Tree House Education & Accessories Ltd Management Discussions.

Overview of Operations of Our Company

The company has gone through challenging times in the past due to various circumstances. Your company has been able to withstand the difficult times and has been able to steer through the rough terrain.

Your company has been successful to convert its owned play school centers to franchise centers and exercise better control over finances of the company. The company earned Royalty Income and Sale of Kits to franchisee. Royalty income stood at Rs. 180.88 lakhs during the year as compared to Rs. 92.64 lakhs during the previous year. Similarly sale of kits was at Rs. 233.45 lakhs during the year as compared to Rs. 125.65 lakhs, during the previous year. The company expects to maintain the same trend in the coming year barring unforeseen circumstances.

Your Company also provides a wide variety of educational services to K-12 schools which include designing, curriculum and providing teaching aids, supplying methods for imparting education, organization extra curricular activities for students and teacher training. During the year the company commenced its services to K-12 schools which were discontinued due to lack of man power. The company is now providing its services to K-12 schools. The company expects to widen its scope of services and number of schools in near future.

Companys Strengths:

The Brand is owned by the Company and is earning Royalty income for the company.

The company is now focusing on developing new franchises for increasing its reach and become profitable.

Financial Highlights for 2017-18.

Particulars Year Ended 31.03.2018 Year Ended 31.03.2017
Revenue 6.99 59.27
Operational EBIDTA (0.86) (16.64)
Profit (loss) before tax (107.12) (165.26)
Profit (Loss) after taxes (97.02) (162.31)
Earning Per Share (22.93) (38.51)

Internal Control system and Risk Management:

The Company has adequate internal controls and processes in place with respect to its financial statements which provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. The processes and controls are reviewed periodically. The Company has a mechanism of testing the controls are regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information. During the year such controls were tested and no reportable material weakness in the design or operation was observed.

Opportunities & Threats

Opportunities:

•Franchisee Business model is vast.

•Capex will be NIL since Franchise will Invest.

•Risk to Centre Performance is on franchisee.

•Reaching tier III & IV towns & cities easy.

•Large section of educated women population available as resource pool can be tapped.

Threats:

•Competitors may reduce franchisee & royalty fees putting pricing pressure.

•Brand risk due to bad performance of franchisee owners.

•Unskilled staff at franchisee centres.

•Non payment of royalty and shifting of brand loyalty.

Industry Structure and developments.

Industry Overview

India – One of the largest education markets in the world.

The Indian education sector is one of the largest education markets (in terms of the potential number of students) in the world.

Key Market Segments

Pre-school Market

While science and child development experts have long proven that the first 6 years of a human beings life are the most critical, in India this is still a nascent concept, there is need to spread higher awareness of importance of early childhood education.

K-12 Market

K-12 schools form the core and largest segment of the Indian education system. India has one of the worlds largest networks of schools. Still, the country needs new schools to meet the demand of quality K-12 education.

Supplemental Education

While the number of schools in India makes for impressive reading, the quality of education imparted in these schools leaves a lot to be desired. There have been multiple reports in recent times that point to the low learning levels of students in Indian schools. The challenge here however, is not to repeat what happens in school but to create a more customized and hands on learning environment.

Segment -wise or product -wise performance.

The activities of the Company comprise of only one business segment i.e. "providing education and related services including leasing of education infrastructure". The company operates in only one segment.