Educational-training companies listed on the stock exchanges have had an overall slow quarter in terms of financial performance. Out of the five major companies including Educomp Solutions, NIIT, Everonn Education, CORE Education & Technologies and Aptech; three saw a major dip in profits this quarter. However, they are betting on tepid growth of the industry to revive their profits.
Scenario in Q1
“The key reasons behind the fall in net profit are impact of forex movement on our cost of goods, as we import a large quantity of equipment from abroad for our SmartClass business and impact of pricing,” said a senior Educomp Solutions spokesperson. Educomp Solutions posted an 86% net loss this quarter.
Similarly, Everonn which posted a 107% net loss in the first quarter, compared to same quarter last year, has attributed it to ‘turbulent weather’ in the company during the previous financial year. “We need to admit that the untoward incidents have reflected on our numbers for the year, which lead to a dip in the revenue and business operations,” the company said in its recently released annual report. However, the company added that this is just a passing phase and they would soon resurface stronger.
Aptech has been another player that has seen a drop in profit. Ninad Karpe, MD &CEO of Aptech explained that overall retail sector in urban areas suffered from downbeat consumer sentiments in the months of April and May, which also reflected on the education & training sector.
NIIT and CORE Education & Technologies have been two firms who have been able to maintain the growth momentum. Sanjeev Mansotra, Chairman & Global CEO, CORE Education and Technologies attributed the increase in profits to acquisition of ITN Mark Education, UK in May 2011 and consistent improved performance of their US business as well as a spurt in India revenues.
Corporate Learning Solutions driven by Managed Training Services is gaining traction and did very well at NIIT, according to Prateek Chatterjee, VP-corporate communications & marketing at NIIT. But he said that in the individual learning space, while BFSI did well, the softness in the IT sector impacted student sentiment and caused delays in decision making and enrolments.
The way ahead
Leaving behind the first quarter’s performance, the educational training companies are betting on the growth ahead this year. Karpe, for example, said that while the growth momentum was slow to pick-up in Q1, the execution focus at Aptech and market trend towards the end of June and in July have started to turn the tide.
Everonn Education, on the other hand, aims to increase its presence manifold by adding capacities in all major cities in the next two years. CORE Education & Technologies’ strategy in India will be centered around growing vocational training programs, teacher training programs, ICT solutions (aimed at supplying hardware, software and educational content infrastructure to schools over 3-5 years) and ‘model schools’ (model schools represent public-private partnerships to design, build, finance, manage, operate and transfer groups of schools).
Players like Educomp Solutions are seeing growth prospects in all their businesses, particularly in the SmartClass segment and the K-12 segment. “Our guidance this year is a 25% growth in consolidated revenue over FY12,” the spokesperson added.
NIIT has also identified four areas that would be its platforms for growth this year and in the visible future. These include cloud campus in the individual learning business, nGuru offerings for schools, managed training services for corporates, and NIIT Yuva Jyoti for skills building.
Betting on the future
Mansotra said that they are looking forward to a decent growth this year for the company. “With schools resuming their operations in July and with consistent growth in our business initiatives in other geographies [UK and India], we feel we are on track to achieve our revenue target for FY13,” he said.
Given the headwinds in the IT sector, the overall growth rates are likely to be moderate during the year and pick up towards the end, according to NIIT’s Chatterjee. He added that they believed that NIIT is in a market which has favourable long term dynamics and we expect their four platforms to drive our growth the future.
Others like Mansotra are betting on the Indian government’s intention to significantly increase the spending on education in the 12th five year plan. The share of education in the 12th five year plan has been increased to 19.4% of total plan outlay from 7.7% in the 11th plan.
The worst sufferer Everonn also ends on a positive note. “Although the year witnessed major upheavals in business, management and operations, let us reassure you that we are confident that the new management team, dedicated employees and our innate ability to deliver the best education solutions will see your company effectively navigate through the turbulent times and emerge winner,” said Everonn in its annual report.