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Wey Education PLC   -  WEY   

Unaudited Interim Results

Released 07:00 08-May-2018

RNS Number : 2620N
Wey Education PLC
08 May 2018
 

 8 May 2018

 

WEY EDUCATION PLC

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

 

Unaudited Interim Results for the six months ended 28 February 2018

 

Wey Education plc (AIM:WEY) today publishes its interim results for the six months to 28 February 2018 and reports on a number of important developments within the business.

 

HIGHLIGHTS:

 

·        Academy 21 acquisition outperforming expectations

 

·        Establishment of Chinese subsidiary and agreement to establish a Joint Venture in China to
progress English language teaching

 

·        Infinity Education starts delivering first courses

 

·        Agreement reached for Joint Venture in Nigeria to teach both English and Nigerian curriculum online

 

·        Launch of primary curriculum

 

·        Appointment of Executive Director of Human Resources

 

·        Turnover up 44% at £1.74m (2017 - £1.21m) including contribution of £249,000 from Academy 21

 

·        Adjusted profit before tax of £145,000 (2017 - £75,000)

 

·        Adjusted basic EPS 0.12p (2017:0.08p)

 

·        Cash balances healthy at £4.3m

 

Commenting on the results, David Massie (Executive Chairman) said: "This was an exciting period in the Company's development. Last November's oversubscribed £5m placing gave the Company the financial resources to implement its medium-term strategy. The results of that process are already beginning to bear fruit. The completion of the Academy 21 acquisition accelerates the Company's growth in the B2B market and we are very pleased with its development so far. The announcements regarding the joint ventures in China and Nigeria is very significant for the group's growth as they have the potential to be transformational. Naturally, there is some cost involved in developing these initiatives, but the Company has the necessary financial resources for such, and the Board considers the potential is so great, that the price is one worth paying."

 

This announcement contains information which, prior to its disclosure by this announcement, was inside information for the purposes of the Market Abuse Regulation

 

Enquiries:

 

 

Wey Education plc

 

David Massie (Executive Chairman)

+44 (0) 20 7518 9700

 

+44 (0) 7785 957 958

 

 

WH Ireland Limited

(Nominated Adviser and Broker)

 

Mike Coe / Ed Allsopp (Corporate Finance)

+44 (0) 117 945 3470

 

 

 

Academy 21 ("A21")

 

The A21 acquisition has to date exceeded management expectations. Turnover for the period 22 December 2017 to 28 February 2018 consolidated into the interim accounts was £249,000. Forward sales indicate that last year's A21 sales figure for the full year of £1.03m is likely to be exceeded.

 

This promising start has given management the confidence to commit to further expansion in the division and the Company is now planning to recruit further sales personnel and commission an improved automated administration system for Academy 21.

 

Establishment of Chinese subsidiary

Proposed Joint Venture in China

Initial supplies by Infinity Education in China

 

After the interim accounts date the company received approval from the relevant authorities in China for the establishment of its wholly owned subsidiary - referred to in China as a Wholly Foreign Owned Enterprise ("WFOE"), domiciled in Beijing. This was an important step in the Group being regulatory compliant and able to do business in China.

 

The Group has entered into a Memorandum of Understanding ("MOU") with a listed Chinese company Beijing Star Cube Science Development Co. Ltd ("Starcube") to establish a Joint venture to market and sell English language courses in China. Negotiations are progressing well and it is anticipated that a formal JV will be agreed in the next few months.

 

Starcube is a Chinese company, specialising in education software development and education content. Starcube was founded in January 2010. It was registered with the National Equities Exchange and Quotations ("NEEQ") in January 2014 - Stock name: StarCube and Ticker symbol: 430375. NEEQ was founded in 2012 and is under the supervision of the China Securities Regulatory Commission. The NEEQ is an over-the-counter (OTC) national securities trading market, providing an alternative finance method to list for Chinese small and medium size enterprises. On June 2016, Starcube's stock was transferred to NEEQ Market Making Component Index.

 

The MOU contemplates that Wey and Starcube will establish a joint venture, to be incorporated as a Chinese limited liability company, which will be 50% owned by each of the shareholders. It is intended that it will initially offer English language lessons to Chinese state schools and expand into the provision of privately funded top up tuition to pupils in due course.

 

Wey will provide the English language tuition online from the UK, supplemented by some local teaching which may be online or off line.

 

Modest targets are being agreed with Starcube for 2018/19 but in the medium term, this is potentially a very material development and gives the Group the opportunity to establish credibility both in the market generally and with the Chinese state authorities in a market of some 200m students learning English day to day. Wey has agreed to provide pilot and training courses in the current financial year at no cost to the joint venture and will also contribute its share of initial infrastructure costs.

 

Infinity Education Limited ("Infinity")

 

The Group's premium brand has now opened its doors and has secured its first contract, also in China. Of modest size, the contract has Infinity provide top up A level tuition and Oxbridge preparation to a group of students attending an international school in China. It is noteworthy that the Chinese school which already has high academic achievements has asked the Company to provide this service which underlines the overall quality of the Group's offerings.

 

Agreement for New Venture in Nigeria to teach both British and Nigerian Curriculum

 

The Group has reached agreement with an independent school in Nigeria to launch and offer Wey's services within the Nigerian market. The new venture will offer both Wey's traditional curriculum of year 7 to year 13 British curriculum secondary courses but will also use the Wey platform to offer teaching in the Nigerian curriculum.

 

The current population of Nigeria is approximately 186 million and the children within such are the initial target market but it is considered that the offering of the Nigerian curriculum may also attract interest amongst the significant Nigeria diaspora living overseas.

 

Wey will provide the British curriculum teaching online from the UK and the Nigerian curriculum will be provided locally but utilising the Wey online learning platform. Wey will be paid a fee for every student utilising the platform for the Nigerian curriculum. It is hoped that the venture will admit its first students in the next financial year.

 

Launch of Primary Curriculum

 

Wey's academic teaching is currently focussed on the secondary school curriculum (Years 7 - 13) i.e. Key stages 3, 4 and 5 broadly speaking for those aged 11 - 19. Wey has decided to extend its provision of online teaching into the Primary curriculum in terms of Key Stage 2, initially beginning with Years 5 and 6, typically for children aged 9 and 10.

 

It is intended to provide a curriculum of 6 core subjects from September 2018.

 

Appointment of Executive Director of Human Resources

 

The Company is pleased to announce the appointment of Tony Knowles as Executive Director responsible for Human Resources in the Group. Tony is an experienced HR professional who has worked in a range of industries. Most recently he was Human Resources Director for Veezu Holdings Limited, a gig economy based company operating in the private hire industry. Tony is expected to take up his position on 13 May 2018 and will be based at the Group's administrative headquarters in Crickhowell.

 

 

Financial review

 

Turnover of £1.74m included a first time contribution of £249,000 from A21 for the period 22 December 2017 to 28 February 2018. This represented an increase of 44% on the 2017 turnover figure of £1.2m or 23% ignoring the Academy 21 contribution.

 

 

 

 

6 months to

28.2.2018

£'000

 

6 months to

28.2.2017

£'000

 

Full year to

31.08.2017

£'000

Sales:

Core

Acquisition

 

1,494

249

 

1,211

-

 

2,429

-

Total

 

1,743

 

1,211

 

2,429

Cost of sales

 

(838)

 

(575)

 

(1,221)

 

 

 

 

 

 

Gross profit

 

905

 

636

 

1,208

Admin Expenses

 

(745)

 

(557)

 

(1,036)

EBITDA

 

 

160

 

 

79

 

 

172

Depreciation

 

(15)

 

(4)

 

(11)

Adjusted Profit

 

145

 

75

 

161

 

 

Adjusted profits were £145,000 (2017: £75,000) in line with our expectations for the first half. The figure represents profit before tax adjusted for share based payments (£18,000), amortisation of intangibles (£95,000), acquisition costs (£43,000) and the higher than trend expenditure on marketing and other matters flagged up at the time of the November placing to substantially boost group revenues and underlying profits over the next three years (£143,000).

 

Adjusted EPS for the period was 0.12p (2017:0.08p)

 

Group cash at 28 February 2018 remained healthy at £4.3 million reflecting the balance of the funds raised in the November placing yet unspent and the inherent cash generative nature of the Group's operations.

 

Marketing

 

The Company allocated a portion of the funds raised in its November 2017 placing to increasing and enhancing marketing across the group. The results of this direct marketing are already apparent in the agreements reached in China and Nigeria and further developments are expected shortly.

 

The group is active online and continues to explore how best to enhance this with complementary advertising. Other initiatives include a campaign with Mumsnet and through Disability Rights UK as well as upgraded websites for overseas advertising.

 

Other UK B2B

 

B2B marketing (non-Interhigh) in the UK increased sales significantly over 2016/17 with most of the growth occurring in the first few months of the period. This contrasts well with the business profile of A21 whose sales are weighted towards the second half. As previously announced, the Wey B2B marketing team has been amalgamated with that of A21.

 

 

Management

 

With the appointment of a Finance Director and a new Human Resources director, senior management now consists of three executive directors and an executive chairman. The group considers itself well place for future development.

 

Outlook

 

The Company is pleased with the progress in the first half.

 

In accordance with the strategy adopted at the time of the Company's £5 million placing in November 2017, emphasis has been put on development of the Company's business for the medium term at some short-term cost. The results of this strategy to date are reflected in the positive announcements made herein regarding A21, the Chinese joint venture and international expansion generally.

 

Turnover in the Group's core businesses increased 23% over the equivalent period in 2016/17 although in terms of profitability margin growth compensated for the sales shortfall. Overall for the full year, and notwithstanding the additional costs flagged above, we remain on track to meet our expectations for adjusted profitability for the year although this is likely to be achieved on lower than previously planned revenues.

 

The JV in Nigeria will be used to open up English speaking markets for the group's academic products in Commonwealth countries. The use of the Company's learning platform for teaching courses other than the British curriculum will open up a new revenue stream with attractive margins.

 

The JV in China is potentially very exciting. The Company will benefit both from the export sales made to the JV and from its share of underlying profitability of the JV. Delivery of the Group's services to China has been tested thoroughly and as noted above, revenue operations have commenced. The Group is developing the business in expectation of significant export sales from the UK from 2019/20 onwards. Management believes that the medium-term potential of this venture is so large that it justifies the commitment made.

 

The Company continues to explore additional marketing channels in China for its core academic products.

 

 

 

 

Consolidated Statement of Comprehensive Income

For the six months ended 28 February 2018

 

 

 

 

Unaudited 

 

Unaudited 

 

Audited

 

 

6 months

 ended

 

6 months ended

 

Year ended

 

28 February

 

28 February

31 August

 

 

2018

 

2017

 

2017

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Total revenue

1,743

 

1,211

 

2,429

 

 

 

 

 

 

 

 

Cost of sales

(838)

 

 (575)

 

(1,221)

 

 

 

 

 

 

 

 

Gross profit

905

 

636

 

1,208

 

 

 

 

 

 

 

 

Administrative expenses

(997)

 

 (641)

 

(1,206)

 

 

 

 

 

 

 

 

Equity share based awards

-

 

-

 

(33)

 

 

 

 

 

 

 

 

Equity based share payments

(18)

 

(43)

 

(108)

 

 

 

 

 

 

 

 

Exceptional items

(43)

 

59

 

156

 

 

 

 

 

 

 

 

Operating profit/(loss) for the period before taxation

(153)

 

11

 

17

 

 

 

 

 

 

 

 

Finance costs

-

 

-

 

-

 

 

 

 

 

 

 

 

Profit/(loss) before tax

(153)

 

11

 

17

 

 

 

 

 

 

 

 

Taxation

-

 

-

 

-

 

 

Total comprehensive loss for the period from continuing activities

(153)

 

  11

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained profit/(loss) for period

(153)

 

11

 

17

 

 

 

 

 

 

 

 

Total comprehensive profit/(loss) for the period

(153)

 

11

 

17

 

 

 

 

 

 

 

 

Profit/(loss) from continuing activities

(153)

 

11

 

17

 

 

 

 

 

 

 

 

Basic (loss)/earnings per share (p)

(0.13)

 

0.01

 

0.02

 

Basic adjusted earnings per share (p)

0.12

 

0.08

 

0.16

 

 

 

 

 

 

 

Unaudited Consolidated Statement of Financial Position

As at 28 February 2018

 

 

Unaudited

 

Unaudited

 

Audited

 

As at

 

As at

 

As at

 

28 February

 

28 February

 

31 August

 

2018

 

2017

 

2017

 

£'000

 

£'000

 

£'000

NON CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

1,643

 

201

 

201

 

Intangible assets

642

 

736

 

737

 

Tangible assets

126

 

49

 

102

 

 

 

 

 

 

 

 

Total non current assets

2,411

 

986

 

1,040

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other receivables

1,126

 

287

 

266

 

Cash and cash equivalents

4,346

 

1,030

 

1,005

 

 

 

 

 

 

 

 

Total current assets

5,472

 

1,317

 

1,271

 

 

 

 

 

 

 

 

TOTAL ASSETS

7,883

 

2,303

 

2,311

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY AND RESERVES

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued share capital

1,267

 

988

 

1,039

 

Share premium

7,352

 

2,783

 

2,868

 

Share option reserve

95

 

91

 

77

 

Profit and loss account

(2,478)

 

(2,398)

 

(2,323)

 

 

 

 

 

 

 

 

Total equity and reserves

6,236

 

1,464

 

1,661

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables

336

 

102

 

168

 

Accruals, deferred income, receipts in advance and refundable deposits

1,311

 

         737

 

482

 

Total current liabilities

1,647

 

839

 

650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

7,883

 

2,303

 

2,311

 

                       

 

 

 

 

 

Unaudited Consolidated Cash Flow Statement

For the six months ended 28 February 2018

 

 

 

 

Unaudited

6 months

ended

28 February

2018

 

Unaudited

6 months

ended

28 February

2017

 

Audited

Year

ended

31 August

2017

 

 

£'000

 

£'000

 

£'000

Cash flows from operating activities

 

 

 

 

 

Profit/(loss) before taxation

 

(153)

 

11

 

 

18

 

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

 

   Amortisation

 

95

 

80

 

160

   Depreciation

 

15

 

4

 

11

   Equity based share payments

 

18

 

43

 

33

   Equity based share awards

 

-

 

-

 

108

 

 

 

 

 

 

 

Changes in working capital:

 

 

 

 

 

 

       Trade and other receivables

 

(614)

 

(70)

 

(49)

       Trade and other payables

 

69

 

    (105)

 

46

  Accruals, deferred income,   receipts in advance and   refundable deposits

 

558

 

368

 

112

 

 

 

 

 

 

 

Net cash generated from/(used in) operating activities

 

                  (12)

 

                 331

 

                    439

 

 

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

Issue of shares

 

 

 

               4,711

 

 

                     -

 

 

                     110

Net cash generated from financing activities

               4,711

 

                    -

 

                     110

 

 

 

 

Cash flow from investing activities

 

 

 

Acquisition of business net of cash

    (1,338)

 

-

 

                  (102)

Development costs

-

 

   (187)

 

                  (267)

Purchase of fixed assets

 

                  (20)

 

                  (24)

 

 

                    (85)

Net cash (used in) investing activities

(1,358)

 

(211)

 

 

                  (454)

 

 

 

 

 

 

Net increase in cash and cash equivalents

3,341

 

120

 

                     95

 

 

 

 

Cash and cash equivalents brought forward

1,005

 

910

 

                   910

 

 

 

 

Cash and cash equivalents carried forward

                4,346

 

              1,030

 

                  1,005

 

 

 

 

 

 

 

                       


 

 


Notes to the Interim Results

For the six months ended 28 February 2018

 

 

1.     The interim results (approved by the Board of Directors and authorised for issue on 8 May 2018 are neither audited nor reviewed and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The financial information for the preceding period is extracted from the statutory accounts for the financial year ended 31 August 2017.  The audited accounts for the year ended 31 August 2017, upon which the auditors issued an unqualified opinion, and which did not contain a statement under Section 498 (2) and (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.  As permitted, this interim report has been prepared in accordance with UK AIM Rules and not in accordance with IAS 34 'Interim Financial Reporting', therefore it is not fully in compliance with IFRS.

 

2.      Wey Education plc is a public limited company incorporated in the United Kingdom.  The Company is domiciled in the United Kingdom and its ordinary shares are traded on the AIM market of the London Stock Exchange plc.  

 

3.      The consolidated interim results have been prepared in accordance with the recognition and measurement principles of IFRS including standards and interpretations issued by the International Accounting Standards Board, as adopted by the European Union.  They have been prepared using the historical cost convention.

 

4.      The preparation of the interim results requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date.  If in the future such estimates and assumptions, which are based on management's best judgement at the reporting date, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change.  The interim results are presented in sterling and all values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.

 

5.      The interim results of the Group for the period ended 28 February 2018 have been prepared in accordance with the accounting policies expected to apply in respect of the financial statements for the year ending 31 August 2018.

 

6.      There is no tax charge for the period due to the availability of tax losses brought forward.

 

7.      The basic earnings per share is calculated on the weighted average number of shares in issue during the period.  The weighted average number of ordinary shares in issue for the six months to 28 February 2018 was 116,650,560 shares (28 February 2017: 96,446,001 shares and 31 August 2017: 98,904,014 shares).  

 

8.      Copies of this report will be available to download from the investor relations section of the Company's website www.weyeducation.com.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Unaudited Interim Results - RNS