Financial results for the year ended 30 June 2018

Chairman's Statement

This is my first Chairman's Statement since taking over from Mark Asplin on 1 May 2018. Mark was a Director for 13 years and Chairman since 2011, and on behalf of the Board I would like to thank him for his significant contribution to the Group.

Strategy

I joined Wilmington at a challenging time for the Group but one which also offers significant opportunities. On the following pages of this announcement you will read about the progress the Group has made over the last year and how it is preparing to address the challenges it is facing. Specifically our prime goal is to achieve organic revenue and profit growth. It is no secret that the Group has found this hard over recent years but much work has already been done to reposition the business and to upgrade the infrastructure on which it operates. 

Over the last four months I have been meeting as many people in the organisation as possible to learn about their businesses, to gain an understanding of the markets in which they operate and to discuss where the growth drivers lie. It is clear to me from these meetings that the Group comprises many businesses which provide highly valuable information and services to their customers. The challenge that we have is determining how best we can accelerate growth and identify where our capital should best be allocated. With this in mind I am working with the management team to review all parts of the business and our plans for growth. 

Results and dividend

Overall financial performance was mixed, with strong cost control meaning we achieved good growth in adjusted profit despite revenue declining slightly on an organic basis. Overall profits have been impacted by one-off costs and by the non-cash impairment of the historical goodwill that we were carrying for the Law for Lawyers business, CLT. Cash generation was strong with net debt remaining unchanged year on year despite the significant investment in Group infrastructure and the purchase in February 2018 of Interactive Medica for £2.2m.

In light of this, and in recognition of the confidence it has in the future prospects of the Group, the Board is maintaining the previous progressive dividend policy that has been in place since 2013/14. The final dividend will be increased 4% to 4.8p  (2017: 4.6p). Taken in conjunction with the increased interim dividend paid in April this takes the full year dividend to 8.8p, up 4% from the 8.5p paid in 2017. This was covered 2.3 times by adjusted earnings per share. It is the Board's intention to continue the progressive dividend policy whilst maintaining dividend cover of two times adjusted earnings per share.   

Acquisitions and disposals

On 12 February 2018 Wilmington acquired the Interactive Medica group of companies ('IM') for initial consideration of €2.5m and further potential deferred consideration of up to €1.6m subject to IM achieving stretching annual revenue targets for the periods to 31 December 2019. 

The addition of IM technology to our existing services not only enhances our existing healthcare product offerings in the UK, but will also increase our ability to access other European markets.

Shortly after the year end, on 18 July 2018, Wilmington sold its specialist credit reporting business ICP to its current management team for £3.0m.  The transaction price will be paid over the next five years. The sale allows Wilmington to focus its resources on its core client communities and secure for shareholders a good return from historic investments. We wish our former colleagues at ICP well as they embark on the next phase of the development of their business.

Acquisitions have been an important part of the Wilmington growth story over recent years. In the immediate future, as explained above, our primary focus will be on deploying capital to achieve organic growth from our existing businesses. In time, we will continue to use acquisitions where we see clear opportunities which support that strategy.  

People

We welcomed our new colleagues from IM into the Group in February. This took our headcount to around 1,000. As a digital information, education and networking business, we are reliant on the quality and professionalism of our people. On behalf of the Board I would like to thank them for their dedication and hard-work over the last twelve months and to wish them every success in the current financial year.  

Board changes

In addition to my own appointment on 1 May 2018, the Board was pleased to welcome Richard Amos who joined as an Executive Director on 1 March 2018.  Richard subsequently succeeded Anthony Foye as Chief Financial Officer on the latter's departure on 1 April 2018. The Board would like to record its gratitude to Anthony for his considerable contribution in the six years he was in post.

Current trading and outlook

In line with the guidance we issued for the current year in our trading update of 6 July, the Group is clearly focussed on improving revenue performance via organic growth. We continue to believe that many of the challenges we experienced in the last year were a result of the significant restructuring that was undertaken during the period. That restructuring is now behind us and at the same time the Group has made significant investments in IT platforms which provide a catalyst for growth.

For the year just started we anticipate achieving underlying revenue growth in each of our divisions albeit at relatively low levels. In total we retain the view, expressed in our trading update on 6 July that revenue growth will be in the low single digit percentage range.  We continue to anticipate costs rising year on year to support that revenue growth and reflecting the non-repeatable nature of certain of last year's costs savings.

Overall the Board remains confident of achieving its expectations for the year just started and in the longer term prospects for the Group. Although representing a seasonally quiet period, the start of the year has reflected our expectations, with organic growth reported in Risk & Compliance and Professional. In Healthcare, although revenue is down reflecting the challenges from last year, sales in the UK in the first two months are flat year on year indicating the shift in momentum that we anticipate delivering over the course of the year.

Part of the strength of Wilmington lies in the stability provided by its breadth of businesses and business models. We operate in markets that have good long term growth characteristics and the divisions are well positioned to service those markets with strong brands, content and services. By focusing on the most attractive opportunities and by executing on our plans we believe we can restore the Group to delivering sustainable underlying revenue and profit growth which, in turn, will deliver significant value for shareholders.      

 

 

 

Chief Executive Review

 

I am pleased to present my report on the year ended 30 June 2018. We have made significant progress over the course of the year with revenue and adjusted operating profit and earnings per share all increasing. We completed the move into our new London head office and upgraded our IT infrastructure, improving both its effectiveness and robustness. We made significant progress on the implementation of our digital platforms. We completed the integration of our UK healthcare assets, including those acquired with HSJ in 2017, into a single UK Healthcare business. And with Interactive Medica we acquired an additional healthcare software platform to strengthen our offering to pharmaceutical clients.

That was all achieved against a backdrop of some difficult trading conditions. With around 50% of Group revenue coming from the provision of information services, the implementation in Europe of the new General Data Protection Regulation ('GDPR') was an important challenge for us. We undertook significant work to prepare for it internally and also faced confusion and nervousness in our external markets as clients, particularly in the healthcare sector, got to grips with what it meant for their business and their ability to use data that we provide. Thankfully, following GDPR's launch on 25 May 2018, although the market is not completely back to historic levels, greater clarity is emerging on the practical implications of the new regulations, with industry best practice becoming established. 

Recognising the market related challenges that the Ark business had in serving the legal support market over a number of years, and following an unsuccessful attempt to sell it, we closed the majority of that business at the start of last year. The remaining elements, which are networking events in the US and UK are now managed within the Healthcare division and we have restated our segmental reporting to reflect this.

Results summary

Against this backdrop Group revenue was up 1% to £122.1m (2017: £120.3m) and adjusted operating profit increased 5% to £24.6m (2017: £23.4m). The adjusted operating margin increased slightly to 20.1% (2017: 19.4%). Much of this growth came from acquisitions including the full year impact of the acquisition of HSJ in 2017. Adjusting for this and at constant currencies, on an 'organic' basis, revenue declined by 3% and adjusted operating profit by 2%. As highlighted in the review of operations below, much of the organic decline came in the Healthcare division, where difficult market conditions combined with the internal impact of significant restructuring activity resulted in declines in the UK healthcare businesses.    

Despite the underlying decline in revenue, the impact on profit was mitigated by some robust cost reduction actions that were taken across the Group. This included reductions in discretionary spending, deferring of certain planned investments and restrictions on recruiting including the replacement of staff leaving the business. As explained in the Financial Review, certain of these actions were one-off in their nature and will not be replicable in the current financial year.      

Strategy

Our strategy remains to provide information, education and networking products to our chosen communities. These are risk & compliance, healthcare and professional - lawyers, accountants and investment bankers. We have chosen these markets as we believe that they offer good sustainable growth opportunities and represent markets where we already have strong brands, products and content. 

Over the last few years much of our growth has come from acquisitions as we have sought to broaden our product and geographic footprint.  We see this work as largely complete and the focus of the Group is now on investing in the existing businesses to provide sustainable organic growth. That process is well underway, with last year seeing a number of key investments that, as set out below, position the Group well for future growth. 

Acquisitions will remain a part of the strategy, albeit of a lower priority for the time being than in the past.  Any acquisitions that we do undertake will be specifically to help accelerate the organic growth potential of existing assets.  We would anticipate them being funded from internally generated cash or from our existing debt facilities, details of which are set out in the Financial Review.

Acquisitions 

In the last year we concluded one relatively small acquisition, the purchase of Interactive Medica. This business was acquired to provide us with a software platform that can be used to deploy the various European information assets that we already provide to clients. It offers a cloud-based insight, CRM and key account management software solution. It provides pharmaceutical clients with the ability to collate, analyse and distribute multiple data sources to their sales force, including sources they have acquired from Wilmington Healthcare.  It allows them to make much greater use of the information assets that they have within their organisations and enables us to become a more critical and better embedded supplier within their organisation. Already clients such as Bayer UK are seeing the benefit of the integrated nature of this offering and we plan to expand that to other top tier pharmaceutical clients over the next few years.            

Vision 2020

Building on the work that we have done over the last three years in integrating the various businesses from across the Group, we have developed a new internal plan to take forward to 2020.

Vision 2020 recognises that personalisation of information is becoming key in the current environment as consumers become ever more bombarded by a plethora of data sources. The vision is that by 2020 Wilmington's chosen communities will benefit from personalised knowledge whenever and wherever they need it. It identifies six key work-streams to make that happen: customer engagement; new product development; information platforms; education platforms; culture and CSR; and communications. Over the next three years these work-streams will be our focus as an organisation to ensure that we develop along a common path.  Ultimately we believe that they will allow us to develop unique and indispensable products and services for our chosen customers that will make us key partners to those communities, enabling us to build a sustainable and valuable business for shareholders.

Investments

During the year we made progress with a number of the investments that we had undertaken as a feature of Project Sixth Gear, the project to accelerate the integration of Wilmington. In total we spent £5.0m on capital expenditure in 2018 (2017: £2.9m). In addition £3.5m (2017: £1.8m) was expensed through the Income Statement in adjusting items as one-off costs ('Opex') associated with various restructuring and investment programmes, mainly related to the London office move and IT infrastructure upgrade. We have no plans for similar adjusting items in the current financial year.  

New London head office  (Capex £2.4m; Opex £3.1m)

We moved into our new London head office in Whitechapel in December. This office, which consolidates two previous locations is now home to around 30% of our global workforce.  It is already providing significant benefits in terms of increased co-operation amongst now co-located teams and generating positive impacts on recruiting. 

Associated with the office move, at the same time, we restructured our IT department and upgraded the IT infrastructure, outsourcing the provision of hosting and support globally to a third-party provider. This upgrade is taking place progressively and as at the end of August, some 90% of the Group's employees are now benefitting from the improved service. 

These investments in infrastructure are not without cost. In total they add around £1.6m per annum to the cost base, of which around 50% was incurred in the last year. However, they were long over-due and without them our ability to operate as a modern digital business was seriously compromised. We are confident that they will deliver significant returns over the medium term.

New product development (Capex £1.0m)

£1.0m was spent on capital investment incurred for new product development. A significant part of this was invested in developing a new information product for the French healthcare market. This product, called APMi, is a French version of a product we acquired with HSJ in 2017.  It provides participants in the French pharmaceutical market with information about key developments with local health services and hospitals. It was launched in July 2018 and the initial response from potential customers has been positive. 

Other new product development largely revolved around supporting the roll out of Totara^©, the group wide Learning Management System ('LMS') that we announced in the prior year.  We had planned to spend £750k last year rolling this system out. In practice, due to the slower progress on revenue growth we deferred part of this spending, incurring around half of that last year, with the rest now planned for the current financial year.  We have however achieved significant progress on the roll-out. There are now 130 courses live on Totara^©, with FRA, UK Healthcare, Accountancy and CLT all live with Totara^© deployments. Over the next financial year we expect to extend that to other businesses across the Group and also to expand the number and ranges of courses provided. 

Providing blended online learning and face-to-face training remains a key element of our strategy. Although the use of online learning is undoubtedly increasing, its adoption is by no means ubiquitous.  Many of our chosen communities continue to value face-to-face learning for its intensity and the networking opportunities that it provides. Being able to supplement focused face-to-face sessions with more flexible online learning resources provides best in class solutions and we will continue to invest in this as we develop our offerings.

Organisation

At the start of last year we welcomed Terry Sweeney into the organisation as the Divisional Director for Professional. Terry has a background in the development of online learning through a number of prior roles.  Over the last twelve months I have worked with Terry to facilitate the integration of the Professional division from the seven discrete businesses from which it was created. That work has progressed well and the division now has much greater cohesion and consistency. This focus has led to better results in the past year.  Going into this financial year, the main focus in Professional is the full integration of the Accountancy business which, whilst under a single management team, still has two separate organisations from its Mercia and SWAT heritage. Plans are well developed for these two organisations to fully integrate over the course of the next twelve months so that Accountancy clients in the UK are offered a single integrated service.

In my review last year, I explained our plan to invest significantly in new staff to drive growth opportunities. Unfortunately, this was not possible, as trading performance required us to take vigorous cost containment actions. We had planned to grow the headcount, mainly in the areas of content development and sales to support the growth plan, but in the event the full time equivalent headcount reduced by 24 to 849 at 30 June 2018 (30 June 2017: 856 plus 17 acquired with Interactive Medica). This was as a result of cost reduction actions taken in recognition of the in-year trading performance. As we go into the current year we anticipate recruiting around 30 new heads across the year to support our growth plans. 

 

Review of operations

Note that variances described below as 'organic' are after adjusting for acquisitions and at constant currency rates.

Risk & Compliance

                                                                                           2018                2017         Absolute           Organic

                                                                                                                                     Variance         Variance               

                                                                                              £'m                  £'m                      %                     %

Revenue                                                                                   

Compliance                                                                      27.4                 27.2                   1%                   2%

Risk                                                                                  15.5                 15.1                   3%                  -2%

Total                                                                                  42.9                 42.3                   1%                   1%

Operating profit                                                                 12.9                 12.3                   5%                   1%

Margin %                                                                           30%                 29%

Business model

Our major compliance business, which was developed organically within Wilmington, is the International Compliance Association ('ICA'), an industry body that we created in 2002 and which offers professional development and support to compliance officers predominantly in the financial services sector. Revenue earned by the business is primarily training income that we receive for running development courses and associated examinations that allow the applicants to achieve their professional accreditation. We now offer 43 accredited qualifications, ranging from entry level 'affiliates' up to post graduate diplomas and masters degrees.  These accreditations are awarded in association with the University of Manchester's Alliance Manchester Business School and we retain a panel of independent academic professionals who teach, set exams and carry out assessments. Additional revenue comes in the form of subscriptions paid by the professional members for their accreditation. These are either paid individually, or increasingly via corporate subscriptions maintained by their employers. In total, revenue from ICA and associated training accounts for around 55% of the total Compliance revenue.

Additional revenue in Compliance is earned through running face-to-face and online courses for in-house programmes for financial institutions and wealth managers. The material for these courses is developed by our own internal R&D team, and we own the associated intellectual property. Revenue is earned per course attendee. Further revenue is earned from subscription services including provision of detailed information on regulations in the UK pensions industry and subscriptions to Compliance Week, the premium industry journal for US and European compliance professionals. The Compliance Week brand also generates revenue from lead generation to the compliance community and from running industry networking events.    

The Risk businesses serve the global insurance industry. Services provided include in-depth regulatory information and market intelligence and analysis. In addition, the division provides networking events and training specifically focussed on the Spanish insurance market. Revenue is predominantly earned through subscriptions to the information and analysis services and from attendance fees and sponsorship at the networking events and training courses.    

Market

The overall market for compliance remains strong, with increasing demand for regulation across the financial services sector. This is helping drive increased interest in related professional qualifications. The industry is however maturing which is changing how organisations manage their compliance needs. The creation of more internal teams at financial services institutions means that employee wide training is tending now to be conducted by in-house teams rather than being outsourced as was previously the case.  For us, this is resulting in a shift in revenue away from the large multi attendee programmes that Wilmington has previously provided to more bespoke development and 'train the trainer' programmes. Aside from this, consolidation of the wealth management industry and the maturing of the defined benefit pension industry in the UK has meant that market conditions for the segments addressed by our Compliance business have been largely flat.

The principal feature of the risk market has been consolidation amongst the major insurance industry players which has resulted in some reduction in addressable market.  Additionally, traditional insurers have been impacted by the entry into the market of new 'InsurTech' players who in many cases are seeking to disrupt the existing market. Offsetting this, the underlying demand for insurance products continues to grow, with newer threats such as cyber risk gaining increased attention. Overall this is helping to balance the market for the services we provide.   

Trading performance

Against this backdrop, the overall Risk & Compliance division performed well, delivering 1% absolute and organic revenue growth. 

Revenue in the Compliance businesses grew 2% organically. This growth came primarily from the ICA and related training that grew organically 5% despite the effect of declines in the major in-house programmes. The growth was driven in part by the success of the professional membership scheme that we introduced in the ICA in the prior year. Accredited paid memberships increased by around 50% to over 12,000 and the mix improved as an increasing number of participants progressed to higher level accreditations.  Additionally the business benefited from a programme of geographic expansion, particularly in Asia Pacific, where for example, work with the Malaysian financial services regulator saw an encouraging uptake in local public and in-house training courses. 

Other Compliance businesses were overall flat, with growth in Compliance Week offset by a decline in training for wealth managers. Revenue in pensions compliance was essentially flat. In recognition of the market challenges in the wealth management area we have restructured that business, with new management, a closer operational integration with the other compliance businesses and an ongoing refresh of course materials. This includes the development of more online learning which we believe will open up new markets in what is geographically a very diverse industry. 

Our strategy with Compliance Week has been to build up its position at the heart of its community and hence reduce dependence on traditional publishing income. That has been successful over the last year with further revenue from lead generation services developed through its strong position in the industry. Additionally increased revenue came from associated events, including a very successful flagship annual conference held in May in Washington DC and the growing Compliance Week Europe event held in November each year. The appointment of a new editorial team just prior to the year end has been aimed at improving online content for its digital publication and with it the value proposition to subscribers to drive further growth.  

The Risk businesses overall reported a 2% organic decline in revenue. This was in part driven by the credit referencing business, ICP which was affected by trading weakness in its Middle Eastern customer base resulting in a 7% organic decline.  We subsequently sold this business shortly after the year end. 

Axco, our insurance information business also had a challenging year, as consolidation in its customer base resulted in a 2% reduction in revenue at constant currency, despite 4% growth overall. Going forward we have a new management team running the business who are seeking to widen the product portfolio and enhance the value generated from the unique database of global information that the business owns. 

Inese, our Spanish insurance industry expert, had a good year, recording 2% organic growth.  Much of this came from the investment made in the prior year in opening an office in Barcelona where we have run increased numbers of training courses and events targeting the local market.

Divisional operating profit was up 5% in absolute terms to £12.9m (2017: £12.3m). On an organic basis the operating profit increase was 1% as the organic revenue growth fed through to margin. Operating margin was up slightly to 30% (2017: 29%) as the currency benefits and strong cost control offset inflation. In particular, a focus on higher margin products in Compliance Week has resulted in an improved mix that boosted underlying margins. 

 

Healthcare

                                                                                           2018              2017*         Absolute           Organic

                                                                                                                                     Variance         Variance               

                                                                                              £'m                  £'m                      %                     %

Revenue                                                                                   

European Healthcare                                                        27.8                 23.8                 17%                  -8%

US Healthcare                                                                    8.9                 10.7                -17%                 -12%

Other Information businesses                                             7.9                  8.0                  -1%                   -2%

Total                                                                                   44.6                 42.5                  5%                   -8%

Operating profit                                                                  9.9                    9.4                   5%                    -7%

Margin %                                                                           22%                 22%

* 2017 comparatives have been restated to include business lines previously managed within Professional

Business model

Wilmington's businesses which serve the healthcare community offer a range of products predominantly around the provision of market and customer intelligence. Wilmington's Healthcare division combines these information assets with others that provide similar services to a number of other communities including charities and not for profit organisations.

Wilmington's European Healthcare businesses operate predominantly in the UK and France, although with the recent acquisition of Interactive Medica, we now have the ability to serve a wider pan-European market.  Services provided include the provision of deep insight information on the UK and French health sector markets that enable participants in those markets to better understand and connect with their customers.  Additionally we provide market participants with online education in the workings of the UK healthcare industry and, following its acquisition in 2017, we publish the Health Service Journal ('HSJ') the leading online publication in the UK for Healthcare leaders. Associated to that we organise networking and training events including the flagship HSJ Awards. The majority of revenue in this area is earned through subscription services either for the provision of information or for access to regular publications and training courses.  Additionally, revenue from certain information provided on a bespoke basis is recognised when delivered.  Events are typically funded by supplier sponsorship although this is occasionally augmented by delegate charges.

The US Healthcare businesses predominantly represent the industry events that were acquired with FRA in July 2015.  These serve the US healthcare and to a lesser extent the US financial services communities.  The prime brand is the RISE series of events that address the Medicare and Medicaid markets, for which the flagship event is RISE Nashville which takes place in March each year.  Revenue from these events is generated both through sponsorship and delegate sales. 

The Other Information businesses represent a portfolio of legacy products including data suppression and charity information.  They include services that are increasingly being used by organisations to help prevent identify fraud.  Revenue is traditionally earned through subscription to the relevant data feed.

Markets

Generally, spend on healthcare globally is increasing due to well publicised demographic changes.  There is increasing pressure on funding sources, either public or private which is resulting in significant industry-wide efficiency initiatives.  These 'value based' healthcare initiatives rely on perceptive insight into the healthcare market to ensure that investment, treatments, drugs and marketing effort are all tightly focussed to be as effective and efficient as possible.  The businesses that Wilmington owns in this area provide that insight and hence we believe are well positioned to deliver long term growth.

Over the last twelve months provision of these services has been impacted by the enactment of new European data protection regulations 'GDPR', which tighten regulation around the management and use of personal data.  Ultimately this will be a good thing for our industry, as it will raise the standard required by companies providing such services and provide additional barriers to new entrants. However in this first year of adoption it has caused some market disruption, as purchasers and users of the data, our customers, defer plans as they seek to understand how the new regulations affect them and their programmes. We saw the impact of this in the first half of the year, and it continued into the second half and up to the launch of GDPR in May.  Subsequently, the market is settling down as custom and practice are being recognised, but it continues to have a diminishing effect on year on year comparisons.

Trading performance

Overall revenue for the Healthcare division increased 5% to £44.6m (2017: £42.5m). This comparison is however affected by both currency movements and more significantly by the effect of the acquisitions of HSJ and Interactive Medica in January 2017 and February 2018 respectively.  Adjusting for these factors, underlying revenue decreased on an organic basis by 8%.  Both the UK and US healthcare businesses saw significant organic declines, with the Other Information businesses showing a 2% reduction reflecting a decline in some of its older legacy products offset by good growth from the newer identity fraud prevention products. 

The European Healthcare businesses combined saw an 8% organic revenue reduction, with a more significant decline in the UK offsetting 4% growth in France. The UK decline was in part caused by market conditions as we felt the impact of the GDPR related delays noted above.  However in addition to this, levels of business activity were affected by the actions that we took to integrate the various UK healthcare assets that existed within Wilmington into a single UK Healthcare business.  Organisationally we restructured the sales organisation to move from a product focus to an account sales model.  Operationally we integrated all of the entities and implemented a new CRM system.  We transitioned the HSJ operations from the systems and processes of its previous owners onto new Wilmington infrastructure and we relocated significant numbers of staff to new offices, including as part of the London head office move. 

This focus on operational integration impacted sales effectiveness which led to a greater than expected effect on growth plans.  Combined with the market factors described above, this resulted in the reduction in UK revenue.  Actions on the cost base were taken to mitigate the effect on profit including reductions in discretionary spending and hiring restrictions.  As discussed in our trading update in July, this will have a consequential effect in terms of growth aspirations for the coming year. 

Revenue in the US Healthcare businesses saw a 12% organic reduction although this reflected a deliberate plan.  At the time of its acquisition, FRA, which makes up the majority of this business, was consistently adding more events to drive top-line growth.  Whilst this was good for revenue, many of the events that were added were proving only marginally profitable.  Having run them for a couple of years it became apparent to us that there was not the long-term appetite for many of these events amongst either sponsors or delegates and indeed a number were proving harder to sell to both customer bases.  As a result we took the decision in the year to rationalise our portfolio and remove the cost that supported it.  The number of events was reduced from 89 to 56 and this resulted in the significant reported reduction in revenue. However associated cost savings more than offset this such that the operating profit made by the business increased organically by around 30% and brought the margin back to in excess of 20%.  Part of that increased margin was also a result of the success of the RISE franchise of events that are at the core of the business's ongoing programme.  RISE now comprises six related events across the year, accounting for more than half of the business's revenue and operating profit.  Building on the RISE franchise, we launched a RISE Institute, to develop further the community offering.  All delegates to the RISE events are invited into the RISE Institute, which uses an online presence to offer industry updates and relevant online education hosted through the Totara^© LMS platform.  We aim to continue to develop the RISE community in future years.

Operating profit in the Healthcare division increased 5% in absolute terms to £9.9m (2017:  £9.4m).  On an underlying basis it reduced 7%, in line with revenue.  The potential impact of the revenue reduction was mitigated by significant cost reduction actions as described above.  Operating margin remained unchanged at 22%.       

 

 

Professional

                                                                                           2018              2017*         Absolute           Organic

                                                                                                                                     Variance         Variance               

                                                                                             £'m                  £'m                      %                     %

Revenue                                                                                   

Ongoing businesses                                                            34.3                 34.1                   1%                   1%

Ark business - closed                                                           0.3                    1.4                                                 

Total                                                                                    34.6                 35.5                  -3%                  -2%

Operating profit                                                                     6.2                    6.1                  2%                   2%

Margin %                                                                             18%                 17%

* 2017 comparatives have been restated to exclude business lines now managed within Healthcare

Business models

The Professional division was created at the end of the prior year through the integration of the previous Legal and Finance divisions.  It predominantly provides education and training for professionals employed in three target communities; accountancy firms, law firms and investment bankers.  It runs face to face courses and provides online learning for these communities. It provides training at various levels including inducting new joiners to the investment banking industry, providing continuing professional development for existing qualified lawyers and accountants and in the case of the legal profession training their clients for interaction with the legal system. It additionally provides technical support to accountancy firms which allows them to keep abreast of technical developments and changes in tax law as well as promoting the services they offer around those activities 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. Investment banking is of course a global industry, and as such Wilmington's business in that area has an international presence, with centres in Europe, North America and Asia Pacific.

Around half the revenue in the Professional division is earned through subscription services for ongoing training support and other related activities, with the rest through one-off course attendance fees.

Markets

The markets within the areas of professional education that Wilmington serves are generally considered to offer the opportunity of low single digit medium term growth rates. 

Over the last twelve months, accountancy markets were reasonably flat. The profession in the UK continues to grow, although consolidation amongst smaller firms had some impact in terms of the wider support services that Wilmington provides. Additionally the low level of new accounting standards in the UK and a relatively stable backdrop in terms of tax legislation resulted in some cyclical decline in terms of demand for training courses. 

The markets for the legal community were mixed. The business continues to suffer from the removal of requirement for CPD hours for lawyers in England and Wales which came into full effect in October 2017. This impacted our Law for Lawyers products. In addition, as discussed in last year's Annual Report, at the start of the year, we decided to close the Ark business that had targeted the legal support markets in the UK and the US. The only elements of that business that we retained were certain industry events that the business ran alongside its training products. These, along with other US financial services events, are now being managed within the events businesses in the Healthcare division and the comparative figures have been adjusted to reflect this in both divisions.

The market for investment banking continues to be challenging. Banks and other financial institutions continue to increase the numbers of new recruits into the industry that need training. However balancing that, they continue to focus hard on cost control, resulting in strong competition in the training market. This was particularly apparent in the Asia Pacific region in the year.

 

Trading performance

Overall revenue for the Professional division was down 3% at £34.6m (2017: £35.5m). On an organic basis the reduction was 2%.  All of this reduction can be attributed to the decision to close the Ark business. Adjusting for that, the underlying revenue performance across Professional would have been marginally positive, with growth in Accountancy offsetting a smaller decline in Investment Banking. After adjusting for the Ark closure, Legal was flat.

Despite relatively flat market conditions described above, Accountancy achieved steady growth. This came in part from the synergy benefits of the combination of the Mercia and SWAT businesses following the latter's acquisition in 2016. 

The Legal businesses had a mixed year. Strong growth was achieved in the La Touche business that serves the Irish legal and compliance community as we continue to make good progress in that area as the local economy grows. Conversely, the Law for Lawyers business in England and Wales continues to be impacted by the changing CPD requirements. In recognition of that we are changing the focus of the business, reducing CPD related networking events and investing in online learning programmes that we believe offer a sustainable growth opportunity. These programmes will be launched in the current year utilising the Totara^© LMS that we are rolling out across the Group. The UK Law for Non-Lawyers business, Bond Solon, also had a good year, particularly in the second half as it benefitted from courses for training witnesses at tribunals. It also developed a programme to train expert witnesses in the new GDPR requirements which proved highly popular. 

Investment Banking, through the AMT business, suffered from difficult trading conditions in Asia Pacific. These were however partly offset by better performance in Europe and North America where the business showed a good level of recovery from the challenges of the previous year. The new management team that we have in Asia Pacific has made encouraging progress and we have seen improving trading performance in that region towards the end of the financial year.

Overall across the division, despite the revenue reduction, operating profit was healthier with an absolute and organic growth of 2% to £6.2m (2017:  £6.1m). Operating margin was up slightly to 18% (2017: 17%). The improvement in operating profit represents a number of factors including cost savings in Accountancy where the combination of the Mercia and SWAT accountancy businesses allowed a more efficient use of resources such as training facilities. In addition, savings from closure of the loss-making Ark businesses offset the increased costs of the new divisional management.

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 £0.1m to £3.8m (2017: £3.9m). The reduction related to lower bonus provisions offset by the higher office space costs incurred by the central team. 

 

Financial review

Adjusting items, measures and adjusted results

Reference is made in this financial review to adjusted results as well as the equivalent statutory measures. Adjusted results in the opinion of the Directors can provide additional relevant information on our future or past performance where equivalent information cannot be presented using financial measures under IFRS. Adjusted results exclude adjusting items, profit on disposal of property plant and equipment (to the extent it is material or significant in nature), impairment of goodwill and intangible assets and amortisation of intangible assets (excluding computer software).

 

	2018	2017	Absolute variance		Organic variance
	£'m	£'m	£'m	%	%
Revenue	122.1	120.3	1.8	1%	-3%
Adjusted EBITA	24.6	23.4	1.2	5%	-3%
Margin %	20.1	19.4

 

Revenue

For the twelve months ended 30 June 2018 revenue increased by 1% (£1.8m) to £122.1m (2017: £120.3m) or 2% on a constant currency basis.  The Group's major non-Sterling revenues are in US Dollars and Euros and on average over the period both these currencies weakened against Sterling. Reported revenue was also impacted by acquisitions, with £5.4m combined coming from the full year effect of the 2017 acquisition of HSJ and the four and a half months that we owned Interactive Medica. Adjusting for this and for the fluctuations in exchange rates, organic revenue declined 3% overall as explained in the Review of Operations above.

The Group's strategy is to increase our international footprint.  However in the year, revenue from UK customers increased to £72.0m or 59% of total revenue (2017: £68.6m or 57%). The change primarily reflects the full year impact of HSJ which serves mainly UK based customers.

 

Operating expenses before adjusting items, amortisation and impairment

Adjusted operating expenses, i.e. before adjusting items, amortisation of intangible assets (excluding computer software) and impairment, were £97.5m (2017: £97.0m) up 1% or £0.6m. The analysis is however significantly affected by acquisitions and closures, which added a net £2.5m, with costs from acquisitions adding £3.9m to the costs, offset by a £1.4m decrease from the closure of Ark.

Within adjusted operating expenses, employee costs (salaries and bonuses, social security and pension costs and share based payments), were down £0.2m overall at £50.0m (2017: £50.2m), whilst non-employee costs increased £0.7m to £47.5m (2017:  £46.8m). 

After adjusting for acquisitions and closures, employee costs reduced by £1.9m during the year. The reduction included a decrease in bonuses of £1.2m and a £0.7m net decrease in salaries due to headcount reductions (including £0.3m related to the rationalisation of FRA) offset by inflationary increases for existing employees. The headcount reductions reflected planned departures as a result of a number of restructuring programmes including the outsourcing of the IT function.  It also reflected the outcome of cost reduction actions that we undertook in the year to reflect the in-year revenue performance which included restrictions on new hires and delayed replacement of vacancies. Of the cost reductions, we anticipate that around half of the bonus reduction and a similar amount of the headcount reduction will not be repeatable in the current financial year.       

The entire increase in non-employee costs of £0.7m can be attributed to the impact of acquisitions and closures. The rationalisation of FRA courses resulted in a net saving of non-employee costs of £1.7m with this offset by increases including £0.3m of GDPR compliance costs, £0.8m of operational costs (including IT costs) for the new London office incurred in the second half, and general inflation increases.   

Adjusted operating profit ('Adjusted EBITA')

As a result of these changes in revenue and adjusted operating expenses, adjusted EBITA was up £1.2m (5%) to £24.6m (2017: £23.4m). Adjusted operating margin (adjusted EBITA expressed as a percentage of revenue) increased to 20.1% (2017: 19.4%).

 

Amortisation excluding computer software

Amortisation of intangible assets (excluding computer software) was £6.4m, compared to £6.0m in the previous year. The increase reflects the acquisition made in the period and a full year impact of the prior year acquisition of HSJ.

Impairment of goodwill and intangible assets

Following a review of the goodwill being carried in relation to the Law for Lawyers business, CLT, an impairment charge of £8.6m has been made in the year to impair its carrying value to nil.  CLT was acquired in May 1999 and the review concluded that whilst the CLT business retains significant value, that value is no longer attributable to the goodwill from that time.  

 

Adjusting items within operating expenses

Adjusting items within operating expenses were £4.6m (2017: £3.5m). 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  These items are mainly £3.1m (2017: £1.0m) associated with the move into the new London head office, including associated IT restructuring costs.  They also include £0.7m of acquisition costs (2017: £1.6m) mainly related to the acquisition of Interactive Medica, a £0.3m increase in deferred consideration (2017: £0.1m) and £0.4m in respect of restructuring and rationalisation costs which have been identified as meeting the Group's criteria for adjusting items. In the period a further £1.1m (2017: £0.6m) of restructuring and rationalisation costs have been incurred which are considered to be in the ordinary course of business and have been included in adjusted operating expenses.   

Operating profit ('EBITA')

After the various adjusting items detailed above, operating profit was £5.0m.  This was down £12.8m from £17.8m in 2017.  In addition to the reasons described above, the reduction was also due in part to the one-off gain on sale of a leasehold property in 2017 of £6.3m not being repeated in 2018.  

 

Finance costs

Finance costs remained constant at £2.0m. The impact of an increase in interest rates affecting the portion of the loan not subject to an interest rate hedge was offset by a £10m reduction in the debt facility which resulted in lower non-utilisation fees.

 

Profit before taxation

After finance costs, profit before tax was £3.0m (2017: £15.8m). Adjusted profit before tax was up 6% to £22.6m (2017: £21.4m). 

Taxation

The tax charge was £2.8m (2017: £3.0m). The tax charge was essentially flat year on year despite the significant fall in profit before tax as many of the items that resulted in the profit reduction are not deductible for tax purposes and hence impact the effective tax rate. The overall effective tax rate⁶ is 23.8% (2017: 16.4%). This rate increase is also due to the relatively low effective tax rate associated with the leasehold property disposal in 2017. These impacts have offset a natural reduction due to lower corporation tax rates in the UK and US. The underlying tax rate⁷ which ignores the tax effects of adjusting items decreased to 20.8% from 22.4% in 2017 due to the fall in UK and US tax rates. It is expected that this rate will decrease further in the near future as the impact of lower corporation tax rates in the US continues to benefit profit generated in that country. 

Earnings per share

Adjusted basic earnings per share increased by 8% to 20.49p (2017: 19.05p), owing to the increase in adjusted profit before tax and a lower underlying tax rate on an essentially unchanged number of issued ordinary shares. Basic earnings per share was 0.25p compared to 14.72p in 2017 due to the fall in profit after tax.

Balance Sheet

Non-current assets

Goodwill decreased by £8.9m from £86.0m to £77.1m primarily due to the CLT impairment of £8.6m in the year that is described above.

Intangible assets decreased by £4.6m from £31.9m to £27.3m due to amortisation of £7.7m offset by £1.5m arising from the acquisition of Interactive Medica and other additions of computer software of £1.9m. These additions included £0.6m of internally generated assets and £0.4m associated with the investment in digital platforms, with the balance a mixture of off-the shelf software and upgrades to existing technology platforms.

Property, plant and equipment increased by £2.1m to £6.5m (2017: £4.4m) reflecting additions of £3.4m, of which £2.7m related to the fit out of the new London head office, offset by depreciation of £1.4m.

Trade and other receivables

Trade and other receivables were down £0.2m at £28.2m (2017: £28.4m). Acquisitions added £0.2m but this was offset by more efficient cash collection following the relocation of the Group's credit control function to Basildon in the prior financial year, and the consolidation of local credit control functions into this new location during the current financial year.

6The effective tax rate is calculated as the total tax charge divided by profit before tax after adding back impairment charges.

7The underlying tax rate is calculated as one minus the adjusted profit after tax divided by the adjusted profit before tax.

Trade and other payables

Total balances decreased from £52.3m to £51.1m. Within this subscriptions and deferred revenue decreased by £2.3m or 8% to £24.7m (2017: £27.0m). This was largely due to a £1.4m reduction in the Healthcare business, caused by the lower level of business activity combined with reductions due to the rationalisation at FRA and a change in the contracting model for certain digital data products. The closure of Ark resulted in a further £0.3m reduction, with invoicing timing differences in Axco accounting for the remainder. The remaining trade and other payables increased by £1.0m to £26.4m (2017: £25.4m) due to acquisitions and the timing of supplier payments.

 

Current tax liabilities

Current tax liabilities decreased from £1.9m to £0.7m reflecting the corporation tax owed on the sale of the leasehold property at the previous year end which was settled during the year.   

Deferred consideration

The liability for deferred consideration in total was £0.1m up on the 2017 total liability to £2.6m. Movements during the year included an increase of £0.3m relating to the provisions for SWAT and Evantage offset by payments of £0.2m in the year in respect of Evantage.

Deferred consideration of up to €1,600,000 is potentially payable in relation to the acquisition of Interactive Medica over the next two years. This is subject to the continued employment of a key member of the management team and IM achieving a challenging revenue target over the two-year period ending 31 December 2018 and 31 December 2019. As this consideration is linked to employment any liability will be built up through the Income Statement in adjusting items in the period it relates to. At year end there is no liability recognised in relation to Interactive Medica.

 

Net debt and cashflow

Net debt, which includes cash and cash equivalents, bank loans (excluding capitalised loan arrangement fees) and bank overdrafts, was £39.6m (30 June 2017: £40.0m.). Cash conversion of 105% (2017: 114%) was offset by acquisition costs of £2.2m and by one-off cash outflows related to the new London head office of £2.4m of capex and £3.1m of adjusting items included in the income statement. 

In support of the acquisition of HSJ the Group had increased its debt facility to £85.0m from £65.0m on 17 January 2017 under the accordion provision of the loan agreement. On 24 November 2017 this facility was reduced by £10.0m to £75.0m. Net debt at 30 June 2018 represented 53% of our debt and overdraft facility of £75m. The loan facility is repayable on 1 July 2020.

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 and a liability of £0.4m at 30 June 2018 (2017: £0.7m liability).

On 2 July 2018 the Group entered into a number of foreign currency transactions to mitigate possible exchange rate fluctuations on its current year financial results. $13.0m USD were sold forward to mature during the 2018/19 financial year at an average rate of $1.33 and €3.0m EUR were sold forward at an average rate of €1.12 with similar maturities. 

Share capital

During the year 166,099 new ordinary shares of £0.05 were issued in settlement of shares vesting under the Group's Performance Share Plan. This resulted in an increase to the number of ordinary shares outstanding at 30 June 2018 to 87,414,073 (2017: 87,247,974).

Dividend

A final dividend of 4.8p per share (2017: 4.6p) will be proposed at the AGM. If approved, it will be paid on 16 November 2018 to shareholders on the register as at 19 October 2018, with an associated ex-dividend date of 18 October 2018. This will give a full year dividend of 8.8p (2017: 8.5p) and dividend cover of 2.3 times (2017: 2.2 times). 

Statement of directors' responsibilities

The statement of directors' responsibilities below has been prepared in connection with the Group's full annual report for the year ended 30 June 2018. Certain parts of the annual report have not been included in this announcement as set out in note 1 of the financial information.

We confirm to the best of our knowledge that:

 

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

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

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

 

This responsibility statement was approved by the board of Directors on 11 September 2018 and is signed on its behalf by

 

Richard Amos
Chief Financial Officer

 

 

 

Consolidated Income Statement for the year ended 30 June 2018

	Notes			Year Ended 30 June 2018 £'000		Year Ended 30 June 2017 £'000
Continuing operations
Revenue	4			122,092		120,329
Operating expenses before amortisation of intangibles excluding computer software, impairment of goodwill and intangible assets and adjusting items				(97,532)		(96,977)
Amortisation of intangible assets excluding computer software	5b			(6,432)		(6,028)
Impairment of goodwill and intangible assets	5b			(8,561)		(2,366)
Adjusting items	5b			(4,573)		(3,468)
Operating expenses	6			(117,098)		(108,839)
Other income - gain on sale of leasehold property	5a			-		6,333
Operating profit				4,994		17,823
Finance costs	7			(1,969)		(1,961)
Profit before tax				3,025		15,862
Taxation	8			(2,763)		(2,988)
Profit for the year				262		12,874
Attributable to:
Owners of the parent				215		12,836
Non-controlling interests	20			47		38
				262		12,874
Earnings per share attributable to the owners of the parent:
Basic (p)	10			0.25		14.72
Diluted (p)	10			0.24		14.62
Adjusted earnings per share attributable to the owners of the parent:
Basic (p)	10			20.49		19.05
Diluted (p)	10			20.34		18.91

 

 

 

 

Consolidated Statement of Comprehensive Income for the year ended 30 June 2018

	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Profit for the year	262	12,874
Other comprehensive income/(expense):
Items that may be reclassified subsequently to the Income Statement
Fair value movements on interest rate swaps, net of tax	339	431
Currency translation differences	(896)	939
Net investment hedges, net of tax	177	(395)
Other comprehensive (expense)/income for the year, net of tax	(380)	975
Total comprehensive (expense)/ income for the year	(118)	13,849
Attributable to:
- Owners of the parent	(165)	13,811
- Non-controlling interests	47	38
	(118)	13,849

 

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

 

 

 

Balance Sheet as at 30 June 2018

		Group
	Notes	2018 £'000	2017 £'000
Non-current assets
Goodwill	12	77,103	86,028
Intangible assets	13	27,305	31,911
Property, plant and equipment	14	6,463	4,444
Deferred tax assets		458	820
Derivative financial instruments	17	113	-
		111,442	123,203
Current assets
Trade and other receivables	16	28,233	28,444
Cash and cash equivalents		10,789	10,687
		39,022	39,131
Assets held for sale	15	317	-
		39,339	39,131
Total assets		150,781	162,334
Current liabilities
Trade and other payables	18	(51,114)	(52,330)
Current tax liabilities		(722)	(1,932)
Deferred consideration - cash settled		(1,320)	(177)
Borrowings	19	-	(925)
		(53,156)	(55,364)
Non-current liabilities
Borrowings	19	(50,380)	(49,353)
Deferred consideration - cash settled		(1,286)	(2,305)
Derivative financial instruments	17	(356)	(662)
Deferred tax liabilities		(3,087)	(4,585)
Provisions for future purchase of non-controlling interests		-	(100)
		(55,109)	(57,005)
Total liabilities		(108,265)	(112,369)
Net assets		42,516	49,965
Equity
Share capital		4,371	4,362
Share premium		45,225	45,225
Treasury shares		(96)	(96)
Share based payments reserve		1,108	898
Translation reserve		2,645	3,541
(Accumulated losses)/retained earnings		(10,819)	(4,051)
Equity attributable to owners of the parent		42,434	49,879
Non-controlling interests	20	82	86
Total equity		42,516	49,965

 

 

 

Statement of Changes in Equity for the year ended 30 June 2018

	Share capital, share premium and treasury shares   £'000	Share based payments reserve £'000	Translation reserve £'000	(Accumulated losses)/ retained earnings £'000	Total £'000	Non-controlling interests (note 20) £'000	Total equity £'000
Group
At 30 June 2016	49,478	886	2,602	(10,116)	42,850	153	43,003
Profit for the year	-	-	-	12,836	12,836	38	12,874
Other comprehensive income for the year	-	-	939	36	975	-	975
	49,478	886	3,541	2,756	56,661	191	56,852
Dividends	-	-	-	(7,150)	(7,150)	(105)	(7,255)
Issue of share capital	13	(466)	-	453	-	-	-
Share based payments	-	478	-	-	478	-	478
Tax on share based payments	-	-	-	(110)	(110)	-	(110)
At 30 June 2017	49,491	898	3,541	(4,051)	49,879	86	49,965
Profit for the year	-	-	-	215	215	47	262
Other comprehensive (expense)/income for the year	-	-	(896)	516	(380)	-	(380)
	49,491	898	2,645	(3,320)	49,714	133	49,847
Dividends	-	-	-	(7,514)	(7,514)	(62)	(7,576)
Issue of share capital	9	(384)	-	375	-	-	-
Share based payments	-	594	-	-	594	-	594
Tax on share based payments	-	-	-	(15)	(15)	-	(15)
Movements in non-controlling interest	-	-	-	(345)	(345)	11	(334)
At 30 June 2018	49,500	1,108	2,645	(10,819)	42,434	82	42,516

 

 

 

Cash Flow Statement for the year ended 30 June 2018

		Group
	Notes	Year ended 30 June 2018 £'000	Year ended 30 June 2017  £'000
Cash flows from operating activities
Cash generated from/(used in) operations before adjusting items	21	25,665	26,653
Cash flows for adjusting items - operating activities		(2,951)	(1,510)
Cash flows from share based payments		(50)	(87)
Cash generated from/(used in) operations		22,664	25,056
Interest paid		(1,934)	(1,656)
Tax paid		(4,738)	(3,905)
Net cash generated from/(used in) operating activities		15,992	19,495
Cash flows from investing activities
Purchase of businesses net of cash acquired		(1,595)	(19,005)
Deferred consideration paid		(205)	(1,295)
Purchase of non-controlling interests		(335)	-
Cash flows for adjusting items - investing activities		(1,118)	(1,327)
Purchase of property, plant and equipment		(3,089)	(1,300)
Cash flows from sale of leasehold property		-	7,300
Proceeds from disposal of property, plant and equipment		55	43
Purchase of intangible assets		(1,934)	(1,599)
Net cash (used in)/generated from investing activities		(8,221)	(17,183)
Cash flows from financing activities
Dividends paid to owners of the parent		(7,514)	(7,150)
Dividends paid to non-controlling interests		(62)	(105)
Share issuance costs		(8)	(5)
Fees relating to new and extended loan facility		(22)	(146)
Decrease in bank loans		(8,012)	(25,593)
Increase in bank loans		9,127	27,702
Net cash used in financing activities		(6,491)	(5,297)
Net increase/(decrease) in cash and cash equivalents, net of bank overdrafts		1,280	(2,985)
Cash and cash equivalents, net of bank overdrafts at beginning of the year		9,762	12,438
Exchange (loss)/gain on cash and cash equivalents		(9)	309
Cash and cash equivalents, net of bank overdrafts at end of the year		11,033	9,762

 

Reconciliation of net debt

Cash and cash equivalents at beginning of the year	10,687	14,642
Bank overdrafts at beginning of the year	(925)	(2,204)
Bank loans at beginning of the year                                                                                    19	(49,781)	(47,126)
Net debt at beginning of the year	(40,019)	(34,688)
Net (decrease)/increase in cash and cash equivalents, net of bank overdrafts	1,271	(2,676)
Net drawdown in bank loans	(1,115)	(2,109)
Exchange gains/(loss) on bank loans	231	(546)
Cash and cash equivalents at end of the year	10,789	10,687
Bank overdrafts at end of the year	-	(925)
Cash classified as held for sale                                                                                         15	244	-
Bank loans at end of the year                                                                                            19	(50,665)	(49,781)
Net debt at end of the year	(39,632)	(40,019)

 

 

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 2018 on which an unqualified report has been made by the Company's auditors.

Financial statements for the year ended 30 June 2017 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 2018 statutory accounts will be delivered in due course.

Copies of the Annual Report and Financial Statements will be posted to shareholders shortly and will be available from the Company's registered office at 10 Whitechapel High Street, London, E1 8QS.

2. Statement of Accounting Policies

The preliminary announcement for the year ended 30 June 2018 has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The accounting policies applied in this preliminary announcement are consistent with those reported in the Group's annual financial statements for the year ended 30 June 2017 along with new standards and interpretations which became mandatory for the financial year

3. Measures of profit

(a)   Reconciliation to profit on continuing activities before tax

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

 

·      amortisation of intangible assets excluding computer software;

·      impairment of goodwill and intangible assets;

·      adjusting items (included in operating expenses);

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

·      finance costs.

 

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

 

	Year ended  30 June 2018 £'000	Year ended  30 June 2017 £'000
Profit before tax	3,025	15,862
Amortisation of intangible assets excluding computer software	6,432	6,028
Impairment of goodwill and intangibles	8,561	2,366
Adjusting items (included in operating expenses)	4,573	3,468
Other income - gain on sale of leasehold property	-	(6,333)
Adjusted profit before tax	22,591	21,391
Finance costs	1,969	1,961
Adjusted operating profit ('Adjusted EBITA')	24,560	23,352
Depreciation of property, plant and equipment included in operating expenses	917	1,071
Amortisation of intangible assets - computer software	1,302	1,165
Adjusted EBITA before depreciation ('Adjusted EBITDA')	26,779	25,588

 

 

(b)   Reconciliation to adjusted profit before tax

	Adjusted results June 2018 £'000	Adjusting items June 2018 £'000	Statutory results June 2018 £'000	Adjusted results June 2017 £'000	Adjusting items  June 2017 £'000	Statutory results June 2017 £'000
Revenue	122,092	-	122,092	120,329	-	120,329
Operating expenses before share based payments, amortisation of intangible assets excluding computer software and impairment	(96,891)	(4,573)	(101,464)	(96,425)	(3,468)	(99,893)
Share based payments	(641)	-	(641)	(552)	-	(552)
Operating expenses before amortisation of intangible assets excluding computer software and impairment	(97,532)	(4,573)	(102,105)	(96,977)	(3,468)	(100,445)
Amortisation of intangible assets excluding computer software	-	(6,432)	(6,432)	-	(6,028)	(6,028)
Impairment of goodwill and intangible assets	-	(8,561)	(8,561)	-	(2,366)	(2,366)
Gain on sale of leasehold property	-	-	-	-	6,333	6,333
Operating profit	24,560	(19,566)	4,994	23,352	(5,529)	17,823
Finance costs	(1,969)	-	(1,969)	(1,961)	-	(1,961)
Profit before tax	22,591	(19,566)	3,025	21,391	(5,529)	15,862

 

 

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.

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

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

The reported segmental revenue and contribution in the year ended 30 June 2017 have been restated to reflect a reallocation between the Professional and Healthcare divisions. This reallocation is in respect of events now managed by the Healthcare division that were previously reported in the Professional division.

 a) Business segments

	Revenue Year ended 30 June 2018 £'000	Profit  Year ended 30 June  2018 £'000	Revenue Year ended 30 June 2017 Restated £'000	Profit  Year ended 30 June  2017 Restated £'000
Risk & Compliance	42,860	12,899	42,272	12,265
Healthcare	44,681	9,899	42,523	9,425
Professional	34,551	6,230	35,534	6,144
Group total	122,092	29,028	120,329	27,834
Unallocated central overheads	-	(3,827)	-	(3,930)
Share based payments	-	(641)	-	(552)
	122,092	24,560	120,329	23,352
Amortisation of intangible assets excluding computer software		(6,432)		(6,028)
Impairment of goodwill and intangibles		(8,561)		(2,366)
Adjusting items (included in operating expenses)		(4,573)		(3,468)
Other income - gain on sale of leasehold property		-		6,333
Finance costs		(1,969)		(1,961)
Profit before tax		3,025		15,862
Taxation		(2,763)		(2,988)
Profit for the financial year		262		12,874

 

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 2018 £'000	Year ended 30 June 2017 £'000
UK	72,034	68,588
Europe (excluding the UK)	20,756	18,049
North America	18,314	22,863
Rest of the World	10,988	10,829
Total revenue	122,092	120,329

 

5. Profit from continuing operations

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

	Year ended  30 June 2018 £'000	Year ended  30 June 2017 £'000
Depreciation of property, plant and equipment - included in operating expenses	917	1,071
Amortisation of intangible assets - computer software	1,302	1,165
Profit on disposal of property, plant and equipment	(11)	(20)
Rentals under operating leases	2,942	1,568
Share based payments (including social security costs)	641	552
Amortisation of intangible assets excluding computer software	6,432	6,028
Impairment of goodwill and intangibles	8,561	2,366
Adjusting items (included in operating expenses)	4,573	3,468
Gain on sale of leasehold property	-	(6,333)
Foreign exchange (gain)/loss (including forward currency contracts)	(229)	50
Fees payable to the auditors for the audit of the Company and consolidated financial statements	117	110
Fees payable to the auditors and their associates for other services:
- The audit of the Company's subsidiaries pursuant to legislation	183	173
- Audit related and other assurance services	74	142
- Tax compliance services	5	8
- Other services	-	47

 

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 2018 £'000	Year ended 30 June 2017 £'000
Costs relating to successful and aborted acquisitions, disposals and integration	721	1,569
Increase in liability for deferred consideration	330	54
	1,051	1,623
Adjusting items relating to property portfolio review and IT infrastructure transformation	3,090	1,027
Restructuring and rationalisation costs	432	818
Other adjusting items (included in operating expenses)	4,573	3,468
Amortisation of intangible assets excluding computer software	6,432	6,028
Impairment of goodwill and intangible assets (note 12)	8,561	2,366
Total adjusting items (classified in profit before tax)	19,566	11,862

 

Successful and aborted acquisitions relate to the acquisition of Interactive Medica and other aborted acquisitions. The increase in the liability for deferred consideration relates to adjustments to deferred consideration in respect of SWAT Group Limited ('SWAT') and Evantage Consulting Limited.

Costs associated with property portfolio review and IT infrastructure transformation relate to a review of the London property portfolio; see note 5c for further details.

 

Restructuring and rationalisation costs include the remaining implementation costs of project Sixth Gear and one-off costs associated with the recruitment of new board members.

Onerous lease and related exit costs relate to the relocation of the Practice Track business from its Bristol office to existing premises occupied by businesses held in the Professional division.

c) Property portfolio review

During the year ended 30 June 2017 Wilmington performed a review of its London property portfolio, on the back of this it sold the leasehold interest in its Underwood Street London premises for a £7.3m cash consideration. This resulted in a gain on sale of £6.3m. At the same time as disposing of its leasehold interest, Wilmington entered into a new ten year market rate lease for a London head office premises near Aldgate. The Aldgate premises became the address of its registered office on 15 December 2017.

 

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

 

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

	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Rent, rates and legal and professional fees relating to new Aldgate lease	1,317	514
Relocation and fit out costs incurred on occupation of Aldgate premises	315	-
Redundancy and implementation costs relating to IT infrastructure transformation	1,026	-
Accelerated depreciation of property, plant and equipment on sale of Underwood Street leasehold property	322	85
Accelerated depreciation of computer equipment relating to IT infrastructure transformation	110	-
Cost to surrender Old Broad Street lease	-	231
Onerous lease on property in Kent	-	197
Total adjusting items relating to property portfolio review	3,090	1,027

 

6. Operating expenses

	Year ended 30 June 2018			Year ended 30 June 2017
	Cost of sales £'000	Administration £'000	Total £'000	Cost of sales £'000	Administration £'000	Total £'000
Operating expenses before depreciation, amortisation and impairment	90,845	4,468	95,313	90,906	3,835	94,741
Depreciation of property, plant and equipment	917	-	917	976	95	1,071
Amortisation of intangible assets - computer software	1,302	-	1,302	1,165	-	1,165
Operating expenses before amortisation of intangible assets excluding computer software and impairment	93,064	4,468	97,532	93,047	3,930	96,977
Amortisation of intangible assets - databases	1,933	-	1,933	1,897	-	1,897
Amortisation of intangible assets - customer relationships	2,038	-	2,038	1,947	-	1,947
Amortisation of intangible assets - brands	1,272	-	1,272	893	-	893
Amortisation of intangible assets - publishing rights and titles	1,189	-	1,189	1,291	-	1,291
Goodwill and intangibles impairment charge (note 12)	-	8,561	8,561	830	1,536	2,366
Other adjusting items (note 5)	-	4,573	4,573	-	3,468	3,468
Operating expenses	99,496	17,602	117,098	99,905	8,934	108,839

 

7. Finance costs

	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Finance costs comprise:
Interest payable on bank loans and overdrafts	1,804	1,814
Amortisation of capitalised loan arrangement fees	165	147
	1,969	1,961

 

 

 

 

8. Taxation

	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Current tax:
UK corporation tax at current rates on UK profits for the year	2,351	3,225
Adjustments in respect of previous years	63	103
	2,414	3,328
Foreign tax	1,114	1,067
Adjustment in respect of previous years	(41)	(43)
Total current tax	3,487	4,352
Deferred tax credit	(765)	(1,247)
Effect on deferred tax of change in corporation tax rate	41	(117)
Total deferred tax	(724)	(1,364)
Taxation	2,763	2,988

 

Factors affecting the tax charge for the year:

The effective tax rate is higher (2017: lower) than the average rate of corporation tax in the UK of 19.00% (2017: 19.75%). The differences are explained below:

	Year ended 30 June 2018  £'000	Year ended 30 June 2017  £'000
Profit before tax	3,025	15,862
Profit before tax multiplied by the average rate of corporation tax in the year of 19.00% (2017: 19.75%)	575	3,133
Tax effects of:
Impairment of goodwill not deductible for tax purposes	1,627	303
Foreign tax rate differences	384	312
Adjustment in respect of previous years	22	59
Reduced effective rate on gain on sale of leasehold property	-	(817)
Other items not subject to tax	114	115
Effect on deferred tax of change of corporation tax rate	41	(117)
Taxation	2,763	2,988

 

On 26 October 2015, the UK corporation tax rate was reduced from 20% to 19% from 1 April 2017 and a further change was announced on 23 November 2016 to reduce the rate from 19% to 17% from 1 April 2020. On 1 January 2018 the US corporate tax rate was reduced from 35% to 21%. These changes have been substantively enacted at the Balance Sheet date and are reflected in the financial statements. Deferred tax assets and liabilities are measured at the rates that are expected to apply in the periods of the reversal. Deferred tax balances at 30 June 2018 have been calculated using the above rates giving rise to a reduction in the net deferred tax liability of £41,000 (2017: £117,000).

 

The Company's profits for this accounting year are taxed at an effective rate of 23.8% (2017: 16.4%).

Included in other comprehensive income are a tax credit of £80,000 (2017: charge £106,000) and a tax charge of £42,000 (2017: credit £97,000) 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 £1,876,000 (2017: £1,757,000).

9. Dividends

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

	Year ended 30 June 2018 pence per share	Year ended 30 June 2017 pence per share	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Final dividends recognised as distributions in the year	4.6	4.3	4,019	3,749
Interim dividends recognised as distributions in the year	4.0	3.9	3,495	3,401
Total dividends paid			7,514	7,150
Final dividend proposed	4.8	4.6	4,194	4,011

 

 

10. 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;

·      impairment of goodwill and intangible assets;

·      adjusting items (included in operating expenses); and

·      other income - gain on sale of leasehold property.

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

	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Earnings from continuing operations for the purpose of basic earnings per share	215	12,836
Add/(remove):
Amortisation of intangible assets excluding computer software	6,432	6,028
Impairment of goodwill and intangibles	8,561	2,366
Adjusting items (included in operating expenses)	4,573	3,468
Other income - gain on sale of leasehold property	-	(6,333)
Tax effect of adjustments above	(1,876)	(1,757)
Adjusted earnings for the purposes of adjusted earnings per share	17,905	16,608

 

	Number	Number
Weighted average number of ordinary shares for the purposes of basic and adjusted earnings per share	87,379,469	87,193,340
Effect of dilutive potential ordinary shares:
Future exercise of share awards and options	645,240	611,052
Weighted average number of ordinary shares for the purposes of diluted and adjusted diluted earnings per share	88,024,709	87,804,393
Basic earnings per share	0.25p	14.72p
Diluted earnings per share	0.24p	14.62p
Adjusted basic earnings per share ('Adjusted Earnings Per Share')	20.49p	19.05p
Adjusted diluted earnings per share	20.34p	18.91p

 

 

11. Acquisitions and disposals

The below acquisitions have been financed out of the £75.0m multi-currency revolving credit facility.

 

a) Non-controlling interest acquired - July 2017

 

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

b) Acquisition - Interactive Medica S.L. group of companies - 12 February 2018

 

On 12 February 2018 Wilmington Insight Limited, 'the buyer' acquired the entire issued share capital of Interactive Medica S.L. group of companies ('IM'), a pan-European provider of cloud-based software solutions to Life Sciences companies, designed to support their commercial effectiveness specifically in key account management ('KAM'), multichannel marketing ('MCM') and analytics. Interactive Medica was acquired for an initial consideration of €2,822,986 (£2,486,387) with a subsequent adjustment for working capital of €282,082 (£248,448) payable to Wilmington Insight Limited.

 

Deferred consideration of up to €1,600,000 is potentially payable in cash subject to the continued employment of a key member of the management team and IM achieving a challenging revenue target over the two year period ended 31 December 2018 and 31 December 2019

 

Acquisition related costs of £497,302 have been expensed as an adjusting item in the income statement (see note 5b).

 

IM is a complimentary addition to the Wilmington Healthcare offering, providing robust technology that will strengthen their existing solutions, give greater competitive advantage through a single platform with enhanced data and insights.

 

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

 

	£'000
Purchase consideration:
Initial consideration	2,486
Final working capital adjustment	(248)
Total consideration	2,238

 

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

	£'000
Intangible assets - Customer relationships - Subscribers	514
Intangible assets - Databases	611
Intangible assets - Brand	348
Intangible assets - Computer software	55
Total intangible assets (see note 13)	1,528
Property, plant and equipment	12
Current tax asset	11
Trade and other receivables (net of allowances)	164
Cash and cash equivalents	643
Trade and other payables	(281)
Subscriptions and deferred revenue	(168)
Deferred tax liabilities	(259)
Net identifiable assets acquired	1,650
Goodwill (see note 12)	588
Net assets acquired	2,238

 

The goodwill is attributable to the expected cost and revenue synergies that will be achieved by integrating the bespoke IM software, established client base, and the solid client relationships held by the experienced and stable workforce. These synergies will enable the Wilmington Healthcare businesses to enhance their existing product offerings in the UK as well as increase its ability to access other European markets

 

 

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

 

Intangible assets - Customer relationships - Subscribers	6 years
Intangible assets - Databases	5 years
Intangible assets - Brand	5 years
Intangible assets - Computer software	3 years

 

The acquired business contributed revenues of £554,863 and a loss of £46,409 to the Group for the period from the date of acquisition to 30 June 2018, this equates to a four and a half months' revenue and contribution.

12. Goodwill

Cost	£'000
At 1 July 2016	93,387
Additions	14,931
Reallocation	1,281
Exchange translation differences	589
At 30 June 2017	110,188
Additions	588
Fair value adjustment	(762)
Exchange translation differences	(190)
At 30 June 2018	109,824
Accumulated impairment
At 30 June 2016	22,624
Impairment	1,536
At 30 June 2017	24,160
Impairment	8,561
At 30 June 2018	32,721
Net book amount
At 30 June 2018	77,103
At 30 June 2017	86,028
At 30 June 2016	70,763

 

The fair value adjustment relates to a change in the provisional value of the deferred tax liability arising on the acquisition of Health Services Journal in the year ended 30 June 2017.

 

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. Impairment reviews were performed by comparing the carrying value of goodwill with the recoverable amount of the cash-generating units ('CGU') to which goodwill has been allocated. Recoverable amounts for cash-generating units are the higher of fair value less costs of disposal, and value in use.

The value in use calculations use pre-tax cash flow projections based on financial budgets and forecasts approved by the Board covering a three year period. These pre-tax cash flows beyond the three year period are extrapolated using estimated long-term growth rates.

Key assumptions for the value in use calculations are those regarding discount rates, cash flow forecasts and long-term growth rates. Management has used a pre-tax discount rate of 12.3% (2017: 12.3%) across all CGUs in the UK except for the CLT CGU which had a pre-tax discount rate of 13.3% (2017: 13.3%) to reflect the greater market challenges and risks. A pre-tax discount rate of 13.5% (2016: 13.5%) has been used for Compliance Week and FRA that both operate in North America. These pre-tax discount rates reflect current market assessments for the time value of money and the risks associated with the CGUs as the Group manages its treasury function on a Group-wide basis.

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

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

 

CGU		30 June 2018 £'000	30 June 2017 £'000
HSJ		12,105	12,867
Axco and Pendragon		11,150	11,150
CLT		-	8,563
ICT		7,972	7,972
Others		45,876	45,476
	77,103		86,028

 

Impairment of CLT

CLT continues to be impacted by the removal of requirement for CPD hours for lawyers in England and Wales which came into full effect in October 2017.  In recognition of these market conditions we are changing the focus of the business, reducing CPD related networking events and investing in on-line learning programmes that we believe offer a sustainable growth opportunity. Recognising these changes, which have occurred during the year, it was concluded that the future economic benefit in the business and hence the value that we still believe exists in CLT does not derive from the historic assets purchased in 1999 which the acquired goodwill was attributable to. On this basis the goodwill relating to CLT has been fully impaired resulting in a £8.6m non-cash impairment expense included in operating expenses as an adjusting item in the Income Statement. 

Compliance week

For Compliance Week, the value in use exceeds the carrying value by 17% (2017: 27%). The reduction in headroom is largely as a result of changes in the assumptions of on-going investment requirements in the business.   The impairment review of Compliance Week is sensitive to a reasonably possible change in the key assumptions used; most notably the projected cash flows and the pre-tax discount rate. The value in use exceeds the carrying value unless any of the assumptions are changed as follows:

- A decrease in the projected operating cash flows of 17.0% in each of the next three years; or

- An increase in the pre-tax discount from 13.5% to 15.5%.

HSJ

Given the lower than expected performance of HSJ in the year, consideration was given as to whether this was an indication of a permanent diminution in value. This was despite the value in use calculation exceeding the carrying value by 50%.  Having reviewed the matter, management have concluded that there is no indication of permanent diminution as there is acceptable headroom and the lower than expected performance was driven by specific in year circumstances that are temporary and expected to reverse.  As such it has concluded that no impairment is required at this time.    

Significant restructuring and integration has already been undertaken in the year to bring the UK Healthcare assets, including HSJ, into a single UK Healthcare business. As these integration activities are expected to complete in early FY19 we will be unable to identify the cash flows generated by HSJ independently from the other UK Healthcare businesses. On this basis going forward HSJ will be included in a single UK Healthcare CGU.

Management performed sensitivities and there were no reasonable possible changes in assumptions that could lead to an impairment.

 

 

13. Intangible assets

	Group
	Computer software £'000	Databases £'000	Customer relationships £'000	Brands £'000	Publishing rights and titles £'000	Total £'000
Cost
At 1 July 2016	8,202	16,116	18,023	10,715	29,919	82,975
Additions	1,599	-	-	-	-	1,599
Acquisitions	128	-	5,839	4,240	-	10,207
Reallocation	-	-	391	(1,672)	-	(1,281)
Disposals	(15)	-	-	-	-	(15)
Exchange translation differences	32	27	102	58	370	589
At 30 June 2017	9,946	16,143	24,355	13,341	30,289	94,074
Additions	1,934	-	-	-	-	1,934
Acquisitions	583	611	514	348	-	2,056
Disposals	(2,161)	-	-	-	-	(2,161)
Reclassification to held for sale	(111)	-	-	-	-	(111)
Exchange translation differences	2	(13)	(67)	(56)	-	(134)
At 30 June 2018	10,193	16,741	24,802	13,633	30,289	95,658
Accumulated amortisation
At 1 July 2016	5,636	8,197	12,935	3,142	24,027	53,937
Charge for the year	1,165	1,897	1,947	893	1,291	7,193
Acquisitions	115	-	-	-	-	115
Impairment	86	-	-	-	744	830
Disposals	(14)	-	-	-	-	(14)
Exchange translation differences	16	16	105	153	(188)	102
At 30 June 2017	7,004	10,110	14,987	4,188	25,874	62,163
Charge for the year	1,302	1,933	2,038	1,272	1,189	7,734
Acquisitions	528	-	-	-	-	528
Disposals	(2,161)	-	-	-	-	(2,161)
Reclassification to held for sale	(53)	-	-	-	-	(53)
Exchange translation differences	22	5	71	36	8	142
At 30 June 2018	6,642	12,048	17,096	5,496	27,071	68,353
Net book amount
At 30 June 2018	3,551	4,693	7,706	8,137	3,218	27,305
At 30 June 2017	2,942	6,033	9,368	9,153	4,415	31,911
At 30 June 2016	2,566	7,919	5,088	7,573	5,892	29,038

 

Included within computer software are assets under construction that have not yet been amortised with a net book amount of £223,000 (2017: £142,000).

 

14. Property, plant and equipment

 

			Group
Group	Land, freehold and leasehold buildings  £'000	Fixtures and fittings £'000	Computer equipment    £'000	Motor  vehicles  £'000	Total  £'000
Cost
At 1 July 2016	5,950	4,117	4,032	487	14,586
Additions	-	775	416	109	1,300
Acquisitions	-	341	340	87	768
Disposals	(2,789)	(10)	(520)	(149)	(3,468)
Exchange translation differences	-	16	24	-	40
At 30 June 2017	3,161	5,239	4,292	534	13,226
Additions	2,122	436	787	68	3,413
Acquisitions	-	119	123	-	242
Disposals	-	(1,760)	(1,289)	(142)	(3,191)
Reclassification to held for sale	-	-	(11)	-	(11)
Exchange translation differences	-	(1)	(2)	-	(3)
At 30 June 2018	5,283	4,033	3,900	460	13,676
Accumulated depreciation
At 1 July 2016	2,879	3,187	3,675	217	9,958
Charge for the year	151	540	275	105	1,071
Disposals	(2,210)	(10)	(520)	(126)	(2,866)
Acquisitions	-	227	315	43	585
Exchange translation differences	-	12	22	-	34
At 30 June 2017	820	3,956	3,767	239	8,782
Charge for the year	142	649	468	90	1,349
Acquisitions	-	116	114	-	230
Disposals	(3)	(1,760)	(1,289)	(95)	(3,147)
Reclassification to held for sale	-	-	(2)	-	(2)
Exchange translation differences	-	-	1	-	1
At 30 June 2018	959	2,961	3,059	234	7,213
Net book amount
At 30 June 2018	4,324	1,072	841	226	6,463
At 30 June 2017	2,341	1,283	525	295	4,444
At 30 June 2016	3,071	930	357	270	4,628

 

 

Included in land, freehold and leasehold buildings is £970,000 (2017: £970,000) of non-depreciated land.

 

Included within additions to property plant and equipment is £2,371,000 of leasehold improvements, furniture and computer equipment relating to the London head office move to premises near Aldgate. Also included in additions to land, freehold and leasehold buildings is £324,000 relating to a provision for asset retirement costs in relation to the leasehold improvements on the London head office premises.

Depreciation of property plant and equipment includes £432,000 of accelerated depreciation on assets disposed of on the exit of the Underwood Street leasehold property in December 2017 and in relation to the IT infrastructure outsourcing. The decision to exit the leasehold property triggered a review, and subsequent reduction, of the useful economic lives of assets held at the property. On disposal, the net book value of these assets was £nil, and the portion of depreciation arising on the reduction in useful economic lives of these assets is shown within other adjusting items (included in operating expenses) within the Income Statement. The remaining £917,000 depreciation is included in operating expenses within the Income Statement.

15. Assets held for sale

	30 June 2018 £'000	30 June 2017 £'000
Intangible assets - computer software	58	--
Property, plant and equipment	9	--
Prepayments and accrued income	6	--
Cash and cash equivalents	244	--
Total assets held for sale	317	--

 

 

Assets presented as held for sale relate to International Company Profile, the credit reporting business held within the Risk & Compliance Division. On 18 July 2018 Wilmington Publishing and Information Limited (a wholly owned subsidiary of Wilmington plc) sold the trade and assets of International Company Profile, including its 100% shareholding in International Company Profile FZ LLC, the statutory entity incorporated in Dubai, to its management team. The £3.0m consideration in respect of the sale will be paid in instalments over the next five years.

16. Trade and other receivables

	Group
	30 June 2018 £'000	30 June 2017 £'000
Current
Trade receivables	22,869	23,207
Prepayments and other receivables	5,364	5,237
Amounts due from subsidiaries	-	-
	28,233	28,444

 

Amounts due from all subsidiaries are interest free, unsecured and repayable on demand.

 

17. Derivative financial investments

	Group
	30 June 2018 £'000	30 June 2017 £'000
Non-current assets
Interest rate swaps - maturing in November 2020	113	-
Non-current liabilities
Interest rate swaps - maturing in November 2020	(356)	(662)

 

 

18. Trade and other payables

	Group
	30 June 2018 £'000	30 June 2017 £'000
Trade and other payables	26,368	25,357
Subscriptions and deferred revenue	24,746	26,973
Amounts due to subsidiaries	-	-
	51,114	52,330

 

Amounts due to subsidiaries are interest free, unsecured and repayable on demand.

 

19. Borrowings

	Group
Current liability	30 June 2018  £'000	30 June 2017  £'000
Bank overdrafts	-	925
	-	925
Non-current liability
Bank loans	50,665	49,781
Capitalised loan arrangement fees	(285)	(428)
Bank loans net of loan arrangement fees	50,380	49,353

 

At 30 June 2018 the Group was in a net credit position in respect of its bank overdrafts. This position comprised of the net of gross overdraft balances of £9.0m (2017: £13.2m) and cash positions of £10.1m (2017: £12.3m) held at Barclays Bank PLC in certain UK companies included in the offsetting agreement.

The £143,000 decrease in capitalised loan arrangement fees reflects an amortisation charge of £165,000 (2017: £147,000) and additions of £22,000 (2017: nil).

 

20. Non-controlling interests

	Net non- controlling interests £'000
At 30 June 2016	153
Profit for the year	38
Dividends paid	(105)
At 30 June 2017	86
Profit for the year	47
Dividends paid	(62)
Movements in non-controlling interest	11
At 30 June 2018	82

Movements in non-controlling interests relate to the purchase of the remaining 20% shareholding in Central Law Training (Scotland) Limited for £335,000 in July 2017.

21. Cash generated from operations

	Group
	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Profit from continuing operations before income tax	3,025	15,862
Gain on sale of leasehold property	-	(6,333)
Adjusting items - excluding depreciation of property plant and equipment	4,141	3,468
Adjusting items - depreciation of property, plant and equipment	432	-
Depreciation of property, plant and equipment included in operating expenses	917	1,071
Amortisation of intangible assets	7,734	7,193
Impairment of goodwill and intangible assets	8,561	2,366
Profit on disposal of property, plant and equipment	(11)	(20)
Share based payments (including social security costs)	641	552
Finance costs	1,969	1,961
Operating cash flows before movements in working capital	27,409	26,120
Decrease/(increase) in trade and other receivables	160	(1,997)
(Decrease)/increase in trade and other payables	(1,904)	2,530
Cash generated from/(used in) operations before adjusting items	25,665	26,653

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

	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Funds from operations before adjusting items:
Adjusted EBITA (note 3a)	24,560	23,352
Share based payments (including social security costs)	641	552
Amortisation of intangible assets - computer software	1,302	1,165
Depreciation of property, plant and equipment included in operating expenses	917	1,071
Profit on disposal of property, plant and equipment	(11)	(20)
Operating cash flows before movement in working capital	27,409	26,120
Net working capital movement	(1,744)	533
Funds from operations before adjusting items	25,665	26,653
Cash conversion	105%	114%
	Year ended 30 June 2018 £'000	Year ended 30 June 2017 £'000
Free cash flow:
Operating cash flows before movement in working capital	27,409	26,120
Proceeds on disposal of property, plant and equipment	55	43
Net working capital movement	(1,744)	533
Interest paid	(1,934)	(1,656)
Tax paid	(4,738)	(3,905)
Purchase of property, plant and equipment	(3,089)	(1,300)
Purchase of intangible assets	(1,934)	(1,599)
Free cash flow	14,025	18,236

 

22. Events after the reporting period

 

Forward contracts

On 2 July 2018 the following forward contracts were entered into in order to provide certainty in sterling terms of 80% of the Group's expected net US dollar and Euro income:

·      On 2 July 2018, the Group sold $3.0m to 19 October 2018 at a rate of 1.3192

·      On 2 July 2018, the Group sold €1.0m to 16 November 2018 at a rate of 1.1242

·      On 2 July 2018, the Group sold €1.0m to 18 January 2019 at a rate of 1.1222

·      On 2 July 2018, the Group sold $5.0m to 15 March 2019 at a rate of 1.3292

·      On 2 July 2018, the Group sold €1.0m to 18 April 2019 at a rate of 1.1190

·      On 2 July 2018, the Group sold $5.0m to 17 May 2019 at a rate of 1.3336

Sale of International Company Profile FZ LLC

On 18 July 2018 Wilmington Publishing and Information Limited (a wholly owned subsidiary of Wilmington plc) sold the trade and assets of its ICP credit reporting business, including the 100% shareholding in International Company Profile FZ LLC, the statutory entity incorporated in Dubai, to its management team. The £3.0m consideration (excluding £0.9m of potential early repayment discounts) in respect of the sale will be paid in instalments over the next five years. At 30 June 2018 all assets disposed of as part of the transaction have been reclassified to held for sale.

 END