Kip McGrath Education Centres Limited reported a 15.4% rise in profit after tax for the half-year ending December 2025, driven by pricing and operational efficiencies despite a 5% drop in lesson volumes. The company also declared a fully franked interim dividend and completed a share buyback amid leadership changes.
- Revenue from continuing operations up 1.6% to $15.2 million
- Profit after tax from continuing operations increased 15.4% to $1.53 million
- Lesson numbers declined 5%, offset by higher average lesson price and franchise fees
- Share buyback completed, acquiring 2.6% of shares
- New CEO Melinda Smith focuses on franchisee engagement and operational reset
Solid Financial Performance Amid Operational Challenges
Kip McGrath Education Centres Limited has delivered a robust half-year financial result for the period ended 31 December 2025, reporting revenue growth and a significant uplift in profitability despite a decline in lesson numbers. Revenue from continuing operations rose modestly by 1.6% to $15.2 million, while profit after income tax from continuing operations jumped 15.4% to $1.53 million, reflecting improved pricing and cost management.
The company’s EBITDA from continuing operations increased slightly to $4.27 million, underscoring the core earnings strength despite ongoing pressures on lesson volumes. Notably, lesson numbers fell by 5%, a trend influenced by the closure of underperforming centres and the exit of some franchise partners. However, this was counterbalanced by a rise in average lessons per centre, an 8.5% increase in average lesson charges, and a slight uptick in franchise fee percentage from 17.9% to 18.1%.
Leadership Transition and Strategic Reset
The half-year marked the first reporting period under new Chief Executive Officer Melinda Smith, who commenced in November 2025. Her leadership has focused on engaging with franchisees, reviewing operational efficiencies, and setting a strategic direction aimed at sustainable growth. A comprehensive franchisee survey provided valuable insights, guiding the company’s efforts to support franchisees in growing their centres and improving student outcomes.
Despite the decline in lesson numbers, the company’s disciplined cost control and operational improvements contributed to a 15.4% increase in net profit after tax. Expenses remained flat compared to the prior period, highlighting effective management during a period of transition.
Exit from US Market and Shareholder Returns
Kip McGrath exited its US operations during the period, closing the Tutorfly business and the Frisco tutoring centre after determining the expansion was uneconomic. This strategic withdrawal allows the company to focus resources on its core markets in Australia, the UK, and New Zealand.
In terms of shareholder returns, the company declared a fully franked interim dividend of 1.0 cent per share, payable on 26 March 2026, doubling the prior final dividend. Additionally, Kip McGrath completed a share buyback, acquiring 2.6% of its shares at a cost of $861,000, signalling confidence in the company’s valuation and future prospects.
Outlook and Market Positioning
Looking ahead to the full year ending 30 June 2026, Kip McGrath expects lesson numbers to decline by mid-single digits but anticipates flat revenue and early double-digit growth in net profit after tax. Capital expenditure is forecast at approximately $1.4 million, reflecting continued investment in the business.
The company’s strong cash position of $6.2 million, no debt, and an undrawn credit facility provide financial flexibility. With a renewed strategic focus, a committed franchise network, and a clear roadmap informed by franchisee feedback, Kip McGrath aims to strengthen centre performance and drive sustainable growth in its core markets.
Bottom Line?
Kip McGrath’s disciplined approach and leadership reset position it well for navigating lesson volume challenges while delivering profit growth and shareholder value.
Questions in the middle?
- How will the company reverse the decline in lesson numbers amid competitive pressures?
- What specific initiatives will the new CEO implement to support franchisee growth?
- How might the exit from the US market impact long-term international expansion plans?