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AEC Education plc Half Year Results
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
AEC Education PLC NOTES
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