The severe pain of teaching and training enterprises is not over yet.
Share price plummeting, layoffs, farewell, losses, and so on, this is the former education leader TAL Education Group (TAL Education Group) nearly half a year's troubling experience. Founder Zhang Bangxin worked hard for 20 years, but now the ship has returned to zero almost overnight, leaving a lot of memories.
With a long delay, TAL Education Group finally disclosed his report card for the first half of fiscal year 2022 to the market recently. Not surprisingly, TAL Education Group, who has been committed to improving children's scores for many years, has scored an unprecedented low score in the big exam, which is unavoidable.
In the six months ended August 31, 2021, TAL Education Group achieved an income of US $2.829 billion, an increase of 40.46% over the same period last year. But the net loss during the period was as high as $928.6 million, or about 5.91 billion yuan, which was 2.56 times the loss of New Oriental Education & Technology Group online (01797.HK) in fiscal year 2021. In the same period last year, TAL Education Group's net profit was close to $100m, compared with fire and ice.
decide promptly and opportunely?
The reason why TAL Education Group suffered huge losses in half a year has something to do with the policy of the education industry.
According to the "double reduction policy" promulgated in July last year, important rules include no longer approving new discipline education and training institutions; subject education institutions prohibit financing and capitalization operations; all become non-profit organizations, and so on. The plan will come into effect before December 31, 2021.
Therefore, before the end of 2021, all domestic listed companies involved in disciplinary education and training have announced the termination of their compulsory education phase discipline training service business in mainland China. K12 education and training service business has been the backbone of the development of many listed companies, with heavy losses after breaking the wrist. Judging from the companies that have disclosed the divestiture of K9 business, New Oriental Education & Technology Group lost 1.658 billion yuan in fiscal year 2021, while Maple Leaf Education (01317.HK), Guangzheng Education and Yuhua Education (06169.HK) suffered one-time losses of 2.906 billion yuan, 2.056 billion yuan and 1.04 billion yuan respectively.
As one of the largest enterprises in the K12 education and training market, TAL Education Group has suffered a greater impact than other small and medium-sized enterprises.
TAL Education Group said in the semi-annual report that the company has stopped the mainland K9 discipline off-campus training service by December 31, 2021, and it is expected that the suspension of the business will have a significant adverse impact on the company's fiscal year ending February 28, 2022 and subsequent revenue.
In the 2021 fiscal year, TAL Education Group K12 discipline business while thinking about excellence, learning while thinking about online schools, and learning while thinking about Zhikang accounted for 53%, 32% and 6% respectively, totaling 91%. According to industry estimates, TAL Education Group's K9 business accounts for about 80 per cent. This proportion far exceeds that of New Oriental Education & Technology Group online, which accounts for 50-60 per cent of K9 revenue.
From this, it can be seen that TAL Education Group's divestiture of K9 business is a "self-abandonment of martial arts", cutting off almost all his family wealth. The Caihua Society found that two figures were responsible for TAL Education Group's huge losses:
The first is an operating loss of up to $510 million ($13.63 million in the same period last year). The author guesses that companies such as Maple Leaf Education are one-off losses caused by divestiture. When cutting K9 business, companies need to lay off a large number of employees and rent out teaching sites. According to media reports, TAL Education Group, who had nearly 100000 employees before the "double reduction" policy, had only about 10, 000 employees and laid off nearly 90, 000 by the end of 2021, thus requiring huge layoff compensation.
However, it is worth noting that the financial reporting period ends on August 31, when TAL Education Group's overall operation was normal, and the teaching site and employees had not yet begun a large-scale retreat. This also implies that TAL Education Group in the fourth quarter of last year or as a result of layoffs and renters and also brought about a large operating loss, thus affecting the performance of the entire fiscal year.
The second is the impairment loss of intangible assets and goodwill of 426 million yuan, which was only 304000 US dollars in the same period last year. As some companies continue to expand the scale of external mergers and acquisitions of K12 projects, so they all leave a certain degree of goodwill, so the impairment of goodwill needs to be included after the divestiture of the corresponding business. Not only TAL Education Group, but Maple Leaf Education also made a goodwill impairment of 200 million yuan in fiscal year 2021.
At the same time, TAL Education Group in response to the policy led to a surge in costs. Of this total, revenue cost, sales and marketing expenses, and general and administrative expenses were $1.4858 billion, $741 million and $688 million, respectively, up 56.1%, 23.7% and 41.8% from the same period last year.
In addition, TAL Education Group left a total debt of 6.103 billion US dollars, including 4.95 billion US dollars in current liabilities. Total assets and current assets during the period were $10.282 billion and $7.31 billion, respectively.
Do not lie flat, look for the future!
Under the pressure of "double reduction", the fate of out-of-school training institutions has changed overnight, and there are only a few ways out: divesting the K9 business and turning it into a non-business; closing the K9 business and transforming it to a track such as vocational education or quality education; and changing careers completely.
Affected by a series of negative effects, TAL Education Group's share price has plummeted by more than 80% since the "double reduction", shareholders have suffered heavy losses, and many investment institutions have also substantially reduced their positions.
Under the torrent of the times, TAL Education Group's former glory has become a hard memory. But people can never live in the past, nor can they choose to lie flat. Zhang Bangxin needs to give TAL Education Group a definite future. In Zhang Bangxin's words, "although it hurts, double reduction is an 18-year-old gift for TAL Education Group."
Now that you are an adult, you must have the courage to face setbacks and ambition for the future. For the live broadcast of New Oriental Education & Technology Group's online war to help farmers, TAL Education Group chose to stick to education.
In the semi-annual report, TAL Education Group said that it will continue to operate and develop business parts that are not related to K9 education services by making use of leading educational technology, high-quality content and rich experience. Other opportunities to provide educational services will be explored in accordance with relevant laws and regulations.
In fact, before the introduction of the "double reduction", TAL Education Group, who had smelled the policy wind, began to increase the size of non-K9 business. Since June 2021, TAL Education Group has successively expanded the business of quality education, trusteeship, To B, as well as adult education business such as postgraduate entrance examination, language training and studying abroad.
Among them, quality education is the focus of TAL Education Group's development. In a previous announcement, TAL Education Group said that in the future, the focus of the business will shift from the original discipline training of "learning to change fate" to the quality training of "the ability to benefit from a lifetime".
According to the company's plan, both learning and training and online schools will comprehensively transform quality education, and its children's English brand "Lipu English" has also completed brand upgrading and changed its name to "Libu". Mainly promote drama, eloquence, aesthetic education, educational and other quality education products.
The transformation of quality education means that TAL Education Group has to start a new entrepreneurial journey. Caihua Society believes that although TAL Education Group has not yet formed strong brand awareness and user recognition in the field of quality education, however, based on the accumulation of a large number of users through online and offline in the past (1098 company learning centers in fiscal year 2021 and 4.67 million students enrolled in long-term positive-price classes), there are many loyal users. This will help the company to transform users into students in the field of quality education and lay a user foundation for the transformation of quality education.
At the same time, it should also be noted that TAL Education Group spun off the K9 business, which has been in operation since 2005, and students or parents can still sign up for high school subject training courses through official channels. TAL Education Group did not mention the high school business income in the performance report, but it is certain that the high school business will continue to provide cash flow for the company and help the company transform.
Investment bosses seeking strategic contraction
TAL Education Group was not only the boss of Jiao Peitian, but also had another identity, that is, the boss of investment, who was better at investing abroad than New Oriental Education & Technology Group.
TAL Education Group is keen on strategic investment in recent years. According to public information, since 2011, New Oriental Education & Technology Group has invested nearly 80 times abroad, while TAL Education Group, who has come from behind, has invested more than 140 times. TAL Education Group's investment direction is: under the background of promoting quality education and autonomous learning, pay attention to Kmur12 related, education and training, Internet, science and technology investment opportunities.
In the field of education, TAL Education Group has invested in enterprises such as Shunshun study abroad, light education (light tutoring), subject network, wing fight education and Xiaogetong, etc. However, with the landing of the "double reduction", TAL Education Group's investment in education has also encountered some obstacles. In October last year, light education, which is engaged in online K12 education, was shut down.
The Caihua Society found that TAL Education Group, who is at a crossroads in development, began to make a strategic contraction in his investment in education before the release of the "double reduction" document. In June 2021, TAL Education Group sold a 30 per cent stake in wing fight education, which is engaged in the development and operation of the "online interactive classroom". Recently, TAL Education Group withdrew from the ranks of Gosling shareholders for unknown reasons. Gosling mainly provides digital tools for knowledge products and user services.
TAL Education Group's strategic contraction, or in order to raise funds to help the company in the quality education transformation, after all, the ship turned around is also costly.
In addition, TAL Education Group also has a passion for the mother and baby market, has invested in pro-baby and 01761.HK (two platforms), but also invested in Internet platforms such as the Himalayas.
According to the results announcement, TAL Education Group's cumulative equity investment income since fiscal year 2017 is about-240 million US dollars. In addition, the company recorded a long-term investment impairment loss every year, reaching-$178 million in the first half of fiscal year 2022 alone.
It is obvious that TAL Education Group's strategic investment has failed to achieve satisfactory results because the investment direction is relatively concentrated in the areas of education and the Internet, which have been greatly impacted by policies in recent years. Therefore, it is not difficult to see the reason why TAL Education Group sold all the shares of Wing Battle Education and Gosling Tong one after another.
Today, TAL Education Group is in a difficult second entrepreneurial period, but also has not yet completely got rid of the "mess" left by K9 business, there is a long way to go. TAL Education Group urgently needs to do subtraction before he can free up energy and financial resources to add.