Ann: Preliminary Final Report, page-4

Note from Petra below -

The result – clean beat

>Versus prospectus/guidance: Underlying statutory EBITDA was $31.7M, 40.9% ahead of prospectus ($22.5M) and in line with 18 August guidance ($30-32M).

>Final dividend: 13cps fully franked (Petra: 12cps). Implies 5.4% yield at yesterday’s $2.42 close. Record date 9 September.

>EPSA: 25.7c versus prospectus’ implied 18.7c (+37.0%).

>Adjusted operating cash flow: $28.6M (pre-reported via Appendix 4C on 23 July 2015).

>Adjusted gearing: net cash ~$57M (pre-reported 23 July 2015) as at reporting date.


Outlook – looks ahead of our existing estimates
>Commentary versus our forecasts: ACO has work in hand for FY16 equating to $120M in revenue based on existing enrolments at 1 July 2015. This is equivalent to our existing revenue forecast for FY16. Should completion rates equivalent to FY15 hold and ACO not enrol another student for the rest of the year, the company should hit our existing forecasts. If completion rates hold and they enrol incremental students between now and the end of FY16 (which we would deem highly likely!) the company is positioned to materially exceed our existing FY16 forecasts, which currently sit at EPS of 39.9c (current 6.2x FY16 PE).

>Guidance: Will be provided at the AGM end-October.

>Enrolments: 17,000 students currently enrolled. If predominantly VET FEE-HELP students this suggests material upside risk to our existing revenue forecast, but we need to confirm the split with the company.

>CTT 2014 funding contract cancellation: Still not resolved, but forgone revenue only ~$200,000

>AMA funding contract: Review of funding contract expected to be completed ‘shortly’. ACO is hopeful of returning to business as usual.


Other points to note
>Amortisation: materially higher than prospectus ($2.8M vs. $1.6M) due to acquisitions post prospectus and a higher proportion of intangibles being attributed to identifiable amortisation vs goodwill than forecast at the time of prospectus

>1Q15 observation: Implied ~$1.7M underlying EBITDA loss. On first pass looks attributable to the acquired NSW assets, Training Experts and Training Synergies. Not entirely surprising given the way NSW funding contracts played out in 2014. Will confirm and revert.