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Financials

Second Quarter Results Financial Statement And Related Announcement For the Financial Period Ended: 30-06-2017

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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 total revenue of $22.58 million and $44.66 million for the second quarter ended 30 June 2017 (Q2 2017) and the six months ended 30 June 2017 (H1 2017) respectively. The decrease in total revenue compared to corresponding periods last year was due to the lower student enrolments for the academic semester January to June 2017 just ended.

Details of revenue lines are as follows:

Revenue from tuition fees was lower at $21.89 million in Q2 2017 compared to $23.60 million in Q2 2016. The six-month tuition fees dropped to $43.43 million in H1 2017 from $46.66 million in H1 2016.

Revenue from registration fees was S$0.43 million in Q2 2017 compared to $0.51 million in Q2 2016. The six-month registration fees revenue was lower at $0.67 million in H1 2017 compared to $0.77 million in H1 2016.

School shop revenue was $0.08 million in Q2 2017 versus $0.09 million in Q2 2016. The six-month school shop revenue was $0.18 million in H1 2017 compared to $0.21 million in H1 2016. Enrichment programme revenue was $0.13 million in Q2 2017 and $0.25 million in H1 2017 which were comparable with the corresponding periods last year.

Interest income was lower at $0.05 million in Q2 2017 compared to $0.07 million in Q2 2016. Similarly, interest income ended lower at $0.12 million in H1 2017 compared to $0.21 million in H1 2016.

Total expenses before depreciation and amortisation was lower at $17.89 million in Q2 2017 compared to $18.96 million in Q2 2016. Similarly, the six-month total operating expenses before depreciation and amortisation was lower at $35.33 million in H1 2017 compared to $37.64 million in H1 2016. The decrease was due mainly to implementation of cost-cutting measures to reduce personnel expenses, coupled with the Bonds interest-cost savings from the repurchase of the Bonds.

Personnel expenses decreased to $13.52 million in Q2 2017 from $14.58 million in Q2 2016, and the six-month personnel expenses decreased to $26.77 million in H1 2017 from $28.78 million in H1 2016. The decrease was due to non-renewal of contracts of academic staff from second half of last year, in line with the lower student enrolments.

Utilities expenses were $0.21 million and $0.42 million in Q2 2017 and H1 2017 respectively, compared to $0.27 million and $0.53 million in the corresponding periods of last year.

Upkeep and maintenance increased to $0.44 million in Q2 2017 and $0.88 million in H1 2017, compared to $0.18 million and $0.37 million in the corresponding periods of Q2 2016 and H1 2016. The increase was due to renewal of several maintenance contracts after the expiry of the maintenance free period which ended in first half of last year.

Finance costs on Bonds were reduced to $1.94 million in Q2 2017 and $3.88 million in H1 2017 from $2.05 million and $4.11 million in Q2 2016 and H1 2016 respectively, due to the interest savings from the repurchase of $8,000,000 Bonds in Q2 2017 and $7,000,000 Bonds in Q3 2016.

Other operating expenses were lower at $1.65 million in Q2 2017 as compared to $1.72 million in Q2 2016. The six-month other operating expenses also decreased to $3.09 million in H1 2017 from $3.56 million in H1 2016. The higher other operating expenses last year (Q2 2016 and H1 2016) was due mainly to the revision of property tax for the new school campus from $0.23 million to $1.08 million per annum with effect from the issuance of the Temporary Occupancy Permit in May 2015. The backdated upward property tax adjustment was charged to the Group in Q1 2016.

Depreciation and amortisation expenses were $2.62 million and $5.24 million in Q2 2017 and H1 2017 respectively, compared to $2.66 million and $5.33 million in Q1 2016 and H1 2016.

Profit before taxation ended at $2.07 million for Q2 2017 compared to $2.81 million in Q2 2016. The six-month profit before taxation ended at $4.09 million for H1 2017 compared to $5.17 million for H1 2016.

Income tax expense for Q2 2017 and H1 2017 were $0.62 million and $1.20 million respectively, comprised mainly of the accrual of net deferred tax liabilities of $0.60 million and $1.16 million respectively. The income tax expense for Q2 2016 and H1 2016 were $0.68 million and $1.70 million respectively, comprised mainly of the accrual of net deferred tax liabilities of $0.68 million and $1.68 million respectively. The net deferred tax liabilities arose from the recognition of capital allowances on new assets acquired for the new school campus.

Profit after taxation for the second quarter ended at $1.45 million for Q2 2017 compared to $2.12 million for Q2 2016. Profit after taxation for the half-year ended at $2.89 million for H1 2017 compared to $3.47 million for H1 2016.

Review of Group Balance Sheet as at 30 June 2017

Total property, plant and equipment at 30 June 2017 amounted to $270.96 million compared to $275.71 million at 31 December 2016. The decrease of $4.75 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 $0.50 million at the end of Q2 2017 compared to $0.47 million at 31 December 2016.

Trade receivables comprised amounts attributable to tuition fees, registration fees, school shop revenue and other revenue. The increase of $1.12 million at the end of Q2 2017 from 31 December 2016 was due mainly to the timing of collection of the receivables for the reporting period.

The Group's cash and bank balances amounted to $31.17 million at 30 June 2017 and $53.91 million at 31 December 2016. The decrease was due to cash used in operating, investing and financing activities, as explained in the review of Group cash flow below.

Trade and other payables and liabilities increased by $0.31 million at 30 June 2017 due mainly to accrual and timing of payments of operating expenses.

Fees received in advance decreased to $16.14 million as at 30 June 2017 from $30.75 million as at 31 December 2016. The fees received in advance as at 31 December 2016 were for tuition fees collected for the second semester commencing in January 2017. The fees received in advance as at 30 June 2017 were for tuition fees collected for the first semester starting inAugust 2017.As at 30 June 2017, the fees for the new semester commencing in August 2017 were not due yet.

Bonds - Interest payable at 30 June 2017 was for the interest accrued on the remaining balance of $135 million bonds at 5.20% p.a. for the period from 17April 2017 to 30 June 2017. Bonds - Interest payable at 31 December 2016 was for the bonds interest on $143 million bonds at 5.20% p.a. for the period from 17 October 2016 to 31 December 2016.

The Goods and Services Tax payable of $2.82 million at 30 June 2017 arose mainly from the billing of semester one 2017/2018 tuition fees.

Deferred tax liabilities amounted to $6.67 million at 30 June 2017 compared to $5.51 million at 31 December 2016. 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, offset by deferred tax asset from unabsorbed capital allowances.

Review of Group cash flow for the second quarter ended 30 June 2017

In Q2 2017, net cash generated from operating activities was $3.24 million, which consisted of cash inflow from operating profit before working capital changes of $6.68 million, net working capital outflow of $3.44 million, interest received of $0.05 million and income tax paid of $0.05 million.

The above-mentioned net working capital outflow of $3.44 million arose mainly from cash outflow relating to the decrease in trade payables, other payables, liabilities and fees received in advance of $3.05 million. There was also the increase in cash outflow from trade receivables of $1.43 million, offset by the cash inflow from other receivables, deposits and prepayments of $1.16 million.

The net cash used in investing activities of $20.41 million in Q2 2017 was for the payment of bond interest of $3.71 million inApril 2017, bonds repurchased of $8.14 million and payment of the final dividend of $8.57 million in respect of FY 2016 in May 2017.

Commentary

The current operating environment for foreign system schools ("FSS") is expected to remain challenging. The Group continues to focus on quality school programmes, including harnessing our student recruitment efforts, to attract student enrolments. The Groups continues to maintain a conservative stance on expenditure 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