Last checked at 23 Sep 2010 07:00
AIM: AEC
AEC Education PLC
("AEC" or "the Company" or "the Group")
Unaudited Results for the Six Months ended 30 June 2010
AEC Education PLC, the provider of educational courses up to postgraduate degree level in Singapore, Malaysia, China, Vietnam, and London and the facilitator of London Chamber of Commerce and Industry ("LCCI") examinations/qualifications in Asia, is pleased to announce its unaudited results for the six months ended 30 June 2010.
Highlights
·; Strong progress in first half - although some short term challenges
- significant investment in the business
·; Revenues up by 169% to £8.637m (2009: £3.208m)
- includes full six month contribution of £5.244m from acquisitions completed in 2009
·; Profit before tax of £346,000 (2009: £403,000)
·; Profit after tax of £338,000 (2009: £385,000)
·; Earnings per share of 0.7p (2009: 1.3p)
·; Net cash of £2.41m (30 June 2009: £3.15m)
- new banking facilities of £0.9m agreed
·; Integration of major acquisition of Malvern House completed - ongoing investment in H2
·; Flagship Singapore centre awarded 4 year EduTrust Certificate in Sept 2010
- one of only 11 private education institutions to be accredited currently
·; Based on current trading, Board remains confident of outcome for the full year
Commenting on results, Liam Swords, Chairman, said,
"AEC continues to make very encouraging progress albeit the first half presented some challenges for the Group. Revenues for the first half have more than doubled against the same period last year, principally reflecting the first full six month contribution from Malvern House, the London-based English language education provider, acquired in July 2009.
To support our growth plans, we have made significant investment in the business over the first half and we will be making further investment over the remainder of the year. The development of our university relationships is a particular area of interest to us.
Demand for our business and vocational offering across Asia remains buoyant and interest in UK university qualifications and English language learning also remains high. We are investing in strengthening our marketing and systems capability which will stand the Group in good stead as it moves into new markets and territories.
Alongside organic development, we are continuing to seek acquisitions, which are synergistic and easily integrated. The Board remains very positive about prospects for the business and looks forward to providing a further update in due course."
Enquiries:
| AEC Education PLC |
| Tel: +44 (0) 20 7448 1000 (today) |
| Liam Swords |
| Tel: +44 (0) 20 8308 1202 |
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| WH Ireland Limited (NOMAD) |
| Tel: +44 (0)161 832 2174 |
| Dan Bate |
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| Stuart Forshaw |
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| Biddicks |
| Tel: +44 (0) 20 7448 1000 |
| Katie Tzouliadis |
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| Sophie Lane |
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Introduction
I am pleased to report that AEC continues to make very encouraging progress albeit the first half presented some challenges for the Group. Revenues for the first half of the year to 30 June 2010 have more than doubled against the same period last year. This increase principally reflects the first full six month contribution from three acquisitions we completed in 2009, most significantly from Malvern House Ltd ("Malvern House"), the London-based English language education provider, which has provided us with a presence in the UK. Our smaller Malaysian acquisitions, Kasturi and IMS, also made very useful contributions. On a like-for-like basis, stripping out the effect of acquisitions, the underlying business shows revenue growth of 6% against 2009.
While the business had to react quickly to the challenges presented over the first half, we also accomplished a great deal, completing the integration of our acquisitions and pushing forwards with our plans to develop the enhanced growth opportunities now available to us with the addition of Malvern House. To support our growth plans, we have made significant investment in the business over the first half and we will be making further investment over the remainder of the year. The development of our university relationships is a particular area of interest to us. In the first half, we began a programme to strengthen AEC's existing relationships and cultivate new ones, focusing especially on the UK. Within our LCCI examinations business, there is scope to enter new markets and in preparation for this, we are strengthening LCCI's systems and marketing.
Financial Review
Revenues for the six months to 30 June 2010 increased by 169% to £8.637m (2009: £3.208m). Our three acquisitions contributed combined revenues of £5.244m, with Malvern House accounting for £4.116m of revenues. Profit before tax was £346,000 (2009: £403,000) and profit after tax was £338,000 (2009: £385,000). As expected, the Group's profitability in the first half was affected by the disruption to Malvern House's activities in the first quarter of the year caused by the UK Border Agency's review of student visas. This adversely impacted profitability in the first half by £0.25m. However, we still anticipate the strong growth in student numbers across the Group to offset the impact on the year as a whole. Results were also affected by costs invested in the integration and development of Malvern House, Kasturi and IMS. Earnings per share were 0.7p (2009: 1.3p).
The Group's balance sheet remains strong, with net cash as at 30 June 2010 of £2.41m (30 June 2009: £3.15m). In February 2010, we also agreed additional loan facilities with HSBC of up to SGD 2,000,000 (approximately £880,000) to support AEC's ongoing expansion plans.
There is no dividend payment at the half year stage but the Board expects to propose the payment of a final dividend, dependent on the Group's trading performance in the second half.
Business Review
Following the acquisitions completed in 2009, the Company's activities now cover three major areas:
·; the provision of university and professional programmes up to postgraduate degree level in Singapore, Malaysia, China, Vietnam and London;
·; the provision of English Language courses in the same markets; and
·; the administration and marketing of LCCI examinations and qualifications across Asia.
During the first six months of the year, the Group has invested across the business to support its growth plans and has achieved encouraging progress across all three business strands.
University and Professional Programmes
This area of business grew by 49% over the same period last year. The growth was a combination of organic and via the acquisitions, with Kasturi College contributing 45% of the increase. Our courses in Malaysia have seen especially strong growth, benefiting from government support for local students, and the acquisition of Kasturi has strengthened AEC's position in the country. We have also continued to strengthen our reputation for quality and, in January 2010, the Singapore campus achieved the ISO9001:2008 status. This was followed post the period end, in September, with the award of a four-year EduTrust Certificate from the Council of Private Education in Singapore, making AEC one of only 11 schools currently to receive this accreditation, out of over 1,000 plus private education institutions in Singapore.
The Board has identified exciting opportunities for the development of markets and programmes in partnership with universities, in the UK in particular but also in other markets overseas. The business has already taken some promising steps to strengthen and add relationships with a number of university partners. The actions taken in the first six months will be developed as we go through the rest of the year and although this is an area of potentially high investment, the Board is confident that returns will begin to emerge as we go through next year.
LCCI Examinations/Qualifications - Educational Resources Pte Ltd ("ER")
LCCI examinations, which are offered in Malaysia, Singapore, Myanmar, Hong Kong and other Asian countries have performed reasonably well. While revenues from examination fees show a small decrease, overall revenues grew by 6% compared to the same period last year. The Group has and will continue to invest in the marketing of LCCI examinations, focusing on the development of LCCI in new markets. Alongside this, we are also strengthening management systems. In addition, we are working with Education Development International plc (which owns the LCCI brand) on the ongoing adaption of its syllabi to meet the demands of the emerging markets across Asia.
English Language provision - branded 'Malvern House'
English language revenue grew to £4.4m compared to approximately £100,000 of revenues in the same period last year, with Malvern House, in London and Kasturi College, in Kuala Lumpur accounting for 73% and 24% respectively of this revenue growth. While demand continues to be strong, trading at Malvern House in the first half was affected by the UK Border Agency's ("UKBA") review of policy towards student visas. While there is some remaining uncertainty here, we returned to more normalised trading from May and, given the strength of demand to date, we expect our English Language provision to continue to grow across the Group as we go through the rest of this year. Consequently, we believe that the Group's growth will offset the UKBA impact on Malvern House in the first quarter. In the meantime, we have also enhanced Malvern House's systems to meet the new requirements set by the UKBA.
During the period under review, the Group commenced the implementation of its strategy to expand its English Language provision under the Malvern House brand on an international scale. This opportunity will be the major focus for the remainder of the year, with the aim of offering the 'Malvern House' experience in other locations around the world. The initial stages have been promising and we expect to be able to report successful progress on this by the end of the year.
Outlook
The integration of the businesses acquired last year is now largely complete and management is focusing on building the three strands of the business. We have already made good progress with a number of initiatives and believe that there are substantial growth opportunities. Demand for our business and vocational offering across Asia remains buoyant and interest in UK university qualifications and English language learning also remains high. We are investing in strengthening our marketing and systems capability which will stand the Group in good stead as it moves into new markets and territories.
Alongside organic development, we are continuing to seek acquisitions which are synergistic and easily integrated. The Board remains very positive about prospects for the business and looks forward to providing a further update in due course.
Liam Swords
Chairman
| UNAUDITED CONSOLIDATED INCOME STATEMENT
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| Six months to | Six months to | Twelve months to |
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| 30 June | 30 June | 31 December |
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| 2010 | 2009 | 2009 |
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| £'000 | £'000 | £'000 |
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| Note | Unaudited | Unaudited | Audited |
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| Revenues |
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| Sales of services and other revenue | (4) | 8,637 | 3,208 | 14,013 |
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| Cost of sales |
| (8,352) | (2,878) | (13,185) |
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| Operating profit |
| 285 | 330 | 828 |
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| Profit from operations |
| 285 | 330 | 828 |
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| Share of results of associated companies |
| 61 | 73 | 253 |
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| Profit on ordinary activities before taxation |
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346 |
403 |
1,081 |
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| Tax on profit on ordinary activities |
| (8) | (18) | (192) |
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| Profit on ordinary activities after taxation |
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338 |
385 |
889 |
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| Minority interests |
| (32) | (24) | (58) |
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| Profit for the period |
| 306 | 361 | 831 |
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| Earnings per share |
| Pence | Pence | Pence |
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| Basic | (6) | 0.7 | 1.3 | 2.5 |
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| Diluted | (6) | 0.6 | 1.2 | 2.2 |
| UNAUDITED CONSOLIDATED BALANCE SHEET
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| As at 30 June 2010 | As at 30 June 2009 | As at 31 Dec 2009 |
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| £'000 | £'000 | £'000 |
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| Note | Unaudited | Unaudited | Audited |
| Fixed assets |
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| Intangible assets |
| 7,563 | 2,553 | 7,556 |
| Tangible assets |
| 1,376 | 312 | 1,327 |
| Investments in associated companies | (7) | 87 | 57 | 23 |
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| 9,026 | 2,922 | 8,906 |
| Current assets |
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| Inventory |
| 86 | 58 | 94 |
| Debtors |
| 2,828 | 1,764 | 2,124 |
| Cash at bank and in hand |
| 2,677 | 3,147 | 3,220 |
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| 5,591 | 4,969 | 5,438 |
| Creditors |
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| Amounts falling due within one year |
| (5,906) | (2,852) | (6,319) |
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| Net current assets |
| (315) | 2,117 | (881) |
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| Total assets |
| 8,711 | 5,039 | 8,025 |
| Non-current liabilities |
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| Deferred income |
| (48) | - | (102) |
| Finance lease |
| (116) | - | - |
| Term loan |
| (268) | - | (197) |
| Deferred taxation |
| (49) | (22) | (29) |
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| 8,230 | 5,017 | 7,697 |
| Equity attributable to equity holders of the Company |
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| Share capital |
| 5,154 | 2,819 | 4,325 |
| Share premium |
| 734 | 434 | 693 |
| Share to be issued |
| - | 109 | - |
| Reserves |
| 2,186 | 1,542 | 2,536 |
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| 8,074 | 4,904 | 7,554 |
| Minority interest in equity |
| 156 | 113 | 143 |
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| 8,230 | 5,017 | 7,697 |
| UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
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| Six months to 30 June | Six months to 30 June | Twelve months to 31 December |
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| 2010 | 2009 | 2009 |
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| Unaudited | Unaudited | Audited |
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| £'000 | £'000 | £'000 |
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| Cash flow from operating activities | (723) | 118 | 2,701 |
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| Returns on investment and servicing of finance |
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| Interest paid | (6) | (7) | (36) |
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| Taxation |
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| Taxes paid | (94) | (64) | (91) |
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| Capital expenditure and financial investment |
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| Purchase of tangible fixed assets | (136) | (11) | (677) |
| Purchase of intangible fixed assets | (4) | (4) | (11) |
| Development expenditure | - | - | - |
| Acquisitions of associated companies | - | - | 166 |
| Acquisition of subsidiaries net of cash acquired | - | - | (3,100) |
| Interest income | - | - | 15 |
| Dividend income received from an associated company | 30 | 52 | 112 |
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| (110) | 37 | (3,495) |
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| Cash flows from financing activities Dividend paid to minority shareholders | (22) | - | (21) |
| Issue of shares | 109 | 1,166 | 1,998 |
| Decrease in share to be issued-deferred consideration | (109) | - | - |
| (Decrease)/ Increase in finance lease liabilities | (58) | (6) | 316 |
| Drawdown of term loan | 537 | - | - |
| Repayment of term loan | (67) | (42) | (97) |
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| 390 | 1,118 |
2,196 |
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| Net increase in cash and cash equivalents | (543) | 1,202 | 1,275 |
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| Cash and cash equivalents at beginning of period/year | 3,220 | 1,945 | 1,945 |
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| Cash and cash equivalents at end of period/year | 2,677 | 3,147 | 3,220 |
| Cash and cash equivalents consist of the following: |
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| Cash and bank balances | 2,677 | 3,147 | 3,220 |
| RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOW
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| Six months to to 30 June | Six months to to 30 June | Twelve months to to 31 December |
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| 2010 | 2009 | 2009 |
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| Unaudited | Unaudited | Audited |
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| £'000 | £'000 | £'000 |
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| From operating activities |
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| Profit before tax | 346 | 403 | 1,081 |
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| Adjustments for: |
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| Depreciation & amortisation | 222 | 59 | 241 |
| Share based payment charge | - | - | 136 |
| Loss on disposal of plant and equipment | - | - | 6 |
| Interest paid | 6 | 7 | 36 |
| Interest income | - | - | (15) |
| Share of results of associated companies | (61) | (73) | (253) |
| (Increase)/decrease in debtors | (712) | (404) | 322 |
| (Decrease)/increase in creditors | (607) | (340) | 789 |
| (Increase)/decrease in inventories | 7 | (4) | (2) |
| Decrease/(increase) in related parties | (27) | 660 | 372 |
| Translation | 103 | (190) | (12) |
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| Cash flow from operating activities | (723) | 118 | 2,701 |
NOTES
1. Publication of non-statutory accounts and basis of preparation.
The financial information contained in this interim report does not constitute statutory accounts for the period ended 30 June 2010. The unaudited consolidated financial statements incorporate the unaudited financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June 2010. The comparative figures for the period ended 30 June 2009, are those as published in the Company's half year announcement made on 18 September 2009.
This report has been approved by the Board of Directors and is unaudited. This report does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985.
2. General
The principal activities of the Company are that of investment holding and provision of educational consultancy services. There have been no significant changes in the principal activities of the subsidiary companies during the period.
3. Accounting Policies
The unaudited results for the six months ended 30 June 2010 have been prepared on the basis of International Financial Reporting standards ("IFRS") and accounting policies consistent with those adopted for the year ended 31 December 2009, and to be adopted in respect of the year ending 31 December 2010.
4. Sale of Services
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| June 2010 | June 2009 | Dec 2009 |
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| £'000 | £'000 | £'000 |
| Course fees and registration fees | 6,246 | 1,736 | 8,645 |
| Examination fees | 973 | 1,010 | 3,187 |
| Students accomodation | 727 | - | 993 |
| Other income | 691 | 462 | 1,188 |
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8,637 |
3,208 |
14,013 |
5. Dividend
During the current financial period, no dividend has been declared or recommended.
6. Earnings per share
Basic earning per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the relevant period. The weighted average number of shares in issue during the period was 44,162,343 (2009: 27,820,844).
Diluted earning per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the relevant period diluted for the effect of share options and warrants in existence at the relevant period. The weighted average number of shares in issue diluted for the effect of share options and warrants in existence during the period was 47,914,992 (2009: 29,850,844).
7. Investments in Associated Companies
Details of associated companies held by AEC College Pte Ltd as at 30 June 2010 are as follows:
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| incorporation | (Place of business) | the Group | ||
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| June 2010 |
| June 2009 |
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| % |
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| Held by AEC College Pte Ltd |
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| Keris Murni Sdn Bhd | Provides education services and the operation of education tuition centers | 30 |
| 30 |
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| (Malaysia) | (Malaysia) |
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| Pusat Tuisyen Kasturi Sdn Bhd | Provides education services and the operation of education tuition centre | 30 |
| 30 |
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| (Malaysia) | (Malaysia) |
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| Kasturi Management Consultancy Sdn Bhd | Provides education services and the operation of education tuition centre | *- |
| 30 |
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| (Malaysia) | (Malaysia) |
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| IMS Professional Training Services Sdn Bhd | Provides education services and the operation of education tuition centre | *- |
| 30 |
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| (Malaysia) | (Malaysia) |
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| * On 13 October 2009, the Group acquired 3,900,100 ordinary shares of RM 1.00 each in the share capital of Smart Eduprocess Group Sdn Bhd representing 100% interest, for a total consideration of RM 2,400,000 (equivalent £433,516). Smart Eduprocess Group Sdn Bhd indirectly held 70% interest in IMS Professional Training Services Sdn Bhd and Kasturi Management Consultancy Sdn Bhd. As a result of this acquisition, the equity interest in IMS Professional Training Services Sdn Bhd and Kasturi Management Consultancy Sdn Bhd increased to 100% respectively and become subsidiaries of the Group.
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