Operating Review
Since taking up my post as Chief Executive Officer in April, I have had the chance to visit a wide range of Nord Anglia operations, and I have been very impressed with the quality of the businesses within the Group and the dedication of our people.
Shortly after my arrival, the Board requested that I conduct a review of the Company s business activities.
The key outcomes of this review were:
I believe that the changes resulting from this review will position the Company to take advantage of the opportunities for profitable growth in the education and training sector. The Board has set clear minimum financial objectives:
Schools
Our schools business has once again shown strong growth in both turnover and profitability.
Operating profits in our UK Schools were, as expected, lower than the previous year as a direct result of substantial increases in the cost of teachers pensions and additional National Insurance costs. Fee increases for the current academic year reflect these costs. Whilst turnover was marginally ahead of last year at £12.61m (2002: £12.15m) operating profits were lower at £0.8m (2002: £0.9m).
The slight fall in the profitability of our UK Schools was more than compensated for by a very strong year from our International Schools, which continue to perform well. Pupil numbers have increased from 4,900 to 5,200 due to the success of the new Shanghai school opened last year and the expansion of existing schools.
International Schools turnover increased to £17.3m (2002: £13.7m) and operating profits grew to £2.2m (2002: £1.9m).
In August, the new school at Limanowskiego, Warsaw was completed on schedule and to budget, and we were extremely pleased that His Royal Highness, The Duke of York agreed to open the school in September in time for the start of the new academic year.
A new campus at the prestigious residential development of Rosinka on the outskirts of Moscow has been added to the six existing school sites in the city.
The international school in Shanghai, which opened in September 2002, reached break-even during its first year of operation.
Schools: outlook
There are a number of major projects planned for the expansion of our schools business in the coming year.
We will develop our London schools with the opening of a major new school in Chelsea in 2005. Demand for independent education remains high in the capital, and this new leasehold building will enable us substantially to increase pupil numbers, laying a firm foundation for future growth in scale and profitability.
Contracts have been exchanged to develop new campus sites in both Budapest and Shanghai. This will provide substantial additional capacity in both schools.
For more than a decade Nord Anglia has delivered high quality British style-education to 10 markets through our successful and profitable international and UK schools. It is the Company s intention to build on our proven models to develop this business further in these 10 markets.
Significant opportunities also exist in new markets where the demand for quality British-style education is high. Nord Anglia will continue rigorously to assess appropriate opportunities within new markets.
The recent appointment of Marcel van Miert as the new Managing Director for Schools further strengthens the Company s senior management team.
Nurseries
The Nursery Division continued to expand, showing an increase in both turnover and operating profits. Turnover was up to £8.9m (2002: £7.6m) whilst operating profits increased 41.9% to £0.7m (2002: £0.5m).
The number of Princess Christian Nurseries has now increased to 34.
Three new build units opened at Bedford, Cheam and Guiseley, and in June a 62-place leasehold unit was launched in Fulham the Group s first nursery in a central London location.
During the year, the Division s NVQ training scheme was expanded from regional to national coverage through a new partnership arrangement with the Learning and Skills Council. There are over 100 trainees on the scheme, guaranteeing a flow of quality staff for our nurseries countrywide.
Princess Christian Nurseries is committed to the provision of high quality day care and early years education. This commitment has been recognised recently by both the Office for Standards in Education (OfSTED) and the Adult Learning Inspectorate (ALI).
A prime example of this is the result of the recent OfSTED inspection of the Princess Christian Nursery at Fallowfield, Manchester.
The report found that this nursery provides good quality day care and commended many aspects of the nursery s practice from meal arrangements to museum visits. The inspectors also recognised the inclusive nature of education at the nursery and welcomed the worthwhile and meaningful links it has made with the wider community. The new nursery at Guiseley also received a good OfSTED report recently.
Princess Christian Nurseries was referred to as one of the best training providers in the country in the ALI chief inspector s annual report.
Nurseries: outlook
Further expansion of the Nursery Division will come from organic growth and acquisition. An additional unit in West London will open in late summer 2004. The plan of three nursery units per annum will recommence in 2004/05 when the successful integration of the Petits Enfants nurseries is expected to be complete.
The integration plan for Petits Enfants is well under way and the anticipated improvements in occupancy levels can already be seen.
The acquisition of the Petits Enfants chain of nurseries, with locations in South West London and Surrey, was completed in early September 2003. The Petits Enfants chain comprises 527 nursery places and operates from nine leasehold premises. Total consideration for Petits Enfants was £3.2m.
In mid-October 2003, the popular children s TV presenter Dave Benson Phillips officially opened another new build nursery at Portishead.
Princess Christian Nurseries will continue to recruit, develop and retain exceptional nursery staff. The appointment of a new Marketing Manager and a new Commercial Manager will ensure we continue to capitalise on our excellent operational performance.
Outsourcing
The turnover of the total Outsourcing Division has increased by £5.5m to £44.5m (2002: £39m). Operating profits have also increased 16.9% to £2.7m (2002: £2.3m), despite a difficult year within the Direct to Schools business.
Our exit from the Direct to Schools business was announced at the end of August. The administrative support contracts have been successfully transferred to Liberata (UK) Ltd., who will undertake contracted service obligations to the schools.
Public-private partnership contracts are largely dependent upon Government policy and relatively few new bidding opportunities became available during the year.
Following the 2003 bidding round, the Division s contract with OfSTED for school inspections was increased to 276 inspections from September 2004.
EduAction, the joint venture company established with Amey PLC, continues to provide support and strategic management for a substantial proportion of the education services in the London Borough of Waltham Forest.
In October 2003, the Minister of State for School Standards David Miliband wrote to congratulate the authority on its excellent Key Stage 2 results :
Your results place you amongst the most improved LEAs this year, and I would like to pass on my congratulations to you and your colleagues& I am sure that this year s results are a reflection of the priority that you have placed on achieving higher standards over the last year, and you will no doubt have plans in place to build on that success in 2004.
Our relationship with Waltham Forest is strong and this success underlines the benefits of this Public/Private Partnership.
The non-military training and education of student recruits at the Army Foundation College, Harrogate continues to be a highly successful partnership with the Ministry of Defence. An inspection this year by the Adult Learning Inspectorate (ALI) rated our services as excellent (Grade 1).
Our Lifetime contracts continue to perform well. The five Lifetime companies span 12 Local Education Authorities and turn over in excess of £23 million per annum.
Around 600 skilled and professionally qualified staff deliver high quality support and personal development services to over 200,000 young people in 280 schools, 30 colleges and through 19 Connexions offices.
Our three training companies Belle Associates, The Interactive College and the newly acquired Yorkshire Post Training (May 2003) provide specific skills training for a range of ages and abilities. The Outsourcing Division is integrating these business units in order to present a co-ordinated training offer to this growing market, consolidating our existing resources and expanding the business.
Outsourcing: outlook
The business development team has been involved with the convergence phase and early bidding process for the MoD s Defence Training Review. It is anticipated that by September 2005, the MoD will let substantial training service contracts to the market.
Current bidding activity also includes preparation for the ITT in Prison Education and school ICT PFIs.
The separation of business development from operational delivery within Outsourcing will allow Nord Anglia to address and develop major contracting opportunities more effectively.
People
Nord Anglia is a people business.
As an education and training company, providing services to tens of thousands of learners old and young, in the UK and overseas people are central to who we are and what we do.
The Company employs in excess of 2,500 people, all of whom are committed to achieving our key objective delivering excellence in education and training.
Nord Anglia believes firmly in equality of opportunity and employs people from all sections of the community. The Company aims to build a diverse and socially inclusive workforce that is responsive and appropriate to all service users.
Princess Christian Nurseries, the Lifetime businesses and Belle Associates are already Investors in People (IiP) accredited, and the rest of the Company has started to work towards achieving the IiP standard.
Quality
In addition to IiP, Nord Anglia will utilise a range of quality marks and models continuously to improve our business results, provide a better working environment for our people and deliver the best possible quality, value and service to our customers.
Our Schools Division employs over 800 headteachers, deputy headteachers, teachers, classroom assistants and bursars. It is their job to deliver quality independent education to young people between the ages of two and 18 to enable them to reach their full potential.
Every day thousands of parents entrust the care and education of their young children to Princess Christian s experienced team of nursery professionals. Supported by a highly skilled senior management team, these people are dedicated to providing pre-school children with an exceptional education while upholding the best traditions of quality childcare.
Our Outsourcing Division delivers a wide range of quality training and professional development solutions for learners at key transitional stages in their lives including: Modern Apprenticeships, skills for business, adult apprenticeships and professional development as well as the provision of Connexions services for young people.
Everyone at Nord Anglia is totally committed to our key objective: delivering excellence in education and training.
Andrew Fitzmaurice
Chief Executive Officer
5 December 2003
