TIDMWEY
RNS Number : 6195Y
Wey Education PLC
23 August 2018
23 August 2018
WEY EDUCATION PLC
("Wey Education or the "Company")
Pre - Close Trading Update
Notice of General Meeting and Circular to Shareholders
Confirmation of Investor Presentation Evening
Wey Education plc (AIM: WEY), the educational services group
provides this trading update for its year ending 31 August 2018 and
announces certain other matters.
Trading Highlights
-- Group turnover to exceed market expectations of GBP4.1 million
-- Significant progress with Academy 21 acquired in December
2017 which is now integrated into the Group
-- Underlying profit and loss expected to be in line with market expectations
-- Cash balances remain substantial and in excess of GBP4 million
-- Nigerian subsidiary established
-- Chinese joint venture in final stages of negotiation with
first sales expected in September 2018
-- Board pleased with progress made in 2017/18 and foundations built for further growth
This announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No.596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
Financial matters
Group turnover will exceed market expectations of GBP4.1 million
for the year to 31 August 2018 (2016/17 GBP2.4 million)
representing growth of at least 70% year on year including the
contribution of Academy 21 which was acquired in December 2017. As
a result of the integration of Academy 21 into the Group, its
results will in future be reported as part of the Group B2B results
but management estimates that it increased turnover by at least 25%
and profits by at least 100% over the corresponding period of
2016/17. As previously reported growth in the original InterHigh
business ran at about 20% during the year and is expected to
accelerate again in 2018/19.
As indicated at the time of the oversubscribed GBP5 million
placing in November 2017, much of this year has been spent on
building the foundations for further growth and in certain areas,
spending has been at higher than normal year to year levels. In
accordance with IFRS all this expenditure will be expensed in the
Company's audited accounts for the year ending 31 August 2018 but
as with the Company's interim results to 28 February 2018, the
Board wishes shareholders to be able to assess the Company on a
consistent basis and therefore will report in its Preliminary
Announcement both a statutory profit and loss account and an
adjusted profit figure.
Underlying trading overall has been in line with expectations
and it is expected that Group adjusted pre-tax profit for the year
will be between GBP400-GBP500k. These adjustments will include
costs highlighted in the interim statement such as share based
payments, amortisation of intangibles, acquisition costs, and
certain expenditure on marketing initiatives considered to be
non-recurring. In addition, it will include costs incurred in the
second half in relation to business development and the
establishment of new overseas companies and business development in
China, Nigeria and Kenya which in aggregate amount to approximately
GBP200k. These figures remain provisional until year end and audit
and may be adjusted to reflect matters which occur between now and
year end.
The Company remains well funded for future expansion with
current cash balances of over GBP4 million.
OVERSEAS VENTURES
Nigeria
A new subsidiary company, Wey Education Nigeria Limited ("WNL")
has been incorporated in Nigeria.
WNL is in advanced negotiations regarding entering into a
technical agreement with an existing educational establishment in
Nigeria under which the partner will provide the relevant education
licenses to enable WNL to operate as an online educational
establishment in Nigeria.
In the initial stages WNL will concentrate on offering the
traditional British curriculum offered by Wey to Nigerian students
both for home study and also through a WNL learning centre to be
opened in Lagos. Over the next few months the parties will also
co-operate to add the Nigerian curriculum onto Wey's learning
platform with a view to offering it online within Nigeria and
overseas during 2019.
Separately WNL is negotiating an operation and services
agreement with a local Nigerian company who will be sub-contracted
by WNL to provide a range of operations and marketing services to
WNL in Nigeria including collection of tuition fees.
Through the agreements it is anticipated that WNL will need very
limited personnel in Nigeria and therefore will be able to
concentrate on education provision while delegating the services
required in Nigeria to local firms. Operations are expected to
commence this Autumn.
China
Documentation of our proposed joint venture agreement with
Starcube, announced on 8 May 2018 progresses and is expected to be
completed over the coming weeks. Following execution of definitive
documentation, the joint venture expects to enter into a contract
to supply English language classes concentrating on pronunciation
to a range of public (state) schools in China. The initial launch
this September will be to around 50 classes in 15 schools. This is
viewed as a trial towards greater adoption in other cities across
China in due course.
The JV intends, in early 2019, to offer an out of school private
tuition option.
The recent deterioration in relations between China and the USA
creates an even greater opportunity for the British curriculum to
thrive in China and we are discussing with Starcube how to exploit
that opportunity.
With first sales expected in September 2018, it anticipated that
China should make a meaningful contribution to revenues next year
but the extent of this contribution will be dependent on timing of
new contracts. In this initial year we have priced the business to
grow market share. We remain excited about the opportunities for
the Group from China which are considerable in the medium term.
HR Strategy
The Company is in discussion with its teaching staff over the
introduction of a new teaching contract which will move them from a
school type, 35 week, 23 hour teaching commitment to a 42 week,
37.5 hour working week, standard employment contract. This will
enable the Company to provide greater flexibility in teaching hours
to different world time zones. In the near term it is expected that
this will result in the Company employing fewer teachers than
otherwise would have been the case but with them working a greater
number of hours on average. Reaction from the teaching workforce to
this opportunity has been positive.
Artificial Intelligence ("AI")
The Company plans to introduce some new areas of AI into its
operations during the forthcoming year.
The embedded computer scientist, from the University of South
Wales, partially funded by the Knowledge Transfer Partnership
Scheme administered by Innovate UK on behalf of the British
Government, has now been in place several months and has already
proved useful in providing insights on how AI can transform our
business. It has assisted the Company to reject several proposals
where the AI was more vanity than business proposition. Our current
strategy is twofold:
i. in the short term to buy in AI products which enhance
students' experience but that are cost efficient for the Company;
and
ii. in the medium term, (up to 5 years), to build an AI school
capable of providing education in the Third World on a low cost
basis.
2018/2019 Outlook and Focus
The board believes that significant progress has been made in
2017/18 and the main tasks for 2018/19 are to ensure that those
initiatives undertaken in the current year are successfully
implemented. The board is planning for significant revenue growth
in the year ahead, but the extent will be partly dependent on the
pace of overseas growth.
Our UK strategy remains twofold:
i. to continue to build on our traditional school operations by
expanding the range of tuition options, year groups and method of
purchase; and
ii. to expand our B2B offering in the public sector and the corporate sector.
Increasingly our UK businesses overlap. Teachers can teach using
a common learning platform across different brands. In addition, we
are increasing the ability for parents to purchase lessons on a
'pick and mix' basis so that home educators can buy the subjects
they need rather than the whole school experience. As such student
numbers become largely irrelevant in measuring progress as they can
fluctuate materially over time. However, between InterHigh, the Wey
Ecademy and Academy 21 we estimate we provided education to over
2,000 different students at different times during the year.
Wey Ecademy and Academy 21 are now integrated and will in future
report as a single B2B division. We believe we are the market
leader in online Alternative Provision teaching and we are planning
for further expansion in 2018/2019.
The main operating targets are to:
i. ensure revenue growth in the core UK business of InterHigh and B2B (including Academy 21);
ii. commence operations in China; and
iii. commence operations in Nigeria and work towards implementation of the Nigerian curriculum.
Other initiatives in hand (including learning centres in Kenya
and London and appointment of marketing agents in the Middle East)
will be continued.
It is expected the Company will make its Preliminary
Announcement for the year ending 31 August 2018 on 29 October
2018.
General Meeting
The Company expects to send a circular to shareholders in the
next few days to convene a general meeting to consider the
Company's general authority to issue shares and its authority to
disapply pre-emption rights. A resolution will also be proposed to
grandfather the Company's ability to honour certain existing option
and warrant contracts. In addition, a resolution will be proposed
to reduce the Company's share premium account to facilitate the
payment of dividends in the future
Authority to Allot Shares
The existing power of the Board to allot shares expired in
August 2018 and the Company proposes to pass a resolution at a
general meeting to give the Directors new authority to (a) allot
shares in the Company up to an aggregate nominal amount of
GBP400,000 representing 40,000,000 ordinary shares and (b) allot
ordinary shares in connection with a rights issue in favour of the
shareholders of the Company.
Both authorities are subject to the above limits and will expire
on the date of the annual general meeting in 2019 or fifteen months
from the date of approval, whichever is sooner.
Passing of this resolution will give the Directors flexibility
in managing the Group's capital resources but there is no current
intention to issue any shares other than to satisfy any option
exercises.
Dis-application of Pre-emption Rights
Section 570 of the Company's Act 2006 gives all shareholders the
right to participate on a pro rata basis in all issues of equity
shares for cash unless they agree that this right should be
excluded. The Board considers that the dis-application of
pre-emption rights provides the Company with flexibility in
managing the Company's capital resources but the existing power of
the board to allot shares has expired in August 2018. The
forthcoming general meeting also includes a resolution to allow the
Directors to allot ordinary shares for cash without first offering
them to existing shareholders up to a limit of an aggregate nominal
value of GBP130,207.12 representing 10% of the Company's issued
ordinary share capital as at 22 August 2018. The authorities given
pursuant to this resolution will expire on the date of the annual
general meeting in 2019 or fifteen months from its approval at the
forthcoming general meeting, whichever is sooner.
Grandfathering of Options and Warrants
In addition to options issued to employees under the Company's
EMI scheme and unapproved options to employees, the Company,
pre-Admission, granted options to Mr David Massie, its Executive
Chairman, conditional on various matters which total 4,333,333 and
subsequently granted Mr Massie a warrant over 850,514 shares.
Following the acquisition of Interhigh, Mr and Mrs Paul Daniell
were each granted options over 1,000,000 shares. In order to allow
flexibility in using the shares authorities described above , the
Company wishes to take a specific authority over the aforementioned
options and warrants.
It is emphasised that there is no current intention to make any
further grant of options or grants to Mr Massie or Mr or Mrs
Daniell.
Proposed Reduction of Share Premium Account
The Company does not have sufficient distributable reserves to
enable the Board to recommend the payment of dividends. As and when
trading conditions and underlying profitability justifies such, it
is the Board's intention to introduce a progressive dividend
policy. The Board therefore proposes that the Company's share
premium account be used to increase the distributable reserves of
the Company.
As at 31 August 2017, being the date of the Company's most
recent audited accounts, the Company has a profit and loss account
deficit of GBP2,744,397. As a result of share issues at a premium
during the current year when combined with previous issues the
balance standing to the Company's share premium account is
currently GBP7,492,523.
A proposal will be made at the forthcoming general meeting by
way of special resolution to reduce the share premium account and
credit the sum arising to the Company's profit and loss account. In
addition to this matter being considered by way of a special
resolution at a general meeting, the matter requires the approval
of the High Court of Justice in England and Wales.
It is emphasised that the Company has no current intention to
propose a dividend, but the Board considers this a useful
preparatory stage towards such time when the Board is in a position
to make such a recommendation.
General Meeting and Circular to Shareholders
The general meeting will take place at 10:00 a.m. on 24
September 2018 at 43-44 New Bond St, London, W1S 2SA.
Details of the resolutions to allot shares, the dis-application
of pre-emption rights, the grandfathering of existing options and
warrants and the proposed reduction of share premium account will
be contained in a circular to be posted to shareholders
shortly.
Investor Presentation
As previously announced, the Company will be holding an Investor
Presentation evening to private and other investors this evening
which will include references to matters in this announcement as
well as a general review of the Company's business operations.
Enquiries:
Wey Education Plc
David Massie (Executive Chairman) Tel: +44 (0) 207 518 9700
+44 (0) 778 595 7958
WH Ireland Limited
Mike Coe/Ed Allsopp (Corporate Finance) Tel: +44 (0) 117 945 3470
THE DIRECTORS OF THE COMPANY ACCEPT RESPONSIBILITY FOR THE
CONTENTS OF THIS ANNOUNCEMENT.
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END
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