Raffles Education Limited FY2025 Financial Analysis: Material Uncertainty Remains

Raffles Education Limited (“Raffles Education” or “the Company”) released its audited financial statements for the year ended 30 June 2025, accompanied by an independent auditor’s report highlighting a material uncertainty related to going concern. Below, we analyze the key findings from the report, notable risks, and the outlook for investors.

Key Financial Metrics and Going Concern Issues

The most significant financial issue disclosed is that as of 30 June 2025, both the Group and the Company reported negative working capital positions:

• Group net current liabilities: \$85.8 million (2024: \$16.8 million)
• Company net current liabilities: \$45.7 million (2024: \$81.4 million)

This deepening net current liability position triggered the auditor to include a “Material Uncertainty Related to Going Concern” paragraph, explicitly warning that these conditions may cast significant doubt on the Company’s ability to continue as a going concern. The audit opinion remains unqualified, but with this critical emphasis.

Factors Mitigating Going Concern Risks

Despite the adverse liquidity position, the Board and management maintain the accounts on a going concern basis, citing several mitigating factors:

• Expectation of positive cash flow generation for at least 15 months from 30 June 2025
• Confidence in continued lender support
• Ability to refinance or extend existing borrowings
• Ongoing efforts to realize certain assets, notably the sale of the property at 51 Merchant Road
• Proposed issue of up to \$10 million in unlisted, non-convertible, 5-year 10.5% unsecured bonds, with \$3 million already subscribed as of the report date
• Potential to raise funds from shareholders and the capital market

However, failure to execute these plans could force the Group to realize assets outside the ordinary course of business and reclassify non-current assets and liabilities as current, which could materially impact asset valuations and liabilities.

Year-Over-Year and Quarter-Over-Quarter Comparison Table

The report does not provide detailed breakdowns of revenue, profit, EPS, or dividends for comparative periods. As such, a comparative financial table cannot be provided, and readers should note the lack of detailed performance metrics in the announcement.

Significant Corporate Actions and Fundraising

• Asset Sale: The Company is in the process of selling its 51 Merchant Road property, which may provide much-needed liquidity.
• Bond Issuance: Raffles Education announced a proposed private placement of up to \$10 million in 5-year 10.5% unsecured bonds, with \$3 million already subscribed as of 13 June 2025.
• No Dividends Declared: There is no mention of any dividend payout in the report.

Other Noteworthy Issues

• No mention of share buybacks, dilution, placements (other than bonds), or mandates.
• No disclosure of exceptional earnings, one-off gains/losses, or related-party transactions.
• No direct commentary on macroeconomic environment, legal disputes, or policy changes.

Chairman’s Statement

No Chairman’s statement is included in the provided extracts. Thus, the tone and sentiment from top management cannot be summarized.

Outlook and Conclusion

In summary, Raffles Education faces severe liquidity pressures, with current liabilities substantially exceeding current assets. While management is optimistic about refinancing, asset sales, and new fundraising initiatives, the auditor’s formal warning about going concern risk is a major red flag. Investors should be aware that the Company’s continued operation depends on the successful execution of several uncertain actions, and failure to do so could materially impact both the balance sheet and shareholder value.

Investor Recommendations

• If currently holding the stock: Exercise caution. Closely monitor the progress of asset sales, bond issuance, and refinancing efforts. Consider reducing exposure or exiting the position if mitigating actions stall or if liquidity deteriorates further.
• If not currently holding the stock: Avoid initiating a new position until there is tangible evidence of improved liquidity, successful asset sales, or a clear recovery plan. The material uncertainty regarding going concern represents a high risk for new investors.

Disclaimer: This analysis is based solely on information provided in the Company’s audited financial report for FY2025. It does not constitute investment advice. Investors should conduct their own due diligence and consult professional advisors before making investment decisions.

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