Wilmington — Focus on governance, risk and compliance

Wilmington (LSE: WIL)

Last close As at 21/12/2024

GBP3.92

−3.00 (−0.76%)

Market capitalisation

GBP354m

More on this equity

Research: TMT

Wilmington — Focus on governance, risk and compliance

With November’s purchase of Astutis, January’s sale of MiExact and the proposed Healthcare business disposal, Wilmington is now firmly focused on opportunities within the large global governance, risk and compliance (GRC) market. The group’s significant cash resource should enable further M&A to accelerate growth across the GRC landscape, while investment in technology platforms and AI capabilities improves revenue and operating margin prospects in the core activities. H124 organic revenue growth (continuing business) was up 7%, with a 12% gain in adjusted EPS. FY24 results to June are expected in line with market forecasts. Given the improving quality of earnings we regard the valuation as undemanding.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Wilmington

Focus on governance, risk and compliance

Media

QuickView

20 February 2024

Price

334p

Market cap

£299m

Share price graph

Share details

Code

WIL

Listing

LSE

Shares in issue

89.6m

Business description

Wilmington is a recognised knowledge leader and partner of choice for data, information, education and training in the global governance, risk and compliance markets. It employs around 1,000 people and sells to around 120 countries.

Bull

Growing proportion of repeat, continuing revenues.

Focus on improving margins.

Strong balance sheet.

Bear

Scarcity of suitable acquisition targets.

Inflated vendor expectations on price.

Execution risk on sale of Healthcare business.

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

With November’s purchase of Astutis, January’s sale of MiExact and the proposed Healthcare business disposal, Wilmington is now firmly focused on opportunities within the large global governance, risk and compliance (GRC) market. The group’s significant cash resource should enable further M&A to accelerate growth across the GRC landscape, while investment in technology platforms and AI capabilities improves revenue and operating margin prospects in the core activities. H124 organic revenue growth (continuing business) was up 7%, with a 12% gain in adjusted EPS. FY24 results to June are expected in line with market forecasts. Given the improving quality of earnings we regard the valuation as undemanding.

Training & Education the main element

On a pro forma basis (Healthcare discontinued), Training & Education comprised 74% of H124 revenues, with Intelligence the balance. Axco and Pendragon, within Intelligence, are market leaders in insurance and pension respectively, with plenty of opportunity to grow their share of client budget through increased scope and new products. Within Training & Education, the move onto a common technology platform (due to go live in H224) opens up the potential for more sophisticated client solutions, some AI-driven, across the three spheres of regulatory compliance, professional accreditation/continuing professional development and ESG and HR compliance. It should also mean greater operational efficiency.

Cash resource supports M&A appetite

At end December, Wilmington had net cash of £28m, excluding leases, which has since increased to over £40m with cash inflows from subscriptions receipts pushed into January. With a further likely cash injection from the proposed sale of Healthcare, the group has considerable resource to invest. The ‘wish list’ centres on GRC, with areas that need training to meet regulatory requirements particularly attractive. US vendor expectations remain over-inflated given private equity appetites, but there are always opportunities there and globally, with the £16.8m Astutis purchase already demonstrating the added value from cross-selling opportunities in both directions.

Valuation starting to reflect growth potential

Wilmington’s share price is broadly unchanged year to date. Within the peer set, those companies with a strong positioning in data, platform and technology have a clear rating premium. Wilmington’s trajectory in this direction gives strong support to the current rating, with potential for further expansion, subject to future deal flow.

Consensus estimates

Year
end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/22

111.9

20.7

16.7

8.2

20.0

2.5

06/23

122.1

24.3

21.3

10.0

15.7

3.0

06/24e

132.6

27.3

22.5

10.8

14.8

3.2

06/25e

143.9

29.6

24.4

11.6

13.7

3.5

6/26e

153.0

32.1

26.7

12.4

12.5

3.7

Source: Refinitiv. Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

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Australia

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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