Company summary

LZYE Group plc, is an AIM listed Hong Kong based company which provides tuition services to 2,000 children aged between 6 months and 12 years in three centres in Hong Kong. The Company plans to open further centres in main line China.

28 November 2012 | Education

Company news

LYZE Reports Interim Results and Announces a New Centre

LYZE has reported an operating loss of HKD 25.8 million for the six month period ended 30th September 2012

​LYZE records higher losses

Revenues for the period increased 16.8% to HKD 10.0m (2011: HKD 8.6m) with the average revenue generated by each teacher up 26.3% to HKD 41,926 per month (2011: HKD 33,195). Losses before tax and excluding the costs associated with its listing on AIM of HKD 12.4 million, were higher at HKD 13.4 million (2011: HKD 11.7 million) due to the cost of developing its operations in China. Rental related expenses increased to 46.4% of revenues (2011: 29.2%)

Other Highlghts

Acquisition of Nantong premises in China, expected to become operational in December 

New Performing Arts Academy centre, in Tai Koo Shing, Hong Kong 

Tin Hau artistic centre commenced operations in October 2012 

Operational restructuring commenced in Hong Kong

The Company said it remains on track to link up with 10 additional co-operative centres before the end of the financial year in March 2013, 2 less than originally planned at the time of its AIM listing.  

CEO Michelle Lai comments

LZYE CEO Michelle Lai: “The restructuring of the Hong Kong operation is well underway. Our centres are being modified, with six to eight classrooms each, and being relocated to more densely populated urban districts. The purpose being to enable the Company to reduce rental charges over time to less than 20% of revenue and move into sustained profitability. After several years of foundation building we have moved into the lucrative market in mainland China with our Flagship Centre in Nantong. The concept of having Clubs in China with over 16 classrooms providing all ten of our programmes remains sound, partly as rental charges are substantially lower  in mainland China than in Hong Kong.

The co-operative arrangements with a number of existing providers of early education are progressing well and the Board expects further contracts to be signed over the coming months.”

Options and Acquisitions

The Company also announced it was launching a share option plan for employees and “contributors”.  Options were granted over 16,000,000 shares or 6.5% of the existing issued share capital. Furthermore the Company disclosed a subsidiary had acquired QQ Club (TH) Limited (formerly known as Rich Insights Limited) from Wong Cher Hong Harry, an employee of the Group, for a consideration of HKD1. QQ Club which had net liabilities is recorded as owing HKD 418k to a director.

LYZE opens fifth centre with a focus on performing arts

The Company also announced it had opened its fifth Centre - Tai Koo Shing in Quarry Bay, a middle-class district of Hong Kong, near Taikoo Place and City Plaza. This Performing Arts Academy centre is targeted at children from 2-14 years of age. The Company expects this new facility (previously occupied by a dance academy) to be fully operational by December 2012. Additional costs are expected to be minimal and there will be no additional staff. The centre will provide its students with the opportunity to take the following world recognised examinations: London College of Music, Associated Board of the Royal Schools of Music, Trinity College, (assessing a spectrum of communicative skills), Australian Teachers of Dancing, and one of the world's most influential dance and training organisations the Royal Academy of Dance.

Comment:

​With a market capitalisation of around £20m but revenues for the period of just £806k and an adjusted pre-tax loss close to £1.1m we remain bemused. The market is clearly pricing in substantial and profitable growth in China and a turnaround in the Hong Kong business as the Company moves to smaller less expensive units.

The high market Cap, the unusual transaction involving the purchase of the Nantong premises and the trading performance to date leave us very much on the side lines here.

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