Edvantage Group (0382. HK) Announced its Business Update for the First Three Quarters ended 31 May 2020

Jul 16, 2020 19:20 JST

Revenue and Gross Profit Met Expectations, up 15.4% and 19.5% YoY Respectively;
Sihui campus in Zhaoqing City commenced operation as scheduled, Xinhui campus in Jiangmen City expanded junior college programmes' capacity, and Edvantage Institute Australia may award the undergraduate and master's degree

HONG KONG, Jul 16, 2020 - (ACN Newswire) - Edvantage Group Holdings Limited ("Edvantage Group" or the "Group", stock code: 0382.HK) announces its update on certain latest unaudited financial and operational information, and business development of the Group for the nine months ended 31 May 2020 (the "Period under Review"). During the Period under Review, the Group operates four schools, Huashang College Guangdong University of Finance and Economics ("Huashang College") and Guangzhou Huashang Vocational College ("Huashang Vocational College") in the Guangdong-Hong Kong-Macau Greater Bay Area ("Greater Bay Area") of the PRC, and one private vocational education institution in Australia, Global Business College of Australia ("GBCA"), as well as NYU Language School ("NYU"), a private education institution in Singapore, which was acquired during the Period under Review.

(Guangzhou Headquarter) From left: Ms. Liu Yi Man, Executive Director and Chief Executive Officer and Ms. Liu Wenqi, Chief Operating Officer

(Hong Kong Office) From left: Mr. Wong Shing Mun, Chief Financial Officer and Company Secretary; and Mr. Yan Kwok Ting Sunny, Director of ICF & IR Department

Live view of the first phase of Sihui campus (Photographed in May 2020)

Business Update Highlights (Unaudited related data for the nine months ended 31 May 2020)
- Revenue rose by approximately 15.4% YoY to approximately RMB609.2 million;
- Gross profit increased by approximately 19.5% to approximately RMB298.9 million;
- Gross margin improved 1.8 ppts to 49.1%;
- Number of student enrolments(1) increased by 8.0% YoY to 35,444;
- Average tuition fee of Huashang College increased by 11.5% YoY to RMB24,324;
- Average tuition fee of Huashang Vocational College increased by 3.9% YoY to RMB15,633;
- New campus in Xinhui District, Jiangmen City with the first-phase campus covering approximately 683 mu could accommodate approximately 12,000 students; The first-phase campus is expected to commence operation in September 2021;
- New Edvantage Institute Australia, a higher education institution which is accredited and licensed by the TEQSA(2) in the first quarter of 2020, and qualified to accept students, offer and award undergraduate and master's degrees. It is expected to start student recruitment in the first quarter of year 2021
Note: (1) The total number of student enrolments for Huashang College, Huashang Vocational College, Global Business College of Australia and NYU Language School as of 31 May 2020; (2) Tertiary Education Quality and Standards Agency

During the Period under Review, Edvantage Group's revenue, gross profit, and gross margin increased by approximately 15.4%, approximately 19.5%, and 1.8 percentage points YoY to approximately RMB609.2 million, approximately RMB298.9 million, and 49.1%, respectively. Number of student enrolments of the four schools operated by the Group was 35,444, representing an increase of 8.0% YoY; Among them, the numbers of students enrolments in Huashang College and Huashang Vocational College were 24,126 and 10,662, up 6.4% and 11.7% YoY respectively, the average tuition fees for student enrolments in Huashang College and Huashang Vocational College were RMB24,324 and RMB15,633, representing a YoY increase of 11.5% and 3.9%, respectively.

In terms of the refund of boarding fees for the 2019/20 school year, the Group is expected to refund boarding fees totalling approximately RMB36 million as the Ministry of Education of the People's Republic of China requires a refund of boarding fees for half a semester to students since they were not able to return to school due to the novel coronavirus pneumonia epidemic 2019 ("COVID-19"). Meanwhile, the Group estimates that the cost of revenue (such as property management related expenses and education related expenses) saved for the financial year 2020 as a result of the COVID-19 will be over RMB30 million as teachers and students were unable to return school. Therefore, it is not expected to have significant adverse impacts on the Group's gross profit and gross margin for the full financial year 2020.

Operation Overview

Operation of four schools went smoothly
During the Period under Review, the second semester of the 2019/20 school year has ended in Huashang College and will end on 20 July 2020 in Huashang Vocational College. In terms of the plan for the start of the 2020/21 school year, existing students of at Huashang College and Huashang Vocational College will return to school for registration from 22 August 2020 and the registration date for new students is tentatively scheduled from late September to early October 2020. GBCA and NYU, two overseas schools under the Group, also gave classes online. During the Period under Review, there were 619 students in GBCA and 37 in NYU. NYU has moved to a larger new campus with a better geographical location, and its teaching experience and the number of students that it can accommodate will be improved in the future.

Increase in both enrolment plan for the 2020/21 school year and the range of tuition fees for new students
In terms of the enrolment plan for the 2020/21 school year, the Ministry of Education of the People's Republic of China has approved approximately 5,300 places for Huashang College. The reason for this adjustment compared with the enrolment plan for the school year of 2019/20 is that the Education Department of Guangdong Province has adopted a unified enrolment adjustment plan for the 2020/21 school year among independent colleges in Guangdong Province to meet the relevant requirements of the Ministry of Education of the People's Republic of China for successful conversion of independent colleges into private higher education institutions. The planned enrolment of junior college to bachelor's degree transfer is 1,800, increased by 900 compared with 2019/20 school year. The 2020 college entrance exam for junior college students has completed in Guangdong Province, and the final number of students enrolled for degree programmes for junior college students for the 2020/21 school year is to be announced but it's expected to exceed 1,800. The planned enrolment in Huashang Vocational College for the 2020/21 school year is approximately 7,500, representing an increase of approximately 2,000 compared with the enrolment plan for the 2019/20 school year. Overall, the planned enrolment of the Group for the 2020/21 school year will steadily increase.

The enrolment plan mentioned about includes unified enrolment plan of undergraduate degree, junior college to bachelor degree transfer and Vocational education training programmes. It is worth noting that although the conversion plan leads to a reduction in the planned undergraduate unified enrolment for the 2020/21 school year ("Impact"), the Group strives to complete the conversion of Huashang College before late December 2020. If the conversion is completed as scheduled, the impact will only affect the enrolment plan for unified admission undergraduates for the 2020/21 school year of the Group, which can be offset by the development of junior college to bachelor's degree transfer, junior college and vocational education business that year. Meanwhile, the Group expects that the enrolment plan for the 2021/22 school year will stay at the same level that for the 2019/20 school year plus a possible rise. The annual fee payable to Guangdong University of Finance & Economics is also expected to gradually decrease from financial year 2022, which will have a positive impact on the Group's future development.

The range of 2020/21 school year tuition fees for new student of the Group saw considerable growth and higher tuition fees reflect the Group's continuous improvement in the quality of its education services. the range for undergraduate programmes is RMB28,000 - 43,800, an increase of RMB1,000 - 4,000 YoY, the range for degree programmes for junior college students is RMB27,000 - 33,000, an increase of RMB2,000 - 3,200 YoY, and that for junior college diploma programmes is RMB16,500 to RMB28,000, an increase of RMB1,000 YoY.

Actively cooperation with industry-leading institutions to further deepen the integration of industry and education
During the Period under Review, the Group established business-education partnerships with many well-known companies to further deepen the integration of industry and education and implement the national "1 + X" certificate system. So far, the Group has reached strategic cooperation with SenseTime Group Limited ("SenseTime"), Kingdee Software China Company Ltd. ("Kingdee"), Shenzhen Zhongxingxin Cloud Service Co., Ltd. ("Zhongxingxin Cloud") and Beijing Baidu Netcom Science and Technology Co., Ltd. ("Baidu") in a variety of fields such as artificial intelligence, management informatisation, teaching informatisation, and financial sharing, with an aim to furnish students with more diverse teaching content, improve their employability after graduation, and facilitate the Group's comprehensive digital transformation.

Business Update

Continuously improve core business

Improvement in School Condition and Teaching Resource

Xinhui campus in Jiangmen City: During the Period under Review, the Group acquired a land parcel in Xinhui District, Jiangmen City, Guangdong Province for the first-phase construction of the new campus of Huashang Vocational College and the part-time academic education newly deployed by the Group. The first-phase campus with an area of approximately 455,652 sq. m. (approximately 683 mu) is expected to accommodate about 12,000 students and put into use in September 2021. After the commencement of the operation of the first-phase campus, there are still two phases to be constructed in the future. The campus is planned to cover a total area of approximately 1,333,400 sq. m. (approximately 2,000 mu) and is expected to accommodate more than 30,000 students.

Sihui Campus in Zhaoqing City: The first-phase Sihui campus of Huashang College will be put into operation as scheduled in September 2020. The first-phase campus covers an area of approximately 165,166 sq. m. (approximately 248 Mu) and is expected to accommodate approximately 6,000 students. The overall planned area of this campus is approximately 533,300 sq. m. (approximately 800 mu) and the campus is expected to accommodate approximately 16,000 students.

Zengcheng campus: The constructions of the Huashuang Science & Technology Centre and Huashang International Conference Centre on the Zengcheng campus are in progress as scheduled. The Huashuang Science & Technology Centre will be mainly used for teaching activities, and the Huashang International Conference Centre will be mainly used to host industry or school-enterprise meetings, academic activities and practical training.

With the completion of Sihui and Xinhui new campuses, the Group's three campuses (Zengcheng, Sihui and Xinhui) will offer over 80,000 students capacity for students seeking academic and non-degree education. The campuses are all located in Guangdong Province, which features great economic and demographic advantages and has a strong demand for higher education resources. There is an approximately 1-1.5 hour drive on average between each other. The Group's quality school brands, sufficient school conditions, and superior school locations will lead to a considerable endogenous growth in the next few years.

Course Improvement
Following cooperation with SenseTime, Southwest University of Political Science and Law and Kingdee, the Group established a strategic partnership with Zhongxingxin Cloud and Baidu during the Period under Review. This strong alliance will continue to help offer more diversified courses for the students of the Group.

- Strategic cooperation with Zhongxingxin Cloud: On 13 May 2020, the Group signed a cooperation agreement with Zhongxingxin Cloud, a subsidiary of ZTE Corporation and one of leading financial shared service solution providers in China. Pursuant to this agreement, the two parties will jointly set up a co-branded class and send professional teachers and expert advisors to each other's schools and companies, provide academic and practical teaching for students majoring in finance, and jointly develop shared finance and medium-and high-end financial management talents.

- Strategic cooperation with Baidu: On 18 June 2020, the Group signed a strategic cooperation agreement with Baidu to jointly provide education in areas of expertise such as big data, artificial intelligence and fintech and develop courses and teaching resources based on their existing curriculum systems and resources and expertise development needs.

Global Expansion and Improvement of Teaching Quality
During the Period under Review, the Group made a major breakthrough in the expansion of its international school network by founding Edvantage Institute Australia in Australia, a higher education institution granted by TEQSA and qualified to accept students and offer and award undergraduate and master degrees. In addition, the Group is continuing with the establishment of its London campus steadily.

Edvantage Institute Australia: Edvantage Institute Australia is the first higher education institution of the Group which was granted the registration to be qualified both undergraduate and master degree admission. In running the school and providing education, the Group is committed to developing high-end application-oriented industry talents, senior business management talents that adapt to social needs, and business leaders of the times. It aims to build the school into a top overseas college of Huashang Education Group with top-level teachers, create an international and diverse campus, and become a globally well-known school with a high reputation in the industry.

- In terms of the curriculum, the Group will start with marketing undergraduate courses and expand traditional immigration undergraduate courses such as IT and education. The Group also plans to develop into a higher education institution with a focus on masters-level programmes represented by MBA and supplemented by pre-masters courses;

- In respect of the enrolment plan, the Group has always been focusing on the teaching quality of its schools and their student enrolment instead of quantitative success. It is currently preparing for the enrolment that is planned to commence in the first quarter of 2021 and the number of students enrolments which is expected to reach 600 within 4 years;

- As for collaboration with its colleges in China, the Group envisages the setup of "3+2" and "2+2" programmes with Huashang College and Huashang Vocational College, respectively, as well as the offering of Global Immersion Programme to students in the domestic colleges to prepare them for Edvantage Institute Australia

London campus: The Group is advancing relevant preparations for a new campus in London. As part of the preparations, such as licensing application is ongoing. So far, the Group has not invested much in preparing for the new campus in London.

Vigorous Development of Vocational Education Training Business:

The vocational education business of the Group further grew under the state government policy on the encouragement of the "1 + X" certificate system for vocational colleges and technical training colleges and enrolment of 2 million additional students for higher vocational colleges. The vocational education business of the Group has high growth and gross profit margin and will become a new revenue growth factor for the Group. The Group expects that the revenue of this business segment in the financial year 2019/20 will increase by approximately 50% or above YoY (approximately RMB9 million in the financial year 2018/19) and its gross profit margin will also exceed that of its core business (gross profit margin of the core business: approximately 48.6% in the financial year 2018/19). The Group has taken the following main measures during the Period under Review to vigorously develop its vocational education business:

- The Group actively cooperated with industry-leading institutions/schools to offer high-end vocational education training courses in China and beyond: including Development of AI-related courses with SenseTime; Development of courses related to enterprise digital management talents with Kingdee Group ; Implementation of vocational training projects in law with the Southwest University of Political Science and Law through overseas educational resources; Delivery of training on medium-and high-end shared corporate finance talents with Zhongxingxin Cloud; Opening of Baidu computer vision and other application development related courses with Baidu; These kind of related courses are expected to commence in the school year of 2020/21.

- More certified vocational training courses have been introduced in Zengcheng campus: such as CFA, junior accountant, computer science, teacher qualification certificate, CET 4, CET 6 and IELTS;

- Further development of the high-skilled talent programme in Zengcheng campus: The numbers of student enrolments in the school year of 2019/20 is 2,229;

- Further development of Continuing Education in Zengcheng campus: The numbers of student enrolments in the school year of 2019/20 is 4,164.

Overall, the Group's business update for the first three quarters of financial year 2019/20 indicate that the Group is able to resist the impact of the COVID-19. The Group's school network is constantly expanding to fully complement its school condition and breakthroughs in the running of overseas schools is also a testament to the Group's strong school management ability. Looking forward, the Group will keep strengthening its higher education business and put enormous efforts to develop vocational education business, which is currently credited to other revenue to create more value for the shareholders.

About Edvantage Group Holdings Limited
Edvantage Group Holdings Limited ('Edvantage Group' or the 'Group', stock code: 0382.HK) is the largest private higher education group in the Greater Bay Area, and an early mover in education sector in pursuing international expansion. The total number of student enrolments of the Group were 35,300 as of 31 May 2020.

The Edvantage Group currently operates two private higher education institutions located in Guangdong Province, China, namely Huashang College Guangdong University of Finance and Economics ("Huashang College") and Guangzhou Huashang Vocational College("Huashang Vocational College"). Huashang College and Huashang Vocational College focus their programme offerings on business programmes, such as accounting, finance, economics and business English. The Group also operates a private vocational education institution named Global Business College of Australia ('GBCA') authorised by ASQA in Australia, offering vocational education courses and non-formal short-term courses. The Group has also acquired NYU Language School, a local private school in Singapore and has established the Singapore campus based in the existing NYU Language School. NYU Language School has been accredited as EduTrust by the Education Department of Singapore. The Singapore campus is expected to commence operation in the second quarter of 2020. It is qualified to offer internationally-recognised courses and accept local and overseas students in Singapore. In the first quarter of the year 2020, the Group established a higher education institution, Edvantage Institute Australia, which is granted by the Tertiary Education Quality and Standards Agency in the first quarter of 2020, and qualified to accept students, offer and award undergraduate and master's degrees. It is expected to start students recruitment in the first quarter of 2021.

Sectors: Daily Finance, Daily News