Maiden Results

AEC Education plc 23 May 2005 Press Release 23 May 2005 AEC Education plc Unaudited Results for the year ended 31 December 2004 AEC Education plc ('AEC Education', 'AEC' or the 'Company'), the provider of educational courses up to postgraduate degree level in Singapore and Malaysia, announces its maiden unaudited results for the year ended 31 December 2004. Highlights • In December, became the first Singapore company to be admitted to AIM and the 1,000th company to be listed on AIM • Share placing raised £500k after expenses • Group revenue on continuing operations up 22.3% from 2003 with total revenue of £1.51m for 2004 against £1.24m in 2003 • Profit before tax on continuing operations for the year up 66.8% from £347k in 2003 to £579k in 2004 • Dividend of 1.6p per share recommended • Management strengthened by the appointment of Associate Professor Chan Yoke Kai as President and Chief Operating Officer of the Singapore subsidiary. Commenting on the results, William Swords, Chairman of AEC Education, said: 'AEC Education is entering an exciting new era and the Board are confident that we can continue to grow the business through building and strengthening our relations with strategic partners in both the Asia-Pacific region and further afield to maximise returns for our shareholders'. For further information: AEC Education plc Ravi Manchanda, Finance Director Tel: +44 (0) 20 7522 6004 Media enquiries: Abchurch Communications Peter Curtain Tel: +44 (0) 20 7398 7700 peter.curtain@abchurch-group.com www.abchurch-group.com Notes to Editors Founded in 1985 in Singapore and Malaysia, AEC is the UK holding company for a number of companies that provide business educational services to approximately 16,000 students in the Asia-Pacific region: the fastest-growing source market for international students. The group offers class-based instruction at the largest educational campus in Singapore's Central Business District, and distance learning up to postgraduate level. In addition, it provides degree qualifications on behalf of several leading international universities, targeting the large volumes of overseas students which the Singaporean government aims to increase as stated in the Global Schoolhouse Vision. AEC's aim is to be a leader in quality education through facilitating learning, fostering creativity and developing knowledge, skills and confidence in its students. Its recognition by the Singaporean Government as a prestigious and forward-moving company is shown by its receipt of four rare Singapore Quality Class Awards. Chairman's Statement On 10th December 2004, AEC Education plc successfully listed on AIM, becoming the first Singaporean business and the 1,000th company to be introduced to the AIM market. This was an historic event for AEC Education plc which greatly increased its profile within the international education industry. Since the business was created in the mid-1980s, it has grown through strategic mergers and acquisitions within the Asian Continent and has delivered consistent annual returns. The last financial year is no exception, with profits from continuing operations increasing by 66.8% to £579k. AEC will use its successful AIM listing and fundraising as a platform to strengthen its position in the global education sector. The business is led by an experienced and strong executive management team and is focused on driving revenues up, costs down and generating consistent returns for its shareholders. Financial Review and Dividend Policy Group revenue from continuing operations for 2004 increased by 22.3% to £1.51m (2003: £1.24m). Profit before tax for continuing operations increased 66.8% from £347k in 2003 to £579k in 2004. AEC proposes to recommend an interim dividend of 1.6p per Ordinary Share payable in July 2005. Outlook The results for this year demonstrate the strength of the underlying business and commercial strategy. A significant amount of progress has been made in the last two years in developing the group. The executive management is committed to maintaining this pace of development and strategy in the forthcoming year. The group will continue to seek to build and strengthen its relations with strategic partners and expand its geographical footprints. Although the Asia-Pacific region is the fastest-growing source market for international students in the world, AEC has also recognised the demographic and economic changes in Eastern Europe and Africa. The group is looking to broaden its service offering and will seek to pursue opportunities as they become available. AEC is entering a new era and I am pleased to report our business is performing well. The Board is confident that we can continue to grow the business into the future and deliver enhanced shareholder value. William Swords UNAUDITED CONSOLIDATED PROFIT AND LOSS STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2004 Note 2004 2003 £'000 £'000 Unaudited Audited Turnover Continuing Operations (4) 1511 1235 Discontinued Operations (4) - 290 Total turnover 1511 1525 Cost of Sales 1033 1310 Operating Profit 478 215 Exceptional items (5) 72 269 Profit from operations (6) 550 484 - Continuing operations 550 327 - Discontinuing operations - 157 Share of results of associated companies 29 20 Profit on ordinary activities before taxation 579 504 Tax on profit on ordinary activities (31) (13) Profit on ordinary activities after taxation 548 491 Minority interest - (1) Profit for the period 548 490 Retained Profits brought forward 790 280 Profit for the period 548 490 Dividends (7) (1271) - Retained Profits carried forward 67 790 Earnings per ordinary Share Pence Pence Basic (8) 4.4 4.2 UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004 Group Note 2004 2003 £'000 £'000 Unaudited Audited Fixed assets Intangible Assets 34 43 Tangible Assets 51 70 Investments in associated companies (9) 1249 (34) 1334 79 Current Assets Debtors 918 3110 Cash at bank and in hand 421 21 1339 3131 Creditors Amounts falling due within one year (10) 724 1244 Net Current Assets 615 1887 Total Assets less current liabilities 1949 1966 Provisions for liabilities and charges (13) (13) 1936 1953 Capital and Reserves Called up share capital 1491 1240 Share Premium 384 0 Reserves 61 712 Minority Interest 1 Total Equity Shareholders funds 1936 1953 UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 Year ended 31 December Unaudited Audited 2004 2003 £'000 £'000 Cash flow from operating activities (104) 63 Returns on investment and servicing of finance Interest paid (2) (4) Taxation Taxes paid (2) (4) Capital expenditure and financial investment Purchase of tangible fixed assets (4) (63) Purchase of intangible fixed assets (15) - Proceeds from disposal of tangible fixed assets - 11 Proceeds from disposal of subsidiary companies 1 5 (18) (47) Cash flows financing activities Receipts from borrowings 106 - Repayment of finance leases - (7) Issue of share capital 625 - Expenses paid in connection with share issues (198) - 533 (7) Net increase in cash 407 1 Cash at beginning of year 21 41 Exchange movements (7) (21) Cash at end of year 421 21 UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 CONTINUED Reconciliation of profit before tax to cash flow From operating activities Profit before tax 579 504 Depreciation & amortisation 32 56 Profit on disposal of assets (263) (7) Interest paid 2 3 Income from associated undertakings (29) (20) Increase in debtors (203) (822) Decrease/(increase) in creditors (478) 605 Cash flow from operating activities (104) 63 Notes 1. Publication of non-statutory accounts and basis of preparation. The financial information contained in this maiden preliminary announcement does not constitute statutory accounts for the period ended 31st Dec 2004. The financial information for the period ended 31st Dec 2004 is derived from the audited statutory consolidated accounts of AEC Edu Group Pte Ltd for the year ended 31 December 2004 consolidated with the unaudited accounts of the Company for the period from incorporation to that date on a merger basis. The comparative figures for the year ended 31 December 2003 are those of the consolidated audited accounts of AEC Edu Group Pte Ltd. The report has been approved by the Board of Directors and is unaudited. The 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 year. The Group operates in 2 countries (2003: 2) and employed 27 employees (2003: 83) as at 31st Dec 2004. 3. Significant Accounting Policies a. Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiary companies, (collectively, the ' Group'), after elimination of material intra-group balances and transactions. Subsidiary companies are consolidated from the date on which control is transferred to the Company and cease to be consolidated from the date on which control of the subsidiary companies are transferred out of the Company. Accordingly, the results of subsidiary companies acquired and disposed of during the financial year are included in the consolidated financial statements from the effective date of acquisition and disposal, respectively. The consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances. b. Subsidiary Companies Subsidiary companies are entities in which the Company, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the Board of Directors. Investments in subsidiaries are stated in the financial statements of the Company at cost less impairment losses. c. Associated Companies An associated company is an entity, not being a subsidiary, in which the Group has a long-term interest of not less than 20% nor more than 50% of the equity and in whose financial and operating policy decisions the Group exercises significant influence. The Group's investment in associated companies is accounted for using the equity method. The Group's investments in associated companies include goodwill (net of accumulated amortisation) on acquisition, which is treated in accordance with the accounting policy for goodwill. The most recent available audited financial statements of the associated companies are used by the Group in applying the equity method. Where the audited financial statements are not co-terminus with those of the Group, the share of results is arrived at from the last audited financial statements available and unaudited management financial statements to the end of the accounting year. d. Goodwill Goodwill represents the excess of the cost of acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/ associated company at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less any impairment losses. Gains or losses on the disposal of the subsidiary/associated company include the carrying amount of the related goodwill. e. Foreign Currency Translations Measurement and presentation currency Items included in the financial statements of each subsidiary of the Group are measured using the currency of the primary economic environment in which the subsidiary operates ('the measurement currency'). The consolidated financial statements are presented in Sterling. Transactions and balances Foreign currency transactions are recorded into the measurement currency based on the exchange rates prevailing at transaction dates. Foreign currency monetary assets and liabilities are translated using the exchange rate prevailing at balance sheet date. Non-monetary assets and liabilities are measured using the exchange rates prevailing at transaction dates, or in the case of the items carried at fair value, the exchange rates ruling when the values were determined. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and translation of foreign currency denominated assets and liabilities are recognised in the profit and loss statement. Group companies Assets and liabilities of the entities having measurement currency other than the presentation currency (Sterling) are translated into Sterling equivalents at exchange rates ruling at balance sheet date. Revenues and expenses are translated at average exchange rates for the year, which approximates the exchange rates at the dates of transactions. All resultant differences are taken directly to equity. On disposal of a foreign entity, accumulated exchange differences are recognised in the profit and loss statement as part of the gain or loss on disposal. f. Revenue Recognition Revenue from sale of services is recognised when services are rendered. Course fees in respect of courses offered with no obligation to impart lessons are recognised when the students register for the course and collect the study materials. All other course fees are recognised as income based on classes conducted during the year. g. Fixed Assets and Depreciation Fixed assets are stated at cost less accumulated depreciation and any impairment losses. The initial cost of fixed assets comprises the purchase price and any directly attributable costs of bringing the asset to working condition and location for its intended use. Expenditure incurred after the fixed assets have been put into operation, such as repairs and maintenance is charged to the profit and loss account. Expenditure for additions, improvements and renewals is capitalised when it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be realised from the use of the items of fixed assets beyond their originally assessed standard of performance. When assets are sold, retired or disposed of, their cost and the related accumulated depreciation and any impairment losses are removed from the account, and any gain or loss resulting from their disposal is included in the profit and loss statement. Depreciation is calculated based on the straight-line method to write off the cost of fixed assets over their estimated useful lives as follows: Furniture and fittings 5 - 10 years Classroom and office equipment 4 - 10 years Computers 4 - 5 years Renovation 5 years Motor vehicles 5 years Library books 5 - 10 years The depreciation method and estimated useful lives are reviewed periodically to ensure that the method and period of depreciation are consistent with the respective pattern of economic benefits from items of fixed assets. h. Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand, bank deposits and short-term, highly liquid investment that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For purposes of the cash flow statement, cash and cash equivalents are shown net of outstanding bank overdrafts which are repayable on demand and which form an integral part of the Group's cash management. i. Trade and Other Receivables Trade receivables, which generally have 30-day terms, are recognised and carried at original invoice amount less provision for doubtful debts. Receivables from related parties are recognised and carried at cost less any provision for doubtful debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off against provision for doubtful debts when collectibility is determined to be unlikely. j. Deferred Income Tax Current tax is the expected tax payable on the taxable income for the year based on the tax rate enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of prior years. Deferred income tax is provided, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiary companies and associated companies, except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. k. Development Expenditure Development expenditure represents direct expenditure and related costs incurred in developing new courses and are capitalised and deferred only when there is a clearly defined project and the outcome of the project has been assessed with reasonable certainty as to its technical feasibility and its ultimate commercial viability. These costs are amortised over the expected course duration of not more than five years, starting in the year when the course commences. l. Impairment of Assets An assessment is made at each balance sheet date of whether there is any indication of impairment of an asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset's recoverable amount is estimated. An asset's recoverable amount is calculated as the higher of the asset's value in use or its net selling price. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. m. Trade and Other Payables Trade and other amounts payable, including amounts due to related parties, are carried at cost, which is the fair value of the consideration to be paid for goods and service received. n. Operating Leases Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased item are classified as operating leases. Operating lease payments are recognised as rental expenses in the profit and loss statement in equal annual amounts over the lease terms. o. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 4 Sale of Services Group 2004 2003 £'000 £'000 Course fees 916 769 Sales of systems and support services 501 453 Consultancy services - 6 Sale of textbooks - 39 Other income 94 258 1511 1525 5 Exceptional Items Group 2004 2003 £'000 £'000 Write-back of trade creditor balance 65 - Gain on disposal of investment in subsidiary companies 7 120 Gain on disposal of investment in associated companies - 149 72 269 The write-back of trade creditor balance relates to commission payable recorded in prior years which has been agreed with the third party as no longer payable. 6 Profit from Operations 2004 2003 £'000 £'000 This was arrived at after charging/(crediting): Bad debts written off 7 - Exchange difference 11 17 Fixed assets written off - 4 Office and classroom rental 26 Provision for doubtful debt - 13 7 Dividends AEC Edu Group Pte Ltd paid a special dividend of £1,271k in April 2004 relating to the restructuring of the Singapore Group. This dividend was paid prior to the acquisition of the entire share capital by AEC Education plc and has been disclosed in the Prospectus at the time of floatation 8 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. The weighted number of shares issued during the year was 12,548,883 (2003: 11, 706,414). 9 Investments in Associated Companies Group 2004 2003 £'000 £'000 Unquoted shares, at cost 1387 115 Goodwill transferred to capital reserves 14 14 Share of post-acquisition reserves (152) (163) 1249 (34) The carrying amount of the investment in associated companies includes goodwill of £908k. Movement in goodwill during the year is as follows: Group 2004 £'000 Cost Balance as at beginning of the year - Addition arising from acquisition of associated company during the year 908 Balance as at end of the year 908 Details of associated companies held by AEC Edu Group Pte Ltd are as follows: Associated companies and Country of Principal activities Cost of Equity held by Incorporation (Place of business) investment the Subsidiary 2004 2003 2004 2003 £'000 £'000 % % Keris Murni Sdn Provides education services 115 115 30 30 Bhd and the operation of education (Malaysia) tuition centers (Malaysia) Pusat Tuisyen Provides education services 0 0 30 30 Kasturi Sdn Bhd and the operation of education (Malaysia) tuition centres (Malaysia) Educational Provides consultancy services in 1271 - 34.96 - Resources Pte Ltd education, related services and (Singapore) business training 1386 115 On 26 July 2004, the Group through it's 100% Singapore Subsidiary AEC Edu Group Pte Ltd acquired a 34.96% interest in Educational Resources Pte Ltd for a consideration of £1,271k from a related party (common directors/shareholders). The consideration was settled by a novation of related party balances, amounting to £1,257k with the balance paid in cash. The amounts due from associated companies are trade in nature, unsecured, interest-free and payable within the next twelve months. 10 On 19 November 2004, the whole of the issued share capital of the AEC Edu Group Pte Limited, a company registered in Singapore was acquired by AEC Education plc, in consideration for the issue of 13,086,394 Ordinary Shares of 10p each in AEC Education plc. AEC Education plc is the ultimate holding company. AEC Education plc placed a further 1,829,628 new Ordinary Shares of 10p each at 41p per Ordinary Share and was admitted to trading on AIM on 10 December 2004. This information is provided by RNS The company news service from the London Stock Exchange

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