Electric Word plc : Interim Results to 31 May 2013

Interim Results to 31 May 2013

Electric Word, the specialist information publisher, announced today interim results for the six months ended 31 May 2013.

Increase in organic investments, mainly in building digital subscriptions products and revenues
H1 2013 Adjusted* EBITA of £326k loss below H1 2012 profit of £463k as a result of revenue timing differences and organic investments

Transition of Education subscriptions from paper to digital largely completed; some early signs of increased sales value from subscribing schools

Education conferences re-grown to 17 in H1 2013 from 13 in H1 2012
Education subscriptions sales and marketing resource increased by £230k over H1 2012
Sport & Gaming division launches new subscription services in SportBusiness on back of strong growth in TV Sports Markets

i-Gaming Business events showing strong like-for-like growth (one major event falls in H2 2013 that was in H1 2012

Health market stabilises after difficult start to year, with new digital product development under way

Cash generation improved despite lower EBITA
Net debt† reduced from £1,100k at H1 2012 to net funds/debt neutral at H1 2013

* Adjusted numbers (note 3) exclude amortisation and impairment of goodwill and intangible assets, acquisition-related and restructuring costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges.

† Net funds / debt (note 6) are cash held net of bank overdrafts and loans, but exclude provisions for deferred and contingent consideration in relation to acquisitions.

The most important achievements in this period have been the growth in a new core of subscribers to the digital school support service, increasing the number of schools conferences again after reductions in

2011 and 2012, building and launching new high-value subscription services in SportBusiness following the successful growth of TV Sports Markets, continued growth in iGaming and the strengthening of the

Group management team.

The fundraising in September 2012 has enabled the Group to focus on growing the long-term value of its businesses. Those funds are being invested through the course of 2013 with benefits expected to show in the second half of the year and into 2014.

The redevelopment of the Education business has continued. The biggest investment has been in building the sales and marketing resource needed to migrate legacy print subscription customers to the new Optimus digital service and start growing the value of those subscriptions. New teacher training products have been developed and launched through the course of the year which will form a valuable portfolio and, in 2014, the basis of a new subscription service. We have also invested in re-growing the Optimus events team to add new events and increase the sales and marketing effort for events in the new academic year. These investments have reduced profits in the Education business in the first half but it is notable that revenue in the first half is higher than in the second half of 2012 and growth prospects for the sector are encouraging in the light of the reduced capacity of Local Authorities to support school improvement and the managers responsible for delivering it.

Investment in the Health division has been focused on medical education and the development of e- learning materials for students, specialist trainees and qualified doctors. This is one of a number of areas

that have been identified for the development of digital products to complement the existing portfolio of books and journals. In future the division will focus on supporting medical students and specialist trainees and serving the professional development needs of medical educators and particular communities of practice such as speech and language therapists,

The Sport & Gaming business has made good progress in both its underlying profitability (allowing for timing differences) and in enhancing its portfolio of digital subscriptions products. Our TV Sports Markets deals analysis service has enjoyed a particularly strong year. The iGaming Affiliate events continue to grow, although a significant element of revenues will now be seen in the second half of the year with a major event moving from May to June.

The foundations that have been laid in the first half put the Group in a good position to grow in the second half of the year and into 2014.

* Adjusted numbers (note 3) exclude amortisation and impairment of goodwill and intangible assets, acquisition-related and restructuring costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges.

† Net funds / debt (note 6) comprise cash held net of bank overdrafts and loans, but exclude provisions for deferred and contingent consideration in relation to acquisitions.

ENDS
Julian Turner, Chief Executive, Electric Word 020 7954 3470
Andrew Potts, Panmure Gordon 020 7886 2500

Education: provides school management and professional development information through an online subscription service supplemented by conferences and training products.

Health: provides professional education and training products for doctors, healthcare managers, speech therapists, elderly care and other health professionals.

Sport & Gaming: provides insight, data and analysis to professionals in the business of sport and the online gaming industry.

The Group provides content in many different formats, including subscription websites, journals, magazines, events, online training, books, reports, bespoke research and consultancy. Competencies developed in one sector can then be transferred to another as opportunities arise.

Electric Word plc

INTERIM RESULTS TO 31 MAY 2013

Chairman's and Chief Executive's Statement

* Adjusted numbers (note 3) exclude amortisation and impairment of goodwill and intangible assets, acquisition-related and restructuring costs, and share based payment costs, as well as the tax impact of those adjusting items and any non-cash tax credits and charges.

In September 2012 the Group raised funds with the aim of investing to build greater future value in its publishing assets and to reduce bank debt. As a result, the first half of 2013 has seen a significant increase in the Group's organic investments, both in product development and sales and marketing. At the same time it has continued to focus on the areas of greatest potential value and cut back non-strategic activities.
The most important achievements in this period have been the growth in a new core of subscribers to the digital school support service, driven by a new sales and marketing team, retaining a high market share in UK secondary schools through the transition from paper to digital, increasing the yield from renewing digital subscribers, ramping up the number of schools conferences again after reductions in 2011 and 2012, building and launching new high-value subscription services in SportBusiness following the successful growth of TV Sports Markets, new digital product development around medical education in the Health division and the strengthening of the Group management team.

Electric Word plc

INTERIM RESULTS TO 31 MAY 2013

Chairman's and Chief Executive's Statement

Like-for-like revenue in the first half is down £0.5m on 2012. This is due to £0.25m from the reduction in scale of Incentive Plus (a low-margin reseller of education resources which remains a useful channel for other Group products) and £0.29m of net revenue in Health (down £0.49m) and Sport & Gaming (up
£0.2m). On top of this, the prior year revenues included £457k for iGaming activities which took place in
the first half in 2012 but will move to the second half in 2013, and £110k which relate to The School Run
(sold in 2012).

The EBITA for the period is most significantly affected by the additional investments made in the period (amounting to £623k in H1 2013), and principally relating to sales and marketing, and product development. Combined with timing differences in iGaming, these account for more than the overall reduction in EBITA, which was improved by like-for-like profit growth in Sport & Gaming and a £129k benefit from the discontinued "The School Run" business.

EDUCATION DIVISION

The above results exclude 'The School Run' which was disposed of for no consideration in April 2012. For the period to 31

May 2012, this contributed revenue of £110,000 and adjusted EBITA* of £129,000 loss before disposal (30 November 2012:

£108,000 revenue and £133,000 adjusted EBITA* loss before disposal). The Group now receives a licence income calculated as a percentage of revenue.

The Education division centres on the Optimus professional development services, which support teacher professional development through an online subscription service, training products and live conferences.
Over the last two years the conferences business has been recovering from a drop in revenue in the school year 2010-11 resulting from uncertainty over school budgets. The first six months of 2013 continued that trend with revenue up 15% on the first half of 2012, though investment in re-growing the conferences team has reduced margins in the year to date. Margins are expected to recover in the second half, when the bulk of the conferences take place.

Electric Word plc

INTERIM RESULTS TO 31 MAY 2013

Chairman's and Chief Executive's Statement

At the same time as the conferences have been recovering, the portfolio of paper subscription newsletters has been replaced by the transition to an online support service for school managers. This is a very significant change for the business which is adding value for our customers by enabling all staff in a subscribing school to access the same information and advice. Once fully implemented, it will ultimately lead to higher revenues per school and a higher-margin business which is therefore more valuable for the Group. However this does require replacing legacy subscriptions to the individual paper newsletters with whole-school site licences for online access. This has entailed adding £230k of additional sales and marketing cost in the first half of 2013 compared to the first half of 2012. The effect of losing some legacy revenue from the paper newsletter subscriptions while also increasing sales and marketing expenditure means that the subscriptions business will lose money before it rebuilds to what are expected to be higher profits than previously. Encouragingly, the first schools to be converted to the new online service last year are starting to purchase the additional services which will drive future revenue and subscribers have so far been renewing at an average price which is over 30% higher than their previous paper newsletter subscription. The process of converting existing subscribers from paper to digital is expected to complete this year, which will result in a smaller number of subscribers at a higher average value and a strong base from which to grow.
From 2014 the new product enhancements that are currently in development should help drive revenues by further increasing the average subscriber value of the service as well as supporting growth in the number of subscribing schools. With the conferences already profitable, profit growth in the division as a whole will be driven by the subscription business moving out of this important investment phase.
With Local Authorities considerably reduced in scale as a result of funding being increasingly directed to schools themselves, the demand for support in improving standards of management and teaching in schools, especially in the new Academies, is expected to increase. The new Optimus platform for delivering cost-effective compliance information, best practice guidance and training solutions puts the Education division in a strong position for future growth.

HEALTH DIVISION

The Health division is made up of the Radcliffe and Speechmark publishing businesses, the Radcliffe
Solutions software business and the Sports Performance websites.
The division had a difficult start to the year, with book sales through trade channels reflecting general weakness in book retailing and software solutions proving difficult to sell into an NHS facing organisational change and uncertainty. At the same time, the division has been investing in developing new digital product to support medical education. The medium term goal is to increase the focus of the business though deeper engagement with a smaller number of targeted segments.
In future the division will focus on supporting medical students and specialist trainees and serving the professional development needs of medical educators and particular communities of practice such as speech and language therapists.

Electric Word plc

INTERIM RESULTS TO 31 MAY 2013

Chairman's and Chief Executive's Statement

SPORT & GAMING DIVISION

The Sport & Gaming Division provides market information and support to professionals in the global businesses of sport and gaming. The division has had a strong first half to the year, with like-for-like revenue and profits growing and the launch of new subscription services in sport on the back of the success of TV Sports Markets. The apparent decrease in revenues and profits from H1 2012 to H1 2013 is due to timing differences in iGaming.
TV Sports Markets is a premium subscription service that analyses media rights deals in global sport. It has now been joined by Sports Sponsorship Insider, which analyses sports sponsorship deals, and the SportBusiness Knowledge Centre, which brings together a wealth of case studies, market intelligence and analysis. There has been a significant investment in developing these high-value services, with the aim of increasing the proportion of SportBusiness revenue coming from digital subscriptions. In the first half these increased to 41% of SportBusiness revenues from 33% in 2012.
iGaming Business continues to deliver profits at high margins and has seen further growth in the iGB Affiliate events business, although changes in the timing of events in 2013 will rebalance profits through the year.

CENTRAL COSTS

Central costs remain consistent with previous periods. The reduced level of bank debt is reflected in lower interest costs.
Since the previous reporting period, there have also been changes to the composition of the Board of Directors. William Fawbert was appointed as Finance Director on 15 February 2013, replacing Quentin Brocklebank and Andrew Brode replaced Peter Rigby as Chairman on 1 June 2013.

Electric Word plc

INTERIM RESULTS TO 31 MAY 2013

Chairman's and Chief Executive's Statement

FINANCIAL REVIEW

In January 2013, the Group's banking arrangements were amended to increase loan repayments in 2013 but with a relaxation in certain covenants. This allows the Group increased flexibility to continue its investment programme, with reduced restrictions and caps.

As noted above, adjusted EBITA has been negatively impacted compared to 2012, primarily as a result of the timing change of the iGaming event from May to June 2013 and the continued investments programme, particularly in the Education division. Despite this, cash conversion has remained strong and is a result of a continued focus on cash management and the impact of billing and collecting the majority of the June iGaming event revenues before the end of May 2013. The change in timing of the iGaming event compared to 2012, also resulted in significant increases in prepayments, deferred income and trade payables compared to 2012.
In addition, Group cash flow has also been positively impacted by £151k relating to a share issue on 22
May 2013 (note 7).

CURRENT TRADING AND PROSPECTS

Current trading is in line with the Board's expectations and H2 2013 results are expected to be
significantly improved compared to H1.
The finalisation of the online migration plans for the Education subscriptions business during H2 2013 will be a significant milestone and should provide the platform from which subscriptions revenues will grow in
2014. The Education conferences business has grown from last year and is well placed to enjoy a strong
H2 2013, carried through to 2014.
In the Health division, following a difficult first quarter, we are now experiencing market stabilisation. The recruitment of a new Health MD coupled with plans to focus the business through deeper engagements with fewer, targeted segments should enable us to build value in the medium term.
The Sport & Gaming division's H2 2013 results will benefit from the timing differences in iGaming. In the short to medium term, we expect this division to enjoy continued growth in both the iGaming events business and the SportBusiness digital subscription products.

Electric Word plc

INTERIM RESULTS TO 31 MAY 2013

Chairman's and Chief Executive's Statement

Overall, as anticipated at the time of the September 2012 Placing, 2013 will be a year of increased investment, with benefits expected to be realised in 2014, especially in the Education and Sport & Gaming Divisions. Targeted investments are expected to continue into 2014, with the objective of creating enhanced value across all divisions in the medium to long term.
Andrew Brode Chairman
Julian Turner Chief Executive

Electric Word plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 31 May 2013 - unaudited

Six months ended

31 May

2012

Year ended

30 November

2012

Note £ ' 0 00 £'0 0 0 £'0 0 0

Cost of sales - direct costs (2,589) (2,978) (5,464) Cost of sales - marketing expense (906) (949) (1,738) GROSS PROFIT 3,158 3,803 7,129

Other operating expenses (3,406) (3,357) (5,980) Restructuring expense (14) (44) (201) Acquisition-related credits 44 282 687

Depreciation expense (66) (65) (127) Amortisation expense (439) (494) (955) Impairment charges and reduction to goodwill 3 - (32) (300) Total administrative expenses (3,881) (3,710) (6,876)

Finance costs (28) (41) (80)

Taxation 4 151 86 54

Attributable to:

- Equity holders of the parent 3, 8 (646) 39 111

- Non-controlling interest 46 99 116

Basic (0.16)p 0.01p 0.03p

Diluted (0.16)p 0.01p 0.03p

The result for the period arises from the Group's continuing operations.

Electric Word plc

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the period ended 31 May 2013 - unaudited

At 30 November

Share capital

£'000

Share premium account

£'000

Other reserves

£'000

Reserve for own shares

£'000

Retained earnings

£'000

Total

£'000

Non- controlling interest

£'000

Total equity

£'000

2011 2,989 7,061 105 (123) (3,425) 6,607 133 6,740

Total comprehensive

income - - - - 39 39 99 138

Tax taken directly

to equity - - - - (13) (13) - (13)

2,989 7,061 105 (123) (3,399) 6,633 232 6,865

Share based

payments - - - - 82 82 - 82

At 31 May 2012 2,989 7,061 105 (123) (3,317) 6,715 232 6,947

Total comprehensive

income - - - - 72 72 17 89

Tax taken directly

to equity - - - - (17) (17) - (17)

2,989 7,061 105 (123) (3,262) 6,770 249 7,019

Share issues 1,007 503 - - - 1,510 - 1,510

Share issue costs - (112) - - - (112) - (112) Share based

payment costs - - - - 62 62 - 62

At 30 November

2012 3,996 7,452 105 (123) (3,200) 8,230 249 8,479

Total comprehensive

income - - - - (646) (646) 46 (600)

3,996 7,452 105 (123) (3,846) 7,584 295 7,879

Dividend paid by

subsidiary - - - - - - (100) (100) Share issues 72 79 - - - 151 - 151

Share based

payment credits - - - - (12) (12) - (12)

distributed by