TIDMILX
RNS Number : 5168H
ILX Group PLC
20 June 2013
ILX Group plc
Unaudited further Interim Report for the six months ended 31
March 2013
Key highlights of the six months to 31 March 2013
-- The in-depth business review and restructure delivered
significant operating cost reductions during the period
-- Two complementary consultancy businesses were integrated into
the Group between December 2012 and 31 March 2013. One was acquired
and the other was formed during the year
-- The www.prince2.com domain continues to be a market leading
asset for the ILX Group plc training business
-- Recruiting commenced to hire strong field sales staff to bolster the sales team
Financial Summary for the six months ended 31 March 2013 versus
six months ended 31 March 2012:
-- Group revenue GBP7.5 million (2012: GBP7.6 million) (Note a)
-- Adjusted profit before tax GBP0.7 million (2012: GBP0.5 million) (Note c)
-- Gross Profit GBP2.5 million (2012: GBP3.1 million)
-- Total comprehensive income GBP0.2 million (2012: profit GBP0.4 million) (Note d)
-- Finance costs fell to GBP0.1 million (2012: GBP0.2 million)
-- Net debt reduced to GBP1.8million (2012: GBP2.9 million)
-- A further GBP0.4 million cash invested in the business by
Praxis Trustees during the six month period (Note b)
Financial Summary for the twelve months ended 31 March 2013
versus twelve months ended 31 March 2012:
-- Group revenue steady at GBP13.5 million (2012: GBP13.5 million) (Note a)
-- Core training business revenue GBP12.6 million (2012: GBP13.5 million)
-- Revenues from new consulting division GBP0.9 million (2012: GBPnil)
-- Adjusted profit before tax GBP0.4 million (2012: GBP0.6 million) (Note c)
-- Gross Profit GBP5.1 million ((2012: GBP6.1 million)
-- Total comprehensive loss GBP2.0 million (2012: profit GBP0.6 million) (Note d)
-- Finance costs fell to GBP0.1 million (2012: GBP0.4 million)
-- Net debt reduced to GBP1.8m (2012: GBP2.9m)
-- GBP1.6 million cash invested in the business by Praxis
Trustees during the twelve month period (Note b)
Operational Summary of the last six months to 31 March 2013
-- An experienced change management team is in place to identify
and execute operational improvements
-- Targeted operational initiatives are in place to improve the business processes
-- Operating headcount reduced to 68 FTE (2012: averaged 87 FTE)
mainly through elimination of back office resource
-- Four different sales (CRM) systems are to be eliminated to
consolidate sales and marketing activity on one unified group sales
platform
-- Further controls have been identified to protect product margins
Notes:
a) Including GBP0.9 million of consulting revenue arising from the new consultancy division
b) Including an equity investment of GBP1.2 million in August
2012 and a convertible loan of GBP0.4 million in December 2012.
Refer to note 5 to the unaudited financial results.
c) Before restructuring charge GBP0.5 million. Refer to Note 6
to the unaudited financial results. GBP1.9 million was provided in
the six months to 30 September 2012.
d) After restructuring charge GBP0.5million. GBP1.9 million was
provided in the six months to 30 September 2012.
Wayne Bos, Executive Chairman, ILX Group plc, commented:
"In my statement for the six months ended 30 September 2012 I
said we would act swiftly to reduce overheads and improve operating
performance. During the last six months our actions have yielded
reductions in the operating costs of the training business and
further steps are in place which we hope will improve the
efficiency of our product delivery to better serve the
extraordinary customer base that the group has built. The wealth of
experience in the Group's training business and its extensive range
of digital products provides a platform to build our relationship
with these customers.
In addition, despite continuing pressure on training business
revenues from external price competition and industry macro
factors, we have held revenues steady by creating a new consultancy
division with a view to capitalising on the contacts and experience
available to the Group. Following the example of our new
consultancy division, I believe that there is an opportunity to
increase the scope and scale of the Group through acquisition.
Restructuring costs have been greater than was initially
estimated. Consequently the full benefit of the reductions in
operating costs will not be reflected until the new financial
year."
20 June 2013
For further information please contact:
ILX Group plc 020 7371 4444
John McIntosh
SPARK Advisory Partners Limited
(Nominated Advisor)
Mark Brady 020 3368 3551
Neil Baldwin 020 3368 3554
Unaudited Interim Report for the six months ended 31 March
2013
Chairman's statement
In my statement for the six months ended 30 September 2012 I
said we would act swiftly to reduce overheads and improve operating
performance. During the last six months our actions have yielded
reductions in the operating costs of the training business and
further steps are in place which we hope will improve the
efficiency of our product delivery to better serve the
extraordinary customer base that the group has built. The wealth of
experience in the Group's training business and its extensive range
of digital products provides a platform to build our relationship
with these customers.
In addition, despite continuing pressure on training business
revenues from external price competition and industry macro
factors, we have held revenues steady by creating a new consultancy
division with a view to capitalising on the contacts and experience
available to the Group. Following the example of our new
consultancy division, I believe that there is an opportunity to
increase the scope and scale of the Group through acquisition.
Restructuring costs have been greater than was initially
estimated. Consequently the full benefit of the reductions in
operating costs will not be reflected until the new financial
year."
Strategy and delivery
Our strategic focus during the period has remained exploring and
developing of the group's capabilities in areas which the Board
believes will afford good growth opportunities. This has included
evaluating a number of potential acquisitions.
We continue to manage overheads tightly in response to
challenging macro-economic conditions. Our marketing review is
revealing valuable insights into our target markets and product
offering (brand hierarchy, pricing and positioning) which will
enable us to prioritise and refocus our marketing activities. We
continue to focus on operational improvement and development of a
broader product portfolio. Further updates on this will appear in
the next set of financial statements.
Board Changes
During the six months to 31 March 2013 the board was further
restructured to ensure the right team are focused on the right
areas. As previously announced Ken Scott (CEO), Jon Pickles (CFO),
Eddie Kilkelly (COO), and Paul Virik and Damien Lane, both
non--executive directors, have all stepped down from the board. As
announced on 18 April 2013 Donald Stewart joined the business as a
non-executive director and, on 3 June, joined the executive team,
as General Counsel. In addition, on 6 June 2013 John McIntosh was
appointed Finance Director. Paul Lever remains a non-executive
Director.
Restructuring
We have achieved material cost reductions in each functional
business area. The business processes and related staffing levels
were analysed and actions taken to bring costs into line with the
businesses objectives. In order to implement these changes rapidly,
we have provided for a further GBP0.5 million of additional
restructuring costs over and above the provisions announced within
the interim results for the period to 30 September 2012. As a
result of the restructuring actions, operating headcount in the
training business has reduced to 65 FTE from an average 87 FTE for
the 12 months to 31 March 2012.
In order to illustrate these changes on a consistent basis we
have recalculated the gross profit as presented in the results for
the six months and the twelve months to 31 March 2012. The effect
of this has been to move certain sales related costs, including
administrative and technical staff costs and shipping costs, from
administrative and distribution expenses to cost of sales. Refer to
note 1 of the notes to the unaudited financial statements to 31
March 2013.
Financial Results
Operating performance from continuing operations
For the six months to 31 March 2013 the Group delivered revenues
of GBP7.5 million (2012: GBP7.6 million). Gross margins across the
training business were 33% (restated 2012: 41%). Operating profit
was GBP0.7 million (2012: GBP0.7 million) principally as a result
of reduced overhead costs offsetting lower than expected sales
through the six months to 31 March 2013.
Cost reductions
Headway has been made toward reducing operating costs across the
core training business. In the six months to 31 March 2013,
following a root and branch review, operating costs were GBP0.8
million lower than in the previous six months reporting period.
Understanding what drives the e-learning revenue of the business is
a significant part of the ongoing review to strengthen the
performance of the core business, and further effort will be
directed towards this objective. To further preserve cash the group
will continue with its current dividend policy and, consequently,
no dividend is anticipated for the forseeable future.
Profit before tax
Profit before tax for the period was GBP0.7 million (2012:
GBP0.5 million).
Finance costs
The Group incurred finance costs of GBP0.1 million (2012: GBP0.2
million) during the period. Much of this improvement resulted from
the investment provided during the period by Praxis Trustees
providing aggregate cash inflow of GBP1.6 million to the Group.
This investment reduced the Group's net debt as announced in the
interim resultsfor the period to 30 September 2012.
Taxation
The tax charge for the period was GBP0.06 million (2012: GBP0.1
million), representing 8% of profit before tax (2012: 16%
annualised). The Group continues to benefit where possible from tax
credits available in the UK arising from qualifying research and
development.
Profit for the period and earnings per share
Profit for the period attributable to equity shareholders was
GBP0.1 million (2012: GBP0.4 million). Earnings per share (basic)
was 0.35p (2012: 1.47p).
Going Concern
The Group has prepared the accounts on a going concern basis and
based on current forecasts for the period through June 2014, the
Group will meet its day-to-day working capital requirements from
operating cash flows and its existing banking facilities.
Cash flow, net debt and facilities
Cash flow
Cash generated from continuing operating activities was GBP1.1
million (2012: GBP0.5 million). The Group continues to generate
operating cash flow from its e-commerce and cash sales and from
advance payments from customers. During the period restructuring
costs have represented a significant proportion of the company
operating cash outflow. It is hoped that the restructuring
investment will have a positive effect on future cash flow when
cost savings are fully realised.
The Group paid out GBP0.1 million in corporation tax during the
period (2012: GBP0.3 million).
The Group continued to invest in its product range and also
incurred capital expenditure in the period relating to updates of
systems and equipment.
Net debt and facilities
The Group reduced its net debt by GBP1.1 million compared with
the period to 31 March 2012, from both positive cash flow from
operations and the proceeds of Praxis Trustees' investment. At the
balance sheet date the Group's debt comprised GBP0.7 million in by
way of a fixed term facility, GBP0.7m by way of a revolving debt
facility and GBP0.4m due to Praxis Trustees.
Of the facilities drawn at the balance sheet date, the term loan
is expected to be repaid in full by the quarterly term loan
repayments. At the balance sheet date GBP0.3m of the revolving
facility remained undrawn.
Net debt at the period end, defined as all bank debt, less cash
at bank, was GBP0.8 million (2012: GBP2.2 million). This comprised:
GBP1.8 million in bank facilities drawn and convertible loans less
GBP1.0 million in cash balances. The Group remains within the terms
of all its banking covenants.
Dividend
As noted above, in order to preserve the Group's cash resources
the Board does not recommend a dividend for the interim period
ended 31 March 2013.
Post balance sheet events
Launch of training rooms at the Group's own office
During May 2013 the first training classes took place at the
Group's new offices in the Strand, London. The opening of these
training rooms provides two anticipated benefits: improved product
margin, as the cost of hiring expensive, third party serviced
training rooms is avoided; and, closer direct contact with our
customers, with whom we hope to develop greater insight into their
needs and how we can improve our offering.
New statutory reporting date
The next set of results will be the statutory results for the
fifteen months to 30 June 2013. This interim report marks the last
reporting period to 31 March. Our reporting for the new financial
year begins 1 July 2013 with the new financial year ending on 30
June 2014.
Appointment of Directors
As noted above on 18 April 2013 Donald Stewart joined the
business as a non-executive director and, on 3 June, became an
executive director. In addition, on 6 June 2013 John McIntosh was
appointed Finance Director.
Business Review
New management team
A new executive management team was introduced. The team is made
up of highly capable change managers with strong combined
experience of business development, sales and digital
transformation, cost reduction, training, mergers and acquisitions
and the public company environment.
Review of Divisions
The Group measures the operating performance of the business
through monthly financial reports on the Training and Consulting
divisions. Each division is further analysed by entity. There are
four reporting entities in the Training business covering the
territories:
UK (plus other international), Australia, New Zealand and UAE.
In the Consulting division the two entities are Obrar Limited
("Obrar") and ILX Consulting pty Ltd ("ILXC") both of which are
able to service international business.
The Training Business
UK (including web sales and other international business)
During the twelve month period to 31 March 2013 the group's
business in the UK has suffered from the contraction of revenue,
with the majority of the reduction occurring in the last few weeks
of the period. Since the period end significant contract wins
include: a large educational establishment; a US based power
company, and a major construction business.
The Group is looking to the US market as a source of future
opportunities and has achieved some sales success there. Efforts to
establish markets in Europe have been hampered by recruitment and
language conversion costs. Consequently resource will, in future,
be targeted towards territories where the training business can
leverage most from its existing products/skills.
As part of a continuing in-depth review the Group is performing
a review of its product portfolio and development capability. This
includes a review of the associated accounting treatment of
development costs.
APAC (Asia Pacific - located in Sydney, Australia with a sales
presence in New Zealand)
The opportunities to improve the financial performance of the
group's business in the region are currently being reviewed.
UAE (based in Dubai)
This division will complete its first full year of operation in
June 2013. During its first six months the small team delivered
strong revenues, despite the significant barriers to entry, through
creating a start-up and accessing tenders within the territory.
New Consulting Division
This division comprises Obrar and ILXC which brought in a
combined GBP0.9 million revenue (2012: GBPnil) between December
2012 and 31 March 2013. Obrar, which is located in the UK, has
managed and implemented large contact centre technical and
operational projects during the period. ILXC has been created to
forge a new revenue stream in project and program management to
help corporate clients and information technology organisations
with service and supply chain, improve, develop organisational
efficiency to compliment that already provided by its sister
company, ILX Group Pty Ltd, which is based in the region. The
potential growth in this consultancy division is complementary with
the current strategy for growth in training, services and
technology.
Website
Direct web sales are made on the following three sites:
www.prince2.com, which is the number one organically ranked site
on Google for Prince2 training.
www.ilxgroup.com
www.itiltraining.com
The existing websites and links have historically been consumer
orientated. A new website front is currently being designed which
we hope will strengthen the online performance of the core training
business. Analysis has revealed that, although there is a large
amount of traffic to the sites, the Group's conversion ratio is
low. A redesign is underway is currently scheduled to go live in
July 2013.
Marketing
In addition to the web traffic analysis we have undertaken a
complete review of our online sales and marketing performance. This
has enabled the team to get a deeper insight into our performance
across our consumer and corporate sales channels, to identify
trends and put in place activities which we hope will increase
sales. Historically the majority of the marketing activity had been
focused on consumers and existing corporate customers only.
A digital marketing executive has been brought on-board to
implement the actions identified with the intention of improving
the website performance. Sales team recruitment is also underway to
support the activities noted above and bolster the current sales
team.
CRM Tools
To date the group has been using four different CRM systems to
register sales opportunities and direct marketing activity. This
has made corporate marketing a more difficult task than should be
the case. Consequently a new unified system has been identified and
is currently being introduced which is expected to result in
improved marketing efficiencies..
PMI PMP Product
The development of PMI PMP, in conjunction with existing
product, provides the group with the opportunity to enter the North
American market. This product is now live and is an addition to our
product training portfolio.
New Centralised Office
The group is now headquartered at 138-142 The Strand, London.
This central London location was chosen in preference to the
group's previous offices on Hammersmith Road in West London as it
better suits the overall needs of the business and the new offices
can accommodate training courses with marginal incremental costs to
the business. The former offices are to be sublet for the remainder
of the term at the prevailing market rate.
Change of advisors/service suppliers
The group has changed certain of its advisors/service suppliers
during the period. The reasons for this were a mix of service
quality and cost. In each case the decision to appoint a new
advisor or service supplier was arrived at after careful
consideration of the costs and benefits of change.
Acquisitions
We continue to review acquisition opportunities as they arise to
capitalise on the Group's capabilities in areas which the Board
believes will afford growth opportunities. As noted above two
consulting businesses have been brought into the group between
December 2012 and 31 March 2013. The Board will continue to
consider and evaluate new opportunities to give the group increased
scope and scale whilst continuing the theme of project management,
training, consulting and services.
As a result of the efforts of many people involved in the
business during the latter half of the twelve month period to 31
March 2013, we are now further into the restructuring project. This
remains work in progress while the remainder of the work is
ongoing. A further update will be provided within the statutory
results for the fifteen months to 30 June 2013.
Wayne Bos, Executive Chairman
20 June 2013
Independent review report to the members of ILX Group Plc.
Introduction
We have reviewed the condensed set of financial statements in
the half-yearly financial report of ILX Group Plc. for the six
months ended 31 March 2013 which comprises the consolidated, the
consolidated statement of comprehensive income, the consolidated
statement of financial position, the consolidated cash flow
statement and the consolidated statement of changes in equity. We
have read the other information contained in the half yearly
financial report, which comprises the Chairman's statement and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company's members, as a body,
in accordance with International Standard on Review Engagements (UK
and Ireland) 2410, 'Review of Interim Financial Information
performed by the Independent Auditor of the Entity'. Our review
work has been undertaken so that we might state to the company's
members those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a
body, for our review work, for this report, or for the conclusion
we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The AIM rules of the London
Stock Exchange require that the accounting policies and
presentation applied to the financial information in the
half-yearly financial report are consistent with those which will
be adopted in the annual accounts having regard to the accounting
standards applicable for such accounts.
As disclosed in Note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The financial information in the half-yearly
financial report has been prepared in accordance with the basis of
preparation in Note 1.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the financial information in the half-yearly financial report based
on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the financial information in the
half-yearly financial report for the six months ended 31 March 2013
is not prepared, in all material respects, in accordance with the
basis of accounting described in Note 1.
GRANT THORNTON UK LLP
AUDITOR
London
20 June 2013
Unaudited Consolidated Statement of Comprehensive Income
For the six months ended 31 March 2013
Six months Six months Twelve Twelve
Ended Ended months months
31.3.2013 31.3.2012 ended ended
restated 31.3.2013 31.3.2012
restated
Notes Unaudited Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 7,480 7,567 13,493 13,473
Cost of sales (4,975) (4,440) (8,407) (7,414)
----------- ----------- ----------- -----------
Gross profit 1 2,505 3,127 5,086 6,059
Administrative and distribution
expenses (1,764) (2,406) (4,587) (5,076)
----------- ----------- ----------- -----------
Operating profit 741 721 499 983
Finance income - 4 - 4
Finance costs (53) (218) (116) (365)
----------- ----------- ----------- -----------
Profit before tax from continuing
operations 688 507 383 622
Tax expense (60) (101) (61) (101)
----------- ----------- ----------- -----------
Profit for the year from continuing
operations 628 406 322 521
Restructuring costs 6 (495) - (2,412) -
----------- ----------- ----------- -----------
Profit / (loss) for the period
attributable to equity shareholders 133 406 (2,090) 521
Other comprehensive income 52 19 55 34
----------- ----------- ----------- -----------
Total comprehensive income / (loss) 185 425 (2,035) 555
=========== =========== =========== ===========
Earnings / (loss) per share 9
From continuing operations:
Basic 0.35p 1.47p (5.92p) 1.91p
Diluted 0.33p 1.41p (5.92p) 1.83p
Unaudited Consolidated Statement of Financial Position
As at 31 March 2013
As at As at
31.3.2013 31.3.2012
Unaudited Audited
Assets Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment 149 194
Intangible assets 2 9,701 9,804
Total non-current assets 9,850 9,998
----------- -----------
Current assets
Trade and other receivables 3,015 3,266
Cash and cash equivalents 970 638
----------- -----------
Total current assets 3,985 3,904
Total assets 13,835 13,902
----------- -----------
Current liabilities
Trade and other payables (4,004) (3,410)
Contingent consideration (446) (28)
Provisions (503) -
Tax liabilities (839) (860)
Bank loans and overdrafts (1,707) (2,888)
----------- -----------
Total current liabilities (7,499) (7,186)
----------- -----------
Non-current liabilities
Contingent consideration (350) (28)
----------- -----------
Total non-current liabilities (350) (28)
----------- -----------
Total liabilities (7,849) (7,214)
=========== ===========
Net assets 5,986 6,688
=========== ===========
Equity
Issued share capital 3,993 2,759
Share premium 71 114
Other Reserve 75 -
Own shares in trust 7 (50) (1,881)
Share option reserve 154 427
Retained earnings 1,682 5,263
Exchange differences arising
on consolidation 61 6
----------- -----------
Total equity 5,986 6,688
=========== ===========
Unaudited Consolidated Cash Flow Statement
For the six months ended 31 March 2013
Six months Six months Twelve months Twelve months
ended ended ended ended
31.3.2013 31.3.2012 31.3.2013 31.3.2012
Unaudited Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000 GBP'000
Profit from continuing operations 741 721 493 983
Adjustments for:
Depreciation 219 100 264 137
Share option charge 25 56 67 113
Movement in trade and other receivables (91) (1,210) 1,012 (461)
Movement in trade and other payables 191 860 326 358
Exchange difference on consolidation 62 19 70 34
Cash generated from continuing
operating activities 1,147 546 2,232 1,164
Tax paid (80) (339) (195) (342)
----------- ----------- -------------- --------------
Net cash generated from continuing
operating activities 1,067 207 2,037 822
----------- ----------- -------------- --------------
Restructuring costs (539) - (761) -
Net cash used by discontinued
operating activities - 1 - (23)
----------- ----------- -------------- --------------
Net cash generated from operating
activities 528 208 1,276 799
----------- ----------- -------------- --------------
Investing activities
Interest received - 4 - 4
Purchases of property and equipment (20) (72) (41) (178)
Capitalised expenditure on product
development (82) (300) (248) (489)
Acquisition of subsidiaries (net
of cash acquired) (557) (23) (610) (23)
----------- ----------- -------------- --------------
Net cash used by investing activities (659) (391) (899) (686)
----------- ----------- -------------- --------------
Financing activities
Increase/(Decrease) in borrowings 765 787 (1,106) (263)
Net proceeds of share issue - - 1,191 -
Interest and refinancing costs
paid (48) (113) (130) (245)
Dividend paid - (232) - (232)
Net cash generated by (used) by
financing activities 717 442 (45) (740)
----------- ----------- -------------- --------------
Net change in cash and cash equivalents 586 259 332 (627)
Cash and cash equivalents at start
of period 384 379 638 1,265
Cash and cash equivalents at end
of period 970 638 970 638
=========== =========== ============== ==============
Unaudited Consolidated Changes in Equity
For the six months ended 31 March 2013
Called Own Exchange
up Share shares Share differences
share premium Other in option arising Retained
capital account reserve trust reserve on consolidation earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 March
2011 2,697 - - (1,852) 317 (28) 5,116 6,250
Profit for the period - - - - - - 521 521
Dividend paid - - - (29) - - (377) (406)
Options granted - - - - 113 - - 113
Options lapsed and
waived - - - - (3) - 3 -
Scrip issue 62 114 - - - - - 176
Other comprehensive
income:
Foreign currency
translation
adjustment - - - - - 34 - 34
--------- --------- --------- -------- --------- ------------------ ---------- --------
Balance at 31 March
2012 2,759 114 - (1,881) 427 6 5,263 6,688
Loss for the period - - - - - - (2,090) (2,090)
Equity instrument
of convertible debt - - 75 - - - - 75
Options granted - - - - 67 - - 67
Options exercised - - - 1,831 (315) - (1,516) -
Options lapsed and
waived - - - - (25) - 25 -
Share issue 1,234 - - - - - - 1,234
Costs relating to
share issue - (43) - - - - (43)
Other comprehensive
income:
Foreign currency
translation
adjustment - - - - - 55 - 55
--------- --------- --------- -------- --------- ------------------ ---------- --------
Balance at 31 March
2013 3,993 71 75 (50) 154 61 1,682 5,986
========= ========= ========= ======== ========= ================== ========== ========
Notes to the Unaudited Interim Report
For the six months ended 31 March 2013
1. The financial information contained in the Interim Report
does not constitute statutory accounts as defined by the Companies
Act 2006. The comparative unaudited figures for the year ended 31
March 2013 were derived from the statutory accounts for that year
which have been delivered to the Registrar of Companies.
Restatement
The Group has recalculated the gross profit measure within the
Training business as presented in the results for the six months to
31 March 2013 and the twelve months to 31 March 2012. The effect of
this has been to move certain sales related costs (including
administrative and technical staff costs and shipping costs) from
administrative and distribution expenses to cost of sales:
- for the six months to 31 March 2013 GBP464,000
- for the six months to 31 March 2012 GBP392,000
- for the twelve months to 31 March 2012 GBP1,570,000
- for the twelve months to 31 March 2012 GBP1,415,000
Nature of operations
The principal activity of ILX Group plc and its subsidiaries
(together 'the Group') is the provision of training and consulting
services.
Basis of preparation
These interim financial statements are for the six months ended
31 March 2013. They have been prepared in accordance with IFRSs as
adopted by the European Union. They do not include all of the
information required for full annual financial statements,
andshould be read in conjunction with ILX Group Plc's audited
financial statements for the year ended 31 March 2012. The
financial information for the period ended 31 March 2012 set out in
this interim report does not constitute statutory accounts as
defined in Section 435 of the Companies Act 2006. The Group's
statutory financial statements for the year ended 31 March 2012
have been filed with the Registrar of Companies and can be found on
the Group's website www.ilxgroup.com. The auditor's report on those
financial statements was unqualified and did not contain statements
under Section 498(2) or Section 498(3) of the Companies Act 2006.
These interim financial statements have been prepared under the
historical cost convention as modified by the revaluation of
derivative financial instruments. These interim financial
statements have been prepared in accordance with the accounting
policies detailed in the Group's financial statements for the year
ended 31 March 2012 except as documented herein. The accounting
policies have been applied consistently throughout the Group for
the purposes of preparation of these interim financial statements.
The interim financial statements are presented in Pounds Sterling
(GBP), which is also the functional currency of the Company.
These interim financial statements have been approved for issue
by the board of directors. It should be noted that accounting
estimates and assumptions are used in preparation of the interim
financial information. Although these estimates are based on
management's best knowledge and judgement of current events and
actions, actual results may ultimately differ from those estimates.
The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the
interim financial information, are set out in note 2 to the interim
financial information. In the future, actual experience may deviate
from these estimates and assumptions
Going concern
The Group meets its day-to-day working capital requirements from
its operating cash flows and from its revolving bank facility, of
which GBP0.35 million was undrawn at the balance sheet date. Based
on cash flow projections the Group considers the existing financing
facilities to be adequate to meet operating requirements through
June 2014.
The Group has an outstanding term loan from HSBC bank (GBP0.7
million as the balance sheet date), which is due to be repaid
during the next twelve months. The Directors have a reasonable
expectation that there are no material uncertainties that cast
significant doubt about the Group's ability to continue as a going
concern. Accordingly, the Group has prepared the interim financial
statements on a going concern basis.
2. The key estimates and judgements made by management are detailed below:
Goodwill
Goodwill is determined by comparing the amount paid, including
any deferred and contingent consideration, on the acquisition of a
subsidiary or associated undertaking and the group's share of the
aggregate fair value of its separable net assets. It is considered
to have an indefinite useful economic life as there are no legal,
regulatory, contractual, or other limitations on its life. Goodwill
is therefore capitalised and is subject to annual impairment
reviews in accordance with applicable accounting standards.
Twelve Twelve
months months ended
ended 31.3.2012
31.3.2013
Unaudited Audited
GBP'000 GBP'000
Other intangibles 1,664 2,674
Goodwill 8,037 7,130
----------- --------------
9,701 9,804
=========== ==============
Research and development
Research expenditure is written off to the statement of
comprehensive income in the year in which it is incurred. Costs
incurred on product development relating to the design and
development of new or enhanced products are capitalised as
intangible assets when it is probable that the development will
provide economic benefits, considering its commercial and
technological feasibility and the resources available for the
completion and marketing of the development, and where the costs
can be measured reliably. The expenditures capitalised are the
direct labour costs, which are managed and controlled centrally.
Other development costs are recognised as an expense as incurred.
Product development costs previously recognised as an expense are
not recognised as an asset in a subsequent period.
Change in accounting estimate
Capitalised product development expenditure is now considered to
have an economic life of ten years and is written off during the
economic life on a straight line basis. Previously, relevant
product development costs were recorded with an indefinite life,
which was subject to regular impairment reviews. To update the
policy and reflect the interpretation of IAS 38 the Group has
decided to adopt this new policy to more accurately reflect the
economic life of the product development investment.
3. Segmental analysis
The Group measures the operating performance of the business
through monthly financial reports on the Training and Consulting
divisions. Each division is further analysed by entity.
Segment profit or loss consists of earnings before interest,
tax, depreciation, amortisation, central overheads and other
adjusting items.
Six months Six months Twelve months Twelve months
ended ended ended ended
31.3.2013 31.3.2012 31.3.2013 31.3.2012
Revenue Profit Revenue Profit Revenue Profit Revenue Profit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Training division 6,548 1,781 7,567 1,943 12,561 2,863 13,473 3,400
Consulting division 932 53 - - 932 53 - -
Unallocated central
costs - (1,093) - (1,222) - (2,423) - (2,417)
-------- -------- -------- -------- -------- -------- -------- --------
Continuing operations 7,480 741 7,567 721 13,493 493 13,473 983
======== ======== ======== ========
Interest (53) (214) (116) (361)
-------- -------- -------- --------
Profit before tax
from continuing operations 688 507 377 647
Non-cash refinancing
charges - 139 - 139
Share option charges 25 55 67 113
Impairment charges - 60 - 60
-------- -------- -------- --------
Adjusted profit before
tax 713 701 444 959
======== ======== ======== ========
Revenue by geographic location
Six months Six months Twleve Twelve
ended ended months months
31.3.2013 31.3.2012 ended ended
Unaudited Unaudited 31.3.2013 31.3.2012
Unaudited Audited
GBP'000 GBP'000 GBP'000 GBP'000
UK & RoW 5,531 5,852 9,475 10,153
Australasia 1,580 1,312 3,210 2,502
Middle East 370 403 807 818
7,480 7,567 13,493 13,473
=========== =========== =========== ===========
4. Acquisition of Obrar Limited
The maximum contingent consideration payable for the acquisition
will be GBP1 million, plus working capital comprising an upfront
payment and earn-out to 31 March 2015. The acquisition has been
provisionally accounted forin the period as follows:
Obrar Limited GBP000s
Net assets 468
Consideration 1,409
Goodwill 941
5. Convertible Debt
Convertible loan notes are regarded as compound instruments,
consisting of a liability instrument and an equity
instrument. At the date of issue the fair value of the liability
component is estimated using the prevailing market interest rate
for similar non-convertible debt. The difference between the
proceeds of issue of the convertible loan note and the fair value
assigned to the liability component, representing the embedded
option to convert the liability into equity of the Group, is
included in equity. The portion relating to the equity component is
charged directly against equity. The interest expense of the
liability component is calculated by applying the effective
interest rate to the liability component of the instrument. The
difference between this amount and the interest paid is added to
the carrying amount of the convertible loan note.
On 17 December 2012 ILX Group plc entered into an agreement with
Praxis Trustees Limited ("Praxis Trustees"), a subsidiary of the
Praxis Group, to raise GBP400,000 by way of a five year convertible
loan. The loan note will be convertible into Ordinary Shares at a
price of 10 pence per Ordinary Share and have a one for one warrant
attached, exercisable at 10 pence per Ordinary Share, giving Praxis
the potential to subscribe for a total of up to 8 million new
Ordinary Shares.
The Loan Note conversion rights cannot be exercised until the
Company has all necessary authorities to enable conversion free
from pre-emption rights. Neither the Loan Note conversion rights
nor the warrants can be exercised unless either the exercising
party will not incur a City Code mandatory offer obligation or it
obtains a dispensation from such obligation.
6. Restructuring
An internal review of the business has identified several
opportunities to reduce costs that will translate into
profitability. The management team has also tightened up a number
of business processes and eliminated certain operating expenses and
capital expenditure that have demonstrated either insufficient
return or none at all. The result of this exercise is that a
further provision was made of GBP0.5million in the period to 31
March 2013. This is in addition to the restructuring provision made
in the period to 30 September 2012 (GBP0.8 million) and an
impairment of intangibles (GBP1.1 million)
Six months Six months Twelve months Twelve
ended ended ended months
31.3.2013 31.3.2012 31.3.2013 ended
Unaudited Unaudited Unaudited 31.3.2012
Audited
GBP'000 GBP'000 GBP'000 GBP'000
Restructuring costs incurred 617 - 760 -
Provision for further
restructuring costs (122) - 503 -
Impairment of intangibles - - 1,149 -
----------- ----------- -------------- -------------
495 - 2,412 -
=========== =========== ============== =============
7. Own Shares in Trust
This reserve records the purchase cost of shares administered by
Investec Trust Guernsey Ltd ("the Trust") which are held in the
Group's medium term incentive plan trust ("MTIP").
As at As at
31.3.2013 31.3.2012
Unaudited Audited Movement
GBP'000 GBP'000 GBP'000
MTIP (50) (1,881) 1,831
At 31 March 2012, the Company held 2,033,235 of its own ordinary
shares in the trust which represented 7.37% of the then total
called up share capital. During the period to 31 March 2013
1,984,004 shares were sold/transferred by the trust to satisfy
exercise of options. At 31 March 2013, the Company held 49,231 of
its own ordinary shares in the trust representing 0.001% of the
total called up capital.
The remaining shares will be utilised as required to satisfy
share options granted on vesting and exercise.
8. Related Parties
The Company has a related party relationship with its
subsidiaries, its Directors, and other employees of the Company
with management responsibility.
Related Party Transaction
The issue of a convertible loan and warrants to Praxis Trustees
(together the "Transaction") is classified as a related party
transaction for the purposes of the AIM Rules by virtue Praxis
Trustees being a substantial shareholder, as defined in the AIM
Rules, in the Company.
9. Earnings per share
Six Six Twleve Twelve
months months months months
ended ended ended ended
31.3.2013 31.3.2012 31.3.2013 31.3.2012
Unaudited Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000 GBP'000
Profit/(Loss) for the period attributable
to equity shareholders 139 406 (2,090) 521
=========== =========== =========== ===========
Weighted average shares 39,933,376 27,549,033 35,286,316 27,260,017
Outstanding share options 611,705 1,234,705 611,705 1,234,705
Convertible loan equity 4,000,000 0 4,000,000 0
Weighted average shares for diluted
earnings per share 44,545,081 28,783,738 39,898,021 28,494,722
=========== =========== =========== ===========
Basic (loss) / earnings per share 0.35p 1.47p (5.92p) 1.91p
Diluted (loss) / earnings per share 0.33p 1.41p (5.92p) 1.83p
Six Six Tweleve Tweleve
months months months months
ended ended ended ended
31.3.2013 31.3.2012 31.3.2013 31.3.2012
GBP'000 GBP'000 GBP'000 GBP'000
Adjusted profit before tax (see
note 5) 719 701 450 959
less notional tax at 26% (187) (182) (117) (249)
----------- ----------- ----------- -----------
Adjusted profit after tax 532 519 333 710
Adjusted earnings per share 1.33p 1.88p 0.94p 2.60p
Adjusted diluted earnings per share 1.21p 1.80p 0.86p 2.49p
Cash Interest
Shares raised Saved EPS
2002 Options: 115,000 75,450 GBP1,886 1.64p
2008 Zero Cost: 660,936 0 Nil N/a
2008 Other: 130,000 32,500 GBP813 0.63p
Convertible loan equity 4,000,000 0 GBP8,880 0.22p
Copies of these interim results will available from the group's
website, www.ilxgroup.com, where this announcement is also
reproduced.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EADKEAEXDEFF
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