Aec Education Final Results
RNS Number:0623Z
AEC Education plc
26 June 2007
26th June 2007
AEC EDUCATION PLC
("AEC" or "the Company")
Audited Results for the Year Ended 31 December 2006
Set out below is a summary of the audited financial results for AEC for the year
ended 31 December 2006.
CHAIRMAN'S STATEMENT - DECEMBER 2006
Introduction
It is my pleasure to announce the financial results of the Company for the
financial year ended 31st December 2006.
The Company operates in an increasingly competitive Asian environment and faced
especially tough trading conditions in 2006. Overall revenues increased during
the year by 2.4% to #1,579,204, compared to #1,542,684 in the year 2005 but an
increase in operating expenses, due to a number of strategic program launches
during the year, as well as the costs of winding down the unprofitable ones, led
to a loss of #271,934 (2005 - profit of #202,346).
The Board remains confident that AEC can meet its working capital requirements,
including its plans for future growth. I am also delighted to state that the
major shareholders have declared their full funding support for any synergistic
acquisition oppportunities that may arise in the future.
Review of 2006 Operations
Acquisition of BrainBox Limited
Vietnam has quietly been experiencing tremendous economic growth in the Asian
region.
In order to take advantage of this growth, the Company acquired 64.8% of the
equity of BrainBox Limited in April 2006. Brainbox is a private education
provider, based in Ho Chi Minh City ( the financial capital of Vietnam),
specialising in Language training and Management Studies. Vietnam has opened
its doors to the flood of global influences and its citizens are eager to be a
part of this new world. This is driving an ever-increasing demand for
English-language skilled management professionals and this acquisition positions
us to take full advantage of these opportunities.
In addition to the current programs running at BrainBox, the Company has
launched new cross-border programs ( please see the Program Development section)
in Vietnam. Of equal importance is the fact that this acquisition provides the
Company with another channel for student recruitment for its programs in
Singapore.
Acquisition of Smartworks Learning Center Pte. Ltd. (SLC)
The Asian region has been experiencing a surge in the real-estate and property
market. Consequently, there is an increasing demand for qualified real-estate
advisors and consultants. In order to leverage on this demand, AEC Edu Group
Pte Ltd, a wholly-owned Singapore-based subsidiary of the Company, acquired 100%
of Smartworks Learning Center Pte. Ltd.(SLC) , a private education provider
focussed on real-estate marketing programs.
SLC provides a distance learning program in real estate and marketing in
collaboration with the University of South Australia and the College of Estate
Management in the UK. SLC also conducts similar programs in partnership with
Singapore Polytechnic.
With this acquisition, AEC will be able to widen the range of education services
it offers and take full advantage of the growing demand for such programs.
Program Development
During 2006, AEC Edu Group developed a number of programs to meet the increasing
demand for courses focused on creative media/ arts and professional reskilling.
Diploma/ Advanced Diploma Programs in Interactive Media
With increasing government encouragement of gaming and digital media/content
development in Singapore, there has been a surge of demand for professionals
with skills in these technologies. In order to meet this demand, AEC has
developed a Diploma and an Advanced Diploma program in Interactive Media and is
currently running its fifth batch of students in Singapore. The program is
accredited by Napier University in the UK. There are also plans to recruit
international students for these programs.
Diploma in Pre-School Teaching - Leadership
In the wake of rising affluence and living standards in the communities that AEC
serves, there is an increasing need to provide childcare support services to
families where both parents work. AEC's Diploma program in Pre-School Teaching
- Leadership is accredited by the Singapore Ministry of Community and Youth
Services and the Singapore Ministry of Education and provides candidates with
the necessary skills to manage pre-school centers and provide curriculum and
operational support. The program is targetted at bringing older workers back
into the workforce while utilising their earlier experiences in operational and
managerial roles.
Diploma /Advanced Diploma in Hospitality Management
The enormous growth in tourism in Singapore and other regions in South-East Asia
has created an increasing demand for Hospitality Management professionals. To
meet this demand, AEC has recently launched the Diploma and Advanced Diploma
programs in Hospitality Management in Vietnam through an innovative cross-border
delivery mechanism. The students start the course in Vietnam and complete it in
Singapore, thereby creating bi-lingual professionals who are at ease in the
burgeoning global world.
Future Plans
The last couple of years have been spent consolidating and restructuring our
business activities whilst identifying new strategic areas of opportunity in the
ASEAN, with specific focus on Singapore and Malaysia. We have launched new
programs to coincide with the economic growth patterns in the region whilst
taking the hard decisions to close down those that have become obsolete. Given
the slightly longer business cycles in the Education market your directors now
expect to see a return on these initiatives over the next 2 -3 years.
China and India are two of the most important markets in Asia and they provide
enormous opportunities for AEC to grow.
China is rapidly expanding its education umbrella in preparation for the Beijing
Olympics in 2008 and the Shanghai World Expo in 2010. The country is urgently
preparing its citizens for the bilingual requirements of these two mammoth
events. AEC is currently evaluating how best to avail of the opportunities
arising from this demand.
With the rapid increase in demand for trained professionals by the
service-industries, India requires a much larger talent pipeline than it
currently possesses. AEC is well-poised to provide a series of skill-building
and career-enhancing programs. We are, therefore exploring alliances and
partnerships in the Indian market that will enable our programs and ongoing
development to be fully exploited.
Outlook
The Board remains confident that the Company's plans for growth and a rapid
return to profitability will provide shareholders with a steady growth in value.
We believe that we have now taken the tough, yet practical decisions, which
will yield these results in the future.
We will continue to seek acquisitions that are synergistic with our operations
and provide a coherent addition to our growth strategy.
Our greatest asset is the commitment and creativity of our loyal employees. The
Board would like to express its gratitude for their unstinting and steadfast
support.
William Swords
Chairman
DIRECTORS REPORT
The directors present their report and the audited financial statements of AEC
Education Plc (the "Company") and its subsidiary companies for the year ended
31st December 2006.
PRINCIPAL ACTIVITIES
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 13 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 and increasingly
competitive in 2006. As shown in the consolidated profit and loss account on
page 12, the Group's revenue increased by 2.4% to #1,579,204 compared to
#1,542,684 in the year 2005 but an increase in operating expenses, investment in
staff for product development and marketing, combined with the slow growth in
the market caused earnings to fall to a loss of #271,934 (2005: profit of
#202,346). The Board expect the new products for launch during 2006 to provide
steady growth in revenue and earnings while it continues to seek suitable niche
acquisitions.
A review of the year's operations and future prospects is given in the
Chairman's Statement.
PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP
The Group operates in an increasingly challenging environment mainly in
Singapore and Malaysia. The principal risks it faces are similar to other
businesses. Specifically, keen competition, changes in government policy on
education, funding and accreditation are some of the factors that could affect
the operations of the Group. Also the general economic and political environment
and the exchange rate fluctuations play an important part in determining the
risk the Group is exposed to.
The Group manages these risks by monitoring the situation carefully and working
closely with all the parties concerned to minimise the impact of any changes on
the operations.
FINANCIAL INSTRUMENTS
The risks faced by the Group, including financial risk, credit risk, liquidity
risk and cash flow interest rate risk and the Group's management of these risks
are detailed in note 30 of the accounts.
KEY PERFORMANCE INDICATORS
2006 2005
Sales growth 2.4% 2.1%
Gross Margin 42.0% 58.0%
Operating (loss) / profit (#292,563) #135,059
(Loss) / Earnings per share (1.8) pence 1.4 pence
As explained in the Chairman's Statement on page 1, due to a number of strategic
program launches during the year as well as the costs of winding down the
unprofitable ones, this has resulted in a drop in gross margin by 16% in the
year and the resulting operating loss of #292,563 as compared to an operating
profit of #135,059 in the year 2005.
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 year ended 31 December 2006 were 52 days (2005: 52 days), calculated in
accordance with the requirements set down in the Companies Act 1985. This
represents the ratio, expressed in days, between 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. The Company has no trade creditors.
DIVIDENDS
The directors do not recommend the payment of a dividend for the year ended 31st
December 2006 (2005: #NIL).
DIRECTORS
The names of the directors who held office during the year and to date were:
William Joseph Swords (Chairman)
Tunku Iskandar Bin Tunku Abdullah
Ramasamy Jayapal
Gopinath Pillai
Ho Peng Cheong (Appointed on 6th March 2007)
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:
At beginning At end
Name of director and company in which interests are held 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 SHAREHOLDING
At 18th April 2007, 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 Company's issued share
capital.
Shares of %
#0.10 each
KSP Investments Pte Limited 5,526,048 37.05
Pershing Keen Nominees Limited * 2,428,319 16.28
Ranch House Limited 2,000,000 13.41
Naboobalan s/o Ramansamy Naidu 874,968 5.87
Vidacos Nominees Limited 554,318 3.72
WB Nominees Limited 475,828 3.19
*Ramasamy Jayapal is deemed to have an interest in the shares held as follows:
Pershing Keen Nominees Limited 574,047
DISCLOSURE OF INFORMATION TO AUDITORS
At the date of making this report each of the persons who are directors at the
time when this Report is approved confirms that:
(a) so far as each director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
(b) each director has taken all the steps that ought to have been taken
as a director, including making appropriate enquiries of fellow directors and of
the Company's auditors for that purpose, in order to be aware of any information
needed by the Company's auditors in connection with preparing their Report and
to establish that the Company's auditors are aware of that information.
AUDITORS
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
25 June 2007
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 THE AEC EDUCATION PLC
Independent Auditors' Report to the Shareholders of AEC Education plc
We have audited the group and parent company financial statements (the "
financial statements") of AEC Education plc for the year ended 31 December 2006
which are set out pages 12 to 51. 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
The directors' responsibilities for preparing the financial statements in
accordance with applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union are set out in the Statement of
Directors' Responsibilities.
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 whether the financial statements have been properly prepared
in accordance with the Companies Act 1985. We also report to you whether in our
opinion the information given in the Directors' Report is consistent with the
financial statements.
In addition we report to you if, in our opinion, 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 other information contained in the Annual Report and consider whether it
is consistent with the audited financial statements. This other information
comprises only the Directors' Report and the Chairman's Statement. We consider
the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements. 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 judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the group's and 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.
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 2006 and of the group's and the
parent company's result for the year then ended;
* the financial statements have been properly prepared in accordance with
the Companies Act 1985 and, as regards the group financial statements,
Article 4 of the IAS Regulation; and
* the information given in the Directors' Report is consistent with the
financial statements.
MOORE STEPHENS LLP
St. Paul's House Registered Auditors
London, EC4M 7BP
England Chartered Accountants
25 June 2007
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
Note 2006 2005
# #
Revenue
Sale of services (4) 1,463,782 1,439,824
Other income (5) 115,422 102,860
1,579,204 1,542,684
Administrative expenses
Cost of services sold 911,220 635,763
Salaries and employees' benefits (6) 416,513 334,426
Amortisation of deferred expenditure 11,644 9,135
Depreciation of plant and equipment 42,478 32,055
Exchange loss 16,547 -
Finance costs (7) 8,074 2,939
Other operating expenses 465,291 393,307
Total operating costs and expenses
1,871,767 1,407,625
Operating (loss) / profit (8) (292,563) 135,059
Share of results of associated companies 25,834 67,620
(Loss) / profit before income tax (266,729) 202,679
Income tax (9) (5,205) (333)
(Loss) / profit for the year (271,934) 202,346
Attributable to:
Equity holders of the Company (271,934) 202,346
Minority interest - -
(271,934) 202,346
(Loss) / Earnings per share (in pence)
Basic (10) (1.8) 1.4
BALANCE SHEETS
AS AT 31 DECEMBER 2006
Group Company
Note 2006 2005 2006 2005
# # # #
Non-Current Assets
Plant and equipment (11) 125,076 128,815 - -
Development expenditure (12) 49,511 28,414 -
Investment in a subsidiary company (13) - - 1,308,639 1,308,639
Investment in associated companies (14) 1,300,058 1,393,934 - -
Goodwill (15) 117,855 - -
1,592,500 1,551,163 1,308,639 1,308,639
Current Assets
Inventories (16) 5,936 86,370 - -
Trade receivables (17) 460,036 252,288 - -
Other receivables (18) 84,132 55,260 8,049 52,140
Deferred expenditure (19) 23,762 31,054 - -
Due from subsidiary companies (13) - - 236,970 343,000
Due from associated companies (14) 169,098 67,106 - -
Due from other related parties (20) 1,607 484,210 - -
Cash and bank balances (21) 161,998 89,679 512 4,280
906,569 1,065,967 245,531 399,420
Total Assets 2,499,069 2,617,130 1,554,170 1,708,059
EQUITY AND LIABILITIES
Non Current Liabilities
Finance lease obligations (26) 1,200 - - -
Deferred taxation (9) 75 480 - -
1,275 480 - -
Current Liabilities
Trade payables (22) 129,916 90,283 - -
Deferred income (23) 244,630 156,478 - -
Other payables and accruals (24) 274,655 111,174 46,811 23,598
Bank overdraft (25) 85,958 120,549 - -
Due to other related parties (20) 39,613 50,639 - -
Finance lease obligations (26) 1,900 1,755 - -
Provision for income tax 29,554 35,511 - -
806,226 566,389 46,811 23,598
Share Capital and Reserves
Share capital (27) 1,491,604 1,491,604 1,491,604 1,491,604
Share premium 242,519 242,519 242,519 242,519
Reserves (42,555) 316,138 (226,764) (49,662)
1,691,568 2,050,261 1,507,359 1,684,461
Minority interest in equity - - -
Total Equity and Liabilities 2,499,069 2,617,130 1,554,170 1,708,059
The financial statements were approved by the Board of Directors on 25 June 2007
and were signed on its behalf by:
William Swords Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006
Share Share Retained Translation Capital
Capital Premium Earnings Reserves Reserves Total
# # # # # #
Group
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 - - 202,346
Dividend paid (a) - - (238,657) - - (238,657)
Cost of share issue - prior year - 4,425 - - - 4,425
overstated
Gains not recognised in the income
statement - Currency translation - - - 145,580 - 145,580
difference
Balance at 31 December 2005 1,491,604 242,519 29,822 115,756 170,560 2,050,261
Balance at 1 January 2006 1,491,604 242,519 29,822 115,756 170,560 2,050,261
Loss for the year - - (271,934) - - (271,934)
Loss not recognised in the income - - - (86,759) - (86,759)
statement - Currency translation
difference
Balance at 31 December 2006 1,491,604 242,519 (242,112) 28,997 170,560 1,691,568
(a) In 2005, the Company paid an interim dividend of 1.6 pence per share
amounting to #238,657.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006
Group
Note 2006 2005
# #
Cash Flows from Operating Activities
(Loss) / Profit before income tax (266,729) 202,679
Adjustments for:
Amortisation of deferred expenditure 11,644 9,135
Depreciation of plant and equipment 42,478 32,055
Loss on disposal of plant and equipment 934 -
Interest expense 8,074 2,939
Interest income (353) -
Exchange gain 14 (1,725) -
Currency alignment 14 63,090 (123,068)
Share of results of associated companies (25,834) (67,620)
Operating cash flow before working capital changes (168,421) 56,120
Changes in working capital:
Receivables (286,565) (145,770)
Payables 190,647 (49,990)
Inventories 80,434 1,742
Related parties 471,577 71,059
Net cash generated from/(used in)operations 287,672 (66,839)
Interest paid (8,074) (2,939)
Interest received 353 -
Tax paid (15,931) (5,678)
Net cash generated from/(used in)operating activities 264,020 (75,456)
Cash Flows from Investing Activities
Dividend income received from an associated company 58,344 45,263
Purchase of plant and equipment (41,568) (103,130)
Development expenditure (34,627) -
Acquisitions of subsidiaries net of cash acquired 15 (58,394) -
Net cash used in investing activities (76,245) (57,867)
Group
2006 2005
# #
Cash Flows from Financing Activities
Proceeds from issue of shares - 100,031
Costs of issue of shares - (126,174)
Dividend paid - (238,657)
Receipt / (repayment) of loan from third parties - (105,828)
Repayment of finance lease creditor (2,451) (2,671)
Repayment of amount due to a director - (7,611)
Net cash generated from / (used in) financing activities (2,451) (380,910)
Effect of foreign exchange rate changes on consolidation (78,414) 62,222
Net increase / (decrease) in cash and cash equivalents 106,910 (452,011)
Cash and cash equivalents at beginning of the year (30,870) 421,141
Cash and cash equivalents at end of the year =SUM(ABOVE) (30,870)
76,040
Cash and cash equivalents consist of the following:
2006 2005
# #
Cash and bank balances 161,998 89,679
Bank overdraft (85,958) (120,549)
76,040 (30,870)
COMPANY INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
Note
Period from
Incorporation
on 8th July
2004 to
31st December
Year ended 31st 2005
December 2006
# #
Administrative expenses
Other operating expenses (187,896) (136,801)
Operating loss (8) (187,896) (136,801)
Other operating income
Consultancy fee 10,000 -
Interest receivable 716 3,799
Dividends received - 321,997
Miscellaneous income 78 -
(Loss) / profit before taxation (177,102) 188,995
Income tax expense (9) - -
(Loss) / profit after taxation (177,102) 188,995
Dividends paid - (238,657)
(Loss) / profit for the year (177,102) 49,662
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006
Share Share Retained
Capital Premium Earnings 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
As at 1 January 2006 1,491,604 242,519 (49,662) 1,684,461
Loss for the year - - (177,102) (177,102)
Balance at 31 December 2006 1,491,604 242,519 (226,764) 1,507,359
COMPANY CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006
Company
Period from
Incorporation
Year ended on 8th July
31st 2004 to
December 31st December
2006 2005
# #
Cash Outflows from Operating Activities
Loss from operations (177,102) (133,002)
(177,102) (133,002)
Change in working capital
Receivables 44,091 (27,120)
Payables 23,213 23,598
Related parties 106,030 (343,000)
Net cash generated used in operating activities (3,768) (479,524)
Cash Flows from Financial 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 by financial activities - 483,804
Net (decrease) / increase in cash and cash equivalents (3,768) 4,280
Cash and cash equivalents at beginning of the year 4,280 -
Cash and cash equivalents at end of the year 512 4,280
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2006
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. The principal
activities of the subsidiary companies are set out in Note 13 to the financial
statements. There have been no significant changes in the nature of these
activities during the year.
The Board of Directors have authorised the issue of these financial
statements on the date of the Statement by directors set out on page 8.
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 European
Union.
(b) Basis of Consolidation
The consolidation of AEC Edu. Group Pte Ltd has 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
during the period ended 31 December 2005. 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.
Acquisitions since the Group re-structure are accounted for applying
the purchase method.
All significant intercompany transactions and balances within the
Group are eliminated in the preparation of the consolidated financial
statements.
(c) 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 has
the 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 purchase method
of accounting.
(d) Associated Companies
Associates are those entities in which the Group has an interest of not less
than 20% of the equity and over 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.
When the audited financial statements of associated companies are
not co-terminous with those of the Group, the Group's share of profits and
losses is arrived at based on the last audited financial statements available
and unaudited management accounts to the end of the accounting period.
In the Company's balance sheet, investments in associates are stated
at cost less any provision for impairment losses.
(e) 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"). The primary functional
currency of Group companies is Singapore Dollars.
(f) 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 the 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 statements.
Assets and liabilities of the entities having a functional currency other than
the presentation currency are translated into sterling equivalents at exchange
rates ruling at the 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 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:
2006 2005
1 # to 1 Singapore Dollar
Closing rate 3.00 2.87
Average rate 2.93 2.97
1 Malaysian Ringgit to 1 Singapore Dollar
Closing rate 2.31 2.25
Average rate 2.31 2.27
(g) Revenue Recognition
Revenue is recognised on the following basis:
(i) Course fees are recognised as income based on classes
conducted during year.
(ii) All other 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.
(iii) Revenue from sub-letting of office space is recognised over
the period of the lease.
(iv) Consulting income is recognised on an accrual basis based on
agreed amounts between parties.
(v) Commission income is recognised when services are rendered.
(vi) Management fee income is recognised when services are rendered.
(vii) Dividend income from investments in associated companies is
recognised when the shareholders' rights to receive payment have been
established.
(viii) Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable.
(h) 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.
(i) Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciated 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 capitalized when it can be clearly
demonstrated that the expenditure has resulted in an increase in the future
economic benefits expected to be realized 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
Plant and equipment held under finance leases are depreciated over their
estimated useful lives on the same basis as owned assets or, where shorter, term
of the relevant leases.
(j) Cash and Cash Equivalents
Cash and cash equivalents comprise cash in 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 cash flow statement.
(k) 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.
(l) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the first-in, first-out method. Cost comprises all costs of
purchase, cost of conversion and other costs incurred in bringing the
inventories to their present location and conditions. Net realisable value
represents the estimated selling price less all estimated costs of completion
and costs to be incurred in marketing, selling and distribution.
Allowance or impairment is made for obsolete, slow moving and defective stocks.
(m) 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.
(n) Deferred Income
Deferred income relates to course fees received in advance and is recognised in
the income statement based on classes conducted.
(o) 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 income 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 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.
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.
(p) 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.
(q) 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.
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.
(r) 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.
(s) 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.
(t) Employees' Benefits
Defined contribution plans
Contributions to defined contribution plans are recognised as an expense in the
income statement as incurred.
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.
(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.
(w) Minority Interests
Minority interests are that part of the net results of operations and of net
assets of a subsidiary attributable to interests which are not owned directly or
indirectly by the Group. It is measured at the minorities' share of the fair
value of the subsidiaries' identifiable assets and liabilities at the date of
acquisition by the Group and the minorities' share of changes in equity since
the date of acquisition, except when the losses applicable to minority interest
in a subsidiary exceed the minority interests in the equity of that subsidiary,
in which case, the losses are absorbed by the Group except to the extent that
the minority has a binding obligation and is able to make an additional
investment to cover its share of those losses.
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(u). The
recoverable amount of goodwill of #907,680 stated in Note 14 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 2006 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) Trade receivables
The directors exercise their judgement in making allowances for
trade receivables. Trade receivable are stated at their nominal value as reduced
by appropriate allowances for estimated irrecoverable amounts.
(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 in
accordance with the accounting policy stated in note 2(p). 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 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
2006 2005
# #
Course fees 1,412,760 926,503
Sales of systems and support services 14,741 476,015
Application fees and registration fees 36,281 37,306
1,463,782 1,439,824
In 2005, application fees and registration fees was classified as
other income.
5 Other Income
Group
2006 2005
# #
Commission income - 344
Consultancy fees - 40,404
Exchange gain 647 -
Interest income 1,069 -
Rental and related income 92,746 20,816
Sale of material and textbooks
9,664 2,698
Summer camp income - 22,980
Miscellaneous income 11,296 15,618
115,422 102,860
6 Salaries and Employees' Benefits
Group
2006 2005
# #
Staff salaries and related costs 290,032 246,978
Director's fee 45,000 22,500
Directors' remuneration 81,481 64,948
416,513 334,426
Average number of employees:
Administration 46 40
46 40
7 Finance Costs
Group
2006 2005
# #
Interest on bank overdraft 7,120 1,303
Interest on loan from third party - 1,536
Interest on finance lease 206 100
Others 748 -
8,074 2,939
8 Operating (loss) / profit
Operating (loss) / profit is stated after charging the following:
Group Company
2006 2005 2006 2005
# # # #
Auditor's remuneration:
- Fees payable to the Company's auditors 34,526 22,940 15,000 12,000
and their associates for statutory audits
- Fees payable to the Company's auditors 5,696 5,479 3,540 1,000
and their associates for taxation
services
- Fees payable to the Company's 8,318 9,778 5,239 7,375
auditors' and their associates for other
services
Bad debts written off 7,628 48,452 - -
Exchange loss / (gain) 16,547 (22,752) - -
Inventory written off 47,482 - - -
Loss on disposal of plant and equipment 934 - - -
Amortisation of pre-operating expenses - 16,748
Office and equipment rental 146,373 39,916 1,200 3,500
Allowance for/(write-back of)
impairment of trade receivables - net
(854) (1,703) - -
9 Income tax
Tax expense attributable to the results is made up of:
Group Company
2006 2005 2006 2005
# # # #
Current income tax 1,049 - - -
Deferred tax - - - -
1,049 - - -
(Over)/underprovision
in respect of prior years:-
Current income tax 4,156 13,464 - -
Deferred tax - (13,131) - -
5,205 333 - -
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
2006 2005
# % # %
(Loss) / profit before income tax (266,730) 202,679
Income tax at the statutory rate of 30% (80,019) 30.0 60,804 30.0
Difference arising from foreign tax rate 19,983 (7.5) 17,734 8.7
Non allowable items 49,990 (18.7) 23,375 11.5
Tax exempted income (68,214) 25.6 (95,296) (47.0)
Group relief set-off (7,347) 2.8
Singapore statutory stepped income exemption - (2,040) (1.0)
Future tax benefits not recognised 86,580 (32.5) (4,577) (2.2)
Underprovision of income tax in respect of prior 4,155 (1.6) 13,464 6.6
years
Under provision of deferred tax in prior years 77 - (13,131) (6.5)
5,205 (2.0) 333 (0.1)
At the balance sheet date, the Group had unutilised tax losses and unabsorbed
capital allowances amounting to approximately #153,445 (2005: #22,577) and
#35,956 (2005: #Nil) respectively available for offsetting against future
taxable profit for subsidiary companies in Singapore.
The Group has unutilised tax losses amounting to #9,579 (2005: #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 deferred tax benefit
arising from the unutilised tax losses has not been recognised in accordance
with the accounting policy in Note 2(n) to the financial statements.
Temporary differences arising from investment in subsidiary and associated
companies are considered to be insignificant to the Group.
Group Company
2006 2005 2006 2005
# # # #
Composition of deferred taxation:
On the excess of the net book value
over tax written down value of
plant and equipment 75 480 - -
Analysis of provision for deferred taxation:
Balance at the beginning of the year 480 12,877 - -
Overprovision of deferred taxation (405) (12,397) - -
Balance at the end of the year 75 480 - -
10 (Loss) / Earnings Per Share
The (loss) / earnings per ordinary share is based on (loss) / profit
attributable to shareholders amounting to #(271,934) (2005: profit of #202,346)
and the weighted average number of ordinary shares in issue of 14,916,062 (2005:
14,916,062) shares.
There is no dilution as the Group did not have any potential ordinary shares
outstanding as at 31 December 2006 and 2005.
11 Plant and Equipment
Classroom
Furniture and office Motor Library
Renovation Computers & fittings equipment vehicle books Total
Group # # # # # # #
2006
Cost
As at 1 January 2006 88,101 51,022 25,694 80,482 422 2,226 247,947
Additions 27,294 5,435 9,657 1,950 - - 44,336
Disposals - (1,006) - - - - (1,006)
Acquisition of subsidiary - 497 - - - - 497
Currency realignment (4,243) 40,126 8,959 (57,231) (24) (176) (12,589)
As at 31 December 2006 111,152 96,074 44,310 25,201 398 2,050 279,185
Accumulated depreciation
As at 1 January 2006 18,689 34,942 4,634 59,047 296 1,524 119,132
Charge for the year 21,342 9,803 7,742 3,092 81 418 42,478
Disposal - (96) - - - - (96)
Currency realignment (1,637) 36,508 6,846 (49,006) (19) (97) (7,405)
As at 31 December 2006 38,394 81,157 19,222 13,133 358 1,845 154,109
Net book value
At 31 December 2006 72,758 14,917 25,088 12,068 40 205 125,076
Classroom
Furniture and office Motor Library
Renovation Computers & fittings equipment 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 1,244 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 69,412 16,080 21,060 21,435 126 702 128,815
At the balance sheet date, the Group's net book value of computers under finance
lease arrangements amounted to #3,504 (2005: #3,615).
12 Development Expenditure
Group
2006 2005
# #
Cost
As at beginning of the year 47,351 43,125
Addition 33,754 -
Currency realignment (2,173) 4,226
As at end of the year 78,932 47,351
Amortisation
As at beginning of the year 18,937 8,624
Charge for the year 11,644 9,135
Currency realignment (1,160) 1,178
As at end of the year 29,421 18,937
Net Book Value
As at end of the year 49,511 28,414
13 Investment in Subsidiary Company
Company
2006 2005
# #
Investment in a subsidiary - AEC.Edu Group Pte Ltd
Unquoted equity shares, at cost 1,308,639 1,308,639
Due from subsidiary company 236,970 343,000
AEC Edu Group Pte Ltd is the Company's immediate subsidiary. The details of AEC
Edu Group Pte Ltd and the subsidiaries companies it held at 31 December 2006 are
as follows:
Subsidiary companies
and country of Principal activities Equity held by
incorporation (Place of business) the Company
2006 2005
% %
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
(Singapore) human resource consultancy
(Singapore)
The McGregorr Consultants 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)
The details of the subsidiary company as at 31 December 2006 are as follows:
Subsidiary companies
and country of Principal activities Equity held by
incorporation (Place of business) the Company
2006 2005
% %
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)
Brainbox Limited Consulting & marketing in 64.8 -
(British Virgin Island) education, training and
related services
(Vietnam)
Smartworks Learning Centre Pte Ltd Commercial education and 100 -
(Singapore) provide training in property
investments, consultancy and
maintenance
(Singapore)
Held by AEC Edutech Sdn Bhd Dormant 100 100
ST Synergy (Malaysia)
Sdn Bhd
(Malaysia)
Held by Brainbox Limited
Brainbox Foreign Training courses in foreign 64.8 -
languages and business
Language & administration
Management Studies (Vietnam)
Training Center
(Vietnam)
In 2005, AEC Edu Group Pte Ltd converted 2 sole-proprietors, Brighton Commercial
Training Centre and AEC Business School to limited liability companies with paid
up capital of S$1 each respectively.
In the opinion of the directors, the recoverable amount of the investment in
subsidiary 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 subsidiaries' operations over the next few year will exceed the
carrying amount of the investment in these subsidiaries.
14 Investment in Associated Companies
Group
2006 2005
# #
Unquoted shares, at cost 1,386,694 1,386,694
Goodwill transferred to capital reserves 14,038 14,038
Share of net post-acquisition reserves
Balance at beginning of year (6,798) (152,223)
Exchange gain 1,725 -
Share in profits for the year 31,562 99,283
Share of taxes (5,729) (31,663)
Dividends received (58,344) (45,263)
Currency alignment (63,090) 123,068
Balance at end of year (100,674) (6,798)
1,300,058 1,393,934
Due from associated company 169,098 67,106
The carrying amount of the investment in associated companies includes goodwill
of #907,680 (2005: #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 Company's associated
companies is set out below:
2006 2005
# #
Total assets 2,433,122 2,558,434
Total liabilities (1,112,103) (984,883)
Net assets 1,321,019 1,573,551
Revenue 2,459,957 2,952,900
Profit for the year 70,687 220,462
Details of associated companies are as follows:
Associated
companies and
country of Principal activities Equity held by
incorporation (Place of business) the Group
2006 2005
% %
Held by AEC.Edu Group Pte Ltd
Keris Murni Sdn Bhd Provides education services and the 30 30
operation
(Malaysia) of education tuition centers
(Malaysia)
Pusat Tuisyen 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) (Singapore)
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.
15 Goodwill
Group
2006 2005
# #
Cost
At beginning of the year - -
Additions 117,855 -
At end of the year 117,855 -
Provision for impairment in value
At beginning and end of year - -
At end of the year 117,855 -
Goodwill arose in the year as a result of acquisitions by the Group.
On 27 April 2006, the Group acquired 64.8% of Brainbox Limited, a company
incorporated in British Virgin Island for a consideration of #16,650.
The fair values of net assets acquired were as follows:
#
Net assets acquired -
Goodwill 16,650
Total purchase price 16,650
Less: Cash of Brainbox Limited -
Cash flow on acquisition net of cash acquired 16,650
On 5 September 2006, the Group acquired the entire share capital of Smartworks
Learning Centre Pte Ltd ("Smartworks"), a company incorporated and operating in
Singapore, which provides a distance learning programme in real estate and
marketing in collaboration with the University of South Australia and the
College of Estate Management in the UK, for a total consideration of #147,180.
The consideration comprised cash and #73,590 was paid on completion from
existing cash resources and #73,590 is to be paid six months after completion
date. The deferred consideration of #73,590 was paid on 5 March 2007.
The fair values of net assets acquired were as follows:
#
Cash and cash equivalent 105,436
Trade receivables 13,370
Other receivables 31,385
Plant and equipment 745
Trade and other payables (104,961)
Net assets acquired 45,975
Goodwill 101,205
Total purchase price 147,180
Less: Cash of Smartworks (105,436)
Cash flow on acquisition net of cash acquired 41,744
16 Inventories
Inventories pertains to the net realisable value of goods received in exchange
for the rendering of training services in 2004.
17 Trade Receivables
Group
2006 2005
# #
Trade receivables are stated after deducting allowance for
impairment of 24,331 37,529
Group
2006 2005
# #
Trade receivables are denominated
in the following currencies:
Singapore dollars 300,725 250,728
Pound sterling 714 -
Malaysian ringgit 158,597 1,560
460,036 252,288
18 Other Receivables
Group Company
2006 2005 2006 2005
# # # #
Deposits 1,618 1,795 - -
Prepayments 24,194 227 - -
Other debtors 58,320 53,238 8,049 52,140
84,132 55,260 8,049 52,140
Other receivables are denominated in
the following currencies:
Singapore dollars 18,315 2,145 - -
Vietnamese dong 57,156 - - -
Pound sterling 7,335 52,140 8,049 52,140
Malaysian ringgit 1,326 975 - -
84,132 55,260 8,049 52,140
19 Deferred Expenditure
Deferred expenditure relates to consultancy and course fees paid in advance.
Group Company
2006 2005 2006 2005
# # # #
Deferred expenditure is denominated
in the following currencies:
Singapore dollars 23,762 31,054 - -
20 Due from/(to) Other Related Parties
Related parties are entities (except for subsidiary companies and associated
companies) 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 by virtue of such common interests.
Group
2006 2005
# #
Due from related parties
Trade - 223,567
Non-trade 1,607 260,643
1,607 484,210
Due to related parties
Trade (16,391) (27,407)
Non-trade (23,222) (23,232)
(39,613) (50,639)
Total (38,006) 433,571
Balances with related parties are denominated in the following
currencies:
Singapore dollar (38,006) 186,920
Malaysian ringgit - 246,651
(38,006) 433,571
The amounts due (to) / from related parties are unsecured, interest-free and due
within the next twelve months.
21 Cash and Bank Balances
Group Company
2006 2005 2006 2005
# # # #
Cash and bank balances are denominated
in the following currencies:
Singapore dollars 149,886 65,764 - -
Vietnamese dong 3,745 - - -
Pound sterling 512 4,280 512 4,280
Malaysian ringgit 7,855 19,635 - -
161,998 89,679 512 4,280
22 Trade Payables
Group Company
2006 2005 2006 2005
# # # #
Trade payables balances are denominated
in the following currencies:
Singapore dollars 129,916 90,283 - -
23 Deferred Income
Deferred income relates to course fees received in advance.
Group Company
2006 2005 2006 2005
# # # #
Deferred income is denominated
in the following currencies:
Singapore dollars 244,630 156,478 - -
24 Other Payables
Group Company
2006 2005 2006 2005
# # # #
Other creditors 152,470 61,480 22,061 23,598
Accrued expenses 122,185 49,694 24,750 -
274,655 111,174 46,811 23,598
Other payables are denominated
in the following currencies:
Singapore dollars 189,964 84,329 - -
Vietnamese dong 35,430 - - -
Pound sterling 46,809 23,598 46,811 23,598
Malaysian ringgit 2,452 3,247 - -
274,655 111,174 46,811 23,598
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
2006 2005 2006 2005
# # # #
Within one year 2,124 1,806 1,900 1,755
Due after one year 1,239 - 1,200 -
3,363 1,806 3,100 1,755
Less: Future finance charges (263) (51) - -
Present value of lease obligations 3,100 1,755 3,100 1,755
Effective rate of interest per
annum for finance lease 5.4% 4.5%
Finance lease creditors are denominated in the following currency:
Singapore dollars - 1,755
Malaysian ringgit 3,100 -
3,100 1,755
27 Share Capital
Group and Company
2006 2005
# #
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
28 Related Party Transactions
In addition to the related party information disclosed elsewhere in the
consolidated financial statements, there were the following significant
transactions with related parties on terms agreed between the parties:
Group Company
2006 2005 2006 2005
# # # #
With subsidiary
AEC Edu Group Pte Ltd
- Consultancy fee income - - 10,000 -
- Management fee paid - - (25,000) -
With a related party with common directors
OLOL Management Service Pte Ltd
- Commission paid and payable (411,687) (343,748) - -
Savant Infocomm Pte Ltd
- Consultancy fees income - (41,880) - -
- Accounting fees (28,598) - (6,000) -
AEC Property Management Pte Ltd
- Office rental expenses - (904) - -
- Air-conditioning and electricity charges - - - -
expenses
Integrative Organisational Learning Sdn Bhd -
revenue
- Royalty and Licensing - 1,563 - -
- Computer software and hardware - 2,863 - -
- Implementation, training and testing - 2,978 - -
- Management and consultancy fees - 391 - -
Open Learning Agency Malaysia Sdn Bhd - revenue
- Royalty and Licensing - 16,877 - -
- Computer software and hardware - 30,920 - -
- Implementation, training and testing - 32,159 - -
- Management and consultancy fees - 4,219 - -
QLA Learning Associates Malaysia Sdn Bhd -revenue
- Royalty and Licensing 121 199 - -
- Computer software and hardware 170 365 - -
- Implementation, training and testing 282 379 - -
- Management and consultancy fees 30 50 - -
Intellectual Challenge Sdn Bhd -revenue
- Royalty and Licensing - 3,128 - -
- Computer software and hardware - 5,731 - -
- Implementation, training and testing - 5,961 - -
- Management and consultancy fees - 782 - -
With associated companies and its related companies
Genting Mutiara Sdn Bhd -revenue
- Royalty and Licensing 8,731 10,238 - -
- Computer software and hardware 12,270 18,756 - -
- Implementation, training and testing 20,364 19,507 - -
- Management and consultancy fees 2,183 2,559 - -
Indopelangi Sdn Bhd - revenue
- Royalty and Licensing 4,941 5,417 - -
- Computer software and hardware 6,943 9,924 - -
- Implementation, training and testing 11,524 10,321 - -
- Management and consultancy fees 1,235 1,354 - -
Jaguh Suria Sdn Bhd - revenue
- Royalty and Licensing 4,431 3,608 - -
- Computer software and hardware 6,226 6,609 - -
- Implementation, training and testing 10,333 6,874 - -
- Management and consultancy fees 1,108 902 - -
Keris Murni Sdn Bhd -revenue
- Royalty and Licensing 23,472 28,688 - -
- Computer software and hardware 32,984 52,557 - -
- Implementation, training and testing 54,743 54,663 - -
- Management and consultancy fees 5,868 7,172 - -
Pusat Tiusyen Kasturi Sdn Bhd -revenue
- Royalty and Licensing 17,376 19,422 - -
- Computer software and hardware 24,418 35,582 - -
- Implementation, training and testing 40,525 37,008 - -
- Management and consultancy fees 4,344 4,856 - -
Pelangi Tegas Sdn Bhd - revenue
- Royalty and Licensing 5,862 6,376 - -
- Computer software and hardware 8,237 11,681 - -
- Implementation, training and testing 13,671 12,149 - -
- Management and consultancy fees 1,465 1,594 - -
Group
2006 2005
# #
Key management personnel
- Short term benefits 123,417 87,420
- Post employment benefit 3,063 1,102
126,480 88,522
A director, Mr Ho Peng Cheong, had an interest in contracts of the company
during the year by reason of his 1% shareholding in the ultimate holding company
of the following:
Integrative Organisation Learning Sdn Bhd
Open Learning Agency Malaysia Sdn Bhd
QLA Learning Associates Malaysia Sdn Bhd
Intellectual Challenge Sdn Bhd
29 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.
The Group also leases various plant and machinery under non-cancellable
operating lease arrangements. The lease expenditure charged to the income
statement during the financial year is disclosed in Note 8.
At the balance sheet date, the future minimum rental payable under these
non-cancellable operating leases are as follows:-
Group
2006 2005
# #
Payable:
Within one year 117,544 119,472
Between two to five years 10,081 99,560
127,625 219,032
30 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. 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 has also been 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.
(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 receivables, 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 loans advanced from third parties
that 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.
(iv) Interest rate 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 repricing or maturity dates.
Fixed rates
Less Non-interest
than
6 Bearing Total
months
# #
#
At 31.12.2006
Assets
Trade and other receivables - 714,873 714,873
Cash and bank balances - 161,998 161,998
Non-financial assets - 1,622,198 1,622,198
Total assets - 2,499,069 2,499,069
At 31.12.2006
Liabilities
Trade and other payables - 473,738 473,738
Borrowings 89,058 - 89,058
Non-financial liabilities - 244,705 244,705
Total Liabilities 89,058 718,443 807,501
Fixed rates
Less Non-interest
than
6 Bearing Total
months
# #
#
At 31.12.2005
Assets
Trade and other receivables - 858,864 858,864
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 - 287,607 287,607
Borrowings 122,304 - 122,304
Non-financial liabilities - 156,958 156,958
Total Liabilities 122,304 444,565 566,869
(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.
31 Comparative figures
Certain comparative figures have been reclassified to confirm with the current
year's presentation as follows:
2005 2005
Before After
reclassification reclassification Effect
# # #
Group
Income Statement
Sale of services (1,402,518) (1,439,824) (37,306)
Other income (140,166) (102,860) 37,306
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2006, but is derived from
those accounts. Statutory accounts for the period have been delivered to the
Registrar of Companies.
Copies of the accounts will be posted to shareholders very shortly.
**End**
For further information please visit www.aec.edu.sg or enquire to:
Liam Swords, Chairman 020 8308 1202 / 07775 787427
AEC Education plc
David Nabarro / Anthony Rowland 020 7710 7400
Nabarro Wells & Co Limited
This information is provided by RNS
The company news service from the London Stock Exchange
END
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