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ILX Group plc, the AIM quoted provider of e-learning software and business training, has today released an encouraging trading update for the six months ended 30th September 2010; the interim results are expected to be released during the week commencing 22nd November.

Last year’s second half recovery has continued into the current year. Sales and profits continued to increase for the Best Practice division, particularly the newly formed international division where year on year sales revenues grew by around 50% while the gross margin almost doubled. The Australian business increased sales from AUD 0.2 million to AUD 0.9 million while growth has continued within the Middle East. The company established an office in Copenhagen to capitalise on growing Nordic region demand and ILX is seeking to establish an office in South Africa to build upon the annualised GBP0.15 million sales being generated there. More overseas offices with be established as and when the identified countries meet key criteria, i.e., current and forecast demand for PRINCE2 in that market from an established revenue stream. UK revenues have remained robust due to growing levels of repeat business enhanced by some new contract wins.

However, trading at the classroom based Finance Training business has remained difficult and the company has taken the decision to exit this activity by the end of this calendar year, which will result in an exceptional but undisclosed charge to write off the residual value of the operation. Nevertheless, programmes will continue as normal to minimise the cash close-down costs while from January 2011 another company in this market has agreed to acquire certain assets for a small initial cash sum and deferred performance payments. The Financial e-learning products will be marketed and sold by the Best Practice division.

The Company is seeking a change of sector classification from Support Services to Software because this would better reflect its business profile; ILX’s strength resides in its proprietary software products and in the last financial year these accounted for 44% of revenue and 62% of gross profit. The trading update provides comfort that our earlier forecasts before exceptional items remain deliverable and with the shares trading 25p, and valuing ILX on a multiple of 8 times March 2012 earnings per share of 5.9p we reiterate our target price of 47.1p and stance of buy.