Wey Education a speculative buy at 16.5p

A report from the IPO experts at AllNewIssues.com

This assessment of Wey Education (WEYP), which was admitted to PLUS last month, takes a detailed look at the business and its prospects. On AllNewIssues.com, the expert team of investment writers consider the most interesting IPOs of the moment and provide regular detailed, impartial reports on the most significant of these, always ending with a firm investment recommendation.

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Background

Wey Education was welcomed to PLUS Markets on 4th April via an introduction of its shares. Listing at 12.5p, the shares have performed well since the first day of dealings. They currently trade at 16.5p, capitalising the business at GBP1.9 million.

Operations

Wey Education was founded as an investment vehicle in August 2007 and made its first acquisition this February. ZAIL Enterprises, an education services provider, was bought for GBP75,000 in cash plus performance based deferred consideration. ZAIL was founded by serial entrepreneur and former Chairman of Ofsted, Zenna Atkins.

Wey is now focused on becoming an outsource provider of management services to schools in the UK State Education sector - taking control of all aspects of the day-to-day running of such schools. The business model is based on earning consulting fees and providing management services to schools at the same standard but at a lower cost than at present. Organic growth will be driven through consultancy projects and the management and administration of schools providing state education. A number of areas have also been identified for acquisition such as teacher placement agencies, teacher training, inspection services, curriculum development and IT network services amongst others.

To date, ZAIL has secured two strategic advisory contracts (one in the UK and one overseas), with further contracts expected during the year. Under the deals, the company will produce a strategy to either create a new school or establish an Academy, with ZAIL having the opportunity to bid to be the school operator.

Management

Zenna Atkins, Chief Executive Officer, was until September 2010 the Chairman of education regulator Ofsted and was previously Chairman of Places for People. She currently serves as a non-executive director on the board of the Royal Navy. She has a long history of entrepreneurship, having at 16 years old co-founded Breadline, an unemployment centre and social enterprise café. She went on to establish three further organisations; Young Single Homeless, a service for young homeless people; PCSP, a youth crime prevention organisation; and Social Solutions, a company promoting the development of new businesses, advising and delivering on corporate social responsibility. In 2000 she won Ernst & Young Entrepreneur of the Year, South Region and in 2003 she was awarded an Honorary Doctorate of Laws from Portsmouth University.

Assessment

While Wey Education has a limited trading history, it has a number of attractions. Firstly, the UK market for education is massive. According to estimates from the company, the government currently spends around GBP16.8 billion per annum on secondary schools and GBP15.2 billion on primary schools. In contrast to universities, the schools budget was relatively untouched by Chancellor Osborne's Comprehensive Spending Review last October. In addition, the firm has good opportunities to take advantage of recent changes made by the Coalition government which will allow for more private sector involvement in state funded schools.

Also attractive is the significant experience of Zenna Atkins. Her pay was increased to GBP100,000 per annum from admission, so the company is clearly expecting her to develop the business into a significant player in the education market. We hope she stays with Wey longer than she did in her most recent position, quitting as CEO of private education provider Gems after less than two months in the job. Overall, as a play on management expertise and opportunities in the education sector the shares are a speculative buy.

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