ELECTRIC WORD PLC. Preliminary Results to 30 November 2012

Transcription

1 14 th February 2013 ELECTRIC WORD PLC Preliminary Results to 30 November 2012 Electric Word, the specialist media company, announced today audited results for the year ended 30 November FINANCIAL HIGHLIGHTS Results in line with September 2012 Placing Board expectations Revenue of 14.3m down 5% o Education down 16% through redevelopment and refocus of products o Continued growth in Gaming revenues (up 12%) Group adjusted profit before tax* down 22% to 1.1m o Flat profits* in Education and Sport & Gaming despite product investment o Health profits reduce as costs increase ahead of new product development Statutory profit before tax of 0.2m (2011: 4.7m loss) following 2011 restructure September 2012 Placing raises 1.4m net of costs Gross debt paid down to 0.9m (2011: 1.1m); net funds of 0.1m held (2011: 0.8m debt) * Adjusted numbers, as explained in note 5, exclude amortisation / impairment of goodwill and intangible assets, restructuring and acquisition-related credits and costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges (which relate to movements on deferred tax such as the use of tax losses or tax credits from the recognition of tax losses). This definition applies throughout both the Chairman s and Chief Executive s statements and the Operating and Financial Review. Net funds / (debt) are cash held net of the gross debt which include bank overdrafts and loans (note 27), but exclude provisions for deferred and contingent consideration in relation to acquisitions (note 21). OPERATIONAL HIGHLIGHTS Education products successfully redeveloped to meet new needs in new formats: o New online service launched January 2012 to replace print newsletters; migration of subscribers expected to be completed in 2012/13 academic year o Events exceed prior year results from fewer conferences o 16 new training products launched successfully Health division digital development gets under way: o New Radcliffe websites launched in December 2012 o New online communities in cardiology and dementia identified for launch in 2013 Sport & Gaming invests in product development and market expansion: o Gaming s 7 th London Affiliate Congress in February 2013 achieved 7% growth in revenues to 0.75m o igaming Business magazine launched North American edition in April 2012 o TV Sports Markets online subscription earnings increased by 51% on PY o Investment started in additional Sport Business premium online subscription services Continued investment in Group infrastructure and web development Current trading is in line with the Board s expectations for 2013 Julian Turner, Chief Executive of Electric Word, commented: It is an exciting time for our business, with great change in the markets we serve, the nature of our products and the information industry itself. The Group made significant progress in 2012, especially in our Education business. Our range of school management products is now very largely digital or live and is set up on scalable platforms for further innovation and future growth. The Sport & Gaming division continues to perform well and, along with the newer Health division, will see a significant investment in new product development and sales in The Group has an excellent opportunity to build value in the medium term and we are focused on that goal. 1

2 Financial summary ( 000) Change Revenue 14,331 15,123-5% Gross Profit 7,129 7,400-4% Adjusted EBITA* 1,166 1,479-21% Adjusted profit before tax* 1,086 1,388-22% Less amortisation and impairment (1,255) (4,708) Add/(Less) acquisition-related and restructuring credits and 486 (1,295) costs Less share-based payment charges and costs (144) (69) Profit / (loss) before tax (PBT) 173 (4,684) Diluted earnings per share 0.03p (1.52)p Adjusted diluted earnings per share* 0.24p 0.24p -% Cash and cash equivalents Net funds / (debt) 108 (820) * Adjusted numbers, as explained in note 5, exclude amortisation and impairment of goodwill and intangible assets, acquisition-related and restructuring credits and costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges (which relate to movements on deferred tax such as the use of tax losses or tax credits from the recognition of tax losses). This definition applies throughout both the Chairman s and Chief Executive s statements and the Operating and Financial Review. Net funds / (debt) are cash held net of bank overdrafts and loans (note 27), but exclude provisions for deferred and contingent consideration in relation to acquisitions (note 21). Revenue by activity Subscriptions 3,485 24% 4,071 27% Event delegates and training 1,988 14% 2,048 14% Books and reports 3,768 26% 3,974 26% Sales of content 9,241 64% 10,093 67% Advertising, sponsorship and exhibitions 3,493 24% 3,262 21% Bespoke publishing and consultancy services 703 5% 550 4% Commerce 894 6% 1,218 8% Sales of access to communities 5,090 36% 5,030 33% Total 14, % 15, % The audited report and accounts of the Company for the year ended 30 November 2012 have been posted to the Company's website at The printed version, together with details of the Annual General Meeting, will be posted to shareholders in due course. ENDS Enquiries: Electric Word Julian Turner, Chief Executive Panmure Gordon Andrew Potts

3 Notes to Editors ELECTRIC WORD PLC is a specialist media group supporting professional education, compliance and management through a wide range of digital, paper and live formats. The Group is composed of three market-facing divisions: Education: provides school management and professional development information through an online subscription service supplemented by conferences and training products. Health: provides professional education and training products for doctors, healthcare managers, speech therapists, elderly care and other health professionals. Sport & Gaming: is an international provider of insight, data and analysis to professionals in both the business of sport (working in governing bodies, the media, sports marketing and management) and the online gaming industry and its marketing affiliates. Our approach is to identify niche communities within our market sectors and fulfil their key information, professional development, best practice and compliance needs. Increasingly, our aim is to provide higher-value services and decision-critical data that help our customers to achieve their key personal and organisational objectives. We expect to achieve this by developing a deep understanding of our sectors and our customers challenges and critical information requirements. The Group provides content in many different formats, including subscription websites, journals, magazines, events, face-to-face training, online training, books, special reports, bespoke research and consultancy. Competencies developed in one sector can then be transferred to another as opportunities arise. 3

4 CHAIRMAN S STATEMENT 2012 has been an exciting and promising year for Electric Word. The business set out an ambitious programme of development in the nature and mix of our products designed to transform the value of the business in the medium term. This was backed up in September 2012 by a successful fundraising to ensure that the Group had the working capital appropriate for a period of rapid change in both our products and our markets. The aim is to enhance the value of each part of the business by making the products worth more to our customers, by increasing the proportion of digital and live revenue and by focusing on activities with higher potential margins in the future. The biggest changes have been achieved in the Education division, where increased profits from the successful conferences business have been reinvested in new products. The relaunch of the newsletters in January 2012 as an integrated online subscription service, the first on the Group s newly developed web publishing platform, was an important moment. With new training products also launched and further enhancements in the pipeline the division has accomplished most of the planned reinvention of its product formats. Increasingly through the year, and into 2013, the investment emphasis has moved to sales and marketing. The Sport & Gaming division has also seen considerable development. New products were launched on sports sponsorship and for the US igaming market and significant further online developments planned for 2013 which will add new premium subscription services. As a result the revenue mix in this division is expected to continue to move away from advertising and towards subscriptions and events. The Health division is the newest in the Group and is at an earlier stage of its digital development but will therefore benefit from the experiences and developments in other parts of the business. Product development will increase in 2013 and reflect a changing market as the health service continues to evolve through Government reforms and initiatives. As previously in Education, this creates some uncertainty in the short-term but opportunity in the future. The ground for these changes had been prepared in 2011 by investing in the Group s infrastructure. This continued in 2012 with several new systems firmly established and further developments in database and e-marketing systems planned for 2013 to support future growth. The Group enters 2013 in its strongest financial shape for many years and with a clear plan in place to deliver three divisions of sufficient scale to be valuable assets in their own right as well as part of the consolidated Group. At this stage we see the departure of Quentin Brocklebank, our Finance Director, and thank him for his enormous contribution to achieving this position, and now welcome William Fawbert who will join the Board in his place. The Group s continued progress depends above all on the strength and talents of the individuals it employs as well as the support of our investors and other stakeholders. I would like to take this opportunity to thank all of them for their energy and effort and wish them further success in 2013 and beyond. Peter Rigby Chairman 13 February

5 CHIEF EXECUTIVE S STATEMENT STRATEGIC DIRECTION Over the last two years the Group has been on a journey of significant change. In part this has been in response to developments in our markets, where change has created both turbulence and opportunity. The business has also been moving through the next phase of the digitisation of its publishing businesses, in common with many others in our sector. Finally, we have also been redeveloping our products to increase their value to our customers and link them more closely with their key personal and organisational objectives. In making these changes we have also been reducing our areas of activity in order to focus on those with the potential to deliver the greatest long-term value. That means an emphasis on renewable revenues, which are increasingly delivered online or live, and products that link more directly with our customers work. The goal is to achieve more focus on fewer activities with greater scale and higher margins. In this way we aim to maximise the potential of each division and the Group as a whole. The strategy has required significant investment in 2012 and 2013: in systems to support more efficient ways of working, a new digital publishing platform, new products in every division and in the nature and capacity of our sales and marketing as the channels to market have evolved along with the products. It also depends on investing in the talent and expertise of the people in the business and a culture of continuous and shared learning, close understanding of customer needs and product excellence. The Group made significant progress towards these goals in 2012, particularly in the Education division. The year also included a fundraising and resetting of terms with our lending Bank which has allowed us to intensify our investment, accelerate change and focus on our goals of long-term value growth. DIVISIONAL REVIEW EDUCATION Optimus Education provide management and professional development information to school and general education managers, teachers and other professionals using subscription online services, conferences, training resources, books, and magazines. It is supplemented by the Incentive Plus catalogue of third-party products relating to children s behavioural and emotional development. 000 Change Revenue 4,601 5,454-16% Adjusted EBITA* % Profit margin 6% 5% The above table excludes The School Run which was disposed of for no consideration in April 2012 (note 26). This contributed revenue of 108,000 (2011: 329,000) and adjusted EBITA* of 133,000 loss (2011: 167,000 loss) before disposal; the Division now receives a licence income calculated as a percentage of revenue. The new Optimus online information service for schools launched in January 2012, replacing 14 individual print and online newsletters. This will enable schools to receive a broader and more valuable service over the coming years in an environment in which local authority support continues to diminish. It includes professional development advice, many practical case studies, compliance information and the opportunity to ask for expert advice. The new support service is expected to be the most important driver of margins and profit growth in the division over the medium term. In 2012 the investment in the product was matched by a significant increase in the sales and marketing resource. This enabled the business to achieve its target number of subscriptions migrated from the old newsletter to the new service. By the end of December 2012 subscriptions to the new service outnumbered the remaining newsletter subscriptions and migrations are expected to be completed by the end of the academic year. Also at the start of the year, the previously wide range of books and e-books was slimmed down and largely reinvented in the form of practical training products that schools could deliver themselves. 16 products were successfully launched in 2012, all achieving their initial sales targets. Further courses will be added in 2013 along with an online learning management system. 5

6 Education events had started to recover in the last quarter of 2011 after a very difficult academic year in the wake of the Comprehensive Spending Review and budget uncertainty in schools has seen a significant further step forward, with the event team achieving year on year profit* growth, despite 16% fewer events being run. Off the back of this year s results, the team plan to achieve further growth by introducing new events to replace some of those previously cut. Revenue is down in the current year due to the lower subscription base at the end of 2011 and the previous disinvestment in low margin books and commerce sales. Overall, profit is flat despite the investments as profit improvements in conferences and books and training offset the losses on the subscription service while it is in transition. A similar pattern is expected in 2013 as the subscription business starts to grow again with a continuing investment in sales and marketing. HEALTH Radcliffe Publishing produces a range of books, journals and training products focused on professional development for doctors, managers and professions allied to health. It is particularly strong in primary care, medical education and exam support. Speechmark Publishing specialises in resources for speech therapists, special needs co-ordinators and teachers, care workers and mental health professionals. The Radcliffe Solutions workforce management software enables online management and compliance reporting of appraisals, training and professional development. Sports Performance is a niche online publisher to competitive sports athletes and coaches and related injury professionals. 000 Change Revenue 4,445 4,619-4% Adjusted EBITA* % Profit margin 10% 17% The 2012 results include 12 months of trade from Radcliffe Solutions (formerly Ikonami Limited) while 2011 includes 7 months only (as acquired in April 2011). The first 5 months of 2012 contributed revenue of 273,000 and adjusted EBITA* of (17,000). Speechmark was acquired in October 2007 and has now seen five years of profits greater than 0.5m under Group ownership and completed payback of acquisition costs within 3.5 years. The acquisition of Radcliffe Publishing in November 2010 enabled the Group to form a Health division and develop synergies between the businesses. Like Speechmark, Radcliffe Publishing came with a strong backlist of books as well as academic journals and a strong brand reputation. The editorial, production and marketing teams of the two businesses have now been combined, along with back office processes. In 2013 the first revenue synergies will be created with the development of an online dementia community using content from both businesses. Progress has also been made in developing e-learning courses to complement key book publishing areas and this will be extended in 2013 with digital versions of Radcliffe s successful MasterPass exam support series. In time it is expected that more revenue from interactive, subscription and sponsored products will complement the base of book sales and support margin growth. In 2012 Radcliffe Solutions experienced its first year without the benefit of a central NHS contract for universal online appraisal using the central knowledge and skills framework ( eksf ). This has now been superseded by the AT-Performance product which has more comprehensive workforce management tools and AT-Learning which allows a Trust s staff training to be monitored and reported. Both products have case studies demonstrating potential savings in employee time and reduced insurance costs, although the market has been an extremely difficult one with many Trusts in the process of merger and slow to take system decisions. Nevertheless it was encouraging that NHS Scotland bought into a new contract and provides an interesting opportunity for further growth. The Sports Performance business draws a significant proportion of its revenue from consumers and in 2011 suffered from changes in search engine algorithms which reduced traffic and led to lower returns on marketing spend. As a result, investment in the business was cut back. Revenue in 2012 in the Health Division was down on the previous as a result of reduced investment in Sports Performance, more focus on core areas in Radcliffe Publishing and the expected disappearance of Solutions central NHS contract. Speechmark revenues, however, grew in the year. The reduced profits in 2012 are as a result of lower profits in Radcliffe Solutions and the Sports Performance business moving from a profit in 2011 to a loss in

7 In January 2013 the Division was strengthened by a new Commercial Development Director with the brief to develop new sponsorship revenue streams and will soon be led by a new Divisional Manager who will be taking on a significant programme of product development and investment in building direct channels to market. SPORT & GAMING The Division is an international provider of business insight and analysis across a range of media from online subscriptions to live events and from daily news to bespoke research. SportBusiness Group publishes for sports industry professionals who work in governing bodies, the media, sports marketing, sponsorship and club and event management. igaming Business publish to both the online gaming industry itself and its marketing affiliates, providing this global and fastgrowing industry with business-critical information and marketing support. 000 Change Revenue 5,177 4,721 10% Adjusted EBITA* 1,307 1,338-2% Profit margin 25% 28% The Sport & Gaming division is also in the process of significant development. The influential TV Sports Markets newsletter and online service has been steadily building the value of its customers site license subscriptions over the last two years and this year that translated into a significant uplift in subscription revenue. In 2012 a parallel product was launched to record and analyse sports sponsorship deals. The fixed costs of this new start-up bring down margins in SportBusiness compared to Both these data-rich products will be developed further in 2013 as they migrate to the Group s new web platform along with new premium subscription services for SportBusiness International subscribers. As in Education, the sales and marketing team has been expanded in 2012 and will grow again in 2013 to support the new products,. The objective is to increase the proportion of high-value subscription revenue to improve revenue quality and ultimately margins in SportBusiness. igaming Business magazine enjoyed another successful year and in April 2012 was launched into the US with a North American edition to position the business in an important area of strategic growth. The igaming Affiliate events business also grew in the year, adding a social gaming event to its calendar. It has started 2013 strongly with its largest annual event, the London Affiliate Conference, achieving record revenues in early February 2013, attracting almost 3,000 delegates (2012: 2,802 delegates). Revenues in Sport & Gaming were up on the previous year with higher revenues in igaming offsetting lower advertising revenue in SportBusiness. Alongside the investment in the new sports sponsorship products, this led to margins dropping to 25% and slightly reduced profits. CENTRAL COSTS These costs represent central PLC costs which are not directly related to the Divisions trading and are not therefore included in their results. They include Board fees and costs related to being both a PLC and a consolidated Group. 000 Change Adjusted EBITA* (715) (715) -% As % of Group revenue 5% 5% Net interest charge (80) (91) +12% The Group has maintained its central costs at 5% of Group revenues. Investments made by the Group to date have been directly related to the trade of Divisions and so have been recharged to them with no additions to the Central cost base. Net interest payable is consistent year on year with the reduction in the Group s debt as the Bank loan was paid down in 2011 and in 2012, offset by higher interest rates in The reduction in the net interest charge comes from the inclusion of notional interest (an accounting charge for the time value of money where no interest is actually inherent) on the contingent 7

8 consideration related to the Ikonami acquisition in April This notional (non-cash) interest came to 3,000 in the year (2011: 17,000), a reduction on the prior year reflecting the reduced provision in the current year (note 21). CHANGE OF DIRECTOR We announced on 3 January that Quentin Brocklebank leaves the business and resigns from the Board in February 2013 on completion of these 2012 results after more than five years as Finance Director and Board member. Quentin leaves the Group with no net debt and its balance sheet in a stronger position than at any other time. The Board would like to thank Quentin for his invaluable contribution to the development of the business and his outstanding dedication throughout that period. William Fawbert will take over as Finance Director and joins the Board in February The Board welcomes William to Electric Word and looks forward to his contribution to the next phase of the Group s development. Julian Turner Chief Executive 13 February

9 OPERATING AND FINANCIAL REVIEW Adjusted numbers to reflect underlying trading performance 000 Change Total Group Revenue 14,331 15,123-5% Adjusted EBITA* 1,166 1,479-21% Margin 8% 10% Net interest charge (80) (91) 12% Adjusted PBT* 1,086 1,388-22% The 2012 results include 12 months of trade from Radcliffe Solutions (formerly Ikonami Limited) while 2011 includes 7 months only (as acquired in April 2011). The first 5 months of 2012 contributed revenue of 273,000 and adjusted EBITA* of (17,000). * A reconciliation of the adjusted numbers is set out in note 5. The adjusted numbers are presented to allow shareholders to gain a further understanding of the trading performance of the Group. Profits are adjusted for items not perceived by management to be part of the underlying trends in the business and the related tax effect of those items together with removing the profit impact of movements in deferred tax balances. Operating segments The Group evolved significantly in 2011 and reorganised its management and reporting around three market-facing divisions: Education, Health and Sport & Gaming reporting is the first year to reflect this new structure. Acquisition-related and restructuring credits and costs As part of the evolution in 2011 the Group remodelled its Education portfolio, with a significant impairment to its books list, a reduction in its exposure to commerce and consumer products and consequently a number of redundancies being made. Costs were also incurred or accrued for the decision to outsource the warehousing and fulfilment functions for the book and commerce businesses. This resulted in a total cost of 1.3m. Restructuring costs in 2012 of 0.2m have been booked which relate to advisory fees and other minor costs on the disposal of the Education division s consumer arm, funding advice leading to the fundraising in the year and a provision against costs of Board level changes. A credit of 0.7m has been recognised in 2012 as the provisions for contingent consideration made at the time of the Radcliffe Publishing and Solutions (formerly Ikonami) acquisitions have been reduced. Impairment charges and reduction to goodwill As part of the restructure in 2011 two now peripheral assets in the Education division were impaired at a total write down of 3.6m to goodwill. One such impairment has been necessary in 2012 for 0.3m to reflect the tough current trading position that Radcliffe Solutions (formerly Ikonami) is in, as described in the Chief Executive s statement. Further to the impairment charges, nil (2011: 0.2m) has been booked as a reduction in goodwill upon recognition of deferred tax asset relating to pre-acquisition losses from the SportBusiness Group which is an indication when booked of higher profits being generated. Capital expenditure The Group has invested 0.5m across web development and enhancing the back office systems added in the previous year (2011: 0.5m acquiring systems and some web). Much of the spend on web development this financial year has continued on improving the functionality of the Group s sites and marketing channel, and particularly the online platforms which the Education division s former print subscription offerings migrated onto early in the year, the development of new Health sites launching late in 2012 and into 2013 and the start of the first Sport sites ahead of 2013 launch. The Health sites will include a My Account area to track professional development across the Radcliffe product range, a feature which, in keeping with the Group s development sharing, will then be rolled out to the Education sites. The Group invested in 2011 by replacing two core databases: CRM and SOP. The replacements are better suited to the fulfilment of sophisticated sales packages such as product bundles and combinations of print and online subscriptions. Investment has continued into this year as most of the Group has now migrated onto these new platforms. Further investment has been made on developing detailed reporting suites that allow real time tracking of leads, sales conversion and ROIs and monitor such as subscriber rates and conversion prices and so enable effective forward sales and marketing planning and spend. 9

10 Fundraising In September 2012 the Group raised 1.3m from a Firm Placing to its largest shareholders and executive directors and 0.2m from an Open Offer, both gross of total costs of 0.1m and at a price of 1.5 pence per share. The combined placing added million shares and diluted the shares in issue by 34%. Debt and cash flow The Group s lending Bank agreed to the fundraising and a change to the Loan Agreement. This change required the Group to make both the 0.125m repayments due in November 2012 and 2013 in November 2012 but allowed much greater financial headroom in its loan covenants so that the Group could pursue a heightened investment programme. A further amendment has now been signed with the Bank in January 2013 which again changes the repayment profile but with further relaxation in covenant headroom. This requires a total repayment of 0.4m in 2013 but that will be out of available cash and achieves the fundraising goals of having sufficient capital and covenant headroom so the Group can invest as directed by the long term asset build rather than with mind to any restrictions or caps. In 2011, when the impact of the acquisitions was added back, the underlying cash generation from operations was sound given that the business was already in a period of investment in future organic growth. Both the Radcliffe Publishing and Solutions (formerly Ikonami) acquisitions added considerable payables into the 2011 year which were subsequently cleared down to normal trading levels. The apparently low cash conversion rate in 2012 is a consequence of three factors: investment in stock, notably development of new lines; slower cash collection to date on debt where outsourced late in 2011 with the warehousing and fulfilment; and as creditors have been significantly paid down at this yearend as a reflection of the funds position held. 000 Cash from operating activities before interest and tax Net cash outflow from acquisition-related and restructuring costs Working capital outflow from acquisitions Adjusted cash from operating activities before interest and tax 356 1,409 Adjusted EBITA* 1,166 1,479 Adjusted cash conversion of operating profits for year 31% 95% Net bank funds (note 27) at the yearend stood at 0.1m (2011: net bank debt of 0.8m). The Group has gross Bank debt (note 18) of 0.9m at November 2012 (2011: 1.1m) and is now being repaid over the period to May Further to this the Group has deferred and contingent consideration relating to two of its recent acquisitions (note 21). The current significant provisions held are for 75,000 payable January 2013, 50,000 payable February 2013, and 100,000 payable based on November 2013 results. Earnings per share Statutory diluted earnings per share ( eps ) is 0.03p (2011: (1.52)p loss). On an adjusted basis reflecting underlying trading (by using adjusted profits* against diluted shares) earnings are flat at 0.24p (2011: 0.24p) reflecting lower adjusted tax rate this year offset by the new shares dilution which is included only for part of the year on the weighted basis. Dividends At this stage of the Group s evolvement, the Directors do not propose a dividend this year (2011: nil). The Group has not paid a dividend in previous years but will continue to evaluate its position. Key performance indicators (KPI) The Board uses a range of KPIs to monitor progress across the Group. These are compared against prior year and forecast equivalents and are analysed in light of that. Actual performance at Group level on these KPI is disclosed in this report against the previous year. Operating managers review monthly a number of financial KPI by profit centre. Profit centres will be individual publishing titles and sites or revenue types within a market sector, such as events or books and reports. Fully loaded income statements and cash receipts by revenue stream are prepared for each profit centre each month, allowing analysis of revenue, gross margin, adjusted EBITA* margin, headcount and cost, capital expenditure and cash receipts as well as review of the detail contributing to those. On a weekly basis the senior operating managers meet with the executive directors to review and discuss sales bookings as well as employee recruitment and retention issues, together with a review of a business area or issue for wider consideration and to share ideas and knowledge. 10

11 At a Group level each month consolidated balance sheet and cash flow information is submitted to the Board and operating management together with a look forward statement against the covenant tests required by the Bank loan. Within the businesses more detailed KPI are used such as marketing campaign return on investment (revenue or gross profit per of marketing spend on that campaign), customer lifetime value and average life, delegate numbers and profit per event or course, and web traffic (page views, unique visitors, leads generated). Quentin Brocklebank Finance Director 13 February

12 CONSOLIDATED INCOME STATEMENT For the year ended 30 November 2012 Notes Revenue 2 14,331 15,123 Cost of Sales Direct costs (5,464) (5,293) Cost of Sales Marketing expenses (1,738) (2,430) GROSS PROFIT 2 7,129 7,400 Other operating expenses 8 (5,980) (5,875) Restructuring costs 5 (201) (1,259) Acquisition-related credits and costs (36) Depreciation expense 8 (127) (115) Amortisation expense 12 (955) (957) Impairment charges and reduction to goodwill 8 (300) (3,751) Total administrative expenses (6,876) (11,993) OPERATING PROFIT / (LOSS) 253 (4,593) Finance costs 6 (80) (92) Finance income 7-1 PROFIT / (LOSS) BEFORE TAX (4,684) Taxation PROFIT / (LOSS) FOR THE FINANCIAL YEAR 227 (4,439) Attributable to: - Equity holders of the parent 111 (4,551) - Non-controlling interest TOTAL COMPREHENSIVE INCOME / (LOSS) 227 (4,439) EARNINGS / (LOSS) PER SHARE Basic p (1.53)p Diluted p (1.52)p 12

13 CONSOLIDATED GROUP AND COMPANY STATEMENTS OF CHANGES IN EQUITY For the year ended 30 November 2012 GROUP Share capital 000 Share premium account 000 Merger reserve 000 Reserve for own shares 000 Retained earnings 000 Noncontrolling interest 000 Total equity 000 Total 000 At 1 December ,987 7, (123) 1,088 11, ,232 Total comprehensive income (4,551) (4,551) 112 (4,439) Tax taken directly to equity (note 15) (31) (31) - (31) 2,987 7, (123) (3,494) 6, ,762 Dividend paid by subsidiary (93) (93) Share issues Share based payments At 30 November ,989 7, (123) (3,425) 6, ,740 Total comprehensive income Tax taken directly to equity (note 15) (30) (30) - (30) 2,989 7, (123) (3,344) 6, ,937 Share issues 1, ,510-1,510 Share issue costs - (112) (112) - (112) Share based payments At 30 November ,996 7, (123) (3,200) 8, ,479 COMPANY Share capital 000 Share premium account 000 Retained earnings 000 Total equity 000 At 1 December ,987 7,061 (134) 9,914 Total comprehensive income - - (2,770) (2,770) Tax taken directly to equity (note 15) - - (31) (31) 2,987 7,061 (2,935) 7,113 Share issues Share based payments At 30 November ,989 7,061 (2,866) 7,184 Total comprehensive income - - (2,719) (2,719) Tax taken directly to equity (note 15) - - (30) (30) 2,989 7,061 (5,615) 4,435 Share issues 1, ,510 Share issue costs - (112) - (112) Share based payments At 30 November ,996 7,452 (5,471) 5,977 13

14 CONSOLIDATED GROUP AND COMPANY STATEMENTS OF FINANCIAL POSITION As at 30 November 2012 Group Company Notes ASSETS Non-current assets Goodwill 11 5,820 6, Other intangible assets 12 2,972 3, Property, plant and equipment Investments ,397 8,025 Deferred tax assets 15 1, ,937 11,051 7,728 8,455 CURRENT ASSETS Inventories 16 1,648 1, Trade and other receivables 17 2,718 2,665 3,933 4,282 Cash and cash equivalents ,349 4,254 4,683 4,292 TOTAL ASSETS 15,286 15,305 12,411 12,747 EQUITY AND LIABILITIES Capital and Reserves Called up ordinary share capital 23 3,996 2,989 3,996 2,989 Share premium account 7,452 7,061 7,452 7,061 Merger reserve Reserve for own shares 24 (123) (123) - - Retained earnings (3,200) (3,425) (5,471) (2,866) Equity attributable to equity holders of the parent 8,230 6,607 5,977 7,184 Non-controlling interest TOTAL EQUITY 8,479 6,740 5,977 7,184 Non-current liabilities Borrowings Provisions Deferred tax liabilities , ,685 Current liabilities Borrowings Current tax liabilities Trade payables and other payables 19 2,769 3,003 5,338 3,503 Provisions Deferred income 20 2,444 2, ,818 6,157 5,863 3,878 TOTAL LIABILITIES 6,807 8,565 6,434 5,563 TOTAL EQUITY AND LIABILITIES 15,286 15,305 12,411 12,747 These financial statements were approved by the Board of Directors and authorised for issue on 13 February 2013 and are signed on its behalf by: Julian Turner Chief Executive Quentin Brocklebank Finance Director 14

15 CONSOLIDATED AND COMPANY CASH FLOW STATEMENT For the year ended 30 November 2012 Group Company Notes Profit / (loss) for the financial year 227 (4,439) (2,719) (2,770) Taxation (54) (245) (54) (37) Amortisation & impairment expense, reduction in goodwill 8 1,255 4, ,839 Depreciation Finance costs Finance income - (1) - - Share based payment charges Operating cash flows before movement in working capital 1, (1,722) 287 (Increase) / decrease in inventories (364) (Increase) / decrease in receivables (52) 612 (61) 285 (Decrease) / increase in payables (1,208) (646) 1,663 (759) Cash flow from operating activities before interest and tax (120) (187) Interest paid 6 (77) (75) (77) (74) Taxation paid (99) (305) (100) (303) Cash inflow / (outflow) from operating activities (21) 313 (297) (564) INVESTING ACTIVITIES Acquisitions of subsidiaries, net of cash acquired 26 - (55) - (65) Deferred consideration paid 21, 26 (29) (58) (29) (58) Purchase of property plant and equipment 13 (51) (57) (16) (29) Purchase of intangible assets 12 (429) (1,519) (66) (105) Loss on disposal of intangible assets Interest received Net cash used in investing activities (449) (1,688) (111) (257) FINANCING Proceeds from issuance of ordinary shares 23 1, ,510 2 Costs of issuing shares (112) - (112) - Proceeds of new long term borrowings , ,125 Proceeds of new short term borrowings Repayments of borrowings 18 (1,375) (1,875) (1,375) (1,875) Payment of dividend to minority interest - (93) - - Net cash from financing activities 1,148 (466) 1,148 (373) NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 678 (1,841) 740 (1,194) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 305 2, ,204 CASH AND CASH EQUIVALENTS AT END OF YEAR

16 NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 November ACCOUNTING POLICIES BASIS OF PREPARATION The financial statements have been prepared in accordance with International Financial Reporting Standards as endorsed by the European Union ( IFRS ), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements of the Group and the Parent Company have been prepared under the historical cost convention and in accordance with applicable accounting standards. As permitted by Section 408 of the Companies Act 2006, no separate profit and loss account is presented for the Company. The Company s loss for the year was 2,719,000 (2011: 2,770,000 loss). Operating profit is defined as profit before tax but excluding net finance and related costs and investment income. GOING CONCERN The Group has made a profit for the year of 227,000 (2011: 4,439,000 loss) and has net assets of 8,479,000 (2011: 6,740,000); notwithstanding this it has a net current liabilities position at 30 November 2012 at 469,000 (2011: 1,903,000). The Directors have prepared group cash flow forecasts for the period ending 30 November These forecasts indicate that the Group will continue to meet its liabilities and bank debt requirements as they fall due for the foreseeable future. The business is currently trading in line with these forecasts. In the event of forecast trading levels not being met due to a weaker economic climate than forecast, the Directors have the scope to take further actions, to enable the group to meet its liabilities as they fall due for the foreseeable future and for it to remain within its financial covenants. There is long-term financing in place with the Group s bank debt renewed in January 2013 to a term loan with repayments over the period to May 2016 (note 18). The Group continues to maintain positive cash flows excluding acquisition spend. On this basis the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis. CHANGES IN ACCOUNTING POLICIES There have been no changes to accounting policies in the period. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Within the consolidated and company financial statements there are a number of areas where management has to include their best estimate of likely outcomes based on their first hand knowledge of the markets and situation. The preparation of consolidated and company financial statements will require management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these consolidated and company financial statements, the significant judgements made by management in applying the accounting policies and the key sources of estimation uncertainty were: Valuation and asset lives of intangible assets which are based on management s considered opinion of what has been bought and what value it is to the Group in the future. Valuation methodologies include the use of discounted cash flows, revenue and profit multiples, whilst asset lives are estimated on the type of asset acquired and range between three and ten years; Impairment of assets assets are subject to at least annual impairment reviews and testing, and the running of these tests and the numbers that form part of them will be based as far as possible on actual known results but will by nature include predictions of future outcomes. The asset carrying values are compared to estimates of the assets value in use. This value in use is calculated by looking at the cash generating units underlying the assets and management estimating the future cash flows after applying a suitable discount factor. The estimates of future cash flows are based on detailed forecasts produced by management. Assumptions on the goodwill assets are given in note 11; Provisioning: both trade receivables for bad debt and inventories for returns and obsolescence are reviewed for potential write down. The provisions created to cover these areas are based on managements experience and considered opinion of the assets current value; Contingent consideration: provisions are made at the Directors best estimate of what the consideration will be but as based on future results it can only be assessed on current knowledge and expectations with no certainty. The provisions made are considerably under the maximum amounts which could be payable (note 21); Valuation of share based payments which are calculated from modelling including estimates of non-transferability, exercise restrictions, and behavioural considerations, including such factors as the volatility of the Company s share price. These inputs and the methods are set out in note 28; Deferred tax: both assets and liabilities require judgement in determining the amounts to be recognised, in particular the extent to which assets should be recognised in consideration of the timing and level of future taxable income. 16

17 2 REVENUE AND COST OF SALES An analysis of the Group s income is as follows: Revenue Sale of goods 8,138 9,263 Rendering of services 6,193 5,860 14,331 15,123 Cost of sales Change in inventories of finished goods Raw materials and consumables used (5,791) (5,714) Marketing costs (1,738) (2,430) (7,202) (7,723) Gross profit 7,129 7,400 3 SEGMENTAL ANALYSIS Segmental information is presented in respect of the Group s business divisions. This format is based on the Group s management and internal reporting structure, as seen by the Board in its financial information used in allocating resources and making strategic decisions. These segments were identified by how the Group is focused on customer types and so does involve some aggregation of how those customers are served and of diversity within the customer bandings as niches are targeted within the broader markets. Education (E): provides school management and professional development information to professional communities in schools and other institutions; Health (H): provides professional education and training products for doctors, healthcare managers, speech therapists, elderly care professionals, and other health professionals as well as HR management and training compliance software; Sport & Gaming (S&G): provides insight, data and analysis to the business communities behind sport and online gaming; Central costs (PLC): the group function represents central PLC costs which are not directly related to the Divisions trading and are not recharged. Finance costs and investment income are also included here as these are driven by central policy which manages the cash positions across the Group. Operating profit is defined in note 1. The sector analysis includes the adjusted definition of operating profit (note 5) to allow shareholders to gain a further understanding of the trading performance of the Group and is considered by the Board alongside operating profit and profit before tax to assess performance and review strategy. Analysis by market sector Year ended 30 November 2012 Year ended 30 November 2011 E H S&G PLC Total E H S&G PLC Total Revenue 4,709 4,445 5,177-14,331 5,783 4,619 4,721-15,123 Adjusted operating profit (note 5) ,307 (715) 1, ,338 (715) 1,479 Share based payment charges (45) (40) (40) (19) (144) (29) (16) (17) (7) (69) Restructuring costs (41) - - (160) (201) (1,048) (112) (5) (94) (1,259) Acquisition-related credits / (costs) (47) - (36) Amortisation of intangible assets (151) (320) (383) (101) (955) (262) (292) (327) (76) (957) Impairment expense - (300) - - (300) (3,600) (3,600) Reduction of goodwill (151) - (151) Operating profit / (loss) (107) (995) 253 (4,858) (892) (4,593) Finance costs (80) (80) (92) (92) Investment income Profit / (loss) before tax (107) (1,075) 173 (4,858) (983) (4,684) 17

18 3 SEGMENTAL ANALYSIS (continued) Analysis by market sector Year ended 30 November 2012 Year ended 30 November 2011 E H S&G PLC Total E H S&G PLC Total Depreciation and amortisation , ,072 Impairment expense , ,751 Expenditure on intangible assets , ,090 Expenditure on property, plant and equipment Analysis by market sector Assets Liabilities Education 292 1,615 1,798 3,394 Health 3,692 3,675 1,924 2,007 Sport & Gaming 3,223 3,038 1,051 1,241 7,207 8,328 4,773 6,642 Group function 7,058 6, Gross debt and taxation (current and deferred) 1, ,374 1,898 15,286 15,305 6,807 8,565 There are no inter-segmental sales and no discontinued operations except for the sale of The School Run trade which is not material to Group numbers (note 26). 4 EMPLOYEES The average monthly number of persons (including directors) employed by the Group during the year, analysed by category, was as follows: Number Number Sales and marketing Content and production Administration and management Their aggregate remuneration comprised: Wages and salaries 5,068 5,119 Social security costs Pension costs Equity-settled share-based payments and related costs ,777 5,722 This remuneration is included in other operating expenses except for 181,000 (2011: 207,000) included in cost of sales direct costs, 127,000 (2011: 106,000) included in cost of sales marketing expenses, 26,000 (2011: 171,000) included in restructuring cost accruals, nil (2011: 167,000) included in goodwill as accrued in acquisition entities balance sheets prior to completion, 214,000 (2011: 63,000) capitalised in the inventory for book development and 404,000 (2011: 273,000) capitalised in the tangible fixed asset for web site development. 18

19 4 EMPLOYEES (continued) The Group considers that the Board of Directors are the key management personnel. Their remuneration is summarised below: Directors emoluments Salaries and Benefits in 30 November 30 November fees Bonus kind Pension Executive Directors J Turner Q Brocklebank Non-executive Directors P Rigby S Routledge There were no retirement benefits accruing for the Directors No Directors (2011: none) exercised share options in the year and so no gains were made (2011: no gains). The amount for share based payment charges (note 28) which relates to Directors was 138,000 (2011: 80,000). Shares are receivable under long term incentive schemes in respect of 2 Directors (2011: 2 Directors). J Turner has maximum numbers of options that could vest subject to performance conditions of 11,950,000 under the Share Price Growth Scheme (2011: 2,250,000 under the Profit Growth Plan and 11,950,000 under the Share Price Growth Scheme) and Q Brocklebank has 7,170,000 under the Share Price Growth Scheme (2011: 1,875,000 under the Profit Growth Plan and 7,170,000 under the Share Price Growth Scheme). The schemes are defined in note ADJUSTED PROFIT The adjusted profits have been prepared to allow shareholders to gain a further understanding of the trading performance of the Group. Profits are adjusted for items not perceived by management to be part of the underlying trends in the business and the related tax effect of those items. The adjustments add back items which have no cash impact or are not trade related and of a non-recurring type. Adjusted numbers exclude amortisation and impairment of goodwill and intangible assets, restructuring and acquisitionrelated costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax charges. Non-cash tax charges relate to movements on deferred tax such as the use of tax losses or tax credits from the recognition of tax losses The Group incurred restructuring costs in 2012 of 201,000 which relate to the disposal of the trade: The School Run, funding advice in advance of the fundraising in the year and changes at Board level where processes were started in The acquisition-related credits in 2012 totalling 687,000 result from reductions in provisions held for contingent consideration on both the Radcliffe Publishing Limited and the Ikonami Limited acquisitions (note 21). In 2011 significant costs were incurred as it restructured its business in response to the continued market difficulties in the education sector, removing redundant staff positions and significantly scaling back its education book list. Also, a lease break clause was activated on its second property where the inventory was stored and fulfilled and the decision taken to outsource those functions. The restructuring costs of 1,259,000 included a provision against inventory of 899,000, which followed the various policy changes and market shifts that made some resources redundant and many non-core, and restructuring costs of 360,000 which related to staff redundancies and the costs of outsourcing the Group s inventory and relocating the remaining staff to a smaller office only premises. In 2011 the acquisition-related costs totalling 36,000 related to the acquisitions of the entire share capitals of Ikonami Limited in April 2011 and of Radcliffe Publishing Limited in November 2010 together with the buy-out of a contract partner in the Group s gaming sector in January The costs included stamp duty, Bank approval charges and professional advisory fees but net of monies received back from the vendors of Radcliffe Publishing Limited which were not provided on acquisition (note 26). The 2012 and 2011 restructuring and 2011 acquisition-related costs (gross of the monies received back from the vendors) but not the 2012 acquisition-related credits were considered to be taxable items for corporation tax and thus attributable tax has been included in the period at 25% (2011: 27%) of their value. All other adjusting items do not have a tax affect on the Group. 19