Raffles Education profit down 27% to $31.1mln

Company continues to expand by setting up five colleges in 2009 and seven colleges in 2010.

Raffles Education Corporation Limited, the largest private education provider in the Asia-Pacific region, on Tuesday reported a net profit of $31.1 million on a revenue of $143.4 million for the nine months ended 31 March 2010 (9MFY2010).

Turnover declined 9% from 9MFY2009 mainly due to a reduction in the allocation of National Education School students as a result of a drop in the number of students in China taking the Gao Kao (the Gao Kao or National Higher Education Entrance Examination is an academic examination held annually for students seeking admission into institutions of higher learning in the People's Republic of China) as well as the cumulative effect of a reduction in students recruited over the last few quarters due to the impact of the global financial crisis, according to a Raffles Education report on Tuesday.

Net profit declined 27% from S$42.6 million in 9MFY2009 to S$31.1 million in 9MFY2010, mainly due to lower revenue and the impact from the following:

• Absence of a gain from disposal of land in Oriental University City (OUC) in 9MFY2010 (9MFY2009: $18.8 million);
• Absence of an impairment loss in Oriental Century Ltd (OCL) in 9MFY2010 (9MFY2009: S$33.1 million);
• An unrealised net foreign exchange loss of S$3.4 million recorded in 9MFY2010 as compared to a $4.2 million gain in 9MFY2009;
• $12.6 million increase in personnel and other operating expenses as a result of expanded operations and set up of new colleges;
• $5.5 million fair value gain from the revaluation of investment properties in OUC in 9MFY2010 (9MFY2009: Nil);
• $2.3 million increase in finance costs due to overall higher interest rates and the amortisation of finance charge on long-term payables.

Net profit for the third quarter ended 31 March 2010 (Q3FY2010) was S$9.5 million, a turnaround from a $16.5 million loss in the corresponding period last year. The Group also experienced a decrease in other operating expenses from $20.1 million in Q3FY2009 to $19.5 million in Q3FY2010 in line with the decrease in turnover.

Mr Chew Hua Seng, Chairman and CEO of RafflesEducationCorp, said: “We have continued to invest in organic growth. In all, the Group set up five colleges in FY2009 and seven colleges in FY2010. These colleges are expected to contribute positively to the Group in FY2011 and FY2012.

The recent investment of 10% stake in OUC by Khazanah for $62.0 million and the proposed investment of a similar 10% stake by AIF Capital for $70.0 million are strong endorsement of the Group’s direction and puts the Group in a good financial position to embark on new opportunities to expand its business.”