Hailiang Education Group Inc. Reports Fiscal Year 2019 Financial Results

HANGZHOU,China,Sept. 24,2019 -- Hailiang Education Group Inc. (Nasdaq:HLG) ("Hailiang Education" or the "Company" or "we" or "us"),an education and management service provider of primary,middle,and high schools in the PRC,announced its financial results for the fiscal year endedJune 30,2019.

"In fiscal year 2019,we expedited our asset-light strategy persistently and focused on enhancing our educational service offerings to our students. By sponsoring additional schools and providing education and management services to a variety of public and private schools,Hailiang Education has extended its school network from 23 schools in fiscal year 2018 to 36 schools in fiscal year 2019. As of June 30,2019,we sponsored 9 affiliated schools and provided education and management services to 27 managed schools,and the aggregate number of students enrolled in both our affiliated and managed schools reached 61,109 students. In addition,our international programs continued to grow rapidly,with an increase of enrollment from 3,860 students as of June 30,2018 to 4,553 students as of June 30," said Mr.Ming Wang,Chairman and Chief Executive Officer of Hailiang Education. "We achieved record revenues and net profit for fiscal year 2019,which represented a year-over-year increase of 28.2% and 36.8%,respectively. Our excellent financial performance was mainly attributed to the increase in the number of schools and students,the increase in tuition fees and diversified ancillary education service offerings. We look forward to implementing our hybrid development strategy,a combination of asset-light mode and strategic acquisitions,to expand our affiliated and managed school network among major metropolitan areas,improving the quality of our faculty,attracting more talented students,and diversifying our educational service offerings in the next fiscal year. We strive to provide excellent K-12 education services to our students."

For the year ended June 30

(RMB millions,except per share data)

2019

2018

% Change

Revenue

1,499.0

1,169.3

28.2%

Basic educational program

805.7

764.2

5.4%

International program

411.3

329.8

24.7%

Educational training services

144.2

36.4

296.2%

Study trip services

81.5

13.8

490.6%

Education and management services

40.9

19.0

115.3%

Others

15.4

6.1

152.5%

Gross Profit

472.1

364.7

29.4%

Gross Margin

31.5%

31.2%

0.3pp*

Operating Profits

399.6

280.5

42.5%

Operating Margin

26.7%

24.0%

2.7pp*

Net Profit

315.8

230.9

36.8%

EPS

0.71

0.54

31.5%

*Notes: pp represents percentage points

Fiscal Year 2019 Financial Highlights

Revenue wasRMB1,499.0 million(US$218.4 million),an increase of 28.2% fromRMB1,169.3 millionin fiscal year 2018.

Gross profit wasRMB472.1 million(US$68.8 million),an increase of 29.4% fromRMB364.7 millionin fiscal year 2018.

Gross margin was 31.5% compared with 31.2% in the same period last year.

Net profit wasRMB315.8 million(US$46.0 million),an increase of 36.8% fromRMB230.9 millionin fiscal year 2018.

Basic and diluted earnings per share wereRMB0.71(US$0.10)compared withRMB0.54in fiscal year 2018.

Fiscal Year 2019 Operational Highlights

As of June 30,the scale of the Company's school network was expanded to 36 schools,9 of which were affiliated schools that we sponsored and 27 of which were managed schools that we provided education and management services. The aggregate number of enrollments in both our affiliated and managed schools were 61,109 students.

As of June 30,the total enrollment of students in our affiliated schools which we sponsored was 22,819.

As of June 30,the number of students enrolled in the basic educational programs of our affiliated schools were 18,266,and the number of students enrolled in the international programs of our affiliated schools was 4,553.

Fiscal Year 2019 Financial Results

Revenue

Revenue increased by 28.2% toRMB1,499.0 million(US$218.4 million) in fiscal year 2019,fromRMB1,169.3 millionin fiscal year 2018. It was mainly driven by the increase in revenue from both our basic educational program and international program,as well as our educational training services,study trip services,education and management services during the same periods.

Revenue from the basic educational programs increased by RMB41.5 million (US$6.0 million),or 5.4% toRMB805.7 million(US$117.4 million) in fiscal year 2019,fromRMB764.2 millionin fiscal year 2018. This was primarily driven by an increase in the average tuition charged in basic educational programs during the same periods.

Revenue from the international programs increased by RMB81.5 million (US$11.9 million),or 24.7%,toRMB411.3 million(US$59.9 million) in fiscal year 2019,fromRMB329.8 millionin fiscal year 2018. This was mainly due to an increase in the number of students enrolled in our international programs as well as an increase in the average tuition charged in our international programs.

Revenue from educational training services increased by RMB107.8 million (US$15.7 million),or 296.2%,to RMB144.2 million (US$21.0 million) in fiscal year 2019,fromRMB36.4 millionin fiscal year 2018. This was mainly derived from the increase in student attendances in educational training programs resulting from the expansion of our affiliated and managed schools.

Revenue from study trip services increased by RMB67.7 million (US$9.9 million),or 490.6%,to RMB81.5 million (US$11.9 million) in fiscal year 2019,fromRMB13.8 millionin fiscal year 2018. This was mainly derived from the increase in the number of students participate in study trips.

Revenue from education and management services increased by RMB21.9 million (US$3.2 million),or 115.3%,to RMB40.9 million (US$6.0 million) in fiscal year 2019,fromRMB19.0 millionin fiscal year 2018. This was mainly due to the increase of number of our managed schools during the same periods.

Other revenue mainly represents revenue derived from overseas study consulting services and hotel management services. Revenue from others wasRMB15.4 million(US$2.2 million) in fiscal year 2019.

Cost of Revenue

Cost of revenue increased byRMB222.2 million(US$32.4 million) or 27.6%,toRMB1,026.9 million(US$149.6 million) in fiscal year 2019,fromRMB804.7 millionin fiscal year 2018. The increase was primarily due to an increase in labor costs resulting from an increase in the total number of teachers and educational staffs and a general increase in the compensation levels as well as the increase in student related cost and transportation cost.

Gross Profit and Gross Margin

Gross profit increased by 29.4% toRMB472.1 million (US$68.8 million) in fiscal year 2019,fromRMB364.7 millionin fiscal year 2018.

Gross margin increased by 0.3 percentage points to 31.5% in fiscal year 2019,compared with 31.2% in fiscal year 2018.

Operating Expenses

Operating expenses increased byRMB9.8 million(US$1.4 million) or 11.1%,toRMB97.7 million (US$14.2 million) in fiscal year 2019,fromRMB87.9 millionin fiscal year 2018.

Selling expenses slightly increased byRMB0.5 million(US$0.07 million) or 2.0%,toRMB25.0 million (US$3.6 million) in fiscal year 2019,fromRMB24.5 millionin fiscal year 2018.

Administrative expenses increased byRMB9.3 million(US$1.4 million) or 14.7%,toRMB72.7 million (US$10.6 million) in fiscal year 2019fromRMB63.4 millionin fiscal year 2018. This increase was primarily due to the increase in labor cost resulting from the increase in the compensation level of our office and administrative staff.

Other Income,net

Other income consists of government grants and other miscellaneous income. Other income increased byRMB21.4 million (US$3.1 million),or 578.4%,toRMB25.1 million(US$3.7 million) in fiscal year 2019,fromRMB3.7 millionin fiscal year 2018,primarily due to the increase of government grants in fiscal year 2019.

Net Finance Income

Net finance income increased byRMB13.5 million(US$2.0 million),or 118.4%,toRMB24.9 million (US$3.6 million) in fiscal year 2019,fromRMB11.4 millionin fiscal year 2018,which was primarily due to the increase in interest income caused by more funds deposited with a related party in the 2019 fiscal year compared to the 2018 fiscal year.

Income Tax Expense

Income tax expense increased by RMB42.4 million (US$6.2 million) or 64.0%,to RMB108.7 million (US$15.8 million) in fiscal year 2019,from RMB66.3 million in fiscal year 2018. The increase was mainly driven by the growth of taxable profits.

Net Profit

Net profit increased by 36.8% toRMB315.8 million (US$46.0 million) in fiscal year 2019,fromRMB230.9 millionin fiscal year 2018.

Basic and Diluted Earnings per Share

Basic and diluted earnings per share wereRMB0.71(US$0.10)in fiscal year 2019,compared with basic and diluted earnings per share ofRMB0.54in fiscal year 2018.

Cash Flow

Net cash provided by operating activities wasRMB690.3 million(US$100.6 million) in fiscal year 2019,compared withRMB587.9 millionin fiscal year 2018. Net cash used in investing activities wasRMB1,234.2 million(US$179.8 million) in fiscal year 2019,compared with net cash provided by investing activities ofRMB131.1 millionin fiscal year 2018. Net cash used in financing activities wasRMB7.3 million(US$1.1 million) in fiscal year 2019,compared withnet cash provided by financing activities of RMB18.6 millionin fiscal year 2018.

Balance Sheet

As ofJune 30,the Company had cash and cash equivalents ofRMB260.7 million(US$38.0 million),compared withRMB812.6 millionas ofJune 30,2018. As ofJune 30,the Company had term deposits held at a related party finance entity ofRMB1,387.1 million(US$202.1 million),compared withRMB204.0 millionas ofJune 30,2018.

Exchange Rate

This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for the convenience of the reader. Unless otherwise noted,the translation of RMB into US$ has been made atRMB6.8650 toUS$1.00,the noon buying rate in effect onJune 28,as set forth in the H.10 Statistical Release of the Federal Reserve Board.

The Company will host its fiscal year 2019 financial results conference call at9:00 am Eastern Time(6:00 am Pacific Time/21:00 pmBeijing Time) onSeptember 24,2019. To attend the call,please use the information below for either dial-in access or webcast access. When prompted on dial-in,ask for "Hailiang Education Group/HLG".

Conference Call

Date:

September 24,2019

Time:

9:00 am ET,U.S.

International Toll Free:

United States: +1 888-346-8982

Mainland China: +86 400-120-1203

Hong Kong: +852 800-905-945

International:

International: +1 412-902-4272

Conference ID:

Hailiang Education Group

Please dial in at least 15 minutes before the commencement of the call to ensure timely participation. For those unable to participate,an audio replay of the conference call will be available from approximately one hour after the end of the live call untilOctober 1,2019. The dial-in for the replay is +1-877-344-7529 within the United States or +1-412-317-0088 internationally. The replay access code is No.10135125.

A live webcast and archive of the conference call will be available athttp://ir.hailiangedu.com.

About Hailiang Education Group Inc.

Hailiang Education (Nasdaq: HLG) is one of the largest primary,and high school educational service providers inChina. The Company primarily focuses on providing distinguished,specialized,and internationalized education. Hailiang Education is dedicated to providing students with high-quality primary,and high school,and international educational services and highly valuing the quality of students' life,study,and development. Hailiang Education adapts its education services based upon its students' individual aptitudes. Hailiang Education is devoted to improving its students' academic capabilities,cultural accomplishments,and international perspectives. Hailiang Education operates multilingual programs including Chinese,English,Spanish,Japanese,Korean,and French. In addition,Hailiang Education has launched various diversified high-quality courses,such as Mathematical Olympiad courses,A-level courses,Australia Victorian Certificate of Education (VCE) courses,IELTS courses,TOEFL courses,as well as SAT courses. The Company has also formed extensive cooperative network with more than 200 educational institutions and universities globally. Hailiang Education is committed to making great effort to provide its students with greater opportunities to enroll in well-known domestic and international universities to further their education. For more information,please visithttp://ir.hailiangedu.com.

Forward-Looking Statement

This press release contains information about Hailiang Education's view of its future expectations,plans,and prospects that constitute forward-looking statements. These forward-looking statements are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts in this announcement are forward-looking statements,including but not limited to the following: general economic conditions inChina,competition in the education industry inChina,the expected growth of the Chinese private education market,Chinese governmental policies relating to private educational services and providers of such services,health epidemics and other outbreaks inChina,the Company's business plans,the Company's future business development,results of operations,and financial condition,expected changes in the Company's revenue and certain cost or expense items,its ability to raise additional funding,its ability to maintain and grow its business,variability of operating results,its ability to maintain and enhance its brand,its development and introduction of new products and services,the number of students entrusted by schools,the successful integration of acquired companies,technologies and assets into its portfolio of software and services,marketing and other business development initiatives,dependence on key personnel,the ability to attract,hire,and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients,and its ability to protect its intellectual property,the outcome of ongoing,or any future,litigation or arbitration,including those relating to copyright and other intellectual property rights,and other risks detailed in the Company's filings with the U.S. Securities and Exchange Commission (the "SEC"). Hailiang Education may also make written or oral forward-looking statements in its periodic reports to the SEC,in its annual report to shareholders,in press releases and other written materials,and in oral statements made by its officers,directors,or employees to third parties. Statements that are not historical facts,including statements about Hailiang Education's beliefs and expectations,are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties,whether known or unknown,and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition,business strategy,and financial needs. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "will make," "will be," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "endeavor to," "is/are likely to," or other similar expressions. Further information regarding these and other risks is included in our annual report on Form 20-F and other filings with the SEC. All information provided in this press release is as of the date of this press release,and Hailiang Education undertakes no obligation to update any forward-looking statements,except as may be required under applicable law.

Contacts:

Mr. Litao Qiu

Board Secretary

Hailiang Education Group Inc.

Phone: +86-571-5812-1974

Email:ir@hailiangeducation.com

Ms.Tina Xiao

Ascent Investor Relations LLC

Phone: +1-917-609-0333

Email:tina.xiao@ascent-ir.com

HAILIANG EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEARS ENDED JUNE30,2017,2018 AND 2019

(Amounts in thousands except per share data)

2017

RMB

2018

RMB

2019

RMB

Revenue

853,295

1,169,348

1,499,025

Cost of revenue

(648,482)

(804,674)

(1,026,903)

Gross profit

204,813

364,674

472,122

Other income,net

6,325

3,689

25,100

Selling expenses

(21,902)

(24,539)

(25,003)

Administrative expenses

(28,385)

(63,374)

(72,661)

Operating profit

160,851

280,450

399,558

Gain on disposal of affiliated entities

-

5,349

-

Net finance income

6,892

11,391

24,935

Profit before tax

167,743

297,190

424,493

Income tax expenses

-

(66,288)

(108,713)

Net Profit

167,743

230,902

315,780

Profit attributable to:

Net profit attributable to non-controlling interests

—

8,314

22,359

Net profit attributable to the Company's shareholders

167,743

222,588

293,421

167,780

Earnings per share

Basic and diluted earnings per share

0.41

0.54

0.71

Net Profit

167,780

Other comprehensive income/(loss),net of nil income tax

2,202

(2,542)

3,310

Total comprehensive income

169,945

228,360

319,090

Total comprehensive income attributable to:

Total comprehensive income attributable to non-controlling

interests

-

8,359

Total comprehensive income attributable to the Company's

shareholders

169,945

220,046

296,731

169,090

HAILIANG EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE30,2018 AND 2019

(Amounts in thousands)

2018

RMB

2019

RMB

Assets

Property and equipment,net

679,081

620,623

Intangible assets and goodwill,net

78,747

99,525

Contract costs

-

9,899

Prepayments to third party suppliers

92

94

Non-current assets

757,920

730,141

Other receivables due from related parties

95,128

91,674

Other current assets

15,182

31,706

Term deposits held at a related party finance entity

204,000

1,387,094

Restricted bank deposits

-

1,613

Cash and cash equivalents

812,620

260,684

Current assets

1,126,930

1,772,771

Total assets

1,884,850

2,502,912

Equity

Share capital

268

268

Share premium

134,583

134,583

Contributed capital

235,895

251,034

Reserves

312,667

360,914

Retained earnings

638,246

905,009

Total Hailiang Education Group Inc. shareholders' equity

1,321,659

1,651,808

Non-controlling interests

13,154

37,439

Total equity

1,334,813

1,689,247

Liabilities

Contract liabilities

-

2,579

Deferred tax liabilities

-

4,691

Non-current liabilities

-

7,270

Trade and other payables due to third parties

141,504

218,122

Other payables due to related parties

138,215

134,745

Contract liabilities

-

398,951

Deferred revenue

212,969

-

Income tax payable

57,349

54,577

Current liabilities

550,037

806,395

Total liabilities

550,037

813,665

Commitments and contingencies

-

-

Total equity and liabilities

1,912

HAILIANG EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE30,2018 AND 2019

(Amounts in thousands)

2017

RMB

2018

RMB

2019

RMB

Cash flows from operating activities

Net profit for the year

167,743

230,902

315,780

Adjustments for:

Depreciation

110,485

113,128

132,026

Gain on disposal of affiliated entities

-

(5,349)

-

(Gain)/loss on the disposal of property and equipment

(41)

371

342

Amortization of intangible assets

662

446

1,494

Net foreign exchange (gain)/loss

(282)

324

(465)

Interest income

(6,709)

(11,715)

(24,470)

Income tax expenses

-

66,288

108,713

271,858

394,395

533,420

Changes in operating assets and liabilities and other,net of

effect of acquisitions and disposals:

Other current assets and contract costs

(530)

(13,681)

(8,127)

Prepayment to third party suppliers

2,235

2,157

-

Trade and other payables due to third parties

23,313

30,416

94,885

Other payables due to related parties

(27,636)

18,000

(5,275)

Deferred revenue and contract liabilities

17,713

165,583

186,731

Cash generated from operating activities

286,953

596,870

801,634

Income tax paid

-

(8,939)

(111,317)

Net cash generated from operating activities

286,953

587,931

690,317

Cash flows from investing activities

Interest received

5,873

10,677

20,592

Proceeds from sale of property and equipment

64

1,015

-

Purchase of property and equipment

(108,959)

(89,369)

(80,133)

Purchase of intangible assets

-

-

(1,743)

Restricted bank deposits

-

-

(1,613)

Term deposits placed with a related party finance entity

(1,953,600)

(204,000)

(4,709,697)

Maturity of term deposits placed with a related party finance

entity

1,552,600

401,000

3,526,603

A loan made to a related party

(98,229)

-

-

Repayment of a loan from a related party

-

-

12,412

Acquisition of subsidiaries or an affiliated entity,net of cash

acquired

-

(6,160)

(627)

Net proceeds from disposal of affiliated entities,net of cash

disposed

-

17,982

-

Net cash (used in)/generated from investing activities

(602,251)

131,145

(1,234,206)

Cash flows from financing activities

Loans borrowed from related parties

99,603

7,609

-

Capital contributions

-

11,000

139

Dividends paid to a non-controlling shareholder of

subsidiaries

-

-

(7,482)

Net cash generated from/(used in) financing activities

99,603

18,609

(7,343)

Net (decrease)/increase in cash and cash equivalents

(215,695)

737,685

(551,232)

Cash and cash equivalents at beginning of the year

291,011

77,801

812,620

Effect of movements in exchange rates on cash held

2,485

(2,866)

(704)

Cash and cash equivalents at the end of the year

77,801

812,620

260,684

Non-cash transaction:

Contributed capital through waived liability

10,000

-

-

Deemed capital contribution for awards paid to the Group's

teachers by the controlling shareholder

-

-

15,000

Net settlement of a loan made to a related party with a loan

borrowed from a related party

-

7,609

-

Payables for purchase of property and equipment

28,131

31,728

20,501

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