Half Yearly Results

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

Unaudited Interim Results
for the Six Months ended 30 June 2009

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

Key Points

  • Revenues up 21% to £3.208m (2008: £2.652m) – reflects strong organic growth
  • Profit before tax up 31% to £403,000 (2008: £308,000)
  • Profits after tax up by 62% to £361,000 (2008: £223,000)
  • Earnings per share of 1.3p (2008: 1.2p)
  • Share placings to raise total of £1.626m
  • Net cash at 30 June 2009: £3.15m (30 June 2008: £0.98m)
  • Post period end – major acquisition completed; Malvern House, the London-based English Language course provider
  • highly complementary addition to Group’s activities
  • Confident outlook for future growth

Commenting on results, Liam Swords, Chairman, said,

“After a very successful year for the Group in 2008, I am delighted to report that AEC continues to make excellent progress.  Results for the six months to 30 June 2009 are strong and demonstrate very encouraging organic growth. Despite the economic difficulties worldwide, education continues to represent a resilient market, with students often seeking to enhance their employment prospects via well-regarded educational programmes and qualifications.

I am pleased to report that trading across all our activities in the Far East continues to be strong.  In the UK, the integration of Malvern House, which we acquired in July 2009, will be a major focus for us in the second half. The process has already commenced and we will be seeking to optimise fully the synergies that exist between the business and the wider Group.

Our strategy to build the Group through organic growth combined with complementary acquisitions remains and we remain confident of the Group’s growth prospects.”

For more information please contact:

AEC Education plc		
Liam Swords, Chairman			        +44 (0) 20 7448 1000 (today)
		                                +44 (0) 20 8308 1202 (thereafter)
		
WH Ireland Limited (NOMAD & Broker)		+44 (0)161 832 2174
Adrian Kirk			
Stuart Forshaw		
		
Biddicks		                        +44 (0) 207 448 1000
Katie Tzouliadis			
Sophie Lane		

CHAIRMAN’S STATEMENT

Introduction

After a very successful year for the Group in 2008, I am delighted to report that AEC continues to make excellent progress.  Results for the six months to 30 June 2009 are strong and demonstrate very encouraging organic growth.  Revenues increased by 21% to £3.21m and profit before tax by 31% to £0.40m.

In January last year, we completed the transformational acquisition of Educational Resources Pte Ltd (“ER”), acquiring the balance of the business that we did not already own, approximately 65%.  In April last year, we also acquired strategic stakes of 30% each in two educational programme providers based in Malaysia, Kasturi and IMS.  There were no further acquisitions or investments made over the remainder of the last financial year or in the period under review.  These results therefore reflect strong organic growth and, in particular, the benefits of the successful integration of ER within the Group and our associated operational reorganisation.

After the end of the first half, in July, the business took another major step forward with the acquisition of the London-based educational courses provider, Malvern House Group Limited (“Malvern House”).  While the positive impact of this acquisition is not apparent in the figures, I am also pleased to report that Malvern House’s integration within the Group is progressing very well.  The addition of Malvern House gives AEC a presence in the UK and represents a highly complementary fit with our existing operations.  Demand for UK-based study in the Far East is strong and we are now in a position to satisfy this demand and to build close links between our operations in the Far East and Malvern House in the UK.

Financial Review

Revenue for the six months to 30 June 2009 increased by 21% to £3.208m (2008: £2.652m) against a backdrop of difficult economic conditions worldwide.  Operating profit increased by 14% to £330,000 (2008: £289,000) and, after the share of the results of associated companies of £73,000 (2008: £19,000), profit before tax rose by 31% to £403,000 (2008: 308,000).  The profit for the period increased by 62% to £361,000 (2008: £223,000).

During the period, we raised a total of £1.626m of new funds through the issue of 13,554,967 new ordinary shares.  As at 30 June 2009, net cash stood at £3.15m (31 December 2008: £1.96m and 30 June 2008: £0.98m).

Business Review

Since the acquisition of Malvern House was completed after the 30 June 2009, the Company’s activities during the period under review covered the following two major areas: the provision of educational courses up to post-graduate degree level in Singapore, Malaysia, China and Vietnam and the provision of London Chamber of Commerce and Industry (“LCCI”) examinations and qualifications across Asia.

The provision of the educational courses is undertaken by the Company’s wholly owned subsidiary, AEC Edu Group Pte Ltd (“Edugroup”) and Edugroup’s associate companies while the provision of LCCI examinations and qualifications is undertaken by ER.

Edugroup – Educational Courses

I am pleased to report that Edugroup’s programmes, such as the teaching of English, Mandarin, GCSEs and tuition programmes and diplomas in Interactive Media, performed strongly during the period and we believe that there is significant scope to expand these activities further.  Our ACCA accounting programmes have maintained their performance despite the softening of the market in general and increasing competition.  Edugroup’s degree and post-graduate programmes, which are run in collaboration with various well-known universities, continue to grow and during this period, we introduced a Bachelor of Arts degree from the University of Teesside in the UK.  This provides a new pathway for the growing number of diploma holders from Singapore Polytechnics.

As part of its programme of continuing expansion, Edugroup has developed a number of proprietary certificate/diploma programmes in Retailing, 3D Computing and Business.  These will be introduced once approval from the Ministry of Education in Singapore is received.  Edugroup is also in various stages of discussion with universities in the UK, Canada and Australia to introduce new degree and post-graduate degree programmes in Early Childhood, Property Management and other business subjects.

ER – LCCI Examinations/Qualifications

Growth of our LCCI examinations business is in line with forecasts for the year with an anticipated 5% increase in overall exam entries for the year despite the economic downturn across the region.  We are very pleased to see demand for LCCI qualifications in Singapore and Myanmar exceed expectations by a considerable margin in the year to date and ER is also benefiting from its close working relationship with Education Development International Plc, which owns the LCCI brand and which has committed additional funding to promote LCCI qualifications across the region.  We intend to continue to promote LCCI exams robustly over the remainder of the year, increasing marketing and advertising in our key territories across the region.

Two special projects have contributed over the past months.  The collaboration with the Malaysian Ministry of Education to offer LCCI Level 2 Accounting certification to all students who have achieved local accounting qualifications resulted in almost 20,000 school leavers (67% of all those eligible) applying for the LCCI certificate.  In China, the collaboration with the Guangzhou Education Bureau to map its internal English qualification with the LCCI Level 1 English for Business saw 70% of the 1,400 achieving a successful outcome.  The Guangzhou initiative is a prelude to further expansion into more Chinese provinces over the next year.

Financial qualifications currently account for over two thirds of LCCI exam entries, however, this profile is gradually changing as we widen the range of qualifications offered.  Over the next 6-12 months, we will be shifting our business development focus towards promoting supplementary products and to expanding into regional markets where LCCI’s profile is currently underdeveloped.  This change will be further developed through an aggressive push to establish LCCI as the preferred course for Vocational English, starting with China and Myanmar, followed by the emerging markets of Indo China, Indonesia and South Asia.

Post Period Developments

Following the period end, on 2 July 2009, we acquired Malvern House, the well-established London-based provider of English Language Learning courses for foreign students as well as courses in Business Administration, Travel, Tourism, Hospitality and Foreign Languages.  The acquisition, for a total consideration of up to £3.994m payable in a mix of cash and shares, almost doubles our size and gives us a presence in the UK educational marketplace.  We see significant cross-selling opportunities between our Far Eastern activities and Malvern House and are already beginning to see good synergies emerging.

Following the acquisition of Malvern House, we were delighted to welcome Naresh Malhotra, Managing Director of Malvern House, to the Board as an Executive Director.

Outlook

The integration of ER and the changes we made to the Group’s operations over the course of the last financial year underpinned AEC’s strong performance in the first half.  I am pleased to report that trading across all our activities in the Far East continues to be strong.

In the UK, the integration of Malvern House within the Group will be a major focus for us in the second half.  The process has already commenced and we will be seeking to optimise fully the synergies that exist between the business and the wider Group.

Our strategy to build the Group through organic growth combined with complementary acquisitions remains and we remain confident of the Group’s growth prospects.

Liam Swords
Chairman

 

UNAUDITED CONSOLIDATED INCOME STATEMENT

GroupGroupGroup
Six months
To
Six months
To
Twelve months
To
30 June30 June31 December
Note200920082008
£’000£’000£’000
UnauditedUnauditedAudited
 

Revenues
Sales of services and other revenue(4)3,2082,6526,150
Cost of sales(2,878)(2,363)(5,439)
Operating profit330289711
Profit from operations330289711
Share of results of associated companies731951
Profit on ordinary activities before taxation403308762
Tax on profit on ordinary activities(18)(91)(199)
Profit on ordinary activities after taxation385217563
Minority interests(24)633
Profit for the period361223596
Earnings per sharePencePencePence
Basic(6)1.31.23.1
UNAUDITED CONSOLIDATED BALANCE SHEETNoteAs at
30 June 2009
As at
30 June 2008
As at
31 Dec 2008
£’000£’000£’000
UnauditedUnauditedAudited
Fixed assets
Intangible assets2,5532,2682,822
Tangible assets312275397
Investments in associated companies(7)576547
 2,922 2,608 3,266
Current assets
Inventory5854
Debtors1,7641,4681,418
Cash at bank and in hand3,1479821,956
4,9692,4503,428
Creditors
Amounts falling due within one year(2,852)(2,238)(2,664)
Net current assets2,117212764
Total assets5,0392,8204,030
Non-current liabilities
Term loan(98)(82)
Deferred taxation(22)(4)(27)
5,0172,7183,921
Equity attributable to equity holders of the Company
Share capital2,8191,8011,801
Share premium434286286
Share to be issued109109
Reserves1,5425841,632
4,9042,6713,828
Minority interest in equity1134793
5,0172,7183,921

UNAUDITED CONSOLIDATED CASH FLOW STATEMENTSix monthsSix monthsTwelve months
to 30 June 2009to 30 June 2008to 31 Dec
2008
UnauditedUnauditedAudited
£’000 £’000 £’000
  
Cash flow from operating activities1181,0232,242
Returns on investment and servicing of finance
Interest paid (7)(8)(17)
Taxation
Taxes paid(64)(64)(193)
Capital expenditure and financial investment
Purchase of tangible fixed assets(11)(65)          (117)
Purchase of intangible fixed assets(4)(1,139)
Development expenditure(1)
Acquisition of investment in associated companies(15)(136)
Acquisition of subsidiary(192)1,030
Interest income5
Dividend income received from an associated company5230
84(273)(327)
Cash flows from financing activities 
Issue of shares1,166
Increase/ (decrease) in finance lease liabilities(6)(3)(5)
Repayment of term loan(42)(175)(65)
1,118
(178)

(70)
Net increase in cash and cash equivalents1,2025001,635 
Cash and cash equivalents at beginning of period1,945310310
Cash and cash equivalents at end of period 3,1478101,945 
Cash and cash equivalents consist of the following:
Cash and bank balances3,1479821,956
Bank overdraft(172)(11)
3,1478101,945

 

RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOWSix months
to 30 June 2009
Six months
to 30 June 2008
Twelve months
to 31 December
2008
UnauditedUnauditedAudited
£’000£’000£’000
From operating activities
Profit before Tax403308795
Adjustments for:
Depreciation & amortisation5950102
Share based payment charge45
Loss on disposal of plant and equipment18
Interest paid7817
Interest income(5)
Share of results of associated companies(73)(19)(51)
(Increase)/decrease in debtors(404)(513)(96)
(Decrease)/increase in creditors(340)8801,038
(Increase)/decrease in inventories(4)(19)(45)
Decrease/(increase) in related parties66031727
Translation(190)11397
 

Cash flow from operating activities1181,0232,242

 

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 2009. 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 2009.  The comparative figures for the period ended 30 June 2008, are those as published in the Company’s half year announcement made on 9 September 2008.

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.

2. GeneralThe 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.

3. Accounting PoliciesThe unaudited results for the six months ended 30 June 2009 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 2008, and to be adopted in respect of the year ending 31 December 2009.

4. Sale of Services

 June 2009June 2008Dec 2008
 £’000£’000£’000
Course fees and registration fees1,7361,5213,276
Examination fees1,0107581,520
Sales of systems and support services238448
Other income462135906
 3,2082,6526,150

5. Dividend

During the current financial period, no dividend has been declared or recommended.

6. Earnings per shareBasic 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 27,820,844 (2008: 17,987,420).

7. Investments in Associated CompaniesDetails of associated companies held by AEC Edu Group Pte Ltd as at 30 June 2009 are as follows:

Associated
companies and
country ofPrincipal activitiesEquity held by
incorporation(Place of business)the Group
20092008

%%
Held by AEC.Edu Group Pte Ltd

Keris Murni Sdn BhdProvides education services and the operation of education tuition centers3030
(Malaysia)(Malaysia)
Pusat Tuisyen Kasturi Sdn BhdProvides education services and the operation of education tuition centre3030
(Malaysia)(Malaysia)
Kasturi Management Consultancy Sdn BhdProvides education services and the operation of education tuition centre3030
(Malaysia)(Malaysia)
IMS  Professional Training Services Sdn BhdProvides education services and the operation of education tuition centre3030
(Malaysia)(Malaysia)