Reading Lang (02385), a company specializing in educational electronics, has issued a profit warning, forecasting a narrowing of losses for the medium term. The company expects a loss attributable to shareholders of approximately 35 million to 40 million yuan (RMB) year-on-year.
In an announcement, Shushulang stated that it anticipates an unaudited comprehensive loss attributable to the company’s owners for the six months ending June 30, 2023, in the range of 35 million yuan to 40 million yuan. This is a decrease compared to the unaudited comprehensive loss of 42.3 million yuan during the same period in 2022.
The expected loss is primarily attributed to a decline in sales of personal tablets and wearable products aimed at students during the first half of 2023. This decline can be traced to several factors, including the impact of the domestic economy on the international environment, increased competition from other industries entering the educational electronics sector, and lower-than-expected sales due to a more cautious consumer sentiment.
Although the decrease in sales was partially offset by an increase in gross profit margin, which was driven by higher pricing of new products and a greater sales share from self-operated platforms, the company’s gross profit still decreased from approximately 66.5 million yuan for the six months ending June 30, 2022, to approximately 48.6 million yuan for the same period in 2023.
Furthermore, the company reported a loss of approximately 20.2 million yuan on changes in fair value of financial assets at fair value through profit or loss. This loss can be attributed to the impact of financial asset investment disclosed in the company’s 2022 annual report.
Additionally, research and development expenditures for the six months ending June 30, 2023, amounted to around 25.5 million yuan, compared to 16.2 million yuan during the same period in 2022. The increase in research and development expenses was primarily due to increased investments in digital resources, content, and new product development.
Lastly, the company achieved an adjusted net loss of approximately 15 million to 20 million yuan for the six months ending June 30, 2023, presenting a significant decrease compared to an adjusted net profit of about 17.5 million yuan during the same period in 2022. The decline in adjusted net profit can be attributed to the aforementioned factors affecting the company’s financial performance.
Reading Lang’s profit warning highlights the challenges faced by the educational electronics industry, including external economic factors and intensified competition. The company’s efforts to invest in new products and digital resources demonstrate their commitment to adapting to the changing market dynamics. Investors and industry observers will be closely monitoring the company’s future strategies to navigate these challenges and return to profitability.