RNS Number:5066F
AEC Education plc
30 June 2006
For immediate release
Stock Exchange Announcement
30th June 2006
AEC Education PLC and its subsidiary companies
Chairman's statement and Accounts for the year to 31st December 2005
Introduction
I have pleasure in announcing the Company's results for the year to 30 December
2005. The Asian educational markets, where AEC operates, continued to be very
competitive during the second half of the year. Despite this, overall revenues
increased by 2.1% to #1,542,684. During the period the Company also made
significant investment in marketing and product development staff in order to
review non - profitable lines and develop new products and partnerships for
launch during 2006. This investment increased operating costs significantly,
with the result that post tax earnings for the year fell to #202,346 (2004 -
#547,628).
Review of 2005 Operations
2005 was a year of many challenges. Competition was keen. Government rules and
regulations in our main markets of Malaysia and Singapore were changing and the
demand pattern continued to move towards degree courses.
The Company viewed these changes as an opportunity and devoted its efforts both,
in terms of manpower and finance, to identify niche programmes to meet the
changing demand in the Asian environment. At the same time it also took
immediate steps to run down those programmes that were no longer viable.
A major portion of the investment focused on the development of proprietary
educational courses. These included a Hospitality programme leading to the award
of an Advanced Diploma, a Diploma and Advanced Diploma in Travel & Tourism and
other Business Management Programmes to meet the changing requirements in the
region.
Early childhood education is a strongly growing market and the Company is
now positioned to avail itself of this opportunity by the introduction of an
Early Childhood Education Programme.
In addition to the above, greater collaboration with various universities was
developed. A Diploma and Advanced Diploma in Business Administration were
successfully introduced in collaboration with the UK's James Watt College. This
programme is recognized by Scotland's Napier's University. These programmes are
being promoted internationally and are currently being offered in China,
Malaysia, Myanmar, India, Sri Lanka and Vietnam.
The Company was also able to secure the rights to conduct doctoral programmes in
education provided by the University of Leicester.
ACCA accounting courses and the London Chamber of Commerce (LCCI) Graduate
Access Programme have also been introduced.
Future Plans
Education continues to grow both in the region and internationally.
AEC is well placed to face the challenges that this growth will bring.
Considerable effort has been put in, in 2005, to strengthen the management and
structure of the Company. The recent appointment of David Ho as Managing
Director of the Asian operations brings a wealth of experience in international
education and commercial development to the Company.
Apart from organic growth, the Company is continuously looking at acquisitions
that have niche education programmes in both the UK and overseas.
Recently, the Company announced the acquisition of 64.8% of the equity of
BrainBox Limited. This company operates in Vietnam, in a prestigious centre in
Ho Chi Min City, providing a range of foreign languages and management studies.
The Directors believe that this acquisition puts AEC in a strong position to be
able to penetrate the lucrative education market in Vietnam and also use the
company to recruit students for its operations in Singapore and Malaysia.
Outlook
Over the last year the Group has gone through a period of review and is now
ready to push forward with the initiatives it started in 2005. The operations
in Singapore and Malaysia will remain stable and are the shop window for a range
of high quality programmes that can be delivered around the world. The Company
will continue with its strategy of continuous product development and
collaboration with relevant Universities and partners around the globe. It
will continue to seek suitable acquisitions of schools and through this strategy
steadily grow its student base and profitability.
The Board expect the Company's plans to grow the revenue and profitability, to
provide shareholders with steady growth from the current position. At the same
time the Board are seeking acquisition opportunities that will add to steady
underlying growth during the coming years.
The Board would like to express its appreciation of the loyal support and
dedication of the staff during what was a challenging year.
William Swords
Chairman
The directors present their report and the audited financial statements of AEC
Education Plc (the "Company") and its subsidiary companies for the year ended 31
December 2005.
PRINCIPAL ACTIVITY
The principal activities of the Company are that of investment holding and
provision of educational consultancy services. The principal activities of the
subsidiary companies are set out in note 14 to the financial statements. There
have been no significant changes in the nature of these activities during the
year.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS.
The markets that the company operate in were challenging in 2005. Nonetheless,
revenue increased by 2.1%. Investment in staff for product development and
marketing combined with the slow growth in the market caused earnings to fall to
#202,346 (2004 - #547,628). The Board expect the new products for launch during
2006 to provide steady growth in revenue and earnings while it continues so seek
suitable niche acquisitions. The financial risks for the Group are set out in
note 31.
RESULTS AND DIVIDENDS
The consolidated profit and loss account for the year is set out on page 6.
The consolidated profit for the year on ordinary activities after taxation
amounted to #202,346 (2004: #547,628). An interim dividend of 1.6p per share was
paid in July 2005. The directors do not recommend the payment of a final
dividend (2004: #Nil).
DIRECTORS
The names of the directors who held office during the period and to date were:
William Joseph Swords (Chairman) (Appointed 21 July 2004)
Tunku Iskandar Bin Tunku Abdullah (Appointed 21 July 2004)
Ramasamy Jayapal (Appointed 21 July 2004)
Gopinath Pillai (Appointed 21 July 2004)
Ravi Manchanda (Appointed 21 July 2004; Resigned 1August 2005)
DIRECTORS' INTERESTS
The directors holding office at the end of the financial year and their
interests in the share capital of the Company and its related corporations as
recorded in the register of directors' shareholdings were as follows:
Name of directors and company in which interests are held At the beginning At the end
of the year of the year
Shares of Shares of
#0.10 each #0.10 each
William Joseph Swords - -
Tunku Iskandar Bin Tunku Abdullah - -
Ramasamy Jayapal 574,047 574,047
Gopinath Pillai - -
Indirect Interest
William Joseph Swords - -
Tunku Iskandar Bin Tunku Abdullah 399,000 399,000
Ramasamy Jayapal - -
Gopinath Pillai 25,000 25,000
SUBSTANTIAL SHAREHOLDINGS
At 23rd June 2005, notification had been received of the following holdings of
more than 3% of the issued capital of the Company. Apart from these, the
directors are not aware of any individual interests or group of interests held
by persons acting together, which exceeds 3% of the issued share capital.
Shares of %
#0.10 each
Asian Excellence Conglomerate Pte Limited 2,174,127 14.58
KSP Investments Pte Limited 5,526,048 37.05
Ravi Manchanda 654,318 4.39
Naboobalan s/o Ramasamy Naidu 874,968 5.87
Ramasamy Jayapal 574,047 3.85
CREDITOR PAYMENT POLICY AND PRACTICE
Group policy is to pay creditors in line with agreed credit terms and generally
this policy is adhered to. On average, creditors were settled within 60 days of
their due date except on disputed items. Trade creditor days of the Group for
the tear ended 31 December 2005 were 52 days, calculated in accordance with the
requirements set down in the Companies act 1985. This represents the ratio,
expressed in days, between the amounts invoiced to the Group by its suppliers in
the year and in the amounts due, at the year end to trade creditors within one
year.
AUDITORS
On 3 October 2005 Moore Stephens, the Company's auditor transferred its entire
business to Moore Stephens LLP, a limited liability partnership incorporated
under the Limited Liability Partnership Act 2000. The directors have consented
to treating the appointment of Moore Stephens as extending to Moore Stephens LLP
with effect from 3 October 2005.
A resolution to reappoint Moore Stephens LLP as the Company's auditors will be
proposed at the annual general meeting.
BY ORDER OF THE BOARD
William Swords
DIRECTOR
30 June 2006
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and of the Group and of the profit and loss of the Group for that
period. In preparing those financial statements, the directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and of the Group and to enable them to ensure that the financial
statements comply with International Financial Reporting Standards and with the
Companies Act 1985. They are also responsible for the system of internal
control, safeguarding the assets of the Group and hence for taking reasonable
steps for the prevention and detection of fraud, error and non-compliance with
laws and regulations.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF AEC EDUCATION PLC
We have audited the group and parent company financial statements ("the "
financial statements") of AEC Education plc (the "Company") for the period from
8th July 2004 (date of incorporation) to 31st December 2005 which comprise the
Group and Company Income Statement, Balance sheets, Changes in Shareholder
Equity and the Group and Company Cash Flow Statements and the related notes.
These financial statements have been prepared under the accounting policies set
out therein.
This report is made solely to the company's members, as a body, in accordance
with Section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditor's report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As described in the Statement of Directors' Responsibilities the company's
directors are responsible for the preparation of the financial statements in
accordance with applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you if, in our opinion, the Directors' Report is not
consistent with the financial statements, if the company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and other transactions is not disclosed.
We read the other information in the Annual Report and consider the implications
for our report if we become aware of any apparent misstatements within it. The
other information accompanying the financial statements comprises the Chairman's
Statement and the Directors' Report. Our responsibilities do not extend to any
other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the group and the company's circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF AEC EDUCATION PLC (CONTINUED)
Opinion
In our opinion the financial statements
* give a true and fair view, in accordance with IFRSs as adopted by the
European Union, of the state of the group's and the parent company's
affairs as at 31 December 2005 and of its result for the year then ended;
and
* have been properly prepared in accordance with the Companies Act 1985.
St. Paul's House MOORE STEPHENS LLP
London, EC4M 7BP
England Registered Auditors
30 June 2006 Chartered Accountants
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2005
Note 2005 2004
# #
Revenue
Sale of services (4) 1,402,518 1,417,049
Other income (5) 140,166 93,903
1,542,684 1,510,952
Administrative expenses
Cost of services sold 635,763 473,841
Salaries and employees' benefits (6) 334,426 236,976
Amortisation of deferred expenditure 9,135 8,624
Depreciation of plant and equipment 32,055 22,962
Finance costs (7) 2,939 2,321
Other operating expenses 393,307 222,617
Total operating costs and expenses 1,407,625 967,341
Operating profit (8) 135,059 543,611
Other income (9) - 6,685
Share of results of associated companies 67,620 10,566
Profit before income tax 202,679 560,862
Income tax (10) (333) (13,234)
Profit for the year 202,346 547,628
Earnings per share (in pence)
Basic (11) 1.4 4.6
Diluted (11) 1.4 4.6
BALANCE SHEETS
AS AT 31 DECEMBER 2005
Group Company
Note 2005 2004 2005 2004
# # # #
Non-Current Assets
Plant and equipment (12) 128,815 50,809 - -
Development expenditure (13) 28,414 34,501 - -
Investment in a subsidiary company (14) - - 1,308,639 1,308,639
Investment in associated companies (15) 1,393,934 1,248,509 - -
1,551,163 1,333,819 1,308,639 1,308,639
Current Assets
Inventories (16) 86,370 88,112 - -
Trade receivables (17) 252,288 140,353 - -
Other receivables (18) 55,260 139,763 52,140 125,050
Deferred expenditure (19) 31,054 12,747 - -
Due from subsidiary company (14) - - 343,000 -
Due from associated companies (15) 67,106 154,190 - -
Due from related parties (20) 484,210 344,652 - -
Cash and bank balances (21) 89,679 421,172 4,280 408,246
1,065,967 1,300,989 399,420 533,296
Total Assets 2,617,130 2,634,808 1,708,059 1,841,935
EQUITY AND LIABILITIES
Non Current Liabilities
Deferred taxation (10) 480 12,877 - -
Current Liabilities
Trade payables (22) 90,283 205,613 - -
Deferred income (23) 156,478 42,446 - -
Other payables and accruals (24) 111,174 290,465 23,598 130,596
Bank overdraft (25) 120,549 31 - -
Due to related parties (20) 50,639 12,522 - -
Finance lease obligations (26) 1,755 - - -
Loans payable (27) - 105,828 - -
Provision for income tax 35,511 28,459 - -
566,389 685,364 23,598 130,596
Share Capital and Reserves
Share capital (28) 1,491,604 1,491,604 1,491,604 1,491,604
Share premium 242,519 238,094 242,519 238,094
Reserves 316,138 206,869 (49,662) (18,359)
2,050,261 1,936,567 1,684,461 1,711,339
Total Equity and Liabilities 2,617,130 2,634,808 1,708,059 1,841,935
The financial statements were approved by the Board of Directors on 30 June 2006
and were signed on its behalf by:
William Swords Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2005
Share Share Retained Translation Capital
Capital Premium Earnings Reserves Reserves Total
# # # # # #
Group
At 1 January 2004 - - 789,961 (101,633) 170,560 858,888
Issue of shares on incorporation 2 - - - - 2
Issue of shares in consideration
for the acquisition of the entire
share capital of AEC.Edu Group Pte
Ltd 1,308,639 - - - - 1,308,639
Issue of shares for cash on 182,963 567,185 - - - 750,148
Admission to AIM
Cost of issue of shares - (329,091) - - - (329,091)
Profit for the year - - 547,628 - 547,628
Dividends paid (a) - - (1,271,456) - - (1,271,456)
Gains not recognised in the profit
and loss
account - Currency translation - - - 71,809 - 71,809
difference
Balance at 31 December 2004 1,491,604 238,094 66,133 (29,824) 170,560 1,936,567
Balance at 1 January 2005 1,491,604 238,094 66,133 (29,824) 170,560 1,936,567
Profit for the year - - 202,346 - - 202,679
Dividends paid (b) - - (238,657) - - (238,657)
Cost of share issue - prior year - 4,425 - - - 4,425
overstated
Gains not recognised in the profit
and loss
account - Currency translation - - - 145,580 - 145,247
difference
Balance at 31 December 2005 1,491,604 242,519 29,822 115,756 170,560 2,050,261
(a) In 2004, a special dividend of #1,271,586 was paid by
AEC.Edu Group Pte Ltd and its subsidiary companies prior to the acquisition of
the entire share capital by the Company.
(b) During the year, the Company paid an interim dividend of 1.6p per
share amounting to #238,657.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2005
Group
2005 2004
# #
Cash Flows from Operating Activities
Profit before income tax 202,679 560,862
Adjustments for:
Amortisation of deferred expenditure 9,135 8,624
Depreciation of plant and equipment 32,055 22,962
Interest expense 2,939 2,321
Gain on disposal of subsidiaries - (6,686)
Share of results of associated companies (67,620) (10,566)
Operating cash flow before working capital changes 179,188 577,517
Changes in working capital:
Receivables (145,770) (7,330)
Payables (49,990) (359,578)
Inventories 1,742 (88,112)
Related parties (6,746) 1,228,498
Net cash generated (used in)/from operations (21,576) 1,365,655
Interest paid (2,939) (2,321)
Tax paid (5,678) (2000)
Net cash generated (used in)/from operating activities (30,193) 1,361,334
Cash Flows from Investing Activities
Purchase of plant and equipment (103,130) (4,218)
Payments to a related party for acquisition of an associate - (1,271,456)
Investment in associates - (14,940)
Net cash flow on disposal of interests in subsidiary companies (A) - 1,413
Net cash used in investing activities (103,130) (1,211,276)
Cash Flows from Financing Activities
Proceeds from issue of shares 100,031 625,097
Costs of issue of shares (126,174) (198,492)
Dividend paid (238,657) -
Loan advances from third parties - 105,828
Repayment of loan from third parties (105,828) (79,698)
Repayment of finance lease creditor (2,671) -
Repayment of amount due to a director (7,611) (118,322)
Net cash generated (used in)/from financing activities (380,910) 334,413
CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2005
Group
2005 2004
# #
Balance brought forward (514,233) 406,546
Effect of foreign exchange rate changes on consolidation 62,222 (5,673)
Net decrease in cash and cash equivalents (452,011) 400,873
Cash and cash equivalents at beginning of the year 421,141 20,268
Cash and cash equivalents at end of the year (30,870) 421,141
Cash and cash equivalents comprise the following:
2005 2004
# #
Cash and bank balances 89,679 421,172
Amount due to banker (120,549) (31)
(30,870) 421,141
(A) Summary of the Effect of the Disposal of Subsidiary Companies
The effect on the individual assets and liabilities is set out below:
2005 2004
# #
Cash and cash equivalent - 704
Other payable - (1,429)
Amount due to related parties - (3,844)
Net liabilities disposed of - (4,569)
Gain on disposal of subsidiaries - 6,686
- 2,117
Less: Cash and cash equivalents of disposed subsidiaries (net) - (704)
- 1,413
COMPANY PROFIT AND LOSS ACCOUNT
FOR THE PERIOD FROM INCORPORATION ON 8TH JULY 2004 TO 31ST DECEMBER 2005
Period from
Incorporation
On 8th July
2004 to
31st December
Note 2005
#
Administrative expenses
Other operating expenses (136,801)
Operating loss (8) (136,801)
Other operating income 3,799
Interest receivable
Dividends received 321,997
Loss before taxation 188,995
Income tax expense (11) -
Dividends paid (238,657)
Loss for the year (49,662)
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM INCORPORATION ON 8TH JULY 2004 TO 31ST DECEMBER 2005
Share Share Retained Translation Capital
Capital Premium Earnings Reserves Reserves Total
# # # # # #
Issue of shares on incorporation 2 - - - - 2
Issue of shares in consideration
for the acquisition of the entire
share capital of AEC.Edu Group Pte
Ltd 1,308,639 - - - - 1,308,639
Issue of shares for cash on
Admission to AIM 182,963 567,185 - - - 750,148
Cost of share issue - (324,666) - - - (324,666)
Profit for the period - - 188,995 - 188,995
Dividends paid - - (238,657) (238,657)
Balance at 31 December 2005 1,491,604 242,519 (49,662) - - 1,684,461
COMPANY CASH FLOW STATEMENT
FOR THE PERIOD FROM INCORPORATION ON 8TH JULY 2004 TO 31ST DECEMBER 2005
Period from
incorporation
on 8th July 2004 to
31st December
2005
#
Cash Outflows from Operating Activities
Loss from operations (133,002)
(133,002)
Changes in working capital
Receivables (27,120)
Payables 23,598
Related parties (343,000)
Net cash generated used in operating activities (479,524)
Cash Flows from Financing Activities
Proceeds from issue of shares 725,130
Costs of issue of shares (324,666)
Dividends received 321,997
Dividends paid (238,657)
Net cash generated used in financing activities 379,693
Net decrease in cash and cash equivalents 4,280
Cash and cash equivalents at start of period -
Cash and cash equivalents at end of the period 4,280
1 General
AEC Education plc (the "Company") is a limited liability company
incorporated in England and Wales on 8 July 2004. The Company was admitted to
AIM on 10 December 2004. Its registered office is 1 Park Row, Leeds LS1 5AB and
its principal place of business is in Singapore.
The principal activities of the Company are that of investment
holding and provision of educational consultancy services. On 17th November
2004, the Company acquired the whole of the issued share capital of AEC Edu
Group Pte Limited, a company incorporated in Singapore. The principal activities
of the subsidiary companies are set out in Note 14 to the financial statements.
There have been no significant changes in the nature of these activities during
the year.
The directors of the Company are considered to be key management.
The Board of Directors have authorised the issue of these financial
statements on the date of the Statement by directors set out on page 9.
2 Significant Accounting Policies
(a) Basis of Preparation
The financial statements have been prepared in accordance with applicable
International Financial Reporting Standards ("IFRS") as adopted by the EU. The
Group has not adopted early IFRS 7, Financial Instruments: Disclosures, which
was published in August 2005 and is effective for accounting periods beginning 1
January 2007. The impact on the accounts had this standard been adopted early is
disclosed in note 31.
(b) Basis of Consolidation
The Company acquired AEC Edu Group Pte Limited by way of a share for
share exchange. The consolidated financial statements have been prepared on the
basis of the pooling of interest method to reflect the effective Group
re-structure by way of a share for share exchange with common shareholders. On
this basis, the Company has been treated as the holding company of its
subsidiary company for the financial years presented rather than from the date
of its acquisition. Accordingly, the consolidated results of the Group for the
financial year ended 31 December 2005 include the results of the Company and its
subsidiary with effect from 1 January 2005. The comparative combined balance
sheet and profit and loss account for the financial year ended 31 December 2004
has been prepared on the basis that the existing Group had been in place at 1
January 2004.
All significant intercompany transactions and balances within the
Group are eliminated in the preparation of the consolidated financial
statements.
2 Significant Accounting Policies (continued)
(b) Subsidiary Company
A subsidiary company is an entity in which the Group, directly or indirectly,
holds more than 50% of the issued share capital, or controls more than half of
the voting power, or controls the composition of the board of directors or which
the Group has power to govern the financial and operating policies.
Investment in subsidiaries is stated in the financial statements of the Company
at cost less impairment losses. The financial statements of subsidiaries
acquired are consolidated in the financial statements of the Group from the date
that control commences until the date control ceases, using the acquisition
method of accounting.
(c) Associated Companies
Associates are those entities in which the Group has an interest of not less
than 20% of the equity and in whose financial and operating policy decisions the
Group exercises significant influence.
The consolidated financial statements include the Group's share of the total
recognised gains and losses of associates on an equity accounted basis, from the
date that significant influence commences until the date that significant
influence ceases.
(d) Functional and Presentation Currency
The consolidated financial statements have been presented with United Kingdom
sterling as the presentation currency as the Company is incorporated in England
and Wales with sterling denominated shares which are traded on AIM.
Items included in the financial statements of each subsidiary of the Group are
measured using the currency of the primary economic environment in which the
subsidiary operates ("the functional currency"). In the opinion of the
directors, Singapore dollars is the most appropriate functional currency.
(e) Foreign Currency Translations
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Foreign currency monetary assets and liabilities are
translated using the exchange rate prevailing at the balance sheet date.
Non-monetary assets and liabilities are measured using the exchange rates
prevailing at transaction dates, or in the case of the items carried at fair
value, the exchange rates ruling when the values were determined. Foreign
exchange gains and losses resulting from the settlement of foreign currency
transactions and translation of foreign currency denominated assets and
liabilities are recognised in the income statement.
Assets and liabilities of the entities having functional currency other than the
presentation currency are translated into sterling equivalents at exchange rates
ruling at balance sheet date. Revenues and expenses are translated at average
exchange rates for the year, which approximates the exchange rates at the dates
of transactions. All resultant differences are taken directly to equity. On
disposal
2 Significant Accounting Policies (continued)
of a foreign entity, accumulated exchange differences are recognised in the
income statement as part of the gain or loss on disposal.
The following rates of exchange have been applied:
2005 2004
1# to 1 Singapore Dollar
Closing rate 2.87 3.15
Average rate 2.97 3.15
1Malaysian Ringgit to 1 Singapore Dollar
Closing rate 2.25 2.31
Average rate 2.27 2.23
(f) Revenue Recognition
Revenue is recognised on the following basis:
(i) Course fees in respect of courses offered with no
obligation to impart lessons are recognised when the students register for the
course and collect the study materials.
All other course fees are recognised as income based on classes
conducted during year.
(ii) Revenue from sub-letting of office space is recognised over
the period of the lease.
(iii) Consulting income is recognised on an accruals basis.
(iv) Commission income is recognised when services are rendered.
(v) Dividend income from investments in associated companies is
recognised when the shareholders' rights to receive payment have been
established.
(vi) Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate applicable.
(g) Borrowing Costs
Borrowing costs incurred to finance the development of plant and equipment are
capitalised during the period of time that is required to complete and prepare
the asset for its intended use. The capitalised costs are depreciated over the
useful life of the plant and equipment.
Other borrowing costs including interest cost and foreign exchange differences,
on short term borrowings are recognised on a time-apportioned basis in the
profit and loss account using the effective interest method.
2 Significant Accounting Policies (continued)
(h) Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and any
impairment losses. Depreciation policy, useful lives and residual values are
reviewed at least annually, for all asset classes to ensure that the current
method is the most appropriate.
Expenditure incurred after the plant and equipment have been put into operation,
such as repairs and maintenance is charged to the income statement. Expenditure
for additions, improvements and renewals is capitalised when it can be clearly
demonstrated that the expenditure has resulted in an increase in the future
economic benefits expected to be realised from the use of the items of plant and
equipment beyond their originally assessed standard of performance.
Depreciation is calculated based on the straight-line method to write off the
cost of plant and equipment over their estimated useful lives as follows:
Furniture and fittings - 5 - 10
years
Classroom and office equipment - 4 - 10 years
Computers - 4 - 5
years
Renovation - 5 years
Motor vehicles - 5 years
Library books - 5 - 10
years
(i) Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and bank deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.
(j) Trade and Other Receivables
Trade and other receivables, which generally have 30 to 90 days terms, are
initially measured at fair value, and subsequently measured at amortised cost,
using the effective interest method, less allowance for impairment. An allowance
for impairment of trade receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to
the original term of the receivables. The amount of the allowance is the
difference between the asset's carrying amount and the present value of the
estimated cash flows discounted at the original effective interest rate. The
amount of the allowance is recognised in the income statement.
(k) Trade and Other Payables
Trade and other payables, which are normally settled on 30 to 90 days term, are
initially measured at fair value, and subsequently measured at amortised cost,
using the effective interest method.
2 Significant Accounting Policies (continued)
(l) Deferred Income
Deferred income relates to course fees received in advance and is recognised in
the income statement based on classes conducted.
(m) Deferred Income Tax
Current tax is the expected tax payable on the taxable income for the year based
on the tax rate enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of prior years.
Deferred tax is provided, using the liability method, on all temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred tax assets and
liabilities are offset when they relate to income taxes levied by the same tax
authority. Tax rates enacted or substantively enacted by the balance sheet date
are used to determine deferred income tax.
Deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be
utilised.
Deferred income tax is provided on temporary differences arising on investments
in subsidiary companies and associated companies, except where the timing of the
reversal of the temporary difference can be controlled by the Group and it is
probable that the temporary difference will not reverse in the foreseeable
future.
(n) Development Expenditure
Development expenditure represents direct expenditure and related costs incurred
in developing new courses and are capitalised and deferred only when there is a
clearly defined project and the outcome of the project has been assessed with
reasonable certainty as to its technical feasibility and its ultimate commercial
viability. These costs are amortised over the expected course duration of not
more than five years, starting in the year when the course commences.
(o) Impairment of Assets
An assessment is made at each balance sheet date of whether there is any
indication of impairment of an asset, or whether there is any indication that an
impairment loss previously recognised for an asset in prior years may no longer
exist or may have decreased. If any such indication exists, the asset's
recoverable amount is estimated. An asset's recoverable amount is calculated as
the higher of the asset's value in use or its net selling price.
2 Significant Accounting Policies (continued)
(o) Impairment of Assets (continued)
Where it is not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the cash-generating unit to
which the asset belongs. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its
recoverable amount. Impairment losses are recognised as an expense immediately,
unless the relevant asset is at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately, unless the relevant asset
is carried at a revalued amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.
(p) Leases
Leases where the lessor effectively retains substantially all the risks and
rewards of ownership of the leased item are classified as operating leases.
Operating lease payments are recognised as rental expenses in the income
statement in equal annual amounts over the lease terms.
(q) Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation.
(s) Employees' Benefits
Defined contribution plans
As required by Singapore law, the Group makes contributions to the Singapore
state pension scheme, the Central Provident Fund ("CPF"). CPF contributions are
recognised as compensation expense in the same year as the employment that gives
rise to the contribution.
Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue to
employees. A provision is made for the estimated liability for annual leave as a
result of services rendered by employees up to the balance sheet date.
2 Significant Accounting Policies (continued)
(t) Fair Value Estimation
The carrying amount of current receivables and payables are assumed to
approximate their fair values. The fair value of financial liabilities for
disclosure purposes is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Group for
similar financial instrument.
(u) Goodwill
Goodwill arising on a business combination represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of the acquired subsidiary/associated company at the date
of acquisition. All business combinations are accounted for using the purchase
method. Goodwill is recognised as an asset and is tested annually for
impairment and carried at cost less any impairment losses. Any impairment is
recognised immediately as a charge to the income statement and is not
subsequently reversed.
(v) Deferred Expenditure
Deferred expenditure relates to course fees and related expenses paid in advance
and is recognised in the income statement based on classes conducted.
Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the Group's accounting policies above, management
necessarily make judgements and estimates that have a significant effect on
the amounts recognised in the financial statements. Changes in the assumptions
underlying the estimates could result in a significant impact to the financial
statements. The most critical of these accounting judgement and estimation
areas are noted.
(i) Estimated Impairment of Goodwill
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in Note 2(v). The recoverable
amount of goodwill of #907,680 stated in Note 15 is determined from value in use
calculation. The key assumption for the value in use calculation are those
regarding expected discounted future cash flows of the associated company. In
the opinion of the directors, as at 31 December 2005 there is no indication of
impairment in the value of goodwill.
(ii) Income Taxes
The Group is subject to income taxes in numerous jurisdictions. Significant
judgement is required in determining the capital allowance, deductibility of
certain expenses and taxability of certain income during the estimation of the
provision for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain during the ordinary course of
business. The Group recognises liabilities based on estimates of whether
additional taxes will be due. Where the final tax outcome is different from the
amounts that were initially recorded, such differences will impact the income
tax and deferred income tax provisions in the period in which such determination
is made.
(iii) Allowance for receivables
The directors exercises their judgement in making allowances for receivables. A
special provision allowance for receivables is made if the receivables are not
collectible. There is no policy on general provision for receivables.
(iv) Impairment of assets/(other than goodwill)
The Group reviews the carrying amounts of assets as at each balance sheet date
to determine whether there is any indication of impairment. If any such
indication exists, the assets' recoverable amount or value in use is estimated.
Determining the value in use of plant and equipment, which requires the
determination of future cash flows expected to be generated from the continued
use and ultimate disposition of such asset, requires the Company to make
estimates and assumptions that can materially affect the financial statements.
Any resulting impairment loss could have a material adverse impact on the
Group's financial condition and results of operations.
3 Segmental Information
All revenue and profit before taxation arises from operations in the education
sector, and in South East Asia.
4 Sale of Services
Group
2005 2004
# #
Course fees 926,503 916,392
Sales of systems and support services 476,015 500,657
1,402,518 1,417,049
In 2004, included in course fees is an amount of #97,902 pertaining to revenue
earned arising from an exchange of goods (Note 16).
5 Other Income
Group
2005 2005
# #
Application fees and registration fees 37,306 9,680
Commission income 344 49,545
Consultancy fees 40,404 -
Training and support income - 4,523
Rental and related income 20,816 -
Sale of material and textbooks 2,698 2,482
Summer camp income 22,980 26,996
Miscellaneous income 15,618 677
140,166 93,903
6 Salaries and Employees' Benefits
Group
2005 2004
# #
Staff salaries and related costs 246,978 184,852
Director's fee 22,500 38,273
Directors' remuneration 64,948 13,851
334,426 236,976
7 Finance Costs
Group
2005 2004
# #
Interest on bank overdraft 1,303 -
Interest on loan from third party 1,536 2,321
Interest on hire purchase 100 -
2,939 2,321
8 Operating profit/loss
Operating profit /loss is stated after charging the following:
Group Company
2005 2004 2005 2004
# # # #
Auditor's remuneration:
In respect of audit services 12,000 - 12,000 -
In respect of other services* 7,375 57,000 7,375 57,000
Amortisation of pre-operating expenses 16,748 - - -
Bad debts written off 48,452 7,448 - -
Exchange (gain)/loss (22,752) 11,650 - -
Office and equipment rental 39,916 25,824 - -
Write back of allowance for
Impairment of trade receivables (1,703) (6,101) - -
* Other services include acting on the Admission of the Company to AIM in 2004.
9 Other Income
Group
2005 2004
# #
Gain on disposal of investment in
subsidiary companies - 6,685
- 6,685
10 Income Tax
Tax expense attributable to the results is made up of:
Group Company
2005 2004 2005 2004
# # # #
Current income tax - 16,514 - -
Deferred tax - (5,146) - -
- 11,368 - -
Underprovision in respect of prior years:
Current income tax 13,464 1,593 - -
Deferred tax (13,131) 273 - -
Office and equipment rental 333 13,234 - -
The reconciliation of the current year tax expense and the product of accounting
profit multiplied by the Singapore statutory tax rate is as follows:
Group
2005 2005 2004 2004
# % # %
Profit before income tax 194,378 560,862
Income tax at the statutory rate of 30% 58,313 30.0 168,259 30.0
Difference arising from foreign tax rate 20,224 10.4 (24,592) (4.4)
Non allowable items 23,375 12.0 9,461 1.7
Tax exempted income (95,296) (49.0) (121,778) (21.7)
Singapore statutory stepped income (2,040) (1.0) (8,020) (1.4)
exemption
Future tax benefits not recognised (4,577) (2.4) 1,082 0.1
Under/(over) provision of income tax in 13,464 6.9 (5,147) (0.9)
respect of prior years
(Over)/under provision of deferred tax in (13,131) (6.8) 273 -
prior years
Utilisation of previously unrecognised tax - - (6,304) (1.1)
benefits
333 (0.1) 13,234 2.3
At the balance sheet date, the Group had unabsorbed tax losses amounting to
#16,727 (2004: #16,727) from pre-pioneer status year carried forward available
for off-setting against future taxable profits for its subsidiary company in
Malaysia. The utilisation of these tax losses is subject to the agreement with
the tax authorities and compliance with certain provisions of the tax
legislation. The
10 Income Tax (continued)
deferred tax benefit arising from the unutilised tax losses has not been
recognised in accordance with the accounting policy in Note 2(m) to the
financial statements.
Temporary differences arising from investment in subsidiary and associated
companies are considered to be insignificant to the Group.
Group Company
2005 2004 2005 2004
# # # #
Composition of deferred taxation:
On the excess of the net book value
over tax written down value of
plant and equipment 480 12,877 - -
Analysis of provision for deferred taxation:
Balance at the beginning of the year 12,877 12,877
Overprovision of deferred taxation (12,397) - - -
Balance at the end of the year 480 12,877 - -
11 Earnings Per Share
The earnings per ordinary share is based on profit attributable to shareholders
amounting to #194,045 (2004:# 547,628) and the weighted average number of
ordinary shares in issue of 14,916,042 (2004: 11,903,557) shares.
There is no dilution as the Group did not have any potential ordinary shares
outstanding as at 31st December 2005 and 2004.
12 Plant and Equipment
Classroom
and office
Furniture Motor Library
equipment
Renovation Computers & fittings vehicle books Total
Group # # # # # # #
2005
Cost
As at 1 January 2005 15,658 34,888 3,522 73,346 392 1,993 129,799
Additions 71,199 12,716 21,776 1,865 - - 107,556
Currency realignment 1244 3,418 396 5,271 30 233 10,592
As at 31 December 2005 88,101 51,022 25,694 80,482 422 2,226 247,947
Accumulated depreciation
As at 1 January 2005 6,929 27,295 2,194 41,366 196 1,010 78,990
Charge for the year 10,692 4,798 2,147 13,916 82 420 32,055
Currency realignment 1,068 2,849 293 3,765 18 94 8,087
As at 31 December 2005 18,689 34,942 4,634 59,047 296 1,524 119,132
Net book value
At 31 December 2005 69,385 16,080 21,086 21,409 126 729 128,815
Classroom
and office
Furniture Motor Library
equipment
Renovation Computers & fittings vehicle books Total
Group # # # # # # #
2004
Cost
As at 1 January 2004 13,454 34,510 3,250 73,587 401 2,064 127,266
Additions 2,465 751 272 730 - - 4,218
Disposal - - - (216) - - (216)
Currency realignment (261) (373) - (755) (9) (71) (1,469)
As at 31 December 2004 15,658 34,888 3,522 73,346 392 2,020 129,799
Accumulated depreciation
As at 1 January 2004 4,036 23,937 1,734 26,822 120 619 57,268
Charge for the year 2,979 3,358 460 15,682 79 404 22,962
Disposal - - - (216) - - (216)
Currency realignment (86) - - (922) (3) (13) (1,024)
As at 31 December 2004 6,929 27,295 2,194 41,366 196 1,010 78,990
Net book value
At 31 December 2004 8,729 7,593 1,328 31,980 196 983 50,809
At the balance sheet date, the Group's net book value of computers
under finance lease arrangements amounted to #3,615 (2004: #Nil).
13 Development Expenditure
Group
2005 2004
# #
Cost
At 1st January 2005 43,125 43,125
Addition - -
Currency alignment 4,226 -
At 31st December 2005 47,351 43,125
Amortisation
At 1st January 2005 8,624 -
Charge for the year 9,135 8,624
Currency alignment 1,178
At 31st December 2005 18,937 8,624
Net Book Value
At 31st December 2005 28,414 34,501
14 Investment in Subsidiary Company
Company
2005 2004
# #
Investment in a subsidiary - AEC.Edu Group Pte Ltd
Unquoted equity shares, at cost 1,308,639 1,308,639
Due from subsidiary company 343,000 -
AEC Edu Group Pte Ltd is the Company's immediate subsidiary. The details of AEC
Edu Group Pte Ltd and the subsidiaries and associates it held at 31 December
2005 are as follows:
Subsidiary companies
and country of Principal activities Equity held by
incorporation (Place of business) the Company
2005 2004
% %
AEC.Edu Group Pte Ltd Investment holding and
(Singapore) provision of education
consultancy services 100 100
(Singapore)
Subsidiaries held by AEC Edu.Group Pte Ltd
AEC Resource Development Pte Ltd Education, training and 100 100
(Singapore) human resource consultancy
(Singapore)
AEC Accountancy & Business School Pte Ltd Education, training and 100 100
(formerly known as Melewar Business School human resource consultancy
Pte Ltd) (Singapore)
(Singapore)
The McGregorr Consultancts Pte Ltd Advisors and consultants for 100 100
(Singapore) further learning and dealing
in study kits and manuals
(Singapore)
Flexi Learning Systems Pte Ltd Operator and agent of schools, 100 100
(Singapore) colleges, institutions, and
professional associations in
promoting training and
Educational programmes and
courses (Singapore)
AEC Internet Education Technology Pte Ltd E-learning applications 100 100
service
(Singapore) provider to develop,
distribute
and implement dynamic
Educational content and
innovative learning processes
and software tools (Singapore)
14 Investment in Subsidiary Company (continued)
The details of the subsidiary company as at 31 December 2005 are as follows:
Subsidiary companies
and country of Principal activities Equity held by
Incorporation (Place of business) the Company
2005 2004
% %
Subsidiaries held by AEC Edu.Group Pte Ltd
AEC Edutech Sdn Bhd Development, management, 100 100
(Malaysia) * and provision of consultancy
and market educational
technology solutions
related products
(Malaysia)
Brighton Commercial Training Centre Pte Ltd Technical, vocational and 100 -
(Singapore) commercial education
(Singapore)
AEC Business School Pte Ltd Technical, vocational and 100 -
(Singapore) commercial education
(Singapore)
In 2005, the subsidiary company, AEC.Edu Group Pte Ltd converted 2
sole-proprietors, Brighton Commercial Training Centre and AEC Business School to
limited liability companies with a paid up capital of S$1 equivalent to 0.3367
pence each respectively.
15 Investment in Associated Companies
Group
2005 2004
# #
Unquoted shares, at cost 1,386,694 1,386,694
Goodwill transferred to capital reserves 14,038 14,038
Share of net postacquisition reserves
Balance at beginning of year (152,223) (162,789)
Share in profits for the year 99,283 28,640
Share of taxes (31,663) (18,074)
Dividends received (45,263) -
Currency alignment 123,068
Balance at end of year (6,798) (152,223)
1,393,934 1,248,509
Due from associated company 67,106 154,190
15 Investment in Associated Companies (continued)
The carrying amount of the investment in associated companies includes goodwill
of #907,680 (2004: #907,680).The amounts due from associated companies are trade
in nature, unsecured, interest-free and payable within the next twelve months.
Summarised financial information in respect of the Group's associated companies
is set out below:
2005 2004
# #
Total assets 2,558,434 2,562,990
Total liabilities (984,883) (1,152,224)
Net assets 1,573,551 1,410,767
Revenue 2,952,900 2,435,418
Profit for the year 220,462 98,133
Details of associated companies are as follows:
Associated
companies and
country of Principal activities Equity held by
Incorporation (Place of business) the Group
2005 2004
% %
Held by AEC.Edu Group Pte Ltd
Keris Murni Sdn Bhd Provides education services and the 30 30
operation
(Malaysia) of education tuition centres
(Malaysia)
Pusat Tiusyen Kasturi Sdn Provides education services and the 30 30
operation
Bhd of education tuition centre
(Malaysia) (Malaysia)
Educational Resources Pte Provides consultancy services in education 34.96 34.96
Ltd related services and business training
(Singapore)
In the prior year, the a subsidiary company, AEC.Edu Group Pte Ltd acquired a
34.96% interest in Educational Resources Pte Ltd for a consideration of S$4
million (#1,271,459) from a related party (common directors/shareholders). The
consideration was settled by a novation of related party balances, amounting to
S$3,953,000 (#1,256,516) with the balance paid in cash.
15 Investment in Associated Companies (continued)
In the opinion of the directors, the recoverable amount of the investment in
associated companies is not less than the carrying amount of the investment on
the basis that the present value of the estimated future cash flows expected to
arise from the associated companies' operations over the next few years will
exceed the carrying amount of the investment in these associated companies.
16 Inventories
Inventories pertains to the net realisable value of goods received in exchange
for the rendering of training services in the previous financial year.
17 Trade Receivables
Group
2005 2004
# #
Trade receivables are stated after deducting allowance for
impairment of
37,529 17,298
Group
2005 2004
# #
Trade receivables are denominated
in the following currencies:
Singapore dollars 250,728 135,863
Pound sterling - -
Malaysian ringgit 1,560 4,490
252,288 140,353
18 Other Receivables
Group Company
2005 2004 2005 2004
# # # #
Deposits 1,795 1,179 - -
Prepayments 227 459 - -
Other debtors 53,238 138,125 52,140 125,050
55,260 139,763 52,140 125,050
Other receivables are denominated in the following currencies:
Singapore dollars 2,145 8,873 - -
Pound sterling 52,140 125,050 52,140 125,050
Malaysian ringgit 975 5,840 - -
55,260 139,763 52,140 125,050
19 Deferred Expenditure
Deferred expenditure relates to consultancy and course fees paid in advance.
Group Company
2005 2004 2005 2004
# # # #
Deferred expenditure is denominated
in the following currencies:
Singapore dollars 31,054 12,747 - -
20 Due from/(to) Related Parties
Related parties are entities (except for holding company and associated company)
with common direct/indirect shareholders and directors. Parties are considered
to be related (directly or indirectly) if one party has the ability to control
or exercise significant influence over the other party in making financial and
operating decision.
The related parties are companies with common shareholders or
directors.
Group
2005 2004
# #
Due from related parties
Trade 223,527 66,270
Non-trade 260,673 278,382
484,210 344,652
Due to related parties
Trade (27,407) -
Non-trade (23,232) (5,337)
(50,639) (5,337)
Total 433,571 339,315
20 Due from/(to) Related Parties (continued)
Group
2005 2004
# #
Balances with related parties are denominated in the following
currencies:
Singapore dollar 186,920 233,715
Pound sterling
Malaysian ringgit 246,651 105,600
433,571 339,315
The amount due from/(to) related parties are unsecured, interest-free and due
within the next twelve months
21 Cash and Bank Balances
Group Company
2005 2004 2005 2004
# # # #
Cash and bank balances are denominated
in the following currencies:
Singapore dollars 65,764 10,916 - -
Pound sterling 4,280 408,246 4,280 408,246
Malaysian ringgit 19,635 2,010 - -
89,679 421,172 4,280 408,246
22 Trade Payables
Group Company
2005 2004 2005 2004
# # # #
Trade payables balances are denominated
in the following currencies:
Singapore dollars 90,283 205,613 - -
23 Deferred Income
Deferred income relates to course fees received in advance.
Group Company
2005 2004 2005 2004
# # # #
Deferred income is denominated
in the following currencies:
Singapore dollars 156,478 42,446 - -
24 Other Payables
Group Company
2005 2004 2005 2004
# # # #
Advance from staff - 497 - -
Other creditors 61,480 206,962 23,598 130,596
Accrued expenses 49,694 83,006 - -
111,174 290,465 23,598 130,596
Other payables are denominated in the following currencies:
Singapore dollars 84,329 159,866 - -
Pound sterling 23,598 141,131 23,598 130,596
Malaysian ringgit 3,247 - - -
111,174 300,997 23,598 130,596
25 Bank Overdraft
The bank overdraft facility of the Group is secured by a personal guarantee by a
director and incurs interest of prime rate plus 2% per annum. The bank overdraft
is payable within 12 months from the balance sheet date.
26 Finance Lease Obligations
Group Group
Present value
Minimum of minimum
lease payments lease payments
2005 2004 2005 2004
# # # #
Within one year 1,806 - 1,755 -
Less: Future finance charges (51) - - -
Present value of lease obligations 1,755 - 1,755 -
Effective rate of interest per -
annum for hire purchase 4.5% Nil
Finance lease creditors are denominated in the following currency:
Singapore dollars 1,755 -
1,755 -
27 Loans Payable
Group
2005 2004
# #
Secured - 71,415
Unsecured - 34,413
- 105,828
Loan Payables are denominated in the following currency:
Singapore dollars - 105,828
In the prior year, the secured loan represented the amount extended to a
director of the Group by The 1 Group Plc (on behalf of Yourway Limited), a
company incorporated in the United Kingdom, amounting to #75,000 to be used as a
temporary advance to the Group for amounts owing to its creditors. The loan was
repayable monthly at #3,500 commencing February 2005 and the balance (including
unpaid interest fees and other sums payable) by 15 May 2005. The loan carried
interest at 18% per annum.
27 Loans Payable (continued)
The 1 Group Plc is a related party by virtue of a common director with the
Group's ultimate holding company. This loan is secured by:-
(a) a personal guarantee by a director;
(b) shares of the ultimate holding company, AEC Edu Group PLC,
amounting to #85,000
This secured loan was fully paid subsequent to year end by the ultimate holding
company on behalf of the Group.
The unsecured loans were from third parties, interest-free, and were
fully repaid during the year.
28 Share Capital
Group and Company
2005 2004
# #
Authorised
50,000,000 ordinary shares of 10p each 5,000,000 5,000,000
Allotted, called up
14,916,042 ordinary shares of 10p each 1,491,604 1,491,604
The Company was incorporated on 8 July 2004 with the name Spurlynx public
limited company, and changed its name to AEC Education plc on 11 November 2004.
On incorporation, the Company had an authorised share capital of #100,000
divided into 100,000 shares of #1 each, of which 2 ordinary shares of #1 each
were issued at par for cash.
On 10 November 2004 the authorised share capital of the Company was increased by
#1,300,000 by the creation of an additional 1,300,000 ordinary shares of #1
each, and subsequently each authorised and issued ordinary share of #1 was
sub-divided into 10 Ordinary shares of 10p.
On 17 November 2004 the authorised share capital of the Company was increased by
#3,600,000 by the creation of an additional 36,000,000 Ordinary Shares of 10p
each.
On 19 November 2004, the Company was granted a certificate to trade under
section 117 Companies Act 1985.
On19 November 2004, the Company acquired the whole of the issued share capital
of AEC Edu Group Pte Ltd, a company incorporated in the Republic of Singapore,
in consideration for the issue of 13,086,394 Ordinary Shares of 10p each in the
Company at par.
29 Related Party Transactions
In addition to the related party information disclosed elsewhere in the
consolidated financial statements, the Group had significant transactions with
related parties on terms agreed between the parties as follows:
Group
2005 2004
# #
With a related party with common directors
OLOL Management Service Pte Ltd
- Course fees income 343,952 217,980
- Commission paid and payable (343,748) (171,322)
Savant Infocomm Pte Ltd
- Consultancy fees income (41,880) -
AEC Property Management Pte Ltd
- Office rental expenses (904) (22,359)
- Air-conditioning and electricity charges expenses - (10,436)
Integrative Organisational Learning Sdn Bhd - revenue
- Royalty and Licensing 1,563 1,228
- Computer software and hardware 2,863 2,352
- Implementation, training and testing 2,978 2,238
- Management and consultancy fees 391 307
Open Learning Agensi Malaysia Sdn Bhd - revenue
- Royalty and Licensing 16,877 15,665
- Computer software and hardware 30,920 30,006
- Implementation, training and testing 32,159 28,541
- Management and consultancy fees 4,219 3,916
QLA Learning Agency Malaysia Sdn Bhd -revenue
- Royalty and Licensing 199 413
- Computer software and hardware 365 790
- Implementation, training and testing 379 752
- Management and consultancy fees 50 236
Intellectual Challenge Sdn Bhd -revenue
- Royalty and Licensing 3,128 5,699
- Computer software and hardware 5,731 10,916
- Implementation, training and testing 5,961 10,383
- Management and consultancy fees 782 1,425
29 Related Party Transactions (continued)
Group
2005 2004
# #
With related parties with associated companies
Genting Mutiara Sdn Bhd -revenue
- Royalty and Licensing 10,238 8,316
- Computer software and hardware 18,756 15,929
- Implementation, training and testing 19,507 15,359
- Management and consultancy fees 2,559 2,079
Indo Pelangi Tegas Sdn Bhd - revenue
- Royalty and Licensing 5,417 4,311
- Computer software and hardware 9,924 8,257
- Implementation, training and testing 10,321 7,854
- Management and consultancy fees 1,354 1,078
Jaguh Suria Sdn Bhd - revenue
- Royalty and Licensing 3,608 3,533
- Computer software and hardware 6,609 6,768
- Implementation, training and testing 6,874 6,437
- Management and consultancy fees 902 883
Keris Murni Sdn Bhd -revenue
- Royalty and Licensing 28,688 23,008
- Computer software and hardware 52,557 44,072
- Implementation, training and testing 54,663 41,921
- Management and consultancy fees 7,172 5,752
Pusat Tuiysen Sdn Bhd -revenue
- Royalty and Licensing 19,422 19,925
- Computer software and hardware 35,582 38,166
- Implementation, training and testing 37,008 36,095
- Management and consultancy fees 4,856 4,848
Pelangi Tegas Sdn Bhd - revenue
- Royalty and Licensing 6,376 5,594
- Computer software and hardware 11,681 10,715
- Implementation, training and testing 12,149 10,192
- Management and consultancy fees 1,594 1,398
29 Related Party Transactions (continued)
Group
2005 2004
# #
Key management personnel
- Short term benefits 87,420 52,124
- post employment benefit 1,102 -
88,522 52,124
30 Operating Lease Commitments
The Group leases its office premises for a period of 2 years, renewable for such
period and under such terms and conditions as may be agreed upon with the
lessor. There are no restrictions placed upon the Group in entering into these
lease arrangements. At the balance sheet date, the future minimum rental payable
under these non-cancellable operating leases are as follows:-
Group
2005 2004
# #
Payable:
Within one year 4,387 17,546
Between two to five years - 4,387
4,387 21,933
31 Financial Instruments
IFRS 7 Financial Instruments: Disclosure was issued in August 2005, but comes
into force for accounting periods beginning on or after 1 January 2007. The
Company is not intending to adopt the standard early. IFRS 7 will have no impact
on the net assets of the Company or Group, but will require increased disclosure
in respect of the credit, liquidity and market risks faced by the Company and
Group.
At the same time as IFRS 7 comes into force, IAS 1 is also amended to require
additional disclosure in respect of capital. The impact of the revision of IAS 1
on the Company and Group will be limited, as neither the Company nor the Group
is subject to externally imposed capital requirements.
31 Financial Instruments (continued)
(a) Financial Risk Management Objectives and Policies
The Group does not have written risk management policies and guidelines.
Generally, the Group adopts conservative strategies in its risk management. The
directors believe that the Group's exposure associated with these risks is
minimal.
(i) Credit risk
The carrying amount of trade and other debtors, subsidiary companies and related
parties' balances and cash represent the Group's maximum exposure to credit
risk.
The Group has no significant concentration of credit risk.
(ii) Liquidity risk
The Group adopts prudent liquidity risk management by maintaining sufficient
cash and having adequate amount of credit facilities. Due to the nature of the
Group's operations, the Group aims at maintaining flexibility in funding by
keeping committed credit facilities available.
(iii) Foreign exchange risk
The Group incurs foreign currency risk on commission payable to universities,
the sale of system and support services, and loan advanced from a third party
are primarily denominated in currencies other than Singapore dollars. The
currencies giving rise to this risk are Australian dollar, Singapore dollar and
Malaysian ringgit.
The Group does not use derivative financial instruments to hedge against the
volatility associated with foreign currency transactions as the directors
believe that the risks arising from fluctuations in foreign currency exchange
rates are not significant.
31 Financial Instruments (continued)
(iv) Interest risk
The Group's exposure to market risk for changes in interest rates relate
primarily to the Group's bank overdraft facility.
The tables below set out the Group's exposure to interest rate risks. Included
in the tables are the assets and liabilities at carrying amounts, categorised by
the earlier of contractual re-pricing or maturity dates.
Fixed rates
Less Non-interest
than
Total
6 Bearing
months #
#
#
At 31.12.2005
Assets
Trade and other receivables - 858,864 858,864984,100
Cash and bank balances - 89,679 89,679
Non-financial assets - 1,668,587 1,668,587
Total assets - 2,617,130 2,617,130
At 31.12.2005
Liabilities
Trade and other payables - 252,096 252,096
Borrowings 122,304 - 122,304
Non-financial liabilities - 192,469 192,469
Total Liabilities 122,304 444,565 566,869
31 Financial Instruments (continued)
(a) Financial Risk Management Objectives and Policies
(iv) Interest risk
Fixed rates
Less Non-interest
than
6 Bearing Total
months
# #
#
At 31.12.2004
Assets
Trade and other receivables - 791,705 791,705
Cash and bank balances - 421,172 421,172
Non-financial assets - 88,112 88,112
Total assets - 1,300,989 1,300,989
Liabilities
Trade and other payables - 561,578 561,578
Borrowings 105,859 - 105,859
Non-financial liabilities - 28,459 28,459
Total Liabilities 105,859 590,037 695,896
(b) Fair Values
The fair value of financial assets and liabilities are not materially different
from their carrying amounts because of the immediate or short-term maturity of
these financial instruments.
32. Post Balance Sheet Events
On 27 April 2006, AEC Edu Group Pte Ltd, a wholly owned subsidiary of the
Company, entered into a sale and purchase agreement with a third party for the
acquisition of 64.8% of the issued share capital of Brainbox Limited, a company
incorporated in the British Virgin Islands, for a total purchase consideration
of S$50,000 in cash. Pursuant to this agreement, the subsidiary has agreed to
provide a loan of US$11,160 to Brainbox Limited for its business operation
purposes.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2005
Page
Chairman's Statement 1
Directors' Report 3
Independent Auditors' Report 6
Profit and Loss Account 8
Balance Sheets 9
Statement of Changes in Equity 10
Cash Flow Statement 11
Company Profit and Loss Account 13
Company statement of Changes in Equity 13
Company Cash Flow Statement 14
Notes to the Financial Statements 15
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2005
This information is provided by RNS
The company news service from the London Stock Exchange
END
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