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Raffles Education FY2025 Financial Results · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Okay, let's unpack this. Imagine a company that, just a year ago,
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  was bleeding red, posting a substantial loss.
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  Then, with almost no change in its core revenue, it completely flips the script
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  and delivers a solid profit.
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  How does a financial turnaround like that even happen?
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  And more importantly, what unexpected lessons does it offer about navigating
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  the global economy today.
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  Welcome to the Deep Dive. Today, we're diving deep into the full-year financial
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  results for Raffles Education Limited, ending June 30, 2025.
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  This isn't your average education provider. It's a fascinating and complex mix
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  of educational services, facility rentals, and significant real estate investments
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  spread across Asia and Europe.
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  You provided us with these detailed reports, and our mission is to cut through
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  the numbers, understand the why behind their performance, both the triumphs
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  and the challenges, and get a clear picture of what the road ahead truly looks like for them.
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  What's fascinating here is, well, we're looking at an entity whose operations
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  are intrinsically linked to vast regional economies and, you know,
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  ever shifting educational trends.
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  Truly grasping their financial performance means connecting a lot of dots from
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  intricate currency fluctuations to highly strategic asset management decisions.
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  It's a compelling case study in global business resilience. So the stage is
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  set for a remarkable turnaround story.
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  The very first number that leaps off the page, the headline act in this financial
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  drama, is that monumental shift on their bottom line. Absolutely.
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  For the full financial year 2025, Raffles Education reported a net profit after tax of $4.358 million.
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  This is a truly significant reversal from the massive $23.994 million net loss
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  they posted in FY 2024. Think about that for a moment.
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  Almost a $28 million swing in profitability in just 12 months.
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  That's a dramatic change by any measure.
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  And their basic earnings per share completely flipped the script too,
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  moving from a loss of 1.39 cents in FY 2024 to a healthy profit of 0.55 cents
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  in FY 2025, a real turnaround on paper.
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  Indeed. And while the second half of FY 2025 still recorded a net loss of $3,000
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  million, that was a colossal improvement compared to the $25.475 million loss
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  in the second half of FY 2024.
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  This shows a clear positive trajectory building within the year itself,
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  suggesting they were already gaining momentum.
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  What makes this impressive turnaround even more intriguing is that it happened
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  while their revenue remained quite stable. It saw only a slight.
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  Yeah, just a slight 1% decrease. 100% decrease for both the six-month and 12-month periods.
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  For the full year, revenue was $111.71 million, just marginally down from $112.472 million.
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  Right. And if we connect this to the bigger picture, a profit swing this dramatic
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  on virtually flat revenue fundamentally shifts our understanding of Raffles' education.
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  It tells us that while their core educational services might be stable,
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  the real levers of profitability, the game changers, are actually in their extensive
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  real estate holdings and their financial management rather than just growing student numbers.
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  This company is as much a property play, you could argue, as it is an education provider.
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  So we need to dig into those non-operational factors.
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  That's a crucial insight. So if core revenue was flat, what specific changes
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  were the biggest drivers behind this impressive financial reversal?
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  Let's break down those key factors. Okay.
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  One of the most impactful positive influences was a significant reduction in
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  the fair value loss on their investment properties.
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  This loss dropped by a substantial 61%, from $14.518 million in FY 2024 to just
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  $5.658 million in FY 2025.
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  This nearly $9 million improvement was primarily due to positive revaluations
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  of their large investment properties, particularly those tied to their university cities in China.
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  While some other properties in Thailand and Malaysia also saw fair value increases,
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  the main driver here was clearly their Chinese real estate portfolio.
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  So a healthier real estate valuation was a huge tailwind.
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  Beyond these asset revaluations, which can sometimes be a one-off accounting
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  boost, were there any sustained operational efficiencies or fundamental improvements
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  that truly bolstered their profitability this year. Absolutely.
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  Their finance costs, for example, decreased by a notable 18% for the full year.
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  They went from $20.293 million down to $16.640 million.
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  This was primarily a result of strategic repayments of borrowings by their Malaysian entities.
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  And additionally, lower borrowing rates for their Singapore-based assets,
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  thanks to a reduced store rate, contributed to this positive change.
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  It shows, well, proactive debt management and maybe a favorable interest rate
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  environment working in their favor.
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  Right. And for a company operating across so many borders, currency movements
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  are always a major factor.
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  How dramatically did foreign exchange impact their bottom line this past year?
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  Ah, this is where it gets really fascinating and frankly a bit complex.
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  The group reported a massive 269% increase in foreign exchange gain for the
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  full year, jumping from $13.831 million to an astonishing $51.056 million.
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  Now, how does that happen? Well, think of it like this. A stronger Singapore
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  dollar was a huge win for them because their biggest debts were in foreign currencies
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  like the Chinese renminbi and the U.S. dollar.
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  When your home currency gets stronger, it takes fewer of your dollars to pay
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  off those foreign debts, showing up as a massive gain.
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  That makes intuitive sense, cheaper to pay off foreign debt.
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  But the report also mentions an increase in foreign exchange loss.
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  How do we make sense of that seemingly contradictory picture?
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  You know, a massive gain and a loss. Yeah, it's a classic international business puzzle, isn't it?
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  And it's really about which side of the ledger a currency shift hits.
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  That same stronger Singapore dollar, while great for foreign debt repayment,
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  meant their assets held in renminbi were worth less when converted back into
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  Singapore dollars. That led to a loss.
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  In fact, foreign exchange losses actually increased by 40% for the full year,
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  reaching $26.916 million.
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  So the same currency movements had both a beneficial and a detrimental side,
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  depending on whether it was impacting their foreign currency debts or their
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  foreign currency investments.
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  It's a very nuanced picture of how interconnected global finance can be.
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  Okay. That clarifies the dual impact. So those were the big tailwinds.
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  What about the headwinds? What were the significant increased costs or challenges they faced?
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  Right. On the flip side, personnel expenses rose by 14% for the full year.
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  That was mainly due to an increase in staff head count and average salaries.
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  Other operating expenses also climbed by 10%, from $37.064 million up to $40.596 million.
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  This increase was driven by factors like losses on the disposal of some investment
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  properties in China, higher camp expenses due to increased participant numbers,
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  and an increase in provisions for doubtful debts.
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  These cost increases were only partially offset by a decrease in professional fees.
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  And we also saw a decrease in other operating income. What were the main reasons there? Correct.
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  Other operating income decreased by 17% for the full year.
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  This was largely due to less interest earned on matured fixed deposits and a
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  reversal of compensation from a terminated property acquisition in Mongolia.
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  However, this impact was partially cushioned by a positive $2.1 million from
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  forfeited deposits related to a canceled sale of shares in an associate.
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  So a smaller swing, but it still contributed to the overall picture.
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  Moving on to other significant financial
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  impacts, the currency translation difference also had a major effect.
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  Yes, a substantial $45.8 million loss for FY2025.
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  A big number. This was predominantly due to the Chinese renminbi weakening against the Singapore dollar.
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  When you consolidate operations and translate net asset values from China back
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  to Singapore dollars, a weaker endman decreases this kind of significant loss.
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  It directly impacts their total comprehensive loss, illustrating the real-world
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  financial consequences of operating across different currency zones.
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  We also see an impairment loss on one of their investments. Indeed.
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  A $3.6 million impairment loss on their investment in Axiom Properties Limited and associate.
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  This was recorded due to a decrease in its fair value, less cost of disposal
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  as of June 30, 2025, reflecting a write-down in the value of that specific asset.
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  Finally, income tax expense also jumped significantly. It really did.
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  Income tax expense for the full year surged by 154 percent, from $3.237 million
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  to $8.22 serial million.
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  This was largely due to an under-provision of income tax expenses on the disposal
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  of land in China by their Wanbo Institute, and the recognition of estimated
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  tax provisions across several subsidiaries.
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  The completion of those property sales brought about the recognition of income
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  tax and landed appreciation tax, partially offset by some reversals of deferred tax liabilities.
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  So we've thoroughly explored the profit and loss statement. Now let's pivot
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  and consider the group's overall financial health from the balance sheet and cash flow perspective.
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  Okay. So as of June 30, 2025, the group reported net current liabilities of
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  $85.8 million. dollars.
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  This means their short-term obligations exceeded their short-term assets,
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  essentially. They have more bills due soon than readily available cash.
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  It's the kind of number that typically makes investors sit up and take notice,
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  almost like a financial tightrope walk.
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  That's a significant shortfall, but the company isn't just ignoring it.
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  They've laid out a very clear plan with several mitigating factors to address
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  this, right? Absolutely. They highlight several crucial points.
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  First, they have $23.4 million in non-refundable course fees and rental service
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  fees received in advance, which will be recognized as revenue over time.
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  Okay, so future income. Exactly.
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  Second, they project positive cash flow generation from their ongoing operations.
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  Third, the group expresses confidence that their lenders will continue to provide
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  support and that they have the ability to refinance existing borrowings.
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  That's key. Lender support. It's crucial.
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  Fourth, they are actively working to realize certain assets through sales or
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  leases of properties, with the proposed sale of their 51 Merchant Road property currently ongoing.
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  Fifth, they recently announced a proposed issue of up to $10 million in unlisted,
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  non-convertible, five-year, 10.5% unsecured bonds, of which $2 million has already
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  been subscribed. Raising capital. Correct.
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  And finally, they emphasize their ability to tap funds from shareholders in
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  capital markets if needed. These are concrete, multi-pronged steps to address
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  their liquidity position.
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  So they have a clear, multifaceted strategy to manage that liability position.
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  What about their overall debt load? Did that change much? Total borrowings decreased,
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  actually, from $225.3 million in FY 2024 down to $208.7 million in FY 2025.
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  This is mainly due to $46.0 million in loan repayments, which is good.
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  Partially offset, though, by the issuance of $21.0 million in those non-convertible
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  bonds and $6.9 million in new bank borrowings.
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  Their net gearing ratio, however, saw a slight increase from 33% to 34%.
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  So leverage ticked up a tiny bit despite the lower total debt.
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  And their cash position, how healthy is that looking?
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  Their cash and cash equivalents stood at $16.9 million at the end of FY2025,
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  which is down from $29.4 million in FY2024. Hmm, quite a drop.
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  It is. But while the cash balance itself decreased, it's important to note that
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  they still generated $4.4 million in net cash from operating activities during
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  the year, which is a positive sign of their core business's ability to generate cash organically.
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  Okay, so what does this all mean for the future? Looking ahead,
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  what factors does Raffles Education Limited identify that might influence their
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  performance in the next reporting period and the next 12 months?
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  Right. This brings us to a crucial point about the external landscape for a
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  company like Raffles Education.
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  They acknowledge that economic and geopolitical uncertainties,
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  including things like tariffs and retaliatory tariffs, will continue to directly
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  influence their recruitment of foreign students.
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  This is a critical factor given their international educational footprint and
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  the global student market they operate in. That link between geopolitics and
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  student recruitment is critical.
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  Given their spread across Asia and Europe, how diversified are their student sources, I wonder?
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  And how much risk does that concentration in certain regions pose if international
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  relations sour? That's a very valid concern.
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  They also foresee a challenging global education landscape, with increasing
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  competition and potentially more restrictive policies in the countries where they operate.
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  This means they face headwinds not just from broad economic forces,
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  but also from evolving regulatory environments and intense localized competition
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  in the education sector itself.
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  And the broader financial market also plays a significant role in their future,
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  particularly regarding borrowing costs, as you mentioned. Precisely.
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  The prevailing interest rate environment will continue to influence their cost
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  of borrowing, which, as we discussed, already impacted their finance costs positively this year.
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  Any shifts there could reverse those hard-won gains. And increasing currency
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  volatility will continue to affect the group, especially given their international
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  operations and the significant foreign exchange impacts, both positive and negative, we just detailed.
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  Managing this volatility will be absolutely key. So given these external challenges,
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  what's their internal strategic response?
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  How are they playing to navigate these choppy waters?
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  The group's stated response is to streamline and restructure its operations
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  for better cost management.
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  This proactive, inward-looking approach seems essential in such a dynamic and
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  challenging external environment.
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  They're focusing on what they
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  can directly control internally to maintain efficiency and profitability.
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  And finally, for shareholders, what was the decision on dividends this year? Right.
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  No dividend was declared or recommended for the 12 months ended 30 June 2025.
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  This decision was specifically made to preserve the group's working capital,
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  which aligns directly with their stated efforts to manage that net current liabilities
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  position and strengthen their overall financial resilience in a challenging market. Makes sense.
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  So what does this all mean when we pull it together?
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  Raffles Education Limited truly experienced a remarkable financial turnaround
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  in FY 2025, swinging from a significant loss to a profit.
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  This was largely driven by a substantial reduction in fair value losses on their
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  investment properties, lower finance costs due to strategic debt management
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  and favorable rates, and a massive foreign exchange gained from a strengthening
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  Singapore dollar impacting their foreign liabilities.
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  However, this impressive positive shift occurred against a backdrop of increasing
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  personnel and operating expenses, a complex and sometimes contradictory foreign
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  exchange picture, and those significant currency translation losses.
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  The company is actively and transparently addressing a net current liabilities
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  position with multiple strategic measures, indicating, I think,
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  a clear awareness of their challenges and a well-defined plan to mitigate them.
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  And as they look to the future, they face a challenging external environment
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  marked by geopolitical uncertainty directly affecting student recruitment,
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  intense competition in the education sector, and volatile interest rates in currencies.
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  Their internal strategy remains sharply focused on operational restructuring
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  and rigorous cost control to navigate these persistent headwinds.
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  Which begs an important question.
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  Considering Raffles Education's unique reliance on diverse income streams,
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  from education to real estate and its broad global footprint,
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  how might the intricate interplay of geopolitics, evolving local education policies,
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  and volatile global financial markets fundamentally redefine what value means
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  for such an entity in the coming years?
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  Is it about student numbers, property holdings, or maybe that agile financial
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  management that truly drives their future?
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  A truly thought-provoking question for you to mull over. What stood out to you in this deep dive?
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  We hope this has given you a clearer, more insightful understanding of Raffles
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  Education Limited's complex financial journey.
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  That's all for this deep dive. Join us next time as we unpack another stack
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  of sources and extract the essential knowledge for you.
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  You.