TreeHouse Scores An Ace In Q4FY13

Education service provider Tree House Education and Accessories (TreeHouse) has posted a healthy Q4FY13 financial performance on YoY basis. It saw good growth of 33% in its operating income, which came in at Rs 29.4 crore as against Rs 22.14 crore in the corresponding period in FY12. The company’s net income went up due to an increase in the number of students.

TreeHouse opened 30 new pre-schools in Q4, which has lead to an increase its total number of centres to 379. At present, it runs a total of 300 self-operated pre-schools, with a presence in 43 cities across India. The company has launched new pre-schools in cities such as Lucknow, Gandhinagar, Palghar, Nasik and Daman. In addition to its self-operated pre-schools, TreeHouse also provides school management services to 24 K-12 schools in 3 states in the country. Its Other Income also showed a growth of Rs 41 lakh to touch Rs 1.67 crore in Q4FY13.

On account of the higher number of pre-schools operated, the company's operating expenses in Q4FY13 increased by 35% on a YoY basis. The major rise in total expenses is due to the increase in other expenses like administrative costs, promotional expenses, rental expenses, etc. The other expenses went up by Rs 2.2 crore from just Rs 1.88 crore in Q4FY12. The operating cost increased by 22% to Rs 7.74 crore. Further, the increase in staff members by 112 in Q4 to a total of 1641, has lead to the employee costs growing by 12.6% to Rs 3.39 crore.

Inspite of the higher overall expenses in the quarter, the company’s EBITDA grew by 30% to Rs 15.86 crore YoY. However, the EBITDA margins were hit and came in at 51.05%, down by 92 basis points.

Further, as finance expenses declined by 41% in Q4, its bottomline registered good growth of 45% at Rs 7.34 crore, up from Rs 5.06 crore in Q4FY12. Interestingly, its net margins showed a growth of 212 basis points, and stood at 24.97% in the elapsed quarter.

The management has also announced a dividend of Rs 1.25 per share to its shareholders, with its quarterly results announcement.

As a result of its healthy performance in Q4FY13, the share price of TreeHouse is up by 4% on May 28 from the previous day’s closing price. Its ratio of self-operated pre-schools to its total pre-schools stood at 79.15%, which is good for the company. It has also been reported that admissions for the year 2013-2014 have indicated a healthy increase in the number of students. Investors can look to enter this counter for a long-term horizon.