Half Year Results

AEC Education plc
(“AEC” or “the Group”)

Half Year Results
for the six months ended 30 June 2012

  • Strong performance in Asia but UK continues to be challenging
  • Revenues of £8.979m (2011: £8.926m)
  • Loss before tax of £670,000 (2011: profit before tax of £298,000)
    • mainly reflecting losses of £939,000 incurred by UK operations, including restructuring & investment in new colleges in Dublin and Oman
  • Loss per share of 1.2p (2011: earnings per share of 0.54p)
  • Net cash of £2.90m (2011: £3.19m)
  • Cost reductions implemented in UK
  • Continued strong growth expected in the Far East
  • New growth initiatives in government-funded sector, Ireland and Oman making good progress
    • benefits will come through in 2013 and beyond
  • Full year results to be impacted by UK performance and investment in growth – will be significantly below current expectations
  • Short-term challenges but long-term prospects remain positive

Liam Swords, Chairman of AEC, commented,

Results across the Group’s two key trading regions, Asia and the UK, show two contrasting pictures.  In Asia, Singapore has continued to perform strongly while Malaysia has seen a significant strengthening in student numbers.  However, in the UK the impact of the well-documented uncertainty surrounding student visas has continued to adversely impact our English language teaching business in London.  As a result, overall results for the Group in the first half are disappointing and full year profitability will be significantly affected.

We have a strong balance sheet, with net cash, which will help us to weather the challenging conditions in the UK as well as support the opportunities we have identified.  We remain focused on the growth potential for both our English language teaching provision overseas and our operations in Singapore and Malaysia.  In the UK, we are focused on ensuring the turnaround of Malvern House London and developing our government-funded business. 

Therefore, despite the short-term challenges, we continue to view the long-term positively.”

Enquiries

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

Results across the Group’s two key trading regions, Asia and the UK, show two contrasting pictures.  In Asia, Singapore has continued to perform strongly while Malaysia has seen a significant strengthening in student numbers.  However, in the UK the impact of the well-documented uncertainty surrounding student visas has continued to adversely impact our English language teaching business in London.  As a result, overall results for the Group in the first half are disappointing, with the Group generating a loss before tax of £670,000 (2011: profit before tax of £298,000) for the first half on revenues of £8.979m (2011: £8.926m).

We have taken further action to reduce the cost base of our UK English language business, which should help to ameliorate the difficulties caused by the market uncertainty, incurring one-off costs of £292,000 in the first half.  More positively in the UK, we have entered the government-funded sector, with the acquisition in March 2012 of an initial 75% holding in Skye Training Ltd, which has subsequently been rename MH Training Services.  In addition, our new English language colleges in Ireland and Oman are also making encouraging progress.

We remain confident that our colleges in the Far East will continue to deliver strong growth and our new initiatives in the UK, Ireland and Oman will make further good progress in the second half of the year.  Nevertheless, we do not expect trading conditions for our UK English language business to improve significantly in the short-term. Ireland and Oman are not expected to make a profit in the second half but are both expected to move into profit next year.

The Group’s balance sheet remains strong, with net cash of £2.90m as at 30 June 2012, and the Board intends to propose a final dividend.

Financial Results

The Group made a loss before tax of £670,000 (2011: profit before tax of £298,000) on revenues of £8.979m (2011: £8.926m). This mainly reflects £939,000 of losses comprising those incurred in our UK English language operations including exceptional costs of £292,000 relating to its reorganisation, and the investment in growth initiatives.  Loss after tax was £632,000 (2011: profit after tax of £288,000) and the loss per share was 1.2p (2011: earnings per share of 0.54p).

AEC’s financial position remains strong with cash balances as at 30 June of £2.90m (2011: £3.19m).

Dividend

The Group does not pay an interim dividend but the Board expects to propose a final dividend.

Business Review

AEC’s performance over the first half of the year was affected by varying market conditions across its different geographic markets.

In Asia, Singapore continued its strong growth following record results last year.  We are seeing excellent demand for our courses and are expanding our facilities in order to increase capacity.  In May, we appointed a new head of operations in Singapore, Dr Chong Chee Leong, who brings over 25 years’ experience in the academic sector and previously was deputy chief executive officer and academic dean of one of Singapore’s largest independent education and training institutions. Dr Chong is already proving a valuable addition and we expect to achieve further growth in Singapore as our college benefits from its status as one of only 40 providers in Singapore to have attained the prestigious EduTrust certification (the Singapore government’s quality standard introduced in 2010) for a four-year period.

Malaysia also saw a considerable rebound in student numbers, having been affected last year by the Arab Spring which led to a fall in numbers from the high volume markets in Northern Africa.  The projects implemented in the second half of last year to improve numbers have achieved positive results and our Malaysian colleges delivered a profit for the first half.  We continue to invest in this business, in particular to raise the level of its programmes ahead of opportunities for high performing education institutions in Malaysia to become ‘deemed’ universities, with their own university campuses.

As indicated above, our English language business in the UK has felt the effects of the changing situation regarding visas for overseas students.  International students in private institutions are now unable to subsidise their study costs by working part time and uptake of long term courses has been particularly impacted.  In view of market conditions we have restructured our Malvern House operations in London, incurring one-off costs of £292,000.

Last year, the Group established a number of initiatives to expand our English language school provision overseas.  Our joint venture in Cyprus, which is predominately targeted at the summer school market, has continued to deliver strong results and in the first half of 2012, we also launched colleges in Ireland and Oman.  Both new colleges are gaining traction and student numbers are growing.  The new college openings incurred set-up costs of £272,000.  We believe that they represent an attractive investment, enabling us to build on the strong reputation of Malvern House overseas.

In March 2012, the Group also expanded into the UK government-funded market with the acquisition of Skye, now named MH Training Services.  The business is currently a relatively small part of our operations but we believe that the sector offers the potential for considerable growth over the next few years.  We have recently appointed a new operations director to assist in taking the business to the next level in its development.

The London Chamber of Commerce and Industry examinations business, Educational Resources (“ER”), has maintained its performance at the same level as last year.  As the Group grows its Malvern House brand globally, ER has increasingly become less of a strategic focus.

Outlook

We expect to achieve further strong growth in Asia during the second half but, whilst we believe that the second half performance of Malvern House London should improve following the changes implemented, we do not foresee a substantial improvement in market conditions in the UK.  Full year profitability will inevitably be affected by this, as well as by the planned costs incurred in restructuring Malvern House London and establishing the new colleges in Ireland and Oman in the first half.  Accordingly it is now anticipated that profits for the full year will be significantly below current market expectations.

We have a strong balance sheet, with net cash, which will help us to weather the challenging conditions in the UK as well as support the opportunities we have identified.  We remain focused on the growth potential for both our English language teaching provision overseas and our operations in Singapore and Malaysia.  In the UK, we are focused on ensuring the turnaround of Malvern House London and developing our government-funded business.

Therefore, despite the short-term challenges, we continue to view the long-term positively.

Liam Swords
Chairman

 

AEC Education PLC   
Unaudited Consolidated Income Statement         
 Six months toSix months toTwelve months to
  30 June 30 June31 December
 201220112011
 £’000£’000£’000
 NoteUnauditedUnauditedAudited
 
Revenues
Sales of services and other revenue(4)8,9798,92619,145
Cost of sales(9,654)(8,695)(18,913)
 
Operating (loss) / profit(675)231232
 
(Loss) / profit from operations(675)231232
Share of results of associated companies
and joint venture
567128
(Loss) / profit on ordinary activities before taxation(670)298360
Tax on profit on ordinary activities38(10)(18)
(Loss) / profit on ordinary activities after taxation  (632)  288  342
 
Minority interests103(49)(21)
(Loss) / profit for the period(529)239321
(Loss) / earnings per sharePencePencePence
Basic(6)(1.20)0.540.73
Diluted(6)(1.20)0.500.67


 

AEC Education PLC
Unaudited Consolidated Balance Sheet
   
    
  As at
30 June 2012
As at
30 June 2011
As at
31 Dec 2011
  £’000£’000£’000
 NoteUnauditedUnauditedAudited
Fixed assets    
Intangible assets 8,1117,8857,662
Tangible assets 1,5161,4511,486
Investments in associated companies 9010949
Investment in joint venture 111147
  9,828 9,445 9,344
Current assets    
Inventory 545453
Debtors 3,4242,6413,332
Cash at bank and in hand 2,9033,1913,810
  6,3815,8867,195
Creditors    
Amounts falling due within one year (8,743)(6,595)(8,027)
     
Net current liabilities (2,362)(709)(832)
     
Total assets 7,4668,7368,512
Non-current liabilities    
Deferred income (4)
Finance lease (22)(57)(50)
Term loan (364)(462)(325)
Deferred taxation (23)(14)(83)
  7,0578,2038,050
Equity attributable to equity holders of the Company    
Share capital 4,4204,4204,420
Share premium 708708708
Reserves 1,9852,8282,726
  7,1137,9567,854
Minority interest in equity (56)247196
  7,0578,2038,050
 

 


AEC Education PLC
  
Unaudited Consolidated Cash Flow Statement  
Six months to
30 June
Six months to
30 June
Twelve months to
31 December
201220112011
UnauditedUnauditedAudited
 £’000 £’000 £’000
 
Cash flow from operating activities(215)459       1,837
    
Returns on investment and servicing of finance   
Interest paid (27)(29)(58)
Taxation 
Taxes recovered / (paid) (22)177237
   
Capital expenditure and financial investment
Purchase of property, plant and equipment(341)(355)          (762)
Purchase of intangible fixed assets(5)(13)
Interest income22310
Acquisition of joint venture(122)
Acquisition of a subsidiary(135)
Dividend income received from an associated company92
 (459)(352)         (795)
           
Cash flows from financing activities
Dividend paid to minority shareholders
(25)(24)
(Decrease) / increase in finance lease liabilities(28)(30)(126)
Repayment of term loan(131)(126)(264)
Dividend paid to shareholders(88)
  (184)(156)     
  (502)
 
Net increase in cash and cash equivalents(907)99719
        
Cash and cash equivalents at beginning of period / year3,8103,0923,091
 
Cash and cash equivalents at end of
period / year
2,9033,1913,810

 

 

 

 

 

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

 

2012

2011

2011

 

Unaudited

Unaudited

Audited

 

£’000

£’000

£’000

 

From operating activities

(Loss) / profit before tax

(669)

298

360

 

Adjustments for:

Depreciation & amortisation
Plant and equipment written off
Loss on disposal of plant and equipment
Impairment of goodwill

322


271


634
13
4
176

Share based payment charge

8

Interest paid

27

29

58

Interest income

(22)

(3)

(10)

Share of results of associated companies and
joint venture

(5)

(67)

(128)

(Increase) / decrease in debtors

(76)

(464)

(1,349)

(Decrease) / increase in creditors

387

683

2,149

(Increase) / decrease in inventories

5

5

(Decrease) / increase in related parties

(133)

(124)

Translation

(179)

(160)

41

 

Cash flow from operating activities

(215)

459

1,837

 

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 2012. 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 2012.  The comparative figures for the period ended 30 June 2011 are those as published in the Company’s half year announcement made on 5 September 2011.

    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 2012 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 2011, and to be adopted in respect of the year ending 31 December 2011.
  1. Sale of Services
     

    June 2012

    June 2011

    Dec 2011

     

    £’000

    £’000

    £’000

    Course fees and registration fees

    7,068

    6,660

    14,028

    Examination fees

    844

    874

    1,685

    Students accomodation

    734

    1,003

    2,326

    Other income

    333

    389

    1,106

     

    8,979

    8,926

    19,145

  2. Dividend
    No interim dividend for this financial year is proposed.
  3. Loss)/ earnings per share
    The basic (loss)/earnings per share is calculated by dividing the (loss)/profit 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 (2011: 44,198, 781).
    The diluted (loss)/earnings per share is calculated by dividing the (loss)/profit 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 (2011: 47,951,430).