Zee Learn Q4FY17 Concall Summary

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 Financial Highlights

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  • Consolidated revenues highlighted for the year is INR 1789 Million which is all time higf
  • Kidzee as a brand has crossed the 1 Billion mark and company at operating EBITDA as a percentage of revenues reaches 35% against 29% last year whoseconsolidated PAT is INR 366 Million against INR 150 Million and has increased by 2.4x and EPS reaches 113% for the face value of 1.13
  • On a standalone basis, they have reduced around Rs.10 Crores from term loan
  • As subsidiary is concerned, compay restructured Rs 125 Crores term loan, which were mentionedin subsidiary balance sheet - the loans has been reduced on Digital Ventures to extent of Rs 125 Crores
  • Marginal rate has decreased marginal rate during the year in Digital Venture and rate of interest used to be around 13% during the previous year which is now around 11%-11.5%
  • In financial year 2017, have operationalized 14 schools, Mount Litera Zee school in financial year 2017 and around 350 Kidzee in FY2017 alone
  • Contribution of Kidzee has approximately 68% and Mount Litera 22%
  • Current year have collected near about Rs 12 Crores from schools and expect the collections will keep on increasing yoy in relation to the number of studentsget added into schools
  • Rs 14.16 Crores is for a fire and Rs 9.4 Crores on provision,a claim added which have mentioned into the books
  • The differential money can be recovered from insurance company at any moment howevertry to still pursue with original claim of 14 Crores
  • Major receivables are from Mount Litera Zee Schools. The receivables have increased from 70 odd days in FY16 to 100 in FY17
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Business Overview

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  • Response for new Kidzee version 2.0 was overwhelming and as it surpassed all the expectations
  • In result of rising scale,the company is undertaking rationalization of vendors and the company has prudently managed cost of goods, while simultaneously improving the quality
  • As far students numbers are concerned, Kidzee served 128000 numbers of students during the year as against around 116000 numbers of students last year and Mount Litera School served approximately 51000 numbers of students as against around 45000 numbers of students last year
  • Keeping in view the legislations, which yet to become an act, it caps a certain amount for the primary, secondary and the state of Gujarat, also has a Gujarat Regulation of Fee Act of 2007
  • Strong presence specially on the vocational side through ZICA and ZIMA, Creative Arts and Media Arts
  • Last academic year had around 3000 students whowere studying in CBSE schools and around 300 students was studying in BKC schools
  • Aspiration of a fairly long number of schools which are expected to receive operationalized in the next 2-3 years in K-12 are now probably the third largest in the country 
  • The rate reduction in Zee Learn by way of loan restructure will happen in this financial year and there will be substantial rate reduction that will be happening in it
  • The Company has Rs 65 Corers NCD, about Rs 36 Crores term loans,12 Crores of promoter loans as per standalone is concerned and by concerning Digital Ventures,  havingRs 125 Crores term loan on the BKC, about Rs 25 Crores sanctioned in it,which would be additionally drawn down during the year in order to complete school construction
  • Some legislation are being formulated is there at various state levels
  • 60-odd admissions came for new academic year whose admission sessions for the IB curriculum goes on till August
  • Operationalized 14 new schools in Mount Litera
  • The company has signed up 22 new schools during the year and 327 new schools for KidzeeWe
  • As far as dividend policy is concerned, the company has started making surplus and specially since it have knocked off the carry forward losses. The management will take a call in terms of the growth areas, investment opportunities and all tax liabilities, etc and shares the wealth with investors

Capex

  • Zee Learn Limited has invested considerable resources in developing learning designs, student learning materials and e-content for pre-schools and K-12 schools
  • Schools are averaged four years, so when the schools keep on getting more older, more cash flow will start generated through the schools and company will be able to recover the debtors more faster then the debtor’s numbers will keep on reducing

Digital ventures 

  • Digital Ventures is into leasing out structure that has been built for running the schools and revenue of digital ventures depends upon the area, which has been let out to run the school operations
  • The lease rentals at DVPL are based on the areas that have made available to the trust to run the schools specially in terms of the classrooms and other facilities and as number of student increases, lease rentals also increases
  • As far as balance sheet is concerned, it is a re-grouping which had about Rs 250 Crores term loan sitting on the Digital Ventures. Out of that Rs 125 Crores already moved out of it ans was put into with respective trusts

Strategy

  • The company plans to  continue developing offers on technology side and also at a school level, are in process of creating an ecosystem where entire content delivery would be digitized significantly improved
  • The company has made progress in AR and VR space developing child kits  
  • Curriculum version 2 is a significant improvement over version 1 . Going forward company creating and deploying new versions
  • Number of students growing every year in system, a scope for better negotiations withvendor is there
  • Student’s specific programmes will be pivotal in aiding a planned growth for the future 

Growth

  • Company will grow in line with industry CAGR that is being registered by the respective sectors in which pre-school growing by around 15% -20% and K-12growing by about 25% at the industry level
  • The K-12 schools are in nascent stage with relatively low average enrollment per Kidzeecenter at c.74, against full capacity of 175 per center
  • Average enrollment per MLZS is c.500, against full capacity of  c.1800 per school
  • Company’s enrollments are at c.700 per school, against full capacity is of 1800 per school
  • With annual addition of C.250 operational preschools and 15 K-12 schools, the company will be on continuous growth trajectory in coming years
  • Private education revenues was at USD 30 Billion in 2012 and are expected to grow at 19% and reach USD 76 Billion by 2018 with its brands which will be well established and widely accepted, ZLL is all set to participate in growth of education sector and tap the huge opportunity
  • Pre-school segment revenues to increase at CAGR of 15% from USD 1.5 Billion in 2011 to USD 5 Billion by 2020 though,with Kidzee as the largest preschool chain in India spread C.600 cities, ZLL is quite poised to tap on this opportunity
  • Share of private institution in total enrolment of K-12 segment is expected to increase to 47% in 2015-16 from 42% in 2010-11 though, with MLZS amongst the fastest growing brand in K-12 segment with its footprint in C.80 cities, are present to make a major impact in this field  

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