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Mar. 19 (NBD) -- China's early education provider RYB Education, Inc. ("RYB") released the annual report of 2017, presenting undistinguished net income growth due to the climbing operation and management costs.

According to the report, the net revenue of RYB surged 29.8 percent year over year to 140.8 million U.S. dollars, compared with 108.5 million U.S. dollars for 2016, with the net income attributable to ordinary shareholders reaching 7.1 million U.S. dollars, up 9.23 percent from 6.5 million U.S. dollars in 2016. 

The company has seen steadily growing revenue and income since 2016. RYB gained profits mainly from tuition fees, which is largely driven by the increase in enrollment and the number of directly operated kindergartens. The latest data showed that the number of students enrolled at RYB's directly operated kindergartens was 21,684 as of December 31, 2017, up 21 percent compared with 17,900 as of December 31, 2016. 

An industry insider told NBD that RYB under a heavy-asset model could face great pressure from the growing costs caused by the expansion of its kindergartens. 

The strengthened supervision and management for both franchised and directly operated kindergartens also led to the sharp rise of costs. 

In late November last year, RYB was investigated for alleged child abuse at the RYB Education New World kindergarten at Beijing's Chaoyang District. The teacher involved was detained by the district police on suspicion of abuse and another 31-year-old woman was also arrested for disrupting social order by spreading false information about the abuse details.

The shares of the New York-listed company plunged 38.4 percent on 24th November after the scandal sparked outrage among parents and the public.

To deal with such matter, the company tightened the security measures as well as personnel management, and also improved benefits and recruitment standards of teachers for its own kindergartens.

In 2017, its management costs amounted to more than 20 million U.S. dollars, growing dramatically from 9.3 million U.S. dollars in the previous year.

It is noted that the financial results of 2018 could be affected by RYB's new measures.

After the annual report was published, RYB's shares plummeted to 17.78 U.S. dollars per share, even lower than the issue price of 18.50 U.S. dollars. But in the long run, the share price will still remain stable despite swinging for several times. 

According to the statistics, China now has 239,800 kindergartens, with 64.3 percent (154,200) being privately-run. Therefore, while public schools undertake most of the compulsory education, the pre-school education mainly rely on private institutions.

Email: zhanglingxiao@nbd.com.cn