Loyalist Group Limited
TSX VENTURE : LOY

Loyalist Group Limited

August 26, 2015 22:49 ET

Loyalist Announces Proposed Name Change to KGIC and Implementation of Optimization Plan to Generate up to $15 Million of Annualized Operating Cost Savings

TORONTO, ONTARIO--(Marketwired - Aug. 26, 2015) - Loyalist Group Limited ("Loyalist" or the "Company") (TSX VENTURE:LOY) today announced a proposed name change to KGIC Inc. ("KGIC") and an operational streamlining initiative (the "Optimization Plan") which is projected to deliver up to $15 million in annualized operating cost savings across the Company's school operations.

"Having recently addressed our immediate liquidity needs, we are turning our attention to the operational turnaround. The proposed corporate name change to KGIC reflects our goal to think and act as one company going forward. Our Optimization Plan coincides with the corporate name change to send a strong message that we are committed to streamlining and properly integrating operations, developing a culture of ownership and accountability throughout the Company, and ultimately building a sustainable business model," said Shawn Klerer, Chief Executive Officer.

Corporate Name Change to KGIC

KGIC (King George International College) is the Company's most recognizable brand and currently represents nearly half of the Company's annualized school revenues on a run-rate basis. Approaching twenty years since the formation of KGIC, no other school brand which the Company operates has achieved a similar level of market awareness. Management also believes the Loyalist Group name carries little, if any, brand equity across the school industry, and therefore does not expect any negative impact from the corporate name change.

By realigning the Company's resources as part of the Optimization Plan and operating under one main school brand as KGIC, management believes it will be able to drive efficiencies and synergies previously unattainable. Prior to the Optimization Plan, each of the school brands operated as a separate business unit, regardless of size.

All of the Company's non KGIC-school brands will be treated as sub-brands going forward, and assessments will be made on a case-by-case basis as to whether there is embedded value as differentiated product offerings or should be phased out over time.

The Company's Common Shareholders will be asked to consider and vote to approve the name change at the Company's upcoming Annual and Special Meeting of Shareholders to be held on September 10, 2015. The resolution for the corporate name change will be included in a supplemental management information circular which will be mailed out to shareholders and will be deemed to be incorporated into the Management Information Circular dated August 12, 2015. Completion of the name change is subject to shareholder approval and the approval of the TSX Venture Exchange.

Optimization Plan

Over the past three months the Company's new management team has spent considerable time analyzing and gaining a more in depth understanding of the school operations from top down and bottom up perspectives. Management has concluded that the Company requires a multi-faceted approach to right-size the business model in order to achieve sustained profitability.

The Company's existing organizational structure results in duplication of people and processes, underutilization of human capital and physical space in a number of locations, unproductive competition between our various schools that have similar product offerings, overlapping advertising, marketing and promotional expenses, and a general lack of communication/co-operation across the Company.

The Optimization Plan will result in a re-alignment of our people, systems, and processes to enable the Company to operate as one entity within a matrix organizational structure consisting of two main regional teams, namely Toronto and Vancouver, and functional centres of excellence.

Management estimates the annualized operating cost savings of the full Optimization Plan implementation may be up to $15 million on a run-rate basis relative to their current level.

These savings are expected to be derived in the following areas:

  • Operational restructuring
    • Integration of administration and marketing on a regional basis
    • Regional consolidation of campuses
    • Payroll management and resource utilization control
    • Advertising and promotion control
    • Accounts receivable monitoring, collection, control and enhanced segregation of duties
    • Closures of non-strategic locations which lack scale and are unprofitable
  • Head office rationalization
    • Delayering of the organization
    • Elimination of duplication and manual processing as a fully integrated financial system is deployed

Management has commenced execution of the Optimization Plan as of mid-August, with the vast majority of the implementation anticipated over the next 30-60 days.

Organic Growth Opportunities

In addition to the operating cost savings noted above, the Optimization Plan incorporates organic revenue growth initiatives within the Company's core operations. The Company is expanding and/or modifying programs in the following areas where management believes there is pent up market demand:

  • Pathway
  • Seasonal camps
  • Night school

Five programs within the above areas have already been developed and will be launched in September 2015.

The incremental annualized revenue estimated from these initiatives is in the range of $4 million for 2016, and $11 million in 2017. As these revenues are to be derived from existing locations and administrative infrastructure, management believes that this leveraging of fixed overhead costs will result in materially improved gross margins.

About Loyalist

Loyalist owns and operates private English as a Second Language (ESL) Schools, Career Colleges and Community Colleges in Toronto, Vancouver, Victoria and Halifax.

Forward-Looking Information and Statements

This news release includes certain forward-looking information and statements within the meaning of Canadian securities laws. Such forward-looking information and statements are not representative of historical facts or information or current condition, but instead represent only the Company's beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company's control. Generally, such forward-looking information or statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken, "will continue", "will occur" or "will be achieved". The forward-looking information contained herein includes information concerning the proposed change of the Company's name and proposed changes to its operations and organizational structure. By identifying such information and statements in this manner, the Company is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.

Any number of important factors could cause actual results to differ materially from these forward-looking statements as well as future results including, but not limited to, risks relating to: the Company's ability to service its outstanding indebtedness and the impact of that indebtedness on the Company's ability to raise additional capital, fund and maintain operations or meet business objectives; the Company's ability to comply with the terms of the amended forbearance agreement with Bank of Montreal and the consequences of any breach or default thereunder; the Company's ability to complete any proposed recapitalization or restructuring activities (including the Optimization Plan referenced herein) on terms acceptable to the Company or at all and the expected cost savings related thereto; the fact that new management of the Company, including the recently appointed Chief Executive Officer and Chief Financial Officer, have had limited experience with the Company and its operations and have not had sufficient time to fully analyze all facets of the Company's business; the impact of negative or unfavourable rumours in the marketplace on the Company's brands and student enrollment; any of the Company's announced or proposed acquisitions failing to close or becoming delayed before closing; carrying on business and activities in international jurisdiction where Canadian laws do not apply; any loss of certain key personnel; levels of student enrolment; delays in rolling out online education programs; delays to the completion of any planned initiatives or the inability to complete those initiatives; competition in the educational services market; and currency fluctuations. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Although the Company believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on any forward-looking information or statements contained in this press release.

The forward-looking information contained in this press release is made as of the date hereof, and the Company does not undertake to update any forward-looking information that is contained or referenced herein, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. All subsequent written and oral forward looking information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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