China New Higher Education Group Announces 2020 Interim Results The Strategy of 'Quality, Grow and Light' Drives the Development of the Group Strong Results Growth with the Number of Enrolled Students up 27% and Adjusted Net Profit Rising by 46% to RMB330

 (Stock code: 2001. HK)

China New Higher Education Group Announces 2020 Interim Results

The Strategy of "Quality, Grow and Light" Drives the Development of the Group

Strong Results Growth with the Number of Enrolled Students up 27% and Adjusted Net Profit Rising by 46% to RMB330 Million

(August 27, 2020, Hong Kong)China New Higher Education Group Limited ("New Higher Education Group", collectively called the "Group" together with its affiliated companies; stock code: 2001.HK) is pleased to announce the interim results for the six months ended June 30, 2020 (the period).

The Group's Position

• Practitioner of Collectivized School Operation: Established in 2005, the Group has now formed a replicable collectivized school operation model.
• The propeller of application-oriented Universities: The Group is the initiator and vice-chairman unit of the Association of Universities (Colleges) of Applied Science of the MOE.
• Leader of High-quality Employment: The Group won the title of the Top 50 National Employment of the MOE, with an average employment rate of above 97%.
• Pioneer of Cross-regional Layout: The group started to operate schools in different provinces since 2009, and has built up its school network in 7 provinces in China.
• Forerunner of Organic Growth: The Group's total number of student enrollment increased by 27.0% YoY, with a continuous increase in student enrollment and tuition fees.

Financial Highlights

• The total adjusted revenue amounted to RMB758 million, up 34.2% YoY;
• The adjusted revenue from principal business amounted to RMB705 million, up40.7% YoY;
• The adjusted net profit amounted to RMB330 million, up 46.0% YoY;
• The adjusted net profit attributable to owners of the parent amounted toRMB299 million, up 48.9% YoY;
• A proposed final dividend of RMB0.042 per share, maintaining a payout ratio of 30%

* The adjusted figures refer to the sum of the deferred tuition income recognised in July and August 2020 as a result of supplementary lessons provided in summervacation for comparison purpose with the figures of the same period of last year.

Business Highlights

• In 2019/20 academic year, the Group's student enrollment totaled over 118,700, up 27.0% YoY
• The Group accelerated the recovery of the prepayment in Xinjiang potential acquisition, which totaled RMB137 million;
• The Group further acquired the remaining shares in Henan School and Guangxi Schools, with the acquisition PEs lower than those in the first acquisitions;
• Seizing the opportunity of government subsidies for training, the Group acquired the stake in a training institution to further diversify the sources of revenue;
• During the public health event period, the Group kept abreast of health conditions of teachers and students on a real-time basis and collected over 7.5 million pieces of health information on a cumulative basis, with no epidemic infection happend; the epidemic resistance deeds of both teachers and students were recognized across the industry and widely covered by media;
• During the public health event period, the Groupuse TronClass platform which can meet the online education demand of all the teachers and students, with the number of clicks reaching over 300 million times; 
• The Group changes the financial year to align financial results with the teaching cycle.

Founder of the Company and Chairman of the Board Mr. Li Xiaoxuan said: "Since our listing, we have gained much support and help from investors and people from all walks of life. In the first half of 2020, in response to the call of MOE to meet the challenge caused by the public health event  to the industry, the Group carried out online teaching through TronClass adhered to the original teaching and class schedule, completing the teaching work for the spring semester and realizing the principle of "Delay backing to school, no delay in teaching.

Meanwhile,we also focus on the employment of new graduates. Through cloud communication, cloud training, cloud guidance, cloud recruitment, cloud graduation, cloud publicity, and cloud safety on 'Qiduo.net' employment platform, and focusing on cooperation with famous enterprises, star employment, and excellence training, all the schools have held over 220 online job fairsinvolving more than 5,670 enterprises; we also set up internship bases in economically developed areas, explored quality resources for internship and employment, and conducted in-depth cooperation with Huawei, Alibaba, ByteDance and some other well-known enterprises.

Seizing the opportunities arising from favorable policies related to higher education, vocational training, and online education, the Group has acquired Yunnan Vocational School and quickly expanded to the field of government - subsidized training, further realizing the diversification of the sources of revenue. Facts show that 'Organic Growth + Value Investment' strategy has been proven, with endogenous growth leading the industry, the Group will further promote the external potential mergersand acquisitions.. In the future, the Group's performance will continue to improve at high quality with a huge room for a higher valuation."

Financial Analysis

In the event of public health, the Group was activelyresponded to the emergencies in the following ways:

1)In response to national policies, it returned students the accommodation fees for the period when they are not at school, and arranged supplementary lessons in summer vocation at schools where face-to-face teaching conditions permit;

2) It actively undertook its CSR, reducing or exempting rents for merchants at school;

3)It continued to lower cost, strictly controlling administrative expenditure while guaranteeing the input in teaching to ensure competitive growth and reasonable returns to investors.

In the first half of 2020, the Group includedincome to be recognized during the period but deferred toJuly and August 2020 in respect of the supplementarylessons in summer vacation. As a result, the adjusted revenue was RMB705 million, up 40.7% in the same period of last year, the adjusted net profit was RMB330 million, up 46% from RMB226 million in the same period of last year; the adjusted net profit attributable to owners of the parent was RMB299 million, up 48.9% from RMB201 million in the same period of last year. Total capital was RMB993 million, up 109% YoY, and the weighted average interest rate continual optimized with a decrease of 20+bps YoY.

In the first half of 2020, the Group's 'High-Quality' strategy continued to advance, and revenue continued to grow strongly; teaching investment continued to increase, cost structure continued to optimize; profitability continued to improve, shareholder returns continued to increase; capital reserves continued to increase, and debt indicators continued to be optimized.

Business Review

During the first half of 2020, the Group has made several achievements in terms of improving the quality of teaching and employment, expanding income and acquiring external resources, With 'Six Excellences' as the overall strategic goals and adhering to the strategic direction of "Quality, Grow and Light".

Value Investment: According to the market environment and its actual development, the Group has establisheda development strategy with 'organic growth as the mainstay and investment as the supplement'.In terms of investment, based on the internal first then external principle, the Group holds thestrategy of first integrating existing schools, and subsequently supplementing by excellent externalmergers and acquisitions. Recently, the Group further acquired minority interests in Henan Schooland Guangxi Schools.

Organic Growth: During the first half of 2020, With 'Quality, Grow and Light' as the overall strategic goals, the Group will further improve thequality of teaching, employment, management and services, as well as expand anddiversify income . To make asset baselighter, the Group will study demand more scientifically, use resources more efficiently, inputmore reasonably and generate income more efficiently.

Improving online education quality and increasing international cooperation

After the outbreak of the public health event, the Group made use of the online education platform TronClassand realized online teaching as scheduled, with more than 300 million clicks recorded by the teaching platformin the first half of 2020.

In terms of international cooperation, the Group has signed cooperation agreements with overseas schools and institutions in the US, UK, Germany, Canada, and Switzerland, broadening channels for overseas exchanges and talent training for both teachers and students of the Group. Recently, the Group reached an agreement with Swiss Education Group (SEG), the largest hotel management education alliance in Switzerland with the highest employment rate in the world.

Developing channels to maintain a high level of employment

In 1H 2020, the average employment rateof the Group'sschools was higher than the average levelreported by schools peers in the provinces. Through 'Qiduo.net' employment platform, the Group provided students with massive resources, corporation with famous enterprises, star employment, excellent training and core process some other employment-related services; it reached in-depth cooperation with famous enterprises, with an aggregate of 893 companies for cooperation with the Group andincreased the rate of internship at famous enterprises; the star employment rate rose by 20% YoY, and 15 high-paying employment excellence classes for freshmen were to be set up; it also optimized the core process of employment and established an effective linkage mechanism to enhance the quality of employment services. 

Meeting trends and improving the level of digitalization

At the teaching level: the Group usesthe TronClass, an on-line and off-line education platform, with AliCloud, Zhiyuan（智園）, and CC Video and other enterprises, allowing the simultaneous access by more than 100,000 visitors to satisfy the needs for large-scale online teaching and learning, realizing the principle of 'Delay backing to school, no delay in teaching and learning' during the public health event, which is covered by Ta Kung Pao and China Education Online.

At the management level, the Group exploites the ERP management system,NCCloud and business intelligence(BI) systerm, visualizing data such as revenue, cost, capital, KPI, procurement and asset management.

At the service level, the Group's digital service platform has provided teachers and studentswith around 20 million times of services related to academic record, examinationsregistration, fees payment, teaching evaluation, apartment maintenance and feebacks and the platform is still updated when applied by other schools of Group. The Group kept abreast of the health status of teachers and students during the pandemic, collecting over 7.5 million pieces of health informationon a cumulative basis, supporting the work of teachers and students during the epidemic.

At the safety level, the Group also cooperated with Hikvision to deploy smart security and safe campus platform, Setting up the Campus Security System by technologies like face recognition, behavior recognition and big data. The Group is appreciated by Education Department of Yunnan Province, Education Department of Guiyang and Enshi Prefecture political and Legal commissions.

Take Opportunities to Expand Revenue Sources

The Group actively responds to the call of the government, continues to analyse on provincial policies, makes a good connection with the education department, human resources and social security departments, and other government departments, and provides vocational skill training services to the public, making contributions to ensuring employment. Various schools have set up special institutions, including continuing education colleges and vocational education colleges, to select and deploy professionaltalent, adjusted the structure of training programs, and vigorously promoted government-subsidized training projects. The Group's six schools were approved to be pilot 1+X certificate institutions by education authority. As of June 30, 2020, it had provided government-subsidized training to about 3,500 people.

Acquisition of Yunnan Vocational School: To expand the training income scale, the Yunnan Vocational School acquired by the Group in the first half of this year is a diversified lifelong vocational education and training institution with integrated businesses of accounting training, IT training and adult corporate-sponsoredtraining. With the acquisition PE of merely 6.4x, which is relatively cost-efficient in the industry. Through the channels of the Group's colleges and universities,the Yunnan Vocational School can make use of the existing resources of schools to open up a new business and expand off-school training based on the existing student training. Furthermore, it significantly increases the government-subsidized training business scale, focusing on light assets and increase revenue.

Development of Light Assets

Cooperation and joint development: the Group will cooperate with large state-owned investment or construction companies to integrate superior resources, improve the quality of construction, and cooperate with companies for building school infrastructure like student dormitories and commercial facilities.

Socialization of asset investment: social resources have been introduced to improve campus facilities and equipment, provide students with high-quality services, and increase logistic income.

Sharing of the training center: it improves the quality of practical teachingand integrates high-quality government resources by sharing experimental and practical training bases, which improved the efficiency and quality of resource utilization.

Outlook

Previously, the Group proactively acquired 5 colleges and universities and completed the integration through abundant experience in collectivized management. In 2020, it further acquired the remaining shares of school in Henan and the minority shares in schools in Guangxi, with significant integration and consolidation effects.

The Group's organic growth increases rapidly, and its newly acquired schools develop fast, which boosts its financial strength and multiplies its capital reserves. Under the development strategies of "Organic Growth + Value Investment", the Group will continue to give full play to the advantage of collectivized operation, replicate successful management experience, quickly release the potential of newly invested schools, and quickly improve the operational efficiency and profitability. Meanwhile, it will vigorously promote potential external M&A projects, and further, promote the implementation of the "Two-wheel Driven" business strategy.

Investment Highlights

With its strong collectivized management capacities, currently, the Group has more than 118,700 students (including the number of expanded enrollment), ranking third among the PRC higher education sector in the Hong Kong stock market, and the quota of top-up programme in the 2020/21 academic year will increase by more than 120%.

The Group proactively invested in 5 colleges and universities before and after the listing where first-mover advantage is obvious. The average acquisition cost of schools is far lower than the current market price, accumulating extensive experience in mergers and acquisitions, restarting the exploration of external potential mergers and acquisitions projects.

The Group has a strong post-investment management ability. The quality of teaching and employment in the schools invested has improved significantly, and the net profit has increased significantly. The compound annual growth rate of the Group's net profit in the past 3 years had reached 56.5%.

In 2019, the Group's average tuition fee was RMB10,995, which is lower than the average market level. The Group will continue to increase the investment in teaching, experimental training and scientific research, continuously enhance the quality of teaching, student employment and student experience. The Group still has a huge potential for improvement in revenue in principal businesses such as tuition and boarding fees in future.

Benefiting from the national "vocational skills improvement action" with funding of RMB100 billion, the Group seized the opportunities to actively provide vocational skills training services to the society, and carry out government subsidy related training projects to further realize the diversification of revenue.

Finally, the Group's development strategy with 'Organic Growth+ Value Investment' as the mainstay and investment as the supplement has been verified. The Group has a leading organic growthrate in the industry and will accelerate the valuation of investment targets. The future performance will continue to improve with high quality.

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About China New Higher Education Group Limited:

China New Higher Education Group Limited is a leading private formal higher education group in China with nearly 21 years of education industry experience, specializing in providing higher education which focuses on applied sciences. The Group endeavors to help each student maximize their potential and live their life to the fullest. Since 2009, the Group has been operating schools in different provinces and regions, and its current school network covers 7 provinces in China, including Yunnan, Guizhou, Hubei, Heilongjiang, Henan, Guangxi, and Gansu.

The Group provides high quality higher education in a wide selection of fields in applied sciences. Its courses are designed to equip students with practical and readily applicable skills, helping to prepare them for the job market. As a leader in high-quality employment, the Group won the title of the Top 50 National Employment of the MOE, with an average employment rate of above 97%. The Group became a constituent stock of the Hang Seng Composite Small Cap Index and the Hang Seng Consumer Goods & Services Index in the Hang Seng Composite Index Series in August 2017, and was included as a constituent stock of the MSCI China Small Cap Index in November 2017 and included as a constituent stock of Shenzhen and Hong Kong Stock Connect in March 2018.

This press release is distributed by Wonderful Sky Financial Group Limited on behalf of China New Higher Education Group Limited.

For further information, please contact:

Wonderful Sky Financial Group Limited

Aileen Wang / Georgina Zhao

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Email: newhigheredu@wsfg.hk