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CML: 2021 H1 Earnings – 19 Key Points!

CML: Earnings Announcement – Six Months Results Ended 28 February 2021

In late April 2021, CML released its six months financials ended 28 February 2021. This FY2021 H1 period is the first period that CML consolidated the revenues and profits of both the two large acquisitions made last year, i.e. Canadian International School (in short, CIS) in Singapore, and Kingsley International School (in short, KIS) in Malaysia. This 2020/2021 school year is also the first year of CML’s Sixth Five-Year plan (from 2020/2021 to 2024/2025 school years). Overall, its total revenue increased by 38% and gross profit increased by 35%, mainly due to the consolidation of the new overseas schools. However, its net profit dropped by 16%. What happened?

Below are our 19 key points from the earnings results, including points we learned from our private communications with the company’s investor relations!

  1. Total revenue increased by RMB304 million, or 38%, from RMB792 million for the six months ended 29 February 2020 to RMB1,096 million for the six months ended 28 February 2021. This was primarily due to the increase in revenue from tuition fees by RMB302 million. For the revenue breakdown, RMB766 million (approximately 70%) was contributed by China, while the remaining RMB331 million (approximately 30%) was contributed by overseas. Revenue from tuition fees increased by 42% from RMB712 million for the six months ended 29 February 2020 to RMB1,014 million for the six months ended 28 February 2021. This was mainly due to, one, revenue generated from the newly acquired overseas schools, KIS and CIS, and, two, an increase in tuition fee rate. Revenue from others (i.e. from non-tuition fees and other services) has also increased slightly by 3%, from RMB80 million for the six months ended 29 February 2020 to RMB82 million for the six months ended 28 February 2021. This was mainly due to the addition of other educational services provided by CIS and KIS to students.

  2. Cost of revenue increased by RMB180 million, or 41%, from RMB441 million for the six months ended 29 February 2020 to RMB620 million for the six months ended 28 February 2021. The increase was largely due to the addition of cost of revenue from the newly acquired overseas schools, KIS and CIS.

  3. Gross profit increased by 35% or RMB125 million, from RMB351 million for the six months ended 29 February 2020 to RMB476 million for the six months ended 28 February 2021. However, the gross margin slightly decreased from 44.4% for the six months ended 29 February 2020 to 43.4% for the six months ended 28 February 2021, primarily due to the gross profit margin in overseas schools being slightly lower than that in mainland schools. It would be interesting to monitor if CML could expand its profit margin from its overseas schools under the CIS and KIS brand name in the future.

  4. Marketing expenses increased by 2.1% from RMB15.5 million for the six months ended 29 February 2020 to RMB15.9 million for the six months ended 28 February 2021. Marketing expenses as a percentage of revenue decreased from 2.0% for the six months ended 29 February 2020 to 1.4% for the six months ended 28 February 2021, primarily due to a decrease in advertising and promotional expenses and student placement related expenses.

  5. Administrative expenses increased by 57.2% from RMB103 million for the six months ended 29 February 2020 to RMB162 million for the six months ended 28 February 2021, mainly attributed from the addition of administrative expenses by newly acquired overseas schools, KIS and CIS. Administrative expenses as a percentage of total revenue increased from 13.0% for the six months ended 29 February 2020 to 14.8% for the six months ended 28 February 2021, as a result of the acquisition of KIS and CIS. It would be important to monitor and determine if the administrative expense would stabilise and reduce over time.

  6. Finance costs increased significantly from RMB8 million for the six months ended 29 February 2020 to RMB67 million for the six months ended 28 February 2021 primarily due to the utilizations of bank borrowings to finance the acquisitions of KIS and CIS.

For the remaining points, check out our Multibagger Research Series at https://moneywisesmart.com/MultibaggerResearch/.

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