31 Oct 2016 07:00
WEY EDUCATION PLC
("Wey", the "Group" or the "Company")
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31 AUGUST 2016
"A year of outstanding progress - turnover up significantly
and record number of students"
Wey Education Plc (AIM: WEY) operator of the UK's only online independent secondary school teaching iGCSE and A Levels, announces the Group's results for the year ended 31 August 2016, a year of outstanding progress.
Highlights:
· AIM Admission in December 2015 - driving greater awareness to Wey's investment proposition
· Turnover increased by 193% to £1.5 million (2015 (8 months): £516,327)
· InterHigh revenue increased by 38% to £1,491,636 (2015: £1,082,244)
· Student numbers increased by 52% to 647 (2015: 425)
· Year-end cash of £909,942 (2015: £97,434)
· Successful outcome of litigation against previous CEO
· Appointment of InterHigh's founder, Jacqui Daniell, as a Director of the Company with effect from today
Commenting, Chairman of Wey, David Massie, said:
"The period under review has been one of significant development and investment in the core business with a view to creating sustainable long term profitability. The funds raised at the time of Admission to AIM placed the Company on a strong financial footing and gave it the resources to fund its expansion during 2015/16. 2016/17 will not see the cost of the Company's AIM Admission, the costs associated with the Atkins litigation, various costs incurred in 2015/16 on planning for future expansion and the discontinued business.
2016/17 has started with a record number of students with future growth anticipated during the year. The Board intends to build upon the solid foundation now created by future organic expansion of the core business, including the new school, and development overseas, particularly in Asia, with a view to generating a positive return for shareholders in a timely fashion."
This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No.596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.
Enquiries:
Wey Education Plc | ||
David Massie (Chairman) | Tel: +44 (0) 77 85957 958 | |
| ||
WH Ireland Limited | ||
Mike Coe/Ed Allsopp (Corporate Finance) | Tel: +44 (0) 117 945 3470 | |
Yellow Jersey PR Limited Alistair De-Kare Silver (PR & IR) Harriet Jackson |
| Tel: +44 (0) 7825 916 715 |
CHAIRMAN'S STATEMENT
The year represented the first full year for the Group including the results of InterHigh, the Group's online school acquired in February 2015. Consolidated revenue was £1,515,825, compared with the 2015 revenue of £516,327, for an eight month period. Of more relevance, revenue at InterHigh for the year to 31 August 2016 of £1,491,636, demonstrated significant growth and was substantially ahead of the previous full year's revenue of £1,082,244, an increase of 38%.
Group Adjusted EBITDA1 for the year to 31 August 2016 was a loss of £228,015 (2015 (8 months): loss £152,078). This reflects the investment made and the base that has been created for further expansion in 2016/17 and thereafter. The loss before tax for the year from continuing operations before exceptional items was £408,846 (2015 (8 months): loss £304,386) but the loss per share from continuing operations reduced to 0.99p (2015 (8 months): loss 1.10p).
Year ended 31 August 2016 | 8 months ended 31 August 2015 | |||
£ | £ | |||
REVENUE | 1,515,825 | 516,327 | ||
Cost of sales | (799,909) | (299,479) | ||
GROSS PROFIT | 715,916 | 216,848 | ||
Adjusted Administrative expenses | (943,931) | (368,926) | ||
Adjusted EBITDA | (228,015) | (152,078) |
1Adjusted earnings before interest tax depreciation and amortisation ("EBITDA") adds back exceptional items, the loss on discontinued business and equity based share payments.
The Company is continuing to expand internationally as illustrated by the geographical breakdown of turnover during the year shown below.
UK | Europe | Middle East | Africa | Other countries | Total | |
2016 | £ | £ | £ | £ | £ | £ |
Online Education | 1,072,613 | 188,329 | 130,342 | 31,338 | 66,238 | 1,488,860 |
Other | 26,965 | - | - | - | - | 26,965 |
Total | 1,099,578 | 188,329 | 130,342 | 31,338 | 66,238 | 1,515,825 |
2015 (8 mth period) | £ | £ | £ | £ | £ | £ |
Online Education | 380,099 | 49,406 | 47,117 | 9,558 | 30,148 | 516,328 |
Total | 380,099 | 49,406 | 47,117 | 9,558 | 30,148 | 516,328 |
Sales are allocated based on the country in which the customer is located.
On its Admission to AIM ("Admission") in December 2015, the Company raised £1.48 million net of Admission expenses and commission, part of which was used to repay all existing Group debt. The Group remains debt free. Despite substantial investment in infrastructure, marketing and development of an updated IT system, the Group ended the year with cash of £909,942 (2015: £97,434).
Growth came through organic expansion of the InterHigh online school. Student numbers in every year group increased over the comparative period in 2015, and the final student roll on the last day of term was 647 compared with 425 on the same day in 2015, an increase of 52%. Notable growth was seen in Year 12, the first year of A Levels, where a relaunched offering with more subjects and rescheduled teaching hours led to an increase in students from 12 in 2014/5 to 41 in 2015/16. The number of Year 12 students has increased materially again in the Autumn term of the current year.
Shortly before the year end, the Company announced that it was creating a second school brand to concentrate on a premium offering to students on a semi-selective basis, soft-launching in the current year with a more general launch of the school scheduled for the 2017/18 academic year.
IT Systems Update
InterHigh's IT system is based around industry standard software applications for lesson delivery. These have been enhanced by propriety software to create the InterHigh school platform. The platform is robust but has been developed over the 11 years of the school's existence during which time significant technological advances have occurred.
The Group is expanding rapidly and targeting significant growth of its current school roll. As such the Company, as anticipated at the time of Admission, has commissioned an update of its online platform to ensure firstly that it is scalable and able to accommodate the Group's projected growth, and secondly to ensure that the efficiency of the teaching platform and the quality of the student experience is maintained.
The project is progressing well, with BETA testing expected to commence in the next few months, prior to its anticipated adoption across the Group in 2017. This platform will be available to InterHigh, the new school brand and any other school brands the Group develops.
The Company expects to build the new system considerably below the budget contemplated at the time of Admission.
Management/Directorship Changes
Under the terms of the InterHigh acquisition in February 2015, the two founders of InterHigh, Paul and Jacqui Daniell entered into service agreements with InterHigh. The service agreements were to run for fixed periods to 31 March 2017 and thereafter on 12 months' notice. Paul and Jacqui have now agreed to extend their agreements with InterHigh for a further two years, until 31 March 2019, rolling on thereafter on 12 months' notice.
The acquisition of InterHigh also provided for an earn out to the Vendor (controlled by Paul and Jacqui) in instalments based on turnover growth, the last of which is due for the period to 31 August 2016 and which is subject to audit. It is anticipated that the earn out will amount to £203,308, payable as to 50% in shares of the Company and 50% in cash.
The Board is pleased to announce that Jacqui Daniell, one of the founders of InterHigh has been appointed an executive director of the Company with effect from today. The Group has decided to utilise the advantage it has of a competitive cost based in Crickhowell, Wales and will therefore concentrate all the Group school's administration there. Jacqui will take on a new role as Executive Director (Marketing and Administration).
The Group has announced the launch of a second school. Although student numbers are expected to be modest during 2016/17, the opportunity is available to build a premium brand. The Board is optimistic that in time it can grow to a size comparable with InterHigh.
To coordinate the IT update and the launch of the second school, Tom Scott (COO) will take specific responsibility for the timely delivery of the implementation of these two projects. As a result of a restructure of Group functions Tom's London based role will become redundant and he will leave the Group in October 2017 or upon earlier completion of the two projects.
Litigation Outcome
The Group's legal action against its former CEO, Ms. Zenna Atkins, (also known as Zenna Hopkins) was decided substantially in the Group's favour by a High Court judgement in July 2016. Costs in favour of the Group have now been awarded. Exceptional costs of the action of £124,501 were expended during the year. Since the year end the High Court has awarded costs in favour of the Company and an on account award of £100,000 has been received by the Company from Ms. Atkins (Hopkins). The security for costs which the Company had lodged in the amount of £98,000 has also been returned to the Company.
Discontinued Business
The group's educational consultancy business found it difficult to identify contracts which met the group's margin requirements. Consequently the Board has decided that, in view of the outstanding prospects for growth within the core teaching business, to discontinue the Wey Consultancy business. The loss associated with the business in 2016 was £19,120 (2015 (8 months): profit £4,635).
Related party transactions
Since 2012 the Company has occupied as its Head Office premises associated with David Massie, the Company's Chairman. Since Admission the number of Wey staff using the Head Office has increased from two to six and increasing the demand for space and administrative services. The Company planned to relocate during the year however it has now secured an agreement with IAF (Corporate Finance) LLP (the "LLP") whereby it will be able to continue to use its existing London premises and related office and administrative services at a fixed price on a flexible basis, until the Board consider it right to open a dedicated Head Office.
The Company has agreed to pay a monthly charge of £5,000 plus VAT for the non-exclusive use of the premises and associated office and administrative services which include desks, the use of meeting rooms and administrative and secretarial staff.
The Independent Directors have confirmed that in their view the Company benefits from having a London address and the cost of securing the use of appropriate alternative accommodation and related services would be higher than the terms negotiated with the LLP. The agreement entered into on 28 October 2016, can be terminated by Wey on one month's notice and by the LLP on 3 months' notice. The effective date of the agreement is 1 September 2016.
In addition, Wey has agreed terms under which it will continue to benefit from certain ancillary services provided by IAF Capital Limited ("IAFC"), a corporate finance firm wholly owned by David Massie.
As stated in the Admission Document, the directors of Wey believe there is considerable demand for online education in certain countries, including China. Since Admission IAFC has provided assistance to Wey in relation to its proposed expansion into Asia on an informal basis. These services have included market research, business introductions and visits and meetings to Chinese education companies both in the UK and in China. IAFC has amongst its staff a Chinese citizen and fluent Mandarin speaker who has already assisted greatly with these projects. IAFC has not, and will not make any charge for the services provided to date.
The Board is keen to progress with expansion into the Chinese market and develop relationships with educational establishments in China and feels that IAFC's services will facilitate this as well as reduce overall costs of business travel. Accordingly, the Board considers it would facilitate the development of such relationships and reduce overall costs of business travel if IAFC's services were continued to be made available to the Company which will include accompanying Wey staff on visits to China. Therefore, the Company now wishes to engage IAFC formally to act for it. Rather than a fixed fee, it has been agreed that, for the period of two years from the date of this announcement, for every contract concluded by the Group for education services in a Chinese-speaking territory, IAFC will receive a commission based on the fees paid to Wey by those students/customers, on the following scale:
i. | for the first three years following the commencement of services: | 10.0% |
ii. | for the next three years: | 7.5% |
iii. | thereafter: | 5.0% |
and subject always to receipt of payment from the underlying customer by Wey. In addition, IAFC would be reimbursed disbursements in relation to the subject matter that have been pre-approved by any Independent Director. This agreement can be terminated by Wey on giving six months' notice at any time to IAFC.
The Independent Directors believe the cost of alternative arrangements would either involve the increase in general overhead or would most likely be expensed on a time basis and lead to significantly higher costs being incurred and would be paid whether students were successfully recruited or not. They therefore consider this arrangement, which will result in commissions being paid only when contracts have been concluded, services commenced and Wey has received payment, to be fair and reasonable insofar as the interests of shareholders are concerned.
Each of these transactions is a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. Accordingly, the independent directors of Wey, that is the directors save for David Massie who took no part in the negotiations (the "Independent Directors"), following consultation with WH Ireland, have concluded that the terms of each transaction are fair and reasonable insofar as the interests of shareholders are concerned.
Outlook
The Group's distinctive interactive schooling provides an alternative to a traditional "bricks and mortar" school. Historically many students came to InterHigh because its online nature resolved personal issues, such as anxiety or bullying. Increasingly students are more mainstream having decided that in today's digital world, the increased flexibility and provision of digital information is a style of teaching which equips them for further study at University and then in the digital working world.
The period under review has been one of significant development and investment in the core business with a view to creating a platform upon which to generate sustainable long term profitability. The funds raised at the time of Admission placed the Company on a strong financial footing and gave it the resources to fund its expansion during 2015/16. 2016/17 will not see the cost of the Company's AIM Admission, the costs associated with the Ms. Atkins litigation, various costs incurred in 2015/16 on planning for future expansion and the discontinued business.
2016/17 has started with a record number of students with future growth anticipated during the year. The Board intends to build upon the solid foundation now created by future organic expansion of the core business, (including the new school) and development overseas, particularly in Asia, with a view to generating a positive return for shareholders in a timely fashion.
Shareholder's Discount Scheme
Eligible shareholders are entitled to a discount on fees at InterHigh for their children and grandchildren. Further details can be found at http://weyeducation.com/index.php/investors.
Annual General Meeting
The Annual General Meeting of the Company will be held on Monday 9 January 2017 at 10.30 a.m. at the Company's registered office, 43-44 New Bond Street, London W1S 2SA. The Group's Annual Report and a formal notice will be separately dispatched to shareholders in due course at which time copies of the Annual Report will be available at the Company's website www.weyeducation.com from that date.
WEY EDUCATION PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST 2016
Year ended 31 August 2016 | 8 months ended 31 August 2015 | |||
CONTINUING OPERATIONS | £ | £ | ||
REVENUE | 1,515,825 | 516,327 | ||
Cost of sales | (799,909) | (299,479) | ||
GROSS PROFIT | 715,916 | 216,848 | ||
Administrative expenses | (1,108,973) | (457,685) | ||
Equity based share payments | (11,489) | (51,739) | ||
Exceptional items | (397,791) | (55,960) | ||
|
| |||
OPERATING LOSS | (802,337) | (348,536) | ||
Finance costs | (4,300) | (11,810) | ||
|
| |||
LOSS BEFORE TAXATION | (806,637) | (360,346) | ||
Taxation | - | - | ||
|
| |||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR FROM CONTINUING OPERATIONS | (806,637) | (360,346) | ||
Profit/(Loss) from discontinued operations | (19,120) | 4,635 | ||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR | (825,757) | (355,711) | ||
Continuing operations | (0.99)p | (1.10)p | ||
Discontinued operations | (0.02)p | 0.01p | ||
Basic and diluted loss per share | (1.01p) | (1.09p) | ||
WEY EDUCATION PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 AUGUST 2016
31 August 2016 | 31 August 2015 | ||
£ | £ | ||
NON CURRENT ASSETS | |||
Goodwill | 201,217 | 201,217 | |
Intangible assets | 629,731 | 763,333 | |
Tangible fixed assets | 29,079 | 18,153 | |
Total non current assets | 860,027 | 982,703 | |
CURRENT ASSETS | |||
Trade and other receivables | 217,108 | 219,321 | |
Cash and cash equivalents | 909,942 | 97,434 | |
Total current assets | 1,127,050 | 316,755 | |
TOTAL ASSETS | 1,987,077 | 1,299,458 | |
EQUITY AND LIABILITIES | |||
Equity and reserves | |||
Share capital | 957,712 | 439,711 | |
Share premium | 2,695,844 | 1,474,839 | |
Option reserve | 48,135 | 51,739 | |
Retained earnings | (2,409,283) | (1,598,619) | |
Total equity and reserves | 1,292,408 | 367,670 | |
CURRENT LIABILITIES | |||
Trade and other payables | 694,669 | 742,788 | |
Total current liabilities | 694,669 | 742,788 | |
NON CURRENT LIABILITIES | |||
Provisions for liabilities | - | 189,000 | |
Total non current liabilities | - | 189,000 | |
TOTAL EQUITY AND LIABILITIES | 1,987,077 | 1,299,458 |
WEY EDUCATION PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2016
Share Capital | Share Premium | Option Reserve | Retained Earnings | Total | |
£ | £ | £ | £ | £ | |
At 1 January 2015 | 138,652 | 559,538 | 33,408 | (1,276,316) | (544,718) |
Comprehensive Income | |||||
Loss for the period | - | - | - | (355,711) | (355,711) |
Total Comprehensive Income | - | - | - | (355,711) | (355,711) |
Transaction with owners | |||||
Issue of shares for cash | 175,000 | 525,000 | - | - | 700,000 |
Issue of shares on conversion of loan | 27,813 | 83,437 | - | - | 111,250 |
Issue of shares for acquisition | 86,246 | 301,864 | - | - | 388,110 |
Issue of shares in lieu of directors fees | 12,000 | 42,000 | - | - | 54,000 |
Expenses associated with share issue | - | (37,000) | - | - | (37,000) |
Transfer on lapsing of share options | - | - | (33,408) | 33,408 | - |
Equity based share payments | - | 51,739 | - | 51,739 | |
|
|
|
|
| |
Total Transaction with owners | 301,059 | 915,301 | 18,331 | 33,408 | 1,268,099 |
At 1 September 2015 | 439,711 | 1,474,839 | 51,739 | (1,598,619) | 367,670 |
Comprehensive Income | |||||
Loss for the year | - | - | - | (825,757) | (825,757) |
Total Comprehensive Income | - | - | - | (825,757) | (825,757) |
Transaction with owners | |||||
Issue of shares for cash | 500,000 | 1,250,000 | - | - | 1,750,000 |
Issue of shares for deferred consideration | 18,001 | 58,505 | - | - | 76,506 |
Expenses associated with share issue | - | (87,500) | - | - | (87,500) |
Transfer on lapsing of share options | - | - | (15,093) | 15,093 | - |
Equity based share payments | - | - | 11,489 | - | 11,489 |
|
|
|
|
| |
Total Transaction with owners | 518,001 | 1,221,005 | (3,604) | 15,093 | 1,750,495 |
At 31 August 2016 | 957,712 | 2,695,844 | 48,135 | (2,409,283) | 1,292,408 |
WEY EDUCATION PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 AUGUST 2016
GROUP | |||||
31 August 2016 | 31 August 2015 | ||||
£ | £ | ||||
Cash flows from operating activities | |||||
Profit/(Loss) before taxation of: | |||||
- continuing operations | (806,637) | (360,346) | |||
- discontinued operations | (19,120) | 4,635 | |||
Adjustments for: | |||||
Amortisation | 160,000 | 86,667 | |||
Depreciation | 5,042 | 2,092 | |||
Loss on disposal of fixed assets | 373 | 142 | |||
Finance costs | 4,300 | 11,810 | |||
Equity based share payments | 11,489 | 51,739 | |||
Changes in working capital: | |||||
Trade and other receivables | 2,213 | (140,905) | |||
Trade and other payables | 216,339 | 45,867 | |||
|
| ||||
Net cash generated from/(used in) operating activities | (426,001) | (298,299) | |||
Cash flow from financing activities | |||||
Repayment of funds to related parties | (266,750) | (35,493) | |||
Issue of shares | 1,662,500 | 663,000 | |||
Net cash (used in)/generated from financing activities | 1,395,750 | 627,507 | |||
|
| ||||
Cash flow from investing activities | |||||
Acquisition of business net of cash | (76,506) | (228,109) | |||
Interest paid | (37,996) | - | |||
Development costs | (26,398) | - | |||
Purchase of fixed assets | (16,341) | (9,450) | |||
Net cash (used in)/generated from investing activities | (157,241) | (237,559) | |||
|
| ||||
Net increase/(decrease) in cash and cash equivalents | 812,508 | 91,649 | |||
Cash and cash equivalents brought forward | 97,434 | 5,785 | |||
Cash and cash equivalents carried forward | 909,942 | 97,434 | |||
WEY EDUCATION PLC
NOTES TO THE RESULTS
FOR THE YEAR ENDED 31 AUGUST 2016
1. The financial information set out above does not constitute statutory accounts for the purpose of the Companies Act 2006. These financial statements have not been reviewed or approved by the Group's auditors.
2. Wey Education Plc has adopted International Financial Reporting Standards ("IFRS"), IFRIC interpretations and the Companies Act 2006 as applicable to companies reporting under IFRS.