Raffles Education Corporation (REC) has reported earnings of $18.3 million for the 2QFY2022 ended December, 51% down from earnings of $37.3 million in the same period a year ago.
This brings the company’s 1HFY2022 earnings to $8.7 million, down 76% y-o-y. In the 1QFY2022, REC reported a loss of $9.6 million on lower other operating income
2QFY2022 earnings per share (EPS) stood at 1.33 cents.
Revenue for the quarter was up 9% y-o-y at $30.0 million mainly due to higher revenue from its colleges in China due to significantly higher student enrolments. This was offset by lower revenue from the leasing of education facilities of Oriental University City Holdings (H.K.). The decline was mainly due to the reduced leasing space of education facilities taken up by a few education institutions in Langfang City, China.
Other operating income for the 2QFY2022 was also up 29% y-o-y at $37.7 million. This was mainly due to the gain on disposal of noncurrent assets held for sale of $37.2 million from compulsory land acquisition by Hefei City Authority of China for the land owned by Wanbo Institute of Science & Technology.
Other operating expenses increased 30% y-o-y to $12.1 million due to higher marketing expenses and registration and examination fees incurred during the quarter, in tandem with the increase in the number of students for some of the group’s education institutions. The higher amount was also due to the higher provision of estimated business tax in China, higher professional fees and increase in scholarship expenses by Wanbo and Boustead College.
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Finance costs increased 59% y-o-y to $5.0 million mainly due to higher interest expenses incurred by OUCHK for additional borrowings, default interest recognised by Raffles K12 Sdn Bhd and Raffles Iskandar Sdn Bhd, and interest charged on outstanding tax liabilities of Raffles Assets Australia Pty Ltd.
There was no fair value gain on investment properties this quarter, compared to the $9.5 million in gains in the 2QFY2021.
Share of results of joint ventures plunged 98% y-o-y to $53,000. This was mainly due to the absence of the one-off compensation of $6.1 million received from the buyer of VVPL’s subsidiary in 2QFY2021.
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Share of results of associates fell 7% y-o-y to $907,000.
The group’s foreign exchange gain fell 59% y-o-y to $406,000.
Foreign exchange loss fell more than three times at $6.8 million from the $1.9 million in the same period the year before.
Income tax expense and deferred tax expense increased 310.5% and 320% y-o-y respectively to $706,000 and $11.4 million.
As at Dec 31, 2021, REC’s current liabilities have exceeded its current assets by $182.1 million and $114.7 million respectively.
Following Affin Bank’s writ, all borrowings from Affin Bank, together with all other bank borrowings with possible cross default, were classified as current borrowings since FY2021.
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As at Dec 27, 2021, REC says it has repaid the settlement amount of RM138.2 million ($44.8 million) payable from June 2021 to March.
The group says it is in discussions with Affin Bank on the continuing facility for the balance outstanding debts owed to Affin Bank after March 31. It is also in discussions with “a few banks” to re-finance Affin Bank’s loans.
The group is also expected to collect the balance of RMB 86.5million ($ 18.5million), from the disposal of land and buildings of Wanbo Institute of Science & Technology’s (WIST) around the end of March 2022.
Further to its statement, REC says it is “confident” that the lenders will continue to give support to the group. To date no other banks have withdrawn their loans and UOB’s mortgage loan on the property is only due for re-financing in May 2023.
Finally, the group expects to collect its remaining balance receivables of RMB74 million arising from the disposal of Langfang Development Zone Oriental University City SinoSingapore Education Investment Co., Ltd by Sept 30.
As at end-December, cash and cash equivalents stood at $36.6 million.
In its outlook statement, REC says the lockdown and restricted border movements from Covid-19 will continue to impact its recruitment and retention of foreign students since January 2020 till date.
“The challenging global education environment with increasing competition and increasing restrictive policies in the countries that we operate in an uncertain global economy and currency volatility will continue to affect the group,” says REC in its Feb 11 statement.
“The group continues to streamline and restructure its operations to adapt to the new paradigm brought about by Covid-19 pandemic for better cost management and improved efficiency,” it adds.
No dividend was declared for the quarter.
Shares in REC closed 0.2 cent higher or 2.67% up at 7.7 cents on Feb 11.
Photo: REC
