Wey Education PLC (LON:WEY) Chairman David Massie caught up with DirectorsTalk for an exclusive interview to discuss their interim results for the six months ended 28th February 2018.
Q1: David, Wey Education results out today, they look quite exciting, are you pleased with them?
A1: Yes, these are our interim results for the 6 months to the 28th February 2018. They indicate the potential for our business to expand on several fronts, I also report that the acquisition we recently made is doing well and on some exciting international news.
Q2: Can you tell me more about the Academy 21 acquisition, how’s it going?
A2: We completed the acquisition on the Friday before Christmas so not much could happen until the New Year. Since then we have amalgamated the Academy 21 sales force with the group’s B2B sales force and actually promoted the Academy 21 sales manager to be the group B2B sales manager.
We’ve closed the Academy 21 head office and relocated accounting and similar functions to the group’s office in Wales.
On a business front, as indicated in the statement, sales are trending well, and we are hopeful of future progress both in the second half and next year.
Q3: You mentioned some exciting news, you’ve announced a new deal in China, what’s it all about?
A3: Well, really, we’ve announcement two new deals in China.
The first is small but significant, in that our premium brand Infinity Education, which we announced we were launching, has started trading. It’s first contract is to provide special tuition to a small group of A-level students at a top Chinese independent school who are applying for places at Oxford and Cambridge.
The second, and somewhat larger agreement, or at least potentially larger agreement, is a deal that we’ve done with a Chinese listed company called Starcube to form a joint venture. This will be done through our new Chinese subsidiary, for which we’ve now received all the relevant authorities, and the joint venture will sell our Quoralexis project which is primarily English as a Foreign Language. It will start providing services to Chinese state schools and then expand into after school lessons privately to pupils and parents who choose to provide them with that extra tuition outside class.
Q4: Do you think it could be important business for Wey Education?
A4: I am trying to keep my feet on the ground, we’ve been working for 2 years to get this point in China.
Originally, our target was pretty much in the private sector and we’re still hopeful of doing some business there in the future but if we can really crack the state sector, the public sector, the transaction will be transformational for the group.
There are no guarantees yet, but this is very exciting and all the people working on project in Wey Education are excited about it.
Q5: When do you think the joint venture will start?
A5: As you might imagine, there are a number of things we have to do, not only on the legal front but also to conclude discussions with the initial proposed customers. We will incur some costs doing so and also provide some free trials over the next few months, but we expect first revenues to arise in our next financial year.
Q6: Now, I see you are announcing a new venture in Nigeria?
A6: Yes, although I have a lot of experience working in Africa over the last 10 or 15 years, I am very cautious in doing business there. Nigeria, however, is a country of great potential, depending on where the oil price is at any time, Nigeria is either Africa’s largest or second largest economy. It has a population of over 180 million people and of course, it is a leading member of the Commonwealth and knows the British curriculum well.
We are seeking to do is de-risk our position by working with a Nigerian educational group, an independent school there but one that has a very experienced and distinguished business leader as its owner.
It is also interesting to us because as well as selling our own British curriculum courses, iGCSE, A-levels etc. and teaching them, our platform will be used to teach Nigerians the Nigerian curriculum, that will be taught through our partner but using our platform, but we will be provided with fee income for the use of the platform.
Q7: Will you expand this outside Nigeria?
A7: Well, I think we want to get it going in Nigeria first and then after that, we can see if there’s demand amongst the estimated 5 million Nigerian citizens who live outside Nigeria who might want to study some elements of the Nigerian curriculum.
Q8: With all these developments we have yet to discuss the figures for the six months, how were they?
A8: I don’t want to appear, I suppose, flippant but in some ways they’re not really that important. The thing we are announcing today should create a step change in the group’s size but of course, we must deal with the details.
Sales for the group were up 45% for the period on the corresponding period last year, including 2 months contribution from Academy 21, the acquisition, or if we exclude the sales, 23% without it.
All our divisions did well overall though the rate of increase at InterHigh, our secondary school, grew a bit less than expected, it was still up but a bit below where management wanted it to be. There were a couple of special factors which impacted student recruitment during the period which we hope we’ve now dealt with. As mentioned in the statement and just now, Academy 21 looks to be very promising.
Our cash position remains strong, last November we received £4.7 million net, after expenses, in our placing and after funding the acquisition of Academy 21, which cost about £1.7 million including fees and legal work, and making the new investments, we ended the period with £4.3 million in the bank. So, that’s a pleasing situation to be in and gives us the resources to develop the various initiatives that we’ve announced.
Q9: What then for the balance of the year?
A9: Well, I think there two parts to that, our year end is the 31st August, so we need to finish off this year’s core teaching and advance the exciting projects we have announced. In terms of trading, we’re happy with our broker’s forecast for our profitability for the full year but we actually think we’ll achieve it on turnover a little bit less than they were forecasting because we’ve controlled our costs and our margins are better than we planned.
Q10: Is there anything else that you want to say?
A10: We have a lot going on which we’ve not even talked about today including our plans for artificial intelligence and how we hope utilising that is going to help us reduce our costs over the next 3-5 years, but we’ll leave that for another day.