China New Higher Education Group Announces Results for FY2019

Total Revenue Increases 72.2% to RMB1,252 Million  

Net Profit Grows 69.3%

Student Enrollment Up 21.3%  

Strong Results Growth

(Hong Kong, March 24, 2020) China New Higher Education Group Limited (“China New Higher Education Group”, together with its subsidiaries, the “Group”; stock code: 2001.HK) is pleased to announce the consolidated annual results for the year ended 31 December 2019 (“Review Period”).

The Group’s Position

n  Practitioner of Collectivized School Operation: Established in 2005, the Group has now formed a replicable collectivized school operation model.

n  The propeller of application-oriented Universities: The Group is the initiator and vice-chairman unit of the Association of Universities (Colleges) of Applied Science of the MOE.

n  Leader of High-quality Employment: The Group won the title of the Top 50 National Employment of the MOE, with an average employment rate of above 97%.

n  Pioneer of Cross-regional Layout: The group started to operate schools in different provinces since 2009, and has built a network of schools in 7 provinces and regions in China.

n  Forerunner of Organic Growth: The Group’s total number of student enrollment increased by 21.3% yoy, with a continuous increase in student enrollment and tuition fees.

Financial Highlights

n  Total revenue amounted to RMB1,252 million, up 72.2% yoy

n  Gross Profit amounted to RMB543 million, up 89.9% yoy

n  Profit before tax amounted to RMB486 million, up 75.5% yoy

n  Net profit amounted to RMB430 million, up 69.3% yoy

n  Net profit attributable to owners of the parent amounted to 386 million, up 58.8% yoy

n  A proposed final dividend of RMB0.032 per share, up 68.4% yoy

Business Highlights

n  In the 2019/2020 academic year, the Group’s student enrollments totaled over 113,500, up 21.3% yoy.

n  The average employment rate for graduates reached 97.35% and high-quality employment rate reached 38.48%.

n  The Group consolidated financial statements for the Guangxi Schools and Central China School in 2019, expanded the Henan School by 500 mu with over 27,000 student enrollments, and completed the construction and relocation of the Gansu School within only one year.

n  In the 2019/2020 academic year, the Group was enabled to add 24 new, popular majors, mainly on arts, engineering, and medicine.

n  Around 1,700 students have won close to 500 awards in subject competitions.

n  The Group has 1,000 experimental training bases on and outside its campuses, among which 164 were added in 2019, including 40 internal experimental training rooms and 124 external practice bases.

n  The Group steadily pushed forward with international collaboration by signing cooperation agreements with 17 overseas schools in countries including the UK, the US, Germany, and Canada; with international students from 34 countries studying and exchanging in the schools.

Founder of the Company and Chairman of the Board Mr. Li Xiaoxuan said: “Since our listing, we have been taking solid steps in the capital market and delivering satisfactory results with supports from our investors and the society. In 2019, the Group realized growth from dual drivers, enhanced the quality of education and employment and successfully merged the acquired universities, achieving steady growth in all its businesses.

Also, we paid attention to improving our teaching and digitalization and digitalized our teaching, management, services and safety measures. During COVID-19 outbreaks, TronClass, an online education platform combining teaching, learning, management and assessment functions, has played a prominent role in meeting online teaching and learning needs and accumulated over 40 million visits.

Looking ahead, we expect growth and plenty of room for value increase, thanks to favorable policies and the potential geographical advantages of our schools. We shall seize the opportunities to achieve synergy and rely on our growth strategy which prioritizes organic growth and pursues business expansion to swiftly improve operational efficiency and profitability, diversify our sources of revenue, bringing greater value for our shareholders.”

Financial Analysis

In 2019, the Group’s revenue increased 94.1% to RMB1,089 million, tuition fee increased 92.2% to RMB984 million, and the boarding fee increased 114.3% to RMB105 million, reflecting the increases in its student number, tuition fees, and boarding fees. Additionally, the Group’s training and logistics revenue grew 65.2% yoy to RMB114 million. The advantages of the Group’s collectivized operation have emerged and a diversified revenue structure has gradually taken shape.

The Company continuously optimized its cost structure and increased its teaching input, with its major business constituting 71% of the total costs in 2019, up from 61% in 2018, which showed constant improvement in teaching quality; on the other hand, the proportions of items such as management fees and financing expenses decreased from last year.

In 2019, the Company’s profitability reached a new high. The gross profit increased 89.9% yoy to RMB542 million; EBITDA increased 63.2% yoy to RMB717 million; net profit attributable to owners of the parent company increased 58.8% yoy to RMB386 million, and the proposed final dividend increased 68.4% yoy to RMB0.032. Significant increase in shareholder returns.

The Company’s total capital doubled and level of liability decreased by half, with the total capital of the Company grew more than doubling yoy by 153.5% to RMB1,047 million, Net interest-bearing liabilities decreased 49.8% yoy to RMB439 million, and net interest-bearing debt/total equity ratio improving remarkably by decreasing from 38.3% in 2018 to 14.9%, which showed noticeable improvement in weighted average interest rate, 100 bps lower yoy.

Business Review

Focusing on the teaching quality

In 2019, to answer the calling of MOE, the Group repeatedly increased its input into education. The Group was enabled to add 24 new, popular majors, mainly on arts, engineering, and medicine; based on the OBE (Outcomes-based Education) model, the Group enhanced its course research; the Group organized more than 100 teacher training sessions to establish a team of dual-qualified teachers, resulting in 2 first prizes and 7-second prizes from provincial teaching competitions; Also, approximately 1,700 students of the Group participated in various types of academic contests in 2019 and won nearly 500 awards and honors, including the Special Award (特等獎) and Best Innovation Award (最佳創新獎) from the National Finals of the 9th China National College Student “Innovation, Originality and Entrepreneurship” Challenge national finals grand prize (第九屆全國大學生電子商務創新、創意及創業挑戰全國總決賽) and National Top-class Award (全國一等獎) from the 3D Design Show (Elite League) (全國三維數位化創新設計大賽（精英聯賽）); Finally, the Group continued to push forward with international cooperation by signing agreements with 17 overseas schools or organizations in countries including the UK, the US, Germany, and Canada; with international students from 34 countries studying and exchanging in the schools.

Bolstering the employment quality

In 2019, the Group trained innovative talent and deepened industry-education integration, leading to a drastic increase in employment quality. It further promoted a high-paid talent training model with pilot classes (such as the college of excellence and Talent Class program), bringing about an average employment rate of nearly 100% and an annual salary of above RMB75,000, far higher than the market average. With its schools collaborating with more than 10,000 employers such as Huawei, Alibaba, State Grid Corporation of China, and China State Construction, the Group boasted an average graduate employment rate of 97.35% and high-quality employment rate of 38.48% (renowned companies, continued education, and civil service positions).

Raising the level of digitalization

In 2019, the Group implemented digital teaching, management, services and safety measures:

For digital teaching, the Group combined cloud technologies to establish TronClass, an online education platform combining teaching, learning, management and assessment functions, which has played a prominent role during the COVID-19 outbreaks in meeting online teaching and learning demands and recorded over 40 million visits.

Regarding digital management, the Group established its computing center, data center, and safety center with help from Alibaba Cloud and applied the products of a renowned management software provider, Yonyou,to upgrade its ERP resources management system.

As for digital services, the Group independently developed the teacher-student digital integrated service platform using micro-frontends, big data and cloud computing structures, providing teachers and students with integrated services – including academic results, exam registration, fee payment, teaching, and learning assessment, apartment repair, and suggestions and advice–recorded more than 15 million times.

Concerning digital safety measures, the Group cooperated with major market player Hangzhou Hikvision Digital Technology Co., Ltd. in comprehensively managing campus personnel safety, fire safety, food safety, campus traffic safety, etc. with emerging technologies such as face recognition, big data, and behavior recognition, achieving zero major safety accidents.

Outlook

The Company will continue to take advantage of its strengths in the collectivized operation of schools and implement its two-wheels-driven development strategy. For Organic Growth, the Group will further enhance the quality of its teaching, employment, management, and services expand its sources of revenue and focus on light assets, to make the demand side more scientifically, the user side more efficiently, the input side more reasonably and the income side more effectively. Regarding Value Investment, the Group will stick to the principle of “Precision, Stability and Collectivized Operation” in promoting higher education, It will also look for quality targets in regions with a low gross enrollment rate, high student demand and great potential for future development; for newly acquired schools, the Group will make good use of its strength of sharing resources and promote both synergy and innovation in a host of areas through support from sources including digital platforms, to further solidify its financial foundation and markedly increase the overall post-investment benefits.

The Group proactively invested in 5 colleges and universities before and after the listing, the acquisition cost is far below current market price, showing evident first-mover advantages; with effective group management and the obvious post-investment integration effects of the acquired schools, the Group currently has more than 113,500 enrolled students, ranks third among listed higher education groups in Hong Kong, and shows notable improvement in teaching, employment quality, revenue and profit of its invested schools. The Group’s development strategy of focusing on organic growth and pursuing business expansion has been validated; benefiting from the recent introduction of favorable policies for higher education, and the locations of the Group’s schools in regions with a low gross enrollment rate, scarce education resources, and huge growth potential, the Group expects to see future growth and continue receiving support from local governments; The Group will experience continued high-quality improvement in its business performance in the future, and there is huge room for valuation improvement.

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About China New Higher Education Group Limited:

China New Higher Education Group Limited is a leading private formal higher education group in China with nearly 20 years of education industry experience, specializing in providing higher education which focuses on applied sciences. The Group endeavors to help each student maximize his or her  potential and live his or her  life to the fullest. Since 2009, the Group has been operating schools in different provinces and regions, and its current school network covers 7 provinces in China, including Yunnan, Guizhou, Hubei, Heilongjiang, Henan, Guangxi, and Gansu.

The Group provides high quality higher education in a wide selection of fields in applied sciences. Its courses are designed to equip students with practical and readily applicable skills, helping to prepare them for the job market. As a leader in high-quality employment, the Group won the title of the Top 50 National Employment of the MOE, with an average employment rate of above 97%. The Group became a constituent stock of the Hang Seng Composite Small Cap Index and the Hang Seng Consumer Goods & Services Index in the Hang Seng Composite Index Series in August 2017, and was included as a constituent stock of the MSCI China Small Cap Index in November 2017 and included as a constituent stock of Shenzhen and Hong Kong Stock Connect in March 2018.