Impairments wipe out Wilmington's profits

Given the increased focus on compliance by financial institutions since the global financial crisis, it makes sense for information and training company Wilmington (WIL) to increase its focus on that part of the market. Its pivot is taking time to reach profitability, though. In the 12 months to June, it cut some business lines, such as companies offering continuous professional development training to lawyers, a UK healthcare business and a pension fund service to charities as it sought to tighten its focus.

Despite a hit to its top line from the cancellation of networking events, which made up 15 per cent of pre-pandemic revenue, the company managed to maintain revenue at around £113m and increase adjusted profit by 27 per cent to £15m. However, write-downs on the discontinued healthcare business, the carrying value of other healthcare assets and its head office led to a net earnings loss through the period.

Chief executive Mark Milner said the 12-month period had been one of “positive change”, arguing that the company had strengthened its digital capabilities and was now focused on the regulatory and compliance markets. This is served through two divisions – one providing information and data and the other training and education. Each makes up about half of total revenues, but the latter, which founded the International Compliance Association and runs accreditation for members, recorded much higher operating margins (22 per cent versus 16 per cent).

Revenue and profits have been in line with expectations in the early part of FY 2022, with Numis Securities arguing that its stronger cash flow and an improved balance sheet (net debt fell by about £12.7m to £26.4m) imply Wilmington has more strategic and merger options open to it. It certainly looks in better shape and will benefit as face-to-face events return, but it still needs to prove its new strategy can deliver profitable growth. Hold.

Last IC View, Hold at 197p, 20 Sep 2019