Last checked at 22 Jul 2008 07:30
22nd July 2008
AEC Education plc
("AEC" or "the Company")
Final Results of the Company
for the year ended 31 December 2007
AEC Education plc (the "Group", "AEC Education", "AEC" or the "Company"), the provider of educational courses up to postgraduate degree levels in Singapore, Malaysia and Vietnam, is pleased to announce it's audited results for the year ended 31 December 2007.
The improvement in performance in the first 6 months, announced in August 2007, has continued through the second period providing the following highlights for the full year.
Highlights
Revenue up 74% to £2.7 million (2006 £1.6 million)
Post tax profits £220,498 (2006 Loss (£271,934))
Management and product restructuring completed
Move to new modern Campus on time and within budget
Acquisitions made during the year successfully integrated
CHAIRMAN'S STATEMENT - DECEMBER 2007
Review of Results
It is my pleasure to announce the financial results of the Company for the year ended 31 December 2007.
The changes in the management structure, the success of new product offerings and certain small synergistic acquisitions, have all contributed to this year's positive results. Revenues increased during the year by 74.3% to £2,752,440 compared to £1,579,204 in the year 2006, while Profit after Tax and Minority Interest for the year was £199,095 compared to a loss of £271,934 in 2006. Earnings per share were 1.3 p for 2007 compared to a loss of 1.8 p in 2006.
Business Development
A significant development during the year was the move, last November, to Jalan Bukit Merah in Singapore which has been refurbished to provide a modern and easily accessed campus. The 25,000 square foot campus has 12 classrooms, computer labs specially designed for the graphic design programmes run by the school, a well resourced library and welcoming student meeting areas that complement the working areas of the building. The transfer of the operations and the refurbishment was completed on time and to budget.
We also secured our status as a holder of the Singaporean Quality Class Awards for a further 3 years which demonstrates that the Company continues to be recognised by the Singaporean Government as a prestigious and forward thinking organisation.
The successful Diploma in Hospitality Management was extended into Vietnam and Myanmar. The student population attending the hospitality programmes continues to grow and to support this growth we have recruited a new Deputy Principal, a new Head of Academics and a new Internship Executive for the school.
Our decision to enter the Association of Chartered and Certified Accountants (ACCA) training market has been very successful. We now have 300 full time and 50 part time students following these courses and enrolments continue to grow. The academic success of the students attending the school for ACCA studies is contributing to this growth and recruitment has now been extended to China, Sri Lanka, India, Nepal and Myanmar.
The acquisition of 51% of the AASM School of Management Pte Ltd ("AASM") has greatly strengthened our position in China and has enabled us to introduce business management and hospitality and tourism programmes in Mandarin. We are now adding an Advanced Diploma in Business in Mandarin for full time students and we expect to see further growth in programmes delivered in Mandarin as the synergies between AEC and AASM strengthen.
Our acquisition of Smartworks, which focuses on professional qualifications for Real Estate executives, has coincided with the drive for more recognised qualifications in the property market and has given impetus to recruitment for these programmes. Smartworks' range of programmes, some of which are run in conjunction with Singapore Polytechnic, place us in a strong position in this niche market.
The acquisition of Brainbox in Vietnam has now been integrated and the range of programmes from AEC has been extended. We have introduced the London Chamber of Commerce and Industry (LCCI) qualification in English and we are launching the Smartworks Real estate programmes in the near future. These initiatives give us a strong foothold in a market that should provide significant opportunity as it continues to build its economy.
Prospects
The acquisition of the balance of 65% of Educational Resources Pte. Ltd. (ER) was announced in January 2008. The mainstay of ER's business is the management of the delivery of LCCI examinations concentrated in Hong Kong, Malaysia and Singapore but offered throughout Asia. The synergy of markets combined with the opportunity for students to progress to other AEC programmes will be developed as we progress through 2008.
2007 was a year of consolidation and expansion of our successful programmes. We now have the structure and management team to grow and expand the products we have developed and the acquisitions we have made. We will continue to look for synergistic and affordable acquisitions and we expect organic growth combined with the impact of further synergistic acquisitions to provide further growth in revenues and profits in 2008.
Board and Staff
I would like to thank my colleagues on the Board for their support during the year, particularly David Ho, the CEO, who has provided the real drive for the Company's positive results. David is supported by a team of highly committed staff who have worked tirelessly to achieve the Company's objectives. On behalf of the Board I record our appreciation of their creativity, energy and commitment.
William Swords
Chairman
DIRECTORS' REPORT - DECEMBER 2007
The directors present their report and the audited financial statements of AEC Education Plc (the "Company") and its subsidiary companies for the year ended 31 December 2007.
PRINCIPAL ACTIVITIES
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.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
The year in review was significant for the Group in terms of growth and the achievement of new milestones.
As shown in the consolidated income statement on page 12, Group revenue increased during the year by 74.3% to £2,752,440 compared to £1,579,204 in the year 2006. Singapore operations performed well with the successful launch of new programs introduced in 2006. The Group's overseas operations in Vietnam and Malaysia also contributed positive results. As a result, profit after tax and minority interest rose to a profit of £199,095 for the year (2006: loss of £271,934). Earnings per share also increased to 1.3 pence from loss per share of 1.8 pence in 2006.
In January 2008, the Group successfully acquired the remaining 65% interest in Educational Resources Pte Ltd (a 34.96% associated company in 2006 and 2007), which provides consultancy services in education, related services and business training, for a consideration of £410,000. Following the acquisition, the Group will hold 100% of the issued share capital of Educational Resources Pte Ltd. The consideration comprised the issue of 2,593,750 new ordinary shares at 11.50p per share at the time of completion and further 950,000 ordinary shares to be issued as deferred consideration 2 years after completion.
On 15 April 2008, the Company acquired a 30% interest in both Kasturi Management Consultancy Sdn Bhd and IMS Professional Training Services Sdn Bhd for a consideration of £63,594 and £17,272 respectively from a related party (common directors/shareholders). The consideration was settled by a novation of related party balances.
The financial risks for the Group are set out in Note 31.
A review of the year's operations and future prospects is given in the Chairman's Statement.
PRINCIPAL RISKS AND UNCERTAINTIES FACING THE GROUP
The Group operates in an increasingly challenging environment mainly in Singapore and Malaysia. Keen competition, changes in government policy on education, funding and accreditation are some of the factors that could affect the operations of the Group. Also the general economic and political environment and exchange rate fluctuations play an important part in determining the risk the Group is exposed to.
The Group manages these risks by monitoring the situation carefully and working closely with all the parties concerned to minimise the impact of any changes on the operations.
FINANCIAL INSTRUMENTS
The risks faced by the Group, including financial risk, credit risk, liquidity risk and cash flow interest rate risk and the Group's management of these risks are detailed in note 31 of the accounts.
KEY PERFORMANCE INDICATORS
| 2007 | 2006 | |
| Sales growth | 74.3% | 2.4% |
| Operating profit / (loss) | £225,234 | (£292,563) |
| Earnings / (Loss) per share | 1.3 pence | (1.8) pence |
| Staff turnover | 37% | 30% |
CREDITOR PAYMENT POLICY AND PRACTICE
Group policy is to pay creditors in line with agreed credit terms and generally this policy is adhered to. On average, creditors were settled within 60 days of their due date except on disputed items. Trade creditor days of the Group for the year ended 31 December 2007 were 78 days (2006: 52 days), calculated in accordance with the requirements set down in the Companies Act 1985. This represents the ratio, expressed in days, between amounts invoiced to the Group by its suppliers in the year and in the amounts due, at the year end to trade creditors within one year.
DIVIDENDS
The directors do not recommend the payment of a dividend for the year ended 31 December 2007 (2006: £NIL).
DIRECTORS
The names of the directors who held office during the year and to date were:
William Joseph Swords (Chairman)
Tunku Iskandar Bin Tunku Abdullah
Ramasamy Jayapal
Gopinath Pillai
Ho Peng Cheong (Appointed on 6 March 2007)
DIRECTORS' INTERESTS
The directors holding office at the end of the financial year and their interests in the share capital of the Company and its related corporations as recorded in the register of directors' shareholdings were as follows:
| Name of company and director | At beginning of the year/ at date of appointment Shares of £0.10 each | At end of the year Shares of £0.10 each | |
| AEC Education plc | |||
| William Joseph Swords | - | - | |
| Tunku Iskandar Bin Tunku Abdullah | - | - | |
| Ramasamy Jayapal | 574,047 | 574,047 | |
| Gopinath Pillai | - | - | |
| Ho Peng Cheong (Appointed on 6 March 2007) | 24,000 | 24,000 | |
| Indirect Interest | |||
| William Joseph Swords | - | - | |
| Tunku Iskandar Bin Tunku Abdullah | 399,000 | 399,000 | |
| Ramasamy Jayapal | - | - | |
| Gopinath Pillai | 25,000 | 25,000 | |
| Ho Peng Cheong (Appointed on 6 March 2007) | 5,526,048 | 5,316,048 | |
SUBSTANTIAL SHAREHOLDING
At 10 July 2008, notification had been received of the following holdings of more than 3% of the issued capital of the Company. Apart from these, the directors are not aware of any individual interests or group of interests held by persons acting together, which exceeds 3% of the Company's issued share capital.
| Shares of £0.10 each | % | ||
| KSP Investments Pte Limited | 5,316,048 | 29.52 | |
| Pershing Keen Nominees Limited Des: PERNY* | 2,839,147 | 15.77 | |
| Educational Development International PLC | 2,000,000 | 11.11 | |
| Ranch House Limited | 2,000,000 | 11.11 | |
| Naboobalan s/o Ramansamy Naidu | 874,968 | 4.86 | |
| Vidacos Nominees Limited | 554,318 | 3.08 | |
| Pershing Keen Nominees Limited Des:GWCLT | 550,000 | 3.05 |
*Ramasamy Jayapal is deemed to have an interest in the shares held as follows:
Pershing Keen Nominees Limited 574,047
DISCLOSURE OF INFORMATION TO AUDITORS
At the date of making this report each of the persons who are directors at the time when this Report is approved confirms that:
(a) so far as each director is aware, there is no relevant audit information of which the Company's auditors are unaware; and
(b) each director has taken all the steps that ought to have been taken as a director, including making appropriate enquiries of fellow directors and of the Company's auditors for that purpose, in order to be aware of any information needed by the Company's auditors in connection with preparing their Report and to establish that the Company's auditors are aware of that information.
BY ORDER OF THE BOARD
William Swords
DIRECTOR
17 July 2008
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group and of the profit and loss of the Group for that period. In preparing those financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with International Financial Reporting Standards and with the Companies Act 1985. They are also responsible for the system of internal control, safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with laws and regulations.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF AEC EDUCATION PLC
Independent Auditors' Report to the Shareholders of AEC Education Plc
We have audited the group and parent company financial statements (the "financial statements") of AEC Education plc for the year ended 31 December 2007 which are set out on pages 12 to 56. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report, and the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements have been properly prepared in accordance with the Companies Act 1985 and, as regards the group financial statements, Article 4 of the IAS Regulation. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the financial statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Directors' Report and the Chairman's Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the parent company financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group's and the parent company's affairs as at 31 December 2007 and of the group's and the parent company's profit and loss respectively for the year then ended;
the financial statements have been properly prepared in accordance with the Companies Act 1985 and, as regards the group financial statements, Article 4 of the IAS Regulation; and
the information given in the Directors' Report is consistent with the financial statements.
| MOORE STEPHENS LLP | |
| St. Paul's House | Registered Auditors |
| Warwick Lane | Chartered Accountants |
| LONDON EC4M 7BP | 18 July 2008 |
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
| Note | 2007 | 2006 | ||||||
| £ | £ | |||||||
| Revenue | ||||||||
| Sale of services | (4) | 2,617,132 | 1,463,782 | |||||
| Other income | (5) | 135,308 | 115,422 | |||||
| 2,752,440 | 1,579,204 | |||||||
| Administrative expenses | ||||||||
| Cost of services sold | 1,304,913 | 911,220 | ||||||
| Salaries and employees' benefits | (6) | 565,199 | 416,513 | |||||
| Amortisation of deferred expenditure | 11,988 | 11,644 | ||||||
| Depreciation of plant and equipment | 42,252 | 42,478 | ||||||
| Exchange loss | 3,822 | 16,547 | ||||||
| Finance costs | (7) | 7,636 | 8,074 | |||||
| Other operating expenses | 591,396 | 465,291 | ||||||
| Total operating costs and expenses | 2,527,206 | 1,871,767 | ||||||
| Operating profit / (loss) | (8) | 225,234 | (292,563) | |||||
| Share of results of associated companies | 72,921 | 25,834 | ||||||
| Profit / (Loss) before income tax | 298,155 | (266,729) | ||||||
| Income tax | (9) | (77,657) | (5,205) | |||||
| Profit / (Loss) for the year | 220,498 | (271,934) | ||||||
| Attributable to: | ||||||||
| Equity holders of the Company | 199,095 | (271,934) | ||||||
| Minority interest | 21,403 | - | ||||||
| 220,498 | (271,934) | |||||||
| Earnings / (Loss) per share (in pence) | ||||||||
| Basic and Diluted | (10) | 1.3 | (1.8) | |||||
BALANCE SHEETS
AS AT 31 DECEMBER 2007
| Group | Company | |||||||
| Note | 2007 | 2006 | 2007 | 2006 | ||||
| £ | £ | £ | £ | |||||
| Non-Current Assets | ||||||||
| Plant and equipment | (11) | 249,311 | 125,076 | - | - | |||
| Development expenditure | (12) | 54,706 | 49,511 | |||||
| Investment in a subsidiary companies | (13) | - | - | 1,390,243 | 1,308,639 | |||
| Investment in associated companies | (14) | 1,422,951 | 1,300,058 | - | - | |||
| Goodwill | (15) | 168,397 | 117,855 | - | - | |||
| 1,895,365 | 1,592,500 | 1,390,243 | 1,308,639 | |||||
| Current Assets | ||||||||
| Inventories | (16) | - | 5,936 | - | - | |||
| Trade receivables | (17) | 493,871 | 460,036 | - | - | |||
| Other receivables | (18) | 227,570 | 84,132 | 10,332 | 8,049 | |||
| Deferred expenditure | (19) | 152,500 | 23,762 | - | - | |||
| Due from subsidiary companies | (13) | - | - | 74,353 | 236,970 | |||
| Due from associated companies | (14) | 126,353 | 169,098 | - | - | |||
| Due from related parties | (20) | 190,306 | 1,607 | 135 | - | |||
| Cash and cash equivalents | (21) | 369,046 | 161,998 | 6,097 | 512 | |||
| 1,559,646 | 906,569 | 90,917 | 245,531 | |||||
| Total Assets | 3,455,011 | 2,499,069 | 1,481,160 | 1,554,170 | ||||
| EQUITY AND LIABILITIES | ||||||||
| Non-Current Liabilities | ||||||||
| Financial liabilities | (25) | 138,226 | 1,200 | 2,100 | - | |||
| Deferred taxation | (9) | 1,679 | 75 | - | - | |||
| 139,905 | 1,275 | 2,100 | - | |||||
| Current Liabilities | ||||||||
| Trade payables | (22) | 277,413 | 129,916 | - | - | |||
| Deferred income | (23) | 292,065 | 244,630 | - | - | |||
| Other payables and accruals | (24) | 510,708 | 274,655 | 102,394 | 46,811 | |||
| Due to related parties | (20) | - | 39,613 | - | - | |||
| Financial liabilities | (25) | 114,233 | 87,858 | 1,900 | - | |||
| Provision for income tax | 31,659 | 29,554 | - | - | ||||
| 1,226,078 | 806,226 | 104,294 | 46,811 | |||||
| Equity attributable to equity holders of the Company | ||||||||
| Share capital | (26) | 1,541,499 | 1,491,604 | 1,541,499 | 1,491,604 | |||
| Share premium | 247,508 | 242,519 | 247,508 | 242,519 | ||||
| Reserves | 246,600 | (42,555) | (414,241) | (226,764) | ||||
| 2,035,607 | 1,691,568 | 1,374,766 | 1,507,359 | |||||
| Minority interest in equity | 53,421 | - | - | - | ||||
| Total Equity and Liabilities | 3,455,011 | 2,499,069 | 1,481,160 | 1,554,170 | ||||
The financial statements were approved by the Board of Directors on 17 July 2008 and were signed on its behalf by:
| William Swords | Chairman |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2007
| Total | ||||||||
| Attributable | ||||||||
| To equity | ||||||||
| Holders | ||||||||
| Share | Share | Retained | Translation | Capital | Of the | Minority | ||
| Capital | Premium | Earnings | Reserves | Reserves | Company | Interests | Total | |
| £ | £ | £ | £ | £ | £ | £ | £ | |
| Group | ||||||||
| Balance at 1 January 2006 | 1,491,604 | 242,519 | 29,822 | 115,756 | 170,560 | 2,050,261 | - | 2,050,261 |
| Loss for the year | - | - | (271,934) | - | - | (271,934) | - | (271,934) |
| Loss not recognised in the profit and loss account - Currency translation difference | - | - | - | (86,759) | - | (86,759) | - | (86,759) |
|
| ||||||||
| Balance at 31 December 2006 | 1,491,604 | 242,519 | (242,112) | 28,997 | 170,560 | 1,691,568 | - | 1,691,568 |
| Balance at 1 January 2007 | 1,491,604 | 242,519 | (242,112) | 28,997 | 170,560 | 1,691,568 | - | 1,691,568 |
| Issue of shares in consideration for the acquisition of 51% share capital of AASM School of Management Pte Ltd (note 13) | 49,895 | 4,989 | - | - | - | 54,884 | - | 54,884 |
| Acquisition of 51% interest in a subsidiary | - | - | - | - | - | - | 32,018 | 32,018 |
| Profit for the year | - | - | 199,095 | - | - | 199,095 | 21,403 | 220,498 |
| Profit not recognised in the profit and loss account - Currency translation difference | - | - | - | 90,060 | - | 90,060 | - | 90,060 |
| Balance at 31 December 2007 | 1,541,499 | 247,508 | (43,017) | 119,057 | 170,560 | 2,035,607 | 53,421 | 2,089,028 |
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
| Group | ||||
| Note | 2007 | 2006 | ||
| £ | £ | |||
| Cash Flows from Operating Activities | ||||
| Profit / (loss) before income tax | 298,155 | (266,729) | ||
| Adjustments for: | ||||
| Amortisation of deferred expenditure | 11,988 | 11,644 | ||
| Depreciation of plant and equipment | 42,252 | 42,478 | ||
| Loss on disposal of plant and equipment | - | 934 | ||
| Plant and equipment written off | 52,528 | - | ||
| Inventory written (back) / off | (347) | 47,482 | ||
| Interest expense | 7,636 | 8,074 | ||
| Interest income | (1,494) | (353) | ||
| Share of results of associated companies | (72,921) | (25,834) | ||
| Operating cash flow before working capital changes | 337,797 | (182,304) | ||
| Changes in working capital: | ||||
| Receivables | (274,582) | (286,565) | ||
| Payables | 358,818 | 190,647 | ||
| Inventories | 6,283 | 32,952 | ||
| Related parties | (185,567) | 471,577 | ||
| Net cash generated from operations | 242,749 | 226,307 | ||
| Interest paid | (7,636) | (8,074) | ||
| Interest received | 1,494 | 353 | ||
| Tax paid | (73,948) | (15,931) | ||
| Net cash generated from operating activities | 162,659 | 202,655 | ||
| Cash Flows from Investing Activities | ||||
| Dividend income received from an associated company | 23,237 | 58,344 | ||
| Purchase of plant and equipment | (187,389) | (41,568) | ||
| Development expenditure | (15,226) | (33,754) | ||
| Acquisitions of subsidiaries net of cash acquired | (15) | 45,751 | (58,394) | |
| Net cash used in investing activities | (133,627) | (75,372) | ||
| Cash Flows from Financing Activities | ||||
| Proceeds from term loan | (25) | 175,350 | - | |
| Minority interest | 32,018 | - | ||
| Repayment of finance lease creditor | (9,888) | (2,451) | ||
| Net cash generated from / (used in) financing activities | 197,480 | (2,451) | ||
| Effect of foreign exchange rate changes on consolidation | 7,344 | (17,922) | ||
| Net increase in cash and cash equivalents | 233,856 | 106,910 | ||
| Cash and cash equivalents at beginning of the year | 76,040 | (30,870) | ||
| Cash and cash equivalents at end of the year | 309,896 | 76,040 | ||
Cash and cash equivalents consist of the following:
| 2007 | 2006 | ||
| £ | £ | ||
| Cash and bank balances | 369,046 | 161,998 | |
| Bank overdraft | (59,150) | (85,958) | |
| 309,896 | 76,040 | ||
COMPANY INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
| Note | 2007 | 2006 | ||||||
| £ | £ | |||||||
| Revenue | - | - | ||||||
| Administrative expenses | ||||||||
| Other operating expenses | (182,287) | (187,896) | ||||||
| Operating loss | (8) | (182,287) | (187,896) | |||||
| Other operating income | ||||||||
| Consultancy fee | - | 10,000 | ||||||
| Interest receivable | 510 | 716 | ||||||
| Miscellaneous income | - | 78 | ||||||
| Loss before taxation | (181,777) | (177,102) | ||||||
| Income tax expense | (9) | (5,700) | - | |||||
| Loss after taxation | (187,477) | (177,102) | ||||||
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2007
| Share | Share | Retained | ||
| Capital | Premium | Earnings | Total | |
| £ | £ | £ | £ | |
| As at 1 January 2006 | 1,491,604 | 242,519 | (49,662) | 1,684,461 |
| Loss for the year | - | - | (177,102) | (177,102) |
| Balance at 31 December 2006 | 1,491,604 | 242,519 | (226,764) | 1,507,359 |
| As at 1 January 2007 | 1,491,604 | 242,519 | (226,764) | 1,507,359 |
| Issue of shares in consideration for the acquisition of 51% share capital of AASM School of Management Pte Ltd (note 13) | 49,895 | 4,989 | - | 54,884 |
| Loss for the year | - | - | (187,477) | (187,477) |
| Balance at 31 December 2007 | 1,541,499 | 247,508 | (414,241) | 1,374,766 |
COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
| Company | |||
| 2007 | 2006 | ||
| £ | £ | ||
| Cash Outflows from Operating Activities | |||
| Loss from operations | (181,777) | (177,102) | |
| Change in working capital | |||
| Receivables | (2,283) | 44,091 | |
| Payables | 36,566 | 23,213 | |
| Related parties | 162,482 | 106,030 | |
| Net cash generated from/(used in) operation | 14,988 | (3,768) | |
| Tax paid | (5,700) | - | |
| Net cash generated from/(used in) operating activities | 9,288 | (3,768) | |
| Cash Flows from Investing Activities | |||
| Acquisition of a subsidiary (15) | (3,703) | - | |
| Net cash used in investing activities | (3,703) | - | |
| Net increase/(decrease) in cash and cash equivalents | 5,585 | (3,768) | |
| Cash and cash equivalents at beginning of the year | 512 | 4,280 | |
| Cash and cash equivalents at end of the year | 6,097 | 512 | |
NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2007
General
AEC Education plc (the "Company") is a 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 1 Park Row, Leeds LS1 5AB and its principal place of business is in Singapore.
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 on page 8.
2 Significant Accounting Policies
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') as adopted by the European Union and the Companies Act 1985 and therefore comply with Article 4 of the EU IAS Regulation. The principal accounting policies are set out below.
Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those of the previous financial year except as follows: The Group has adopted the following new and amended IFRS and IFRIC interpretations during the year. Adoption of these revised standards and interpretations did not have any effect on the financial performance or position of the group. They did however give rise to additional disclosures.
-IFRS 7 Financial Instruments: Disclosures;
-IAS 1 Amendment: Capital disclosures - Presentation of Financial Statements;
-IFRIC 8 Scope of IFRS 2;
-IFRIC 9 Reassessment of Embedded Derivatives;
-IFRIC 10 Interim Financial Reporting and Impairment;
New standards and interpretations not applied
The IASB and IFRIC have issued the following standards and interpretations which are not effective and have not been early adopted for these financial statements:
Effective for financial year beginning
International Accounting Standards (IAS/IFRSs)
IFRS 2 (amended) Share-Based Payment Vesting Conditions and Cancellations 1 January 2009
IFRS 8 Operating segments 1 January 2009
IAS 1 (revised) Presentation of Financial Statements 1 January 2009
IAS 23 (revised) Borrowing costs 1 January 2009
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 12 Service Concession Arrangements 1 January 2008
IFRIC 13 Customer Loyalty Programmes 1 July 2008
IFRIC 14 IAS 19 The limit on a defined benefit asset, minimum funding requirement and their interaction. 1 January 2008
The directors do not anticipate that adoption of these standards and interpretations will have a material impact on the group and company's financial position or performance other than additional disclosure requirements in the period of initial application, although IAS 1 (revised) will change the manner in which the statements are presented.
(b) Basis of Consolidation
The consolidated financial statements have been prepared on the basis of the pooling of interest method to reflect the effective Group re-structure by way of a share for share exchange with common shareholders during the year ended 31 December 2007. On this basis, the Company has been treated as the holding company of its subsidiary company for the financial years presented rather than from the date of its acquisition.
All significant intercompany transactions and balances within the Group are eliminated in the preparation of the consolidated financial statements.
For transactions in which combining entities are controlled by the same party or parties before and after the transaction and that control is not transitory are referred to as common control transactions. There is currently no guidance under IFRS for the accounting treatment of such transactions. In terms of IAS8 -Accounting Policies, Changes in Accounting Estimates and Errors, the group may either apply IFRS3 -Business Combinations or a similar framework. US GAAP uses the predecessor values with restatement of comparatives method for such transactions and the group has elected to apply this as the policy for common control transactions. Therefore no purchase price allocation is performed and any difference between the net asset value and the amount paid (i.e. the purchase consideration) is recorded directly in the merger reserve in equity.
The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued, or liabilities undertaken at the date of acquisition plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.
(c) Subsidiary Company
A subsidiary company is an entity in which the Group, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors or in which the Group has power to govern the financial and operating policies.
Investment in subsidiaries is stated in the financial statements of the Company at cost less any provision for impairment losses. The financial statements of subsidiaries acquired are consolidated in the financial statements of the Group from the date that control commences until the date control ceases, using the acquisition method of accounting.
(d) Associated Companies
Associates are those entities in which the Group has an interest of not less than 20% of the equity and in whose financial and operating policy decisions the Group exercise significant influence.
Significant influence is defined as the "power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies".
The consolidated financial statements include the Group's share of the total recognised gains and losses of associates on an equity accounting basis, from the date that significant influence commences until the date that significant influence ceases.
When the audited financial statements of associated companies are not co-terminous with those of the Group, the Group's share of profits and losses is arrived at based on the last audited financial statements available and unaudited management accounts to the end of the accounting period.
In the Company's balance sheet, investments in associates are stated at cost less any provision for impairment losses.
Dividend income from investments in associated companies is recognised when the shareholders' rights to receive payment have been established.
(e) Functional and Presentation Currency
The consolidated financial statements have been presented in United Kingdom sterling as the presentation currency as the Company is incorporated in England and Wales with Sterling denominated shares which are traded on AIM.
Items included in the financial statements of each subsidiary of the Group are measured using the currency of the primary economic environment in which the subsidiary operates ("the functional currency"). The primary functional currency of Group companies is Singapore Dollars.
(f) Foreign Currency Translation
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are measured using the exchange rates prevailing at the transaction dates, or in the case of the items carried at fair value, the exchange rates ruling when the values were determined. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and translation of foreign currency denominated assets and liabilities are recognised in the income statements.
Assets and liabilities of the entities having functional currency other than the presentation currency are translated into sterling equivalents at exchange rates ruling at the balance sheet date. Revenues and expenses are translated at average exchange rates for the year, which approximates the exchange rates at the dates of transactions. All resultant differences are taken directly to equity. On disposal of a foreign entity, accumulated exchange differences are recognised in the income statement as part of the gain or loss on disposal.
The following rates of exchange have been applied:
| 2007 | 2006 | |
| 1 £ to 1 Singapore Dollar Closing rate Average rate | 2.85 3.01 | 3.00 2.93 |
| 1 Malaysian Ringgit to 1 Singapore Dollar Closing rate Average rate | 2.32 2.28 | 2.31 2.31 |
| 1 USD to 1 Singapore Dollar Closing rate Average rate | 1.44 1.51 | 1.53 1.57 |
(g) Revenue Recognition
Revenue is recognised on the following basis:
(i) Course fees are recognised as income based on classes conducted during the year.
(ii) All other course fees in respect of courses offered with no obligation to impart lessons are recognised when the students register for the course and collect the study materials.
(iii) Revenue from sub-letting of office space is recognised over the period of the lease.
(iv) Consulting income is recognised on an accrual basis based on agreed amounts between parties.
(v) Commission income is recognised when services are rendered.
(vi) Management fee income is recognised when services are rendered.
(vii) Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
(h) Borrowing Costs
Borrowing costs incurred to finance the development of plant and equipment are capitalised during the period of time that is required to complete and prepare the asset for its intended use. The capitalised costs are depreciated over the useful life of the plant and equipment.
Other borrowing costs including interest cost and foreign exchange differences, on short term borrowings are recognised on a time-apportioned basis in the income statement using the effective interest method.
(i) Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Depreciation policy, useful lives and residual values are reviewed at least annually, for all asset classes to ensure that the current method is the most appropriate.
Expenditure incurred after the plant and equipment have been put into operation, such as repairs and maintenance is charged to the income statement. Expenditure for additions, improvements and renewals is capitalised when it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be realised from the use of the items of plant and equipment beyond their originally assessed standard of performance.
Depreciation is calculated based on the straight-line method to write off the cost of plant and equipment less their estimated residual value over their estimated useful economic lives as follows:
| Furniture and fittings | - | 5 - 10 years |
| Classroom and office equipment | - | 4 - 10 years |
| Computers | - | 4 - 5 years |
| Renovation | - | 5 years |
| Motor vehicles | - | 5 years |
| Library books | - | 5 - 10 years |
Plant and equipment held under finance leases are depreciated over their estimated useful lives on the same basis as owned assets or, where shorter, the term of the relevant leases.
(j) Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand and bank deposits with an initial maturity of less than three months. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.
(k) Trade and Other Receivables
Trade and other receivables, which generally have 30 to 90 days terms, are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest method, less allowance for impairment. An allowance for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original term of the receivables. The amount of the allowance is the difference between the asset's carrying amount and the present value of the estimated cash flows discounted at the original effective interest rate. The amount of the allowance is recognised in the income statement.
(l) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. Cost comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and conditions. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Allowance or impairment is made for obsolete, slow moving and defective stocks.
(m) Trade and Other Payables
Trade and other payables, which are normally settled on 30 to 90 days term, are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest method.
(n) Deferred Income
Deferred income relates to course fees received in advance and is recognised in the income statement based on classes conducted.
(o) Income Tax
Current tax is the expected tax payable on the taxable income for the year based on the tax rate enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of prior years.
Deferred income tax is provided, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred income tax.
Deferred income tax is provided on temporary differences arising on investments in subsidiary companies and associated companies, except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
(p) Development Expenditure
Development expenditure represents direct expenditure and related costs incurred in developing new courses and is capitalised and deferred only when there is a clearly defined project and the outcome of the project has been assessed with reasonable certainty as to its technical feasibility and its ultimate commercial viability. These costs are amortised over the expected course duration of not more than five years, starting in the year when the course commences.
(q) Impairment of Assets
An assessment is made at each balance sheet date of whether there is any indication of impairment of an asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset's recoverable amount is estimated. An asset's recoverable amount is calculated as the higher of the asset's value in use or its net selling price.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.
Impairment losses are recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
(r) Leases
Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased item are classified as operating leases. Operating lease payments are recognised as rental expenses in the income statement in equal annual amounts over the lease term.
(s) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
(t) Employees' Benefits
Defined contribution plans
Contributions to defined contribution plans are recognised as an expense in the income statement as incurred.
Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.
(u) Goodwill
Goodwill arising on business combinations represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of the acquired subsidiary/associated company at the date of acquisition. Goodwill is recognised as an asset and is tested annually for impairment and carried at cost less any impairment losses. Any impairment is recognised immediately as a charge to the income statement and is not subsequently reversed.
(v) Deferred Expenditure
Deferred expenditure relates to course fees and related expenses paid in advance and is recognised in the income statement based on classes conducted.
(w) Minority Interests
Minority interests are that part of the net results of operations and of net assets of a subsidiary attributable to interests which are not owned directly or indirectly by the Group. It is measured at the minorities' share of the fair value of the subsidiaries' identifiable assets and liabilities at the date of acquisition by the Group and the minorities' share of changes in equity since the date of acquisition, except when the losses applicable to minority interest in a subsidiary exceed the minority interests in the equity of that subsidiary, in which case, the losses are absorbed by the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover its share of those losses.
(x) Intra-group Financial Guarantees
Financial guarantees are financial instruments issued by the Group that requires the issuer to make specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance with the original or modified terms of a debt instrument.
Financial guarantees are recognised initially at fair value and are classified as financial liabilities. Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantees is transferred to the income statement.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
In the process of applying the Group's accounting policies above, management necessarily make judgements and estimates that have a significant effect on the amounts recognised in the financial statements. Changes in the assumptions underlying the estimates could result in a significant impact to the financial statements. The most critical of these accounting judgement and estimation areas are as follows:
(i) Estimated Impairment of Goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2(u). The recoverable amount of goodwill of £1,001,446 stated in Note 14 is determined from value in use calculations. The key assumption for the value in use calculation are those regarding expected discounted future cash flows of the associated company. In the opinion of the directors, as at 31 December 2007 there is no indication of impairment in the value of goodwill.
(ii) Income Taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the capital allowance, deductibility of certain expenses and taxability of certain income during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities based on estimates of whether additional taxes will be due. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.
(iii) Impairment of Assets other than Goodwill
The Group reviews the carrying amounts of assets as at each balance sheet date to determine whether there is any indication of impairment in accordance with the accounting policy stated in note 2(q). If any such indication exists, the assets' recoverable amount or value in use is estimated. Determining the value in use of plant and equipment, which requires the determination of future cash flows expected to be generated from the continued use and ultimate disposal of the asset, requires the company to make estimates and assumptions that can materially affect the financial statements. Any resulting impairment loss could have a material adverse impact on the Group's financial position and results of operations.
3 Segmental Information
All revenue and profit before taxation arises from operations in the education sector, and in South East Asia.
4 Sale of Services
| Group | ||||
| 2007 | 2006 | |||
| £ | £ | |||
| Course fees | 2,472,993 | 1,412,760 | ||
| Sales of systems and support services | 9,832 | 14,741 | ||
| Application fees and registration fees | 129,676 | 36,281 | ||
| Other | 4,631 | - | ||
| 2,617,132 | 1,463,782 | |||
5 Other Income
| Group | ||||||||
| 2007 | 2006 | |||||||
| £ | £ | |||||||
| Exchange gain | - | 647 | ||||||
| Interest income | 1,494 | 1,069 | ||||||
| Rental and related income | 84,305 | 92,746 | ||||||
| Sale of material and textbooks | - | 9,664 | ||||||
| Miscellaneous income | 49,509 | 11,296 | ||||||
| 135,308 | 115,422 | |||||||
6 Salaries and Employees' Benefits
| Group | ||||||||
| 2007 | 2006 | |||||||
| £ | £ | |||||||
| Staff salaries and related costs | 404,197 | 290,032 | ||||||
| Director's fee | 45,000 | 45,000 | ||||||
| Directors' remuneration | 108,844 | 81,481 | ||||||
| Consultancy fees | 7,158 | - | ||||||
| 565,199 | 416,513 | |||||||
Average number of employees:
| Administration | 52 | 46 | ||||||
| 52 | 46 |
7 Finance Costs
| Group | ||||
| 2007 | 2006 | |||
| £ | £ | |||
| Interest on bank overdraft | 3,898 | 7,120 | ||
| Interest on term loan | 2,040 | - | ||
| Interest on finance lease | 818 | 206 | ||
| Others | 880 | 748 | ||
| 7,636 | 8,074 | |||
8 Operating profit / (loss)
Operating profit / (loss) is stated after charging / (crediting) the following:
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Auditor's remuneration: | ||||||||
| - Fees payable to the Company's auditors and their associates for statutory audits | 65,008 | 34,526 | 41,000 | 15,000 | ||||
| - Fees payable to the Company's auditors and their associates for taxation services | 17,768 | 5,696 | 6,111 | 3,540 | ||||
| - Fees payable to the Company's auditors' associates for other services | 8,046 | 8,318 | 4,497 | 5,239 | ||||
| Bad debts written off | - | 7,628 | - | - | ||||
| Exchange loss | 3,822 | 16,547 | 401 | - | ||||
| Inventory (write-back) / written off | (347) | 47,482 | - | - | ||||
| Loss on disposal of plant and equipment | - | 934 | - | - | ||||
| Plant and equipment written off | 52,528 | - | - | - | ||||
| Office and equipment rental | 154,815 | 146,373 | 1,200 | 1,200 | ||||
| Write-back of impairment of trade receivables - net | - | (854) | - | - | ||||
9 Income tax
Tax expense attributable to the results is made up of:
| Group | Company | ||||||||
| 2007 | 2006 | 2007 | 2006 | ||||||
| £ | £ | £ | £ | ||||||
| Current income tax | 70,589 | 1,049 | - | - | |||||
| Underprovision in respect of prior years:- | |||||||||
| Current income tax | 5,464 | 4,561 | 5,700 | - | |||||
| Current year tax | 76,053 | 5,610 | 5,700 | - | |||||
| Deferred taxation | 1,604 | (405) | - | - | |||||
| 77,657 | 5,205 | 5,700 | - | ||||||
The reconciliation of the current year tax expense and the product of accounting profit multiplied by the Singapore statutory tax rate is as follows:
| Group | |||||||
| 2007 | 2006 | ||||||
| £ | % | £ | % | ||||
| Profit / (Loss) before income tax | 298,155 | (266,729) | |||||
| Income tax at the statutory rate of 30% | 89,446 | 30.0 | (80,019) | (30.0) | |||
| Difference arising from foreign tax rate | (37,830) | (12.7) | 19,983 | 7.5 | |||
| Non allowable items | 10,518 | 3.5 | 49,990 | 18.8 | |||
| Tax exempted income | (29,107) | (9.8) | (68,214) | (25.6) | |||
| Group relief set-off | (8,510) | (2.9) | (7,347) | (2.8) | |||
| Singapore statutory stepped income exemption | (3,137) | (1.1) | - | ||||
| Future tax benefits not recognised | 52,928 | 17.8 | 86,580 | 32.5 | |||
| Underprovision of income tax in respect of prior years | 5,464 | 1.8 | 4,561 | 1.7 | |||
| Utilisation of previously unrecognised tax benefits | (2,224) | (1.0) | - | ||||
| Others | (1,495) | (0.0) | 76 | (0.0) | |||
| 76,053 | 25.5 | 5,610 | 2.1 | ||||
At the balance sheet date, the Group had unutilised tax losses and unabsorbed capital allowances amounting to £547,729 (2006: £336,361) and £1,059 (2006: £35,956) respectively available for offsetting against future taxable profit in Singapore and in UK.
The Group has unutilised tax losses amounting to £NIL (2006: £9,579) from pre-pioneer status carried forward available for off-setting against future taxable profits for its subsidiary company in Malaysia. The utilisation of these tax losses is subject to the agreement with the tax authorities and compliance with certain provisions of the tax legislation. The deferred tax benefit arising from the unutilised tax losses has not been recognised in accordance with the accounting policy in Note 2(o) to the financial statements.
Temporary differences arising from investment in subsidiary and associated companies are considered to be insignificant to the Group.
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Composition of deferred taxation: | ||||||||
| On the excess of the net book value | ||||||||
| over tax written down value of plant and equipment | 1,679 | 75 | - | - | ||||
| Analysis of provision for deferred taxation: | ||||||||
| Balance at the beginning of the year | 75 | 480 | - | - | ||||
| Deferred taxation for the year | 1,604 | (405) | - | - | ||||
| Balance at the end of the year | 1,679 | 75 | - | - | ||||
10 Earnings / (Loss) Per Share
The earnings / (loss) per ordinary share is based on profit / (loss) attributable to shareholders amounting to £199,095 (2006: loss of £271,934) and the weighted average number of ordinary shares in issue of 15,082,357 (2006: 14,916,042) shares.
There is no dilution as the Group did not have any potential ordinary shares outstanding as at 31 December 2007 and 2006.
11 Plant and Equipment
| Renovation | Computers | Furniture & fittings | Classroom and office equipment | Motor vehicle | Library books | Total | ||
| Group | £ | £ | £ | £ | £ | £ | £ | |
| 2007 | ||||||||
| Cost | ||||||||
| As at 1 January 2007 | 111,152 | 96,074 | 44,310 | 25,201 | 398 | 2,050 | 279,185 | |
| Additions | 167,916 | 27,120 | 9,542 | 7,558 | - | - | 212,136 | |
| Disposals | (89,036) | - | (1,726) | - | - | - | (90,762) | |
| Acquisition of subsidiary | 87 | 2,760 | 999 | 1,746 | - | - | 5,592 | |
| Currency realignment | 785 | 4,746 | 2,180 | 1,222 | 18 | 93 | 9,044 | |
| As at 31 December 2007 | 190,904 | 130,700 | 55,305 | 35,727 | 416 | 2,143 | 415,195 | |
| Accumulated depreciation | ||||||||
| As at 1 January 2007 | 38,394 | 81,157 | 19,222 | 13,133 | 358 | 1,845 | 154,109 | |
| Charge for the year | 22,021 | 8,834 | 7,570 | 3,582 | 40 | 205 | 42,252 | |
| Disposal | (37,514) | - | (720) | - | - | - | (38,234) | |
| Currency realignment | 1,049 | 4,462 | 1,321 | 815 | 18 | 92 | 7,757 | |
| As at 31 December 2007 | 23,950 | 94,453 | 27,393 | 17,530 | 416 | 2,142 | 165,884 | |
| Net book value | ||||||||
| At 31 December 2007 | 166,954 | 36,247 | 27,912 | 18,197 | - | 1 | 249,311 | |
| Renovation | Computers | Furniture & fittings | Classroom and office equipment | Motor vehicle | Library Books | Total | ||
| Group | £ | £ | £ | £ | £ | £ | £ | |
| 2006 | ||||||||
| Cost | ||||||||
| As at 1 January 2006 | 88,101 | 51,022 | 25,694 | 80,482 | 422 | 2,226 | 247,947 | |
| Additions | 27,294 | 5,435 | 9,657 | 1,950 | - | - | 44,336 | |
| Disposals | - | (1,006) | - | - | - | - | (1,006) | |
| Acquisition of subsidiary | - | 497 | - | - | - | - | 497 | |
| Currency realignment | (4,243) | 40,126 | 8,959 | (57,231) | (24) | (176) | (12,589) | |
| As at 31 December 2006 | 111,152 | 96,074 | 44,310 | 25,201 | 398 | 2,050 | 279,185 | |
| Accumulated depreciation | ||||||||
| As at 1 January 2006 | 18,689 | 34,942 | 4,634 | 59,047 | 296 | 1,524 | 119,132 | |
| Charge for the year | 21,342 | 9,803 | 7,742 | 3,092 | 81 | 418 | 42,478 | |
| Disposal | - | (96) | - | - | - | - | (96) | |
| Currency realignment | (1,637) | 36,508 | 6,846 | (49,006) | (19) | (97) | (7,405) | |
| As at 31 December 2006 | 38,394 | 81,157 | 19,222 | 13,133 | 358 | 1,845 | 154,109 | |
| Net book value | ||||||||
| At 31 December 2006 | 72,758 | 14,917 | 25,088 | 12,068 | 40 | 205 | 125,076 | |
At the balance sheet date, the Group's net book value of computers under finance lease arrangements amounted to £23,211 (2006: £3,575). The depreciation charge in the year amounted to £5,127 (2006: £1,191).
12 Development Expenditure
| Group | ||||||||||||
| 2007 | 2006 | |||||||||||
| £ | £ | |||||||||||
| Cost | ||||||||||||
| As at beginning of the year | 78,932 | 47,351 | ||||||||||
| Additions | 15,226 | 33,754 | ||||||||||
| Currency realignment | 4,195 | (2,173) | ||||||||||
| As at end of the year | 98,353 | 78,932 | ||||||||||
| Amortisation | ||||||||||||
| As at beginning of the year | 29,421 | 18,937 | 18,937 | |||||||||
| Charge for the year | 11,988 | 11,644 | 11,644 | |||||||||
| Currency realignment | 2,238 | (1,160) | (1,160) | |||||||||
| As at end of the year | 43,647 | 29,421 | 29,421 | |||||||||
| Net Book Value | ||||||||||||
| As at end of the year | 54,706 | 49,511 | 49,511 | |||||||||
13 Investment in Subsidiary Companies
|
| Company | |||
| 2007 | 2006 | |||
| £ | £ | |||
| Investment in subsidiaries | ||||
| Unquoted equity shares, at cost | ||||
| As at beginning of the year | 1,308,639 | 1,308,639 | ||
| Additions during the year (Note 15) | 77,604 | - | ||
| Intra-group guarantee | 4,000 | - | ||
| As at end of the year | 1,390,243 | 1,308,639 | ||
| Due from subsidiary company | 74,353 | 236,970 | ||
On 8 June 2007, the Company acquired a 51% interest in AASM School of Management Pte Ltd ("AASM"), a company incorporated in Singapore. AASM is a private education provider based in Singapore which recruits students from China for its Business Management and Logistics program. It has operations in Shenzhen and Changchun in China which are focused on student recruitment, adult education and placement and advisory services.
The total consideration for the acquisition was S$331,500 (£109,768). This was settled by the allotment of 498,946 ordinary shares at a price of 11p per share at an exchange rate of £1 = S$ 3.02 on completion date in September 2007 and the balance of 498,946 ordinary shares is to be paid in equal tranches over the next two years subject to the achievement of a target profit of SGD$185,000
per year over the next two years. If the profit target is not achieved, the number of shares will be reduced proportionately. Based on the budgets provided, 172,878 ordinary shares have been estimated to be paid over in the next two years. The estimated deferred consideration of £19,017 is included in other payables.
AEC Edu Group Pte Ltd and AASM School of Management Pte Ltd are the Company's immediate subsidiaries. The details of AEC Edu Group Pte Ltd and the subsidiary companies it held at 31 December 2007 are as follows:
| Subsidiary companies | ||||||
| and country of | Principal activities | Equity held by | ||||
| incorporation | (Place of business) | the Group | ||||
| 2007 | 2006 | |||||
| % | % | |||||
| AEC.Edu Group Pte Ltd | Investment holding and | |||||
| (Singapore) | provision of education | |||||
| consultancy services (Singapore) | 100 | 100 | ||||
| AASM School of Management Pte Ltd | Technical, vocational and | 51 | - | |||
| (Singapore) | commercial education | |||||
| (Singapore) | ||||||
| Subsidiaries held by AEC.Edu Group Pte Ltd | ||||||
| AEC Resource Development Pte Ltd | Education, training and | 100 | 100 | |||
| (Singapore) | human resource consultancy | |||||
| (Singapore) | ||||||
| AEC Accountancy & Business School Pte Ltd | Education, training and | 100 | 100 | |||
| (Singapore) | human resource consultancy | |||||
| (Singapore) | ||||||
| The McGregorr Consultants Pte Ltd | Advisors and consultants for | 100 | 100 | |||
| (Singapore) | further learning and dealing | |||||
| in study kits and manuals | ||||||
| (Singapore) | ||||||
| Flexi Learning Systems Pte Ltd | Operator and agent of schools, | 100 | 100 | |||
| (Singapore) | colleges and professional | |||||
| assoc. in promoting training | ||||||
| and educational programmes | ||||||
| and courses (Singapore) | ||||||
| Subsidiary companies | |||||
| and country of | Principal activities | Equity held by | |||
| incorporation | (Place of business) | the Group | |||
| 2007 | 2006 | ||||
| % | % | ||||
| AEC Internet Education Technology Pte Ltd | E-learning applications service | 100 | 100 | ||
| (Singapore) | provider to develop, distribute | ||||
| and implement dynamic | |||||
| educational content and | |||||
| innovative learning processes | |||||
| and software tools | |||||
| (Singapore) | |||||
| AEC Edutech Sdn Bhd | Development, management, | 100 | 100 | ||
| (Malaysia) | and provision of consultancy | ||||
| and market educational | |||||
| technology solutions | |||||
| related products | |||||
| (Malaysia) | |||||
| Brighton Commercial Training Centre Pte Ltd | Technical, vocational and | 100 | 100 | ||
| (Singapore) | commercial education | ||||
| (Singapore) | |||||
| AEC Business School Pte Ltd | Technical, vocational and | 100 | 100 | ||
| (Singapore) | commercial education | ||||
| (Singapore) | |||||
| Brainbox Limited | Consulting & marketing in | 88.2 | 64.8 | ||
| (British Virgin Islands) | education, training and | ||||
| related services (Vietnam) | |||||
| Smartworks Learning Centre Pte Ltd | Commercial education and | 100 | 100 | ||
| (Singapore) | provide training in property | ||||
| investments, consultancy and maintenance (Singapore) | |||||
| Held by AEC Edutech Sdn Bhd | Dormant | 100 | 100 | ||
| ST Synergy (Malaysia) | |||||
| Sdn Bhd | |||||
| (Malaysia) | |||||
| Subsidiary companies | |||||
| and country of | Principal activities | Equity held by | |||
| incorporation | (Place of business) | the Group | |||
| 2007 | 2006 | ||||
| % | % | ||||
| Held by Brainbox Limited | |||||
| Brainbox Foreign Language & Management Studies Training Center (Vietnam) | Training courses in foreign languages and business administration (Vietnam) | 88.2 | 64.8 | ||
In the opinion of the directors, the recoverable amount of the investment in subsidiary companies is not less than the carrying amount of the investment on the basis that the present value of the estimated future cash flows expected to arise from the subsidiaries' operations over the next few years will exceed the carrying amount of the investment in these subsidiaries.
14 Investment in Associated Companies
| Group | |||||||||
| 2007 | 2006 | ||||||||
| £ | £ | ||||||||
| Unquoted shares, at cost | 1,400,732 | 1,400,732 | |||||||
| Share of net post-acquisition reserves | |||||||||
| Balance at beginning of year | (100,674) | (6,798) | |||||||
| Share in profits for the year | 72,921 | 25,834 | |||||||
| Dividends received | (23,237) | (58,344) | |||||||
| Currency alignment | 73,209 | (61,366) | |||||||
| Balance at end of year | 22,219 | (100,674) | |||||||
| 1,422,951 | 1,300,058 | ||||||||
| Due from associated companies | 126,353 | 169,098 | |||||||
The amounts due from associated companies are trade in nature, unsecured, interest-free and payable within the next twelve months.
The carrying amount of the investment in associated companies includes goodwill of £1,001,446 (2006: £907,680).
Movement in goodwill during the year is as follows:
| Group | |||
| 2007 | |||
| £ | |||
| Cost | |||
| Balance as at beginning of the year | 907,680 | ||
| Currency alignment | 93,766 | ||
| Balance as at end of the year | 1,001,446 | ||
Summarised financial information in respect of the Group's associated companies is set out below:
| 2007 | 2006 | |||
| £ | £ | |||
| Total assets | 2,511,281 | 2,433,122 | ||
| Total liabilities | (1,103,859) | (1,112,103) | ||
| Net assets | 1,407,422 | 1,321,019 | ||
| Revenue | 3,375,100 | 2,459,957 | ||
| Profit for the year | 189,377 | 70,687 | ||
Details of associated companies are as follows:
| Associated | |||||
| companies and | |||||
| country of | Principal activities | Equity held by | |||
| incorporation | (Place of business) | the Group | |||
| 2007 | 2006 | ||||
| % | % | ||||
| Held by AEC.Edu Group Pte Ltd | |||||
| Keris Murni Sdn Bhd | Provides education services and the operation | 30 | 30 | ||
| (Malaysia) | of education tuition centre | ||||
| (Malaysia) | |||||
| Pusat Tuisyen Kasturi Sdn | Provides education services and the operation | 30 | 30 | ||
| Bhd | of education tuition centre | ||||
| (Malaysia) | (Malaysia) | ||||
| Educational Resources Pte | Provides consultancy services in education | 34.96 | 34.96 | ||
| Ltd | related services and business training | ||||
| (Singapore) | (Singapore) | ||||
In the opinion of the directors, the recoverable amount of the investment in associated companies is not less than the carrying amount of the investment on the basis that the present value of the estimated future cash flows expected to arise from the associated companies' operations over the next few years will exceed the carrying amount of the investment in these associated companies.
15 Goodwill
| Group | ||||||||
| 2007 | 2006 | |||||||
| £ | £ | |||||||
| Cost | ||||||||
| At beginning of the year | 117,855 | - | ||||||
| Additions | 44,279 | 117,855 | ||||||
| Currency alignment | 6,263 | - | ||||||
| At end of the year | 168,397 | 117,855 | ||||||
Goodwill arose in the year as a result of acquisitions by the Group.
During the year, the Group acquired an additional 23.4% of Brainbox Limited, a company incorporated in the British Virgin Islands by the take up of a rights issue of 100,000 shares by Brainbox Limited. The consideration of the rights issue was by way of capitalisation of intercompany debt. No goodwill has been recognised as the consideration was deemed to be at fair value.
On 8 June 2007, the Company acquired 51% interest of AASM School of Management Pte Ltd, a company incorporated in Singapore for a consideration of £77,604, as shown in note 13.
An analysis of the consideration paid, fair values of net assets acquired and goodwill arising in relation to the above acquisition is set out below:
| £ | |||||
| Cash and cash equivalents | 49,454 | ||||
| Other investment | 501 | ||||
| Other receivables | 30,928 | ||||
| Plant and equipment | 5,592 | ||||
| Trade and other payables | (53,150) | ||||
| Net assets acquired | 33,325 | ||||
| Goodwill on acquisition | 44,279 | ||||
| Total purchase consideration | 77,604 | ||||
| Less: Non-cash consideration paid, satisfied by issue of 498,946 shares at 11p each (Note 28) | (54,884) | ||||
| Less: Deferred consideration | (19,017) | ||||
| Legal fees paid | 3,703 | ||||
| Less: Cash in subsidiary acquired | (49,454) | ||||
| Cash flow on acquisition net of cash acquired | (45,751) | ||||
The effect of the acquisition on the income statement is an increase in revenue of £299,770 and increase in operating profit of £47,066 covering the period 8 June 2007 to 31 December 2007.
If the acquisition had occurred on 1 January 2007, the increase in Group revenue would have been £459,259 and operating profit would have been £35,444.
16 Inventories
Inventories pertains to the net realisable value of goods received in exchange for the rendering of training services in 2004.
17 Trade Receivables
| Group | ||||
| 2007 | 2006 | |||
| £ | £ | |||
| Trade receivables are stated after deducting allowance for | ||||
| impairment | 7,729 | 24,331 | ||
| Group | ||||||||
| 2007 | 2006 | |||||||
| £ | £ | |||||||
| Trade receivables are denominated | ||||||||
| in the following currencies: | ||||||||
| Singapore Dollars | 492,253 | 300,725 | ||||||
| Pound Sterling | - | 714 | ||||||
| Malaysian Ringgit | 1,618 | 158,597 | ||||||
| 493,871 | 460,036 | |||||||
18 Other Receivables
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Deposits | 17,592 | 1,618 | - | - | ||||
| Prepayments | 12,843 | 24,194 | 10,009 | - | ||||
| Staff loan | 4,208 | - | - | - | ||||
| Other debtors | 192,927 | 58,320 | 323 | 8,049 | ||||
|
|
| 227,570 |
| 84,132 |
| 10,332 |
| 8,049 |
| Other receivables are denominated in the following currencies: | ||||||||
| Singapore Dollars | 212,335 | 18,315 | - | - | ||||
| Vietnamese Dong | 306 | 57,156 | - | - | ||||
| Pound Sterling | 10,332 | 7,335 | 10,332 | 8,049 | ||||
| Malaysian Ringgit | 4,597 | 1,326 | - | - | ||||
| 227,570 | 84,132 | 10,332 | 8,049 | |||||
19 Deferred Expenditure
Deferred expenditure relates to consultancy and course fees paid in advance.
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Deferred expenditure is denominated | ||||||||
| in the following currency: | ||||||||
| Singapore Dollars | 152,500 | 23,762 | - | - | ||||
20 Due from/(to) Related Parties
Related parties are entities (except for subsidiary companies and associated companies) with common direct/indirect shareholders and directors. Parties are considered to be related (directly or indirectly) if one party has the ability to control or exercise significant influence over the other party in making financial and operating decisions by virtue of such common interests.
| Group | |||||||||||
| 2007 | 2006 | ||||||||||
| £ | £ | ||||||||||
| Due from related parties | |||||||||||
| Trade | 84,343 | - | |||||||||
| Non-trade | 105,963 | 1,607 | |||||||||
| 190,306 | 1,607 | ||||||||||
| Due to related parties | |||||||||||
| Trade | - | (16,391) | |||||||||
| Non-trade | - | (23,222) | |||||||||
| - | (39,613) | ||||||||||
| Total | 190,306 | (38,006) | |||||||||
| Balances with related parties are denominated in the following currencies: | |||||||||||
| Singapore Dollars | 189,376 | (38,006) | |||||||||
| Pound Sterling | 135 | - | |||||||||
| Malaysian Ringgit | 795 | - | |||||||||
| 190,306 | (38,006) | ||||||||||
Amounts due from / (to) related parties are unsecured, interest-free and due within the next twelve months
| Group | ||||
| 2007 | 2006 | |||
| £ | £ | |||
| The details of related parties balances are as follows: | ||||
| Due from related parties | ||||
| Kasturi Management Consultancy Sdn Bhd | 130,719 | 411 | ||
| IMS Professional Training Services Sdn Bhd | 34,490 | - | ||
| Savant Infocomm Pte Ltd | 9,857 | - | ||
| AEC Business School India | 14,262 | 522 | ||
| Windmill International Pte Ltd | 356 | - | ||
| Melewar Academia Holdings Pte Ltd | 485 | 563 | ||
| AEC Property Management Pte Ltd | 2 | 2 | ||
| Playware Studios Asia Pte Ltd | - | 41 | ||
| Savant Infotech Solutions Pte Ltd | - | 68 | ||
| KSP Investments Pte Ltd | 135 | - | ||
| 190,306 | 1,607 | |||
| Group | ||||
| 2007 | 2006 | |||
| Due to related parties | £ | £ | ||
| OLOL Management Service Pte Ltd | - | (16,421) | ||
| AEC Property Management Pte Ltd | - | (546) | ||
| Windmill International Pte Ltd | - | (1,572) | ||
| Savant Infocomm Pte Ltd | - | (21,074) | ||
| - | (39,613) | |||
21 Cash and Cash Equivalents
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Cash and bank balances are denominated in the following currencies: | ||||||||
| Singapore Dollars | 312,243 | 149,886 | - | - | ||||
| Vietnamese Dong | 22,053 | 3,745 | - | - | ||||
| Pound Sterling | 6,097 | 512 | 6,097 | 512 | ||||
| United States Dollars | 15,684 | - | - | - | ||||
| Malaysian Ringgit | 12,969 | 7,855 | - | - | ||||
| 369,046 | 161,998 | 6,097 | 512 | |||||
22 Trade Payables
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Trade payables balances are denominated | ||||||||
| in the following currencies: | ||||||||
| Singapore Dollars | 252,409 | 129,916 | - | - | ||||
| Vietnamese Dong | 25,004 | - | - | - | ||||
| 277,413 | 129,916 | - | - | |||||
23 Deferred Income
Deferred income relates to course fees received in advance.
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Deferred income is denominated in the following currency: | ||||||||
| Singapore Dollars | 292,065 | 244,630 | - | - | ||||
24 Other Payables
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Other creditors | 359,997 | 152,470 | 38,483 | 22,061 | ||||
| Accrued expenses | 150,711 | 122,185 | 63,911 | 24,750 | ||||
| 510,708 | 274,655 | 102,394 | 46,811 | |||||
| Other payables are denominated in the following currencies: | ||||||||
| Singapore Dollars | 399,692 | 189,964 | - | - | ||||
| Vietnamese Dong | 5,585 | 35,430 | - | - | ||||
| Pound Sterling | 102,394 | 46,809 | 102,394 | 46,811 | ||||
| Malaysian Ringgit | 3,037 | 2,452 | - | - | ||||
| 510,708 | 274,655 | 102,394 | 46,811 | |||||
25 Financial Liabilities
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| Non-current liabilities | ||||||||
| Finance lease obligations | 9,637 | 1,200 | - | - | ||||
| Term loan | 128,589 | - | - | - | ||||
| Intra-group financial guarantee | - | - | 2,100 | - | ||||
| 138,226 | 1,200 | 2,100 | - | |||||
| Current liabilities | ||||||||
| Bank overdraft | 59,150 | 85,958 | - | - | ||||
| Finance lease obligations | 8,322 | 1,900 | - | - | ||||
| Term loan | 46,761 | - | - | - | ||||
| Intra-group financial guarantee | - | - | 1,900 | - | ||||
| 114,233 | 87,858 | 1,900 | - | |||||
| 252,459 | 89,058 | 4,000 | - | |||||
The bank overdraft facility of the Group is secured by a personal guarantee by a director and incurs interest of prime rate plus 2% per annum. The bank overdraft is payable within 12 months from the balance sheet date.
Finance Lease Obligations
At 31 December 2007, the Group and the Company has obligations under finance leases that are payable as follows:
| Group | Group | |||||||||||||||
| Present value | ||||||||||||||||
| Minimum | of minimum | |||||||||||||||
| lease payments | lease payments | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| £ | £ | £ | £ | |||||||||||||
| Within one year | 9,555 | 2,124 | 8,322 | 1,900 | ||||||||||||
| Due after one year | 10,324 | 1,239 | 9,637 | 1,200 | ||||||||||||
| 19,879 | 3,363 | 17,959 | 3,100 | |||||||||||||
| Less: Future finance charges | (1,920) | (263) | - | - | ||||||||||||
| Present value of lease obligations | 17,959 | 3,100 | 17,959 | 3,100 | ||||||||||||
| Effective rate of interest per | ||||||||||||||||
| annum for finance leases |
| 3.8% | 5.4% | |||||||||||||
| Finance lease creditors are denominated in the following currencies: | ||||||||||||||||
| Singapore Dollars | 16,704 | - | ||||||||||||||
| Malaysian Ringgit | 1,255 | 3,100 | ||||||||||||||
| 17,959 | 3,100 | |||||||||||||||
Term Loan
| Group and Company | ||||
| 2007 | 2006 | |||
| £ | £ | |||
| Due within one year | 81,973 | - | ||
| Due after one year | 128,239 | - | ||
| 210,212 | - | |||
| Less: Future term loan interest | (34,862) | - | ||
| Present value of principal on term loan | 175,350 | - | ||
| Principal to be repaid: | ||||
| - Due within one year | 46,761 | - | ||
| - Due after one year | 128,589 | - | ||
| 175,350 | - | |||
The term loan is used specifically for renovation works of the new office at Block 167, Jalan Bukit Merah, Connection 1 Tower 4 #02-13 Singapore 150167.
The term loan is secured by the corporate guarantee of the holding company, AEC Education plc and a first fixed and floating charge over all the assets of AEC Education plc.
The term loan shall be repaid by 30 monthly installments, together with the interest charged at 2% per annum over the prevailing average lending rate or lender's S$ base rate, whichever is higher.
Interest ranges from 7.33% to 7.38% per annum (2006: nil).
Intra-group guarantee
Intra-group financial guarantee relates to the corporate guarantee granted by the holding company in respect of the term loan facility granted to a subsidiary. The fair value of the guarantee amounts to £4,000 (2006: NIL). The periods in which the financial guarantee expires are as follows:
| Company | ||||
| 2007 | 2006 | |||
| £ | £ | |||
| Less than 1 year | 1,900 | - | ||
| Between 1 and 5 years | 2,100 | - | ||
| 4,000 | - | |||
26 Share Capital
| Group and Company | |||||||||
| 2007 | 2006 | ||||||||
| £ | £ | ||||||||
| Authorised | |||||||||
| 50,000,000 ordinary shares of 10p each | 5,000,000 | 5,000,000 | |||||||
| Allotted, called up and fully paid | |||||||||
| At beginning of the year | |||||||||
| - 14,916,042 ordinary shares of 10p each | 1,491,604 | 1,491,604 | |||||||
| Issued during the year | |||||||||
| - 498,946 ordinary shares of 10p each issued at 11p each for the acquisition of 51% share capital of AASM School of Management Pte Ltd (shown in note 13) | 49,895 | - | |||||||
| At end of the year | |||||||||
| - 15,414,988 ordinary shares of 10p each | 1,541,499 | 1,491,604 | |||||||
27 Related Party Transactions
In addition to the related party information disclosed in note 20, there were the following significant transactions with related parties on terms agreed between the parties:
| | | Group | | Company | ||||
| | | 2007 | | 2006 | | 2007 | | 2006 |
| | | £ | | £ | | £ | | £ |
| | | | | | | | | |
| | With subsidiary | | | | | | | |
| | AEC Edu Group Pte Ltd | | | | | | | |
| | - Consultancy fee income | - | | - | | - | | 10,000 |
| | - Management fee paid | - | | - | | - | | (25,000) |
| | | | | | | | | |
| | With a related party with common directors | | | | | | | |
| | OLOL Management Service Pte Ltd | | | | | | | |
| | - Commission paid and payable | (484,635) | | (411,687) | | - | | - |
| | | | | | | | | |
| | Savant Infocomm Pte Ltd | | | | | | | |
| | - Accounting fees | (33,987) | | (28,598) | | (12,000) | | (6,000) |
| | | | | | | | | |
| | QLA Learning Associates Malaysia Sdn Bhd - revenue | | | | | | | |
| | - Royalty and Licensing | - | | 121 | | - | | - |
| | - Computer software and hardware | - | | 170 | | - | | - |
| | - Implementation, training and testing | - | | 282 | | - | | - |
| | - Management and consultancy fees | - | | 30 | | - | | - |
| | | | | | | | | |
| | | | | | | | | |
| | | Group | | Company | ||||
| | | 2007 | | 2006 | | 2007 | | 2006 |
| | | £ | | £ | | £ | | £ |
| | | | | | | | | |
| | Open Learning Agensi Malaysia Sdn Bhd - revenue | | | | | | | |
| | - Management and consultancy fees | 3,914 | | - | | - | | - |
| | | | | | | | | |
| | With associated companies and companies related to them | | | | | | | |
| | Genting Mutiara Sdn Bhd -revenue | | | | | | | |
| | - Royalty and Licensing | 7,706 | | 8,731 | | - | | - |
| | - Computer software and hardware | 9,909 | | 12,270 | | - | | - |
| | - Implementation, training and testing | 18,894 | | 20,364 | | - | | - |
| | - Management and consultancy fees | 1,927 | | 2,183 | | - | | - |
| | | | | | | | | |
| | Indopelangi Sdn Bhd - revenue | | | | | | | |
| | - Royalty and Licensing | 5,079 | | 4,941 | | - | | - |
| | - Computer software and hardware | 9,909 | | 6,943 | | - | | - |
| | - Implementation, training and testing | 9,073 | | 11,524 | | - | | - |
| | - Management and consultancy fees | 1,270 | | 1,235 | | - | | - |
| | | | | | | | | |
| | With associated companies and companies related to them | | | | | | | |
| | Jaguh Suria Sdn Bhd - revenue | | | | | | | |
| | - Royalty and Licensing | 8,640 | | 4,431 | | - | | - |
| | - Computer software and hardware | 11,109 | | 6,226 | | - | | - |
| | - Implementation, training and testing | 21,183 | | 10,333 | | - | | - |
| | - Management and consultancy fees | 2,160 | | 1,108 | | - | | - |
| | | | | | | | | |
| | Keris Murni Sdn Bhd -revenue | | | | | | | |
| | - Royalty and Licensing | 22,266 | | 23,472 | | - | | - |
| | - Computer software and hardware | 28,630 | | 32,984 | | - | | - |
| | - Implementation, training and testing | 54,590 | | 54,743 | | - | | - |
| | - Management and consultancy fees | 5,567 | | 5,868 | | - | | - |
| | | | | | | | | |
| | Pusat Tiusyen Kasturi Sdn Bhd -revenue | | | | | | | |
| | - Royalty and Licensing | 17,654 | | 17,376 | | - | | - |
| | - Computer software and hardware | 22,700 | | 24,418 | | - | | - |
| | - Implementation, training and testing | 43,282 | | 40,525 | | - | | - |
| | - Management and consultancy fees | 4,414 | | 4,344 | | - | | - |
| | | | | | | | | |
| | Pelangi Tegas Sdn Bhd - revenue | | | | | | | |
| | - Royalty and Licensing | 5,722 | | 5,862 | | - | | - |
| | - Computer software and hardware | 7,358 | | 8,237 | | - | | - |
| | - Implementation, training and testing | 14,030 | | 13,671 | | - | | - |
| | - Management and consultancy fees | 1,431 | | 1,465 | | | | |
| Group | Company | |||||||
| 2007 | 2006 | 2007 | 2006 | |||||
| £ | £ | £ | £ | |||||
| With related parties with common ultimate shareholders | ||||||||
| Kasturi Management Consultancy Sdn Bhd - balance sheet | ||||||||
| - novation of debts from AEC Edutech Sdn Bhd | 63,594 | - | - | - | ||||
|
| ||||||||
| IMS Professional Training Services Sdn Bhd - balance sheet | ||||||||
| - novation of debts from AEC Edutech Sdn Bhd | 17,272 | - | - | - | ||||
|
| ||||||||
| Group | ||||
| 2007 | 2006 | |||
| £ | £ | |||
| Key management personnel | ||||
| - Short term benefits | 242,774 | 123,417 | ||
| - Post employment benefits | 20,183 | 3,063 | ||
| 262,957 | 126,480 | |||
Post employment benefits relate to the Group's contribution to the Central Provident Fund, a defined contribution plan which is mandatory in Singapore.
The director Mr Ho Peng Cheong had an interest in contracts with the following related parties during the year by reason of his 1% effective interest in the following companies:
Kasturi Management Consultancy Sdn Bhd (Formerly known as Open Learning Agency Malaysia Sdn Bhd)
QLA Learning Associates Malaysia Sdn Bhd
IMS Professional Training Services Sdn Bhd (Formerly known as Intellectual Challenge Sdn Bhd)
28 Operating Lease Commitments
The Group leases its office premises for a period of 3 years, renewable for such period and under such terms and conditions as may be agreed upon with the lessor.
The Group also leases various plant and machinery under non-cancellable operating lease arrangements. The lease expenditure charged to the income statement during the financial year is disclosed in Note 8.
At the balance sheet date, the future minimum rentals payable under these non-cancellable operating leases are as follows:-
| Group | ||||
| 2007 | 2006 | |||
| £ | £ | |||
| Payable: | ||||
| Within one year | 441,983 | 117,544 | ||
| Between two to five years | 659,374 | 10,081 | ||
| 1,101,357 | 127,625 | |||
29 Contingent Liability
The company is incorporated in England & Wales, although its principal place of business is Singapore. The company is seeking the agreement of the tax authorities in United Kingdom and Singapore that the company is resident in Singapore for tax purposes as the central management and control is exercised in Singapore. On this basis, the company has no tax liability to United Kingdom corporation tax. In the event that the company is unsuccessful in its submissions, and the company is deemed to be resident in United Kingdom (by virtue of its place of incorporation) then the maximum liability to United Kingdom Corporation tax is estimated at £70,000.
30 Subsequent events
a. In January 2008, the Company acquired the remaining 65% interest in Educational Resources Pte Ltd, a company incorporated in Singapore, which provides consultancy services in education, related services and business training, for a consideration of £410,000. Following the acquisition, the Group will hold 100% of the issued share capital of Educational Resources Pte Ltd. The consideration comprised the issue of 2,593,750 new ordinary shares at 11.5p per share at the time of completion and a further 950,000 ordinary shares are to be issued as deferred consideration 2 years after completion.
b. The AEC Education plc Unapproved Executive Share Option Scheme (the "ESOS") was adopted by the Directors on 21 February 2008.
The ESOS is a share incentive scheme to give recognition to employees whose contributions have been essential to the well-being and prosperity of the Group. On 3 March 2008, a total of 1,220,000 non-transferable options to subscribe for ordinary shares of £0.10 each in the Company were granted to Executive Directors, Managerial Staff and Specially Selected Employees. Options are granted for a term of 5 years to purchase AEC Education plc ordinary shares.
The exercise price was fixed at market value less 20% discount or par value per share whichever is higher. All options have an 18-month vesting period.
The issue of options on 3 March 2008 is expected to give rise to a charge of £57,000 in 2008.
c. On 15 April 2008, the Group acquired a 30% interest in both Kasturi Management Consultancy Sdn Bhd and IMS Professional Training Services Sdn Bhd for a consideration of £63,594 and £17,272 respectively from a related party (common directors/indirect shareholders). The consideration was settled by a novation of related party balances.
d. On 30 April 2008, the Group acquired an additional 3.4% interest in Brainbox Limited from the minority shareholders for a cash consideration of US$5,100. Together with those shares held by Educational Resources Pte Ltd, the group now holds a 95% interest in Brainbox Limited.
31 Financial Instruments
(a) Financial Risk Management Objectives and Policies
Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group's risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.
(i) Credit risk
The carrying amount of trade and other receivables, subsidiary companies and related party balances and cash represent the Group's maximum exposure to credit risk.
75% of the Group's accounts receivables is made up of individual students and 25% relates to two large funding organisations.
All trading activity is concentrated in South East Asia.
The Groups current accounts were concentrated with four financial institutions, which held credit ratings ranging from AA- to A-.
(ii) Liquidity risk
The Group adopts prudent liquidity risk management by maintaining sufficient cash and having adequate amounts of credit facilities. Due to the nature of the Group's operations, the Group aims at maintaining flexibility in funding by keeping committed credit facilities available.
(iii)Foreign currency risk
The Group's investments in overseas subsidiaries and associates which are held for long-term investment purposes are exposed to currency translation risk. The differences arising from such translation are recorded under the foreign currency translation reserve.
The Group does not use derivative financial instruments to hedge against the volatility associated with foreign currency transactions as the directors believe that the risks arising from fluctuations in foreign currency exchange rates are not significant.
The Group's exposures to foreign currencies are as follows:
| Singapore Dollar £ | Malaysian Ringgit £ | Vietnamese Dong £ | US Dollar £ | |
| At 31.12.2007 | ||||
|
| ||||
| Trade and other receivables | 1,020,316 | 7,010 | 306 | - |
| Cash and bank balances | 312,241 | 12,969 | 22,053 | 15,684 |
| Borrowings | (251,204) | (1,255) | - | - |
| Trade and other payables | (652,101) | (3,037) | (30,588) | - |
|
| 429,252 | 15,687 | (8,229) | 15,684 |
| Singapore Dollar £ | Malaysian Ringgit £ | Vietnamese Dong £ | US Dollar £ | |
| At 31.12.2006 | ||||
|
| ||||
| Trade and other receivables | 489,745 | 159,923 | 57,156 | - |
| Cash and bank balances | 149,886 | 7,855 | 3,745 | - |
| Borrowings | (85,958) | (3,100) | - | - |
| Trade and other payables | (359,493) | (2,452) | (35,430) | - |
|
| 194,180 | 162,226 | 25,471 | - |
Sensitivity analysis for foreign exchange risk
The following analyses illustrate the effect that specific changes could have had on our income and equity for Sterling to Singapore Dollar exchange movements. This analysis is for illustrative purposes only, as in practice market rates rarely change in isolation. Actual results in the future may differ materially from these results due to developments in the global financial markets which may cause fluctuations in interest and exchange rates to vary from the hypothetical amounts disclosed in the following table, which therefore should not be considered a projection of likely future events and losses.
| Group | Group | |||
| 10% weakening of GBP | 10% strengthening of GBP | |||
| Impact on Equity £ | Impact on Income /Reserves £ | Impact on Equity £ | Impact on Income /Reserves £ | |
| At 31.12.2007 | ||||
|
| ||||
| Singapore Dollar | (42,925) | 42,925 | 42,925 | (42,925) |
| Group | Group | |||
| 10% weakening of GBP | 10% strengthening of GBP | |||
| Impact on Equity £ | Impact on Income /Reserves £ | Impact on Equity £ | Impact on Income /Reserves £ | |
| At 31.12.2006 | ||||
|
| ||||
| Singapore Dollar | (19,418) | 19,418 | 19,418 | (19,418) |
Interest rate risk
The Group's exposure to market risk for changes in interest rates relate primarily to the Group's bank overdraft facility and term loan. A change in interest rate at the reporting date would not materiality affect income or reserves.
The tables below set out the Group's exposure to interest rate risks. Included in the tables are the assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.
| Fixed rates | |||
| Less than 12 months £ | Non-interest Bearing £ | Total £ | |
| At 31.12.2007 | |||
| Assets | |||
| Trade and other receivables | - | 1,038,100 | 1,038,100 |
| Cash and bank balances | - | 369,046 | 369,046 |
| Non-financial assets | - | 2,028,849 | 2,028,849 |
| Total assets | - | 3,435,995 | 3,435,995 |
| At 31.12.2007 | |||
| Liabilities | |||
| Trade and other payables | 756,602 | 756,602 | |
| Borrowings | 252,459 | - | 252,459 |
| Non-financial liabilities | 325,403 | 325,403 | |
| Total Liabilities | 252,459 | 1,082,005 | 1,334,464 |
| Fixed rates | |||
| Less than 12 months £ | Non-interest Bearing £ | Total £ | |
| At 31.12.2006 | |||
| Assets | |||
| Trade and other receivables | - | 714,873 | 714,873 |
| Cash and bank balances | - | 161,998 | 161,998 |
| Non-financial assets | - | 1,622,198 | 1,622,198 |
| Total assets | - | 2,499,069 | 2,499,069 |
| At 31.12.2006 | |||
| Liabilities | |||
| Trade and other payables | - | 444,184 | 444,184 |
| Borrowings | 89,058 | - | 89,058 |
| Non-financial liabilities | - | 274,259 | 274,259 |
| Total Liabilities | 89,058 | 718,443 | 807,501 |
(b) Fair Values
The fair value of financial assets and liabilities are not materially different from their carrying amounts because of the immediate or short-term maturity of these financial instruments.
AEC advises that its 2007 Annual Report for the year ended 31 December 2007, was mailed to shareholders today and is available from the Company's website at www.aeceduplc.co.uk
For further information please visit www.aeceduplc.co.uk or enquire to:
Mr David Ho
AEC Edu Group Pte Ltd
Tel: (65) 64120718
Email: davidho@aec.edu.sg
Nabarro Wells & Co Limited
Tel: +44 (0) 20 7634 4700
David Nabarro, Natasha Reed
Notes to Editors
AEC Education PLC is the UK holding company for a number of companies in Singapore, Malaysia and Vietnam that provide educational services to approximately 16,000 students in the Asia-Pacific region: source of the fastest-growing market for international students. The Group offers class-based instruction at its various educational campuses in Singapore, Malaysia and Vietnam and distance learning, up to postgraduate levels. It also delivers degree qualifications for several leading international universities, targeting the large volumes of overseas students in that region in line with the Singapore Government's Global Schoolhouse Vision to make Singapore an Education Hub.
AEC's continuing objective is to be a leader in quality education through facilitating learning, fostering creativity and developing knowledge, skills and confidence in its students. AEC has secured its status as a holder of the Singaporean Quality Class Awards for a further 3 years which demonstrates that the Company continues to be recognized by the Singaporean Government as a prestigious and forward thinking organization.