RNS Number:5694X
Creative Education Corp Plc
27 January 2006
The Creative Education Corporation Plc ("CEC" or "the Company")
Preliminary Statement of results
Chairman's statement
For the year ended 31st July 2005, turnover increased to #6,076,000 (11 months
2004 - #1,927,096) with a like for like increase in turnover excluding
acquisitions of 35% to #2,598,000. The loss before tax was #2,942,380 (11 months
2004 - #1,338,555) while shareholders funds at the year end stood at #8,658,646
(2004 - #4,774,578).
Acquisitions
During the year the company successfully completed the acquisition of Happy
House Nurseries Limited in October 2004, Academy Childcare Limited in January
2005 and, HeadStart Limited in February 2005. This acquisition programme has
resulted in the Company growing its portfolio of nursery facilities from 12
units with 407 places to 32 units with over 1700 places in England, with the
majority of facilities in the South East.
The acquisition strategy has resulted in a period of consolidations, which has
required the management team to integrate a number of different operational
cultures and accounting systems to the CEC format. It has also required a
restructuring of the management and a great deal of work to make our nurseries
conform to the Primary Steps brand. This process has involved the company in a
number of one off costs which are continuing in the current year.
Trading Conditions
Trading conditions remain difficult, and as a result of this, margins have been
under pressure throughout the trading period. In response to these market
conditions, the Board is implementing a new strategy to provide bespoke
nurseries. In conjunction with this, and the implementation of a new education
continuum, the Board believe that the revised Primary Steps proposition will be
perceived as a premium brand in the market place, delivering outstanding
childcare, an innovative education platform and a partnership with those who
entrust their children to us.
Outlook and Strategy
In what has been a difficult period for the Company, the Board are implementing
a number of changes that will see the Company optimise its cost base and
increase our revenue performance. While the Company continues to develop its
portfolio of products and services, the Board will implement the rationalisation
of facilities and processes in a judicious and timely manner.
During this challenging year for the Creative Education Corporation, I would
like to take this opportunity to thank our staff for their efforts during a very
difficult year.
The Company continues to evolve its strategy. Our occupancy rates are rising
once again, our brand continues to gain momentum and the Board's main focus
above all, is to deliver a solid platform for bringing the Company to
profitability.
Chris Phillips
Chairman
Contacts:
CEC - David Alexander / Paul Ayres 0208 864 5147
Corporate Synergy - Olly Cairns 0207 448 4400
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 JULY 2005
2005 2004
# #
Turnover
Continuing operations 2,598,487 1,927,096
Acquisitions 3,477,513 -
------------ -----------
6,076,000 1,927,096
Administrative expenses (8,875,636) (2,955,541)
------------ -----------
Operating loss
Continuing operations (2,282,939) (1,028,445)
Acquisitions (516,697) -
------------ -----------
(2,799,636) (1,028,445)
Exceptional item
Profit on disposal of tangible fixed assets 106,762 (8,131)
------------ -----------
Loss on ordinary activities before interest (2,693,874) (1,036,576)
Share of operating loss in associated undertaking (159,018) (299,076)
Other income 47,822 2,542
Interest payable and similar charges (138,310) (5,445)
------------ -----------
Loss on ordinary activities before taxation (2,942,380) (1,338,555)
Tax on loss on ordinary activities - -
------------ -----------
Loss on ordinary activities after taxation (2,942,380) (1,338,555)
============ ===========
Loss per share
-Basic (1.17)p (0.85)p
============ ===========
-Diluted (1.17)p (0.85)p
============ ===========
There are no recognised gains and losses other than those passing through the profit and loss account.
BALANCE SHEETS
AS AT 31 JULY 2005
Group Company
2005 2004 2005 2004
# # # #
Fixed assets
Intangible assets 8,844,989 4,050,204 7,713,026 4,050,204
Tangible assets 2,906,396 682,430 1,033,404 682,430
Investments - 78,160 1,582,550 78,160
---------- ---------- ---------- ----------
11,751,385 4,810,794 10,328,980 4,810,794
---------- ---------- ---------- ----------
Current assets
Debtors 951,262 313,773 1,204,040 313,773
Cash at bank and in hand 507,100 145,247 368,509 145,247
---------- ---------- ---------- ----------
1,458,362 459,020 1,572,549 459,020
Creditors: amounts falling due within one year (3,439,995) (495,236) (2,916,956) (495,236)
---------- ---------- ---------- ----------
Net current liabilities (1,981,633) (36,216) (1,344,407) (36,216)
---------- ---------- ---------- ----------
Total assets less current liabilities 9,769,752 4,774,578 8,984,573 4,774,578
Creditors: amounts falling due after more than
one year (1,111,106) - (70,000) -
---------- ---------- ---------- ----------
Net assets 8,658,646 4,774,578 8,914,573 4,774,578
========== ========== ========== ==========
Capital and reserves
Called up share capital 3,116,160 1,659,762 3,116,160 1,659,762
Share premium account 7,635,396 2,265,346 7,635,396 2,265,346
Other reserves 2,143,250 2,510,771 2,164,939 2,510,771
Profit and loss account (4,236,160) (1,661,301) (4,001,922) (1,661,301)
---------- ---------- ---------- ----------
Shareholders' funds - equity interests 8,658,646 4,774,578 8,914,573 4,774,578
========== ========== ========== ==========
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 JULY 2005
2005 2004
Notes # #
Net cash outflow from operating 23 (1,898,716) (1,390,638)
activities
Returns on investments and
servicing of finance
Interest received 38,128 2,542
Interest paid (138,310) (5,445)
Rent received 7,124 -
Other income 2,570 -
----------- ----------
Net cash outflow from returns
on investments and servicing of
finance (90,488) (2,903)
Capital expenditure and financial
investment
Payments to acquire tangible
fixed assets (498,920) (281,667)
Payments to acquire investments (799,105) (377,236)
Receipts from sales of tangible
fixed assets 1,618,945 8,131
----------- ----------
Net cash inflow/ (outflow) from capital
expenditure and financial investment 320,920 (650,772)
Acquisitions and disposals
Purchase of subsidiary undertakings (2,424,326) -
Net cash acquired with subsidiaries 70,507 -
----------- ----------
Net cash outflow on acquisitions and disposals (2,353,819) -
----------- ----------
Net cash outflow before financing (4,022,103) (2,044,313)
Financing
Issue of ordinary share capital 5,050,000 2,439,980
Cost of share issue (423,674) (93,145)
New loan notes 400,000 -
New short term bank loan 573,750 -
Repurchase of loan notes (50,000) -
Repayment of long term bank loan (1,311,435) -
----------- ----------
Net cash inflow from financing 4,238,641 2,346,835
----------- ----------
Increase in cash 216,538 302,522
=========== ==========
Accounting policies
Basis of preparation
The accounts have been prepared under the historical cost convention and on a going concern
basis.
Compliance with accounting standards
The accounts have been prepared in accordance with applicable accounting standards.
Basis of consolidation
The consolidated profit and loss account and balance sheet include the accounts of the company
and its subsidiary undertakings made up to 31 July 2005. The results of subsidiaries sold or
acquired are included in the profit and loss account up to, or from the date control passes.
Intra-group sales and profits are eliminated fully on consolidation.
Associated undertakings
The group profit and loss account includes the group's share of the loss made by its associated
undertaking, Academy Childcare Group Plc, from 1 August 2004 until 30 December 2004, when the
Group acquired the remaining share capital of Academy Childcare Group Plc. The results of this
undertaking were consolidated as a subsidiary from this date.
Turnover
Turnover represents the invoiced value of services provided net of VAT.
Goodwill
Goodwill is amortised over its useful economic life, currently estimated to be 20 years.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less depreciation. Depreciation is provided on all
tangible fixed assets at rates calculated to write off the cost less estimated residual value
of each asset over its expected useful life, as follows:
Freehold Building 2% straight line
Leasehold property Over the period of the lease
Fixtures, fittings & equipment 20% - 33.3% straight line
Motor vehicles 20% straight line
Operating leases
Rental payments under operating leases are charged to the profit and loss account on a straight
line basis over the period of the lease.
Investments
Fixed asset investments are stated at cost less any provision for permanent diminution in value.
Deferred taxation
Deferred tax is provided in full on timing differences which result in an obligation at the
balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates
expected to apply when they crystallise based on current tax rates and law. Timing differences
arise from the inclusion of items of income and expenditure in taxation computations in periods
different from those in which they are included in the accounts. Deferred tax is not provided on
timing differences arising from the revaluation of fixed assets where there is no commitment to
sell the assets. Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered. Deferred tax assets and liabilities are not
discounted.
Loss per share
The calculation of the basic loss per share and the diluted loss per share is based on the loss attributable to ordinary
shareholders of #2,942,380 (2004 - #1,338,555), divided by the weighted average number of shares in issue during the
year.
The weighted average number of shares used in the calculations are set out below:
2005 2004
Number of Number of
shares shares
250,560,104 156,773,501
Acquisitions
The net assets of the subsidiaries that were acquired
were:
Academy Headstart Happy Total
Group Group House and
Pinner
Nurseries
# # # #
Fixed assets 2,802,231 633,599 - 3,435,830
Debtors 81,871 51,866 - 133,737
Cash 18,162 52,570 - 70,732
Overdrafts - (225) - (225)
Creditors (3,691,209) (105,985) (47,195) (3,844,389)
---------- --------- --------- ----------
(788,945) 631,825 (47,195) (204,315)
Goodwill 3,365,878 950,725 845,895 5,162,498
---------- --------- --------- ----------
2,576,933 1,582,550 798,700 4,958,183
Less: existing investment in (718,247) - - (718,247)
associate
---------- ---------- --------- ----------
1,858,686 1,582,550 798,700 4,239,936
========== ========== ========= ==========
Satisfied by:
Issue of shares 1,545,610 100,000 100,000 1,745,610
Issue of loan notes - 70,000 - 70,000
Cash (including acquisition 313,076 1,412,550 698,700 2,424,326
costs)
---------- ---------- --------- ----------
1,858,686 1,582,550 798,700 4,239,936
========== ========== ========= ==========
Borrowing Facilities
The Group's bank borrowings are made available by Bank of Scotland under a combined credit facility of
#20,000,000. This includes an undrawn committed working capital facility of #2,000,000, the availability
of which expires between one and two years from the balance sheet date. In addition to this facility,
the Group has a long-term loan with Bank of Scotland amounting to #1,071,022. Bank borrowings are
secured by fixed and floating charges over the assets of the group and cross-guarantees between all Group
companies.
Loan notes are issued to fund the Group's operations and mature within two years of the balance sheet
date.
Transactions with directors
Leases; During the period the group was charged rent by Conduit Square Limited, a company in which L Davis and J Baker,
a former director of the company, were directors and shareholders, in respect of the leases on the following
properties:
Primary Steps Bedford #72,000 (2004 - #69,097)
Primary Steps Hemel Hempstead #22,000 (2004 - #22,000)
Primary Steps Ilford #250,000 (2004 - #239,919)
Primary Steps Milton Keynes #52,500 (2004 - #52,500)
Also during the year the group was charged #55,000 (2004 - #64,167) for the lease of Primary Steps East Sheen by Iron
Founders & Allied Trade Nominees Limited, a company controlled by J Baker.
Other transactions;
During the year #32,677 (2004 - #11,750) was paid to Adler Shine LLP, of which R Patel is a partner and R Harris a
consultant, in respect of professional fees.
Also during the year loans of #35,000 from Shortlands Investments Limited, a company controlled by L Davis, and #15,000
from John Baker trading as JB Consultancy, were converted to Ordinary shares in the company (see note 15). At the year
end #nil (2004 - #35,000) was owed to Shortlands Investments Limited and #nil (2004 - #15,000) was owed to John Baker
trading as JB Consultancy.
In addition, at the year end #218,364 (2004 - #120,000) was due to Conduit Square Limited.
Post Balance Sheet Events
Group and Company
On 10 August 2005 the Company announced that it had agreed to purchase the entire share capital of
Conduit Square Limited, a company wholly owned by Laurence Davis, John Baker and Frank Mountain, who
are all shareholders in the Company. Laurence Davis is also deputy chairman of the Company and John
Baker is a former director of the Company. The consideration was #2,233,262, payable in unsecured loan
notes.
On the same day the Company announced that it had agreed to purchase the freehold interest in the
Primary Steps Nursery at Upper Richmond Road, East Sheen from Iron Founders and Allied Trade Nominees
Limited, a company wholly owned by John Baker. In addition to agreeing to refinance the borrowings on
the property of #583,546, the Company agreed to pay a consideration of not greater than #257,579,
payable in unsecured loan notes.
Approval for the Conduit Square Limited acquisition was obtained at an extraordinary general meeting of
7 September 2005 and completion took place on 10 October 2005.
On 20 September 2005 the Company announced that it would be entering into a strategic partnership with
Ely Property Group Plc, a Dublin based investment property group of which Laurence Davis is the
non-executive chairman and a shareholder, in order to develop up to 25 Primary Steps branded creches in
Ireland over the next 2-3 years. Ely Property Group Plc have commenced marketing activity to identify
suitable sites for development.
Also subsequent to the year end the company acquired 75% of the share capital of Naughton-Green
Associates Limited in order to undertake a venture in the area of special educational needs.
Dividend
The directors do not recommend payment of a dividend.
Financial Information
The financial information contained in this preliminary announcement of audited
results does not constitute the group's statutory accounts for the year ended 31
July 2005. The financial information has been prepared using consistent
financial policies. The accounts for the year ended 31 July 2005 will be
delivered to the Registrar of Companies.
The statutory accounts for the year ended 31 July 2005 have been reported on by
the company's auditors; the reports on these accounts were unqualified and they
did not contain a statement under section 237(2) or (3) of the Companies Act
1985.
Copies of the full statutory accounts and notice of AGM have been despatched to
shareholders. The AGM will take place at 10.00am on 23 February 2006 at 25
North Row, London W1K 6DJ. Copies of this announcement and the full statutory
accounts are available, free of charge, from the registered office of the
company at Aston House, Cornwall Avenue, London N3 1LF, and from the offices of
the Company's nominated adviser, Corporate Synergy Plc at 30 Old Broad Street,
London EC2N 1HT.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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