Kepei Education (1890.HK) Announces 2020 Annual Results

Core Net Profit Significantly Increased by 35.3% YoY

 

[30 March 2021, Hong Kong] A leading provider of private higher education services in China focusing on profession - oriented education, China Kepei Education (1890.HK), announced its annual results for the year ended 31 December 2020 .

 

Delivered Solid Growth in Financial Results, Number of Students Enrolled Continued to Increase

With over 20 years' experience in operating higher education institutions in China, Kepei Education is a leading provider of private higher education services in China focusing on profession - oriented education. As of the 2020/2021 school year, the Group operated and consolidated, namely, Guangdong Polytechnic College and Zhaoqing Science and Technology Secondary Vocational School ("Zhaoqing School"), and  Harbin Institute of Petroleum ("Harbin College"), which is operated under the share management agreement with the Group. According to the recent market research, Guangdong Polytechnic College ranked the first among the private higher education institutions (excluding independent colleges) in South China in terms of the number of newly admitted students and student enrollment. Zhaoqing School ranked the first in terms of student enrollment among the private specialized secondary schools in Guangdong Province.

 

During the Reporting Period, the Group experienced revenue growth at its schools, which was in line with the expansion of its business and student enrollment. Revenue recorded RMB867.3 million, representing a year-on-year ("YOY") increase of 21.4%. The increase was primarily the result of revenue from tuition fees increasing. For the 2020/2021 school year, Guangdong Polytechnic College has a total of 73,482 students enrolled, consisting of 29,262 undergraduate students, 6,325 junior college students and 37,895 adult college students. Zhaoqing School has a total of 8,468 students enrolled. Harbin College has a total of 10,674 students, including 9,736 undergraduate students and 938 adult college students. For the school year of 2020/2021, the total number of enrolled students of the Group was 92,624, increased by 60.0% from the school year of 2019/2020. In order to meet the increasing demands due to organic growth, the Group increased the capacity of Guangdong Polytechnic College and Zhaoqing School by around 5,200 and 1,300 students respectively in 2020. The third phase of the construction of the new Dinghu campus of Guangdong Polytechnic College was completed in the first half of 2020, and has further expanded the capacity of Guangdong Polytechnic College by around 2,800 students. Besides the new Dinghu campus, the Group has expanded the capacity of Gaoyao campus of Guangdong Polytechnic College by around 2,400 students. The utilization rate of Guangdong Polytechnic College and Zhaoqing School were 96.9% and 94.7% respectively, increased 5.8 percentage points and 2.0 percentage points respectively from the 2020/2019 school year. The utilization rate of Harbin College was 99.4%.

 

During the Reporting Period, Gross profit of the Group increased 25.8% YoY to approximately RMB606.1 million, which was in line with the growth of the Group's business. Gross profit margin reached 69.9%, increased 2.4 percentage points, mainly due to the increase of student enrollments and average tuition fee. The profit for the year significantly increased 23.8% to approximately RMB564.8 million as a result of above factors.

 

Expand the Group's School Network Through Strategic Mergers and Acquisitions, Increase the Capacity of the Schools

On 13 January 2020, the Group announced the acquisition of 100% equity interest of Harbin College. Harbin College was a high-quality undergraduate college founded in 2003 with a provincial leading employment rate of 90.5% and student registration rate of 97.4% for the 2020/2021 school year. It offers 32 undergraduate majors with core majors include mechatronic engineering, computer science and technology, petroleum engineering, electronic information engineering.

 

The Group believes that the acquisition marks the Group's first step to expand the school network in China and increase its market share. The Group sees great growth potential in Harbin College and have implemented effective measures to integrate the Harbin College into our Group. In 2020, the enrollment of Harbin College increased by 14% and the net profit increased by 33%, demonstrating the Group's high execution capability to improve the performance of the newly acquired school. The Group will continue to leverage its leading industry experience to streamline the operation of Harbin College and enhance its operational and financial performance. The Group intends to implement the Group's centralized management system to improve its operational efficiencies, increase its schools' capacity, expand its course offerings, optimize its pricing strategies and as a result improve the profitability of the Group as a whole.

 

In the future, the Group will explore more acquisitions opportunities in both private regular undergraduate college and independent college with attractive growth potential. The Group expects more high-quality colleges to join its school network in the future. In terms of geographical coverage, the Group will explore expansion opportunities in South China and Southwest China, where there is a relative scarcity of higher education resources, as well as other areas in China with market potential.

 

Moreover, the Group plans to further expand the capacity in Gaoyao campus of Guangdong Polytechnic College. The construction of the dormitories in the Gaoyao campus with a capacity of around 3,000 students is expected to be completed in the second half of 2021. In addition, the Group intends to increase the capacity of Harbin College by around 3,000 students in the second half of 2022. The Group plans to use proceeds from the Listing, supplemented by the Group's working capital, to fund such expansion.

 

Further Expand Service Offering and Diversify Revenue Sources

The Group will raise tuition fees for the 2021/2022 school year to reflect its increased operating costs and the adjustment of its major and curriculum offering. The Group believes its leading position and established reputation enable it to further increase its tuition fees while maintaining competitiveness in student admission.

 

In addition, the Group is also committed to expanding the adult college program. The student enrolment of the Group's adult college program increased from 19,659 in 2019/2020 school year to 38,833 in 2020/2021 school year, with an YoY increase of 97.5%. The Group believes that the market for adult college education in China is growing strongly. The Group plans to further expand the adult college program by cooperating with more partner education institutions to accommodate various needs of adult college students who might be in the workforce.

 

Events After the Reporting Period: Financial Statement of Harbin College was Fully Consolidated and Acquired Equity Interest to Reach 100% Holding of Huaibei Polytechnic College

On 29 March 2021, after the Company has obtained all necessary government approvals as well as business registration and obtained the ownership of Harbin College, an indirect wholly-owned subsidiary of the Company, Tibet Kepei and Harbin College entered into the structured contracts and pursuant to which, Harbin College will become an entity wholly owned by the Company and its financial results will be consolidated into the accounts of the Group.

 

On 29 March 2021, Zhaoqing Kepei entered into an equity transfer agreement with Zhaoqing Gaoyao District Xincheng Education Investment Development Company Limited ("Xincheng Education") and Zhaoqing Gaoyao District Deshang Education Investment Development Company Limited ("Deshang Education") pursuant to which, Xincheng Education and Deshang Education will transfer their 55% equity interest in Huaibei Kepei Education Investment Development Company ("Huaibei Kepei") to Zhaoqing Kepei at a total consideration of RMB197,340,000. Upon completion of the equity transfer, Huaibei Kepei will be an entity wholly owned by the Company. Subject to the approvals for conversion by the Ministry of Education of the PRC, Huaibei Kepei will be the sole sponsor of Huaibei Polytechnic College, which is a private regular undergraduate institution to be converted from Huaibei Normal University Information College and is expected to commence operation in September 2021.

 

Mr. Ye Nianqiao, the Chairman of the Board, Chief Executive Officer and Executive Director of Kepei Education, said "We are committed to providing students with high-quality profession-oriented education and help them to meet the growing and changing market demand. With over 20 years' experience in operating higher education institutions in China, we believe that we have established a strong reputation, which helps us attract high-quality students and teachers and promote our long-term and stable development in the future. Looking ahead, we will expand the Group's school network through strategic mergers and acquisitions, increase the capacity of the schools, further expand service offering and diversify revenue sources, continue to focus on profession-oriented education, strengthen our market position in the private higher education industry in China and create greater returns to our shareholders."

 

About China Kepei Education Group Limited

Kepei Education is a leading provider of private higher education in China focusing on profession-oriented education. The Group operates two schools in Zhaoqing, Guangdong Province: one is Zhaoqing Science and Technology Secondary Vocational School established in 2000 and the other is Guangdong Polytechnic College established in 2005. In March 2020, the Group entered into an entrustment agreement to operate Harbin College. With over 20 years' experience in operating higher education institutions in China, Kepei Education is committed to providing students with high-quality profession-oriented education and helping them to meet the growing and changing market demand. The Group focuses on engineering majors in order to better capture local employment demands, balanced with economics, management, education and art majors to offer well-rounded education services. Meantime, Kepei Education endeavors to provide students with various profession-oriented training and internship opportunities in collaboration with research institutions and enterprises, through which it fosters practical skills and market competitiveness of our students.