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Q&A with David Massie Executive Chairman at Wey Education PLC (LON:WEY)

Wey Education PLC (LON:WEY) Executive Chairman David Massie caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update & their recent investor evening.

 

Q1: Now I see that Wey Education published a pre-close trading update yesterday, what were the highlights in that update?

A1: In terms of yesterday’s trading update, I think there were three major items of note.

First, we confirmed the likely trading result for the year to 31st August 2018, that’s our year-end which ends next week, and we said turnover will be ahead of market expectations at over £4.1 million for the year and also our adjusted profits will be in the range of between £400,000-£500,000 for the year. Those figures compare with just £2.4 million of turnover last year and adjusted profits of £130,000 last year so they demonstrate real progress within the business.

Second, we updated the market with progress on our international expansion, primarily in Nigeria, and our joint venture in China. We explained to shareholders how we will avoid any local risks in the Nigerian market by using local partners who will have responsibility for matters domestic and leave us to concentrate on technology and teaching. We also gave some guidance on the initial business that we expect in China and we confirmed that both these overseas ventures are expected to be live this autumn.

Third, we passed a comment about how well the Academy 21 acquisition had gone, this is a business we bought in December last year, turnover and profits are both up ahead of our expectations at the time of the acquisition. We talked about our plans for further B2B expansion and also gave a brief update on our historic InterHigh business, we reported that we remain cash-rich with over £4 million in the bank at what is our weakest time of year for cash flow because, of course, most students start in September.

So, there were quite a few items to be covered.

 

Q2: All sounds very positive, were there any disappointments?

A2: I would not call it a disappointment but our most established business InterHigh grew at just over 20% during the year, now I realise that most companies would be delighted with that rate of growth, but management had hoped for a little bit more. We have thought about why we didn’t quite meet the targets we’d set ourselves and we’ve adjusted our product offering for this year to be a little bit more responsive to customer demand. So, we expect to do better and get the pace of growth moving again, I don’t want to put a dampener on matters and it should be noted that as a group, we’re growing turnover at more than 70% per annum. I think when you are a smaller company, it’s bound to be the case that from year to year one bit of the group does a bit better than another.

 

Q3: Now, I also see that there are some updated forecasts from your brokers out and about, what do they say?

A3: I think they are very positive. We’re still a small company and getting the timing right of major contracts such as our overseas expansion can affect revenue recognition and when it first starts to happen and which year it falls in. I think our brokers have taken a prudent approach in their forecasts for the next year and made sure we’re not getting carried away and the market doesn’t get carried away.

Of course, as each month goes by the quality of their predictions against our actual numbers improves but they’re seeing turnover more than doubling next year, the year to 31st August 2019, to over £8 million and our profits getting up to approximately £2million for the year and with us having EPS of 1.43p.

 

Q4: I’m sure Investors will be happy with that. You’ve also announced plans to reorganise your share premium account and distribute reserves, are you planning to declare a dividend?

A4: We’re committed, as a Board, as a company, to introducing a progressive dividend policy when the time is right, not least because a number of the directors are major shareholders. That time is not just yet but by doing this legal work now, when trading permits and profitability permits, we’ll be able to move quickly so we’re just getting our ducks in a row.

 

Q5: So, your new year starts in a couple of weeks on 1st September, what are the priorities for the coming year?

A5: I think that’s simple, we want to concentrate on making sure that we deliver on the hard work done in 2017/18 and the foundations we laid.

That means first ensuring revenue growth in our core UK businesses of InterHigh and our B2B division including Academy 21. Second, to commence the operations that we talked about in China which could be fantastically exciting. Third, to commence our operations in Nigeria with our partners we’re hoping to work with there and work towards not only our British curriculum but in due course, the implementation of the Nigerian curriculum using our technology.

We want to make sure that we really push those three things, of course there may be other developments but that’s where our focus is.

 

Q6: Now, I know that you held an investor evening last night, how did that go?

A6: We started these events last summer, I think it was July 2017 we held the first one, and we did it to give private clients the opportunity to meet the company’s management and get direct updates, that’s something that’s really been lost in this era of nominee accounts. We tend to hold these events a few times a year and they are always interesting evenings and our shareholders can be tough task masters.

Last night, there was something like 25 attendees, we took them through the announcement and clarified details where there was some questions and we also had a Q&A session. Now, in the Q&A session, some of the questions we could deal with easily such as the timing of contracts and our expansion plans, others were more difficult. Our share price has been volatile in 2018 and some shareholders were upset that they’d bought shares at higher prices and wanted us to comment on that. All we could really say is that we are a disrupter in an established multi-billion-pound market, it’s bigger than multi-billion, we’re talking hundreds of billions of pounds in this market and we have huge ambitions to grow this company. I, personally, will not be satisfied until we’ve made progress and we’re one of the most profitable companies on AIM.

In terms of shareholders, I suppose in simplistic terms at the moment, the ‘the bulls and bears’, seem to be fighting over, not whether Wey will get there, but how long it will take us to get to our objectives Of course, the share price matters, I can understand all shareholders would be concerned about it, but the real issue is not how we travel to our destination but what it looks like when we arrive.

To me, again personally, I’m looking to build this into a business perhaps 50 times our current size and with a share price that rewards shareholders for their support. I had to, of course, explain to those attending that the Board cannot move the share price by itself, all we can do is run the company as well as we can and let the results do the talking for us.

I think the attendees understood that and this is a multi-year, not multi-day story that we’re engaged in. Certainly, our institutional shareholders, and they weren’t there last night but from previous discussions, I know they are very supportive of our medium-term vision. I’d also say there’s not many small AIM companies, we’re sort of £20 million market cap, with over 50% of their shares owned by major institutions and also sitting with a comfortable position of having over £4 million of cash in the bank to fund that future expansion.

The last thing we did at the investor presentation was that my colleague, Jacqui Daniell, also reminded everyone that whilst we are for profit, Wey is not just about making profits. The vast majority of those we serve, our customers if you like, are children and although we have many children who have what you might call ‘irregular education online’, there are others that have other issues and to those, we make a tremendous difference. In some cases, we have given them meaning when others had written them off and Jacqui took the audience through some case studies in what we might say is our field of social capital. We are a company for profit but not exclusively for profit and I think some of the investors really appreciated that there was that other aspect to our business.

 

Q7: What news might we expect next from Wey Education?

A7: I think that on the assumption we finish off the documentation for the two ventures in Nigeria and China, we will announce such with an RNS and clearly, as a management, we hope that will be soon. We will then be making our Preliminary Announcement for the year on 29th October 2018 so in just about 2 months’ time.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.