New Oriental's first loss in four years: English training farewell to savage growth

New Oriental into "four years first loss", expansion too fast? Seasonal factors? SEC investigation? Farewell to savage Growth, new Oriental How to go next? Source: Chao Zhiqiang, a new film "China Partner", directed by a well-known director Chan, is expected to be released officially on April 16. This inspirational movie, made by a real person, tells the story of three people who started their English training school in the 80 's. Reflected in reality, the character archetype of the script is the new Oriental Education Technology Group (hereinafter referred to as the new Oriental) and its founder, Yu. The new Oriental, which started in 1993, will celebrate its 20 birthday on November 16, but the first "birthday gift" from New Oriental is the company's "first loss in four years" – its quarterly report for the second quarter ending November 30, 2012 showed a net loss of 15.8 million dollars. Although in the past few years, due to the financial crisis and the subsequent impact of real estate regulation and deepening, many industries into a downturn, but the English language training industry has maintained a strong growth posture. Data show that 2012 China's foreign language training industry output value of more than 90 billion yuan, and 2009, this figure is only 20 billion yuan up and down. "New Oriental losses, exposing some of its management problems, at the same time, the entire English training industry this year may be from the brutal expansion to the need for normative management of the trend." In an interview with the Daily Economic news reporter, Li, a U.S. stock analyst who has long been concerned about the education industry, said. Expansion too fast: 238 Learning Centers opened in 4 quarters in late February some ordinary Monday morning, the new oriental Guangzhou Haizhu District Village, the staff are busy, occasionally students parents come to consult. In the reception room, the reporter saw the table is full of various leaflets information, about 20 kinds, many students have to test the needs of "tailored." "We're losing money because we've been expanding too fast." A staff member explained to reporters that some areas have closed the teaching center, but Guangzhou has not heard similar news. The information she provided to reporters shows that new Oriental has 32 branches in 7 boroughs in Guangzhou. Earlier, the new Oriental confessed that it had made a mistake-too optimistic about income growth and too fast to expand. In the face of the reality of quarterly losses, New Oriental president and CFO Shedong said that the new Oriental will close 15~25 Teaching Center, 4 months will lay off 1000~1500 name. The average severance cost is $6000 ~10000 USD/person. "New Oriental losses, unsurprisingly. Now employees ' wages and social security are growing, rent also in accordance with the speed of 8%~10% every year, English training has the world and the new channel in the Chase, primary and secondary training have learned and think of institutions, studying in the market of our institutions in order to occupy the market, had to reduce intermediary fees, but also to improve the quality, although the new Oriental study market has But profits may not grow, not optimistic about the future development of the new Oriental. "360 Education Group chairman Rocheng through the microblog evaluation way. However, the new Oriental officialThe response is that the "external" impact on the loss is far greater than the internal. Because the second quarter (September-November) was originally the new Oriental "small season", and winter vacation, summer vacation two "big season" compared to the calendar year "small quarter" profit is less. Li that the new Oriental is indeed because of the rapid expansion of the loss, not only the new Oriental, education since the listing, but also because of the expansion of the cause of many quarterly losses, "The new Oriental losses, exposing some of its management problems." "According to Li, because the English training institutions are mostly prepayment mode, in the past the industry's cash flow is very good, resulting in rapid expansion." New Oriental official website data show, as of May 2012, it has set up in 49 cities nationwide 55 schools, 7 industrial institutions, 32 bookstores and 600 learning centers, the cumulative training of nearly 13 million trainees. But "only in the past 4 quarters, the new Oriental opened 238 learning centers." "In recent quarters, the number of schools in the new Oriental Quarter has increased by more than 40% per cent, which is terrifying." "Li to reporters," The new Oriental interior is the direct assessment of local principals, the principal most direct approach is to open a new branch. Before the new Oriental, the Group Vice-President has the right to approve the opening of the branch, and the new Oriental managers are generally from the beginning of the teacher, ' the feudal separatist ' situation led to some local principals and the group's vice-president relationship is very good. In other words, find a relationship with their good vice president, direct approval, you can open a new campus. "The problem began to emerge under the rapid expansion. "We now find that, including the new Oriental, admits that the current teaching level of the new Oriental is somewhat diluted than its early level." Li said the current new Oriental faces at least three problems. First, internal management is facing adjustment, the source of rapid expansion lies in the concentration of Vice-President power, followed by some of the teachers will "defection" problem, such as some department heads will take his business team to set up a school; third, from the perspective of capital market valuation, now the new Oriental is not the past new Oriental, The past new Oriental is to do a large list of students, fees are very high, profits are guaranteed, but now low-margin business has gradually replaced the high-margin business. The latest earnings figures show a 30.2% per cent profit margin for new oriental operations, compared with 35.7% in the same period last year. Changes in the pattern: the new Oriental territory has been eroded in the industry, the new Oriental still enjoy "a single big." "The so-called big, because it is done relatively full, so its revenue scale is also the largest." "Li explains, but in some areas of subdivision, subtle changes are already under progress." July 2012, the new Oriental will be its elite English to 5.5 million U.S. dollars of the price stripped to the elite English general manager Ong Yunque. At that time, there was a voice that the new Oriental move lies in its view that elite English face the high-end consumer, market capacity is small, so stripped. But in Li's view, this may be due to the new Oriental has not competed in Wall Street English, EF education and other similar institutions. "Daily economic news" reporter in the interview learned that for the fightRob constantly enlarge the market cake, in recent years, the domestic English training industry has many new people. At present, the industry consists of 4 kinds of forces: the first is the English training institutions derived from universities and colleges; The second one is well-known private training institutions, such as the new Oriental; The third is a very low starting point but a large number of large and complex general private English training institutions; The fourth is "exotic predators", such as Wall Street English. Guangzhou Tianhe District Sports West Road Business Circle, has concentrated on a number of English training institutions, including Wall Street English, Web International English, United States English, the International English and so on. Wall Street English, positioned in the high-end customer base, is a strong opponent of new Oriental elite English. Zhaoxiaojuan, consultant manager of the Wall Street English Sports Center course, told the Daily economic news reporter that Wall Street was in Guangzhou in 2005 and has 9 campuses. "I've been on Wall Street for 3 years, and the number of teachers and trainees has been growing," he said. Should say to learn English more and more, we opened two last year, Foshan and Guangzhou 9 (digital representative of the 9th Campus, editor note), this year may open Foshan 2, Guangzhou 10 also possible. "Web International English, headquartered in Shanghai, is also in the midst of a steady expansion in 2013, its 7th year in Guangzhou, which currently has 7 branches in Guangzhou." Zhingjing, the agency's curriculum advisor, said that in the 7 branches, the first branch to the second, after a two-year period, but in the last two years the new open more. Zhaoxiaojuan This understanding of the current Guangzhou market, the pattern of English training institutions: New oriental bias test; On Wall Street for the more high-end adult students, EF in the Global Youth education, and now do overseas study, Web is the Chinese open, many places copied the Wall Street model; The United States will be late (set up). "It exists, after all, to have its reasons. "Zhingjing said," Like EF, the first to do the children's market, and then turned into people; Wall Street more high-end, the environment is good, seems to have high consumption level, for Web definition, I think is to take the golden mean route, more popular. "In the above-mentioned institutions quietly rising, while some of the" weak "was forced to retreat. In the 2009, the so-called "Hundred Years Authority" of the spirit of English in many teaching points in the country "bankruptcy, suspension, roll money escape" situation, is the end of the year, the new dynamic education group will be Guangzhou Ling-feng revenue bag. Thereafter, Kane's English and Rachel's English were also caught in a wave of closures, with some teaching institutions in smaller camps opting to opt out of the market. Li said that the English training industry has been divided, and the future of the industry is facing the biggest impact is that these institutions will collectively enter the management of the rectification period, the depth of the shuffle. She predicts that there may be two extremes in the future, that "large, very normative institutions will be very good, and that very small, workshop-style institutions may well exist." Because the latter does not involve too much expansion, but focus on teaching effects and Word-of-mouth. "Zhaoxiaojuan also believes that in the education industry, scale is not the key factor, Word-of-mouth only determines life and death, because it requires continuous learning, if the studyHe can't go on studying, or he can't bring his friends to study. Industry trends: The advent of fine market era "now the Chinese people's enthusiasm for learning English is very high, the market can reach two-digit growth every year, the trend of study abroad growth is very obvious, as before we are not familiar with the SAT and so on, the need for more and more." Li said, however, the new Oriental losses and the withdrawal of some training institutions in recent years, gave the industry a trace of vigilance: from Savage expansion to fine management has become an urgent proposition. From the external factors, the transformation of educational mode is also necessary. It has been reported that some investment companies are changing their investment strategies to invest money in education companies with online operations, rather than in traditional offline education entities. In fact, in the past 2012 years, many online educational institutions have been set up, while traditional educational institutions have tried to meet the needs of users by "online" elements. Zhingjing to reporters that online education is indeed likely to impact on the traditional English training institutions, on the other hand, now students have more channels to understand English training, these factors have to the existing training institutions put forward new requirements. However, Li that "I do not see much of the impact of online education, because there is no online organization has a mature online model." I don't think there will be an online model that can subvert an online education, because education itself is very experiential. One example is that while we can download movies on the computer, can it replace the way you feel about movies at the cinema? This and online shopping is different, such as Taobao buy things and supermarkets buy things, but the essence of this thing is the same. Training is not the same, face-to-face training and online access to education, even if only in the subtle communication process, this feeling is not the same. "An English language training institute in Guangzhou, a person not to be named, said that from the source, the industry's threat is from within the industry, its professionalism, how to continuously study some new things, so that the students here or customers, can really be promoted." The above people also believe that education is required to have a dedicated team to study, if there is no professional team, given the learning method is not professional, it is difficult to achieve sustainability. Another point is the service, in the education industry, although the service is not the most critical, but from the subject of supply and demand, students are first and foremost a consumer, if the same type of training institutions, the price is similar, the service to do better, of course, more attractive. Zhaoxiaojuan to this, "I feel to do more professional, to have effect, including services to do in place." In fact, language (training) you have to do a good job. "In Li View, the new Oriental" cold "and the industry shuffle to the current domestic English training institutions to give some necessary path: First, the new Oriental case reflects the management needs to be improved, to be more standardized; Secondly, in the face of different customers, we should slowly penetrate the market segments to achieve humanization; third, further research, How to teach students in a better way. "I think the current rate of growth will be maintained in this industryGo, at least in a relatively short period of time will be maintained, but the market may change, such as studying abroad from the traditional GRE, TOEFL to the SAT to study the elite of this piece, early childhood training is also rising. Li added, "The future of online education is also constantly innovation and development, from the perspective of the potential market, the industry still has a lot of space to open up." ”