PERFORMANCE
Education business returns capital despite pandemic
Pacific Equity Partners (PEP), the majority stakeholder, and other shareholders have received a $NZ60 million return of capital and a $NZ22.1 million dividend from New Zealand-based private training provider UP Education.
The payments were received after the company made alterations to its student fee guarantee arrangements to enable it to free up cash.
UP Education (formerly part of ACG Schools) runs private colleges at more than 30 locations in New Zealand and Australia. The business offers vocational courses in areas such as tourism, hospitality, trades, web and graphic design, film and animation, health, early childhood education, business, and hair and beauty. UP Education is also a leading provider of pathway programs which provide international students with foundation studies needed to transition successfully into courses at English language universities. Returns from this part of the business have been substantially reduced as a result of COVID-19 travel restrictions.
According to financial statements filed with the New Zealand Companies Office, UP Education Group’s holding company reported a net profit of $NZ17.5 million for the year to December, up from $NZ14.5 million the prior year.
Revenue at $NZ167.2 million was, however, down from $NZ171.3 million the prior year.
Managing director Mark Rushworth said the company’s major focus was on domestic enrolments and these had increased during the COVID-19 pandemic and were still increasing which resulted in the business attracting additional government funding. He said exposure to the international students sector was currently relatively small.
Rushworth said the changes to fee guarantee arrangements had been structured by the company to return capital to shareholders.
The financial statements show that the group’s cash balance had been reduced from $NZ104.8 million to $NZ12.7 million. The statements note that a new student fee protection trust deed had been established with the New Zealand Public Trust in August 2021. The new deed releases funds to the training provider after expiry of an 8-10-day refund period with fees protected after that under a bank guarantee.
The accounts also show that cash held by the Public Trust had reduced to $5.1 million at balance date from $28.7 million the previous year while cash in the UP Education Student Fees Trust fell to zero from $NZ12.4 million.
The sale for $NZ39 million and leaseback of the group’s premises at Queen Street, Auckland, in 2019 had also contributed to the capital release.
Rushworth said the COVID-19 pandemic had increased acceptance of online education and UP Education had followed up on that by increasing its investment in online capabilities. This was changing the education model of the future and providing penetration into new markets.
Over the longer-term, the group expected overseas recruitment of students to recover as an important revenue source but Rushworth said he expected that to require two or three years of rebuilding.
PEP acquired ACG (Academic Colleges Group) in a leveraged buyout in 2015. No financial details of that transaction were disclosed but it was speculated at the time that ACG valued its business at around $NZ530 million. At that time, ACG ran seven schools and six private tertiary education institutions in New Zealand plus international schools in Saigon and Jakarta. In 2017, PEP acquired tertiary operations that had been operated by Intueri Education for about $NZ29 million after Intueri had been placed in voluntary administration. The private equity firm added the substantial Intueri operations to ACG.
In 2018, PEP launched a strategic review of ACG, which is believed to have looked at whether offering the schools and tertiary institutions divisions for sale separately would generate greater overall return. Later that year the ACG Schools division was divested to UK-based Inspired Education Holdings which operates private schools around the world, including Reddam House in Sydney. The return from that transaction was not disclosed but is believed to have been around $NZ285 million.
The remaining tertiary division was re-named UP Education in 2019.
In New Zealand, the business operates vocational training operations including New Zealand School of Tourism, NZMA, Face & Beauty, Elite School of Beauty, The Culinary Collective, Cut Above Hairdressing, Elite School of Beauty and Spa, New Zealand Institute of Sport; plus tertiary institutes, New Zealand Tertiary College and Yoobee Colleges. In Australia, UP Education operates the Adelaide-based International College of Hotel Management (ICHM), has international student preparation partnerships with universities. The business has plans for further expansion in Australia.