Wey Education plc Turnover increased 72.6%, Adjusted EBITDA up 162%

Wey Education plc (LON:WEY) the educational services group announced today the Group’s results for the year to 31 August 2018.

HIGHLIGHTS:

· Turnover increased 72.6% to £4.2 million (2017: £2.4 million)

· Adjusted EBITDA up 162% at £452,569 (2017: £172,419)

· Adjusted EPS almost doubled to 0.33p (2017:0.17p)

· Academy 21 acquisition successfully integrated into group

· Turnover expected to grow significantly again in current year

· Encouraging start to current financial year

· At year end, cash balances totalled over £4.0m (2017: £1.0m)

Commenting on the results, David Massie (Executive Chairman) said:

“Wey had an excellent year in terms of turnover growth, technical implementation and the acquisition of Academy 21. With substantial cash resources of over £4 million we are well placed for further significant growth in the current year and beyond. In setting our budget for this year the Board has taken a prudent approach to the timing of overseas expansion and expects to hit its core targets primarily through organic growth. Any acceleration of overseas revenues will enhance the group’s results”

Executive Chairman’s Statement

I am very pleased to report to shareholders on a year of significant growth and achievement.

Financial Highlights

Group turnover of £4.2 million for the year to 31 August 2018 (2016/17 £2.4 million) represented growth of 72.6% year on year. It included partial contribution from Academy 21 which was acquired in December 2017. Underlying turnover grew by approximately 29.2%.

Much of this year has been spent on building the foundations for further growth and, in certain areas, spending was at higher than normal annual levels. In accordance with IFRS all this expenditure will be expensed in the Company’s audited accounts for the year ending 31 August 2018. However, to provide shareholders with a more meaningful method of measuring the Group’s progress, year on year, we have calculated our Adjusted EBITDA to reflect non-recurring costs as set out below.

This calculation includes a total of £238,466 of non-continuing marketing and international costs which have been added back to arrive at adjusted EBITDA.

The statutory loss was £196,381 (2017: profit £17,630) and the EPS loss was 0.16p (EPS 2017: 0.02p)

The Group remains well funded for future expansion with cash balances of over £4.2 million at year end which have increased since.

Operational Review

The Group undertook a number of significant initiatives during the year.

· The Group’s new “state of the art” online learning platform went live on 1 September 2017 and has performed extremely well and has attracted praise from both teachers and students. This new technology cements the Group’s position as the leading online schools group in the UK. The Learning Platform combines a number of market leading software packages to produce a powerful, flexible IT system capable of delivering lessons to anywhere in the world with an internet connection. The Learning Platform has been designed to be scalable to almost any quantum of student use and is available to students in all our target geographic locations 24 hours a day, 7 days a week, 365 days a year.

· During the year a number of marketing initiatives were trialled including large scale brand awareness campaigns, but results suggest that in both student recruitment and overall spend these were not as effective as the Group’s traditional online marketing and use of social media. Concentration of marketing efforts in the current year has reverted to our traditional channels and is showing a significant increase in opportunities already.

· The core Interhigh business grew turnover by 20% and it is expected that this will accelerate in the current year.

· In December 2017 the Company acquired Academy 21, a provider of online secondary teaching to pupils in the state school and other public-sector bodies. The acquisition has been successfully integrated and has performed very well with both sales growth and improved profitability post acquisition. The Group has created a unified B2B sales force, closed the Academy 21 local office and integrated all administrative and accounting systems. B2B revenues grew more than management anticipated and further expansion is expected in 2018/19.

· The group concluded a £5 million oversubscribed placing at 22p per share in November 2017 primarily with institutional investors. The funds were partly used for the acquisition of Academy 21 and to fund other initiatives. At the year end, the Group retains substantial cash resources of £4.2m.

· In addition to my own move from non-executive to Executive Chairman, two senior appointments were made in 2018. Barry Nichols-Grey was appointed Company Secretary and Finance Director (designate) in April 2018. Barry has now been promoted to Executive Director and joins the Plc board. Tony Knowles joined as Executive Director of Human Resources in May 2018, reflecting the importance of human resources in our otherwise online business where the majority of our staff work remotely from Head Office.

Geographic Analysis

The Group has an active export business served from the UK. An analysis of turnover for the year shows that 14.8% of 2018 turnover arose outside the UK (2017: 23.6%) which reflected growth in the UK business rather than a decline in export sales. At £620,259 (2017: £573,112) export sales were up 8.2%.

The Group is making further efforts to expand its export and overseas business as detailed below.

Artificial Intelligence (“AI”)

The Group has taken its first steps on AI introducing certain features into lessons. Further applications have been commissioned in areas such as “induction of new pupils” to automate current manual processes. A longer-term plan for greater use of AI is under development and the Group is conducting further research in partnership with the University of South Wales.

Staffing and Premises

Management functions, administrative staff and senior teaching personnel are based at the Group’s administrative headquarters in Crickhowell, Wales while teaching staff are home based. At 1 September 2018, analysis of the Group’s staff was as follows: –

As of 1 September 2018, most of our teaching staff moved to a new form of employment contract which provides for greater flexibility in teaching hours over that in a typical ‘teaching’ contract. This will assist us in broadening our time zone offering both in the UK and overseas.

Overseas Update

In addition to its traditional export businesses the Group is developing a number of overseas channels. Since year end we have reported on our new venture in Nigeria and the work necessary to both launch the traditional British curriculum and to teach the Nigerian curriculum online continues. We are pleased with progress to date.

We are progressing opportunities in Kenya and the Middle East to offer both our British Curriculum and English Language teaching.

Shareholders will be aware that the Group believes that expansion into China holds great potential for growth in both revenues and profitability. However, the company is only prepared to make the necessary investment when it is satisfied that on matters of transparency and compliance, the local systems adopted will be compatible with those required of an AIM listed company in London. At the current time, we continue to discuss how this will be achieved with our potential partners but continue preparatory works in the interim.

The Directors anticipate that overall revenues from overseas operations will be modest in 2018/19 and concentrated in the second half of the year.

Outlook

The Group remains in a dynamic phase of expansion offering a market leading product to a largely untapped sector. The year has started encouragingly and sales activity in the Interhigh and B2B divisions are materially ahead of the equivalent position at this time last year.

The Group’s emphasis this year is to generate more sales utilising the new Learning Platform and in particular to grow its core InterHigh and B2B sales while nurturing its businesses in development stage including Quoralexis, our online English language school. The Group has a number of other initiatives under consideration but will be careful to balance the time, commitment and expense of these with building on the excellent progress made in its core divisions over the last two years.

The Board has recently reviewed its plans and budgets for the coming year and while setting challenging targets which will see the group expand significantly, has decided to be very prudent in relation to the pace at which it assumes its overseas sales will grow. Average growth of group turnover in the last three years has been 66% per annum. The Board’s ambition is to maintain that trend in the current year and beyond and any acceleration in overseas development should enhance this figure further.

It is expected that the emphasis placed upon core Interhigh recruitment and B2B will influence results throughout the year while other initiatives will be concentrated in the second half.

Capital Reconstruction

The Capital Reconstruction approved by shareholders at the General Meeting on 24 September 2018 awaits a further court hearing for the High Court to sanction the proposals. Assuming such is granted, the effects will be reflected in the 2018/19 accounts. A further RNS will be made when the process is complete.

Shareholders

The prevalence of nominee holdings makes it difficult for listed companies to communicate directly with its shareholders. Therefore, the Directors were very pleased that a number of individual shareholders were able to attend its private investor shareholder evenings held in London during the year. The Company intends to repeat the event in the New Year, around the time of its Annual General Meeting. The Group’s provisional reporting timetable for 2018/19 is as follows:

David L. Massie

Executive Chairman