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Financials

First Quarter Results Financial Statement And Related Announcement For the Financial Period Ended: 31-03-2018

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Consolidated Statements Of Comprehensive Income

Consolidated Statements Of Comprehensive Income

Balance Sheets

Consolidated Statements Of Comprehensive Income

Review of performance

Review of Income statement

The Group posted a total revenue of $21.22 million for the first quarter ended 31 March 2018 (Q1 2018) compared to $22.19 million for the corresponding quarter ended 31 March 2017 (Q1 2017). The overall decrease of 4.4% was due to the lower student enrolments compared to the same period last year.

Details of revenue lines are as follows:

Revenue from tuition fees was lower at $20.55 million in Q1 2018 compared to $21.54 million in Q1 2017.

Revenue from registration fees was $0.31 million in Q1 2018 compared to $0.35 million in Q1 2017.

School shop revenue was comparable at $0.10 million in Q1 2018 and Q1 2017. Enrichment programme revenue was higher at $0.14 million in Q1 2018 compared to $0.12 million in Q1 2017.

Interest income was $0.12 million in Q1 2018 compared to $0.07 million in Q1 2017.

Total expenses before depreciation and amortisation was lower at $15.84 million in Q1 2018 compared to $17.44 million in Q1 2017. The Group benefitted mainly from lower personnel expenses and interest cost savings, and maintaining a conservative stance on the other operating expenditure as explained below.

Personnel expenses decreased to $11.96 million in Q1 2018 from $13.25 million in Q1 2017 due to rightsizing measures to reduce personnel expenses in line with the lower student enrolments.

Utilities expenses were lower at $0.19 million in Q1 2018 compared to $0.21 million in Q1 2017. Upkeep and maintenance expenses were also lower at $0.36 million in Q1 2018 compared to $0.44 million in Q1 2017.

Finance costs on Bonds were lower at $1.83 million in Q1 2018 compared to $1.94 million in Q1 2017 due to the interest cost savings from the repurchase of additional $8,000,000 Bonds in FY2017. Information on the repurchase of the Bonds is disclosed in paragraph above.

Other operating expenses were lower at $1.36 million in Q1 2018 compared to $1.44 million in Q1 2017.

Depreciation and amortisation expenses were lower at $2.55 million in Q1 2018 compared to $2.62 million in Q1 2017.

Profit before taxation ended higher at $2.83 million in Q1 2018 compared to $2.13 million in Q1 2017, an increase of 32.6% over the same period last year

Income tax expense for Q1 2018 was $0.89 million as compared to $0.58 million in Q1 2017, comprised mainly of the accrual of net deferred tax liabilities of $0.85 million in Q1 2018 and $0.57 million in Q1 2017. The net deferred tax liabilities arose from the recognition of capital allowances on new assets acquired.

Net profit after taxation for Q1 2018 ended higher at $1.94 million compared to $1.55 million for Q1 2017, an improvement of 25.0% over the same period last year.

Review of Balance Sheet as at 31 March 2018

Total property, plant and equipment at 31 March 2018 amounted to $264.44 million compared to $266.63 million at 31 December 2017. The decrease of $2.19 million was due mainly to the depreciation charge for the reporting period.

Inventories for school uniforms, books and stationery supplies for sale at the school shop were $0.41 million at 31 March 2018 compared to $0.43 million at 31 December 2017.

Trade receivables comprised amounts attributable to tuition fees, registration fees, school shop revenue and other revenue. Trade receivables balance at 31 March 2018 decreased to $1.03 million due to collection of outstanding receivables at 31 December 2017.

Other receivables and deposits amount was constant at $0.27 million at 31 March 2018 and at 31 December 2017.

Prepayments increased by $1.06 million due to increase in prepaid expenses incurred at the beginning of the year.

The Group's cash and cash equivalents amounted to $49.51 million at 31 March 2018 and $53.58 million at 31 December 2017. The decrease was due to cash used in operating and investing activities as explained in the review of Group cash flow below.

Trade and other payables and liabilities were lower at $1.64 million at 31 March 2018 compared to $1.78 million at 31 December 2017 due to timing of payments of operating expenses.

Total fees received in advance (current and non-current) decreased to $22.82 million at 31 March 2018 from $29.97 million at 31 December 2017. The total fees received in advance at 31 December 2017 comprised of tuition fees collected before the commencement of the next semester and registration fees collected upon enrollment. The decrease was due to recognition of the tuition fees and registration fees as revenue over the duration of the course and over the average student life respectively. The recognition of registration fees over the average student life was adopted with effect from 1 January 2018 in accordance with SFRS(I) 15 - Revenue from Contracts with Customers.

Bonds - Interest Payable at 31 March 2018 was for the interest accrued on the remaining balance of $135 million bonds at 5.20% p.a. for the period from 17 October 2017 to 31 March 2018. Bonds - Interest Payable at 31 December 2017 was for the bonds interest accrued on $135 million bonds for the period from 17 October 2017 to 31 December 2017.

The GST payable of $2.66 million at 31 December 2017 was mainly related to the billing of semester two 2017/2018 tuition fees and was paid in Q1 2018.

Deferred tax liabilities amounted to $8.51 million at 31 March 2018 compared to $7.66 million at 31 December 2017. The net deferred tax liabilities arose from the tax effect on temporary differences between the net book value and the tax-written-down-value of qualifying assets.

Review of Group cash flow for the first quarter ended 31 March 2018

The net cash used in operating activities in Q1 2018 was $3.73 million, which consisted of cash inflow from operating activities before working capital changes of $7.10 million, net working capital outflow of $10.94 million and interest received of $0.11 million.

The above-mentioned net working capital outflow of $10.94 million arose mainly from the cash outflow relating to the decrease in trade payables, other payables, liabilities and fees received in advance (current and non-current) of $9.97 million. There was also the cash outflow from the increase in other receivables, deposits and prepayments of $1.11 million, offset by the cash inflow from trade receivables of $0.14 million.

The net cash used in investing activities of $0.34 million was for the capital expenditure in the normal course of business.

Commentary

The Group noted some degree of normalisation of student enrolment numbers from the latter part of last year. However, the Group remains cautious and expects the current operating environment for foreign system schools (FSS) to remain challenging.

The Group continues to focus on delivering quality school programmes, and has increased our student recruitment efforts to attract student enrolments. The Group maintains a conservative stance on expenditure, and will continue to rightsize personnel expenses as and when necessary during this challenging period.

FSS in Singapore are to a large extent dependent upon the ability of Singapore to continue to attract foreign direct investments, and the Group is well placed in the FSS market to compete and to support any expansion of foreign investments into Singapore.

Overseas Education Limited
81 Pasir Ris Heights, Singapore 519292 | Tel (65) 6738 0211 | Fax (65) 6733-8825