What’s new: China’s largest private tutoring provider sank $907 million into the red in the six months through November after the government sprung sweeping changes on the after-school education industry.
To comply with new rules, New Oriental Education & Technology Group Inc. has ceased all of its tutoring services related to K-9 academics, which has had a “substantial adverse impact” on earnings, according to its Tuesday filing to the Hong Kong bourse.
The Hong Kong and U.S.-listed company turned a net profit of $178 million in the same period the year before.
New Oriental also said it “incurred considerable costs and expenses” due to the termination of lease agreements and employee layoffs. During the six-month period, its cash reserves eroded by $1.07 billion due to operating activities.
As of Nov. 30, New Oriental had $1.03 billion in cash and cash equivalents, down 57% from the last day of May, while its total liabilities also dropped 33% to $3.43 billion.
Its Hong Kong shares jumped 6.1% on Wednesday morning to HK$11.82 ($1.51), which represented a roughly 92% slump from February 2021.
Background: New Oriental founder Yu Minhong said earlier this year that the company laid off 60,000 staff last year and had to pay nearly $3.13 billion in severance packages, fees for early lease termination, and returned tuition payments.
The new private tutoring rules rolled out last year mandated that companies that teach curriculum subjects must become nonprofit, banned the approval of new private education firms that teach primary and secondary school subjects, barred existing companies from selling shares, and restricted the flow of foreign capital into the sector.
Contact reporter Manyun Zou (manyunzou@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)
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