TIDMAEC

RNS Number : 9232S

AEC Education plc

30 September 2014

AIM: AEC

30 September 2014

AEC Education PLC

("AEC" or "the Company" and together with its subsidiaries, "the Group")

Half year results for the six months to 30 June 2014

Key Points

   --     Revenues on continuing activities of GBP4.33m (2013: GBP5.74m) 
   --     Operating loss of GBP0.07m (2013: loss of GBP0.53m) 
   --     Loss before tax of GBP0.10m (2013: loss of GBP0.56m) 
   --     Loss after tax from continuing activities of GBP0.11m (2013: loss of GBP0.58m) 
   --     Loss per share of 0.15p (2013: 1.64p) 
   --     Revenue decline in London offset by 53% growth in Ireland 
   --     Singapore College returns to profit. 
   --     Oman trading very difficult with operating losses for the half year 

Liam Swords, Chairman, stated,

"The Group's results for the six months to 30 June 2014, as expected, show a significant improvement in AEC's operations. Our English language teaching operations in London showed an operating profit and our new operation in Ireland continued to grow very strongly offsetting the effect of the difficult trading conditions in London. Singapore has returned to profit albeit at a very reduced operating level.

We are encouraged by progress across our operations in London, Dublin, Cyprus and Malaysia and have begun to implement a further growth plan in Europe. Singapore is starting to build a local market and is working hard to remain in profit whilst a range of alternatives for growth are investigated. Oman has not lived up to expectations and is impacting the group negatively whilst our recovery is still in the early stages.

Nonetheless, we expect the progress achieved to date to continue into the peak summer period and

as we begin to implement strong growth plans in Europe."

Enquiries:

 
 AEC Education PLC            Tel: +44 (0) 7725 836 811 
 Liam Swords 
 
 WH Ireland Limited (NOMAD)   Tel: +44 (0)161 832 2174 
 Andrew Kitchingman 
 
 

CHAIRMAN'S STATEMENT

Introduction

The Group's results for the six months to 30 June 2014, as expected, show a significant improvement in AEC's operations. Most importantly, our English language teaching operations in London continued to show an operating profit and our new operation in Ireland grew by 53% offsetting the effect of a very sluggish London market which recorded a drop of 19%. Singapore has also returned to profit albeit at a much reduced operating level. Malaysia has been affected by a delay in renewing University partnerships and a more competitive ACCA market and showed a small operating loss of 1% of revenue. The progress made in this period is encouraging. Trading is traditionally higher in the 2(nd) period so our predicted return to profit this year is still on track.

Financial Results

Revenues on continuing activities for the six months reduced to GBP4.33m. (2013: GBP5.74.m). The loss before tax was GBP0.07m compared to a loss of GBP0.53m in the same period last year. All of the operations, with the exception of Oman, were operating at about break - even level in this period The loss after tax was GBP0.11m (2013: GBP0.82m including GBP0.24m on discontinued activities) The loss per share was 0.15p (2013: 1.10p and 1.64p per share including discontinued activities). Cash balances as at 30 June 2014 stood at GBP0.65m (2013: GBP1.42m).

Operational Review

In Europe, Ireland has continued to grow very strongly and will benefit from the strong interest in the Summer Camp which was a very profitable feature last year during the summer months. The lower price business, from the mainly Latin markets, dominated this period but now the higher value business from Europe and Eastern Europe are beginning to feed through with order intake at the higher margins increasing strongly. Strategicaly, Ireland was developed to help to offset the difficult trading position in London and this strategy is now beginning to pay off. London remains difficult because of visa restrictions and the inability of non EU students to work part time to subsidise their learning, with the result that revenue reduced against last year. In view if this we have begun to implement further saving by centralizing sales and marketing, finance and general administration in Dublin. At the same time we have begun to develop new products and new agreements and increased the sales force across a wider range of markets. We expect these initiatives to bring London back into a growth pattern next year. The Malvern School in Limassol, Cyprus, has continued to grow strongly, with order intake on track to achieve increased revenue again this year. Additionally the Summer Camp, which just commenced for this year at the end of June, looks like repeating the success of last year and we expect our agreement with UCLAN in Cyprus to continue to develop as we go through the 2(nd) period of this year.

Oman did not achieve in this period. It generated very low revenue and sustained heavy losses relative to its size. We have not increased our investment in this venture and have been diluted because of the funding requirements which have been supported by our partners. The Board are actively seeking a solution to this drain on our results.

In Singapore, as we previously reported, we cannot recruit overseas students. The impact on our revenue is a reduction of 52% on last year. The management have focused on building a local market

and extending its range of products to suit this initiative. This has enabled it to show a small operating profit during the period and further initiatives are being developed to enable growth in the coming period. We are unlikely to reapply for EDUTrust in the near future but, instead, we are focusing on plans with partners to seek and develop opportunities in the local market.

Revenue in Malaysia continues to be affected by the upheaval in its North Africa markets, competition in its accounting markets and delays in completing University agreements. Revenue is down significantly on last year with the result it made a small operating loss of 1%. Initiatives have been taken to return the Accounting revenue to the budgeted level and the University agreements are expected to be completed shortly. As mentioned previously, Malaysia has diversified its markets and this initiative is expected to gain traction as we go through the 2(nd) period.

Outlook

Notwithstanding the issues in our market opportunities in Singapore and London, we are encouraged by progress across all our operations in very significantly improving the Group results compared to the same period last year. We anticipate further progress across all units during the next six months and all are working on initiatives that will bring the Group back into a growth pattern. In the meantime, we are pleased to have the continued support of our shareholders as we evaluate potential financing options to look to further strengthen the business.

Liam Swords

Chairman

UNAUDITED CONSOLIDATED INCOME STATEMENT

 
                                  Note                 Six months                Six months              Twelve months 
                                                       to 30 June                to 30 June             to 31 December 
                                                             2014                      2013                       2013 
                                                          GBP'000                   GBP'000                    GBP'000 
                                                        Unaudited                 Unaudited                    Audited 
 
 Revenues 
 Sales of services and other 
  revenue                          4                        4,333                     5,742                     11,304 
 
 Cost of services sold & 
  operating 
  expenses                                                (4,403)                   (6,267)                   (12,983) 
 
 Operating (loss) / profit                                   (70)                     (525)                    (1,679) 
 
 (Loss) / profit from 
  operations                                                 (70)                     (525)                    (1,679) 
 
 Share of results of associated 
  companies 
  and joint venture                                           (6)                        22                        (4) 
 Finance costs                                               (20)                      (52)                       (46) 
 
 (Loss) / profit before 
  taxation                                                   (96)                     (555)                    (1,729) 
 
 Income tax credit / (charge)                                 (9)                      (25)                      (235) 
 
 (Loss) / profit for the period / 
  year from continuing activities                           (105)                     (580)                    (1,964) 
 (Loss) / profit for the period / 
  year from discontinued activities                             -                     (241)                      (998) 
 
 (Loss) / profit for the period 
  / year                                                    (105)                     (821)                    (2,962) 
 
 Minority interests                                            13                        96                         58 
                                        -------------------------  ------------------------  ------------------------- 
 
 (Loss) / profit attributable 
  to equity holders                                          (92)                     (725)                    (2,904) 
 
 (Loss) / earnings per share 
  on continuing activities                                  Pence                     Pence                      Pence 
 
 Basic                                                     (0.15)                    (1.10)                     (4.27) 
 
 Diluted                                                   (0.15)                    (1.10)                     (4.27) 
 
 
 (Loss) / earnings per share 
  on discontinued activities                                Pence                     Pence                      Pence 
 
 Basic                                                                               (0.54)                     (2.24) 
 
 Diluted                                                                             (0.54)                     (2.24) 
 

UNAUDITED STATEMENT OF FINANCIAL POSITION

 
                                                        As at 30                       As at 30               As at 31 
                                                       June 2014                      June 2013               December 
                               Note                                                                               2013 
                                                         GBP'000                        GBP'000                GBP'000 
                                                       Unaudited                      Unaudited                Audited 
 
 Fixed assets 
 Intangible assets                                         3,951                          4,764                  4,023 
 Tangible assets                                             650                          1,176                    763 
 Investment in associated companies                            -                             58                     17 
 Investment in joint venture                                  17                             59                     26 
 Deferred taxation                                             -                            239 
                                                           4,618                          6,296                  4,829 
                                      --------------------------  -----------------------------  --------------------- 
 Current assets 
 Inventory                                                     9                             22                      9 
 Debtors                                                   1,848                          3,386                  2,010 
 Cash at bank and in hand                                    645                          1,421                  1,475 
                                      --------------------------  -----------------------------  --------------------- 
                                                           2,502                          4,829                  3,494 
 
 Total assets                                              7,120                         11,125                  8,323 
                                      ==========================  =============================  ===================== 
 
 Creditors 
 Amounts falling due within 
  one year                                               (4,375)                        (7,011)                (5,453) 
 
 Net current liabilities                                 (1,873)                        (2,182)                (1,959) 
                                      --------------------------  -----------------------------  --------------------- 
 
 Non-current liabilities 
 Deferred income                                               -                              -                      - 
 Finance lease                                              (48)                              -                   (63) 
 Term loan                                                                                 (68) 
 Deferred taxation                                          (22)                           (25)                   (22) 
                                      --------------------------  -----------------------------  --------------------- 
                                                            (70)                           (93)                   (85) 
 
 Total liabilities                                       (4,445)                        (7,104)                (5,538) 
                                      --------------------------  -----------------------------  --------------------- 
 
 Equity attributable to equity 
 holders 
 of the Company 
 Share capital                                             5,362                          4,420                  5,362 
 Share premium                                               896                            708                    896 
 Reserves                                                (3,403)                        (1,018)                (3,299) 
                                      --------------------------  -----------------------------  --------------------- 
                                                           2,855                          4,110                  2,959 
 Minority interest in equity                               (180)                           (89)                  (174) 
                                                           2,675                          4,021                  2,785 
                                      --------------------------  -----------------------------  --------------------- 
 
 Total equity and liabilities                              7,120                         11,125                  8,323 
                                      ==========================  =============================  ===================== 
 

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

 
                                                          Six months                 Six months          Twelve months 
                                                          to 30 June                 to 30 June         to 31 December 
                                    Note                        2014                       2013                   2013 
                                                             GBP'000                    GBP'000                GBP'000 
                                                           Unaudited                  Unaudited                Audited 
 
 Cash Flows from operating 
 activities 
 (Loss) / profit before income 
  tax from continuing activities                                (96)                      (555)                (1,729) 
 (Loss) / profit before income tax 
  from discontinued activities                                     -                      (241)                  (998) 
 
 Adjustments for: 
 Depreciation & amortisation                                     176                        304                    608 
 Plant and equipment written-off                                   -                          2                    299 
 Loss on disposal of plant and 
  equipment                                                     (11)                          -                     89 
 Loss/(profit) on disposal of 
  a subsidiary                                                     -                                             (215) 
 Loss/(profit) on disposal of 
  an associate                                                 (279)                                                 - 
 Impairment of goodwill                                            -                         59                     59 
 Impairment of intangible assets                                   -                          -                    600 
 Interest paid                                                  (20)                         52                     46 
 Interest income                                                   -                          -                      - 
 Share of results of associated companies 
  and joint venture                                                6                       (22)                      4 
                                                               (224)                      (401)                (1,237) 
                                           -------------------------  -------------------------  --------------------- 
 
 Changes in working capital 
 (Increase) / decrease in debtors                                172                        234                  1,568 
 (Increase) / decrease in creditors                            (769)                      (644)                (2,480) 
 (Increase) / decrease in inventories                              -                          -                     13 
 (Increase) / decrease in related 
  parties                                                      (209)                        (1)                    668 
 
 Cash flows from operating activities                        (1,030)                      (812)                (1,468) 
                                           -------------------------  -------------------------  --------------------- 
 
 Taxation 
 Taxes recovered / (paid)                                       (20)                        (1)                   (40) 
 
 Net cash used in operating 
  activities                                                 (1,050)                      (813)                (1,508) 
                                           -------------------------  -------------------------  --------------------- 
 
 Cash flows from investing 
 activities 
 Interest income                                                   -                          -                      - 
 Purchase of property, plant 
  and equipment                                                 (21)                      (287)                  (528) 
 Purchase of intangible fixed 
  assets                                                         (7)                          -                   (16) 
 Acquisition of joint venture                                      -                          -                      - 
 Acquisition of a subsidiary                                       -                          -                  (100) 
 Disposal of property, plant 
  and equipment                                                   27 
 Disposal of a subsidiary                                          -                                              (11) 
 Disposal of an associate                                        293                          -                      - 
                                                                 292                      (287)                  (655) 
                                           -------------------------  -------------------------  --------------------- 
 Cash flows from financing 
 activities 
 Share issue                                                       -                                             1,131 
 Interest paid                                                     -                       (52)                   (46) 
 Dividend paid to minority 
 shareholders                                                      -                          -                      - 
 (Decrease) / increase in finance 
  lease liabilities                                             (31)                       (20)                     63 
 Repayment of term loan                                         (62)                      (127)                  (267) 
 Dividend paid to shareholders                                     -                          -                      - 
                                                                (93)                      (199)                    881 
                                           -------------------------  -------------------------  --------------------- 
 
 Effect of foreign exchange 
  rate changes on consolidation                                   21                         13                     50 
                                           -------------------------  -------------------------  --------------------- 
 
 Net increase in cash and cash 
  equivalents                                                  (830)                    (1,286)                (1,232) 
 
 Cash and cash equivalents at 
  beginning of period / year                                   1,475                      2,707                  2,707 
 
 Cash and cash equivalents at 
  end of period / year                                           645                      1,421                  1,475 
                                           -------------------------  -------------------------  --------------------- 
 

NOTES TO ACCOUNTS

   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 2014. 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 2014. The comparative figures for the period ended 30 June 2013 are those as published in the Company's half year announcement made on 16 September 2013.

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 2014 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 2013, and to be adopted in respect of the year ending 31 December 2014.

   4.    Sale of Services 
 
                                         Six months                  Six months                       Twelve months 
                                         to 30 June                  to 30 June                      to 31 December 
                                               2014                        2013                                2013 
                                            GBP'000                     GBP'000                             GBP'000 
                                          Unaudited                   Unaudited                             Audited 
 Course fees and registration 
  fees                                        3,345                       5,032                               9,428 
 Examination fees                                 3                           8                                   9 
 Students accommodation                         578                         514                               1,393 
 Others                                         407                         188                                 474 
                                              4,333                       5,742                              11,304 
                                -------------------  --------------------------  ---------------------------------- 
 
   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 63,051,043 (2013: 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 63,051,043 (2013: 44,198, 781).

This information is provided by RNS

The company news service from the London Stock Exchange

END

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