News blog

Electric Word

  • BY: Andrew Hore |
  • POSTED: 13/08/2009 |

Electric Word has raised £2.7m gross at 3.625p a share in order to reduce its borrowings and put it in a strong position to take advantage of organic and acquisitive growth over the next few years.

Chief executive Julian Turner feels that the educational and sporting information publisher has been held back by investors’ perception that the company was highly geared and had a complicated balance sheet. The placing raised £2.45m after costs and £875,000 of preference shares have been converted into ordinary shares. Some of the cash will be used to repay £987,500 of preference shares and the rest will be used to repay other debt. Pro forma net debt (at the end of May 2009) will be £1.1m. Electric Word has a £1.5m revolving credit facility that lasts until May 2011. 

Turner describes this as a “good time to plant seeds and wait for economic conditions to improve”. Initially he will look to grow organically but he will believe better quality businesses may become available in the future. At the moment it is mainly businesses in financial distress that are up for sale.

Interim results show that Electric Word is performing well under tough economic conditions.

Revenues fell 3% to £8.72m in the six months to May 2009, but this was down to a restructuring of the MyChild consumer business. Underlying revenues rose 4%. Underlying profits excluding amortisation improved from £697,000 to £832,000 thanks to costs being kept down.

The professional education division reported a small dip in profits. There has been a small decline in subscriptions and commerce revenues. This division remains the main profit contributor but pressure on public spending could make trading difficult. Even so, Electric Word supplies publications in specialist niches, such as behaviour and teach development, so this should help it retain revenues. The main uncertainty is what will happen after the General Election in 2010.

Online gaming continues to be a booming business for the sports business division. The market for iGaming Business continues to grow with more revenues coming from events. Two new events are being added and there could be more spin offs from the original magazine. The sports operations will be boosted by FIFA’s decision to offer the 2018 and 2022 World Cups for tender at the same time.

The consumer division returned to profit after the restructuring of the MyChild business, even though revenues were more than one-third lower. Revenues will improve as online sales build up. There is scope for new product launches.

A fall in deferred revenues in the balance sheet relates to the restructuring of the MyChild business so it is not a problem. Deferred revenues are important to Electric Word because around one-quarter of its income comes from subscriptions. Advertising, sponsorship and exhibitions account for 18%. However, Electric Word is not dependent on advertising like so many media companies.

At 4p a share, Electric Word is valued at £5.91m before the placing. The main negative of the fundraising is that it is highly dilutive to earnings per share. House broker Panmure Gordon reckons that the 2009-10 earnings will be diluted by 33%. It may take some time to make up for that dilution through additional growth.

The shares are trading on six times 2009-10 earnings.

Electric Word has an experienced management team. It intends to add new book titles to the professional education division and expand its other operations. Management believes that it has benefited from having a spread of activities and is interested in widening the scope of activities into other niche sectors.

© 2024 Aim Micro. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Browse by issue
All issues
Popular tags
All tags

betbrokers, financial, gold, health, leisure, media, mobile, resources, services, technology

AIM Micro feeds

Keep up to date with articles published at AIMMicro.com. Subscribe to AIM Micro RSS Feeds