Published November 4, 2009

Raffles Education's Q1 profit tumbles 55%

Results hit by sharp fall in other income, higher overheads and lower turnover

By OH BOON PING

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HIT by a sharp drop in other income, Raffles Education Group reported a 55 per cent plunge in its fiscal first-quarter net profit to $14 million. Turnover for the three months ended Sept 30, 2009, also dipped 3 per cent to $51.55 million.

Mr Chew: 'We view these start-up costs as part of our investment for growth as many of these new colleges are expected to contribute to the group in FY2011.'

Earnings per share dropped to 0.54 cents from 1.36 cents.

Raffles, which operates three universities and 26 colleges in the Asia-Pacific region, saw its 'other operating income' drop to $703,000 from $9.5 million. The year-ago period had non-recurring gains of $6 million from the disposal of land in Oriental University City (OUC) and an unrealised foreign exchange gain of $2.5 million.

Meanwhile, the decrease in turnover was primarily due to a reduction of national education school (NES) students, which was partially compensated by an increase in students studying in Raffles' private education school colleges.

Related links: Click here for Raffles Education's news release Financial statements

The decline in NES student numbers resulted from a drop in the number of students in China taking an academic examination held annually for students seeking admission into institutions of higher learning in China.

In terms of overheads, rental, personnel and other operating expenses also rose $5.1 million as a result of investments in six new colleges in Bangalore, New Delhi, Jakarta, Langfang, Yunnan and Tianjin. There was also an unrealised foreign exchange loss of $2.1 million.

Said chairman Chew Hua Seng: 'We continued to invest in organic growth, opening six new colleges in India, Indonesia and China during the past financial year and targeting to open eight more in the current financial year. We view these start-up costs as part of our investment for growth as many of these new colleges are expected to contribute to the group in FY2011.'

The education group said it will continue to build on its strong fundamentals to expand regionally.

In addition to opening new colleges in the region in FY2010, other growth drivers include the development of proprietary courseware and value creation of OUC.

Raffles said it will continue to look for strategic acquisitions to expand its brand equity regionally.