Raffles Education Corporation today reported a net profit of $7.5 million for Q2FY2010 on the back of a 13% decline in turnover. Revenue was $47.2 million for the second quarter ended December 31, 2009 (Q2FY2010) compared with $54.2 million in the second quarter ended December 31, 2009 (Q2FY2009).

The decline in turnover was primarily due to a reduction of National Education School (NES) students as a result of a decrease in the number of students in China taking the Gao Kao, the academic examination held annually for students seeking admission into institutions of higher learning in China, as well as the cumulative effect of reduction in students recruited over the last four quarters due to the impact of the global financial crisis.

For Q2FY2010, there was a marginal increase in student enrolment in the group’s Private Education School (PES) colleges compared to Q2FY2009. The impact of this increase in student enrolment will only flow through the results in the subsequent quarters.

Net profit declined 73% from $27.3 million in Q2FY2009 to $7.5 million in Q2FY2010, mainly due to lower revenue in Q2FY2010 and the impact from the following:-

• Absence of a gain from disposal of land in Oriental University City (OUC) in Q2FY2010 compared to a $6.3 million gain in Q2FY2009;
• An unrealised foreign exchange loss of $1.2 million recorded in Q2FY2010 as compared to an unrealised foreign exchange gain of $1.4 million in Q2FY2009;
• $1.8 million increase in personnel and other operating expenses as a result of the set up of new colleges;
• $0.4 million increase in finance costs due to higher amortisation of finance charge on long term payables related to the deferred purchase consideration of OUC, over the period of payment for the purchase consideration;
• $0.8 million decrease in share of results from associates as the Group stopped equity accounting for the results of Oriental Century (OCL) since Q3FY2009.

Raffles Education says the group’s balance sheet is strong, with a low net gearing level of 0.18 times as at Dec 31, 2009. Cash and cash equivalents stood at $89.7 million as at Dec 31, 2009.