NORD Nord Anglia Education Ordinary Shares (delisted)

HONG KONG, April 27, 2017 /PRNewswire/ -- Nord Anglia Education, Inc. (NYSE: NORD), the world's leading premium schools organization, today announced financial results for the second quarter of fiscal 2017, the three month period ended February 28, 2017.

Second quarter FY2017 highlights (compared to second quarter FY2016)

• Average full time equivalent students (FTEs) increased 7.1% to 37,194
• Revenue increased 6.7% on a reported basis and 8.5% on a constant currency basis to $259.5 million
• Adjusted EBITDA was unchanged on a reported basis and increased 2.2% on a constant currency basis to $66.9 million
• Adjusted Net Income increased 4.5% to $28.9 million
• Diluted Adjusted EPS increased 2.9% to $0.27

Year to date February 28, 2017 highlights (compared to year to date February 29, 2016)

• Revenue increased 6.8% on a reported basis and 8.5% on a constant currency basis to $520.5 million
• Adjusted EBITDA decreased 0.6% on a reported basis but increased 1.3% on a constant currency basis to $130.2 million
• Adjusted Net Income increased 2.6% to $54.9 million
• Diluted Adjusted EPS increased 1.2% to $0.52

"Nord Anglia Education delivered another strong performance in the second quarter," said Andrew Fitzmaurice, CEO of Nord Anglia Education. "We continue to add high quality schools to the Nord Anglia family and are pleased to welcome the Prague British School, in addition to the recent announcement of our greenfield school in Dublin, Ireland and an additional campus in Guangzhou, China. We have achieved a great deal as a public company, which has been an important period in Nord Anglia Education's development as the world's leading premium schools organization."

Second Quarter FY2017 Results

Average FTEs increased 7.1% to 37,194 in the three months ended February 28, 2017 ("Q2 FY2017") from 34,737 in the three months ended February 29, 2016 ("Q2 FY2016").  Average capacity and utilization were 54,813 seats and 68%, respectively, in Q2 FY2017 compared to 49,057 seats and 71%, respectively, in Q2 FY2016.

Revenue increased 6.7%, or $16.3 million, to $259.5 million in Q2 FY2017 from $243.2 million in Q2 FY2016.  This increase was due primarily to higher revenues from premium schools, partly offset by the impact of the strengthening US dollar on our premium schools revenue. On a constant currency basis, revenue increased 8.5% in Q2 FY2017 from Q2 FY2016. Revenue per FTE was $7.0k in Q2 FY2017, unchanged from Q2 FY2016.

Gross profit increased 2.1%, or $2.1 million, to $100.4 million in Q2 FY2017 from $98.3 million in Q2 FY2016. Gross profit margin was 38.7% for Q2 FY2017 compared to 40.4% for Q2 FY2016.  The reduction in gross profit margin in Q2 FY2017 was primarily due to the additional rent included in cost of sales from the sale and leaseback and the new school openings in September 2016, partially offset by tuition fee increases in excess of cost inflation and increased FTEs within our schools.

Selling, general and administrative (SG&A) expenses increased 9.0% to $50.5 million in Q2 FY2017 from $46.4 million in Q2 FY2016. The increase in SG&A expenses was mainly due to the operating expenses of the new schools opened in September 2016, pre-opening costs of the new greenfield schools expected to open in September of 2017 in Abu Dhabi, Bangkok and Hong Kong, Global Campus related costs and Sarbanes-Oxley project costs.

Other (losses)/gains changed by $7.9 million to a loss of $2.5 million in Q2 FY2017 from a gain of $5.4 million in Q2 FY2016.  In Q2 FY2017, other (losses)/gains included $0.7 million of non-cash foreign exchange losses on intercompany balances and $1.8 million non-cash losses on financial instruments, including a $0.2 million loss on the cross currency swaps and a $1.6 million loss on embedded lease derivatives.  In Q2 FY2016, other (losses)/gains included $6.7 million of non-cash foreign exchange gains on intercompany balances and a $1.3 million loss on embedded lease derivatives and other options.

Adjusted EBITDA was unchanged at $66.9 million in Q2 FY2017 from Q2 FY2016.  On a constant currency basis, adjusted EBITDA increased 2.2% in Q2 FY2017 from Q2 FY2016. 

Net financing expense decreased 23.2% to $17.7 million in Q2 FY2017 from $22.9 million in Q2 FY2016. The decrease was primarily due to an unrealized loss of $2.7 million in Q2 FY2017 compared to an unrealized loss of $6.0 million in Q2 FY2016, both due to the revaluation of the CHF 200.0 million bonds.

Adjusted Net Income increased 4.5% to $28.9 million in Q2 FY2017 from $27.7 million in Q2 FY2016.

Balance Sheet and Cash Flow

Cash used in operating activities was $128.5 million for the six months ended February 28, 2017, compared to $61.8 million for the six months ended February 29, 2016.  Cash used in operations increased by $75.2 million from $12.6 million for the six months ended February 29, 2016 to $87.8 million for the six months ended February 28, 2017 as a result of working capital changes, primarily a reduction in trade and other payables.  The increased outflow is primary due to the impact of a bigger cost base as the business has grown, a one-off cash payment relating to our new bilingual school in China of $11.3 million and the deferral of some payments in the prior fiscal year from the three months ended February 29, 2016 to the three months ended May 31, 2016.  Interest paid decreased from $31.9 million to $28.0 million and tax paid decreased from $12.4 million to $10.0 million for the six months ended February 29, 2016 and February 28, 2017, respectively.  The reduction in interest paid for the six months ended February 28, 2017 was primarily from our revolving credit facility remaining undrawn compared to a drawn balance of $74.0 million in the six months ended February 29, 2016.  The outflows were in line with expectations.

Cash used in investing activities was $40.3 million for the six months ended February 28, 2017 compared to $70.1 million used in investing activities for the six months ended February 29, 2016.  The outflow for the six months ended February 28, 2017 includes $13.5 million deferred consideration for our schools in Vietnam and Cambodia, $36.7 million of capital expenditure in relation to the new Houston campus, the new China bilingual school in Shanghai and general maintenance capital expenditure, offset by sale proceeds of $8.9 million in relation to the sale of the old Houston campus.  The outflow for the six months ended February 29, 2016 was due primarily to the $27.9 million final payment for the Meritas acquisition and $43.0 million of capital expenditure.

Cash used in financing activities was $5.8 million for the six months ended February 28, 2017 compared to cash generated from financing activities of $67.3 million for the six months ended February 29, 2016.  The outflow for the six months ended February 28, 2017 was due to repayment of borrowings of $4.6 million and the payment of dividends related to non-controlling interests of $1.3 million.  The inflow for the six months ended February 29, 2016 was primarily due to net drawings on the revolving credit facility of $74.0 million.

Cash and cash equivalents (excluding the bank overdraft on our notional pooling accounts) as of February 28, 2017 were $225.7 million, compared to $226.0 million as of February 29, 2016.

Cash and cash equivalents (including the bank overdraft on our notional pooling accounts) as of February 28, 2017 were $188.9 million, compared to $155.1 million as of February 29, 2016.

Recently Completed Acquisitions

On March 21, 2017, we completed the acquisition of the Prague British School in Prague, Czech Republic.  The consideration of $21.0 million for the school represents 6.3x expected fiscal 2017 EBITDA. 

Conference Call Details

Nord Anglia Education will host an investor conference call today at 8:00 am ET.  Interested parties are invited to listen to the conference call by dialing the following numbers:

An audio replay of the conference call will be available through May 4, 2017 via the investor relations section of nordangliaeducation.com or by dialing the following numbers:

A live webcast of the conference call will be available via the investor relations section of nordangliaeducation.com and will be archived on the website.

Forward-Looking Statements

This press release includes statements that express our current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, "forward looking statements".  These forward looking statements can generally be identified by the use of forward-looking terminology, including the terms "believe," "expect," "may," "will," "should," "seek," "project," "approximately," "intend," "plan," "estimate" or "anticipate," or, in each case, their negatives or other variations or comparable terminology.  These forward-looking statements include all matters that are not historical facts.  They appear in a number of places throughout this press release and include statements regarding our intentions, beliefs or current expectations concerning among other things, anticipated school openings, our results of operations, financial condition, liquidity, growth prospects, strategies and the industry in which we operate.

By their nature, forward-looking statements relate to events that involve risks and uncertainties or that depend on circumstances that may or may not occur in the future.  Factors or risks that could cause our actual results to differ materially from the results we anticipate include, but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (2) the inability to complete the proposed merger due to the failure to obtain shareholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger; and (3) the failure to obtain the necessary financing arrangements set forth in the debt and equity commitment letters delivered pursuant to the merger agreement.  Additional risks and uncertainties include, but are not limited to, those under "Risk Factors" in our most recent Annual Report on Form 20-F filed with the SEC.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, liquidity, growth prospects, strategies and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this press release.  In addition, even if our results of operations, financial condition, liquidity, growth prospects, strategies and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods.  Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements.  Any forward-looking statement that we make in this press release speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.

Non-GAAP Supplemental Financial Measures

We use EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Ordinary Share, as supplemental financial measures of our operating performance. We define EBITDA as (loss)/profit for the period plus income tax expense, net financing (expense)/income, exceptional items, impairment of goodwill, amortization and depreciation, and we define Adjusted EBITDA as EBITDA adjusted for loss/(gain) on disposal of property, plant and equipment, share based payments, realised gains or losses on hedging agreements and other items. We define Adjusted Net Income as Adjusted EBITDA adjusted for depreciation, net financing expense, income tax expense, tax adjustments and non-controlling interests. We define Adjusted Earnings per Ordinary share as Adjusted Net Income divided by the weighted average ordinary shares outstanding for the period.  EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Ordinary Share are not standard measures under IFRS. These measures should not be considered in isolation or construed as alternatives to cash flows, net income, earnings per ordinary share or any other measure of financial performance or as indicators of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. We may incur expenses similar to the adjustments in this presentation in the future and certain of these items could be recurring. EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Ordinary Share as presented herein may not be comparable to similarly titled measures presented by other companies. 

About Nord Anglia Education, Inc.

Nord Anglia Education (NYSE: NORD) is the world's leading premium schools organization. Our 44 international schools are located in China, Europe, the Middle East, Southeast Asia and North America. Together, they educate more than 38,400 students from kindergarten through to the end of secondary education.  We are driven by one unifying philosophy – we are ambitious of our students, our people and our family of schools. Our schools deliver a high quality education through a personalized approach enhanced with unique global opportunities to enable every student to succeed. We primarily operate in geographic markets with high foreign direct investment, large expatriate populations and rising disposable income. We believe that these factors contribute to high demand for premium schools and strong growth in our business.  Nord Anglia Education is headquartered in Hong Kong SAR, China. Our website is www.nordangliaeducation.com.

For further information, please contact:

Investors:
Vanessa Cardonnel
Corporate Finance and Investor Relations Director – Nord Anglia Education
Tel: +852 3951 1130
Email: vanessa.cardonnel@nordanglia.com

Media:
Brunswick Group
Tripp Kyle / Patricia Graue
Tel: +1 212 333 3810

Sarah Doyle
Head of Brand – Nord Anglia Education
Tel: +852 3951 1144
Email: sarah.doyle@nordanglia.com  

KEY OPERATING DATA AND SUPPLEMENTARY FINANCIAL DATA

Key Operating Data

We use the following key operating metrics to manage our schools: full-time equivalent students ("FTEs"), capacity, utilization and revenue per FTE. We monitor FTEs on a weekly basis and the other operating metrics on a monthly, quarterly and annual basis, as we believe that they are the most reliable metrics for measuring the profitability of our schools. The table below sets out our key operating data for the periods indicated:

Supplementary Financial Data

The following table sets forth certain supplementary financial data for the periods indicated.

We use EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Ordinary Share as supplemental financial measures of our operating performance. We define EBITDA as profit for the period plus income tax expense, net financing expense, exceptional items, other losses/(gains), impairment of goodwill, amortization and depreciation, and we define Adjusted EBITDA as EBITDA adjusted for the items set forth in the table below. We define Adjusted Net Income as Adjusted EBITDA adjusted for the items in the table below.  We define Adjusted Earnings per Ordinary share as Adjusted Net Income divided by the weighted average ordinary shares outstanding for the period. EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Ordinary Share are not standard measures under IFRS. These measures should not be considered in isolation or construed as alternatives to cash flows, net income, earnings per ordinary share or any other measure of financial performance or as indicators of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. We may incur expenses similar to the adjustments in this presentation in the future and certain of these items could be recurring. EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Ordinary Share presented herein may not be comparable to similarly titled measures presented by other companies.   

Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS

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SOURCE Nord Anglia Education, Inc.