Hailiang Education Group Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Highline Education Group's Fiscal Year 2020 Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. This conference has been recorded today, Thursday, October 15, 2020. Joining us today from Highline Education Group are the company's Chairman and CEO, Mr. Jun Wei Chen, the company's Vice President, Mr. Peng Fang, the company's Chief Financial Officer, Mr. Jian Gou Yu, and the company's Board Secretary, Mr. Li Taoshu. I would like to remind our listeners who are on this call, management's prepared remarks contain forward looking statements, which are subject to risk and uncertainties. And management may make additional forward looking statements in response to your questions. Therefore, Therefore, the company claims the protection of the safe harbor for forward-looking statements as contained in the Private Security and Litigation Reform Act of 1995. Highline Education is under no obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to Mr. Junwei Chen, Chairman and CEO of Highline Education Group. Mr. Chen, please go ahead.

Thank you, operator, and everyone for joining High Down Education's fiscal year 2020 earnings conference call today. Before we start, I would like to introduce myself briefly, as this is the first time I attend this call as chairman and CEO of High Down Education. I was appointed as chairman and CEO of High Down Education Group on June 23, 2020. Prior to that, I was vice president of High Down Group and the President of Heilong Education Management Group. I personally hold a Ph.D. degree in Energy and Resources Engineering from Peking University, one of the top two universities in China. During my time at Peking University, I also served as the 38th Chairman of the university's Postgraduate Student Association. I appreciate your continuous support and attention to Heilong education. And I welcome all of you to visit Hai Liang Education and meet in person in the future. Now move back to our business review. In the past fiscal year, our performance has been strong and stable, demonstrating our continued progress in executing and innovating our growth strategy and highlighting the resilience of our underlying business. despite temporary disruption and a short-term impact on our business caused by the COVID-19 pandemic. For the fiscal year 2020, our revenue was RMB RM1,482.6 million, slightly decreased by 1.1% year-over-year from RMB RM1,499 million. However, the decline was mainly due to non-K-12 education services, which was impacted by COVID-19. And our revenue from K-12 educational services was人民비 1,308,000,000, increased from 1,217,000,000 year-on-year. Our net profit attributable to company's shareholders was人民비 370.8 million, increased by 26.4% year-on-year from人民비 293.4 million, Our gross profit margin was 33.7% and the net profit margin was 25%, increased from 31.5% and 19.6% respectively. In addition, we are pleased to have the celebration of our 25th anniversary in 2020. We have received awards such as the Best China Concept Stock in Education Sector 2020 by Zhitong Caijin a leading financial media agency in China. Top 10 influential brands of Chinese education enterprises award by 2020 China Brand Boao Summit. As of June 30, 2020, the scale of the company's school network has expanded to 37 schools. The aggregate number of enrollments in both our affiliated and managed schools was 66,344 students, which included 23,716 students enrolled in our affiliated schools. The number of students enrolled in basic education programs of our affiliated schools was 18,867, and the number of students enrolled in the international programs of our affiliated schools was 4,869. As of the date of our annual report on 20F, filed October 14, 2020, there were four new affiliated schools that started operations or was acquired in September 2020. They were Lanzhou Hailiang Experimental School, Wuhu Hailiang Experimental School, Hailiang Overseas Chinese School, and the Jinhua Hailiang Foreign Language School. For the fourth semester of fiscal year 2021, as of September 20, 2020, the aggregated number of students enrolled in our affiliated schools increased to 26,865, which included 2,542 students enrolled in four new affiliated schools that started operation or was acquired in September 2020. The number of students enrolled in the basic educational programs of our affiliated school was 20,864, and the number of students enrolled in the international programs of our affiliated schools was 6,001. Such number of students enrolled in our affiliated schools represented a 13% increase, demonstrating a strong prospect of our performance in fiscal year 2021. As of the date of our annual report on 20F filed on October 14, 2020, We have facilitated the development and application of smart campus and smart classroom by establishing an experienced team composed of education professionals and IT developers, and cooperating with top-tier Chinese universities and leading enterprises. With the integration of IoT, cloud, and big data technology, and the innovation of education and management experiences, we have launched a variety of applications and IT infrastructures such as iClass, Star Classroom, Star Teacher Training, and online registration system to improve efficiency of our standardized management and quality of teaching and learning. When outbreak of COVID-19 first appeared, with careful and proactive arrangements and deployments, We regarded the safety and health of all of our students and employees as top priority and made appropriate short-term adjustments to our business operations when needed. To reduce the negative impacts of COVID-19 on planned teaching progress of the spring semester, we launched a high-down VIP cloud virtual classroom in February 2020. to ensure that our students could continue their courses as planned before the outbreak of COVID-19 via online live classes. Benefiting from our abundant educational services, outstanding facility capabilities, and the technical advantages in IT infrastructure, our online education services and smart campus platform have thrived during the outbreak of COVID-19. Despite this pandemic, our enrolled students still hit a record. Students enrollment of 72,839 for the fourth semester of 2020 or the fourth semester as of September 20, 2020, up approximately 9.5% compared to 66,543 students for the same period of last year. The increase in enrollment has effectively confirmed that the impact of COVID-19 on the company is very limited. As of the date of our annual report on 20F, filed on October 14, 2020, we have 13 affiliated schools and provide education and management services for 29 private and public schools. The company will continue to diversify business model, increase the proportion of auxiliary education services, Invest in the application and development of education technology and improve the ability of teachers and management team to improve our education quality, maximize academic performances, optimize management efficiency, support our school network expansion, and diversify our education services offerings. In the future, we are expected to further explore international expansion strategies and build or invest or acquire private schools in one belt in one road countries, and develop the countries with strategic synergies. Thank you again for all your support and attention. Next, I will turn this call over to Mr. Jian Guo Yu, our CFO, who will summarize our fiscal year 2020 financial results on behalf of the management team. Mr. Yu, please go ahead.

Thank you, Mr. Chen, and good morning, everyone. Now, on behalf of management team, I would like to summarize some of the key financial results for the fiscal year 2020. For the fiscal year 2020, our revenue was 1.482 billion RMB or 209.8 million US dollars, slightly decreased by 1.1% from 1.499 billion RMB Our gross profit was 499.4 million RMB or 70.7 million US dollars, an increase of 5.8% from 472.1 million RMB. Our net profit was 366 million RMB or 51.9 million US dollars, an increase by 16.1% from 315.8 million RMB. Our gross profit margin was 33.7% and that the net profit margin was 24.7% increase from 31.5% and 21.1% respectfully. Compared to the same period of last year, our net profit attributed to the company's shareholder was 370.8 million RMBs or 52.5 million US dollars, increased by 26.4% from 293.4 million RMBs. Basic and the diluted earning per share was 0.9 RMBs or 0.13 US dollars compared to 0.71 RMBs for the same period of last year. Our revenue mainly derived from K-12 educational service, educational training service, study trip service, education and management service. Revenue from K-12 Basic Educational Program was 859.2 million RMBs or 121.6 million US dollars, an increase of 6.6% from 805.7 million RMBs for the same period of last year. Revenue from K-12 International Program was 449 million RMBs or 63.6 million US dollars, an increase of 9.2% from 411.3 million RMBs for the same period of last year. Revenue from educational training service was 53.7 million RMBs or 7.6 million US dollars, a decrease of 62.6% from 144.2 million RMBs for the same period of last year, mainly due to the liquidation of Jiangxi Highball Educational Management Corporation Limited. Revenue from study trip service was 56.4 million RMBs or $8 million, a decrease of 30.8% from $81.5 million for the same period of last year, mainly due to the restriction on traveling because of COVID-19 outbreak, which affect the study trip services in the second half of fiscal year 2020. Revenue from education and management services was 48.3 million RMBs or 6.8 million US dollars, an increase of 18.1% from 40.9 million RMBs for the same period of last year. Other revenue, mainly represented revenue derived from overseas study consultations, consulting services, hotel management services, other revenue was 16 million RMBs or 2.3 million US dollars, an increase of 3.9% from 15.4 million RMBs for the same period of last year. The cost of revenue was 983 million RMBs or $139.2 million, a decrease of 4.3% of 1.26 billion RMBs for the same period of last year. The decrease was primarily due to the steep decrease in the transportation cost related to K through 12 educational service and study trip services as a result of outbreak of COVID-19. And a slight decrease in labor costs of our teachers and the teaching staffs. Selling expense was 29 point, 26.9 million RMBs or 3.8 million US dollars, an increase of 7.6% from 25 million for the same period of last year. The increase was mainly attributed to an increased student enrollment reward on the recruitment. Administrative expenses were 77.5 million RMBs or $11 million. An increase of 6.7% from 72.7 million RMBs for the same period of last year. Other income was 72.8 million RMBs or 10.3 million RMBs million U.S. dollars, an increase of 189.9% from 25.1 million RMBs for the same period of last year, primarily due to an increase in government rent subsidy we received from the local government. Finance income was 25.1 million RMBs or 3.6 million U.S. dollars, a slight increase of 0.8% for the same period of last year. The finest cost was 4.4 million RMBs or 0.6 million US dollars, which represented interest on relief liability upon the adoption of IFRS 16. Income tax expense was 121.9 million US dollars RMBs or 17.3 million US dollars. million US dollars compared with 108.7 million RMDs for the same period of the last year, which was driven by the growth of tax profit. Our effective tax rate in the fiscal year 2020 was 25% compared with 25.6% fiscal year 2019. Now for a quick summary of our balance sheet and cashflow as of June 30th, 2020. we had cash and cash equivalent of 503 million US RMBs or 71.2 million US dollars compared with a 260.7 million RMBs as of June 30th of 2019. Net cash provided by operating activity was 431 million RMBs or 61 million US dollars compared with 690.3 million RMBs for the same period of last year. The net cash used in the investing activities was 127.8 million RMBs or 18.1 million US dollars compared with 1.234 billion RMBs for the same period of last year. The net cash used in financing activities was 61.4 million RMBs, or 8.7 million U.S. dollars, compared with 7.3 million RMBs for the same period of last year. Now I would like to turn the discussion over to the operator for any questions.