How Is Academies Australasia Narrowing Losses Despite Falling Revenue?

Financial Performance Overview

Academies Australasia Group Limited (ASX: AKG) has reported a mixed half-year financial result for the period ending 31 December 2025. Revenue from ordinary activities fell by 6% to $22.5 million compared to the previous corresponding period, reflecting ongoing challenges in the private education sector. Despite this, the company managed to reduce its net loss after tax by 21%, down to $754,000, signalling some operational improvements.

Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) remained largely stable at approximately $3.2 million, suggesting that core business activities maintained steady cash generation despite revenue pressures. The company also benefited from a $70,000 write-back on impairment provisions related to employee incentive plan loans, linked to a modest increase in share price.

Director Loans and Capital Management

Notably, director loans to the company increased by $1 million during the half, bringing total director lending to $6.2 million. These unsecured loans carry a 9% simple interest rate, with quarterly interest payments and principal due within 12 months. The willingness of directors to provide financial support highlights ongoing confidence in the company’s prospects, but also underscores the need for external funding amid tight liquidity.

In a significant capital management move, the Board approved the buy-back and cancellation of 5 million shares issued under the Employee Incentive Plan, along with the cancellation of the associated non-recourse loans. This action will reduce the total shares on issue to approximately 127.6 million, potentially improving earnings per share metrics in future periods. The buy-back reflects a strategic effort to streamline the capital structure and address the dilutive impact of incentive shares issued at a premium to current market prices.

Operational and Cash Flow Highlights

Operationally, the company saw a reduction in refunds paid to students, primarily due to fewer visa rejections, halving from $1.34 million to $681,000. Cash reserves stood at $5.6 million at period end, down from $6.8 million a year earlier, while net tangible asset backing per share remained negative at 9.7 cents, reflecting accumulated losses and intangible assets on the balance sheet.

The company continues to lease its Goulburn Street premises, with associated costs slightly increasing to $1.2 million, including depreciation and finance charges. Despite a net current liability position, the Board expressed confidence in meeting future obligations, supported by director loans, cash holdings, and asset realisations.

Outlook and Market Implications

While the improved loss position and stable EBITDA provide some reassurance, the decline in revenue and ongoing reliance on director loans highlight underlying challenges. The share buy-back may be viewed positively by investors seeking capital discipline, but the company’s negative net tangible asset position and current liabilities warrant close monitoring. The absence of dividends and the cautious tone in commentary suggest management remains focused on stabilising operations and strengthening the balance sheet.