NORD Nord Anglia Education Ordinary Shares (delisted)

HONG KONG, July 25, 2017 /PRNewswire/ -- Nord Anglia Education, Inc. (NYSE: NORD), the world's leading premium schools organization, today announced financial results for the third quarter of fiscal 2017, the three month period ended May 31, 2017.

Third quarter FY2017 highlights (compared to third quarter FY2016)

• Average full time equivalent students (FTEs) increased 8.4% to 38,287
• Revenue of $272.2 million, up 7.4% on a reported basis and up 9.6% on a constant currency basis
• Adjusted EBITDA of $69.3 million, down 0.2% on a reported basis but up 2.1% on a constant currency basis
• Adjusted Net Income increased 2.9% to $29.3 million
• Diluted Adjusted EPS increased 0.9% to $0.28

Year to date May 31, 2017 highlights (compared to year to date May 31, 2016)

• Revenue of $792.2 million, up 7.0% on a reported basis and up 8.8% on a constant currency basis
• Adjusted EBITDA of $199.5 million, down 0.5% on a reported basis but up 1.4% on a constant currency
• Adjusted Net Income increased 2.7% to $84.2 million
• Diluted Adjusted EPS increased 1.1% to $0.80

"We are pleased with our third quarter results," said Andrew Fitzmaurice, Chief Executive Officer of Nord Anglia Education. "We finished the 2016/2017 academic year with 38,754 full-time equivalent students, representing enrollment growth of 9.7% over the prior year. This is a very exciting time of the year for Nord Anglia as we celebrate the achievements of our students. Recently, 87 students participated in a special side meeting at the UN High-level Political Forum in New York, presenting to the President of the UN General Assembly and UN Membership about the work our schools have undertaken over the last academic year to support the UN's Sustainable Development Goals. We would also like to congratulate our IB Diploma students who achieved a pass rate of 94% and an average score of 33.4 points, significantly higher than the world average. We are proud of the progress we have achieved this year and look forward to continuing our ambitious approach to support the success of our students and teachers in the coming years."

Third Quarter FY2017 Results

Average FTEs increased 8.4% to 38,287 in the three months ended May 31, 2017 ("Q3 FY2017") from 35,309 in the three months ended May 31, 2016 ("Q3 FY2016"). Average capacity and utilization were 55,750 seats and 69%, respectively, in Q3 FY2017 compared to 49,402 seats and 71%, respectively, in Q3 FY2016.

Revenue increased 7.4%, or $18.7 million, to $272.2 million in Q3 FY2017 from $253.5 million in Q3 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 9.6% in Q3 FY2017, compared to Q3 FY2016. Revenue per FTE was approximately $7,100 in Q3 FY2017, unchanged from Q3 FY2016.

Gross profit increased 5.7%, or $5.8 million, to $106.7 million in Q3 FY2017 from $100.9 million in Q3 FY2016. Gross profit margin was 39.2% in Q3 FY2017 compared to 39.8% in Q3 FY2016. The reduction in gross profit margin in Q3 FY2017 was primarily due to the additional rent included in cost of sales from the sale and leaseback transactions completed during Q3 FY2016 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 13.5% to $55.1 million in Q3 FY2017 from $48.5 million in Q3 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 associated with the opening of new campuses in Houston, Abu Dhabi, Bangkok and Hong Kong, Global Campus related costs and Sarbanes-Oxley project costs.

Other (losses)/gains changed by $2.4 million from a loss of $10.1 million in Q3 FY2016 to a loss of $7.7 million in Q3 FY2017. In Q3 FY2017, other (losses)/gains included $3.7 million of non-cash foreign exchange losses on intercompany balances and $4.0 million non-cash losses on financial instruments including a $3.1 million loss on the cross currency swaps and a $0.9 million loss on embedded lease derivatives and other options. In Q3 FY2016, other (losses)/gains included $6.3 million of non-cash foreign exchange losses on intercompany balances and $3.8 million non-cash losses on financial instruments including a $3.2 million loss on the cross currency swaps and a $0.6 million loss on embedded lease derivatives and other options.

Adjusted EBITDA decreased 0.2%, or $0.2 million, to $69.3 million in Q3 FY2017 from Q3 FY2016. On a constant currency basis, adjusted EBITDA increased 2.1% in Q3 FY2017.

Net financing expense increased $3.4 million from $19.2 million in Q3 FY2016 to $22.6 million in Q3 FY2017 primarily due to an unrealized loss of $7.0 million in Q3 FY2017 compared to an unrealized loss of $2.0 million in Q3 FY2016 on the revaluation of the CHF 200.0 million bonds, partially offset by the reduction in interest margin on our term loan from December 2016 and the revolving credit facility remaining undrawn in Q3 FY2017.

Adjusted Net Income increased 2.9% to $29.3 million in Q3 FY2017 from $28.5 million in Q3 FY2016.

Balance Sheet and Cash Flow

Cash used in operating activities was $81.1 million for the nine months ended May 31, 2017, compared to $54.1 million for the nine months ended May 31, 2016. Cash used in operations was $18.6 million for the nine months ended May 31, 2017 compared to cash generated from operations of $14.3 million for the nine months ended May 31, 2016 as a result of working capital changes, primarily a reduction in trade and other payables. The increased outflow was primarily due to the impact of a larger cost base as the business has grown. Interest paid decreased from $44.5 million to $38.8 million, and tax paid increased from $18.9 million to $21.0 million for the nine months ended May 31, 2016 and May 31, 2017, respectively. The reduction in interest paid for the nine months ended May 31, 2017 was primarily due to the revolving credit facility remaining undrawn compared to a drawn balance of $28.0 million as at May 31, 2016 and a reduced margin from December 2016 from 4.0% to 3.5% on the term loan. The outflows were in line with expectations.

Cash used in investing activities was $62.2 million for the nine months ended May 31, 2017 compared to cash generated from investing activities of $74.1 million for the nine months ended May 31, 2016. The outflow for the nine months ended May 31, 2017 included a $27.6 million outflow for the acquisition of subsidiaries (net of cash acquired), including the acquisition of the Prague British School for $14.2 million net of cash acquired and $13.5 million deferred payments for the Cambodia and Vietnam acquisitions, $44.9 million of capital expenditures in relation to the new campuses in Houston, Bangkok, Hong Kong, and the new China bilingual school in Shanghai, and general maintenance capital expenditure, offset by net sale proceeds of $8.9 million in relation to the sale of the old Houston campus. The inflow for the nine months ended May 31, 2016 was primarily due to a $167.0 million inflow from the proceeds of the sale and leaseback transaction and a $33.6 million outflow for the acquisition of subsidiaries (net of cash acquired), including the final deferred payment for the Meritas acquisition, and capital expenditures of $60.0 million.

Cash used in financing activities was $8.4 million for the nine months ended May 31, 2017 compared to cash generated from financing activities of $19.4 million for the nine months ended May 31, 2016. The outflow for the nine months ended May 31, 2017 was primarily due to repayment of borrowings of $6.8 million and payments to non-controlling interests of $1.8 million. The inflow for the nine months ended May 31, 2016 was primarily due to net drawings on the revolving credit facility of $28.0 million.

Cash and cash equivalents (excluding the bank overdraft on our notional pooling accounts) as of May 31, 2017 were $265.9 million, compared to $376.6 million as of May 31, 2016.

Cash and cash equivalents (including the bank overdraft on our notional pooling accounts) as of May 31, 2017 were $216.8 million, compared to $260.5 million as of May 31, 2016.

Recent Developments

As previously disclosed, we have called an extraordinary general meeting of shareholders (the "EGM") to be held on August 21, 2017 to consider and vote on, among other matters, the proposal to authorize and approve the agreement and plan of merger announced on April 25, 2017.  Additional information about the EGM and the merger agreement can be found in the transaction statement on Schedule 13E-3 and the proxy statement attached thereto as Exhibit (a)-(1) filed with the SEC.

On July 5, 2017, we completed the acquisition of an international school in Latin America to take our total number of schools to 46.  The school currently educates more than 820 FTEs with 870 seats of capacity.  The consideration of approximately $30.0 million (with $10.0 million deferred) for the school was within Nord Anglia Education's targeted range of 7-10x trailing EBITDA.

On May 11, 2017, we acquired effective control of and 100% economic interest in the Netherlands Inter-community School in Jakarta, Indonesia for approximately $0.7 million.  With over 160 FTEs and 300 seats of capacity, the school is expected to be EBITDA breakeven in fiscal 2017 and provides us entry into a high growth market in Southeast Asia.

We have not resolved objections raised by the Hong Kong Lands Department with respect to the new campus for Nord Anglia International School Hong Kong and therefore do not expect to open the new campus in September 2017.  To provide parents with a solution, we have secured two sites in Hong Kong with a combined capacity of 436 seats.  Both sites will cater to children aged three to five years old and are planned to open in September 2017.

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.  We believe that these 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 46 international schools are located in China, Europe, the Middle East, Southeast Asia and North America. Together, they educate more than 39,000 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 
Email: nordanglia@brunswickgroup.com

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

View original content:http://www.prnewswire.com/news-releases/nord-anglia-education-reports-third-quarter-fy2017-financial-results-300493454.html

SOURCE Nord Anglia Education, Inc.