Scholar Education Group (Scholar Edu, 01769) reported a sharp earnings contraction for the six months ended 30 June 2026, as continued network expansion in Guangdong weighed on margins.

Revenue and Enrolments • Revenue slipped 3.5% year on year to RMB 424.10 million, reflecting a 3.4% decline in total student enrolments to 193,891 and a 3.0% drop in tutoring hours to 4.80 million. • Non-academic literacy programmes remained the main contributor, generating RMB 367.77 million (-5.1%). The smaller tutoring segment grew 8.9% to RMB 56.33 million.

Profitability • Gross profit contracted 28.9% to RMB 107.01 million as cost of sales rose 9.8% to RMB 317.10 million, pushing gross margin down to 25.2% from 34.3%. • Profit attributable to owners plunged 79.7% to RMB 12.76 million. • After stripping out RMB 13.27 million of share-based compensation, adjusted profit fell 68.0% to RMB 26.03 million. • Basic earnings per share dropped to RMB 1.93 cents from RMB 11.42 cents; adjusted basic EPS fell to RMB 3.94 cents.

Cost Structure • Teacher compensation and right-of-use amortisation pushed cost of sales higher as new learning centres ramped up. • Administrative expenses surged 31.2% to RMB 84.53 million, while R&D spending increased 16.5% to RMB 12.21 million. • Finance costs rose 36.9% to RMB 5.83 million, mainly from higher lease-related interest.

Balance Sheet and Liquidity • Cash and cash equivalents declined 27.2% since end-2025 to RMB 344.10 million, reflecting increased investments in financial assets. • Net current assets stood at RMB 78.70 million; total equity was RMB 790.50 million. • Bank borrowings totalled RMB 68.00 million, keeping the gearing ratio stable at 8.6%.

Operational Highlights • The group added learning centres in Guangzhou, driving higher direct operating costs during the ramp-up phase. • Headcount increased to 3,295 employees from 2,946 at end-2025, contributing to elevated personnel expenses.

Capital Management and Dividends • The board declared no interim dividend. • The company’s share-award scheme trustee repurchased 32.21 million shares for approximately HKD 45.99 million during the period; 1.00 million repurchased shares await cancellation.

Outlook Management plans to broaden its revenue base through educational tours, international courses and expansion of the “Le Xue” liberal education brand, while maintaining stringent cost control and leveraging AI technologies to enhance operational efficiency.