WEY.L Regulatory News (WEY)

11 December 2015

Wey Education plc

("Wey Education", the "Company" or the "Group")

First Day of Dealings on AIM

£1.75m raised to support the Company's organic and acquisitive growth strategy

Wey Education plc, the education group operating an established online independent secondary school in the UK, is pleased to announce that admission and dealings in its Ordinary Shares ("Admission") will commence today at 8.00 a.m. on the London Stock Exchange's AIM under the ticker code WEY and ISIN number of GB00B54NKM12.

The Company has placed 50,000,000 new Ordinary Shares at 3.5p to raise £1.75 million gross for the Company, which will be used to fund the further development of the Group, meet the expenses of Admission and repay existing debt. On Admission the Company will have 93,971,082 Ordinary Shares in issue with a market capitalisation at the Placing Price of approximately £3.29 million and approximately 23.2 per cent. of the issued share capital will be in public hands.

The Company is a holding company of an educational group with two trading divisions. Through InterHigh the Company owns and operates a fully interactive, online independent secondary school in the UK, offering IGCSEs, 'AS' Levels and 'A' Levels. Through Wey Consultancy it operates a consultancy business, assisting parties seeking to sponsor free schools and academies.

The Directors believe that the Company's admission to AIM will enhance its market position and facilitate further growth.

Key strengths include:

· Established online school with ten-year track record. At Admission InterHigh had 42 teachers. In September 2015 the student roll was approximately 516 students. The curriculum is based on the English National Curriculum with pupils studying for IGCSE exams in year 11, 'AS' Levels in year 12 and 'A' Levels in year 13. The Directors believe that one of its advantages is the high quality of its teacher profiles. Its low teacher turnover rate, which is approximately half of that of English schools, is indicative of a stable work force; 

· Re-launched the sixth form in late July 2015. The re-launch has been accompanied by an increase in the subject choices available, which will be further expanded over the next few years. Year 12 'A' Levels are now taught between the more conventional hours of 9.30 a.m. and 3.30 p.m. By the first week of the Autumn term 2015/2016, Year 12 (the "lower sixth") had grown to 35 students and has expanded further to 45 students since the term started. The Directors believe that these changes will lead to a major increase in the number of students studying 'A' Levels at InterHigh;

· Scalable technology platform that is poised for rapid growth. The teaching platform has been designed to be scalable, utilising a combination of proprietary and packaged software and requires modest levels of connectivity to operate.

· Significant first mover advantage and barriers to entry in online schooling. The Directors are of the opinion that most traditional schools are unlikely to be active competitors as they are committed to utilising the school building, their largest asset, and are reluctant to venture into an online offering. Independent schools which have expanded overseas have stopped short of providing an online offer due, the Directors believe, to concerns of brand dilution;

· Organic growth and acquisition opportunities in the UK online education sector. It is estimated that there are approximately 80,000 students in England who are currently home schooled as a matter of choice by their parents for various reasons. This is an obvious target market for expansion of the existing InterHigh Business and obtaining only a modest market share of these students would lead to a significant expansion in the size of the school; and

· Significant market opportunities identified globally. There are over 7,000 international schools globally of which 2,900 follow a British curriculum. There are estimated to be over one million British expatriate citizens living and working abroad. The Directors believe that there are potential opportunities for InterHigh in Asia and have identified a number of market segments which they consider are likely to respond well to an alternative model to traditional international schooling principally in Spain, France, Portugal and East Africa. 

Placing Statistics

Commenting, Wey Education's Non Executive-Chairman, David Massie, said:

"Our admission to AIM today represents an exciting phase in the Company's development. The funds raised provide us with the funding to take advantage of the significant organic growth and acquisition opportunities in the UK online education sector and in international markets. The listing will also enhance the Group's profile and provides it with a broader investor base, liquidity and access to institutional investors." 

"Our goal is to become the UK market leader in the online education sector and to deliver meaningful returns to shareholders while providing a quality education to our students. We look to the future with confidence and look forward to continuing our journey as a publicly listed company on AIM."

Enquiries:

Notes to editors

History and Background

The Company was incorporated on 14 August 2007 but did not trade until April 2011 when the Company was listed on the PLUS market (now ICAP Securities & Derivatives Exchange ("ISDX")).

The catalyst to the listing on the PLUS market was the acquisition at that time by the Company of Wey Consultancy which was intended to enable the Group to bid to manage local authority new schools as well as free schools and academies. While the Company maintained a steady flow of consultancy business, initial targets for the establishment of an active schools management company were not met which resulted in a number of management changes and a reduction in the Company's operational overhead.

With effect from 13 February 2015 the Group acquired the business and assets of InterHigh, a successful online education business, which it intends to expand by the organic growth of its existing products and the introduction of new educational products.

The Business

InterHigh

The acquisition of the InterHigh Business in February 2015 has provided an online secondary education platform, which the Directors believe presents the Company with significant expansion opportunities in the UK and overseas markets.

The acquisition of the InterHigh Business was effected through a new Group subsidiary, InterHigh, incorporated and currently trading as a not for profit company for VAT purposes then called Wey InterHigh Limited, for an initial consideration of £776,217 paid as to £388,109 in cash and the balance through the issue of 8,624,634 new Ordinary Shares in the Company. In addition, deferred consideration is payable of an amount equal to 50 per cent. of the incremental growth in turnover of the InterHigh Business for each of the periods ending 31 August 2015 and 31 August 2016, payable as to 50 per cent. in cash and 50 per cent. through the issue of new Ordinary Shares in the Company. It is estimated that the deferred consideration payable for the period ending 31 August 2015 is in aggregate £153,000. On completion of the acquisition, Wey InterHigh Limited changed its name to InterHigh Education Limited.

The InterHigh Business was founded in 2005 by Paul and Jacqueline Daniell to provide an online, fee-paying secondary school. At 31 May 2015, InterHigh had 33 teachers. Student numbers vary as students join and leave for different reasons during the year. In September 2015 the student roll was approximately 516 students. Approximately 70 per cent. of these were from the UK and 30 per cent. were from overseas. Many of the overseas students were from Europe but there were also students enrolled from further afield, such as East Africa and the Company sees considerable growth potential in that market. The curriculum is based on the English National Curriculum with pupils studying for IGCSE exams in year 11, 'AS' Levels in year 12 and 'A' Levels in year 13.

InterHigh is not a video based school where students' education is primarily by self-study. InterHigh is a fully interactive online independent school with full classroom participation between teacher and students. Teaching is delivered via a resilient, cloud-based platform under which students and teachers interact through using the computer screen as an interactive whiteboard. Students can speak to, message or email the teacher directly, as well as contact each other online through the platform.

InterHigh provides students with pastoral support and a comprehensive parent portal to enable families to communicate with the school and observe student progress, and aims to achieve an environment which is as inclusive and supportive as in a conventional school. Students can participate in a range of enrichment studies, clubs, societies and seminars. In addition the platform offers the opportunity to congregate in the online common room, interact using 'InterHigh chat' or engage with fellow students via the school's social media system - 'myInterHigh'.

The teaching platform has been designed to be scalable, utilising a combination of proprietary and packaged software and requires modest levels of connectivity to operate. InterHigh uses licenced third party software for its basic platform, which is enhanced by proprietary software. This has been developed for InterHigh by the contracted IT consultant to give the additional functionality. In a typical InterHigh class, the teacher will lead the teaching and interact with students via their respective computers, with the screen acting as an interactive whiteboard. Communication is through voice, text and interactive presentation.

InterHigh's proprietary software provides a "dashboard" from which parents, teachers and students can evaluate performance, school attendance and grades achieved, as well as whether homework has been completed on time.

Quality assurance has been verified through adoption of ISO 9001 and the subsequent approval of the school's key processes.

The Directors believe that InterHigh's education model provides benefits for students, parents and teachers. Students have the ability to access an online library of both a syllabus and lessons and to revisit digital recordings of lessons. Parents can utilise the school to avoid the need to move to a catchment area of a school with good examination results, while the parent portal allows parents to constantly monitor the attendance and performance of their children. The online nature of the school also means that the school run is not needed but teachers and staff can be readily contacted via the internet. Teachers have the ability to manage their own working hours better and to concentrate their time on teaching students.

InterHigh's main servers are hosted remotely from its offices in a tier 4 data centre. A maintenance contract is in place providing for a four hour response on critical issues. All data on students is encrypted and backups of data are regularly taken and stored remotely from the data centre.

Support on both hardware and software is provided by an independent IT consultant, who has worked with InterHigh under its previous ownership, and appropriate backups of critical records are maintained. The Company takes the potential of cyber-attacks very seriously and maintains an active monitoring program with appropriate fire walls in place to protect the IT systems. Most issues in using the technology can be resolved promptly and online.

If the Company's overseas expansion plans are successful, then the Board will consider locating further servers overseas, giving both greater resilience of delivery to those markets and also providing additional backup to the UK IT infrastructure.

Teachers are generally located remotely from InterHigh's premises and typically teach from their homes. InterHigh's policy is in general to have class sizes of up to 18 students at IGCSE and up to 12 at 'A' Level.

The core IGCSE programme is generally taught between 9.30 a.m. and 1.00 p.m. and this has proved effective in obtaining high levels of good IGCSE passes. The Directors believe that InterHigh's approach is more efficient when compared to a traditional school and it eliminates some of the time wasted in a traditional school, such as the time for students to move between classes with the disruption caused at the beginning and end of each lesson. Research by Ofsted showed that up to one hour a day of a school's traditional teaching time is lost to disruption.

InterHigh operates a sixth form. Until the current academic year it taught 'A' Levels between 6.00 p.m. and 9.30 p.m. At 31 May 2015 only 20 students were enrolled with InterHigh to study 'A' Levels, meaning a significant proportion of those taking their IGCSEs at InterHigh went elsewhere to study 'A' Levels.

Until recently the subjects available for study at 'A' Level through InterHigh Advanced (InterHigh's Sixth Form online college) were Business Studies, Classical Studies, English Literature, Geography, History, Mathematics, Sociology, Psychology, Economics and Media Studies. As from September 2015, the sixth form has been relaunched and Year 12 'A' Levels are now taught between the more conventional hours of 9.30 a.m. and 3.30 p.m. The relaunch has been accompanied by an increase in the subject choices available, which will be further expanded over the next few years. Year 13 will convert to these new hours from September 2016. The Directors believe that these changes will lead to a major increase in the number of students studying 'A' Levels at InterHigh.

Part of this change will be to offer various specialist 'A' Levels such as 'Further Mathematics' and 'Latin', which will be made available not only to dedicated InterHigh students but to other schools which are unable to offer such subject choices to their own students.

InterHigh has expanded over the past three years without the need to advertise for additional teacher vacancies due to the number and quality of unsolicited approaches received from prospective staff. Teacher turnover is low compared to traditional schools in England. The Directors believe that one of its advantages is the high quality of its teacher profiles. Its low teacher turnover rate, which is approximately half of that of English schools, is indicative of a stable work force. InterHigh maintains a database of candidate teachers seeking employment with the Company and has paid no recruitment fees in the 3 years ended 31 August 2015.

The Company's primary measure of business performance in the next few years will be the growth in student numbers and annual fees per student, as this is directly related to turnover and resulting profitability. Students pay annually, termly or monthly in advance and procedures have been introduced to closely monitor the incidence of arrears.

Wey Consultancy

Wey Consultancy has specialised in supporting aspirant free school groups with a range of services from initial school concept to school opening. It has successfully supported primary, secondary, all-through, and University Technical College Free School applications. The delivery model utilises associates together with specialist partners in the areas of school finance, building design and technology. The Directors believe that Wey Consultancy has established a reputation for high quality delivery which has resulted in new business opportunities primarily arising from recommendations or unsolicited approaches.

Market

In England, the state secondary school sector is estimated to be worth around £36 billion consisting of 3,250 state funded secondary schools with almost 3.2 million students and a further 0.8 million students studying in other colleges. According to schools capacity forecast data for 2013, demand for state secondary school places is forecast to rise by over 230,000 by 2020. The Company has ambitions to develop a 'state sector' product (the "ecademy") but this is less advanced than the existing InterHigh offering.

The UK independent schools market is estimated to be worth around £7.5 billion, with 2,000 schools attended by over 500,000 students. This represents the highest number of students within independent schools since 1974 when records began. The 2015 Independent Schools Council Census stated that average independent school fees were £14,000 per annum compared to InterHigh's current annual fee for students to 16 of £2,340.

It is estimated that there are approximately 80,000 students in England who are currently home schooled as a matter of choice by their parents for various reasons. This is an obvious target market for expansion of the existing InterHigh Business. Obtaining only a modest market share of these students would lead to a significant expansion in the size of the InterHigh school. In 2014 over 16,500 families who applied to a state school were not offered any of the choices they had indicated in the admissions process. The Directors believe that this group represents further opportunities to grow student numbers.

As regards the overseas market for English education, there are over 7,000 international schools globally of which about 2,900 follow a British curriculum. Aggregate fee income in 2013 was about £21.4 billion and has grown by about 70 per cent. from 2009. The market monitoring International Schools Consultancy (ISC) group predicts the market will rise to £36 billion by 2024. The Directors believe that there are potential opportunities for InterHigh in Asia and these will be researched further post Admission.

In addition, there are estimated to be over one million British expatriate citizens living and working abroad.

The Directors believe that there are considerable opportunities available to the Group in both the UK market and the overseas market for English education.

Current Trading, Strategy and Prospects

The Company's results for the eight month period ended 31 August 2015 were announced on 8 December 2015. In the results the Chairman stated that:

· although the Sixth Form re-launch was only announced in late July 2015, by the first week of the Autumn term 2015/2016, Year 12 (the "lower sixth") had grown to 35 students and has expanded further to 45 students since the term started. With a full year to recruit students, the Directors anticipate substantial growth in this area of the school for 2016/2017 and beyond;

· the Company is piloting a programme with a local authority for students who are not in conventional schooling and hopes that this will prosper; and

· the Company has launched an initiative to offer selective lessons schooling to students through its existing schools and is confident this will lead to further student growth. The initial pilot, started in September, has already proved successful and the school will include InterHigh in its own prospectus for 2016/2017, as a provider of supplementary teaching.

The Directors consider that there is significant scope to increase the profitability of the Group, through further organic growth in the UK, particularly in the online sector both in the privately funded and state funded market segments and through selective acquisitions.

InterHigh's online, fee-paying secondary school education platform has become the foundation of the Group's online education offering. In the 2015/16 year, emphasis is being placed on:

a) growing the number of InterHigh students, particularly through the Sixth Form;

b) international expansion;

c) offering a number of services to other independent schools and the state sector; and

d) ensuring the Group's IT systems are capable of supporting a business with a multiple of the current number of students.

InterHigh will begin offering 'A' Level courses to other independent and state schools in subjects which are difficult for some schools to timetable such as further Mathematics and Latin. In the state funded segment, the Company's initial focus will be to introduce a product for the 14+ home education market through a third party further education provider but due to practical constraints the first students will probably not join until September 2016.

In addition, the Directors have identified a number of market segments which they consider are likely to respond well to an alternative model to traditional international schooling principally in Spain, France, Portugal and East Africa.

For Kenya, Uganda and Rwanda, the Company has appointed a local agent to promote its educational offering, which may, in certain of these markets, use a variation of the existing product which is targeted at individual students. The Directors consider it more likely that agreements will be reached with leading independent schools in the region, to provide supplementary teaching to those schools on a course by course basis, where the local school believes that the talent and quality of the teaching provided by InterHigh will enhance the education of their students. Initial reaction within the East African region to the InterHigh services has been encouraging, with a number of discussions already initiated. A recent market survey has predicted that the total number of international schools in Africa will double in the next decade, making it an attractive market to enter.

The Group intends to explore the possibilities of an offering to the Asian markets, where a British education is highly respected and may be seen by parents as a route to their children studying at a university in the UK. The time difference needs to be addressed in terms of teacher availability/student attendance but the Directors believe there is considerable pent up demand for online education in certain countries such as China. The expansion possibilities discussed above may also involve creating white label versions of the existing school, both to provide services to established education groups and to develop a B2B market serving other users of educational services.

The Financials

The Admission Document contains an Accountants' Report on the audited historical financial information on the Company for each of the years ended 31 December 2012, 2013, 2014 and the period ended 31 August 2015. Summary financial information on the Company is set out in the table below. The summary financial information on InterHigh has been extracted without material adjustment from the Financial Information on the InterHigh Business contained in the Company's Admission Document.

Wey Education plc - Summary Consolidated Profit & Loss Account

InterHigh Business - Summary Profit & Loss Account

Reasons for Admission, the Placing of New Ordinary Shares and the move to AIM

The Directors believe the Group has reached a size and stage of development where Admission will help facilitate further growth in the business by:

· enhancing the profile and credibility of the Group in its markets;

· causing the Group to be better positioned to attract, retain and recruit key staff (who may be further incentivised through the Share Option Scheme);

· providing access to equity markets to finance further growth and potential acquisitive growth in the business; and

· providing a currency in the Company's shares which may facilitate the financing of future acquisitions. The Placing will enable the Group to become debt free and have the resources to scale up its IT systems in advance of anticipated growth, while providing additional working capital.

The Directors

At Admission, the Board will comprise a Non-executive Chairman, one Executive Director and two Non-executive Directors. John Bridges and Dame Erica Pienaar are considered to be independent for the purposes of the QCA Guidelines. In addition, Paul and Jacqueline Daniell who run the InterHigh Business day-to-day are directors of InterHigh, and have fixed term service contracts until 31 March 2017. Brief biographical details of the Directors are set out below:

David Massie, aged 60 - Non-executive Chairman

David is an experienced Company Director and Chairman and has been Chairman of a number of publicly quoted and privately owned companies. He holds a degree in accounting and financial analysis from the University of Warwick.

David is also Chairman and Chief Executive Officer of IAF Capital, where he leads a team focused on financial advisory work in sub Saharan Africa. From time to time, David is called upon to advise various overseas Governments in the region on various commercial and economic matters. He has wide ranging experience across a number of sectors, including financial services, infrastructure and IT. He recently led IAF Capital's team advising on the Government of Rwanda's new e-gov platform, structured as a public private partnership with a significant IT component. He travels regularly to both Africa and China.

David is also involved in educational affairs as a member of the Vice Chancellor's Circle, an advisory body to the University of Warwick.

In addition to his role as Chairman, it is anticipated that David will assist in the Company's proposed expansion overseas, with an emphasis on African and Asian markets.

Tom Scott, aged 50 - Chief Operating Officer

Tom started his career in teaching having completed a Physics Degree at Imperial College and teacher training at Kings College London. Subsequently he moved into business.

Tom joined the Company in July 2012, initially as a consultant and then as a full time employee from October 2012. He became an Executive Director in February 2015. He has led the Company's move into online education and will continue that role as Chief Operating Officer, with a particular emphasis on expansion and growth. Tom has successfully led a range of large scale technical and non-technical projects. He has experience in the management and delivery of free school and academy projects in challenging, multi-stakeholder and partnership environments.

Tom was a Founding Director of the Southwark Free Schools Trust where he led the proposer group from inception to successful approval. In addition Tom was Director of Operations for E-ACT a major multi- academy trust from 2010 - 2011, having responsibility for 11 secondary academies across England. E- ACT's turnover was approximately £55 million per year during the relevant period. In addition, Tom has had extensive operations, service and technology experience, gained in a commercial career spanning over 20 years, including roles at Camelot and the RAC and start-up (Seatwave) businesses. In 2006 Tom was admitted to Companion Membership of the Institute of Customer Services for his contribution to service excellence.

John Bridges, aged 73 - Non-executive and senior independent Director

John has worked in the City for over fifty years. The majority of his first twenty years was in institutional stockbroking and the remainder in public company corporate finance.

John has been a Member of The Chartered Institute for Securities and Investment since 1993 and is a past Committee Member of the Corporate Finance Forum and is a current Committee Member of the Compliance Forum. In other business activities he is regulated by the Financial Conduct Authority and the Central Bank of Ireland.

Dame Erica Pienaar, aged 63 - Non-executive Director

Erica has had a long and distinguished career in education and was appointed a Dame for her services to education in the 2014 Queen's birthday honours list.

Until her retirement in September 2013, she was Executive Head Teacher of the Leathersellers' Federation of Schools. The Federation was established in September 2008 in Lewisham and comprises three Colleges: Prendergast-Hilly Fields College, Prendergast-Ladywell Fields College and Prendergast-Vale College. The federation is a "hard federation" led by a single governing body which means that the schools in the federation remain separate schools with their own budgets but come together under a single governance body.

She began her career as a Science Teacher in 1973 and has taught for 40 years in South East London. She was the Head Teacher of Prendergast School (Hilly Fields) from 1998 to 2008. At Crofton School (renamed Prendergast-Ladywell Fields College) under Erica's leadership the school changed from being the most unpopular secondary school in Lewisham to one that was trusted by parents and fit for expansion.