Wey Education PLC (LON:WEY) Chairman David Massie caught up with DirectorsTalk to discuss their background and what they do, how they operate, potential customers, education in Asia, their key focus and strategy and news flow over the coming year
Q1: David, could you tell us a little about the background of Wey Education and what it is that the group does?
A1: Yes, Wey is an educational services group and it’s trading on AIM, it was admitted to AIM last December. We deliver live interactive teaching of the British academic curriculum primarily iGCSE and A levels to a UK and an international customer base. Within the business we have four target markets:
At our heart is the UK’s only true online secondary school called InterHigh, established in 2005 and now growing extremely rapidly.
We’ve recently launched a second online school called Infinity Education which is a premium brand school, targeted at students who are seeking the highest grades; 2 A’s and a B, 3 A’s, whatever, in order to apply for entry into leading universities not only in the UK but overseas, in the US or elsewhere because the English A level is very highly regarded around the world.
Our third market is where we provide education and teaching to other schools and institutions. This may be to help them with timetabling or demand problems, for example, a school in the UK may have a small group of students who want to study a particular foreign language but that group is too small for the school to justify hiring a specialist teacher on its own. We can work with them and deliver that course for them online.
Fourthly, and 30% of our students are already overseas, primarily in the Middle East and in Europe, we are aiming to expand our business significantly in Asia over the next 2-3 years.
Q2: Now, an online school sounds different, how do you operate?
A2: We aren’t very different, we have a small administration office in Wales, our teachers, all British qualified, teach from home, what we do not have are bricks and mortar classrooms, our classrooms are virtual. Most of our students are home based, not all of them, but our business model is therefore very flexible as we do not have a lot of fixed costs and where we work with other schools, they’re the ones who have to own and operate the bricks and mortar. Perhaps I should emphasise that we are a real school, when a student comes to us he enjoys live interactive learning, classes are timetabled on a conventional basis, he’s taught in a conventional basis, it’s very different from a video download service or those without any personal interaction. Our students are typically in classes of 12-18 and study a very wide range of subjects, we offer 16 subjects at GCSE and 18 subjects at A level.
Q3: You talked a little bit about your markets but what can you tell me about the size of your market and who are your potential customers?
A3: Well the market is truly enormous and at one level if we look at the home school market, there are 80,000 students in England alone, that’s not the whole of the UK, who are home schooled by their parents for one reason or another. Often they do a very good job but sometimes they find, as the child moves into his teenage years, they need something different. At the moment we have less than 1% of that market and so just the organic growth in within that can drive this business forward to a significant level.
For our B2B product, that’s the product when we’re working with other educational services such as schools or further education colleges, every school in the UK is a potential customer, doesn’t matter if they’re state or independent we can work with both of them. We’re currently working with one state sixth form college, we have framework contracts in place with a number of local authorities to help them.
Overseas, the British curriculum is the most widely taught in the world, it’s ahead of the US curriculum, something over 2,900 international schools around the world teach iGCSE and A levels. So the number of students are running into millions and we can work with any of those in partnership.
Q4: Now we hear a lot about education in Asia, is that region one Wey Education wants to be involved in?
A4: Very much so, we see enormous potential. A lot of international schools in Asia really like the British curriculum but they have problems with the quality of teaching and finding continuity of teachers perhaps skilled in speaking English, either as their first or second language who can deliver the teaching to a good level. We can deliver to them that British education taught by British home trained teachers of an exceptional quality. Interestingly, the market doesn’t appear to be particularly price sensitive, what they really want is quality, now we already use, in our core business, the benefits of the internet to provide our services at a fraction of the cost of traditional independent schools and this could give us a significant pricing advantage in that market. Just in the UK typical independent school fees are over £15,000 for a day child we teach that same course for around £3,000 so there are very significant cost advantages to customers and we can also turn a profit from doing it.
Q5: So what is Wey Education’s key focus and what’s the strategy behind it?
A5: We have just come out of a period of transition where over the last twelve months, we’ve put in place the infrastructure to scale the business to many times its current size. Our original school, InterHigh, is growing at 50% per year compound which is a result of improved marketing and also improved demand as people’s attitude to online teaching changes. An example of that is that we finished the last academic year with 647 students, was up 200 on the previous year and we’ve already announced that we’re substantially up on that 647 already this year.
Our second school where we intend to put a lot of effort in over the next 2 years is currently undergoing a soft launch, it has its first students, a very small number but will be fully active from September 2017. We see no reason why over the next few years it will not grow to a size comparable with InterHigh which means we just doubled the size of the business whatever happens.
Our B2B business with schools and local authorities is a slow burner, it takes time to get acceptance from them, time to agree deals with local authorities but we think we’ll get there in due course.
The real excitement for us is Asia, now we’ve done a deal yet so we can’t get ahead of ourselves but getting one done is my personal target for 2016/17.
The key driver in terms of our focus is student recruitment. With a relatively fixed overhead base and operating costs very much linked to student numbers, incremental turnover drops pretty much to the bottom line after the direct costs of teaching. As I said to you, we’re growing at 50% compound, the strategy is to maintain that growth and see if we can accelerate it and reap the rewards it will bring to the business and shareholders, while at the same time reinvesting in the quality of our product on a continuous basis because we are always mindful that we are dealing with a child’s education, that we’re looking for positive outcomes from them whether that is just academic results or their whole persona for their future life.
Q6: What should investors be looking for in terms of news flow over the coming year?
A6: Well, when I first became Chairman I really thought this was going to be a niche business dealing with certain sectors of the market but I’m finding that the opportunity is enormous and also that society is changing and teachers are changing. The current generation of students and teenagers are, unlike any other, they enjoy learning via the internet, they expect to get their data digitally, that’s how they’ve grown up. We’re finding that it prepares them not only for university, where universities like the fact that they have the discipline of doing some self-study even though most of the teaching’s online but it’s also preparing them for the digital world of employment. Now those students’ parents who pay our bills are gradually waking up to the idea that there’s a different way to send their children to independent school at a sixth of the cost of a traditional day school and that’s a very attractive proposition for the parents so we’re arriving at a situation whereby both the parents and the students want it so when you ask me what is the big driver, the big driver for us is student numbers.
I think that investors should follow any guidance we give on growth, if we do not say anything negative, then they should assume all is well, if they see positive news they can draw their own conclusions and of course an announcement that a deal has been done in China could well be a game changer for Wey Education PLC.