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Lower enrolments impact BPP first half results

publication date: Mar 31, 2011

BPP, the UK provider of education and training to lawyers and accountants owned by Apollo Group, has reported a 7.4% fall in revenue to $131.8m (2010: $142.3m) for the six-months ended 28 February 2011. Apollo reports that during the second quarter BPP experienced lower than expected rates of enrolment for its finance and accountancy professional training programmes for the upcoming semi-annual qualification exams. As a result, the company has revised its outlook for BPP and reduced forecasted revenues and operating cash flows for the remainder of fiscal year 2011. And according to Apollo the lower than expected rates of enrolment are expected to negatively impact revenue growth for the next couple of years. The company is also reducing its forecasts for future years as it now believes that BPP will likely experience further near term declines. Currently, finance professional training programmes account for approximately one-half of BPP's revenues and a significant portion of BPP's operating cash flows. In addition, the company announced that it has reduced its pricing assumptions for degree programmes at BPP’s University College given the emerging competitive landscape and the implementation of the UK government’s review of HE funding.

Based on its analysis of the market, Apollo recorded an impairment charge for its BPP business of $214.7m (net of $5.2m tax benefit) during the second quarter of fiscal year 2011. This is the second time that Apollo has received new information that has caused it to revise its forecasts for BPP and record impairment charges since acquiring the business in July 2009. As a result of the impairment charge BPP reported an operating loss of $209.1m (2010: $4.8m profit) for the six months ended 28 February 2011.

Apollo acquired BPP through its 86.1% owned subsidiary Apollo Global for a cash purchase price of 620p per share. At exchange rates on the date of the acquisition, the purchase price for BPP, including assumed debt and transaction related expenses, was around $600m.

Overall, Apollo, the for-profit university group, reported revenue up 2% to $2,375m (2010: $2,329m) in the first six months of fiscal year 2011. The increase in revenue was primarily due to selective tuition price increases at University of Phoenix partially offset by a 3.2% decrease in enrolments in the first six months of FY2011 as the US Department of Education’s new regulatory framework for the sector began to take affect. Operating income fell to $384.1m (2010: $566.0m) due in part to the impairment charge at BPP.

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