In June this year some £635 million was transferred from the capital reserves of the three UK- based holding companies which form part of US-based education giant Kaplan to their respective (P&L) accounts, according to filings lodged at Companies House.
The funds, equivalent to US$875 million or just under half of the entire annual turnover of the UK ELT industry, came from the share premium accounts of the UK holding companies. These accounts have now been reduced to zero.
Under UK law, all or some of the funds held in a share premium account, which forms part of a company’s capital reserves, can be cancelled and transferred to P&L. The sum is treated as a realised profit and can be used to cover accumulated losses and to strengthen the balance sheet. All or some of the money can, alternatively, be distributed to shareholders as dividends.
A spokesperson for Kaplan told the Gazette that, “No cash was transferred and no distributions have been made outside of the UK group as a result of these transactions”, according to a Kaplan spokesperson, putting paid to any speculation that the funds had been paid out in dividends to the US owners, including Graham Holdings, named in the accounts of all three UK holding companies as their ‘ultimate parent company and controlling party’.
According to the spokesperson, the majority of the share premium accounts had been “created by historic corporate restructures” and that the cancellation of these accounts “was done to simplify an overly complex structure within this group to enable greater flexibility and ease of financial administration”.
Kaplan International, as the non-US division is known, “comprises a large number of corporate entities that have either grown organically or been acquired over a long period of time”, according to the company spokesperson. The majority of operations in this division are owned, directly or indirectly, by the three UK holdings companies
Two of the British companies, Kaplan International Holdings and Kaplan International UK Holdings, name the third company, Kaplan UK Limited, as their immediate owner, termed ‘Person with Significant Control’ (PSC) on Companies House filings.
Kaplan International Holdings, which owns Kaplan International Colleges and MPW colleges, as well as assets in financial and professional training, has cancelled around £98 million in premium share capital and, according to filings at Companies House, currently has capital of £19.7 million.
Kaplan international UK Holdings, which owns, among other things, businesses in Australia, cancelled some £235 million in premium share capital and, according to its filings, retains £53 in capital, a comparatively low amount.
Kaplan UK Limited, which reports the language school company Aspect Education among its assets, has a different ownership structure. Until July 2016, when the law on Persons with Significant Control was introduced, its owner was reported at Companies House as Kaplan Inc, an unlisted US company owned by Graham Holdings. The 2019 accounts name Kaplan Inc as the shareholder and a Kaplan spokesperson has confirmed this is still the case.
Unlisted foreign companies are not normally registrable for PSC status under UK law, though they can still own the shares in a UK company. Currently the section headed PSC on the Companies House filing for Kaplan UK reads: ‘The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company’.
In June, Kaplan UK Limited cancelled £302 million of premium share capital and reports current share capital of £51.7 million.
In 2019, before the pandemic hit, all three holding companies had reported losses according to the Directors’ Reports in their accounts.
According to its Directors’ report, Kaplan UK Ltd made a loss of £1.4 million in 2019, well down from a loss of approximately £38.5 million in 2018. Reported net assets as at 31 December 2019 were £382 million.
At Kaplan International Holdings, Directors’ reported losses of £12.1 million for 2019 were down slightly from the £12.4 million loss the previous year. Net assets were reported as £60.6 million.
The 2019 accounts for Kaplan International UK Holdings show a small loss of £0.3 million, following a profit of £1.6 million in 2018. Its net assets were reported as £212.9 million.
As part of the share premium account cancellations, all three of the UK holding companies have been certified as solvent by the Directors, according to documents filed on 17 June 2021 at Companies House.
Covid appeared to still be hitting operating income in the first quarter of this year. According to the Graham Holdings Report for the period, overall operations for Kaplan International saw a 14% drop in income year on year, while operating income, reported after all operating costs have been deducted, dropped 46%. The report cites ‘government-imposed travel restrictions and school closures arising from Covid-19’ as negatively impacting results, especially on its language programmes. ‘Adverse impacts are likely to continue through 2021’, the report noted, ‘particularly at Kaplan International Languages’.
The Kaplan spokesperson confirmed that, “Like everyone else in the ELT sector, the Kaplan Languages Group has experienced significant difficulties, including material financial difficulties, as a result of the pandemic. “
On a more optimistic note , they added, “While the business continues to suffer as a result of the pandemic, we are optimistic that this will reverse when the pandemic recedes and interest in international travel for study returns.”
