RNS Number:4398O
Electric Word PLC
21 February 2008
21 February 2008
ELECTRIC WORD PLC
PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 NOVEMBER 2007
Electric Word, the specialist information publisher, today announces preliminary
results for the year to 30 November 2007.
SOLID BASE FOR STRONG ORGANIC GROWTH POTENTIAL
* Fourth successive year of strong financial growth
* Turnover up 26% to �13.5m (2006: �10.7m)
* Adjusted profit before tax* up 41% to �1.4m (2006: �1.0m)
* Adjusted earnings per share* up 36% to 0.87p (2006: 0.64p)
* Adjusted profit before tax* margin up 11% to 10% (2006: 9%)
* 33% of Group revenue from renewal subscriptions
* Two significant acquisitions, in new education sectors, enhance
future growth
* Current year started well, with trading in line with Board's
expectations
* excludes tax, goodwill amortisation, exceptional costs, minority interests and
notional accounting charges
Julian Turner, Chief Executive of Electric Word, commented:
"At the end of a year of focussed, productive work Electric Word has improved
the profits and cash flows from its continuing businesses and used them to
invest in both enhancing their growth prospects for the future and acquiring new
businesses of real potential. Our significant level of subscription-based
revenue and good cash generation gives us a firm financial base from which to
develop these opportunities and the business is well positioned to drive future
growth in earnings per share.
"The current year has started well and in line with the Board's expectations and
in 2008 we are anticipating continued organic growth, the full profit benefit of
the 2007 Speechmark acquisition and further revenue growth from MyChild, with
profits building into 2009. We are confident we will be able to take advantage
of further synergies and new opportunities across all the businesses to make
2008 another year of strong growth for the Group. "
ENDS
Enquiries:
Julian Turner, Chief Executive
Electric Word 0207 954 3470
Helen Thomas / Tim Spratt
Financial Dynamics 0207 831 3113
Notes to Editors
Electric Word plc delivers specialist information in a wide range of formats to
communities in two market sectors, targeting growing niche areas with strong
defensive qualities:
* Education: serves professional communities in schools and other institutions,
including school leaders and managers, special needs and speech therapy professionals,
teachers and parents, accounting for 65% of group revenue.
* Sport: covers the communities of amateur and elite sports competitors, governing
bodies, media bidding for sports content, venues, sponsoring brands and the
online gaming industry, accounting for 35% of group revenue.
The range of products and services offered to these communities include
subscription newsletters, magazines, websites, events, books, special reports
and bespoke research and publishing. In 2007 60% of revenue came from selling
content, including 33% from subscription revenue, and 40% came from selling
access to these communities.
EXTRACTS FROM CHAIRMAN'S AND CHIEF EXECUTIVE'S REPORTS
INTRODUCTION
2007 marks Electric Word's fourth successive year of strong improvement in
pre-tax profits and margins and in turnover. As previously, profit growth was
achieved from a combination of organic development and acquisitions,
highlighting the Group's capacity to create value through its well-organised
publishing competencies in highly specialist markets in the education and sports
sectors. The progress made across the business in 2007, combined with two
significant acquisitions, leaves the Group in an excellent position to
capitalise on the exciting opportunities for organic growth in both the
continuing operations and the new businesses added during the year.
The year started with a reorganisation of the company structure and management
teams and a renewed focus on the most important and valuable customer
communities and businesses. This process, which included cutting out some
sub-scale products and niches, was successfully completed in 2007 at the same
time as new products were launched and new businesses acquired in the areas of
greatest and most sustainable growth potential.
2007 has also seen significant progress in building the Group's infrastructure.
New enlarged premises in Milton Keynes now house both the expanding Incentive
Plus catalogue business and the newly-acquired Speechmark Publishing, creating
an immediate efficiency benefit in 2008. In July 2007 the Board appointed
Quentin Brocklebank as Finance Director, whose arrival has significantly
strengthened the senior management team, enabling Natascha Lloyd to be appointed
Electric Word's first HR Director and other senior managers to focus on leading
and developing the business units.
Looking ahead, the outlook appears as positive as 2007 has been successful.
Electric Word's business model is robust. Revenue is driven by established
competencies in direct marketing (81% of revenues) and sales (19%), with a
business culture rooted in measured improvements in the return on resources
invested. The Group's market sectors are ones in which information remains of
high value and enduring interest. Sport continues to grow in importance for
participants, media and governments around the world. The management of our
schools, the quality of our teachers' professional education and children's
behaviour and learning remain long-term political priorities. In entering the
parents' market with the acquisition of a majority stake in MyChild magazine,
Electric Word is addressing a specialist information market with potential for
significant growth and scale.
The growth potential in these markets and in the acquired businesses in
particular, creates a platform for continued growth over several years to come.
The Board would like to thank the staff in all Electric Word's businesses, as
well as our external partners, for their contribution to the results achieved in
2007 and the opportunities they have created for the future.
FINANCIAL REVIEW
2007 has seen a further year of strong growth for the Group with a 26% increase
in turnover to �13.5m (2006: �10.7m) and an increase in adjusted profit before
tax* of 41% to �1.35m (2006: �0.96m). This growth was driven by a combination of
margin improvement and the benefit of a full year's result from the 2006
Incentive Plus acquisition of �204,000, which, if excluded from these results,
still leaves comparable year on year results up by �189,000.
With 33% of all revenues coming from renewable subscriptions, cash generation
has been strong, with operating cash flows at 101% of adjusted pre-tax profits.
Cash, along with the strong balance sheet position at the end of 2006, supported
the greater leverage achieved in 2007 that enabled Electric Word to make
investments of �3.7m in acquisitions during the year without dilution at current
share prices. As a result, despite the fact that at least one of those
businesses is at an early stage of development, adjusted earnings per share rose
by 36% to 0.87p in 2007 (2006: 0.67p).
Financial summary (�000) 2007 2006 Change
Turnover 13,508 10,712 +26%
Gross Profit 6,167 4,919 +25%
Adjusted EBITDA* 1,522 1,088 +40%
Adjusted profit before tax* 1,353 960 +41%
Profit before tax 186 196 -5%
Adjusted earnings per share* 0.87p 0.64p +36%
Earnings per share (diluted) 0.02 0.16
Operating cash flow 1,365 511 +167%
Cash balance 1,116 1,475 -24%
*Adjusted numbers exclude tax �150,648 (2006: �(72,611) credit), goodwill
amortisation �938,806 (2006: �704,003), exceptional costs �102,684 (2006: �nil),
minority interests �6,097 (2006: �27,037) and notional accounting charges
�125,757 (2006: �59,181). The amount for notional accounting charges encompasses
the unwinding of discounts on preference shares �69,656 (2006: �19,375) and
provisions �6,367 (2006: �6,666) and FRS20 share based payment costs �49,734
(2006: �33,140). The adjusted earnings per share measure is fully diluted. All
references to profit in this announcement refer to the adjusted basis as defined
above unless otherwise stated.
Interest paid increased significantly in the period following the negotiation of
a �1.5 million revolving credit facility, which was fully drawn down to pay for
the Speechmark Publishing Limited acquisition. This deal represented a
significant change for the business, being the first acquisition by the Group
that was fully debt funded.
In total the Group entered into acquisitions in 2007 with a total value in the
region of �3.7m, of which �2.6m was disbursed in the year. Along with �255,000
related to deferred or contingent consideration on prior year deals this
amounted to a cash spend of �2.8m. It should be noted that none of this spend
was financed by the issue of shares. It was instead financed by the revolving
credit facility, a �0.5m short term loan and cash from working capital.
OPERATIONAL PERFORMANCE
2007 has been another year of development and progress for Electric Word with
strong profit growth achieved in both the education (+64%) and sport (+28%)
sectors, following a sharper focus on profits while continuing to invest in
future growth. The revenue mix has continued to build, with long-established
subscriptions revenues (33% of the total) now matched by event, book and report
sales also reaching a significant scale. The advances made in 2006 in the
development of new tiers of revenue from selling access to our valuable
specialist communities have been consolidated and, with a full year of commerce
revenues from Incentive Plus' catalogue of other suppliers' education products,
these 'sell-side' revenues now account for 40% of the total.
Education
�000 2007 2006 Change
Turnover 8,678 6,580 32%
Adjusted EBITA* 1,276 776 64%
Profit margin 15% 12% 25%
Electric Word's Education business has been significantly strengthened in 2007.
The 64% increase in operating profits was driven by improved margins in Optimus
Professional Publishing and a full year of trading in Incentive Plus, acquired
in May 2006. Following the acquisition of a majority stake in MyChild, the Group
now enjoys a strong position in both the school and parent ends of the UK
education market.
Optimus
The professional communities that Optimus has served, for example heads, bursars
and middle managers responsible for managing the curriculum and continuing
professional development, have proliferated over the last decade with the
devolution of management responsibilities to schools and new initiatives from
successive education ministers. 2007 saw some peripheral consolidation, with
Optimus exiting some sub-scale niches and under-performing products and
replacing these revenue streams with new products launched into the core
communities around school leadership, management, special needs and teaching and
learning, each supported by increasingly well-developed e-marketing channels.
With the new books front list enhanced also by the CKP imprint (specialising in
learning, teaching and thinking skills) acquired in 2006, books revenues jumped
46%. Optimus conferences also achieved a significant increase in revenues, with
delegate sales up 16% on 13% fewer events.
Optimus added a new format to its portfolio by taking over the publishing of
three magazines owned by Special Education Publishing Ltd in September 2007,
with a contractual option to purchase them for a fixed consideration of �875,000
or 6.6 million shares. Special Children, Teaching & Learning and PE & Sport
Today have a strong subscriber base in primary schools and, by occupying two of
the most important niches, offer opportunities to develop advertising revenues
in the Optimus business for the first time.
Overall, these developments in 2007 maintained revenues and improved profits by
17%. The pruning of some less profitable activities was balanced by investments
in new senior roles around education media sales, online marketing and books
publishing, creating a platform for further organic growth in the future.
Incentive Plus
The social and emotional aspects of learning (SEAL) are a key part of the
Government's current and future agenda, encompassing both behaviour and
emotional and intellectual development. Incentive Plus, which Electric Word
acquired in May 2006, brings together materials that teachers and other
professionals working with young people can use in this work. Following a
successful first 12 months as part of Electric Word, on the back of a
significant increase in marketing investment, Incentive Plus relocated to larger
premises in Milton Keynes in August 2007.
With a full year of Incentive Plus sales, education commerce revenues in
Electric Word increased by 138% in 2007, representing a 17% increase on the
equivalent period in 2006. Profits increased fivefold, despite the costs and
disruption of relocation.
The acquisition of Incentive Plus brought to the Group a competency in
generating commerce revenue from the sale of third-party products and its
logistical support. Electric Word sees the combination of owned content and
commerce as strategically important: content to attract and retain communities
of customers and commerce to generate revenue from access to them (in this case
by owning a distribution channel). This strategy also underpins Electric Word's
entry to the parents' side of the education market led by the acquisition of a
majority stake in MyChild.
MyChild
Parental impact on children's educational attainment is another key influence on
strategic Government thinking. Parents make a difference by what they do at
home, through the emotional preparedness of their children and by the nature of
their relationship with schools. MyChild magazine, in which Electric Word
acquired a 10% stake in August 2007 and a further 40.1% stake in November 2007,
aims to support parents with their children's educational development both in
and out of school.
MyChild has over 26,000 parent subscribers and is currently adding around 1,000
new subscribers per month through a range of different sales channels. The
circulation growth now supports advertising, which since the year end has been
strengthened by the re-launch of the www.mychild.co.uk website. Catalogue and
e-commerce revenues are also being introduced this year on the back of the
improved Incentive Plus infrastructure which will give parents the opportunity
to buy products to support their children's educational and emotional
development.
Electric Word has developed a strong position in the education market over many
years. In 2007 it has given that position more focus and more depth while also
opening itself an important new market among parental audiences. Strategically,
the Group's leading position at both the school and parent ends of the UK
education sector presents unique opportunities for organic growth over the long
term.
Sport Sector
�000 2007 2006 Change
Turnover 4,829 4,133 17%
Adjusted EBITA* 940 736 28%
Profit margin 19% 18% 5%
Electric Word's sport sector underwent a dramatic transformation last year
following the acquisition of SportBusiness Group in 2005. Progress has been
continued in 2007 in both the consumer (P2P Publishing) and the
business-to-business divisions, with profit growth of 28% on a 17% revenue
increase.
P2P Publishing
In 2007 profits grew by 32% as the business continued to migrate online and take
advantage of higher online margins. Costs were also reduced by closing the small
Australian office and although Australia remains an important market for the
business, we identified that it no longer needed to be managed and marketed
locally. At the same time a substantial investment was made in rebuilding the
successful Peak Performance website with a greater community focus and a wider
range of digital content. This is part of a strategy to further increase content
sales from the site and increase the potential monetisation of the audience
through advertising and e-commerce.
SportBusiness Group
In 2006, the first year of its ownership of SportBusiness Group (SBG), bespoke
revenues were particularly important as Electric Word had the benefit of a
substantial contract to publish the official magazine of the Asian Games. It is
a mark of the significant progress the business has achieved with revenue growth
across SBG by 26% in 2007 despite that contract finishing at the end of the
first quarter.
Sales of both content and access to the SBG community contributed to growth.
Subscription revenues increased 30% in the period as SportBusiness International
magazine continued to attract a growing subscriber base of senior executives.
Its premium position and strong brand have also attracted high-quality
advertisers keen to influence this target audience, including a growing number
of cities bidding to host major sports events - a trend that is set to continue
with the increasingly important role of sport in geopolitics and inward
investment.
At the start of 2007 i-Gaming Business magazine faced some uncertainty in the
market as a result of compliance changes in the USA. However revenues actually
increased substantially in 2007, with advertising strong enough to support the
launch of a second magazine and the opportunity for i-Gaming to take advantage
of Electric Word's established event management competency to launch a series of
online gaming marketing exhibitions.
The result has been that business-to-business sport publishing increased profits
by 23% and pushed overall sport sector margins up again to 19% (18%), exceeding
what was expected to be a high point in 2006. Looking ahead, the outlook is
promising, with a buoyant international market and significant potential for
further growth.
OPERATING REVIEW
In 2007 the resource at the centre of the Group was enhanced with the
appointment of Quentin Brocklebank as Finance Director and the creation of a
senior HR role. Central costs not directly attributable to businesses increased
to �835k (�541k), or 6.2% of Group revenues (5.1%).
As anticipated in last year's review, we moved ahead with relocating the
Incentive Plus business into larger premises in Milton Keynes. By doubling
warehouse capacity, we are now in a position to handle considerable future
growth, while fully off-setting the higher short term costs by in-sourcing
storage and distribution for other parts of the group. The increased office area
enabled us to seamlessly relocate the Smallwood and the Speechmark acquisitions.
Co-location has yielded further integration benefits for these businesses, both
in terms of cost-savings and management control. Enhanced IT and e-commerce
systems were also successfully implemented at Incentive Plus, which we
anticipate rolling out to the Speechmark business in 2008. This should yield
further efficiencies, and reflects our philosophy of consolidating systems
whenever possible across the Group. The launch of a catalogue and e-commerce
revenue stream around the MyChild Family Learning brand is also being led from
Milton Keynes, demonstrating our commitment to sharing Group competencies as a
way of opening up new avenues for growth.
In December 2006 we reorganised the Group's corporate structure, creating
separate subsidiaries for each of our five business units. By the end of the
year, the acquisitions of Speechmark and MyChild had expanded this to seven. The
reorganisation was mirrored in terms of management responsibilities, with more
control being given to our emerging market-facing managers. This has proved to
be very successful, with the emergence of dynamic and collaborative teams within
the separate business units. At the same time, we strengthened the provision of
group-wide central services in finance, HR, IT and fulfilment. The appointments
of a Finance Director and HR Director have under-pinned this investment,
increasing our senior team capacity. Group wide services are not only
cost-effective, but they ensure that systems, procedures and reporting systems
are consistent and robust.
OUTLOOK
At the end of a year of focussed, productive work Electric Word has improved the
profits and cash flows from its continuing businesses and used them to invest in
both enhancing their growth prospects for the future and adding new businesses
of real potential. Our significant level of subscription based revenue and good
cash generation gives us a solid base from which to develop these opportunities
and the business is well positioned to drive future growth.
The current year has started well and in line with the Board's expectations, We
are anticipating continued organic growth, the full profit benefit of the 2007
Speechmark acquisition and further revenue growth from MyChild, with profits
building into 2009. We are confident we will be able to take advantage of
further synergies across the sector businesses and that 2008 will be another
year of strong growth for the Group.
Consolidated Profit and Loss Account 30 November 2007
Continuing Acquisitions 2007 2006
(restated)
Note � � � �
TURNOVER 2 13,036,493 471,068 13,507,561 10,712,433
Cost of Sales (4,741,751) (193,246) (4,934,997) (3,633,291)
Marketing (2,321,251) (84,044) (2,405,295) (2,160,353)
--------- --------- --------- ---------
GROSS PROFIT 5,973,491 193,778 6,167,269 4,918,789
Operating expenses (4,571,293) (264,850) (4,836,143) (3,981,420)
Amortisation of goodwill (938,806) - (938,806) (704,003)
-------- -------- -------- --------
Total administrative expenses (5,510,099) (264,850) (5,774,949) (4,685,423)
--------- --------- --------- ---------
OPERATING PROFIT / (LOSS) 463,392 (71,072) 392,320 233,366
Exceptional costs 3 (102,684) - (102,684) -
Interest receivable 4 32,784 - 32,784 28,003
Interest payable 4 (136,452) (211) (136,663) (64,962)
--------- --------- --------- ---------
PROFIT / (LOSS) ON ORDINARY 2, 5 257,040 (71,283) 185,757 196,407
ACTIVITIES BEFORE TAXATION
Taxation 7 (156,727) 6,079 (150,648) 72,611
--------- --------- --------- ---------
PROFIT / (LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION 100,313 (65,204) 35,109 269,018
Minority interests (6,097) - (6,097) (27,037)
--------- --------- --------- ---------
PROFIT / (LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION AND 94,216 (65,204) 29,012 241,981
MINORITY INTERESTS
--------- --------- --------- ---------
EARNINGS PER SHARE
Basic 8 0.02p 0.19p
--------- ---------
Diluted 8 0.02p 0.16p
--------- ---------
The operating profit for the year arises from the Group's continuing operations.
Consolidated statement of recognised gains and losses 30 November 2007
Group Group
2007 2006
Notes � �
Profit for the year 35,109 269,018
Prior period adjustments 10 (160,644) -
--------- ---------
Total gains and losses recognised
since the last annual report (125,535) 269,018
--------- ---------
Attributable to:
- Equity holders of the parent (131,632) 241,981
- Minority interests 6,097 27,037
--------- ---------
Consolidated Balance Sheet 30 November 2007
Group Group
2007 2006
(restated)
Notes � �
FIXED ASSETS
Intangible assets 9 10,870,300 6,122,743
Tangible assets 418,310 313,900
Investments - 90,000
--------- ---------
11,288,610 6,526,643
--------- ---------
CURRENT ASSETS
Stocks 860,260 284,462
Debtors due within one year 3,811,478 2,618,336
Debtors due after more than one year 385,226 578,097
Cash at bank and in hand 1,116,199 1,475,468
--------- ---------
6,173,163 4,956,363
--------- ---------
CREDITORS: Amounts falling due within
one year
Deferred revenue (5,055,165) (3,079,905)
Other creditors (3,658,430) (1,948,442)
--------- ---------
(8,713,595) (5,028,347)
--------- ---------
NET CURRENT (LIABILITIES) (2,540,432) (71,984)
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 8,748,178 6,454,659
CREDITORS: Amounts falling due after more than (2,705,140) (1,489,302)
one year
PROVISIONS FOR LIABILITIES (1,261,492) (330,592)
--------- ---------
NET ASSETS 4,781,546 4,634,765
--------- ---------
CAPITAL AND RESERVES
Called up share capital 10 1,423,644 1,381,442
Share premium account 10 3,038,644 2,977,933
Merger reserve 10 105,011 105,011
Reserve for own shares 10 (103,376) (67,497)
Reserve for share based payments 10 104,182 54,448
Profit and loss account 10 185,403 156,391
--------- ---------
SHAREHOLDERS' FUNDS 4,753,508 4,607,728
Minority Interest 28,038 27,037
--------- ---------
4,781,546 4,634,765
--------- ---------
Consolidated Cash Flow Statement 30 November 2007
2007 2006
Notes � �
Net cash flow from operating 11a 1,365,000 511,087
activities
Returns on investments and servicing 11b (27,856) (11,769)
of finance
Taxation (4,080) (84,582)
Capital expenditure and financial 11b (233,573) (226,815)
investment
--------- ---------
Cash inflow before acquisitions and 1,099,491 187,921
financing
Acquisitions 11b (2,812,425) (1,955,138)
--------- ---------
Cash outflow before financing (1,712,934) (1,767,217)
Financing 11b 1,353,665 2,362,008
--------- ---------
(DECREASE)/INCREASE IN CASH IN THE (359,269) 594,791
YEAR
--------- ---------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT) / FUNDS
2007 2006
� �
(Decrease)/increase in cash in the (359,269) 594,791
year
Cash outflow from movement in lease 41,987 37,439
financing
Cash inflow from increase in loans (1,329,531) (650,000)
--------- ---------
MOVEMENTS IN NET FUNDS IN THE YEAR (1,646,813) (17,770)
NET FUNDS AT 1 DECEMBER 2006 716,852 734,622
--------- ---------
NET (DEBT) / FUNDS AT 30 NOVEMBER 2007 11c (929,961) 716,852
--------- ---------
Notes to the Consolidated Financial Statements
For the year ended 30 November 2007
1 BASIS OF ACCOUNTING
The announcement was approved by the Board of directors on 20 February 2008. The
preliminary results for the year ended 30 November 2007 are unaudited. The
financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 30 November 2007 or 30 November
2006. The financial information for the year ended 30 November 2006 is derived
from the statutory accounts for that year, which have been delivered to the
Registrar of Companies. The auditors reported on those accounts and their report
was unqualified. Accounting policies remain consistent with those used in the
financial statements for the year ended 30 November 2006 except as disclosed
below.
The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards. One change from the
prior year's policies is the adoption of 'FRS20 - Accounting for Share-Based
Payments', the impact of which is a cost of �49,734 (2006: �19,140, net of the
reversal of a �14,000 charge previously recognised under "UITF 17 - Employee
share schemes"). In addition a charge of �21,308 was posted to the profit and
loss account at 30 November 2005 to restate the brought forward position. A
second change is the adoption of "UITF 25 - National Insurance contributions on
share option gains", the impact of which has been to accrue for �120,196 against
the profit and loss account at 30 November 2005 and post against this accrual a
cost of �30,240 in the year following an exercise of warrants.
2 TURNOVER AND SEGMENTAL ANALYSIS
The Group's turnover and profit on ordinary activities before taxation were all
derived from its principal activity. An analysis of sales by destination in the
following geographical markets is as follows:
2007 2006
� �
United Kingdom 10,618,421 8,434,816
Rest of Europe 773,067 381,107
Rest of the World 2,116,073 1,896,510
--------- ---------
13,507,561 10,712,433
--------- ---------
Profit on ordinary
Analysis by class of activities before taxation
business Turnover and minority interests Net assets
2007 2006 2007 2006 2007 2006
(restated) (restated)
� � � � � �
Public Sector 8,678,152 6,579,833 683,899 335,277 2,030,501 1,893,585
Sport Sector 4,829,409 4,132,600 385,617 472,467 3,288,979 3,189,033
Group overheads - - (883,759) (611,337) (537,934) (447,853)
--------- --------- --------- --------- --------- ---------
13,507,561 10,712,433 185,757 196,407 4,781,546 4,634,765
--------- --------- --------- --------- --------- ---------
3 EXCEPTIONAL COSTS
The exceptional costs relate to the costs of a fundamental reorganisation of the
business as described in the annual report for the year ended 30 November 2006.
This resulted in a significant change in management responsibilities and a
restructure of the businesses into four subsidiaries matching the Group's major
business units. The costs associated with this included some redundancy and
legal and financial assistance. These were all considered to be allowable
expenses for corporation tax and thus have been treated as reducing the Group's
charge in the year at 30% of their value.
Notes to the Consolidated Financial Statements - continued
For the year ended 30 November 2007
4 INTEREST RECEIVABLE AND PAYABLE
Receivable 2007 2006
� �
Bank interest 32,784 28,003
--------- ---------
Payable 2007 2006
� �
Bank loans and overdrafts 56,306 36,440
Finance lease interest 4,334 2,481
Unwinding of discount on preference shares and provisions 76,023 26,041
--------- ---------
136,663 64,962
--------- ---------
5 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
2007 2006
(restated)
� �
Profit on ordinary activities before taxation is stated after
charging:
Depreciation and amounts written off tangible fixed assets
- owned assets 107,678 62,185
- leased assets 33,453 45,225
Amortisation of intangible fixed assets 938,806 704,003
Operating lease rentals:
Land and buildings 133,740 91,200
Share based payment costs 49,734 33,140
Loss on foreign exchange 20,845 12,005
--------- ---------
Amounts payable to Baker Tilly or Baker Tilly UK Audit LLP and their associates
in respect of both audit and non-audit services are as follows:
2007 2006
� �
Fees payable to the company's auditor for the audit of the 37,500 35,000
company's annual accounts
Fees payable to the company's auditor and its associates for
other services:
- the audit of the company's subsidiaries pursuant to 22,500 18,000
legislation
- other services relating to taxation 25,000 57,550
- services relating to corporate finance transactions
involving the company or its subsidiaries 25,000 19,000
- other services 14,000 32,317
--------- ---------
Notes to the Consolidated Financial Statements - continued
For the year ended 30 November 2007
6 EMPLOYEES
2007 2006
No No
The average monthly number of persons (including directors)
employed by the Group during the year was
- Sales and marketing 30 29
- Content and production 30 33
- Administration and management 47 36
--------- ---------
107 98
--------- ---------
2007 2006
(restated)
� �
Staff costs for the above persons:
- Wages and salaries 3,022,057 2,682,217
- Social security costs 352,647 283,512
- Pension costs 34,535 5,564
- Equity-settled share-based payments and related costs 49,734 33,140
--------- ---------
3,458,973 3,004,433
--------- ---------
7 TAXATION
2007 2006
� �
Current tax:
UK corporation tax on profits of the period 915 110,063
--------- ---------
Total current tax 915 110,063
--------- ---------
Deferred taxation:
Effect of decreased tax rate on opening assets 48,326 -
Origination and reversal of timing differences 101,407 (182,674)
--------- ---------
149,733 (182,674)
--------- ---------
Tax on profit on ordinary activities 150,648 (72,611)
--------- ---------
Notes to the Consolidated Financial Statements - continued
For the year ended 30 November 2007
7 TAXATION (continued)
Factors affecting tax charge for the period 2007 2006
(restated)
� �
The tax assessed for the period differs from the standard
rate of corporation tax in the UK. The differences are
explained below:
Profit on ordinary activities before tax 185, 757 196,407
--------- ---------
Profit on ordinary activities multiplies by the standard rate
of corporation tax in the UK of 30% (2006 - 30%) 55,727 58,922
Effect of:
Expenses not deductible for tax purposes 34,869 87,115
Amortisation of intangible fixed asset 264,414 213,047
Capital allowances in arrears / (excess) of depreciation (6,667) (33,080)
Share based payments 14,920 5,742
Tax relief on share options and warrants exercised (109,191) -
Other timing differences (14,310) -
Utilisation of tax losses (239,931) (214,372)
Small companies relief (2,050) (7,311)
Over provision in prior year 3,134 -
--------- ---------
Current tax charge for the period 915 110,063
--------- ---------
There are accumulated losses of �12.7 million (2006: �10.3 million) which,
subject to agreement with the HM Revenue & Customs, are available to offset
future profits of the same trade. A deferred tax asset of �730,623 (2006:
�729,297) has been recognised on the balance sheet representing losses which are
expected to be utilised in the foreseeable future.
8 EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on the following:
Weighted 2007 Weighted 2006
average Earnings average Earnings
Earnings number of per share Earnings number of per share
shares shares
(restated) (restated)
� p � p
Earnings per share 29,012 140,982,634 0.02p 241,981 126,251,152 0.19p
Adjustment in
respect of SIP
Shares - (1,228,046) 0.00p - (992,783) 0.00p
--------- --------- --------- --------- --------- ---------
Basic earnings per 29,012 139,754,588 0.02p 241,981 125,258,369 0.19p
share
Dilutive effect of
share options - 7,790,729 0.00p - 14,066,599 (0.02p)
Dilutive effect of - 8,602,869 0.00p - 10,089,713 (0.01p)
warrants
--------- ---------- --------- --------- ---------- ---------
Diluted earnings per 29,012 156,148,186 0.02p 241,981 149,414,681 0.16p
share
--------- ---------- --------- --------- ---------- ---------
Notes to the Consolidated Financial Statements - continued
For the year ended 30 November 2007
9 INTANGIBLE FIXED ASSETS
Goodwill Magazines Total
� � �
Cost
1 December 2006 7,821,042 50,000 7,871,042
Additions 5,686,363 - 5,686,363
--------- --------- ---------
30 November 2007 13,507,405 50,000 13,557,405
--------- --------- ---------
Amortisation
1 December 2006 1,698,299 50,000 1,748,299
Charged in the year 938,806 - 938,806
--------- --------- ---------
30 November 2007 2,637,105 50,000 2,687,105
--------- --------- ---------
Net book value
30 November 2007 10,870,300 - 10,870,300
--------- ---------- ---------
30 November 2006 6,122,743 - 6,122,743
--------- ---------- ---------
The additions to the Group in the year relate to four current year acquisitions
as detailed below and �246,032 on prior year acquisitions, relating to fair
value adjustments.
The current year additions to the Group comprise:
Acquisition Percentage of Goodwill Consideration Consideration
issued share arising on paid payable in
capital acquisition 2008
purchased
� � �
ArkSports Limited 100% 144,324 144,626 -
Smallwood Publishing 100% 180,054 189,717 12,500
Limited
Speechmark Publishing 100% 1,985,878 1,464,656 654,125
Limited
MyChild Limited 50.1% 3,130,075 609,134 512,500
--------- --------- ---------
5,440,331 2,408,133 1,179,125
--------- --------- ---------
The consideration payable in 2008 is deferred except for that on Smallwood
Publishing Limited where the maximum payable is �75,000.
Notes to the Consolidated Financial Statements - continued
For the year ended 30 November 2007
10 CAPITAL AND RESERVES
Reserve Reserve Profit and
Share Merger for Loss
Share premium reserve for own account Total
Share
Capital shares Based
Payments
GROUP � � � � � � �
30 November
2006 as
previously
stated
1,381,442 2,977,933 105,011 (53,497) - 317,035 4,727,924
Prior year
adjustments* - - - (14,000) 54,448 (160,644) (120,196)
--------- --------- --------- --------- --------- --------- ---------
1 December
2006 as
restated 1,381,442 2,977,933 105,011 (67,497) 54,448 156,391 4,607,728
Share issues 42,202 60,711 - - - - 102,913
Share issue - - - - - - -
costs
Purchase of - - - (35,879) - - (35,879)
shares
Share based
payment
costs - - - - 49,734 - 49,734
Profit for - - - - - 29,012 29,012
the year
--------- --------- --------- --------- --------- --------- ---------
30 November
2007
1,423,644 3,038,644 105,011 (103,376) 104,182 185,403 4,753,508
--------- --------- --------- --------- --------- ---------- ---------
* One prior period adjustment relates to the adoption of 'FRS20 - Accounting for
Share-Based Payments'. The impact on 2006 is a reduction in profits of �19,140,
net of the reversal of a �14,000 charge previously recognised under 'UITF 17 -
Employee share schemes'. In addition a charge of �21,308 was posted to the
brought forward balances at 30 November 2005 to restate that balance. A second
adjustment is the adoption of "UITF 25 - National Insurance contributions on
share option gains" which has accrued �120,196 against the profit and loss
account at 30 November 2005.
11 CASH FLOWS
a Reconciliation of operating profit to net cash inflow from operating
activities
2007 2006
(restated)
� �
Operating profit 392,320 233,366
Exceptional costs (102,684) -
Amortisation 938,806 704,003
Depreciation 141,131 107,410
Decrease in stocks (15,688) (90,086)
Increase in debtors (597,809) (626,481)
Increase in creditors 559,190 149,735
Movement in share based payment reserve 49,734 33,140
--------- ---------
Net cash inflow from operating activities 1,365,000 511,087
--------- ---------
b Analysis of cash flows for headings netted in the cash flow statement
2007 2006
� �
Returns on investments and servicing of finance
Interest received 32,784 28,003
Bank interest paid (56,306) (37,291)
Interest element of finance lease rental payments (4,334) (2,481)
--------- ---------
Net cash outflow from returns on investments and servicing of (27,856) (11,769)
finance
--------- ---------
Notes to the Consolidated Financial Statements - continued
For the year ended 30 November 2007
11 CASH FLOWS (continued)
b Analysis of cash flows for headings netted in the cash flow statement
(continued)
2007 2006
� �
Returns on investments and servicing of finance
Interest received 32,784 28,003
Bank interest paid (56,306) (37,291)
Interest element of finance lease rental payments (4,334) (2,481)
--------- ---------
Net cash outflow from returns on investments and servicing of (27,856) (11,769)
finance
--------- ---------
Capital expenditure and financial investment
Purchase of tangible fixed assets (233,573) (226,815)
--------- ---------
Acquisitions
Purchase of subsidiary undertakings (2,498,673) (2,130,930)
Purchase of unincorporated businesses - (86,624)
Payment of deferred / contingent consideration on (254,592) -
acquisitions
(Bank overdraft) / cash acquired with subsidiary undertakings (59,160) 262,416
--------- ---------
Net cash outflow from acquisitions (2,812,425) (1,955,138)
--------- ---------
Financing
Issue of share capital 102,000 1,900,000
Share issue costs - (107,265)
Cash inflow from long term bank loan 1,500,000 750,000
Repayment of long term loans (170,469) (100,000)
Capital element of finance lease rental payments (41,987) (37,439)
Purchase of own shares (35,879) (43,288)
--------- ---------
Net cash inflow from financing 1,353,665 2,362,008
--------- ---------
c Analysis of funds
At 1 Other At 30
December non-cash November
2006 Cash flow charges 2007
� � � �
Cash at bank and in hand 1,475,468 (359,269) - 1,116,199
--------- --------- --------- ---------
Cash 1,475,468 (359,269) - 1,116,199
--------- --------- --------- ---------
Loans due within one year (150,000) 170,469 (200,911) (180,442)
Finance leases due within one (38,463) 41,987 (41,923) (38,399)
year
--------- --------- --------- ---------
Debt due within one year (188,463) 212,456 (242,834) (218,841)
--------- --------- --------- ---------
Loans due after one year (500,000) (1,500,000) 200,911 (1,799,089)
Finance leases due after one (70,153) - 41,923 (28,230)
year
--------- --------- --------- ---------
Debt due after one year (570,153) (1,500,000) 242,834 (1,827,319)
--------- --------- --------- ---------
Net funds / (debt) 716,852 (1,646,813) - (929,961)
--------- --------- --------- ---------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Electric Word (LSE:ELE)
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