Wey Education Share Discussion Threads

[zulu_principle] 15/11/2019 09:35

Agreed - good summary above.

Revenue is not overstated as prepayments don't appear on the sales line until the service is actually delivered (the accountant's counter-intuitive double entry is "DR Cash and CR Liabilities" - when the service is actually delivered you simply reduce the liability and recognise the sale).

Also no detrimental impact on cash balances unless the level of prepayments drops in future years - if sales are growing this is unlikely to happen.

[smithie6] 14/11/2019 19:49

Im not an accountant & I dont claim to be an accnt expert
but here are some opinions/replies if useful for you


---
1) "So, just to clarify, do you think the £1.8mln is the same mix as the £2mln at interim"

yes
----

2. "its just that they haven't included the breakdown like they did at interims ?"

..talking about the audited final results of any co. (as logged at co. house), & not the prelims released before (I think) auditing & registering at co. house

any audited 'final' results will/should always give at least as much data & breakdown of numbers; & usually more than any interim results. (& noting that interim results of most AIM cos are not audited results, only the finals are)

3) "So does this mean that the cash could be 'flattered' by some of that £1.8mln ?"

...this communicating/answering is getting to be hard work !
...an uphill struggle

you said that you knew from the interim results that various clients paid in advance, before doing all of a studying/learning course, & that you had seen the different numbers

so, of course, "cash held" means "cash held" !!

& 'is flattered' by advance payments

but
the liability to have to provide the services/teaching to clients in the future is declared

so if you want to do any calcs for nett values then you can, but the accounts probably already reports that & saves you the effort
----

myself I try to look at the big chunks of money and what it shows...
there can always be small ups & downs in certain numbers depending if 1 big customer has paid or not at that moment (for cos other than WEY) ; or for WEY whether annual course students pay before or after the period for interim results
...in that case the year to year change/trend is the thing to include in any analysis, imo

[yump] 14/11/2019 18:31

Thanks for the explanation - I wasn't trying to diss the shares. The prospects in a year or so look good. Someone raised a query about the £1.8mln earlier and I wondered what it was.

So, just to clarify, do you think the £1.8mln is the same mix as the £2mln at interims, its just that they haven't included the breakdown like they did at interims ?

I didn't realise that you can't book revenue where money has been received, but the work not done yet. I know mark to market is a big no-no though.

So does this mean that the cash could be 'flattered' by some of that £1.8mln ?

[smithie6] 14/11/2019 18:02

so

the in a previous recent post by someone saying

"So I think its likely that 1.8mln is the same mix, will include revenue for services that have not yet been delivered - "

"The implication is that a big chunk of the £6mln revenue" ('is in fact 1.8M for services that have not yet been delivered') " has been booked as revenue"

ie. ' that the 6M turnover number includes 1.8M for work that was not done in the reporting period, but will be done in the future. falsely inflating the turnover number'

uh. no.
completely NOT true.

accounting rules would not allow it & the auditor also checks to make sure it doesnt happen

turnover in the future is treated as turnover in the future when the service has been provided & can be charged for

[smithie6] 14/11/2019 17:57

money paid in advance for work not yet done
is not recognised as turnover, yet, since the work hasnt been done yet

(deferred revenue)

and a liability exists in the accounts since the work hasnt been done yet, so there is a risk of X that it might not be done (the services are owed to the customer) & hence there is possible liability to re-pay the money


to help understand the numbers in any co. accounts imo its good too look at
- shareholders assets (= nett assets)
- tangible net assets

& the change in them from 1 year to the next

[yump] 14/11/2019 14:00

I've been having a nose around this on the basis of potential long term topline growth and it always seemed a bit pricey.

The unspecified liability of 1.8mln is a bit of a mystery. At interims there was an entry of £2mln comprising: "Accruals, deferred income, receipts in advance and refundable deposits".

So I think its likely that 1.8mln is the same mix, will include revenue for services that have not yet been delivered - presumably forward contracts. Accruals is stuff that is owed but not yet paid. No idea what refundable deposits is without them saying. The lack of explanation is a bit irritating.

Worst case is the cash easily covers the 1.8mln of liability.

Presumably somewhere in past accounts there is an explanation of the way they do business wrt contracts and payments, but I haven't found it yet.

The implication is that a big chunk of the £6mln revenue has been booked as revenue, but as the services haven't yet been delivered, there has to be an entry in liabilities. Not entirely sure about that as I'm not an accountant (but have read lots of accounts !)

[smithie6] 14/11/2019 12:01

or maybe buying 1 share in certificate form

to
- automatically receive the paper annual report (assuming WEY produces on paper) & any other papers/comms posted to shareholders

- appear on shareholder list, to easily get in to the AGM

[666james] 14/11/2019 11:03

I have just looked at the trades yesterday and at 4.35pm one share was traded at 11.20p. Is someone "balancing" their books with such a small purchase?

[abergele] 12/11/2019 17:39

Perhaps those sells are all priced into the current situation? lets hope so..
gla.lth's

[zulu_principle] 12/11/2019 17:24

james - good point. I'm hoping the increase is due to prepayments rather than shunting the final settlement of reorganisation costs into 2019-20. Both possibilities flatter the year end cash balance but at least there's no subsequent cash outflow associated with prepayments (apart from any refunds). A trading update before January's AGM should clarify matters.

[tenniselbow] 12/11/2019 16:20

Schools should be making 40% bottom line so could be plenty of up side

[smithie6] 12/11/2019 15:11

yet another exec. director !....arghhh !

for a co. with a low turnover (6M) & adj. PBT of only ~300k there seem to be a lot of exec. dirs. (is it 4 or 5 with this new one added in !??)

( while many small AIM cos. have 2 dirs.
the MD and the FD & even 2 is a big weight on the gross profit of a small AIM co.

although on the plus side I guess its a sign that the bod is confident that good turnover growth will continue

---

reading the job description
a) London/South east based

?
I thought the bod was based in Wales ?

dont exec. directors normally have offices in the same building so they can work together ??

b) job description looks quite big.
what will the rest of the bod do ?, since it looks like this newbee will be doing most of the work !!

c) WEY closed their London facilities

I assume that no one there was considered suitable. :-(

(maybe London location is to in-part use them in a sales role to HQ offices of possible clients in London...ah, & to perhaps liase/meet with Govt. officials

& to hop on/off international flights (the job advert mentions overseas growth/sales)
which is not so easy from the Abergavenny/Crickhowell area in Wales

[jameshughes1980] 12/11/2019 14:09

I think that’s a good assessment Zulu. I haven’t looked at detail but could it be the increase in liabilities is increased customer prepayments. I read another review which suggested a drive to get fees in up front rather than paying monthly. Cash in Pre year end also. If this is the case suggests positive working capital and will benefit cash perspective if holds through future growth phases

[zulu_principle] 12/11/2019 13:01

Thanks for your various comments. I felt the exceptional costs (£436k) were pretty well covered in Notes 4 to the accounts and the change in direction + loss arising on discontinued ops were adequately explained in the general tabulations / comments parts of the announcement. However I agree some extra views on these points in the Stockopedia analysis might have provided additional clarity

What did concern me (per my earlier post yesterday - No. 2140) was the increase of £1.1m in payables with no accompanying explanation. I was surprised this wasn't picked up in the Stockopedia analysis as I have an unworthy suspicion it's helped flatter the year end £5m cash balance.

I'm also less than happy with the apparent largesse in handing out share options in recent months - I'm assuming these were contractual obligations and therefore unavoidable but they did give me occasion to review my holding a bit more rigorously last month.

I'm hoping we don't attract a predator. Selling out at 25p would give a very nice short term profit but I think we might be better served by allowing the business to develop and (hopefully) enjoying a much higher payback in the medium term.

Bottom line - I'm a long term holder and WEY is one of my larger investments. I'll continue to accumulate for now but (as always) my views may well change with events as more information about trading performance emerges.

[netcurtains] 12/11/2019 11:27

What do you think the new Director of Education will be doing (advert been out for a couple of weeks)....Does talk about expanding overseas as well as UK. Interesting appointment:

[microscope] 12/11/2019 11:21

Thanks Zulu, very similar to my own thinking. Stripping out all the one-off nasties and accepting the 300k+ profit as a base for future years, a 50% growth would still leave it around 500k next year assuming improved margins.

Hopefully as Bones has said, marketing is no longer treated as exceptional. Would be useful to find that out.

A takeout would unlock value, but in the current climate I think it would be nearer 20-25 million (about 15-18p) a share.

[cyberbub] 12/11/2019 11:10

What the Stockopedia guy doesn't mention is the potential for acquisition by a bigger fish. Surely that would be at 25p minimum?

[abergele] 12/11/2019 11:03

Well I bought in a year back perhaps,, suffered a fall back but never sold, and have bought 2 x lots since, and am slowly into profit now,but as I'm here for the longer term I can quietly wait for 15p maybe, down the line next year, and higher as the broker says into the future,,more interest than at the B/Soc, or Banks will ever give out.. so buy and hold, sit back and enjoy the ride as the management say
''Accelerate Growth'',that'll do me Tommy..gla lth's

[mjcrockett] 12/11/2019 10:47

Zulu, The Stockopedia piece makes some good points. But, it makes no mention as to why there were significant one-off exceptional costs in 2019 nor that the business has undergone a significant change in recent months. Key points for me in considering investment here.

[netcurtains] 12/11/2019 10:26

I guess we'll get an update from WEYs brokers soon; possibly concerning the "accelerating growth".

[texaschaser] 12/11/2019 09:41

He’s probably derisking as you are buying. Same technique over and over

[netcurtains] 12/11/2019 08:31

Its nice to see people beginning to "get it"... The UK is a world leader in Education and on-line education is growing fast.

[smithie6] 11/11/2019 21:24

(pretty good logical and argued/justified post
9/10

but
"ton" is spelt incorrectly
& if my memory is correct, one can't/shouldn't put a comma right before the word "and"



so, maybe there is a massive unfilled demand for all of us to improve our written skills, partly since X decades after leaving school/classes a short refresher could be very beneficial, including to our careers. (who likes to see spelling mistakes or other simple mistakes ?, no boss

the potential market (& markets) is very big

----

and as an aside, I liked the bod comment in the results that the teaching English section is doing well

that has the potential to be 'the gorilla in the room'

(the global mkt to learn, or improve, English is massive)