loss)/earnings per share
(5.18p)
5.26p
Adjusted basic earnings per share ('adjusted earnings per share')
13.62p
10.71p
Adjusted diluted earnings per share
13.56p
10.56p
Potentially dilutive share options are only considered in relation to adjusted earnings per share as the Group made a basic loss per share.
11. Disposals
In the year ended 30 June 2021 the Group disposed of the following subsidiary and business operations:
Country
Date of disposal
Share/asset deal
Central Law Training Scotland Limited
UK
16 December 2020
Share deal
AP Pensions
UK
28 May 2021
Asset deal
Ark Publishing book list
UK
30 April 2021
Asset deal
The disposals were executed in line with the Group's strategy to simplify its structure and to focus attention on businesses that operate in the GRC and Regulatory Compliance markets. These business operations were classified as continuing operations until their respective disposal dates. In total the Group recognised a gain on disposal of £4.2m presented as adjusting items.
a) Disposals of a subsidiary - Central Law Training Scotland
On 16 December 2020 the Group disposed of Central Law Training Scotland. The disposal was executed by way of the sale of
100% of the equity shares. As at the disposal date, the net assets of Central Law Training Scotland were as follows:
£'000
Property, plant and equipment
71
Trade and other receivables
138
Amounts due from subsidiaries
1,190
Trade and other payables
(247)
Deferred income
(432)
Net assets disposed
720
Directly attributable costs of disposal
100
Gain on disposal
770
Fair value of consideration
1,590
Satisfied by:
Cash and cash equivalents
400
Settlement of intercompany balances
1,190
1,590
b) Disposal of a business operation - AP Pensions
On 28 May 2021 the Group disposed of AP Pensions, a business operation within Wilmington Publishing & Information Limited. At the disposal date, the net assets of AP Pensions were as follows:
£'000
Goodwill
861
Deferred income
(406)
Net assets disposed
455
Directly attributable costs of disposal
295
Gain on disposal
3,344
Fair value of consideration
4,094
Satisfied by:
Cash and cash equivalents
4,094
4,094
c) Disposal of a business operation - ARK Publishing book list
In addition to the above, the Group disposed of the ARK Publishing book list, a business operation within Ark Conferences Limited, on 30 April 2021 for £50,000, settled in cash with net assets of £nil.
12. Goodwill
£'000
Cost
At 1 July 2019
110,256
Exchange translation differences
341
At 30 June 2020
110,597
Disposals
(1,192)
Exchange translation differences
(1,309)
At 30 June 2021
108,096
Accumulated impairment
At 1 July 2019 and 30 June 2020
32,721
Disposals
(331)
Impairment
9,873
At 30 June 2021
42,263
Net book amount
At 30 June 2021
65,833
At 30 June 2020
77,876
At 30 June 2019
77,535
Goodwill arising on business combinations is not amortised but reviewed for impairment on an annual basis, or more frequently if there are indications that goodwill may be impaired. Determining whether the carrying value of acquired goodwill is recoverable is a significant judgment given the material nature of the goodwill balance and the significant assumptions underpinning management's impairment assessment of the Group's cash generating units ('CGUs'). The Group identifies its CGUs on a business operation and geographic level. This is consistent with the way the chief operating decision maker reviews performance.
Indication of impairment
During the year, a decision was taken to discontinue the delivery of a loss-making product line in the Healthcare sub-division. This decision indicated that the associated goodwill may be impaired. Following a review, management concluded that it was appropriate to impair the remaining £1.5m goodwill relating to the investment in the discontinued product. This resulted in a reduction to the carrying value of the UK Healthcare CGU used in the annual impairment review.
Disposal
During the year a pension fund product line within the Healthcare sub-division was disposed of, which resulted in the disposal of the carrying value of goodwill associated with this product line. At the date of disposal the carrying value of this goodwill was £0.9m.
Annual impairment review
The recoverable amount for each CGU has been determined using value in use calculations. These calculations use the pre-tax future cash flow forecasts covering a three year period based on Board approved budgets. Pre-tax cash flows beyond the three year period are then extrapolated using an estimated long term growth rate of 2.0% (2020: 2.0%), providing a 'base case' scenario for the purpose of the impairment review. Key assumptions for the value in use calculations are those regarding discount rates, three year cash flow forecasts and long term growth rates.
Discount rates
Management has applied pre-tax discount rates as follows:
Territory
Year ended
30 June 2021
(%)
Year ended
30 June 2020
(%)
United Kingdom
11.8
11.2
United States
12.9
12.1
Spain
12.4
11.8
France
12.6
12.4
Pre-tax discounts rates are calculated on a company specific participant basis, movements in the pre-tax discount rates for CGUs since the prior year are driven by changes in Company specific market-based inputs. Management considers the pre-tax discount rates to be calculated using appropriate methodology. The rates are in in line with its peers, and the Board views the rates as accurately reflecting the return expected by a market participant.
Three year cash flow forecasts
The three year cash flow forecasts which drive the value in use calculations take into account the impact of Covid-19. They assume a return to face-to-face training or events during the year ended 30 June 2022, albeit with flexibility built into the cost base to reduce the downside impact on profit if restrictions return. Cash flow forecasts also reflect detailed consideration of the current economic environment in the relevant markets, and external projections for wider market recovery from Covid-19. When preparing forecasts management have also benefitted from customer and market insights gained in the year ended 30 June 2021, which was impacted by a full twelve month period of Covid-19 related restrictions. Whilst acknowledging the inherent ongoing economic uncertainty, management believe the cash flows reflect a reasonable scenario on which to base the valuation of CGUs.
Sensitivity to changes in assumptions
The Group has performed sensitivity testing to assess the impact of changes in assumptions on the value in use of each CGUs. The sensitivity analysis performed assessed the impact of pessimistic but reasonably possible changes to future cash flows, long term growth rates and pre-tax discount rates. With the exception of UK Healthcare, all other CGUs retained significant headroom in these sensitised calculations, leading to the conclusion that there is no realistic change of assumption that would result in carrying value to exceed its recoverable amount.
UK Healthcare
The UK Healthcare CGU has a relatively high goodwill carrying value, partly due to its composition of predominantly acquired, rather than internally generated, assets. As a result, the headroom on this CGU has historically been at a lower level than that related to the Group's other assets. The sensitivity analysis performed as part of the annual impairment review demonstrated that reasonably possible changes in the assumptions used resulted in the carrying value of the CGU exceeding its recoverable amount.
Whilst management are confident that the 'base case' cash flows used in the impairment assessment reflect a reasonable and likely scenario on which to base the valuation of CGUs, it also recognises that the uncertain economic environment in which the Group operates presents inherent risk to these forecasts. The healthcare industry in particular, and consequently our Healthcare business, has been disrupted by the Covid-19 pandemic and therefore uncertainty remains about the anticipated timeline for a return to pre-pandemic growth projections in this part of the Group.
Management have therefore produced a set of risk adjusted cash flows, reflecting more prudent growth assumptions in the three year forecasts for the UK Healthcare CGU. These risk adjusted cash flows are based on minimal growth assumptions for mature products, and more conservative growth assumptions for new and emerging products than those reflected in the base case forecast. The risk adjusted cash flows reflect a reduction in revenue growth from 7.6% CAGR to 4.9% CAGR over the 3 year assessment period. Management consider the risk adjusted cash flows to reflect a reasonably possible downside scenario to generate the reasonable minimum value in use for the CGU. The carrying value of the UK Healthcare CGU exceeds this risk adjusted value in use by £8.4m and therefore management have impaired the associated goodwill by this amount.
Sensitivity to changes in assumptions of risk adjusted case
The Group subsequently performed sensitivity testing to assess the impact of changes in assumptions on the revised value in use of the UK Healthcare CGU, as detailed below:
Increase/(decrease) in assumption
%
Effect on value in use calculation
£m
Long term growth rate
(25.0)
(0.7)
Pre-tax discount rate
5.0
(1.0)
Reduction in discounted cash flows
(5.0)
(0.9)
Change to cash generating units
Consistent with the disclosure made in the Group's prior year Annual Report, Interactive Medica has now been included in the UK Healthcare CGU. Management consider this appropriate following the increased integration of the UK Healthcare businesses into one single UK Healthcare business which means it is no longer possible to identify cash flows generated by Interactive Medica independently from other UK Healthcare businesses.
The following table details the net book value of each CGU:
CGU
30 June
2021
£'000
30 June
2020
£'000
UK Healthcare
11,877
21,770
Axco and Pendragon
11,150
11,150
Accountancy
8,307
8,307
Legal
6,830
6,830
AMT
6,203
6,203
Compliance
7,972
7,972
Compliance Week
4,342
4,854
FRA
6,773
7,550
Business Intelligence
2,379
3,240
65,833
77,876
13. Intangible assets
Computer
software
£'000
Databases
£'000
Customer
relationships
£'000
Brands
£'000
Publishing
rights and titles
£'000
Total
£'000
Cost
At 1 July 2019
12,174
16,771
24,969
13,757
30,393
98,064
Additions
3,215
-
-
-
100
3,315
Disposal
(62)
-
-
-
-
(62)
Exchange translation differences
111
24
135
100
-
370
At 30 June 2020
15,438
16,795
25,104
13,857
30,493
101,687
Additions
1,969
-
-
-
-
1,969
Disposal
(2,130)
-
-
-
-
(2,130)
Write-off of fully amortised intangible assets
-
(2,940)
(15,549)
(3,672)
(20,808)
(42,969)
Exchange translation differences
(139)
(90)
(399)
(237)
-
(865)
At 30 June 2021
15,138
13,765
9,156
9,948
9,685
57,692
Accumulated amortisation
At 1 July 2019
7,850
13,810
18,720
6,782
27,689
74,851
Charge for the year
2,080
1,673
1,309
1,241
574
6,877
Disposals
(62)
-
-
-
-
(62)
Exchange translation differences
135
13
73
88
-
309
At 30 June 2020
10,003
15,496
20,102
8,111
28,263
81,975
Charge for the year
2,416
826
1,052
1,016
506
5,816
Impairment
-
-
-
1,516
-
1,516
Disposals
(2,010)
-
-
-
-
(2,010)
Write-off of fully amortised intangible assets
-
(2,940)
(15,549)
(3,672)
(20,808)
(42,969)
Exchange translation differences
(80)
(70)
(276)
(210)
-
(636)
At 30 June 2021
10,329
13,312
5,329
6,761
7,961
43,692
Net book amount
At 30 June 2021
4,809
453
3,827
3,187
1,724
14,000
At 30 June 2020
5,435
1,299
5,002
5,746
2,230
19,712
At 30 June 2019
4,324
2,961
6,249
6,975
2,704
23,213
The impairment of £1,516,000 in the year relates to the assets associated with a discontinued loss-making product line in the Healthcare sub-division.
14. Property, plant and equipment
Land, freehold
and leasehold
buildings
£'000
Fixtures and
fittings
£'000
Computer
equipment
£'000
Motor
vehicles
£'000
Right-of-use assets
Land and buildings
£'000
Total
£'000
Cost
At 30 June 2019
5,531
3,585
3,745
397
-
13,258
Transition to IFRS 16
(273)
-
-
-
11,043
10,770
At 1 July 2019
5,258
3,585
3,745
397
11,043
24,028
Additions
-
126
369
43
2,854
3,392
Disposals
-
(23)
(114)
(63)
-
(200)
Exchange translation differences
2
17
17
-
(43)
(7)
At 30 June 2020
5,260
3,705
4,017
377
13,854
27,213
Additions
468
253
326
-
449
1,496
Disposals
-
(774)
(258)
(60)
(109)
(1,201)
Lease modifications
-
-
-
-
(725)
(725)
Asset transferred to held for sale
(2,243)
(17)
-
-
-
(2,260)
Exchange translation differences
(3)
(45)
(35)
-
(191)
(274)
At 30 June 2021
3,482
3,122
4,050
317
13,278
24,249
Accumulated depreciation
At 30 June 2019
1,284
2,770
3,065
172
-
7,291
Charge for the year
287
263
483
72
2,094
3,199
Disposals
-
(14)
(114)
(52)
-
(180)
Exchange translation differences
(5)
35
(20)
(1)
-
9
At 30 June 2020
1,566
3,054
3,414
191
2,094
10,319
Charge for the year
436
254
421
63
2,225
3,399
Disposals
-
(774)
(159)
(51)
(41)
(1,025)
Lease modifications
-
-
-
-
(337)
(337)
Impairment
523
103
33
-
2,786
3,445
Asset transferred to held for sale
(660)
(12)
-
-
-
(672)
Exchange translation differences
(9)
(84)
(64)
-
-
(157)
At 30 June 2021
1,856
2,541
3,645
203
6,727
14,972
Net book amount
At 30 June 2021
1,626
581
405
114
6,551
9,277
At 30 June 2020
3,694
651
603
186
11,760
16,894
At 30 June 2019
4,247
815
680
225
-
5,967
Included in land, freehold and leasehold buildings is £570,000 (2020: £970,000) of non-depreciated land.
Depreciation of property, plant and equipment is charged to operating expenses within the income statement.
As at 30 June 2021, assets classified as held for sale relate to a building marketed for sale at 30 June 2021 with a carrying value of £1,588,000. Subsequently the assets were sold on 31 August 2021.
The impairment in the year of £3,445,000 relates to the impairment of assets associated with the head office property, recognised as a result of the exercise performed to consolidate the Group's office space.
15. Trade and other receivables
30 June
2021
£'000
30 June
2020
£'000
Current
Trade receivables
23,202
20,752
Prepayments and other receivables
5,496
4,774
28,698
25,526
16. Trade and other payables
30 June
2021
£'000
30 June
2020
£'000
Trade and other payables
24,835
27,030
Subscriptions and deferred revenue
30,124
31,465
54,959
58,495
17. Lease liabilities
The Group enters into leases of buildings in relation to offices & business premises in the geographical locations in which they operate.
The following table shows the discounted lease liabilities included in the Group balance sheets:
30 June
2021
£'000
30 June
2020
£'000
Current
2,356
2,660
Non-current
8,386
10,461
10,742
13,121
A reconciliation of the movement in the right-of-use assets is included in note 14. The interest expense in relation to lease liabilities is included in note 7. Amounts recognised through the consolidated income statement in respect of short term leases and low-value leases are included in note 5. The total cash outflow for leases was £3,352,000 (2020: £3,040,000).
Contracts entered into by the Group have a wide range of terms and conditions but generally do not impose any additional covenants. Extension and terminations options provide the Group with additional operational flexibility. These options are included in the lease term if the Group considers it reasonably certain that the lease will be extended or terminated.
18. Provisions
Property and other
£'000
At 1 July 2020
-
Additional provision in the year
1,842
At 30 June 2021
1,842
£'000
Included in current liabilities
461
Included in non-current liabilities
1,381
1,842
The provision included in the year is in respect of anticipated costs expected to be incurred in relation to the closed proportion of the head office for the period from 1 July 2021 until the end of the contractual lease term. The charge to recognise the provision has been included in adjusting items in the income statement.
The provision is based on assumptions and estimates where the ultimate outcome may be different from the amount provided. The provision reflects the Group's best estimate of the probable exposure as at 30 June 2021. This assessment has been made having considered the sensitivity of the provision for possible changes in key assumptions.
19. Cash generated from operations
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
(Loss)/profit from continuing operations before income tax
(2,025)
6,434
Gain on disposal of subsidiary
(770)
-
Gain on disposal of business operations
(3,394)
-
Adjusting items
2,970
625
Depreciation of property, plant and equipment included in operating expenses
3,399
3,199
Amortisation of intangible assets
5,816
6,877
Impairment of goodwill, intangible assets and property, plant and equipment
14,834
-
Loss/(profit) on disposal of property, plant and equipment
2
(7)
Share based payments (including social security costs)
566
724
Net finance costs
1,634
2,175
Operating cash flows before movements in working capital
23,032
20,027
(Increase)/decrease in trade and other receivables
(3,619)
3,279
(Decrease)/increase in trade and other payables
(2,123)
3,206
Cash generated from operations before adjusting items
17,290
26,512
Cash conversion is calculated as a percentage of cash generated by operations to adjusted EBITA as follows:
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Funds from operations before adjusting items:
Adjusted EBITA (note 3)
16,649
14,031
Share based payments (including social security costs)
566
724
Amortisation of intangible assets - computer software
2,416
2,080
Depreciation of property, plant and equipment included in operating expenses
3,399
3,199
Loss/(profit) on disposal of property, plant and equipment
2
(7)
Operating cash flows before movement in working capital
23,032
20,027
Net working capital movement
(5,742)
6,485
Funds from operations before adjusting items
17,290
26,512
Cash conversion
104%
189%
Year ended
30 June
2021
£'000
Year ended
30 June
2020
£'000
Free cash flow:
Operating cash flows before movement in working capital
23,032
20,027
Proceeds on disposal of property, plant and equipment
103
27
Net working capital movement
(5,742)
6,485
Interest paid
(1,196)
(1,632)
Payment of lease liabilities
(2,530)
(2,392)
Tax paid
(2,697)
(4,377)
Purchase of property, plant and equipment
(1,047)
(538)
Purchase of intangible assets
(1,969)
(3,315)
Free cash flow
7,954
14,285
20. Events after the reporting period
Forward contracts
On 1 July 2021 the following forward contracts were entered in order to provide certainty in Sterling terms of 80% of the Group's expected net US Dollar income:
Currency
Amount (£'m)
Maturity date
Foreign exchange rate
US Dollar
1.0
29 October 2021
1.3792
US Dollar
1.0
30 November 2021
1.3793
US Dollar
1.0
31 December 2021
1.3795
US Dollar
1.0
31 January 2022
1.3801
US Dollar
1.0
28 February 2022
1.3802
US Dollar
2.0
31 March 2022
1.3803
US Dollar
1.5
29 April 2022
1.3805
END
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