Wey Education Share Discussion Threads

[rampmeister] 31/10/2018 18:08

Net, they do say that forecast growth will be generated primarily from their core business which should make things easier. However, Wey don’t show the revenue split of A21/b2b and inter high so difficult to estimate how their 2018/19 forecast will be met. We know that Interhigh growth is expected to accelerate from last year’s 20% but that does suggest that A21/b2b will be expected to do the heavy lifting.
My conclusion based on the FY report is that 79% will be a tough ask. Happy to be convinced otherwise and sincerely hope they bring it off.

RM

[netcurtains] 31/10/2018 13:37

rampmeister: I'm no expert, but unless otherwise specified, one probably can say the current intake numbers are either BETTER or the SAME as the forecast given by the house brokers. We can see that the broker figures only came out with their revised estimate two days ago so they will know the current figures(one assumes). Does that make rational sense or have I gone awol??

Cheers Net.

[rampmeister] 31/10/2018 12:10

As above posts testify it’s not easy to come up with realistic numbers when we are looking at an immature company a long way off achieving critical mass.

Final results overall pretty good although they seem to have cooled their enthusiasm for overseas growth. At least o/s earning not factored into forecasts so anything there would be a bonus. My slight concern would be that there is very little mention in the outlook section about the first 2 months trading. September particularly and October are supposed to be good months when new intake is enrolled but all we have is a materially ahead comment compared to previous year. In my book materially ahead means + 10% which doesn’t sit well with forecasts particularly for inter high.
Maybe someone can help me with this - net?

RM

[netcurtains] 31/10/2018 10:41

garth: I strongly disagree. This year will be the FIRST full year of JUNIOR INTERHIGH... That could be 25% growth by itself.

Then there is the growth in local council contracts thanks to the merged sales teams.. this could add 25% growth by itself.

Then there is growth from the increase in money available for marketing and advertising - this can also result in 25% growth.

There there is growth from China and Africa. This also could result in about 25% growth.

To my mind we should be expecting 100% growth and the company (having learnt from past mistakes) is underplaying the current years growth.

[garth] 31/10/2018 10:20

microscope,

I understand that revenues are really growing - what I am talking about is organic growth. Do you know how much growth A21 did in the year before acquisition? That might be important in judging likely % growth the year after next - without further acquisitions.

Just been in too many Aim companies that raise cash to buy the lions share of their "growth" which then gets glossed up.

G.

[microscope] 31/10/2018 10:11

I see what you are trying to say Garth, but not quite right imho and your final sentence just doesn't work atall for me.

The acquisition's contribution being part of the growth is not irrelevant, but imho it is perfectly legitimate to include, as it too can be expected to contribute growth in future years. If it could not be so expected, then you would have had a point.

And the fact that the contribution is for less than 12 months means that it can be expected to add a full year's growth for 2018-19, while further growth in the other core businesses is clearly anticipated from the company's comments.

In coming to my personal guesss for 50% growth for 2018-19 I have deliberately erred on what i believe to be the side of caution, but I believe it to be comfortably achievable.

[garth] 31/10/2018 09:03

These two statements from the results, taken together are of interest.

They quote an average turnover growth of 66% per annum. But we know that is nice sounding but easy to achieve when ramping up in % terms from a low base.
In the current year they did 29.2% organic growth - less than half that headline grabbing figure. They rest was bought turnover with the acquisition.

They say that they want to maintain that 66% trend this year. Well, after achieving only 29% this year that ain't going to happen organically. Growth is slowing and is likely to continue to as size and revenue increase. They are only going to hit that target because of Academy 21 turnover they didn't have before.


"Group turnover of GBP4.2 million for the year to 31 August 2018 (2016/17 GBP2.4 million) represented growth of 72.6% year on year. It included partial contribution from Academy 21 which was acquired in December 2017. Underlying turnover grew by approximately 29.2%.

The Board has recently reviewed its plans and budgets for the coming year and while setting challenging targets which will see the group expand significantly, has decided to be very prudent in relation to the pace at which it assumes its overseas sales will grow. Average growth of group turnover in the last three years has been 66% per annum. The Board's ambition is to maintain that trend in the current year and beyond and any acceleration in overseas development should enhance this figure further.

All that said, even at 29% the growth is good. Lets just be clear and honest about where the most significant "growth" is coming from in the year ahead. The main growth will not be growth at all.

G.

[mcfly79] 30/10/2018 15:32

Agreed, good post microscope.

I’ve just seen another short note out by WHIreand yesterday. Doesn’t say much new but it does include a graph showing a split of the forecast revenues by division.

I’m pleased to see that they are now being very cautious with the timing of overseas revenue and that there is very little forecast for the current year. Looks like only £0.1m and £0.3m of the £7.5m is coming from Quoralexis and Infinity. The remaining £7.1m is coming from strong growth in the core Interhigh and B2B business.

[microscope] 30/10/2018 14:55

Dribble alert..... :)

Had a more detailed look at the results, taking into account the broker updates and comments from others, including here....

I agree with all the positives others have mentioned, such as cash, established businesses with high growth trajectory, and limited competition.

I still see plenty of challenges too, such as margins, a long time before international profits (China/Nigeria) are likely to be meaningful, notwithstanding some of the core courses are also now available globally.

However even taking an ultra cautious view, as McFly has sensibly mentioned, with a personal target of just 50% growth for me, if they really can cut marketing costs while improving margins then I think there is real value to be had.

There are still some relative unknowns, such as currency movements, as international growth develops for example.

At a market cap of something around 17 million, 4 million in the bank, which i expect to grow nicely, it seems i am not for the first time at odds with the market and this time - at 8 shares for a quid lol - have picked up a very small holding.

[seanworld] 29/10/2018 20:30

Thanks McFly79 for the updated WHI forecasts.


Anywhere close to these est. will indeed lead to a substantially higher price next year. The pace of this expansion is impressive and I do agree with netcurtains upwards from here. 4 million in the bank the company is positioned well in my opinion to scale up the core business.

Pleased with progress.

[mcfly79] 29/10/2018 19:31

Catching up after a busy afternoon.

On a fully diluted basis the revised profit before tax figures of £1.31m and £3.3m equate to 0.83p eps this year and 1.89p next year.

That puts us on a PE of 15 for this year and 6.6 for next year. Stripping out the cash reduces that to about 12 for this year and 5 for next year.

If the company can meet those forecast the current share price will be far too cheap. It comes back to whether people believe the revised forecast.

I'm happy to hold. The direction of travel of the company is clearly good, with turnover growth of 50%, 60% and 73% in the last three years, and with strong growth looking highly likely for the current year (let's see if the forecasted 79% growth can be met). The company is also very well funded and the £4.2m cash balance is forecast to grow from here. That gives the company flexibility if the right opportunity comes along (the A21 acquisition for £1.6m is now looking like a very good piece of business).

There is also nothing in the price for China. This has been delayed but the figures involved could dwarf the rest of the business if it works out.

Edit: updated eps figures for latest WHIreland note.

[netcurtains] 29/10/2018 14:25

come on guys what is wrong with you lot. No one ever believes broker figures to start with so the fact they get missed is neither here nor there. What actually does count in the REAL WORLD of REAL PEOPLE is the fact that they have been averaging 60% growth a year, it says it all. all else is just words words words you might as well be dribbling nonsense. Dribble nonsense all you want,


results good, price heading north, things set fair for next 2 years! All upwards from here on.
this is about the best position to get into this company you're going to find.

[daz] 29/10/2018 13:29

After such a savage profit downgrade, I think a substantial rally is unlikely in the near term, as the revenue shortfall is unlikely to be replaced. The downgrade shows the operational gearing going into reverse.
Like McFly says, I do hope WHI and the company have been cautious, as another revenue miss would likely mean another substantial profit downgrade as the same operational gearing would probably apply

[superadams] 29/10/2018 13:24

Looks like the new advertising initiatives have met their Waterloo. Best stick with social media etc.

[bones] 29/10/2018 12:11

WHI forecasting reduced profit before tax of GBP 1.31m (down from 1.95m) for FY2019 and GBP 3.3m (down from 5.2m) for FY2020.

WHI comments have an air of caution all over them given recent events at WEY but note that the overseas developments could be either negative or positive and also that, with reduced marketing spend, the main business has the potential to scale up profits.

The impression given to me is that WHI are slightly unsure of how things might turn out hence their downgrades.

[qs99] 29/10/2018 10:05

So how much EBITDA will it do under new note this, next and year after? What is the "drop through" from increasing revenues? If not making more than £1.5-2m EBITDA in short order then c.£17m market cap for the time being may seem "about right" for many, until the board start delivering on those higher operational leveraged EBITDA numbers....DYOR and all IMO..

[microscope] 29/10/2018 09:58

McFly thanks for the thoughts, and the note info, have they adjusted ebitda and eps as well? Not much mention of margins in the report? They'd have to go some on margins, even on near doubled turnover, to increase eps by the amount previously forecast (given more shares, options etc in issue as well).

[seanworld] 29/10/2018 09:44

Thanks for the WH revised figs
McFly, appreciated.

Not adding at present but pleased with current progress.

[netcurtains] 29/10/2018 09:30

Mcfly79: you're trying to backward guess why the price fell - pointless, the sellers were simply not BELIEVERs. This is going to grow with or without them. Let them go!

[babbler] 29/10/2018 09:28

They said in the rns they are being cautious didn't they?!?

[mcfly79] 29/10/2018 09:21

net,

79% growth from £4.2m to £7.5m this year (18/19) and 60% growth from £7.5m to £12m next year (19/20).

[mcfly79] 29/10/2018 09:16

I hope that the company really have been cautious in guiding these forecasts and that we will not have any further downward revisions.

Investors may focus on the downward revisions and need some convincing that the new forecasts are realistic.

WHIreland's first detailed note was in January 2018. At that point the latest results were to the year ended 31 Aug 2017 and turnover growth had been 60% for the year. At that stage imagine if the company had guided 60% revenue growth for the next three years rather than the higher figures that were put out. (60% still being a fantastic growth rate).

We'd now be in a position where last year's figures came in ahead of forecast with a 73% increase and the company was confident of achieving 60% for the current year. How different a picture that would paint.

Perhaps this is being harsh on the company. I know this is oversimplifying things and things are easy with hindsight but the fact remains that going forward the company should start to under promise.

[netcurtains] 29/10/2018 08:55

Mcfly79 is the 80% growth for 2019 or is if for 2020?

[mcfly79] 29/10/2018 08:51

WHIreland have produced a short note!

Revenues for the current year and next year are now forecast at £7.5m and £12m (representing growth of 79% and 60% respectively). This reflects a more cautious assumptions for overseas growth.