tree house education accessories ltd Management discussions


Overview of Operations of Our Company:

Due to ongoing Pandamic, the company could not conduct physical classes throughout the year. However, the online classes were running smoothly and improved during the academic year compared to the previous academic year. The overall effect of the pandemic was mainly on the franchisee business due to closure of physical education since March 2020.

Companys total income from pre-school activity and other related business during the financial year was Rs.599lakhs which consist of the following:

Rs. in Lakhs

Particulars Early Child Education School Management Services Rental Income Sale of Educational Kit Misc Income Total
Gross Income 234.69 275.00 36.45 50.56 3.20 599.90
Operating Exps (Apportioned) 56.10 65.72 0.00 12.08 0.00 133.90
Operating Profit 178.59 209.28 36.45 38.48 3.20 466.00
Other Exps (Apportioned) 250.84 293.93 0.00 0.00 0.00 544.77
EBIDTA -72.25 -84.65 36.45 38.48 3.20 -78.77

Companys Strengths:

The Tree House brand is owned by the Company and is earning Royalty income from Franchises. Also the strong online platform created by the company in 2020 has resulted in gaining students for online preschool education and other activities like online dance class, online summer activities, online Art & Craft class etc.

During the year the company has settled the loans with ICICI bank Limited and with Kotak Bank Limited. The Company plans to become debt free by March 2023.

Impact of Covid 19:

Due to ongoing Covid-19 pandemic, the online education has become a new norm. The Company has developed its online platform for online education for which the students from all over India has responded very well.

The franchise centres at metropolitan and Tier I cities have also received good response for the online education due to the closure of physical schools. The company is looking to reach other cities and to increase its pan India presence in online education. However during the end of the year, there were good response received for physical classes, which will be reflected in the next academic year.

In addition some of the major areas where the companys business has effected due to CoVID-19 are as follows:-

1) Cash flow crunch.

2) Closure of own and Franchise centers.

3) Reduction in collection of royalty payments.

4) Decrease in number of students.

5) Reduction in fees structure due to closure of physical centers.

6) Sale/Write off of Assets lying in the warehouse/centres due to closure of centres.

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 on 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:

Due to the Covid19 pandemic, the company has started online education in following areas which has resulted in :

1. Increase in direct admission to preschool through Online Education, which has resulted in increase in fees income.

2. Online Dance Activities.

3. Online Summer Camps.

4. Online Art and Craft.

5. Online Teacher Training etc.

Threats:

Company sees Covid-19 as the major threat to the business in the following areas:

1. Reduction in franchisee renewal & royalty fees due to closure of franchise centres

2. Brand name is in risk due to bad performance of franchisee owners

3. Unskilled staff at franchisee centres

4. Non payment of royalty and shifting of brand loyalty.

5. Discontinuation of Students in between the academic period results in refund of fees.

6. Non renewal of students for the next academic year

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, 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.

(i) details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore, including:

Changes in Key Financial Ratios:

Particulars 2021-22 2020-21 Change Remarks
(i) Debtors Turnover 0.24 0.27 (11.40)% Increase in Debtors due to pending collection.
(ii) Inventory Turnover 13.16 7.77 69.35% Reduction in Old Inventory due to sale through tender.
(iii) Interest Coverage Ratio (3.84) (4.79) 19.84% Interest reduced due to repayment of debts during the year.
(iv) Current Ratio 1.10 0.56 96.23% Reduction in Current liabilities due to payment to creditors.
(v) Debt Equity Ratio 0.12 0.17 (31.52)% Reduction due to payment of liabilities and debts.
(vi) Operating Profit Margin (%) 77.68 85.57 (9.22)% Reduction in Margin due to online education.
(vii) Net Profit Margin (%) (147.94) (714.93) 79.31 % Extra ordinary income due to OTS of loan with ICICI bank has improved Net profit ratio.
(viii) Return on Net Worth (%) (11.84) (15.62) 24.23% Improved profit due to OTS of loan with ICICI bank.
For Tree House Education & Accessories Limited
Sd/- Sd/-
Jugal Shah Deepak Valecha
Director Director
DIN: 08334114 DIN:07736480