Malvern Intl Regulatory News (MLVN)

This announcement is a duplicate of the Final Results announcement issued at 7.00am on 24 May 2011 under RNS No. 1380H save for an amendment to Note 9 of the Notes to the Financial Statements. All other information remains the same.

AIM: AEC

AEC Education PLC

("AEC" or "the Company" or "the Group")

Final Results for the 12 months ended 31 December 2010

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

·; Challenging year, especially in UK - but expectation of turnaround in 2011

·; Revenues of £18.1m (2009: £12.6m) - includes full year contributions from acquisitions (Malvern House , in UK acquired in July 2009, and Kasturi College, in Malaysia acquired in October 2009)

·; Underlying loss before tax excluding the cost of share options, of £0.22m (2009: profit before tax of £1.08m)

Statutory loss before tax of £0.44m, including cost of cost of share options granted to management and staff of £0.22m (2009: statutory profit before tax of £1.08m)

·; Loss per share of 0.85p (2009: earnings per share of 2.50p)

·; Healthy balance sheet with cash of £3.09m (2009 £3.22m)

·; Final and total dividend proposed of 0.2p per share (2009: 0.15p)

·; UK operations reorganised and restructured; platform in place for return to profitability

·; Investment in Asian operations (Singapore and Malaysia) - colleges well positioned to benefit from expected market consolidation and top level accredited status

·; Board expects Group to deliver materially improved performance in 2011

Enquiries:

CHAIRMAN'S STATEMENT

Overview

The year ended 31 December 2010 was a challenging one for the Group and particularly for the UK operations which were severely affected by the uncertainty surrounding changes to regulations for student visas. In Asia, the picture was different and while there have also been major regulatory changes in the private education markets in Singapore and Malaysia, resulting in additional one-off costs in the year, these changes have presented further opportunities. We expect AEC's position to strengthen in these important markets as a result.

Underlying trading results for 2010 are in line with revised market expectations and reflect the challenges we have faced in the year, with the Group reporting an underlying loss before tax (excluding the cost of share options) of £221,583 on revenues of £18.1m. We took decisive action in the UK to reduce the cost base and to reposition the business in the light of the forthcoming changes to overseas student visas. This should see the UK deliver a significantly improved performance in 2011 although clearly some uncertainty still remains until we see the trading situation normalise. In Asia, our operations in Singapore and Malaysia should see the benefits of their new high level accreditations and we expect the private education market in both countries to consolidate as a result of government regulation. We also expect our English Language provision in our Asian markets to gain from the unrolling of the Malvern House brand and model across all our centres.

Financially, the Group position remains strong. Cash at the year end stood at £3.09m (2009: £3.22m) and this, together with our enhanced banking facilities, will support our expected return to profitability in 2011

Financial results

Revenues for the year to 31 December 2010 rose by 43% to £18.1m (2009: £12.6m). This increase largely reflects the benefits of a full year's contribution from acquisitions, principally Malvern House, which was purchased in July 2009. The underlying pre-tax loss for the year, excluding the cost of share options, was £221,583 (2009: profit of £1.08m). Including the cost of share options granted to management and staff of £217,026, the statutory loss before tax was £438,609. The loss after tax was £289,886 (2009: profit of £0.89m) and the loss per share was 0.85p (2009: earnings per share of 2.5p).

The cash outflow from operating activities was £0.13m (2009: cash inflow of £2.62m). The actions to restructure the UK business, Malvern House, impacted our cash reserves by £0.92m. Nevertheless, net cash at the end of the year stood at a healthy £3.09m (2009: £3.22m). Continued organic growth, in what was a difficult year, combined with the opportunities we see in 2011, have given the Board the confidence to recommend a final and total dividend of 0.20p per ordinary share. Subject to shareholder approval at the Annual General Meeting, the dividend will be paid in August 2011 to shareholders on the register at 24 June 2011. The ex-dividend date is 22 June 2011.

Business Development

Whilst our UK business was adversely affected by the uncertainty surrounding student visa regulations, our Asian operations recorded growth in revenue ranging from 15% to 3% across its markets.

The major highlight in the year for our flagship AEC College in Singapore was its award of the EduTrust Certificate for four years in September 2010 by the Council of Private Education in Singapore, making it one of the few private education institutions in Singapore to have gained this status. We expect it to have a material positive effect on our ability to recruit new students. There was some disruption to the Singapore marketplace while the new regulations were being developed and introduced by the Government but as 2010 closed, student numbers were strong. The University of Wales, Newport (UK), Master of Business Administration and Bachelor programmes introduced last year performed extremely well, recording a 100% increase in student numbers albeit from a small base. Diploma and Advanced Diploma in Business programmes and the new Advanced Diploma in Business taught in Mandarin have also been very successful. However, we did see significant reductions in vocational programmes, especially in the Diploma in Interactive Media. The market in Singapore is beginning to show signs of consolidation and we expect to be able to gain significantly from this as we go through 2011 and 2012.

These accounts reflect the first full year contribution from Kasturi College in Malaysia, after we acquired the 70% balance of the business which we did not already own in October 2009. The business continued to grow strongly with volumes increasing by 9% over the last full year. Degree programmes have achieved robust growth and the College has now been expanded to three locations in Kuala Lumpur to meet the growing demand for these programmes. The College will continue to invest in marketing to recruit students in Northern Africa and the Middle East where demand has been high. It will also continue to raise the level of its programmes to prepare for the opportunities that are being granted to high performing education institutions in Malaysia to become 'deemed' universities, with their own university campuses.

The results also include the first full year contribution from Malvern House, our London based business. As previously stated, the UK Government's review of student visa regulations and the prolonged uncertainty surrounding further government action caused significant disruption and the business recorded a pre-tax loss for the year of £603,000. A trend for students to book shorter English Language courses became increasingly evident over the year and the average number of course weeks per student reduced from 15 weeks to 11.5 weeks. This switch to shorter courses looks, for the time being, to be firmly established and we are not anticipating a material improvement in 2011. In reacting to the changes in trading conditions, we have significantly realigned capacity and overheads in London. These actions should provide a platform for Malvern House to return to sustainable profitability and we expect the business to contribute profitably to first half results in the current financial year.

During the year, we continued with our strategy to unroll the Malvern House brand and model across our Asian centres which teach English Language. The existing English Language centres in Singapore, Malaysia and Vietnam have now all been rebranded and their methodology and approach to teaching English Language now conforms to the Malvern House model. The expansion of the Malvern House brand, combined with the changes already made in the UK, gives us confidence that we will now begin to see a favourable return from our investment in the UK.

Educational Resources Ltd ("ER"), the Group's London Chamber of Commerce & Industry ("LCCI") examinations subsidiary, continued its programme of investment during the year. We added additional marketing and management resources to our operations in Hong Kong in order to develop new market segments as the changes to the schools syllabus impact and in Kuala Lumpur, we created a new Market Intelligence unit to support growth initiatives. Despite the decrease in ER's overall revenues of 2%, gross profit increased by 10% year on year and the certification numbers grew by 3%. Within the overall revenue result, we saw a decrease in contribution from Hong Kong because of changes in the schools system but all our other LCCI markets performed well. New agreements with universities in Asia to accept Level 3 LCCI students into the first year of Business, Accounting and Finance courses, along with new initiatives in India, will provide ER with additional opportunities going forward.

Staff

2010 has been a particularly difficult year, with significant change having to be managed effectively. On behalf of the Board I would like to thank all staff for their hard work and efforts during the period. It was especially encouraging to see the positive attitude that has been apparent as we have implemented the necessary changes to ensure the Group returns to sustainable profit growth.

Prospects

During 2010, the Board was focused on managing both the challenges and opportunities in our various markets, and on ensuring that, where necessary, we adapted our model to create the appropriate platform for growth. We believe we are now almost at the end of that programme and that we will see a turnaround in our performance in 2011.

We have the resources and cash balances to support the growth of our existing operations and are also returning to our strategy to acquire businesses, with a focus on growth in Asia. We are also continuing with the search for suitable university partners in the UK and hope to be in a position to report more fully on this towards the end of 2011.

With strong cash balances, AEC is well placed to continue its development and the Board remains confident that the Group will return to profitability in 2011.

Liam Swords

Chairman

Chief Executive's Report

The Group's activities cover the three core offerings listed below and my report below provides an overview of each activity:

·; pathways programmes;

·; examinations; and

·; the teaching of English.

Our pathway programmes and examinations provision are centred in Singapore and Malaysia principally, with a small presence in Vietnam. These centres also offer English Language teaching, however, it is our London operation which currently forms the hub of our English Language provision. Approximately 13,000 students passed through our schools in 2010 and the student base comprises a mix of students drawn from South East Asia, the Far East, South America, Europe, Africa and the Middle East.

Our global footprint has been built up through a well established network of marketing agencies. This network represents a valuable asset for the Group. Our staff travel extensively across the globe to meet students, agents and partners and our Malvern House brand has established a particularly strong reputation in the English Language market across the world. We believe that as we continue to develop, there will be further significant advantages to be derived from this network.

Technology is also important to us and we have a state-of-the-art IT system at Malvern House which enables both students and agents to engage actively with us and this will support our growth plans going forward.

Pathway Programmes

Following the award of the highly coveted EduTrust certificate covering the next four years, the second half of the year saw AEC achieve good progress in Singapore. Business and accounting qualifications performed robustly during the year and the programmes introduced last year saw excellent uptake. In addition, the three-year degree courses from the Manchester Metropolitan University and MBAs with the University of Wales are gradually gaining momentum. With AEC being one of only 17 providers in Singapore to have achieved the four-year EduTrust certificate, we are well placed to participate fully in the consolidation of the private education market in the country. We are currently expanding our premises, converting corporate offices into additional lecture rooms, and when fully operational, AEC College will have 28 lecture rooms. We are also increasing our marketing efforts in China and India, both of which offer exciting growth potential.

In Malaysia, degree programmes have also continued to perform well, including the University of Wales degree offering. Uptake from students in Central Asia, North Africa and the Middle East, for whom Malaysia is an attractive destination, has remained strong and we are actively recruiting in these regions. New industry regulation has also been introduced in Malaysia and the newly created Malaysia Quality Agency has established more rigorous assessment and compliance requirements for education institutions. We invested substantially in Malaysia in 2010 to ensure that our operations met the new requirements and part of our investment was in leasing additional space. We achieved full compliance with the new regulations in the last quarter of the year. As a result, the College is now benefiting from government loan sponsored programmes supporting less well-off local students. We are also reviewing the potential for the college to qualify as a "deemed university" which would require significant investment in a campus for the college. 

Given the evolving landscape for UK universities, there are exciting new opportunities for additional partnerships. AEC College in Singapore is launching a new law programme with Birmingham City University in 2011 and the Group is in active discussions with a number of other UK universities with a view to forming partnerships in London, Singapore and Malaysia.

Examinations (Educational Resources Pte Ltd ("ER"))

Overall, our examinations business, which offers London Chamber of Commerce & Industry ("LCCI") qualifications, showed a satisfactory performance. The Hong Kong market was affected by changes to the school syllabus but ER's operations elsewhere in Asia increased their market share. In total 149,000 individual exams (entries) were taken by students across Asia in 2010 at both Certificate and Diploma levels, compared to 145,000 in 2009.

We continue to work together with Asian universities in order to ensure that the qualifications remain an attractive option for students and we now have in place a number of agreements with universities to accept Level 3 LCCI accounting students onto Business, Accounting and Finance courses. The Group is also introducing new initiatives in India which should support our expansion in this large potential market.

Teaching of English

As we have previously reported, 2010 was especially challenging for our English Language business in London, with the Government's review of student visas creating major uncertainty and disruption in the marketplace. At the same time, the Government's new compliance requirements for all private education schools in UK also required management attention and additional investment. 

Although there is now greater clarity in the UK marketplace, some residual uncertainty remains and the shift to shorter term courses we saw in 2010 looks to be firmly established. However, we believe that Malvern House in London is now better placed to operate profitably having removed cost and adjusted its model in 2010. We expect to see a significantly better performance in 2011, with losses reversing. In early 2011, Malvern House was awarded 'Highly Trusted Sponsor' status from the UK Borders Agency ("UKBA") and this will enable it to map its future in the changing UK landscape. 

We were also focused during the year on implementing the Malvern House model and branding across our English Language businesses in Asia. We introduced the Malvern House English Language programmes in Malaysia, Vietnam and Singapore, and rebranded Kasturi College in Malaysia as Malvern International College. This means that our students in Asia study English to the same high standards provided by Malvern House in London. Over time, we see scope to use the Malvern House model and brand in other parts of Asia and potentially in South America and the Middle East.

Outlook

2010 was a challenging year and 2011 should see a turnaround in performance, driven by the changes we have implemented over last year both in the UK and in Asia. Now that we have largely completed the reorganisation of our UK resources and adapted the model, we believe that the UK business should see a return to sustainable profits growth. However, we are also aware that we have yet to see the English Language market in the UK fully settle since some UKBA regulation has yet to take effect. In Singapore and Malaysia, our new accredited status should help our operations here to make strong progress and we believe that we are well placed to benefit from the expected market consolidation in both countries as new regulatory requirements reshape the private education sector. We are also refocusing our efforts on seeking complementary acquisitions which will assist us in achieving our growth ambitions. 

Going forward in 2011, I expect Group profitability to be restored and view prospects for growth positively. 

I am very grateful to all our partners in business for their co-operation and support and to our loyal staff for their hard work in this challenging year.

David Ho

Chief Executive

AEC EDUCATION PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

* Restated comparatives- see note 9

AEC EDUCATION PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

AEC EDUCATION PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2010

AEC EDUCATION PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 (CONTINUED)

AS AT 31 DECEMBER 2010

AEC EDUCATION PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

AEC EDUCATION PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

AEC EDUCATION PLC

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

AEC EDUCATION PLC

CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2010

Cash and cash equivalents consist of the following:

AEC EDUCATION PLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010

1 General

AEC Education plc (the "Company") is a public limited liability company incorporated in England and Wales on 8 July 2004. The Company was admitted to AIM on 10 December 2004. Its registered office is Witan Gate House, 500-600 Witan Gate West, Milton Keynes MK9 1SH and its principal place of business is in Singapore. The registration number of the Company is 5174452.

The principal activities of the Company are that of investment holding and provision of educational consultancy services. The principal activities of the subsidiary companies are set out in Note 13 to the financial statements. There have been no significant changes in the nature of these activities during the year.

The Board of Directors have authorised the issue of these financial statements on the date of the Statement by directors set out above.

2 Significant Accounting Policies

(1) Basis of Preparation

The consolidated financial statements of the Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").

The financial statements have been prepared on the historical cost basis except that certain financial instruments are accounted for at fair values.

3 Segmental Information

All revenue and profit before taxation arises from operations in the education sector.

Reportable segments are based on the geographical area where operations are based.

Segmental analysis is as follows:

4 (Loss)/Earnings Per Share

The basic (loss)/earnings per share was based on (loss)/profit attributable to shareholders of loss of (£376,291) (2009: earnings of £831,209) and the weighted average number of ordinary shares in issue at the year end of 44,146,726 (2009: 33,223,897) shares.

The diluted (loss)/earnings per ordinary share was based on (loss)/profit attributable to shareholders of loss of (£376,291) (2009: earnings of £831,209) and the weighted average number of ordinary shares in issue at the year end diluted for the effect of share options and warrants in existence at the year end of 47,899,375 (2009: 37,926,546) shares.

5 Intangible assets