CHINA EDU GROUP (00839) issues profit warning, expecting annual net profit to decrease by approximately 420-590 million yuan compared to the previous year.

China Edu Group (00839) announced that the group is expected to achieve a net profit of approximately RMB 4.20 billion to RMB 5.90 billion for the fiscal year ending on August 31, 2024, compared to a net profit of approximately RMB 15.41 billion for the fiscal year ending on August 31, 2023. The decrease in expected net profit is mainly attributed to the impairment losses that may occur on the goodwill and intangible assets related to certain cash generating units (CGUs) in Sichuan Province and Shaanxi Province of the People's Republic of China. This adjustment is based on the expected decrease in cash flows of these CGUs to reflect the current market conditions in the respective regions. Additionally, potential policy changes in Australia regarding international students have affected the business prospects of one of the CGUs in Australia, leading to possible impairment of goodwill. Preliminary assessment shows that a one-time, non-cash impairment loss (net of deferred tax) of approximately RMB 16.80 billion to RMB 17.50 billion needs to be recognized for the fiscal year 2024. This impairment loss (net of deferred tax) does not exceed 5% of the total assets of the group. As this impairment loss is non-cash in nature, it will not affect the group's operating profit or cash flow.