Wilmington's strategic review vindicated

Wilmington’s (WIL) strong showing through FY2023 was foreshadowed in a July update. So the muted reaction of the market on results day was understandable. Yet a modest 7 per cent uptick in the company’s share price over the past 12 months seems a paltry return given its operational and financial progress.

Annual revenue was up by 6.7 per cent on an organic basis. And the business information and training provider delivered a 30 per cent increase in pre-tax profits once impairments, amortisation, and one-off gains are discounted. The underlying margin increased by 310 basis points to 19.7 per cent, driven by rising profitability in the intelligence division, together with an increased focus on cost management.

The balance sheet also reflects the operational progress through the period under review. Group chief executive Mark Milner highlighted the increase in recurring revenue and cash conversion rate, with the latter standing at 138 per cent. Adjusted operating cash flow before working capital movements came in at £29.6mn, up 2 per cent on the prior year.

It could be argued that the improved showing, particularly in terms of profitability, is a vindication of the group’s strategic review, completed in 2021, which refocused attention on the governance, risk, and compliance markets. The move reflects the “increased importance of ESG and widespread adoption of technological and data-driven compliance”.

The group’s forward rating of 14 times is undemanding, although peer comparisons aren’t particularly illuminating given the bespoke nature of services offered in this corner of the market. The stark increase in both sales and cash profits over long-term average rates is probably far more significant. Hold.

Last IC View: Hold, 339p, 20 Feb 2023