Wey Education PLC (LON:WEY) Chairman David Massie caught up with DirectorsTalk for an exclusive interview to discuss their recent placing, a possible acquisition, further areas of marketing and when to expect further news
Q1: We Education has announced a placing and a possible acquisition today, can you tell us more about that please David?
A1: We’ve announced a £5 million placing, priced at 22p per share, the placing is now concluded and will see the arrival on the Wey shareholder list of a number of new institutions. Naturally, we need to wait for those institutions to make disclosure of their interest in the share capital on the base it’s over 3% of the last share but their participation in the placing, and I hope their presence on our shareholder list, indicates a confidence by major city players in Wey’s prospects for the future.
Q2: The placing was done at a discount to the market price, why was that?
A2: Well, it is customary that such placings are at a discount to the prevailing market price, in these circumstances, we took advice from our broker as to what level would generate significance support and they came back with that price. I think there was a perception that the company share price had had a good run since the results and that, although last night’s closing price was agreed, it did represent a premium to the market price over the last month or so on average.
The overwhelming proportion of the shares in the placing have been placed with a few a major institutional investors who we hope will be long-term supporters of the group. It may be remembered that Wey Education, at a small AIM company, was already unusual in that the majority of its shares were institutionally owned, we’ve now built on that but do remember that management do own a significant stake.
Q3: You talk about taking advice, did you consider an open offer?
A3: We did and considered whether there should be an open offer as well as the placing but in the end the Board decided that the costs and complications of having an open offer as well outweighed the advantages.
The placing actually only represents about a 20% increase in the total share capital of the company, if we apply that percentage to our existing share register, ignoring existing institutional shareholders, the amount that would be raised through an open offer, even if all the remaining shareholders took it up, is really quite modest. The overall costs between brokers’ commissions and the additional legal work that would be needed would represent a disproportionate amount of funds that might possible be raised. The market has shown a fair degree of liquidity in the company shares in recent times so shareholders have had the opportunity to trade if they wish.
I note that the share price did open a little bit lower today on the announcement of the placing but has soon recovered and is now only a modest amount below last night’s placing price given the announcement of the placing.
Q4: So, what do you propose to use the funds for?
A4: When I announced our results for the year to 31st August a couple of weeks ago, in my preliminary announcement at the time, I identified that we wanted to step up and increase our marketing efforts this year and that we were also taking initial steps into the use of artificial intelligence within the business. These funds give the Board confidence and the ability to do that and it will also be noted that we’re in discussions regarding a potential acquisition, so we’ve made sure in the funding that we have the funds available to complete that deal if it happens.
Q5: What further areas of marketing do you consider necessary?
A5: When Wey Education bought our core business, InterHigh, the UK’s only online secondary school in 2015, InterHigh was spending a very small sum on marketing, in the year to August 2015, I think that totalled about £19,000, w increased that spend to £90,000 the following year and nearly doubled it again in our last financial year. The results were that sales grew dramatically, in fact, our turnover increased by 60% last year, it seems logical and it seems proven that there is a correlation between increased advertising and increased sales but in reality, it’s a little bit more complicated.
As a business, we’re becoming increasingly sophisticated in our online advertising through Google, Facebook and Twitter, I don’t claim that the company is perfect yet, but we’ve increased our free search percentage and responses significantly and our search engine optimisation rankings have increased as well.
However, the issue with online advertising in a business like ours is that the potential customer needs to be searching for you in the first place, if you do not know that an online school exists, teaching the UK secondary school curriculum, you’re not going to be looking on Google for it. Yet we know that if we can get people to come and look at the company’s websites, a certain percentage of them will buy the product and enrol their child, what we therefore need to do is to drive more potential customers to the websites so that more customers are captured, and that percentage just becomes a bigger number of sales.
In addition, as we’ve said before, we want to make a bigger push overseas. Now, we not only have our core academic products but our new online language school, Quarolexis, which has started teaching English as a foreign language, we believe we have tremendous prospects overseas and we want to spend some time and money building those markets.
Q6: What type of marketing do you think we might see?
A6: I think you’ll see much more direct brand advertising this year, we will continue online, we will do more targeting online, advertising in some overseas markets, but you’ll see something by way of electronic billboards or similar. The team have some very exciting ideas that we’re working on but I do not want to spoil the surprise just yet.
Q7: Who will be undertaking this work?
A7: Jacqui Daniel is our Executive Director of Marketing and she’s spearheading the overall campaign. You may not have noticed, at the beginning of the month I changed from being Non-Executive Chairman to Executive Chairman, I spent the last 25 years of my career concentrating on international business, so I will lead the company’s efforts to develop new overseas markets in order to assist Jacqui and I’ll also be spending some time in those overseas markets where we are already active but believe there is further potential. It should be remembered that something like 30% of our students are already based overseas and something like 26% of our revenues are exports.
Q8: Finally, when might there be some further news from Wey Education?
A8: It’s likely that our next news will be about the acquisition, if it comes about that it’ll be a nice addition to the company’s portfolio in a complementary online business area but still very much in our core competency. The Board want to undertake the acquisition process professionally, that means we need to take appropriate legal and undertake financial due diligence and that process is continuing, I can’t give you a precise time, but we hope it will not take much longer and we will, of course, update the market as soon as there is some news.