Half-year Results

Wilmington plc, (LSE: WIL, 'Wilmington' or 'the Group') the provider of data, information, education and training services in the global Governance, Risk and Compliance (GRC) markets, today announces its half year results for the six months ended 31 December 2023 (H1 FY24).

Financial performance

Highlights

• Strong continuing and organic revenue growth, both up 7% - driven by strong demand in Training & Education and Financial Services in Intelligence division

§ Recurring revenue from continuing businesses up 11%, underpinned by strong retention rates

§ Repeat revenues, including recurring revenues of 36%, now 73% of continuing revenues (77% in FY23), due to billing timing

• Continuing adjusted profit before tax up 23% to £8.1m
• Dividend increased by 11% in line with profits
• Robust balance sheet - net cash[4] at 31 Dec 23 of £28.0m (31 Dec 22: £22.9m; 30 Jun 23: £42.2m)
• Continuing active portfolio management: acquisition of Astutis for £21.5m (Nov '23), disposal of MiExact for £9.6m (Jan '24) and initiated sale process of Healthcare business in Nov '23
• Significant progress made in establishing single Training and Education technology platform this financial year

Mark Milner, Chief Executive Officer, commented:

"H1 was another period of strong sustainable organic growth, both for revenue and profits as well as continued good cash generation, across all of our continuing businesses. We have a notably strong balance sheet which leaves us well placed to continue to invest across the business, in both organic and inorganic opportunities.

"We continue to actively manage our portfolio of businesses with one earnings enhancing acquisition and one disposal. We have also initiated a sale process for our Healthcare division, after a period of restructuring which put that business in a much stronger position.

"Our strategy is clear: to grow the business profitably across the rapidly expanding GRC landscape by a combination of acquisitions, which provide attractive returns on investment, and investing in our operations and infrastructure, as well as actively managing our portfolio in line with our required characteristics.

"Trading in the current financial year continues to be in line with expectations."

596/2014.

Overview

We have continued to deliver solid and sustainable organic revenue growth and double-digit profit improvement whilst also investing in our portfolio of businesses and infrastructure. Demand has been particularly strong in our Training & Education division and in Financial Services within our Intelligence division.

Continuing revenue was up 7% at £41.4m with organic revenue growth of 7%, after removing the impact of currency movements. Reported total Group revenue, including business sold and discontinued, was £59.1m (H1 FY23: £57.4m).

Recurring revenues from continuing businesses grew 11% with strong retention rates continuing, highlighting the resilience of the Group's business model. Recurring revenues represent 36% of total ongoing revenues (34% in H1 FY23). Repeat continuing revenues, including the recurring revenues from existing customers, made up 73% of our revenues in H1 FY24 (77% in FY23). This small reduction reflects the timing of billings, not a decrease of repeat business.

With further margin improvements in the Intelligence division, continuing adjusted profit before tax was up 23% to £8.1m (H1 FY23: £6.6m) and continuing adjusted basic earnings per share by 12% to 6.86p (H1 FY23: 6.10p).

Operating cash conversion remained strong at 92%, with net cash excluding lease liabilities of £28.0m (30 June 2023: £42.2m). Usual first half outflows of working capital will be offset by increased revenue collections in H2, when most subscriptions are billed and collected.

The Group acquired Astutis in November 2023 to deliver on our strategy to consolidate and strengthen our presence in the GRC market.

The interim dividend is being increased by 11% to 3.00p (H1 FY23: 2.70p), in line with continuing profits.

Strategic and operational progress

Our strategy is to grow revenues and profits organically in the large, growing and rapidly evolving GRC and Regulatory Compliance markets by investing in our business and actively managing our portfolio of brands.

We focus on actively managing our portfolio by assessing the potential of each business to exhibit the six common Wilmington characteristics that we recognise as key drivers of organic revenue growth and profitability improvement: a GRC focus operating in regulated markets, a differentiated offering, attractive markets, strong leadership, digital and data capabilities and a strong financial model exhibiting growth and strong profitability.

The acquisition of Astutis in November 2023 meets all six of these characteristics and brings continuing revenue and profit growth to the Group. The business has demonstrated a strong track record of organic growth over a number of years and strengthens our portfolio of GRC training and education solutions by expanding our capabilities into the attractive Health, Safety and Environmental markets. The acquisition is expected to be earnings enhancing in the first full year of ownership.

In January 2024, we have sold MiExact from our Intelligence division for £9.6m in cash as the business had been identified as not meeting the six characteristics. We have also decided to sell our Healthcare businesses for the same reason. The process for that disposal is well underway.

We intend to use our capital to acquire suitable GRC businesses to enhance and widen the Group's capabilities and rate of profitable growth to improve shareholder returns, although will continue to remain disciplined as valuation expectations remain high. We will continue to apply high levels of scrutiny in respect of target suitability and multiples paid.

We continue to invest in our priority ESG initiatives, as our responsible business strategy underpins the delivery of our broader strategic objectives.

Current trading and outlook

Trading in the current financial year continues to be in line with expectations.

Divisional review

Training & Education

Continuing revenues grew 8% organically. This was led by a strong performance in UK and Ireland where, in particular, Bond Solon in the Legal sector saw strong demand for its services. Repeat revenues increased to 72% (H1 FY23 - 71%) of the total.

North America grew at 8% when currency fluctuations are excluded, with growth in delegate attendance of events boosting revenues. In Global, growth was led by the European sales, which continued to see strong demand from the financial services market.

Organic operating profit increased by 7% as a result of organic revenue growth. Profit margins remain at 22% and are expected to increase in H2 when the majority of revenue in North America is delivered.

Statutory figures include a small contribution from Astutis for the first few weeks of ownership. In the 12-month period to 30 June 2023, Astutis reported unaudited revenues of £7.4m and profit before tax of £2.0m.

We have made significant progress in establishing a single Training and Education technology platform with the main project delivering this financial year.

Intelligence

Continuing revenues in the Intelligence division are now focussed on Financial Services, where growth has been maintained with continuing strong demand from customers, particularly in the Insurance sector.

Recurring revenues grew 11% and repeat revenues decreased to 73% of the total (H1 FY23 - 83%) due to billing timing (repeat revenues are measured on billing). Profit margins also improved as we continue to invest in automation.

Healthcare has been classified as a discontinued operation under IFRS 5 because it is in the process of being sold. MiExact has been sold but does not qualify as a discontinued operation under IFRS 5 because it does not meet the criteria of being a significant line of business.

The sale and identification for sale of lower margin businesses has resulted in a notable improvement in margins in the division.

Financial review

Other income and finance income

Other income represents a gain of £0.8m from the sale of a building (H1 FY23: £2.2m from the disposal of a subsidiary, Inese).

Net finance income of £0.8m (H1 FY23: £0.0m) was achieved due to having no debt and cash to deposit in interest-bearing accounts.

Profit before taxation

Continuing adjusted profit before tax was up 23% to £8.1m (H1 FY23: £6.6m) with statutory continuing profit before tax of £8.1m (H1 FY23: £8.8m).

Taxation

The underlying tax rate[5], which ignores the tax effects of adjusting items, is 25% (H1 FY23: 19%). The increase reflects the UK corporation tax increase to 25%.

The tax charge excluding discontinued operations is £2.3m (H1 FY23: £1.2m) with an overall effective tax rate[6] of 28% (H1 FY23: 13%). The lower effective tax rate in the prior period was due to the lower UK corporation tax rate and other income (from the sale of a subsidiary) being non-taxable. The current year tax charge includes tax on the sale of a building.

Earnings per share

Continuing adjusted basic earnings per share, excluding the results of sold and discontinued businesses, increased by 12% to 6.86p (H1 FY23: 6.10p), reconciliation below. Reported earnings per share 8.00p (H1 FY23: 9.40p).

Dividend

The Board has increased the interim dividend by 11% to 3.00p (H1 FY23: 2.70p), in line with profits. It will be paid on 10 April 2024 to shareholders on the share register as at 1 March 2024, with an associated ex-dividend date of 29 February 2024.

Balance sheet and cashflow

Cash generation improved due to the strong trading performance with operating cash conversion remaining strong at 92%, with net cash excluding lease liabilities of £28.0m (30 June 2023: £42.2m).

Responsibility statement of the Directors in respect of the half year results to 31 December 2023

We confirm that, to the best of our knowledge:

• The Condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting
• The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

Consolidated Income Statement

Other comprehensive income/(expense): Items that may be reclassified subsequently to the Income Statement

Notes to the Financial Results

General information

The Company is a public limited company incorporated and domiciled in the UK. The address of the Company's registered office is 10 Whitechapel High Street, London, E1 8QS.

The Company is listed on the Main Market on the London Stock Exchange. The Company is a provider of data, information, education and training in the global Governance, Risk and Compliance ('GRC') markets.

This condensed consolidated interim financial information ('Interim Information') was approved for issue by the Board of Directors on 16 February 2024.

The Interim Information is neither reviewed nor audited and does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2023 were approved by the Board of Directors on 22 September 2023 and subsequently filed with the Registrar. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

Basis of preparation

This Interim Information for the six months ended 31 December 2023 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and in accordance with IAS 34 'Interim Financial Reporting'. The Interim Information should be read in conjunction with the Annual Financial Statements for the year ended 30 June 2023 which have been prepared in accordance with UK adopted international accounting standards ('UK adopted IAS') and are available on the Group's website: wilmingtonplc.com.

The Group's forecast and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate well within its net cash position. The Directors have therefore adopted a going concern basis in preparing the Interim Information.

Accounting policies

The accounting policies, significant judgements and key sources of estimation adopted in the preparation of this Interim Report are consistent with those applied by the Group in its consolidated financial statements for the year ended 30 June 2023.

There has been no material impact on the financial statements of adopting new standards or amendments.

Principal risks and uncertainties

The principal risks and uncertainties that affect the Group remain unchanged from those stated on pages 41 to 49 of the strategic report in the Annual Report and Financial Statements for the year ended 30 June 2023.

Measures of profit

Reconciliation to profit on continuing activities before tax.

• amortisation of intangible assets excluding computer software;
• adjusting items (included in operating expenses);
• other income - gain on disposal of subsidiaries;
• other income - gain on disposal of property, plant and equipment; and
• net finance income.

Adjusted profit before tax, adjusted EBITA, adjusted EBITDA and continuing adjusted profit before tax reconcile to statutory profit before tax as follows:

The following adjusting items have been charged to the Income Statement during the period but are considered to be adjusting so are shown separately:

Segmental information

The Group's dynamic portfolio provides customers with a range of information, data, training and education solutions. The two divisions (Training & Education and Intelligence) are the Group's segments and generate all of the Group's revenue. The Executive Board considers the business from both a geographic and product perspective. Geographically, management considers the performance of the Group between the UK, Europe (excluding the UK), USA and the Rest of the World.

Business segments

There are no intra-segmental revenues which are material for disclosure. Unallocated central overheads represent head office costs that are not specifically allocated to segments. Total assets and liabilities for each reportable segment are not presented, as such, this information is not provided to the Board.

Segmental information by geography

Sterling makes up the largest portion of our ongoing revenue. In the current period 16% of revenue was derived in US dollars, no other currency was material.

• Earnings per share
• amortisation of intangible assets excluding computer software;
• adjusting items (included in operating expenses);
• other income - gain on disposal of subsidiaries;
• other income - gain on disposal of property, plant and equipment; and
• net finance income.

The calculation of the basic and diluted earnings per share is based on the following data:

Acquisition of Astutis

On 23 November 2023, the Group acquired 100% of the issued share capital of Astutis Limited ("Astutis"), a Company based in the United Kingdom, for an initial consideration of £16.8m. In addition, under the terms of the acquisition, there are two potential deferred payments of up to £4.7m based on Astutis' performance in each of the two years ending 30 June 2025 and 30 June 2026.

Astutis, which offers training for a range of globally recognised and regulated health, safety and environmental qualifications, strengthens Wilmington's portfolio of GRC training and education solutions by expanding its capabilities into the health, safety and environmental markets. The acquisition is part of Wilmington's strategy to focus on consolidating its already strong presence in the large, growing and rapidly evolving GRC markets. These markets are underpinned by strong macro drivers, particularly the increasing volume and enforcement of regulation, complex geopolitical landscape, increased importance of ESG and widespread adoption of technological and data-driven compliance solutions.

The process to measure the fair values of the assets acquired and liabilities assumed is not yet finalised in respect of the acquisition and accordingly the fair values measured at the acquisition date are provisional amounts. In accordance with IFRS 3 until the assessment is complete the measurement period will remain open up to a maximum of 12 months from the acquisition date so long as information remains outstanding.

Based on the provisional view, the fair value of the net assets acquired in the business at acquisition date was £7.8m, resulting in goodwill on acquisition of £12.4m. Acquisition related charges include transaction costs of £0.6m relating to the acquisition of Astutis. The results of the acquisition included in the Group's consolidated results are revenue of £0.6m and an operating result of £0.0m.

Discontinued operations and disposal groups held for sale

During the period, the Healthcare and MiExact businesses, which are part of the Intelligence Division, have been classified as disposal groups held for sale under IFRS 5.

The Group is focussed on actively managing our portfolio by assessing the potential of each business to exhibit the six common Wilmington characteristics that we recognise as key drivers of organic revenue growth and profitability improvement. Consequently, as a result of this assessment, the Board decided to exit the Healthcare and MiExact businesses.

Furthermore, the Healthcare business has been classified as a discontinued operation in the period with the financial results, including the comparatives, presented separately. The operation meets the IFRS 5 definition as a discontinued operation due to it being a separate major line of business and part of single coordinated disposal plan.

The major classes of assets and liabilities comprising the disposal groups held for sale are as follows:

31 December 2023 (unaudited) £'000

Events after the reporting period

On 31 January 2024, the MiExact business was sold for consideration of £9.6m in cash, subject to working capital adjustments. The consideration consists of £6.6m of cash on completion and £3.0m of loan notes with a 7% coupon, deferred for up to three years. At the date of this announcement, the initial accounting for the business disposal is incomplete and accordingly, the Group has not finalised the gain on disposal.

Related party transactions

The Company and its wholly owned subsidiary undertakings offer certain group-wide purchasing facilities to the Company's other subsidiary undertakings whereby the actual costs are recharged.

There were no (H1 FY23: £nil) transactions with related parties of key management personnel in the period.

Cash generated from operations

From continuing and discontinued operations: Funds from operations before adjusting items:

[1] Continuing - eliminating the effects of the impact of disposals; Organic - Continuing, eliminating acquisitions and exchange rate fluctuations

[2] Adjusted profit before tax - see note 4

[3] Continuing adjusted basic earnings per share - see the financial review; Adjusted basic earnings per share - see note 6

[4] Net cash includes cash and cash equivalents, bank loans (excluding capitalised loan arrangement fees) and bank overdrafts but excludes lease liabilities

[5] The underlying tax rate is calculated as one minus the adjusted profit after tax divided by the adjusted profit before tax - the tax rate excluding the tax impact of adjusting items

[6] The effective tax rate is calculated as the total tax charge divided by profit before tax