TIDMILX
RNS Number : 5774N
ILX Group PLC
10 September 2013
ILX Group plc
Final Results for the 15 months to 30 June 2013
Chairman's statement
In my statement for the six months ended 31 March 2013 I said
that there were steps in place to improve the efficiency of our
product delivery. The launch of our own training rooms at our new
offices in the Strand, London is a good example of providing closer
direct contact with our customers and improved product margin.
I also said that I believed that there was an opportunity to
increase the scope and scale of the Group through acquisition. Our
recent acquisition of TFPL Limited, which brings recruitment sector
skills and other expertise into the Group, is a good example of
this.
The in-depth business review and restructure which we have
carried out since I joined the board in August 2012 has delivered
significant operating cost reductions during the period. The
business processes and related staffing levels have been analysed
and we have taken positive action to bring costs into line with the
business's objectives. We have achieved material cost reductions in
each functional business area.
In addition the board has been restructured with Ken Scott, CEO,
Jon Pickles, CFO, Eddie Kilkelly, COO, and Paul Virik and Damien
Lane, both non--executive Directors, having all stepped down. In
their place I am pleased to have welcomed Donald Stewart and John
McIntosh onto the board. Donald joined the business originally as a
non-executive Director on 18 April 2013 and, on 3 June, joined the
executive team, as General Counsel while, on 6 June 2013, John
McIntosh was appointed Finance Director, and it is the board's
intention to seek to appoint a further suitable independent
non-executive director in the near future. Paul Lever remains an
independent non-executive Director.
Alongside these new Directors we have put an experienced team of
highly capable change managers in place to identify and deliver
further operational improvements and business development
opportunities.
In order to make the most of the Group's extensive project
management customer base we have expanded the Group's product
offering by creating further complementary business divisions in
consulting and recruitment. This will allow the Group to provide
more comprehensive services for both corporate and individual
project managers and provide a platform on which to connect with
our customers at different stages in the project management life
cycle. Not only are we able to train project managers, we can also
provide consulting services across relevant sectors and now,
additionally, a recruitment link to our growing list of trained
project manager clients.
Restructuring costs during the period have been greater than was
initially anticipated as a result of our thorough review of the
business. The full benefit of the resulting reductions in operating
costs are not expected to be reflected until the new financial
year.
Continuing pressure remains on revenues from the training
division due to external price competition and industry macro
factors. The new consultancy division has made a positive
contribution and kept overall Group revenues steady. We believe
that the acquisition of TFPL gives sound foundations to the Group's
new recruitment division and we will continue to aim to increase
the scope and scale of the business through capitalising on the
contacts and experience available to the Group.
Strategy and delivery
Our strategic focus during the period has remained exploring and
developing of the group's capabilities in areas which the Board
believes will afford good growth opportunities. Building on the
Group's presence in the area of project management, we have added
consulting and recruitment to our experience and skills in
training. We will continue to evaluate further growth opportunities
including acquisitions.
Our on-going marketing review is continuing to reveal valuable
insights into our target markets and product offering, particularly
in relation to our on-line positioning, which will enable us to
prioritise and refocus our marketing activities and guide us in the
future development of our on-line offering. We continue to work on
operational improvements and the development of a broader digital
and classroom product portfolio. This month saw the launch of our
PMP product, which will serve as an alternative to PRINCE2 for our
clients in the North American market.
Group re-organisation
The business processes and related staffing levels of the
training division were analysed to align the strengths of the team
with the ongoing challenges required to arrest the historic pattern
of declining revenues. Significant actions were taken to bring
costs into line with businesses objectives. The changes to the
commercial culture of the training business were made rapidly to
minimize disruption. However this resulted in a total charge to
restructuring of GBP2.4 million including a non-cash charge against
intangible assets of GBP1.1 million.
Restated Gross Profit
We have recalculated the gross profit as presented in the
results for the 15 months to 30 June and the twelve months to 31
March 2012. The effect of this has been to move certain sales
related costs, including administrative and technical staff costs
and shipping costs, from administrative and distribution expenses
to cost of sales. Refer to note 1 of the notes to the audited
financial statements to 30 June 2013.
Business Review
Management
A new executive management team was introduced during the 15
month period made up of highly capable change managers within
sales, finance, legal and operations. Their combined experience
covers training, consulting, business development, sales, digital
transformation, cost control and the public company environment.
Each executive is experienced in mergers and acquisitions and
business integration.
Review of Divisions
The group is now headquartered at Strand Bridge House, 138-142
The Strand, London. This central London location was chosen as it
better suits the overall needs of the business and the new offices
can accommodate training courses with marginal incremental costs to
the business. The Group's former offices at Hammersmith were sublet
for the remainder of the term at the prevailing market rate.
Performance Management
The Group measures the operating performance of the business
through monthly financial reports on the Training and Consulting
(and, going forward, Recruitment) divisions.
The Training division covers the following territories, UK
(including other international), Australia, New Zealand and UAE.
The Consulting division is represented by Obrar Limited ("Obrar")
and ILX Consulting Pty Ltd ("ILXC") both of which are able to
service international business.
Training Division
The Training division was the Group's primary business until
December 2012.
During the 15 month period to 30 June 2013 the Group's business
in the UK has suffered a contraction of revenue to the level last
achieved in 2011. Since the period end further steps have been
taken to address marketing performance which, it is hoped, will
improve leads generation and, in turn, the sales performance.
During the period the opportunities to improve the financial
performance of the Group's training business in the APAC region
were reviewed and the office was restructured. The intention is
that with a lower cost base that office will continue to develop
its sales but at a better gross margin that was previously
experienced.
The UAE training business based in Dubai completed its first
full year of operation in June 2013. During this period the small
team delivered strong revenues, despite the significant barriers to
entry, through creating a start-up and accessing tenders within the
territory.
Efforts to establish markets in Europe have been hampered by
recruitment and language conversion costs. Consequently the Danish
and Polish operations have been scaled back. Instead the Group is
looking to the larger English speaking business markets as a source
of future training business opportunities and has achieved some
sales success there.
Consequently, future resources will be targeted towards
territories where the training business can leverage most from its
existing products and skills and, for example, where the language
barriers are less of an issue, until such time as further market
penetration can be achieved economically.
The Group will continue to review its product portfolio and
development capability. During the period it was decided to review
the accounting treatment of development costs. As a result there
has been a non-cash charge against previously capitalised product
development.
Consulting Division
This division comprises Obrar and ILXC which brought in a
combined GBP1.6 million revenue (2012: GBPnil) between December
2012 and 30 June 2013. Obrar, which was acquired on 5 December
2012, is located in the UK, has managed and implemented several
large contact centre technical and operational projects during the
period. Since its formation in February 2013 ILXC has successfully
progressed and the team, now three strong, has implemented several
operational projects primarily for clients in the Australian public
sector.
Corporate activity
We continue to review acquisition opportunities as they arise to
capitalise on the Group's capabilities in areas which the Board
believes will afford growth opportunities. Two consulting
businesses were brought into the Group during the period and a
recruitment business shortly after the period end. The Board will
continue to consider and evaluate new opportunities to give the
group increased scope and scale whilst continuing the theme of
project management, training, consulting and recruitment
services.
Wayne Bos
Executive Chairman
10 September 2013
For further information please contact:
Enquiries:
ILX Group plc
Wayne Bos, Executive Chairman and Interim
CEO +44 (0) 20 7371
John McIntosh, Finance Director 4444
Spark Advisory Partners (Nomad) +44 (0) 20 3368
Mark Brady / Sean Wyndham-Quin 3551
WH Ireland (Broker) +44 (0) 20 7220
Adrian Hadden / Nick Field 1666
Tavistock Communications +44 (0) 20 7920
Matt Ridsdale / Niall Walsh 3150
Financial Review
Operating performance
For the 15 months to 30 June 2013 the Group delivered revenues
of GBP17.0 million (2012: GBP13.5 million). Operating loss after
accounting for restructuring costs was GBP1.5 million (2012 GBP1.0
million profit). Operating profit before restructuring costs of
GBP2.4 million (2012: GBPnil) was GBP0.9 million (2012: GBP1.0
million). All the restructuring costs related to the training
business.
Training Division performance
For the 15 months to 30 June 2013 the training division
delivered revenues of GBP15.3 million (2012: GBP13.5 million).
Gross margins across the training business were 40% (restated 2012:
45%). Operating loss was GBP1.5 million (2012: GBP1.0 million)
after restructuring costs of GBP2.4 million (2012: GBPnil) and
central costs of GBP1.7 million (2012 GBP2.4 million).
Consulting Division performance
For the period from 5 December 2012, when the Group acquired
Obrar Limited, to 30 June 2013 the division delivered revenues of
GBP1.6 million (2012: nil). Gross margins across the business were
11% (2012: nil). Operating profit was GBP0.1 million (2012: nil)
principally as a result of set up costs and transition within the
Group.
Cost reductions
Steps have been taken to reduce operating costs across the core
training business. In the 15 months to 30 June 2013, after removing
restructuring charges of GBP2.4 million, following a root and
branch review, operating costs were GBP0.7 million lower than in
the previous twelve months reporting period. Understanding what
drives the e-learning revenue of the business is a significant part
of the ongoing review to strengthen the performance of the core
business, and further effort will be directed towards this
objective.
To preserve cash the group will continue with its current
dividend policy and, consequently, no dividend is anticipated for
the foreseeable future.
During the period the Group traded principally through its
subsidiaries in the UK, Australia, New Zealand and in United Arab
Emirates. The physical office operations begun in Denmark and
Poland have been scaled back to focus on the larger markets where
greater return will be achieved. This includes directing marketing
effort more towards the USA and the larger emerging markets of the
Far East/Australasia, where English speaking project management
clients have a presence.
Profit before tax
Loss before tax for the period was GBP1.7 million (2012: GBP0.6
million profit). The adjusted Profit before tax, before taking
account of restructuring, share option and impairment charges was
GBP1.1 million (2012: GBP0.9 million).
Finance costs
The Group incurred finance costs of GBP0.1 million (2012: GBP0.4
million) during the period. As described in the interim results for
the period to 31 March 2013 much of the finance cost improvement
resulted from the investment provided during the period by Praxis
Trustees providing aggregate cash inflow of GBP1.6 million to the
Group during the period.
Taxation
The tax benefit for the period was GBP0.3 million (2012: expense
GBP0.1 million), representing 20% of loss before tax (2012: 16%
annualised).
The Group has previously benefited from tax credits available in
the UK arising from qualifying research and development.
Profit for the period and earnings per share
Loss for the period attributable to equity shareholders was
GBP1.3 million (2012: GBP0.6 million profit). Loss per share was
3.79p basic (2012: 2.07p earnings).
Going Concern
The Group has prepared the accounts on a going concern basis
based on current forecasts for the period through to December 2014.
While the Group has negative net current assets, as at 30 June
2013, the Board believes that it can meet its day-to-day working
capital requirements from operating cash flows and its existing
banking facilities. The Group's banking facility is due for renewal
at 30 November 2013, and the Group's banker, HSBC, has indicated
its willingness to continue its support of the Group's ongoing
development.
Cash flow, net debt and facilities
Cash flow
Cash generated from operating activities was GBP2.0 million
(2012: GBP1.1 million). The Group continues to generate operating
cash flow from its e-commerce and cash sales and from advance
payments from customers. During the period to 30 June 2013 the
required restructuring costs have represented a significant
proportion of the Group operating cash outflow. It is believed that
the restructuring investment will have a positive effect on future
cash flow. The effectiveness of this investment will be reflected
in its impact on the Group's Training business development and on
the take up of a strengthened digital offering, once this is fully
communicated to our customers.
The Group paid out GBP0.2 million in corporation tax during the
period (2012: GBP0.3 million).
The Group continues to invest in its product range and also
incurred capital expenditure in the period relating to updates of
its client portal and its internal systems and equipment to improve
operating efficiency and remove labour intensive data
processing.
Net debt and facilities
The Group reduced its net debt by GBP1.7 million compared with
the period to 31 March 2012, from both positive cash flow from
operations and the proceeds of Praxis Trustees' investment. At the
balance sheet date the Group's debt comprised GBP0.5 million in by
way of a fixed term facility, GBP0.7m by way of a revolving debt
facility and GBP0.4m due to Praxis Trustees.
Of the facilities drawn at the balance sheet date, the term loan
is expected to be repaid in full by the quarterly term loan
repayments during the first quarter of 2014. At the balance sheet
date GBP0.35 million of the revolving facility remained undrawn.
Post year end the Group's revolving credit facility was raised to
GBP2.0m
Net debt at the period end, defined as all bank debt plus
convertible debt, less cash at bank, was GBP0.5 million (2012:
GBP2.2 million). This comprised: GBP1.2 million in bank facilities
drawn and GBP0.4m of convertible loans less GBP1.1 million in cash
balances. The Group remains within the terms of all its banking
covenants.
Dividend
As noted above, in order to preserve the Group's cash resources
the Board does not recommend a dividend for the period ended 30
June 2013, which will remain the position for the foreseeable
future.
Post balance sheet events
New acquisition - TFPL Limited
TFPL Limited ("TFPL") is a recruitment, training and consulting
business, which was purchased for a maximum potential consideration
of GBP0.6 million.
The consideration for the Acquisition comprised an upfront
payment of GBP0.3 million, deferred contingent consideration of
GBP50,000 payable if TFPL's net fee income for the year to 31
October 2013 reaches GBP1.05 million, and a single earn-out payment
of up to GBP0.25 million payable in full if TFPL's net fee income
exceeds GBP1.3 million in the 12 months to 30 June 2014. All the
consideration is payable in cash.
At the date these financial statements were completed the
Directors had not finalised the valuation of the intangible assets
acquired. A further valuation will take place. The Directors have
identified three main types of intangible asset: Domain name and
brand; IT systems; and, customer relationships. The Directors
consider that any residual goodwill that may arise will do so due
to synergies and economies of scale from integrating TFPL within
the Group.
Consolidated Statement of Comprehensive Income
For the Period ended 30 June 2013
15
months Year
ended ended
30.6.2013 31.3.2012
Total Restated
Notes GBP'000 GBP'000
Revenue 16,992 13,473
Cost of sales (10,614) (7,414)
----------- -----------
Gross profit 6,378 6,059
Administrative and distribution expenses (5,469) (5,076)
Restructuring costs 5 (2,412) -
----------- -----------
Operating profit (1,503) 983
Finance income - 4
Finance costs (147) (365)
----------- -----------
Profit before tax (1,650) 622
Tax benefit/ (expense) 332 (101)
----------- -----------
(Loss)/Profit for the year attributable
to equity shareholders (1,318) 521
Other comprehensive(loss)/ income (69) 34
----------- -----------
Total comprehensive (loss)/income (1,387) 555
=========== ===========
Earnings per share 4
Basic (3.79p) 2.07p
Diluted (3.79p) 1.86p
Consolidated statement of Financial Position
For the Period ended 30 June 2013
As at As at
30.6.2013 31.3.2012
Assets GBP'000 GBP'000
Non-current assets
Deferred tax asset 82 -
Property, plant and equipment 209 194
Intangible assets 9,608 9,795
----------- -----------
Total non-current assets 9,899 9,989
----------- -----------
Current assets
Trade and other receivables 2,161 3,266
Tax receivable 263 -
Cash and cash equivalents 1,142 638
----------- -----------
Total current assets 3,566 3,904
Total assets 13,465 13,893
----------- -----------
Current liabilities
Trade and other payables (4,505) (3,410)
Contingent consideration (307) (28)
Tax liabilities (69) (860)
Bank and shareholder loans (1,536) (2,888)
----------- -----------
Total current liabilities (6,417) (7,186)
----------- -----------
Non-current liabilities
Deferred Tax (91) -
Contingent consideration (289) (28)
----------- -----------
Total non-current liabilities (380) (28)
----------- -----------
Total liabilities (6,797) (7,214)
----------- -----------
Net assets 6,668 6,679
=========== ===========
Equity
Issued share capital 3,993 2,759
Share premium 114 114
Other reserve 75 -
Own shares in trust (50) (1,881)
Share option reserve 152 427
Retained earnings 2,447 5,254
Exchange differences arising on consolidation (63) 6
Total equity 6,668 6,679
=========== ===========
The financial statements were approved by the Board of Directors
and authorised for issue on 10 September 2013. They were signed on
its behalf by Wayne Bos and John Mc Intosh.
Consolidated Cash Flow Statement
For the period ended 30 June 2013
15 months
ended Year ended
30.6.2013 31.3.2012
GBP'000 GBP'000
(Loss)/Profit before tax (1,650) 622
Adjustments for:
Depreciation and amortisation 328 137
Losson fixed asset disposal 6 -
Impairment - product development 1,123 -
Goodwill adjustment 26 -
Share option charge 67 113
Investment income - (4)
Interest expensed 147 365
Movement in trade and other receivables 1,870 (461)
Movement in trade and other payables 82 335
----------- -----------
Cash generated from operations 1,999 1,107
Income taxes paid (194) (342)
----------- -----------
Net cash generated from operating
activities 1,805 765
----------- -----------
Investing activities
Interest received - 4
Purchases of property and equipment (126) (178)
Capitalised expenditure on product
development (241) (489)
Acquisition of subsidiaries, net
of cash acquired (665) (23)
----------- -----------
Net cash used by investing activities (1,032) (686)
----------- -----------
Financing activities
Proceeds from borrowings 400 3,050
Repayment of borrowings (1,677) (3,313)
Proceeds of share issue 1,234 -
Interest and refinancing costs paid (157) (245)
Dividend paid - (232)
Net cash from financing activities (200) (740)
----------- -----------
Net change in cash and cash equivalents 573 (661)
Impact of exchange differences on
consolidation (69) 34
Cash and cash equivalents at start
of year 638 1,265
Cash and cash equivalents at end
of year 1,142 638
=========== ===========
Statement of Changes in Equity
For the period ended 30 June 2013
Exchange
Called Own differences
up Share shares Share arising
share premium Other in option on Retained
capital account reserve trust reserve consolidation earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31.3.2011 2,697 - - (1,852) 317 (28) 5,116 6,250
Dividend paid - - - (29) - - (377) (406)
Options granted - - - - 113 - - 113
Options lapsed
and waived - - - - (3) - 3 -
Scrip issue 62 114 - - - - (9) 167
Transactions
with owners 62 114 - (29) 110 - (383) (126)
--------- --------- --------- -------- --------- --------------- ---------- --------
Profit for the
year - - - - - - 521 521
Other comprehensive
income: - - - - - 34 - 34
Total comprehensive
income for the
year - - - - - 34 521 555
--------- --------- --------- -------- --------- --------------- ---------- --------
Balance at 31.3.2012 2,759 114 - (1,881) 427 6 5,254 6,679
Equity component
of convertible
debt - - 75 - - - - 75
Options granted - - - - 67 - - 67
Options exercised - - - 1,831 (315) - (1,516) -
Options lapsed
and waived - - - - (27) - 27 -
Share issue 1,234 - - - - - - 1,234
Transactions
with owners 1,234 - 75 1,831 (275) - (1,489) 1,376
--------- --------- --------- -------- --------- --------------- ---------- --------
Loss for the
period - - - - - - (1,318) (1,318)
Other comprehensive
income: - - - - - (69) - (69)
Total comprehensive
income for the
period - - - - - (69) (1,318) (1,387)
--------- --------- --------- -------- --------- --------------- ---------- --------
Balance at 30.6.2013 3,993 114 75 (50) 152 (63) 2,447 6,668
========= ========= ========= ======== ========= =============== ========== ========
Notes to the Accounts
1) Results
The financial information set out in this (unaudited)
preliminary announcement does not constitute the statutory
financial statements for the fifteen months ended 30 June 2013 or
the year ended 31 March 2012 but is derived from those accounts.
Statutory accounts for 2012 have been delivered to the registrar of
companies, and those for 2013 will be delivered in due course. The
auditors have reported on the accounts for 2013 in the results
issued today. Their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 of the
Companies Act 2006.
2) Accounting policies
The principal accounting policies of the Group are set out in
the Group's 2012 Annual Report and Financial Statements. The
policies have remained unchanged for the fifteen months ended 30
June 2013.
3) Basis of preparation and significant accounting policies
Basis of preparation
The preparation of the Group accounts in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities,
and the disclosure of contingent liabilities at the date of the
financial statements. The key estimates and assumptions are set out
in the accounting policies below, together with the related notes
to the accounts.
Such estimates and assumptions are based on historical
experience and various other factors that are believed to be
reasonable in the circumstances and constitute management's best
judgment of conditions at the date of the financial statements. Key
estimates and judgments relate to impairment analysis assumptions,
revenue recognition over exam vouchers (see accounting policy) and
deferred tax assets. In the future, actual experience may deviate
from these estimates and assumptions, which could affect the
financial statements as the original estimates and assumptions are
modified, as appropriate, in the year in which the circumstances
change.
The financial statements have been prepared on the historical
cost basis as modified by financial assets and financial
liabilities (including derivative financial instruments) at fair
value through the statement of comprehensive income.
Change in Statutory period end
On 21 March 2013 the statutory year end was changed to 30 June
to better reflect the cycle of revenue and reporting within the
core Training business. As such the information in the financial
statements is not entirely comparable with the prior year.
Restatement of Gross profit
We have recalculated the gross profit to better effect the cost
of goods sold. The effect of this has been to move certain sales
related costs, including administrative and technical staff costs
and shipping costs, from administrative and distribution expenses
to cost of sales. The accounting policies set out below have,
unless otherwise stated, been applied consistently by the Group to
all years presented in these financial statements. Due to the
immateriality of the resulting changes it has not been deemed
necessary to provide a third set of comparatives from 2011.
15 months
ended Year ended
30.6.2013 31.3.2012
-----------
Restatement of Gross Profit: GBP'000 GBP'000
Increased Cost of Sales by 1,894 1,415
Decreased Administrative and distributions
expenses (1,894) (1,415)
--------------------------------------------- ----------- -----------
Going concern
The Group meets its day-to-day working capital requirements from
its operating cash flows and from its revolving bank facility, of
which GBP0.35 million was undrawn at the balance sheet date. The
Group has an outstanding term loan from HSBC bank (GBP0.5 million
at the balance sheet date), which is due to be repaid during the
next twelve months. The Group's banking facilities are due for
renewal in November 2013.
Through the recent negotiations with its loan note holders and
its principal bankers, the Directors, after making enquiries, have
a reasonable expectation that the Company and the Group will have
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the annual report and financial
statements.
It is the board's view that based on cash flow projections the
Group considers the existing financing facilities to be adequate to
meet operating requirements through December 2014.
Basis of consolidation
The consolidated financial statements include the financial
statements of ILX Group Plc and its subsidiaries. There are no
associates or joint ventures to be considered.
Intra-group balances, and any unrealised gains and losses or
income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements. The
Group uses the acquisition method of accounting to account for the
acquisition of subsidiaries.
Revenue
Revenue for licenses to generic software products is recognised
at the start of the license term, provided that delivery has
occurred. Revenue from multi-year licenses is recognised over the
license term.
Revenue from software that is sold together with a workshop or
exam voucher is split into separate components based on the fair
value of the individual deliverables. The software will be
recognised upon delivery. The workshop or course deliverable will
be recognised upon delivery of the service. The allocation of the
fair value of the exam voucher is determined after taking into
account the expected redemptions that have been reliably estimated
based on significant historical experience. This amount is deferred
until the exam has been taken or the voucher has expired.
Revenue from fixed price consultancy, training, customisation,
and software development projects or events is recognised in
accordance with the delivery for each project or event. Revenue
from such projects chargeable on a time and materials basis is
recognised when the work is performed.
Revenue from rental and support services is recognised evenly
over the period for which the service is to be provided.
Deferred revenue represents amounts invoiced for revenue which
is expected to be recognised in a future period. Accrued revenue
represents amounts recognised as revenue which are to be invoiced
in a future period.
Foreign currency
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currency are
translated at the rates of exchange ruling at the balance sheet
date. Exchange differences are taken to the statement of
comprehensive income.
In the consolidated accounts, the assets and liabilities of
foreign subsidiaries are translated at the rates of exchange ruling
at the balance sheet date. The trading results of foreign
subsidiaries are translated using the exchange rate ruling at the
date of the transactions. Exchange differences arising are
classified as other comprehensive income and accumulated in foreign
exchange reserve in equity.
Share based payments
The Company operates two share option schemes. The fair value of
the options granted under these schemes is recognised as an
employee expense with a corresponding increase in equity. The fair
value is measured at grant date and spread over the vesting period,
based on the number of options expected to vest.
The fair value of the options granted is measured using the
Black-Scholes model, adjusted to take into account sub-optimal
exercise factor and other flaws in Black-Scholes, and taking into
account the terms and conditions upon which the incentives were
granted.
Business combinations
On acquisition the assets liabilities and contingent liabilities
of a subsidiary are measured at their fair values at the date of
acquisition. Any excess of the fair value of the consideration
transferred over the fair values of the identifiable net assets
acquired is recognized as goodwill. Any deficiency of the fair
value of the consideration transferred below fair values of the
identified net asset acquired is credited to the income statements
in the period of acquisition.
Changes in the Group's ownership interest that do not result in
a loss of control are accounted for as equity transactions.
Purchase of non-controlling interests are recognized directly
within equity being the difference between the fair value of the
consideration paid and the relevant share acquired of the carrying
value of the net assets to the subsidiary.
Contingent and deferred consideration arising as a result of
acquisitions is stated at fair value. Contingent and deferred
consideration is based on management's best estimate of the likely
outcome and best estimate of fair value, which is usually a
contracted formula based on multiples of revenue and / or
ebitda.
The Group has elected not to apply IFRS3 business combinations
retrospectively to combinations prior to the date of transition of
1 January 2008.
Goodwill
Goodwill is determined by comparing the amount paid, including
the fair value of any deferred and contingent consideration, on the
acquisition of a subsidiary or associated undertaking and the
Group's share of the aggregate fair value of its separable net
assets. It is considered to have an indefinite useful economic life
as there are no legal, regulatory, contractual, or other
limitations on its life. Goodwill is therefore capitalised and is
subject to annual impairment reviews in accordance with applicable
accounting standards. Contingent consideration classified as a
financial liability is subject to annual fair value re-measurement
and any movement recorded through the profit and loss account.
Impairment
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment, first
looking at the intangible product and then acquired goodwill,
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Eg if the product become
obsolete, or a technology change occurs in the case of capitalized
intangible product. The recoverable amount is the higher of an
asset's fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows using
a discount rate that approximates the Group's cash generating units
cost of capital to calculate the net present discounted cash flow.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount.
Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at
each reporting date.
Where an impairment loss subsequently reverses, the carrying
amount of the asset or cash generating unit is increased to the
revised estimate of its recoverable amount, not to exceed the
carrying amount that would have been determined had no impairment
loss been recognised for the asset in prior years. A reversal of an
impairment loss is recognised immediately in the profit and loss
account.
Acquired customer relationships
The value of acquired customer relationships is determined by
estimating the net present value of the future profits expected
from the customer relationships. Where customer relationships
relate to contracts covering a pre-determined period, the value is
amortised over that period.
Research and development
Research expenditure is written off to the statement of
comprehensive income in the year in which it is incurred. Costs
incurred on product development relating to the design and
development of new or enhanced products are capitalised as
intangible assets when it is probable that the development will
provide economic benefits, considering its commercial and
technological feasibility and the resources available for the
completion and marketing of the development, and where the costs
can be measured reliably. The expenditures capitalised are the
direct labour costs, which are managed and controlled centrally.
Other development costs are recognised as an expense as incurred.
Product development costs previously recognised as an expense are
not recognised as an asset in a subsequent period.
Change in accounting estimate
The Group has decided to adopt this new estimate of amortisation
under IAS 38 to more accurately reflect the economic life of the
product development investment. Capitalised product development
expenditure is considered to have an economic life of ten years and
is written off during the economic life on a straight line basis.
Previously, relevant product development costs were recorded with
an indefinite life, which was subject to regular impairment
reviews.
As a result of the change in the estimate there was a charge to
the amortisation account of GBP224,000 and is recognised within
Depreciation and Amortisation in the Consolidated Statement of
Comprehensive Income.
Depreciation
Property, plant, and machinery are stated at cost less
accumulated depreciation. Depreciation on these assets is provided
at rates estimated to write off the cost, less estimated residual
value, of each asset over its expected useful life as follows:
Fixtures, fittings and 4 years
equipment
Computer equipment 3 years
Building & properties 10 years
Investments
The Company carries the value of investments in subsidiaries at
cost, after adjusting for any impairment.
Deferred taxation
Deferred income taxes are calculated using the liability method
on temporary differences between the carrying amounts of assets and
liabilities and their tax bases. However, deferred tax is not
provided on the initial recognition of goodwill, or on the initial
recognition of an asset or liability unless the related transaction
is a business combination or affects tax or accounting profit.
Deferred tax on temporary differences associated with investments
in subsidiaries and joint ventures is not provided if reversal of
these temporary differences can be controlled by the Group and it
is probable that reversal will not occur in the foreseeable
future.
Deferred tax assets and liabilities are calculated, without
discounting, at tax rates that are expected to apply to their
respective period of realisation, provided those rates are enacted
or substantively enacted by the end of the reporting period.
Deferred tax assets are recognised to the extent that it is
probable that the underlying tax loss or deductible temporary
difference will be able to be utilised against future taxable
income. This is assessed based on the Group's forecast of future
operating results, adjusted for significant nontaxable income and
expenses and specific limits on the use of any unused tax loss or
credit. Deferred tax liabilities are always provided for in
full.
Defined contribution pension scheme
The pension costs charged in the financial statements represent
the contributions payable by the Company during the year.
Leases and hire purchase contracts
The Company has no assets financed through finance leases.
Other leases are treated as operating leases. Annual rentals are
charged to the statement of comprehensive income on a straight line
basis over the term of the lease.
Convertible debt
Convertible loan notes are regarded as compound instruments,
consisting of a liability instrument and an equity instrument. At
the date of issue the fair value of the liability component is
estimated using the prevailing market interest rate for similar
non-convertible debt. The difference between the proceeds of issue
of the convertible loan note and the fair value assigned to the
liability component, representing the embedded option to convert
the liability into equity of the Group, is included in equity. The
portion relating to the equity component is charged directly
against equity. The interest expense of the liability component is
calculated by applying the effective interest rate to the liability
component of the instrument. The difference between this amount and
the interest paid is added to the carrying amount of the
convertible loan note.
Deferred and contingent consideration
Deferred and contingent consideration payable is shown as a
creditor on the balance sheet to the extent that a contractual
obligation exists, or may exist, to make payment in cash.
Company profit
The Company profit for the financial year includes a loss after
tax of GBP1,525,000 relating to the Company after taking account of
restructuring costs of GBP2,412,000. No separate Company statement
of comprehensive income has been presented, in accordance with
Section 408 of the Companies Act 2006.
Interest
Interest on loans is expensed as it is incurred. Transaction
costs of borrowings are expensed as interest over the term of the
loans.
Financial instruments
The Directors consider the Company to have financial
instruments, as defined under IFRS 7, in the following
categories:
Loans and receivables
The Group's loans and receivables comprise cash and cash
equivalents and trade receivables.
Cash and cash equivalents include cash in hand, deposits held at
call with banks and other short-term highly liquid investments with
original maturities of three months or less that are readily
convertible to known amounts of cash and are subject to an
insignificant risk of change in value.
Trade receivables are recognised and carried at original invoice
amount less an adjustment for doubtful debts. Bad debts are written
off to the statement of comprehensive income when identified. An
estimate of the adjustment for doubtful debts is made when
collection of the full amount is no longer probable.
Contingent consideration measured at fair value through profit
or loss
The Group measures its contingent liabilities arising upon
acquisition on an annual basis. Changes in the fair value of any
such contingent liabilities, such as earn out or other contingent
consideration are recognised immediately through the profit and
loss account.
Other financial liabilities measured at amortised cost
These include accruals, trade payables, revolving credit
facilities and term debt.
Trade payables are recognised and carried at original invoice
amount. Accruals are recognised and carried at the amounts expected
to be paid for the goods or services received but not invoiced at
the balance sheet date.
Bank borrowings, overdrafts, and revolving credit facilities are
classified as current liabilities to the extent that capital
repayments are due within 12 months of the balance sheet date, and
long term liabilities where they fall due more than 12 months after
the balance sheet date.
Future changes to accounting policies
Certain new standards, amendments and interpretations to
existing standards have been issued by the IASB or IFRIC with an
effective date after the date of these financial statements:
Effective
(periods beginning
on
Standard Description or after)
Classification of financial
IFRS 9 assets and liabilities 1 January 2015
==================================== ===================
IFRS 10 Consolidated financial statements 1 January 2014
==================================== ===================
IFRS 11 Joint arrangements 1 January 2014
==================================== ===================
Disclosure of Interests in other
IFRS 12 entities 1 January 2014
==================================== ===================
IFRS 13 Fair Value Accounting 1 January 2013
==================================== ===================
IAS 1 Presentation of Financial Statements 1 January 2014
==================================== ===================
The impact on the Group's financial statements of the future
adoption of these standards is still under review. Other than IFRS
9, where the Group is continuing to assess the materiality of the
impact of this new standard, the Group does not expect any of the
changes to have a material effect on the result or net assets of
the Group.
4) Earnings per share
Earnings per share is calculated by dividing profit attributable
to shareholders by the weighted average number of shares in issue
during the year.
15 months
ended Year ended
30.6.2013 31.3.2012
GBP'000 GBP'000
Loss/Profit for the period attributable
to equity shareholders (1,318) 521
=========== ===========
Weighted average shares 34,733,754 25,226,782
Outstanding share options - 2,714,760
Convertible loan equity - -
----------- -----------
Weighted average shares for diluted
earnings per share 34,733,754 27,941,542
=========== ===========
Basic earnings per share (3.79p) 2.07p
Diluted earnings per share (3.79p) 1.86p
Note: The GBP400,000 convertible loan note is convertible into
Ordinary Shares at a price of 10 pence per Ordinary Share and has a
one for one warrant attached, exercisable at 10 pence per Ordinary
Share, giving Praxis the potential to subscribe for a total of up
to 8 million new Ordinary Shares. In addition, there are 660,936 of
nil value shares eligible for exercise as well as 130,000 other
share options. The loss for the period attributable to equity
shareholders results in the exercise of the nil value share options
and the convertible debt dilution being anti-dilutive.
5) Restructuring
An internal review of the business has identified several
opportunities to reduce costs that will translate into
profitability. The management team has also tightened up a number
of business processes and eliminated certain operating expenses and
capital expenditure that have demonstrated either insufficient
return or none at all. This has resulted in restructuring costs and
intangibles impairment as follows:
15 months
ended Year ended
30.6.2013 31.3.2012
GBP'000 GBP'000
Restructuring costs incurred 1,263 -
Impairment of intangibles 1,149 -
----------- -------------
Total restructuring 2,412 -
=========== =============
6) Post Balance Sheet Review
Acquisition of TFPL Limited ("TFPL")
TFPL is a recruitment, training and consulting business. The
entire share capital was acquired on the 1(st) July 2013 for a
maximum consideration of GBP0.6 million. The recruitment business
is complementary to the activities of the group in the project
management area. The Group has clients whose projects are temporary
in nature and therefore there is potential demand for a service
which can also help recruit while training clients in their chosen
project management field.
TFPL provides executive search, managed services and the
placement of permanent, interim and contract personnel into the
public and private sectors. Since its establishment in 1985, the
company has developed a strong brand and reputation in its
marketplace.
The consideration for the acquisition comprises an upfront
payment of GBP0.3 million, deferred consideration of GBP50,000
payable if TFPL's net fee income for the year to 31 October 2013
reaches GBP1.05 million, and a single earn-out payment of up to
GBP0.25 million payable in full if TFPL's net fee income exceeds
GBP1.3 million in the 12 months to 30 June 2014. All consideration
is payable in cash.
At the date these financial statements were finalised the
Directors has not finalised the valuation of the intangible assets
acquired. A further valuation will take place. The Directors have
identified three main types of intangible asset: Domain name and
brand; IT systems; and, customer relationships. The Directors
consider that any residual goodwill that may arise will do so due
to synergies and economies of scale from integrating TFPL within
the Group.
7) Annual Report
Copies of the Annual Report are available from the Company's
website www.ilxgroup.com from 10 September 2013. Copies will be
sent to shareholders in due course and will be available from the
Group's registered office Strand Bridge House, 138-142 The Strand,
London, WC2R 1HH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GBGDCGBBBGXG
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