ASIA Asia Strategic Holdings Limited

24 June 2024

 

Asia Strategic Holdings Ltd.

("Asia Strategic", the "Group" or the "Company")

 

Interim results for the six months ended 31 March 2024

 

The Board of Asia Strategic Holdings Ltd. (LSE: ASIA), an independent developer and operator of consumer businesses in Emerging Asia, is pleased to announce its unaudited interim results for the period ended 31 March 2024 ("6M24").

 

Financial Highlights

 

All dates for the reporting period refer to the six-month financial period that ended 31 March 2024 ("6M24") and the Group's financial year ended 30 September 2023 ("FY23"), unless otherwise stated. The comparative six-month financial period from 1 October 2022 to 31 March 2023 is referred to as "6M23".

 

The year-on-year ("YOY") growth or decline refers to any change that occurred between 6M24 and 6M23, or equivalent periods of one year, as applicable.

 

Unless otherwise specified, all figures are reported in United States dollar ("$").

 

·   Revenue increased 26% YOY to $14.4 million for 6M24 (6M23: $11.5 million), of which 76% derived from Education (6M23: 77%) and 24% from Services (6M23: 23%).

 

·   Contributing factors to the strong double-digit revenue growth include (i) the further development of Myanmar's Education division with YOY revenue growth of 42% (6M23: 141%), (ii) the continued improvement of Vietnam's Education division delivering YOY revenue growth of 3% (6M23: 22%), and (iii) the return to growth of the Service division achieving YOY revenue growth of 33% due to improved commercial positioning coupled with the introduction of high value-added services.

 

·   Group gross profit increased 27% YOY for 6M24 (6M23: 106%) to $8.3 million, of which the Education division contributed 90% (6M23: 90%) and the Services division provided 10% (6M23: 10%). The robust growth in gross profit is attributable to (i) strong revenue growth coupled with (ii) margin expansion due to higher utilisation and operational efficiency of teaching personnel and facilities across all Education brands, a gradual shift to higher margin products, and prudent spending on other cost of services.

 

·   Group Adjusted EBITDA was $86k for 6M24 (6M23: $24k loss), which was driven by strong improvement in the Education businesses across Myanmar. 

 

·   The Group recorded net losses of $2.6 million for 6M24 (6M23: $2.3 million loss). The key contributing factors were (i) a foreign exchange loss of $0.6 million (6M23: $0.4 million loss), (ii) an increase in marketing expenses to $1.5 million (6M23: $1.2 million) to build brands and acquire new customers for newly launched businesses (less than two years of operations) and (iii) a slower pace of recovery at Wall Street English Vietnam. If newly launched businesses are excluded, the net losses for the Group would be $1.8 million.

 

·   At 31 March 2024, the Group's current and non-current deferred revenue, representing cash received in advance of service performance, amounted to $10.6 million and $1.4 million, respectively (30 September 2023: $11.0 million and $1.1 million).

 

·   The Group recorded a positive operating cash flow of $0.7 million for 6M24 (6M23: $1.6 million). However, after considering the repayment of lease liabilities (including principal and interest), the Group would have recorded a negative operating cash flow of $0.7 million (6M23: positive $0.2 million). The Group's slow commercial performance, cash collection, ongoing brand-building efforts, business expansion, and investments in capacity contributed to this result.

 

·   The Group invested $1.0 million during 6M24 (6M23: $0.8 million) primarily to establish nine new schools under its existing brands across two countries.

 

·   The Group maintained a loan facility of $4.5 million with MACAN (the "Loan Facility"), the Group's largest corporate shareholder, and drew down $1.3 million during 6M24. At the date of this report, the available amount under the Loan Facility is $0.5 million.

 

·   The diversification of Group operations across multiple countries continues to play an important role in mitigating single-country exposure. Management has determined that there are sufficient mitigating actions within the Group's control to ensure liquidity for at least the next twelve months from the date of this report. These include undertaking a measured expansion of its existing and future businesses, maintaining financial liquidity discipline, accessing the unutilised Loan Facility and further diversifying the Group's capital structure by accessing bank loans.

 

Operational Highlights

 

Education

 

·   Revenue from owned Education businesses increased 24% YOY to $10.9 million for 6M24 (6M23: $8.8 million).

 

·   At 31 March 2024, the current and non-current deferred revenue from Education businesses, representing cash received in advance of service performance, were $9.8 million and $1.4 million, compared to $10.3 million and $1.1 million at 30 September 2023.

 

·   The Education division consists of the following operations:

 

Vietnam

(i)    Wall Street English - English language education for adults;

(ii)   Kids&Us - English language education for children and teens; and

(iii)  Logiscool - Coding education for children and teens.

 

Myanmar

(i)    Wall Street English - English language education for adults;

(ii)   Kids&Us - English language education for children and teens; 

(iii)  Logiscool - Coding education for children and teens;

(iv)  Yangon American International School ("Yangon American") - K-12 international school; and

(v)   Auston - Tertiary education.

 

·   The number of schools and students at the end of each reporting period was as follows:

 

	Number of Schools			Number of Students
	31 Mar 2024	30 Sep 2023	31 Mar 2023	31 Mar 2024	30 Sep 2023	31 Mar 2023
Vietnam	15	11	11	4,218	4,039	3,812
-     Wall Street English	8	7	7	3,638	3,681	3,584
-     Kids&Us	5	4	4	569	358	228
-     Logiscool	2	-	-	11	-	-
Myanmar	14	9	8	4,925	4,647	4,271
-     Wall Street English	6	5	5	3,562	3,696	3,631
-     Kids&Us	3	1	-	288	98	-
-     Logiscool	1	-	-	72	-	-
-     Yangon American	2	1	1	117	101	57
-     Auston	2	2	2	886	752	583
Group	291	20	19	9,143	8,686	8,083

 

¹ As of June 2024, the number of schools has grown to 31 reflecting the opening of one Wall Street English and one Kids&Us in Vietnam.

 

·   In Vietnam, the overall number of students increased by 4% compared to 30 September 2023, mainly driven by Kids&Us Vietnam while Wall Street English Vietnam remains flat due to a slow commercial performance.

 

·   In Myanmar, the number of students increased by 6% compared to 30 September 2023, driven by growth across all brands except Wall Street English Myanmar. Contrary to its Vietnam counterpart, it was nearly at capacity and experienced a temporary decline due to attrition.

 

Services

·   Revenue from owned Services businesses increased 32% YOY to $3.5 million for 6M24 (6M23: $2.6 million). The managed Services business contributed $10k for 6M24 (6M23: nil), mainly from Ostello Bello.

 

·   At 31 March 2024, the Group's current deferred revenue from Services businesses representing cash received in advance of service performance from EXERA's corporate customers was $0.8 million compared to $0.7 million at 30 September 2023. The increase is due to the growth in advance payments for the provision of integrated security projects.

 

·   The Services division consists of the following operations:

(i)    EXERA - Integrated risk management services; and

(ii)   Ostello Bello - Boutique hostels

 

·   EXERA employed approximately 1,600 security officers at 31 March 2024 (30 September 2023: 1,400) across 230 sites in Myanmar (30 September 2023: 200). This growth was driven by the acquisition of new customers and expansion of services offered to the UN and embassy client base.

 

·   Ostello Bello operates boutique hostels with ca. 136 beds and ca. 41 rooms across two locations in Bagan and Mandalay. There has been a slight increase in occupancy, mainly driven by local tourism, although the sector remains largely stagnant due to low inbound international mobility.

 

SIGNIFICANT AND SUBSEQUENT EVENTS

The Group did not experience any significant or subsequent events.

COUNTRY ECONOMIC UPDATES

 

The most recent forecast by the Asian Development Bank ("ADB") is for developing Asia GDP growth of 4.9% in 2024 and 4.9% in 2025.

Inflation in developing Asia is expected to be 3.2% in 2024 and 3.0% in 2025, as supply disruptions persist driving food and fuel prices growth in the region.

 

Vietnam

 

According to the General Statistics Office of Vietnam ("GSO"), GDP growth for the first quarter of 2024 was 5.7% YOY, exhibiting strong economic fundamentals and a long-term positive outlook. According to GSO, full-year 2023 GDP growth in Vietnam was 5.1% with ADB forecasts 6.0% growth in 2024.

 

·   Average CPI for the first quarter of 2024 increased by 3.8% compared to the same period last year while the core CPI recorded a 2.8% gain. Customer demand decreased after the Lunar New Year causing the price of essential goods and services on the market to decrease, especially food.

 

·   The Vietnamese Dong has been under downward pressure since the beginning of 2024. The State Bank of Vietnam ("SBV") took measures to stabilise the exchange rate by reactivating T-bill issuance for three consecutive weeks in March, withdrawing approximately $6.9 billion from the economy and increasing bond yields. However, in early April 2024, the SBV injected around $0.4 billion into circulation. SBV announced readiness to intervene and stabilise the exchange rate as needed, backed by foreign exchange reserves exceeding $100.0 billion.

 

·   Vietnam's exports in the first quarter of 2024 are estimated to have grown by 17.0% YOY to $93.1 billion, while imports were estimated to have increased by 13.9% YOY to $85.0 billion. This led to a trade surplus of $8.1 billion, according to the GSO.

 

·   Vietnam is increasingly attractive to global manufacturers as they look to diversify production away from China. S&P Global expects industrial production to continue expanding, bolstered by improving exports. GSO estimates that Vietnam's Index of Industrial Production ("IIP") for April 2024 increased 7.4% YOY.

 

·   Foreign Direct Investment ("FDI") attraction and disbursement have stood out as bright spots amidst the contraction in global trade and investment. The total registered FDI in the first quarter of 2024 reached $6.2 billion, reflecting a 13.4% increase YOY. The FDI disbursement reached $4.6 billion, up 7.1% YOY, representing the highest implementation level in the past five years and demonstrating Vietnam's attractiveness to foreign investors.

 

·   Vietnam is also experiencing rapid demographic and social change as its population is forecasted to grow from 99.4 million today to 120.0 million by 2050. GSO estimates that 73.3% of the labor force is under 50 years old, with a life expectancy of 73.7 years in 2023 - the highest among countries in the region at similar income levels.

 

·   According to the EF English Proficiency Index ("EF EPI"), Vietnam is classified as "moderate proficiency" and ranks 58th globally in 2023. In addition, the country falls within the "high" category of the Human Development Index, ranking fourth in ASEAN.

 

Myanmar

 

·   Myanmar's economy remains stagnant with the World Bank forecasting 1.0% GDP growth in 2024. Recent data and surveys suggest that the industrial and service sectors are expected to experience moderate growth at 1.5% and 2.5%, respectively.

 

·   Myanmar experienced a 6.0% increase in imports in 2023, driven by improved local demand following economic challenges from the previous year's COVID-19 impact. At the same time, exports declined resulting in a trade deficit. An overall reduction in total trade volume is expected in 2024 influenced by constraints on cross-border financial transactions and disruptions in border trade due to armed conflicts in key regions.

 

·   Despite attempts to stabilise the Myanmar Kyats ("MMK") against the USD, it depreciated significantly in May 2024 and the trend is likely to persist due to escalating conflicts. Ongoing lack of FDI and depressed business trust results in a diminished export outlook.

 

·   Rice and fuel prices have remained stable due to price ceilings being enforced by the Myanmar Rice Federation and the State Administrative Council's restricted selling price ranges for retailers. Despite these efforts, IMF data showed that the inflation rate reached 20% at the end of 2023.

 

·   According to the World Bank's "State of Education in Myanmar" report, there has been a significant rise in the proportion of household budgets allocated to private tutoring in 2023 to support children's education.

                                                                                       

·   According to the International Labor Organization's report on the Myanmar Labor market, the unemployment rate in Myanmar was about 45.5% in 2022, one of the highest in the region. Labor productivity, as measured by real GDP per worker, declined by 10.0% in the first half of 2022 as skilled workers struggled to find employment.

 

·   Myanmar faces fundamental infrastructure challenges exacerbated by the recent slowdown in FDI, lack of international assistance, and severe power cuts during dry season due to heavy reliance on hydropower for electricity. Moreover, approximately 80% of natural gas production is committed through long-term contracts to neighboring nations, resulting in a growing disparity between electricity supply and demand.

 

·   Political instability, the introduction of a conscription law, and uncertainties have dampened optimism for Myanmar's economic outlook in 2024, resulting in subdued expectations for the future.

 

Enrico Cesenni (OSI), Chief Executive Officer of Asia Strategic, commented:

"The financial year 2024 has started strongly for Asia Strategic, with the Group exceeding $14 million in revenue for the first six-month period.

Group revenue grew 26% to $14.4 million, with Education revenue up 24%, highlighting strong demand for education in Vietnam and Myanmar despite challenging macroeconomic conditions. The Services division returned to growth with a 33% YOY increase, driven by the growth of its customer base and the introduction of higher value-added services.

The Group is experiencing operational efficiencies as its school portfolio matures. The gross profit margin remains healthy at 58%, equivalent to $8.3 million (6M23: $6.5 million). Since the beginning of FY24, the Group has invested $1.0 million to open nine schools across both countries, demonstrating our commitment to service increasing demand from our existing markets.

Asia Strategic now operates seven brands across two countries. To support robust growth, the Group reorganised its administrative offices into shared service functions, providing scalable, high-quality service to onboard and support new businesses. As schools mature and core competencies are established across shared service functions, the Group is on track to achieve better cost efficiency and sustainable returns in the coming years.

We extend our gratitude to our valued shareholders for their continued support and to all staff members across Asia Strategic for their hard work and commitment during these challenging times."

For more information, please visit www.asia-strategic.com or contact:

Asia Strategic Holdings Ltd. Richard Greer, Independent Non-Executive Chairman Enrico Cesenni (OSI), Founder and CEO	richard@asia-strategic.com enrico@asia-strategic.com
Allenby Capital Limited (Broker) Nick Athanas Nick Naylor Lauren Wright	+44 (0) 20 3328 5656
Yellow Jersey PR (Financial PR) Shivantha Thambirajah Bessie Elliot	+44 (0) 20 3004 9512

Notes to editors

Asia Strategic Holdings Ltd. (LSE: ASIA) is an independent developer and operator of consumer businesses in Emerging Asia, specifically Vietnam and Myanmar, two of the world's fastest-growing economies. The Group's portfolio focuses on Education and Services.

Education: The Group operates brands in English language learning, coding, K-12 international education, and tertiary education, with 29 schools serving over 9,100 students at 31 March 2024.

The Group entered into an exclusive agreement with Wall Street English in 2017 for operating rights to Myanmar and secured rights to operate Wall Street English Vietnam through an acquisition in 2020. At 31 March 2024, Wall Street English Vietnam operated eight schools and served ca. 3,600 students, while Wall Street English Myanmar operated six schools and served ca. 3,600 students.

The Group also signed an exclusive agreement with Kids&Us in 2022 to offer English language learning for children in Vietnam and Myanmar. At 31 March 2024, Kids&Us Vietnam operated five schools and served ca. 570 students, while Kids&Us Myanmar operated three schools and served ca. 290 students.

In 2023, the Group entered into an exclusive franchising agreement with Logiscool to develop coding schools for children in Vietnam and Myanmar. At 31 March 2024, Logiscool Vietnam operated two schools and served ca. 10 students while Logiscool Myanmar operated one school and served ca. 70 students.

Yangon American International School launched in August 2019. It is an accredited International Baccalaureate ("IB") Primary Years Programme ("PYP") school and a candidate school for the IB Middle Years Programme ("MYP") accreditation. The school offered up to seventh grade in the Academic Year 2023/24 and served ca. 120 students at 31 March 2024.

The company has partnerships with Auston Institute of Management (Singapore) and Liverpool John Moores University (UK) to offer internationally recognised engineering and IT diplomas and degrees. Auston has two campuses in Yangon and Mandalay and had ca. 890 enrolled students at 31 March 2024.

Services: through its acquisition of EXERA in 2018, the Group provides protection of assets, risk management, secure logistics and people safety services to a wide range of international and local clients across Myanmar. EXERA employs approximately 1,600 well-trained security officers in Myanmar. The company also manages two boutique hotels in core tourist destinations in Myanmar under the brand Ostello Bello.

Deploying an asset-light strategy, Asia Strategic Holdings is well-positioned to offer investors early exposure to the robust fundamentals of Vietnam and Myanmar.

To receive news alerts on Asia Strategic Holdings please sign up here under the 'RNS' header: https://asia-strategic.com/investor-relations/

 

 

OPERATIONAL REVIEW

 

EDUCATION

 

The Group's objective for its Education division is to become a leading operator and retailer of tech-enabled education services in Emerging Asia.

 

Revenue from owned Education businesses increased 24% YOY to $10.9 million for 6M24 (6M23: $8.8 million).

 

At 31 March 2024, the current and non-current deferred revenue from Education businesses, representing cash received in advance of service performance, were $9.8 million and $1.4 million, compared to $10.3 million and $1.1 million at 30 September 2023.

 

Within its Education division, the Group provides educational products for children, teens, and adults through five brands active across Vietnam and Myanmar.

 

Franchised brands

 

Wall Street English is a leading English language education provider for adults with over 120,000 students in 34 countries. The flexible and integrated blended learning solution is offered online or through a hybrid online/in-centre approach.

 

Kids&Us is a leading English language education provider for children starting at age one and operates in 9 countries with over 180,000 students across 500 schools. The unique teaching method focuses on natural language acquisition, personalised for each student's age and experiences.

 

Logiscool is an enrichment programme that teaches children coding and digital literacy. Logiscool operates in 30 countries through more than 210 locations with over 220,000 students. Logiscool's unique educational platform is developed so users can easily transition from visual coding to text-based programming languages.

 

Own brands

 

Auston is a private higher education school operator in Myanmar that offers internationally recognised engineering and IT diplomas and degrees through partnerships with Liverpool John Moores University in the UK and the Auston Institute of Management in Singapore.

 

Yangon American International School offers an international K-12 education, is an accredited International Baccalaureate ("IB") Primary Years Programme ("PYP") school and is a candidate to be accredited as an IB Middle Years Programme ("MYP") school.

 

While each brand has its own unique characteristics and customer base, economies of scope, experience and scale are achieved through common management.  One example is the creation of learning centres where multiple brands occupy the same building or are in close proximity, reducing construction and operating costs, while creating one-stop educational experiences for families.

 

The Group generates student revenue from the businesses it owns and operates. The fees paid by students vary depending on the type and duration of the service as well as when the course begins.

Historically, the Group also generated revenue through management fees from the operations it managed. In FY23, the Group completed service delivery to legacy students of a related party.

Vietnam

Revenue from Education businesses in Vietnam increased 3% YOY to $4.2 million for 6M24 (6M23: $4.1 million). 

 

At 31 March 2024, the current and non-current deferred revenue from Education businesses in Vietnam, representing cash received in advance of service performance, was $3.9 million and $80k compared to $4.2 million and $60k at 30 September 2023.

Wall Street English Vietnam is the largest revenue contributor in Vietnam and for the Group. Revenue from Kids&Us Vietnam is expected to increase as schools reach capacity and new ones open. Logiscool Vietnam will start contributing in FY24, following a similar growth pattern to Kids&Us Vietnam.

Wall Street English Vietnam

·    Revenue from Wall Street English Vietnam declined 1% YOY to $3.9 million for 6M24 (6M23: same).

·    Wall Street English Vietnam saw the number of students decreased marginally by 1% compared to 30 September 2023 due to (i) a difficult macroeconomic environment and (ii) mixed commercial performance.

·    Since the start of FY24, a key focus has been on developing and commercialising an online sales team selling an online product. This initiative targets the growing middle class providing accessibility to those not living near schools in Ho Chi Minh City as well as throughout the country.

·    At 31 March 2024, Wall Street English Vietnam operated seven schools in Ho Chi Minh City and one school in Binh Duong.

·    In October 2023 and June 2024, Wall Street English Vietnam opened its eighth and ninth schools in Ho Chi Minh City. The eighth school shares a location with Kids&Us and Logiscool and the ninth with Kids&Us. This creates learning hubs and reduces administrative expenses and rent.

·    Total investment in facilities for 6M24 was $0.2 million, reflecting the opening of one new school in Ho Chi Minh City.

Kids&Us Vietnam

·    Revenue from Kids&Us Vietnam increased to $0.2 million for 6M24 (6M23: $84k).

·    Growth in the number of students was steady throughout the year, yielding 563 students at 31 March 2024. Additional school openings and stronger brand recognition contribute to increasing numbers of students, which is a leading growth driver.

·    At 31 March 2024, Kids&Us Vietnam operated five schools in Ho Chi Minh City.

·    In October 2024 and June 2024, Kids&Us Vietnam opened its fifth and sixth schools in Ho Chi Minh City. The fifth school shares a location with Wall Street English and Logiscool and the sixth with Wall Street English. This creates learning hubs and reduces administrative expenses and rent.

·    Total investment in facilities for 6M24 was $60k reflecting the opening of one new school in Ho Chi Minh City.

Logiscool Vietnam

·    In June 2023, the Group entered into an exclusive franchising agreement with Logiscool to develop coding schools for children in Vietnam.

·    At 31 March 2024, Logiscool Vietnam operated two schools one in Ho Chi Minh City and one in Binh Duong.

·    Logiscool Vietnam opened its maiden school in Ho Chi Minh City in October 2023 and a second school in Binh Duong in December 2023. The first school shares a location with Wall Street English and Kids&Us, and the second with Wall Street English. This creates learning hubs and reduces administrative expenses and rent.

·    Total investment in facilities for 6M24 was $0.1 million reflecting the opening of two new schools in Ho Chi Minh City and Binh Duong.

Myanmar

Revenue from Education businesses in Myanmar increased 42% YOY to $6.7 million for 6M24 (6M23: $4.7 million).

 

At 31 March 2024, the current and long-term deferred revenue from Education businesses in Myanmar, representing cash received in advance of service performance, were $5.9 million and $1.3 million, compared to $6.1 million and $1.0 million at 30 September 2023.

Wall Street English Myanmar is the largest English language education provider and the top revenue contributor to the Group in Myanmar. Auston saw the fastest revenue growth among the Group's education businesses in Myanmar and is expected to remain a strong contributor due to its longer programme duration compared to Wall Street English Myanmar. Yangon American International School saw a marginal revenue increase, with student numbers surpassing previous highs. Kids&Us Myanmar, which began service in June 2023, has gained strong traction since its inception. Logiscool Myanmar recently commenced operations and is experiencing a similar growth trajectory to Kids&Us Myanmar.

Wall Street English Myanmar

·    Revenue from Wall Street English Myanmar increased 12% YOY to $3.8 million for 6M24 (6M23: $3.4 million) due to the continued robust demand for English language training in a market with few alternatives.

·    In December 2023, Wall Street English Myanmar opened its second school in Mandalay (sixth in Myanmar) to meet growing demand from the city attributed to the recent influx of migrants from nearby third-tiered cities.

·    Wall Street English Myanmar also introduced the "community centre" a concept that leverages the Global Online Classroom provided by Wall Street English International, eliminating the need for Encounter Classrooms. This results in smaller unit sizes and fewer dedicated native English speakers, reducing investment costs, operating costs, and rent.

·    At March 2024, Wall Street English Myanmar operated six schools with four in Yangon and two in Mandalay.

·    In December 2023, Wall Street English Myanmar opened its sixth school in Mandalay.

·    Total investment in facilities for 6M24 was $53k, reflecting the initial fit out costs for the opening of the sixth school.

Kids&Us Myanmar

·    Revenue from Kids&Us Myanmar was $0.1 million for 6M24.

·    The number of students reached 288 at 31 March 2024, confirming a strong product-market fit and indicating significant growth potential.

·    At March 2024, Kids&Us Myanmar operated three schools in Yangon.

·    In October 2023 and November 2023, Kids&Us Myanmar opened its second and third schools in prime areas near existing Wall Street English schools.

·    Total investment in facilities for 6M24 was $0.3 million, reflecting the opening of schools in Yangon during 6M24.

Logiscool Myanmar

·    In August 2023, the Group entered into an exclusive franchising agreement with Logiscool, for the development of coding schools for children in Myanmar.

·    At March 2024, Logiscool Myanmar operated one school in Yangon.

·    Total investment in facilities for 6M24 was $0.2 million, reflecting the opening of its maiden school in Yangon during 6M24.

·    A second and third school for Logiscool Myanmar are already identified and expected to open alongside a Wall Street English Myanmar and Yangon American International School tentatively before the end of FY24.

Auston

·    Revenue from Auston increased 136% YOY to $2.2 million for 6M24 (6M23: $0.9 million).

·    The robust revenue growth was driven by a strong commercial performance, limited competition, and clear differentiation in the market that allows students to pursue a career in the tech and engineering sectors.

·    Additionally, the Auston programme design offers students access to higher diplomas and bachelor's degrees providing coursework for almost three years. This long customer lifetime also experiences price increases as students advance toward graduation.

·    A dedicated campus in Mandalay and an expansion in Yangon will be opened in FY24 which will significantly increase capacity to serve the growing number of students and enable the school to launch more engineering subjects.

·    Total investment in facilities for 6M24 was $16k reflecting the extension of facilities in Yangon and Mandalay.

Yangon American International School

·    Revenue from Yangon American International School increased 34% YOY to $0.6 million for 6M24 (6M23: $0.4 million).

·    The number of students increased 16% to 117 at 31 March 2024 compared to 101 at 30 September 2023.

·    Total investment in facilities for 6M24 was $46k reflecting initial capital expenditures for the opening of the Early Years.

·    A site adjacent to the existing facilities was secured during FY23 and refurbished to provide a standalone Early Years Village for students ages two to four and opened in April 2024. Subsequent renovations of the ground floor will improve the current offering, expand capacity, and integrate a Logiscool school.

SERVICES

The Group's objective is to become one of the leading risk management partners for organisations operating across Emerging Asia.

 

Revenue from owned Services businesses increased 32% YOY to $3.5 million for 6M24 (6M23: $2.6 million). The managed Services business contributed $10k for 6M24 (6M23: nil), mainly from Ostello Bello.

 

At 31 March 2024, the current deferred revenue from Services businesses, representing cash received in advance of service performance, was $0.8 million, compared to $0.7 million at 30 September 2023.

 

Within its Services division, the Group operates two businesses in Myanmar:

 

EXERA is the leading provider of risk management, consulting, integrated security, manned guarding, secure logistics, and cash-in-transit services to a wide range of international and local clients across Myanmar. EXERA's security officers are trained extensively in accordance with British Security Industry Association guidelines. EXERA has been awarded ISO 18788, ISO 9001, and OHSAS 18000 accreditations, and the ICoCA certification.

 

Ostello Bello is a boutique hostel operator across the most popular tourist destinations in Italy and Myanmar. It is renowned for its vibrant, social atmosphere and exceptional hospitality. Originating in Italy, the brand expanded internationally offering travelers a unique and welcoming experience.

 

The Services division is active only in Myanmar; however, EXERA plans to commence operations in Vietnam in FY24.

 

EXERA

 

·    Revenue from EXERA increased 32% YOY to $3.5 million for 6M24 (6M23: $2.6 million).

 

·    The increase in revenue was primarily due to (i) signing new customer contracts, (ii) the acquisition of new customers and expansion of services offered to the UN and embassy client base, and (iii) the introduction and sales of high-value-added services such as CCTV installations.

Ostello Bello

·    Ostello Bello, a managed business in the Services division, operates two boutique hostels in Mandalay and Bagan, Myanmar, with ca. 136 beds and ca. 41 rooms. Hotel-related services of $10k were generated in 6M24 by Ostello Bello's managed operations.

 

·    Currently, Ostello Bello Mandalay accommodates Group teachers and security personnel, providing a safe environment and a base from which the Group's Education and EXERA operations can expand in Mandalay.

 

 

FINANCIAL REVIEW

 

RESULTS OF OPERATIONS

		6M24		6M23		6M22	FY23	FY22
$	Brand	Unaudited		Unaudited		Unaudited	Audited	Audited
Owned businesses
Education - Vietnam		4,183,035		4,055,667		3,312,986	8,539,813	7,391,025
- English language learning	Wall Street English	3,929,484		3,971,580		3,312,986	8,254,131	7,391,025
- English language learning	Kids&Us	249,524		84,087		−	285,682	−
- Coding	Logiscool	4,027		−		−	−	−
Education - Myanmar		6,741,082		4,741,070		1,790,716	10,162,576	4,485,240
- English language learning	Wall Street English	3,767,997		3,356,148		1,248,184	6,860,636	3,204,937
- English language learning	Kids&Us	142,739		−		−	24,632	−
- Coding	Logiscool	15,922		−		−	−	−
- Tertiary education	Auston	2,213,533		937,730		144,872	2,390,112	475,907
- International school (K-12)	Yangon American	600,891		447,192		397,660	887,196	804,396
Education		10,924,117		8,796,737		5,103,702	18,702,389	11,876,265
Services	EXERA	3,496,937		2,642,785		3,025,078	5,327,189	5,794,603
Total owned businesses		14,421,054		11,439,522		8,128,780	24,029,578	17,670,868
Managed businesses
Education (Legacy) - Myanmar		−	14,177		184,700		24,969	236,006
- English language learning	Wall Street English	−	14,177		184,000		−	−
- Tertiary education	Auston	−	−		700		−	−
Services	Ostello Bello	10,351	−		−		−	−
Total managed businesses		10,351	14,177		184,700		24,969	236,006
Total revenue		14,431,405	11,453,699		8,313,480		24,054,547	17,906,874

 

Revenue from the owned and managed businesses grew by 26% YOY to $14.4 million in 6M24 (6M23: $11.4 million). The double-digit revenue growth was a result of strong improvement in Myanmar across the Education businesses (6M24: 42% YOY) and services businesses (6M24: 33% YOY). The revenue growth in Vietnam (6M24: 3% YOY) was mainly driven by the maturation of five Kids&Us schools.

 

Group gross profit increased 27% YOY for 6M24 (6M23: 106%), of which the Education division provided 90% (6M23: same) and the Services division provided 10% (6M23: same). The robust growth in gross profit is attributable to (i) strong revenue growth coupled with (ii) margin expansion due to (a) higher utilisation and operational efficiency of teaching personnel and facilities across all Education brands, (b) a shift to higher margin products, and (c) prudent spending on other cost of service.

 

	6M24	6M23	6M22	FY23	FY22
$	Unaudited	Unaudited	Unaudited	Audited	Audited
Revenue	14,431,405	11,453,699	8,313,480	24,054,547	17,906,874
Cost of services	(6,107,945)	(4,897,166)	(5,130,275)	(10,184,215)	(9,924,470)
Gross profit	8,323,460	6,556,533	3,183,205	13,870,332	7,982,404
Gross profit margin	58%	57%	38%	58%	45%
Other income	37,550	8,314	85,052	90,018	80,711
Foreign exchange loss	(584,505)	(386,886)	(121,198)	(1,134,441)	(972,259)
Administrative and other operating expenses	(9,722,868)	(7,988,551)	(5,227,357)	(17,098,388)	(12,146,613)
Loss from operations	(1,946,363)	(1,810,590)	(2,080,298)	(4,272,479)	(5,085,757)
Finance cost	(617,946)	(442,146)	(432,306)	(979,791)	(862,678)
Loss before income tax	(2,564,310)	(2,252,736)	(2,512,604)	(5,252,270)	(5,948,435)
Income tax (expense)/credit	-	-	(82,520)	(67,414)	(33,646)
Loss after income tax	(2,564,310)	(2,252,736)	(2,595,124)	(5,319,684)	(5,982,081)
Selected non-cash items:
Total depreciation of plant and equipment	580,733	371,187	205,506	826,953	436,363
Total amortisation on of right-of-use asset	1,402,364	1,382,345	1,350,354	2,858,275	2,694,870
Total amortisation on of intangible assets	49,522	38,215	28,268	80,498	74,342
(Reversal of)/impairment on trade and other receivables	-	(6,187)	18,421	(9,514)	15,453
Reversal of impairment of intangible assets	-	-	-	-	(30,000)
Finance costs (excluding interest on lease liabilities)	94,550	44,887	65,342	105,748	115,890
Total interest on lease liabilities	523,396	398,454	372,105	875,405	754,370
	2,650,565	2,228,901	2,039,996	4,737,365	4,061,288
Adjusted EBITDA *	86,255	(23,835)	(472,608)	(514,905)	(1,887,147)
Adjusted EBITDA after impact of ROUs *	(1,839,505)	(1,804,634)	(2,195,067)	(4,248,585)	(5,336,387)

 

 

*   Key performance indicators for the Group, based on earnings before interest, income tax, depreciation and amortisation ("EBITDA") are (i) Adjusted EBITDA (as presented above) and (ii) Adjusted EBITDA less right-of-use assets and interest on lease liabilities ("Adjusted EBITDA after impact of ROUs").

 

Group adjusted EBITDA was $86k for 6M24 (6M23: $24k loss), driven by the strong performance in the Education businesses across Myanmar. 

 

Full-time employees were ca. 2,480 as at 31 March 2024 (30 September 2023: ca. 2,200). The increment is directly linked to school portfolio expansion across both countries and the acquisition of additional sites under EXERA.

 

CASH FLOW EVOLUTION

At 31 March 2024, the Group's cash and cash equivalents position was $0.8 million. The $0.6 million decrease in net changes in cash and cash equivalents from 30 September 2023 resulted from the combination of (i) a $0.7 million inflow from operating activities, (ii) a $1.2 million outflow from investing activities, and (iii) a $0.1 million outflow from financing activities.

 

The Group generated positive cash flows from operating activities of $0.7 million for 6M24 (6M23: $1.6 million). Operating cash flow before working capital changes for 6M24 is positive $87k down $89k compared to 6M23. The decrease is attributable to a negative change of $1.1 million in receivables due to a shift in the payment mix after the introduction of the subscription model. If repayment of lease liabilities ($1.4 million) were considered, adjusted cash inflow from operating activities would be negative $0.7 million (6M23: positive $0.2 million).

 

The Group incurred cash outflows from investing activities of $1.2 million for 6M24 (6M23: $0.8 million), mainly spent on leasehold improvements for the opening of (i) four schools in Vietnam (Wall Street English 1 / Kids&Us 1 and Logiscool 2), (ii) four schools in Myanmar (Wall Street English 1 / Kids&Us 2 / Logiscool 1), (iii) the opening of Early Years Village at the Yangon American. These expansions increased capacity and visibility and ensured the businesses protect and grow market share.

 

Cash flows from financing amounted to negative $0.1 million for 6M24 (6M23: negative $1.5 million), of which repayment of lease liabilities totaled $1.4 million (6M23: $1.4 million). Cash flows from financing, before repayment of lease liabilities, was positive $1.3 million for 6M24 (6M23: negative $0.1 million), which comprised of proceeds from shareholder's loan ($1.3 million) utilised mainly to open new school for existing and new Education brands.

 

LIQUIDITY MANAGEMENT AND GOING CONCERN

 

The Board of Directors has reviewed in detail the Group cash flow forecast for the next 24 months. This forecast considered the time needed for new and non-performing businesses to turn profitable. The Group conducted extensive stress testing on various scenarios calibrating the duration it might take for these businesses to recover as well as other items impacting future performance, such as the general macroeconomic environment and initiatives within the management's control.

 

The Board of Directors determined management has control over sufficient mitigating actions to manage cash outflows, such as prioritising capital expenditures, reducing operational activities of non−performing business divisions and pausing discretionary spending. Other key considerations included:

a)    The Group meticulously plans its business expansion and continuously monitors how changes to the political and economic environment may potentially impact its business operations, particularly in Myanmar. Since FY23, Myanmar businesses have been self-sustainable and no financial support has been required;

b)    Negative Cash Conversion Cycle for many businesses as tuition fees and certain risk management services are generally collected up to twelve months in advance of service delivery. Refer to Note 4 for further details;

c)    Flexible discretionary capital spending as any capital expenditures in Myanmar would be funded through excess capital earned locally; and

d)    Access to unutilised Loan Facility as disclosed in Note 15.

 

Established businesses within the Education and Services divisions in Myanmar generate sufficient cash flows to support the existing operations and their expansion as well as the establishment of new brands in Myanmar. Management expects this trend to continue for the foreseeable future.

 

In Vietnam the macroeconomic outlook has improved in 2024 and we anticipate further growth from businesses as new schools continue to open and new brands gain traction.

 

Therefore, at the date of this report, the Directors have concluded that the Group has adequate financial resources to cover its working capital needs for the next twelve months.

 

 

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the financial period from 1 October 2023 to 31 March 2024

     

$	Note	6M24	6M23
Revenue	4	14,431,405	11,453,699
Cost of services		(6,107,945)	(4,897,166)
Gross profit		8,323,460	6,556,533
Other income		37,549	8,314
Administrative and other operating expenses		(10,307,373)	(8,375,437)
Loss from operations		(1,946,364)	(1,810,590)
Finance cost	6	(617,946)	(442,146)
Loss before income tax	7	(2,564,310)	(2,252,736)
Income tax expense	8	−	−
Loss after income tax		(2,564,310)	(2,252,736)
Other comprehensive income:
Items that may be reclassified subsequently   to profit or loss:
Exchange difference in translation of foreign operations		11,264	(19,959)
Items that will not be reclassified subsequently to profit or loss:
Changes in fair value of equity instruments at FVOCI	12	(49,363)	(80,774)
Other comprehensive income for the period, net of tax		(38,099)	(100,733)
Total comprehensive income		(2,602,409)	(2,353,469)
Loss for the period attributable to:
Owners of the Company		(2,564,310)	(2,252,736)
Total comprehensive income attributable to:
Owners of the Company		(2,602,409)	(2,353,469)
Loss per share attributable to the owners of the Company ($)
- Basic and diluted ($)	19	(0.86)	(0.77)

 

The above condensed interim consolidated statement of comprehensive income should be read in

 conjunction with the accompanying notes

 

 

CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2024

 

$	Note	31 Mar 2024	30 Sep 2023
ASSETS
Non-current assets
Plant and equipment	9	3,246,572	2,846,539
Intangible assets	10	6,621,507	6,705,035
Right-of-use assets	11	11,768,970	11,383,340
Financial assets at FVOCI	12	−	49,363
Trade and other receivables	13	2,014,106	1,828,771
Total non-current assets		23,651,155	22,813,048
Current assets
Inventories		293,296	222,395
Trade and other receivables	13	3,513,298	2,481,989
Cash and cash equivalents	14	848,471	1,489,812
Total current assets		4,655,065	4,194,196
Total assets		28,306,220	27,007,244
LIABILITIES AND EQUITY
Liabilities
Non-current liabilities
Contract liabilities	4	1,404,248	1,096,763
Shareholder loan	15	3,928,365	2,577,181
Lease liabilities		10,391,602	9,869,397
Total non-current liabilities		15,724,215	13,543,341
Current liabilities
Contract liabilities	4	10,648,355	10,996,568
Trade and other payables	16	7,375,063	5,840,468
Lease liabilities		2,411,834	2,251,819
Tax payables		3,906	7,368
Total current liabilities		20,439,158	19,096,223
Total liabilities		36,163,373	32,639,564
Equity
Share capital	17	21,919,638	21,639,638
Convertible notes	18	5,730,000	5,730,000
Accumulated losses		(36,108,851)	(33,544,541)
Other reserves		602,060	542,583
Total equity		(7,857,153)	(5,632,320)
Total liabilities and equity		28,306,220	27,007,244

 

 

The above condensed interim consolidated statement of financial position should be read in conjunction with the accompanying notes.

 

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the financial period from 1 October 2023 to 31 March 2024