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Hailiang Education Group Inc. Reports Financial Results for The First Six Months of Fiscal Year 2020
Mar 24, 2020.

HANGZHOU, ChinaMarch 24, 2020 /PRNewswire/ -- Hailiang Education Group Inc. (Nasdaq: HLG) ("Hailiang Education", the "Company" or "we"), an education and management service provider of primary, middle, and high schools in the PRC, today announced its financial results for the first six months of fiscal year 2020 ended December 31, 2019.

Hailiang Education Logo (PRNewsfoto/Hailiang Education Group Inc.)

"We are very pleased to build a one-stop K-12 education integrated service platform by providing excellent basic, international education program and ancillary education services, delivering solid performance results. For the first six months of fiscal year 2020, our revenue was RMB736.7 million, increased by 12.9% from RMB652.7 million. Our net profit was RMB197.6 million, increased by 52.5% from RMB129.6 million. The increase was primarily due to the continued growth of tuition of our affiliated schools and the expansion of our study trips and overseas study consulting services. Furthermore, our earning capability continued to grow. For the first six months of fiscal year 2020, our gross profit margin was 32.3% and net profit margin was 26.8%, increased from 30.3% and 19.9%, respectively, compared to the same period last year,"commented Mr. Ming Wang, Chairman and Chief Executive Officer of Hailiang Education.

Mr. Wang continued, "The outbreak of COVID-19[1] has caught the world off guard. Schools in many regions were ordered by the government to postpone the spring semester of 2020 or to suspend their ongoing classes. At present, it is estimated that the epidemic will have a negative impact on the operations of our study trip services and onsite educational training services. Besides, since there is still uncertainty about the beginning and ending time of the spring semester, we are evaluating the impact on the revenue recognition of K-12 educational services. We will continually monitor the development of the epidemic, assess the impact on our financial position and financial performance, orderly prepare for back-to-school in accordance with government directives, and timely disclose the impact of the outbreak on our financial position and operations. On the other hand, online education services have thrived during the outbreak of COVID-19. Relying on our abundant educational resources, outstanding facility capabilities, and technical advantages across our affiliated and management schools, we launched 'Hailiang VIP Cloud Virtual Classroom' in February 2020. As of February 29, 2020, more than 2,000 teachers and nearly 38,000 students were participating in the online live classes. Online education services are not just a countermeasure for this emergency, but we intend that it will be a growing and long-lasting creative initiative to supplement the way that we deliver quality innovative K-12 educational services."

Overview of Recent Operations

As of December 31, 2019, Hailiang Education sponsored and managed 38 schools, with an aggregate number of 67,821 students enrolled. As of December 31, 2019, we had 2,129 teachers and educational staff in our affiliated schools. To better recruit, develop and retain talents, we founded Cadre Army Academy and Excellent Teacher Development Academy in April 2019 and August 2019, respectively. These academies provide professional training programs to our staff, and we expect to cultivate outstanding school administrators and professional teaching staff.

Our efforts to deliver quality education were reflected by our students' academic accomplishment. As of February 29, 2020, 198 students from the 2020 graduating class of our international programs have received more than 500 offers, approximately 65% of these students received offers from global top 100 universities. In addition, our students have received remarkable achievements in Academic Competition, including competitions in mathematics, physics, chemistry, biology and computer science. Our students were awarded four national gold medals and two national silver medal, and five provincial first-prize, 18 provincial second-prize and 25 provincial third-prize.

Hailiang Education adheres to the hybrid development strategy, which combines asset-light mode, with self-construction and strategic acquisitions. As of the reporting date, one affiliated school and two managed schools are expected to start operations in September 2020.


Six Months Ended December 31,

(RMB millions, except per share data)

2019


2018


 % Change

 Revenue


736.7


652.7


12.9%

 Gross Profit


237.8


197.7


20.3%

 Gross Margin


32.3%


30.3%


2.0pp*

 Operating Profit


240.8


165.2


45.8%

 Operating Margin


32.7%


25.3%


7.4pp*

 Net Profit


197.6


129.6


52.5%

 Net Profit Margin


26.8%


19.9%


6.9pp*

 Earnings per Share


0.49


0.29


69.0%

*Note: pp represents percentage points

Financial Highlights for the First Six Months of Fiscal Year 2020

  • Revenue was RMB736.7 million (US$105.8 million), an increase of 12.9% from RMB652.7 million for the same period last year.

  • Gross profit was RMB237.8 million (US$34.2 million), an increase of 20.3% from RMB197.7 million for the same period last year.

  • Gross margin was 32.3% compared with 30.3% for the same period last year.

  • Net profit was RMB197.6 million (US$28.4 million), an increase of 52.5% from RMB129.6 million for the same period last year.

  • Net profit margin was 26.8% compared with 19.9% for the same period last year.

  • Basic and diluted earnings per share were RMB0.49 (US$0.07) compared with RMB0.29 for the same period last year.

Operational Highlights for the First Six Months of Fiscal Year 2020

  • As of December 31, 2019, the scale of the Company's school network was expanded to 38 schools, 10 of which were affiliated schools that we sponsored and 28 of which were managed schools that we provided education and management services. The aggregate number of enrollments in both our affiliated and managed schools were 67,821 students, an increase of 10.9% for the same period last year.

  • As of December 31, 2019, the total enrollment of students in our affiliated schools we sponsored was 23,630, an increase of 4.6% for the same period last year.

  • As of December 31, 2019, the number of students enrolled in the basic educational programs of our affiliated schools were 18,752, an increase of 4.0% from 18,034 as of December 31, 2018. The number of students enrolled in the international programs of our affiliated schools was 4,878, an increase of 7.1% from 4,555 as of December 31, 2018.

  • As of December 31, 2019, there is an aggregate of 2,129 teachers and educational staff in our affiliated schools, which includes 133 senior teachers, 15 golden Olympiad competition training coaches, 70 full-time foreign teachers, and 258 teachers with masters or doctoral degrees.

Financial Results for the First Six Months of Fiscal Year 2020

Revenue

Revenue was RMB736.7 million (US$105.8 million), an increase of 12.9% from RMB652.7 million for the same period last year.

The table below sets forth a breakdown of our total revenue:



Six Months Ended December 31,

(RMB millions)

2019


2018


 % Change

K-12 educational services

624.5


544.1


14.8%

  Basic educational program

411.8


355.1


16.0%

  International program


212.7


189.0


12.5%

Educational training services


43.4


59.8


-27.4%

Study trip services


43.1


26.5


62.6%

Education and management services


17.4


16.9


3.0%

Others


8.3


5.4


53.7%

Total revenue


736.7


652.7


12.9%

Revenue from K-12 educational services was RMB624.5 million (US$89.7 million), an increase of 14.8% from RMB544.1 million for the same period last year, primarily due to a 4.6% increase of the number of students enrolled and a 9.7% increase in average tuitions.

Revenue from the basic educational program was RMB411.8 million (US$59.1 million), an increase of 16.0% from RMB355.1 million for the same period last year. Revenue from the international program was RMB212.7 million (US$30.6 million), an increase of 12.5% from RMB189.0 million for the same period last year.

Revenue from educational training services was RMB43.4 million (US$6.2 million), a decrease of 27.4% from RMB59.8 million for the same period last year, mainly due to the decrease of the number of students enrolled in managed schools' educational training program since we stopped the educational training business in Jiangxi Province.

Revenue from study trip services was RMB43.1 million (US$6.2 million), an increase of 62.6% from RMB26.5 million for the same period last year, mainly derived from the increase in the number of students participating in study trips.

Revenue from education and management services was RMB17.4 million (US$2.5 million), a slight increase of 3.0% from RMB16.9 million for the same period last year. We provided various education and management services to schools located in JiangxiZhejiangJiangsuHubei and Shandong provinces.

Other revenue was RMB8.3 million (US$1.2 million), an increase of 53.7% from RMB5.4 million for the same period last year, mainly derived from the increased number of students in international program enrolled in overseas study consulting services.

Cost of Revenue

Cost of revenue was RMB498.9 million (US$71.7 million), an increase of 9.6% from RMB455.0 million for the same period last year. The increase was primarily due to increased compensation levels of employees and increased cost related to study trip services.

Gross Profit and Gross Margin

Gross profit was RMB237.8 million (US$34.2 million), an increase of 20.3% from RMB197.7 million for the same period last year.

Gross margin was 32.3% compared to 30.3% for the same period last year. The increase in gross margin was mainly due to the increase in student enrollments and average tuition.

Other income, net

Other income, net was RMB49.8 million (US$7.2 million), an increase of 403.0% from RMB9.9 million for the same period last year, which was mainly driven by an increase in government grants of discretionary and non-conditional subsidies we received from local government.

Operating expenses

Operating expenses were RMB46.7 million (US$6.7 million), an increase of 9.9% from RMB42.5 million for the same period last year.

Selling expenses were RMB15.1 million (US$2.2 million), an increase of 52.5% from RMB9.9 million for the same period last year. The increase was mainly attributable to the increasing sales commission payment related to educational training services.

Administrative expenses were RMB31.6 million (US$4.5 million), a slight decrease of 3.1% from RMB32.6 million for the same period last year.

Finance income

Finance income was RMB13.9 million (US$2.0 million), an increase of 11.2% from RMB12.5 million for the same period last year, which was primarily due to an increase in the interest income derived from term deposits held at a related party finance entity.

Finance costs

Finance costs were RMB3.9 million (US$0.6 million), which represent the interest portion of operating lease payment upon the adoption of IFRS 16.

Income tax expenses

Income tax expenses were RMB53.1 million (US$7.6 million) compared with RMB48.0 million for the same period last year. The increase was mainly driven by the growth of educational services that were subject to income tax.

Net Profit

Net profit was RMB197.6 million (US$28.4 million), an increase of 52.5% compared to RMB129.6 million for the same period of last year.

Basic and Diluted Earnings per share

Basic and diluted earnings per share were RMB0.49 (US$0.07) compared to bas

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