Half Year Results

RNS Number : 5801N

AEC Education plc

05 September 2011

 



AIM: AEC

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."

Enquiries:

AEC Education PLC		Tel: [phone] (today)
Liam Swords		Tel: [phone]
WH Ireland Limited (NOMAD)		Tel: [phone]
Dan Bate
Biddicks		Tel: [phone]
Katie Tzouliadis/ Sophie McNulty

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.

2.     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.

3.     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.

4.     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

5.     Dividend

No interim dividend for this financial year is proposed.

6.     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).

 

END

 

 

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