Hailiang Education Group, Inc. :HLG-US: Earnings Analysis: For the six months ended June 30, 2017 : October 31, 2017

Hailiang Education Group, Inc. reports financial results for the half-year ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 70.85 million, Net Earnings of USD 16.73 million.
  • Gross margins narrowed from 37.65% to 26.96% compared to the same period last year, operating (EBITDA) margins now 22.62% from 34.72%.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2016-12-31 2015-06-30 2014-12-31 2014-06-30
Relevant Numbers (Semi-Annual)
Revenues 70.85 54.32 46.85 36.3 40.04
Revenue Growth (YOY) 51.22 49.65 17.01 3.04 N/A
Earnings 16.73 7.84 14.53 8.22 13.59
Earnings Growth (YOY) 15.13 -4.68 6.94 -11.32 N/A
Net Margin 23.61 14.43 31.02 22.65 33.94
EPS 0.65 0.31 0.64 0.36 0.59
Return on Equity 11.03 6.19 13.81 8.76 15.14
Return on Assets 14.89 8.22 20.23 13.05 26.39

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, HLG-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if HLG-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 30.43% and earnings by 113.45% compared to the previous period.

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 26.96% to 37.65% for the same period last year, while operating margins (EBITDA margins) went from 22.62% to 34.72% over the same time frame.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

HLG-US’s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days are now 164.10 days from 178.62 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Hailiang Education Group, Inc.

Company Profile

Hailiang Education Group, Inc. engages in the provision of private K-12 educational services. It offers basic educational and international programs for kindergarten, primary, middle, and high school levels. The company was founded on April 7, 2011 and is headquartered in Hangzhou, China.

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