Last checked at 16 Sep 2013 07:00
AIM: AEC
AEC Education PLC
("AEC" or "the Company" and together with its subsidiaries, "the Group")
Half year results
for the six months to 30 June 2013
Key Points
· Revenues on continuing activities of £5.74m (2012: £8.98m)
· Operating loss of £0.53m (2012: loss of £0.65m)
· Loss before tax of £0.56m (2012: loss of £0.67m) - including loss of £0.42m from Singapore operations
· Loss after tax from continuing activities of £0.58m (2012: loss of £0.63m)
· Loss from discontinued activities of £0.24m (2012: nil)
· Loss after tax including discontinued activities of £0.82m (2012: 0.63m)
· Loss per share of 1.64p (2012: 1.20p)
· Progress in Europe, especially at London operations which returned to profitability, and in Malaysia were offset by the Singapore operations
· Singapore College's EduTrust certification issues are being addressed and an application for a reinstatement of certification will be made at the earliest appropriate time. Management changes have been made
Liam Swords, Chairman, stated,
"The Group's results for the six months to 30 June 2013, as expected, show a significant improvement in AEC's European operations. Most importantly, our English language teaching operations in London returned to profitability but our new operation in Ireland also moved into profit at the end of the period and our Cyprus joint venture continued to trade profitably. While this is encouraging, as previously reported, overall results for the half year have been materially adversely affected by deficiencies which emerged at our Singapore operation. These are being addressed but, as we previously stated, results for the year will be affected as we work through the issues and the Group's expected return to profitability will be delayed.
"Notwithstanding the issues at our operations in Singapore, we are encouraged by progress across our operations in London, Dublin, Cyprus and Malaysia. We anticipate further progress across these units and will be working hard to address the challenges at our Singapore College. In the meantime, we are pleased to have the continuing support of our shareholders as we evaluate potential financing options and look to further strengthen the business."
Enquiries:
AEC Education PLC |
| Tel: +44 (0) 7725 836 811 |
Liam Swords |
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WH Ireland Limited (NOMAD) |
| Tel: +44 (0)161 832 2174 |
Dan Bate |
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Biddicks |
| Tel: +44 (0) 20 3178 6378 |
Katie Tzouliadis / Alex Shilov
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CHAIRMAN'S STATEMENT
Introduction
The Group's results for the six months to 30 June 2013, as expected, show a significant improvement in AEC's European operations. Most importantly, our English language teaching operations in London returned to profitability but our new operation in Ireland also moved into profit at the end of the period and our Cyprus joint venture continued to trade profitably. While this is encouraging, as previously reported, overall results for the half year have been materially adversely affected by deficiencies which emerged at our Singapore operation. These are being addressed but, as we previously stated, results for the year will be affected as we work through the issues and the Group's expected return to profitability will be delayed.
Financial Results
Revenues on continuing activities for the six months reduced to £5.74m (2012: £8.98m). The loss before tax was £0.56m compared to a loss of £0.67m in the prior period, with the major part of the Group's loss for the period attributed to the performance of the Singapore operation, which recorded a loss before tax of £0.42m. The loss after tax from continuing activities was £0.58m (2012: £0.63m) and after taking account of the loss from discontinued activities of £0.24m (2012: nil) relating to the legacy losses arising from Malvern House Training Solutions, the loss for the period increased to £0.82m (2012: £0.63m). The loss per share before discontinued activities was 1.10p and including discontinued activities, the loss per share was 1.64p per share (2012: 1.20 per share). Cash balances as at 30 June 2013 stood at £1.42m (2012: £2.90m).
Operational Review
In Singapore, as we previously reported, the Council of Private Education ("CPE"), which is the Singapore Government Body that regulates the Private Education sector, issued a six month suspension of our College's EduTrust certification. The suspension period started at the beginning of August and comes after issues around English language entry requirements of students enrolled to take the MBA programme were identified and other compliance weaknesses highlighted to the management. The suspension means that while the Singapore College will continue to operate to fulfil its obligations to current registered students and can continue to recruit local students to the College, it is unable to recruit foreign students, our typical applicants, during the suspension period.
We are working hard to ensure that all regulatory and compliance issues are addressed fully and satisfactorily. Importantly, we have implemented an immediate change of management at the College. We will apply for an assessment of the College's eligibility for a reinstatement of the EduTrust certification at the earliest appropriate time but clearly in the intervening period there is a significant adverse financial impact and there already has been material impact in the first half of the financial year. Elsewhere in Asia, our operations in Malaysia showed a year-on-year improvement. Enrolments in the local market have been strong with increasing interest in our degree programmes. We also continued to increase enrolments from the Middle East and North Africa and the operations made a profitable contribution.
In Europe, our main activity, which is our English language teaching operations in the UK, returned to profitability after the restructuring we undertook last year to consolidate all our activities into our Kings Cross site. In May, we reported that we had closed our operation in the funded business and that we were reviewing our overall position in the UK government funded sector. This discontinued business contributed a loss of £0.24m to the Group in the period and we have decided for the time being to withdraw from the funded sector in the UK so that we can focus our resources on our core business. Our English language teaching operation in Ireland, Malvern House Dublin, moved into profit in June and continues to grow strongly in high value markets which is helping to offset weaker demand in Europe. Despite the economic crisis in Cyprus, we are pleased that the Malvern School in Limassol has continued to grow, with revenues up by 20% in the period and the Summer School also showed a small increase in revenue. Our new operation in Oman is still trading at a loss but we have diversified into new product areas as planned in the first half which are beginning to show promise.
Outlook
Notwithstanding the issues at our operations in Singapore, we are encouraged by progress across our operations in London, Dublin, Cyprus and Malaysia. We anticipate further progress across these units and will be working hard to address the challenges at our Singapore College. In the meantime, we are pleased to have the continued support of our shareholders as we evaluate potential financing options and look to further strengthen the business.
Liam Swords
Chairman
AEC Education PLC
Unaudited Consolidated Income Statement
| Six months to 30 June 2013 | Six months to 30 June 2012 | Twelve months to 31 December 2012 | |
Note | Unaudited | Unaudited | Audited | |
£'000 | £'000 | £'000 | ||
Revenues | 4 | |||
Sales of services and other revenue | 5,742 | 8,979 | 15,093 | |
Cost of sales | (6,267) | (9,627) | (18,613) | |
Operating (loss) / profit | (525) | (648) | (3,520) | |
Share of results of associated companies and joint ventures | 22 | 5 | 15 | |
Finance costs | (52) | (27) | (71) | |
(Loss) / profit before income tax | (555) | (670) | (3,576) | |
Income tax (charge)/credit | (25) | 38 | 287 | |
(Loss) / profit for the period / year from continuing activities | (580) | (632) | (3,289) | |
(Loss) / profit for the period / year from discontinued activities | (241) | - | (262) | |
(Loss) / profit for the period / year | (821) | (632) | (3,551) | |
Non-controlling interests | 96 | 103 | 376 | |
(Loss) / profit attributable to equity holders | (725) | (529) | (3,175) | |
(Loss) / earnings per share | Pence | Pence | Pence | |
Basic | 6 | (1.64) | (1.20) | (7.15) |
Diluted | 6 | (1.64) | (1.20) | (7.15) |
AEC Education PLC
Unaudited Statement of Financial Position
As at 30 June 2013 | As at 30 June 2012 | As at 31 December 2012 | |
Unaudited | Unaudited | Audited | |
£'000 | £'000 | £'000 | |
TOTAL ASSETS | |||
Fixed assets | |||
Intangible assets | 4,764 | 8,111 | 4,804 |
Tangible assets | 1,176 | 1,516 | 1,090 |
Investment in associated companies | 58 | 90 | 29 |
Investment in joint venture | 59 | 111 | 67 |
Deferred taxation | 239 | - | 233 |
6,296 | 9,828 | 6,223 | |
Current assets | |||
Inventory | 22 | 54 | 22 |
Debtors | 3,386 | 3,424 | 3,664 |
Cash at bank and in hand | 1,421 | 2,903 | 2,707 |
4,829 | 6,381 | 6,393 | |
Total assets | 11,125 | 16,209 | 12,616 |
EQUITY AND LIABILITIES | |||
Non-current liabilities | |||
Finance lease | - | 22 | 28 |
Term loan | 68 | 364 | 66 |
Deferred taxation | 25 | 23 | 24 |
93 | 409 | 118 | |
Current liabilities | |||
Creditors: | |||
Amounts falling due within one year | 7,011 | 8,743 | 7,795 |
Total liabilities | 7,104 | 9,152 | 7,913 |
Equity attributable to equity holders of the Company | |||
Share capital | 4,420 | 4,420 | 4,420 |
Share premium | 708 | 708 | 708 |
Reserves | (1,018) | 1,985 | (382) |
4,110 | 7,113 | 4,746 | |
Non-controlling interests | (89) | (56) | (43) |
4,021 | 7,057 | 4,703 | |
Total equity and liabilities | 11,125 | 16,209 | 12,616 |
AEC Education PLC
Unaudited Consolidated Statement of Cash Flows
Six months to 30 June 2013 | Six months to 30 June 2012 | Twelve months to 31 December 2012 | |
Unaudited | Unaudited | Audited | |
£'000 | £'000 | £'000 | |
Cash Flows from operating activities | |||
(Loss) / profit before income tax from continuing activities | (555) | (670) | (3,576) |
(Loss) / profit before income tax from discontinued activities | (241) | - | (262) |
Adjustments for: | |||
Depreciation and amortisation | 304 | 322 | 820 |
Plant and equipment written-off | 2 | - | 220 |
Loss on disposal of plant and equipment | - | - | 24 |
Loss on disposal of a subsidiary | - | - | 191 |
Impairment of goodwill | 59 | - | 882 |
Interest expense | 52 | 27 | 71 |
Interest income | - | (22) | (7) |
Share of results of associated companies and joint ventures | (22) | (5) | (15) |
(401) | (348) | (1,652) | |
Changes in working capital | |||
Receivables | 234 | (76) | (690) |
Payables | (644) | 388 | (47) |
Inventories | - | - | 12 |
Related parties | (1) | - | (80) |
(812) | (36) | (2,457) | |
Taxes recovered / (paid) | (1) | (22) | 40 |
Cash used in operating activities | (813) | (58) | (2,417) |
Six months to 30 June 2013 | Six months to 30 June 2012 | Twelve months to 31 December 2012 | |
Unaudited | Unaudited | Audited | |
£'000 | £'000 | £'000 | |
Cash used in operating activities | (813) | (58) | (2,417) |
Cash Flows from Investing Activities | |||
Interest received | - | 22 | 7 |
Dividend income received from an associated and joint venture companies | - | - | 155 |
Purchase of property, plant and equipment | (287) | (341) | (510) |
Purchase of intangible fixed assets | - | (5) | (9) |
Disposal of a subsidiary | - | - | 2,260 |
Acquisition of a subsidiary | - | (135) | (133) |
Net cash generation/(used) in investing activities | (287) | (459) | 1,770 |
Cash Flows from Financing Activities | |||
Interest paid | (52) | (27) | (71) |
Repayment of term loan | (127) | (131) | (256) |
Dividend paid to shareholders | - | - | (88) |
Dividend paid to non-controlling interests | - | (25) | (24) |
Finance leases | (20) | (28) | (86) |
(199) | (211) | (525) | |
Effect of foreign exchange rate changes on consolidation | 13 | (179) | 69 |
Net decrease in cash and cash equivalents | (1,286) | (907) | (1,103) |
Cash and cash equivalents at beginning of period / year | 2,707 | 3,810 | 3,810 |
Cash and cash equivalents at end of period / year | 1,421 | 2,903 | 2,707 |
AEC Education PLC
Notes
1. Publication of non-statutory accounts and basis of preparation
The financial information contained in this interim report does not constitute statutory accounts for the period ended 30 June 2013. 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 2013. The comparative figures for the period ended 30 June 2012 are those as published in the Company's half year announcement made on 24 September 2012.
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 2013 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 2012, and to be adopted in respect of the year ending 31 December 2012.
4. Sale of Services
Six months to 30 June 2013 | Six months to 30 June 2012 | Twelve months to 31 December 2012 | |
| Unaudited | Unaudited | Audited |
| £'000 | £'000 | £'000 |
Course fees and registration fees | 5,032 | 7,068 | 12,156 |
Examination fees | 8 | 844 | 108 |
Students accommodation | 514 | 734 | 1,662 |
Others | 188 | 333 | 1,167 |
| 5,742 | 8,979 | 15,093 |
5. Dividend
No interim dividend for this financial year is proposed.
6. (Loss)/ earnings per share
The basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the relevant period. The weighted average number of shares in issue during the period was 44,198,781 (2012: 44,198,781).
The diluted (loss)/earnings per share is calculated by dividing the (loss)/profit 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 46,213,781 (2012: 47,951,430).