RNS Number:4560Q
Creative Education Corp Plc
31 January 2007
Creative Education Corporation Plc
('Creative Education' or the 'Company')
Preliminary Results for the year ended 31st July 2006
Creative Education Corporation plc (AIM: CEC), a leading UK educational services
company , today announces its preliminary results for the year ended 31 July
2006.
Post period highlights
* Appointment of turnaround specialist Paul Ayres as Chief Executive Officer
* Appointment of educationalist Rhidian Llewellyn as non-executive Deputy
Chairman
* Completion of #1 million funding with option for further investment of up
to #1.5 million before March 2007
Period-end highlights
* Turnover increased from #6,076,000 to #7,892,481
* 28 operational nurseries offering in excess of 1,600 full-time equivalent
places
* Losses before tax of #3,315,526 (2005: #2,924,380)
Christopher Phillips, Chairman of Creative Education Corporation plc, commented:
"This has been a year of change, most recently with the appointment of a new CEO
and the recent funding. The business now has a secure operational footing from
which to drive profitable growth and we believe that there are significant
opportunities for our Primary Steps business to become a market leader in
nursery day care for children in the UK."
Paul Ayres, Creative Education 020 8864 5147
Olly Cairns, Corporate Synergy 020 7448 4417
Toby Hall / Jade Mamarbachi, gth media relations 020 7153 8035
About CEC - The Creative Education Corporation is one of the UK's top 10
childcare/day nursery providers and has two main business units. Primary Steps
Day Nurseries with 28 nurseries trading across the UK. The majority are based
in the South East of England and are registered to provide care to children from
3 months to 5 years. The Companies special education needs business operates
through Naughton Green and Associates from West London.
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 JULY 2006
Chairman's Statement
At the time of writing this statement post period end, the Company has been
through a period of significant revitalisation with the appointments of Paul
Ayres, an acknowledged turnaround specialist as Chief Executive, John Macaulay
to the role of Finance Director and Rhidian Llewellyn, an influential
educationalist, as non-executive Deputy Chairman. These appointments have
coincided with the closing of a #1 million funding round with Solent Nominees
Limited who now have the option to invest a further #1.5 million into the
business. The receipt of this funding will place the business on a secure
operational footing. It is against this backdrop that I present the preliminary
results for the year ended 31 July 2006. During the period turnover increased to
#7,892,481 (#6,076,000 - 2005). The loss before tax was #3,315,526 (#2,942,380 -
2005) while shareholders funds at the year end stood at #5,258,506 (#8,658,646 -
2005).
Acquisitions
While the Company has not made any further acquisitions during the year, the
extraordinary general meeting of the Company, held on 7 September 2005 approved
the Conduit Square acquisition and completion took place on 10 October 2005. The
continued impact of the integration of Happy House Nurseries Limited purchased
in October 2004, Academy Childcare Limited purchased in December 2004 and,
HeadStart Limited purchased in February 2005 has been profound. While the
acquisition programme has resulted in the Company growing its portfolio of
nursery facilities to 28, with over 1,600 full time equivalent places, the
differing trading cultures within the individual nurseries have presented some
challenging management problems. Specifically, it is now evident that management
had failed to adequately understand the financial and operational impact that
the integration of the different businesses would have on the Company.
Trading Conditions
Trading conditions remain challenging, and as a result of this, margins have
been under pressure throughout the trading period. Greater competition and a
reduction in the average number of prospective pupils has seen the market sector
start to slow. While strong growth is still forecast for the sector, it is
recognised that the Company will increasingly be operating in a mature and
competitive market. As such, the Company's approach to the market will have to
change and it is for this reason that the management team are focused on the
delivery of a well rounded and marketed product proposition.
Recent changes to government legislation will deliver greater opportunity for
the business as the gap between the public and private sectors narrows. The
recommendations see greater focus on the educational aspects of Early Years
framework, and as such, development of the Company's education continuum
continues at a pace.
Outlook and Strategy
Recent mergers and acquisitions activity in the Day Nursery market sector
supports the Management's view that while the controls of the industry are
changing, the underlying indicators that make the business sector a strong
growth environment are sound. However, there is little doubt that the market is
becoming increasingly competitive, and as such, the management have recognised
the need to adapt and improve the quality of our buildings, the level of
training and support invested in our staff and the way in which we communicate
with our existing and prospective parents
In what has been a year of change, challenge and flux, our staff and customers
have been hugely supportive and loyal. I would like to thank all of our team for
their commitment, professionalism and tenacity. We are a 'people' business first
and foremost and it is a testimony to the staff within the nurseries that in
ever competitive and trying trading conditions, occupancy rates have remained
stable while costs continue to be curtailed.
I would also like to thank David Alexander for the contribution he has made in
establishing the Primary Steps brand in the UK market.
The Company remains utterly committed to its three core values, total quality,
the drive towards a profitable revenue performance and growth. We continue to
hone and evolve our business processes, specifically reducing our cost base,
constantly striving to deliver premium quality services and care to our existing
and prospective customers and introducing innovative systems to enable our
business objectives. We look forward to the next twelve months with confidence.
C Phillips
Chairman
30 January 2007
THE CREATIVE EDUCATION CORPORATION PLC
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 JULY 2006
2006 2005
Notes # #
Turnover
Continuing operations 7,892,481 2,598,487
Acquisitions - 3,477,513
_________ _________
7,892,481 6,076,000
Administrative expenses (10,606,656) (8,875,636)
_________ _________
Operating loss
Continuing operations (2,714,175) (2,282,939)
Acquisitions - (516,697)
_________ _________
(2,714,175) (2,799,636)
Exceptional item
Profit on disposal of tangible fixed assets - 106,762
_________ _________
Loss on ordinary activities before interest (2,714,175) (2,692,874)
Share of operating loss in associated undertaking - (159,018)
Other income 23,119 47,822
Interest payable and similar charges (624,470) (138,310)
_________ _________
Loss on ordinary activities before (3,315,526) (2,942,380)
taxation
Tax on loss on ordinary activities - -
_________ _________
Loss on ordinary activities after (3,315,526) (2,942,380)
taxation
========= =========
Loss per share
-Basic (1.06) p (1.17) p
========= =========
-Diluted (1.06) p (1.17) p
========= =========
There are no recognised gains and losses other than those passing through the profit and loss account.
THE CREATIVE EDUCATION CORPORATION PLC
BALANCE SHEETS
AS AT 31 JULY 2006
Group Company
Notes 2006 2005 2006 2005
# # # #
Fixed assets
Intangible assets 8,169,888 8,844,989 7,095,617 7,713,026
Tangible assets 4 12,001,504 2,906,396 3,900,539 1,033,404
Investments - - 3,225,474 1,582,550
_________ _________ _________ _________
20,171,392 11,751,385 14,221,630 10,328,980
_________ _________ _________ _________
Current assets
Debtors 550,659 951,262 7,196,421 1,204,040
Cash at bank and in hand 23,463 507,100 13,245 368,509
_________ _________ _________ _________
574,122 1,458,362 7,209,666 1,572,549
Creditors: amounts falling due within (5,167,744) (3,439,995) (5,927,081) (2,916,956)
one year
_________ _________ _________ _________
Net current assets/ (liabilities) (4,593,622) (1,981,633) 1,282,585 (1,344,407)
_________ _________ _________ _________
Total assets less current liabilities 15,577,770 9,769,752 15,504,215 8,984,573
Creditors: amounts falling due after (10,319,264) (1,111,106) (10,319,264) (70,000)
more than one year
_________ _________ _________ _________
Net assets 5,258,506 8,658,646 5,184,951 8,914,573
========= ========= ========= =========
Capital and reserves
Called up share capital 3,116,160 3,116,160 3,116,160 3,116,160
Share premium account 5 7,594,532 7,635,396 7,594,532 7,635,396
Other reserves 5 1,468,149 2,143,250 1,547,530 2,164,939
Profit and loss account 5 (6,876,585) (4,236,160) (7,073,271) (4,001,922)
Own shares held as treasury (43,750) - - -
_________ _________ _________ _________
Shareholders' funds - equity 5,258,506 8,658,646 5,184,951 8,914,573
interests
========= ========= ========= =========
THE CREATIVE EDUCATION CORPORATION PLC
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 JULY 2006
2006 2005
# #
Net cash outflow from operating (923,660) (1,898,716)
activities
Returns on investments and servicing of finance
Interest received 4,881 38,128
Interest paid (401,206) (138,310)
Rent received 7,125 7,124
Other income 8,113 2,570
_________ _________
Net cash outflow from returns on investments and (381,087) (90,488)
servicing of finance
Corporation tax (29,160)
Capital expenditure and financial investment
Payments to acquire tangible fixed (460,912) (498,920)
assets
Payments to acquire investments - (799,105)
Receipts from sales of tangible fixed 3,000 1,618,945
assets
_________ _________
Net cash inflow/ (outflow) from capital expenditure (457,912) 320,920
and financial investment
Acquisitions and disposals
Purchase of subsidiary undertakings (431,643) (2,424,326)
Net cash acquired with subsidiaries 656 70,507
_________ _________
Net cash outflow on acquisitions and disposals (430,987) (2,353,819)
_________ _________
Net cash outflow before financing (2,222,806) (4,022,103)
Financing
Issue of ordinary share capital - 5,050,000
Cost of share issue (40,863) (423,674)
New loan notes - 400,000
New short term bank loan 488,932 573,750
Repurchase of loan notes (150,000) (50,000)
Repayment of long term bank loan (32,092) (1,311,435)
_________ _________
Net cash inflow from financing 265,977 4,238,641
_________ _________
Increase in cash (1,956,829) 216,538
========= =========
THE CREATIVE EDUCATION CORPORATION PLC
NOTES TO THE GROUP ACCOUNTS
FOR THE YEAR ENDED 31 JULY 2006
1 Accounting policies
1.1 Basis of preparation
The accounts have been prepared under the historical cost convention.
The group has made a further loss of #3,315,526 in the year and has net current liabilities of #4,593,622 at
the year end. The directors anticipate a return to profitability but have prepared projections which show that
further financing will be required to enable the company to continue to trade until that time. Since the year
end the company has already raised a further #1,000,000 as share capital and is in the process of raising a
further #1,500,000 of share capital. The directors are confident that this additional funding will be
sufficient to enable the company to continue as a going concern.
1.2 Compliance with accounting standards
The accounts have been prepared in accordance with applicable accounting standards.
1.3 Basis of consolidation
The consolidated profit and loss account and balance sheet include the accounts of the company and its
subsidiary undertakings made up to 31 July 2006. The results of subsidiaries sold or acquired are included in
the profit and loss account up to, or from the date control passes. Intra-group sales and profits are
eliminated fully on consolidation.
2 Loss for the financial year
As permitted by section 230 of the Companies Act 1985, the holding company's profit and loss account has not
been included in these accounts. The loss for the financial year is made up as follows:
2006 2005
# #
Holding company's loss for the financial year (3,688,758) (2,686,453)
========= =========
3 Loss per share
The calculation of the basic loss per share and the diluted loss per share is based on the loss attributable to
ordinary shareholders of #3,315,526 (2005 - #2,942,380), divided by the weighted average number of shares in
issue during the year.
4 Tangible fixed assets
Group
Land and Fixtures Motor Vehicles Total
fittings &
buildings
equipment
# # # #
Cost
At 1 August 2005 2,694,397 391,601 13,127 3,099,125
Acquired with subsidiaries 8,138,828 - - 8,138,828
Additions 1,119,083 183,221 - 1,302,304
Disposals (43,103) (77,345) (4,041) (124,489)
_________ _________ _________ _________
At 31 July 2006 11,909,205 497,477 9,086 12,415,768
========= ========= ========= =========
Depreciation
At 1 August 2005 98,278 91,898 2,553 192,729
On disposals (43,005) (44,388) (1,123) (88,516)
Charge for the year 200,915 105,771 3,365 310,051
_________ _________ _________ _________
256,188 153,281 4,795 414,264
========= ========= ========= =========
Net book value
At 31 July 2006 11,653,017 344,196 4,291 12,001,504
========= ========= ========= =========
At 31 July 2005 2,596,119 299,703 10,574 2,906,396
========= ========= ========= =========
The net book value of land and buildings comprises: 2006 2005
# #
Freeholds 11,043,469 1,789,779
Short leaseholds (under 50 years) 609,548 806,340
_________ _________
11,653,017 2,596,119
========= =========
5 Statement of movements on reserves
Group
Share premium Merger reserve Profit and loss
account account
# # #
Balance at 1 August 2005 7,635,396 2,143,250 (4,236,160)
Retained loss for the year - - (3,315,526)
Cost of issue of shares (40,864) - -
Transfer of amortisation of goodwill to merger reserve - (675,101) 675,101
_________ _________ _________
Balance at 31 July 2006 7,594,532 1,468,149 (6,876,585)
========= ========= =========
Company Share premium Merger reserve Profit and loss
account account
# # #
Balance at 1 August 2005 7,635,396 2,164,939 (4,001,922)
Retained loss for the year - - (3,688,758)
Cost of issue of shares (40,864) - -
Transfer of amortisation of goodwill to merger reserve - (617,409) 617,409
of
amortisation
_________ _________ _________
Balance at 31 July 2006 7,594,532 1,547,530 (7,073,271)
========= ========= =========
Post balance sheet events
On 22 December 2006, Solent Nominees Limited ('SNL') has subscribed to #1 million in nominal value loan stock (Loan
Stock) in the company. In addition, the company has granted SNL, or its elected nominees, an option to subscribe for up
to a further #1.5 million of Loan Stock on or before 31 March 2007.
Following the company's EGM held on 22 January 2007 SNL has converted #605,469.84 nominal of Loan Stock into
183,475,708 ordinary shares in CEC (representing 29.9% of the issued ordinary share capital of CEC).
As a result of the subscription and the part conversion of the loan stock permitted under the transaction, the issued
capital of the company has been increased from 311,615,930 ordinary shares of 0.1 pence each to 613,273,456 ordinary
shares of 0.1 pence each and 311,615,930 deferred shares of 0.9 pence each.
Dividend
The directors do not recommend payment of a dividend.
Financial Information
The financial information contained in this preliminary announcement of audited
results does not constitute the group's statutory accounts for the year ended 31
July 2006. The financial information has been prepared using consistent
financial policies. The accounts for the year ended 31 July 2006 will be
delivered to the Registrar of Companies.
The statutory accounts for the year ended 31 July 2006 have been reported on by
the company's auditors; the reports on these accounts were unqualified and they
did not contain a statement under section 237(2) or (3) of the Companies Act
1985.
Copies of the full statutory accounts have been despatched to shareholders.
Copies of this announcement and the full statutory accounts are available, free
of charge, from the registered office of the company at 11/15 Acre House,
William Road, London NW1 3ER, and from the offices of the Company's nominated
adviser, Corporate Synergy Plc at 30 Old Broad Street, London EC2N 1HT.
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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