Final Results

RNS Number : 1593R

AEC Education plc

25 June 2015

 



AEC Education Plc
("AEC" or the "Company")

Final Results for the year ended 31 December 2014

Highlights:

·      Ireland demonstrated significant growth in sales and achieved a small operating profit but results in London and Singapore offset this success

·      Group revenue fell by 20% to £9.0 million (2013: £11.3 million) due largely to the reduction in business in Singapore

·      Losses before tax from continuing operations of £1.1 million (2013 (restated): loss before tax of £1.66 million)

·      Loss per share on continuing activities is 1.85p (2013 (restated): loss per share of 4.01p)

·      Net cash of £0.36 million (2013: £1.48 million)

·      Malaysia continued to recover lost ground following the Middle East crisis and returned a profit before brand amortisation

·      Cyprus returned a small loss driven by a slowdown in revenue from Russia

·      The Company exited operations in Oman in the year which had returned losses up to the sale of shares to a local company

·      2014 has been a difficult year, though the success in Ireland demonstrates the strength of the Malvern brand internationally.

Liam Swords, Chairman of AEC, commented,

"The London and Singaporean markets continue to be challenging but the Group implemented its strategy to centralise the European operations and to focus Singapore on the local market. This creates a new platform in Singapore from which we can build and helps to reduce costs in London. It is satisfying to see the continued growth in Ireland and the steady turnaround in Malaysia reflected in these accounts".

ENDS

For further information, please contact:

AEC Education Plc

Liam Swords

Tel: [phone]

WH Ireland Limited (NOMAD & Broker)

Andrew Kitchingman

Liam Gribben

Tel: [phone]

CHAIRMAN'S STATEMENT

Overview

The year under review continued to show mixed fortunes. Trading in London showed another downturn but by judicious cost reduction London returned a small operating loss. Cyprus was also affected by a slowing down in revenue from Russia, its largest summer school market and, whilst showing a reasonable operating result, the increased marketing costs to maintain revenue resulted in a small operating loss on our share of the joint venture. Oman declined further during the year to the point where the Board decided to transfer the operation to a local company for a price that will recover about one quarter of our original investment and advance. The residual impact from the loss of EduTrust meant that Singapore suffered a large operating loss but during the year made ground towards restructuring a new business targeting the local market. Ireland again grew substantially and showed an operating profit. Malaysia continued to recover the ground lost following the Middle East crisis and was again profitable before Malvern brand amortisation.

The market in the UK continued to be severely impacted by attitudes towards immigration and the withdrawal of the students' ability to support their costs by temporary work. However, the strategy to invest in Ireland to offset this has proven to be very successful. Additionally the positive signs in Malaysia continued during the year with strong gains in new markets and Singapore began to see some traction in the local market.

Financial results

Group revenues on continuing activities for the year to 31 December 2014 reduced by 20% to £9.0m (2013: £11.3m). The reduction was mainly due to the difficult trading conditions in London and the substantially reduced capacity in Singapore. Singapore's revenue decreased by 68% to £1.2m (2013: £3.8m) and London's revenue reduced by 11% to £3.3m (2013 £3.7m). The Group achieved significant reductions in operating costs during the year by implementing effective cost control strategies in all units. Because of this the Group's loss before tax from continuing operations was reduced to £1.10m (2013: £1.66m).

The London operation recorded an operating loss of £245k after brand impairment and amortisation of £395k which, after finance charges, resulted in a loss of £414k before tax. Ireland recorded turnover of £2.34m in 2014 (2013 - £1.41m), an operating profit of £49k. In Asia, the Singapore College recorded an operating loss of £420k and Malaysia returned an a profit of £23k before brand amortisation and an operating loss of £2k after brand amortisation. Additionally our share of the profit from our joint venture in Cyprus was £54k, which after central charges, was breakeven. Oman showed a loss of £81k (AEC's share £28k) until 31st July 2014, when the Group decided to exit the operations in Oman by selling the shares to an interested party. We expect that the initiatives we have taken in Singapore to reduce costs and to focus on the local market should return it to profit in 2015. Steps are also being taken to further reduce costs and to generate revenue from non-traditional sources to improve the results in London.

The loss per share was 1.40p (2013: Loss of 6.19p).

The net cash outflow from operating activities was £1.13m (2013: outflow of £1.51m). Net cash at the end of the year stood at £0.36m (2013: £1.48m).

Dividend

The Board does not propose the payment of a final dividend for the year ended 31 December 2014 (2013: 0.00p per share).

Business Review

In Asia, our operations in Singapore continued to be impacted by the withdrawal of EduTrust status. The revenue declined by 68% to £1.2m (2013: £3.8m) and a loss of £0.3m before tax. They have registered courses for diplomas / advanced diplomas in civil engineering / electrical engineering / mechanical engineering, higher diplomas in accounting and finance and Singapore Workforce Development Agency related safety short courses that are tailored and repositioned for the local market in 2015 and we expect will help to return it to profitability.

In Malaysia, revenue was lower than the previous year by 10% largely due to the fact that the contract with the University of Wales to recruit students expired in September 2014. Because of this decrease in revenue to £2.15m (2013: £2.40m), a small operating loss of £2k was returned (2013: loss £1k). However, a new contract with Leeds Beckett University will allow us to resume the recruitment of students for both undergraduate and post graduate programmes in the latter part of 2015. The introduction of new programmes ranging from post graduate to vocational studies combined with the focus on new markets should open up opportunities for growth next year.

As we have previously reported, our English language teaching operations in the UK have felt the significant effects of the changing legislation and regulations regarding visas and work permits for overseas students and the negative perception of this overseas continued during 2014. This has caused the market in the UK to drop significantly during the year with the result that revenue in our Kings Cross school was down year on year by 11% to £3.3m (2013: £3.7m). This and the consequent additional brand impairment charge of £350k resulted in an operating loss of £245k (2013: profit £45k). Steps have been taken to find new sources of revenue both from new products and areas of distribution which should stabilise London during 2015.

Ireland achieved revenue of £2.3m, a 66% increase on 2013 in its second full year of trading and produced an operating profit of £49k (2013: loss £48k). The strength of the summer school market combined with continuing strong growth in the core EFL business in Ireland leaves it with potential to show significantly improved results in 2015.

Our joint venture in Cyprus showed a reduction in revenue in the summer school mainly from Russia, its largest market. Operating profits were affected such that our share of the joint venture recorded a profit before tax of £54k and was breakeven before brand amortisation. The market in Russia continues to be depressed because of its political stance in Europe and the reduced value of the Rouble and we expect these conditions to remain during 2015.

Oman declined further during the year and impacted the Group results with a loss of £81k (AEC's share £28k). Due to earlier losses including the loss until 31 July 2014, we see no future for our investment in Oman. Consequently, the Board has decided to exit the operation and sold the investment to a local company for £41k which recovers approximately one quarter of our investment and advance given.

Staff

On behalf of the Board I would like to thank all staff for their hard work and efforts during what has been a very difficult period. Their support as we continue to implement the necessary changes to ensure the Group returns to sustainable profit is very much appreciated by the Board.

Prospects

2014 was another very difficult year in Singapore and the market in the UK remains constrained by visa restrictions and the negative perception by overseas students of UK Government policy. Our success in Ireland has demonstrated that the Malvern brand is still a major strength in international markets and we continue to pursue options to support further expansion overseas under the Malvern brand. The restructuring of the operations in Singapore and London is now almost complete and this combined with the return to profit in Malaysia and the withdrawal from Oman creates a platform from which AEC can begin to rebuild group profitability.

Liam Swords

Chairman  

24 June 2015

	AEC EDUCATION PLC
	CONSOLIDATED INCOME STATEMENT
	FOR THE YEAR ENDED 31 DECEMBER 2014
				2014		2013 (Restated)
				£		£
Revenue
Sale of services				8,520,196		10,989,755
Other income				457,972		314,123
				8,978,168		11,303,878
Cost of services sold				5,136,220		6,906,791
Salaries and employees' benefits				2,059,555		2,770,010
Amortisation of brand, licences and      trademarks				166,050		144,957
Depreciation of plant and equipment				203,710		437,778
Impairment or write-down of property, plant and equipment				-		287,390
Other operating expenses				2,176,610		2,213,560
Brand impairment				350,000		150,000
Total operating costs and expenses				10,092,145		12,910,486
Operating loss				(1,113,977)		(1,606,608)
Share of results of associated companies and    joint ventures				53,829		(4,320)
Finance costs				(41,201)		(45,875)
Loss before income tax				(1,101,349)		(1,656,803)
Income tax charge				(28,986)		(235,459)
Loss for the year from continuing activities				(1,130,335)		(1,892,262)
Profit/(loss) for the year from discontinued activities				282,419		(998,323)
Loss for the year				(847,916)		(2,890,585)
Attributable to:
Equity holders of the Company				(881,956)		(2,832,688)
Non-controlling interest				34,040		(57,897)
				(847,916)		(2,890,585)
Loss per share on continuing activities  (in pence)
Basic				(1.85)		(4.01)
Diluted				(1.85)		(4.01)
Profit /(loss) per share on discontinued activities  (in pence)
Basic				0.45		(2.18)
Diluted				0.45		(2.18)

	AEC EDUCATION PLC
	CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
	FOR THE YEAR ENDED 31 DECEMBER 2014
					2014		2013 (Restated)
					£		£
Loss for the year					(847,916)		(2,890,585)
Foreign currency translation movements					182,880		(19,465)
Other comprehensive (expense)/income    for the year					182,880		(19,465)
Total comprehensive income for the year					(665,036)		(2,910,050)
Attributable to:
Equity holders of the parent					(708,899)		(2,845,515)
Non-controlling interest					43,863		(64,535)
Total comprehensive income for the year					(665,036)		(2,910,050)

AEC EDUCATION PLC
STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014
		Group					Company
		2014		2013 (Restated)			2014		2013
TOTAL ASSETS		£		£			£		£
Non-Current Assets
Property, plant and equipment		450,042		763,033			-		-
Investment in subsidiary     companies		-		-			5,260,107		5,760,107
Investment in associated     companies		-		16,668			-		-
Investment in joint ventures		97,799		26,074			-		122,039
Intangible assets		3,101,851		3,603,250			-		-
Goodwill		422,520		420,324			-		-
Deferred tax asset		-		-			-		-
		4,072,212		4,829,349			5,260,107		5,882,146
Current Assets
Inventories		6,718		9,229			-		-
Trade receivables		677,573		908,710			-		-
Other receivables and       prepayments		445,670		990,959			5,218		131,010
Tax recoverable		51,844		9,806			51,844		-
Due from subsidiary companies		-		-			692,752		442,304
Due from joint ventures		46,684		95,897			41,000		94,427
Due from related parties		456		3,798			-		-
Cash and cash equivalents		360,746		1,475,351			14,816		1,153,035
		1,589,691		3,493,750			805,630		1,820,776
Total Assets		5,661,903		8,323,099			6,065,737		7,702,922

EQUITY AND LIABILITIES
Non-Current Liabilities
Financial liabilities			38,185			63,048				23,000				23,000
Deferred taxation liability			12,674			22,275				-				-
			50,859			85,323				23,000				23,000
Current Liabilities
Trade payables			514,951			263,303				35,934				-
Deferred income			620,389			2,160,688				-				-
Other payables and accruals			1,140,218			1,938,962				31,638				88,009
Due to subsidiary companies			-			-				1,243,545				2,090,328
Due to joint ventures			38,673			-				-				-
Due to related parties			801,358			660,810				368,079				23,323
Financial liabilities			39,654			112,107				14,000				14,000
Provision for income tax			26,667			7,736				-				-
			3,181,910			5,143,606				1,693,196				2,215,660
Total liabilities			3,232,769			5,228,929				1,716,196				2,238,660
Equity attributable to equity holders of the Company
Share capital		5,362,491			5,362,491				5,362,491				5,362,491
Share premium		896,111			896,111				896,111				896,111
Reserves		(3,699,184)			(2,990,285)				(1,909,061)				(794,340)
		2,559,418			3,268,317				4,349,541				5,464,262
Non-controlling interests		(130,284)			(174,147)				-				-
Total equity		2,429,134			3,094,170				4,349,541				5,464,262
Total Equity and Liabilities		5,661,903			8,323,099				6,065,737				7,702,922

AEC EDUCATION PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014

	Share Capital	Share Prem-ium	Other Reserves Share-Based Payment Reserve	Other Reserves Retained Earnings	Other Reserves Trans- lation Reserve	Other Reserves Capital Reserve	Total Of Other Reserves	Attributable To Equity Holders Of The Company	Non- controlling Interests	Total
	£	£	£	£	£	£	£	£	£	£
Balance at 1 January 2013 as previously reported	4,419,878	707,588	328,744	(2,018,789)	1,137,715	170,560	(381,770)	4,745,696	(43,415)	4,702,281
Prior year adjustment	-	-	-	237,000	-	-	237,000	237,000	-	237,000
Balance at 1 January 2013 as restated	4,419,878	707,588	328,744	(1,781,789)	1,137,715	170,560	(144,700)	4,982,696	(43,415)	4,939,281
Loss for the year	-	-	-	(2,832,688)	-	-	(2,832,688)	(2,832,688)	(57,897)	(2,890,585)
Total other comprehensive income	-	-	-	-	(12,827)	-	(12,827)	(12,827)	(6,638)	(19,465)
Total comprehensive income for the year	-	-	-	(2,832,688)	(12,827)	-	(2,845,515)	(2,845,515)	(64,535)	(2,910,050)
Issue of new shares	942,613	188,523	-	-	-	-	-	1,131,136	-	1,131,136
Share based compensation transfer	-	-	(89,700)	89,700	-	-	-	-	-	-
Total transactions with owners	942,613	188,523	(89,700)	89,700	-	-	-	1,131,136	-	1,131,136
Non-controlling interest acquired	-	-	-	-	-	-	-	-	(125,489)	(125,489)
Impairment of carrying value	-	-	-	-	-	-	-	-	59,292	59,292
Balance at 31 December 2013 as restated	5,362,491	896,111	239,044	(4,524,777)	1,124,888	170,560	(2,990,285)	3,268,317	(174,147)	3,094,170
Balance at 1 January 2014 as restated	5,362,491	896,111	239,044	(4,524,777)	1,124,888	170,560	(2,990,285)	3,268,317	(174,147)	3,094,170
Loss for the year	-	-	-	(881,956)	-	-	(881,956)	(881,956)	34,040	(847,916)
Total other comprehensive income	-	-	-	-	173,057	-	173,057	173,057	9,823	182,880
Total comprehensive income for the year	-	-	-	(881,956)	173,057	-	(708,899)	(708,899)	43,863	(665,036)
Share based compensation transfer	-	-	(239,044)	239,044	-	-	-	-	-	-
Total transactions with owners	-	-	(239,044)	239,044	-	-	-	-	-	-
Balance at 31 December 2014	5,362,491	896,111	-	(5,167,689)	1,297,945	170,560	(3,699,184)	2,559,418	(130,284)	2,429,134

AEC EDUCATION PLC CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014

			2014		2013
			£		£ (Restated)
Cash Flows from Operating Activities
Loss before income tax from continuing activities			(1,101,349)		(1,656,803)
Profit/(loss) before income tax from discontinued activities			282,419		(998,323)
Adjustments for:
Amortisation of intangible assets			166,050		169,957
Depreciation of property, plant and equipment			203,710		437,778
Impairment and write down of property plant and          equipment			-		299,099
Impairment of intangible assets			350,000		600,000
Loss on disposal of plant and equipment			170,481		88,909
Profit on disposal of subsidiary			-		(215,308)
Non-cash elements of profit on discontinued activities			(52,104)		-
Interest expense			41,201		45,875
Interest income			(244)		(375)
Impairment of goodwill and minority interest			-		59,292
Share of results of associated and joint           venture companies			(53,829)		4,320
			6,335		(1,165,579)
Changes in working capital:
Receivables			724,582		1,567,976
Payables			(2,087,395)		( 2,551,785)
Inventories			2,511		12,629
Related parties and associated companies			231,777		668,427
			(1,122,190)		( 1,468,332)
Taxation			(4,741)		( 39,638)
Net cash used from operating activities			(1,126,931)		(1,507,970)
Cash Flows from Investing Activities
Interest received			244		375
Profit distribution received from associated and joint              venture companies			40,303		-
Purchases of property, plant and equipment			(68,254)		(528,009)
Purchase of trademarks and licences			(14,685)		(16,099)
Disposal of subsidiary			-		(11,606)
Acquisition of subsidiary			-		(99,541)
Net cash used in investing activities			(42,392)		(654,880)
Cash Flows from Financing Activities
Share issue		-			1,131,136
Interest paid		(41,201)			(45,875)
Repayment of term loan		(62,378)			(267,376)
Finance leases		(34,939)			63,577
Net cash generated by/(used in) financing activities		(138,518)			881,462
Effect of foreign exchange rate changes on consolidation		193,236			50,048
Net decrease in cash and cash equivalents		(1,114,605)			(1,231,340)
Cash and cash equivalents at the beginning of the Year		1,475,351			2,706,691
Cash and cash equivalents at the end of the year		360,746			1,475,351

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2014

1              General

AEC Education plc is a public limited liability company incorporated in England and Wales on 8 July 2004. The Company was admitted to AIM on 10 December 2004. Its registered office is Witan Gate House, 500-600 Witan Gate West, Milton Keynes MK9 1SH and its principal place of business is in Singapore. The registration number of the Company is 05174452.

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 nature of these activities during the year.

The Board of Directors has authorised the issue of these financial statements on 24 June 2015.

2              Segmental Information

Segmental analysis is as follows:

	Europe	South East Asia/Middle East	Total
2014	£	£	£
Revenue from external customers	5,661,457	3,316,711	8,978,168
Depreciation, write offs and amortisation	(182,036)	(537,724)	(719,760)
Loss before taxation	(50,851)	(1,050,498)	(1,101,349)
Taxation charge	(4,685)	(24,301)	(28,986)
Profit on discontinued activities	76,313	206,106	282,419
Loss for the year	20,777	(868,693)	(847,916)
Segmental assets	3,706,133	1,955,770	5,661,903
Segmental liabilities	(4,567,440)	1,334,671	(3,232,769)
Additions to non-current assets	38,970	43,969	82,939
2013 (Restated)
Revenue from external customers	5,080,994	6,222,884	11,303,878
Depreciation, write offs and amortisation	(415,496)	(604,629)	(1,020,125)
Loss before taxation	(198,939)	(1,457,864)	(1,656,803)
Taxation charge	(6,460)	(228,999)	(235,459)
Loss on discontinued activities	(380,629)	(617,694)	(998,323)
Loss for the year	(586,028)	(2,304,557)	(2,890,585)
Segmental assets	4,194,708	4,128,391	8,323,099
Segmental liabilities	(4,655,567)	(573,362)	(5,228,929)
Additions to non-current assets	170,478	347,682	518,160

Note that the Segmental liabilities figure for South East Asia and the Middle East is shown as a net asset due to the treatment of the amount due from Europe to South East Asia for funding being shown as a liability in the former and an asset in the latter.

3              Earnings/(Loss) Per Share

The basic earnings/(loss) per share on continuing activities was based on the loss attributable to shareholders of £1,164,375 (2013: restated loss of £1,834,365) and the weighted average number of ordinary shares in issue during the year of 63,051,043 shares (2013: 45,753,464 shares).

The basic earnings/(loss) per share on discontinued activities was based on the profit attributable to shareholders of £282,419 (2013: loss of £998,323) and the weighted average number of ordinary shares in issue during the year of 63,051,043 shares (2013: 45,753,464 shares).

The diluted earnings/(loss) per ordinary share on continuing activities and the diluted earnings/(loss) per share on discontinued activities are based respectively on the loss attributable to shareholders of £1,164,375 (2013 (restated): loss of £1,834,365) and profit attributable to shareholders of £282,419 (2013: loss of £998,323) and the weighted average number of ordinary shares in issue at during the year of 63,051,043 shares (2013: 45,753,464 shares) diluted for the effect of share options and warrants.

By 31 December 2014 all previously issued options had lapsed (2013: 1,950,000 options were outstanding). At 31 December 2013 all 1,950,000 options were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.

9           Annual Report

The Annual Report will be sent to shareholders by close of business on or around 25 June 2015. Additional copies will be available to the public, free of charge, from the Company's website  ww.aeceducationplc.co.uk.

 

END

 

 

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