IQE
24/02/2016 08:54
FLLYR
PRICE SENSITIVE
REL: 0854 HRS Intueri Education Group Limited
FLLYR: IQE: IQE: Intueri 2015 Preliminary Results Announcement
INTUERI DELIVERS STRATEGIC REVENUE GROWTH; RESULTS IMPACTED BY SIGNIFICANT
REGULATORY AND OPERATIONAL CHANGES
o Intueri Education Group (Intueri) has reported a preliminary 2015 full year
result in line with its February 2016 guidance, with Underlying EBITA of
$21.5m (Prospective Financial Information (PFI) $30.1m; FY 2014 $18.3m)
o Total revenue was $91.6m, up 6% on FY 2015 PFI and an increase of 40% on FY
2014 with particularly strong growth in the Online segment and a positive
contribution from acquisitions
o Intueri has taken impairments totalling $59.9m, primarily against Quantum
Education Group (Quantum) of $53.1m, but also the Dive School and the Design
and Arts College
o Including these non-cash impairments, Intueri reported a Net Loss After Tax
of $48.5m
o Net Profit After Tax Before Amortisation of Acquired Intangibles, Change in
Contingent Consideration and Impairments (NPATA) of $14.6m was 26% below PFI
of $19.8m but 39% ahead of FY 2014 ($10.5m)
o Operating cash flow for FY 2015 was $12.5m, below PFI of $24.9m, but
slightly above FY 2014
o Debt increased from $11.4m to $52.7m, primarily due to acquisitions
o The Board has agreed to suspend dividends while the Tertiary Education
Commission (TEC) reviews are underway
2015 Financial Summary
See attached pdf file
Refer endnote 2 for impact of acquisition timings on 2015 and 2014 results.
Intueri has today reported revenue growth across all its segments and an
underlying EBITA result in line with February 2016 guidance for the year
ended 31 December 2015 (FY 2015). The result includes contributions from
acquisitions, and reflects the implementation of the company's quality
strategy and the change in the regulatory environment since the company
listed.
REVENUE
A 40% year on year increase in total revenue to $91.6m (6% ahead of PFI) was
primarily driven by an outperformance in Intueri's Online segment, which
comprises the Australian-based, The OCA Group. Online revenue increased 174%
year on year and was well ahead of PFI due to a combination of growing demand
for online learning, more courses on offer and more focused sales and
marketing activity.
Domestic revenue increased 16% year on year, mainly due to additional revenue
from acquisitions. The 24% shortfall against PFI can be largely attributed
to the softer performance from Quantum due to the implementation of Intueri's
quality standards to ensure the right students are doing the right courses
for the right reasons. This has resulted in stricter enrolment criteria and a
corresponding 34% decrease in student numbers at Quantum from FY 2014.
International revenue was up 13% on FY 2014, matching the reported year on
year growth in international student visas approved in New Zealand.
Additional investment has been made to increase capacity and broaden the
course offer for international students. International revenue was 4% below
PFI due to changes in programmes at the Dive School and a marginally slower
uptake than forecast at other schools.
IMPAIRMENTS, PROFIT AND LOSS
Earnings Before Interest, Tax, Impairment and Amortisation of Acquired
Intangibles (EBITA) increased 22% to $21.9m, generating a solid EBITA margin
of 23.9%.
The Board believes Underlying EBITAii, which excludes significant
non-recurring items such as acquisition costs and the one-off $1m change to
Academy Group deferred consideration, provides the most appropriate measure
of Intueri's operating performance and it is the basis for the company's full
year guidance. Underlying EBITA was $21.5m, in line with February 2016
guidance but below PFI of $30.1 million due to the impact of lower earnings
from the Domestic segment and higher costs.
In November, Intueri was advised of TEC reviews into its Quantum and Dive
School colleges in New Zealand, primarily focused on legacy issues prior to
Intueri's ownership. Enrolment restrictions have been put in place at
Quantum which are expected to have a significant impact on the future
financial performance of the school. Therefore, the Board has taken a full
impairment on Quantum Group (including Learntree) of $53.1m, as required
under International Financial Reporting Standards. Quantum is forecast to
make a loss in 2016 before returning to profitablity in 2017 once the
expected annualised benefits of a strategic review are realised, and when a
partial reversal of the impairment may be considered.
In addition, the Board has taken impairments totalling $6.8m, on the Dive
School ($3.9m) and the Design and Arts College ($2.9m). Performance at both
schools has been weaker than anticipated, with legacy issues continuing to
impact on the Dive School, and a slower than expected rebound in enrolments
at the Design and Art School in Christchurch following the 2011 earthquake.
All other Domestic colleges delivered a satisfactory performance, whilst the
strong Online and International profit performances partially offset the
profit shortfalls of the Domestic sector.
Costs increased primarily due to the increased size of the group following
acquisitions, the continuing implementation of the quality mandate, and
investment into building a strong organisational infrastructure. A strategic
review has commenced to identify and realise cost savings across the group.
Including the non-cash $59.9m impairments, the company reported a Net Loss
After Tax of $48.5m. Net Profit After Tax Before Amortisation of Acquired
Intangibles, Change in Deferred Contingent Consideration and Impairments
(NPATA) was $14.6m, 39% ahead of FY 2014 ($10.5m), but below PFI of $19.8m.
DIVIDEND
Intueri's Directors have agreed to suspend dividends until such time as the
TEC reviews are completed.
BALANCE SHEET, CASH AND CAPITAL
Net debt increased to $52.7m as at 31 December 2015 mainly as a result of
strategic acquisitions including the outstanding 50% shareholding in The OCA
Group and the 100% acquisitions of Information Technology Training Institute
in April 2015 and the New Zealand Institute of Sport and New Zealand College
of Massage in November 2015, which settled two months later than anticipated.
Intueri has a supportive relationship with its bankers and has recently
agreed indicative terms for an $80m, 3-year refinancing of debt facilities,
primarily to allow for the deferred consideration costs for the acquisitions
of The OCA Group, the New Zealand Institute of Sport and the New Zealand
College of Massage.
The company continues to generate solid cash flows, with a stronger second
half resulting in FY 2015 cash flow from operations of $12.5m. The OCA Group
continued to periodically require additional working capital, due to its
rapid growth and the timing of VET FEE-HELP (VFH) payments.
STUDENT ENROLMENTS
The company has also reported on Net Enrolments, which is defined as students
who have successfully enrolled and have gone past the withdrawal period
during which they could be eligible for refund.
See attached pdf file
Total Net Enrolments grew 18% to 10,345 students in FY 2015, with pleasing
growth in both Online and International enrolments and a decrease in Domestic
enrolments as expected, primarily due to the lower enrolment numbers at
Quantum. Since its prospectus was issued, Intueri has changed Quantum
reporting measures to align with all other colleges, moving from gross to
net enrolments.
MANAGEMENT COMMENT AND 2016 OUTLOOK
Intueri CEO, Mr Rob Facer, said: "Intueri produced revenue growth ahead of FY
2014 and a result in line with our February guidance, although behind PFI.
Our focus has been on improving the performance of all our schools while
continuing to implement our quality mandate. We also made a number of
strategic investment decisions during the year which we believe strengthen
our market position and will add long term value to our company.
"The last quarter of the year delivered a number of challenges, with a more
focused regulatory environment and increased oversight in both Australia and
New Zealand. In November, we were advised of TEC reviews into our Quantum and
Dive School colleges in New Zealand, and in December, the Australian
government announced it was undertaking a review of the VFH funding system
and that 2016 funding would be capped for all providers while this was
underway. We are working closely with regulators and expect to have an
outcome to the TEC reviews by the middle of 2016.
"TEC has confirmed funding for 2016 which is 6% ahead of the level of funding
consumed last year, but with a restriction on the number of unfunded students
who can be enrolled at Quantum in 2016. As previously advised, this will
impact 2016 annual course fee revenues by approximately $8 to $9m. We have
therefore commenced a strategic review to align capacity at Quantum with the
reduced student numbers and to identify and realise cost savings across the
wider group.
"Our focus in 2016 is to align our portfolio to the new funding arrangements,
build on and improve the performance of all our schools and identify organic
growth opportunities for our existing colleges."
Chairman of Intueri, Mr Chris Kelly, said: "It has now been 21 months since
the publication of Intueri's prospectus. While we have made good progress on
a number of our objectives, significant operational and regulatory changes
have impacted on our original expectations and projected financials for FY
2015.
"As forecast, we have seen good growth in our Online and International
segments, where we have high performing and well regarded schools. We have
also seen good performances from a number of our domestic colleges and
realised additional earnings from strategic acquisitions, however these have
been offset by the disappointing performance of Quantum as we implemented our
quality strategy and introduced stricter enrolment criteria. This has meant
that our growth, while positive, has been lower than expected at the time of
listing.
"A strong governance structure has been put in place across the Intueri group
and the Board is fully supportive of management's quality focus as we look to
evolve and adapt to meet the new operating conditions.
"We have a long term strategy, and while this continues to evolve to meet
the changing conditions, we believe the key fundamentals underlying Intueri's
potential to build its position in the vocational education market remain
strong."
This Preliminary Results announcement should be read in conjunction with the
FY 2015 Preliminary Financial Statements and the FY 2015 Preliminary Results
Presentation.
-Ends-
For more information, please contact:
Rob Facer
Chief Executive & Director
Tel: +64 (0) 27 675 3538
[email protected]
Rod Marvin
Chief Financial Officer
Tel: +64 (0) 27 499 7822
[email protected]
The FY 2015 financial statements are currently being audited and the
Directors anticipate receiving an unqualified opinion from the auditors in
respect of them.
Financial results reflect earnings from businesses from the time of
acquisition. FY 2015 includes a full twelve months for all colleges except
for ITTI which was acquired on 1 April 2015 and NZIS which was acquired on 30
November 2015. FY 2014 includes seven months of Quantum (acquired 23 May
2014) and nine months of OCA (acquired 31 March 2014). It does not include
ITTI or Academy, which was acquired in December 2014.
The Board has used Underlying EBITA, being EBITA excluding significant
non-recurring items such as Acquisition Costs and the one off $1m changes to
Academy deferred consideration, as the basis for its full year forecast
guidance as it believes this provides the most appropriate measure of
Intueri's operating performance. EBITA, Underlying EBITA and EBITDA are
non-GAAP measures. More detail on the financial results and reconciliation of
non-GAAP to GAAP measures is available in the Preliminary Results
Presentation released to the market on 24 February 2016 and available on the
company website www.intueri.co.nz.
NPATA is Net Profit After Tax Before Amortisation of Acquired Intangibles,
impairments and changes in deferred contingent consideration. The Board
believes NPATA provides a better comparable measure of its operating
performance and cash flow and it is the basis for the Intueri dividend
policy.
Gross Enrolments are all students who completed an enrolment application
End CA:00278210 For:IQE Type:FLLYR Time:2016-02-24 08:54:36
