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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Electric Word | LSE:ELE | London | Ordinary Share | GB0003083622 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 3.825 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMELE
RNS Number : 2775U
Electric Word PLC
06 April 2016
6 April 2016
ELECTRIC WORD PLC
Preliminary Results to 30 November 2015
Electric Word, the specialist information business with divisions operating in the Education and Sport sectors, today announced audited results for the year ended 30 November 2015.
HIGHLIGHTS
-- Significant strategic progress with the disposals of the businesses of Radcliffe Solutions, Radcliffe Publishing and post year end, the 70% stake in iGaming Business for a total cash consideration of GBP14.9m.
-- Management and reporting restructured around two market-facing divisions (Sport and Education) following sale of stake in iGaming Business.
-- Adjusted EBITA* for continuing and discontinued operations increased by 75% to GBP937k (2014: GBP536k).
-- Outcome of external review of Optimus business in 2016 leads to refocus on conferences and premium subscription products.
-- Net cash increased from GBP389k debt in 2014 to cash of GBP449k in 2015, excluding GBP12.1m post year end receipts from sale of stake in iGaming Business.
* EBITA denotes adjusted EBITA as defined in Note 5 and excludes amortisation and 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. This definition applies throughout the Annual Report and Financial Statements.
Julian Turner, Chief Executive of Electric Word, commented:
"We made progress in 2015 in simplifying the Group and have transformed our balance sheet through the sale of iGaming Business Ltd, which demonstrated the group's ability to add value to its businesses. SportBusiness is also showing the benefit of our investments in digital development and the strategic move towards more subscription-based revenues. Trading in 2016 will be affected by higher unallocated central costs than in 2015 but net margins in both Sport and Education are currently running slightly ahead of Board expectations as a result of tighter cost control."
Financial summary (GBP'000) 2015 2014 GBP'000 GBP'000 Restated Continuing operations Revenue 6,893 7,076 Adjusted EBITA* (1,333) (1,063) Margin -19% -15% Discontinued operations Revenue 6,914 7,295 Adjusted EBITA* 2,270 1,599 Margin 33% 22% Continuing and Discontinued operations Revenue 13,807 14,371 Adjusted EBITA* 937 536 Margin 7% 4% Continuing operations Revenue 6,893 7,076 Gross profit 3,843 3,777 Adjusted EBITA* (1,333) (1,063) ------------------------------------------------ ---------- ---------- Amortisation (470) (471) Impairment expense (1,000) - Restructuring costs - (91) Share-based payment charges (66) (270) ------------------------------------------------ ---------- ---------- Loss before tax from continuing operations (2,885) (1,930) ================================================ ========== ========== Loss for the financial year from continuing operations (2,666) (1,671) ================================================ ========== ========== Loss for the financial year from continuing and discontinued operations (2,292) (1,289) ================================================ ========== ========== * Adjusted figures (note 5) exclude amortisation, impairment of goodwill and intangible assets, acquisition-related and restructuring credits and costs, share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges.
Comparative figures for the year to 30 November 2014 have been reclassified to reflect the results of Radcliffe Solutions, Radcliffe Publishing and iGaming Business Ltd as discontinued operations as a result of their disposals. See note 9.
The audited report and accounts of the Company for the year ended 30 November 2015 have been posted to the Company's website at www.electricwordplc.com. 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 020 7265 4170 Panmure Gordon Andrew Potts 020 7459 3600
Notes to Editors
Electric Word plc is a specialist media group supporting professional development, management effectiveness and market intelligence through a wide range of digital, print and live formats. Our approach is to identify niche communities within our market sectors and fulfil our customers' key information needs to enable them to make better-informed decisions and so improve their performance. We achieve this by developing a deep understanding of our sectors and our customers' challenges and information requirements.
The Group provides content in many different formats, including market data, subscription websites, magazines, conferences, face-to-face training, online training, books, special reports, bespoke research and consultancy.
Following the disposal of the Group's stake in iGaming Business, it is now composed of two market-facing divisions:
Education
Optimus Education supports the professional development of teachers and school leaders through an online subscription-based information and training service and through live conferences. Speechmark specialises in resources for speech therapists, mental health professionals and teachers.
Sport
SportBusiness Group provides business insight, data and analysis to executives in the global business of sport. It supports sports industry professionals who work in governing bodies, the media, sports marketing, sponsorship and club and event management through market data, subscription websites, magazines, special reports, bespoke research and consultancy.
CHAIRMAN'S STATEMENT
Dear shareholders,
2015 was a significant year for Electric Word during which the Group continued its plan to simplify and focus the business. The year started with the completion of the sale of Radcliffe Solutions Ltd in January, which provided IT services to the Health sector and continued with the sale in April of Radcliffe Publishing, which produced books for medics and other health professionals. After the year end, the Group exited from the online gaming sector after many years of successful growth.
The sale of the Group's 70% interest in iGaming Business enabled Electric Word to realise the value in an asset whose market sector carries a different risk profile to that of the Group's other businesses. The business also had a minority shareholder and was therefore an enterprise over which the Group did not have full control. Nevertheless, the Group was able to achieve a full valuation of GBP13.8m for its shareholding on the back of 18% revenue growth and a 24% improvement in adjusted EBITA in 2015. iGaming Business was originally acquired as part of SportBusiness Group at the end of 2005 for a total consideration of GBP2.7m and has grown considerably since that time as part of Electric Word. The board would like to thank the staff and management of iGaming Business for their excellent work over many years.
Trading overall across all businesses, including those sold, was solid with revenues broadly flat at GBP13.8m and Adjusted EBITA up 75% to GBP937k. We were particularly pleased with the performance of the continuing Sport division which saw revenues up 23% and a turnaround in profitability to an Adjusted EBITA of GBP152k. Trading in Education however continued to be difficult with an adjusted EBITA loss of GBP717k. This division is facing significant market change with tight customer budgets and the rapid consolidation of local authority managed schools into Multiple Academy Trusts (MATs or large groups of academies).
Outlook
In prior years, the Health division included the Radcliffe and Speechmark businesses. Speechmark publishes books and other resources for speech therapists, mental health professionals and special needs co-ordinators in schools. Schools are a significant market for Speechmark and as a result of the sale of Radcliffe Solutions, Radcliffe Publishing and iGaming Business Ltd, the Directors have restructured the management of the Group's continuing operations and now organise its management and reporting around two divisions: Sport and Education. The Education division now comprises Speechmark and Optimus Education.
In December 2015, the Group announced that it had commissioned an external review of the Optimus Education business, including underlying performance and growth opportunities. The review highlighted a number of options for bringing that business back to profitability which included focusing on developing its conferences and online training membership services and reducing its investment in the Knowledge Centre database of articles and case studies.
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Following the sale of iGaming Business in January 2016, we are a smaller business so the Group is undertaking a comprehensive review of its infrastructure, systems and processes to ensure that its central costs are appropriate for the businesses they are there to support. Although we anticipate reducing central costs where possible, it is likely that central costs be higher than in 2015 as a result of higher property costs and costs which were previously allocated to the businesses which have been sold.
In the circular to shareholders dated 18 December 2015, the Board noted that it was mindful that the Company's cash balance following the sale of the stake in iGaming Business could exceed the Company's expected capital requirements for the foreseeable future and that it was giving consideration to making a capital return to shareholders. However, the Board is also mindful of the continuing adjusted EBITA losses reported for 2015, the increase in central costs and that the timing of the Group's return to profitability is uncertain. The Board considers that any such capital return to shareholders would be enhanced by improvements to profitability in the Optimus business. It has also received various views from shareholders and advisors which it is in the process of assessing. The Board continues to review the options available to them, taking into account consideration of risks and returns, and does not consider that a return of capital would be appropriate while this review is ongoing. Shareholders will be updated in due course.
On behalf of shareholders and the Board I would like to thank the staff and other stakeholders for their hard work this year as the group has continued to focus its activities, develop more coherence and build greater value in its most strategic areas.
Andrew Brode
Chairman
5 April 2016
CHIEF EXECUTIVE'S STATEMENT
BUSINESS MODEL AND STRATEGY
Business model
Electric Word plc is a specialist media group supporting management development and decision-making through a wide range of digital, live and paper formats. Our approach is to identify niche communities within our market sectors and fulfil their key information, professional development and best practice needs.
Our business model starts with the customer. By better understanding our customers' aspirations and challenges we can provide increasingly valuable information products that support their critical decisions and key objectives. We serve our customers' needs through many different formats, including subscription websites, events, face-to-face training, online training, books, magazines, special reports, bespoke research and consultancy. Competencies developed in one sector can then be transferred to another as opportunities arise. Within this mix we favour high-quality revenue streams from digital subscription services, tools that connect directly with customer work requirements and live events with the scale to build brand presence in their markets.
We aim to increase the value of the services that we deliver over the lifetime of each customer relationship. We deliver this by increasing the penetration of our information within each customer organisation and also by innovating and developing new products.
Group Strategy
Our business model requires focus and investment, so it is important that the activities we select for strategic development are scalable and will ultimately generate high margins.
The deep knowledge of customers and markets needed to deliver our business model also means that we concentrate on a small number of market sectors and activities. We are therefore focusing the business on doing fewer things, each at a greater scale, to seek to achieve higher margins. Our objective is a simpler business that is better able to capitalise on the opportunities in our markets and the changing technology underpinning our sector. During 2015, we simplified the business further by disposing of Radcliffe Solutions Ltd and the Radcliffe Publishing business which operated in the Health sector. On 4 January 2016, we also disposed of our interests in iGaming Business Ltd thereby exiting from the gaming sector.
As a result of this simplification of the business we have embarked on a programme of improving efficiency to ensure that costs in all businesses are at a level appropriate to their growth objectives.
GROUP PERFORMANCE
Total Group 2015 Change 2014 GBP'000 % GBP'000 Restated Continuing operations ---------------------------------------- --------- ------- ---------- Revenue 6,893 -3% 7,076 ---------------------------------------- --------- ------- ---------- Adjusted EBITA* (1,333) 25% (1,063) ---------------------------------------- --------- ------- ---------- Margin -19% -15% ---------------------------------------- --------- ------- ---------- Discontinued operations ---------------------------------------- --------- ------- ---------- Revenue 6,914 -5% 7,295 ---------------------------------------- --------- ------- ---------- Adjusted EBITA* 2,270 42% 1,599 ---------------------------------------- --------- ------- ---------- Margin 33% 22% ---------------------------------------- --------- ------- ---------- Continuing and Discontinued operations ---------------------------------------- --------- ------- ---------- Revenue 13,807 -4% 14,371 ---------------------------------------- --------- ------- ---------- Adjusted EBITA* 937 75% 536 ---------------------------------------- --------- ------- ---------- Margin 7% 4% ---------------------------------------- --------- ------- ----------
Comparative figures for the year to 30 November 2014 have been reclassified to reflect the results of the Radcliffe Solutions, Radcliffe Publishing and iGaming businesses as discontinued operations as a result of their disposals. See note 9.
Revenues
Revenues from continuing operations were 3% lower than 2014 as growth in Sport was counterbalanced by reduced sales from Education. Subscriptions revenue grew by 8% and now accounts for 40% of total revenues from continuing operations (36% in 2014).
Revenues from discontinued operations reduced by 5% compared to 2014. This was driven by strong growth in iGaming revenues offset by lower book sales as a result of the Radcliffe Publishing disposal on 31 May 2015 and the impact of the Radcliffe Solutions disposal on 28 January 2015.
Profitability
In the continuing businesses, adjusted profit margins fell in Education but improved in Sport which returned to profit. Overall, Group Adjusted EBITA for continuing operations is down to a loss of GBP1.3m from a loss of GBP1.1m in 2014.
Adjusted EBITA from discontinued operations improved by 42% as a result of strong profit performance in the Gaming business. This improvement enabled the Group to realise the full value of this business when it was sold after year end.
Divisional PERFORMANCe - CONTINUING OPERATIONS
Following the disposal of iGaming Business in January 2016, the Directors have restructured the management of the Group's continuing operations and now organises its management and reporting around two market-facing divisions: Sport and Education.
SPORT DIVISION
2015 Change 2014 Continuing Operations GBP'000 % GBP'000 Restated ------------------------- --------- ------- ---------- Revenue 2,366 23% 1,917 ------------------------- --------- ------- ---------- Adjusted EBITA* 152 -643% (28) ------------------------- --------- ------- ---------- Margin 6% -1% ------------------------- --------- ------- ----------
The table above excludes the results of the iGaming Business Ltd which was sold on 4 January 2016 - see note 9.
The Sport division provides market information and knowledge to professionals in the global business of sport, particularly on media rights, sponsorship and event hosting.
Revenue in this division grew by 23%, with 59% of revenue from live or digital services in 2015 (53% in 2014). Subscriptions grew by 26% and now account for 67% of the revenue in this division (65% in 2014). Revenue from bespoke consulting projects also grew significantly and accounted for 11% of revenue (6% in 2014), whereas advertising reduced from 24% to 18% of divisional revenue. During the year the online sponsorship deals database was redeveloped to enhance the value of the Sports Sponsorship Insider service and the coverage of the Rights Tracker online database was broadened by further research.
The increase in revenues brought the division into profit in 2015, whilst still maintaining investment in development of our digital products and staff.
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EDUCATion DIVISION
2015 Change 2014 Continuing Operations GBP'000 % GBP'000 Restated ------------------------- --------- ------- ---------- Revenue 4,527 -12% 5,159 ------------------------- --------- ------- ---------- Adjusted EBITA* (717) 175% (261) ------------------------- --------- ------- ---------- Margin -16% -5% ------------------------- --------- ------- ----------
The table above now includes the results of the Speechmark business which was previously reported in the Health segment. The results of the Incentive Plus business which was sold on 15 October 2014 have been excluded- see note 9.
The Education division now includes the Optimus and Speechmark businesses. Optimus supports teachers' professional development requirements through an online subscription-based information and training service and through live conferences. Speechmark publishes books and other resources for speech and language therapists, mental health professionals and teachers in schools.
This business evolved further in 2015. New premium membership services were developed: Premium CPD, launched in 2014, is a subscription service providing schools with downloadable training courses and Unlimited CPD, launched in October 2015, gives access to all online membership services as well as Optimus conferences. These premium membership services grew through the year while subscriptions to the Knowledge Centre database of articles and case studies continued to decline. The conferences business had a more difficult year than in 2014 and book sales were lower following a decision to divest from this lower value activity. Following an external review, the business will now focus on conferences for a narrower group of school senior leaders alongside the Premium CPD and Unlimited services.
Speechmark revenues were down slightly although UK book sales increased by 8% driven by growing Amazon sales and a number of strong second editions.
Central costs
These costs represent those central group costs which have not been recharged to the divisions and are therefore not included in the divisional results. They include Board fees and costs related to being both a public company and a Group as well as some of the costs of central functions such as HR, IT and unallocated property costs.
2015 Change 2014 GBP'000 % GBP'000 --------------------------------------- --------- ------- --------- Adjusted EBITA* (768) -1% (774) --------------------------------------- --------- ------- --------- As % of Group revenue from continuing operations 11% 11% --------------------------------------- --------- ------- --------- Net interest payable (16) (35) --------------------------------------- --------- ------- ---------
The Group maintained its central costs at broadly flat levels in 2015. For the current year, although we anticipate reducing central costs where possible, it is likely that central costs will be higher than in 2015 as a result of higher property costs and costs which were previously allocated to the businesses which have been sold.
Net interest payable is consistent with the reduction in the Group's debt due to loan repayments made in 2014 and 2015.
Julian Turner
Chief Executive
5 April 2016
OPERATING AND FINANCIAL REVIEW
Financial summary (GBP'000) 2015 2014 GBP'000 GBP'000 Restated Continuing operations Revenue 6,893 7,076 Adjusted EBITA* (1,333) (1,063) Margin -19% -15% Discontinued operations Revenue 6,914 7,295 Adjusted EBITA* 2,270 1,599 Margin 33% 22% Continuing and Discontinued operations Revenue 13,807 14,371 Adjusted EBITA* 937 536 Margin 7% 4% Continuing operations Revenue 6,893 7,076 Gross profit 3,843 3,777 Adjusted EBITA* (1,333) (1,063) ------------------------------------------------ ---------- ---------- Amortisation (470) (471) Impairment expense (1,000) - Restructuring costs - (91) Share-based payment charges (66) (270) ------------------------------------------------ ---------- ---------- Loss before tax from continuing operations (2,885) (1,930) ================================================ ========== ========== Loss for the financial year from continuing operations (2,666) (1,671) ================================================ ========== ========== Loss for the financial year from continuing and discontinued operations (2,292) (1,289) ================================================ ========== ========== * Adjusted figures (note 5) exclude amortisation, impairment of goodwill and intangible assets, acquisition-related and restructuring credits and costs, share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges. ------------------------------------------------------------------------
A summary of the Group's financial results is given in the table above. Further details on revenue and adjusted profit performance are given in the Chief Executive's statement.
CONTINUING AND DISCONTINUED OPERATIONS
As noted in the Chairman's statement, during 2015 the Group disposed of Radcliffe Solutions and Radcliffe Publishing Ltd, and on 4 January 2016 the Group's 70% interest in iGaming Business Ltd was sold for GBP13.8m.
As the sale of the stake in iGaming Business Ltd was after the date of the balance sheet, its assets and liabilities have been separately classified as held for sale in the Consolidated Group Statement of Financial Position (see note 9). The Group will recognise the profit on the sale of its interest in iGaming Business in its 2016 results which will also show the sale's impact on cash balances.
The results of Radcliffe Solutions, Radcliffe Publishing and iGaming Business have been classed as discontinued operations in 2015 as they no longer form part of the Group and our 2014 results have been restated accordingly. The total net profit from discontinued operations (net of tax) included in the Consolidated Statement of Comprehensive Income is GBP374,000 (2014: GBP382,000).
The profit from discontinued operations in 2015 is net of a tax charge of GBP1.2m arising from de-recognition of a deferred tax asset as a result of the disposal of iGaming Business. In accordance with International Financial Reporting Standards, the deferred tax charge has been recognised at 30 November 2015 as the reduction in the value of the deferred tax asset was reasonably foreseeable, whilst the profit on disposal will be recognised in 2016 aligned with the date the transaction completed.
Further details of results from discontinued operations are given in notes 9 and 26.
ADJUSTED AND STATUTORY RESULTS
In these results we refer to adjusted and statutory results. Adjusted results are prepared to provide a more comparable indication of the Group's underlying business performance. A reconciliation of statutory results to adjusted results is given in note 5, and further details of adjusting items are given below.
Amortisation
Amortisation of intangible fixed assets for continuing operations charged in 2015 amounted to GBP470,000 (2014: GBP471,000). Details of intangible fixed assets are given in note 12.
Impairment charges
An impairment expense of GBP1m has been recognised in 2015 against the carrying value of goodwill in the Optimus business. This reflects declining subscriptions to the Knowledge Centre product and the decision to focus the business on the conference and premium subscription products following an external review of the business. Further details are given in note 11.
There were no impairment charges recognised in 2014 in continuing operations. Impairment charges of GBP778,000 were booked in 2014 discontinued operations comprising GBP414,000 and GBP364,000 in impairments recognised on Radcliffe Solutions Ltd's goodwill and intangible assets respectively.
Restructuring costs
There were no restructuring costs in 2015 in relation to continuing operations. In 2014, a restructuring charge of GBP91,000 was incurred relating to the cost of making changes to the Education senior management and content teams.
Share-based payment charges
Share-based payment charges are recognised to spread the fair value of each award over the vesting period on a straight-line basis, after allowing for an estimate of the share awards that will actually vest. The expense recognised in 2015 was GBP66,000 (2014: GBP270,000).
OTHER KEY FINANCIAL ITEMS
Capital expenditure
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During the year, the Group has invested an additional GBP286,000 in web development and enhancing its digital products (2014: GBP511,000). The majority of web development spend this financial year has concentrated on launching major enhancements to the Education subscriptions website, and further development of digital subscription products in Sports Business.
The Group also incurred GBP95,000 of additions to property, plant and equipment, the majority of which related to the fit-out of a new office (2014: GBP12,000).
Debt and cash flow
Net cash (note 27) at 30 November 2015 was GBP449,000 (2014: net debt of GBP389,000). The Group has gross bank debt (note 18) of GBP94,000 at November 2015 (2014: GBP389,000). This is being repaid over equal monthly instalments to May 2017.
Cash conversion rate
GBP'000 2015 2014 GBP'000 GBP'000 Restated ----------------------------------------- --------- ---------- Cash from operating activities before interest and tax 496 500 ----------------------------------------- --------- ---------- Net cash outflow from restructuring costs - 91 ----------------------------------------- --------- ---------- Adjusted cash from operating activities before interest and tax 496 591 ----------------------------------------- --------- ---------- Adjusted EBITA from Continuing and Discontinued operations 937 536 ----------------------------------------- --------- ---------- Adjusted cash conversion of operating profits for year 53% 110% ----------------------------------------- --------- ----------
The high cash conversion rate in 2014 was primarily a result of significant pre-billing of 2015 events during 2014 and cash collection of annual subscriptions. In 2015, cash conversion was impacted by lower levels of cash collected against the iGaming 2016 London conference compared to the prior year, lower amounts of cash collected against annual Education subscriptions and the disposal of the Radcliffe Solutions business which used to bill software licences in advance.
In addition, Group cash flow has been impacted by GBP1,078,000 proceeds from the disposal of discontinued activities, bank loan repayments of GBP292,000 and the payment of GBP185,000 of dividends to the minority shareholder of iGaming Business Ltd.
Earnings per share
Statutory diluted earnings per share from continuing and discontinued operations are 0.62p loss (2014: 0.35p loss). Adjusted diluted earnings per share (calculated using adjusted profit from continuing operations) are 0.33p loss (2014: 0.28p loss) reflecting the net impact of trading performance and investments made during the year as noted in the Business and Performance Review section of the Strategic Report.
Dividends
The Directors have not proposed a dividend to be paid in respect of 2015 (2014: GBPnil).
William Fawbert
Finance Director
5 April 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 November 2015
2015 2014 Notes GBP'000 GBP'000 Restated -------------------------------------- ------ ---------- ---------- CONTINUING OPERATIONS Revenue 2 6,893 7,076 Cost of Sales - Direct costs (2,182) (2,384) Cost of Sales - Marketing expenses (868) (915) -------------------------------------- ------ ---------- ---------- GROSS PROFIT 2 3,843 3,777 Other operating expenses 7 (5,169) (5,030) Restructuring costs 5 - (91) Depreciation expense 7 (73) (80) Amortisation expense 7 (470) (471) Impairment charges 7 (1,000) - Total administrative expenses (6,712) (5,672) OPERATING LOSS (2,869) (1,895) Finance costs 6 (16) (35) LOSS BEFORE TAX 7 (2,885) (1,930) Taxation 8 219 259 LOSS FOR THE FINANCIAL YEAR FROM CONTINUING OPERATIONS (2,666) (1,671) DISCONTINUED OPERATIONS PROFIT FOR THE FINANCIAL YEAR FROM DISCONTINUED OPERATIONS, NET OF TAX 9 374 382 -------------------------------------- ------ ---------- ---------- LOSS FOR THE FINANCIAL YEAR (2,292) (1,289) ====================================== ====== ========== ========== Attributable to: - Equity holders of the parent (2,523) (1,405) - Non-controlling interest 231 116 -------------------------------------- ------ ---------- ---------- Total comprehensive LOSS (2,292) (1,289) ====================================== ====== ========== ========== LOSS PER SHARE From continuing and discontinued operations Basic 10 (0.62)p (0.35)p Diluted 10 (0.62)p (0.35)p From continuing operations Basic 10 (0.66)p (0.41)p Diluted 10 (0.66)p (0.41)p ====================================== ====== ========== ==========
2014 results have been restated to show the effect of operations which have been discontinued in the current period.
Of the profit for the financial year from discontinued operations, GBP143,000 (2014: GBP266,000) is attributable to equity holders of the parent and GBP231,000 (2014: GBP116,000) is attributable to the non-controlling interest.
CONSOLIDATED GROUP AND COMPANY STATEMENTS OF CHANGES IN EQUITY
For the year ended 30 November 2015
GROUP Reserve Share for Non- Share premium Merger own Retained controlling Total capital account reserve shares earnings Total interest equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------------------- --------- --------- --------- --------- ---------- ---------- ------------- --------- At 1 December 2013 4,068 7,531 105 (123) (3,960) 7,621 268 7,889 Total comprehensive income - - - - (1,405) (1,405) 116 (1,289) Tax credited directly to equity (note 15) - - - - 112 112 - 112 4,068 7,531 105 (123) (5,253) 6,328 384 6,712 Dividend paid by subsidiary - - - - - - (303) (303) Share issues 8 - - - - 8 - 8 Share based payments - - - - 270 270 - 270 At 30 November 2014 4,076 7,531 105 (123) (4,983) 6,606 81 6,687 Total comprehensive income - - - - (2,523) (2,523) 231 (2,292) Tax debited directly to equity (note 15) - - - - (112) (112) - (112) 4,076 7,531 105 (123) (7,618) 3,971 312 4,283 Dividend paid by subsidiary - - - - - - (185) (185) Share based payments - - - - 66 66 - 66 At 30 November 2015 4,076 7,531 105 (123) (7,552) 4,037 127 4,164 ======================= ========= ========= ========= ========= ========== ========== ============= ========= COMPANY Share Share premium Retained Total capital account earnings equity GBP'000 GBP'000 GBP'000 GBP'000 --------------------------------- --------- --------- ---------- --------- At 1 December 2013 4,068 7,531 (6,184) 5,415 Total comprehensive income - - (2,569) (2,569) Tax credited directly to equity (note 15) - - 112 112 4,068 7,531 (8,641) 2,958 Share issues 8 - - 8 Share based payments - - 270 270
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--------------------------------- --------- --------- ---------- --------- At 30 November 2014 4,076 7,531 (8,371) 3,236 Total comprehensive income - - (2,035) (2,035) Tax debited directly to equity (note 15) - - (112) (112) 4,076 7,531 (10,518) 1,089 Share based payments - - 66 66 At 30 November 2015 4,076 7,531 (10,452) 1,155 ================================= ========= ========= ========== =========
CONSOLIDATED GROUP AND COMPANY STATEMENTS OF FINANCIAL POSITION
As at 30 November 2015
Group Company 2015 2014 2015 2014 Notes GBP'000 GBP'000 GBP'000 GBP'000 -------------------------------- ------ -------- -------- --------- -------- ASSETS Non-current assets Goodwill 11 3,050 4,869 - - Intangible assets 12 882 1,754 34 23 Property, plant and equipment 13 46 24 46 23 Investments 14 - - 4,736 6,380 Deferred tax assets 15 637 1,804 - 248 -------------------------------- ------ -------- -------- --------- -------- 4,615 8,451 4,816 6,674 Current assets Inventories 16 622 1,267 - - Trade and other receivables 17 1,987 2,777 3,741 6,729 Cash and cash equivalents 27 542 - 468 152 -------------------------------- ------ -------- -------- --------- -------- 3,151 4,044 4,209 6,881 Assets classified as held for sale 9 1,544 81 - - -------------------------------- ------ -------- -------- --------- -------- Total current assets 4,695 4,125 4,209 6,881 -------------------------------- ------ -------- -------- --------- -------- TOTAL ASSETS 9,310 12,576 9,025 13,555 ================================ ====== ======== ======== ========= ======== EQUITY AND LIABILITIES Capital and Reserves Called up ordinary share capital 23 4,076 4,076 4,076 4,076 Share premium account 7,531 7,531 7,531 7,531 Merger reserve 105 105 - - Reserve for own shares 24 (123) (123) - - Retained earnings (7,552) (4,983) (10,452) (8,371) Equity attributable to equity holders of the parent 4,037 6,606 1,155 3,236 Non-controlling interest 25 127 81 - - -------------------------------- ------ -------- -------- --------- -------- TOTAL EQUITY 4,164 6,687 1,155 3,236 -------------------------------- ------ -------- -------- --------- -------- Non-current liabilities Borrowings 18 28 94 28 94 Deferred tax liabilities 15 50 178 - - 78 272 28 94 Current liabilities Borrowings 18 66 295 66 292 Current tax liabilities - 61 - - Trade payables and other payables 19 1,640 2,543 7,716 9,873 Provisions 21 60 60 60 60 Deferred income 20 1,934 2,481 - - -------------------------------- ------ -------- -------- --------- -------- 3,700 5,440 7,842 10,225 Liabilities associated with assets classified as held for sale 9 1,368 177 - - -------------------------------- ------ -------- -------- --------- -------- Total current liabilities 5,068 5,617 7,842 10,225 -------------------------------- ------ -------- -------- --------- -------- TOTAL LIABILITIES 5,146 5,889 7,870 10,319 TOTAL EQUITY AND LIABILITIES 9,310 12,576 9,025 13,555 ================================ ====== ======== ======== ========= ========
These financial statements were approved by the Board of Directors and authorised for issue on 5 April 2016 and are signed on its behalf by:
Julian Turner William Fawbert Chief Executive Finance Director
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
For the year ended 30 November 2015
Group Company 2015 2014 2015 2014 Notes GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------- ------ -------- -------- -------- -------- (Loss) / profit for the financial year (2,292) (1,289) (2,035) (2,569) Taxation 1,196 (74) 136 (72) Amortisation & impairment expense, reduction in goodwill 11,12 1,582 1,470 15 44 Depreciation 13 73 88 72 85 Impairment of investment in subsidiary 14 - - 1,644 480 (Loss) / profit on disposal of discontinued operations 26 27 (4) (121) - Finance costs 16 35 16 35 Share based payment charges / (credits) 7 66 270 66 270 Operating cash flows before movement in working capital 668 496 (207) (1,727) Decrease / (increase) in inventories 233 343 - - Decrease / (increase) in receivables (132) 598 2,988 89 (Decrease) / increase in payables (273) (937) (2,157) 1,538 Cash flow from operating activities before interest and tax 496 500 624 (100) Interest paid 6 (16) (35) (16) (35) Taxation paid (154) (144) - - Cash inflow / (outflow) from operating activities 326 321 608 (135) ------------------------------- ------ -------- -------- -------- -------- INVESTING ACTIVITIES Purchase of property plant and equipment 13 (95) (12) (95) (11) Purchase of intangible assets 12 (286) (511) (26) - Proceeds from disposal of discontinued operations 26 1,078 120 121 - Net cash inflow / (outflow) from investing activities 697 (403) - (11) ------------------------------- ------ -------- -------- -------- -------- FINANCING Proceeds from issuance of ordinary shares 23 - 8 - 8 Proceeds of new borrowings 27 - 200 - 200 Repayments of borrowings 27 (292) (289) (292) (289) Payment of dividend to minority interest (185) (303) - - Net cash outflow from financing activities (477) (384) (292) (81) ------------------------------- ------ -------- -------- -------- -------- NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 546 (466) 316 (227) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR (3) 463 152 379 CASH AND CASH EQUIVALENTS AT END OF YEAR 27 543 (3) 468 152 =============================== ====== ======== ======== ======== ========
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 November 2015
1. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented. There have been no changes to accounting policies in the period.
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.
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A discontinued operation is a component of the Group's business, the operations and cash flows of which represents a separate major line of business. Classification of a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale. When an operation is classified as a discontinued operation, the comparative statement of profit or loss is restated as if the operation had been discontinued from the start of the prior year. Comparative figures for the year to 30 November 2014 have been reclassified to reflect the results of the Radcliffe Solutions, Radcliffe Publishing and iGaming businesses as discontinued operations as a result of their disposals.
As permitted by Section 408 of the Companies Act 2006, no separate income statement is presented for the Company. The Company's loss for the year was GBP2,035,000 (2014: GBP2,569,000 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 loss for the year of GBP2,292,000 (2014: GBP1,289,000) and has net assets of GBP4,164,000 (2014: GBP6,687,000); notwithstanding this it has a net current liabilities position at 30 November 2015 of GBP373,000 (2014: GBP1,492,000). The level of bank debt has however reduced to GBP94,000 (2014:GBP389,000), and the Group also received net proceeds of GBP12.1m in January 2016 from the sale of iGaming Business Ltd. The Directors have prepared group cash flow forecasts for the period ending 30 November 2018, which take into account known factors in the business including the disposal of iGaming Business Ltd in January 2016. 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 and financial facilities. On this basis the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.
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 or generated 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
-- 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.
2 REVENUE AND COST OF SALES
An analysis of the Group's income from continuing operations is as follows:
2015 2014 GBP'000 GBP'000 Restated ------------------------------------ -------- ---------- Revenue Sale of goods 1,726 2,019 Rendering of services 5,167 5,057 ------------------------------------ -------- ---------- 6,893 7,076 Cost of sales Change in inventories of finished goods (233) (343) Raw materials and consumables used (1,949) (2,041) Marketing costs (868) (915) ------------------------------------ -------- ---------- (3,050) (3,299) Gross profit 3,843 3,777 ------------------------------------ -------- ---------- 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 reviewed by the Board when reviewing performance, allocating resources and making strategic decisions. Following the disposal of iGaming Business Ltd, the Directors have restructured the management of the Group's continuing operations and now organises its management and reporting around two market-facing divisions: Education and Sport.
-- Sport (S): provides insight, data and analysis to the business communities behind sport.
-- Education (E): provides professional education, development, training and resources to professional communities in schools and other institutions including school managers, teachers, speech and language therapists and special needs co-ordinators.
-- Central costs (PLC): the group function represents central 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 position across the Group.
Operating profit is defined in note 1. The sector analysis includes the adjusted 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.
As described in note 9, three businesses have been classed as discontinued in the current year. The information in the table below excludes amounts relating to discontinued activities and 2014 comparatives have been restated accordingly
Analysis by Year ended 30 November Year ended 30 November market sector 2015 2014 - Restated - continuing operations S E PLC Total S E PLC Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Revenue 2,366 4,527 - 6,893 1,917 5,159 - 7,076 -------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- --------- Adjusted operating (loss) /profit (note 5) 152 (717) (768) (1,333) (28) (261) (774) (1,063) Share based payment credits/(charges) - - (66) (66) - - (270) (270) Restructuring costs - - - - - (91) - (91) Amortisation of intangible assets (112) (342) (16) (470) (126) (300) (45) (471) Impairment expense - (1,000) - (1,000) - - - - Operating (loss) / profit 40 (2,059) (850) (2,869) (154) (652) (1,089) (1,895) Finance costs - - (16) (16) - - (35) (35) (Loss) / profit
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before tax 40 (2,059) (866) (2,885) (154) (652) (1,124) (1,930) ==================== ========= ========== ========== ========== ========== ========== ========== ========= 3 SEGMENTAL ANALYSIS (continued) Analysis by market Year ended 30 Year ended 30 November sector - continuing November 2015 2014 - Restated operations S E PLC Total S E PLC Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------- -------- -------- -------- -------- -------- -------- -------- -------- Depreciation and amortisation 112 343 87 542 126 295 130 551 Impairment expense - 1,000 - 1,000 - - - - Expenditure on intangible fixed assets 81 157 26 264 115 276 - 391 Expenditure on property, plant and equipment - - 94 94 - 1 11 12 Analysis by market sector Assets Liabilities 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------- -------- -------- -------- -------- Sport 347 221 677 528 Education 2,093 2,671 1,784 2,133 2,440 2,892 2,461 2,661 Discontinued operations 1,474 1,730 1,604 1,928 Group function 4,759 6,150 760 675 Gross debt and taxation (current and deferred) 637 1,804 321 625 9,310 12,576 5,146 5,889 =========================== ======== ======== ======== ========
The UK is the Group's country of domicile and the majority of revenues from external customers is generated there. There are no inter-segmental sales. An analysis of continuing revenues split by customers' country of origin is given below.
2015 2014 GBP'000 GBP'000 ----------------------- -------- -------- UK 4,905 5,273 Europe (excluding UK) 1,347 1,041 North America 222 235 Rest of the World 419 527 6,893 7,076 ======================= ======== ======== 4 EMPLOYEES
The average monthly number of persons (including directors) employed by the Group during the year, analysed by category, was as follows:
2015 2014 Number Number ------------------------------- ------- ------- Sales and marketing 45 51 Content and production 49 55 Administration and management 33 33 127 139 =============================== ======= =======
Their aggregate remuneration comprised:
2015 2014 GBP'000 GBP'000 ------------------------------------- -------- -------- Wages and salaries 5,136 5,510 Social security costs 518 535 Pension costs 86 55 Equity-settled share-based payments and related costs / (credits) 66 270 5,806 6,370 ===================================== ======== ======== 4 EMPLOYEES (continued)
This remuneration is included in other operating expenses except for: GBP1,314,000 (2014: GBP1,759,000) in discontinued operations, GBP24,000 (2014: GBP144,000) included in cost of sales - direct costs; GBP220,000 (2014: GBP131,000) included in cost of sales - marketing expenses; GBPnil (2014: GBP91,000) included in restructuring costs and GBP170,000 (2014: GBP328,000) capitalised in intangible fixed assets for web site development.
The Group considers that the Board of Directors are the key management personnel. Their remuneration is summarised in the Remuneration Report on page 22.
5 ADJUSTED PROFIT
Adjusted profits are presented to allow shareholders to gain a further understanding of the trading performance of the Group. Profits are adjusted for items not considered by management to be part of the underlying trends in the business together with 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 figures exclude amortisation and impairment of goodwill and intangible assets, restructuring and acquisition-related costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax charges.
As noted in the Strategic Report, the Group has disposed of the Radcliffe Solutions Ltd and the Radcliffe Publishing business during 2015, whilst the Group's 70% stake in iGaming Business Ltd was disposed of post year end. The results of these businesses have therefore been classed as discontinued and excluded from adjusted amounts in both 2015 and 2014 - see note 9. During 2014, the Group also incurred a restructuring charge of GBP91,000 related to the Education division.
The 2014 restructuring costs were considered to be taxable items for corporation tax and thus attributable tax has been included in the period 21.7% of their value.
A reconciliation of operating profit to Adjusted EBITA split between continuing and discontinued operation is given in the table below. Further detail on discontinued operations is given in note 9.
2015 2015 2015 2014 2014 2014 Continuing Disc'd Total Continuing Disc'd Total Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Restated Restated Restated --------------------- ------ ------------ -------- -------- ------------ ---------- ---------- Operating (loss) / profit 7 (2,869) 1,816 (1,053) (1,895) 563 (1,332) --------------------- ------ ------------ -------- -------- ------------ ---------- ---------- Amortisation of intangible assets 7 470 112 582 471 221 692 Impairment expense 11,12 1,000 - 1,000 - 778 778 Restructuring costs - 342 342 91 37 128 Share based payment charges 7 66 - 66 270 - 270 Adjusting items to operating profit 1,536 454 1,990 832 1,036 1,868 Adjusted operating profit for the year (Adjusted EBITA) (1,333) 2,270 937 (1,063) 1,599 536 Depreciation 7 73 - 73 80 8 88 Adjusted earnings before interest, tax, depreciation and amortisation for the year (1,260) 2,270 1,010 (983) 1,607 624 ===================== ====== ============ ======== ======== ============ ========== ========== 5 ADJUSTED PROFIT (continued) 2015 2014 GBP'000 GBP'000 Restated --------------------------------------- ---------- ---------- Loss before tax for the year from continuing operations (2,885) (1,930) ---------------------------------------- ---------- ---------- Adjusting items to operating loss 1,536 832 Adjusting items to loss before tax 1,536 832 Adjusted loss before tax for the year from continuing operations (1,349) (1,098) ======================================== ========== ========== Loss for the year attributable to equity holders of the parent (2,523) (1,405) Deduct profit for the year from discontinued operations attributable to equity holders of the parent (143) (266) ---------------------------------------- ---------- ---------- Loss for the year attributable to equity holders of the parent from continuing operations (2,666) (1,671) ---------------------------------------- ---------- ---------- Adjusting items to operating loss 1,536 832 Attributable tax expense on adjusting items - (20) Exclude movements on deferred tax assets and liabilities taken to income statement (219) (259) Adjusting items to profit for the year 1,317 553 Adjusted loss for the year (1,349) (1,118) ======================================== ========== ========== 6 FINANCE COSTS 2015 2014 GBP'000 GBP'000 --------------------------------------- -------- --------
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Interest on bank loans and overdrafts 16 35 ======================================= ======== ======== 7 LOSS BEFORE TAXATION FROM CONTINUING OPERATIONS 2015 2014 GBP'000 GBP'000 Restated ----------------------------------------- -------- ---------- Loss before taxation from continuing operations is stated after charging: Depreciation and amounts written off property, plant and equipment - owned assets 73 80 Amortisation of intangible fixed assets 470 471 Impairment of goodwill 1,000 - Operating lease rentals: - Land and buildings 123 112 - Plant and equipment 6 4 Share based payment charges 66 270 ========================================= ======== ==========
Other operating expenses as disclosed on the face of the income statement include staff costs (note 4) of GBP4,078,000 (2014: GBP3,917,000) and premises costs of GBP463,000 (2014: GBP390,000).
In 2015, impairment charges of GBP1,000,000 have been recognised in respect of goodwill as described in note 11 (2014: GBPnil).
There were no impairment charges recognised in discontinued operations in 2015. In 2014, impairment charges of GBP778,000 were recognised in respect of Radcliffe Solutions included in discontinued operations. GBP414,000 related to goodwill and GBP364,000 was in respect of intangible fixed assets.
Amounts payable to KPMG LLP and their associates in respect of both audit and non-audit services are as follows:
2015 2014 GBP'000 GBP'000 ------------------------------------------- -------- -------- Fees payable to the company's auditor for the audit of the company's annual accounts 31 31 Fees payable to the company's auditor and its associates for other services: - the audit of the company's subsidiaries pursuant to legislation 37 41 - other services relating to taxation 10 - 78 72 =========================================== ======== ======== 8 TAXATION 2015 2014 GBP'000 GBP'000 Restated ------------------------------------------- -------- ---------- Current tax: UK corporation tax on profits of the - - year from continuing operations Total current tax - - Deferred taxation: Origination and reversal of timing differences (219) (259) Total deferred tax (219) (259) Tax credit on loss on ordinary activities from continuing operations (219) (259) =========================================== ======== ==========
UK corporation tax is calculated at 20.3% as 21% for the first four months of the financial year and then 20% for the remainder (2014: 21.7% as 23% for the first four months of the financial year and then 21% for the remainder) of the estimated assessable profit for the year.
8 TAXATION (continued)
Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. A further reduction to the UK corporation tax rate was announced in the 2016 Budget to further reduce the tax rate to 17% (to be effective from 1 April 2020). This will reduce the company's future current tax charge accordingly. The deferred tax assets and liabilities at the balance sheet date have been calculated based on the rate of 18% substantively enacted at the balance sheet date.
The total tax charge can be reconciled to the accounting profit as follows:
Factors affecting tax charge for the 2015 2014 year GBP'000 GBP'000 Restated ---------------------------------------- -------- ---------- Loss on ordinary activities before tax from continuing operations (2,885) (1,930) Loss on ordinary activities multiplied at the standard rate of corporation tax in the UK of 20.3% (2014 - 21.7%) (586) (418) Effect of: (Credits)/charges not deductible for tax purposes (34) 173 Recognition of / (reduction to) prior year tax losses 146 (36) Change in tax rate 255 22 Tax credit and effective rate for the year (219) (259) ======================================== ======== ========== 9 DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE On 28 January 2015, the Group disposed of the Radcliffe Solutions Ltd for cash consideration of GBP125,000 less a GBP4,000 working capital adjustment. At 30 November 2014, the net assets of Radcliffe Solutions were classified as assets held for sale. This business was included within the Health reportable segment. On 19 June 2015, the Group disposed of the Radcliffe Publishing trade and assets for cash consideration of GBP957,000. The contractual effective date of the disposal, and the date on which control over the business passed to the buyer was 31 May 2015. This business was included within the Health reportable segment. Details of the assets and liabilities disposed of, and the calculation of the profit and loss on disposal, are disclosed in note 26. On 4 January 2016, the Group disposed of its 70% interest in iGaming Business Ltd for cash consideration of GBP13,797,000 plus an adjustment for net working capital which will be determined at a later date. As at 30 November 2015, the net assets of iGaming Business Ltd were classified as assets held for sale. In 2014, the Group disposed of the Peak Performance and Sports Injury Bulletin businesses operated through its subsidiary P2P Publishing Ltd. These businesses were included within the Health reportable segment. The Group also disposed of the Incentive Plus business. This business was included within the Education reportable segment. The combined results of the discontinued operations (ie Peak Performance, Sports Injury Bulletin, Incentive Plus, Radcliffe Solutions, Radcliffe Publishing and iGaming Business Ltd) included in the results for the current and preceding year are set out below. The comparative profit and cash flows from discontinued operations have been restated to include those operations classified as discontinued in the current year. 2015 2014 Profit for the year from discontinued GBP'000 GBP'000 activities -------------------------------------------- -------- -------- Revenue 6,914 7,295 Expenses (5,098) (5,954) Impairment losses - (778) Profit before tax 1,816 563 Attributable tax charge (1,415) (185) -------------------------------------------- -------- -------- 401 378 (Loss) / profit on disposal of operation (note 26) (27) 4 -------------------------------------------- -------- -------- Profit for the year from discontinued operations 374 382 ============================================ ======== ======== 9 DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (continued) The total profit before tax of GBP1,816,000 comprises profit from iGaming of GBP2,374,000, GBP482,000 losses from Radcliffe Publishing, GBP80,000 losses from Radcliffe Solutions and GBP4,000 of profits from disposals made in prior years. In 2014, profits before tax of GBP563,000 comprised iGaming profits of GBP1,922,000, GBP330,000 losses from Radcliffe Publishing, GBP967,000 losses from Radcliffe Solutions and GBP62,000 losses from other disposals. Central costs of GBP437,000 were allocated to discontinued businesses in 2015 (2014: 406,000). The 2015 tax charge attributable to discontinued operations includes GBP1,163,000 arising from de-recognition of a deferred tax asset as a result of the disposal of iGaming Business. In accordance with International Financial Reporting Standards, the deferred tax charge has been recognised at 30 November 2015, despite the disposal after the balance sheet date. 2015 2014 Cash flows from discontinued activities GBP'000 GBP'000 ----------------------------------------------- --------- -------- Net cash (outflows) / inflows from
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operating activities (599) 24 Net cash inflows from investing activities 835 121 Net cash outflows from financing (185) (303) =============================================== ========= ======== Net cash inflows / (outflows) 51 (158) =============================================== ========= ========
As noted above, at 30 November 2015, the net assets related to iGaming Business Ltd have been classified as held for sale. At 30 November 2014 the net assets of Radcliffe Solutions Ltd were classed as held for sale. The major classes of assets and liabilities classed as held for sale are as follows:
2015 2014 GBP'000 GBP'000 ----------------------------------------- -------- -------- Goodwill 500 - Other intangible assets 75 5 Trade receivables 638 42 Prepayments and accrued income 330 33 Cash and bank balances 1 1 ----------------------------------------- -------- -------- Assets classified as held for sale 1,544 81 ----------------------------------------- -------- -------- Trade payables 346 54 Taxation 164 - Other payables 28 6 Accruals 380 34 Deferred income 437 83 Deferred taxation 13 - ----------------------------------------- -------- -------- Liabilities associated with assets held for sale 1,368 177 ----------------------------------------- -------- -------- Net assets / (liabilities) classified as held for sale 176 (96) ========================================= ======== ======== 10 EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on the following:
2015 2014 Number Number ------------------------------------- ------------ ------------ Weighted average number of shares 407,590,795 406,921,466 Adjustment in respect of SIP shares (619,749) (684,925) Weighted average number of shares used in basic earnings per share calculations 406,971,046 406,236,541 -------------------------------------- ------------ ------------ Dilutive effect of share options 13,265,034 14,459,961 Weighted average number of shares used in diluted earnings per share calculations 420,236,080 420,696,502 -------------------------------------- ------------ ------------ 2015 2014 GBP'000 GBP'000 Restated ------------------------------------------- ---------- ---------- Loss for the year from continuing and discontinued operations attributable to equity holders of the parent (2,523) (1,405) Profit from discontinued operations attributable to equity holders of the parent (143) (266) -------------------------------------------- ---------- ---------- Loss for the period from continuing operations (2,666) (1,671) Adjustment to earnings (Note 5) 1,317 553 -------------------------------------------- ---------- ---------- Adjusted loss for the period from continuing operations (1,349) (1,118) -------------------------------------------- ---------- ---------- 2015 2014 GBP'000 GBP'000 Restated Loss per share from continuing and discontinued operations Basic loss per share (0.62)p (0.35)p ============================================ ======== ========== Diluted loss per share (0.62)p (0.35)p ============================================ ======== ========== Loss per share from continuing operations Basic loss per share (0.66)p (0.41)p ============================================ ======== ========== Diluted loss per share (0.66)p (0.41)p ============================================ ======== ========== Loss per share from discontinued operations Basic loss per share (0.00)p (0.00)p ============================================ ======== ========== Diluted loss per share (0.00)p (0.00)p ============================================ ======== ========== Adjusted loss per share Adjusted basic loss per share (0.33)p (0.28)p ============================================ ======== ========== Adjusted diluted loss per share (0.33)p (0.28)p ============================================ ======== ========== 11 GOODWILL Group 2015 2014 GBP'000 GBP'000 ------------------------------------- -------- -------- Cost 1 December 10,797 11,211 Disposals (319) - Reclassified as held for sale (note 9) (500) (414) 30 November 9,978 10,797 ------------------------------------- -------- -------- Accumulated impairment provisions 1 December 5,928 5,928 Impairment charges for the year 1,000 414 Reclassified as held for sale (note 9) - (414) 30 November 6,928 5,928 ------------------------------------- -------- -------- Carrying amount 30 November 3,050 4,869 ===================================== ======== ========
Goodwill by segment
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units ('CGUs') that are expected to benefit from that business combination. CGU are identified as individual operating units with specific market and product types, usually derived from the original acquisition. The carrying amount has been allocated to the operating segments as follows:
2014 Disposals Impairment Reclassified 2015 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Restated -------------- ---------- ---------- ----------- ------------- -------- Education 2,580 - (1,000) - 1,580 Sport 1,470 - - - 1,470 Discontinued operations 819 (319) - (500) - -------------- ---------- ---------- ----------- ------------- -------- 4,869 (319) (1,000) (500) 3,050 ============== ========== ========== =========== ============= ========
Goodwill has been restated in the table above to reflect the change in reportable operating segments described in note 3. During the year, goodwill has been reduced by GBP319,000 as a result of the sale of the Radcliffe Publishing business and goodwill associated with Optimus Education has been impaired by GBP1,000,000 to reflect the uncertainty in the future profitability of the Optimus subscriptions business. Goodwill of GBP500,000 relating to iGaming Business Ltd has been reclassified to assets held for sale - see note 9.
Impairment testing methodology
The Group tests each CGU's goodwill for impairment annually or more frequently if there are indications that goodwill might be impaired. The impairments in the periods reported are as disclosed in note 7.
The recoverable amounts of the CGU are determined from value in use calculations which are estimated using a discounted cash flow model. The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next 3 years and extrapolates further cash flows based on estimated long-term growth of 3%. The rates do not exceed the average long-term growth rate for the relevant markets. The pre-tax rate used to discount the cash flows for SportBusiness and Speechmark is 8.5%, Optimus has used a discount rate of 10.5% which reflects the greater market challenges and risks with these businesses. In 2014, a pre-tax discount rate of 8.5% was used for all CGUs.
The key assumptions across the CGU for the value in use calculations are those regarding revenue growth, profit margin, cash conversion, discount rate and terminal growth rate. The Group has formally approved the budgets used for the initial three years. The terminal growth rates are based on industry growth forecasts. Management estimate discount rates using pre-tax rates that reflect the Group's weighted average cost of capital and the risks specific to the CGU.
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Management has also conducted sensitivity analysis taking into consideration the impact of reasonably possible changes in the discount factor, budgeted cash flows and growth assumptions. The results of this analysis indicate no further impairments are required.
12 INTANGIBLE ASSETS Group Company Other Publishing acquired Web Computer Web Computer titles assets design software Total design software Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------------- ----------- ---------- -------- ---------- -------- -------- ---------- -------- Cost 1 December 2013 4,842 1,235 1,476 200 7,753 176 142 318 Additions - - 511 - 511 - - - Disposals - - (126) - (126) - - - Written off (1,235) - - - (1,235) - - - Reclassified as held for sale (note 9) (364) - (7) - (371) - - - ----------------- ----------- ---------- -------- ---------- -------- -------- ---------- -------- 30 November 2014 3,243 1,235 1,854 200 6,532 176 142 318 Additions - - 286 - 286 26 - 26 Disposals (714) - (321) - (1,035) - - - Written off (230) - (279) (181) (690) (122) (142) (264) Reclassified as held for sale (note 9) - - (166) - (166) - - - ----------------- ----------- ---------- -------- ---------- -------- -------- ---------- -------- 30 November 2015 2,299 1,235 1,374 19 4,927 80 - 80 ----------------- ----------- ---------- -------- ---------- -------- -------- ---------- -------- Amortisation and impairment 1 December 2013 3,387 1,192 623 152 5,354 141 110 251 Charge for the year Impairment 292 43 309 48 692 13 31 44 364 - - - 364 - - - Disposals - - (31) - (31) - - - Written off (1,235) - - - (1,235) - - - Reclassified as held for sale (note 9) (364) - (2) - (366) - - - 30 November 2014 2,444 1,235 899 200 4,778 154 141 295 Charge for the year 200 - 382 - 582 14 1 15 Disposals (395) - (139) - (534) - - - Written off (230) - (279) (181) (690) (122) (142) (264) Reclassified as held for sale (note 9) - - (91) - (91) - - - 30 November 2015 2,019 1,235 772 19 4,045 46 - 46 ----------------- ----------- ---------- -------- ---------- -------- -------- ---------- -------- Carrying amount 30 November 2015 280 - 602 - 882 34 - 34 ================= =========== ========== ======== ========== ======== ======== ========== ======== 30 November 2014 799 - 955 - 1,754 22 1 23 ================= =========== ========== ======== ========== ======== ======== ========== ========
The carrying value of publishing titles at 30 November 2015 relates to over three hundred product title rights acquired as part of the Speechmark Publishing Limited acquisition. These will be fully amortised in 2 years (2014: 3 years).
During the year the Group has written off GBP690,000 of intangible assets and amortisation associated with old assets that have GBPnil net book value and are no longer used. Of this value GBP264,000 was held in the Company. Major additions in 2015 include the enhancement of the Education and Sport subscription products.
The Group tests the assets annually for impairment or more frequently if there are indications that they might be impaired following the impairment methodology set out in note 11. In 2014, intangible assets held by Radcliffe Solutions were impaired by GBP364,000 to a carrying value of GBPnil as a result of its disposal on 28 January 2015. Radcliffe Solutions Ltd's assets and liabilities were classified as held for sale at 30 November 2014 and iGaming Business assets and liabilities were classified as held for sale at 30 November 2015 - see note 9.
Management has also conducted sensitivity analysis taking into consideration the impact of reasonably possible changes in the discount factor, budgeted cash flows and growth assumptions. The results of this analysis indicate no further impairments are required.
13 PROPERTY, PLANT AND EQUIPMENT Group Leasehold Fixtures, property Computer fittings improvements equipment & equipment Total GBP'000 GBP'000 GBP'000 GBP'000 ------------------ -------------- ----------- ------------- -------- Cost 1 December 2013 140 61 78 279 Additions - 6 6 12 Disposals (27) - (3) (30) Reclassified as held for sale (note 9) - (2) - (2) 30 November 2014 113 65 81 259 Additions 82 13 - 95 Written off (113) (60) (68) (241) Reclassified as - - - - held for sale (note 9) 30 November 2015 82 18 13 113 ------------------- -------------- ----------- ------------- -------- Depreciation and impairment 1 December 2013 58 56 65 179 Charged in the year 70 5 13 88 Disposals (27) - (3) (30) Reclassified as held for sale (note 9) - (2) - (2) 30 November 2014 101 59 75 235 Charged in the year 61 9 3 73 Written off (113) (60) (68) (241) Reclassified as - - - - held for sale (note 9) 30 November 2015 49 8 10 67 ------------------- -------------- ----------- ------------- -------- Net book value 30 November 2015 33 10 3 46 =================== ============== =========== ============= ======== 30 November 2014 12 6 6 24 =================== ============== =========== ============= ======== Company Leasehold Fixtures, property Computer fittings improvements equipment & equipment Total GBP'000 GBP'000 GBP'000 GBP'000 ---------------- --- -------------- ----------- ------------- -------- Cost 1 December 2013 94 56 53 203 Additions - 5 6 11 30 November 2014 94 61 59 214 Additions 82 13 - 95 Written off (94) (57) (52) (203) 30 November 2015 82 17 7 106 --------------------- -------------- ----------- ------------- -------- Depreciation 1 December 2013 12 43 51 106 Charged in the year 71 12 2 85 30 November 2014 83 55 53 191 Charged in the year 60 9 3 72 Written off (94) (57) (52) (203) 30 November 2015 49 7 4 60 --------------------- -------------- ----------- ------------- -------- Net book value 30 November
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2015 33 10 3 46 ===================== ============== =========== ============= ======== 30 November 2014 11 6 6 23 ===================== ============== =========== ============= ======== 14 INVESTMENTS
The Company holds more than 20% of the share capital of the following companies, all of which are incorporated in England apart from IGaming Business North America Inc and SAM Media LLC which are incorporated in the USA:
Class % of Nature of Subsidiary of shareholding shares business undertakings: held ----------------------------- ----------------- -------- ----------- Optimus Professional Ordinary 100% Publisher Publishing Limited SBG Companies Ordinary 100% Publisher Limited iGaming Business Ordinary 70% Publisher Limited^ Incentive Ordinary 100% Mail order Plus Limited P2P Publishing Limited Ordinary 100% Publisher Speechmark Publishing Ordinary 100% Publisher Limited Radcliffe Publishing Limited Ordinary 100% Publisher iGaming Business North Ordinary 70% Publisher America Inc. * SAM Media LLC* Ordinary 35% Events
^ Indirectly held through SBG Companies Limited
* Indirectly held through iGaming Business Limited
As described in note 30, the Group disposed of its holdings in iGaming Business Limited, iGaming Business North America Inc. and SAM Media LLC on 4 January 2016.
Company 2015 2014 Shares Loans Shares Loans in subsidiary to subsidiary in subsidiary to subsidiary undertakings undertakings Total undertakings undertakings Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------------- --------------- --------------- -------- --------------- --------------- -------- Cost: At 1 December 13,791 2,595 16,386 13,791 2,595 16,386 Disposal (480) - (480) - - - ----------------- --------------- --------------- -------- --------------- --------------- -------- At 30 November 13,311 2,595 15,906 13,791 2,595 16,386 ----------------- --------------- --------------- -------- --------------- --------------- -------- Amounts written off: At 1 December 10,006 - 10,006 9,526 - 9,526 Impairment in the year 1,644 - 1,644 480 - 480 Disposal (480) - (480) - - ----------------- --------------- --------------- -------- --------------- --------------- -------- At 30 November 11,170 - 11,170 10,006 - 10,006 ----------------- --------------- --------------- -------- --------------- --------------- -------- Net book value: ----------------- --------------- --------------- -------- --------------- --------------- -------- At 30 November 2,141 2,595 4,736 3,785 2,595 6,380 ================= =============== =============== ======== =============== =============== ========
The Group tests the investments annually for impairment or more frequently if there are indications that they might be impaired following the impairment methodology set out in note 11. In 2014, the investment in Radcliffe Solutions Ltd was fully impaired as a result of the sale of its shares on 28 January 2015. In 2015 the investment in Radcliffe Publishing Ltd was fully impaired as a result of its sale on 19 June 2015 from GBP1,227,000 to GBPnil (note 9) and the investment in Speechmark was impaired by GBP417,000 to GBP1,600,000 to reflect the Board's estimate of its net realisable value. Management has also conducted sensitivity analysis taking into consideration the impact of reasonably possible changes in the discount factor, budgeted cash flows and growth assumptions. The results of this analysis indicate no further impairments are required.
15 DEFERRED TAX Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------ -------- -------- -------- -------- Deferred tax assets Current - 69 - 14 Non-current 637 1,735 - 234 ------------------------------ -------- -------- -------- -------- 637 1,804 - 248 ------------------------------ -------- -------- -------- -------- Deferred tax liabilities Current - - - - Non-current (63) (178) - - Classified as liabilities 13 - - - associated with assets held for sale (note 9) ------------------------------ -------- -------- -------- -------- (50) (178) - - ------------------------------ -------- -------- -------- -------- Net position at 30 November 587 1,626 - 248 ============================== ======== ======== ======== ======== Group Goodwill and Capital Tax Intangible allowances losses assets Other Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------- ------------ -------- ------------ -------- -------- 1 December 2013 120 1,408 (290) 19 1,257 Credit to income for the year 51 20 132 54 257 Credit to equity for the year - - - 112 112 30 November 2014 171 1,428 (158) 185 1,626 --------------------------- ------------ -------- ------------ -------- -------- Debit to income for the year (78) (916) 108 (54) (940) Debit to equity for the year - - - (112) (112) Classified as liabilities associated with assets held for sale (note 9) 13 - - - 13 30 November 2015 106 512 (50) 19 587 --------------------------- ------------ -------- ------------ -------- --------
There are accumulated losses of GBP11,105,000 (2014: GBP9,448,000) which, subject to agreement with the HM Revenue & Customs, are available to offset future profits of the same trade. Of this, the Group has not recognised tax losses of GBP8,246,000 (2014: GBP7,142,000) as management does not believe that recovery is probable.
Company Capital allowances Other Total GBP'0000 GBP'000 GBP'000 ------------------------------- ------------ -------- -------- 1 December 2013 63 1 64 Credit to income for the year 17 55 72 Credit to equity for the year - 112 112 30 November 2014 80 168 248 ------------------------------- ------------ -------- -------- Charge to income for the year (80) (56) (136) Charge to equity for the year - (112) (112) 30 November 2015 - - - ------------------------------- ------------ -------- -------- 16 INVENTORIES Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 ------------------ -------- -------- -------- -------- Book inventories 622 1,267 - - =================== ======== ======== ======== ========
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Inventories were written down by GBP285,000 (2014: GBP158,000) from a carrying amount of GBP285,000 (2014: GBP158,000) down to GBPnil (2014: GBP nil). The cost of inventories, including the write-down, is included within cost of sales.
17 TRADE AND OTHER RECEIVABLES Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------------ -------- -------- -------- -------- Due within one year: Trade receivables 1,069 1,734 4 - Amounts owed by group undertakings - - 3,391 6,477 Other receivables 585 562 151 168 Prepayments and accrued income 333 481 195 84 ------------------------------------ -------- -------- -------- -------- 1,987 2,777 3,741 6,729 ==================================== ======== ======== ======== ========
The average credit period taken on sales of goods is 36 days (2014: 37 days). Standard terms are thirty days but many of the Group's goods and services, such as subscription renewals and events, are invoiced in advance of the delivery date. An allowance is maintained for estimated irrecoverable amounts and has been made with reference to past default experience. The Directors consider that the carrying amount of trade and other receivables approximates to their fair values.
The Group's exposure to credit risk and impairment losses related to trade and other receivables are disclosed in note 22.
The Group holds no collateral against these receivables at the balance sheet date and charges no interest on its overdue receivables.
18 BORROWINGS Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------- -------- -------- -------- -------- Non-current Bank loans 28 94 28 94 --------------------------- -------- -------- -------- -------- 28 94 28 94 --------------------------- -------- -------- -------- -------- Current Bank overdraft - 2 - - Cash balance reclassified - 1 - - as held for sale (note 9) --------------------------- -------- -------- -------- -------- - 3 - - Bank loans 66 292 66 292 66 295 66 292 --------------------------- -------- -------- -------- -------- 94 389 94 386 =========================== ======== ======== ======== ========
The effective interest rates and applicable balances at the balance sheet dates are as follows:
Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 -------------------------- -------- -------- -------- -------- Bank overdraft facility - 3 - - (4.50% over the lending Bank's base rate) Bank loan A (4.25% over LIBOR) - 225 - 225 Bank loan B (4.73% over the lending Bank's base rate) 94 161 94 161 94 389 94 386 ========================== ======== ======== ======== ======== 18 BORROWINGS (continued)
At 30 November there were the following committed undrawn borrowing facilities expiring as follows:
Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------------- -------- -------- -------- -------- In one year or less - Bank overdraft facility 750 747 750 747 ============================ ======== ======== ======== ========
The weighted average interest rate implicit in the group's bank loans at 30 November 2015 was 5.23% (2014: 4.97%) and the weighted average period until maturity was 0.7 years (2014: 0.9 years). The Directors estimate that the fair value of the Group's borrowings is not significantly different to the carrying value.
The bank overdraft facility for GBP750,000 (2014: GBP747,000) is, when utilised, repayable on demand.
Bank loan A was fully repaid in November 2015. Bank loan B is guaranteed by material subsidiaries of the Group and is repayable over 1.5 years ending in May 2017. The repayment profile is given in note 22.
19 TRADE AND OTHER PAYABLES Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 ----------------------------------- -------- -------- -------- -------- Trade payables 415 929 147 140 Amounts due to group undertakings - - 7,046 9,158 Other payables 307 265 260 274 Accruals 918 1,349 263 301 Total current 1,640 2,543 7,716 9,873 =================================== ======== ======== ======== ========
Trade, other payables, and accruals principally comprise amounts outstanding for trade and ongoing costs. The average credit period taken for trade purchases is 34 days (2014: 39 days).
20 DEFERRED INCOME Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------- -------- -------- -------- -------- Subscription and events fees received in advance 1,934 2,481 - - =========================== ======== ======== ======== ======== 21 PROVISIONS Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------------- -------- -------- -------- -------- 1 December 60 127 60 - Increase in year 60 60 60 60 Release of provisions in year (60) (18) (60) - Utilised during the year - (109) - - Unwinding of discount - - - - --------------------------------- -------- -------- -------- -------- 30 November 60 60 60 60 ================================= ======== ======== ======== ======== Included in current liabilities 60 60 60 60 ================================= ======== ======== ======== ========
Provisions of GBP60,000 were made at 30 November 2014 to reflect anticipated costs arising reflect an estimate of dilapidation costs due on termination of a lease during 2015. This provision was released during 2015, but a further provision of GBP60,000 has been raised to cover estimated dilapidation costs relating to a lease due to terminate in 2016.
22 FINANCIAL INSTRUMENTS
The Group's activities expose the Group to a number of risks including capital risk management, market risk (foreign currency risk and interest rate risk), liquidity risk and credit risk. The policies for managing these risks are regularly reviewed and agreed by the Board.
It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be undertaken.
Capital management
The Group's main objective when managing capital is to protect returns to shareholders by ensuring the Group will continue to trade in the foreseeable future. The Group also aims to maximise its capital structure of debt and equity so as to minimise its cost of capital. The Group in particular reviews its levels of borrowing (note 18) and the repayment dates, setting these out against forecast cash flows and reviewing the level of available funds.
The capital structure of the Group consists of debt, cash and cash equivalents and equity attributable to holders of the parent, comprising issued share capital, reserves and retained earnings. Consistent with others in the industry, the Group reviews the gearing ratio to monitor the capital. This ratio is calculated as the net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity (including capital, reserves and retained earnings). This gearing ratio will be considered in the wider macroeconomic environment. With the current restraints on the availability of finance and economic pressures the Group has lowered its gearing ratio expectations and has reduced debt considerably in the last five years.
22 FINANCIAL INSTRUMENTS (continued)
Categories of financial instruments
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Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.
Group Company 2015 2014 2015 2014 Notes GBP'000 GBP'000 GBP'000 GBP'000 Financial assets Loans and receivables Trade receivables 17 1,069 1,734 4 - Other receivables 17 585 562 3,542 6,645 Accrued income 15 70 - - Cash and cash equivalents 27 542 - 468 152 Assets held for sale 9 737 59 - - -------------------------------- ------ -------- -------- -------- -------- Total financial assets 2,948 2,425 4,014 6,797 -------------------------------- ------ -------- -------- -------- -------- Financial liabilities Amortised cost Bank loans and overdrafts 18 94 389 94 386 Current tax liabilities - 61 - - Trade payables 19 415 929 147 140 Other payables 19 307 265 7,306 9,432 Accruals 19 918 1,349 263 301 Provisions 21 60 60 60 60 Deferred income 20 1,934 2,481 - - Liabilities associated with assets held for sale 9 1,355 177 - - -------------------------------- ------ -------- -------- -------- -------- Total financial liabilities 5,083 5,711 7,870 10,319 -------------------------------- ------ -------- -------- -------- --------
Liquidity risk
Cash balances are placed so as to maximise interest earned while maintaining the liquidity requirements of the business. When seeking borrowings, the Directors consider the commercial terms available and consider whether such terms should be fixed or variable and are appropriate to the business. The Directors review the placing of cash balances on an ongoing basis. Any surplus cash balances during the year were kept in standard accounts at standard bank interest rates. The financial assets of the group at 30 November 2015 were mainly designated in sterling and earned floating rate standard bank interest.
The Group aims to ensure that sufficient cash is generated in the operating cycle to meet the contractual cash flows through effective cash management. In addition, the Group maintains a committed bank facility of GBP750,000 (2014: GBP750,000) which can be accessed as considered necessary. This facility is subject to annual renewal and any borrowings under it are repayable on demand.
Interest rate risk
The Group and company's interest rate exposure arises mainly from interest bearing borrowings. Contractual agreements entered into at floating rates expose the entity to cash flow risk while any fixed rate borrowings would expose the entity to fair value risk.
The tables below show the Group's financial assets and liabilities split by those bearing fixed and floating rates and those that are non-interest bearing.
22 FINANCIAL INSTRUMENTS (continued) Floating Non-interest Interest rate risk rate bearing Total GBP'000 GBP'000 GBP'000 ----------------------------- --------- ------------- -------- At 30 November 2015 Cash and cash equivalents 542 - 542 Trade and other receivables - 1,669 1,669 Assets held for sale 1 736 737 ----------------------------- --------- ------------- -------- 543 2,405 2,948 ============================= ========= ============= ======== Trade and other payables - 1,640 1,640 Deferred income - 1,934 1,934 Borrowings 94 - 94 Provisions - 60 60 Liabilities associated with assets held for sale - 1,355 1,355 94 4,989 5,083 ============================= ========= ============= ======== At 30 November 2014 Trade and other receivables - 2,366 2,366 Assets held for sale 1 58 59 ----------------------------- --------- ------------- -------- 1 2,424 2,425 ============================= ========= ============= ======== Current tax liabilities - 61 61 Trade and other payables - 2,543 2,543 Deferred income - 2,481 2,481 Borrowings 389 - 389 Provisions - 60 60 Liabilities associated with assets held for sale - 177 177 389 5,322 5,711 ============================= ========= ============= ========
The Group has derived a sensitivity analysis based on a 1% change in the floating interest rate:
2015 2014 GBP'000 GBP'000 -------------------------------------- -------- -------- Impact on equity and profit after tax 1% increase in base rate of interest (1) (4) 1% decrease in base rate of interest 1 4 -------------------------------------- -------- --------
The undiscounted contractual cash flows, including interest payments, are set out in the tables below.
UNDISCOUNTED CONTRACTUAL CASH FLOWS Between Between In less one two than and and one two five Group year years years Total GBP'000 GBP'000 GBP'000 GBP'000 --------------------------- -------- -------- -------- -------- Bank loans and overdrafts 72 30 - 102 Provisions 60 - - 60 Other liabilities 4,929 - - 4,929 At 30 November 2015 5,061 30 - 5,091 =========================== ======== ======== ======== ======== Bank loans 307 72 30 409 Provisions 60 - - 60 Other liabilities 5,262 - - 5,262 At 30 November 2014 5,629 72 30 5,731 =========================== ======== ======== ======== ======== 22 FINANCIAL INSTRUMENTS (continued) UNDISCOUNTED CONTRACTUAL CASH FLOWS Between Between In less one two than and and one two five Company year years years Total GBP'000 GBP'000 GBP'000 GBP'000 -------------------------- -------- -------- -------- -------- Bank loans 72 30 - 102 Other liabilities 7,776 - - 7,776 At 30 November 2015 7,848 30 - 7,878 ========================== ======== ======== ======== ======== Bank loans 307 72 30 409 Other liabilities 9,933 - - 9,933 At 30 November 2014 10,240 72 30 10,342 ========================== ======== ======== ======== ========
The terms, security and repayment information on these borrowings are given in note 18. Provisions and other liabilities are not interest bearing and are unsecured.
Foreign exchange risk
The Group and Company operates principally in the United Kingdom and as such the majority of the Group and Company's financial assets and liabilities are denominated in sterling and there is no material exposure to exchange risks.
The Group and Company does suffer some exposure to exchange risk as a proportion of its business is overseas. Where the Group and Company enters into significant contracts denominated in overseas currencies it is not currently the Group and Company's policy to mitigate exchange risk by entering into forward currency contracts. The Group and Company attempt to mitigate its exposure by offsetting liabilities against foreign currency receipts as far as is possible.
Credit risk
The Group's principal financial assets are cash and cash equivalents, trade and other receivables and accrued income which represent the Group's maximum exposure to credit risk in relation to financial assets.
The Group's credit risk primarily relates to trade and other receivables and accrued income. The amounts presented in the balance sheet are net of allowances for doubtful receivables, as estimated by the Group's management.
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The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
The following table provides analysis of trade receivables that were past due at 30 November, but not impaired. The Group believes that the balances are ultimately recoverable based on a review of past payment history and the current financial status of the customers.
Ageing of receivables past due but not impaired 2015 2014 GBP'000 GBP'000 ------------------------------------ -------- -------- 30-60 days 300 353 60-90 days 153 179 90-120 days 65 23 Greater than 120 days - - ------------------------------------ -------- -------- 518 555 ==================================== ======== ========
The Group's policy is that debt is payable within 30 days. The older debt above includes conferences and subscription renewals, which have been billed in advance of delivery so some payments may be delayed by customers.
Movement in the provision for impairment for trade receivables:
2015 2014 GBP'000 GBP'000 -------------------------------------- -------- -------- Opening balance at 1 December (158) (97) Provision for receivables impairment charged (90) (61) Receivables written off during the - - year Closing balance at 30 November (248) (158) ====================================== ======== ========
Fair value
The Directors consider that the fair values of the Group's financial instruments do not significantly differ from their book values.
23 SHARE CAPITAL
The Company does not have an authorised share capital in either year.
Allotted, issued and fully paid: 2015 2014 Ordinary Ordinary shares shares GBP'000 GBP'000 ---------------------------------- --------- --------- As at 1 December 4,076 4,068 Issue of share capital - 8 As at 30 November 4,076 4,076 ================================== ========= =========
A reconciliation of the movements in issued ordinary share capital is as follows:
Number Total Share of shares share price capital at issue Number GBP'000 Pence ---------------- -------------------- ------------ --------- ---------- At 1 December 2013 406,781,838 4,068 29 September Share issue at 1.0 2014 pence per share 808,957 8 3.62p At 30 November 2014 407,590,795 4,076 At 30 November 2015 407,590,795 4,076 ====================================== ============ ========= ==========
The share issue on 29 September 2014 related to the exercise of share options by various employees. There have been no shares issued since the year end.
24 RESERVES
The reserve for own shares relates to the employee Share Incentive Plan (note 28a) under which the Group owns 1,465,391 shares (2014: 1,712,938 shares).
25 NON-CONTROLLING INTEREST
The Group's non-controlling interest in both 2015 and 2014 was composed entirely of equity interests and represents the non-controlling interest of 30% in iGaming Business Limited.
26 BUSINESS COMBINATIONS
As described in note 9, on 28 January 2015, the Group disposed of Radcliffe Solutions Ltd ("RSL") and on 19 June 2015, the Group disposed of the Radcliffe Publishing business ("RP"). The contractual effective date of the disposal, and the date on which control over the business passed to the buyer was 31 May 2015. Details of the assets and liabilities disposed of, and the calculation of the profit and loss on disposal are given in the table below.
2015 2015 2015 GBP'000 GBP'000 GBP'000 RSL RP Total ------------------------------- -------- -------- -------- Non-current assets Goodwill - 319 319 Intangible assets - 502 502 Property, plant and equipment 5 - 5 Current assets Inventories - 412 412 Other debtors 29 - 29 Current liabilities Other payables (33) (5) (38) Deferred income (49) (75) (124) --------------------------------- -------- -------- -------- Net (liabilities) / assets disposed of (48) 1,153 1,105 Profit / (loss) on disposal included in discontinued operations 169 (196) (27) --------------------------------- -------- -------- -------- Consideration received 121 957 1,078 ================================= ======== ======== ======== 27 ANALYSIS OF CHANGES IN NET (DEBT) / CASH Group At 1 December Cash flow Non-cash At 30 2014 changes November 2015 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------- -------------- ---------- --------- ---------- Cash at bank and in hand - 542 - 542 Overdraft (2) 2 - - Classified as held for sale (1) 2 - 1 --------------------------- -------------- ---------- --------- ---------- Cash and cash equivalents (3) 546 - 543 Bank loans due within one year (292) 292 (66) (66) --------------------------- -------------- ---------- --------- ---------- Debt due within one year (292) 292 (66) (66) Bank loans due after one year (94) - 66 (28) Debt due after one year (94) - 66 (28) Net (debt) / cash (389) 838 - 449 =========================== ============== ========== ========= ==========
Non-cash changes represent reclassifications from due after one year to due within one year and recognition of overdraft positions where the right of set-off does not apply. The terms related to debt are set out in note 18.
28 SHARE BASED PAYMENTS
The Company has the following option or share ownership schemes and warrants in issue. All the schemes use the Monte Carlo valuation method with the exception of the Long Term Incentive Plan which uses the Black Scholes Method. The relevant inputs for each scheme have been outlined below:
2015 2014 ------------------ ------------------------- ---------------------------- Black Monte Carlo Black Scholes Monte Carlo Scholes ------------------ ----------- ------------ -------------- ------------ Expected life 3.00 - 3.00 - (years) 3.25 4.80 3.25 4.80 Risk free rate 4.8039 4.8039 (%) - 4.9315 3 - 4.9315 3 30.473 30.473 Volatility (%) - 31.1165 49.66 - 31.1165 49.66 Dividend yield (%) 0 0 0 0 Weighted average share price (p) 2.10 2.38 2.10 2.38 Weighted average exercise price (p) 1.00 1.50 1.00 1.50
The volatility of the Company's share price on each date of grant was calculated as the average of the standard deviations of daily continuously compounded returns on the stock of the Company, calculated back over a period commensurate with the expected life of the option. The risk-free rate used is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity equal to the expected life of the option. It was assumed that options would be exercised within two years of the date on which they vest. The number of options exercisable for each scheme at the year-end is based on the year end share price.
There have been no transactions with non-employees.
a Share Incentive Plan
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In September 2005, the Group introduced a Share Incentive Plan (SIP) and has run it in three further years (2006, 2007 and 2010). Under this plan the employees are eligible to acquire shares in the following ways:
-- Free Shares -- Partnership Shares -- Matching Shares
The Free shares were available to all eligible employees and the shares must be held in the trust for a minimum period of 3 years unless the employee leaves the Company, in which case the Free shares may either be forfeited or withdrawn from the Plan.
Partnership shares were available for purchase by employees at current market value. Employees could invest any amount from between GBP10 - GBP1,500 (or 10% of the employee's salary if lower). The Partnership shares were matched by the Matching shares on a 1 for 1 basis in 2010 (2 for 1 basis in 2006 and 2005).
The Partnership and Matching shares must be held in the Trust for a minimum of 3 years unless the employee leaves the Company in which case the Free shares may either be forfeited or withdrawn from the Plan. All of the shares were purchased at fair value in the market and the cash cost of the Partnership shares was expensed in the year of issue. The total fair value of the options granted in the year was GBPnil (2014: GBPnil).
2015 2014 Number Weighted Number Weighted of options average of options average exercise exercise price price ------------------------------ ------------ ---------- ------------ ---------- Outstanding at the beginning of the period 684,925 6.75 967,282 6.79 Withdrawn during the period (65,176) 5.46 (282,357) 6.88 Outstanding at the end of the period 619,749 6.89 684,925 6.75 ============================== ============ ========== ============ ========== Exercisable at the end of the period 619,749 6.89 684,925 6.75 ============================== ============ ========== ============ ==========
The weighted average remaining contractual life of share options outstanding at the end of the period was 3 years (2014: 3 years). The exercise price of the outstanding options ranges from 4.75 - 10.37 pence, but was paid at the outset on these options and nothing will be receivable by the Group.
b Long Term Incentive Plan
In November 2007, the Group introduced a Long Term Incentive Plan ('LTIP'), under which at that time 14 members of senior management were granted a maximum of 5,658,824 share options dependent on performance criteria. The options, all with an exercise price of 1 pence, vested in February 2010 as the performance criteria of the Company achieving an average of at least 15% annualised adjusted earnings per share growth over the three years to November 2009 was met, although the maximum criteria which required growth of 25% per year was not. There were no movements during the year and 969,174 of the vested options remain at 30 November 2015 (2014: 969,174). The weighted average remaining contractual life of these options is 2 years (2014: 3 years).
In 2010 a new LTIP scheme was launched in two parts, a Profit Growth Plan ('PGP') and a Share Price Growth Scheme ('SPGS').
28 SHARE BASED PAYMENT (continued)
Under the PGP, 8 members of senior management were granted a maximum of 9,650,000 options in April 2010 to acquire shares in the Company at nominal value under a new 2010 Company Share Option Plan ("2010 Plan"). The scheme was subject to performance conditions relating to the growth in adjusted operating profit (note 5) in the business unit for which the participant was responsible over the two years to 30th November 2011 or, in the case of Directors, the Group as a whole. Vesting rights in these options accrued if profit growth exceeded certain minimum growth thresholds that were set for each individual business unit and ranged from 3% to 8% per annum. The number of shares that have vested under the Profit Growth Plan is 1,500,000 (2014: 1,500,000) and relate to one individual only. There were no movements during the year and the weighted average remaining contractual life of these options is 4 years (2014: 4 years).
2015 2014 Number Weighted Number Weighted of options average of options average exercise exercise price price ------------------------------ ------------ ---------- ------------- ---------- Outstanding at the beginning of the period 2,469,174 1.00 15,407,731 1.00 Forfeited during the period - 1.00 (12,209,600) 1.00 Exercised during the - - (728,957) - period Expired during the period - - - - Outstanding at the end of the period 2,469,174 1.00 2,469,174 1.00 ============================== ============ ========== ============= ========== Exercisable at the end of the period 2,469,174 1.00 2,469,174 1.00 ============================== ============ ========== ============= ==========
The weighted average remaining contractual life of share options outstanding at the end of the period was 3 years (2014: 4 years). For all share options outstanding at the year end the exercise price was 1.0p
c Enterprise Management Incentive Scheme
These options were awarded to key members of management and staff and are exercisable, subject to various trigger price restriction, at any time between the third and tenth anniversaries of the date of grant. During 2014, 790,000 options were forfeited and 80,000 options were exercised. There were no remaining options at 30 November 2014 or 30 November 2015.
2015 2014 Weighted Weighted average average Number exercise Number exercise of options price of options price ------------------------------ ------------- ----------- ------------ ---------- Outstanding at the beginning of the period - - 870,000 3.01 Forfeited during the period - - (790,000) 3.22 Exercised during the period - - (80,000) 1.00 Outstanding at the end - - - - of the period ============================== ============= =========== ============ ========== Exercisable at the end - - - - of the period ============================== ============= =========== ============ ========== d The 2013 Award
In December 2013, the Group made a new award of share options ("2013 Award"). Options were granted to the two Executive Directors, the non-Executive Chairman and two other members of management. Options under this plan are exercisable at the 2012 placing price of 1.5p and will vest according to a scale if the Company's average share price, over any four-month period after the date of grant, exceeds a target share price. The target share price is 3.5p for 27.1% of the options, 5.0p for 20.8% of the options, 6p for 13.0% of the options, 7p for 13.0% of the options, 8p for 13.0% of the options and 9p for the remaining 13.0% of the options. A maximum of 78,090,157 ordinary shares may be issued under the 2013 Award. Where individual options have vested, up to 10% of the vested shares may be exercised from 12 months following vesting, up to 20% from two years and up to 30% from three years. Subject to the vesting conditions, unexercised options may be exercised from September 2018 until they expire in September 2022.
2014 2013 Number Weighted Number Weighted of options average of options average exercise exercise price price ------------------------------ ------------ ---------- ------------ ---------- Outstanding at the beginning of the period 75,513,182 1.5 - - Options granted during the period - 1.5 78,090,157 1.5 Forfeited during the period - 1.5 (2,576,975) 1.5 Outstanding at the end of the period 75,513,182 1.5 75,513,182 1.5 ============================== ============ ========== ============ ========== Exercisable at the end of the period 2,044,306 1.5 - 1.5 ============================== ============ ========== ============ ==========
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April 06, 2016 02:00 ET (06:00 GMT)
The weighted average remaining contractual life of share options outstanding at the end of the period was 7 years (2014: 8 years). The exercise price of the outstanding options is 1.5p.
29 COMMITMENTS UNDER OPERATING LEASES
The minimum lease payments under non-cancellable operating lease rentals are in aggregate as follows:
Land and buildings Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------------- -------- -------- -------- -------- Within one year 69 19 69 19 Between two and five years - - - - 69 19 69 19 ============================ ======== ======== ======== ========
Operating lease payments represent rentals payable by the Group for its office properties. Leases are negotiated for an average term, excluding break clauses, of 1 year (2014: 1 year) and rentals are fixed for an average of 1 year (2014: 1 year).
Plant and machinery Group Company 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------------- -------- -------- -------- -------- Within one year 4 4 4 4 Between two and five years 2 6 2 6 6 10 6 10 ============================ ======== ======== ======== ========
Operating lease payments represent rentals payable by the Group for printers and copiers. Leases are negotiated for an average term, excluding break clauses, of 3 years (2014: 3 years) and rentals are fixed for an average of 3 years (2014: 3 years).
30 POST BALANCE SHEET EVENTS
As described in note 9, on 4 January 2016, the Group's 70% interest in iGaming Business Ltd was disposed of for cash consideration of GBP13,797,000 plus an adjustment for net working capital which will be determined at a later date. At the balance sheet date, the assets and liabilities of iGaming Business Ltd have been classified as held for sale. As a result of the disposal, a contract between iGaming Business Ltd and SBG Companies Ltd, whereby SBG Companies Ltd provided support to iGaming Business Ltd in return for a share of revenues has been terminated for no consideration as SBG Companies Ltd is no longer in a position to fulfil its contractual obligations.
31 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
There are no capital commitments at the balance sheet date (2014: GBPnil).
32 RELATED PARTY TRANSACTIONS
Group related party balances held at November 2015 and 2014 are unsecured.
Subsidiaries
Its 70% (2014: 70%) owned subsidiary, iGaming Business Ltd, is owed by other Group undertakings GBP7,774,000 (2014: GBP5,765,000) and owes GBP6,078,000 at 30 November 2015 (2014: GBP4,678,000), including debt due from the Company of GBP6,078,000 (2014: GBP5,227,000), after being charged costs and allocated staff time in the year of GBP1,157,000 (2014: GBP1,341,000).
Advisory Services
From time to time, the Board receives financial advice from Trillium Partners Limited ("Trillium Partners"). Trillium Partners is a specialist media advisory firm, in which voting control of 50.0% (2014: 45.0%) is held by Stephen Routledge, a non-executive Director of Electric Word, and as such is a related party. The total fee charged in 2015 for advice is GBPnil (2014: GBP6,000). As set out in the 18 December 2015 shareholder circular, the Group was charged fees of GBP480,000 in January 2016 in connection with the disposal of iGaming Business Ltd as disclosed in note 30. The Directors (other than Stephen Routledge) having consulted with Panmure Gordon (UK) Limited, its nominated adviser, considered that the fees payable to Trillium Partners were fair and reasonable.
32 RELATED PARTY TRANSACTIONS (continued)
Company
The table below sets out the transactions and balances with other group undertakings:
Balance Transactions in year Receivable Income / (expenditure) / (payable) 2015 2014 2015 2014 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------------- -------- -------- ------------ ----------- iGaming Business Limited (1,696) (5,227) 3,531 (674) Incentive Plus Limited - (14) 14 (475) Speechmark Publishing Limited (939) (3,917) 2,978 (1,244) Optimus Professional Publishing Limited 3,220 2,891 329 1,441 P2P Publishing Limited (9) 33 (42) 305 SBG Companies Limited (4,402) 785 (5,187) (754) Radcliffe Publishing Limited - 2,597 (2,597) 522 Radcliffe Solutions Limited - - - (662) Electric Word Employee Benefit Trust 171 171 - - -------- -------- (3,655) (2,681) -------- --------
The nature of the transactions with group undertakings comprises salary recharges, recharges of various trading activities, and cash draw downs. All intra-group balances are payable on demand and non-interest bearing.
Key management personnel
For details of related party transactions with key management personnel see the Remuneration Report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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April 06, 2016 02:00 ET (06:00 GMT)
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