Wey Education PLC (LON:WEY) Chairman David Massie caught up with DirectorsTalk for an exclusive interview to discuss their recent acquisition of Academy 21
Q1: I saw that you announced the acquisition of Academy 21 yesterday, were you working over Christmas?
A1: Not quite, the transaction completed about 4pm on Friday 22nd December but by then the stock market had closed, so yesterday was the earliest we could make the announcement. Actually, Wey staff don’t get much of a holiday at this time of year because although the school is on Christmas break, the admin team are in and January is normally a busy time for recruitment. You’d also be amazed at how many of our pupils log on & use the learning platform & the online library over the holidays including on Christmas Day.
Q2: I note that the acquisition price has changed from what you announced in November, what happened there?
A2: Well, originally, we were going to pay £1.5 million up front and an earn out of up to £700,000 based on Academy 21 sales to the 31st August 2018. As it turned out, due diligence and the legal work took a bit longer than we had originally contemplated, the owner was keen to retire, we were becoming more and more comfortable with the future sales prospects of the acquisition and the condition of the business he was leaving behind. Eventually, we decided that we would rather save £600,000 than ask him to work for less than a year.
Q3: So, what is it that Academy 21 do?
A3: Academy 21, like Wey Education, is an online educational business. It provides a range of Key Stage 3, GCSE and iGCSE programmes to pupils who have been referred by local authorities and schools across the UK. Its customers tend to buy Academy 21’s services for short periods of approximately six weeks, this is in contrast to typical students of our school such as InterHigh who tend to be at our school for several years.
So, the Academy 21 business fits in very nicely with our existing B2B business, we think that each businesses’ customers will be interested in the broader product range we can now offer.
Q4: Where are they based?
A4: Like us, most of its operations are online and it teachers work from home but there is small office in Stevenage.
Q5: Acquisitions can be a bit of a risk, are you worried about it in any way?
A5: It would be foolish and arrogant of us to say we knew everything about Academy 21 but there a couple of special factors at work. First, Jacqui and Paul Daniell, the founders of InterHigh who both still work for Wey, were initial shareholders in Academy 21 when it was set up, though they sold their shares many years ago to concentrate on InterHigh so that gave us some confidence we knew how it worked. Secondly, the negotiations with the owner were quite protracted & took place over 18 months or so, so this was not a rushed deal.
Q6: I see Academy 21 made a profit of over £130,000 in the year to the 31st August, are there many synergies that you think you can achieve?
A6: As well as the cross-selling opportunities for our products through the different teams, we think there are a number of efficiencies that can be mad, in particular we intend, in due course, to bring all their students on to our new state of the art learning platform. In order to avoid disruption to pupils and students alike, we probably won’t do that until just before the start of the next academic year but when it happens, will save money and also improve the quality of Academy 21’s lessons. In addition, we think there are various administrative costs which will be less for the enlarged group & there’s no reason that their teachers cannot work for Wey’s other schools & vice versa.
So, all those are benefits for 2018/19, we don’t intend to rush anything except that the marketing teams are being combined immediately.
Q7: Do you think you’ll make any more acquisitions?
A7: Possibly. As a management team & as the Board of directors, we always balance opportunities against the alternative of possible organic expansion. In the case of Academy 21, we thought that the acceleration of our B2B business, because it brings us instant critical mass, justified the use of shareholders money.
Q8: I see you are to hold another investor evening on 10th January at Paddington, are you expecting many attendees?
A8: Yes, we held our first event like this in July of this year in an attempt to communicate with private shareholders who are often locked out of contact with company’s management now that most shares are held in nominees. I think that that event was well received, and our team also enjoyed meeting real shareholders and seeing that there were real people out there interested in the company and not just institutions.
This time the event is at the Paddington Hilton and it is filling up fast. The event is really about explaining our business & the current developments, more than a financial presentation. We will have a number of staff up from the office in Wales to demonstrate some of our activities and Jacqui Daniell will give an update on marketing & then maybe one or to interesting demonstrations that we show of things that are being developed.
There are still a few places left so if anyone wants to come, do email me for an invite, the details are in the announcement.
Q9: Talking about the marketing side, Wey Education are going be advertising at Waterloo, can you tell us what that’s about?
A9: When we raised £5 million in our oversubscribed placing in November we said that we wanted to devote some of the money to expansion our marketing. We’re becoming pretty good at online marketing such a Google, Facebook, Twitter but to find customers that way they generally have to be looking for online schooling. The reality is that only a tiny percentage of parents in the UK, and of course overseas, even know about Wey or that online schooling or an online secondary school even exists.
The campaign is about making them aware of the possibility of their child attending an online secondary school, the aim is to drive them, persuade them, to visit our websites where we think we can dispel all their preconceptions about what school online is like. We do have thousands of satisfied customers so we’re confident that if we can get people to come to the websites, we can convert a number of them to becoming parents & customers of children attending our school.
What we’ve done now is to hire a number of electronic display boards at Waterloo station for January and indeed for the week of 8th January, will be running an ad on the huge screen, I think it’s something like 40 metres above the platforms. We want to see what effect it has, it’s part of our experimental marketing, we have researched it, we have talked to many different agencies, but the main impact will be to recruit students for next year, but advance bookings are always welcome & we shall test this out & see if it’s an effective way for us to work.