AEC Half Year Results

AEC Education PLC
(“AEC” or “the Company” or “the Group”)

Half year results
for the six months ended 30 June 2011

AEC provides educational courses up to post-graduate degree level in Asia and the UK as well as London Chamber of Commerce and Industry (“LCCI”) examinations/qualifications in Asia.

KEY POINTS

  • Revenues of £8.926m (2010: £8.637m)
  • Profit before tax of £298,000 (2010: H1: £346,000 and H2: loss of £567,000)
  • Earnings per share of 0.5p (2010: H1: 0.7p and H2: loss of 1.55p)
  • Balance sheet remains strong – net cash of £3.19m (2010: £2.68m)
  • UK operations returned to profitability after reorganisation and restructuring
  • Singapore operations delivered strong performance
  • Rebranding programme of English language offering (under Malvern House brand) completed across Asian operations (Singapore and Malaysia)
  • Significant investment to be committed in H2 to support growth initiatives
  • Board views growth prospects very positively

Liam Swords, Chairman of AEC, commented,

I am pleased to report that AEC has returned to profit in the first six months to 30 June 2011, as anticipated.  This is a creditable result. The turnaround in the Group’s performance reflects both the remedial actions we took in the UK to address the change in market conditions as well as the investment we made in Asia to develop our operations in the region. 

The first half saw us complete our rebranding programme of our English language offering in Singapore and Malaysia, under our Malvern House brand.  We have also been active with other initiatives to develop the business, including further geographic expansion of the Malvern House English language teaching brand and the expansion of the Group’s university relationships.  Both areas will remain a major focus in the second half of the year and we expect to invest significantly in the development of the Malvern House brand overseas, which will dampen margins in the short term before the benefits are felt more strongly as we move through the next financial year and beyond.

With a strong balance sheet and net cash of £3.19m, we believe that AEC is well positioned to take advantage of the growth opportunities available and expect to see the Group make further progress in the second half of the financial year.“

 

For further information contact:

AEC Education plc
Liam Swords				                Tel: +44 (0) 20 7448 1000 (today)                
                                                        Tel: +44 (0) 20 8308 1202

WH Ireland Limited (NOMAD)
Dan Bate				                Tel: +44 (0)161 832 2174
Stuart Forshaw

Biddicks
Katie Tzouliadis				        Tel: +44 (0) 20 7448 1000
Sophie Lane

CHAIRMAN’S STATEMENT

Introduction

I am pleased to report that AEC has returned to profit in the first six months to 30 June 2011, as anticipated.  This is a creditable result after a challenging year last year, particularly in the second half of the year when our market in the UK was disrupted as a result of uncertainty surrounding the UK Government’s review of student visas.

The turnaround in the Group’s performance reflects both the remedial actions we took in the UK to address the change in market conditions as well as the investment we made in Asia to develop our operations in the region.  Underpinning first half results is the restoration of profitability in the Group’s English language teaching operations in the UK and the strong performance from our activities in Singapore.

The first half saw us complete our rebranding programme of our English language offering in Singapore and Malaysia, under our Malvern House brand.  We have also been active with other initiatives to develop the business, including further geographic expansion of the Malvern House English language teaching brand and the expansion of the Group’s university relationships.  Both areas will remain a major focus in the second half of the year and beyond. We have also committed significant investment to business development as well as ongoing investment in systems.

With a strong balance sheet and net cash of £3.19m, we believe that AEC is well positioned to take advantage of the growth opportunities available and expect to see the Group make further progress in the second half of the financial year.

Financial Review

Revenues for the six months to 30 June 2011 increased by 3% to £8.926m compared to the same period last year (2010: £8.637m).

Profit before tax was £298,000 compared to £346,000 in the first half of last year. However when compared to second half of last year the results show a substantial turnaround against the loss before tax (before the cost of share options) of £567,000. While profitability in the Group’s UK operations continued to be adversely affected by the Government’s review of student visas, the restructuring and reorganising of our UK operations has meant that, as planned, our UK operations returned to profitability in the period.

Profit after tax for the first half was £288,000 compared to £338,000 during the same period last year.  When compared to the loss of £628,000 in the second half of last year, it again shows significant improvement.

Earnings per share were 0.5p. This compares to the loss per share of 1.55p in the second half of 2010 and earnings per share of 0.7p in the first half of 2010.

The Group’s balance sheet remains strong, with net cash as at 30 June 2011 increased to £3.19m (30 June 2010: £2.68m).

Dividend

There is no dividend payment at the half year stage but the Board expects to propose the payment of a final dividend, dependent on the Group’s trading performance in the second half.

Business Review

The Company’s activities cover three major areas:

  • the provision of university and professional programmes up to postgraduate degree level;
  • the provision of English Language courses; and
  • the provision of London Chamber of Commerce and Industry (“LCCI”) examinations and qualifications across Asia.

University and Professional Programmes

Our university and professional programme offering operates principally in Singapore and Malaysia, with a small presence in Vietnam and China.  Our Singapore operations achieved an excellent result in the first half, with profits increasing by about 150% compared to the first half last year.  Whilst reduced government funding impacted uptake of our local academic programmes, the vocational programmes achieved exceptional growth, underpinned by the enhanced status we gained in September 2010 when we were awarded the EduTrust Certificate for four years by the Council of Private Education in Singapore, making our AEC College now one of only 23 private education institutions in Singapore to gain this status. The performance was also due to the benefits derived from productivity and marketing improvements made during the latter part of last year.

In Malaysia, the strong growth we expected to see continue in the first half was constrained by the troubles in the Middle East, a market which traditionally accounts for a large proportion of our student numbers here.  While revenues were slightly ahead of the same period last year, the additional capacity and resource we had invested to support the expected growth rate has had to be adjusted.  The actions we have taken to realign the cost base with conditions should have a positive effect on the profit contribution in the second half. In addition, we have focused closely on recruiting students in alternative markets, including from Malaysia itself, and are seeing positive results coming through.

Vietnam, China and India continue to be areas of investment and development and we do not expect any contribution to the Group’s profitability from them during the current financial year.

We continue to work on building relationships with UK universities which will strengthen the Group’s offering in Singapore, Malaysia and London.  This will continue to be a major focus of our strategic development for the remainder of 2011 and next year.

Teaching of English (under Malvern House brand)

Our London operations currently form the hub of our English language provision, although we are expanding this activity in our Asian operations.

The review of student visas by the UK Government in 2010 resulted in major uncertainty and disruption to the UK marketplace and with new regulations only taking effect in July 2011, the market is still settling. As previously announced, we took action in the second half of 2010 to remove cost and adjust the UK model and this was largely completed in the first half of 2011.  In addition, in early 2011, our Malvern House operations in the UK gained ‘Highly Trusted Sponsor’ status from the UK Borders Agency.  Revenues at the UK Malvern House business were 3% ahead of the same period last year, with May and June benefiting from students registering ahead of the introduction of new regulations in July, and profitability has been restored.  We expect the UK contribution to continue to improve in the second half.

During the period, we also completed the introduction of the Malvern House model and brand across our English language businesses in Asia, including Malaysia and Singapore.  The brand has a strong reputation in the English language market across the world and the rebranding programme ensures that all our operations perform to the same high standards established by Malvern House in London.

We have established a number of new initiatives aimed at expanding the Malvern House brand both overseas and in the UK and expect to make significant investment in new projects in the second half as initiatives move forwards.

London Chamber of Commerce & Industry (“LCCI”) Examinations & Qualifications

As expected, the contribution from our examinations business was below last year’s level, mainly reflecting changes to the school syllabus in Hong Kong.  However, we expect to see an improved performance in the second half.

Outlook

After a challenging year in 2010, the actions we have taken in response to market changes, especially in English language teaching in the UK, have resulted in the Group returning to profitability.  We are now focusing closely on our initiatives to grow the business.

We expect to invest significantly in the development of the Malvern House brand overseas over the next 18 months or so. It should be noted that this is likely to see a dampening effect on margins in the short term before the benefits are felt more strongly as we move through the next financial year and beyond. In addition, we are continuing to deepen our relationships with universities in order to widen the Group’s offering and are making good progress here.  We are continuing to strengthen our marketing and distribution and this is combined with ongoing systems development as we widen the range of markets we operate in.

Alongside organic growth, we continue to review acquisition opportunities which fit our criteria. The Group’s financial position remains very robust and with demand for our business and vocational offering across Asia remaining strong and interest in UK university qualifications and English language learning also high, the Board remains very positive about prospects for the Group.

Liam Swords
Chairman

AEC Education PLC

 

 

 

Unaudited Consolidated Income Statement

 

 

 

 

 

 

  

Six months to

Six months to

Twelve months to

  

 30 June

 30 June

31 December

  

2011

2010

2010

  

£’000

£’000

£’000

 Note

Unaudited

Unaudited

Audited

  

Revenues 

Sales of services and other revenue

(4)

8,926

8,637

18,136

 

Cost of sales

 

(8,695)

(8,352)

(18,673)

  

Operating profit/(loss) 

231

285

(537)

  

Profit/(loss) from operations 

231

285

(537)

  

Share of results of associated companies 

67

61

98

  

Profit/(loss) on ordinary activities before taxation 

298

346

(439)

  

Tax on profit on ordinary activities 

(10)

(8)

149

Profit/(loss) on ordinary activities after taxation

 

288

 

338

 

(290)

 

Minority interests

(49)

(32)

(86)

Profit/(loss) for the period

239

306

(376)

 

 

Earnings/(loss) per share

Pence

Pence

Pence

 

Basic

(6)

0.5

0.7

(0.9)

 

Diluted

(6)

0.5

0.6

(0.8)

 

AEC Education PLC

 

 

 

Unaudited Consolidated Balance Sheet

 

 

 

  

As at
30 June 2011

As at
30 June 2010

As at
31 Dec 2010

  

£’000

£’000

£’000

 Note

Unaudited

Unaudited

Audited

Fixed assets 

Intangible assets 

7,885

7,563

7,889

Tangible assets 

1,451

1,376

1,369

Investments in associated companies 

109

87

41

  

 9,445

 9,026

 9,299

Current assets 

Inventory 

54

86

59

Debtors 

2,641

2,828

2,147

Cash at bank and in hand 

3,191

2,677

3,092

  

5,886

5,591

5,298

Creditors

 
Amounts falling due within one year 

(6,595)

(5,906)

(6,030)

 

 

 

Net current liabilities

(709)

(315)

(732)

  

Total assets 

8,736

8,711

8,567

Non-current liabilities 

Deferred income 

(48)

(11)

Finance lease 

               (57)

               (116)

(111)

Term loan 

(462)

(268)

(588)

Deferred taxation 

(14)

(49)

(28)

  

8,203

8,230

7,829

Equity attributable to equity holders of the Company 

 

 

 

Share capital 

4,420

5,154

4,420

Share premium 

708

734

708

Reserves 

2,828

2,186

2,502

  

7,956

8,074

7,630

Minority interest in equity 

247

156

199

  

8,203

8,230

7,829

 

AEC Education PLC

 

 

Unaudited Consolidated Cash Flow Statement

 

 

 

Six months to
30 June

Six months to
30 June

Twelve months to
31 December

 

2011

2010

2010

 

Unaudited

Unaudited

Audited

 

£’000

 £’000

 £’000

 

Cash flow from operating activities

459

(723)

       (351)

 

 

 

 

Returns on investment and servicing of finance

 

 

 

Interest paid 

(29)

(6)

(48)

 

Taxation 

Taxes recovered/(paid) 

177

(94)

(50)

 

 

 

 

Capital expenditure and financial investment

Purchase of tangible fixed assets

(355)

(136)

          (438)

Purchase of intangible fixed assets

(4)

(17)

Interest income

3

3

Dividend income received from an associated company

30

89

 

(352)

(110)

         (363)

 

 

 

        

Cash flows from financing activities
Dividend paid to minority shareholders

(22)

(24)

Issue of shares

109

Decrease in share to be issued-deferred consideration

(109)

(Decrease)/ Increase in finance lease liabilities

(30)

(58)

(67)

Drawdown of term loan

537

775

Repayment of term loan

(126)

(67)

  

(156)

390

  684

 

Net increase in cash and cash equivalents

99

(543)

(128)

 

       

Cash and cash equivalents at beginning of period/year

3,092

3,220

3,220

 

Cash and cash equivalents at end of period/year

3,191

2,677

3,092

Cash and cash equivalents consist of the following:   
    
Cash and bank balances

3,191

2,677

3,092

 

AEC Education PLC
Reconciliation of Profit Before Tax to Cash Flow

 

 

 

Six months to
to 30 June

Six months to
to 30 June

Twelve months to
to 31 December

 

2011

2010

2010

 

Unaudited

Unaudited

Audited

 

£’000

£’000

£’000

 

From operating activities

Profit/(Loss) before tax

298

346

(439)

 

Adjustments for:

Depreciation & amortisation

271

222

481

Share based payment charge

217

Interest paid

29

6

48

Interest income

(3)

(3)

Share of results of associated companies

(67)

(61)

(98)

(Increase)/decrease in debtors

(464)

(712)

215

(Decrease)/increase in creditors

683

(607)

(547)

(Increase)/decrease in inventories

5

7

34

(Decrease)/increase in related parties

(133)

(27)

15

Translation

(160)

103

(274)

 

Cash flow from operating activities

459

(723)

(351)

 

AEC Education PLC

NOTES

  1. Publication of non-statutory accounts and basis of preparation.
    The financial information contained in this interim report does not constitute statutory accounts for the period ended 30 June 2011. The unaudited consolidated financial statements incorporate the unaudited financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June 2011.  The comparative figures for the period ended 30 June 2010 are those as published in the Company’s half year announcement made on 23 September 2010.

    This report has been approved by the Board of Directors and is unaudited. This report does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985.

  1. General
    The principal activities of the Company are that of investment holding and provision of educational consultancy services. There have been no significant changes in the principal activities of the subsidiary companies during the period.
  1. Accounting Policies
    The unaudited results for the six months ended 30 June 2011 have been prepared on the basis of International Financial Reporting standards (“IFRS”) and accounting policies consistent with those adopted for the year ended 31 December 2010, and to be adopted in respect of the year ending 31 December 2011.
  1. Sale of Services
 

June 2011

June 2010

Dec 2010

 

£’000

£’000

£’000

Course fees and registration fees

6,660

6,246

12,940

Examination fees

874

973

1,963

Students accomodation

1,003

727

1,758

Other income

389

691

1,475

 

8,926

8,637

18,136

               

  1. Dividend
    No interim dividend for this financial year is proposed.
  2. Earnings per share
    Basic earning per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the relevant period. The weighted average number of shares in issue during the period was 44,198,781 (2010: 44,162,343).

    Diluted earning per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the relevant period diluted for the effect of share options and warrants in existence at the relevant period. The weighted average number of shares in issue diluted for the effect of share options and warrants in existence during the period was 47,951,430 (2010: 47,914,992).